S-4

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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

As filed with the Securities and Exchange Commission on July 7, 2006

Registration No. 333-          

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

LINENS HOLDING CO.
LINENS 'N THINGS, INC.
LINENS 'N THINGS CENTER, INC.
*And the Subsidiary Guarantors listed in Table of Additional Registrants
(Exact name of Registrant as specified in its charter)

Delaware Delaware California (State or other jurisdiction of incorporation)	5719 5719 5719 (Primary Standard Industrial Classification Code Number)	20-4192917 22-3463939 59-2740308 (I.R.S. Employer Identification Number)
6 Brighton Road Clifton, New Jersey 07015 (973) 778-1300 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Francis M. Rowan
6 Brighton Road
Clifton, New Jersey 07015
Tel: (973) 778-1300
(Name and address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

David R. Earhart, Esq.
Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas 75201-4761
Tel: (214) 999-4645
Fax: (214) 999-3645

        Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

        If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.    o

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

CALCULATION OF REGISTRATION FEE

Title of each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Note	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee
Senior Secured Floating Rate Notes due 2014	$650,000,000	100%	$650,000,000	$69,550(1)
Guarantees related to the Senior Secured Floating Rate Notes due 2014	Not Applicable	Not Applicable	Not Applicable	Not Applicable(2)

(1)

Calculated pursuant to Rule 457(f)(2) under the Securities Act. For purposes of this calculation, the Offering Price Per Note was assumed to be the principal amount as shown on the face of the exchange notes.

(2)

No separate consideration was received for the guarantees and, therefore, pursuant to Rule 457(n) under the Securities Act, no separate fee is payable with respect to the guarantees being registered hereby.

        The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

*Table of Additional Registrants

Name of Additional Registrant#	State or other Jurisdiction of Incorporation or Formation	Primary Standard Industrial Classification Code Number	I.R.S. Employer Identification Number
Bloomington MN., L.T., Inc.	Minnesota	5719	22-2708498
Vendor Finance, LLC	Delaware	5719	81-0665543
LNT, Inc.	New Jersey	5719	22-2074668
LNT Services, Inc.	Delaware	5719	20-0392093
LNT Leasing II, LLC	Delaware	5719	26-0004182
LNT West, Inc.	Delaware	5719	20-0391975
LNT Virginia LLC	Virginia	5719	22-0379453
LNT Merchandising Company LLC	Delaware	5719	20-0422616
LNT Leasing III, LLC	Delaware	5719	51-0503599
Citadel LNT, LLC	Delaware	5719	33-1092479

^#

Addresses and telephone numbers of principal executive offices are the same as those of Linens 'n Things, Inc.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT COMPLETE THE EXCHANGE OFFER OF THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED JULY 6, 2006

PROSPECTUS

[LOGO]

LINENS 'N THINGS, INC.
LINENS 'N THINGS CENTER, INC.

Offer to Exchange all of the Outstanding
$650,000,000 Senior Secured Floating Rate Notes due 2014
for
$650,000,000 Registered Senior Secured Floating Rate Notes due 2014

        We are offering to exchange all of our outstanding Senior Secured Floating Rate Notes due 2014, which were issued in a private placement on February 14, 2006 and which we refer to as the "old notes," for an equal aggregate amount of our registered Senior Secured Floating Rate Notes due 2014, which have been registered with the Securities and Exchange Commission, or the "Commission," and which we refer to as the "exchange notes." The terms of the exchange notes are identical in all material respects to the terms of the old notes, except that the exchange notes will not bear legends restricting their transfer under the Securities Act of 1933, as amended, and certain transfer restrictions, registration rights and additional interest payment provisions relating to the old notes will not apply to the exchange notes.

        The old notes were issued, jointly and severally, by Linens 'n Things, Inc., or "Linens 'n Things," and Linens 'n Things Center, Inc., or "Linens 'n Things Center," on February 14, 2006, in connection with the acquisition of Linens 'n Things by Linens Holding Co. The old notes have been, and the exchange notes will be, guaranteed by Linens Holding Co. and all of its wholly owned domestic restricted subsidiaries other than the co-issuers.

MATERIAL TERMS OF THE EXCHANGE OFFER

•

The exchange offer expires at 5:00 p.m., New York City time, on    •    , 2006, unless extended.



•

We will exchange all old notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offer.



•

You may withdraw tendered old notes at any time prior to the expiration of the exchange offer.



•

Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes.



•

The only conditions to completing the exchange offer are that the exchange offer not violate any applicable law or applicable interpretation of the staff of the Commission and no injunction, order or decree has been issued that would prohibit, prevent or materially impair our ability to proceed with the exchange offer.



•

We will not receive any cash proceeds from the exchange offer.



•

There is no active trading market for the old notes and we do not intend to list the exchange notes on any securities exchange or to seek approval for quotations through any automated quotation system.

Before participating in this exchange offer, consider carefully the "Risk Factors" beginning on page 18 of this prospectus.

Neither the Commission nor any state securities commission has approved or disapproved of the exchange notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is                , 2006

TABLE OF CONTENTS

The information contained in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies. No dealer, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this prospectus in connection with the offer contained herein and, if given or made, such information or representations must not be relied upon as having been authorized by us. Neither the delivery of this prospectus nor any sale made hereunder shall under any circumstances create an implication that there has been no change in our affairs or that of our subsidiaries since the date hereof.

        In this prospectus and except as the context otherwise requires or indicates:

•

"Issuers" means Linens 'n Things, Inc. and Linens 'n Things Center, Inc.; and



•

"Us," "we," "our" or "Company" means Linens Holding Co., a Delaware corporation, together with its consolidated subsidiaries, including Linens 'n Things, Inc. and Linens 'n Things Center, Inc.

WHERE CAN YOU FIND MORE INFORMATION

        We have filed with the Commission a registration statement on Form S-4 under the Securities Act relating to the offering of the exchange notes. This prospectus is part of that registration statement. You may obtain from the Commission a copy of the registration statement and exhibits that we have filed with the Commission. The registration statement may contain additional information that may be important to you. Statements made in this prospectus about legal documents may not necessarily be complete, and you should read it together with the documents filed as exhibits to the registration statement filed with the Commission.

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FORWARD-LOOKING STATEMENTS

        Certain information included in this prospectus may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than statements of historical facts, included in this prospectus, are forward-looking statements. In particular, statements that we make relating to our overall volume trends, industry forces, margin trends, anticipated capital expenditures and our strategies are forward-looking statements. When used in this document, the words "believe," "expect," "anticipate," "estimate," "project," "plan," "should" and similar expressions are intended to identify forward-looking statements.

        These statements are based on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Any forward-looking statements are not guarantees of our future performance and are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements. We disclaim any duty to update any forward-looking statements. Some of the factors that may cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements include the risk factors discussed under the heading "Risk Factors." We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them does, what impact they will have on our results of operations and financial condition.

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PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus and may not contain all of the information that is important to you. You should read carefully this entire prospectus and should consider, among other things, the financial statements appearing elsewhere in this prospectus and the matters set forth in the section entitled "Risk Factors." We operate on a fiscal year ending on the Saturday closest to December 31. Fiscal years 2005, 2004 and 2003 were fifty-two week periods.

Our Company

        We are the second largest specialty retailer of home textiles, housewares and home accessories in North America operating 549 stores in 47 U.S. states and six Canadian provinces as of April 1, 2006. We are a destination retailer, offering one of the broadest and deepest selections of high quality brand-name as well as private label home furnishings merchandise in the industry. Our average store size of approximately 33,000 gross square feet enables us to offer a more comprehensive product and brand selection than department stores and other retailers that sell home furnishings. We believe our store format coupled with our knowledgeable sales assistance and attentive service to our customers, whom we refer to as our guests, creates an enjoyable shopping experience. Our primary target guest is female between the ages of 25 and 55 who is fashion and brand conscious, has good-to-better income and focuses on the home as a reflection of her individuality.

        We are committed to providing our guests with a one-stop shopping destination for home furnishings. Our extensive merchandise offering enables our guests to select from a wide assortment of styles, brands, colors and designs across varying price points at competitive values. Our "linens" product line includes home textiles such as bedding, towels, window treatments and table linens. Our "things" product line includes housewares and home accessories such as cookware, dinnerware, glassware, small appliances, candles, picture frames and storage and cleaning products. We offer a wide array of national home furnishing brands, including All-Clad, Braun, Calphalon, Conair, Croscill, Cuisinart, Henckels, Krups, KitchenAid, Nautica, OXO, Wamsutta and Yankee Candle. We also offer products under our LNT Home private label brand, which is designed to complement our brand name products by offering our guests quality merchandise at value prices. We also carry a number of exclusive products, including several high-fashion home textile patterns from Waverly and our Nate Berkus collection.

        Our store format features an efficient racetrack layout in a visually appealing format that encourages guests to shop the entire store. We operate various store size formats generally ranging from 25,000 to 40,000 gross square feet. This allows us to match the size of our stores with the market potential of each location. Our stores are located predominately in power strip centers adjacent to complementary broad-based retail chains. In addition, our stores are generally located in geographic trading areas with at least 150,000 people within a five to ten mile radius and with demographic characteristics that match our target guest profile. We were incorporated on September 10, 1996 and were a wholly owned subsidiary of CVS Corporation ("CVS"), formerly Melville Corporation, until November 26, 1996, when CVS completed an initial public offering of our common stock.

Business Strategy

        Improve Our Overall Merchandise Assortments.    We intend to maximize merchandise productivity by implementing the following assortment planning initiatives:

•

reduce our overall SKUs and increase the in-stock positions of our most popular merchandise;



•

re-allocate space in our stores to more productive categories;



•

increase the use of analytics in our merchandise assortment planning process, enabling us to make more informed, trend-based purchasing decisions in advance of guest demand; and

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•

selectively expand existing merchandise categories and key vendor assortments as well as introduce new merchandise product lines that better reflect the style and regional preferences of our guests.

        Establish a Key Item Program.    We have established a "Best Bets" program in order to provide our guests superior value on our top 100 selling items. We intend to price these key items competitively and maintain deep in-stock positions to meet guest demand. We believe that our key item program will help drive store traffic, improve sales per square foot and strengthen the Linens 'n Things brand over the long-term.

        Increase the Effectiveness of Our Marketing Expenditures.    We intend to implement an aggressive new, multi-tiered marketing campaign that re-invigorates the Linens 'n Things brand, emphasizes our commitment to our Best Bets program and drives traffic to our stores. Our marketing expenditures were approximately $114.0 million in fiscal 2005, or 4.2% of net sales. We expect to reduce marketing expenditures as a percentage of net sales in fiscal 2006; however, we intend to broaden our reach with a more diversified mix of marketing utilizing broadcast media, preprint, newspaper advertising and direct mail. We believe that these changes, coupled with a greater emphasis on national advertising, will be more effective in communicating our merchandising strategy while attracting new guests into our stores and enhancing our brand.

        Improve Our Guests' Shopping Experience.    Our goal is to exceed our guests' expectations in every store, every day. We intend to achieve this goal by building on our existing service philosophy and by creating a more inviting atmosphere for our guests. We believe we can make our guests' shopping experience more efficient and enjoyable through enhanced merchandise presentation, including more stimulating product displays and clearer in-store signage.

        Improve Our Operating Free Cash Flow.    We are highly committed to increasing our operating free cash flow. As a result, we plan to reduce new store openings over the next few years and focus on improving the operations of our existing stores. We currently expect to open approximately 25 to 30 new stores in 2006, primarily consisting of stores we have already committed to opening, as opposed to an average of approximately 56 new stores per year since 2003. As a result, we currently expect our fiscal 2006 capital expenditures to be approximately $85.0 million, as opposed to $127.6 million in fiscal 2005. In addition, in connection with our merchandise assortment planning and sales productivity initiatives, we expect to improve our inventory turns and reduce our working capital. Our new business strategy does not require any out of the ordinary or one-time capital expenditures.

        Realize Improved Financial Performance as Recently Opened Stores Mature.    As of April 1, 2006, we operate 549 stores, 174 of which were opened since the beginning of 2003. These 174 stores have not yet reached sales and store-level EBITDA consistent with our stores that were opened before 2003. Store-level EBITDA represents operating profit derived for each store, before depreciation for all fixed assets located at each store and amortization, where operating profit is based on each store's actual sales less direct expenses excluding an allocation of overhead. Historically, new stores take 4 to 5 years to reach the financial performance of a mature store. Accordingly, we expect our recently opened stores to generate improved financial performance and contribute meaningfully to our overall net sales and store-level EBITDA as they mature over the next few years.

Competitive Strengths

        Strong Brand Name Recognition.    The Linens 'n Things brand name has a strong reputation as a leading provider of home furnishings. Our brand recognition is reinforced by our national footprint and highly visible store locations. Additionally, we utilize extensive national and local advertising through multiple formats to reinforce our guest recognition and support our promotional events. Based on a

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study by Leo J. Shapiro & Associates, an independent market research firm, in May 2005, 9 out of 10 U.S. households located in our markets recognize the Linens 'n Things brand.

        Leading Destination for Home Furnishings.    We are the second largest specialty retailer of home textiles, housewares and home accessories in North America and, as of April 1, 2006, operate 549 stores in 47 U.S. states and six Canadian provinces with an aggregate of approximately 18.3 million gross square feet. With over 25,000 SKUs, we market one of the broadest and deepest selections of home furnishings in the industry, providing us with a competitive advantage over department stores and mass merchants who offer a more limited product selection. Our more comprehensive product and brand selection provides our guests with a one-stop shopping destination for their home furnishing needs.

        Well Maintained Store Base with Attractive Real Estate.    Our portfolio of stores is primarily located in high traffic suburban locations that are convenient and accessible to our core guests and in close proximity to other high quality, national retailers. According to a study done by MapInfo in March 2004, our real estate is extremely competitive as to location and size with other national specialty retailers of home furnishings. Our store base is up to date with an average age per store of approximately five years. We believe that the average age of our store base minimizes our near-term maintenance and remodeling capital expenditure requirements.

        Strong and Diversified Vendor Relationships.    We are one of the largest purchasers of home furnishings in the United States and have developed strong long-term relationships with our vendors, from whom we consistently purchase large quantities of quality merchandise. We believe that our strong and diversified vendor relationships coupled with our buying power provides us a competitive advantage in the U.S. home furnishings industry. In addition, due to our broad range of branded products, our success is not dependent on any one specific product or vendor. In fiscal 2005, no single vendor accounted for more than 8% of our purchases.

        Strong Guest Base.    We have cultivated a strong base of loyal guests who return to our stores time and again. This is complemented by our Internet website which allows guests both to purchase our products and receive product information. We have a large customer database that we use to reach our target guests through, among other things, direct mail events. We define active guests as those who have visited our stores at least once in the last 12 months. We have over 12 million active guests in our database, who on average visit our stores approximately two to three times each year. To further strengthen our guest base, we also offer a private label charge card program, which has built-in loyalty programs to encourage more frequent visits and allows us to more efficiently target our direct mail efforts.

Attractive Industry Fundamentals

        The U.S. home furnishings market, which we define as the retail market for textile home furnishing and durable home furnishings, was approximately an $82 billion market in 2005 according to the U.S. Department of Commerce. Textile home furnishings include bedding, bath accessories, kitchen and table linens and window treatments. Durable home furnishings include kitchenware, tabletop, small appliances, floor care, home décor and storage items. According to the U.S. Department of Commerce, the U.S. home furnishings market has generated positive growth in each year since 1990 and has grown at a 5.0% compound annual growth rate between 1990 and 2004. According to Retail Forward, Inc., a market research firm, the U.S. home furnishings market is expected to grow at a 4.4% compound annual growth rate between 2004 and 2009. Positive industry trends include continued consumer focus on the home, greater consumer disposable income and increasing home ownership.

        The retail U.S. home furnishings market is highly fragmented. The market includes many different types of retailers including, among others, department stores, home improvement centers, mass

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merchandisers and discounters, specialty retailers and warehouse clubs. We believe that specialty retailers have been one of the fastest growing segments of the market over the past few years. As compared to department stores and other retailers of home furnishings, we believe that "big box" specialty retailers offer a broader and deeper merchandise selection, a higher level of customer service and a more convenient, one-stop shopping experience. As a result, we believe that "big box" specialty retailers will continue to gain market share, particularly as department stores focus increasingly on the fashion elements in their business, including apparel and cosmetics.

The Transactions

        On November 8, 2005, Linens Merger Sub Co. and its parent company, Linens Holding Co., entered into an Agreement and Plan of Merger with Linens 'n Things, Inc. governing a reverse subsidiary merger (the "Merger") pursuant to which, on February 14, 2006, Linens Merger Sub Co. was merged with and into Linens 'n Things, Inc., with Linens 'n Things, Inc. as the surviving corporation. In the Merger, each share of common stock of Linens 'n Things, Inc. (other than shares held in treasury or owned by Linens Merger Sub Co., its parent company or any affiliate of Linens Merger Sub Co. and other than shares held by stockholders who properly demanded and perfected appraisal rights) was converted into the right to receive $28.00 in cash, without interest, for aggregate consideration of approximately $1.3 billion. As the surviving corporation in the Merger, Linens 'n Things, Inc. assumed by operation of law all of the rights and obligations of Linens Merger Sub Co., including those under the notes and the related indenture. Linens 'n Things Center, Inc., a direct wholly owned subsidiary of Linens 'n Things, Inc., was a co-issuer of the notes.

        Affiliates of Apollo Management, L.P., National Realty & Development Corp. and Silver Point Capital Fund Investments LLC (the "Sponsors") collectively contributed approximately $648.0 million as equity to Linens Merger Sub Co. immediately prior to the Merger.

        The Sponsors financed the purchase of Linens 'n Things, Inc. and paid related fees and expenses through the offering of the notes, the equity investment described above and excess cash on hand at Linens 'n Things, Inc. We did not draw on our asset-based revolving credit facility at closing.

        The aforementioned transactions, including the Merger and its payment of any costs related to these transactions, are collectively referred to herein as the "Transactions." In connection with the Transactions, we incurred significant indebtedness and became highly leveraged.

        Immediately following the Merger, we became a wholly owned subsidiary of Linens Holding Co. Linens Holding Co. is an entity that was formed in connection with the Transactions and had no assets or liabilities other than the shares of Linens Merger Sub Co. and its rights and obligations under and in connection with the merger agreement with us and the equity commitment letters and debt financing commitment letters provided in connection with the Transactions.

        The closing of the Merger occurred simultaneously with:

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the closing of the note offering;



•

the closing of our $600.0 million asset-based revolving credit facility;



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the termination of our prior $250.0 million unsecured revolving credit facility and CAN $40.0 million unsecured credit facility agreements; and



•

the equity investments described above.

        As a result of the Merger, all of Linens 'n Things, Inc.'s issued and outstanding capital stock was acquired by Linens Holding Co. At such time, investment funds associated with or designated by the Sponsors acquired approximately 99.7% of the common stock of Linens Holding Co. through an

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investment vehicle controlled by Apollo Management V, L.P., or one of its affiliates, and Robert J. DiNicola, our Chairman and Chief Executive Officer, acquired the remaining 0.3%.

        Upon consummation of the Transactions, we delisted our shares of common stock from the New York Stock Exchange (the "NYSE") and deregistered under Section 12 of the Securities Exchange Act of 1934. The last day of trading on the NYSE was February 14, 2006.

        Our principal executive offices are located at 6 Brighton Road, Clifton, New Jersey 07015 and our telephone number at that address is (973) 778-1300. Our corporate website address is www.lnt.com. Our website and the information contained on our website are not part of this prospectus.

        Linens Holding Co. was incorporated on November 7, 2005. Linens 'n Things, Inc. was incorporated on September 10, 1996. Linens 'n Things Center, Inc. was incorporated on January 12, 1996.

        Certain of the titles and logos referenced in this prospectus are our trademarks and service marks. All other trademarks, service marks and trade names referred to in this prospectus are the property of their respective owners.

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Summary of the Exchange Offer

We are offering to exchange $650 million aggregate principal amount of our exchange notes for $650 million aggregate principal amount of our old notes. The following is a brief summary of the terms and conditions of the exchange offer. For a more complete description of the exchange offer, you should read the discussions under the heading "The Exchange Offer."

Exchange Notes	$650 million aggregate principal amount of Senior Secured Floating Rate Notes due 2014. The terms of the exchange notes are identical to the terms of the old notes, except that the exchange notes have been registered under the Securities Act and will not bear legends restricting their transfer under the Securities Act. In addition, certain transfer restrictions, registration rights and additional interest payment provisions relating to the old notes will not apply to the exchange notes.
Old Notes	$650 million aggregate principal amount of Senior Secured Floating Rate Notes due 2014, which were issued in a private placement on February 14, 2006.
The Exchange Offer	We are offering to exchange $1,000 principal amount of our exchange notes for each $1,000 principal amount of our old notes. We are making this exchange offer to satisfy our obligations under a registration rights agreement that we entered into with the initial purchasers of the old notes in connection with the private placement.
	To exchange your old notes, you must properly tender them in the exchange offer and we must accept your tender. All old notes that you validly tender and do not subsequently validly withdraw will be exchanged in the exchange offer.
	We will issue the exchange notes promptly after the expiration of the exchange offer.
Registration Rights Agreement	You are entitled under the registration rights agreement to exchange your old notes for exchange notes with substantially identical terms. This exchange offer is intended to satisfy these rights. After the exchange offer is complete, except as set forth in the next paragraph, you will no longer be entitled to any exchange or registration rights with respect to your old notes.
	The registration rights agreement requires us to file a registration statement for a continuous offering in accordance with Rule 415 under the Securities Act for your benefit if you would not receive freely tradable exchange notes in the exchange offer or you are ineligible to participate in the exchange offer, provided that you indicate that you wish to have your old notes registered under the Securities Act. See "The Exchange Offer—Procedures for Tendering."

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Resales of the Exchange Notes	We believe that you may resell, offer for resale or otherwise transfer any exchange notes issued to you in the exchange offer without complying with the registration and prospectus delivery requirements of the Securities Act if you meet all of the following conditions:
	(1)	you acquired the exchange notes in the ordinary course of your business;
	(2)	you are not engaging in and do not intend to engage in a distribution of the exchange notes;
	(3)	you do not have an arrangement or understanding with any person to participate in the distribution of the exchange notes; and
	(4)	you are not an affiliate of ours, as the term "affiliate" is defined in Rule 405 under the Securities Act.
	Our belief is based on interpretations by the staff of the Commission, as set forth in no-action letters issued to third parties unrelated to us. We have not asked the staff for a no-action letter in connection with this exchange offer, however, and we cannot assure you that the staff would make a similar determination with respect to the exchange offer.
	If you do not meet all of the above conditions, you may incur liability under the Securities Act if you transfer any exchange note without delivering a prospectus meeting the requirements of the Securities Act. We do not and will not assume or indemnify you against that liability.
	Each broker-dealer that is issued exchange notes in the exchange offer for its own account in exchange for old notes that the broker-dealer acquired as a result of market-making activities or other trading activities must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of the exchange notes. A broker-dealer may use this prospectus for an offer to resell or to otherwise transfer the exchange notes. We have agreed that, for a period of 180 days from the effective date of this registration statement, upon the request of a broker-dealer, we will make this prospectus, as amended or supplemented, available to the broker-dealer for use in connection with any such resale.

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Expiration Date	The exchange offer will expire at 5:00 p.m., New York City time, on •, 2006, unless we decide to extend the exchange offer. We do not intend to extend the exchange offer, although we reserve the right to do so.
Conditions to the Exchange Offer	We will complete the exchange offer only if it will not violate applicable law or any applicable interpretation of the staff of the Commission and no injunction, order or decree has been issued which would prohibit, prevent or materially impair our ability to proceed with the exchange offer. See "The Exchange Offer—Conditions."
Procedures for Tendering Old Notes Held in the Form of Book-Entry Interests	The old notes were issued as global securities in fully registered form without interest coupons. Beneficial interests in the old notes are held by direct or indirect participants in The Depository Trust Company, or DTC, through certificateless depositary interests that are shown on, and transfers of the old notes can be made only through, records maintained in book-entry form by DTC with respect to its participants.
	If you are a holder of an old note held in the form of a book-entry interest and you wish to exchange your old note for an exchange note pursuant to the exchange offer, you must transmit to The Bank of New York, as exchange agent, on or prior to the expiration of the exchange offer a computer-generated message transmitted by means of DTC's Automated Tender Offer Program system and forming a part of a confirmation of book-entry transfer in which you acknowledge and agree to be bound by the terms of the letter of transmittal.
	The exchange agent must also receive on or prior to the expiration of the exchange offer either:
	•	a timely confirmation of book-entry transfer of your old notes into the exchange agent's account at DTC, in accordance with the procedure for book-entry transfers described in this prospectus under the heading "The Exchange Offer—Procedures for Tendering" and "—Book-Entry Transfer"; or
	•	the documents necessary for compliance with the guaranteed delivery procedures described below.

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	A letter of transmittal accompanies this prospectus. By delivering a computer-generated message through DTC's Automated Tender Offer Program system, you will represent to us, among other things, that:
	•	you are acquiring the exchange notes in the exchange offer in the ordinary course of your business;
	•	you are not engaging in and do not intend to engage in a distribution of the exchange notes;
	•	you do not have an arrangement or understanding with any person to participate in the distribution of the exchange notes; and
	•	you are not our affiliate.
Procedures for Tendering Certificated Notes	No certificated notes are issued and outstanding as of the date of this prospectus. If you are a holder of book-entry interests in old notes, you are entitled to receive, in limited circumstances, in exchange for your book-entry interests, certificated notes in principal amounts equal to your book-entry interests. If you acquire certificated old notes prior to the expiration of the exchange offer, you must tender your certificated old notes in accordance with the procedures described in "The Exchange Offer—Procedures for Tendering" and "—Certificated Old Notes."
Special Procedures for Beneficial Owners	If you are the beneficial owner of old notes that are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you wish to tender your old notes, you should promptly contact the person in whose name your old notes are registered and instruct that person to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your notes, either make appropriate arrangements to register ownership of the old notes in your name or obtain a properly completed bond power from the person in whose name your old notes are registered. The transfer of registered ownership may take considerable time. See "The Exchange Offer—Procedures for Tendering."
Guaranteed Delivery Procedures	If you wish to tender your old notes and you cannot get the required documents to the exchange agent on time, you may tender your old notes in accordance with the guaranteed delivery procedures set forth in "The Exchange Offer—Procedures for Tendering" and "—Guaranteed Delivery Procedures."

9

Acceptance of Old Notes and Delivery of Registered Notes	Except under the circumstances summarized above under "Conditions to the Exchange Offer," we will accept for exchange any and all old notes that are properly tendered in the exchange offer prior to 5:00 p.m., New York City time, on the expiration date for the exchange offer. The exchange notes to be issued to you in the exchange offer will be delivered promptly following the expiration of the exchange offer. See "The Exchange Offer—Terms of the Exchange Offer."
Withdrawal	You may withdraw any tender of your old notes at any time prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer. We will return to you any old notes not accepted for exchange for any reason without expense to you as promptly as we can after the expiration or termination of the exchange offer.
Exchange Agent	The Bank of New York is serving as the exchange agent in connection with the exchange offer.
Consequences of Failure to Exchange	If you do not participate or properly tender your old notes in the exchange offer:
	•	you will retain old notes that are not registered under the Securities Act and that will continue to be subject to restrictions on transfer that are described in the legend on the old notes;
	•	you will not be able, except in very limited instances, to require us to register your old notes under the Securities Act;
	•	you will not be able to offer to resell or transfer your old notes unless they are registered under the Securities Act or unless you offer to resell or transfer them pursuant to an exemption under the Securities Act; and
	•	the trading market for your old notes will become more limited to the extent that other holders of old notes participate in the exchange offer.
Federal Income Tax Consequences	Your exchange of old notes for exchange notes in the exchange offer should not result in any gain or loss to you for U.S. federal income tax purposes. See "Certain United States Federal Income Tax Considerations."

10

The summary below describes the principal terms of the notes. Some of the terms and conditions described below are subject to important limitations and exceptions. The "Description of Exchange Notes" section of this prospectus contains a more detailed description of the terms and conditions of the notes.

Co-Issuers	Linens 'n Things, Inc. and Linens 'n Things Center, Inc.
Notes Offered	$650,000,000 aggregate principal amount of senior secured floating rate notes due 2014.
Maturity Date	January 15, 2014.
Interest Payment Date	We pay interest on the old notes and will pay interest on the exchange notes at a per annum rate equal to LIBOR plus 5.625%, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year. The interest rate on the exchange notes will be reset quarterly.
Guarantees	The old notes are and the exchange notes will be fully and unconditionally guaranteed, jointly and severally, on a senior basis by Linens Holding Co., the parent corporation of the Issuers, and by each of our direct and indirect subsidiaries that guarantee our asset-based revolving credit facility except for our Canadian subsidiaries, all of which are referred to in this prospectus as the guarantors. If the Issuers cannot make payments required by the exchange notes, the guarantors are required to make payments instead. The guarantees may be released under certain circumstances.
Ranking	The exchange notes and the guarantees will be our senior secured obligations and:
	•	will rank equally in right of payment with all of our existing and future senior indebtedness;
	•	will rank senior in right of payment to all of our existing and future senior subordinated and subordinated indebtedness;
	•	will be effectively senior to our asset-based revolving credit facility to the extent of the value of the collateral securing the exchange notes on a first priority basis;
	•	will be effectively junior in right of payment to indebtedness under our asset-based revolving credit facility to the extent of the value of the collateral securing our asset-based revolving credit facility on a first priority basis; and
	•	be effectively junior in right of payment to the indebtedness and all other liabilities, including trade payables, of our subsidiaries that do not guarantee the exchange notes.

11

	As of April 1, 2006, our subsidiaries that do not guarantee the exchange notes had outstanding liabilities of $35.8 million, excluding intercompany liabilities and notes payable. For the 13 weeks ended April 1, 2006, our foreign subsidiaries had net sales of $36.5 million (6.2% of our total net sales), net loss of $1.4 million (2.2% of our total net loss) and assets of $113 million including intercompany payable and excluding intercompany notes receivable (5.6% of our total assets).
Collateral	The exchange notes and guarantees will be secured by first-priority liens, subject to permitted liens, on all of our and the guarantors' equipment, intellectual property rights and related general intangibles and all of our capital stock and the capital stock of certain subsidiaries. The lien on capital stock may be released under certain circumstances. The exchange notes and guarantees will also be secured by second-priority liens, subject to permitted liens, in all of our and the guarantors' inventory, accounts receivable, cash, securities and other general intangibles. See "Description of Exchange Notes—Security."
Intercreditor Agreement	The trustee under the indenture and the agent under our asset-based revolving credit facility (and their respective collateral agents) have entered into an intercreditor agreement as to the relative priorities of their respective security interests in our assets securing the exchange notes and the loans under our asset-based revolving credit facility and certain other matters relating to the administration of such security interests. The terms of the intercreditor agreement are set forth under "Description of Exchange Notes—Intercreditor Agreement."
Optional Redemption	We may, at our option, redeem some or all of the exchange notes at any time on or after January 15, 2008 at the redemption prices listed under "Description of Exchange Notes—Optional Redemption" plus accrued and unpaid interest and additional interest.
	Prior to January 15, 2008, we may, at our option, redeem up to 35% of the exchange notes with the proceeds of certain sales of our equity or equity of our parent at the redemption prices listed under "Description of Exchange Notes—Optional Redemption" plus accrued and unpaid interest and additional interest. We may make the redemption only if, after the redemption at least 65% of the aggregate principal amount of the exchange notes originally issued remains outstanding.

12

	Prior to January 15, 2008, we may, at our option, redeem some or all of the exchange notes at a price equal to 100% of the principal amount of the exchange notes plus a "make-whole" premium.
Mandatory Repurchase Offer	If we experience certain kinds of changes of control, we must offer to purchase the exchange notes at 101% of their principal amount, plus accrued and unpaid interest and additional interest. For more details, see "Description of Exchange Notes—Repurchase at the Option of Holders—Change of Control."
	If we sell assets under certain circumstances, we must offer to repurchase the exchange notes at a price equal to par plus the accrued and unpaid interest and additional interest, if any, to the repurchase date as described under "Description of Exchange Notes—Repurchase at the Option of Holders—Asset Sales."
Certain Covenants	We will issue the exchange notes under an indenture with The Bank of New York, which will initially act as trustee on your behalf. The indenture will, among other things, restrict our ability and the ability of our restricted subsidiaries to:
	•	incur, assume or guarantee additional indebtedness;
	•	issue redeemable stock and preferred stock;
	•	repurchase capital stock;
	•	make other restricted payments including, without limitation, paying dividends and making investments;
	•	create liens;
	•	redeem debt that is junior in right of payment to the exchange notes; and
	•	sell or otherwise dispose of assets, including capital stock of subsidiaries.
	These covenants are subject to a number of important limitations and exceptions. See "Description of Exchange Notes—Certain Covenants."
Absence of Public Market for the Notes	The exchange notes are a new issue of securities and there is currently no established trading market for the exchange notes. The exchange notes generally will be freely transferable but will also be new securities for which there will not initially be a market. Accordingly, there can be no assurance as to the development or liquidity of any market for the exchange notes.
Use of Proceeds	We will not receive any cash proceeds upon completion of the exchange offer.

You should refer to the section entitled "Risk Factors" for an explanation of certain risks of participating or not participating in the exchange offer.

13

Summary Historical and Unaudited Pro Forma Consolidated Financial and Operating Data

        The following table sets forth our summary historical and pro forma consolidated financial and operating data. The summary historical income statement data for fiscal 2005, fiscal 2004 and fiscal 2003 and the summary historical balance sheet data as at the end of fiscal 2005 and fiscal 2004 have been derived from our consolidated financial statements for such periods and such dates, which have been audited by KPMG LLP and are included in this registration statement. The summary historical, pro forma and financial data should be read in conjunction with the consolidated financial statements for the year ended December 31, 2005, the related notes and the independent registered public accounting firm's report, which refers to a change in the method of accounting for vendor arrangements to conform to the requirements of Emerging Issues Task Force Issue No. 02-16. As a result of the consummation of the transaction, a new entity was formed with an effective date of February 14, 2006. The historical financial data as of and for each of the periods through February 13, 2006 shown under the predecessor entity caption, consists of Linens 'n Things and subsidiaries. The historical financial data for the successor entity as of April 1, 2006 and for the period February 14 to April 1, 2006 show the operations of the successor entity, Linens Holding Co. and subsidiaries. The unaudited historical financial data as of April 1, 2006, for the periods from January 1, 2006 to February 13, 2006 and February 14, 2006 to April 1, 2006, and the thirteen weeks ended April 2, 2005, have been derived from our unaudited consolidated financial statements. The unaudited consolidated financial statements for the period after February 13, 2006 are presented on a different basis than that for the periods before February 14, 2006, as a result of the application of purchase accounting as of February 14, 2006 and therefore are not comparable. In the opinion of management, such unaudited financial data reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results for that period. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or any future period.

        The summary unaudited pro forma consolidated financial data are based on our historical consolidated financial statements appearing elsewhere in this prospectus and give effect to the Transactions as if they had occurred on January 2, 2005. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable; however, we can provide no assurance that the assumptions used in the preparation of the pro forma condensed consolidated financial information are correct. The pro forma condensed consolidated financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what our financial condition or results of operations would have been had the Transactions described under "Prospectus Summary—The Transactions" occurred on such dates. The pro forma condensed consolidated financial information also should not be considered representative of our future financial condition or results of operations. The acquisition of Linens 'n Things, Inc. is being accounted for as a business combination using the purchase method of accounting.

        The term "predecessor" refers to Linens 'n Things, Inc. and the term "successor" refers to Linens Holding Co. after its acquisition of Linens 'n Things, Inc. on February 14, 2006. This information is a summary and should be read in conjunction with "Capitalization," "Unaudited Pro Forma Condensed Consolidated Financial Information," "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

14

	(Predecessor)															(Successor)
																						Pro Forma Fifty-Two Weeks Ended(2)
	Fiscal Year Ended									Thirteen Weeks Ended									Thirteen Weeks Ended(1)
	January 3, 2004			January 1, 2005(3)			December 31, 2005			April 2, 2005			January 1 to February 13, 2006			February 14 to April 1, 2006			April 1, 2006			April 1, 2006
										(unaudited)			(unaudited)			(unaudited)			(unaudited)			(unaudited)
	(dollars in thousands)
Income Statement Data:
Net sales	$	2,395,272		$	2,661,469		$	2,694,742		$	570,946		$	284,971		$	307,845		$	592,816		$	2,716,612
Cost of sales, including buying and distribution costs		1,426,880			1,589,700			1,595,394			334,553			180,675			189,068			369,743			1,630,556
Gross profit		968,392			1,071,769			1,099,348			236,393			104,296			118,777			223,073			1,086,056
Selling, general and administrative expenses		846,826			970,479			1,037,521			242,154			174,138			137,761			311,899			1,097,853
Operating profit (loss)		121,566			101,290			61,827			(5,761	)		(69,842	)		(18,984	)		(88,826	)		(11,797	)
Interest income		(169	)		(542	)		(894	)		(495	)		(668	)		(86	)		(754	)		(1,153	)
Interest expense		4,001			3,903			4,860			1,218			—			9,987			9,987			83,778
Income (loss) before provision (benefit) for income taxes		117,734			97,929			57,861			(6,484	)		(69,174	)		(28,885	)		(98,059	)		(94,422	)
Provision (benefit) for income taxes		44,975			37,408			21,879			(2,410	)		(21,270	)		(11,313	)		(32,583	)		(38,173	)
Net income (loss)	$	72,759		$	60,521		$	35,982		$	(4,074	)	$	(47,904	)	$	(17,572	)	$	(65,476	)	$	(56,249	)

		(Predecessor)															(Successor)
																						Pro Forma Fifty-Two Weeks Ended(2)
		Fiscal Year Ended									Thirteen Weeks Ended								Thirteen Weeks Ended(1)
		January 3, 2004			January 1, 2005(3)			December 31, 2005			April 2, 2005			January 1 to February 13, 2006			February 14 to April 1, 2006		April 1, 2006			April 1, 2006
											(unaudited)			(unaudited)			(unaudited)		(unaudited)			(unaudited)
		(dollars in thousands, except for ratios and store data)
Other Financial Data:
Adjusted EBITDA(4)		$	215,669		$	226,843		$	173,726		$	17,618		$	(14,170	)	$	10,721	$	(3,449	)	$	189,439
Depreciation and amortization			71,348			81,318			90,270			21,176			12,642			15,022		27,664			97,650
Capital expenditures:
	New stores		82,531			87,863			93,678			9,258			6,875			6,517		13,392			97,812
	Existing stores and other		30,765			31,189			33,904			2,769			901			2,054		2,955			34,090
Total capital expenditures			113,296			119,052			127,582			12,027			7,776			8,571		16,347			131,902
Cash interest expense			3,888			4,018			4,851			1,288			135			47		182			69,161
Ratio of total debt to Adjusted EBITDA																							3.87	x
Ratio of Adjusted EBITDA to cash interest expense																							2.74	x
Store Data:
Number of stores (at period end)			440			492			542			499			542			549		549			549
Total gross square footage (000's) (at period end)			15,106			16,702			18,071			16,900			18,071			18,300		18,300			18,300
Comparable net sales(5)			1.3	%		1.8	%		(5.9	)%		(5.4	)%		—			—		(3.7	)%		(5.5	)%
Balance Sheet Data (at period end):
Cash and cash equivalents		$	136,129		$	204,009		$	158,158		$	75,271		$	90,333		$	15,033	$	15,033		$	15,033
Working capital			458,519			519,686			537,453			533,971			506,757			442,017		442,017			442,017
Total assets			1,467,456			1,591,884			1,650,834			1,509,856			1,613,665			2,003,848		2,003,848			2,003,848
Total debt			—			2,196			2,139			2,182			2,131			733,725		733,725			733,725
Total shareholders' equity			737,377			809,353			849,863			806,012			820,408			630,184		630,184			630,184

(1)

For comparative purposes, the Company combined the two periods from January 1, 2006 through April 1, 2006. This combination is not GAAP presentation. However, the Company believes this presentation is useful to provide the reader a more accurate comparison.

(2)

The Pro Forma Fifty-Two Weeks ended April 1, 2006 have been derived from historical consolidated financial statements for the fiscal year 2005, less data from the consolidated financial statements for the thirteen weeks ended April 2, 2005 plus data from the consolidated financial statements for the thirteen weeks ended April 1, 2006 giving effect to the Transactions as if they had occurred on January 2, 2005.

(3)

Fiscal year 2004 results include the implementation of the provisions of EITF 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor ("EITF 02-16") which reduced the Company's net income in fiscal 2004 by $13.3 million net of tax.

15

(4)

EBITDA represents net income (loss) before provision (benefit) for income taxes, interest expense, net and depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to exclude non-cash and unusual items. Management uses EBITDA and Adjusted EBITDA as additional tools to assess our operating performance. Management considers EBITDA and Adjusted EBITDA to be useful measures in highlighting trends in our business and in analyzing the profitability of similar enterprises. It is also used as a measurement for the calculation of management incentive compensation. Management believes that EBITDA and Adjusted EBITDA are effective, when used in conjunction with net income, in evaluating asset performance and differentiating efficient operators in the industry. Furthermore, management believes that EBITDA and Adjusted EBITDA provide useful information to, and is commonly used by, investors, analysts and others to measure operating performance and because it provides insights into management's evaluation of our results of operations. EBITDA and Adjusted EBITDA (as calculated with contractually specified adjustments) are also one of the key measures used in calculating compliance with covenants in our new asset-based revolving credit facility and our notes. Non-compliance with financial covenants could prevent us from engaging in certain activities or result in a default under our asset-based revolving credit facility or our notes.

EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP, are not intended to represent cash flow from operations under GAAP and should not be used as an alternative to net income as an indicator of operating performance or to cash flow from operating, investing or financing activities as a measure of liquidity. Management compensates for the limitations of using EBITDA and Adjusted EBITDA by using it only to supplement our GAAP results to provide a more complete understanding of the factors and trends affecting our business. Each of EBITDA and Adjusted EBITDA has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of the limitations of EBITDA and Adjusted EBITDA are:

•

EBITDA and Adjusted EBITDA do not reflect our cash used for capital expenditures;



•

although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and EBITDA and Adjusted EBITDA do not reflect the cash requirements for such replacements;



•

EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital requirements;



•

EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on our indebtedness; and



•

EBITDA and Adjusted EBITDA do not reflect non-recurring expenses which qualify as extraordinary such as one-time write-offs to inventory and reserve accruals.

While EBITDA and Adjusted EBITDA are frequently used as a measure of operations and the ability to meet indebtedness service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation.

(5)

Comparable net sales includes our internet sales and sales for our stores beginning on the first day of the month following the 13^th full month of sales. Stores that are closed for a number of days in a particular month are excluded from comparable net sales if it would cause meaningful disparity in sales over the prior period. In the case of a store to be permanently closed, such store's sales are not considered comparable once the store closing process has commenced.

The following table reconciles EBITDA and Adjusted EBITDA as presented above, to net income (loss) as presented in our summary consolidated statements of operations and in accordance with GAAP (dollars in thousands):

		(Predecessor)															(Successor)
																							Pro Forma Fifty-Two Weeks Ended
		Fiscal Year Ended									Thirteen Weeks Ended									Thirteen Weeks Ended
		January 3, 2004			January 1, 2005			December 31, 2005			April 2, 2005			January 1 to February 13, 2006			February 14 to April 1, 2006			April 1, 2006			April 1, 2006
Net income (loss)		$	72,759		$	60,521		$	35,982		$	(4,074	)	$	(47,904	)	$	(17,572	)	$	(65,476	)	$	(56,249	)
Income tax provision (benefit)			44,975			37,408			21,879			(2,410	)		(21,270	)		(11,313	)		(32,583	)		(38,173	)
Interest expense, net			3,832			3,361			3,966			723			(668	)		9,901			9,233			82,625
Depreciation and amortization			71,348			81,318			90,270			21,176			12,642			15,022			27,664			97,650
	EBITDA		192,914			182,608			152,097			15,415			(57,200	)		(3,962	)		(61,162	)		85,853
Non-cash rent expense(a)			8,052			7,978			4,739			1,238			534			1,682			2,216			15,448
Non-cash landlord allowance amortization(b)			(17,283	)		(19,968	)		(21,633	)		(5,234	)		(2,959	)		(94	)		(3,053	)		(2,735	)
Cash landlord allowances received(c)			30,410			29,096			28,697			5,490			1,277			1,054			2,331			25,538
EBITDA after rent-related adjustments			214,093			199,714			163,900			16,909			(58,348	)		(1,320	)		(59,668	)		124,104
Transaction expenses(d)			—			—			3,322			—			31,730			—			31,730			35,052
Non-cash fixed asset impairment charge(e)			760			900			4,060			—			—			—			—			4,059
Non-cash stock-based compensation(f)			816			510			1,243			109			3,143			36			3,179			4,313
Accounting change for vendor allowances(g)			—			21,468			—			—			—			—			—			—
Non-recurring consulting expenses(h)			—			4,251			5,412			600			—			—			—			4,812
Write-down of aged inventory(i)			—			—			—			—			—			10,313			10,313			10,313
Accelerated payment of stock option(j)			—			—			—			—			9,305			—			9,305			9,305
Executive Severance(k)			—			—			—			—			—			1,692			1,692			1,692
Visa/Mastercard litigation settlement(l)			—			—			(2,211	)		—			—			—			—			(2,211	)
Gain on sale of lease(m)			—			—			(2,000	)		—			—			—			—			(2,000	)
	Adjusted EBITDA	$	215,669		$	226,843		$	173,726		$	17,618		$	(14,170	)	$	10,721		$	(3,449	)		189,439

(a)

Represents the non-cash portion of rent expense.

16

(b)

Non-cash landlord allowance amortization represents the amortization of cash allowances received from landlords at inception of leases. Non-cash landlord allowance amortization has the effect of reducing rent expense.

(c)

Represents cash allowances received from landlords at inception of leases.

(d)

Transaction costs represent legal and other merger-related expenses.

(e)

Represents the non-cash accelerated write-down of the book value of certain underperforming fixed assets.

(f)

Represents non-cash compensation expense related to predecessor period restricted stock grants.

(g)

Prior to January 4, 2004, certain funds received from vendors were reflected immediately as a reduction of advertising expense in SG&A or cost of sales. Effective January 4, 2004, in connection with the implementation of EITF 02-16, the Company treats these vendor funds as a reduction in the cost of inventory and as a result, these funds are recognized as a reduction to cost of sales when the inventory is sold. The effect of the implementation of EITF 02-16 was to reduce pre-tax income by $21.5 million for the fiscal year ended January 1, 2005.

(h)

Represents non-recurring consulting costs related to a strategic corporate profitability project that began in 2004 and was completed in 2005 and that was significantly greater in scope and costs than what the Company typically incurs or is expected to incur.

(i)

Charges related to change in reserves for markdowns on non-productive and aged inventory.

(j)

Represents acceleration of compensation expense related to stock option grants, as a result of the acquisition of the Company by the Sponsors.

(k)

Changes related to severance for departure of Jane Gilmartin.

(l)

Represents the Company's share of the Visa/MasterCard antitrust litigation settlement.

(m)

Represents non-recurring gain from sale of favorable lease.

17

RISK FACTORS

You should carefully consider the risks described below as well as the other information contained in this prospectus before tendering your old notes in the exchange offer. The risks described below are not the only ones facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations.

Risks Related to Our Business

Our profitability would be adversely affected if our merchandise selections do not match guest preferences.

        The retail industry is subject to changing merchandise trends and consumer preferences. Our success depends in large part on our ability to identify merchandise trends as well as to anticipate, gauge and react to changing consumer demands in a timely manner. We cannot assure you that our merchandise selections will accurately reflect the preferences of our guests at any given time. In addition, any decline in the popularity or quality of any of our key brands could adversely affect our business. Furthermore, the products we sell often require long lead times to order and must appeal to consumers whose preferences cannot be predicted with certainty and often change rapidly. Consequently, we must stay abreast of changing lifestyle and consumer trends and anticipate trends and fashions that will appeal to our guests. If we miscalculate the market for our merchandise or the purchasing preferences of our guests, our business and financial results could be adversely affected.

We do not have long-term contracts with any of our vendors and if we are unable to purchase suitable merchandise in sufficient quantities at competitive prices, we may be unable to offer a merchandise mix that is attractive to our guests and our sales may be harmed.

        Third-party vendors manufacture virtually all of the products that we offer. In fiscal 2005, we purchased our merchandise from approximately 1,200 vendors. Many of our key vendors limit the number of retail channels they use to sell their merchandise and competition among retailers to obtain and sell these goods is intense. In addition, nearly all of the brands of our top vendors are sold by competing retailers, and some of our top vendors also have their own dedicated retail stores. Moreover, we typically buy products from our vendors on a purchase order basis. We have no long-term purchase contracts with any of our vendors and, therefore, have no contractual assurances of continued supply, pricing or access to products, and any vendor could change the terms upon which they sell to us or discontinue selling to us at any time. In fiscal 2005, products supplied by our 25 largest vendors represented approximately 40% of our purchases, with our top three vendors supplying approximately 14% and our largest single vendor supplying approximately 8% of our purchases for that year.

        If our relationships with our vendors were disrupted, we might not be able to acquire the merchandise we require in sufficient quantities or on terms acceptable to us. Any inability to acquire suitable merchandise would have a negative effect on our business and operating results because we would be missing products from our merchandise mix unless and until alternative supply arrangements were made, resulting in deferred or lost guest sales.

Delays in receipt of merchandise in connection with either the manufacturing or shipment of such merchandise could affect our performance.

        Virtually all of our merchandise is delivered to us by our vendors as finished goods and is manufactured in numerous locations. Our vendors rely on third party carriers to deliver merchandise to our distribution facilities. In addition, our success depends on our ability to efficiently source and distribute merchandise to our retail stores and online guests. Events such as labor disputes, natural disasters, availability of raw materials, vendor financial liquidity, inclement weather, work stoppages or

18

boycotts affecting the manufacturing or transportation sectors could increase the cost or reduce the supply of merchandise available to us and could adversely affect our results of operations. Upon the loss of one or more of our vendors, we may not be able to develop relationships with new vendors, and products from alternative sources, if available, may be more expensive or of a different or inferior quality from the ones we currently sell.

        In addition, a significant portion of our merchandise is currently sourced by us or by our domestic suppliers from foreign vendors. As a result, events resulting in the disruption of trade from other countries or the imposition of additional regulations relating to duties upon imports could cause significant delays or interruptions in the supply of our merchandise or increase our costs, either of which could have a material adverse effect on our business. Examples of such events include:

•

political unrest, terrorist activities, war or other hostilities;



•

strikes and labor problems;



•

economic upheaval;



•

import duties and quotas; and



•

loss or change in "Most Favored Nation" status of the United States with a particular foreign country.

        An increase in the cost to manufacture, or a disruption in shipment to us of, foreign-sourced products could decrease our sales and profitability.

Our future growth and profitability could be adversely affected if our advertising and marketing programs are not effective in generating sufficient levels of customer awareness and traffic.

        We rely heavily on print advertising, especially direct mail, to promote new store openings, to increase consumer awareness of our product offerings and pricing and to drive store traffic. In addition, we rely and will increasingly rely on other forms of media advertising. Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our advertising and marketing programs. In order for our advertising and marketing programs to be successful, we must:

•

effectively manage advertising and marketing costs in order to maintain acceptable operating margins and return on our marketing investment; and



•

convert customer awareness into actual store visits and product purchases.

        Our planned advertising and marketing expenditures may not result in increased total or comparable net sales or generate sufficient levels of product awareness. We may not be able to manage our advertising and marketing expenditures on a cost-effective basis.

        There are a limited number of companies capable of distributing our direct mail advertising at the volume levels we require. If any of these companies cease operations, or if their expenses (e.g., postage, printing and paper costs) increase substantially, then it is likely that our advertising expenses will increase, which will have a negative effect on our business and operating results.

Weak economic conditions may significantly impact discretionary consumer spending and reduce our sales and profitability.

        Most of the products the we sell are not consumer necessities. Purchases of our merchandise are largely dependent upon discretionary spending by our guests. A number of external economic factors could affect the purchases by our guests of the type of merchandise we offer, including:

•

disposable income or consumer confidence in future economic conditions;

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•

general economic and business conditions; and



•

increased interest rates or consumer debt levels.

        Decreases in consumer confidence and consumer spending could adversely impact our sales and results of operations. Reduced consumer spending may also require increased markdowns and increased promotional expenses, which would adversely impact our results of operations.

Competitive factors could reduce our sales and profitability.

        The U.S. retail home furnishings market is highly fragmented and intensely competitive. We compete with many different types of retailers, including among others department stores, mass merchandisers and discounters, specialty retail stores, home improvement centers, warehouse clubs and other retailers. Some of our competitors sell many of the same products and brands that we sell. The competitive challenges facing us include:

•

anticipating and quickly responding to changing consumer demands;



•

increasing customer awareness and traffic to our stores;



•

variety and fashion of the products we offer;



•

maintaining favorable brand recognition and achieving customer perception of value;



•

effectively marketing and competitively pricing our products to our target guests; and



•

competing with entities that have substantially greater financial and other resources than we do.

        Competition by existing or future competitors, including aggressive price competition, could result in the need to reduce our prices or increase our spending and could result in a decrease in our sales and profitability and require a change in our operating strategies.

Attrition among our buyers or key sales associates could adversely affect our financial performance and our growth.

        Our success is largely dependent on the efforts and abilities of our buyers and key sales associates. Our ability to meet our labor needs generally is subject to numerous factors, including the availability of a sufficient number of qualified persons in the work force, unemployment levels, the wages and benefits we pay, prevailing wage rates, changing demographics, health and other insurance costs and changes in employment legislation. If we were to lose buyers or key sales associates and not promptly fill their positions with comparably qualified individuals, our ability to benefit from long-standing relationships with key vendors or to provide relationship-based guest service may suffer. We cannot assure you that we will not suffer significant attrition among our current buyers or key sales associates. The loss of these individuals could adversely affect our business.

We may not be successful in opening and operating new stores profitably or making our recently opened stores profitable.

        Although at a decreased rate as compared to prior years, we plan to open a number of new stores as part of our growth strategy. There are many risks inherent in our store expansion strategy, and we cannot assure you that we will be able to achieve our expansion goals. Our ability to grow our store base and operate our new and recently opened stores profitably will be affected by many factors, including:

•

risks inherent in constructing, furnishing and supplying a store in a timely and cost effective manner, including obtaining necessary permits and zoning approvals;



•

integrating the new store into our distribution network;

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•

our ability to maintain financing on commercially reasonable terms;



•

our ability to identify and secure favorable sites for our new stores in well-trafficked areas and to negotiate satisfactory rent and other lease terms;



•

the competition for favorable store sites;



•

the presence of other complementary retail outlets at the locations where we open our new stores;



•

the proximity of our competitors' stores;



•

the impact on sales at our existing stores if we locate new stores in the same market;



•

our ability to invest in and expand our distribution, information technology, management and logistics infrastructure to support a continually increasing store base;



•

our ability to attract, train and retain good and experienced store managers and store personnel for our new stores; and



•

acceptance of our new stores in markets where we have limited or no existing presence.

        We intend to open additional stores in new markets, as well as in existing markets, in fiscal 2006, 2007 and beyond. The new markets we enter may have different competitive conditions, consumer trends and discretionary spending patterns than our existing markets, which may cause our stores in these new markets to be less successful than stores in our existing markets.

        Where we add stores into our existing markets, we may not be able to attract sufficient new customers to these new stores and, in addition, these new stores may have the effect of reducing sales from our existing stores in those markets, which may have an adverse effect on our results of operations.

        We cannot assure you that our new or recently opened stores will meet our internal financial operating targets or that we will be able to operate our new or recently opened stores profitably. We also cannot assure you that the operating results of our new or recently built stores will be comparable to the operating results of our mature existing stores.

A disruption in the operation of our distribution centers would impact our ability to deliver merchandise to our stores, which could adversely impact our sales and our results of operations.

        Our inventory is generally shipped by our suppliers to one of our three distribution centers, which are located in Shepherdsville, Kentucky; Swedesboro, New Jersey and Greensboro, North Carolina. At our distribution centers, the merchandise is processed, sorted and shipped to our stores. Events such as fire or other catastrophic events, any malfunction or disruption of our centralized information systems or shipping problems may result in delays or disruptions in the timely distribution of merchandise to our stores, which could adversely impact our sales and our results of operations. Additionally, increases in variable expenses such as fuel costs associated with our distribution operations may adversely impact our results of operations.

Our revenues and cash requirements are affected by the seasonal nature of our business.

        Our business is subject to substantial seasonal variations. Historically, we have realized a significant portion of our net sales and substantially all of our earnings for the year during the third and fourth quarters, with a majority of sales and earnings for these quarters realized in the fourth quarter. Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including the timing of new store openings, holiday spending patterns and general economic conditions. We believe this is the typical pattern associated with our segment of the retail industry, and we expect

21

this pattern will continue in the future. In anticipation of its peak selling season, we incur substantial additional costs, including additional inventory, payroll and advertising costs. If for any reason our sales during the fourth quarter of any year were significantly below expectations, our results of operations for that full year would be materially adversely affected.

A problem with our management information systems could impact our flow of product and information and adversely affect our operating productivity and results of operations.

        We rely heavily upon our existing management information systems in operating and monitoring all aspects of our business, including sales, warehousing, distribution, purchasing, inventory control, merchandise planning and replenishment and our financial systems. The bulk of our management information systems are centrally located at our headquarters, with offsite backup at other locations. Any extended disruption in the operation of our management information systems could have an adverse effect on our operating productivity and results of operations.

        Furthermore, to keep pace with changing technology, we must continuously provide for the design and implementation of new information technology systems as well as enhancements of our existing systems. Any failure to adequately maintain and update the information technology systems supporting our sales operations or inventory control could prevent us from processing and delivering merchandise, which could adversely affect our business.

Our business can be affected by extreme or unseasonable weather conditions.

        Extreme weather conditions in the areas in which our stores are located could adversely affect our business. For example, heavy snowfall, rainfall or other extreme weather conditions over a prolonged period might make it difficult for our guests to travel to our stores and thereby reduce our sales and profitability. Our business is also susceptible to unseasonable weather conditions. For example, extended periods of unseasonably warm weather temperatures during the winter seasons could render a portion of our inventory incompatible with those conditions. Reduced sales from extreme or prolonged unseasonable weather conditions would adversely affect our business.

Acts of terrorism could adversely affect our business.

        The economic downturn that followed the terrorist attacks of September 11, 2001 had a material adverse effect on our business. Any further acts of terrorism or other future conflict may disrupt commerce and undermine consumer confidence, cause a downturn in the economy generally, cause consumer spending or shopping center traffic to decline or reduce the desire of our guests to make discretionary purchases. Any of the foregoing factors could negatively impact our sales revenue, particularly in the case of any terrorist attack targeting retail space, such as a shopping center. Furthermore, an act of terrorism or war, or the threat thereof, could negatively impact our business by interfering with our ability to obtain merchandise from foreign manufacturers. Any future inability to obtain merchandise from our foreign manufacturers or to substitute other manufacturers, at similar costs and in a timely manner, could adversely affect our business.

We are subject to numerous regulations that could affect our operations.

        We are subject to customs, truth-in-advertising and other laws, including consumer protection regulations and zoning and occupancy ordinances, which regulate retailers generally and/or govern the importation, promotion and sale of merchandise and the operation of retail stores and warehouse facilities. Although we undertake to monitor changes in these laws, if these laws change without our knowledge, or are violated by importers, designers, manufacturers or distributors, we could experience delays in shipments and receipt of goods or be subject to fines or other penalties under the controlling regulations, any of which could adversely affect our business.

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If we are unable to enforce our intellectual property rights, or if we are accused of infringing on a third party's intellectual property rights, our profitability may be adversely affected.

        We and our subsidiaries currently own our trademarks and service marks, including the "Linens 'n Things" and "LNT" marks. Our trademarks and service marks are registered with both the United States Patent and Trademark Office and the Canadian Intellectual Property Office. The laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United States. Moreover, we are unable to predict the effect that any future foreign or domestic intellectual property legislation or regulation may have on our existing or future business. The loss or reduction of any of our significant proprietary rights could have an adverse effect on our business.

        Additionally, third parties may assert claims against us alleging infringement, misappropriation or other violations of their trademarks, copyrights or patents (including with respect to alleged proprietary designs) or other proprietary rights, whether or not the claims have merit. Claims like these may be time consuming and expensive to defend and could result in us being required to cease using the trademark, copyright or patent, design or other rights and selling the allegedly infringing products or to acquire licenses to continue using such intellectual property. This might have an adverse affect on our sales or business operations and cause us to incur significant litigation costs and expenses.

If we significantly overestimate our sales, our profitability may be adversely affected.

        We make decisions regarding the purchase of our merchandise well in advance of the season in which it will be sold, generally six months to one year. If our sales during any season, particularly a peak season, are significantly lower than we expect for any reason, we may not be able to adjust our expenditures for inventory and other expenses in a timely fashion and may be left with a substantial amount of unsold inventory. If that occurs, we may be forced to rely on markdowns or promotional sales to dispose of excess inventory. This could have an adverse effect on our margins and operating income. At the same time, if we fail to purchase a sufficient quantity of merchandise or if our vendors do not have the capacity to handle our new purchase commitments, we may not have an adequate supply of products to meet guest demand. This may cause us to lose sales or adversely affect our reputation.

Changes in our credit card arrangements, applicable regulations and consumer credit patterns could adversely impact our ability to facilitate the provision of consumer credit to our guests and adversely affect our business.

        We maintain a proprietary credit card program through which credit is extended to guests under the "Linens 'n Things" name. Changes in our proprietary credit card arrangements that adversely impact our ability to facilitate the provision of consumer credit may adversely affect our performance. Credit card operations are subject to numerous federal and state laws that impose disclosure and other requirements upon the origination, servicing and enforcement of credit accounts and limitations on the maximum amount of finance charges that may be charged by a credit provider. Any effect of these regulations or change in the regulation of credit arrangements that would materially limit the availability of credit to our guest base could adversely affect our business. In addition, changes in credit card use, payment patterns and default rates may result from a variety of economic, legal, social and other factors that we cannot control or predict with certainty.

Failure to maintain competitive terms under our loyalty programs could adversely affect our business.

        As part of our strategy, we intend to formalize and maintain loyalty programs that are designed to cultivate long-term relationships with our customers and enhance the quality of service we provide to our customers. We must constantly monitor and update the terms of our loyalty programs so that we continue to meet the demands and needs of our customers and remain competitive with loyalty

23

programs offered by our competitors. Our failure to provide quality service and competitive loyalty programs to our customers could adversely affect our business.

If we are unable to renew or replace our store leases or enter into leases for new stores on favorable terms, or if any of our current leases are terminated prior to the expiration of their stated term and we cannot find suitable alternate locations, our growth and profitability could be harmed.

        We lease all of our store locations. Our current leases expire at various dates through 2029 subject, in many cases, to renewal options for periods ranging from five to 20 years. Our ability to renew any expired lease or, if such lease cannot be renewed, our ability to lease a suitable alternate location, and our ability to enter into leases for new stores on favorable terms will depend on many factors which are not within our control, such as conditions in the local real estate market, competition for desirable properties and our relationships with current and prospective landlords. If we are unable to renew existing leases or lease suitable alternate locations, or enter into leases for new stores on favorable terms, our growth and our profitability may be significantly harmed.

Restrictions contained in some of our leases relating to change of control of our Company may make any change of control more difficult or impair our ability to retain such leases in the event of a change of control.

        Approximately 5% of our leases contain, and leases related to new stores may contain, various restrictions relating to a change of control of our Company. In such cases, a change of control of our Company without the consent of the landlord may result in a violation of the terms of such lease, thereby exposing us to potential damages or lease termination. This, in turn, could harm our growth and profitability. The presence of such provisions may also make any change of control in the future more difficult.

We have identified certain issues relating to our internal controls and procedures, which, if not remedied effectively, could have an adverse effect on our business.

        On February 7, 2005, the Office of the Chief Accountant of the SEC issued a clarification regarding lease accounting under Generally Accepted Accounting Principles in the United States ("GAAP"). As a result of this clarification, we reviewed our lease accounting practices and determined that our former methods of accounting for leases and landlord allowances were not consistent with the views expressed by the SEC. As a result, management has concluded that our internal control over the selection and monitoring of appropriate assumptions and factors affecting accounting for leases and landlord allowances was not effective as the end of fiscal 2004. Such internal control deficiencies resulted in the restatement of certain of our financial statements and constituted a material weakness in our internal control over financial reporting. We made this determination in consultation with the audit committee of our board of directors and senior management. Consequently, our assessment resulted in an attestation report with an opinion from our independent registered public accounting firm that we had not maintained effective internal control over financial reporting as of January 1, 2005. In addition, during the fourth quarter of 2004, management determined that there was a material weakness in the design of controls over inventory existence, due to the timing of our physical inventory counts and our cycle counting procedures over inventory. In response to this control deficiency we enhanced our inventory cycle count procedures within the fourth quarter of 2004 to confirm the existence of inventory.

        Our management also determined that as of the end of fiscal 2005 we did not have adequate review controls to ensure the propriety of the accounting for the classification of capital expenditures related to store self-development transactions. Our accounting treatment for capital expenditures related to store self-development transactions, initially recorded on the balance sheet as other current assets and on the cash flow statement as a change in other current assets, was subsequently determined

24

to be incorrect according to generally accepted accounting principles, which principles provide that capital expenditures related to store self-development transactions should be recorded on the balance sheet as property and equipment and on the cash flow statement as additions to property and equipment. Our management corrected the accounting related to store self-development transactions prior to issuance of the financial statements for the fiscal year ended December 31, 2005. There was no change in the overall cash flow generated by us and the incorrect accounting had no impact on our income statement. The control deficiency that resulted in the incorrect accounting for the classification of capital expenditures related to store self-development transactions represented a material weakness in our internal control over financial reporting as of December 31, 2005. Our management has implemented review controls to ensure the propriety of our accounting for these transactions.

        A material weakness in internal control over financial reporting is a control deficiency (within the meaning of the Public Company Accounting Oversight Board ("PCAOB") Auditing Standard No. 2), or combination of control deficiencies, that adversely affects a company's ability to initiate, authorize, record, process or report external financial data reliably in accordance with GAAP that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

        Although we have taken certain actions to address these issues, if we are unable to identify and remedy all such issues promptly and effectively, it could have a material adverse effect on our business, results of operations and financial condition. Maintaining effective control over financial reporting is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud. If our management or our independent registered public accounting firm were to conclude again in the future that our internal control over financial reporting was ineffective, investors could lose confidence in our reported financial information.

We are indirectly owned and controlled by the Sponsors, and their interests as equity holders may conflict with creditors.

        We are indirectly owned and controlled by affiliates of Apollo Management, L.P., National Realty & Development Corp. and Silver Point Capital Fund Investments LLC (the "Sponsors"), and the Sponsors have the ability to elect all of the members of our board of directors and thereby control our policies and operations, including the appointment of management, future issuances of our common stock or other securities, the payment of dividends, if any, on our common stock, the incurrence of debt by us, amendments to our certificate of incorporation and bylaws and the entering into of extraordinary transactions. The interests of the Sponsors may not in all cases be aligned with the interests of noteholders. For example, if we encounter financial difficulties or are unable to pay our indebtedness as it matures, the interests of our equity holders might conflict with the interests of noteholders. In addition, our equity holders may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to noteholders. Furthermore, the Sponsors may in the future own businesses that directly or indirectly compete with us. One or more of the Sponsors also may pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. So long as the Sponsors continue to own a significant amount of our combined voting power, even if such amount is less than 50%, they will continue to be able to strongly influence or effectively control our decisions.

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Risks Related to Holding the Notes

Our substantial leverage may impair our financial condition and prevent us from fulfilling our obligations under the notes.

        We have a substantial amount of indebtedness. As of April 1, 2006, our total debt was $733.7 million, and we had $351.4 million of available borrowings under our asset-based revolving credit facility. For the thirteen weeks ended April 1, 2006, we had a deficit of earnings to fixed charges of $98.1 million.

        Our substantial indebtedness could have important consequences to you, including:

•

making it more difficult for us to satisfy our obligations with respect to the notes;



•

increasing our vulnerability to general adverse economic and industry conditions by making it more difficult for us to react quickly to changing conditions;



•

limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions and other general corporate requirements;



•

requiring a substantial portion of our cash flow from operations for the payment of interest on our indebtedness and reducing our ability to use our cash flow to fund working capital, capital expenditures, acquisitions and general corporate requirements;



•

exposing us to risks inherent in interest rate fluctuations because some of our borrowings will be at variable rates of interest, which could result in a higher interest expense in the event of increases in interest rates;



•

limiting our flexibility in planning for, or reacting to, changes in our business, and the industry in which we operate; and



•

placing us at a competitive disadvantage compared with our competitors that have less indebtedness.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more indebtedness. This could further exacerbate the risks associated with our substantial leverage.

        Subject to specified limitations, the indenture governing the notes and the credit agreement governing our asset-based revolving credit facility permits us and our subsidiaries to incur substantial additional indebtedness, including $600.0 million of borrowings under our asset-based revolving credit facility that ranks equally with the notes. If new indebtedness is added to our and our subsidiaries' current indebtedness levels, the risks described above could intensify. See "Description of Certain Indebtedness" and "Description of Exchange Notes—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock" for additional information.

Covenant restrictions under our indebtedness may limit our ability to operate our business.

        The credit agreement governing our asset-based revolving credit facility and the indenture governing the notes do, and our future indebtedness agreements may, contain covenants that may restrict our ability to finance future operations or capital needs or to engage in other business activities. Our asset-based revolving credit facility and the indenture restricts, among other things, our ability and the ability of our restricted subsidiaries to:

•

incur, assume or guarantee additional indebtedness;



•

issue redeemable stock and preferred stock;



•

repurchase capital stock;

26

•

make other restricted payments including, without limitation, paying dividends and making investments;



•

create liens;



•

redeem debt that is junior in right of payment to the notes;



•

sell or otherwise dispose of assets, including capital stock of subsidiaries;



•

enter into agreements that restrict dividends from subsidiaries;



•

enter into mergers or consolidations;



•

enter into transactions with affiliates; and



•

enter into sale/leaseback transactions.

        In addition, our asset-based revolving credit facility requires us to maintain specified financial ratios and satisfy certain financial condition tests in certain situations. Events beyond our control, including changes in general economic and business conditions, may affect our ability to meet those financial ratios and financial condition tests. We cannot assure you that we will meet those tests or that the lenders will waive any failure to meet those tests. A breach of any of these covenants would result in a default under our asset-based revolving credit facility and the indenture. If an event of default under our asset-based revolving credit facility occurs, the lenders could terminate all commitments to lend and elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable. If we were unable to pay such amounts, the lenders could proceed against the collateral pledged to them. We have pledged our inventory, accounts receivable, cash, securities, other general intangibles and the capital stock of certain subsidiaries (our "revolving credit collateral") to the lenders on first-priority basis. In such an event, we cannot assure you that we would have sufficient assets to pay amounts due on the notes. As a result, you may receive less than the full amount you would be otherwise entitled to receive on the notes. See "Description of Certain Indebtedness," "Description of Exchange Notes—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock" and "Description of Exchange Notes—Certain Covenants—Liens" for additional information.

Certain of the collateral securing the notes is subject to control by creditors with first priority liens. If there is a default, the value of that collateral may not be sufficient to repay both the first priority creditors and the holders of the notes.

        The notes are secured by a first priority lien on equipment, intellectual property rights, related general intangibles and all of our capital stock and the capital stock of certain subsidiaries (our "note lien collateral"), and a second priority lien on our revolving credit collateral. Our asset-based revolving credit facility is secured by a first priority lien on our revolving credit collateral and a second priority lien on our note lien collateral. If we become insolvent or are liquidated, or if payment under any of the instruments governing our secured debt under our asset-based revolving credit facility is accelerated, the lenders under those instruments will be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to the instruments governing such debt. Accordingly, you will have a prior claim on our note lien collateral and the lenders under our asset-based revolving credit facility will have a prior claim on our revolving credit collateral. We cannot assure you that, in the event of a foreclosure, the proceeds from the sale of our note lien collateral would be sufficient to satisfy the amounts outstanding under the notes or that proceeds from the sale of our revolving credit collateral would be sufficient to satisfy the amounts outstanding under the notes and other obligations secured by the second priority liens, if any, after payment in full of all obligations under our asset-based revolving credit facility secured by the first priority liens on our revolving credit collateral. If such proceeds were not sufficient to repay amounts outstanding under the notes, then holders of such notes

27

(to the extent not repaid from the proceeds of the sale of the collateral) would only have an unsecured claim against our remaining assets, which claim will rank equal in priority to the unsecured claims with respect to any unsatisfied portion of the obligations secured by the first priority liens and our other unsecured senior indebtedness. We have not performed valuations on the value of our note lien collateral or our revolving credit collateral. We will be permitted to borrow substantial additional secured indebtedness in the future under the terms of the indenture. See "Description of Exchange Notes—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock" and "Description of Exchange Notes—Certain Covenants—Liens."

        Under the indenture, we could also incur additional indebtedness secured by first priority liens and second priority liens so long as such first and second priority liens are securing indebtedness permitted to be incurred by the covenants described under "Description of Exchange Notes" and certain other conditions are met. Our ability to designate future debt as either first priority secured or second priority secured and, in either event, to enable the holders thereof to share in the collateral on either a priority basis or a pari passu basis with holders of the notes and our asset-based revolving credit facility, may have the effect of diluting the ratio of the value of such collateral to the aggregate amount of the obligations secured by the collateral.

It may be difficult to realize the value of the collateral securing the notes.

        The collateral securing the notes is subject to any and all exceptions, defects, encumbrances, liens and other imperfections as may be accepted by the trustee for the notes and any other creditors that also have the benefit of first liens on the collateral securing the notes from time to time, whether on or after the date the notes are issued. The existence of any such exceptions, defects, encumbrances, liens or other imperfections could adversely affect the value of the collateral securing the notes as well as the ability of the collateral agent to realize or foreclose on such collateral.

        No appraisals of any collateral have been prepared in connection with this offering. The value of the collateral at any time will depend on market and other economic conditions, including the availability of suitable buyers. By their nature, some or all of the pledged assets may be illiquid and may have no readily ascertainable market value. We cannot assure you that the fair market value of the collateral as of the date of this prospectus exceeds the principal amount of the indebtedness secured thereby. The value of the assets pledged as collateral for the notes could be impaired in the future as a result of changing economic conditions, our failure to implement our business strategy, competition or other future trends. In the event that a bankruptcy case is commenced by or against us, if the value of the collateral is less than the amount of principal and accrued and unpaid interest on the notes and all other senior secured obligations, interest may cease to accrue on the notes from and after the date the bankruptcy petition is filed.

        The security interest of the collateral agent is subject to practical problems generally associated with the realization of security interests in collateral. For example, the collateral agent may need to obtain the consent of a third party to obtain or enforce a security interest in a contract. We cannot assure you that the collateral agent will be able to obtain any such consent. We also cannot assure you that the consents of any third parties will be given when required to facilitate a foreclosure on such assets. Accordingly, the collateral agent may not have the ability to foreclose upon those assets and the value of the collateral may significantly decrease.

The lien-ranking provisions set forth in the indenture and the intercreditor agreement will substantially limit the rights of the holders of the notes with respect to the collateral securing the notes.

        The rights of the holders of the notes with respect to the collateral securing the notes is substantially limited pursuant to the terms of the lien-ranking provisions set forth in the indenture and the intercreditor agreement. Under those lien-ranking provisions, at any time that obligations that have

28

the benefit of the first priority liens are outstanding, any actions that may be taken in respect of the collateral, including the ability to cause the commencement of enforcement proceedings against the collateral and to control the conduct of such proceedings, and the approval of amendments to, releases of collateral from the lien of and waivers of past defaults under, the collateral documents, will be at the direction of the holders of the obligations secured by the first priority liens. The trustee, on behalf of the holders of the notes, will not necessarily have the ability to control or direct such actions, even if the rights of the holders of the notes are adversely affected. Additional releases of collateral from the second priority lien securing the notes are permitted under some circumstances.

Your rights in the collateral may be adversely affected by the failure to perfect security interests in collateral.

        Applicable law requires that a security interest in certain tangible and intangible assets can only be properly perfected and its priority retained through certain actions undertaken by the secured party. The first priority liens in the collateral securing the notes may not be perfected with respect to the claims or the notes if we are not able to take the actions necessary to perfect any of these liens. There can be no assurance that the lenders under our asset-based revolving credit facility will have taken all actions necessary to create properly perfected security interests in the collateral subject to a second priority lien securing the notes, which, as a result of the intercreditor agreement, may result in the loss of the priority of the security interest in favor of the noteholders to which they would have been entitled as a result of such non-perfection.

Rights of holders of notes in the collateral may be adversely affected by the failure to perfect security interests in certain collateral acquired in the future.

        The security interest in the collateral securing the notes includes assets of us and of the guarantors, both tangible and intangible, whether now owned or acquired or arising in the future. Applicable law requires that certain property and rights acquired after the grant of a general security interest, such as real property, equipment subject to a certificate and certain proceeds, can only be perfected at the time such property and rights are acquired and identified. We and the guarantors are not obligated to perfect the noteholders' security interest in specified collateral. There can be no assurance that the trustee or the collateral agent will monitor, or that we will inform the trustee or the collateral agent of, the future acquisition of property and rights that constitute collateral, and that the necessary action will be taken to properly perfect the security interest in such after-acquired collateral. The collateral agent for the notes has no obligation to monitor the acquisition of additional property or rights that constitute collateral or the perfection of any security interest. Such failure may result in the loss of the security interest in the collateral or the priority of the security interest in favor of the notes against third parties.

Bankruptcy laws may limit your ability to realize value from the collateral.

        The right of the collateral agent to repossess and dispose of the collateral securing the notes and guarantees is likely to be significantly impaired by applicable bankruptcy law if another bankruptcy proceeding were to be commenced by or against us. Even if the repossession and disposition has occurred, a subsequent bankruptcy proceeding could give rise to causes of action against the collateral agent and the holders of notes. Following the commencement of a case under the U.S. Bankruptcy Code, a secured creditor such as the collateral agent is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security repossessed from such debtor, without prior bankruptcy court approval, which may not be given. Moreover, the U.S. Bankruptcy Code permits the debtor to continue to retain and use collateral, and the proceeds, products, rents or profits of the collateral, even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given "adequate protection." The meaning of the term "adequate protection" varies

29

according to circumstances, but it is intended in general to protect the value of the secured creditor's interest in the collateral as of the commencement of the bankruptcy case and may include cash payments, the granting of additional security or otherwise, if and at such times as the bankruptcy court in its discretion determines during the pendency of the bankruptcy case. A bankruptcy court may determine that a secured creditor may not require compensation for a diminution in the value of its collateral if the value of the collateral exceeds the debt it secures.

        Given the uncertainty as to what will be the value of the collateral at the time when a bankruptcy case may be commenced, and in view of the fact that the granting of "adequate protection" varies on a case-by-case basis and the broad discretionary power of a bankruptcy court, it is impossible to predict:

•

how long payments under the notes could be delayed following commencement of a bankruptcy case;



•

whether or when the collateral agent could repossess or dispose of the collateral; or



•

whether or to what extent holders of the notes would be compensated for any delay in payment or loss of value of the collateral through the requirement of "adequate protection."

        Furthermore, in the event a bankruptcy court determines the value of the collateral is not sufficient to repay all amounts due on first priority lien debt and, thereafter, the notes, the holders of the notes would hold unsecured claims with respect to such insufficiency. The U.S. Bankruptcy Code only permits the accrual of post-petition interest (and sometimes current payment), costs and attorney's fees to a secured creditor during a debtor's bankruptcy case to the extent the value of its collateral exceeds the aggregate outstanding principal amount of the obligations secured by the collateral.

        In addition, the intercreditor agreement provides that, in the event of a bankruptcy, the trustee and the collateral agent may not object to a number of important matters following the filing of a bankruptcy petition so long as any first lien debt is outstanding.

Any future pledge of collateral might be avoidable in bankruptcy.

        Any future pledge of collateral in favor of the collateral agent, including pursuant to security documents delivered after the date of the indenture, might be avoidable by the pledgor (as debtor in possession) or by its trustee in bankruptcy if certain events or circumstances exist or occur, including, among others, if the pledgor is insolvent at the time of the pledge, the pledge permits the holders of the notes to receive a greater recovery than if the pledge had not been given and a bankruptcy proceeding in respect of the pledgor is commenced within 90 days following the pledge or, in certain circumstances, a longer period.

We will require a significant amount of cash, and our ability to generate sufficient cash depends upon many factors, some of which are beyond our control.

        Our ability to make payments on and refinance our indebtedness and to fund working capital needs and planned capital expenditures depends on our ability to generate adequate cash flow in the future. To some extent, this is subject to general economic, financial, competitive, legislative and regulatory factors and other factors that are beyond our control. For example, our need to stock substantial inventory could increase our working capital needs. We cannot assure you that our business will continue to generate cash flow from operations at current levels or that our cash needs will not increase. If we are unable to generate sufficient cash flow from operations in the future to service our indebtedness and meet our other needs, we may have to refinance all or a portion of our existing indebtedness, obtain additional financing, reduce expenditures that we deem necessary to our business or sell assets. We cannot assure you that any refinancing of this kind would be possible or that any additional financing could be obtained or could be obtained on commercially reasonable terms. The

30

inability to obtain additional financing could have a material adverse effect on our financial condition and on our ability to meet our obligations to you under the notes.

We may not be able to make the change of control offer required by the indenture.

        Upon a change of control, subject to certain conditions, we are required to offer to repurchase all outstanding notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the date of repurchase. The source of funds for that purchase of notes will be our available cash or cash generated from our subsidiaries' operations or other potential sources, including borrowings, sales of assets or sales of equity. We cannot assure you that sufficient funds from such sources will be available at the time of any change of control to make required repurchases of notes tendered. In addition, the terms of our asset-based revolving credit facility limit our ability to repurchase your notes and provides that certain change of control events will constitute an event of default thereunder. Our future indebtedness agreements may contain similar restrictions and provisions. If the holders of the notes exercise their right to require us to repurchase all of the notes upon a change of control, the financial effect of this repurchase could cause a default under our other indebtedness, even if the change of control itself would not cause a default. Accordingly, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of our other indebtedness and the notes or that restrictions in our asset-based revolving credit facility and the indenture will not allow such repurchases. In addition, certain corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a "Change of Control" under the indenture. See "Description of Exchange Notes—Repurchase at the Option of Holders—Change of Control" and "Description of Certain Indebtedness" for additional information.

Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

        Certain of our borrowings, primarily borrowings under our asset-based revolving credit facility and the notes, are, and are expected to continue to be, at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income would decrease. Borrowings under our asset-based revolving credit facility bear interest at a rate equal to, at our option, either (a) an alternate base rate determined by reference to the higher of (1) the base rate in effect on such day and (2) the federal funds effective rate plus 0.50% or (b) a LIBOR rate, with respect to any Eurodollar borrowing, determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, in each case plus an applicable margin. The initial applicable margin for borrowings under our asset-based revolving credit facility was 0% with respect to alternate base rate borrowings and 1.50% with respect to LIBOR borrowings. The applicable margin with respect to the notes was a percentage per annum equal to 5.625%. Assuming all revolving loans are fully drawn, each quarter point change in interest rates would result in a $3.1 million change in annual interest expense on our asset-based revolving credit facility and the notes. Pursuant to the indenture governing the old notes and the exchange notes, we are required to enter into interest rate swaps, involving the exchange of floating for fixed rate interest payments, or other forms of derivative transactions, to reduce interest rate volatility. However, we may not be successful in obtaining interest rate swaps on commercially reasonable terms or at all.

Fraudulent transfer statutes may limit your rights as a holder of the notes.

        Federal and state fraudulent transfer laws as previously interpreted by various courts permit a court, if it makes certain findings, to:

•

avoid all or a portion of our obligations to holders of the notes;

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•

subordinate our obligations to holders of the notes to our other existing and future indebtedness, entitling other creditors to be paid in full before any payment is made on the notes; and



•

take other action detrimental to holders of the notes, including invalidating the notes.

        In that event, we cannot assure you that you would ever be repaid. There is also no assurance that amounts previously paid to you would not be subject to return.

        Under federal and state fraudulent transfer laws, in order to take any of those actions, courts will typically need to find that, at the time the notes were issued, we:

•

issued the notes with the intent of hindering, delaying or defrauding current or future creditors; or



•

received less than fair consideration or reasonably equivalent value for incurring the indebtedness represented by the notes; and



•

were insolvent or were rendered insolvent by reason of the issuance of the notes;



•

were engaged, or were about to engage, in a business or transaction for which our capital was unreasonably small; or



•

intended to incur, or believed or should have believed we would incur, indebtedness beyond our ability to pay as such indebtedness matures.

        Many of the foregoing terms are defined in or interpreted under those fraudulent transfer statutes and as judicially interpreted. A court could find that we did not receive fair consideration or reasonably equivalent value for the incurrence of the indebtedness represented by the notes.

        The measure of insolvency for purposes of the foregoing considerations will vary depending on the law of the jurisdiction that is being applied in any such proceeding. Generally, a company would be considered insolvent if, at the time it incurred the indebtedness:

•

the sum of its indebtedness (including contingent liabilities) is greater than its assets, at fair valuation; or



•

the present fair saleable value of its assets is less than the amount required to pay the probable liability on its total existing indebtedness and liabilities (including contingent liabilities) as they become absolute and matured.

        We cannot assure you what standard a court would apply in determining our solvency and whether it would conclude that we were solvent when we incurred our obligations under the notes.

        Our obligations under the notes are guaranteed by our parent and all of our direct and indirect present and future subsidiaries that guarantee our obligations under our asset-based revolving credit facility, and the guarantees may also be subject to review under various laws for the protection of creditors. It is possible that creditors of the guarantors may challenge the guarantees as a fraudulent transfer or conveyance. The analysis set forth above would generally apply, except that the guarantees could also be subject to the claim that, because the guarantees were incurred for the benefit of the Issuers, and only indirectly for the benefit of the guarantors, the obligations of the guarantors thereunder were incurred for less than reasonably equivalent value or fair consideration. A court could avoid a guarantor's obligation under its guarantee, subordinate the guarantee to the other indebtedness of a guarantor, direct that holders of the notes return any amounts paid under a guarantee to the relevant guarantor or to a fund for the benefit of its creditors or take other action detrimental to the holders of the notes.

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There is no active trading market for the notes.

        The old notes are not listed, and we do not intend to list the exchange notes, on any securities exchange or to seek approval for quotations through any automated quotation system. We do not anticipate that an active and liquid trading market for the notes will develop as a result of the exchange of the exchange notes for the old notes. For that reason we cannot assure you that:

•

a liquid market for the notes will develop;



•

you will be able to sell your notes; or



•

you will receive any specific price upon any sale of the notes.

        If a public market for the notes does develop, the notes could trade at prices that may be higher or lower than their principal amount or purchase price, depending on many factors, including prevailing interest rates, the market for similar notes and our financial performance.

You may have difficulty selling the old notes that you do not exchange in this exchange offer.

        If you do not participate or properly tender your old notes in this exchange offer:

•

you will retain old notes that are not registered under the Securities Act and that will continue to be subject to restrictions on transfer that are described in the legend on the old notes;



•

you will not be able, except in very limited instances, to require us to register your old notes under the Securities Act;



•

you will not be able to offer to resell or transfer your old notes unless they are registered under the Securities Act or unless you offer to resell or transfer them pursuant to an exemption under the Securities Act; and



•

the trading market for your old notes will become more limited to the extent that other holders of old notes participate in the exchange offer.

If you do not properly tender your old notes, you will continue to hold unregistered old notes and be subject to the same limitations on your ability to transfer old notes.

        We will only issue exchange notes in exchange for old notes that are timely received by the exchange agent together with all required documents, including a properly completed and signed letter of transmittal. Therefore, you should allow sufficient time to ensure timely delivery of the old notes and you should carefully follow the instructions on how to tender your old notes. Neither we nor the exchange agent are required to tell you of any defects or irregularities with respect to your tender of the old notes. If you are eligible to participate in the exchange offer and do not tender your old notes or if we do not accept your old notes because you did not tender your old notes properly, then, after we consummate the exchange offer, you will continue to hold old notes that are subject to the existing transfer restrictions and will no longer have any registration rights or be entitled to any additional interest with respect to the old notes. In addition:

•

if you tender your old notes for the purpose of participating in a distribution of the exchange notes, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes; and



•

if you are a broker-dealer that receives exchange notes for your own account in exchange for old notes that you acquired as a result of market making activities or any other trading activities, you will be required to acknowledge that you will deliver a prospectus in connection with any resale of those exchange notes.

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        We have agreed that, for a period of 180 days after the exchange offer is consummated, we will make this prospectus available to any broker-dealer for use in connection with any resales of the exchange notes.

        After the exchange offer is consummated, if you continue to hold any old notes, you may have difficulty selling them because there will be fewer old notes outstanding.

The market price for the notes may be volatile.

        Historically, the market for non-investment grade indebtedness has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the notes. The market for the notes, if any, may be subject to similar disruptions. Any such disruptions may materially adversely affect you as a holder of the notes.

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THE EXCHANGE OFFER

Purpose and Effect

        We issued the old notes in a private placement on February 14, 2006. The old notes were, and the exchange notes will be, issued under the Indenture, dated February 14, 2006, between us, Linens 'n Things, Inc., Linens 'n Things Center, Inc., the subsidiary guarantors and The Bank of New York, as trustee. In connection with the private placement, we entered into a registration rights agreement, which requires that we file this registration statement under the Securities Act with respect to the exchange notes to be issued in the exchange offer and, upon the effectiveness of this registration statement, offer to you the opportunity to exchange your old notes for a like principal amount of exchange notes. The exchange notes will be issued without a restrictive legend and, except as set forth below, you may reoffer and resell them without registration under the Securities Act. After we complete the exchange offer, our obligation to register the exchange of exchange notes for old notes will terminate. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus is a part.

        Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, if you are not our "affiliate" within the meaning of Rule 405 under the Securities Act or a broker-dealer referred to in the next paragraph, we believe that you may reoffer, resell or otherwise transfer the exchange notes issued to you in the exchange offer without compliance with the registration and prospectus delivery requirements of the Securities Act. This interpretation, however, is based on your representation to us that:

•

the exchange notes to be issued to you in the exchange offer are acquired in the ordinary course of your business;



•

you are not engaging in and do not intend to engage in a distribution of the exchange notes to be issued to you in the exchange offer; and



•

you have no arrangement or understanding with any person to participate in the distribution of the exchange notes to be issued to you in the exchange offer.

        If you tender old notes in the exchange offer for the purpose of participating in a distribution of the exchange notes to be issued to you in the exchange offer, you cannot rely on this interpretation by the staff of the Commission. Under those circumstances, you must comply with the registration and prospectus delivery requirements of the Securities Act in order to reoffer, resell or otherwise transfer your exchange notes. Each broker-dealer that receives exchange notes in the exchange offer for its own account in exchange for old notes that were acquired by the broker-dealer as a result of market-making activities or other trading activities must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of those exchange notes. See "Plan of Distribution."

        If you will not receive freely tradeable exchange notes in the exchange offer or are not eligible to participate in the exchange offer, you can elect, by indicating on the letter of transmittal and providing certain additional necessary information, to have your old notes registered on a "shelf" registration statement pursuant to Rule 415 under the Securities Act. In the event that we are obligated to file a shelf registration statement, we will be required to keep the shelf registration statement effective for a period of two years following the date of original issuance of the old notes or such shorter period that will terminate when all of the old notes covered by the shelf registration statement have been sold pursuant to the shelf registration statement. Other than as set forth in this paragraph, you will not have the right to require us to register your old notes under the Securities Act. See "—Procedures for Tendering" below.

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Consequences of Failure to Exchange

        If you do not participate or properly tender your old notes in this exchange offer:

•

you will retain old notes that are not registered under the Securities Act and that will continue to be subject to restrictions on transfer that are described in the legend on the old notes;



•

you will not be able to require us to register your old notes under the Securities Act unless, as set forth above, you do not receive freely tradable exchange notes in the exchange offer or are not eligible to participate in the exchange offer, and we are obligated to file a shelf registration statement;



•

you will not be able to offer to resell or transfer your old notes unless they are registered under the Securities Act or unless you offer to resell or transfer them pursuant to an exemption under the Securities Act; and



•

the trading market for your old notes will become more limited to the extent that other holders of old notes participate in the exchange offer.

Terms of the Exchange Offer

        Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, we will accept any and all old notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer. We will issue $1,000 principal amount of the exchange notes in exchange for each $1,000 principal amount of the old notes accepted in the exchange offer. You may tender some or all of your old notes pursuant to the exchange offer; however, old notes may be tendered only in integral multiples of $1,000 in principal amount.

        The forms and terms of the exchange notes are substantially the same as the forms and terms of the old notes, except that the exchange notes have been registered under the Securities Act and will not bear legends restricting their transfer. The exchange notes will be issued pursuant to, and entitled to the benefits of, the indenture that governs the old notes. The exchange notes and any remaining old notes will be deemed one class of notes under the indenture.

        As of the date of this prospectus, $650 million in aggregate principal amount of the old notes are outstanding. This prospectus, together with the letter of transmittal, is being sent to all registered holders of old notes and to others believed to have beneficial interests in the old notes. You do not have any appraisal or dissenters' rights in connection with the exchange offer under Delaware or California law or the indenture.

        We will be deemed to have accepted validly tendered old notes if and when we have given oral or written notice of our acceptance to The Bank of New York, the exchange agent for the exchange offer. The exchange agent will act as our agent for the purpose of receiving from us the exchange notes for the tendering noteholders. If we do not accept any tendered old notes because of an invalid tender, the occurrence of certain other events set forth in this prospectus, or otherwise, we will return certificates, if any, for any unaccepted old notes, without expense, to the tendering noteholder as promptly as practicable after the expiration date of the exchange offer.

        You will not be required to pay brokerage commissions or fees or, except as set forth below under "—Transfer Taxes," with respect to the exchange of your old notes in the exchange offer. We will pay all charges and expenses, other than certain applicable taxes, in connection with the exchange offer. See "—Fees and Expenses" below.

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Expiration Date; Amendment

        The exchange offer will expire at 5:00 p.m., New York City time, on    •    , 2006, unless we determine, in our sole discretion, to extend the exchange offer, in which case it will expire at the later date and time to which it is extended. We do not intend to extend the exchange offer, however, although we reserve the right to do so. If we extend the exchange offer, we will give oral or written notice of the extension to the exchange agent and give each registered holder of old notes notice by means of a press release or other public announcement of any extension prior to 9:00 a.m., New York City time, on the next business day after the scheduled expiration date.

        We also reserve the right, in our sole discretion,

•

to accept tendered notes upon the expiration of the tender offer, and extend the exchange offer with respect to untendered notes;



•

to delay accepting any old notes or, if any of the conditions set forth below under "—Conditions" have not been satisfied or waived, to terminate the exchange offer by giving oral or written notice of such delay or termination to the exchange agent; or



•

to amend the terms of the exchange offer in any manner by complying with Rule 14e-l(d) under the Exchange Act to the extent that rule applies.

        We will notify you as promptly as we can of any extension, termination or amendment. In addition, we acknowledge and undertake to comply with the provisions of Rule 14e-l(c) under the Exchange Act, which requires us to pay the consideration offered, or return the old notes surrendered for exchange, promptly after the termination or withdrawal of the exchange offer.

Procedures for Tendering

        Only a holder of old notes may tender the old notes in the exchange offer. Except as set forth under "—Book-Entry Transfer," to tender in the exchange offer a holder must complete, sign and date the letter of transmittal, or a copy of the letter of transmittal, have the signatures on the letter of transmittal guaranteed if required by the letter of transmittal and mail or otherwise deliver the letter of transmittal or copy to The Bank of New York, as the exchange agent, prior to the expiration date. In addition:

•

the certificates representing your old notes must be received by the exchange agent prior to the expiration date;



•

a timely confirmation of book-entry transfer of such notes into the exchange agent's account at The Depository Trust Company, or DTC, pursuant to the procedure for book-entry transfers described below under "—Book-Entry Transfer" must be received by the exchange agent prior to the expiration date; or



•

you must comply with the guaranteed delivery procedures described below.

        If you hold old notes through a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your old notes, you should contact the registered holder of your old notes promptly and instruct the registered holder to tender on your behalf.

        If you tender an old note and you do not properly withdraw the tender prior to the expiration date, you will have made an agreement with us to participate in the exchange offer in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal.

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        Signatures on a letter of transmittal or a notice of withdrawal must be guaranteed by an eligible institution unless:

•

old notes tendered in the exchange offer are tendered either by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the holder's letter of transmittal or for the account of an eligible institution; and



•

the box entitled "Special Registration Instructions" on the letter of transmittal has not been completed.

        If signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, the guarantee must be by a financial institution, which includes most banks, savings and loan associations and brokerage houses, that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Program or the Stock Exchanges Medallion Program.

        If the letter of transmittal is signed by a person other than you, your old notes must be endorsed or accompanied by a properly completed bond power and signed by you as your name appears on those old notes.

        If the letter of transmittal or any old notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, those persons should so indicate when signing. Unless we waive this requirement, in this instance you must submit with the letter of transmittal proper evidence satisfactory to us of their authority to act on your behalf.

        We will determine, in our sole discretion, all questions regarding the validity, form, eligibility, including time of receipt, acceptance and withdrawal of tendered old notes. Our determination will be final and binding. We reserve the absolute right to reject any and all old notes not properly tendered or any old notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to certain old notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties.

        You must cure any defects or irregularities in connection with tenders of your old notes within the time period that we determine unless we waive that defect or irregularity. Although we intend to notify you of defects or irregularities with respect to your tender of old notes, neither we, the exchange agent nor any other person will incur any liability for failure to give this notification. Your tender will not be deemed to have been made and your old notes will be returned to you if:

•

you improperly tender your old notes;



•

you have not cured any defects or irregularities in your tender; and



•

we have not waived those defects, irregularities or improper tender.

        The exchange agent will return your old notes, unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration of the exchange offer.

        In addition, we reserve the right in our sole discretion to:

•

purchase or make offers for, or offer exchange notes for, any old notes that remain outstanding subsequent to the expiration of the exchange offer;



•

terminate the exchange offer; and



•

to the extent permitted by applicable law, purchase notes in the open market, in privately negotiated transactions or otherwise.

        The terms of any of these purchases or offers could differ from the terms of the exchange offer.

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        In all cases, the issuance of exchange notes for old notes that are accepted for exchange in the exchange offer will be made only after timely receipt by the exchange agent of certificates for your old notes or a timely book-entry confirmation of your old notes into the exchange agent's account at DTC, a properly completed and duly executed letter of transmittal, or a computer-generated message instead of the letter of transmittal, and all other required documents. If any tendered old notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if old notes are submitted for a greater principal amount than you desire to exchange, the unaccepted or non-exchanged old notes, or old notes in substitution therefor, will be returned without expense to you. In addition, in the case of old notes tendered by book-entry transfer into the exchange agent's account at DTC pursuant to the book-entry transfer procedures described below, the non-exchanged old notes will be credited to your account maintained with DTC, as promptly as practicable after the expiration or termination of the exchange offer.

Book-Entry Transfer

        The old notes were issued as global securities in fully registered form without interest coupons. Beneficial interests in the global securities, held by direct or indirect participants in DTC, are shown on, and transfers of these interests are effected only through, records maintained in book-entry form by DTC with respect to its participants.

        The exchange agent will make a request to establish an account with respect to the old notes at DTC for purposes of the exchange offer within two business days after the date of this prospectus, and any financial institution that is a participant in DTC's systems may make book-entry delivery of old notes being tendered by causing DTC to transfer such old notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. However, although delivery of old notes may be effected through book-entry transfer at DTC, the letter of transmittal or a copy of the letter of transmittal, with any required signature guarantees and any other required documents, must, in any case other than as set forth in the following paragraph, be transmitted to and received by the exchange agent at the address set forth under "—Exchange Agent" on or prior to the expiration date or you must comply with the guaranteed delivery procedures described below.

        The Depository Trust Company's Automated Tender Offer Program, or ATOP, is the only method of processing exchange offers through DTC. To accept the exchange offer through ATOP, participants in DTC must send electronic instructions to DTC through DTC's communication system instead of sending a signed, hard copy letter of transmittal. DTC is obligated to communicate those electronic instructions to the exchange agent. To tender old notes through ATOP, the electronic instructions sent to DTC and transmitted by DTC to the exchange agent must contain the character by which the participant acknowledges its receipt of, and agrees to be bound by, the letter of transmittal.

        If you hold your old notes in the form of book-entry interests and you wish to tender your old notes for exchange for exchange notes, you must instruct a participant in DTC to transmit to the exchange agent on or prior to the expiration date for the exchange offer a computer-generated message transmitted by means of ATOP and received by the exchange agent and forming a part of a confirmation of book-entry transfer, in which you acknowledge and agree to be bound by the terms of the letter of transmittal.

        In addition, in order to deliver old notes held in the form of book-entry interests:

•

a timely confirmation of book-entry transfer of such notes into the exchange agent's account at DTC pursuant to the procedure for book-entry transfers described above must be received by the exchange agent prior to the expiration date; or



•

you must comply with the guaranteed delivery procedures described below.

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Certificated Old Notes

        Only registered holders of certificated old notes may tender those notes in the exchange offer. If your old notes are certificated notes and you wish to tender those notes in the exchange offer, you must transmit to the exchange agent on or prior to the expiration date a written or facsimile copy of a properly completed and duly executed letter of transmittal, including all other required documents, to the address set forth below under "—Exchange Agent." In addition, in order to validly tender your certificated old notes:

•

the certificates representing your old notes must be received by the exchange agent prior to the expiration date; or



•

you must comply with the guaranteed delivery procedures described below.

Guaranteed Delivery Procedures

        If you desire to tender your old notes and your old notes are not immediately available or one of the situations described in the immediately preceding paragraph occurs, you may tender if:

•

you tender through an eligible financial institution;



•

on or prior to 5:00 p.m., New York City time, on the expiration date, the exchange agent receives from an eligible institution, a written or facsimile copy of a properly completed and duly executed letter of transmittal and notice of guaranteed delivery, substantially in the form provided by us; and



•

the certificates for all certificated old notes, in proper form for transfer, or a book-entry confirmation, and all other documents required by the letter of transmittal, are received by the exchange agent within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery.

        The notice of guaranteed delivery may be sent by facsimile transmission, mail or hand delivery. The notice of guaranteed delivery must set forth:

•

your name and address;



•

the amount of old notes you are tendering; and



•

a statement that your tender is being made by the notice of guaranteed delivery and that you guarantee that within three New York Stock Exchange trading days after the execution of the notice of guaranteed delivery, the eligible institution will deliver the following documents to the exchange agent:



•

the certificates for all certificated old notes being tendered, in proper form, for transfer or a book-entry confirmation of tender;



•

a written or facsimile copy of the letter of transmittal or a book-entry confirmation instead of the letter of transmittal; and



•

any other documents required by the letter of transmittal.

Withdrawal Rights

        You may withdraw tenders of your old notes at any time prior to 5:00 p.m., New York City time, on the expiration date of the exchange offer.

        For your withdrawal to be effective, the exchange agent must receive a written or facsimile transmission of or, for DTC participants, an electronic ATOP transmission of, the notice of withdrawal

40

at its address set forth below under "—Exchange Agent" prior to 5:00 p.m., New York City time, on the expiration date.

        The notice of withdrawal must:

•

state your name;



•

identify the specific old notes to be withdrawn, including the certificate number or numbers and the principal amount of the old notes to be withdrawn;



•

be signed by you in the same manner as you signed the letter of transmittal when you tendered your old notes, including any required signature guarantees, or be accompanied by documents of transfer sufficient for the exchange agent to register the transfer of the old notes into your name; and



•

specify the name in which the old notes are to be registered, if different from yours.

        We will determine all questions regarding the validity, form and eligibility, including time of receipt, of withdrawal notices. Our determination will be final and binding on all parties. Any old notes withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any old notes that have been tendered for exchange but that are not exchanged for any reason will be returned to you without cost as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn old notes may be retendered by following one of the procedures described under "—Procedures for Tendering" above at any time on or prior to 5:00 p.m., New York City time, on the expiration date.

Conditions

        Notwithstanding any other provision of the exchange offer, and subject to our obligations under the related registration rights agreement, we will not be required to accept for exchange, or to issue exchange notes in exchange for, any old notes and may terminate or amend the exchange offer, if at any time before the acceptance of any old notes for exchange any one of the following events occurs:

•

any injunction, order or decree has been issued by any court or any governmental agency that would prohibit, prevent or otherwise materially impair our ability to proceed with the exchange offer; or



•

the exchange offer violates any applicable law or any applicable interpretation of the staff of the Commission.

        These conditions are for our sole benefit and we may assert them regardless of the circumstances giving rise to them, subject to applicable law. We also may waive in whole or in part at any time and from time to time any particular condition in our sole discretion. If we waive a condition, we may be required in order to comply with applicable securities laws, to extend the expiration date of the exchange offer. Our failure at any time to exercise any of the foregoing rights will not be deemed a waiver of these rights and these rights will be deemed ongoing rights which may be asserted at any time and from time to time.

        In addition, we will not accept for exchange any old notes tendered, and no exchange notes will be issued in exchange for any tendered old notes if, at the time the notes are tendered, any stop order is threatened by the Commission or in effect with respect to the registration statement of which this prospectus is a part or the qualification of the indenture under the Trust Indenture Act of 1939.

        The exchange offer is not conditioned on any minimum principal amount of old notes being tendered for exchange.

41

Exchange Agent

        We have appointed The Bank of New York as exchange agent for the exchange offer. Questions, requests for assistance and requests for additional copies of the prospectus, the letter of transmittal and other related documents should be directed to the exchange agent addressed as follows:

        By registered or certified mail, by hand or by overnight courier:

	The Bank of New York Corporate Trust Operations Reorganization Unit 101 Barclay Street—Floor 7 East New York, New York 10286 Attention: Franca Ferrera
By facsimile:	(212) 815-5704
By telephone:	(212) 815-4779

        The exchange agent also acts as trustee under the indenture.

Fees and Expenses

        We will not pay brokers, dealers or others soliciting acceptances of the exchange offer. The principal solicitation is being made by mail. Additional solicitations, however, may be made in person or by telephone by our officers and employees.

        We will pay the estimated cash expenses to be incurred in connection with the exchange offer. These are estimated in the aggregate to be approximately $    •    , which includes fees and expenses of the exchange agent and accounting, legal, printing and related fees and expenses.

Transfer Taxes

        You will not be obligated to pay any transfer taxes in connection with a tender of your old notes unless you instruct us to register exchange notes in the name of, or request that old notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder of old notes, in which event the registered tendering holder will be responsible for the payment of any applicable transfer tax.

Accounting Treatment

        We will not recognize any gain or loss for accounting purposes upon the consummation of the exchange offer. We will amortize the expense of the exchange offer over the term of the exchange notes under generally accepted accounting principles.

42

USE OF PROCEEDS

        We will not receive any cash proceeds from the exchange offer. Any old notes that are properly tendered and exchanged pursuant to the exchange offer will be retired and cancelled.

CAPITALIZATION

        The following table sets forth our capitalization as of April 1, 2006. The table below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Certain Indebtedness" and our consolidated financial statements and related notes included elsewhere in this prospectus.

			As of April 1, 2006
			Actual
			(unaudited) (dollars in thousands)
Cash and cash equivalents			$	15,033
Asset-based revolving credit facility			$	81,601
Mortgage loan payable				2,124
Old Notes				650,000
	Total debt			733,725
Shareholders' equity				630,184
		Total capitalization	$	1,363,909

43

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

        The following unaudited pro forma condensed consolidated statements of operations for the fiscal year ended December 31, 2005 and for the thirteen week period ended April 1, 2006 and the thirteen week period ended April 2, 2005 are based on our historical financial statements appearing elsewhere in this prospectus and give effect to the Transactions as if they had occurred on January 2, 2005 (the first day of the 2005 fiscal year).

        Pro forma adjustments were made to reflect:

•

the net increase to depreciation and amortization expense resulting from recording property and equipment and intangible assets at its fair value;



•

the increase in rent expense based on an assessment of remaining lease terms for those leases in place at January 2, 2005;



•

the amounts attributable to the annual management fee to be paid to the Sponsors; and



•

the incremental interest expense related to issuing the old notes, entering into our new asset-based revolving credit facility and the termination of our former $250.0 million unsecured revolving credit facility.

        The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical consolidated financial statements appearing elsewhere in this prospectus. The unaudited pro forma condensed consolidated financial statements are presented for information purposes only and are not intended to represent or be indicative of the results of operations that we would have reported had the Transactions been completed at the beginning of the periods presented, and should not be taken as representative of our consolidated results of operations for future periods.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Fiscal Year Ended December 31, 2005
(in thousands)

	Historical			Pro Forma Adjustments			Pro Forma
Net sales	$	2,694,742		$	—		$	2,694,742
Cost of sales		1,595,394			2			1,595,396
Gross profit		1,099,348			(2	)(a)		1,099,346
Selling, general and administrative expenses		1,037,521			39,425	(a)		1,076,946
Operating income (loss)		61,827			(39,427	)		22,400
Interest income		(894	)		—			(894	)
Interest expense		4,860			79,371	(b)		84,231
Income (loss) before provision (benefit) for income taxes		57,861			(118,798	)		(60,937	)
Provision (benefit) for income taxes		21,879			(46,569	)(c)		(24,690	)
Net income (loss)	$	35,982		$	(72,229	)	$	(36,247	)

44

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Thirteen Week Period Ended April 1, 2006
(in thousands)

	Historical			Pro Forma Adjustments			Pro Forma
Net sales	$	592,816		$	—		$	592,816
Cost of sales		369,743			38	(a)		369,781
Gross profit		223,073			(38	)		223,035
Selling, general and administrative expenses		311,899			(39,191	)(a)		272,708
Operating (loss) income		(88,826	)		39,153			(49,673	)
Interest income		(754	)		—			(754	)
Interest expense		9,987			9,502	(b)		19,489
(Loss) income before (benefit) provision for income taxes		(98,059	)		29,651			(68,408	)
(Benefit) provision for income taxes		(32,583	)		5,542	(c)		(27,041	)
Net (loss) income	$	(65,476	)	$	24,109		$	(41,367	)

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Thirteen Week Period Ended April 2, 2005
(in thousands)

	Historical			Pro Forma Adjustments			Pro Forma
Net sales	$	570,946		$	—		$	570,946
Cost of sales		334,553			68	(a)		334,621
Gross profit		236,393			(68	)		236,325
Selling, general and administrative expenses		242,154			9,648	(a)		251,802
Operating (loss)		(5,761	)		(9,716	)		(15,477	)
Interest income		(495	)		—			(495	)
Interest expense		1,218			18,724	(b)		19,942
(Loss) before (benefit) for income taxes		(6,484	)		(28,440	)		(34,924	)
(Benefit) for income taxes		(2,410	)		(11,148	)(c)		(13,558	)
Net (loss)	$	(4,074	)	$	(17,292	)	$	(21,366	)

45

Notes to the Unaudited Pro Forma Condensed Consolidated Statements of Operations
(dollars in thousands)

        (a)   Reflects the aggregate effect of the following items:

	Fiscal Year Ended			Thirteen Weeks Ended
	December 31, 2005			April 1, 2006			April 2, 2005
Property and equipment(1)	$	(2,579	)	$	(312	)	$	(645	)
Intangible assets(2)		3,508			424			877
Total depreciation and amortization		929			112			232
Rent(3)		36,498			4,580			8,984
Management fees(4)		2,000			333			500
Transaction costs(5)		—			(44,178	)		—
	$	39,427		$	(39,153	)	$	9,716
Allocated to:
Costs of goods sold	$	2		$	38		$	68
Selling, general and administrative expenses		39,425			(39,191	)		9,648
	$	39,427		$	(39,153	)	$	9,716

(1)

Represents the net decrease to depreciation expense resulting from recording property and equipment at its fair value. The decrease has been allocated between cost of goods sold and selling, general and administrative expense based on historical allocations between the two items.

(2)

Represents the net increase in amortization expense resulting from the values allocated to our credit card customer relationships and customer list, which is being amortized over lives ranging from 3 to 5 years, on a straight-line basis.

(3)

Represents the adjustment to rent expense based on an assessment of remaining lease terms for those leases in place at January 2, 2005. The adjustment records both rent expense and tenant allowances received after January 2, 2005 on a straight-line basis over an assumed revised rental period from January 2, 2005 to the scheduled termination of the lease. The adjustment also records net favorable lease amortization over an average estimated remaining life of 5 years for the favorable lease asset and 8 years for the unfavorable lease liability.

(4)

Represents the amounts attributable to the annual management fee to be paid to the Sponsors. See "Certain Relationships and Related Party Transactions—Management Services Agreement."

(5)

Represents the adjustment for transaction costs related to the merger that were expensed as incurred in the period.

        (b)   Reflects incremental interest expense related to the additional indebtedness, consisting of the notes offered hereby in the principal amount of $650,000 and assumed borrowings under our new asset-based revolving credit facility, which borrowings are based on historical levels of borrowings plus (i) expected cash needs as the result of the use of cash in the Transactions and (ii) interest payments on the notes. The interest rates used for pro forma purposes are LIBOR plus 5.625% (10.345%) on borrowings under the notes and LIBOR plus 1.500% (6.220%) on the new asset-based revolving credit facility. The adjustment assumes amortization of debt issuance costs on a straight line basis over the maturities of the indebtedness. A 0.125% change in interest rates on our indebtedness, all of which is floating rate, would change pro forma interest expense by approximately $211 and $203 for the thirteen weeks ended April 1, 2006 and April 2, 2005, respectively, and $937 for the fiscal year ended December 31, 2005.

        (c)   Reflects the estimated tax effect resulting from the pro forma adjustments at an estimated rate of 39.2%. The pro forma adjustments for the thirteen-week period ending April 1, 2006 were adjusted by permanent non-deductible expenses amounting to approximately $15.5 million.

46

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

        The following table sets forth our selected historical consolidated financial and operating data. The historical income statement data for fiscal 2005, fiscal 2004 and fiscal 2003, and the historical balance sheet data as of the end of fiscal 2005 and fiscal 2004 have been derived from our consolidated financial statements and related notes for such periods and such dates, which have been audited by KPMG LLP and are included in this registration statement. The selected historical consolidated financial data should be read in conjunction with the consolidated financial statements for the year ended December 31, 2005, the related notes and the independent registered public accounting firm's report, which refers to a change in the method of accounting for vendor arrangements to conform to the requirements of Emerging Issues Task Force Issue No. 02-16. As a result of the consummation of the transaction, a new entity was formed with an effective date of February 14, 2006. The historical financial data as of and for each of the periods through February 13, 2006 shown under the predecessor entity caption, consists of Linens 'n Things and subsidiaries. The historical financial data for the successor entity as of April 1, 2006 and for the period February 14 to April 1, 2006 show the operations of the successor entity, Linens Holding Co and subsidiaries. The unaudited historical financial data as of and for the thirteen weeks ended April 2, 2005 and for the periods from January 1, 2006 to February 13, 2006 and February 14, 2006 to April 1, 2006 have been derived from our unaudited consolidated financial statements and related notes and are included in this registration statement. The unaudited consolidated financial statements for the period after February 13, 2006 are presented on a different basis than that for the periods before February 14, 2006, as a result of the application of purchase accounting as of February 14, 2006 and therefore are not comparable. In the opinion of management, such unaudited financial data reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results for that period. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or any future period. Selected historical income statement data for fiscal 2002 and fiscal 2001 and the selected historical balance sheet data as of the end of fiscal 2003, fiscal 2002 and fiscal 2001 have been derived from our unaudited consolidated financial statements for such periods and at such dates are not included in this prospectus.

        Our historical results included below and elsewhere in this prospectus are not necessarily indicative of our future performance and the results for the periods from January 1, 2006 to February 13, 2006 and February 14, 2006 to April 1, 2006 are not necessarily indicative of our results of operations for a full fiscal year. The term "predecessor" refers to Linens 'n Things, Inc. and the term "successor" refers to Linens Holding Co. after its acquisitions of Linens 'n Things, Inc. on February 14, 2006. This information is only a summary and should be read in conjunction with "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus.

47

		(Predecessor)																		(Successor)
		Fiscal Year Ended(1)															Thirteen Weeks Ended									Thirteen Weeks Ended
		December 29, 2001			January 4, 2003			January 3, 2004			January 1, 2005(2)			December 31, 2005			April 2, 2005			January 1 to February 13, 2006			February 14 to April 1, 2006			April 1, 2006
		(unaudited)			(unaudited)												(unaudited)			(unaudited)			(unaudited)			(unaudited)
		(dollars in thousands, except for ratios and store data)
Income Statement Data:
Net sales		$	1,823,803		$	2,184,716		$	2,395,272		$	2,661,469		$	2,694,742		$	570,946		$	284,971		$	307,845		$	592,816
Cost of sales, including buying and distribution costs			1,100,470			1,308,524			1,426,880			1,589,700			1,595,394			334,553			180,675			189,068			369,743
Gross profit			723,333			876,192			968,392			1,071,769			1,099,348			236,393			104,296			118,777			223,073
Selling, general and administrative expenses			639,065			764,590			846,826			970,479			1,037,521			242,154			174,138			137,761			311,899
Restructuring and asset impairment charge			34,006			—			—			—			—			—			—			—			—
Litigation charge			4,000			—			—			—			—			—			—			—			—
Operating profit (loss)			46,262			111,602			121,566			101,290			61,827			(5,761	)		(69,842	)		(18,984	)		(88,826	)
Interest income			(27	)		(79	)		(169	)		(542	)		(894	)		(495	)		(668	)		(86	)		(754	)
Interest expense			5,849			5,588			4,001			3,903			4,860			1,218			—			9,987			9,987
Income (loss) before provision (benefit) for income taxes			40,440			106,093			117,734			97,929			57,861			(6,484	)		(69,174	)		(28,885	)		(98,059	)
Provision (benefit) for income taxes			15,741			40,508			44,975			37,408			21,879			(2,410	)		(21,270	)		(11,313	)		(32,583	)
Net income (loss)		$	24,699		$	65,585		$	72,759		$	60,521		$	35,982		$	(4,074	)	$	(47,904	)	$	(17,572	)	$	(65,476	)
Other Financial Data:
Depreciation and amortization			51,487			60,124			71,348			81,318			90,270			21,176			12,642			15,022			27,664
Capital expenditures:
	New stores		110,164			79,888			82,531			87,863			93,678			9,258			6,875			6,517			13,392
	Existing stores and other		27,737			30,932			30,765			31,189			33,904			2,769			901			2,054			2,955
Total capital expenditures			137,901			110,820			113,296			119,052			127,582			12,027			7,776			8,571			16,347
Cash interest expense			6,011			5,945			3,888			4,018			4,851			1,288			135			47			182
Ratio of earnings to fixed charges(3)			1.71	x		2.59	x		2.65	x		2.23	x		1.66	x		.70	x		(5.09	)x		(.33	)x		(1.97	)x
Store Data:
Number of stores (at period end)			343			391			440			492			542			499			542			549			549
Total gross square footage (000's) (at period end)			11,980			13,607			15,106			16,702			18,071			16,900			18,071			18,300			18,300
Net sales per store (000's)		$	5,800		$	5,900		$	5,700		$	5,600		$	5,200		$	1,144		$	526		$	561		$	1,080
Net sales per square foot		$	168		$	171		$	167		$	166		$	156		$	164			—			—		$	153
Comparable net sales			(2.40	)%		3.10	%		1.30	%		1.80	%		(5.90	)%		(5.40	)%		—			—			(3.70	)%
Balance Sheet Data (at period end):
Cash and cash equivalents		$	15,437		$	86,605		$	136,129		$	204,009		$	158,158		$	75,271		$	90,333		$	15,033		$	15,033
Working capital			218,163			369,221			458,519			519,686			537,453			533,971			506,757			442,017			442,017
Total assets			1,046,305			1,277,123			1,467,456			1,591,884			1,650,834			1,509,856			1,613,665			2,003,848			2,003,848
Total debt			29,675			1,831			—			2,196			2,139			2,182			2,131			733,725			733,725
Total shareholders' equity			479,858			646,733			737,377			809,353			849,863			806,012			820,408			630,184			630,184
Cash Flow:
Cash provided by (used in):
	Operating activities	$	82,131		$	109,362		$	150,892		$	177,341		$	78,201		$	(117,422	)	$	(65,146	)	$	(132,574	)	$	(197,720	)
	Investing activities		137,901			(110,820	)		(113,296	)		(119,052	)		(127,582	)		(12,027	)		(7,776	)		(1,214,073	)		(1,221,849	)
	Financing activities		32,689			72,704			11,375			8,727			3,369			917			4,972			1,361,754			1,366,726

(1)

Fiscal years 2005, 2004, 2003 and 2001 were fifty-two week periods. Fiscal year 2002 was a fifty-three week period.

(2)

Fiscal year 2004 results include the implementation of the provisions of EITF 02-16, which reduced the Company's net income in fiscal 2004 by $13.3 million net of tax.

(3)

For purposes of calculating the ratio of earnings to fixed charges, earnings represent net income (loss) from continuing operations before income taxes plus fixed charges. Fixed charges include interest expense, including amortization of debt issuance costs, and a third of rental expense which management believes is representative of the interest component of rental expense.

48

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our audited historical consolidated financial statements and the notes accompanying those statements, which are included in the back of this prospectus and "Unaudited Pro Forma Condensed Consolidated Financial Information." The results described below are not necessarily indicative of the results to be expected in any future periods. This discussion contains forward-looking statements based on our current expectations, which are inherently subject to risks and uncertainties. Actual results may differ significantly from those projected in such forward-looking statements due to a number of factors. We undertake no obligation to update or revise any forward-looking statement.

Introduction

        We are the second largest specialty retailer of home textiles, housewares and home accessories in North America operating 549 stores in 47 U.S. states and six Canadian provinces at April 1, 2006. During our fiscal 2005, we opened 55 new stores and closed five stores, increasing our total net square footage by 8.2% to approximately 18.1 million.

        Net sales consist of gross sales to customers net of returns, discounts and incentives. Provisions for estimated future sales returns are recorded in the period that the related sales are recorded. We determine the amount of provision based on historical information. Sales discounts, coupons, cash rebates and other similar incentives are recorded as a reduction of sales revenue in the period when the related sales are recorded.

Acquisition of our Company by Apollo Management, L.P. Together with Certain Co-Investors

        On November 8, 2005, Linens Merger Sub Co. and its parent company, Linens Holding Co., entered into an Agreement and Plan of Merger with Linens 'n Things, Inc. governing a reverse subsidiary merger (the "Merger") pursuant to which, on February 14, 2006, Linens Merger Sub Co. was merged with and into Linens 'n Things, Inc., with Linens 'n Things, Inc. as the surviving corporation. In the Merger, each share of common stock of Linens 'n Things, Inc. (other than shares held in treasury or owned by Linens Merger Sub Co., its parent company or any affiliate of Linens Merger Sub Co. and other than shares held by stockholders who properly demand and perfect appraisal rights) was converted into the right to receive $28.00 in cash, without interest, for aggregate consideration of approximately $1.3 billion. As the surviving corporation in the Merger, Linens 'n Things, Inc. assumed by operation of law all of the rights and obligations of Linens Merger Sub Co., including those under the notes and the related indenture. Linens 'n Things Center, Inc., a direct wholly owned subsidiary of Linens 'n Things, Inc., was a co-issuer of the notes.

        Affiliates of Apollo Management, L.P., National Realty & Development Corp. and Silver Point Capital Fund Investments LLC (the "Sponsors") collectively contributed approximately $648.0 million as equity to Linens Merger Sub Co. immediately prior to the Merger.

        The Sponsors financed the purchase of Linens 'n Things, Inc. and paid related fees and expenses through the offering of the notes, the equity investment described above and excess cash on hand at Linens 'n Things, Inc. We did not draw on our asset-based revolving credit facility at closing.

        The aforementioned transactions, including the Merger and the payment of any costs related to these transactions, are collectively referred to herein as the "Transactions." In connection with the Transactions, we incurred significant indebtedness and became highly leveraged.

        Immediately following the Merger, we became a wholly owned subsidiary of Linens Holding Co. Linens Holding Co. is an entity that was formed in connection with the Transactions and had no assets or liabilities other than the shares of Linens Merger Sub Co. and its rights and obligations under and

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in connection with the merger agreement with us and the equity commitment letters and debt financing commitment letters provided in connection with the Transactions.

        The closing of the Merger occurred simultaneously with:

•

the closing of the note offering;



•

the closing of our $600.0 million asset-based revolving credit facility;



•

the termination of our existing $250.0 million unsecured revolving credit facility and CAD $40.0 million unsecured credit facility agreements; and



•

the equity investments described above.

        As a result of the Merger, all of Linens 'n Things, Inc.'s issued and outstanding capital stock was acquired by Linens Holding Co. At such time, investment funds associated with or designated by the Sponsors acquired approximately 99.7% of the common stock of Linens Holding Co. through an investment vehicle controlled by Apollo Management V, L.P., or one of its affiliates, and Robert J. DiNicola, our Chairman and Chief Executive Officer, acquired the remaining 0.3%.

        Upon consummation of the Transactions, we delisted our shares of common stock from the New York Stock Exchange (the "NYSE") and deregistered under Section 12 of the Securities Exchange Act of 1934. The last day of trading on the NYSE was February 14, 2006.

Overview of Business

        We are a destination retailer, offering one of the broadest and deepest selections of high quality brand-name as well as private label home furnishings merchandise in the industry. Our average store size of approximately 33,000 gross square feet enables us to offer a more comprehensive product and brand selection than department stores and other retailers that sell home furnishings. We believe our store format coupled with our knowledgeable sales assistance and attentive service to our customers, whom we refer to as our "guests," creates an enjoyable shopping experience. Our primary target guest is female between the ages of 25 and 55 who is fashion and brand conscious, has good-to-better income and focuses on the home as a reflection of her individuality.

        Our financial performance weakened in 2005 due to less effective merchandising and marketing initiatives that were implemented in the second half of 2004 and in 2005. We believe, however, the underlying fundamentals of our Company remain strong, including our strong brand name recognition and attractive real estate locations, and the fundamentals of our industry are very favorable. As a result, we believe we have the opportunity to significantly improve our financial performance in the near term. Effective upon consummation of the Transactions, Robert J. DiNicola became our new Chairman and Chief Executive Officer. Mr. DiNicola is a 34-year veteran of the retail industry, with extensive experience in retail, including home furnishings. Previously, Mr. DiNicola served as Executive Chairman of General Nutrition Centers, Inc. and as Chairman and Chief Executive Officer of Zale Corporation. Under the leadership of Mr. DiNicola, we intend to focus on growing our sales per square foot and improving the productivity of our existing store base, which we believe is key to improving our profitability and cash flow. To achieve this the we intend to:

•

improve our overall merchandise assortment;



•

establish a formalized key item program;



•

increase the effectiveness and diversify the mix of our marketing expenditures;



•

improve our guests' shopping experience; and



•

improve our operating free cash flow.

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Effect of the Transactions

        In connection with the Transactions, we incurred significant additional indebtedness, including $650.0 million aggregate principal amount of the old notes.

        Our acquisition is being accounted for as a business combination using the purchase method of accounting. As a result, our assets and liabilities were assigned new values on a fair value basis.

Cost of Acquisition
Cash Paid		$	1,295,834
Transaction costs			22,824
					$	1,318,658
Net Assets Acquired:
Historical net assets			820,408
Add: deferred rent reversed			252,236
Less: New basis of accounting for previous ownership percentage			(1,112	)
Less: historical goodwill			(18,126	)
Write-off Southern Linens			(252	)
	Net assets acquired					1,053,154
Excess of costs of acquisition over net assets acquired					$	265,504
Allocated to:
Property and equipment						(57	)
Definite lived intangibles						38,330
Indefinite lived intangibles						122,688
Unfavorable lease liability						(20,000	)
Goodwill						277,435
Deferred Income taxes						(152,892	)
					$	265,504

        Intangible assets identified in the preliminary purchase price allocation above included the following:

Definite-lived intangible assets (liabilities)
	Credit card customer relationships and customer list (estimated life 3 to 5 years)	$	10,542
	Favorable leases (average life 5 years)		27,788
	Unfavorable leases (average life 8 years)		(20,000	)
Indefinite-lived intangible assets
	Trademark and trade names	$	122,688

        The following discussion and analysis of our historical financial condition and results of operation covers periods prior to and after the consummation of the Transactions. Accordingly, most of the discussion and analysis of such periods does not reflect the significant impact the Transactions have had on us. After the Transactions, we became highly leveraged. Significant additional liquidity requirements, resulting primarily from increased interest expense, and other factors related to the Transactions, such as increased depreciation and amortization as a result of the application of purchase accounting, has significantly affected our financial condition, results of operations and liquidity going forward.

        Net sales increased 1.2% to $2.69 billion in fiscal 2005 compared to $2.66 billion in fiscal 2004. For fiscal 2005, comparable net sales decreased 5.9% versus a 1.8% increase in fiscal 2004. For fiscal 2005,

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our earnings per share on a fully diluted basis were $0.79 as compared to $1.32 on a fully diluted basis for fiscal 2004.

        The following table sets forth the results and percentage of net sales included in our Consolidated Statements of Operations for the fifty-two week periods ended December 31, 2005, January 1, 2005 and January 3, 2004 and the periods from January 1, 2006 to February 13, 2006 and February 14, 2006 to April 1, 2006:

	February 14 to April 1, 2006(1) (Successor)					January 1 to February 13, 2006 (Predecessor)					Fiscal Year Ended December 31, 2005 (Predecessor)				Fiscal Year Ended January 1, 2005(2) (Predecessor)				Fiscal Year Ended January 3, 2004 (Predecessor)
	Unaudited					Unaudited
	(in thousands, except per share data)
Net sales	$	307,845		100.00	%	$	284,971		100.00	%	$	2,694,742	100.00	%	$	2,661,469	100.00	%	$	2,395,272	100.00	%
Cost of sales(3)		189,068		61.42	%		180,675		63.40	%		1,595,394	59.20	%		1,589,700	59.73	%		1,426,880	59.57	%
Gross profit		118,777		38.58	%		104,296		36.60	%		1,099,348	40.80	%		1,071,769	40.27	%		968,392	40.43	%
SG&A(4)		137,761		44.75	%		174,138		61.11	%		1,037,521	38.50	%		970,479	36.46	%		846,826	35.35	%
Operating (loss) profit		(18,984	)	(6.17	)%		(69,842	)	(24.51	)%		61,827	2.29	%		101,290	3.81	%		121,566	5.08	%
Interest expense, net		9,901		3.22	%		(668	)	(0.23	)%		3,966	0.15	%		3,361	0.13	%		3,832	0.16	%
(Loss) income before (benefit) provision for income taxes		(28,885	)	(9.38	)%		(69,174	)	(24.27	)%		57,861	2.15	%		97,929	3.68	%		117,734	4.92	%
(Benefit) provision for income Taxes		(11,313	)	(3.67	)%		(21,270	)	(7.46	)%		21,879	0.81	%		37,408	1.41	%		44,975	1.88	%
Net (loss) income	$	(17,572	)	(5.71	)%	$	(47,904	)	(16.81	)%	$	35,982	1.34	%	$	60,521	2.27	%	$	72,759	3.04	%
Earnings per share:
Basic		N/A					N/A				$	0.79			$	1.34			$	1.65
Fully diluted		N/A					N/A				$	0.79			$	1.32			$	1.62

(1)

The unaudited consolidated financial statements for the period after February 13, 2006 are presented on a different basis than that for the periods before February 14, 2006, as a result of the application of purchase accounting as of February 14, 2006 and therefore are not comparable.

(2)

Results of operations for fiscal 2004 include the implementation of the provisions of EITF 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor" ("EITF 02-16"), which negatively impacted our fiscal 2004 net income by $13.3 million or $0.29 per fully diluted share. EITF 02-16 had no impact on our net cash flows.

(3)

Decrease in the cost of sales result from management's decision to mark down certain inventory.

(4)

Decrease was a result of transaction costs in the January 1, 2006 to February 13, 2006 period.

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        We use a number of key indicators of financial condition and operating performance to evaluate the performance of our business, including the following:

							Fiscal Year Ended
				January 1 to February 13, 2006 (Predecessor)
Key Performance Indicators	February 14 to April 1, 2006 (Successor)						December 31, 2005 (Predecessor)			January 1, 2005 (Predecessor)			January 3, 2004 (Predecessor)
Net sales growth		N/A			N/A			1.20	%		11.10	%		9.60	%
Comparable net sales growth		N/A			N/A			(5.90	)%		1.80	%		1.30	%
Net sales per average square foot	$	17.04		$	15.57		$	156		$	166		$	167
Average net sales per store (in millions)	$	0.57		$	0.52		$	5.20		$	5.60		$	5.70
Gross profit as a % of net sales		38.58	%		36.60	%		40.80	%		40.27	%		40.43	%
SG&A as a % of net sales		44.75	%		61.11	%		38.50	%		36.46	%		35.35	%
SG&A per average square foot	$	7.62		$	9.52		$	59.90		$	60.70		$	58.90
Operating (loss) profit as a % of net sales.		(6.17	)%		(24.51	)%		2.29	%		3.81	%		5.08	%
Net (loss) income as a % of sales		(5.71	)%		(16.81	)%		1.34	%		2.27	%		3.04	%
Diluted earnings per share		N/A			N/A		$	0.79		$	1.32		$	1.62
Inventory turnover		2.0			N/A			2.0			2.1			2.1
Inventory per square foot	$	45.81			N/A		$	43.57		$	42.82		$	46.37
Net square footage growth		1.30	%		N/A			8.0	%		11.0	%		11.0	%

        During the latter part of fiscal 2004, we implemented several initiatives, which aimed to improve sales productivity and enhance the guest shopping experience. These strategic initiatives impacted several areas throughout our Company, from our buying, assortment planning and inventory management functions, to our sales floor activities. We also intensified our focus on up-front planning and continued to refine our forecasting methods to anticipate the needs of each store on a regular basis, as opposed to merely measuring total stock levels across the entire chain.

        Although we made significant progress in implementing these initiatives in 2004, there was more to be accomplished as of the start of fiscal 2005. During fiscal 2005, we planned to leverage our expanded buying team and our improved capabilities to introduce new brands and accelerate new businesses that would distinguish our product selection with a sense of "freshness."

        Fiscal 2005 proved to be a very difficult year for us. The external retail environment was challenging as we were faced with a softening home furnishings industry. Many parts of the decorative home furnishings industry were not in a strong cycle. Improving our merchandise assortment and maintaining our focus on trend-merchandising and brand building remained a high priority throughout the year, but the merchandise initiatives undertaken to inject more newness and freshness in our assortment took more time to evolve and were not as effective as was originally expected. We underestimated the impact of these initiatives on guest traffic, transaction conversion and the disruption to the organization as a whole, which ultimately led to the inconsistencies in our financial performance.

        Throughout the year, guest response to our marketing content and vehicles was weaker than planned, and changes to our distribution did not generate the level of traffic that was originally anticipated. Other factors that weakened our financial performance in fiscal 2005 included unfavorable weather conditions in the Northeast during the first quarter of the year, the negative impact on our spring and summer outdoor businesses caused by early, unseasonable weather, resulting in both a loss of business and additional merchandise markdowns later in the season when the weather improved, and leaner inventories than planned at various times during the year due to vendor late deliveries.

        Although the results of our merchandising and marketing initiatives in fiscal 2005 were disappointing, there were also some noteworthy accomplishments. The "things" business performed well in fiscal 2005, with net sales improving approximately 6% compared to last year. During the year, we

53

continued the successful expansion of our furniture business to over 400 stores. In September, we launched the Nate Berkus collection exclusively at Linens 'n Things, which generated excitement in our stores around this important new trend-setting brand.

        Throughout fiscal 2005 we undertook significant changes within our organization with a view toward improved financial results. But, we were not fully successful in consistently delivering a meaningful recovery in profitability. In September, the board of directors took decisive action to carry out its fiduciary responsibility to our stockholders to do their best to create value, including an exploration of all possible strategic avenues. The board of directors announced that it intended to fulfill its responsibility to explore, examine and evaluate whatever strategic alternatives may emerge, including a possible sale of our Company. This responsibility was fulfilled when the board of directors approved on November 8, 2005 the Merger Agreement.

        In fiscal 2006, we continued to take the necessary steps to consummate the Merger Agreement. A key condition to the Merger Agreement was satisfied when, at a special meeting of the stockholders on January 30, 2006, the Merger Agreement was overwhelming approved. On February 14, 2006, the Merger Agreement was consummated and trading of our common stock on the NYSE ceased at the closing bell. Moving forward, as a private concern, we intend to focus on growing our sales per square foot and improving the productivity of our existing store base, which we believe are key to improving our profitability and cash flow. To do so, we intend to improve our overall merchandise assortment, establish a formalized key item program, increase the effectiveness and diversify the mix of our marketing expenditures, improve our guests shopping experience and improve our operating free cash flow.

        We expect to slow our square footage growth in fiscal 2006 as we continue to refine our stores' design in order to improve the guest shopping experience and improve our stores' productivity. In fiscal 2006, we expect to open approximately 25 to 30 new stores, primarily consisting of stores that we have already committed to opening, as opposed to approximately 56 new store openings per year since fiscal 2003, inclusive. Additionally, real estate typically has a 12 to 18 month lead-time, and although we believe that there are ample real estate opportunities, we will continue to be selective in executing our real estate strategy.

        We were required to begin expensing stock options as compensation cost as of the beginning of fiscal 2006. Prior to the beginning of fiscal 2006, we disclosed the effect on net income and earnings per share related to the expensing of options as a note to our Consolidated Financial Statements. This accounting change in the recognition of compensation expense for stock options impacted our fiscal 2006 consolidated results of operation by approximately $6.4 million, net of tax, due to the accelerated recognition of compensation expense resulting from the consummation of the Merger Agreement. The expensing of stock options does not have any impact on our net cash flows.

Consolidated Results of Operations

        The following discusses the Consolidated Results of Operations for each of the fifty-two week periods ended December 31, 2005 ("fiscal 2005"), January 1, 2005 ("fiscal 2004") and January 3, 2004 ("fiscal 2003") and the thirteen week periods ended April 1, 2006 and April 2, 2005:

Thirteen Week Period Ended April 1, 2006 Compared With Thirteen Week Period Ended April 2, 2005

        For comparative purposes, the Company combined the two periods from January 1, 2006 to February 13, 2006 and February 14, 2006 to April 1, 2006. This combination is not GAAP presentation. However, the Company believes this presentation is useful to provide the reader a more accurate comparison.

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Net Sales

        Net sales for the thirteen weeks ended April 1, 2006 increased approximately 3.8% to $592.8 million compared to $570.9 million for the same period last year. We believe that the increased sales associated with new store openings since last year were partially offset by declines in guest traffic. Guest traffic was negatively impacted by the shift of the Easter holiday to the second quarter of this year versus the first quarter last year, and to changes in our marketing programs. At April 1, 2006, we operated 549 stores, including 30 stores in Canada, as compared with 499 stores, including 24 stores in Canada, at April 2, 2005. Store square footage increased approximately 8.4% to 18.3 million at April 1, 2006 compared with 16.9 million at April 2, 2005. During the thirteen weeks ended April 1, 2006, we opened seven stores and closed no stores as compared with opening eight stores and closing one store during the same period last year.

        Comparable net sales decreased 3.7% for the thirteen weeks ended April 1, 2006 compared to a decline of 5.4% for the same period last year. The continuing decline in comparable net sales is due to lower guest traffic.

Gross Profit

        In addition to the cost of inventory sold, we include our buying and distribution expenses in our cost of sales. Buying expenses include all direct and indirect costs to procure merchandise. Distribution expenses include the cost of operating our distribution centers and freight expense related to transporting merchandise. Gross profit for the thirteen weeks ended April 1, 2006 was $223.1 million, or 37.6% of net sales, compared with $236.4 million, or 41.4% of net sales, for the same period last year. During the first quarter, increases in gross margin from improved markup, through lower acquisition costs, and vendor allowances were offset by an increase in markdowns associated with our efforts to move old and slow moving merchandise in anticipation of replacing it with better selling items in the second half of the year.

Expenses

        Our selling, general and administrative expenses consist of store selling expenses, occupancy costs, advertising expenses and corporate office expenses. SG&A for the thirteen weeks ended April 1, 2006 was $311.9 million, or 52.6% of net sales, compared with $242.2 million, or 42.4% of net sales, for the same period last year. The increase in SG&A as a percent of net sales is primarily due to an increase in occupancy costs as a result of new store additions and costs associated with the purchase of Linens 'n Things, Inc. Fixed costs, such as occupancy, increased as a percentage of net sales as a result of the overall decline in our net sales. In response to our sales performance, we reduced certain variable expenses, such as payroll and corporate overhead, but maintained overall marketing spend to support sales. Marketing as a percentage of net sales was 3.8% for the thirteen weeks ended April 1, 2006 versus 3.8% for the thirteen weeks ended April 2, 2005.

        Operating loss for the thirteen weeks ended April 1, 2006 was approximately $88.8 million or 15.0% of net sales, compared with an operating loss of $5.8 million or 1.0% of net sales, for the same period last year.

        Net interest expense for the thirteen weeks ended April 1, 2006 increased to approximately $9.2 million from $0.7 million during the same period last year primarily due to the additional interest expense associated with the $650 million Senior Secured Floating Rate Notes due 2014 issued on February 14, 2006. In addition, lower average investment balances and higher average borrowings required to fund working capital needs and an increase in average borrowing interest rates also contributed to the overall increase in net interest expense.

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        Our income tax benefit was approximately $32.6 million for the thirteen weeks ended April 1, 2006, compared with an income tax benefit of $2.4 million for the same period last year. This increase is due to additional merger related charges. Due to an increase in nondeductible expenses related to the merger, our effective tax rate for the thirteen weeks ended April 1, 2006 declined to 33.2% compared to 37.2% for the same period last year.

Net Income

        As a result of the factors described above, net loss for the thirteen weeks ended April 1, 2006 was approximately $65.5 million compared with a net loss of $4.1 million for the same period last year.

Fiscal 2005 Compared With Fiscal 2004

Net Sales

        Net sales for fiscal 2005 were $2,694.7 million, an increase of 1.2% over fiscal 2004 net sales of $2,661.5 million, primarily as a result of new store openings offset by a decrease in comparable net sales. We opened 55 stores and closed five stores in fiscal 2005, compared with opening 54 stores and closing two stores in fiscal 2004. Net square footage increased 8.2% to 18.1 million at December 31, 2005 compared with 16.7 million at January 1, 2005.

        Comparable net sales decreased 5.9% for fiscal 2005 compared with an increase of 1.8% in fiscal 2004. Comparable net sales percentages are based on total net sales. Comparable net sales include our Internet sales and sales for our stores beginning on the first day of the month following the 13th full month of sales. Stores that are closed for a number of days in a particular month are excluded from comparable net sales if it would cause meaningful disparity in sales over the prior period. In the case of a store to be permanently closed, such store's sales are not considered comparable once the store closing process has commenced. The decrease in comparable net sales is primarily attributable to a decrease in guest traffic as further discussed in the following paragraph.

        Our average net sales per store were $5.2 million in fiscal 2005 and $5.6 million in fiscal 2004. The external retail environment was challenging as we were faced with a softening home furnishings industry. Improving our merchandise assortment and maintaining our focus on trend-merchandising and brand building remained a high priority throughout the year, but the initiatives undertaken to inject more newness and freshness in our assortment were not as effective as was originally hoped for. We underestimated the impact of these initiatives on guest traffic, transaction conversion and the disruption to the organization as a whole, which ultimately led to the inconsistencies in our financial performance and the decline of comparable net sales. Throughout the year, guest response to our marketing content and vehicles was weaker than planned, and changes to our distribution did not generate the level of traffic that was originally anticipated.

        Our core business strategy is to offer a broad and deep selection of high quality brand name "linens" (e.g., bedding, towels and table linens) and "things" (e.g., housewares and home accessories) merchandise. For fiscal 2005, net sales of "linens" merchandise decreased approximately 3% compared to the prior year, while net sales of "things" increased approximately 6% over the prior year. The increase in net sales for "things" merchandise resulted primarily from the continued expansion of product categories within the "things" business and our continued strength in our functional housewares business. Our textile business remained challenging due to the large number of assortment changes during the year, the impact of which was further compounded by inventory in-stock deficiencies caused by vendor late deliveries.

        Our proprietary merchandise accounted for approximately 15% of fiscal 2005 sales. Our proprietary product is an important point of differentiation from our competitors, providing our guests with high value merchandise in categories that we believe are underserved by national brand names.

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Gross Profit

        Gross profit for fiscal 2005 was $1,099.3 million, or 40.8% of net sales, compared with $1,071.8 million, or 40.3% of net sales, for fiscal 2004. Increases in gross margin from improved markup through lower merchandise acquisition costs were largely offset by an increase in markdowns associated with the acceleration of our transitions to newer assortments.

Expenses

        SG&A expenses consist of store selling expenses, occupancy costs, advertising expenses and corporate office expenses. SG&A expenses for fiscal 2005 were $1,037.5 million, or 38.5% of net sales, compared with $970.5 million, or 36.5% of net sales, for fiscal 2004. The increase in SG&A as a percent of net sales is primarily due to the impact of our flat sales performance compared to the previous year. Although new store additions increased fixed costs, such as occupancy, we responded with reductions in certain variable expenses, such as store payroll and corporate overhead. As a result, SG&A per average square foot declined approximately 1.3% to $59.90 in fiscal 2005 compared to $60.70 in fiscal 2004.

        Operating profit for fiscal 2005 was $61.8 million, or 2.3% of net sales, compared with $101.3 million, or 3.8% of net sales for fiscal 2004.

        Net interest expense in fiscal 2005 was $4.0 million compared to $3.4 million in fiscal 2004. An increase in interest expense, due to higher average borrowings required to fund working capital needs and an increase in average borrowing interest rates, was partially offset by a decrease in interest expense due to the termination of the trade payables arrangement with General Electric Capital Corporation and an increase in interest income from short-term investments due to higher average interest rates.

        Our income tax expense for fiscal 2005 was $21.9 million, compared with $37.4 million for fiscal 2004. Due to a change in the mix of earnings within jurisdictions, our effective tax rate for fiscal 2005 declined to 37.8% compared to 38.2% for the same period last year.

Net Income

        As a result of the factors described above, net income for fiscal 2005 was $36.0 million, or $0.79 per share on a fully diluted basis, compared with $60.5 million, or $1.32 per share on a fully diluted basis, for fiscal 2004.

Fiscal 2004 Compared With Fiscal 2003

        Results of operations for fiscal 2004 include the implementation of the provisions of EITF 02-16, which negatively impacted our fiscal 2004 net income by $13.3 million, net of tax, or $0.29 per fully diluted share. EITF 02-16 did not impact fiscal 2003.

Net Sales

        Net sales for fiscal 2004 were $2,661.5 million, an increase of 11.1% over fiscal 2003 net sales of $2,395.3 million, primarily as a result of new store openings as well as comparable net sales increases. We opened 54 stores and closed two stores in fiscal 2004, compared with opening 58 stores and closing nine stores in fiscal 2003. Net square footage increased 10.6% to 16.7 million at January 1, 2005 compared with 15.1 million at January 3, 2004.

        Comparable net sales, which include our Internet sales, increased 1.8% for fiscal 2004 compared with an increase of 1.3% in fiscal 2003.

        Our average net sales per store were $5.6 million in fiscal 2004 and $5.7 million in fiscal 2003.

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        For fiscal 2004, net sales of "linens" merchandise increased approximately 9% over the prior year, while net sales of "things" increased approximately 13% over the prior year. The increase in net sales for "things" merchandise resulted primarily from the continued expansion of product categories within the "things" business and its continued strength in its functional housewares business. Although our textile business was challenging in fiscal 2004, we were undergoing significant assortment changes in its textile business to inject more newness into our overall assortment.

        Our proprietary merchandise accounted for approximately 15% of fiscal 2004 sales.

Gross Profit

        Gross profit for fiscal 2004 was $1,071.8 million, or 40.3% of net sales, compared with $968.4 million, or 40.4% of net sales, for fiscal 2003. The EITF 02-16 adjustment impact was to increase gross profit by $5.9 million, or 0.3% of net sales, for fiscal 2004. The increase in gross profit from the EITF 02-16 impact was offset primarily by higher markdowns, as well as higher fuel costs.

Expenses

        SG&A expenses for fiscal 2004 were $970.5 million, or 36.5% of net sales, compared with $846.8 million, or 35.3% of net sales, for fiscal 2003. The EITF 02-16 adjustment impact was $27.4 million, or 1.1% of net sales, for the fifty-two weeks ended January 1, 2005. SG&A for fiscal 2003 also included advertising allowances equaling 1.0% of net sales, which, as a part of the EITF 02-16 implementation, were no longer classified as an offset to SG&A in fiscal 2004. In addition to the increase in SG&A from the EITF 02-16 impact, SG&A increased as a percentage of net sales primarily due to higher occupancy costs as a percentage of net sales, partially offset by store payroll. SG&A per average square foot was $60.70 in fiscal 2004 compared to $58.90 in fiscal 2003. The EITF 02-16 adjustment impact to SG&A per square foot in fiscal 2004 was $1.70.

        Operating profit for fiscal 2004 was $101.3 million, or 3.8% of net sales, compared with $121.6 million, or 5.1% of net sales for fiscal 2003. The EITF 02-16 adjustment impact was $21.5 million, or 0.8% of net sales, for fiscal 2004.

        Net interest expense in fiscal 2004 was $3.4 million compared to $3.8 million in fiscal 2003. The decrease in net interest expense was mainly due to lower average borrowings compared to the same period last year.

        Our income tax expense for fiscal 2004 was $37.4 million, compared with $45.0 million for fiscal 2003. The EITF 02-16 impact was a decrease of $8.2 million for fiscal 2004. Our effective tax rate was 38.2% for fiscal 2004 and 2003.

Net Income

        As a result of the factors described above, net income for fiscal 2004 was $60.5 million, or $1.32 per share on a fully diluted basis, compared with $72.8 million, or $1.62 per share on a fully diluted basis, for fiscal 2003. The EITF 02-16 adjustment negatively impacted net income by $13.3 million, or $0.29 per share on a fully diluted basis for fiscal 2004.

Liquidity and Capital Resources

        In connection with the Transactions the Company had significant cash outlays during the first quarter of 2006 and became highly leveraged upon the issuance of $650 million aggregate principal amount of the notes. As of Decembr 31, 2005, the Company had no indebtedness outstanding except for $2.1 million for the mortgage note. Cash outlays for the payment of interest will be significantly higher in the current fiscal year compared to the last fiscal year as a result of the notes.

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Post-Transactions

        We fund our operations through a combination of internally generated cash from operations and from borrowings under our asset-based revolving credit facility. Prior to the Transactions, these requirements were funded through a combination of internally generated cash flows from operations and short-term borrowings. Our primary incremental uses of cash after the consummation of the Transactions are working capital requirements, new store expenditures, new store inventory purchases and debt service requirements. We anticipate that cash generated from operations together with amounts available under our asset-based revolving credit facility will be sufficient to meet our future working capital requirements, new store expenditures, new store inventory purchases and debt service obligations as they become due. However, our ability to fund future operating expenses and capital expenditures and our ability to make scheduled payments of interest on, to pay principal on or refinance indebtedness and to satisfy any other present or future debt obligations will depend on future operating performance which will be affected by general economic, financial and other factors beyond our control. See "Risk Factors—We will require a significant amount of cash, and our ability to generate sufficient cash depends upon many factors, some of which are beyond our control."

        As a result of the Transactions, the cash flow results for the first quarter of fiscal 2006 have been separately presented in the Condensed Consolidated Statements of Cash Flows, presented elsewhere herein, split between the "Predecessor Entity," covering the period January 1, 2006 through February 13, 2006 and the "Successor Entity" covering the period February 14, 2006 through April 1, 2006. The results for the prior year's first quarter are presented under "Predecessor Entity." For comparative purposes, the Company combined the two periods from January 1, 2006 through April 1, 2006 in its discussion below. This combination is not a GAAP presentation. However, the Company believes this combination is useful to provide the reader a more accurate comparison and is provided to enhance the reader's understanding of cash flows for the periods presented.

Historical

        Net cash used in operating activities for the periods January 1 to February 13, 2006 and February 14 to April 1, 2006 was $65.1 million and $132.6 million, respectively. Net cash used in operating activities for the combined thirteen weeks ended April 1, 2006 was $197.7 million compared with $117.4 million used in operating activities for the same period last year.

        The increase in net cash used in operating activities is due to the timing of vendor payments, an increase to prepaid rent due to timing of payments and additional costs incurred by the Company resulting from the consummation of the Transactions.

        Net cash used in investing activities for the periods January 1 to February 13, 2006 and February 14 to April 1, 2006 was $7.8 million and $1,214.0 million, respectively. Net cash used in investing activities for the combined thirteen weeks ended April 1, 2006 was $1,221.8 million compared with $12.0 million used in investing activities for the same period last year. Excluding acquisition cost in connection with the Transaction, net cash used in investing activities was $16.3 million. The Company currently estimates capital expenditures will be approximately $85 million in fiscal 2006, primarily to open approximately 25 to 30 new stores, to maintain existing stores, and for system enhancements.

        Net cash provided by financing activities for the periods January 1 to February 13, 2006 and February 14 to April 1, 2006 was $5.0 million and $1,361.8 million, respectively. Net cash provided by financing activities for the combined thirteen weeks ended April 1, 2006 was $1,336.7 million compared with $0.9 million provided by financing activities for the same period last year. The increase is due to the issuance of the Notes, the issuance of Company stock to the Sponsors in connection with the Transactions, and an increase in borrowings under the asset-based revolving credit facility to fund working capital needs.

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        Net cash provided by operating activities for fiscal 2005 was $78.2 million compared with $177.3 million for fiscal 2004. The decrease in net cash provided between periods is primarily attributable to an increase in inventories due to new store openings, an increase in income tax payments, the timing of receivable collections for guest-related credit card and debit card transactions and for landlord allowances and the decrease in our net sales and net profitability compared to last year.

        Net cash used in investing activities for fiscal 2005 was $127.6 million, primarily for 55 new stores, maintenance of existing stores and system enhancements, compared with $119.1 million for fiscal 2004. We currently estimate capital expenditures will be approximately $85.0 million in fiscal 2006, primarily for an estimated 25 to 30 new stores, maintenance of existing stores, and system enhancements.

        Net cash provided by financing activities for fiscal 2005 was $3.4 million, compared with $8.7 million for fiscal 2004. The decrease is primarily attributable to a decline in proceeds from common stock issued under stock incentive plans. In addition, we had no short-term borrowings at the end of fiscal 2005 and 2004, other than an amount due GECC at the end of fiscal 2004 which was included in accounts payable.

Credit Agreements

        In November 2004, we entered into a $250.0 million senior revolving credit facility agreement with third party institutional lenders which was to expire November 23, 2009, and in July 2005 we entered into a CAD $40.0 million unsecured credit facility agreement which was to expire July 29, 2008 (collectively, the "Credit Agreements"). The Credit Agreements were terminated simultaneously with the consummation of the Transactions.

Asset-Based Revolving Credit Facility

        In connection with the Transactions, as of February 14, 2006 we have an asset-based revolving credit facility (the "Credit Facility) that provides for senior secured financing of up to $600.0 million, subject to the borrowing base. The borrowing base is a formula based on certain eligible inventory and receivables, minus certain reserves. A portion of the Credit Facility, not to exceed $40.0 million, is also available to Linens 'n Things Canada Corp. subject to the Canadian borrowing base. The Credit Facility requires us to comply with financial ratio maintenance covenants if the excess availability under the Credit Facility, at any time, does not exceed $75 million and also contains certain customary affirmative covenants and events of default. The principal amount outstanding of the loans under the Credit Facility, plus interest accrued and unpaid thereon, will be due and payable in full at maturity, five years from the date of closing of the Transactions.

        All obligations under the Credit Facility are unconditionally guaranteed by Linens Holding Co. and certain of our existing and future domestic subsidiaries. All obligations under the Credit Facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of our assets and the assets of the Issuers and the subsidiary guarantors, including: (i) a first-priority security interest in inventory, accounts receivable, cash, securities and other general intangibles; and (ii) a second-priority security interest in equipment, intellectual property rights and related general intangibles and all of the capital stock of Linens 'n Things, Inc. and the capital stock of certain subsidiaries.

        Borrowings under the Credit Facility bear interest at a rate equal to, at our option, either (a) an alternate base rate determined by reference to the higher of (1) the base rate in effect on such day and (2) the federal funds effective rate plus 0.50% or (b) a LIBOR rate, with respect to any Eurodollar borrowing, determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, in each case plus an applicable margin. The initial applicable margin for borrowings under the Credit Facility is 0% with respect to alternate

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base rate borrowings and 1.50% with respect to LIBOR borrowings. After the delivery of the financial statements for the first full fiscal quarter after the closing date, the applicable margin for borrowings under the Credit Facility will be subject to adjustment based on the excess availability under the Credit Facility. In addition to paying interest on outstanding principal under the Credit Facility, we are required to pay a commitment fee, initially 0.375% per annum, in respect of the unutilized commitments thereunder. After the delivery of financial statements for the first full fiscal quarter after the closing date, the commitment fee will be subject to adjustment based on the excess availability under the Credit Facility. We must also pay customary letter of credit fees and agency fees. We initiated borrowings under our Credit Facility on February 23, 2006 to meet our operational working capital needs.

        Management regularly reviews and evaluates our liquidity and capital needs. We experience peak periods for our cash needs generally during the second quarter and fourth quarter of the fiscal year. As our business continues to grow and our current store expansion plan is implemented, such peak periods may require increases in the amounts available under the Credit Facility from those currently existing and/or other debt or equity funding.

        Management currently believes that our cash flows from operations, our access to increases to the Credit Facility or additional capacity from new credit facilities will be sufficient to fund our expected capital expenditures, working capital and non-acquisition business expansion requirements as they become due.

Off-Balance Sheet Arrangements

        We do not have any transactions or relationships that could be considered material off-balance sheet arrangements.

Contractual Commitments

        We maintained a trade payables arrangement with General Electric Capital Corporation ("GECC") under which GECC purchased our payables at a discount directly from our suppliers prior to the payables due date, thereby permitting a supplier to receive payment prior to the due date of the payable, with us sharing in part of the GECC discount. We and GECC terminated the trade payables program effective January 13, 2006. As of December 31, 2005, we paid all amounts outstanding under the program. As of January 1, 2005, we owed approximately $65.0 million to GECC under this program, which was included in accounts payable. We, in our sole discretion, may continue to offer early payment options to suppliers in exchange for discounted payments. The discontinuance of the availability of the GECC program did not have a material adverse effect on our financial position, results of operations or cash flows.

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        The following table summarizes existing contractual obligations requiring the use of cash, as of April 1, 2006:

Payments Due By Period (in millions)
Contractual Obligations		Total		Less Than 1 Year		2-3 Years		4-5 Years		More Than 5 Years
Operating leases—real property		$	2,662.8	$	273.6	$	568.0	$	558.8	$	1,262.4
Operating leases—personal Property			11.5		5.1		4.4		2.0		—
	Total operating leases(1)		2,674.3		278.7		572.4		560.8		1,262.4
Inventory purchases			128.6		128.6		—		—		—
New store capital additions			7.2		7.2		—		—		—
Short and long-term debt obligations(2)			733.9		81.8		0.2		0.2		651.7
	Total	$	3,544.0	$	496.3	$	572.6	$	561.0	$	1,914.1

(1)

Operating leases consist of future minimum rental payments required under non-cancelable operating leases excluding lease obligations of closed stores in the amount of $18.9 million.

As of April 1, 2006, we had fully executed leases for 36 stores planned to open in fiscal 2006 and 2007, for which aggregate minimum rental payments over the term of the leases is approximately $193.1 million. The table above includes payments for stores that had fully executed leases as of April 1, 2006.

We also have assigned property at a retail location in which we guarantee the payment of rent over the specified lease term in the event of non-performance. As of April 1, 2006 the maximum potential amount of future payments we could be required to make under such guarantee is approximately $0.7 million.

(2)

Short and long-term debt obligations include senior notes, asset-based revolving credit facility and monthly payments of principal and interest for a mortgage on the land and building of one of our closed stores. Floating interest rate payments related to the senior notes and any future indebtedness and interest under the asset-based revolving credit facility, which will significantly increase our long-term liabilities, are not included in the above table.

Seasonality

        Our business is subject to substantial seasonal variations. Historically, we have realized a significant portion of our net sales and net income for the year during the third and fourth quarters. Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including the timing of new store openings. We believe this is the general pattern associated with our segment of the retail industry and expect this pattern will continue in the future. Consequently, comparisons between quarters are not necessarily meaningful and the results for any quarter are not necessarily indicative of future results.

Accounting Pronouncements

        In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised 2004), "Share-Based Payment" ("SFAS No. 123 (Revised 2004)"). SFAS No. 123 (Revised 2004) focuses primarily on accounting for transactions in which an entity obtains employee services through share-based payment transactions.

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SFAS No. 123 (Revised 2004) requires us to measure the cost of employee services received in exchange for an award of equity instruments based on the fair value of the award at the date of grant. Under SFAS No. 123 (Revised 2004), the cost is recognized as compensation expense over the period during which an employee is required to provide service in exchange for the award. SFAS No. 123 (Revised 2004) provides guidance but expresses no preference for the type of valuation method to use in determining the fair value of options. Under SFAS No. 123 (Revised 2004), we would have been required to implement the standard as of the beginning of the first interim period that begins after June 15, 2005 (our fiscal 2005 third quarter). On April 14, 2005, the Commission adopted a new rule that allows us to implement SFAS No. 123 (Revised 2004) at the beginning of our next fiscal year, instead of the next interim reporting period that begins after June 15, 2005. Accordingly, we adopted SFAS No. 123 (Revised 2004) as of the beginning of our first fiscal quarter of 2006, using the modified prospective method. Beginning in fiscal 2006, our results of operations reflect compensation expense for new stock option grants, if any, and for the unvested portion of previous stock options granted. Previously, we disclosed the effect on net income and earnings per share related to the expensing of options as a note to our Consolidated Financial Statements (see Note 2). For fiscal 2006, the accounting change in the recognition of compensation expense for stock options resulting from the adoption of SFAS 123 (Revised 2004) impacted our fiscal 2006 consolidated results of operations by approximately $6.4 million, net of tax. The adoption of SFAS No. 123 (Revised 2004) did not have any impact on our net cash flows.

        In December 2004, FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29." This Statement requires that exchanges should be recorded and measured at the fair value of the assets exchanged, with certain exceptions. The Statement is effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of this Statement did not have a material effect on our financial position or results of operations.

        In November 2004, FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4." This Statement amends the guidance to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversions be based on the normal capacity of the production facilities. The Statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption of this Statement did not have a material effect on our financial position or results of operations.

        In March 2005, the FASB issued Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143" ("FIN 47"). FIN 47 clarifies that an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation when incurred if the liability's fair value can be reasonably estimated. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The adoption of FIN 47 did not have a material effect on our financial position or results of operations.

Impact of Inflation

        We do not believe that our operating results have been materially affected by inflation during the preceding three years. There can be no assurance, however, that our operating results will not be affected by inflation in the future.

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Critical Accounting Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts and timing of revenues and of expenses during the reporting period. We base our estimates on historical experience and on other assumptions that we believe to be relevant under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our management believes the following critical accounting estimates involve such significant judgments and estimates inherent in the preparation of the Consolidated Financial Statements. Management discussed the development and selection of these critical accounting estimates with the audit committee of the board of directors.

        Valuation of Inventory:    Merchandise inventory is a significant portion of our balance sheet, representing approximately 41.3% of total assets at April 1, 2006. Inventories are valued using the lower of cost or market value, determined by the retail inventory method ("RIM"). Under RIM, the valuation of inventories at cost and the resulting gross margins are determined by applying a calculated cost-to-retail ratio to the retail value of inventories. RIM is an averaging method that is used in the retail industry due to its practicality. Inherent in RIM calculations are certain significant management judgments and estimates including, among others, merchandise mark-on, mark-up, markdowns and shrinkage based on historical experience between the dates of physical inventories, all of which significantly impact the ending inventory valuation at cost. The methodologies utilized by us in our application of RIM are consistent for all periods presented. Such methodologies include the development of the cost-to-retail ratios, the development of shrinkage reserves and the accounting for price changes. At any one time, inventories include items that have been written down to our best estimate of their realizable value. Factors considered in estimating realizable value include the age of merchandise and anticipated demand. Actual realizable value could differ materially from this estimate based upon future customer demand or economic conditions.

        Sales Returns:    We estimate future sales returns and record a provision in the period that the related sales are recorded based on historical return rates. Should actual returns differ from our estimates, we may be required to revise estimated sales returns. Although these estimates have not varied materially from historical provisions, estimating sales returns requires management judgment as to changes in preferences and quality of products being sold, among other things; therefore, these estimates may vary materially in the future. The sales returns calculations are regularly compared with actual return experience. In preparing our financial statements as of April 2, 2005, December 31, 2005 and April 1, 2006, our sales returns reserve was approximately $5.2 million, $7.1 million and $5.5 million, respectively.

        Impairment of Long-Lived Assets (including Goodwill):    In accordance with SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," long-lived assets, such as property and equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying value of the asset exceeds the fair value of the asset.

        Goodwill and intangible assets that have indefinite useful lives are tested annually for impairment. These assets are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset's fair value. For goodwill, the impairment determination is made at the reporting unit

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level and consists of two steps. First, the Company determines the fair value of a reporting unit and compares it to its carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit's goodwill over the implied fair value of the goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with FASB Statement No. 141, Business Combinations. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. As of April 2, 2005, December 31, 2005 and April 1, 2006, our net value for property and equipment was approximately $569.3 million, $612.2 million and $601.8 million, respectively, and goodwill was approximately $18.1 million, $18.1 million and $277.3 million, respectively. The increase in goodwill was due to the acquisition.

        Store Closure Costs:    In fiscal 2001, we recorded a pre-tax restructuring and asset impairment charge of $37.8 million ($23.7 million after-tax) related to the closing of certain under-performing stores. As of April 2, 2005, December 31, 2005 and April 1, 2006, we had $8.3 million, $5.4 million and $4.2 million, respectively, remaining related to this reserve. We have closed all of the initially identified stores other than one store, which we decided to keep open and whose reserve was reversed. We continue to negotiate and/or explore lease buyouts or sublease agreements for certain of these stores. For the remaining store for which an acceptable buyout or sublease agreement has not yet been negotiated and entered into, we are considering other alternatives, including reopening the store. The activity in the thirteen-week period ended April 1, 2006 includes the reversal of estimated lease commitment costs of approximately $55,000 which were not needed, offset by an increase to lease commitment costs of approximately $130,000 due to changes in estimates based on current negotiations. Final settlement of these reserves is predominantly a function of negotiations with unrelated third parties, and, as such, these estimates may be subject to change in the future.

        Self-Insurance:    We purchase third party insurance for worker's compensation, medical, auto and general liability costs that exceed certain limits for each type of insurance program. We are responsible for the payment of claims under these insured excess limits. We establish accruals for our insurance programs based on available claims data and historical trend and experience, as well as loss development factors prepared by third party actuaries. The ultimate cost of these claims may be greater than or less than the established accrual. The accrued obligation for these self-insurance programs was approximately $13.1 million as of April 2, 2005, $15.3 million as of December 31, 2005 and $14.6 million as of April 1, 2006.

        Stock-based Compensation:    SFAS No. 123 (Revised 2004) requires the recognition of compensation expense in the Consolidated Statements of Operations related to the fair value of employee share-based options. Determining the fair value of share-based awards at the grant date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise, the associated volatility and the amount of share-based awards expected to be forfeited prior to vesting. Prior to adopting SFAS No. 123 (Revised 2004), on January 1, 2006 we applied the recognition and measurement principles of Accounting Principles Board Opinion No. 25, and related Interpretations, in accounting for our stock-based compensation plans. All employee stock options were granted at or above the grant date market price. Accordingly, no compensation cost was recognized for fixed stock option grants prior to January 1, 2006.

        Litigation:    We record an estimated liability related to various claims and legal actions arising in the ordinary course of business, which is based on available information and advice from outside counsel where applicable. As additional information becomes available, we assess the potential liability related to our pending claims and may adjust our estimates accordingly.

        Accounting Control Deficiency:    Our management determined that as of the end of fiscal 2005, we did not have adequate review controls to ensure the propriety of the accounting for the classification of capital expenditures related to store self-development transactions. Our accounting treatment for

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capital expenditures related to store self-development transactions, initially recorded on the balance sheet as other current assets and on the cash flow statement as a change in other current assets, was subsequently determined to be incorrect according to generally accepted accounting principles, which principles provide that capital expenditures related to store self-development transactions should be recorded on the balance sheet as property and equipment and on the cash flow statement as additions to property and equipment. Our management corrected the accounting related to store self-development transactions prior to issuance of the financial statements for the fiscal year ended December 31, 2005. There was no change in the overall cash flow generated by us and the incorrect accounting had no impact on our income statement. The control deficiency that resulted in the incorrect accounting for the classification of capital expenditures related to store self-development transactions represented a material weakness in our internal control over financial reporting as of December 31, 2005. Our management has implemented review controls to ensure the propriety of our accounting for these transactions.

        A material weakness in internal control over financial reporting is a control deficiency (within the meaning of the Public Company Accounting Oversight Board ("PCAOB") Auditing Standard No. 2), or combination of control deficiencies, that adversely affects a company's ability to initiate, authorize, record, process or report external financial data reliably in accordance with GAAP that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

        Although we have taken certain actions to address these issues, if we are unable to identify and remedy all such issues promptly and effectively, it could have a material adverse effect on our business, results of operations and financial condition. Maintaining effective control over financial reporting is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud. If our management or our independent registered public accounting firm were to conclude again in the future that our internal control over financial reporting was ineffective, investors could lose confidence in our reported financial information.

Quantitative and Qualitative Disclosure About Market Risk

        We continuously evaluate the market risk associated with our financial instruments. Market risks relating to our operations result primarily from changes in interest rates. We do not engage in financial transactions for trading or speculative purposes.

        Since fiscal year end 2005, market risk exposure has significantly increased due to the issuance of the notes in connection with the Merger and Transactions.

        Interest Rate Risk:    Our financial instruments include cash and cash equivalents and borrowings under our asset-based revolving credit facility and our notes. Our asset-based revolving credit facility and our notes carry floating rate interest and, therefore, our Consolidated Statement of Operations and our Consolidated Statement of Cash Flows for fiscal 2006 will be exposed to changes in interest rates. As of April 1, 2006, we had $81.6 million in borrowings under our asset-based revolving credit facility at an average interest rate of 6.3% and $650 million aggregate principal amount in notes at an interest rate of 10.3%. As of April 1, 2006 a one percentage point change in floating rate interest would cause an increase to interest expense of approximately $7.3 million. We do not currently use derivative financial instruments in our investment portfolio but expect to hedge a portion of our floating rate interest in future periods.

        Foreign Currency Risk:    We enter into some purchase obligations outside of the United States, which are predominately settled in U.S. dollars, and therefore, we do not have a material exposure to foreign currency exchange risks. We operated 30 stores in Canada as of April 1, 2006. We believe our foreign currency translation risk is not material, as a hypothetical 10% strengthening or weakening of the U.S. dollar relative to the Canadian dollar would not materially affect our results from operations or cash flow. As of April 1, 2006 and for the thirteen-week period then ended we did not hedge against foreign currency risks.

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BUSINESS

About Our Company

        We are the second largest specialty retailer of home textiles, housewares and home accessories in North America operating 549 stores in 47 U.S. states and six Canadian provinces as of April 1, 2006. We are a destination retailer, offering one of the broadest and deepest selections of high quality brand-name as well as private label home furnishings merchandise in the industry. Our average store size of approximately 33,000 gross square feet enables us to offer a more comprehensive product and brand selection than department stores and other retailers that sell home furnishings. We believe our store format coupled with our knowledgeable sales assistance and attentive service to our customers, whom we refer to as our guests, creates an enjoyable shopping experience. Our primary target guest is female between the ages of 25 and 55 who is fashion and brand conscious, has good-to-better income and focuses on the home as a reflection of her individuality.

        We are committed to providing our guests with a one-stop shopping destination for home furnishings. Our extensive merchandise offering enables our guests to select from a wide assortment of styles, brands, colors and designs across varying price points at competitive values. Our "linens" product line includes home textiles such as bedding, towels, window treatments and table linens. Our "things" product line includes housewares and home accessories such as cookware, dinnerware, glassware, small appliances, candles, picture frames and storage and cleaning products. We offer a wide array of national home furnishing brands, including All-Clad, Braun, Calphalon, Conair, Croscill, Cuisinart, Henckels, Krups, KitchenAid, Nautica, OXO, Wamsutta and Yankee Candle. We also offer products under our LNT Home private label brand, which is designed to complement our brand name products by offering our guests quality merchandise at value prices. We also carry a number of exclusive products, including several high-fashion home textile patterns from Waverly and our Nate Berkus collection.

        Our store format features an efficient racetrack layout in a visually appealing format that encourages guests to shop the entire store. We operate various store size formats generally ranging from 25,000 to 40,000 gross square feet. This allows us to match the size of our stores with the market potential of each location. Our stores are located predominately in power strip centers adjacent to complementary broad-based retail chains. In addition, our stores are generally located in geographic trading areas with at least 150,000 people within a five to 10 mile radius and with demographic characteristics that match our target guest profile. We were incorporated on September 10, 1996 and were a wholly owned subsidiary of CVS Corporation ("CVS"), formerly Melville Corporation, until November 26, 1996, when CVS completed an initial public offering of our common stock.

Business Strategy

        Improve Our Overall Merchandise Assortments.    We intend to maximize merchandise productivity by implementing the following assortment planning initiatives:

•

reduce our overall SKUs and increase the in-stock positions of our most popular merchandise;



•

re-allocate space in our stores to more productive categories;



•

increase the use of analytics in our merchandise assortment planning process, enabling us to make more informed, trend-based purchasing decisions in advance of guest demand; and



•

selectively expand existing merchandise categories and key vendor assortments as well as introduce new merchandise product lines that better reflect the style and regional preferences of our guests.

        Establish a Key Item Program.    We have established a "Best Bets" program in order to provide our guests superior value on our top 100 selling items. We intend to price these key items competitively and

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maintain deep in-stock positions to meet guest demand. We believe that our key item program will help drive store traffic, improve sales per square foot and strengthen the Linens 'n Things brand over the long-term.

        Increase the Effectiveness of Our Marketing Expenditures.    We intend to implement an aggressive new, multi-tiered marketing campaign that re-invigorates the Linens 'n Things brand, emphasizes our commitment to our Best Bets program and drives traffic to our stores. Our marketing expenditures were approximately $114.0 million in fiscal 2005, or 4.2% of net sales. We expect to reduce marketing expenditures as a percentage of net sales in fiscal 2006; however, we intend to broaden our reach with a more diversified mix of marketing utilizing broadcast media, preprint, newspaper advertising and direct mail. We believe that these changes, coupled with a greater emphasis on national advertising, will be more effective in communicating our merchandising strategy while attracting new guests into our stores and enhancing our brand.

        Improve Our Guests' Shopping Experience.    Our goal is to exceed our guests' expectations in every store, every day. We intend to achieve this goal by building on our existing service philosophy and by creating a more inviting atmosphere for our guests. We believe we can make our guests' shopping experience more efficient and enjoyable through enhanced merchandise presentation, including more stimulating product displays and clearer in-store signage.

        Improve Our Operating Free Cash Flow.    We are highly committed to increasing our operating free cash flow. As a result, we plan to reduce new store openings over the next few years and focus on improving the operations of our existing stores. We currently expect to open approximately 25 to 30 new stores in 2006, primarily consisting of stores we have already committed to opening, as opposed to an average of approximately 56 new stores per year since 2003. As a result, we currently expect our fiscal 2006 capital expenditures to be approximately $85.0 million, as opposed to $127.6 million in fiscal 2005. In addition, in connection with our merchandise assortment planning and sales productivity initiatives, we expect to improve our inventory turns and reduce our working capital. Our new business strategy does not require any out of the ordinary or one-time capital expenditures.

        Realize Improved Financial Performance as Recently Opened Stores Mature.    As of April 1, 2006, we operate 549 stores, 174 of which were opened since the beginning of 2003. These 174 stores have not yet reached sales and store-level EBITDA consistent with our stores that were opened before 2003. Store-level EBITDA represents operating profit derived for each store, before depreciation for all fixed assets located at each store and amortization, where operating profit is based on each store's actual sales less direct expenses excluding an allocation of overhead. Historically, new stores take 4 to 5 years to reach the financial performance of a mature store. Accordingly, we expect our recently opened stores to generate improved financial performance and contribute meaningfully to our overall net sales and store-level EBITDA as they mature over the next few years.

Competitive Strengths

        Strong Brand Name Recognition.    The Linens 'n Things brand name has a strong reputation as a leading provider of home furnishings. Our brand recognition is reinforced by our national footprint and highly visible store locations. Additionally, we utilize extensive national and local advertising through multiple formats to reinforce our guest recognition and support our promotional events. Based on a study by Leo J. Shapiro & Associates, an independent market research firm, in May 2005, 9 out of 10 U.S. households located in our markets recognize the Linens 'n Things brand.

        Leading Destination for Home Furnishings.    We are the second largest specialty retailer of home textiles, housewares and home accessories in North America and operate 549 stores in 47 U.S. states and six Canadian provinces with an aggregate of approximately 18.3 million gross square feet as of April 1, 2006. With over 25,000 SKUs, we market one of the broadest and deepest selections of home

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furnishings in the industry, providing us with a competitive advantage over department stores and mass merchants who offer a more limited product selection. Our more comprehensive product and brand selection provides our guests with a one-stop shopping destination for their home furnishing needs.

        Well Maintained Store Base with Attractive Real Estate.    Our portfolio of stores is primarily located in high traffic suburban locations that are convenient and accessible to our core guests and in close proximity to other high quality, national retailers. According to a study done by MapInfo in March 2004, our real estate is extremely competitive as to location and size with other national specialty retailers of home furnishings. Our store base is up to date with an average age per store of approximately five years. We believe that the average age of our store base minimizes our near-term maintenance and remodeling capital expenditure requirements.

        Strong and Diversified Vendor Relationships.    We are one of the largest purchasers of home furnishings in the United States and have developed strong long-term relationships with our vendors, from whom we consistently purchase large quantities of quality merchandise. We believe that our strong and diversified vendor relationships coupled with our buying power provides us a competitive advantage in the U.S. home furnishings industry. In addition, due to our broad range of branded products, our success is not dependent on any one specific product or vendor. In fiscal 2005, no single vendor accounted for more than 8% of our purchases.

        Strong Guest Base.    We have cultivated a strong base of loyal guests who return to our stores time and again. This is complemented by our Internet website which allows guests both to purchase our products and receive product information. We have a large customer database that we use to reach our target guests through, among other things, direct mail events. We define active guests as those who have visited our stores at least once in the last 12 months. We have over 12 million active guests in our database, who on average visit our stores approximately two to three times each year. To further strengthen our guest base, we also offer a private label charge card program, which has built-in loyalty programs to encourage more frequent visits and allows us to more efficiently target our direct mail efforts.

Products and Merchandising

        We offer quality home textiles, housewares and home accessories at compelling values. Our extensive merchandise offering of over 25,000 SKUs in an average store enables our guests to select from within each of our major product lines a wide assortment of styles, brands, colors and designs that exceed the selection generally available in department stores. Our "linens" product line includes home textiles such as bedding, towels, window treatments and table linens. Our "things" product line includes housewares, home accessories and storage and cleaning, such as cookware, dinnerware, glassware, small appliances, candles and picture frames. We are committed to maintaining a consistent in-stock inventory position and ensuring that our stores carry a broad and deep merchandise selection.

        We also intend to continue to implement our assortment planning and space management initiatives to maximize productivity. By increasing the use of analytics in our merchandise assortment planning process, we will be in a stronger position to make more informative, trend-based purchasing decisions well in advance of guest demand and will be more able to streamline our merchandise selection, reduce product duplication and develop a more balanced overall assortment. We also continue to re-allocate space in our stores to merchandise categories that better reflect guest demand. This effort allows us the opportunity to maximize productivity by expanding high-growth categories such as rugs, furniture, specialty foam and home environment. Furthermore, we continue to implement our regional merchandising initiatives, thereby positioning our stores to better reflect local geographic tastes and needs. As a result, our stores now carry a deeper, more balanced selection of merchandise that more closely corresponds with the preferences of our guests. In addition, our merchandise is displayed with impactful presentations in groups of related product lines, and seasonal merchandise and impulse

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items are prominently displayed in the front of the store. The presentation of our merchandise is designed to maximize customer convenience and reinforce our guests' impression that we offer a wide selection. For fiscal 2006, we intend to focus on adding more newness in our assortment by offering updated merchandise and building brands both within a category and across categories. In addition, we intend to focus on improving the in-store experience with enhanced merchandise presentation and clearer signage.

        Merchandise and sample brands offered in each major department are highlighted below:

Department	Items Sold	Sample Brands
Bath	Towels, shower curtains, waste baskets, bathroom rugs and wall hardware	Nautica, Wamsutta and Croscill
Home Accessories	Decorative pillows, napkins, tablecloths, placemats, lamps, gifts, picture frames, candles and framed art	Colonial Candle, Waverly and Yankee Candle
Housewares	Cookware, cutlery, kitchen gadgets, small electric appliances (such as blenders and coffee makers), dinnerware, flatware and glassware	All-Clad, Black & Decker, Braun, Calphalon, Circulon, Cuisinart, Farberware, Henckels, KitchenAid, Krups and OXO
Storage and Cleaning	Closet-related items (such as hangers, organizers and shoe racks), cleaning and laundry care products	Dyson, Euro-Pro, Hoover, Rowenta and Rubbermaid
Bedding	Sheets, comforters, comforter covers, bedspreads, bed pillows, blankets and mattress pads	Croscill, Liz Claiborne, Nautica, Wamsutta and Waverly
Window Treatment	Curtains, valances and window hardware	Croscill, Nautica, Wamsutta and Waverly

        Our merchandise procurement is done centrally rather than in store operations. We utilize an auto-replenishment system, whereby approximately 65% of our core products are replenished from a centralized monitoring system.

Guest Service and Marketing

        We treat every customer as a guest. Our philosophy is to enhance the guest's entire shopping experience so that we will become the store of first choice for our guests' home furnishing needs. To facilitate the ease of shopping, our assisted self-service culture is complemented by trained department specialists, zoned floor coverage, product information displays and videos, self-demonstrations and in-store product seminars. The entire store team is trained to be highly visible in order to assist guests with their selections. The use of modern technologies reduces the need for our associates to manage "back office" activities so that the majority of their time can be focused on greeting and assisting guests and delivering attentive service. Sophisticated management systems that provide efficient guest service and our fair return policies are geared toward making each guest's visit a convenient, efficient and pleasant experience.

Sales Associates

        We seek to maintain a sales force of knowledgeable, professional and well-trained sales associates to deliver personal attention and service to our guests. We offer competitive wages and on-going

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training and personnel development in order to attract and retain qualified, motivated associates committed to providing superior guest service. Training at the sales associate level focuses on the areas of guest interaction, product knowledge and store systems usage. We actively monitor and analyze the service levels in our stores in order to maximize sales associate productivity and store profitability.

Marketing and Advertising

        We use our advertising programs to communicate, build and strengthen the Linens 'n Things brand. We intend to implement an aggressive new, multi-tiered marketing campaign that re-invigorates the Linens 'n Things brand, emphasizes our commitment to our key item program and drives traffic to our stores. We expect to reduce marketing expenditures as a percentage of net sales in fiscal 2006; however, we intend to broaden our reach with a more diversified mix of marketing utilizing broadcast media, preprint, newspaper advertising and direct mail. We believe that these changes, coupled with a greater emphasis on national advertising, will be more effective in communicating our merchandising strategy while attracting new guests into our stores and enhancing our brand. We focus our advertising programs during key selling seasons such as spring/summer, back-to-school and holidays. In addition, we utilize our proprietary marketing database to track the buying habits of our guests.

Private Label Charge Card

        In April 2002, we launched our private label charge card program. The intent of this program is to build guest loyalty. Through a points program, guests receive enhanced value by using the card. The program also allows us to provide consistent and effective communication with our guests, while increasing our information base of our guests' purchasing patterns. Subject to customary exceptions, credit risk relating to this program is borne by GE Consumer Finance, a top issuer of private label credit cards.

Vendor Relationships

        Our merchandise assortment consists of a wide selection of high quality, brand name fashion home textiles, housewares and home accessories from both established and emerging vendors. We communicate with our vendors frequently, providing feedback on current demand for their products. Many of our key vendors limit the number of retail channels they use to sell their merchandise and competition among retailers to obtain and sell these goods is intense. Our relationships with our vendors has been a significant contributor to our past success. We monitor and evaluate the sales and profitability performance of each vendor and adjusts our future purchasing decisions from time to time based upon the results of this analysis. We have no guaranteed supply arrangements with our principal merchandising sources.

        We purchase our merchandise from a diverse vendor base of approximately 1,200 suppliers, of which approximately 17% are located overseas. In fiscal 2005, products supplied by our 25 largest vendors represented approximately 40% of our purchases, with our top three vendors supplying approximately 14% of our purchases and our largest single vendor supplying approximately 8% of our purchases. We believe that this buying power and our ability to make centralized purchases generally allows us to acquire products at favorable terms. In addition, the breadth of our sourcing helps mitigate risks associated with a single brand or designer.

Store Operations

Store Management and Operations

        We place a strong emphasis on our people, their development and their opportunity for advancement, and are committed to maintaining a high internal promotion rate. Our practice is to open each new store with a seasoned management team, which usually includes managers who have

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significant experience with our Company. Additionally, our structured management training program requires that each new manager learn all facets of the business within the framework of a fully operational store. This program includes, among other things, product knowledge, merchandise presentation, business and sales perspective, employee relations and manpower planning. At the sales associate level, we focus our training on guest interaction, product knowledge and store systems usage. We believe that our policy of promoting from within, as well as the opportunities for advancement from our store expansion program, serve as incentives to attract and retain quality individuals.

        Our stores are open seven days a week, generally from 9:00 am to 9:30 pm Monday through Saturday and 10:00 am to 7:00 pm on Sunday unless affected by local laws.

Distribution

        We currently operate distribution centers in Shepherdsville, Kentucky; Swedesboro, New Jersey and Greensboro, North Carolina. We also use third-party logistics companies to supplement our distribution centers. We believe that the utilization of centralized distribution centers has resulted in lower average freight expense, more timely control of inventory shipments to stores and improved information flow. We believe strong distribution support for our stores is a critical element in our strategy and is central to our ability to maintain a low cost operating structure.

        We manage the distribution process centrally from our corporate headquarters. Purchase orders issued by us are electronically transmitted to nearly all of our suppliers. We plan to continue our efforts to ship as much merchandise through our distribution centers as possible to ensure all benefits of our logistics strategy are fully taken advantage of. Continued growth will also facilitate new uses of electronic data interchange technologies between us and our suppliers to exploit the most productive and beneficial use of our assets and resources. In order to realize greater efficiency, we also use third-party freight carriers to ship our merchandise from our distribution centers to our stores.

Management Information Systems

        We continually evaluate and upgrade our management information systems to enhance the quantity, quality and timeliness of information available to management. We believe our management information systems have fully integrated our stores, headquarters and distribution process. Over the last several years, we have made significant investments in technology to improve guest service such as Internet and online bridal and gift registry tools. We operate an IBM AS/400 management information system that integrates all major aspects of our business, including sales, distribution, purchasing, inventory control, merchandise planning and replenishment and financial systems. Information obtained from management information systems results in automatic inventory replenishment in response to specific requirements of each store, thereby improving in-stock positions and enhancing guest service. We also utilize hand-held scanners with inventory status and price look-up capabilities, which allow our sales associates to remain accessible to guests on the selling floor.

Competition

        The U.S. retail home furnishings market is highly fragmented. The market includes many different types of retailers including, among others, department stores, mass merchandisers and discounters, specialty retailers, home improvement centers and warehouse clubs. We believe that our ability to compete successfully in our market is influenced by several factors, including price, breadth and quality of product selection, in-stock availability of merchandise, effective merchandise presentation, guest service and superior store locations. We believe that we are well positioned to compete on the basis of these factors. Nevertheless, there can be no assurance that any or all of the factors that enable us to compete favorably will not be adopted by companies having greater financial and other resources than

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we do. See "Risk Factors—Competitive factors could reduce our sales and profitability." We generally classify our competition as follows:

Department Stores

        This category includes national and regional department stores such as J.C. Penney Company Inc., Sears, Roebuck and Co. and the department store chains operated by Federated Department Stores, Inc. These retailers offer name brand merchandise as well as their own private label furnishings. Department stores also offer certain designer merchandise, such as Ralph Lauren, which is not generally distributed through the specialty and mass merchandise distribution channels. In general, department stores offer a more limited selection of home furnishings merchandise than we do. The prices offered by department stores during off-sale periods generally are significantly higher than ours and during on-sale periods are comparable to or slightly higher than ours.

Mass Merchandisers

        This category includes companies such as Wal-Mart Stores, Inc. and Target Corporation. Fashion home furnishings generally represent only a small portion of the total merchandise sales in these stores; however, this channel of distribution makes up the largest portion of home furnishings sales. These stores generally offer a more limited merchandise selection with fewer high quality name brands and lower quality merchandise at lower price points. In addition, these mass merchandisers typically have more limited guest service staffing than we do.

Specialty Stores/Retailers

        This category includes large format home furnishings retailers including Bed Bath & Beyond, Inc., Home Goods, a division of TJX Companies, Inc. and smaller format retailers such as Pier One Inc., Crate & Barrel and Williams-Sonoma, Inc. We estimate that the large format stores range in size from approximately 25,000 to 70,000 gross square feet offering home furnishing merchandise selection of approximately 15,000 to 40,000 SKUs. These retailers attempt to develop loyal guests and increase guest traffic by providing a single outlet to satisfy the guest's household needs. The smaller format retailers generally offer a more limited selection of merchandise within a specific niche and generally range in size from 2,000 to 20,000 gross square feet.

Other Retailers

        This category includes mail order retailers, such as Domestications; off-price retailers, such as Kohl's Corporation; the T.J. Maxx and Marshall's divisions of the TJX Companies, Inc.; home improvement stores, such as The Home Depot, Inc. and Lowe's Companies, Inc.; warehouse clubs, such as Costco Wholesale Corporation and Sam's Club and smaller local retail stores. These retailers, with the exception of off-price retailers, generally offer a more limited selection of merchandise. Off-price retailers typically offer closeout or out of season name brand merchandise at competitive prices.

Seasonality and Inflation

        Our business is subject to substantial seasonal variations. Historically, we have realized a significant portion of our net sales and substantially all of our net income for the year during the third and fourth quarters. Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including the timing of new store openings. We believe this is the general pattern associated with our segment of the retail industry and expect that this pattern will continue in the future. Consequently, comparisons between quarters are not necessarily meaningful and the results for any quarter are not necessarily indicative of future results.

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        We do not believe that our operating results have been materially affected by inflation during the past year. There can be no assurance, however, that our operating results will not be affected by inflation in the future.

Intellectual Property

        We use "Linens 'n Things" and "LNT" as trademarks and as service marks in connection with retail services. We have registered the "Linens 'n Things" and "LNT" marks with both the United States Patent and Trademark Office and the Canadian Intellectual Property Office. We believe that the name "Linens 'n Things" and its related marks are important elements of our business. Our corporate website address is www.lnt.com.

Employees

        As of April 1, 2006, we employed approximately 17,500 individuals, of whom approximately 7,500 were full-time employees and 10,000 were part-time employees. None of our employees is represented by a union, and we believe that we have a good relationship with our employees.

Government Regulation

        Our operations are affected by numerous federal and state laws that impose disclosure and other requirements upon the origination, servicing and enforcement of credit accounts and limitations on the maximum amount of finance charges that may be charged by a credit provider. In addition to our proprietary credit cards, credit to our guests is also provided through third parties such as American Express, Visa and MasterCard. Any change in the regulation of credit that would materially limit the availability of credit to our guest base could adversely affect our results of operations or financial condition.

        Our and our competitors' practices are subject to review in the ordinary course of business by the Federal Trade Commission and are subject to numerous federal and state laws. Additionally, we are subject to certain customs, truth-in-advertising and other laws, including consumer protection regulations that regulate retailers generally and/or govern the importation, promotion and sale of merchandise. We undertake to monitor changes in these laws and believe that we are in material compliance with all applicable state and federal regulations with respect to such practices.

Foreign Sales

        Our current international business is in Canada. The following table represents a summary of net sales and long-lived assets:

		Thirteen Weeks Ended April 1, 2006				Fiscal 2005				Fiscal 2004				Fiscal 2003
		(in millions)
Net sales from stores located within:
	United States	$	556.3	93.8	%	$	2,535.5	94.1	%	$	2,537.5	95.3	%	$	2,310.9	96.5	%
	Canada		36.5	6.2	%		159.2	5.9	%		124.0	4.7	%		84.4	3.5	%
	Total	$	592.8	100.0	%		2,694.7	100.0	%	$	2,661.5	100.0	%	$	2,395.3	100.0	%
Long-lived assets(1):
	United States	$	1,015.1	94.4	%	$	601.2	93.6	%	$	573.9	94.4	%	$	542.1	95.6	%
	Canada		60.0	5.6	%		41.2	6.4	%		34.0	5.6	%		24.7	4.4	%
	Total	$	1,075.1	100.0	%	$	642.4	100.0	%	$	607.9	100.0	%	$	566.8	100.0	%

(1)

Includes property and equipment, intangible assets, goodwill and deferred charges and other non-current assets.

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MANAGEMENT

        Our executive officers and directors, and their ages and positions, are as follows:

Name	Age	Position
Robert J. DiNicola	58	Chairman of the Board of Directors, President and Chief Executive Officer
Francis M. Rowan	43	Senior Vice President and Chief Financial Officer
F. David Coder	48	Executive Vice President, Store Operations
Robert Homler	60	Executive Vice President, Merchandising
Joyce F. Brown	60	Director
Peter P. Copses	47	Director
Andrew S. Jhawar	34	Director
Lee S. Neibart	55	Director
Richard Baker	40	Director
Michael A. Gatto	38	Director
George G. Golleher	58	Director
Damian J. Giangiacomo	29	Director

Robert J. DiNicola became the Chairman of our board of directors and our President and Chief Executive Officer in February 2006 upon the consummation of the Merger. Mr. DiNicola has operated in the retail industry for 33 years. He is currently the Executive Chairman of GNC Corporation and General Nutrition Centers, Inc. (collectively, "GNC") and has been in that capacity since October 2004. He also served as GNC's interim Chief Executive Officer from December 2004 to May 2005. Mr. DiNicola is the former Chairman of the Board of Directors of Zale Corporation. Mr. DiNicola joined Zale Corporation as its Chairman and Chief Executive Officer in April 1994. In July 1999, Mr. DiNicola relinquished his position as Chief Executive Officer of Zale Corporation and as an officer of the company the following year, but remained a member of the board. At the request of the board, he rejoined Zale Corporation in February 2001 as Chairman and Chief Executive Officer. Mr. DiNicola subsequently relinquished his position as Chief Executive Officer of Zale Corporation in August 2002 but retained his position as Chairman of the Board until March 2004. Prior to joining Zale Corporation, Mr. DiNicola served as the Chairman and Chief Executive Officer of the Bon Marché, a division of Federated Department Stores, located in Seattle, Washington. Mr. DiNicola also serves as the Senior Retail Advisor for Apollo Management, L.P. Beginning his retail career in 1972, Mr. DiNicola has also worked for Macy's, May Company and Federated Department Stores. He has held numerous executive positions in buying, merchandising and store operations across the country during his retail career. Mr. DiNicola is a graduate of St. Peter's College in New Jersey and a veteran of the U.S. Army.

Francis M. Rowan became our Senior Vice President and Chief Financial Officer in April 2006. Mr. Rowan joined Linens 'n Things, Inc. in 1989 as the Budget Manager. He was promoted in April 1993 to Director of Inventory Control and promoted to Assistant Controller in November 1995, Executive Director in August 1999 and Vice President in August 2000. Most recently, Mr. Rowan served as Divisional Vice President. Mr. Rowan has a Bachelor of Science degree in Accounting from St. Peter's College and a Master of Business Administration degree from Montclair State University.

F. David Coder became our Executive Vice President of Stores in 2005. Mr. Coder joined Linens 'n Things, Inc. in 1989 as Regional Manager—Mid-Atlantic Region. He was promoted to Vice President in 1994, was promoted to Vice President of Stores—Eastern Zone in 1995 and was promoted to Senior Vice President, Store Operations in 2001. Prior to joining Linens 'n Things, Inc. Mr. Coder held various store management positions including Market Manager at Branden's, a Division of Dayton-Hudson, and Regional Merchandise Manager at Montgomery Wards. Mr. Coder studied Business Management and Psychology at Anderson College.

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Robert Homler became our Executive Vice President, Merchandising in May 2006. Mr. Homler joined Linens 'n Things, Inc. in April 2006 as Senior Vice President of Marketing. Prior to that, he was Executive Vice President and Chief Operating Officer of GNC, after having served as Chief Merchandising Officer of GNC from February to December 2005. From March 2001 until January 2005, the Mr. Homler owned a Coffee Beanery (a gourmet coffee retailer) franchise operation in East Brunswick, New Jersey. From July 1998 to January 2000, Mr. Homler was President of Merchandising and Marketing of Levitz Furniture Corporation. Prior to joining Levitz Furniture Corporation, Mr. Homler was, from January 1994 to June 1998, Executive Vice President of Home Store Operations at Macy's East Division of Federated Department Stores. From 1984 through 1994, Mr. Homler was a General Merchandise Manager of Home Store Operations at various Federated Department Store divisions: A & S/Jordan Marsh from 1992 until 1994; Rich's Department Stores from 1991 until 1992; and the Bon Marché from 1988 until 1992. From 1984 until 1988, Mr. Homler was Senior Vice President—Director of Merchandising for R.H. Macy Corporation where he began his retail career in 1968 as a buyer and merchandiser.

Dr. Joyce F. Brown became a member of our board of directors in June 2006. Dr. Brown is president of the Fashion Institute of Technology ("FIT"), a specialized college of art and design, business, and technology of the State University of New York. Prior to her appointment at FIT in 1998, Dr. Brown was Professor of Clinical Psychology at the Graduate School and University Center of the City University of New York ("CUNY"), where she is currently Professor Emerita. From 1983 to 1992, Dr. Brown served CUNY in a variety of capacities, including acting President of Bernard Baruch College and Vice Chancellor for Urban Affairs and Development. From 1993 to 1994, Dr. Brown served as Deputy Mayor for Public and Community Affairs in the Office of the Mayor of the City of New York. In addition to her position at FIT, Dr. Brown serves as Chief Executive Officer of the Educational Foundation for the Fashion Industries, an advisory and support body to FIT. She is also a director of Paxar Corporation, Polo Ralph Lauren Corporation and USEC Inc. Dr. Brown earned her doctorate and master's degrees in Counseling Psychology from New York University and her bachelor's degree from Marymount College in Tarrytown, New York. She also received a certificate from the Institute for Educational Management at Harvard University.

Peter P. Copses became a member of our board of directors in February 2006 upon the consummation of the Merger. Mr. Copses became a founding senior partner at Apollo Management, L.P., one of the Sponsors, in 1990. Mr. Copses is also a director of Rent-A-Center, Inc. and GNC. Mr. Copses received his Master of Business Administration degree from Stanford University's Graduate School of Business and his Bachelor of Commerce degree from the University of Toronto.

Andrew S. Jhawar became a member of our board of directors in February 2006 upon the consummation of the Merger. Mr. Jhawar is a partner of Apollo Management, L.P., where he has been employed since February 2000. Prior to joining Apollo, Mr. Jhawar was an investment banker at Donaldson, Lufkin & Jenrette Securities Corporation and, prior to that, at Jefferies & Company, Inc. where he specialized in leveraged finance. Mr. Jhawar is also a director of GNC and was a director of Rent-A-Center, Inc. from October 2001 through May 2005. Mr. Jhawar received his Master of Business Administration degree from Harvard University's Graduate School of Business and his Bachelor of Science degree in Economics with a concentration in Finance from the Wharton School of the University of Pennsylvania.

Lee S. Neibart became a member of our board of directors in February 2006 upon the consummation of the Merger. Mr. Neibart has been a Partner of Apollo Real Estate Advisors since 1993 and is a Partner of NRDC Advisors. From 1989 to 1993, Mr. Neibart was with the Robert Martin Company, most recently as Executive Vice President and Chief Operating Officer. Robert Martin was a real estate development and management firm with a portfolio of approximately seven million square feet of commercial real estate. Mr. Neibart serves on the Advisory Boards of both The Enterprise Foundation and The Real Estate Institute of New York University. He is also a past President of the

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New York Chapter of the National Association of Industrial and Office Parks. Mr. Neibart graduated with a Bachelor of Arts degree from the University of Wisconsin and a Master of Business Administration degree from New York University.

Richard Baker became a member of our board of directors in February 2006 upon the consummation of the Merger. Mr. Baker is President and Chief Operating Officer of National Realty & Development Corp., one of the Sponsors. Mr. Baker is a graduate of the Cornell Hotel School. He is a director of City and Suburban Savings Bank, a New York based savings and loan, and is on the Board of Trustees of Brunswick School in Greenwich, Connecticut. In July 2004, Mr. Baker was elected to the Cornell University Council for a four-year term. He is also a member of the Waterside School Board of Trustees in Stamford, Connecticut.

Michael A. Gatto became a member of our board of directors in February 2006 upon the consummation of the Merger. Mr. Gatto is currently a Partner at Silver Point Capital, an affiliate of one of the Sponsors. He was previously a Vice President in the Special Situations Investing Group of Goldman Sachs Group, Inc. from 1998 to 2001, a Principal of Stroble & Associates, a financial consulting firm, from 1997 to 1998 and a Corporate Finance Associate in the Retail Industry Group of Citibank, N.A. from 1993 to 1997. Mr. Gatto served as a director of Party City Corporation from February 2001 to August 2003 and is currently a director of Bush Industries, Inc. Mr. Gatto received a Bachelor of Arts degree in Economics from Cornell University and a Master of Business Administration degree from Columbia Business School. He is also a Chartered Financial Analyst.

George G. Golleher became a member of our board of directors in March 2006. Mr. Golleher has been a business consultant and private equity investor since June 1999. Mr. Golleher was a director of Simon Worldwide, Inc., a former promotional manufacturing company, from September 1999 to April 2006 and was also its Chief Executive Officer from March 2003 to April 2006. From March 1998 to May 1999, Mr. Golleher served as President, Chief Operating Officer and director of Fred Meyer, Inc. a food and drug retailer. Prior to joining Fred Meyer, Inc., Mr. Golleher served for 15 years with Ralphs Grocery Company until March 1998, ultimately as the Chief Executive Officer and Vice Chairman of the Board. Mr. Golleher is also a director of GNC and Rite Aid Corporation.

Damian J. Giangiacomo became a member of our board of directors in March 2006. Mr. Giangiacomo is a principal at Apollo Management, L.P., where he has been employed since July 2000. Prior to joining Apollo, Mr. Giangiacomo was an investment banker at Morgan Stanley & Co. Mr. Giangiacomo received a Bachelor of Business degree in Finance from the University of Notre Dame.

Board Composition

        Our board of directors is composed of nine directors. Each director serves for annual terms and until his or her successor is elected and qualified. Apollo Management V, L.P. indirectly controls a majority of the common stock of our parent company. Pursuant to the stockholders' agreement governing ownership of our parent, the Sponsors have the right to appoint all of the members of its board of directors. See "Certain Relationships and Related Party Transactions—Stockholders' Agreement," which follows.

Board Committees

        The board of directors has the authority to appoint committees to perform certain management and administration functions. The board of directors has provided for an audit committee and a compensation committee. The members of the Audit Committee are Messrs. Copses (chair), Gatto and Giangiacomo. The members of the Compensation Committee are Messrs. Jhawar (chair), Baker and Golleher. The audit committee is responsible for reviewing and monitoring our accounting controls and internal audit functions and recommending to the board of directors the engagement of our outside

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auditors. The compensation committee reviews and either approves, on behalf of our board of directors, or recommends to the board of directors for approval the annual salaries and other compensation of our executive officers and individual stock and stock option grants. The compensation committee also provides assistance and recommendations with respect to our compensation policies and practices and assists with the administration of our compensation plans.

        We have adopted a Code of Business Conduct and Ethics (the "Code of Ethics") that applies to our chief executive officer, principal financial officer, principal accounting officer and to all other directors, officers and employees. A waiver from any provision of the Code of Ethics for executive officers and directors may only be granted by the board of directors.

Compensation of Directors

        We pay the chairman of our board of directors and each non-employee director an aggregate annual retainer of $40,000 and a stipend of $2,000 for each board meeting attended in person or $500 for each meeting attended telephonically. Additionally, we expect to pay non-employee directors serving on board committees a stipend of $1,000 for each meeting attended in person or $500 for each meeting attended telephonically. In addition, we grant stock options to purchase shares of our parent's common stock to the chairman and each non-employee director, upon first election or appointment to our board of directors, outside of the equity incentive plan described below, with the number of shares to be determined by the board of directors in its discretion. To date, each of the grants have been for 5,000 shares.

Stock Option Plan

        Our parent, Linens Holding Co., adopted a stock option plan pursuant to which it intended to offer equity incentives in the form of options to purchase up to 7.5% of the fully-diluted common stock of Linens Holding Co. to our directors, senior executives and other key employees. The Compensation Committee approved 346,946 stock options under the stock option plan to the following executive officers:

Name	Principal Position	Number of Stock Options Granted		Grant Date of Stock Options
Robert J. DiNicola	Chairman and Chief Executive Officer	281,946	(1)	3/27/2006
F. David Coder	Executive Vice President, Store Operations	25,000	(1)	3/27/2006
Robert Homler	Executive Vice President of Merchandising	25,000	(2)	4/17/2006
Francis M. Rowan	Senior Vice President/CFO	5,000 10,000	(1) (3)	3/27/2006 4/28/2006

        In addition to the above stock option awards, the Compensation Committee also approved the grant of 441,000 to certain other of our employees. As of June 19^th, 2006 the Compensation Committee has approved a total of 798,946 stock options, which includes all grants.

(1)

The stock options granted under the stock option plan to each optionee are equally divided between a "Time Option" and a "Performance Option," as those terms are defined in the standard form of option grant letter. The stock options have an exercise price of $50.00 per share, expire seven years after the date of grant and become vested and exercisable in four equal installments on each of February 14, 2007, February 14, 2008, February 14, 2009 and February 14, 2010 with respect to the Time Options and as provided in the standard form of option grant letter with respect to the Performance Options.

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(2)

The stock options granted under the stock option plan to each optionee are equally divided between a "Time Option" and a "Performance Option," as those terms is defined in the standard form of option grant letter. The stock options have an exercise price of $50.00 per share, expire seven years after the date of grant and become vested and exercisable in four equal installments on each of April 17, 2007, April 17, 2008, April 17, 2009, and April 17, 2010 with respect to the Time Options and as provided in the standard form of option grant letter with respect to the Performance Options.

(3)

The stock options granted under the stock option plan to each optionee are equally divided between a "Time Option" and a "Performance Option," as those terms is defined in the standard form of option grant letter. The stock options have an exercise price of $50.00 per share, expire seven years after the date of grant and become vested and exercisable in four equal installments on each of April 28, 2007, April 28, 2008, April 28, 2009, and April 28, 2010 with respect to the Time Options and as provided in the standard form of option grant letter with respect to the Performance Options.

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EXECUTIVE COMPENSATION

        The following table sets forth information with respect to the compensation for the years 2005, 2004 and 2003 of Norman Axelrod (former Chairman and CEO), Jack E. Moore (former President and COO), William T. Giles (former Executive Vice President and Chief Financial Officer), Brian D. Silva (former Senior Vice President, Human Resources, Administration and Corporate Secretary), F. David Coder and Jane Gilmartin (former Executive Vice President, Chief Merchandising Officer), or collectively, the named executive officers.

SUMMARY COMPENSATION TABLE

					Long-Term Compensation
		Annual Compensation			Awards		Payouts
Name and Principal Position	Fiscal Year	Salary ($)	Bonus ($)(1)	Other Annual Compensation ($)(2)	Restricted Stock Award(s) ($)(3)	Number of Securities Underlying Options(4)	LTIP Payouts ($)(3)	All Other Compensation ($)(5)
Norman Axelrod, Former Chairman and Chief Executive Officer(7)	2005 2004 2003	904,231 893,269 813,462	— 126,000 389,400	— — —	— 55,131 —	— 200,000 200,000	— — —	25,602 35,382 22,844
Jack E. Moore, Former President and Chief Operating Officer(6)	2005 2004	585,962 309,615	— 560,000	69,427 151,371	— 720,500	— 400,000	— —	3,639 —
William T. Giles, Former Executive Vice President and Chief Financial Officer(10)	2005 2004 2003	350,769 351,462 315,896	250,000 33,858 94,548	— — —	— 640,902 312,750	— 50,000 40,000	— — —	4,372 4,312 4,041
Brian D. Silva, Former Senior Vice President, Human Resources, Administration and Corporate Secretary(8)	2005 2004 2003	287,308 287,692 267,115	125,000 22,680 71,685	— — —	— 12,599 —	— 25,000 25,000	— — —	4,100 — 3,712
F. David Coder, Executive Vice President, Store Operations	2005 2004 2003	339,769 320,308 278,654	— 25,272 100,000	— — —	— 8,431 —	— 50,000 50,000	— — —	4,100 4,303 4,028
Jane Gilmartin, Former Executive Vice President, Chief Merchandising Officer(9)	2005	222,115	543,193	—	1,576,240	175,000	—	4,100

(1)

Ms. Gilmartin received a $100,000 sign-on bonus upon her commencement of employment in July 2005. Ms. Gilmartin is also entitled to a guaranteed minimum bonus under our annual incentive compensation plan of $300,000, payable no later than March 31, 2006, subject to continued active employment. We also reimbursed Ms. Gilmartin in the amount of $143,193, for part of her signing bonus, relocation allowance and other amounts she was required to repay to her previous employer.

Based on their services during the strategic review process leading up to the execution of the Merger Agreement, Mr. Giles and Mr. Silva each received additional compensation of $250,000 and $125,000, respectively. Mr. Giles and Mr. Silva are also each entitled to additional compensation of $250,000 and $125,000, respectively, due to the consummation of the Merger. In addition, Mr. Coder is entitled to additional compensation of $100,000 due to the consummation of the Merger.

(2)

For fiscal 2005 represents reimbursement of Mr. Moore's relocation costs of $15,027 and moving expenses of $54,400. For fiscal 2004 represents reimbursement of Mr. Moore's relocation costs including moving costs, temporary housing and purchase-related costs of $120,677, tax gross-up related to these costs of $27,299 and COBRA payments of $3,395.

(3)

Ms. Gilmartin was awarded 61,000 restricted stock units in connection with her hiring as Executive Vice President and Chief Merchandising Officer.

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The number and value of all restricted stock unit holdings at December 31, 2005 were:

Name	Units	Value
Mr. Axelrod	2,341	$	62,505
Mr. Moore	20,000		534,000
Mr. Giles	33,154		885,212
Mr. Silva	535		14,285
Mr. Coder	358		9,559
Ms. Gilmartin	53,500		1,428,450

Holders of restricted stock units are entitled to be credited with any dividends on such units. Awards under our long term incentive plan ("LTIP") had previously been made based on the executive officers having achieved certain preestablished financial performance targets. The LTIP was discontinued in Fiscal 2004. For the 3-year cycles ending in fiscal 2003 and 2004 the financial targets were based on earnings and net return on assets over the prior 3 years, but no awards were achieved.

(4)

Upon the commencement of her employment in July 2005 and in November 2005, Ms. Gilmartin was awarded 150,000 options and 25,000 options, respectively, to purchase shares of our common stock.

(5)

For fiscal 2005 these values represent amounts contributed under our 401(k) profit sharing plan (401(k) employer matches). In addition, for Mr. Axelrod, the fiscal 2005 amount represents: (i) $13,821 credited to his account maintained under the defined contribution component of the supplemental executive retirement program and (ii) imputed income of $7,681 associated with the term portion of the split dollar insurance component of the supplemental executive retirement program.

(6)

Mr. Moore ceased serving as President and Chief Operating Officer on January 12, 2006. His final date of employment was February 14, 2006.

(7)

Mr. Axelrod ceased serving as Chairman and Chief Executive Officer on February 14, 2006.

(8)

Mr. Silva resigned as Senior Vice President, Human Resources, Administration and Corporate Secretary effective February 27, 2006.

(9)

Ms. Gilmartin ceased serving as Executive Vice President, Chief Merchandising Officer on March 24, 2006.

(10)

Mr. Giles resigned as Executive Vice President, Chief Financial Officer effective April 28, 2006.

        Option Grants In Last Fiscal Year.    The table below sets forth certain information concerning stock options granted during fiscal 2005 to the named executive officers.

        The grant date present values shown in the following table are required by SEC regulations, and are not intended to forecast possible future appreciation. We are not aware of any formula which will predict with reasonable accuracy the future appreciation of equity securities. No benefit from the grant of stock options can be realized unless there is an appreciation in stock price, which benefits all shareholders.

        All of the equity interests disclosed in the table below were cashed-out upon consummation of the Merger.

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OPTION GRANTS IN LAST FISCAL YEAR

	Individual Grants
Name	Number of Securities Underlying Options Granted		Percent of Total Options Granted to Employees in Fiscal Year		Exercise or Base Price ($/Share)	Expiration Date	Grant Date Present Value ($)(2)
Jane F. Gilmartin	100,000 50,000 25,000	(1) (1) (1)	39.9 20.0 10.0	% % %	25.84 25.84 25.61	07/20/2012 07/20/2012 12/31/2012	598,680 523,635 148,337

(1)

These option grants were made in connection with the hiring of Ms. Gilmartin as Executive Vice President and Chief Merchandising Officer. In accordance with the original terms and conditions of each grant—

(a)

The 100,000 options were issued in July 2005 pursuant to our New Hire Authorization. The options vest and are exercisable on or after December 31, 2005, provided that the shares of common stock acquired upon exercise of this option may not be sold or otherwise disposed of at the earlier of (1) June 20, 2012 or (2) in one-third increments if, and at such point, over ten days (which need not be consecutive) in an established period of thirty days, the fair market value of our common stock is at or above $31.01, $34.11, and $37.52, respectively;

(b)

The 50,000 options were issued in July 2005 pursuant to our New Hire Authorization which vest in one-third annual increments beginning March 1, 2006; and

(c)

The 25,000 options were issued in November 2005 pursuant to our New Hire Authorization. The options vest and are exercisable on or after December 31, 2005, provided that the shares of common stock acquired upon exercise of this option may not be sold or otherwise disposed of at the earlier of (1) November 30, 2012 or (2) in one-third increments if, and at such point, over ten days (which need not be consecutive) in an established period of thirty days, the fair market value of our common stock is at or above $30.73, $33.81, and $37.19, respectively.

(2)

The hypothetical present values on the grant date are calculated under the modified Black-Scholes Model, which is a mathematical formula used to value options traded on stock exchanges. This formula considers a number of factors used in hypothesizing an option's present value. Weighted-average factors used to value options granted include the stock's expected volatility rate of 32.8%, risk free rate of return of 4.0%, dividend yield of 0.0%, projected time of exercise of 3.23 years and projected risk of forfeiture and non-marketability for the vesting period of 0% per annum.

        Option Exercises and Year-end Option Holdings.    The following table shows information regarding option exercises during fiscal 2005 as well as fiscal 2005 year-end option holdings for each of the named executive officers. All of the equity interests disclosed in the table below (exercisable and unexercisable) were cashed-out upon consummation of the Merger.

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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

			Number of Securities Underlying Unexercised Options at FY-End (#) Exercisable/ Unexercisable		Value of Unexercised In-the-Money Options at FY-End ($) Exercisable/ Unexercisable
	Shares Acquired on Exercise (#)
Name		Value Realized ($)
			Exercisable	Unexercisable	Exercisable	Unexercisable
Norman Axelrod	—	—	1,865,984	—	4,892,076	—
Jack E. Moore	—	—	120,000	280,000	168,000	—
William T. Giles	—	—	345,000	—	1,495,725	—
Brian D. Silva	—	—	186,250	—	564,175	—
F. David Coder	—	—	172,500	10,000	290,575	31,600
Jane Gilmartin	—	—	125,000	50,000	113,250	43,000

Employment Agreements and Other Executive Agreements

Robert J. DiNicola

        Upon the consummation of the Merger, Robert J. DiNicola became Chairman of our board of directors and Chief Executive Officer. We and Mr. DiNicola have entered into an employment agreement containing the following terms: an initial term expiring on December 31, 2008, subject to automatic one-year renewals unless either party provides one-year advance notice of non-renewal; a base salary of $1,350,000; a target bonus of up to 100% of base salary subject to meeting pre-established performance goals; an option grant for 2% of the fully-diluted common stock of Linens Holding Co. from the 7.5% equity pool described in "Stock Option Plan" above; severance pay, in the event of a termination of employment by us, other than for cause, or by Mr. DiNicola for good reason equal to continued base salary and benefits for the remainder of the term (but no less than two years if such termination occurs during the six month period following a change in control); restrictions on Mr. DiNicola's engaging in competitive and similar activities during his employment and for 12 months following termination of his employment, or, if longer, the period during which he is receiving severance pay. In addition, upon consummation of the Merger, Mr. DiNicola purchased 40,000 shares, or approximately 0.3% of the fully diluted common stock, of Linens Holding Co. for $2 million, and also received a fully vested option, outside of the stock option plan, to purchase 40,000 shares at an exercise price of $50.00 per share.

Other Executive Officers

        We have employment agreements with each of Mr. Rowan, Mr. Coder and Mr. Homler (the "Executives") (the "Employment Agreements"). The following summarizes the principal terms of these Employment Agreements. The Employment Agreements are for an initial term ending on December 31, 2007. The Employment Agreements contain automatic one-year extensions at the end of the term unless either party provides one-year advance notice of non-renewal (the "Employment Period").

        The Employment Agreements provide that we agree to pay to the Executives an annual base salary (the "Base Salary") in the following amounts: Mr. Rowan—$250,000, Mr. Coder—$400,000, and Mr. Homler—$400,000. Our Board of Directors or the Compensation Committee of the Board of Directors will review the Executive's performance on an annual basis and, based on such review, may change the Base Salary, as it, acting in its sole discretion, shall determine to be reasonable and appropriate.

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        The Employment Agreements also provide, with respect to the 2006 calendar year, and each calendar year that commences during the Employment Period, that the Executive will be eligible to receive an annual performance bonus ("Annual Bonus") on a basis and in an amount to be determined by our Board of Directors or the Compensation Committee of the Board of Directors in the exercise of their sole discretion. The Annual Bonus, if any, may be up to 40-100% of the Executive's Base Salary, depending on the Executive, and shall be payable in full as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year. The Executive shall also be eligible to participate in and be granted stock options under the Linens Holding Co. Stock Option Plan to purchase shares of Common Stock, par value $0.01 per share, of Linens Holding Co.

        The Employment Agreements also provide for (1) participation during the Employment Period in benefit plans and programs including life insurance, medical benefits and financial planning services, (2) restrictive covenants including non-competition, non-disclosure and non-solicitation of employees and (3) with respect to Mr. Homler, the payment of his relocation from the Pittsburgh, Pennsylvania area to the Clifton, New Jersey area. The Executives agree not to compete with us during the Employment Period and until the longer of (a) 12 months after the date of termination of employment (the Executive's last day of work for us) or (b) the period during which the Executive is receiving payments from us.

        In the event the Executive's employment is terminated by us other than for cause, or resignation by the Executive for good reason, the Employment Agreement provides for continued payment of Base Salary to which the Executive would have been entitled had he remained in the employ of us until the expiration of the Employment Period in effect immediately prior to the date of termination. Subject to the sole discretion of our Board of Directors or the Compensation Committee of the Board of Directors, we may pay to the Executive a prorated share of the Annual Bonus that he would have been entitled to had the Executive worked the full year during which the termination occurred.

        In the event the Executive's employment is terminated by us within six months following a "change in control" and other than for cause, the Employment Agreement provides that we shall continue to pay the Executive the Base Salary to which he would have been entitled for the greater of (1) the period had the Executive remained in the employ of us until the expiration of the Employment Period or (2) a two-year period following such date of termination.

        In May 2006, Mr. Coder purchased 3,000 shares of our parent's common stock for $150,000, and also received a fully vested option, outside of the stock option plan, to purchase 3,000 shares at an exercise price of $50.00 per share.

        Brian D. Silva resigned as Senior Vice President, Human Resources, Administration and Corporate Secretary effective February 27, 2006. Mr. Silva was not entitled to any severance under his employment agreement with us because he voluntarily terminated his employment with us.

        Jane Gilmartin ceased serving as Executive Vice President, Chief Merchandising Officer on March 24, 2006. We and Ms. Gilmartin have entered into a separation agreement and general release pursuant to which Ms. Gilmartin agreed to release us and our affiliates from any claims Ms. Gilmartin may have had, and we agreed to pay Ms. Gilmartin's severance and other entitlements under her employment agreement, including a cash lump sum severance payment equal to $1,522,500 representing two times her base salary plus two times her target annual bonus (45% of base salary) and a prorated annual bonus equal to $59,062.50.

        William T. Giles submitted his resignation as Executive Vice President, Chief Financial Officer on April 21, 2006, effective April 28, 2006. Mr. Giles was not entitled to any severance under his employment agreement with us because he voluntarily terminated his employment with us.

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Severance Arrangements

Norman Axelrod

        Upon the consummation of the Merger, Norman Axelrod ceased to be Chairman of our board of directors and Chief Executive Officer, and his employment terminated on February 16, 2006. We and Mr. Axelrod have entered into a general release agreement pursuant to which Mr. Axelrod agreed to release us and our affiliates from any claims Mr. Axelrod may have had, and we agreed to pay Mr. Axelrod's severance and other entitlements under his employment agreement. These entitlements include a payment equal to $4,924,530 representing 2.99 times his base salary and annual incentive compensation, $135,495 representing the pro rated portion of his annual cash incentive compensation and a pro rated portion of his annual equity grant at his target rates, medical and life coverage until he attains age 60 at no cost (and at his cost from age 60 to age 65), approximately $5,562,674 representing the defined benefit portion of his supplemental executive retirement program ("SERP"), $971,988 representing the defined contribution portion of his SERP, and his current interest under a frozen split dollar life insurance arrangement, estimated to be $443,449.

Jack E. Moore

        Jack E. Moore ceased serving as our President and Chief Operating Officer on January 12, 2006, and his employment terminated upon consummation of the Merger. We and Mr. Moore have entered into a separation and general release agreement pursuant to which Mr. Moore agreed to release us and our affiliates from any claims Mr. Moore may have had, and we agreed to pay Mr. Moore's severance and other entitlements under his employment agreement, including a cash lump sum severance payment equal to $2,419,000 representing 2.5 times his base salary plus 2 times his target annual bonus (80% of base salary), a prorated annual bonus equal to $39,333, continued health and life insurance benefits for up to two years, and a payment equal to $1,197,872 representing a gross-up payment to make him whole for golden parachute excise taxes imposed upon him.

Jane Gilmartin

        Jane Gilmartin ceased serving as Executive Vice President, Chief Merchandising Officer on March 24, 2006. We and Ms. Gilmartin have entered into a separation agreement and general release pursuant to which Ms. Gilmartin agreed to release us and our affiliates from any claims Ms. Gilmartin may have had, and we agreed to pay Ms. Gilmartin's severance and other entitlements under her employment agreement, including a cash lump sum severance payment equal to $1,522,500 representing two times her base salary plus two times her target annual bonus (45% of base salary) and a prorated annual bonus equal to $59,062.50.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

        We own all of Linens 'n Things, Inc.'s issued and outstanding capital stock.

        The table below sets forth certain information regarding the beneficial ownership of our common stock with respect to each entity or person that is a beneficial owner of more than 5% of its outstanding common stock and beneficial ownership of its common stock by each director and executive officer and all directors and officers as a group, at May 31, 2006:

Name of Beneficial Owner	Number of Shares		Percentage
Linens Investors, LLC(1)	13,000,000	(2)(3)	99.3	%
Robert J. DiNicola(3)(4)	80,000	(3)	*
Francis M. Rowan(3)(4)	—		—
F. David Coder(4)	6,000		*
Robert Homler(4)	—		—
Peter P. Copses(5)	13,000,000	(2)(5)	99.3	%
Andrew S. Jhawar(5)	13,000,000	(2)(5)	99.3	%
Lee S. Neibart(6)	—	(2)(6)	—
Richard Baker(6)	—	(2)(6)	—
Michael A. Gatto(7)	—	(2)(7)	—
George G. Golleher(4)	—		—
Damian J. Giangiacomo(5)	—	(2)(5)	—	%
All officers and directors as a group (12 persons)(2)(8)	13,086,000		100	%

*

Less than 1% of the outstanding shares.

(1)

The address of Linens Investors, LLC ("Linens Investors") is c/o Apollo Management V, L.P., 10250 Constellation Boulevard, Los Angeles, California 90067.

(2)

Linens Investors is our principal stockholder. We are a special purpose entity that was created in connection with the Merger and are controlled by Apollo Linens Investors, LLC and its affiliates ("Apollo Linens Investors") which, together with NRDC Real Estate Advisors I LLC and Silver Point Capital Fund Investments LLC, and their respective affiliates, own all of the membership interests of Linens Investors.

(3)

Upon consummation of the Merger, Robert J. DiNicola purchased 40,000 shares of our common stock for $2.0 million, and also received a fully vested option to purchase the same number of shares for an additional $2.0 million. Mr. Coder holds a fully vested option to purchase 3,000 shares of our common stock for $150,000. A person is deemed to be the beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days.

As of May 31, 2006, our only stockholders were Robert J. DiNicola, F. David Coder and Linens Investors. In connection therewith, we and Linens Investors entered into a stockholders' agreement. See "Certain Relationships and Related Transactions—Stockholders' Agreement." Pursuant to the stockholders' agreement, Mr. DiNicola, Mr. Coder, and any subsequent stockholders, agreed to give Linens Investors a voting proxy to vote all of our shares held by such stockholder with respect to certain matters as set forth in the stockholders' agreement. As a result, Linens Investors may be deemed to be the beneficial owner of the shares of common stock held by the parties to the stockholders' agreement. Linens Investors expressly disclaims beneficial ownership of such shares of common stock held by each of the parties to the stockholders' agreement, except to the extent of its pecuniary interest in us.

(4)

The address for each of Messrs. DiNicola, Rowan, Coder, Homler and Golleher is c/o Linens 'n Things, Inc., 6 Brighton Road, Clifton, New Jersey 07015.

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(5)

Apollo Linens Investors is controlled by its manager, Apollo Management V, L.P. Peter P. Copses and Andrew S. Jhawar, two of our directors, are affiliates of Apollo Management V, L.P., and therefore, may be deemed to be beneficial owners of the membership interests of Apollo Linens Investors. Each of Messrs. Copses and Jhawar disclaim beneficial ownership of any such interests in which he does not have a pecuniary interest. The address for each of Messrs. Copses, Jhawar and Giangiacomo is c/o Apollo Management V, L.P., 10250 Constellation Boulevard, Los Angeles, California 90067.

(6)

Lee S. Neibart and Richard Baker, two of our directors, are affiliates of NRDC Real Estate Advisors I LLC, and therefore, may be deemed to be beneficial owners of the membership interests of NRDC Real Estate Advisors I LLC. Each of Messrs. Neibart and Baker disclaim beneficial ownership of any such interests in which he does not have a pecuniary interest. The address for each of Messrs. Neibart and Baker is c/o NRDC Real Estate Advisors I LLC, 3 Manhattanville Road, Purchase, New York 10577.

(7)

Michael A. Gatto is an affiliate of Silver Point Capital Fund Investments LLC, and therefore, may be deemed to be the beneficial owner of the membership interests of Silver Point Capital Fund Investments LLC. Mr. Gatto disclaims beneficial ownership of any such interests in which he does not have a pecuniary interest. The address of Mr. Gatto is c/o Silver Point Capital Fund Investments LLC, 2 Greenwich Plaza, Greenwich, Connecticut 06830.

(8)

Includes shares held by Linens Investors.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Management Services Agreement

        Upon consummation of the Merger, we entered into a management services agreement with Apollo Management V, L.P., NRDC Linens B LLC and Silver Point Capital Fund Investments LLC (the "Sponsors") (each of whom is an affiliate of us). Under this management services agreement, the Sponsors agree to provide to us certain investment banking, management, consulting, financial planning and real estate advisory services on an ongoing basis for a fee of $2.0 million per year. Under this management services agreement, Apollo Management V, L.P. will also agree to provide to us certain financial advisory and investment banking services from time to time in connection with major financial transactions that may be undertaken by us or our subsidiaries in exchange for fees customary for such services after taking into account Apollo Management V, L.P.'s expertise and relationships within the business and financial community. Under this management services agreement, we also agreed to provide customary indemnification. In addition, we agreed to pay a transaction fee of $15.0 million in the aggregate (plus reimbursement of expenses) to the Sponsors for financial advisory services rendered in connection with the Merger. These services included assisting us in structuring the Merger, taking into account tax considerations and optimal access to financing, and assisting in the negotiation of our material agreements and financing arrangements in connection with the Merger.

Stockholders' Agreement

        Our only stockholders are Robert J. DiNicola, F. David Coder and Linens Investors, LLC, a limited liability company owned by the Sponsors. In connection therewith, Linens Investors, LLC has entered into a stockholders' agreement with us that sets forth applicable provisions relating to the management and ownership of us and our subsidiaries. Pursuant to the stockholders' agreement, Mr. DiNicola and Mr. Coder agreed to give Linens Investors a voting proxy to vote all of our shares held by them with respect to certain matters as set forth in the stockholders' agreement. In addition, the stockholders' agreement contains customary drag along rights, tag along rights, registration rights, restrictions on the transfer of our common stock and an indemnity of the Sponsors.

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DESCRIPTION OF CERTAIN INDEBTEDNESS

Asset-Based Revolving Credit Facility

        In connection with the Merger, as of February 14, 2006, we have an asset-based revolving credit facility (the "Credit Facility") that provided for senior secured financing of up to $600.0 million, subject to the borrowing base. The borrowing base is a formula based on certain eligible inventory and receivables, minus certain reserves. A portion of the Credit Facility, not to exceed $40.0 million, is also available to Linens 'n Things Canada Corp. subject to the Canadian borrowing base. The Credit Facility requires us to comply with financial ratio maintenance covenants if the excess availability under the Credit Facility, at any time, does not exceed $75 million and also contains certain customary affirmative covenants and events of default. The principal amount outstanding of the loans under the Credit Facility, plus interest accrued and unpaid thereon, will be due and payable in full at maturity, five years from the date of closing of the Merger.

        All obligations under the Credit Facility are unconditionally guaranteed by Linens Holding Co., our direct parent company, and certain of our existing and future domestic subsidiaries. All obligations under the Credit Facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of our assets and the assets of the Issuers and the subsidiary guarantors, including: (i) a first-priority security interest in inventory, accounts receivable, cash, securities and other general intangibles; and (ii) a second-priority security interest in equipment, intellectual property rights and related general intangibles and all of the capital stock of us and the capital stock of certain subsidiaries.

        Borrowings under the Credit Facility bear interest at a rate equal to, at our option, either (a) an alternate base rate determined by reference to the higher of (1) the base rate in effect on such day and (2) the federal funds effective rate plus 0.50% or (b) a LIBOR rate, with respect to any Eurodollar borrowing, determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, in each case plus an applicable margin. The initial applicable margin for borrowings under the Credit Facility is 0% with respect to alternate base rate borrowings and 1.50% with respect to LIBOR borrowings. After the delivery of the financial statements for the first full fiscal quarter after the closing date, the applicable margin for borrowings under the Credit Facility will be subject to adjustment based on the excess availability under the Credit Facility. In addition to paying interest on outstanding principal under the Credit Facility, we are required to pay a commitment fee, initially 0.375% per annum, in respect of the unutilized commitments thereunder. After the delivery of financial statements for the first full fiscal quarter after the closing date, the commitment fee will be subject to adjustment based on the excess availability under the Credit Facility. We must also pay customary letter of credit fees and agency fees. We initiated borrowings under our Credit Facility on February 23, 2006 to meet our operational working capital needs. As of April 1, 2006, we had $81.6 million in borrowings under the Credit Facility.

        Management regularly reviews and evaluates its liquidity and capital needs. We experience peak periods for our cash needs generally during the second quarter and fourth quarter of the fiscal year. As our business continues to grow and our current store expansion plan is implemented, such peak periods may require increases in the amounts available under the Credit Facility from those currently existing and/or other debt or equity funding.

        Management currently believes that our cash flows from operations, our access to increases to the Credit Facility or additional capacity from new credit facilities will be sufficient to fund our expected capital expenditures, working capital and non-acquisition business expansion requirements as they become due.

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DESCRIPTION OF EXCHANGE NOTES

        The old notes were issued, and the exchange notes will be issued, under an indenture, dated as of February 14, 2006 (the "Indenture"), among Linens 'n Things, Inc., Linens 'n Things Center, Inc., Linens Holding Co., The Bank of New York, as trustee (the "Trustee"), and the Initial Subsidiary Guarantors, as subsidiary guarantors. The terms of the old notes and the exchange notes (collectively, the "notes") include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939. The form and terms of the exchange notes and the old notes are identical in all material respects, except that the exchange notes will be registered under the Securities Act and will not contain terms with respect to transfer restrictions or additional interest upon a failure to fulfill certain of our obligations under the registration rights agreement.

        You can find the definitions of certain terms used in this description under the subheading "Certain Definitions." In this description, "Linens 'n Things, Inc." and the "Company" refer only to Linens 'n Things, Inc. and not to any of its subsidiaries, "Linens 'n Things Center, Inc." and the "Co-Issuer" refer only to Linens 'n Things Center, Inc. and not to any of its subsidiaries and the "Issuers" refers to the Company and the Co-Issuer.

        The following description is a summary of the material provisions of the indenture, the registration rights agreement, certain Note Lien Documents and the Intercreditor Agreement. It does not restate those agreements in their entirety. We urge you to read the indenture, the registration rights agreement, the Note Lien Documents and the Intercreditor Agreement, because they, and not this description, define your rights as holders of the notes. Copies of the indenture and the registration rights agreement are filed as exhibits to the registration statement to which this prospectus is a part. Certain defined terms used in this description but not defined below under "—Certain Definitions" have the meanings assigned to them in the indenture.

        The registered holder of a note will be treated as the owner of it for all purposes. Only registered holders will have rights under the indenture.

Brief Description of the Notes and the Note Guarantees

        The notes:

•

are general obligations of the Issuers;



•

are secured on a first-priority basis, equally and ratably with all obligations of the Issuers under any future Note Lien Debt, by Liens on Note Lien Collateral, which is substantially all of the assets of the Issuers and the Note Guarantors consisting of Intellectual Property, Equipment, documents of title related to Equipment, Note Lien General Intangibles and the Note Capital Stock Collateral (which consists of all of the Capital Stock in the Company and certain of the Company's Domestic Subsidiaries and 65% of the Capital Stock of the Foreign Subsidiaries owned directly by the Parent or its Domestic Subsidiaries) subject to certain Permitted Liens;



•

are secured on a second-priority basis, equally and ratably with all obligations of the Issuers under any future Note Lien Debt, by Liens on the Revolving Credit Collateral, subject to the Liens on the Revolving Credit Collateral securing the Issuers' obligations under the Revolving Credit Agreement and any future Revolving Credit Obligations that we may incur and certain Permitted Liens;



•

are effectively junior, to the extent of the value of the Revolving Credit Collateral, to the Issuers' obligations under the Revolving Credit Agreement and any future Revolving Credit Obligations that we may incur, which will be secured on a first-priority basis by the Revolving Credit Collateral;

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•

are effectively junior to certain Permitted Liens, to the extent of the value of the assets subject to those Permitted Liens;



•

are pari passu in right of payment with all existing and future senior Indebtedness of the Issuers, including Indebtedness outstanding under the Revolving Credit Agreement;



•

are senior in right of payment to all existing and future subordinated indebtedness of the Issuers;



•

are effectively subordinated to all liabilities (including Trade Payables) and Preferred Stock of each Subsidiary of the Company that is not a Guarantor; and



•

are fully and unconditionally guaranteed by our parent, Linens Holding Co., and each of the Issuers' current and future Subsidiaries that guarantee the Revolving Credit Agreement except for the Canadian Subsidiaries of the Issuers.

        The Note Guarantees:

•

are general obligations of such Guarantor;



•

are secured on a first-priority basis, equally and ratably with all obligations of each Guarantor under any future Note Lien Debt, by Liens on Note Lien Collateral of such Guarantor, subject to certain Permitted Liens;



•

are secured on a second-priority basis, equally and ratably with all obligations of each Guarantor under any future Note Lien Debt, by the Liens on the Revolving Credit Collateral of such Guarantor, subject to Liens on the Revolving Credit Collateral securing the Guarantor's obligations under the Revolving Credit Agreement and any future Revolving Credit Obligations guaranteed by such Guarantor and certain Permitted Liens;



•

are effectively junior, to the extent of the value of the Revolving Credit Collateral that secures Revolving Credit Obligations, to each Guarantor's obligations under the Revolving Credit Agreement and any future Revolving Credit Obligations guaranteed by such Guarantor, which will be secured on a first-priority basis by Revolving Credit Collateral;



•

are effectively junior to certain Permitted Liens, to the extent of the value of the assets of the Guarantors subject to those Permitted Liens;



•

are pari passu in right of payment with all existing and future senior Indebtedness of each Guarantor, including Indebtedness outstanding under the Revolving Credit Agreement; and



•

are senior in right of payment to any subordinated Indebtedness of each Guarantor.

        The Note Lien Collateral consists of substantially all Intellectual Property, Equipment (whether or not constituting Fixtures), Note Lien General Intangibles, the Note Capital Stock Collateral, and other related assets of the Issuers and the Guarantors; but the Note Lien Collateral does not include the Revolving Credit Collateral, the Canadian Collateral and certain Excluded Assets. The Revolving Credit Collateral consists of substantially all of the remaining assets of our parent, Linens Holding Co., the Issuers and their Subsidiaries, including all Inventory, Accounts (including Payment Intangibles), Chattel Paper, Instruments (including Intercompany Notes of Subsidiaries), Letter of Credit Rights, Deposit Accounts (other than the Net Available Cash Account to the extent constituting a Deposit Account), Credit Card Processing Accounts and Securities Accounts (other than the Net Available Cash Account to the extent constituting a Securities Account), other Investment Property (other than Capital Stock Collateral), General Intangibles (other than Intellectual Property and Note Lien General Intangibles), the Revolving Credit Capital Stock Collateral and other related assets. The notes and the Revolving Credit Agreement (and the respective Guarantees thereof) will be secured by Liens on the Note Lien Collateral and the Revolving Credit Collateral, although the relative priority of such Liens is

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different on each Collateral Class. The Revolving Credit Agreement will also be secured by Liens on the Canadian Collateral. In addition, the Liens on the Note Capital Stock Collateral to secure the notes and the Note Guarantees may be released under certain circumstances.

        The notes and Note Guarantees are effectively subordinated to all Revolving Credit Obligations to the extent of the value of the Revolving Credit Collateral securing Revolving Credit Obligations. Pursuant to the indenture, the Issuers will be permitted to Incur additional Indebtedness and designate such Indebtedness as Revolving Credit Obligations, subject to the Revolving Credit Facility Debt Cap. The Issuers also will be permitted to Incur additional Indebtedness and designate such Indebtedness as Note Lien Debt, subject to the limitations described in the definition of that term. The Incurrence by the Issuers or any of its Restricted Subsidiaries of any additional secured Indebtedness is also subject to the covenants described below under "—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock" and "—Certain Covenants—Liens."

        Linens Holding Co. and each of the current and future Subsidiaries of the Issuers that guarantee the Revolving Credit Agreement, except for the Canadian Subsidiaries of the Issuers, also have guaranteed the notes. In the event of a bankruptcy, liquidation or reorganization of any of the non-guarantor Subsidiaries, the non-guarantor Subsidiaries will pay the holders of their debt (including the holders of the Revolving Credit Obligations) and their trade creditors before they will be able to distribute any of their assets to us. For the year ended December 31, 2005, and the three months ended April 1, 2006, the non-guarantor Subsidiaries had net sales of approximately $159.2 million and $36.5 million and income/(loss) from continuing operations of approximately $6.4 million and ($1.4) million, respectively. At April 1, 2006, the non-guarantor Subsidiaries had total assets of approximately $113.0 million.

        As of the date of the indenture, all of our Subsidiaries will be "Restricted Subsidiaries." However, under the circumstances described below under the captions "—Certain Covenants—Designation of Restricted and Unrestricted Subsidiaries" and the definition of "Unrestricted Subsidiary" under "—Certain Definitions," we will be permitted to designate certain of our other Subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the indenture. Our Unrestricted Subsidiaries will not guarantee the notes.

Principal, Maturity and Interest

        The Issuers will issue up to $650.0 million aggregate principal amount of exchange notes in this offering. The Issuers may issue additional notes under the indenture from time to time after this offering. Any issuance of additional notes is subject to all of the covenants in the indenture, including the covenant described below under the caption "—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock." The notes and any additional notes subsequently issued under the indenture will be treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase. The Issuers will issue notes in denominations of $2,000 and larger integral multiples of $1,000. The notes will mature on January 15, 2014.

        Interest on the notes will accrue at a per annum rate equal to the Applicable Eurodollar Rate from the most recent date to which interest has been paid or, if no interest has been paid, from February 14, 2006. The Applicable Eurodollar Rate will be reset quarterly. The Applicable Eurodollar Rate for the first quarterly period will be 10.34500%. The Issuers will pay interest on the notes quarterly, in arrears, every January 15, April 15, July 15 and October 15 of each year, commencing on April 15, 2006, to holders of record at the close of business on the immediately preceding January 1, April 1, July 1 and October 1, and at maturity.

        Interest on overdue principal and interest and Additional Interest, if any, will accrue at a rate that is 1% higher than the then applicable interest rate on the notes. Interest on the notes will accrue from

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the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

        The interest rate on the notes will in no event be higher than the maximum rate permitted by New York law as the same may be modified by U.S. law of general application. All percentages resulting from the calculation of the Applicable Eurodollar Rate will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point being rounded upwards (e.g., 9.876545% will be rounded to 9.87655%) and all dollar amounts used in or resulting from such calculations will be rounded to the nearest cent, with one-half cent being rounded upwards. The Issuers will, upon the request of the holder of any note, provide the interest rate then in effect with respect to the notes.

Methods of Receiving Payments on the Notes

        If a holder of notes has given wire transfer instructions to the Issuers, the Issuers will pay all principal, interest and premium and Additional Interest, if any, on that holder's notes in accordance with those instructions. All other payments on the notes will be made at the office or agency of the paying agent and registrar within the City and State of New York unless the Issuers elect to make interest payments by check mailed to the noteholders at their address set forth in the register of holders.

Paying Agent and Registrar for the Notes

        The Trustee will initially act as paying agent and registrar. The Issuers may change the paying agent or registrar without prior notice to the holders of the notes, and any of the Issuers or their respective Subsidiaries may act as paying agent or registrar.

Transfer and Exchange

        A holder may transfer or exchange notes in accordance with the provisions of the indenture. The registrar and the Trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents in connection with a transfer of notes. Holders will be required to pay all taxes due on transfer. The Issuers will not be required to transfer or exchange any note selected for redemption. Also, the Issuers will not be required to transfer or exchange any note for a period of 15 days before a selection of notes to be redeemed.

Note Guarantees

        The notes are guaranteed by Linens Holding Co. and each of the Issuers' current and future Subsidiaries that guarantee any portion of the Revolving Credit Agreement, other than solely a portion of the Revolving Credit Agreement with respect to which only one or more of the Canadian Subsidiaries of the Issuers is a borrower. These Note Guarantees are joint and several obligations of the Guarantors. The obligations under each Note Guarantee will be limited as necessary. See "Risk Factors—Risks Relating to the Notes—Fraudulent transfer statutes may limit your rights as a holder of the notes."

        The Note Guarantee of a Guarantor will be released:

(1)

in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) any of the Issuers or their respective Restricted Subsidiaries, if the sale or other disposition does not violate the "Asset Sale" provisions of the indenture;

93

(2)

in connection with any sale or other disposition of all of the Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) any of the Issuers or their respective Restricted Subsidiaries, if the sale or other disposition does not violate the "Asset Sale" provisions of the indenture;



(3)

if the Issuers designate any Restricted Subsidiary that is a Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture; or



(4)

upon legal defeasance or satisfaction and discharge of the indenture as provided below under the captions "—Legal Defeasance and Covenant Defeasance" and "—Satisfaction and Discharge."

        See "—Repurchase at the Option of Holders—Asset Sales."

Optional Redemption

        At any time prior to January 15, 2008, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of notes issued under the indenture at a redemption price of 100% plus the Applicable Eurodollar Rate then in effect of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date, with the net cash proceeds of an Equity Offering of Linens 'n Things, Inc. or Parent; provided that:

(1)

at least 65% of the aggregate principal amount of notes originally issued under the indenture (excluding notes held by the Issuers and their respective Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and



(2)

the redemption occurs within 90 days of the date of the closing of such initial public offering.

        In addition, at any time prior to January 15, 2008, the Issuers may redeem all or a part of the notes upon not less than 30 nor more than 60 days' notice, at a redemption price of 100% plus the Applicable Premium, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

        "Applicable Premium" means, with respect to a note at any redemption date, the greater of (i) 1.0% of the principal amount of such note and (ii) the excess of (A) the present value at such time of (1) the redemption price of such note at January 15, 2008, (such redemption price being described under "—Optional Redemption") plus (2) all required interest payments due on such note through January 15, 2008 assuming that the rate of interest is the rate of interest in effect on the date the notice of redemption is given, computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the principal amount of such note.

        "Treasury Rate" means 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) which has become publicly available at least two business days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source or similar market data)) most nearly equal to the period from the redemption date to January 15, 2008; provided, however, that if the period from the redemption date to January 15, 2008, is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall 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 the redemption date to January 15, 2008 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

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        On or after January 15, 2008, the Issuers may redeem all or a part of the notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, on the notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on January 15 of the years indicated below, subject to the rights of holders of notes on the relevant record date to receive interest on the relevant interest payment date:

Year	Percentage
2008	102.00	%
2009	101.00	%
2010 and thereafter	100.00	%

        Unless the Issuers default in the payment of the redemption price, interest will cease to accrue on the notes or portions thereof called for redemption on the applicable redemption date.

Mandatory Redemption

        The Issuers are not required to make mandatory redemption or sinking fund payments with respect to the notes.

Security

        Both the notes and the Revolving Credit Agreement (and the respective Guarantees thereof) are secured by Liens on the Note Lien Collateral and the Revolving Credit Collateral. The Collateral consists of substantially all of the assets of the Issuers and the Note Guarantors, other than Excluded Assets. The relative priority of the Liens securing the notes and the Revolving Credit Agreement will be different for each Collateral Class. The Note Lien Collateral consists of substantially all Intellectual Property, Equipment (whether or not constituting Fixtures), Note Lien General Intangibles, the Note Capital Stock Collateral, and other related assets of the Issuers and the Note Guarantors; but the Note Lien Collateral does not include the Revolving Credit Collateral, the Canadian Collateral and certain Excluded Assets. The Revolving Credit Collateral consists of substantially all of the remaining assets of our parent, Linens Holding Co., the Issuers and their Subsidiaries, including all Inventory, Accounts (including Payment Intangibles), Chattel Paper, Instruments (including Intercompany Notes of Subsidiaries), Letter of Credit Rights, Deposit Accounts (other than the Net Available Cash Account to the extent constituting a Deposit Account), Credit Card Processing Accounts and Securities Accounts (other than the Net Available Cash Account to the extent constituting a Securities Account), other Investment Property (other than Capital Stock Collateral), General Intangibles (other than Intellectual Property and Note Lien General Intangibles), the Revolving Credit Capital Stock Collateral and other related assets. The Capital Stock Collateral consists of all of the Capital Stock in the Company, all of the Capital Stock in certain of the Company's Domestic Subsidiaries and 65% of the Capital Stock of the Foreign Subsidiaries owned directly by the Parent or its Domestic Subsidiaries. The Liens on the Note Capital Stock Collateral to secure the notes and the Note Guarantees may be released in certain circumstances.

        Security interests in respect of the specific items of Collateral described below have not been, and in the case of any after-acquired property consisting of the below property, will not be, perfected with respect to the notes:

•

Goods included in Collateral received by any Person for "sale or return" within the meaning of Section 2-326 of the Uniform Commercial Code of the applicable jurisdiction, to the extent of claims of creditors of such Person;

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•

Money which has not been transferred to or deposited in a Deposit Account in which the Priority Lien Collateral Agent maintains "control" as described in the UCC and which does not constitute identifiable Cash Proceeds of other Collateral;



•

any Deposit Account (other than the Net Available Cash Account) containing an average daily balance not to exceed a certain dollar amount individually and in the aggregate for all such Deposit Accounts;



•

any Intellectual Property outside of the United States;



•

real property owned on the closing date of the Transactions; and



•

any other property or assets (other than Intellectual Property) in which a Lien cannot be perfected either automatically or by the filing of a financing statement under the UCC of the relevant jurisdiction, so long as the aggregate fair market value of all such property and assets does not at any one time exceed $5.0 million.

        The obligations of the Issuers with respect to the notes, the obligations of the Guarantors under the Note Guarantees, all other Note Lien Obligations and the performance of all other obligations of the Issuers and the Guarantors under the Note Documents are secured equally and ratably by:

•

first-priority Liens on the Note Lien Collateral; and



•

second-priority Liens on the Revolving Credit Collateral,

in each case, granted to the Note Lien Collateral Agent for the benefit of the holders of the Note Lien Obligations. The Liens on the Note Lien Collateral securing the Note Lien Obligations are senior in priority to the Liens on the Note Lien Collateral securing Revolving Credit Obligations, but are junior to all Permitted Liens. The Liens on the Revolving Credit Collateral securing the Note Lien Obligations are junior in priority to the Priority Liens on the Revolving Credit Collateral securing Revolving Credit Obligations and to all Permitted Liens.

        Conversely, the Revolving Credit Obligations are secured by:

•

second priority Liens on the Note Lien Collateral; and



•

first priority Liens on the Revolving Credit Collateral,

in each case, granted to the Revolving Credit Collateral Agent for the benefit of the holders of the Revolving Credit Obligations. The Liens on the Revolving Credit Collateral securing the Revolving Credit Obligations are senior in priority to the Liens on the Revolving Credit Collateral securing Note Lien Obligations. The Liens on the Note Lien Collateral securing the Revolving Credit Obligations are junior in priority to the Liens on the Note Lien Collateral securing Note Lien Obligations and to all Permitted Liens. The Revolving Credit Obligations are also secured by Liens on the Canadian Collateral, but the Note Lien Obligations are not.

        The indenture provides that, so long as the Note Lien Collateral Agent has not exercised its rights with respect to Collateral upon the occurrence and during the continuance of an Event of Default, the Issuers and the Note Guarantors have the right, as against the Note Lien Collateral Agent, Note Lien Representatives and holders of Note Lien Obligations:

•

to remain in possession and retain exclusive control of the Collateral, to conduct ordinary course activities with respect to the Collateral, to acquire, manufacture, process and sell Inventory and collect Receivables and expend the proceeds thereof, and to operate, alter or repair the Collateral and to collect, invest and dispose of any income therefrom; and

96

•

to sell or otherwise dispose of any property subject to the Note Liens, subject to the restrictions and obligations set forth below under the captions "—Repurchase at the Option of Holders—Asset Sales" and "—Certain Covenants—Merger, Consolidation or Sale of Assets."

The Issuers and the Note Guarantors have the right to obtain a release of items of Collateral upon any such sale or disposition or the occurrence of any of the other events or circumstances described under "—Intercreditor Agreement—Release of Liens on Collateral" and under "—Provisions of the Indenture Relating to Security—Release of Liens in Respect of Notes." The Note Lien Collateral Agent will release such Collateral from the Lien of the relevant Note Lien Security Document and reconvey such Collateral to the Issuers and the Note Guarantors, so long as (i) such release complies with the Trust Indenture Act, if applicable and (ii) all conditions precedent to such release in the indenture and the Note Lien Security Documents have been complied with, each of (i) and (ii) to be evidenced by an opinion of counsel and an officers' certificate delivered to the Trustee and the Note Lien Collateral Agent (see "—Provisions of the Indenture Relating to Security—Compliance with the Trust Indenture Act").

Intercreditor Agreement

        On the date of the indenture, the Issuers and the Note Guarantors entered into the Intercreditor Agreement with the Revolving Credit Collateral Agent, the Trustee and the Note Lien Collateral Agent. The Intercreditor Agreement sets forth certain agreements between the holders of Liens on the Revolving Credit Collateral and the holders of Liens on the Note Lien Collateral.

Ranking of Liens

        The Intercreditor Agreement provides that, notwithstanding:

(1)

anything to the contrary contained in the Revolving Credit Loan Documents or the Note Lien Documents;



(2)

the time of incurrence of any of Note Lien Obligations or the Revolving Credit Obligations;



(3)

the date, time, method, manner or order of grant, attachment or perfection of any Liens securing the Note Lien Obligations granted on the Collateral or of any Liens securing the Revolving Credit Obligations granted on the Collateral;



(4)

any provision of any UCC, or any other applicable law;



(5)

any defect or deficiencies in, or failure to perfect, the Liens securing the Revolving Credit Obligations or Note Lien Obligations or any other circumstance whatsoever;

all Liens of the Revolving Credit Collateral Agent on the Revolving Credit Collateral, whether now or hereafter held by or on behalf of the Revolving Credit Collateral Agent or any Revolving Credit Claimholder or any agent or Trustee therefor, regardless of how acquired, whether by grant, possession, statute, operation of law, subrogation or otherwise, shall be senior in all respects and prior to any Lien on the Revolving Credit Collateral securing any Note Lien Obligations; and, conversely, all Liens of the Note Lien Collateral Agent or any Note Lien Representative on Note Lien Collateral, whether now or hereafter held by or on behalf of the Note Lien Collateral Agent, any Note Lien Representative, any Note Lien Claimholder or any agent or Trustee therefor regardless of how acquired, whether by grant, possession, statute, operation of law, subrogation or otherwise, shall be senior in all respects and prior to any Liens on the Note Lien Collateral securing any Revolving Credit Obligations. The indenture and the Revolving Credit Agreement impose limits on the aggregate amount of Note Lien Debt that may be secured by Liens on the Note Lien Collateral and the aggregate amount of Revolving Credit Obligations that may be secured by Liens on the Revolving Credit Collateral.

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        The provisions described under this caption "—Ranking of Liens" are intended for the benefit of, and will be enforceable as a third party beneficiary by, each present and future holder of Note Lien Debt and Revolving Credit Obligations, each present and future Note Lien Collateral Agent, any Note Lien Representative and Revolving Credit Collateral Agent, in each case with respect to the applicable Collateral Class. No other Person will be entitled to rely on, have the benefit of or enforce those provisions. The Note Lien Representative of each future Series of Note Lien Debt will be required to deliver a Lien Sharing and Priority Confirmation to the Revolving Credit Collateral Agent, each Note Lien Representative and the Note Lien Collateral Agent at the time of incurrence of such Series of Note Lien Debt.

        In addition, the provisions described under this caption "—Ranking of Liens" are intended solely to set forth the relative ranking, as Liens, of the Liens on each Collateral Class securing Note Lien Debt as against the Liens on such Collateral Class securing Revolving Credit Obligations. Neither the notes nor any other Note Lien Obligations, nor any Revolving Credit Obligations, nor the exercise or enforcement of any right or remedy for the payment or collection thereof are intended to be, or will ever be by reason of the foregoing provision, in any respect subordinated, deferred, postponed, restricted or prejudiced.

Notice of Enforcement

        The Revolving Credit Collateral Agent, the Note Lien Collateral Agent and the Note Lien Representatives have agreed not to commence Enforcement until the earlier of date on which (A) an Enforcement Notice has been given to the Note Lien Collateral Agent or the Revolving Credit Collateral Agent, as the case may be and (B) any insolvency or liquidation proceeding is commenced by or against any Grantor that has not been dismissed.

Restrictions on Enforcement of Junior Liens

        Until the Discharge of Priority Lien Obligations with respect to a Collateral Class, whether or not any insolvency or liquidation proceeding has been commenced by or against any Grantor, the Junior Lien Collateral Agent and Junior Lien Claimholders:

•

will not exercise or seek to exercise any rights or remedies with respect to any Priority Liens on such Collateral Class (including the exercise of any right of setoff or any right under any Account Agreement, landlord waiver or bailee's letter or similar agreement or arrangement to which Junior Lien Collateral Agent or any Junior Lien Claimholder is a party) or institute any action or proceeding with respect to such rights or remedies (including any action of foreclosure);

provided, however, that the Junior Lien Collateral Agent may exercise any or all such rights or remedies after the passage of a period of at least 180 days has elapsed since the earlier of: (x) the date of the commencement of any insolvency or liquidation proceeding by or against any Grantor that has not been dismissed, or (y) the date on which the Junior Lien Collateral Agent first declares the existence of a Junior Lien Default, demands the repayment of all the principal amount of any Junior Lien Obligations; and the Priority Lien Collateral Agent has received notice from the Junior Lien Collateral Agent of such declaration of a Junior Lien Default (the "Junior Lien Standstill Period") (provided that the Revolving Credit Collateral Agent and Revolving Credit Claimholders may exercise rights set forth in the provisions described below under the caption "—Cooperation and Access with Respect to Revolving Credit Collateral");

provided, further, however, that in no event shall the Junior Lien Collateral Agent or any Junior Lien Claimholder exercise any rights or remedies with respect to the Priority Lien on such Collateral Class if, notwithstanding the expiration of the Junior Lien Standstill Period, any Priority Lien Collateral Agent or Priority Lien Claimholders shall have commenced and be

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diligently pursuing the exercise of their rights or remedies with respect to all or any material portion of such Collateral Class (prompt notice of such exercise to be given to the Junior Lien Collateral Agent);

•

will not contest, protest or object to any foreclosure proceeding or action brought by any Priority Lien Collateral Agent or any Priority Lien Claimholder or any other exercise by any Priority Lien Collateral Agent or any Priority Lien Claimholder of any rights and remedies relating to such Collateral Class, whether under the Priority Lien Documents or otherwise; and



•

subject to their rights under first paragraph above and except as may be otherwise permitted by the Intercreditor Agreement, will not object to the forbearance by any Priority Lien Collateral Agent or the Priority Lien Claimholders from bringing or pursuing any Enforcement;

provided, however, that, in the case of the three paragraphs above, the Liens granted to secure the Junior Lien Obligations shall attach to any proceeds resulting from actions taken by any Priority Lien Collateral Agent or any Priority Lien Claimholder in accordance with the Intercreditor Agreement after application of such proceeds to the extent necessary to meet the requirements of a Discharge of Priority Lien Obligations.

        Notwithstanding the foregoing paragraph, each holder of Junior Liens on a Collateral Class may, subject to the rights of the holders of Permitted Liens:

(1)

file a claim or statement of interest with respect to the Junior Lien Obligations of any Grantor; provided that an insolvency or liquidation proceeding has been commenced by or against such Grantor;



(2)

take any action (not adverse to the priority status of the Priority Liens on such Collateral Class, or the rights of the Priority Lien Collateral Agent or any Priority Lien Claimholder to exercise remedies in respect thereof) in order to create, perfect, preserve or protect its Lien on any of the Collateral (which, in the case of the Note Lien Collateral Agent and the Note Lien Representatives, shall not include the Canadian Collateral);



(3)

file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of the Junior Lien Claimholders, including any claims secured by the Priority Liens on such Collateral Class, if any, in each case in accordance with the terms of the Intercreditor Agreement;



(4)

file any pleadings, objections, motions or agreements which assert rights or interests available to unsecured creditors of the Grantors arising under either any insolvency or liquidation proceeding or applicable non-bankruptcy law, in each case not prohibited by the terms of the Intercreditor Agreement;



(5)

vote on any plan of reorganization, file any proof of claim, make other filings and make any arguments and motions that are, in each case, not prohibited by the terms of the Intercreditor Agreement, with respect to the Junior Lien Obligations;



(6)

exercise any of its rights or remedies with respect to any of the Priority Lien on such Collateral Class after the termination of the Junior Lien Standstill Period to the extent permitted by the Intercreditor Agreement; and



(7)

make a cash bid on all or any portion of the Priority Lien on such Collateral Class in any foreclosure proceeding or action.

        Subject to the provisions described below under the caption "—Provisions of the Indenture Relating to Security—Relative Rights," until the Discharge of Priority Lien Obligations with respect to

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a Collateral Class, no holder of a Junior Lien Obligation, and neither Junior Lien Collateral Agent nor any Junior Lien Claimholder with respect to such Collateral Class will:

(1)

take any action that would hinder any exercise of remedies under the Priority Lien Documents or that is otherwise prohibited under the Intercreditor Agreement, including any sale, lease, exchange, transfer or other disposition of such Collateral Class, whether by foreclosure or otherwise;



(2)

exercise any rights the Junior Lien Collateral Agent and the Junior Lien Claimholders, as applicable, may have as a junior lien creditor or otherwise to object to the manner in which the Priority Lien Collateral Agent or the Priority Lien Claimholders seek to enforce or collect the Priority Lien Obligations or the Liens securing the Priority Lien Obligations granted in any of the Priority Lien Documents or undertaken in accordance with the Intercreditor Agreement, regardless of whether any action or failure to act by or on behalf of the Priority Lien Collateral Agent or Priority Lien Claimholders is adverse to the interest of the Junior Lien Claimholders;



(3)

assert that any covenant, agreement or restriction contained in any Junior Lien Document (other than the Intercreditor Agreement) shall be deemed to restrict in any way the rights and remedies of the Priority Lien Collateral Agent or the Priority Lien Claimholders with respect to the enforcement of the Priority Liens on such Collateral Class as set forth in the Intercreditor Agreement and the Priority Lien Documents;



(4)

seek (or support any other Person seeking) relief from the automatic stay or any other stay in any insolvency or liquidation proceeding in respect of such Collateral Class (other than to the extent such relief

is required to exercise the Revolving Credit Collateral Agent's rights under provisions described below under the caption "—Cooperation and Access with Respect to Revolving Credit Collateral"), without the prior written consent of the Priority Lien Collateral Agent;

(5)

contest (or support any other Person contesting):



(a)

any request by any Priority Lien Collateral Agent for adequate protection with respect to such Collateral Class; or



(b)

any objection by any Priority Lien Collateral Agent to any motion, relief, action or proceeding based on such Priority Lien Collateral Agent or the Priority Lien Claimholders claiming a lack of adequate protection with respect to such Collateral Class;



(6)

oppose or seek to challenge any claim by any Priority Lien Collateral Agent or any Priority Lien Claimholder for allowance in any insolvency or liquidation proceeding of Priority Lien Obligations consisting of post-petition interest, fees or expenses to the extent of the value of the Lien securing any Priority Lien Claimholder's claim, without regard to the existence of the Lien of the Junior Lien Collateral Agent on behalf of the Junior Lien Claimholders on the Collateral; or



(7)

contest or support any other Person in contesting, in any proceeding (including any insolvency or liquidation proceeding), the perfection, priority, validity or enforceability of a Lien held by or on behalf of any of the Priority Lien Claimholders in all or any part of the such Collateral Class, or the provisions of the Intercreditor Agreement.

Except as otherwise specifically set forth in the Intercreditor Agreement, the Note Lien Collateral Agent, the Note Lien Representatives, the Note Lien Claimholders, the Revolving Credit Collateral Agent and the Revolving Credit Claimholders may exercise rights and remedies as unsecured creditors against any Grantor that has guaranteed or granted Liens to secure the Note Lien Obligations and the

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Revolving Credit Obligations, as the case may be, and may exercise rights and remedies with respect to the Note Lien Collateral and the Revolving Credit Collateral, as the case may be, in each case, in accordance with the terms of the Note Lien Documents and the Revolving Credit Loan Documents, as the case may be, and applicable law; provided, however, that in the event that any Priority Lien Claimholder becomes a judgment Lien creditor in respect of Junior Lien Collateral as a result of its enforcement of its rights as an unsecured creditor with respect to the Priority Lien Debt, such judgment Lien shall be subject to the terms of this Agreement for all purposes (including in relation to the Note Lien Obligations) as the other Liens securing the Revolving Credit Obligations are subject to this Agreement.

Waiver of Right of Marshalling

        The Intercreditor Agreement will provide that, with respect to a Collateral Class, the Junior Lien Collateral Agent, each Junior Lien Representative and the Junior Lien Claimholders with respect to such Collateral Class waive any and all rights to have such Collateral Class, or any part thereof, marshaled upon any foreclosure or other enforcement by the Priority Lien Collateral Agent of Priority Liens on such Collateral.

Insolvency or Liquidation Proceedings

        In any insolvency or liquidation proceeding and prior to the Discharge of Revolving Credit Obligations, if the Revolving Credit Collateral Agent shall, acting in accordance with the Revolving Credit Agreement, agree to permit:

(1)

the use of Cash Collateral other than the identifiable Cash Proceeds of any Note Lien Collateral on which a Lien has been granted to the Revolving Credit Collateral Agent pursuant to the Revolving Credit Loan Documents; or



(2)

any Grantor to obtain financing, whether from the Revolving Credit Claimholders or any other Person under Section 364 of the Bankruptcy Code or any similar Bankruptcy Law ("DIP Financing"),

then each Note Lien Claimholder agrees to raise no objection to or contest such Cash Collateral use or DIP Financing so long as such Cash Collateral use or DIP Financing meet the following requirements: (i) it is on commercially reasonable terms, (ii) the Claimholders retain the right to object to any ancillary agreements or arrangements regarding the Cash Collateral use or the DIP Financing that are materially prejudicial to their interests in the Note Lien Collateral (other than any Real Estate Assets upon which such Lien has not been perfected), and (iii) the terms of the DIP Financing (a) do not compel the applicable Grantor to seek confirmation of a specific plan of reorganization for which all or substantially all of the material terms are set forth in the DIP Financing documentation or a related document and (b) do not expressly require the liquidation of the Collateral prior to a default under the DIP Financing documentation or Cash Collateral order. To the extent the Liens securing the Revolving Credit Obligations are subordinated to or pari passu with such DIP Financing which meets the requirements of clauses (i) through (iii) above, the Note Lien Representative will subordinate any Liens in the Revolving Credit Collateral to the Liens securing such DIP Financing (and all Obligations relating thereto) and will not request adequate protection or any other relief in connection therewith (except, as expressly agreed by the Revolving Credit Collateral Agent or to the extent permitted by the Intercreditor Agreement).

        In any insolvency or liquidation proceeding and prior to the Discharge of Note Lien Obligations, if the Note Lien Representatives shall, acting in accordance with the Note Lien Documents, agree to permit the use of Cash Collateral consisting solely of the identifiable Cash Proceeds of any Note Lien Collateral on which a Lien has been granted to the Note Lien Representatives pursuant to the Note Lien Documents; then each Revolving Credit Claimholder agrees that it will raise no objection to or

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contest such Cash Collateral use so long as such Cash Collateral use meets the following requirements: (i) it is on commercially reasonable terms and (ii) Revolving Credit Claimholders retain the right to object to any ancillary agreements or arrangements regarding the Cash Collateral use that are materially prejudicial to their interests in the Note Lien Collateral.

        In any insolvency or liquidation proceeding and prior to the Discharge of Priority Lien Obligations, if a Priority Lien Representative shall, acting in accordance with the Priority Lien Documents, agree to permit a sale of Collateral Class that is subject to the Priority Liens free and clear of Liens and other claims, under Section 363 of the Bankruptcy Code or otherwise, then each Junior Lien Claimholder agrees that it will not raise any objection to or contest such sale or request adequate protection or any other relief in connection therewith (except, as expressly agreed by the Priority Lien Collateral Agent or to the extent permitted by the Intercreditor Agreement).

        Notwithstanding the above paragraphs and the provisions described above under the caption "—Restrictions on Enforcement of Junior Liens," in any insolvency or liquidation proceeding:

if the Revolving Credit Claimholders (or any subset thereof) are granted adequate protection with respect to the Revolving Credit Collateral in the form of additional collateral (even if such collateral is not of a type which would otherwise have constituted Revolving Credit Collateral) in connection with any Cash Collateral use or DIP Financing, then the Note Lien Collateral Agent, on behalf of itself or any of the Note Lien Claimholders, may seek or request adequate protection with respect to its interests in such Collateral in the form of a Lien on the same additional collateral, which Lien will be subordinated (except to the extent that the Note Lien Collateral Agent already had a Lien on such Collateral (in which case the priorities established by the Intercreditor Agreement shall apply)) to the Liens securing the Revolving Credit Obligations and such Cash Collateral use or DIP Financing (and all Obligations relating thereto) on the same basis as the other Liens of the Note Lien Collateral Agent on Revolving Credit Collateral; and

in the event any Note Lien Claimholder seeks or requests adequate protection in respect of Note Lien Collateral and such adequate protection is granted in the form of additional collateral (even if such collateral is not of a type which would otherwise have constituted Note Lien Collateral), then the Note Lien Collateral Agent, the Note Lien Representatives and the Note Lien Claimholders each agrees that the Revolving Credit Collateral Agent may also be granted a Lien on the same additional collateral as security for the Revolving Credit Obligations and for any Cash Collateral use or DIP Financing provided by the Revolving Credit Claimholders, each Revolving Credit Collateral Agent and each Revolving Credit Claimholder agrees that any Lien on such additional collateral securing the Revolving Credit Obligations, shall be subordinated (except to the extent that the Revolving Credit Collateral Agent already had a Lien on such Collateral (in which case the priorities established by the Intercreditor Agreement shall apply)) to the Liens on such collateral securing the Note Lien Obligations, all on the same basis as the other Liens of the Revolving Credit Collateral Agent on Note Lien Collateral.

        Except as otherwise expressly set forth in the Intercreditor Agreement or in connection with the exercise of remedies with respect to (i) the Revolving Credit Collateral, nothing in the Intercreditor Agreement shall limit the rights of any Note Lien Claimholder from seeking adequate protection with respect to their rights in the Note Lien Collateral in any insolvency or liquidation proceeding (including adequate protection in the form of a cash payment, periodic cash payments or otherwise) or (ii) the Note Lien Collateral, nothing in the Intercreditor Agreement shall limit the rights of any Revolving Credit Claimholders from seeking adequate protection with respect to their rights in the Revolving Credit Collateral in any insolvency or liquidation proceeding (including adequate protection in the form of a cash payment, periodic cash payments or otherwise).

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Application of Proceeds, Payments Over and Application of Payments

        The Intercreditor Agreement will provide that so long as the Discharge of Priority Lien Obligations has not occurred, whether or not any insolvency or liquidation proceeding has been commenced by or against any Grantor, all Collateral Class subject to a Priority Lien or proceeds thereof received in connection with the sale or other disposition of, or collection on, such Collateral upon the exercise of remedies by the Priority Lien Collateral Agent or other Priority Lien Claimholders, shall be applied by the Priority Lien Collateral Agent to the Priority Lien Obligations in such order as specified in the relevant Priority Lien Loan Documents.

        Unless and until both the Discharge of Revolving Credit Obligations and the Discharge of Note Lien Obligations have occurred, whether or not any insolvency or liquidation proceeding has been commenced by or against any Grantor, any Collateral or proceeds thereof received by any Revolving Credit Claimholder or any Note Lien Claimholder in connection with the exercise of any right or remedy (including set-off) relating to the Collateral in contravention of the Intercreditor Agreement shall be segregated and held in trust and forthwith paid over to the Revolving Credit Collateral Agent or Note Lien Collateral Agent, as appropriate in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. The Note Lien Collateral Agent and Revolving Credit Collateral Agent will each be authorized to make any such endorsements as agent for the other Person. That authorization is coupled with an interest and is irrevocable until both the Discharge of Revolving Credit Obligations and Discharge of Note Lien Obligations have occurred.

        Subject to the other terms of the Intercreditor Agreement, all payments received by (a) the Revolving Credit Claimholders may be applied, reversed and reapplied, in whole or in part, to the Revolving Credit Obligations to the extent provided for in the Revolving Credit Loan Documents; and (b) the Note Lien Claimholders may be applied, reversed and reapplied, in whole or in part, to the Note Lien Obligations to the extent provided for in the Note Lien Documents.

        If, in any insolvency or liquidation proceeding, the Revolving Credit Claimholders or the Note Lien Claimholders (the "Applicable Junior Lien Claimholders") receive pursuant to a plan of reorganization or similar dispositive restructuring plan a distribution of debt obligations ("Junior Lien Reorganization Securities") in whole or in part on account of their junior Liens on the Note Lien Collateral or the Revolving Credit Collateral, as the case may be (such Collateral as to which the applicable Claimholders have a junior Lien, the "Applicable Junior Collateral") that are secured by Liens on such Applicable Junior Collateral, and the other Claimholders (the "Applicable Senior Lien Claimholders") receive pursuant to such plan of reorganization or similar dispositive restructuring plan a distribution of debt obligations ("Senior Lien Reorganization Securities") in whole or in part on account of their Revolving Credit Obligations or Note Lien Obligations, as the case may be, that are secured by Liens on such Applicable Junior Collateral, then (i) the Applicable Junior Lien Claimholders shall be entitled to retain their Junior Lien Reorganization Securities and shall not be obligated to turnover same to any or all of the Applicable Senior Lien Claimholders, and (ii) to the extent the Junior Lien Reorganization Securities and the Senior Lien Reorganization Securities are secured by Liens upon the same Applicable Junior Collateral, the provisions of the Intercreditor Agreement will survive the distribution of such Junior Lien Reorganization Securities and Senior Lien Reorganization Securities and will apply with like effect to the Junior Lien Reorganization Securities and Senior Lien Reorganization Securities, to such Liens securing such Junior Lien Reorganization Securities and Senior Lien Reorganization Securities and to the distribution of proceeds of such Applicable Junior Collateral.

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Enforcement With Respect To Capital Stock

        After the Release Date, the Revolving Credit Collateral Agent will not sell or dispose of any Revolving Credit Capital Stock Collateral pursuant to any Enforcement unless (i) the Discharge of Note Obligations has occurred; (ii) the Note Lien Collateral Agent and the Revolving Credit Collateral Agent have reached an agreement with respect to the distribution of the proceeds from any such disposition (and in which case the proceeds will be distributed between the Note Claimholders and the holders of Revolving Credit Obligations pursuant to such agreement; or (iii) the Note Lien Collateral Agent has requested that the Revolving Credit Collateral Agent sell or dispose of such Revolving Credit Capital Stock Collateral, provided, however, that the Revolving Credit Collateral Agent may refuse such request unless and until it is satisfied in its sole reasonable discretion that it has received from the Note Lien Collateral Agent adequate indemnity (as determined in the Revolving Credit Collateral Agent's sole reasonable discretion and which may include security or other payment assurances reasonably required by the Revolving Lien Collateral Agent) against all costs, expenses, losses, damages, actions, judgments, suits and liabilities in connection with or arising from such action.

        All net proceeds received by the Revolving Credit Collateral Agent from any such Enforcement pursuant to clause (iii) above shall be applied to payment of the Revolving Credit Obligations; provided, however, that the Revolving Credit Collateral Agent and the holders of Revolving Credit Obligations agree to subordinate their rights to receive from the sale or other disposition of Revolving Credit Collateral on which the Note Lien Collateral Agent has a perfected Lien to the Note Lien Claimholders in an amount equal to the net proceeds received from the Enforcement with respect to the Revolving Credit Capital Stock Collateral.

Release of Liens on Collateral

        The Intercreditor Agreement provides that:

(1)

If in connection with the exercise of any Revolving Credit Collateral Agent's remedies in respect of any Collateral as provided for in the Intercreditor Agreement, the Revolving Credit Collateral Agent, for itself and/or on behalf of any of the other Revolving Credit Claimholders, releases its Liens on any part of the Revolving Credit Collateral, then the Liens, if any, of the Note Lien Collateral Agent, the Note Lien Representatives and the Note Lien Claimholders, on the Collateral sold or disposed of in connection with such exercise, shall be automatically, unconditionally and simultaneously released. The Note Lien Collateral Agent, for itself and/or on behalf of any of the Note Lien Claimholders promptly shall execute and deliver to the Revolving Credit Collateral Agent or such Grantor such termination statements, releases and other documents as the Revolving Credit Collateral Agent or such Grantor may request to effectively confirm such release.



(2)

If in connection with the exercise by any Note Lien Representative of remedies in respect of any Collateral as provided for in the Intercreditor Agreement, the Note Lien Collateral Agent, for itself and/or on behalf of any of the Note Lien Claimholders, releases all of its Liens on any part of the Note Lien Collateral, then the Liens, if any, of the Revolving Credit Collateral Agent, for itself and/or for the benefit of the Revolving Credit Claimholders, on the Collateral sold or disposed of in connection with such exercise, shall be automatically, unconditionally and simultaneously released. The Revolving Credit Collateral Agent, for itself and/or on behalf of any such Revolving Credit Claimholder shall promptly execute and deliver to the Note Lien Collateral Agent or such Grantor such termination statements, releases and other documents as the Note Lien Collateral Agent or such Grantor may request to effectively confirm such release.

        In addition, if in connection with any sale, lease, exchange, transfer or other disposition of any Collateral (collectively, a "Disposition") permitted under the terms of both the Revolving Credit Loan

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Documents and the Note Lien Documents (including voluntary Dispositions of Revolving Credit Collateral by the respective Grantors after a Revolving Credit Default and voluntary Dispositions of Note Lien Collateral by the respective Grantors after a Note Lien Default), (i) the Revolving Credit Collateral Agent, for itself and/or on behalf of any of the Revolving Credit Claimholders, releases its Liens on any part of the Revolving Credit Collateral, in each case other than (A) in connection with the Discharge of Revolving Credit Obligations or (B) after the occurrence and during the continuance of a Note Lien Default, then the Liens, if any, of the Note Lien Representatives, for themselves and/or for the benefit of the Note Lien Claimholders, on such Collateral shall be automatically, unconditionally and simultaneously released, and (ii) any Note Lien Representative, for itself and/or on behalf of the Note Lien Claimholders, releases all of its Liens on any part of the Note Lien Collateral, in each case other than (A) in connection with the Discharge of Note Lien Obligations or (B) after the occurrence and during the continuance of a Revolving Credit Default, then the Liens, if any, of the Revolving Credit Collateral Agent, for itself and/or for the benefit of the Revolving Credit Claimholders, on such Collateral shall be automatically, unconditionally and simultaneously released. Each Revolving Credit Collateral Agent and the Note Lien Representative, each for itself and/or on behalf of any such Revolving Credit Claimholders or Note Lien Claimholder, as the case may be, promptly shall execute and deliver to the Note Lien Collateral Agent, Revolving Credit Collateral Agent or such Grantor such termination statements, releases and other documents as the Note Lien Collateral Agent, Revolving Credit Collateral Agent or such Grantor may request to effectively confirm such release.

        Otherwise, the release of Liens on Collateral will be governed by the Note Lien Documents and the Revolving Credit Loan Documents, respectively, and not by the Intercreditor Agreement. See the provisions relating to release of Liens described above under "—Security" and below under "—Provisions of the Indenture Relating to Security—Release of Liens in Respect of Notes."

Amendment of Intercreditor Agreement and Other Security Documents

        The Intercreditor Agreement provides that no amendment, modification or waiver of any of the provisions of the Intercreditor Agreement shall be deemed to be made unless the same shall be in writing signed on behalf of Revolving Credit Collateral Agent and the Note Lien Collateral Agent or their respective authorized agent and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the parties making such waiver or the obligations of the other parties to such party in any other respect or at any other time.

        The indenture provides that any amendment or supplement that purports to contractually subordinate the Note Liens on the Priority Collateral securing the Note Lien Obligations will be effective only with the consent of the holders of at least two-thirds in principal amount of the notes then outstanding, voting as a single class.

        The Intercreditor Agreement will not restrict the ability of the Issuers, the other Grantors and the Revolving Credit Collateral Agent to amend or supplement any other Revolving Credit Loan Document, or the ability of the Issuers, the other Grantors and the Note Lien Collateral Agent to amend or supplement any other Note Lien Document. The Note Lien Security Documents may be amended or supplemented as set forth under "—Provisions of the Indenture Relating to Security—Amendment of Note Lien Security Documents."

        The Revolving Credit Obligations and Note Lien Obligations may be Refinanced, in each case, without notice to, or the consent (except to the extent a consent is required to permit the Refinancing transaction under any Revolving Credit Document or any Note Lien Document) of the Revolving Credit Claimholders or the Note Lien Claimholders, as the case may be, all without affecting the Lien subordination or other provisions of the Intercreditor Agreement, provided, however, that the holders of such Refinancing debt bind themselves in an intercreditor joinder agreement or other writing,

105

reasonably acceptable to the Note Lien Collateral Agent and Revolving Credit Collateral Agent and addressed to the Note Lien Collateral Agent or Revolving Credit Collateral Agent, as the case may be, to the terms of the Intercreditor Agreement and any such amendment, supplement, modification or Refinancing shall be in accordance with the provisions of both the Revolving Credit Loan Documents and the Note Lien Documents.

Bailees for Perfection

        Revolving Credit Collateral Agent and each Note Lien Representative, as the case may be, agree to hold that part of the Collateral that is in its possession or control (or in the possession or control of its agents or bailees) to the extent that possession or control thereof is taken to perfect a Lien thereon under the UCC (such Collateral being the "Pledged Collateral") as collateral agent for the Revolving Credit Claimholders and Note Lien Claimholders, as the case may be, and as bailee for the Revolving Credit Collateral Agent or the Note Lien Representatives, as the case may be, (such bailment being intended, among other things, to satisfy the requirements of Sections 8-301(a)(2) and 9-313(c) of the UCC) and any assignee solely for the purpose of perfecting the security interest granted under the Revolving Credit Loan Documents and the Note Lien Documents, as applicable, subject to the terms and conditions of the Intercreditor Agreement.

Delivery of Collateral

        Upon the Discharge of Priority Lien Obligations, the Priority Lien Collateral Agent shall deliver to the Junior Lien Collateral Agent any Collateral and proceeds of Collateral held by it in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct to be applied by the Junior Lien Collateral Agent or any other Junior Lien Representative in such order as specified in the Junior Lien Documents.

Cooperation and Access with Respect to Revolving Credit Collateral

Consent to License to Use Equipment and Intellectual Property

        Each Note Lien Representative will grant (to the full extent of their respective rights and interests) the Revolving Credit Collateral Agent and its agents, representatives and designees (a) a nonexclusive, royalty free, rent free worldwide license or sublicense (subject to the terms of the underlying license) and lease to use all of the Note Lien Collateral including any computer or other data processing Equipment exclusive of Intellectual Property, to operate stores or distribution activities on the Real Estate Assets during any Enforcement Period, to collect all Accounts or amounts owing under Instruments or Chattel Paper, to copy, use or preserve any and all information relating to any of the Collateral, and to complete the manufacture, packaging and sale of Inventory and (b) a nonexclusive, royalty free worldwide license or sublicense (subject to the terms of the underlying license) (which will be binding on any successor or assignee of the Intellectual Property) to use any and all Intellectual Property at any time to in connection with its Enforcement; provided, however, the royalty free, rent free license and lease granted in clause (a) with respect to Equipment shall immediately expire upon the sale, lease, transfer or other disposition of such Equipment and provided further that on or after the 30th day following the termination of the Access Period with respect to the Primary Real Estate Assets, the Revolving Credit Collateral Agent, during the term of the above licenses, shall use any Trademarks of such licensed Intellectual Property solely in connection with (x) goods or services which the Revolving Credit Collateral Agent in good faith reasonably believes to be in an all material respects of at least the same level of quality offered by, and in a manner in which the Revolving Credit Collateral Agent in good faith reasonably believes to be in all material respects consistent with the practices of, one or more Grantors as of the date of the Enforcement Notice or (y) the disposition of damaged, obsolete or second-quality goods which dispositions the Revolving Credit Collateral Agent in good faith reasonably believes will not materially diminish the distinctiveness and quality characteristics associated

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with such Intellectual Property or the validity thereof (it being understood and agreed that the Revolving Credit Collateral Agent and its agents, representatives and designees shall comply in all material respects with all laws pertaining to its use of Intellectual Property described hereunder, including notice requirements).

Access to Property to Process and Sell Inventory

        If any Note Lien Representative or any of its respective agents or representatives, or any third party pursuant to any Enforcement undertaken by any Note Lien Representative, or any receiver, shall obtain possession or physical control of any of the Primary Real Estate Assets or any of the Other Real Estate, such Note Lien Representative shall promptly notify the Revolving Credit Collateral Agent of that fact and the Revolving Credit Collateral Agent shall, within ten (10) Business Days thereafter, notify Note Lien Representative or, if applicable, any such third party (at such address to be provided by such Note Lien Representative, as applicable, in connection with the applicable Enforcement), as to whether the Revolving Credit Collateral Agent desires to exercise access rights under the Intercreditor Agreement, at which time the parties shall confer in good faith to coordinate with respect to the Revolving Credit Collateral Agent's exercise of such access rights. Access rights may apply to differing parcels of Other Real Estate at differing times (i.e. a Revolving Credit Collateral Agent may obtain possession of one store or distribution center at a different time than it obtains possession of other properties), in which case, a differing Access Period may apply to each such property.

        Upon delivery of notice to the relevant Note Lien Representative, the Access Period shall commence for all of the Primary Real Estate Assets or the subject parcel of Other Real Estate. During the Access Period and for any period prior to an Access Period when the Revolving Credit Collateral Agent may have had access and/or use of any Note Lien Collateral (e.g. pursuant to access granted by a landlord of any Real Estate Asset), the Revolving Credit Collateral Agent and its agents, representatives and designees shall have a non-exclusive right to have such access to, and a rent free right to use, the Note Lien Collateral for the purpose of arranging for and effecting the sale or disposition of Revolving Credit Collateral, including the production, completion, packaging, shipping and other preparation of such Revolving Credit Collateral for sale or disposition. During any such Access Period (or period prior to an Access Period), the Revolving Credit Collateral Agent and its representatives (and persons employed on its behalf), may continue to operate, service, maintain, process and sell the Revolving Credit Collateral, as well as to engage in bulk sales or other liquidations of Revolving Credit Collateral. Revolving Credit Collateral Agent shall take proper care of any Note Lien Collateral that is used by it during the Access Period and repair and replace any damage (ordinary wear-and-tear excepted) caused by it or its agents, representatives or designees and comply with all applicable laws in connection with its use or occupancy of the Note Lien Collateral. The Revolving Credit Claimholders shall indemnify and hold harmless the relevant Note Lien Claimholders for any injury or damage to Persons or property caused by the acts or omissions of Persons under its control. Revolving Credit Collateral Agent and each Note Lien Representative shall cooperate and use reasonable efforts to ensure that their activities during the Access Period as described above do not interfere materially with the activities of the other as described above, including the right of any Note Lien Representative to commence foreclosure of the Note Lien Mortgages or to show the Note Lien Collateral to prospective purchasers and to ready the Note Lien Collateral for sale.

Grantor Consent

        The Companies and the other Grantors will agree with the Note Lien Representatives that Revolving Credit Collateral Agent shall have access, during the Access Period, as described in the Intercreditor Agreement and each such Grantor that owns any of the Mortgaged Premises will grant a non-exclusive easement in gross over its property to permit the uses by Revolving Credit Collateral

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Agent contemplated by the Intercreditor Agreement. Each Note Lien Representative will consent to such easement.

Exercise of Remedies—Set Off and Tracing of and Priorities in Proceeds.

        The Note Lien Collateral Agent and each Note Lien Representative, for itself and/or on behalf of the Note Lien Claimholders, each will acknowledge and agree that, to the extent any such Person exercises its rights of setoff against any Grantors' Deposit Accounts, Credit Card Processing Accounts, Securities Accounts or other assets, the amount of such setoff shall be deemed to be the Revolving Credit Collateral to be held and distributed pursuant to the provisions described above under the caption "—Application of Proceeds, Payments Over and Application of Payments"; provided, however, that the foregoing shall not apply to any setoff by any such Person against any Note Lien Collateral (including funds in any Net Available Cash Account) to the extent applied to payment of Note Lien Debt. The Note Lien Collateral Agent and each Note Lien Representative, for itself and/or on behalf of the Note Lien Claimholders will agree that prior to an issuance of an Enforcement Notice all funds deposited under Account Agreements and then applied to the Revolving Credit Obligations shall be treated as Revolving Credit Collateral and, unless the Revolving Credit Collateral Agent have actual knowledge to the contrary, any claim that payments made to Revolving Credit Collateral Agent through the Deposit Accounts, Credit Card Processing Accounts or Securities Accounts that are subject to Account Agreements are proceeds of or otherwise constitute Note Lien Collateral, are waived. The Revolving Credit Collateral Agent, Revolving Claimholders, the Note Lien Collateral Agent, the Note Lien Representatives and the Note Lien Claimholders, each will agree that, prior to an issuance of an Enforcement Notice, any proceeds of Collateral, whether or not deposited under Account Agreements, which are used by any Grantor to acquire other property which is Collateral shall not (as among the Revolving Credit Collateral Agent, the Note Lien Collateral Agent, the Note Lien Representatives and the various Claimholders) be treated as proceeds of Collateral for purposes of determining the relative priorities in the Collateral which was so acquired. The Revolving Credit Collateral Agent, Revolving Claimholders, the Note Lien Collateral Agent, the Note Lien Representatives and the Note Lien Claimholders, each will agree that after an issuance of an Enforcement Notice, each such Person shall cooperate in good faith to identify the proceeds of the Revolving Credit Collateral and the Note Lien Collateral, as the case may be (it being agreed that after an issuance of an Enforcement Notice, unless the Revolving Credit Collateral Agent has actual knowledge to the contrary, all funds deposited under Account Agreements and then applied to the Revolving Credit Obligations shall be presumed to be Revolving Credit Collateral (a presumption that can be rebutted by the Note Lien Collateral Agent); provided, however, that neither any Revolving Credit Claimholder nor any Note Lien Claimholder shall be liable or in any way responsible for any claims or damages from conversion of the Revolving Credit Collateral or Note Lien Collateral, as the case may be (it being understood and agreed that (A) the only obligation of any Revolving Credit Claimholder is to pay over to the Note Lien Collateral Agent, in the same form as received, with any necessary endorsements, all proceeds that such Revolving Credit Claimholder received that have been identified as proceeds of the Note Lien Collateral and (B) the only obligation of any Note Lien Claimholder is to pay over to the Revolving Credit Collateral Agent, in the same form as received, with any necessary endorsements, all proceeds that such Note Lien Claimholder received that have been identified as proceeds of the Revolving Credit Collateral. Each of the Revolving Credit Collateral Agent and the Note Lien Collateral Agent may request from the other an accounting of the identification of the proceeds of Collateral (and the Revolving Credit Collateral Agent and the Note Lien Collateral Agent, as the case may, upon which such request is made shall deliver such accounting reasonably promptly after such request is made).

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Provisions of the Indenture Relating to Security

Enforcement of Note Liens

        The indenture and the Note Lien Security Documents provide that, upon the occurrence and during the continuance of an Event of Default, the Trustee may pursue any available remedy, including directing the Note Lien Collateral Agent to enforce the Note Liens securing the notes, subject to the provisions described above under the caption "Intercreditor Agreement—Restrictions on Enforcement of Junior Liens" and to the provisions of the indenture governing the Trustee's duties and rights generally; and the Trustee will be subject to such instructions as may be given to it by the Holders of a majority in outstanding principal amount of the notes to direct (and in its sole discretion and without the consent of the holders of the notes may direct) on behalf of the holders of the notes as the Note Lien Debt Representative with respect to the notes, the Note Lien Collateral Agent to take all actions it deems necessary or appropriate in order to:

(1)

foreclose upon or otherwise enforce any or all of the Note Liens;



(2)

enforce any of the terms of the Note Lien Security Documents; or



(3)

collect and receive payment of any and all of the Note Lien Obligations.

Release of Liens in Respect of Notes

        The indenture provides that the Note Liens upon the Collateral will be released and no longer secure the notes outstanding under the indenture or any other Note Lien Obligations, and the right of the holders of the notes and such other Note Lien Obligations to the benefits and proceeds of the Note Liens on the Collateral will terminate and be discharged:

(1)

upon satisfaction and discharge of the indenture as set forth under the caption "—Satisfaction and Discharge";



(2)

upon a Legal Defeasance or Covenant Defeasance of the notes as set forth under the caption "—Legal Defeasance and Covenant Defeasance";



(3)

upon payment in full of all notes outstanding under the indenture and all outstanding Note Lien Obligations due and payable under the indenture at the time the notes are paid in full and discharged;



(4)

in whole or in part, with the consent of the Holders of a majority in aggregate principal amount of the notes in accordance with the provisions described below under the caption "—Amendment, Supplement and Waiver";



(5)

upon the taking of Collateral by eminent domain, condemnation or in similar circumstances;



(6)

in the case of Note Liens on Collateral owned by any Note Guarantor, upon the release of the Guarantee of such Note Guarantor in accordance with the provisions of the indenture described under "—Note Guarantees";



(7)

as to any Collateral that is sold, transferred or otherwise disposed of by the Issuers or any Note Guarantor to a Person that is not (either before or after such sale, transfer or disposition) the Issuers or a Restricted Subsidiary of the Issuers (i) in a transaction or other circumstance that is not prohibited by the provisions of the indenture described above under the caption "—Repurchase at the Option of Holders—Asset Sales," at the time of such sale, transfer or other disposition or to the extent of the interest sold, transferred or otherwise disposed of or (ii) in connection with the enforcement of a Permitted Lien so long as the Lien attaches to the Proceeds of such enforcement action; provided that

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the Liens on the Collateral will not be released pursuant to clause (i) of this provision if the sale or disposition is subject to the covenant described below under the caption "—Certain Covenants—Merger, Consolidation or Sale of Assets";

(8)

as to any Collateral owned by a Note Guarantor all of the Capital Stock of which is being sold, transferred or otherwise disposed of, to a Person that is not (either immediately before or after giving effect to such transaction) the Issuers or a Restricted Subsidiary in a transaction that is not prohibited by the provisions of the indenture described below under the caption "—Repurchase at the Option of Holders—Asset Sales," at the time of such sale, transfer or other disposition;



(9)

as to any Revolving Credit Collateral securing Revolving Credit Obligations upon any release of such Collateral pursuant to the terms of the Revolving Credit Loan Documents;



(10)

as to any Collateral consisting of Note Capital Stock Collateral, on the Release Date; or



(11)

upon release of Collateral as set forth under the caption "—Intercreditor Agreement—Release of Liens on Collateral."

        The Note Lien Security Documents provide that the Liens securing the Note Lien Debt will extend to the Proceeds of any sale of Collateral. As a result, the Note Liens will apply to the Proceeds of any such Collateral received in connection with any sale or other disposition of assets described in the preceding paragraph.

Equal and Ratable Sharing of Collateral by Holders of Note Lien Debt

        The indenture provides that, notwithstanding:

(1)

anything to the contrary contained in the Note Lien Security Documents;



(2)

the time of incurrence of any Series of Note Lien Debt;



(3)

the order or method of attachment or perfection of any Liens securing any Series of Note Lien Debt;



(4)

the time or order of filing or recording of financing statements, mortgages or other documents filed or recorded to perfect any Lien upon any Collateral;



(5)

the time of taking possession or control over any Collateral;



(6)

that any Note Lien may not have been perfected or may be or have become subordinated, by equitable subordination or otherwise, to any other Lien; or



(7)

the rules for determining priority under any law governing relative priorities of Liens:



(a)

all Note Liens granted at any time by the Issuers or any Note Guarantor will secure, equally and ratably, all present and future Note Lien Obligations; and



(b)

all Proceeds of all Note Liens granted at any time by the Issuers or any Note Guarantor will be allocated and distributed equally and ratably on account of the Note Lien Debt and other Note Lien Obligations.

        This section is intended for the benefit of, and will be enforceable as a third party beneficiary by, each present and future holder of Note Lien Obligations, each present and future Note Lien Representative and the Note Lien Collateral Agent as holder of Note Liens. The Note Lien Representative of each future Series of Note Lien Debt will be required to deliver a Lien Sharing and Priority Confirmation to the Note Lien Collateral Agent and the Trustee at the time of incurrence of such Series of Note Lien Debt.

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Relative Rights

        Nothing in the Note Lien Documents will:

(1)

impair, as between the Issuers and the holders of the notes, the obligation of the Issuers to pay principal of, premium and interest and additional interest, if any, on the notes in accordance with their terms or any other obligation of the Issuers or any Note Guarantor;



(2)

affect the relative rights of holders of notes as against any other creditors of the Issuers or any Note Guarantor (other than holders of Revolving Credit Liens or other Note Liens);



(3)

restrict the right of any holder of notes to sue for payments that are then due and owing (but not enforce any judgment in respect thereof against any Collateral to the extent specifically prohibited by the provisions described above under the captions "—Intercreditor Agreement—Restrictions on Enforcement of Junior Liens" or "—Intercreditor Agreement—Insolvency or Liquidation Proceedings");



(4)

restrict or prevent any holder of notes or other Note Lien Obligations, the Note Lien Collateral Agent or any Note Lien Representative from exercising any of its rights or remedies upon a Default or Event of Default not specifically restricted or prohibited by the provisions described above under the captions "—Intercreditor Agreement—Restrictions on Enforcement of Junior Liens" or "—Intercreditor Agreement—Insolvency or Liquidation Proceedings"; or



(5)

restrict or prevent any holder of notes or other Note Lien Obligations, the Note Lien Collateral Agent or any Note Lien Representative from taking any lawful action in an insolvency or liquidation proceeding not specifically restricted or prohibited by the provisions described above under the captions "—Intercreditor Agreement—Restrictions on Enforcement of Junior Liens" or "—Intercreditor Agreement—Insolvency or Liquidation Proceedings."

Compliance with Trust Indenture Act

        To the extent applicable, the Issuers will cause TIA §313(b), relating to reports, and TIA §314(d), relating to the release of property or securities subject to the Lien of the Note Lien Security Documents, to be complied with. Any certificate or opinion required by TIA §314(d) may be made by an Officer of the Issuers except in cases where TIA §314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected by or reasonably satisfactory to the Trustee. Notwithstanding anything to the contrary in this paragraph, the Issuers will not be required to comply with all or any portion of TIA §314(d) if it determines, in good faith based on advice of counsel (which may be internal counsel), that under the terms of TIA §314(d) and/or any interpretation or guidance as to the meaning thereof of the SEC and its staff, including "no action" letters or exemptive orders, all or any portion of TIA §314(d) is inapplicable to one or a series of released Collateral. In the case where the Issuers determine that the TIA is not applicable, the Issuers shall deliver an opinion of counsel and an officers' certificate to the Trustee and the Note Lien Collateral Agent to the effect that the TIA does not apply to the release of Collateral and that all conditions precedent to such release in the indenture and the Note Lien Security Documents (including the Intercreditor Agreement) have been complied with.

Further Assurances; Insurance

        The indenture and the Note Lien Security Documents provide that each of the Issuers and the Guarantors will do or cause to be done all acts that the Note Lien Collateral Agent from time to time may reasonably request or as necessary to assure and confirm that the Note Lien Collateral Agent holds, for the benefit of the holders of Note Lien Obligations, duly created and enforceable and (except with respect to Excluded Perfection Collateral) perfected Note Liens upon the Collateral (including any property or assets (other than Excluded Perfection Collateral) that are acquired or

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otherwise become Collateral after the notes are issued), in each case, as contemplated by, and with the Lien priority and perfection required under, the Note Lien Documents.

        At any time and from time to time, each of the Issuers and the Guarantors will promptly execute, acknowledge and deliver such security documents, instruments, certificates, notices and other documents, and take such other actions that are necessary to or that the Note Lien Collateral Agent may reasonably request to create, perfect, protect, assure or enforce the Liens and benefits intended to be conferred, in each case as contemplated by, and with the Lien priority and perfection required under, the Note Lien Documents for the benefit of the holders of Note Lien Obligations.

        The Issuers and the Guarantors will:

(1)

keep their properties insured at all times by financially sound and reputable insurers in such amounts and against such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies in the same or similar business and, in any event, insuring the Collateral against loss by fire, explosion or theft or other risks as may be required by the Note Lien Security Documents;



(2)

maintain such other insurance as may be required by law; and



(3)

maintain title insurance on real property Collateral to the extent required by the Note Lien Security Documents.

        The Issuers and the Guarantors will furnish to the Note Lien Collateral Agent all information reasonably requested by it as to their property and liability insurance carriers. The Note Lien Security Documents will provide that the Note Lien Collateral Agent, on behalf of holders of Note Lien Debt, be named as an additional insured and/or loss payee in respect of casualty insurance for Note Lien Collateral property, with a waiver of subrogation, and 30 days' notice of any cancellation of or material change to all insurance policies of the Issuers and the Guarantors required by the Note Lien Security Documents. Any payments received by the Note Lien Collateral Agent in its capacity as additional insured and/or loss payee in respect of such insurance shall be deposited by it into the Net Available Cash Account and may be applied by the Issuers and their respective Restricted Subsidiaries in accordance with the provisions of the indenture described in the fourth paragraph under the caption "—Repurchase at the Option of Holders—Asset Sales."

Amendment of Note Lien Security Documents

        The Note Lien Security Documents (other than the Intercreditor Agreement) provide that no amendment or supplement to the provisions of any such Note Lien Security Document will be effective without the approval of the Note Lien Collateral Agent acting as directed by the Required Note Lien Debtholders, except that:

(1)

any amendment or supplement that has the effect solely of:



(a)

adding or maintaining Collateral;



(b)

securing additional Note Lien Debt that was otherwise permitted by the terms of the Note Lien Documents to be secured by the Collateral;



(c)

preserving, perfecting or establishing the priority of the Liens thereon or the rights of the Note Lien Collateral Agent therein; provided that the Note Liens remain Priority Liens on the Note Lien Collateral;



(d)

releasing Liens on Collateral securing Note Lien Obligations in accordance with the requirements set forth in the applicable Note Lien Documents referenced above under the caption "—Provisions of the Indenture Relating to Security—Release of Liens in Respect of Notes," under the caption "—Intercreditor Agreement—Release of Liens on

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Collateral" and, if applicable, the provisions of any other Note Lien Document governing any other Series of Note Lien Debt that regulates the release of Collateral;

(e)

curing any ambiguity, omission, defect or inconsistency; provided that such amendment or supplement does not adversely affect any security interest in Collateral securing the Note Lien Obligations or perfection thereof or the rights of any holder of Note Lien Debt, any Note Lien Representative or the Note Lien Collateral Agent, subject to the provisions of the Note Lien Security Documents;



(f)

adding to the covenants of the Grantors for the benefit of the holders of Note Lien Debt or to surrender any right or power conferred upon the Grantors;



(g)

making any change that does not adversely affect any security interest in Collateral securing the Note Lien Obligations or perfection thereof or the rights of any holder of Note Lien Debt, any Note Lien Representative or the Note Lien Collateral Agent, subject to the provisions of the Note Lien Security Documents; or



(h)

conforming the text of the Note Lien Security Documents to any provision of this Description of Notes to the extent that such provision in this Description of Notes was intended to be a verbatim recitation of a provision of such Note Lien Security Document,

will become effective when executed and delivered by the Issuers or any other applicable Guarantor party thereto and the Note Lien Collateral Agent acting without any direction by the holders of Note Lien Obligations;

(2)

no amendment or supplement that reduces, impairs or adversely affects the right of any holder of Note Lien Obligations:



(a)

to vote its outstanding Note Lien Debt with respect to Note Lien Collateral as to any matter described as subject to direction by the Required Note Lien Debtholders (or amends the provisions of this clause (2) or the definitions of "Required Note Lien Debtholders");



(b)

to share equally and ratably with the holders of all Note Lien Obligations in the Proceeds of enforcement of or realization on any Collateral as described above under "Intercreditor Agreement—Application of Proceeds, Payments Over and Application of Payments" and "—Provisions of the Indenture Relating to Security—Equal and Ratable Sharing of Collateral by Holders of Note Lien Debt"; or



(c)

to require that Note Liens be released only as set forth in the provisions described above under the caption "—Provisions of the Indenture Relating to Security—Release of Liens in Respect of Notes,"

will become effective without the consent of the requisite percentage or number of holders of each Series of Note Lien Debt so affected under the applicable Note Lien Document; and

(3)

no amendment or supplement that imposes any obligation upon the Note Lien Collateral Agent or any Note Lien Representative or adversely affects the rights of the Note Lien Collateral Agent or any Note Lien Representative, in its individual capacity as such, will become effective without the consent of the Note Lien Collateral Agent or such Note Lien Representative, respectively.

        In connection with executing any amendment or supplement to the Note Lien Documents, the Note Collateral Agent shall be entitled to rely on an opinion of counsel and an officers' certificate to the effect that all conditions precedent to the execution of such amendment or supplement have been complied with, and such amendment or supplement is authorized or permitted by the Note Lien Documents.

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        Any amendment or supplement to the provisions of the Note Lien Security Documents that releases Liens on Collateral securing Note Lien Debt will be effective only in accordance with the requirements set forth in the applicable Note Lien Documents referenced above under the caption "—Provisions of the Indenture Relating to Security—Release of Liens in Respect of Notes," under the caption "—Intercreditor Agreement—Release of Liens on Collateral" and, if applicable, the provisions of any other Note Lien Document governing any other Series of Note Lien Debt that regulates the release of Collateral. Any amendment or supplement that results in the Note Lien Collateral Agent's Liens upon the Collateral no longer securing the notes and the other Obligations under the indenture may only be effected in accordance with the provisions described above under the caption "—Provisions of the Indenture Relating to Security—Release of Liens in Respect of Notes" or under the caption "—Intercreditor Agreement—Release of Liens on Collateral."

Repurchase at the Option of Holders

Change of Control

        If a Change of Control occurs, each holder of notes will have the right to require the Issuers to repurchase all or any part (equal to $2,000 or a larger integral multiple of $1,000) of that holder's notes pursuant to a Change of Control Offer on the terms set forth in the indenture. In the Change of Control Offer, the Issuers will offer a Change of Control payment in cash equal to 101% of the aggregate principal amount of notes repurchased plus accrued and unpaid interest and Additional Interest, if any, on the notes repurchased to the date of purchase, subject to the rights of holders of notes on the relevant record date to receive interest due on the relevant interest payment date. Within 20 days following any Change of Control, the Issuers will mail a notice to each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase notes on the Change of Control payment date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedures required by the indenture and described in such notice. The Issuers will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of the indenture, the Issuers will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of the indenture by virtue of such compliance.

        On the Change of Control payment date, the Issuers will, to the extent lawful:

(1)

accept for payment all notes or portions of notes properly tendered pursuant to the Change of Control Offer;



(2)

deposit with the paying agent an amount equal to the Change of Control payment in respect of all notes or portions of notes properly tendered; and



(3)

deliver or cause to be delivered to the Trustee the notes properly accepted together with an officers' certificate stating the aggregate principal amount of notes or portions of notes being purchased by the Issuers.

        The paying agent will promptly mail or wire to each holder of notes properly tendered the Change of Control payment for such notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new note equal in principal amount to any unpurchased portion of the notes surrendered, if any. The Issuers will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

        The provisions described above that require the Issuers to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the indenture

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are applicable. Except as described above with respect to a Change of Control, the indenture does not contain provisions that permit the holders of the notes to require that the Issuers repurchase or redeem the notes in the event of a takeover, recapitalization or similar transaction.

        The Issuers will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the indenture applicable to a Change of Control Offer made by the Issuers and purchases all notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to the indenture as described above under the caption "—Optional Redemption," unless and until there is a default in payment of the applicable redemption price.

        The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the properties or assets of the Issuers and their respective Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of notes to require the Issuers to repurchase its notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Issuers and their respective Subsidiaries taken as a whole to another Person or group may be uncertain.

Asset Sales

        The Issuers will not, and will not permit any of their respective Restricted Subsidiaries to, consummate an Asset Sale unless:

(1)

such Issuer (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



(2)

at least 75% of the consideration received in the Asset Sale by such Issuer or Restricted Subsidiary consists of cash or Cash Equivalents. For purposes of this provision, each of the following will be deemed to be cash:



(a)

any liabilities, as shown on the Issuers' most recent consolidated balance sheet, of such Issuer or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the notes or any Note Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation or similar agreement that releases such Issuer or Restricted Subsidiary from further liability;



(b)

any securities, notes or other obligations received by such Issuer or Restricted Subsidiary from such transferee that are converted, sold or exchanged by such Issuer or Restricted Subsidiary into cash or Cash Equivalents within 180 days after such Asset Sale, to the extent of the cash or Cash Equivalents received in that conversion, sale or exchange; and



(c)

any stock, property or assets of the kind referred to in clauses (2) or (4) of the next paragraph of this covenant.

        Other than with respect to an Asset Sale of Note Lien Collateral, within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Issuers (or the applicable Restricted Subsidiary, as the case may be) may apply such Net Proceeds at its option:

(1)

to repay (i) Credit Facilities or (ii) Indebtedness used to finance the acquisition of the assets subject of the Asset Sale incurred within 12 months prior to such Asset Sale and, in the case of each of clauses (i) and (ii), if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto;

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(2)

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 Issuers;



(3)

to make a capital expenditure;



(4)

to acquire other assets that are not classified as current assets under GAAP and that are used or useful in a Permitted Business; or



(5)

to enter into a binding written agreement to acquire any stock or assets of the kind referred to in the foregoing clauses (2) or (4) if the acquisition of such stock or assets, as the case may be, is consummated within 180 days of such binding written agreement.

        Pending the final application of any Net Proceeds in accordance with the foregoing, the Issuers may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by the indenture.

        In the case of an Asset Sale of Note Lien Collateral the Issuers (or the Restricted Subsidiary that owned the sold assets, as the case may be) shall promptly deposit the Net Proceeds of such disposition into a segregated Net Available Cash Account, under the control of the Note Lien Collateral Agent, that includes only proceeds from the disposition of Note Lien Collateral and interest earned thereon (a "Net Available Cash Account") and is free from all other Liens (other than Junior Liens), all on terms and pursuant to arrangements reasonably satisfactory to the Note Lien Collateral Agent in its reasonable determination (which may include, at the Note Lien Collateral Agent's reasonable request, customary officer's certificates and opinions of counsel and shall include release provisions requiring the Note Lien Collateral Agent to release deposits in the Net Available Cash Account as requested to permit the Issuers or their respective Restricted Subsidiaries to apply such Net Proceeds in the manner described below, unless the Note Lien Collateral Agent has received written notice that an Event of Default has occurred and is continuing from the Trustee or the holders of at least 25% in aggregate principal amount of notes then outstanding), and an amount equal to 100% of the Net Proceeds from such disposition is applied by the Issuers (or such Restricted Subsidiary, as the case may be), to the extent the Issuers or such Restricted Subsidiary elects, to reinvest in Additional Assets constituting Note Lien Collateral to be owned by the Issuers or a Guarantor, and the Note Lien Collateral Agent shall promptly be granted a perfected first priority security interest on all such assets as Note Lien Collateral under the Note Lien Security Documents to secure the notes on terms and pursuant to arrangements reasonably satisfactory to the Note Lien Collateral Agent in its reasonable determination (which may include, at the collateral agent's reasonable request, customary officer's certificates and legal opinions); provided that, notwithstanding the foregoing the Issuers or such Restricted Subsidiary may reinvest such Net Proceeds in Additional Assets that do not constitute Note Lien Collateral in an aggregate amount not to exceed $25.0 million since the Closing Date.

        In addition, upon receipt of any Net Proceeds from a Casualty Event with respect to Note Lien Collateral, the Issuers (or the Restricted Subsidiary that owned those assets, as the case may be) shall treat such Net Proceeds as if it were proceeds of a disposition of Note Lien Collateral and apply such proceeds in accordance with the preceding paragraph.

        Any Net Proceeds from Asset Sales or a Casualty Event with respect to Collateral that are not applied or invested as provided above will constitute "Excess Collateral Proceeds." When the aggregate amount of Excess Collateral Proceeds exceeds $15.0 million, within 10 days thereof, the Issuers will make an Collateral Sale Offer to all holders of notes and may make an offer to all holders of other Indebtedness of the Issuers that is Note Lien Debt containing provisions similar to those set forth in the indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of notes and such other Note Lien Debt that may be purchased out of the Excess Proceeds (provided that in no event shall the Issuers offer to purchase

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such other Note Lien Debt of the Issuers at a purchase price in excess of 101% of its principal amount, plus accrued and unpaid interest, if any, thereon); provided, however, that to the extent the Excess Collateral Proceeds relate to Asset Sales or a Casualty Event with respect to Revolving Credit Collateral, the Issuers may, prior to making a Collateral Disposition Offer, make a permanent prepayment with respect to the maximum principal amount of indebtedness that is secured by such Collateral on a first-priority basis that may be prepaid out of such Excess Collateral Proceeds (and in the case of a prepayment of revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto) at a price not in excess of 101% of its principal amount, plus accrued and unpaid interest to, if any, thereon to the date of prepayment and any amounts applied to make such a prepayment shall not constitute Excess Collateral Proceeds. The offer price of the notes in any Collateral Sale Offer will be equal to 100% of the principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and will be payable in cash, and the offer or redemption price for such other Note Lien Debt shall be as set forth in the related documentation governing such Note Lien Debt. If any Excess Proceeds remain after consummation of a Collateral Sale Offer, the Issuers may use those Excess Proceeds for any purpose not otherwise prohibited by the indenture. If the aggregate principal amount of notes and other Note Lien Debt tendered into such Collateral Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the notes and the Company or such other applicable person shall select such other Note Lien Debt to be purchased on a pro rata basis. Upon completion of each Collateral Sale Offer, the amount of Excess Proceeds will be reset at zero.

        Any Net Proceeds from Asset Sales other than with respect to Collateral that are not applied or invested as provided above will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15.0 million, within 10 days thereof, the Issuers will make an Asset Sale Offer to all holders of notes and may make an offer to all holders of other pari passu Indebtedness of the Issuers containing provisions similar to those set forth in the indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of notes and such other pari passu Indebtedness of the Issuers that may be purchased out of the Excess Proceeds (provided that in no event shall the Issuers offer to purchase such other pari passu Indebtedness of the Issuers at a purchase price in excess of 101% of its principal amount (without premium), plus accrued and unpaid interest and liquidated damages, if any, thereon). The offer price of the notes in any Asset Sale Offer will be equal to 100% of the principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and will be payable in cash, and the offer or redemption price for such other Indebtedness shall be as set forth in the related documentation governing such Indebtedness. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Issuers may use those Excess Proceeds for any purpose not otherwise prohibited by the indenture. If the aggregate principal amount of notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the notes and the Company or such other applicable person shall select such other pari passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

        The Issuers will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of the indenture, the Issuers will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of the indenture by virtue of such compliance.

        The agreements governing the Revolving Credit Agreement contain, and future agreements may contain, prohibitions of certain events, including events that would constitute a Change of Control or

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an Asset Sale. The exercise by the holders of notes of their right to require the Issuers to repurchase the notes upon a Change of Control or an Asset Sale could cause a default under these other agreements, even if the Change of Control or Asset Sale itself does not, due to the financial effect of such repurchases on the Issuers. In the event a Change of Control or Asset Sale occurs at a time when the Issuers are prohibited from purchasing notes, the Issuers could seek the consent of their lenders to the purchase of notes or could attempt to refinance the borrowings that contain such prohibition. If the Issuers do not obtain a consent or repay those borrowings, the Issuers will remain prohibited from purchasing notes. In that case, the Issuers' failure to purchase tendered notes would constitute an Event of Default under the indenture. Finally, the Issuers' ability to pay cash to the holders of notes upon a repurchase may be limited by their then existing financial resources. See "Risk Factors—Risks Relating to the Notes—We may not be able to make the change of control offer required by the indenture."

Selection and Notice

        If less than all of the notes are to be redeemed at any time, the Trustee will select notes for redemption as follows:

(1)

if the notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the notes are listed; or



(2)

if the notes are not listed on any national securities exchange, on a pro rata basis, by lot or by such method as the Trustee deems fair, appropriate and practicable.

        No notes of $2,000 or less can be redeemed in part. Notices of redemption will be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the indenture. Notices of redemption may not be conditional.

        If any note is to be redeemed in part only, the notice of redemption that relates to that note will state the portion of the principal amount of that note that is to be redeemed. A new note in principal amount equal to the unredeemed portion of the original note will be issued in the name of the holder of notes upon cancellation of the original note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on notes or portions of notes called for redemption.

Certain Covenants

Restricted Payments

        The Issuers will not, and will not permit any of their Restricted Subsidiaries to, directly or indirectly:

(1)

declare or pay any dividend or make any other payment or distribution on account of the Issuers' or any of their respective Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Issuers or any of their respective Restricted Subsidiaries) or to the direct or indirect holders of the Issuers' or any of their respective Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock or preferred stock of Subsidiaries) of the Issuers and other than dividends or distributions payable to the Issuers or a Restricted Subsidiary of the Issuers);



(2)

purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Issuers) any Equity Interests of the

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Issuers or any direct or indirect parent of the Issuers held by Persons other than the Issuers or their respective Restricted Subsidiaries;

(3)

make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Issuers or any Guarantor that is contractually subordinated to the notes or to any Note Guarantee (excluding any intercompany Indebtedness between or among the Issuers and any of their respective Restricted Subsidiaries), except (x) a payment of interest or principal at the Stated Maturity thereof or (y) a payment, purchase, redemption, defeasance or other acquisition or retirement for value of any such Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of payment, purchase, redemption, defeasance, acquisition or retirement; or



(4)

make any Restricted Investment

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

(1)

no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;



(2)

Linens 'n Things, Inc. 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 the first paragraph of the covenant described below under the caption "—Incurrence of Indebtedness and Issuance of Preferred Stock;" and



(3)

such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuers and their respective Restricted Subsidiaries since the date of the indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5), (6), (7), (8), (9), (10), (11) or (12) of the next succeeding paragraph), is less than the sum, without duplication, of:



(a)

50% of the Consolidated Net Income of Linens 'n Things, Inc. for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the indenture to the end of the Issuers' 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 deficit, less 100% of such deficit); plus

(b)

100% of the aggregate net cash proceeds and the Fair Market Value of assets received by Linens 'n Things, Inc. since the date of the indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of Linens 'n Things, Inc. (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of Linens 'n Things, Inc. 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 Linens 'n Things, Inc.); plus

(c)

100% of the aggregate amount received in cash and the Fair Market Value of property and marketable securities received by means of (x) the sale or other disposition (other than to any of the Issuers or their respective Restricted Subsidiaries) of Restricted Investments made by any of the Issuers or their respective Restricted Subsidiaries and

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repurchases and redemptions of such Restricted Investments from any of the Issuers or their respective Restricted Subsidiaries and repayments of loans or advances which constitute Restricted Investments by any of the Issuers or their respective Restricted Subsidiaries or (y) the sale (other than to any of the Issuers or their respective Restricted Subsidiaries) of the Capital Stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than to the extent it constituted a Permitted Investment); plus

(d)

to the extent that any Unrestricted Subsidiary of the Issuers designated as such after the date of the indenture is redesignated as a Restricted Subsidiary after the date of the indenture, the lesser of (i) the Fair Market Value of the Issuers' Investment in such Subsidiary as of the date of such redesignation or (ii) such Fair Market Value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary after the date of the indenture (other than to the extent it constituted a Permitted Investment); plus

(e)

50% of any dividends received by any of the Issuers or their respective Restricted Subsidiaries after the date of the indenture from an Unrestricted Subsidiary of the Issuers, to the extent that such dividends were not otherwise included in the Consolidated Net Income of Linens 'n Things, Inc. for such period.

        So long as no Default has occurred and is continuing or would be caused thereby, the preceding provisions will not prohibit:

(1)

the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or redemption payment would have complied with the provisions of the indenture;



(2)

the making of any Restricted Payment in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of Linens 'n Things, Inc.) of, Equity Interests of Linens 'n Things, Inc. (other than Disqualified Stock) or from the substantially concurrent contribution of common equity capital to Linens 'n Things, Inc.; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(b) of the preceding paragraph;



(3)

the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of any of the Issuers or the Guarantors that is contractually subordinated to the notes or to any Note Guarantee with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness;



(4)

the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary of Linens 'n Things, Inc. to the holders of its Equity Interests on a pro rata basis;



(5)

the repurchase, redemption or other acquisition or retirement for value of, or dividends or distributions to any direct or indirect parent of the Issuers to allow any direct or indirect parent of the Issuers to repurchase, redeem or acquire, any Equity Interests of any of the Parent, the Issuers or any intermediate holding company between the Parent and the Issuers held by any current or former officer, director or employee of any of Parent, the Issuers or their respective Restricted Subsidiaries pursuant to any equity subscription agreement, stock option agreement, shareholders' agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $2.5 million in any twelve-month period plus the aggregate net cash proceeds received by the Issuers after the date of the indenture from the issuance of such Equity Interests to, or

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the exercise of options to purchase such Equity Interests by, any current or former director, officer, partner, consultant or employee of Parent, the Issuers or their respective Restricted Subsidiaries (provided that the amount of such net cash proceeds received by the Issuers and utilized pursuant to this clause (5) for any such repurchase, redemption, acquisition or retirement will be excluded from clause (3)(b) of the preceding paragraph); and provided, further, that amounts available pursuant to this clause (5) during any twelve-month period may be carried forward and utilized in succeeding twelve-month periods);

(6)

loans or advances to employees made in the ordinary course of business of any of the Issuers or their respective Restricted Subsidiaries in an aggregate principal amount not to exceed $1.0 million at any one time outstanding;



(7)

the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options;



(8)

the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of any of the Issuers or their respective Restricted Subsidiaries issued on or after the date of the indenture in accordance with the applicable Fixed Charge Coverage Ratio test described below under the caption "—Incurrence of Indebtedness and Issuance of Preferred Stock";



(9)

any Permitted Payments to Parent;



(10)

any payments made in connection with the Transactions pursuant to the Acquisition Agreement and any other agreements or documents related to the Transactions and set forth on a schedule provided to the Initial Purchasers on or prior to the closing date of the Transactions (without giving effect to subsequent amendments, waivers or other modifications to such agreements or documents) or as otherwise described in the prospectus;



(11)

the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Indebtedness of any of the Issuers or a Guarantor that is contractually subordinated to the notes or any Note Guarantee (i) at a purchase price not greater than 101% of the principal amount of such contractually subordinated Indebtedness in the event of a Change of Control in accordance with provisions similar to the provisions of the indenture described above under the caption "—Repurchase at the Option of Holders—Change of Control" or (ii) at a purchase price not greater than 101% of the principal amount thereof in accordance with provisions similar to the provisions of the indenture described above under the caption "—Repurchase at the Option of Holders—Asset Sales"; provided that, prior to or simultaneously with such purchase, repurchase, redemption, defeasance or other acquisition or retirement, the Issuers have made the Change of Control Offer or Asset Sale Offer, as applicable, as provided in such covenant with respect to the notes and has completed the repurchase or redemption of all notes validly tendered for payment in connection with such Change of Control Offer or Asset Sale Offer; and



(12)

other Restricted Payments in an aggregate amount not to exceed $25.0 million since the date of the indenture.

        The amount of all Restricted Payments (other than cash) will 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 such Issuer or 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 this covenant will be determined by the Boards of Directors of the Issuers whose resolution with respect thereto will be delivered to the Trustee. The Boards of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the Fair Market Value exceeds $20.0 million.

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        For purposes of determining compliance with this covenant, if a Restricted Payment meets the criteria of more than one of the exceptions described in clauses (1) through (12) above or is entitled to be made according to the first paragraph of this covenant, Linens 'n Things, Inc. may, in its sole discretion, classify the Restricted Payment in any manner that complies with this covenant.

Incurrence of Indebtedness and Issuance of Preferred Stock

        The Issuers will not, and will not permit any of their respective 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 Linens 'n Things, Inc. will not issue any Disqualified Stock and will not permit any of their respective Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that (x) Linens 'n Things, Inc. may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, if the Fixed Charge Coverage Ratio for Linens 'n Things, Inc. 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 if the additional Indebtedness had been incurred or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period and (y) Linens 'n Things Center, Inc. may incur Indebtedness (including Acquired Debt) or issue preferred stock, and Linens 'n Things Center, Inc.'s Subsidiaries that are Guarantors may incur Indebtedness (including Acquired Debt) or issue preferred stock, if the Fixed Charge Coverage Ratio for Linens 'n Things Center, Inc.'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 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.

        The first paragraph of this covenant will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"):

(1)

Indebtedness of the Issuers or their respective Restricted Subsidiaries under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) not to exceed the greater of (A) $600.0 million and (B) the amount of the Borrowing Base as of the date of such incurrence;



(2)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Indebtedness existing on the date of the indenture;



(3)

the incurrence by the Issuers and the Guarantors of Indebtedness represented by the notes and the related Note Guarantees to be issued on the date of the indenture and the exchange notes and the related Note Guarantees to be issued pursuant to the registration rights agreement;



(4)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing, whether or not incurred at the time of such cost or acquisition, all or any part of the purchase price or cost of design, construction, installation or improvement of property, plant or equipment used in the business of any of the Issuers or their respective Restricted Subsidiaries, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (4) that are at any one time

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outstanding not to exceed the greater of (A) $15.0 million or (B) 1% of Consolidated Net Tangible Assets;

(5)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted by the indenture to be incurred under the first paragraph of this covenant or clauses (2), (3), (4), (5) or (12) of this paragraph;



(6)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of intercompany Indebtedness between or among any of the Issuers and their respective Restricted Subsidiaries; provided, however, that:



(x)

if an Issuer or a Guarantor is the obligor on such Indebtedness and the payee is not an Issuer or a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the notes, in the case of an Issuer, or the Note Guarantee, in the case of a Guarantor; and



(y)

(i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than any of the Issuers or their respective Restricted Subsidiaries and (ii) any sale or other transfer of any such Indebtedness to a Person that is not any of the Issuers or their respective Restricted Subsidiaries, will be deemed, in each case, to constitute an incurrence of such Indebtedness by such Issuer or Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);



(7)

the issuance by any of the Issuers' Restricted Subsidiaries to any of the Issuers or their respective Restricted Subsidiaries of shares of preferred stock; provided, however, that:



(x)

any subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than an Issuer or any of their respective Restricted Subsidiaries; and



(y)

any sale or other transfer of any such preferred stock to a Person that is not an Issuer or any of their respective Restricted Subsidiaries,

will be deemed, in each case, to constitute an issuance of such preferred stock by such Restricted Subsidiary that was not permitted by this clause (7);

(8)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Hedging Obligations in the ordinary course of business;



(9)

the Guarantee by an Issuer or any of the Guarantors of Indebtedness of an Issuer or their respective Restricted Subsidiaries that was permitted to be incurred by another provision of this covenant; provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the notes, then the Guarantee shall be subordinated or pari passu, as applicable, to the same extent as the Indebtedness guaranteed;



(10)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Indebtedness in respect of workers' compensation claims, self-insurance obligations, bankers' acceptances, performance and surety bonds or similar types of obligations in the ordinary course of business;



(11)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within five business days of being incurred;

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(12)

Indebtedness of a Restricted Subsidiary incurred and outstanding on the date on which such Restricted Subsidiary was acquired by, or merged into, any of the Issuers or their respective Restricted Subsidiaries (other than Indebtedness incurred (a) to provide all or any portion of the funds utilized to consummate the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by an Issuer or (b) otherwise in connection with, or in contemplation of, such acquisition); provided, however, that at the time such Restricted Subsidiary is acquired by an Issuer, such Issuer would have been able to incur $1.00 of additional Indebtedness pursuant to the first paragraph of this covenant after giving effect to the incurrence of such Indebtedness pursuant to this clause (12);



(13)

Indebtedness arising from agreements of Linens 'n Things, Inc. or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by Linens 'n Things, Inc. and their respective Restricted Subsidiaries in connection with such disposition; and



(14)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (14), not to exceed $50.0 million.

        The Issuers will not incur, and will not permit any Guarantor to incur, any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Issuers or such Guarantor unless such Indebtedness is also contractually subordinated in right of payment to the notes and the applicable Note Guarantee on substantially identical terms; provided, however, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Issuers solely by virtue of being unsecured or by virtue of being secured on a first or junior Lien basis.

        For purposes of determining compliance with this "Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (14) above, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Issuers will be permitted, in its sole discretion, to 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 under Credit Facilities outstanding on the date on which notes are first issued and authenticated under the indenture will initially be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt. 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 in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant; provided, in each such case, that the amount of any such accrual, accretion or payment is included in Fixed Charges of the Issuers as accrued. Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Issuers or any Restricted Subsidiary may incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values.

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        The amount of any Indebtedness outstanding as of 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:



(a)

the Fair Market Value of such assets at the date of determination; and



(b)

the amount of the Indebtedness of the other Person.

Liens

        The Issuers will not and will not permit any of their respective Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist any Lien of any kind (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, provided that the Issuers and their respective Restricted Subsidiaries may incur Liens (in addition to Permitted Liens) securing Indebtedness on property or assets that are not Note Lien Collateral if:

(1)

in the case of any Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the notes, the notes are secured by a Lien on such property or assets that is senior in right of priority to such Liens; and



(2)

in the case of all Liens securing other Indebtedness, the notes are equally and ratably secured by a Lien on such property or assets.

Dividend and Other Payment Restrictions Affecting Subsidiaries

        The Issuers will not, and will not permit any of their respective Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(1)

pay dividends or make any other distributions on its Capital Stock to any of the Issuers or their respective Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to any of the Issuers or their respective Restricted Subsidiaries;



(2)

make loans or advances to any of the Issuers or their respective Restricted Subsidiaries; or



(3)

sell, lease or transfer any of its property or assets to any of the Issuers or their respective Restricted Subsidiaries.

        However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:

(1)

agreements as in effect on the date of the indenture (including the Revolving Credit Loan Documents) and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such encumbrances or restrictions than those contained in those agreements on the date of the indenture;



(2)

the indenture, the notes, the Note Lien Documents and the Note Guarantees;



(3)

applicable law, rule, regulation or order;

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(4)

any instrument governing Indebtedness or Capital Stock of a Person acquired by any of the Issuers or their respective Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the property or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the indenture to be incurred;



(5)

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



(6)

purchase money obligations for property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause (3) of the preceding paragraph;



(7)

any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending the sale or other disposition;



(8)

Liens, including real estate mortgages, permitted to be incurred under the provisions of the covenant described above under the caption "—Liens" that limit the right of the debtor to dispose of the assets subject to such Liens;



(9)

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 entered into with the approval of the Issuers' Boards of Directors, which limitation is applicable only to the assets that are the subject of such agreements;



(10)

agreements governing Indebtedness permitted to be incurred pursuant to the covenant described under "—Incurrence of Indebtedness and Issuance of Preferred Stock"; provided that the terms of the agreements (i) are not materially more restrictive, taken as a whole, with respect to such encumbrances or restrictions than those in the Revolving Credit Agreement or the indenture on the date of the indenture and (ii) do not restrict any Restricted Subsidiaries not so restricted on the date of the indenture;



(11)

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



(12)

encumbrances or restrictions under any agreement, amendment, modification, restatement, renewal, supplement, refunding, replacement or refinancing that extends, renews, refinances or replaces the agreements containing the encumbrances or restrictions in the foregoing clauses (2), (4), (6) or (8) or in this clause (12), provided that the terms and conditions of any such encumbrances or restrictions are not materially more restrictive, taken as a whole, than those contained in the agreements, being amended, modified, restated, renewed, supplemented, refunded, replaced or refinanced.

Merger, Consolidation or Sale of Assets

        Neither of the Issuers will, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not such Issuer is the surviving Person); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of it and their respective Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person, unless:

(1)

either: (a) such Issuer is the surviving Person; or (b) the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a Person organized or existing

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under the laws of the United States, any state of the United States or the District of Columbia;

(2)

the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of such Issuer under the notes, the indenture, the registration rights agreement and the Note Lien Security Documents pursuant to agreements reasonably satisfactory to the Trustee;



(3)

immediately after such transaction, no Default or Event of Default exists;



(4)

such Issuer or the Person formed by or surviving any such consolidation or merger (if other than such Issuer), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, either (A) be permitted to incur at least $1.00 of additional Indebtedness pursuant to the applicable Fixed Charge Coverage Ratio test of such Issuer set forth in the first paragraph of the covenant described above under the caption "—Incurrence of Indebtedness and Issuance of Preferred Stock" or (B) the applicable Fixed Charge Coverage Ratio of such Issuer or the Person formed by or surviving any such consolidation or merger (if other than such Issuer) would be greater than the applicable Fixed Charge Coverage Ratio of such Issuer immediately prior to such transaction;



(5)

each Guarantor (unless it is the other party to the transactions above, in which case clause (1) shall apply) shall have by supplemental indenture confirmed that its Note Guarantee shall apply to such Person's obligations in respect of the indenture and the notes and its obligations under the registration rights agreement shall continue to be in effect, if applicable; and



(6)

such Issuer or the Person formed by or surviving any such consolidation or merger (if other than such Issuer), or to which such sale, assignment, transfer, conveyance or other disposition has been made shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that such consolidation or merger or sale, assignment, transfer, conveyance or other disposition and such supplemental indenture (if any) comply with the indenture and the Note Lien Security Documents and that all relevant conditions precedent in the indenture and the Note Lien Security Documents shall have been satisfied.

        In addition, the Issuers will not permit any Guarantor to consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its assets to, any Person unless:

(1)

the resulting, surviving or transferee Person (the "Successor Guarantor") will be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such Person (if not such Guarantor) will expressly assume, the indenture, the registration rights agreement and the Note Lien Security Documents pursuant to agreements reasonably satisfactory to the Trustee, all the obligations of such Guarantor under its Note Guarantee and the registration rights agreement (if applicable), respectively; and



(2)

immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Guarantor or any Restricted Subsidiary as a result of such transaction as having been incurred by the Successor Guarantor or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing.

Notwithstanding the foregoing:

(a)

any Guarantor may consolidate with, merge into or transfer all or substantially all of its assets to the Issuers or any Restricted Subsidiary so long as such Restricted Subsidiary

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becomes a Guarantor and any Restricted Subsidiary other than a Guarantor may consolidate with, merge into or transfer all or substantially all of its assets to the Issuers or any other Restricted Subsidiary;

(b)

any Issuer or Guarantor may merge with or into, or convey, transfer or lease all or substantially all its assets to, an Affiliate incorporated solely for the purpose of reincorporating or reforming such Issuer or Guarantor in another jurisdiction, and any Issuer may merge with or into, or convey, transfer or lease all or substantially all of its assets to, the other Issuer or a Restricted Subsidiary so long as all assets of such Issuer immediately prior to such transaction are owned by the Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, conveyance or other disposition has been made immediately after the consummation thereof and clause (2) of the first paragraph of this provision has been complied with; and



(c)

any Guarantor may consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its assets so long as the transactions comply with the release provisions set forth in the second paragraph of the section entitled "—Note Guarantees."

        In addition, the Issuers will not, directly or indirectly, lease all or substantially all of their properties and assets and the property and assets of their Restricted Subsidiaries taken as a whole, in one or more related transactions, to any other Person.

        In the event of any transaction described in and complying with the conditions listed in this covenant in which any Issuer or Guarantor is not the continuing entity, the successor Person formed or remaining or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, such Issuer or Guarantor, as the case may be, and such Issuer or Guarantor, as the case may be, would be discharged from all obligations and covenants under the indenture and the notes or its Note Guarantee, as the case may be, and the registration rights agreement (if applicable).

Transactions with Affiliates

        The Issuers will not, and will not permit any of their respective 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 any Issuer (each, an "Affiliate Transaction"), unless:

(1)

the Affiliate Transaction is on terms that are no less favorable to such Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by such Issuer or such Restricted Subsidiary with an unrelated Person; and



(2)

the Issuers deliver to the Trustee:



(a)

with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15.0 million, a resolution of the Board of Directors of the Company set forth in an officers' certificate certifying that such Affiliate Transaction complies with this covenant and either (x) that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors of the Company, or (y) a copy of an opinion as to the fairness to such Issuer 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; and



(b)

with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $30.0 million, a copy of an opinion as to

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the fairness to such Issuer 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.

        The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:

(1)

any employment or consulting agreement, employee benefit plan, officer or director indemnification agreement, severance agreement or any similar arrangement entered into by the Issuers or any of their respective Restricted Subsidiaries in the ordinary course of business and payments pursuant thereto and the issuance of Capital Stock of the Issuers (other than Disqualified Stock) to directors and employees pursuant to stock option or stock ownership plans, in each case, approved in good faith by the Board of Directors of such Issuer;



(2)

transactions between or among the Issuers and/or their respective Restricted Subsidiaries;



(3)

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



(4)

payment of reasonable directors' fees, compensation benefits or indemnity to directors;



(5)

any issuance of Equity Interests (other than Disqualified Stock) of Linens 'n Things, Inc. to Affiliates of Linens 'n Things, Inc.;



(6)

Restricted Payments that do not violate the provisions of the indenture described above under the caption "—Restricted Payments" or any Permitted Investment;



(7)

transactions pursuant to any registration rights agreement with the shareholders of Parent or any direct or indirect parent of the Company, on customary terms;



(8)

written agreements entered into or assumed in connection with acquisitions of other businesses with Persons who were not Affiliates prior to such transactions approved by a majority of the Boards of Directors of the Issuers;



(9)

any payments made in connection with the Transactions pursuant to the Acquisition Agreement and any other agreements or documents related to the Transactions and set forth on a schedule provided to the Initial Purchasers on or prior to the closing date of the Transactions (without giving effect to any subsequent amendments, waivers or modifications to such agreements or documents) or as otherwise described in the prospectus;



(10)

(a) payment of annual management fees to the Sponsors in an aggregate amount not to exceed, during any consecutive 12-month period, $2.0 million, (b) the payment of fees to the Sponsors for financial advisory and investment banking services rendered to Parent and its respective Restricted Subsidiaries in connection with acquisitions, securities offerings and other financings and similar significant corporate transactions in customary and reasonable amounts for such transactions, and (c) reimbursement of reasonable out-of-pocket expenses incurred by the Sponsors in connection with the services described in clauses (a) and (b) above;



(11)

loans or advances to employees made in the ordinary course of business of any of the Issuers or their respective Restricted Subsidiaries in an aggregate principal amount not to exceed $1.0 million at any one time outstanding; and



(12)

any Permitted Payments to Parent.

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Business Activities

        The Issuers will not, and will not permit any of their respective Restricted Subsidiaries to, engage in any business other than Permitted Businesses, except to such extent as would not be material to Linens 'n Things, Inc. and their respective Restricted Subsidiaries taken as a whole.

Additional Note Guarantees

        If after the date of the indenture, any Subsidiary of an Issuer issues a Guarantee of any of the Indebtedness under the Revolving Credit Agreement, other than the Guarantees thereof existing on the Closing Date, then subject to certain exceptions that Subsidiary will become a Guarantor and execute a supplemental indenture and deliver an opinion of counsel satisfactory to the Trustee within 10 business days of the date on which it was acquired or created; provided that any Domestic Subsidiary that constitutes an Immaterial Subsidiary need not become a Guarantor until such time as it ceases to be an Immaterial Subsidiary.

        The form of the Note Guarantee will be attached as an exhibit to the indenture.

Designation of Restricted and Unrestricted Subsidiaries

        The Board of Directors of the applicable Issuer may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by such Issuer and its respective Restricted Subsidiaries in the Subsidiary designated as Unrestricted will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the covenant described above under the caption "—Restricted Payments" or under one or more clauses of the definition of Permitted Investments, as determined by the Issuers. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.

        Any designation of a Subsidiary of the Issuers as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of a resolution of the Board of Directors of the applicable Issuer giving effect to such designation and an officers' certificate certifying that such designation complied with the preceding conditions and was permitted by the covenant described above under the caption "—Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Issuers as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under the caption "—Incurrence of Indebtedness and Issuance of Preferred Stock," the Issuers will be in default of such covenant. The Board of Directors of the applicable Issuer may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Issuers; provided that such designation will be deemed to be an incurrence of Indebtedness by such Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted if (1) such Indebtedness is permitted under the covenant described under the caption "—Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation.

Payments for Consent

        The Issuers will not, and will not permit any of their respective Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any holder of notes for

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or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the indenture or the notes unless such consideration is offered to be paid and is paid to all holders of the notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Reports

        Whether or not required by the rules and regulations of the SEC, so long as any notes are outstanding, the Issuers will furnish to the holders of notes, within the time periods specified in the SEC's rules and regulations:

(1)

all quarterly and annual reports that would be required to be filed with the SEC on Forms 10-Q and 10-K if Linens 'n Things, Inc. were required to file such reports; and



(2)

all current reports that would be required to be filed with the SEC on Form 8-K if Linens 'n Things, Inc. were required to file such reports.

        The availability of the foregoing materials on the SEC's Electronic Data Gathering and Retrieval service or on the Issuers' website shall be deemed to satisfy the Issuers' delivery obligation.

        All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. Each annual report on Form 10-K will include a report on Linens 'n Things, Inc.'s consolidated financial statements by Linens 'n Things, Inc.'s certified registered public accounting firm. In addition, following the consummation of the exchange offer contemplated by the registration rights agreement, Linens 'n Things, Inc. will file a copy of each of the reports referred to in clauses (1) and (2) above with the SEC for public availability within the time periods specified in the rules and regulations applicable to such reports (unless the SEC will not accept such a filing) and will post the reports on its website within those time periods.

        Notwithstanding the foregoing, the requirements referred to in clauses (1) and (2) above may be satisfied prior to the commencement of the exchange offer or the effectiveness of the shelf registration statement each as contemplated by the registration rights agreement by filing the exchange offer registration statement and/or shelf registration statement, and any amendments thereto, with the SEC, with such information that satisfies Regulation S-K and Regulation S-X under the Securities Act within the time periods specified in the rules and regulations applicable to each of the reports referred to in clauses (1) and (2) above.

        If, at any time after consummation of the exchange offer contemplated by the registration rights agreement, Linens 'n Things, Inc. is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, Linens 'n Things, Inc. will nevertheless continue filing the reports specified in the preceding paragraphs of this covenant with the SEC within the time periods specified above unless the SEC will not accept such a filing. Linens 'n Things, Inc. will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the Issuers' filings for any reason, Linens 'n Things, Inc. will post the reports referred to in the preceding paragraphs on its website within the time periods that would apply if Linens 'n Things, Inc. were required to file those reports with the SEC.

        In addition, the Issuers and the Guarantors agree that, for so long as any notes remain outstanding, if at any time they are not required to file with the SEC the reports required by the preceding paragraphs, they will furnish to the holders of notes 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.

        In the event that (1) the rules and regulations of the SEC permit Linens 'n Things, Inc. and any direct or indirect parent company of Linens 'n Things, Inc. to report at such parent entity's level on a

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consolidated basis and (2) such parent entity of Linens 'n Things, Inc. holds no assets other than cash, Cash Equivalents and the Capital Stock of Linens 'n Things, Inc., the information and reports required by this covenant may be those of such parent company on a consolidated basis.

Events of Default and Remedies

        Each of the following is an "Event of Default":

(1)

default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to, the notes;



(2)

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



(3)

failure by the Issuers or any of their respective Restricted Subsidiaries to comply with the provisions described under the captions "—Repurchase at the Option of Holders—Change of Control," "—Repurchase at the Option of Holders—Asset Sales" or "—Certain Covenants—Merger, Consolidation or Sale of Assets";



(4)

failure by the Issuers or any of their respective Restricted Subsidiaries for 30 days after notice to the Issuers by the Trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding voting as a single class to comply with any of the agreements described under "—Certain Covenants—Restricted Payments" and "—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock";



(5)

failure by the Issuers or any of their respective Restricted Subsidiaries for 60 days after notice to the Issuers by the Trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding voting as a single class to comply with any of the other agreements in the indenture;



(6)

default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuers or any of their respective Restricted Subsidiaries (or the payment of which is guaranteed by the Issuers or any of their respective Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after the date of the indenture, if that default:



(a)

is caused by a failure to pay principal of, or interest or premium, if any, on, such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or



(b)

results in the acceleration of such Indebtedness prior to its express maturity,

and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more;

(7)

failure by the Issuers or any of their respective Restricted Subsidiaries to pay final judgments entered by a court or courts of competent jurisdiction aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;



(8)

except as permitted by the indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect, or any Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee;

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(9)

certain events of bankruptcy or insolvency described in the indenture with respect to the Issuers or any of their respective Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary; or



(10)

the occurrence of any of the following:



(a)

except as permitted by the indenture, any Note Lien Security Document is held to be unenforceable or invalid in any respect by a court of competent jurisdiction (and such holding remains unstayed for a period of 30 days) or otherwise ceases for any reason to be fully enforceable for a period of 30 days after notice thereof is delivered to the Issuers by the Trustee or the holders of at least 25% in aggregate principal amount of notes then outstanding; provided that it will not be an Event of Default under this clause (10)(a) if the sole result of the failure of one or more of any such Note Lien Security Documents to be fully enforceable is that (x) any Note Lien purported to be granted thereunder purports to encumber Collateral that has been released in accordance with the terms of the Indenture and the Note Lien Security Documents or (y) any Note Lien purported to be granted thereunder on Collateral having, individually or in the aggregate, a Fair Market Value not more than $20.0 million, ceases to be an enforceable and perfected Priority Lien (in the case of Note Lien Collateral, subject only to Permitted Liens) or Junior Lien (in the case of Revolving Credit Collateral, subject only to Credit Facility Liens and Permitted Liens), as and to the extent required by the applicable Note Lien Security Documents;



(b)

any Note Lien purported to be granted under any Note Lien Security Document on Collateral, individually or in the aggregate, having a Fair Market Value in excess of $20.0 million ceases to be an enforceable and perfected Priority Lien (in the case of Note Lien Collateral, subject only to Permitted Liens) or Junior Lien (in the case of Revolving Credit Collateral, subject only to Credit Facility Liens and Permitted Liens), as and to the extent required by the applicable Note Lien Security Documents, for a period of 30 days after notice thereof is delivered to the Issuers by the Trustee or the holders of at least 25% in aggregate principal amount of notes then outstanding; or



(c)

any Issuer or Guarantor, or any Person acting on behalf of any of them, denies or disaffirms, in writing, any obligation of any Issuer or Guarantor set forth in or arising under any Note Lien Security Document, except to the extent of any Note Lien purported to be granted thereunder which purports to encumber Collateral that has been released in accordance with the terms of the Indenture and the Note Lien Security Documents.

        In the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Issuers, any Restricted Subsidiary of the Issuers that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Issuers that, taken together, would constitute a Significant Subsidiary, all outstanding notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding notes may declare all the notes to be due and payable immediately.

        Subject to certain limitations, holders of a majority in aggregate principal amount of the then outstanding notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from holders of the notes notice of any continuing Default or Event of Default if it determines that withholding notice is in their interest, except a Default or Event of Default relating to the payment of principal, interest or premium or Additional Interest, if any.

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        Subject to the provisions of the indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the indenture at the request or direction of any holders of notes unless such holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest or Additional Interest, if any, when due, no holder of a note may pursue any remedy with respect to the indenture or the notes unless:

(1)

such holder has previously given the Trustee notice that an Event of Default is continuing;



(2)

holders of at least 25% in aggregate principal amount of the then outstanding notes have requested the Trustee to pursue the remedy;



(3)

such holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense;



(4)

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



(5)

holders of a majority in aggregate principal amount of the then outstanding notes have not given the Trustee a direction inconsistent with such request within such 60-day period.

        The holders of a majority in aggregate principal amount of the then outstanding notes by notice to the Trustee may, on behalf of the holders of all of the notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under the indenture except a continuing Default or Event of Default in the payment of interest or premium or Additional Interest, if any, on, or the principal of, the notes.

        The Issuers are required to deliver to the Trustee annually a statement regarding compliance with the indenture. Upon becoming aware of any Default or Event of Default, the Issuers are required to deliver to the Trustee a statement specifying such Default or Event of Default.

No Personal Liability of Directors, Officers, Employees and Stockholders

        No director, officer, employee, incorporator or stockholder of the Issuers or any Guarantor, as such, will have any liability for any obligations of the Issuers or the Guarantors under the notes, the indenture, the Note Guarantees or the Note Lien Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. The waiver may not be effective to waive liabilities under the federal securities laws.

Legal Defeasance and Covenant Defeasance

        The Issuers may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an officers' certificate, elect to have all of its obligations discharged with respect to the outstanding notes and all obligations of the Guarantors discharged with respect to their Note Guarantees ("Legal Defeasance") except for:

(1)

the rights of holders of outstanding notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on, such notes when such payments are due from the trust referred to below;



(2)

the Issuers' obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payment and money for security payments held in trust;

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(3)

the rights, powers, trusts, duties and immunities of the Trustee, and the Issuers' and the Guarantors' obligations in connection therewith; and



(4)

the Legal Defeasance provisions of the indenture.

        In addition, Linens 'n Things, Inc. may, at its option and at any time, elect to have the obligations of Linens 'n Things, Inc. and the Guarantors released with respect to certain covenants (including its obligation to make Change of Control Offers and Asset Sale Offers) that are described in the indenture ("Covenant Defeasance") and thereafter any omission to comply with those covenants will not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default and Remedies" will no longer constitute an Event of Default with respect to the notes.

        In order to exercise either Legal Defeasance or Covenant Defeasance:

(1)

Linens 'n Things, Inc. must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the notes, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest and premium and Additional Interest, if any, on, the outstanding notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and Linens 'n Things, Inc. must specify whether the notes are being defeased to such stated date for payment or to a particular redemption date;



(2)

in the case of Legal Defeasance, Linens 'n Things, Inc. must deliver to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that (a) Linens 'n Things, Inc. has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the date of the indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;



(3)

in the case of Covenant Defeasance, Linens 'n Things, Inc. must deliver to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that the holders of the outstanding notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;



(4)

no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which Linens 'n Things, Inc. or any Guarantor is a party or by which Linens 'n Things, Inc. or any Guarantor is bound;



(5)

such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than the indenture) to which Linens 'n Things, Inc. or any of their respective Subsidiaries is a party or by which Linens 'n Things, Inc. or any of their respective Subsidiaries is bound;

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(6)

Linens 'n Things, Inc. must deliver to the Trustee an officers' certificate stating that the deposit was not made by Linens 'n Things, Inc. with the intent of preferring the holders of notes over the other creditors of Linens 'n Things, Inc. with the intent of defeating, hindering, delaying or defrauding any creditors of Linens 'n Things, Inc. or others; and



(7)

Linens 'n Things, Inc. must deliver to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Amendment, Supplement and Waiver

        Except as provided below, the indenture or the notes or the Note Guarantees may be amended or supplemented with the consent of the holders of at least a majority in aggregate principal amount of the notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes), and any existing Default or Event of Default or compliance with any provision of the indenture or the notes or the Note Guarantees may be waived with the consent of the holders of a majority in aggregate principal amount of the then outstanding notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes). In addition, any amendment to, or waiver of, the provisions of the indenture or any Note Lien Security Document that has the effect of releasing one or more of the Guarantors from its Guarantee or of releasing all or substantially all of the Collateral from the Liens securing the notes will, unless otherwise permitted in accordance with the indenture, require the consent of the Holders of a majority in principal amount of the notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, notes).

        Without the consent of each holder of notes affected, an amendment, supplement or waiver may not (with respect to any notes held by a non-consenting holder):

(1)

reduce the principal amount of notes whose holders must consent to an amendment, supplement or waiver;



(2)

reduce the principal of or change the fixed maturity of any note or alter the provisions with respect to the redemption of the notes (other than provisions relating to the covenants described above under the caption "—Repurchase at the Option of Holders");



(3)

reduce the rate of or change the time for payment of interest, including default interest, on any note;



(4)

waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on, the notes (except a rescission of acceleration of the notes by the holders of at least a majority in aggregate principal amount of the then outstanding notes and a waiver of the payment default that resulted from such acceleration);



(5)

make any note payable in money other than that stated in the notes;



(6)

make any change in the provisions of the indenture relating to waivers of past Defaults or the rights of holders of notes to receive payments of principal of, or interest or premium or Additional Interest, if any, on, the notes;



(7)

waive a redemption payment with respect to any note (other than a payment required by one of the covenants described above under the caption "—Repurchase at the Option of Holders");



(8)

release any Guarantor from any of its obligations under its Note Guarantee or the indenture, except in accordance with the terms of the indenture; or

136

(9)

make any change in the preceding amendment and waiver provisions.

        Notwithstanding the preceding, without the consent of any holder of notes, the Issuers, the Guarantors and the Trustee may amend or supplement the indenture, the notes or the Note Guarantees:

(1)

to cure any ambiguity, defect or inconsistency;



(2)

to provide for uncertificated notes in addition to or in place of certificated notes;



(3)

to provide for the assumption of the Issuers' or a Guarantor's obligations to holders of notes and Note Guarantees in the case of a merger or consolidation or sale of all or substantially all of the Issuers' or such Guarantor's assets, as applicable;



(4)

to make any change that would provide any additional rights or benefits to the holders of notes or that does not adversely affect the legal rights under the indenture of any such holder;



(5)

to comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act;



(6)

to conform the text of the indenture, the Note Guarantees or the notes to any provision of this Description of Notes to the extent that such provision in this Description of Notes was intended to be a verbatim recitation of a provision of the indenture, the Note Guarantees or the notes;



(7)

to provide for the issuance of additional notes in accordance with the limitations set forth in the indenture as of the date of the indenture; or



(8)

to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the notes or to add a Lien on additional Collateral to secure the notes or the Guarantees.

Satisfaction and Discharge

        The indenture will be discharged and will cease to be of further effect as to all notes issued thereunder, when:

(1)

either:



(a)

all notes that have been authenticated, except lost, stolen or destroyed notes that have been replaced or paid and notes for whose payment money has been deposited in trust and thereafter repaid to the Issuers, have been delivered to the Trustee for cancellation; or



(b)

all notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Issuers or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and non-callable Government Securities, in amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the notes not delivered to the Trustee for cancellation for principal, premium and Additional Interest, if any, and accrued interest to the date of maturity or redemption;



(2)

no Default or Event of Default has occurred and is continuing on the date of the deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a

137

default under, any other instrument to which the Issuers or any Guarantor is a party or by which the Issuers or any Guarantor is bound;

(3)

the Issuers or any Guarantor has paid or caused to be paid all sums payable by it under the indenture; and



(4)

the Issuers have delivered irrevocable instructions to the Trustee under the indenture to apply the deposited money toward the payment of the notes at maturity or on the redemption date, as the case may be.

        In addition, the Issuers must deliver an officers' certificate and an opinion of counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

Concerning the Trustee

        The Trustee shall comply with the provisions of TIA §311. The holders of a majority in aggregate principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The indenture provides that in case an Event of Default occurs and is continuing, the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any holder of notes, unless such holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

Additional Information

        Anyone who receives this prospectus may obtain a copy of the indenture and registration rights agreement without charge by writing to Attention: Chief Financial Officer, Linens 'n Things, Inc., 6 Brighton Road, Clifton, New Jersey 07015.

Registration Rights

        The following is a summary of the material provisions of the registration rights agreement. You should read the registration rights agreement, which is filed as an exhibit to the registration statement to which this prospectus is a part.

        The issuers have agreed with the initial purchasers of the old notes, for the benefit of the holders thereof, that they will use their reasonable efforts, at their cost, to file and cause to become effective a registration statement with respect to an exchange offer to exchange the old notes for an issue of exchange notes with terms identical to the old notes (except that the exchange notes will not bear legends restricting transfer).

        This exchange offer is being made to satisfy our obligations under the registration rights agreement.

        In the event that applicable interpretations of the staff of the Securities and Exchange Commission do not permit the issuers to effect the exchange offer, or under other specified circumstances, the issuers will, at their cost, use their reasonable efforts to cause to become effective a shelf registration statement with respect to resales of the old notes. The issuers will use their reasonable efforts to keep such shelf registration statement effective until the expiration of up to two years after February 14, 2006, or such shorter period that will terminate when all old notes covered by the shelf registration statement have been sold pursuant to the shelf registration statement. The issuers will, in the event of such a shelf registration, provide to each holder of old notes copies of the prospectus, notify each holder of old notes when the shelf registration statement for the old notes has become effective and

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take certain other actions as are required to permit resales of the old notes. A holder of old notes that sells its old notes pursuant to the shelf registration statement (1) generally will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, (2) will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales, (3) may be restricted from selling its Notes during certain blackout periods and (4) will be bound by the provisions of the registration rights agreement that are applicable to such a holder (including indemnification obligations).

Certain Definitions

        Set forth below are certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all defined terms used therein, as well as any other capitalized terms used herein for which no definition is provided.

"Access Period" means (a) with respect to all Primary Real Estate Assets, the period, after the commencement of an Enforcement Period, which begins, with respect to all Primary Real Estate Assets, on the day that a Revolving Credit Collateral Agent provides the Note Lien Collateral Agent with the notice of its election to request access with respect to all Primary Real Estate Assets pursuant to the Intercreditor Agreement and ends on the earliest of (i) the 180th day after such Revolving Credit Collateral Agent obtains the ability to use, take physical possession of, remove or otherwise control the use or access to the Revolving Credit Collateral located on the Primary Real Estate Assets following Enforcement plus such number of days, if any, after such Revolving Credit Collateral Agent obtains access to such Revolving Credit Collateral that it is stayed or otherwise prohibited by law or court order from exercising remedies with respect to Revolving Credit Collateral located on the Primary Real Estate Assets or (ii) the date on which all or substantially all of the Revolving Credit Collateral located on the Primary Real Estate Assets is sold, collected or liquidated or (iii) the date on which the Discharge of Revolving Credit Obligations occurs and (b) with respect to each parcel of Other Real Estate, the period, after the commencement of an Enforcement Period, which begins, with respect to such parcel of Other Real Estate, on the day that a Revolving Credit Collateral Agent provides the Note Lien Collateral Agent with the notice of its election to request access with respect to such parcel of Other Real Estate pursuant to the Intercreditor Agreement and ends on the earliest of (i) the 180th day after such Revolving Credit Collateral Agent obtains the ability to use, take physical possession of, remove or otherwise control the use or access to the Revolving Credit Collateral located on such to the Revolving Credit Collateral located on such Other Real Estate following Enforcement plus such number of days, if any, after such Revolving Credit Collateral Agent obtains access to such Revolving Credit Collateral that it is stayed or otherwise prohibited by law or court order from exercising remedies with respect to Revolving Credit Collateral located on such Other Real Estate or (ii) the date on which all or substantially all of the Revolving Credit Collateral located on such Other Real Estate is sold, collected or liquidated or (iii) the date on which the Discharge of Revolving Credit Obligations occurs.

"Accounts" means all now present and future "accounts" and "payment intangibles" (in each case, as defined in Article 9 of the UCC).

"Acquired Debt" means Indebtedness (i) of a Person or any of their respective Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, in each case whether or not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary or such acquisition. Acquired Debt shall be deemed to have been incurred, with respect to clause (i) of the preceding sentence, on the date such Person becomes a Restricted Subsidiary and, with respect to clause (ii) of the preceding sentence, on the date of consummation of such acquisition of assets.

139

"Acquisition Agreement" means the Agreement and Plan of Merger among Linens Merger Sub Co., the Parent and Linens 'n Things, Inc., dated as of November 8, 2005, as the same may be amended, modified or supplemented from time to time.

"Additional Interest" means all Additional Interest then owing pursuant to the registration rights agreement.

"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," as used with respect to any Person, means 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. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings.

"Applicable Eurodollar Rate" means, for each quarterly period during which any note is outstanding subsequent to the initial quarterly period, 562.5 basis points over the rate per annum determined by Linens 'n Things, Inc. (notice of such rate to be sent to the Trustee by Linens 'n Things, Inc. on the date of determination thereof) equal to the arithmetic mean (rounded upward, if necessary, to the nearest 1/100th of 1%) of the offered rates for deposits in U.S. dollars for a period of three months that appears on the Telerate British Bankers Assoc. Interest Settlement Rates Page (as defined below) at approximately 11:00 a.m., London, England time, on the second full Business Day preceding the first day of such quarterly period; provided, however, that (i) if no comparable term for a quarterly period is available, the Applicable Eurodollar Rate for the relevant quarterly period shall be determined using the weighted average of the offered rates for the two terms most nearly corresponding to such quarterly period and (ii) if there shall at any time no longer exist a Telerate British Bankers Assoc. Interest Settlement Rates Page, "Applicable Eurodollar Rate" shall mean, with respect to each day during the relevant quarterly period, the rate per annum equal to the rate at which Bear, Stearns & Co. Inc. or one of its affiliate banks is offered deposits in U.S. dollars at approximately 11:00 a.m., London, England time, two Business Days prior to the first day of such quarterly period in the London interbank market for delivery on the first day of such quarterly period for a period of three months, in amounts equal to $1.0 million. "Telerate British Bankers Assoc. Interest Settlement Rates Page" shall mean the display designated as Page 3750 (or other appropriate page if dollars do not appear on such page) on the Telerate System Incorporated Service (or such other page as may replace such page on such service for the purpose of displaying the rates at which dollar deposits are offered by leading banks in the London interbank deposit market). Notwithstanding the foregoing, the Applicable Eurodollar Rate for the initial quarterly period shall be 10.34500%.

"Asset Sale" means:

(1)

the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of Linens 'n Things, Inc. and its respective Restricted Subsidiaries taken as a whole will be governed by the provisions of the indenture described above under the caption "—Repurchase at the Option of Holders—Change of Control" and/or the provisions described above under the caption "—Certain Covenants—Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant; and



(2)

the issuance or sale of Equity Interests in any of the Issuers' Restricted Subsidiaries.

        Notwithstanding the preceding, none of the following items will 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;

140

(2)

a transfer of assets between or among the Issuers and their respective Restricted Subsidiaries;



(3)

an issuance of Equity Interests by a Restricted Subsidiary of Linens 'n Things, Inc. to Linens 'n Things, Inc. or to a Restricted Subsidiary of Linens 'n Things, Inc.;



(4)

the sale or lease of products, services or accounts receivable in the ordinary course of business and any sale or other disposition of damaged, worn-out or obsolete (or otherwise unsuitable for use in connection with the business of Linens 'n Things, Inc. and their respective Restricted Subsidiaries) assets in the ordinary course of business;



(5)

the sale or other disposition of cash or Cash Equivalents;



(6)

a Restricted Payment that does not violate the covenant described above under the caption "—Certain Covenants—Restricted Payments" or is a Permitted Investment;



(7)

dispositions of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements;



(8)

the granting of a Lien permitted by the indenture;



(9)

the unwinding of any Hedging Obligations;



(10)

licenses, leases or subleases of property in the ordinary course of business which do not materially interfere with the business of Linens 'n Things, Inc. and their respective Restricted Subsidiaries;



(11)

the sale or other disposition of Equity Interests of or any Investment in an Unrestricted Subsidiary;



(12)

(i) a sale and leaseback transaction relating to a retail store acquired, constructed or developed by any of the Issuers or their respective Restricted Subsidiaries after the date of the indenture entered into within 18 months of the date of consummation of the acquisition or completion of the construction or development, as the case may be, or (ii) a sale and leaseback transaction relating to the Company's corporate headquarters located at 6 Brighton Road, Clifton, New Jersey 07015; and



(13)

the sale of Permitted Investments (other than sales of Capital Stock of any of the Issuers' Restricted Subsidiaries) made by the Issuers or any Restricted Subsidiary after the date of the indenture, if such Permitted Investments were (a) received in exchange for, or purchased out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of Linens 'n Things, Inc.) of, Capital Stock of Linens 'n Things, Inc. (other than Disqualified Stock) or (b) received in the form of, or were purchased from the proceeds of, a substantially concurrent contribution of common equity capital to Linens 'n Things, Inc.

"Asset Sale Offer" has the meaning assigned to that term in the indenture governing the notes.

"Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy," as now and hereafter in effect, or any successor statute.

"beneficial owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms "beneficially owns" and "beneficially owned" have a corresponding meaning.

141

"Board of Directors" means:

(1)

with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board of directors;



(2)

with respect to a partnership, the board of directors of the general partner of the partnership;



(3)

with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and



(4)

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

"Borrowing Base" means, as of any date of determination, an amount equal to:

(1)

85% of the face amount of all Receivables owned by the Issuers and their respective Restricted Subsidiaries as reported in accordance with GAAP on the Issuers' consolidated balance sheet (or notes thereto) as of the end of the most recent fiscal quarter preceding such determination date for which financial statements are available, excluding Receivables that were more than 90 days past due as of such balance sheet date; plus

(2)

75% of the book value of all Inventory owned by the Issuers and their respective Restricted Subsidiaries as reported in accordance with GAAP on the Issuers' consolidated balance sheet (or notes thereto) as of the end of the most recent fiscal quarter preceding such determination date for which financial statements are available;

it being understood that the Receivables and Inventories of an acquired business may be included if such acquisition has been completed on or prior to the date of determination.

"Business Day" means any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York or at a place of payment are authorized by law, regulation or executive order to remain closed.

"Canadian" means as to any Person, a Person that is created or organized under the laws of Canada or a Province or territory of Canada.

"Canadian Collateral" means the assets of Linens 'n Things Canada Corp. and Canadian Subsidiaries of the Parent covered by one or more Security Documents (as defined in the Revolving Credit Agreement) and any other assets of Linens 'n Things Canada Corp. or Canadian Subsidiaries of Linens Holding Co., real or personal, tangible or intangible, now existing or hereafter acquired, that may at any time be or become subject to a Lien in favor of the Canadian Revolving Credit Collateral Agent (as defined in the Intercreditor Agreement) and all or some of the other Revolving Credit Claimholders.

"Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that 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:

(1)

in the case of a corporation, corporate stock;



(2)

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



(3)

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

142

(4)

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

"Capital Stock Collateral" means all of the following property of the Company and each Grantor now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest:

(1)

all of the Capital Stock in the Company and its Domestic Subsidiaries (including, without limitation, Bloomington MN, L.T., Inc., LNT, Inc., LNT Services, Inc., LNT West, Inc., Vendor Finance, LLC, LNT Leasing II, LLC, LNT Leasing III, LLC, LNT Virginia LLC, LNT Merchandising Company LLC and Citadel LNT, LLC);



(2)

65% of the Capital Stock of the Foreign Subsidiaries owned directly by the Parent or its Domestic Subsidiaries;



(3)

Records, "supporting obligations" (as defined in Article 9 of the UCC) and related Letters of Credit, commercial tort claims or other claims and causes of action, in each case, to the extent related primarily to the foregoing; and



(4)

substitutions, replacements, accessions, products and proceeds (including, without limitation, insurance proceeds, licenses, royalties, income, payments, claims, damages and proceeds of suit) of any or all of the foregoing.

"Cash Equivalents" means:

(1)

United States dollars;



(2)

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 six months from the date of acquisition;



(3)

certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to any Credit Facility or any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better;



(4)

repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;



(5)

commercial paper having one of the two highest ratings obtainable from Moody's or S&P and, in each case, maturing within one year after the date of acquisition; and



(6)

investment funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.

"Cash Management Obligations" means all monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise of the Issuers or any of their respective Subsidiaries arising out of any cash management, clearing house, wire transfer, depository or investment services provided by any lender under any Credit Facility or an Affiliate of such lender.

"Cash Proceeds" means all Proceeds of any Collateral received by any Grantor consisting of cash and Cash Equivalents.

143

"Casualty Event" means any taking under power of eminent domain or similar proceeding and any insured loss (excluding business interruption), in each case relating to property or other assets that constitute Note Lien Collateral.

"Change of Control" means the occurrence of any of the following:

(1)

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 Linens 'n Things, Inc. or the Parent and their respective Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d) of the Exchange Act) other than a Sponsor or a Related Party of a Sponsor; provided that the transfer of 100% of the Voting Stock of Linens 'n Things, Inc. or the Parent to a Person that has an ownership structure identical to that of Linens 'n Things, Inc. or the Parent, as the case may be, prior to such transfer, such that Linens 'n Things, Inc. or the Parent, as the case may be, becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control for purposes of the indenture;



(2)

the adoption of a plan relating to the liquidation or dissolution of Linens 'n Things, Inc.;



(3)

after an initial public offering of Linens 'n Things, Inc. or the Parent, the first day on which a majority of the members of the Board of Directors of Linens 'n Things, Inc. or the Parent are not Continuing Directors;



(4)

prior to an initial public offering of Common Stock of Linens 'n Things, Inc. or the Parent, (A) the Sponsors or their Related Persons cease to be the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of Linens 'n Things, Inc. or the Parent, including, without limitation, as a result of the issuance of securities of Linens 'n Things, Inc. or the Parent, any merger, consolidation, liquidation or dissolution of Linens 'n Things, Inc. or the Parent, any direct or indirect transfer of securities by any Sponsor or Related Party or otherwise and (B) the Sponsors or their Related Parties do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of Linens 'n Things, Inc. or the Parent; or



(5)

on or subsequent to an initial public offering of Common Stock of Linens 'n Things, Inc. or the Parent, any event occurs the result of which is that (A) any "person" or "group" of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Sponsors or their Related Parties, is or becomes the beneficial owner, directly or indirectly, of more than 35% of the Voting Stock of Linens 'n Things, Inc. or the Parent and (B) the Sponsors and their Related Parties beneficially own, directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of Linens 'n Things, Inc. or the Parent, as the case may be, (or its successor by merger, consolidation or purchase of all or substantially all of its assets) than such other person or group and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of Linens 'n Things, Inc. or the Parent or such successor.

"Change of Control Offer" has the meaning assigned to that term in the indenture governing the notes.

"Chattel Paper" means all "chattel paper" as defined in Article 9 of the UCC, including, without limitation, "electronic chattel paper" or "tangible chattel paper," as each term is defined in Article 9 of the UCC.

"Collateral" means all of the assets and property of any Grantor, whether real, personal or mixed, constituting Note Lien Collateral or Revolving Credit Collateral.

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"Collateral Agent" means:

(1)

with respect to holders of Note Lien Obligations, the Note Lien Collateral Agent; and



(2)

with respect to holders of Revolving Credit Obligations, the Revolving Credit Collateral Agent.

"Collateral Class," as used with respect to Collateral, means the Note Lien Collateral or the Revolving Credit Collateral, as applicable.

"Collateral Records" means all books, records, ledger cards, files, correspondence, customer lists, blueprints, technical specifications, manuals, computer software, computer printouts, tapes, disks and related data processing software and similar items that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon.

"Collateral Sale Offer" has the meaning assigned to that term in the indenture governing the notes.

"Collateral Support" means all property (real or personal) assigned, hypothecated or otherwise securing any Collateral and shall include any security agreement or other agreement granting a lien or security interest in such real or personal property.

"Commercial Tort Claims" means all "commercial tort claims" as defined in Article 9 of the UCC.

"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:

(1)

provision for taxes based on income or profits of such Person and their respective Restricted Subsidiaries for such period and any applicable franchise or property taxes (calculated in each case based on income) to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

(2)

the Fixed Charges of such Person and their respective Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income; plus

(3)

the amount of any restructuring charges or reserves (which for the avoidance of doubt, shall include without limitation retention, escheat, severance, relocation, excess pension charges, contract termination costs, including future lease commitments) deducted in such period in computing Consolidated Net Income (excluding any such items 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 that was paid in a prior period); plus

(4)

cash received pursuant to tenant allowances from landlords; plus

(5)

for any quarter in the period beginning October 3, 2004 and ending December 31, 2005, all adjustments to net income (or loss) used in connection with the calculation of "Adjusted EBITDA" for the 52 weeks ended October 1, 2005 (as set forth in this prospectus under Note (3) to the section entitled "Prospectus Summary—Summary Historical and Pro Forma Consolidated Financial and Operating Data") to the extent such adjustments are not fully reflected in the period being measured and continue to be applicable to such Person; plus

(6)

depreciation, amortization (including amortization of intangibles and any amortization of straight line rent expense in excess of cash rent expense but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (including charges related to the write-off of goodwill or intangibles as a result of impairment, in each case as required by SFAS No. 142 or SFAS No. 144 but excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period

145

or amortization of a prepaid cash expense that was paid in a prior period) of such Person and their respective Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus

(7)

annual management fees and fees for financial advisory and investment banking services rendered to Linens 'n Things, Inc. and their respective Restricted Subsidiaries in connection with acquisitions, securities offerings and other financings and similar significant corporate transactions in customary and reasonable amounts for such transactions paid to the Sponsors in an aggregate amount not to exceed, during any consecutive 12-month period, $2.0 million to the extent such amount was deducted in computing such Consolidated Net Income; minus

(8)

non-cash items increasing such Consolidated Net Income (including the amortization of tenant allowances received) for such period, other than the accrual of revenue in the ordinary course of business; minus

(9)

the amount of cash rent expense in excess of amortization of straight line rent expense,

in each case, on a consolidated basis and determined in accordance with GAAP.

        Notwithstanding the preceding sentence, clauses (1) and (3) through (6) relating to amounts of a Restricted Subsidiary of a Person will be added to Consolidated Net Income to compute Consolidated Cash Flow of such Person only to the extent (and in the same proportion) that the net income (loss) of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person and, to the extent the amounts set forth in clauses (1) and (3) through (6) are in excess of those necessary to offset a net loss of a Restricted Subsidiary that is not a Guarantor or if such Restricted Subsidiary has net income for such period included in Consolidated Net Income, only if a corresponding amount would be permitted at the date of determination to be dividended to the Issuers by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders.

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

(1)

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 will be included only to the extent of the amount of dividends or similar distributions paid in cash (or converted into cash) to the specified Person or a Restricted Subsidiary of the Person;



(2)

the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar 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; provided that if any such dividend or distribution is actually received it will be included for the purposes of this definition;



(3)

any increase in amortization and depreciation or any one-time non-cash charges resulting from purchase accounting in connection with any acquisition that is consummated on or after the date of the Indenture (including the Transactions) will be excluded;



(4)

accruals and reserves that are established within 12 months of the closing of the Transactions and that are required to be established in accordance with GAAP shall be excluded;

146

(5)

the cumulative effect of a change in accounting principles will be excluded;



(6)

any net after-tax gains or losses (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of indebtedness will be excluded;



(7)

non-cash gains, losses, income and expenses resulting from fair value accounting required by Statement of Financial Accounting Standards No. 133 and related interpretations will be excluded; and



(8)

any fees, expenses and charges relating to the Transactions up to an aggregate of $81.0 million will be excluded (whenever paid).

"Consolidated Net Tangible Assets" of any Person means, as of any date of determination, the sum of the assets of such Person after eliminating intercompany items, determined on a consolidated basis in accordance with GAAP, including appropriate deductions for any minority interest in tangible assets of such Person's Subsidiaries, less (without duplication) (i) the net book value of all of its licenses, patents, patent applications, copyrights, trademarks, trade names, goodwill, non-compete agreements or organizational expenses and other like intangibles shown on the balance sheet of Linens 'n Things, Inc. and their respective Restricted Subsidiaries as of the most recent date for which such a balance sheet is available, (ii) unamortized Indebtedness discount and expenses, (iii) all reserves for depreciation, obsolescence, depletion and amortization of its properties and all other proper reserves related to assets which in accordance with GAAP have been provided by such Person and (iv) all current liabilities.

"Continuing Directors" means, as of any date of determination, any member of the Board of Directors of Linens 'n Things, Inc. who:

(1)

was a member of such Board of Directors on the date of the indenture; or



(2)

was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election.

"Copyright Licenses" means any and all present and future agreements (whether or not in writing) providing for the granting of any right in, to or under Copyrights (whether the applicable Grantor is licensee or licensor thereunder).

"Copyrights" means, collectively, with respect to each Grantor, all copyrights (whether statutory or common law, whether established or registered in the United States or any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished) and all copyright registrations and applications made by such Grantor, in each case, whether now owned or hereafter created or acquired by or assigned to such Grantor, and all goodwill associated therewith, now existing or hereafter adopted or acquired, together with any and all (i) rights and privileges arising under applicable law with respect to such Grantor's use of such copyrights, (ii) reissues, renewals, continuations and extensions thereof and amendments thereto, (iii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto, including damages and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present or future infringements thereof.

"Credit Card Processing Accounts" means any accounts which are not Deposit Accounts or Securities Accounts and which are maintained by or with a person which conducts the processing of credit card payments for any of the Grantors, including all amounts reflecting any reserves or other amounts owing to any of the Grantors and which may be maintained by such processors pursuant to the respective card processing agreements.

147

"Credit Facilities" means, one or more debt facilities (including, without limitation, the Revolving Credit 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, 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 to institutional investors) in whole or in part from time to time.

"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.

"Deposit Accounts" means all "deposit accounts" as defined in Article 9 of the UCC of any applicable jurisdiction and, in any event including any demand, time, savings, passbook or like account maintained with a depositary institution.

"Discharge of Note Lien Obligations" means, except to the extent otherwise expressly provided in the Intercreditor Agreement:

(1)

termination or expiration of all commitments to extend credit that would constitute Note Lien Debt;



(2)

payment in full in cash of the principal of and interest (including interest accruing on or after the commencement of any insolvency or liquidation proceeding, whether or not such interest would be allowed in such insolvency or liquidation proceeding), on all Indebtedness outstanding under the Note Lien Documents and constituting Note Lien Debt;



(3)

discharge or cash collateralization (at the lower of (A) 105% of the aggregate undrawn amount and (B) the percentage of the aggregate undrawn amount required for release of Liens under the terms of the applicable Note Lien Document) of all outstanding letters of credit constituting Note Lien Debt; and



(4)

payment in full in cash of all other Note Lien Obligations that are outstanding and unpaid at the time the Note Lien Debt is paid in full in cash (other than any obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities in respect of which no claim or demand for payment has been made at such time).

        If a Discharge of Note Lien Obligations occurs prior to the termination of the Intercreditor Agreement in accordance with the Intercreditor Agreement, to the extent that additional Note Lien Obligations are incurred or Note Lien Obligations are reinstated in accordance with the Intercreditor Agreement, the Discharge of Note Lien Obligations shall (effective upon the incurrence of such additional Note Lien Obligations or reinstatement of such Note Lien Obligations, as applicable) be deemed to no longer be effective.

"Discharge of Revolving Credit Obligations" means, except to the extent otherwise expressly provided in the Intercreditor Agreement:

(1)

termination or expiration of all commitments, if any, to extend credit that would constitute Revolving Credit Obligations;



(2)

payment in full in cash of the principal of and interest (including interest accruing on or after the commencement of any Insolvency or Liquidation Proceeding, whether or not such interest would be allowed in such Insolvency or Liquidation Proceeding), on all Indebtedness outstanding under the Revolving Credit Loan Documents and constituting Revolving Credit Obligations;



(3)

termination or cash collateralization (in an amount and manner reasonably satisfactory to the Revolving Credit Collateral Agent, but in no event greater than 105% of the aggregate

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undrawn face amount) of all letters of credit issued under the Revolving Credit Loan Documents and constituting Revolving Credit Obligations; and

(4)

payment in full in cash of all other Revolving Credit Obligations that are outstanding and unpaid at the time the Indebtedness constituting such Revolving Credit Obligations is paid in full in cash (other than any obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities in respect of which no claim or demand for payment has been made at such time).

        If a Discharge of Revolving Credit Obligations occurs prior to the termination of the Intercreditor Agreement in accordance with the Intercreditor Agreement, to the extent that additional Revolving Credit Obligations are incurred or Revolving Credit Obligations are reinstated in accordance with the Intercreditor Agreement, the Discharge of Revolving Credit Obligations shall (effective upon the incurrence of such additional Revolving Credit Obligations or reinstatement of such Revolving Credit Obligations, as applicable) be deemed to no longer be effective.

"Discharge of Priority Lien Obligations" means:

(1)

with respect to Priority Liens on Note Lien Collateral, the Discharge of Note Lien Obligations; and



(2)

with respect to Priority Liens on Revolving Credit Collateral, the Discharge of Revolving Credit Obligations.

"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 91 days after the date on which the notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require Linens 'n Things, Inc. to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that Linens 'n Things, Inc. may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such provisions are not more favorable to the holders of such Capital Stock than the provisions in the indenture described above under the caption "—Repurchase at the Option of Holders." The amount of Disqualified Stock deemed to be outstanding at any time for purposes of the indenture will be the maximum amount that Linens 'n Things, Inc. and their respective Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends.

"Documents" means all "documents" as defined in Article 9 of the UCC.

"Domestic Subsidiary" means any Restricted Subsidiary of Linens 'n Things, Inc. that was formed under the laws of the United States or any state of the United States or the District of Columbia.

"Enforcement" means, collectively or individually for any one of the Revolving Credit Collateral Agent or the Note Lien Collateral Agent when a Revolving Credit Default or a Note Lien Default, as the case may be, has occurred and is continuing, any action taken by such Person to repossess, or exercise any remedies with respect to, any material amount of Collateral (other than Canadian Collateral) or commence the judicial enforcement of any of the rights and remedies under the Revolving Credit Loan Documents or the Note Lien Documents or under any applicable law with respect to the Collateral, but in all cases excluding (i) the demand of the repayment of all the principal amount of any Obligations, (ii) the imposition of a default rate or late fee and (iii) the collection and application of, or the delivery of any activation notice with respect to, Accounts or other monies

149

deposited from time to time in Deposit Accounts, Credit Card Processing Accounts or Securities Accounts against the Revolving Credit Obligations pursuant to the Revolving Credit Loan Documents; provided, however, the foregoing exclusion set forth in clause (iii) shall immediately cease to apply upon the earlier of (x) the Revolving Credit Collateral Agent' delivery of written notice to the Borrowers that such exclusion no longer applies, (y) the lapse of ten (10) consecutive Business Days after a Revolving Credit Default in which no "Revolving Loans" or "Special Agent Advances" are made and no "Letters of Credit" are issued (in each case, as defined in the Revolving Credit Agreement), and (z) the termination of the Revolving Commitments pursuant to Section 8.1 (or any other applicable provision) of the Revolving Credit Agreement.

"Enforcement Notice" means a written notice delivered, at a time when a Revolving Credit Default or Note Lien Default has occurred and is continuing, by either the Revolving Credit Collateral Agent or the Note Lien Collateral Agent to the other such Person announcing that an Enforcement Period has commenced, specifying the relevant event of default, stating the current balance of the Revolving Credit Obligations or the current balances owing with respect to Note Lien Obligations, as the case may be, and requesting the current balance owing of the Revolving Credit Obligations or Note Lien Obligations, as the case may be.

"Enforcement Period" means the period of time following the receipt by either the Revolving Credit Collateral Agent or the Note Lien Collateral Agent of an Enforcement Notice from the other until either (i) in the case of an Enforcement Period commenced by the Note Lien Collateral Agent, the Discharge of Note Lien Obligations, or (ii) in the case of an Enforcement Period commenced by the Revolving Credit Collateral Agent, the Discharge of Revolving Credit Obligations, or (iii) the Revolving Credit Collateral Agent or the Note Lien Collateral Agent (as applicable) agree in writing to terminate the Enforcement Period.

"Equipment" means: (i) all "equipment" (as defined in Article 9 of the UCC), (ii) all trade-fixtures, sales displays, lighting, shelving, signage and "fixtures" (as defined in Article 9 of the UCC) and (iii) all accessions or additions thereto, all parts thereof, whether or not at any time of determination incorporated or installed therein or attached thereto, and all replacements therefore, wherever located and whether now or hereafter existing.

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

"Equity Offering" means any public or private sale of Capital Stock (other than Disqualified Stock) of the Company or any of its direct or indirect parent companies, other than: (a) public offerings with respect to the Company's or any direct or indirect parent company's common stock registered on Form S-4 or Form S-8 or (b) an issuance to any Subsidiary of the Company.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Excluded Assets" means any of the following property to the extent that and for as long as such grant of a security interest therein:

(1)

is prohibited by any Requirement of Law; provided that (a) such property shall cease to be an Excluded Asset immediately and automatically (without need for any further grant or act) at such time as the condition described in this clause (1) ceases to exist and (b) to the extent severable, all such rights that are not subject to the applicable condition described in clause (1) in respect of such property shall not constitute an Excluded Asset;



(2)

requires a filing with or consent from any Governmental Authority pursuant to any Requirement of Law that has not been made or obtained;



(3)

constitutes a breach or default under or results in the termination of, or requires any consent not obtained under, any lease, license or agreement, except to the extent that such

150

Requirement of Law or provisions of any such lease, license or agreement is ineffective under applicable law or would be ineffective under Sections 9-406, 9-407, 9-408 or 9-409 of the New York UCC to prevent the attachment of the security interest granted hereunder; provided that such lease, license, contract, property right or agreement will cease to be an Excluded Asset and will become subject to the Lien granted under the security documents, immediately and automatically, at such time as the grant of a Lien under the security documents no longer constitutes or results in a breach, termination or default under any lease, license, contract, property right or agreement;

(4)

is in any other property or assets (other than Intellectual Property) in which a Lien cannot be perfected either automatically or by the filing of a financing statement under the UCC of the relevant jurisdiction, so long as the aggregate fair market value of all such property and assets does not at any one time exceed $5.0 million; and



(5)

any "intent-to-use" applications for trademark or service mark registration filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051(b), unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has been properly filed and finally accepted by the Patent and Trademark Office, to the extent that any assignment of an "intent-to-use" application prior to such filing would violate the Lanham Act, whereupon such application shall be automatically subject to the security interest granted to secure the obligations under the notes, and will be deemed to be included in the collateral.

"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 of the relevant Issuer or Restricted Subsidiary, which determination shall be conclusive (unless otherwise provided in the indenture).

"Fixed Charge Coverage Ratio" means with respect to any specified 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 their respective 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 subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or 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 will 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, and the use of the 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:

(1)

acquisitions that have been made by the specified Person or any of their respective Restricted Subsidiaries, including through mergers or consolidations, or any Person or any of their respective Restricted Subsidiaries acquired by the specified Person or any of their respective 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 will be given pro forma effect (in accordance with Regulation S-X under the Securities Act) as if they had occurred on the first day of the four-quarter reference period;



(2)

the 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 the Calculation Date, will be excluded;

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(3)

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, will 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 their respective Restricted Subsidiaries following the Calculation Date;



(4)

any Person that is a Restricted Subsidiary on the Calculation Date (or would become a Restricted Subsidiary on such Calculation Date in connection with the transaction requiring determination of such Consolidated Cash Flow) will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period;



(5)

any Person that is not a Restricted Subsidiary on the Calculation Date (or would cease to be a Restricted Subsidiary on such Calculation Date in connection with the transaction requiring determination of such Consolidated Cash Flow) will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period; and



(6)

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 if such Hedging Obligation has a remaining term as at the Calculation Date in excess of 12 months).

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

(1)

the consolidated interest expense of such Person and their respective Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, original issue discount, non-cash interest payments, 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 of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates, but excluding amortization of debt issuance costs; plus

(2)

the consolidated interest expense of such Person and their respective Restricted Subsidiaries that was capitalized during such period; plus

(3)

any interest on Indebtedness of another Person that is guaranteed by such Person or one of their respective Restricted Subsidiaries or secured by a Lien on assets of such Person or one of their respective Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus

(4)

the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of their respective Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of Linens 'n Things, Inc. (other than Disqualified Stock) or to any of the Issuers of their respective Restricted Subsidiaries, 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, determined on a consolidated basis in accordance with GAAP.

"Foreign Subsidiary" means any Restricted Subsidiary of Linens 'n Things, Inc. that is not a Domestic Subsidiary.

"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 date of the indenture.

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"Grantors" means Parent, the Issuers, Linens 'n Things Canada Corp, each Guarantor and each other Person that has or may from time to time execute and deliver a Security Document (as defined in the Revolving Credit Agreement) or a Note Lien Security Document or as a Person granting a Lien or other interest in its property to secure any of the Obligations.

"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).

"Guarantors" means each of:

(1)

Linens Holding Co., Bloomington MN, L.T., Inc., LNT, Inc., LNT Services, Inc., LNT West, Inc., Vendor Finance, LLC, LNT Leasing II, LLC, LNT Leasing III, LLC, LNT Virginia LLC, LNT Merchandising Company LLC and Citadel LNT, LLC; and



(2)

any other Subsidiary of Linens 'n Things, Inc. that executes a Note Guarantee in accordance with the provisions of the indenture,

and their respective successors and assigns, in each case, until the Note Guarantee of such Person has been released in accordance with the provisions of the indenture.

"Hedge Agreements" means any:

(1)

interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements and other agreements or arrangements designed for the purpose of fixing, hedging or swapping interest rate risk;



(2)

other agreements or arrangements designed to manage interest rates or interest rate risk; and



(3)

other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

"Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under any Hedge Agreement.

"Immaterial Subsidiary" means, as of any date, any Restricted Subsidiary whose total assets, as of that date, are less than $100,000 and whose total revenues for the most recent 12-month period do not exceed $100,000; provided that a Restricted Subsidiary will not be considered to be an Immaterial Subsidiary if it, directly or indirectly, guarantees or otherwise provides direct credit support for any Indebtedness of the Issuers.

"Indebtedness" means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent:

(1)

in respect of borrowed money;



(2)

evidenced by bonds, notes, debentures or similar instruments;



(3)

in respect of banker's acceptances or letters of credit (other than obligations with respect to letters of credit securing obligations (other than obligations described in (1) or (2) above or (4) below) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon);



(4)

representing Capital Lease Obligations;

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(5)

representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed; or



(6)

representing 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) but only to the extent of the lesser of (x) the Fair Market Value of the assets subject to such Lien, or (y) the amount of the Indebtedness secured by such Lien and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person.

"Instruments" means all "instruments" as defined in Article 9 of the UCC.

"Intellectual Property" means, collectively, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses.

"Intercreditor Agreement" means the Intercreditor Agreement, dated as of the date of the indenture, among the Issuers, the Guarantors, the Revolving Credit Collateral Agent, and the Note Lien Collateral Agent, as amended, supplemented or otherwise modified from time to time.

"Intercompany Notes of Subsidiaries" means all indebtedness owing by any of the Company's Subsidiaries to the Company or any of the Company's other Subsidiaries, whether or not represented by a note or an agreement.

"Inventory" mean all present and future "inventory" (as defined in Article 9 of the UCC) and, in any event, includes, without limitation, all goods held for sale or lease or to be furnished under contracts of service or so leased or furnished, all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in any Grantor's business; the purchaser's interest in any goods being manufactured pursuant to any contract or other arrangement with a supplier, all goods in transit from suppliers (whether or not evidenced by a document of title) and all goods in which any Grantor has an interest in mass or a joint or other interest or right of any kind; and all goods which are returned to or repossessed by any Grantor, all computer programs embedded in any goods and all accessions thereto and products thereof (in each case, regardless of whether characterized as inventory under the UCC).

"Investment Property" means the collective reference to all "investment property" as such term is defined in Section 9-102(a)(49) of the New York UCC (other than Equity Interests).

"Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the form of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel 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 Linens 'n Things, Inc. or any Restricted Subsidiary of Linens 'n Things, Inc. sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of Linens 'n Things, Inc. such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of Linens 'n Things, Inc., Linens 'n Things, Inc. 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 Issuers' Investments in such Person that were not sold or disposed of in an amount determined as provided in the penultimate paragraph of the covenant described above under the caption "—Certain Covenants—Restricted Payments." The acquisition by Linens 'n Things, Inc. or any Restricted Subsidiary of Linens 'n Things, Inc. of a Person

154

that holds an Investment in a third Person will be deemed to be an Investment by Linens 'n Things, Inc. or such Restricted Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investments held by the acquired Person in such third Person in an amount determined as provided in the penultimate paragraph of the covenant described above under the caption "—Certain Covenants—Restricted Payments." Except as otherwise provided in the indenture, the amount of an Investment will be determined at the time the Investment is made and without giving effect to subsequent changes in value.

"Junior Lien" means:

(1)

with respect to Note Lien Collateral, the Revolving Credit Liens; and



(2)

with respect to Revolving Credit Collateral, the Note Liens.

"Junior Lien Collateral Agent" means, with respect to any Collateral and the Junior Liens thereon, the Revolving Credit Collateral Agent or the Note Lien Collateral Agent, as applicable, on behalf of the holders of the Junior Liens thereon.

"Junior Lien Debt" means:

(1)

with respect to Note Lien Collateral, Revolving Credit Obligations; and



(2)

with respect to Revolving Credit Collateral, Note Lien Debt.

"Junior Lien Documents" means:

(1)

with respect to Note Lien Collateral, the Revolving Credit Loan Documents; and



(2)

with respect to Revolving Credit Collateral, the Note Lien Documents.

"Junior Lien Obligations" means:

(1)

with respect to Note Lien Collateral, the Revolving Credit Obligations; and



(2)

with respect to Revolving Credit Collateral, the Note Lien Obligations.

"Junior Lien Representative" means:

(1)

with respect to Note Lien Collateral, each Revolving Credit Lien Representative; and



(2)

with respect to Revolving Credit Collateral, each Note Lien Representative.

"Letter of Credit Right" means "letter-of-credit right" as defined in Article 9 of the UCC.

"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

"Lien Sharing and Priority Confirmation" means the written agreement of the holders of any Series of Note Lien Debt, as set forth in the indentures, credit agreement or other agreement governing such Series of Note Lien Debt, for the enforceable benefit of all holders of each existing and future Series of Priority Lien Debt and Note Lien Debt, each existing and future Note Lien Representative and each existing and future holder of "Permitted Liens" (as defined in the Indenture):

(1)

that all Note Lien Obligations will be and are secured Equally and Ratably by all Note Liens at any time granted by the Company or any other Guarantor to secure any Obligations in respect of such Series of Note Lien Debt, whether or not upon property otherwise constituting collateral for such Series of Note Lien Debt, and that all such Note Liens will be enforceable

155

by the Note Lien Collateral Agent for the benefit of all holders of Note Lien Obligations Equally and Ratably;

(2)

that the holders of Obligations in respect of such Series of Note Lien Debt are bound by the provisions of this Agreement, including the provisions relating to the ranking of Note Liens and the order of application of proceeds from the enforcement of Note Liens;



(3)

consenting to and directing the Note Lien Collateral Agent to perform its obligations under the Security Documents; and



(4)

consenting to the terms of this Agreement.

"Moody's" means Moody's Investors Service, Inc.

"Mortgaged Premises" means any real property which shall now or hereafter be subject to a Note Lien Mortgage.

"Net Available Cash Account" means any Deposit Account or Securities Account established by the Company or any other Grantor in accordance in accordance with the requirements of the covenant set forth above under the caption "—Repurchase of the Option of Holders—Asset Sales" and which does not contain proceeds of Inventory, Accounts, Chattel Paper, Instruments, Investment Property (other than Capital Stock Collateral) or General Intangibles and which has been identified in writing to the Revolving Credit Collateral Agent as such at the time that proceeds from any sale of Note Lien Collateral shall be deposited pending final application in accordance with such covenant. into which the proceeds from any disposition of Note Lien Collateral shall be deposited pending final application in accordance with such covenant.

"Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however:

(1)

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 their respective Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of their respective Restricted Subsidiaries; and



(2)

any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss.

"Net Proceeds" means the aggregate cash proceeds received by any of the Issuers of their respective 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 and discounts, and sales commissions, and any other fees and expenses, including, without limitation, relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, amounts required to be applied to the repayment of Indebtedness, other than Indebtedness under a Credit Facility, secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.

"Non-Recourse Debt" means Indebtedness:

(1)

as to which none of the Issuers or any of their respective 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;

156

(2)

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 any of the Issuers of their respective Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity; and



(3)

as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of any of the Issuers of their respective Restricted Subsidiaries.

"Note Capital Stock Collateral" means, except as provided below, all of the following property of the Company and each Grantor now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest:

(1)

until the Release Date (A) all of the Capital Stock in the Company, Vendor Finance, LLC, LNT Virginia LLC, LNT Merchandising Company LLC, Citadel LNT, LLC and the Company's hereafter acquired Domestic Subsidiaries; and (B) 65% of the Capital Stock of the Foreign Subsidiaries owned directly by the Parent or its Domestic Subsidiaries;



(2)

Records, "supporting obligations" (as defined in Article 9 of the UCC) and related Letters of Credit, commercial tort claims or other claims and causes of action, in each case, to the extent related primarily to the foregoing; and



(3)

substitutions, replacements, accessions, products and proceeds (including, without limitation, insurance proceeds, licenses, royalties, income, payments, claims, damages and proceeds of suit) of any or all of the foregoing.

"Note Claimholders" means, at any relevant time, the holders of the Note Obligations, including holders of notes and the Note Lien Representatives.

"Note Guarantee" means the Guarantee by each Guarantor of the Issuers' obligations under the indenture and the notes, executed pursuant to the provisions of the indenture.

"Note Lien" means a Lien granted by a security document to the Note Lien Collateral Agent, at any time, upon any property of the Issuers or any Guarantor to secure Note Lien Obligations.

"Note Lien Collateral" means all now owned or hereafter acquired by the Issuers and the note guarantors:

(1)

any Net Available Cash Account;



(2)

Equipment;



(3)

Real Estate Assets;



(4)

documents of title related to Equipment;



(5)

Intellectual Property;



(6)

Note Lien General Intangibles;



(7)

Note Capital Stock Collateral;



(8)

Records, "supporting obligations" (as defined in Article 9 of the UCC) and related Letters of Credit, commercial tort claims or other claims and causes of action, in each case, to the extent related primarily to the foregoing; and



(9)

substitutions, replacements, accessions, products and proceeds (including, without limitation, insurance proceeds, licenses, royalties, income, payments, claims, damages and proceeds of suit) of any or all of the foregoing;

157

provided, however, that the term "Note Lien Collateral" shall include Instruments or Chattel Paper to the extent such Instruments or Chattel Paper constitute identifiable proceeds of Note Lien Collateral and other identifiable proceeds (including lease payments under leases of Equipment) of Note Lien Collateral are deposited or held in any such Deposit Accounts, Credit Card Processing Accounts or Securities Accounts after an Enforcement Notice but shall not, in any event, include the Canadian Collateral and the Excluded Assets.

"Note Lien Collateral Agent" means The Bank of New York, in its capacity as collateral agent under the Note Lien Security Documents, together with its successors in such capacity.

"Note Lien Debt" means:

(1)

the notes issued on the date of the Indenture and notes issued under the Indenture in exchange therefor in accordance with the Registration Rights Agreement, and in each case the Note Guarantees thereof by the Guarantors; and



(2)

any other Indebtedness of the Issuers (including Additional Notes) that is secured equally and ratably with the notes by a Note Lien that was permitted to be incurred and so secured under each applicable Secured Debt Document and the Note Guarantees thereof by the Guarantors; provided that:



(a)

the net proceeds are used to refund, refinance, replace, defease, discharge or otherwise acquire or retire other Note Lien Debt; or



(b)

on the date of incurrence of such Indebtedness, after giving pro forma effect to the incurrence thereof and the application of the proceeds therefrom, the aggregate principal amount of Note Lien Debt outstanding does not exceed $725.0 million;

provided further, in the case of any Indebtedness referred to in clause (2) of this definition:

(i)

on or before the date on which such Indebtedness is incurred by the Issuers, such Indebtedness is designated by the Issuers in an Officer's Certificate delivered to each Note Lien Representative. the Note Lien Collateral Agent and the Credit Facility Collateral Agent, as "Note Lien Debt" for the purposes of the Indenture and the Intercreditor Agreement; provided that no Series of Secured Debt may be designated as both Note Lien Debt and Credit Facility Lien Debt;



(ii)

such Indebtedness is governed by an Indenture, credit agreement or other agreement that includes a Lien Sharing and Priority Confirmation; and



(iii)

all requirements set forth in the Intercreditor Agreement as to the confirmation, grant or perfection of the Note Lien Collateral Agent's Liens to secure such Indebtedness or Obligations in respect thereof are satisfied (and the satisfaction of such requirements and the other provisions of this clause (iii) will be conclusively established if the Issuers delivers to the Note Lien Collateral Agent and the Credit Facility Collateral Agent an Officer's Certificate stating that such requirements and other provisions have been satisfied and that such Indebtedness is "Note Lien Debt").

"Note Lien Default" means an "Event of Default" (as defined in any of the Note Documents), which is no longer subject to any applicable cure or notice period.

"Note Lien Documents" means, collectively, the Note Documents, the indenture, credit agreement or other agreement governing each other Series of Note Lien Debt, and the Note Lien Security Documents.

158

"Note Lien General Intangibles" means all General Intangibles pertaining to the other items of property included within clauses (2), (3), (4), (5) and (7) of the definition of Note Lien Collateral, including, without limitation, all contingent rights with respect to warranties on Equipment.

"Note Lien Mortgages" means a collective reference to each mortgage, deed of trust and other document or instrument under which any Lien on real property owned or leased by any Grantor is granted to secure any Note Lien Obligations or (except for this Agreement) under which rights or remedies with respect to any such Liens are governed.

"Note Lien Obligations" means Note Lien Debt and all other Obligations in respect thereof.

"Note Lien Representative" means:

(1)

in the case of each Series of the Notes, the Note Lien Collateral Agent; or



(2)

in the case of any other Series of Note Lien Debt, the Trustee, agent or representative of the holders of such Series of Note Lien Debt who maintains the transfer register for such Series of Note Lien Debt and is appointed as a Note Lien Representative (for purposes related to the administration of the Security Documents) pursuant to an indenture, credit agreement or other agreement governing such Series of Note Lien Debt, together with its successors in such capacity.

"Note Lien Security Documents" means the Intercreditor Agreement, each Lien Sharing and Priority Confirmation with respect to Note Lien Obligations, and all security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, collateral agency agreements. control agreements or other grants or transfers for security executed and delivered by the Issuers or any Guarantor creating (or purporting to create) a Note Lien upon Collateral in favor of the Note Lien Collateral Agent to secure Note Lien Obligations, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms and the provisions described above under the caption "—Intercreditor Agreement—Amendment of Intercreditor Agreement and Other Security Documents."

"Note Secured Party" means the Trustee and the holders of notes (together with any other holders of Note Lien Obligations).

"Obligations" means all obligations of every nature of each Grantor from time to time owed to any agent or Trustee, the Revolving Credit Claimholders, the Note Claimholders or any of them or their respective Affiliates, in each case under the Revolving Credit Loan Documents or the Note Lien Documents, whether for principal, interest or payments for early termination of Hedge Agreements, fees, expenses, indemnification or otherwise and all guarantees of any of the foregoing.

"Other Real Estate" means any Real Estate Asset which is not Mortgaged Premises.

"Parent" means Linens Holding Co.

"Patent Licenses" means all present and future agreements providing for the granting of any right in or to Patents (whether the applicable Grantor is licensee or licensor thereunder).

"Patents" means, collectively, with respect to each Grantor, all letters patent issued or assigned to, and all patent applications and registrations made by, such Grantor (whether established or registered or recorded in the United States or any other country or any political subdivision thereof), and all goodwill associated therewith, now existing or hereafter adopted or acquired, together with any and all (i) rights and privileges arising under applicable law with respect to such Grantor's use of any patents, (ii) inventions and improvements described and claimed therein, (iii) reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof and amendments thereto, and rights to obtain any of the foregoing, (iv) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto including damages and payments for past, present

159

or future infringements thereof, (v) rights corresponding thereto throughout the world and (vi) rights to sue for past, present or future infringements thereof.

"Payment Intangibles" means all "payment intangibles" as defined in Article 9 of the UCC.

"Permitted Business" means any business which is the same as or related, ancillary or complementary to, or a reasonable extension, development or expansion of, any of the businesses of the Issuers and their respective Restricted Subsidiaries on the date of the indenture.

"Permitted Investments" means:

(1)

any Investment in Linens 'n Things, Inc. or in a Restricted Subsidiary of Linens 'n Things, Inc.;



(2)

any Investment in Cash Equivalents;



(3)

any Investment by any of the Issuers or their respective Restricted Subsidiaries in a Person (and any Investment held by such Person), if as a result of such Investment:



•

such Person becomes a Restricted Subsidiary of the Issuers; or



•

such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, any of the Issuers or their respective Restricted Subsidiaries;



(4)

any Investment existing on or made prior to the date of the indenture;



(5)

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 the covenant described above under the caption "—Repurchase at the Option of Holders—Asset Sales";



(6)

any acquisition of assets or Capital Stock solely in exchange for, or for the net cash proceeds of, the issuance of Equity Interests (other than Disqualified Stock) of Linens 'n Things, Inc.;



(7)

any Investments received in compromise or resolution of (A) obligations of trade creditors or customers that were incurred in the ordinary course of business of any of the Issuers of their respective Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (B) litigation, arbitration or other disputes with Persons who are not Affiliates;



(8)

Investments represented by Hedging Obligations;



(9)

endorsements of negotiable instruments and documents in the ordinary course of business;



(10)

pledges or deposits permitted under clause (12) of the definition of Permitted Liens;



(11)

payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;



(12)

receivables owing to the Issuers or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms as the Issuers or such Restricted Subsidiary deems reasonable under the circumstances;



(13)

loans or advances to employees made in the ordinary course of business of any of the Issuers or their respective Restricted Subsidiaries in an aggregate principal amount not to exceed $1.0 million at any one time outstanding;



(14)

repurchases of the notes; and

160

(15)

other Investments in any Person other than an Affiliate of Linens 'n Things, Inc. 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 (15) that are at any one time outstanding not to exceed $35.0 million.

"Permitted Liens" means:

(1)

Liens on Collateral held by the Note Lien Collateral Agent equally and ratably securing (a) the notes to be issued on the date of the Indenture and all related Note Lien Obligations and (b) all other Note Lien Debt, subject to the limits thereon set forth in the definition thereof, and all related Note Lien Obligations;



(2)

Liens on Collateral and Liens on other Excluded Assets to the extent such Excluded Assets would not constitute Note Lien Collateral if not classified as Excluded Assets, in each case held by the Credit Facility Collateral Agent securing Credit Facility Lien Obligations; provided that:



(a)

without otherwise limiting the amount secured by such Liens insofar as they attach to any property other than Revolving Credit Collateral or secure Credit Facility Lien Obligations that are not Indebtedness, such Liens shall not be permitted to the extent such Liens secure the amount by which the aggregate principal amount of all Indebtedness (including all fixed and contingent reimbursement obligations in respect of letters of credit but excluding Hedging Obligations and Cash Management Obligations) secured by such Liens insofar as they attach to Revolving Credit Collateral exceeds the Revolving Credit Facility Debt Cap; and



(b)

all such Liens on Collateral are subject to the Intercreditor Agreement;



(3)

Liens in favor of the Issuers or the Guarantors;



(4)

Liens on property of a Person existing at the time such Person is merged with or into or consolidated with any of the Issuers of their respective Subsidiaries; 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 such Issuer or Subsidiary;



(5)

Liens on property (including Capital Stock) existing at the time of acquisition of the property by any of the Issuers of their respective Subsidiaries; provided that such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition;



(6)

Liens or deposits to secure the performance by a Person under workers' compensation laws, unemployment insurance laws or other statutory obligations, surety or appeal bonds, performance bonds or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits as security for import or custom duties or other obligations of a like nature, in each case incurred in the ordinary course of business;



(7)

Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of the second paragraph of the covenant entitled "—Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired with or financed by such Indebtedness;



(8)

Liens existing on the date of the indenture;



(9)

Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and

161

diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;

(10)

Liens imposed by law, such as carriers', warehousemen's, landlord's and mechanics' Liens;



(11)

judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired;



(12)

Liens arising solely by virtue of any statutory or common law provision relating to banker's Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided, however, that (a) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Issuers or any of their respective Restricted Subsidiaries in excess of those set forth by regulations promulgated by the Federal Reserve Board and (b) such deposit account is not intended by the Issuers or any Restricted Subsidiary to provide collateral to the depository institution;



(13)

Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto to the extent permitted hereunder;



(14)

purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal property entered into in the ordinary course of business;



(15)

survey exceptions, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;



(16)

Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under the indenture; provided, however, that:



(a)

the new Lien shall be 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); and



(b)

the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge;



(17)

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



(18)

Liens incurred with respect to obligations that do not exceed $30.0 million at any one time outstanding.

"Permitted Payments to Parent" means, without duplication as to amounts:

(1)

payments to the Parent to permit the Parent to pay reasonable accounting, legal and administrative expenses of the Parent when due, in an aggregate amount not to exceed $3.0 million per annum;

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(2)

for so long as Linens 'n Things, Inc. is a member of a group filing a consolidated or combined tax return with the Parent, payments to the Parent in respect of an allocable portion of the tax liabilities of such group, including estimated taxes, that is attributable to Linens 'n Things, Inc. and its Subsidiaries ("Tax Payments"). The Tax Payments shall not exceed the lesser of (i) the amount of the relevant tax (including any penalties and interest and estimated taxes) that Linens 'n Things, Inc. would owe if Linens 'n Things, Inc. were filing a separate tax return (or a separate consolidated or combined return with its Subsidiaries that are members of the consolidated or combined group), taking into account any carryovers and carrybacks of tax attributes (such as net operating losses) of Linens 'n Things, Inc. and such Subsidiaries from other taxable years and (ii) the net amount of the relevant tax that the Parent actually owes to the appropriate taxing authority. Any Tax Payments received from Linens 'n Things, Inc. shall be paid over to the appropriate taxing authority within 30 days of the Parent's receipt of such Tax Payments or refunded to Linens 'n Things, Inc. and any refunds received by Parent in respect of Tax Payments shall be refunded to Linens 'n Things, Inc.; and



(3)

fees and expenses related to any equity offering or other financing of any direct or indirect parent of Linens 'n Things, Inc.

"Permitted Refinancing Indebtedness" means any Indebtedness of any of the Issuers of their respective Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge other Indebtedness of any of the Issuers of their respective Restricted Subsidiaries (other than intercompany Indebtedness); provided that:

(1)

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 renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith);



(2)

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 renewed, refunded, refinanced, replaced, defeased or discharged;



(3)

if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the notes on terms at least as favorable to the holders of notes as those contained in the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; and



(4)

such Indebtedness is incurred either by the Issuers or the Restricted Subsidiaries who is the obligor on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged.

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

"Primary Real Estate Asset" means Mortgaged Premises, distribution centers and warehouses and corporate headquarters and administrative offices.

"Priority Liens" means:

(1)

with respect to Note Lien Collateral, the Note Liens; and



(2)

with respect to Revolving Credit Collateral, the Revolving Credit Liens.

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"Priority Lien Collateral Agent" means, with respect to any Collateral and the Priority Liens thereon, the Note Lien Collateral Agent or the Revolving Credit Collateral Agent, as applicable, on behalf of the holders of the Priority Liens thereon.

"Priority Lien Debt" means:

(1)

with respect to Priority Liens on Note Lien Collateral, the Note Lien Debt; and



(2)

with respect to Priority Liens on Revolving Credit Collateral, the Revolving Credit Obligations.

"Priority Lien Documents" means:

(1)

with respect to Note Lien Collateral; and



(2)

with respect to Revolving Credit Collateral, the Revolving Credit Loan Documents.

"Priority Lien Obligations" means:

(1)

with respect to Note Lien Collateral, the Note Lien Obligations: and



(2)

with respect to Revolving Credit Collateral, the Revolving Credit Obligations.

"Priority Lien Representative" means, with respect to Note Lien Collateral, each Note Lien Representative.

"Proceeds" shall mean all "proceeds" as defined in Article 9 of the UCC including, in any event all dividends, returns of capital and other distributions from Investment Property and all collection thereon and payments with respect thereto.

"Real Estate Asset" means, at any time of determination, any interest (fee, leasehold or otherwise) then owned by any Grantor in any real property.

"Receivable" means any right to payment, whether or not arising in connection with goods sold or leased or for services rendered and including any right to payment arising out of the use of a credit or charge card, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including all Accounts); provided that, for purposes of the definitions of "Receivables Entity," "Receivables Financing" and "Receivables Subsidiary," the term "Receivables" shall mean a right to receive payment arising from a sale or lease of goods or services by a Person pursuant to an arrangement with another Person pursuant to which such other Person is obligated to pay for goods or services under terms that permit the purchase of such goods and services on credit.

"Receivables Records" shall mean (i) all original copies of all documents, instruments or other writings or electronic records or other Records evidencing the Receivables, (ii) all books, correspondence, credit or other files, Records, ledger sheets or cards, invoices, and other papers relating to Receivables, including, without limitation, all tapes, cards, computer tapes. computer discs, computer runs, record keeping systems and other papers and documents relating to the Receivables, whether in the possession or under the control of the Grantor or any computer bureau or agent from time to time acting for the Grantor or otherwise, (iii) all evidences of the filing of financing statements and the registration of other instruments in connection therewith, and amendments, supplements or other modifications thereto, notices to other creditors or secured parties, and certificates, acknowledgments, or other writings, including, without limitation, lien search reports, from filing or other registration officers, (iv) all credit information, reports and memoranda relating thereto and (v) all other written or nonwritten forms of information related in any way to the foregoing or any Receivable.

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"Related Party" means:

(1)

any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Sponsor; or



(2)

any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Sponsors and/or such other Persons referred to in the immediately preceding clause (1).

"Release Date" means the earlier of (1) the date on which the Lien on Capital Stock Collateral is released pursuant to the indenture; or (2) with respect to any Subsidiary of the Company, the date on which the Lien on Capital Stock Collateral relating to such Subsidiary triggers a separate reporting requirement with respect to such Subsidiary pursuant to Rule 3-16 of Regulation S-X.

"Required Note Lien Debtholders" means, at any time, the holders of a majority in aggregate principal amount of all Note Lien Debt then outstanding. For purposes of this definition. Note Lien Debt registered in the name of, or beneficially owned by, the Issuers or any Affiliate of the Issuers will be deemed not to be outstanding.

"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.

"Revolving Credit Agreement" means that certain Revolving Credit Agreement, to be dated the date of the indenture, among Linens 'n Things, Inc., Linens 'n Things Center, Inc., Linens 'n Things Canada Corp, Linens Holding Co., the other guarantors party thereto, UBS AG, Stamford Branch, as US Administrative Agent and US Co-Collateral Agent, UBS AG, Toronto Branch, as Canadian Administrative Agent and Canadian Co-Collateral Agent, Bear Stearns Corporate Lending Inc. as Syndication Agent, Wachovia Capital Finance, Inc., as US Co-Collateral Agent and Wachovia Capital Finance, Inc. as Canadian Co-Collateral Agent, and the lenders party thereto from time to time, providing for up to $600.0 million of revolving credit borrowings (which may increase to up to $700.0 million of revolving credit borrowings), including any related notes, Guarantees, collateral documents, instruments and agreements executed in connection therewith, and, 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 to institutional investors) in whole or in part from time to time.

"Revolving Credit Capital Stock Collateral" means all of the Capital Stock Collateral other than the Note Capital Stock Collateral.

"Revolving Credit Default" means an "Event of Default" (as defined in the Revolving Credit Agreement).

"Revolving Credit Collateral" means all now owned or hereafter acquired Collateral other than the Note Lien Collateral, including, without limitation:

(1)

all Accounts;



(2)

all Chattel Paper;



(3)

all Instruments (including Intercompany Notes of Subsidiaries);



(4)

all Letter of Credit Rights;



(5)

all Deposit Accounts (other than the Net Available Cash Account, to the extent that it constitutes a Deposit Account), Credit Card Processing Accounts and Securities Accounts

165

(other than the Net Available Cash Account, to the extent it constitutes a Securities Account), and all other Investment Property (other than Capital Stock Collateral), including all cash, marketable securities, securities entitlements, financial assets and other funds held in or on deposit in any of the foregoing;

(6)

all Inventory or documents of title, customs receipts, insurance certificates, shipping documents and other written materials related to the purchase or import of any Inventory;



(7)

all General Intangibles (other than Intellectual Property and Note Lien General Intangibles) and all rights under Hedge Agreements;



(8)

all Revolving Credit Capital Stock Collateral;



(9)

all Records, "supporting obligations" (as defined in Article 9 of the UCC) and related Letters of Credit, commercial tort claims or other claims and causes of action, in each case, to the extent not primarily related to Note Lien Collateral; and



(10)

substitutions, replacements, accessions, products and proceeds (including, without limitation, insurance proceeds, licenses, royalties, income, payments, claims, damages and proceeds of suit) of any or all of the foregoing;

provided, however, that to the extent that Instruments or Chattel Paper constitute identifiable proceeds of Note Lien Collateral or other identifiable proceeds of Note Lien Collateral are deposited or held in any such Deposit Accounts, Credit Card Processing Accounts or Securities Accounts after an Enforcement Notice, then (as provided in the Intercreditor Agreement) such Instruments, Chattel Paper or other identifiable proceeds shall be treated as Note Lien Collateral.

"Revolving Credit Collateral Agent" means, at any time, the Person serving at such time as an "Administrative Agent" or a "Collateral Agent" (including as a "Co-Collateral Agent") under the Revolving Credit Agreement or any other representative then most recently designated in accordance with the applicable provisions of the Revolving Credit Agreement, together with its successors in such capacity.

"Revolving Credit Facility Debt Cap" means, as of any date, an aggregate principal amount equal to the sum of (a) the aggregate principal amount of Indebtedness permitted to be Incurred under clause (1) of the second paragraph of "Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock" (regardless of the amount actually Incurred) as of such date, plus (b) the principal amount of Indebtedness permitted to be Incurred under clause (14) of the second paragraph of "Certain Covenants—Incurrence of Indebtedness and Issuance of Preferred Stock" (regardless of the amount actually Incurred) as of such date.

"Revolving Credit Lien" means a Lien on Collateral granted by a Revolving Credit Loan Document to the Revolving Credit Collateral Agent, at any time, upon any property of the Issuers or any Guarantor to secure Revolving Credit Obligations.

"Revolving Credit Loan Documents" means the Revolving Credit Agreement, the Security Documents (as defined in the Revolving Credit Agreement) and the other Loan Documents (as defined in the Revolving Credit Agreement) and each of the other agreements, documents and instruments providing for or evidencing any other Revolving Credit Obligation, and any other document or instrument executed or delivered at any time in connection with any Revolving Credit Obligations, including any intercreditor or joinder agreement among holders of Revolving Credit Obligations, to the extent such are effective at the relevant time, as each may be amended, supplemented, refunded, deferred, restructured, replaced or refinanced from time to time in whole or in part (whether with the Revolving Credit Collateral Agent and lenders from time to time party to the Revolving Credit Agreement or other agents and lenders or otherwise), in each case in accordance with the provisions of the Intercreditor Agreement.

166

"Revolving Credit Obligations" means all Obligations outstanding under the Revolving Credit Agreement and the other Revolving Credit Loan Documents. "Revolving Credit Obligations" shall include all interest accrued or accruing (or which would, absent commencement of an Insolvency or Liquidation Proceeding, accrue) after commencement of an Insolvency or Liquidation Proceeding in accordance with the rate specified in the relevant Revolving Credit Loan Document whether or not the claim for such interest is allowed as a claim in such insolvency or liquidation proceeding.

"S&P" means Standard & Poor's Ratings Group.

"SEC" means the U.S. Securities and Exchange Commission.

"Secured Debt" means all Note Lien Debt and all Credit Facility Lien Debt.

"Securities Accounts" means all present and future "securities accounts" (as defined in Article 8 of the UCC), including all monies, "uncertificated securities," and "securities entitlements" (as defined in Article 8 of the UCC) contained therein.

"Series of Note Lien Debt" means, severally, the notes and each other issue or series of Note Lien Debt for which a single transfer register is maintained.

"Series of Priority Lien Debt" means, with respect to the Note Lien Collateral, each Series of Note Lien Debt and, with respect to the Revolving Credit Collateral, each Series of Revolving Credit Obligations.

"Series of Secured Debt" means each Series of Note Lien Debt and each Series of Revolving Credit Obligations.

"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 Securities Act, other than a Subsidiary that is a Significant Subsidiary solely due to clause (3) of such definition, as such Regulation is in effect on the date of the indenture.

"Sponsors" means Apollo Management V, L.P., Apollo Management VI, L.P., NRDCReal Estate Advisors I, LLC, National Realty & Development Corp., NRDCLinens B LLC and Silver Point Capital LP, and their respective Affiliates wholly owned or directly or indirectly managed by any of them.

"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 date of the indenture (including any sinking fund payment), and will 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.

"Subsidiary" means, with respect to any specified Person:

(1)

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



(2)

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).

"TIA" means the Trust Indenture Act of 1939, as amended from time to time.

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"Trademark Licenses" means any and all present and future agreements providing for the granting of any right in or to Trademarks (whether such Grantor is licensee or licensor thereunder).

"Trademarks" means, collectively, with respect to each Grantor, all trademarks, service marks, slogans, logos, certification marks, trade dress, uniform resource locations (URL's), domain names, corporate names, trade names and other source or business identifiers, whether registered or unregistered, owned by or assigned to such Grantor and all registrations and applications for the foregoing (whether statutory or common law and whether established or registered in the United States, any State thereof, or any other country or any political subdivision thereof), and all goodwill associated therewith, now existing or hereafter adopted or acquired, together with any and all (i) rights and privileges arising under applicable law with respect to such Grantor's use of any trademarks, (ii) reissues, continuations, extensions and renewals thereof and amendments thereto, (iii) income, fees, royalties, damages and payments now and hereafter due and/or payable thereunder and with respect thereto, including damages, claims and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present and future infringements thereof.

"Transactions" has the meaning set forth in "Prospectus Summary—The Transactions."

"Trustee" means The Bank of New York or its successors under the indenture.

"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in the State of New York, or where the context requires, each other applicable jurisdiction.

"Unrestricted Subsidiary" means any Subsidiary of Linens 'n Things, Inc. that is designated by the Board of Directors of Linens 'n Things, Inc. as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but only to the extent that such Subsidiary:

(1)

has no Indebtedness other than Non-Recourse Debt;



(2)

except as permitted by the covenant described above under the caption "—Certain Covenants—Transactions with Affiliates," is not party to any agreement, contract, arrangement or understanding with Linens 'n Things, Inc. or any Restricted Subsidiary of Linens 'n Things, Inc. unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Linens 'n Things, Inc. or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Linens 'n Things, Inc.;



(3)

is a Person with respect to which neither Linens 'n Things, Inc. nor any of their respective 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



(4)

has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Linens 'n Things, Inc. or any of their respective Restricted Subsidiaries.

"Voting Stock" of any specified 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:

(1)

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



(2)

the then outstanding principal amount of such Indebtedness.

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

        The following is a summary of the material United States federal income tax consequences of exchanging old notes for exchange notes in the exchange offer and of the ownership and disposition of the exchange notes offered hereby, but does not purport to be a complete analysis of all potential tax considerations relating to the exchange offer or the exchange notes. The United States federal income tax considerations set forth below are based upon currently existing provisions of the Internal Revenue Code of 1986, as amended, or the Code, applicable Treasury Regulations, judicial authority, and current administrative rulings and pronouncements of the Internal Revenue Service, or the IRS, as of the date of this prospectus. There can be no assurance that the IRS will not take a contrary view, and no ruling from the IRS has been, or will be, sought on the issues discussed in this summary. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conclusions set forth herein. Any such changes or interpretations may be retroactive and could affect the tax consequences discussed below.

        This summary does not address all potential United States federal tax considerations, such as estate and gift tax considerations, that may be relevant to particular holders of exchange notes and does not address foreign, state or local tax consequences. This summary is limited to persons that acquired the old notes in the initial offering at their original issue price, are exchanging old notes for exchange notes in the exchange offer and will hold the exchange notes as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). This summary does not address the federal income tax consequences to taxpayers who may be subject to special tax treatment, including, without limitation:

•

persons subject to the alternative minimum tax;



•

banks, insurance companies, or other financial institutions;



•

small business investment companies;



•

dealers in securities or currencies;



•

certain former citizens or residents of the United States;



•

broker-dealers;



•

partnerships or other pass-through entities for United States federal income tax purposes;



•

traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;



•

United States holders (as defined below) whose functional currency is not the United States dollar;



•

tax-exempt organizations;



•

persons that hold the old notes or will hold the exchange notes as part of a position in a straddle, or as part of a hedging, conversion, or other integrated investment transaction; or



•

persons deemed to sell the exchange notes under the constructive sale provisions of the Code.

        If a partnership or other entity taxable as a partnership for United States federal income tax purposes holds the exchange notes, the United States federal income tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership.

THIS SUMMARY OF MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. EACH PROSPECTIVE PARTICIPANT IS URGED TO CONSULT ITS TAX ADVISOR WITH RESPECT TO THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX LAWS WITH RESPECT TO

169

ITS PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE UNITED STATES FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY FOREIGN, STATE OR LOCAL JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

Consequences of Exchanging Old Notes for Exchange Notes

        The exchange of your old notes for exchange notes in the exchange offer should not constitute a taxable exchange for federal income tax purposes. Accordingly, the exchange offer should have no federal income tax consequences to you. Your federal income tax basis in the exchange notes should be the same as your federal income tax basis in your old notes and your holding period for federal income tax purposes in the exchange notes will include your holding period in the old notes you exchanged for the exchange notes.

Consequences to United States Holders of Exchange Notes Ownership

        United States Holders.    The discussion in this section will apply to you if you are a United States holder. A United States holder is a beneficial owner of the exchange notes who or which is:

•

an individual who is a citizen or resident of the United States;



•

a corporation, including any entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;



•

an estate if its income is subject to United States federal income taxation regardless of its source; or



•

a trust if (a) a United States court can exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions, or (b) such trust was in existence and was treated as a United States person on August 20, 1996, and has in effect a valid election to be treated as a domestic trust for United States federal income tax purposes.

        Interest and Original Issue Discount.    If you are a United States holder, stated interest on the exchange notes will be reportable by you as ordinary income at the time it accrues or is received in accordance with your regular method of accounting for United States federal income tax purposes. Thus, if you are on the accrual method of accounting for United States federal income tax purposes, stated interest on the exchange notes will be reportable by you as ordinary income at the time it accrues. If you are on the cash method of accounting for United States federal income tax purposes, stated interest on the exchange notes will be taxable to you as ordinary income at the time it is received.

        Because the stated redemption price of the notes will not exceed their issue price by more than a de minimis amount for federal income tax purposes, no portion of the original issue discount, or OID, on the notes will be reportable by a United States holder as ordinary income on a current basis, unless the United States holder makes an affirmative election to accrue such OID (and all stated interest and any market discount) into income on a constant interest basis.

        We believe that the likelihood, as of the issue date of the old notes, that additional interest would become payable on the old notes as a result of a failure to timely consummate a registered exchange offer for the notes or cause a shelf registration statement for resales of the notes to be declared effective was remote. Accordingly, we will take the position that United States holders are not required, prior to such additional interest becoming payable, to take the potential for such additional interest into account in determining their income from the old notes. Our determination that there was, as of the issue date, only a remote likelihood of additional interest is binding on each United States holder

170

unless such holder explicitly discloses in the manner required by applicable Treasury regulations that such holder's determination is different from ours. The IRS may disagree with our position regarding the likelihood of additional interest on the old notes, in which case the timing of a United States holder's recognition of income on the notes could be affected.

        Sale, Exchange, Retirement or Other Disposition of the Exchange Notes.    If you are a United States holder, you generally will recognize taxable gain or loss upon the sale, exchange, retirement at maturity or other disposition of an exchange note in an amount equal to the difference between the amount of cash plus the fair market value of all property received on such disposition (except to the extent such cash or property is attributable to accrued interest not previously included in gross income, which is treated as ordinary income) and your adjusted tax basis in the exchange note. In general, your adjusted tax basis in an exchange note will be equal the price paid for the old note increased by the amounts of any market discount previously included in income by you and reduced by any amortized bond premium deducted, and by any principal payments received, by you. In general, gain or loss recognized on the sale, exchange, retirement or other disposition of an exchange note will be capital gain or loss, except to the extent of any accrued market discount which you have not previously included in income, and will generally be long-term capital gain or loss if at the time of sale, exchange, retirement or other disposition of an exchange note, such exchange note has been held for more than one year. The deductibility of capital losses is subject to limitations.

        Information Reporting and Backup Withholding.    You may be subject to backup withholding, currently at a rate of twenty-eight percent (28%), with respect to certain reportable payments, including interest payments and, under certain circumstances, principal payments on the exchange notes and payments of the proceeds of the sale or other disposition of exchange notes, if you, among other things:

•

fail to furnish a social security number or other taxpayer identification number certified under penalties of perjury within a reasonable time after the request for the taxpayer identification number;



•

furnish an incorrect taxpayer identification number;



•

fail to report interest properly; or



•

under certain circumstances, fail to provide a certified statement, signed under penalties of perjury, that the taxpayer identification number furnished is the correct number and that you are not subject to backup withholding.

        Any amount withheld from a payment to you under the backup withholding rules is creditable against your income tax liability and may entitle you to a refund provided that the requisite information is timely furnished to the IRS. Backup withholding does not apply, however, if you properly establish your eligibility for an exemption from backup withholding. We will report to you and to the IRS the amount of any reportable payments for each calendar year and the amount of tax withheld, if any, with respect to the reportable payments.

Consequences to Non-United States Holders of Exchange Note Ownership

        Non-United States Holders.    The discussion in this section will apply to you if you are a Non-United States holder. A Non-United States holder is a beneficial owner of the exchange notes that is neither a United States holder as defined in "—Consequences to United States Holders—United States Holders" above nor a partnership for United States federal income tax purposes.

        Interest Income.    If you are a Non-United States holder, interest paid or accrued on the exchange notes will not be subject to United States federal income tax or withholding tax if the interest is not

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effectively connected with the conduct of a trade or business within the United States by you and each of the following conditions are met:

•

you do not actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock;



•

you are not a controlled foreign corporation that is related to us through stock ownership;



•

you are not a bank whose receipt of interest on the notes is described in Section 881(c)(3)(A) of the Code; and



•

either (A) you certify, under penalties of perjury and in a statement provided to us or our paying agent (on IRS Form W-8BEN or substitute form), that you are not a "United States person" and provide your name and address or (B) a securities clearing organization, bank, or other financial institution that holds customers' securities in the ordinary course of its trade or business certifies, under penalties of perjury, that it or a qualified intermediary has received the certification and information described in (A) above from you and furnishes us or our paying agent with a copy thereof. With respect to exchange notes held by a foreign partnership, under current law, the certification may be provided by the foreign partnership (which certification may be made on IRS Form W-8IMY or substitute form). However, unless the foreign partnership has entered into a withholding agreement with the IRS, the foreign partnership will be required, in addition to providing IRS Form W-8IMY, to attach an appropriate certification by each partner on IRS Form W-8BEN. Look-through rules apply in the case of tiered partnerships.

        If you do not qualify for an exemption from United States federal withholding tax under this paragraph, then, unless income on the exchange notes is effectively connected with your conduct of a United States trade or business, interest on the exchange notes will be subject to United States federal withholding tax at a rate of 30%, or such lower rate as may be provided for in an applicable income tax treaty. You will be required to provide a United States taxpayer identification number and comply with applicable certification requirements if you seek to claim an exemption from, or reduced rate of, withholding under an income tax treaty. Special rules apply in the case of exchange notes held through intermediaries. Prospective participants should consult their tax advisors regarding the certification requirements for non-United States persons.

        If you are a Non-United States holder engaged in a trade or business in the United States, and if interest on the exchange notes (or gain realized on its sale, exchange, retirement or other disposition) is effectively connected with the conduct of such trade or business (or, if a tax treaty applies, is attributable to a permanent establishment or fixed base maintained by you in the United States), you will generally be subject to United States income tax on such effectively connected income in the same manner as if you were a United States holder. In addition, if you are a foreign corporation, you may be subject to a 30% branch profits tax (unless reduced or eliminated by an applicable treaty) on your effectively connected earnings and profits for the taxable year, subject to certain adjustments. If income on the exchange notes held by you is effectively connected with the conduct of a United States trade or business, you will generally be exempt from withholding tax if you provide to us or our withholding agent a properly executed IRS Form W-8ECI to claim an exemption from withholding tax.

        Gain On Disposition.    If you are a Non-United States holder, generally you will not be subject to United States federal income tax or withholding tax on gain recognized on a sale, exchange, retirement or other disposition of the exchange notes unless (i) the gain is effectively connected with the conduct of a trade or business within the United States by you (or, if a tax treaty applies, is attributable to a permanent establishment or fixed based maintained by you in the United States) or (ii) you are a nonresident alien individual who is present in the United States for 183 or more days during the taxable year and certain other conditions are met.

172

        Information Reporting and Backup Withholding.    If you are a Non-United States holder, payments of interest to you with respect to which the requisite certification, as described above, has been received (or for which an exemption has otherwise been established) will not be subject to either information reporting or backup withholding, unless we or our paying agent have actual knowledge or reason to know that you are a United States person or that the conditions of any other exemption are not in fact satisfied.

        Information reporting and backup withholding requirements will apply, however, to the gross proceeds paid to you on the disposition of exchange notes by or through a United States office of a United States or foreign broker, unless you certify to the broker under penalties of perjury as to your name, address and status as a foreign person or otherwise establishes an exemption. Information reporting requirements, but generally not backup withholding, will also apply to a payment of the proceeds of a disposition of exchange notes by or through a foreign office of a United States broker or foreign broker with certain types of relationships to the United States unless the broker has documentary evidence in its files that you are not a United States person, and the broker has no actual knowledge or reason to know to the contrary, or you establish an exemption. Neither information reporting nor backup withholding generally will apply to a payment of the proceeds of a disposition of notes by or through a foreign office of a foreign broker not subject to the preceding sentence.

        Backup withholding is not an additional tax. Any amount withheld from a payment to you under the backup withholding rules is creditable against your actual United States federal income tax liability and may entitle you to a refund, provided the requisite information is timely furnished to the IRS.

173

PLAN OF DISTRIBUTION

        Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of these exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for old notes where such old notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the consummation of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until     •    , 2006 all dealers effecting transactions in the exchange notes may be required to deliver a prospectus.

        We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transaction:

•

in the over-the-counter market;



•

in negotiated transactions;



•

through the writing of options on the new notes; or



•

a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices.

        Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. Any broker-dealer that resells exchange notes that were received by it for its own account in the exchange offer and any broker-dealer that participates in a distribution of those exchange notes may be deemed to be an underwriter within the meaning of the Securities Act and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, including the delivery of a prospectus that contains information with respect to any selling holder required by the Securities Act in connection with any resale of the new notes. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

        Furthermore, any broker-dealer that acquired any of the old notes directly from us:

•

may not rely on the applicable interpretation of the staff of the SEC's position contained in Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan, Stanley and Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1983); and



•

must also be named as a selling noteholder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction.

        For a period of 180 days after the expiration of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the old notes) other than commissions or concessions of any broker-dealer and will indemnify the holders of the old notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

174

CERTAIN ERISA MATTERS

        The following is a summary of certain considerations associated with the purchase of the notes by (1) employee benefit plans that are subject to Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended ("ERISA"), plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the Code or provisions under any federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of the Code or ERISA (collectively "Similar Laws"), and (2) entities whose underlying assets are considered to include "plan assets" of any such plan, account or arrangement (each a "Plan").

General Fiduciary Matters

        ERISA imposes certain duties on persons who are fiduciaries of a Plan subject to Title I of ERISA (an "ERISA Plan") and ERISA and the Code prohibit certain transactions involving the assets of an ERISA Plan and its fiduciaries or other interested parties. Under ERISA, any person who exercises any discretionary authority or control over the administration of such an ERISA Plan or the management or disposition of the assets of such an ERISA Plan or who renders investment advice for a fee or other compensation to such an ERISA Plan, is generally considered to be a fiduciary of the ERISA Plan.

        In considering participating or not participating in the exchange offer of a portion of the assets of any Plan, a fiduciary should determine whether the participation is in accordance with the documents and instruments governing the Plan and the applicable provisions of ERISA, the Code or any Similar Laws relating to a fiduciary's duties to the Plan including, without limitation, the prudence, diversification, delegation of control and prohibited transaction provisions of ERISA, the Code and any other applicable Similar Laws.

Prohibited Transaction Issues

        Section 406 of ERISA and Section 4975 of the Code prohibit ERISA Plans from engaging in specified transactions involving plan assets with persons or entities who are "parties in interest," within the meaning of ERISA, or "disqualified persons," within the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or disqualified person who engaged in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, the fiduciary of the ERISA Plan that engaged in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code. The acquisition and/or holding of notes (or the exchange notes) by an ERISA Plan with respect to which the Issuers, the initial purchasers or the guarantors are considered parties in interest or disqualified persons may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or Section 4975 of the Code, unless the investment is acquired and is held in accordance with an applicable statutory, class or individual prohibited transaction exemption. In this regard, the U.S. Department of Labor has issued prohibited transaction class exemptions, or "PTCEs," that may apply to the acquisition and holding of the notes. These class exemptions include, without limitation, PTCE 84-14 respecting transactions determined by independent qualified professional asset managers, PTCE 90-1 respecting insurance company pooled separate accounts, PTCE 91-38 respecting bank collective investment funds, PTCE 95-60 respecting life insurance company general accounts and PTCE 96-23 respecting transactions determined by in-house asset managers, although there can be no assurance that all of the conditions of any such exemptions will be satisfied.

        Because of the foregoing, the notes (and exchange notes) should not be purchased or held by any person investing "plan assets" of any Plan, unless such purchase and holding (and the exchange of notes for exchange notes) will not constitute a non-exempt prohibited transaction under ERISA and the Code or similar violation of any applicable Similar Laws.

175

Representation

        Accordingly, by acceptance of a note (or an exchange note), each purchaser and subsequent transferee will be deemed to have represented and warranted that either (i) no portion of the assets used by such purchaser or transferee to acquire and hold the notes (or the exchange notes) constitutes assets of any Plan or (ii) the purchase and holding of the notes (and the exchange of notes for exchange notes) by such purchaser or transferee will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or similar violation under any applicable Similar Laws.

        The foregoing discussion is general in nature and is not intended to be all-inclusive. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries, or other persons considering purchasing the notes (and holding the notes or exchange notes) on behalf of, or with the assets of, any Plan, consult with their counsel regarding the potential applicability of ERISA, Section 4975 of the Code and any Similar Laws to such investment and whether an exemption would be applicable to the purchase and holding of the notes (or the exchange notes).

176

LEGAL MATTERS

        Certain legal matters as to the validity and enforceability of the issuance of the exchange notes and certain legal matters in connection with this exchange offer will be passed upon for us by Gardere Wynne Sewell LLP, Dallas, Texas, in reliance upon local counsel where necessary.

EXPERTS

        The consolidated financial statements of Linens 'n Things, Inc. and subsidiaries as of December 31, 2005 and January 1, 2005, and for each of the years in the three-year period ended December 31, 2005, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

        The audit report covering the December 31, 2005 financial statements refers to a change, in fiscal 2004, in the method of accounting for vendor allowance arrangements to conform to the requirements of Emerging Issues Task Form Issue No. 02-16.

177

INDEX TO FINANCIAL STATEMENTS

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Linens Holding Co.

        We have audited the accompanying consolidated balance sheets of Linens 'n Things, Inc. and subsidiaries as of December 31, 2005 and January 1, 2005, and the related consolidated statements of operations, shareholders' equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Linens 'n Things, Inc. and subsidiaries as of December 31, 2005 and January 1, 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

        As discussed in note 2 to the consolidated financial statements, in fiscal 2004, the Company changed its method of accounting for vendor allowance arrangements to conform to the requirements of Emerging Issues Task Force Issue No. 02-16.

/s/ KPMG LLP

New York, New York
March 17, 2006, except as to
Note 15 which is as of July 6, 2006

F-2

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

			December 31, 2005			January 1, 2005
Assets
	Current assets:
		Cash and cash equivalents	$	158,158		$	204,009
		Accounts receivable		43,561			25,766
		Inventories		787,283			715,184
		Prepaid expenses and other current assets		17,425			38,335
		Current deferred taxes		2,033			685
	Total current assets			1,008,460			983,979
		Property and equipment, net		612,247			578,816
		Goodwill		18,126			18,126
		Deferred charges and other non-current assets, net		12,001			10,963
Total assets			$	1,650,834		$	1,591,884
Liabilities and Shareholders' Equity
	Current liabilities:
		Accounts payable	$	267,582		$	245,635
		Accrued expenses and other current liabilities		199,024			212,644
		Current deferred taxes		4,401			6,014
	Total current liabilities			471,007			464,293
		Deferred income taxes and other long-term liabilities		329,964			318,238
	Total liabilities			800,971			782,531
	Shareholders' equity:
		Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding		—			—
		Common stock, $0.01 par value; 135,000,000 shares authorized; 45,653,954 shares issued and 45,389,975 shares outstanding at December 31, 2005; 45,460,467 shares issued and 45,200,896 shares outstanding at January 1, 2005		457			455
		Additional paid-in capital		376,730			372,627
		Retained earnings		476,896			440,914
		Accumulated other comprehensive gain		3,287			2,619
		Treasury stock, at cost; 263,979 shares at December 31, 2005 and 259,571 shares at January 1, 2005		(7,507	)		(7,262	)
	Total shareholders' equity			849,863			809,353
Total liabilities and shareholders' equity			$	1,650,834		$	1,591,884

See accompanying Notes to Consolidated Financial Statements.

F-3

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

		Fiscal Year Ended
		December 31, 2005			January 1, 2005			January 3, 2004
Net sales		$	2,694,742		$	2,661,469		$	2,395,272
Cost of sales, including buying and distribution costs			1,595,394			1,589,700			1,426,880
Gross profit			1,099,348			1,071,769			968,392
Selling, general and administrative expenses			1,037,521			970,479			846,826
Operating profit			61,827			101,290			121,566
	Interest income		(894	)		(542	)		(169	)
	Interest expense		4,860			3,903			4,001
Interest expense, net			3,966			3,361			3,832
Income before income taxes			57,861			97,929			117,734
Provision for income taxes			21,879			37,408			44,975
Net income		$	35,982		$	60,521		$	72,759
Per share of common stock:
Basic
Net income		$	0.79		$	1.34		$	1.65
Weighted-average shares outstanding			45,293			45,055			44,225
Diluted
Net income		$	0.79		$	1.32		$	1.62
Weighted-average shares outstanding			45,702			45,804			44,847

See accompanying Notes to Consolidated Financial Statements.

F-4

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND
COMPREHENSIVE INCOME

	Common Stock
					Additional Paid-in Capital		Retained Earnings		Foreign Currency Translation Adjustment			Treasury Stock
	Shares		Amount												Total
	(in thousands, except number of shares)
Balance at January 4, 2003	44,065,960		$	444	$	346,251	$	307,634	$	(386	)	$	(7,210	)	$	646,733
Net income	—			—		—		72,759		—			—			72,759
Currency translation adjustment	—			—		—		—		1,777			—			1,777
Comprehensive income																74,536
Common stock issued under stock incentive plans and related tax benefits	729,904			6		16,232		—		—			—			16,238
Increase in treasury stock, net	(2,245	)		—		—		—		—			(130	)		(130	)
Balance at January 3, 2004	44,793,619			450		362,483		380,393		1,391			(7,340	)		737,377
Net income	—			—		—		60,521		—			—			60,521
Currency translation adjustment	—			—		—		—		1,228			—			1,228
Comprehensive income																61,749
Common stock issued under stock incentive plans and related tax benefits	408,212			5		10,144		—		—			—			10,149
Increase in treasury stock, net	(935	)		—		—		—		—			78			78
Balance at January 1, 2005	45,200,896			455		372,627		440,914		2,619			(7,262	)		809,353
Net income	—			—		—		35,982		—			—			35,982
Currency translation adjustment	—			—		—		—		668			—			668
Comprehensive income																36,650
Common stock issued under stock incentive plans and related tax benefits	193,487			2		4,103		—		—			—			4,105
Increase in treasury stock, net	(4,408	)		—		—		—		—			(245	)		(245	)
Balance at December 31, 2005	45,389,975		$	457	$	376,730	$	476,896	$	3,287		$	(7,507	)	$	849,863

See accompanying Notes to Consolidated Financial Statements.

F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

				Fiscal Year Ended
				December 31, 2005			January 1, 2005			January 3, 2004
Cash flows from operating activities:
	Net income			$	35,982		$	60,521		$	72,759
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			90,270			81,318			71,348
		Deferred income taxes			(11,265	)		(1,112	)		37,126
		Loss on disposal of assets			1,433			2,209			1,265
		Loss on fixed asset impairment writedown			4,059			900			760
		Federal tax benefit from common stock issued under stock incentive plans			492			1,500			2,614
		Changes in assets and liabilities:
			(Increase) decrease in accounts receivable		(17,704	)		3,851			(4,914	)
			Increase in inventories		(70,657	)		(11,997	)		(90,885	)
			Decrease (increase) in prepaid expenses and other current assets		20,569			(6,033	)		(8,429	)
			Increase in deferred charges and other non-current assets		(1,231	)		(4,899	)		(622	)
			Increase (decrease) in accounts payable		21,411			(5,431	)		46,275
			Increase in accrued expenses and other liabilities		4,842			56,514			23,595
	Net cash provided by operating activities				78,201			177,341			150,892
Cash flows from investing activities:
	Additions to property and equipment				(127,582	)		(119,052	)		(113,296	)
Cash flows from financing activities:
	Proceeds from common stock issued under stock incentive plans				3,614			8,649			13,624
	(Increase) decrease in treasury stock				(245	)		78			(130	)
	Decrease in short-term borrowings				—			—			(2,119	)
	Net cash provided by financing activities				3,369			8,727			11,375
	Effect of exchange rate changes on cash and cash equivalents				161			864			553
Net (decrease) increase in cash and cash equivalents					(45,851	)		67,880			49,524
Cash and cash equivalents at beginning of year					204,009			136,129			86,605
Cash and cash equivalents at end of year				$	158,158		$	204,009		$	136,129
Supplemental disclosure of cash flow information
Cash paid during the year for:
	Interest (net of amounts capitalized)			$	4,851		$	4,018		$	3,888
	Income taxes			$	32,809		$	20,407		$	11,545

See accompanying Notes to Consolidated Financial Statements.

F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business

        Linens 'n Things, Inc. and its subsidiaries (collectively the "Company") operate in one segment, the retail industry, and had 542 stores in 47 states across the United States and in six provinces in Canada as of the fiscal year ended December 31, 2005. The Company's stores offer a broad assortment of home textiles, housewares and home accessories, carrying both national brands and private label goods.

2. Summary of Significant Accounting Policies

Basis of Presentation

        The Consolidated Financial Statements include those of Linens 'n Things, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

        As a result of the Transaction, described in Note 16, Subsequent Events, a new entity ("successor entity") was formed with an effective date of February 14, 2006, consisting of Linens Holding Co. and subsidiaries. Immediately following the Transaction, the Company became a wholly owned subsidiary of Linens Holding Co.

Reclassifications and Immaterial Adjustments

        Prior period amounts, within the 2003 Consolidated Statement of Cash Flows, related to the classification of accrued property and equipment purchases have been reclassified to conform with the 2005 presentation. Additionally, subsequent to the reporting of the 2005 consolidated financial statements, the Company determined an accrual for inventory in-transit was not properly reflected in the 2003 Consolidated Statement of Cash Flows. The following reclassification and immaterial adjustments, which have no impact on previously reported operating cash flow totals, has been reflected in the 2003 Consolidated Statement of Cash Flows:

Consolidated Statement of Cash Flow:	As Previously Reported			As Reclassified or Corrected
	(In thousands)
Increase in inventories	$	(82,266	)	$	(90,885	)
Increase in accounts payable		31,194			46,275
Increase in accrued expense		30,057			23,595

Fiscal Periods

        The Company utilizes a 52/53-week period ending on the Saturday nearest the last day of December. Accordingly, fiscal 2005 was a 52-week period that ended December 31, 2005 ("fiscal 2005"), fiscal 2004 was a 52-week period that ended January 1, 2005 ("fiscal 2004") and fiscal 2003 was a 52-week period that ended January 3, 2004 ("fiscal 2003").

Revenue Recognition

        The Company recognizes revenue at the time merchandise is purchased by customers at its retail stores or when shipped for merchandise purchased from its website or ordered by telephone. Shipping terms for merchandise purchased from its website or ordered by telephone are FOB shipping point and title passes to the customer upon delivery of the merchandise to the carrier. Shipping and handling fees billed to customers in a sale transaction are included in sales.

F-7

        Revenue from gift cards, gift certificates and merchandise credits are recognized when redeemed. As part of the Company's private-label credit card ("PLCC") program, when customers purchase merchandise using their PLCC they earn points that enable them to receive future free or discounted merchandise once they reach certain purchase thresholds. The value of these points is accrued for on each PLCC purchase net of an estimate for points never to be redeemed. The resulting net value of these points is reflected as a decrease in cost of sales in the Consolidated Statements of Operations.

        Provisions for estimated future sales returns are recorded in the period that the related sales are recorded. The Company determines the amount of provision based on historical information. Sales discounts, coupons, cash rebates and other similar incentives are recorded as a reduction of sales revenue in the period when the related sales are recorded. The Company periodically offers rebate programs in which customers receive either a check or a gift card upon receipt of an approved rebate claim form. For each respective rebate promotion, the Company accrues for over the promotion period the total amount eligible to be disbursed. During the period when the related qualifying sales subject to rebate are recorded, the Company records cash rebates earned as a reduction of sales revenue and gift cards to be awarded as an increase to cost of sales in the Consolidated Statements of Operations.

Inventories

        Inventories consist of the cost of finished goods merchandise purchased from domestic and foreign vendors, including inbound freight and other importation costs, product development costs and certain vendor allowances. Inventories are carried at the lower of cost or market; cost is determined by the retail inventory method of accounting. Amounts are removed from inventory at the average cost method.

Deferred Rent

        The Company accrues for scheduled rent increases contained in its leases on a straight-line basis over the expected lease term, beginning when the Company first obtains possession of the premises, including cancelable option periods in those instances where exercising such options is reasonably assured.

Store Opening and Closing Costs

        New store opening costs are charged to expense as incurred. Certain legal and construction-related overhead costs are capitalized. Store opening costs primarily include rent, store payroll and general operating costs incurred prior to the store opening.

        Prior to the adoption of Statement of Financial Accounting Standards No. 146 ("SFAS No. 146"), "Accounting for Costs Associated with Exit or Disposal Activities," in the event a store was closed before its lease expired, the remaining lease obligation, less anticipated sublease rental income, and asset impairment charges related to improvements and fixtures, inventory writedowns, and other miscellaneous closing costs, were provided for in the period in which management determined to close the store. In fiscal 2001, the Company recorded a pre-tax restructuring and asset impairment charge of $37.8 million related to the closing of certain under-performing stores (see Note 3). As of December 31, 2005 and January 1, 2005, the Company had $5.4 million and $9.0 million, respectively, remaining related to this reserve related primarily to lease obligations.

F-8

        The Company has adopted the provisions of SFAS No. 146 for exit or disposal activities, if any, initiated after December 31, 2002. SFAS No. 146 requires the Company to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan.

Financial Instruments

        Cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reflected in the Consolidated Financial Statements at carrying values which approximate fair value due to the short-term nature of these instruments.

Cash and Cash Equivalents

        Cash equivalents are considered to be those securities with maturities of three months or less when purchased. The Company's cash management program utilizes zero balance disbursement accounts. Accordingly, outstanding checks have been reclassified to Accounts Payable or Accrued Expenses and Other Current Liabilities in the Consolidated Balance Sheets. Such outstanding checks included in Accounts Payable totaled $67.2 million and $17.9 million at December 31, 2005 and January 1, 2005, respectively, and outstanding checks included in Accrued Expenses and Other Current Liabilities totaled $29.5 million and $43.8 million at December 31, 2005 and January 1, 2005, respectively.

Property and Equipment

        Property and equipment are stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets (40 years for buildings and 5 to 15 years for furniture, fixtures and equipment). Capitalized software costs are amortized on a straight-line basis over their estimated useful lives of 3 to 5 years, beginning in the year placed in service. Leasehold improvements are amortized over the expected lease term, including cancelable option periods in those instances where exercising such options is reasonably assured.

        Maintenance and repairs are charged directly to expense as incurred. Major renewals or replacements are capitalized after making the necessary adjustments to the asset and accumulated depreciation accounts of the items renewed or replaced.

Impairment of Long-Lived Assets (including Goodwill)

        In accordance with SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," long-lived assets, such as property and equipment and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount that the carrying value of the asset exceeds the fair value of the asset.

        Goodwill and intangible assets that have indefinite useful lives are tested annually for impairment. These assets are tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset's fair value. For goodwill, the impairment determination is made at the reporting unit

F-9

level and consists of two steps. First, the Company determines the fair value of a reporting unit and compares it to its carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit's goodwill over the implied fair value of the goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with FASB Statement No. 141, Business Combinations. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill.

Deferred Charges

        Deferred charges, principally lease acquisition fees, are amortized on a straight-line basis, generally over the expected lease term, beginning when the Company first obtains possession of the premises, including cancelable option periods in those instances where exercising such option is reasonably assured.

Goodwill and Other Intangible Assets

        Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets." Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets."

Costs of Sales

        In addition to the cost of inventory sold, the Company includes its buying and distribution expenses in its cost of sales. Buying expenses include all direct and indirect costs to procure merchandise. Distribution expenses include the cost of operating the Company's distribution centers and freight expense related to transporting merchandise.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses ("SG&A") in the Consolidated Statements of Operations include store payroll and selling expenses, store occupancy costs, advertising and other corporate expenses.

Vendor Allowances

        The Company receives various types of allowances from its merchandise vendors, which are based on negotiated terms, to cover costs such as freight expense, damages and markdowns and advertising. These allowances are recorded as an offset to the expense as incurred or when the merchandise is sold, as applicable, and is reflected as a reduction of cost of sales in accordance with the provisions of the Emerging Issues Task Force Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor" ("EITF 02-16"), issued by the Financial Accounting Standards Board ("FASB") in January 2003.

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        EITF 02-16 states that cash consideration received from a vendor is presumed to be a reduction of the prices of the vendor's products or services and should, therefore, be characterized as a reduction of cost of merchandise sold when recognized in the Company's Consolidated Statement of Operations. That presumption may be overcome when the consideration is either a reimbursement of specific, incremental and identifiable costs incurred to sell the vendor's products, or a payment for assets or services delivered to the vendor. EITF 02-16 was effective for contracts entered into or modified after December 31, 2002. This issue did not have a material impact on the Company's fiscal 2003 Consolidated Financial Statements as substantially all of the Company's vendor contracts in effect during fiscal 2003 were entered into prior to December 31, 2002. Beginning in the first quarter of fiscal 2004, as vendor agreements were initiated or modified, the Company applied the method of accounting for vendor allowances pursuant to EITF 02-16. In connection with the implementation of EITF 02-16, the Company treats certain funds received from vendors as a reduction to the cost of inventory and, as a result, these funds are recognized as a reduction to cost of merchandise sold when the inventory is sold. Vendor allowances, which are reflected as a reduction of inventory, and vendor purchase discounts are amortized to reduce cost of sales on an inventory turn basis. Accordingly, certain funds received from vendors, which were historically reflected as a reduction of advertising expense in SG&A or cost of sales, are now treated as a reduction of cost of inventory as the advertising allowances received are presumed to be reductions to the cost of inventory under EITF 02-16 when the costs cannot be determined as incremental and specifically identifiable. The accounting for vendor allowances in accordance with EITF 02-16 reduced the Company's operating profit and net income for fiscal 2004 by $21.5 million and $13.3 million, respectively.

Advertising Costs

        The Company expenses the production costs of advertising at the commencement date of the advertisement. Advertising costs, recorded as a component of selling, general and administrative expenses, were $114.0 million, $103.5 million and $95.0 million for fiscal 2005, fiscal 2004 and fiscal 2003, respectively. Prior to the implementation of EITF 02-16 in fiscal 2004, fiscal 2003 advertising costs were reduced by vendor credits totaling $24.7 million.

Income Taxes

        Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to estimated taxable income to be realized in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in statutory tax rates is recognized in income in the period that includes the enactment date.

Stock-Based Compensation

        The Company grants stock options and restricted stock units for a fixed number of shares to employees and directors. The exercise prices of the stock options are equal to the fair market value of the underlying shares at the date of grant. The Company has adopted the disclosure provisions of Statement No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123") and has not adopted the recognition provisions of SFAS No. 123. In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of SFAS No. 123" ("SFAS No. 148"). In accordance with the provisions of

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SFAS No. 148, the Company elected not to adopt the fair value based method of accounting for its stock-based compensation plans, but continues to apply the recognition and measurement principles of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. Accordingly, the Company does not recognize compensation expense for stock option grants and amortizes restricted stock unit grants at fair market value at the date of grant over specified vesting periods in the accompanying Consolidated Financial Statements. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has complied with the disclosure requirements of SFAS No. 148.

        For fiscal years ended 2005, 2004 and 2003, the Company accounted for stock options using the intrinsic value method prescribed under APB No. 25, and accordingly, no compensation cost has been recognized in connection with stock option grants in the accompanying Consolidated Financial Statements.

        Compensation cost charged against income for the Company's restricted stock unit grants was $1.2 million, $0.5 million and $0.8 million for fiscal years 2005, 2004 and 2003, respectively.

        In December 2004 the FASB issued SFAS No. 123 (Revised 2004), "Share-Based Payment" ("SFAS No. 123 (Revised 2004)"). Effective for the first quarter of fiscal 2006, SFAS No. 123 (Revised 2004) will require the Company to recognize the grant-date fair value of stock options grants as compensation expense in the Consolidated Statements of Operations.

        Set forth below are the Company's net income and net income per share presented "as reported" and as if compensation cost had been recognized in accordance with the provisions of SFAS No. 148:

		Fiscal Year Ended
		2005		2004		2003
		(in millions, except per share data)
Net income:
As reported		$	36.0	$	60.5	$	72.8
Add: Stock-based employee compensation expense included in net income as reported, net of tax			0.8		0.3		0.5
			36.8		60.8		73.3
Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects			7.3		8.6		11.4
Pro forma		$	29.5	$	52.2	$	61.9
Net income per share of common stock:
Basic:
	As reported	$	0.79	$	1.34	$	1.65
	Pro forma	$	0.65	$	1.16	$	1.40
Diluted:
	As reported	$	0.79	$	1.32	$	1.62
	Pro forma	$	0.65	$	1.16	$	1.40

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        The effects of applying SFAS No. 148 in this disclosure are not necessarily indicative of future amounts.

        The fair value of each stock option grant and restricted stock unit grant is estimated on the date of grant using the Black-Scholes option-pricing model using the following assumptions for grants:

	Fiscal Year Ended
	2005		2004		2003
Expected life (years)	3.9		5.0		5.7
Expected volatility	35.2	%	43.5	%	40.7	%
Risk-free interest rate	4.0	%	3.6	%	1.5	%
Expected dividend yield	0.0	%	0.0	%	0.0	%

        The weighted-average fair value of options granted as of December 31, 2005, January 1, 2005 and January 3, 2004 was $8.24, $10.48 and $12.19, respectively. The weighted-average fair value of restricted stock units granted as of December 31, 2005, January 1, 2005 and January 3, 2004 was $6.87, $12.81 and $13.48, respectively.

Earnings Per Share

        The Company presents earnings per share on a "basic" and "diluted" basis. Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares outstanding adjusted for dilutive common stock equivalents.

        The calculation of basic and diluted earnings per share ("EPS") for fiscal 2005, 2004 and 2003 is as follows (in thousands, except per share amounts):

		Fiscal Year Ended
		2005		2004		2003
Net income		$	35,982	$	60,521	$	72,759
Average shares outstanding:
Basic			45,293		45,055		44,225
Effect of outstanding stock options and restricted stock unit grants			409		749		622
Diluted			45,702		45,804		44,847
Earnings per share
	Basic	$	0.79	$	1.34	$	1.65
	Diluted	$	0.79	$	1.32	$	1.62

        Options for which the exercise price was greater than the average market price of common shares as of the fiscal years ended 2005, 2004 and 2003 were not included in the computation of diluted earnings per share as the effect would be antidilutive. These consisted of options totaling 2,732,000 shares, 1,638,000 shares and 2,430,000 shares, respectively.

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Use of Estimates in the Preparation of Financial Statements

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts and timing of revenues and of expenses during the reporting period. The Company bases its estimates on historical experience and on other assumptions that it believes to be relevant under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The Company's management believes the following critical accounting estimates involve such significant judgments and estimates inherent in the preparation of the Consolidated Financial Statements.

        Valuation of Inventory:    Inventories are valued using the lower of cost or market value, determined by the retail inventory method ("RIM"). Under RIM, the valuation of inventories at cost and the resulting gross margins are calculated by applying a calculated cost-to-retail ratio to the retail value of inventories. RIM is an averaging method that is used in the retail industry due to its practicality. Inherent in RIM calculation are certain significant management judgments and estimates including, among others, merchandise mark-on, mark-up, markdowns and shrinkage based on historical experience between the dates of physical inventories, all of which significantly impact the ending inventory valuation at cost. The methodologies utilized by the Company in its application of RIM are consistent for all periods presented. Such methodologies include the development of the cost-to-retail ratios, the development of shrinkage reserves and the accounting for price changes. At any one time, inventories include items that have been written down to the Company's best estimate of their realizable value. Factors considered in estimating realizable value include the age of merchandise and anticipated demand. Actual realizable value could differ materially from this estimate based upon future customer demand or economic conditions.

        Sales Returns:    The Company estimates future sales returns and records a provision in the period that the related sales are recorded based on historical return rates. Should actual returns differ from the Company's estimates, the Company may be required to revise the recorded provision for future sales returns. As such, estimating sales returns requires management judgment as to changes in preferences and quality of products being sold, among other things; therefore, these estimates may vary materially in the future. The sales returns calculations are regularly compared with actual return experience. In preparing the Company's financial statements for fiscal 2005 and fiscal 2004, the Company's sales returns reserve was approximately $7.1 million and $7.4 million, respectively.

        Impairment of Assets:    The Company reviews goodwill for possible impairment at least annually. Impairment losses are recognized when the implied fair value of goodwill is less than its carrying value. The Company also periodically evaluates long-lived assets other than goodwill for indicators of impairment. The Company's judgments regarding the existence of impairment indicators are based on market conditions and operational performance. Future events could cause the Company to conclude that impairment indicators exist and that the value of long-lived assets and goodwill is impaired. During fiscal years 2005, 2004 and 2003, the Company determined that the carrying value of certain store assets exceeded their related estimated future undiscounted cash flows. As a result, the Company reduced the carrying value of fixed assets by approximately $4.1 million, $0.9 million and $0.8 million for fiscal years 2005, 2004 and 2003, respectively, with the related impairment loss recorded in SG&A. At the end of fiscal 2005 and fiscal 2004, the Company's net value for property and equipment was

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approximately $612.2 million and $578.8 million, respectively, and goodwill was $18.1 million for fiscal years 2005 and 2004.

        Store Closure Costs:    Prior to the adoption of SFAS No. 146, the Company recorded estimated store closure costs, such as fixed asset write-offs, estimated lease commitment costs net of estimated sublease income, markdowns for inventory that will be sold below cost, and other miscellaneous store closing costs, in the period in which management determined to close a store. Such estimates may be subject to change should actual costs differ. In fiscal 2001, the Company recorded a pre-tax restructuring and asset impairment charge of $37.8 million ($23.7 million after-tax) related to the closing of certain under-performing stores. As of December 31, 2005 and January 1, 2005, the Company had $5.4 million and $9.0 million, respectively, remaining related to this reserve. The Company continues to negotiate the lease buyouts or sublease agreements for certain of these stores. Final settlement of these reserves is predominantly a function of negotiations with unrelated third parties, and, as such, these estimates may be subject to change in the future. For the remaining three stores for which an acceptable buyout or sublease agreement has not yet been negotiated and entered into, the Company is considering other alternatives, including reopening one or more of the stores.

        The Company has adopted the provisions of SFAS No. 146 for exit or disposal activities, if any, initiated after December 31, 2002. SFAS No. 146 requires the Company to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Although the Company believes the adoption of SFAS No. 146 does not impact the consolidated financial position or results of operations, it can be expected to impact the timing of liability recognition associated with future exit activities, if any.

        Self-Insurance:    The Company purchases third party insurance for worker's compensation, medical, auto and general liability costs that exceed certain levels for each type of insurance program. The Company is responsible for the payment of claims under these insured excess limits. The Company establishes accruals for its insurance programs based on available claims data and historical trend and experience, as well as loss development factors prepared by third party actuaries. Workers compensation and general liability accruals are recorded at their net present value. In preparing the estimates, the Company also considers the nature and severity of the claims, analysis provided by third party claims administrators, as well as current legal, economic and regulatory factors.

        The Company evaluates the accrual and the underlying assumptions periodically and makes adjustments as needed. The ultimate cost of these claims may be greater than or less than the established accrual. While the Company believes that the recorded amounts are adequate, there can be no assurance that changes to management's estimates will not occur due to limitations inherent in the estimate process. In the event the Company determines the accruals should be increased or reduced, the Company would record such adjustments in the period in which such determination is made.

        The accrued obligation for these self-insurance programs was approximately $15.3 million for fiscal year 2005 and $14.5 million for fiscal year 2004.

        Litigation:    The Company records an estimated liability related to various claims and legal actions arising in the ordinary course of business, which is based on available information and advice from outside counsel where applicable. As additional information becomes available, the Company assesses the potential liability related to its pending claims and may adjust its estimates accordingly.

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3. Restructuring and Asset Impairment Charge

        In fiscal 2001, the Company developed and committed to a strategic initiative designed to improve store performance and profitability. This initiative called for the closing of certain under-performing stores, which did not meet the Company's profit objectives. In connection with this initiative, the Company recorded a pre-tax restructuring and asset impairment charge of $37.8 million ($23.7 million after-tax) in the fourth quarter of fiscal 2001. A pre-tax reserve of $20.5 million was established for estimated lease commitments for stores to be closed. The reserve considers estimated sublease income. Because all of the stores were leased, the Company is not responsible for the disposal of property other than fixtures. A pre-tax writedown of $9.5 million was recorded as a reduction in property and equipment for fixed asset impairments for these stores. The fixed asset impairments represent fixtures and leasehold improvements. A pre-tax reserve of $4.0 million was established for other estimated miscellaneous store closing costs. Additionally, a pre-tax charge of $3.8 million was recorded in cost of sales for estimated inventory markdowns below cost for the stores to be closed. Certain components of the restructuring charge were based on estimates and may be subject to change in the future. The Company has closed all of the initially identified stores other than one store, which the Company decided to keep open and whose reserve was reversed.

        As of December 31, 2005 the Company has $5.4 million remaining in the 2001 restructuring and asset impairment charge. The following table displays a roll forward of the activity for fiscal years 2005 and 2004, and the reserves remaining as of December 31, 2005 ($ in millions):

	Remaining at 1/03/04		Fiscal 2004 Usage			Remaining at 1/01/05		Fiscal 2005 Usage			Remaining at 12/31/05
Lease commitments	$	15.6	$	(6.6	)	$	9.0	$	(3.6	)	$	5.4
	$	15.6	$	(6.6	)	$	9.0	$	(3.6	)	$	5.4

        The fiscal 2005 and 2004 usage primarily consists of payments for lease commitments. The 2005 activity also includes the reversal of estimated lease commitment costs of approximately $4.3 million as these reserves were not needed, offset by an increase to lease commitment costs of approximately $5.8 million due to changes in estimates based on current negotiations. The 2004 activity also includes the reversal of estimated lease commitment costs of approximately $1.1 million as these reserves were not needed, offset by an increase to lease commitment costs by approximately $1.8 million due to changes in estimates based on current negotiations. The net changes in the restructuring reserve have been reflected within SG&A on the Consolidated Statements of Operations. The restructuring reserve balance is included in Accrued Expenses and Other Current Liabilities in the Consolidated Balance Sheets.

4. Accounts Receivable

	Fiscal Year Ended
Accounts receivable consisted of the following (in thousands):
	2005		2004
Credit card settlements due	$	27,007	$	16,538
Due from landlords		8,778		5,431
Other		7,776		3,797
	$	43,561	$	25,766

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        The Company's bad debt experience has historically been insignificant and accordingly, a minimal allowance for doubtful accounts has been established for these receivables.

        Amounts due from landlords are allowances provided by landlords recorded as deferred rent credits included in Deferred Income Taxes and Other Long-Term Liabilities on the Consolidated Balance Sheets. Deferred rent credits are amortized as a reduction of rent expense over the expected lease term, including cancelable option periods in those instances where exercising such options is reasonably assured.

        Other includes approximately $2.2 million resulting from the VISA/MasterCard antitrust litigation settlement which has been included in the fourth quarter of fiscal 2005 as a reduction of selling, general and administrative expenses in the Consolidated Statements of Operations.

5. Property and Equipment

		Fiscal Year Ended
Property and equipment consisted of the following (in thousands):
		2005		2004
Land		$	1,480	$	1,480
Building			6,080		6,080
Furniture, fixtures and equipment			608,307		556,822
Leasehold improvements			417,005		371,095
Computer software			34,762		26,152
Construction-in-progress			9,109		—
			1,076,743		961,629
Less:
	Accumulated depreciation and amortization		464,496		382,813
		$	612,247	$	578,816

        Depreciation expense was approximately $90.1 million, $80.8 million and $70.9 million for fiscal 2005, fiscal 2004 and fiscal 2003, respectively.

6. Accounts Payable, Accrued Expenses and Other Current Liabilities

Accounts Payable

        The Company maintains a trade payables program with General Electric Capital Corporation ("GECC") under which GECC pays participating Company suppliers the amount due from the Company in advance of the original due date. In exchange for the earlier payment, these suppliers accept a discounted payment. On the original due date of the payables, the Company pays GECC the full amount. Pursuant to the agreement, any favorable economics realized by GECC for transactions under this program are shared with the Company. The Company recognizes the total vendor discount realized by GECC as a reduction of the cost of inventory in the Consolidated Balance Sheets and records the share of the vendor discount due GECC as interest expense in the Consolidated Statements of Operations.

        GECC and the Company have determined to terminate the trade payables program effective January 13, 2006. As of December 31, 2005, the Company paid all amounts outstanding under the

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program. As of January 1, 2005, the Company owed approximately $65.0 million to GECC under this program. The Company, at its discretion, may continue to offer early payment options to suppliers in exchange for discounted payments.

        In addition, included in accounts payable are amounts for gift card liabilities of $35.8 million and $30.5 million as of December 31, 2005 and January 1, 2005, respectively. Gift cards that are not expected to be redeemed are recorded as a reduction to selling, general and administrative expense in the Consolidated Statements of Operations. Such amounts recognized for fiscal 2005, 2004 and 2003 amounted to $2.8 million, $5.3 million and $2.5 million, respectively.

Accrued Expenses and Other Current Liabilities

	Fiscal Year Ended
Accrued expenses and other current liabilities consisted of the following (in thousands):
	2005		2004
Other taxes payable	$	35,602	$	33,123
Income taxes payable		29,181		31,381
Salaries and employee benefits		24,518		22,376
Other		109,723		125,764
	$	199,024	$	212,644

        Included in "other" is miscellaneous store operating and corporate office accrued expenses.

7. Short-Term Borrowing Arrangements

        In November 2004, the Company entered into a $250 million senior revolving credit facility agreement (the "Credit Agreement") with third party institutional lenders which expires November 23, 2009. The Credit Agreement allows for up to $50 million of additional unsecured indebtedness under lines of credit outside of the Credit Agreement ("Additional Indebtedness"). Additional Indebtedness includes a new unsecured credit facility in the amount of $34 million which the Company entered into in July 2005 covering its Canadian operations. This credit facility expires July 29, 2008. The Credit Agreement replaced the $150 million senior revolving credit facility amended June 2002, which allowed for up to $40 million in borrowings from additional lines of credit outside the agreement (the "2002 Credit Agreement").

        Under the Credit Agreement, interest on all borrowings is determined based upon several alternative rates, including a fixed margin above LIBOR. The Credit Agreement contains certain financial covenants, including those relating to the maintenance of a minimum tangible net worth, a minimum fixed charge coverage ratio and a maximum leverage ratio. As of December 31, 2005, the Company was in compliance with its covenants under the Credit Agreement. Under the Credit Agreement, the amount of dividends that the Company may pay may not exceed the sum of $50 million plus, on a cumulative basis, an amount equal to 25% of the consolidated net income for each fiscal quarter, commencing with the fiscal quarter ending April 3, 2004. The Company has never paid cash dividends and does not currently anticipate paying cash dividends in the future. As of December 31, 2005, the Company had no borrowings under the Credit Agreement and no borrowings under the Additional Indebtedness. At various times throughout fiscal 2005 and 2004, the Company borrowed against its Credit Agreement and the 2002 Credit Agreement, respectively, for working capital needs. The Company also had $98.9 million of letters of credit outstanding as of December 31,

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2005, which included standby letters of credit issued primarily under the Credit Agreement and import letters of credit used for merchandise purchases. The Company is not obligated under any formal or informal compensating balance requirements.

8. Deferred Income Taxes and Other Long-Term Liabilities

	Fiscal Year Ended
Deferred income taxes and other long-term liabilities consisted of the following (in thousands):
	2005		2004
Deferred income taxes	$	54,416	$	62,720
Deferred rent		74,262		69,390
Deferred rent credit		189,020		176,975
Mortgage note payable		2,076		2,196
Other		10,190		6,957
	$	329,964	$	318,238

        Deferred rent represents the unamortized accrual for scheduled rent increases contained in the Company's leases and deferred rent credits represent the unamortized portion of landlord allowances. Mortgage note payable represents an 8.25% fixed-rate mortgage note on the land and building of one of the Company's closed stores. Under the mortgage note terms, the Company is required to make 96 equal payments of principal and interest, with a final principal payment of approximately $1.6 million in August 2012.

9. Leases

        The Company has non-cancelable operating leases, primarily for retail stores, which expire through 2029. The leases generally contain renewal options for periods ranging from 5 to 20 years in total and require the Company to pay costs such as real estate taxes and common area maintenance. Contingent rentals are paid based on a percentage of net sales as defined by lease agreements. Rental expense, net of landlord allowance amortization of $21.6 million, $20.0 million and $17.3 million for fiscal years 2005, 2004 and 2003, respectively, and sublease rentals, for all operating leases was as follows (in thousands):

		Fiscal Year Ended
		2005		2004		2003
Minimum rentals		$	249,210	$	228,575	$	204,110
Contingent rentals			—		17		34
			249,210		228,592		204,144
Less:
	Sublease rentals		4,489		3,599		2,903
		$	244,721	$	224,993	$	201,241

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        At fiscal year end 2005, the future minimum rental payments required under operating leases and the future minimum sublease rentals excluding lease obligations for closed stores resulting from the 2001 restructuring and asset impairment charge were as follows (in thousands):

Fiscal Year
2006	$	278,241
2007		282,852
2008		282,452
2009		280,745
2010		275,949
Thereafter		1,298,567
	$	2,698,806
Total future minimum sublease rentals	$	39,303

        As of December 31, 2005 the Company had fully executed leases for 28 stores planned to open in fiscal years 2006 and 2007, for which aggregate minimum rental payments over the term of the leases is approximately $158.4 million. The table above includes payments for stores that had fully executed leases as of December 31, 2005.

        The Company also has assigned property at a retail location in which the Company guarantees the payment of rent over the specified lease term in the event of non-performance. As of December 31, 2005, the maximum potential amount of future payments the Company could be required to make under such guarantee is approximately $0.7 million.

10. Stock Incentive Plans

        The Company has adopted the 2004 Stock Award and Incentive Plan (the "2004 Plan"). The 2004 Plan provides for the granting of options, restricted stock unit grants and other stock-based awards (collectively, "awards") to key employees and non-employee directors. The 2004 Plan replaced both the Company's 2000 Stock Award and Incentive Plan (the "2000 Plan") and the Broad-Based Equity Plan. The 2000 Plan replaced both the Company's 1996 Incentive Compensation Plan (the "1996 Plan") and the 1996 Non-Employee Directors' Stock Plan (the "Directors' Plan"). Therefore, no future awards will be made under the 2000 Plan, the Broad-Based Equity Plan, the 1996 Plan or the Directors' Plan (collectively, the "Prior Plans"), although outstanding awards under the Prior Plans will continue to be in effect. The Company has also adopted the New Hire Authorization. The New Hire Authorization provides for the granting of awards as an inducement to a person being retained for employment by the Company.

        Under the 2004 Plan, an aggregate of 4,000,000 shares (plus any shares under outstanding awards under the Prior Plans which become available for further grants) was authorized for issuance of awards. Under the New Hire Authorization, an aggregate of 500,000 shares was authorized.

        Stock options under the 2004 Plan and the New Hire Authorization are granted with exercise prices at the fair market value of the underlying shares at the date of grant. The right to exercise options generally commences one to five years after the grant date, and the options expire between five to ten years after the grant date. Restrictions on restricted stock unit grants lapse over vesting periods of up to five years. Restricted stock unit grants are considered outstanding as of the grant date for

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purposes of computing diluted EPS and are considered outstanding upon vesting for purposes of computing basic EPS.

        At fiscal year end 2005, 7,500 restricted stock unit grants were outstanding under the 2000 Plan. During fiscal 2005, 3,750 restricted stock unit grants were released, no restricted stock unit grants were awarded and no restricted stock unit grants were canceled.

        At fiscal year end 2005, 9,850 restricted stock unit grants were outstanding under the Broad-Based Equity Plan. During 2005, 4,135 restricted stock unit grants were released, no restricted stock unit grants were awarded and no restricted stock unit grants were canceled.

        At fiscal year end 2005, 118,066 restricted stock unit grants were outstanding under the 2004 Plan. During 2005, 16,733 restricted stock unit grants were released, 72,299 restricted stock unit grants were awarded and no restricted stock unit grants were canceled.

        At fiscal year end 2005, 20,000 restricted stock unit grants were outstanding under the New Hire Authorization. During 2005, 5,000 restricted stock unit grants were released, no restricted stock unit grants were awarded and no restricted stock unit grants were canceled.

        At fiscal year end 2005, 1,151,673 stock options were outstanding under the 1996 Plan. During fiscal 2005, no stock options were granted, 69,275 stock options were exercised, 18,070 stock options were canceled, and 1,151,673 stock options were exercisable at fiscal year end 2005 under the 1996 Plan.

        At fiscal year end 2005, 48,800 stock options were outstanding under the Directors' Plan. During fiscal 2005, no stock options were granted, no stock options were exercised, no stock options were canceled, and 48,800 stock options were exercisable at fiscal year end 2005 under the Directors' Plan.

        At fiscal year end 2005, 1,463,796 stock options were outstanding under the 2000 Plan. During fiscal 2005, no stock options were granted, 10,425 stock options were exercised, 538 stock options were canceled, and 1,455,131 stock options were exercisable at fiscal year end 2005 under the 2000 Plan.

        At fiscal year end 2005, 1,470,638 stock options were outstanding under the Broad-Based Equity Plan. During fiscal 2005, no stock options were granted, 79,043 stock options were exercised, 237,234 stock options were canceled, and 1,209,142 stock options were exercisable at fiscal year end 2005 under the Broad-Based Equity Plan.

        At fiscal year end 2005, 1,246,690 stock options were outstanding under the 2004 Plan. During fiscal 2005, 135,290 stock options were granted, no stock options were exercised, 108,195 stock options were canceled, and 782,231 options were exercisable at fiscal year end 2005 under the 2004 Plan.

        At fiscal year end 2005, 450,000 stock options were outstanding under the New Hire Authorization. During fiscal 2005, 150,000 stock options were granted, no stock options were exercised, no stock options were canceled, and 120,000 stock options were exercisable at fiscal year end 2005 under the New Hire Authorization.

F-21

        The following tables summarize information about stock option transactions for the 2004 Plan, the New Hire Authorization, and the Prior Plans:

	Number of Shares	Weighted- Average Exercise Price
Balance at January 4, 2003	5,347,248	$	23.21
Options granted	1,056,625	$	27.13
Options exercised	717,652	$	17.70
Options canceled	370,397	$	23.19
Balance at January 3, 2004	5,315,824	$	24.72
Options granted	1,534,695	$	25.56
Options exercised	381,946	$	20.46
Options canceled	399,486	$	27.54
Balance at January 1, 2005	6,069,087	$	25.02
Options granted	285,290	$	25.22
Options exercised	158,743	$	16.95
Options canceled	364,037	$	25.79
Balance at December 31, 2005	5,831,597	$	25.20
Options Exercisable as of:
January 3, 2004	3,102,033	$	25.06
January 1, 2005	3,412,039	$	24.76
December 31, 2005	4,766,977	$	25.09

	Options Outstanding
Range of Exercise Price	Outstanding as of December 31, 2005	Weighted-Average Remaining Contractual Life (in years)	Weighted-Average Exercise Price
$  7.75-$11.50	60,400	0.9	$	8.08
$11.51-$17.25	4,300	1.5	$	13.76
$17.26-$21.50	1,220,574	5.1	$	19.88
$21.51-$25.75	2,108,575	4.6	$	24.34
$25.76-$32.50	2,386,748	4.4	$	28.88
$32.51-$48.75	51,000	5.3	$	36.79
Total	5,831,597	4.6	$	25.20

F-22

	Options Exercisable
Range of Exercise Price	Exercisable as of December 31, 2005	Weighted-Average Exercise Price
$  7.75-$11.50	60,400	$	8.08
$11.51-$17.25	4,300	$	13.76
$17.26-$21.50	1,195,809	$	19.87
$21.51-$25.75	1,554,044	$	24.27
$25.76-$32.50	1,907,599	$	29.31
$32.51-$48.75	44,825	$	37.07
Total	4,766,977	$	25.09

11. Employee Benefit Plans

        The Company has a 401(k) plan for its US employees and an employee savings plan for its Canadian employees. Company contributions to the two plans amounted to approximately $1.4 million, $1.4 million and $1.2 million for fiscal years 2005, 2004 and 2003, respectively.

        Effective July 1, 1999, the Company established a Supplemental Executive Retirement Program ("SERP"). The SERP, which in part is funded with the cash surrender values of certain life insurance policies owned by the Company, provides eligible executives with supplemental pension benefits, in addition to amounts received under the Company's 401(k) benefit plan. Under the terms of the SERP, upon termination of employment with the Company, eligible participants will be entitled to benefits determined under the SERP beginning at or after age 55. The SERP has three components: (i) a defined benefit component, (ii) a split dollar insurance component, which is frozen due to limitations imposed by the Sarbanes-Oxley Act prohibiting the Company from paying premiums into the policy beginning with the 2003 premium payment and (iii) a new defined contribution component, which was established in 2004 because of the restrictions on further premium payments under the split dollar insurance arrangement. This new component is designed to provide, together with the defined benefit component and the frozen split dollar policy, total projected benefits similar to what would have been provided if the split dollar insurance arrangement had not been frozen. Currently, only the Company's Chairman and Chief Executive Officer is a participant under the SERP, although additional participants could be added in the future. The Company recorded expenses related to the SERP of approximately $220,000, $170,000 and $875,000 for fiscal years 2005, 2004 and 2003, respectively. Included in fiscal 2003 SERP expense is $784,000 related to the departure of a former executive.

12. Income Taxes

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax

F-23

purposes. Significant components of the Company's deferred tax assets and liabilities were as follows (in thousands):

Fiscal Year Ended		2005		2004
Deferred tax assets:
	Employee benefits	$	6,481	$	4,917
	Lease termination costs		2,140		3,393
	State NOL		5,911		3,183
	Other		1,618		1,372
Total deferred tax assets			16,150		12,865
Deferred tax liabilities:
	Inventories	$	9,762	$	11,921
	Property and equipment		61,594		68,993
	Other		1,578		—
Total deferred tax liabilities			72,934		80,914
Net deferred tax liability		$	56,784	$	68,049

        Deferred tax assets at December 31, 2005 include state net operating loss carryforward ("NOL") of approximately $125.4 million, expiring at various dates between 2006 and 2021. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances of $0.9 million at December 31, 2005. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

        At December 31, 2005 and January 1, 2005, the net deferred tax liability was included in the Consolidated Balance Sheets as follows (in thousands):

Fiscal Year Ended	2005			2004
Current deferred asset	$	2,033		$	685
Current deferred liability		(4,401	)		(6,014	)
Non-Current deferred tax liability		(54,416	)		(62,720	)
Net deferred tax liability	$	56,784		$	68,049

F-24

        The components of income before income taxes comprised the following:

	Fiscal Year Ended
(in thousands):
	2005		2004		2003
Domestic	$	49,356	$	91,989	$	113,102
Foreign		8,505		5,940		4,632
Total	$	57,861	$	97,929	$	117,734

        The provision for income taxes comprised the following for:

		Fiscal Year Ended
(in thousands):
		2005			2004			2003
Current:
	U.S. Federal	$	21,516		$	28,212		$	5,835
	U.S. State		8,526			8,932			612
	Non-U.S.		3,102			1,376			1,402
			33,144			38,520			7,849
Deferred:
	U.S. Federal		(6,578	)		2,971			32,600
	U.S. State		(3,654	)		(4,977	)		4,264
	Non-U.S.		(1,033	)		894			262
			(11,265	)		(1,112	)		37,126
Total		$	21,879		$	37,408		$	44,975

        The Company has not recognized any United States tax expense on its undistributed international earnings since it has an intention to reinvest the earnings outside the United States for the foreseeable future. These undistributed earnings total approximately $19.4 million at December 31, 2005. The Company did not repatriate any of its foreign earnings under the provisions of the American Jobs Creation Act of 2004.

        The following is a reconciliation between the statutory Federal income tax rate and the effective rate for:

	Fiscal Year Ended
	2005		2004		2003
Effective tax rate	37.8	%	38.2	%	38.2	%
State income taxes, net of federal benefit	(5.5	)	(2.6	)	(2.7	)
Foreign taxes	1.6		(0.3	)	(0.1	)
Other	1.1		(0.3	)	(0.4	)
Statutory Federal income tax rate	35.0	%	35.0	%	35.0	%

F-25

13. Commitments and Contingencies

        On November 8, 2005, the Company announced that it entered into a definitive agreement (the "Merger Agreement") to be acquired by a company newly formed and controlled by Apollo Management, L.P. ("Apollo"), on behalf of itself and its managed funds, together with certain investors; NRDC Real Estate Advisors I, LLC and Silver Point Capital Fund Investments LLC. Under the terms of the agreement, Linens "n Things' stockholders are to receive $28.00 per share in cash. All outstanding options to purchase shares of common stock, restricted shares and deferred shares of common stock of the Company will be canceled and converted into the right to receive $28.00 per restricted share, deferred share or share of common stock underlying such option less, in the case of options, the exercise price thereof, without interest. The Merger Agreement contains certain termination rights and provides that, upon the termination of the Merger Agreement under specified circumstances, the Company may be required to pay Apollo a termination fee equal to $27 million and expenses up to $5 million. The debt financing for the transaction is subject to various conditions, including the Company achieving EBITDA of not less than $140 million for the full 2005 fiscal year and comparable net sales of not less than negative 6% for the 2005 fourth quarter, as well as other customary conditions for a leveraged acquisition financing. The debt financing commitments define EBITDA as net earnings before interest, taxes, depreciation and amortization, with other specified adjustments.

        The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement and the debt financing commitment letters, which are each filed as exhibits to the Company's Form 8-K filed with the Securities and Exchange Commission on November 9, 2005.

        The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management the ultimate disposition of these matters is not expected to have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.

F-26

14. Summary of Quarterly Results (unaudited)

(in thousands, except per share data)	First Quarter			Second Quarter			Third Quarter		Fourth Quarter		Fiscal Year
Net sales
2005	$	570,946		$	573,317		$	629,268	$	921,211	$	2,694,742
2004	$	552,800		$	578,749		$	654,196	$	875,724	$	2,661,469
Gross profit
2005		236,393			236,943			258,315		367,697		1,099,348
2004		221,246			232,676			269,106		348,741		1,071,769
Operating (loss) profit
2005		(5,761	)		(8,759	)		2,807		73,540		61,827
2004		(1,042	)		1,201			28,442		72,689		101,290
Net (loss) income
2005		(4,074	)		(5,932	)		1,024		44,964		35,982
2004		(1,112	)		97			17,175		44,361		60,521
Net (loss) income per share
Basic(1)
2005	$	(0.09	)	$	(0.13	)	$	0.02	$	0.99	$	0.79
2004	$	(0.02	)	$	—		$	0.38	$	0.98	$	1.34
Diluted(1)
2005	$	(0.09	)	$	(0.13	)	$	0.02	$	0.98	$	0.79
2004	$	(0.02	)	$	—		$	0.38	$	0.97	$	1.32

(1)

Net income per share amounts for each quarter are required to be computed independently and may not equal the amount computed for the fiscal year.

15. Supplemental Condensed Consolidating Financial Information

      As part of the Transactions as discussed in Note 16, Subsequent Events, Linens "n Things, Inc. and Linens "n Things Center, Inc. (collectively, the "Co-Issuers"), issued $650 million aggregate principal amount of Senior Secured Floating Rate Notes due 2014 (the "Notes"). The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior basis by the Company, and by each of the Company's direct and indirect subsidiaries that guarantee the Company's new asset-based revolving credit facility except for its Canadian subsidiaries. The Company's Canadian subsidiaries (the "Non-Guarantors") are not guarantors of the Notes.

        The following tables present the supplemental condensed consolidating financial information for the Co-Issuers, the Guarantors (excluding the Co-Issuers which is also a Guarantor but is separately presented) and the Non-Guarantors together with eliminations, as of and for the periods indicated. The company has not presented separate financial statements and other disclosures concerning the Guarantors because management has determined that such information is not material to investors. The accounting policies for Co-Issuers, Guarantors, and Non-Guarantors are the same as those described for the Company in the Summary of Significant Accounting Policies. The consolidating financial information may not necessarily be indicative of results of operations or financial position had the Guarantors operated as independent entities.

        Income tax expense has been provided on the combined Co-Issuer and Guarantor subsidiaries based on actual effective tax rates.

F-27

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2005
(In Thousands)

	Co-Issuers			Guarantors		Non-Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	136,569		$	8,718	$	12,871	$	—		$	158,158
Accounts receivable		361			39,757		3,443		—			43,561
Inventories		15,105			725,856		46,322		—			787,283
Prepaid expenses and other current assets		84			15,368		1,973		—			17,425
Current deferred taxes		—			1,789		244		—			2,033
Total current assets		152,119			791,488		64,853		—			1,008,460
Property and equipment, net		9,974			561,271		41,002		—			612,247
Goodwill		—			18,126		—		—			18,126
Intercompany receivables		—			856,999		—		(856,999	)		—
Intercompany notes receivable		1,096,991			—		23,306		(1,120,297	)		—
Investment in subsidiaries		490,933			—		—		(490,933	)		—
Deferred charges and other noncurrent assets, net		332			11,466		203		—			12,001
Total assets	$	1,750,349		$	2,239,350	$	129,364	$	(2,468,229	)	$	1,650,834
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	(16	)	$	249,399	$	18,199	$	—		$	267,582
Accrued expenses and other current liabilities		43,824			144,840		10,360		—			199,024
Current deferred taxes		222			4,179		—		—			4,401
Total current liabilities		44,030			398,418		28,559		—			471,007
Intercompany payable		848,054			—		8,945		(856,999	)		—
Intercompany notes payable		—			1,073,800		46,497		(1,120,297	)		—
Deferred income taxes and other long-term liabilities		8,402			302,713		18,849		—			329,964
Total liabilities		900,486			1,774,931		102,850		(1,977,296	)		800,971
Total shareholders' equity		849,863			464,419		26,514		(490,933	)		849,863
Total liabilities and shareholders' equity	$	1,750,349		$	2,239,350	$	129,364	$	(2,468,229	)	$	1,650,834

F-28

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
January 1, 2005
(In Thousands)

	Co-Issuers			Guarantors		Non-Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	174,973		$	13,122	$	15,914	$	—		$	204,009
Accounts receivable		757			23,489		1,520		—			25,766
Inventories		14,500			657,005		43,679		—			715,184
Prepaid expenses and other current assets		85			36,854		1,396		—			38,335
Current deferred taxes		—			—		685		—			685
Total current assets		190,315			730,470		63,194		—			983,979
Property and equipment, net		8,314			536,527		33,975		—			578,816
Goodwill		—			18,126		—		—			18,126
Intercompany receivable		—			39,120		—		(39,120	)		—
Intercompany notes receivable		201,527			—		22,574		(224,101	)		—
Investment in subsidiaries		468,110			—		—		(468,110	)		—
Deferred charges and other noncurrent assets, net		424			10,406		133		—			10,963
Total assets	$	868,690		$	1,334,649	$	119,876	$	(731,331	)	$	1,591,884
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	(13	)	$	231,837	$	13,811	$	—		$	245,635
Accrued expenses and other current liabilities		31,464			172,545		8,635		—			212,644
Current deferred taxes		71			5,943		—		—			6,014
Total current liabilities		31,522			410,325		22,446		—			464,293
Intercompany payable		21,213			—		17,907		(39,120	)		—
Intercompany notes payable		—			179,065		45,036		(224,101	)		—
Deferred income taxes and other long-term liabilities		6,603			295,639		15,996		—			318,238
Total liabilities		59,338			885,029		101,385		(263,221	)		782,531
Total shareholders' equity		809,352			449,620		18,491		(468,110	)		809,353
Total liabilities and shareholders' equity	$	868,690		$	1,334,649	$	119,876	$	(731,331	)	$	1,591,884

F-29

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

(In Thousands)

	Co-Issuers			Guarantors		Non-Guarantors		Eliminations			Consolidated
Net sales	$	73,754		$	2,461,747	$	159,241	$	—		$	2,694,742
Cost of sales, including buying and distribution costs		42,647			1,467,510		85,237		—			1,595,394
Gross profit		31,107			994,237		74,004		—			1,099,348
Selling, general and administrative expenses		18,963			954,111		64,447		—			1,037,521
Operating profit		12,144			40,126		9,557		—			61,827
Interest income		(12,357	)		—		—		11,463			(894	)
Interest expense		—			15,271		1,052		(11,463	)		4,860
Interest (income) expense, net		(12,357	)		15,271		1,052		—			3,966
Income before income taxes		24,501			24,855		8,505		—			57,861
Provision for income taxes		9,834			9,977		2,068		—			21,879
Net income	$	14,667		$	14,878	$	6,437	$	—		$	35,982

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED JANUARY 1, 2005

(In Thousands)

	Co-Issuers			Guarantors		Non-Guarantors		Eliminations			Consolidated
Net sales	$	76,451		$	2,461,026	$	123,992	$	—		$	2,661,469
Cost of sales, including buying and distribution costs		45,150			1,475,001		69,549		—			1,589,700
Gross profit		31,301			986,025		54,443		—			1,071,769
Selling, general and administrative expenses		20,092			903,033		47,354		—			970,479
Operating profit		11,209			82,992		7,089		—			101,290
Interest income		(17,187	)		—		—		16,645			(542	)
Interest expense		—			19,491		1,057		(16,645	)		3,903
Interest (income) expense, net		(17,187	)		19,491		1,057		—			3,361
Income before income taxes		28,396			63,501		6,032		—			97,929
Provision for income taxes		10,856			24,247		2,305		—			37,408
Net income	$	17,540		$	39,254	$	3,727	$	—		$	60,521

F-30

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 3, 2004
(In Thousands)

	Co-Issuers			Guarantors		Non-Guarantors		Eliminations			Consolidated
Net sales	$	73,349		$	2,237,506	$	84,417	$	—		$	2,395,272
Cost of sales, including buying and distribution costs		44,038			1,333,775		49,067		—			1,426,880
Gross profit		29,311			903,731		35,350		—			968,392
Selling, general and administrative expenses		19,121			797,911		29,794		—			846,826
Operating profit		10,190			105,820		5,556		—			121,566
Interest income		(11,843	)		—		—		11,674			(169	)
Interest expense		—			14,631		1,044		(11,674	)		4,001
Interest (income) expense, net		(11,843	)		14,631		1,044		—			3,832
Income before income taxes		22,033			91,189		4,512		—			117,734
Provision for income taxes		8,417			34,835		1,723		—			44,975
Net income	$	13,616		$	56,354	$	2,789	$	—		$	72,759

F-31

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

(In Thousands)

	Co-Issuers			Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash inflows (outflows) from operating activities:
Net income	$	14,667		$	14,878		$	6,437		$	—		$	35,982
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		1,453			83,749			5,068			—			90,270
Deferred income taxes		2,162			(12,810	)		(617	)		—			(11,265	)
Loss on disposal of assets		35			1,360			38			—			1,433
Loss on fixed asset impairment		—			4,059			—			—			4,059
Federal tax benefit from issuance of common stock under stock incentive plans		492			—			—			—			492
Changes in assets and liabilities:
Decrease (increase) in accounts receivable		396			(16,268	)		(1,832	)		—			(17,704	)
Increase in inventories		(605	)		(68,851	)		(1,201	)		—			(70,657	)
Decrease (increase) in prepaid expenses and other current assets		1			21,486			(918	)		—			20,569
Decrease (increase) in deferred charges and other noncurrent assets		25			(1,122	)		(134	)		—			(1,231	)
(Decrease) increase in accounts payable		(2	)		17,561			3,852			—			21,411
Increase (decrease) in accrued expenses and other liabilities		12,149			(11,374	)		4,067			—			4,842
Net cash provided by operating activities		30,773			32,668			14,760			—			78,201
Cash outflows from investing activities:
Additions to property and equipment		(9,663	)		(106,530	)		(11,389	)		—			(127,582	)
Addition to investment in subsidiary		(919	)		—			—			919			—
Net cash (used in) provided by investing activities		(10,582	)		(106,530	)		(11,389	)		919			(127,582	)
Cash inflows (outflows) from financing activities:
Proceeds from common stock under stock incentive plans		3,614			—			919			(919	)		3,614
Inter-company movements		(62,042	)		69,536			(7,494	)		—			—
Increase in treasury stock		(167	)		(78	)		—			—			(245	)
Net cash (used in) provided by financing activities		(58,595	)		69,458			(6,575	)		(919	)		3,369
Effect of exchange rate changes on cash and cash equivalents		—			—			161			—			161
Net decrease in cash and cash equivalents		(38,404	)		(4,404	)		(3,043	)		—			(45,851	)
Cash and cash equivalents at beginning of period		174,973			13,122			15,914			—			204,009
Cash and cash equivalents at end of period	$	136,569		$	8,718		$	12,871		$	—		$	158,158

F-32

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JANUARY 1, 2005
(In Thousands)

	Co-Issuers			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash inflows (outflows) from operating activities:
Net income	$	17,540		$	39,254		$	3,727		$	—		$	60,521
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		1,079			76,342			3,897			—			81,318
Deferred income taxes		2,016			(4,023	)		895			—			(1,112	)
Loss on disposal of assets		17			2,188			4			—			2,209
Loss on fixed asset impairment		—			900			—			—			900
Federal tax benefit from issuance of common stock under stock incentive plans		1,500			—			—			—			1,500
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		(2	)		4,742			(889	)		—			3,851
Decrease (increase) in inventories		322			(3,548	)		(8,771	)		—			(11,997	)
Increase in prepaid expenses and other current assets		(38	)		(4,640	)		(1,355	)		—			(6,033	)
Decrease (increase) in deferred charge and other noncurrent assets		87			(4,531	)		(455	)		—			(4,899	)
(Decrease) increase in accounts payable		(7	)		(5,647	)		223			—			(5,431	)
Increase in accrued expenses and other liabilities		16,043			34,819			5,652			—			56,514
Net cash provided by operating activities		38,557			135,856			2,928			—			177,341
Cash outflows from investing activities:
Additions to property and equipment		(605	)		(108,773	)		(9,674	)		—			(119,052	)
Addition to investment in subsidiary		(28,063	)		—			—			28,063			—
Net cash (used in) provided by investing activities		(28,668	)		(108,773	)		(9,674	)		28,063			(119,052	)
Cash inflows (outflows) from financing activities:
Proceeds from common stock under stock incentive plans		8,649			26,020			2,043			(28,063	)		8,649
Inter-company movements		35,189			(48,341	)		13,152			—			—
Increase in treasury stock		(56	)		134			—			—			78
Net cash provided by (used in) financing activities		43,782			(22,187	)		15,195			(28,063	)		8,727
Effect of exchange rate changes on cash and cash equivalents		—			—			864			—			864
Net increase in cash and cash equivalents		53,671			4,896			9,313			—			67,880
Cash and cash equivalents at beginning of period		121,302			8,226			6,601			—			136,129
Cash and cash equivalents at end of period	$	174,973		$	13,122		$	15,914		$	—		$	204,009

F-33

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE FISCAL YEAR ENDED JANUARY 3, 2004

(In Thousands)

	Co-Issuers			Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash inflows (outflows) from operating activities:
Net income	$	13,616		$	56,354		$	2,789		$	—		$	72,759
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		1,224			67,721			2,403			—			71,348
Deferred income taxes		(1,228	)		38,930			(576	)		—			37,126
Loss on disposal of assets		1			1,264			—			—			1,265
Loss on fixed asset impairment		—			760			—			—			760
Federal tax benefit from issuance of common stock under stock incentive plans		2,614			—			—			—			2,614
Changes in assets and liabilities:
Increase in accounts receivable		(104	)		(4,757	)		(53	)		—			(4,914	)
Decrease (increase) in inventories		67			(85,718	)		(5,234	)		—			(90,885	)
Decrease (increase) in prepaid expenses and other current assets		4			(5,543	)		(2,890	)		—			(8,429	)
Decrease (increase) in deferred charges and other noncurrent assets		89			(358	)		(353	)		—			(622	)
Increase in accounts payable		—			42,176			4,099			—			46,275
(Decrease) increase in accrued expenses and other liabilities		(21,646	)		40,811			4,430			—			23,595
Net cash (used in) provided by operating activities		(5,363	)		151,640			4,615			—			150,892
Cash outflows from investing activities:
Additions to property and equipment		(733	)		(108,110	)		(4,453	)		—			(113,296	)
Addition to investment in subsidiary		(168	)		—			—			168			—
Net cash (used in) provided by investing activities		(901	)		(108,110	)		(4,453	)		168			(113,296	)
Cash inflows (outflows) from financing activities:
Proceeds from common stock under stock incentive plans		13,624			—			168			(168	)		13,624
Intercompany movements		36,451			(42,964	)		6,513			—			—
Increase in treasury stock		158			(288	)		—			—			(130	)
Decrease in short-term borrowings		—			—			(2,119	)		—			(2,119	)
Net cash provided by (used in) financing activities		50,233			(43,252	)		4,562			(168	)		11,375
Effect of exchange rate changes on cash and cash equivalents		—			—			553			—			553
Net increase in cash and cash equivalents		43,969			278			5,277			—			49,524
Cash and cash equivalents at beginning of period		77,333			7,948			1,324			—			86,605
Cash and cash equivalents at end of period	$	121,302		$	8,226		$	6,601		$	—		$	136,129

F-34

16. Subsequent events

        On November 8, 2005, Linens Merger Sub Co. and its parent company, Linens Holding Co., entered into an Agreement and Plan of Merger with the Company governing a merger (the "Merger") pursuant to which each share of common stock of the Company (other than shares held in treasury or owned by Linens Merger Sub Co., its parent company or any affiliate of Linens Merger Sub Co. and other than shares held by stockholders who properly demand and perfect appraisal rights) would be converted into the right to receive $28.00 in cash, without interest, for aggregate consideration of approximately $1.3 billion. The Merger was structured as a reverse subsidiary merger, and on February 14, 2006, Linens Merger Sub Co. was merged with and into the Company, with the Company as the surviving corporation. As the surviving corporation in the Merger, the Company assumed by operation of law all of the rights and obligations of Linens Merger Sub Co., including $650 million of notes (the "Notes") and the related indenture. Linens 'n Things Center, Inc., a direct wholly owned subsidiary of the Company, was a co-issuer of the Notes.

        Affiliates of Apollo Management, L.P., National Realty & Development Corp. and Silver Point Capital Fund Investments LLC (the "Sponsors") collectively contributed approximately $648.0 million as equity to Linens Merger Sub Co. immediately prior to the Merger.

        The Sponsors financed the purchase of the Company and paid related fees and expenses through the offering of the Notes, the equity investment described above and excess cash on hand at the Company. The Company did not draw on its new asset-based revolving credit facility at closing.

        The aforementioned transactions, including the Merger and its payment of any costs related to these transactions, are collectively referred to herein as the "Transactions." In connection with the Transactions, the Company incurred significant indebtedness and became highly leveraged.

        Immediately following the Merger, the Company became a wholly owned subsidiary of Linens Holding Co. Linens Holding Co. is an entity that was formed in connection with the Transactions and has no assets or liabilities other than the shares of Linens Merger Sub Co. and its rights and obligations under and in connection with the merger agreement with the Company and the equity commitment letters and debt financing commitment letters provided in connection with the Transactions.

        The closing of the Merger occurred simultaneously with:

•

the closing of the Note offering;



•

the closing of the Company's new $600.0 million asset-based revolving credit facility;



•

the termination of the Company's existing $250.0 million unsecured revolving credit facility and CAD $40.0 million unsecured credit facility agreements; and



•

the equity investments described above.

        The consummation of the Note offering was conditioned upon the consummation of the Merger, the closing of the Company's new asset-based revolving credit facility and the equity investments described above, all of which were completed on February 14, 2006.

        Set forth below is a summary of the terms of the Notes:

        The Notes bear interest at a per annum rate equal to LIBOR plus 5.625%, which is paid every three months on January 15, April 15, July 15 and October 15, commencing April 15, 2006. The interest rate on the Notes is reset quarterly. The Notes mature on January 15, 2014.

F-35

        The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior basis by the Company's parent, Linens Holding Co., and by each of the Company's direct and indirect subsidiaries that guarantee the Company's new asset-based revolving credit facility except for its Canadian subsidiaries (collectively, the "Guarantors").

        The Notes and guarantees are secured by first-priority liens, subject to permitted liens, on all of the Company's and the Guarantors' equipment, intellectual property rights and related general intangibles and all of its capital stock and the capital stock of certain subsidiaries. The lien on capital stock may be released under certain circumstances. The Notes and guarantees will also be secured by second-priority liens, subject to permitted liens, on all of the Company's and the guarantors' inventory, accounts receivable, cash, securities and other general intangibles.

        If the Company sells certain assets or experiences specific kinds of changes in control, the Company must offer to repurchase the Notes. The Company may, at its option, redeem the Notes at any time on or after January 15, 2008 at pre-determined prices. Prior to January 15, 2008, the Company may, at its option, redeem up to 35% of the Notes with the proceeds of certain sales of its equity or of its parent. Prior to January 15, 2008, the Company may, at its option, redeem the Notes at a price equal to 100% of the principal amount of the Notes plus a "make-whole" premium.

        The Company's new asset-based revolving credit facility (the "Credit Facility") provides senior secured financing of up to $600.0 million, subject to a borrowing base. The borrowing base is a formula based on certain eligible inventory and receivables, minus certain reserves. A portion of the Credit Facility, not to exceed $40.0 million, is also available to Linens 'n Things Canada Corp. subject to the Canadian borrowing base. The Credit Facility requires the Company to comply with financial ratio maintenance covenants if the excess availability under the Credit Facility, at any time, does not exceed $75 million and also contains certain customary affirmative covenants and events of default. The principal amount outstanding of the loans under the Credit Facility, plus interest accrued and unpaid thereon, will be due and payable in full at maturity, five years from the date of closing of the Transactions.

        All obligations under the Credit Facility are unconditionally guaranteed by Linens Holding Co., the Company's direct parent company, and certain of its existing and future domestic subsidiaries. All obligations under the Credit Facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of the Company's assets and the assets of Linens Holding Co. and the subsidiary guarantors, including: (i) a first-priority security interest in inventory, accounts receivable, cash, securities and other general intangibles; and (ii) a second-priority security interest in equipment, intellectual property rights and related general intangibles and all of the capital stock of the Company and the capital stock of certain subsidiaries.

        Borrowings under the Credit Facility bear interest at a rate equal to, at the Company's option, either (a) an alternate base rate determined by reference to the higher of (1) the base rate in effect on such day and (2) the federal funds effective rate plus 0.50% or (b) a LIBOR rate, with respect to any Eurodollar borrowing, determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, in each case plus an applicable margin. The initial applicable margin for borrowings under the Credit Facility is 0% with respect to alternate base rate borrowings and 1.50% with respect to LIBOR borrowings. After the delivery of the financial statements for the first full fiscal quarter after the closing date, the applicable margin for borrowings under the Credit Facility will be subject to adjustment based on the excess availability under the Credit Facility. In addition to paying interest on outstanding principal under the

F-36

Credit Facility, the Company is required to pay a commitment fee, initially 0.375% per annum, in respect of the unutilized commitments thereunder. After the delivery of financial statements for the first full fiscal quarter after the closing date, the commitment fee will be subject to adjustment based on the excess availability under the Credit Facility. The Company must also pay customary letter of credit fees and agency fees. The Company initiated borrowings under its Credit Facility on February 23, 2006 to meet its operational working capital needs.

        As a result of the Merger, all of the Company's issued and outstanding capital stock was acquired by Linens Holding Co. At such time, investment funds associated with or designated by the Sponsors acquired approximately 99.7% of the common stock of Linens Holding Co. through an investment vehicle controlled by Apollo Management V, L.P., or one of its affiliates, and Robert J. DiNicola, the Company's new Chairman and Chief Executive Officer, acquired the remaining 0.3%.

        Upon consummation of the Transactions, the Company delisted its shares of common stock from the New York Stock Exchange (the "NYSE") and deregistered under Section 12 of the Securities Exchange Act of 1934. The last day of trading on the NYSE was February 14, 2006.

        Total fees and expenses related to the Transactions are estimated by the Company to be approximately $103.0 million, which includes $15.0 million of non-cash transaction-related expenses. Such fees include commitment, placement, financial advisory and other transaction fees as well as legal, accounting and other professional fees.

        The acquisition of Linens 'n Things, Inc. is being accounted for as a business combination using the purchase method of accounting. As a result, the assets and liabilities will be assigned new values, which will be fair value basis.

F-37

LINENS HOLDING CO. (AND PREDECESSOR)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

			Predecessor Entity						Successor Entity
			April 2, 2005			December 31, 2005			April 1, 2006
			(Unaudited)			(Audited)			(Unaudited)
Assets
	Current assets:
		Cash and cash equivalents	$	75,271		$	158,158		$	15,033
		Accounts receivable		30,186			43,561			42,646
		Inventories		765,929			787,283			827,779
		Prepaid expenses and other current assets		39,364			17,425			43,074
		Current deferred taxes		800			2,033			179
	Total current assets			911,550			1,008,460			928,711
	Property and equipment, net of accumulated depreciation of $403,286, $464,496 and $13,684 at April 2, 2005, December 31, 2005 and April 1, 2006, respectively			569,329			612,247			601,805
	Identifiable intangible assets, net			1,442			1,301			159,979
	Goodwill			18,126			18,126			277,264
	Deferred financing cost and other noncurrent assets, net			9,409			10,700			36,089
Total assets			$	1,509,856		$	1,650,834		$	2,003,848
Liabilities and Shareholders' Equity
	Current liabilities:
		Accounts payable	$	238,598		$	267,582		$	251,767
		Accrued expenses and other current liabilities		133,259			199,024			149,446
		Current deferred taxes		5,722			4,401			3,880
		Asset-based revolving credit facility		—			—			81,601
	Total current liabilities			377,579			471,007			486,694
	Senior secured notes and other long-term debt, net of current portion			2,123			2,076			652,059
	Deferred income taxes and other long-term liabilities			324,142			327,888			234,911
Total liabilities				703,844			800,971			1,373,664
Shareholders' equity:
	Preferred stock of Predecessor Entity, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding			—			—			—
	Common stock of Predecessor Entity, $0.01 par value; 135,000,000 shares authorized; 45,505,967 shares issued and 45,245,626 shares outstanding at April 2, 2005; and 45,653,954 shares issued and 45,389,975 shares outstanding at December 31, 2005			455			457			—
	Common stock of Successor Entity, $0.01 par value; 15,000,000 shares authorized; 13,000,000 shares issued and outstanding at April 1, 2006			—			—			130
	Additional paid-in capital			373,665			376,730			648,192
	Retained earnings (deficit)			436,840			476,896			(17,572	)
	Accumulated other comprehensive income (loss)			2,436			3,287			(566	)
	Treasury stock of LNT, at cost; 260,341 shares at April 2, 2005; and 263,979 shares at December 31, 2005			(7,384	)		(7,507	)		—
	Total shareholders' equity			806,012			849,863			630,184
Total liabilities and shareholders' equity			$	1,509,856		$	1,650,834		$	2,003,848

See accompanying Notes to Condensed Consolidated Financial Statements

F-38

LINENS HOLDING CO. (AND PREDECESSOR)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)

		Predecessor Entity						Successor Entity
		Thirteen Weeks Ended April 2, 2005			January 1 to February 13, 2006			February 14 to April 1, 2006
Net sales		$	570,946		$	284,971		$	307,845
Cost of sales, including buying and distribution costs			334,553			180,675			189,068
Gross profit			236,393			104,296			118,777
Selling, general and administrative expenses			242,154			174,138			137,761
Operating loss			(5,761	)		(69,842	)		(18,984	)
	Interest income		(495	)		(668	)		(86	)
	Interest expense		1,218			—			9,987
Interest expense (income), net			723			(668	)		9,901
Loss before benefit for income taxes			(6,484	)		(69,174	)		(28,885	)
Benefit for income taxes			(2,410	)		(21,270	)		(11,313	)
Net loss		$	(4,074	)	$	(47,904	)	$	(17,572	)

See accompanying Notes to Condensed Consolidated Financial Statements

F-39

LINENS HOLDING CO. (AND PREDECESSOR)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)

				Predecessor Entity
										Successor Entity
				Thirteen Weeks Ended April 2, 2005
							January 1 to February 13, 2006			February 14 to April 1, 2006
Cash flows from operating activities:
Net loss				$	(4,074	)	$	(47,904	)	$	(17,572	)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation and amortization			21,176			12,642			15,022
		Deferred income taxes			2,296			(6,646	)		(6,968	)
		Share-based compensation			233			12,484			709
		Loss on disposal of assets			86			—			73
		Changes in assets and liabilities, net of effect of acquisition:
			(Increase) decrease in accounts receivable		(4,425	)		(2,240	)		3,157
			Increase in inventories		(51,128	)		(31,886	)		(8,711	)
			Increase in prepaid expenses and other current assets		(880	)		(12,153	)		(13,502	)
			Decrease in identifiable intangible assets, net, deferred financing cost and other noncurrent assets, net		61			9,623			1,138
			(Decrease) increase in accounts payable		(6,930	)		7,244			(23,030	)
			Decrease in accrued expenses and other liabilities, net		(73,837	)		(6,310	)		(82,890	)
Net cash used in operating activities					(117,422	)		(65,146	)		(132,574	)
Cash flows from investing activities:
	Acquisition of the Company, net of cash acquired(1)				—			—			(1,205,502	)
	Additions to property and equipment				(12,027	)		(7,776	)		(8,571	)
Net cash used in investing activities					(12,027	)		(7,776	)		(1,214,073	)
Cash flows from financing activities:
	Issuance of common stock to Linens Investors LLC				—			—			650,000
	Issuance of floating rate notes				—			—			650,000
	Financing and direct acquisition costs				—			—			(19,866	)
	Issuance of common stock under stock incentive plans				904			—			—
	Federal tax benefit from common stock issued under stock incentive plans				135			4,298			—
	Increase in short-term borrowings				—			—			81,620
	(Increase) decrease in treasury stock				(122	)		674			—
Net cash provided by financing activities					917			4,972			1,361,754
Effect of exchange rate changes on cash and cash equivalents				$	(206	)	$	125		$	(74	)
Net (decrease) increase in cash and cash equivalents				$	(128,738	)	$	(67,825	)	$	15,033
Cash and cash equivalents at beginning of period					204,009			158,158			—
Cash and cash equivalents at end of period				$	75,271		$	90,333		$	15,033
Cash paid during the year for:
	Interest (net of amounts capitalized)			$	1,288		$	135		$	47
	Income taxes			$	27,981		$	57		$	22,090

(1)

In connection with the Merger, net cash settlements of approximately $20.0 million and $4.4 million for stock options and restricted stock units, respectively, are included in "Acquisition of the Company, net of cash acquired"

See accompanying Notes to Condensed Consolidated Financial Statements

F-40

LINENS HOLDING CO. (AND PREDECESSOR)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Acquisition of Linens 'n Things, Inc. by Linens Holding Co.

        On November 8, 2005, Linens Merger Sub Co. and its parent company, Linens Holding Co. (the "Company"), entered into an Agreement and Plan of Merger with Linens 'n Things, Inc. governing a merger (the "Merger") pursuant to which each share of common stock of Linens 'n Things, Inc. (other than shares held in treasury or owned by Linens Merger Sub Co., its parent company or any affiliate of Linens Merger Sub Co. and other than shares held by stockholders who properly demand and perfect appraisal rights) would be converted into the right to receive $28.00 in cash, without interest, for aggregate consideration of approximately $1.3 billion. The Merger was structured as a reverse subsidiary merger, and on February 14, 2006 Linens Merger Sub Co. was merged with and into Linens 'n Things, Inc., with Linens 'n Things, Inc. as the surviving corporation. As the surviving corporation in the Merger, Linens 'n Things, Inc. assumed by operation of law all of the rights and obligations of Linens Merger Sub Co., including $650 million aggregate principal amount of Senior Secured Floating Rate Notes (the "Notes") due 2014 of Linens 'n Things, Inc. and Linens 'n Things Center, Inc. and the related indenture. Linens 'n Things Center, Inc., a direct wholly owned subsidiary of Linens 'n Things, Inc., was a co-issuer of the Notes.

        Affiliates of Apollo Management, L.P., National Realty & Development Corp. and Silver Point Capital Fund Investments LLC (the "Sponsors") collectively contributed approximately $648 million as equity to Linens Merger Sub Co. immediately prior to the Merger.

        The Sponsors financed the purchase of Linens 'n Things, Inc. and paid related fees and expenses through the offering of the Notes, the equity investment described above and excess cash on hand at Linens 'n Things, Inc. Linens 'n Things, Inc. did not draw on its new asset-based revolving credit facility at closing.

        The aforementioned transactions, including the Merger and payment of any costs related to these transactions, are collectively referred to herein as the "Transactions." In connection with the Transactions, Linens 'n Things, Inc. incurred significant indebtedness and became highly leveraged.

        Immediately following the Merger, Linens 'n Things, Inc. became a wholly owned subsidiary of Linens Holding Co. Linens Holding Co. is an entity that was formed in connection with the Transactions and has no assets or liabilities other than the shares of Linens Merger Sub Co. and its rights and obligations under and in connection with the merger agreement with Linens 'n Things, Inc. and the equity commitment letters and debt financing commitment letters provided in connection with the Transactions.

        The closing of the Merger occurred simultaneously with:

•

the closing of the Note offering;



•

the closing of Linens 'n Things, Inc.'s new $600 million asset-based revolving credit facility;



•

the termination of Linens 'n Things, Inc.'s existing $250 million unsecured revolving credit facility and CAD $40 million unsecured credit facility agreements; and



•

the equity investments described above.

        The consummation of the Note offering was conditioned upon the consummation of the Merger, the closing of Linens 'n Things, Inc.'s new asset-based revolving credit facility and the equity investments described above, all of which were completed on February 14, 2006.

F-41

        Set forth below is a summary of the terms of the Notes:

        The Notes bear interest at a per annum rate equal to LIBOR plus 5.625%, which is paid every three months on January 15, April 15, July 15 and October 15, commencing April 15, 2006. The interest rate on the Notes is reset quarterly. The Notes mature on January 15, 2014.

        The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior basis by the Company and by each of the Company's direct and indirect subsidiaries that guarantee Linens 'n Things, Inc.'s new asset-based revolving credit facility except for its Canadian subsidiaries (collectively, the "Guarantors").

        The Notes and guarantees are secured by first-priority liens, subject to permitted liens, on all of the Company's and the Guarantors' equipment, intellectual property rights and related general intangibles and all of its capital stock and the capital stock of certain subsidiaries. The lien on capital stock may be released under certain circumstances. The Notes and guarantees will also be secured by second-priority liens, subject to permitted liens, on all of the Company's and the guarantors' inventory, accounts receivable, cash, securities and other general intangibles.

        If the Company sells certain assets or experiences specific kinds of changes in control, the Company must offer to repurchase the Notes. The Company may, at its option, redeem the Notes at any time on or after January 15, 2008 at pre-determined prices. Prior to January 15, 2008, the Company may, at its option, redeem up to 35% of the Notes with the proceeds of certain sales of its equity or of its subsidiaries. Prior to January 15, 2008, the Company may, at its option, redeem the Notes at a price equal to 100% of the principal amount of the Notes plus a "make-whole" premium.

        The Company's new asset-based revolving credit facility (the "Credit Facility") provides senior secured financing of up to $600 million, subject to a borrowing base. The borrowing base is a formula based on certain eligible inventory and receivables, minus certain reserves. A portion of the Credit Facility, not to exceed $40 million, is also available to Linens 'n Things Canada Corp. subject to the Canadian borrowing base. The Credit Facility requires the Company to comply with financial ratio maintenance covenants if the excess availability under the Credit Facility, at any time, does not exceed $75 million and also contains certain customary affirmative covenants and events of default. The principal amount outstanding of the loans under the Credit Facility, plus interest accrued and unpaid thereon, will be due and payable in full at maturity, five years from February 14, 2006, the date of closing of the Transactions.

        All obligations under the Credit Facility are unconditionally guaranteed by Linens Holding Co. and certain of its existing and future domestic subsidiaries. All obligations under the Credit Facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of the Company's assets and the subsidiary guarantors, including: (i) a first-priority security interest in inventory, accounts receivable, cash, securities and other general intangibles; and (ii) a second-priority security interest in equipment, intellectual property rights and related general intangibles and all of the capital stock of the Company and the capital stock of certain subsidiaries.

        Borrowings under the Credit Facility bear interest at a rate equal to, at the Company's option, either (a) an alternate base rate determined by reference to the higher of (1) the base rate in effect on such day and (2) the federal funds effective rate plus 0.50% or (b) a LIBOR rate, with respect to any Eurodollar borrowing, determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, in each case plus an

F-42

applicable margin. The initial applicable margin for borrowings under the Credit Facility is 0% with respect to alternate base rate borrowings and 1.50% with respect to LIBOR borrowings. After the delivery of the financial statements for the first full fiscal quarter after the closing date, the applicable margin for borrowings under the Credit Facility will be subject to adjustment based on the excess availability under the Credit Facility. In addition to paying interest on outstanding principal under the Credit Facility, the Company is required to pay a commitment fee, initially 0.375% per annum, in respect of the unutilized commitments thereunder. After the delivery of financial statements for the first full fiscal quarter after the closing date, the commitment fee will be subject to adjustment based on the excess availability under the Credit Facility. The Company must also pay customary letter of credit fees and agency fees. The Company initiated borrowings under its Credit Facility on February 23, 2006 to meet its operational working capital needs.

        As a result of the Merger, all of Linens 'n Things, Inc.'s issued and outstanding capital stock was acquired by Linens Holding Co. At such time, investment funds associated with or designated by the Sponsors acquired approximately 99.7% of the common stock of Linens Holding Co. through an investment vehicle controlled by Apollo Management V, L.P., or one of its affiliates, and Robert J. DiNicola, the new Chairman and Chief Executive Officer of Linens 'n Things, Inc., acquired the remaining 0.3%.

        Upon consummation of the Transactions, Linens 'n Things, Inc. delisted its shares of common stock from the New York Stock Exchange (the "NYSE") and deregistered under Section 12 of the Securities Exchange Act of 1934. The last day of trading on the NYSE was February 14, 2006.

        Total fees and expenses related to the Transactions were approximately $107 million, inclusive of approximately $23 million of direct acquisition costs of the Company and $36 million of deferred financing costs. Such fees include commitment, placement, financial advisory and other transaction fees as well as legal, accounting and other professional fees. Deferred financing costs of approximately $11 million relates to the asset-based revolving credit facility which are amortized over five years and $25 million relates to the Notes, which are amortized over eight years.

        The acquisition of Linens 'n Things, Inc. is being accounted for as a business combination using the purchase method of accounting, whereby the purchase price (including liabilities assumed) was preliminarily allocated to the assets acquired based on their estimated fair market values at the date of acquisition. Independent third-party appraisers were engaged to perform valuations of certain of the tangible and intangible assets acquired.

        The Company has not yet completed the evaluation and allocation of the purchase price as the appraisal associated with the valuation of certain assets and liabilities is not yet complete. The Company does not believe that the appraisal or its estimate of certain contingencies will materially modify the preliminary purchase price allocation.

        As a result of the consummation of the Transactions, a new entity ("successor entity") was formed with an effective date of February 14, 2006, consisting of Linens Holding Co. and Subsidiaries. The condensed consolidated financial statements presented as of April 2, 2005 and December 31, 2005, and for the 13-week period ended April 2, 2005 and for the period January 1 to February 13, 2006 are shown under the "predecessor entity" caption, consisting of Linens 'n Things, Inc. and Subsidiaries. The condensed consolidated financial statements for the successor entity as of April 1, 2006 and for the period February 14 to April 1, 2006 show the operations of the successor entity, Linens Holding Co.

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and Subsidiaries. As a result of the consummation of the transactions, the consolidated financial statements for the period after February 13, 2006 are presented on a different basis than that for the periods before February 14, 2006 as a result of the application of purchase accounting as of February 14, 2006 and therefore are not comparable.

        A reconciliation of the preliminary purchase price adjustments recorded in connection with the Transactions is presented below (in thousands):

			Predecessor Entity
								Successor Entity February 14, 2006
			February 13, 2006		Transaction Adjustments
			(Unaudited)		(Unaudited)			(Unaudited)
Assets
	Current assets:
		Cash and cash equivalents	$	90,333	$	(15,701	)	$	74,632
		Accounts receivable		45,833		—			45,833
		Inventories		819,600		—			819,600
		Prepaid expenses and other current assets		29,499		—			29,499
		Current deferred taxes		132		—			132
	Total current assets			985,397		(15,701	)		969,696
	Property and equipment, net			607,787		(57	)		607,730
	Identifiable intangible assets, net			—		161,018			161,018
	Goodwill			18,126		259,309			277,435
	Deferred financing cost and other noncurrent assets, net			2,355		34,896			37,251
Total assets			$	1,613,665	$	439,465		$	2,053,130
Liabilities and Shareholders' Equity
	Current liabilities:
		Accounts payable	$	274,997	$	—		$	274,997
		Accrued expenses and other current liabilities		195,467		39,388	(1)		234,855
		Current deferred taxes		8,176		—			8,176
	Total current liabilities			478,640		39,388			518,028
	Senior secured notes and other long-term debt, net of current portion			2,068		650,000			652,068
	Deferred income taxes and other long-term liabilities			312,549		(77,128	)(2)		235,421
Total liabilities				793,257		612,260			1,405,517
Shareholders' equity				820,408		(172,795	)		647,613
Total liabilities and shareholders' equity			$	1,613,665	$	439,465		$	2,053,130

(1)

Represents an accrual for unpaid transaction expenses.

(2)

Consists of the following purchase accounting adjustments:

Unfavorable leases	$	20,000
Deferred rents		(250,020	)
Deferred income taxes		152,892
	$	(77,128	)

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        The unaudited pro forma results of operations provided below for the thirteen weeks ended April 2, 2005 and April 1, 2006 are presented as though the Transactions had occurred at the beginning of the periods presented, after giving effect to purchase accounting adjustments relating to depreciation and amortization of the revalued assets, interest expense associated with the Notes and the Credit Facility and other acquisition-related adjustments in connection with the Transactions. The pro forma results of operations are not necessarily indicative of the combined results that would have occurred had the Transactions been consummated at the beginning of the periods presented, nor are they necessarily indicative of future operating results.

	Thirteen Weeks Ended
	April 2, 2005			April 1, 2006
(In Thousands)	(Unaudited)			(Unaudited)
Net sales	$	570,946		$	592,816
Loss before benefit for income taxes	$	(34,924	)	$	(68,408	)
Net loss	$	(21,366	)	$	(41,367	)

2. Basis of Presentation

        The accompanying Condensed Consolidated Financial Statements are unaudited. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position of successor entity Linens Holding Co. and its subsidiaries and predecessor entity Linens 'n Things, Inc. and subsidiaries, as of April 1, 2006 and April 2, 2005 and the results of operations for the respective periods then ended and cash flows for the respective periods then ended as presented in the unaudited statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Because of the seasonality of the specialty retailing business, operating results of the Company on a quarterly or interim basis may not be indicative of operating results for the full year.

        These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements for the fiscal year ended December 31, 2005 included in the Company's predecessor entity's Annual Report on Form 10-K Equivalent for Linens 'n Things, Inc. posted on the Linens 'n Things, Inc. website on March 21, 2006 under "Noteholder Information." All significant intercompany accounts and transactions have been eliminated.

        Certain prior period amounts have been reclassified to conform with the current period's presentation.

3. Stock-based Compensation

        On January 1, 2006, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised 2004), "Share-Based Payment" ("SFAS No. 123 (Revised 2004)"), requiring the recognition of compensation cost for all equity classified awards granted, modified or settled after the effective date and for the unvested portion of awards outstanding as of the effective date using the fair-value measurement method. SFAS No. 123 (Revised 2004) revises SFAS No. 123, "Accounting for

F-45

Stock-Based Compensation," and supersedes Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees."

        The Company recognizes the cost of all employee stock options on a straight-line attribution basis over their respective vesting periods, net of estimated forfeitures. The Company has selected the modified prospective method of transition; accordingly, prior periods have not been restated. Prior to adopting SFAS No. 123 (Revised 2004), the Company applied the recognition and measurement principles of APB Opinion No. 25 and related interpretations. All employee stock options were granted at or above the grant date market price. Accordingly, the Company did not recognize compensation expense for stock option grants. Restricted stock units granted at fair market value at the date of grant are amortized over specified vesting periods in the accompanying Condensed Consolidated Financial Statements.

Share-based Compensation Plans—Predecessor Entity

        Prior to the completion of the Merger, the Company granted stock options and restricted stock units for a fixed number of shares to employees and directors under share-based compensation plans. The exercise prices of the stock options were equal to the fair market value of the underlying shares at the date of grant. Compensation expense for restricted stock awards was measured at fair value on the date of grant based on the number of shares granted and the quoted market price of the Company's common stock. Such value was recognized as expense over the vesting period of the award adjusted for actual forfeitures.

        Upon completion of the Merger and in accordance with the terms of the stock plans, all of the outstanding stock options became fully vested and immediately exercisable. Each option was exercised, equal to the excess of $28.00 over the underlying stock option exercise price, less applicable withholding taxes. Each restricted stock unit award was exercised at $28.00 in cash, without interest, less applicable withholding taxes.

F-46

        The following is a summary of activity under the stock option plans that were in effect upon adoption of SFAS 123 (Revised 2004) through the effective date of the Merger, when all of the stock options and restricted stock units were exercised:

		Predecessor Entity
Plan		Outstanding at January 1, 2006	Exercised	Outstanding at February 14, 2006
Stock options
	1996 Plan	1,151,673	1,151,673	—
	Directors' Plan	48,800	48,800	—
	2000 Plan	1,463,796	1,463,796	—
	Broad-based Equity Plan	1,470,638	1,470,638	—
	2004 Plan	1,246,690	1,246,690	—
	New Hire Authorization	450,000	450,000	—
Total options outstanding		5,831,597	5,831,597	—
Weighted average exercise price per option		$25.20	$25.20	—
Weighted average remaining contractual term per option		4.6 years		—
Options exercisable at period end:
	Number of options			—
	Weighted average exercise price			—
	Weighted average remaining contractual term			—
Restricted stock units
	2000 Plan	7,500	7,500	—
	Broad-based Equity Plan	9,850	9,850	—
	2004 Plan	118,066	118,066	—
	New Hire Authorization	20,000	20,000	—
Total units outstanding		155,416	155,416	—
Weighted average fair market value per unit at date of award		$25.71	$25.71	—
Weighted average remaining contractual term for restrictions		2.9 years		—

(1)

Based on $28.00 per share, in accordance with the Merger.

        The 2004 Stock Award and Incentive Plan (the "2004 Plan") provided for the granting of options, restricted stock unit grants and other stock-based awards (collectively, "awards") to key employees and non-employee directors. The 2004 Plan replaced both the Company's 2000 Stock Award and Incentive Plan (the "2000 Plan") and the Broad-Based Equity Plan. The 2000 Plan replaced both the Company's 1996 Incentive Compensation Plan (the "1996 Plan") and the 1996 Non-Employee Directors' Stock Plan (the "Directors' Plan"). Therefore, no future awards were made under the 2000 Plan, the Broad-Based Equity Plan, the 1996 Plan or the Directors' Plan (collectively, the "Prior Plans"), although outstanding awards under the Prior Plans continued to be in effect. The New Hire Authorization provided for the granting of awards as an inducement to a person being retained for employment by the Company.

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        Under the 2004 Plan, an aggregate of 4,000,000 shares (plus any shares under outstanding awards under the Prior Plans which become available for further grants) was authorized for issuance of awards. Under the New Hire Authorization, an aggregate of 500,000 shares was authorized.

        Stock options under the 2004 Plan and the New Hire Authorization were granted with exercise prices at the fair market value of the underlying shares at the date of grant. The right to exercise options generally commenced one to five years after the grant date, and the options expired between five to ten years after the grant date. Restrictions on restricted stock unit grants lapsed over vesting periods of up to five years.

        The weighted-average grant date fair value of options and restricted stock units granted during the thirteen weeks ended April 2, 2005 was $10.59 and $23.55, respectively. There were no share-based grants during the period January 1, 2006 to February 14, 2006 (predecessor entity).

        The total intrinsic value of stock options exercised during the thirteen weeks ended April 2, 2005 was approximately $349,000 and no restricted stock units were converted into common stock. The total intrinsic value of each stock option and restricted stock unit exercised due to the Merger was approximately $20.0 million and $4.4 million, respectively, for the period January 1, 2006 to February 14, 2006 (predecessor entity).

        The following is a summary of the activity for nonvested stock option grants and restricted stock unit awards as of February 14, 2006 and the changes for the period January 1, 2006 to February 14, 2006:

	Predecessor Entity
	Stock Options				Restricted Stock Units
	Options		Fair Value(1)		Units		Fair Value(1)
Nonvested at January 1, 2006	1,064,620		$	10.59	155,416		$	25.71
Grants	—			—	—			—
Vested(2)	(1,060,940	)	$	10.59	(155,416	)	$	25.71
Cancelled	(3,680	)	$	11.12	—			—
Nonvested at February 14, 2006	—			—	—			—

(1)

Represents the weighted-average grant date fair value per share-based unit, using the Black-Scholes option-pricing model for stock options and the average high/low market price of the Company's common stock for restricted stock units.

(2)

All of the share-based units became immediately vested on the date of the Merger.

        The total fair value of stock options vested during the thirteen-week period ended April 2, 2005 was approximately $0.4 million and no restricted stock units vested. The total fair value of stock options and restricted stock units vested during the period from January 1, 2006 to February 14, 2006 (predecessor entity) was approximately $11.2 million and $4.0 million, respectively.

        The compensation cost that has been charged against income for restricted stock unit grants was $0.2 million for the thirteen weeks ended April 2, 2005. No compensation cost was recognized for stock option grants.

        As of December 31, 2005, there was approximately $9.3 million and $3.2 million of total unrecognized compensation cost related to stock option grants and restricted stock unit awards,

F-48

respectively, under the stock option plans. The consummation of the Merger accelerated the recognition of compensation cost, and, accordingly, all of this cost was included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations in the period from January 1, 2006 to February 13, 2006 (predecessor entity).

Share-based Compensation Plans—Successor Entity

        On February 14, 2006, the board of directors (the "Board") and stockholders of Linens Holding Co. adopted the Linens Holding Co. Stock Option Plan (the "Plan"). The Plan provides employees or directors of the Company or its subsidiaries who are in a position to contribute to the long-term success of these entities, with options to acquire shares in the Company to aid in attracting, retaining and motivating persons of outstanding ability. The Plan was amended in March 2006 to increase the number of shares of common stock, par value less than $0.01 per share, of Linens Holding (the "Common Stock") available for issuance under the Plan to 1,157,298 shares.

        As of April 1, 2006, 737,446 stock options were outstanding as detailed below:

        (1) On March 27, 2006, the Compensation Committee approved the grant of stock options under the Plan to the following executive officers:

Name and Principal Position	Number of Stock Options Granted
Robert J. DiNicola, Chairman and Chief Executive Officer	281,946
William T. Giles, Executive Vice President, Chief Financial Officer	25,000
F. David Coder, Executive Vice President, Store Operations	25,000

        The Compensation Committee also approved the granting of a total of 365,500 stock option awards under the Plan to certain other employees of the Company. The stock options granted under the Plan to each optionee are equally divided between a "Time Option" and a "Performance Option," as those terms are defined in the standard form of option grant letter. The stock options have an exercise price of $50.00 per share, the estimated fair market value of the underlying shares at the date of grant, and expire seven years after the date of grant. Time Options become vested and exercisable in four equal installments on each of February 14, 2007, February 14, 2008, February 14, 2009, and February 14, 2010. With respect to Performance Options and as provided for and defined in the standard form of grant letter, the stock options become vested and exercisable in two equal installments from a measurement date if, on such measurement date, the value per share equals or exceeds a target stock price.

        (2) On March 23, 2006, the Board approved a grant to Robert J. DiNicola, the Chairman and Chief Executive Officer of Linens "n Things, Inc., of a non-qualified stock option to purchase 40,000 shares of Common Stock outside of the Plan. These stock options also have an exercise price of $50.00 per share and are fully vested and immediately exercisable on the date of grant.

F-49

        The following is a summary of share-based option activity for the period February 14, 2006 to April 1, 2006:

		Successor Entity
		Outstanding at February 14, 2006	Grants	Outstanding at April 1, 2006
Stock options granted under the Plan
	Executive officers	—	331,946	331,946
	Certain other employees	—	365,500	365,500
		—	697,446	697,446
Stock options granted outside of the Plan
	Robert J. DiNicola, Chairman and Chief Executive Officer	—	40,000	40,000
Total options outstanding		—	737,446	737,446
Weighted average exercise price per option		—	$50.00	$50.00
Weighted average remaining contractual term per option		—		7.0 years
Options exercisable at period end:
	Number of options			40,000
	Weighted average exercise price			$50.00
	Weighted average remaining contractual term			7.0 years

        There are no provisions in the Plan for the issuance of restricted stock units.

        The weighted-average grant date fair value of options granted during the period from February 14, 2006 to April 1, 2006 (successor entity) was approximately $17.43.

        There were no stock option exercises during the period February 14, 2006 to April 1, 2006 (successor entity).

        The following is a summary of the activity for nonvested stock option grants as of April 1, 2006 and the changes for the period February 14, 2006 to April 1, 2006:

	Successor Entity Stock Options
	Options		Fair Value(1)
Nonvested at February 14, 2006	—		$	—
Grants	737,446		$	17.43
Vested	(40,000	)	$	16.67
Nonvested at April 1, 2006	697,446		$	17.47

(1)

Represents the weighted-average grant date fair value per option, using the Monte Carlo simulation option-pricing model for Performance Options, and the Black-Scholes option-pricing model for Time Options.

        The total fair value of stock options vested during the period from February 14, 2006 to April 1, 2006 (successor entity) was approximately $0.7 million.

F-50

        As of April 1, 2006, there was approximately $11.2 million of total unrecognized compensation cost related to stock option grants both under and outside the Plan. This cost is expected to be recognized over a remaining weighted-average period of 3.7 years. The compensation cost that has been charged against income for stock option grants was $0.7 million and was included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations in the period from February 14, 2006 to April 1, 2006 (successor entity).

        Prior to the adoption of SFAS 123 (Revised 2004) the Company used the Black-Scholes option-pricing model for estimating the fair value for all options granted. In the first quarter of 2006, the Company, with the assistance of an independent third party, used the Monte Carlo simulation option-pricing model for estimating the fair value of Performance Options and the Black-Scholes option-pricing model for Time Options. This change was made in order to provide a better estimate of fair value. The Monte Carlo option-pricing model is particularly useful in the valuation of options with complicated features that make them difficult to value through a straight-forward Black-Scholes style computation.

        Presented below is a comparative summary of valuation assumptions for the indicated periods:

					Successor Entity
	Predecessor Entity				February 14 to April 1, 2006 (Monte Carlo Simulation and Black-Scholes)
Valuation Assumptions:	Thirteen Weeks Ended April 2, 2005 (Black-Scholes)			January 1 to February 14, 2006 (Black-Scholes)
Weighted-average fair value of options granted	$	10.59		No Grants		N/A
Weighted-average calculated value of options granted		N/A		No Grants	$	17.43
Expected volatility		41.1	%	No Grants		N/A	(1)
Weighted-average volatility		41.1	%	No Grants		38.3%	(1)
Weighted-average expected term (in years)		5.0		No Grants		3.8
Dividend yield		0.0	%	No Grants		0.0	%
Weighted-average risk-free interest rate		4.1	%	No Grants		4.7	%
Weighted average expected annual forfeiture		2.3	%	No Grants		4.4	%

(1)

The Company used the average of the historical volatility of each of the component companies included in the Standard & Poors Specialty Retail Index as a substitute for expected volatility.

        The Company utilized historical optionee behavioral data to estimate the option exercise and termination rates used in the Black-Scholes option-pricing model prior to the adoption of SFAS 123 (Revised 2004). The expected term of the options represents the period of time the options were expected to be outstanding based on historical trends. Expected volatility was based on the historical volatility of the common stock of Linens 'n Things, Inc. for a period approximating the expected life. The Company has never paid dividends, and, accordingly, the dividend yield is zero. The risk-free interest rate within the expected term was based on the U.S. Treasury yield curve in effect at the time of grant.

F-51

        For the period subsequent to the adoption of SFAS 123 (Revised 2004) it is not possible for the Company, a non-public entity, to make a reasonable estimate of fair value of options granted as it is not practicable for the Company to make a reasonable estimate of its common stock volatility. Accordingly, the Company is required to use an alternative measurement method. Under the alternative measurement method, a nonpublic entity uses a calculated volatility, determined by applying the historical volatility of an appropriate index of public entities, as an input to the valuation models. The Company used the Standard & Poors Specialty Retail Index for a period approximating the expected term as this index most closely approximates the Company's applicable operating industry. Expected term of share options granted represents the period of time that the options grants are expected to be outstanding. The Company is not expected to pay dividends, and, accordingly, the dividend yield is zero. The risk-free interest rate within the expected term was based on the U.S. Treasury yield curve in effect at the time of grant.

        Prior to the adoption of SFAS No. 123 (Revised 2004) the Company complied with the disclosure requirements of SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of SFAS No. 123" ("SFAS No. 148"). SFAS No. 148 required prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results.

        Set forth below are the Company's net loss presented "as reported" and as if compensation cost had been recognized in accordance with the provisions of SFAS No. 148 for the indicated periods:

		Predecessor Entity						Successor Entity
(In thousands)		Thirteen Weeks Ended April 2, 2005			January 1 to February 13, 2006			February 14 to April 1, 2006
Net loss:
	As reported	$	(4,074	)	$	(47,904	)	$	(17,572	)
	Add: stock-based employee compensation expense included in net loss as reported, net of related tax effects(1)		146			8,651			431
			(3,928	)		(39,253	)		(17,141	)
	Deduct: total stock-based employee compensation expense determined under the fair value based method of accounting for all awards, net of related tax effects		1,611			8,651			431
	Pro forma	$	(5,539	)	$	(47,904	)	$	(17,572	)

(1)

Stock-based employee compensation expense included in net loss as reported, net of related tax effects, is detailed as follows:

		Predecessor Entity				Successor Entity
(In thousands)		Thirteen Weeks Ended April 2, 2005		January 1 to February 13, 2006		February 14 to April 1, 2006
Compensation expense:
	Stock option grants	$	—	$	9,305	$	709
	Restricted stock units		233		3,179		—

F-52

			233			12,484			709
Benefit for income taxes:
	Stock option grants		—			(2,857	)		(278	)
	Restricted stock units		(87	)		(976	)		—
			(87	)		(3,833	)		(278	)
Stock-based employee compensation expense, net of related tax effects		$	146		$	8,651		$	431

4. Short-Term Borrowing Arrangements

        In February 2006, the Company entered into a new senior secured asset-based revolving credit facility agreement (the "Credit Facility") with third party institutional lenders which expires February 14, 2011. The Credit Facility provides senior secured financing of up to $600 million, subject to a borrowing base consisting of certain eligible inventory and receivables, minus certain reserves. A portion of the Credit Facility, not to exceed $40 million, is also available to a Canadian subsidiary of the Company subject to the Canadian borrowing base. The Credit Facility replaced the $250 million senior revolving credit facility amended November 2004, which allowed for up to $50 million in borrowings from additional lines of credit outside the agreement, including CAD $40 million covering the Company's Canadian operations (the "2004 Credit Agreement").

        Under the Credit Facility, interest on all borrowings is determined, at the Company's option, on either of two alternative rates, specifically (1) a variable margin above LIBOR or (2) a variable margin above the federal funds effective rate plus 0.50%. In addition to paying interest on outstanding principal under the Credit Facility, the Company is required to pay a variable rate commitment fee in respect of the unutilized commitments thereunder. The Credit Facility requires the Company to comply with financial ratio maintenance covenants if the excess availability under the Credit Facility, at any time, does not exceed $75 million and also contains certain restrictive covenants including the Company's ability to pay dividends, which the Company has never paid in the past, and certain customary affirmative covenants and events of default. During the period February 14 to April 1, 2006 the Company always maintained excess availability above $75 million. As of April 1, 2006, the Company had $81.6 million in borrowings under the Credit Facility at an average interest rate of 6.3%. Such borrowings have been classified as short-term as of April 1, 2006 as the Company has the ability and intent to pay these borrowings from existing current assets. At various times during the thirteen weeks ended April 1, 2006 the Company borrowed against its Credit Facility and the 2004 Credit Agreement, respectively, for working capital needs. During the thirteen weeks ended April 2, 2005 the Company did not borrow against the 2004 Credit Agreement. The Company also had $106.0 million of letters of credit outstanding as of April 1, 2006, which included standby letters of credit issued primarily under the Credit Facility and import letters of credit used for merchandise purchases. The Company is not obligated under any formal or informal compensating balance requirements.

F-53

5. Comprehensive Loss

        Comprehensive loss for the thirteen weeks ended April 2, 2005 and April 1, 2006 is as follows (in thousands):

	Predecessor Entity						Successor Entity
	Thirteen Weeks Ended April 2, 2005			January 1 to February 13, 2006			February 14 to April 1, 2006
Net loss	$	(4,074	)	$	(47,904	)	$	(17,572	)
Other comprehensive (loss) income—foreign currency translation adjustment		(183	)		253			(566	)
Comprehensive loss	$	(4,257	)	$	(47,651	)	$	(18,138	)

6. 2001 Restructuring and Asset Impairment Charge

        In fiscal 2001, the Company developed and committed to a strategic initiative designed to improve store performance and profitability. This initiative called for the closing of certain under-performing stores, which did not meet the Company's profit objectives. In connection with this initiative, the Company recorded a pre-tax restructuring and asset impairment charge of $37.8 million ($23.7 million after-tax) in the fourth quarter of fiscal 2001. A pre-tax reserve of $20.5 million was established for estimated lease commitments for stores to be closed. The reserve considers estimated sublease income. Because all of the stores were leased, the Company is not responsible for the disposal of property other than fixtures. A pre-tax writedown of $9.5 million was recorded as a reduction in property and equipment for fixed asset impairments for these stores. The fixed asset impairments represent fixtures and leasehold improvements. A pre-tax reserve of $4.0 million was established for other estimated miscellaneous store closing costs. Additionally, a pre-tax charge of $3.8 million was recorded in cost of sales for estimated inventory markdowns below cost for the stores to be closed. Certain components of the restructuring charge were based on estimates and may be subject to change in the future. The Company has closed all of the initially identified stores other than one store, which the Company decided to keep open and whose reserve was reversed.

        The following table displays a roll forward of the activity and significant components since December 31, 2005, and the reserve remaining as of April 1, 2006:

		Predecessor Entity					Successor Entity
(in millions)		Remaining at December 31, 2005		Usage 2006			Remaining at April 1, 2006
		(Audited)		(Unaudited)			(Unaudited)
Cash components:
	Lease commitments	$	5.4	$	(1.2	)	$	4.2
Total		$	5.4	$	(1.2	)	$	4.2

        The restructuring reserve balance is included in accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheet. The 2006 usage primarily consists of payments for lease commitments. The 2006 activity also includes the reversal of estimated lease commitment costs of

F-54

approximately $55,000 which were not needed, offset by an increase to lease commitment costs of approximately $130,000 due to changes in estimates based on current negotiations.

7. Identifiable Intangible Assets

        In connection with the Transactions, the Company's intangible assets were revalued with the assistance of an independent third party. The carrying amount and accumulated amortization of identifiable intangible assets consisted of the following:

		Predecessor Entity						Successor Entity
(in thousands)		April 2, 2005			December 31, 2005			April 1, 2006
		(Unaudited)			(Audited)			(Unaudited)
Intangible assets subject to amortization:
	Credit card customer relationships	$	—		$	—		$	10,136
	Customer list		—			—			406
	Favorable leases		2,900			2,900			27,788
			2,900			2,900			38,330
	Less: accumulated amortization		(1,458	)		(1,599	)		(1,039	)
Total intangible assets subject to amortization			1,442			1,301			37,291
Total indefinite-lived trademarks			—			—			122,688
Total identifiable intangible assets		$	1,442		$	1,301		$	159,979

        Customer list has an estimated life of 5 years, credit card customer relationships have an estimated life of 3 years and favorable leases have an average estimated life of 5 years. For the thirteen weeks ended April 2, 2005, the period January 1 to February 13, 2006 and the period February 14 to April 1, 2006, amortization expense of $47,000, $25,000 and $1.1 million, respectively, was recorded by the Company and is included in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.

        The following is a summary table representing the remaining amortization of identifiable intangible asset, net, with definitive lives, by year (in thousands):

Fiscal Year	Amortization
2006	$	6,494
2007		7,983
2008		7,039
2009		3,519
2010		2,799
2011 and thereafter		9,457
Total	$	37,291

8. Guarantees

        The Company has assigned property at a retail location in which the Company guarantees the payment of rent over the specified lease term in the event of non-performance. As of April 1, 2006, the

F-55

maximum potential amount of future payments the Company could be required to make under such guarantee is approximately $0.7 million.

9. Accounts Payable

        Accounts payable includes amounts for gift card liabilities of $25.6 million, $35.8 million and $32.6 million as of April 2, 2005, December 31, 2005 and April 1, 2006, respectively. Gift cards that are not expected to be redeemed are recorded as a reduction to selling, general and administrative expense in the Condensed Consolidated Statements of Operations. Such amounts recognized for the thirteen weeks ended April 2, 2005, the period January 1 to February 13, 2006 and the period February 14 to April 1, 2006 amounted to $0.8 million, $0.5 million and $0.6 million, respectively.

10. Senior Secured Notes and Other Long-Term Debt

        Senior secured notes and other long-term debt consists of the following (in thousands):

		Predecessor Entity						Successor Entity
		April 2, 2005			December 31, 2005			April 1, 2006
		(Unaudited)			(Audited)			(Unaudited)
Senior secured floating rate notes due 2014		$	—		$	—		$	650,000
Mortgage note payable			2,182			2,139			2,124
			2,182			2,139			652,124
Less: current portion of mortgage note payable			(59	)		(63	)		(65	)
	Total	$	2,123		$	2,076		$	652,059

        Senior secured floating rate notes due 2014 consists of $650 million aggregate principal amount of Senior Secured Floating Rate Notes due 2014 of Linens "n Things, Inc. and Linens "n Things Center, Inc.

        The Notes bear interest at a per annum rate equal to LIBOR plus 5.625%, which is paid every three months on January 15, April 15, July 15 and October 15, commencing April 15, 2006. The interest rate on the Notes is reset quarterly. The Notes mature on January 15, 2014. As of April 1, 2006 the interest rate on the Notes was 10.3%.

        The Notes are guaranteed on a senior basis by the Company and by certain of the Company's domestic subsidiaries (collectively, the "Note Guarantors"), and are secured by first-priority liens on all of the Company's and Note Guarantors' equipment, intellectual property rights and related general intangibles and all of its capital stock and the capital stock of certain subsidiaries and by second-priority liens on the Company's and the Note Guarantors' inventory, accounts receivable, cash, securities and other general intangibles.

        If the Company sells certain assets or experiences specific kinds of changes in control, the Company must offer to repurchase the Notes. The Company may, at its option, redeem the Notes at any time on or after January 15, 2008 at pre-determined prices. Prior to January 15, 2008, the Company may, at its option, redeem up to 35% of the Notes with the proceeds of certain sales of its equity or of its subsidiaries. Prior to January 15, 2008, the Company may, at its option, redeem the Notes at a price equal to 100% of the principal amount of the Notes plus a "make-whole" premium.

F-56

        Mortgage note payable represents an 8.2% fixed-rate mortgage note on the land and building of one of the Company's closed stores. Under the mortgage note terms, the Company is required to make 96 equal payments of principal and interest, with a final principal payment of approximately $1.6 million in August 2012.

11. Income Taxes

        For the Predecessor Entity period January 1 to February 13, 2006, the effective tax rate of 30.7% is lower than the statutory federal rate of 35.0% primarily due to non-deductible transaction costs. The Successor Entity estimated effective tax rate for the period February 14 to April 1, 2006 was 39.2%. This exceeds the statutory federal tax rate of 35.0% primarily due to expected deferred state tax benefits. Purchase accounting adjustments resulted in an increase to net deferred tax liabilities of $152,892 as indicated in the table below (in thousands):

Component	Pretax Purchasing Accounting Adjustment			Tax Rate		Deferred Tax (Asset) Liability
Trademarks	$	122,688		39.2%	(1)	$	48,094
Deferred rent and deferred rent credits		233,016		39.2	%		91,342
Other intangibles		16,847		39.2	%		6,604
Valuation allowance for state tax loss carryovers, net of federal benefit		8,214		N/A			8,214
Deferred rent and deferred rent credits—Canada		17,002		35.5%	(2)		6,035
Preliminary estimate of deductible portion of certain capitalized transaction costs		(17,855	)	39.2	%		(7,000	)
Other							(397	)
Total						$	152,892

(1)

Includes federal rate of 35.0% plus blended state rate of 4.2%, net of federal benefit.

(2)

Includes Canadian federal and provincial taxes.

12. Related Party Transactions

Management Services Agreement

        Upon consummation of the Merger, the Company entered into a management services agreement with Apollo Management V, L.P., NRDC Linens B LLC and Silver Point Capital Fund Investments LLC (each of whom is an affiliate of the Company). Under this management services agreement, the Sponsors agreed to provide to the Company certain investment banking, management, consulting, financial planning and real estate advisory services on an ongoing basis for a fee of $2.0 million per year. Under this management services agreement, Apollo Management V, L.P. also agreed to provide to the Company certain financial advisory and investment banking services from time to time in connection with major financial transactions that may be undertaken by it or its subsidiaries in exchange for fees customary for such services after taking into account Apollo Management V, L.P.'s expertise and relationships within the business and financial community. Under this management services agreement, the Company also agreed to provide customary indemnification. In addition, the

F-57

Company paid a transaction fee of $15.0 million in the aggregate (plus reimbursement of expenses) to the Sponsors for financial advisory services rendered in connection with the Merger. This fee has been included as part of the purchase price. These services included assisting the Company in structuring the Merger, taking into account tax considerations and optimal access to financing, and assisting in the negotiation of the Company's material agreements and financing arrangements in connection with the Merger.

Stockholders' Agreement

        The only stockholders of the Company are Robert J. DiNicola and Linens Investors, LLC, a limited liability company owned by the Sponsors. In connection therewith, Linens Investors, LLC has entered into a stockholders' agreement with the Company that sets forth applicable provisions relating to the management and ownership of the Company and its subsidiaries. In addition, the stockholders' agreement contains customary drag along rights, tag along rights, registration rights, restrictions on the transfer of the Company's common stock and an indemnity of the Sponsors.

13. Supplemental Condensed Consolidating Financial Information

        On February 14, 2006 Linens 'n Things, Inc. and Linens 'n Things Center, Inc. (collectively, the "Issuers"), issued $650 million aggregate principal amount of Senior Secured Floating Rate Notes due 2014 in a private offering. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior basis by the Company, and by each of the Company's direct and indirect subsidiaries that guarantee the Company's new asset-based revolving credit facility except for its Canadian subsidiaries. The Company's Canadian subsidiaries (the "Non-Guarantors") are not guarantors of the Notes.

        The following tables present the supplemental condensed consolidating financial information for the Company (Parent), the Issuers, the Guarantors (excluding the Company which is also a Guarantor but is separately presented) and the Non-Guarantors, together with eliminations, as of and for the periods indicated. The company has not presented separate financial statements and other disclosures concerning the Guarantors because management has determined that such information is not material to investors. The accounting policies for Parent, Co-Issuers, Guarantors, and Non-Guarantors are the same as those described for the Company in the Summary of Significant Accounting Policies. The financial information may not necessarily be indicative of results of operations or financial position had the Guarantors operated as independent entities.

        The information as of April 1, 2006 and for the period February 14 to April 1, 2006 presents the financial position and operations, respectively, of the Successor Entity. The information as of April 2, 2005 and December 31, 2005, and for the 13-week period ended April 2, 2005 and the period January 1 to February 13, 2006 presents the financial position and operations, respectively, of the Predecessor Entity.

F-58

(Predecessor Entity)

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

APRIL 2, 2005

(In Thousands)

	Co-Issuers			Guarantors		Non-Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	53,256		$	10,688	$	11,327	$	—		$	75,271
Accounts receivable		578			27,035		2,573		—			30,186
Inventories		14,439			705,630		45,860		—			765,929
Prepaid expenses and other current assets		90			37,856		1,418		—			39,364
Current deferred taxes		—			—		800		—			800
Total current assets		68,363			781,209		61,978		—			911,550
Property and equipment, net		7,734			527,665		33,930		—			569,329
Identifiable intangible assets, net		398			923		121		—			1,442
Goodwill		—			18,126		—		—			18,126
Intercompany receivables		73,742			—		—		(73,742	)		—
Intercompany notes receivable		201,320			—		22,366		(223,686	)		—
Investment in subsidiaries		462,033			—		—		(462,033	)		—
Deferred financing cost and other noncurrent assets, net		1			9,401		7		—			9,409
Total assets	$	813,591		$	1,337,324	$	118,402	$	(759,461	)	$	1,509,856
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	(14	)	$	222,446	$	16,166	$	—		$	238,598
Accrued expenses and other current liabilities		(1,358	)		131,219		3,398		—			133,259
Current deferred taxes		252			5,470		—		—			5,722
Total current liabilities		(1,120	)		359,135		19,564		—			377,579
Intercompany notes payable		—			179,065		44,621		(223,686	)		—
Intercompany payable		—			54,911		18,831		(73,742	)		—
Senior secured notes and other long-term debt, net of current portion		—			2,123		—		—			2,123
Deferred income taxes and other long-term liabilities		8,699			297,772		17,671		—			324,142
Total liabilities		7,579			893,006		100,687		(297,428	)		703,844
Total shareholders' equity		806,012			444,318		17,715		(462,033	)		806,012
Total liabilities and shareholders' equity	$	813,591		$	1,337,324	$	118,402	$	(759,461	)	$	1,509,856

F-59

(Predecessor Entity)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2005
(In Thousands)

	Co-Issuers(1)			Guarantors(1)		Non-Guarantors(1)		Eliminations(1)			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	136,569		$	8,718	$	12,871	$	—		$	158,158
Accounts receivable		361			39,757		3,443		—			43,561
Inventories		15,105			725,856		46,322		—			787,283
Prepaid expenses and other current assets		84			15,368		1,973		—			17,425
Current deferred taxes		—			1,789		244		—			2,033
Total current assets		152,119			791,488		64,853		—			1,008,460
Property and equipment, net		9,974			561,271		41,002		—			612,247
Identifiable intangible assets, net		331			861		109		—			1,301
Goodwill		—			18,126		—		—			18,126
Intercompany receivable		—			856,999		—		(856,999	)		—
Intercompany notes receivable		1,096,991			—		23,306		(1,120,297	)		—
Investment in subsidiaries		490,933			—		—		(490,933	)		—
Deferred financing cost and other noncurrent assets, net		1			10,605		94		—			10,700
Total assets	$	1,750,349		$	2,239,350	$	129,364	$	(2,468,229	)	$	1,650,834
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	(16	)	$	249,399	$	18,199	$	—		$	267,582
Accrued expenses and other current liabilities		43,824			144,840		10,360		—			199,024
Current deferred taxes		222			4,179		—		—			4,401
Total current liabilities		44,030			398,418		28,559		—			471,007
Intercompany payable		848,054			—		8,945		(856,999	)		—
Intercompany notes payable		—			1,073,800		46,497		(1,120,297	)		—
Senior secured notes and other long-term debt, net of current portion		—			2,076		—		—			2,076
Deferred income taxes and other long-term liabilities		8,402			300,637		18,849		—			327,888
Total liabilities		900,486			1,774,931		102,850		(1,977,296	)		800,971
Total shareholders' equity		849,863			464,419		26,514		(490,933	)		849,863
Total liabilities and shareholders' equity	$	1,750,349		$	2,239,350	$	129,364	$	(2,468,229	)	$	1,650,834

(1)

Certain amounts have been corrected by amounts, which in the opinion of management are deemed to be immaterial from the disclosure in the original reported condensed consolidated financial statements. See the details of such corrections at the end of this footnote.

F-60

(Successor Entity)

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

April 1, 2006

(In Thousands)

	Parent		Co-Issuers			Guarantors		Non-Guarantors		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—	$	660		$	7,682	$	6,691	$	—		$	15,033
Accounts receivable		—		517			39,303		2,826		—			42,646
Inventories		—		15,052			762,621		50,106		—			827,779
Prepaid expenses and other current assets		—		619			40,163		2,292		—			43,074
Current deferred taxes		—		—			—		179		—			179
Total current assets		—		16,848			849,769		62,094		—			928,711
Property and equipment, net		—		9,749			550,385		41,671		—			601,805
Identifiable intangible assets, net		—		839			157,123		2,017		—			159,979
Goodwill		—		7,607			253,418		16,239		—			277,264
Intercompany receivable		—		—			722,106		—		(722,106	)		—
Intercompany notes receivable		—		1,096,963			—		23,278		(1,120,241	)		—
Investment in subsidiaries		630,185		907,569			—		—		(1,537,754	)		—
Deferred financing cost and other noncurrent assets, net		—		35,200			776		113		—			36,089
Total assets	$	630,185	$	2,074,775		$	2,533,577	$	145,412	$	(3,380,101	)	$	2,003,848
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	—	$	(11	)	$	232,998	$	18,780		—		$	251,767
Accrued expenses and other current liabilities		—		(7,182	)		150,695		5,933		—			149,446
Current deferred taxes		—		173			3,707		—		—			3,880
Asset-based revolving credit facility		—		79,823			64		1,714		—			81,601
Total current liabilities		—		72,803			387,464		26,427		—			486,694
Intercompany notes payable		—		—			1,073,800		46,441		(1,120,241	)		—
Intercompany payable		—		713,020			—		9,086		(722,106	)		—
Senior secured notes and other long-term debt, net of current portion		—		650,000			2,059		—		—			652,059
Deferred income taxes and other long-term liabilities		—		8,768			216,780		9,363		—			234,911
Total liabilities		—		1,444,591			1,680,103		91,317		(1,842,347	)		1,373,664
Total shareholders' equity		630,185		630,184			853,474		54,095		(1,537,754	)		630,184
Total liabilities and shareholders' equity	$	630,185	$	2,074,775		$	2,533,577	$	145,412	$	(3,380,101	)	$	2,003,848

F-61

(Predecessor Entity)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE 13-WEEK PERIOD ENDED APRIL 2, 2005
(In Thousands)

		Co-Issuers			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales		$	16,265		$	526,228		$	28,453		$	—		$	570,946
Cost of sales, including buying and distribution costs			9,359			309,624			15,570			—			334,553
Gross profit			6,906			216,604			12,883			—			236,393
Selling, general and administrative expenses			4,671			224,047			13,436			—			242,154
Operating income (loss)			2,235			(7,443	)		(553	)		—			(5,761	)
	Interest income		(862	)		—			(49	)		416			(495	)
	Interest expense		—			1,160			474			(416	)		1,218
Interest (income) expense, net			(862	)		1,160			425			—			723
Income (loss) before income taxes			3,097			(8,603	)		(978	)		—			(6,484	)
Provision (benefit) for income taxes			1,166			(3,262	)		(314	)		—			(2,410	)
Net income (loss)		$	1,931		$	(5,341	)	$	(664	)	$	—		$	(4,074	)

(Predecessor Entity)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 1, 2006 TO FEBRUARY 13, 2006
(In Thousands)

		Co-Issuers			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales		$	7,684		$	259,826		$	17,461		$	—		$	284,971
Cost of sales, including buying and distribution costs			4,749			165,927			9,999			—			180,675
Gross profit			2,935			93,899			7,462			—			104,296
Selling, general and administrative expenses			2,119			163,511			8,508			—			174,138
Operating income (loss)			816			(69,612	)		(1,046	)		—			(69,842	)
	Interest income		(2,374	)		—			—			1,706			(668	)
	Interest expense		—			1,591			115			(1,706	)		—
Interest (income) expense, net			(2,374	)		1,591			115			—			(668	)
Income (loss) before income taxes			3,190			(71,203	)		(1,161	)		—			(69,174	)
Provision (benefit) for income taxes			976			(21,822	)		(424	)		—			(21,270	)
Net income (loss)		$	2,214		$	(49,381	)	$	(737	)	$	—		$	(47,904	)

F-62

(Successor Entity)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE PERIOD FEBRUARY 14, 2006 TO APRIL 1, 2006

(In Thousands)

		Parent		Co-Issuers			Guarantors			Non-Guarantors			Eliminations		Consolidated
Net sales			—	$	8,160		$	280,656		$	19,029		—		$	307,845
Cost of sales, including buying and distribution costs			—		4,700			175,213			9,155		—			189,068
Gross profit			—		3,460			105,443			9,874		—			118,777
Selling, general and administrative expenses			—		3,221			123,874			10,666		—			137,761
Operating income (loss)			—		239			(18,431	)		(792	)	—			(18,984	)
	Interest income		—		(7,400	)		—			—		7,314			(86	)
	Interest expense		—		—			17,067			234		(7,314	)		9,987
Interest (income) expense, net			—		(7,400	)		17,067			234		—			9,901
Income (loss) before income taxes			—		7,639			(35,498	)		(1,026	)	—			(28,885	)
Provision (benefit) for income taxes			—		3,009			(13,982	)		(340	)	—			(11,313	)
Net income (loss)		$	—	$	4,630		$	(21,516	)	$	(686	)	—		$	(17,572	)

F-63

(Predecessor Entity)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE 13-WEEK PERIOD ENDED APRIL 2, 2005
(In Thousands)

	Co-Issuers			Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash inflows (outflows) from operating activities:
Net income (loss)	$	1,931		$	(5,341	)	$	(664	)	$	—		$	(4,074	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		297			19,777			1,102			—			21,176
Deferred income taxes		2,286			(65	)		75			—			2,296
Stock based compensation		233			—			—			—			233
Loss on disposal of assets		—			86			—			—			86
Changes in assets and liabilities:
Decrease (increase) in accounts receivable		179			(3,547	)		(1,057	)		—			(4,425	)
Decrease (increase) in inventories		62			(48,625	)		(2,565	)		—			(51,128	)
Increase in prepaid expenses and other current assets		(5	)		(824	)		(51	)		—			(880	)
Decrease (increase) in deferred financing cost and other noncurrent assets		26			82			(47	)		—			61
(Decrease) increase in accounts payable		—			(9,391	)		2,461			—			(6,930	)
Decrease in accrued expenses and other liabilities		(33,218	)		(37,329	)		(3,290	)		—			(73,837	)
Net cash used in operating activities		(28,209	)		(85,177	)		(4,036	)		—			(117,422	)
Cash outflows from investing activities:
Additions to property and equipment		(108	)		(10,564	)		(1,355	)		—			(12,027	)
Addition to investment in subsidiary		(127	)								127			—
Net cash (used in) provided by investing activities		(235	)		(10,564	)		(1,355	)		127			(12,027	)
Cash inflows (outflows) from financing activities:
Issuance of common stock under stock incentive plans		904			—			127			(127	)		904
Federal tax benefit from issuance of common stock under stock incentive plans		135			—			—			—			135
Inter-company movements		(94,312	)		93,429			883			—			—
Increase in treasury stock		—			(122	)		—			—			(122	)
Net cash (used in) provided by financing activities		(93,273	)		93,307			1,010			(127	)		917
Effect of exchange rate changes on cash and cash equivalents		—			—			(206	)		—			(206	)
Net decrease in cash and cash equivalents		(121,717	)		(2,434	)		(4,587	)		—			(128,738	)
Cash and cash equivalents at beginning of period		174,973			13,122			15,914			—			204,009
Cash and cash equivalents at end of period	$	53,256		$	10,688		$	11,327			—		$	75,271

F-64

(Predecessor Entity)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 2006 TO FEBRUARY 13, 2006
(In Thousands)

	Co-Issuers(1)			Guarantors(1)			Non-Guarantors(1)			Eliminations		Consolidated
Cash inflows (outflows) from operating activities:
Net income (loss)	$	2,214		$	(49,381	)	$	(737	)	$	—	$	(47,904	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		203			11,662			777			—		12,642
Deferred income taxes		(730	)		(6,029	)		113			—		(6,646	)
Shared based compensation expense		12,484			—			—			—		12,484
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		(288	)		(2,582	)		630			—		(2,240	)
Decrease (increase) in inventories		687			(30,481	)		(2,092	)		—		(31,886	)
(Increase) decrease in prepaid expenses and other current assets		(250	)		(12,595	)		692			—		(12,153	)
Decrease in deferred financing cost and other noncurrent assets		11			9,558			54			—		9,623
(Decrease) increase in accounts payable		(1	)		8,465			(1,220	)		—		7,244
(Decrease) increase in accrued expenses and other liabilities		(27,640	)		25,490			(4,160	)		—		(6,310	)
Net cash used in operating activities		(13,310	)		(45,893	)		(5,943	)		—		(65,146	)
Cash outflows from investing activities:
Additions to property and equipment		(30	)		(5,430	)		(2,316	)		—		(7,776	)
Net cash used in investing activities		(30	)		(5,430	)		(2,316	)		—		(7,776	)
Cash inflows (outflows) from financing activities:
Federal tax benefit from common stock issued under stock incentive plan		4,298			—			—			—		4,298
Intercompany cash movements		(52,158	)		49,564			2,594			—		—
Common stock offering		—			—			—
Decrease in treasury stock		—			674			—			—		674
Net cash (used in) provided by financing activities		(47,860	)		50,238			2,594			—		4,972
Effect of exchange rate changes on cash and cash equivalents		—			—			125			—		125
Net decrease in cash and cash equivalents		(61,200	)		(1,085	)		(5,540	)		—		(67,825	)
Cash and cash equivalents at beginning of period		136,569			8,718			12,871			—		158,158
Cash and cash equivalents at end of period	$	75,369		$	7,633		$	7,331		$	—	$	90,333

(1)

Certain amounts have been corrected by amounts, which in the opinion of management are deemed to be immaterial from the disclosure in the original reported condensed consolidated financial statements. See the details of such corrections at the end of this footnote.

F-65

(Successor Entity)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE PERIOD FEBRUARY 14, 2006 TO APRIL 1, 2006

(In Thousands)

	Parent			Co-Issuers			Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash inflows (outflows) from operating activities:
Net income (loss)	$	—		$	4,630		$	(21,516	)	$	(686	)	$	—		$	(17,572	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		—			242			13,906			874			—			15,022
Deferred income taxes		—			5,605			(12,333	)		(240	)		—			(6,968	)
Share-based compensation		—			—			709			—			—			709
Loss on disposal of assets		—			—			73			—			—			73
Changes in assets and liabilities:
Decrease (increase) in accounts receivable		—			132			3,035			(10	)		—			3,157
Increase in inventories		—			(633	)		(6,284	)		(1,794	)		—			(8,711	)
Increase in prepaid expenses and other current assets		—			(286	)		(12,199	)		(1,017	)		—			(13,502	)
Decrease (increase) in intangible assets, deferred financing cost and other noncurrent assets		—			1,231			29			(122	)		—			1,138
Increase (decrease) in accounts payable		—			6			(24,865	)		1,829			—			(23,030	)
(Decrease) increase in accrued expenses and other liabilities		—			(65,895	)		(17,376	)		381			—			(82,890	)
Net cash used in operating activities		—			(54,968	)		(76,821	)		(785	)		—			(132,574	)
Cash inflow (outflows) from investing activities:
Acquisition of Company, net of cash acquired		—			(1,220,465	)		7,632			7,331			—			(1,205,502	)
Investment in Linens 'n Things, Inc.		(650,000	)		—			—			—			650,000			—
Additions to property and equipment		—			(19	)		(8,197	)		(355	)		—			(8,571	)
Net cash (used in) provided by investing activities		(650,000	)		(1,220,484	)		(565	)		6,976			650,000			(1,214,073	)
Cash inflows (outflows) from financing activities:
Issuance of common stock to Linens Investors LLC		650,000			—			—			—			—			650,000
Investment from Parent		—			650,000			—			—			(650,000	)		—
Issuance of floating rate notes		—			650,000			—			—			—			650,000
Financing and direct acquisition costs		—			(19,866	)		—			—			—			(19,866	)
Intercompany movement		—			(83,845	)		85,004			(1,159	)		—			—
Increase in borrowings		—			79,823			64			1,733			—			81,620
Net cash provided by (used in) financing activities		650,000			1,276,112			85,068			574			(650,000	)		1,361,754
Effect of exchange rate changes on cash and cash equivalents		—			—			—			(74	)		—			(74	)
Net increase in cash and cash equivalents		—			660			7,682			6,691			—			15,033
Cash and cash equivalents at beginning of period		—			—			—			—			—			—
Cash and cash equivalents at end of period	$	—		$	660		$	7,682		$	6,691		$	—		$	15,033

F-66

The following corrections, in the opinion of Management, are deemed immaterial by the Company as these adjustments are primarily made between the Co-Issuers and the Guarantors or between categories within the same entity. These adjustments do not materially impact the Non-Guarantors, Co-Issuers and Guarantors financial statements and do not impact the consolidated totals. Subsequent to the reporting of the condensed consolidating financial statements for the quarterly period ended April 1, 2006, it was determined by the Company that the tax provision was booked only to the Guarantors subsidiary in fiscal 2004 and fiscal 2005 instead of the Co-Issuers, Guarantors, and Non-Guarantors. In addition, a short-term cash investment of $35.6 million was booked to the Guarantors entity instead of the Co-Issuers entity and an adjustment was made to reflect the proper balances. It was also determined that $0.7 million of expense reported on the Parent entity for the quarterly period ended April 1, 2006 was related to the Guarantors entity. It was also determined that certain costs associated with buying and distribution were charged to Selling, General and Administrative Expenses instead of Cost of Goods Sold within the entities.

        The following table shows the overall impact of the adjustment to the stated line items in order to properly correct the tax provision, related taxes payable accounts, Cost of Sales, Selling, General and Administrative Expenses, and cash balances between component Parent, Co-Issuers, Guarantors and Non-Guarantors subsidiaries:

		Previously Reported			As Corrected
		(In thousands)
Parent
	Supplemental Condensed Consolidating Statement of Cash Flows for the period February 14, 2006 to April 1, 2006
	Net loss	$	(709	)	$	—
	Share-based compensation		709			—
	Supplemental Condensed Consolidating Statement of Operations for the period February 14, 2006 to April 1, 2006
	Selling, general and administrative expenses		709			—
	Operating loss		(709	)		—
	Loss before income taxes		(709	)		—
	Net loss		(709	)		—
Co-Issuers
	Supplemental Condensed Consolidating Balance Sheet at December 31, 2005
	Cash and cash equivalents		101,000			136,569
	Current deferred taxes		1,789			—
	Total current assets		118,339			152,119
	Investment in subsidiaries		481,216			490,933
	Total assets		1,706,851			1,750,349
	Accrued expenses and other current liabilities		33,970			43,824
	Total current liabilities		34,176			44,030
	Intercompany payable		814,410			848,054
	Total liabilities		856,989			900,486
	Total liabilities and shareholders' equity		1,706,851			1,750,349

F-67

Supplemental Condensed Consolidating Balance Sheet at April 1, 2006
Investment in subsidiaries	$	907,446		$	907,569
Total assets		2,074,652			2,074,775
Accrued expenses and other current liabilities		(7,305	)		(7,182	)
Total current liabilities		72,680			72,803
Total liabilities		1,444,468			1,444,591
Total liabilities and shareholders' equity		2,074,652			2,074,775
Supplemental Condensed Consolidating Statement of Operations for the 13-Week Period Ended April 2, 2005
Cost of sales, including buying and distribution costs		9,135			9,359
Gross profit		7,130			6,906
Selling, general and administrative expenses		4,895			4,671
Supplemental Condensed Consolidating Statement of Operations for the Period January 1, 2006 to February 13, 2006
Cost of sales, including buying and distribution costs		4,625			4,749
Gross profit		3,059			2,935
Selling, general and administrative expenses		2,243			2,119
Supplemental Condensed Consolidating Statement of Operations for the Period February 14, 2006 to April 1, 2006
Cost of sales, including buying and distribution costs		4,565			4,700
Gross profit		3,595			3,460
Selling, general and administrative expenses		3,356			3,221
Provision for income taxes		2,887			3,009
Net income		4,752			4,630
Supplemental Condensed Consolidating Statement of Cash Flows for the period January 1, 2006 to February 13, 2006
Deferred income taxes		1,058			(730	)
Decrease in accrued expenses and other liabilities		(17,785	)		(27,640	)
Net cash used in operating activities		(1,667	)		(13,310	)
Intercompany cash movements		(28,232	)		(52,158	)
Net cash used in financing activities		(23,934	)		(47,860	)
Net decrease in cash and cash equivalents		(25,631	)		(61,200	)
Cash and cash equivalents at beginning of period		101,000			136,569
Supplemental Condensed Consolidating Statement of Cash Flows for the period February 14, 2006 to April 1, 2006
Net income		4,752			4,630
Decrease in accrued expenses and other liabilities		(66,017	)		(65,895	)

F-68

Guarantors
	Supplemental Condensed Consolidating Balance Sheet at December 31, 2005
	Cash and cash equivalents	$	44,287	$	8,718
	Current deferred taxes		—		1,789
	Total current assets		825,268		791,488
	Intercompany receivable		823,410		856,999
	Total assets		2,239,541		2,239,350
	Accrued expenses and other current liabilities		154,711		144,840
	Total current liabilities		408,289		398,418
	Total liabilities		1,784,802		1,774,931
	Total shareholders' equity		454,739		464,419
	Total liabilities and shareholders' equity		2,239,541		2,239,350
	Supplemental Condensed Consolidating Balance Sheet at April 2, 2005
	Prepaid expenses and other current assets		37,679		37,856
	Total current assets		781,032		781,209
	Property and equipment, net		527,842		527,665
	Supplemental Condensed Consolidating Balance Sheet at April 1, 2006
	Accrued expenses and other current liabilities		150,818		150,695
	Total current liabilities		387,587		387,464
	Total liabilities		1,680,226		1,680,103
	Total shareholders' equity		853,351		853,474
	Supplemental Condensed Consolidating Statement of Operations for the 13-Week Period Ended April 2, 2005
	Cost of sales, including buying and distribution costs		310,131		309,624
	Gross profit		216,097		216,604
	Selling, general and administrative expenses		223,540		224,047
	Supplemental Condensed Consolidating Statement of Operations for the Period January 1, 2006 to February 13, 2006
	Cost of sales, including buying and distribution costs		166,224		165,927
	Gross profit		93,602		93,899
	Selling, general and administrative expenses		163,214		163,511

F-69

	Supplemental Condensed Consolidating Statement of Operations for the Period February 14, 2006 to April 1, 2006
	Cost of sales, including buying and distribution costs	$	175,536		$	175,213
	Gross profit		105,120			105,443
	Selling, general and administrative expenses		122,842			123,874
	Operating loss		(17,722	)		(18,431	)
	Loss before income taxes		(34,789	)		(35,498	)
	Benefit for income taxes		(13,860	)		(13,982	)
	Net loss		(20,929	)		(21,516	)
	Supplemental Condensed Consolidating Statement of Cash Flows for the period January 1, 2006 to February 13, 2006
	Deferred income taxes		(7,817	)		(6,029	)
	Increase in accrued expenses and other liabilities		15,618			25,490
	Net cash used in operating activities		(57,553	)		(45,893	)
	Intercompany cash movements		25,655			49,564
	Net cash provided by financing activities		26,239			50,238
	Net decrease in cash and cash equivalents		(36,654	)		(1,085	)
	Cash and cash equivalents at beginning of period		44,287			8,718
	Supplemental Condensed Consolidating Statement of Cash Flows for the period February 14, 2006 to April 1, 2006
	Net loss		(20,929	)		(21,516	)
	Share-based compensation		—			709
	Decrease in accrued expenses and other liabilities		(17,254	)		(17,376	)
Non-Guarantors
	Supplemental Condensed Consolidating Balance Sheet at December 31, 2005
	Accrued expenses and other current liabilities		10,343			10,360
	Total current liabilities		28,542			28,559
	Intercompany payable		9,000			8,945
	Total liabilities		102,887			102,850
	Shareholders' equity		26,477			26,514
	Supplemental Condensed Consolidating Statement of Operations for the 13-Week Period Ended April 2, 2005
	Cost of sales, including buying and distribution costs		15,287			15,570
	Gross profit		13,166			12,883
	Selling, general and administrative expenses		13,719			13,436
	Supplemental Condensed Consolidating Statement of Operations for the Period January 1, 2006 to February 13, 2006
	Cost of sales, including buying and distribution costs		9,826			9,999
	Gross profit		7,635			7,462
	Selling, general and administrative expenses		8,681			8,508

F-70

	Supplemental Condensed Consolidating Statement of Operations for the Period February 14, 2006 to April 1, 2006
	Cost of sales, including buying and distribution costs	$	8,967		$	9,155
	Gross profit		10,062			9,874
	Selling, general and administrative expenses		10,854			10,666
	Supplemental Condensed Consolidating Statement of Cash Flows for the period January 1, 2006 to February 13, 2006
	Decrease in accrued expenses and other liabilities		(4,143	)		(4,160	)
	Net cash used in operating activities		(5,926	)		(5,943	)
	Intercompany cash movements		2,577			2,594
	Net cash provided by financing activities		2,577			2,594
Eliminations
	Supplemental Condensed Consolidating Balance Sheet at December 31, 2005
	Intercompany receivable		(823,410	)		(856,999	)
	Investment in subsidiaries		(481,216	)		(490,933	)
	Total assets		(2,424,922	)		(2,468,229	)
	Intercompany payable		(823,410	)		(856,999	)
	Total liabilities		(1,934,707	)		(1,977,296	)
	Total shareholders' equity		(481,215	)		(490,933	)
	Total liabilities and shareholders' equity	$	(2,424,922	)	$	(2,468,229	)
	Supplemental Condensed Consolidating Balance Sheet at April 1, 2006
	Investment in subsidiaries		(1,537,631	)		(1,537,754	)
	Total assets		(3,379,978	)		(3,380,101	)
	Total shareholders' equity		(1,537,631	)		(1,537,754	)
	Total liabilities and shareholders' equity		(3,379,978	)		(3,380,101	)

F-71

PART II

ITEM 20. Indemnification of Directors and Officers

        Linens Holding Co., Linens 'n Things, Inc., LNT Services, Inc. and LNT West, Inc. are organized under the laws of the State of Delaware. Under Delaware law, directors, officers, employees and other individuals may be indemnified against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with specified actions, suits or proceedings, whether civil, criminal, administrative or investigative if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. A similar standard of conduct is applicable in the case of a derivative action, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with defense or settlement of such an action and Delaware law requires court approval before there can be any indemnification of expenses where the person seeking indemnification has been found liable to the corporation.

        Vendor Finance, LLC, LNT Leasing II, LLC, LNT Merchandising Company LLC, LNT Leasing III, LLC and Citadel LNT, LLC are organized under the laws of the State of Delaware. Under Section 18.108 of the Delaware Limited Liability Company Act, a limited liability company has the power to indemnify and hold harmless any member or manager or other person from and against all claims and demands whatsoever, subject to any restrictions set forth in its limited liability company agreement.

        Linens 'n Things Center, Inc. is organized under the laws of the State of California. Section 317 of the California Corporations Code permits indemnification of directors, officers, employees and other agents of corporations, provided such person acted in good faith and in a manner they reasonably believed to be in the corporation's best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that their conduct was illegal. Determination of whether this standard of conduct has been met is subject to specific procedures set forth in the statute, except that when the agent has been successful on the merits, indemnification for actual and reasonable expenses is mandatory. However, where the person has been adjudged to be liable to the corporation, or with respect to amounts paid in settling a pending action without court approval, indemnification is generally not permitted. Section 204(a)(10) of the California Corporations Code also permits a corporation to provide, in its articles of incorporation, that directors shall not have liability to the corporation or its shareholders for monetary damages for breach of fiduciary duty, subject to certain prescribed exceptions.

        LNT Virginia LLC is organized under the laws of the Commonwealth of Virginia. Under Section 13.1-1009 of the Limited Liability Company Act, a limited liability company has the power to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever, subject to such standards and restrictions, if any, as are set forth in its articles of organization or an operating agreement.

        LNT, Inc. is organized under the laws of the State of New Jersey. Section 14A:3-5 of the New Jersey Business Corporation Act provides, in substance, that New Jersey corporations shall have the power, under specified circumstances, to indemnify their directors, officers and employees and agents in connection with actions, suits or proceedings brought against them or in the right of the corporation, by reason of the fact that they were or are such directors, officers, employees or agents, against expenses incurred in any such action, suit or proceeding.

        Bloomington, MN., L.T., Inc. is organized under the laws of the State of Minnesota. Section 302A.521, subd. 2, of the Minnesota Statutes requires a Company to indemnify a person made or threatened to be made a party to a proceeding by reason of the former or present official capacity of the person with respect to the Company, against judgments, penalties, fines, including, without

II-1

limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements, and reasonable expenses, including attorneys' fees and disbursements, incurred by the person in connection with the proceeding with respect to the same acts or omissions if such person (1) has not been indemnified by another organization or employee benefit plan for the same judgments, penalties or fines; (2) acted in good faith; (3) received no improper personal benefit, and statutory procedure has been followed in the case of any conflict of interest by a director; (4) in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and (5) in the case of acts or omissions occurring in the person's performance in the official capacity of director or, for a person not a director, in the official capacity of officer, board committee member or employee, reasonably believed that the conduct was in the best interests of the Company, or, in the case of performance by a director, officer or employee of the Company involving service as a director, officer, partner, trustee, employee or agent of another organization or employee benefit plan, reasonably believed that the conduct was not opposed to the best interests of the Company. In addition, Section 302A.521, subd. 3, requires payment by a Company, upon written request, of reasonable expenses in advance of final disposition of the proceeding in certain instances. A decision as to required indemnification is made by a disinterested majority of the Board of Directors present at a meeting at which a disinterested quorum is present, or by a designated committee of the Board, by special legal counsel, by the shareholders, or by a court.

        Pursuant to certain indemnification agreements, certain officers of the Company are entitled to be indemnified, to the fullest extent permitted by law for certain liabilities that may be incurred by them in the performance of their duties.

ITEM 21. EXHIBITS

(a)

Exhibits

Exhibit Number	Description of Exhibits
3.1*	Certificate of Incorporation of Laundry Merger Sub Co. (n/k/a Linens 'n Things, Inc.)
3.2*	Certificate of Amendment to the Certificate of Incorporation of Laundry Merger Sub Co. (changing name to Linens Merger Sub Co.)
3.3*	Certificate of Amendment to the Certification of Incorporation of Linens Merger Sub Co. (changing name to Linens 'n Things, Inc.)
3.4*	Amended and Restated By-laws of Linens 'n Things, Inc.
3.5*	Articles of Incorporation of Linens 'n Things Center, Inc.
3.6*	By-laws of Linens 'n Things Center, Inc.
3.7*	Certificate of Incorporation of Laundry Holding Co. (n/k/a Linens Holding Co.)
3.8*	Certificate of Amendment to the Certificate of Incorporation of Laundry Holding Co. (changing name to Linens Holding Co.)
3.9*	Amended and Restated By-laws of Linens Holding Co.
3.10*	Articles of Incorporation of Bloomington, MN., L.T., Inc.
3.11*	By-laws of Bloomington, MN., L.T., Inc.
3.12*	Certificate of Formation of Vendor Finance, LLC
3.13*	Operating Agreement of Operating Agreement of Vendor Finance, LLC
3.14*	Certificate of Incorporation of E W Kalkin, Inc. (n/k/a) LNT, Inc.
3.15*	Certificate of Amendment to the Certificate of Incorporation of E W Kalkin, Inc. (changing name to Linens 'n Things, Inc.)
3.16*	Certificate of Amendment to the Certificate of Incorporation of Linens 'n Things, Inc. (changing name to LNT, Inc.)
3.17*	By-laws of LNT, Inc.
3.18*	Certificate of Incorporation of LNT Services, Inc.

II-2

3.19*	By-laws of LNT Services, Inc.
3.20*	Certificate of Formation of LNT Leasing II, LLC
3.21*	Operating Agreement of LNT Leasing II, LLC
3.22*	Certificate of Incorporation of LNT West, Inc.
3.23*	By-laws of LNT West, Inc.
3.24*	Certificate of Organization of LNT Virginia LLC
3.25*	Operating Agreement of LNT Virginia LLC
3.26*	Certificate of Formation of LNT Merchandising Company LLC
3.27*	Operating Agreement of LNT Merchandising Company LLC
3.28*	Certificate of Formation of LNT Leasing III, LLC
3.29*	Operating Agreement of LNT Leasing III, LLC
3.30*	Certificate of Formation of Citadel LNT, LLC
3.31*	Operating Agreement of Citadel LNT, LLC
4.1	Indenture, dated as of February 14, 2006, among Linens 'n Things, Inc., Linens 'n Things Center, Inc., the Guarantors (as defined therein) and The Bank of New York, as Trustee, with respect to the Senior Secured Floating Rate Notes due 2014
4.2	Form of Senior Secured Floating Rate Notes due 2014 (included as "Exhibit A" to Exhibit 4.1)
4.3	Registration Rights Agreement, dated February 14, 2006, by and among Linens 'n Things, Inc., Linens 'n Things Center, Inc., the Guarantors listed on Schedule I thereto and Bear, Stearns & Co. Inc. and UBS Securities LLC
5.1*	Opinion of Gardere Wynne Sewell LLP regarding the validity of the securities offered hereby
10.1	Credit Agreement, (the "Credit Agreement") dated as of February 14, 2006, among Linens 'n Things, Inc., Linens 'n Things Center, Inc., the Subsidiary Guarantors (as defined therein), the parties named therein from time to time as lenders, whether by execution of the Credit Agreement or an Assignment and Acceptance, UBS Securities LLC, as Arranger and Bookmanager, UBS AG, Stamford Branch, as Issuing Bank, US Administrative Agent and US Co-Collateral Agent, UBS AG, Canada Branch, as Canadian Co-Collateral Agent, Wachovia Bank, National Association, as US Co-Collateral Agent, Co-Documentation Agent and an Issuing Bank, Wachovia Capital Finance Corporation (Canada), as Canadian Administrative Agent, Canadian Co-Collateral Agent and Canadian Swingline Lender, UBS Loan Finance LLC, as US Swingline Lender, UBS Securities LLC and Bear, Stearns & Co. Inc., as Joint Book Runners, Bear, Stearns & Co. Inc., as Co-Syndication Agent, Wells Fargo, as Co-Documentation Agent and The CIT Group/Business Credit, Inc., as Co-Syndication Agent
10.2*	Stockholders' Agreement, dated as of February 14, 2006, between Linens Holding Co. and its Stockholders
10.3*	Security Agreement, dated as of February 14, 2006, by Linens 'n Things, Inc., Linens 'n Things Center, Inc., the Guarantors party thereto and The Bank of New York
10.4*	Security Agreement, dated as of February 14, 2006, by Linens 'n Things, Inc., Linens 'n Things Center, Inc., the Guarantors party thereto, UBS AG, Stamford Branch and Wachovia Bank, National Association
10.5*	Management Services Agreement, dated as of February 14, 2006, among Linens 'n Things, Inc., Linens Holding Co., Apollo Management V, L.P., NRDC Linens B LLC and Silver Point Capital Fund Investments LLC

II-3

10.6*	Intercreditor Agreement, dated as of February 14, 2006, by and among Linens 'n Things, Inc., Linens Holding Co., Linens 'n Things Center, Inc., Linens 'n Things Canada Corp., the Subsidiary Guarantors (as defined therein), UBS AG, Stamford Branch, Wachovia Bank, National Association, UBS AG Canada Branch, Wachovia Capital Finance Corporation and The Bank of New York
10.7	Employment Agreement with Robert J. DiNicola
10.8	Option Grant Letter with Robert J. DiNicola
10.9	Employment Agreement with F. David Coder
10.10	Amended and Restated Employment Agreement with F. David Coder
10.11	Option Grant Letter with F. David Coder
10.12	Employment Agreement with Robert Homler
10.13	Amended and Restated Employment Agreement with Robert Homler
10.14*	Separation Agreement and General Release, by and between Norman Axelrod and Linens 'n Things, Inc.
10.15*	Separation Agreement and General Release, by and between Jack E. Moore and Linens 'n Things, Inc.
10.16	Separation Agreement and General Release, dated April 10, 2006, by and between Jane Gilmartin and Linens 'n Things, Inc.
10.17	Linens Holding Co. Stock Option Plan
10.18	Standard Form of Option Grant Letter
10.19*	Supplemental Executive Retirement Plan
10.20	Director Compensation Policy
10.21	Standard Form of Director Option Grant Letter
10.22*	Trademark Security Agreement, dated as of February 14, 2006, by Bloomington, MN., L.T., Inc. in favor of The Bank of New York
10.23*	Trademark Security Agreement, dated as of February 14, 2006, by LNT Merchandising Company LLC in favor of The Bank of New York
10.24*	Trademark Security Agreement, dated as of February 14, 2006, by LNT Services, Inc. in favor of The Bank of New York
10.25*	Copyright Security Agreement, dated as of February 14, 2006, by Linens 'n Things, Inc. in favor of The Bank of New York
10.26*	Copyright Security Agreement, dated as of February 14, 2006, by Linens 'n Things Center, Inc. in favor of The Bank of New York
12.1	Statement Regarding the Computation of Ratio of Earnings to Fixed Charges for Linens Holding Co.
21.1	Subsidiaries of Linens Holding Co.
23.1	Consent of Independent Registered Public Accounting Firm
23.3*	Consent of Gardere Wynne Sewell LLP (included in Exhibit 5.1)
24.1	Powers of Attorney (included in the signature pages to the Registration Statement)
25.1*	Statement of Eligibility and Qualification on Form T-1 of The Bank of New York, as trustee under the Indenture for Linens 'n Things, Inc.'s and Linens 'n Things Center, Inc.'s Senior Secured Floating Rate Notes due 2014
99.1*	Form of Letter of Transmittal
99.2*	Form of Notice for Guaranteed Delivery
99.3*	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees

*

To be filed by amendment.

II-4

ITEM 22. UNDERTAKINGS

        The undersigned registrants hereby undertake:

        (a)   To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

        (i)    to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

        (ii)   to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and

        (iii)  to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

        (b)   That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

        (c)   To remove from the registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

        (d)   Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the provisions described in Item 20, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

        (e)   To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), or 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the date of the registration statement through the date of responding to the request.

        (f)    To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

II-5

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

LINENS 'N THINGS, INC.
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer)	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	July 6, 2006
/s/  DR. JOYCE F. BROWN Dr. Joyce F. Brown	Director	July 6, 2006
/s/  PETER P. COPSES Peter P. Copses	Director	July 6, 2006
/s/  ANDREW S. JHAWAR Andrew S. Jhawar	Director	July 6, 2006

II-6

/s/  LEE S. NEIBART Lee S. Neibart	Director	July 6, 2006
/s/  RICHARD BAKER Richard Baker	Director	July 6, 2006
/s/  MICHAEL A. GATTO Michael A. Gatto	Director	July 6, 2006
/s/  GEORGE G. GOLLEHER George G. Golleher	Director	July 6, 2006
/s/  DAMIAN J. GIANGIACOMO Damian J. Giangiacomo	Director	July 6, 2006

II-7

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

LINENS 'N THINGS CENTER, INC.
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer) and Director	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director	July 6, 2006

II-8

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

LINENS HOLDING CO.
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer)	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	July 6, 2006
/s/  DR. JOYCE F. BROWN Dr. Joyce F. Brown	Director	July 6, 2006
/s/  PETER P. COPSES Peter P. Copses	Director	July 6, 2006
/s/  ANDREW S. JHAWAR Andrew S. Jhawar	Director	July 6, 2006

II-9

/s/  LEE S. NEIBART Lee S. Neibart	Director	July 6, 2006
/s/  RICHARD BAKER Richard Baker	Director	July 6, 2006
/s/  MICHAEL A. GATTO Michael A. Gatto	Director	July 6, 2006
/s/  GEORGE G. GOLLEHER George G. Golleher	Director	July 6, 2006
/s/  DAMIAN J. GIANGIACOMO Damian J. Giangiacomo	Director	July 6, 2006

II-10

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

BLOOMINGTON, MN., L.T., INC.
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer) and Director	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director	July 6, 2006

II-11

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

VENDOR FINANCE, LLC
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer) and Director	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director	July 6, 2006

II-12

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

LNT, INC.
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer) and Director	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director	July 6, 2006

II-13

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

LNT SERVICES, INC.
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer) and Director	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director	July 6, 2006

II-14

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

LNT LEASING II, INC.
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer) and Director	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director	July 6, 2006

II-15

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

LNT WEST, INC.
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer) and Director	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director	July 6, 2006

II-16

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

LNT VIRGINIA LLC
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer) and Director	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director	July 6, 2006

II-17

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

LNT MERCHANDISING COMPANY LLC
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer) and Director	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director	July 6, 2006

II-18

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

LNT LEASING III, LLC
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer) and Director	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director	July 6, 2006

II-19

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on their behalf by the undersigned, thereunto duly authorized, in the city of Clifton, state of New Jersey, on July 6, 2006.

CITADEL LNT, LLC
By:	/s/  FRANCIS M. ROWAN Francis M. Rowan Chief Financial Officer

POWER OF ATTORNEY

        Each person whose signature appears below hereby appoints Robert J. DiNicola and Francis M. Rowan, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents full power and authority to perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ROBERT J. DINICOLA Robert J. DiNicola	Chairman and Chief Executive Officer (Principal Executive Officer) and Director	July 6, 2006
/s/  FRANCIS M. ROWAN Francis M. Rowan	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) and Director	July 6, 2006

II-20

EXHIBIT INDEX

Exhibit Number	Description of Exhibits
3.1*	Certificate of Incorporation of Laundry Merger Sub Co. (n/k/a Linens 'n Things, Inc.)
3.2*	Certificate of Amendment to the Certificate of Incorporation of Laundry Merger Sub Co. (changing name to Linens Merger Sub Co.)
3.3*	Certificate of Amendment to the Certification of Incorporation of Linens Merger Sub Co. (changing name to Linens 'n Things, Inc.)
3.4*	Amended and Restated By-laws of Linens 'n Things, Inc.
3.5*	Articles of Incorporation of Linens 'n Things Center, Inc.
3.6*	By-laws of Linens 'n Things Center, Inc.
3.7*	Certificate of Incorporation of Laundry Holding Co. (n/k/a Linens Holding Co.)
3.8*	Certificate of Amendment to the Certificate of Incorporation of Laundry Holding Co. (changing name to Linens Holding Co.)
3.9*	Amended and Restated By-laws of Linens Holding Co.
3.10*	Articles of Incorporation of Bloomington, MN., L.T., Inc.
3.11*	By-laws of Bloomington, MN., L.T., Inc.
3.12*	Certificate of Formation of Vendor Finance, LLC
3.13*	Operating Agreement of Operating Agreement of Vendor Finance, LLC
3.14*	Certificate of Incorporation of E W Kalkin, Inc. (n/k/a) LNT, Inc.
3.15*	Certificate of Amendment to the Certificate of Incorporation of E W Kalkin, Inc. (changing name to Linens 'n Things, Inc.)
3.16*	Certificate of Amendment to the Certificate of Incorporation of Linens 'n Things, Inc. (changing name to LNT, Inc.)
3.17*	By-laws of LNT, Inc.
3.18*	Certificate of Incorporation of LNT Services, Inc.
3.19*	By-laws of LNT Services, Inc.
3.20*	Certificate of Formation of LNT Leasing II, LLC
3.21*	Operating Agreement of LNT Leasing II, LLC
3.22*	Certificate of Incorporation of LNT West, Inc.
3.23*	By-laws of LNT West, Inc.
3.24*	Certificate of Organization of LNT Virginia LLC
3.25*	Operating Agreement of LNT Virginia LLC
3.26*	Certificate of Formation of LNT Merchandising Company LLC
3.27*	Operating Agreement of LNT Merchandising Company LLC
3.28*	Certificate of Formation of LNT Leasing III, LLC
3.29*	Operating Agreement of LNT Leasing III, LLC
3.30*	Certificate of Formation of Citadel LNT, LLC
3.31*	Operating Agreement of Citadel LNT, LLC
4.1	Indenture, dated as of February 14, 2006, among Linens 'n Things, Inc., Linens 'n Things Center, Inc., the Guarantors (as defined therein) and The Bank of New York, as Trustee, with respect to the Senior Secured Floating Rate Notes due 2014
4.2	Form of Senior Secured Floating Rate Notes due 2014 (included as "Exhibit A" to Exhibit 4.1)
4.3	Registration Rights Agreement, dated February 14, 2006, by and among Linens 'n Things, Inc., Linens 'n Things Center, Inc., the Guarantors listed on Schedule I thereto and Bear, Stearns & Co. Inc. and UBS Securities LLC
5.1*	Opinion of Gardere Wynne Sewell LLP regarding the validity of the securities offered hereby

II-21

10.1	Credit Agreement, (the "Credit Agreement") dated as of February 14, 2006, among Linens 'n Things, Inc., Linens 'n Things Center, Inc., the Subsidiary Guarantors (as defined therein), the parties named therein from time to time as lenders, whether by execution of the Credit Agreement or an Assignment and Acceptance, UBS Securities LLC, as Arranger and Bookmanager, UBS AG, Stamford Branch, as Issuing Bank, US Administrative Agent and US Co-Collateral Agent, UBS AG, Canada Branch, as Canadian Co-Collateral Agent, Wachovia Bank, National Association, as US Co-Collateral Agent, Co-Documentation Agent and an Issuing Bank, Wachovia Capital Finance Corporation (Canada), as Canadian Administrative Agent, Canadian Co-Collateral Agent and Canadian Swingline Lender, UBS Loan Finance LLC, as US Swingline Lender, UBS Securities LLC and Bear, Stearns & Co. Inc., as Joint Book Runners, Bear, Stearns & Co. Inc., as Co-Syndication Agent, Wells Fargo, as Co-Documentation Agent and The CIT Group/Business Credit, Inc., as Co-Syndication Agent
10.2*	Stockholders' Agreement, dated as of February 14, 2006, between Linens Holding Co. and its Stockholders
10.3*	Security Agreement, dated as of February 14, 2006, by Linens 'n Things, Inc., Linens 'n Things Center, Inc., the Guarantors party thereto and The Bank of New York
10.4*	Security Agreement, dated as of February 14, 2006, by Linens 'n Things, Inc., Linens 'n Things Center, Inc., the Guarantors party thereto, UBS AG, Stamford Branch and Wachovia Bank, National Association
10.5*	Management Services Agreement, dated as of February 14, 2006, among Linens 'n Things, Inc., Linens Holding Co., Apollo Management V, L.P., NRDC Linens B LLC and Silver Point Capital Fund Investments LLC
10.6*	Intercreditor Agreement, dated as of February 14, 2006, by and among Linens 'n Things, Inc., Linens Holding Co., Linens 'n Things Center, Inc., Linens 'n Things Canada Corp., the Subsidiary Guarantors (as defined therein), UBS AG, Stamford Branch, Wachovia Bank, National Association, UBS AG Canada Branch, Wachovia Capital Finance Corporation and The Bank of New York
10.7	Employment Agreement with Robert J. DiNicola
10.8	Option Grant Letter with Robert J. DiNicola
10.9	Employment Agreement with F. David Coder
10.10	Amended and Restated Employment Agreement with F. David Coder
10.11	Option Grant Letter with F. David Coder
10.12	Employment Agreement with Robert Homler
10.13	Amended and Restated Employment Agreement with Robert Homler
10.14*	Separation Agreement and General Release, by and between Norman Axelrod and Linens 'n Things, Inc.
10.15*	Separation Agreement and General Release, by and between Jack E. Moore and Linens 'n Things, Inc.
10.16	Separation Agreement and General Release, dated April 10, 2006, by and between Jane Gilmartin and Linens 'n Things, Inc.
10.17	Linens Holding Co. Stock Option Plan
10.18	Standard Form of Option Grant Letter
10.19*	Supplemental Executive Retirement Plan
10.20	Director Compensation Policy
10.21	Standard Form of Director Option Grant Letter
10.22*	Trademark Security Agreement, dated as of February 14, 2006, by Bloomington, MN., L.T., Inc. in favor of The Bank of New York

II-22

10.23*	Trademark Security Agreement, dated as of February 14, 2006, by LNT Merchandising Company LLC in favor of The Bank of New York
10.24*	Trademark Security Agreement, dated as of February 14, 2006, by LNT Services, Inc. in favor of The Bank of New York
10.25*	Copyright Security Agreement, dated as of February 14, 2006, by Linens 'n Things, Inc. in favor of The Bank of New York
10.26*	Copyright Security Agreement, dated as of February 14, 2006, by Linens 'n Things Center, Inc. in favor of The Bank of New York
12.1	Statement Regarding the Computation of Ratio of Earnings to Fixed Charges for Linens Holding Co.
21.1	Subsidiaries of Linens Holding Co.
23.1	Consent of Independent Registered Public Accounting Firm
23.3*	Consent of Gardere Wynne Sewell LLP (included in Exhibit 5.1)
24.1	Powers of Attorney (included in the signature pages to the Registration Statement)
25.1*	Statement of Eligibility and Qualification on Form T-1 of The Bank of New York, as trustee under the Indenture for Linens 'n Things, Inc.'s and Linens 'n Things Center, Inc.'s Senior Secured Floating Rate Notes due 2014
99.1*	Form of Letter of Transmittal
99.2*	Form of Notice for Guaranteed Delivery
99.3*	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees

*

To be filed by amendment.

II-23

EX-4.1

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Exhibit 4.1

EXECUTION COPY

LINENS 'N THINGS, INC.

LINENS 'N THINGS CENTER, INC.

AND

THE GUARANTORS FROM TIME TO TIME PARTY HERETO

SENIOR SECURED FLOATING RATE NOTES DUE 2014

INDENTURE

Dated as of February 14, 2006

The Bank of New York

Trustee

[CROSS-REFERENCE TABLE*

Trust Indenture Act Section	Indenture Section
310(a)(1)	7.10
(a)(2)	7.10
(a)(3)	N.A.
(a)(4)	N.A.
(a)(5)	7.10
(b)	7.10
(c)	N.A.
311(a)	7.11
(b)	7.11
(c)	N.A.
312(a)	2.05
(b)	13.03
(c)	13.03
313(a)	7.06
(b)(1)	10.03; 7.06
(b)(2)	7.06; 7.07
(c)	7.06; 13.02
(d)	7.06
314(a)	4.03;13.02; 13.05
(b)	10.03
(c)(1)	13.04
(c)(2)	13.04
(c)(3)	N.A.
(d)	10.03
(e)	13.05
(f)	N.A.
315(a)	7.01
(b)	7.05; 13.02
(c)	7.01
(d)	7.01
(e)	6.11
316(a) (last sentence)	2.09
(a)(1)(A)	6.05
(a)(1)(B)	6.04
(a)(2)	N.A.
(b)	6.07
(c)	2.12
317(a)(1)	6.08
(a)(2)	6.09
(b)	2.04
318(a)	13.01
(b)	N.A.
(c)	13.01

N.A. means not applicable.

*

This Cross Reference Table is not part of this Indenture.]

TABLE OF CONTENTS

		Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01	Definitions	1
Section 1.02	Other Definitions	33
Section 1.03	Incorporation by Reference of Trust Indenture Act	33
Section 1.04	Rules of Construction	33
ARTICLE 2 THE NOTES
Section 2.01	Form and Dating	34
Section 2.02	Execution and Authentication	35
Section 2.03	Registrar and Paying Agent	35
Section 2.04	Paying Agent to Hold Money in Trust	36
Section 2.05	Holder Lists	36
Section 2.06	Transfer and Exchange	36
Section 2.07	Replacement Notes	47
Section 2.08	Outstanding Notes	47
Section 2.09	Treasury Notes	48
Section 2.10	Temporary Notes	48
Section 2.11	Cancellation	48
Section 2.12	Defaulted Interest	48
Section 2.13	CUSIP Numbers	48
ARTICLE 3 REDEMPTION AND PREPAYMENT
Section 3.01	Notices to Trustee	49
Section 3.02	Selection of Notes to Be Redeemed or Purchased	49
Section 3.03	Notice of Redemption	49
Section 3.04	Effect of Notice of Redemption	50
Section 3.05	Deposit of Redemption or Purchase Price	50
Section 3.06	Notes Redeemed or Purchased in Part	51
Section 3.07	Optional Redemption	51
Section 3.08	Mandatory Redemption	52
ARTICLE 4 COVENANTS
Section 4.01	Payment of Notes	52
Section 4.02	Maintenance of Office or Agency	53
Section 4.03	SEC Reports	53
Section 4.04	Compliance Certificate	54
Section 4.05	[Intentionally Omitted]	54
Section 4.06	Stay, Extension and Usury Laws	54
Section 4.07	Limitation on Restricted Payments	55
Section 4.08	Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries.	58
Section 4.09	Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock.	59
Section 4.10	Limitation on Sales of Assets	63

i

Section 4.11	Limitation on Transactions with Affiliates	65
Section 4.12	Limitation on Liens	67
Section 4.13	Business Activities	67
Section 4.14	Corporate Existence	67
Section 4.15	Offer to Repurchase Upon Change of Control	68
Section 4.16	[Intentionally Omitted]	69
Section 4.17	Payments for Consent	69
Section 4.18	Additional Note Guarantees	70
Section 4.19	Further Assurances; Insurance	70
ARTICLE 5 SUCCESSORS
Section 5.01	Merger, Consolidation or Sale of Assets	72
Section 5.02	Successor Corporation Substituted	73
ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.01	Default	73
Section 6.02	Acceleration	76
Section 6.03	Other Remedies	76
Section 6.04	Waiver of Past Defaults	76
Section 6.05	Control by Majority	76
Section 6.06	Limitation on Suits	77
Section 6.07	Rights of Holders of Notes to Receive Payment	77
Section 6.08	Collection Suit by Trustee	77
Section 6.09	Trustee May File Proofs of Claim	77
Section 6.10	Priorities	78
Section 6.11	Undertaking for Costs	78
ARTICLE 7 TRUSTEE
Section 7.01	Duties of Trustee	78
Section 7.02	Rights of Trustee	79
Section 7.03	Individual Rights of Trustee	80
Section 7.04	Trustee's Disclaimer	80
Section 7.05	Notice of Defaults	80
Section 7.06	Reports by Trustee to Holders of the Notes	81
Section 7.07	Compensation and Indemnity	81
Section 7.08	Replacement of Trustee	82
Section 7.09	Successor Trustee by Merger, etc	82
Section 7.10	Eligibility; Disqualification	82
Section 7.11	Preferential Collection of Claims Against Issuers	83
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01	Option to Effect Legal Defeasance or Covenant Defeasance	83
Section 8.02	Legal Defeasance and Discharge	83
Section 8.03	Covenant Defeasance	83
Section 8.04	Conditions to Legal or Covenant Defeasance	84

ii

Section 8.05	Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions	85
Section 8.06	Repayment to the Issuers	85
Section 8.07	Reinstatement.	86
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01	Without Consent of Holders of Notes	86
Section 9.02	With Consent of Holders of Notes	87
Section 9.03	Compliance with Trust Indenture Act	88
Section 9.04	Revocation and Effect of Consents	88
Section 9.05	Notation on or Exchange of Notes	88
Section 9.06	Trustee to Sign Amendments, etc	89
ARTICLE 10 COLLATERAL AND SECURITY
Section 10.01	Collateral and Note Lien Security Documents	89
Section 10.02	Equal and Ratable Sharing of Collateral by Holders of Note Lien Debt	90
Section 10.03	Recording; Certificates and Opinions	91
Section 10.04	Freedom to Deal	91
Section 10.05	Enforcement of Note Liens	92
Section 10.06	Relative Rights	92
Section 10.07	Authorization of Receipt of Funds by the Trustee Under the Note Lien Security Documents	92
Section 10.08	Release of Liens in Respect of Notes	92
Section 10.09	Intercreditor Agreement; Lien Sharing	93
Section 10.10	Sufficiency of Release	94
ARTICLE 11 NOTE GUARANTEES
Section 11.01	Guarantee	94
Section 11.02	[Intentionally Omitted]	95
Section 11.03	Limitation on Guarantor Liability	95
Section 11.04	Delivery of Note Guarantee	95
Section 11.05	Guarantors May Consolidate, etc., on Certain Terms	96
Section 11.06	Releases	96
ARTICLE 12 SATISFACTION AND DISCHARGE
Section 12.01	Satisfaction and Discharge	97
Section 12.02	Application of Trust Money	98
Section 12.03	Repayment to Company	98
ARTICLE 13 MISCELLANEOUS
Section 13.01	Trust Indenture Act Controls	99
Section 13.02	Notices	99
Section 13.03	Communication by Holders of Notes with Other Holders of Notes	100
Section 13.04	Certificate and Opinion as to Conditions Precedent	100
Section 13.05	Statements Required in Certificate or Opinion	100

iii

Section 13.06	Rules by Trustee and Agents	100
Section 13.07	No Personal Liability of Directors, Officers, Employees and Stockholders	100
Section 13.08	Governing Law	101
Section 13.09	No Adverse Interpretation of Other Agreements	101
Section 13.10	Successors	101
Section 13.11	Severability	101
Section 13.12	Counterpart Originals	101
Section 13.13	Table of Contents, Headings, etc	101
Section 13.14	Waiver of Jury Trial	101

EXHIBITS
Exhibit A	FORM OF NOTE
Exhibit B	FORM OF CERTIFICATE OF TRANSFER
Exhibit C	FORM OF CERTIFICATE OF EXCHANGE
Exhibit D	FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E	FORM OF SUPPLEMENTAL INDENTURE FOR FUTURE GUARANTORS

iv

        INDENTURE dated as of February 14, 2006 among Linens 'n Things, Inc., a Delaware corporation (the "Company"), Linens 'n Things Center, Inc., a California corporation ("Co-Issuer" and, together with the Company, the "Issuers"), the Guarantors (as defined) and The Bank of New York, as trustee.

        The Issuers, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined) of the Senior Secured Floating Rate Notes due 2014 (the "Notes"):

ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE

Section 1.01    Definitions.

        "144A Global Note" means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

        "Accounts" means all now present and future "accounts" and "payment intangibles" (in each case, as defined in Article 9 of the UCC).

        "Acquired Debt" means Indebtedness (i) of a Person or any of their respective Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person, in each case whether or not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary or such acquisition. Acquired Debt shall be deemed to have been incurred, with respect to clause (i) of the preceding sentence, on the date such Person becomes a Restricted Subsidiary and, with respect to clause (ii) of the preceding sentence, on the date of consummation of such acquisition of assets.

        "Acquisition Agreement" means the Agreement and Plan of Merger among Linens Merger Sub Co., Linens Holding Co. and Linens 'n Things, Inc., dated as of November 8, 2005, as the same may be amended, modified or supplemented from time to time.

        "Additional Interest" means all Additional Interest then owing pursuant to the Registration Rights Agreement.

        "Additional Notes" means additional Notes (other than (x) the Initial Notes, (y) any Exchange Note or (z) any Note issued pursuant to Sections 2.06(a), (c), (e) or (f), Section 2.07 or Section 2.10 hereof) issued under this Indenture in accordance with Sections 2.01, 2.02 and 4.09 hereof, as part of the same series as the Initial 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," as used with respect to any Person, means 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. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings.

        "Agent" means any Registrar, co-registrar, Paying Agent or additional paying agent.

        "Applicable Eurodollar Rate" means, for each quarterly period during which any note is outstanding subsequent to the initial quarterly period, 562.5 basis points over the rate per annum determined by the Company (notice of such rate to be sent to the Trustee by the Company on the date of determination thereof) equal to the arithmetic mean (rounded upward, if necessary, to the nearest 1/100th of 1%) of the offered rates for deposits in U.S. dollars for a period of three months that appears on the Telerate British Bankers Assoc. Interest Settlement Rates Page at approximately 11:00 a.m., London, England

time, on the second full Business Day preceding the first day of such quarterly period; provided, however, that (i) if no comparable term for a quarterly period is available, the Applicable Eurodollar Rate for the relevant quarterly period shall be determined using the weighted average of the offered rates for the two terms most nearly corresponding to such quarterly period and (ii) if there shall at any time no longer exist a Telerate British Bankers Assoc. Interest Settlement Rates Page, "Applicable Eurodollar Rate" shall mean, with respect to each day during the relevant quarterly period, the rate per annum equal to the rate at which Bear, Stearns & Co. Inc. or one of its affiliate banks is offered deposits in U.S. dollars at approximately 11:00 a.m., London, England time, two Business Days prior to the first day of such quarterly period in the London interbank market for delivery on the first day of such quarterly period for a period of three months, in amounts equal to $1.0 million. Notwithstanding the foregoing, the Applicable Eurodollar Rate for the initial quarterly period shall be 10.34500%.

        "Applicable Premium" means, as determined by the Company, with respect to a note at any redemption date, the greater of (i) 1.0% of the principal amount of such note and (ii) the excess of (A) the present value at such time of (1) the redemption price of such note at January 15, 2008 (such redemption price as set forth in Section 3.07(c) hereof) plus (2) all required interest payments due on such note through January 15, 2008 assuming that the rate of interest is the rate of interest in effect on the date the notice of redemption is given, computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the principal amount of such note.

        "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

        "Asset Sale" means:

(1)

the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its respective Restricted Subsidiaries taken as a whole will be governed by Section 4.15 of this Indenture or Article V of this Indenture; and



(2)

the issuance or sale of Equity Interests in any of the Issuers' Restricted Subsidiaries.

        Notwithstanding the preceding, none of the following items will 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 Issuers and their respective Restricted Subsidiaries;



(3)

an issuance of Equity Interests by a Restricted Subsidiary of the Company to the Company or to a Restricted Subsidiary of the Company;



(4)

the sale or lease of inventory, products, services or accounts receivable in the ordinary course of business and any sale or other disposition of damaged, worn-out or obsolete (or otherwise unsuitable for use in connection with the business of the Company and their respective Restricted Subsidiaries) assets in the ordinary course of business;



(5)

the sale or other disposition of cash or Cash Equivalents;



(6)

a Restricted Payment that does not violate Section 4.07 of this Indenture or is a Permitted Investment;



(7)

dispositions of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements;



(8)

the granting of a Lien permitted by this Indenture;

2

(9)

the unwinding of any Hedging Obligations;



(10)

licenses, leases or subleases of property in the ordinary course of business which do not materially interfere with the business of the Company and their respective Restricted Subsidiaries;



(11)

the sale or other disposition of Equity Interests of or any Investment in an Unrestricted Subsidiary;



(12)

(i) a sale and leaseback transaction relating to a retail store acquired, constructed or developed by any of the Issuers' or their respective Restricted Subsidiaries after the Closing Date entered into within 18 months of the date of consummation of the acquisition or completion of the construction or development, as the case may be, or (ii) a sale and leaseback transaction relating to the Company's corporate headquarters located at 6 Brighton Road, Clifton, New Jersey 07015; and



(13)

the sale of Permitted Investments (other than sales of Capital Stock of any of the Issuers' Restricted Subsidiaries) made by the Issuers or any Restricted Subsidiary after the Closing Date, if such Permitted Investments were (a) received in exchange for, or purchased out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Capital Stock of the Company (other than Disqualified Stock) or (b) received in the form of, or were purchased from the proceeds of, a substantially concurrent contribution of common equity capital to the Company.

        "Asset Sale Offer" has the meaning set forth in Section 4.10(d).

        "Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy," as now and hereafter in effect, or any successor statute.

        "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the Beneficial Ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have Beneficial Ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.

        "Board of Directors" means (i) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board of directors; (ii) with respect to a partnership, the board of directors of the general partner of the partnership; (iii) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and (iv) with respect to any other Person, the board or committee of such Person serving a similar function.

        "Borrowing Base" means, as of any date of determination, an amount equal to:

(1)

85% of the face amount of all Receivables owned by the Issuers and their respective Restricted Subsidiaries as reported in accordance with GAAP on the Issuers' consolidated balance sheet (or notes thereto) as of the end of the most recent fiscal quarter preceding such determination date for which financial statements are available, excluding Receivables that were more than 90 days past due as of such balance sheet date; plus



(2)

75% of the book value of all Inventory owned by the Issuers and their respective Restricted Subsidiaries as reported in accordance with GAAP on the Issuers' consolidated balance sheet (or notes thereto) as of the end of the most recent fiscal quarter preceding such determination date for which financial statements are available;

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it being understood that the Receivables and Inventories of an acquired business may be included if such acquisition has been completed on or prior to the date of determination.

        "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement.

        "Business Day" means any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York or at a place of payment are authorized by law, regulation or executive order to remain closed.

        "Canadian" means as to any Person, a Person that is created or organized under the laws of Canada or a Province or territory of Canada.

        "Canadian Collateral" means the assets of Linens 'n Things Canada Corp. and Canadian Subsidiaries of the Parent covered by one or more Security Documents (as defined in the Revolving Credit Agreement) and any other assets of Linens 'n Things Canada Corp. or Canadian Subsidiaries of Linens Holding Co., real or personal, tangible or intangible, now existing or hereafter acquired, that may at any time be or become subject to a Lien in favor of the Canadian Revolving Credit Collateral Agent (as defined in the Intercreditor Agreement) and all or some of the other Revolving Credit Claimholders.

        "Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that 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:

(1)

in the case of a corporation, corporate stock;



(2)

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



(3)

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



(4)

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

        "Capital Stock Collateral" means all of the following property of the Company and each Grantor now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest:

(1)

all of the Capital Stock in the Company and its Domestic Subsidiaries (including, without limitation, Bloomington MN., L.T., Inc., LNT, Inc., LNT Services, Inc., LNT West, Inc., Vendor Finance, LLC, LNT Leasing II, LLC, LNT Leasing III, LLC, LNT Virginia LLC, LNT Merchandising Company LLC and Citadel LNT, LLC);



(2)

65% of the Capital Stock of the Foreign Subsidiaries owned directly by the Parent or its Domestic Subsidiaries;



(3)

Records, "supporting obligations" (as defined in Article 9 of the UCC) and related Letters of Credit, commercial tort claims or other claims and causes of action, in each case, to the extent related primarily to the foregoing; and

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(4)

substitutions, replacements, accessions, products and proceeds (including, without limitation, insurance proceeds, licenses, royalties, income, payments, claims, damages and proceeds of suit) of any or all of the foregoing.

        "Cash Equivalents" means:

(1)

United States dollars;



(2)

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 six months from the date of acquisition;



(3)

certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case, with any lender party to any Credit Facility or any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better;



(4)

repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;



(5)

commercial paper having one of the two highest ratings obtainable from Moody's or S&P and, in each case, maturing within one year after the date of acquisition; and



(6)

investment funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition.

        "Cash Management Obligations" means all monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise of the Issuers or any of their respective Subsidiaries arising out of any cash management, clearing house, wire transfer, depository or investment services provided by any lender under any Credit Facility or an Affiliate of such lender.

        "Cash Proceeds" means all Proceeds of any Collateral received by any Grantor consisting of cash and Cash Equivalents.

        "Casualty Event" means any taking under power of eminent domain or similar proceeding and any insured loss (excluding business interruption), in each case relating to property or other assets that constitute Note Lien Collateral.

        "Change of Control" means the occurrence of any of the following:

(1)

the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company or the Parent and their respective Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d) of the Exchange Act) other than a Sponsor or a Related Party of a Sponsor; provided that the transfer of 100% of the Voting Stock of the Company or the Parent to a Person that has an ownership structure identical to that of the Company or the Parent, as the case may be, prior to such transfer, such that the Company or the Parent, as the case may be, becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control for purposes of this Indenture;



(2)

the adoption of a plan relating to the liquidation or dissolution of the Company;

5

(3)

after an initial public offering of the Company or the Parent, the first day on which a majority of the members of the Board of Directors of the Company or the Parent are not Continuing Directors;



(4)

prior to an initial public offering of Common Stock of the Company or the Parent, (A) the Sponsors or their Related Persons cease to be the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company or the Parent, including, without limitation, as a result of the issuance of securities of the Company or the Parent, any merger, consolidation, liquidation or dissolution of the Company or the Parent, any direct or indirect transfer of securities by any Sponsor or Related Party or otherwise and (B) the Sponsors or their Related Parties do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of the Company or the Parent; or



(5)

on or subsequent to an initial public offering of Common Stock of the Company or the Parent, any event occurs the result of which is that (A) any "person" or "group" of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Sponsors or their Related Parties, is or becomes the Beneficial Owner, directly or indirectly, of more than 35% of the Voting Stock of the Company or the Parent and (B) the Sponsors and their Related Parties Beneficially Own, directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company or the Parent, as the case may be, (or its successor by merger, consolidation or purchase of all or substantially all of its assets) than such other person or group and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of the Company or the Parent or such successor.

        "Chattel Paper" means all "chattel paper" as defined in Article 9 of the UCC, including, without limitation, "electronic chattel paper" or "tangible chattel paper," as each term is defined in Article 9 of the UCC.

        "Clearstream" means Clearstream Banking, S.A.

        "Closing Date" means February 14, 2006.

        "Code" means the Internal Revenue Code of 1986, as amended.

        "Collateral" means all of the assets and property of any Grantor, whether real, personal or mixed, constituting Note Lien Collateral or Revolving Credit Collateral.

        "Collateral Agent" means:

        (1)   with respect to holders of Note Lien Obligations, the Note Lien Collateral Agent, and

        (2)   with respect to holders of Revolving Credit Obligations, the Revolving Credit Collateral Agent.

        "Collateral Class," as used with respect to Collateral, means the Note Lien Collateral or the Revolving Credit Collateral, as applicable.

        "Collateral Records" means all books, records, ledger cards, files, correspondence, customer lists, blueprints, technical specifications, manuals, computer software, computer printouts, tapes, disks and related data processing software and similar items that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon.

        "Collateral Sale Offer" has the meaning set forth in Section 4.10(d).

6

        "Collateral Support" means all property (real or personal) assigned, hypothecated or otherwise securing any Collateral and shall include any security agreement or other agreement granting a lien or security interest in such real or personal property.

        "Commercial Tort Claims" means all "commercial tort claims" as defined in Article 9 of the UCC.

        "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:

(1)

provision for taxes based on income or profits of such Person and their respective Restricted Subsidiaries for such period and any applicable franchise or property taxes (calculated in each case based on income) to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus



(2)

the Fixed Charges of such Person and their respective Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income; plus



(3)

the amount of any restructuring charges or reserves (which for the avoidance of doubt, shall include without limitation retention, escheat, severance, relocation, excess pension charges, contract termination costs, including future lease commitments) deducted in such period in computing Consolidated Net Income (excluding any such items 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 that was paid in a prior period); plus



(4)

cash received pursuant to tenant allowances from landlords; plus



(5)

for any quarter in the period beginning October 3, 2004 and ending December 31, 2005, all adjustments to net income (or loss) used in connection with the calculation of "Adjusted EBITDA" for the 52 weeks ended October 1, 2005 (as set forth in the Offering Memorandum under Note (3) to the section entitled "Offering Memorandum Summary—Summary Historical and Pro Forma Consolidated Financial and Operating Data") to the extent such adjustments are not fully reflected in the period being measured and continue to be applicable to such Person; plus



(6)

depreciation, amortization (including amortization of intangibles and any amortization of straight line rent expense in excess of cash rent expense but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (including charges related to the write-off of goodwill or intangibles as a result of impairment, in each case as required by SFAS No. 142 or SFAS No. 144 but excluding any such non-cash expense 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 that was paid in a prior period) of such Person and their respective Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus



(7)

annual management fees and fees for financial advisory and investment banking services rendered to the Company and their respective Restricted Subsidiaries in connection with acquisitions, securities offerings and other financings and similar significant corporate transactions in customary and reasonable amounts for such transactions paid to the Sponsors in an aggregate amount not to exceed, during any consecutive 12-month period, $2.0 million to the extent such amount was deducted in computing such Consolidated Net Income; minus



(8)

non-cash items increasing such Consolidated Net Income (including the amortization of tenant allowances received) for such period, other than the accrual of revenue in the ordinary course of business; minus

7

(9)

the amount of cash rent expense in excess of amortization of straight line rent expense,

in each case, on a consolidated basis and determined in accordance with GAAP.

        Notwithstanding the preceding sentence, clauses (1) and (3) through (6) relating to amounts of a Restricted Subsidiary of a Person will be added to Consolidated Net Income to compute Consolidated Cash Flow of such Person only to the extent (and in the same proportion) that the net income (loss) of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person and, to the extent the amounts set forth in clauses (1) and (3) through (6) are in excess of those necessary to offset a net loss of a Restricted Subsidiary that is not a Guarantor or if such Restricted Subsidiary has net income for such period included in Consolidated Net Income, only if a corresponding amount would be permitted at the date of determination to be dividended to the Issuers by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders.

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

(1)

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 will be included only to the extent of the amount of dividends or similar distributions paid in cash (or converted into cash) to the specified Person or a Restricted Subsidiary of the Person;



(2)

the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar 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; provided that if any such dividend or distribution is actually received it will be included for the purposes of this definition;



(3)

any increase in amortization and depreciation or any one-time non-cash charges resulting from purchase accounting in connection with any acquisition that is consummated on or after the Closing Date (including the Transactions) will be excluded;



(4)

accruals and reserves that are established within 12 months of the closing of the Transactions and that are required to be established in accordance with GAAP shall be excluded;



(5)

the cumulative effect of a change in accounting principles will be excluded;



(6)

any net after-tax gains or losses (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of indebtedness will be excluded;



(7)

non-cash gains, losses, income and expenses resulting from fair value accounting required by Statement of Financial Accounting Standards No. 133 and related interpretations will be excluded; and



(8)

any fees, expenses and charges relating to the Transactions up to an aggregate of $81.0 million will be excluded (whenever paid).

        "Consolidated Net Tangible Assets" of any Person means, as of any date of determination, the sum of the assets of such Person after eliminating intercompany items, determined on a consolidated basis in accordance with GAAP, including appropriate deductions for any minority interest in tangible assets of such Person's Subsidiaries, less (without duplication) (i) the net book value of all of its licenses,

8

patents, patent applications, copyrights, trademarks, trade names, goodwill, non-compete agreements or organizational expenses and other like intangibles shown on the balance sheet of the Company and their respective Restricted Subsidiaries as of the most recent date for which such a balance sheet is available, (ii) unamortized Indebtedness discount and expenses, (iii) all reserves for depreciation, obsolescence, depletion and amortization of its properties and all other proper reserves related to assets which in accordance with GAAP have been provided by such Person and (iv) all current liabilities.

        "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who:

(1)

was a member of such Board of Directors on the Closing Date; or



(2)

was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election.

        "Copyright Licenses" means any and all present and future agreements (whether or not in writing) providing for the granting of any right in, to or under Copyrights (whether the applicable Grantor is licensee or licensor thereunder).

        "Copyrights" means, collectively, with respect to each Grantor, all copyrights (whether statutory or common law, whether established or registered in the United States or any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished) and all copyright registrations and applications made by such Grantor, in each case, whether now owned or hereafter created or acquired by or assigned to such Grantor, and all goodwill associated therewith, now existing or hereafter adopted or acquired, together with any and all (i) rights and privileges arising under applicable law with respect to such Grantor's use of such copyrights, (ii) reissues, renewals, continuations and extensions thereof and amendments thereto, (iii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto, including damages and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present or future infringements thereof.

        "Corporate Trust Office of the Trustee" will be at the address of the Trustee specified in Section 13.02 hereof or such other address as to which the Trustee may give notice to the Company.

        "Credit Card Processing Accounts" means any accounts which are not Deposit Accounts or Securities Accounts and which are maintained by or with a person which conducts the processing of credit card payments for any of the Grantors, including all amounts reflecting any reserves or other amounts owing to any of the Grantors and which may be maintained by such processors pursuant to the respective card processing agreements.

        "Credit Card Receivables" shall mean, collectively, all present and future rights of the Grantors to payment from (a) any major credit card issuer or major credit card processor arising from sales of goods or rendition of services to customers who have purchased such goods or services using a credit or debit card, (b) any major credit card issuer or major credit card processor in connection with the sale or transfer of Accounts arising pursuant to the sale of goods or rendition of services to customers who have purchased such goods or services using a credit card or a debit card, including, but not limited to, all amounts at any time due or to become due from any major credit card issuer or major credit card processor under the Credit Card Agreements (as defined in the Revolving Credit Agreement) or otherwise and (c) Private Label Credit Cards (as defined in the Revolving Credit Agreement).

9

        "Credit Facilities" means, one or more debt facilities (including, without limitation, the Revolving Credit 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, 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 to institutional investors) in whole or in part from time to time.

        "Custodian" means the Trustee, as custodian for the Depositary or its nominee with respect to the Notes in global form, or any successor entity thereto.

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

        "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto.

        "Deposit Accounts" means all "deposit accounts" as defined in Article 9 of the UCC of any applicable jurisdiction and, in any event including any demand, time, savings, passbook or like account maintained with a depositary institution.

        "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

        "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 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such provisions are not more favorable to the holders of such Capital Stock than the provisions in Sections 4.10 and 4.15 of this Indenture. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Indenture will be the maximum amount that the Company and their respective Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends.

        "Documents" means all "documents" as defined in Article 9 of the UCC.

        "Domestic Subsidiary" means any Restricted Subsidiary of Linens 'n Things, Inc. that was formed under the laws of the United States or any state of the United States or the District of Columbia.

        "Equipment" means: (i) all "equipment" (as defined in Article 9 of the UCC), (ii) all trade-fixtures, sales displays, lighting, shelving, signage and "fixtures" (as defined in Article 9 of the UCC) and (iii) all accessions or additions thereto, all parts thereof, whether or not at any time of determination incorporated or installed therein or attached thereto, and all replacements therefore, wherever located and whether now or hereafter existing.

10

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

        "Equity Offering" means any public or private sale of Capital Stock (other than Disqualified Stock) of the Company or any of its direct or indirect parent companies, other than: (a) public offerings with respect to the Company's or any direct or indirect parent company's common stock registered on Form S-4 or Form S-8 or (b) an issuance to any Subsidiary of the Company.

        "Euroclear" means Euroclear Bank, S.A./N.V., as operator of the Euroclear system.

        "Exchange Act" means the Securities Exchange Act of 1934, as amended.

        "Exchange Notes" has the meaning set forth in the Registration Rights Agreement.

        "Exchange Offer" has the meaning set forth in the Registration Rights Agreement.

        "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement.

        "Excluded Assets" means any of the following property to the extent that and for as long as such grant of a security interest therein:

(1)

is prohibited by any Requirement of Law; provided that (a) such property shall cease to be an Excluded Asset immediately and automatically (without need for any further grant or act) at such time as the condition described in this clause (1) ceases to exist and (b) to the extent severable, all such rights that are not subject to the applicable condition described in clause (1) in respect of such property shall not constitute an Excluded Asset;



(2)

requires a filing with or consent from any Governmental Authority pursuant to any Requirement of Law that has not been made or obtained;



(3)

constitutes a breach or default under or results in the termination of, or requires any consent not obtained under, any lease, license or agreement, except to the extent that such Requirement of Law or provisions of any such lease, license or agreement is ineffective under applicable law or would be ineffective under Sections 9-406, 9-407, 9-408 or 9-409 of the New York UCC to prevent the attachment of the security interest granted hereunder; provided that such lease, license, contract, property right or agreement will cease to be an Excluded Asset and will become subject to the Lien granted under the security documents, immediately and automatically, at such time as the grant of a Lien under the security documents no longer constitutes or results in a breach, termination or default under any lease, license, contract, property right or agreement;



(4)

is in any other property or assets (other than Intellectual Property) in which a Lien cannot be perfected either automatically or by the filing of a financing statement under the UCC of the relevant jurisdiction, so long as the aggregate fair market value of all such property and assets does not at any one time exceed $5.0 million; and



(5)

any "intent-to-use" applications for trademark or service mark registration filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051(b), unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has been properly filed and finally accepted by the Patent and Trademark Office, to the extent that any assignment of an "intent-to-use" application prior to such filing would violate the Lanham Act, whereupon such application shall be automatically subject to the security interest granted to secure the obligations under the Notes, and will be deemed to be included in the collateral.

        "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

11

faith by the Board of Directors of the relevant Issuer or Restricted Subsidiary, which determination shall be conclusive (unless otherwise provided in this Indenture).

        "Fixed Charge Coverage Ratio" means with respect to any specified 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 their respective 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 subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or 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 will 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, and the use of the 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:

(1)

acquisitions that have been made by the specified Person or any of their respective Restricted Subsidiaries, including through mergers or consolidations, or any Person or any of their respective Restricted Subsidiaries acquired by the specified Person or any of their respective 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 will be given pro forma effect (in accordance with Regulation S-X under the Securities Act) as if they had occurred on the first day of the four-quarter reference period;



(2)

the 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 the Calculation Date, will be excluded;



(3)

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, will 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 their respective Restricted Subsidiaries following the Calculation Date;



(4)

any Person that is a Restricted Subsidiary on the Calculation Date (or would become a Restricted Subsidiary on such Calculation Date in connection with the transaction requiring determination of such Consolidated Cash Flow) will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period;



(5)

any Person that is not a Restricted Subsidiary on the Calculation Date (or would cease to be a Restricted Subsidiary on such Calculation Date in connection with the transaction requiring determination of such Consolidated Cash Flow) will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period; and



(6)

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 if such Hedging Obligation has a remaining term as at the Calculation Date in excess of 12 months).

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

(1)

the consolidated interest expense of such Person and their respective Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, original issue discount, non-cash interest payments, 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 of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates, but excluding amortization of debt issuance costs; plus

(2)

the consolidated interest expense of such Person and their respective Restricted Subsidiaries that was capitalized during such period; plus

(3)

any interest on Indebtedness of another Person that is guaranteed by such Person or one of their respective Restricted Subsidiaries or secured by a Lien on assets of such Person or one of their respective Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus

(4)

the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of their respective Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to any of the Issuers of their respective Restricted Subsidiaries, 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, determined on a consolidated basis in accordance with GAAP.

        "Foreign Subsidiary" means any Restricted Subsidiary of the Company that is not a Domestic Subsidiary.

        "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 Closing Date. All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP.

        "General Intangibles" means all "general intangibles" as defined in Article 9 of the UCC.

        "Global Note Legend" means the legend set forth in Section 2.06(g)(2) hereof, which is required to be placed on all Global Notes issued under this Indenture.

        "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes deposited with or on behalf of and registered in the name of the Depository or its nominee, substantially in the form of Exhibit A hereto and that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2) or 2.06(f) hereof.

        "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization (including the National Association of Insurance Commissioners).

13

        "Grantors" means Parent, the Issuers, Linens 'n Things Canada Corp, each Guarantor and each other Person that has or may from time to time execute and deliver a Security Document (as defined in the Revolving Credit Agreement) or a Note Lien Security Document or as a Person granting a Lien or other interest in its property to secure any of the Obligations.

        "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).

        "Guarantors" means each of:

(1)

Linens Holding Co., Bloomington MN., L.T., Inc., LNT, Inc., LNT Services, Inc., LNT West, Inc., Vendor Finance, LLC, LNT Leasing II, LLC, LNT Leasing III, LLC, LNT Virginia LLC, LNT Merchandising Company LLC and Citadel LNT, LLC; and



(2)

any other Subsidiary of the Company that executes a Note Guarantee in accordance with the provisions of this Indenture,

and their respective successors and assigns, in each case, until the Note Guarantee of such Person has been released in accordance with the provisions of this Indenture.

        "Hedge Agreements" means any:

(1)

interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements and other agreements or arrangements designed for the purpose of fixing, hedging or swapping interest rate risk;



(2)

other agreements or arrangements designed to manage interest rates or interest rate risk; and



(3)

other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

        "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under any Hedge Agreement.

        "Holder" means the Person in whose name a Note is registered on the Registrar's books.

        "IAI Global Note" means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors.

        "Immaterial Subsidiary" means, as of any date, any Restricted Subsidiary whose total assets, as of that date, are less than $100,000 and whose total revenues for the most recent 12-month period do not exceed $100,000; provided that a Restricted Subsidiary will not be considered to be an Immaterial Subsidiary if it, directly or indirectly, guarantees or otherwise provides direct credit support for any Indebtedness of the Issuers.

        "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent:

(1)

in respect of borrowed money;



(2)

evidenced by bonds, notes, debentures or similar instruments;

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(3)

in respect of banker's acceptances or letters of credit (other than obligations with respect to letters of credit securing obligations (other than obligations described in (1) or (2) above or (4) below) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon);



(4)

representing Capital Lease Obligations;



(5)

representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed; or



(6)

representing 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) but only to the extent of the lesser of (x) the Fair Market Value of the assets subject to such Lien, or (y) the amount of the Indebtedness secured by such Lien and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person.

        "Indenture" means this Indenture, as amended or supplemented from time to time.

        "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant.

        "Initial Notes" means (i) the first $650,000,000 aggregate principal amount of Notes issued under this Indenture on the Closing Date, (ii) any Exchange Note, and (iii) any Note issued pursuant to Sections 2.06(a), (c), (e) or (f), Section 2.07 or Section 2.10 hereof.

        "Initial Purchasers" means Bear, Stearns & Co. Inc. and UBS Securities LLC.

        "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who is not also a QIB.

        "insolvency or liquidation proceeding" means:

(1)

any voluntary or involuntary case or proceeding under the Bankruptcy Code with respect to any of the Issuers or any Guarantor;



(2)

any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding with respect to any of the Issuers or any Guarantor or with respect to a material portion of their respective assets;



(3)

any liquidation, dissolution, reorganization or winding up of any of the Issuers or any Guarantor whether voluntary or involuntary and whether or not involving insolvency or bankruptcy; or



(4)

any assignment for the benefit of creditors or any other marshalling of assets and liabilities of any of the Issuers or any Guarantor.

        "Instruments" means all "instruments" as defined in Article 9 of the UCC.

        "Intellectual Property" means, collectively, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses.

        "Intercreditor Agreement" means the Intercreditor Agreement, dated as of the Closing Date, among the Issuers, the Guarantors, the Revolving Credit Collateral Agent, the Note Lien Collateral Agent, as amended, supplemented or otherwise modified from time to time.

15

        "Interest Rate Agreement" means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement to which such Person is party or of which it is a beneficiary.

        "Intercompany Notes of Subsidiaries" means all indebtedness owing by any of the Company's Subsidiaries to the Company or any of the Company's other Subsidiaries, whether or not represented by a note or an agreement.

        "Inventory" mean all present and future "inventory" (as defined in Article 9 of the UCC) and, in any event, includes, without limitation, all goods held for sale or lease or to be furnished under contracts of service or so leased or furnished, all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in any Grantor's business; the purchaser's interest in any goods being manufactured pursuant to any contract or other arrangement with a supplier, all goods in transit from suppliers (whether or not evidenced by a document of title) and all goods in which any Grantor has an interest in mass or a joint or other interest or right of any kind; and all goods which are returned to or repossessed by any Grantor, all computer programs embedded in any goods and all accessions thereto and products thereof (in each case, regardless of whether characterized as inventory under the UCC).

        "Investment Property" means the collective reference to all "investment property" as such term is defined in Section 9-102(a)(49) of the New York UCC (other than Equity Interests).

        "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the form of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company will be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Issuers' Investments in such Person that were not sold or disposed of in an amount determined as provided in the penultimate paragraph of Section 4.07 of this Indenture. The acquisition by the Company or any Restricted Subsidiary of the Company of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investments held by the acquired Person in such third Person in an amount determined as provided in the penultimate paragraph of Section 4.07 of this Indenture. Except as otherwise provided in this Indenture, the amount of an Investment will be determined at the time the Investment is made and without giving effect to subsequent changes in value.

        "Junior Lien" means:

(1)

with respect to Note Lien Collateral, the Revolving Credit Liens; and



(2)

with respect to Revolving Credit Collateral, the Note Liens.

        "Letter of Credit Right" means "letter-of-credit right" as defined in Article 9 of the UCC.

        "Letter of Transmittal" means the letter of transmittal to be prepared by the Issuers and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer.

16

        "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

        "Lien Sharing and Priority Confirmation" means the written agreement of the holders of any Series of Note Lien Debt, as set forth in the indentures, credit agreement or other agreement governing such Series of Note Lien Debt, for the enforceable benefit of all holders of each existing and future Series of Priority Lien Debt and Note Lien Debt, each existing and future Note Lien Representative and each existing and future holder of "Permitted Liens" (as defined in this Indenture):

(1)

that all Note Lien Obligations will be and are secured Equally and Ratably by all Note Liens at any time granted by the Company or any other Guarantor to secure any Obligations in respect of such Series of Note Lien Debt, whether or not upon property otherwise constituting collateral for such Series of Note Lien Debt, and that all such Note Liens will be enforceable by the Note Lien Collateral Agent for the benefit of all holders of Note Lien Obligations Equally and Ratably;



(2)

that the holders of Obligations in respect of such Series of Note Lien Debt are bound by the provisions of this Agreement, including the provisions relating to the ranking of Note Liens and the order of application of proceeds from the enforcement of Note Liens;



(3)

consenting to and directing the Note Lien Collateral Agent to perform its obligations under the Security Documents; and



(4)

consenting to the terms of this Agreement.

        "Moody's" means Moody's Investors Service, Inc.

        "Mortgaged Premises" means any real property which shall now or hereafter be subject to a Note Lien Mortgage.

        "Net Available Cash Account" means any Deposit Account or Securities Account established by the Company or any other Grantor in accordance with Section 4.10 of this Indenture and which does not contain proceeds of Inventory, Accounts, Chattel Paper, Instruments, Investment Property (other than Capital Stock Collateral) or General Intangibles and which has been identified in writing to the Revolving Credit Collateral Agent as such at the time that proceeds from any sale of Note Lien Collateral shall be deposited pending final application in accordance with such covenant into which the proceeds from any disposition of Note Lien Collateral shall be deposited pending final application in accordance with such covenant.

        "Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however:

(1)

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 their respective Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of their respective Restricted Subsidiaries; and



(2)

any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss.

        "Net Proceeds" means the aggregate cash proceeds received by any of the Issuers of their respective Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash

17

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 and discounts, and sales commissions, and any other fees and expenses, including, without limitation, relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, amounts required to be applied to the repayment of Indebtedness, other than Indebtedness under a Credit Facility, secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.

        "Non-U.S. Person" means a Person who is not a U.S. Person.

        "Non-Recourse Debt" means Indebtedness:

(1)

as to which none of the Issuers or any of their respective 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;



(2)

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 any of the Issuers of their respective Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity; and



(3)

as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of any of the Issuers of their respective Restricted Subsidiaries.

        "Note Capital Stock Collateral" means, except as provided below, all of the following property of the Company and each Grantor now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest:

(1)

until the Release Date (A) all of the Capital Stock in the Company, Vendor Finance LLC, LNT Virginia LLC, LNT Merchandising Company LLC, Citadel LNT, LLC and the Company's hereafter acquired Domestic Subsidiaries; and (B) 65% of the Capital Stock of the Foreign Subsidiaries owned directly by the Parent or its Domestic Subsidiaries;



(2)

Records, "supporting obligations" (as defined in Article 9 of the UCC) and related Letters of Credit, commercial tort claims or other claims and causes of action, in each case, to the extent related primarily to the foregoing; and



(3)

substitutions, replacements, accessions, products and proceeds (including, without limitation, insurance proceeds, licenses, royalties, income, payments, claims, damages and proceeds of suit) of any or all of the foregoing.

        "Note Claimholders" means, at any relevant time, the holders of the Note Obligations, including Holders of Notes and the Note Lien Representatives.

        "Note Guarantee" means the Guarantee by each Guarantor of the Issuers' obligations under this Indenture and the Notes, executed pursuant to the provisions of this Indenture.

        "Note Documents" means the Notes, the notations of Note Guarantee, if any, this Indenture and the Registration Rights Agreement.

        "Note Lien" means a Lien granted by a security document to the Note Lien Collateral Agent, at any time, upon any property of the Issuers or any Guarantor to secure Note Lien Obligations.

18

        "Note Lien Collateral" means all now owned or hereafter acquired by the Issuers and the note guarantors:

(1)

any Net Available Cash Account;



(2)

Equipment;



(3)

Real Estate Assets;



(4)

documents of title related to Equipment;



(5)

Intellectual Property;



(6)

Note Lien General Intangibles;



(7)

Note Capital Stock Collateral;



(8)

Records, "supporting obligations" (as defined in Article 9 of the UCC) and related Letters of Credit, commercial tort claims or other claims and causes of action, in each case, to the extent related primarily to the foregoing; and



(9)

substitutions, replacements, accessions, products and proceeds (including, without limitation, insurance proceeds, licenses, royalties, income, payments, claims, damages and proceeds of suit) of any or all of the foregoing;

provided, however, that the term "Note Lien Collateral" shall include Instruments or Chattel Paper to the extent such Instruments or Chattel Paper constitute identifiable proceeds of Note Lien Collateral and other identifiable proceeds (including lease payments under leases of Equipment) of Note Lien Collateral are deposited or held in any such Deposit Accounts, Credit Card Processing Accounts or Securities Accounts after an Enforcement Notice but shall not, in any event, include the Canadian Collateral and the Excluded Assets.

        "Note Lien Collateral Agent" means The Bank of New York, in its capacity as collateral agent under the Security Agreement, together with its successors in such capacity.

        "Note Lien Debt" means:

(1)

the Notes issued on the Closing Date and Notes issued under this Indenture in exchange therefor in accordance with the Registration Rights Agreement, and in each case the Note Guarantees thereof by the Guarantors; and



(2)

any other Indebtedness of the Issuers (including Additional Notes) that is secured equally and ratably with the Notes by a Note Lien that was permitted to be incurred and so secured under each applicable Secured Debt Document and the Note Guarantees thereof by the Guarantors; provided that:



(a)

the net proceeds are used to refund, refinance, replace, defease, discharge or otherwise acquire or retire other Note Lien Debt; or



(b)

on the date of incurrence of such Indebtedness, after giving pro forma effect to the incurrence thereof and the application of the proceeds therefrom, the aggregate principal amount of Note Lien Debt outstanding does not exceed $725.0 million;

provided further, in the case of any Indebtedness referred to in clause (2) of this definition:

(i)

on or before the date on which such Indebtedness is incurred by the Issuers, such Indebtedness is designated by the Issuers in an Officer's Certificate delivered to each Note Lien Representative the Note Lien Collateral Agent and the Credit Facility Collateral Agent, as "Note Lien Debt" for the purposes of this Indenture and the

19

Intercreditor Agreement; provided that no Series of Secured Debt may be designated as both Note Lien Debt and Revolving Credit Obligations;

(ii)

such Indebtedness is governed by an Indenture, credit agreement or other agreement that includes a Lien Sharing and Priority Confirmation; and



(iii)

all requirements set forth in the Intercreditor Agreement as to the confirmation, grant or perfection of the Note Lien Collateral Agent's Liens to secure such Indebtedness or Obligations in respect thereof are satisfied (and the satisfaction of such requirements and the other provisions of this clause (iii) will be conclusively established if the Issuers delivers to the Note Lien Collateral Agent and the Credit Facility Collateral Agent an Officer's Certificate stating that such requirements and other provisions have been satisfied and that such Indebtedness is "Note Lien Debt").

        "Note Lien Default" means an "Event of Default" (as defined in any of the Note Documents), which is no longer subject to any applicable cure or notice period.

        "Note Lien Documents" means, collectively, the Note Documents, this Indenture, credit agreement or other agreement governing each other Series of Note Lien Debt, and the Note Lien Security Documents.

        "Note Lien General Intangibles" means all General Intangibles pertaining to the other items of property included within clauses (2), (3), (4), (5) and (7) of the definition of Note Lien Collateral, including, without limitation, all contingent rights with respect to warranties on Equipment.

        "Note Lien Mortgages" means a collective reference to each mortgage, deed of trust and other document or instrument under which any Lien on real property owned or leased by any Grantor is granted to secure any Note Lien Obligations or (except for this Agreement) under which rights or remedies with respect to any such Liens are governed.

        "Note Lien Obligations" means Note Lien Debt and all other Obligations in respect thereof.

        "Note Lien Representative" means:

(1)

in the case of each Series of the Notes, the Note Lien Collateral Agent; or



(2)

in the case of any other Series of Note Lien Debt, the Trustee, agent or representative of the holders of such Series of Note Lien Debt who maintains the transfer register for such Series of Note Lien Debt and is appointed as a Note Lien Representative (for purposes related to the administration of the Security Documents) pursuant to an indenture, credit agreement or other agreement governing such Series of Note Lien Debt, together with its successors in such capacity.

        "Note Lien Security Documents" means the Intercreditor Agreement, each Lien Sharing and Priority Confirmation with respect to Note Lien Obligations, and all security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, collateral agency agreements. control agreements or other grants or transfers for security executed and delivered by the Issuers or any Guarantor creating (or purporting to create) a Note Lien upon Collateral in favor of the Note Lien Collateral Agent to secure Note Lien Obligations, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms and the provisions of the Intercreditor Agreement.

        "Notes" has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes and any Additional Notes.

20

        "Note Secured Party" means the Trustee and the Holders (together with any other holders of Note Lien Obligations).

        "Obligations" means all obligations of every nature of each Grantor from time to time owed to any agent or Trustee, the Revolving Credit Claimholders, the Note Claimholders or any of them or their respective Affiliates, in each case under the Revolving Credit Loan Documents or the Note Lien Documents, whether for principal, interest or payments for early termination of Hedge Agreements, fees, expenses, indemnification or otherwise and all guarantees of any of the foregoing.

        "Offering Memorandum" means the Offering Memorandum, dated February 8, 2006, with respect to the Notes.

        "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of an Issuer. "Officer" of a Guarantor has a correlative meaning.

        "Officer's Certificate" means a certificate signed by an Officer as provided in Section 13.05 hereof.

        "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuers or to a Guarantor.

        "Other Real Estate" means any Real Estate Asset which is not Mortgaged Premises.

        "Parent" means Linens Holding Co, a Delaware corporation.

        "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream).

        "Patent Licenses" means all present and future agreements providing for the granting of any right in or to Patents (whether the applicable Grantor is licensee or licensor thereunder).

        "Patents" means, collectively, with respect to each Grantor, all letters patent issued or assigned to, and all patent applications and registrations made by, such Grantor (whether established or registered or recorded in the United States or any other country or any political subdivision thereof), and all goodwill associated therewith, now existing or hereafter adopted or acquired, together with any and all (i) rights and privileges arising under applicable law with respect to such Grantor's use of any patents, (ii) inventions and improvements described and claimed therein, (iii) reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof and amendments thereto, and rights to obtain any of the foregoing, (iv) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto including damages and payments for past, present or future infringements thereof, (v) rights corresponding thereto throughout the world and (vi) rights to sue for past, present or future infringements thereof.

        "Payment Intangibles" means all "payment intangibles" as defined in Article 9 of the UCC.

        "Permitted Business" means any business which is the same as or related, ancillary or complementary to, or a reasonable extension, development or expansion of, any of the businesses of the Issuers and their respective Restricted Subsidiaries on the Closing Date.

        "Permitted Investments" means:

(1)

any Investment in the Company or in a Restricted Subsidiary of the Company;



(2)

any Investment in Cash Equivalents;

21

(3)

any Investment by any of the Issuers or their respective Restricted Subsidiaries in a Person (and any Investment held by such Person), if as a result of such Investment:



•

such Person becomes a Restricted Subsidiary of the Issuers; or



•

such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, any of the Issuers or their respective Restricted Subsidiaries;



(4)

any Investment existing on or made prior to the Closing Date;



(5)

any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof;



(6)

any acquisition of assets or Capital Stock solely in exchange for, or for the net cash proceeds of, the issuance of Equity Interests (other than Disqualified Stock) of the Company;



(7)

any Investments received in compromise or resolution of (A) obligations of trade creditors or customers that were incurred in the ordinary course of business of any of the Issuers of their respective Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (B) litigation, arbitration or other disputes with Persons who are not Affiliates;



(8)

Investments represented by Hedging Obligations;



(9)

endorsements of negotiable instruments and documents in the ordinary course of business;



(10)

pledges or deposits permitted under clause (12) of the definition of Permitted Liens;



(11)

payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;



(12)

receivables owing to the Issuers or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms as the Issuers or such Restricted Subsidiary deems reasonable under the circumstances;



(13)

loans or advances to employees made in the ordinary course of business of any of the Issuers or their respective Restricted Subsidiaries in an aggregate principal amount not to exceed $1.0 million at any one time outstanding;



(14)

repurchases of the Notes; and



(15)

other Investments in any Person other than an Affiliate of the Company 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 (15) that are at any one time outstanding not to exceed $35.0 million.

        "Permitted Liens" means:

(1)

Liens on Collateral held by the Note Lien Collateral Agent equally and ratably securing (a) the Notes to be issued on the Closing Date and all related Note Lien Obligations and (b) all other Note Lien Debt, subject to the limits thereon set forth in the definition thereof, and all related Note Lien Obligations;



(2)

Liens on Collateral and Liens on other Excluded Assets to the extent such Excluded Assets would not constitute Note Lien Collateral if not classified as Excluded Assets, in each case

22

held by the Credit Facility Collateral Agent securing Revolving Credit Obligations; provided that:

(a)

without otherwise limiting the amount secured by such Liens insofar as they attach to any property other than Revolving Credit Collateral or secure Revolving Credit Obligations that are not Indebtedness, such Liens shall not be permitted to the extent such Liens secure the amount by which the aggregate principal amount of all Indebtedness (including all fixed and contingent reimbursement obligations in respect of letters of credit but excluding Hedging Obligations and Cash Management Obligations) secured by such Liens insofar as they attach to Revolving Credit Collateral exceeds the Revolving Credit Facility Debt Cap; and



(b)

all such Liens on Collateral are subject to the Intercreditor Agreement;

(3)

Liens in favor of the Issuers or the Guarantors;



(4)

Liens on property of a Person existing at the time such Person is merged with or into or consolidated with any of the Issuers of their respective Subsidiaries; 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 such Issuer or Subsidiary;



(5)

Liens on property (including Capital Stock) existing at the time of acquisition of the property by any of the Issuers of their respective Subsidiaries; provided that such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition;



(6)

Liens or deposits to secure the performance by a Person under workers' compensation laws, unemployment insurance laws or other statutory obligations, surety or appeal bonds, performance bonds or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits as security for import or custom duties or other obligations of a like nature, in each case incurred in the ordinary course of business;



(7)

Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (4) of Section 4.09(b) hereof covering only the assets acquired with or financed by such Indebtedness;



(8)

Liens existing on the Closing Date;



(9)

Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;



(10)

Liens imposed by law, such as carriers', warehousemen's, landlord's and mechanics' Liens;



(11)

judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired;



(12)

Liens arising solely by virtue of any statutory or common law provision relating to banker's Liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided, however, that (a) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Issuers or any of their respective Restricted Subsidiaries in excess of those set forth by regulations promulgated by the Federal Reserve Board and (b) such deposit account

23

is not intended by the Issuers or any Restricted Subsidiary to provide collateral to the depository institution;

(13)

Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto to the extent permitted hereunder;



(14)

purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal property entered into in the ordinary course of business;



(15)

survey exceptions, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;



(16)

Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under this Indenture; provided, however, that:



(a)

the new Lien shall be 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); and



(b)

the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge;



(17)

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



(18)

Liens incurred with respect to obligations that do not exceed $30.0 million at any one time outstanding.

        "Permitted Payments to Parent" means, without duplication as to amounts:

(1)

payments to the Parent to permit the Parent to pay reasonable accounting, legal and administrative expenses of the Parent when due, in an aggregate amount not to exceed $3.0 million per annum;



(2)

for so long as the Company is a member of a group filing a consolidated or combined tax return with the Parent, payments to the Parent in respect of an allocable portion of the tax liabilities of such group, including estimated taxes, that is attributable to the Company and its Subsidiaries ("Tax Payments"). The Tax Payments shall not exceed the lesser of (i) the amount of the relevant tax (including any penalties and interest and estimated taxes) that the Company would owe if the Company were filing a separate tax return (or a separate consolidated or combined return with its Subsidiaries that are members of the consolidated or combined group), taking into account any carry-overs and carrybacks of tax attributes (such as net operating losses) of the Company and such Subsidiaries from other taxable years and (ii) the net amount of the relevant tax that the Parent actually owes to the appropriate taxing authority. Any Tax Payments received from the Company shall be paid over to the appropriate taxing authority within 30 days of the Parent's receipt of such Tax Payments or refunded to the Company and any refund received by Parent in respect of Tax Payments shall be refunded to Linens 'n Things, Inc.; and

24

(3)

fees and expenses related to any equity offering or other financing of any direct or indirect parent of the Company

        "Permitted Refinancing Indebtedness" means any Indebtedness of any of the Issuers of their respective Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge other Indebtedness of any of the Issuers of their respective Restricted Subsidiaries (other than intercompany Indebtedness); provided that:

(1)

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 renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith);



(2)

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 renewed, refunded, refinanced, replaced, defeased or discharged;



(3)

if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; and



(4)

such Indebtedness is incurred either by the Issuers or the Restricted Subsidiaries who is the obligor on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged.]

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

        "Preferred Stock" as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person.

        "Primary Real Estate Asset" means Mortgaged Premises, distribution centers and warehouses and corporate headquarters and administrative offices.

        "principal" of a Note means the principal of the Note payable on the Note which is due or overdue or is to become due at the relevant time.

        "Priority Liens" means:

(1)

with respect to Note Lien Collateral, the Note Liens; and



(2)

with respect to Revolving Credit Collateral, the Revolving Credit Liens.

        "Priority Lien Collateral Agent" means, with respect to any Collateral and the Priority Liens thereon, the Note Lien Collateral Agent or the Revolving Credit Collateral Agent, as applicable, on behalf of the holders of the Priority Liens thereon.

        "Priority Lien Debt" means:

(1)

with respect to Priority Liens on Note Lien Collateral, the Note Lien Debt; and

25

(2)

with respect to Priority Liens on Revolving Credit Collateral, the Revolving Credit Obligations.

        "Private Placement Legend" means the legend set forth in Section 2.06(g)(1) hereof to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture.

        "Proceeds" shall mean all "proceeds" as defined in Article 9 of the UCC including, in any event all dividends, returns of capital and other distributions from Investment Property and all collection thereon and payments with respect thereto.

        "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

        "Real Estate Asset" means, at any time of determination, any interest (fee, leasehold or otherwise) then owned by any Grantor in any real property.

        "Receivable" means any right to payment, whether or not arising in connection with goods sold or leased or for services rendered and including any right to payment arising out of the use of a credit or charge card, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including all Accounts); provided that, for purposes of the definitions of "Receivables Entity," "Receivables Financing" and "Receivables Subsidiary," the term "Receivables" shall mean a right to receive payment arising from a sale or lease of goods or services by a Person pursuant to an arrangement with another Person pursuant to which such other Person is obligated to pay for goods or services under terms that permit the purchase of such goods and services on credit.

        "Receivables Records" shall mean (i) all original copies of all documents, instruments or other writings or electronic records or other Records evidencing the Receivables, (ii) all books, correspondence, credit or other files, Records, ledger sheets or cards, invoices, and other papers relating to Receivables, including, without limitation, all tapes, cards, computer tapes, computer discs, computer runs, record keeping systems and other papers and documents relating to the Receivables, whether in the possession or under the control of the Grantor or any computer bureau or agent from time to time acting for the Grantor or otherwise, (iii) all evidences of the filing of financing statements and the registration of other instruments in connection therewith, and amendments, supplements or other modifications thereto, notices to other creditors or secured parties, and certificates, acknowledgments, or other writings, including, without limitation, lien search reports, from filing or other registration officers, (iv) all credit information, reports and memoranda relating thereto and (v) all other written or nonwritten forms of information related in any way to the foregoing or any Receivable.

        "Record" shall have the meaning specified in Article 9 of the UCC.

        "Registration Rights Agreement" means the Registration Rights Agreement, dated as of February 14, 2006, among the Initial Purchasers, the Issuers, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements among the Initial Purchasers, the Issuers, the Guarantors and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Issuers to the purchasers of Additional Notes with respect to the registration of such Additional Notes, and any Notes issued in exchange therefor, under the Securities Act.

        "Regulation S" means Regulation S promulgated under the Securities Act.

        "Regulation S Global Note" means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of

26

and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 903 of Regulation S.

        "Related Party" means:

(1)

any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Sponsor; or



(2)

any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Sponsors and/or such other Persons referred to in the immediately preceding clause (1).

        "Release Date" means the earlier of (1) the date on which the Lien on Capital Stock Collateral is released pursuant to this Indenture; or (2) with respect to any Subsidiary of the Company, the date on which the Lien on Capital Stock Collateral relating to such Subsidiary triggers a separate reporting requirement with respect to such Subsidiary pursuant to Rule 3-16 of Regulation S-X.

        "Requirement of Law" means, as to any Person, any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or two which such Person or any of its property is subject.

        "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend.

        "Restricted Global Note" means a Global Note bearing the Private Placement Legend.

        "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.

        "Revolving Credit Agreement" means that certain Revolving Credit Agreement, to be dated the Closing Date, among the Company, Linens 'n Things Center, Inc., Linens 'n Things Canada Corp, Linens Holding Co., the other guarantors party thereto, UBS AG, Stamford Branch, as US Administrative Agent and US Co-Collateral Agent, UBS AG Canada Branch, as Canadian Administrative Agent and Canadian Co-Collateral Agent, Bear Stearns Corporate Lending Inc. as Syndication Agent, Wachovia Bank, National Association, as US Co-Collateral Agent and Wachovia Capital Finance Corporation (Canada) as Canadian Co-Collateral Agent and the lenders party thereto from time to time, providing for up to $600.0 million of revolving credit borrowings (which may increase to up to $700.0 million of revolving credit borrowings), including any related notes, Guarantees, collateral documents, instruments and agreements executed in connection therewith, and, 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 to institutional investors) in whole or in part from time to time.

        "Revolving Credit Capital Stock Collateral" means all of the Capital Stock Collateral other than the Note Capital Stock Collateral.

        "Revolving Credit Claimholders" shall have the meaning ascribed to it in the Intercreditor Agreement.

        "Revolving Credit Collateral" means all now owned or hereafter acquired Collateral other than the Note Lien Collateral, including, without limitation:

(1)

all Accounts, including, without limitation Credit Card Receivables;



(2)

all Chattel Paper;



(3)

all Instruments (including Intercompany Notes of Subsidiaries);

27

(4)

all Letter of Credit Rights;



(5)

all Deposit Accounts (other than the Net Available Cash Account, to the extent that it constitutes a Deposit Account), Credit Card Processing Accounts and Securities Accounts (other than the Net Available Cash Account, to the extent it constitutes a Securities Account), and all other Investment Property (other than Capital Stock Collateral), including all cash, marketable securities, securities entitlements, financial assets and other funds held in or on deposit in any of the foregoing;



(6)

all Inventory or documents of title, customs receipts, insurance certificates, shipping documents and other written materials related to the purchase or import of any Inventory;



(7)

all General Intangibles (other than Intellectual Property and Note Lien General Intangibles) and all rights under Hedge Agreements;



(8)

all Revolving Credit Capital Stock Collateral;



(9)

all Records, "supporting obligations" (as defined in Article 9 of the UCC) and related Letters of Credit, commercial tort claims or other claims and causes of action, in each case, to the extent not primarily related to Note Lien Collateral; and



(10)

substitutions, replacements, accessions, products and proceeds (including, without limitation, insurance proceeds, licenses, royalties, income, payments, claims, damages and proceeds of suit) of any or all of the foregoing;

provided, however, that to the extent that Instruments or Chattel Paper constitute identifiable proceeds of Note Lien Collateral or other identifiable proceeds of Note Lien Collateral are deposited or held in any such Deposit Accounts, Credit Card Processing Accounts or Securities Accounts after an Enforcement Notice, then (to the extent provided in the Intercreditor Agreement) such Instruments, Chattel Paper or other identifiable proceeds shall be treated as Note Lien Collateral.

        "Revolving Credit Collateral Agent" means, at any time, the Person serving at such time as an "Administrative Agent" or a "Collateral Agent" (including as a "Co-Collateral Agent") under the Revolving Credit Agreement or any other representative then most recently designated in accordance with the applicable provisions of the Revolving Credit Agreement, together with its successors in such capacity.

        "Revolving Credit Facility Debt Cap" means, as of any date, an aggregate principal amount equal to the sum of (a) the aggregate principal amount of Indebtedness permitted to be Incurred under clause (1) of Section 4.09(b) hereof (regardless of the amount actually Incurred) as of such date, plus (b) the principal amount of Indebtedness permitted to be Incurred under clause (14) of Section 4.09 hereof (regardless of the amount actually Incurred) as of such date.

        "Revolving Credit Lien" means a Lien on Collateral granted by a Revolving Credit Loan Document to the Revolving Credit Collateral Agent, at any time, upon any property of the Issuers or any Guarantor to secure Revolving Credit Obligations.

        "Revolving Credit Loan Documents" means the Revolving Credit Agreement, the Security Documents (as defined in the Revolving Credit Agreement) and the other Loan Documents (as defined in the Revolving Credit Agreement) and each of the other agreements, documents and instruments providing for or evidencing any other Revolving Credit Obligation, and any other document or instrument executed or delivered at any time in connection with any Revolving Credit Obligations, including any intercreditor or joinder agreement among holders of Revolving Credit Obligations, to the extent such are effective at the relevant time, as each may be amended, supplemented, refunded, deferred, restructured, replaced or refinanced from time to time in whole or in part (whether with the Revolving Credit Collateral Agent and lenders from time to time party to the Revolving Credit

28

Agreement or other agents and lenders or otherwise), in each case in accordance with the provisions of the Intercreditor Agreement.

        "Revolving Credit Obligations" means all Obligations outstanding under the Revolving Credit Agreement and the other Revolving Credit Loan Documents. "Revolving Credit Obligations" shall include all interest accrued or accruing (or which would, absent commencement of an insolvency or liquidation proceeding, accrue) after commencement of an insolvency or liquidation proceeding in accordance with the rate specified in the relevant Revolving Credit Loan Document whether or not the claim for such interest is allowed as a claim in such insolvency or liquidation proceeding.

        "S&P" means Standard & Poor's Ratings Group.

        "Rule 144" means Rule 144 promulgated under the Securities Act.

        "Rule 144A" means Rule 144A promulgated under the Securities Act.

        "Rule 903" means Rule 903 promulgated under the Securities Act.

        "Rule 904" means Rule 904 promulgated under the Securities Act.

        "SEC" means the U.S. Securities and Exchange Commission.

        "Secured Debt" means all Note Lien Debt and all Revolving Credit Obligations.

        "Securities Accounts" means all present and future "securities accounts" (as defined in Article 8 of the UCC), including all monies, "uncertificated securities," and "securities entitlements" (as defined in Article 8 of the UCC) contained therein.

        "Securities Act" means the Securities Act of 1933, as amended.

        "Security Agreement" means the security agreement dated as of the date hereof, among the Issuers, the Guarantors and The Bank of New York, as collateral agent, as amended or supplemented from time to time.

        "Series of Note Lien Debt" means, severally, the Notes and each other issue or series of Note Lien Debt for which a single transfer register is maintained.

        "Series of Priority Lien Debt" means, with respect to the Note Lien Collateral, each Series of Note Lien Debt and, with respect to the Revolving Credit Collateral, each Series of Revolving Credit Obligations.

        "Series of Secured Debt" means each Series of Note Lien Debt and each Series of Revolving Credit Obligations.

        "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement.

        "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 Securities Act, other than a Subsidiary that is a Significant Subsidiary solely due to clause (3) of such definition, as such Regulation is in effect on the Closing Date.

        "Sponsors" means Apollo Management V, L.P., Apollo Management VI, L.P., NRDC Real Estate Advisors I, LLC, National Realty & Development Corp., NRDC Linens B LLC and Silver Point Capital LP, and their respective Affiliates wholly owned or directly or indirectly managed by any of them.

        "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 Closing Date (including any sinking fund

29

payment), and will 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

        "Subsidiary" means, with respect to any specified Person:

(1)

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



(2)

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).

        "Telerate British Bankers Assoc. Interest Settlement Rates Page" shall mean the display designated as Page 3750 (or other appropriate page if dollars do not appear on such page) on the Telerate System Incorporated Service (or such other page as may replace such page on such service for the purpose of displaying the rates at which dollar deposits are offered by leading banks in the London interbank deposit market).

        "TIA" means the Trust Indenture Act of 1939, as amended from time to time.

        "Trademark Licenses" means any and all present and future agreements providing for the granting of any right in or to Trademarks (whether such Grantor is licensee or licensor thereunder).

        "Trademarks" means, collectively, with respect to each Grantor, all trademarks, service marks, slogans, logos, certification marks, trade dress, uniform resource locations (URL's), domain names, corporate names, trade names and other source or business identifiers, whether registered or unregistered, owned by or assigned to such Grantor and all registrations and applications for the foregoing (whether statutory or common law and whether established or registered in the United States, any State thereof, or any other country or any political subdivision thereof), and all goodwill associated therewith, now existing or hereafter adopted or acquired, together with any and all (i) rights and privileges arising under applicable law with respect to such Grantor's use of any trademarks, (ii) reissues, continuations, extensions and renewals thereof and amendments thereto, (iii) income, fees, royalties, damages and payments now and hereafter due and/or payable thereunder and with respect thereto, including damages, claims and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present and future infringements thereof.

        "Transactions" has the meaning set forth in the Offering Memorandum dated February 8, 2006 relating to the Notes.

        "Treasury Rate" means, as determined or obtained by the Company, 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) which has become publicly available at least two business days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source or similar market data)) most nearly equal to the period from the redemption date to January 15, 2008; provided, however, that if the period from the redemption date to January 15, 2008, is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall 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 the redemption date to January 15, 2008 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

30

        "Trustee" means The Bank of New York or its successors under this Indenture.

        "Trust Officer" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

        "Uniform Commercial Code" or "UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in the State of New York, or where the context requires, each other applicable jurisdiction.

        "Unrestricted Definitive Note" means a Definitive Note that does not bear and is not required to bear the Private Placement Legend.

        "Unrestricted Global Note" means a Global Note that does not bear and is not required to bear the Private Placement Legend.

        "Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but only to the extent that such Subsidiary:

(1)

has no Indebtedness other than Non-Recourse Debt;



(2)

except as permitted by Section 4.11 hereof, is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company;



(3)

is a Person with respect to which neither the Company nor any of their respective 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



(4)

has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of their respective Restricted Subsidiaries.

        The Board of Directors of the applicable Issuer may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by such Issuer and its respective Restricted Subsidiaries in the Subsidiary designated as Unrestricted will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under Section 4.07 hereof or under one or more clauses of the definition of Permitted Investments, as determined by the Issuers. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.

        Any designation of a Subsidiary of the Issuers as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of a resolution of the Board of Directors of the applicable Issuer giving effect to such designation and an officers' certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the requirements of an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Issuers

31

as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof, the Issuers will be in Default of such covenant. The Board of Directors of the applicable Issuer may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Issuers; provided that such designation will be deemed to be an incurrence of Indebtedness by such Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary, and such designation will only be permitted if (1) such Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation.

        "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option.

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

        "Voting Stock" of any specified 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:

(1)

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



(2)

the then outstanding principal amount of such Indebtedness.

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Section 1.02    Other Definitions.

Term	Defined in Section
"Affiliate Transaction"	4.11
"Authentication Order"	2.02
"Change of Control Offer"	4.15
"Change of Control Payment Date"	4.15
"Covenant Defeasance"	8.03
"DTC"	2.03
"Event of Default"	6.01
"Excess Collateral Proceeds"	4.10(c)
"Excess Proceeds"	4.10(d)
"incur"	4.09
"Legal Defeasance"	8.02
"Offer"	4.10
"Offer Amount"	4.10
"Offer Period"	4.10
"Paying Agent"	2.03
"Permitted Debt"	4.09
"Permitted Payment"	4.07
"Purchase Date"	4.10
"Registrar"	2.03
"Restricted Payment"	4.07
"Successor Company"	5.01
"Successor Guarantor"	11.05

Section 1.03    Incorporation by Reference of Trust Indenture Act.

        Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.

        The following TIA terms used in this Indenture have the following meanings:

        "indenture securities" means the Notes;

        "indenture security Holder" means a Holder of a Note;

        "indenture to be qualified" means this Indenture;

        "indenture trustee" or "institutional trustee" means the Trustee; and

        "obligor" on the Notes and the Note Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Note Guarantees, respectively.

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

Section 1.04    Rules of Construction.

        (a)   Unless the context otherwise requires:

(1)

a term has the meaning assigned to it;



(2)

an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

33

(3)

"or" is not exclusive;



(4)

words in the singular include the plural, and in the plural include the singular;



(5)

"will" shall be interpreted to express a command;



(6)

provisions apply to successive events and transactions; and



(7)

references to sections of or rules under the Securities Act will be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time.

        (b)   All percentages resulting from the calculation of the Applicable Eurodollar Rate will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point being rounded upwards (e.g., 9.876545% will be rounded to 9.87655%) and all dollar amounts used in or resulting from such calculations will be rounded to the nearest cent, with one-half cent being rounded upwards.

ARTICLE 2
THE NOTES

Section 2.01    Form and Dating.

        (a)    General.    The Notes and the Trustee's certificate of authentication will be substantially in the form of Exhibit A hereto. The Notes may have such appropriate insertions, omissions, substitutions, notations, legends, endorsements identifications and other variations as are required or permitted by law, stock exchange rule or depositary rule or usage, agreements to which the Issuers are subject, if any, or other customary usage, or as may consistently herewith be determined by the Officer or Officers of the Issuers executing such Notes, as evidenced by such execution (provided always that any such notation, legend, endorsement, identification or variation is in a form acceptable to the Issuers). Each Note will be dated the date of its authentication. The Notes will be issued in fully registered form, without coupons, in denominations of $2,000 and any larger integral multiple of $1,000.

        The terms and provisions contained in the Notes will constitute, and are hereby expressly made, a part of this Indenture and the Issuers, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

        (b)    Global Notes.    Notes issued in global form will be substantially in the form of Exhibit A hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form will be substantially in the form of Exhibit A hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note will represent such of the outstanding Notes as will be specified therein and each shall provide that it represents the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, by adjustments made thereon and/or in the records of the Custodian to reflect exchanges and redemptions as herein after provided. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby will be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.

        (c)    Additional Notes.    The Issuers may issue, from time to time in accordance with the provisions of this Indenture, including without limitation Sections 2.02 and 4.09 hereof, Additional Notes, without

34

consent of the Holders, Additional Notes with identical terms as the Initial Notes other than with respect to: (i) the date of issuance, (ii) the issue price, (iii) the date from which interest shall accrue and the amount of interest payable on the first interest payment date and (iv) any adjustments in order to conform to and ensure compliance with the Securities Act (or other applicable securities laws). With respect to any Additional Notes, the Issuers shall set forth in a resolution of the Board of Directors and an Officers' Certificate, the following information:

(1)

the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture;



(2)

the issue price, the date of issuance, the date from which interest shall accrue and the amount of interest payable on the first interest payment date; and



(3)

whether such Additional Notes shall be Restricted Definitive Notes, Restricted Global Notes, Unrestricted Definitive Notes or Unrestricted Global Notes.

        The Initial Notes, the Additional Notes and the Exchange Notes shall be considered collectively as a single class for all purposes of this Indenture. Holders of the Initial Notes, the Additional Notes and the Exchange Notes will vote and consent together on all matters to which such Holders are entitled to vote or consent as one class, and none of the Holders of the Initial Notes, the Additional Notes or the Exchange Notes shall have the right to vote or consent as a separate class on any matter to which such Holders are entitled to vote or consent.

        (d)    Euroclear and Clearstream Procedures Applicable.    The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Global Note that are held by Participants through Euroclear or Clearstream.

Section 2.02    Execution and Authentication.

        At least one Officer must sign the Notes for each Issuer by manual or facsimile signature.

        If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note will nevertheless be valid.

        A Note will not be valid until authenticated by the manual signature of the Trustee. The signature will be conclusive evidence that the Note has been authenticated under this Indenture.

        The Trustee will, upon receipt of a written order of the Issuers signed by an Officer of each Issuer (an "Authentication Order"), authenticate Notes for original issue that may be validly issued under this Indenture, including any Additional Notes. The aggregate principal amount of Notes outstanding at any time may not exceed the aggregate principal amount of Notes authorized for issuance by the Issuers pursuant to one or more Authentication Orders, except as provided in Section 2.07 hereof.

        The Trustee may appoint an authenticating agent acceptable to the Issuers to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Issuers.

Section 2.03    Registrar and Paying Agent.

        The Issuers will maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar will keep a register of the Notes and of their transfer and exchange. The Issuers may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any

35

additional paying agent. The Issuers may change any Paying Agent or Registrar without notice to any Holder. The Issuers will notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Issuers fail to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Issuers or any of their Subsidiaries may act as Paying Agent or Registrar.

        The Issuers initially appoint The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes.

        The Issuers initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes.

Section 2.04    Paying Agent to Hold Money in Trust.

        The Issuers will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Additional Interest, if any, or interest on the Notes, and will notify the Trustee of any default by the Issuers in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Issuers at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Issuers or a Subsidiary) will have no further liability for the money. If the Issuers or a Subsidiary acts as Paying Agent, it will segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Issuers, the Trustee will serve as Paying Agent for the Notes.

Section 2.05    Holder Lists.

        The Trustee will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, the Issuers will furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Issuers shall otherwise comply with TIA § 312(a).

Section 2.06    Transfer and Exchange.

        (a)    Transfer and Exchange of Global Notes.    A Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Issuers for Definitive Notes if:

(1)

the Depositary notifies the Issuers that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Issuers within 120 days after the date of such notice from the Depositary;



(2)

the Issuers in their sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; or



(3)

there has occurred and is continuing a Default or Event of Default with respect to the Notes, and the Depositary requests such exchange.

        Upon the occurrence of either of the preceding events in (1), (2) or (3) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be

36

exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note, except as provided in this Section 2.06(a). A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a); however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.

        (b)    Transfer and Exchange of Beneficial Interests in the Global Notes.    The transfer and exchange of beneficial interests in the Global Notes will be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. None of the Issuers or any agent of the Issuers shall have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Beneficial interests in the Restricted Global Notes will be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also will require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

(1)

Transfer of Beneficial Interests in the Same Global Note.    Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1).



(2)

All Other Transfers and Exchanges of Beneficial Interests in Global Notes.    In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar (in each case in form and substance reasonably satisfactory to the Trustee and the Issuers) either:



(A)

both:

        (i)    a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and

        (ii)   instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or

(B)

both:

        (i)    a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and

37

        (ii)   instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above.

Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee, the Custodian or the Depositary or its nominee, as the case may be, shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.

(3)

Transfer of Beneficial Interests to Another Restricted Global Note.    A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following:



(A)

if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;



(B)

if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and



(C)

if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and opinion of counsel required by item (3) thereof, if applicable.



(4)

Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any Holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and:



(A)

such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, provides the certifications required by the applicable Letter of Transmittal and Exchange Offer Registration Statement;



(B)

such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement and applicable law;



(C)

such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement and applicable law; or



(D)

the Registrar receives the following:

        (i)    if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or

        (ii)   if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of

38

a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar or the Issuers so request or if the Applicable Procedures so require, an opinion of counsel (which opinion and counsel are reasonably satisfactory to the Issuers and the Trustee) to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

        If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Issuers shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above.

        Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.

        (c)   Transfer or Exchange of Beneficial Interests for Definitive Notes.

(1)

Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes.    If any Holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

        (A)  if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof

        (B)  if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

        (C)  if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

        (D)  if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

        (E)  if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and opinion of counsel required by item (3) thereof, if applicable;

        (F)  if such beneficial interest is being transferred to the Issuers or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

        (G)  if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

39

the Trustee, the Custodian or the Depositary or its nominee, as the case may be, shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Issuers shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(2)

[Intentionally Omitted]



(3)

Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes.    A Holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if:

        (A)  such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and applicable law and the Holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, provides in the certifications required by the applicable Letter of Transmittal and the Exchange Offer Registration Statement;

        (B)  such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement and applicable law;

        (C)  such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement and applicable law; or

        (D)  the Registrar receives the following:

        (i)    if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or

        (ii)   if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar or the Issuers so request or if the Applicable Procedures so require, an opinion of counsel (which opinion and counsel are reasonably satisfactory to the Issuers and the Trustee) to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(4)

Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes.    If any Holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person

40

who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee, the Custodian or the Depositary or its nominee, as the case may be, will cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Issuers will execute and the Trustee will authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) will be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee will deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(4) will not bear the Private Placement Legend.

        (d)   Transfer and Exchange of Definitive Notes for Beneficial Interests.

(1)

Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes.    If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

        (A)  if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

        (B)  if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

        (C)  if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

        (D)  if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;

        (E)  if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and opinion of counsel required by item (3) thereof, if applicable;

        (F)  if such Restricted Definitive Note is being transferred to the Issuers or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or

        (G)  if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,

the Trustee will cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate

41

Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note.

(2)

Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes.    A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if:

        (A)  such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and applicable law and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, provides the certifications required by the applicable Letter of Transmittal and Exchange Offer Registration Statement;

        (B)  such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement and applicable law;

        (C)  such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement and applicable law; or

        (D)  the Registrar receives the following:

        (i)    if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or

        (ii)   if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar or the Issuers so request or if the Applicable Procedures so require, an opinion of counsel (which opinion and counsel are reasonably satisfactory to the Issuers and the Trustee)to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

        Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(2), the Trustee will cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

(3)

Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes.    A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee will cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

        If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (2)(B), (2)(D) or (3) above at a time when an Unrestricted Global Note has not yet been issued, the Issuers will issue and, upon receipt of an Authentication

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Order in accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

        (e)    Transfer and Exchange of Definitive Notes for Definitive Notes.    Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar will register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder must present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar and the Issuers duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder must provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).

(1)

Restricted Definitive Notes to Restricted Definitive Notes.    Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

        (A)  if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

        (B)  if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and

        (C)  if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and opinion of counsel required by item (3) thereof, if applicable.

(2)

Restricted Definitive Notes to Unrestricted Definitive Notes.    Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if:

        (A)  such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and applicable law and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, provides the certifications required by the applicable Letter of Transmittal and Exchange Offer Registration Statement;

        (B)  any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement and applicable law;

        (C)  any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement and applicable law; or

        (D)  the Registrar receives the following:

        (i)    if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or

        (ii)   if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted

43

Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar or the Issuers so request, an opinion of counsel (which opinion and counsel shall be reasonably satisfactory to the Issuers and the Trustee) to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(3)

Unrestricted Definitive Notes to Unrestricted Definitive Notes.    A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

        (f)    Exchange Offer.    Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Issuers will issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee will authenticate one or more Unrestricted Global Notes and/or Unrestricted Definitive Notes in an aggregate principal amount equal to the aggregate principal amount of the beneficial interests in the Restricted Global Notes, or the Restricted Definitive Notes, as the case may be, accepted for exchange in the Exchange Offer in accordance with the Registration Rights Agreement and applicable law.

        Concurrently with the issuance of such Notes, the Trustee, the Custodian or the Depositary or its nominee, as the case may be, will cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly.

        (g)    Legends.    The following legends will appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

(1)

Private Placement Legend.

        (A)  Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) SUCH SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) (a) IN THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (c) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)

44

(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR")) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUERS THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUERS SO REQUESTS), (2) TO THE ISSUERS, OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."

        (B)  Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(4), (c)(3), (c)(4), (d)(2), (d)(3), (e)(2), (e)(3) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) will not bear the Private Placement Legend.

(2)

Global Note Legend.    Each Global Note will bear a legend in substantially the following form:

"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."

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        (h)    Cancellation and/or Adjustment of Global Notes.    At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note will be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note will be reduced accordingly and an endorsement will be made on such Global Note by the Trustee, the Custodian or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note will be increased accordingly and an endorsement will be made on such Global Note by the Trustee, the Custodian or by the Depositary at the direction of the Trustee to reflect such increase.

        (i)General Provisions Relating to Transfers and Exchanges.    

(1)

To permit registrations of transfers and exchanges, the Issuers will execute and the Trustee will authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar's request.



(2)

No service charge will be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Issuers may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06 and 9.05 hereof).



(3)

The Registrar will not be required to register the transfer of or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.



(4)

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



(5)

None of the Registrar or the Issuers will be required:

        (A)  to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection;

        (B)  to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or

        (C)  to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date.

(6)

Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Issuers may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Issuers shall be affected by notice to the contrary.

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(7)

The Trustee will authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof.



(8)

All certifications, certificates and opinions of counsel required to be submitted to the Trustee and/or the Issuers pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile unless the Trustee or the Issuers otherwise require.

        The Trustee shall retain copies of all letters, notices and other written communications received pursuant to this Section 2.06 (including all Notes received for transfer pursuant to Section 2.06). The Issuers shall have the right to require the Trustee to deliver to the Issuers, at the Issuers' expense, copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Trustee.

        In connection with any transfer of any Note, the Trustee and the Issuers shall be entitled to receive, shall be under no duty to inquire into, may conclusively presume the correctness of, and shall be fully protected in relying upon the certificates, opinions and other information referred to herein (or in the forms provided herein, attached hereto or to the Notes, or otherwise) received from any Holder and any transferee of any Note regarding the validity, legality and due authorization of any such transfer, the eligibility of the transferee to receive such Note and any other facts and circumstances related to such transfer.

        The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary Participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

Section 2.07    Replacement Notes.

        If any mutilated Note is surrendered to the Trustee or the Issuers and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Issuers will issue and the Trustee, upon receipt of an Authentication Order, will authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Issuers, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Issuers to protect the Issuers, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Issuers may charge for its expenses in replacing a Note.

        Every replacement Note is an additional obligation of the Issuers and will be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

Section 2.08    Outstanding Notes.

        The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because an Issuer or an Affiliate of the Issuers holds the Note.

        If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser.

        If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

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        If the Paying Agent (other than an Issuer, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes will be deemed to be no longer outstanding and will cease to accrue interest.

Section 2.09    Treasury Notes.

        In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by an Issuer or any Guarantor, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuers or any Guarantor, will be considered as though not outstanding, except that for the purposes of determining whether the Trustee will be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned will be so disregarded.

Section 2.10    Temporary Notes.

        Until certificates representing Notes are ready for delivery, the Issuers may prepare and the Trustee, upon receipt of an Authentication Order, will authenticate temporary Notes. Temporary Notes will be substantially in the form of certificated Notes but may have variations that the Issuers consider appropriate for temporary Notes and as may be reasonably acceptable to the Trustee. Without unreasonable delay, the Issuers will prepare and the Trustee will authenticate definitive Notes in exchange for temporary Notes.

        Holders of temporary Notes will be entitled to all of the benefits of this Indenture.

Section 2.11    Cancellation.

        The Issuers at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent will forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else will cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will destroy canceled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all canceled Notes will be delivered to the Issuers. The Issuers may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

Section 2.12    Defaulted Interest.

        If the Issuers default in a payment of interest on the Notes, it will pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Issuers will notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Issuers will fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Issuers (or, upon the written request of the Issuers, the Trustee in the name and at the expense of the Issuers) will mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.

Section 2.13    CUSIP Numbers.

        The Issuers in issuing the Notes may use CUSIP, ISIN or other such numbers (if then generally in use), and, if so, the Trustee shall us CUSIP, ISIN or other such numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers.

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ARTICLE 3
REDEMPTION AND PREPAYMENT

Section 3.01    Notices to Trustee.

        If the Issuers elect to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it must furnish to the Trustee, at least 30 days (unless a shorter notice shall be satisfactory to the Trustee) but not more than 60 days before a redemption date, an Officer's Certificate setting forth:

(1)

the clause of this Indenture pursuant to which the redemption shall occur;



(2)

the expected redemption date;



(3)

the principal amount of Notes to be redeemed;



(4)

the redemption price;



(5)

any conditions precedent to such redemption; and



(6)

the CUSIP numbers of such Notes to be redeemed.

Section 3.02    Selection of Notes to Be Redeemed or Purchased.

        If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee will select Notes for redemption or purchase on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair, appropriate and practicable, except:

(1)

if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or



(2)

if otherwise required by law.

        In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased will be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date by the Trustee from the outstanding Notes not previously called for redemption or purchase.

        The Trustee will promptly notify the Issuers in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected will be in amounts of $2,000 or larger integral multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.

Section 3.03    Notice of Redemption.

        At least 30 days but not more than 60 days before a redemption date, the Issuers will mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 12 hereof.

        The notice will identify the Notes to be redeemed and will state:

(1)

the expected redemption date;



(2)

the redemption price;

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(3)

if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued upon cancellation of the original Note;



(4)

the name and address of the Paying Agent;



(5)

that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;



(6)

that, unless the Issuers default in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;



(7)

the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed;



(8)

any conditions precedent to such redemption;



(9)

the CUSIP numbers, if any; and



(10)

that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes.

        In addition, if such redemption, purchase or notice is subject to satisfaction of one or more conditions precedent, as permitted by Section 3.07, such notice shall describe each such condition, and if applicable, shall state that, in the Issuers' discretion, the redemption date may be delayed (but may not be delayed more than 60 days beyond the date the Issuers mail the applicable notice of redemption) until such time as any or all such conditions are satisfied, or such redemption or purchase may not occur and such notice may be rescinded in the event that any or all such conditions shall not have been satisfied by the redemption date.

        At the Issuers' request, the Trustee will give the notice of redemption in the Issuers' names and at their expense; provided, however, that the Issuers have delivered to the Trustee, at least 45 days (unless a shorter notice shall be satisfactory to the Trustee) prior to the expected redemption date, an Officer's Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

        The notice if mailed in the manner herein provided shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Note.

Section 3.04    Effect of Notice of Redemption.

        Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price; provided that Notes called for redemption may be subject to the satisfaction of one or more conditions precedent, as provided in Section 3.07 of this Indenture, and included in the redemption notice mailed to Holders pursuant to Section 3.03 hereof. Such redemption may be extended or delayed, and such redemption may be rescinded, as provided in Section 3.03.

Section 3.05    Deposit of Redemption or Purchase Price.

        By 10:00 a.m. on the redemption date, or any purchase date referred to in Section 4.10(c) or Section 4.15 hereof, as applicable, the Issuers will deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest and Additional Interest, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent will promptly return to the Issuers any money deposited with the Trustee or the Paying Agent by

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the Issuers in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest and Additional Interest, if any, on, all Notes to be redeemed or purchased.

        If a redemption is subject to one or more conditions precedent that have been included in the redemption notice mailed to Holders pursuant to Section 3.03 hereof, and any of such conditions precedent have not been satisfied or waived by the Issuers prior to the close of business on the redemption date given in the notice of redemption mailed to the Holders pursuant to Section 3.03 hereof (as such date may have been extended or delayed as provided in Section 3.03 hereof), or such redemption shall have been rescinded as provided in Section 3.03 hereof, the Trustee or Paying Agent will promptly return to the Issuers money deposited with the Trustee or the Paying Agent by the Issuers to pay the redemption price of, and accrued interest and Additional Interest, if any, on all Notes to be redeemed. If the Trustee returns the redemption price of, and accrued interest and Additional Interest, if any, on all Notes to be redeemed because such condition precedent has not been satisfied, then, within 15 days following the redemption date given in the notice of redemption mailed to Holders (as such date may be have been extended or delayed as provided in Section 3.03 hereof), the Issuers will mail or caused to be mailed, by first class mail, a notice to each Holder whose Notes were to be redeemed at its registered address, stating that (i) such redemption has been rescinded in accordance with Section 3.03 hereof, (ii) any Notes surrendered for redemption by such Holder have been credited to such Holder's account or otherwise returned to such Holder, (iii) such Notes remain issued and outstanding and (iv) interest on the Notes did not cease to accrue and will continue to accrue pursuant to this Indenture, and including such other information as determined by the Issuers, consistent with this Article 3.

        Subject to the final sentence of this paragraph, if the Issuers comply with the provisions of the first paragraph of this Section 3.05, on and after the redemption or purchase date, interest will cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Issuers to comply with the first paragraph of this Section 3.05, interest shall be paid on the unpaid principal, from the redemption or purchase 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 Notes and in Section 4.01 hereof. If any Note called for redemption is not so paid upon surrender for redemption on the redemption date because one or more conditions precedent to redemption is not satisfied, interest shall continue to accrue on such Note or the portions thereof called for redemption.

Section 3.06    Notes Redeemed or Purchased in Part.

        Upon surrender of a Note that is redeemed or purchased in part, the Issuers will issue and, upon receipt of an Authentication Order, the Trustee will authenticate for the Holder at the expense of the Issuers a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered.

Section 3.07    Optional Redemption.

        (a)   At any time prior to January 15, 2008, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price of 100% plus the Applicable Eurodollar Rate then in effect of the principal amount thereof, plus

51

accrued and unpaid interest and Additional Interest, if any, to the redemption date, with the net cash proceeds of an Equity Offering of the Company or Parent; provided that:

(1)

at least 65% of the aggregate principal amount of Notes originally issued under this Indenture (excluding Notes held by the Issuers and their respective Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and



(2)

the redemption occurs within 90 days of the date of the closing of such initial public offering.

        (b)   At any time prior to January 15, 2008, the Issuers may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at a redemption price of 100% plus the Applicable Premium, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date).

        (c)   On or after January 15, 2008, the Issuers may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, on the Notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on January 15 of the years indicated below, subject to the rights of Holders of Notes on the relevant record date to receive interest on the relevant interest payment date:

Year	Percentage
2008	102.00	%
2009	101.00	%
2010 and thereafter	100.00	%

        Unless the Issuers default in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

        (d)   Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

Section 3.08    Mandatory Redemption.

        The Issuers are not required to make mandatory redemption or sinking fund payments with respect to the Notes.

ARTICLE 4
COVENANTS

Section 4.01    Payment of Notes.

        The Issuers will pay or cause to be paid the principal of, premium, if any, and interest and Additional Interest, if any, on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Additional Interest, if any will be considered paid on the date due if the Paying Agent, if other than the Issuers or a Subsidiary thereof, holds by 10:00 a.m. on the due date money deposited by the Issuers in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day and no interest shall accrue on such payment for the intervening period. The Issuers will pay all Additional Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement.

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        The Issuers will pay interest (including post-petition interest in any proceeding under any Bankruptcy Code) on overdue principal at the rate equal to the then applicable interest rate on the Notes to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Code) on overdue installments of interest and Additional Interest (without regard to any applicable grace period) at the same rate to the extent lawful.

Section 4.02    Maintenance of Office or Agency.

        The Issuers will maintain an office or agency designated by it (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Issuers in respect of the Notes and this Indenture may be served. The Issuers will give prompt written notice to the Trustee of any such designation or rescission of any such designation, and the location and any change in the location, of such office or agency (other than the designation and location specified in the following paragraph). If at any time the Issuers fail to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

        The Issuers hereby designate the Corporate Trust Office of the Trustee as one such office or agency of the Issuers in accordance with Section 2.03 hereof.

Section 4.03    SEC Reports.

        (a)   Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Issuers will furnish to the Holders of Notes, within the time periods specified in the SEC's rules and regulations:

(1)

all quarterly and annual reports that would be required to be filed with the SEC on Forms 10-Q and 10-K if the Company were required to file reports; and



(2)

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

        The availability of the foregoing materials on the SEC's Electronic Data Gathering and Retrieval service or on the Issuers' website shall be deemed to satisfy the Issuers' delivery obligation.

        All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. Each annual report on Form 10-K will include a report on the Company's consolidated financial statements by the Company's independent registered public accounting firm. In addition, following the consummation of the Exchange Offer contemplated by the Registration Rights Agreement, the Company will file a copy of each of the reports referred to in clauses (1) and (2) above with the SEC for public availability within the time periods specified in the rules and regulations applicable to such reports (unless the SEC will not accept such a filing) and will post the reports on its website within those time periods.

        Notwithstanding the foregoing, the requirements referred to in clauses (1) and (2) above may be satisfied prior to the commencement of the exchange offer or the effectiveness of the Shelf Registration Statement each as contemplated by the registration rights agreement by filing the exchange offer registration statement and/or Shelf Registration Statement, and any amendments thereto, with the SEC, with such information that satisfies Regulation S-K and Regulation S-X under the Securities Act within the time periods specified in the rules and regulations applicable to each of the reports referred to in clauses (1) and (2) above.

        If, at any time after consummation of the exchange offer contemplated by the registration rights agreement, the Company is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, the Company will nevertheless continue filing the reports specified in the preceding

53

paragraphs of this covenant with the SEC within the time periods specified above unless the SEC will not accept such a filing. the Company will not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the Issuers' filings for any reason, the Company will post the reports referred to in the preceding paragraphs on its website within the time periods that would apply if the Company were required to file those reports with the SEC.

        (b)   In addition, the Issuers and the Guarantors agree that, for so long as any Notes remain outstanding, if at any time they are not required to file with the SEC the reports required by the preceding paragraphs, they will furnish to the Holders of Notes 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.

        (c)   In the event that (1) the rules and regulations of the SEC permit the Company and any direct or indirect parent company of the Company to report at such parent entity's level on a consolidated basis and (2) such parent entity of the Company holds no assets other than cash, Cash Equivalents and the Capital Stock of the Company, the information and reports required by this Section 4.03 may be those of such parent company on a consolidated basis.

        Delivery of any such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates).

Section 4.04    Compliance Certificate.

        (a)   The Issuers and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officer's Certificate stating that a review of the activities of the Issuers and their Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officer with a view to determining whether the Issuers have kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to such Officer signing such certificate, that to the best of his or her knowledge the Issuers have kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions, conditions and covenants of this Indenture (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Issuers are 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 or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Issuers are taking or proposes to take with respect thereto.

        (b)   So long as any of the Notes are outstanding, the Issuers will deliver to the Trustee, within 30 days after the occurrence thereof, specifying such Default or Event of Default, its status and what action the Issuers are taking or proposes to take in respect thereof.

Section 4.05    [Intentionally Omitted]

Section 4.06    Stay, Extension and Usury Laws.

        The Issuers and each of the Guarantors covenants (to the extent that it may lawfully do so) that it will 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 Indenture; and the Issuers and each of the

54

Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted. Notwithstanding the foregoing, in no event will the interest on the principal amount of the Notes be higher than the maximum rate permitted by New York law as the same may be modified by U.S. law of general application.

Section 4.07    Limitation on Restricted Payments.

        (a)   The Issuers will not, and will not permit any of their Restricted Subsidiaries to, directly or indirectly:

(1)

declare or pay any dividend or make any other payment or distribution on account of the Issuers' or any of their respective Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Issuers or any of their respective Restricted Subsidiaries) or to the direct or indirect holders of the Issuers' or any of their respective Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock or preferred stock of Subsidiaries) of the Issuers and other than dividends or distributions payable to the Issuers or a Restricted Subsidiary of the Issuers);



(2)

purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Issuers) any Equity Interests of the Issuers or any direct or indirect parent of the Issuers held by Persons other than the Issuers or their respective Restricted Subsidiaries;



(3)

make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Issuers or any Guarantor that is contractually subordinated to the Notes or to any Note Guarantee (excluding any intercompany Indebtedness between or among the Issuers and any of their respective Restricted Subsidiaries), except (x) a payment of interest or principal at the Stated Maturity thereof or (y) a payment, purchase, redemption, defeasance or other acquisition or retirement for value of any such Indebtedness in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of payment, purchase, redemption, defeasance, acquisition or retirement; or



(4)

make any Restricted Investment;

(all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"),

unless, at the time of and after giving effect to such Restricted Payment:

(1)

no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;



(2)

the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a); and



(3)

such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuers and their respective Restricted Subsidiaries since the Closing Date (excluding Restricted Payments permitted by clauses (2), (3), (4), (5), (6),

55

(7), (8), (9), (10), (11) or (12) of the next succeeding paragraph), is less than the sum, without duplication, of:

(A)

50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Closing Date to the end of the Issuers' 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 deficit, less 100% of such deficit); plus

(B)

100% of the aggregate net cash proceeds and the Fair Market Value of assets received by the Company since the Closing Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company); plus

(C)

100% of the aggregate amount received in cash and the Fair Market Value of property and marketable securities received by means of (x) the sale or other disposition (other than to any of the Issuers or their respective Restricted Subsidiaries) of Restricted Investments made by any of the Issuers or their respective Restricted Subsidiaries and repurchases and redemptions of such Restricted Investments from any of the Issuers or their respective Restricted Subsidiaries and repayments of loans or advances which constitute Restricted Investments by any of the Issuers or their respective Restricted Subsidiaries or (y) the sale (other than to any of the Issuers or their respective Restricted Subsidiaries) of the Capital Stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than to the extent it constituted a Permitted Investment); plus

(D)

to the extent that any Unrestricted Subsidiary of the Issuers designated as such after the Closing Date is redesignated as a Restricted Subsidiary after the Closing Date, the lesser of (i) the Fair Market Value of the Issuers' Investment in such Subsidiary as of the date of such redesignation or (ii) such Fair Market Value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary after the Closing Date (other than to the extent it constituted a Permitted Investment); plus

(E)

50% of any dividends received by any of the Issuers or their respective Restricted Subsidiaries after the Closing Date from an Unrestricted Subsidiary of the Issuers, to the extent that such dividends were not otherwise included in the Consolidated Net Income of the Company for such period.

        So long as no Default has occurred and is continuing or would be caused thereby, the preceding provisions will not prohibit:

(4)

the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or redemption payment would have complied with the provisions of this Indenture;



(5)

the making of any Restricted Payment in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock) or from the substantially

56

concurrent contribution of common equity capital to the Company; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from clause (3)(b) of Section 4.07(a) hereof;

(6)

the repurchase, redemption, defeasance or other acquisition or retirement for value of Indebtedness of any of the Issuers or the Guarantors that is contractually subordinated to the Notes or to any Note Guarantee with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness;



(7)

the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis;



(8)

the repurchase, redemption or other acquisition or retirement for value of, or dividends or distributions to any direct or indirect parent of the Issuers to allow any direct or indirect parent of the Issuers to repurchase, redeem or acquire, any Equity Interests of any of the Parent, the Issuers or any intermediate holding company between the Parent and the Issuers held by any current or former officer, director or employee of any of Parent, the Issuers or their respective Restricted Subsidiaries pursuant to any equity subscription agreement, stock option agreement, shareholders' agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $2.5 million in any twelve-month period plus the aggregate net cash proceeds received by the Issuers after the Closing Date from the issuance of such Equity Interests to, or the exercise of options to purchase such Equity Interests by, any current or former director, officer, partner, consultant or employee of Parent, the Issuers or their respective Restricted Subsidiaries (provided that the amount of such net cash proceeds received by the Issuers and utilized pursuant to this clause (5) for any such repurchase, redemption, acquisition or retirement will be excluded from clause (3)(b) of Section 4.07(a) hereof); and provided, further, that amounts available pursuant to this clause (5) during any twelve-month period may be carried forward and utilized in succeeding twelve-month periods);



(9)

loans or advances to employees made in the ordinary course of business of any of the Issuers or their respective Restricted Subsidiaries in an aggregate principal amount not to exceed $1.0 million at any one time outstanding;



(10)

the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options;



(11)

the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of any of the Issuers or their respective Restricted Subsidiaries issued on or after the Closing Date in accordance with the applicable Fixed Charge Coverage Ratio test described in Section 4.09(a);



(12)

any Permitted Payments to Parent;



(13)

any payments made in connection with the Transactions pursuant to the Acquisition Agreement and any other agreements or documents related to the Transactions and set forth on a schedule provided to the Initial Purchasers on or prior to the closing date of the Transactions (without giving effect to subsequent amendments, waivers or other modifications to such agreements or documents) or as otherwise described in the Offering Memorandum;

57

(14)

the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Indebtedness of any of the Issuers or a Guarantor that is contractually subordinated to the Notes or any Note Guarantee (i) at a purchase price not greater than 101% of the principal amount of such contractually subordinated Indebtedness in the event of a Change of Control in accordance with provisions similar to the provisions of Section 4.15 hereof or (ii) at a purchase price not greater than 101% of the principal amount thereof in accordance with provisions similar to the provisions of Section 4.10 hereof; provided that, prior to or simultaneously with such purchase, repurchase, redemption, defeasance or other acquisition or retirement, the Issuers have made the Change of Control Offer or Asset Sale Offer, as applicable, as provided in such covenant with respect to the Notes and has completed the repurchase or redemption of all Notes validly tendered for payment in connection with such Change of Control Offer or Asset Sale Offer; and



(15)

other Restricted Payments in an aggregate amount not to exceed $25.0 million since the Closing Date.

        The amount of all Restricted Payments (other than cash) will 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 such Issuer or 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 this covenant will be determined by the Boards of Directors of the Issuers whose resolution with respect thereto will be delivered to the Trustee. The Boards of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the Fair Market Value exceeds $20.0 million.

        For purposes of determining compliance with this covenant, if a Restricted Payment meets the criteria of more than one of the exceptions described in clauses (1) through (12) above or is entitled to be made according to the first paragraph of this covenant, the Company may, in its sole discretion, classify the Restricted Payment in any manner that complies with this covenant.

Section 4.08    Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries.

        (a)   The Issuers will not, and will not permit any of their respective Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(1)

pay dividends or make any other distributions on its Capital Stock to any of the Issuers or their respective Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to any of the Issuers or their respective Restricted Subsidiaries;



(2)

make loans or advances to any of the Issuers or their respective Restricted Subsidiaries; or



(3)

sell, lease or transfer any of its property or assets to any of the Issuers or their respective Restricted Subsidiaries.

        (b)   However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of:

(1)

agreements as in effect on the Closing Date (including the Revolving Credit Loan Documents) and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with

58

respect to such encumbrances or restrictions than those contained in those agreements on the Closing Date;

(2)

this Indenture, the Notes, the Note Lien Documents and the Note Guarantees;



(3)

applicable law, rule, regulation or order;



(4)

any instrument governing Indebtedness or Capital Stock of a Person acquired by any of the Issuers or their respective Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the property or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred;



(5)

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



(6)

purchase money obligations for property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause (3) of Section 4.08(a) hereof;



(7)

any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending the sale or other disposition;



(8)

Liens, including real estate mortgages, permitted to be incurred under the provisions of Section 4.12 hereof that limit the right of the debtor to dispose of the assets subject to such Liens;



(9)

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 entered into with the approval of the Issuers' Boards of Directors, which limitation is applicable only to the assets that are the subject of such agreements;



(10)

agreements governing Indebtedness permitted to be incurred pursuant to Section 4.09 hereof; provided that the terms of the agreements (i) are not materially more restrictive, taken as a whole, with respect to such encumbrances or restrictions than those in the Revolving Credit Agreement or this Indenture on the Closing Date and (ii) do not restrict any Restricted Subsidiaries not so restricted on the Closing Date;



(11)

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



(12)

encumbrances or restrictions under any agreement, amendment, modification, restatement, renewal, supplement, refunding, replacement or refinancing that extends, renews, refinances or replaces the agreements containing the encumbrances or restrictions in the foregoing clauses (2), (4), (6) or (8) or in this clause (12), provided that the terms and conditions of any such encumbrances or restrictions are not materially more restrictive, taken as a whole, than those contained in the agreements, being amended, modified, restated, renewed, supplemented, refunded, replaced or refinanced.

Section 4.09    Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock.

        (a)   The Issuers will not, and will not permit any of their respective Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly

59

liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company will not issue any Disqualified Stock and will not permit any of their respective Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that (x) the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or such preferred stock is issued, as the case may be, would have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period and (y) Linens 'n Things Center, Inc. may incur Indebtedness (including Acquired Debt) or issue preferred stock, and Linens 'n Things Center, Inc.'s Subsidiaries that are Guarantors may incur Indebtedness (including Acquired Debt) or issue preferred stock, if the Fixed Charge Coverage Ratio for Linens 'n Things Center, Inc.'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 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)   Section 4.09(a) hereof will not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"):

(1)

Indebtedness of the Issuers or their respective Restricted Subsidiaries under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) not to exceed the greater of (A) $600.0 million and (B) the amount of the Borrowing Base as of the date of such incurrence;



(2)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Indebtedness existing on the Closing Date;



(3)

the incurrence by the Issuers and the Guarantors of Indebtedness represented by the Notes and the related Note Guarantees to be issued on the Closing Date and the Exchange Notes and the related Note Guarantees to be issued pursuant to the registration rights agreement;



(4)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing, whether or not incurred at the time of such cost or acquisition, all or any part of the purchase price or cost of design, construction, installation or improvement of property, plant or equipment used in the business of any of the Issuers or their respective Restricted Subsidiaries, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (4) that are at any one time outstanding not to exceed the greater of (A) $15.0 million or (B) 1% of Consolidated Net Tangible Assets;



(5)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under Section 4.09(a) hereof or clauses (2), (3), (4), (5) or (12) of this paragraph;

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(6)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of intercompany Indebtedness between or among any of the Issuers and their respective Restricted Subsidiaries; provided, however, that:



(A)

if an Issuer or a Guarantor is the obligor on such Indebtedness and the payee is not an Issuer or a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the Notes, in the case of an Issuer, or the Note Guarantee, in the case of a Guarantor; and



(B)

(i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than any of the Issuers or their respective Restricted Subsidiaries and (ii) any sale or other transfer of any such Indebtedness to a Person that is not any of the Issuers or their respective Restricted Subsidiaries, will be deemed, in each case, to constitute an incurrence of such Indebtedness by such Issuer or Restricted Subsidiary, as the case may be, that was not permitted by this clause (6);



(7)

the issuance by any of the Issuers' Restricted Subsidiaries to any of the Issuers or their respective Restricted Subsidiaries of shares of preferred stock; provided, however, that:



(A)

any subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than an Issuer or any of their respective Restricted Subsidiaries; and



(B)

any sale or other transfer of any such preferred stock to a Person that is not an Issuer or any of their respective Restricted Subsidiaries,

will be deemed, in each case, to constitute an issuance of such preferred stock by such Restricted Subsidiary that was not permitted by this clause (7);

(8)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Hedging Obligations in the ordinary course of business;



(9)

the Guarantee by an Issuer or any of the Guarantors of Indebtedness of an Issuer or their respective Restricted Subsidiaries that was permitted to be incurred by another provision of this covenant; provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the Notes, then the Guarantee shall be subordinated or pari passu, as applicable, to the same extent as the Indebtedness guaranteed;



(10)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Indebtedness in respect of workers' compensation claims, self-insurance obligations, bankers' acceptances, performance and surety bonds or similar types of obligations in the ordinary course of business;



(11)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within five business days of being incurred;



(12)

Indebtedness of a Restricted Subsidiary incurred and outstanding on the date on which such Restricted Subsidiary was acquired by, or merged into, any of the Issuers or their respective Restricted Subsidiaries (other than Indebtedness incurred (a) to provide all or any portion of the funds utilized to consummate the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired by an Issuer or (b) otherwise in connection with, or in contemplation of, such acquisition); provided, however, that at the time such Restricted

61

Subsidiary is acquired by an Issuer, such Issuer would have been able to incur $1.00 of additional Indebtedness pursuant to Section 4.09(a) hereof after giving effect to the incurrence of such Indebtedness pursuant to this clause (12);

(13)

Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and their respective Restricted Subsidiaries in connection with such disposition; and



(14)

the incurrence by any of the Issuers or their respective Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (14), not to exceed $50.0 million.

        (c)   The Issuers will not incur, and will not permit any Guarantor to incur, any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Issuers or such Guarantor unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the applicable Note Guarantee on substantially identical terms; provided, however, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Issuers solely by virtue of being unsecured or by virtue of being secured on a first or junior Lien basis.

        (d)   For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (14) of Section 4.09(b) hereof, or is entitled to be incurred pursuant to the first paragraph of this covenant, the Issuers will be permitted, in its sole discretion, to 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 under Credit Facilities outstanding on the date on which Notes are first issued and authenticated under this Indenture will initially be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of this Section 4.09(b). 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 in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this covenant; provided, in each such case, that the amount of any such accrual, accretion or payment is included in Fixed Charges of the Issuers as accrued. Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Issuers or any Restricted Subsidiary may incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values.

        The amount of any Indebtedness outstanding as of 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

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(3)

in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of:



(a)

the Fair Market Value of such assets at the date of determination; and



(b)

the amount of the Indebtedness of the other Person.

Section 4.10    Limitation on Sales of Assets.

        (a)   The Issuers will not, and will not permit any of their respective Restricted Subsidiaries to, consummate an Asset Sale unless:

(1)

such Issuer (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



(2)

at least 75% of the consideration received in the Asset Sale by such Issuer or Restricted Subsidiary consists of cash or Cash Equivalents. For purposes of this provision, each of the following will be deemed to be cash:



(a)

any liabilities, as shown on the Issuers' most recent consolidated balance sheet, of such Issuer or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation or similar agreement that releases such Issuer or Restricted Subsidiary from further liability;



(b)

any securities, notes or other obligations received by such Issuer or Restricted Subsidiary from such transferee that are converted, sold or exchanged by such Issuer or Restricted Subsidiary into cash or Cash Equivalents within 180 days after such Asset Sale, to the extent of the cash or Cash Equivalents received in that conversion, sale or exchange; and



(c)

any stock, property or assets of the kind referred to in clauses (2) or (4) of the next paragraph of this covenant.

        Other than with respect to an Asset Sale of Note Lien Collateral, within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Issuers (or the applicable Restricted Subsidiary, as the case may be) may apply such Net Proceeds at its option:

(1)

to repay (i) Credit Facilities or (ii) Indebtedness used to finance the acquisition of the assets subject of the Asset Sale incurred within 12 months prior to such Asset Sale and, in the case of each of clauses (i) and (ii), if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto;



(2)

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 Issuers;



(3)

to make a capital expenditure;



(4)

to acquire other assets that are not classified as current assets under GAAP and that are used or useful in a Permitted Business; or



(5)

to enter into a binding written agreement to acquire any stock or assets of the kind referred to in the foregoing clauses (2) or (4) if the acquisition of such stock or assets, as the case may be, is consummated within 180 days of such binding written agreement.

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        Pending the final application of any Net Proceeds in accordance with the foregoing, the Issuers may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture.

        (b)   (1) In the case of an Asset Sale of Note Lien Collateral the Issuers (or the Restricted Subsidiary that owned the sold assets, as the case may be) shall promptly deposit the Net Proceeds of such disposition into a segregated Net Available Cash Account, under the control of the Note Lien Collateral Agent, that includes only proceeds from the disposition of Note Lien Collateral and interest earned thereon (a "Net Available Cash Account") and is free from all other Liens (other than Junior Liens), all on terms and pursuant to arrangements reasonably satisfactory to the Note Lien Collateral Agent in its reasonable determination (which may include, at the Note Lien Collateral Agent's reasonable request, customary officer's certificates and opinions of counsel and shall include release provisions requiring the Note Lien Collateral Agent to release deposits in the Net Available Cash Account as requested to permit the Issuers or their respective Restricted Subsidiaries to apply such Net Proceeds in the manner described below, unless the Note Lien Collateral Agent has received written notice that an Event of Default has occurred and is continuing from the Trustee or the Holders of at least 25% in aggregate principal amount of Notes then outstanding), and an amount equal to 100% of the Net Proceeds from such disposition is applied by the Issuers (or such Restricted Subsidiary, as the case may be), to the extent the Issuers or such Restricted Subsidiary elects, to reinvest in Additional Assets constituting Note Lien Collateral to be owned by the Issuers or a Guarantor, and the Note Lien Collateral Agent shall promptly be granted a perfected first priority security interest (subject to Permitted Liens) on all such assets as Note Lien Collateral under the Note Lien Security Documents to secure the Notes on terms and pursuant to arrangements reasonably satisfactory to the Note Lien Collateral Agent in its reasonable determination (which may include, at the collateral agent's reasonable request, customary officer's certificates and legal opinions); provided that, notwithstanding the foregoing the Issuers or such Restricted Subsidiary may reinvest such Net Proceeds in Additional Assets that do not constitute Note Lien Collateral in an aggregate amount not to exceed $25.0 million since the Closing Date. Prior to depositing or releasing any proceeds from the Net Available Cash Account, the Trustee and the Note Lien Collateral Agent shall be entitled to receive an Opinion of Counsel and an Officer's Certificate, each stating that all conditions precedent to such release of funds have been complied with, and that such release complies with the Indenture, the Note Lien Security Documents, and the Intercreditor Agreement.

(2)

In addition, upon receipt of any Net Proceeds from a Casualty Event with respect to Note Lien Collateral, the Issuers (or the Restricted Subsidiary that owned those assets, as the case may be) shall treat such Net Proceeds as if it were proceeds of a disposition of Note Lien Collateral and apply such proceeds in accordance with Section 4.10(b)(1).

        (c)   Any Net Proceeds from Asset Sales or a Casualty Event with respect to Collateral that are not applied or invested as provided above will constitute "Excess Collateral Proceeds." When the aggregate amount of Excess Collateral Proceeds exceeds $15.0 million, within 10 days thereof, the Issuers will make an offer to purchase ("Collateral Sale Offer") to all Holders of Notes and may make an offer to all holders of other Indebtedness of the Issuers that is Note Lien Debt containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other Note Lien Debt that may be purchased out of the Excess Proceeds (provided that in no event shall the Issuers offer to purchase such other Note Lien Debt of the Issuers at a purchase price in excess of 101% of its principal amount, plus accrued and unpaid interest, if any, thereon); provided, however, that to the extent the Excess Collateral Proceeds relate to Asset Sales or a Casualty Event with respect to Revolving Credit Collateral, the Issuers may, prior to making a Collateral Disposition Offer, make a permanent prepayment with respect to the maximum principal amount of indebtedness that is secured by such Collateral on a first-priority basis that may be prepaid out of such Excess Collateral Proceeds (and in

64

the case of a prepayment of revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto) at a price not in excess of 101% of its principal amount, plus accrued and unpaid interest to, if any, thereon to the date of prepayment and any amounts applied to make such a prepayment shall not constitute Excess Collateral Proceeds. The offer price of the Notes in any Collateral Sale Offer will be equal to 100% of the principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and will be payable in cash, and the offer or redemption price for such other Note Lien Debt shall be as set forth in the related documentation governing such Note Lien Debt. If any Excess Proceeds remain after consummation of a Collateral Sale Offer, the Issuers may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and other Note Lien Debt tendered into such Collateral Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and the Company or such other applicable person shall select such other Note Lien Debt to be purchased on a pro rata basis. Upon completion of each Collateral Sale Offer, the amount of Excess Proceeds will be reset at zero.

        (d)   Any Net Proceeds from Asset Sales other than with respect to Collateral that are not applied or invested as provided above will constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15.0 million, within 10 days thereof, the Issuers will make an offer to purchase ("Asset Sale Offer") to all Holders of Notes and may make an offer to all holders of other pari passu Indebtedness of the Issuers containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other pari passu Indebtedness of the Issuers that may be purchased out of the Excess Proceeds (provided that in no event shall the Issuers offer to purchase such other pari passu Indebtedness of the Issuers at a purchase price in excess of 101% of its principal amount (without premium), plus accrued and unpaid interest and Additional Interest, if any, thereon). The offer price of the Notes in any Asset Sale Offer will be equal to 100% of the principal amount plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and will be payable in cash, and the offer or redemption price for such other Indebtedness shall be as set forth in the related documentation governing such Indebtedness. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Issuers may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and the Company or such other applicable person shall select such other pari passu Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero.

        (e)   The Issuers will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of this Indenture, the Issuers will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Asset Sale provisions of this Indenture by virtue of such compliance.

Section 4.11    Limitation on Transactions with Affiliates.

        The Issuers will not, and will not permit any of their respective 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,

65

agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate of any Issuer (each, an "Affiliate Transaction"), unless:

(1)

the Affiliate Transaction is on terms that are no less favorable to such Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by such Issuer or such Restricted Subsidiary with an unrelated Person; and



(2)

the Issuers deliver to the Trustee:



(a)

with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15.0 million, a resolution of the Board of Directors of the Company set forth in an officers' certificate certifying that such Affiliate Transaction complies with this covenant and either (x) that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors of the Company, or (y) a copy of an opinion as to the fairness to such Issuer 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; and



(b)

with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $30.0 million, a copy of an opinion as to the fairness to such Issuer 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.

        The following items will not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph:

(1)

any employment or consulting agreement, employee benefit plan, officer or director indemnification agreement, severance agreement or any similar arrangement entered into by the Issuers or any of their respective Restricted Subsidiaries in the ordinary course of business and payments pursuant thereto and the issuance of Capital Stock of the Issuers (other than Disqualified Stock) to directors and employees pursuant to stock option or stock ownership plans, in each case, approved in good faith by the Board of Directors of such Issuer;



(2)

transactions between or among the Issuers and/or their respective Restricted Subsidiaries;



(3)

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



(4)

payment of reasonable directors' fees, compensation benefits or indemnity to directors;



(5)

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



(6)

Restricted Payments that do not violate the provisions of this Indenture described under Section 4.07 or any Permitted Investment;



(7)

transactions pursuant to any registration rights agreement with the shareholders of Parent or any direct or indirect parent of the Company, on customary terms;



(8)

written agreements entered into or assumed in connection with acquisitions of other businesses with Persons who were not Affiliates prior to such transactions approved by a majority of the Boards of Directors of the Issuers;

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(9)

any payments made in connection with the Transactions pursuant to the Acquisition Agreement and any other agreements or documents related to the Transactions and set forth on a schedule provided to the Initial Purchasers on or prior to the closing date of the Transactions (without giving effect to any subsequent amendments, waivers or modifications to such agreements or documents) or as otherwise described in the Offering Memorandum;



(10)

(a) payment of annual management fees to the Sponsors in an aggregate amount not to exceed, during any consecutive 12-month period, $2.0 million, (b) the payment of fees to the Sponsors for financial advisory and investment banking services rendered to Parent and its respective Restricted Subsidiaries in connection with acquisitions, securities offerings and other financings and similar significant corporate transactions in customary and reasonable amounts for such transactions, and (c) reimbursement of reasonable out-of-pocket expenses incurred by the Sponsors in connection with the services described in clauses (a) and (b) above;



(11)

loans or advances to employees made in the ordinary course of business of any of the Issuers or their respective Restricted Subsidiaries in an aggregate principal amount not to exceed $1.0 million at any one time outstanding; and



(12)

any Permitted Payments to Parent.

Section 4.12    Limitation on Liens.

        The Issuers will not and will not permit any of their respective Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist any Lien of any kind (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, provided that the Issuers and their respective Restricted Subsidiaries may incur Liens (in addition to Permitted Liens) securing Indebtedness on property or assets that are not Note Lien Collateral if:

(1)

in the case of any Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes, the Notes are secured by a Lien on such property or assets that is senior in right of priority to such Liens; and



(2)

in the case of all Liens securing other Indebtedness, the Notes are equally and ratably secured by a Lien on such property or assets.

Section 4.13    Business Activities.

        The Issuers will not, and will not permit any of their respective Restricted Subsidiaries to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole.

Section 4.14    Corporate Existence.

        Subject to Article 5 hereof, the Issuers shall do or cause to be done all things necessary to preserve and keep in full force and effect:

(1)

its corporate existence, and the corporate, partnership or other existence of each of their Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Issuers or any such Subsidiary; and



(2)

the rights (charter and statutory), licenses and franchises of the Issuers and their Restricted Subsidiaries; provided, however, that the Issuers shall not be required to preserve any such right, license or franchise, of the Issuers or any Restricted Subsidiary or (ii) the corporate, partnership or other existence of any Restricted Subsidiary if the maintenance and preservation thereof is in the judgment of the Issuers no longer

67

desirable in the conduct of the business of the Issuers and their Restricted Subsidiaries, taken as a whole.

Section 4.15    Offer to Repurchase Upon Change of Control.

        (a)   If a Change of Control occurs, each Holder of Notes will have the right to require the Issuers to repurchase all or any part (equal to $2,000 or a larger integral multiple of $1,000) of that Holder's Notes pursuant to a Change of Control Offer on the terms set forth in this Indenture. In the Change of Control Offer, the Issuers will offer a Change of Control payment in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Additional Interest, if any, on the Notes repurchased to the date of purchase, subject to the rights of Holders of Notes on the relevant record date to receive interest due on the relevant interest payment date.

        (b)   Within 20 days following any Change of Control, the Issuers shall mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating:

(1)

that a Change of Control has occurred and that such Holder has the right to require the Company to purchase all or a portion of such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date);



(2)

the circumstances and relevant facts and financial information regarding such Change of Control;



(3)

the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the "Change of Control Payment Date");



(4)

that any Note not tendered will continue to accrue interest;



(5)

that, unless the Company defaults in the payment of a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date) in respect of any Notes or portions of Notes properly tendered, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date;



(6)

that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" attached to the Notes completed, or transfer by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;



(7)

that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased;



(8)

that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $2,000 in principal amount or larger integral multiple of $1,000;

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(9)

such other instructions determined by the Company, consistent with this Section 4.15 and this Indenture, that a Holder must follow in order to have its Notes purchased; and



(10)

if such notice is mailed prior to the occurrence of a Change of Control, that such offer is conditioned on the occurrence of such Change of Control.

        (c)   The Issuers will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of this Indenture, the Issuers will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control provisions of this Indenture by virtue of such compliance.

        (d)   On the Change of Control payment date, the Issuers will, to the extent lawful:

(1)

accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;



(2)

deposit with the paying agent an amount equal to the Change of Control payment in respect of all Notes or portions of Notes properly tendered; and



(3)

deliver or cause to be delivered to the Trustee the Notes properly accepted together with an officer's certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Issuers.

        The paying agent will promptly mail or wire to each Holder of Notes properly tendered the Change of Control payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new note equal in principal amount to any unpurchased portion of the Notes surrendered, if any. The Issuers will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

        (e)   The provisions described above that require the Issuers to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of this Indenture are applicable.

        (f)    Notwithstanding anything to the contrary in this Section 4.15, the Issuers will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Issuers and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to this Indenture as described in Section 3.07, unless and until there is a default in payment of the applicable redemption price.

Section 4.16    [Intentionally Omitted]

Section 4.17    Payments for Consent.

        The Issuers will not, and will not permit any of their respective Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holder of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

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Section 4.18    Additional Note Guarantees.

        If after the date of the indenture, any Subsidiary of an Issuer issues a Guarantee of any of the Indebtedness under the Revolving Credit Agreement, other than solely Indebtedness under the Revolving Credit Agreement with respect to which only one or more of the Canadian Subsidiaries of the Issuers is a borrower, then that Subsidiary will become a Guarantor and execute a supplemental indenture in the form set forth in this Indenture and deliver an Opinion of Counsel within 10 business days of the date on which it was acquired or created; provided that any Domestic Subsidiary that constitutes an Immaterial Subsidiary need not become a Guarantor until such time as it ceases to be an Immaterial Subsidiary.

Section 4.19    Further Assurances; Insurance.

        (a)   Each of the Issuers and the Guarantors will do or cause to be done all acts necessary to, or that the Note Lien Collateral Agent from time to time may reasonably request to, assure and confirm that the Note Lien Collateral Agent holds, for the benefit of the holders of Note Lien Obligations, duly created and enforceable and (except with respect to Excluded Assets) perfected Note Liens upon the Collateral (other than such Collateral in which a Security interest cannot be perfected under the UCC as in effect at the relevant time in the relevant jurisdiction and including any property or (other than Excluded Assets) assets that are acquired or otherwise become Collateral after the Notes are issued), in each case, as contemplated by, and with the Lien priority required under, the Note Lien Documents.

        (b)   The Issuers and each of the Guarantors will promptly execute, acknowledge and deliver such security documents, instruments, certificates, notices and other documents, and take such other actions that are necessary to (or that the Note Lien Collateral Agent may reasonably request), to create, perfect, protect, assure or enforce the Liens and benefits intended to be conferred, in each case as contemplated by, and with the Lien priority and perfection required under, the Note Lien Documents for the benefit of the holders of Note Lien Obligations.

        (c)   Each of the Issuers and the Guarantors will:

(1)

keep their properties insured at all times by financially sound and reputable insurers in such amounts and against such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies in the same or similar business and, in any event, insuring the Collateral against loss by fire, explosion or theft or other risks as may be required by the Note Lien Security Documents;



(2)

maintain such other insurance as may be required by law; and



(3)

maintain title insurance on real property Collateral to the extent required by the Note Lien Security Documents.

        (d)   Each of each of the Issuers and the Guarantors will furnish to the Note Lien Collateral Agent all information reasonably requested by it as to their property and liability insurance carriers; provided that the Note Lien Collateral Agent shall have no obligation or responsibility to monitor such insurance carriers. Each of each of the Issuers and the Guarantors will provide that the Note Lien Collateral Agent, on behalf of holders of Note Lien Debt, be named as an additional insured and/or loss payee in respect of casualty insurance for Note Lien Collateral property. Any payments received by the Note Lien Collateral Agent in its capacity as additional insured and/or loss payee in respect of such insurance will be deposited by it into the Net Available Cash Account and may be applied by the Issuers and their Restricted Subsidiaries in accordance Section 4.10(a)(4) hereof (subject to the terms of the Intercreditor Agreement).

        (e)   Within forty-five (45) days following the Closing Date, each of the Issuers and the Guarantors shall deliver to the Note Lien Collateral Agent either (a) executed Deposit Account Control

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Agreements (as defined in the Note Lien Security Documents) with respect to all accounts at each depository bank listed on Schedule 9.04 to the Revolving Credit Agreement or (b) an Officers' Certificate stating that each of the Issuers and the Guarantors no longer maintain any accounts at a depository bank listed on Schedule 9.04 to the Revolving Credit Agreement.

        (f)    Within forty-five (45) days following the Closing Date, each of the Issuers and the Guarantors shall deliver to the Note Lien Collateral Agent executed Securities Account Control Agreements (as defined in the Security Agreement) with respect to each of the financial institutions listed on Schedule 6.04(b) to the Credit Agreement.

        (g)   Within forty-five (45) days following the Closing Date, each of the Issuers and the Guarantors shall deliver to the Note Lien Collateral Agent executed Armored Car Control Agreements (as defined in the Security Agreement) with respect to all of the agreements listed on Schedule 17 to the Perfection Certificate (as such term is defined in the Security Agreement).

        (h)   Within forty-five (45) days following the Closing Date, each of the Issuers and the Guarantors shall deliver to the Note Lien Collateral Agent executed Credit Card Processing Control Agreements (as defined in the Security Agreement) with respect to each of the following credit card processors:

(1)

Chase Merchant Services;



(2)

American Express;



(3)

Novus Services; and



(4)

GE Money Bank.

        (i)    Within one (1) year following the Closing Date, each of the Issuers and the Guarantors shall either (a) comply with the definition of "Note Lien Collateral" with respect to each Mortgaged Property listed below or (b) an Officers' Certificate stating that each of the Issuers and the Guarantors have sold such Mortgaged Property:

(1)

Mortgaged Property located in Colorado Springs, Colorado;



(2)

Mortgaged Property located in Greensboro, North Carolina;



(3)

Mortgaged Property located in Newport News, Virginia; and



(4)

Mortgaged Property located in College Station, Texas.

        (j)    Within forty-five (45) days following the Closing Date, each of the Issuers and the Guarantors shall deliver to the Note Lien Collateral Agent evidence of marine cargo insurance in form and substance customary to transactions of this nature.

        (k)   Within forty-five (45) days following the Closing date, each of the Issuers and the Guarantors shall deliver to the Note Lien Collateral Agent executed amendments to the operating agreements of each of the Issuers and the Guarantors listed below to clarify the rights of pledgees with respect to the membership interests of such Guarantors:

(1)

Vendor Finance, LLC[;][and]



(2)

LNT Merchandising Company LLC[.][;



(3)

LNT Leasing II, LLC;



(4)

LNT Leasing III, LLC; and



(5)

Citadel LNT, LLC].

        (l)    Within forty-five (45) days following the Closing Date, each of the Issuers and the Guarantors shall deliver to the Note Lien Collateral Agent a file-stamped UCC termination statement effective to

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terminate the lien and encumbrance evidenced by UCC financing statement #2186574-9 filed with the New Jersey Department of Treasury on September 17, 2003.

        (m)  With respect to any of the covenants contained in clauses (e), (f), (g), (h), (j), (k) and (l) of this Section 4.19, the obligations of the Issuers and Guarantors thereunder will be waived, or the time periods for compliance will be extended, to the extent that the Revolving Collateral Agent shall have waived such obligations or extended such time periods, so long as the Note Lien Collateral Agent has been provided with a copy of such waiver or extension, as the case may be.

ARTICLE 5
SUCCESSORS

Section 5.01    Merger, Consolidation or Sale of Assets.

        Neither of the Issuers will, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not such Issuer is the surviving Person); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of it and their respective Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person, unless:

(1)

either: (a) such Issuer is the surviving Person; or (b) the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a Person organized or existing under the laws of the United States, any state of the United States or the District of Columbia;



(2)

the Person formed by or surviving any such consolidation or merger (if other than such Issuer) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of such Issuer under the Notes, this Indenture, the registration rights agreement and the Note Lien Security Documents pursuant to agreements reasonably satisfactory to the Trustee;



(3)

immediately after such transaction, no Default or Event of Default exists;



(4)

such Issuer or the Person formed by or surviving any such consolidation or merger (if other than such Issuer), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, either (A) be permitted to incur at least $1.00 of additional Indebtedness pursuant to the applicable Fixed Charge Coverage Ratio test of such Issuer set forth in Section 4.09(a) of this Indenture or (B) the applicable Fixed Charge Coverage Ratio of such Issuer or the Person formed by or surviving any such consolidation or merger (if other than such Issuer) would be greater than the applicable Fixed Charge Coverage Ratio of such Issuer immediately prior to such transaction;



(5)

each Guarantor (unless it is the other party to the transactions above, in which case clause (1) shall apply) shall have by supplemental indenture confirmed that its Note Guarantee shall apply to such Person's obligations in respect of this Indenture and the Notes and its obligations under the registration rights agreement shall continue to be in effect, if applicable; and



(6)

such Issuer or the Person formed by or surviving any such consolidation or merger (if other than such Issuer), or to which such sale, assignment, transfer, conveyance or other disposition has been made shall have delivered to the Trustee an officer's certificate and an opinion of counsel, each stating that such consolidation or merger or sale, assignment,

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transfer, conveyance or other disposition and such supplemental indenture (if any) comply with this Indenture and the Note Lien Security Documents and that all relevant conditions precedent in this Indenture and the Note Lien Security Documents shall have been satisfied.

        Notwithstanding the foregoing, any Issuer may merge with or into, or convey, transfer or lease all or substantially all its assets to, an Affiliate incorporated solely for the purpose of reincorporating or reforming such Issuer in another jurisdiction, and any Issuer may merge with or into, or convey, transfer or lease all or substantially all of its assets to, the other Issuer or a Restricted Subsidiary so long as all assets of such Issuer immediately prior to such transaction are owned by the Person formed by or surviving any such consolidation or merger, or to which such sale, assignment, transfer, conveyance or other disposition has been made immediately after the consummation thereof and clause (2) above has been complied with.

        In addition, the Issuers will not, directly or indirectly, lease all or substantially all of their properties and assets and the property and assets of their Restricted Subsidiaries taken as a whole, in one or more related transactions, to any other Person.

Section 5.02    Successor Corporation Substituted.

        In the event of any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties or assets of the Issuers and their respective Restricted Subsidiaries taken as a whole in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the successor Person formed or remaining or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, such Issuer or Guarantor, as the case may be, and such Issuer or Guarantor, as the case may be, would be discharged from all obligations and covenants under this Indenture and the Notes or its Note Guarantee, as the case may be, and the registration rights agreement (if applicable). Notwithstanding Section 5.01 hereof, this Section 5.02 shall apply to the Transactions as if the Transactions are subject to, and comply with the provisions of, Section 5.01 hereof.

ARTICLE 6
DEFAULTS AND REMEDIES

Section 6.01    Default.

        Each of the following is an "Event of Default":

(1)

default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to, the Notes;



(2)

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



(3)

failure by the Issuers or any of their respective Restricted Subsidiaries to comply with Section 4.10, Section 4.15 or Section 5.01;



(4)

failure by the Issuers or any of their respective Restricted Subsidiaries for 30 days after notice to the Issuers by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the agreements described Section 4.07 or Section 4.09;



(5)

failure by the Issuers or any of their respective Restricted Subsidiaries for 60 days after notice to the Issuers by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the other agreements in this Indenture;

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(6)

default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuers or any of their respective Restricted Subsidiaries (or the payment of which is guaranteed by the Issuers or any of their respective Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after the Closing Date, if that default:



(a)

is caused by a failure to pay principal of, or interest or premium, if any, on, such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or



(b)

results in the acceleration of such Indebtedness prior to its express maturity,

and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more;

(7)

failure by the Issuers or any of their respective Restricted Subsidiaries to pay final judgments entered by a court or courts of competent jurisdiction aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days;



(8)

except as permitted by this Indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect, or any Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee;



(9)

any of the Issuers or any or their respective Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, pursuant to or within the meaning of Bankruptcy Code:



(i)

commences a voluntary case,



(ii)

consents to the entry of an order for relief against it in an involuntary case,



(iii)

consents to the appointment of a custodian of it or for all or substantially all of its property,



(iv)

makes a general assignment for the benefit of its creditors, or



(v)

generally is not paying its debts as they become due;



(10)

a court of competent jurisdiction enters an order or decree under any Bankruptcy Code that:



(i)

is for relief against any of the Issuers or any or their respective Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary in an involuntary case;



(ii)

appoints a custodian of any of the Issuers or any or their respective Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary or for all or substantially all of the property of any of the Issuers or any or their respective Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary; or

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(iii)

orders the liquidation of any of the Issuers or any or their respective Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary;

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

(11)

the occurrence of any of the following:



(a)

except as permitted by this Indenture, any Note Lien Security Document is held to be unenforceable or invalid in any respect by a court of competent jurisdiction (and such holding remains unstayed for a period of 30 days) or otherwise ceases for any reason to be fully enforceable for a period of 30 days after notice thereof is delivered to the Issuers by the Trustee or the Holders of at least 25% in aggregate principal amount of Notes then outstanding; provided that it will not be an Event of Default under this clause (10)(a) if the sole result of the failure of one or more of any such Note Lien Security Documents to be fully enforceable is that (x) any Note Lien purported to be granted thereunder purports to encumber Collateral that has been released in accordance with the terms of this Indenture and the Note Lien Security Documents or (y) any Note Lien purported to be granted thereunder on Collateral having, individually or in the aggregate, a Fair Market Value not more than $20.0 million, ceases to be an enforceable and perfected Priority Lien (in the case of Note Lien Collateral, subject only to certain Permitted Liens) or Junior Lien (in the case of Revolving Credit Collateral, subject only to Revolving Credit Liens and certain Permitted Liens), as and to the extent required by the applicable Note Lien Security Documents;



(b)

any Note Lien purported to be granted under any Note Lien Security Document on Collateral, individually or in the aggregate, having a Fair Market Value in excess of $20.0 million ceases to be an enforceable and perfected Priority Lien (in the case of Note Lien Collateral, subject only to certain Permitted Liens) or Junior Lien (in the case of Revolving Credit Collateral, subject only to Revolving Credit Liens and certain Permitted Liens), as and to the extent required by the applicable Note Lien Security Documents, for a period of 30 days after notice thereof is delivered to the Issuers by the Trustee or the Holders of at least 25% in aggregate principal amount of Notes then outstanding; or



(c)

any Issuer or Guarantor, or any Person acting on behalf of any of them, denies or disaffirms, in writing, any obligation of any Issuer or Guarantor set forth in or arising under any Note Lien Security Document, except to the extent of any Note Lien purported to be granted thereunder which purports to encumber Collateral that has been released in accordance with the terms of this Indenture and the Note Lien Security Documents.

        The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body.

        However, a default under clause (4) will not constitute an Event of Default until the Trustee notifies the Issuers or the Holders of at least 25% in principal amount of the outstanding Notes notify the Issuers and the Trustee of the default and the Issuer or the relevant Restricted Subsidiary, as applicable, does not cure such default within the time specified in clause (4) hereof after receipt of such notice.

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Section 6.02    Acceleration.

        If an Event of Default (other than an Event of Default pursuant to Section 6.01(9) or Section 6.01(10)) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes by notice to the Issuers may declare the principal of and accrued but unpaid interest and Additional Interest, if any, on all the Notes to be due and payable. Upon such a declaration, such principal and interest and Additional Interest, if any, will be due and payable immediately. If an Event of Default pursuant to Section 6.01(9) or Section 6.01(10) with respect to any of the Issuers, any Restricted Subsidiary of the Issuers that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Issuers that, taken together, would constitute a Significant Subsidiary occurs, the principal of and interest and Additional Interest, if any, on all the Notes will become immediately due and payable without any further action or notice on the part of the Trustee or any Holders.

        The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of all of the Holders, rescind an acceleration or waive any existing Default or Event of Default and its consequences under this Indenture, except a continuing Default or Event of Default in the payment of interest or premium or Additional Interest, if any, on, or the principal of, the Notes.

Section 6.03    Other Remedies.

        If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium and Additional Interest, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

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

Section 6.04    Waiver of Past Defaults.

        Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, or interest on, the Notes; provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

Section 6.05    Control by Majority.

        Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder of Notes or that would involve the Trustee in personal liability.

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Section 6.06    Limitation on Suits.

        Except to enforce the right to receive payment of principal, premium, if any, or interest or Additional Interest, if any, when due, no Holder of a note may pursue any remedy with respect to this Indenture or the Notes unless:

(1)

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



(2)

Holders of at least 25% in aggregate principal amount of the then outstanding Notes have requested the Trustee to pursue the remedy;



(3)

such Holder or Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense;



(4)

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



(5)

Holders of a majority in aggregate principal amount of the then outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.

Section 6.07    Rights of Holders of Notes to Receive Payment.

        Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, and interest on the Note, on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

Section 6.08    Collection Suit by Trustee.

        If an Event of Default specified in Section 6.01(1) or (2) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuers for the whole amount of principal of, premium and Additional Interest, if any, and interest remaining unpaid on, the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09    Trustee May File Proofs of Claim.

        The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Issuers (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or

77

consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10    Priorities.

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

        First:    to the Trustee and the Collateral Agent, their agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee or the Collateral Agent and the costs and expenses of collection;

        Second:    to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Additional Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Additional Interest, if any and interest, respectively; and

        Third:    to the Issuers or to such party as a court of competent jurisdiction shall direct.

        The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10.

Section 6.11    Undertaking for Costs.

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

ARTICLE 7
TRUSTEE

Section 7.01    Duties of Trustee.

        (a)   If an Event of Default has occurred and is continuing, the Trustee will exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.

        (b)   Except during the continuance of an Event of Default:

(1)

the duties of the Trustee will be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and



(2)

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

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requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

        (c)   The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(1)

this paragraph does not limit the effect of paragraph (b) of this Section 7.01;



(2)

the Trustee will not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and



(3)

the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

        (d)   Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to Sections 7.01 and 7.02 in their entirety.

        (e)   No provision of this Indenture will require the Trustee to expend or risk its own funds or incur any liability. The Trustee will be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

        (f)    The Trustee will not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuers. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

        (g)   The Trustee agrees to accept and act upon facsimile transmission of written instructions or directions pursuant to this Indenture.

Section 7.02    Rights of Trustee.

        (a)   The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.

        (b)   Before the Trustee acts or refrains from acting, it (unless other evidence be herein specifically prescribed) may require an Officer's Certificate. The Trustee will not be liable for any action it takes or omits to take in good faith in reliance on such Officer's Certificate. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

        (c)   The Trustee may act through its attorneys and agents and will not be responsible for the misconduct or negligence of any attorney or agent appointed with due care.

        (d)   The Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.

        (e)   Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuers will be sufficient if signed by an Officer of the Issuers.

        (f)    The Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against the losses, liabilities and expenses that might be incurred by it in compliance with such request or direction.

        (g)   The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent,

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order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of any such inquiry or investigation;

        (h)   The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.

        (i)    The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities under the Note Lien Security Documents, including the capacity of Collateral Agent, and each agent, custodian and other Person employed to act hereunder.

        (j)    The Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture.

        (k)   In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations under any of the Note Lien Security Documents arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

Section 7.03    Individual Rights of Trustee.

        The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuers or any Affiliate of the Issuers with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee (if this Indenture has been qualified under the TIA) or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.

Section 7.04    Trustee's Disclaimer.

        The Trustee will not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuers' use of the proceeds from the Notes or any money paid to the Issuers or upon the Issuers' direction under any provision of this Indenture, it will not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it will not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.

Section 7.05    Notice of Defaults.

        If a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each Holder notice of the Default within the earlier of 90 days after it occurs or 30 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default or Event of Default relating to the payment of principal, interest or premium or Additional Interest, if any, on any Note (including payments pursuant to the redemption provisions of such Note), the Trustee

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may withhold notice if and so long as a committee of its Trust Officers in good faith determines that withholding notice is in the interest of the Holders.

Section 7.06    Reports by Trustee to Holders of the Notes.

        (a)   Within 60 days after each May 15 beginning with the May 15 following the Closing Date, and for so long as Notes remain outstanding, the Trustee will mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA § 313(a) (but if no event described in TIA § 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also will comply with TIA § 313(b). The Trustee will also transmit by mail all reports as required by TIA § 313(c).

        (b)   A copy of each report at the time of its mailing to the Holders of Notes will be mailed by the Trustee to the Issuers and filed by the Trustee with the SEC and each stock exchange on which the Notes are listed in accordance with TIA § 313(d). The Issuers will promptly notify the Trustee when the Notes are listed on any stock exchange.

Section 7.07    Compensation and Indemnity.

        (a)   The Issuers, jointly and severally, will pay to the Trustee and the Collateral Agent from time to time reasonable compensation for its acceptance of this Indenture and services hereunder and under all of the Note Lien Security Documents. The Trustee's compensation will not be limited by any law on compensation of a trustee of an express trust. The Issuers will reimburse the Trustee and the Collateral Agent promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in accordance with any provision of this Indenture or any of the Note Lien Security Documents, except any such disbursement, advance or expense as may be attributable to its negligence or bad faith. Such expenses will include the reasonable compensation, disbursements and expenses of the Trustee's and Collateral Agent's agents and counsel.

        (b)   The Issuers and the Guarantors, jointly and severally, will indemnify the Trustee and the Collateral Agent against any and all losses, liabilities or expenses incurred by them arising out of or in connection with the acceptance or administration of its duties under this Indenture or under any of the Note Lien Security Documents, including the reasonable costs and expenses of enforcing this Indenture (and the Note Lien Security Documents) against the Issuers and the Guarantors (including this Section 7.07) and defending themselves against any claim (whether asserted by the Issuers, the Guarantors, any Holder or any other Person) or liability in connection with the exercise or performance of any of their powers or duties hereunder or under any of the Note Lien Security Documents, except to the extent any such loss, liability or expense may be attributable to their negligent action, negligent failure to act, willful misconduct or bad faith of the Trustee or Collateral Agent. The Trustee or the Collateral Agent will notify the Issuers promptly of any claim for which it may seek indemnity. Failure by the Trustee or the Collateral Agent to so notify the Issuers will not relieve the Issuers or any of the Guarantors of their obligations hereunder or under any of the Note Lien Security Documents. The Issuers or such Guarantor will defend the claim and the Trustee or the Collateral Agent will cooperate in the defense. The Trustee or the Collateral Agent may have separate counsel of one law firm and the Issuers will pay the reasonable fees and expenses of such counsel. Neither the Issuers nor any Guarantor need pay for any settlement made without its consent.

        (c)   The obligations of the Issuers and the Guarantors under this Section 7.07 will survive the satisfaction and discharge of this Indenture and the termination of the Note Lien Security Documents.

        (d)   To secure the Issuers' and the Guarantors' payment obligations in this Section 7.07, the Trustee will have a claim prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such claim will survive the satisfaction and discharge of this Indenture.

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        (e)   When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(5) or (6) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Code.

        (f)    The Trustee will comply with the provisions of TIA § 313(b)(2) to the extent applicable.

Section 7.08    Replacement of Trustee.

        (a)   A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08.

        (b)   The Trustee may resign at any time and be discharged from the trust hereby created upon 30 days' written notice to the Issuers. The Holders of a majority in aggregate principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Issuers in writing. The Issuers may remove the Trustee if:

(1)

the Trustee fails to comply with Section 7.10 hereof;



(2)

the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Code;



(3)

a custodian or public officer takes charge of the Trustee or its property; or



(4)

the Trustee becomes incapable of acting.

        (c)   If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuers will promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuers.

        (d)   If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuers, or the Holders of at least 10% in aggregate principal amount of the then outstanding Notes, at the expense of the Company, may petition any court of competent jurisdiction for the appointment of a successor Trustee.

        (e)   If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

        (f)    A successor Trustee will deliver a written acceptance of its appointment to the retiring Trustee and to the Issuers. Thereupon, the resignation or removal of the retiring Trustee will become effective, and the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee will mail a notice of its succession to Holders. The retiring Trustee will promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuers' obligations under Section 7.07 hereof will continue for the benefit of the retiring Trustee.

Section 7.09    Successor Trustee by Merger, etc.

        If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act will be the successor Trustee.

Section 7.10    Eligibility; Disqualification.

        There will at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such

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laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50.0 million as set forth in its most recent published annual report of condition.

        This Indenture will always have a Trustee who satisfies the requirements of TIA § 310(a)(1), (2) and (5). The Trustee is subject to TIA § 310(b).

Section 7.11    Preferential Collection of Claims Against Issuers.

        The Trustee shall comply with the provisions of TIA §311.

ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01    Option to Effect Legal Defeasance or Covenant Defeasance.

        The Issuers may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an Officer's Certificate, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes and Note Guarantees upon compliance with the conditions set forth below in this Article 8.

Section 8.02    Legal Defeasance and Discharge.

        Upon the Issuers' exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Issuers and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes (including the Note Guarantees) on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and the Guarantors will be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including the Note Guarantees), which will thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes, the Note Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which will survive until otherwise terminated or discharged hereunder:

(1)

the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on, such Notes when such payments are due from the trust referred to in Section 8.04 hereof;



(2)

the Issuers' obligations with respect to such Notes under Article II and Section 4.02 hereof;



(3)

the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuers' and the Guarantors' obligations in connection therewith; and



(4)

this Article 8.

        Subject to compliance with this Article 8, the Issuers may exercise their option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

Section 8.03    Covenant Defeasance.

        Upon the Issuers' exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Issuers and each of the Guarantors will, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under the covenants contained in Sections 4.03, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.17, 4.18 and 4.19 hereof and clauses (3), (4) and (5) of Section 5.01 hereof and clause (1) of Section 11.05 hereof with respect to the

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outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, "Covenant Defeasance"), and the Notes will thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes will not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes and Note Guarantees, the Issuers and the Guarantors may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes and Note Guarantees will be unaffected thereby. In addition, upon the Issuers' exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Section 6.01(3), (4) and (5) hereof will not constitute Events of Default.

Section 8.04    Conditions to Legal or Covenant Defeasance.

        In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof:

(1)

the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable U.S. Government Obligations, or a combination of cash in U.S. dollars and non-callable U.S. Government Obligations, in amounts as will be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants, to pay the principal of, or interest and premium and Additional Interest, if any, on, the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to such stated date for payment or to a particular redemption date;



(2)

in the case of Legal Defeasance, the Company must deliver to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (b) since the Closing Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel will confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;



(3)

in the case of Covenant Defeasance, the Company must deliver to the Trustee an opinion of counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;



(4)

no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound;

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(5)

such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of their respective Subsidiaries is a party or by which the Company or any of their respective Subsidiaries is bound;



(6)

the Company must deliver to the Trustee an officers' certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and



(7)

the Company must deliver to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Section 8.05    Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions.

        Subject to Section 8.06 hereof, all money and non-callable U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Additional Interest, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

        The Issuers will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable U.S. Government Obligations deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

        Notwithstanding anything in this Article 8 to the contrary, the Trustee will deliver or pay to the Issuers from time to time upon the request of the Issuers any money or non-callable U.S. Government Obligations held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.06    Repayment to the Issuers.

        Subject to applicable law, any money deposited with the Trustee or any Paying Agent, or then held by the Issuers, in trust for the payment of the principal of, premium or Additional Interest, if any, or interest on, any Note and remaining unclaimed for two years after such principal, premium or Additional Interest, if any, or interest has become due and payable shall be paid to the Issuers on its request or (if then held by the Issuers) will be discharged from such trust; and the Holder of such Note will thereafter be permitted to look only to the Issuers for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuers as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuers cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Issuers.

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Section 8.07    Reinstatement.

        If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable U.S. Government Obligations in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuers' and the Guarantors' obligations under this Indenture and the Notes and the Note Guarantees will be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Issuers make any payment of principal of, premium or Additional Interest, if any, or interest on, any Note following the reinstatement of its obligations, the Issuers will be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01    Without Consent of Holders of Notes.

        Notwithstanding Section 9.02 of this Indenture, without the consent of any Holder, the Issuers, the Guarantors and the Trustee may amend or supplement this Indenture, the Notes or the Note Guarantees, to:

(1)

cure any ambiguity, omission, defect or inconsistency;



(2)

provide for uncertificated Notes in addition to or in place of certificated Notes (provided, however, that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code);



(3)

provide for the assumption by a successor of the Issuers' or a Guarantor's obligations to Holders of the Notes and Note Guarantees in the case of a merger or consolidation or sale, conveyance, transfer or lease of all or substantially all of the Issuers' or such Guarantor's assets, as applicable;



(4)

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



(5)

comply with any requirement of the SEC in connection with the qualification of this Indenture under the TIA;



(6)

conform the text of this Indenture, the Note Guarantees or the Notes to any provision of the "Description of Notes" section of the Offering Memorandum to the extent that such provision in that "Description of Notes" section was intended to be a verbatim recitation of a provision of this Indenture, the Note Guarantees or the Notes;



(7)

to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date of this Indenture;



(8)

to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes or to add a Lien on additional Collateral to secure the Notes or the Guarantees; or



(9)

make, complete or confirm any grant of Collateral permitted or required by this Indenture or any of the Note Lien Security Documents, including adding any additional assets as Collateral, or any release of Collateral in accordance with this Indenture or any of the Note Lien Security Documents.

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        Upon the request of the Issuers accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Sections 13.04 and 9.06 hereof, the Trustee will join with the Issuers and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee will not be obligated to enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise.

Section 9.02    With Consent of Holders of Notes.

        Except as provided below in this Section 9.02, the Issuers and the Trustee may amend or supplement this Indenture (including, without limitation, Sections 4.10 and 4.15 hereof) and the Notes and the Note Guarantees with the written consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding (including, without limitation, Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, or interest on, the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes or the Note Guarantees may be waived with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding (including, without limitation, Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). In addition, any amendment to, or waiver of, the provisions of this Indenture or any Note Lien Security Document that has the effect of releasing one or more of the Guarantors from its Note Guarantee or of releasing all or substantially all of the Collateral from the Liens securing the Notes will require the consent of the Holders of a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02.

        Upon the request of the Issuers accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence reasonably satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Sections 13.04 and 9.06 hereof, the Trustee will join with the Issuers and the Guarantors in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but will not be obligated to, enter into such amended or supplemental Indenture.

        It is not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it is sufficient if such consent approves the substance thereof.

        After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuers will mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuers to mail such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Issuers with any provision of this Indenture or the Notes or the Note Guarantees. However, without the consent of each Holder of an outstanding Note affected, no amendment,

87

supplement or waiver under this Section 9.02 may (with respect to any Notes held by a non-consenting Holder):

(1)

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



(2)

reduce the principal of or change the Stated Maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than Sections 4.10 and 4.15 hereof);



(3)

reduce the rate of or change the time for payment of interest, including default interest, on any Note;



(4)

waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on, the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the Payment Default that resulted from such acceleration);



(5)

make any Note payable in money other than that stated in the Note;



(6)

make any change in the provisions of the indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Additional Interest, if any, on, the Notes;



(7)

waive a redemption payment with respect to any note (other than a payment required by Sections 4.10 or 4.15 hereof);



(8)

release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture; or



(9)

make any change to the provisions of this Article 9.

Section 9.03    Compliance with Trust Indenture Act.

        Every amendment or supplement to this Indenture or the Notes will be set forth in a amended or supplemental indenture that complies with the TIA as then in effect.

Section 9.04    Revocation and Effect of Consents.

        Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date on which the Trustee receives an Officer's Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and not thereafter revoked such consent) to the amendment, supplement or waiver. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

Section 9.05    Notation on or Exchange of Notes.

        The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Issuers in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

        Failure to make the appropriate notation or issue a new Note will not affect the validity and effect of such amendment, supplement or waiver.

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Section 9.06    Trustee to Sign Amendments, etc.

        The Trustee will sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Issuers may not sign an amended or supplemental indenture until the Board of Directors of the Issuers approves it. In executing any amended or supplemental indenture, the Trustee will be entitled to receive and (subject to Section 7.01 hereof) will be fully protected in relying upon, in addition to the documents required by Section 13.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture.

ARTICLE 10
COLLATERAL AND SECURITY

Section 10.01    Collateral and Note Lien Security Documents.

        The due and punctual payment of the principal of and interest and Additional Interest, if any, on the Notes when and as the same shall be due and payable, whether on an interest payment date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on the overdue principal of and interest and Additional Interest (to the extent permitted by law), if any, on the Notes and performance of all other obligations of the Issuers to the Holders of Notes or the Trustee under this Indenture and the Notes, according to the terms hereunder or thereunder, are secured as provided in the Note Lien Security Documents (subject to the terms of the Intercreditor Agreement). The Bank of New York is initially appointed to act as the Note Lien Collateral Agent. Each Holder of Notes, by its acceptance thereof, consents and agrees to the terms of the Note Lien Security Documents (including, without limitation, the provisions providing for foreclosure and release of Collateral) as the same may be in effect or may be amended, modified or waived from time to time in accordance with their terms and the terms of this Indenture, and authorizes and directs the Trustee and the Note Lien Collateral Agent to enter into the Note Lien Security Documents to which they are a party, bind the Holders to the terms set forth in such Note Lien Security Documents and to perform and observe their respective obligations and exercise their respective rights thereunder in accordance therewith; provided, however, that if any of the provisions of the Note Lien Security Documents limits, qualifies or conflicts with a provision of the TIA that is required to be a part of and govern this Indenture, such TIA provision shall control. The Issuers will deliver to the Trustee copies of all documents delivered to the Note Lien Collateral Agent pursuant to the Note Lien Security Documents and will comply with the provisions of Section 4.19 hereof. The relative rights of the holders of Note Liens and the holders of Revolving Credit Liens with respect to the Collateral are governed by, and subject to the terms and conditions of, the Intercreditor Agreement. The Note Lien Security Documents may be amended, supplemented or modified in accordance with the terms thereof.

        All of the rights, protections and privileges granted to the Trustee hereunder shall inure to the benefit of the Note Lien Collateral Agent acting under this Indenture and under all of the Note Lien Security Documents. Beyond the exercise of reasonable care in the custody thereof, neither the Trustee nor the Note Lien Collateral Agent shall have a duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto. Neither the Trustee nor the Note Lien Collateral Agent shall be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral. The Trustee and the Note Lien Collateral Agent shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property and shall not be liable or responsible for any loss or diminution in the value of any of the Collateral, by reason of the act or omission of any carrier, forwarding agency or other

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agent or bailee. Neither the Trustee nor the Collateral Agent shall be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Liens in any of the Collateral or for insuring the Collateral or for the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the Collateral.

        Neither the Trustee nor the Note Lien Collateral Agent shall have a duty to act outside of the United States in respect of any Collateral located in the jurisdiction other than the United States. At any time, for the purpose of meeting any legal requirement of any jurisdiction in which any part of the Collateral may at the time be located, the Trustee and/or the Note Lien Collateral Agent shall have the power and may execute and deliver all instruments necessary to appoint one or more persons to act as a co-trustee or co-Collateral Agent, or separate trustee or separate collateral agent, and to vest in such person such powers, duties, obligations, rights and trusts as the Trustee and/or the Note Lien Collateral Agent may consider necessary or desirable. No co-trustee or separate trustee or co-collateral agent or separate collateral agent hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 7.10 and no notice to Noteholders of the appointment of any co-trustee or separate trustee or co-collateral agent or separate collateral agent shall be required. Every separate trustee and co-trustee or separate collateral agent or co-collateral agent shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

(i)

all rights, powers, duties and obligations conferred or imposed upon the Trustee and/or the Note Lien Collateral Agent shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (or by the Note Lien Collateral Agent and such separate collateral agent or co-collateral agent), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee and/or the Note Lien Collateral Agent shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed singly by such separate trustee or co-trustee or separate collateral agent or co-collateral agent;



(ii)

no trustee or collateral agent hereunder shall be personally liable by reason of any act or omission of any other trustee or collateral agent hereunder or under any Note Lien Security Document;



(iii)

any notice, request or other writing given to the Trustee or the Note Lien Collateral Agent shall be deemed to have been given to each of the then separate trustees and co-trustees (or separate collateral agent or co-collateral agent), as effectively as if given to each of them.

Section 10.02    Equal and Ratable Sharing of Collateral by Holders of Note Lien Debt.

        Notwithstanding (1) anything to the contrary contained in the Note Lien Security Documents; (2) the time of incurrence of any Series of Note Lien Debt; (3) the order or method of attachment or perfection of any Liens securing any Series of Note Lien Debt; (4) the time or order of filing or recording of financing statements, mortgages or other documents filed or recorded to perfect any Lien upon any Collateral, (5) the time of taking possession or control over any Collateral, (6) that any Note Lien may not have been perfected or may be or have become subordinated, by equitable subordination or otherwise, to any other Lien or (7) the rules for determining priority under any law governing relative priorities of Liens:

        (A)  all Note Liens at any time granted by the Issuers or any Guarantor will secure, equally and ratably, all present and future Note Lien Obligations; and

        (B)  all Proceeds of all Note Liens at any time granted by the Issuers or any Guarantor will be allocated and distributed equally and ratably on account of the Note Lien Debt and other Note Lien Obligations.

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        This Section 10.02 is intended for the benefit of, and will be enforceable as a third party beneficiary by, each present and future holder of Note Lien Obligations, each present and future Note Lien Representative and the Note Lien Collateral Agent as holder of Note Liens. The Note Lien Representative of each future Series of Note Lien Debt will be required to deliver a Lien Sharing and Priority Confirmation to the Note Lien Collateral Agent and the Trustee at the time of incurrence of such Series of Note Lien Debt.

Section 10.03    Recording; Certificates and Opinions.

        (a)   The Issuers will furnish to the Trustee the opinions required by TIA §314(b). The Issuers will furnish to the Trustee the annual opinion required by TIA §314(b)(2) beginning November 1, 2006.

        (b)   To the extent applicable, the Issuers will cause TIA §313(b), relating to reports, and TIA §314(d), relating to the release of property or securities subject to the Lien of the Note Lien Security Documents, to be complied with. Any certificate or opinion required by TIA §314(d) may be made by an Officer of the Issuers except in cases where TIA §314(d) requires that such certificate or opinion be made by an independent Person, which Person will be an independent engineer, appraiser or other expert selected by or reasonably satisfactory to the Trustee. Notwithstanding anything to the contrary in this paragraph, the Issuers will not be required to comply with all or any portion of TIA §314(d) if it determines, in good faith based on advice of counsel (which may be internal counsel), that under the terms of TIA §314(d) and/or any interpretation or guidance as to the meaning thereof of the SEC and its staff, including "no action" letters or exemptive orders, all or any portion of TIA §314(d) is inapplicable to one or a series of released Collateral.

        (c)   If, in connection with any release of Collateral pursuant to this Indenture, the Issuers request that the Trustee and Note Lien Collateral Agent confirm such release or provide any release or termination statement with respect to such release, the Issuers will furnish to the Trustee and to the Note Lien Collateral Agent (i) any certificate or opinion required by TIA §314(d) as set forth in Section 10.03(b) hereof and (ii) an Opinion of Counsel to the effect that (A) the documents furnished pursuant to TIA §314(d) satisfy the requirements of TIA §314(d) or that no such documents are required by TIA §314(d) in connection with such release, and (B) all conditions precedent to the release of Collateral in the Indenture, the Note Lien Security Documents and the Intercreditor Agreement have been complied with, and such release complies with the foregoing requirements. Upon receipt of the foregoing, the Trustee and the Note Lien Collateral Agent will provide such requested confirmation or release or termination statement. The Trustee and the Note Lien Collateral Agent may, to the extent permitted by Sections 7.01 and 7.02 hereof, accept as conclusive evidence of compliance with this Section 10.03 the appropriate statements contained in such documents and such Opinion of Counsel.

Section 10.04    Freedom to Deal.

        So long as the Note Lien Collateral Agent has not exercised its rights with respect to Collateral upon the occurrence and during the continuance of an Event of Default, the Issuers and the Guarantors will have the right, as against the Note Lien Collateral Agent, the Note Lien Representatives, the Holders and any holders of other Note Lien Obligations:

(1)

to remain in possession and retain exclusive control of the Collateral; to conduct ordinary course activities with respect to the Collateral; to acquire, manufacture, process and sell Inventory and collect Receivables and expend the proceeds thereof; to operate, alter or repair the Collateral; and to collect, invest and dispose of any income therefrom; and



(2)

to sell or otherwise dispose of any property subject to the Note Liens, subject to the restrictions and obligations set forth in Sections 4.10, 5.01 and 11.05 hereof.

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Section 10.05    Enforcement of Note Liens.

        Upon the occurrence and during the continuance of an Event of Default, the Trustee may pursue any available remedy, including directing the Note Lien Collateral Agent to enforce the Note Liens securing the Notes, subject to the provisions of the Intercreditor Agreement and to Section 7.01 and 7.02 hereof; and the Trustee will be subject to such instructions as may be given to it by the Holders of a majority in outstanding principal amount of the Notes to direct (and in its sole discretion and without the consent of the Holders may direct) on behalf of the Holders as the Note Lien Debt Representative with respect to the Notes, the Note Lien Collateral Agent to take all actions it deems necessary in order to:

(1)

foreclose upon or otherwise enforce any or all of the Note Liens;



(2)

enforce any of the terms of the Note Lien Security Documents; or



(3)

collect and receive payment of any and all of the Note Lien Obligations.

Section 10.06    Relative Rights.

        Nothing in the Note Lien Documents will:

(1)

impair, as between the Issuers and the Holders, the obligation of the Issuers to pay principal of, premium and interest and Additional Interest, if any, on the Notes in accordance with their terms or any other Obligation of the Issuers or any Guarantor



(2)

affect the relative rights of Holders as against any other creditors of the Issuers or any Guarantor (other than holders of Revolving Credit Liens, certain Permitted Liens or other Note Liens);



(3)

restrict the right of any Holder to sue for payments that are then due and owing (but not enforce any judgment in respect thereof against any Collateral to the extent specifically prohibited by Sections 2.3 and 2.5 of the Intercreditor Agreement);



(4)

restrict or prevent any Holder or any holder of other Note Lien Obligations, the Note Lien Collateral Agent or any Note Lien Representative from exercising any of its rights or remedies upon a Default or Event of Default not specifically restricted or prohibited by Sections 2.3 and 2.5 of the Intercreditor Agreement; or



(5)

restrict or prevent any Holder or any holder of other Note Lien Obligations, the Note Lien Collateral Agent or any Note Lien Representative from taking any lawful action in an insolvency or liquidation proceeding not specifically restricted or prohibited by Sections 2.3 and 2.5 of the Intercreditor Agreement.

Section 10.07    Authorization of Receipt of Funds by the Trustee Under the Note Lien Security Documents.

        The Trustee is authorized to receive any funds for the benefit of the Holders distributed under the Note Lien Security Documents, and to make further distributions of such funds to the Holders of Notes according to the provisions of this Indenture.

Section 10.08    Release of Liens in Respect of Notes.

        The Note Liens upon the Collateral will be released and no longer secure the Notes outstanding under this Indenture or any other Note Lien Obligations, and the right of the Holders or any holder of other Note Lien Obligations to the benefits and proceeds of the Note Liens on the Collateral will terminate and be discharged:

(1)

upon satisfaction and discharge of this Indenture pursuant to Article 12 hereof;



(2)

upon Legal Defeasance or Covenant Defeasance;

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(3)

upon payment in full of all Notes outstanding under this Indenture and all outstanding Note Lien Obligations due and payable under this Indenture at the time the Notes are paid in full and discharged;



(4)

in whole or in part, with the consent of the Holders of a majority in aggregate principal amount of the Notes in accordance with Section 9.02 hereof;



(5)

upon the taking of Collateral by eminent domain, condemnation or in similar circumstances;



(6)

in the case of Note Liens on Collateral owned by any Guarantor, upon the release of the Note Guarantee of such Guarantor in accordance with Section 11.06 hereof;



(7)

as to any Collateral that is sold, transferred or otherwise disposed of by the Issuers or any Guarantor to a Person that is not (either before or after such sale, transfer or disposition) the Issuers or a Restricted Subsidiary of the Issuers (i) in a transaction or other circumstance that is not prohibited by Section 4.10 hereof, at the time of such sale, transfer or other disposition or to the extent of the interest sold, transferred or otherwise disposed of or (ii) in connection with the enforcement of a Permitted Lien so long as the Lien attaches to the Proceeds of such enforcement action; provided that the Liens on the Collateral will not be released pursuant to clause (i) of this provision if the sale or disposition is subject to Section 5.01 or Section 11.05 hereof;



(8)

as to any Collateral owned by a Guarantor all of the Capital Stock of which is being sold, transferred or otherwise disposed of, to a Person that is not (either immediately before or after giving effect to such transaction) the Issuers or a Restricted Subsidiary in a transaction that is not prohibited by Section 4.10 hereof, at the time of such sale, transfer or other disposition;



(9)

as to any Revolving Credit Collateral securing Revolving Credit Obligations upon any release of such Collateral pursuant to the terms of the Revolving Credit Loan Documents; or



(10)

upon release of Collateral as provided in the Intercreditor Agreement.

        Any release of Collateral made in accordance with the provisions of this Section 10.08 or any Note Lien Security Document will be deemed not to impair the Liens in the Collateral not so released under this Indenture and the Note Lien Security Documents in contravention of the provisions hereof.

Section 10.09    Intercreditor Agreement; Lien Sharing.

        For the enforceable benefit of all holders of each existing and future Series of Revolving Credit Obligations and each existing and future Revolving Credit Collateral Agent, each Holder of a Note, by its acceptance thereof:

(1)

agrees that all Note Lien Obligations will be and are secured equally and ratably by all Note Liens at any time granted by the Issuers or any Guarantor to secure any Obligations in respect of the Notes and the related Guarantees thereof by the Guarantors, whether or not upon property otherwise constituting collateral for the Notes and the related Guarantees thereof by the Guarantors, and that all such Note Liens will be enforceable by the Note Lien Collateral Agent for the benefit of all holders of Note Lien Obligations equally and ratably;



(2)

agrees that the holders of Obligations in respect of the Notes and the related Guarantees thereof by the Guarantors are bound by the provisions of the Intercreditor Agreement, including the provisions therein relating to the ranking of Note Liens; and

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(3)

consents to and directs the Note Lien Collateral Agent to perform its obligations under the Intercreditor Agreement and the other Note Lien Security Documents.

Section 10.10    Sufficiency of Release.

        All purchasers and grantees of any Collateral purporting to be released will be entitled to rely upon any release executed by the Note Lien Collateral Agent or the Trustee as sufficient for the purpose of this Indenture and the Note Lien Security Documents and as constituting a good and valid release of the Collateral therein described from the Lien of this Indenture and the Note Lien Security Documents.

ARTICLE 11
NOTE GUARANTEES

Section 11.01    Guarantee.

        (a)   Subject to this Article 11, each of the Guarantors hereby, as primary obligor and not merely as surety, jointly and severally, fully and unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Issuers hereunder or thereunder, that:

(1)

the principal of, premium and Additional Interest, if any, and interest on, the Notes will be promptly paid in full when due, whether at Stated Maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other monetary obligations of the Issuers to the Holders or the Trustee hereunder whether for payment of principal of or interest on the Notes, expenses, indemnification or otherwise, or thereunder will be punctually paid in full, all in accordance with the terms hereof and thereof; and



(2)

in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be punctually paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.

        Failing payment when due of any amount so guaranteed for whatever reason, the Guarantors will be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.

        Each Guarantor, pursuant to its Note Guarantee, also hereby agrees to pay any and all reasonable out-of-pocket expenses (including reasonable counsel fees and expenses) incurred by the Trustee or the Holders in enforcing any rights under its Note Guarantee.

        (b)   The Guarantors hereby agree that (to the fullest extent permitted by law) their obligations hereunder are unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuers, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives (to the fullest extent permitted by law) diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuers, any right to require a proceeding first against the Issuers, protest, notice and all demands whatsoever and covenant (except as otherwise provided in Section 11.06 hereof) that this Note Guarantee will not be discharged except by complete performance of the monetary obligations contained in the Notes and this Indenture.

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        (c)   If any Holder or the Trustee is required by any court or otherwise to return to the Issuers, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuers or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, will be reinstated in full force and effect.

        (d)   Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees (to the fullest extent permitted by law) that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors will have the right to seek contribution from the Issuers any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Note Guarantee.

Section 11.02    [Intentionally Omitted]

Section 11.03    Limitation on Guarantor Liability.

        Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or fraudulent conveyance for purposes of Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will be limited to the maximum amount that will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or fraudulent conveyance. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that its Note Guarantee, and the waiver set forth in Section 11.01(d), are knowingly made in contemplation of such benefits.

Section 11.04    Delivery of Note Guarantee.

        The delivery of any Note by the Trustee, after the authentication thereof hereunder, will constitute due delivery of the Note Guarantee set forth in this Indenture or any supplemental indenture on behalf of the Guarantors. Neither the Issuers nor any Guarantor shall be required to make a notation on the Notes to reflect any Note Guarantee or any such release, termination or discharge thereof.

        The Issuers shall cause each Restricted Subsidiary that is required to become a Guarantor pursuant to Section 4.18, and each Subsidiary of the Issuers that the Issuers cause to become a Guarantor pursuant to Section 4.18, to promptly execute and deliver to the Trustee a Supplemental Indenture substantially in the form set forth in Exhibit E to this Indenture, or otherwise in form and substance reasonably satisfactory to the Trustee, evidencing its Note Guarantee on substantially the terms set forth in this Article 11.

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Section 11.05    Guarantors May Consolidate, etc., on Certain Terms.

        Except as otherwise provided in this Section 11.05 and Section 11.06, the Issuers will not permit any Guarantor to consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its assets to, any Person unless:

(1)

the resulting, surviving or transferee Person (the "Successor Guarantor") will be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and such Person (if not such Guarantor) will expressly assume, this Indenture, the registration rights agreement (if applicable) and the Note Lien Security Documents pursuant to agreements reasonably satisfactory to the Trustee, all the obligations of such Guarantor under its Note Guarantee and the registration rights agreement (if applicable), respectively; and



(2)

immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Guarantor or any Restricted Subsidiary as a result of such transaction as having been incurred by the Successor Guarantor or such Restricted Subsidiary at the time of such transaction), no Default shall have occurred and be continuing.

Notwithstanding the foregoing, and except as set forth in Articles 4 and 5 hereof:

(a)

any Guarantor may consolidate with, merge into or transfer all or substantially all of its assets to the Issuers or any Restricted Subsidiary so long as such Restricted Subsidiary becomes a Guarantor and any Restricted Subsidiary other than a Guarantor may consolidate with, merge into or transfer all or substantially all of its assets to the Issuers or any other Restricted Subsidiary;



(b)

any Guarantor may merge with or into, or convey, transfer or lease all or substantially all its assets to, an Affiliate incorporated solely for the purpose of reincorporating or reforming such Guarantor in another jurisdiction; and



(c)

any Guarantor may consolidate with or merge with or into, or convey, transfer or lease all or substantially all of its assets so long as the transactions comply with the release provisions set forth Section 11.06.

        In case of any such consolidation, merger, conveyance, transfer or lease and upon the assumption by the successor Person, by such supplemental indenture, of such Note Guarantee, such successor Person will succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. All the Note Guarantees so issued will in all respects have the same legal rank and benefit under this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof.

        The Issuers may permit any Guarantor to consolidate or merge, or convey, transfer or lease all or substantially all of the assets of such Guarantor if such transaction would result in the release of the Note Guarantee of such Guarantor pursuant to Section 11.06 hereof.

Section 11.06    Releases.

        The Note Guarantee of a Guarantor will be released:

(1)

in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) any of the Issuers or their respective Restricted Subsidiaries, if the sale or other disposition complies with the provisions of Section 4.10 hereof;

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(2)

in connection with any sale or other disposition of all of the Capital Stock of that Guarantor to a Person that is not (either before or after giving effect to such transaction) any of the Issuers or their respective Restricted Subsidiaries, if the sale or other disposition complies with the provisions of Section 4.10 hereof;



(3)

if the Issuers designate any Restricted Subsidiary that is a Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of this Indenture;



(4)

upon legal defeasance of the Notes in accordance with Article 8 hereof or satisfaction and discharge of this Indenture in accordance with Article 12 hereof, each Guarantor will be released and relieved of any obligations under its Note Guarantee; and



(5)

with the consent of Holders of a majority in aggregate principal amount of Notes then outstanding in accordance with Article 9 hereof.

        Upon any such occurrence specified in this Section 11.06, the Trustee will execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee.

        Any Guarantor not released from its obligations under its Note Guarantee as provided in this Section 11.06 will remain liable for the full amount of principal of and interest and premium and Additional Interest, if any, on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11.

ARTICLE 12
SATISFACTION AND DISCHARGE

Section 12.01    Satisfaction and Discharge.

        This Indenture will be discharged and will cease to be of further effect as to all Notes issued hereunder, when:

(1)

either:



(a)

all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been deposited in trust and thereafter repaid to the Issuers, have been delivered to the Trustee for cancellation; or



(b)

all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Issuers or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Additional Interest, if any, and accrued interest to the date of maturity or redemption;



(2)

no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Issuers or any Guarantor is a party or by which the Issuers or any Guarantor is bound;

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(3)

the Issuers or any Guarantor has paid or caused to be paid all sums then payable by it under this Indenture; and



(4)

the Issuers have delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or on the redemption date, as the case may be.

In addition, the Issuers must deliver an Officer's Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

        Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section 12.01, the provisions of Sections 12.02 and 8.06 hereof will survive. In addition, nothing in this Section 12.01 will be deemed to discharge those provisions of Section 7.07 hereof, that, by their terms, survive the satisfaction and discharge of this Indenture.

Section 12.02    Application of Trust Money.

        Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 12.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuers acting as their own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium and Additional Interest, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

        If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 12.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuers' and any Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.01 hereof; provided that if the Issuers have made any payment of principal of, premium or Additional Interest, if any, or interest on, any Notes because of the reinstatement of its obligations, the Issuers shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent.

Section 12.03    Repayment to Company.

        Subject to applicable law, any money deposited with the Trustee or any Paying Agent, or then held by the Issuers, in trust for the payment of the principal of, premium or Additional Interest, if any, or interest on, any Note and remaining unclaimed for two years after such principal, premium or Additional Interest, if any, or interest has become due and payable shall be paid to the Issuers on its request or (if then held by the Company) will be discharged from such trust; and the Holder of such Note will thereafter be permitted to look only to the Issuers for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuers as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuers cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which will not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Issuers.

98

ARTICLE 13
MISCELLANEOUS

Section 13.01    Trust Indenture Act Controls.

        If any provision hereof limits, qualifies or conflicts with a provision of the TIA that is required under the TIA to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision shall be deemed (i) to apply to this Indenture as so modified or (ii) to be excluded, as the case may be.

Section 13.02    Notices.

        Any notice or communication by the Issuers, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or by first class mail (registered or certified, return receipt requested), facsimile transmission or overnight air courier guaranteeing next day delivery, to the others' address:

If to the Issuers and/or any Guarantor:

6 Brighton Road
Clifton, New Jersey 07015
Facsimile No.: (973) 815-2990
Attention: Chief Financial Officer

With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: (212) 309-6001
Attention: Robert G. Robison

If to the Trustee:
The Bank of New York
101 Barclay Street, 8W
New York New York 10286
Facsimile No.: (212) 815-5707
Attention: Corporate Trust Administration

        The Issuers, any Guarantor or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications.

        All notices and communications (other than those sent to Holders) will be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

        Any notice or communication to a Holder will be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication will also be so mailed to any Person described in TIA § 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it will not affect its sufficiency with respect to other Holders.

        If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

99

        If the Issuers mail a notice or communication to Holders, it will mail a copy to the Trustee and each Agent at the same time.

Section 13.03    Communication by Holders of Notes with Other Holders of Notes.

        Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Issuers, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

Section 13.04    Certificate and Opinion as to Conditions Precedent.

        Upon any request or application by the Issuers to the Trustee to take any action under this Indenture, the Issuers shall furnish to the Trustee:

(1)

an Officer's Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with; and



(2)

an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been complied with.

Section 13.05    Statements Required in Certificate or Opinion.

        Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA § 314(a)(4)) must comply with the provisions of TIA § 314(e) and must include:

(1)

a statement that the Person making such certificate or opinion has read such covenant or condition;



(2)

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



(3)

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



(4)

a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.

Section 13.06    Rules by Trustee and Agents.

        The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

Section 13.07    No Personal Liability of Directors, Officers, Employees and Stockholders.

        No director, officer, employee, incorporator or stockholder of the Issuers or any Guarantor, as such, will have any liability for any obligations of the Issuers or the Guarantors under the Notes, this Indenture, the Note Guarantees or the Note Lien Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws.

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Section 13.08    Governing Law.

        THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

Section 13.09    No Adverse Interpretation of Other Agreements.

        This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Issuers or their Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

Section 13.10    Successors.

        All agreements of the Issuers in this Indenture and the Notes will bind its successors. All agreements of the Trustee in this Indenture will bind its successors. All agreements of each Guarantor in this Indenture will bind its successors, except as otherwise provided in Section 11.05 hereof.

Section 13.11    Severability.

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

Section 13.12    Counterpart Originals.

        The parties may sign any number of copies of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement.

Section 13.13    Table of Contents, Headings, etc.

        The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and will in no way modify or restrict any of the terms or provisions hereof.

Section 13.14    Waiver of Jury Trial.

        THE ISSUERS, THE GUARANTORS AND THE TRUSTEE HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN CONNECTION WITH THE INDENTURE, THE NOTES AND THE NOTE GUARANTEES.

[Signatures on following page]

101

SIGNATURES

Dated as of February 14, 2006

LINENS 'N THINGS, INC.
By:	Name: Title:
LINENS 'N THINGS CENTER, INC.
By:	Name: Title:
LINENS HOLDING CO.
By:	Name: Title:
BLOOMINGTON, MN., L.T., INC.
By:	Name: Title:
VENDOR FINANCE, LLC
By:	Name: Title:
LNT, INC.
By:	Name: Title:

LNT SERVICES, INC.
By:	Name: Title:
LNT LEASING II, INC.
By:	Name: Title:
LNT WEST, INC.
By:	Name: Title:
LNT VIRGINIA LLC
By:	Name: Title:
LNT MERCHANDISING COMPANY LLC
By:	Name: Title:
LNT LEASING III, LLC
By:	Name: Title:
CITADEL LNT, LLC
By:	Name: Title:
THE BANK OF NEW YORK, as Trustee
By:	Name: Title:

EXHIBIT A

[Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture]

[Insert the Private Placement Legend, if applicable pursuant to the provisions of the Indenture]

[Face of Note]

	CUSIP/CINS
Senior Secured Floating Rate Notes due 2014
No.	$

LINENS 'N THINGS, INC.

AND

LINENS 'N THINGS CENTER, INC.

promises to pay to              or registered assigns,

the principal sum of                                                             DOLLARS on January 15, 2014.

Interest Payment Dates: January 15, April 15, July 15 and October 15

Record Dates: January 1, April 1, July 1 and October 1

Dated:                              

LINENS 'N THINGS, INC.
By:
	Name:
	Title:
LINENS 'N THINGS CENTER, INC.
By:
	Name:
	Title:

This is one of the Notes referred to in the within-mentioned Indenture:

THE BANK OF NEW YORK,   as Trustee
By:	Authorized Signatory

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[Back of Note]
Senior Secured Floating Rate Notes due 2014

        Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

        (1)   INTEREST. Linens 'n Things, Inc., a Delaware corporation and Linens 'n Things Center, Inc., a California corporation (together, the "Issuers") promise to pay interest on the principal amount of this Note at a rate equal to the Applicable Eurodollar Rate (as defined in the Indenture) in effect from time to time per annum from [                        , 20    ] until maturity and shall pay the Additional Interest, if any, payable pursuant to the Registration Rights Agreement referred to below. Notwithstanding the foregoing, in no event will the interest on the principal amount of this Note be higher than the maximum rate permitted by New York law as the same may be modified by U.S. law of general application. The Issuers will pay interest and Additional Interest, if any, quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be [April 15, 2006](1) [                        , 20    ](2). The Issuers will pay interest (including post-petition interest in any proceeding under any Bankruptcy Code) on overdue principal and premium, if any, from time to time on demand at the rate then in effect to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Code) on overdue installments of interest and Additional Interest, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

(1)

Include only for Notes issued on the Closing Date.

(2)

For any Additional Notes, insert the Interest Payment Date immediately preceding the date of issuance of such Additional Notes, or if the date of issuance of such Additional Notes is an Interest Payment Date, such date of issuance.

        (2)   METHOD OF PAYMENT. The Issuers will pay interest on the Notes (except defaulted interest) and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on the January 1, April 1, July 1 or October 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium and Additional Interest, if any, and interest at the office or agency of the Issuers maintained for such purpose, provided that payment by wire transfer of immediately available funds will be made with respect to principal of and interest, premium and Additional Interest, if any, on, all Global Notes and all other Notes the Holders of which will have provided wire transfer instructions to the Issuers or the Paying Agent, provided, further, that the Issuers reserve the right to pay interest and Additional Interest, if any, by check mailed directly to the Holders at their addresses set forth in the register of Holders maintained by the Registrar. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

        (3)   PAYING AGENT, REGISTRAR AND NOTE LIEN COLLATERAL AGENT. Initially, The Bank of New York, the Trustee under the Indenture, will act as Paying Agent, Registrar and Note Lien Collateral Agent. The Issuers may change any Paying Agent, Registrar or Note Lien

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Collateral Agent without notice to any Holder. The Issuers or any of their Subsidiaries may act in any such capacity.

        (4)   INDENTURE. The Issuers issued the Notes under an Indenture dated as of February 14, 2006 (the "Indenture") among the Issuers, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the TIA. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are senior secured obligations of the Issuers. The Indenture does not limit the aggregate principal amount of Notes that may be issued thereunder.

        (5)   OPTIONAL REDEMPTION.

        (a)   Except as set forth in subparagraph (b) of this Paragraph 5, the Issuers will not have the option to redeem the Notes prior to January 15, 2008. On or after January 15, 2008, the Issuers may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, on the Notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on January 15 of the years indicated below, subject to the rights of Holders of Notes on the relevant record date to receive interest on the relevant interest payment date:

Year	Percentage
2008	102.00	%
2009	101.00	%
2010 and thereafter	100.00	%

        Any such redemption and notice thereof may, in the Issuers' discretion, be subject to the satisfaction of one or more conditions precedent.

        Unless the Issuers default in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

        (b)   Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to January 15, 2008, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under the Indenture at a redemption price of 100% plus the Applicable Eurodollar Rate then in effect of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date, with the net cash proceeds of an Equity Offering of the Company or Parent; provided that: (1) at least 65% of the aggregate principal amount of Notes originally issued under the Indenture (excluding Notes held by the Issuers and their respective Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and (2) the redemption occurs within 90 days of the date of the closing of such initial public offering.

        In addition, at any time prior to January 15, 2008, the Issuers may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at a redemption price of 100% plus the Applicable Premium, plus accrued and unpaid interest and Additional Interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date).

        (6)   MANDATORY REDEMPTION.

        The Issuers are not required to make mandatory redemption or sinking fund payments with respect to the Notes.

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        (7)   REPURCHASE AT THE OPTION OF HOLDER.

        (a)   Upon the occurrence of a Change of Control, each Holder will have the right to require the Issuers to repurchase all or any part (equal to $2,000 or a larger integral multiple of $1,000) of such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase (subject to the rights of Holders of record on the relevant record date to receive interest and Additional Interest, if any, due on the relevant interest payment date), as and to the extent provided in the Indenture. Within 20 days following any Change of Control, the Issuers shall mail a notice to each Holder with a copy to the Trustee as required by the Indenture.

        (b)   Under the circumstances provided in Section 4.10 of the Indenture, the Issuers will be required to purchase Notes tendered pursuant to an offer by the Issuers to the Holders for the Notes at a purchase price of 100% of their principal amount plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest and Additional Interest, if any, due on the relevant interest payment date) in accordance with the procedures set forth in the Indenture and subject to the provisions of Section 4.10 of the Indenture. Holders of Notes that are the subject of an offer to purchase may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" attached to the Notes.

        (8)   NOTICE OF REDEMPTION. Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indenture. Notices of redemption may not be conditional. Notes in denominations larger than $2,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed.

        (9)   DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in fully registered form, without coupons, in denominations of $2,000 and larger integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Issuers may require a Holder to pay any taxes required by law or permitted by the Indenture. The Issuers need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Issuers need not transfer or exchange any Note for a period of 15 days prior to a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.

        (10) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes.

        (11) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes or the Note Guarantees may be amended or supplemented with the written consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding including Additional Notes, if any, voting as a single class, and any existing Default or Event of Default or compliance with any provision of the Indenture or the Notes or the Note Guarantees may be waived with the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding including Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes or the Note Guarantees may be amended or supplemented to cure any ambiguity, omission, defect or inconsistency, provide for uncertificated Notes in addition to or in place of certificated Notes (provided, however,

A-4

that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code), provide for the assumption of the Issuers' or a Guarantor's obligations to the Holders of Notes and Note Guarantees in the case of a merger or consolidation or sale, conveyance, transfer or lease of all or substantially all of the Issuers' or such Guarantor's assets, as applicable, make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder, comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA, conform the text of the Indenture, the Note Guarantees or the Notes to any provision of the "Description of Notes" section of the Offering Memorandum, to the extent that such provision in that Description of Notes was intended to be a verbatim recitation of a provision of the Indenture, provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date of the Indenture, to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes or to add a Lien on additional Collateral to secure the Notes or the Guarantees, or make, complete or confirm any grant of Collateral permitted or required by the Indenture or any of the Note Lien Security Documents, including adding any additional assets as Collateral, or any release of Collateral in accordance with the Indenture or any of the Note Lien Security Documents.

        (12) DEFAULTS AND REMEDIES. Events of Default include: (i) a default for 30 days in the payment when due of interest on, or Additional Interest, if any, with respect to, a Note; (ii) a default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, any Note; (iii) the failure by the Issuers or any of their respective Restricted Subsidiaries to comply with Sections 4.10, 4.15 or 5.01 of the Indenture; (iv) the failure by the Issuers or any of their respective Restricted Subsidiaries for 30 days after notice to the Issuers by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the agreements described Sections 4.07 or 4.09 of the Indenture; (v) the failure by the Issuers or any of their respective Restricted Subsidiaries for 60 days after notice to the Issuers by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the other agreements in the Indenture; (vi) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Issuers or any of their respective Restricted Subsidiaries (or the payment of which is guaranteed by the Issuers or any of their respective Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after the Closing Date, if that default: (a) is caused by a failure to pay principal of, or interest or premium, if any, on, such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or (b) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more; (v) certain events of bankruptcy or insolvency with respect to the Issuers or a Significant Subsidiary; (vi) certain judgments for the payment of money aggregating in excess of $10.0 million that remain undischarged for a period of 60 days; (vii) except as permitted by the Indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect, or any Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee; and (viii) the occurrence of any of the following: (A) except as permitted by the Indenture, any Note Lien Security Document is held in to be unenforceable or invalid by a court of competent jurisdiction or otherwise ceases for any reason to be fully enforceable for a period of 30 days after notice thereof is delivered to the Issuers by the Trustee or the Holders of at least 25% in

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aggregate principal amount of Notes then outstanding (subject to certain exceptions specified in the Indenture), (B) any Note Lien purported to be granted under any Note Lien Security Document on Collateral, individually or in the aggregate, having a Fair Market Value in excess of $20.0 million ceases to be an enforceable and perfected Priority Lien or Junior Lien, as and to the extent required by the applicable Note Lien Security Documents, for a period of 30 days after notice thereof is delivered to the Issuers by the Trustee or the Holders of at least 25% in aggregate principal amount of Notes then outstanding; or (C) the Issuers or any Guarantor, or any Person acting on behalf of any of them, denies or disaffirms, in writing, any obligation of the Issuers or any Guarantor set forth in or arising under any Note Lien Security Document, except to the extent of any Note Lien purported to be granted thereunder which purports to encumber Collateral that has been released in accordance with the terms of the Indenture and the Note Lien Security Documents. However, a default under clause (iii) above will not constitute an Event of Default until the Trustee notifies the Issuers or the Holders of at least 25% in principal amount of the outstanding Notes notify the Issuers and the Trustee of the default and the Issuers or the relevant Guarantor, as applicable, does not cure such default within the time specified in clause (iii) above after receipt of such notice. If any Event of Default (other than an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Issuers) occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately.

        (13) Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or premium or Additional Interest, if any,) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of the Holders of all of the Notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Issuers are required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuers are required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

        (14) TRUSTEE DEALINGS WITH ISSUERS. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Issuers or their Affiliates, and may otherwise deal with the Issuers or their Affiliates, as if it were not the Trustee.

        (15) NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or stockholder of the Issuers or any Guarantor, as such, will have any liability for any obligations of the Issuers or the Guarantors under the Notes, the Indenture, the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

        (16) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent.

        (17) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

A-6

        (18) [ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes will have all the rights set forth in the Registration Rights Agreement dated as of February 14, 2006, among Linens 'n Things, Inc., a Delaware corporation, Linens 'n Things Center, a California corporation, the Guarantors party thereto and the other parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes will have the rights set forth in one or more registration rights agreements, if any, among the Issuers, the Guarantors and the other parties thereto, relating to rights given by the Issuers and the Guarantors to the purchasers of any Additional Notes (collectively, the "Registration Rights Agreement").](3)

(3)

Include for any Note other than an Exchange Note.

        (19) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuers have caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon.

        (20) GOVERNING LAW. THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

        The Issuers will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to:

Linens 'n Things, Inc.
6 Brighton Road
Clifton, New Jersey 07015
Attention: Chief Financial Officer

A-7

ASSIGNMENT FORM

        To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:	(Insert assignee's legal name)
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)

and irrevocably appoint                                                                                          to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:
	Your Signature:
	(Sign exactly as your name appears on the face of this Note)

Signature Guarantee*:

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

A-8

OPTION OF HOLDER TO ELECT PURCHASE

        If you want to elect to have this Note purchased by the Issuers pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below:

Section 4.10 —Section 4.15

        If you want to elect to have only part of the Note purchased by the Issuers pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased:

$                             

Date:
	Your Signature:
	(Sign exactly as your name appears on the face of this Note)

Tax Identification No.:

Signature Guarantee*:

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

A-9

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*

        The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange
Amount of
decrease in
Principal Amount
of
this Global Note Amount of
increase in
Principal Amount
of
this Global Note Principal Amount
of this Global Note
following such
decrease
(or increase) Signature of
authorized officer
of Trustee or
Custodian

*

This schedule should be included only if the Note is issued in global form.

A-10

EXHIBIT B

FORM OF CERTIFICATE OF TRANSFER

Linens 'n Things, Inc.
Linens 'n Things Center, Inc.
6 Brighton Road
Clifton, New Jersey 07015

The Bank of New York
[                        ]
[                        ]

        Re: Senior Secured Floating Rate Notes due 2014

        Reference is hereby made to the Indenture, dated as of February 14, 2006 among Linens 'n Things, Inc., a Delaware corporation (the "Company"), Linens 'n Things Center, Inc. (together with the Company, the "Issuers"), the Guarantors party thereto and The Bank of New York, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                , (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $                        in such Note[s] or interests (the "Transfer"), to                        (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:

[CHECK ALL THAT APPLY]

        1.     Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Restricted Definitive Note pursuant to Rule 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

        2.     Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Note or a Restricted Definitive Note pursuant to Regulation S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account

B-1

or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act.

        3.     Check and complete if Transferee will take delivery of a beneficial interest in the IAI Global Note or a Restricted Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):

        (a)   such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;

or

        (b)   such Transfer is being effected to the Issuers or a subsidiary thereof;

or

        (c)   such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act;

or

        (d)   such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144, Rule 903 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) an opinion of counsel (which opinion and counsel are reasonably satisfactory to the Issuers and the Trustee) provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Restricted Definitive Notes and in the Indenture and the Securities Act.

        4.     Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.

        (a)   Check if Transfer is pursuant to Rule 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

B-2

        (b)   Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.

        (c)   Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.

        This certificate and the statements contained herein are made for your benefit and the benefit of the Issuers.

	[Insert Name of Transferor]
	By:
		Name:
		Title:
Dated:

B-3

ANNEX A TO CERTIFICATE OF TRANSFER

1.

The Transferor owns and proposes to transfer the following:

[CHECK ONE OF (a) OR (b)]

(a)

a beneficial interest in the:



(i)

144A Global Note (CUSIP                        ), or



(ii)

Regulation S Global Note (CUSIP                        ), or



(iii)

IAI Global Note (CUSIP                        ); or



(b)

a Restricted Definitive Note.

2.

After the Transfer the Transferee will hold:

[CHECK ONE]

(a)

a beneficial interest in the:



(i)

144A Global Note (CUSIP                        ), or



(ii)

Regulation S Global Note (CUSIP                        ), or



(iii)

IAI Global Note (CUSIP                        ); or



(iv)

Unrestricted Global Note (CUSIP                        ); or



(b)

a Restricted Definitive Note; or



(c)

an Unrestricted Definitive Note, in accordance with the terms of the Indenture.

B-4

EXHIBIT C

FORM OF CERTIFICATE OF EXCHANGE

Linens 'n Things, Inc.
Linens 'n Things Center, Inc.
6 Brighton Road
Clifton, New Jersey 07015

The Bank of New York
[                        ]
[                        ]

Re:

Senior Secured Floating Rate Notes due 2014

        Reference is hereby made to the Indenture, dated as of February 14, 2006 among Linens 'n Things, Inc., a Delaware corporation (the "Company"), Linens 'n Things Center, Inc. (together with the Company, the "Issuers"), the Guarantors party thereto and The Bank of New York, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

                                             , (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $                  in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that:

        1.     Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note

        (a)   Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial interest in an Unrestricted Global Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

        (b)   Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

        (c)   Check if Exchange is from Restricted Definitive Note to beneficial interest in an Unrestricted Global Note. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such

C-1

Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

        (d)   Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.

        2.     Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes

        (a)   Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted Definitive Note. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.

        (b)   Check if Exchange is from Restricted Definitive Note to beneficial interest in a Restricted Global Note. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] 144A Global Note, Regulation S Global Note, IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.

        This certificate and the statements contained herein are made for your benefit and the benefit of the Issuers.

	[Insert Name of Transferor]
	By:	Name: Title:
Dated:

C-2

FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR

Linens 'n Things, Inc.
Linens 'n Things Center, Inc.
6 Brighton Road
Clifton, New Jersey 07015

The Bank of New York
[                        ]
[                        ]

Re:

Senior Secured Floating Rate Notes due 2014

        Reference is hereby made to the Indenture, dated as of February 14, 2006 among Linens 'n Things, Inc., a Delaware corporation (the "Company"), Linens 'n Things Center, Inc. (together with the Company, the "Issuers"), the Guarantors party thereto and The Bank of New York, as trustee (the "Trustee"). Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

        In connection with our proposed purchase of $                  aggregate principal amount of:

        (a)   a beneficial interest in a Global Note, or

        (b)   a Definitive Note,

        we confirm that:

        1.     We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act").

        2.     We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Issuers or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and an opinion of counsel (which opinion and counsel are reasonably satisfactory to the Issuers and the Trustee) to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any Person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein.

        3.     We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Issuers such certifications, legal opinions and other information as you and the Issuers may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect.

C-3

        4.     We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment.

        5.     We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion.

        You and the Issuers are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.

	[Insert Name of Accredited Investor]
	By:	Name: Title:
Dated:

C-4

[FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS]

SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of                        , 200    , among                        (the "New Guarantor"), Linens 'n Things, Inc. (or its permitted successor), a Delaware corporation (the "Company"), Linens 'n Things Center, Inc. (or its permitted successor), a California corporation (together with the Company, the "Issuers"), the other Guarantors (as defined in the Indenture referred to herein) and The Bank of New York, as trustee under the Indenture referred to below (the "Trustee").

W I T N E S S E T H

        WHEREAS, the Issuers and other Guarantors have heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of February 14, 2006 providing for the issuance of Senior Secured Floating Rate Notes due 2014 (the "Notes");

        WHEREAS, the Indenture provides that under certain circumstances the New Guarantor shall execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor shall unconditionally guarantee all of the Issuers' Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Note Guarantee"); and

        WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

        NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

        1.     Capitalized Terms.    Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

        2.     Agreement to Guarantee.    The NEW GUARANTOR hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Indenture including but not limited to Article 11 thereof.

        3.     No Recourse Against Others.    No past, present or future director, officer, employee, incorporator, stockholder or agent of the New Guarantor, as such, shall have any liability for any obligations of the Company or any New Guarantor under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

        4.     GOVERNING LAW.    THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

        5.     Counterparts.    The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

        6.     Effect of Headings.    The Section headings herein are for convenience only and shall not affect the construction hereof.

        7.     The Trustee.    The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the New Guarantor and the Issuers.

        IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.

[NEW GUARANTOR]
By:	Name: Title:
[LINENS 'N THINGS, INC.]
By:	Name: Title:
[LINENS 'N THINGS CENTER, INC.]
By:	Name: Title:
[EXISTING GUARANTORS]
By:	Name: Title:
THE BANK OF NEW YORK,     as Trustee
By:	Authorized Signatory

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INDENTURE Dated as of February 14, 2006
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
ARTICLE 2 THE NOTES
ARTICLE 3 REDEMPTION AND PREPAYMENT
ARTICLE 4 COVENANTS
ARTICLE 5 SUCCESSORS
ARTICLE 6 DEFAULTS AND REMEDIES
ARTICLE 7 TRUSTEE
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER
ARTICLE 10 COLLATERAL AND SECURITY
ARTICLE 11 NOTE GUARANTEES
ARTICLE 12 SATISFACTION AND DISCHARGE
ARTICLE 13 MISCELLANEOUS

EX-4.3

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Exhibit 4.3

EXECUTION COPY

REGISTRATION RIGHTS AGREEMENT

Dated as of February 14, 2006
by and among

LINENS 'N THINGS, INC.

LINENS 'N THINGS CENTER, INC.

THE GUARANTORS LISTED ON SCHEDULE I HERETO

and

BEAR, STEARNS & CO. INC.
UBS SECURITIES LLC

        This Registration Rights Agreement (this "Agreement") is made and entered into as of February 14, 2006, by and among Linens 'n Things, Inc., a Delaware corporation (the "Company"), Linens 'n Things Center, Inc., a California corporation (the "Center" and together with the Company, the "Issuers"), the guarantors listed on Schedule I hereto (the "Guarantors") and Bear, Stearns & Co. Inc. and UBS Securities LLC (each an "Initial Purchaser" and, together, the "Initial Purchasers"), who have agreed to purchase the Issuers' Senior Secured Floating Rate Notes due 2014 (the "Initial Notes") pursuant to the Purchase Agreement (as defined below).

        This Agreement is made pursuant to the Purchase Agreement, dated February 8, 2006 between Linens Merger Sub Co., a Delaware corporation, and the Initial Purchasers, as amended by the Joinder Agreement dated as of the date hereof among the Issuers and the Guarantors (together, the "Purchase Agreement"). In order to induce the Initial Purchasers to purchase the Initial Notes, the Issuers and the Guarantors have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 8 of the Purchase Agreement.

        Capitalized terms used herein and not otherwise defined shall have the meaning assigned to them in the Indenture, dated as of February 14, 2006 (the "Indenture"), among the Issuers, the Guarantors and The Bank of New York, as trustee, as amended, relating to the Initial Notes and the Exchange Notes (as defined below).

        The parties hereby agree as follows:

SECTION 1. DEFINITIONS

        As used in this Agreement, the following capitalized terms shall have the following meanings:

        Act:    The Securities Act of 1933, as amended.

        Additional Interest:    As defined in Section 5 hereof.

        Affiliate:    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," as used with respect to any Person, means 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. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings.

        Broker-Dealer:    Any broker or dealer registered under the Exchange Act.

        Business Day:    Any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York or at a place of payment are authorized by law, regulation or executive order to remain closed.

        Closing Date:    The date hereof.

        Commission:    The U.S. Securities and Exchange Commission.

        Consummate:    An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof and (c) the delivery by the Issuers to the Registrar (as defined in the Indenture) under the Indenture of Exchange Notes in the same aggregate principal amount as the aggregate principal amount of Initial Notes that were tendered by Holders thereof pursuant to the Exchange Offer.

        Consummation Deadline:    As defined in Section 3(b) hereof.

        Exchange Act:    The Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated by the Commission thereunder.

        Exchange Notes:    The Issuers' Senior Secured Floating Rate Notes due 2014 and the related guarantees to be issued pursuant to the Indenture (i) in the Exchange Offer or (ii) as contemplated by Section 4 hereof.

        Exchange Offer:    The exchange and issuance by the Issuers of a principal amount of Exchange Notes (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding principal amount of Initial Notes that are tendered by such Holders in connection with such exchange and issuance.

        Exchange Offer Effectiveness Deadline:    As defined in Section 3(a) hereof.

        Exchange Offer Registration Statement:    The Registration Statement relating to the Exchange Offer, including the related Prospectus.

        Filing Deadline:    As defined in Section 3(a) hereof.

        Holders:    As defined in Section 2 hereof.

        Indemnified Holder:    As defined in Section 8(a) hereof.

        indemnified party:    As defined in Section 8(c) hereof.

        indemnified person:    As defined in Section 8(c) hereof.

        Person:    Any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

        Prospectus:    The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus.

        Recommencement Date:    As defined in Section 6(d) hereof.

        Registration Default:    As defined in Section 5 hereof.

        Registration Statement:    Any registration statement of the Issuers and the Guarantors relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, that is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein and all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein.

        Rule 144:    Rule 144 promulgated under the Act.

        Shelf Filing Deadline:    As defined in Section 4(a) hereof.

        Shelf Registration Statement:    As defined in Section 4 hereof.

        Shelf Registration Statement Effectiveness Deadline:    As defined in Section 4(a) hereof.

        Suspension Notice:    As defined in Section 6(d) hereof.

        TIA:    The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb), as amended.

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        Transfer Restricted Securities:    Each Initial Note until the earliest to occur of (a) the date on which such Initial Note has been exchanged by a Person other than a Broker-Dealer for an Exchange Note in the Exchange Offer, (b) following the exchange by a Broker-Dealer in the Exchange Offer of an Initial Note for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such Broker-Dealer on or prior to the date of such sale a copy of the Prospectus contained in the Exchange Offer Registration Statement, (c) the date on which such Initial Note has been effectively registered under the Act and disposed of in accordance with the Shelf Registration Statement or (d) the date on which such Initial Note is distributed to the public pursuant to Rule 144.

SECTION 2. HOLDERS

        A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities.

SECTION 3. REGISTERED EXCHANGE OFFER

        (a)   Unless the Exchange Offer shall not be permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a)(i) below have been complied with), the Issuers and the Guarantors shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission on or prior to 150 days after the Closing Date (such 150th day being the "Filing Deadline"), (ii) use all of their respective commercially reasonable efforts to cause such Exchange Offer Registration Statement to become effective on or prior to 240 days after the Closing Date (such 240th day being the "Exchange Offer Effectiveness Deadline"), (iii) in connection with the foregoing, use their respective commercially reasonable efforts to (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Exchange Notes to be made under the blue sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer; provided, however, that neither the Issuers nor the Guarantors shall be required to take any action that would subject them to general service of process or taxation in any jurisdiction where they are not already so subject, and (iv) as promptly as practicable after the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The 150 and 240 day periods referred to in clause (i) and (ii) of this Section 3(a) shall not include any period in which the Issuers are pursuing a Commission decision in accordance with the provisions of Section 6(a)(i) hereof. The Exchange Offer shall be on the appropriate form permitting (i) registration of the Exchange Notes to be offered in exchange for the Transfer Restricted Securities and (ii) resales of Exchange Notes by Broker-Dealers that tendered into the Exchange Offer Initial Notes that such Broker-Dealer acquired for its own account as a result of market-making activities or other trading activities (other than Initial Notes acquired directly from the Issuers or any of their Affiliates) as contemplated by Section 3(c) below.

        (b)   Unless the Exchange Offer shall not be permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a)(i) below have been complied with), the Issuers and the Guarantors shall use all of their respective commercially reasonable efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 Business Days. The Issuers and the Guarantors shall cause the Exchange Offer to comply in all material respects with all applicable federal and state securities laws. No securities other than the Exchange Notes shall be included in the Exchange Offer Registration Statement. The Issuers and the Guarantors shall use all of their respective commercially reasonable efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration

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Statement has become effective, but in no event later than 30 Business Days thereafter, or longer, if required by the federal securities laws (such 30th (or longer) Business Day being the "Consummation Deadline").

        (c)   The Issuers and the Guarantors shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Initial Notes that are Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Issuers or any Affiliate of the Issuers), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Initial Notes held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. See the Shearman & Sterling no-action letter (available July 2, 1993).

        Because such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with its initial sale of any Exchange Notes received by such Broker-Dealer in the Exchange Offer, the Issuers and Guarantors shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement. To the extent necessary to ensure that the Prospectus contained in the Exchange Offer Registration Statement is available for sales of Exchange Notes by Broker-Dealers, the Issuers and the Guarantors agree to use all of their respective commercially reasonable efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by and subject to the provisions of Sections 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 180 days from the Consummation Deadline or such shorter period ending on the date when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto. The Issuers and the Guarantors shall provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers, promptly upon reasonable request at any time during such period.

SECTION 4. SHELF REGISTRATION

        (a)   Shelf Registration.    If (i) the Issuers and the Guarantors are not (A) required to file the Exchange Offer Registration Statement or (B) permitted to Consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the Issuers and the Guarantors have complied with the procedures set forth in Section 6(a)(i) below) or (ii) any Holder of Transfer Restricted Securities notifies the Issuers prior to 20 Business Days following Consummation of the Exchange Offer that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer, (B) such Holder may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Initial Notes acquired directly from the Issuers or any of their Affiliates, then the Issuers and the Guarantors shall:

        (x)   use all of their respective commercially reasonable efforts on or prior to 30 days after the earlier of (i) the date as of which the Issuers determine that the Exchange Offer Registration Statement will not be or cannot be, as the case may be, filed as a result of clause (a)(i) above and (ii) the date on which the Issuers receive the notice specified in clause (a)(ii) above (such earlier date, the "Shelf Filing Deadline"); provided that such Shelf Filing Deadline shall not be earlier than 150 days after the date of this Agreement, to file a shelf registration statement pursuant to

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Rule 415 under the Act (which may be an amendment to the Exchange Offer Registration Statement (the "Shelf Registration Statement")), relating to all Transfer Restricted Securities of Holders that have provided the information required pursuant to Section 4(b) hereof; and

        (y)   use all of their respective commercially reasonable efforts to cause such Shelf Registration Statement to become effective on or prior to 240 days after the Shelf Filing Deadline (such 240th day, the "Shelf Registration Statement Effectiveness Deadline").

        If, after the Issuers and the Guarantors have filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Issuers and the Guarantors are required to file and make effective a Shelf Registration Statement solely because the Exchange Offer is not permitted as a result of the circumstances described under applicable federal law or Commission policy (i.e., clause (a)(i)(B) above), then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above; provided that, in such event, the Issuers and the Guarantors shall remain obligated to meet the Shelf Registration Statement Effectiveness Deadline.

        To the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Issuers and the Guarantors shall use all of their respective commercially reasonable efforts to keep any Shelf Registration Statement required by this Section 4(a) continuously effective, supplemented and amended as required by and subject to the provisions of Sections 6(b) and (c) hereof and in conformity in all material respects with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(d) hereof) following the Closing Date, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto.

        (b)   Provision by Holders of Certain Information in Connection with the Shelf Registration Statement.    No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until (i) such Holder furnishes to the Issuers in writing, within 20 days after receipt of a request therefor, the information specified in Item 507 or Item 508 of Regulation S-K, as applicable, of the Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary prospectus included therein, and (ii) in the case of an underwritten offering, such Holder completes and executes all questionnaires, powers of attorney, underwriting agreements, lock-up letters and other documents reasonably requested by the Issuers in connection with the terms of such underwritten offering. Furthermore, no Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Issuers in writing, within 10 Business Days after receipt of a request therefor, such Holder's comments to the disclosure relating to such Holder in the Shelf Registration Statement. No Holder of Transfer Restricted Securities shall be entitled to Additional Interest pursuant to Section 5 hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Issuers by such Holder not materially misleading.

SECTION 5. ADDITIONAL INTEREST

        Subject to the Issuers' rights set forth in Section 6(b)(iii) and 6(d) hereof, if (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline or Shelf Filing Deadline, as applicable, (ii) any of such Registration Statements is not declared effective by the Commission on or prior to the Exchange Offer Effectiveness Deadline or the Shelf Registration Statement Effectiveness Deadline, as applicable, (iii) the Exchange Offer has not

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been Consummated on or prior to the Consummation Deadline or (iv) any Shelf Registration Statement required by this Agreement is filed and declared effective but thereafter ceases to be usable for its intended purpose, without being succeeded within 10 Business Days by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective within such 10 Business Day period (each such event referred to in clauses (i) through (iv), a "Registration Default"), then the Issuers and the Guarantors hereby jointly and severally agree to pay to each Holder of Transfer Restricted Securities additional interest ("Additional Interest") in an amount equal to $0.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for the period of time that the Registration Default continues for the first 90-day period immediately following the occurrence of such Registration Default. The amount of the Additional Interest shall increase by an additional $0.05 per week per $1,000 principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until no Registration Default is in effect, up to a maximum amount of Additional Interest for all Registration Defaults of $0.20 per week per $1,000 principal amount of Transfer Restricted Securities; provided that the Issuers and the Guarantors shall in no event be required to pay Additional Interest for more than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the Additional Interest payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease on the date of such cure and the interest rate on such Transfer Restricted Securities will revert to the interest rate on such Transfer Restricted Securities prior to the applicable Registration Default.

        All accrued Additional Interest shall be paid to the Holders entitled thereto, in the manner provided for the payment of interest in the Indenture, on the next scheduled Interest Payment Date (as defined in the Indenture), as more fully set forth in the Indenture and the Notes. Notwithstanding the fact that any securities for which Additional Interest are due cease to be Transfer Restricted Securities, all obligations of the Issuers and the Guarantors to pay Additional Interest with respect to securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full.

        The amount of Additional Interest payable shall not increase because more than one Registration Default has occurred and is continuing, and a Holder of Initial Notes or Exchange Notes who is not entitled to the benefits of a Shelf Registration Statement shall not be entitled to Additional Interest with respect to a Registration Default that pertains to such Shelf Registration Statement.

        This Section 5 represents the sole monetary remedy to the Initial Purchasers and the Holders in connection with any failure by the Issuers and the Guarantors to comply with their obligations under Sections 3 and 4 hereof. Without limiting the remedies available to the Initial Purchasers and the Holders, the Issuers and the Guarantors acknowledge that any failure by the Issuers or the Guarantors to comply with their obligations under Sections 3 and 4 hereof may result in damages to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Issuers' and the Guarantors' obligations under Sections 3 and 4 hereof.

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SECTION 6. REGISTRATION PROCEDURES

        (a)   Exchange Offer Registration Statement.    In connection with the Exchange Offer, the Issuers and the Guarantors shall (x) comply with all applicable provisions of Section 6(c) below, (y) use all of their respective commercially reasonable efforts to effect such exchange and to permit the resale of Exchange Notes by Broker-Dealers that tendered in the Exchange Offer Initial Notes that such Broker-Dealer acquired for its own account as a result of its market-making activities or other trading activities (other than Initial Notes acquired directly from the Issuers or any of their Affiliates) being sold in accordance with the intended method or methods of distribution thereof set forth in the Registration Statement, and (z) comply with all of the following provisions:

        (i)    As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker-Dealer) shall furnish, upon the request of the Issuers, prior to the Consummation of the Exchange Offer, a written representation to the Issuers and the Guarantors (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Issuers, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business. As a condition to its participation in the Exchange Offer each Holder using the Exchange Offer to participate in a distribution of the Exchange Notes shall acknowledge and agree that, if the resales are of Exchange Notes obtained by such Holder in exchange for Initial Notes acquired directly from the Issuers or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K.

        (ii)   Prior to effectiveness of the Exchange Offer Registration Statement, the Issuers and the Guarantors shall provide a supplemental letter to the Commission (A) stating that the Issuers and the Guarantors are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993 and (B) including a representation that neither the Issuers has nor the Guarantors have entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of the Issuers' and the Guarantors' information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer.

        (b)   Shelf Registration Statement.    In connection with the Shelf Registration Statement, the Issuers and the Guarantors shall:

        (i)    comply with all the provisions of Section 6(c) below and use all of their respective commercially reasonable efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Issuers pursuant to Section 4(b) hereof),

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and pursuant thereto the Issuers and the Guarantors will prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof, and

        (ii)   issue, upon the request of any Holder or purchaser of Initial Notes covered by any Shelf Registration Statement contemplated by this Agreement; provided that such Holder provides all documentation reasonably requested by the Issuers in connection with such issuance, Exchange Notes having an aggregate principal amount equal to the aggregate principal amount of Initial Notes sold pursuant to the Shelf Registration Statement and surrendered to the Issuers for cancellation; the Issuers shall register Exchange Notes on the Shelf Registration Statement for this purpose and issue the Exchange Notes to the purchaser(s) of securities subject to the Shelf Registration Statement in the names as such purchaser(s) shall designate.

        (iii)  At any time after the effectiveness of the Shelf Registration Statement, if Issuers determine in good faith for valid business reasons not to disclose the existence of or facts surrounding any proposed or pending material corporate transaction or other material development involving the Issuers or the Guarantors, the Issuers may allow the Shelf Registration Statement to fail to be effective or the Prospectus contained therein to be unusable as a result of such nondisclosure for up to forty-five (45) days in any three-month period or ninety (90) days in any year during the two-year period of effectiveness required by Section 4 hereof and no Additional Interest shall become payable by the Issuers or the Guarantors as a result of any such Shelf Registration Statement failing to be effective or any such Prospectus being unusuable pursuant to this Section 6(b)(iii). Upon the occurrence of a transaction or development described above, the Issuers shall notify the Holders as promptly as practicable and, if requested by such Holders, confirm such notice in writing.

        (c)   General Provisions.    In connection with any Registration Statement and any related Prospectus required by this Agreement, the Issuers and the Guarantors shall:

        (i)    use their respective commercially reasonable efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 hereof, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Issuers and the Guarantors shall file as promptly as practicable an appropriate amendment to such Registration Statement curing such defect, and, if Commission review is required, use all of their respective commercially reasonable efforts to cause such amendment to be declared effective as soon as practicable;

        (ii)   prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with the applicable provisions of Rules 424, 430A and 462, as applicable, under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus;

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        (iii)  advise the Holders as promptly as practicable and, if requested by such Holders, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, and (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided, however, that no advice by the Issuers shall be required pursuant to this clause (D) in the event that the Issuers either promptly file a Prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into such Registration Statement, which, in either case, contains the requisite information with respect to such event or facts that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements contained therein not misleading). If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or blue sky laws, the Issuers and the Guarantors shall use all of their respective commercially reasonable efforts to obtain the withdrawal or lifting of such order at the earliest practicable time;

        (iv)  subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus, as of its date, will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

        (v)   in the case of a Shelf Registration Statement, furnish to each Holder named in any such Registration Statement in connection with such exchange or sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least five Business Days, and the Issuers will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such Holders shall reasonably object in writing within five Business Days after the receipt thereof. A Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading or fails to comply with the applicable requirements of the Act. Notwithstanding the foregoing, the Issuers shall not be required to take

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any actions under this Section 6(c)(v) that are not, in the reasonable opinion of counsel for the Issuers, in compliance with applicable law;

        (vi)  in the case of a Shelf Registration Statement, promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus in connection with such exchange or sale, if any, provide copies of such document to the Holders named in any such Registration Statement, make the Issuers' and the Guarantors' representatives available for discussion of such document and other customary due diligence matters, subject to negotiation, execution and delivery of customary confidentiality agreements, and include such information in such document prior to the filing thereof as such Holders may reasonably request;

        (vii) make available, at reasonable times, for inspection by the Holders named in any applicable Registration Statement and legal counsel or accountant retained by such Holders, all financial and other records, pertinent corporate documents of the Issuers and the Guarantors reasonably requested by any such Persons and cause the Issuers' and the Guarantors' officers, directors and employees to supply all information reasonably requested by any such Holder, counsel or accountant, subject to negotiation, execution and delivery of customary confidentiality agreements, in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness;

        (viii) in the case of a Shelf Registration Statement, if requested by any Holders named in any such Registration Statement in connection with such exchange or sale, promptly include in any Registration Statement or Prospectus, pursuant to a supplement, document incorporated by reference or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold, the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Issuers are notified of the matters to be included in such Prospectus supplement or post-effective amendment;

        (ix)  in the case of a Shelf Registration Statement, use its commercially reasonable efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Transfer Restricted Securities covered thereby;

        (x)   in the case of a Shelf Registration Statement, upon request, furnish to each Holder named in any such Registration Statement in connection with such exchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, (without all documents incorporated by reference therein and exhibits thereto, unless requested);

        (xi)  in the case of a Shelf Registration Statement, upon request, deliver to each Holder named in any such Registration Statement without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; provided that if no Registration Statement is effective or no Prospectus is usable in accordance with the provisions of Section 6(b) hereof, the Issuers shall deliver to each Holder named in any such Registration Statement a notice to that effect; the Issuers and the Guarantors hereby consent to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto;

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        (xii) in the case of a Shelf Registration Statement, upon the reasonable request of any Holder named in any such Registration Statement, enter into such agreements (including underwriting agreements containing customary terms) and make such customary representations and warranties and take all such other customary actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to such Registration Statement as may be reasonably requested by any such Holder in connection with any sale or resale pursuant to such Registration Statement. In such connection, the Issuers and the Guarantors shall:

        (A)  to the extent reasonably requested by any Holder named in any such Registration Statement, furnish (or in the case of paragraphs (2) and (3), use all of their respective commercially reasonable efforts to cause to be furnished) to each Holder, upon the effectiveness of the Shelf Registration Statement:

        (1)   a certificate in customary form, dated such date, signed on behalf of the Issuers and each Guarantor by two officers of each of the Issuers and the Guarantors;

        (2)   an opinion in customary form, dated the date of effectiveness of the Shelf Registration Statement, of counsel for the Issuers and the Guarantors; and

        (3)   a customary comfort letter, dated the date of effectiveness of the Shelf Registration Statement, from the Issuers' independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with primary underwritten offerings; and

        (B)  deliver such other documents and certificates as may be reasonably requested by the Holders named in any such Registration Statement and as are customarily delivered in similar offerings to evidence compliance with the matters covered in clause (A) above and with any customary conditions contained in any agreement entered into by the Issuers and the Guarantors pursuant to this clause (B);

        (xiii) prior to any public offering of Transfer Restricted Securities, use all of their respective commercially reasonable efforts to cooperate with the Holders named in the applicable Registration Statement and their counsel in connection with the registration and qualification of the Transfer Restricted Securities under the state securities or blue sky laws of such jurisdictions as such Holders may reasonable request and use all of their respective commercially reasonable efforts to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that neither the Issuers nor the Guarantors shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation in any jurisdiction where it is not now so subject;

        (xiv) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to enable such Transfer Restricted Securities to be registered in such denominations and such names as the selling Holders may request at least three Business Days prior to such sale of Transfer Restricted Securities;

        (xv) use all of their respective commercially reasonable efforts to cause the disposition of the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities other than as set forth in Section 6(c)(xiii) hereof;

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        (xvi) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Indenture with any necessary printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company;

        (xvii) otherwise use all of their respective commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 under the Act (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Act); and

        (xviii) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use all of their respective commercially reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner.

        (d)   Restrictions on Holders.    Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(b)(iii), Section 6(c)(iii)(C), or any notice from the Issuers of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof (in each case, a "Suspension Notice"), such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until (x) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or (y) such Holder is advised in writing by the Issuers that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "Recommencement Date"). Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any Prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Issuers with more recently dated Prospectuses or (ii) deliver to the Issuers (at the Issuers' expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. In the event the Issuers shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the Recommencement Date.

SECTION 7. REGISTRATION EXPENSES

        (a)   All expenses incident to the Issuers' and the Guarantors' performance of or compliance with this Agreement (other than any underwriting discounts and commissions) will be borne by the Issuers, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Issuers and the Guarantors; (v) all application and filing fees in connection with listing the Exchange Notes on a national securities exchange or automated quotation system pursuant to the requirements thereof; and (vi) all fees and disbursements of independent certified public accountants of the Issuers and the

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Guarantors (including the expenses of any special audit and comfort letters required by or incident to such performance).

        The Issuers will, in any event, bear its and the Guarantors' internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Issuers or the Guarantors.

        (b)   In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement) regardless of whether a Registration Statement becomes effective, the Issuers and the Guarantors will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are tendering Initial Notes in the Exchange Offer and/or selling or reselling Initial Notes or Exchange Notes pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Simpson Thacher & Bartlett LLP, unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared; provided that the Issuers and the Guarantors' reimbursement obligation with respect to such fees and disbursements shall not exceed $25,000.

SECTION 8. INDEMNIFICATION

        (a)   The Issuers and the Guarantors agree, jointly and severally, to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) (collectively, an "Indemnified Holder"), from and against any and all losses, claims, damages, liabilities, judgments, and expenses (including without limitation, any reasonable legal fees or other expenses reasonably incurred in connection with investigating, preparing or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments) to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities, judgments and expenses are caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto) provided by the Issuers to any Holder or any prospective purchaser of Exchange Notes or registered Initial Notes, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission that is based upon information relating to any of the Holders furnished in writing to the Issuers by any of the Holders.

        (b)   Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Issuers and the Guarantors, and their respective directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Issuers, or the Guarantors to the same extent as the foregoing indemnity from the Issuers and the Guarantors set forth in section (a) above to each of the Indemnified Holders, but only with reference to information relating to such Indemnified Holder furnished in writing to the Issuers by such Indemnified Holder expressly for use in any Registration Statement. In no event shall any Indemnified Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Indemnified Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Indemnified Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Indemnified Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

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        (c)   In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "indemnified party"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "indemnifying person") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), an Indemnified Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Indemnified Holder). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party within a reasonable time after notice of commencement of the action or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by a majority of the Indemnified Holders, in the case of the parties indemnified pursuant to Section 8(a), and by the Issuers and Guarantors, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with its written consent or (ii) effected without its written consent if (A) such settlement is entered into more than 60 days after receipt by the indemnifying party of a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party), (B) the indemnifying party shall not have reimbursed the indemnified party in accordance with such request or disputed in good faith the indemnified party's entitlement to such reimbursement prior to the date of such settlement, and (C) such indemnified party shall have given the indemnifying party at least 30 days prior notice of its intention to settle. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party.

        (d)   To the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuers and the Guarantors, on the one hand, and the Indemnified Holders, on the other hand, from

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their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Issuers and the Guarantors, on the one hand, and of the Indemnified Holders, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Issuers and the Guarantors, on the one hand, and of the Indemnified Holders, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers or the Guarantors, on the one hand, or by the Indemnified Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and judgments referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any claim or action.

        The Issuers, the Guarantors and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder, or its related Indemnified Holders, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Transfer Restricted Securities held by each Holder hereunder and not joint.

SECTION 9. RULE 144A AND RULE 144

        The Issuers and the Guarantors agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Issuers or the Guarantors (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A under the Act, and (ii) is subject to Section 13 or 15(d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144.

SECTION 10. SELECTION OF UNDERWRITERS

        The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an underwritten offering. In any such

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underwritten offering, the investment banker(s) and managing underwriter(s) that will administer such offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, however, that such investment banker(s) and managing underwriter(s) must be reasonably satisfactory to the Issuers.

SECTION 11. MISCELLANEOUS

        (a)   Remedies.    The Issuers and the Guarantors acknowledge and agree that any failure by the Issuers and/or the Guarantors to comply with their respective obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Issuers' and the Guarantors' obligations under Sections 3 and 4 hereof. The Issuers and the Guarantors further agree to waive the defense in any action for specific performance that a remedy at law would be adequate.

        (b)   No Inconsistent Agreements.    Neither the Issuers nor the Guarantors will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Issuers have nor the Guarantors have previously entered into, nor is currently party to, any agreement granting any registration rights with respect to its securities to any Person that would require such securities to be included in any Registration Statement filed hereunder. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Issuers' and the Guarantors' securities under any agreement in effect on the date hereof.

        (c)   Amendments and Waivers.    The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Issuers have obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Issuers or their Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer.

        (d)   Additional Guarantors.    The Issuers shall cause any of its Restricted Subsidiaries (as defined in the Indenture) that becomes, prior to the consummation of the Exchange Offer, a Guarantor in accordance with the terms and provisions of the Indenture to become a party to this Agreement as a Guarantor. Notwithstanding the generality of the foregoing statement, any entity that becomes a Guarantor upon the consummation of the Acquisition (as defined in the Purchase Agreement) shall become a party to this Agreement as a Guarantor. It is understood and agreed that if, prior to the Exchange Offer, a Guarantor that has executed this Agreement is no longer a Guarantor under the Indenture pursuant to and in accordance with the provisions of the Indenture, such Guarantor shall no longer be a Guarantor for purposes of this Agreement.

        (e)   Third Party Beneficiary.    The Holders shall be third party beneficiaries to the agreements made hereunder between the Issuers and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder.

        By acquiring Transfer Restricted Securities, a Holder will be deemed to have agreed to indemnify and hold harmless the Issuers, the Guarantors, and their respective directors and officers, and each

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person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) to the same extent as the indemnity from the Issuers and the Guarantors set forth in Section 8(a) hereof, but only with reference to information relating to such Holder and provided in writing by such Holder for inclusion in any Shelf Registration Statement. In no event shall any such Holder be liable or responsible for any amount in excess of the amount by which such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Shelf Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

        (f)    Notices.    All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), facsimile or air courier guaranteeing overnight delivery:

        (i)    if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and

        (ii)   if to the Issuers or the Guarantors:

Linens 'n Things, Inc.
6 Brighton Road
Clifton, New Jersey 07012
Facsimile No.: (973) 815-2990
Attention: Chief Financial Officer

With a copy to:

Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Facsimile No.: (212) 309-6001
Attention: Robert Robison

        All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.

        Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture.

        (g)   Successors and Assigns.    This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof.

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        (h)   Counterparts.    This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

        (i)    Headings.    The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

        (j)    Governing Law.    THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. TIME IS OF THE ESSENCE IN THIS AGREEMENT.

        (k)   Severability.    In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

        (l)    Entire Agreement.    This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

(Signature Pages Follow)

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        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

LINENS 'N THINGS, INC.
By:	Name: Title:
LINENS 'N THINGS CENTER, INC.
By:	Name: Title:
LINENS HOLDING CO.
By:	Name: Title:
BLOOMINGTON, MN., L.T., INC.
By:	Name: Title:
VENDOR FINANCE, LLC
By:	Name: Title:
LNT, INC.
By:	Name: Title:

19

LNT SERVICES, INC.
By:	Name: Title:
LNT LEASING II, INC.
By:	Name: Title:
LNT WEST, INC.
By:	Name: Title:
LNT VIRGINIA LLC
By:	Name: Title:
LNT LEASING III, LLC
By:	Name: Title:
LNT MERCHANDISING COMPANY LLC
By:	Name: Title:
CITADEL LNT, LLC
By:	Name: Title:

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BEAR, STEARNS & CO. INC.
By:	Name: Title:
UBS SECURITIES LLC
By:	Name: Title:
By:	Name: Title:

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SCHEDULE I

Guarantors

1.

Linens Holding Co., a Delaware corporation

2.

Bloomington, MN., L.T., Inc., a Minnesota corporation

3.

Vendor Finance, LLC, a Delaware limited liability company

4.

LNT, Inc., a New Jersey corporation

5.

LNT Services, Inc., a Delaware corporation

6.

LNT Leasing II, LLC, a Delaware limited liability company

7.

LNT West, Inc., a Delaware corporation

8.

LNT Virginia LLC, a Virginia limited liability company

9.

LNT Merchandising Company LLC, a Delaware limited liability company

10.

LNT Leasing III, LLC, a Delaware limited liability company

11.

Citadel LNT, LLC, a Delaware limited liability company

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REGISTRATION RIGHTS AGREEMENT Dated as of February 14, 2006 by and among LINENS 'N THINGS, INC. LINENS 'N THINGS CENTER, INC. THE GUARANTORS LISTED ON SCHEDULE I HERETO and BEAR, STEARNS & CO. INC. UBS SECURITIES LLC
SCHEDULE I Guarantors

EX-10.1

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Exhibit 10.1

EXECUTION COPY

$600,000,000.00

CREDIT AGREEMENT

dated as of February 14, 2006,

among

LINENS 'N THINGS, INC.
and
LINENS 'N THINGS CENTER, INC.,
as US Borrowers,

LINENS 'N THINGS CANADA CORP.,
as Canadian Borrower,

LINENS HOLDING CO.
and
THE OTHER GUARANTORS PARTY HERETO,
as Guarantors,

THE LENDERS PARTY HERETO,

UBS SECURITIES LLC,
as Arranger and Bookmanager,

UBS AG, STAMFORD BRANCH,
as an Issuing Bank, US Administrative Agent and US Co-Collateral Agent,

UBS AG CANADA BRANCH,
as Canadian Co-Collateral Agent,

WACHOVIA BANK, NATIONAL ASSOCIATION,
as US Co-Collateral Agent, Co-Documentation Agent and an Issuing Bank,

WACHOVIA CAPITAL FINANCE CORPORATION (CANADA),
as Canadian Administrative Agent, Canadian Co-Collateral Agent and Canadian
Swingline Lender,

UBS LOAN FINANCE LLC,
as US Swingline Lender,

UBS SECURITIES LLC and BEAR, STEARNS & CO. INC.,
as Joint Book-Runners,

BEAR, STEARNS & CO. INC.,
as Co-Syndication Agent,

WELLS FARGO RETAIL FINANCE, LLC,
as Co-Documentation Agent,

and

THE CIT GROUP/BUSINESS CREDIT, INC.,
as Co-Syndication Agent

TABLE OF CONTENTS

			Page
ARTICLE I. DEFINITIONS			2
	Section 1.01.	Defined Terms	2
	Section 1.02.	Classification of Loans and Borrowings	43
	Section 1.03.	Terms Generally	44
	Section 1.04.	Accounting Terms; GAAP	44
	Section 1.05.	Resolution of Drafting Ambiguities	44
ARTICLE II. THE CREDITS			44
	Section 2.01.	Commitments	44
	Section 2.02.	Loans.	45
	Section 2.03.	Borrowing Procedure	46
	Section 2.04.	Evidence of Debt; Repayment of Loans.	50
	Section 2.05.	Fees.	51
	Section 2.06.	Interest on Loans	52
	Section 2.07.	Termination and Reduction of Commitments	53
	Section 2.08.	Interest Elections	53
	Section 2.09.	[Intentionally Deleted].	55
	Section 2.10.	Optional and Mandatory Prepayments of Loans	55
	Section 2.11.	Alternate Rate of Interest	58
	Section 2.12.	Yield Protection	59
	Section 2.13.	Breakage Payments	60
	Section 2.14.	Payments Generally; Pro Rata Treatment; Sharing of Setoffs	61
	Section 2.15.	Taxes	62
	Section 2.16.	Mitigation Obligations; Replacement of Lenders	66
	Section 2.17.	Swingline Loans	67
	Section 2.18.	Letters of Credit	69
	Section 2.19.	Increase in Commitments	75
	Section 2.20.	Determination of Borrowing Base.	76
	Section 2.21.	Determination of Canadian Borrowing Base.	79
	Section 2.22.	Collection Allocation Mechanism	82
ARTICLE III. REPRESENTATIONS AND WARRANTIES			84
	Section 3.01.	Organization; Powers	84
	Section 3.02.	Authorization; Enforceability	84
	Section 3.03.	No Conflicts	84
	Section 3.04.	Financial Statements; Projections	85
	Section 3.05.	Properties	85
	Section 3.06.	Intellectual Property	86
	Section 3.07.	Equity Interests and Subsidiaries	86
	Section 3.08.	Litigation; Compliance with Laws	87
	Section 3.09.	Agreements	87
	Section 3.10.	Federal Reserve Regulations	87
	Section 3.11.	Investment Company Act; Public Utility Holding Company Act	88
	Section 3.12.	Use of Proceeds	88
	Section 3.13.	Taxes	88
	Section 3.14.	No Material Misstatements	88
	Section 3.15.	Labor Matters	88

i

	Section 3.16.	Solvency	89
	Section 3.17.	Employee Benefit Plans	89
	Section 3.18.	Environmental Matters	90
	Section 3.19.	Insurance	91
	Section 3.20.	Security Documents	91
	Section 3.21.	Acquisition Documents	92
	Section 3.22.	Anti-Terrorism Law	93
	Section 3.23.	[Intentionally Deleted]	93
	Section 3.24.	Executive Offices; Location of Material Inventory	93
	Section 3.25.	Accuracy of Borrowing Base	93
	Section 3.26.	Post-Audit Asset Dispositions	93
	Section 3.27.	Common Enterprise	94
ARTICLE IV. CONDITIONS TO CREDIT EXTENSIONS			94
	Section 4.01.	Conditions to Initial Credit Extension	94
	Section 4.02.	Conditions to All Credit Extensions	99
ARTICLE V. AFFIRMATIVE COVENANTS			100
	Section 5.01.	Financial Statements, Reports, etc.	100
	Section 5.02.	Litigation and Other Notices	103
	Section 5.03.	Existence; Businesses and Properties	103
	Section 5.04.	Insurance	104
	Section 5.05.	Obligations and Taxes	105
	Section 5.06.	Employee Benefits	105
	Section 5.07.	Maintaining Records; Access to Properties and Inspections; Annual Meetings	106
	Section 5.08.	Use of Proceeds	106
	Section 5.09.	Compliance with Environmental Laws; Environmental Reports	106
	Section 5.10.	[Intentionally Deleted]	107
	Section 5.11.	Additional Collateral; Additional Guarantors	107
	Section 5.12.	Security Interests; Further Assurances	108
	Section 5.13.	Information Regarding Collateral	109
	Section 5.14.	Post-Closing Collateral Matters	109
	Section 5.15.	Affirmative Covenants with Respect to Leases	109
	Section 5.16.	Interest Rate Agreements	109
ARTICLE VI. NEGATIVE COVENANTS			110
	Section 6.01.	Indebtedness	110
	Section 6.02.	Liens	111
	Section 6.03.	Sale and Leaseback Transactions	113
	Section 6.04.	Investment, Loan and Advances	113
	Section 6.05.	Mergers and Consolidations	114
	Section 6.06.	Asset Sales	115
	Section 6.07.	Acquisitions	115
	Section 6.08.	Dividends	116
	Section 6.09.	Transactions with Affiliates	116
	Section 6.10.	Financial Covenants	118
	Section 6.11.	Prepayments of Other Indebtedness; Modifications of Organizational Documents and Other Documents, etc.	118
	Section 6.12.	Limitation on Certain Restrictions on Subsidiaries	119

ii

	Section 6.13.	Limitation on Issuance of Capital Stock	119
	Section 6.14.	Limitation on Creation of Subsidiaries	120
	Section 6.15.	Business	120
	Section 6.16.	Limitation on Accounting Changes	120
	Section 6.17.	Fiscal Year	120
	Section 6.18.	No Further Negative Pledge	120
	Section 6.19.	Anti-Terrorism Law; Anti-Money Laundering	121
	Section 6.20.	Embargoed Person	121
ARTICLE VII. GUARANTEE			121
	Section 7.01.	The Guarantee	121
	Section 7.02.	Obligations Unconditional	122
	Section 7.03.	Reinstatement	123
	Section 7.04.	Subrogation; Subordination	123
	Section 7.05.	Remedies	123
	Section 7.06.	Instrument for the Payment of Money	123
	Section 7.07.	Continuing Guarantee	123
	Section 7.08.	General Limitation on Guarantee Obligations	123
	Section 7.09.	Release of Guarantors	124
ARTICLE VIII. EVENTS OF DEFAULT			124
	Section 8.01.	Events of Default	124
	Section 8.02.	Rescission	126
	Section 8.03.	Application of Proceeds	127
ARTICLE IX. COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS			127
	Section 9.01.	Collateral Accounts	128
	Section 9.02.	Accounts; Cash Management	128
	Section 9.03.	Inventory	131
	Section 9.04.	Borrowing Base-Related Reports	132
	Section 9.05.	Rescission of Activation Notice	133
ARTICLE X. THE ADMINISTRATIVE AGENTS AND THE COLLATERAL AGENTS			133
	Section 10.01.	Appointment and Authority	133
	Section 10.02.	Rights as a Lender	134
	Section 10.03.	Exculpatory Provisions.	134
	Section 10.04.	Reliance by Agent	135
	Section 10.05.	Delegation of Duties	135
	Section 10.06.	Resignation of Agent	135
	Section 10.07.	Non-Reliance on Agent and Other Lenders	136
	Section 10.08.	No Other Duties, etc	136
	Section 10.09.	Indemnification	136
	Section 10.10.	Overadvances	137
	Section 10.11.	Concerning the Collateral and the Related Loan Documents	137
	Section 10.12.	Field Audit, Examination Reports and Other Reports	137
ARTICLE XI. MISCELLANEOUS			138
	Section 11.01.	Notices	138
	Section 11.02.	Waivers; Amendment	141
	Section 11.03.	Expenses; Indemnity; Damage Waiver	144

iii

Section 11.04.	Successors and Assigns	146
Section 11.05.	Survival of Agreement	148
Section 11.06.	Counterparts; Integration; Effectiveness; Electronic Execution	148
Section 11.07.	Severability	149
Section 11.08.	Right of Setoff	149
Section 11.09.	Governing Law; Jurisdiction; Consent to Service of Process	149
Section 11.10.	Waiver of Jury Trial	150
Section 11.11.	Headings	150
Section 11.12.	Treatment of Certain Information; Confidentiality	150
Section 11.13.	USA PATRIOT Act Notice	151
Section 11.14.	Interest Rate Limitation	151
Section 11.15.	Lender Addendum	151
Section 11.16.	Obligations Absolute	151
Section 11.17.	Dollar Equivalent Calculations	152
Section 11.18.	Judgment Currency	152
Section 11.19.	Special Provisions Relating to Currencies Other Than Dollars	153
Section 11.20.	Intercreditor Agreement	153

iv

ANNEXES
Annex I	Applicable Margin
SCHEDULES
Schedule 1.01(a)	Refinancing Indebtedness to Be Repaid
Schedule 1.01(b)	Subsidiary Guarantors
Schedule 1.01(c)	Existing Letters of Credit
Schedule 1.01(d)	Existing Lender Letters of Credit
Schedule 3.03	Governmental Approvals; Compliance with Laws
Schedule 3.09	Material Agreements
Schedule 3.19	Insurance
Schedule 3.21	Acquisition Documents
Schedule 3.24	Location of Material Inventory
Schedule 4.01(g)	Local Counsel
Schedule 5.14	Post-Closing Matters
Schedule 6.01(b)	Existing Indebtedness
Schedule 6.02(c)	Existing Liens
Schedule 6.04(b)	Existing Investments
Schedule 9.02	Accounts and Lockboxes
EXHIBITS
Exhibit A	Form of Administrative Questionnaire
Exhibit B	Form of Assignment and Assumption
Exhibit C	Form of Borrowing Request
Exhibit D	Form of Compliance Certificate
Exhibit E	Form of Interest Election Request
Exhibit F	Form of Joinder Agreement
Exhibit G	Form of Landlord Access Agreement
Exhibit H	Form of LC Request
Exhibit I	Form of Lender Addendum
Exhibit J	[Intentionally Deleted]
Exhibit K-1	Form of Revolving Note
Exhibit K-2	Form of Canadian Revolving Note
Exhibit K-3	Form of US Swingline Note
Exhibit K-4	Form of Canadian Swingline Note
Exhibit K-5	Form of Discount Note
Exhibit L-1	Form of Perfection Certificate
Exhibit L-2	Form of Perfection Certificate Supplement
Exhibit M-1	Form of US Security Agreement
Exhibit M-2	Form of Canadian Security Agreement
Exhibit N	Form of Opinion of Company Counsel
Exhibit O	Form of Solvency Certificate
Exhibit P	Form of Intercompany Note
Exhibit Q	Form of Non-Bank Certificate
Exhibit R	Form of Intercreditor Agreement
Exhibit S	Form of Borrowing Base Certificate

v

CREDIT AGREEMENT

        This CREDIT AGREEMENT (this "Agreement") dated as of February 14, 2006 is among LINENS 'N THINGS, INC., a Delaware corporation ("LNT") and LINENS 'N THINGS CENTER, INC., a California corporation ("LNT Center" and together with LNT the "US Borrowers" and each individually a "US Borrower"), LINENS 'N THINGS CANADA CORP., a Nova Scotia corporation ("Canadian Borrower" and together with US Borrowers, the "Borrowers"); LINENS HOLDING CO., a Delaware corporation ("Holdings"); the Subsidiary Guarantors (such term and each other capitalized term used but not defined herein having the meaning given to it in Article I); the Lenders; UBS SECURITIES LLC ("UBSS"), as lead arranger (in such capacity, "Arranger") and as documentation agent (in such capacity, "Documentation Agent"); UBS LOAN FINANCE LLC ("UBS"), as US swingline lender (in such capacity, "US Swingline Lender"); BEAR, STEARNS & CO. INC. ("Bear Stearns"), as co-syndication agent (in such capacity, "Syndication Agent"); UBS AG, STAMFORD BRANCH, as an issuing bank, as US administrative agent (in such capacity, "US Administrative Agent") for the Lenders and as US co-collateral agent (in such capacity, the "US Co-Collateral Agent") for the Secured Parties and the Issuing Bank; UBS AG CANADA BRANCH, as Canadian co-collateral agent (in such capacity, the "Canadian Co-Collateral Agent") for the Secured Parties and the Issuing Bank; WACHOVIA BANK, NATIONAL ASSOCIATION, as US co-collateral agent (together with US Co-Collateral Agent, the "US Collateral Agents") for the Secured Parties and the Issuing Bank and as an issuing bank; WACHOVIA CAPITAL FINANCE CORPORATION (CANADA), as Canadian administrative agent (in such capacity, the "Canadian Administrative Agent" together with the US Administrative Agent, the "Administrative Agents") for the Lenders, as Canadian co-collateral agent (together with Canadian Co-Collateral Agent, the "Canadian Collateral Agents"; the US Collateral Agents and the Canadian Collateral Agents are collectively referred to herein as the "Collateral Agents") for the Secured Parties and the Issuing Bank, as an issuing bank, and as Canadian swingline lender (in such capacity, "Canadian Swingline Lender" and together with US Swingline Lender, the "Swingline Lenders").

WITNESSETH:

        WHEREAS, Holdings and Laundry Merger Sub Co. ("Merger Sub Co."), a Delaware corporation and a direct Wholly Owned Subsidiary of Holdings, have entered into an Agreement and Plan of Merger, dated as of November 8, 2005 (as amended, supplemented or otherwise modified from time to time in accordance with the provisions hereof and thereof, the "Acquisition Agreement"), with LNT ("Seller"), to acquire (the "Acquisition") all of the business of LNT (the "Acquired Business").

        WHEREAS, the Acquisition will be effected by a merger (the "Merger") of Merger Sub Co. with and into Seller, with Seller surviving the merger.

        WHEREAS, the Equity Financing shall be consummated simultaneously herewith.

        WHEREAS, Borrowers have requested the Lenders to extend credit in the form of Revolving Loans at any time and from time to time prior to the Revolving Maturity Date, in an aggregate principal amount at any time outstanding not in excess of $600 million, of which (i) no more than up to $100 million of Loans plus up to $160 million of Letters of Credit may be drawn on the Closing Date and (ii) up to $40 million may be extended to the Canadian Borrower in the form of Canadian Revolving Loans.

        WHEREAS, Borrowers have requested the Swingline Lenders to make Swingline Loans, at any time and from time to time prior to the Revolving Maturity Date, in an aggregate principal amount at any time outstanding not in excess of (i) $35 million for US Swingline Loans and (ii) $5 million for Canadian Swingline Loans.

        WHEREAS, US Borrowers have requested the Issuing Bank to issue letters of credit, in an aggregate face amount at any time outstanding not in excess of $400 million, to support obligations of the Borrowers and their Subsidiaries.

        WHEREAS, the proceeds of the Loans are to be used in accordance with Section 3.12.

        NOW, THEREFOR, the Lenders are willing to extend such credit to Borrowers and the Issuing Bank is willing to issue letters of credit for the account of the US Borrowers on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:

ARTICLE I.

DEFINITIONS

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

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

        "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.

        "ABR Loan" shall mean any ABR Revolving Loan or US Swingline Loan.

        "ABR Revolving Loan" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Alternate Base Rate in accordance with the provisions of Article II.

        "Acceptance Fee" shall have the meaning assigned to such term in Section 2.06(d).

        "Account Debtor" shall mean any Person who may become obligated to another Person under, with respect to, or on account of, an Account.

        "Accounts" shall mean all "accounts" as such term is defined in the UCC as in effect on the date hereof in the State of New York or as defined in the PPSA, as applicable, in which such Person now or hereafter has rights and shall include, without limitation, Credit Card Receivables.

        "Acquired Business" shall have the meaning assigned to such term in the first recital hereto.

        "Acquisition" shall have the meaning assigned to such term in the first recital hereto.

        "Acquisition Agreement" shall have the meaning assigned to such term in the first recital hereto.

        "Acquisition Consideration" shall mean the purchase consideration for any Permitted Acquisition and all other payments by Holdings or any of its Subsidiaries in exchange for, or as part of, or in connection with, any Permitted Acquisition, whether paid in cash or by exchange of Equity Interests or of properties or otherwise and whether payable at or prior to the consummation of such Permitted Acquisition or deferred for payment at any future time, whether or not any such future payment is subject to the occurrence of any contingency, and includes any and all payments representing the purchase price and any assumptions of Indebtedness, "earn-outs" and other agreements to make any payment the amount of which is, or the terms of payment of which are, in any respect subject to or contingent upon the revenues, income, cash flow or profits (or the like) of any person or business; provided that any such future payment that is subject to a contingency shall be considered Acquisition Consideration only to the extent of the reserve, if any, required under GAAP at the time of such sale to be established in respect thereof by Holdings or any of its Subsidiaries.

        "Acquisition Documents" shall mean the collective reference to the Acquisition Agreement, and the other documents listed on Schedule 3.21.

        "Activation Notice" has the meaning assigned to such term in Section 9.02.

        "Adjusted LIBOR Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, (a) an interest rate per annum (rounded upward, if necessary, to the nearest

2

1/100th of 1%) determined by the applicable Administrative Agent to be equal to the LIBOR Rate for such Eurodollar Borrowing in effect for such Interest Period divided by (b) 1 minus the Statutory Reserves (if any) for such Eurodollar Borrowing for such Interest Period.

        "Administrative Agent Fees" shall have the meaning assigned to such term in Section 2.05(b).

        "Administrative Agents" shall have the meaning assigned to such term in the preamble hereto.

        "Administrative Borrower" shall mean LNT Center, or any successor entity serving in that role pursuant to Section 2.03(c).

        "Administrative Questionnaire" shall mean an Administrative Questionnaire in substantially the form of Exhibit A.

        "Affiliate" shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified; provided, however, that, for purposes of Section 6.09, the term "Affiliate" shall also include (i) any person that directly or indirectly owns more than 10% of any class of Equity Interests of the person specified or (ii) any person that is an executive officer or director of the person specified.

        "Agents" shall mean the Administrative Agents and the Collateral Agents; and "Agent" shall mean any of them.

        "Agreement" shall have the meaning assigned to such term in the preamble hereto.

        "Alternate Base Rate" shall mean, for any day, a rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the greater of (a) the Base Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 0.50%. If the US Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the US Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Base Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Base Rate or the Federal Funds Effective Rate, respectively.

        "Anti-Terrorism Laws" shall have the meaning assigned to such term in Section 3.22.

        "Applicable Fee" shall mean, for any day, with respect to any Commitment, the applicable percentage set forth in Annex I under the caption "Applicable Fee".

        "Applicable Margin" shall mean, for any day, with respect to any Revolving Loan or Swingline Loan, as the case may be, the applicable percentage set forth in Annex I under the appropriate caption.

        "Applicable Percentage" shall mean, with respect to any Lender, the percentage of the total Loans and Commitments represented by such Lender's Loans and Commitments.

        "Approved Currency" shall mean each of dollars and Canadian dollars.

        "Approved Fund" shall mean any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

        "Arranger" shall have the meaning assigned to such term in the preamble hereto.

3

        "Asset Sale" shall mean (a) any conveyance, sale, lease, sublease, assignment, transfer or other disposition (including by way of merger, amalgamation or consolidation and including any Sale and Leaseback Transaction) of any property excluding (i) sales of Inventory, (ii) dispositions of Cash Equivalents and (iii) leases or subleases of less than all or substantially all of the Stores, in each case, in the ordinary course of business, by Holdings or any of its Subsidiaries and (b) any issuance or sale of any Equity Interests of any Subsidiary of Holdings, in each case, to any person other than (i) the Borrowers, (ii) any Subsidiary Guarantor or (iii) other than for purposes of Section 6.06, any other Subsidiary.

        "Assignment and Assumption" shall mean an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 11.04(b)), and accepted by the applicable Administrative Agent, in substantially the form of Exhibit B, or any other form approved by the applicable Administrative Agent.

        "Average Excess Availability" shall mean, as of any date of determination, the Excess Availability on the last Business Day of the fiscal quarter most recently ended; provided, that, if an Activation Notice has been delivered, the Average Excess Availability shall mean the weighted average amount of Excess Availability for such quarter which shall equal the sum of each "Periodic Availability Amount" (defined below) calculated for such quarter. As used herein, the term "Periodic Availability Amount" shall mean with respect to any period of days in a quarter for which a Borrowing Base Certificate is in effect, (a) the Excess Availability amount determined by the Collateral Agents and Administrative Agents based on (x) the information set forth in the Borrowing Base Certificate as adjusted to reflect any change noted by the Collateral Agents pursuant to the terms hereof, and (y) the outstanding Dollar Equivalents of the Loans and LC Exposures as shown on the books of the applicable Administrative Agent, for such period of days multiplied by (b) the fraction (expressed as a percentage), the numerator of which is the number of days in such quarter for which such Borrowing Base Certificate was in effect, and the denominator of which is the number of days in such quarter. Average Excess Availability shall be calculated for each fiscal quarter by the Collateral Agents and such calculations shall be presumed to be correct, absent manifest error.

        "BA Equivalent Loan" shall mean a Canadian Revolving Loan made by a Non-BA Lender.

        "Bailee Letter" shall have the meaning assigned thereto in the Security Agreement.

        "Bank Commitment Letter" shall mean that certain Bank Commitment Letter dated as of November 7, 2005 among Sponsor, UBS, UBSS, Bear Stearns, and Bear Stearns Corporate Lending Inc., as amended.

        "Bankers' Acceptance" shall mean a bill of exchange, including a depository bill defined and issued in accordance with the Depository Bills and Notes Act (Canada), denominated in Canadian dollars, drawn by the Canadian Borrower and accepted by the Lender and shall include, where the context requires, a Discount Note and a BA Equivalent Loan not evidenced by a Discount Note.

        "Base Rate" shall mean, for any day, a rate per annum that is equal to the corporate base rate of interest established by the US Administrative Agent from time to time; each change in the Base Rate shall be effective on the date such change is effective. The corporate base rate is not necessarily the lowest rate charged by the US Administrative Agent to its customers.

        "BIA" shall mean the Bankruptcy and Insolvency Act (Canada) as such legislation now exists or may from time to time hereafter be amended, modified, recodified, supplemented or replaced, together with all rules, regulations and interpretations thereunder or related thereto.

        "Blocked Account" shall mean shall have the meaning assigned to such term in Section 9.02(b).

4

        "Board" shall mean the Board of Governors of the Federal Reserve System of the United States.

        "Board of Directors" shall mean, with respect to any person, (i) in the case of any corporation (including, for the avoidance of doubt, any company incorporated under the laws of Canada (or any province or territory thereof)), the board of directors of such person, (ii) in the case of any limited liability company, the board of managers of such person, (iii) in the case of any partnership, the Board of Directors of the general partner of such person and (iv) in any other case, the functional equivalent of the foregoing.

        "Borrowers" shall have the meaning assigned to such term in the preamble hereto.

        "Borrowing" shall mean (a) Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurodollar Loans or Banker's Acceptances, as to which a single Interest Period is in effect, or (b) a Swingline Loan.

        "Borrowing Base" shall mean at any time, subject to adjustment as provided in Section 2.20, an amount equal to the lesser of (a) the sum of, without duplication:

        (i)    the book value of Eligible Accounts of US Borrowers multiplied by the advance rate of 85%, plus

        (ii)   (A) at any time other than during a Seasonal Advance Period, the lesser of (x) the advance rate of 70% of the Cost of Eligible Inventory of US Borrowers, and (y) the advance rate of 85% of the Net Recovery Cost Percentage multiplied by the Cost of Eligible Inventory of US Borrowers and (B) during a Seasonal Advance Period, the lesser of (x) the advance rate of 80% of the Cost of Eligible Inventory of US Borrowers, and (y) the advance rate of 90% of the Net Recovery Cost Percentage multiplied by the Cost of Eligible Inventory of US Borrowers, plus

        (iii)  (A) at any time other than during a Seasonal Advance Period, the lesser of (x) the Cost of all Eligible In-Transit Inventory of US Borrowers multiplied by the advance rate of 70%, and (y) the advance rate of 85% of the Net Recovery Cost Percentage multiplied by the Cost of Eligible In-Transit Inventory of US Borrowers and (B) during a Seasonal Advance Period, the lesser of (x) the Cost of all Eligible In-Transit Inventory of US Borrowers multiplied by the advance rate of 80%, and (y) the advance rate of 90% of the Net Recovery Cost Percentage multiplied by the Cost of Eligible In-Transit Inventory of US Borrowers, plus

        (iv)  the aggregate of all Incorporated Borrowing Bases, plus

        (v)   (A) at any time other than during a Seasonal Advance Period, the lesser of (x) the aggregate undrawn face amount of Eligible Letters of Credit multiplied by the advance rate of 70% and (y) 85% of the Net Recovery Cost Percentage of Inventory being purchased with Eligible Letters of Credit and (B) at any time during a Seasonal Advance Period, the lesser of (x) the aggregate undrawn face amount of Eligible Letters of Credit multiplied by the advance rate of 80% and (y) 90% of the Net Recovery Cost Percentage of Inventory being purchased with Eligible Letters of Credit, minus

        (vi)  a reserve in the amount of the Current Derivative Exposure; minus

        (vii) effective immediately upon notification thereof to US Borrowers by the applicable Collateral Agents, any Reserves established from time to time by such Collateral Agents in the exercise of their Permitted Discretion; and

        (b)   the maximum amount of Revolving Credit Obligations (as defined in the Senior Note Agreement) that are permitted in Section 4.09 of the Senior Note Agreement as Permitted Debt

5

thereunder minus the Canadian Exposure of all the Lenders minus the Line Reserve allocated to US Revolving Commitments.

        The Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate theretofore delivered to the Collateral Agents and the Administrative Agents with such adjustments as Administrative Agents and Collateral Agents deem appropriate in their collective Permitted Discretion to assure that the Borrowing Base is calculated in accordance with the terms of this Agreement.

        "Borrowing Base Certificate" shall mean an Officers' Certificate from Borrowers, substantially in the form of (or in such other form as may be mutually agreed upon by Borrowers, Collateral Agents and Administrative Agents), and containing the information prescribed by Exhibit S, delivered to the Administrative Agents and the Collateral Agents setting forth Borrowers' calculation of the Borrowing Base and the Canadian Borrowing Base.

        "Borrowing Base Guarantor Intercompany Loan Amount" shall mean, at any time, the amount which is the sum of (a) the net amount of any intercompany advances (including Letters of Credit issued for the account or benefit of a US Borrowing Base Guarantor) which are made and outstanding to or for the account of a US Borrowing Base Guarantor from the Administrative Borrower and (b) interest accrued and unpaid on such amount (from the date of this Agreement for amounts outstanding on the date hereof and which remain outstanding, and from the date of such intercompany advance for subsequent advances) at the rate per annum equal to the Alternate Base Rate plus the Applicable Margin in effect from time to time.

        "Borrowing Base Guarantors" shall mean the US Borrowing Base Guarantors and the Canadian Borrowing Base Guarantors.

        "Borrowing Request" shall mean a request by Borrowers in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C, or such other form as shall be approved by the Administrative Agents.

        "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks in New York City are authorized or required by law to close; provided, however, that when used in connection with (a) a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market (b) a Canadian Revolving Loan, the term "Business Day" shall also exclude any day on which banks in Toronto, Canada are authorized or required by law to close.

        "CAM Exchange" shall mean the exchange of the Lenders' interests provided for in Section 2.22.

        "CAM Exchange Date" shall mean the date on which (i) any event referred to in Section 8.01(g) or (h) shall occur, or (ii) an acceleration of the maturity of the Loans pursuant to Section 8.01 shall occur.

        "CAM Percentage" shall mean, as to each Lender, a fraction, expressed as a decimal, of which (i) the numerator shall be (without duplication) the aggregate Dollar Equivalent of the Specified Obligations owed to such Lender and such Lender's participation in the aggregate LC Obligations immediately prior to the CAM Exchange Date and (ii) the denominator shall be (without duplication) the aggregate Dollar Equivalent (as so determined) of the Specified Obligations owed to all the Lenders and the aggregate LC Obligations immediately prior to such CAM Exchange Date.

        "Canadian Administrative Agent" shall have the meaning assigned to such term in the preamble hereto.

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        "Canadian Borrower" shall have the meaning assigned to such term in the preamble hereto.

        "Canadian Borrowing Base" shall mean at any time, subject to adjustment as provided in Section 2.21, an amount equal to the lesser of (a) the sum of, without duplication:

        (i)    the book value of Eligible Canadian Accounts of Canadian Borrower multiplied by the advance rate of 85%, plus

        (ii)   (A) at any time other than during a Seasonal Advance Period, the lesser of (x) the advance rate of 70% of the Cost of Eligible Canadian Inventory of Canadian Borrower, and (y) the advance rate of 85% of the Net Recovery Cost Percentage multiplied by the Cost of Eligible Canadian Inventory of Canadian Borrower and (B) during a Seasonal Advance Period, the lesser of (x) the advance rate of 80% of the Cost of Eligible Canadian Inventory of Canadian Borrower, and (y) the advance rate of 90% of the Net Recovery Cost Percentage multiplied by the Cost of Eligible Canadian Inventory of Canadian Borrower, plus

        (iii)  (A) at any time other than during a Seasonal Advance Period, the lesser of (x) the cost of all the Eligible Canadian In-Transit Inventory of Canadian Borrower multiplied by an advance rate of 70%, and (y) the advance rate of 85% of the Net Recovery Cost Percentage multiplied by the Cost of Eligible Canadian In-Transit Inventory of Canadian Borrower and (B) during a Seasonal Advance Period, the lesser of (x) the Cost of all Eligible Canadian In-Transit Inventory of Canadian Borrower multiplied by the advance rate of 80% and (y) the advance rate of 90% of the Net Recovery Cost Percentage multiplied by the Cost of Eligible Canadian In-Transit Inventory of Canadian Borrower, plus

        (iv)  the amount, if any, by which the Borrowing Base exceeds the US Revolving Exposure of all of the Lenders (but only to the extent that such excess is not made available to US Borrowers), minus

        (v)   to the extent not already deducted in the calculation of the Borrowing Base, a reserve in the amount of the Current Derivative Exposure; minus

        (vi)  a reserve in the amount of the Priority Payables; minus

        (vii) effective immediately upon notification thereof to Canadian Borrower by the applicable Collateral Agents, any Reserves established from time to time by such Collateral Agents in the exercise of their Permitted Discretion; and

        (b)   the maximum amount of Revolving Credit Obligations (as defined in the Senior Note Agreement) that are permitted in Section 4.09 of the Senior Note Agreement as Permitted Debt thereunder minus the US Revolving Exposure of all of the Lenders minus the Line Reserve allocated to the Canadian Revolving Commitments.

        The Canadian Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate theretofore delivered to the Collateral Agents and the Administrative Agents with such adjustments as Administrative Agents and Collateral Agents deem appropriate in their collective Permitted Discretion to assure that the Canadian Borrowing Base is calculated in accordance with the terms of this Agreement.

        "Canadian Borrowing Base Guarantor" shall mean any Wholly Owned Subsidiary of the Canadian Borrower which may hereafter be approved by the Administrative Agents and the Collateral Agents and which (a) is organized under the laws of Canada (or any province or territory thereof), (b) is currently able to prepare all collateral reports in a comparable manner to the Borrowers' reporting procedures and (c) has executed and delivered to the applicable Collateral Agents such joinder agreements to guarantees, contribution and set-off agreements and other Security Documents as such Collateral Agents have reasonably requested so long as such

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Collateral Agents have received and approved, in their reasonable discretion, (i) a collateral audit and Inventory Appraisal conducted by an independent appraisal firm reasonably acceptable to such Collateral Agents and (ii) all PPSA and similar search results necessary to confirm such Collateral Agents' first priority Lien on all of such Canadian Borrowing Base Guarantor's personal property, subject to Permitted Liens.

        "Canadian Collateral Agent" shall have the meaning assigned to such term in the preamble hereto.

        "Canadian dollars" or "Can$" shall mean the lawful money of Canada.

        "Canadian Exposure" shall mean, with respect to any Lender at any time, the Dollar Equivalent of the aggregate principal amount at such time of all outstanding Canadian Revolving Loans of such Lender, plus the aggregate amount at such time of such Lender's Swingline Exposure to Canadian Borrower.

        "Canadian Guarantors" shall mean LNT I, LNT II, LNT Partnership and each other person, if any, that executes or becomes party to a Canadian Guaranty or other similar agreement guaranteeing the Canadian Obligations in favor of the Canadian Collateral Agents.

        "Canadian Guaranty" shall mean each certain Guaranty Agreement dated as of the Closing Date guaranteeing the Canadian Obligations addressed to the Canadian Collateral Agents for the benefit of the Canadian Secured Parties by each Canadian Loan Party governed by Canadian law, as the same may from time to time be modified, amended, extended or reaffirmed in accordance with the terms thereof.

        "Canadian Inventory" shall mean all of the Canadian Borrower's and Canadian Borrowing Base Guarantors' now owned and hereafter existing or acquired raw materials, work in process, finished goods and all other inventory of whatsoever kind or nature, wherever located.

        "Canadian Loan Parties" shall mean Canadian Borrower and the Canadian Guarantors.

        "Canadian Obligations" shall mean (a) obligations of Canadian Borrower and the other Canadian Loan Parties from time to time arising under or in respect of the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Canadian Revolving Loans and Canadian Swingline Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by Canadian Borrower under this Agreement in respect of any Letter of Credit or LC Acceptance, when and as due, including payments in respect of Reimbursement Obligations, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of Canadian Borrower and the other Canadian Loan Parties under this Agreement and the other Loan Documents with respect to obligations of Canadian Borrower and the Canadian Guarantors, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of Canadian Borrower and the Canadian Guarantors under or pursuant to this Agreement and the other Loan Documents with respect to the obligations of Canadian Borrower, (c) the due and punctual payment and performance of all obligations of Canadian Borrower and the other Canadian Loan Parties under each Lender Hedging Agreement to which Canadian Borrower and/or the other Canadian Loan Parties maybe a party, and (d) the due and punctual payment and performance of all obligations of any Canadian Loan Party in respect of overdrafts and related liabilities owed to any Lender, any Affiliate of a Lender, the Administrative

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Agents or the Collateral Agents arising from treasury, depository and cash management services or in connection with any automated clearinghouse transfer of funds. Notwithstanding anything herein to the contrary, the term "Canadian Obligations" shall only refer to obligations of Canadian Borrower and Canadian Guarantors hereunder and under the other Loan Documents and shall not refer to obligations of US Borrowers and their US Subsidiaries.

        "Canadian Pledge Agreements" shall mean that certain Pledge Agreement by LNT Center pledging sixty-five percent (65%) of its Equity Interests in LNT I and LNT II to secure the US Obligations and pledging 100% thereof to secure the Canadian Obligations and that certain Pledge Agreement by LNT I, LNT II, LNT Partnership and Canadian Borrower pledging all of their Equity Interests in the Canadian Borrower and the Canadian Guarantors, as applicable, to secure the Canadian Obligations, in each case, addressed to the applicable Collateral Agents for the benefit of the applicable Secured Parties, as the same may from time to time be modified, amended, extended or reaffirmed in accordance with the terms thereof.

        "Canadian Prime Rate" shall mean on any day the greater of:

        (a)   a rate per annum that is equal to the corporate base rate of interest established from time to time by Bank of Montreal (or such other Schedule I Bank selected by the Canadian Administrative Agent from time to time) as its reference rate then in effect on such day for commercial loans made by it in Canada (it is understood and agreed that such corporate base rate is not necessarily the lowest rate charged by the Canadian Administrative Agent to its customers); and

        (b)   the CDOR Rate in effect from time to time plus 100 basis points per annum.

        Any change in the Canadian Prime Rate shall be effective as of the opening of business on the date the change become effective generally.

        "Canadian Prime Rate Borrowing" shall mean a Borrowing comprised of Canadian Prime Rate Loans.

        "Canadian Prime Rate Loans" shall mean any Canadian Revolving Loan or Canadian Swingline Loan bearing interest at a rate determined by reference to the Canadian Prime Rate in accordance with the provisions of Article II.

        "Canadian Pro Rata Percentage" of any Canadian Revolving Lender at any time shall mean the percentage of the total Canadian Revolving Commitments of all Canadian Revolving Lenders represented by such Lender's Canadian Revolving Commitment.

        "Canadian Revolving Borrowing" shall mean a Borrowing comprised of Canadian Revolving Loans.

        "Canadian Revolving Commitment" shall mean, with respect to each Revolving Lender, the commitment, if any, of such Revolving Lender to make Canadian Revolving Loans hereunder up to the amount set forth on Schedule I to the Lender Addendum executed and delivered by such Lender or in the Assignment and Assumption pursuant to which such lender assumed its Canadian Revolving Commitment. The Canadian Revolving Commitment of each Revolving Lender is a sub-commitment of its Revolving Commitment and, as such, may be (a) reduced from time to time pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant to assignments by or to such Revolving Lender pursuant to Section 11.04. The aggregate amount of the Lenders' Canadian Revolving Commitments on the Closing Date is $40 million.

        "Canadian Revolving Lender" shall mean a Lender with a Canadian Revolving Commitment.

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        "Canadian Revolving Loan" shall mean a Revolving Loan borrowed by the Canadian Borrower denominated in Canadian dollars or a Bankers' Acceptance (and any advances with respect thereto) denominated in Canadian dollars.

        "Canadian Secured Parties" shall mean the Canadian Administrative Agent, the Canadian Collateral Agents, each Lender that holds Canadian Revolving Loans or has Canadian Revolving Commitments (in its capacity as such) and the Canadian Swingline Lender.

        "Canadian Security Agreement" shall mean each certain Security Agreement dated as of the Closing Date in favor of the Canadian Collateral Agents to secure the Canadian Obligations for the benefit of the Canadian Secured Parties by Canadian Borrower and by each Canadian Guarantor, which is governed by Canadian law, as the same may from time to time be modified, amended, extended or reaffirmed in accordance with the terms thereof.

        "Canadian Swingline Commitment" shall mean the commitment of the Canadian Swingline Lender to make loans pursuant to Section 2.17, as the same may be reduced from time to time pursuant to Section 2.07 or Section 2.17. The amount of the Canadian Swingline Commitment shall initially be $5 million, but in no event shall exceed the Revolving Commitment.

        "Canadian Swingline Lender" shall have the meaning assigned to such term in the preamble hereto.

        "Canadian Swingline Loans" shall mean any loan made by the Canadian Swingline Lender pursuant to Section 2.17(d).

        "Capital Expenditures" shall mean, for any period, without duplication, the increase during that period in the gross property, plant or equipment account in the consolidated balance sheet of LNT and its Subsidiaries, determined in accordance with GAAP, whether such increase is due to purchase of properties for cash or financed by the incurrence of Indebtedness, but excluding (i) expenditures made in connection with the replacement, substitution or restoration of property pursuant to Section 2.10(d) and (ii) any portion of such increase attributable solely to acquisitions of property, plant and equipment in Permitted Acquisitions.

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

        "Cash Collateral Account" shall mean a collateral account in the form of a deposit account established and maintained by the Collateral Agents for the benefit of the Secured Parties from the proceeds of Collateral collected in the Collection Account that have not either been released to the Borrowers or applicable Guarantor or applied immediately to outstanding Obligations.

        "Cash Equivalents" shall mean, as to any person, (a) securities issued, or directly, unconditionally and fully guaranteed or insured, by the United States, Canada or any agency or instrumentality thereof (provided that the full faith and credit of the United States or Canada is pledged in support thereof) having maturities of not more than one year from the date of acquisition by such person; (b) time deposits and certificates of deposit of any Lender or any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States, any state thereof or the District of Columbia or any province or territory of Canada having, capital and surplus aggregating in excess of $500 million and a rating of "A" (or such other similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) with maturities of not more than one year from the date of acquisition by such person; (c) repurchase

10

obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) above entered into with any bank meeting the qualifications specified in clause (b) above, which repurchase obligations are secured by a valid perfected security interest in the underlying securities; (d) commercial paper issued by any person incorporated in the United States or Canada rated at least A-1 or the equivalent thereof by Standard & Poor's Rating Service or at least P-1 or the equivalent thereof by Moody's Investors Service Inc., and in each case maturing not more than one year after the date of acquisition by such person; (e) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (a) through (d) above; (f) demand deposit accounts maintained in the ordinary course of business; and (g) other bank accounts which contain funds that have not been swept to the Concentration Accounts because of the need to meet compensating balance or other fee requirements of a bank that provides a Blocked Account.

        "Casualty Event" shall mean any loss of title or any loss of or damage to or destruction of, or any condemnation or other taking (including by any Governmental Authority) of, any property of Holdings or any of its Subsidiaries. "Casualty Event" shall include but not be limited to any taking of all or any part of any Real Property of any person or any part thereof, in or by condemnation or other eminent domain proceedings pursuant to any Requirement of Law, or by reason of the temporary requisition of the use or occupancy of all or substantially all of any Real Property of any person or any part thereof by any Governmental Authority, civil or military, or any settlement in lieu thereof, but shall not include a loss of title to the extent covered by a title insurance policy.

        "CDOR Rate" shall mean, on any day, the annual rate of interest which is the arithmetic average of the "BA 1 month" rates applicable to Bankers' Acceptances issued by Schedule I banks identified as such on the Reuters Screen CDOR Page at approximately 10:00 a.m. (Toronto time) on such day (as adjusted by the Canadian Administrative Agent after 10:00 a.m. (Toronto time) to reflect any error in any posted rate or in the posted average annual rate). If the rate does not appear on the Reuters Screen CDOR Page as contemplated above, then the CDOR Rate on any day shall be calculated as the arithmetic average of the discount rates applicable to one month Bankers' Acceptances of, and as quoted by, any two of the Schedule I banks, chosen by the Canadian Administrative Agent, as of 10:00 a.m. (Toronto time) on such day, or if such day is not a Business Day, then on the immediately preceding Business Day. If less than two Schedule I banks quote the aforementioned rate, the CDOR Rate shall be the rate chosen by the Canadian Administrative Agent.

        "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq. and all implementing regulations.

        A "Change in Control" shall be deemed to have occurred if:

        (a)   Holdings at any time ceases to own directly or indirectly 100% of the Equity Interests of Borrowers;

        (b)   at any time a change of control occurs under any Material Indebtedness;

        (c)   prior to an IPO, the Permitted Holders cease to own, or to have the power to vote or direct the voting of, Voting Stock of Holdings representing a majority of the voting power of the total outstanding Voting Stock of Holdings;

        (d)   following an IPO, (i) the Permitted Holders shall fail to own, or to have the power to vote or direct the voting of, Voting Stock of Holdings representing more than 25% of the voting power of the total outstanding Voting Stock of Holdings, (ii) the Permitted Holders cease to own Equity Interests representing more than 25% of the total economic interests of the Equity Interests of Holdings or (iii) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is

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or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause such person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of an equal or greater percentage of Voting Stock of Holdings than the percentage of Voting Stock that the Sponsor and its Controlled Investment Affiliates own or have the power to vote or direct the voting of after such IPO; or

        (e)   following an IPO, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Holdings (together with any new directors whose election to such Board of Directors or whose nomination for election was approved by a vote of a majority of the members of the Board of Directors of Holdings, or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Holdings.

        For purposes of this definition, a person shall not be deemed to have beneficial ownership of Equity Interests subject to a stock purchase agreement, merger agreement, amalgamation agreement or similar agreement until the consummation of the transactions contemplated by such agreement.

        "Change in Law" shall mean the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking into effect of any law, treaty, order, policy, rule or regulation, (b) any change in any law, treaty, order, policy, rule or regulation or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

        "Charges" shall have the meaning assigned to such term in Section 11.14.

        "Chattel Paper" shall mean all "chattel paper," as such term is defined in the UCC as in effect on the date hereof in the State of New York, or as defined in the PPSA, as applicable, in which any Person now or hereafter has rights.

        "Class," when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, US Swingline Commitment or Canadian Swingline Commitment, in each case, under this Agreement as originally in effect or pursuant to Section 2.19, of which such Loan, Borrowing or Commitment shall be a part.

        "Closing Date" shall mean the date of the initial Credit Extension hereunder.

        "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.

        "Collateral" shall mean, collectively, all of the Security Agreement Collateral, the Mortgaged Property and all other property of whatever kind and nature subject or purported to be subject from time to time to a Lien under any Security Document.

        "Collateral Agent" shall have the meaning assigned to such term in the preamble hereto; provided, however, when reference is made to the applicable Collateral Agents, the reference shall be deemed to be (i) to UBS AG, Stamford Branch or UBS AG Canada Branch as Co-Collateral Agent, if and to the extent that such reference requires a payment to be made (other than with respect to any indemnification or such other payment that is to be made to Wachovia Bank, National Association as Co-Collateral Agent, as provided by this Agreement), (ii) Wachovia Bank, National Association or Wachovia Capital Finance Corporation (Canada) as Co-Collateral Agent, if and to the extent that such reference requires action or determination with respect to the

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reporting or monitoring of the Collateral, the Borrowing Base or the Canadian Borrowing Base, as applicable, including any and all actions relating to Eligible In-Transit Inventory, Eligible Canadian In-Transit Inventory or Eligible Letters of Credit, and (iii) both US Collateral Agents or both Canadian Collateral Agents or (in the case of issues affecting all Lenders (other than after the operation of a CAM Exchange)) all Collateral Agents if and to the extent that such reference requires action or determination with respect to other issues, such as the establishment or modification of eligibility criteria, advance rates or Reserves.

        "Collection Accounts" has the meaning assigned to such term in Section 9.02(d).

        "Commercial Letter of Credit" shall mean any letter of credit or similar instrument issued for the purpose of providing credit support in connection with the purchase of materials, goods or services by US Borrowers or any of their Subsidiaries in the ordinary course of their businesses.

        "Commitment" shall mean, with respect to any Lender, such Lender's Revolving Commitment, Canadian Revolving Commitment, US Swingline Commitment or Canadian Swingline Commitment, and any Commitment to make Revolving Loans of a new Class extended by such Lender as provided in Section 2.19.

        "Commitment Fee" shall have the meaning assigned to such term in Section 2.05(a).

        "Companies" shall mean Holdings and its Subsidiaries; and "Company" shall mean any one of them.

        "Compliance Certificate" shall mean a certificate of a Financial Officer substantially in the form of Exhibit D or such other form as may be acceptable to the Administrative Agents.

        "Concentration Accounts" shall have the meaning assigned to such term in Section 9.02(d).

        "Confidential Information Memorandum" shall mean that certain confidential information memorandum relating to the Senior Notes dated as of February 8, 2006.

        "Consolidated Cash Flow" means, for any period, the Consolidated Net Income for such period plus, without duplication:

        (i)    an amount equal to any extraordinary loss plus any net loss realized by LNT or any of its Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus

        (ii)   provision for taxes based on income or profits of LNT and its Subsidiaries for such period, including any applicable franchise or property taxes, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus

        (iii)  Consolidated Interest Expense for such period, to the extent that such Consolidated Interest Expense were deducted in computing such Consolidated Net Income; plus

        (iv)  the amount of any restructuring charges or reserves (which for the avoidance of doubt, shall include retention, escheat, severance, relocation, excess pension charges, contract termination costs, including future lease commitments) deducted in such period in computing Consolidated Net Income; plus

        (v)   the amount of management, monitoring, consulting and advisory fees and related expenses paid to the Sponsors (or any accruals relating to such fees and related expenses) during such period; provided that such amount shall not exceed $2.0 million in any four quarter period (calculated without giving effect to this clause (5)); plus

        (vi)  cash received pursuant to tenant allowances from landlords, plus

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        (vii) for any quarter in the four quarter periods ended October 1, 2005 and December 31, 2005, respectively, all adjustments to net income (or loss) used in connection with the calculation of pro forma "Adjusted EBITDA" for the 52 weeks ended October 1, 2005 and December 31, 2005, respectively (as set forth in the offering memorandum relating to the Senior Notes under Note (4) to the section entitled "Offering Memorandum Summary—Summary Historical and Pro Forma Consolidated Financial and Operating Data") to the extent such adjustments are not fully reflected in the applicable quarter and continue to be applicable; plus

        (viii) depreciation, amortization (including amortization of intangibles and any amortization of straight line rent expense but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (including charges related to the write-off of goodwill or intangibles as a result of impairment, in each case as required by SFAS No. 142 or SFAS No. 144 but excluding any such non-cash expense 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 that was paid in a prior period) of LNT and its Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus

        (ix)  non-cash items increasing such Consolidated Net Income (including the amortization of tenant allowances received) for such period, other than the accrual of revenue in the ordinary course of business,

in each case, on a consolidated basis and determined in accordance with GAAP.

        "Consolidated Fixed Charge Coverage Ratio" shall mean, for any Test Period, the ratio of (a) Consolidated Cash Flow for such Test Period to (b) Consolidated Fixed Charges for such Test Period.

        "Consolidated Fixed Charges" shall mean, for any period, the sum, without duplication, of

        (a)   Consolidated Interest Expense for such period;

        (b)   the aggregate amount of Capital Expenditures for such period (other than to the extent financed by Excluded Issuances);

        (c)   all cash payments in respect of income taxes made during such period (net of any cash refund in respect of income taxes actually received during such period);

        (d)   the principal amount of all scheduled amortization payments on all Indebtedness (including the principal component of all Capital Lease Obligations, but excluding such amortization payments on Indebtedness incurred to finance Capital Expenditures included in clause (b) above in such period or any prior period) of LNT and its Subsidiaries for such period (as determined on the first day of the respective period);

        (e)   the product of all cash dividend payments on any series of Disqualified Capital Stock of Holdings or any of its Subsidiaries (other than dividend payments to LNT or any of its Subsidiaries); and

        (f)    the product of all cash dividend payments on any Preferred Stock (other than Disqualified Capital Stock) of Holdings or any of its Subsidiaries (other than dividend payments to LNT or any of its Subsidiaries).

        "Consolidated Indebtedness" shall mean, as at any date of determination, the aggregate amount of all Indebtedness and all LC Exposure for Standby Letters of Credit of LNT and its Subsidiaries, determined on a consolidated basis in accordance with GAAP.

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        "Consolidated Interest Expense" shall mean, for any period, the total consolidated cash interest expense of LNT and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP plus, without duplication each of the following to the extent paid or payable in cash:

        (a)   imputed interest on Capital Lease Obligations of LNT and its Subsidiaries for such period;

        (b)   commissions, discounts and other fees and charges owed by LNT or any of its Subsidiaries with respect to Standby Letters of Credit, bankers' acceptance financing and receivables financings for such period;

        (c)   cash contributions to any employee stock ownership plan or similar trust made by LNT or any of its Subsidiaries to the extent such contributions are used by such plan or trust to pay interest or fees to any person (other than LNT or a Wholly Owned Subsidiary) in connection with Indebtedness incurred by such plan or trust for such period;

        (d)   all interest paid or payable with respect to discontinued operations of LNT or any of its Subsidiaries for such period;

        (e)   the interest portion of any deferred payment obligations of LNT or any of its Subsidiaries for such period;

        (f)    all interest on any Indebtedness of LNT or any of its Subsidiaries of the type described in clause (e) or (i) of the definition of "Indebtedness" for such period;

provided that (a) to the extent directly related to the Transactions, debt issuance costs, debt discount or premium and other financing fees and expenses shall be excluded from the calculation of Consolidated Interest Expense and (b) Consolidated Interest Expense shall be calculated after giving effect to Hedging Agreements (including associated costs), but excluding unrealized gains and losses with respect to Hedging Agreements.

        Consolidated Interest Expense shall be calculated on a Pro Forma Basis to give effect to any Indebtedness incurred, assumed or permanently repaid or extinguished during the relevant Test Period in connection with the Acquisition, any Permitted Acquisitions and Asset Sales (other than any dispositions in the ordinary course of business) as if such incurrence, assumption, repayment or extinguishing had been effected on the first day of such period.

        "Consolidated Net Income" means, for any period, the aggregate of the Net Income of LNT and its 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 Subsidiary Guarantor or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or similar distributions paid in cash (or converted into cash) to the US Borrowers or a Subsidiary Guarantor;

        (ii)   the Net Income of any Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that 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 Subsidiary or its stockholders; provided that if any such dividend or distribution is actually received it will be included for the purposes of this definition;

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        (iii)  any increase in amortization and depreciation or any one-time non-cash charges resulting from purchase accounting in connection with any acquisition that is consummated on or after the date of this Agreement will be excluded;

        (iv)  the cumulative effect of a change in accounting principles will be excluded;

        (v)   any net after-tax gains or losses (less all fees and expenses or charges relating thereto) attributable to business dispositions or asset dispositions other than in the ordinary course of business (as determined in good faith by senior management or the board of directors of Holdings) will be excluded;

        (vi)  any net after-tax gains or losses (less all fees and expenses or charges relating thereto) attributable to the early extinguishment of indebtedness will be excluded;

        (vii) non-cash gains, losses, income and expenses resulting from fair value accounting required by Statement of Financial Accounting Standards No. 133 and related interpretations will be excluded;

        (viii) the effects of purchase accounting as a result of the Transactions will be excluded;

        (ix)  any fees, expenses and charges relating to the Transactions (whenever paid) will be excluded; and

        (x)   accruals and reserves that are established within 12 months of the Closing Date and that are required to be established in accordance with GAAP will be excluded.

        "Consolidated Net Tangible Assets" means, as of any date of determination, the sum of the assets of LNT and its Subsidiaries after eliminating intercompany items, determined on a consolidated basis in accordance with GAAP, less (without duplication) (i) the net book value of all of LNT's and its Subsidiaries' licenses, patents, patent applications, copyrights, trademarks, trade names, goodwill, non-compete agreements or organizational expenses and other like intangibles shown on the balance sheet of LNT and its Subsidiaries as of the most recent date for which such a balance sheet is available, (ii) unamortized Indebtedness discount and expenses, (iii) all reserves for depreciation, obsolescence, depletion and amortization of its properties and all other proper reserves related to assets which in accordance with GAAP have been provided by LNT and its Subsidiaries and (iv) all current liabilities.

        "Contested Collateral Lien Conditions" shall mean, with respect to any Permitted Lien of the type described in clauses (a), (b), (e) and (f) of Section 6.02, the following conditions:

        (a)   US Borrowers shall cause any proceeding instituted contesting such Lien to stay the sale or forfeiture of any portion of the Collateral on account of such Lien;

        (b)   at the option and at the request of the US Administrative Agent, to the extent such Lien is in an amount in excess of $100,000, the applicable Collateral Agent shall maintain a Reserve against the Borrowing Base or Canadian Borrowing Base, as applicable, in an amount sufficient to pay and discharge such Lien and the US Administrative Agent's reasonable estimate of all interest and penalties related thereto; and

        (c)   such Lien shall in all respects be subject and subordinate in priority to the Lien and security interest created and evidenced by the Security Documents, except if and to the extent that the Requirement of Law creating, permitting or authorizing such Lien provides that such Lien is or must be superior to the Lien and security interest created and evidenced by the Security Documents.

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        "Contingent Obligation" shall mean, as to any person, any obligation, agreement, understanding or arrangement of such person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other person (the "primary obligor") in any manner, whether directly or indirectly, including any obligation of such person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor; (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; (d) with respect to bankers' acceptances, letters of credit and similar credit arrangements, until a reimbursement obligation arises (which reimbursement obligation shall constitute Indebtedness); or (e) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term "Contingent Obligation" shall not include endorsements of instruments for deposit or collection in the ordinary course of business or any product warranties. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such person may be liable, whether singly or jointly, pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith.

        "Contribution, Intercompany Contracting and Offset Agreement" shall mean that certain Contribution, Intercompany Contracting and Offset Agreement dated as of the date hereof by and among the Loan Parties (other than Foreign Subsidiaries), Collateral Agents and Administrative Agents.

        "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "Controlling" and "Controlled" shall have meanings correlative thereto.

        "Control Agreement" shall have the meaning assigned to such term in the Security Agreement.

        "Controlled Investment Affiliate" means, as to any person, any other person which directly or indirectly is in Control of, is Controlled by, or is under common Control with, such person and is organized by such person (or any person Controlling such person) primarily for making equity or debt investments in Holdings or other portfolio companies.

        "Cost" shall mean, as determined by the applicable Collateral Agents, in good faith, with respect to Inventory or Canadian Inventory, as applicable, the lower of (a) landed cost computed on first-in a first-out basis in accordance with GAAP or (b) market value; provided, that for purposes of the calculation of the Borrowing Base or the Canadian Borrowing Base, (i) the Cost of the Inventory or the Cost of the Canadian Inventory shall not include: (A) the portion of the cost of Inventory or Canadian Inventory equal to the profit earned by any Affiliate on the sale thereof to Borrowers or the Borrowing Base Guarantors or (B) write-ups or write-downs in cost with respect to currency exchange rates, and (ii) notwithstanding anything to the contrary contained herein, the cost of the Inventory and Canadian Inventory shall be computed in the same manner and consistent with the most recent Inventory Appraisal which has been received and approved by Collateral Agents in their reasonable discretion.

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        "Credit Card Agreements" shall mean all agreements now or hereafter entered into by Borrowers or Borrowing Base Guarantors with any credit card issuer or any credit card processor, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, including, without limitation, any agreements entered into in connection with any Private Label Credit Cards.

        "Credit Card Receivables" shall mean, collectively, all present and future rights of Borrowers or Borrowing Base Guarantors to payment from (a) any major credit card issuer or major credit card processor arising from sales of goods or rendition of services to customers who have purchased such goods or services using a credit or debit card, (b) any major credit card issuer or major credit card processor in connection with the sale or transfer of Accounts arising pursuant to the sale of goods or rendition of services to customers who have purchased such goods or services using a credit card or a debit card, including, but not limited to, all amounts at any time due or to become due from any major credit card issuer or major credit card processor under the Credit Card Agreements or otherwise and (c) the issuers of Private Label Credit Cards.

        "Credit Extension" shall mean, as the context may require, (i) the making of a Loan by a Lender or (ii) the issuance of any Letter of Credit, or the amendment, extension or renewal of any existing Letter of Credit, by the Issuing Bank.

        "Current Derivative Exposure" shall mean, as of any date of determination, 100% of the aggregate mark-to-market exposure then owing by any Borrower under Lender Hedging Agreements, determined by all Lenders that are counterparties to each Lender Hedging Agreement, in good faith and in a commercially reasonable manner, based on net termination values and calculated as if such Lender Hedging Agreements were terminated as of such determination date and a payment were due thereunder to the Lender or its Affiliates and furnished to the applicable Agent on a bi-monthly basis (or more frequently, in the commercially reasonable discretion of the applicable Agent).

        "Debt Issuance" shall mean the incurrence by Holdings or any of its Subsidiaries of any Indebtedness after the Closing Date (other than as permitted by Section 6.01).

        "Default" shall mean any event, occurrence or condition which is, or upon notice, lapse of time or both would constitute, an Event of Default.

        "Default Rate" shall have the meaning assigned to such term in Section 2.06(e).

        "Discount Note" shall mean a non-interest bearing promissory note denominated in Canadian Dollars, substantially in the form of Exhibit K-4, issued by the Canadian Borrower to evidence a BA Equivalent Loan.

        "Discount Proceeds" shall mean on any day, for any Bankers' Acceptance issued hereunder, an amount calculated on such day by multiplying:

        (a)   the face amount of such Bankers' Acceptance by

        (b)   the quotient obtained by dividing:

        (i)    one by

        (ii)   the sum of one plus the product of:

        A)   the Discount Rate applicable to such Bankers' Acceptance and

        B)    a fraction, the numerator of which is the number of days in the applicable Interest Period and the denominator of which is 365,

with the quotient being rounded up or down to the fifth decimal place and 0.00005 being rounded up.

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        "Discount Rate" means, on any day, with respect to an issue of Bankers' Acceptances, or in respect of a BA Equivalent Loan, with the same maturity date, (a) for a Lender which is a Schedule I Lender, (i) the average bankers' acceptance discount rate of the appropriate term as quoted on Reuters Screen CDOR Page determined at or about 10:00 a.m. (Toronto time) on that day or, (ii) if the discount rate for a particular term is not quoted on Reuters Screen CDOR Page, the arithmetic average of the actual discount rates for bankers' acceptances for such term accepted by any two of the Schedule I banks, chosen by the Canadian Administrative Agent, as of 10:00 a.m. (Toronto time) on such day, or if such day is not a Business Day, then on the immediately preceding Business Day, and (b) for a Lender which is not a Schedule I Lender, the rate determined by the Canadian Administrative Agent in accordance with (a) above, plus 10 basis points per annum.

        "Disqualified Capital Stock" shall mean any Equity Interest which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (a) matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the Final Maturity Date, (b) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (i) debt securities or (ii) any Equity Interests referred to in (a) above, in each case at any time on or prior to the first anniversary of the Final Maturity Date, or (c) contains any repurchase obligation which may come into effect prior to payment in full of all Obligations; provided, however, that any Equity Interests that would not constitute Disqualified Capital Stock but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests is convertible, exchangeable or exercisable) the right to require the issuer thereof to redeem such Equity Interests upon the occurrence of a change in control or an asset sale occurring prior to the first anniversary of the Final Maturity Date shall not constitute Disqualified Capital Stock if such Equity Interests provide that the issuer thereof will not redeem any such Equity Interests pursuant to such provisions prior to the repayment in full of the Obligations.

        "Dividend" with respect to any person shall mean that such person has declared or paid a dividend or returned any equity capital to the holders of its Equity Interests or authorized or made any other distribution, payment or delivery of property (other than Qualified Capital Stock of such person) or cash to the holders of its Equity Interests as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for consideration any of its Equity Interests outstanding (or any options or warrants issued by such person with respect to its Equity Interests), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for consideration any of the Equity Interests of such person outstanding (or any options or warrants issued by such person with respect to its Equity Interests). Without limiting the foregoing, "Dividends" with respect to any person shall also include all payments made or required to be made by such person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes.

        "Documentation Agent" shall have the meaning assigned to such term in the preamble hereto.

        "Dollar Equivalent" shall mean, as to any amount denominated in Canadian dollars on any date of determination, the amount of dollars that would be required to purchase the amount of Canadian dollars based upon the Spot Selling Rate.

        "dollars" or "$" shall mean lawful money of the United States.

        "Eligible Accounts" shall have the meaning assigned to such term in Section 2.20(a).

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        "Eligible Assignee" shall mean (a) if the assignment does not include assignment of a Revolving Commitment, (i) any Lender, (ii) an Affiliate of any Lender, (iii) an Approved Fund and (iv) any other person approved by the applicable Administrative Agent (such approval not to be unreasonably withheld or delayed) and (b) if the assignment includes assignment of a Revolving Commitment, (i) any Revolving Lender, (ii) an Affiliate of any Revolving Lender, (iii) an Approved Fund of a Revolving Lender and (iv) any other person approved by the applicable Administrative Agent, the Issuing Bank, the Swingline Lenders and Borrowers (each such approval not to be unreasonably withheld or delayed); provided that (x) no approval of Borrowers shall be required during the continuance of a Default, (y) "Eligible Assignee" shall not include US Borrowers or any of their Affiliates or Subsidiaries or any natural person and (z) each Revolving Lender becoming a party hereto pursuant to an Assignment and Assumption must also arrange to designate an Affiliate as a Canadian Revolving Lender and such Canadian Revolving Lender must also become a party hereto pursuant to such Assignment and Assumption.

        "Eligible Canadian Accounts" shall have the meaning assigned to such term in Section 2.21(a).

        "Eligible Canadian Inventory" shall mean, subject to adjustment as set forth in Section 2.21(b), items of Canadian Inventory of the Canadian Borrower and any Canadian Borrowing Base Guarantors.

        "Eligible Canadian In-Transit Inventory" means, as of any date of determination, without duplication of other Eligible Canadian Inventory, Inventory (a) which has been shipped by or on behalf of a supplier from any location for receipt by Canadian Borrower or any Canadian Borrowing Base Guarantor within sixty (60) days of the date of determination, but which has not yet been received by Canadian Borrower or such Canadian Borrowing Base Guarantor, (b) for which the purchase order is in the name of Canadian Borrower or any Canadian Borrowing Base Guarantor, and title has passed to Canadian Borrower or any Canadian Borrowing Base Guarantor, (c) for which the document of title, to the extent applicable, reflects Canadian Borrower or any Canadian Borrowing Base Guarantor as consignee (along with delivery to Canadian Borrower or such Canadian Borrowing Base Guarantor of the documents of title, to the extent applicable, with respect thereto), (d) as to which the applicable Collateral Agent has control over the documents of title, to the extent applicable, which evidence ownership of the subject Inventory (such as by the delivery of a Freight Forwarding Agreement), (e) is covered by insurance reasonably acceptable to the Collateral Agents, and (f) which otherwise is not excluded from the definition of Eligible Inventory.

        "Eligible Canadian Lender" means a financial institution that is (i) not a non-resident of Canada for the purpose of the ITA, or (ii) an "authorized foreign bank" as defined in section 2, of the Bank Act (Canada) and in subsection 248(1) of the ITA, that is not subject to the restrictions and requirements referred to in subsection 524(2) of the Bank Act (Canada) and which will receive all amounts paid or credited to it under its Canadian Revolving Loans and under the Loan Documents in respect of its "Canadian banking business" (as defined in subsection 248(1) of the ITA) for the purposes of paragraph 212(13.3)(a) of the ITA.

        "Eligible In-Transit Inventory" means, as of any date of determination, without duplication of other Eligible Inventory, Inventory (a) which has been shipped by or on behalf of a supplier from any location for receipt by either a US Borrower or any US Borrowing Base Guarantor within sixty (60) days of the date of determination, but which has not yet been received by such US Borrower or US Borrowing Base Guarantor, (b) for which the purchase order is in the name of either a US Borrower or any US Borrowing Base Guarantor, and title has passed to either a US Borrower or any US Borrowing Base Guarantor, (c) for which the document of title, to the extent applicable, reflects either a US Borrower or any US Borrowing Base Guarantor as consignee (along with delivery to such a US Borrower or US Borrowing Base Guarantor of the documents of title, to the

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extent applicable, with respect thereto), (d) as to which either the applicable Collateral Agent has control over the documents of title, to the extent applicable, which evidence ownership of the subject Inventory (such as by the delivery of a Freight Forwarding Agreement) or the goods covered by such document of title are expected to be delivered to a distribution center operated by US Borrowers or any of their Subsidiaries within 20 days of the date such goods become the subject of such document of title, (e) is covered by insurance reasonably acceptable to the Collateral Agents, and (f) which otherwise is not excluded from the definition of Eligible Inventory.

        "Eligible Inventory" shall mean, subject to adjustment as set forth in Section 2.20(b), items of Inventory of the US Borrowers and any US Borrowing Base Guarantors.

        "Eligible Letter of Credit" means, as of any date of determination a Commercial Letter of Credit issued by the Issuing Bank which meet the following criteria:

        (a)   the Inventory being purchased thereunder has not yet been delivered to a US Borrower or any of the US Borrowing Base Guarantors;

        (b)   The purchase order for such Inventory is in the name of US Borrowers or any of its US Borrowing Base Guarantors (or Canadian Borrower or any Canadian Borrowing Base Guarantor, for Letters of Credit issued pursuant to Section 2.18(m)) and the purchase of which is supported by a Commercial Letter of Credit issued under this Agreement having an initial expiry, subject to the proviso hereto, within 120 days after the date of initial issuance of such Commercial Letter of Credit, provided that fifty percent (50%) of the maximum Stated Amount all such Commercial Letters of Credit shall not, at any time, have an initial expiry greater than ninety (90) days after the original date of issuance of such Commercial Letters of Credit;

        (c)   Drawing under such Commercial Letters of Credit requires delivery of a bill of lading or other document of title, which names the US Collateral Agent, a US Borrower or any of the US Borrowing Base Guarantors or any of their agents as consignee, which evidences ownership of the subject inventory and which complies with the requirements of the applicable Freight Forwarding Agreement;

        (d)   the Inventory is not otherwise included in another category of Eligible Inventory or Eligible In-Transit Inventory;

        (e)   the Inventory being purchased thereunder is covered by insurance reasonably acceptable to the Collateral Agents; and

        (f)    the Inventory being purchased thereunder is not expected to be excluded from the definition of Eligible Inventory once it has been purchased and delivered.

        "Embargoed Person" shall have the meaning assigned to such term in Section 6.20.

        "Environment" shall mean ambient air, indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources, the workplace or as otherwise defined in any Environmental Law.

        "Environmental Claim" shall mean any claim, notice, demand, order, action, suit, proceeding or other communication alleging liability for or obligation with respect to any investigation, remediation, removal, cleanup, response, corrective action, damages to natural resources, personal injury, property damage, fines, penalties or other costs resulting from, related to or arising out of (i) the presence, Release or threatened Release in or into the Environment of Hazardous Material at any location or (ii) any violation or alleged violation of any Environmental Law, and shall include any claim seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from, related to or arising out of the presence, Release or threatened

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Release of Hazardous Material or alleged injury or threat of injury to health, safety or the Environment.

        "Environmental Law" shall mean any and all present and future, foreign or domestic, federal, provincial, territorial or state (or any Subdivision of any of them) treaties, laws, statutes, ordinances, regulations, rules, decrees, orders, judgments, consent orders, consent decrees, code or other binding requirements, and the common law, relating to protection of public health or the Environment, the Release or threatened Release of Hazardous Material, natural resources or natural resource damages, or occupational safety or health, and any and all Environmental Permits.

        "Environmental Permit" shall mean any permit, license, approval, registration, notification, exemption, consent or other authorization required by or from a Governmental Authority under Environmental Law.

        "Equipment" shall have the meaning assigned to such term in the applicable Security Agreement.

        "Equity Financing" shall mean the cash equity investment in Holdings by the Equity Investors as the same is further invested in cash equity in the US Borrowers on or prior to the Closing Date, in an amount not less than $600 million on terms and conditions satisfactory to the Administrative Agents; provided that Sponsor and its Controlled Investment Affiliates shall, directly or indirectly, invest at least 50% of the aggregate amount of the Equity Financing.

        "Equity Interest" shall mean, with respect to any person, any and all shares, interests, participations or other equivalents, including membership interests (however designated, whether voting or nonvoting), of equity of such person, including, if such person is a partnership, partnership interests (whether general or limited) and 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 property of, such partnership, whether outstanding on the date hereof or issued after the Closing Date, but excluding debt securities convertible or exchangeable into such equity.

        "Equity Investors" shall mean Sponsor, its Controlled Investment Affiliates and one or more investors reasonably satisfactory to the Administrative Agents and the Arranger.

        "Equity Issuance" shall mean, without duplication, (i) any issuance or sale by Holdings after the Closing Date of any Equity Interests in Holdings (including any Equity Interests issued upon exercise of any warrant or option) or any warrants or options to purchase Equity Interests or (ii) any contribution to the capital of Holdings; provided, however, that an Equity Issuance shall not include (x) any Preferred Stock Issuance or Debt Issuance, (y) any such sale or issuance by Holdings of not more than an aggregate amount of 5.0% of its Equity Interests (including its Equity Interests issued upon exercise of any warrant or option or warrants or options to purchase its Equity Interests but excluding Disqualified Capital Stock), in each case, to directors, officers or employees of any Company and (z) any Excluded Issuance.

        "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.

        "ERISA Affiliate" shall mean, with respect to any person, any trade or business (whether or not incorporated) that, together with such person, is treated as a single employer under Section 414 (b), (c) or (m) of the Code.

        "ERISA Event" shall mean (a) any "reportable event," as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived by regulation); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the failure to make by its due date a required installment

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under Section 412(m) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the incurrence by any Company of any liability under Title IV of ERISA with respect to the termination of any Plan; (f) the incurrence by the Company of material liability, under Title IV of ERISA with respect to a defined benefit pension plan maintained by an ERISA Affiliate or a multi-employer plan (as defined in ERISA Section 3 (37)) contributed to by an ERISA Affiliate (g) the receipt by any Company from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, or the occurrence of any event or condition which could reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (h) the incurrence by any Company of any liability with respect to the withdrawal from any Plan or Multiemployer Plan; (i) the receipt by any Company of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (j) the "substantial cessation of operations" within the meaning of Section 4062(e) of ERISA with respect to a Plan; (k) the making of any amendment to any Plan which could result in the imposition of a Lien or the posting of a bond or other security; and (l) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to result in liability to any Company.

        "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans.

        "Eurodollar Loan" shall mean any Eurodollar Revolving Loan.

        "Eurodollar Revolving Borrowing" shall mean a Borrowing comprised of Eurodollar Revolving Loans.

        "Eurodollar Revolving Loan" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of Article II.

        "Event of Default" shall have the meaning assigned to such term in Section 8.01.

        "Excess Amount" shall have the meaning assigned to such term in Section 2.10(f)(iii).

        "Excess Availability" shall mean, at any time, (a) the lesser of (i) the Revolving Commitments of all of the Lenders and (ii) (x) the Borrowing Base plus (y) the lesser of the Canadian Borrowing Base and the Canadian Revolving Commitments on the date of determination less (b) all outstanding Loans and LC Exposure less (c) in the applicable Collateral Agents' reasonable discretion, the aggregate amount of all the outstanding and unpaid trade payables and other obligations of Borrowers and/or the Borrowing Base Guarantors which are not paid within 75 days past the due date according to their original terms of sale, in each case as of such date of determination less (d) in the applicable Collateral Agents' reasonable discretion, and without duplication, the amount of checks issued by Borrowers and/or the Borrowing Base Guarantors to pay trade payables and other obligations but which are not paid within 75 days past the due date according to their original terms of sale, in each case as of such date of determination, but which either have not yet been sent or are subject to other arrangements which are expected to delay the prompt presentation of such checks for payment.

        "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

        "Excluded Issuance" shall mean an issuance and sale of Qualified Capital Stock of Holdings, to the extent such Qualified Capital Stock is used, or the Net Cash Proceeds thereof shall be,

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within ninety (90) days of the consummation of such issuance and sale, used, without duplication, to finance Capital Expenditures or one or more Permitted Acquisitions.

        "Excluded Taxes" shall mean, with respect to the Administrative Agents, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of Borrowers hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), franchise taxes imposed on it (in lieu of net income taxes) and branch profits taxes imposed on it, by a jurisdiction (or any political subdivision thereof) as a result of the recipient being organized or having its principal office or, in the case of any Lender, its applicable lending office in such jurisdiction; (b) in the case of a Foreign Lender, any U.S. federal withholding tax that (i) is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from Borrowers with respect to such withholding tax pursuant to Section 2.15(a) or (y) if such Foreign Lender is an assignee pursuant to a request by Borrowers under Section 2.16; provided that this subclause (b)(i) shall not apply to any Tax imposed on a Lender following an Event of Default or in connection with an interest or participation in any Loan or other obligation that such Lender was required to acquire pursuant to Section 2.14(d), or (ii) is attributable to such Lender's failure to comply with Section 2.15(e); and (c) those Canadian federal withholding taxes under Part XIII of the ITA, if any, in excess of the amount of such taxes that would have been imposed had the recipient of the particular payment been, at the time of the payment, a resident of the United States for the purposes of the Canada-United States Income Tax Convention (1980), as amended from time to time, and entitled to the reduced withholding tax rate provided under paragraph 2 of Article XI thereof (such rate, for greater certainty, being 10% (ten percent) as at the date of this Agreement).

        "Executive Order" shall have the meaning assigned to such term in Section 3.22.

        "Existing Issuing Bank Letters of Credit" shall mean the outstanding letters of credit issued before the date hereof by an Issuing Bank for the account of a Borrower or a Subsidiary of a Borrower set forth on Schedule 1.01(c) hereto.

        "Existing Lender Letters of Credit" shall mean the outstanding letters of credit issued before the date hereof by Bank of America, N.A. for the account of a Borrower or a Subsidiary of a Borrower set forth on Schedule 1.01(d) hereto.

        "Existing Lien" shall have the meaning assigned to such term in Section 6.02(c).

        "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System of the United States 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 that is a Business Day, the average of the quotations for the day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.

        "Fee Letter" shall mean that certain Bank Fee Letter dated as of November 7, 2005 by and among UBS, UBSS, Bear Stearns, Bear Stearns Corporate Lending, Inc., Holdings and Merger Sub Co., as the same may be amended, amended and restated, supplemented, revised or modified from time to time.

        "Fees" shall mean the Commitment Fees, the Administrative Agent Fees, The Collateral Monitoring Fees, the LC Participation Fees and the Fronting Fees.

        "Final Maturity Date" shall mean the Revolving Maturity Date.

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        "Financial Officer" of any person shall mean the chief financial officer, principal accounting officer, treasurer or controller of such person.

        "FIRREA" shall mean the Federal Institutions Reform, Recovery and Enforcement Act of 1989, as amended.

        "First Priority" means, with respect to any Lien purported to be created in any Collateral pursuant to any Security Document, that such Lien is the most senior Lien to which such Collateral is subject (subject to Permitted Liens).

        "Foreign Lender" shall mean any Lender that is not, for United States federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation, partnership or other entity treated as a corporation or partnership created or organized in or under the laws of the United States, or any political subdivision thereof, (iii) an estate whose income is subject to U.S. federal income taxation regardless of its source or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States persons have the authority to control all substantial decisions of such trust.

        "Foreign Plan" shall mean any defined benefit pension plan, program, policy, arrangement or agreement maintained or contributed to by any Company with respect to employees employed outside the United States.

        "Foreign Subsidiary" shall mean a Subsidiary that is organized under the laws of a jurisdiction other than the United States or any state thereof or the District of Columbia.

        "Freight Forwarding Agreement" means a multi-party agreement in a form and substance satisfactory to Collateral Agents among a Borrower, a customs broker, freight forwarder, or other carrier, and the applicable Collateral Agents in which the customs broker, freight forwarder, or other carrier acknowledges that it has control over (in the case of persons other than carriers which are issuing non-negotiable bills of lading) and holds the documents evidencing ownership of the subject Inventory or other property for the benefit of such Collateral Agents and agrees, upon notice from such Collateral Agent to hold and dispose of the subject Inventory and other property solely as directed by the such Collateral Agent.

        "Fronting Fee" shall have the meaning assigned to such term in Section 2.05(d).

        "Fund" shall mean any person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

        "GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis.

        "Governmental Authority" shall mean the government of the United States of America or any other nation, or of any political subdivision thereof, whether state, provincial, territorial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

        "Governmental Real Property Disclosure Requirements" shall mean any Requirement of Law of any Governmental Authority requiring notification of the buyer, lessee, mortgagee, assignee or other transferee of any Real Property, facility, establishment or business, or notification, registration or filing to or with any Governmental Authority, in connection with the sale, lease, mortgage, assignment or other transfer (including any transfer of control) of any Real Property,

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facility, establishment or business, of the actual or threatened presence or Release in or into the Environment, or the use, disposal or handling of Hazardous Material on, at, under or near the Real Property, facility, establishment or business to be sold, leased, mortgaged, assigned or transferred.

        "Guaranteed Obligations" shall have the meaning assigned to such term in Section 7.01.

        "Guarantees" shall mean the guarantees issued pursuant to Article VII by Holdings and the Subsidiary Guarantors.

        "Guarantors" shall mean Holdings, each Borrowing Base Guarantor and the Subsidiary Guarantors.

        "Hazardous Materials" shall mean the following: hazardous substances; hazardous wastes; polychlorinated biphenyls ("PCBs") or any substance or compound containing PCBs; asbestos or any asbestos-containing materials in any form or condition; radon or any other radioactive materials including any source, special nuclear or by-product material; petroleum, crude oil or any fraction thereof; and any other pollutant or contaminant or chemicals, wastes, materials, compounds, constituents or substances, subject to regulation or which can give rise to liability under any Environmental Laws.

        "Hedging Agreement" shall mean any swap, cap, collar, forward purchase or similar agreements or arrangements dealing with interest rates, currency exchange rates or commodity prices, either generally or under specific contingencies entered into for the purpose of hedging any Borrower's exposure to interest or exchange rates, loan credit exchange, security or currency valuations or commodity prices not for speculative purposes.

        "Hedging Obligations" shall mean obligations under or with respect to Hedging Agreements.

        "Holdings" shall have the meaning assigned to such term in the preamble hereto.

        "Incorporated Borrowing Base" shall mean at any time, for each US Borrowing Base Guarantor, subject to adjustment as provided in Section 2.20, an amount equal to the lesser of:

        (a)   the sum of, without duplication:

        (i)    the book value of Eligible Accounts of such US Borrowing Base Guarantor multiplied by the advance rate of 85%, plus

        (ii)   (A) at any time other than during a Seasonal Advance Period, the lesser of (x) the advance rate of 70% of the Cost of Eligible Inventory of US Borrowing Base Guarantors, and (y) the advance rate of 85% of the Net Recovery Cost Percentage multiplied by the Cost of Eligible Inventory of US Borrowing Base Guarantors and (B) during a Seasonal Advance Period, the lesser of (x) the advance rate of 80% of the Cost of Eligible Inventory of US Borrowing Base Guarantors, and (y) the advance rate of 90% of the Net Recovery Cost Percentage multiplied by the Cost of Eligible Inventory of US Borrowing Base Guarantors, or

        (b)   with respect to the US Borrowing Base Guarantors, the applicable Borrowing Base Guarantor Intercompany Loan Amount.

        "Increase Effective Date" shall have the meaning assigned to such term in Section 2.19(a).

        "Increase Joinder" shall have the meaning assigned to such term in Section 2.19(c).

        "Indebtedness" of any person shall mean, without duplication, (a) all obligations of such person for borrowed money or advances; (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person; (d) all

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obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business on normal trade terms and not overdue by more than 90 days); (e) all Indebtedness of others secured by any Lien on property owned or acquired by such person, whether or not the obligations secured thereby have been assumed, but limited to the fair market value of such property; (f) all Capital Lease Obligations, Purchase Money Obligations and synthetic lease obligations of such person; (g) all Hedging Obligations to the extent required to be reflected on a balance sheet of such person; (h) all obligations of such person for the reimbursement of any obligor in respect of Standby Letters of Credit, letters of guaranty, bankers' acceptances and similar credit transactions; and (i) all Contingent Obligations of such person in respect of Indebtedness or obligations of others of the kinds referred to in clauses (a) through (h) above. The Indebtedness of any person shall include the Indebtedness of any other entity (including any partnership in which such person is a general partner) to the extent such person is liable therefor as a result of such person's ownership interest in or other relationship with such entity, except (other than in the case of general partner liability) to the extent that terms of such Indebtedness expressly provide that such person is not liable therefor.

        "Indemnified Taxes" shall mean all Taxes other than Excluded Taxes.

        "Indemnitee" shall have the meaning assigned to such term in Section 11.03(b).

        "Information" shall have the meaning assigned to such term in Section 11.12.

        "Insolvency Laws" shall mean any of the BIA, the Companies' Creditors Arrangement Act (Canada), and the Winding-Up and Restructuring Act (Canada), each as now exists or may from time to time hereafter be amended, modified, recodified, supplemented or replaced, together with all rules, regulations and interpretations thereunder or related thereto, and any other applicable insolvency or other similar law of any jurisdiction, including any law of any jurisdiction permitting a debtor to obtain a stay or a compromise of the claims of its creditors against it.

        "Instruments" shall mean all "instruments," as such term is defined in the UCC as in effect on the date hereof in the State of New York or as defined in the PPSA, as applicable, in which any Person now or hereafter has rights.

        "Insurance Policies" shall mean the insurance policies and coverages required to be maintained by each Loan Party which is an owner of Mortgaged Property with respect to the applicable Mortgaged Property pursuant to Section 5.04 and all renewals and extensions thereof.

        "Insurance Requirements" shall mean, collectively, all provisions of the Insurance Policies, all requirements of the issuer of any of the Insurance Policies and all orders, rules, regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon each Loan Party which is an owner of Mortgaged Property and applicable to the Mortgaged Property or any use or condition thereof.

        "Intellectual Property" shall have the meaning assigned to such term in Section 3.06(a).

        "Intercompany Note" shall mean a promissory note substantially in the form of Exhibit P.

        "Intercreditor Agreement" shall mean that certain Intercreditor Agreement dated as of the date hereof by and among Holdings, US Borrowers, Canadian Borrower, the Subsidiary Guarantors party thereto, US Administrative Agent, US Collateral Agents, Canadian Collateral Agents and Senior Note Collateral Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.

        "Interest Election Request" shall mean a request by a Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.08(b), substantially in the form of Exhibit E.

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        "Interest Payment Date" shall mean (a) with respect to any ABR Loan or Canadian Prime Rate Loan, the last Business Day of each March, June, September and December to occur during any period in which such Loan is outstanding, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Loan with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, (c) with respect to any Swingline Loan, the last Business Day of each month to occur during any period in which such Swingline Loan is outstanding and (d) with respect to any Revolving Loan or Swingline Loan, the Revolving Maturity Date or such earlier date on which the Revolving Commitments are terminated.

        "Interest Period" shall mean, with respect to any Eurodollar Borrowing or Bankers' Acceptance, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months (or, if each affected Lender so agrees, nine or twelve months) thereafter as the applicable Borrower may elect; provided that with respect to any Eurodollar Borrowing (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion, rollover or continuation of such Borrowing.

        "Inventory" shall mean all "inventory," as such term is defined in the UCC as in effect on the date hereof in the State of New York, or as defined in the PPSA, as applicable, wherever located, in which any Person now or hereafter has rights.

        "Inventory Appraisal" shall mean (a) on the Closing Date, the audit prepared by the Great American Appraisal & Valuation Services, L.L.C. dated December, 2005 and (b) thereafter, the most recent inventory appraisal conducted by an independent appraisal firm and delivered pursuant to Section 9 hereof.

        "Investments" shall have the meaning assigned to such term in Section 6.04.

        "Issuing Bank" shall mean, as the context may require, (a) UBS AG, Stamford Branch, in its capacity as issuer of Letters of Credit issued by it; (b) Wachovia Bank, National Association in its capacity as issuer of Letters of Credit issued by it; (c) The Bank of New York in its capacity as issuer of Letters of Credit issued by it; (d) National City Bank in its capacity as issuer of Letters of Credit issued by it; (e) any other Lender that may become an Issuing Bank pursuant to Sections 2.18(j) and (k) in its capacity as issuer of Letters of Credit issued by such Lender; or (f) collectively, all of the foregoing.

        "ITA" means the Income Tax Act, RSC 1985, c.1 (5^th supp), as amended from time to time.

        "Joinder Agreement" shall mean a joinder agreement substantially in the form of Exhibit F.

        "Landlord Access Agreement" shall mean a Landlord Access Agreement, substantially in the form of Exhibit G, or such other form as may reasonably be acceptable to the applicable Administrative Agent.

        "LC Acceptance(s)" shall mean acceptances that are created by an Issuing Bank pursuant to Commercial Letters of Credit.

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        "LC Collateral Account" shall mean a collateral account in the form of a deposit account established and maintained by the applicable Collateral Agents for the benefit of the Secured Parties, in accordance with the provisions of Section 9.01.

        "LC Commitment" shall mean the commitment of the Issuing Bank to issue Letters of Credit pursuant to Section 2.18. The total amount of the LC Commitment shall initially be $400 million, but in no event exceed the Revolving Commitment.

        "LC Disbursement" shall mean a payment or disbursement made by the Issuing Bank pursuant to a Letter of Credit or a LC Acceptance.

        "LC Exposure" shall mean at any time the sum of (a) the Dollar Equivalent of the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the Dollar Equivalent of the aggregate principal amount of all Reimbursement Obligations outstanding at such time, plus, (c) the Dollar Equivalent of the aggregate amount owing on all outstanding LC Acceptances. The LC Exposure of any Revolving Lender at any time shall mean its Pro Rata Percentage of the aggregate LC Exposure at such time.

        "LC Obligations" shall mean each payment required to be made by US Borrowers and the other Loan Parties under this Agreement in respect of any Letter of Credit or LC Acceptance, when and as due, including payments in respect of Reimbursement Obligations, interest thereon and obligations to provide cash collateral.

        "LC Participation Fee" shall have the meaning assigned to such term in Section 2.05(d).

        "LC Request" shall mean a request by a Borrower in accordance with the terms of Section 2.18(b) and substantially in the form of Exhibit H, or such other form as shall be approved by the Administrative Agents.

        "Leases" shall mean any and all leases, subleases, tenancies, options, concession agreements, rental agreements, occupancy agreements, franchise agreements, access agreements and any other agreements (including all amendments, extensions, replacements, renewals, modifications and/or guarantees thereof), whether or not of record and whether now in existence or hereafter entered into, affecting the use or occupancy of all or any material portion of any Real Property.

        "Lender Addendum" shall mean with respect to any Lender on the Closing Date, a lender addendum in the form of Exhibit I, to be executed and delivered by such Lender on the Closing Date as provided in Section 11.15, as the same may be amended, restated, supplemented or otherwise modified from time to time.

        "Lender Hedging Agreement" shall mean any Hedging Agreement between a Borrower and any Person (or affiliate of such Person) that was a Lender or an Affiliate of such lender at the time it entered into such Hedging Agreement whether or not such Person has ceased to be a Lender under this Agreement.

        "Lenders" shall mean (a) the financial institutions that have become a party hereto pursuant to a Lender Addendum and (b) any financial institution that has become a party hereto pursuant to an Assignment and Assumption, other than, in each case, any such financial institution that has ceased to be a party hereto pursuant to an Assignment and Assumption. Unless the context clearly indicates otherwise, the term "Lenders" shall include the Swingline Lenders and the Canadian Revolving Lenders.

        "Letter of Credit" shall mean any (i) Standby Letter of Credit, (ii) Commercial Letter of Credit, in each case, issued or to be issued by an Issuing Bank for the account of the US Borrowers or the Canadian Borrower pursuant to Section 2.18 and (iii) the Existing Issuing Bank Letters of Credit.

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        "Letter of Credit Expiration Date" shall mean the date which is five (5) days prior to the Revolving Maturity Date.

        "LIBOR Rate" shall mean, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the applicable Administrative Agent to be the arithmetic mean (rounded upward, if necessary, to the nearest 1/100th of 1%) of the offered rates for deposits in dollars with a term comparable to such Interest Period that appears on the Telerate British Bankers Assoc. Interest Settlement Rates Page (as defined below) at approximately 11:00 a.m., London, England time, on the second full Business Day preceding the first day of such Interest Period; provided, however, that (i) if no comparable term for an Interest Period is available, the LIBOR Rate shall be determined using the weighted average of the offered rates for the two terms most nearly corresponding to such Interest Period and (ii) if there shall at any time no longer exist a Telerate British Bankers Assoc. Interest Settlement Rates Page, "LIBOR Rate" shall mean, with respect to each day during each Interest Period pertaining to Eurodollar Borrowings comprising part of the same Borrowing, the rate per annum equal to the rate at which the applicable Administrative Agent is offered deposits in dollars at approximately 11:00 a.m., London, England time, two Business Days prior to the first day of such Interest Period in the London interbank market for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to its portion of the amount of such Eurodollar Borrowing to be outstanding during such Interest Period. "Telerate British Bankers Assoc. Interest Settlement Rates Page" shall mean the display designated as Page 3750 (or other appropriate page if dollars do not appear on such page) on the Telerate System Incorporated Service (or such other page as may replace such page on such service for the purpose of displaying the rates at which dollar deposits are offered by leading banks in the London interbank deposit market).

        "Lien" shall mean, with respect to any property, (a) any mortgage, deed of trust, lien, pledge, encumbrance, claim, charge, assignment, hypothecation, security interest or encumbrance of any kind or any arrangement to provide priority or preference or any filing of any financing statement or financing change statement under the UCC or the PPSA or any other similar notice of lien under any similar notice or recording statute of any Governmental Authority, including any easement, right-of-way or other encumbrance on title to Real Property, in each of the foregoing cases whether voluntary or imposed by law, and any agreement to give any of the foregoing; (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such property; and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

        "Line Reserve" shall have the meaning assigned to such term in Section 2.10(f)(ii).

        "LNT" shall have the meaning assigned to such term in the preamble.

        "LNT Center" shall have the meaning assigned to such term in the preamble.

        "LNT Partnership" means Linens 'n Things Canada Limited Partnership, an Alberta limited partnership.

        "LNT I" means Linens 'n Things Investment Canada I Company, a Nova Scotia unlimited liability company.

        "LNT II" means Linens 'n Things Investment Canada II Company, a Nova Scotia unlimited liability company.

        "Loan Documents" shall mean this Agreement, any Borrowing Base Certificate, the Letters of Credit, the Notes (if any), the Intercreditor Agreement, and the Security Documents.

        "Loan Parties" shall mean Holdings, Borrowers and the Subsidiary Guarantors.

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        "Loans" shall mean, as the context may require, a US Revolving Loan, a Canadian Revolving Loan or a Swingline Loan (and shall include any Loans contemplated by Section 2.19).

        "Management Services Agreement" means that certain Management Services Agreement dated as of February 14, 2006 among LNT, Holdings, Apollo Management V, L.P., NRDC Linens B LLC and Silver Point Capital Fund Investments LLC.

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

        "Material Adverse Effect" shall mean (a) a material adverse effect on the business, property, results of operations, prospects or condition, financial or otherwise, or material agreements of US Borrowers and their Subsidiaries, taken as a whole; (b) material impairment of the ability of the Loan Parties to fully and timely perform their obligations under the Loan Documents; (c) material impairment of the rights of or benefits or remedies available to the Lenders or the Collateral Agents under any Loan Document; or (d) a material adverse effect on the Collateral or the Liens in favor of the Collateral Agents (for their benefit and for the benefit of the other Secured Parties) on the Collateral or the priority of such Liens.

        "Material Indebtedness" shall mean (a) the Senior Note Documents and (b) any other Indebtedness (other than the Loans and Letters of Credit) or Hedging Obligations of Holdings or any of its Subsidiaries in an aggregate outstanding principal amount exceeding $30 million. For purposes of determining Material Indebtedness, the "principal amount" in respect of any Hedging Obligations of any Loan Party at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Loan Party would be required to pay if the related Hedging Agreement were terminated at such time.

        "Maximum Rate" shall have the meaning assigned to such term in Section 11.14.

        "Merger" shall have the meaning assigned to such term in the second recital hereto.

        "Mortgage" shall mean an agreement, including, but not limited to, a mortgage, deed of trust or any other document, creating and evidencing a Lien on a Mortgaged Property, which shall be substantially in a form reasonably satisfactory to the applicable Collateral Agents, in each case, with such schedules and including such provisions as shall be reasonably necessary to conform such document to applicable local or foreign law or as shall be customary under applicable local or foreign law.

        "Mortgaged Property" shall mean (a) each Real Property identified as a Mortgaged Property on Schedule 8(a) to the Perfection Certificate dated the Closing Date and (b) each Real Property, if any, which shall be subject to a Mortgage delivered after the Closing Date pursuant to Section 5.11(c).

        "Multiemployer Plan" shall mean a multiemployer plan within the meaning of Section 4001(a)(3) or Section 3(37) of ERISA (a) to which any Company is then making or accruing an obligation to make contributions; (b) to which any Company has within the preceding five plan years made contributions; or (c) with respect to which any Company could incur liability.

        "Net Cash Proceeds" shall mean:

        (a)   with respect to any Asset Sale (other than any issuance or sale of Equity Interests), the cash proceeds received by Holdings or any of its Subsidiaries (including cash proceeds subsequently received (as and when received by Holdings or any of its Subsidiaries) in respect of non-cash consideration initially received) net of (i) selling expenses (including reasonable brokers' fees or commissions, legal, accounting and other professional and transactional fees, transfer and similar taxes and Borrowers' good faith estimate of income taxes paid or payable in connection with such sale); (ii) amounts reasonably estimated by Holdings or any of its

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Subsidiaries as a reserve, in accordance with GAAP, against (x) any liabilities under any indemnification obligations associated with such Asset Sale or (y) any other liabilities retained by Holdings or any of its Subsidiaries associated with the properties sold in such Asset Sale (provided that, to the extent and at the time any such amounts are released from such reserve, such amounts shall constitute Net Cash Proceeds); (iii) Borrowers' good faith estimate of payments required to be made with respect to unassumed liabilities relating to the properties sold within 90 days of such Asset Sale (provided that, to the extent such cash proceeds are not used to make payments in respect of such unassumed liabilities within 90 days of such Asset Sale, such cash proceeds shall constitute Net Cash Proceeds); and (iv) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness for borrowed money (other than Obligations) which is secured by a Lien on the properties sold in such Asset Sale (so long as such Lien was permitted to encumber such properties under the Loan Documents at the time of such sale) and which is repaid with such proceeds (other than any such Indebtedness assumed by the purchaser of such properties);

        (b)   with respect to any Debt Issuance, any Equity Issuance or any other issuance or sale of Equity Interests by Holdings or any of its Subsidiaries, the cash proceeds thereof, net of customary fees, commissions, costs and other expenses incurred in connection therewith; and

        (c)   with respect to any Casualty Event, the cash insurance proceeds, condemnation awards and other compensation received in respect thereof, net of all reasonable costs and expenses incurred in connection with the collection of such proceeds, awards or other compensation in respect of such Casualty Event.

        "Net Income" means, with respect to any specified person, the net income (loss) of such person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding for the purposes of the calculation of the Consolidated Fixed Charge Coverage Ratio only, however:

        (i)    any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (a) any Asset Sale; or (b) the disposition of any securities by such person or any of its Subsidiaries or the extinguishment of any Indebtedness of such person or any of its Subsidiaries; and

        (ii)   any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss).

        "Net Recovery Cost Percentage" shall mean the fraction, expressed as a percentage, (a) the numerator of which is the amount equal to the recovery on the aggregate amount of the Inventory or Canadian Inventory, as applicable, at such time on a "net orderly liquidation value" basis as set forth in the most recent Inventory Appraisal received by Collateral Agents in accordance with Section 4.01 or Section 9, net of operating expenses, liquidation expenses and commissions reasonably anticipated in the disposition of such assets, and (b) the denominator of which is the original Cost of the aggregate amount of the Inventory or the Canadian Inventory, as applicable, subject to appraisal.

        "Non-BA Lender" shall mean a Canadian Revolving Lender that cannot or does not, as a matter of policy, accept Bankers' Acceptances.

        "Non-Guarantor Subsidiary" shall mean each Subsidiary that is not a Subsidiary Guarantor.

        "Notes" shall mean any notes evidencing the Revolving Loans or Swingline Loans issued pursuant to this Agreement, if any, substantially in the form of Exhibit K-1, K-2, K-3 or K-4.

        "Obligations" shall mean (a) obligations of Borrowers and the other Loan Parties from time to time arising under or in respect of the due and punctual payment of (i) the principal of and

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premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by Borrowers and the other Loan Parties under this Agreement in respect of any Letter of Credit or LC Acceptance, when and as due, including payments in respect of Reimbursement Obligations, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of Borrowers and the other Loan Parties under this Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of Borrowers and the other Loan Parties under or pursuant to this Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of the Borrowers and any and all of the other Loan Parties under each Lender Hedging Agreement and (d) the due and punctual payment and performance of all obligations in respect of overdrafts and related liabilities owed to any Lender, any Affiliate of a Lender, the Administrative Agents or the Collateral Agents arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfer of funds.

        "OFAC" shall have the meaning assigned to such term in Section 3.22.

        "Officers' Certificate" shall mean a certificate executed by the chairman of the Board of Directors (if an officer), the chief executive officer, the president or one of the Financial Officers, each in his or her official (and not individual) capacity.

        "Organizational Documents" shall mean, with respect to any person, (i) in the case of any corporation, the certificate of incorporation and by-laws (or similar documents) of such person, (ii) in the case of any limited liability company, the certificate of formation and operating agreement (or similar documents) of such person, (iii) in the case of any limited partnership, the certificate of formation and limited partnership agreement (or similar documents) of such person, (iv) in the case of any general partnership, the partnership agreement (or similar document) of such person, (v) with respect to any Foreign Subsidiary, the equivalent of the foregoing in its jurisdiction of incorporation or organization, and (vi) in any other case, the functional equivalent of the foregoing.

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

        "Participant" shall have the meaning assigned to such term in Section 11.04(d).

        "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA.

        "Perfection Certificate" shall mean a certificate in the form of Exhibit L-1 or any other form approved by the Collateral Agents, as the same shall be supplemented from time to time by a Perfection Certificate Supplement or otherwise.

        "Perfection Certificate Supplement" shall mean a certificate supplement in the form of Exhibit L-2 or any other form approved by the Collateral Agents.

        "Permitted Acquisition" shall mean any transaction or series of related transactions for the direct or indirect (a) acquisition of all or substantially all of the property of any person, or of any

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line of business or division of any person; (b) acquisition of in excess of 50% of the Equity Interests of any person, and otherwise causing such person to become a Subsidiary of such person; or (c) merger, amalgamation or consolidation or any other combination with any person, if each of the following conditions is met:

        (i)    no Default then exists or would result therefrom;

        (ii)   after giving effect to such transaction on a Pro Forma Basis, (A) Average Excess Availability determined as of the date five (5) Business Days prior to the Closing Date of such acquisition would have exceeded $150 million (after giving effect to such acquisition and the Revolving Loans to be funded in connection therewith as if made on the first day of such period), and (B) the projections in connection with the proposed acquisition for the 2 years after the consummation of such acquisition shall be reasonably acceptable to the Collateral Agents and Administrative Agents;

        (iii)  no Company shall, in connection with any such transaction, assume or remain liable with respect to any Indebtedness or other liability (including any material tax or ERISA liability) of the related seller or the business, person or properties acquired, except (A) to the extent permitted under Section 6.01 and (B) obligations not constituting Indebtedness incurred in the ordinary course of business and necessary or desirable to the continued operation of the underlying properties, and any other such liabilities or obligations not permitted to be assumed or otherwise supported by any Company hereunder shall be paid in full or released as to the business, persons or properties being so acquired on or before the consummation of such acquisition;

        (iv)  the person or business to be acquired shall be, or shall be engaged in, a business of the type that US Borrowers and their Subsidiaries are permitted to be engaged in under Section 6.15 and the property acquired in connection with any such transaction shall be made subject to the Lien of the Security Documents and shall be free and clear of any Liens, other than Permitted Liens;

        (v)   the Board of Directors of the person to be acquired shall not have indicated publicly its opposition to the consummation of such acquisition (which opposition has not been publicly withdrawn);

        (vi)  all transactions in connection therewith shall be consummated in accordance with all applicable Requirements of Law;

        (vii) with respect to any transaction involving Acquisition Consideration of more than $100 million, unless the Administrative Agent shall otherwise agree, Borrowers shall have provided the Administrative Agents and the Lenders with (A) historical financial statements for the last three fiscal years (or, if less, the number of years since formation) of the person or business to be acquired (audited if available without undue cost or delay) and unaudited financial statements thereof for the most recent interim period which are available, (B) reasonably detailed projections for the succeeding five years pertaining to the person or business to be acquired and updated projections for Borrower after giving effect to such transaction, (C) a reasonably detailed description of all material information relating thereto and copies of all material documentation pertaining to such transaction, and (D) all such other information and data relating to such transaction or the person or business to be acquired as may be reasonably requested by the Administrative Agents or the Required Lenders;

        (ix)  the Property acquired in connection with any such acquisition shall be made subject to the Lien of the Security Documents on terms reasonably satisfactory to the Agents, and shall be free and clear of any Liens, other than Permitted Liens, and the Agents shall have received all opinions, certificates, lien search results and other documents reasonably requested by the Agents;

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        (x)   at least 10 Business Days prior to the proposed date of consummation of the transaction, Borrowers shall have delivered to the Agents and the Lenders an Officers' Certificate certifying that (A) such transaction complies with this definition (which shall have attached thereto reasonably detailed backup data and calculations showing such compliance), and (B) such transaction could not reasonably be expected to result in a Material Adverse Effect; and

        (xi)  the Acquisition Consideration (exclusive of any amounts financed by Excluded Issuances) for such acquisition shall not exceed $300 million, and the aggregate amount of the Acquisition Consideration (exclusive of any amounts financed by Excluded Issuances) for all Permitted Acquisitions since the Closing Date shall not exceed $500 million; provided that any Equity Interests constituting all or a portion of such Acquisition Consideration shall not have a cash dividend requirement on or prior to the Final Maturity Date.

        "Permitted Discretion" shall mean a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset based lender) business judgment.

        "Permitted Holders" shall mean (a) Sponsor, (b) its Controlled Investment Affiliates, (c) Silver Point Capital, L.P. and National Realty & Development Corp. and (d) each such person's Related Parties.

        "Permitted Liens" shall have the meaning assigned to such term in Section 6.02.

        "Permitted Tax Distributions" shall mean payments, dividends or distributions by US Borrowers and any US Subsidiaries to Holdings in order to pay consolidated or combined federal, state or local taxes, including estimated taxes, not payable directly by US Borrowers or any of their Subsidiaries which payments by US Borrowers and their US Subsidiaries are not in excess of the tax liabilities that would have been payable by US Borrowers and their Subsidiaries on a stand-alone basis.

        "person" shall mean any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

        "Plan" shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA which is maintained or contributed to by any Company or with respect to which any Company could incur liability (including under Section 4069 of ERISA) other than plans of ERISA Affiliates.

        "Post-Increase Revolving Lenders" shall have the meaning assigned to such term in Section 2.19(d).

        "PPSA" shall mean the Personal Property Security Act (Ontario) and the Regulations thereunder, as from time to time in effect, provided, however, if attachment, perfection or priority of any Agent's security interest in any Collateral is governed by the personal property security laws of any jurisdiction other than Ontario, PPSA shall mean those personal property security laws in such other jurisdiction of Canada for the purposes of the provisions hereof relating to such attachment, perfection or priority and for the definitions related to such provisions.

        "Pre-Increase Revolving Lenders" shall have the meaning assigned to such term in Section 2.19(d).

        "Preferred Stock" shall mean, with respect to any person, any and all preferred or preference Equity Interests (however designated) of such person whether now outstanding or issued after the Closing Date.

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        "Preferred Stock Issuance" shall mean the issuance or sale by Holdings or any of its Subsidiaries of any Preferred Stock after the Closing Date (other than any Excluded Issuance).

        "Premises" shall have the meaning assigned thereto in the applicable Mortgage.

        "Priority Payables" shall mean, at any time, the full amount of the liabilities at such time which have a trust imposed to provide for payment or security interest, lien or charge ranking or capable of ranking senior to or pari passu with security interests, hypothecs, liens or charges securing the Obligations on any of the Collateral under federal, provincial, state, county, municipal, or local law including, but not limited, to claims for unremitted and accelerated rents, taxes, wages, workers' compensation obligations, vacation pay, government royalties or pension fund obligations, together with the aggregate value, determined in accordance with GAAP, of all Eligible Canadian Inventory which applicable Collateral Agents consider may be or may become subject to a right of a supplier to recover possession thereof under any federal or provincial or territorial law, where such supplier's right may have priority over the security interests, liens or charges securing the Obligations including, without limitation, Eligible Canadian Inventory subject to a right of a supplier to repossess goods pursuant to Section 81.1 of the BIA.

        "Private Label Credit Card" shall mean a credit card that bears either Borrower's trademark and/or logo and is issued by a third party which takes the credit risk as to customers and makes payments to the Borrowers or Guarantors in a manner similar to other major credit card issuers.

        "Pro Forma Basis" shall mean on a basis in accordance with GAAP and Regulation S-X and otherwise reasonably satisfactory to the Administrative Agent.

        "Pro Rata Percentage" of any Revolving Lender at any time shall mean the percentage of the total Revolving Commitments of all Revolving Lenders represented by such Lender's Revolving Commitment, and with respect to any Canadian Revolving Lender at any time, the percentage of the total Canadian Revolving Commitments of all Canadian Revolving Lenders represented by such Canadian Revolving Lender's Canadian Revolving Commitment.

        "property" shall mean any right, title or interest in or to property or assets of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible and including Equity Interests or other ownership interests of any person and whether now in existence or owned or hereafter entered into or acquired, including all Real Property.

        "Property Material Adverse Effect" shall have the meaning assigned thereto in the Mortgage.

        "Purchase Money Obligation" shall mean, for any person, the obligations of such person in respect of Indebtedness (including Capital Lease Obligations) incurred for the purpose of financing all or any part of the purchase price of any property (including Equity Interests of any person) or the cost of installation, construction or improvement of any property and any refinancing thereof; provided, however, that (i) such Indebtedness is incurred within one year after such acquisition of such property by such person and (ii) the amount of such Indebtedness does not exceed 100% of the cost of such acquisition, installation, construction or improvement, as the case may be.

        "Qualified Capital Stock" of any person shall mean any Equity Interests of such person that are not Disqualified Capital Stock.

        "Real Property" shall mean, collectively, all right, title and interest (including any leasehold, mineral or other estate) in and to any and all parcels of or interests in real property owned, leased or operated by any person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures.

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        "Refinancing" shall mean the repayment in full and the termination of any commitment to make extensions of credit under all of the outstanding indebtedness of Holdings or any of its Subsidiaries listed on Schedule 1.01(a).

        "Register" shall have the meaning assigned to such term in Section 11.04(c).

        "Regulation D" shall mean Regulation D of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

        "Regulation S-X" shall mean Regulation S-X promulgated under the Securities Act.

        "Regulation T" shall mean Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

        "Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

        "Regulation X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

        "Reimbursement Obligations" shall mean Borrowers' obligations under Section 2.18(e) to reimburse LC Disbursements.

        "Related Parties" shall mean, with respect to any person, such person's Affiliates and the partners, directors, officers, employees, agents and advisors of such person and of such person's Affiliates.

        "Release" shall mean any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating of any Hazardous Material in, into, onto or through the Environment.

        "Required Lenders" shall mean Lenders having more than 50% of the sum of all Loans outstanding, LC Exposure and unused Revolving Commitments.

        "Requirements of Law" shall mean, collectively, any and all requirements of any Governmental Authority including any and all laws, judgments, orders, decrees, ordinances, rules, regulations, statutes or case law.

        "Reserves" shall mean reserves established against the Borrowing Base or Canadian Borrowing Base that the Collateral Agents may, in their Permitted Discretion, establish from time to time.

        "Response" shall mean (a) "response" as such term is defined in CERCLA, 42 U.S.C. § 9601(24), and (b) all other actions required by any Governmental Authority or voluntarily undertaken to (i) clean up, remove, treat, abate or in any other way address any Hazardous Material in the Environment; (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Material; or (iii) perform studies and investigations in connection with, or as a precondition to, or to determine the necessity of the activities described in, clause (i) or (ii) above.

        "Responsible Officer" of any person shall mean any executive officer or Financial Officer of such person and any other officer or similar official thereof with responsibility for the administration of the obligations of such person in respect of this Agreement.

        "Reuters Screen CDOR Page" shall mean the display designated as page CDOR on the Reuters Monitor Money Rates Service or such other page as may, from time to time, replace that page on that service for the purpose of displaying bid quotations for bankers' acceptances accepted by leading Canadian banks.

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        "Revolving Availability Period" shall mean the period from and including the Closing Date to but excluding the earlier of (i) the Business Day preceding the Revolving Maturity Date and (ii) the date of termination of the Revolving Commitments.

        "Revolving Borrowing" shall mean a Borrowing comprised of Revolving Loans.

        "Revolving Commitment" shall mean, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans hereunder up to the amount set forth on Schedule I to the Lender Addendum executed and delivered by such Lender or by an Increase Joinder delivered pursuant to Section 2.19, or in the Assignment and Assumption pursuant to which such Lender assumed its Revolving Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 11.04. The portion of the Revolving Commitments, if any, which may be utilized for Canadian Revolving Loans shall constitute the Canadian Revolving Commitment, which shall be treated as a sub-facility of the Revolving Commitment and the total Revolving Loans and LC Exposure shall not exceed the total Revolving Commitments. The aggregate amount of the Lenders' Revolving Commitments on the Closing Date is $600 million.

        "Revolving Exposure" shall mean, with respect to any Lender at any time, the Dollar Equivalent of the aggregate principal amount at such time of all outstanding Revolving Loans of such Lender, plus the Dollar Equivalent of the aggregate amount at such time of such Lender's LC Exposure, plus the Dollar Equivalent of the aggregate amount at such time of such Lender's Swingline Exposure.

        "Revolving Lender" shall mean a Lender with a Revolving Commitment and, with respect to any Canadian Revolving Commitment, shall include the respective Canadian Revolving Lender; it being understood that each Revolving Lender that is not a Canadian Revolving Lender shall have an affiliated Canadian Revolving Lender that will provide the Canadian Revolving Loans and become a signatory hereto.

        "Revolving Loan" shall mean a Loan made by any of the Lenders to any Borrower pursuant to Section 2.01(a) or (b). Each Revolving Loan shall either be an ABR Revolving Loan, Eurodollar Revolving Loan, Canadian Prime Rate Loan or Bankers' Acceptance.

        "Revolving Maturity Date" shall mean the date which is five (5) years after the Closing Date or, if such date is not a Business Day, the first Business Day thereafter.

        "Sale and Leaseback Transaction" means any arrangement, directly or indirectly, with any person whereby any person shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold or transferred.

        "Sarbanes-Oxley Act" shall mean the United States Sarbanes-Oxley Act of 2002, as amended, and all rules and regulations promulgated thereunder.

        "Schedule I Lender" means any Lender named on Schedule I to the Bank Act (Canada).

        "Seasonal Advance Period" shall mean the period from and including September 1 of each year to and including December 31 of the same year.

        "Secured Obligations" shall mean (a) the Obligations, (b) the due and punctual payment and performance of all obligations of Borrowers and the other Loan Parties under each Hedging Agreement entered into with any counterparty that is a Secured Party and (c) the due and punctual payment and performance of all obligations in respect of overdrafts and related liabilities

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owed to any Lender, any Affiliate of a Lender, the Administrative Agents or the Collateral Agents arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfer of funds.

        "Secured Parties" shall mean, collectively, the Administrative Agents, the Collateral Agents, the Lenders, the Issuing Banks and each party to a Lender Hedging Agreement if at the date of entering into such Lender Hedging Agreement such person executes and delivers to the Administrative Agents a letter agreement in form and substance acceptable to the Administrative Agents pursuant to which such person (i) appoints the applicable Collateral Agents as its agent under the applicable Loan Documents and (ii) agrees to be bound by the provisions of Section 10.03, Section 10.09 and the Security Agreements.

        "Securities Act" shall mean the Securities Act of 1933.

        "Securities Collateral" shall have the meaning assigned to such term in the Security Agreements.

        "Security Agreement Collateral" shall mean all property pledged or granted as collateral pursuant to the Security Agreements delivered (a) on the Closing Date or (b) thereafter pursuant to Section 5.11.

        "Security Agreements" shall mean, collectively, (a) the US Security Agreement and (b) the Canadian Security Agreements, in each case, as the same may from time to time be modified, amended, extended or reaffirmed in accordance with the terms thereof.

        "Security Documents" shall mean the Security Agreements, the Mortgages, the Canadian Pledge Agreements, the US Pledge Agreements, each Canadian Guaranty and each other security document or pledge agreement delivered in accordance with applicable local or foreign law to grant a valid, perfected security interest in any property as collateral for the Secured Obligations, and all UCC or PPSA or other financing statements or financing change statements or instruments of perfection required by this Agreement, the Security Agreements, any Mortgage or any other such security document or pledge agreement to be filed with respect to the security interests in property and fixtures created pursuant to the Security Agreements or any Mortgage and any other document or instrument utilized to pledge or grant or purport to pledge or grant a security interest or lien on any property as collateral for the Secured Obligations.

        "Seller" shall have the meaning assigned to such term in the first recital hereto.

        "Senior Note Agreement" shall mean that certain Indenture dated as of February 14, 2006 by US Borrowers in favor of Senior Note Collateral Agent pursuant to which the Senior Notes are issued as in effect on the date hereof and thereafter amended from time to time subject to the requirements of this Agreement.

        "Senior Note Collateral" shall have the meaning assigned to such term in the Intercreditor Agreement.

        "Senior Note Collateral Agent" means the Bank of New York, in its capacity as the collateral agent under the Senior Note Documents, together with any successors and assigns.

        "Senior Note Documents" shall mean the Senior Notes, the Senior Note Agreement, the Senior Note Guarantees and all other documents executed and delivered with respect to the Senior Notes or the Senior Note Agreement.

        "Senior Note Guarantees" shall mean the guarantees of Holdings and the Subsidiary Guarantors pursuant to the Senior Note Agreement.

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        "Senior Note Secured Parties" shall have the meaning assigned to such term in the Intercreditor Agreement.

        "Senior Notes" shall mean US Borrowers' Senior Secured Floating Rate Notes due 2014 issued on February 14, 2006 and any registered notes issued by US Borrowers in exchange for, and as contemplated by, such notes with substantially identical terms as such notes.

        "Specified Obligations" shall mean any obligation of any Loan Parties under the Loan Documents consisting of (i) the payment of principal of and interest on Loans and (ii) Reimbursement Obligations in respect of Letters of Credit.

        "Sponsor" shall mean Apollo Management, L.P. and its Affiliates.

        "Spot Selling Rate" shall mean the spot selling rate at which the US Administrative Agent offers to sell Canadian Dollars for dollars in the Toronto foreign exchange market at approximately 11:00 a.m. Toronto time on such date for delivery two (2) Business Days later.

        "Standby Letter of Credit" shall mean any Letters of Credit other than Letters of Credit which are Commercial Letters of Credit.

        "Stated Amount" means at any time the maximum amount for which a Letter of Credit may be honored.

        "Statutory Reserves" shall mean (a) for any Interest Period for any Eurodollar Borrowing in dollars, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the United States Federal Reserve System in New York City with deposits exceeding one billion dollars against "Eurocurrency liabilities" (as such term is used in Regulation D).

        "Stores" shall mean any of the retail stores operated by LNT Center and its Subsidiaries.

        "Subsidiary" shall mean, with respect to any person (the "parent") at any date, (i) any person the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, (ii) any other corporation, limited liability company, association or other business entity of which securities or other ownership interests representing more than 50% of the voting power of all Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors thereof are, as of such date, owned, controlled or held by the parent and/or one or more subsidiaries of the parent, (iii) any partnership (a) the sole general partner or the managing general partner of which is the parent and/or one or more subsidiaries of the parent or (b) the only general partners of which are the parent and/or one or more subsidiaries of the parent and (iv) any other person that is otherwise Controlled by the parent and/or one or more subsidiaries of the parent. Unless the context requires otherwise, "Subsidiary" refers to a Subsidiary of Borrower.

        "Subsidiary Guarantor" shall mean each Subsidiary listed on Schedule 1.01(b), and each other Subsidiary that is or becomes a party to this Agreement pursuant to Section 5.11.

        "Supermajority Lenders" shall mean at any time, Lenders having at least 66²/3% of the Revolving Commitment or, if the Revolving Commitments have been terminated, at least 66²/3% of the sum of Revolving Exposure.

        "Survey" shall mean a survey of any Mortgaged Property (and all improvements thereon) which is (i) prepared by a surveyor or engineer licensed to perform surveys in the jurisdiction where such Mortgaged Property is located, (ii) dated (or redated) not earlier than six months prior to the date of delivery thereof unless there shall have occurred within six months prior to such

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date of delivery any exterior construction of structures on the site of such Mortgaged Property or any easement or right of way on the Mortgaged Property has been granted or become effective through operation of law or otherwise with respect to such Mortgaged Property which, in either case, can reasonably be depicted on a survey, in which events, as applicable, such survey shall be dated (or redated) after the completion of such construction or if such construction shall not have been completed as of such date of delivery, not earlier than 20 days prior to such date of delivery, or after the grant or effectiveness of any such easement or right of way on the applicable Mortgaged Property, (iii) certified by the surveyor (in a manner reasonably acceptable to the Administrative Agents) to such Administrative Agents, the applicable Collateral Agents and the Title Company, and (iv) complying in all respects with the minimum detail requirements of the American Land Title Association as such requirements are in effect on the date of preparation of such survey.

        "Swingline Exposure" shall mean at any time the aggregate principal amount at such time of all outstanding Swingline Loans. The Swingline Exposure of any Revolving Lender at any time shall equal its Pro Rata Percentage of the aggregate Swingline Exposure at such time.

        "Swingline Lenders" shall have the meaning assigned to such term in the preamble hereto.

        "Swingline Loans" shall mean the US Swingline Loans and the Canadian Swingline Loans.

        "Syndication Agent" shall have the meaning assigned to such term in the preamble hereto.

        "Tax Return" shall mean all returns, statements, filings, attachments and other documents or certifications required to be filed in respect of Taxes.

        "Taxes" shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings, social security and unemployment taxes, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

        "Test Period" shall mean, at any time, the four consecutive fiscal quarters of US Borrowers then last ended (in each case taken as one accounting period) for which financial statements have been or are required to be delivered pursuant to Section 5.01(a) or (b).

        "Title Company" shall mean any title insurance company as shall be retained by Borrowers and reasonably acceptable to the Administrative Agent.

        "Title Policy" shall have the meaning assigned to such term in Section 4.01(o)(iii).

        "Total Leverage Ratio" shall mean, at any date of determination, the ratio of Consolidated Indebtedness on such date to Consolidated Cash Flow for the Test Period then most recently ended.

        "Transaction Documents" shall mean the Acquisition Documents, the Senior Note Documents and the Loan Documents.

        "Transactions" shall mean, collectively, the transactions to occur on or prior to the Closing Date pursuant to the Transaction Documents, including (a) the consummation of the Acquisition; (b) the execution, delivery and performance of the Loan Documents and the initial borrowings hereunder; (c) the Refinancing; (d) the Equity Financing; (e) the issuance of the Senior Notes; and (f) the payment of all fees and expenses to be paid on or prior to the Closing Date and owing in connection with the foregoing.

        "Transferred Guarantor" shall have the meaning assigned to such term in Section 7.09.

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        "Trigger Event" shall mean at any time (a) a Default shall have occurred and be continuing and/or (b) Average Excess Availability for the preceding fiscal quarter shall be less than $90 million.

        "Type," when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBOR Rate, the Alternate Base Rate, Canadian Prime Rate or Bankers' Acceptances.

        "UCC" shall mean the Uniform Commercial Code as in effect from time to time (except as otherwise specified) in any applicable state or jurisdiction.

        "United States" shall mean the United States of America.

        "US Administrative Agent" shall have the meaning assigned to such term in the preamble hereto and includes each other person appointed as the successor pursuant to Article X.

        "US Borrower" shall have the meaning assigned to such term in the preamble hereto.

        "US Borrowing Base Guarantor" shall mean LNT Inc., a New Jersey corporation, LNT West, a Delaware corporation, and LNT Merchandising Company, LLC, a Delaware limited liability company and any Wholly Owned Subsidiary of US Borrowers which may hereafter be approved by the Administrative Agents and the Collateral Agents which (a) is organized in a State within the United States, (b) is currently able to prepare all collateral reports in a comparable manner to the Borrowers' reporting procedures and (c) has executed and delivered to the applicable Collateral Agents such joinder agreements to guarantees, contribution and set-off agreements and other Security Documents as such Collateral Agents have reasonably requested so long as such Collateral Agents have received and approved, in their reasonable discretion, (i) a collateral audit and Inventory Appraisal conducted by an independent appraisal firm reasonably acceptable to such Collateral Agents and (ii) all UCC and similar search results necessary to confirm such Collateral Agents' first priority Lien on all of such Borrowing Base Guarantor's personal property, subject to Permitted Liens.

        "US Obligations" shall mean (a) obligations of US Borrowers and the other Loan Parties from time to time arising under or in respect of the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the US Revolving Loans and the US Swingline Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by US Borrowers and the other Loan Parties under this Agreement in respect of any Letter of Credit or LC Acceptance, when and as due, including payments in respect of Reimbursement Obligations, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of US Borrowers and the other Loan Parties under this Agreement and the other Loan Documents, (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of US Borrowers and the other Loan Parties under or pursuant to this Agreement and the other Loan Documents, (c) the due and punctual payment and performance of all obligations of the US Borrowers and any and all of the other Loan Parties under each Lender Hedging Agreement and (d) the due and punctual payment and performance of all obligations in respect of overdrafts and related liabilities owed to any Lender, any Affiliate of a Lender, the Administrative Agents or the

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Collateral Agents arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfer of funds.

        "US Pledge Agreements" shall mean that certain Pledge Agreement by Holdings pledging all of its Equity Interests in LNT and that certain Pledge Agreement by LNT and certain US Subsidiaries pledging all of their Equity Interests in LNT Center and the Subsidiary Guarantors, as applicable (except the Canadian Loan Parties), in each case, addressed to the Collateral Agents for the benefit of the Secured Parties, as the same may from time to time be modified, amended, extended or reaffirmed in accordance with the terms thereof.

        "US Revolving Commitment" shall mean, with respect to each Revolving Lender, the commitment, if any, of such Revolving Lender to make US Revolving Loans hereunder up to its Pro Rata Percentage of the Revolving Commitment.

        "US Revolving Exposure" shall mean, with respect to any Lender at any time, the Dollar Equivalent of the aggregate principal amount at such time of all outstanding Revolving Loans made to US Borrowers of such Lender, plus the aggregate amount at such time of such Lender's LC Exposure, plus the aggregate amount at such time of such Lender's Swingline Exposure to US Borrower.

        "US Revolving Lender" shall mean a Lender with a US Revolving Commitment.

        "US Revolving Loans" shall mean each Revolving Loan borrowed by a US Borrower.

        "US Security Agreement" shall mean a Security Agreement substantially in the form of Exhibit M-1 among certain of the Loan Parties and Collateral Agents for the benefit of the Secured Parties, as the same may from time to time be modified, amended, extended or reaffirmed in accordance with the terms thereof.

        "US Subsidiary" shall mean a Subsidiary organized in a State of the United States.

        "US Swingline Commitment" shall mean the commitment of the Swingline Lender to make loans pursuant to Section 2.17, as the same may be reduced from time to time pursuant to Section 2.07 or Section 2.17. The amount of the US Swingline Commitment shall initially be $35 million, but in no event shall exceed the Revolving Commitment.

        "US Swingline Lender" shall have the meaning assigned to such term in the preamble hereto.

        "US Swingline Loans" shall mean any loan made by the US Swingline Lender pursuant to Section 2.17(a).

        "Voting Stock" shall mean, with respect to any person, any class or classes of Equity Interests pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors of such person.

        "Wholly Owned Subsidiary" shall mean, as to any person, (a) any corporation 100% of whose capital stock (other than directors' qualifying shares) is at the time owned by such person and/or one or more Wholly Owned Subsidiaries of such person and (b) any partnership, association, joint venture, limited liability company or other entity in which such person and/or one or more Wholly Owned Subsidiaries of such person have a 100% equity interest at such time.

        "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02.    Classification of Loans and Borrowings.    For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified

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and referred to by Class (e.g., a "Revolving Borrowing," "Borrowing of Tranche A Loans") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing").

SECTION 1.03.    Terms Generally.    The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The word "will" shall be construed to have the same meaning and effect as the word "shall." Unless the context requires otherwise (a) any definition of or reference to any Loan Document, agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any person shall be construed to include such person's successors and assigns, (c) the words "herein," "hereof" and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) any reference to any law or regulation herein shall refer to such law or regulation as amended, modified or supplemented from time to time, (f) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights and (g) "on," when used with respect to the Mortgaged Property or any property adjacent to the Mortgaged Property, means "on, in, under, above or about."

SECTION 1.04.    Accounting Terms; GAAP.    Except as otherwise expressly provided herein, all financial statements to be delivered pursuant to this Agreement shall be prepared in accordance with GAAP as in effect from time to time and all terms of an accounting or financial nature shall be construed and interpreted in accordance with GAAP, as in effect on the date hereof unless otherwise agreed to by Borrower and the Required Lenders.

SECTION 1.05.    Resolution of Drafting Ambiguities.    Each Loan Party acknowledges and agrees that it was represented by counsel in connection with the execution and delivery of the Loan Documents to which it is a party, that it and its counsel reviewed and participated in the preparation and negotiation hereof and thereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation hereof or thereof.

ARTICLE II.

THE CREDITS

SECTION 2.01.    Commitments.    Subject to the terms and conditions and relying upon the representations and warranties herein set forth, each Lender agrees, severally and not jointly as follows:

        (a)   each US Revolving Lender agrees, severally and not jointly, to make US Revolving Loans to US Borrowers, at any time and from time to time on or after the Closing Date until the earlier of the Business Day prior to the Revolving Maturity Date and the termination of the Revolving Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not (subject to the provisions of Section 10.10 and Section 10.11) result in such Lender's US Revolving Exposure exceeding the lesser of (i) such Lender's Revolving Commitment less such Lender's Pro Rata Percentage of any Line Reserve and (ii) such Lender's Pro Rata Percentage multiplied by the Borrowing Base then in effect; and

        (b)   each Canadian Revolving Lender agrees, severally and not jointly, to make Canadian Revolving Loans to Canadian Borrower, at any time and from time to time on or after the Closing Date until the earlier of the Business Day prior to the Revolving Maturity Date and the

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termination of the Canadian Revolving Commitment of such Lender in accordance with the terms hereof, in an aggregate principal amount at any time outstanding that will not (subject to Section 10.10 and Section 10.11) result in such Lender's Canadian Exposure exceeding the lesser of (i) such Lender's Canadian Revolving Commitment less such Lender's Pro Rata Percentage of any Line Reserve allocated to Canadian Revolving Commitments and (ii) such Lender's Pro Rata Percentage multiplied by the Canadian Borrowing Base then in effect.

        Within the limits set forth in clause (a) and clause (b) above and subject to the terms, conditions and limitations set forth herein, Borrower may borrow, pay or prepay and reborrow Revolving Loans.

SECTION 2.02.    Loans.

        (a)   Each Loan (other than Swingline Loans) shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their applicable Commitments; provided, that the failure of any Lender to make its Loan shall not in itself relieve any other Lender of its obligation to lend hereunder (it being understood, however, that no Lender shall be responsible for the failure of any other Lender to make any Loan required to be made by such other Lender). Except for Loans deemed made pursuant to Section 2.18(e)(ii), (A) ABR Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $1.0 million and not less than $3.0 million or (ii) equal to the remaining available balance of the applicable Commitments and (B) the Eurodollar Loans comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of $1.0 million and not less than $3.0 million or (ii) equal to the remaining available balance of the applicable Commitments (C) Canadian Prime Rate Loans in Canadian dollars comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of Can$100,000 and not less than Can$1.0 million or (ii) equal to the remaining available balance of the applicable Commitments and (D) Bankers' Acceptances in Canadian dollars comprising any Borrowing shall be in an aggregate principal amount that is (i) an integral multiple of Can$100,000 and not less than Can$3.0 million or (ii) equal to the remaining available balance of the applicable commitments.

        (b)   Subject to Section 2.11 and Section 2.12, each Borrowing shall be comprised entirely of ABR Loans, Eurodollar Loans, Canadian Prime Rate Loans or Bankers' Acceptances as the applicable Borrower may request pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of such Borrower to repay such Loan in accordance with the terms of this Agreement. Borrowings of more than one Type may be outstanding at the same time; provided that such Borrower shall not be entitled to request any Borrowing that, if made, would result in more than eight Eurodollar Borrowings outstanding hereunder at any one time. For purposes of the foregoing, Borrowings having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate Borrowings.

        (c)   Except with respect to Loans deemed made pursuant to Section 2.18(e)(ii), each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds to such account in New York City or Toronto, as the case may be, as the applicable Administrative Agent may designate not later than 11:00 a.m., New York City time, and the applicable Administrative Agent shall promptly credit the amounts so received to an account as directed by the Administrative Borrower in the applicable Borrowing Request maintained with the applicable Administrative Agent or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Lenders.

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        (d)   Unless the applicable Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the applicable Administrative Agent such Lender's portion of such Borrowing, such Administrative Agent may assume that such Lender has made such portion available to such Administrative Agent on the date of such Borrowing in accordance with paragraph (c) above, and such Administrative Agent may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If the applicable Administrative Agent shall have so made funds available, then, to the extent that such Lender shall not have made such portion available to such Administrative Agent, each of such Lender and the Borrowers severally agrees to repay to such Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the applicable Borrower until the date such amount is repaid to such Administrative Agent at (i) in the case of such Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by such Administrative Agent in accordance with banking industry rules on interbank compensation. If such Lender shall repay to such Administrative Agent such corresponding amount, such amount shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement, and Borrowers' obligation to repay such Administrative Agent such corresponding amount pursuant to this Section 2.02(d) shall cease.

        (e)   Notwithstanding any other provision of this Agreement, Borrowers shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Maturity Date.

SECTION 2.03.    Borrowing Procedure.

        (a)    Borrowings.    To request a Revolving Borrowing, the Administrative Borrower shall deliver, by hand delivery or telecopier, a duly completed and executed Borrowing Request to the applicable Administrative Agent (i) in the case of a Eurodollar Borrowing in dollars or a Bankers' Acceptance, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing, (ii) in the case of an ABR Borrowing, not later than 9:00 a.m., New York City time, on the date of the proposed Borrowing or (iii) in the case of a Borrowing of Canadian Prime Rate Loans, not later than 11:00 a.m., New York time, one Business Day before the date of the proposed Borrowing. Each Borrowing Request shall be irrevocable and shall specify the following information in compliance with Section 2.02:

        (i)    the aggregate amount and Approved Currency of such Borrowing;

        (ii)   the date of such Borrowing, which shall be a Business Day;

        (iii)  for US Revolving Loans, whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing or, for Canadian Revolving Loans, whether such Borrowing is to be by way of Bankers' Acceptance or Canadian Prime Rate Loan;

        (iv)  in the case of a Eurodollar Borrowing or a Bankers' Acceptance, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period";

        (v)   the name of the applicable Borrower and the location and number of the applicable Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.02(c); and

        (vi)  that the conditions set forth in Section 4.02(b)-(e) have been satisfied as of the date of the notice.

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        If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing in dollars or, in the case of a Canadian Revolving Loan in Canadian dollars, a Canadian Prime Rate Loan. If no Interest Period is specified with respect to any requested Eurodollar Borrowing or Bankers' Acceptance then the applicable Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, such Administrative Agent shall advise each applicable Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing.

        (b)    Bankers' Acceptances.

        (i)    Canadian Administrative Agent.    On each date that a Bankers' Acceptance is to be accepted hereunder, the Canadian Administrative Agent shall advise the Canadian Borrower as to the Canadian Administrative Agent's determination of the applicable Discount Rate for the Bankers' Acceptance which any of the Canadian Revolving Lenders have agreed to accept and purchase.

        (ii)   Purchase.    Each Canadian Revolving Lender shall purchase a Bankers' Acceptance accepted by it, and the Canadian Borrower shall sell such Bankers' Acceptance to such Canadian Revolving Lender at the applicable Discount Rate. The relevant Canadian Revolving Lender shall provide to the Canadian Administrative Agent on the date of the related Borrowing the Discount Proceeds less the Acceptance Fee payable by the Canadian Borrower with respect to such Bankers' Acceptance.

        (iii)  Sale.    Each Canadian Revolving Lender may from time to time hold, sell, rediscount or otherwise dispose of any or all Bankers' Acceptances accepted and purchased by it.

        (iv)  Power of Attorney for the Execution of Bankers' Acceptances.    To facilitate the issuance of Bankers' Acceptances, the Canadian Borrower hereby appoints each Canadian Revolving Lender as its attorney to sign and endorse on its behalf, in handwriting or facsimile or mechanical signature as and when deemed necessary by such Canadian Revolving Lender, blank forms of Bankers' Acceptances. In this respect, it is each Canadian Revolving Lender's responsibility to maintain an adequate supply of blank forms of Bankers' Acceptances for acceptance under this Agreement. The Canadian Borrower recognizes and agrees that all Bankers' Acceptances signed and/or endorsed on its behalf by a Canadian Revolving Lender shall bind the Canadian Borrower as fully and effectually as if signed in the handwriting of and duly issued by the proper signing officers of the Canadian Borrower. Each Canadian Revolving Lender is hereby authorized to issue such Bankers' Acceptances endorsed in blank in such face amounts as may be determined by such Canadian Revolving Lender; provided that the aggregate amount thereof is equal to the aggregate amount of Bankers' Acceptances required to be accepted and purchased by such Canadian Revolving Lender. No Canadian Revolving Lender shall be liable for any damage, loss or other claim arising by reason of any loss or improper use of any such instrument except for the gross negligence or willful misconduct of such Canadian Revolving Lender. Each Canadian Revolving Lender shall maintain a record with respect to Bankers' Acceptances held by it in blank hereunder, voided by it for any reason, accepted and purchased by it hereunder, and canceled at their respective maturities.

        (v)   Execution.    Drafts drawn by the Canadian Borrower to be accepted as Bankers' Acceptances shall be signed by a duly authorized officer or officers of the Canadian Borrower or by its attorneys-in-fact, including attorneys-in-fact appointed pursuant to this Section. Notwithstanding that any person whose signature appears on any Bankers' Acceptance may no longer be an authorized signatory for the Canadian Borrower at the time of issuance of a Bankers' Acceptance, that signature shall nevertheless be valid and sufficient for all purposes

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as if the authority had remained in force at the time of issuance and any Bankers' Acceptance so signed shall be binding on the Canadian Borrower. Any executed drafts or orders to be used as Bankers' Acceptances shall be held in safekeeping with the same degree of care as if they were Lender's own property.

        (vi)  Issuance.    The Canadian Administrative Agent, promptly following receipt of a Borrowing Request or Interest Election Request for Bankers' Acceptances, shall advise the Canadian Revolving Lenders of the notice and the face amount of Bankers' Acceptances to be accepted by it and the applicable Interest Period (which shall be identical for all Canadian Revolving Lenders). The aggregate face amount of Bankers' Acceptances to be accepted by a Canadian Revolving Lender shall be determined by reference to such Canadian Revolving Lender's Canadian Pro Rata Percentage of the issue of Bankers' Acceptances, except that, if the face amount of a Bankers' Acceptance which would otherwise be accepted by a Canadian Revolving Lender would not be Can$500,000 or a whole multiple thereof, the face amount shall be increased or reduced by the Canadian Administrative Agent in its sole discretion to Can$100,000, or the nearest whole multiple of that amount, as appropriate; provided that after such issuance, no Canadian Revolving Lender shall have aggregate outstanding Canadian Exposure in excess of its Canadian Revolving Commitment.

        (vii) Waiver of Presentment and Other Conditions.    The Canadian Borrower waives presentment for payment and any other defense to payment of any amounts due to any Canadian Revolving Lender in respect of a Bankers' Acceptance accepted and purchased by it pursuant to this Agreement which might exist solely by reason of the Bankers' Acceptance being held, at the maturity thereof, by such Canadian Revolving Lender in its own right and the Canadian Borrower agrees not to claim any days of grace if the Canadian Revolving Lender as holder sues or otherwise commences legal proceedings against the Canadian Borrower on the Bankers' Acceptance for payment of the amount payable by the Canadian Borrower thereunder.

        (viii) BA Equivalent Loans by Non-BA Lenders.    Whenever the Canadian Borrower requests a Canadian Revolving Loan under this Agreement by way of Bankers' Acceptances, each Non-BA Lender (or, at its option, any other Canadian Revolving Lender), shall, in lieu of accepting a Bankers' Acceptance, make a BA Equivalent Loan in an amount equal to such Non-BA Lender's Canadian Pro Rata Percentage of such Canadian Revolving Loan.

        (ix)  Terms Applicable to Discount Notes.    As set out in the definition of "Bankers' Acceptances", that term includes Discount Notes and BA Equivalent Loans not evidenced by Discount Notes and all terms of this Agreement applicable to Bankers' Acceptances shall apply equally to BA Equivalent Loans and Discount Notes evidencing BA Equivalent Loans with such changes as may in the context be necessary. For greater certainty:

        (1)   the term of a Discount Note shall be the same as the Interest Period for Bankers' Acceptances accepted and purchased on the same date in respect of the same Canadian Revolving Loan;

        (2)   an acceptance fee will be payable in respect of a Discount Note and shall be calculated at the same rate and in the same manner as the Acceptance Fee in respect of a Bankers' Acceptance; and

        (3)   the Discount Rate applicable to a Discount Note shall be the Discount Rate applicable to BA Equivalent Loans made on the same date in respect of the same Canadian Revolving Loan.

        Notwithstanding the foregoing, it is understood and agreed that any Non-BA Lender may agree, in lieu of receiving any Discount Notes, that such Discount Notes may be uncertificated

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and the applicable BA Equivalent Loan shall be evidenced by a loan account, which such Non-BA Lender shall maintain in its name, and in such event such loan account shall be entitled to all the benefits of Discount Notes in respect of BA Equivalent Loans.

        (x)   Depository Bills and Notes Act.    At the option of the Canadian Borrower and any Canadian Revolving Lender, Bankers' Acceptances under this Agreement to be accepted by such Canadian Revolving Lender may be issued in the form of depository bills for deposit with The Canadian Depository for Securities Limited pursuant to the Depository Bills and Notes Act (Canada). All depository bills so issued shall be governed by the provisions of this Section.

        (xi)  Prepayments and Mandatory Payments.    If at any time any Bankers' Acceptances are to be paid prior to their maturity, the Canadian Borrower shall be required to deposit the face amount of such Bankers' Acceptances being prepaid in an interest-bearing cash collateral account with the Canadian Administrative Agent until the date of maturity of such Bankers' Acceptances. The cash collateral account shall be under the sole control of the Canadian Administrative Agent and shall be subject to no Liens, except for Liens in favor of the Canadian Administrative Agent in its capacity as such. Except as contemplated by this Section, neither the Canadian Borrower nor any person claiming on its behalf shall have any right to any of the cash in the cash collateral account. The Canadian Administrative Agent shall apply the cash held in the cash collateral account and interest earned thereon to the face amount of such Bankers' Acceptances at maturity, whereupon any cash remaining in the cash collateral account shall be released by the Canadian Administrative Agent to the Canadian Borrower.

        (c)    Appointment of Administrative Borrower.    Each Borrower hereby irrevocably appoints and constitutes Administrative Borrower as its agent to request and receive Loans and Letters of Credit pursuant to this Agreement in the name or on behalf of such Borrower. The Administrative Agents and Lenders may disburse the Loans to such bank account of Administrative Borrower or a Borrower or otherwise make such Loans to a Borrower and provide such Letters of Credit to a Borrower as Administrative Borrower may designate or direct, without notice to any other Borrower or Guarantor. Administrative Borrower hereby accepts the appointment by Borrowers to act as the agent of Borrowers and agrees to ensure that the disbursement of any Loans to a Borrower requested by or paid to or for the account of such Borrower, or the issuance of any Letter of Credit for a Borrower hereunder, shall be paid to or for the account of such Borrower. Each Borrower hereby irrevocably appoints and constitutes Administrative Borrower as its agent to receive statements on account and all other notices from the Agents and Lenders with respect to the Obligations or otherwise under or in connection with this Agreement and the other Loan Documents. Any notice, election, representation, warranty, agreement or undertaking by or on behalf of any other Borrower by Administrative Borrower shall be deemed for all purposes to have been made by such Borrower, as the case may be, and shall be binding upon and enforceable against such Borrower to the same extent as if made directly by such Borrower. No purported termination of the appointment of Administrative Borrower as agent as aforesaid shall be effective, except after ten (10) days' prior written notice to Administrative Agents.

        (d)    Additional Functions of Administrative Borrower.    The Administrative Borrower operates a centralized cash management system for the Borrowers and their Subsidiaries, including the Borrowing Base Guarantor Intercompany Loan Amounts and all other intercompany accounts owing among the Loan Parties. All Loans or Letters of Credit requested by the Administrative Borrower for ultimate use by Loan Parties other than LNT or Canadian Borrower shall be drawn or obtained in the name of the Administrative Borrower. Upon request, Administrative Borrower shall promptly confirm for the Administrative Agents that each Loan or Letter of Credit has been issued in the name of the appropriate Borrower and, in the event of any error, the respective records shall be adjusted without prejudice to the rights of the Agents and Lenders.

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SECTION 2.04.    Evidence of Debt; Repayment of Loans.

        (a)    Promise to Repay.    The US Borrowers hereby unconditionally promise to pay (i) to the US Administrative Agent for the account of each Revolving Lender, the then unpaid principal amount of each US Revolving Loan of such Revolving Lender on the Revolving Maturity Date and (ii) to the US Swingline Lender, the then unpaid principal amount of each US Swingline Loan on the earlier of the Revolving Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least two (2) Business Days after such Swingline Loan is made; provided that on each date that a US Revolving Loan is made, the US Borrowers shall repay all US Swingline Loans that were outstanding on the date such Borrowing was requested. Canadian Borrower hereby unconditionally promises to pay (i) to Canadian Administrative Agent for the account of each Canadian Revolving Lender, the then unpaid principal amount of each Canadian Revolving Loan of such Canadian Revolving Lender on the Revolving Maturity Date and (ii) to the Canadian Swingline Lender, the then unpaid principal amount of each Canadian Swingline Loan on the earlier of the Revolving Maturity Date and the first date after such Swingline Loan is made that is the 15^th or last day of a calendar month and is at least two (2) Business Days after such Swingline Loan is made; provided that on each date that a Canadian Revolving Loan is made, the Canadian Borrower shall repay all Canadian Swingline Loans that were outstanding on the date such Borrowing was requested. All payments or repayments of Loans made pursuant to this Section 2.04(a) shall be made in the Approved Currency in which such Loan is denominated.

        (b)    Lender and Administrative Agent Records.    Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the applicable Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. The applicable Administrative Agent shall maintain accounts in which it will record (i) the amount and Approved Currency of each Loan made hereunder, the Type and Class thereof, the name of the applicable Borrower and the Interest Period applicable thereto; (ii) the amount of any principal or interest due and payable or to become due and payable from the applicable Borrower to each applicable Lender hereunder; and (iii) the amount of any sum received by such Administrative Agent hereunder for the account of the applicable Lenders and each such Lender's share thereof. The entries made in the accounts maintained pursuant to this paragraph shall be prima facie evidence of the existence and amounts of the obligations therein recorded as well as the Borrower which received such Loans or Letters of Credit; provided that the failure of any Lender or such Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrowers to repay the Loans in accordance with their terms.

        (c)    Promissory Notes.    Any Lender by written notice to Administrative Borrower (with a copy to the Administrative Agents) may request that Loans of any Class made by it be evidenced by a promissory note (unless already evidenced by a Bankers' Acceptance). In such event, the applicable Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in the form of Exhibit K-1, K-2, K-3 or K-4 as the case may be. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 11.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

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SECTION 2.05.    Fees.

        (a)    Commitment Fee.    The Borrowers agree to pay to the applicable Administrative Agent for the account of each Lender a commitment fee (a "Commitment Fee") equal to the Applicable Fee per annum on the average daily unused amount of each Commitment of such Lender during the period from and including the date hereof to but excluding the date on which such Commitment terminates. Accrued Commitment Fees shall be payable in arrears (A) on the last Business Day of March, June, September and December of each year, commencing on the first such date to occur after the date hereof, and (B) on the date on which such Commitment terminates. Commitment Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing Commitment Fees with respect to Revolving Commitments a Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender shall be disregarded for such purpose).

        (b)    Administrative Agent Fees.    The Borrowers agree to pay to the US Administrative Agent, for the accounts of the applicable Administrative Agents, the administrative fees (to be allocated between the Administrative Agents in a manner to be mutually agreed upon by the Administrative Agents) payable in the amounts and at the times set forth in the Fee Letter (the "Administrative Agent Fees").

        (c)    Collateral Monitoring Fee.    The Borrowers agree to pay to the US Administrative Agent, for the accounts of the applicable Collateral Agents, a collateral monitoring fee (to be allocated among the Collateral Agents in a manner to be mutually agreed upon by the Collateral Agents) payable in the amounts and at the times set forth in the Fee Letter (the "Collateral Monitoring Fees").

        (d)    LC and Fronting Fees.    The US Borrowers agree to pay (i) to the US Administrative Agent for the account of each Revolving Lender (other than a Canadian Revolving Lender) a participation fee ("Standby LC Participation Fee") with respect to its participations in Standby Letters of Credit, which shall accrue at a rate equal to the Applicable Margin from time to time used to determine the interest rate on Eurodollar Revolving Loans pursuant to Section 2.06 on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to Reimbursement Obligations), as appropriate, during the period from and including the Closing Date to but excluding the later of the date on which such Lender's Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, (ii) to the US Administrative Agent for the account of each Revolving Lender a participation fee ("Commercial LC Participation Fee" and together with the Standby LC Participation Fee, the "LC Participation Fee") with respect to its participation in Commercial Letters of Credit, which shall accrue at a rate equal to the greater of (A) the Applicable Margin from time to time used to determine the interest rate on Eurodollar Revolving Loans pursuant to Section 2.06 on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to Reimbursement Obligations), as appropriate, during the period from and including the Closing Date to but excluding the later of the date on which such Lender's Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure minus 0.50% and (B) 0.50%, and (iii) to the Issuing Bank a fronting fee ("Fronting Fee"), which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to Reimbursement Obligations) during the period from and including the Closing Date to but excluding the later of the date of termination of the Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank's customary fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Accrued LC Participation Fees and Fronting Fees shall be payable in arrears

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(i) on the last Business Day of March, June, September and December of each year, commencing on the first such date to occur after the Closing Date, and (ii) on the date on which the Revolving Commitments terminate. Any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand therefor. All LC Participation Fees and Fronting Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). During the continuance of a Default, the LC Participation Fee shall be increased to a per annum rate equal to 2% plus the otherwise applicable rate with respect thereto.

        (e)   All Fees shall be paid on the dates due, in immediately available funds in dollars, to the applicable Administrative Agent for distribution, if and as appropriate, among the applicable Lenders, except that the US Borrowers shall pay the Fronting Fees directly to the Issuing Bank. Once paid, none of the Fees shall be refundable under any circumstances.

SECTION 2.06.    Interest on Loans.    

        (a)    ABR Loans.    Subject to the provisions of Section 2.06(e), the Loans comprising each ABR Borrowing, including each Swingline Loan, shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin in effect from time to time.

        (b)    Canadian Prime Rate Loans.    Subject to Section 2.06(e), the Loans comprising each Canadian Prime Rate Borrowing shall bear interest at a rate per annum equal to the Canadian Prime Rate plus the Applicable Margin in effect from time to time.

        (c)    Eurodollar Loans.    Subject to the provisions of Section 2.06(e), the Loans comprising each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBOR Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin in effect from time to time.

        (d)    Bankers' Acceptances.    Subject to Section 2.06(e), upon acceptance of a Bankers' Acceptance by a Lender, Canadian Borrower shall pay to Canadian Administrative Agent on behalf of such Lender a fee (the "Acceptance Fee") calculated on the face amount of such Bankers' Acceptance at a rate per annum equal to the Applicable Margin on the basis of the number of days in the Interest Period applicable to such Bankers' Acceptance and a year of 365 or 366 days, as applicable.

        (e)    Default Rate.    Notwithstanding the foregoing, during an Event of Default, all Obligations shall, to the extent permitted by applicable law, bear interest, after as well as before judgment, at a per annum rate equal to (i) in the case of principal and premium, if any, of or interest on any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section 2.06 or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans in the case of Borrowings in dollars, or Canadian Prime Rate Loans, in the case of Borrowings in Canadian dollars, as provided in Section 2.06(a) or (b) , respectively (in either case, the "Default Rate").

        (f)    Interest Payment Dates.    Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to Section 2.06(e) shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan, Canadian Prime Rate Loan or a Swingline Loan without a permanent reduction in Revolving Commitments), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

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        (g)    Interest Calculation.    All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate, the Canadian Prime Rate or Bankers' Acceptances shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBOR Rate, Canadian Prime Rate or Acceptance Fee shall be determined by the applicable Administrative Agent in accordance with the provisions of this Agreement and such determination shall be conclusive absent manifest error.

        (h)    Currency for Payment of Interest.    All interest paid or payable pursuant to this Section 2.06 shall be paid in the Approved Currency in which the Loan giving rise to such interest is denominated.

        (i)    Interest Act (Canada).    For the purposes of the Interest Act (Canada), in any case in which an interest or fee rate is stated in this Agreement to be calculated on the basis of a number of days that is other than the number in a calendar year, the yearly rate, to which such interest or fee rate is equivalent, is equal to such interest or fee rate multiplied by the actual number of days in the year in which the relevant interest or fee payment accrues and divided by the number of days used as the basis for such calculation.

SECTION 2.07.    Termination and Reduction of Commitments.    

        (a)    Termination of Commitments.    The Revolving Commitments, the US Swingline Commitment, the Canadian Swingline Commitment and the LC Commitment shall automatically terminate on the Revolving Maturity Date.

        (b)    Optional Terminations and Reductions.    At their option, Borrowers may at any time terminate, or from time to time permanently reduce, the Commitments of any Class; provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $1.0 million and not less than $5.0 million and (ii) the Revolving Commitments shall not be terminated or reduced if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.10, the aggregate amount of Revolving Exposures would exceed the aggregate amount of Revolving Commitments. Any permanent reduction of the Revolving Commitment shall result in a pro rata permanent reduction in the Canadian Revolving Commitments.

        (c)    Notice by the Borrowers.    The applicable Borrower shall notify the applicable Administrative Agent in writing of any election to terminate or reduce the Commitments under Section 2.07(b) at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, such Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by such Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by any Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by such Borrower (by notice to such Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class.

SECTION 2.08.    Interest Elections.    

        (a)    Generally.    Each Revolving Borrowing including each Canadian Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing and a Bankers' Acceptance, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the applicable Borrower may elect to convert such

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Borrowing to a different Type or to rollover or continue such Borrowing and, in the case of a Eurodollar Borrowing or a Bankers' Acceptance, may elect Interest Periods therefor, all as provided in this Section (except that only the Canadian Borrower may elect Canadian Prime Rate Borrowings or Bankers' Acceptances). Borrowings consisting of Canadian Revolving Loans may only be converted to a different Type of Canadian Revolving Loan. The applicable Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. Notwithstanding anything to the contrary, the applicable Borrower shall not be entitled to request any conversion, rollover or continuation that, if made, would result in more than eight Eurodollar Borrowings or Bankers' Acceptances having more than eight different Interest Periods being outstanding hereunder at any one time. This Section shall not apply to Borrowings of Swingline Loans, which may not be converted or continued.

        (b)    Interest Election Notice.    To make an election pursuant to this Section, the applicable Borrower shall deliver, by hand delivery or telecopier, a duly completed and executed Interest Election Request to the applicable Administrative Agent not later than the time that a Borrowing Request would be required under Section 2.03 if such Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each Interest Election Request shall be irrevocable. Each Interest Election Request shall specify the following information in compliance with Section 2.02:

        (i)    the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, or if outstanding Borrowings are being combined, allocation to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii), (iv) and (v) below shall be specified for each resulting Borrowing);

        (ii)   the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

        (iii)  the Approved Currency of the resulting Borrowing;

        (iv)  whether the resulting Borrowing is to be an ABR Borrowing, Canadian Prime Rate Borrowing, a Eurodollar Borrowing or an advance by way of Bankers' Acceptance; and

        (v)   if the resulting Borrowing is a Eurodollar Borrowing or an advance by way of Bankers' Acceptance, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period".

        If any such Interest Election Request requests a Eurodollar Borrowing or an advance by way of Bankers' Acceptance but does not specify an Interest Period, then such Borrower shall be deemed to have selected an Interest Period of one month's duration.

        Promptly following receipt of an Interest Election Request, such Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing.

        (c)    Automatic Conversion to ABR Borrowing or Canadian Prime Rate Borrowings.    If an Interest Election Request with respect to a Eurodollar Borrowing or a Bankers' Acceptance is not timely delivered prior to the end of the Interest Period applicable thereto, then, unless such Borrowing or Bankers' Acceptance is repaid as provided herein, at the end of such Interest Period such Eurodollar Borrowing or Bankers' Acceptance shall be converted to (i) in the case of a Eurodollar Borrowing, an ABR Borrowing and (ii) in the case of a Bankers' Acceptance, a Canadian Prime Rate Borrowing. Notwithstanding any contrary provision hereof, if an Event of

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Default has occurred and is continuing, the applicable Administrative Agent or the Required Lenders may require, by notice to the applicable Borrower, that (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing or a Bankers' Acceptance and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing and each Banker's Acceptance shall be converted into a Canadian Prime Rate Loan, in each case, at the end of the Interest Period applicable thereto.

SECTION 2.09.[Intentionally Deleted].    

SECTION 2.10.    Optional and Mandatory Prepayments of Loans.    

        (a)    Optional Prepayments.    Each Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, subject to the requirements of this Section 2.10 and subject to the provisions of Section 9.02(g); provided that each partial prepayment shall be in an amount that is an integral multiple of $1.0 million (or, if applicable, Can$100,000) and not less than $3.0 million (or, if applicable, Can$1.0 million) or, if less, the outstanding principal amount of such Borrowing.

        (b)    Certain Revolving Loan Prepayments.    

        (i)    In the event of the termination of all the Revolving Commitments, each Borrower shall, on the date of such termination, repay or prepay all its outstanding Revolving Borrowings and all outstanding Swingline Loans and replace all outstanding Letters of Credit or cash collateralize all outstanding Letters of Credit in accordance with the procedures set forth in Section 2.18(i) .

        (ii)   In the event of any partial reduction of the Revolving Commitments, then (x) at or prior to the effective date of such reduction, the Administrative Agents shall notify Borrowers and the Revolving Lenders of the sum of the Revolving Exposures after giving effect thereto and (y) if the sum of the Revolving Exposures would exceed the aggregate amount of Revolving Commitments after giving effect to such reduction, then Borrowers shall, on the date of such reduction, first, repay or prepay Swingline Loans, second, repay or prepay Revolving Borrowings and third, replace outstanding Letters of Credit or cash collateralize outstanding Letters of Credit in accordance with the procedures set forth in Section 2.18(i), in an aggregate amount sufficient to eliminate such excess.

        (iii)  In the event that (x) the sum of all Lenders' Revolving Exposures exceeds the Revolving Commitments then in effect (including on any date on which Dollar Equivalents are determined pursuant to Section 11.17) or (y) the sum of all Lenders' Canadian Exposures exceeds the Canadian Revolving Commitments then in effect (including on any date on which Dollar Equivalents are determined pursuant to Section 11.17), then in each case, Borrowers shall, without notice or demand, immediately first, repay or prepay Revolving Borrowings, and second, replace outstanding Letters of Credit or cash collateralize outstanding Letters of Credit in accordance with the procedures set forth in Section 2.18(i), in an aggregate amount sufficient to eliminate such excess.

        (iv)  In the event that the aggregate LC Exposure exceeds the LC Commitment then in effect (including on any date on which Dollar Equivalents are determined pursuant to Section 11.17), US Borrowers shall, without notice or demand, immediately replace outstanding Letters of Credit or cash collateralize outstanding Letters of Credit in accordance with the procedures set forth in Section 2.18(i), in an aggregate amount sufficient to eliminate such excess.

        (v)   In the event that (x) the sum of all Lenders' US Revolving Exposures exceeds the Borrowing Base then in effect or (y) the sum of all Lenders' Canadian Exposures exceeds the

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Canadian Borrowing Base then in effect, the Borrowers shall, without notice or demand, immediately apply an amount equal to such excess to prepay the Loans and any interest accrued thereon, in accordance with this Section 2.10(b)(v). The Borrowers shall make prepayments in accordance with Section 2.10(f) in an amount sufficient to eliminate such excess.

        (vi)  In the event an Activation Notice has been given (as contemplated by Section 9.02), the Borrowers shall pay all proceeds of Collateral (other than proceeds of a Casualty Event or an Asset Sale that do not require a permanent repayment) into the Collection Account, for application in accordance with Section 9.02(g).

        (vii) Borrowings by way of Bankers' Acceptance may only be prepaid by cash collateralizing the same in accordance with Section 2.03(b)(xi).

        (c)    Asset Sales.    Not later than one Business Day following the receipt of any Net Cash Proceeds of any Asset Sale by Holdings or any of its Subsidiaries, Borrowers shall make any prepayments required by Section 2.10(b) as well as prepayments in accordance with Section 2.10(f) and (g) in an aggregate amount equal to 100% of such Net Cash Proceeds; provided that:

        (i)    no such prepayment shall be required under this Section 2.10(c)(i) with respect to (A) any Asset Sale permitted by Section 6.06(a), (B) the disposition of property which constitutes a Casualty Event, or (C) Asset Sales for fair market value resulting in no more than the Dollar Equivalent of $100,000 in Net Cash Proceeds per Asset Sale (or series of related Asset Sales) and less than the Dollar Equivalent of $1.0 million in Net Cash Proceeds in any fiscal year; provided that clause (C) shall not apply in the case of any Asset Sale described in clause (b) of the definition thereof; and

        (ii)   subject to Section 2.10(g) and any requirement for a prepayment made under Section 2.10(b) and so long as no Default shall then exist or would arise therefrom, such proceeds shall not be required to be so applied on such date to the extent that Borrowers shall have delivered an Officers' Certificate to the applicable Administrative Agent on or prior to such date stating that such Net Cash Proceeds are expected to be reinvested in fixed or capital assets within 365 days following the date of such Asset Sale (which Officers' Certificate shall set forth the estimates of the proceeds to be so expended); provided that if all or any portion of such Net Cash Proceeds is not so reinvested within such 365-day period, such unused portion shall be applied on the last day of such period as a mandatory prepayment as provided in this Section 2.10(c); provided, further, that if the property subject to such Asset Sale constituted Collateral, then all property purchased with the Net Cash Proceeds thereof pursuant to this subsection shall be made subject to the Lien of the applicable Security Documents in favor of the applicable Collateral Agents for their benefit and for the benefit of the other Secured Parties in accordance with Section 5.11 and Section 5.12.

        (d)    Casualty Events.    Not later than one Business Day following the receipt of any Net Cash Proceeds from a Casualty Event by Holdings or any of its Subsidiaries, the applicable Borrower shall make any prepayments required by Section 2.10(b) as well as any prepayments in accordance with Sections 2.10(f) and (g) in an aggregate amount equal to 100% of such Net Cash Proceeds; provided that:

        (i)    so long as no Default shall then exist or arise therefrom, such proceeds (other than amounts required under Section 2.10(b) to be prepaid) shall not be required to be so applied on such date to the extent that Borrowers shall have delivered an Officers' Certificate to the Administrative Agents on or prior to such date stating that such proceeds are expected to be used to repair, replace or restore any property in respect of which such Net Cash Proceeds were paid or to reinvest in other fixed or capital assets, no later than 180 days following the

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date of receipt of such proceeds; provided that if the property subject to such Casualty Event constituted Collateral under the Security Documents, then all property purchased with the Net Cash Proceeds thereof pursuant to this subsection shall be made subject to the Lien of the applicable Security Documents in favor of the applicable Collateral Agents for their benefit and for the benefit of the other Secured Parties in accordance with Section 5.11 and Section 5.12; and

        (ii)   if any portion of such Net Cash Proceeds shall not be so applied within such 180-day period, such unused portion shall be applied on the last day of such period as a mandatory prepayment as provided in this Section 2.10(d).

        (e)[Intentionally Deleted].    

        (f)    Application of Prepayments.    (i) Prior to any optional or mandatory prepayment hereunder, Borrowers shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to Section 2.10(g), subject to the provisions of this Section 2.10(f). Any mandatory prepayments (other than those required by Section 2.10(b)) shall be applied to the Revolving Loans and, upon the Administrative Agent's election, the Revolving Commitments shall be permanently reduced ratably among the Revolving Lenders in accordance with their applicable Revolving Commitments in an aggregate amount equal to such prepayment and Borrower shall comply with Section 2.10(b).

        (ii)   Notwithstanding the foregoing, in the event that Borrowers have delivered an Officers' Certificate in accordance with Section 2.10(c) or in accordance with Section 2.10(d) , (A) the applicable Net Cash Proceeds shall be applied against the outstanding Revolving Loans, without a permanent reduction in the Commitments, (B) both a Reserve and a reserve against the Commitments ("Line Reserve") shall be established (in the amount of the Net Cash Proceeds less any amounts used for prepayments that were required by Sections 2.10(b) because of the sale or disposition of Inventory outside of the ordinary course of business) which Reserve and Line Reserve shall each be released simultaneously with and to the extent of any Loans advanced to the Borrowers for the purpose of purchasing assets in accordance with Section 2.10(c) or Section 2.10(d), as applicable; provided Borrowers submit (with the applicable Borrowing Request) an Officer's Certificate setting forth the use of proceeds of the requested Loan and confirming that such use is in compliance with Section 2.10(c) or Section 2.10(d), as applicable, and (C) in the event that any part or all of the Reserve remains in place at the end of the time period set forth in Section 2.10(c) or Section 2.10(d), as applicable, the Commitments shall be permanently reduced by an amount equal to such remaining Reserve and, simultaneously with the such reduction, the remaining Line Reserve shall be released.

        (iii)  Amounts to be applied pursuant to this Section 2.10 to the prepayment of Revolving Loans shall, in the absence of direction from the Borrowers pursuant to Section 2.10(g)(i), be applied to the prepayment of the ABR Loans and Canadian Prime Rate Loans in the discretion of the Administrative Agents. Any amounts remaining after each such application shall be applied to prepay Eurodollar Revolving Loans or Bankers' Acceptances, as applicable. Notwithstanding the foregoing, if the amount of any prepayment of Loans required under this Section 2.10 shall be in excess of the amount of the ABR Loans and Canadian Prime Rate Loans at the time outstanding (an "Excess Amount"), only the portion of the amount of such prepayment as is equal to the amount of such outstanding ABR Loans and Canadian Prime Rate Loans shall be immediately prepaid and, at the election of the applicable Borrower, the Excess Amount shall be either (A) deposited in an escrow account on terms satisfactory to the applicable Collateral Agents and applied to the prepayment of Eurodollar Loans or Bankers' Acceptances on the last day of the then next-expiring Interest Period for the applicable

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Eurodollar Loans or Bankers' Acceptances, as the case may be; provided that (i) interest in respect of such Excess Amount shall continue to accrue thereon at the rate provided hereunder for the Loans which such Excess Amount is intended to repay until such Excess Amount shall have been used in full to repay such Loans and (ii) at any time while a Default has occurred and is continuing, the Administrative Agent may, and upon written direction from the Required Lenders shall, apply any or all proceeds then on deposit to the payment of such Loans in an amount equal to such Excess Amount or (B) prepaid immediately, together with any amounts owing to the Lenders under Section 2.13.

        (g)    Notice of Prepayment.    The applicable Borrower shall notify the applicable Administrative Agent (and, in the case of prepayment of a Swingline Loan, the applicable Swingline Lender) by written notice of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing or Bankers' Acceptances, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing or a Canadian Prime Rate Loan, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment and (iii) in the case of prepayment of a Swingline Loan, not later than 11:00 a.m., New York City time, on the date of prepayment. Each such notice shall be irrevocable; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07, then such notice of prepayment may be revoked if such termination is revoked in accordance with Section 2.07. Each such notice shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment. Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans), such Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of a Credit Extension of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing and otherwise in accordance with this Section 2.09. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.06.

SECTION 2.11.    Alternate Rate of Interest.    

        (a)   If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

        (i)    the applicable Administrative Agent determines (which determination shall be final and conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBOR Rate for such Interest Period; or

        (ii)   the applicable Administrative Agent is advised in writing by the Required Lenders that the Adjusted LIBOR Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

then such Administrative Agent shall give written notice thereof to the applicable Borrower and the Lenders as promptly as practicable thereafter and, until such Administrative Agent notifies such Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

        (b)   If prior to the commencement of any Interest Period relating to a Bankers' Acceptance, the Canadian Administrative Agent determines (which determination shall be final and conclusive absent manifest error) that, by reason of circumstances affecting the money markets, there is no

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active market for Bankers' Acceptances or the demand for Bankers' Acceptances is insufficient to allow the sale or trading of the Bankers' Acceptances to be created hereunder, then:

        (i)    the right of the Canadian Borrower to request a Canadian Revolving Loan by means of a Bankers' Acceptance shall be suspended until such time as the Canadian Administrative Agent determines that the circumstances causing such suspension no longer exist and the Canadian Administrative Agent so notifies the Canadian Borrower;

        (ii)   any Borrowing Request which calls for the issuance of a Bankers' Acceptance which is outstanding shall be cancelled and such Borrowing Request shall be deemed to be a request for a Canadian Prime Rate Loan in the face amount of the requested Bankers' Acceptance;

        (iii)  any outstanding Interest Election Request requesting a conversion of a Canadian Prime Rate Loan into Bankers' Acceptances or BA Equivalent Loan shall be deemed to be revoked; and

        (iv)  any outstanding Interest Election Request requesting a rollover of Bankers' Acceptances or BA Equivalent Loans shall (unless revoked by the Canadian Borrower before the Borrowing) be deemed to be an Interest Election Request requesting a conversion of such Loans into Canadian Prime Rate Loans.

SECTION 2.12.    Yield Protection.    

        (a)    Increased Costs Generally.    If any Change in Law shall:

        (i)    impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in, by any Lender (except any reserve requirement reflected in the Adjusted LIBOR Rate) or the Issuing Bank;

        (ii)   subject any Lender or the Issuing Bank to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurodollar Loan made by it or any Bankers' Acceptance purchased or accepted by it, or change the basis of taxation of payments to such Lender or the Issuing Bank in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 2.15 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the Issuing Bank); or

        (iii)  impose on any Lender or the Issuing Bank or the London interbank market any other condition, cost or expense (other than any Taxes) affecting this Agreement or Eurodollar Loans made by such Lender or any Bankers' Acceptance purchased or accepted by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan or purchasing or accepting any Bankers' Acceptance), or to increase the cost to such Lender, the Issuing Bank or such Lender's or the Issuing Bank's holding company, if any, of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or any other amount), then, upon request of such Lender or the Issuing Bank, the applicable Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

        (b)    Capital Requirements.    If any Lender or the Issuing Bank determines (in good faith, but in its sole absolute discretion) that any Change in Law affecting such Lender or the Issuing Bank

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or any lending office of such Lender or such Lender's or the Issuing Bank's holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, the Bankers' Acceptances purchased or accepted by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy), then from time to time the applicable Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company for any such reduction suffered.

        (c)    Certificates for Reimbursement.    A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section 2.12 and delivered to the applicable Borrower shall be conclusive absent manifest error. The applicable Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

        (d)    Delay in Requests.    Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section 2.12 shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; provided that Borrowers shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the applicable Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

SECTION 2.13.    Breakage Payments.    In the event of (a) the payment or prepayment, whether optional or mandatory, of any principal of any Eurodollar Loan earlier than the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan earlier than the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such prepayment notice is later revoked in accordance with Section 2.10(g)), (d) the assignment of any Eurodollar Loan earlier than the last day of the Interest Period applicable thereto as a result of a request by Borrowers pursuant to Section 2.16(b) or (e) the reallocation of Loans pursuant to Section 2.19(d), then, in any such event, the applicable Borrower shall compensate each applicable Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBOR Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth in reasonable detail any amount or amounts that such Lender is entitled to

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receive pursuant to this Section 2.13 shall be delivered to the applicable Borrower (with a copy to the Administrative Agents) and shall be conclusive and binding absent manifest error. The applicable Borrower shall pay such Lender the amount shown as due on any such certificate within 5 days after receipt thereof.

SECTION 2.14.    Payments Generally; Pro Rata Treatment; Sharing of Setoffs.    

        (a)    Payments Generally.    Borrowers shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or Reimbursement Obligations, or of amounts payable under Section 2.12, Section 2.13, Section 2.15 or Section 11.03, or otherwise) on or before the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 2:00 p.m., New York City time), on the date when due, in immediately available funds, without setoff, deduction or counterclaim. Any amounts received after such time on any date may, in the discretion of the applicable Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the applicable Administrative Agent at the office designated by it from time to time, except payments to be made directly to the Issuing Bank or a Swingline Lender as expressly provided herein and except that payments pursuant to Section 2.12, Section 2.13, Section 2.15 and Section 11.03 shall be made directly to the persons entitled thereto and payments pursuant to other Loan Documents shall be made to the persons specified therein. The applicable 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. If any payment under any Loan Document shall be due on a day that is not a Business Day, unless specified otherwise, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars, except as expressly specified otherwise.

        (b)    Pro Rata Treatment.    

        (i)    Each payment by Borrowers of interest in respect of its Loans shall be applied to the amounts of such Borrower's obligations owing to the applicable Lenders pro rata according to the respective amounts then due and owing to such Lenders.

        (ii)   Each payment by Borrowers on account of principal of the Revolving Borrowings shall be made to the applicable Lenders pro rata based on the principal amounts of the Revolving Loans then held by the Revolving Lenders.

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

        (d)    Sharing of Set-Off.    Subject to the terms of the Intercreditor Agreement, if any Lender (and/or the Issuing Bank, which shall be deemed a "Lender" for purposes of this Section 2.14(d)) shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or other Obligations resulting in such Lender's receiving payment of a proportion of the aggregate amount of its Loans and accrued interest thereon or other Obligations greater than its pro rata share thereof as provided herein, then the

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Lender receiving such greater proportion shall (a) notify the applicable Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and such other obligations of the other applicable Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the applicable Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, 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 (x) any payment made by Borrowers pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to Borrowers or any Subsidiary thereof (as to which the provisions of this paragraph shall apply).

Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Requirements of Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation. If under applicable bankruptcy, insolvency or any similar law any Secured Party receives a secured claim in lieu of a setoff or counterclaim to which this Section 2.14(d) applies, such Secured Party shall to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights to which the Secured Party is entitled under this Section 2.14(d) to share in the benefits of the recovery of such secured claim.

        (e)    Borrowers Default.    Unless the applicable Administrative Agent shall have received notice from any Borrower prior to the date on which any payment is due to such Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that Borrowers will not make such payment, the Administrative Agent may assume that such Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the applicable Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the applicable Administrative Agent forthwith on demand the amount so distributed to such Lender or the Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by such Administrative Agent in accordance with banking industry rules on interbank compensation.

        (f)    Lender Default.    If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.02(c), Section 2.14(e), Section 2.17(d), Section 2.18(d), Section 2.18 (e) or Section 11.03(c), then the applicable Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by such 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 2.15.    Taxes.    

        (a)    Payments Free of Taxes.    Any and all payments by or on account of any obligation of the Loan Parties hereunder or under any other Loan Document shall be made free and clear of and without deduction or withholding for any Indemnified Taxes or Other Taxes; provided that if the

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Loan Parties shall be required by applicable Requirements of Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the applicable Administrative Agent, the applicable Collateral Agent, Lender or Issuing Bank, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the applicable Loan Party shall make such deductions and (iii) the applicable Loan Party shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Requirements of Law.

        (b)    Payment of Other Taxes by Borrowers.    Without limiting the provisions of paragraph (a) above, Borrowers shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Requirements of Law.

        (c)    Indemnification by Borrowers.    Borrowers shall indemnify the Agents, each Lender and the Issuing Bank, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Agents, such Lender or the Issuing Bank, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to Borrowers by a Lender or the Issuing Bank (with a copy to the Administrative Agents), or by the Agents on their own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.

        (d)    Evidence of Payments.    As soon as practicable after any payment of Indemnified Taxes or Other Taxes by Borrowers to a Governmental Authority, Borrowers shall deliver to the Administrative Agents the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agents.

        (e)    Status of Lenders.    Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which US Borrowers are resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall, to the extent it may lawfully do so, deliver to US Borrowers (with a copy to the Administrative Agents), at the time or times prescribed by applicable Requirements of Law or as reasonably requested by US Borrowers or the Administrative Agents, such properly completed and executed documentation prescribed by applicable Requirements of Law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by US Borrowers or either Administrative Agent, shall deliver such other documentation prescribed by applicable Requirements of Law or reasonably requested by US Borrowers or the Administrative Agents as will enable US Borrowers or the Administrative Agents to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the above two sentences, in the case of non-U.S. withholding taxes the completion, execution and submission of non-U.S. forms shall not be required if in the Lender's judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would be otherwise disadvantageous to such Lender in any material respect.

        Each initial Canadian Lender of the Canadian Borrower represents and warrants to the Canadian Borrower that on the Closing Date (a) (i) it is not a "non-resident" within the meaning of the ITA; or (ii) it is an "authorized foreign bank" within the meaning of the Bank Act for

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purposes of the ITA, and is entering into this Agreement in the ordinary course of its trade and business that is its "Canadian banking business" for purposes of the ITA, and each amount paid or credited by or to it in respect of the transactions contemplated hereunder is, and will be brought into account and recorded and reported in computing its income for Canadian tax purposes as having been made or received as the case may be, in respect of its "Canadian banking business" as so defined; and (b) has no present intention to withdraw from this Agreement. Upon the written request of the Canadian Administrative Agent or the Canadian Borrower acting reasonably, each such Canadian Lender shall use its best efforts to deliver to the Canadian Administrative Agent and Canadian Borrower such certificates, documents or other evidence as may be required from time to time, properly completed and duly executed by such Canadian Lender, to confirm the continuing accuracy of the foregoing representation or alternatively, shall deliver a notice to the Canadian Borrower indicating the facts and circumstances (other than facts and circumstances brought about unilaterally by such Canadian Lender) which have resulted in the above representation and warranty no longer continuing to be true and accurate. If such Canadian Lender fails to deliver such requested certificates, documents, other evidence on the one hand, or such notice on the other or, for greater certainty, the facts and circumstances relating to the change of the status of the Canadian Lender have been brought about unilaterally by such Canadian Lender, then the Canadian Borrower or the Canadian Administrative Agent, as the case may be, shall withhold from any interest payment to such Canadian Lender an amount equivalent to the applicable Canadian withholding tax imposed by applicable Canadian laws (including any applicable tax treaty) and the Canadian Borrower shall not be required to pay any additional or other amounts to such Canadian Lender under Section 2.15(a). From time to time, each such Canadian Lender shall (i) promptly submit to the Canadian Administrative Agent and the Canadian Borrower such certificates, documents, other evidence or notice as aforesaid, (ii) promptly notify the Canadian Administrative Agent and the Canadian Borrower of any change in circumstances which would result in the above representation and warranty no longer continuing to be true and accurate, and (iii) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Canadian Lender, and as may be reasonably necessary (including the re-designation of its Lending Office) to avoid any requirement of applicable laws that the Canadian Borrower make any deduction or withholding for Taxes from amounts payable to such Canadian Lender. Notwithstanding the foregoing, but subject to Section 11.04(b)(v), the Borrowers acknowledge that the rights and obligations of a Canadian Lender hereunder may be assigned to an Eligible Assignee that does not qualify as an Eligible Canadian Lender and further agree that any Borrower approval required in respect of such an assignment shall not be withheld on such basis.

        Without limiting the generality of any of the foregoing, any Foreign Lender shall, to the extent it may lawfully do so, deliver to US Borrowers and the Administrative Agents (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of Administrative Borrower or either Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

        (i)    duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

        (ii)   duly completed copies of Internal Revenue Service Form W-8ECI,

        (iii)  in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate, in substantially the form of Exhibit Q, or any other form approved by the applicable Administrative Agent, to the effect that such Foreign Lender is not (A) a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of any Borrower within the meaning of

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Section 881(c)(3)(B) of the Code, or (C) a "controlled foreign corporation" described in Section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN, or

        (iv)  any other form prescribed by applicable Requirements of Law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable Requirements of Law to permit Borrower to determine the withholding or deduction required to be made.

        (v)   any Lender that is not a Foreign Lender and has not otherwise established to the reasonable satisfaction of the Administrative Borrower and the Administrative Agent that it is an exempt recipient (as defined in Section 6049(b)(4) of the Code and the regulations thereunder) shall deliver to the Administrative Borrower (with a copy to the US Administrative Agent) on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter as prescribed by Applicable Law or upon the request of the Administrative Borrower or the US Administrative Agent) two duly executed and properly completed copies of Internal Revenue Service Form W-9 (or applicable successor form). Each Lender (other than a Foreign Lender) shall promptly notify the Administrative Borrower and the US Administrative Agent at any time that it determines any previously delivered form or certification is no longer accurate.

        Each Foreign Lender shall promptly notify the Administrative Borrower and each Administrative Agent at any time that a previously delivered form of certificate is no longer accurate.

        (f)    Treatment of Certain Refunds.    If either Administrative Agent, a Lender or the Issuing Bank determines, in its sole discretion, that it has received a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by Borrowers or with respect to which Borrowers have paid additional amounts pursuant to this Section, it shall pay to Borrowers an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by Borrowers under this Section with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of such Administrative Agent, such Lender or the Issuing Bank, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that Borrowers, upon the request of either Administrative Agent, such Lender or the Issuing Bank, agrees to repay the amount paid over to Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Administrative Agent, such Lender or the Issuing Bank in the event such Administrative Agent, such Lender or the Issuing Bank is required to repay such refund to such Governmental Authority. If and to the extent that any Lender is able, in its sole opinion, to apply or otherwise take advantage of any offsetting tax credit or other similar tax benefit arising out of or in conjunction with any deduction or withholding which gives rise to an obligation of a Borrower to pay any additional amount pursuant to this Section 2.15, then such Lender shall, to the extent that in its sole opinion it can do so without prejudice to the retention of the amount of such credit or benefit and without any other adverse tax consequences for such Lender, reimburse such Borrower at such time as such tax credit or benefit shall have actually been received by such Lender such amount as such Lender shall, in its sole opinion, have determined to be attributable to the relevant deduction or withholding and as will leave such Lender in no better or worse position than it would have been in if the payment of such additional amount had not been required. (net of all out-of-pocket expenses of such Administrative Agent, such Lender or the Issuing Bank, as the case may be); provided that the Borrowers upon the request of either Administrative Agent, such Lender or the Issuing Bank agrees to repay the amount paid over to the Borrowers (plus any penalties, interest or other charges imposed by the

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relevant Governmental Authority) in the event Governmental Authority successfully challenges such tax credits or other tax benefits.

This section shall not be construed to require either Administrative Agent, any Lender or the Issuing Bank to make available its tax returns (or any other information relating to its taxes that it deems confidential) to Borrowers or any other person. Notwithstanding anything to the contrary, in no event will any Administrative Agent, any Lender or the Issuing Bank be required to pay any amount to Borrowers the payment of which would place such Lender, such Administrative Agent or the Issuing Bank in a less favorable net after-tax position than such Lender, such Administrative Agent or the Issuing Bank would have been in if the additional amounts giving rise to such refund of any Indemnified Taxes or Other Taxes had never been paid.

        (g)   Upon the reasonable request of the Canadian Borrower, and at the Canadian Borrower's expense, a Canadian Lender shall use its reasonable efforts to co-operate with the Canadian Borrower with a view to obtaining a refund of any Tax which is not, in the Canadian Borrower's reasonable opinion, correctly or legally imposed and for which the Canadian Borrower has indemnified the Canadian Lender under this Agreement, if obtaining such refund would not, in the sole judgment of the Canadian Lender, be disadvantageous to the Canadian Lender; provided that nothing in this clause shall be construed to require the Canadian Lender to institute any administrative proceeding (other than the filing of a claim for any such refund) or judicial proceeding to obtain any such refund. If such Canadian Lender shall receive a refund from a taxing authority (as a result of any error in the imposition of Taxes by such taxing authority) or any Taxes paid by the Canadian Borrower pursuant to this Agreement, the Canadian Lender shall promptly pay to the Canadian Borrower the amount so received, less any Taxes imposed on the Canadian Lender as a result of such amount and net out-of-pocket expenses provided that the Canadian Lender shall only be required to pay the Canadian Borrower such amounts as the Canadian Lender determines are attributable to Taxes paid by the Canadian Borrower. In the event that the Canadian Lender is required to repay the amount of such refund (including interest, if any), the Canadian Borrower, upon the request of the Canadian Lender, agrees to promptly return to the Canadian Lender the amount of such refund and interest, if any (plus penalties, interest and other charges imposed in connection with the repayment of such amounts by the Canadian Lender).

SECTION 2.16.    Mitigation Obligations; Replacement of Lenders.    

        (a)    Designation of a Different Lending Office.    If any Lender requests compensation under Section 2.12, or requires Borrowers to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.12 or Section 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. A certificate setting forth such costs and expenses submitted by such Lender to Borrower shall be conclusive absent manifest error.

        (b)    Replacement of Lenders.    If any Lender requests compensation under Section 2.12, or if Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, or if any Lender defaults in its obligation to fund Loans hereunder, or if Borrowers exercises their replacement rights under Section 11.02(d), then Borrowers may, at their sole expense and effort, upon notice to such Lender

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and the Administrative Agents, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.04), all of its interests, rights and obligations under this Agreement and the other Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that:

        (i)    Borrowers shall have paid to the applicable Administrative Agent the processing and recordation fee specified in Section 11.04(b);

        (ii)   such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 2.13), from the assignee (to the extent of such outstanding principal and accrued interest and fees) or Borrowers(in the case of all other amounts);

        (iii)  in the case of any such assignment resulting from a claim for compensation under Section 2.12 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments thereafter; and

        (iv)  such assignment does not conflict with applicable Requirements of Law.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling Borrowers to require such assignment and delegation cease to apply.

SECTION 2.17.    Swingline Loans.    

        (a)    US Swingline Commitment.    Subject to the terms and conditions set forth herein, the US Swingline Lender agrees to make US Swingline Loans to US Borrowers from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in the aggregate principal amount of outstanding US Swingline Loans exceeding $35 million and provided that after making a US Swingline Loan, the sum of the total US Revolving Exposures shall not exceed the lesser of (A) the total Revolving Commitments minus any Line Reserve and (B) the Borrowing Base then in effect; provided that the US Swingline Lender shall not be required to make a US Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, US Borrowers may borrow, repay and reborrow US Swingline Loans.

        (b)    US Swingline Loans.    To request a US Swingline Loan, Administrative Borrower shall deliver, by hand delivery or telecopier, a duly completed and executed Borrowing Request to the US Administrative Agent and the US Swingline Lender, not later than 2:00 p.m., New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and the amount of the requested US Swingline Loan. Each US Swingline Loan shall be an ABR Loan. The US Swingline Lender shall make each US Swingline Loan available to the applicable US Borrower by means of a credit to the general deposit account of such US Borrower with the US Swingline Lender (or, in the case of a US Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.18(e), by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such US Swingline Loan. US Borrowers shall not request a US Swingline Loan if at the time of or immediately after giving effect to the extension of credit contemplated by such request a Default has occurred and is continuing or would result therefrom. US Swingline Loans shall be made in minimum amounts of $1.0 million and integral multiples of $500,000 above such amount.

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        (c)    Prepayment.    US Borrowers shall have the right at any time and from time to time to repay any US Swingline Loan, in whole or in part, upon giving written notice to the US Swingline Lender and the US Administrative Agent before 12:00 (noon), New York City time, on the proposed date of repayment.

        (d)    Canadian Swingline Commitment.    Subject to the terms and conditions set forth herein, the Canadian Swingline Lender agrees to make Canadian Swingline Loans to Canadian Borrower from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in the aggregate principal amount of outstanding Canadian Swingline Loans exceeding $5.0 million and provided that after making a Canadian Swingline Loan, the sum of the total Canadian Exposures shall not exceed the lesser of (A) the total Canadian Revolving Commitments minus any Line Reserve allocated to the Canadian Revolving Commitments and (B) the Canadian Borrowing Base then in effect; provided that the Canadian Swingline Lender shall not be required to make a Canadian Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, Canadian Borrower may borrow, repay and reborrow Canadian Swingline Loans.

        (e)    Canadian Swingline Loans.    To request a Swingline Loan, Administrative Borrower shall deliver, by hand delivery or telecopier, a duly completed and executed Borrowing Request to the Canadian Administrative Agent and the Canadian Swingline Lender, not later than 2:00 p.m., New York City time, on the day of a proposed Canadian Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and the amount of the requested Canadian Swingline Loan. Each Canadian Swingline Loan shall be a Canadian Prime Rate Loan. The Canadian Swingline Lender shall make each Canadian Swingline Loan available to Canadian Borrower by means of a credit to the general deposit account of Canadian Borrower with the Canadian Swingline Lender by 3:00 p.m., New York City time, on the requested date of such Canadian Swingline Loan. Canadian Borrower shall not request a Canadian Swingline Loan if at the time of or immediately after giving effect to the extension of credit contemplated by such request a Default has occurred and is continuing or would result therefrom. Canadian Swingline Loans shall be made in minimum amounts of Can$1.0 million and integral multiples of Can$500,000 above such amount.

        (f)    Prepayment.    Canadian Borrower shall have the right at any time and from time to time to repay any Canadian Swingline Loan, in whole or in part, upon giving written notice to the Canadian Swingline Lender and the Canadian Administrative Agent before 12:00 (noon), New York City time, on the proposed date of repayment.

        (g)    Participations.    Either Swingline Lender may at any time in its discretion by written notice given to the applicable Administrative Agent (provided such notice requirement shall not apply if either (i) the US Swingline Lender and the US Administrative Agent are the same entity or (ii) the Canadian Swingline Lender and the Canadian Administrative Agent are the same entity, as applicable) not later than 11:00 A.M., New York City time, on the next succeeding Business Day following such notice require the Revolving Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans then outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Lenders will participate. Promptly upon receipt of such notice, the applicable Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender's Pro Rata Percentage of such Swingline Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the applicable Administrative Agent, for the account of the applicable Swingline Lender, such Lender's Pro Rata Percentage of such Swingline Loan or Swingline Loans. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of

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a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever (so long as such payment shall not cause such Lender's Revolving Exposure to exceed such Lender's Revolving Commitment). Each Revolving Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.02(c) with respect to Loans made by such Lender (and Section 2.02 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the applicable Administrative Agent shall promptly pay to the applicable Swingline Lender the amounts so received by it from the Revolving Lenders. The applicable Administrative Agent shall notify Administrative Borrower of any participations in any Swingline Loan acquired by the Revolving Lenders pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to such Administrative Agent and not to such Swingline Lender. Any amounts received by any Swingline Lender from any Borrower (or other party on behalf of Borrowers) in respect of a Swingline Loan after receipt by such Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agents. Any such amounts received by the Administrative Agents shall be promptly remitted by the Administrative Agents to the Revolving Lenders that shall have made their payments pursuant to this paragraph, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve Borrowers of any default in the payment thereof.

SECTION 2.18.    Letters of Credit.    

        (a)    General.    Subject to the terms and conditions set forth herein, US Borrowers may request the Issuing Bank, and the Issuing Bank agrees, to issue Letters of Credit denominated in any Approved Currency for its own account or the account of a Subsidiary in a form reasonably acceptable to the US Administrative Agent and the Issuing Bank, at any time and from time to time during the Revolving Availability Period (provided that US Borrowers shall be a co-applicant, and be jointly and severally liable, with respect to each Letter of Credit issued for the account of a Subsidiary). Upon receipt of an LC Request in accordance with Section 2.18(b) below, the US Administrative Agent shall notify the Issuing Bank as to whether the issuance of such Letter of Credit is authorized. The Issuing Bank shall not issue any Letter of Credit without first receiving such authorization and US Borrowers shall not request the issuance of, any Letter of Credit at any time if after giving effect to such issuance, the LC Exposure would exceed the LC Commitment or the total Revolving Exposure would exceed the limits set forth in clause (b) below. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by US Borrowers to, or entered into by US Borrowers with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. Borrowers and Guarantors hereby acknowledge and agree that, effective on the date hereof, each of the Existing Issuing Bank Letters of Credit shall be deemed and shall each constitute a Letter of Credit as if such Existing Issuing Bank Letters of Credit were originally issued as a Letter of Credit hereunder and shall be subject to the terms and conditions of this Agreement.

        (b)    Request for Issuance, Amendment, Renewal, Extension; Certain Conditions and Notices.    To request the issuance of a Letter of Credit or the amendment, renewal or extension of an outstanding Letter of Credit, US Borrowers shall deliver, by hand or telecopier (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank), an LC Request to the Issuing Bank and the US Administrative Agent not later than 11:00 a.m. on the third Business Day preceding the requested date of issuance, amendment, renewal or extension (or such later date and time as is acceptable to the Issuing Bank).

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        Each LC Request for an initial issuance of a Letter of Credit shall specify in form and detail satisfactory to the Issuing Bank the following:

        (i)    the proposed issuance date of the requested Letter of Credit (which shall be a Business Day);

        (ii)   the amount and the currency thereof (which shall be any Approved Currency);

        (iii)  the expiry date thereof (which shall not be later than the close of business on the Letter of Credit Expiration Date);

        (iv)  the name and address of the beneficiary thereof;

        (v)   whether the Letter of Credit is to be issued for its own account or for the account of one of its Subsidiaries (provided that US Borrowers shall be a co-applicant, and therefor jointly and severally liable, with respect to each Letter of Credit issued for the account of a Subsidiary);

        (vi)  the documents to be presented by such beneficiary in connection with any drawing thereunder;

        (vii) the full text of any certificate to be presented by such beneficiary in connection with any drawing thereunder; and

        (viii) such other matters as the Issuing Bank may require.

        A request for an amendment, renewal or extension of any outstanding Letter of Credit shall specify in form and detail satisfactory to the Issuing Bank:

        (i)    the Letter of Credit to be amended, renewed or extended;

        (ii)   the proposed date of amendment, renewal or extension thereof (which shall be a Business Day);

        (iii)  the nature of the proposed amendment, renewal or extension; and

        (iv)  such other matters as the Issuing Bank may require.

If requested by the Issuing Bank, US Borrowers also shall submit a letter of credit application on the Issuing Bank's standard form in connection with any request for a Letter of Credit, but in the event of any inconsistency between such standard form and this Agreement, the terms of this Agreement shall control. A Letter of Credit shall be issued, amended, renewed or extended only if (and, upon issuance, amendment, renewal or extension of each Letter of Credit, US Borrowers shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, (i) the LC Exposure shall not exceed the LC Commitment, (ii) the total Revolving Exposures shall not exceed the lesser of (A) the total Revolving Commitments minus any Line Reserve and (B) the Borrowing Base then in effect and (iii) the conditions set forth in Article IV in respect of such issuance, amendment, renewal or extension shall have been satisfied. Unless the Issuing Bank shall agree otherwise, no Letter of Credit shall be in an initial amount less than $100,000, in the case of a Commercial Letter of Credit, or $500,000, in the case of a Standby Letter of Credit.

        Upon the issuance of any Letter of Credit or amendment, renewal, extension or modification to a Letter of Credit, the Issuing Bank shall promptly notify the US Administrative Agent, who shall promptly notify each Revolving Lender, thereof, which notice shall be accompanied by a copy of such Letter of Credit or amendment, renewal, extension or modification to a Letter of Credit and the amount of such Lender's respective participation in such Letter of Credit pursuant to Section 2.18. On the first Business Day of each calendar month, the Issuing Bank shall provide to the US Administrative Agent a report listing all

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outstanding Letters of Credit and the outstanding amounts and beneficiaries thereof and the amount and maturities of any LC Acceptances and the US Administrative Agent shall promptly provide such report to each Revolving Lender.

        (c)    Expiration Date.    Each Letter of Credit shall expire (or be subject to non-renewal or termination by the US Administrative Agent) at or prior to the close of business on the earlier of (x) the date which is one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (y) the Letter of Credit Expiration Date.

        (d)    Participations.    By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby irrevocably grants to each Revolving Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Revolving Lender's Pro Rata Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the US Administrative Agent, for the account of the Issuing Bank, such Revolving Lender's Pro Rata Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by US Borrowers on the date due as provided in Section 2.18(d), or of any reimbursement payment required to be refunded to US Borrowers for any reason. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, or expiration, termination or cash collateralization of any Letter of Credit and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

        (e)    Reimbursement.    

        (i)    If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit or LC Acceptance, US Borrowers (or Canadian Borrower, in the first instance, and US Borrowers, alternatively, for Letters of Credit governed by Section 2.18(m)) shall reimburse such LC Disbursement by paying to the Issuing Bank an amount equal to such LC Disbursement not later than 3:00 p.m., New York City time, on the date that such LC Disbursement is made if Administrative Borrower shall have received notice of such LC Disbursement prior to 11:00 a.m., New York City time, on such date, or, if such notice has not been received by Administrative Borrower prior to such time on such date, then not later than 3:00 p.m., New York City time, on the Business Day immediately following the day that Administrative Borrower receives such notice; provided that US Borrowers may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 that such payment be financed with ABR Revolving Loans or Swingline Loans in an equivalent amount and, to the extent so financed, Administrative Borrowers' obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Loans or Swingline Loans.

        (ii)   If US Borrowers (or Canadian Borrower and US Borrowers for Letters of Credit governed by Section 2.18(m)) fail to make such payment when due, the Issuing Bank shall notify the US Administrative Agent and the US Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from US Borrowers in respect thereof and such Revolving Lender's Pro Rata Percentage thereof. Each Revolving Lender shall pay by wire transfer of immediately available funds to the US Administrative Agent not later than 2:00 p.m., New York City time, on such date (or, if such Revolving Lender shall have received such notice later than 12:00 noon, New York City time,

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on any day, not later than 11:00 a.m., New York City time, on the immediately following Business Day), an amount equal to such Revolving Lender's Pro Rata Percentage of the unreimbursed LC Disbursement in the same manner as provided in Section 2.02(c) with respect to Revolving Loans made by such Revolving Lender, and the US Administrative Agent will promptly pay to the Issuing Bank the amounts so received by it from the Revolving Lenders. The US Administrative Agent will promptly pay to the Issuing Bank any amounts received by it from US Borrowers or Canadian Borrower, as the case may be, pursuant to the above paragraph prior to the time that any Revolving Lender makes any payment pursuant to the preceding sentence and any such amounts received by the US Administrative Agent from US Borrowers or Canadian Borrower, as the case may be, thereafter will be promptly remitted by the US Administrative Agent to the Revolving Lenders that shall have made such payments and to the Issuing Bank, as appropriate.

        (iii)  If any Revolving Lender shall not have made its Pro Rata Percentage of such LC Disbursement available to the US Administrative Agent as provided above, each of such Revolving Lender and US Borrowers severally agree to pay interest on such amount, for each day from and including the date such amount is required to be paid in accordance with the foregoing to but excluding the date such amount is paid, to the US Administrative Agent for the account of the Issuing Bank at (i) in the case of US Borrower, the rate per annum set forth in Section 2.18(h) and (ii) in the case of such Lender, at a rate determined by the US Administrative Agent in accordance with banking industry rules or practices on interbank compensation.

        (iv)  All payments made pursuant to this Section 2.18(e) shall be in the Approved Currency in which the LC Disbursement giving rise to such payment is denominated.

        (f)    Obligations Absolute.    The Reimbursement Obligation of US Borrowers and Canadian Borrower, as applicable, as provided in Section 2.18(e) shall be absolute, unconditional and irrevocable, and shall be paid and performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein; (ii) any draft or other document presented under a Letter of Credit being proved to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iii) payment by the Issuing Bank (or creation of an LC Acceptance) under a Letter of Credit against presentation of a draft or other document that fails to comply with the terms of such Letter of Credit; (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.18, constitute a legal or equitable discharge of, or provide a right of setoff against, the obligations of US Borrowers and Canadian Borrower, as applicable, hereunder; (v) the fact that a Default shall have occurred and be continuing; or (vi) any material adverse change in the business, property, results of operations, prospects or condition, financial or otherwise, of US Borrowers and its Subsidiaries. None of the Agents, the Lenders, the Issuing Bank or any of their Affiliates shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any LC Acceptance or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to US Borrowers or Canadian Borrower, as applicable, to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by Borrowers to the extent permitted by applicable

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Requirements of Law) suffered by US Borrowers or Canadian Borrower, as applicable, that are caused by the Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

        (g)    Disbursement Procedures.    The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment (or creation of an LC Acceptance) under a Letter of Credit. The Issuing Bank shall promptly give written notice to the US Administrative Agent and US Borrowers of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder (or, in the case of the creation of an LC Acceptance, the date payment is due thereunder); provided that any failure to give or delay in giving such notice shall not relieve Administrative Borrower or Canadian Borrower, as applicable, of its Reimbursement Obligation to the Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement (other than with respect to the timing of such Reimbursement Obligation set forth in Section 2.18(e)).

        (h)    Interim Interest.    If the Issuing Bank shall make any LC Disbursement, then, unless US Borrowers or Canadian Borrower, as applicable, shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest payable on demand, for each day from and including the date such LC Disbursement is made to but excluding the date that US Borrowers or Canadian Borrower, as applicable, reimburse such LC Disbursement, at the rate per annum determined pursuant to Section 2.06(e). Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to Section 2.18(e) to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

        (i)    Cash Collateralization.    If any Event of Default shall occur and be continuing, on the Business Day that Administrative Borrower receives notice from the US Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, US Borrowers shall deposit on terms and in accounts satisfactory to the applicable Collateral Agents, in the name of the applicable Collateral Agents and for the benefit of the Revolving Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to US Borrowers described in Section 8.01(g) or Section 8.01(h). Funds so deposited shall be applied by the applicable Collateral Agents to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of outstanding Reimbursement Obligations or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other Obligations of US Borrowers under this Agreement. If US Borrowers are required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such

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amount plus any accrued interest or realized profits with respect to such amounts (to the extent not applied as aforesaid) shall be returned to US Borrowers within three Business Days after all Events of Default have been cured or waived.

        (j)    Additional Issuing Banks.    US Borrowers may, at any time and from time to time, designate one or more additional Revolving Lenders to act as an issuing bank under the terms of this Agreement, with the consent of the US Administrative Agent (which consent shall not be unreasonably withheld), the Issuing Bank and such Revolving Lender(s). Any Lender designated as an issuing bank pursuant to this paragraph (j) shall be deemed (in addition to being a Revolving Lender) to be the Issuing Bank with respect to Letters of Credit issued or to be issued by such Revolving Lender, and all references herein and in the other Loan Documents to the term "Issuing Bank" shall, with respect to such Letters of Credit, be deemed to refer to such Revolving Lender in its capacity as Issuing Bank, as the context shall require.

        (k)    Resignation or Removal of the Issuing Bank.    The Issuing Bank may resign as Issuing Bank hereunder at any time upon at least 30 days' prior notice to the Lenders, the Administrative Agents and Administrative Borrower. The Issuing Bank may be replaced at any time by written agreement among US Borrowers, each Agent, the replaced Issuing Bank and the successor Issuing Bank. US Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank or any such additional Issuing Bank. At the time any such resignation or replacement shall become effective, US Borrowers shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.05(c). From and after the effective date of any such resignation or replacement or addition, as applicable, (i) the successor or additional Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued by it thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or such addition or to any previous Issuing Bank, or to such successor or such addition and all previous Issuing Banks, as the context shall require. After the resignation or replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such resignation or replacement, but shall not be required to issue additional Letters of Credit. If at any time there is more than one Issuing Bank hereunder, US Borrowers may, in their discretion, select which Issuing Bank is to issue any particular Letter of Credit.

        (l)    Other.    The Issuing Bank shall be under no obligation to issue any Letter of Credit if

        (i)    any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any Requirement of Law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Bank in good faith deems material to it; or

        (ii)   the issuance of such Letter of Credit would violate one or more policies of the Issuing Bank.

The Issuing Bank shall be under no obligation to amend any Letter of Credit if (A) the Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the

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terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

        (m)  Notwithstanding the foregoing, at no time shall there be greater than $10 million outstanding of Letters of Credit issued for the account of Canadian Borrower and/or Canadian Guarantors and any such Letters of Credit issued for the account of Canadian Borrower and/or the Canadian Guarantors shall be treated as if issued for the account of a US Borrower for purposes of calculating the Borrowing Base. The Canadian Borrower shall have the primary responsibility for the Reimbursement Obligation with respect to any such Letter of Credit through the borrowing of Canadian Revolving Loans; provided, that in the event Canadian Borrower shall not reimburse such Issuing Bank then such obligation shall be for the account of US Borrowers as provided in Section 2.18(e).

SECTION 2.19.    Increase in Commitments.    

        (a)    Borrower Request.    The Borrowers may by written notice to the Administrative Agents elect to request prior to the Revolving Maturity Date, an increase to the existing Revolving Commitments by an amount not in excess of $100 million in the aggregate and not less than $50 million individually (unless otherwise agreed to by the Administrative Agents). Each such notice shall specify (i) the date on which the Borrowers propose that the increased or new Commitments shall be effective (each, an "Increase Effective Date") and the time period within which each Lender is requested to respond, which in each case shall be a date not less than ten (10) Business Days after the date on which such notice is delivered to the Administrative Agents and the Lenders. The Administrative Agents shall promptly circulate such notice to each of the Lenders and each Lender in its sole and absolute discretion may notify Administrative Agents within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to, greater than, or less than its Pro Rata Percentage of such requested increase. Any Lender not responding within such time period shall be deemed to have declined to increase its Commitment. Administrative Agents shall notify Borrowers and each Lender of the Lenders' responses to each request made hereunder. If the existing Lenders do not agree to the full amount of a requested increase, Borrowers may then invite a Lender or any Lenders to increase their Commitments or invite additional financial institutions (reasonably satisfactory to Administrative Agents, the Arranger and solely to the extent otherwise permitted by Section 11.04) to become Lenders pursuant to an Increase Joinder (as defined below).

        (b)    Conditions.    The increased or new Commitments shall become effective, as of such Increase Effective Date; provided that:

        (i)    each of the conditions set forth in Section 4.02 shall be satisfied;

        (ii)   no Default shall have occurred and be continuing or would result from the borrowings to be made on the Increase Effective Date;

        (iii)  if on the Increase Effective Date (prior to giving effect to the borrowings or the increase in commitments to be made on the Increase Effective Date) the Excess Availability is less than $75 million then, after giving pro forma effect to the borrowings to be made on the Increase Effective Date and to any change in Consolidated Cash Flow and any increase in Indebtedness resulting from the consummation of any Permitted Acquisition concurrently with such borrowings as of the date of the most recent financial statements delivered pursuant to Section 5.01(a) or Section 5.01(b), Borrowers shall be in compliance with each of the covenants set forth in Section 6.10;

        (iv)  Borrowers shall make any payments required pursuant to Section 2.13 in connection with any adjustment of Revolving Loans pursuant to Section 2.19(d); and

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        (v)   Borrowers shall deliver or cause to be delivered any legal opinions or other documents reasonably requested by the applicable Administrative Agent in connection with any such transaction.

        (c)    Terms of New Loans and Commitments.    The terms and provisions of the Revolving Loans made pursuant to the new Commitments shall be identical to the Revolving Loans. The increased or new Commitments shall be effected by a joinder agreement (the "Increase Joinder") executed by the Borrowers, the Administrative Agents and each Lender making such increased or new Commitment, in form and substance satisfactory to each of them. The Increase Joinder may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the opinion of the Administrative Agents, to effect the provisions of this Section 2.19.

        (d)    Adjustment of Revolving Loans.    Each of the Revolving Lenders (other than Canadian Revolving Lenders) having a Revolving Commitment prior to such Increase Effective Date (the "Pre-Increase Revolving Lenders") shall assign to any Revolving Lender which is acquiring a new or additional Revolving Commitment on the Increase Effective Date (the "Post-Increase Revolving Lenders"), and such Post-Increase Revolving Lenders shall purchase from each Pre-Increase Revolving Lender, at the principal amount thereof, such interests in the Revolving Loans and participation interests in LC Exposure and Swingline Loans outstanding on such Increase Effective Date as shall be necessary in order that, after giving effect to all such assignments and purchases, such Revolving Loans and participation interests in LC Exposure and Swingline Loans will be held by Pre-Increase Revolving Lenders and Post-Increase Revolving Lenders ratably in accordance with their Revolving Commitments after giving effect to such increased Revolving Commitments.

        (e)    Adjustment of Canadian Revolving Loans.    Each of the Canadian Revolving Lenders having a Canadian Revolving Commitment prior to such Increase Effective Date (the "Canadian Pre-Increase Revolving Lenders") shall assign to any Revolving Lender which is acquiring a new or additional Canadian Revolving Commitment on the Increase Effective Date (the "Canadian Post-Increase Revolving Lenders"), and such Canadian Post-Increase Revolving Lenders shall purchase from each Canadian Pre-Increase Revolving Lender, at the principal amount thereof, such interests in the Canadian Revolving Loans outstanding on such Increase Effective Date as shall be necessary in order that, after giving effect to all such assignments and purchases, such Revolving Loans will be held by Canadian Pre-Increase Revolving Lenders and Canadian Post-Increase Revolving Lenders ratably in accordance with their Canadian Revolving Commitments after giving effect to such increased Canadian Revolving Commitments.

        (f)    Equal and Ratable Benefit.    The Loans and Commitments established pursuant to this paragraph shall constitute Loans and Commitments under, and shall be entitled to all the benefits afforded by, this Agreement and the other Loan Documents, and shall, without limiting the foregoing, benefit equally and ratably from the Guarantees and security interests created by the Security Documents, except that the new Loans may be subordinated in right of payment or the Liens securing the new Loans may be subordinated, in each case, as set forth in the Increase Joinder. The Loan Parties shall take any actions reasonably required by the Administrative Agents to ensure and/or demonstrate that the Lien and security interests granted by the Security Documents continue to be perfected under the UCC or the PPSA, as applicable, or otherwise after giving effect to the establishment of any such new Commitments.

SECTION 2.20.    Determination of Borrowing Base.    

        (a)    Eligible Accounts.    On any date of determination of the Borrowing Base, the term "Eligible Accounts" as used herein shall comprise all of the Credit Card Receivables of US Borrowers and any of the US Borrowing Base Guarantors as arise in the ordinary course of business, which have been earned by performance, that are not excluded as ineligible by virtue of

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one or more of the criteria set forth below and are reflected in the most recent Borrowing Base Certificate delivered by the Borrowers to the Collateral Agents and the Administrative Agents. None of the following shall be deemed to be Eligible Accounts:

        (i)    Credit Card Receivables due from major credit card processors that have been outstanding for more than five (5) Business Days from the date of sale, or for such longer period(s) as may be approved by the applicable Collateral Agents;

        (ii)   Credit Card Receivables due from major credit card processors with respect to which US Borrowers or any of the US Borrowing Base Guarantors do not have good, valid and marketable title thereto, free and clear of any Lien (other than Liens granted to the applicable Administrative Agent for its own benefit and the benefit of the other Secured Parties pursuant to the Security Documents, those Liens specified in Section 6.02 (a), (e) and (i) and Permitted Liens having priority by operation of applicable law over the Lien of the Collateral Agents);

        (iii)  Credit Card Receivables due from major credit card processors that are not subject to a first priority (except as provided in clause (ii), above) security interest in favor of the Collateral Agents, as applicable, for its own benefit and the benefit of the other Secured Parties;

        (iv)  Credit Card Receivables due from major credit card processors which are disputed, or with respect to which a claim, counterclaim, offset or chargeback has been asserted, by the related credit card processor (but only to the extent of such dispute, counterclaim, offset or chargeback) (it being the intent that chargebacks in the ordinary course by the credit card processors as contemplated by the applicable Control Agreement shall not be deemed violative of this clause);

        (v)   Except as otherwise approved by the US Administrative Agent and applicable Collateral Agents, Credit Card Receivables due from major credit card processors as to which the credit card processor has the right under certain circumstances to require the US Borrowers or any of the US Borrowing Base Guarantors to repurchase such Accounts from such credit card processor;

        (vi)  Except as otherwise approved by the US Administrative Agent and applicable Collateral Agents, Credit Card Receivables due from major credit card processors as to which the US Administrative Agent and the applicable Collateral Agents have not received an acceptable Control Agreement;

        (vii) Accounts due from major credit card processors (other than Visa, Mastercard, American Express, Diners Club and Discover) which the applicable Collateral Agents determine in their commercially reasonable discretion, acting in good faith, to be unlikely to be collected; or

        (viii) Except as otherwise approved by the applicable Collateral Agents in their sole discretion, Credit Card Receivables of US Borrowers and any of the US Borrowing Base Guarantors arising from Private Label Credit Cards.

Notwithstanding the above, the applicable Collateral Agents and the US Administrative Agent reserve the right, at any time and from time to time after the Closing Date, to adjust the criteria set forth above, to establish new criteria and to adjust the applicable advance rate with respect to Eligible Accounts, in their Permitted Discretion, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria or changes in the applicable advance rates which have the effect of making more credit available. The Collateral Agents shall have the right to establish, modify or eliminate Reserves against Eligible Accounts (including, without limitation, for estimates, chargeback or

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other accrued liabilities or offsets by credit card processors and amounts to adjust for material claims, offsets, defenses or counterclaims or other material disputes described in Section 9.01) from time to time in their Permitted Discretion.

        (b)    Eligible Inventory.    For purposes of this Agreement, Eligible Inventory shall exclude any Inventory to which any of the exclusionary criteria set forth below applies. The Collateral Agents shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in their Permitted Discretion. In addition, the Collateral Agents and the Administrative Agents reserve the right, upon two (2) Business Day's prior written notice to the Administrative Borrower, at any time and from time to time after the Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate with respect to Eligible Inventory, in their Permitted Discretion, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible Inventory shall not include any Inventory of US Borrowers or any US Borrowing Base Guarantor that:

        (i)    the applicable Collateral Agents, on behalf of Secured Parties, do not have a first priority and exclusive perfected Lien on such Inventory;

        (ii)   (1) is stored at a leased or rented location where the aggregate value of Inventory exceeds $250,000 unless the applicable Collateral Agents have given their prior consent thereto or unless either (x) a Landlord Access Agreement in respect of such location has been delivered to the applicable Collateral Agents, or (y) Reserves reasonably satisfactory to the applicable Collateral Agents have been established with respect thereto or (2) is stored with a bailee or warehouseman where the aggregate value of Inventory exceeds $250,000 unless either (x) an acknowledged bailee waiver letter which is in form and substance satisfactory to the applicable Collateral Agents and the US Administrative Agent has been received by the applicable Collateral Agents or (y) Reserves reasonably satisfactory to the applicable Collateral Agents have been established with respect thereto, or (3) is located at an owned location subject to a mortgage in favor of a lender other than any of the Collateral Agents and the Senior Note Collateral Agent where the aggregate value of Inventory exceeds $250,000 unless either (x) mortgagee waiver which is in form and substance satisfactory to the applicable Collateral Agents and the US Administrative Agent has been delivered to the applicable Collateral Agents or (y) Reserves reasonably satisfactory to the applicable Collateral Agents have been established with respect thereto;

        (iii)  (1) is placed on consignment by a third party consignor with any US Borrower or US Borrowing Base Guarantor as consignee or (2) is placed on consignment by any US Borrower or US Borrowing Base Guarantor as consignor with any third party as consignee, unless a valid consignment agreement which is reasonably satisfactory to applicable Collateral Agents is in place with respect to such Inventory;

        (iv)  is covered by a negotiable document of title, unless such document has been delivered to the applicable Collateral Agents with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agents and the Lenders and landlords, carriers, bailees and warehousemen if clause (ii) above has been complied with;

        (v)   is to be returned to suppliers;

        (vi)  is obsolete, unsalable, shopworn, seconds, damaged or unfit for sale;

        (vii) consists of display items, samples or packing or shipping materials, manufacturing supplies, work-in-process Inventory, replacement parts or spare parts;

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        (viii) is not finished goods held for sale in the ordinary course of US Borrower's or any US Borrowing Base Guarantor's, as applicable, business;

        (ix)  breaches any of the representations or warranties pertaining to Inventory set forth in the Loan Documents;

        (x)   consists of Hazardous Material or goods that, in either case, can be transported or sold only with licenses that are not readily available;

        (xi)  is not covered by casualty insurance maintained as required by Section 5.04;

        (xii) supplies used or consumed in US Borrower's business;

        (xiii) bill and hold goods;

        (xiv) unserviceable or slow moving Inventory;

        (xv) inventory returned by retail customers that is not held for resale;

        (xvi) inventory subject to deposit made by retail customers for sale of Inventory that have not been delivered to the extent of such deposits; or

        (xvii) is subject to any licensing arrangement the effect of which would be to limit the ability of any Collateral Agent, or any person selling the Inventory on behalf of such Collateral Agent, to sell such Inventory in enforcement of such Collateral Agent's Liens, without further consent or payment to the licensor or other person.

SECTION 2.21.    Determination of Canadian Borrowing Base.

        (a)    Eligible Canadian Accounts.    On any date of determination of the Canadian Borrowing Base the term "Eligible Canadian Accounts" as used herein shall comprise all of the Credit Card Receivables of Canadian Borrower and any of Canadian Borrowing Base Guarantors as arise in the ordinary course of business, which have been earned by performance, that are not excluded as ineligible by virtue of one or more of the criteria set forth below and are reflected in the most recent Borrowing Base Certificate delivered by the Borrowers to the Collateral Agents and the Administrative Agents. None of the following shall be deemed to be Eligible Accounts:

        (i)    Credit Card Receivables due from major credit card processors that have been outstanding for more than five (5) Business Days from the date of sale or, in the case of Accounts due from American Express to the Canadian Borrower or any of the Canadian Borrowing Base Guarantors, that have been outstanding for more than ten (10) Business Days from the date of sale, or for such longer period(s) as may be approved by the applicable Collateral Agents;

        (ii)   Credit Card Receivables due from major credit card processors with respect to which Canadian Borrower or any of the Canadian Borrowing Base Guarantors do not have good, valid and marketable title thereto, free and clear of any Lien (other than Liens granted to the applicable Administrative Agent for its own benefit and the benefit of the other Secured Parties pursuant to the Security Documents, those Liens specified in Section 6.02 (a), (e) and (i) and Permitted Liens having priority by operation of applicable law over the Lien of the applicable Collateral Agents);

        (iii)  Credit Card Receivables due from major credit card processors that are not subject to a first priority (except as provided in clause (ii), above) security interest in favor of the Collateral Agents, as applicable, for its own benefit and the benefit of the other Secured Parties;

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        (iv)  Credit Card Receivables due from major credit card processors which are disputed, or with respect to which a claim, counterclaim, offset or chargeback has been asserted, by the related credit card processor (but only to the extent of such dispute, counterclaim, offset or chargeback) (it being the intent that chargebacks in the ordinary course by the credit card processors shall not be deemed violative of this clause);

        (v)   Except as otherwise approved by the Canadian Administrative Agent and applicable Collateral Agents, Credit Card Receivables due from major credit card processors as to which the credit card processor has the right under certain circumstances to require the Canadian Borrower or any of the Canadian Borrowing Base Guarantors to repurchase such Accounts from such credit card processor;

        (vi)  Except as otherwise approved by the Canadian Administrative Agent and applicable Collateral Agents, Credit Card Receivables due from major credit card processors as to which the Canadian Administrative Agent and the applicable Collateral Agents have not received an acceptable Control Agreement;

        (vii) Accounts due from major credit card processors (other than Visa, Mastercard, American Express, Diners Club and Discover) which the applicable Collateral Agents determine in their commercially reasonable discretion, acting in good faith, to be unlikely to be collected.; or

        (viii) Except as otherwise approved by the applicable Collateral Agents in their sole discretion, Credit Card Receivables of Canadian Borrower and any of the Canadian Borrowing Base Guarantors arising from Private Label Credit Cards.

Notwithstanding the above, the applicable Collateral Agents and the Canadian Administrative Agent reserve the right, at any time and from time to time after the Closing Date, to adjust the criteria set forth above, to establish new criteria and to adjust the applicable advance rate with respect to Eligible Canadian Accounts, in their Permitted Discretion, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria or changes in the applicable advance rates which have the effect of making more credit available. The Collateral Agents shall have the right to establish, modify or eliminate Reserves against Eligible Canadian Accounts (including, without limitation, for estimates, chargeback or other accrued liabilities or offsets by credit card processors and amounts to adjust for material claims, offsets, defenses or counterclaims or other material disputes described in Section 9.01) from time to time in their Permitted Discretion.

        (b)    Eligible Inventory.    For purposes of this Agreement, Eligible Canadian Inventory shall exclude any Canadian Inventory to which any of the exclusionary criteria set forth below applies. The applicable Collateral Agents shall have the right to establish, modify or eliminate Reserves against Eligible Canadian Inventory from time to time in their Permitted Discretion. In addition, the applicable Collateral Agents and the Canadian Administrative Agent reserve the right, upon two (2) Business Day's prior written notice to the Administrative Borrower, at any time and from time to time after the Closing Date, to adjust any of the criteria set forth below, to establish new criteria and to adjust the applicable advance rate with respect to Eligible Canadian Inventory, in their Permitted Discretion, subject to the approval of the Supermajority Lenders in the case of adjustments, new criteria, changes in the applicable advance rate or the elimination of Reserves which have the effect of making more credit available. Eligible Canadian Inventory shall not include any Canadian Inventory of Canadian Borrower or any of the Canadian Borrowing Base Guarantors that:

        (i)    the applicable Collateral Agents, on behalf of Secured Parties, do not have a first priority and exclusive perfected Lien on such Canadian Inventory;

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        (ii)   (1) is stored at a leased or rental location where the aggregate value of Canadian Inventory exceeds $250,000 unless the applicable Collateral Agents have given their prior consent thereto or unless either (x) a Landlord Access Agreement in respect of such location has been delivered to the applicable Collateral Agents, or (y) Reserves reasonably satisfactory to the applicable Collateral Agents have been established with respect thereto or (2) is stored with a bailee or warehouseman where the aggregate value of Canadian Inventory exceeds $250,000 unless either (x) an acknowledged bailee waiver letter which is in form and substance satisfactory to the applicable Collateral Agents and the Canadian Administrative Agent has been received by the applicable Collateral Agents or (y) Reserves reasonably satisfactory to the applicable Collateral Agents have been established with respect thereto, or (3) is located at an owned location subject to a mortgage in favor of a lender other than the Collateral Agents and the Senior Note Collateral Agent where the aggregate value of such Canadian Inventory exceeds $250,000 unless either (x) a mortgagee waiver which is in form and substance satisfactory to the applicable Collateral Agents and the Canadian Administrative Agent has been delivered to the applicable Collateral Agents or (y) Reserves reasonably satisfactory to the applicable Collateral Agents have been established with respect thereto;

        (iii)  (1) is placed on consignment by a third party consignor with any Canadian Borrower or any Canadian Borrowing Base Guarantor as consignee or (2) is placed on consignment by any Canadian Borrower or Canadian Borrowing Base Guarantor as consignor with any third party as consignee, unless a valid consignment agreement which is reasonably satisfactory to applicable Collateral Agent is in place with respect to such Canadian Inventory;

        (iv)  is covered by a negotiable document of title, unless such document has been delivered to one of the applicable Collateral Agents with all necessary endorsements, free and clear of all Liens except those in favor of the Collateral Agents and the Lenders and landlords, carriers, bailees and warehousemen if clause (ii) above has been complied with;

        (v)   is to be returned to suppliers;

        (vi)  is obsolete, unsalable, shopworn, seconds, defective, damaged or unfit for sale;

        (vii) consists of display items, samples or packing or shipping materials, manufacturing supplies, work-in-process Canadian Inventory, replacement or spare parts;

        (viii) is not finished goods held for sale in the ordinary course of Canadian Borrower's or any of the Canadian Borrowing Base Guarantor's, as applicable, business;

        (ix)  breaches any of the representations or warranties pertaining to Canadian Inventory set forth in the Loan Documents;

        (x)   consists of Hazardous Material or goods that, in either case, can be transported or sold only with licenses that are not readily available;

        (xi)  is not covered by casualty insurance maintained as required by Section 5.04;

        (xii) supplies used or consumed in Canadian Borrower's business;

        (xiii) bill and hold goods;

        (xiv) unserviceable or slow moving Canadian Inventory;

        (xv) inventory returned by retail customers that is not held for resale;

        (xvi) inventory subject to deposit made by retail customers for sale of Inventory that have not been delivered to the extent of such deposits; or

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        (xvii) is subject to any licensing arrangement the effect of which would be to limit the ability of any Collateral Agent, or any person selling the Canadian Inventory on behalf of such Collateral Agent, to sell such Canadian Inventory in enforcement of such Collateral Agent's Liens, without further consent or payment to the licensor or other person.

SECTION 2.22.    Collection Allocation Mechanism.    

        (a)   Notwithstanding any other provision of this Agreement or any Loan Document, on the CAM Exchange Date, (i) all Commitments shall automatically and without further act be terminated as provided in Section 8 and (ii) the Lenders shall automatically and without further act be deemed to have exchanged interests in the Loans such that in lieu of the interest of each Lender in each Loan in which it shall participate as of such date, such Lender shall hold an interest in every one of the Loans, whether or not such Lender shall previously have participated therein, equal to such Lender's CAM Percentage thereof; provided that such CAM Exchange will not affect the aggregate amount of the obligations of the Loan Parties to the Lenders under the Loan Documents. Each Lender and each Loan Party hereby consents and agrees to the CAM Exchange, and each Lender agrees that the CAM Exchange shall be binding upon its successors and assigns and any person that acquires a participation in its interests in any Loan. Each Loan Party agrees from time to time to execute and deliver to the Agents all promissory notes and other instruments and documents as the Agents shall reasonably request to evidence and confirm the respective interests of the Lenders after giving effect to the CAM Exchange, and each Lender agrees to surrender any promissory notes originally received by it in connection with its Loans hereunder to the Agents against delivery of new promissory notes evidencing its interests in the Loans; provided, however, that the failure of any Loan Party to execute or deliver or of any Lender to accept any such promissory note, instrument or document shall not affect the validity or effectiveness of the CAM Exchange.

        (b)   As a result of the CAM Exchange, upon and after the CAM Exchange Date, each payment received by the Administrative Agents pursuant to any Loan Document in respect of the Specified Obligations, and each distribution made by the Administrative Agents pursuant to any Loan Document in respect of the Specified Obligations, shall be distributed to the Lenders pro rata in accordance with their respective CAM Percentages. Any direct payment received by a Lender upon or after the CAM Exchange Date, including by way of setoff, in respect of a Specified Obligation, shall be paid over to the US Administrative Agent or the Canadian Administrative Agent, as applicable, for distribution to the Lenders in accordance herewith.

        (c)   In the event that on the CAM Exchange Date any Letter of Credit shall be outstanding and undrawn in whole or in part, or any amount drawn under any Letter of Credit shall remain unpaid, each Lender shall, before giving effect to the CAM Exchange, promptly pay over to the Administrative Agents, in immediately available funds and in the currency that such Letter of Credit is denominated, an amount (determined after deducting any cash collateral held by the Collateral Agents on behalf of the Loan Parties with respect to such Letter of Credit) equal to such Lender's Pro Rata Percentage (as notified to such Lender by the Administrative Agents), of such Letter of Credit's undrawn face amount or (to the extent it has not already done so) any unpaid LC Disbursement under Section 2.18(e)(ii), together with interest thereon from the CAM Exchange Date to the date on which such amount shall be paid to the applicable Administrative Agent, at the rate that would be applicable at the time to a Revolving Loan that is an ABR Loan accruing interest at the ABR Rate in a principal amount equal to such amount. The Administrative Agents shall establish a separate account or accounts for each Lender (each, an "L/C Reserve Account") for the amounts received with respect to each such Letter of Credit pursuant to the preceding sentence. The applicable Administrative Agent shall deposit in each Lender's L/C Reserve Account such Lender's CAM Percentage of the amounts received from the Lenders as provided above. The Administrative Agents shall have sole dominion and control over each L/C

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Reserve Account, and the amounts deposited in each L/C Reserve Account shall be held in such L/C Reserve Account until withdrawn as provided in paragraph (d), (e), (f) or (g) below. The applicable Administrative Agent shall maintain records enabling it to determine the amounts paid over to it and deposited in the L/C Reserve Accounts in respect of each Letter of Credit and the amounts on deposit in respect of each Letter of Credit attributable to each Lender's CAM Percentage. The amounts held in each Lender's L/C Reserve Account shall be held as a reserve against the LC Obligations due and owing, shall be the property of such Lender, shall not constitute Loans to or give rise to any claim of or against any Loan Party and shall not give rise to any obligation on the part of any Borrower to pay interest to such Lender, it being agreed that the reimbursement obligations in respect of Letters of Credit shall arise only at such times as drawings are made thereunder, as provided in Section 2.18.

        (d)   In the event that after the CAM Exchange Date any drawing shall be made in respect of a Letter of Credit, the applicable Administrative Agent shall, at the request of the Issuing Bank in respect of such Letter of Credit, withdraw from the L/C Reserve Account of each Lender any amounts, up to the amount of such Lender's CAM Percentage of such drawing, deposited in respect of such Letter of Credit and remaining on deposit and deliver such amounts to such Issuing Bank in satisfaction of the reimbursement obligations of the Lenders under Section 2.18 (but not of any Borrower under Section 2.18). In the event any Lender shall default on its obligation to pay over any amount to the Administrative Agents in respect of any Letter of Credit as provided in this Section 2.22, the Issuing Bank in respect thereof shall, in the event of a drawing thereunder, have a claim against such Lender to the same extent as if such Lender had defaulted on its obligations under Section 2.18, but shall have no claim against any other Lender in respect of such defaulted amount, notwithstanding the exchange of interests in the reimbursement obligations pursuant to Section 2.22(a). Each other Lender shall have a claim against such defaulting Lender for any damages sustained by it as a result of such default, including, in the event such Letter of Credit shall expire undrawn, its CAM Percentage of the defaulted amount.

        (e)   In the event that after the CAM Exchange Date any Letter of Credit shall expire undrawn, the applicable Administrative Agent shall withdraw from the L/C Reserve Account of each Lender the amount remaining on deposit therein in respect of such Letter of Credit and distribute such amount to such Lender.

        (f)    With the prior written approval of the US Administrative Agent or the Canadian Administrative Agent, as applicable, and the Issuing Bank in respect of such Letter of Credit, any Lender may withdraw the amount held in its L/C Reserve Account in respect of the undrawn amount of any Letter of Credit. Any Lender making such a withdrawal shall be unconditionally obligated, in the event there shall subsequently be a drawing under such Letter of Credit, to pay over to the applicable Administrative Agent for the account of such Issuing Bank on demand, its CAM Percentage of such drawing.

        (g)   Pending the withdrawal by any Lender of any amounts from its L/C Reserve Account as contemplated by the above paragraphs, the applicable Administrative Agent will, at the direction of such Lender and subject to such rules as the applicable Administrative Agent may prescribe for the avoidance of inconvenience, invest such amounts in Cash Equivalents. Each Lender that has not withdrawn the amounts in its L/C Reserve Account as provided in Section 2.22(f) above shall have the right, at intervals reasonably specified by the applicable Administrative Agent to withdraw the earnings on investments so made by the Administrative Agents with amounts in its L/C Reserve Account and to retain such earnings for its own account.

        (h)   Notwithstanding any other provision of this Agreement, if, as a direct result of the implementation of the CAM Exchange, any Borrower is required to withhold Taxes from amounts payable to any Agent, any Lender or any Participant hereunder, the amounts so payable to such

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Agent, such Lender or such Participant shall be increased to the extent necessary to yield to such Agent, such Lender or such Participant (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement; provided, however, that such Borrower shall not be required to increase any such amounts payable to such Lender or Participant under this Section 2.22 (but, rather, shall be required to increase any such amounts payable to such Lender or Participant to the extent required by Section 2.15) if such Lender or Participant was prior to or on the CAM Exchange Date already a Lender or Participant with respect to such Borrower. If a Lender that is not incorporated in the United States, in its good faith judgment, is eligible for an exemption from, or reduced rate of, U.S. federal withholding tax on payments by the U.S. Borrower under this Agreement, the U.S. Borrowers shall not be required to increase any such amounts payable to such Lender if such Lender fails to comply with the requirements of Section 2.15(e).

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

        Each Loan Party represents and warrants to the Administrative Agents, the Collateral Agents, the Issuing Bank and each of the Lenders (with references to the Companies being references thereto after giving effect to the Transactions unless otherwise expressly stated) that:

SECTION 3.01.    Organization; Powers.    Each Company (a) is duly organized and validly existing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to carry on its business as now conducted and to own and lease its property and (c) is qualified and in good standing (to the extent such concept is applicable in the applicable jurisdiction) to do business in every jurisdiction where such qualification is required, except in such jurisdictions where the failure to so qualify or be in good standing, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. There is no existing default under any Organizational Document of any Company or any event which, with the giving of notice or passage of time or both, would constitute a default by any party thereunder.

SECTION 3.02.    Authorization; Enforceability.    The Transactions to be entered into by each Loan Party are within such Loan Party's powers and have been duly authorized by all necessary action on the part of such Loan Party. This Agreement has been duly executed and delivered by each Loan Party and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.03.    No Conflicts.    Except as set forth on Schedule 3.03, the Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect, (ii) filings necessary to perfect Liens created by the Loan Documents and (iii) consents, approvals, registrations, filings, permits or actions the failure to obtain or perform which could not reasonably be expected to result in a Material Adverse Effect, (b) will not violate the Organizational Documents of any Company, (c) will not violate any Requirement of Law, except for violations, defaults or the creation of such rights that could not reasonably be expected to result in a Material Adverse Effect, (d) will not violate or result in a default or require any consent or approval under any indenture, agreement or other instrument binding upon any Company or its property, or give rise to a right thereunder to require any payment to be made by any Company, except for violations, defaults or the creation of such rights that could not reasonably be expected to result in a Material Adverse Effect,

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and (e) will not result in the creation or imposition of any Lien on any property of any Company, except Liens created by the Loan Documents and Permitted Liens.

SECTION 3.04.    Financial Statements; Projections.    

        (a)    Historical Financial Statements.    The Borrowers have heretofore delivered to the Lenders (i) the consolidated balance sheets and related statements of income, stockholders' equity and cash flows of the Acquired Business as of and for the fiscal years ended December 31, 2003, and December 31, 2004, audited by and accompanied by the unqualified opinion of KPMG LLP, independent public accountants (the "Accountants") and (ii) the unaudited consolidated balance sheets and related statements of income, stockholders' equity and cash flows of the Acquired Business as of and for the fiscal quarter ended September 30, 2005 (with respect to which the Accountants have performed SAS 100 reviews), in each case, certified by the chief financial officer of US Borrowers. Such financial statements and all financial statements delivered pursuant to Section 5.01(a), Section 5.01(b) and Section 5.01(c) have been prepared in accordance with GAAP and present fairly and accurately the financial condition and results of operations and cash flows of the Acquired Business as of the dates and for the periods to which they relate, subject in the case of unaudited statements, to year-end audit adjustments.

        (b)    No Liabilities.    Except as set forth in the financial statements referred to in Section 3.04(a) (including the notes thereto), there are no liabilities of any Company of any kind, whether accrued, contingent, absolute, determined, determinable or otherwise, which could reasonably be expected to result in a Material Adverse Effect, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability, other than liabilities under the Loan Documents and the Senior Note Documents. Since December 31, 2005, there has been no event, change, circumstance or occurrence that, individually or in the aggregate, has had or could reasonably be expected to result in a Material Adverse Effect.

        (c)    Forecasts.    The forecasts of financial performance of Holdings and its Subsidiaries furnished to the Lenders have been prepared in good faith by the Borrowers and based on assumptions believed by the Borrowers to be reasonable.

SECTION 3.05.    Properties.    

        (a)    Generally.    Each Company has good title to, or valid leasehold interests in, all its property material to its business, free and clear of all Liens except for, Permitted Liens and minor irregularities or deficiencies in title that, individually or in the aggregate, do not interfere with its ability to conduct its business as currently conducted or to utilize such property for its intended purpose. The property of the Companies, taken as a whole, (i) is in good operating order, condition and repair (ordinary wear and tear excepted), except to the extent that the failure to be in such condition could not reasonably be expected to result in a Material Adverse Effect and (ii) constitutes all the property which is required for the business and operations of the Companies as presently conducted.

        (b)    Real Property.    Schedules 8(a) and 8(b) to the Perfection Certificate dated the Closing Date contain a true and complete list of each interest in Real Property (i) owned by any Company as of the date hereof and describes the type of interest therein held by such Company and whether such owned Real Property is leased and if leased whether the underlying Lease contains any option to purchase all or any portion of such Real Property or any interest therein or contains any right of first refusal relating to any sale of such Real Property or any portion thereof or interest therein and (ii) leased, subleased or otherwise occupied or utilized by any Company, as lessee, sublessee, franchisee or licensee, as of the date hereof and describes the type of interest therein held by such Company. No such Lease requires the consent of the landlord or tenant thereunder,

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or other party thereto, to the Transactions, except (i) for such consents which have been obtained or (ii) to the extent that failure to obtain such consent could not reasonably be expected to result in a Material Adverse Effect.

        (c)    No Casualty Event.    No Company has received any written notice of, nor has any knowledge of, the occurrence or pendency of any Casualty Event affecting all or any material portion of its property. No Mortgage encumbers improved Real Property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards within the meaning of the National Flood Insurance Act of 1968 unless flood insurance available under such Act has been obtained in accordance with Section 5.04 or the applicable Collateral Agent has waived such requirement in the Mortgage.

        (d)    Collateral.    Each Company owns or has rights to use all of the Collateral and all rights with respect to any of the foregoing used in, necessary for or material to each Company's business as currently conducted. The use by each Company of such Collateral and all such rights with respect to the foregoing do not infringe on the rights of any person other than such infringement which could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. No claim has been made and remains outstanding that any Company's use of any Collateral does or may violate the rights of any third party that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

SECTION 3.06.    Intellectual Property.    

        (a)    Ownership/No Claims.    Each Loan Party owns, or is licensed to use, all patents, patent applications, trademarks, industrial designs, trade names, servicemarks, copyrights, technology, trade secrets, proprietary information, domain names, know-how and processes necessary for the conduct of its business as currently conducted (the "Intellectual Property"), except for those the failure to own or license which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No claim has been asserted and is pending by any person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property in any material respect, nor does any Loan Party know of any valid basis for any such claim. The use of such Intellectual Property by each Loan Party does not infringe the rights of any person, except for such claims and infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

        (b)    Registrations.    Except pursuant to licenses and other user agreements entered into by each Loan Party in the ordinary course of business that are listed in Schedule 12(a) or 12(b) to the Perfection Certificate, on and as of the date hereof (i) each Loan Party owns and possesses the right to use, and has done nothing to authorize or enable any other person to use, any copyright, patent, industrial designs or trademark (as such terms are defined in the Security Agreement) listed in Schedule 12(a) or 12(b) to the Perfection Certificate and (ii) all registrations listed in Schedule 12(a) or 12(b) to the Perfection Certificate are valid and in full force and effect.

        (c)    No Violations or Proceedings.    To each Loan Party's knowledge, on and as of the date hereof, there is no material violation by others of any right of such Loan Party with respect to any copyright, patent, industrial designs or trademark listed in Schedule 12(a) or 12(b) to the Perfection Certificate, pledged by it under the name of such Loan Party.

SECTION 3.07.    Equity Interests and Subsidiaries.    

        (a)    Equity Interests.    Schedules 1(a) and 10(a) to the Perfection Certificate dated the Closing Date set forth a list of (i) all the Subsidiaries of Holdings and their jurisdictions of organization as of the Closing Date and (ii) the number of each class of its Equity Interests authorized, and the number outstanding, on the Closing Date and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the Closing Date. All

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Equity Interests of each Company are duly and validly issued and are fully paid and non-assessable, and, other than the Equity Interests of US Borrowers, are owned by LNT Center, directly or indirectly through Wholly Owned Subsidiaries. All Equity Interests of LNT are owned directly by Holdings. Each Loan Party is the record and beneficial owner of, and has good and marketable title to, the Equity Interests pledged by it under the Security Agreement, free of any and all Liens, rights or claims of other persons, except the security interest created by the Security Agreement, and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any such Equity Interests.

        (b)    No Consent of Third Parties Required.    No consent of any person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any other trust beneficiary is necessary or reasonably desirable (from the perspective of a secured party) in connection with the creation, perfection or First Priority status of the security interest of the applicable Collateral Agent in any Equity Interests pledged to the such Collateral Agent for the benefit of the Secured Parties under the Security Agreements or the exercise by such Collateral Agent of the voting or other rights provided for in any such Security Agreement or the exercise of remedies in respect thereof.

        (c)    Organizational Chart.    An accurate organizational chart, showing the ownership structure of Holdings, the Borrowers and each Subsidiary on the Closing Date, and after giving effect to the Transactions, is set forth on Schedule 10(a) to the Perfection Certificate dated the Closing Date.

SECTION 3.08.    Litigation; Compliance with Laws.    There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority now pending or, to the knowledge of any Company, threatened against or affecting any Company or any business, property or rights of any Company (i) that involve any Loan Document or any of the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. Except for matters covered by Section 3.18, no Company or any of its property is in violation of, nor will the continued operation of its property as currently conducted violate, any Requirements of Law (including any zoning or building ordinance, code or approval or any building permits) or any restrictions of record or agreements affecting any Company's Real Property or is in default with respect to any Requirement of Law, where such violation or default, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

SECTION 3.09.    Agreements.    No Company is a party to any agreement or instrument or subject to any corporate or other constitutional restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect. No Company is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other agreement or instrument to which it is a party or by which it or any of its property is or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect, and no condition exists which, with the giving of notice or the lapse of time or both, would constitute such a default. Schedule 3.09 accurately and completely lists all material agreements (other than leases of Real Property set forth on Schedule 8(a) or 8(b) to the Perfection Certificate dated the Closing Date) to which any Company is a party which are in effect on the date hereof in connection with the operation of the business conducted thereby and Borrower has delivered to the Administrative Agents complete and correct copies of all such material agreements, including any amendments, supplements or modifications with respect thereto, and all such agreements are in full force and effect.

SECTION 3.10.    Federal Reserve Regulations.    No Company is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the regulations of the Board, including Regulation T, U or X. The pledge of the Securities Collateral pursuant to the Security Agreements does not violate such regulations.

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SECTION 3.11.    Investment Company Act; Public Utility Holding Company Act.    No Company is (a) an "investment company" or a company "controlled" by an "investment company," as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended, or (b) a "holding company," an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company," as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended.

SECTION 3.12.    Use of Proceeds.    The Borrowers will use the proceeds of their respective Revolving Loans and Swingline Loans for working capital and general corporate purposes (including to effect Permitted Acquisitions) on and after the Closing Date (it being understood that the Revolving Loans shall not exceed $100 million on the Closing Date).

SECTION 3.13.    Taxes.    Each Company has (a) timely filed or caused to be timely filed all federal Tax Returns and all material state, provincial, territorial, local and foreign Tax Returns or materials required to have been filed by it and all such Tax Returns are true and correct in all material respects and (b) duly and timely paid, collected or remitted or caused to be duly and timely paid, collected or remitted all Taxes (whether or not shown on any Tax Return) due and payable, collectible or remittable by it and all assessments received by it, except Taxes (i) that are being contested in good faith by appropriate proceedings and for which such Company has set aside on its books adequate reserves in accordance with GAAP and (ii) which could not, individually or in the aggregate, have a Material Adverse Effect. Each Company has made adequate provision in accordance with GAAP for all material Taxes not yet due and payable. Each Company is unaware of any proposed or pending tax assessments, deficiencies or audits that could be reasonably expected to, individually or in the aggregate, result in a Material Adverse Effect. No Company has ever been a party to any understanding or arrangement constituting a "tax shelter" within the meaning of Section 6111(c), Section 6111(d) or Section 6662(d)(2)(C)(iii) of the Code, or has ever "participated" in a "reportable transaction" within the meaning of Treasury Regulation Section 1.6011-4, except as, in each case, could not be reasonably expected to, individually or in the aggregate, result in a Material Adverse Effect in respect of Taxes.

SECTION 3.14.    No Material Misstatements.    No information, report, financial statement, certificate, Borrowing Request, LC Request, exhibit or schedule furnished by or on behalf of any Company to the Administrative Agents or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto, taken as a whole, or the Confidential Information Memorandum contained or contains any material misstatement of fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were or are made, not misleading as of the date such information is dated or certified; provided that to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, each Company represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule.

SECTION 3.15.    Labor Matters.    As of the date hereof and the Closing Date, there are no strikes, lockouts or slowdowns against any Company pending or, to the knowledge of any Company, threatened. The hours worked by and payments made to employees of any Company have not been in violation of the Fair Labor Standards Act of 1938, as amended, or any other applicable federal, state, provincial, territorial, local or foreign law dealing with such matters in any manner which could reasonably be expected to result in a Material Adverse Effect. All payments due from any Company, or for which any claim may be made against any Company, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of such Company except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect. Each Loan Party has withheld all employee withholdings and has made all employer contributions to be withheld and made by it pursuant to applicable law on account of any employee

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benefit plans, employment insurance and employee income taxes except where such failure to do so could not reasonably be expected to result in a Material Adverse Effect. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Company is bound.

SECTION 3.16.    Solvency.    Immediately after the consummation of the Transactions to occur on the Closing Date and immediately following the making of each Loan and after giving effect to the application of the proceeds of each Loan and the operation of the Contribution, Intercompany Contracting and Offset Agreement, (a) the fair value of the assets of each Loan Party (individually and on a consolidated basis with its Subsidiaries) will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of each Loan Party (individually and on a consolidated basis with its Subsidiaries) will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) each Loan Party (individually and on a consolidated basis with its Subsidiaries) will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; (d) each Loan Party (individually and on a consolidated basis with its Subsidiaries) will not have unreasonably small capital with which to conduct its business in which it is engaged as such business is now conducted and is proposed to be conducted following the Closing Date and (e) each Loan Party is not "insolvent" as such term is defined under any bankruptcy, insolvency or similar laws of any jurisdiction.

SECTION 3.17.    Employee Benefit Plans.    Each Company and its ERISA Affiliates is in compliance in all material respects with the applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder, except where such failure could not reasonably be expected to result in a Material Adverse Effect. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to result in a Material Adverse Effect of any Company or any of its ERISA Affiliates or the imposition of a Lien on any of the property of any Company. The present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $1,000,000 the fair market value of the property of all such underfunded Plans. Using actuarial assumptions and computation methods consistent with subpart I of subtitle E of Title IV of ERISA, the aggregate liabilities of each Company to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Multiemployer Plan, could not reasonably be expected to result in a Material Adverse Effect.

        To the extent applicable, each Foreign Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable Requirements of Law and has been maintained, where required, in good standing with applicable regulatory authorities except where failure to do so could not reasonably be expected to result in a Material Adverse Effect. No Company has incurred any obligation in connection with the termination of or withdrawal from any Foreign Plan except where such obligation could not reasonably be expected to result in a Material Adverse Effect. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Plan which is funded, determined as of the end of the most recently ended fiscal year of the respective Company on the basis of actuarial assumptions, each of which is reasonable, did not exceed by $1,000,000 the current value of the property of such Foreign Plan, and for each Foreign Plan which is not funded, the obligations of such Foreign Plan are properly accrued except where such failure to accrue could not reasonably be expected to result in a Material Adverse Effect.

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SECTION 3.18.    Environmental Matters.    

        (a)   Except as, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect:

        (i)    The Companies and their businesses, operations and Real Property are in compliance with, and the Companies have no liability under, any applicable Environmental Law; and under the currently effective business plan of the Companies, no expenditures or operational adjustments will be required in order to comply with applicable Environmental Laws during the next five years;

        (ii)   The Companies have obtained all Environmental Permits required for the conduct of their businesses and operations, and the ownership, operation and use of their property, under Environmental Law, all such Environmental Permits are valid and in good standing and, under the currently effective business plan of the Companies, no expenditures or operational adjustments will be required in order to renew or modify such Environmental Permits during the next five years;

        (iii)  There has been no Release or threatened Release of Hazardous Material on, at, under or from any Real Property or facility presently or formerly owned, leased or operated by the Companies or their predecessors in interest that could reasonably be expected to result in liability by the Companies under any applicable Environmental Law;

        (iv)  There is no Environmental Claim pending or, to the knowledge of the Companies, threatened against the Companies, or relating to the Real Property currently or formerly owned, leased or operated by the Companies or their predecessors in interest or relating to the operations of the Companies, and there are no actions, activities, circumstances, conditions, events or incidents that could reasonably be expected to form the basis of such an Environmental Claim; and

        (v)   No person with an indemnity or contribution obligation to the Companies relating to compliance with or liability under Environmental Law is in default with respect to such obligation.

        (b)   (i) No Company is obligated to perform any action or otherwise incur any expense under Environmental Law pursuant to any order, decree, judgment or agreement by which it is bound or has assumed by contract, agreement or operation of law, and no Company is conducting or financing any Response pursuant to any Environmental Law with respect to any Real Property or any other location;

        (ii)   No Real Property or facility owned, operated or leased by the Companies and, to the knowledge of the Companies, no Real Property or facility formerly owned, operated or leased by the Companies or any of their predecessors in interest is (i) listed or proposed for listing on the National Priorities List promulgated pursuant to CERCLA or (ii) listed on the Comprehensive Environmental Response, Compensation and Liability Information System promulgated pursuant to CERCLA or (iii) included on any similar list maintained by any Governmental Authority including any such list relating to petroleum;

        (iii)  No Lien has been recorded or, to the knowledge of any Company, threatened under any Environmental Law with respect to any Real Property or other assets of the Companies;

        (iv)  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not require any notification, registration, filing, reporting, disclosure, investigation, remediation or cleanup pursuant to any Governmental Real Property Disclosure Requirements or any other applicable Environmental Law; and

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        (v)   The Companies have made available to the Lenders all material records and files in the possession, custody or control of, or otherwise reasonably available to, the Companies concerning compliance with or liability under Environmental Law, including those concerning the actual or suspected existence of Hazardous Material at Real Property or facilities currently or formerly owned, operated, leased or used by the Companies.

SECTION 3.19.    Insurance.    Schedule 3.19 sets forth a true, complete and correct description of all insurance maintained by each Company as of the Closing Date. All insurance maintained by the Companies is in full force and effect, all premiums have been duly paid, no Company has received notice of violation or cancellation thereof, the Premises, and the use, occupancy and operation thereof, comply in all material respects with all Insurance Requirements, and there exists no default under any Insurance Requirement, except for minor defaults that, taken as a whole, do not adversely affect the coverage provided by such insurance. Each Company has insurance in such amounts and covering such risks and liabilities as are customary for companies of a similar size engaged in similar businesses in similar locations.

SECTION 3.20.    Security Documents.    

        (a)    US Security Agreement.    The US Security Agreement is effective to create on the Closing Date in favor of the applicable Collateral Agents for the benefit of the Secured Parties, legal, valid and enforceable Liens (such enforceability subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law) on, and security interests in, the Security Agreement Collateral subject to or referenced in the US Security Agreement and (i) when financing statements and other filings including, without limitation, filings with the United States Patent and Trademark Office or United States Copyright Office in appropriate form are filed in the offices specified on Schedule 7 to the Perfection Certificate or (ii) upon the taking of possession or control by the applicable Collateral Agent of the Security Agreement Collateral subject to or referenced in the US Security Agreement with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to such Collateral Agent to the extent possession or control by such Collateral Agent is required by the US Security Agreement), the Liens created by the US Security Agreement shall constitute First Priority fully perfected Liens on, and security interests in, all right, title and interest of the grantors in the Security Agreement Collateral subject to or referenced in the US Security Agreement (other than such Security Agreement Collateral subject to or referenced in the US Security Agreement in which a security interest cannot be perfected under the UCC as in effect at the relevant time in the relevant jurisdiction), in each case subject to no Liens other than Permitted Liens.

        (b)    Canadian Security Agreement.    Each Canadian Security Agreement is effective to create on the Closing Date in favor of the applicable Collateral Agents for the benefit of the Canadian Secured Parties, legal, valid and enforceable Liens (such enforceability subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally (including mandatory provisions of corporate law under the jurisdiction of incorporation of the Loan Parties) and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law) on, and security interests in, the Security Agreement Collateral subject to or referenced in such Canadian Security Agreement and (i) when financing statements or financing change statements and other filings in appropriate form are filed in the offices specified on Schedule 7 to the Perfection Certificate or (ii) upon the taking of possession or control by the applicable Collateral Agent of the Security Agreement Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the applicable Collateral Agents to the extent possession or control by the applicable Collateral Agents is required by such Canadian Security Agreement), the Liens created

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by such Canadian Security Agreement shall constitute First Priority fully perfected Liens on, and security interests in, all right, title and interest of the grantors in the Security Agreement Collateral subject to or referenced in such Canadian Security Agreement (other than such Security Agreement Collateral subject to or referenced in such Canadian Security Agreement in which a security interest cannot be perfected (x) under the PPSA as in effect at the relevant time in the relevant jurisdiction or (y) by other filings in appropriate form filed in the offices specified on Schedule 7 to the Perfection Certificate), in each case subject to no Liens other than Permitted Liens.

        (c)    Copyright Office Filing.    When the Security Agreements or a short form thereof are filed in the United States Copyright Office and the Canadian Intellectual Property Office, the Liens created by such Security Agreements shall constitute fully perfected First Priority Liens on, and security interests in, all right, title and interest of the grantors thereunder in the Intellectual Property referenced therein, including the Registered Copyrights and Registered Copyright Licenses (each as defined in such Security Agreement), in each case subject to no Liens other than Permitted Liens.

        (d)    Mortgages.    Each Mortgage is effective to create, in favor of the applicable Collateral Agent, for its benefit and the benefit of the Secured Parties, legal, valid and enforceable First Priority Liens on, and security interests in, all of the Loan Parties' right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, subject only to Permitted Liens or other Liens reasonably acceptable to the Senior Note Collateral Agent, and when the Mortgages are filed in the offices specified on Schedule 8(a) to the Perfection Certificate dated the Closing Date (or, in the case of any Mortgage executed and delivered after the date thereof in accordance with the provisions of Section 5.11 and Section 5.12, unless a Loan Party has disclosed in writing any issues related to perfection thereof or the security interest therein to the applicable Collateral Agent when such Mortgage is filed in the offices specified in the local counsel opinion delivered with respect thereto in accordance with the provisions of Section 5.11 and Section 5.12), the Mortgages shall constitute fully perfected First Priority Liens on, and security interests in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other person, other than Liens permitted by such Mortgage.

        (e)    Valid Liens.    Each Security Document, unless a Loan Party has disclosed in writing any issues related to the legality, enforceability, validity or security interest therein, delivered pursuant to Section 5.11 and Section 5.12 will, upon execution and delivery thereof, be effective to create in favor of the applicable Collateral Agent, for the benefit of the applicable Secured Parties, legal, valid and enforceable Liens on, and security interests in, all of the Loan Parties' right, title and interest in and to the Collateral thereunder, and when all appropriate filings or recordings are made in the appropriate offices as may be required under applicable law, such Security Document will constitute fully perfected First Priority Liens on, and security interests in, all right, title and interest of the Loan Parties in such Collateral, in each case subject to no Liens other than the applicable Permitted Liens.

SECTION 3.21.    Acquisition Documents.    Schedule 3.21 lists (i) each exhibit, schedule, annex or other attachment to the Acquisition Agreement and (ii) each agreement, certificate, instrument, letter or other document contemplated by the Acquisition Agreement or any item referred to in clause (i) to be entered into, executed or delivered or to become effective in connection with the Acquisition or otherwise entered into, executed or delivered in connection with the Acquisition. The Lenders have been furnished true and complete copies of each Acquisition Document to the extent executed and delivered on or prior to the Closing Date.

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SECTION 3.22.    Anti-Terrorism Law.    No Loan Party and, to the knowledge of the Loan Parties, none of its Affiliates is in violation of any Requirement of Law relating to terrorism or money laundering ("Anti-Terrorism Laws"), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the "Executive Order"), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

        No Loan Party and to the knowledge of the Loan Parties, no Affiliate or broker or other agent of any Loan Party acting or benefiting in any capacity in connection with the Loans is any of the following:

        (i)    a person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

        (ii)   a person owned or controlled by, or acting for or on behalf of, any person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

        (iii)  a person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

        (iv)  a person that commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order; or

        (v)   a person that is named as a "specially designated national and blocked person" on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control ("OFAC") at its official website or any replacement website or other replacement official publication of such list.

        No Loan Party and, to the knowledge of the Loan Parties, no broker or other agent of any Loan Party acting in any capacity in connection with the Loans (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in paragraph (b) above, (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

SECTION 3.23.    [Intentionally Deleted].    

SECTION 3.24.    Executive Offices; Location of Material Inventory.    Schedule 3.24 sets forth all locations in the United States and Canada where the aggregate value of Inventory owned by the Loan Parties exceeds $250,000. As of the Closing Date, the location in Canada of each chief executive office, principal place of business and domicile (within the meaning of the Civil Code of Quebec), as applicable, of each Canadian Loan Party is as set out in Schedule 3.24.

SECTION 3.25.    Accuracy of Borrowing Base.    At the time any Borrowing Base Certificate is delivered pursuant to this Agreement, (i) each Account and each item of Inventory included in the calculation of the Borrowing Base satisfies all of the criteria stated herein to be an Eligible Account and an item of Eligible Inventory, respectively and (ii) each Account and each item of Inventory included in the calculation of the Canadian Borrowing Base satisfies all of the criteria stated herein to be an Eligible Canadian Account and an item of Eligible Canadian Inventory, respectively.

SECTION 3.26.    Post-Audit Asset Dispositions.    As of the Closing Date, the Borrowers and the other Loan Parties have not disposed of assets (other than Inventory sold in the ordinary course of their business) which are set forth in the initial Inventory Appraisal and which have an aggregate fair market value of more than $250,000.

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SECTION 3.27.    Common Enterprise.    The successful operation and condition of each of the Loan Parties is dependent on the continued successful performance of the functions of the group of the Loan Parties as a whole and the successful operation of each of the Loan Parties affects the successful performance and operation of each other Loan Party. Each Loan Party expects to derive benefit (and its board of directors or other governing body has determined that it may reasonably be expected to derive benefit), directly or indirectly, from (i) successful operations of each of the other Loan Parties, and (ii) the credit extended by the Lenders to the Borrowers hereunder, both in their separate capacities and as members of the group of companies. Each Loan Party has determined that execution, delivery, and performance of this Agreement and any other Loan Documents to be executed by such Loan Party is within its purpose, will be of direct and indirect benefit to such Loan Party, and is in its best interest.

ARTICLE IV.

CONDITIONS TO CREDIT EXTENSIONS

SECTION 4.01.    Conditions to Initial Credit Extension.    The obligation of each Lender and, if applicable, each Issuing Bank to fund the initial Credit Extension requested to be made by it shall be subject to the prior or concurrent satisfaction (except to the extent that such conditions are permitted to be satisfied on a post-closing basis pursuant to Section 5.14 herein) of each of the conditions precedent set forth in this Section 4.01.

        (a)    Loan Documents.    All legal matters incident to this Agreement, the Credit Extensions hereunder and the other Loan Documents shall be satisfactory to the Lenders, to the Issuing Bank, the Collateral Agents and to the Administrative Agents and there shall have been delivered to the Administrative Agents an executed counterpart of each of the Loan Documents and the Perfection Certificate.

        (b)    Corporate Documents.    The Administrative Agents shall have received:

        (i)    a certificate of the secretary or assistant secretary of each Loan Party dated the Closing Date, certifying (A) that attached thereto is a true and complete copy of each Organizational Document of such Loan Party certified (to the extent applicable) as of a recent date by the Secretary of State of the state of its organization, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of the Borrowers, the borrowings hereunder, and that such resolutions have not been modified, rescinded or amended and are in full force and effect and (C) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such Loan Party (together with a certificate of another officer as to the incumbency and specimen signature of the secretary or assistant secretary executing the certificate in this clause (i));

        (ii)   a certificate as to the good standing of each Loan Party (in so-called "long-form" if available) as of a recent date, from such Secretary of State (or other applicable Governmental Authority); and

        (iii)  such other documents as the Lenders, the Issuing Bank or the Administrative Agents may reasonably request.

        (c)    Officers' Certificate.    The Administrative Agents shall have received a certificate, dated the Closing Date and signed by the chief executive officer(s) and the chief financial officer(s) of the Borrowers, confirming compliance with the conditions precedent set forth in this Section 4.01 and Section 4.02(b), (c) and (e).

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        (d)    Financings and Other Transactions, Etc.

        (i)    The Transactions shall have been consummated or shall be consummated simultaneously on the Closing Date, in each case in all material respects in accordance with the terms hereof and the terms of the Transaction Documents, without the waiver or amendment of any such terms not approved by the Administrative Agent and the Arranger other than any waiver or amendment thereof that is not materially adverse to the interests of the Lenders.

        (ii)   The Equity Financing shall have been consummated. The terms of the Equity Financing shall not require any payments or other distributions of cash or property in respect thereof other than payments in kind, or any purchases, redemptions or other acquisitions thereof for cash or property other than payments in kind, in each case prior to the payment in full of all obligations under the Loan Documents and the Senior Notes, except as permitted by the Loan Documents.

        (iii)  The transactions contemplated by the Senior Note Documents shall have been consummated on terms and conditions acceptable to Agents and the Collateral Agents shall have received, in form and substance acceptable to Agents, the Intercreditor Agreement, duly executed and delivered by the Senior Note Collateral Agent.

        (iv)  The Refinancing shall have been consummated in full to the satisfaction of the Lenders with all liens in favor of the existing lenders being unconditionally released; the Administrative Agents shall have received a "pay-off" letter in form and substance reasonably satisfactory to the Administrative Agents with respect to all debt being refinanced in the Refinancing; and the Administrative Agents shall have received (A) from any person holding any Lien securing any such debt, such UCC termination statements, PPSA discharges, mortgage releases, releases of assignments of leases and rents, releases of security interests in Intellectual Property and other instruments, in each case in proper form for recording, as the Administrative Agents shall have reasonably requested to release and terminate of record the Liens securing such debt or (B) one or more Letters of Credit or cash collateral to secure the reimbursement obligation of any Borrower or any Subsidiary of any Borrower under any Existing Lender Letter of Credit.

        (e)    Financial Statements; Pro Forma Balance Sheet; Projections.    The Lenders shall have received the financial statements described in Section 3.04 and with the forecasts of the Borrowing Base and the financial performance of Holdings, the Borrowers, the Acquired Business and their respective Subsidiaries.

        (f)    Indebtedness and Minority Interests.    After giving effect to the Transactions and the other transactions contemplated hereby, no Company shall have outstanding any Indebtedness or preferred stock other than (i) the Loans and Credit Extensions hereunder, (ii) the Senior Notes, (iii) the Indebtedness listed on Schedule 6.01(b) and (iv) Indebtedness owed to any Borrower or any Guarantor.

        (g)    Opinions of Counsel.    The Administrative Agents shall have received, on behalf of themselves, the other Agents, the Arranger, the Lenders and the Issuing Bank, a favorable written opinion of (i) Morgan, Lewis & Bockius LLP, special counsel for the Loan Parties, (ii) each local and foreign counsel listed on Schedule 4.01(g), in each case (A) dated the Closing Date, (B) addressed to the Agents, the Issuing Bank and the Lenders and (C) covering the matters set forth in Exhibit N and such other matters relating to the Loan Documents and the Transactions as the Administrative Agents shall reasonably request, and (iii) a copy of each legal opinion delivered under the other Transaction Documents, accompanied by reliance letters from the party delivering

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such opinion authorizing the Agents, Lenders and the Issuing Bank to rely thereon as if such opinion were addressed to them.

        (h)    Solvency Certificate.    The Administrative Agents shall have received a solvency certificate in the form of Exhibit O, dated the Closing Date and signed by the chief financial officer(s) of the Borrowers.

        (i)    Requirements of Law.    The Lenders shall be satisfied that Holdings, its Subsidiaries and the Transactions shall be in full compliance with all material Requirements of Law, including Regulations T, U and X of the Board, and shall have received satisfactory evidence of such compliance reasonably requested by them.

        (j)    Consents.    The Lenders shall be satisfied that all requisite Governmental Authorities and third parties shall have approved or consented to the Transactions, except for such consents or approvals the absence of which could not reasonably be expected to have a Material Adverse Effect, and there shall be no governmental or judicial action, actual or threatened, that has or would have, singly or in the aggregate, a reasonable likelihood of restraining, preventing or imposing burdensome conditions on the Transactions or the other transactions contemplated hereby.

        (k)    Litigation.    There shall be no litigation, public or private, or administrative proceedings, governmental investigation or other legal or regulatory developments, actual or threatened, that, singly or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or could materially and adversely affect the ability of Holdings, the Borrowers and their respective Subsidiaries to fully and timely perform their respective obligations under the Transaction Documents, or the ability of the parties to consummate the financings contemplated hereby or the other Transactions.

        (l)    Sources and Uses.    The sources and uses of the Loans shall be as set forth in Section 3.12.

        (m)    Fees.    The Arranger, Administrative Agents and Collateral Agents shall have received all Fees and other amounts due and payable on or prior to the Closing Date, including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket expenses (including the reasonable legal fees and expenses of Latham & Watkins, LLP, special counsel to the applicable Administrative Agents and the applicable Collateral Agents, and the reasonable fees and expenses of any local counsel, foreign counsel, appraisers, consultants and other advisors) required to be reimbursed or paid by the Borrowers hereunder or under any other Loan Document.

        (n)    Personal Property Requirements.    The applicable Collateral Agents shall have received:

        (i)    all certificates, agreements or instruments representing or evidencing the Securities Collateral accompanied by instruments of transfer and stock powers undated and endorsed in blank;

        (ii)   the Intercompany Loan Documents executed by and among Holdings and each of its Subsidiaries, accompanied by instruments of transfer undated and endorsed in blank;

        (iii)  all other certificates, agreements, including Control Agreements, or instruments necessary to perfect such Collateral Agents' security interest in all Chattel Paper, all Instruments, all Deposit Accounts and Securities and all Investment Property of each Loan Party (as each such term is defined in the Security Agreement and to the extent required by the Security Agreement);

        (iv)  UCC financing statements in appropriate form for filing under the UCC, and PPSA financing statements or financing change statements in appropriate form for filing under the

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PPSA together with filings with the United States Patent and Trademark Office and United States Copyright Office, as well as the Canadian Intellectual Property Office, and such other documents under applicable Requirements of Law in each jurisdiction as may be necessary or appropriate or, in the opinion of such Collateral Agents, desirable to perfect the Liens created, or purported to be created, by the Security Documents and, with respect to all financing statements required to be filed pursuant to the Loan Documents, evidence satisfactory to the Administrative Agents that the Borrowers have retained, at its sole cost and expense, a service provider acceptable to the Administrative Agents for the tracking of all such financing statements and notification to the Administrative Agents, of, among other things, the upcoming lapse or expiration thereof;

        (v)   certified copies of UCC, PPSA, Canadian Intellectual Property Office, United States Patent and Trademark Office and United States Copyright Office, other personal property and intellectual property searches, tax and judgment lien searches, bankruptcy and pending lawsuit searches or equivalent reports or searches, each of a recent date listing all effective financing statements, lien notices or comparable documents that name any Loan Party as debtor and that are filed in those state, provincial and any other county jurisdictions in which any property of any Loan Party is located and the state, provincial and any other county jurisdictions in which any Loan Party is organized or maintains its principal place of business or domicile (within the meaning of the Quebec Civil Code) and such other searches that the applicable Collateral Agents deem necessary or appropriate, none of which encumber the Collateral covered or intended to be covered by the Security Documents (other than Permitted Liens or any other Liens acceptable to the Collateral Agents);

        (vi)  evidence acceptable to the applicable Collateral Agents of payment or arrangements for payment by the Loan Parties of all applicable recording taxes, fees, charges, costs and expenses required for the recording of the Security Documents.

        (o)    Real Property Requirements.    The applicable Collateral Agents shall have received:

        (i)    a Mortgage encumbering each Mortgaged Property in favor of the applicable Collateral Agents, for the benefit of the Secured Parties, duly executed and acknowledged by each Loan Party that is the owner of or holder of any interest in such Mortgaged Property, and otherwise in form for recording in the recording office of each applicable political subdivision where each such Mortgaged Property is situated, together with such certificates, affidavits, questionnaires or returns as shall be required in connection with the recording or filing thereof to create a lien under applicable Requirements of Law, and such financing statements and any other instruments necessary to grant a mortgage lien under the laws of any applicable jurisdiction, all of which shall be in form and substance reasonably satisfactory to such Collateral Agent;

        (ii)   with respect to each Mortgaged Property, such consents, approvals, amendments, supplements, estoppels, tenant subordination agreements or other instruments as necessary to consummate the Transactions or as shall reasonably be deemed necessary by such Collateral Agent in order for the owner or holder of the fee or leasehold interest constituting such Mortgaged Property to grant the Lien contemplated by the Mortgage with respect to such Mortgaged Property;

        (iii)  with respect to each Mortgage, a policy of title insurance (or marked up title insurance commitment having the effect of a policy of title insurance) insuring the Lien of such Mortgage as a valid First Priority mortgage Lien on the Mortgaged Property and fixtures described therein in the amount equal to not less than 115% of the fair market value of such Mortgaged Property and fixtures, which policy (or such marked-up commitment) (each, a "Title Policy") shall (A) be issued by the Title Company, (B) contain a "tie-in" or "cluster"

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endorsement, if available under applicable law (i.e., policies which insure against losses regardless of location or allocated value of the insured property up to a stated maximum coverage amount), (C) have been supplemented by such endorsements (or where such endorsements are not available, opinions of special counsel, architects or other professionals reasonably acceptable to such Collateral Agent) as shall be reasonably requested by such Collateral Agent (including endorsements on matters relating to usury, first loss, last dollar, zoning, contiguity, revolving credit, doing business, non-imputation, public road access, survey, variable rate, environmental lien, subdivision, mortgage recording tax, separate tax lot, and so-called comprehensive coverage over covenants and restrictions), and (D) contain no exceptions to title other than Permitted Liens and other exceptions acceptable to such Collateral Agent;

        (iv)  with respect to each Mortgaged Property, such affidavits, certificates, information (including financial data) and instruments of indemnification (including a so-called "gap" indemnification) as shall be reasonably required to induce the Title Company to issue the Title Policy/ies and endorsements contemplated above;

        (v)   evidence reasonably acceptable to such Collateral Agent of payment by or on behalf of the Borrowers of all Title Policy premiums, search and examination charges, escrow charges and related charges, mortgage recording taxes, fees, charges, costs and expenses required for the recording of the Mortgages and issuance of the Title Policies referred to above;

        (vi)  with respect to each Mortgaged Property, copies of all Leases in which any Borrower or any Subsidiary holds the lessor's interest. To the extent any of the foregoing affect any Mortgaged Property, such agreement shall be subordinate to the Lien of the Mortgage to be recorded against such Mortgaged Property, either expressly by its terms or pursuant to a subordination, non-disturbance and attornment agreement, and shall otherwise be acceptable to such Collateral Agent;

        (vii) with respect to each Mortgaged Property, each Company shall have made all notifications, registrations and filings, to the extent required by, and in accordance with, all Governmental Real Property Disclosure Requirements applicable to such Mortgaged Property;

        (viii) Surveys with respect to each Mortgaged Property; and

        (ix)  a completed Federal Emergency Management Agency Standard Flood Hazard Determination with respect to each Mortgaged Property.

        (p)    Insurance.    The Administrative Agents shall have received a copy of, or a certificate as to coverage under, the insurance policies required by Section 5.04 and the applicable provisions of the Security Documents, each of which shall be endorsed or otherwise amended to include a "standard" or "New York" lender's loss payable or mortgagee endorsement (as applicable) and, in the case of any Canadian insurable interests, shall evidence that all applicable policies are subject to the standard mortgage clause approved by the Insurance Bureau of Canada, and shall name the applicable Collateral Agents, on behalf of the Secured Parties, as additional insured, and shall otherwise be in form and substance satisfactory to the Administrative Agents and Collateral Agents.

        (q)    USA Patriot Act.    The Lenders shall have received, sufficiently in advance of the Closing Date, all documentation and other information required by bank regulatory authorities under applicable "know your customer" and anti-money laundering rules and regulations, including without limitation, the United States PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) including, without limitation, the information described in Section 11.13.

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        (r)    Initial Borrowing Base Certificate.    The Collateral Agents and the Administrative Agents shall have received a Borrowing Base Certificate, dated as of the Closing Date, showing an Excess Availability of not less than $325,000,000 or such lesser amount as UBS, after consultation with the Lenders, may approve on the Closing Date.

        (s)    Take Over Audit.    Within five (5) days prior to the Closing Date, the Collateral Agents' (directly or through one or more agents) and Administrative Agents' shall have conducted a review of the Collateral, including a supplemental "take over audit" which supports and confirms (i) the calculation of the initial Borrowing Base and Excess Availability, (ii) no material change in the procedures since the delivery of the initial Inventory Appraisal, (iii) no material change in sales, Inventory turn or the level of Inventory since the delivery of the initial Inventory Appraisal and (iv) the accuracy of all representations and warranties set forth herein.

        (t)    Cash Management.    The Collateral Agents and the Administrative Agents shall have reviewed and approved the Companies' cash management system and shall have received executed blocked account agreements (from all of the financial institutions where the Loan Parties maintain bank accounts or securities accounts, other than those identified in Section 9.02) in form and substance satisfactory to Administrative Agents and Collateral Agents and in accordance with Section 9.02.

        (u)   Borrowings on the Closing Date will not exceed an amount (not to exceed $100 million) equal to (i) the net working capital (current assets, other than cash, less current liabilities) of the Acquired Business as of the last completed month's balance sheet less (ii) $470 million. In addition, (x) up to $150 million face amount of Letters of Credit may be issued on the Closing Date to replace outstanding letters of credit of the Acquired Business and (y) up to $10 million face amount of Letters of Credit may be issued on the Closing Date to secure certain indemnity obligations in favor of CVS Corporation and certain affiliated entities.

SECTION 4.02.    Conditions to All Credit Extensions.    The obligation of each Lender and each Issuing Bank to make any Credit Extension (including the initial Credit Extension) shall be subject to, and to the satisfaction of, each of the conditions precedent set forth below.

        (a)    Notice.    The applicable Administrative Agent shall have received a Borrowing Request as required by Section 2.03 (or such notice shall have been deemed given in accordance with Section 2.03) if Loans are being requested or, in the case of the issuance, amendment, extension or renewal of a Letter of Credit, the Issuing Bank and the applicable Administrative Agent shall have received an LC Request as required by Section 2.18(b) or, in the case of the Borrowing of a Swingline Loan, the applicable Swingline Lender and the applicable Administrative Agent shall have received a Borrowing Request as required by Section 2.17(b).

        (b)    No Default.    The Borrowers and each other Loan Party shall be in compliance in all material respects with all the terms and provisions set forth herein and in each other Loan Document on its part to be observed or performed, and, at the time of and immediately after giving effect to such Credit Extension and the application of the proceeds thereof, no Default shall have occurred and be continuing on such date.

        (c)    Representations and Warranties.    Each of the representations and warranties made by any Loan Party set forth in Article III hereof or in any other Loan Document shall be true and correct in all material respects (except that any representation and warranty that is qualified as to "materiality" or "Material Adverse Effect" shall be true and correct in all respects) on and as of the date of such Credit Extension with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date.

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        (d)    Compliance with Borrowing Base.    After giving pro forma effect to the proposed Credit Extension, the outstanding Revolving Exposure shall not exceed the Borrowing Base plus (without duplication) the Canadian Borrowing Base, in each case then in effect.

        (e)    No Legal Bar.    No order, judgment or decree of any Governmental Authority shall purport to restrain any Lender from making any Loans to be made by it. No injunction or other restraining order shall have been issued, shall be pending or noticed with respect to any action, suit or proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated by this Agreement or the making of Loans hereunder.

        Each of the delivery of a Borrowing Request or an LC Request and the acceptance by the Borrowers of the proceeds of such Credit Extension shall constitute a representation and warranty by the Borrowers and each other Loan Party that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the conditions contained in Section 4.02(b)-(e) have been satisfied. The Borrowers shall provide such information (including calculations in reasonable detail of the covenants in Section 6.10) as the Administrative Agents and Collateral Agents may reasonably request to confirm that the conditions in Section 4.02(b)-(e) have been satisfied.

ARTICLE V.

AFFIRMATIVE COVENANTS

        Each Loan Party warrants, covenants and agrees with each Administrative Agent, Collateral Agent and Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired or been fully cash collateralized and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, each Loan Party will, and will cause each of its Subsidiaries to:

SECTION 5.01.    Financial Statements, Reports, etc.    Furnish to the Administrative Agents and each Lender:

        (a)    Annual Reports.    As soon as available and in any event, not later than April 1, 2006, an annual report of Holdings on form 10-K as would be required to be filed with the SEC (whether or not such report is actually required to be filed) and a consolidating year end balance sheet for the fiscal year ending December 31, 2005. As soon as available and in any event, within 90 days after the end of each fiscal year, beginning with the fiscal year ending December 31, 2006, (i) the consolidated balance sheet of Holdings as of the end of each such fiscal year and related consolidated statements of income, cash flows and stockholders' equity for such fiscal year in comparative form with such financial statements as of the end of, and for, the preceding fiscal year (except that comparative statements of income and cash flows for the fiscal year ending December 31, 2005 shall not be required), and, in each case, notes thereto (including a note with a consolidating balance sheet and statements of income and cash flows separating out the results of Holdings, the Borrowers, each Borrowing Base Guarantor and the aggregate results of all Subsidiaries), all prepared in accordance with Regulation S-X and accompanied by an opinion of KPMG LLP or other independent public accountants of recognized national standing satisfactory to the Administrative Agents (which opinion shall not be qualified as to scope or contain any going concern or other qualification), stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations, cash flows of Holdings as of the dates and for the periods specified in accordance with GAAP, (ii) a management report in a form reasonably satisfactory to the Administrative Agents setting forth (A) statement of

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income items and Consolidated Cash Flow of Holdings for such fiscal year, showing variance, by dollar amount and percentage, from amounts for the previous fiscal year and budgeted amounts and (B) key operational information and statistics for such fiscal year consistent with internal and industry-wide reporting standards, including same-store sales, and (iii) a narrative report and management's discussion and analysis, in a form reasonably satisfactory to the Administrative Agents, of the financial condition and results of operations of Holdings for such fiscal year, as compared to amounts for the previous fiscal year and budgeted amounts (it being understood that the information required by clause (i) may be furnished in the form of a Form 10-K);

        (b)    Quarterly Reports.    As soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year, beginning with the first fiscal quarter of the 2006 fiscal year, (i)(A) the consolidated balance sheet of Holdings as of the end of each of the first three fiscal quarters of the 2006 fiscal year and related consolidated statements of income and cash flows for each such fiscal quarter and for the then elapsed portion of the fiscal year and (B) the consolidated balance sheet of Holdings as of the end of each of the first three fiscal quarters of the 2007 fiscal year and of each fiscal year thereafter and related consolidated statements of income and cash flows for such fiscal quarter and for the then elapsed portion of the fiscal year, in comparative form with the consolidated statements of income and cash flows for the comparable periods in the previous fiscal year, and notes, in each case, thereto (including a note with a consolidating balance sheet and statements of income and cash flows separating out Holdings, the Borrowers and the Subsidiaries), all prepared in accordance with Regulation S-X under the Securities Act and accompanied by a certificate of a Financial Officer stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of Holdings as of the date and for the periods specified in accordance with GAAP consistently applied, and on a basis consistent with audited financial statements referred to in clause (a) of this Section, subject to normal year-end audit adjustments, (ii) a management report in a form reasonably satisfactory to the Administrative Agents setting forth (A) statement of income items and Consolidated Cash Flow of Holdings for such fiscal quarter and for the then elapsed portion of the fiscal year, showing variance, by dollar amount and percentage, from amounts for the comparable periods in the previous fiscal year and budgeted amounts and (B) key operational information and statistics for such fiscal quarter and for the then elapsed portion of the fiscal year consistent with internal and industry-wide reporting standards, including same-store sales and (iii) management's discussion and analysis, in a form reasonably satisfactory to the Administrative Agents, of the financial condition and results of operations for such fiscal quarter and the then elapsed portion of the fiscal year, as compared to the comparable periods in the previous fiscal year and budgeted amounts (it being understood that the information required by clause (i) may be furnished in the form of a Form 10-Q);

        (c)    Monthly Reports.    Within 30 days after the end of each of the first two months of each fiscal quarter (i) the unaudited consolidated balance sheet of Holdings and its Subsidiaries as of the end of such two months and the related consolidated statements of income and cash flows of Holdings and its Subsidiaries for such month and for the then elapsed portion of the fiscal year, in comparative form with the consolidated statements of income and cash flows for the comparable periods in the previous fiscal year (except that comparative statements of income and cash flows for the fiscal year ending December 31, 2005 shall not be required), and (ii) same store sales information and statistics for such month and for the then elapsed portion of the fiscal year consistent with internal and industry-wide reporting standards, each in form and substance reasonably satisfactory to the Administrative Agent;

        (d)    Financial Officer's Certificate.    (i) Concurrently with any delivery of financial statements under Section 5.01(a) or (b), a Compliance Certificate (A) certifying that no Default has occurred or, if such a Default has occurred, specifying the nature and extent thereof and any corrective

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action taken or proposed to be taken with respect thereto, (B) beginning with the first fiscal quarter of the 2006 fiscal year, setting forth computations in reasonable detail satisfactory to the Administrative Agents demonstrating compliance with the covenants contained in Section 6.10 (including the aggregate amount of Excluded Issuances for such period and the uses therefor) and (C) showing a reconciliation of Consolidated Cash Flow to the net income set forth on the statement of income; and (ii) concurrently with any delivery of financial statements under Section 5.01(a) above, beginning with the fiscal year ending December 31, 2006, a report of the accounting firm opining on or certifying such financial statements stating that in the course of its regular audit of the financial statements of Holdings and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge that any Default insofar as it relates to financial or accounting matters has occurred or, if in the opinion of such accounting firm such a Default has occurred, specifying the nature and extent thereof;

        (e)    Financial Officer's Certificate Regarding Collateral.    Concurrently with any delivery of financial statements under Section 5.01(a), a certificate of a Financial Officer setting forth the information required pursuant to the Perfection Certificate Supplement or confirming that there has been no change in such information since the date of the Perfection Certificate or latest Perfection Certificate Supplement;

        (f)    Public Reports.    Promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by any Company with the Securities and Exchange Commission, the Ontario Securities Commission or any Governmental Authority succeeding to any or all of the functions of any said Commission, or with any national or other securities exchange or securities commission, or distributed to holders of its Indebtedness pursuant to the terms of the documentation governing such Indebtedness (or any trustee, agent or other representative therefor), as the case may be;

        (g)    Management Letters.    Promptly after the receipt thereof by any Company, a copy of any "management letter" received by any such person from its certified public accountants and the management's responses thereto;

        (h)    Budgets.    Within 30 days after the beginning of each fiscal year, a budget for Holdings in form reasonably satisfactory to the Administrative Agents, but to include balance sheets, statements of income and sources and uses of cash, for (i) each month of such fiscal year prepared in detail, including line items for budgeted Borrowing Base levels and utilization of Revolving Loans and (ii) each fiscal year thereafter, through and including the fiscal year in which the Final Maturity Date occurs, prepared in summary form, in each case, of Holdings, Borrowers and their respective Subsidiaries, with appropriate presentation and discussion of the principal assumptions upon which such budgets are based, accompanied by the statement of a Financial Officer of Borrower to the effect that the budget of Holdings is a reasonable estimate for the periods covered thereby and, promptly when available, any material revisions of such budget;

        (i)    Organization.    Concurrently with any delivery of financial statements under Section 5.01(a), an accurate organizational chart as required by Section 3.07(c), or confirmation that there are no changes to Schedule 10(a) to the Perfection Certificate;

        (j)    Organizational Documents.    Promptly provide copies of any Organizational Documents that have been amended or modified in accordance with the terms hereof and deliver a copy of any notice of default given or received by any Company under any Organizational Document within 15 days after such Company gives or receives such notice; and

        (k)    Other Information.    Promptly, from time to time, such other information regarding the operations, business affairs and financial condition of any Company, or compliance with the terms

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of any Loan Document or matters regarding the Collateral (beyond the requirements contained in Section 9.04) as the Administrative Agents or any Lender may reasonably request.

SECTION 5.02.    Litigation and Other Notices.    Furnish to the Administrative Agents and each Lender written notice of the following promptly (and, in any event, within three Business Days of the occurrence thereof):

        (a)   any Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto;

        (b)   the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit, litigation or proceeding, whether at law or in equity by or before any Governmental Authority, (i) against any Company or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect or (ii) with respect to any Loan Document;

        (c)   any development that has resulted in, or could reasonably be expected to result in a Material Adverse Effect;

        (d)   the occurrence of a Casualty Event; and

        (e)   (i) the incurrence of any material Lien (other than Permitted Liens) on, or claim asserted against any of the Collateral or (ii) the occurrence of any other event which could materially affect the value of the Collateral.

SECTION 5.03.    Existence; Businesses and Properties.    

        (a)   Do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05 or Section 6.06 or, in the case of any Subsidiary, where the failure to perform such obligations, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

        (b)   Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, privileges, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business except where such failure could reasonably be expected to result in a Material Adverse Effect; maintain and operate such business in substantially the manner in which it is presently conducted and operated; comply with all applicable Requirements of Law (including any and all zoning, building, Environmental Law, ordinance, code or approval or any building permits or any restrictions of record or agreements affecting the Real Property) and decrees and orders of any Governmental Authority, whether now in effect or hereafter enacted, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; pay and perform its obligations under all Leases and Transaction Documents; and at all times maintain, preserve and protect all property material to the conduct of such business and keep such property in good repair, working order and condition (other than wear and tear occurring in the ordinary course of business) and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times; provided that nothing in this Section 5.03(b) shall prevent (i) sales of property, consolidations or mergers or amalgamations by or involving any Company in accordance with Section 6.05 or Section 6.06; (ii) the withdrawal by any Company of its qualification as a foreign corporation in any jurisdiction where such withdrawal, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; or (iii) the abandonment by any Company of any rights, franchises,

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licenses, trademarks, trade names, copyrights or patents that such person reasonably determines are not useful to its business or no longer commercially desirable.

SECTION 5.04.    Insurance.    

        (a)    Generally.    Keep its insurable property adequately insured at all times by financially sound and reputable insurers; maintain such other insurance, to such extent and against such risks as is customary with companies in the same or similar businesses operating in the same or similar locations, including insurance with respect to Mortgaged Properties and other properties material to the business of the Companies against such casualties and contingencies and of such types and in such amounts with such deductibles as is customary in the case of similar businesses operating in the same or similar locations, including (i) physical hazard insurance on an "all risk" basis, (ii) commercial general liability against claims for bodily injury, death or property damage covering any and all insurable claims, (iii) explosion insurance in respect of any boilers, machinery or similar apparatus constituting Collateral, (iv) business interruption insurance, (v) worker's compensation insurance and such other insurance as may be required by any Requirement of Law and (vi) such other insurance against risks as the Administrative Agents and the Collateral Agents may from time to time reasonably require (such policies to be in such form and amounts and having such coverage as may be reasonably satisfactory to the applicable Administrative Agent and applicable Collateral Agent); provided that with respect to physical hazard insurance, neither Collateral Agent nor the applicable Company shall agree to the adjustment of any claim for more than $5.0 million thereunder without the consent of the other (such consent not to be unreasonably withheld or delayed); provided, further, that no consent of any Company shall be required during an Event of Default.

        (b)    Requirements of Insurance.    All such insurance shall (i) provide that no cancellation, material reduction in amount or material reduction in coverage thereof shall be effective until at least 30 days after receipt by the applicable Collateral Agent of written notice thereof, (ii) with respect to the Collateral, name the applicable Collateral Agents as mortgagee (in the case of property insurance) or additional insured on behalf of the applicable Secured Parties (in the case of liability insurance) or loss payee (in the case of property insurance), as applicable, (iii) if reasonably requested by such Collateral Agents, include a breach of warranty clause and (iv) be reasonably satisfactory in all other respects to such Collateral Agents.

        (c)    Notice to Agents.    Notify the Administrative Agents and the Collateral Agents immediately whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.04 is taken out by any Company; and promptly deliver to the Administrative Agents and the Collateral Agents a duplicate original copy of such policy or policies.

        (d)    Flood Insurance.    With respect to each Mortgaged Property, obtain flood insurance in such total amount as the Administrative Agents or the Required Lenders may from time to time reasonably require, if at any time the area in which any improvements located on any Mortgaged Property is designated a "flood hazard area" in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), and otherwise comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as amended from time to time.

        (e)    Broker's Report.    Deliver to the Administrative Agents and the Collateral Agents and the Lenders a report of a reputable insurance broker with respect to such insurance and such supplemental reports with respect thereto as the Administrative Agents or the Collateral Agents may from time to time reasonably request.

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        (f)    Mortgaged Properties.    Each Loan Party shall otherwise comply in all material respects with all Insurance Requirements in respect of the Premises; provided, however, that each Loan Party may, at its own expense and after written notice to the Administrative Agents and the Collateral Agents, (i) contest the applicability or enforceability of any such Insurance Requirements by appropriate legal proceedings, or (ii) cause the Insurance Policy containing any such Insurance Requirement to be replaced by a new policy complying with the provisions of this Section 5.04.

SECTION 5.05.    Obligations and Taxes.    

        (a)    Payment of Obligations.    Pay its Indebtedness and other obligations promptly and in accordance with their terms and pay and discharge promptly when due all Taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property, before the same shall become delinquent or in default, as well as all lawful claims for labor, services, materials and supplies or otherwise that, if unpaid, might give rise to a Lien other than a Permitted Lien upon such properties or any part thereof; provided that such payment and discharge shall not be required with respect to any such Tax, assessment, charge, levy or claim so long as (x)(i) the validity or amount thereof shall be contested in good faith by appropriate proceedings timely instituted and diligently conducted and the applicable Company shall have set aside on its books adequate reserves or other appropriate provisions with respect thereto in accordance with GAAP, (ii) such contest operates to suspend collection of the contested obligation, Tax, assessment or charge and enforcement of a Lien other than a Permitted Lien and (iii) in the case of Collateral, the applicable Company shall have otherwise complied with the Contested Collateral Lien Conditions and (y) the failure to pay could not reasonably be expected to result in a Material Adverse Effect.

        (b)    Filing of Returns.    Timely and correctly file all material Tax Returns required to be filed by it. Withhold, collect and remit all Taxes that it is required to collect, withhold or remit.

        (c)    Tax Shelter Reporting.    Each Borrower does not intend to treat the Loans as being a "reportable transaction" within the meaning of Treasury Regulation Section 1.6011-4. In the event any Borrower determines to take any action inconsistent with such intention, such Borrower will promptly notify the Administrative Agents thereof.

SECTION 5.06.    Employee Benefits.    (a) Comply in all material respects with the applicable provisions of ERISA and the Code except where such non-compliance could not reasonably be expected to result in a Material Adverse Effect and (b) furnish to the Administrative Agents (x) as soon as possible after, and in any event within 5 Business Days after any Responsible Officer of any Company knows or has reason to know that, any ERISA Event has occurred that, alone or together with any other ERISA Event could reasonably be expected to result in liability of the Companies or any of their ERISA Affiliates in an aggregate amount that could reasonably be expected to result in a Material Adverse Effect or the imposition of a Lien, a statement of a Financial Officer of the Borrowers setting forth details as to such ERISA Event and the action, if any, that the Companies propose to take with respect thereto, and (y) upon request by the Administrative Agents, copies of (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by any Company with the Internal Revenue Service with respect to each Plan; (ii) the most recent actuarial valuation report for each Plan; (iii) all notices received by any Company from a Multiemployer Plan sponsor or any governmental agency concerning an ERISA Event; and (iv) such other documents or governmental reports or filings relating to any Plan as the Administrative Agents shall reasonably request.

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SECTION 5.07.    Maintaining Records; Access to Properties and Inspections; Annual Meetings.    

        (a)   Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law are made of all dealings and transactions in relation to its business and activities, including, without limitation, proper records of intercompany transaction and the Borrowing Base Guarantor Intercompany Loan Amounts with full, true and correct entries reflecting all payments received and paid (including, without limitation, funds received by or for the account of Borrower from deposit accounts of the other Companies). Each Company will permit any representatives designated by the Administrative Agents or any Lender to visit and inspect the financial records and the property of such Company at reasonable times during regular business hours and as often as reasonably requested and to make extracts from and copies of such financial records, and permit any representatives designated by the Administrative Agents or any Lender to discuss the affairs, finances, accounts and condition of any Company with the officers and employees thereof and advisors therefor (including independent accountants).

        (b)   Within 150 days after the end of each fiscal year of the Companies, at the request of the Administrative Agents or Required Lenders, hold a meeting (at a mutually agreeable location, venue and time or, at the option of the Administrative Agents, by conference call, the costs of such venue or call to be paid by the Borrowers) with all Lenders who choose to attend such meeting, at which meeting shall be reviewed the financial results of the previous fiscal year and the financial condition of the Companies and the budgets presented for the current fiscal year of the Companies.

SECTION 5.08.    Use of Proceeds.    Use the proceeds of the Loans only for the purposes set forth in Section 3.12 and request the issuance of Letters of Credit only for the purposes set forth in the definition of Commercial Letter of Credit or Standby Letter of Credit, as the case may be.

SECTION 5.09.    Compliance with Environmental Laws; Environmental Reports.    

        (a)   Comply, and cause all lessees and other persons occupying Real Property of any Company to comply, in all material respects with all Environmental Laws and Environmental Permits applicable to its operations and Real Property; obtain and renew all material Environmental Permits applicable to its operations and Real Property; and conduct all Responses required by, and in accordance with, Environmental Laws; provided that no Company shall be required to undertake any Response to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances in accordance with GAAP.

        (b)   If a Default caused by reason of a breach of Section 3.18 or Section 5.09(a) shall have occurred and be continuing for more than 20 days without the Companies commencing activities reasonably likely to cure such Default in accordance with Environmental Laws, at the written request of the Administrative Agents or the Required Lenders through the Administrative Agents, provide to the Lenders within 45 days after such request, at the expense of the Borrowers, an environmental assessment report regarding the matters which are the subject of such Default, including, where appropriate in the reasonable judgment of the Administrative Agents, soil and/or groundwater sampling, prepared by an environmental consulting firm and, in the form and substance, reasonably acceptable to the Administrative Agents and indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance or Response to address them.

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SECTION 5.10.    [Intentionally Deleted].    

SECTION 5.11.    Additional Collateral; Additional Guarantors.    

        (a)   Subject to the terms of the Intercreditor Agreement and this Section 5.11, with respect to any property acquired after the Closing Date by any Loan Party that is intended to be subject to the Lien created by any of the Security Documents (as specified in this Section 5.11), promptly (and in any event within 60 days after the acquisition thereof) (i) execute and deliver to the applicable Administrative Agent and the applicable Collateral Agents such amendments or supplements to the relevant Security Documents or such other documents as such Administrative Agent or such Collateral Agents shall deem reasonably necessary or advisable to grant to such Collateral Agents, for their benefit and for the benefit of the Secured Parties, a Lien on such property subject to no Liens other than Permitted Liens, and (ii) take all actions necessary to cause such Lien to be duly perfected to the extent required by such Security Document in accordance with all applicable Requirements of Law, including the filing of financing statements in such jurisdictions as may be reasonably requested by such Administrative Agent. The Borrowers shall otherwise take such actions and execute and/or deliver to the applicable Collateral Agents such documents as the applicable Administrative Agent or such Collateral Agents shall require to confirm the validity, perfection and priority of the Lien of the Security Documents against such after-acquired properties.

        (b)   Subject to the terms of the Intercreditor Agreement, with respect to any person that is or becomes a Subsidiary after the Closing Date, promptly (and in any event within 30 days after such person becomes a Subsidiary) (i) pledge and deliver to the applicable Collateral Agent the certificates, if any, representing all of the Equity Interests of such Subsidiary, provided that with respect to any Foreign Subsidiary no more than 65% of the Equity Interests of any first-tier Foreign Subsidiary of US Borrowers or any US Subsidiary (and no stock of any other Foreign Subsidiary) shall be so pledged and delivered as security for the US Obligations, together with undated stock powers or other appropriate instruments of transfer executed and delivered in blank by a duly authorized officer of the holder(s) of such Equity Interests, (ii)(A) deliver to the US Collateral Agent as security for the US Obligations all intercompany notes owing from such Subsidiary to any Loan Party that is a US Borrower or US Subsidiary and (B) deliver to the Canadian Collateral Agent as security for the Canadian Obligations all intercompany notes owing from such Subsidiary to any Loan Party that is a Canadian Borrower or Foreign Subsidiary, in each case, together with instruments of transfer executed and delivered in blank by a duly authorized officer of such Loan Party and (iii) (A) if such new Subsidiary is a US Subsidiary, cause such new US Subsidiary to execute and deliver a Joinder Agreement or such comparable documentation to become a Subsidiary Guarantor and a joinder agreement to the applicable Security Agreement, substantially in the form annexed thereto, (B) if such new Subsidiary is a Foreign Subsidiary, cause such new Foreign Subsidiary to execute and deliver a pledge agreement, security agreement and guarantee substantially in the form of the applicable Canadian Pledge Agreement, Canadian Security Agreement and Canadian Guaranty and (C) cause to take all actions necessary or advisable in the opinion of the applicable Administrative Agent or the applicable Collateral Agent to cause the Lien created by the applicable Security Agreement to be duly perfected to the extent required by such agreement in accordance with all applicable Requirements of Law, including the filing of financing statements in such jurisdictions as may be reasonably requested by the applicable Administrative Agent or the applicable Collateral Agent.

        (c)   Subject to the terms of the Intercreditor Agreement, promptly grant to the applicable Collateral Agents, within 60 days of the acquisition thereof, a security interest in and Mortgage on each Real Property owned in fee by such Loan Party that is a US Borrower or US Subsidiary, as is acquired by such Loan Party after the Closing Date and that, together with any improvements thereon, individually has a fair market value of at least $5,000,000, in each case, as additional

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security for the Secured Obligations (unless the subject property is already mortgaged to a third party to the extent permitted by Section 6.02). Subject to the terms of the Intercreditor Agreement, such Mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the applicable Administrative Agents and the applicable Collateral Agents and shall constitute valid and enforceable perfected First Priority Liens subject only to Permitted Liens or other Liens reasonably acceptable to the such Collateral Agent. Subject to the terms of the Intercreditor Agreement, the Mortgages or instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the First Priority Liens in favor of the applicable Collateral Agents required to be granted pursuant to the Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full. Such Loan Party shall otherwise take such actions and execute and/or deliver to the applicable Collateral Agents such documents as the applicable Administrative Agent or such Collateral Agent shall reasonably require to confirm the validity, perfection and priority of the Lien of any existing Mortgage or new Mortgage against such after-acquired Real Property (including a Title Policy, a Survey and local counsel opinion (in form and substance reasonably satisfactory to such Administrative Agent and such Collateral Agent) in respect of such Mortgage).

        (d)   The Borrowers may designate any Subsidiary acquired or formed after the Closing Date as a Non-Guarantor Subsidiary by written notice to the applicable Administrative Agent; provided, however, that if at any time any Non-Guarantor Subsidiary or group of Non-Guarantor Subsidiaries in the aggregate (other than any Foreign Subsidiary not otherwise subject to Section 5.11(b)) has assets with either a book value or fair market value in excess of $1.0 million, then the Borrowers shall, and shall cause one or more of such Subsidiaries to, comply with Section 5.11(b) within the time frames set forth therein so that no Non-Guarantor Subsidiary or group of Non-Guarantor Subsidiaries in the aggregate holds property having either a book value or fair market value in excess of $1.0 million.

SECTION 5.12.    Security Interests; Further Assurances.    Subject to the terms of the Intercreditor Agreement, promptly, upon the reasonable request of any Administrative Agent, Collateral Agent or Lender, at the applicable Borrower's expense, execute, acknowledge and deliver, or cause the execution, acknowledgment and delivery of, and thereafter register, file or record, or cause to be registered, filed or recorded, in an appropriate governmental office, any document or instrument supplemental to or confirmatory of the Security Documents or otherwise deemed by such Administrative Agent or such Collateral Agent reasonably necessary or desirable for the continued validity, perfection and priority of the Liens on the Collateral covered thereby subject to no other Liens except as permitted by the applicable Security Document or this Agreement, or obtain any consents or waivers as may be reasonably necessary or appropriate in connection therewith. Deliver or cause to be delivered to the applicable Administrative Agent and the applicable Collateral Agents from time to time such other documentation, consents, authorizations, approvals and orders in form and substance reasonably satisfactory to such Administrative Agent and such Collateral Agents as such Administrative Agent and such Collateral Agents shall reasonably deem necessary to perfect or maintain the Liens on the Collateral pursuant to the Security Documents. Upon the exercise by any Administrative Agent, Collateral Agent or Lender of any power, right, privilege or remedy pursuant to any Loan Document which requires any consent, approval, registration, qualification or authorization of any Governmental Authority execute and deliver all applications, certifications, instruments and other documents and papers that such Administrative Agent, Collateral Agent or Lender may require. If any Administrative Agent, any Collateral Agent or the Required Lenders determine that they are required by a Requirement of Law to have appraisals prepared in respect of the Real Property of any Loan Party constituting Collateral, the Borrowers shall provide to the applicable Administrative Agent appraisals that satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of FIRREA, as applicable, and are otherwise in form and substance satisfactory to such Administrative Agent and the applicable Collateral Agent.

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SECTION 5.13.    Information Regarding Collateral.    

        (a)   Not effect any change (i) in any Loan Party's legal name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) in the location of any Loan Party's chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it, domicile (within the meaning of the Quebec Civil Code) or any office or facility (other than any Store) at which Collateral owned by it with a value of more than $250,000 is located (including the establishment of any such new office or facility), (iii) in any Loan Party's identity or organizational structure, (iv) in any Loan Party's Federal Taxpayer Identification Number or organizational identification number, if any, or (v) in any Loan Party's jurisdiction of organization (in each case, including by merging or amalgamating with or into any other entity, reorganizing, dissolving, liquidating, reorganizing or organizing in any other jurisdiction), until (A) it shall have given the applicable Collateral Agents and the applicable Administrative Agent not less than 30 days' prior written notice (in the form of an Officers' Certificate), or such lesser notice period agreed to by such Collateral Agents, of its intention so to do, clearly describing such change and providing such other information in connection therewith as such Collateral Agents or such Administrative Agent may reasonably request and (B) it shall have taken all action reasonably satisfactory to such Collateral Agents to maintain the perfection and priority of the security interest of such Collateral Agents for the benefit of the Secured Parties in the Collateral, if applicable. Each Loan Party agrees to promptly provide the applicable Collateral Agents with certified Organizational Documents reflecting any of the changes described in the preceding sentence. Each Loan Party also agrees to promptly notify the applicable Collateral Agents of any change in the location of any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral is located (including the establishment of any such new office or facility), other than changes in location to a Mortgaged Property or a leased property subject to a Landlord Access Agreement.

        (b)   Concurrently with the delivery of financial statements pursuant to Section 5.01(a), deliver to the applicable Administrative Agents and applicable Collateral Agents a Perfection Certificate Supplement and a certificate of a Financial Officer and the chief legal officer(s) of the Borrowers certifying that all UCC financing statements (including fixture filings, as applicable), PPSA financing statements or financing change statements or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction necessary to protect and perfect the security interests and Liens under the Security Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period).

SECTION 5.14.    Post-Closing Collateral Matters.    Execute and deliver the documents and complete the tasks set forth on Schedule 5.14, in each case within the time limits specified on such schedule.

SECTION 5.15.    Affirmative Covenants with Respect to Leases.    With respect to each Lease, the respective Loan Party shall perform all the obligations imposed upon the landlord under such Lease and enforce all of the tenant's obligations thereunder, except where the failure to so perform or enforce could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.16.    Interest Rate Agreements.    Within one hundred eighty (180) days after the Closing Date, US Borrowers shall enter into, and shall maintain, Hedging Agreements providing for interest rate protection for an amount equal to fifty percent (50%) of the outstanding principal due on the Senior Notes at any time on terms and conditions reasonably satisfactory to US Administrative Agent.

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ARTICLE VI.

NEGATIVE COVENANTS

        Each Loan Party warrants, covenants and agrees with each Administrative Agent, each Collateral Agent and each Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document have been paid in full and all Letters of Credit have been canceled or have expired or been fully cash collateralized and all amounts drawn thereunder have been reimbursed in full, unless the Required Lenders shall otherwise consent in writing, no Loan Party will, nor will they cause or permit any Subsidiaries to:

SECTION 6.01.    Indebtedness.    Incur, create, assume or permit to exist, directly or indirectly, any Indebtedness, except

        (a)   Indebtedness incurred under this Agreement and the other Loan Documents;

        (b)   (i) Indebtedness outstanding on the Closing Date and listed on Schedule 6.01(b), (ii) refinancings or renewals thereof; provided that (A) any such refinancing Indebtedness is in an aggregate principal amount not greater than the aggregate principal amount of the Indebtedness being renewed or refinanced, plus the amount of any premiums required to be paid thereon, accrued or capitalized interest and reasonable fees and expenses associated therewith, (B) such refinancing Indebtedness has a later or equal final maturity and longer or equal weighted average life than the Indebtedness being renewed or refinanced and (C) the covenants, events of default, subordination and other provisions thereof (including any guarantees thereof) shall be, in the aggregate, no less favorable to the Lenders than those contained in the Indebtedness being renewed or refinanced and (iii) the Senior Notes and Senior Note Guarantees (including any notes and guarantees issued in exchange therefor in accordance with the registration rights document entered into in connection with the issuance of the Senior Notes and Senior Note Guarantees);

        (c)   Indebtedness of any Company under Hedging Agreements;

        (d)   Indebtedness permitted by Section 6.04(i);

        (e)   To the extent recorded in the Companies' intercompany account ledgers, intercompany Indebtedness of the Companies outstanding to the extent permitted by Section 6.04(d);

        (f)    Indebtedness in respect of Purchase Money Obligations and Capital Lease Obligations, and refinancings or renewals thereof (other than refinancings funded with intercompany advances), in an aggregate amount not to exceed the greater of (i) $15 million or (ii) 1% of Consolidated Net Tangible Assets, in either case, at any time outstanding;

        (g)   Indebtedness incurred by Foreign Subsidiaries and/or Non-Guarantor Subsidiaries in an aggregate amount not to exceed $15 million at any time outstanding;

        (h)   Indebtedness in respect of workers' compensation claims, self-insurance obligations, performance bonds, surety appeal or similar bonds and completion guarantees provided by a Company in the ordinary course of its business;

        (i)    Contingent Obligations of any Loan Party in respect of Indebtedness otherwise permitted under this Section 6.01;

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

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        (k)   Indebtedness of any seller, the business, person or properties acquired in a Permitted Acquisition;

        (l)    Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business;

        (m)  Indebtedness arising from the Existing Lender Letters of Credit so long as such Existing Lender Letters of Credit are secured by a Letter of Credit or cash collateral acceptable to Agents.

        (n)   unsecured Indebtedness of any Company in an aggregate amount not to exceed $100 million at any time outstanding.

SECTION 6.02.    Liens.    Create, incur, assume or permit to exist, directly or indirectly, any Lien on any property now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except the following (collectively, the "Permitted Liens"):

        (a)   inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or delinquent and Liens for taxes, assessments or governmental charges or levies, which (i) are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien, and (ii) in the case of any such charge or claim which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions;

        (b)   Liens in respect of property of any Company imposed by Requirements of Law, and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's, landlords', workmen's, suppliers', repairmen's and mechanics' Liens and other similar Liens, and (i) which do not in the aggregate materially detract from the value of the property of the Companies, taken as a whole, and do not materially impair the use thereof in the operation of the business of the Companies, taken as a whole, (ii) which, if they secure obligations that are then due and unpaid, are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien, and (iii) in the case of any such Lien which has become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions;

        (c)   any Lien in existence on the Closing Date and set forth on Schedule 6.02(c) and any Lien granted as a replacement or substitute therefor; provided that any such replacement or substitute Lien (i) except as permitted by Section 6.01(b) (ii)(A), does not secure an aggregate amount of Indebtedness, if any, greater than that secured on the Closing Date and (ii) does not encumber any property other than the property subject thereto on the Closing Date (any such Lien, an "Existing Lien");

        (d)   easements, rights-of-way, restrictions (including zoning restrictions), covenants, licenses, encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies on or with respect to any Real Property, in each case whether now or hereafter in existence, not (i) securing Indebtedness, (ii) individually or in the aggregate materially impairing the value or marketability of such Real Property or (iii) individually or in the aggregate materially interfering with the ordinary conduct of the business of the Companies at such Real Property;

        (e)   Liens arising out of judgments, attachments or awards not resulting in a Default and in respect of which such Company shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall be secured a subsisting stay of execution pending such

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appeal or proceedings and, in the case of any such Lien which has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions;

        (f)    Liens (other than any Lien imposed by ERISA) (x) imposed by Requirements of Law or deposits made in connection therewith in the ordinary course of business in connection with workers' compensation, unemployment insurance, social security and similar legislation, (y) incurred in the ordinary course of business to secure the performance of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or (z) arising by virtue of deposits made in the ordinary course of business to secure liability for premiums to insurance carriers; provided that (i) with respect to clauses (x), (y) and (z) of this paragraph (f), such Liens are for amounts not yet due and payable or delinquent or, to the extent such amounts are so due and payable, such amounts are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings or orders entered in connection with such proceedings have the effect of preventing the forfeiture or sale of the property subject to any such Lien, (ii) to the extent such Liens are not imposed by Requirements of Law, such Liens shall in no event encumber any property other than cash and Cash Equivalents, (iii) in the case of any such Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions and (iv) the aggregate amount of deposits at any time pursuant to clause (y) and clause (z) of this paragraph (f) shall not exceed $250,000 in the aggregate;

        (g)   Leases of the properties of any Company, so long as such Leases are subordinate in all respects to the Liens granted and evidenced by the Security Documents and do not, individually or in the aggregate, (i) interfere in any material respect with the ordinary conduct of the business of any Company or (ii) materially impair the use (for its intended purposes) or the value of the property subject thereto;

        (h)   Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by any Company in the ordinary course of business in accordance with the past practices of such Company;

        (i)    Liens securing Indebtedness incurred pursuant to Section 6.01(f); provided that any such Liens attach only to the property being financed pursuant to such Indebtedness and do not encumber any other property of any Company;

        (j)    bankers' Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by any Company, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that, unless such Liens are non-consensual and arise by operation of law, in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness;

        (k)   Liens on property of a person existing at the time such person is acquired or merged with or into or consolidated with any Company to the extent permitted hereunder (and not created in anticipation or contemplation thereof); provided that such Liens do not extend to property not subject to such Liens at the time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than such existing Lien;

        (l)    Liens granted pursuant to the Security Documents to secure the Secured Obligations;

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        (m)  licenses of Intellectual Property granted by any Company in the ordinary course of business and not interfering in any material respect with the ordinary conduct of business of the Companies;

        (n)   the filing of UCC financing statements or PPSA financing statements or financing change statements solely as a precautionary measure in connection with operating leases or consignment of goods;

        (o)   Liens securing Indebtedness incurred pursuant to Section 6.01(g); provided that (i) such Liens do not extend to, or encumber, property which constitutes Collateral and (ii) such Liens extend only to the property (or Equity Interests) of the Foreign Subsidiary incurring such Indebtedness;

        (p)   the existence of the "equal and ratable" clause in the Senior Note Documents (but not any security interests granted pursuant thereto); and

        (q)   Liens with respect to obligations that do not in the aggregate exceed $10 million at any time outstanding;

provided, however, that no consensual Liens shall be permitted to exist, directly or indirectly, on any Securities Collateral, other than Liens granted pursuant to the Security Documents or the Senior Note Documents. Furthermore, notwithstanding anything to the contrary contained herein (including any provision for, reference to, or acknowledgement of, any Lien or Permitted Lien), nothing herein and no approval by any Administrative Agent, Collateral Agent or Lender of any Lien or Permitted Lien (whether such approval is verbal or in writing) shall be construed as or deemed to constitute a subordination by any Administrative Agent, Collateral Agent or Lender of any Lien or vary any of the terms or priorities established by the Intercreditor Agreement or other right or interest held by or for the benefit of any of them in or to any Collateral of any of the Loan Parties or any part thereof in favor of any Lien or Permitted Lien held by or for the benefit of any other person.

SECTION 6.03.    Sale and Leaseback Transactions.    Enter into any Sale and Leaseback Transaction unless it makes any mandatory prepayment required by Section 2.10.

SECTION 6.04.    Investment, Loan and Advances.    Directly or indirectly, lend money or credit (by way of guarantee or otherwise) or make advances to any person, or purchase or acquire any stock, bonds, notes, debentures or other obligations or securities of, or any other interest in, or make any capital contribution to, any other person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract (all of the foregoing, collectively, "Investments"), except that the following shall be permitted:

        (a)   the Companies may consummate the Transactions in accordance with the provisions of the Transaction Documents;

        (b)   Investments outstanding on the Closing Date and identified on Schedule 6.04(b);

        (c)   the Companies may (i) acquire and hold accounts receivables owing to any of them if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms, (ii) invest in, acquire and hold cash and Cash Equivalents, (iii) endorse negotiable instruments held for collection in the ordinary course of business or (iv) make lease, utility and other similar deposits in the ordinary course of business;

        (d)   any Borrowing Base Guarantor (other than Holdings) may make intercompany loans and advances to any other Borrowing Base Guarantor (other than Holdings) that is a Wholly Owned Subsidiary; provided, that such loan shall simultaneously be recorded on such Borrowing Base

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Guarantor's ledgers as an intercompany loan, evidenced by a promissory notes and shall be pledged (and delivered) by such Borrowing Base Guarantor that is the lender of such intercompany loan as Collateral pursuant to the Security Agreement, provided further that (i) no Borrowing Base Guarantor may make loans to any Foreign Subsidiary pursuant to this paragraph (d) unless permitted under Section 6.01(g) and (ii) any loans made pursuant to this paragraph (d) shall be subordinated to the obligations of the Borrowing Base Guarantors pursuant to an intercompany note in substantially the form of Exhibit P and may only be repaid in accordance with Section 6.09(b);

        (e)   The Borrowers and the Borrowing Base Guarantors may make loans and advances (including payroll, travel and entertainment related advances) in the ordinary course of business to their respective employees (other than any loans or advances to any director or executive officer (or equivalent thereof) that would be in violation of Section 402 of the Sarbanes-Oxley Act) so long as the aggregate principal amount thereof at any time outstanding (determined without regard to any write-downs or write-offs of such loans and advances) shall not exceed $1.0 million;

        (f)    Any Borrower may enter into Hedging Agreements to the extent permitted by Section 6.01(c);

        (g)   The Borrowers and the Borrowing Base Guarantors may sell or transfer amounts and acquire assets to the extent permitted by Section 6.06;

        (h)   loans and advances to directors, employees and officers of the Borrowers and the Subsidiaries for bona fide business purposes and to purchase Equity Interests of Holdings, in aggregate amount not to exceed $1.0 million at any time outstanding;

        (i)    Investments (i) by any Company in any Borrower or any Subsidiary Guarantor, (ii) by a Subsidiary Guarantor in another Subsidiary Guarantor and (iii) by a Subsidiary that is not a Subsidiary Guarantor in any other Subsidiary that is not a Subsidiary Guarantor; provided that any Investment in the form of a loan or advance shall be evidenced by the Intercompany Note and, in the case of a loan or advance by a Loan Party, pledged by such Loan Party as Collateral pursuant to the Security Documents;

        (j)    Investments in securities of trade creditors or customers in the ordinary course of business received upon foreclosure or pursuant to any plan of reorganization or liquidation or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;

        (k)   Investments made by any Borrower or any Subsidiary as a result of consideration received in connection with an Asset Sale made in compliance with Section 6.06;

        (l)    other Investments in an aggregate amount not to exceed $35 million at any time outstanding; and

        (m)  An Investment shall be deemed to be outstanding to the extent not returned in the same form as the original Investment to any Borrower or any Subsidiary Guarantor.

SECTION 6.05.    Mergers and Consolidations.    Wind up, liquidate or dissolve its affairs or enter into any transaction of merger, amalgamation or consolidation (or agree to do any of the foregoing at any future time), except that the following shall be permitted:

        (a)   the Transactions as contemplated by the Transaction Documents;

        (b)   Asset Sales in compliance with Section 6.06;

        (c)   acquisitions in compliance with Section 6.07;

        (d)   any Company may merge or consolidate with or into any Borrower or any Subsidiary Guarantor (as long as such Borrower is the surviving person in the case of any merger,

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amalgamation or consolidation involving such Borrower and such Subsidiary Guarantor is the surviving person and remains a Wholly Owned Subsidiary of Holdings in any other case); provided that the Lien on and security interest in such property granted or to be granted in favor of the applicable Collateral Agents under the Security Documents shall be maintained or created in accordance with the provisions of Section 5.11 or Section 5.12, as applicable; and

        (e)   any Subsidiary may dissolve, liquidate or wind up its affairs at any time; provided that such dissolution, liquidation or winding up, as applicable, could not reasonably be expected to have a Material Adverse Effect.

        To the extent the Required Lenders waive the provisions of this Section 6.05 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 6.05, such Collateral (unless sold to a Company) shall be sold, subject to the terms of the Intercreditor Agreement, free and clear of the Liens created by the Security Documents, and the Agents shall take all actions they deem appropriate in order to effect the foregoing.

SECTION 6.06.    Asset Sales.    Effect any Asset Sale, or agree to effect any Asset Sale, except that the following shall be permitted:

        (a)   disposition of used, worn out, obsolete or surplus property by any Company in the ordinary course of business and the abandonment or other disposition of Intellectual Property that is, in the reasonable judgment of the Borrowers, no longer economically practicable to maintain or useful in the conduct of the business of the Companies taken as a whole;

        (b)   Asset Sales (other than Sale and Leaseback Transactions); provided that the aggregate consideration received in respect of all Asset Sales (other than Sale and Leaseback Transactions) pursuant to this clause (b) shall not exceed $100 million in any four consecutive fiscal quarters of the Borrowers;

        (c)   dispositions as part of Sale and Leaseback Transactions with respect to any Store, distribution center or corporate office building constructed or owned by US Borrowers or any of their Subsidiaries;

        (d)   leases and subleases of real or personal property in the ordinary course of business and in accordance with the applicable Security Documents;

        (e)   the Transactions as contemplated by the Transaction Documents;

        (f)    mergers, amalgamations and consolidations in compliance with Section 6.05; and

        (g)   Investments in compliance with Section 6.04.

        To the extent the Required Lenders waive the provisions of this Section 6.06 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 6.06, such Collateral (unless sold to a Company) shall be sold free and clear of the Liens created by the Security Documents, and the Agents shall take all actions they deem appropriate in order to effect the foregoing.

SECTION 6.07.    Acquisitions.    Purchase or otherwise acquire (in one or a series of related transactions) any part of the property (whether tangible or intangible) of any person (or agree to do any of the foregoing at any future time), except that the following shall be permitted:

        (a)   Capital Expenditures by the Borrowers and the Subsidiaries;

        (b)   purchases and other acquisitions of inventory, materials, equipment and intangible property in the ordinary course of business;

        (c)   Investments in compliance with Section 6.04;

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        (d)   leases or subleases of real or personal property in the ordinary course of business and in accordance with the applicable Security Documents;

        (e)   the Transactions as contemplated by the Transaction Documents;

        (f)    Permitted Acquisitions; and

        (g)   Mergers, amalgamations and consolidations in compliance with Section 6.05;

provided that the Lien on and security interest in such property granted or to be granted in favor of the applicable Collateral Agents under the Security Documents shall be maintained or created in accordance with the provisions of Section 5.11 or Section 5.12, as applicable.

SECTION 6.08.    Dividends.    Authorize, declare or pay, directly or indirectly, any Dividends with respect to any Company, except that the following shall be permitted:

        (a)   Dividends by any Company to any Borrower or any Guarantor that is a Wholly Owned Subsidiary of any Borrower;

        (b)   so long as no Default shall then exist or would arise therefrom, payments to Holdings to permit Holdings, and the subsequent use of such payments by Holdings, to repurchase or redeem Qualified Capital Stock of Holdings held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates) of any Company, upon their death, disability, retirement, severance or termination of employment or service; provided that the aggregate cash consideration paid for all such redemptions and payments shall not exceed $2.5 million, in any fiscal year, (and up to 100% of such $2.5 million not used in any fiscal year may be carried forward to the next succeeding (but no other) fiscal year);

        (c)   so long as no Default shall then exist or would arise therefrom, (A) to the extent actually used by Holdings to pay such taxes, costs and expenses, payments by any Borrower to or on behalf of Holdings in an amount sufficient to pay franchise taxes and other fees required to maintain the legal existence of Holdings and (B) payments by any Borrower to or on behalf of Holdings in an amount sufficient to pay out-of-pocket legal, accounting and filing costs and other expenses in the nature of overhead in the ordinary course of business of Holdings, in the case of clauses (A) and (B) in an aggregate amount not to exceed $5 million in any fiscal year;

        (d)   Permitted Tax Distributions, so long as Holdings uses such distributions to pay its taxes; and

        (e)   payments to Holdings by any Company to permit distributions by Holdings, and the subsequent use of such payments by Holdings to make distributions, in an aggregate amount not exceeding the sum of 50% of Consolidated Net Income for the period from October 2, 2005 to the end of the most recent fiscal quarter for which financial statements are available plus 100% of the Net Cash Proceeds of Equity Issuances after the Closing Date (to the extent not used for Permitted Acquisitions), so long as at the time of such distribution (i) Administrative Borrower has given five (5) Business Days written notice to Administrative Agents of its intention to make such distribution, which notice shall specify the amount of such distribution, (ii) no Triggering Event has occurred and is continuing and (iii) Excess Availability, after giving effect to such distribution, shall be greater than $90 million.

SECTION 6.09.    Transactions with Affiliates.    Enter into, directly or indirectly, any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of any Company (other than between or among one or both Borrowers and one or more Subsidiary Guarantors), other than on terms and conditions at least as favorable to such Company as would

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reasonably be obtained by such Company at that time in a comparable arm's-length transaction with a person other than an Affiliate, except that the following shall be permitted:

        (a)   Dividends permitted by Section 6.08;

        (b)   Investments permitted by Section 6.04(h) and Section 6.04(i);

        (c)   reasonable and customary director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans) and indemnification arrangements, which in the case of director and executive officer compensation is approved by the Board of Directors of Borrower;

        (d)   transactions with customers, clients, suppliers, joint venture partners or purchasers or sellers of goods and services, in each case in the ordinary course of business and otherwise not prohibited by the Loan Documents;

        (e)   so long as no Default exists, (i) the payment of regular management fees to Sponsor in the amounts and at the times specified in the Management Services Agreement, as in effect on the Closing Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more adverse to the interests of the Lenders in any material respect than such agreement as it was in effect on the Closing Date; provided that payments under this clause (e)(i) shall in any event not exceed $2.0 million per fiscal year plus out of pocket expenses and (ii) the payment of the "Transaction Fee" as defined in the Management Services Agreement;

        (f)    the existence of, and the performance by any Loan Party of its obligations under the terms of, any limited liability company, limited partnership or other Organizational Document or securityholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party on the Closing Date and which has been disclosed to the Lenders as in effect on the Closing Date, and similar agreements that it may enter into thereafter; provided, however, that the existence of, or the performance by any Loan Party of obligations under, any amendment to any such existing agreement or any such similar agreement entered into after the Closing Date shall only be permitted by this Section 6.09(f) to the extent not more adverse to the interest of the Lenders in any material respect, when taken as a whole, than any of such documents and agreements as in effect on the Closing Date;

        (g)   sales of Qualified Capital Stock of Holdings to Affiliates of the Borrowers not otherwise prohibited by the Loan Documents and the granting of registration and other customary rights in connection therewith;

        (h)   any transaction with an Affiliate where the only consideration paid by any Loan Party is Qualified Capital Stock of Holdings; and

        (i)    the Transactions as contemplated by the Transaction Documents.

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SECTION 6.10.    Financial Covenants.    

        (a)    Maximum Total Leverage Ratio.    At any time when the Excess Availability does not exceed $75,000,000, permit the Total Leverage Ratio during the applicable Test Period set forth in the table below, to exceed the ratio set forth opposite such period in the table below:

Test Period Ending on the Following Dates	Leverage Ratio
March 31, 2006	5.05 to 1.00
June 30, 2006	5.50 to 1.00
September 30, 2006	5.10 to 1.00
December 31, 2006	4.80 to 1.00
March 31, 2007	4.75 to 1.00
June 30, 2007	4.75 to 1.00
September 30, 2007	4.50 to 1.00
December 31, 2007	4.50 to 1.00
March 31, 2008	4.50 to 1.00
June 30, 2008	4.50 to 1.00
September 30, 2008	4.25 to 1.00
December 31, 2008	4.00 to 1.00
March 31, 2009	4.00 to 1.00
June 30, 2009	4.00 to 1.00
September 30, 2009	3.75 to 1.00
December 31, 2009	3.50 to 1.00
March 31, 2010	3.50 to 1.00
June 30, 2010	3.50 to 1.00
September 30, 2010	3.25 to 1.00
December 31, 2010 and thereafter	3.00 to 1.00

        (b)    Minimum Fixed Charge Coverage Ratio.    At any time when the Excess Availability does not exceed $75,000,000, permit the Consolidated Fixed Charge Coverage Ratio during the applicable Test Period set forth in the table below, to be less than the ratio set forth opposite such period in the table below:

Test Period Ending on the Following Dates	Fixed Charge Coverage Ratio
March 31, 2006 through and including December 31, 2007	1.0 to 1.0
March 31, 2008 and thereafter	1.1 to 1.0

SECTION 6.11.    Prepayments of Other Indebtedness; Modifications of Organizational Documents and Other Documents, etc.    Directly or indirectly:

        (a)   make (or give any notice in respect thereof) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any asset sale, change of control or similar event of, any Indebtedness outstanding under the Senior Notes unless (i) the Administrative Borrower shall have given the Administrative Agents five (5) Business Day's prior written notice of its intention to make such payment or prepayment, which notice shall specify the amount of such payment or prepayment, (ii) no Triggering Event has occurred and is continuing and (ii) Excess Availability, after giving effect to such payment or prepayment, shall be greater than $90 million;

        (b)   amend or modify, or permit the amendment or modification of, any provision of any Transaction Document in any manner that is adverse in any material respect to the interests of the Lenders; or

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        (c)   terminate, amend, modify (including electing to treat any Pledged Interests (as defined in the Security Agreement) as a "security" under Section 8-103 of the UCC or under the PPSA) or change any of its Organizational Documents (including by the filing or modification of any certificate of designation) or any agreement to which it is a party with respect to its Equity Interests (including any stockholders' agreement), or enter into any new agreement with respect to its Equity Interests, other than any such amendments, modifications or changes or such new agreements which are not adverse in any material respect to the interests of the Lenders; provided that Holdings may issue such Equity Interests, so long as such issuance is not prohibited by Section 6.13 or any other provision of this Agreement, and may amend its Organizational Documents to authorize any such Equity Interests.

SECTION 6.12.    Limitation on Certain Restrictions on Subsidiaries.    Directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrowers or any Subsidiary, or pay any Indebtedness owed to the Borrowers or a Subsidiary, (b) make loans or advances to the Borrowers or any Subsidiary or (c) transfer any of its properties to the Borrowers or any Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) applicable Requirements of Law; (ii) this Agreement and the other Loan Documents; (iii) the Senior Note Documents, as in effect on the Closing Date; (iv) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of a Subsidiary; (v) customary provisions restricting assignment of any agreement entered into by a Subsidiary in the ordinary course of business; (vi) any holder of a Lien permitted by Section 6.02 restricting the transfer of the property subject thereto; (vii) customary restrictions and conditions contained in any agreement relating to the sale of any property permitted under Section 6.06 pending the consummation of such sale; (viii) any agreement in effect at the time such Subsidiary becomes a Subsidiary of the Borrowers, so long as such agreement was not entered into in connection with or in contemplation of such person becoming a Subsidiary of the Borrowers; (ix) without affecting the Loan Parties' obligations under Section 5.11, customary provisions in partnership agreements, limited liability company organizational governance documents, asset sale and stock sale agreements and other similar agreements entered into in the ordinary course of business that restrict the transfer of ownership interests in such partnership, limited liability company or similar person; (x) restrictions on cash or other deposits or net worth imposed by suppliers or landlords under contracts entered into in the ordinary course of business; (xi) any instrument governing Indebtedness assumed in connection with any Permitted 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 properties or assets of the person so acquired; (xii) in the case of any joint venture which is not a Loan Party in respect of any matters referred to in clauses (b) and (c) above, restrictions in such person's Organizational Documents or pursuant to any joint venture agreement or stockholders agreements solely to the extent of the Equity Interests of or property held in the subject joint venture or other entity; or (xiii) any encumbrances or restrictions imposed by any amendments or refinancings that are otherwise permitted by the Loan Documents of the contracts, instruments or obligations referred to in clauses (iii) or (viii) above; provided that such amendments or refinancings are no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing.

SECTION 6.13.    Limitation on Issuance of Capital Stock.    

        (a)   With respect to Holdings, issue any Equity Interest that is not Qualified Capital Stock.

        (b)   With respect to the Borrowers or any Subsidiary, issue any Equity Interest (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, any Equity Interest, except (i) for stock splits, stock dividends and additional issuances of Equity Interests which do not decrease the aggregate percentage ownership of the Borrowers and their Subsidiaries in any class of the Equity Interest of any other Subsidiary; (ii) Subsidiaries of the

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Borrowers formed after the Closing Date in accordance with Section 6.14 may issue Equity Interests to Borrower or the Subsidiary of the Borrowers which is to own such Equity Interests; and (iii) the Borrowers may issue common stock that is Qualified Capital Stock to Holdings. All Equity Interests issued in accordance with this Section 6.13(b) shall, to the extent required by Section 5.11 and Section 5.12 or any Security Agreement, be delivered to the applicable Collateral Agent for pledge pursuant to the applicable Security Agreement.

SECTION 6.14.    Limitation on Creation of Subsidiaries.    Establish, create or acquire any additional Subsidiaries without the prior written consent of the Required Lenders; provided that, without such consent, the Borrowers may (i) establish or create one or more Wholly Owned Subsidiaries of the Borrowers, (ii) establish, create or acquire one or more Subsidiaries in connection with an Investment made pursuant to Section 6.04(i), or (iii) acquire one or more Subsidiaries in connection with a Permitted Acquisition, so long as, in each case, Section 5.11(b) shall be complied with.

SECTION 6.15.    Business.    

        (a)   With respect to Holdings, engage in any business activities or have any properties or liabilities, other than (i) its ownership of the Equity Interests of the Borrowers, (ii) obligations under the Loan Documents and the Senior Note Documents and (iii) activities and properties incidental to the foregoing clauses (i) and (ii).

        (b)   With respect to the Borrowers and the Subsidiaries, engage (directly or indirectly) in any business other than those businesses in which the Borrowers and its Subsidiaries are engaged on the Closing Date as described in the Confidential Information Memorandum (or, in the good faith judgment of the Board of Directors, which are substantially related thereto or are reasonable extensions thereof).

SECTION 6.16.    Limitation on Accounting Changes.    Make or permit any change in accounting policies or reporting practices, without the consent of the Required Lenders, which consent shall not be unreasonably withheld, except changes that are required by GAAP.

SECTION 6.17.    Fiscal Year.    Change its fiscal year-end.

SECTION 6.18.    No Further Negative Pledge.    Enter into any agreement, instrument, deed or lease which prohibits or limits the ability of any Loan Party to create, incur, assume or suffer to exist any Lien upon any of their respective properties or revenues, whether now owned or hereafter acquired, or which requires the grant of any security for an obligation if security is granted for another obligation, except the following: (1) this Agreement and the other Loan Documents; (2) covenants in documents creating Liens permitted by Section 6.02 prohibiting further Liens on the properties encumbered thereby; (3) the Senior Note Documents, as in effect on the Closing Date; (4) any other agreement that does not restrict in any manner (directly or indirectly) Liens created pursuant to the Loan Documents on any Collateral securing the Secured Obligations and does not require the direct or indirect granting of any Lien securing any Indebtedness or other obligation by virtue of the granting of Liens on or pledge of property of any Loan Party to secure the Secured Obligations; and (5) any prohibition or limitation that (a) exists pursuant to applicable Requirements of Law, (b) consists of customary restrictions and conditions contained in any agreement relating to the sale of any property permitted under Section 6.06 pending the consummation of such sale, (c) restricts subletting or assignment of any lease governing a leasehold interest of the Borrowers or a Subsidiary, (d) exists in any agreement in effect at the time such Subsidiary becomes a Subsidiary of the Borrowers, so long as such agreement was not entered into in contemplation of such person becoming a Subsidiary or (e) is imposed by any amendments or refinancings that are otherwise permitted by the Loan Documents of the contracts, instruments or obligations referred to in clause (3) or (5)(d); provided that such

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amendments and refinancings are no more materially restrictive with respect to such prohibitions and limitations than those prior to such amendment or refinancing.

SECTION 6.19.    Anti-Terrorism Law; Anti-Money Laundering.    

        (a)   Directly or indirectly, (i) knowingly conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in Section 3.22, (ii) knowingly deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order or any other Anti-Terrorism Law, or (iii) knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and the Loan Parties shall deliver to the Lenders any certification or other evidence requested from time to time by any Lender in its reasonable discretion, confirming the Loan Parties' compliance with this Section 6.19).

        (b)   Cause or permit any of the funds of such Loan Party that are used to repay the Loans to be derived from any unlawful activity with the result that the making of the Loans would be in violation of any Requirement of Law.

SECTION 6.20.    Embargoed Person.    Cause or permit (a) any of the funds or properties of the Loan Parties that are used to repay the Loans to constitute property of, or be beneficially owned directly or indirectly by, any person subject to sanctions or trade restrictions under United States law ("Embargoed Person" or "Embargoed Persons") that is identified on (1) the "List of Specially Designated Nationals and Blocked Persons" maintained by OFAC and/or on any other similar list maintained by OFAC pursuant to any authorizing statute including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Order or Requirement of Law promulgated thereunder or that is named as a "listed person" or "listed entity" or any other similar lists made under any Anti-Terrorism Laws, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by a Requirement of Law, or the Loans made by the Lenders would be in violation of a Requirement of Law, or (2) the Executive Order, any related enabling legislation or any other similar Executive Orders or (b) any Embargoed Person to have any direct or indirect interest, of any nature whatsoever in the Loan Parties, with the result that the investment in the Loan Parties (whether directly or indirectly) is prohibited by a Requirement of Law or the Loans are in violation of a Requirement of Law.

ARTICLE VII.

GUARANTEE

SECTION 7.01.    The Guarantee.    The Guarantors (other than the Canadian Guarantors which have contemporaneously herewith executed and delivered the Canadian Guaranty) and each US Borrower hereby jointly and severally guarantee, as a primary obligor and not as a surety to each Secured Party and their respective successors and assigns, the prompt payment in full when due (whether at stated maturity, by required prepayment, declaration, demand, by acceleration or otherwise) of the principal of and interest (including any interest, fees, costs or charges that would accrue but for the provisions of the Title 11 of the United States Code after any bankruptcy or insolvency petition under Title 11 of the United States Code or the provisions of any Insolvency Law) on the Loans made by the Lenders to, and the Notes held by each Lender of, the Borrowers, and all other Secured Obligations from time to time owing to the Secured Parties by any Loan Party under any Loan Document or any Hedging Agreement entered into with a counterparty that is a Secured Party, in each case strictly in accordance with the terms thereof (such obligations being herein collectively called the "Guaranteed Obligations"). The Guarantors (other than the Canadian Guarantors) and each US Borrower hereby jointly and severally agree that if the Borrowers or other Guarantor(s) shall fail to

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pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, such Guarantors and each US Borrower will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.

SECTION 7.02.    Obligations Unconditional.    The obligations of the Guarantors and each US Borrower under Section 7.01 shall constitute a guaranty of payment and to the fullest extent permitted by applicable Requirements of Law, are absolute, irrevocable and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations of the Borrowers under this Agreement, the Notes, if any, or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety, Guarantor or US Borrower (except for payment in full). Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of such Guarantors and each US Borrower hereunder which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above:

        (i)    at any time or from time to time, without notice to the Guarantors or US Borrowers, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived;

        (ii)   any of the acts mentioned in any of the provisions of this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein shall be done or omitted;

        (iii)  the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Loan Documents or any other agreement or instrument referred to herein or therein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with;

        (iv)  any Lien or security interest granted to, or in favor of, Issuing Bank or any Lender or Agent as security for any of the Guaranteed Obligations shall fail to be perfected; or

        (v)   the release of any other Guarantor or US Borrower pursuant to Section 7.09.

        The Guarantors (other than the Canadian Guarantors) and each US Borrower hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Secured Party exhaust any right, power or remedy or proceed against the Borrowers under this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Guarantors (other than the Canadian Guarantors) and each US Borrower waive any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by any Secured Party upon this Guarantee or acceptance of this Guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guarantee, and all dealings between the Borrowers and the Secured Parties shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. This Guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by

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Secured Parties, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by the Secured Parties or any other person at any time of any right or remedy against the Borrowers or against any other person which may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral security or guarantee therefor or right of offset with respect thereto. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and the successors and assigns thereof, and shall inure to the benefit of the Lenders, and their respective successors and assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding.

SECTION 7.03.    Reinstatement.    The obligations of the Guarantors under this Article VII shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrowers or other Loan Party in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise. The Guarantors jointly and severally agree that they will indemnify each Secured Party on demand for all reasonable costs and expenses (including reasonable fees of counsel) incurred by such Secured Party in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law, other than any costs or expenses resulting from the bad faith or willful misconduct of such Secured Party.

SECTION 7.04.    Subrogation; Subordination.    Each Guarantor hereby agrees that until the indefeasible payment and satisfaction in full in cash of all Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement it shall waive any claim and shall not exercise any right or remedy, direct or indirect, arising by reason of any performance by it of its guarantee in Section 7.01, whether by subrogation or otherwise, against the Borrowers or any other Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. Any Indebtedness of any Loan Party permitted pursuant to Section 6.01(d) shall be subordinated to such Loan Party's Secured Obligations in the manner set forth in the Intercompany Note evidencing such Indebtedness.

SECTION 7.05.    Remedies.    Subject to the terms of the Intercreditor Agreement, the Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the obligations of the Borrowers under this Agreement and the Notes, if any, may be declared to be forthwith due and payable as provided in Section 8.01 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 8.01) for purposes of Section 7.01, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrowers and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrowers) shall forthwith become due and payable by the Guarantors for purposes of Section 7.01.

SECTION 7.06.    Instrument for the Payment of Money.    Each Guarantor hereby acknowledges that the guarantee in this Article VII constitutes an instrument for the payment of money, and consents and agrees that any Lender or Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213.

SECTION 7.07.    Continuing Guarantee.    The guarantee in this Article VII is a continuing guarantee of payment, and shall apply to all Guaranteed Obligations whenever arising.

SECTION 7.08.    General Limitation on Guarantee Obligations.    In any action or proceeding involving any state corporate limited partnership or limited liability company law, or any applicable

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state, provincial, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 7.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 7.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Loan Party or any other person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

SECTION 7.09.    Release of Guarantors.    If, in compliance with the terms and provisions of the Loan Documents, all or substantially all of the Equity Interests or property of any Guarantor are sold or otherwise transferred (a "Transferred Guarantor") to a person or persons, none of which is a Borrower or a Subsidiary, such Transferred Guarantor shall, upon the consummation of such sale or transfer, be released from its obligations under this Agreement (including under Section 11.03 hereof) and its obligations to pledge and grant any Collateral owned by it pursuant to any Security Document and, in the case of a sale of all or substantially all of the Equity Interests of the Transferred Guarantor, the pledge of such Equity Interests to the applicable Collateral Agents pursuant to the Security Agreements shall be released, and the applicable Collateral Agents shall take such actions as are necessary to effect each release described in this Section 7.09 in accordance with the relevant provisions of the Security Documents, including the return of any certificates or securities in the possession of such Collateral Agents; provided that such Guarantor is also released from its obligations under the Senior Note Documents, on the same terms.

ARTICLE VIII.

EVENTS OF DEFAULT

SECTION 8.01.    Events of Default.    Upon the occurrence and during the continuance of the following events ("Events of Default"):

        (a)   default shall be made in the payment of any principal of any Loan or any Reimbursement Obligation when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment (whether voluntary or mandatory) thereof or by acceleration thereof or otherwise;

        (b)   default shall be made in the payment of any interest on any Loan or any Fee or any other amount (other than an amount referred to in paragraph (a) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of three Business Days;

        (c)   any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings or issuances of Letters of Credit hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished;

        (d)   default shall be made in the due observance or performance by any Company of any covenant, condition or agreement contained in Section 5.02, Section 5.03(a) or Section 5.08 or in Article VI;

        (e)   default shall be made in the due observance or performance by any Company of any covenant, condition or agreement contained in any Loan Document (other than those specified in paragraphs (a), (b) or (d) immediately above) and such default shall continue unremedied or shall not be waived for a period of 30 days after written notice thereof from the Administrative Agents or any Lender to the Borrowers;

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        (f)    any Company shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness (other than the Obligations), when and as the same shall become due and payable beyond any applicable grace period, or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee or other representative on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity or become subject to a mandatory offer purchase by the obligor; provided that it shall not constitute an Event of Default pursuant to this paragraph (f) unless the aggregate amount of all such Indebtedness referred to in clauses (i) and (ii) exceeds $5 million at any one time (provided that, in the case of Hedging Obligations, the amount counted for this purpose shall be the amount payable by all Companies if such Hedging Obligations were terminated at such time);

        (g)   an involuntary proceeding shall be commenced (including the filing of any notice of intention in respect thereof) or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any Company or of a substantial part of the property of any Company, under Title 11 of the U.S. Code, as now constituted or hereafter amended, or any other Insolvency Law, federal, state, provincial or foreign bankruptcy, insolvency, receivership or similar law; (ii) the appointment of a receiver, interim receiver, receiver and manager, liquidator, trustee, custodian, sequestrator, conservator or similar official for any Company or for a substantial part of the property of any Company; or (iii) the winding-up or liquidation of any Company; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

        (h)   any Company shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Insolvency Law, federal, state, provincial or foreign bankruptcy, insolvency, receivership, incorporation law in any jurisdiction or similar law; (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (g) above; (iii) apply for or consent to the appointment of a receiver, interim receiver, receiver and manager, liquidator, trustee, custodian, sequestrator, conservator or similar official for any Company or for a substantial part of the property of any Company; (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding; (v) make a general assignment for the benefit of creditors; (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due; (vii) take any action for the purpose of effecting any of the foregoing; or (viii) wind up or liquidate;

        (i)    one or more judgments, orders or decrees for the payment of money in an aggregate amount in excess of $5 million shall be rendered against any Company or any combination thereof and the same shall remain undischarged, unvacated or unbonded for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon properties of any Company to enforce any such judgment;

        (j)    one or more ERISA Events or noncompliance with respect to Foreign Plans shall have occurred that, in the reasonable opinion of the Required Lenders, when taken together with all other such ERISA Events and noncompliance with respect to Foreign Plans, could reasonably be expected to result in a Material Adverse Effect or in the imposition of a Lien on any properties of a Company;

        (k)   any security interest and Lien purported to be created by any Security Document shall cease to be in full force and effect, or shall cease to give the applicable Collateral Agents for the benefit of the applicable Secured Parties, the Liens, rights, powers and privileges purported to be

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created and granted under such Security Document (including a perfected first priority security interest in and Lien on all of the Collateral thereunder (except as otherwise expressly provided in this Agreement or such Security Document)) in favor of such Collateral Agents, or shall be asserted by the Borrowers or any other Loan Party not to be a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in or Lien on the Collateral covered thereby;

        (l)    any Loan Document or any material provisions thereof shall at any time and for any reason be declared by a court of competent jurisdiction to be null and void, or a proceeding shall be commenced by any Loan Party or any other person, or by any Governmental Authority, seeking to establish the invalidity or unenforceability thereof (exclusive of questions of interpretation of any provision thereof), or any Loan Party shall repudiate or deny any portion of its liability or obligation for the Obligations;

        (m)  there shall have occurred a Change in Control;

        (n)   any Company shall be prohibited or otherwise restrained from conducting the business theretofore conducted by it in any manner that has or could reasonably be expected to result in a Material Adverse Effect by virtue of any determination, ruling, decision, decree or order of any court or Governmental Authority of competent jurisdiction;

then, and in every such event (other than an event with respect to Holdings or any Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agents may, and at the request of the Required Lenders shall, by notice to the Borrowers, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitments and (ii) declare the Loans and Reimbursement Obligations then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans and Reimbursement Obligations so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other Obligations of the Borrowers accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding; and in any event, with respect to Holdings or any Borrower described in paragraph (g) or (h) above, the Commitments shall automatically terminate and the principal of the Loans and Reimbursement Obligations then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other Obligations of the Borrowers accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding.

SECTION 8.02.    Rescission.    If at any time after termination of the Commitments or acceleration of the maturity of the Loans, the Borrowers shall pay all arrears of interest and all payments on account of principal of the Loans and Reimbursement Obligations owing by it that shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified herein) and all Defaults (other than non-payment of principal of and accrued interest on the Loans due and payable solely by virtue of acceleration) shall be remedied or waived pursuant Section 11.02, then upon the written consent of the Required Lenders and written notice to Administrative Borrower, the termination of the Commitments or the acceleration and their consequences may be rescinded and annulled; but such action shall not affect any subsequent Default or impair any right or remedy consequent thereon. The provisions of the preceding sentence are intended merely to bind the Lenders and the Issuing Bank to a decision that may be made at the election of the Required Lenders, and such provisions are not intended to benefit the Borrowers and do not give the Borrowers the right to require the Lenders to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met.

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SECTION 8.03.    Application of Proceeds.    Subject to the terms of the Intercreditor Agreement, the proceeds received by the applicable Collateral Agents in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by such Collateral Agents of their remedies shall be applied, in full or in part, together with any other sums then held by such Collateral Agents pursuant to this Agreement, promptly by such Collateral Agents as follows:

        (a)   First, to the payment of all reasonable costs and expenses, fees, commissions and taxes of such sale, collection or other realization including compensation to such Collateral Agents and their agents and counsel, and all expenses, liabilities and advances made or incurred by such Collateral Agents in connection therewith and all amounts for which such Collateral Agents are entitled to indemnification pursuant to the provisions of any Loan Document, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full;

        (b)   Second, to the payment of all other reasonable costs and expenses of such sale, collection or other realization including compensation to the other Secured Parties and their agents and counsel and all costs, liabilities and advances made or incurred by the other Secured Parties in connection therewith, together with interest on each such amount at the highest rate then in effect under this Agreement from and after the date such amount is due, owing or unpaid until paid in full;

        (c)   Third, without duplication of amounts applied pursuant to clauses (a) and (b) above, to the indefeasible payment in full in cash, pro rata, of interest and other amounts constituting Obligations (other than principal, Reimbursement Obligations and obligations of the type described in clause (d) in the definition of "Obligations") and any fees, premiums and scheduled periodic payments due under Hedging Agreements constituting Secured Obligations and any interest accrued thereon, in each case equally and ratably in accordance with the respective amounts thereof then due and owing;

        (d)   Fourth, to the indefeasible payment in full in cash, pro rata, of principal amount of the Obligations (including Reimbursement Obligations, but excluding obligations of the type described in clause (d) in the definition of "Obligations") and any breakage, termination or other payments under Hedging Agreements constituting Secured Obligations and any interest accrued thereon;

        (e)   Fifth, to the indefeasible payment in full in cash, pro rata, of obligations of the type described in clause (d) in the definition of "Obligations";

        (f)    Sixth, the balance, if any, to the person lawfully entitled thereto (including the applicable Loan Party or its successors or assigns) or as a court of competent jurisdiction may direct.

        In the event that any such proceeds are insufficient to pay in full the items described in clauses (a) through (d) of this Section 8.02, the Loan Parties shall remain liable, jointly and severally, for any deficiency. Each Loan Party acknowledges the relative rights, priorities and agreements of the Senior Note Secured Parties, as set forth in the Intercreditor Agreement and this Agreement, including as set forth in this Section 8.03.

ARTICLE IX.

COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS

        Each Loan Party warrants, covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan, all Fees and all other expenses or amounts payable under any Loan Document shall have been paid in full and all Letters of Credit have been canceled or have expired or been fully

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cash collateralized and all amounts drawn thereunder have been reimbursed in full, unless Collateral Agents and Administrative Agents or the Required Lenders shall otherwise consent in writing:

SECTION 9.01.    Collateral Accounts.    

        (a)   The Borrowers and each Borrowing Base Guarantor shall notify the Collateral Agents promptly of: (i) any material delay in the performance by the Borrowers or any Borrowing Base Guarantor of any of their material obligations to any Account Debtor or the assertion of any material claims, offsets, defenses or counterclaims by any Account Debtor, or any material disputes with Account Debtors, or any settlement, adjustment or compromise thereof, (ii) all material adverse information known to any Loan Party relating to the financial condition of any Account Debtor and (iii) any event or circumstance which, to any Loan Party's knowledge, would result in any Account no longer constituting an Eligible Account. The Borrowers and each Borrowing Base Guarantor hereby agree not to grant to any Account Debtor any credit, discount, allowance or extension, or to enter into any agreement for any of the foregoing, without the applicable Collateral Agents consent, except in the ordinary course of business in accordance with practices and policies previously disclosed in writing to the Collateral Agents. So long as no Event of Default exists or has occurred and is continuing, the Borrowers and each Borrowing Base Guarantor may settle, adjust or compromise any claim, offset, counterclaim or dispute with any Account Debtor. At any time that an Event of Default exists or has occurred and is continuing, the applicable Collateral Agents shall, at their option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with Account Debtors of any Loan Party or grant any credits, discounts or allowances.

        (b)   With respect to each Account: (i) the amounts shown on any invoice delivered to Collateral Agents or schedule thereof delivered to Collateral Agents shall be true and complete in all material respects, (ii) no payments shall be made thereon except payments immediately delivered to Collateral Agents pursuant to the terms of this Agreement or any applicable Security Document (to the extent so required), (iii) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect thereto except as reported to Collateral Agents and promptly reflected in the reporting of the Borrowing Base, in accordance with the terms of this Agreement, and (iv) none of the transactions giving rise thereto will violate any applicable laws or regulations, all documentation relating thereto will be legally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms.

        (c)   Collateral Agents shall have the right at any time or times, in Collateral Agents' name or in the name of a nominee of a Collateral Agent, to verify the validity, amount or any other matter relating to any Account or other Collateral, by mail, telephone, e-mail, facsimile transmission or otherwise. To facilitate the exercise of the right described in the immediately preceding sentence, the Borrowers hereby agrees to provide Collateral Agents upon request the name and address of each Account Debtor of the Borrowers and Borrowing Base Guarantors.

SECTION 9.02.    Accounts; Cash Management.    

        The Borrowers and each Guarantor shall maintain a cash management system which is acceptable to the Administrative Agents and the applicable Collateral Agents (the "Cash Management System"), which shall operate as follows:

        (a)   All funds held by Borrowers or any other Loan Party (other than funds being collected pursuant to the provisions stated below) shall be deposited in one or more bank accounts or securities investment accounts, in form and substance reasonably satisfactory to applicable Collateral Agents subject to the terms of the Security Agreement and applicable Control Agreements.

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        (b)   The Borrowers shall establish and maintain, at their sole expense, and shall cause each Guarantor to establish and maintain, at its sole expense blocked accounts or lockboxes and related deposit accounts, which, on the Closing Date, shall consist of accounts and related lockboxes maintained by the financial institutions as described on Schedule 9.02 hereto (in each case, "Blocked Accounts"), as the applicable Collateral Agent may specify, with such banks as are acceptable to the applicable Collateral Agents into which the Borrowers and Guarantors shall promptly deposit and direct their respective Account Debtors to directly remit all payments on Accounts and all payments constituting proceeds of Inventory or other Collateral (other than proceeds of a Casualty Event or an Asset Sale that do not require a permanent repayment under Loan Documents) in the identical form in which such payments are made, whether by cash, check or other manner and shall be identified and segregated from all other funds of the Loan Parties. The Borrowers and Guarantors shall deliver, or cause to be delivered, to the applicable Collateral Agents a Control Agreement duly authorized, executed and delivered by each bank where a Blocked Account for the benefit of the Borrowers or any Guarantor is maintained, and by each bank where any other deposit account is from time to time maintained. The Borrowers shall further execute and deliver, and shall cause each Guarantor to execute and deliver, such agreements and documents as the applicable Collateral Agents may require in connection with such Blocked Accounts and such Control Agreements. The Borrowers and Guarantors shall not establish any deposit accounts after the Closing Date, unless the Borrowers or Guarantor (as applicable) have complied in full with the provisions of this Section 9.01 with respect to such deposit accounts. Borrowers agree that from and after the delivery of an Activation Notice (as defined below) all payments made to such Blocked Accounts or other funds received and collected by the applicable Collateral Agents or any Lender, whether in respect of the Accounts, as proceeds of Inventory or other Collateral or otherwise shall be treated as payments to the applicable Collateral Agents and Lenders in respect of the Obligations and therefor shall constitute the property of such Collateral Agents and Lenders to the extent of the then outstanding Obligations.

        (c)   With respect to the Blocked Accounts of US Borrowers and such Guarantors (other than Guarantors organized under the laws of Canada) as the applicable Collateral Agents shall determine in their sole discretion, the applicable bank maintaining such Blocked Accounts shall agree to forward daily all amounts in each Blocked Account to one of the Blocked Accounts designated as a concentration account in the name of US Borrowers (the "US Concentration Account") at the bank that shall be designated as the Concentration Account bank for US Borrowers (the "US Concentration Account Bank"), which, on the Closing Date, shall be account #8900338261 maintained by The Bank of New York (or other financial institution acceptable to the applicable Collateral Agents); provided, however, that amounts in the Blocked Accounts with numbers 2000028308229, 2000028308245, 2000028308261, 2000028308274, 2000028308258 and 2000028308232 maintained at Wachovia Bank, National Association (the "US Tax Bank") will be combined into account #2000028308216 (the "Master Tax Account") at Wachovia Bank, National Association. The US Concentration Account Bank and US Tax Bank shall agree, from and after the receipt of a notice (an "Activation Notice") from the applicable US Collateral Agent (which Activation Notice may or, upon instruction of the Required Lenders, shall be given by such Collateral Agent at any time from and after the occurrence of a Trigger Event which is continuing at the time of such notice) pursuant to the applicable Control Agreement, to forward daily all amounts in the US Concentration Account to the account designated as collection account (the "US Collection Account") which shall be under the exclusive dominion and control of the US Administrative Agent.

        (d)   With respect to the Blocked Accounts of Canadian Borrower and such Guarantors organized under the laws of Canada as the applicable Collateral Agents shall determine in their sole discretion, the applicable bank maintaining such Blocked Accounts shall agree to forward daily all amounts in each Blocked Account to one of the Blocked Accounts designated as a

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concentration accounts in the name of Canadian Borrower (the "Canadian Concentration Accounts" and together with the US Concentration Account and Master Tax Account, the "Concentration Accounts") at the bank that shall be designated as the Concentration Account bank for Canadian Borrower (the "Canadian Concentration Account Bank" and together with the US Concentration Account Bank, the "Concentration Account Banks"), which, on the Closing Date, shall be account nos. 1496-666 and 4688-785 maintained by The Bank of Montreal (or other financial institution acceptable to the applicable Collateral Agents). The Canadian Concentration Account Bank shall agree, from and after the receipt of a notice an Activation Notice (which Activation Notice may or, upon instruction of the Required Lenders, shall be given by such Collateral Agent at any time from and after the occurrence of a Trigger Event which is continuing at the time of such notice) pursuant to the applicable Control Agreement, to forward daily all amounts in the Canadian Concentration Account to the account designated as collection account (the "Canadian Collection Account" and together with the US Collection Account, the "Collection Accounts") which shall be under the exclusive dominion and control of the Canadian Administrative Agent.

        (e)   With respect to the Blocked Accounts of such Guarantors as the respective Collateral Agents shall determine in their sole discretion, the applicable bank maintaining such Blocked Accounts shall agree, from and after the receipt of an Activation Notice (which Activation Notice may or, upon instruction of the Required Lenders, shall be given by the applicable Collateral Agents at any time from and after a Trigger Event), to forward all amounts in each Blocked Account to the US Collection Account and/or Canadian Collection Account, as applicable, and to commence the process of daily sweeps from such Blocked Account into the applicable Collection Accounts.

        (f)    Any provision of this Section 9.02 to the contrary notwithstanding, (A) Loan Parties may maintain payroll accounts and trust accounts that are not a part of the Cash Management System provided that no Loan Party shall accumulate or maintain cash in such accounts as of any date of determination in excess of checks outstanding against such accounts as of that date and amounts necessary to meet minimum balance requirements and (B) Loan Parties may maintain local cash accounts that are not a part of the Cash Management System which individually do not at any time contain funds in excess of $500,000 and, together with all other such local cash accounts, do not exceed $5 million.

        (g)   (i) The US Administrative Agent shall apply all funds received in the US Collection Account on a daily basis to the repayment of the Obligations of the US Borrowers and its US Subsidiaries to either, at its option, (a) outstanding US Swingline Loans or (b) in accordance with any instructions received under Section 2.10(g). From and after the delivery of an Activation Notice, unless Administrative Agents and Collateral Agents determine to release such funds to Borrowers in accordance with the following sentence, US Administrative Agent shall apply all such funds in the US Collection Account on a daily basis to the repayment of (a) first, Fees and reimbursable expenses of the US Administrative Agent and the US Collateral Agent then due and payable; (b) second, to interest then due and payable on all Loans (other than Canadian Revolving Loans), (c) third, Overadvances (other than such Overadvances comprised of Canadian Revolving Loans), (d) fourth, the Swingline Loans, (e) fifth, ABR Revolving Loans (other than Canadian Revolving Loans), (f) sixth, Eurodollar Revolving Loans (other than Canadian Revolving Loans), together with all accrued and unpaid interest thereon (provided, however, payments on Eurodollar Revolving Loans with respect to which the application of such payment would result in the payment of the principal prior to the last day of the relevant Interest Period shall be transferred to the Cash Collateral Account to be applied to the Eurodollar Revolving Loans (other than Canadian Revolving Loans) on the last day of the relevant Interest Period of such Eurodollar Revolving Loan or to the Obligations of the US Borrowers and its Domestic Subsidiaries as they

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come due (whether at stated maturity, by acceleration or otherwise)). Notwithstanding the foregoing sentence, after payment in full has been made of the amounts required under subsections (a)-(c) above, upon US Borrower's request and as long as no Default has occurred and is continuing and all other conditions precedent to a Borrowing have been satisfied, any additional funds deposited in the US Collection Account or Cash Collateral Account shall be released to US Borrower. In addition, if consented to by the Administrative Agents, the Collateral Agents and the Required Lenders, such funds in the US Collection Account or Cash Collateral Account may be released to Borrowers. Notwithstanding the above, if the applicable Administrative Agent has declared the Loans and/or Reimbursement Obligations then outstanding to be forthwith due and payable in whole or in part pursuant to Section 8.01, the US Administrative Agent shall apply all funds received in the Collection Account in accordance with Section 8.03.

        (ii)   The Canadian Administrative Agent shall apply all funds received in the Canadian Collection Account on a daily basis to the repayment of the Canadian Obligations to either, at its option, (a) outstanding Canadian Swingline Loans or (b) in accordance with any instructions received under Section 2.10(g). From and after the delivery of an Activation Notice, unless Administrative Agents and Collateral Agents determine to release such funds to Borrowers in accordance with the following sentence, Canadian Administrative Agent shall apply all such funds in the Canadian Collection Account on a daily basis to the repayment of (a) first, Fees and reimbursable expenses of the Canadian Administrative Agent and the Canadian Collateral Agent then due and payable; (b) second, to interest then due and payable on all Canadian Revolving Loans, (c) third, Overadvances comprised of Canadian Revolving Loans, (d) fourth, the Swingline Loans, (e) fifth pro rata, Canadian Prime Rate Loans, and (f) sixth, Bankers' Acceptances in accordance with Section 2.03(xi). Notwithstanding the foregoing sentence, after payment in full has been made of the amounts required under subsections (a)-(c) above, upon Canadian Borrower's request and as long as no Default has occurred and is continuing and all other conditions precedent to a Borrowing have been satisfied, any additional funds deposited in the Canadian Collection Account or Cash Collateral Account shall be released to Canadian Borrower. In addition, if consented to by the Administrative Agents, the Collateral Agents and the Required Lenders, such funds in the Canadian Collection Account or Cash Collateral Account may be released to Borrowers. Notwithstanding the above, if the applicable Administrative Agent has declared the Loans and/or Reimbursement Obligations then outstanding to be forthwith due and payable in whole or in part pursuant to Section 8.01, the Collateral Agents shall apply all funds received in the Collection Account in accordance with Section 8.03.

        (h)   The Borrowers and their directors, employees, agents and other Affiliates and Borrowing Base Guarantors shall promptly deposit or cause the same to be deposited, any monies, checks, notes, drafts or any other payment relating to and/or proceeds of Accounts, Inventory or other Collateral which come into their possession or under their control in the applicable Blocked Accounts, or remit the same or cause the same to be remitted, in kind, to the applicable Collateral Agents. In no event shall the same be commingled with Borrowers' own funds. US Borrowers agrees to reimburse US Collateral Agents and Canadian Borrower agrees to reimburse Canadian Collateral Agents, as applicable, on demand for any amounts owed or paid to any bank at which a Blocked Account is established or any other bank or person involved in the transfer of funds to or from the Blocked Accounts arising out of such Collateral Agents' payments to or indemnification of such bank or person.

SECTION 9.03.    Inventory.    With respect to the Inventory: (a) the Borrowers and Borrowing Base Guarantors shall at all times maintain records of Inventory reasonably satisfactory to Collateral Agents, keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, the cost therefor and daily withdrawals therefrom and additions thereto; (b) any of the

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Administrative Agents' and Collateral Agents' officers, employees or agents shall have the right, at any time or times, in the name of such Administrative Agent or Collateral Agent, as applicable, any designee of the Administrative Agents, Collateral Agents or the Borrowers, to verify the validity, amount or any other matter relating to Accounts or Inventory by mail, telephone, electronic communication, personal inspection or otherwise and to conduct field audits of the financial affairs and Collateral of the Loan Parties, and the Borrowers shall cooperate fully with the Administrative Agents and Collateral Agents in an effort to facilitate and promptly conclude any such verification process; (c) the Loan Parties shall cooperate fully with the Collateral Agents and their agents during all Collateral field audits and Inventory Appraisals which shall be at the expense of the Borrowers and which shall be conducted once in any twelve (12) month period, or, following either (i) a time period when Excess Availability does not exceed $90,000,000 or (ii) a Trigger Event, more frequently at any Collateral Agent's reasonable request; (d) neither the Borrowers nor any Borrowing Base Guarantor shall sell Inventory to any customer on approval, or any other basis which entitles the customer to return (except for the right of customers for Inventory which is defective or non-conforming) or may obligate any Loan Party to repurchase such Inventory; and (e) Borrowers and Borrowing Base Guarantor shall keep the Inventory in good and marketable condition.

SECTION 9.04.    Borrowing Base-Related Reports.    The Borrowers shall deliver or cause to be delivered (at the expense of the Borrowers) to the Collateral Agents and the Administrative Agents the following:

        (a)   (i) in no event less frequently than 30 days after the end of the month ending February 28, 2006 and for each month thereafter through and including the month ending July 31, 2006 and (ii) in no event less frequently than 20 days after the end of the month ending August 30, 2006 and for each month thereafter, a Borrowing Base Certificate from the Borrowers accompanied by such supporting detail and documentation as shall be requested by the applicable Collateral Agent in its reasonable credit judgment, provided, that if at any time the Average Excess Availability is less than $90 million and so long as Borrowers do not maintain Average Excess Availability in excess of $90 million for a period of three (3) consecutive fiscal months, Borrowers shall deliver additional weekly roll-forward of Accounts and Inventory referenced in paragraph (b) below within five (5) Business Days after the end of each calendar week, and, if requested by the applicable Collateral Agents, a Borrowing Base Certificate (prepared weekly to reflect results satisfactory to such Collateral Agents) within five (5) Business Days after the end of each calendar week, or more frequent Borrowing Base Certificates reflecting shorter periods as reasonably requested by such Collateral Agents. Each Borrowing Base Certificate shall reflect all information through the end of the appropriate period for Borrowers and each Borrowing Base Guarantor;

        (b)   upon request by the Collateral Agents, and in no event less frequently than 30 days after the end of (i) each month, a monthly trial balance showing Accounts outstanding aged from statement date as follows: 1 to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more, accompanied by a comparison to the prior month's trial balance and such supporting detail and documentation as shall be requested by the Collateral Agents in their reasonable credit judgment and (ii) each month, a summary of Inventory by location and type accompanied by such supporting detail and documentation as shall be requested by the Collateral Agents in their reasonable credit judgment (in each case, together with a copy of all or any part of such delivery requested by any Lender in writing after the Closing Date);

        (c)   on the date any Borrowing Base Certificate is delivered pursuant to Section 9.04(a) or at such more frequent intervals as the Collateral Agents may request from time to time (together with a copy of all or any part of such delivery requested by any Lender in writing after the Closing Date), (i) a copy of the ledger registering the Borrowing Base Guarantor Intercompany Loan Amount as of the date of the Borrowing Base Certificate and (ii) a collateral report with respect

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to the Loan Parties, including all additions and reductions (cash and non-cash) with respect to intercompany loan accounts of the Borrowers and Borrowing Base Guarantors, accompanied by such supporting detail and documentation as shall be requested by the Collateral Agents in their reasonable credit judgment;

        (d)   at the time of delivery of each of the financial statements delivered pursuant to Section 5.01(a) and (b), a reconciliation of the Accounts trial balance and quarter-end Inventory reports of the Borrowers and Borrowing Base Guarantors to the general ledger of such Loan Party, in each case, accompanied by such supporting detail and documentation as shall be requested by the Collateral Agents in their reasonable credit judgment;

        (e)   a list of any applications for the registration of any patent, trademark or copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency which any Loan Party has filed in the prior fiscal quarter; and

        (f)    such other reports, statements and reconciliations with respect to the Borrowing Base, Canadian Borrowing Base or Collateral of any or all Loan Parties as the Collateral Agents shall from time to time request in its reasonable credit judgment.

        The delivery of each certificate and report or any other information delivered pursuant to this Section 9.04 shall constitute a representation and warranty by the Borrowers that the statements and information contained therein are true and correct in all material respects on and as of such date.

SECTION 9.05.    Rescission of Activation Notice.    Notwithstanding any of the provisions of Section 9.02, after Collateral Agents have delivered an Activation Notice and upon delivery of a certificate (provided, such certificate may not be delivered more than once in any 360 day period) by a Financial Officer of the Borrowers to the Collateral Agents certifying that (i) the Average Excess Availability has exceeded $90 million for the previous fiscal quarter and (ii) no Default has occurred or is continuing, the Collateral Agents shall rescind the Activation Notice by written notice, as necessary, to the applicable Concentration Account Banks and any such other banks to which Collateral Agents had issued such Activation Notice and following such rescission the Cash Management System shall be operated as if no such Activation Notice had been given.

ARTICLE X.

THE ADMINISTRATIVE AGENTS AND THE COLLATERAL AGENTS

SECTION 10.01.    Appointment and Authority.    Each of the Lenders and the Issuing Bank hereby irrevocably appoints UBS AG, Stamford Branch, to act on its behalf as the US Administrative Agent and as US Collateral Agent hereunder and under the other Loan Documents and authorizes such Agent to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Each of the Lenders and the Issuing Bank hereby irrevocably appoints UBS AG Canada Branch, to act on its behalf as a Canadian Collateral Agent hereunder and under the other Loan Documents and authorizes such Agent to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Each of the Lenders and the Issuing Bank hereby irrevocably appoints The Bank of New York, to act on its behalf as the Senior Note Collateral Agent hereunder and under the other Loan Documents and authorizes such Agent to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Each of the Lenders and the Issuing Bank hereby irrevocably appoints Wachovia Bank, National Association to act on its behalf as a US Collateral Agent hereunder and under the other Loan Documents and authorizes such Agent to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms hereof or thereof,

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together with such actions and powers as are reasonably incidental thereto. Each of the Lenders and the Issuing Bank hereby irrevocably appoints Wachovia Capital Finance Corporation (Canada) to act on its behalf as Canadian Administrative Agent and as a Canadian Collateral Agent hereunder and under the other Loan Documents and authorizes such Agent to take such actions on its behalf and to exercise such powers as are delegated to such Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agents, the Collateral Agents, the Lenders and the Issuing Bank, and neither Borrowers nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.

SECTION 10.02.    Rights as a Lender.    Each person serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated or unless the context otherwise requires, include each person serving as an Agent hereunder in its individual capacity. Such person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrowers or any Subsidiary or other Affiliate thereof as if such person were not an Agent hereunder and without any duty to account therefor to the Lenders.

SECTION 10.03.    Exculpatory Provisions.

        (a)   No Agent shall have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, no Agent:

        (i)    shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

        (ii)   shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that such Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that such Agent shall not be required to take any action that, in its judgment or the judgment of its counsel, may expose such Agent to liability or that is contrary to any Loan Document or applicable Requirements of Law; and

        (iii)  shall, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrowers or any of its Affiliates that is communicated to or obtained by the person serving as such Agent or any of its Affiliates in any capacity.

        (b)   No Agent shall be liable for any action taken or not taken by it (x) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as such Agent shall believe in good faith shall be necessary, under the circumstances as provided in Section 11.02) or (y) in the absence of its own gross negligence or willful misconduct. No Agent shall be deemed to have knowledge of any Default unless and until notice describing such Default is given to such Agent by the Borrowers, a Lender or the Issuing Bank.

        (c)   No Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this

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Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to such Agent. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Administrative Agents or the Collateral Agents is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term us used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties.

        (d)   Canadian Administrative Agent represents and warrants to the Canadian Borrower that on the Closing Date and throughout the term of this Agreement:

        (i)    it is not a "non-resident" within the meaning of the ITA, or

        (ii)   it is an "Authorized Foreign Bank" within the meaning of the Bank Act for purposes of the ITA and is entering into this agreement in the ordinary course of its trade and business that is its "Canadian banking business" for purposes of the ITA.

SECTION 10.04.    Reliance by Agent.    Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper person. Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the Issuing Bank, the Administrative Agents and the Collateral Agents may presume that such condition is satisfactory to such Lender or the Issuing Bank unless such Administrative Agent or such Collateral Agent shall have received notice to the contrary from such Lender or the Issuing Bank prior to the making of such Loan or the issuance of such Letter of Credit. Each Agent may consult with legal counsel (who may be counsel for the Borrowers), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

SECTION 10.05.    Delegation of Duties.    Each Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by such Agent. Each Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of each Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent.

SECTION 10.06.    Resignation of Agent.    Each Agent may at any time give notice of its resignation to the Lenders, the Issuing Bank and the Borrowers. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrowers, to appoint a successor, which shall be a bank with an office in the United States or in the case of a successor to the Canadian Administrative Agent, a person which (i) (A) is not a "non-resident" within the meaning of the ITA, or (B) is an "Authorized Foreign Bank" within the meaning of the Bank Act for purposes of the ITA and which becomes a party hereunder in the ordinary course of its trade and business that is its "Canadian banking business" for purposes of the ITA and (ii) which has provided a representation and warranty substantially in the form of that contained in Section 10.03(d), or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders and the Issuing Bank, appoint a

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successor Agent meeting the qualifications set forth above provided that if the Agent shall notify Borrower and the Lenders that no qualifying person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by such Agent on behalf of the Lenders or the Issuing Bank under any of the Loan Documents, the retiring Agent shall continue to hold such collateral security as nominee until such time as a successor Collateral Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through an Agent shall instead be made by or to each Lender and the Issuing Bank directly, until such time as the Required Lenders appoint a successor Agent as provided for above in this paragraph. Upon the acceptance of a successor's appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this paragraph). The fees payable by the Borrowers to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the retiring Agent's resignation hereunder and under the other Loan Documents, the provisions of this Article X and Section 11.03 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Agent.

SECTION 10.07.    Non-Reliance on Agent and Other Lenders.    Each Lender and the Issuing Bank acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and the Issuing Bank also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

SECTION 10.08.    No Other Duties, etc.    Anything herein to the contrary notwithstanding, none of the Bookrunners, Arrangers, Syndication Agents, Documentation Agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as an Administrative Agent, a Collateral Agent, a Lender or the Issuing Bank hereunder.

SECTION 10.09.    Indemnification.    The Lenders severally agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrowers or the Guarantors and without limiting the obligation of the Borrowers or the Guarantors to do so), ratably according to their respective outstanding Loans and Commitments in effect on the date on which indemnification is sought under this Section 10.09 (or, if indemnification is sought after the date upon which all Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such outstanding Loans and Commitments as in effect immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's

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gross negligence or willful misconduct. The agreements in this Section 10.09 shall survive the payment of the Loans and all other amounts payable hereunder.

SECTION 10.10.    Overadvances.    The Administrative Agents shall not, without the prior consent of Lenders, make (and shall prohibit the Issuing Banks and Swingline Lenders, as applicable, from making) any Revolving Loans or provide any Letters of Credit to the Borrowers on behalf of Lenders intentionally and with actual knowledge that such Revolving Loans, Swingline Loans, or Letters of Credit would either (i) cause the aggregate amount of the Revolving Exposure to exceed the Borrowing Base or (ii) be made when one or more of the other conditions precedent to the making of Loans hereunder cannot be satisfied except, that, Administrative Agents may make (or cause to be made) such additional Revolving Loans or Swingline Loans or provide such additional Letters of Credit on behalf of Lenders (each an "Overadvance" and collectively, the "Overadvances"), intentionally and with actual knowledge that such Loans or Letters of Credit will be made without the satisfaction of the foregoing conditions precedent, if the Administrative Agents deem it necessary or advisable in their discretion to do so, provided, that: (a) the total principal amount of the Overadvances to the Borrowers which Administrative Agents may make or provide (or cause to be made or provided) after obtaining such actual knowledge that the conditions precedent have not been satisfied, shall not exceed the amount equal to $30 million outstanding at any time and shall not cause the Revolving Exposure to exceed the Revolving Commitments of all of the Lenders or the Revolving Exposure of a Lender to exceed such Lender's Revolving Commitment, (b) without the consent of all Lenders, (i) no Overadvance shall be outstanding for more than sixty (60) days and (ii) after all Overadvances have been repaid, Administrative Agents shall not make any additional Overadvance unless sixty (60) days or more have elapsed since the last date on which any Overadvance was outstanding and (c) Administrative Agents shall be entitled to recover such funds, on demand from the Borrowers together with interest thereon for each day from the date such payment was due until the date such amount is paid to such Administrative Agent at the interest rate provided for in Section 2.06(e). Each Lender shall be obligated to pay such Administrative Agent the amount of its Pro Rata Percentage of any such Overadvance provided, that such Administrative Agent is acting in accordance with the terms of this Section 10.10 and provided further, if a CAM Exchange shall have occurred, then the Pro Rata Percentage of any such Overadvance shall be calculated by reference to the CAM Percentage.

SECTION 10.11.    Concerning the Collateral and the Related Loan Documents.    Each Lender authorizes and directs Agents to enter into this Agreement and the other Loan Documents. Each Lender agrees that any action taken by Agents or Required Lenders in accordance with the terms of this Agreement or the other Loan Documents and the exercise by Agents or Required Lenders of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders.

SECTION 10.12.    Field Audit, Examination Reports and Other Reports.    By signing this Agreement, each Lender:

        (a)   is deemed to have requested that Agents furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report and report with respect to the Borrowing Base prepared or received by Agents (each field audit or examination report and report with respect to the Borrowing Base being referred to herein as a "Report" and collectively, "Reports"), appraisals with respect to the Collateral and financial statements with respect to Borrowers and its Subsidiaries received by Agents;

        (b)   expressly agrees and acknowledges that Agents (i) does not make any representation or warranty as to the accuracy of any Report, appraisal or financial statement or (ii) shall not be liable for any information contained in any Report, appraisal or financial statement;

        (c)   expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agents or any other party performing any audit or examination will inspect only

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specific information regarding Borrowers and Guarantors and will rely significantly upon Borrowers' and Guarantors' books and records, as well as on representations of Borrowers' and Guarantors' personnel; and

        (d)   agrees to keep all Reports confidential and strictly for its internal use in accordance with the terms of Section 11.12, and not to distribute or use any Report in any other manner.

ARTICLE XI.

MISCELLANEOUS

SECTION 11.01.    Notices.    

        (a)    Generally.    Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows:

        (i)    if to any Loan Party, to US Borrowers at:

6 Brighton Road
Clifton, New Jersey 07012
Attention: David Dick
Telephone: (973) 614-7054
Telecopier No.: (973) 249-4330
Email: ddick@int.com

        (ii)   if to UBS AG, Stamford Branch, as US Administrative Agent, US Collateral Agent or the Issuing Bank, to it at:

UBS AG, Stamford Branch
677 Washington Boulevard
Stamford, Connecticut 06901
Attention: Doris Mesa
Telecopier No.: (203) 719-4176
Email: doris.mesa@ubs.com

with a copy to each of the other Agents
as set forth herein and, except with respect to
communications under Sections 5.01 and 9.04, to:

Latham & Watkins, LLP
233 S. Wacker Drive, Suite 5800
Chicago, IL 60606
Attention: Donald L. Schwartz
Telecopy No.: (312) 993-9767

        (iii)  if to UBS AG Canada Branch, as Canadian Collateral Agent, to it at:

UBS AG Canada Branch
161 Bay Street
Suite 4100, BCE Place
Toronto, Ontario M5J2S1
Attention: Amy Fung
Phone No.: (416) 350-2261
Email: amy-c.fung@ubs.com

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with a copy to the other Agents as set
forth herein and, except with respect to communications
under Sections 5.01 and 9.04, to:

Latham & Watkins, LLP
233 S. Wacker Drive, Suite 5800
Chicago, IL 60606
Attention: Donald L. Schwartz
Telecopy No.: (312) 993-9767

        (iv)  if to Wachovia Bank, National Association, as US Collateral Agent, to it at:

1133 Avenue of the Americas
New York, New York 10036
Attention: Portfolio Manager
Telecopier No.: (212) 445-4283

with a copy to the other Agents as set
forth herein

        (v)   if to Wachovia Bank, National Association, as Issuing Bank, to it at

Wachovia Bank, National Association
1133 Avenue of the Americas
New York, New York 10036
Attention: Portfolio Manager
Telecopier No.: (212) 545-4283

with a copy to the other Agents as set
forth herein

        (vi)  if to Wachovia Capital Finance Corporation (Canada), as Canadian Collateral Agent or Canadian Administrative Agent, to it at:

Wachovia Capital Finance Corporation (Canada)
141 Adelaide Street West
Suite 1500
Toronto, Ontario M5H 3L5
Attention: Portfolio Manager
Telecopier No.: (416) 364-6068

with a copy to:

Wachovia Bank, National Association
1133 Avenue of the Americas
New York, New York 10036
Attention: Portfolio Manager
Telecopier No.: (212) 545-4283

and with a copy to the other Agents as set
forth herein

        (vii) if to a Lender, to it at its address (or telecopier number) set forth in its Administrative Questionnaire; and

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        (viii) if to the US Swingline Lender, to it at:

UBS Loan Finance LLC
677 Washington Boulevard
Stamford, Connecticut 06901
Attention: Doris Mesa
Telecopier No.: (203) 719-4176
Email: doris.mesa@ubs.com

        (ix)  if to the Canadian Swingline Lender, to it at:

Wachovia Capital Finance Corporation (Canada)
141 Adelaide Street West
Suite 1500
Toronto, Ontario M5H 3L5
Attention: Portfolio Manager
Telecopier No.: (416) 364-6068

with a copy to:

Wachovia Bank, National Association
1133 Avenue of the Americas
New York, New York 10036
Attention: Portfolio Manager
Telecopier No.: (212) 545-4283

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

        (b)    Electronic Communications.    Notices and other communications to the Lenders and the Issuing Bank hereunder may (subject to Section 11.01(d)) be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agents; provided that the foregoing shall not apply to notices to any Lender or the Issuing Bank pursuant to Article II if such Lender or the Issuing Bank, as applicable, has notified the Administrative Agents that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agents, the Collateral Agents or the Borrowers may, in their discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it (including as set forth in Section 11.01(d)); provided that approval of such procedures may be limited to particular notices or communications.

        Unless the applicable Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender's receipt of an acknowledgement from the intended recipient (such as by the "return receipt requested" function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

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        (c)    Change of Address, Etc.    Any party hereto may change its address or telecopier number for notices and other communications hereunder by notice to the other parties hereto.

        (d)    Posting.    Each Loan Party hereby agrees that it will provide to the Administrative Agents all information, documents and other materials that it is obligated to furnish to the Administrative Agents pursuant to this Agreement and any other Loan Document, including all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing, Borrowing or other extension of credit (including any election of an interest rate or interest period relating thereto), (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any Default under this Agreement or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or other extension of credit hereunder (all such non-excluded communications, collectively, the "Communications"), by transmitting the Communications in an electronic/soft medium in a format reasonably acceptable to the US Administrative Agent at such e-mail address(es) provided to the Borrowers from time to time or in such other form, including hard copy delivery thereof, as the Administrative Agents shall require. In addition, each Loan Party agrees to continue to provide the Communications to the Administrative Agents in the manner specified in this Agreement or any other Loan Document or in such other form, including hard copy delivery thereof, as the Administrative Agents shall require. Nothing in this Section 11.01(d) shall prejudice the right of the Agents, any Lender or any Loan Party to give any notice or other communication pursuant to this Agreement or any other Loan Document in any other manner specified in this Agreement or any other Loan Document or as any such Agent shall require.

        To the extent consented to by any Administrative Agent in writing from time to time, the applicable Administrative Agent agrees that receipt of the Communications by such Administrative Agent at its e-mail address(es) set forth above shall constitute effective delivery of the Communications to such Administrative Agent for purposes of the Loan Documents; provided that the Borrowers shall also deliver to such Administrative Agent an executed original of each Compliance Certificate required to be delivered hereunder.

        Each Loan Party further agrees that the Administrative Agents may make the Communications available to the Lenders by posting the Communications on Intralinks or a substantially similar electronic transmission system (the "Platform"). The Platform is provided "as is" and "as available." The Agents do not warrant the accuracy or completeness of the Communications, or the adequacy of the Platform and expressly disclaim liability for errors or omissions in the communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by any Agent in connection with the Communications or the Platform. In no event shall the Administrative Agents or any of its Related Parties have any liability to the Loan Parties, any Lender or any other person for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of any Loan Party's or any Administrative Agent's transmission of communications through the Internet, except to the extent the liability of such person is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such person's gross negligence or willful misconduct.

SECTION 11.02.    Waivers; Amendment.    

        (a)    Generally.    No failure or delay by any Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any

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abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of each Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by this Section 11.02, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether any Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time. No notice or demand on the Borrowers in any case shall entitle the Borrowers to any other or further notice or demand in similar or other circumstances.

        (b)    Required Consents.    Subject to the terms of the Intercreditor Agreement and to Section 11.02(c) and (d) neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended, supplemented or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agents, the Collateral Agents (in the case of any Security Document) and the Loan Party or Loan Parties that are party thereto, in each case with the written consent of the Required Lenders; provided that no such agreement shall be effective if the effect thereof would:

        (i)    increase the Commitment of any Lender without the written consent of such Lender (it being understood that no amendment, modification, termination, waiver or consent with respect to any condition precedent, covenant or Default shall constitute an increase in the Commitment of any Lender);

        (ii)   reduce the principal amount or premium of any Loan or LC Disbursement or reduce the rate of interest thereon (other than interest pursuant to Section 2.06(d)), or reduce any Fees payable hereunder, or change the form or currency of payment of any Obligation, without the written consent of each Lender directly affected thereby (it being understood that any amendment or modification to the financial definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (ii));

        (iii)  (A) change the scheduled final maturity of any Loan, (B) postpone the date for payment of any Reimbursement Obligation or any interest or fees payable hereunder, (C) change the amount of, waive or excuse any such payment (other than waiver of any increase in the interest rate pursuant to Section 2.06(e)), or (D) postpone the scheduled date of expiration of any Commitment or any Letter of Credit beyond the Revolving Maturity Date, in any case, without the written consent of each Lender directly affected thereby;

        (iv)  increase the maximum duration of Interest Periods hereunder, without the written consent of each Lender directly affected thereby;

        (v)   permit the assignment or delegation by the Borrowers of any of their rights or obligations under any Loan Document, without the written consent of each Lender;

        (vi)  release Holdings or all or substantially all of the Subsidiary Guarantors from their Guarantee (except as expressly provided in Article VII), or limit their liability in respect of such Guarantee, without the written consent of each Lender;

        (vii) except as provided for in the Intercreditor Agreement, release all or a substantial portion of the Collateral from the Liens of the Security Documents or alter the relative priorities of the Secured Obligations entitled to the Liens of the Security Documents, in each

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case without the written consent of each Lender (it being understood that additional Classes of Loans pursuant to Section 2.19 or consented to by the Required Lenders may be equally and ratably secured by the Collateral with the then existing Secured Obligations under the Security Documents);

        (viii) change Section 2.14(b), (c) or (d) in a manner that would alter the pro rata sharing of payments or setoffs required thereby or any other provision in a manner that would alter the pro rata allocation among the Lenders of Loan disbursements, including the requirements of Section 2.02(a), Section 2.17(d) and Section 2.18(d), without the written consent of each Lender directly affected thereby;

        (ix)  change any provision of this Section 11.02(b), (c), or (d), without the written consent of each Lender directly affected thereby (except for additional restrictions on amendments or waivers for the benefit of Lenders of additional Classes of Loans pursuant to Section 2.19 or consented to by the Required Lenders);

        (x)   change the percentage set forth in the definition of "Required Lenders," "Supermajority Lenders" or any other provision of any Loan Document (including this Section) specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as the case may be), other than to increase such percentage or number or to give any additional Lender or group of Lenders such right to waive, amend or modify or make any such determination or grant any such consent;

        (xi)  change the application of payments as among or between Classes under Section 2.10(f), Section 8.03 or Section 9.02(g) without the written consent of the Lenders of each Class that is being allocated a lesser prepayment as a result thereof (it being understood that the Required Lenders may waive, in whole or in part, any prepayment under Section 2.10(f) so long as the application, as between Classes, of any portion of such prepayment that is still required to be made is not changed and, if additional Classes of Revolving Loans under this Agreement pursuant to Section 2.19 or consented to by the Required Lenders are made, such new Revolving Loans may be included on a pro rata basis in the various prepayments required pursuant to Section 2.10(f));

        (xii) [Intentionally Deleted];

        (xiii) change or waive any provision of Article X as the same applies to any Agent, or any other provision of this Agreement as the same applies to the rights or obligations of any Agent, in each case without the written consent of such Agent;

        (xiv) change or waive any obligation of the Lenders relating to the issuance of or purchase of participations in Letters of Credit, without the written consent of the applicable Administrative Agent and the Issuing Bank;

        (xv) change or waive any provision hereof relating to Swingline Loans (including the definition of "US Swingline Commitment" or "Canadian Swingline Commitment"), without the written consent of the applicable Swingline Lender; or

        (xvi) expressly change or waive any condition precedent in Section 4.02 to any Credit Extension without the written consent of the Required Lenders;

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provided, further, that

        (1)   any waiver, amendment or modification prior to the completion of the primary syndication of the Commitments and Loans (as determined by the Arranger) may not be effected without the written consent of the Arranger; and

        (2)   any waiver, amendment or modification of the Intercreditor Agreement (and any related definitions) may be effected by an agreement or agreements in writing entered into among the Collateral Agents, the US Administrative Agent, the Required Lenders and the Senior Note Collateral Agent (without the consent of any Loan Party, so long as such amendment, waiver or modification does not impose any additional duties or obligations on the Loan Parties or alter or impair any right of any Loan Party under the Loan Documents).

        (c)    Collateral.    Without the consent of any other person, the applicable Loan Party or Parties and the Administrative Agents and/or the Collateral Agents may (in its or their respective sole discretion, or shall, to the extent required by any Loan Document) enter into any amendment or waiver of any Loan Document, or enter into any new agreement or instrument, to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional property to become Collateral for the benefit of the Secured Parties, or as required by local law to give effect to, or protect any security interest for the benefit of the Secured Parties, in any property or so that the security interests therein comply with applicable Requirements of Law.

        (d)    Dissenting Lenders.    If, in connection with any proposed change, waiver, discharge or termination of the provisions of this Agreement as contemplated by Section 11.02(b), the consent of the Required Lenders or Supermajority Lenders, as applicable, is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then the Borrowers shall have the right to replace all, but not less than all, of such non-consenting Lender or Lenders (so long as all non-consenting Lenders are so replaced) with one or more persons pursuant to Section 2.16 so long as at the time of such replacement each such new Lender consents to the proposed change, waiver, discharge or termination.

SECTION 11.03.    Expenses; Indemnity; Damage Waiver.    

        (a)    Costs and Expenses.    The Borrowers and Guarantors shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agents, the Collateral Agents and their respective Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agents and/or the Collateral Agents) in connection with the syndication of the credit facilities provided for herein (including the obtaining and maintaining of CUSIP numbers for the Loans), the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents, including any Inventory Appraisal, or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), including in connection with post-closing searches to confirm that security filings and recordations have been properly made, (ii) all reasonable out-of-pocket expenses incurred by the Issuing Banks in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iii) all reasonable out-of-pocket expenses incurred by the Administrative Agents, the Collateral Agents, any Lender or the Issuing Banks (including the reasonable fees, charges and disbursements of any counsel for the Administrative Agents, the Collateral Agents, any Lender or the Issuing Banks), in connection with the enforcement or protection or attempted enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section 11.03, or (B) in preserving and protecting, or attempting to preserve or protect its interests in the Collateral, or (C) in connection with the Loans made or

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Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit and (iv) all documentary and similar taxes and charges in respect of the Loan Documents.

        (b)    Indemnification by Borrower.    Each of the Borrowers and Guarantors shall indemnify the Administrative Agents (and any sub-agent thereof), the Collateral Agents (and any sub-agent thereof) each Lender and the Issuing Bank, and each Related Party of any of the foregoing persons (each such person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee) incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrowers or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release or threatened Release of Hazardous Materials on, at, under or from any property owned, leased or operated by any Company at any time, or any Environmental Claim related in any way to any Company, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrowers or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrowers or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee's obligations hereunder or under any other Loan Document, if the Borrowers or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

        (c)    Reimbursement by Lenders.    To the extent that any Borrowers or Guarantors for any reason fails to indefeasibly pay any amount required under paragraph (a) or (b) of this Section 11.03 to be paid by it to the Administrative Agents (or any sub-agent thereof), the Collateral Agents, the Issuing Bank, the Swingline Lenders or any Related Party of any of the foregoing, each applicable Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Collateral Agents (or any sub-agent thereof), the Issuing Bank, the Swingline Lenders or such Related Party, as the case may be, such Lender's pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent), the Collateral Agents (or any sub-agent thereof), the Swingline Lenders or the Issuing Bank in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent), the Collateral Agents (or any sub-agent thereof), the Swingline Lenders or Issuing Bank in connection with such capacity. The obligations of the Lenders under this paragraph (c) are subject to the provisions of Section 2.14. For purposes hereof, a Lender's "pro rata share" shall be determined based upon its share of the sum of the total Revolving Exposure and unused Commitments at the time.

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        (d)    Waiver of Consequential Damages, Etc.    To the fullest extent permitted by applicable Requirements of Law, no Loan Party shall assert, and each Loan Party hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in paragraph (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

        (e)    Payments.    All amounts due under this Section shall be payable not later than three (3) Business Days after demand therefor.

SECTION 11.04.    Successors and Assigns.    

        (a)    Successors and Assigns Generally.    The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrowers may not assign or otherwise transfer any of their rights or obligations hereunder without the prior written consent of the Administrative Agent, the Collateral Agents, the Issuing Bank, the Swingline Lenders and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of paragraph (b) of this Section 11.04, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section 11.04 or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (and any other attempted assignment or transfer by Borrower or any Lender shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the other Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.

        (b)    Assignments by Lenders.    Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that

        (i)    except in the case of any assignment made in connection with the primary syndication of the Commitment and Loans by the Arranger or an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $5.0 million, in the case of any assignment in respect of Revolving Loans and/or Revolving Commitments, unless the applicable Administrative Agent and, so long as no Default has occurred and is continuing, the Borrowers otherwise consent (each such consent not to be unreasonably withheld or delayed);

        (ii)   each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to the Loan

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or the Commitment assigned, except that this clause (ii) shall not permit any Lender to assign all or a portion of its rights and obligations among separate tranches or to separate Lenders on a non-pro rata basis;

        (iii)  after the Effective Date (as defined in the related Assignment and Assumption), the assigning Lender shall hold the same percentage of Canadian Revolving Loans as compared to Revolving Loans as such Lender held prior to the such Effective Date;

        (iv)  the parties to each assignment shall execute and deliver to the applicable Administrative Agent an Assignment and Assumption, together with the Assigning Lender's original Note (if any) and a processing and recordation fee of $3,500, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the applicable Administrative Agent an Administrative Questionnaire; and

        (v)   in the case of an assignment of rights and obligations hereunder by a Canadian Lender, such Lender shall use its commercially reasonable efforts to assign such rights and obligations to an Eligible Assignee which qualifies as an Eligible Canadian Lender.

Subject to acceptance and recording thereof by the applicable Administrative Agent pursuant to paragraph (c) of this Section 11.04, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender, including a Canadian Revolving Lender, as applicable, under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 2.12, Section 2.13, Section 2.15 and Section 11.03 with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section 11.04.

        (c)    Register.    The applicable Administrative Agent, acting solely for this purpose as an agent of the Borrowers, shall maintain at one of its offices, a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrowers, the Administrative Agents, the Issuing Bank and the Lenders may treat each person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers, the Issuing Bank, the Collateral Agents, the Swingline Lenders and any Lender (with respect to its own interest only), at any reasonable time and from time to time upon reasonable prior notice.

        (d)    Participations.    Any Lender may at any time, without the consent of, or notice to, the Borrowers, the Administrative Agents, the Issuing Bank or the Swingline Lenders sell participations to any person (other than a natural person or the Borrowers or any of the Borrowers' Affiliates or Subsidiaries) (each, a "Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Administrative Agents

147

and the Lenders and Issuing Bank shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement.

        Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in clause (i), (ii) or (iii) of the first proviso to Section 11.02(b) that affects such Participant. Subject to paragraph (e) of this Section, the Borrowers agree that each Participant shall be entitled to the benefits of Section 2.12, Section 2.13 and Section 2.15(subject to the requirements of those Sections) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.14 as though it were a Lender.

        (e)    Limitations on Participant Rights.    A Participant shall not be entitled to receive any greater payment under Section 2.12, Section 2.13 and Section 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers' prior written consent.

        (f)    Certain Pledges.    Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. In the case of any Lender that is a fund that invests in bank loans, such Lender may, without the consent of the Borrowers or the Administrative Agents, collaterally assign or pledge all or any portion of its rights under this Agreement, including the Loans and Notes or any other instrument evidencing its rights as a Lender under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities.

SECTION 11.05.    Survival of Agreement.    All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Agents, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Section 2.12, Section 2.14, Section 2.15 and Article X shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the payment of the Reimbursement Obligations, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

SECTION 11.06.    Counterparts; Integration; Effectiveness; Electronic Execution.    

        (a)    Counterparts; Integration; Effectiveness.    This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement

148

and the other Loan Documents, and any separate letter agreements with respect to fees payable to the Administrative Agent, constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement.

        (b)    Electronic Execution of Assignments.    The words "execution," "signed," "signature," and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Requirement of Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

SECTION 11.07.    Severability.    Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 11.08.    Right of Setoff.    If an Event of Default shall have occurred and be continuing, each Lender, the Issuing Bank, and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Requirements of Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the Issuing Bank or any such Affiliate to or for the credit or the account of the Borrowers or any other Loan Party against any and all of the obligations of the Borrowers or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender or the Issuing Bank, irrespective of whether or not such Lender or the Issuing Bank shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrowers or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender or the Issuing Bank different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender, the Issuing Bank and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, the Issuing Bank or their respective Affiliates may have. Each Lender and the Issuing Bank agrees to notify the Borrowers and the Administrative Agents promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

SECTION 11.09.    Governing Law; Jurisdiction; Consent to Service of Process.    

        (a)    Governing Law.    This Agreement shall be construed in accordance with and governed by the law of the State of New York, without regard to conflicts of law principles that would require the application of the laws of another jurisdiction.

        (b)    Submission to Jurisdiction.    Each Loan Party hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof and any court of competent jurisdiction in Ontario, Canada, in any action or proceeding arising out of or relating to

149

any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court, each Ontario court or, to the fullest extent permitted by applicable law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agents, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction.

        (c)    Waiver of Venue.    Each Loan Party hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable Requirements of Law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in Section 11.09(b). Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by applicable Requirements of Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

        (d)    Service of Process.    Each party hereto irrevocably consents to service of process in any action or proceeding arising out of or relating to any Loan Document, in the manner provided for notices (other than telecopier) in Section 11.01. Nothing in this Agreement or any other Loan Document will affect the right of any party hereto to serve process in any other manner permitted by applicable Requirements of Law.

SECTION 11.10.    Waiver of Jury Trial.    Each Loan Party hereby waives, to the fullest extent permitted by applicable Requirements of Law, any right it may have to a trial by jury in any legal proceeding directly or indirectly arising out of or relating to this Agreement, any other Loan Document or the transactions contemplated hereby (whether based on contract, tort or any other theory). Each party hereto (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties hereto have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section.

SECTION 11.11.    Headings.    Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 11.12.    Treatment of Certain Information; Confidentiality.    Each of the Administrative Agents, the Lenders and the Issuing Bank agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates' respective partners, directors, officers, employees, agents, advisors and other representatives (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable Requirements of Law or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 11.10, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative

150

transaction relating to the Borrowers and their obligations or (iii) any rating agency for the purpose of obtaining a credit rating applicable to any Lender, (g) with the consent of the Borrowers or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agents, any Lender, the Issuing Bank or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrowers. For purposes of this Section, "Information" means all information received from the Borrowers or any of their Subsidiaries relating to the Borrowers or any of their Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the Issuing Bank on a nonconfidential basis prior to disclosure by Borrower or any of its Subsidiaries; provided that, in the case of information received from Borrower or any of its Subsidiaries after the date hereof, such information is clearly identified at the time of delivery as confidential. Any person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Information as such person would accord to its own confidential information.

SECTION 11.13.    USA PATRIOT Act Notice.    Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agents (for itself and not on behalf of any Lender) hereby notifies the Borrowers that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name, address and tax identification number of the Borrowers and other information regarding the Borrowers that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrowers in accordance with the Act. This notice is given in accordance with the requirements of the Act and is effective as to the Lenders and the Administrative Agents.

SECTION 11.14.    Interest Rate Limitation.    Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable Requirements of Law (collectively, the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable Requirements of Law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

SECTION 11.15.    Lender Addendum.    Each Lender to become a party to this Agreement on the date hereof shall do so by delivering to the applicable Administrative Agent a Lender Addendum duly executed by such Lender, the Borrowers and the such Administrative Agent.

SECTION 11.16.    Obligations Absolute.    To the fullest extent permitted by applicable Requirements of Law, all obligations of the Loan Parties hereunder shall be absolute and unconditional irrespective of:

        (a)   any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any Loan Party;

        (b)   any lack of validity or enforceability of any Loan Document or any other agreement or instrument relating thereto against any Loan Party;

151

        (c)   any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from any Loan Document or any other agreement or instrument relating thereto;

        (d)   any exchange, release or non-perfection of any other Collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Obligations;

        (e)   any exercise or non-exercise, or any waiver of any right, remedy, power or privilege under or in respect hereof or any Loan Document; or

        (f)    any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Loan Parties.

SECTION 11.17.    Dollar Equivalent Calculations.    For purposes of this Agreement, the Dollar Equivalent of each Loan that is an Approved Currency Revolving Loan and the Dollar Equivalent of the stated amount of each Letter of Credit that is an Approved Currency Letter of Credit shall be calculated on the date when any such Loan is made, such Letter of Credit is issued, on the first Business Day of each month and at such other times as designated by the applicable Administrative Agent. Such Dollar Equivalent shall remain in effect until the same is recalculated by such Administrative Agent as provided above and notice of such recalculation is received by the Borrowers, it being understood that until such notice of such recalculation is received, the Dollar Equivalent shall be that Dollar Equivalent as last reported to the Borrowers by such Administrative Agent. Such Administrative Agent shall promptly notify the Borrowers and the Lenders of each such determination of the Dollar Equivalent.

SECTION 11.18.    Judgment Currency.    

        (a)   The Borrowers' obligation hereunder and under the other Loan Documents to make payments in the applicable Approved Currency (pursuant to such obligation, the "Obligation Currency") shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency, except to the extent that such tender or recovery results in the effective receipt by the applicable Administrative Agent or the respective Lender of the full amount of the Obligation Currency expressed to be payable to such Administrative Agent or such Lender under this Agreement or the other Loan Documents. If, for the purpose of obtaining or enforcing judgment against the Borrowers in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than the Obligation Currency (such other currency being hereinafter referred to as the "Judgment Currency") an amount due in the Obligation Currency, the conversion shall be made at the Dollar Equivalent, and in the case of other currencies, the rate of exchange (as quoted by such Administrative Agent or if such Administrative Agent does not quote a rate of exchange on such currency, by a known dealer in such currency designated by such Administrative Agent) determined, in each case, as of the Business Day immediately preceding the day on which the judgment is given (such Business Day being hereinafter referred to as the "Judgment Currency Conversion Date").

        (b)   If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Borrowers covenant and agree to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date.

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        (c)   For purposes of determining the Dollar Equivalent or any other rate of exchange for this Section 11.18, such amounts shall include any premium and costs payable in connection with the purchase of the Obligation Currency.

SECTION 11.19.    Special Provisions Relating to Currencies Other Than Dollars.    

        (a)   All funds to be made available to the applicable Administrative Agent pursuant to this Agreement in Canadian dollars shall be made available to such Administrative Agent in immediately available, freely transferable, cleared funds to such account with such bank in such principal financial center in Canada as such Administrative Agent shall from time to time nominate for this purpose.

        (b)   In relation to the payment of any amount denominated in Canadian dollars, no Administrative Agent shall be liable to the Borrowers or any of the Lenders for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by such Administrative Agent if such Administrative Agent shall have taken all relevant and necessary steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds (in Canadian dollars) to the account with the bank in the principal financial center in Canada which the Borrowers or, as the case may be, any Lender shall have specified for such purpose. In this Section 11.19(b), "all relevant steps" means all such steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as such Administrative Agent may from time to time determine for the purpose of clearing or settling payments of Canadian dollars. Furthermore, and without limiting the foregoing, such Administrative Agent shall not be liable to the Borrowers or any of the Lenders with respect to the foregoing matters in the absence of its gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision or pursuant to a binding arbitration award or as otherwise agreed in writing by the affected parties).

SECTION 11.20.    Intercreditor Agreement.    Notwithstanding anything herein to the contrary, each Lender acknowledges that the Lien and security interest granted to the Collateral Agents pursuant to the Security Documents and the exercise of any right or remedy by such Collateral Agents thereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and the Security Documents, the terms of the Intercreditor Agreement shall govern and control.

[Signature Pages Follow]

153

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

US BORROWERS:
LINENS 'N THINGS, INC.

By:

Name:

Title:

LINENS 'N THINGS CENTER, INC.

By:

Name:

Title:

CANADIAN BORROWER:
LINENS 'N THINGS CANADA CORP.

By:

Name:

Title:

HOLDINGS:
LINENS HOLDING CO.

By:

Name:

Title:

SUBSIDIARY GUARANTORS:

BLOOMINGTON MN, L.T., INC.

By:

Name:

Title:

S-1

LNT, INC.

By:

Name:

Title:

LNT SERVICES, INC.

By:

Name:

Title:

LNT WEST, INC.

By:

Name:

Title:

VENDOR FINANCE LLC

By:

Name:

Title:

LNT LEASING II LLC

By:

Name:

Title:

LNT VIRGINIA LLC

By:

Name:

Title:

S-2

LNT MERCHANDISING COMPANY, LLC

By:

Name:

Title:

LNT LEASING III LLC

By:

Name:

Title:

CITIDEL LNT LLC

By:

Name:

Title:

LINENS 'N THINGS INVESTMENT
CANADA II COMPANY

By:

Name:

Title:

LINENS 'N THINGS INVESTMENT
CANADA I COMPANY

By:

Name:

Title:

LINENS 'N THINGS
CANADA LIMITED PARTNERSHIP

By:

Name:

Title:

S-3

UBS AG, STAMFORD BRANCH
as US Co-Collateral Agent, US Administrative
Agent and Issuing Bank

By:

Name:

Title:

By:

Name:

Title:

WACHOVIA BANK, NATIONAL ASSOCIATION
as US Co-Collateral Agent, Co-Documentation
Agent and Issuing Bank

By:

Name:

Title:

By:

Name:

Title:

WACHOVIA CAPITAL FINANCE CORPORATION (CANADA)
as Canadian Administrative Agent, Canadian Co-Collateral Agent
and Canadian Swingline Lender

By:

Name:

Title:

By:

Name:

Title:

S-4

UBS AG CANADA BRANCH
as Canadian Co-Collateral Agent

By:

Name:

Title:

By:

Name:

Title:

UBS AG LOAN FINANCE LLC,
as US Swingline Lender

By:

Name:

Title:

By:

Name:

Title:

S-5

Annex I

Applicable Margin

	Revolving Loans
Average Excess Availability for Preceding Fiscal Quarter	Eurodollar/ Acceptance Fees		ABR/Canadian Prime
Level I: <$125 million	1.75	%	0.25	%
Level II: ³ $125 million and < $350 million	1.50	%	0.00	%
Level III: ³ $350 million and < $475 million	1.25	%	0.00	%
Level IV: ³ $475 million	1.00	%	0.00	%

Applicable Fee

	Fee
Level I	0.375	%
Level II	0.375	%
Level III	0.375	%
Level IV	0.250	%

        Each change in the Applicable Margin or Applicable Fee resulting from a change in the Excess Availability shall be effective with respect to all Loans and Letters of Credit outstanding on and after the date of delivery to the Administrative Agents of the financial statements and certificates required by Section 5.01(a) or (b) and Section 5.01(d) (as well as the Borrowing Base Certificate for the last month of such fiscal quarter), respectively, indicating such change until the date immediately preceding the next date of delivery of such financial statements and certificates (and related Borrowing Base Certificate) indicating another such change. Notwithstanding the foregoing, the Average Excess Availability shall be deemed to be in Level II (i) from the Closing Date to the date of delivery to the Administrative Agents of the financial statements and certificates required by Section 5.01(a) or (b) and Section 5.01(d) for the fiscal period ended at least six months after the Closing Date, (ii) at any time during which the Borrowers have failed to deliver the financial statements and certificates required by Section 5.01(a) or (b) and Section 5.01(d), respectively, and (iii) at any time during the existence of an Event of Default.

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TABLE OF CONTENTS
CREDIT AGREEMENT
ARTICLE I. DEFINITIONS
ARTICLE II. THE CREDITS
ARTICLE III. REPRESENTATIONS AND WARRANTIES
ARTICLE IV. CONDITIONS TO CREDIT EXTENSIONS
ARTICLE V. AFFIRMATIVE COVENANTS
ARTICLE VI. NEGATIVE COVENANTS
ARTICLE VII. GUARANTEE
ARTICLE VIII. EVENTS OF DEFAULT
ARTICLE IX. COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS
ARTICLE X. THE ADMINISTRATIVE AGENTS AND THE COLLATERAL AGENTS
ARTICLE XI. MISCELLANEOUS

EX-10.7

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Exhibit 10.7

EXECUTION COPY

EMPLOYMENT AGREEMENT

        THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into effective as of February 14, 2006 (the "Effective Date"), by and between Linens 'n Things, Inc., a Delaware corporation (the "Company"), Linens Holding Co., a Delaware corporation ("Holding"), and Robert J. DiNicola (the "Executive").

        WHEREAS, the Company is a wholly owned subsidiary of Holding;

        WHEREAS, as of the Effective Date, the Company has consummated the merger of Laundry Merger Sub Co., a Delaware corporation ("Merger Sub"), with and into the Company (the "Acquisition") pursuant to that certain Agreement and Plan of Merger dated as of November 8, 2005 (the "Merger Agreement"), by and among Holding, Merger Sub and the Company; and

        WHEREAS, the Company desires to employ the Executive on the terms and subject to the conditions set forth herein and the Executive has agreed to be so employed.

        NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

        1.     Employment of Executive; Duties.

        1.1   Title. During the Employment Period (as defined in Section 2 hereof), the Executive shall serve as executive Chairman of the Board and Chief Executive Officer of the Company. The Executive shall have the normal duties, responsibilities and authority commensurate with such positions.

        1.2   Duties.

        (a)   During the Employment Period, the Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities of the Executive's position and shall render such services on the terms set forth herein. In addition, the Executive shall have such other executive and managerial powers and duties as may reasonably be assigned to the Executive by the Board of Directors of the Company (the "Board"), commensurate with the Executive serving as executive Chairman of the Board and Chief Executive Officer. The Company may adjust the duties and responsibilities of Executive as executive Chairman of the Board and Chief Executive Officer, notwithstanding the specific title set forth in Section 1.1 hereof, based upon the Company's needs from time to time. Except for sick leave, reasonable vacations and excused leaves of absence, the Executive shall, throughout the Employment Period, devote the Executive's working time, attention, knowledge and skills, to such extent as may be necessary and appropriate as determined by the Executive in his business judgment and in consultation with the Board, faithfully, and to the best of the Executive's ability, to the duties and responsibilities of the Executive's positions in furtherance of the business affairs and activities of the Company and its subsidiaries and Affiliates (as defined in Section 5.4(a) hereof).

        (b)   The Company recognizes that the Executive has entered into an employment agreement with GNC Corporation ("GNC"), pursuant to which the Executive is serving as executive Chairman of the Board of GNC, and has entered into a consulting agreement with Apollo Management V, L.P. ("Apollo"), pursuant to which the Executive is providing consulting services to Apollo and certain of its affiliates. The Executive agrees to devote sufficient business time, outside of the time required to fulfill the Executive's obligations under the employment agreement with GNC (or to serve as a member of the board of directors of GNC) and the Executive's obligations under the consulting agreement with Apollo, to enable the Executive to fulfill the duties and responsibilities to the Company set forth in Section 1.2(a) hereof.

        (c)   During the Employment Period, the Executive shall spend sufficient time at the Company's corporate headquarters in Clifton, New Jersey as the Executive and the Board shall deem necessary to discharge the Executive's responsibilities hereunder, and the Company shall provide the Executive with an appropriate office and secretarial support at such corporate headquarters.

        (d)   The Executive shall at all times be subject to, comply with, observe and carry out (a) the Company's rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time and (b) such rules, regulations, policies, codes of ethics and/or conduct, directions and restrictions as the Board may from time to time reasonably establish or approve for senior executive officers of the Company.

        2.     Term of Employment.

        2.1   Employment Period. The employment of the Executive hereunder shall continue until December 31, 2008 (the "Initial Employment Period"), unless terminated earlier in accordance with the provisions of Section 4 of this Agreement.

        2.2   Extension. Unless terminated earlier in accordance with the provisions of Section 4 of this Agreement, the employment of the Executive hereunder shall continue after the end of the Initial Employment Period for additional one (1)-year periods (each an "Extension Period" and, together with the Initial Employment Period, the "Employment Period"), unless the Company or the Executive notifies the other in writing not less than one (1) year prior to the end of the Initial Employment Period, or the end of the applicable Extension Period, of its or the Executive's election, in its or the Executive's sole discretion, not to extend the Employment Period.

        3.     Compensation and General Benefits.

        3.1   Base Salary.

        (a)   During the Employment Period, the Company agrees to pay to the Executive an annual base salary in an amount equal to $1,350,000 (such base salary, as may be adjusted from time to time pursuant to Section 3.1(b), is referred to herein as the "Base Salary"). The Executive's Base Salary, less amounts required to be withheld under applicable law, shall be payable in equal installments in accordance with the Company's normal payroll practices and procedures in effect from time to time for the payment of salaries to officers of the Company, but in no event less frequently than monthly.

        (b)   The Board or the Compensation Committee established by the Board (the "Compensation Committee") shall review the Executive's performance on an annual basis and, based on such review, may change the Base Salary, as it, acting in its sole discretion, shall determine to be reasonable and appropriate.

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        3.2   Bonus. With respect to the 2006 calendar year and with respect to each calendar year that commences during the Employment Period, the Executive shall be eligible to receive from the Company an annual performance bonus (the "Annual Bonus") based upon the Company's attainment of annual goals established by the Board or the Compensation Committee, which are based on the Company's sales, earnings before interest, taxes, depreciation and amortization ("EBITDA") and cash generation goals. The Executive's target Annual Bonus shall be one hundred percent (100%) of the Executive's Base Salary if the Company exceeds the sales, EBITDA and cash generation goals based on levels to be determined by the Board or the Compensation Committee for the applicable year. Any Annual Bonus earned shall be payable in full as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures. Except as otherwise expressly provided in Section 4 hereof, any Annual Bonus (or portion thereof) payable under this Section 3.2 shall not be earned and payable unless the Executive is employed by the Company on the last day of the period to which such Annual Bonus relates.

        3.3   Expenses.

        (a)   During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this Section 3.3 or elsewhere herein, the Executive shall be entitled to receive reimbursement from the Company for all reasonable and necessary expenses incurred by the Executive in performing the Executive's duties hereunder on behalf of the Company, subject to, and consistent with, the Company's policies for expense payment and reimbursement, in effect from time to time, including, but not limited to, all reasonable expenses incurred in connection with hotels, meals, transportation and the like while in Clifton, New Jersey and first-class air travel to and from the greater New York City-Southern New Jersey area (the "New York Area") for the Executive and his spouse as reasonably necessary during the Employment Period.

        (b)   If the Executive elects to relocate his primary residence to the New York metropolitan area, the Company shall pay for all expenses incurred in connection with the sale of the Executive's home in Dallas, Texas and the purchase of a home in the New York City Area (excluding the purchase price of the New York Area home, but including closing costs on the sale of the Dallas home and purchase of the New York Area home) and relocation expenses, including, without limitation, moving, packing, storage of household goods and the like to the New York Area, and including a tax gross-up for such expenses to the extent they are taxable income. The Executive shall take all reasonable steps necessary to seek reimbursement from Zale Corporation of any of the relocation expenses Zale Corporation may be obligated to pay. In the event Zale Corporation reimburses the Executive for any portion of these relocation expenses, such payment shall be an offset against the obligations of the Company under this Agreement.

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        3.4   Fringe Benefits. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this Section 3 or elsewhere herein, the Executive shall be entitled to participate in, and to receive benefits under, any benefit plans, arrangements or policies made available by the Company to its employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of each such plan, arrangement or policy; provided, however, that the Executive shall not be entitled to health insurance, prescription drug benefits or dental insurance provided by the Company except to the extent such insurance or benefits are not covered as benefits to the Executive pursuant to the Executive's employment agreement with Zale Corporation dated as of August 1, 2001. Notwithstanding the foregoing, on each business day during the Employment Period when the Executive is in the New York Area, the Executive shall be entitled to executive car service, at the Company's expense, for any transportation between the Company's corporate headquarters in Clifton, New Jersey and the Executive's permanent or temporary residence in the New York Area or a New York Area airport, provided that to the extent the Executive does not utilize such benefit, the Executive shall be entitled to cash compensation in an amount equivalent to the value of the benefit not used.

        3.5   Employee Stock Options.

        (a)   On or shortly after the Effective Date, Holding shall have adopted a stock option plan, in the form attached hereto as Exhibit A and incorporated herein by reference (the "Plan"), for the grant of stock options to employees or directors of Holding or of any subsidiary of Holding to purchase shares of Common Stock, $0.01 par value per share, of Holding (the "Common Stock").

        (b)   On or shortly after the Effective Date, pursuant to the Plan, the Executive shall be granted nonqualified options to purchase a total of 281,946 shares of Common Stock on the terms set forth in the Grant Letter attached hereto as Exhibit B and incorporated herein by reference (the "Grant Letter"). Holding and the Executive acknowledge and agree that the grant of the Performance Option (as defined in the Grant Letter) is subject to a review of the financial accounting impact thereof on Holding. Holding and the Executive agree to cooperate in good faith with respect to any modification of the structure of the Performance Option to the extent necessary to avoid unfavorable financial accounting treatment. If Holding and the Executive are not able to mutually agree on a modification of the Performance Option or if Holding reasonably determines that it is not feasible to grant the Performance Option or any modification thereof because of the unfavorable accounting treatment that would likely result therefrom, then, in lieu of the Performance Option (or any modification thereof), the number of shares of Common Stock subject to the Time Option (as defined in the Grant Letter) shall be increased to 281,946 shares.

        (c)   In the event of (i) the Executive's death or "Total Disability" (as defined in Section 4.2(b) hereof) or (ii) a Change of Control (as defined in Exhibit C attached hereto), all of the Executive's then outstanding stock options granted pursuant to the Plan shall vest in full and become immediately exercisable; provided, however, that the Performance Option, if granted, shall not vest solely because of a Change of Control.

        (d)   During the Employment Period and subject to the approval of the administrator of the Plan, the Executive shall be eligible to participate in and be granted future awards under the Plan.

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        3.6   Stock Investment.

        (a)   On the Effective Date, Holding agrees to offer and sell to Executive, and the Executive agrees to purchase from Holding, 40,000 shares of Common Stock for aggregate cash consideration of $2,000,000 (the "Stock Purchase"). The Stock Purchase shall otherwise be on the terms set forth in a separate Subscription Agreement entered into by and between the Company and the Executive in the form attached hereto as Exhibit D and incorporated herein by reference.

        (b)   Upon completion of the Stock Purchase, the Executive shall be granted an additional nonqualified stock option to purchase 40,000 shares of Common Stock on the terms set forth in the Grant Letter.

        3.7   Indemnification. On the Effective Date, Holding and Executive shall enter into an Indemnification Agreement in the form attached hereto as Exhibit E and incorporated herein by reference.

        4.     Termination.

        4.1   General. The employment of the Executive hereunder (and the Employment Period) shall terminate as provided in Section 2 hereof, unless earlier terminated in accordance with the provisions of this Section 4.

        4.2   Death or Disability of the Executive.

        (a)   The employment of the Executive hereunder (and the Employment Period) shall terminate upon (i) the death of the Executive and (ii) at the option of the Company, upon not less than fifteen (15) days' prior written notice to the Executive or the Executive's personal representative or guardian, if the Executive suffers a "Total Disability" (as defined in Section 4.2(b) hereof). Upon termination for death or Total Disability, (A) the Company shall pay to the Executive, guardian or personal representative, as the case may be, the Executive's current Base Salary for the remainder of the Employment Period in effect immediately prior to the date of termination and (B) the Company shall also pay to the Executive, guardian or personal representative, as the case may be, a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had the Executive worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. Any bonus shall be payable as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures

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        (b)   For purposes of this Agreement, "Total Disability" shall mean (i) if the Executive is subject to a legal decree of incompetency (the date of such decree being deemed the date on which such disability occurred), (ii) the written determination by a physician selected by the Company (which expense shall be paid by the Company) that, because of a medically determinable disease, injury or other physical or mental disability, the Executive is unable substantially to perform, with or without reasonable accommodation, the material duties of the Executive required hereby, and that such disability has lasted for ninety (90) consecutive days or any one hundred twenty (120) days during the immediately preceding twelve (12)-month period or is, as of the date of determination, reasonably expected to last six (6) months or longer after the date of determination, in each case based upon medically available reliable information or (iii) Executive's qualifying for benefits under the Company's long-term disability coverage, if any. In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive hereby consents to (x) any examinations that the Board or the Compensation Committee determines are relevant to a determination of whether the Executive is mentally and/or physically disabled or are required by the Company physician, (y) furnish such medical information as may be reasonably requested and (z) waive any applicable physician patient privilege that may arise because of such examination. All expenses incurred by the Executive under this subsection shall be paid by the Company.

        (c)   With respect to outstanding stock options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.2, (i) as provided in Section 3.5(c), all of the Executive's stock options granted pursuant to the Plan shall vest in full and become immediately exercisable and (ii) any such vested and exercisable options shall expire immediately following the expiration of the one hundred eighty (180)-day period following such date of termination.

        4.3   Termination by the Company Without Cause or Resignation by the Executive For Good Reason.

        (a)   The Company may terminate the Executive's employment without "Cause" (as defined in Section 4.3(g)), and thereby terminate the Executive's employment (and the Employment Period) under this Agreement at any time with no requirement for notice to the Executive.

        (b)   The Executive may resign, and thereby terminate the Executive's employment (and the Employment Period), at any time for "Good Reason" (as defined in Section 4.3(f) hereof), upon not less than sixty (60) days' prior written notice to the Company specifying in reasonable detail the reason therefore; provided, however, that the Company shall have a reasonable opportunity to cure any such Good Reason (to the extent possible) within thirty (30) days after the Company's receipt of such notice; and provided further that, if the Company is not seeking to cure, the Company shall not be obligated to allow the Executive to continue working during such period and may, in its sole discretion, accelerate such termination of employment (and the Employment Period) to any date during such period.

        (i)    Executive may not terminate employment under this Agreement for Good Reason regarding any of the Company's acts or omissions of which Executive had actual notice for sixty (60) days or more prior to giving notice of termination for Good Reason.

        (ii)   A determination of whether the Executive legitimately has Good Reason for termination of the Executive's employment under this Agreement, and of whether the Company has effectively cured and thus eliminated the grounds for such Good Reason, shall be made only by the members of the Board other than the Executive (the "Disinterested Directors"), within the sole judgment and discretion of the Disinterested Directors, as determined by majority vote thereof.

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        (c)   In the event the Executive's employment is terminated pursuant to this Section 4.3, then, subject to Section 4.3(d) hereof, the following provisions shall apply:

        (i)    The Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the year of termination) had the Executive remained in the employ of the Company until the expiration of the Employment Period in effect immediately prior to the date of termination, with all such amounts payable in accordance with the Company's normal payroll practices and procedures in the same manner and at the same time as though the Executive remained employed by the Company.

        (ii)   If such termination occurs upon or within six (6) months following a Change of Control (as defined in Exhibit C attached hereto), the Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the year of termination) for the greater of (A) the period set forth in Section 4.3(c)(i) hereof or (B) a two (2)-year period following such date of termination, with all such amounts payable in accordance with the Company's normal payroll practices and procedures in the same manner and at the same time as though the Executive remained employed by the Company.

        (iii)  In the event the Executive's employment is terminated pursuant to this Section 4.3 without Cause, and if the Company has previously effected reductions in the Executive's Base Salary and the base salary of all executives at the same level as the Executive, which reductions were substantially similar, then the Base Salary rate for purposes of Section 4.3(c)(i) or (ii) hereof shall be the Base Salary rate in effect immediately prior to such reductions.

        (iv)  The Company shall pay to the Executive a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had the Executive worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. The bonus shall be payable as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures.

        (v)   With respect to outstanding options and other equity-based awards granted pursuant to the Plan held by the Executive as of the date of termination pursuant to this Section 4.3, (A) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (B) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the one hundred eighty (180)-day period following such date of termination.

        (vi)  The Executive shall continue to be entitled to the perquisites available to the Executive immediately preceding the Executive's date of termination as provided in Section 3.4, in each case (A) through the expiration of the Employment Period in effect immediately prior to the date of termination or (B) in the event that Executive's Base Salary is being paid pursuant to Section 4.3(c)(ii), for the period set forth therein.

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        (d)   As a condition precedent to the Executive's right to receive the benefits set forth in Section 4.3(c) hereof, the Executive agrees to execute a release of the Company and its respective Affiliates, officers, directors, stockholders, employees, agents, insurers, representatives and successors from and against any and all claims that the Executive may have against any such Person (as defined in Section 5.4(f) hereof) relating to the Executive's employment by the Company and the termination thereof, such release to be in form and substance reasonably satisfactory to the Company.

        (e)   Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment, vesting, distribution or transfer by the Company or any successor, or any Affiliate of the foregoing or by any other Person or that any other event occurring with respect to the Executive and the Company for the Executive's benefit, whether paid or payable or distributed or distributable under the terms of this Agreement or otherwise (including under any employee benefit plan) (a "Payment") would be subject to or result in the imposition of the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (and any regulations or guidance promulgated or issued thereunder, any successor provision, and any similar provision of state or local income tax law) (collectively, the "Excise Tax"), then the amount of the Payment shall be reduced to the highest amount that may be paid by the Company or other entity without subjecting any such Payment to the Excise Tax (the "Payment Reduction"). The Executive shall have the right to designate those payments or benefits that shall be reduced or eliminated under the Payment Reduction to avoid the imposition of the Excise Tax, subject to the confirmation of the Accounting Firm (as defined herein) with respect to the intended effect thereof. Notwithstanding the foregoing, the Payment Reduction shall not apply if the Executive would, on a net after-tax basis, receive less compensation than if the Payment were not so reduced.

        (i)    Subject to the provisions of Section 4.3(e)(ii), all determinations required to be made under this Section 4.3(e), including whether and when a Payment is subject to Section 4999 and the assumptions to be utilized in arriving at such determination and in determining an appropriate Payment Reduction, shall be made by KPMG LLP, or any other nationally recognized accounting firm that shall be the Company's outside auditors at the time of such determination (the "Accounting Firm"), which Accounting Firm shall provide detailed supporting calculations to the Executive and the Company within fifteen (15) business days of the receipt of notice from the Company or the Executive that there will be a Payment that the Person giving notice believes may be subject to the Excise Tax. All fees and expenses of the Accounting Firm shall be borne by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive in determining whether a Payment Reduction is required and the amount thereof (subject to Sections 4.3(e)(ii) and (iii)), in the absence of material mathematical or legal error.

        (ii)   As a result of uncertainty in the application of Section 4999 that may exist at the time of the initial determination by the Accounting Firm, it may be possible that in making the calculations required to be made hereunder, the Accounting Firm shall determine that a Payment Reduction need not be made that properly should be made (an "Overpayment") or that a Payment Reduction not properly needed to be made should be made (an "Underpayment"). If, within seventy-five (75) days after the Accounting Firm's initial determination under Section 4.3(e)(i), the Accounting Firm shall determine that an Overpayment was made, any such Overpayment shall be treated for all purposes, to the extent practicable and subject to applicable law, as a loan to the Executive with interest at the applicable Federal rate provided for in Section 1274(d) of the Code and shall be

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repaid by the Executive to the Company within thirty-five (35) days after the Executive receives notice of the Accounting Firm's determination; provided, however, that the amount to be repaid by the Executive to the Company either as a loan or otherwise as a lump sum payment (where a loan is not practicable or permitted by law) shall be reduced to the extent that any portion of the Overpayment to be repaid will not be offset by a corresponding reduction in tax by reason of such repayment of the Overpayment. If the Accounting Firm shall determine that an Underpayment was made, any such Underpayment shall be due and payable by the Company to the Executive within thirty-five (35) days after the Company receives notice of the Accounting Firm's determination.

        (iii)  The Executive shall give written notice to the Company of any claim by the Internal Revenue Service that, if successful, would require the payment by the Executive of an Excise Tax, such notice to be provided within fifteen (15) days after the Executive shall have received written notice of such claim. The Executive shall cooperate with the Company in determining whether to contest or pay such claim and shall not pay such claim without the written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.

        (iv)  This Section 4.3(e) shall remain in full force and effect following the termination of the Executive's employment for any reason until the expiration of the statute of limitations on the assessment of taxes applicable to the Executive for all periods in which the Executive may incur a liability for taxes (including Excise Taxes), interest or penalties arising out of the operation of this Agreement.

        (f)    For purposes of this Agreement, the Executive would be entitled to terminate the Executive's employment for "Good Reason" if without the Executive's prior written consent:

        (i)    the Company fails to comply with any material obligation imposed by this Agreement;

        (ii)   the Company changes the Executive's position from that of Chairman of the Board and Chief Executive Officer; provided, however, that a change in the Executive's duties or responsibilities without a change in the Executive's position as Chairman of the Board and Chief Executive Officer shall not constitute Good Reason; and, provided further, that if Executive ceases to be Chief Executive Officer, but remains Chairman of the Board, such change shall not constitute Good Reason;

        (iii)  the Company effects a reduction in the Executive's Base Salary, unless all executives at the same level as the Executive receive a substantially similar reduction in base salary; or

        (iv)  The Company requires the Executive to relocate his residence.

        (g)   For purposes of this Agreement, "Cause" means the occurrence of any one or more of the following events, and the Company shall have the sole discretion to determine the existence of Cause:

        (i)    a failure by the Executive to comply with any obligation under this Agreement;

        (ii)   the Executive's being indicted for (A) any felony or (B) any misdemeanor that causes or is likely to cause harm or embarrassment to the Company or any of its Affiliates, in the reasonable judgment of the Board;

        (iii)  theft, embezzlement or fraud by the Executive in connection with the performance of the Executive's duties hereunder;

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        (iv)  the Executive's engaging in any activity that gives rise to a material conflict with the Company or any of its Affiliates;

        (v)   the misappropriation by the Executive of any material business opportunity of the Company or any of its Affiliates;

        (vi)  any failure to comply with, observe or carry out the Company's rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time, including (without limitation) those regarding conflicts, potential conflicts of interest or the appearance of a conflict of interest

        (vii) any failure to comply with, observe or carry out the rules, regulations, policies, directions, codes of ethics and/or conduct and restrictions established or approved by the Board from time to time for senior executive officers of the Company, including (without limitation) those regarding conflicts, potential conflicts of interest or the appearance of a conflict of interest;

        (viii) substance abuse or use of illegal drugs that, in the reasonable judgment of the Board, (A) impairs the Executive's performance of the Executive's duties hereunder or (B) causes or is likely to cause harm or embarrassment to the Company or any of its Affiliates; and

        (ix)  engagement in conduct that Executive knows or should know is injurious to the Company or any of its Affiliates.

        4.4   Termination For Cause, Voluntary Resignation Other Than For Good Reason or Election Not to Extend the Employment Period.

        (a)   (i) The Company may, upon action of the Board, terminate the employment of the Executive (and the Employment Period) at any time for "Cause," (ii) the Executive may voluntarily resign other than for Good Reason and thereby terminate the Executive's employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30)-days' prior written notice or (iii) either the Company or the Executive may elect not to extend or further extend the Employment Period pursuant to Section 2.2 hereof.

        (b)   The following provisions shall apply upon termination by the Company for Cause, by the Executive as the result of resignation for other than for Good Reason, or by the Company or the Executive at the end of the Employment Period as the result of an election not to extend or further extend the Employment Period:

        (i)    The Executive shall be entitled to receive all amounts of earned but unpaid Base Salary and benefits accrued through the date of such termination. Except as provided below, all other rights of the Executive (and all obligations of the Company) hereunder shall terminate as of the date of such termination.

        (ii)   With respect to outstanding options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.4, (A) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited, and (B) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.

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        (c)   Before the Company may terminate the Executive for Cause pursuant to Section 4.4(a)(i), the Disinterested Directors shall deliver to the Executive a written notice of the Company's intent to terminate the Executive for Cause, and the Executive shall have been given a reasonable opportunity to cure any such acts or omissions (which are susceptible of cure as reasonably determined by the Disinterested Directors by majority vote thereof) within thirty (30) days after the Executive's receipt of such notice.

        4.5   Resignation from Officer Positions. Upon the termination of the Executive's employment for any reason (unless otherwise agreed in writing by the Company and the Executive), the Executive will be deemed to have resigned, without any further action by the Executive, from any and all officer, director and/or director positions that the Executive, immediately prior to such termination, (a) held with the Company or any of its Affiliates and (b) held with any other entities at the direction of, or as a result of the Executive's affiliation with, the Company or any of its Affiliates. If for any reason this Section 4.5 is deemed to be insufficient to effectuate such resignations, then Executive will, upon the Company's request, execute any documents or instruments that the Company may deem necessary or desirable to effectuate such resignations. In addition, the Executive hereby designates the Secretary or any Assistant Secretary of the Company and of any Affiliate to execute any such documents or instruments as the Executive's attorney-in-fact to effectuate such resignations if execution by the Secretary or any Assistant Secretary of the Company or Affiliate is deemed by the Company or the Affiliate to be a more expedient means to effectuate such resignation or resignations.

        4.6   Section 409A of the Code. Notwithstanding anything to the contrary in this Agreement, the parties mutually desire to avoid adverse tax consequences associated with the application of Section 409A of the Code to this Agreement and agree to cooperate fully and take appropriate reasonable actions to avoid any such consequences under Section 409A of the Code, including delaying payments and reforming the form of the Agreement if such action would reduce or eliminate taxes and/or interest payable as a result of Section 409A of the Code. In this regard, notwithstanding anything to the contrary in this Section 4, to the extent necessary to comply with Section 409A of the Code, any payment required under this Section 4 shall be deferred for a period of six (6) months, regardless of the circumstances giving rise to or the basis for such payment.

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        5.     Confidentiality, Work Product and Non-Competition and Non-Solicitation.

        5.1   Confidentiality.

        (a)   In connection with the Executive's employment with the Company, the Company promises to provide the Executive with access to "Confidential Information" (as defined in Section 5.4(d) hereof) in support of the Executive's employment duties. The Executive recognizes that the Company's business interests require a confidential relationship between the Company and the Executive and the fullest practical protection and confidential treatment of all Confidential Information. At all times, both during and after the Employment Period, the Executive shall not directly or indirectly: (i) appropriate, download, print, copy, remove, use, disclose, divulge, communicate or otherwise "Misappropriate" (as defined in Section 5.4(e) hereof), any Confidential Information, including, without limitation, originals or copies of any Confidential Information, in any media or format, except for the Company's benefit within the course and scope of the Executive's employment or with the prior written consent of a majority of the Disinterested Directors; or (ii) take or encourage any action that would circumvent, interfere with or otherwise diminish the value or benefit of the Confidential Information to any of the Company Parties (as defined in Section 5.4(b) hereof).

        (b)   All Confidential Information, and all other information and property affecting or relating to the business of the Company Parties within the Executive's possession, custody or control, regardless of form or format, shall remain, at all times, the property of the respective Company Parties, the appropriation, use and/or disclosure of which is governed and restricted by this Agreement.

        (c)   The Executive acknowledges and agrees that:

        (i)    the Executive occupies a unique position within the Company, and the Executive is and will be intimately involved in the development and/or implementation of Confidential Information;

        (ii)   in the event the Executive breaches this Section 5.1 with respect to any Confidential Information, such breach shall be deemed to be a Misappropriation of such Confidential Information; and

        (iii)  any Misappropriation of Confidential Information will result in immediate and irreparable harm to the Company.

        (d)   Upon receipt of any formal or informal request, by legal process or otherwise, seeking the Executive's direct or indirect disclosure or production of any Confidential Information to any Person, the Executive shall promptly and timely notify the Company and provide a description and, if applicable, hand deliver a copy of such request to the Company. The Executive irrevocably nominates and appoints the Company as the Executive's true and lawful attorney-in-fact to act in the Executive's name, place and stead to perform any act that the Executive might perform to defend and protect against any disclosure of Confidential Information.

        (e)   At any time the Company may request, during or after the Employment Period, the Executive to deliver to the Company all originals and copies of Confidential Information and all other information and property affecting or relating to the business of the Company Parties within the Executive's possession, custody or control, regardless of form or format, including, without limitation any Confidential Information produced by the Executive. Both during and after the Employment Period, the Company shall have the right of reasonable access to review, inspect, copy and/or confiscate any Confidential Information within the Executive's possession, custody or control.

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        (f)    Upon termination or expiration of this Agreement, the Executive shall immediately return to the Company all Confidential Information, and all other information and property affecting or relating to the business of the Company Parties, within the Executive's possession, custody or control, regardless of form or format, without the necessity of a prior Company request.

        (g)   During the Employment Period, the Executive represents and agrees that the Executive will not use or disclose any confidential or proprietary information or trade secrets of others, including but not limited to former employers, and that the Executive will not bring onto the premises of the Company or access such confidential or proprietary information or trade secrets of such others, unless consented to in writing by said others, and then only with the prior written authorization of the Company.

        5.2   Work Product/Intellectual Property.

        (a)   Assignment. The Executive hereby assigns to the Company all right, title and interest to all "Work Product" (as defined in Section 5.4(h) hereof) that (i) relates to any of the Company Parties' actual or anticipated business, research and development or existing or future products or services, or (ii) is conceived, reduced to practice, developed or made using any equipment, supplies, facilities, assets, information or resources of any of the Company Parties (including, without limitation, any intellectual property rights).

        (b)   Disclosure. The Executive shall promptly disclose Work Product to the Disinterested Directors and perform all actions reasonably requested by the Company (whether during or after the Employment Period) to establish and confirm the ownership and proprietary interest of any of the Company Parties in any Work Product (including, without limitation, the execution of assignments, consents, powers of attorney, applications and other instruments). The Executive shall not file any patent or copyright applications related to any Work Product except with the written consent of a majority of the Disinterested Directors.

        5.3   Non-Competition and Non-Solicitation.

        (a)   In consideration of the Confidential Information being provided to the Executive as stated in Section 5.1 hereof, and other good and valuable new consideration as stated in this Agreement, including, without limitation, employment and/or continued employment with the Company, and the business relationships, Company goodwill, work experience, client, customer and/or vendor relationships and other fruits of employment that the Executive will have the opportunity to obtain, use and develop under this Agreement, the Executive agrees to the restrictive covenants stated in this Section 5.3.

        (b)   During the Employment Period and until the end of the Restricted Period (as defined in Section 5.4(g) hereof), the Executive agrees that the Executive will not, directly or indirectly, on the Executive's own behalf or on the behalf of any other Person, within the United States of America or in any other country or territory in which the businesses of the Company are conducted:

        (i)    engage in a Competing Business, including, without limitation, by owning, managing, operating, controlling, being employed by, providing services as a consultant or independent contractor to or participating in the ownership, management, operation or control of any Competing Business;

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        (ii)   induce or attempt to induce any customer, vendor, supplier, licensor or other Person in a business relationship with any Company Party, for or with which the Executive or employees working under the Executive's supervision had any direct or indirect responsibility or contact during the Employment Period, (A) to do business with a Competing Business or (B) to cease, restrict, terminate or otherwise reduce business with the Company for the benefit of a Competing Business, regardless of whether the Executive initiates contact; or

        (iii)  (A) solicit, recruit, persuade, influence or induce, or attempt to solicit, recruit, persuade, influence or induce anyone employed or otherwise retained by any of the Company Parties (including any independent contractor or consultant), to cease or leave their employment or contractual or consulting relationship with any Company Party, regardless of whether the Executive initiates contact for such purposes or (B) hire, employ or otherwise attempt to establish, for any Person, any employment, agency, consulting, independent contractor or other business relationship with any Person who is or was employed or otherwise retained by any of the Company Parties (including any independent contractor or consultant).

        (c)   The parties hereto acknowledge and agree that, notwithstanding anything in Section 5.3(b)(i) hereof, (i) the Executive may own or hold, solely as passive investments, securities of Persons engaged in any business that would otherwise be included in Section 5.3(b)(i), as long as with respect to each such investment the securities held by the Executive do not exceed five percent (5%) of the outstanding securities of such Person and such securities are publicly traded and registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) the Executive may serve on the board of directors (or other comparable position) or as an officer of any entity at the request of the Board; provided, however, that in the case of investments otherwise permitted under clause (i) above, the Executive shall not be permitted to, directly or indirectly, participate in, or attempt to influence, the management, direction or policies of (other than through the exercise of any voting rights held by the Executive in connection with such securities), or lend the Executive's name to, any such Person.

        (d)   The Executive acknowledges and agrees that, for purposes of this Section 5.3, indirect acts by the Executive shall include, without limitation, an act by the Executive's spouse, ancestor, lineal descendant, lineal descendant's spouse, sibling or other member of the Executive's immediate family.

        (e)   The Executive acknowledges that (i) the restrictive covenants contained in this Section 5.3 hereof are ancillary to and part of an otherwise enforceable agreement, such being the agreements concerning Confidential Information and other consideration as stated in this Agreement, (ii) at the time that these restrictive covenants are made, the limitations as to time, geographic scope and activity to be restrained, as described herein, are reasonable and do not impose a greater restraint than necessary to protect the good will and other legitimate business interests of the Company, including without limitation, Confidential Information (including trade secrets), client, customer and/or vendor relationships, client and/or customer goodwill and business productivity, (iii) in the event of termination of the Executive's employment, the Executive's experiences and capabilities are such that the Executive can

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obtain gainful employment without violating this Agreement and without the Executive incurring undue hardship, (iv) based on the relevant benefits and other new consideration provided for in this Agreement, including, without limitation, the disclosure and use of Confidential Information, the restrictive covenants of this Section 5.3, as applicable according to their terms, shall remain in full force and effect even in the event of the Executive's involuntary termination from employment, with or without Cause and (v) the Executive has carefully read this Agreement and has given careful consideration to the restraints imposed upon the Executive by this Agreement and consents to the terms of the restrictive covenants in this Section 5.3, with the knowledge that this Agreement may be terminated at any time in accordance with the provisions hereof.

        5.4   Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

        (a)   An "Affiliate" of any specified Person means any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

        (b)   "Company Parties" means the Company, and its direct and indirect parents, subsidiaries and Affiliates, and their successors in interest.

        (c)   "Competing Business" means any business that competes with any of the Company Parties, including, without limitation, any enterprise that engages in, owns or operates businesses that market, sell, distribute, manufacture or otherwise are involved in the home textile, housewares or home accessories industries.

        (d)   Confidential Information.

        (i)    Definition. "Confidential Information" means any and all material, information, ideas, inventions, formulae, patterns, compilations, programs, devices, methods, techniques, processes, know how, plans (marketing, business, strategic, technical or otherwise), arrangements, pricing and other data of or relating to any of the Company Parties (as well as their customers and/or vendors) that is confidential, proprietary or trade secret (A) by its nature, (B) based on how it is treated or designated by a Company Party, (C) because the disclosure of which would have a material adverse effect on the business or planned business of any of the Company Parties and/or (D) as a matter of law.

        (ii)   Exclusions. Confidential Information does not include material, data, and/or information (A) that any Company Party has voluntarily placed in the public domain, (B) that has been lawfully and independently developed and publicly disclosed by third parties, (C) that constitutes the general non-specialized knowledge and skills gained by the Executive during the Employment Period or (D) that otherwise enters the public domain through lawful means; provided, however, that the unauthorized appropriation, use or disclosure of Confidential Information by the Executive, directly or indirectly, shall not affect the protection and relief afforded by this Agreement regarding such information.

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        (iii)  Inclusions. Confidential Information includes, without limitation, the following information (including without limitation, compilations or collections of information) relating or belonging to any Company Party (as well as their clients, customers and/or vendors) and created, prepared, accessed, used or reviewed by the Executive during or after the Employment Period: (1) product and manufacturing information, such as ingredients, combinations of ingredients and manufacturing processes; (2) scientific and technical information, such as research and development, tests and test results, formulae and formulations, studies and analysis; (3) financial and cost information, such as operating and production costs, costs of goods sold, costs of supplies and manufacturing materials, non-public financial statements and reports, profit and loss information, margin information and financial performance information; (4) customer related information, such as customer related contracts, engagement and scope of work letters, proposals and presentations, customer-related contacts, lists, identities and prospects, practices, plans, histories, requirements and needs, price information and formulae and information concerning client or customer products, services, businesses or equipment specifications; (5) vendor and supplier related information, such as the identities, practices, history or services of any vendors or suppliers and vendor or supplier contacts; (6) sales, marketing and price information, such as marketing and sales programs and related data, sales and marketing strategies and plans, sales and marketing procedures and processes, pricing methods, practices and techniques and pricing schedules and lists; (7) database, software and other computer related information, such as computer programs, data, compilations of information and records, software and computer files, presentation software and computer-stored or backed-up information including, but not limited to, e-mails, databases, word processed documents, spreadsheets, notes, schedules, task lists, images and video; (8) employee-related information, such as lists or directories identifying employees, representatives and contractors, and information regarding the competencies (knowledge, skill, experience), compensation and needs of employees, representatives and contractors and training methods; and (9) business- and operation-related information, such as operating methods, procedures, techniques, practices and processes, information about acquisitions, corporate or business opportunities, information about partners and potential investors, strategies, projections and related documents, contracts and licenses and business records, files, equipment, notebooks, documents, memoranda, reports, notes, sample books, correspondence, lists and other written and graphic business records.

        (e)   "Misappropriate", or any form thereof, means:

        (i)    the acquisition of any Confidential Information by a Person who knows or has reason to know that the Confidential Information was acquired by theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means (each, an "Improper Means"); or

        (ii)   the disclosure or use of any Confidential Information without the express consent of the Company by a Person who (A) used Improper Means to acquire knowledge of the Confidential Information (B) at the time of disclosure or use, knew or had reason to know that his or her knowledge of the Confidential Information was (x) derived from or through a Person who had utilized Improper Means to acquire it, (y) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use or (z) derived from or through a Person who owed a duty to the Company to maintain its secrecy or limit its use or (C) before a material change of his or her position, knew or had reason to know that it was Confidential Information and that knowledge of it had been acquired by accident or mistake.

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        (f)    "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity.

        (g)   "Restricted Period" means the longer of (i) twelve (12) months after the date of termination of employment (the Executive's last day of work for the Company) or (ii) the period during which the Executive is receiving payments from the Company pursuant to Section 4 hereof.

        (h)   "Work Product" means all patents and patent applications, all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, creative works, discoveries, software, computer programs, modifications, enhancements, know-how, formulations, concepts and ideas, and all similar or related information (in each case whether or not patentable), all copyrights and copyrightable works, all trade secrets, confidential information, and all other intellectual property and intellectual property rights that are conceived, reduced to practice, developed or made by the Executive either alone or with others in the course of employment with the Company (including employment prior to the date of this Agreement).

        5.5   Remedies. Because the Executive's services are unique and because the Executive has access to Confidential Information, the Executive acknowledges and agrees that if the Executive breaches any of the provisions of Section 5 hereof, the Company may suffer immediate and irreparable harm for which monetary damages alone will not be a sufficient remedy. The restrictive covenants stated in Section 5 hereof are without prejudice to the Company's rights and causes of action at law.

        5.6   Interpretation; Severability.

        (a)   The Executive has carefully considered the possible effects on the Executive of the covenants not to compete, the confidentiality provisions and the other obligations contained in this Agreement, and the Executive recognizes that the Company has made every effort to limit the restrictions placed upon the Executive to those that are reasonable and necessary to protect the Company's legitimate business interests.

        (b)   The Executive acknowledges and agrees that the restrictive covenants set forth in this Agreement are reasonable and necessary in order to protect the Company's valid business interests. It is the intention of the parties hereto that the covenants, provisions and agreements contained herein shall be enforceable to the fullest extent allowed by law. If any covenant, provision or agreement contained herein is found by a court having jurisdiction to be unreasonable in duration, scope or character of restrictions, or otherwise to be unenforceable, such covenant, provision or agreement shall not be rendered unenforceable thereby, but rather the duration, scope or character of restrictions of such covenant, provision or agreement shall be deemed reduced or modified with retroactive effect to render such covenant, provision or agreement reasonable or otherwise enforceable (as the case may be),

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and such covenant, provision or agreement shall be enforced as modified. If the court having jurisdiction will not review the covenant, provision or agreement, the parties hereto shall mutually agree to a revision having an effect as close as permitted by applicable law to the provision declared unenforceable. The parties hereto agree that if a court having jurisdiction determines, despite the express intent of the parties hereto, that any portion of the covenants, provisions or agreements contained herein are not enforceable, the remaining covenants, provisions and agreements herein shall be valid and enforceable. Moreover, to the extent that any provision is declared unenforceable, the Company shall have any and all rights under applicable statutes or common law to enforce its rights with respect to any and all Confidential Information or unfair competition by the Executive.

        6.     Miscellaneous.

        6.1   Public Statements.

        (a)   Media Nondisclosure. The Executive agrees that during the Employment Period or at any time thereafter, except as may be authorized in writing by the Company, the Executive will not directly or indirectly disclose or release to the Media any information concerning or relating to any aspect of the Executive's employment or termination from employment with the Company and/or any aspect of any dispute that is the subject of this Agreement. For the purposes of this Agreement, the term "Media" includes, without limitation, any news organization, station, publication, show, website, web log (blog), bulletin board, chat room and/or program (past, present and/or future), whether published through the means of print, radio, television and/or the Internet or otherwise, and any member, representative, agent and/or employee of the same.

        (b)   Non-Disparagement. The Executive agrees that during the Employment Period or at any time thereafter, the Executive will not make any statements, comments or communications in any form, oral, written or electronic to any Media or any customer, client or supplier of the Company or any of its Affiliates, which would constitute libel, slander or disparagement of the Company or any of its Affiliates, including, without limitation, any such statements, comments or communications that criticize, ridicule or are derogatory to the Company or any of its Affiliates; provided, however, that the terms of this Section 6.1(b) shall not apply to communications between the Executive and, as applicable, the Executive's attorneys or other persons with whom communications would be subject to a claim of privilege existing under common law, statute or rule of procedure. The Executive further agrees that the Executive will not in any way solicit any such statements, comments or communications from others.

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        6.2   ARBITRATION. SUBJECT TO THE RIGHTS UNDER SECTION 6.3 HEREOF TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF, BINDING ARBITRATION SHALL BE THE EXCLUSIVE REMEDY FOR ANY AND ALL DISPUTES, CLAIMS OR CONTROVERSIES, WHETHER STATUTORY, CONTRACTUAL OR OTHERWISE, BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE EXECUTIVE'S EMPLOYMENT BY OR TERMINATION FROM THE COMPANY (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, OR THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) (COLLECTIVELY, "DISPUTES"). THE PARTIES EACH WAIVE THE RIGHT TO A JURY TRIAL AND WAIVE THE RIGHT TO ADJUDICATE THEIR DISPUTES UNDER THIS AGREEMENT OUTSIDE THE ARBITRATION FORUM PROVIDED FOR IN THIS AGREEMENT, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT. In the event either party provides a notice of arbitration of any dispute to the other party, the parties agree to submit that dispute to a single arbitrator selected from a panel of arbitrators of JAMS located in the New York Area. The arbitration will be governed by the JAMS Comprehensive Arbitration Rules and Procedures in effect at the time the arbitration is commenced. If for any reason JAMS cannot serve as the arbitration administrator, the Company may select an alternative arbitration administrator such as the American Arbitration Association, to serve under the terms of this Agreement.

        (a)   VENUE. THE PARTIES STIPULATE AND AGREE THAT THE EXCLUSIVE VENUE OF ANY SUCH ARBITRATION PROCEEDING (AND OF ANY OTHER PROCEEDING, INCLUDING ANY COURT PROCEEDING, UNDER THIS AGREEMENT) SHALL BE PASSAIC COUNTY, NEW JERSEY (THE "AGREED VENUE").

        (b)   Authority and Decision. The arbitrator shall have the authority to award the same damages and other relief that a court could award. The arbitrator shall issue a reasoned award explaining the decision and any damages awarded. The arbitrator's decision will be final and binding upon the parties and enforceable by a court of competent jurisdiction. The parties will abide by and perform any award rendered by the arbitrator. In rendering the award, the arbitrator shall state the reasons therefor, including (without limitation) any computations of actual damages or offsets, if applicable.

        (c)   Fees and Costs. In the event of arbitration under the terms of this Agreement, the fees charged by JAMS or other arbitration administrator and the arbitrator shall be borne by the parties as determined by the arbitrator, except for any initial registration fee, which the parties shall bear equally. Otherwise, the parties shall each bear their own costs, expenses and attorneys' fees incurred in arbitration; provided, however, that the prevailing party shall be entitled to recover and have awarded its attorneys' fees, court costs, arbitration expenses, and its portion of the fees and costs charged by JAMS or other arbitration administrator, regardless of which party initiated the proceedings, in addition to any other relief to which it may be entitled.

        (d)   Limited Scope. The following are excluded from binding arbitration under this Agreement: claims for workers' compensation benefits or unemployment benefits; replevin; and claims for which a binding arbitration agreement is invalid as a matter of law.

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        6.3   Injunctive Relief. The parties hereto may seek injunctive relief in arbitration; provided, however, that as an exception to the arbitration agreement set forth in Section 6.2 hereof, the parties, in addition to all other available remedies, shall each have the right to initiate an action in any court of competent jurisdiction in order to request injunctive or other equitable relief regarding the terms of Sections 5 or 6.2 hereof. The exclusive venue of any such proceeding shall be in the Agreed Venue. The parties agree (a) to submit to the jurisdiction of any competent court in the Agreed Venue, (b) to waive any and all defenses the Executive may have on the grounds of lack of jurisdiction of such court and (c) that neither party shall be required to post any bond, undertaking or other financial deposit or guarantee in seeking or obtaining such equitable relief. Evidence adduced in any such proceeding for an injunction may be used in arbitration as well. The existence of this right shall not preclude or otherwise limit the applicability or exercise of any other rights and remedies that a party hereto may have at law or in equity.

        6.4   Settlement of Existing Rights. In exchange for the other terms of this Agreement, the Executive acknowledges and agrees that: (a) the Executive's entry into this Agreement is a condition of employment and/or continued employment with the Company, as applicable; (b) except as otherwise provided herein, this Agreement will replace any existing employment agreement between the parties and thereby act as a novation, if applicable; (c) the Executive is being provided with access to Confidential Information, including, without limitation, proprietary trade secrets of one or more Company Parties, to which the Executive has not previously had access; (d) all Company inventions and intellectual property developed by the Executive during any past employment with the Company and all goodwill developed with the Company's clients, customers and other business contacts by the Executive during any past employment with Company, as applicable, is the exclusive property of the Company; and (e) all Confidential Information and/or specialized training accessed, created, received or utilized by the Executive during any past employment with Company, as applicable, will be subject to the restrictions on Confidential Information described in this Agreement, whether previously so agreed or not.

        6.5   Entire Agreement; Waiver. This Agreement contains the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior understandings or agreements, whether written or oral. No modification or addition hereto or waiver or cancellation of any provision hereof shall be valid except by a writing signed by the party to be charged therewith. No delay on the part of any party to this Agreement in exercising any right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiver of such right or privilege.

        6.6   Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without regard to principles of conflict of laws.

        6.7   Successors and Assigns; Binding Agreement. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, personal representatives, successors and permitted assigns. This Agreement is a personal contract, and, except as specifically set forth herein, the rights and interests of the Executive herein may not be sold, transferred, assigned, pledged or hypothecated by any party without the prior written consent of the others. As used herein, the term "successor" as it relates to the Company, shall include, but not be limited to, any successor by way of merger, consolidation or sale of all or substantially all of such Person's assets or equity interests.

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        6.8   Representation by Counsel; Independent Judgment. Each of the parties hereto acknowledges that (a) it or the Executive has read this Agreement in its entirety and understands all of its terms and conditions, (b) it or the Executive has had the opportunity to consult with any individuals of its or the Executive's choice regarding its or the Executive's agreement to the provisions contained herein, including legal counsel of its or the Executive's choice, and any decision not to was the Executive's or its alone and (c) it or the Executive is entering into this Agreement of its or the Executive's own free will, without coercion from any source, based upon its or the Executive's own independent judgment.

        6.9   Interpretation. The parties and their respective legal counsel actively participated in the negotiation and drafting of this Agreement, and in the event of any ambiguity or mistake herein, or any dispute among the parties with respect to the provisions hereto, no provision of this Agreement shall be construed unfavorably against any of the parties on the ground that the Executive, it, or the Executive's or its counsel was the drafter thereof.

        6.10 Survival. The provisions of Sections 4.3(e), 5 and 6 hereof shall survive the termination of this Agreement.

        6.11 Notices. All notices and communications hereunder shall be in writing and shall be deemed properly given and effective when received, if sent by facsimile or telecopy, or by postage prepaid by registered or certified mail, return receipt requested, or by other delivery service which provides evidence of delivery, as follows:

If to the Company or Holding, to:

Linens 'n Things, Inc.
6 Brighton Road
Clifton, New Jersey 07015
Attention: General Counsel

with a copy (which shall not constitute notice) to:

Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas 75201-4761
Attention: Ronald M. Gaswirth, Esq.
Telephone: (214) 999-4601
Facsimile: (214) 999-3601
E-mail: rgaswirth@gardere.com

If to the Executive, to:

Robert J. DiNicola
6211 St. Andrews Drive
Dallas, Texas 75205

or to such other address as one party may provide in writing to the other party from time to time.

        6.12 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Facsimile transmission of any signed original document or retransmission of any signed facsimile transmission will be deemed the same as delivery of an original. At the request of any party, the parties will confirm facsimile transmission by signing a duplicate original document.

        6.13 Captions. Paragraph headings are for convenience only and shall not be considered a part of this Agreement.

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        6.14 No Third Party Beneficiary Rights. Except as otherwise provided in this Agreement, no entity shall have any right to enforce any provision of this Agreement, even if indirectly benefited by it.

        6.15 Withholding. Any payments provided for hereunder shall be paid net of any applicable withholding required under Federal, state or local law and any additional withholding to which Executive has agreed.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, to be effective for all purposes as of the Effective Date.

LINENS 'N THINGS, INC.
By:	/s/  WILLIAM T. GILES
Name:	William T. Giles
Title:	Executive Vice President and Chief Financial Officer
LINENS HOLDING CO.
By:	/s/  ANDREW JHAWAR
Name:	Andrew S. Jhawar
Title:	Vice President
EXECUTIVE
/s/  ROBERT J. DINICOLA Name: Robert J. DiNicola

EXHIBIT C

Definition of Change of Control

        "Change of Control" means:

        (1)   any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders or their Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of Holding or any successor company, including, without limitation, through a merger or consolidation or purchase of Voting Stock of Holding; provided that none of the Permitted Holders or their Related Parties have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board; provided further that the transfer of 100% of the Voting Stock of Holding to a Person that has an ownership structure identical to that of Holding prior to such transfer, such that Holding becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control for purposes of the indenture;

        (2)   after an initial public offering of Capital Stock of Holding, during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by such Board or whose nomination for election by the stockholders of Holding was approved by a vote of a majority of the directors of Holding then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board then in office;

        (3)   the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of Holding and its Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or

        (4)   the adoption of a plan relating to the liquidation or dissolution of Holding.

        For purposes of this definition, the following terms shall have the meanings set forth below:

        An "Affiliate" of any specified Person means any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled thereby or any of the partners thereof.

"Board" means the Board of Directors of Holding or any committee thereof duly authorized to act on behalf of such Board of Directors.

"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Holding" means Linens Holding Co., a Delaware corporation.

C-1

        "Permitted Holder" means any of Apollo, NRDC Real Estate Advisors I, LLC or Silver Point Capital Fund Investments, LLC.

"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity.

"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.

"Related Party" means:

        (1)   any controlling stockholder, 50% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or

        (2)   any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 50% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).

"Subsidiary" means, with respect to any specified Person:

        (1)   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

        (2)   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).

"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.

Notwithstanding anything to the contrary in this Exhibit C, the definition of Change of Control shall be interpreted consistently with the definition of "Change of Control" contained in Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations and guidance issued by the Internal Revenue Service under Section 409A of the Code, including IRS Notice 2005-1.

C-2

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EMPLOYMENT AGREEMENT
EXHIBIT C Definition of Change of Control

EX-10.8

Exhibit 10.8

LINENS HOLDING CO.
6 Brighton Road
Clifton, NJ 07015

March 27, 2006

Robert J. DiNicola
6211 St. Andrews Drive
Dallas, Texas 75205

Re:

Grant of Stock Options

Dear Bob:

        We are pleased to inform you that you have been granted options to purchase 321,946 shares of common stock of Linens Holding Co. (the "Company"). As further described below, the options have varying features relating to vesting and are denominated as an "Investment Option", a "Time Option" and a "Performance Option", and are collectively referred to as the "Options". The Time Option and the Performance Option have been granted pursuant to the Company's Stock Option Plan (the "Plan"), a copy of which is attached, and are subject in all respects to the provisions of the Plan, except as specifically modified hereby. The Investment Option has not been granted under the Plan and shall have no effect on the number of options that may be awarded under the Plan. However, in all other respects, the Investment Option shall be treated as if it were awarded under the Plan, and shall be subject to the terms and conditions of the Plan, except as specifically modified hereby. Capitalized terms not otherwise defined in the text are defined in the Plan.

1.

Investment Option:    The key terms of the Investment Option are as follows:



(a)

Number of Shares.    40,000



(b)

Exercise Price per Share.    $50.00



(c)

Vesting.    The Investment Option is fully vested and immediately exercisable.



2.

Time Option:    The key terms of the Time Option are as follows:



(a)

Number of Shares.    140,973



(b)

Exercise Price per Share.    $50.00



(c)

Vesting.    The Time Option will vest and become exercisable in four equal annual installments on February 14, 2007, 2008, 2009 and 2010, provided that the Time Option will become fully vested and exercisable (i) immediately prior to a "Change of Control" (as defined in the Employment Agreement among you, the Company, and Linens 'n Things, Inc. dated as of February 14, 2006 (the "Employment Agreement")), or (ii) upon your ceasing to be an Employee by reason of your death or Disability.



3.

Performance Option:    The key terms of the Performance Option are as follows:



(a)

Number of Shares.    140,973



(b)

Exercise Price per Share.    $50.00



(c)

Vesting.



(i)

If on any Measurement Date, the Value Per Share equals or exceeds the Target Stock Price (the "Performance Goal"), then (1) if such Measurement Date is other than the date of a Linens Investors Liquidity Event, the Performance Option will vest and become exercisable in two equal annual installments on each of the first two anniversaries of such Measurement Date, provided that if a Change of Control

occurs after any such Measurement Date, any unvested installment shall become fully vested immediately prior to the Change of Control, and (2) if such Measurement Date is the date of a Linens Investors Liquidity Event, the Performance Option will become fully vested and immediately exercisable at such time.

(ii)

If, on any Measurement Date prior to a Qualified IPO, the Performance Goal would be satisfied by disregarding in the calculation of Net Equity Value, some portion, but not all, of your Performance Option as well as similar performance options granted to other employees, then a portion of your Performance Option shall vest, as determined by the Option Committee in a fair and equitable manner.



(iii)

Whether or not the Performance Goal is achieved, if you cease to be an Employee by reason of your death or Disability, the Performance Option will become fully vested and exercisable.

(d)

Definitions.



(i)

"Fully Diluted Shares" means, on any Measurement Date, the number of Shares outstanding, plus the number of Shares subject to all outstanding options, warrants and rights to acquire Shares, whether or not exercisable.



(ii)

"Linens Investors Liquidity Event" means any transaction (including, without limitation, a stock sale, redemption or buy back, merger, consolidation or otherwise) immediately following which all of the Shares held by Linens Investors have been exchanged for or converted into consideration, all or substantially all of which consists of cash or readily marketable securities that Linens Investors can immediately resell for cash at prevailing quoted prices without legal, contractual or market restrictions.



(iii)

"Measurement Date" means (1) prior to a Qualified IPO, the last day of any fiscal quarter, starting with the last day of the fiscal quarter ending coincident with or next following December 31, 2007, (2) following a Qualified IPO, each trading day, starting with the 90th trading day following the Qualified IPO, or (3) the date of a Linens Investors Liquidity Event, whether before or after a Qualified IPO.



(iv)

"Net Equity Value" means (1) 7.5 multiplied by the Company's consolidated operating earnings, before interest, income taxes, depreciation and amortization ("EBITDA") for the four fiscal quarters ending upon a Measurement Date, plus (2) the sum of cash, cash equivalents, and the aggregate exercise price of all outstanding options or warrants to purchase Shares, whether or not exercisable, in each case as of the Measurement Date, less (3) debt as of the Measurement Date. EBITDA, cash and debt shall be determined by the Option Committee based on the Company's financial statements for such period, subject to such adjustments to reflect unusual, nonrecurring or extraordinary events as the Option Committee shall deem equitable and appropriate.



(v)

"Qualified IPO" means a sale by the Company of Shares in an underwritten (firm commitment) public offering registered under the Securities Act of 1933, with gross proceeds to the Company of not less than $150 million, resulting in the listing of the Shares on a nationally recognized stock exchange, including without limitation the Nasdaq National Market System.



(vi)

"Target Stock Price" means $50, compounded at an annual rate of 25% from February 14, 2006 to the Measurement Date, provided that the Option Committee shall make such adjustment to the Target Stock Price as it determines is equitable

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and appropriate to reflect changes to the outstanding Shares or capital structure of the Company, including contributions and distributions of capital.

(vii)

"Value Per Share" means (1) prior to a Qualified IPO, the Net Equity Value divided by the Fully Diluted Shares, (2) following a Qualified IPO, the average closing price of a Share for the period of 90 consecutive trading days ending on the Measurement Date, or (3) upon a Linens Investors Liquidity Event, the price per Share realized by Linens Investors.

4.

Termination of the Options:    Whether or not exercisable or scheduled to become exercisable, the Options will terminate as provided in Section 5 of the Plan; provided that (i) clause (ii) of Section 5(a) of the Plan shall not apply, and (ii) upon your ceasing to be an Employee under circumstances pursuant to which you are entitled to receive the severance benefits set forth in the Employment Agreement, the Options, to the extent then vested, will remain exercisable until and expire upon the 181st day following such termination, and (iii) the Performance Option will terminate no later than a Linens Investors Liquidity Event to the extent the Performance Goal is not achieved at such time, or was not previously achieved.



5.

No Repurchase Right.    Section 8(c) of the Plan shall not apply to any Shares you acquire upon exercise of the Options.



6.

Federal Taxes:    The Options granted to you are treated as "nonqualified options" for federal tax purposes, which means that when you exercise, the excess of the value of the Shares issued on exercise over the exercise price paid for the Shares is income to you, subject to wage-based withholding and reporting. When you sell the Shares acquired upon exercise, the excess (or shortfall) between the amount you receive upon the sale and the value of the shares at the time of exercise is treated as capital gain (or loss). State and local taxes may also apply. You should consult your personal tax advisor for more information concerning the tax treatment of your Options.

        We are excited to give you this opportunity to share in our future success. Please indicate your acceptance of this option grant and the terms of the Plan by signing and returning a copy of this letter.

Sincerely,

LINENS HOLDING CO.
By:	/s/  WILLIAM T. GILES William T. Giles Executive Vice President and Chief Financial Officer
Agreed to and Accepted by:
/s/  ROBERT J. DINICOLA Name: Robert J. DiNicola

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EX-10.9

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Exhibit 10.9

EMPLOYMENT AGREEMENT

        THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into on April 20, 2006 (the "Execution Date"), to be effective for all purposes as of April 3, 2006 (the "Effective Date"), by and between Linens 'n Things, Inc., a Delaware corporation (the "Company") and wholly owned subsidiary of Linens Holding Co., a Delaware corporation ("Holding"), and F. David Coder (the "Executive").

        WHEREAS, the Executive is currently employed by the Company; and

        WHEREAS, the Company desires to continue to employ the Executive, and enter into a new employment agreement with the Executive, on the terms and subject to the conditions set forth herein and the Executive has agreed to be so employed.

        NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

        1.     Employment of Executive; Duties.

        1.1   Title. During the Employment Period (as defined in Section 2 hereof), the Executive shall serve as Executive Vice President of Store Operations of the Company. The Executive shall have the normal duties, responsibilities and authority commensurate with such position.

        1.2   Duties. During the Employment Period, the Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities of the Executive's position and shall render such services on the terms set forth herein. In addition, the Executive shall have such other executive and managerial powers and duties as may reasonably be assigned to the Executive, commensurate with the Executive serving as an Executive Vice President. The Company may adjust the duties and responsibilities of the Executive as an Executive Vice President, notwithstanding the specific title set forth in Section 1.1 hereof, based upon the Company's needs from time to time. Except for sick leave, reasonable vacations and excused leaves of absence, the Executive shall, throughout the Employment Period, devote substantially all the Executive's working time, attention, knowledge and skills faithfully, and to the best of the Executive's ability, to the duties and responsibilities of the Executive's position in furtherance of the business affairs and activities of the Company and its subsidiaries and Affiliates (as defined in Section 5.4(a) hereof) and, except where the Company provides its written consent otherwise, shall maintain the Executive's principal residence within 75 miles of the principal office of the Company as of the Effective Date. The Executive shall at all times be subject to, comply with, observe and carry out (a) the Company's rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time and (b) such rules, regulations, policies, codes of ethics and/or conduct, directions and restrictions as the Board of Directors of the Company (the "Board") may from time to time reasonably establish or approve for senior executive officers of the Company.

        2.     Term of Employment.

        2.1   Employment Period. The employment of the Executive hereunder shall continue until December 31, 2007 (the "Initial Employment Period"), unless terminated earlier in accordance with the provisions of Section 4 of this Agreement.

        2.2   Extension. Unless terminated earlier in accordance with the provisions of Section 4 of this Agreement, the employment of the Executive hereunder shall continue after the end of the Initial Employment Period for additional one (1)-year periods (each an "Extension Period" and, together with the Initial Employment Period, the "Employment Period"), unless the Company or the Executive notifies the other in writing not less than one (1) year prior to the end of the Initial Employment Period, or the end of the applicable Extension Period, of its or the Executive's election, in its or the Executive's sole discretion, not to extend the Employment Period.

        3.     Compensation and General Benefits.

        3.1   Base Salary.

        (a)   During the Employment Period, the Company agrees to pay to the Executive an annual base salary in an amount equal to $350,000 (such base salary, as may be adjusted from time to time pursuant to Section 3.1(b), is referred to herein as the "Base Salary"). The Executive's Base Salary, less amounts required to be withheld under applicable law, shall be payable in equal installments in accordance with the Company's normal payroll practices and procedures in effect from time to time for the payment of salaries to officers of the Company, but in no event less frequently than monthly.

        (b)   The Board or the Compensation Committee established by the Board (the "Compensation Committee") shall review the Executive's performance on an annual basis and, based on such review, may change the Base Salary, as it, acting in its sole discretion, shall determine to be reasonable and appropriate.

        3.2   Bonus. With respect to the 2006 calendar year and with respect to each calendar year that commences during the Employment Period, the Executive shall be eligible to receive from the Company an annual performance bonus (the "Annual Bonus") on a basis and in an amount to be determined by the Board or the Compensation Committee in the exercise of its sole discretion for the applicable year. The target Annual Bonus will be 50% of the Base Salary up to a maximum of 100% of the Base Salary. Any Annual Bonus earned shall be payable in full as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures. Except as otherwise expressly provided in Section 4 hereof, any Annual Bonus (or portion thereof) payable under this Section 3.2 shall not be payable unless the Executive is employed by the Company on the last day of the period to which such Annual Bonus relates.

        3.3   Expenses. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this Section 3 or elsewhere herein, the Executive shall be entitled to receive reimbursement from the Company for all reasonable and necessary expenses incurred by the Executive in performing the Executive's duties hereunder on behalf of the Company, subject to, and consistent with, the Company's policies for expense payment and reimbursement, in effect from time to time.

        3.4   Fringe Benefits. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this Section 3 or elsewhere herein, the Executive shall be entitled to participate in, and to receive benefits under, (a) any benefit plans, arrangements or policies made available by the Company to its employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of each such plan, arrangement or policy and (b) without limiting the foregoing, the benefits set forth on Exhibit B attached hereto.

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        3.5   Stock Options.

        (a)   On March 27, 2006, the Option Committee of Holding, as defined in the Linens Holding Co. Stock Option Plan (the "Plan"), approved a grant of nonqualified options to the Executive to purchase a total of 25,000 shares of Common Stock, par value $0.01 per share, of Holding (the "Common Stock") with a per share exercise price of $50.00, which is equal to the fair market value of the Common Stock on the date of grant as determined by the Option Committee (the "Options"). The Options have a term of seven (7) years from the date of grant and are equally divided between a "Time Option" and a "Performance Option." The Time Option shall become vested and exercisable in four equal annual installments on each of February 14, 2007, 2008, 2009 and 2010, subject to the Executive's continued employment with the Company, and the Performance Option shall become vested and exercisable upon satisfaction of the performance criteria set forth in the grant letter. Except as otherwise provided herein, the Options are subject to the terms and conditions of the Plan and the grant letter executed in respect of the Options.

        (b)   During the Employment Period and subject to the approval of the Option Committee, the Executive shall be eligible to participate in and be granted additional stock options under the Plan.

        4.     Termination.

        4.1   General. The employment of the Executive hereunder (and the Employment Period) shall terminate as provided in Section 2 hereof, unless earlier terminated in accordance with the provisions of this Section 4.

        4.2   Death or Disability of the Executive.

        (a)   The employment of the Executive hereunder (and the Employment Period) shall terminate upon (i) the death of the Executive and (ii) at the option of the Company, upon not less than fifteen (15) days' prior written notice to the Executive or the Executive's personal representative or guardian, if the Executive suffers a "Total Disability" (as defined in Section 4.2(b) hereof). Upon termination for death or Total Disability, subject to reduction by any benefits paid or payable to the Executive, the Executive's beneficiaries or estate under any Company-sponsored disability benefit plan program or policy for the period following such date of termination, (A) the Company shall pay to the Executive, guardian or personal representative, as the case may be, the Executive's current Base Salary for the remainder of the Employment Period in effect immediately prior to the date of termination and (B) subject further to the sole discretion of the Board or the Compensation Committee, the Company may also pay to the Executive, guardian or personal representative, as the case may be, a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had the Executive worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. Any bonus shall be payable as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures.

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        (b)   For purposes of this Agreement, "Total Disability" shall mean (i) if the Executive is subject to a legal decree of incompetency (the date of such decree being deemed the date on which such disability occurred), (ii) the written determination by a physician selected by the Company that, because of a medically determinable disease, injury or other physical or mental disability, the Executive is unable substantially to perform, with or without reasonable accommodation, the material duties of the Executive required hereby, and that such disability has lasted for ninety (90) consecutive days or any one hundred twenty (120) days during the immediately preceding twelve (12)-month period or is, as of the date of determination, reasonably expected to last six (6) months or longer after the date of determination, in each case based upon medically available reliable information or (iii) Executive's qualifying for benefits under the Company's long-term disability coverage, if any. In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive hereby consents to (x) any examinations that the Board or the Compensation Committee determines are relevant to a determination of whether the Executive is mentally and/or physically disabled or are required by the Company physician, (y) furnish such medical information as may be reasonably requested and (z) waive any applicable physician patient privilege that may arise because of such examination.

        (c)   With respect to outstanding stock options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.2, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the one hundred eighty (180)-day period following such date of termination.

        (d)   With respect to any shares of Common Stock, par value $0.01 per share, of Holding (the "Common Stock") held by the Executive that are vested as of the date of termination pursuant to this Section 4.2 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.2(c) hereof), for the two hundred seventy (270)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive or the Executive's beneficiary, as applicable, and the Executive or the Executive's beneficiary hereby agrees to sell any or all such shares to the Company (or the Company's designee) for an amount equal to the product of (i) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (ii) the number of shares so purchased.

        4.3   Termination by the Company Without Cause or Resignation by the Executive For Good Reason.

        (a)   The Company may terminate the Executive's employment without "Cause" (as defined in Section 4.3(g)), and thereby terminate the Executive's employment (and the Employment Period) under this Agreement at any time with no requirement for notice to the Executive.

        (b)   The Executive may resign, and thereby terminate the Executive's employment (and the Employment Period), at any time for "Good Reason" (as defined in Section 4.3(f) hereof), upon not less than sixty (60) days' prior written notice to the Company specifying in reasonable detail the reason therefore; provided, however, that the Company shall have a reasonable opportunity to cure any such Good Reason (to the extent possible) within sixty (60) days after the Company's receipt of such notice; and provided further that, if the Company is not seeking to cure, the Company shall not be obligated to allow the Executive to continue working during such period and may, in its sole discretion, accelerate such termination of employment (and the Employment Period) to any date during such period.

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        (i)    Executive may not terminate employment under this Agreement for Good Reason regarding any of the Company's acts or omissions of which Executive had actual notice for sixty (60) days or more prior to giving notice of termination for Good Reason.

        (ii)   A determination of whether the Executive legitimately has Good Reason for termination of the Executive's employment under this Agreement, and of whether the Company has effectively cured and thus eliminated the grounds for such Good Reason, shall be made only by the Chief Executive Officer of the Company (the "Chief Executive Officer"), within the Chief Executive Officer's sole judgment and discretion, acting in good faith after having met with the Company's Vice President of Human Resources.

        (c)   In the event the Executive's employment is terminated pursuant to this Section 4.3, then, subject to Section 4.3(d) hereof, the following provisions shall apply:

        (i)    The Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the year of termination) had the Executive remained in the employ of the Company until the expiration of the Employment Period in effect immediately prior to the date of termination, with all such amounts payable in accordance with the Company's normal payroll practices and procedures in the same manner and at the same time as though the Executive remained employed by the Company.

        (ii)   If such termination occurs upon or within six (6) months following a Change of Control (as defined in Exhibit A attached hereto), the Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the year of termination) for the greater of (A) the period set forth in Section 4.3(c)(i) hereof or (B) a two (2)-year period following such date of termination, with all such amounts payable in accordance with the Company's normal payroll practices and procedures in the same manner and at the same time as though the Executive remained employed by the Company.

        (iii)  In the event the Executive's employment is terminated pursuant to this Section 4.3 without Cause, and if the Company has previously effected reductions in the Executive's Base Salary and the base salary of all executives at the same level as the Executive, which reductions were substantially similar, then the Base Salary rate for purposes of Section 4.3(c)(i) or (ii) hereof shall be the Base Salary rate in effect immediately prior to such reductions.

        (iv)  Subject to the sole discretion of the Board or the Compensation Committee, the Company may pay to the Executive a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had the Executive worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. The bonus shall be payable as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures.

        (v)   With respect to outstanding options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.3, (A) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (B) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.

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        (vi)  With respect to any shares of Common Stock held by the Executive that are vested as of the date of termination pursuant to this Section 4.3 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.3(c)(v) hereof), for the one hundred eighty (180)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive, and the Executive hereby agrees to sell any or all such shares to the Company (or the Company's designee), for an amount equal to the product of (A) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (B) the number of shares so purchased.

        (d)   As a condition precedent to the Executive's right to receive the benefits set forth in Section 4.3(c) hereof, the Executive agrees to execute a release of the Company and its respective Affiliates, officers, directors, stockholders, employees, agents, insurers, representatives and successors from and against any and all claims that the Executive may have against any such Person (as defined in Section 5.4(f) hereof) relating to the Executive's employment by the Company and the termination thereof, such release to be in form and substance reasonably satisfactory to the Company.

        (e)   Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment, vesting, distribution or transfer by the Company or any successor, or any Affiliate of the foregoing or by any other Person or that any other event occurring with respect to the Executive and the Company for the Executive's benefit, whether paid or payable or distributed or distributable under the terms of this Agreement or otherwise (including under any employee benefit plan) (a "Payment") would be subject to or result in the imposition of the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (and any regulations or guidance promulgated or issued thereunder, any successor provision, and any similar provision of state or local income tax law) (collectively, the "Excise Tax"), then the amount of the Payment shall be reduced to the highest amount that may be paid by the Company or other entity without subjecting any such Payment to the Excise Tax (the "Payment Reduction"). The Executive shall have the right to designate those payments or benefits that shall be reduced or eliminated under the Payment Reduction to avoid the imposition of the Excise Tax, subject to the confirmation of the Accounting Firm (as defined herein) with respect to the intended effect thereof.

        (i)    Subject to the provisions of Section 4.3(e)(ii), all determinations required to be made under this Section 4.3(e), including whether and when a Payment is subject to Section 4999 and the assumptions to be utilized in arriving at such determination and in determining an appropriate Payment Reduction, shall be made by KPMG LLP, or any other nationally recognized accounting firm that shall be the Company's outside auditors at the time of such determination (the "Accounting Firm"), which Accounting Firm shall provide detailed supporting calculations to the Executive and the Company within fifteen (15) business days of the receipt of notice from the Company or the Executive that there will be a Payment that the Person giving notice believes may be subject to the Excise Tax. All fees and expenses of the Accounting Firm shall be borne by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive in determining whether a Payment Reduction is required and the amount thereof (subject to Sections 4.3(e)(ii) and (iii)), in the absence of material mathematical or legal error.

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        (ii)   As a result of uncertainty in the application of Section 4999 that may exist at the time of the initial determination by the Accounting Firm, it may be possible that in making the calculations required to be made hereunder, the Accounting Firm shall determine that a Payment Reduction need not be made that properly should be made (an "Overpayment") or that a Payment Reduction not properly needed to be made should be made (an "Underpayment"). If, within seventy-five (75) days after the Accounting Firm's initial determination under Section 4.3(e)(i), the Accounting Firm shall determine that an Overpayment was made, any such Overpayment shall be treated for all purposes, to the extent practicable and subject to applicable law, as a loan to the Executive with interest at the applicable Federal rate provided for in Section 1274(d) of the Code and shall be repaid by the Executive to the Company within thirty-five (35) days after the Executive receives notice of the Accounting Firm's determination; provided, however, that the amount to be repaid by the Executive to the Company either as a loan or otherwise as a lump sum payment (where a loan is not practicable or permitted by law) shall be reduced to the extent that any portion of the Overpayment to be repaid will not be offset by a corresponding reduction in tax by reason of such repayment of the Overpayment. If the Accounting Firm shall determine that an Underpayment was made, any such Underpayment shall be due and payable by the Company to the Executive within thirty-five (35) days after the Company receives notice of the Accounting Firm's determination.

        (iii)  The Executive shall give written notice to the Company of any claim by the Internal Revenue Service that, if successful, would require the payment by the Executive of an Excise Tax, such notice to be provided within fifteen (15) days after the Executive shall have received written notice of such claim. The Executive shall cooperate with the Company in determining whether to contest or pay such claim and shall not pay such claim without the written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.

        (iv)  This Section 4.3(e) shall remain in full force and effect following the termination of the Executive's employment for any reason until the expiration of the statute of limitations on the assessment of taxes applicable to the Executive for all periods in which the Executive may incur a liability for taxes (including Excise Taxes), interest or penalties arising out of the operation of this Agreement.

        (f)    For purposes of this Agreement, the Executive would be entitled to terminate the Executive's employment for "Good Reason" if without the Executive's prior written consent:

        (i)    the Company fails to comply with any material obligation imposed by this Agreement;

        (ii)   the Company changes the Executive's position from that of an Executive Vice President; provided, however, that (A) a change in the Executive's duties or responsibilities without a change in the Executive's position as an Executive Vice President shall not constitute Good Reason and (B) nothing herein shall prohibit the Company from changing the Executive's specific title as an Executive Vice President, notwithstanding the specific title set forth in Section 1.1 hereof, based upon the Company's needs from time to time; or

        (iii)  the Company effects a reduction in the Executive's Base Salary, unless all executives at the same level as the Executive receive a substantially similar reduction in base salary.

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        (g)   For purposes of this Agreement, "Cause" means the occurrence of any one or more of the following events, and the Company shall have the sole discretion to determine the existence of Cause:

        (i)    a failure by the Executive to comply with any obligation under this Agreement;

        (ii)   the Executive's being indicted for (A) any felony or (B) any misdemeanor that causes or is likely to cause harm or embarrassment to the Company or any of its Affiliates, in the reasonable judgment of the Board;

        (iii)  theft, embezzlement or fraud by the Executive in connection with the performance of the Executive's duties hereunder;

        (iv)  the Executive's engaging in any activity that gives rise to a material conflict with the Company or any of its Affiliates;

        (v)   the misappropriation by the Executive of any material business opportunity of the Company or any of its Affiliates;

        (vi)  any failure to comply with, observe or carry out the Company's rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time, including (without limitation) those regarding conflicts, potential conflicts of interest or the appearance of a conflict of interest

        (vii) any failure to comply with, observe or carry out the rules, regulations, policies, directions, codes of ethics and/or conduct and restrictions established or approved by the Board from time to time for senior executive officers of the Company, including (without limitation) those regarding conflicts, potential conflicts of interest or the appearance of a conflict of interest;

        (viii) substance abuse or use of illegal drugs that, in the reasonable judgment of the Board, (A) impairs the Executive's performance of the Executive's duties hereunder or (B) causes or is likely to cause harm or embarrassment to the Company or any of its Affiliates; and

        (ix)  engagement in conduct that Executive knows or should know is injurious to the Company or any of its Affiliates.

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        4.4   Termination For Cause, Voluntary Resignation Other Than For Good Reason or Election Not to Extend the Employment Period.

        (a)   (i) The Company may, upon action of the Board, terminate the employment of the Executive (and the Employment Period) at any time for "Cause," (ii) the Executive may voluntarily resign other than for Good Reason and thereby terminate the Executive's employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30)-days' prior written notice or (iii) either the Company or the Executive may elect not to extend or further extend the Employment Period pursuant to Section 2.2 hereof.

        (b)   The following provisions shall apply upon termination by the Company for Cause, by the Executive as the result of resignation for other than for Good Reason, or by the Company or the Executive at the end of the Employment Period as the result of an election not to extend or further extend the Employment Period:

        (i)    The Executive shall be entitled to receive all amounts of earned but unpaid Base Salary and benefits accrued through the date of such termination. Except as provided below, all other rights of the Executive (and all obligations of the Company) hereunder shall terminate as of the date of such termination.

        (ii)   With respect to outstanding options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.4, (A) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (B) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.

        (iii)  With respect to any shares of Common Stock held by the Executive that are vested as of the date of termination pursuant to this Section 4.4 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.4(b)(ii) hereof), for the one hundred eighty (180)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive and the Executive hereby agrees to sell any or all such shares to the Company (or the Company's designee) for an amount equal to the product of (A) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (B) the number of shares so purchased.

        4.5   Resignation from Officer Positions. Upon the termination of the Executive's employment for any reason (unless otherwise agreed in writing by the Company and the Executive), the Executive will be deemed to have resigned, without any further action by the Executive, from any and all officer, director and/or director positions that the Executive, immediately prior to such termination, (a) held with the Company or any of its Affiliates and (b) held with any other entities at the direction of, or as a result of the Executive's affiliation with, the Company or any of its Affiliates. If for any reason this Section 4.5 is deemed to be insufficient to effectuate such resignations, then Executive will, upon the Company's request, execute any documents or instruments that the Company may deem necessary or desirable to effectuate such resignations. In addition, the Executive hereby designates the Secretary or any Assistant Secretary of the Company and of any Affiliate to execute any such documents or instruments as the Executive's attorney-in-fact to effectuate such resignations if execution by the Secretary or any Assistant Secretary of the Company or Affiliate is deemed by the Company or the Affiliate to be a more expedient means to effectuate such resignation or resignations.

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        4.6   Section 409A of the Code. Notwithstanding anything to the contrary in this Agreement, the parties mutually desire to avoid adverse tax consequences associated with the application of Section 409A of the Code to this Agreement and agree to cooperate fully and take appropriate reasonable actions to avoid any such consequences under Section 409A of the Code, including delaying payments and reforming the form of the Agreement if such action would reduce or eliminate taxes and/or interest payable as a result of Section 409A of the Code. In this regard, notwithstanding anything to the contrary in this Section 4, to the extent necessary to comply with Section 409A of the Code, any payment required under this Section 4 shall be deferred for a period of six (6) months, regardless of the circumstances giving rise to or the basis for such payment.

        5.     Confidentiality, Work Product and Non-Competition and Non-Solicitation.

        5.1   Confidentiality.

        (a)   In connection with the Executive's employment with the Company, the Company promises to provide the Executive with access to "Confidential Information" (as defined in Section 5.4(d) hereof) in support of the Executive's employment duties. The Executive recognizes that the Company's business interests require a confidential relationship between the Company and the Executive and the fullest practical protection and confidential treatment of all Confidential Information. At all times, both during and after the Employment Period, the Executive shall not directly or indirectly: (i) appropriate, download, print, copy, remove, use, disclose, divulge, communicate or otherwise "Misappropriate" (as defined in Section 5.4(e) hereof) any Confidential Information, including, without limitation, originals or copies of any Confidential Information, in any media or format, except for the Company's benefit within the course and scope of the Executive's employment or with the prior written consent of the Chief Executive Officer; or (ii) take or encourage any action that would circumvent, interfere with or otherwise diminish the value or benefit of the Confidential Information to any of the Company Parties (as defined in Section 5.4(b) hereof).

        (b)   All Confidential Information, and all other information and property affecting or relating to the business of the Company Parties within the Executive's possession, custody or control, regardless of form or format, shall remain, at all times, the property of the respective Company Parties, the appropriation, use and/or disclosure of which is governed and restricted by this Agreement.

        (c)   The Executive acknowledges and agrees that:

        (i)    the Executive occupies a unique position within the Company, and the Executive is and will be intimately involved in the development and/or implementation of Confidential Information;

        (ii)   in the event the Executive breaches this Section 5.1 with respect to any Confidential Information, such breach shall be deemed to be a Misappropriation of such Confidential Information; and

        (iii)  any Misappropriation of Confidential Information will result in immediate and irreparable harm to the Company.

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        (d)   Upon receipt of any formal or informal request, by legal process or otherwise, seeking the Executive's direct or indirect disclosure or production of any Confidential Information to any Person, the Executive shall promptly and timely notify the Company and provide a description and, if applicable, hand deliver a copy of such request to the Company. The Executive irrevocably nominates and appoints the Company as the Executive's true and lawful attorney-in-fact to act in the Executive's name, place and stead to perform any act that the Executive might perform to defend and protect against any disclosure of Confidential Information.

        (e)   At any time the Company may request, during or after the Employment Period, the Executive shall deliver to the Company all originals and copies of Confidential Information and all other information and property affecting or relating to the business of the Company Parties within the Executive's possession, custody or control, regardless of form or format, including, without limitation any Confidential Information produced by the Executive. Both during and after the Employment Period, the Company shall have the right of reasonable access to review, inspect, copy and/or confiscate any Confidential Information within the Executive's possession, custody or control.

        (f)    Upon termination or expiration of this Agreement, the Executive shall immediately return to the Company all Confidential Information, and all other information and property affecting or relating to the business of the Company Parties, within the Executive's possession, custody or control, regardless of form or format, without the necessity of a prior Company request.

        (g)   During the Employment Period, the Executive represents and agrees that the Executive will not use or disclose any confidential or proprietary information or trade secrets of others, including but not limited to former employers, and that the Executive will not bring onto the premises of the Company or access such confidential or proprietary information or trade secrets of such others, unless consented to in writing by said others, and then only with the prior written authorization of the Company.

        5.2   Work Product/Intellectual Property.

        (a)   Assignment. The Executive hereby assigns to the Company all right, title and interest to all "Work Product" (as defined in Section 5.4(h) hereof) that (i) relates to any of the Company Parties' actual or anticipated business, research and development or existing or future products or services, or (ii) is conceived, reduced to practice, developed or made using any equipment, supplies, facilities, assets, information or resources of any of the Company Parties (including, without limitation, any intellectual property rights).

        (b)   Disclosure. The Executive shall promptly disclose Work Product to the Chief Executive Officer and perform all actions reasonably requested by the Company (whether during or after the Employment Period) to establish and confirm the ownership and proprietary interest of any of the Company Parties in any Work Product (including, without limitation, the execution of assignments, consents, powers of attorney, applications and other instruments). The Executive shall not file any patent or copyright applications related to any Work Product except with the written consent of the Chief Executive Officer.

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        5.3   Non-Competition and Non-Solicitation.

        (a)   In consideration of the Confidential Information being provided to the Executive as stated in Section 5.1 hereof, and other good and valuable new consideration as stated in this Agreement, including, without limitation, employment and/or continued employment with the Company, and the business relationships, Company goodwill, work experience, client, customer and/or vendor relationships and other fruits of employment that the Executive will have the opportunity to obtain, use and develop under this Agreement, the Executive agrees to the restrictive covenants stated in this Section 5.3.

        (b)   During the Employment Period and until the end of the Restricted Period (as defined in Section 5.4(g) hereof), the Executive agrees that the Executive will not, directly or indirectly, on the Executive's own behalf or on the behalf of any other Person, within the United States of America or in any other country or territory in which the businesses of the Company are conducted:

        (i)    engage in a Competing Business, including, without limitation, by owning, managing, operating, controlling, being employed by, providing services as a consultant or independent contractor to or participating in the ownership, management, operation or control of any Competing Business;

        (ii)   induce or attempt to induce any customer, vendor, supplier, licensor or other Person in a business relationship with any Company Party, for or with which the Executive or employees working under the Executive's supervision had any direct or indirect responsibility or contact during the Employment Period, (A) to do business with a Competing Business or (B) to cease, restrict, terminate or otherwise reduce business with the Company for the benefit of a Competing Business, regardless of whether the Executive initiates contact; or

        (iii)  (A) solicit, recruit, persuade, influence or induce, or attempt to solicit, recruit, persuade, influence or induce anyone employed or otherwise retained by any of the Company Parties (including any independent contractor or consultant), to cease or leave their employment or contractual or consulting relationship with any Company Party, regardless of whether the Executive initiates contact for such purposes or (B) hire, employ or otherwise attempt to establish, for any Person, any employment, agency, consulting, independent contractor or other business relationship with any Person who is or was employed or otherwise retained by any of the Company Parties (including any independent contractor or consultant).

        (c)   The parties hereto acknowledge and agree that, notwithstanding anything in Section 5.3(b)(i) hereof, (i) the Executive may own or hold, solely as passive investments, securities of Persons engaged in any business that would otherwise be included in Section 5.3(b)(i), as long as with respect to each such investment the securities held by the Executive do not exceed five percent (5%) of the outstanding securities of such Person and such securities are publicly traded and registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) the Executive may serve on the board of directors (or other comparable position) or as an officer of any entity at the request of the Board; provided, however, that in the case of investments otherwise permitted under clause (i) above, the Executive shall not be permitted to, directly or indirectly, participate in, or attempt to influence, the management, direction or policies of (other than through the exercise of any voting rights held by the Executive in connection with such securities), or lend the Executive's name to, any such Person.

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        (d)   The Executive acknowledges and agrees that, for purposes of this Section 5.3, indirect acts by the Executive shall include, without limitation, an act by the Executive's spouse, ancestor, lineal descendant, lineal descendant's spouse, sibling or other member of the Executive's immediate family.

        (e)   The Executive acknowledges that (i) the restrictive covenants contained in this Section 5.3 hereof are ancillary to and part of an otherwise enforceable agreement, such being the agreements concerning Confidential Information and other consideration as stated in this Agreement, (ii) at the time that these restrictive covenants are made, the limitations as to time, geographic scope and activity to be restrained, as described herein, are reasonable and do not impose a greater restraint than necessary to protect the good will and other legitimate business interests of the Company, including without limitation, Confidential Information (including trade secrets), client, customer and/or vendor relationships, client and/or customer goodwill and business productivity, (iii) in the event of termination of the Executive's employment, the Executive's experiences and capabilities are such that the Executive can obtain gainful employment without violating this Agreement and without the Executive incurring undue hardship, (iv) based on the relevant benefits and other new consideration provided for in this Agreement, including, without limitation, the disclosure and use of Confidential Information, the restrictive covenants of this Section 5.3, as applicable according to their terms, shall remain in full force and effect even in the event of the Executive's involuntary termination from employment, with or without Cause and (v) the Executive has carefully read this Agreement and has given careful consideration to the restraints imposed upon the Executive by this Agreement and consents to the terms of the restrictive covenants in this Section 5.3, with the knowledge that this Agreement may be terminated at any time in accordance with the provisions hereof.

        5.4   Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

        (a)   An "Affiliate" of any specified Person means any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

        (b)   "Company Parties" means the Company, and its direct and indirect parents, subsidiaries and Affiliates, and their successors in interest.

        (c)   "Competing Business" means any business that competes with any of the Company Parties, including, without limitation, any enterprise that engages in, owns or operates businesses that market, sell, distribute, manufacture or otherwise are involved in the home textile, housewares or home accessories industries.

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        (d)   Confidential Information.

        (i)    Definition. "Confidential Information" means any and all material, information, ideas, inventions, formulae, patterns, compilations, programs, devices, methods, techniques, processes, know how, plans (marketing, business, strategic, technical or otherwise), arrangements, pricing and other data of or relating to any of the Company Parties (as well as their customers and/or vendors) that is confidential, proprietary or trade secret (A) by its nature, (B) based on how it is treated or designated by a Company Party, (C) because the disclosure of which would have a material adverse effect on the business or planned business of any of the Company Parties and/or (D) as a matter of law.

        (ii)   Exclusions. Confidential Information does not include material, data, and/or information (A) that any Company Party has voluntarily placed in the public domain, (B) that has been lawfully and independently developed and publicly disclosed by third parties, (C) that constitutes the general non-specialized knowledge and skills gained by the Executive during the Employment Period or (D) that otherwise enters the public domain through lawful means; provided, however, that the unauthorized appropriation, use or disclosure of Confidential Information by the Executive, directly or indirectly, shall not affect the protection and relief afforded by this Agreement regarding such information.

        (iii)  Inclusions. Confidential Information includes, without limitation, the following information (including without limitation, compilations or collections of information) relating or belonging to any Company Party (as well as their clients, customers and/or vendors) and created, prepared, accessed, used or reviewed by the Executive during or after the Employment Period: (1) product and manufacturing information, such as ingredients, combinations of ingredients and manufacturing processes; (2) scientific and technical information, such as research and development, tests and test results, formulae and formulations, studies and analysis; (3) financial and cost information, such as operating and production costs, costs of goods sold, costs of supplies and manufacturing materials, non-public financial statements and reports, profit and loss information, margin information and financial performance information; (4) customer related information, such as customer related contracts, engagement and scope of work letters, proposals and presentations, customer-related contacts, lists, identities and prospects, practices, plans, histories, requirements and needs, price information and formulae and information concerning client or customer products, services, businesses or equipment specifications; (5) vendor and supplier related information, such as the identities, practices, history or services of any vendors or suppliers and vendor or supplier contacts; (6) sales, marketing and price information, such as marketing and sales programs and related data, sales and marketing strategies and plans, sales and marketing procedures and processes, pricing methods, practices and techniques and pricing schedules and lists; (7) database, software and other computer related information, such as computer programs, data, compilations of information and records, software and computer files, presentation software and computer-stored or backed-up information including, but not limited to, e-mails,

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databases, word processed documents, spreadsheets, notes, schedules, task lists, images and video; (8) employee-related information, such as lists or directories identifying employees, representatives and contractors, and information regarding the competencies (knowledge, skill, experience), compensation and needs of employees, representatives and contractors and training methods; and (9) business- and operation-related information, such as operating methods, procedures, techniques, practices and processes, information about acquisitions, corporate or business opportunities, information about partners and potential investors, strategies, projections and related documents, contracts and licenses and business records, files, equipment, notebooks, documents, memoranda, reports, notes, sample books, correspondence, lists and other written and graphic business records.

        (e)   "Misappropriate", or any form thereof, means:

        (i)    the acquisition of any Confidential Information by a Person who knows or has reason to know that the Confidential Information was acquired by theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means (each, an "Improper Means"); or

        (ii)   the disclosure or use of any Confidential Information without the express consent of the Company by a Person who (A) used Improper Means to acquire knowledge of the Confidential Information, (B) at the time of disclosure or use, knew or had reason to know that his or her knowledge of the Confidential Information was (x) derived from or through a Person who had utilized Improper Means to acquire it, (y) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use or (z) derived from or through a Person who owed a duty to the Company to maintain its secrecy or limit its use or (C) before a material change of his or her position, knew or had reason to know that it was Confidential Information and that knowledge of it had been acquired by accident or mistake.

        (f)    "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity.

        (g)   "Restricted Period" means the longer of (i) twelve (12) months after the date of termination of employment (the Executive's last day of work for the Company) or (ii) the period during which the Executive is receiving payments from the Company pursuant to Section 4 hereof.

        (h)   "Work Product" means all patents and patent applications, all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, creative works, discoveries, software, computer programs, modifications, enhancements, know-how, formulations, concepts and ideas, and all similar or related information (in each case whether or not patentable), all copyrights and copyrightable works, all trade secrets, confidential information, and all other intellectual property and intellectual property rights that are conceived, reduced to practice, developed or made by the Executive either alone or with others in the course of employment with the Company (including employment prior to the date of this Agreement).

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        5.5   Remedies. Because the Executive's services are unique and because the Executive has access to Confidential Information, the Executive acknowledges and agrees that if the Executive breaches any of the provisions of Section 5 hereof, the Company may suffer immediate and irreparable harm for which monetary damages alone will not be a sufficient remedy. The restrictive covenants stated in Section 5 hereof are without prejudice to the Company's rights and causes of action at law.

        5.6   Interpretation; Severability.

        (a)   The Executive has carefully considered the possible effects on the Executive of the covenants not to compete, the confidentiality provisions and the other obligations contained in this Agreement, and the Executive recognizes that the Company has made every effort to limit the restrictions placed upon the Executive to those that are reasonable and necessary to protect the Company's legitimate business interests.

        (b)   The Executive acknowledges and agrees that the restrictive covenants set forth in this Agreement are reasonable and necessary in order to protect the Company's valid business interests. It is the intention of the parties hereto that the covenants, provisions and agreements contained herein shall be enforceable to the fullest extent allowed by law. If any covenant, provision or agreement contained herein is found by a court having jurisdiction to be unreasonable in duration, scope or character of restrictions, or otherwise to be unenforceable, such covenant, provision or agreement shall not be rendered unenforceable thereby, but rather the duration, scope or character of restrictions of such covenant, provision or agreement shall be deemed reduced or modified with retroactive effect to render such covenant, provision or agreement reasonable or otherwise enforceable (as the case may be), and such covenant, provision or agreement shall be enforced as modified. If the court having jurisdiction will not review the covenant, provision or agreement, the parties hereto shall mutually agree to a revision having an effect as close as permitted by applicable law to the provision declared unenforceable. The parties hereto agree that if a court having jurisdiction determines, despite the express intent of the parties hereto, that any portion of the covenants, provisions or agreements contained herein are not enforceable, the remaining covenants, provisions and agreements herein shall be valid and enforceable. Moreover, to the extent that any provision is declared unenforceable, the Company shall have any and all rights under applicable statutes or common law to enforce its rights with respect to any and all Confidential Information or unfair competition by the Executive.

        6.     Miscellaneous.

        6.1   Public Statements.

        (a)   Media Nondisclosure. The Executive agrees that during the Employment Period or at any time thereafter, except as may be authorized in writing by the Company, the Executive will not directly or indirectly disclose or release to the Media any information concerning or relating to any aspect of the Executive's employment or termination from employment with the Company and/or any aspect of any dispute that is the subject of this Agreement. For the purposes of this Agreement, the term "Media" includes, without limitation, any news organization, station, publication, show, website, web log (blog), bulletin board, chat room and/or program (past, present and/or future), whether published through the means of print, radio, television and/or the Internet or otherwise, and any member, representative, agent and/or employee of the same.

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        (b)   Non-Disparagement. The Executive agrees that during the Employment Period or at any time thereafter, the Executive will not make any statements, comments or communications in any form, oral, written or electronic to any Media or any customer, client or supplier of the Company or any of its Affiliates, which would constitute libel, slander or disparagement of the Company or any of its Affiliates, including, without limitation, any such statements, comments or communications that criticize, ridicule or are derogatory to the Company or any of its Affiliates; provided, however, that the terms of this Section 6.1(b) shall not apply to communications between the Executive and, as applicable, the Executive's attorneys or other persons with whom communications would be subject to a claim of privilege existing under common law, statute or rule of procedure. The Executive further agrees that the Executive will not in any way solicit any such statements, comments or communications from others.

        6.2   ARBITRATION. SUBJECT TO THE RIGHTS UNDER SECTION 6.3 HEREOF TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF, BINDING ARBITRATION SHALL BE THE EXCLUSIVE REMEDY FOR ANY AND ALL DISPUTES, CLAIMS OR CONTROVERSIES, WHETHER STATUTORY, CONTRACTUAL OR OTHERWISE, BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE EXECUTIVE'S EMPLOYMENT BY OR TERMINATION FROM THE COMPANY (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, OR THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) (COLLECTIVELY, "DISPUTES"). THE PARTIES EACH WAIVE THE RIGHT TO A JURY TRIAL AND WAIVE THE RIGHT TO ADJUDICATE THEIR DISPUTES UNDER THIS AGREEMENT OUTSIDE THE ARBITRATION FORUM PROVIDED FOR IN THIS AGREEMENT, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT. In the event either party provides a notice of arbitration of any dispute to the other party, the parties agree to submit that dispute to a single arbitrator selected from a panel of arbitrators of JAMS located in greater New York City-Southern New Jersey area. The arbitration will be governed by the JAMS Comprehensive Arbitration Rules and Procedures in effect at the time the arbitration is commenced. If for any reason JAMS cannot serve as the arbitration administrator, the Company may select an alternative arbitration administrator such as the American Arbitration Association, to serve under the terms of this Agreement.

        (a)   VENUE. THE PARTIES STIPULATE AND AGREE THAT THE EXCLUSIVE VENUE OF ANY SUCH ARBITRATION PROCEEDING (AND OF ANY OTHER PROCEEDING, INCLUDING ANY COURT PROCEEDING, UNDER THIS AGREEMENT) SHALL BE PASSAIC COUNTY, NEW JERSEY (THE "AGREED VENUE").

        (b)   Authority and Decision. The arbitrator shall have the authority to award the same damages and other relief that a court could award. The arbitrator shall issue a reasoned award explaining the decision and any damages awarded. The arbitrator's decision will be final and binding upon the parties and enforceable by a court of competent jurisdiction. The parties will abide by and perform any award rendered by the arbitrator. In rendering the award, the arbitrator shall state the reasons therefor, including (without limitation) any computations of actual damages or offsets, if applicable.

        (c)   Fees and Costs. In the event of arbitration under the terms of this Agreement, the fees charged by JAMS or other arbitration administrator and the arbitrator shall be borne by the parties as determined by the arbitrator, except for any initial registration fee, which the parties shall bear equally. Otherwise, the parties shall each bear their own costs, expenses and attorneys' fees incurred in arbitration; provided, however, that the prevailing party shall be entitled to recover and have awarded its attorneys' fees, court costs, arbitration expenses, and its portion of the fees and costs charged by JAMS or other arbitration administrator, regardless of which party initiated the proceedings, in addition to any other relief to which it may be entitled.

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        (d)   Limited Scope. The following are excluded from binding arbitration under this Agreement: claims for workers' compensation benefits or unemployment benefits; replevin; and claims for which a binding arbitration agreement is invalid as a matter of law.

        6.3   Injunctive Relief. The parties hereto may seek injunctive relief in arbitration; provided, however, that as an exception to the arbitration agreement set forth in Section 6.2 hereof, the parties, in addition to all other available remedies, shall each have the right to initiate an action in any court of competent jurisdiction in order to request injunctive or other equitable relief regarding the terms of Sections 5 or 6.2 hereof. The exclusive venue of any such proceeding shall be in the Agreed Venue. The parties agree (a) to submit to the jurisdiction of any competent court in the Agreed Venue, (b) to waive any and all defenses the Executive may have on the grounds of lack of jurisdiction of such court and (c) that neither party shall be required to post any bond, undertaking or other financial deposit or guarantee in seeking or obtaining such equitable relief. Evidence adduced in any such proceeding for an injunction may be used in arbitration as well. The existence of this right shall not preclude or otherwise limit the applicability or exercise of any other rights and remedies that a party hereto may have at law or in equity.

        6.4   Settlement of Existing Rights. In exchange for the other terms of this Agreement, the Executive acknowledges and agrees that: (a) the Executive's entry into this Agreement is a condition of employment and/or continued employment with the Company, as applicable; (b) except as otherwise provided herein, this Agreement will replace any existing employment agreement between the parties and thereby act as a novation, if applicable; (c) the Executive is being provided with access to Confidential Information, including, without limitation, proprietary trade secrets of one or more Company Parties, to which the Executive has not previously had access; (d) all Company inventions and intellectual property developed by the Executive during any past employment with the Company and all goodwill developed with the Company's clients, customers and other business contacts by the Executive during any past employment with Company, as applicable, is the exclusive property of the Company; and (e) all Confidential Information and/or specialized training accessed, created, received or utilized by the Executive during any past employment with Company, as applicable, will be subject to the restrictions on Confidential Information described in this Agreement, whether previously so agreed or not.

        6.5   Entire Agreement; Waiver. This Agreement contains the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior understandings or agreements, whether written or oral. No modification or addition hereto or waiver or cancellation of any provision hereof shall be valid except by a writing signed by the party to be charged therewith. No delay on the part of any party to this Agreement in exercising any right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiver of such right or privilege.

        6.6   Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without regard to principles of conflict of laws.

        6.7   Successors and Assigns; Binding Agreement. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, personal representatives, successors and permitted assigns. This Agreement is a personal contract, and, except as specifically set forth herein, the rights and interests of the Executive herein may not be sold, transferred, assigned, pledged or hypothecated by any party without the prior written consent of the others. As used herein, the term "successor" as it relates to the Company, shall include, but not be limited to, any successor by way of merger, consolidation or sale of all or substantially all of such Person's assets or equity interests.

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        6.8   Representation by Counsel; Independent Judgment. Each of the parties hereto acknowledges that (a) it or the Executive has read this Agreement in its entirety and understands all of its terms and conditions, (b) it or the Executive has had the opportunity to consult with any individuals of its or the Executive's choice regarding its or the Executive's agreement to the provisions contained herein, including legal counsel of its or the Executive's choice, and any decision not to was the Executive's or its alone and (c) it or the Executive is entering into this Agreement of its or the Executive's own free will, without coercion from any source, based upon its or the Executive's own independent judgment.

        6.9   Interpretation. The parties and their respective legal counsel actively participated in the negotiation and drafting of this Agreement, and in the event of any ambiguity or mistake herein, or any dispute among the parties with respect to the provisions hereto, no provision of this Agreement shall be construed unfavorably against any of the parties on the ground that the Executive, it, or the Executive's or its counsel was the drafter thereof.

        6.10 Survival. The provisions of Sections 4.3(e), 5 and 6 hereof shall survive the termination of this Agreement.

        6.11 Notices. All notices and communications hereunder shall be in writing and shall be deemed properly given and effective when received, if sent by facsimile or telecopy, or by postage prepaid by registered or certified mail, return receipt requested, or by other delivery service which provides evidence of delivery, as follows:

If to the Company, to:

Linens 'n Things, Inc.
6 Brighton Road
Clifton, New Jersey 07015
Attention: General Counsel

with a copy (which shall not constitute notice) to:

Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas 75201-4761
Attention: Ronald M. Gaswirth, Esq.
Telephone: (214) 999-4601
Facsimile: (214) 999-3601
E-mail: rgaswirth@gardere.com

If to the Executive, to:

F. David Coder
at the most recent address of the
Executive on file with the Company

or to such other address as one party may provide in writing to the other party from time to time.

        6.12 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Facsimile transmission of any signed original document or retransmission of any signed facsimile transmission will be deemed the same as delivery of an original. At the request of any party, the parties will confirm facsimile transmission by signing a duplicate original document.

        6.13 Captions. Paragraph headings are for convenience only and shall not be considered a part of this Agreement.

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        6.14 No Third Party Beneficiary Rights. Except as otherwise provided in this Agreement, no entity shall have any right to enforce any provision of this Agreement, even if indirectly benefited by it.

        6.15 Withholding. Any payments provided for hereunder shall be paid net of any applicable withholding required under Federal, state or local law and any additional withholding to which Executive has agreed.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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        IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, on the Execution Date to be effective for all purposes as of the Effective Date.

LINENS 'N THINGS, INC.
By:	/s/  ROBERT J. DINICOLA
	Name:	Robert J. DiNicola
	Title:	Chairman and Chief Executive Officer
EXECUTIVE
/s/ F. DAVID CODER Name: F. David Coder

EXHIBIT A

Definition of Change of Control

        "Change of Control" means:

        (1)   any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders or their Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of Holding or any successor company, including, without limitation, through a merger or consolidation or purchase of Voting Stock of Holding; provided that none of the Permitted Holders or their Related Parties have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board; provided further that the transfer of 100% of the Voting Stock of Holding to a Person that has an ownership structure identical to that of Holding prior to such transfer, such that Holding becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control;

        (2)   after an initial public offering of Capital Stock of Holding, during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by such Board or whose nomination for election by the stockholders of Holding was approved by a vote of a majority of the directors of Holding then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board then in office;

        (3)   the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of Holding and its Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or

        (4)   the adoption of a plan relating to the liquidation or dissolution of Holding.

        For purposes of this definition, the following terms shall have the meanings set forth below:

        An "Affiliate" of any specified Person means any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled thereby or any of the partners thereof.

"Board" means the Board of Directors of Holding or any committee thereof duly authorized to act on behalf of such Board of Directors.

"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Holding" means Linens Holding Co., a Delaware corporation.

A-1

"Permitted Holder" means any of Apollo, NRDC Real Estate Advisors I, LLC or Silver Point Capital Fund Investments, LLC.

"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity.

"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.

"Related Party" means:

        (1)   any controlling stockholder, 50% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or

        (2)   any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 50% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).

"Subsidiary" means, with respect to any specified Person:

        (1)   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

        (2)   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).

"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.

        Notwithstanding anything to the contrary in this Exhibit A, the definition of Change of Control shall be interpreted consistently with the definition of "Change of Control" contained in Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations and guidance issued by the Internal Revenue Service under Section 409A of the Code, including IRS Notice 2005-1.

A-2

EXHIBIT B

Fringe Benefits

1.

Health insurance in accordance with the Company's health insurance plan or program in effect from time to time.

2.

Prescription drug coverage in accordance with the Company's health insurance plan or program, or separate prescription drug coverage plan or program, in effect from time to time.

3.

Dental insurance in accordance with the Company's dental insurance plan or program in effect from time to time.

4.

Long-term disability insurance in accordance with the Company's long-term disability insurance plan or program in effect from time to time.

5.

Eligibility for life insurance coverage in amount equal to one and one half (1.5) times Base Salary, subject to a bi-weekly payroll deduction for the premium and completion by the Executive of any authorization documentation.

6.

Cellular telephone and service.

7.

Annual financial planning services through Joel Isaacson Company, or a reasonable substitute therefor, as may be determined by the Company from time to time.

B-1

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EMPLOYMENT AGREEMENT
EXHIBIT A Definition of Change of Control
EXHIBIT B Fringe Benefits

EX-10.10

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Exhibit 10.10

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

        THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is entered into on May 9, 2006 (the "Execution Date"), to be effective for all purposes as of May 1, 2006 (the "Effective Date"), by and between Linens 'n Things, Inc., a Delaware corporation (the "Company") and wholly owned subsidiary of Linens Holding Co., a Delaware corporation ("Holding"), and F. David Coder (the "Executive").

        WHEREAS, the Company and the Executive entered in an Employment Agreement on April 20, 2006, effective as of April 3, 2006 (the "Original Employment Agreement"); and

        WHEREAS, the Company and the Executive now desire to amend certain provisions of the Original Employment Agreement and restate the Original Employment Agreement, as so amended, effective as of the Effective Date.

        NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

        1.     Employment of Executive; Duties.

        1.1   Title. During the Employment Period (as defined in Section 2 hereof), the Executive shall serve as Executive Vice President, Store Operations of the Company and of Holding. The Executive shall have the normal duties, responsibilities and authority commensurate with such positions.

        1.2   Duties. During the Employment Period, the Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities of the Executive's positions and shall render such services on the terms set forth herein. In addition, the Executive shall have such other executive and managerial powers and duties as may reasonably be assigned to the Executive, commensurate with the Executive serving as an Executive Vice President. The Company may adjust the duties and responsibilities of the Executive as an Executive Vice President, notwithstanding the specific title set forth in Section 1.1 hereof, based upon the Company's needs from time to time. Except for sick leave, reasonable vacations and excused leaves of absence, the Executive shall, throughout the Employment Period, devote substantially all the Executive's working time, attention, knowledge and skills faithfully, and to the best of the Executive's ability, to the duties and responsibilities of the Executive's positions in furtherance of the business affairs and activities of the Company and its subsidiaries and Affiliates (as defined in Section 5.4(a) hereof) and, except where the Company provides its written consent otherwise, shall maintain the Executive's principal residence within 75 miles of the principal office of the Company as of the Effective Date. The Executive shall at all times be subject to, comply with, observe and carry out (a) the Company's rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time and (b) such rules, regulations, policies, codes of ethics and/or conduct, directions and restrictions as the Board of Directors of the Company (the "Board") may from time to time reasonably establish or approve for senior executive officers of the Company.

        2.     Term of Employment.

        2.1   Employment Period. The employment of the Executive hereunder shall continue until December 31, 2007 (the "Initial Employment Period"), unless terminated earlier in accordance with the provisions of Section 4 of this Agreement.

        2.2   Extension. Unless terminated earlier in accordance with the provisions of Section 4 of this Agreement, the employment of the Executive hereunder shall continue after the end of the Initial Employment Period for additional one (1)-year periods (each an "Extension Period" and, together with the Initial Employment Period, the "Employment Period"), unless the Company or the Executive notifies the other in writing not less than one (1) year prior to the end of the Initial Employment Period, or the end of the applicable Extension Period, of its or the Executive's election, in its or the Executive's sole discretion, not to extend the Employment Period.

        3.     Compensation and General Benefits.

        3.1   Base Salary.

        (a)   During the Employment Period, the Company agrees to pay to the Executive an annual base salary in an amount equal to $400,000 (such base salary, as may be adjusted from time to time pursuant to Section 3.1(b), is referred to herein as the "Base Salary"). The Executive's Base Salary, less amounts required to be withheld under applicable law, shall be payable in equal installments in accordance with the Company's normal payroll practices and procedures in effect from time to time for the payment of salaries to officers of the Company, but in no event less frequently than monthly.

        (b)   The Board or the Compensation Committee established by the Board (the "Compensation Committee") shall review the Executive's performance on an annual basis and, based on such review, may change the Base Salary, as it, acting in its sole discretion, shall determine to be reasonable and appropriate.

        3.2   Bonus. With respect to the 2006 calendar year and with respect to each calendar year that commences during the Employment Period, the Executive shall be eligible to receive from the Company an annual performance bonus (the "Annual Bonus") on a basis and in an amount to be determined by the Board or the Compensation Committee in the exercise of its sole discretion for the applicable year. The target Annual Bonus, if any, will be 50% of the Base Salary. Any Annual Bonus earned shall be payable in full as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures. Except as otherwise expressly provided in Section 4 hereof, any Annual Bonus (or portion thereof) payable under this Section 3.2 shall not be payable unless the Executive is employed by the Company on the last day of the period to which such Annual Bonus relates.

        3.3   Expenses. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this Section 3 or elsewhere herein, the Executive shall be entitled to receive reimbursement from the Company for all reasonable and necessary expenses incurred by the Executive in performing the Executive's duties hereunder on behalf of the Company, subject to, and consistent with, the Company's policies for expense payment and reimbursement, in effect from time to time.

        3.4   Fringe Benefits. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this Section 3 or elsewhere herein, the Executive shall be entitled to participate in, and to receive benefits under, (a) any benefit plans, arrangements or policies made available by the Company to its employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of each such plan, arrangement or policy and (b) without limiting the foregoing, the benefits set forth on Exhibit B attached hereto.

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        3.5   Stock Options. During the Employment Period and subject to the approval of the Option Committee of Holding, as defined in the Linens Holding Co. Stock Option Plan (the "Plan"), the Executive shall be eligible to participate in and be granted stock options under the Plan to purchase shares of Common Stock, par value $0.01 per share, of Holding (the "Common Stock").

        4.     Termination.

        4.1   General. The employment of the Executive hereunder (and the Employment Period) shall terminate as provided in Section 2 hereof, unless earlier terminated in accordance with the provisions of this Section 4.

        4.2   Death or Disability of the Executive.

        (a)   The employment of the Executive hereunder (and the Employment Period) shall terminate upon (i) the death of the Executive and (ii) at the option of the Company, upon not less than fifteen (15) days' prior written notice to the Executive or the Executive's personal representative or guardian, if the Executive suffers a "Total Disability" (as defined in Section 4.2(b) hereof). Upon termination for death or Total Disability, subject to reduction by any benefits paid or payable to the Executive, the Executive's beneficiaries or estate under any Company-sponsored disability benefit plan program or policy for the period following such date of termination, (A) the Company shall pay to the Executive, guardian or personal representative, as the case may be, the Executive's current Base Salary for the remainder of the Employment Period in effect immediately prior to the date of termination and (B) subject further to the sole discretion of the Board or the Compensation Committee, the Company may also pay to the Executive, guardian or personal representative, as the case may be, a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had the Executive worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. Any bonus shall be payable as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures.

        (b)   For purposes of this Agreement, "Total Disability" shall mean (i) if the Executive is subject to a legal decree of incompetency (the date of such decree being deemed the date on which such disability occurred), (ii) the written determination by a physician selected by the Company that, because of a medically determinable disease, injury or other physical or mental disability, the Executive is unable substantially to perform, with or without reasonable accommodation, the material duties of the Executive required hereby, and that such disability has lasted for ninety (90) consecutive days or any one hundred twenty (120) days during the immediately preceding twelve (12)-month period or is, as of the date of determination, reasonably expected to last six (6) months or longer after the date of determination, in each case based upon medically available reliable information or (iii) Executive's qualifying for benefits under the Company's long-term disability coverage, if any. In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive hereby consents to (x) any examinations that the Board or the Compensation Committee determines are relevant to a determination of whether the Executive is mentally and/or physically disabled or are required by the Company physician, (y) furnish such medical information as may be reasonably requested and (z) waive any applicable physician patient privilege that may arise because of such examination.

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        (c)   With respect to outstanding stock options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.2, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the one hundred eighty (180)-day period following such date of termination.

        (d)   With respect to any shares of Common Stock held by the Executive that are vested as of the date of termination pursuant to this Section 4.2 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.2(c) hereof), for the two hundred seventy (270)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive or the Executive's beneficiary, as applicable, and the Executive or the Executive's beneficiary hereby agrees to sell any or all such shares to the Company (or the Company's designee) for an amount equal to the product of (i) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (ii) the number of shares so purchased.

        4.3   Termination by the Company Without Cause or Resignation by the Executive For Good Reason.

        (a)   The Company may terminate the Executive's employment without "Cause" (as defined in Section 4.3(g)), and thereby terminate the Executive's employment (and the Employment Period) under this Agreement at any time with no requirement for notice to the Executive.

        (b)   The Executive may resign, and thereby terminate the Executive's employment (and the Employment Period), at any time for "Good Reason" (as defined in Section 4.3(f) hereof), upon not less than sixty (60) days' prior written notice to the Company specifying in reasonable detail the reason therefore; provided, however, that the Company shall have a reasonable opportunity to cure any such Good Reason (to the extent possible) within sixty (60) days after the Company's receipt of such notice; and provided further that, if the Company is not seeking to cure, the Company shall not be obligated to allow the Executive to continue working during such period and may, in its sole discretion, accelerate such termination of employment (and the Employment Period) to any date during such period.

        (i)    Executive may not terminate employment under this Agreement for Good Reason regarding any of the Company's acts or omissions of which Executive had actual notice for sixty (60) days or more prior to giving notice of termination for Good Reason.

        (ii)   A determination of whether the Executive legitimately has Good Reason for termination of the Executive's employment under this Agreement, and of whether the Company has effectively cured and thus eliminated the grounds for such Good Reason, shall be made only by the Chief Executive Officer of the Company (the "Chief Executive Officer"), within the Chief Executive Officer's sole judgment and discretion, acting in good faith after having met with the Company's Vice President of Human Resources.

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        (c)   In the event the Executive's employment is terminated pursuant to this Section 4.3, then, subject to Section 4.3(d) hereof, the following provisions shall apply:

        (i)    The Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the year of termination) had the Executive remained in the employ of the Company until the expiration of the Employment Period in effect immediately prior to the date of termination, with all such amounts payable in accordance with the Company's normal payroll practices and procedures in the same manner and at the same time as though the Executive remained employed by the Company.

        (ii)   If such termination occurs upon or within six (6) months following a Change of Control (as defined in Exhibit A attached hereto), the Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the year of termination) for the greater of (A) the period set forth in Section 4.3(c)(i) hereof or (B) a two (2)-year period following such date of termination, with all such amounts payable in accordance with the Company's normal payroll practices and procedures in the same manner and at the same time as though the Executive remained employed by the Company.

        (iii)  In the event the Executive's employment is terminated pursuant to this Section 4.3 without Cause, and if the Company has previously effected reductions in the Executive's Base Salary and the base salary of all executives at the same level as the Executive, which reductions were substantially similar, then the Base Salary rate for purposes of Section 4.3(c)(i) or (ii) hereof shall be the Base Salary rate in effect immediately prior to such reductions.

        (iv)  Subject to the sole discretion of the Board or the Compensation Committee, the Company may pay to the Executive a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had the Executive worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. The bonus shall be payable as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures.

        (v)   With respect to outstanding options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.3, (A) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (B) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.

        (vi)  With respect to any shares of Common Stock held by the Executive that are vested as of the date of termination pursuant to this Section 4.3 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.3(c)(v) hereof), for the one hundred eighty (180)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive, and the Executive hereby agrees to sell any or all such shares to the Company (or the Company's designee), for an amount equal to the product of (A) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (B) the number of shares so purchased.

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        (d)   As a condition precedent to the Executive's right to receive the benefits set forth in Section 4.3(c) hereof, the Executive agrees to execute a release of the Company and its respective Affiliates, officers, directors, stockholders, employees, agents, insurers, representatives and successors from and against any and all claims that the Executive may have against any such Person (as defined in Section 5.4(f) hereof) relating to the Executive's employment by the Company and the termination thereof, such release to be in form and substance reasonably satisfactory to the Company.

        (e)   Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment, vesting, distribution or transfer by the Company or any successor, or any Affiliate of the foregoing or by any other Person or that any other event occurring with respect to the Executive and the Company for the Executive's benefit, whether paid or payable or distributed or distributable under the terms of this Agreement or otherwise (including under any employee benefit plan) (a "Payment") would be subject to or result in the imposition of the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (and any regulations or guidance promulgated or issued thereunder, any successor provision, and any similar provision of state or local income tax law) (collectively, the "Excise Tax"), then the amount of the Payment shall be reduced to the highest amount that may be paid by the Company or other entity without subjecting any such Payment to the Excise Tax (the "Payment Reduction"). The Executive shall have the right to designate those payments or benefits that shall be reduced or eliminated under the Payment Reduction to avoid the imposition of the Excise Tax, subject to the confirmation of the Accounting Firm (as defined herein) with respect to the intended effect thereof.

        (i)    Subject to the provisions of Section 4.3(e)(ii), all determinations required to be made under this Section 4.3(e), including whether and when a Payment is subject to Section 4999 and the assumptions to be utilized in arriving at such determination and in determining an appropriate Payment Reduction, shall be made by KPMG LLP, or any other nationally recognized accounting firm that shall be the Company's outside auditors at the time of such determination (the "Accounting Firm"), which Accounting Firm shall provide detailed supporting calculations to the Executive and the Company within fifteen (15) business days of the receipt of notice from the Company or the Executive that there will be a Payment that the Person giving notice believes may be subject to the Excise Tax. All fees and expenses of the Accounting Firm shall be borne by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive in determining whether a Payment Reduction is required and the amount thereof (subject to Sections 4.3(e)(ii) and (iii)), in the absence of material mathematical or legal error.

        (ii)   As a result of uncertainty in the application of Section 4999 that may exist at the time of the initial determination by the Accounting Firm, it may be possible that in making the calculations required to be made hereunder, the Accounting Firm shall determine that a Payment Reduction need not be made that properly should be made (an "Overpayment") or that a Payment Reduction not properly needed to be made should be made (an "Underpayment"). If, within seventy-five (75) days after the Accounting Firm's initial determination under Section 4.3(e)(i), the Accounting Firm shall determine that an Overpayment was made, any such Overpayment shall be treated for all purposes, to the extent practicable and subject to applicable law, as a loan to the Executive with interest at the applicable Federal rate provided for in Section 1274(d) of the Code and shall be

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repaid by the Executive to the Company within thirty-five (35) days after the Executive receives notice of the Accounting Firm's determination; provided, however, that the amount to be repaid by the Executive to the Company either as a loan or otherwise as a lump sum payment (where a loan is not practicable or permitted by law) shall be reduced to the extent that any portion of the Overpayment to be repaid will not be offset by a corresponding reduction in tax by reason of such repayment of the Overpayment. If the Accounting Firm shall determine that an Underpayment was made, any such Underpayment shall be due and payable by the Company to the Executive within thirty-five (35) days after the Company receives notice of the Accounting Firm's determination.

        (iii)  The Executive shall give written notice to the Company of any claim by the Internal Revenue Service that, if successful, would require the payment by the Executive of an Excise Tax, such notice to be provided within fifteen (15) days after the Executive shall have received written notice of such claim. The Executive shall cooperate with the Company in determining whether to contest or pay such claim and shall not pay such claim without the written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.

        (iv)  This Section 4.3(e) shall remain in full force and effect following the termination of the Executive's employment for any reason until the expiration of the statute of limitations on the assessment of taxes applicable to the Executive for all periods in which the Executive may incur a liability for taxes (including Excise Taxes), interest or penalties arising out of the operation of this Agreement.

        (f)    For purposes of this Agreement, the Executive would be entitled to terminate the Executive's employment for "Good Reason" if without the Executive's prior written consent:

        (i)    the Company fails to comply with any material obligation imposed by this Agreement;

        (ii)   the Company changes the Executive's position from that of an Executive Vice President; provided, however, that (A) a change in the Executive's duties or responsibilities without a change in the Executive's position as an Executive Vice President shall not constitute Good Reason and (B) nothing herein shall prohibit the Company from changing the Executive's specific title as an Executive Vice President, notwithstanding the specific title set forth in Section 1.1 hereof, based upon the Company's needs from time to time; or

        (iii)  the Company effects a reduction in the Executive's Base Salary, unless all executives at the same level as the Executive receive a substantially similar reduction in base salary.

        (g)   For purposes of this Agreement, "Cause" means the occurrence of any one or more of the following events, and the Company shall have the sole discretion to determine the existence of Cause:

        (i)    a failure by the Executive to comply with any obligation under this Agreement;

        (ii)   the Executive's being indicted for (A) any felony or (B) any misdemeanor that causes or is likely to cause harm or embarrassment to the Company or any of its Affiliates, in the reasonable judgment of the Board;

        (iii)  theft, embezzlement or fraud by the Executive in connection with the performance of the Executive's duties hereunder;

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        (iv)  the Executive's engaging in any activity that gives rise to a material conflict with the Company or any of its Affiliates;

        (v)   the misappropriation by the Executive of any material business opportunity of the Company or any of its Affiliates;

        (vi)  any failure to comply with, observe or carry out the Company's rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time, including (without limitation) those regarding conflicts, potential conflicts of interest or the appearance of a conflict of interest

        (vii) any failure to comply with, observe or carry out the rules, regulations, policies, directions, codes of ethics and/or conduct and restrictions established or approved by the Board from time to time for senior executive officers of the Company, including (without limitation) those regarding conflicts, potential conflicts of interest or the appearance of a conflict of interest;

        (viii) substance abuse or use of illegal drugs that, in the reasonable judgment of the Board, (A) impairs the Executive's performance of the Executive's duties hereunder or (B) causes or is likely to cause harm or embarrassment to the Company or any of its Affiliates; and

        (ix)  engagement in conduct that Executive knows or should know is injurious to the Company or any of its Affiliates.

        4.4   Termination For Cause, Voluntary Resignation Other Than For Good Reason or Election Not to Extend the Employment Period.

        (a)   (i) The Company may, upon action of the Board, terminate the employment of the Executive (and the Employment Period) at any time for "Cause," (ii) the Executive may voluntarily resign other than for Good Reason and thereby terminate the Executive's employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30)-days' prior written notice or (iii) either the Company or the Executive may elect not to extend or further extend the Employment Period pursuant to Section 2.2 hereof.

        (b)   The following provisions shall apply upon termination by the Company for Cause, by the Executive as the result of resignation for other than for Good Reason, or by the Company or the Executive at the end of the Employment Period as the result of an election not to extend or further extend the Employment Period:

        (i)    The Executive shall be entitled to receive all amounts of earned but unpaid Base Salary and benefits accrued through the date of such termination. Except as provided below, all other rights of the Executive (and all obligations of the Company) hereunder shall terminate as of the date of such termination.

        (ii)   With respect to outstanding options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.4, (A) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (B) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.

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        (iii)  With respect to any shares of Common Stock held by the Executive that are vested as of the date of termination pursuant to this Section 4.4 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.4(b)(ii) hereof), for the one hundred eighty (180)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive and the Executive hereby agrees to sell any or all such shares to the Company (or the Company's designee) for an amount equal to the product of (A) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (B) the number of shares so purchased.

        4.5   Resignation from Officer Positions. Upon the termination of the Executive's employment for any reason (unless otherwise agreed in writing by the Company and the Executive), the Executive will be deemed to have resigned, without any further action by the Executive, from any and all officer, director and/or director positions that the Executive, immediately prior to such termination, (a) held with the Company or any of its Affiliates and (b) held with any other entities at the direction of, or as a result of the Executive's affiliation with, the Company or any of its Affiliates. If for any reason this Section 4.5 is deemed to be insufficient to effectuate such resignations, then Executive will, upon the Company's request, execute any documents or instruments that the Company may deem necessary or desirable to effectuate such resignations. In addition, the Executive hereby designates the Secretary or any Assistant Secretary of the Company and of any Affiliate to execute any such documents or instruments as the Executive's attorney-in-fact to effectuate such resignations if execution by the Secretary or any Assistant Secretary of the Company or Affiliate is deemed by the Company or the Affiliate to be a more expedient means to effectuate such resignation or resignations.

        4.6   Section 409A of the Code. Notwithstanding anything to the contrary in this Agreement, the parties mutually desire to avoid adverse tax consequences associated with the application of Section 409A of the Code to this Agreement and agree to cooperate fully and take appropriate reasonable actions to avoid any such consequences under Section 409A of the Code, including delaying payments and reforming the form of the Agreement if such action would reduce or eliminate taxes and/or interest payable as a result of Section 409A of the Code. In this regard, notwithstanding anything to the contrary in this Section 4, to the extent necessary to comply with Section 409A of the Code, any payment required under this Section 4 shall be deferred for a period of six (6) months, regardless of the circumstances giving rise to or the basis for such payment.

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        5.     Confidentiality, Work Product and Non-Competition and Non-Solicitation.

        5.1   Confidentiality.

        (a)   In connection with the Executive's employment with the Company, the Company promises to provide the Executive with access to "Confidential Information" (as defined in Section 5.4(d) hereof) in support of the Executive's employment duties. The Executive recognizes that the Company's business interests require a confidential relationship between the Company and the Executive and the fullest practical protection and confidential treatment of all Confidential Information. At all times, both during and after the Employment Period, the Executive shall not directly or indirectly: (i) appropriate, download, print, copy, remove, use, disclose, divulge, communicate or otherwise "Misappropriate" (as defined in Section 5.4(e) hereof) any Confidential Information, including, without limitation, originals or copies of any Confidential Information, in any media or format, except for the Company's benefit within the course and scope of the Executive's employment or with the prior written consent of the Chief Executive Officer; or (ii) take or encourage any action that would circumvent, interfere with or otherwise diminish the value or benefit of the Confidential Information to any of the Company Parties (as defined in Section 5.4(b) hereof).

        (b)   All Confidential Information, and all other information and property affecting or relating to the business of the Company Parties within the Executive's possession, custody or control, regardless of form or format, shall remain, at all times, the property of the respective Company Parties, the appropriation, use and/or disclosure of which is governed and restricted by this Agreement.

        (c)   The Executive acknowledges and agrees that:

        (i)    the Executive occupies a unique position within the Company, and the Executive is and will be intimately involved in the development and/or implementation of Confidential Information;

        (ii)   in the event the Executive breaches this Section 5.1 with respect to any Confidential Information, such breach shall be deemed to be a Misappropriation of such Confidential Information; and

        (iii)  any Misappropriation of Confidential Information will result in immediate and irreparable harm to the Company.

        (d)   Upon receipt of any formal or informal request, by legal process or otherwise, seeking the Executive's direct or indirect disclosure or production of any Confidential Information to any Person, the Executive shall promptly and timely notify the Company and provide a description and, if applicable, hand deliver a copy of such request to the Company. The Executive irrevocably nominates and appoints the Company as the Executive's true and lawful attorney-in-fact to act in the Executive's name, place and stead to perform any act that the Executive might perform to defend and protect against any disclosure of Confidential Information.

        (e)   At any time the Company may request, during or after the Employment Period, the Executive shall deliver to the Company all originals and copies of Confidential Information and all other information and property affecting or relating to the business of the Company Parties within the Executive's possession, custody or control, regardless of form or format, including, without limitation any Confidential Information produced by the Executive. Both during and after the Employment Period, the Company shall have the right of reasonable access to review, inspect, copy and/or confiscate any Confidential Information within the Executive's possession, custody or control.

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        (f)    Upon termination or expiration of this Agreement, the Executive shall immediately return to the Company all Confidential Information, and all other information and property affecting or relating to the business of the Company Parties, within the Executive's possession, custody or control, regardless of form or format, without the necessity of a prior Company request.

        (g)   During the Employment Period, the Executive represents and agrees that the Executive will not use or disclose any confidential or proprietary information or trade secrets of others, including but not limited to former employers, and that the Executive will not bring onto the premises of the Company or access such confidential or proprietary information or trade secrets of such others, unless consented to in writing by said others, and then only with the prior written authorization of the Company.

        5.2   Work Product/Intellectual Property.

        (a)   Assignment. The Executive hereby assigns to the Company all right, title and interest to all "Work Product" (as defined in Section 5.4(h) hereof) that (i) relates to any of the Company Parties' actual or anticipated business, research and development or existing or future products or services, or (ii) is conceived, reduced to practice, developed or made using any equipment, supplies, facilities, assets, information or resources of any of the Company Parties (including, without limitation, any intellectual property rights).

        (b)   Disclosure. The Executive shall promptly disclose Work Product to the Chief Executive Officer and perform all actions reasonably requested by the Company (whether during or after the Employment Period) to establish and confirm the ownership and proprietary interest of any of the Company Parties in any Work Product (including, without limitation, the execution of assignments, consents, powers of attorney, applications and other instruments). The Executive shall not file any patent or copyright applications related to any Work Product except with the written consent of the Chief Executive Officer.

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        5.3   Non-Competition and Non-Solicitation.

        (a)   In consideration of the Confidential Information being provided to the Executive as stated in Section 5.1 hereof, and other good and valuable new consideration as stated in this Agreement, including, without limitation, employment and/or continued employment with the Company, and the business relationships, Company goodwill, work experience, client, customer and/or vendor relationships and other fruits of employment that the Executive will have the opportunity to obtain, use and develop under this Agreement, the Executive agrees to the restrictive covenants stated in this Section 5.3.

        (b)   During the Employment Period and until the end of the Restricted Period (as defined in Section 5.4(g) hereof), the Executive agrees that the Executive will not, directly or indirectly, on the Executive's own behalf or on the behalf of any other Person, within the United States of America or in any other country or territory in which the businesses of the Company are conducted:

        (i)    engage in a Competing Business, including, without limitation, by owning, managing, operating, controlling, being employed by, providing services as a consultant or independent contractor to or participating in the ownership, management, operation or control of any Competing Business;

        (ii)   induce or attempt to induce any customer, vendor, supplier, licensor or other Person in a business relationship with any Company Party, for or with which the Executive or employees working under the Executive's supervision had any direct or indirect responsibility or contact during the Employment Period, (A) to do business with a Competing Business or (B) to cease, restrict, terminate or otherwise reduce business with the Company for the benefit of a Competing Business, regardless of whether the Executive initiates contact; or

        (iii)  (A) solicit, recruit, persuade, influence or induce, or attempt to solicit, recruit, persuade, influence or induce anyone employed or otherwise retained by any of the Company Parties (including any independent contractor or consultant), to cease or leave their employment or contractual or consulting relationship with any Company Party, regardless of whether the Executive initiates contact for such purposes or (B) hire, employ or otherwise attempt to establish, for any Person, any employment, agency, consulting, independent contractor or other business relationship with any Person who is or was employed or otherwise retained by any of the Company Parties (including any independent contractor or consultant).

        (c)   The parties hereto acknowledge and agree that, notwithstanding anything in Section 5.3(b)(i) hereof, (i) the Executive may own or hold, solely as passive investments, securities of Persons engaged in any business that would otherwise be included in Section 5.3(b)(i), as long as with respect to each such investment the securities held by the Executive do not exceed five percent (5%) of the outstanding securities of such Person and such securities are publicly traded and registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) the Executive may serve on the board of directors (or other comparable position) or as an officer of any entity at the request of the Board; provided, however, that in the case of investments otherwise permitted under clause (i) above, the Executive shall not be permitted to, directly or indirectly, participate in, or attempt to influence, the management, direction or policies of (other than through the exercise of any voting rights held by the Executive in connection with such securities), or lend the Executive's name to, any such Person.

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        (d)   The Executive acknowledges and agrees that, for purposes of this Section 5.3, indirect acts by the Executive shall include, without limitation, an act by the Executive's spouse, ancestor, lineal descendant, lineal descendant's spouse, sibling or other member of the Executive's immediate family.

        (e)   The Executive acknowledges that (i) the restrictive covenants contained in this Section 5.3 hereof are ancillary to and part of an otherwise enforceable agreement, such being the agreements concerning Confidential Information and other consideration as stated in this Agreement, (ii) at the time that these restrictive covenants are made, the limitations as to time, geographic scope and activity to be restrained, as described herein, are reasonable and do not impose a greater restraint than necessary to protect the good will and other legitimate business interests of the Company, including without limitation, Confidential Information (including trade secrets), client, customer and/or vendor relationships, client and/or customer goodwill and business productivity, (iii) in the event of termination of the Executive's employment, the Executive's experiences and capabilities are such that the Executive can obtain gainful employment without violating this Agreement and without the Executive incurring undue hardship, (iv) based on the relevant benefits and other new consideration provided for in this Agreement, including, without limitation, the disclosure and use of Confidential Information, the restrictive covenants of this Section 5.3, as applicable according to their terms, shall remain in full force and effect even in the event of the Executive's involuntary termination from employment, with or without Cause and (v) the Executive has carefully read this Agreement and has given careful consideration to the restraints imposed upon the Executive by this Agreement and consents to the terms of the restrictive covenants in this Section 5.3, with the knowledge that this Agreement may be terminated at any time in accordance with the provisions hereof.

        5.4   Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

        (a)   An "Affiliate" of any specified Person means any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

        (b)   "Company Parties" means the Company, and its direct and indirect parents, subsidiaries and Affiliates, and their successors in interest.

        (c)   "Competing Business" means any business that competes with any of the Company Parties, including, without limitation, any enterprise that engages in, owns or operates businesses that market, sell, distribute, manufacture or otherwise are involved in the home textile, housewares or home accessories industries.

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        (d)   Confidential Information.

        (i)    Definition. "Confidential Information" means any and all material, information, ideas, inventions, formulae, patterns, compilations, programs, devices, methods, techniques, processes, know how, plans (marketing, business, strategic, technical or otherwise), arrangements, pricing and other data of or relating to any of the Company Parties (as well as their customers and/or vendors) that is confidential, proprietary or trade secret (A) by its nature, (B) based on how it is treated or designated by a Company Party, (C) because the disclosure of which would have a material adverse effect on the business or planned business of any of the Company Parties and/or (D) as a matter of law.

        (ii)   Exclusions. Confidential Information does not include material, data, and/or information (A) that any Company Party has voluntarily placed in the public domain, (B) that has been lawfully and independently developed and publicly disclosed by third parties, (C) that constitutes the general non-specialized knowledge and skills gained by the Executive during the Employment Period or (D) that otherwise enters the public domain through lawful means; provided, however, that the unauthorized appropriation, use or disclosure of Confidential Information by the Executive, directly or indirectly, shall not affect the protection and relief afforded by this Agreement regarding such information.

        (iii)  Inclusions. Confidential Information includes, without limitation, the following information (including without limitation, compilations or collections of information) relating or belonging to any Company Party (as well as their clients, customers and/or vendors) and created, prepared, accessed, used or reviewed by the Executive during or after the Employment Period: (1) product and manufacturing information, such as ingredients, combinations of ingredients and manufacturing processes; (2) scientific and technical information, such as research and development, tests and test results, formulae and formulations, studies and analysis; (3) financial and cost information, such as operating and production costs, costs of goods sold, costs of supplies and manufacturing materials, non-public financial statements and reports, profit and loss information, margin information and financial performance information; (4) customer related information, such as customer related contracts, engagement and scope of work letters, proposals and presentations, customer-related contacts, lists, identities and prospects, practices, plans, histories, requirements and needs, price information and formulae and information concerning client or customer products, services, businesses or equipment specifications; (5) vendor and supplier related information, such as the identities, practices, history or services of any vendors or suppliers and vendor or supplier contacts; (6) sales, marketing and price information, such as marketing and sales programs and related data, sales and marketing strategies and plans, sales and marketing procedures and processes, pricing methods, practices and techniques and pricing schedules and lists; (7) database, software and other computer related information, such as computer programs, data, compilations of information and records, software and computer files, presentation software and computer-stored or backed-up information including, but not limited to, e-mails,

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databases, word processed documents, spreadsheets, notes, schedules, task lists, images and video; (8) employee-related information, such as lists or directories identifying employees, representatives and contractors, and information regarding the competencies (knowledge, skill, experience), compensation and needs of employees, representatives and contractors and training methods; and (9) business- and operation-related information, such as operating methods, procedures, techniques, practices and processes, information about acquisitions, corporate or business opportunities, information about partners and potential investors, strategies, projections and related documents, contracts and licenses and business records, files, equipment, notebooks, documents, memoranda, reports, notes, sample books, correspondence, lists and other written and graphic business records.

        (e)   "Misappropriate", or any form thereof, means:

        (i)    the acquisition of any Confidential Information by a Person who knows or has reason to know that the Confidential Information was acquired by theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means (each, an "Improper Means"); or

        (ii)   the disclosure or use of any Confidential Information without the express consent of the Company by a Person who (A) used Improper Means to acquire knowledge of the Confidential Information, (B) at the time of disclosure or use, knew or had reason to know that his or her knowledge of the Confidential Information was (x) derived from or through a Person who had utilized Improper Means to acquire it, (y) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use or (z) derived from or through a Person who owed a duty to the Company to maintain its secrecy or limit its use or (C) before a material change of his or her position, knew or had reason to know that it was Confidential Information and that knowledge of it had been acquired by accident or mistake.

        (f)    "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity.

        (g)   "Restricted Period" means the longer of (i) twelve (12) months after the date of termination of employment (the Executive's last day of work for the Company) or (ii) the period during which the Executive is receiving payments from the Company pursuant to Section 4 hereof.

        (h)   "Work Product" means all patents and patent applications, all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, creative works, discoveries, software, computer programs, modifications, enhancements, know-how, formulations, concepts and ideas, and all similar or related information (in each case whether or not patentable), all copyrights and copyrightable works, all trade secrets, confidential information, and all other intellectual property and intellectual property rights that are conceived, reduced to practice, developed or made by the Executive either alone or with others in the course of employment with the Company (including employment prior to the date of this Agreement).

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        5.5   Remedies. Because the Executive's services are unique and because the Executive has access to Confidential Information, the Executive acknowledges and agrees that if the Executive breaches any of the provisions of Section 5 hereof, the Company may suffer immediate and irreparable harm for which monetary damages alone will not be a sufficient remedy. The restrictive covenants stated in Section 5 hereof are without prejudice to the Company's rights and causes of action at law.

        5.6   Interpretation; Severability.

        (a)   The Executive has carefully considered the possible effects on the Executive of the covenants not to compete, the confidentiality provisions and the other obligations contained in this Agreement, and the Executive recognizes that the Company has made every effort to limit the restrictions placed upon the Executive to those that are reasonable and necessary to protect the Company's legitimate business interests.

        (b)   The Executive acknowledges and agrees that the restrictive covenants set forth in this Agreement are reasonable and necessary in order to protect the Company's valid business interests. It is the intention of the parties hereto that the covenants, provisions and agreements contained herein shall be enforceable to the fullest extent allowed by law. If any covenant, provision or agreement contained herein is found by a court having jurisdiction to be unreasonable in duration, scope or character of restrictions, or otherwise to be unenforceable, such covenant, provision or agreement shall not be rendered unenforceable thereby, but rather the duration, scope or character of restrictions of such covenant, provision or agreement shall be deemed reduced or modified with retroactive effect to render such covenant, provision or agreement reasonable or otherwise enforceable (as the case may be), and such covenant, provision or agreement shall be enforced as modified. If the court having jurisdiction will not review the covenant, provision or agreement, the parties hereto shall mutually agree to a revision having an effect as close as permitted by applicable law to the provision declared unenforceable. The parties hereto agree that if a court having jurisdiction determines, despite the express intent of the parties hereto, that any portion of the covenants, provisions or agreements contained herein are not enforceable, the remaining covenants, provisions and agreements herein shall be valid and enforceable. Moreover, to the extent that any provision is declared unenforceable, the Company shall have any and all rights under applicable statutes or common law to enforce its rights with respect to any and all Confidential Information or unfair competition by the Executive.

        6.     Miscellaneous.

        6.1   Public Statements.

        (a)   Media Nondisclosure. The Executive agrees that during the Employment Period or at any time thereafter, except as may be authorized in writing by the Company, the Executive will not directly or indirectly disclose or release to the Media any information concerning or relating to any aspect of the Executive's employment or termination from employment with the Company and/or any aspect of any dispute that is the subject of this Agreement. For the purposes of this Agreement, the term "Media" includes, without limitation, any news organization, station, publication, show, website, web log (blog), bulletin board, chat room and/or program (past, present and/or future), whether published through the means of print, radio, television and/or the Internet or otherwise, and any member, representative, agent and/or employee of the same.

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        (b)   Non-Disparagement. The Executive agrees that during the Employment Period or at any time thereafter, the Executive will not make any statements, comments or communications in any form, oral, written or electronic to any Media or any customer, client or supplier of the Company or any of its Affiliates, which would constitute libel, slander or disparagement of the Company or any of its Affiliates, including, without limitation, any such statements, comments or communications that criticize, ridicule or are derogatory to the Company or any of its Affiliates; provided, however, that the terms of this Section 6.1(b) shall not apply to communications between the Executive and, as applicable, the Executive's attorneys or other persons with whom communications would be subject to a claim of privilege existing under common law, statute or rule of procedure. The Executive further agrees that the Executive will not in any way solicit any such statements, comments or communications from others.

        6.2   ARBITRATION. SUBJECT TO THE RIGHTS UNDER SECTION 6.3 HEREOF TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF, BINDING ARBITRATION SHALL BE THE EXCLUSIVE REMEDY FOR ANY AND ALL DISPUTES, CLAIMS OR CONTROVERSIES, WHETHER STATUTORY, CONTRACTUAL OR OTHERWISE, BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE EXECUTIVE'S EMPLOYMENT BY OR TERMINATION FROM THE COMPANY (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, OR THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) (COLLECTIVELY, "DISPUTES"). THE PARTIES EACH WAIVE THE RIGHT TO A JURY TRIAL AND WAIVE THE RIGHT TO ADJUDICATE THEIR DISPUTES UNDER THIS AGREEMENT OUTSIDE THE ARBITRATION FORUM PROVIDED FOR IN THIS AGREEMENT, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT. In the event either party provides a notice of arbitration of any dispute to the other party, the parties agree to submit that dispute to a single arbitrator selected from a panel of arbitrators of JAMS located in greater New York City-Southern New Jersey area. The arbitration will be governed by the JAMS Comprehensive Arbitration Rules and Procedures in effect at the time the arbitration is commenced. If for any reason JAMS cannot serve as the arbitration administrator, the Company may select an alternative arbitration administrator such as the American Arbitration Association, to serve under the terms of this Agreement.

        (a)   VENUE. THE PARTIES STIPULATE AND AGREE THAT THE EXCLUSIVE VENUE OF ANY SUCH ARBITRATION PROCEEDING (AND OF ANY OTHER PROCEEDING, INCLUDING ANY COURT PROCEEDING, UNDER THIS AGREEMENT) SHALL BE PASSAIC COUNTY, NEW JERSEY (THE "AGREED VENUE").

        (b)   Authority and Decision. The arbitrator shall have the authority to award the same damages and other relief that a court could award. The arbitrator shall issue a reasoned award explaining the decision and any damages awarded. The arbitrator's decision will be final and binding upon the parties and enforceable by a court of competent jurisdiction. The parties will abide by and perform any award rendered by the arbitrator. In rendering the award, the arbitrator shall state the reasons therefor, including (without limitation) any computations of actual damages or offsets, if applicable.

        (c)   Fees and Costs. In the event of arbitration under the terms of this Agreement, the fees charged by JAMS or other arbitration administrator and the arbitrator shall be borne by the parties as determined by the arbitrator, except for any initial registration fee, which the parties shall bear equally. Otherwise, the parties shall each bear their own costs, expenses and attorneys' fees incurred in arbitration; provided, however, that the prevailing party shall be entitled to recover and have awarded its attorneys' fees, court costs, arbitration expenses, and its portion of the fees and costs charged by JAMS or other arbitration administrator, regardless of which party initiated the proceedings, in addition to any other relief to which it may be entitled.

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        (d)   Limited Scope. The following are excluded from binding arbitration under this Agreement: claims for workers' compensation benefits or unemployment benefits; replevin; and claims for which a binding arbitration agreement is invalid as a matter of law.

        6.3   Injunctive Relief. The parties hereto may seek injunctive relief in arbitration; provided, however, that as an exception to the arbitration agreement set forth in Section 6.2 hereof, the parties, in addition to all other available remedies, shall each have the right to initiate an action in any court of competent jurisdiction in order to request injunctive or other equitable relief regarding the terms of Sections 5 or 6.2 hereof. The exclusive venue of any such proceeding shall be in the Agreed Venue. The parties agree (a) to submit to the jurisdiction of any competent court in the Agreed Venue, (b) to waive any and all defenses the Executive may have on the grounds of lack of jurisdiction of such court and (c) that neither party shall be required to post any bond, undertaking or other financial deposit or guarantee in seeking or obtaining such equitable relief. Evidence adduced in any such proceeding for an injunction may be used in arbitration as well. The existence of this right shall not preclude or otherwise limit the applicability or exercise of any other rights and remedies that a party hereto may have at law or in equity.

        6.4   Settlement of Existing Rights. In exchange for the other terms of this Agreement, the Executive acknowledges and agrees that: (a) the Executive's entry into this Agreement is a condition of employment and/or continued employment with the Company, as applicable; (b) except as otherwise provided herein, this Agreement will replace any existing employment agreement between the parties and thereby act as a novation, if applicable; (c) the Executive is being provided with access to Confidential Information, including, without limitation, proprietary trade secrets of one or more Company Parties, to which the Executive has not previously had access; (d) all Company inventions and intellectual property developed by the Executive during any past employment with the Company and all goodwill developed with the Company's clients, customers and other business contacts by the Executive during any past employment with Company, as applicable, is the exclusive property of the Company; and (e) all Confidential Information and/or specialized training accessed, created, received or utilized by the Executive during any past employment with Company, as applicable, will be subject to the restrictions on Confidential Information described in this Agreement, whether previously so agreed or not.

        6.5   Entire Agreement; Waiver. This Agreement contains the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior understandings or agreements, whether written or oral. No modification or addition hereto or waiver or cancellation of any provision hereof shall be valid except by a writing signed by the party to be charged therewith. No delay on the part of any party to this Agreement in exercising any right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiver of such right or privilege.

        6.6   Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without regard to principles of conflict of laws.

        6.7   Successors and Assigns; Binding Agreement. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, personal representatives, successors and permitted assigns. This Agreement is a personal contract, and, except as specifically set forth herein, the rights and interests of the Executive herein may not be sold, transferred, assigned, pledged or hypothecated by any party without the prior written consent of the others. As used herein, the term "successor" as it relates to the Company, shall include, but not be limited to, any successor by way of merger, consolidation or sale of all or substantially all of such Person's assets or equity interests.

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        6.8   Representation by Counsel; Independent Judgment. Each of the parties hereto acknowledges that (a) it or the Executive has read this Agreement in its entirety and understands all of its terms and conditions, (b) it or the Executive has had the opportunity to consult with any individuals of its or the Executive's choice regarding its or the Executive's agreement to the provisions contained herein, including legal counsel of its or the Executive's choice, and any decision not to was the Executive's or its alone and (c) it or the Executive is entering into this Agreement of its or the Executive's own free will, without coercion from any source, based upon its or the Executive's own independent judgment.

        6.9   Interpretation. The parties and their respective legal counsel actively participated in the negotiation and drafting of this Agreement, and in the event of any ambiguity or mistake herein, or any dispute among the parties with respect to the provisions hereto, no provision of this Agreement shall be construed unfavorably against any of the parties on the ground that the Executive, it, or the Executive's or its counsel was the drafter thereof.

        6.10 Survival. The provisions of Sections 4.3(e), 5 and 6 hereof shall survive the termination of this Agreement.

        6.11 Notices. All notices and communications hereunder shall be in writing and shall be deemed properly given and effective when received, if sent by facsimile or telecopy, or by postage prepaid by registered or certified mail, return receipt requested, or by other delivery service which provides evidence of delivery, as follows:

If to the Company, to:

Linens 'n Things, Inc.
6 Brighton Road
Clifton, New Jersey 07015
Attention: General Counsel

with a copy (which shall not constitute notice) to:

Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas 75201-4761
Attention: Ronald M. Gaswirth, Esq.
Telephone: (214) 999-4601
Facsimile: (214) 999-3601
E-mail: rgaswirth@gardere.com

If to the Executive, to:

F. David Coder
at the most recent address of the
Executive on file with the Company

or to such other address as one party may provide in writing to the other party from time to time.

        6.12 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Facsimile transmission of any signed original document or retransmission of any signed facsimile transmission will be deemed the same as delivery of an original. At the request of any party, the parties will confirm facsimile transmission by signing a duplicate original document.

        6.13 Captions. Paragraph headings are for convenience only and shall not be considered a part of this Agreement.

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        6.14 No Third Party Beneficiary Rights. Except as otherwise provided in this Agreement, no entity shall have any right to enforce any provision of this Agreement, even if indirectly benefited by it.

        6.15 Withholding. Any payments provided for hereunder shall be paid net of any applicable withholding required under Federal, state or local law and any additional withholding to which Executive has agreed.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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        IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, on the Execution Date to be effective for all purposes as of the Effective Date.

LINENS 'N THINGS, INC.
By:	/s/  ROBERT J. DINICOLA Robert J. DiNicola Chairman of the Board and         Chief Executive Officer
EXECUTIVE
/s/  F. DAVID CODER Name: F. David Coder

EXHIBIT A

Definition of Change of Control

        "Change of Control" means:

        (1)   any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders or their Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of Holding or any successor company, including, without limitation, through a merger or consolidation or purchase of Voting Stock of Holding; provided that none of the Permitted Holders or their Related Parties have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board; provided further that the transfer of 100% of the Voting Stock of Holding to a Person that has an ownership structure identical to that of Holding prior to such transfer, such that Holding becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control;

        (2)   after an initial public offering of Capital Stock of Holding, during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by such Board or whose nomination for election by the stockholders of Holding was approved by a vote of a majority of the directors of Holding then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board then in office;

        (3)   the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of Holding and its Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or

        (4)   the adoption of a plan relating to the liquidation or dissolution of Holding.

        For purposes of this definition, the following terms shall have the meanings set forth below:

        An "Affiliate" of any specified Person means any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled thereby or any of the partners thereof.

"Board" means the Board of Directors of Holding or any committee thereof duly authorized to act on behalf of such Board of Directors.

"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Holding" means Linens Holding Co., a Delaware corporation.

A-1

"Permitted Holder" means any of Apollo, NRDC Real Estate Advisors I, LLC or Silver Point Capital Fund Investments, LLC.

"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity.

"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.

"Related Party" means:

        (1)   any controlling stockholder, 50% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or

        (2)   any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 50% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).

"Subsidiary" means, with respect to any specified Person:

        (1)   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

        (2)   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).

"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.

        Notwithstanding anything to the contrary in this Exhibit A, the definition of Change of Control shall be interpreted consistently with the definition of "Change of Control" contained in Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations and guidance issued by the Internal Revenue Service under Section 409A of the Code, including IRS Notice 2005-1.

A-2

EXHIBIT B

Fringe Benefits

1.

Health insurance in accordance with the Company's health insurance plan or program in effect from time to time.

2.

Prescription drug coverage in accordance with the Company's health insurance plan or program, or separate prescription drug coverage plan or program, in effect from time to time.

3.

Dental insurance in accordance with the Company's dental insurance plan or program in effect from time to time.

4.

Long-term disability insurance in accordance with the Company's long-term disability insurance plan or program in effect from time to time.

5.

Eligibility for life insurance coverage in such amount as the Company makes available to its employees or executives, subject to a bi-weekly payroll deduction for the premium and completion by the Executive of any authorization documentation.

6.

Cellular telephone and service.

7.

Annual financial planning services through Joel Isaacson Company, or a reasonable substitute therefor, as may be determined by the Company from time to time.

B-1

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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
EXHIBIT A Definition of Change of Control
EXHIBIT B Fringe Benefits

EX-10.11

Exhibit 10.11

EXECUTION COPY

LINENS HOLDING CO.
6 Brighton Road
Clifton, NJ 07015

May 11, 2006

F. David Coder
13 D'Altrui Drive
Hillsborough, NJ 08844

Re:

Grant of Stock Options

Dear David:

        We are pleased to inform you that you have been granted an option to purchase 3,000 shares of common stock of Linens Holding Co. (the "Company"). As further described below, the option is denominated as an "Investment Option". The Investment Option has not been granted under the Company's Stock Option Plan (the "Plan"), a copy of which is attached, and shall have no effect on the number of options that may be awarded under the Plan. However, in all other respects, the Investment Option shall be treated as if it were awarded under the Plan, and shall be subject to the terms and conditions of the Plan, except as specifically modified hereby. Capitalized terms not otherwise defined in the text are defined in the Plan.

1.

Investment Option:    The key terms of the Investment Option are as follows:



(a)

Number of Shares.    3,000



(b)

Exercise Price per Share.    $50.00



(c)

Vesting.    The Investment Option is fully vested and immediately exercisable.



2.

Termination of the Options:    Whether or not exercisable or scheduled to become exercisable, the Investment Option will terminate as provided in Section 5 of the Plan.



3.

Federal Taxes:    The Investment Option granted to you is treated as a "nonqualified option" for federal tax purposes, which means that when you exercise, the excess of the value of the Shares issued on exercise over the exercise price paid for the Shares is income to you, subject to wage-based withholding and reporting. When you sell the Shares acquired upon exercise, the excess (or shortfall) between the amount you receive upon the sale and the value of the shares at the time of exercise is treated as capital gain (or loss). State and local taxes may also apply. You should consult your personal tax advisor for more information concerning the tax treatment of your Investment Option.

        We are excited to give you this opportunity to share in our future success. Please indicate your acceptance of this option grant and the terms of the Plan by signing and returning a copy of this letter.

Sincerely,

LINENS HOLDING CO.
By:	/s/  ROBERT J. DINICOLA Robert J. DiNicola Chairman of the Board and Chief Executive Officer
Agreed to and Accepted by:
/s/  F. DAVID CODER Name: F. David Coder

EX-10.12

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Exhibit 10.12

EMPLOYMENT AGREEMENT

        THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into on April 12, 2006 (the "Execution Date"), to be effective for all purposes as of April 17, 2006 (the "Effective Date"), by and between Linens 'n Things, Inc., a Delaware corporation (the "Company") and wholly owned subsidiary of Linens Holding Co., a Delaware corporation ("Holding"), and Robert Homler (the "Executive").

        WHEREAS, the Company desires to employ the Executive on the terms and subject to the conditions set forth herein and the Executive has agreed to be so employed.

        NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

        1.     Employment of Executive; Duties.

        1.1   Title. During the Employment Period (as defined in Section 2 hereof), the Executive shall serve as Senior Vice President, Marketing of the Company. The Executive shall have the normal duties, responsibilities and authority commensurate with such positions.

        1.2   Duties. During the Employment Period, the Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities of the Executive's position and shall render such services on the terms set forth herein. In addition, the Executive shall have such other executive and managerial powers and duties as may reasonably be assigned to the Executive, commensurate with the Executive serving as a Senior Vice President. The Company may adjust the duties and responsibilities of the Executive as a Senior Vice President, notwithstanding the specific title set forth in Section 1.1 hereof, based upon the Company's needs from time to time. Except for sick leave, reasonable vacations and excused leaves of absence, the Executive shall, throughout the Employment Period, devote substantially all the Executive's working time, attention, knowledge and skills faithfully, and to the best of the Executive's ability, to the duties and responsibilities of the Executive's position in furtherance of the business affairs and activities of the Company and its subsidiaries and Affiliates (as defined in Section 5.4(a) hereof) and, except where the Company provides its written consent otherwise, shall maintain the Executive's principal residence within 75 miles of the principal office of the Company as of the Effective Date. The Executive shall at all times be subject to, comply with, observe and carry out (a) the Company's rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time and (b) such rules, regulations, policies, codes of ethics and/or conduct, directions and restrictions as the Board of Directors of the Company (the "Board") may from time to time reasonably establish or approve for senior executive officers of the Company.

        2.     Term of Employment.

        2.1   Employment Period. The employment of the Executive hereunder shall continue until December 31, 2007 (the "Initial Employment Period"), unless terminated earlier in accordance with the provisions of Section 4 of this Agreement.

        2.2   Extension. Unless terminated earlier in accordance with the provisions of Section 4 of this Agreement, the employment of the Executive hereunder shall continue after the end of the Initial Employment Period for additional one (1)-year periods (each an "Extension Period" and, together with the Initial Employment Period, the "Employment Period"), unless the Company or the Executive notifies the other in writing not less than one (1) year prior to the end of the Initial Employment Period, or the end of the applicable Extension Period, of its or the Executive's election, in its or the Executive's sole discretion, not to extend the Employment Period.

        3.     Compensation and General Benefits.

        3.1   Base Salary.

        (a)   During the Employment Period, the Company agrees to pay to the Executive an annual base salary in an amount equal to $350,000 (such base salary, as may be adjusted from time to time pursuant to Section 3.1(b), is referred to herein as the "Base Salary"). The Executive's Base Salary, less amounts required to be withheld under applicable law, shall be payable in equal installments in accordance with the Company's normal payroll practices and procedures in effect from time to time for the payment of salaries to officers of the Company, but in no event less frequently than monthly.

        (b)   The Board or the Compensation Committee established by the Board (the "Compensation Committee") shall review the Executive's performance on an annual basis and, based on such review, may change the Base Salary, as it, acting in its sole discretion, shall determine to be reasonable and appropriate.

        3.2   Bonus. With respect to the 2006 calendar year and with respect to each calendar year that commences during the Employment Period, the Executive shall be eligible to receive from the Company an annual performance bonus (the "Annual Bonus") on a basis and in an amount to be determined by the Board or the Compensation Committee in the exercise of its sole discretion for the applicable year. The Annual Bonus, if any, may be up to 50% of the Executive's Base Salary. Any Annual Bonus earned shall be payable in full as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures. Except as otherwise expressly provided in Section 4 hereof, any Annual Bonus (or portion thereof) payable under this Section 3.2 shall not be payable unless the Executive is employed by the Company on the last day of the period to which such Annual Bonus relates.

        3.3   Expenses. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this Section 3 or elsewhere herein, the Executive shall be entitled to receive reimbursement from the Company for all reasonable and necessary expenses incurred by the Executive in performing the Executive's duties hereunder on behalf of the Company, subject to, and consistent with, the Company's policies for expense payment and reimbursement, in effect from time to time.

        3.4   Fringe Benefits. During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this Section 3 or elsewhere herein, the Executive shall be entitled to participate in, and to receive benefits under, (a) any benefit plans, arrangements or policies made available by the Company to its employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of each such plan, arrangement or policy and (b) without limiting the foregoing, the benefits set forth on Exhibit B attached hereto.

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        3.5   Stock Options.

        (a)   The Company shall recommend to the Option Committee of Holding, as defined in the Linens Holding Co. Stock Option Plan (the "Plan"), that the Executive be granted nonqualified options to purchase a total of 25,000 shares of Common Stock, par value $0.01 per share, of Holding (the "Common Stock") with a per share exercise price equal to the fair market value of the Common Stock on the date of grant, as determined by the Option Committee, which is expected to be $50.00 per share (the "Options"). The Options shall have a term of seven (7) years from the date of grant and be equally divided between a "Time Option" and a "Performance Option." The Time Option shall become vested and exercisable in four equal annual installments on each of the first four anniversaries of the date of grant, subject to the Executive's continued employment with the Company, and the Performance Option shall become vested and exercisable upon satisfaction of the performance criteria set forth in the grant letter. Except as otherwise provided herein, the Options shall be subject to the terms and conditions of the Plan and the form of grant letter applicable for other senior executives of the Company approved by the Option Committee.

        (b)   During the Employment Period and subject to the approval of the Option Committee, the Executive shall be eligible to participate in and be granted additional stock options under the Plan.

        4.     Termination.

        4.1   General. The employment of the Executive hereunder (and the Employment Period) shall terminate as provided in Section 2 hereof, unless earlier terminated in accordance with the provisions of this Section 4.

        4.2   Death or Disability of the Executive.

        (a)   The employment of the Executive hereunder (and the Employment Period) shall terminate upon (i) the death of the Executive and (ii) at the option of the Company, upon not less than fifteen (15) days' prior written notice to the Executive or the Executive's personal representative or guardian, if the Executive suffers a "Total Disability" (as defined in Section 4.2(b) hereof). Upon termination for death or Total Disability, subject to reduction by any benefits paid or payable to the Executive, the Executive's beneficiaries or estate under any Company-sponsored disability benefit plan program or policy for the period following such date of termination (provided, however, that no such reduction shall be made for any benefits paid upon the Executive's death under the Company's life insurance policy), (A) the Company shall pay to the Executive, guardian or personal representative, as the case may be, the Executive's current Base Salary for the remainder of the Employment Period in effect immediately prior to the date of termination and (B) subject further to the sole discretion of the Board or the Compensation Committee, the Company may also pay to the Executive, guardian or personal representative, as the case may be, a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had the Executive worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. Any bonus shall be payable as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures.

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        (b)   For purposes of this Agreement, "Total Disability" shall mean (i) if the Executive is subject to a legal decree of incompetency (the date of such decree being deemed the date on which such disability occurred), (ii) the written determination by a physician selected by the Company that, because of a medically determinable disease, injury or other physical or mental disability, the Executive is unable substantially to perform, with or without reasonable accommodation, the material duties of the Executive required hereby, and that such disability has lasted for ninety (90) consecutive days or any one hundred twenty (120) days during the immediately preceding twelve (12)-month period or is, as of the date of determination, reasonably expected to last six (6) months or longer after the date of determination, in each case based upon medically available reliable information or (iii) Executive's qualifying for benefits under the Company's long-term disability coverage, if any. In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive hereby consents to (x) any examinations that the Board or the Compensation Committee determines are relevant to a determination of whether the Executive is mentally and/or physically disabled or are required by the Company physician, (y) furnish such medical information as may be reasonably requested and (z) waive any applicable physician patient privilege that may arise because of such examination.

        (c)   With respect to outstanding stock options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.2, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (ii) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the one hundred eighty (180)-day period following such date of termination.

        (d)   With respect to any shares of Common held by the Executive that are vested as of the date of termination pursuant to this Section 4.2 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.2(c) hereof), for the two hundred seventy (270)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive or the Executive's beneficiary, as applicable, and the Executive or the Executive's beneficiary hereby agrees to sell any or all such shares to the Company (or the Company's designee) for an amount equal to the product of (i) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (ii) the number of shares so purchased.

        4.3   Termination by the Company Without Cause or Resignation by the Executive For Good Reason.

        (a)   The Company may terminate the Executive's employment without "Cause" (as defined in Section 4.3(g)), and thereby terminate the Executive's employment (and the Employment Period) under this Agreement at any time with no requirement for notice to the Executive.

        (b)   The Executive may resign, and thereby terminate the Executive's employment (and the Employment Period), at any time for "Good Reason" (as defined in Section 4.3(f) hereof), upon not less than sixty (60) days' prior written notice to the Company specifying in reasonable detail the reason therefore; provided, however, that the Company shall have a reasonable opportunity to cure any such Good Reason (to the extent possible) within sixty (60) days after the Company's receipt of such notice; and provided further that, if the Company is not seeking to cure, the Company shall not be obligated to allow the Executive to continue working during such period and may, in its sole discretion, accelerate such termination of employment (and the Employment Period) to any date during such period.

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        (i)    Executive may not terminate employment under this Agreement for Good Reason regarding any of the Company's acts or omissions of which Executive had actual notice for sixty (60) days or more prior to giving notice of termination for Good Reason.

        (ii)   A determination of whether the Executive legitimately has Good Reason for termination of the Executive's employment under this Agreement, and of whether the Company has effectively cured and thus eliminated the grounds for such Good Reason, shall be made only by the Chief Executive Officer of the Company (the "Chief Executive Officer"), within the Chief Executive Officer's sole judgment and discretion, acting in good faith after having met with the Company's Vice President of Human Resources.

        (c)   In the event the Executive's employment is terminated pursuant to this Section 4.3, then, subject to Section 4.3(d) hereof, the following provisions shall apply:

        (i)    The Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the year of termination) had the Executive remained in the employ of the Company until the expiration of the Employment Period in effect immediately prior to the date of termination, with all such amounts payable in accordance with the Company's normal payroll practices and procedures in the same manner and at the same time as though the Executive remained employed by the Company.

        (ii)   If such termination occurs upon or within six (6) months following a Change of Control (as defined in Exhibit A attached hereto), the Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the year of termination) for the greater of (A) the period set forth in Section 4.3(c)(i) hereof or (B) a two (2)-year period following such date of termination, with all such amounts payable in accordance with the Company's normal payroll practices and procedures in the same manner and at the same time as though the Executive remained employed by the Company.

        (iii)  In the event the Executive's employment is terminated pursuant to this Section 4.3 without Cause, and if the Company has previously effected reductions in the Executive's Base Salary and the base salary of all executives at the same level as the Executive, which reductions were substantially similar, then the Base Salary rate for purposes of Section 4.3(c)(i) or (ii) hereof shall be the Base Salary rate in effect immediately prior to such reductions.

        (iv)  Subject to the sole discretion of the Board or the Compensation Committee, the Company may pay to the Executive a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had the Executive worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. The bonus shall be payable as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures.

        (v)   With respect to outstanding options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.3, (A) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (B) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.

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        (vi)  With respect to any shares of Common Stock held by the Executive that are vested as of the date of termination pursuant to this Section 4.3 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.3(c)(v) hereof), for the one hundred eighty (180)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive, and the Executive hereby agrees to sell any or all such shares to the Company (or the Company's designee), for an amount equal to the product of (A) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (B) the number of shares so purchased.

        (vii) The Executive shall continue to be entitled to the fringe benefits available to the Executive immediately preceding the Executive's date of termination pursuant to Section 4.3, in each case (A) through the expiration of the Employment Period in effect immediately prior to the date of termination, or, (B) in the event that Executive's Base Salary is being paid pursuant to Section 4.3(c)(ii), for the period set forth therein.

        (d)   As a condition precedent to the Executive's right to receive the benefits set forth in Section 4.3(c) hereof, the Executive agrees to execute a release of the Company and its respective Affiliates, officers, directors, stockholders, employees, agents, insurers, representatives and successors from and against any and all claims that the Executive may have against any such Person (as defined in Section 5.4(f) hereof) relating to the Executive's employment by the Company and the termination thereof, such release to be in form and substance reasonably satisfactory to the Company.

        (e)   Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment, vesting, distribution or transfer by the Company or any successor, or any Affiliate of the foregoing or by any other Person or that any other event occurring with respect to the Executive and the Company for the Executive's benefit, whether paid or payable or distributed or distributable under the terms of this Agreement or otherwise (including under any employee benefit plan) (a "Payment") would be subject to or result in the imposition of the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (and any regulations or guidance promulgated or issued thereunder, any successor provision, and any similar provision of state or local income tax law) (collectively, the "Excise Tax"), then the amount of the Payment shall be reduced to the highest amount that may be paid by the Company or other entity without subjecting any such Payment to the Excise Tax (the "Payment Reduction"). The Executive shall have the right to designate those payments or benefits that shall be reduced or eliminated under the Payment Reduction to avoid the imposition of the Excise Tax, subject to the confirmation of the Accounting Firm (as defined herein) with respect to the intended effect thereof. Notwithstanding the foregoing, the Payment Reduction shall not apply if the Executive would, on a net after-tax basis, receive less compensation than if the Payment were not so reduced.

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        (i)    Subject to the provisions of Section 4.3(e)(ii), all determinations required to be made under this Section 4.3(e), including whether and when a Payment is subject to Section 4999 and the assumptions to be utilized in arriving at such determination and in determining an appropriate Payment Reduction, shall be made by KPMG LLP, or any other nationally recognized accounting firm that shall be the Company's outside auditors at the time of such determination (the "Accounting Firm"), which Accounting Firm shall provide detailed supporting calculations to the Executive and the Company within fifteen (15) business days of the receipt of notice from the Company or the Executive that there will be a Payment that the Person giving notice believes may be subject to the Excise Tax. All fees and expenses of the Accounting Firm shall be borne by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive in determining whether a Payment Reduction is required and the amount thereof (subject to Sections 4.3(e)(ii) and (iii)), in the absence of material mathematical or legal error.

        (ii)   As a result of uncertainty in the application of Section 4999 that may exist at the time of the initial determination by the Accounting Firm, it may be possible that in making the calculations required to be made hereunder, the Accounting Firm shall determine that a Payment Reduction need not be made that properly should be made (an "Overpayment") or that a Payment Reduction not properly needed to be made should be made (an "Underpayment"). If, within seventy-five (75) days after the Accounting Firm's initial determination under Section 4.3(e)(i), the Accounting Firm shall determine that an Overpayment was made, any such Overpayment shall be treated for all purposes, to the extent practicable and subject to applicable law, as a loan to the Executive with interest at the applicable Federal rate provided for in Section 1274(d) of the Code and shall be repaid by the Executive to the Company within thirty-five (35) days after the Executive receives notice of the Accounting Firm's determination; provided, however, that the amount to be repaid by the Executive to the Company either as a loan or otherwise as a lump sum payment (where a loan is not practicable or permitted by law) shall be reduced to the extent that any portion of the Overpayment to be repaid will not be offset by a corresponding reduction in tax by reason of such repayment of the Overpayment. If the Accounting Firm shall determine that an Underpayment was made, any such Underpayment shall be due and payable by the Company to the Executive within thirty-five (35) days after the Company receives notice of the Accounting Firm's determination.

        (iii)  The Executive shall give written notice to the Company of any claim by the Internal Revenue Service that, if successful, would require the payment by the Executive of an Excise Tax, such notice to be provided within fifteen (15) days after the Executive shall have received written notice of such claim. The Executive shall cooperate with the Company in determining whether to contest or pay such claim and shall not pay such claim without the written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.

        (iv)  This Section 4.3(e) shall remain in full force and effect following the termination of the Executive's employment for any reason until the expiration of the statute of limitations on the assessment of taxes applicable to the Executive for all periods in which the Executive may incur a liability for taxes (including Excise Taxes), interest or penalties arising out of the operation of this Agreement.

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        (f)    For purposes of this Agreement, the Executive would be entitled to terminate the Executive's employment for "Good Reason" if without the Executive's prior written consent:

        (i)    the Company fails to comply with any material obligation imposed by this Agreement;

        (ii)   the Company changes the Executive's position from that of a Senior Vice President; provided, however, that (A) a change in the Executive's duties or responsibilities without a change in the Executive's position as a Senior Vice President shall not constitute Good Reason and (B) nothing herein shall prohibit the Company from changing the Executive's specific title as a Senior Vice President, notwithstanding the specific title set forth in Section 1.1 hereof, based upon the Company's needs from time to time; or

        (iii)  the Company effects a reduction in the Executive's Base Salary, unless all executives at the same level as the Executive receive a substantially similar reduction in base salary.

        (g)   For purposes of this Agreement, "Cause" means the occurrence of any one or more of the following events, and the Company shall have the sole discretion to determine the existence of Cause:

        (i)    a failure by the Executive to comply with any obligation under this Agreement;

        (ii)   the Executive's being indicted for (A) any felony or (B) any misdemeanor that causes or is likely to cause harm or embarrassment to the Company or any of its Affiliates, in the reasonable judgment of the Board;

        (iii)  theft, embezzlement or fraud by the Executive in connection with the performance of the Executive's duties hereunder;

        (iv)  the Executive's engaging in any activity that gives rise to a material conflict with the Company or any of its Affiliates;

        (v)   the misappropriation by the Executive of any material business opportunity of the Company or any of its Affiliates;

        (vi)  any failure to comply with, observe or carry out the Company's rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time, including (without limitation) those regarding conflicts, potential conflicts of interest or the appearance of a conflict of interest

        (vii) any failure to comply with, observe or carry out the rules, regulations, policies, directions, codes of ethics and/or conduct and restrictions established or approved by the Board from time to time for senior executive officers of the Company, including (without limitation) those regarding conflicts, potential conflicts of interest or the appearance of a conflict of interest;

        (viii) substance abuse or use of illegal drugs that, in the reasonable judgment of the Board, (A) impairs the Executive's performance of the Executive's duties hereunder or (B) causes or is likely to cause harm or embarrassment to the Company or any of its Affiliates; and

        (ix)  engagement in conduct that Executive knows or should know is injurious to the Company or any of its Affiliates.

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        4.4   Termination For Cause, Voluntary Resignation Other Than For Good Reason or Election Not to Extend the Employment Period.

        (a)   (i) The Company may, upon action of the Board, terminate the employment of the Executive (and the Employment Period) at any time for "Cause," (ii) the Executive may voluntarily resign other than for Good Reason and thereby terminate the Executive's employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30)-days' prior written notice or (iii) either the Company or the Executive may elect not to extend or further extend the Employment Period pursuant to Section 2.2 hereof.

        (b)   The following provisions shall apply upon termination by the Company for Cause, by the Executive as the result of resignation for other than for Good Reason, or by the Company or the Executive at the end of the Employment Period as the result of an election not to extend or further extend the Employment Period:

        (i)    The Executive shall be entitled to receive all amounts of earned but unpaid Base Salary and benefits accrued through the date of such termination. Except as provided below, all other rights of the Executive (and all obligations of the Company) hereunder shall terminate as of the date of such termination.

        (ii)   With respect to outstanding options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.4, (A) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (B) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.

        (iii)  With respect to any shares of Common Stock held by the Executive that are vested as of the date of termination pursuant to this Section 4.4 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.4(b)(ii) hereof), for the one hundred eighty (180)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive and the Executive hereby agrees to sell any or all such shares to the Company (or the Company's designee) for an amount equal to the product of (A) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (B) the number of shares so purchased.

        (c)   Before the Company may terminate the Executive for Cause pursuant to Section 4.4(a)(i), the Board shall deliver to the Executive a written notice of the Company's intent to terminate the Executive for Cause, and the Executive shall have been given a reasonable opportunity to cure any such acts or omissions (which are susceptible of cure as reasonably determined by the Board) within thirty (30) days after the Executive's receipt of such notice.

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        4.5   Resignation from Officer Positions. Upon the termination of the Executive's employment for any reason (unless otherwise agreed in writing by the Company and the Executive), the Executive will be deemed to have resigned, without any further action by the Executive, from any and all officer, director and/or director positions that the Executive, immediately prior to such termination, (a) held with the Company or any of its Affiliates and (b) held with any other entities at the direction of, or as a result of the Executive's affiliation with, the Company or any of its Affiliates. If for any reason this Section 4.5 is deemed to be insufficient to effectuate such resignations, then Executive will, upon the Company's request, execute any documents or instruments that the Company may deem necessary or desirable to effectuate such resignations. In addition, the Executive hereby designates the Secretary or any Assistant Secretary of the Company and of any Affiliate to execute any such documents or instruments as the Executive's attorney-in-fact to effectuate such resignations if execution by the Secretary or any Assistant Secretary of the Company or Affiliate is deemed by the Company or the Affiliate to be a more expedient means to effectuate such resignation or resignations.

        4.6   Section 409A of the Code. Notwithstanding anything to the contrary in this Agreement, the parties mutually desire to avoid adverse tax consequences associated with the application of Section 409A of the Code to this Agreement and agree to cooperate fully and take appropriate reasonable actions to avoid any such consequences under Section 409A of the Code, including delaying payments and reforming the form of the Agreement if such action would reduce or eliminate taxes and/or interest payable as a result of Section 409A of the Code. In this regard, notwithstanding anything to the contrary in this Section 4, to the extent necessary to comply with Section 409A of the Code, any payment required under this Section 4 shall be deferred for a period of six (6) months, regardless of the circumstances giving rise to or the basis for such payment.

        5.     Confidentiality, Work Product and Non-Competition and Non-Solicitation.

        5.1   Confidentiality.

        (a)   In connection with the Executive's employment with the Company, the Company promises to provide the Executive with access to "Confidential Information" (as defined in Section 5.4(d) hereof) in support of the Executive's employment duties. The Executive recognizes that the Company's business interests require a confidential relationship between the Company and the Executive and the fullest practical protection and confidential treatment of all Confidential Information. At all times, both during and after the Employment Period, the Executive shall not directly or indirectly: (i) appropriate, download, print, copy, remove, use, disclose, divulge, communicate or otherwise "Misappropriate" (as defined in Section 5.4(e) hereof) any Confidential Information, including, without limitation, originals or copies of any Confidential Information, in any media or format, except for the Company's benefit within the course and scope of the Executive's employment or with the prior written consent of the Chief Executive Officer; or (ii) take or encourage any action that would circumvent, interfere with or otherwise diminish the value or benefit of the Confidential Information to any of the Company Parties (as defined in Section 5.4(b) hereof).

        (b)   All Confidential Information, and all other information and property affecting or relating to the business of the Company Parties within the Executive's possession, custody or control, regardless of form or format, shall remain, at all times, the property of the respective Company Parties, the appropriation, use and/or disclosure of which is governed and restricted by this Agreement.

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        (c)   The Executive acknowledges and agrees that:

        (i)    the Executive occupies a unique position within the Company, and the Executive is and will be intimately involved in the development and/or implementation of Confidential Information;

        (ii)   in the event the Executive breaches this Section 5.1 with respect to any Confidential Information, such breach shall be deemed to be a Misappropriation of such Confidential Information; and

        (iii)  any Misappropriation of Confidential Information will result in immediate and irreparable harm to the Company.

        (d)   Upon receipt of any formal or informal request, by legal process or otherwise, seeking the Executive's direct or indirect disclosure or production of any Confidential Information to any Person, the Executive shall promptly and timely notify the Company and provide a description and, if applicable, hand deliver a copy of such request to the Company. The Executive irrevocably nominates and appoints the Company as the Executive's true and lawful attorney-in-fact to act in the Executive's name, place and stead to perform any act that the Executive might perform to defend and protect against any disclosure of Confidential Information.

        (e)   At any time the Company may request, during or after the Employment Period, the Executive shall deliver to the Company all originals and copies of Confidential Information and all other information and property affecting or relating to the business of the Company Parties within the Executive's possession, custody or control, regardless of form or format, including, without limitation any Confidential Information produced by the Executive. Both during and after the Employment Period, the Company shall have the right of reasonable access to review, inspect, copy and/or confiscate any Confidential Information within the Executive's possession, custody or control.

        (f)    Upon termination or expiration of this Agreement, the Executive shall immediately return to the Company all Confidential Information, and all other information and property affecting or relating to the business of the Company Parties, within the Executive's possession, custody or control, regardless of form or format, without the necessity of a prior Company request.

        (g)   During the Employment Period, the Executive represents and agrees that the Executive will not use or disclose any confidential or proprietary information or trade secrets of others, including but not limited to former employers, and that the Executive will not bring onto the premises of the Company or access such confidential or proprietary information or trade secrets of such others, unless consented to in writing by said others, and then only with the prior written authorization of the Company.

        5.2   Work Product/Intellectual Property.

        (a)   Assignment. The Executive hereby assigns to the Company all right, title and interest to all "Work Product" (as defined in Section 5.4(h) hereof) that (i) relates to any of the Company Parties' actual or anticipated business, research and development or existing or future products or services, or (ii) is conceived, reduced to practice, developed or made using any equipment, supplies, facilities, assets, information or resources of any of the Company Parties (including, without limitation, any intellectual property rights).

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        (b)   Disclosure. The Executive shall promptly disclose Work Product to the Chief Executive Officer and perform all actions reasonably requested by the Company (whether during or after the Employment Period) to establish and confirm the ownership and proprietary interest of any of the Company Parties in any Work Product (including, without limitation, the execution of assignments, consents, powers of attorney, applications and other instruments). The Executive shall not file any patent or copyright applications related to any Work Product except with the written consent of the Chief Executive Officer.

        5.3   Non-Competition and Non-Solicitation.

        (a)   In consideration of the Confidential Information being provided to the Executive as stated in Section 5.1 hereof, and other good and valuable new consideration as stated in this Agreement, including, without limitation, employment and/or continued employment with the Company, and the business relationships, Company goodwill, work experience, client, customer and/or vendor relationships and other fruits of employment that the Executive will have the opportunity to obtain, use and develop under this Agreement, the Executive agrees to the restrictive covenants stated in this Section 5.3.

        (b)   During the Employment Period and until the end of the Restricted Period (as defined in Section 5.4(g) hereof), the Executive agrees that the Executive will not, directly or indirectly, on the Executive's own behalf or on the behalf of any other Person, within the United States of America or in any other country or territory in which the businesses of the Company are conducted:

        (i)    engage in a Competing Business, including, without limitation, by owning, managing, operating, controlling, being employed by, providing services as a consultant or independent contractor to or participating in the ownership, management, operation or control of any Competing Business;

        (ii)   induce or attempt to induce any customer, vendor, supplier, licensor or other Person in a business relationship with any Company Party, for or with which the Executive or employees working under the Executive's supervision had any direct or indirect responsibility or contact during the Employment Period, (A) to do business with a Competing Business or (B) to cease, restrict, terminate or otherwise reduce business with the Company for the benefit of a Competing Business, regardless of whether the Executive initiates contact; or

        (iii)  (A) solicit, recruit, persuade, influence or induce, or attempt to solicit, recruit, persuade, influence or induce anyone employed or otherwise retained by any of the Company Parties (including any independent contractor or consultant), to cease or leave their employment or contractual or consulting relationship with any Company Party, regardless of whether the Executive initiates contact for such purposes or (B) hire, employ or otherwise attempt to establish, for any Person, any employment, agency, consulting, independent contractor or other business relationship with any Person who is or was employed or otherwise retained by any of the Company Parties (including any independent contractor or consultant).

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        (c)   The parties hereto acknowledge and agree that, notwithstanding anything in Section 5.3(b)(i) hereof, (i) the Executive may own or hold, solely as passive investments, securities of Persons engaged in any business that would otherwise be included in Section 5.3(b)(i), as long as with respect to each such investment the securities held by the Executive do not exceed five percent (5%) of the outstanding securities of such Person and such securities are publicly traded and registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) the Executive may serve on the board of directors (or other comparable position) or as an officer of any entity at the request of the Board; provided, however, that in the case of investments otherwise permitted under clause (i) above, the Executive shall not be permitted to, directly or indirectly, participate in, or attempt to influence, the management, direction or policies of (other than through the exercise of any voting rights held by the Executive in connection with such securities), or lend the Executive's name to, any such Person.

        (d)   The Executive acknowledges and agrees that, for purposes of this Section 5.3, indirect acts by the Executive shall include, without limitation, an act by the Executive's spouse, ancestor, lineal descendant, lineal descendant's spouse, sibling or other member of the Executive's immediate family.

        (e)   The Executive acknowledges that (i) the restrictive covenants contained in this Section 5.3 hereof are ancillary to and part of an otherwise enforceable agreement, such being the agreements concerning Confidential Information and other consideration as stated in this Agreement, (ii) at the time that these restrictive covenants are made, the limitations as to time, geographic scope and activity to be restrained, as described herein, are reasonable and do not impose a greater restraint than necessary to protect the good will and other legitimate business interests of the Company, including without limitation, Confidential Information (including trade secrets), client, customer and/or vendor relationships, client and/or customer goodwill and business productivity, (iii) in the event of termination of the Executive's employment, the Executive's experiences and capabilities are such that the Executive can obtain gainful employment without violating this Agreement and without the Executive incurring undue hardship, (iv) based on the relevant benefits and other new consideration provided for in this Agreement, including, without limitation, the disclosure and use of Confidential Information, the restrictive covenants of this Section 5.3, as applicable according to their terms, shall remain in full force and effect even in the event of the Executive's involuntary termination from employment, with or without Cause and (v) the Executive has carefully read this Agreement and has given careful consideration to the restraints imposed upon the Executive by this Agreement and consents to the terms of the restrictive covenants in this Section 5.3, with the knowledge that this Agreement may be terminated at any time in accordance with the provisions hereof.

        5.4   Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

        (a)   An "Affiliate" of any specified Person means any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

        (b)   "Company Parties" means the Company, and its direct and indirect parents, subsidiaries and Affiliates, and their successors in interest.

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        (c)   "Competing Business" means any business that competes with any of the Company Parties, including, without limitation, any enterprise that engages in, owns or operates businesses that market, sell, distribute, manufacture or otherwise are involved in the home textile, housewares or home accessories industries.

        (d)   Confidential Information.

        (i)    Definition. "Confidential Information" means any and all material, information, ideas, inventions, formulae, patterns, compilations, programs, devices, methods, techniques, processes, know how, plans (marketing, business, strategic, technical or otherwise), arrangements, pricing and other data of or relating to any of the Company Parties (as well as their customers and/or vendors) that is confidential, proprietary or trade secret (A) by its nature, (B) based on how it is treated or designated by a Company Party, (C) because the disclosure of which would have a material adverse effect on the business or planned business of any of the Company Parties and/or (D) as a matter of law.

        (ii)   Exclusions. Confidential Information does not include material, data, and/or information (A) that any Company Party has voluntarily placed in the public domain, (B) that has been lawfully and independently developed and publicly disclosed by third parties, (C) that constitutes the general non-specialized knowledge and skills gained by the Executive during the Employment Period or (D) that otherwise enters the public domain through lawful means; provided, however, that the unauthorized appropriation, use or disclosure of Confidential Information by the Executive, directly or indirectly, shall not affect the protection and relief afforded by this Agreement regarding such information.

        (iii)  Inclusions. Confidential Information includes, without limitation, the following information (including without limitation, compilations or collections of information) relating or belonging to any Company Party (as well as their clients, customers and/or vendors) and created, prepared, accessed, used or reviewed by the Executive during or after the Employment Period: (1) product and manufacturing information, such as ingredients, combinations of ingredients and manufacturing processes; (2) scientific and technical information, such as research and development, tests and test results, formulae and formulations, studies and analysis; (3) financial and cost information, such as operating and production costs, costs of goods sold, costs of supplies and manufacturing materials, non-public financial statements and reports, profit and loss information, margin information and financial performance information; (4) customer related information, such as customer related contracts, engagement and scope of work letters, proposals and presentations, customer-related contacts, lists, identities and prospects, practices, plans, histories, requirements and needs, price information and formulae and information concerning client or customer products, services, businesses or equipment specifications; (5) vendor and supplier related information, such as the identities, practices, history or services of any vendors or suppliers and vendor or supplier contacts; (6) sales, marketing and price information, such as marketing and sales programs and related data, sales and marketing strategies and plans, sales and marketing procedures and processes, pricing methods, practices and techniques and pricing schedules and lists; (7) database, software and other computer related information, such as computer programs, data, compilations of information and records, software and computer files, presentation software and computer-stored or backed-up information including, but not limited to, e-mails,

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databases, word processed documents, spreadsheets, notes, schedules, task lists, images and video; (8) employee-related information, such as lists or directories identifying employees, representatives and contractors, and information regarding the competencies (knowledge, skill, experience), compensation and needs of employees, representatives and contractors and training methods; and (9) business- and operation-related information, such as operating methods, procedures, techniques, practices and processes, information about acquisitions, corporate or business opportunities, information about partners and potential investors, strategies, projections and related documents, contracts and licenses and business records, files, equipment, notebooks, documents, memoranda, reports, notes, sample books, correspondence, lists and other written and graphic business records.

        (e)   "Misappropriate", or any form thereof, means:

        (i)    the acquisition of any Confidential Information by a Person who knows or has reason to know that the Confidential Information was acquired by theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means (each, an "Improper Means"); or

        (ii)   the disclosure or use of any Confidential Information without the express consent of the Company by a Person who (A) used Improper Means to acquire knowledge of the Confidential Information, (B) at the time of disclosure or use, knew or had reason to know that his or her knowledge of the Confidential Information was (x) derived from or through a Person who had utilized Improper Means to acquire it, (y) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use or (z) derived from or through a Person who owed a duty to the Company to maintain its secrecy or limit its use or (C) before a material change of his or her position, knew or had reason to know that it was Confidential Information and that knowledge of it had been acquired by accident or mistake.

        (f)    "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity.

        (g)   "Restricted Period" means the longer of (i) twelve (12) months after the date of termination of employment (the Executive's last day of work for the Company) or (ii) the period during which the Executive is receiving payments from the Company pursuant to Section 4 hereof.

        (h)   "Work Product" means all patents and patent applications, all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, creative works, discoveries, software, computer programs, modifications, enhancements, know-how, formulations, concepts and ideas, and all similar or related information (in each case whether or not patentable), all copyrights and copyrightable works, all trade secrets, confidential information, and all other intellectual property and intellectual property rights that are conceived, reduced to practice, developed or made by the Executive either alone or with others in the course of employment with the Company (including employment prior to the date of this Agreement).

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        5.5   Remedies. Because the Executive's services are unique and because the Executive has access to Confidential Information, the Executive acknowledges and agrees that if the Executive breaches any of the provisions of Section 5 hereof, the Company may suffer immediate and irreparable harm for which monetary damages alone will not be a sufficient remedy. The restrictive covenants stated in Section 5 hereof are without prejudice to the Company's rights and causes of action at law.

        5.6   Interpretation; Severability.

        (a)   The Executive has carefully considered the possible effects on the Executive of the covenants not to compete, the confidentiality provisions and the other obligations contained in this Agreement, and the Executive recognizes that the Company has made every effort to limit the restrictions placed upon the Executive to those that are reasonable and necessary to protect the Company's legitimate business interests.

        (b)   The Executive acknowledges and agrees that the restrictive covenants set forth in this Agreement are reasonable and necessary in order to protect the Company's valid business interests. It is the intention of the parties hereto that the covenants, provisions and agreements contained herein shall be enforceable to the fullest extent allowed by law. If any covenant, provision or agreement contained herein is found by a court having jurisdiction to be unreasonable in duration, scope or character of restrictions, or otherwise to be unenforceable, such covenant, provision or agreement shall not be rendered unenforceable thereby, but rather the duration, scope or character of restrictions of such covenant, provision or agreement shall be deemed reduced or modified with retroactive effect to render such covenant, provision or agreement reasonable or otherwise enforceable (as the case may be), and such covenant, provision or agreement shall be enforced as modified. If the court having jurisdiction will not review the covenant, provision or agreement, the parties hereto shall mutually agree to a revision having an effect as close as permitted by applicable law to the provision declared unenforceable. The parties hereto agree that if a court having jurisdiction determines, despite the express intent of the parties hereto, that any portion of the covenants, provisions or agreements contained herein are not enforceable, the remaining covenants, provisions and agreements herein shall be valid and enforceable. Moreover, to the extent that any provision is declared unenforceable, the Company shall have any and all rights under applicable statutes or common law to enforce its rights with respect to any and all Confidential Information or unfair competition by the Executive.

        6.     Miscellaneous.

        6.1   Public Statements.

        (a)   Media Nondisclosure. The Executive agrees that during the Employment Period or at any time thereafter, except as may be authorized in writing by the Company, the Executive will not directly or indirectly disclose or release to the Media any information concerning or relating to any aspect of the Executive's employment or termination from employment with the Company and/or any aspect of any dispute that is the subject of this Agreement. For the purposes of this Agreement, the term "Media" includes, without limitation, any news organization, station, publication, show, website, web log (blog), bulletin board, chat room and/or program (past, present and/or future), whether published through the means of print, radio, television and/or the Internet or otherwise, and any member, representative, agent and/or employee of the same.

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        (b)   Non-Disparagement. The Executive agrees that during the Employment Period or at any time thereafter, the Executive will not make any statements, comments or communications in any form, oral, written or electronic to any Media or any customer, client or supplier of the Company or any of its Affiliates, which would constitute libel, slander or disparagement of the Company or any of its Affiliates, including, without limitation, any such statements, comments or communications that criticize, ridicule or are derogatory to the Company or any of its Affiliates; provided, however, that the terms of this Section 6.1(b) shall not apply to communications between the Executive and, as applicable, the Executive's attorneys or other persons with whom communications would be subject to a claim of privilege existing under common law, statute or rule of procedure. The Executive further agrees that the Executive will not in any way solicit any such statements, comments or communications from others.

        6.2   ARBITRATION. SUBJECT TO THE RIGHTS UNDER SECTION 6.3 HEREOF TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF, BINDING ARBITRATION SHALL BE THE EXCLUSIVE REMEDY FOR ANY AND ALL DISPUTES, CLAIMS OR CONTROVERSIES, WHETHER STATUTORY, CONTRACTUAL OR OTHERWISE, BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE EXECUTIVE'S EMPLOYMENT BY OR TERMINATION FROM THE COMPANY (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, OR THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) (COLLECTIVELY, "DISPUTES"). THE PARTIES EACH WAIVE THE RIGHT TO A JURY TRIAL AND WAIVE THE RIGHT TO ADJUDICATE THEIR DISPUTES UNDER THIS AGREEMENT OUTSIDE THE ARBITRATION FORUM PROVIDED FOR IN THIS AGREEMENT, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT. In the event either party provides a notice of arbitration of any dispute to the other party, the parties agree to submit that dispute to a single arbitrator selected from a panel of arbitrators of JAMS located in greater New York City-Southern New Jersey area. The arbitration will be governed by the JAMS Comprehensive Arbitration Rules and Procedures in effect at the time the arbitration is commenced. If for any reason JAMS cannot serve as the arbitration administrator, the Company may select an alternative arbitration administrator such as the American Arbitration Association, to serve under the terms of this Agreement.

        (a)   VENUE. THE PARTIES STIPULATE AND AGREE THAT THE EXCLUSIVE VENUE OF ANY SUCH ARBITRATION PROCEEDING (AND OF ANY OTHER PROCEEDING, INCLUDING ANY COURT PROCEEDING, UNDER THIS AGREEMENT) SHALL BE PASSAIC COUNTY, NEW JERSEY (THE "AGREED VENUE").

        (b)   Authority and Decision. The arbitrator shall have the authority to award the same damages and other relief that a court could award. The arbitrator shall issue a reasoned award explaining the decision and any damages awarded. The arbitrator's decision will be final and binding upon the parties and enforceable by a court of competent jurisdiction. The parties will abide by and perform any award rendered by the arbitrator. In rendering the award, the arbitrator shall state the reasons therefor, including (without limitation) any computations of actual damages or offsets, if applicable.

        (c)   Fees and Costs. In the event of arbitration under the terms of this Agreement, the fees charged by JAMS or other arbitration administrator and the arbitrator shall be borne by the parties as determined by the arbitrator, except for any initial registration fee, which the parties shall bear equally. Otherwise, the parties shall each bear their own costs, expenses and attorneys' fees incurred in arbitration; provided, however, that the prevailing party shall be entitled to recover and have awarded its attorneys' fees, court costs, arbitration expenses, and its portion of the fees and costs charged by JAMS or other arbitration administrator, regardless of which party initiated the proceedings, in addition to any other relief to which it may be entitled.

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        (d)   Limited Scope. The following are excluded from binding arbitration under this Agreement: claims for workers' compensation benefits or unemployment benefits; replevin; and claims for which a binding arbitration agreement is invalid as a matter of law.

        6.3   Injunctive Relief. The parties hereto may seek injunctive relief in arbitration; provided, however, that as an exception to the arbitration agreement set forth in Section 6.2 hereof, the parties, in addition to all other available remedies, shall each have the right to initiate an action in any court of competent jurisdiction in order to request injunctive or other equitable relief regarding the terms of Sections 5 or 6.2 hereof. The exclusive venue of any such proceeding shall be in the Agreed Venue. The parties agree (a) to submit to the jurisdiction of any competent court in the Agreed Venue, (b) to waive any and all defenses the Executive may have on the grounds of lack of jurisdiction of such court and (c) that neither party shall be required to post any bond, undertaking or other financial deposit or guarantee in seeking or obtaining such equitable relief. Evidence adduced in any such proceeding for an injunction may be used in arbitration as well. The existence of this right shall not preclude or otherwise limit the applicability or exercise of any other rights and remedies that a party hereto may have at law or in equity.

        6.4   Settlement of Existing Rights. In exchange for the other terms of this Agreement, the Executive acknowledges and agrees that: (a) the Executive's entry into this Agreement is a condition of employment and/or continued employment with the Company, as applicable; (b) except as otherwise provided herein, this Agreement will replace any existing employment agreement between the parties and thereby act as a novation, if applicable; (c) the Executive is being provided with access to Confidential Information, including, without limitation, proprietary trade secrets of one or more Company Parties, to which the Executive has not previously had access; (d) all Company inventions and intellectual property developed by the Executive during any past employment with the Company and all goodwill developed with the Company's clients, customers and other business contacts by the Executive during any past employment with Company, as applicable, is the exclusive property of the Company; and (e) all Confidential Information and/or specialized training accessed, created, received or utilized by the Executive during any past employment with Company, as applicable, will be subject to the restrictions on Confidential Information described in this Agreement, whether previously so agreed or not.

        6.5   Entire Agreement; Waiver. This Agreement contains the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior understandings or agreements, whether written or oral. No modification or addition hereto or waiver or cancellation of any provision hereof shall be valid except by a writing signed by the party to be charged therewith. No delay on the part of any party to this Agreement in exercising any right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiver of such right or privilege.

        6.6   Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without regard to principles of conflict of laws.

        6.7   Successors and Assigns; Binding Agreement. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, personal representatives, successors and permitted assigns. This Agreement is a personal contract, and, except as specifically set forth herein, the rights and interests of the Executive herein may not be sold, transferred, assigned, pledged or hypothecated by any party without the prior written consent of the others. As used herein, the term "successor" as it relates to the Company, shall include, but not be limited to, any successor by way of merger, consolidation or sale of all or substantially all of such Person's assets or equity interests.

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        6.8   Representation by Counsel; Independent Judgment. Each of the parties hereto acknowledges that (a) it or the Executive has read this Agreement in its entirety and understands all of its terms and conditions, (b) it or the Executive has had the opportunity to consult with any individuals of its or the Executive's choice regarding its or the Executive's agreement to the provisions contained herein, including legal counsel of its or the Executive's choice, and any decision not to was the Executive's or its alone and (c) it or the Executive is entering into this Agreement of its or the Executive's own free will, without coercion from any source, based upon its or the Executive's own independent judgment.

        6.9   Interpretation. The parties and their respective legal counsel actively participated in the negotiation and drafting of this Agreement, and in the event of any ambiguity or mistake herein, or any dispute among the parties with respect to the provisions hereto, no provision of this Agreement shall be construed unfavorably against any of the parties on the ground that the Executive, it, or the Executive's or its counsel was the drafter thereof.

        6.10 Survival. The provisions of Sections 4.3(e), 5 and 6 hereof shall survive the termination of this Agreement.

        6.11 Notices. All notices and communications hereunder shall be in writing and shall be deemed properly given and effective when received, if sent by facsimile or telecopy, or by postage prepaid by registered or certified mail, return receipt requested, or by other delivery service which provides evidence of delivery, as follows:

If to the Company, to:

Linens 'n Things, Inc.
6 Brighton Road
Clifton, New Jersey 07015
Attention: General Counsel

with a copy (which shall not constitute notice) to:

Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas 75201-4761
Attention: Ronald M. Gaswirth, Esq.
Telephone: (214) 999-4601
Facsimile: (214) 999-3601
E-mail: rgaswirth@gardere.com

If to the Executive, to:

Robert Homler
at the most recent address of the
Executive on file with the Company

or to such other address as one party may provide in writing to the other party from time to time.

        6.12 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Facsimile transmission of any signed original document or retransmission of any signed facsimile transmission will be deemed the same as delivery of an original. At the request of any party, the parties will confirm facsimile transmission by signing a duplicate original document.

        6.13 Captions. Paragraph headings are for convenience only and shall not be considered a part of this Agreement.

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        6.14 No Third Party Beneficiary Rights. Except as otherwise provided in this Agreement, no entity shall have any right to enforce any provision of this Agreement, even if indirectly benefited by it.

        6.15 Withholding. Any payments provided for hereunder shall be paid net of any applicable withholding required under Federal, state or local law and any additional withholding to which Executive has agreed.

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        IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, on the Execution Date to be effective for all purposes as of the Effective Date.

LINENS 'N THINGS, INC.
By:	/s/  ROBERT J. DINICOLA
	Name:	Robert J. DiNicola
	Title:	Chairman of the Board and Chief Executive Officer
EXECUTIVE
/s/  ROBERT HOMLER Name: Robert Homler

EXHIBIT A

Definition of Change of Control

        "Change of Control" means:

        (1)   any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders or their Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of Holding or any successor company, including, without limitation, through a merger or consolidation or purchase of Voting Stock of Holding; provided that none of the Permitted Holders or their Related Parties have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board; provided further that the transfer of 100% of the Voting Stock of Holding to a Person that has an ownership structure identical to that of Holding prior to such transfer, such that Holding becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control;

        (2)   after an initial public offering of Capital Stock of Holding, during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by such Board or whose nomination for election by the stockholders of Holding was approved by a vote of a majority of the directors of Holding then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board then in office;

        (3)   the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of Holding and its Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or

        (4)   the adoption of a plan relating to the liquidation or dissolution of Holding.

        For purposes of this definition, the following terms shall have the meanings set forth below:

        An "Affiliate" of any specified Person means any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled thereby or any of the partners thereof.

"Board" means the Board of Directors of Holding or any committee thereof duly authorized to act on behalf of such Board of Directors.

"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Holding" means Linens Holding Co., a Delaware corporation.

A-1

"Permitted Holder" means any of Apollo, NRDC Real Estate Advisors I, LLC or Silver Point Capital Fund Investments, LLC.

"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity.

"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.

"Related Party" means:

        (1)   any controlling stockholder, 50% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or

        (2)   any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 50% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).

"Subsidiary" means, with respect to any specified Person:

        (1)   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

        (2)   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).

"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.

        Notwithstanding anything to the contrary in this Exhibit A, the definition of Change of Control shall be interpreted consistently with the definition of "Change of Control" contained in Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations and guidance issued by the Internal Revenue Service under Section 409A of the Code, including IRS Notice 2005-1.

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EXHIBIT B

Fringe Benefits

1.

Health insurance in accordance with the Company's health insurance plan or program in effect from time to time.

2.

Prescription drug coverage in accordance with the Company's health insurance plan or program, or separate prescription drug coverage plan or program, in effect from time to time.

3.

Dental insurance in accordance with the Company's dental insurance plan or program in effect from time to time.

4.

Long-term disability insurance in accordance with the Company's long-term disability insurance plan or program in effect from time to time.

5.

Life insurance coverage in amount equal to one and one half (1.5) times Base Salary for a bi-weekly payroll deduction of $20.84.

6.

Cellular telephone and service.

7.

Annual financial planning services through Joel Isaacson Company, or a reasonable substitute therefor, as may be determined by the Company from time to time.

8.

The Company will pay for the Executive's relocation from the Pittsburg, Pennsylvania area to the Clifton, New Jersey area in accordance with the Company's policy applicable to senior executive officers. The relocation benefits will include, without limitation, payment of or reimbursement to the Executive for (a) closing costs payable by the Executive in connection with the sale of the Executive's personal residence in Pennsylvania, (b) closing costs payable by the Executive in connection with the purchase of a new personal residence in the Clifton, New Jersey area, and (c) to the extent the aggregate sales price of the Executive's Pennsylvania residence is less than the aggregate purchase price of the Executive's new residence in the Clifton, New Jersey area, an amount equal to such difference.

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EMPLOYMENT AGREEMENT
EXHIBIT A Definition of Change of Control
EXHIBIT B Fringe Benefits

EX-10.13

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Exhibit 10.13

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

        THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is entered into on May 8, 2006 (the "Execution Date"), to be effective for all purposes as of May 8, 2006 (the "Effective Date"), by and between Linens 'n Things, Inc., a Delaware corporation (the "Company") and wholly owned subsidiary of Linens Holding Co., a Delaware corporation ("Holding"), and Robert Homler (the "Executive").

        WHEREAS, the Company and the Executive entered in an Employment Agreement on April 12, 2006, effective as of April 17, 2006 (the "Original Employment Agreement"); and

        WHEREAS, the Company and the Executive now desire to amend certain provisions of the Original Employment Agreement and restate the Original Employment Agreement, as so amended, effective as of the Effective Date.

        NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

1.Employment of Executive; Duties.

1.1Title.    During the Employment Period (as defined in Section 2 hereof), the Executive shall serve as Executive Vice President, Merchandising of the Company and of Holding. The Executive shall have the normal duties, responsibilities and authority commensurate with such positions.

1.2Duties.    During the Employment Period, the Executive shall do and perform all services and acts necessary or advisable to fulfill the duties and responsibilities of the Executive's positions and shall render such services on the terms set forth herein. In addition, the Executive shall have such other executive and managerial powers and duties as may reasonably be assigned to the Executive, commensurate with the Executive serving as an Executive Vice President. The Company may adjust the duties and responsibilities of the Executive as an Executive Vice President, notwithstanding the specific title set forth in Section 1.1 hereof, based upon the Company's needs from time to time. Except for sick leave, reasonable vacations and excused leaves of absence, the Executive shall, throughout the Employment Period, devote substantially all the Executive's working time, attention, knowledge and skills faithfully, and to the best of the Executive's ability, to the duties and responsibilities of the Executive's positions in furtherance of the business affairs and activities of the Company and its subsidiaries and Affiliates (as defined in Section 5.4(a) hereof) and, except where the Company provides its written consent otherwise, shall maintain the Executive's principal residence within 75 miles of the principal office of the Company as of the Effective Date. The Executive shall at all times be subject to, comply with, observe and carry out (a) the Company's rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally and in effect from time to time and (b) such rules, regulations, policies, codes of ethics and/or conduct, directions and restrictions as the Board of Directors of the Company (the "Board") may from time to time reasonably establish or approve for senior executive officers of the Company.

2.Term of Employment.

2.1Employment Period.    The employment of the Executive hereunder shall continue until December 31, 2007 (the "Initial Employment Period"), unless terminated earlier in accordance with the provisions of Section 4 of this Agreement.

2.2Extension.    Unless terminated earlier in accordance with the provisions of Section 4 of this Agreement, the employment of the Executive hereunder shall continue after the end of the Initial Employment Period for additional one (1)-year periods (each an "Extension Period" and,

together with the Initial Employment Period, the "Employment Period"), unless the Company or the Executive notifies the other in writing not less than one (1) year prior to the end of the Initial Employment Period, or the end of the applicable Extension Period, of its or the Executive's election, in its or the Executive's sole discretion, not to extend the Employment Period.

3.Compensation and General Benefits.

3.1Base Salary.

        (a)   During the Employment Period, the Company agrees to pay to the Executive an annual base salary in an amount equal to $400,000 (such base salary, as may be adjusted from time to time pursuant to Section 3.1(b), is referred to herein as the "Base Salary"). The Executive's Base Salary, less amounts required to be withheld under applicable law, shall be payable in equal installments in accordance with the Company's normal payroll practices and procedures in effect from time to time for the payment of salaries to officers of the Company, but in no event less frequently than monthly.

        (b)   The Board or the Compensation Committee established by the Board (the "Compensation Committee") shall review the Executive's performance on an annual basis and, based on such review, may change the Base Salary, as it, acting in its sole discretion, shall determine to be reasonable and appropriate.

3.2Bonus.    With respect to the 2006 calendar year and with respect to each calendar year that commences during the Employment Period, the Executive shall be eligible to receive from the Company an annual performance bonus (the "Annual Bonus") on a basis and in an amount to be determined by the Board or the Compensation Committee in the exercise of its sole discretion for the applicable year. The target Annual Bonus, if any, will be 50% of the Base Salary. Any Annual Bonus earned shall be payable in full as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures. Except as otherwise expressly provided in Section 4 hereof, any Annual Bonus (or portion thereof) payable under this Section 3.2 shall not be payable unless the Executive is employed by the Company on the last day of the period to which such Annual Bonus relates.

3.3Expenses.    During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this Section 3 or elsewhere herein, the Executive shall be entitled to receive reimbursement from the Company for all reasonable and necessary expenses incurred by the Executive in performing the Executive's duties hereunder on behalf of the Company, subject to, and consistent with, the Company's policies for expense payment and reimbursement, in effect from time to time.

3.4Fringe Benefits.    During the Employment Period, in addition to any amounts to which the Executive may be entitled pursuant to the other provisions of this Section 3 or elsewhere herein, the Executive shall be entitled to participate in, and to receive benefits under, (a) any benefit plans, arrangements or policies made available by the Company to its employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of each such plan, arrangement or policy and (b) without limiting the foregoing, the benefits set forth on Exhibit B attached hereto.

3.5Stock Options.    During the Employment Period and subject to the approval of the Option Committee of Holding, as defined in the Linens Holding Co. Stock Option Plan (the "Plan"), the Executive shall be eligible to participate in and be granted stock options under the Plan to purchase shares of Common Stock, par value $0.01 per share, of Holding (the "Common Stock").

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4.Termination.

4.1General.    The employment of the Executive hereunder (and the Employment Period) shall terminate as provided in Section 2 hereof, unless earlier terminated in accordance with the provisions of this Section 4.

4.2Death or Disability of the Executive.

        (a)   The employment of the Executive hereunder (and the Employment Period) shall terminate upon (i) the death of the Executive and (ii) at the option of the Company, upon not less than fifteen (15) days' prior written notice to the Executive or the Executive's personal representative or guardian, if the Executive suffers a "Total Disability" (as defined in Section 4.2(b) hereof). Upon termination for death or Total Disability, subject to reduction by any benefits paid or payable to the Executive, the Executive's beneficiaries or estate under any Company-sponsored disability benefit plan program or policy for the period following such date of termination (provided, however, that no such reduction shall be made for any benefits paid upon the Executive's death under the Company's life insurance policy), (A) the Company shall pay to the Executive, guardian or personal representative, as the case may be, the Executive's current Base Salary for the remainder of the Employment Period in effect immediately prior to the date of termination and (B) subject further to the sole discretion of the Board or the Compensation Committee, the Company may also pay to the Executive, guardian or personal representative, as the case may be, a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had the Executive worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. Any bonus shall be payable as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures.

        (b)   For purposes of this Agreement, "Total Disability" shall mean (i) if the Executive is subject to a legal decree of incompetency (the date of such decree being deemed the date on which such disability occurred), (ii) the written determination by a physician selected by the Company that, because of a medically determinable disease, injury or other physical or mental disability, the Executive is unable substantially to perform, with or without reasonable accommodation, the material duties of the Executive required hereby, and that such disability has lasted for ninety (90) consecutive days or any one hundred twenty (120) days during the immediately preceding twelve (12)-month period or is, as of the date of determination, reasonably expected to last six (6) months or longer after the date of determination, in each case based upon medically available reliable information or (iii) Executive's qualifying for benefits under the Company's long-term disability coverage, if any. In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive hereby consents to (x) any examinations that the Board or the Compensation Committee determines are relevant to a determination of whether the Executive is mentally and/or physically disabled or are required by the Company physician, (y) furnish such medical information as may be reasonably requested and (z) waive any applicable physician patient privilege that may arise because of such examination.

        (c)   With respect to outstanding stock options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.2, (i) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (ii) any such options that are vested and exercisable as of such date of

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termination shall expire immediately following the expiration of the one hundred eighty (180)-day period following such date of termination.

        (d)   With respect to any shares of Common Stock held by the Executive that are vested as of the date of termination pursuant to this Section 4.2 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.2(c) hereof), for the two hundred seventy (270)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive or the Executive's beneficiary, as applicable, and the Executive or the Executive's beneficiary hereby agrees to sell any or all such shares to the Company (or the Company's designee) for an amount equal to the product of (i) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (ii) the number of shares so purchased.

4.3Termination by the Company Without Cause or Resignation by the Executive For Good Reason.

        (a)   The Company may terminate the Executive's employment without "Cause" (as defined in Section 4.3(g)), and thereby terminate the Executive's employment (and the Employment Period) under this Agreement at any time with no requirement for notice to the Executive.

        (b)   The Executive may resign, and thereby terminate the Executive's employment (and the Employment Period), at any time for "Good Reason" (as defined in Section 4.3(f) hereof), upon not less than sixty (60) days' prior written notice to the Company specifying in reasonable detail the reason therefore; provided, however, that the Company shall have a reasonable opportunity to cure any such Good Reason (to the extent possible) within sixty (60) days after the Company's receipt of such notice; and provided further that, if the Company is not seeking to cure, the Company shall not be obligated to allow the Executive to continue working during such period and may, in its sole discretion, accelerate such termination of employment (and the Employment Period) to any date during such period.

        (i)    Executive may not terminate employment under this Agreement for Good Reason regarding any of the Company's acts or omissions of which Executive had actual notice for sixty (60) days or more prior to giving notice of termination for Good Reason.

        (ii)   A determination of whether the Executive legitimately has Good Reason for termination of the Executive's employment under this Agreement, and of whether the Company has effectively cured and thus eliminated the grounds for such Good Reason, shall be made only by the Chief Executive Officer of the Company (the "Chief Executive Officer"), within the Chief Executive Officer's sole judgment and discretion, acting in good faith after having met with the Company's Vice President of Human Resources.

        (c)   In the event the Executive's employment is terminated pursuant to this Section 4.3, then, subject to Section 4.3(d) hereof, the following provisions shall apply:

        (i)    The Company shall continue to pay the Executive the Base Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the year of termination) had the Executive remained in the employ of the Company until the expiration of the Employment Period in effect immediately prior to the date of termination, with all such amounts payable in accordance with the Company's normal payroll practices and procedures in the same manner and at the same time as though the Executive remained employed by the Company.

        (ii)   If such termination occurs upon or within six (6) months following a Change of Control (as defined in Exhibit A attached hereto), the Company shall continue to pay the

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Executive the Base Salary to which the Executive would have been entitled pursuant to Section 3.1 hereof (at the Base Salary rate during the year of termination) for the greater of (A) the period set forth in Section 4.3(c)(i) hereof or (B) a two (2)-year period following such date of termination, with all such amounts payable in accordance with the Company's normal payroll practices and procedures in the same manner and at the same time as though the Executive remained employed by the Company.

        (iii)  In the event the Executive's employment is terminated pursuant to this Section 4.3 without Cause, and if the Company has previously effected reductions in the Executive's Base Salary and the base salary of all executives at the same level as the Executive, which reductions were substantially similar, then the Base Salary rate for purposes of Section 4.3(c)(i) or (ii) hereof shall be the Base Salary rate in effect immediately prior to such reductions.

        (iv)  Subject to the sole discretion of the Board or the Compensation Committee, the Company may pay to the Executive a prorated share of the Annual Bonus pursuant to Section 3.2 hereof (based on the period of actual employment) that the Executive would have been entitled to had the Executive worked the full year during which the termination occurred, provided that bonus targets are met for the year of such termination. The bonus shall be payable as soon as reasonably practicable following the determination thereof, but in no event later than May 15 of the following year, and in accordance with the Company's normal payroll practices and procedures.

        (v)   With respect to outstanding options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.3, (A) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (B) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.

        (vi)  With respect to any shares of Common Stock held by the Executive that are vested as of the date of termination pursuant to this Section 4.3 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.3(c)(v) hereof), for the one hundred eighty (180)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive, and the Executive hereby agrees to sell any or all such shares to the Company (or the Company's designee), for an amount equal to the product of (A) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (B) the number of shares so purchased.

        (vii) The Executive shall continue to be entitled to the fringe benefits available to the Executive immediately preceding the Executive's date of termination pursuant to Section 4.3, in each case (A) through the expiration of the Employment Period in effect immediately prior to the date of termination, or, (B) in the event that Executive's Base Salary is being paid pursuant to Section 4.3(c)(ii), for the period set forth therein.

        (d)   As a condition precedent to the Executive's right to receive the benefits set forth in Section 4.3(c) hereof, the Executive agrees to execute a release of the Company and its respective Affiliates, officers, directors, stockholders, employees, agents, insurers, representatives and successors from and against any and all claims that the Executive may have against any such Person (as defined in Section 5.4(f) hereof) relating to the Executive's employment by the Company and the termination thereof, such release to be in form and substance reasonably satisfactory to the Company.

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        (e)   Anything in this Agreement to the contrary notwithstanding, if it shall be determined that any payment, vesting, distribution or transfer by the Company or any successor, or any Affiliate of the foregoing or by any other Person or that any other event occurring with respect to the Executive and the Company for the Executive's benefit, whether paid or payable or distributed or distributable under the terms of this Agreement or otherwise (including under any employee benefit plan) (a "Payment") would be subject to or result in the imposition of the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (and any regulations or guidance promulgated or issued thereunder, any successor provision, and any similar provision of state or local income tax law) (collectively, the "Excise Tax"), then the amount of the Payment shall be reduced to the highest amount that may be paid by the Company or other entity without subjecting any such Payment to the Excise Tax (the "Payment Reduction"). The Executive shall have the right to designate those payments or benefits that shall be reduced or eliminated under the Payment Reduction to avoid the imposition of the Excise Tax, subject to the confirmation of the Accounting Firm (as defined herein) with respect to the intended effect thereof. Notwithstanding the foregoing, the Payment Reduction shall not apply if the Executive would, on a net after-tax basis, receive less compensation than if the Payment were not so reduced.

        (i)    Subject to the provisions of Section 4.3(e)(ii), all determinations required to be made under this Section 4.3(e), including whether and when a Payment is subject to Section 4999 and the assumptions to be utilized in arriving at such determination and in determining an appropriate Payment Reduction, shall be made by KPMG LLP, or any other nationally recognized accounting firm that shall be the Company's outside auditors at the time of such determination (the "Accounting Firm"), which Accounting Firm shall provide detailed supporting calculations to the Executive and the Company within fifteen (15) business days of the receipt of notice from the Company or the Executive that there will be a Payment that the Person giving notice believes may be subject to the Excise Tax. All fees and expenses of the Accounting Firm shall be borne by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive in determining whether a Payment Reduction is required and the amount thereof (subject to Sections 4.3(e)(ii) and (iii)), in the absence of material mathematical or legal error.

        (ii)   As a result of uncertainty in the application of Section 4999 that may exist at the time of the initial determination by the Accounting Firm, it may be possible that in making the calculations required to be made hereunder, the Accounting Firm shall determine that a Payment Reduction need not be made that properly should be made (an "Overpayment") or that a Payment Reduction not properly needed to be made should be made (an "Underpayment"). If, within seventy-five (75) days after the Accounting Firm's initial determination under Section 4.3(e)(i), the Accounting Firm shall determine that an Overpayment was made, any such Overpayment shall be treated for all purposes, to the extent practicable and subject to applicable law, as a loan to the Executive with interest at the applicable Federal rate provided for in Section 1274(d) of the Code and shall be repaid by the Executive to the Company within thirty-five (35) days after the Executive receives notice of the Accounting Firm's determination; provided, however, that the amount to be repaid by the Executive to the Company either as a loan or otherwise as a lump sum payment (where a loan is not practicable or permitted by law) shall be reduced to the extent that any portion of the Overpayment to be repaid will not be offset by a corresponding reduction in tax by reason of such repayment of the Overpayment. If the Accounting Firm shall determine that an Underpayment was made, any such Underpayment shall be due and payable by the Company to the Executive within

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thirty-five (35) days after the Company receives notice of the Accounting Firm's determination.

        (iii)  The Executive shall give written notice to the Company of any claim by the Internal Revenue Service that, if successful, would require the payment by the Executive of an Excise Tax, such notice to be provided within fifteen (15) days after the Executive shall have received written notice of such claim. The Executive shall cooperate with the Company in determining whether to contest or pay such claim and shall not pay such claim without the written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.

        (iv)  This Section 4.3(e) shall remain in full force and effect following the termination of the Executive's employment for any reason until the expiration of the statute of limitations on the assessment of taxes applicable to the Executive for all periods in which the Executive may incur a liability for taxes (including Excise Taxes), interest or penalties arising out of the operation of this Agreement.

        (f)    For purposes of this Agreement, the Executive would be entitled to terminate the Executive's employment for "Good Reason" if without the Executive's prior written consent:

        (i)    the Company fails to comply with any material obligation imposed by this Agreement;

        (ii)   the Company changes the Executive's position from that of an Executive Vice President; provided, however, that (A) a change in the Executive's duties or responsibilities without a change in the Executive's position as an Executive Vice President shall not constitute Good Reason and (B) nothing herein shall prohibit the Company from changing the Executive's specific title as an Executive Vice President, notwithstanding the specific title set forth in Section 1.1 hereof, based upon the Company's needs from time to time; or

        (iii)  the Company effects a reduction in the Executive's Base Salary, unless all executives at the same level as the Executive receive a substantially similar reduction in base salary.

        (g)   For purposes of this Agreement, "Cause" means the occurrence of any one or more of the following events, and the Company shall have the sole discretion to determine the existence of Cause:

        (i)    a failure by the Executive to comply with any obligation under this Agreement;

        (ii)   the Executive's being indicted for (A) any felony or (B) any misdemeanor that causes or is likely to cause harm or embarrassment to the Company or any of its Affiliates, in the reasonable judgment of the Board;

        (iii)  theft, embezzlement or fraud by the Executive in connection with the performance of the Executive's duties hereunder;

        (iv)  the Executive's engaging in any activity that gives rise to a material conflict with the Company or any of its Affiliates;

        (v)   the misappropriation by the Executive of any material business opportunity of the Company or any of its Affiliates;

        (vi)  any failure to comply with, observe or carry out the Company's rules, regulations, policies and codes of ethics and/or conduct applicable to its employees

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generally and in effect from time to time, including (without limitation) those regarding conflicts, potential conflicts of interest or the appearance of a conflict of interest

        (vii) any failure to comply with, observe or carry out the rules, regulations, policies, directions, codes of ethics and/or conduct and restrictions established or approved by the Board from time to time for senior executive officers of the Company, including (without limitation) those regarding conflicts, potential conflicts of interest or the appearance of a conflict of interest;

        (viii) substance abuse or use of illegal drugs that, in the reasonable judgment of the Board, (A) impairs the Executive's performance of the Executive's duties hereunder or (B) causes or is likely to cause harm or embarrassment to the Company or any of its Affiliates; and

        (ix)  engagement in conduct that Executive knows or should know is injurious to the Company or any of its Affiliates.

4.4Termination For Cause, Voluntary Resignation Other Than For Good Reason or Election Not to Extend the Employment Period.

        (a)   (i) The Company may, upon action of the Board, terminate the employment of the Executive (and the Employment Period) at any time for "Cause," (ii) the Executive may voluntarily resign other than for Good Reason and thereby terminate the Executive's employment (and the Employment Period) under this Agreement at any time upon not less than thirty (30)-days' prior written notice or (iii) either the Company or the Executive may elect not to extend or further extend the Employment Period pursuant to Section 2.2 hereof.

        (b)   The following provisions shall apply upon termination by the Company for Cause, by the Executive as the result of resignation for other than for Good Reason, or by the Company or the Executive at the end of the Employment Period as the result of an election not to extend or further extend the Employment Period:

        (i)    The Executive shall be entitled to receive all amounts of earned but unpaid Base Salary and benefits accrued through the date of such termination. Except as provided below, all other rights of the Executive (and all obligations of the Company) hereunder shall terminate as of the date of such termination.

        (ii)   With respect to outstanding options and other equity-based awards held by the Executive as of the date of termination pursuant to this Section 4.4, (A) any such options that are not vested or exercisable as of such date of termination shall immediately expire and any such equity-based awards that are not vested as of such date of termination shall immediately be forfeited and (B) any such options that are vested and exercisable as of such date of termination shall expire immediately following the expiration of the ninety (90)-day period following such date of termination.

        (iii)  With respect to any shares of Common Stock held by the Executive that are vested as of the date of termination pursuant to this Section 4.4 (or issued pursuant to the exercise of options following such date of termination pursuant to Section 4.4(b)(ii) hereof), for the one hundred eighty (180)-day period following such date of termination, the Company (or its designee) shall have the right to purchase from the Executive and the Executive hereby agrees to sell any or all such shares to the Company (or the Company's designee) for an amount equal to the product of (A) the per share current fair market value of a share of Common Stock (as determined by the Board in good faith) and (B) the number of shares so purchased.

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        (c)   Before the Company may terminate the Executive for Cause pursuant to Section 4.4(a)(i), the Board shall deliver to the Executive a written notice of the Company's intent to terminate the Executive for Cause, and the Executive shall have been given a reasonable opportunity to cure any such acts or omissions (which are susceptible of cure as reasonably determined by the Board) within thirty (30) days after the Executive's receipt of such notice.

4.5Resignation from Officer Positions.    Upon the termination of the Executive's employment for any reason (unless otherwise agreed in writing by the Company and the Executive), the Executive will be deemed to have resigned, without any further action by the Executive, from any and all officer, director and/or director positions that the Executive, immediately prior to such termination, (a) held with the Company or any of its Affiliates and (b) held with any other entities at the direction of, or as a result of the Executive's affiliation with, the Company or any of its Affiliates. If for any reason this Section 4.5 is deemed to be insufficient to effectuate such resignations, then Executive will, upon the Company's request, execute any documents or instruments that the Company may deem necessary or desirable to effectuate such resignations. In addition, the Executive hereby designates the Secretary or any Assistant Secretary of the Company and of any Affiliate to execute any such documents or instruments as the Executive's attorney-in-fact to effectuate such resignations if execution by the Secretary or any Assistant Secretary of the Company or Affiliate is deemed by the Company or the Affiliate to be a more expedient means to effectuate such resignation or resignations.

4.6Section 409A of the Code.    Notwithstanding anything to the contrary in this Agreement, the parties mutually desire to avoid adverse tax consequences associated with the application of Section 409A of the Code to this Agreement and agree to cooperate fully and take appropriate reasonable actions to avoid any such consequences under Section 409A of the Code, including delaying payments and reforming the form of the Agreement if such action would reduce or eliminate taxes and/or interest payable as a result of Section 409A of the Code. In this regard, notwithstanding anything to the contrary in this Section 4, to the extent necessary to comply with Section 409A of the Code, any payment required under this Section 4 shall be deferred for a period of six (6) months, regardless of the circumstances giving rise to or the basis for such payment.

5.Confidentiality, Work Product and Non-Competition and Non-Solicitation.

5.1Confidentiality.

        (a)   In connection with the Executive's employment with the Company, the Company promises to provide the Executive with access to "Confidential Information" (as defined in Section 5.4(d) hereof) in support of the Executive's employment duties. The Executive recognizes that the Company's business interests require a confidential relationship between the Company and the Executive and the fullest practical protection and confidential treatment of all Confidential Information. At all times, both during and after the Employment Period, the Executive shall not directly or indirectly: (i) appropriate, download, print, copy, remove, use, disclose, divulge, communicate or otherwise "Misappropriate" (as defined in Section 5.4(e) hereof) any Confidential Information, including, without limitation, originals or copies of any Confidential Information, in any media or format, except for the Company's benefit within the course and scope of the Executive's employment or with the prior written consent of the Chief Executive Officer; or (ii) take or encourage any action that would circumvent, interfere with or otherwise diminish the value or benefit of the Confidential Information to any of the Company Parties (as defined in Section 5.4(b) hereof).

        (b)   All Confidential Information, and all other information and property affecting or relating to the business of the Company Parties within the Executive's possession, custody or

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control, regardless of form or format, shall remain, at all times, the property of the respective Company Parties, the appropriation, use and/or disclosure of which is governed and restricted by this Agreement.

        (c)   The Executive acknowledges and agrees that:

        (i)    the Executive occupies a unique position within the Company, and the Executive is and will be intimately involved in the development and/or implementation of Confidential Information;

        (ii)   in the event the Executive breaches this Section 5.1 with respect to any Confidential Information, such breach shall be deemed to be a Misappropriation of such Confidential Information; and

        (iii)  any Misappropriation of Confidential Information will result in immediate and irreparable harm to the Company.

        (d)   Upon receipt of any formal or informal request, by legal process or otherwise, seeking the Executive's direct or indirect disclosure or production of any Confidential Information to any Person, the Executive shall promptly and timely notify the Company and provide a description and, if applicable, hand deliver a copy of such request to the Company. The Executive irrevocably nominates and appoints the Company as the Executive's true and lawful attorney-in-fact to act in the Executive's name, place and stead to perform any act that the Executive might perform to defend and protect against any disclosure of Confidential Information.

        (e)   At any time the Company may request, during or after the Employment Period, the Executive shall deliver to the Company all originals and copies of Confidential Information and all other information and property affecting or relating to the business of the Company Parties within the Executive's possession, custody or control, regardless of form or format, including, without limitation any Confidential Information produced by the Executive. Both during and after the Employment Period, the Company shall have the right of reasonable access to review, inspect, copy and/or confiscate any Confidential Information within the Executive's possession, custody or control.

        (f)    Upon termination or expiration of this Agreement, the Executive shall immediately return to the Company all Confidential Information, and all other information and property affecting or relating to the business of the Company Parties, within the Executive's possession, custody or control, regardless of form or format, without the necessity of a prior Company request.

        (g)   During the Employment Period, the Executive represents and agrees that the Executive will not use or disclose any confidential or proprietary information or trade secrets of others, including but not limited to former employers, and that the Executive will not bring onto the premises of the Company or access such confidential or proprietary information or trade secrets of such others, unless consented to in writing by said others, and then only with the prior written authorization of the Company.

5.2Work Product/Intellectual Property.

        (a)   Assignment. The Executive hereby assigns to the Company all right, title and interest to all "Work Product" (as defined in Section 5.4(h) hereof) that (i) relates to any of the Company Parties' actual or anticipated business, research and development or existing or future products or services, or (ii) is conceived, reduced to practice, developed or made using any equipment, supplies, facilities, assets, information or resources of any of the Company Parties (including, without limitation, any intellectual property rights).

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        (b)   Disclosure. The Executive shall promptly disclose Work Product to the Chief Executive Officer and perform all actions reasonably requested by the Company (whether during or after the Employment Period) to establish and confirm the ownership and proprietary interest of any of the Company Parties in any Work Product (including, without limitation, the execution of assignments, consents, powers of attorney, applications and other instruments). The Executive shall not file any patent or copyright applications related to any Work Product except with the written consent of the Chief Executive Officer.

5.3Non-Competition and Non-Solicitation.

        (a)   In consideration of the Confidential Information being provided to the Executive as stated in Section 5.1 hereof, and other good and valuable new consideration as stated in this Agreement, including, without limitation, employment and/or continued employment with the Company, and the business relationships, Company goodwill, work experience, client, customer and/or vendor relationships and other fruits of employment that the Executive will have the opportunity to obtain, use and develop under this Agreement, the Executive agrees to the restrictive covenants stated in this Section 5.3.

        (b)   During the Employment Period and until the end of the Restricted Period (as defined in Section 5.4(g) hereof), the Executive agrees that the Executive will not, directly or indirectly, on the Executive's own behalf or on the behalf of any other Person, within the United States of America or in any other country or territory in which the businesses of the Company are conducted:

        (i)    engage in a Competing Business, including, without limitation, by owning, managing, operating, controlling, being employed by, providing services as a consultant or independent contractor to or participating in the ownership, management, operation or control of any Competing Business;

        (ii)   induce or attempt to induce any customer, vendor, supplier, licensor or other Person in a business relationship with any Company Party, for or with which the Executive or employees working under the Executive's supervision had any direct or indirect responsibility or contact during the Employment Period, (A) to do business with a Competing Business or (B) to cease, restrict, terminate or otherwise reduce business with the Company for the benefit of a Competing Business, regardless of whether the Executive initiates contact; or

        (iii)  (A) solicit, recruit, persuade, influence or induce, or attempt to solicit, recruit, persuade, influence or induce anyone employed or otherwise retained by any of the Company Parties (including any independent contractor or consultant), to cease or leave their employment or contractual or consulting relationship with any Company Party, regardless of whether the Executive initiates contact for such purposes or (B) hire, employ or otherwise attempt to establish, for any Person, any employment, agency, consulting, independent contractor or other business relationship with any Person who is or was employed or otherwise retained by any of the Company Parties (including any independent contractor or consultant).

        (c)   The parties hereto acknowledge and agree that, notwithstanding anything in Section 5.3(b)(i) hereof, (i) the Executive may own or hold, solely as passive investments, securities of Persons engaged in any business that would otherwise be included in Section 5.3(b)(i), as long as with respect to each such investment the securities held by the Executive do not exceed five percent (5%) of the outstanding securities of such Person and such securities are publicly traded and registered under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) the Executive may serve on the board

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of directors (or other comparable position) or as an officer of any entity at the request of the Board; provided, however, that in the case of investments otherwise permitted under clause (i) above, the Executive shall not be permitted to, directly or indirectly, participate in, or attempt to influence, the management, direction or policies of (other than through the exercise of any voting rights held by the Executive in connection with such securities), or lend the Executive's name to, any such Person.

        (d)   The Executive acknowledges and agrees that, for purposes of this Section 5.3, indirect acts by the Executive shall include, without limitation, an act by the Executive's spouse, ancestor, lineal descendant, lineal descendant's spouse, sibling or other member of the Executive's immediate family.

        (e)   The Executive acknowledges that (i) the restrictive covenants contained in this Section 5.3 hereof are ancillary to and part of an otherwise enforceable agreement, such being the agreements concerning Confidential Information and other consideration as stated in this Agreement, (ii) at the time that these restrictive covenants are made, the limitations as to time, geographic scope and activity to be restrained, as described herein, are reasonable and do not impose a greater restraint than necessary to protect the good will and other legitimate business interests of the Company, including without limitation, Confidential Information (including trade secrets), client, customer and/or vendor relationships, client and/or customer goodwill and business productivity, (iii) in the event of termination of the Executive's employment, the Executive's experiences and capabilities are such that the Executive can obtain gainful employment without violating this Agreement and without the Executive incurring undue hardship, (iv) based on the relevant benefits and other new consideration provided for in this Agreement, including, without limitation, the disclosure and use of Confidential Information, the restrictive covenants of this Section 5.3, as applicable according to their terms, shall remain in full force and effect even in the event of the Executive's involuntary termination from employment, with or without Cause and (v) the Executive has carefully read this Agreement and has given careful consideration to the restraints imposed upon the Executive by this Agreement and consents to the terms of the restrictive covenants in this Section 5.3, with the knowledge that this Agreement may be terminated at any time in accordance with the provisions hereof.

5.4Definitions.    For purposes of this Agreement, the following terms shall have the following meanings:

        (a)   An "Affiliate" of any specified Person means any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

        (b)   "Company Parties" means the Company, and its direct and indirect parents, subsidiaries and Affiliates, and their successors in interest.

        (c)   "Competing Business" means any business that competes with any of the Company Parties, including, without limitation, any enterprise that engages in, owns or operates businesses that market, sell, distribute, manufacture or otherwise are involved in the home textile, housewares or home accessories industries.

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        (d)   Confidential Information.

        (i)    Definition. "Confidential Information" means any and all material, information, ideas, inventions, formulae, patterns, compilations, programs, devices, methods, techniques, processes, know how, plans (marketing, business, strategic, technical or otherwise), arrangements, pricing and other data of or relating to any of the Company Parties (as well as their customers and/or vendors) that is confidential, proprietary or trade secret (A) by its nature, (B) based on how it is treated or designated by a Company Party, (C) because the disclosure of which would have a material adverse effect on the business or planned business of any of the Company Parties and/or (D) as a matter of law.

        (ii)   Exclusions. Confidential Information does not include material, data, and/or information (A) that any Company Party has voluntarily placed in the public domain, (B) that has been lawfully and independently developed and publicly disclosed by third parties, (C) that constitutes the general non-specialized knowledge and skills gained by the Executive during the Employment Period or (D) that otherwise enters the public domain through lawful means; provided, however, that the unauthorized appropriation, use or disclosure of Confidential Information by the Executive, directly or indirectly, shall not affect the protection and relief afforded by this Agreement regarding such information.

        (iii)  Inclusions. Confidential Information includes, without limitation, the following information (including without limitation, compilations or collections of information) relating or belonging to any Company Party (as well as their clients, customers and/or vendors) and created, prepared, accessed, used or reviewed by the Executive during or after the Employment Period: (1) product and manufacturing information, such as ingredients, combinations of ingredients and manufacturing processes; (2) scientific and technical information, such as research and development, tests and test results, formulae and formulations, studies and analysis; (3) financial and cost information, such as operating and production costs, costs of goods sold, costs of supplies and manufacturing materials, non-public financial statements and reports, profit and loss information, margin information and financial performance information; (4) customer related information, such as customer related contracts, engagement and scope of work letters, proposals and presentations, customer-related contacts, lists, identities and prospects, practices, plans, histories, requirements and needs, price information and formulae and information concerning client or customer products, services, businesses or equipment specifications; (5) vendor and supplier related information, such as the identities, practices, history or services of any vendors or suppliers and vendor or supplier contacts; (6) sales, marketing and price information, such as marketing and sales programs and related data, sales and marketing strategies and plans, sales and marketing procedures and processes, pricing methods, practices and techniques and pricing schedules and lists; (7) database, software and other computer related information, such as computer programs, data, compilations of information and records, software and computer files, presentation software and computer-stored or backed-up information including, but not limited to, e-mails, databases, word processed documents, spreadsheets, notes, schedules, task lists, images and video; (8) employee-related information, such as lists or directories identifying employees, representatives and contractors, and information regarding the competencies (knowledge, skill, experience), compensation and needs of employees, representatives and contractors and training methods; and (9) business- and operation-related information, such as operating methods, procedures, techniques, practices and processes, information about acquisitions, corporate or business opportunities, information about partners and potential investors, strategies, projections and related documents, contracts and licenses

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and business records, files, equipment, notebooks, documents, memoranda, reports, notes, sample books, correspondence, lists and other written and graphic business records.

        (e)   "Misappropriate", or any form thereof, means:

        (i)    the acquisition of any Confidential Information by a Person who knows or has reason to know that the Confidential Information was acquired by theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means (each, an "Improper Means"); or

        (ii)   the disclosure or use of any Confidential Information without the express consent of the Company by a Person who (A) used Improper Means to acquire knowledge of the Confidential Information, (B) at the time of disclosure or use, knew or had reason to know that his or her knowledge of the Confidential Information was (x) derived from or through a Person who had utilized Improper Means to acquire it, (y) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use or (z) derived from or through a Person who owed a duty to the Company to maintain its secrecy or limit its use or (C) before a material change of his or her position, knew or had reason to know that it was Confidential Information and that knowledge of it had been acquired by accident or mistake.

        (f)    "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity.

        (g)   "Restricted Period" means the longer of (i) twelve (12) months after the date of termination of employment (the Executive's last day of work for the Company) or (ii) the period during which the Executive is receiving payments from the Company pursuant to Section 4 hereof.

        (h)   "Work Product" means all patents and patent applications, all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, creative works, discoveries, software, computer programs, modifications, enhancements, know-how, formulations, concepts and ideas, and all similar or related information (in each case whether or not patentable), all copyrights and copyrightable works, all trade secrets, confidential information, and all other intellectual property and intellectual property rights that are conceived, reduced to practice, developed or made by the Executive either alone or with others in the course of employment with the Company (including employment prior to the date of this Agreement).

5.5Remedies.    Because the Executive's services are unique and because the Executive has access to Confidential Information, the Executive acknowledges and agrees that if the Executive breaches any of the provisions of Section 5 hereof, the Company may suffer immediate and irreparable harm for which monetary damages alone will not be a sufficient remedy. The restrictive covenants stated in Section 5 hereof are without prejudice to the Company's rights and causes of action at law.

5.6Interpretation; Severability.

        (a)   The Executive has carefully considered the possible effects on the Executive of the covenants not to compete, the confidentiality provisions and the other obligations contained in this Agreement, and the Executive recognizes that the Company has made every effort to limit the restrictions placed upon the Executive to those that are reasonable and necessary to protect the Company's legitimate business interests.

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        (b)   The Executive acknowledges and agrees that the restrictive covenants set forth in this Agreement are reasonable and necessary in order to protect the Company's valid business interests. It is the intention of the parties hereto that the covenants, provisions and agreements contained herein shall be enforceable to the fullest extent allowed by law. If any covenant, provision or agreement contained herein is found by a court having jurisdiction to be unreasonable in duration, scope or character of restrictions, or otherwise to be unenforceable, such covenant, provision or agreement shall not be rendered unenforceable thereby, but rather the duration, scope or character of restrictions of such covenant, provision or agreement shall be deemed reduced or modified with retroactive effect to render such covenant, provision or agreement reasonable or otherwise enforceable (as the case may be), and such covenant, provision or agreement shall be enforced as modified. If the court having jurisdiction will not review the covenant, provision or agreement, the parties hereto shall mutually agree to a revision having an effect as close as permitted by applicable law to the provision declared unenforceable. The parties hereto agree that if a court having jurisdiction determines, despite the express intent of the parties hereto, that any portion of the covenants, provisions or agreements contained herein are not enforceable, the remaining covenants, provisions and agreements herein shall be valid and enforceable. Moreover, to the extent that any provision is declared unenforceable, the Company shall have any and all rights under applicable statutes or common law to enforce its rights with respect to any and all Confidential Information or unfair competition by the Executive.

6.Miscellaneous.

6.1Public Statements.

        (a)   Media Nondisclosure. The Executive agrees that during the Employment Period or at any time thereafter, except as may be authorized in writing by the Company, the Executive will not directly or indirectly disclose or release to the Media any information concerning or relating to any aspect of the Executive's employment or termination from employment with the Company and/or any aspect of any dispute that is the subject of this Agreement. For the purposes of this Agreement, the term "Media" includes, without limitation, any news organization, station, publication, show, website, web log (blog), bulletin board, chat room and/or program (past, present and/or future), whether published through the means of print, radio, television and/or the Internet or otherwise, and any member, representative, agent and/or employee of the same.

        (b)   Non-Disparagement. The Executive agrees that during the Employment Period or at any time thereafter, the Executive will not make any statements, comments or communications in any form, oral, written or electronic to any Media or any customer, client or supplier of the Company or any of its Affiliates, which would constitute libel, slander or disparagement of the Company or any of its Affiliates, including, without limitation, any such statements, comments or communications that criticize, ridicule or are derogatory to the Company or any of its Affiliates; provided, however, that the terms of this Section 6.1(b) shall not apply to communications between the Executive and, as applicable, the Executive's attorneys or other persons with whom communications would be subject to a claim of privilege existing under common law, statute or rule of procedure. The Executive further agrees that the Executive will not in any way solicit any such statements, comments or communications from others.

6.2ARBITRATION.SUBJECT TO THE RIGHTS UNDER SECTION 6.3 HEREOF TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF, BINDING ARBITRATION SHALL BE THE EXCLUSIVE REMEDY FOR ANY AND ALL DISPUTES, CLAIMS OR CONTROVERSIES, WHETHER STATUTORY, CONTRACTUAL OR OTHERWISE, BETWEEN THE PARTIES HERETO ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE EXECUTIVE'S

15

EMPLOYMENT BY OR TERMINATION FROM THE COMPANY (INCLUDING, BUT NOT LIMITED TO, THE AMOUNT OF DAMAGES, OR THE CALCULATION OF ANY BONUS OR OTHER AMOUNT OR BENEFIT DUE) (COLLECTIVELY, "DISPUTES"). THE PARTIES EACH WAIVE THE RIGHT TO A JURY TRIAL AND WAIVE THE RIGHT TO ADJUDICATE THEIR DISPUTES UNDER THIS AGREEMENT OUTSIDE THE ARBITRATION FORUM PROVIDED FOR IN THIS AGREEMENT, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT. In the event either party provides a notice of arbitration of any dispute to the other party, the parties agree to submit that dispute to a single arbitrator selected from a panel of arbitrators of JAMS located in greater New York City-Southern New Jersey area. The arbitration will be governed by the JAMS Comprehensive Arbitration Rules and Procedures in effect at the time the arbitration is commenced. If for any reason JAMS cannot serve as the arbitration administrator, the Company may select an alternative arbitration administrator such as the American Arbitration Association, to serve under the terms of this Agreement.

        (a)   VENUE.    THE PARTIES STIPULATE AND AGREE THAT THE EXCLUSIVE VENUE OF ANY SUCH ARBITRATION PROCEEDING (AND OF ANY OTHER PROCEEDING, INCLUDING ANY COURT PROCEEDING, UNDER THIS AGREEMENT) SHALL BE PASSAIC COUNTY, NEW JERSEY (THE "AGREED VENUE").

        (b)   Authority and Decision.    The arbitrator shall have the authority to award the same damages and other relief that a court could award. The arbitrator shall issue a reasoned award explaining the decision and any damages awarded. The arbitrator's decision will be final and binding upon the parties and enforceable by a court of competent jurisdiction. The parties will abide by and perform any award rendered by the arbitrator. In rendering the award, the arbitrator shall state the reasons therefor, including (without limitation) any computations of actual damages or offsets, if applicable.

        (c)   Fees and Costs.    In the event of arbitration under the terms of this Agreement, the fees charged by JAMS or other arbitration administrator and the arbitrator shall be borne by the parties as determined by the arbitrator, except for any initial registration fee, which the parties shall bear equally. Otherwise, the parties shall each bear their own costs, expenses and attorneys' fees incurred in arbitration; provided, however, that the prevailing party shall be entitled to recover and have awarded its attorneys' fees, court costs, arbitration expenses, and its portion of the fees and costs charged by JAMS or other arbitration administrator, regardless of which party initiated the proceedings, in addition to any other relief to which it may be entitled.

        (d)   Limited Scope.    The following are excluded from binding arbitration under this Agreement: claims for workers' compensation benefits or unemployment benefits; replevin; and claims for which a binding arbitration agreement is invalid as a matter of law.

6.3Injunctive Relief.    The parties hereto may seek injunctive relief in arbitration; provided, however, that as an exception to the arbitration agreement set forth in Section 6.2 hereof, the parties, in addition to all other available remedies, shall each have the right to initiate an action in any court of competent jurisdiction in order to request injunctive or other equitable relief regarding the terms of Sections 5 or 6.2 hereof. The exclusive venue of any such proceeding shall be in the Agreed Venue. The parties agree (a) to submit to the jurisdiction of any competent court in the Agreed Venue, (b) to waive any and all defenses the Executive may have on the grounds of lack of jurisdiction of such court and (c) that neither party shall be required to post any bond, undertaking or other financial deposit or guarantee in seeking or obtaining such equitable relief. Evidence adduced in any such proceeding for an injunction may be used in arbitration as well. The existence of this right shall not preclude or otherwise limit the applicability or exercise of any other rights and remedies that a party hereto may have at law or in equity.

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6.4Settlement of Existing Rights.    In exchange for the other terms of this Agreement, the Executive acknowledges and agrees that: (a) the Executive's entry into this Agreement is a condition of employment and/or continued employment with the Company, as applicable; (b) except as otherwise provided herein, this Agreement will replace any existing employment agreement between the parties and thereby act as a novation, if applicable; (c) the Executive is being provided with access to Confidential Information, including, without limitation, proprietary trade secrets of one or more Company Parties, to which the Executive has not previously had access; (d) all Company inventions and intellectual property developed by the Executive during any past employment with the Company and all goodwill developed with the Company's clients, customers and other business contacts by the Executive during any past employment with Company, as applicable, is the exclusive property of the Company; and (e) all Confidential Information and/or specialized training accessed, created, received or utilized by the Executive during any past employment with Company, as applicable, will be subject to the restrictions on Confidential Information described in this Agreement, whether previously so agreed or not.

6.5Entire Agreement; Waiver.    This Agreement contains the entire agreement between the Executive and the Company with respect to the subject matter hereof, and supersedes any and all prior understandings or agreements, whether written or oral. No modification or addition hereto or waiver or cancellation of any provision hereof shall be valid except by a writing signed by the party to be charged therewith. No delay on the part of any party to this Agreement in exercising any right or privilege provided hereunder or by law shall impair, prejudice or constitute a waiver of such right or privilege.

6.6Governing Law.    This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, without regard to principles of conflict of laws.

6.7Successors and Assigns; Binding Agreement.    The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, personal representatives, successors and permitted assigns. This Agreement is a personal contract, and, except as specifically set forth herein, the rights and interests of the Executive herein may not be sold, transferred, assigned, pledged or hypothecated by any party without the prior written consent of the others. As used herein, the term "successor" as it relates to the Company, shall include, but not be limited to, any successor by way of merger, consolidation or sale of all or substantially all of such Person's assets or equity interests.

6.8Representation by Counsel; Independent Judgment.    Each of the parties hereto acknowledges that (a) it or the Executive has read this Agreement in its entirety and understands all of its terms and conditions, (b) it or the Executive has had the opportunity to consult with any individuals of its or the Executive's choice regarding its or the Executive's agreement to the provisions contained herein, including legal counsel of its or the Executive's choice, and any decision not to was the Executive's or its alone and (c) it or the Executive is entering into this Agreement of its or the Executive's own free will, without coercion from any source, based upon its or the Executive's own independent judgment.

6.9Interpretation.    The parties and their respective legal counsel actively participated in the negotiation and drafting of this Agreement, and in the event of any ambiguity or mistake herein, or any dispute among the parties with respect to the provisions hereto, no provision of this Agreement shall be construed unfavorably against any of the parties on the ground that the Executive, it, or the Executive's or its counsel was the drafter thereof.

6.10Survival.    The provisions of Sections 4.3(e), 5 and 6 hereof shall survive the termination of this Agreement.

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6.11Notices.    All notices and communications hereunder shall be in writing and shall be deemed properly given and effective when received, if sent by facsimile or telecopy, or by postage prepaid by registered or certified mail, return receipt requested, or by other delivery service which provides evidence of delivery, as follows:

If to the Company, to:

Linens 'n Things, Inc.
6 Brighton Road
Clifton, New Jersey 07015
Attention: General Counsel

with a copy (which shall not constitute notice) to:

Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas 75201-4761
Attention: Ronald M. Gaswirth, Esq.
Telephone: (214) 999-4601
Facsimile: (214) 999-3601
E-mail: rgaswirth@gardere.com

If to the Executive, to:

Robert Homler
at the most recent address of the
Executive on file with the Company

or to such other address as one party may provide in writing to the other party from time to time.

6.12Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Facsimile transmission of any signed original document or retransmission of any signed facsimile transmission will be deemed the same as delivery of an original. At the request of any party, the parties will confirm facsimile transmission by signing a duplicate original document.

6.13Captions.    Paragraph headings are for convenience only and shall not be considered a part of this Agreement.

6.14No Third Party Beneficiary Rights.    Except as otherwise provided in this Agreement, no entity shall have any right to enforce any provision of this Agreement, even if indirectly benefited by it.

6.15Withholding.    Any payments provided for hereunder shall be paid net of any applicable withholding required under Federal, state or local law and any additional withholding to which Executive has agreed.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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        IN WITNESS WHEREOF, the parties have duly executed this Agreement, intending it as a document under seal, on the Execution Date to be effective for all purposes as of the Effective Date.

LINENS 'N THINGS, INC.
By:	/s/  ROBERT J. DINICOLA Robert J. DiNicola Chairman of the Board and         Chief Executive Officer
EXECUTIVE
/s/  ROBERT HOMLER Name: Robert Homler

EXHIBIT A

Definition of Change of Control

        "Change of Control" means:

        (1)   any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders or their Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of Holding or any successor company, including, without limitation, through a merger or consolidation or purchase of Voting Stock of Holding; provided that none of the Permitted Holders or their Related Parties have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board; provided further that the transfer of 100% of the Voting Stock of Holding to a Person that has an ownership structure identical to that of Holding prior to such transfer, such that Holding becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control;

        (2)   after an initial public offering of Capital Stock of Holding, during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by such Board or whose nomination for election by the stockholders of Holding was approved by a vote of a majority of the directors of Holding then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board then in office;

        (3)   the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of Holding and its Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or

        (4)   the adoption of a plan relating to the liquidation or dissolution of Holding.

        For purposes of this definition, the following terms shall have the meanings set forth below:

        An "Affiliate" of any specified Person means any other Person, whether now or hereafter existing, directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes hereof, "control" or any other form thereof, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing.

"Apollo" means Apollo Management V, L.P. and its Affiliates or any entity controlled thereby or any of the partners thereof.

"Board" means the Board of Directors of Holding or any committee thereof duly authorized to act on behalf of such Board of Directors.

"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Holding" means Linens Holding Co., a Delaware corporation.

A-1

"Permitted Holder" means any of Apollo, NRDC Real Estate Advisors I, LLC or Silver Point Capital Fund Investments, LLC.

"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity.

"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.

"Related Party" means:

        (1)   any controlling stockholder, 50% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or

        (2)   any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 50% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).

"Subsidiary" means, with respect to any specified Person:

        (1)   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

        (2)   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).

"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.

        Notwithstanding anything to the contrary in this Exhibit A, the definition of Change of Control shall be interpreted consistently with the definition of "Change of Control" contained in Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations and guidance issued by the Internal Revenue Service under Section 409A of the Code, including IRS Notice 2005-1.

A-2

EXHIBIT B

Fringe Benefits

1.

Health insurance in accordance with the Company's health insurance plan or program in effect from time to time.

2.

Prescription drug coverage in accordance with the Company's health insurance plan or program, or separate prescription drug coverage plan or program, in effect from time to time.

3.

Dental insurance in accordance with the Company's dental insurance plan or program in effect from time to time.

4.

Long-term disability insurance in accordance with the Company's long-term disability insurance plan or program in effect from time to time.

5.

Eligibility for life insurance coverage in such amount as the Company makes available to its employees or executives, subject to a bi-weekly payroll deduction for the premium and completion by the Executive of any authorization documentation.

6.

Cellular telephone and service.

7.

Annual financial planning services through Joel Isaacson Company, or a reasonable substitute therefor, as may be determined by the Company from time to time.

8.

The Company will pay for the Executive's relocation from the Pittsburgh, Pennsylvania area to the Clifton, New Jersey area in accordance with the Company's policy applicable to senior executive officers. The relocation benefits will include, without limitation, payment of or reimbursement to the Executive for (a) closing costs payable by the Executive in connection with the sale of the Executive's personal residence in Pennsylvania, (b) closing costs payable by the Executive in connection with the purchase of a new personal residence in the Clifton, New Jersey area, and (c) to the extent (i) the sales price received by the Executive with respect to the sale of the Executive's Pennsylvania residence, net of closing costs payable by the Executive in connection with such sale, plus the amount of such closing costs that are paid or reimbursed by the Company pursuant to clause (a) above is less than (ii) the original purchase price paid by the Executive for such residence, plus closing and financing costs payable by the Executive in connection with such purchase, and less any amount of such closing or financing costs that were paid on the Executive's behalf or reimbursed to the Executive, then an amount equal to the difference between the amount in clause (i) and the amount in clause (ii) plus a tax gross-up with respect to such amount.

B-1

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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
EXHIBIT A Definition of Change of Control
EXHIBIT B Fringe Benefits

EX-10.16

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Exhibit 10.16

SEPARATION AGREEMENT
AND GENERAL RELEASE

        This Separation Agreement and General Release ("Agreement") is entered into on April 10, 2006 (the "Execution Date"), to be effective for all purposes as of March 24, 2006, by and between Jane Gilmartin ("Executive"), and Linens 'n Things, Inc., a Delaware corporation (the "Company"). (The Executive and the Company are referred to collectively herein as the "Parties").

RECITALS

        WHEREAS, the Executive has been employed by the Company as a Senior Executive pursuant to an Employment Agreement, dated as of July 20, 2005, by and between the Company and Executive (the "Employment Agreement"); and

        WHEREAS, the Company terminated Executive's employment without Cause following a Change in Control (as such terms are defined in the Employment Agreement), effective March 24, 2006 (the "Separation Date"), and, in connection with such termination, the Parties have agreed to settle any and all related agreements between the Parties and their affiliates in the manner set forth herein;

        NOW THEREFORE, in consideration of the promises and mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are expressly acknowledged, the Parties agree and promise as follows:

        1.     TERMINATION. To the extent not already effected, the Parties hereby confirm Executive's termination from all director, officer and/or other positions, as applicable, with the Company and each of its affiliates, as of the Separation Date.

        2.     BENEFITS. With respect to any benefits or rights that Executive has accrued or earned as of the Separation Date under any of the Company's employee benefit plans, Executive shall be entitled to such benefits pursuant to the terms of such plans, if any.

        3.     TERMINATION BENEFITS.

        In consideration of Executive's release of claims and Executive's other covenants and agreements contained herein and provided that Executive has not exercised any revocation rights as provided in Section 5 below, the Company shall compensate the Executive with severance pay and benefits as follows ("Severance Compensation"), effective within fourteen (14) days after the Executive's execution of this Agreement:

        (a)   The Company shall pay the Executive her remaining base salary for 2006 (if any remains to be paid), pro rata through the Separation Date, minus deductions authorized by Executive and/or required by law, paid in accordance with the Company's normal payroll system and practices.

        (b)   The Company shall pay the Executive the single, aggregate lump sum amount of One Million, Fifty Thousand Dollars and No/100 ($1,050,000.00), minus deductions authorized by Executive and/or required by law, which sum is equal to two times Executive's most recent base salary. This lump sum amount shall be payable in accordance with the Company's normal payroll system and practices.

        (c)   The Company shall pay the Executive the single, aggregate lump sum amount of Four Hundred and Seventy-Two Thousand, Five Hundred Dollars and No/100 ($472,500.00), minus deductions authorized by Executive and/or required by law, which sum is equal to two times 45% of Executive's most recent base salary. This lump sum amount shall be payable in accordance with the Company's normal payroll system and practices.

        (d)   The Company shall pay the Executive the single, aggregate lump sum amount of Fifty-Nine Thousand, Sixty-Two Dollars, and 50/100 ($59,062.50), minus deductions authorized by Executive and/or required by law, which sum is equal to Executive's pro rata incentive bonus for 2006, based on an award (as deemed by the Employment Agreement) equal to 45% of base salary. This lump sum amount shall be payable in accordance with the Company's normal payroll system and practices.

        (e)   The Parties acknowledge and agree that they are subject to the terms and conditions of the provisions set forth in Section 10(e)(ix) (including subparts (A) and (B)) of the Employment Agreement and agree to continue to be bound by those terms and conditions in accordance therewith.

        (f)    Section 18 of the Employment Agreement shall survive Executive's termination from employment, to the extent it is applicable.

        4.     GENERAL RELEASE BY EXECUTIVE.

        (a)   Executive, individually, and on behalf of, as applicable, Executive's current, former, and successor attorneys, representatives, guardians, heirs, assigns, successors, executors, administrators, insurers, servants, agents, employees, affiliates, and entities does hereby irrevocably GENERALLY RELEASE, ACQUIT, AND DISCHARGE the Company and the Other Released Parties (as defined in 4(b) below), from any and all Claims and Controversies (as defined in 4(c) below); provided, however, that nothing in this Agreement will be considered a release of Executive's claims, if any, for (i) vested employment benefits pursuant to the Employee Retirement Income Security Act of 1974 as amended, (ii) worker's compensation insurance coverage, (iii) unemployment insurance coverage, (iv) Executive's right to enforce this Agreement, (v) indemnification as an officer, director or employee of the Company pursuant to the Company's Certificate of Incorporation, By-laws, or applicable state law, or (vi) coverage under the Company's directors' and officers' liability insurance, if any.

        (b)   For the purposes of this Agreement, the term "Other Released Parties" means, as applicable, the Company's related and affiliated entities (including corporations, limited liability companies, firms, associations, partnerships, and joint ventures), and with respect to the Company and its related and affiliated entities, each of their respective predecessors and successors, and each of their past, present and future employees, officers, directors, stockholders, trustees, owners, partners, members, representatives, administrators, assigns, attorneys, agents, servants, assigns, insurers, employee benefit programs (and the trustees, administrators, fiduciaries, and insurers of such programs), specifically including, but not limited to, Linens Investors, LLC, Apollo Management V, LP, Apollo Investment Fund V, LP, and their affiliates.

        (c)   For the purposes of this Agreement, the term "Claims and Controversies" means any and all claims, debts, damages, demands, liabilities, benefits, suits in equity, complaints, grievances, obligations, promises, agreements, rights, controversies, costs, losses, remedies, attorneys' fees and expenses, back pay, front pay, severance pay, percentage recovery, injunctive relief, lost profits, emotional distress, mental anguish, personal injuries, liquidated damages, punitive damages, disability benefits, interest, expert fees and expenses, reinstatement, other compensation, suits, appeals, actions, and causes of action, of whatever kind or character, including without limitation, any dispute, claim, charge, or cause of action arising under the Civil Rights Act of 1964, Title VII, 42 U.S.C. §§ 2000e et seq., as amended (including the Civil Rights Act of 1991), the Civil Rights Act of 1866, 42 U.S.C. §§ 1981 et seq., as amended, the Equal Pay Act of 1963 (EPA), 29 U.S.C. §§ 201 et seq., as amended, the Age Discrimination in Employment Act of 1967, 29 U.S.C. §§ 621 et seq., as amended, the Americans with Disabilities Act of 1990 (ADA), 42 U.S.C. §§ 12101 et seq., as amended, the Rehabilitation Act of 1973, 29 U.S.C. §§ 794 et seq., as amended, the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001 et seq., as amended, the

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Consolidated Budget and Reconciliation Act of 1985 (COBRA), §§ 1161 et seq., as amended, the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201 et seq., as amended, the Family and Medical Leave Act (FMLA), 29 U.S.C. §§ 2601 et seq., as amended, the Labor Management Relations Act (LMRA), 29 U.S.C. §§ 141 et seq., as amended, the Employee Polygraph Protection Act, 29 U.S.C. §§ 2001 et seq., as amended, the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., as amended, the Occupational Safety and Health Act (OSHA), 29 U.S.C. §§ 651 et seq., as amended, the Electronic Communications Privacy Act, 18 U.S.C. 2510 et seq., and 2701 et seq., as amended, the Uniform Services Employment and Re-Employment Rights Act, 38 U.S.C. §§ 4301 et seq., as amended, the Sarbanes-Oxley Act, 18 U.S.C. § 1514A, as amended, all other applicable state and federal fair employment laws, state and federal equal employment opportunity laws, and state and federal labor statutes and regulations, and all other constitutional, federal, state, local, and municipal law claims, whether statutory, regulatory, common law (including without limitation, breach of the Employment Agreement, other breach of express or implied contract, wrongful discharge in violation of public policy, breach of covenant of good faith and fair dealing, promissory estoppel, quantum meruit, fraud, fraud in the inducement, fraud in the factum, statutory fraud, negligent misrepresentation, defamation, libel, slander, slander per se, retaliation, tortious interference with prospective contract, tortious interference with business relationship, tortious interference with contract, invasion of privacy, intentional infliction of emotional distress, and any other common law theory of recovery, whether legal or equitable, negligent or intentional), or otherwise, whether known or unknown to the Parties, foreseen or unforeseen, fixed or contingent, liquidated or unliquidated, directly or indirectly arising out of or relating to any and all disputes now existing between Executive on the one hand, and the Company on the other hand, whether related to or in any way growing out of, resulting from or to result from Executive's employment with and/or termination from the Company, for or because of any matter or thing done, omitted, or allowed to be done by the Company or the Other Released Parties, as applicable, for any incidents, including those past and present, which existed or may have existed at any time prior to and/or contemporaneously with the execution of this Agreement, including all past, present, and future damages, injuries, costs, expenses, attorney's fees, other fees, effects and results in any way related to or connected with such incidents.

        (d)   Executive understands that Executive is releasing Claims of which Executive may not be aware. This is Executive's knowing and voluntary intent, even though Executive recognizes that some day Executive might learn that some or all of the facts that Executive currently believes to be true are untrue and even though Executive might then regret having signed this Agreement. Nevertheless, Executive is assuming that risk and Executive agrees that this Agreement shall remain effective in all respects in any such case. It is further understood and agreed that Executive is waiving all rights under any statute or common law principle which otherwise limits application of a general release to claims which the releasing Party does not know or suspect to exist in her favor at the time of signing the release which, if known by her, would have materially affected her settlement with the Party being released (releasee). Executive understands the significance of doing so.

        (e)   Neither Executive nor her heirs, agents, representatives or attorneys have filed or caused to be filed any lawsuit, with respect to any Claim that Executive is releasing in this Agreement.

        (f)    Executive acknowledges and represents that the Company has not provided any tax advice to her in connection with this Agreement and that she has been advised by the Company to seek tax advice from her own tax advisors regarding this Agreement and payments that may be made to Executive pursuant to this Agreement, including specifically, the application of the provisions of Section 409A of the Internal Revenue Code of 1986, as amended to such payments.

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        (g)   Executive acknowledges that, regarding the severance compensation and benefits stated in paragraphs 10(e)(v), (vi), (vii) (first), and (vii) (second) of the Employment Agreement, (i) there are no restricted stock awards, deferred stock awards, stock options awards, or rights to exercise vested stock options, outstanding as of the time of this Agreement, and none shall be paid to Executive at any time, (ii) there is no outstanding balance owed to Executive for any incentive awards earned as of December 31, 2005, and none shall be paid to Executive at any time, and (iii) there are no deferred compensation arrangements to be settled, and none shall be paid to Executive at any time. The Parties agree that all rights to severance compensation and benefits stated in paragraphs 10(e)(v), (vi), (vii) (first), and (vii) (second) of the Employment Agreement, if any, are terminated effective as of the Separation Date.

        (h)   Except as set forth in this Agreement and with respect to any vested benefits or rights under any of the Company's "employee benefit plans" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), Executive acknowledges and agrees that she is not entitled to receive any other compensation or benefits of any sort ("Other Compensation or Benefits") including, without limitation, salary, vacation, sick leave, personal leave, bonuses, annual incentives, stock options, short-term or long-term disability benefits, or health care coverage (except as provided under applicable state or federal law) from the Company or any Other Released Parties, at any time. Executive hereby waives and releases any right to Other Compensation or Benefits to the extent that they are embodied in the Employment Agreement but not this Agreement; the Parties agree that this Agreement replaces and preempts the Employment Agreement with regard to Other Compensation and Benefits.

        5.     REVIEW AND REVOCATION PERIOD. Executive acknowledges that: (a) the consideration provided pursuant to this Agreement is in addition to any consideration that she would otherwise be entitled to receive; (b) she has been provided a full and ample opportunity to review this Agreement, including a period of at least twenty-one (21) days within which to consider it; (c) to the extent that Executive takes less than twenty-one (21) days to consider this Agreement prior to execution, she acknowledges that she had sufficient time to consider this Agreement with counsel and that she expressly, voluntarily and knowingly waives any additional time; and (d) Executive is aware of her right to revoke this Agreement at any time within the seven (7) day period following the date on which she signs the Agreement and that the Agreement shall not become effective or enforceable until the seven (7) day revocation period expires (the "Revocation Expiration Date"). Any such revocation must be in writing, must specifically revoke this Agreement, and must be received by the Chairman of the Board of Directors of the Company no later than 5:00 p.m. Eastern Standard Time on the Revocation Expiration Date. Executive further understands that she shall relinquish any right she has to the Severance Compensation set forth in this Agreement if she exercises her right to revoke this Agreement.

        6.     RETURN OF THE COMPANY'S DOCUMENTS AND PROPERTY.

        (a)   Executive represents and warrants that she has returned all records, documents, proposals, notes, lists, files, and any and all other materials including, without limitation, computerized and/or electronic information that refers, relates or otherwise pertains to the Company, its affiliates, and/or their respective partners, principals, officers, directors, stockholders, managers, employees, agents, representatives, or insurance companies, or their respective predecessors, successors or assigns at any time. In addition, Executive represents and warrants that she has returned to the Company all property or equipment that she has been issued during the course of her employment or which she otherwise currently possesses, including, without limitation, keys, business credit cards, identification badges, or any similar items issued or provided by the Company and/or its affiliates. Executive is not authorized to retain any copies of any such records, documents, proposals, notes, lists, files or materials, nor is she authorized to retain any other of the Company's or its affiliates' property or equipment.

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        (b)   Executive represents and warrants that she has not incurred any outstanding charges on credit cards issued or provided by the Company and/or its affiliates, either as personal charges or business expenses to be paid by the Company and/or its affiliates. Executive agrees that the Company may offset any amounts due the Company and/or its affiliates from Executive, if any, against the final payment of base salary owed to Executive.

        (c)   By executing this Agreement, Executive is certifying that she has complied with Section 6 of this Agreement. The Company is not aware of any information contrary to the Executive's representations and warranties contained in this Section 6 of the Agreement.

        7.     CONFIDENTIALITY/INTELLECTUAL PROPERTY. Executive acknowledges and agrees that she is subject to the terms and conditions of the Confidentiality/Intellectual Property provisions set forth in Section 12 of the Employment Agreement and agrees to continue to be bound by those terms and conditions in accordance therewith, provided however, that Executive may disclose this Agreement and the Employment Agreement to a future employer or entity engaging her services, if she first obtains the new employer's or entity's agreement to keep such documents and their contents confidential. Executive further acknowledges and agrees that she has an obligation not to disclose any attorney work product and/or attorney-client communications of which she is aware and/or to which she had access.

        8.     NON-SOLICITATION. Executive acknowledges and agrees that she is subject to the terms and conditions of the Non-solicitation of Employees provision set forth in Section 14 of the Employment Agreement and agrees to continue to be bound by those terms and conditions in accordance therewith.

        9.     COOPERATION BY EXECUTIVE. The Parties acknowledge and agree that they are subject to the terms and conditions of the Litigation Cooperation provisions set forth in Section 12 of the Employment Agreement and agree to continue to be bound by those terms and conditions in accordance therewith.

        10.   NON-ADMISSION OF LIABILITY. Nothing in this Agreement shall be construed as an admission of liability by Executive or the Released Parties; rather, Executive and the Released Parties are resolving all matters arising out of their employer-employee relationship and all other relationships between Executive and the Released Parties, as to which the Released Parties and Executive each deny any liability.

        11.   NON-DISPARAGEMENT. Except as otherwise required by law, Executive will not make, publish, or disseminate any derogatory statements or comments about the Company or its respective officers and directors; or take any action which a reasonable person would expect would impair the good will, business reputation, or good name of any of them. Except as otherwise required by law, Senior Executives of the Company with actual authority to speak or write on the matter will not make, publish, or disseminate any derogatory statements or comments about the Executive; or take any action which a reasonable person would expect would impair the good will, business reputation, or good name of the Executive.

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        12.   ARBITRATION. The Parties agree that any claim or controversy (including all claims pursuant to common and statutory law) relating to this Agreement or arising out or relating to the subject matter of this Agreement (including, without limitation, Executives employment with or termination from the Company) shall be resolved exclusively through binding arbitration. Subject to the terms and any exceptions provided in this Agreement, the Parties each waive the right to a jury trial and waive the right to adjudicate their disputes under this Agreement outside the arbitration forum provided for in this Agreement. All aspects of any such arbitration shall be kept strictly confidential by the Parties, so that the Parties shall not make any public or media comment or unsealed lawsuit filing regarding the facts or circumstances of any dispute underlying such arbitration. The arbitration shall be administered by a single arbitrator with the American Arbitration Association ("AAA") in accordance with its then-current applicable rules and procedures; the Company may select a different arbitration administrator to fulfill this provision if AAA cannot serve. Any such arbitration proceeding shall take place exclusively in Clifton, New Jersey. The arbitrator will have the authority to award the same remedies, damages and costs that a court could award, including injunctive relief and damages. The arbitrator shall issue a reasoned award explaining the decision, the reasons for the decision and any damages awarded. The arbitrator's decision will be final and binding. The judgment on the award rendered by the arbitrator may be entered with and enforced by any court of competent jurisdiction. In the event of arbitration under the terms of this Agreement, the fees charged by AAA and/or the individual arbitrator shall be borne equally by the Parties except as otherwise provided herein. The Parties shall each bear their own costs and attorneys' fees incurred in arbitration except as otherwise provided herein. Either of the Parties may seek injunctive relief in arbitration; provided, however, that as a narrow exception to the arbitration agreement set forth herein, the Parties shall each have the right to initiate an action in any court of competent jurisdiction in order to request injunctive or other equitable relief regarding the terms of Sections 4, 6, 7, 8, 11, and/or 12 of this Agreement. The exclusive venue of any such proceeding shall be Clifton, New Jersey.

        13.   BINDING EFFECT. This Agreement shall be binding and inure to the benefit of the Parties and their respective heirs, administrators, representatives, executors, successors, and assigns.

        14.   SEVERABILITY. While the provisions contained in this Agreement are considered by the Parties to be reasonable in all circumstances, it is recognized that some provisions may fail for technical reasons. Accordingly, it is hereby agreed and declared that if any one or more of such provisions shall, either by itself or themselves or taken with others, be adjudged to be invalid as exceeding what is reasonable in all circumstances for the protection of the interests of the Company, but would be valid if any particular restrictions or provisions were deleted or restricted or limited in a particular manner, then said provisions shall apply with any such deletions, restrictions, limitations, reductions, curtailments, or modifications as may be necessary to make them valid and effective, and the remaining provisions shall be unaffected thereby.

        15.   ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the entire understanding among the Parties with respect to the matters set forth herein, except as otherwise stated in this Agreement, and may not be modified without the express written consent of the Parties. Except as specified herein (including but not limited to the terms of Sections 3, 4, 7, 8 and 9 of this Agreement), this Agreement supersedes all prior written and/or oral and all contemporaneous oral agreements, understandings and negotiations regarding the subject matter hereof.

        16.   INTERPRETATION; GOVERNING LAW. This Agreement shall be construed as a whole according to its fair meaning and shall not be construed strictly for or against either Party. Any uncertainty or ambiguity shall not be construed against the drafter. Captions are intended solely for convenience of reference and shall not be used in the interpretation of this Agreement. This Agreement shall be governed by and construed and enforced pursuant to the laws of the State of New Jersey applicable to contracts made and entirely to be performed therein without regard to rules relating to conflicts of law.

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        17.   VOLUNTARY AGREEMENT; NO INDUCEMENTS. Each Party to this Agreement acknowledges and represents that she or it (a) has fully and carefully read this Agreement prior to signing it, (b) has been, or has had the opportunity to be, advised by independent legal counsel of her or its own choice as to the legal effect and meaning of each of the terms and conditions of this Agreement, and (c) is signing and entering into this Agreement as a free and voluntary act without duress or undue pressure or influence of any kind or nature whatsoever and has not relied on any promises, representations or warranties regarding the subject matter hereof other than as set forth in this Agreement.

        18.   WITHHOLDING. Any payments provided for under this Agreement shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed.

        19.   COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. Facsimile transmission of any signed original document or retransmission of any signed facsimile transmission will be deemed the same as delivery of an original. At the request of any Party, the Parties will confirm facsimile transmission by signing a duplicate original document.

[Remainder of this page intentionally left blank.]

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THIS AGREEMENT CONTAINS A PROVISION FOR BINDING ARBITRATION.

        IN WITNESS WHEREOF, the Parties have executed this Agreement on the Execution Date, to be effective for all purposes as of the Separation Date.

EXECUTIVE
/s/  JANE GILMARTIN Jane Gilmartin
LINENS 'N THINGS, INC.
By:	/s/  A. DAVID BROWN
Name:	A. David Brown
Title:	SVP Human Resources

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SEPARATION AGREEMENT AND GENERAL RELEASE
RECITALS

EX-10.17

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Exhibit 10.17

LINENS HOLDING CO.
STOCK OPTION PLAN

        Section 1.    Purpose

        The Plan authorizes the Option Committee to provide employees or directors of the Company or its subsidiaries, who are in a position to contribute to the long-term success of the Company or its subsidiaries, with Options to acquire Shares in the Company. The Company believes that this incentive program will cause those persons to increase their interest in the welfare of the Company and its subsidiaries, and aid in attracting, retaining and motivating persons of outstanding ability.

        Section 2.    Definitions

        Capitalized terms used herein shall have the meanings set forth in this Section.

(a)

"Affiliate" shall mean any person or entity that, either directly or indirectly through one or more intermediaries, (i) controls the Company, or (ii) is controlled by the Company or a person described in clause (i).



(b)

"Board" means the Board of Directors of the Company.



(c)

"Cause" shall have the meaning ascribed thereto in any effective employment agreement between the Company or subsidiaries and the Grantee, or if no employment agreement is in effect that contains a definition of cause, then Cause shall mean a finding by the Option Committee that the Grantee has (i) committed a felony or a crime involving moral turpitude, (ii) committed any act of gross negligence or fraud, (iii) failed, refused or neglected to substantially perform his duties (other than by reason of a physical or mental impairment) or to implement the reasonable directives of the Company (which, if curable, is not cured within 30 days after notice thereof to the Grantee by the Option Committee), (iv) materially violated any policy of the Company (which, if curable, is not cured within 30 days after notice thereof to the Grantee by the Option Committee), or (v) engaged in conduct that is materially injurious to the Company, monetarily or otherwise.



(d)

"Company" shall mean Linens Holding Co., a corporation organized under the laws of the State of Delaware.



(e)

"Disability" shall have the meaning ascribed thereto in any effective employment agreement between the Company and the Grantee, or if no employment agreement is in effect that contains a definition of disability, then Disability shall mean any physical or mental incapacitation which results in a Grantee's inability to perform his duties and responsibilities hereunder, as determined by the Option Committee in its good faith judgment, for a period of 180 consecutive days.



(f)

"Employee" shall mean any person or entity that is providing services to the Company or any of its subsidiaries as an employee or director.



(g)

"Grant Letter" shall mean a letter, certificate or other agreement accepted by the Grantee, evidencing the grant of an Option hereunder and containing such terms and conditions, not inconsistent with the express provisions of the Plan, as the Option Committee shall approve.



(h)

"Grantee" shall mean an Employee granted an Option under the Plan.

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(i)

"ISO" shall mean any Option or portion thereof that meets the requirements of an incentive stock option under Section 422 of the Internal Revenue Code of 1986, and that is designated by the Option Committee to be an ISO.



(j)

"Linens Investors" shall mean Linens Investors, LLC, a limited liability company organized under the laws of Delaware, and its successors or assigns.



(k)

"Nonqualified Option" shall mean any Option or portion thereof that is not an ISO.



(l)

"Option Committee" shall mean the individuals appointed by the Board to serve as the Option Committee with responsibility for the administration of the Plan, or if no such individuals are appointed, then the Option Committee shall consist of all of the members of the Board.



(m)

"Options" shall refer to options issued under and subject to the Plan.



(n)

"Plan" shall mean this Option Plan as set forth herein and as amended from time to time.



(o)

"Share" shall mean a share of common stock of the Company.



(p)

"Stockholders Agreement" shall mean the Stockholders' Agreement, dated as of February 14, 2006, among the Company, Linens Investors, and the Company's other stockholders, as the same may thereafter be amended from time to time.

        Section 3.    Shares Available under the Plan

        Subject to the provisions of Section 7, the total number of Shares with respect to which Options may be granted under the Plan shall not exceed 1,157,298. If, prior to exercise, any Options are forfeited, lapse or terminate for any reason, the Shares covered thereby may again be available for Option grants under the Plan.

        Section 4.    Administration of the Plan

        (a)    Authority of the Option Committee.    The Plan shall be administered by the Option Committee. The Option Committee shall have full and final authority to take the following actions, in each case subject to and consistent with the provisions of the Plan:

        (i)    to select the Employees to whom Options may be granted;

        (ii)   to determine the number of Shares subject to each such Option;

        (iii)  to determine the terms and conditions of any Option granted under the Plan, including the exercise price, conditions relating to exercise, and termination of the right to exercise;

        (iv)  to determine whether any Option shall be an ISO or a Nonqualified Option;

        (v)   to determine the restrictions or conditions related to the delivery, holding and disposition of Shares acquired upon exercise of an Option;

        (vi)  to prescribe the form of each Grant Letter;

        (vii) to adopt, amend, suspend, waive and rescind such rules and regulations and appoint such agents as the Option Committee may deem necessary or advisable to administer the Plan;

        (viii) to correct any defect or supply any omission or reconcile any inconsistency in the Plan and to construe and interpret the Plan and any Option, Grant Letter or other instrument hereunder; and

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        (ix)  to make all other decisions and determinations as may be required under the terms of the Plan or as the Option Committee may deem necessary or advisable for the administration of the Plan.

        (b)    Manner of Exercise of Option Committee Authority.    Any action of the Option Committee with respect to the Plan shall be final, conclusive and binding on all persons, including the Company, its Affiliates, Grantees, or any person claiming any rights under the Plan from or through any Grantee, except to the extent the Option Committee may subsequently modify, or take further action not consistent with, its prior action. If not specified in the Plan, the time at which the Option Committee must or may make any determination shall be determined by the Option Committee, and any such determination may thereafter be modified by the Option Committee. The express grant of any specific power to the Option Committee, and the taking of any action by the Option Committee, shall not be construed as limiting any power or authority of the Option Committee. The Option Committee may delegate to officers or managers of the Company or any Affiliate of the Company the authority, subject to such terms as the Option Committee shall determine, to perform such functions as the Option Committee may determine, to the extent permitted under applicable law.

        (c)    Limitation of Liability.    Each member of the Option Committee shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or other employee of the Company or any of its Affiliates, the Company's independent certified public accountants or any executive compensation consultant, legal counsel or other professional retained by the Company to assist in the administration of the Plan. To the fullest extent permitted by applicable law, no member of the Option Committee, nor any officer or employee of the Company acting on behalf of the Option Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Option Committee and any officer or employee of the Company acting on its behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination or interpretation.

        Section 5.    Option Termination.    

        Unless otherwise determined by the Option Committee and set forth in a Grant Letter, Options shall terminate on the earliest of:

        (a)   the 91st day following the date the Grantee ceases to be an Employee for any reason (except if such cessation is on account of death or Disability, the 181^st day following such cessation); provided, however, that (i) in all cases the portion of any Option that did not vest prior to or upon the date of termination of employment or engagement for any reason shall terminate immediately upon such termination, and (ii) if such termination is for Cause, the vested portion shall terminate as well;

        (b)   the seventh anniversary of the date of grant as set forth in the Grant Letter; and

        (c)   cancellation, termination or expiration of the Options pursuant to action taken by the Option Committee in accordance with Section 7.

        Section 6.    Exercise of Options

        (a)   Only the vested portion of any Option may be exercised. A Grantee shall exercise an Option by delivery of written notice to the Company setting forth the number of Shares with respect to which the Option is to be exercised, together with cash, a certified check or bank draft payable to the order of the Company, in amount equal to the sum of the exercise price for such Shares and any withholding tax obligation arising in connection with such exercise. The Option

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Committee may, in its sole discretion, permit other forms of payment, including notes or other contractual obligations of a Grantee to make payment on a deferred basis.

        (b)   Before the Company issues any Shares to a Grantee pursuant to the exercise of an Option, the Company shall have the right to require that the Grantee make such provision, or furnish the Company such authorization, necessary or desirable so that the Company may satisfy its obligation under applicable tax laws to withhold for income or other taxes due upon or incident to such exercise. The Option Committee, may, in its discretion, permit such withholding obligation to be satisfied through the withholding of Shares that would otherwise be delivered upon exercise of the Option.

        (c)   As a condition to the grant of an Option or delivery of any Shares upon exercise of an Option, the Company shall have the right to require that the Grantee become party to the Stockholders Agreement, or any similar or successor agreement.

        Section 7.    Adjustment Upon Changes in Capitalization

        In the event any recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, exchange or issuance of Shares or other securities, any stock dividend or other special and nonrecurring dividend or distribution (whether in the form of cash, securities or other property), liquidation, dissolution, or other similar transactions or events, affects the Shares, then the Option Committee shall make such equitable adjustment as it determines in its discretion is appropriate in order to prevent dilution or enlargement of the rights of Grantees under the Plan, including adjustment in (i) the number and kind of Shares deemed to be available thereafter for grants of Options under Section 3, (ii) the number and kind of Shares that may be delivered or deliverable in respect of outstanding Options, and (iii) the exercise price. In addition, the Option Committee is authorized to make such adjustments as it shall in its sole discretion determine are appropriate in the terms and conditions of, and the criteria included in, Options (including, without limitation, cancellation of Options in exchange for the in-the-money value, if any, of the vested portion thereof, cancellation of unvested and/or out-of-the-money options for no consideration, substitution of Options using securities of a successor or other entity, acceleration of the time that Options expire, or adjustment of performance targets) in recognition of unusual or nonrecurring events (including, without limitation, an event described in the preceding sentence) affecting the Company, Linens Investors or any other Affiliate of the Company or the financial statements of the Company, Linens Investors or any Affiliate of the Company, or in response to changes in applicable laws, regulations or accounting principles.

        Section 8.    Restrictions on Shares.    

        (a)    Restrictions on Issuing Shares.    No Shares shall be issued or transferred to an Employee under the Plan unless and until all applicable legal requirements have been complied with to the satisfaction of the Option Committee. The Option Committee shall have the right to condition the exercise of any Option on the Grantee's undertaking in writing to comply with such restrictions on any subsequent disposition of the Shares issued or transferred thereunder as the Option Committee shall deem necessary or advisable as a result of any applicable law, regulation, official interpretation thereof, or any underwriting agreement.

        (b)    ISO Notice.    A Grantee shall notify the Company of any disposition of Shares acquired upon exercise of an ISO if such disposition occurs within one year of the date of such exercise or within two years of the date of grant of such ISO. The Company may impose such procedures as it determines may be necessary to ensure that such notification is made.

        (c)    Repurchase Right.    Unless otherwise determined in a Grant Letter, the Company shall have the right (but not the obligation) to repurchase any or all of the Shares acquired upon exercise of the Options upon a Grantee's ceasing to be an Employee for any reason. Such right

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shall be exercisable by the Company during the one year period following the later of the date of such cessation or the date the Option is exercised. The price per Share to be paid by the Company should it choose to exercise its repurchase right shall equal the fair market value per share, as determined by the Board in good faith; provided, however, if the Shares are to be repurchased following a termination for Cause, then the price per Share to be paid by the Company shall not exceed the price per Share paid by the Grantee. The price per Share to be paid by the Company should it choose to exercise its repurchase right shall be paid in cash or by plain check against delivery of certificates representing the repurchased shares. Notwithstanding the foregoing, if at the time of the exercise of the repurchase right or payment for the Shares pursuant thereto, such exercise or repurchase would result in a default or breach on the part of the Company or any subsidiary under any loan or other agreement, or if the repurchase would not be permitted under any applicable state law, then the Company shall take possession of the Shares to be repurchased and payment shall be deferred until the first business day that it may occur without any such event existing or resulting. The Company may offset against the payment of the repurchase price any amounts owed by the Grantee to the Company or any Affiliate of the Company. Should the Company choose not to exercise its repurchase right, Linens Investors or its controlling Affiliates may exercise such right as if it were the Company, and Linens Investors and its controlling Affiliates shall be a third party beneficiary of the Plan with respect to the exercise of such right. The provisions of this Section 8(c) shall cease to be applicable with respect to any termination of employment occurring on or after an initial public offering of the Company's common stock.

        Section 9.    General Provisions

        (a)    Grant Letter.    Each Option shall be evidenced by a Grant Letter. The terms and provisions of such Grant Letters may vary among Grantees and among different Options granted to the same Grantee.

        (b)    No Right to Employment.    The grant of an Option in any year shall not give the Grantee any right to similar grants in future years, any right to continue such Grantee's employment relationship with the Company or its Affiliates, or, until such Option is exercised and Shares are issued, any rights as a stockholder of the Company. All Grantees shall remain subject to discharge to the same extent as if the Plan were not in effect. For purposes of the Plan, a Grantee shall cease to be an Employee upon a sale of any subsidiary of the Company that employs or engages such Grantee, unless the Grantee shall otherwise continue to provide services to the Company or another subsidiary of the Company as an employee or director.

        (c)    No Funding.    No Grantee, and no beneficiary or other persons claiming under or through the Grantee, shall have any right, title or interest by reason of any Option to any particular assets of the Company or Affiliates of the Company, or any Shares allocated or reserved for the purposes of the Plan or subject to any Option except as set forth herein. The Company shall not be required to establish any fund or make any other segregation of assets to assure satisfaction of the Company's obligations under the Plan.

        (d)    No Transfers.    No Option may be sold, transferred, assigned, pledged or otherwise encumbered, except by will or the laws of descent and distribution, and an Option shall be exercisable during the Grantee's lifetime only by the Grantee. Upon a Grantee's death, the estate or other beneficiary of such deceased Grantee shall be subject to all the terms and conditions of the Plan and Grant Letter, including the provisions relating to the termination of the right to exercise the Option.

        (e)    Governing Law; Jurisdiction.    The Plan shall be governed by and construed in accordance with the laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New Jersey, except to

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the extent that the Delaware General Corporation Law applies as a result of the Company being incorporated in the State of Delaware, in which case the Delaware General Corporation Law shall apply. Each Grantee, and each beneficiary or other person claiming under or through the Grantee by accepting the grant of an Option consents to the exclusive jurisdiction of any state or federal court located within the State of New Jersey, agrees that all actions or proceedings relating to the Plan shall be litigated in such courts, waives any defense of forum non conveniens, and agrees to be bound by any final and nonappealable judgment rendered thereby in connection with the Plan. To the extent the Grantee is a party to an employment agreement with the Company or any of its subsidiaries that provides for binding arbitration of employment disputes, then any disputes between the Company and such Grantee arising under the Plan shall be arbitrated in accordance with the procedures set forth in such employment agreement.

        Section 10.    Amendment or Termination

        In addition to its authority elsewhere in the Plan, the Option Committee may, at any time, amend or terminate the Plan or any Grant Letter; provided, however, that, no such action shall adversely affect the rights of Grantees with respect to Options previously granted hereunder.

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LINENS HOLDING CO. STOCK OPTION PLAN

EX-10.18

Exhibit 10.18

LNT Option Grant Letter-Employees (Updated 3/26/06)
(Any variations to the form must be reviewed by
LNT Legal Dept. or outside legal counsel)

LINENS HOLDING CO.
6 Brighton Road
Clifton, NJ 07015

                 , 200  

[Name of Grantee]
[Address]

Re:

Grant of Stock Options

Dear                        :

        We are pleased to inform you that you have been granted options to purchase                        shares of common stock of Linens Holding Co. (the "Company"). As further described below, the options have varying features relating to vesting and are denominated as a "Time Option" and a "Performance Option", and are collectively referred to as the "Options". The Options have been granted pursuant to the Company's Stock Option Plan (the "Plan"), a copy of which is attached, and are subject in all respects to the provisions of the Plan. Capitalized terms not otherwise defined in the text are defined in the Plan.

1.

Time Option:    The key terms of the Time Option are as follows:



(a)

Number of Shares.                



(b)

Exercise Price per Share.    $                  



(c)

Vesting.    The Time Option will vest and become exercisable in four equal annual installments on                             , 200    , 200    , 200    and 20    , provided that the Time Option will become fully vested and exercisable immediately prior to a "Change of Control" (as defined in paragraph 2(d) below).



2.

Performance Option:    The key terms of the Performance Option are as follows:



(a)

Number of Shares.                



(b)

Exercise Price per Share.    $                  



(c)

Vesting.



(i)

If on any Measurement Date, the Value Per Share equals or exceeds the Target Stock Price (the "Performance Goal"), then (1) if such Measurement Date is other than the date of a Linens Investors Liquidity Event, the Performance Option will vest and become exercisable in two equal annual installments on each of the first two anniversaries of such Measurement Date, provided that if a Change of Control occurs after any such Measurement Date, any unvested installment shall become fully vested immediately prior to the Change of Control, and (2) if such Measurement Date is the date of a Linens Investors Liquidity Event, the Performance Option will become fully vested and immediately exercisable at such time.



(ii)

If, on any Measurement Date prior to a Qualified IPO, the Performance Goal would be satisfied by disregarding in the calculation of Net Equity Value, some portion, but not all, of your Performance Option as well as similar performance options granted to other employees, then a portion of your Performance Option shall vest, as determined by the Option Committee in a fair and equitable manner.

(d)

Definitions.



(i)

"Apollo" means Apollo Management V, L.P. and its affiliates or any entity controlled thereby or any of the partners thereof.



(ii)

"Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in, however designated, equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity.



(iii)

"Change in Control" means:



(1)

any event occurs the result of which is that any "Person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than one or more Permitted Holders or their Related Parties, becomes the beneficial owner, as defined in Rules l3d-3 and l3d-5 under the Exchange Act (except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire within one year) directly or indirectly, of more than 50% of the Voting Stock of the Company or any successor company, including, without limitation, through a merger or consolidation or purchase of Voting Stock of the Company; provided that none of the Permitted Holders or their Related Parties have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board; provided further that the transfer of 100% of the Voting Stock of the Company to a Person that has an ownership structure identical to that of the Company prior to such transfer, such that the Company becomes a wholly owned Subsidiary of such Person, shall not be treated as a Change of Control;



(2)

after an initial public offering of Capital Stock of the Company, during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by such Board or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board then in office;



(3)

the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any Person or group of related Persons other than a Permitted Holder or a Related Party of a Permitted Holder; or



(4)

the adoption of a plan relating to the liquidation or dissolution of the Company.



(iv)

"Exchange Act" means the Securities Exchange Act of 1934, as amended.



(v)

"Fully Diluted Shares" means, on any Measurement Date, the number of Shares outstanding, plus the number of Shares subject to all outstanding options, warrants and rights to acquire Shares, whether or not exercisable.



(vi)

"Linens Investors Liquidity Event" means any transaction (including, without limitation, a stock sale, redemption or buy back, merger, consolidation or otherwise) immediately following which all of the Shares held by Linens Investors have been exchanged for or converted into consideration, all or substantially all of which consists of cash or readily marketable securities that Linens Investors can

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immediately resell for cash at prevailing quoted prices without legal, contractual or market restrictions.

(vii)

"Measurement Date" means (1) prior to a Qualified IPO, the last day of any fiscal quarter, starting with the last day of the fiscal quarter ending coincident with or next following December 31, 2007, (2) following a Qualified IPO, each trading day, starting with the 90th trading day following the Qualified IPO, or (3) the date of a Linens Investors Liquidity Event, whether before or after a Qualified IPO.



(viii)

"Net Equity Value" means (1) 7.5 multiplied by the Company's consolidated operating earnings, before interest, income taxes, depreciation and amortization ("EBITDA") for the four fiscal quarters ending upon a Measurement Date, plus (2) the sum of cash, cash equivalents, and the aggregate exercise price of all outstanding options or warrants to purchase Shares, whether or not exercisable, in each case as of the Measurement Date, less (3) debt as of the Measurement Date. EBITDA, cash and debt shall be determined by the Option Committee based on the Company's financial statements for such period, subject to such adjustments to reflect unusual, nonrecurring or extraordinary events as the Option Committee shall deem equitable and appropriate.



(ix)

"Permitted Holder" means any of Apollo, NRDC Real Estate Advisors I, LLC or Silver Point Capital Fund Investments, LLC.



(x)

"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, business trust, joint-stock company, estate, trust, unincorporated organization, government or other agency or political subdivision thereof or any other legal or commercial entity.



(xi)

"Preferred Stock" as applied to the Capital Stock of any corporation means Capital Stock of any class or classes, however designated, that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation.



(xii)

"Related Party" means (1) any controlling stockholder, 50% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder; or (2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 50% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (1).



(xiii)

"Qualified IPO" means a sale by the Company of Shares in an underwritten (firm commitment) public offering registered under the Securities Act of 1933, with gross proceeds to the Company of not less than $150 million, resulting in the listing of the Shares on a nationally recognized stock exchange, including without limitation the Nasdaq National Market System.



(xiv)

"Subsidiary" means, with respect to any specified Person, (1) 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

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other Subsidiaries of that Person (or a combination thereof); and (2) 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).

(xv)

"Target Stock Price" means $50, compounded at an annual rate of 25% from February 14, 2006 to the Measurement Date, provided that the Option Committee shall make such adjustment to the Target Stock Price as it determines is equitable and appropriate to reflect changes to the outstanding Shares or capital structure of the Company, including contributions and distributions of capital.



(xvi)

"Value Per Share" means (1) prior to a Qualified IPO, the Net Equity Value divided by the Fully Diluted Shares, (2) following a Qualified IPO, the average closing price of a Share for the period of 90 consecutive trading days ending on the Measurement Date, or (3) upon a Linens Investors Liquidity Event, the price per Share realized by Linens Investors.



(xvii)

"Voting Stock" of an entity means all classes of Capital Stock of such entity then outstanding and normally entitled to vote in the election of directors or all interests in such entity with the ability to control the management or actions of such entity.

3.

Termination of the Options:    Whether or not exercisable or scheduled to become exercisable, the Options will terminate as provided in Section 5 of the Plan. In addition, the Performance Option will terminate no later than a Linens Investors Liquidity Event to the extent the Performance Goal is not achieved at such time, or was not previously achieved.



4.

Federal Taxes:    The Options granted to you are treated as "nonqualified options" for federal tax purposes, which means that when you exercise, the excess of the value of the Shares issued on exercise over the exercise price paid for the Shares is income to you, subject to wage-based withholding and reporting. When you sell the Shares acquired upon exercise, the excess (or shortfall) between the amount you receive upon the sale and the value of the shares at the time of exercise is treated as capital gain (or loss). State and local taxes may also apply. You should consult your personal tax advisor for more information concerning the tax treatment of your Options.

        We are excited to give you this opportunity to share in our future success. Please indicate your acceptance of this option grant and the terms of the Plan by signing and returning a copy of this letter.

Sincerely,

LINENS HOLDING CO.

By:

Name:

Title:

Agreed to and Accepted by:

Name:

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EX-10.20

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Exhibit 10.20

LINENS HOLDING CO. AND
LINENS 'N THINGS, INC.
DIRECTOR COMPENSATION POLICY

as adopted by the Boards of Directors of
Linens Holding Co. and Linens 'n Things, Inc.
on June 13, 2006

WHEREAS, the Boards of Directors (each a "Board" and, collectively, the "Boards") of Linens Holding Co. ("Parent") and Linens 'n Things, Inc. (the "Company") desire to approve and adopt a policy with respect to the director compensation paid to the Chairman of the Board of Parent and the Company (the "Chairman") and to the directors of Parent and the Company who are not employees thereof or of any other direct or indirect subsidiary of Parent (the "Non-Employee Directors");

NOW, THEREFORE, BE IT RESOLVED, that the policy for director compensation for the Chairman and the Non-Employee Directors be and is hereby approved and adopted as follows, with retroactive effect to April 1, 2006, the date of Parent's acquisition of the Company:

1.

the Chairman and each Non-Employee Director shall be entitled to receive an annual retainer in an amount equal to $40,000, and such annual retainer shall be paid in quarterly installments at or before the beginning of each calendar quarter, provided that the quarterly installment shall be pro-rated for the Chairman or any Non-Employee Director first elected to a Board after the beginning of a calendar quarter;



2.

the Chairman and each Non-Employee Director shall be entitled to receive a stipend of $2,000 for each joint meeting of the Boards or separate meeting of a Board attended in person and $500 for each such meeting attended telephonically, provided that only a single stipend shall be paid for any joint meeting of the Boards;



3.

each Non-Employee Director serving on a Board committee shall be entitled to receive a stipend of $1,000 for each meeting of such Board committee attended in person and $500 for each such meeting attended telephonically, provided that only a single stipend shall be paid for any joint meeting of such Board committees;



4.

the retainers and stipends shall be paid directly to the respective Chairman or Non-Employee Director or as otherwise designated thereby;



5.

the retainers and stipends shall be allocated among Parent and the Company as determined by management of Parent and the Company in its discretion and pursuant to any applicable legal or accounting requirements; and



6.

each Chairman and Non-Employee Director, upon first election to the Boards, shall be entitled to receive a grant of a non-qualified stock option to purchase a minimum of 5,000 shares of Parent's common stock, par value $0.01 per share (the "Common Stock"), such number of shares to be determined by the Board of Parent in its discretion and which grant shall be made outside of the Linens Holding Co. Stock Option Plan (the "Plan").

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LINENS HOLDING CO. AND LINENS 'N THINGS, INC. DIRECTOR COMPENSATION POLICY

EX-10.21

Exhibit 10.21

Linens Holding
Grant Letter—Directors Option
(Updated 6/13/06)

LINENS HOLDING CO.
6 Brighton Road
Clifton, NJ 07015

                 , 200  

[Name]
[Address]
[Address]

Re:

Grant of Stock Options

Dear [First Name]:

        We are pleased to inform you that you have been granted an option to purchase 5,000 shares of common stock of Linens Holding Co. (the "Company"). As further described below, the option is denominated as a "Director Option". The Director Option has not been granted under the Company's Stock Option Plan (the "Plan"), a copy of which is attached, and shall have no effect on the number of options that may be awarded under the Plan. However, in all other respects, the Director Option shall be treated as if it were awarded under the Plan, and shall be subject to the terms and conditions of the Plan, except as specifically modified hereby. Capitalized terms not otherwise defined in the text are defined in the Plan.

1.

Director Option:    The key terms of the Director Option are as follows:



(a)

Number of Shares.                



(b)

Exercise Price per Share.    $                  



(c)

Vesting.    The Director Option is fully vested and immediately exercisable.



2.

Termination of the Option:    Whether or not exercisable or scheduled to become exercisable, the Director Option will terminate as provided in Section 5 of the Plan; provided that Section 5(a) of the Plan shall not apply.



3.

No Repurchase Right.    Section 8(c) of the Plan shall not apply to any Shares you acquire upon exercise of the Director Option.



4.

Federal Taxes:    The Director Option granted to you is treated as a "nonqualified option" for federal tax purposes, which means that when you exercise, the excess of the value of the Shares issued on exercise over the exercise price paid for the Shares is income to you, subject to wage-based withholding and reporting. When you sell the Shares acquired upon exercise, the excess (or shortfall) between the amount you receive upon the sale and the value of the shares at the time of exercise is treated as capital gain (or loss). State and local taxes may also apply. You should consult your personal tax advisor for more information concerning the tax treatment of your Director Option.

        We are excited to give you this opportunity to share in our future success. Please indicate your acceptance of this option grant and the terms of the Plan by signing and returning a copy of this letter.

Sincerely,

LINENS HOLDING CO.

By:

Name:

Title:

Agreed to and Accepted by:

Name: [Name]

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EX-12.1

Exhibit 12.1

Linens 'N Things
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)

	Fiscal Year ended										Thirteen Weeks Ended						Thirteen Weeks Ended
	December 29, 2001		January 4, 2003		January 3, 2004		January 1, 2005		December 31, 2005		April 2, 2005		January 1 to February 13, 2006		February 14 to April 1, 2006		April 1, 2006
	(unaudited)		(unaudited)								(unaudited)		(unaudited)		(unaudited)		(unaudited)
Earnings:
Income (loss) from continuing operations before income taxes	40,440		106,093		117,734		97,929		57,861		(6,484	)	(69,174	)	(28,885	)	(98,059	)
Fixed charges	56,637		66,874		71,422		79,377		87,516		21,384		11,352		21,672		33,024
Earnings adjusted for fixed charges	97,077		172,967		189,156		177,306		145,377		14,900		(57,822	)	(7,213	)	(65,035	)
Fixed charges:
Interest expense, gross (note no interest capitalized)	6,287		5,777		4,044		3,942		5,277		1,242		2		10,013		10,015
Portion of rent expense representative of interest(1)	50,350		61,097		67,378		75,435		82,239		20,142		11,350		11,659		23,009
Total fixed charges	56,637		66,874		71,422		79,377		87,516		21,384		11,352		21,672		33,024
Ratio of earnings to fixed charges	1.71		2.59		2.65		2.23		1.66		0.70		(5.09	)	(0.33	)	(1.97	)
ESTIMATE OF INTEREST WITHIN RENTAL EXPENSE
Total Rent expense (per historical financial statements)	152,577		185,141		204,175		228,592		249,210		61,038		34,394		35,331		69,724
Estimated percentage (based on SEC guidance)	33	%	33	%	33	%	33	%	33	%	33	%	33	%	33	%	33	%
Estimated interest within rental expense	50,350		61,097		67,378		75,435		82,239		20,142		11,350		11,659		23,009

(1)

One third of rent expense is deemed to be representative of interest.

EX-21.1

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Exhibit 21.1

SUBSIDIARIES OF THE COMPANY

Linens 'n Things, Inc.
Linens 'n Things Center, Inc.
Bloomington, MN., L.T., Inc.
Vendor Finance, LLC
LNT, Inc.
LNT Services, Inc.
LNT Leasing II, LLC
LNT West, Inc.
LNT Virginia LLC
LNT Merchandising Company LLC
LNT Leasing III, LLC
Citadel LNT, LLC
Linens 'n Things Investment Canada I Company
Linens 'n Things Investment Canada II Company
Linens 'n Things Canada Limited Partnership
Linens 'n Things Canada Corp.

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SUBSIDIARIES OF THE COMPANY

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Linens Holding Co.:

We consent to the use of our report included herein and to the reference of our firm under the heading "Experts" and "Selected Financial Data" in the registration statement.

Our report refers to a change in the method of accounting for vendor allowance arrangements to conform to the requirements of Emerging Issues Task Force Issue No. 02-16 in fiscal 2004.

KPMG LLP
New York, New York
July 6, 2006