Exhibit 10.6

EXECUTION VERSION

INTERCREDITOR AGREEMENT

by and among

GENERAL ELECTRIC CAPITAL CORPORATION,

as ABL Agent,

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Term Agent,

THE TALBOTS, INC.,

THE TALBOTS GROUP, LIMITED PARTNERSHIP, and

TALBOTS CLASSICS FINANCE COMPANY, INC.,

as Borrowers,

and

THE GUARANTORS PARTY HERETO

dated as of February 16, 2012

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TABLE OF CONTENTS

 

     Page   ARTICLE 1.   

DEFINITIONS

     2   

Section 1.1.

  

UCC Definitions

     2   

Section 1.2.

  

Other Definitions

     2   

Section 1.3.

  

Rules of Construction

     21   

Section 1.4.

  

Québec Matters

     21   

Section 1.5.

  

English Language

     22    ARTICLE 2.   

LIEN PRIORITY

     22   

Section 2.1.

  

Priority of Liens

     22   

Section 2.2.

  

Waiver of Right to Contest Liens

     24   

Section 2.3.

  

Remedies Standstill

     25   

Section 2.4.

  

Release of Liens

     28   

Section 2.5.

  

No New Liens

     30   

Section 2.6.

  

Waiver of Marshalling

     30    ARTICLE 3.   

ACTIONS OF THE PARTIES

     31   

Section 3.1.

  

Certain Actions Permitted

     31   

Section 3.2.

  

Agent for Perfection

     31   

Section 3.3.

  

Sharing of Information and Access; Notices of Default

     31   

Section 3.4.

  

Insurance

     34   

Section 3.5.

  

No Additional Rights For the Credit Parties Hereunder

     34   

Section 3.6.

  

Inspection and Access Rights

     34   

Section 3.7.

  

Tracing of and Priorities in Proceeds

     37   

Section 3.8.

  

Payments Over

     37   

Section 3.9.

  

Term Loan Push Down Reserve and Term Loan Reserve Amount

     37   

Section 3.10.

  

Legends

     38    ARTICLE 4.   

APPLICATION OF PROCEEDS

     39   

Section 4.1.

  

Application of Proceeds

     39   

Section 4.2.

  

Specific Performance

     41    ARTICLE 5.   

INTERCREDITOR ACKNOWLEDGEMENTS AND WAIVERS

     42   

Section 5.1.

  

Notice of Acceptance and Other Waivers

     42   

 

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TABLE OF CONTENTS

(continued)

 

          Page  

Section 5.2.

  

Modifications to ABL Documents and Term Documents

     43   

Section 5.3.

  

Reinstatement and Continuation of Agreement

     47   

Section 5.4.

  

Term Purchase Option of ABL Obligations

     48   

ARTICLE 6.

  

INSOLVENCY PROCEEDINGS

     50   

Section 6.1.

  

DIP Financing

     50   

Section 6.2.

  

Relief From Stay

     52   

Section 6.3.

  

No Contest; Adequate Protection

     53   

Section 6.4.

  

Asset Sales

     55   

Section 6.5.

  

Separate Grants of Security and Separate Classification

     55   

Section 6.6.

  

Enforceability

     56   

Section 6.7.

  

ABL Obligations Unconditional

     56   

Section 6.8.

  

Term Obligations Unconditional

     56   

Section 6.9.

  

Reorganization Securities

     56   

Section 6.10.

  

Rights as Unsecured Creditors

     56   

ARTICLE 7.

  

MISCELLANEOUS

     57   

Section 7.1.

  

Rights of Subrogation

     57   

Section 7.2.

  

Further Assurances

     57   

Section 7.3.

  

Representations

     57   

Section 7.4.

  

Amendments

     57   

Section 7.5.

  

Addresses for Notices

     58   

Section 7.6.

  

No Waiver; Remedies

     58   

Section 7.7.

  

Continuing Agreement, Transfer of Secured Obligations

     58   

Section 7.8.

  

Governing Law; Entire Agreement

     59   

Section 7.9.

  

Counterparts

     59   

Section 7.10.

  

No Third Party Beneficiaries

     59   

Section 7.11.

  

Headings

     59   

Section 7.12.

  

Severability

     59   

Section 7.13.

  

VENUE; JURY TRIAL WAIVER

     59   

Section 7.14.

  

Intercreditor Agreement

     60   

Section 7.15.

  

No Warranties or Liability

     60   

 

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TABLE OF CONTENTS

(continued)

 

         Page  

Section 7.16.

 

Conflicts

     61   

Section 7.17.

 

Information Concerning Financial Condition of the Credit Parties

     61   

 

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INTERCREDITOR AGREEMENT

THIS INTERCREDITOR AGREEMENT (as amended, supplemented, restated or otherwise
modified from time to time pursuant to the terms hereof, this “Agreement”) is
entered into as of February 16, 2012 among (a) GENERAL ELECTRIC CAPITAL
CORPORATION, in its capacity as administrative agent (together with its
successors and assigns in such capacity, the “ABL Agent”) for the ABL Secured
Parties (as defined below), and (b) WELLS FARGO BANK, NATIONAL ASSOCIATION, in
its capacity as administrative agent (together with its successors and assigns
in such capacity, the “Term Agent”) for the Term Secured Parties (as defined
below), and acknowledged by (c) each of THE TALBOTS, INC. (“Company”), THE
TALBOTS GROUP, LIMITED PARTNERSHIP (“Talbots Group LP”) and TALBOTS CLASSICS
FINANCE COMPANY, INC. (“Talbots Finance”) and (d) each of the Company’s
affiliates which are signatories to this Agreement.

RECITALS

A. The Company, Talbots Group LP and Talbots Finance (collectively, and together
with such other borrowers from time to time under the ABL Credit Agreement
referred to below, the “ABL Borrowers” and each individually an “ABL Borrower”),
as borrowers, have entered into that certain Amended and Restated Credit
Agreement dated of even date herewith (as such agreement may be amended,
restated, supplemented, renewed or otherwise modified from time to time,
together with any other agreements pursuant to which any of the Indebtedness,
commitments, obligations, costs, expenses, fees, reimbursements, indemnities or
other obligations payable or owing thereunder may be refinanced, restructured,
renewed, extended, increased, refunded or replaced in accordance with the terms
of this Agreement, the “ABL Credit Agreement”) with the ABL Agent, the ABL
Lenders (as hereinafter defined) and the other parties thereto, pursuant to
which, among other things, the ABL Lenders have agreed to make loans and provide
extensions of credit from time to time to the Borrowers.

B. The Company, Talbots Group LP and Talbots Finance (collectively, and together
with such other borrowers from time to time under the Term Loan Agreement
referred to below, the “Term Borrowers” and each individually a “Term
Borrower”), as borrowers, have entered into that certain Term Loan Agreement
dated of even date herewith (as such agreement may be amended, restated,
supplemented, renewed or otherwise modified from time to time, together with any
other agreements pursuant to which any of the Indebtedness, commitments,
obligations, costs, expenses, fees, reimbursements, indemnities or other
obligations payable or owing thereunder may be refinanced, restructured,
renewed, extended, increased, refunded or replaced in accordance with the terms
of this Agreement, the “Term Loan Agreement”), pursuant to which, among other
things, the Term Loan Lenders have made a term loan to the Borrowers.

C. The ABL Guarantors (as hereinafter defined) have guaranteed, among other
things, the payment and performance of the Borrowers’ obligations under the ABL
Documents (as defined below), and the Term Guarantors (as hereinafter defined)
have guaranteed, among other things, the payment and performance of the
Borrowers’ obligations under the Term Documents (as defined below).

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D. To secure the obligations of the ABL Credit Parties under and in connection
with the ABL Documents, the ABL Credit Parties have granted to the ABL Agent
(for the benefit of the ABL Secured Parties) Liens on the Collateral (as
hereinafter defined).

E. To secure the obligations of the Term Credit Parties under and in connection
with the Term Documents, the Term Credit Parties have granted to the Term Agent
(for the benefit of the Term Secured Parties) Liens on the Collateral (as
hereinafter defined).

F. Each of the ABL Agent (on behalf of the ABL Secured Parties) and the Term
Agent (on behalf of the Term Secured Parties) and, by their acknowledgment
hereof, each of the ABL Credit Parties and the Term Credit Parties, desires to
agree to the relative priority of Liens on the Collateral and certain other
rights, priorities and interests as provided herein.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, receipt of which is hereby acknowledged, the parties hereto agree
as follows:

ARTICLE 1.

DEFINITIONS

Section 1.1. UCC Definitions. The following terms which are defined in the
Uniform Commercial Code are used herein as so defined: Accounts, Chattel Paper,
Commercial Tort Claims, Deposit Accounts, Documents, Electronic Chattel Paper,
Equipment, Financial Assets, Fixtures, General Intangibles, Goods, Instruments,
Inventory, Investment Property, Letter-of-Credit Rights, Payment Intangibles,
Proceeds, Promissory Notes, Records, Securities Accounts, Security, Security
Entitlements, Supporting Obligations and Tangible Chattel Paper.

Section 1.2. Other Definitions. Subject to Section 1.1, as used in this
Agreement, the following terms shall have the meanings set forth below:

“ABL Agent” shall have the meaning assigned to that term in the introduction to
this Agreement and shall include any successor thereto as well as any Person
designated as the “Agent”, “Administrative Agent” or “Collateral Agent” (or
similar role) under any ABL Credit Agreement.

“ABL Bank Product Affiliate” shall mean any ABL Agent, ABL Lender or any
Affiliate of an ABL Lender or ABL Agent that provides or arranges any Bank
Product or Cash Management Services to or for any of the ABL Credit Parties or
any of their respective Subsidiaries with the obligations of such ABL Credit
Parties or such Subsidiaries thereunder being secured by one or more ABL
Collateral Documents, together with their respective successors, assigns and
transferees.

“ABL Borrowers” and “ABL Borrower” shall have the meaning assigned to such terms
in the recitals to this Agreement.

“ABL Borrowing Base” shall mean, as of any date of determination thereof, the
“Borrowing Base” as defined in the ABL Credit Agreement as reflected on the most
recent Borrowing Base Certificate received by ABL Agent (i) pursuant to the ABL
Credit Agreement or (ii) from the Term Loan Agent, in either case, prior to
funding of loans or advances by an ABL

 

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Lender or the issuance, renewal or amendment of a Letter of Credit by an ABL
Lender (it being understood and agreed that the use of cash collateral in an
Insolvency Proceeding shall not constitute a funding of a loan or other
advance).

“ABL Collateral Documents” shall mean all “Collateral Documents” as defined in
the ABL Credit Agreement, and all other security agreements, mortgages, deeds of
trust and other security documents executed and delivered in connection with the
ABL Documents, in each case as the same may be amended, supplemented, restated
or otherwise modified from time to time.

“ABL Credit Agreement” shall have the meaning assigned to such term in the
recitals to this Agreement and shall include any other agreement extending the
maturity of, consolidating, restructuring, refunding, replacing or refinancing
all or any portion of the ABL Obligations, in each case including pursuant to
any DIP Financing provided by any of the ABL Secured Parties, in accordance with
the terms hereof, whether by the same or any other agent, lender or group of
lenders.

“ABL Credit Parties” collectively, the ABL Borrowers, the ABL Guarantors and
each other direct or indirect subsidiary or parent of the ABL Borrowers or any
of their affiliates that is now or hereafter becomes a party to any ABL
Document.

“ABL Documents” shall mean the ABL Credit Agreement, the ABL Collateral
Documents, all Secured Rate Contracts between any ABL Credit Party or any
Subsidiary thereof and any ABL Swap Affiliate, all Bank Product Agreements
between any ABL Credit Party or any Subsidiary thereof and any ABL Bank Product
Affiliate, those other ancillary agreements as to which any ABL Secured Party is
a party or a beneficiary and all other related agreements, instruments,
documents and certificates, now or hereafter executed by or on behalf of any ABL
Credit Party or any of its respective Subsidiaries or Affiliates, and/or
delivered to the ABL Agent or any other ABL Secured Party, in connection with
any of the foregoing or any ABL Credit Agreement, in each case as the same may
be amended, supplemented, restated or otherwise modified from time to time in
accordance with the terms hereof.

“ABL Event of Default” shall mean an Event of Default as defined in the ABL
Credit Agreement.

“ABL Guarantors” shall mean the collective reference to (i) the ABL Borrowers,
(ii) each of the Guarantors as defined in the ABL Credit Agreement, and
(iii) any other Person who becomes a guarantor of the ABL Obligations.

“ABL Lenders” shall mean, collectively, the Lenders (including any Swingline
Lenders) and L/C Issuers (as such terms are defined in the ABL Credit
Agreement), as well as any other Person designated as a “Lender”, “Swingline
Lender” or an “L/C Issuer” under any ABL Credit Agreement.

“ABL Obligations” shall mean all obligations (including all Obligations as
defined in the ABL Credit Agreement) of every nature of each ABL Credit Party or
any Subsidiary thereof from time to time owed to the ABL Secured Parties, or any
of them, under any ABL Document (including any DIP Financing provided by any of
the ABL Secured Parties), whether for principal, interest (including interest
which, but for the filing of an Insolvency Proceeding with

 

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respect to such ABL Credit Party, would have accrued on any ABL Obligation),
reimbursement of amounts drawn under letters of credit (including Letters of
Credit), payments for early termination of Secured Rate Contracts and all other
Swap Obligations (as defined in the ABL Credit Agreement) and other amounts
owing in respect of Secured Rate Contracts, all amounts owing in respect of any
Bank Products or Cash Management Services, fees, expenses, indemnification or
otherwise, and all other amounts owing or due under the terms of the ABL
Documents, as amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time. ABL Obligations shall not
include interest, costs, advances, fees, expenses or indemnities (including
legal fees and disbursements) incurred in respect of the ABL Credit Agreement
and the other ABL Documents to the extent the ABL Agent’s or any ABL Secured
Party’s claim therefor is not allowed in any Insolvency Proceeding.

“ABL Priority Collateral” shall mean all Collateral, other than Term Priority
Collateral, including, without limitation, all of the following (including for
the avoidance of doubt, any such assets that, but for the application of
Section 552 of the Bankruptcy Code (or any similar provision of any foreign
Debtor Relief Laws), would be ABL Priority Collateral):

(1) all Accounts (including all “Credit Card Receivables” and “PL Credit Card
Receivables” (as each such term is defined in the ABL Credit Agreement)), other
than Accounts which constitute identifiable Proceeds of Term Priority
Collateral;

(2) all Chattel Paper (including Tangible Chattel Paper and Electronic Chattel
Paper), other than Chattel Paper which constitutes identifiable Proceeds of Term
Priority Collateral;

(3) all (x) Deposit Accounts, bank accounts and lockboxes (other than Term Loan
Priority Accounts) and money and all cash, cash equivalents, checks, other
negotiable instruments, funds and other evidences of payments held therein,
(y) Securities Accounts (other than Term Loan Priority Accounts), Security
Entitlements, Securities and other assets and amounts credited to such a
Securities Account and (z) commodity accounts (other than Term Loan Priority
Accounts) and commodity contracts and all other assets and amounts credited
thereto; provided, however, that subject to Section 3.2, to the extent that
identifiable Proceeds of Term Priority Collateral are deposited in any such
Deposit Accounts, Securities Accounts or commodity accounts, such identifiable
proceeds shall be treated as Term Priority Collateral;

(4) all Inventory;

(5) all cash, cash equivalents and money (other than cash, cash equivalents and
money constituting identifiable Proceeds of Term Priority Collateral);

(6) all Documents (other than to the extent constituting Term Priority
Collateral or identifiable Proceeds thereof), General Intangibles (including all
Payment Intangibles but excluding Intellectual Property) and PLCC Account Holder
Lists and Information;

(7) all Instruments (including Promissory Notes), Commercial Tort Claims (other
than such claims to the extent relating to Term Priority Collateral), and
Investment Property, in each case, other than to the extent constituting
identifiable Proceeds of Term Priority Collateral;

 

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(8) to the extent relating to any of the items referred to in the preceding
clauses (1) through (7) constituting ABL Priority Collateral, all Supporting
Obligations, Letter-of-Credit Rights and rights under contracts for sale;
provided that to the extent any of the foregoing also relates to Term Priority
Collateral only that portion related to the items referred to in the preceding
clauses (1) through (7) shall be included in the ABL Priority Collateral;

(9) all books, Records and information and Proceeds thereof (other than to the
extent constituting Term Priority Collateral), and all rights of access to such
books, Records, and information relating to the items referred to in the
preceding clauses (1) through (8) constituting ABL Priority Collateral
(including all books, databases, engineer drawings, and Records, whether
tangible or electronic, which contain any information relating to any of the
items referred to in the preceding clauses (1) through (8)); provided that the
Term Agent shall be entitled to a copy of all such books, Records and
information;

(10) all federal, state, provincial and other tax refunds; and

(11) all liens, collateral security, guarantees, rights (including the right of
stoppage in transit), remedies, privileges, and insurance policies and
certificates with respect to any of the foregoing, all products, rents, profits,
Proceeds, substitutions, and accessions of or to any of the foregoing and all
cash, cash equivalents, checks, negotiable instruments, money, insurance
proceeds (including, without limitation, proceeds of fire and credit insurance,
business interruption insurance, refunds and premium rebates), Instruments,
Accounts, Chattel Paper, Securities, Securities Entitlements, Financial Assets
and Deposit Accounts in each case received as Proceeds of any of the foregoing.

“ABL Recovery” shall have the meaning set forth in Section 5.3(a).

“ABL Secured Parties” shall mean, collectively, the ABL Agent, the ABL Lenders,
the ABL Swap Affiliates, the ABL Bank Product Affiliates and each other holder
from time to time of the ABL Obligations. For the avoidance of doubt, the term
ABL Secured Parties shall include all “Secured Parties” as defined in the ABL
Credit Agreement.

“ABL Swap Affiliate” shall mean a Secured Swap Provider as defined in the ABL
Credit Agreement, together with their respective successors, assigns and
transferees.

“Affiliate” shall mean, any Person which, directly or indirectly, Controls, is
Controlled by or is under common Control with any Person.

“Agent(s)” means, individually, the ABL Agent or the Term Agent and,
collectively, means both the ABL Agent and the Term Agent.

“Agreement” shall have the meaning assigned to that term in the introduction to
this Agreement.

 

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“Availability Block” shall have the meaning assigned to that term in the ABL
Credit Agreement.

“Bank Product” shall mean any of the product, services or facilities extended to
any Credit Party (or any Affiliate of any Credit Party) or any of its
Subsidiaries under clauses (b), (c) or (d) of the definition of “Bank Product”
as defined in the ABL Credit Agreement.

“Bank Product Agreement” shall mean any agreement or document pursuant to which
an ABL Bank Product Affiliate provides or agrees to provide any Bank Product or
Cash Management Services.

“Bankruptcy Code” shall mean Title 11 of the United States Code, as now or
hereafter in effect or any successor thereto.

“Borrower” shall mean any of the ABL Borrowers and the Term Borrowers.

“Borrowing Base Certificate” shall have the meaning assigned to that term in the
ABL Credit Agreement.

“Business Day” shall mean any day that is not a Saturday, Sunday or other day on
which commercial banks in Boston, Massachusetts or New York, New York are
authorized or required by law to remain closed (or are in fact closed).

“Capitalized Lease” shall mean any lease under which the Company or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.

“Capital Stock” shall mean, any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.

“Carve Out” shall mean in connection with any Insolvency Proceeding any carve
out amount granted with respect to professional fees and expenses, court cost,
filing fees, and fees and cost of the Office of the United States Trustee as
granted by the court or as agreed to by the ABL Agent in its reasonable
discretion.

“Cash Management Services” shall mean any of the product, services or facilities
extended to any Credit Party (or any Affiliate of any Credit Party) or any of
its Subsidiaries under clause (a) of the definition of “Bank Product” as defined
in the ABL Credit Agreement as in effect on the date hereof.

“Collateral” shall mean all Property now owned or hereafter acquired by any
Credit Party in or upon which a Lien is granted or purported to be granted to
the ABL Agent or the Term Agent under any of the ABL Collateral Documents or the
Term Collateral Documents, together with all rents, issues, profits, products
and Proceeds thereof.

 

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“Control” shall mean the possession, directly or indirectly, of the power (a) to
vote five percent (5%) or more of the Capital Stock (on a fully diluted basis)
of such Person having ordinary voting power for the election of directors,
managing members or general partners (as applicable); or (b) to direct or cause
the direction of the management and policies of such Person, (whether by
contract or otherwise). The terms “Controlling” and “Controlled” have meanings
correlative thereto.

“Control Collateral” shall mean any Collateral consisting of any Certificated
Security (as defined in Section 8-102 of the Uniform Commercial Code or the
PPSA, as applicable), Investment Property, Deposit Account, Instruments and any
other Collateral (a) as to which a Lien may be perfected through possession or
control by the secured party, or any agent therefor or (b) subject to a landlord
waiver, bailee waiver, freight forwarder agreement, or similar collateral
agreement.

“Copyright License” shall mean any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by any Credit Party or that such Credit Party otherwise has the
right to license, or granting any right to any Credit Party under any Copyright
now or hereafter owned by any third party, and all rights of such Credit Party
under any such agreement.

“Copyrights” shall mean all of the following now owned or hereafter acquired by
or assigned to any Credit Party: (a) all copyright rights in any work subject to
the copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, whether registered or unregistered and
whether published or unpublished, (b) all registrations and applications for
registration of any such copyright in the United States or any other country,
including registrations, recordings, supplemental registrations and pending
applications for registration in the United States Copyright Office and all
(i) rights and privileges arising under applicable law with respect to such
Credit Party’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 Documents” shall mean the ABL Documents and the Term Documents.

“Credit Parties” shall mean the ABL Credit Parties and the Term Credit Parties.

“Debtor Relief Laws” shall mean the Bankruptcy Code, any of the Bankruptcy and
Insolvency Act, R.S.C. 1985, c. B-3, the Companies’ Creditors Arrangement Act,
R.S.C. 1985, c. C-36 the Winding-Up and Restructuring Act, R.S.C. 1985, c. W-11,
and all other liquidation, conservatorship, bankruptcy, assignment for the
benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws of the United States, Canada or
other applicable jurisdictions from time to time in effect and affecting the
rights of creditors generally.

“DIP Financing” shall have the meaning set forth in Section 6.1(a).

 

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“Discharge of ABL Obligations” shall mean (a) the payment in full in cash of all
outstanding ABL Obligations, (b) with respect to amounts available to be drawn
under outstanding Letters of Credit (or indemnities, guarantees or other
undertakings issued pursuant thereto in respect of outstanding Letters of
Credit), the cancellation of such Letters of Credit or the delivery or provision
of money, cash collateral or backstop letters of credit in respect thereof in
compliance with the terms of any ABL Credit Agreement, (c) with respect to any
other unmatured or contingent ABL Obligations (excluding unknown and unasserted
contingent indemnity claims against any ABL Secured Party which may be asserted
after the date upon which Discharge of the ABL Obligations occurs; but including
reasonably anticipated out-of-pocket costs and expenses (including fees, costs
and expenses of counsel to the ABL Secured Parties) of the ABL Secured Parties),
delivery of cash collateral or other credit support in an amount reasonably
determined by (and on terms reasonably satisfactory to) the ABL Agent with
respect to such ABL Obligations to be held by the ABL Agent for a period of time
reasonably determined by the ABL Agent with respect to such unmatured or
contingent ABL Obligations (and subject to the application of such cash
collateral or other credit support to such ABL Obligations when matured or
otherwise due), and (d) the termination of all commitments to extend credit
under the ABL Documents. If, at any time prior to or simultaneously with the
occurrence of the Discharge of ABL Obligations, the Credit Parties enter into
(x) any refinancing of the ABL Obligations, which refinancing is permitted under
the terms of this Agreement or (y) DIP Financing provided by one or more of the
ABL Lenders to one or more Credit Parties and such DIP Financing is entered into
in accordance with Section 6.1, then, in each case, the Discharge of ABL
Obligations shall automatically be deemed not to have occurred for all purposes
of this Agreement.

“Discharge of Term Obligations” shall mean (a) the payment in full in cash of
all outstanding Term Obligations and (b) with respect to any other unmatured or
contingent Term Obligations (excluding unknown and unasserted contingent
indemnity claims against any Term Secured Party which may be asserted after the
date upon which Discharge of the Term Obligations occurs; but including
reasonably anticipated out-of-pocket costs and expenses (including fees, costs
and expenses of counsel to the Term Secured Parties) of the Term Secured
Parties), delivery of cash collateral or other credit support in an amount
reasonably determined by (and on terms reasonably satisfactory to) the Term
Agent with respect to such Term Obligations to be held by the Term Agent for a
period of time reasonably determined by the Term Agent with respect to such
unmatured or contingent Term Obligations (and subject to the application of such
cash collateral or other credit support to such Term Obligations when matured or
otherwise due). If, at any time prior to or simultaneously with the occurrence
of the Discharge of Term Obligations, the Credit Parties enter into (x) any
refinancing of the Term Obligations, which refinancing is permitted under the
terms of this Agreement or (y) DIP Financing provided by one or more of the Term
Lenders to one or more Credit Parties and such DIP Financing is entered into in
accordance with Section 6.1, then, in each case, the Discharge of Term
Obligations shall automatically be deemed not to have occurred for all purposes
of this Agreement.

“Domain Names” shall mean all Internet domain names and associated URL addresses
in or to which any Credit Party now or hereafter has any right, title or
interest.

“Due Diligence” shall have the meaning set forth in Section 3.3(c).

 

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“Enforcement Notice” shall mean a written notice delivered by either the ABL
Agent or the Term Agent to the other announcing that an Enforcement Period has
commenced.

“Enforcement Period” shall mean the period of time following the receipt by
either the ABL Agent or the Term Agent of an Enforcement Notice from the other
and continuing until the earliest of (a) in case of an Enforcement Period
commenced by the Term Agent, the Discharge of Term Obligations, (b) in the case
of an Enforcement Period commenced by the ABL Agent, the Discharge of ABL
Obligations, or (c) the ABL Agent or the Term Agent (as applicable) terminates,
or agrees in writing to terminate, the Enforcement Period.

“Event of Default” shall mean an Event of Default as defined in the ABL Credit
Agreement or the Term Loan Agreement, as applicable.

“Excess ABL Obligations” shall mean ABL Obligations constituting (a) the
aggregate outstanding principal amount of loans and outstanding amount of
letters of credit made, issued or incurred pursuant to the ABL Documents in
excess of the Maximum ABL Facility Amount and any interest, fees or
reimbursement obligations accrued on or with respect to such amounts (other than
interest, fees, indemnities and reimbursement obligations added to the loan
account), (b) Swap Obligations and obligations in respect of Bank Products
(other than, for the avoidance of doubt, Letters of Credit issued under the ABL
Credit Agreement) to the extent that the ABL Agent has not implemented and
maintained a Reserve under the ABL Borrowing Base in respect of such Swap
Obligations or such Bank Product obligations and (c) any early termination fee
or prepayment fee (other than customary breakage costs) payable under the ABL
Credit Agreement. “Excess ABL Obligations” shall not include any portion of the
ABL Obligations (and any interest, fees or reimbursement obligations accrued on
or with respect to thereto) attributable to an Inadvertent Overadvance.

“Excess Term Obligations” shall mean Term Obligations constituting the aggregate
outstanding principal amount of loans made pursuant to the Term Documents in
excess of the Maximum Term Loan Facility Amount and any interest or fees accrued
on or with respect to such amounts.

“Exercise of Any Secured Creditor Remedies” or “Exercise of Secured Creditor
Remedies” shall mean, except as otherwise provided in the final sentence of this
definition:

(a) the taking by any Secured Party of any action to enforce or realize upon any
Lien in the Collateral, including the institution of any foreclosure
proceedings, whether judicial or non-judicial, under applicable law relating to
the foreclosure of mortgages, deeds of trust or personal property Liens, or the
noticing of any public or private sale pursuant to Article 9 of the Uniform
Commercial Code, PPSA or other applicable law;

(b) the exercise by any Secured Party of any right or remedy provided to a
secured creditor on account of a Lien in the Collateral under any of the Credit
Documents or under applicable law, in an Insolvency Proceeding or otherwise,
including the election to retain any of the Collateral in satisfaction of a
Lien;

 

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(c) the taking of any action by any Secured Party or the exercise of any right
or remedy by any Secured Party in respect of the collection on, set off against,
marshaling of, injunction respecting or foreclosure on the Collateral or the
Proceeds thereof, except ordinary course netting and setoff arrangements in
connection with periodic settlements but not termination payments with respect
to Secured Rate Contracts between any ABL Credit Party or any Subsidiary thereof
and any ABL Swap Affiliate and ordinary course offsets of fees and expenses of
account banks, chargebacks and collections of checks and similar arrangements in
connection with Bank Product Agreements between any ABL Credit Party or any
Subsidiary thereof and any ABL Bank Product Affiliate;

(d) the appointment on the application of a Secured Party, of a receiver,
receiver and manager, interim receiver or receiver-manager of all or part of the
Collateral;

(e) the sale, lease, license, or other disposition of all or any portion of the
Collateral by private or public sale conducted by a Secured Party or any other
means at the direction of a Secured Party permissible under applicable law;

(f) the exercise of any other right of a secured creditor under Part 6 of
Article 9 of the Uniform Commercial Code or under provisions of similar effect
under the PPSA or other applicable law in respect of the Collateral; and

(g) the exercise by a Secured Party of any voting rights relating to any Capital
Stock included in the Collateral.

For the avoidance of doubt, none of the following shall be deemed to constitute
an Exercise of Secured Creditor Remedies: (i) acceleration by the relevant
Secured Parties of the maturity of the ABL Obligations or the Term Obligations,
as the case may be, (ii) the filing of a proof of claim in any Insolvency
Proceeding or seeking adequate protection, (iii) the exercise of rights by the
ABL Agent in connection with cash dominion, including, without limitation, the
notification of account debtors, depository institutions or any other Person to
deliver Proceeds of Collateral to the ABL Agent and the collection and
application of such proceeds to the ABL Obligations, (iv) the consent by the ABL
Agent or Term Agent to a store closing sale, going out of business sale or other
disposition by any Credit Party of any of the Collateral, (v) the reduction of
advance rates or sub-limits by the ABL Agent and the ABL Lenders or (vi) the
imposition or adjustment of Reserves by the ABL Agent or other limitations on
availability provided under the ABL Credit Agreement.

“Governmental Authority” shall mean any foreign, federal, state, provincial,
regional, local, municipal or other government, or any department, commission,
board, bureau, agency, public authority or instrumentality thereof, or any court
or arbitrator.

“Guarantor” shall mean any of the ABL Guarantors or Term Guarantors.

“Inadvertent Overadvance Amounts” shall mean the aggregate amount of all
Overadvances resulting from any and all Inadvertent Overadvances.

 

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“Inadvertent Overadvances” shall mean the funding of any loan or advance under
the ABL Credit Agreement or the issuance, renewal or amendment of a Letter of
Credit by an Issuing Bank which did not result in an Overadvance when made based
upon the most recent Borrowing Base Certificate received by the ABL Agent from
either the Borrowers or the Term Agent prior to such funding or issuance,
renewal or amendment of a Letter of Credit but which has, on the relevant date
of determination, become an Overadvance as the result of circumstances beyond
the reasonable control of the ABL Agent or the ABL Secured Parties (including as
the result of the entry of an adverse order for use of cash collateral by the
United States Bankruptcy Court), including (i) a decline in the value of the ABL
Borrowing Base or the Collateral, (ii) errors or fraud on a Borrowing Base
Certificate, (iii) components of the ABL Borrowing Base on any date thereafter
being deemed ineligible, (iv) the return of uncollected checks or other items of
payment applied to the reduction of Loans (as defined in the ABL Credit
Agreement) or other similar involuntary or unintentional actions, (v) the
imposition of any reserve (other than a reserve in respect of Bank Product
obligations or Swap Obligations which is known by the ABL Agent at the time of
the imposition of such reserve to result in an Overadvance under the ABL
Borrowing Base based upon the most recent Borrowing Base Certificate received by
ABL Agent pursuant to the ABL Credit Agreement or from the Term Agent prior to
the imposition of such reserves) or a reduction in advance rates after the
funding of any loan or advance or the issuance, renewal or amendment of a Letter
of Credit by an L/C Issuer or (vi) any other circumstance beyond the reasonable
control of the ABL Agent or the ABL Secured Parties that results in the
reduction of the net orderly liquidation value or realizable value of the ABL
Borrowing Base.

“Indebtedness” shall have the meaning assigned to that term in the ABL Credit
Agreement.

“Insolvency Event of Default” shall mean (a) any ABL Event of Default resulting
from an Insolvency Proceeding being commenced by, or filed against, any Credit
Party, and (b) any Term Event of Default resulting from an Insolvency Proceeding
being commenced by, or filed against, any Credit Party.

“Insolvency Proceeding” shall mean (a) any case, action or proceeding before any
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, administration, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors or other similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors; in each case covered by clauses (a) and (b) undertaken under any
Debtor Relief Laws.

“Intellectual Property” shall mean all intellectual and similar property of
every kind and nature now owned or hereafter acquired by any Credit Party,
including inventions, designs, Patents, Copyrights, Licenses, Trademarks, Trade
Secrets, Domain Names, confidential and proprietary information, including,
without limitation, all trade secrets, technology, ideas, know how, and formulae
and customer lists (other than any PLCC Account Holder Lists and Information),
any and all intellectual property rights in computer software and computer
software products (including, without limitation, source codes, object codes,
data and related documentation) and any and all design rights owned or used by
such Credit Party. For the avoidance of doubt, (i) any Collateral to which
Intellectual Property is affixed or applied but does not otherwise constitute
intellectual property in accordance with this definition shall not be deemed to
be Intellectual Property and (ii) Intellectual Property shall not include any
PLCC Account Holder Lists and Information.

 

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“Issuing Bank” shall have the meaning assigned to that term in the ABL Credit
Agreement.

“Lender(s)” means individually, the ABL Lenders or the Term Lenders and
collectively means all of the ABL Lenders and the Term Lenders.

“Letter of Credit” shall have the meaning assigned to that term in the ABL
Credit Agreement.

“License” means any Patent License, Trade Secret License, Trademark License,
Copyright License or other license or sublicense agreement to which any Credit
Party is a party.

“Lien” shall mean, with respect to any asset, any mortgage, deed of trust,
security interest, charge, pledge, hypothec, hypothecation, assignment,
attachment, deposit arrangement, encumbrance, lien (statutory, judgment or
otherwise, but excluding any right of set off arising by operation of law or
pursuant to agreements entered into in the ordinary course of business), or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any conditional sale) or other title retention agreement,
any Capitalized Lease, any Synthetic Lease, any financing lease involving
substantially the same economic effect as any of the foregoing and the filing of
any financing statement under the Uniform Commercial Code, the PPSA or
comparable law of any jurisdiction in respect of the foregoing.

“Lien Priority” shall mean with respect to any Lien of the ABL Secured Parties
or the Term Secured Parties in the Collateral, the order of priority of such
Lien as specified in Section 2.1.

“Maximum ABL Facility Amount” shall mean, on any date of determination thereof,
an amount equal to the lesser of:

(a) $220,000,000, minus the amount of any permanent commitment reductions under
the ABL Credit Agreement made after the date hereof; and

(b) the result of (i) the ABL Borrowing Base, minus (ii) the Availability Block,
plus (iii) prior to the commencement or institution of an Insolvency Proceeding
by or against any Credit Party, Protective Overadvances in an amount not to
exceed five percent (5.00%) of the ABL Borrowing Base, plus (iv) after an
Insolvency Proceeding by or against any Credit Party, an amount equal to the
result of (x) ten percent (10.00%) of the ABL Borrowing Base (the
“Post-Insolvency Increase Amount”), minus (y) any then outstanding Protective
Overadvances made prior to the institution or commencement of the applicable
Insolvency Proceeding; provided that the result of this clause (iv) shall not be
less than zero, plus (v) all Inadvertent Overadvance Amounts. Notwithstanding
the foregoing, in the event that the Term Agent imposes any reserves in respect
of any ABL Priority Collateral components of the Term Loan Borrowing Base that
result in (I) the ABL Borrowing Base being reduced through a corresponding Term
Loan Push Down Reserve (or in increase therein) and (II) the Post-Insolvency
Increase

 

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Amount being less than $15,000,000 as a result of such reserves in respect of
any ABL Priority Collateral components of the Term Loan Borrowing Base, then the
Post-Insolvency Increase Amount shall be equal to the lesser of (x) $15,000,000
or (y) ten percent (10.00%) of the ABL Borrowing Base (without giving effect to
the amount of any such reserves imposed by the Term Agent in respect of ABL
Priority Collateral components of the Term Loan Borrowing Base which have
resulted in the ABL Borrowing Base being reduced through a corresponding Term
Loan Push Down Reserve (or increase therein)).

The Parties and the Credit Parties understand and agree that in all cases the
determination of the ABL Borrowing Base shall be based upon the most recent
Borrowing Base Certificate received by ABL Agent pursuant to the ABL Credit
Agreement or from the Term Agent prior to funding of loans or advances by an ABL
Lender or the issuance, renewal or amendment of a letter of credit by an ABL
Lender (it being understood and agreed that (x) the use of cash collateral in an
Insolvency Proceeding shall not constitute a funding of a loan or other advance
and (y) the ABL Agent shall have a one (1) Business Day period of time to
implement such Borrowing Base Certificate). For the purposes of determining the
Maximum ABL Facility Amount at any time there is an Inadvertent Overadvance
Amount outstanding, amounts applied to repay the loans under the ABL Credit
Agreement shall be deemed to be applied to Inadvertent Overadvance Amounts prior
to being applied to loans which do not constitute Inadvertent Overadvance
Amounts.

“Maximum Term Loan Facility Amount” shall mean the result of (i) the principal
amount of $82,500,000, minus (ii) the amount of any permanent repayment of the
Term Obligations made after the date hereof, plus (iii) an amount constituting
Term Protective Overadvances not to exceed $5,000,000.

“NOLV Factor” shall have the meaning set forth in the ABL Credit Agreement.

“Overadvance” shall have the meaning assigned to that term in the ABL Credit
Agreement.

“Party” shall mean the ABL Agent or the Term Agent, and “Parties” shall mean
both the ABL Agent and the Term Agent.

“Patent License” shall mean any written agreement, now or hereafter in effect,
granting to any third party any right to make, use or sell any invention on
which a Patent, now or hereafter owned by any Credit Party or that any Credit
Party otherwise has the right to license, is in existence, or granting to any
Credit Party any right to make, use or sell any invention on which a Patent, now
or hereafter owned by any third party, is in existence, and all rights of any
Credit Party under any such agreement.

“Patents” shall mean all of the following now owned or hereafter acquired by any
Credit Party: (a) all letters patent of the United States or the equivalent
thereof in any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or the equivalent thereof
in any other country, including registrations, recordings and pending

 

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applications in the United States Patent and Trademark Office or any similar
offices in any other country and (b)(i) rights and privileges arising under
applicable law with respect to such Credit Party’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, (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, (vi) rights
corresponding thereto throughout the world and (vii) rights to sue for past,
present or future infringements thereof.

“Person” shall mean an individual, corporation, limited liability company,
partnership, limited liability partnership, trust, other unincorporated
association, business, or other legal entity, and any Governmental Authority.

“PLCC Account Holder Lists and Information” shall mean all account holder lists,
records and information, account information and records, transaction
information and records and matters in connection with, or relating to, the
Private Label Credit Cards (as such term is defined in the ABL Credit Agreement)
and the PL Credit Card Receivables, which shall include, without limitation, all
PLCC Books and Records as defined in the Private Label Credit Card Access and
Monitoring Agreement (including all credit applications, account documentation
and charge slips).

“PL Credit Card Receivables” shall have the meaning assigned to that term in the
ABL Credit Agreement.

“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 the Revolving Credit Agent’s of the Term
Loan Agent’s security interests in any Collateral are 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 for the
purposes of the provisions hereof relating to such attachment, perfection or
priority and for the definitions related to such provisions, including, in
respect of the Province of Québec, the Québec Civil Code.

“Priority Collateral” shall mean the ABL Priority Collateral or the Term
Priority Collateral, as applicable.

“Private Label Credit Card Access and Monitoring Agreement” shall have the
meaning assigned to that term in the ABL Credit Agreement.

“Property” shall mean any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

“Protective Overadvances” shall mean an Overadvance which the ABL Agent in its
reasonable business judgment in the performance of its duties under the ABL
Credit Agreement, determines to be necessary or desirable to, directly or
indirectly, (i) maintain, protect or preserve the value of the Collateral and/or
the ABL Agent’s rights therein as determined in the discretion of the ABL Agent,
including to preserve the Credit Parties’ business assets and infrastructure

 

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(such as the payment of insurance premiums, taxes, necessary suppliers, rent and
payroll), (ii) commence the Exercise of Any Secured Creditor Remedies,
(iii) fund an orderly liquidation or wind-down of the Credit Parties’ assets or
business (whether or not occurring prior to or after the commencement of an
Insolvency Proceeding), or (iv) enhance the likelihood, or maximize, the
repayment of the ABL Obligations; provided, however, that, prior to the
occurrence of an Insolvency Proceeding by or against any Credit Party, there
shall not be more than (i) 90 days during which any Protective Overadvance is
outstanding during any 180 consecutive day period and (ii) four (4) Protective
Overadvances made in any 90 consecutive day period.

“Purchasing Creditors” shall have the meaning set forth in Section 5.4(a).

“Purchase Date” shall have the meaning set forth in Section 5.4(a).

“Purchase Notice” shall have the meaning set forth in Section 5.4(a).

“Purchase Option Event” shall have the meaning set forth in Section 5.4(a).

“Remedy Standstill Period” shall mean (a) with respect to a Term Loan Event of
Default, the period commencing on the date of the ABL Agent’s receipt of written
notice from the Term Agent that a Term Loan Event of Default has occurred and is
continuing and that the Term Agent intends to commence the Exercise of Secured
Creditor Remedies, and ending on the earlier to occur of (i) the date which is
sixty (60) days (or, (A) with respect to a Specified Event of Default, thirty
(30) days or (B) with respect to an Insolvency Event of Default, three
(3) Business Days) after receipt of such notice and (ii) the date on which the
Discharge of ABL Obligations has occurred, and (b) with respect to an ABL Event
of Default, the period commencing on the date of the Term Agent’s receipt of
written notice from the ABL Agent that an ABL Event of Default has occurred and
is continuing and that the ABL Agent intends to commence the Exercise of Secured
Creditor Remedies, and ending on the earlier to occur of (i) the date which is
sixty (60) days (or, (A) with respect to a Specified Event of Default, thirty
(30) days or (B) with respect to an Insolvency Event of Default, three
(3) Business Days) after receipt of such notice and (ii) the date on which the
Discharge of Term Obligations has occurred. Such written notice from the Term
Agent to the ABL Agent, or from the ABL Agent to the Term Agent, as the case may
be, shall reference this Agreement, declare a “Remedy Standstill Period” to
commence and certify that the “Obligations” under and as defined in the Term
Loan Agreement or the ABL Credit Agreement, as the case may be, are then due and
payable in full (whether as a result of acceleration hereof or otherwise) in
accordance with the terms of the Term Loan Agreement or the ABL Credit
Agreement, as the case may be, and the Term Agent or the ABL Agent, as the case
may be, intends to commence the Exercise of Secured Creditor Remedies.

“Reserves” shall mean Reserves as defined in the ABL Credit Agreement.

“Secured Parties” shall mean the ABL Secured Parties and the Term Secured
Parties.

“Secured Rate Contract” shall have the meaning assigned to that term in the ABL
Credit Agreement.

 

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“Specified Event of Default” shall mean (a) any ABL Event of Default under
Sections 7.1(a) (payment default) or 7.1(c) (with respect to Section 4.2(d) or
4.11 only) (failure to deliver Borrowing Base Certificates or comply with cash
management requirements) of the ABL Credit Agreement, and (b) any Term Event of
Default under Sections 7.1(a) (payment default) or 7.1(c) (with respect to
Sections 4.2(d), 4.11 or 5.26 only) (failure to deliver Borrowing Base
Certificates, comply with cash management requirements or maintain minimum
excess availability) of the Term Loan Agreement or occurring as a result of an
Overadvance, including any Protective Overadvance.

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

“Swap Obligations” shall mean the aggregate amount of the swap termination value
and any and all other obligations under, or with respect to, Secured Rate
Contracts.

“Synthetic Lease” means any lease of goods or other property, whether real or
personal, which is treated as an operating lease under generally accepted
accounting principles and as a loan or financing for U.S. income tax purposes.

“Term Agent” shall have the meaning assigned to that term in the introduction to
this Agreement and shall include any successor thereto as well as any Person
designated as the “Agent”, “Administrative Agent” or “Collateral Agent” (or
similar role) under any Term Loan Agreement.

“Term Borrower” and “Term Borrowers” shall have the meaning assigned to such
terms in the recitals to this Agreement.

“Term Collateral Documents” shall mean all “Security Documents” as defined in
the Term Loan Agreement, and all other security agreements, mortgages, deeds of
trust and other security documents executed and delivered in connection with any
Term Loan Agreement, in each case as the same may be amended, supplemented,
restated or otherwise modified from time to time.

“Term Credit Parties” shall mean collectively, the Term Borrowers, the Term
Guarantors and each other direct or indirect subsidiary or parent of the Term
Borrowers or any of their affiliates that is now or hereafter becomes a party to
any Term Document.

“Term Documents” shall mean the Term Loan Agreement, the Term Collateral
Documents, those other ancillary agreements as to which any Term Secured Party
is a party or a beneficiary and all other related agreements, instruments,
documents and certificates, now or

 

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hereafter executed by or on behalf of any Term Credit Party or any of its
respective Subsidiaries or Affiliates, and delivered to the Term Agent, in
connection with any of the foregoing or any Term Loan Agreement, in each case as
the same may be amended, supplemented, restated or otherwise modified from time
to time in accordance with the terms hereof.

“Term Guarantors” shall mean the collective reference to (i) the Term Borrowers,
(ii) each of the Guarantors as defined in the Term Loan Agreement and (iii) any
other Person who becomes a guarantor of the Term Obligations.

“Term Lenders” shall mean, collectively, the Lenders (as such term is defined in
the Term Loan Agreement), as well as any other Person designated as a “Lender”
under any Term Loan Agreement.

“Term Loan Agreement” shall have the meaning assigned to that term in the
recitals to this Agreement and shall include any other agreement extending the
maturity of, consolidating, restructuring, refunding, replacing or refinancing
all or any portion of the Term Obligations in accordance with the terms hereof,
whether by the same or any other agent, lender or group of lenders and whether
or not increasing the amount of any Indebtedness that may be incurred
thereunder.

“Term Loan Borrowing Base” shall mean the Term Loan Borrowing Base as defined in
the Term Credit Agreement as in effect on the date hereof.

“Term Loan Event of Default” shall mean an Event of Default as defined in the
Term Loan Agreement.

“Term Loan Priority Accounts” means any Deposit Accounts or Securities Accounts
that are intended to solely contain Proceeds of the Term Priority Collateral (it
being understood that any property in such Deposit Accounts or Securities
Accounts which is not Proceeds of Term Priority Collateral shall not be Term
Priority Collateral solely by virtue of being on deposit in any such Deposit
Account or Securities Account).

“Term Loan Push Down Reserve” shall mean the Term Loan Push Down Reserve as
defined in the ABL Credit Agreement.

“Term Loan Push Down Reserve Correction Notice” shall have the meaning set forth
in Section 3.9.

“Term Loan Reserve Amount” shall have the meaning set forth in the ABL Credit
Agreement.

“Term Loan Trigger Event Period” shall have the meaning set forth in the ABL
Credit Agreement.

“Term Obligations” shall mean all obligations of every nature of each Term
Credit Party from time to time owed to the Term Secured Parties or any of them,
under any Term Document, whether for principal, interest (including interest
which, but for the filing of a petition in bankruptcy with respect to such Term
Credit Party, would have accrued on any Term

 

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Obligation), fees, expenses, indemnification or otherwise, and all other amounts
owing or due under the terms of the Term Documents, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time. Term Obligations shall not include interest, costs, advances,
fees, expenses or indemnities (including legal fees and disbursements) incurred
in respect of the Term Loan Agreement and the other Term Documents to the extent
the Term Agent’s or any Term Secured Party’s claim therefor is not allowed in
any Insolvency Proceeding.

“Term Priority Collateral” shall mean all Collateral consisting of the following
(including for the avoidance of doubt, any such assets that, but for the
application of Section 552 of the Bankruptcy Code (or any similar provision of
any foreign Debtor Relief Laws) would be Term Priority Collateral):

(1) all (i) Equipment, (ii) Fixtures, (iii) the Real Property owned by any Term
Credit Party located at the address known and numbered as 10 Churchill Road and
175 Beal Street, Hingham, Massachusetts (also known as One Talbots Drive) and
(iv) the Real Property owned by any Term Credit Party located at the address
known and numbered as 175, 180 and 190 Kenneth W. Welch Drive, Lakeville,
Massachusetts;

(2) all Intellectual Property;

(3) the Term Priority Collateral Accounts and deposits therein constituting
Proceeds of Term Priority Collateral held therein; provided, however, that to
the extent that identifiable Proceeds of ABL Priority Collateral are deposited
in any such Term Priority Collateral Accounts, such identifiable Proceeds shall
be treated as ABL Priority Collateral;

(4) all earnest money deposits received in connection with the sale or
disposition of any of the foregoing; and

(5) all liens, collateral security, guarantees, rights (including the right of
stoppage in transit), remedies, privileges, and insurance policies and
certificates with respect to any of the foregoing, all products, rents, profits,
Proceeds, substitutions, and accessions of or to any of the foregoing and all
cash, cash equivalents, checks, negotiable instruments, money, insurance
proceeds (including, without limitation, proceeds of fire and credit insurance,
refunds, and premium rebates), Instruments, Accounts, Chattel Paper, Securities,
Securities Entitlements, Financial Assets, Deposit Accounts, books, Records and
information in each case received as Proceeds of, or with respect to such books,
Records and information, to the extent relating to, any of the foregoing;
provided that the ABL Agent shall be entitled to a copy of all such books,
Records and information.

“Term Protective Overadvances” shall mean a Protective Advance (as defined in
the Term Loan Agreement as in effect on the date hereof) which the Term Agent in
its reasonable business judgment in the performance of its duties under the Term
Loan Agreement, (i) maintain, protect or preserve the value of the Collateral
and/or the Term Agent’s rights therein as determined in the discretion of the
Term Agent, including to preserve the Credit Parties’ business assets and
infrastructure (such as the payment of insurance premiums, taxes, necessary
suppliers, rent and payroll), (ii) commence the Exercise of Any Secured Creditor
Remedies, (iii) fund an

 

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orderly liquidation or wind-down of the Credit Parties’ assets or business
(whether or not occurring prior to or after the commencement of an Insolvency
Proceeding), or (iv) enhance the likelihood, or maximize, the repayment of the
Term Obligations.

“Term Recovery” shall have the meaning set forth in Section 5.3(b).

“Term Secured Parties” shall mean, collectively, the Term Agent, the Term
Lenders, and each other holder from time to time of the Term Obligations. For
the avoidance of doubt, the term ABL Secured Parties shall include all “Secured
Parties” as defined in the Term Loan Agreement.

“Trade Secret License” shall mean any and all agreements, whether written or
oral, providing for the grant by or to any Credit Party of any right in or to
Trade Secrets, to the extent that a grant of a security interest in such Trade
Secret License is not prohibited by applicable law or the applicable Trade
Secret License.

“Trade Secrets” shall mean with respect to any Credit Party, all of such Credit
Party’s right, title and interest in and to all United States and foreign trade
secrets, including know how, processes, formulae, compositions, designs, and
confidential business and technical information, and all rights of any kind
whatsoever accruing thereunder or pertaining thereto, including (a) all income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including payments under all licenses, non disclosure
agreements and memoranda of understanding entered into in connection therewith,
and damages and payments for past or future misappropriations thereof, and
(b) the right to sue or otherwise recover for past, present or future
misappropriations thereof.

“Trademark License” shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Credit Party or that any Credit Party otherwise has the
right to license, or granting to any Credit Party any right to use any Trademark
now or hereafter owned by any third party, and all rights of any Credit Party
under any such agreement.

“Trademarks” shall mean all of the following now owned or hereafter acquired by
any Credit Party: (a) all trademarks, service marks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
trade dress, logos, other source or business identifiers and designs, now
existing or hereafter adopted, acquired or assigned to, all registrations and
recordings thereof, and all registration and recording applications filed in
connection therewith, including registrations and registration applications in
the United States Patent and Trademark Office or any similar offices in any
State of the United States or any other country or any political subdivision
thereof, and all extensions or renewals thereof and (b) any and all (i) rights
and privileges arising under applicable law with respect to such Credit Party’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) all goodwill associated therewith and all assets,
rights and interests that uniquely reflect or embody such goodwill, (iv) all
goodwill associated therewith and all assets, rights and interests that uniquely
reflect or embody such goodwill, (v) rights corresponding thereto throughout the
world and (vi) rights to sue for past, present and future infringements thereof.

 

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“Uniform Commercial Code” shall mean the Uniform Commercial Code as the same
may, from time to time, be in effect in the State of New York; provided that to
the extent that the Uniform Commercial Code is used to define any term in any
security document and such term is defined differently in differing Articles of
the Uniform Commercial Code, the definition of such term contained in Article 9
shall govern; provided, further, that, to the extent that personal property
security laws as enacted and in effect in any foreign jurisdiction contains and
is used to define terms which are defined in the Uniform Commercial Code and
mentioned in Section 1.1 hereof, and such term is defined differently in such
foreign personal property security laws, the definition of such term contained
in the Uniform Commercial Code shall govern to the extent of any conflict or
inconsistency; and provided further that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection,
publication or priority of, or remedies with respect to, Liens of any Party is
governed by the Uniform Commercial Code or foreign personal property security
laws as enacted and in effect in a jurisdiction other than the State of New
York, the term “Uniform Commercial Code” will mean the Uniform Commercial Code
or such foreign personal property security laws as enacted and in effect in such
other jurisdiction solely for purposes of the provisions thereof relating to
such attachment, perfection, priority or remedies and for purposes of
definitions related to such provisions.

“Use Period” means the period (a) commencing on the date that the ABL Agent (or
an ABL Credit Party acting with the consent of the ABL Agent) commences the
liquidation and sale of the ABL Priority Collateral in a manner as provided in
Section 3.6 (having theretofore furnished the Term Agent with an Enforcement
Notice) and ending one hundred and fifty (150) days thereafter or (b) commencing
on the date that the ABL Agent receives a written notice from the Term Agent
expressly notifying the ABL Agent of the commencement of the Use Period (having
theretofore furnished the ABL Agent with an Enforcement Notice) and ending one
hundred and eighty (180) days thereafter; provided that the Use Period shall
terminate upon the completion of the sale, disposition, or other transfer by or
with the consent of the ABL Agent (including any sale, disposition, or other
transfer by any ABL Credit Party, any agent, receiver, interim receiver or
receiver-manager of any ABL Credit Party or any agent of the ABL Agent
(including any receiver, receiver manager or interim receiver)) of all ABL
Priority Collateral and the completion of the collection of all ABL Priority
Collateral; and provided, further, that as to (i) each real estate location
constituting Term Priority Collateral where ABL Priority Collateral is located,
the completion of the sale, disposition, or other transfer of all ABL Priority
Collateral at such location shall terminate the Use Period of the ABL Secured
Parties solely with respect to such real estate location; and (ii) each store
location upon the completion of the sale, disposition, or other transfer of all
ABL Priority Collateral at such store location shall terminate the Use Period of
the ABL Secured Parties solely with respect to such store location.
Notwithstanding the foregoing, if any stay or other order that prohibits any of
the ABL Agent, the other ABL Secured Parties or any ABL Credit Party (with the
consent of the ABL Agent) from commencing and continuing the Exercise of Any
Secured Creditor Remedies or to liquidate and sell or otherwise transfer the ABL
Priority Collateral has been entered by a court of competent jurisdiction, such
150-day or 180-day period, as the case may be, shall be tolled during the
pendency of any such stay or other order and the Use Period shall be so
extended.

 

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Section 1.3. Rules of Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term “including” is not limiting and shall
be deemed to be followed by the phrase “without limitation,” and the term “or”
has, except where otherwise indicated, the inclusive meaning represented by the
phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Article, section, subsection,
clause, schedule and exhibit references herein are to this Agreement unless
otherwise specified. Any reference in this Agreement to any agreement,
instrument, or document shall include all alterations, amendments, changes,
restatements, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, restatements, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth in this Agreement); provided that any terms used herein which are
defined by reference to the ABL Credit Agreement or the Term Loan Agreement and
are subject to the modification restrictions set forth in Section 5.2 of this
Agreement shall mean such terms as defined in the ABL Credit Agreement as of the
date hereof or the Term Loan Agreement as of the date hereof, as the case may
be, without giving effect to any modifications or amendments thereto except to
the extent that such definitions have been modified or amended in accordance
with this Agreement; and provided further that any such modifications or
amendments shall be deemed to be automatically incorporated herein by reference.
Any reference herein to any Person shall be construed to include such Person’s
successors and assigns. Any reference herein to the repayment in full of an
obligation shall mean the payment in full in cash of such obligation, or in such
other manner as may be approved in writing by the requisite holders or
representatives in respect of such obligation.

Section 1.4. Québec Matters. For purposes of any assets, liabilities, Collateral
or entities located in the Province of Québec and for all other purposes
pursuant to which the interpretation or construction of this Agreement may be
subject to the laws of the Province of Québec or a court or tribunal exercising
jurisdiction in the Province of Québec, (a) “personal property” shall include
“movable property”, (b) “real property” or “real estate” shall include
“immovable property”, (c) “tangible property” shall include “corporeal
property”, (d) “intangible property” shall include “incorporeal property”,
(e) “security interest”, “mortgage” and “security” shall include a “hypothec”,
“right of retention”, “prior claim” and a resolutory clause, (f) all references
to filing, perfection, priority, remedies, registering or recording under the
UCC or a PPSA shall include publication under the Civil Code of Québec, (g) all
references to “perfection” of or “perfected” security or security interest shall
include a reference to an “opposable” or “set up” hypothec, security or security
interest as against third parties, (h) any “right of offset”, “right of setoff”
or similar expression shall include a “right of compensation”, (i) “goods” shall
include “corporeal movable property” other than chattel paper, documents of
title, instruments, money and securities, (j) an “agent” shall include a
“mandatary”, (k) “construction security” shall include “legal hypothecs”,
(l) “joint and several” shall include “solidary”, (m) “gross negligence or
willful misconduct” shall be deemed to be “intentional or gross fault”,
(n) “beneficial ownership” shall include “ownership on behalf of another as
mandatary”; (o) “easement” shall include “servitude”, (p) “priority” shall
include “prior claim”, (q) “survey” shall include “certificate of location and
plan”, (r) “state” shall include “province”, (s) “fee simple title” shall
include “absolute ownership”, and (t) “accounts” shall include “claims”.

 

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Section 1.5. English Language. The parties hereto confirm that it is their wish
that this Agreement and any other document executed in connection with the
transactions contemplated herein be drawn up in the English language only and
that all other documents contemplated hereunder or relating hereto, including
notices, may also be drawn up in the English language only. Les parties aux
présentes confirment que c’est leur volonté que cette convention et les autres
documents de crédit y affereuts soient rédigés en anglais seulement et que tous
les documents, y compris tous avis, envisagés par cette convention soient
rédigés en anglais seulement.

ARTICLE 2.

LIEN PRIORITY

Section 2.1. Priority of Liens.

(a) Notwithstanding (i) the date, time, method, manner, or order of grant,
attachment, or perfection of any Liens granted to the ABL Agent or the ABL
Secured Parties in respect of all or any portion of the Collateral or of any
Liens granted to the Term Agent or the Term Secured Parties in respect of all or
any portion of the Collateral and regardless of how any such Lien was acquired
(whether by grant, statute, operation of law, subrogation or otherwise),
(ii) the order or time of filing or recordation of any document or instrument
for perfecting the Liens in favor of the ABL Agent or the Term Agent (or ABL
Secured Parties or Term Secured Parties) in any Collateral, (iii) any provision
of the Uniform Commercial Code, the PPSA, Debtor Relief Laws or any other
applicable law, or of the ABL Documents or the Term Documents, (iv) whether the
ABL Agent or the Term Agent, in each case, either directly or through agents,
holds possession of, or has control over, all or any part of the Collateral, or
(v) the date on which the ABL Obligations or the Term Obligations are advanced
or made available to the Credit Parties, the ABL Agent, on behalf of itself and
the ABL Secured Parties, and the Term Agent, on behalf of itself and the Term
Secured Parties, hereby agree that:

(1) any Lien in respect of all or any portion of the ABL Priority Collateral now
or hereafter held by or on behalf of the Term Agent or any Term Secured Party
that secures all or any portion of the Term Obligations shall in all respects be
junior and subordinate to all Liens granted to the ABL Agent and the ABL Secured
Parties in the ABL Priority Collateral to secure all or any portion of the ABL
Obligations (other than the Excess ABL Obligations);

(2) any Lien in respect of all or any portion of the ABL Priority Collateral now
or hereafter held by or on behalf of the ABL Agent or any ABL Secured Party that
secures all or any portion of the ABL Obligations (other than the Excess ABL
Obligations) shall in all respects be senior and prior to all Liens granted to
the Term Agent or any Term Secured Party in the ABL Priority Collateral to
secure all or any portion of the Term Obligations;

(3) any Lien in respect of all or any portion of the ABL Priority Collateral now
or hereafter held by or on behalf of the ABL Agent or any ABL Secured Party that
secures all or any portion of the Excess ABL Obligations shall in all respects
be junior and subordinate to all Liens granted to the Term Agent or any Term
Secured Party in the ABL Priority Collateral to secure all or any portion of the
Term Obligations (other than the Excess Term Obligations);

 

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(4) any Lien in respect of all or any portion of the ABL Priority Collateral now
or hereafter held by or on behalf of the Term Agent or any Term Secured Party
that secures all or any portion of the Term Obligations (other than Excess Term
Obligations) shall in all respects be senior and prior to all Liens granted to
the ABL Agent and the ABL Secured Parties in the ABL Priority Collateral to
secure all or any portion of the Excess ABL Obligations;

(5) any Lien in respect of all or any portion of the ABL Priority Collateral now
or hereafter held by or on behalf of the Term Agent or any Term Secured Party
that secures all or any portion of the Excess Term Obligations shall in all
respects be junior and subordinate to all Liens granted to the ABL Agent and the
ABL Secured Parties in the ABL Priority Collateral to secure all or any portion
of the Excess ABL Obligations;

(6) any Lien in respect of all or any portion of the ABL Priority Collateral now
or hereafter held by or on behalf of the ABL Agent or any ABL Secured Party that
secures all or any portion of the Excess ABL Obligations shall in all respects
be senior and prior to all Liens granted to the Term Agent or any Term Secured
Party in the ABL Priority Collateral to secure all or any portion of the Excess
Term Obligations;

(7) any Lien in respect of all or any portion of the Term Priority Collateral
now or hereafter held by or on behalf of the ABL Agent or any ABL Secured Party
that secures all or any portion of the ABL Obligations shall in all respects be
junior and subordinate to all Liens granted to the Term Agent and the Term
Secured Parties in the Term Priority Collateral to secure all or any portion of
the Term Obligations (other than the Excess Term Obligations);

(8) any Lien in respect of all or any portion of the Term Priority Collateral
now or hereafter held by or on behalf of the Term Agent or any Term Secured
Party that secures all or any portion of the Term Obligations (other than the
Excess Term Obligations) shall in all respects be senior and prior to all Liens
granted to the ABL Agent or any ABL Secured Party in the Term Priority
Collateral to secure all or any portion of the ABL Obligations;

(9) any Lien in respect of all or any portion of the Term Priority Collateral
now or hereafter held by or on behalf of the Term Agent or any Term Secured
Party that secures all or any portion of the Excess Term Obligations shall in
all respects be junior and subordinate to all Liens granted to the ABL Agent or
any ABL Secured Party in the Term Priority Collateral to secure all or any
portion of the ABL Obligations (other than Excess ABL Obligations);

(10) any Lien in respect of all or any portion of the Term Priority Collateral
now or hereafter held by or on behalf of the ABL Agent or any ABL Secured Party
that secures all or any portion of the ABL Obligations (other than Excess ABL

 

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Obligations) shall in all respects be senior and prior to all Liens granted to
the Term Agent and the Term Secured Parties in the Term Priority Collateral to
secure all or any portion of the Excess Term Obligations;

(11) any Lien in respect of all or any portion of the Term Priority Collateral
now or hereafter held by or on behalf of the ABL Agent or any ABL Secured Party
that secures all or any portion of the Excess ABL Obligations shall in all
respects be junior and subordinate to all Liens granted to the Term Agent and
the Term Secured Parties in the Term Priority Collateral to secure all or any
portion of the Excess Term Obligations; and

(12) any Lien in respect of all or any portion of the Term Priority Collateral
now or hereafter held by or on behalf of the Term Agent or any Term Secured
Party that secures all or any portion of the Excess Term Obligations shall in
all respects be senior and prior to all Liens granted to the ABL Agent or any
ABL Secured Party in the Term Priority Collateral to secure all or any portion
of the Excess ABL Obligations.

(b) The Term Agent, for and on behalf of itself and the Term Secured Parties,
acknowledges and agrees that, prior to or concurrently herewith, the ABL Agent,
for the benefit of itself and the ABL Secured Parties, has been, or may be,
granted Liens upon all of the Collateral in which the Term Agent has been
granted Liens and the Term Agent hereby consents thereto. The ABL Agent, for and
on behalf of itself and the ABL Secured Parties, acknowledges and agrees that,
concurrently herewith, the Term Agent, for the benefit of itself and the Term
Secured Parties, has been, or may be, granted Liens upon all of the Collateral
in which the ABL Agent has been granted Liens and the ABL Agent hereby consents
thereto. The subordination of Liens by the Term Agent and the ABL Agent in favor
of one another as set forth herein shall not be deemed to subordinate the Term
Agent’s Liens or the ABL Agent’s Liens to the Liens of any other Person.

(c) The Lien subordination provisions contained herein relate solely to the
priority of Liens granted to the ABL Agent and the Term Agent by the Credit
Parties and shall apply only to the extent that the Liens of the ABL Agent and
the Term Agent are valid, perfected, and enforceable. It is the ABL Agent’s
responsibility to ensure the validity, perfection and enforceability of the
Liens granted by the Credit Parties to the ABL Agent for the benefit of itself
and the other ABL Secured Parties. It is the Term Agent’s responsibility to
ensure the validity, perfection and enforceability of the Liens granted by the
Credit Parties to the Term Agent for the benefit of itself and the other Term
Secured Parties.

Section 2.2. Waiver of Right to Contest Liens.

(a) The Term Agent, for and on behalf of itself and the Term Secured Parties,
agrees that it and they shall not (and hereby waives any right to) take any
action to contest or challenge (or assist or support any other Person in
contesting or challenging), directly or indirectly, whether or not in any
proceeding (including in any Insolvency Proceeding), the validity, priority,
enforceability, or perfection of the Liens of the ABL Agent and the ABL Secured
Parties in respect of the Collateral or the provisions of this Agreement. The
Term Agent, for itself and on behalf of the Term Secured Parties, agrees that
none of the Term Agent

 

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or the Term Secured Parties will take any action that would interfere with any
Exercise of Secured Creditor Remedies undertaken by the ABL Agent or any ABL
Secured Party under the ABL Documents with respect to the ABL Priority
Collateral. The Term Agent, for itself and on behalf of the Term Secured
Parties, hereby waives any and all rights it or the Term Secured Parties may
have as a junior lien creditor or otherwise to contest, protest, object to, or
interfere with the manner in which the ABL Agent or any ABL Lender seeks to
enforce its Liens in any ABL Priority Collateral. The foregoing shall not be
construed to prohibit the Term Agent from enforcing the provisions of this
Agreement.

(b) The ABL Agent, for and on behalf of itself and the ABL Secured Parties,
agrees that it and they shall not (and hereby waives any right to) take any
action to contest or challenge (or assist or support any other Person in
contesting or challenging), directly or indirectly, whether or not in any
proceeding (including in any Insolvency Proceeding), the validity, priority,
enforceability, or perfection of the Liens of the Term Agent or the Term Secured
Parties in respect of the Collateral or the provisions of this Agreement. Except
to the extent expressly set forth in this Agreement, the ABL Agent, for itself
and on behalf of the ABL Secured Parties, agrees that none of the ABL Agent or
the ABL Secured Parties will take any action that would interfere with any
Exercise of Secured Creditor Remedies undertaken by the Term Agent or any Term
Secured Party under the Term Documents with respect to the Term Priority
Collateral. The ABL Agent, for itself and on behalf of the ABL Secured Parties,
hereby waives any and all rights it or the ABL Secured Parties may have as a
junior lien creditor or otherwise to contest, protest, object to, or interfere
with the manner in which the Term Agent or any Term Secured Party seeks to
enforce its Liens in any Term Priority Collateral. The foregoing shall not be
construed to prohibit the ABL Agent from enforcing the provisions of this
Agreement.

(c) Notwithstanding anything to the contrary herein contained, none of the
Parties hereto waives any claim that it may have against a Secured Party on the
grounds that any sale, transfer, or other disposition, or collection, of the
Collateral by the Secured Party was not commercially reasonable to the extent
required by the Uniform Commercial Code, the PPSA, any Debtor Relief Law or any
other applicable law.

Section 2.3. Remedies Standstill.

(a) Following the occurrence of any Term Loan Event of Default and until the
expiration of the Remedy Standstill Period, the Term Agent may not commence or
continue the Exercise of Any Secured Creditor Remedies in respect of the ABL
Priority Collateral; provided, however, nothing contained herein shall impair
the Term Agent’s and the Term Secured Parties’ rights to take, in the event that
the ABL Agent has declined to take such protective actions within a reasonable
time period after the written request by the Term Agent to the ABL Agent to do
so, any actions (including the commencement of legal proceedings, but excluding
the commencement of an involuntary bankruptcy proceeding against any Credit
Party) that the Term Agent or such Term Secured Party deems necessary to protect
and preserve, but not to realize or foreclose on, the ABL Priority Collateral.
After the expiration of the Remedy Standstill Period, and upon five (5) Business
Days prior written notice to the ABL Agent (which notice may be delivered to the
ABL Agent during the Remedy Standstill Period but in no event more than ten
(10) days prior to the expiration thereof), the Term Agent may take, for the
benefit of the Term

 

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Secured Parties, one or more of the following actions in respect of the Term
Loan Event of Default that was the subject of the notice giving rise to such
Remedy Standstill Period at the same or different times:

(1) the Exercise of Any Secured Creditor Remedies with respect to the ABL
Priority Collateral (including, without limitation, foreclosure upon and taking
possession of the ABL Priority Collateral); provided, however, that until the
Discharge of ABL Obligations has occurred, the Term Agent will not commence or
continue the Exercise of Any Secured Creditor Remedies or seek or continue
remedies under the Term Documents on account of the ABL Priority Collateral so
long as the ABL Agent is diligently pursuing in good faith the exercise of its
enforcement rights and remedies against all or a material portion of the ABL
Priority Collateral; and

(2) exercise any and all other remedies under the Term Documents and applicable
law available to the Term Secured Parties with respect to the ABL Priority
Collateral, including the notification of account debtors or other Persons
obligated on ABL Priority Collateral of the assignment of any Credit Party’s
accounts receivable to the ABL Agent and the Term Agent, all subject to the
first proviso in Section 2.3(a)(1) above.

(b) Following the occurrence of any ABL Event of Default and until the
expiration of the Remedy Standstill Period, the ABL Agent may not commence or
continue the Exercise of Any Secured Creditor Remedies in respect of the Term
Priority Collateral; provided, however, nothing contained herein shall impair
the ABL Agent’s and the ABL Secured Parties’ rights to take, in the event that
the Term Agent has declined to take such protective actions within a reasonable
time period after the written request by the ABL Agent to the Term Agent to do
so, any actions (including the commencement of legal proceedings, but excluding
the commencement of an involuntary bankruptcy proceeding against any Credit
Party) that the ABL Agent or such ABL Secured Party deems necessary to protect
and preserve, but not to realize or foreclose on, the Term Priority Collateral.
After the expiration of the Remedy Standstill Period, and upon five (5) Business
Days prior written notice to the Term Agent (which notice may be delivered to
the Term Agent during the Remedy Standstill Period but in no event more than ten
(10) days prior to the expiration thereof), the ABL Agent may take, for the
benefit of the ABL Secured Parties, one or more of the following actions in
respect of the ABL Event of Default that was the subject of the notice giving
rise to such Remedy Standstill Period at the same or different times:

(1) the Exercise of Any Secured Creditor Remedies with respect to the Term
Priority Collateral (including, without limitation, foreclosure upon and taking
possession of the Term Priority Collateral); provided, however, that until the
Discharge of Term Obligations has occurred, the ABL Agent will not commence or
continue the Exercise of Any Secured Creditor Remedies or seek or continue
remedies under the ABL Documents on account of the Term Priority Collateral so
long as the Term Agent is diligently pursuing in good faith the exercise of its
enforcement rights and remedies against all or a material portion of the Term
Priority Collateral; and

 

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(2) the exercise of any and all other remedies under the ABL Documents and
applicable law available to the ABL Secured Parties with respect to the Term
Priority Collateral, including the notification of account debtors or other
Persons obligated on Term Priority Collateral of the assignment of any Credit
Party’s accounts receivable to the Term Agent and the ABL Agent, all subject to
the proviso in Section 2.3 (b)(1) above.

(c) All Proceeds of ABL Priority Collateral received by the Term Agent shall be
turned over to the ABL Agent for prompt application in accordance with
Section 4.1(b) hereof, or, to the extent that the Term Agent is entitled to
apply such Proceeds to the Term Obligations pursuant to the terms of
Section 4.1(b), applied promptly by the Term Agent in accordance with
Section 4.1(b). This Section 2.3 shall not be construed to in any way limit or
impair the rights of the Term Agent to join (but not control or object to in any
way) any foreclosure or other Exercise of Secured Creditor Remedies with respect
to the Collateral initiated by the ABL Agent, so long as it does not delay or
interfere in any material respect with the exercise by the ABL Secured Parties
of their respective rights as provided in this Agreement.

(d) All Proceeds of Term Priority Collateral received by the ABL Agent shall be
turned over to the Term Agent for prompt application in accordance with
Section 4.1(c) hereof, or, to the extent that the ABL Agent is entitled to apply
such Proceeds to the ABL Obligations pursuant to the terms of Section 4.1(c),
applied promptly by the ABL Agent in accordance with Section 4.1(c). This
Section 2.3 shall not be construed to in any way limit or impair the rights of
the ABL Agent to join (but not control or object to in any way) any foreclosure
or other Exercise of Secured Creditor Remedies with respect to the Collateral
initiated by the Term Agent, so long as it does not delay or interfere in any
material respect with the exercise by the Term Secured Parties of their
respective rights as provided in this Agreement.

(e) Nothing contained herein shall impair the Term Agent’s or any Term Secured
Party’s rights (i) to exercise any remedies against any of the Credit Parties or
the Collateral (other than any remedies against any ABL Priority Collateral)
pursuant to the Term Documents; (ii) to accelerate any of the Term Obligations;
(iii) to make demand upon any Credit Party or any other Person liable on the
Term Obligations; (iv) to institute a lawsuit to collect its debt, (v) to
exercise any of its rights or remedies with respect to the ABL Priority
Collateral as and when permitted by Section 2.3(a), (vi) to file a claim or
statement of interest with respect to the Term Obligations; (vii) to take any
action (not adverse to the priority and perfection status of, and validity and
value of, the Liens of the ABL Agent, or the rights of the ABL Agent to exercise
remedies in respect thereof) in order to create, perfect, preserve or protect
its Lien on the Collateral subject to the other terms of this Agreement;
(viii) to file any necessary responsive or defensive pleadings in opposition to
any motion, claim, adversary proceeding or other pleading made by any Person
objecting to or otherwise seeking the disallowance of the claims of the Term
Secured Parties, including, without limitation, any claims secured by the
Collateral, if any, in each case not otherwise in contravention of the terms of
this Agreement; (ix) to exercise any rights or remedies available to unsecured
creditors or file any pleadings, objections, motions or agreements which assert
rights or interests available to unsecured creditors of the Credit Parties
arising under the Term Documents, any Insolvency Proceeding or applicable
non-bankruptcy law, in each case, not otherwise prohibited by the terms of this
Agreement; and (x) to vote on any plan of reorganization, arrangement or
compromise or any proposal, file any proof of claim, make other filings and make
any arguments and motions in any Insolvency Proceeding that are, in each case,
not otherwise prohibited by the terms of this Agreement.

 

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(f) Nothing contained herein shall impair the ABL Agent’s or any ABL Secured
Party’s rights (i) to exercise any remedies against any of the Credit Parties or
the Collateral (other than any remedies against any Term Priority Collateral)
pursuant to the ABL Documents; (ii) to accelerate any of the ABL Obligations;
(iii) to make demand upon any Credit Party or any other Person liable on the ABL
Obligations; (iv) to institute a lawsuit to collect its debt, (v) to exercise
any of its rights or remedies with respect to the Term Priority Collateral as
and when permitted by Section 2.3(b), (vi) to file a claim or statement of
interest with respect to the ABL Obligations; (vii) to take any action (not
adverse to the priority and perfection status of, and validity and value of, the
Liens of the Term Agent, or the rights of the Term Agent to exercise remedies in
respect thereof) in order to create, perfect, preserve or protect its Lien on
the Collateral subject to the other terms of this Agreement; (viii) to file any
necessary responsive or defensive pleadings in opposition to any motion, claim,
adversary proceeding or other pleading made by any Person objecting to or
otherwise seeking the disallowance of the claims of the ABL Secured Parties,
including, without limitation, any claims secured by the Collateral, if any, in
each case not otherwise in contravention of the terms of this Agreement; (ix) to
exercise any rights or remedies available to unsecured creditors or file any
pleadings, objections, motions or agreements which assert rights or interests
available to unsecured creditors of the Credit Parties arising under the ABL
Documents, any Insolvency Proceeding or applicable non-bankruptcy law, in each
case, not otherwise prohibited by the terms of this Agreement; and (x) to vote
on any plan of reorganization, arrangement or compromise or any proposal, file
any proof of claim, make other filings and make any arguments and motions in any
Insolvency Proceeding that are, in each case, not otherwise prohibited by the
terms of this Agreement.

Section 2.4. Release of Liens.

(a) In the event of (A) any private or public sale of all or any portion of the
ABL Priority Collateral in connection with any Exercise of Secured Creditor
Remedies by the ABL Agent or by the Credit Parties with the consent of the ABL
Agent after the occurrence and during the continuance of an Event of Default, or
(B) any sale, transfer or other disposition of all or any portion of the ABL
Priority Collateral, so long as such sale, transfer or other disposition is then
permitted by the ABL Documents or consented to by the requisite ABL Lenders
(and, so long as no Event of Default has occurred and is continuing, or is
permitted by the Term Documents as in effect on the date hereof), upon the
written request of the ABL Agent delivered to the Term Agent not less than ten
(10) Business Days prior to the proposed sale, transfer or disposition of such
ABL Priority Collateral, the Term Agent agrees, on behalf of itself and the Term
Secured Parties, that such sale, transfer or other disposition will be free and
clear of the Liens on such ABL Priority Collateral securing the Term
Obligations, and the Term Agent’s and the Term Secured Parties’ Liens with
respect to the ABL Priority Collateral so sold, transferred, or disposed shall
terminate and be automatically released without further action concurrently
with, and to the same extent as, the release of the ABL Secured Parties’ Liens
on such ABL Priority Collateral; provided that, for the avoidance of doubt, the
Term Secured Parties’ Liens in respect of the Proceeds of such ABL Priority
Collateral so sold, transferred, or disposed shall continue to exist to the same
extent, and with the same relative priorities, as the ABL Secured Parties’ Liens
on such Proceeds; and provided, further, that to the extent Proceeds are
required to

 

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be applied to the obligations under the terms of the ABL Credit Agreement, such
Proceeds shall be applied in accordance with Section 4.1(b). In furtherance of,
and subject to, the foregoing, the Term Agent agrees that it will promptly
execute any and all Lien releases or other documents reasonably requested by the
ABL Agent in connection therewith. The Term Agent hereby appoints the ABL Agent
and any officer or duly authorized person of the ABL Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power of attorney to be exercised if the Term Agent does not take such action
within five (5) days after written notice, in the place and stead of the Term
Agent and in the name of the Term Agent or in the ABL Agent’s own name, from
time to time, in the ABL Agent’s sole discretion, for the purposes of carrying
out the terms of this paragraph, to take any and all appropriate action and to
execute and deliver any and all documents and instruments as may be necessary or
desirable to accomplish the purposes of this paragraph, including any financing
statements, endorsements, assignments, releases or other documents or
instruments of transfer (which appointment, being coupled with an interest, is
irrevocable).

(b) In the event of (A) any private or public sale of all or any portion of the
Term Priority Collateral in connection with any Exercise of Secured Creditor
Remedies by the Term Agent or by the Credit Parties with the consent of the Term
Agent after the occurrence and during the continuance of an Event of Default, or
(B) any sale, transfer or other disposition of all or any portion of the Term
Priority Collateral, so long as such sale, transfer or other disposition is then
permitted by the Term Documents or consented to by the requisite Term Lenders
(and, so long as no Event of Default has occurred and is continuing, or is
permitted by the ABL Documents as in effect on the date hereof), upon the
written request of the Term Agent delivered to the ABL Agent not less than ten
(10) Business Days prior to the proposed sale, transfer or disposition of such
Term Priority Collateral, the ABL Agent agrees, on behalf of itself and the ABL
Secured Parties, that such sale, transfer or disposition will be free and clear
of the Liens on such Term Priority Collateral securing the ABL Obligations and
the ABL Agent’s and the ABL Secured Parties’ Liens with respect to the Term
Priority Collateral so sold, transferred, or disposed shall terminate and be
automatically released without further action concurrently with, and to the same
extent as, the release of the Term Secured Parties’ Liens on such Term Priority
Collateral; provided that, for the avoidance of doubt, the ABL Agent’s and the
ABL Secured Parties’ Liens in respect of the Proceeds of such Term Priority
Collateral so sold, transferred, or disposed shall continue to exist to the same
extent, and with the same relative priorities, as the Term Secured Parties’
Liens on such Proceeds; and provided, further, that (i) to the extent Proceeds
are required to be applied to the obligations under the terms of the Term Loan
Agreement, such Proceeds shall be applied in accordance with Section 4.1(c) and
(ii) the Term Priority Collateral so sold, transferred or otherwise disposed of
shall be subject to the use and access rights granted to the ABL Agent and the
other ABL Secured Parties (and their agents and designees) pursuant to
Section 3.6 hereof. In furtherance of, and subject to, the foregoing, the ABL
Agent agrees that it will promptly execute any and all Lien releases or other
documents reasonably requested by the Term Agent in connection therewith. The
ABL Agent hereby appoints the Term Agent and any officer or duly authorized
person of the Term Agent, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power of attorney to be exercised
if the ABL Agent does not take such action within five (5) days after written
notice, in the place and stead of the ABL Agent and in the name of the ABL Agent
or in the Term Agent’s own name, from time to time, in the Term Agent’s sole
discretion, for the purposes of carrying out the terms of this paragraph, to
take any and all appropriate action and to

 

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execute and deliver any and all documents and instruments as may be necessary or
desirable to accomplish the purposes of this paragraph, including any financing
statements, endorsements, assignments, releases or other documents or
instruments of transfer (which appointment, being coupled with an interest, is
irrevocable).

Section 2.5. No New Liens. (a) It is the anticipation of the Parties that no
Term Secured Party shall acquire or hold any Lien on any assets of any Credit
Party securing any Term Obligation which assets are not also subject to the Lien
of the ABL Agent under the ABL Documents. If any Term Secured Party shall
acquire or hold any Lien on any assets of any Credit Party securing any Term
Obligation which assets are not also subject to the Lien of the ABL Agent under
the ABL Documents, then the Term Agent (or the relevant Term Secured Party)
shall, without the need for any further consent of any other Term Secured Party,
any Term Borrower or any Term Guarantor and notwithstanding anything to the
contrary in any other Term Document, be deemed to also hold and have held such
Lien as agent or bailee for the benefit of the ABL Agent as security for the ABL
Obligations (subject to the Lien Priority and other terms hereof) and shall
promptly notify the ABL Agent in writing of the existence of such Lien.

(b) It is the anticipation of the Parties that no ABL Secured Party shall
acquire or hold any Lien on any assets of any Credit Party securing any ABL
Obligation which assets are not also subject to the Lien of the Term Agent under
the Term Documents. If any ABL Secured Party shall acquire or hold any Lien on
any assets of any Credit Party securing any ABL Obligation which assets are not
also subject to the Lien of the Term Agent under the Term Documents, then the
ABL Agent (or the relevant ABL Secured Party) shall, without the need for any
further consent of any other ABL Secured Party, any ABL Borrower or any ABL
Guarantor and notwithstanding anything to the contrary in any other ABL Document
be deemed to also hold and have held such Lien as agent or bailee for the
benefit of the Term Agent as security for the Term Obligations (subject to the
Lien Priority and other terms hereof) and shall promptly notify the Term Agent
in writing of the existence of such Lien.

Section 2.6. Waiver of Marshalling.

(a) Until the Discharge of ABL Obligations, the Term Agent, on behalf of itself
and the Term Secured Parties, agrees not to assert and hereby waives, to the
fullest extent permitted by law, any right to demand, request, plead or
otherwise assert or otherwise claim the benefit of, any marshalling, appraisal,
valuation or other similar right that may otherwise be available under
applicable law with respect to the ABL Priority Collateral or any other similar
rights a junior secured creditor may have under applicable law.

(b) Until the Discharge of Term Obligations, the ABL Agent, on behalf of itself
and the ABL Secured Parties, agrees not to assert and hereby waives, to the
fullest extent permitted by law, any right to demand, request, plead or
otherwise assert or otherwise claim the benefit of, any marshalling, appraisal,
valuation or other similar right that may otherwise be available under
applicable law with respect to the Term Priority Collateral or any other similar
rights a junior secured creditor may have under applicable law.

 

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ARTICLE 3.

ACTIONS OF THE PARTIES

Section 3.1. Certain Actions Permitted. The Term Agent and the ABL Agent may
make such demands or file such claims in respect of the Term Obligations or the
ABL Obligations, as applicable, as are necessary to prevent the waiver or bar of
such claims under applicable statutes of limitations or other statutes, court
orders, or rules of procedure at any time. Nothing in this Agreement shall
prohibit the receipt by the Term Agent or any Term Secured Party of the payments
of interest, principal and other amounts owed in respect of the Term Obligations
so long as such receipt is not the direct or indirect result of the exercise by
the Term Agent or any Term Secured Party of rights or remedies as a secured
creditor (including set-off) with respect to ABL Priority Collateral or
enforcement in contravention of this Agreement of any Lien held by any of them.
Nothing in this Agreement shall prohibit the receipt by the ABL Agent or any ABL
Secured Party of the payments of interest, principal and other amounts owed in
respect of the ABL Obligations so long as such receipt is not the direct or
indirect result of the exercise by the ABL Agent or any ABL Secured Party of
rights or remedies as a secured creditor (including set-off) with respect to
Term Priority Collateral or enforcement in contravention of this Agreement of
any Lien held by any of them.

Section 3.2. Agent for Perfection. The ABL Agent, for and on behalf of itself
and each ABL Secured Party, and the Term Agent, for and on behalf of itself and
each Term Secured Party, as applicable, each acknowledge and agree to hold all
Control Collateral in its respective possession, custody, or control (or in the
possession, custody, or control of agents or bailees for either, including,
without limitation, landlords, freight forwarders and other bailees) as agent
for the benefit of, and on behalf of, the other solely for the purpose of
perfecting the security interest granted to each in such Collateral, subject to
the terms and conditions of this Section 3.2. None of the ABL Agent, the ABL
Secured Parties, the Term Agent, or the Term Secured Parties, as applicable,
shall have any obligation whatsoever to the others to assure that the Collateral
is genuine or owned by any relevant Borrower, any Guarantor, or any other Person
or to preserve rights or benefits of any Person. The duties or responsibilities
of the ABL Agent and the Term Agent under this Section 3.2 are and shall be
limited solely to holding or maintaining control of the Control Collateral as
agent for the other Party for purposes of perfecting the Lien held by the Term
Agent or the ABL Agent, as applicable. The ABL Agent is not and shall not be
deemed to be a fiduciary of any kind for the Term Secured Parties or any other
Person. Without limiting the generality of the foregoing, the ABL Secured
Parties shall not be obligated to see to the application of any Proceeds of the
Term Priority Collateral deposited into any Deposit Account or securities
account or be answerable in any way for the misapplication thereof. The Term
Agent is not and shall not be deemed to be a fiduciary of any kind for the ABL
Secured Parties, or any other Person. It is that intention of the Parties that
only proceeds of Term Priority Collateral shall be deposited by the Credit
Parties in the Term Loan Priority Accounts and that the Credit Parties shall not
deposit proceeds of Term Priority Collateral in bank accounts that constitute
ABL Priority Collateral (other than as expressly provided by the Term Loan
Agreement).

Section 3.3. Sharing of Information and Access; Notices of Default.

(a) In the event that the ABL Agent shall, in the exercise of its rights under
the ABL Collateral Documents or otherwise, receive possession or control of any
books and records of any Term Credit Party which contain information identifying
or pertaining to the Term Priority Collateral, the ABL Agent shall, upon request
from the Term Agent and as

 

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promptly as practicable thereafter, either make available to the Term Agent such
books and records for inspection and duplication or provide to the Term Agent
copies thereof. In the event that the Term Agent shall, in the exercise of its
rights under the Term Collateral Documents or otherwise, receive possession or
control of any books and records of any ABL Credit Party which contain
information identifying or pertaining to any of the ABL Priority Collateral, the
Term Agent shall, upon request from the ABL Agent and as promptly as practicable
thereafter, either make available to the ABL Agent such books and records for
inspection and duplication or provide the ABL Agent copies thereof.

(b) Each Agent shall give to the other Agent concurrently with the giving
thereof to any Credit Party (a) a copy of any written notice by such Agent of an
ABL Event of Default or a Term Loan Event of Default, as the case may be, or a
written notice of demand for payment from any Credit Party and (b) a copy of any
written notice sent by such Agent to any Credit Party stating such Agent’s
intention to exercise any material enforcement rights or remedies against such
Credit Party, including written notice pertaining to any foreclosure on all or
any material part of its Liens or other judicial or non judicial remedy in
respect thereof, and any legal process served or filed in connection therewith;
provided that the failure of any Agent to give such required notice shall not
result in any liability to such Agent or affect the enforceability of any
provision of this Agreement, including the relative priorities of the Liens of
the Agents and Secured Parties as provided herein, and shall not affect the
validity or effectiveness of any such notice as against any Credit Party or of
any action taken pursuant to such notice or in relation to the events giving
rise thereto; provided, further, that the foregoing shall not in any way impair
any claims that any Agent may have against the other Agent as a result of any
failure of such Agent to provide any notice in connection with a foreclosure
against the Collateral by such Agent as required under applicable law.

(c) Each Agent shall promptly provide to the other Agent copies of all
collateral reports, appraisals, results of field examinations, physical
inventories and tax and other lien searches that it receives (collectively, “Due
Diligence”) with respect to the Credit Parties or the Collateral (to the extent
not prohibited by any third parties that prepared such materials); provided that
the failure of any Agent to provide any Due Diligence shall not (A) affect the
relative priorities of any Agent’s Liens as provided herein or the validity or
effectiveness of any notices or demands as against any Credit Party, (B) impair
the effectiveness of this Agreement, or (C) give rise to any claim or cause of
action or liability by any Agent or Secured Party against any other Agent,
Secured Party or any third person conducting such appraisals and commercial
finance audits. Each Agent, for itself and on behalf of its respective Secured
Parties, acknowledges and agrees that neither the other Agent, such other
Agent’s respective Secured Parties nor any of their respective agents and
employees make any representations or warranties whatsoever with respect to the
Due Diligence of any kind, nature, or description, including, without
limitation, any representation as to the completeness or accuracy of the Due
Diligence, either at the time that the Due Diligence was prepared or at the
present time and such information is provided for informational purposes only,
and may not be relied upon by such other Agent, such other Secured Parties or
any other party, in any manner whatsoever. Each Agent, for itself and on behalf
of its respective Secured Parties, further acknowledges and agrees that the Due
Diligence shall not give rise to any claim or cause of action or liability
against, and shall be provided without recourse to, the other Agent, such other
Agent’s respective Secured Parties or any agent or employee thereof. Each Agent,
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Secured Parties, agrees that it shall use such Due Diligence in connection with
its administration under the applicable Credit Documents. The Credit Parties,
the ABL Agent and the Term Agent agree and acknowledge that the Term Agent may,
in its discretion, provide copies of any Borrowing Base Certificate delivered to
the Term Agent by the Borrowers to the ABL Agent and, subject to a one
(1) Business Day period of time for the ABL Agent to process such Borrowing Base
Certificate, after receipt of such Borrowing Base Certificate by the ABL Agent
until the delivery of a new Borrowing Base Certificate by the Borrowers in
accordance with the terms and conditions of the ABL Credit Agreement, such
Borrowing Base Certificate received by the ABL Agent from the Term Agent shall
constitute the Borrowing Base Certificate under the ABL Documents. The Credit
Parties irrevocably, by their execution of the acknowledgment hereto, authorize
the ABL Agent and the Term Agent to provide the other Agent with copies of any
Due Diligence and Borrowing Base Certificates.

(d) Prior to the Discharge of ABL Obligations, each of the Credit Parties and
the ABL Agent agrees that in the event the ABL Agent does not arrange for at
least one appraisal of the Inventory and PL Credit Card Receivables included in
the ABL Borrowing Base and one field examination of the ABL Priority Collateral
included in the ABL Borrowing Base during any four-month period, the Term Agent
shall have the right to direct the ABL Agent to engage an appraiser to conduct
such an appraisal or an examiner to conduct such a field examination, and the
ABL Agent agrees to, with reasonable promptness, commence such an engagement of
an appraiser or examiner, as the case may be; provided that to the extent the
ABL Agent does not engage an appraiser to conduct such an appraisal or an
examiner to conduct such a field examination within five (5) Business Days of a
written request addressed to the ABL Agent from the Term Agent, the Term Agent
may engage an appraiser or an examiner on behalf of the ABL Agent (which shall
be the Term Agent’s sole remedy as against the ABL Agent for not engaging such
an appraiser or examiner as set forth in this Section 3.3(d)). Subject to a one
(1) Business Day period of time for the ABL Agent to process the applicable
appraisal results, after receipt of a final appraisal report by the ABL Agent
(received either from an appraiser engaged by the ABL Agent or from an appraiser
engaged by the Term Agent, on behalf of the ABL Agent, in accordance with this
Section 3.3(d)), the results of such appraisal shall be used by the ABL Agent to
determine the NOLV Factor under the ABL Borrowing Base if the NOLV Factor
reflected in such appraisal is lower than the NOLV Factor reflected in the
previous appraisal received by the ABL Agent (and, for the avoidance of doubt,
the results of such appraisal may be used by the ABL Agent to determine the NOLV
Factor under the ABL Borrowing Base in all other circumstances). The Term Agent
agrees that it shall use the same final appraisal report as the ABL Agent to
determinate the relevant NOLV Factors under the Term Loan Borrowing Base (with
respect to components included in both the ABL Borrowing Base and the Term Loan
Borrowing Base) so long as such final appraisal report is prepared by an
appraiser reasonably acceptable to Term Agent (it being understood that Hilco
Merchant Resources, LLC and Vion Receivable Investments is deemed to be
reasonably acceptable to the Term Agent). The Parties hereby acknowledge that
the ABL Agent’s obligations under this Section 3.3(d) are subject to the Credit
Parties’ compliance with their respective obligations under the ABL Credit
Agreement (including as to cooperation with the ABL Agent) with respect to such
appraisals and examinations. The Credit Parties irrevocably, by their execution
of the acknowledgment hereto, authorize the ABL Agent to conduct any appraisals
and examinations required by the Term Agent under this Section 3.3(d) and agree
that the Credit Parties shall reimburse the ABL Agent for any and all reasonable
costs and expenses of such appraisals and examinations.

 

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Section 3.4. Insurance. Proceeds of Collateral include insurance proceeds and,
therefore, the Lien Priority shall govern the ultimate disposition of casualty
insurance proceeds. The ABL Agent and the Term Agent shall each be named as
additional insured or loss payee, as applicable, with respect to all insurance
policies relating to the Collateral. Prior to the Discharge of ABL Obligations,
the ABL Agent shall have the sole and exclusive right, as against the Term
Agent, to adjust settlement of insurance claims in a commercially reasonable
manner in the event of any covered loss, theft or destruction of ABL Priority
Collateral. Prior to the Discharge of Term Obligations, the Term Agent shall
have the sole and exclusive right, as against the ABL Agent, to adjust
settlement of insurance claims in a commercially reasonable manner in the event
of any covered loss, theft or destruction of Term Priority Collateral. If any
insurance claim includes both ABL Priority Collateral and Term Priority
Collateral, the insurer will not settle such claim separately with respect to
ABL Priority Collateral and Term Priority Collateral, and if the Parties are
unable after negotiating in good faith to agree on the settlement for such
claim, either Party may apply to a court of competent jurisdiction to make a
determination as to the settlement of such claim, and the court’s determination
shall be binding upon the Parties. All Proceeds of such insurance shall be
remitted to the ABL Agent or the Term Agent, as the case may be, and each of the
Term Agent and ABL Agent shall cooperate (if necessary) in a reasonable manner
in effecting the payment of insurance proceeds in accordance with Section 4.1
hereof.

Section 3.5. No Additional Rights For the Credit Parties Hereunder. Except as
provided in Section 3.6, if any ABL Secured Party or Term Secured Party shall
enforce its rights or remedies in violation of the terms of this Agreement, the
Credit Parties shall not be entitled to use such violation as a defense to any
action by any ABL Secured Party or Term Secured Party, nor to assert such
violation as a counterclaim or basis for set off or recoupment against any ABL
Secured Party or Term Secured Party.

Section 3.6. Inspection and Access Rights. (a) Without limiting any rights the
ABL Agent or any other ABL Secured Party may otherwise have under applicable law
or by agreement, in the event of any liquidation (including, without limitation,
by means of a sale pursuant to Section 363 of the Bankruptcy Code) of the ABL
Priority Collateral (or any other Exercise of Any Secured Creditor Remedies by
the ABL Agent) and whether or not the Term Agent or any other Term Secured Party
has commenced and is continuing the Exercise of Any Secured Creditor Remedies of
the Term Agent, the ABL Agent or any other Person (including any ABL Credit
Party or any agent thereof) acting with the consent, or on behalf, of the ABL
Agent, shall have the right (i) to access ABL Priority Collateral that (x) is
stored or located in or on, (y) has become an accession with respect to (within
the meaning of Section 9-335 of the Uniform Commercial Code, the PPSA or other
applicable law), or (z) has been commingled with (within the meaning of
Section 9-336 of the Uniform Commercial Code, the PPSA or other applicable law),
Term Priority Collateral, (ii) during the Use Period, shall have the right to
use and access all of the Term Priority Collateral (including, without
limitation, Equipment, Fixtures, Intellectual Property and Real Property, but
excluding cash proceeds of Term Priority Collateral) and all information which
is stored or located in or on the Term Loan Priority Collateral in order to
assemble, inspect, copy or download information stored on, take actions to
perfect its Lien on, complete a production run of Inventory involving, take
possession of, move, prepare and advertise for sale, sell (by public auction,
private sale or a “store closing”, “going out of business” or similar sale,
whether in bulk, in lots or to customers in the ordinary course of

 

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business or otherwise and which sale may include augmented Inventory of the same
type sold in any ABL Credit Party’s business), store, collect or otherwise deal
with the ABL Priority Collateral, in each case without the involvement of or
interference by any Term Secured Party or liability to any Term Secured Party;
provided, however, that the expiration of the Use Period shall be without
prejudice to the sale or other disposition of the ABL Priority Collateral in
accordance with this Agreement and applicable law and (iii) to use and access
all of the Term Priority Collateral (including, without limitation, Equipment,
Fixtures, Intellectual Property and Real Property, but excluding cash proceeds
of Term Priority Collateral) and all information which is stored or located in
or on the Term Loan Priority Collateral (including, without limitation, the
right to copy and extract data and information therefrom, to implement the full
conversion of the Private Label Credit Card Program and the Private Label Credit
Card Infrastructure (as each such term is defined in the Private Label Credit
Card Access and Monitoring Agreement) from a program administered by the Credit
Parties to a program administered by the ABL Agent and/or its affiliates and
agents or any other Person, including the administration and operation by the
ABL Agent and/or its affiliates and agents of the Private Label Credit Card
Program, and to take such other actions as are described in the Private Label
Credit Card Access and Monitoring Agreement) in order to collect or otherwise
realize on the PL Credit Card Receivables. The Term Agent may not sell, assign
or otherwise transfer the related Term Priority Collateral, unless the
purchaser, assignee or transferee thereof agrees to be bound by the provisions
of this Section 3.6.

(b) In furtherance of the ABL Agent’s rights under Section 3.6(a), prior to the
earlier of the Discharge of the ABL Obligations or the termination of the Use
Period, the Term Agent (i) shall, to the extent permitted by law, permit the ABL
Agent and its agents or representatives at the ABL Agent’s option to use, on a
nonexclusive, royalty free basis, any of the Intellectual Property as is or may
be necessary for the ABL Agent to sell or otherwise liquidate the ABL Priority
Collateral or to collect or otherwise realize on any ABL Priority Collateral
(including, without limitation, the PL Credit Card Receivables) and (ii) hereby
grants, to the extent it has the rights to do so, to the ABL Agent (which may be
sublicensed to its agents, which sublicense shall be subject to the terms of
this Agreement) a nonexclusive, irrevocable, royalty-free, worldwide license to
use any and all Intellectual Property as is or may be reasonably necessary to
sell or otherwise liquidate the ABL Priority Collateral or to collect or
otherwise realize on any ABL Priority Collateral (including, without limitation,
the PL Credit Card Receivables). The Term Agent (i) acknowledges and consents to
the grant to the ABL Agent by the Credit Parties on the date hereof of a
continuing, non-exclusive royalty-free license for such use at any time prior to
the Discharge of the ABL Obligations (the “Effective Date License”) and
(ii) agrees that its Liens on the Term Priority Collateral shall be subject to
the Effective Date License. Furthermore, the Term Agent agrees that, in
connection with any foreclosure sale conducted by the Term Agent (or by the
Credit Parties at the direction, or with the consent of, the Term Agent) in
respect of the Intellectual Property, (x) any notice required to be given by the
Term Agent in connection with such foreclosure shall contain an acknowledgement
that the Term Agent’s Lien is subject to the Effective Date License, and (y) the
Term Agent shall deliver a copy of the Effective Date License to any purchaser
at such foreclosure and provide written notice to such purchaser that the Term
Agent’s Lien and the purchaser’s rights in such transferred Collateral are
subject to the Effective Date License, and any such purchaser shall acknowledge
in writing that it is subject to the Effective Date License in all respects.

 

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(c) During the period of actual occupation, use and/or control by the ABL
Secured Parties and/or the ABL Agent (or their respective employees, agents,
advisers and representatives) of any Term Priority Collateral, the ABL Secured
Parties and the ABL Agent shall be obligated (a) to reimburse the Term Secured
Parties for any reasonable out-of-pocket costs and expenses incurred by the Term
Secured Party in respect of maintaining the Intellectual Property and operating
the Term Priority Collateral during the Use Period (including out-of-pocket
utility expenses and taxes incurred during the Use Period); and (b) to repair at
their expense any physical damage (but not any diminution in value) to such Term
Priority Collateral resulting from such occupancy, use or control, and to leave
such Term Priority Collateral in substantially the same condition as it was at
the commencement of such occupancy, use or control, ordinary wear and tear
excepted. The ABL Agent and the ABL Secured Parties agree not to disable or
terminate the use of any domain names or URLs or to use the Intellectual
Property in a manner that infringes upon third party rights or would adversely
affect the value of the Intellectual Property, provided, however, that it is
acknowledged and agreed that the use of the Intellectual Property in connection
with a liquidation or collection of the ABL Priority Collateral conducted in a
commercially reasonable manner, including “going out of business sales” or
similar dispositions conducted by a nationally recognized liquidator as
reasonably selected by the ABL Agent, shall not be deemed to adversely affect
the value of the Intellectual Property. Notwithstanding the foregoing, in no
event shall the ABL Secured Parties or the ABL Agent have any liability to the
Term Secured Parties and/or to the Term Agent pursuant to this Section 3.6 as a
result of any condition (including any environmental condition, claim or
liability) on or with respect to the Term Priority Collateral existing prior to
the date of the exercise by the ABL Secured Parties (or the ABL Agent, as the
case may be) of their rights under this Section 3.6 and the ABL Secured Parties
shall have no duty or liability to maintain the Term Priority Collateral in a
condition or manner better than that in which it was maintained prior to the use
thereof by the ABL Secured Parties, or for any diminution in the value of the
Term Priority Collateral that results from ordinary wear and tear resulting from
the use of the Term Priority Collateral by the ABL Secured Parties in the manner
and for the time periods specified under this Section 3.6. Without limiting the
rights granted in this Section 3.6, the ABL Secured Parties and the ABL Agent
shall (without incurring any cost or expense) cooperate with the Term Secured
Parties and/or the Term Agent in connection with any efforts made by the Term
Secured Parties and/or the Term Agent to sell the Term Priority Collateral.

(d) Except to the extent provided in clause (c) above, the ABL Agent and the ABL
Secured Parties shall not be obligated to pay any amounts to the Term Agent or
the Term Secured Parties (or any person claiming by, through or under the Term
Secured Parties, including any purchaser of the Term Priority Collateral) or to
the ABL Credit Parties, for or in respect of the access and use by the ABL Agent
and the ABL Secured Parties of the Term Priority Collateral prior to the
termination of the Use Period.

(e) The ABL Secured Parties shall (i) use the Term Priority Collateral in
accordance with applicable law, and (ii) insure for damage to property and
liability to persons, including property and liability insurance for the benefit
of the Term Secured Parties.

(f) The Term Agent and the other Term Secured Parties shall use commercially
reasonable efforts to not hinder or obstruct the ABL Agent and the other ABL
Secured Parties from exercising the rights described in Section 3.6 hereof.

 

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(g) Subject to the terms hereof, the Term Agent may advertise and conduct public
auctions or private sales of the Term Priority Collateral without notice (except
as required by applicable law) to any ABL Secured Party, the involvement of or
interference by any ABL Secured Party or liability to any ABL Secured Party as
long as, in the case of an actual sale, the respective purchaser assumes,
acknowledges and agrees to the obligations of the Term Agent and the Term
Secured Parties under this Section 3.6.

(h) The ABL Secured Parties acknowledge and agree that they shall not use, sell
or dispose of the PLCC Account Holder Lists and Information except in connection
with the administration, collection, sale or other disposition of the PL Credit
Card Receivables.

Section 3.7. Tracing of and Priorities in Proceeds. The ABL Agent, for itself
and on behalf of the ABL Secured Parties, and the Term Agent, for itself and on
behalf of the Term Secured Parties, further agree that prior to an issuance of
any notice of Exercise of Any Secured Creditor Remedies by such Secured Party
(unless an Insolvency Event of Default then exists), any Proceeds of Collateral,
whether or not deposited in Deposit Accounts subject to control agreements,
which are used by any Credit Party to acquire other property which is Collateral
shall not (solely as between the Agents and the Lenders) be treated as Proceeds
of Collateral for purposes of determining the relative priorities in the
Collateral which was so acquired.

Section 3.8. Payments Over.

(a) So long as the Discharge of Term Obligations has not occurred, any Term
Priority Collateral or Proceeds thereof not constituting ABL Priority Collateral
received by the ABL Agent or any other ABL Secured Party in contravention of
Section 4.1(c) in connection with the exercise of any right or remedy (including
set off) relating to the Term Priority Collateral shall be segregated and held
in trust and forthwith paid over to the Term Agent for the benefit of the Term
Secured Parties in the same form as received, with any necessary endorsements or
as a court of competent jurisdiction may otherwise direct. The Term Agent is
hereby authorized to make any such endorsements as agent for the ABL Agent or
any such other ABL Secured Parties. This authorization is coupled with an
interest and is irrevocable until such time as this Agreement is terminated in
accordance with its tetras.

(b) So long as the Discharge of ABL Obligations has not occurred, any ABL
Priority Collateral or Proceeds thereof not constituting Term Priority
Collateral received by the Term Agent or any Term Secured Parties in
contravention of Section 4.1(b) in connection with the exercise of any right or
remedy (including set off) relating to the ABL Priority Collateral shall be
segregated and held in trust and forthwith paid over to the ABL Agent for the
benefit of the ABL Secured Parties in the same form as received, with any
necessary endorsements or as a court of competent jurisdiction may otherwise
direct. The ABL Agent is hereby authorized to make any such endorsements as
agent for the Term Agent or any such Term Secured Parties. This authorization is
coupled with an interest and is irrevocable until such time as this Agreement is
terminated in accordance with its terms.

Section 3.9. Term Loan Push Down Reserve and Term Loan Reserve Amount. For the
purposes of determining the Term Loan Push Down Reserve under the ABL Credit
Agreement, each of the Term Secured Parties and the Credit Parties agrees that
the ABL Agent

 

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shall be entitled to rely solely on the calculation thereof made by the ABL
Borrowers as reflected in the most recent Borrowing Base Certificate delivered
by the ABL Borrowers to the ABL Agent, unless the ABL Agent is notified in
writing by the Term Agent that such calculation is inaccurate and providing the
ABL Agent with the correct calculation of the Term Loan Push Down Reserve (“Term
Loan Push Down Reserve Correction Notice”), and, in such event, the ABL Agent
shall be entitled to rely solely on the calculation of the Term Loan Push Down
Reserve made by the Term Agent as reflected in the Term Loan Push Down Reserve
Correction Notice. Upon receipt by the ABL Agent of a Borrowing Base Certificate
or a Term Loan Push Down Reserve Correction Notice, as applicable, the ABL Agent
shall have a one (1) Business Day period of time to implement any adjustments to
the Term Loan Push Down Reserve as set forth in such Borrowing Base Certificate
or such Term Loan Push Down Reserve Correction Notice, as the case may be. Each
of the Term Secured Parties and the Credit Parties agrees that no ABL Secured
Party shall have any liability for relying on the calculation of the Term Loan
Push Down Reserve as set forth in a Borrowing Base Certificate delivered by the
Borrowers or in the Term Loan Push Down Reserve Correction Notice delivered by
the Term Agent, as the case may be. Each of the Term Secured Parties and the
Credit Parties agrees that in the event of any discrepancy or dispute between
the Term Secured Parties and the Credit Parties as to the amount of the Term
Loan Push Down Reserve, the ABL Secured Parties shall be entitled to rely solely
on the calculation of the Term Loan Push Down Reserve as determined by the Term
Secured Parties and shall have no liability to any Person for doing so. In all
cases, the ABL Borrowing Base shall be calculated based upon the most recent
Borrowing Base Certificate received by the ABL Agent pursuant to the ABL Credit
Agreement prior to funding of loans or advances by any ABL Lender or the
issuance, renewal or amendment of a letter of credit by an ABL Lender (it being
understood and agreed that the use of cash collateral in an Insolvency or
Liquidation Proceeding shall not constitute a funding of a loan or other
advance). Subject to a one (1) Business Day period of time for the ABL Agent to
implement any required adjustments, the ABL Agent shall increase the
Availability Block under the ABL Credit Agreement by the Term Loan Reserve
Amount at the times required by the ABL Credit Agreement (provided that in the
case of an Insolvency Proceeding of any Credit Party, it is understood that the
ABL Agent shall increase the Availability Block under the ABL Credit Agreement
by the Term Loan Reserve Amount promptly upon the commencement of such
Insolvency Proceeding).

Section 3.10. Legends. The ABL Agent acknowledges with respect to the ABL Credit
Agreement, on the one hand, and the Term Agent acknowledges with respect to the
Term Loan Agreement, on the other hand, that such documents will contain the
following legend (or such other legend as may be reasonably approved by the
other Agent):

Each Lender hereby (a) consents to the subordination of the Liens securing the
Obligations on the terms set forth in the [Intercreditor Agreement], (b) agrees
that this Agreement and the other Loan Documents, and the rights and remedies of
the Agent and the Lenders hereunder and thereunder, are subject to the terms of
the [Intercreditor Agreement] (and to the extent any term of this Agreement or
any other Loan Document conflicts or is inconsistent with the terms hereof, the
terms of the [Intercreditor Agreement] shall control), (c) agrees that it will
be bound by and will take no actions contrary to the provisions of the
[Intercreditor Agreement] and (d) hereby authorizes and instructs the Agent to
enter into the [Intercreditor Agreement] and to subject the Liens securing the
Obligations to the provisions thereof.

 

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ARTICLE 4.

APPLICATION OF PROCEEDS

Section 4.1. Application of Proceeds.

(a) Revolving Nature of ABL Obligations. The Term Agent, for and on behalf of
itself and the Term Secured Parties, expressly acknowledges and agrees that
(i) the ABL Credit Agreement includes a revolving commitment, that in the
ordinary course of business the ABL Agent and the ABL Lenders will apply
payments and make advances thereunder, and that no application of any Collateral
or the release of any Lien pursuant to Section 2.4 by the ABL Agent upon any
portion of the ABL Priority Collateral in connection with a permitted
disposition by the ABL Credit Parties under any ABL Credit Agreement shall
constitute the Exercise of Secured Creditor Remedies under this Agreement;
(ii) the amount of the ABL Obligations that may be outstanding at any time or
from time to time may be increased or reduced and subsequently reborrowed, and
that the terms of the ABL Obligations may be modified, extended or amended from
time to time, and that the aggregate amount of the ABL Obligations may be
increased, replaced or refinanced, in each event, without notice to or consent
by the Term Secured Parties and without affecting the provisions hereof;
provided, however, that the aggregate outstanding principal amount of loans and
outstanding amount of letters of credit made, issued or incurred pursuant to the
ABL Documents shall not be increased to exceed the Maximum ABL Facility Amount;
and (iii) all ABL Priority Collateral received by the ABL Agent may be applied,
reversed, reapplied, credited, or reborrowed, in whole or in part, to the ABL
Obligations at any time; provided, however, that from and after the date on
which the ABL Agent (or any ABL Secured Party) or the Term Agent (or any Term
Secured Party) commences the Exercise of Any Secured Creditor Remedies, all
amounts received by the ABL Agent or any ABL Lender shall be applied as
specified in this Section 4.1 (but without any requirement that the commitments
under the ABL Documents be reduced or the amount of the loans and letters of
credit available to the ABL Borrowers be permanently reduced as a result of such
application). The Lien Priority shall not be altered or otherwise affected by
any such amendment, modification, supplement, extension, repayment, reborrowing,
increase, replacement, renewal, restatement or refinancing of either the ABL
Obligations or the Term Obligations, or any portion thereof.

(b) Application of Proceeds of ABL Priority Collateral. The ABL Agent and the
Term Agent hereby agree that all ABL Priority Collateral and all other Proceeds
thereof, received by either of them (i) in connection with any Exercise of
Secured Creditor Remedies with respect to the ABL Priority Collateral, (ii) in
connection with the sale, transfer or other disposition of all or any portion of
the ABL Priority Collateral under Section 2.4(a) or Section 6.4 or
(iii) following the commencement of any Insolvency Proceeding in connection with
any DIP Financing or cash collateral usage which, in each case, is not permitted
by Section 6.1, in each case, shall be applied,

first, to the payment of reasonable costs and expenses of the ABL Agent in
connection with such Exercise of Secured Creditor Remedies,

 

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second, to the payment of the ABL Obligations (other than the Excess ABL
Obligations) in accordance with the ABL Documents until the Discharge of ABL
Obligations (other than the Excess ABL Obligations) shall have occurred;

third, to the payment of the Term Obligations (other than the Excess Term
Obligations) in accordance with the Term Documents until the Discharge of Term
Obligations (other than the Excess Term Obligations) shall have occurred,

fourth, to the payment of the Excess ABL Obligations in accordance with the ABL
Documents until the Discharge of ABL Obligations shall have occurred,

fifth, to the payment of Excess Term Obligations in accordance with the Term
Documents until the Discharge of Term Obligations shall have occurred; and

sixth, the balance, if any, to the Credit Parties or as a court of competent
jurisdiction may direct;

provided that if, in connection with an Insolvency Proceeding, the Lien granted
in favor of the ABL Agent or the ABL Secured Parties in respect of such ABL
Priority Collateral has been voided, avoided, subordinated, or otherwise
invalidated by a court of competent jurisdiction and the provisions of
Section 5.3 would not be effective, the Proceeds received with respect to the
ABL Priority Collateral subject to avoidance, subordination or invalidation
shall be applied, to the extent permitted under applicable law, to the payment
of the Term Obligations in accordance with the Term Documents until Discharge of
Term Obligations shall have occurred so long as the Lien granted in favor of the
Term Agent or the Term Secured Parties in respect of such ABL Priority
Collateral has not been voided, avoided, subordinated, or otherwise invalidated
by a court of competent jurisdiction.

(c) Application of Proceeds of Term Priority Collateral. The ABL Agent and the
Term Agent hereby agree that all Term Priority Collateral and all Proceeds
thereof, received by either of them (i) in connection with any Exercise of
Secured Creditor Remedies with respect to the Term Priority Collateral, (ii) in
connection with the sale, transfer or other disposition of all or any portion of
the Term Priority Collateral under Section 2.4(b) or Section 6.4 or
(iii) following the commencement of any Insolvency Proceeding in connection with
any DIP Financing or cash collateral usage which, in each case, is not permitted
by Section 6.1, in each case, shall be applied,

first, to the payment of reasonable costs and expenses of the Term Agent in
connection with such Exercise of Secured Creditor Remedies,

second, to the payment of the Term Obligations (other than the Excess Term
Obligations) in accordance with the Term Documents until the Discharge of Term
Obligations (other than the Excess Term Obligations) shall have occurred,

third, to the payment of the ABL Obligations (other than the Excess ABL
Obligations) in accordance with the ABL Documents until the Discharge of ABL
Obligations (other than the Excess ABL Obligations) shall have occurred,

 

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fourth, to the payment of Excess Term Obligations in accordance with the Term
Documents until the Discharge of Term Obligations shall have occurred,

fifth, to the payment of the Excess ABL Obligations in accordance with the ABL
Documents until the Discharge of ABL Obligations shall have occurred, and

sixth, the balance, if any, to the Credit Parties or as a court of competent
jurisdiction may direct;

provided that if, in connection with an Insolvency Proceeding, the Lien granted
in favor of the Term Agent or the Term Secured Parties in respect of such Term
Priority Collateral has been voided, avoided, subordinated, or otherwise
invalidated by a court of competent jurisdiction and the provisions of
Section 5.3 would not be effective, the Proceeds received with respect to the
Term Priority Collateral subject to avoidance, subordination or invalidation
shall be applied, to the extent permitted under applicable law, to the payment
of the ABL Obligations in accordance with the ABL Documents until Discharge of
ABL Obligations shall have occurred so long as the Lien granted in favor of the
ABL Agent or the ABL Secured Parties in respect of such Term Priority Collateral
has not been voided, avoided, subordinated, or otherwise invalidated by a court
of competent jurisdiction.

(d) Limited Obligation or Liability. In exercising remedies, whether as a
secured creditor or otherwise, the ABL Agent shall have no obligation or
liability to the Term Agent or to any Term Secured Party, and the Term Agent
shall have no obligation or liability to the ABL Agent or any ABL Secured Party,
regarding the adequacy of any Proceeds or for any action or omission, except
solely for an action or omission that breaches the express obligations
undertaken by each Party under the terms of this Agreement. Notwithstanding
anything to the contrary herein contained, none of the Parties hereto waives any
claim that it may have against a Secured Party on the grounds that any sale,
transfer or other disposition by the Secured Party was not commercially
reasonable as required by the Uniform Commercial Code or other applicable law.

(e) Turnover of Collateral After Discharge. Upon the Discharge of ABL
Obligations, the ABL Agent shall deliver to the Term Agent or shall execute such
documents as the Term Agent may reasonably request (at the expense of the Term
Borrowers) to enable the Term Agent to have control over any Control Collateral
still in the ABL Agent’s possession, custody, or control in the same form as
received with any necessary endorsements, or as a court of competent
jurisdiction may otherwise direct. Upon the Discharge of Term Obligations, the
Term Agent shall deliver to the ABL Agent or shall execute such documents as the
ABL Agent may reasonably request (at the expense of the relevant Credit Parties)
to enable the ABL Agent to have control over any Control Collateral still in the
Term Agent’s possession, custody or control in the same form as received with
any necessary endorsements, or as a court of competent jurisdiction may
otherwise direct.

Section 4.2. Specific Performance. Each of the ABL Agent and the Term Agent is
hereby authorized to demand specific performance of this Agreement, whether or
not any relevant Borrower or any Guarantor shall have complied with any of the
provisions of any of the

 

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Credit Documents, at any time when the other Party shall have failed to comply
with any of the provisions of this Agreement applicable to it. Each of the ABL
Agent, for and on behalf of itself and the ABL Secured Parties, and the Term
Agent, for and on behalf of itself and the Term Secured Parties, hereby
irrevocably waives any defense based on the adequacy of a remedy at law that
might be asserted as a bar to such remedy of specific performance.

ARTICLE 5.

INTERCREDITOR ACKNOWLEDGEMENTS AND WAIVERS

Section 5.1. Notice of Acceptance and Other Waivers.

(a) All ABL Obligations at any time made or incurred by any Borrower or any
Guarantor shall be deemed to have been made or incurred in reliance upon this
Agreement, and the Term Agent, on behalf of itself and the Term Secured Parties,
hereby waives notice of acceptance, or proof of reliance by the ABL Agent or any
ABL Secured Party of this Agreement, and notice of the existence, increase,
renewal, extension, accrual, creation, or non-payment of all or any part of the
ABL Obligations. All Term Obligations at any time made or incurred by any
Borrower or any Guarantor shall be deemed to have been made or incurred in
reliance upon this Agreement, and the ABL Agent, on behalf of itself and the ABL
Secured Parties, hereby waives notice of acceptance, or proof of reliance, by
the Term Agent or any Term Secured Party of this Agreement, and notice of the
existence, increase, renewal, extension, accrual, creation, or non-payment of
all or any part of the Term Obligations.

(b) None of the ABL Agent, any ABL Secured Party, or any of their respective
Affiliates, directors, officers, employees, or agents shall be liable for
failure to demand, collect, or realize upon any of the Collateral or any
Proceeds, or for any delay in doing so, or shall be under any obligation to sell
or otherwise dispose of any Collateral or Proceeds thereof or to take any other
action whatsoever with regard to the Collateral or any part or Proceeds thereof,
except as specifically provided in this Agreement. If the ABL Agent or any ABL
Secured Party honors (or fails to honor) a request by any Borrower for an
extension of credit pursuant to any ABL Credit Agreement or any of the other ABL
Documents, whether the ABL Agent or any ABL Secured Party has knowledge that the
honoring of (or failure to honor) any such request would constitute a default
under the terms of any Term Loan Agreement or any other Term Document or an act,
condition, or event that, with the giving of notice or the passage of time, or
both, would constitute such a default, or if the ABL Agent or any ABL Secured
Party otherwise should exercise any of its contractual rights or remedies under
any ABL Documents (subject to the terms and conditions hereof), neither the ABL
Agent nor any ABL Secured Party shall have any liability whatsoever to the Term
Agent or any Term Secured Party as a result of such action, omission, or
exercise (so long as any such exercise does not breach the terms and provisions
of this Agreement). The ABL Agent and the ABL Secured Parties shall be entitled
to manage and supervise their loans and extensions of credit under any ABL
Credit Agreement and any of the other ABL Documents as they may, in their sole
discretion, deem appropriate, and may manage their loans and extensions of
credit without regard to any rights or interests that the Term Agent or any of
the Term Secured Parties have in the Collateral, except as otherwise expressly
set forth in this Agreement. The Term Agent, on behalf of itself and the Term
Secured Parties, agrees that neither the ABL Agent nor any ABL Secured Party
shall incur any liability as a result of a sale, lease, license, application, or
other disposition of all or any portion of the

 

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Collateral or Proceeds thereof, pursuant to the ABL Documents, so long as such
disposition is conducted in accordance with mandatory provisions of applicable
law and does not breach the provisions of this Agreement.

(c) None of the Term Agent, any Term Secured Party or any of their respective
Affiliates, directors, officers, employees, or agents shall be liable for
failure to demand, collect, or realize upon any of the Collateral or any
Proceeds, or for any delay in doing so, or shall be under any obligation to sell
or otherwise dispose of any Collateral or Proceeds thereof or to take any other
action whatsoever with regard to the Collateral or any part or Proceeds thereof,
except as specifically provided in this Agreement. If the Term Agent or any Term
Secured Party honors (or fails to honor) a request by any Borrower for an
extension of credit pursuant to any Term Loan Agreement or any of the other Term
Documents, whether the Term Agent or any Term Secured Party has knowledge that
the honoring of (or failure to honor) any such request would constitute a
default under the terms of any ABL Credit Agreement or any other ABL Document or
an act, condition, or event that, with the giving of notice or the passage of
time, or both, would constitute such a default, or if the Term Agent or any Term
Secured Party otherwise should exercise any of its contractual rights or
remedies under the Term Documents (subject to the terms and conditions hereof),
neither the Term Agent nor any Term Secured Party shall have any liability
whatsoever to the ABL Agent or any ABL Secured Party as a result of such action,
omission, or exercise (so long as any such exercise does not breach the terms
and provisions of this Agreement). The Term Agent and the Term Secured Parties
shall be entitled to manage and supervise their loans under the Term Documents
as they may, in their sole discretion, deem appropriate, and may manage their
loans without regard to any rights or interests that the ABL Agent or any ABL
Secured Party has in the Collateral, except as otherwise expressly set forth in
this Agreement. The ABL Agent, on behalf of itself and the ABL Secured Parties,
agrees that none of the Term Agent or the Term Secured Parties shall incur any
liability as a result of a sale, lease, license, application, or other
disposition of the Collateral or any part or Proceeds thereof, pursuant to the
Term Documents, so long as such disposition is conducted in accordance with
mandatory provisions of applicable law and does not breach the provisions of
this Agreement.

Section 5.2. Modifications to ABL Documents and Term Documents.

(a) The ABL Agent and the ABL Secured Parties may at any time and from time to
time and without the consent of or notice to the Term Agent or any Term Secured
Party, without incurring any liability to the Term Agent or any Term Secured
Party and without impairing or releasing any rights or obligations hereunder or
otherwise, amend, restate, supplement, modify, waive, substitute, renew,
refinance, or replace any or all of the ABL Documents; provided, however, that
without the consent of the Term Agent, the ABL Secured Parties shall not amend,
restate, supplement, modify, waive, substitute, renew, refinance or replace
(including in connection with any DIP Financing provided by any of the ABL
Secured Parties) any or all of the ABL Documents to:

(1) (A) increase the rates of interest set forth in the definition of
“Applicable Margin” as defined in the ABL Credit Agreement by more than
2.00% per annum at any level of the pricing grid applicable thereto (other than
any increase occurring because of fluctuations in underlying rate indices or the
imposition of the rate

 

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specified in Section 1.3(c) (default rate with respect to Loans) or
Section 1.9(c) (default rate with respect to Letter of Credit Fees) of the ABL
Credit Agreement), or (B) increase the percentage set forth in Section 1.3(c)
(default rate with respect to Loans) or Section 1.9(c) (default rate with
respect to Letter of Credit Fees) by more than 2.00% per annum above the rate
applicable thereto (other than any increase occurring because of fluctuations in
underlying rate indices), or (C) increase the rates set forth in the definition
of “Unused Commitment Fee Rate” as defined in the ABL Credit Agreement by more
than 2.00% per annum at any level of the grid applicable thereto;

(2) other than in connection with a DIP Financing, shorten the scheduled
maturity of the ABL Obligations;

(3) other than in connection with a DIP Financing, change any conditions,
covenants, defaults or events of default thereunder that expressly restricts any
Credit Party from making payments of the Term Obligations that would otherwise
be permitted under the ABL Credit Agreement other than as expressly provided
herein; provided that the ABL Secured Parties shall not change any conditions,
covenants, defaults or events of default under the ABL Documents that expressly
restricts any Credit Party from making payments of the Term Obligations from
proceeds of Term Priority Collateral;

(4) increase the sum of the then outstanding aggregate principal amount of the
loans and outstanding Letters of Credit made, issued or incurred under the ABL
Credit Agreement and any DIP Financing in excess of the amount of the Maximum
ABL Facility Amount;

(5) change the definition of “Availability”, “Availability Block”, “Term Loan
Reserve Amount”, “Term Loan Push Down Reserve”, “Borrowing Base”, “Borrowing
Base Certificate”, “Eligible Credit Card Accounts”, “Eligible In-Transit
Inventory”, “Eligible Inventory”, “Eligible PL Credit Card Accounts”, “Net
Orderly Liquidation Value”, “NOLV Factor”, “Overadvance”, “Reserves”, “Rent and
Charges Reserve”, “Gift Card Reserve”, or “Rate Contract Reserve” contained in
the ABL Credit Agreement or any component definition thereof, each as set forth
in the ABL Credit Agreement, in a manner that would make more credit available
to the ABL Borrowers, in each case, except for increases in advances rates and
modifications of reserves in order to (i) allow for the making of Protective
Overadvances or (ii) allow for increased advance rates or modified reserves in
connection with a DIP Financing, provided that, in each case, the amount of such
Protective Overadvances and the amount of such DIP Financing does not result in
the aggregate outstanding principal amount of loans and outstanding amount of
letters of credit made, issued or incurred pursuant to the ABL Credit Agreement
together with, but without duplication, the aggregate principal amount of loans
and letter of credit accommodations outstanding under any such DIP Financing (if
any), exceeding the Maximum ABL Facility Amount as determined prior to giving
effect to such increase in the advance rates or such modification of reserves;

 

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(6) change (i) the definition of “Term Loan Trigger Event Period” or
(ii) Section 7.1(f) or Section 7.1(g) of the ABL Credit Agreement (other than in
connection with a DIP Financing);

(7) fail to establish and maintain (i) any Reserve in effect on the date hereof,
(ii) the Term Loan Push-Down Reserve; or (iii) the Term Loan Reserve Amount
during the continuance of a Term Loan Trigger Event Period, in each case, as and
when required under the ABL Credit Agreement as in effect on the date hereof
(subject to any grace periods provided for in this Agreement); provided that, in
each case, (A) the amount of such Reserves (other than the Term Loan Push-Down
Reserve and the Term Loan Reserve Amount) may be adjusted based on changes in
the facts or circumstances that gave rise thereto (as long as the methodology
for the calculation thereof is not modified in a manner that would make more
credit available to the ABL Borrowers) and (B) the foregoing shall not limit the
discretion of the ABL Agent to establish, eliminate and adjust the amount of any
other Reserves (other than the Term Loan Push Down Reserve and the Term Loan
Reserve Amount) not in effect on the date hereof; or

(8) amend the ABL Credit Agreement to permit assignments of the ABL Obligations
under the ABL Credit Agreement to any ABL Credit Party or any Affiliate of any
ABL Credit Party.

Nothing contained herein shall limit, restrict or impair the discretionary
rights and ability of the ABL Agent to impose or establish any and all reserves,
and to thereafter reduce or eliminate such reserves, or to determine the
eligibility of Collateral for inclusion in the calculation of the ABL Borrowing
Base, in each case, as provided in the ABL Credit Agreement; provided, that the
ABL Agent agrees to impose a methodology no less restrictive than that used as
of the date hereof in determining reserves. The Maximum ABL Facility Amount is
not a limitation on the discretionary rights and ability of the ABL Agent to
impose or establish any and all reserves, and to thereafter reduce or eliminate
such reserves in accordance with the terms of this Agreement.

(b) The Term Agent and the Term Secured Parties may at any time and from time to
time and without consent of or notice to the ABL Secured Parties, without
incurring any liability to the ABL Secured Parties and without impairing or
releasing any rights or obligations hereunder or otherwise, amend, restate,
supplement, modify, waive, substitute, renew, refinance or replace any or all of
the Term Documents; provided, however, that without the consent of the ABL
Agent, the Term Agent and the Term Secured Parties shall not amend, restate,
supplement, modify, waive, substitute, renew, refinance or replace (including in
connection with any DIP Financing provided by any of the Term Secured Parties)
any or all of the Term Documents to:

(1) increase the aggregate outstanding principal amount of the Term Obligations
in excess of the amount of the Maximum Term Loan Facility Amount;

(2) increase the rate of interest set forth in the definition of “Applicable
Margin” as defined in the Term Loan Agreement by more than 2.00% per annum
(other than any increase occurring because of fluctuations in underlying rate
indices or the imposition of the default rate set forth in Section 1.3(c) of the
Term Loan

 

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Agreement) or increase the percentage with respect to the default rate set forth
in Section 1.3(c) of the Term Loan Agreement by more than 2.00% per annum above
the rate applicable thereto on the date hereof;

(3) shorten the scheduled maturity of the Term Obligations;

(4) change any conditions, covenants, defaults or events of default thereunder
that expressly restricts any Credit Party from making payments of the ABL
Obligations that would otherwise be permitted under the Term Loan Agreement
other than as expressly provided herein;

(5) require any mandatory prepayments or scheduled repayments of the Term
Obligations except as provided in the Term Documents as in effect on the date
hereof or require that any payment on the Term Obligations be made earlier than
the date originally scheduled for such payment;

(6) change the definition of “Appraised Value”, “Availability”, “Availability
Block”, “Term Loan Reserve Amount”, “Term Loan Push Down Reserve”, “Borrowing
Base”, “Term Loan Borrowing Base”, “Borrowing Base Certificate”, “Eligible
Credit Card Accounts”, “Eligible In-Transit Inventory”, “Eligible Inventory”,
“Eligible PL Credit Card Accounts”, “Eligible Real Estate”, “Eligible
Intellectual Property”, “Net Orderly Liquidation Value”, “NOLV Factor”,
“Overadvance”, “Reserves”, “Rent and Charges Reserve”, “Gift Card Reserve”, or
“Rate Contract Reserve” contained in the Term Loan Agreement or any component
definition thereof, each as set forth in the Term Loan Agreement, in a manner
that would make less credit available to the Borrowers;

(7) change the definition of “Term Loan Trigger Event”;

(8) change any conditions, covenants, defaults or events of default thereunder
that expressly restricts any Credit Party from making payments of the ABL
Obligations that would otherwise be permitted under the Term Documents as in
effect on the date hereof; or

(9) amend the Term Loan Agreement to permit assignments of the Term Obligations
under the Term Loan Agreement to any Term Credit Party or any Affiliate of any
Term Credit Party.

(c) Subject to Sections 5.2(a) and (b) above, the ABL Obligations and the Term
Obligations may be refinanced, in whole or in part, in each case, without notice
to, or the consent (except to the extent a consent is required to permit the
refinancing transaction under any ABL Document or any Term Document) of the ABL
Agent, the ABL Secured Parties, the Term Agent or the Term Secured Parties, as
the case may be, all without affecting the Lien Priorities provided for herein
or the other provisions hereof, provided, however, that the holders of such
refinancing Indebtedness (or an authorized agent or trustee on their behalf)
bind themselves in writing to the terms of this Agreement pursuant to such
documents or agreements (including amendments or supplements to this Agreement)
as the ABL Agent or the Term Agent, as the case may be, shall reasonably request
and in form and substance reasonably acceptable to the

 

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ABL Agent or the Term Agent, as the case may be, and any such refinancing
transaction shall be in accordance with any applicable provisions of both the
ABL Documents and the Term Documents (to the extent such documents survive the
refinancing).

Section 5.3. Reinstatement and Continuation of Agreement.

(a) If the ABL Agent or any ABL Secured Party is required in any Insolvency
Proceeding or otherwise to turn over or otherwise pay to the estate of any
Borrower, any Guarantor, or any other Person any payment made in satisfaction of
all or any portion of the ABL Obligations (an “ABL Recovery”), then the ABL
Obligations shall be reinstated to the extent of such ABL Recovery. If this
Agreement shall have been terminated prior to such ABL Recovery, this Agreement
shall be reinstated in full force and effect in the event of such ABL Recovery,
and such prior termination shall not diminish, release, discharge, impair, or
otherwise affect the obligations of the Parties from such date of reinstatement,
but such reinstatement shall not impose an obligation on the Term Agent or Term
Secured Parties to disgorge payments previously made, including from the
Proceeds of ABL Priority Collateral. All rights, interests, agreements, and
obligations of the ABL Agent, the Term Agent, the ABL Secured Parties, and the
Term Secured Parties under this Agreement shall remain in full force and effect
and shall continue irrespective of the commencement of, or any discharge,
confirmation, conversion, or dismissal of, any Insolvency Proceeding by or
against any Borrower or any Guarantor or any other circumstance which otherwise
might constitute a defense available to, or a discharge of any Borrower or any
Guarantor in respect of the ABL Obligations or the Term Obligations. No priority
or right of the ABL Agent or any ABL Secured Party shall at any time be
prejudiced or impaired in any way by any act or failure to act on the part of
any Borrower or any Guarantor or by the noncompliance by any Person with the
terms, provisions, or covenants of any of the ABL Documents, regardless of any
knowledge thereof which the ABL Agent or any ABL Secured Party may have.

(b) If the Term Agent or any Term Secured Party is required in any Insolvency
Proceeding or otherwise to turn over or otherwise pay to the estate of any
Borrower, any Guarantor, or any other Person any payment made in satisfaction of
all or any portion of the Term Obligations (a “Term Recovery”), then the Term
Obligations shall be reinstated to the extent of such Term Recovery. If this
Agreement shall have been terminated prior to such Term Recovery, this Agreement
shall be reinstated in full force and effect in the event of such Term Recovery,
and such prior termination shall not diminish, release, discharge, impair, or
otherwise affect the obligations of the Parties from such date of reinstatement,
but such reinstatement shall not impose an obligation on the ABL Agent or ABL
Secured Parties to disgorge payments previously made, including from Proceeds of
Term Priority Collateral. All rights, interests, agreements, and obligations of
the ABL Agent, the Term Agent, the ABL Secured Parties, and the Term Secured
Parties under this Agreement shall remain in full force and effect and shall
continue irrespective of the commencement of, or any discharge, confirmation,
conversion, or dismissal of, any Insolvency Proceeding by or against any
Borrower or any Guarantor or any other circumstance which otherwise might
constitute a defense available to, or a discharge of any Borrower or any
Guarantor in respect of the ABL Obligations or the Term Obligations. No priority
or right of the Term Agent or any Term Secured Party shall at any time be
prejudiced or impaired in any way by any act or failure to act on the part of
any Borrower or any Guarantor or by the noncompliance by any Person with the
terms, provisions, or covenants of any of the Term Documents, regardless of any
knowledge thereof which the Term Agent or any Term Secured Party may have.

 

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Section 5.4. Term Purchase Option of ABL Obligations.

(a) If (i) the ABL Agent or ABL Lenders shall sell, lease, license or dispose of
all or substantially all of the ABL Priority Collateral by private or public
sale, (ii) the principal amount of the ABL Obligations shall have been
accelerated or (iii) an Insolvency Proceeding occurs with respect to any of the
Credit Parties (each such event described in clauses (i) through (iii) above,
the “Purchase Option Event”), the Term Secured Parties shall have the
opportunity (with each Term Secured Parties having a ratable right to make the
purchase, with each Term Secured Party’s right to purchase being automatically
proportionately increased by the amount not purchased by another Term Secured
Party) to purchase all (but not less than all) of the ABL Obligations pursuant
to this Section 5.4; provided, that such option shall expire if the applicable
Term Secured Parties fail to deliver a written notice (a “Purchase Notice”) to
the ABL Agent within ten (10) Business Days following the first date the Term
Agent obtains knowledge of the occurrence of the earliest Purchase Option Event,
which Purchase Notice shall (A) be signed by the applicable Term Secured Parties
committing to such purchase (the “Purchasing Creditors”) and indicate the
percentage of the ABL Obligations to be purchased by each Purchasing Creditor
(which aggregate commitments must add up to 100% of the ABL Obligations) and
(B) state that (1) it is a Purchase Notice delivered pursuant to Section 5.4 of
this Agreement and (2) the offer contained therein is irrevocable. Upon receipt
of such Purchase Notice by the ABL Agent, the Purchasing Creditors shall have
from the date of delivery thereof to and including the date that is ten
(10) Business Days after the Purchase Notice was received by the ABL Agent to
purchase all (but not less than all) of the ABL Obligations pursuant to this
Section 5.4 (the date of such purchase, the “Purchase Date”).

(b) On the Purchase Date, the ABL Agent and the other ABL Secured Parties shall,
subject to any required approval of any Governmental Authority and any
limitation in the ABL Credit Agreement, in each case then in effect, if any,
sell to the Purchasing Creditors all (but not less than all) of the ABL
Obligations. On such Purchase Date, the Purchasing Creditors shall (i) pay to
the ABL Agent, for the benefit of the ABL Secured Parties, as directed by the
ABL Agent, in immediately available funds the full amount (at par) of all ABL
Obligations then outstanding together with all accrued and unpaid interest and
fees and other amounts thereon (but excluding any prepayment fee, prepayment
premium or early termination fee not then due and owing (other than as provided
below)), all in the amounts specified by the ABL Agent and determined in good
faith in accordance with the applicable ABL Documents or other applicable
documents, (ii) furnish cash collateral as the ABL Agent determines is
reasonably necessary to secure the ABL Secured Parties on terms and in amounts
reasonably satisfactory to the ABL Agent in connection with any (x) contingent
ABL Obligations and (y) issued and outstanding Letters of Credit issued under
the ABL Credit Agreement (in the case of this clause (y), in an amount not to
exceed 107% of the maximum amount to be drawn under such Letters of Credit) and
(iii) agree to reimburse the ABL Secured Parties for any loss, cost, damage or
expense resulting from the granting of provisional credit for any checks, wire
or ACH transfers that are reversed or not final or other payments provisionally
credited to the ABL Obligations under the ABL Credit Agreement and as to which
the ABL Agent and ABL Secured Parties have not yet received final payment as of
the Purchase Date; provided that the Purchasing Creditors agree (x)

 

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to pay to the ABL Agent, for the benefit of the ABL Lenders, any prepayment fee,
prepayment premium or early termination fee set forth in the ABL Documents
within five (5) Business Days after receipt by the Purchasing Creditors (or any
of them) of amount on account of any such prepayment fee, prepayment premium or
early termination fee and (y) not to amend the terms of the ABL Documents (as in
effect on the Purchase Date) in respect of any prepayment fee, prepayment
premium or early termination fee after the purchase by the Purchasing Creditors
of the ABL Obligations. Such purchase price shall be remitted by wire transfer
in immediately available funds to such bank account of the ABL Agent (for the
benefit of the ABL Secured Parties) as the ABL Agent shall have specified in
writing to the Term Agent. Interest and fees shall be calculated to but
excluding the Purchase Date if the amounts so paid by the Purchasing Creditors
to the bank account designated by the ABL Agent are received in such bank
account prior to 1:00 p.m., New York, New York time, and interest shall be
calculated to and including such Purchase Date if the amounts so paid by the
Purchasing Creditors to the bank account designated by the ABL Agent are
received in such bank account after 1:00 p.m., New York, New York time.

(c) Any purchase pursuant to the purchase option set forth in this Section 5.4
shall, except as provided below, be expressly made without representation or
warranty of any kind by the ABL Agent or the other ABL Secured Parties as to the
ABL Obligations, the collateral or otherwise, and without recourse to the ABL
Agent and the other ABL Secured Parties as to the ABL Obligations, the
collateral or otherwise, except that the ABL Agent and each of the ABL Secured
Parties, as to itself only, shall represent and warrant only as to (i) the
amount of the ABL Obligations being sold by it, (ii) that such Person has not
created any Lien on, or sold any participation in, any ABL Obligations being
sold by it, and (iii) that such Person has the right to assign the ABL
Obligations being assigned by it and its assignment agreement has been duly
authorized by it. The Credit Parties irrevocably, by their execution of the
acknowledgment hereto, authorize and consent to the ABL Agent and the other ABL
Secured Parties assigning the ABL Obligations to the Purchasing Creditors as
provided in this Section 5.4.

(d) In connection with any purchase of ABL Obligations pursuant to this
Section 5.4, each ABL Lender and ABL Agent agrees to enter into and deliver to
the Purchasing Creditors on the Purchase Date, as a condition to closing, an
assignment agreement in a form reasonably acceptable to each Agent and, at the
expense of the Credit Parties, the ABL Agent and each other ABL Lender shall
deliver all possessory collateral (if any), together with any necessary
endorsements and other documents (including any applicable stock powers or bond
powers), then in its possession or in the possession of its agent or bailee, or
turn over control as to any pledged collateral, Deposit Accounts or securities
accounts of which it or its agent or bailee then has control, as the case may
be, to any Person designated by the ABL Agent to act as the successor ABL Agent
and otherwise take such actions as may be reasonably appropriate to effect an
orderly transition to any Person designated by the Term Agent to act as the
successor ABL Agent. Upon the consummation of the purchase of the ABL
Obligations pursuant to this Section 5.4, the ABL Agent (and all other agents
under the ABL Credit Agreement) shall be deemed to have resigned as an “agent”
or “administrative agent” or “collateral agent” (or any similar role) for the
ABL Secured Parties under the ABL Documents; provided that the ABL Agent (and
all other agents under the ABL Credit Agreement) shall be entitled to all of the
rights and benefits of a former “agent” or “administrative agent” or “collateral
agent” under the ABL Documents.

 

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(e) Notwithstanding the foregoing purchase of the ABL Obligations by the
Purchasing Creditors, the ABL Secured Parties shall retain all contingent
indemnification obligations and other obligations under the ABL Documents which
by their express terms would survive any repayment of the ABL Obligations.

ARTICLE 6.

INSOLVENCY PROCEEDINGS

Section 6.1. DIP Financing.

(a) If any ABL Borrower or any ABL Guarantor shall be subject to any Insolvency
Proceeding at any time prior to the Discharge of ABL Obligations, and the ABL
Agent or the ABL Secured Parties shall seek to provide any ABL Borrower or any
ABL Guarantor with, or consent to a third party providing, any financing under
Section 364 of the Bankruptcy Code or consent to any order for the use of cash
collateral constituting ABL Priority Collateral under Section 363 of the
Bankruptcy Code (or any similar provision of any foreign Debtor Relief Laws or
under a court order in respect of measures granted with similar effect under any
foreign Debtor Relief Laws) (each, a “DIP Financing”), with such DIP Financing
to be secured by all or any portion of the Collateral (including assets that,
but for the application of Section 552 of the Bankruptcy Code (or any similar
provision of any foreign Debtor Relief Laws) would be Collateral), then the Term
Agent, on behalf of itself and the Term Secured Parties, agrees that it will
raise no objection and will not support any objection to such DIP Financing or
use of cash collateral or to the Liens securing the same on the grounds of a
failure to provide “adequate protection” for the Liens of the Term Agent on ABL
Priority Collateral securing the Term Obligations (and will not request any
adequate protection solely as a result of such DIP Financing or use of cash
collateral that is ABL Priority Collateral except as permitted by
Section 6.3(c)(i)), so long as (i) the Term Agent retains its Lien on the
Collateral to secure the Term Obligations (in each case, including Proceeds
thereof arising after the commencement of the case under any Debtor Relief Laws)
and, as to the Term Priority Collateral only, such Lien has the same priority as
existed prior to the commencement of the case under the subject Debtor Relief
Laws and any Lien on the Term Priority Collateral securing such DIP Financing is
junior and subordinate to the Lien of the Term Agent on the Term Priority
Collateral, (ii) the aggregate principal amount of loans and letter of credit
accommodations outstanding under any such DIP Financing, together with, but
without duplication, the aggregate outstanding principal amount of loans and
outstanding amount of letters of credit made, issued or incurred pursuant to the
ABL Documents, and any portion of any Carve Out for which the ABL Agent has not
established and maintained a Reserve against the ABL Borrowing Base does not
exceed the Maximum ABL Facility Amount; (iii) a reserve in the amount of any
Carve Out is implemented and maintained against the ABL Borrowing Base in such
DIP Financing and (iv) such DIP Financing shall not require the Credit Parties
to seek confirmation of a specific plan of reorganization for which all or
substantially all of the material terms are set forth in the documentation
evidencing such DIP Financing.

 

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(b) If any ABL Credit Party shall be subject to any Insolvency Proceeding at any
time prior to the Discharge of ABL Obligations and the ABL Credit Parties
request the use of cash collateral in such Insolvency Proceeding, the ABL Agent,
on behalf of the ABL Secured Parties, agrees that no ABL Secured Party shall
give its consent to any order for the use of cash collateral constituting ABL
Priority Collateral under Section 363 of the Bankruptcy Code (or any similar
provision of any foreign Debtor Relief Laws or under a court order in respect of
measures granted with similar effect under any foreign Debtor Relief Laws) that
is not stated to be subject to compliance with the Maximum ABL Facility Amount;
provided, however, that if the relevant court in such Insolvency Proceeding of
such Credit Parties approves the use of cash collateral notwithstanding the ABL
Secured Parties’ failure to consent to such request or court order, the Term
Agent, for and on behalf of the Term Secured Parties, agrees that if the
aggregate loans and letters of credit outstanding under the ABL Credit Agreement
and the amount of cash collateral constituting ABL Priority Collateral used or
proposed to be used by the relevant Credit Parties in such Insolvency Proceeding
at any time exceeds the Maximum ABL Facility Amount, all such excess amounts
shall not be subject to the limitations on the Maximum ABL Facility Amount for
all purposes under this Agreement and shall be treated as Inadvertent
Overadvances for the purposes of determining the Maximum ABL Facility Amount.
The Term Agent, for and on behalf of the Term Secured Parties, agree that the no
ABL Secured Party has any obligation to object to any order for the use of cash
collateral constituting ABL Priority Collateral under Section 363 of the
Bankruptcy Code (or any similar provision of any foreign Debtor Relief Laws or
under a court order in respect of measures granted with similar effect under any
foreign Debtor Relief Laws) that is not stated to be subject to compliance with
the Maximum ABL Facility Amount. Notwithstanding the foregoing in this
Section 6.1(b), if any of the ABL Credit Parties request the use of cash
collateral in an Insolvency Proceeding of such ABL Credit Parties in order to
liquidate all or substantially all of the ABL Priority Collateral, the Term
Agent, for and on behalf of the Term Secured Parties, agrees that the ABL
Secured Parties may (in their discretion) consent to the use of cash collateral
(including any order providing for such use) by such ABL Credit Parties and
further agrees that if the aggregate loans and letters of credit outstanding
under the ABL Credit Agreement and the amount of cash collateral constituting
ABL Priority Collateral used or proposed to be used by the relevant Credit
Parties in such Insolvency Proceeding at any time exceeds the Maximum ABL
Facility Amount, all such excess amounts shall not be subject to the limitations
on the Maximum ABL Facility Amount for all purposes under this Agreement and
shall be treated as Inadvertent Overadvances for the purposes of determining the
Maximum ABL Facility Amount. Except as set forth in Section 6.1(a), the Term
Agent and the Term Secured Parties may object to and seek adequate protection
for any request for use of cash collateral on any grounds including, without
limitation the failure to provide the Term Secured Parties adequate protection
for their interest in any of the Collateral.

(c) All Liens in respect of the ABL Obligations or the Term Obligations, as the
case may be, granted to the ABL Agent, the ABL Secured Parties, the Term Agent
or the Term Secured Parties in any Insolvency Proceeding, whether as adequate
protection or otherwise, are intended by the Parties to be and shall be deemed
to be subject to the Lien Priority and the other terms and conditions of this
Agreement.

(d) Each Agent, on behalf of its respective Secured Parties, agrees that none of
them, nor any of their respective Affiliates, shall offer to provide any DIP
Financing to the Credit Parties in any Insolvency Proceeding or endorse the
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Credit Parties in any Insolvency Proceeding which does not comply with the terms
and conditions of this Agreement. The Term Agent, on behalf of the Term Secured
Parties, hereby agrees and acknowledges that any consent or waiver of the terms
of this Agreement in respect of any DIP Financing or use of cash collateral in
any Insolvency Proceeding of any Credit Party provided by any of them in favor
of any ABL Secured Party (including any ABL Secured Party which is also an
affiliate of any Term Secured Party) shall automatically (and with no further
action on behalf of any Person) run in favor of all ABL Secured Parties in all
respects, and the Term Agent agrees to provide written notice to the ABL Agent
of any such consent or waiver and the details thereof.

(e) The Term Agent, on behalf of the Term Secured Parties each solely in their
capacity as Term Secured Parties, agrees that none of them shall offer to
provide any DIP Financing to the Credit Parties in any Insolvency Proceeding or
endorse the provision of any DIP Financing to the Credit Parties in any
Insolvency Proceeding in competition with any financing provided by or consented
to any of the ABL Secured Parties so long as the ABL Secured Parties (or any of
them) provide a commitment letter for a DIP Financing which complies with the
terms and conditions of this Agreement (an “ABL DIP Financing Proposal”) in
response to an initial written request from the Credit Parties for a DIP
Financing within ten (10) Business Days from receipt of such written request
from the Credit Parties (it being understood that ABL Lenders who are either
Term Secured Parties or affiliated with Term Secured Parties may, other than in
their capacity as Term Secured Parties, offer an ABL DIP Financing Proposal to
the Credit Parties in competition with an ABL DIP Financing Proposal of any
other ABL Lender). In the event that no ABL Secured Party provides an ABL DIP
Financing Proposal to the Credit Parties within the time period described in
this clause (e) above, any Term Secured Party, or any Affiliate thereof, may
offer to provide (i) a DIP Financing to the Credit Parties in such Insolvency
Proceeding so long as such DIP Financing provides for, and results in, the
Discharge of the ABL Obligations on the closing date of such DIP Financing and
(ii) a DIP Financing to the Credit Parties in such Insolvency Proceeding so long
as the Liens securing such DIP Financing are junior and subordinate in priority
in all respects to the Liens securing the ABL Obligations on all ABL Priority
Collateral.

(f) The Term Agent and the Term Secured Parties hereby agree that they shall not
offer to provide any DIP Financing to the Credit Parties in any Insolvency
Proceeding or endorse the provision of any DIP Financing to the Credit Parties
in any Insolvency Proceeding pursuant to which Liens that are senior or pari
passu in priority to the Liens securing the ABL Obligations are granted on the
ABL Priority Collateral. The ABL Agent and the ABL Secured Parties hereby agree
that they shall not offer to provide any DIP Financing to the Credit Parties in
any Insolvency Proceeding or endorse the provision of any DIP Financing to the
Credit Parties in any Insolvency Proceeding pursuant to which Liens that are
senior or pari passu in priority to the Liens securing the Term Obligations are
granted on the Term Priority Collateral. Nothing contained herein shall be
deemed to limit the rights of the ABL Agent or any ABL Secured Party to object
to DIP Financing or the use of cash collateral on any grounds.

Section 6.2. Relief From Stay. Until the Discharge of ABL Obligations has
occurred, the Term Agent, on behalf of itself and the Term Secured Parties,
agrees not to seek relief from the automatic stay or any other stay in any
Insolvency Proceeding in respect of any portion of the ABL Priority Collateral
without the ABL Agent’s express written consent. Until the Discharge

 

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of Term Obligations has occurred, the ABL Agent, on behalf of itself and the ABL
Secured Parties, agrees not to seek relief from the automatic stay or any other
stay in any Insolvency Proceeding in respect of any portion of the Term Priority
Collateral without the Term Agent’s express written consent. In addition,
neither the Term Agent nor the ABL Agent shall seek any relief from the
automatic stay or any other stay in any Insolvency Proceeding with respect to
any Collateral without providing three (3) Business Days’ prior written notice
to the other, unless such period is agreed by both the ABL Agent and the Term
Agent to be modified or unless the ABL Agent or Term Agent, as applicable, makes
a good faith determination that either (A) the ABL Priority Collateral or the
Term Priority Collateral, as applicable, will decline speedily in value or
(B) the failure to take any action will have a reasonable likelihood of
endangering the ABL Agent’s or the Term Agent’s ability to realize upon its
Collateral.

Section 6.3. No Contest; Adequate Protection.

(a) The Term Agent, on behalf of itself and the Term Secured Parties, agrees
that, prior to the Discharge of ABL Obligations, none of them shall contest (or
support any other Person contesting) (i) any request by the ABL Agent or any ABL
Secured Party for adequate protection of its interest in the Collateral in
compliance with the terms of this Agreement, (ii) any proposed provision of DIP
Financing by the ABL Agent and/or some or all of the ABL Secured Parties
consistent with Section 6.1 on adequate protection grounds, or (iii) any
objection by the ABL Agent or any ABL Secured Party to any motion, relief,
action, or proceeding based on a claim by the ABL Agent or any ABL Secured Party
that its interests in the Collateral are not adequately protected (or any other
similar request under any law applicable to an Insolvency Proceeding), so long
as (x) any Liens granted to the ABL Agent as adequate protection of its
interests are subject to this Agreement and (y) any payments with respect to
such adequate protection are not made with the Proceeds of Term Priority
Collateral.

(b) The ABL Agent, on behalf of itself and the ABL Secured Parties, agrees that,
prior to the Discharge of Term Obligations, none of them shall contest (or
support any other Person contesting) (i) any request by the Term Agent or any
Term Secured Party for adequate protection of its interest in the Collateral
(unless in contravention of Section 6.1(a) above) or (ii) any objection by the
Term Agent or any Term Secured Party to any motion, relief, action or proceeding
based on a claim by the Term Agent or any Term Secured Party that its interests
in the Collateral (unless in contravention of Section 6.1(a) above) are not
adequately protected (or any other similar request under any law applicable to
an Insolvency Proceeding), so long as (x) any Liens granted to the Term Agent as
adequate protection of its interests are subject to this Agreement and (y) any
payments with respect to such adequate protection are not made with the Proceeds
of ABL Priority Collateral, except that, subject to the following conditions,
the ABL Agent will not contest adequate protection payments of interest at the
contract rate and reasonable fees and expenses of the Term Agent from Proceeds
of ABL Priority Collateral: (a) to the extent such payments are approved by a
final order of the bankruptcy court approving DIP Financing or the use of cash
collateral consented to by the ABL Agent, (b) the ABL Secured Parties are also
receiving adequate protection payments covering their interest and fees at the
contract rate and other reasonable fees and expenses, and (c) the amount of such
payments is added to the Maximum ABL Facility Amount.

(c) In any Insolvency Proceeding:

 

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(i) in the event that the ABL Agent, on behalf of itself or any of the ABL
Secured Parties, is granted adequate protection with respect to the ABL Priority
Collateral in the form of additional collateral (even if such collateral is not
of a type which would otherwise have constituted ABL Priority Collateral), then
the ABL Agent, on behalf of itself and the ABL Secured Parties, agrees that the
Term Agent, on behalf of itself or any of the Term Secured Parties, may seek or
request (and the ABL Secured Parties will not oppose such 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 to the
Liens securing the ABL Obligations on the same basis as the other Liens of the
Term Agent on ABL Priority Collateral; and

(ii) in the event that the Term Agent, on behalf of itself or any of the Term
Secured Parties, is granted adequate protection in respect of Term Priority
Collateral in the form of additional collateral (even if such collateral is not
of a type which would otherwise have constituted Term Priority Collateral), then
the Term Agent, on behalf of itself and the Term Secured Parties, agrees that
the ABL Agent on behalf of itself or any of the ABL Secured Parties, may seek or
request (and the Term Secured Parties will not oppose such 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 to the
Liens securing the Term Obligations on the same basis as the other Liens of the
ABL Agent on Term Priority Collateral.

(d) Nothing herein shall limit the rights of (A) the Term Agent or the Term
Secured Parties from seeking adequate protection with respect to their rights in
the Term Priority Collateral in any Insolvency Proceeding (including adequate
protection in the form of a cash payment, periodic cash payments or otherwise)
and (B) the ABL Agent or the ABL Secured Parties from seeking adequate
protection with respect to their rights in the ABL Priority Collateral in any
Insolvency Proceeding (including adequate protection in the form of a cash
payment, periodic cash payments or otherwise).

(e) Neither the Term Agent nor any Term Secured Party shall seek adequate
protection with respect to their rights in the ABL Priority Collateral in any
Insolvency Proceeding except as set forth in this Agreement.

(f) Neither the ABL Agent nor any ABL Secured Party shall seek adequate
protection with respect to their rights in the Term Priority Collateral in any
Insolvency Proceeding except as set forth in this Agreement.

(g) Neither the Term Agent nor any Term Secured Party shall oppose or seek to
challenge any claim by the ABL Agent or any ABL Secured Party for allowance in
any Insolvency Proceeding of ABL Obligations consisting of post-petition
interest, fees or expenses to the extent of the value of the Lien securing any
ABL Secured Party’s claim, without regard to the existence of the Lien of the
Term Agent on behalf of the Term Secured Parties on the ABL Priority Collateral.

(h) Neither the ABL Agent nor any other ABL Secured Party shall oppose or seek
to challenge any claim by the Term Agent or any Term Secured Party for allowance
in any Insolvency Proceeding of Term Obligations consisting of post-petition
interest, fees or expenses

 

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to the extent of the value of the Lien securing any Term Secured Party’s claim,
without regard to the existence of the Lien of the ABL Agent on behalf of the
ABL Secured Parties on the Term Priority Collateral.

Section 6.4. Asset Sales. The Term Agent agrees, on behalf of itself and the
Term Secured Parties, that it will not oppose any sale consented to by the ABL
Agent of any ABL Priority Collateral pursuant to Section 363(f) of the
Bankruptcy Code (or any similar provision under the law applicable to any
Insolvency Proceeding or under a court order in respect of measures granted with
similar effect under any foreign Debtor Relief Laws) so long as the Proceeds of
such sale are applied in accordance with this Agreement. The ABL Agent agrees,
on behalf of itself and the ABL Secured Parties, that it will not oppose any
sale consented to by the Term Agent of any Term Priority Collateral pursuant to
Section 363(f) of the Bankruptcy Code (or any similar provision under the law
applicable to any Insolvency Proceeding or under a court order in respect of
measures granted with similar effect under any foreign Debtor Relief Laws) so
long as the Proceeds of such sale are applied in accordance with this Agreement.
In connection with the sale of any Collateral, the parties agree that they will
support the debtor in obtaining a bid from a nationally recognized liquidator as
a stalking horse bid. The allocation of purchase price contained in any purchase
agreement relating to such sale shall not control such allocation, unless agreed
to by the ABL Agent and the Term Agent.

Section 6.5. Separate Grants of Security and Separate Classification. Each Term
Secured Party and each ABL Secured Party acknowledges and agrees that (i) the
grants of Liens pursuant to the ABL Collateral Documents and the Term Collateral
Documents constitute two separate and distinct grants of Liens and (ii) because
of, among other things, their differing rights in the Collateral, the Term
Obligations are fundamentally different from the ABL Obligations and must be
separately classified in any plan of reorganization (or other plan of similar
effect under any Debtor Relief Laws) proposed or adopted in an Insolvency
Proceeding. To further effectuate the intent of the parties as provided in the
immediately preceding sentence, if it is held that the claims of the ABL Secured
Parties and the Term Secured Parties in respect of the Collateral constitute
only one secured claim (rather than separate classes of senior and junior
secured claims), then the ABL Secured Parties and the Term Secured Parties
hereby acknowledge and agree that all distributions shall be made as if there
were separate classes of ABL Obligation claims and Term Obligation claims
against the Credit Parties, with the effect being that, to the extent that the
aggregate value of the ABL Priority Collateral or Term Priority Collateral is
sufficient (for this purpose ignoring all claims held by the other Secured
Parties), the ABL Secured Parties or the Term Secured Parties, respectively,
shall be entitled to receive, in addition to amounts distributed to them in
respect of principal, pre-petition interest and other claims, all amounts owing
in respect of post-petition interest that is available from each pool of
Priority Collateral for each of the ABL Secured Parties and the Term Secured
Parties, respectively, before any distribution is made in respect of the claims
held by the other Secured Parties from such Priority Collateral, with such other
Secured Parties hereby acknowledging and agreeing to turn over to the ABL
Secured Parties and the Term Secured Parties, as the case may be, amounts
otherwise received or receivable by them to the extent necessary to effectuate
the intent of this sentence, even if such turnover has the effect of reducing
the aggregate recoveries.

 

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Section 6.6. Enforceability. This Agreement shall be applicable, as to
Collateral and the proceeds thereof in existence before the commencement of any
Insolvency Proceeding, both before and after the commencement of any Insolvency
Proceeding and all converted or succeeding cases in respect thereof. The
relative rights of the Secured Parties in or to any distributions from or in
respect of any such Collateral or proceeds of such Collateral, shall continue
after the commencement of any Insolvency Proceeding. All references herein to
any Credit Party shall be deemed to apply to any debtor in possession, any
trustee, receiver, receiver manager, interim receiver or monitor for such Credit
Party. Any reference to Agent or Secured Parties shall be deemed to apply to any
agent or secured parties under any DIP Financing. Accordingly, the provisions of
this Agreement are intended to be and shall be enforceable as a subordination
agreement within the meaning of Section 510 of the Bankruptcy Code or any other
applicable provisions of any other Debtor Relief Law.

Section 6.7. ABL Obligations Unconditional. All rights of the ABL Agent
hereunder, and all agreements and obligations of the Term Agent and the Credit
Parties (to the extent applicable) hereunder, shall remain in full force and
effect irrespective of any change in the time, place or manner of payment of, or
in any other term of, all or any portion of the ABL Obligations, or any
amendment, waiver or other modification, whether by course of conduct or
otherwise, or any refinancing, replacement, refunding or restatement of any ABL
Document in accordance with the terms hereof.

Section 6.8. Term Obligations Unconditional. All rights of the Term Agent
hereunder, all agreements and obligations of the ABL Agent and the Credit
Parties (to the extent applicable) hereunder, shall remain in full force and
effect irrespective of any change in the time, place or manner of payment of, or
in any other term of, all or any portion of the Term Obligations, or any
amendment, waiver or other modification, whether by course of conduct or
otherwise, or any refinancing, replacement, refunding or restatement of any Term
Document in accordance with the terms hereof.

Section 6.9. Reorganization Securities. Subject to the ability of the ABL
Secured Parties and the Term Secured Parties, as applicable, to support or
oppose confirmation or approval of any plan of reorganization, compromise or
arrangement or a proposal as provided herein, if, in any Insolvency Proceeding,
debt obligations of the reorganized debtor secured by Liens upon any property of
the reorganized debtor are distributed pursuant to a plan of reorganization
compromise or arrangement or a proposal, both on account of ABL Obligations and
on account of Term Obligations, then, to the extent the debt obligations
distributed on account of the ABL Obligations and on account of the Term
Obligations are secured by Liens upon the same property, the provisions of this
Agreement will survive the distribution of such debt obligations pursuant to
such plan or proposal and will apply with like effect to the debt obligations so
distributed, to the Liens securing such debt obligations and the distribution of
Proceeds thereof.

Section 6.10. Rights as Unsecured Creditors. Except as expressly provided in
this Agreement, nothing contained herein shall affect the rights or claims of
any Agent or any Secured Party as an unsecured creditor in any Insolvency
Proceeding, and the Agents and the Secured Parties shall retain all such rights
and claims.

 

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ARTICLE 7.

MISCELLANEOUS

Section 7.1. Rights of Subrogation. The Term Agent, for and on behalf of itself
and the Term Secured Parties, agrees that no payment to the ABL Agent or any ABL
Secured Party pursuant to the provisions of this Agreement shall entitle the
Term Agent or any Term Secured Party to exercise any rights of subrogation in
respect thereof until the Discharge of ABL Obligations shall have occurred.
Following the Discharge of ABL Obligations, the ABL Agent agrees to execute such
documents, agreements, and instruments as the Term Agent or any Term Secured
Party may reasonably request to evidence the transfer by subrogation to any such
Person of an interest in the ABL Obligations resulting from payments to the ABL
Agent by such Person, so long as all costs and expenses (including all
reasonable legal fees and disbursements) incurred in connection therewith by the
ABL Agent are paid by such Person upon request for payment thereof. The ABL
Agent, for and on behalf of itself and the ABL Secured Parties, agrees that no
payment to the Term Agent or any Term Secured Party pursuant to the provisions
of this Agreement shall entitle the ABL Agent or any ABL Secured Party to
exercise any rights of subrogation in respect thereof until the Discharge of
Term Obligations shall have occurred. Following the Discharge of Term
Obligations, the Term Agent agrees to execute such documents, agreements, and
instruments as the ABL Agent or any ABL Secured Party may reasonably request to
evidence the transfer by subrogation to any such Person of an interest in the
Term Obligations resulting from payments to the Term Agent by such Person, so
long as all costs and expenses (including all reasonable legal fees and
disbursements) incurred in connection therewith by the Term Agent are paid by
such Person upon request for payment thereof.

Section 7.2. Further Assurances. The Parties will, at the expense of the Credit
Parties, promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that either
Party may reasonably request, in order to protect any right or interest granted
or purported to be granted hereby or to enable the ABL Agent or the Term Agent
to exercise and enforce its rights and remedies hereunder; provided, however,
that no Party shall be required to pay over any payment or distribution, execute
any instruments or documents, or take any other action referred to in this
Section 7.2, to the extent that such action would contravene any law, order or
other legal requirement or any of the terms or provisions of this Agreement, and
in the event of a controversy or dispute, such Party may interplead any payment
or distribution in any court of competent jurisdiction, without further
responsibility in respect of such payment or distribution under this
Section 7.2.

Section 7.3. Representations. The Term Agent represents and warrants to the ABL
Agent that it has the requisite power and authority under the Term Documents to
enter into, execute, deliver, and carry out the terms of this Agreement on
behalf of itself and the Term Secured Parties and that this Agreement shall be
binding obligations of the Term Agent and the Term Secured Parties, enforceable
against the Term Agent and the Term Secured Parties in accordance with its
terms. The ABL Agent represents and warrants to the Term Agent that it has the
requisite power and authority under the ABL Documents to enter into, execute,
deliver, and carry out the terms of this Agreement on behalf of itself and the
ABL Secured Parties and that this Agreement shall be binding obligations of the
ABL Agent and the ABL Secured Parties, enforceable against the ABL Agent and the
ABL Secured Parties in accordance with its terms.

Section 7.4. Amendments. No amendment or waiver of any provision of this
Agreement nor consent to any departure by any Party hereto shall be effective
unless it is in a written agreement executed by the Term Agent and the ABL Agent
and then such waiver or

 

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consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that this Agreement may be amended
from time to time, without the consent of either Agent, to add additional Credit
Parties, whereupon such Person will be bound by the terms hereof to the same
extent as if it had executed and delivered this Agreement as of the date hereof.

Section 7.5. Addresses for Notices. Unless otherwise specifically provided
herein, any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telecopied, sent
electronically in PDF or similar format or sent by overnight express courier
service or United States mail and shall be deemed to have been given when
delivered in person or by courier service, upon receipt of a telecopy or
electronic transmission or five (5) days after deposit in the United States mail
(certified, with postage prepaid and properly addressed). For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section) shall be as set forth below or, as to
each party, at such other address as may be designated by such party in a
written notice to all of the other parties.

 

ABL Agent:   

General Electric Capital Corporation

401 Merritt 7, UL-109

Norwalk, CT 06851

Attention: The Talbots, Inc. Portfolio Manager

Fax: (203) 956-4098

Term Agent:   

Wells Fargo Bank, National Association

One Boston Place

18th Floor

Boston, MA 02108

Attention: Adam Salter

Fax: 877-774-7409

Section 7.6. No Waiver; Remedies. No failure on the part of any Party to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

Section 7.7. Continuing Agreement, Transfer of Secured Obligations. This
Agreement is a continuing agreement and shall (a) remain in full force and
effect until the Discharge of ABL Obligations and the Discharge of Term
Obligations shall have occurred, (b) be binding upon the Parties and their
successors and assigns, and (c) inure to the benefit of and be enforceable by
the Parties and their respective successors, transferees and assigns. Nothing
herein is intended, or shall be construed to give, any other Person any right,
remedy or claim under, to or in respect of this Agreement or any Collateral. All
references to any Credit Party shall include any Credit Party as
debtor-in-possession and any receiver, interim receiver, receiver-manager,
monitor or trustee for such Credit Party in any Insolvency Proceeding. Without
limiting the generality of the foregoing clause (c), the ABL Agent, any ABL
Secured Party, the Term Agent, or any Term Secured Party may assign or otherwise
transfer all or any

 

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portion of the ABL Obligations or the Term Obligations, as applicable, to any
other Person (other than any Borrower, any Guarantor or any Affiliate of any
Borrower or any Guarantor and any Subsidiary of any Borrower or any Guarantor),
and such other Person shall thereupon become vested with all the rights and
obligations in respect thereof granted to the ABL Agent, the Term Agent, any ABL
Secured Party, or any Term Secured Party, as the case may be, herein or
otherwise. The ABL Secured Parties and the Term Secured Parties may continue, at
any time and without notice to the other parties hereto, to extend credit and
other financial accommodations, lend monies and provide Indebtedness to, or for
the benefit of, any Credit Party on the faith hereof.

Section 7.8. Governing Law; Entire Agreement. The validity, performance, and
enforcement of this Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York (excluding the laws applicable to
conflicts or choice of law (other than the New York General Obligations Law
§5-1401)). This Agreement constitutes the entire agreement and understanding
among the Parties with respect to the subject matter hereof and supersedes any
prior agreements, written or oral, with respect thereto.

Section 7.9. Counterparts. This Agreement may be executed in any number of
counterparts, and it is not necessary that the signatures of all Parties be
contained on any one counterpart hereof, each counterpart will be deemed to be
an original, and all together shall constitute one and the same document.
Delivery of an executed signature page of this Agreement by facsimile or
electronic transmission (including .pdf format) shall be as effective as
delivery of a manually executed counterpart hereof.

Section 7.10. No Third Party Beneficiaries. This Agreement is solely for the
benefit of the ABL Agent, the ABL Secured Parties, the Term Agent and the Term
Secured Parties. No other Person (including any Borrower, any Guarantor or any
Affiliate of any Borrower or any Guarantor, or any Subsidiary of any Borrower or
any Guarantor) shall be deemed to be a third party beneficiary of this
Agreement.

Section 7.11. Headings. The headings of the articles and sections of this
Agreement are inserted for purposes of convenience only and shall not be
construed to affect the meaning or construction of any of the provisions hereof.

Section 7.12. Severability. If any of the provisions in this Agreement shall,
for any reason, be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
of this Agreement and shall not invalidate the Lien Priority or the application
of Proceeds and other priorities set forth in this Agreement.

Section 7.13. VENUE; JURY TRIAL WAIVER.

(a) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE
STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT
COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF

 

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OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN
SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY ABL SECURED PARTY OR
ANY TERM SECURED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT, ANY TERM DOCUMENTS, OR ANY ABL DOCUMENTS AGAINST ANY
CREDIT PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(b) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
HERETO REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.

(c) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN
THE MANNER PROVIDED FOR NOTICES IN SECTION 7.5. NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.

Section 7.14. Intercreditor Agreement. This Agreement is the “Term Loan B
Intercreditor Agreement” referred to in the ABL Credit Agreement and the “ABL
Intercreditor Agreement” referred to in the Term Loan Agreement. Nothing in this
Agreement shall be deemed to subordinate the obligations due to (i) any ABL
Secured Party to the obligations due to any Term Secured Party or (ii) any Term
Secured Party to the obligations due to any ABL Secured Party (in each case,
whether before or after the occurrence of an Insolvency Proceeding), it being
the intent of the Parties that this Agreement shall effectuate a subordination
of Liens but not a subordination of Indebtedness.

Section 7.15. No Warranties or Liability. The Term Agent and the ABL Agent
acknowledge and agree that neither has made any representation or warranty with
respect to the execution, validity, legality, completeness, collectability or
enforceability of any other ABL Document or any Term Document. Except as
otherwise provided in this Agreement, the Term Agent and the ABL Agent will be
entitled to manage and supervise their respective extensions of credit to any
Credit Party in accordance with law and their usual practices, modified from
time to time as they deem appropriate.

 

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Section 7.16. Conflicts. In the event of any conflict between the provisions of
this Agreement and the provisions of any ABL Document or any Term Document, the
provisions of this Agreement shall govern.

Section 7.17. Information Concerning Financial Condition of the Credit Parties.
Each of the Term Agent and the ABL Agent hereby assumes responsibility for
keeping itself informed of the financial condition of the Credit Parties and all
other circumstances bearing upon the risk of nonpayment of the ABL Obligations
or the Term Obligations. The Term Agent and the ABL Agent hereby agree that no
party shall have any duty to advise any other party of information known to it
regarding such condition or any such circumstances. In the event the Term Agent
or the ABL Agent, in its sole discretion, undertakes at any time or from time to
time to provide any information to any other party to this Agreement, (a) it
shall be under no obligation (i) to provide any such information to such other
party or any other party on any subsequent occasion except as required pursuant
to Section 3.3, (ii) to undertake any investigation not a part of its regular
business routine, or (iii) to disclose any other information, or (b) it makes no
representation as to the accuracy or completeness of any such information and
shall not be liable for any information contained therein, and (c) the Party
receiving such information hereby to hold the other Party harmless from any
action the receiving Party may take or conclusion the receiving Party may reach
or draw from any such information, as well as from and against any and all
losses, claims, damages, liabilities, and expenses to which such receiving Party
may become subject arising out of or in connection with the use of such
information.

[Remainder of page intentionally left blank.]

 

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IN WITNESS WHEREOF, the ABL Agent, for and on behalf of itself and the ABL
Lenders, and the Term Agent, for and on behalf of itself and the Term Lenders,
have caused this Agreement to be duly executed and delivered as of the date
first above written.

 

GENERAL ELECTRIC CAPITAL CORPORATION, in its capacity as the ABL Agent

By:

 

/s/ Mark J. Forti

Name:

  Mark J. Forti

Title:

  Duly Authorized Signatory

[Signature Page to Intercreditor Agreement]

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WELLS FARGO BANK, NATIONAL ASSOCIATION, in its capacity as the Term Agent By:  

/s/ Adam D. Salter

Name:   Adam D. Salter Title:   Managing Director

[Signature Page to Intercreditor Agreement]

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ACKNOWLEDGMENT

Each Borrower and each Guarantor hereby acknowledges that it has received a copy
of this Agreement and consents thereto, agrees to recognize all rights granted
thereby to the ABL Agent, the ABL Secured Parties, the Term Agent, and the Term
Secured Parties and will not do any act or perform any obligation which is not
in accordance with the agreements set forth in this Agreement. Each Borrower and
each Guarantor further acknowledges and agrees that it is not an intended
beneficiary or third party beneficiary under this Agreement and (i) as between
the ABL Secured Parties, the Borrowers and the Guarantors, the ABL Documents
remain in full force and effect as written and are in no way modified hereby,
and (ii) as between the Term Secured Parties, the Borrowers and the Guarantors,
the Term Documents remain in full force and effect as written and are in no way
modified hereby.

 

BORROWERS: THE TALBOTS, INC. By:  

/s/ Michael Scarpa

Name:   Michael Scarpa Title:   Chief Operating Officer, Chief Financial Officer
and Treasurer THE TALBOTS GROUP, LIMITED PARTNERSHIP By:  

/s/ Michael Scarpa

Name:   Michael Scarpa Title:   Vice President and Treasurer TALBOTS CLASSICS
FINANCE COMPANY, INC. By:  

/s/ Richard T. O’Connell, Jr.

Name:   Richard T. O’Connell, Jr. Title:   Vice President

[Signature Page to Intercreditor Agreement]

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GUARANTORS: TALBOTS CLASSICS, INC. By:  

/s/ Richard T. O’Connell, Jr.

Name:   Richard T. O’Connell, Jr. Title:   Vice President TALBOTS IMPORT, LLC
By:  

/s/ Richard T. O’Connell, Jr.

Name:   Richard T. O’Connell, Jr. Title:   Vice President BIRCH POND REALTY
CORPORATION By:  

/s/ Richard T. O’Connell, Jr.

Name:   Richard T. O’Connell, Jr. Title:   Vice President TALBOTS (CANADA), INC.
By:  

/s/ Richard T. O’Connell, Jr.

Name:   Richard T. O’Connell, Jr. Title:   Vice President TALBOTS (CANADA)
CORPORATION By:  

/s/ Richard T. O’Connell, Jr.

Name:   Richard T. O’Connell, Jr. Title:   Vice President

[Signature Page to Intercreditor Agreement]