Exhibit
10.8




 





 


INTERCREDITOR AGREEMENT


 


by and between


 


BANK OF AMERICA, N.A.,


 


as ABL Agent,


 


and


 


Z INVESTMENT HOLDINGS, LLC,


 


as Term Agent


 


 


Dated as of May 10, 2010




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1 DEFINITIONS

  	
  4

  
	
   

  	
   

  
	
  Section 1.1

  	
  UCC Definitions

  	
  4

  
	
  Section 1.2

  	
  Other Definitions

  	
  4

  
	
  Section 1.3

  	
  Rules of Construction

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 LIEN PRIORITY

  	
  15

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
  Priority of Liens

  	
  15

  
	
  Section 2.2

  	
  Waiver of Right to Contest Liens

  	
  16

  
	
  Section 2.3

  	
  Remedies Standstill

  	
  17

  
	
  Section 2.4

  	
  Exercise of Rights

  	
  18

  
	
  Section 2.5

  	
  No New Liens

  	
  20

  
	
  Section 2.6

  	
  Waiver of Marshalling

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 ACTIONS OF
  THE PARTIES

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
  Certain Actions Permitted

  	
  21

  
	
  Section 3.2

  	
  Agent for Perfection

  	
  21

  
	
  Section 3.3

  	
  Insurance

  	
  22

  
	
  Section 3.4

  	
  No Additional Rights For the Loan Parties Hereunder

  	
  22

  
	
  Section 3.5

  	
  Inspection and Access Rights

  	
  22

  
	
  Section 3.6

  	
  Tracing of and Priorities in Proceeds

  	
  24

  
	
  Section 3.7

  	
  Payments Over

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 APPLICATION
  OF PROCEEDS

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
  Application of Proceeds

  	
  25

  
	
  Section 4.2

  	
  Specific Performance

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 INTERCREDITOR
  ACKNOWLEDGEMENTS AND WAIVERS

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 5.1

  	
  Notice of Acceptance and Other Waivers

  	
  27

  
	
  Section 5.2

  	
  Modifications to ABL Documents and Term Documents

  	
  29

  
	
  Section 5.3

  	
  Reinstatement and Continuation of Agreement

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 INSOLVENCY
  PROCEEDINGS

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 6.1

  	
  DIP Financing

  	
  32

  
	
  Section 6.2

  	
  Relief From Stay

  	
  33

  
	
  Section 6.3

  	
  No Contest; Adequate Protection

  	
  34

  
	
  Section 6.4

  	
  Asset Sales

  	
  35

  
	
  Section 6.5

  	
  Separate Grants of Security and Separate Classification

  	
  36

  
	
  Section 6.6

  	
  Enforceability

  	
  36

  
	
  Section 6.7

  	
  ABL Obligations Unconditional

  	
  36

  
	
  Section 6.8

  	
  Term Obligations Unconditional

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7 PURCHASE
  OPTION

  	
  37

  
	
   

  	
   

  
	
  Section 7.1

  	
  Option to Purchase ABL Obligations

  	
  37

  



 


i

















 


	
  ARTICLE 8 MISCELLANEOUS

  	
  39

  
	
   

  	
   

  
	
  Section 8.1

  	
  Rights of Subrogation

  	
  39

  
	
  Section 8.2

  	
  Further Assurances

  	
  39

  
	
  Section 8.3

  	
  Representations

  	
  39

  
	
  Section 8.4

  	
  Amendments

  	
  40

  
	
  Section 8.5

  	
  Addresses for Notices

  	
  40

  
	
  Section 8.6

  	
  No Waiver; Remedies

  	
  41

  
	
  Section 8.7

  	
  Continuing Agreement, Transfer of Secured Obligations

  	
  41

  
	
  Section 8.8

  	
  Governing Law; Entire Agreement

  	
  41

  
	
  Section 8.9

  	
  Counterparts

  	
  42

  
	
  Section 8.10

  	
  No Third Party Beneficiaries

  	
  42

  
	
  Section 8.11

  	
  Headings

  	
  42

  
	
  Section 8.12

  	
  Severability

  	
  42

  
	
  Section 8.13

  	
  Attorneys’ Fees

  	
  42

  
	
  Section 8.14

  	
  VENUE; JURY TRIAL WAIVER

  	
  42

  
	
  Section 8.15

  	
  Intercreditor Agreement

  	
  43

  
	
  Section 8.16

  	
  No Warranties or Liability

  	
  43

  
	
  Section 8.17

  	
  Conflicts

  	
  43

  
	
  Section 8.18

  	
  Information Concerning Financial Condition
  of the Obligors

  	
  43

  



 


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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 May 10, 2010 between BANK OF
AMERICA, N.A. (“Bank of America”),
in its capacity as administrative agent and collateral agent (together with its
respective successors and assigns in such capacities, the “ABL Agent”)
for (i) the financial institutions party from time to time to the ABL
Credit Agreement referred to below (such financial institutions, together with
their respective successors, assigns and transferees, the “ABL
Lenders”) and (ii) any
ABL Bank Product Affiliates and ABL Cash Management Affiliates (each as defined
below) (such ABL Bank Product Affiliates and ABL Cash Management Affiliates,
together with the ABL Agent and the ABL Lenders, the “ABL
Secured Parties”) and Z INVESTMENT HOLDINGS, LLC
in its capacity as administrative agent (together with its successors and
assigns in such capacities, the “Term Agent”) for the
financial institutions party from time to time to the Term Credit Agreement
referred to below (such financial institutions, together with their respective
successors, assigns and transferees, the “Term Lenders”) (such Term
Agent and the Term Lenders, the “Term Secured Parties”).


 


RECITALS


 


A.            Pursuant to that certain Amended and Restated Credit
Agreement dated as of May 10, 2010 by and among the ABL Borrowers, the ABL
Guarantors, the ABL Lenders and the ABL Agent (as such agreement may be
amended, supplemented, restated or otherwise modified from time to time in
accordance with the terms hereof and thereof, the “ABL Credit Agreement”),
the ABL Lenders have agreed to make certain loans and provide other financial
accommodations to or for the benefit of the ABL Borrowers.


 


B.            Pursuant to certain Facility Guarantees dated as of the
date hereof (collectively, the “ABL Guaranty”),
certain Subsidiaries of the ABL Borrowers (the “ABL
Guarantors”) have guaranteed all of the obligations outstanding
under the ABL Credit Agreement.


 


C.            Pursuant to the ABL Collateral Documents (as hereinafter
defined) by the ABL Borrowers and the ABL Guarantors in favor of the ABL Agent
for the benefit of the ABL Secured Parties, the ABL Borrowers and the ABL
Guarantors have granted a security interest and lien in certain of their assets
(including, without limitation, accounts receivables, inventory and other
assets related thereto) to secure the respective obligations of each of the ABL
Borrowers and ABL Guarantors under the ABL Documents.


 


C.            Pursuant to that certain Credit Agreement dated as of May 10,
2010 by and among Zale Corporation (the “Term Borrower”),
the Term Lenders and the Term Agent (as such agreement may be amended,
supplemented, restated or otherwise modified from time to time in accordance
with the terms hereof and thereof, the “Term Credit Agreement”),
the Term Lenders have agreed to make a certain term loan to the Term Borrower
in the principal amount of $150,000,000.


 


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D.            Pursuant to a certain guaranties dated as of the date
hereof (collectively, the “Term Guaranty”),
certain Subsidiaries of the Term Borrower (the “Term
Guarantors”) have guaranteed all of the obligations outstanding
under the Term Credit Agreement.


 


E.             Pursuant to those certain security agreements dated as
of the date hereof (collectively, the “Term Security Agreement)
by the Term Borrower and the Term Guarantors in favor of the Term Agent for the
benefit of the Term Secured Parties, the Term Borrower and the Term Guarantors
have granted a security interest and lien in certain of their assets to secure
the obligations of the Term Borrower and Term Guarantors under the Term
Documents.


 


E.             Each of the ABL Agent (on behalf of the ABL Secured
Parties) and the Term Agent (on behalf of the Term Secured Parties) desire to
agree to the relative priority of Liens on the Collateral (as defined below)
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. Unless
otherwise defined herein, all capitalized terms used herein shall have the same
meaning herein as in the Uniform Commercial Code.


 


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 successors thereto as well as any Person
designated as the “Agent”, “Administrative Agent”, or “Collateral Agent” under
any ABL Credit Agreement.


 


“ABL Bank Products
Affiliate” shall mean any ABL Lender or any branch or
Affiliate of any ABL Lender that has entered into a Hedging Agreement or other
Bank Product with an ABL Obligor with the obligations of such ABL Obligor
thereunder being secured by one or more ABL Collateral Documents, together with
their respective successors, assigns and transferees.


 


“ABL Borrowers”
shall mean, collectively, Zale Delaware, Inc., Zale Corporation, ZGCO,
LLC, TXDC, L.P., and Zale Puerto Rico, Inc. and any other Person who
hereafter becomes a “Borrower” under the ABL Credit Agreement.


 


“ABL Cash Management
Affiliate” shall mean any ABL Lender or any branch or
Affiliate of an ABL Lender that provides Cash Management Services to any of the
ABL Obligors with the obligations of such ABL Obligors thereunder being secured
by one or more ABL Collateral Documents, together with their respective
successors, assigns and transferees.


 


“ABL Collateral
Documents” shall mean the ABL Security Agreements, together with
all other security agreements, mortgages, deeds of trust, account control
agreements, freight forwarder and/or customs broker’s agreements, collateral
access agreements, license agreements 


 


4

















 


and
other collateral documents executed and delivered in connection with the ABL
Credit Agreement, 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, whether by the same or any other
agent, lender or group of lenders.


 


“ABL Documents”
shall mean the ABL Credit Agreement, any ABL Notes, the ABL Collateral
Documents, all Hedging Agreements and other Bank Products between any ABL
Obligor and any ABL Bank Products Affiliate, all Cash Management Services
agreements between any ABL Obligor and any ABL Cash Management Affiliate, those
other ancillary agreements to which any ABL Secured Party is a party or
beneficiary and all other agreements, instruments, documents and certificates,
now or hereafter executed by or on behalf of any ABL Obligor and delivered to
the ABL Agent or any other ABL Secured Party, in connection with any of the
foregoing or with the ABL Credit Agreement or the ABL Security 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 and thereof.


 


“ABL
Guarantors” shall have the meaning assigned to such term in the
recitals to this Agreement and any other Person who hereafter becomes a “Facility
Guarantor” under the ABL Credit Agreement.


 


“ABL
Guaranty” shall have the meaning assigned to such term in the
recitals to this Agreement as the same may be amended, supplemented, restated
or otherwise modified from time to time and shall also include any other
agreement amending or replacing such guaranty, whether with the same or any
other agent, lender or group of lenders.


 


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


 


“ABL Note”
shall mean any promissory note executed and delivered by the ABL Borrowers to
evidence any loan made pursuant to the ABL Credit Agreement, as the same may be
amended, modified, extended, renewed, refunded, consolidated, replaced,
restructured or refinanced from time to time in accordance with the terms
hereof and thereof.


 


“ABL Obligations”
shall mean, collectively, all “Obligations” as such term is defined in the ABL
Credit Agreement, and all obligations of the ABL Guarantors under the ABL Guaranty.


 


“ABL
Obligors” means collectively, the ABL Borrowers and the ABL
Guarantors.


 


“ABL Priority
Collateral” shall mean all Collateral
consisting of the following:


 


(1)           all Accounts;


 


(2)           all Inventory;


 


5

















 


(3)           all Deposit Accounts, Concentration Accounts, and
Securities Accounts consisting of Account No. 487498743 maintained with
Fidelity Brokerage Services LLC or any other account which replaces such
Securities Account with Fidelity Brokerage Services LLC and used for short term
investments for cash management purposes (including in order to minimize LIBOR
breakage costs), but excluding the Term Securities Accounts (as defined in the
ABL Credit Agreement as of the date hereof);


 


(4)           all Documents relating to Inventory, (b) all Chattel
Paper, Instruments, General Intangibles, Supporting Obligations and
Letter-of-Credit Rights arising from the sale of Inventory and/or from
Accounts, and (c) all Commercial Tort Claims relating to Inventory or
Accounts;


 


(5)           all books and Records relating to the items referred to in
the preceding clauses (including all books, databases, and Records, whether
tangible or electronic, which contain any information relating to any of the
items referred to in the preceding clauses (1) through (4)); and


 


(6)           all
guarantees with respect to any of the foregoing and all cash, cash equivalents,
money, insurance proceeds and other proceeds of any of the foregoing (such
proceeds, “ABL Priority Proceeds”).


 


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


 


“ABL Secured
Parties” shall have the meaning to that term in the introduction
to this Agreement.


 


“ABL Security
Agreements” shall mean collectively, (a) a certain Amended
and Restated Security Agreement dated as of May 10, 2010, and (b) an
Amended and Restated General Security Agreement dated as of May 10, 2010,
in each case executed by any or all of the ABL Obligors in favor of the ABL
Agent for the benefit of the ABL Secured Parties (as each of the same may be
amended, supplemented, restated and/or otherwise modified), and shall also
include any other agreement amending, restating, replacing or otherwise
modifying such agreement, whether with the same or any other agent, lender or
group of lenders.


 


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


 


“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.


 


“Ancillary
Cap” means the aggregate of any amounts due or to become due
with respect to those Bank Products, not to exceed (a) the sum of
$10,000,000, plus (b) the amount of any Reserves (as defined in the ABL
Credit Agreement), if any, established and maintained by the ABL Agent with
respect to Bank Products and Cash Management Services.


 


6

















 


“Asserted
Known Bank Indemnification Claim” means any matters or
circumstances for which notice of demand has been made, asserted or threatened
against the ABL Agent or any ABL Secured Party whether in writing or orally
that at the time of determination could reasonably be expected to result in
direct or actual damages and expenses (including, without limitation,
reasonable and documented attorneys’ fees and disbursements but excluding
special, indirect, consequential or punitive damages to the ABL Agent or any
ABL Secured Party) to the ABL Agent or any ABL Secured Party and which are
subject to indemnification by the ABL Obligors pursuant to the terms of the ABL
Credit Agreement or the ABL Documents.


 


“Bank Products”
shall have the meaning provided in the ABL Credit Agreement.


 


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


 


“Borrowers”
shall mean collectively the ABL Borrowers and the Term Borrower.


 


“Business
Day” shall mean any day other than (a) Saturday or Sunday; (b) any
day on which banks in Boston, Massachusetts or New York City, New York,
generally are not open to the general public for the purpose of conducting
commercial banking business; or (c) a day on which the principal office of
the Term Agent or the ABL Agent is not open to the general public to conduct
business, if such office is ordinarily open to the general public to conduct
business.


 


“Cash
Management Services” shall have the meaning provided in the ABL
Credit Agreement.


 


“Collateral”
shall mean all Property now owned or hereafter acquired by any Obligor 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 substitutions, additions, products and Proceeds
thereof.


 


“Concentration
Accounts” shall have the meaning provided in the ABL Credit
Agreement as in effect on the date hereof.


 


“Control
Collateral” shall mean any Collateral consisting of any Deposit
Account, Instruments and any other Collateral as to which a Lien may be
perfected through possession or control by the secured party, or any agent
therefor.


 


“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 Obligor or that such Obligor otherwise has the right to
license, or granting any right to any Obligor under any Copyright now or
hereafter owned by any third party, and all rights of such Obligor under any
such agreement.


 


“Copyrights”
shall have the meaning assigned to such term in the Term Security Agreement as
in effect on the date hereof.


 


“Credit
Documents” shall mean, collectively, the ABL Documents and the
Term Documents.


 


7

















 


“Debtor Relief
Laws” shall mean the Bankruptcy Code, the Bankruptcy
and Insolvency Act (Canada), the Companies’ Creditors
Arrangement Act (Canada) and the Winding-up and
Restructuring Act (Canada), as now or hereafter in effect or any
successor thereto, as well as all other liquidation, conservatorship,
bankruptcy, assignment for benefit of creditors, moratorium, rearrangement,
receivership, insolvency, reorganization, winding-up, or similar debtor relief
laws of the United States federal or state law or of any applicable foreign law
from time to time in effect affecting the rights of creditors generally.


 


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


 


“Discharge of
ABL Obligations” shall mean (a) the payment in full in cash
of all ABL Obligations including, without limitation, with respect to (i) amounts
available to be drawn under outstanding letters of credit issued thereunder (or
indemnities 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 or backstop letters of credit in respect
thereof in compliance with the terms of any ABL Credit Agreement (which shall
not exceed an amount equal to 103% of the aggregate undrawn amount of such
letters of credit), (ii) outstanding ABL Obligations with respect to Bank
Products and Cash Management Services (or indemnities or other undertakings
issued pursuant thereto in respect of outstanding Bank Products and Cash
Management Services) or the delivery or provision of cash collateral in respect
thereof in compliance with the terms of any ABL Credit Agreement; and (iii) the
delivery or provision of money or backstop letters of credit for any Asserted
Known Bank Indemnification Claims, in an amount reasonably estimated by the ABL
Agent but in any event not to exceed 100% of the ABL Obligors’ obligations to
the ABL Agent and the ABL Secured Parties in respect thereof; and (b) 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 ABL Obligors enter into (x) any refinancing of the ABL
Obligations in accordance with this Agreement, or (y) DIP Financing is
entered into in accordance with this Agreement, then, in each case, the
Discharge of ABL Obligations shall automatically be deemed not to have occurred
for all purposes of this Intercreditor Agreement.


 


“Discharge of
Term Obligations” shall mean the payment in full in cash of all
outstanding Term Obligations.


 


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


 


“Enforcement
Notice” shall mean a written notice delivered by the ABL Agent
or the Term Agent to the other applicable party announcing that an Enforcement
Period has commenced and specifying the relevant Event of Default.


 


“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.


 


8

















 


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


 


“Excess
ABL Obligations” shall mean, at any time of calculation, the
portion, if any, of the ABL Obligations in excess of the Maximum ABL
Obligations.


 


“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, including the institution of any foreclosure
proceedings or the noticing of any public or private sale pursuant to Article 9
of the Uniform Commercial Code 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 under any of the Credit
Documents, under applicable law, in an Insolvency Proceeding or otherwise,
including the election to retain any of the Collateral in satisfaction of a
Lien;


 


(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;


 


(d)           the appointment on the application of a Secured Party, of
a receiver, receiver and manager, interim receiver, national receiver, monitor,
trustee or similar official in respect 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; and


 


(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 other applicable law.


 


For the avoidance of doubt,
none of the following shall be deemed to constitute an Exercise of Secured
Creditor Remedies: (i) the filing of a proof of claim in any Insolvency
Proceeding or seeking adequate protection (subject to Section 6.3 below), (ii) the
collection and application of the ABL Priority Proceeds against the ABL
Obligations or the delivery of any activation notice with respect to any
Deposit Accounts or Securities Accounts (including, without limitation, with
respect to any account control agreements relating thereto), in each case by
the ABL Agent during the continuance of a Cash Control Event (as defined in the
ABL Credit Agreement), including, without limitation, the notification of
account debtors, depository institutions or any other Person to deliver
proceeds of ABL Priority Collateral to the ABL Agent, (iii) the reduction
of advance rates or sub-limits by the ABL Agent, (iv) the consent by the
ABL Agent to a store closing sale, going out of business sale or other
disposition by any ABL Obligor of any of the ABL Priority Collateral, (v) the
consent by a Secured Party pursuant to the applicable Credit


 


9
















 


Documents to any other sale
or disposition by an ABL Obligor or any Term Obligor of any of its assets or
properties, (vi) the acceleration of all or any portion of the ABL
Obligations or the Term Obligations, or (vii) subject to the provisions of
Section 5.2(a) hereof, the imposition or modification of Reserves (as
defined in the ABL Credit Agreement) by the ABL Agent.


 


“Exigent Circumstances” means an
event or circumstance that either (a) would result in a material
deterioration of the value of the Collateral or (b) materially and
imminently threatens the ability of the ABL Agent to realize upon all or a
material part of the Collateral, such as, without limitation, fraudulent
removal or concealment thereof, destruction (other than to the extent covered
by insurance) or material waste thereof.


 


“Governmental
Authority” shall mean any nation or government, any state,
provincial or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.


 


“Hedging
Agreement” shall have the meaning provided in the ABL Credit
Agreement.


 


“Inadvertent Overadvances” shall have the
meaning provided in the ABL Credit Agreement as in effect on the date hereof..


 


“Indebtedness”  shall have the meaning provided in the Term
Credit Agreement (as in effect on the date hereof).


 


“Insolvency Proceeding” shall mean (a) any
case, action, filing or proceeding before any court or other Governmental
Authority relating to bankruptcy, reorganization, insolvency, liquidation,
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 have the meaning assigned to such term in the
Term Security Agreement as in effect on the date hereof.


 


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


 


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


 


“Lien” shall mean,
with respect to any asset, any mortgage, deed of trust, lien (statutory or
otherwise), imposition of a trust (statutory or otherwise), pledge,
hypothecation, encumbrance, collateral assignment, charge or security interest
in, on or of such asset.


 


“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.


 


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“Maximum
ABL Obligations” means, on any date of determination thereof, an
amount equal to the result of (a) the principal sum of $750,000,000, plus
(b) ABL Obligations with respect to Bank Products and Cash Management
Services  provided that the
maximum amount of Bank Products shall, for purposes of this definition, not
exceed the Ancillary Cap, plus (c) interest, fees, expenses, and
indemnification obligations under the ABL Documents (including interest, fees,
expenses, and indemnification obligations which, but for the filing of an
Insolvency Proceeding with respect any ABL Obligor, would have accrued or been
payable with respect to any ABL Obligation, whether or not such claim is
allowed or allowable against any ABL Obligor in any Insolvency
Proceeding).  For clarity and without
limiting the foregoing, as long as the amounts set forth in clause (a) are
not exceeded, and subject to the provisions of Section 5.2(a), the ABL
Obligations equal to the sum of amounts available under the Borrowing Base
(subject to increase by the Permitted Insolvency Increase Amount), plus the
amount of Permitted Overadvances, plus the amount of Inadvertent Overadvances
shall not be violative of this Agreement.


 


“Obligors” means, collectively, the
ABL Obligors and the Term Obligors.


 


“Overadvance”
shall have the meaning provided in the ABL Credit Agreement as in effect on the
date hereof.


 


“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 Obligor or that any
Obligor otherwise has the right to license, is in existence, or granting to any
Obligor 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
Obligor under any such agreement.


 


“Patents”
shall have the meaning assigned to such term in the Term Security Agreement as
in effect on the date hereof.


 


“Permitted Insolvency
Increase Amount” means, at any time any Obligor is the subject
of an Insolvency Proceeding, an amount equal to five percent (5%) of the
Borrowing Base at such time (calculated for purposes hereof, without giving
effect to the Term Reserve, if then in effect).


 


“Permitted Overadvances”
shall have the meaning provided in the ABL Credit Agreement as in effect on the
date hereof.


 


“Person”
shall mean an individual, partnership, corporation, limited liability company,
unlimited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity of whatever nature.


 


11

















 


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


 


“Proceeds”
shall mean (a) all “proceeds,” as defined in Article 9 of the Uniform
Commercial Code, with respect to the Collateral, and (b) whatever is
recoverable or recovered when any Collateral is sold, exchanged, collected, or
disposed of, whether voluntarily or involuntarily.


 


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


 


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


 


“Subsidiary” shall mean
with respect to any Person (the “parent”) at any date, any corporation,
partnership, joint venture, limited liability company, unlimited liability
company, trust, or other entity (a) of which equity interests representing
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.


 


“Term Agent”
shall have the meaning assigned to that term in the introduction to this
Agreement and shall include any successor thereto.


 


“Term Borrower”
shall mean Zale Corporation.


 


“Term Collateral
Documents” shall mean the Term Security Agreement and each other
instrument, document and agreement executed and delivered in connection with
the Term Credit Agreement and securing the Term Obligations, in each case as
the same may be amended, supplemented, restated or otherwise modified from time
to time.


 


“Term Credit
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, whether by the same or any other
agent, lender or group of lenders.


 


“Term Documents”
shall mean the Term Credit Agreement, any Term Notes, the Term Collateral
Documents, and all other agreements, instruments, and documents now or
hereafter executed by or on behalf of any Term Obligor or any of their
respective Affiliates, and delivered to the Term Agent, in connection with any
of the foregoing or any Term 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 and thereof.


 


“Term
Guarantors” shall have the meaning assigned to that term in the
recitals to this Agreement.


 


“Term
Guaranty” shall have the meaning assigned to such term in the
recitals to this Agreement.


 


12

















 


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


 


“Term Note”
shall mean any promissory note executed and delivered by the Term Borrower to
evidence any loan made pursuant to the Term Credit Agreement, as the same may
be amended, modified, extended, renewed, refunded, consolidated, replaced,
restructured or refinanced from time to time in accordance with the terms
hereof and thereof.


 


“Term
Obligations” shall mean all “Obligations” as such term is
defined in the Term Credit Agreement, including, without limitation, any
interest, fees, expenses, and indemnification obligations which, but for the
filing of an Insolvency Proceeding with respect any Term Obligor, would have
accrued or been payable with respect to any Term Obligation, whether or not
such claim is allowed or allowable against any Term Obligor in any Insolvency
Proceeding.


 


“Term
Obligors” means collectively, the Term Borrower and the Term
Guarantors.


 


“Term Priority
Collateral” shall mean (a) all Collateral other than ABL
Priority Collateral and (b) all guarantees with respect to any of the
foregoing and all cash, cash equivalents, money, insurance proceeds and other
proceeds of any of the foregoing (such proceeds, “Term
Priority Proceeds”).


 


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


 


“Term
Reserve” shall have the meaning set forth in Section 5.2(a).


 


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


 


“Term Security Agreement” shall have
the meaning assigned to that term in the recitals to this Agreement.


 


“Trade
Secret License” shall mean any and all agreements, whether written
or oral, providing for the grant by or to any Obligor 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 Obligor, all of such
Obligor’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.


 


13

















 


“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 Obligor or that any Obligor otherwise has the right to
license, or granting to any Obligor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Obligor under any
such agreement.


 


“Trademarks”
shall have the meaning assigned to such term in the Term Security Agreement as
in effect on the date hereof.


 


“Trigger
Event” shall have the meaning assigned to that term in Section 7.1(a) hereof.


 


“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 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, the Personal Property Security Act, 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 commencing on the date that the ABL
Agent (or an ABL Obligor acting with the consent of the ABL Agent) commences
the full liquidation and sale of the ABL Priority Collateral and ending on the
earliest of (i) 180 days thereafter, or (ii) the date on which the
Discharge of ABL Obligations occurs. If any stay or other order that prohibits
any of the ABL Agent, the other ABL Secured Parties or any ABL Obligor (with
the consent of the ABL Agent) from commencing and continuing to Exercise Any
Secured Creditor Remedies or to liquidate and sell the ABL Priority Collateral
has been entered by a court of competent jurisdiction, such 180-day period
shall be tolled during the pendency of any such stay or other order and the Use
Period shall be so extended.


 


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,


 


14

















 


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 herein).  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. 
Any reference herein to a time of day means Eastern time.


 


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 Secured Parties in respect of all or any portion of the
Collateral or of any Liens granted to 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 for
the benefit of the ABL Secured Parties or the Term Agent for the benefit of the
Term Secured Parties in any Collateral, (iii) any provision of the Uniform
Commercial Code, 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, (v) the date on which
the ABL Obligations or the Term Obligations are advanced or made available to
the Borrowers, or (vi) any failure of the ABL Agent or the Term Agent to
perfect its Lien on the Collateral, the subordination of any Lien on the
Collateral securing any ABL Obligations or Term Obligations, as applicable, to
any Lien securing any other obligation of any Obligor, or the avoidance,
invalidation or lapse of any Lien on the Collateral securing any ABL Obligations
or Term Obligations, 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 the following priorities apply to the ABL Priority Collateral
and the Term Priority Collateral:


 


(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 ABL Agent or any ABL Secured Parties that secures all or
any portion of the ABL Obligations shall in all respects be senior and prior to
all Liens granted to the Term Agent or any Term Secured Parties on the ABL
Priority Collateral;


 


(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 Term Agent or any Term Secured Parties that secures all or
any portion of the Term Obligations shall in all respects be, until the
Discharge of ABL Obligations, junior and subordinate to all Liens granted to
the ABL Agent or the ABL Secured Parties on the ABL Priority Collateral;


 


(3) 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 Parties that secures all or
any portion of the Term Obligations shall in all respects be senior and prior
to all Liens granted to the ABL Agent or any ABL Secured Parties on the Term Priority
Collateral; and


 


(4) 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 Parties that secures all or
any


 


15

















 


portion of the ABL
Obligations shall in all respects be, until the Discharge of Term Priority
Obligations, junior and subordinate to all Liens granted to the Term Agent or
the Term Secured Parties on the Term Priority Collateral.


 


(b)                                 The Term Agent, for and on behalf of
itself and the Term Secured Parties, acknowledges and agrees that, 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 Term Priority Collateral 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 ABL Priority Collateral 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’
Liens to the Liens of any other Person that is not a holder of ABL Obligations
or Term Obligations.


 


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 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 or otherwise acting in accordance with this
Agreement.


 


(b)                                 The ABL Agent, for and on behalf of
itself and the ABL Secured Parties, agrees that it 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 set
forth in Section 3.5, 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 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 waive 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 seeks to enforce its Liens in any Term Priority
Collateral.  The 


 


16

















 


foregoing shall not be construed to prohibit the ABL
Agent from enforcing the provisions of this Agreement or otherwise acting in
accordance with this Agreement.


 


Section 2.3                                   Remedies
Standstill.


 


(a)                                  The Term Agent, on behalf of itself and
the Term Secured Parties, agrees that, from the date hereof until the date upon
which the Discharge of ABL Obligations shall have occurred, neither the Term
Agent nor any Term Secured Party will Exercise Any Secured Creditor Remedies
with respect to any of the ABL Priority Collateral, and will not take, receive
or accept any Proceeds of ABL Priority Collateral.  From and after the date upon which the
Discharge of ABL Obligations shall have occurred, the Term Agent or any Term
Secured Party may Exercise Any Secured Creditor Remedies under the Term
Documents or applicable law as to any ABL Priority Collateral; provided,
however, that any Exercise of Secured Creditor Remedies with respect to
any Collateral by the Term Agent or the Term Secured Parties is at all times
subject to the provisions of this Agreement until the termination hereof.


 


(b)                                 The ABL Agent, on behalf of itself and
the ABL Secured Parties, agrees that, from the date hereof until the date upon
which the Discharge of Term Obligations shall have occurred, neither the ABL
Agent nor any ABL Secured Party will Exercise Any Secured Creditor Remedies
with respect to the Term Priority Collateral, and will not take, receive or
accept any Proceeds of the Term Priority Collateral, it being understood and
agreed that any Term Obligor’s deposit of Proceeds of Term Priority Collateral
in a Deposit Account controlled by the ABL Agent shall not constitute a breach
of this Agreement.  From and after the
date upon which the Discharge of Term Obligations shall have occurred, the ABL
Agent or any ABL Secured Party may Exercise Any Secured Creditor Remedies under
the ABL Documents or applicable law as to any Term Priority Collateral; provided,
however, that any Exercise of Secured Creditor Remedies with respect to
any Collateral by the ABL Agent or the ABL Secured Parties is at all times
subject to the provisions of this Agreement until the termination hereof.


 


(c)                                  Notwithstanding the provisions of
Sections 2.3(a), 2.3(b) or any other provision of this Agreement, nothing
contained herein shall be construed to prevent any Agent or any Secured Party
from (i) filing a claim or statement of interest with respect to the ABL
Obligations or Term Obligations owed to it in any Insolvency Proceeding
commenced by or against any Obligor, (ii) taking any action (not adverse
to the Lien Priority of the Liens of the other Agent or other Secured Parties
on the Collateral in which such other Agent or other Secured Party has a
priority Lien or the rights of the other Agent or any of the other Secured
Parties to Exercise Any Secured Creditor Remedies in respect thereof) in order
to create, perfect, preserve or protect its Lien (but not enforce its Lien) on
any Collateral, provided that each Agent may join in any judicial
proceedings commenced by the other Agent to enforce Liens on the Collateral, provided
further that in connection therewith, subject to the ABL Agent’s rights
under  Section 3.5 hereof, the ABL
Agent shall not interfere with the enforcement actions of the Term Agent with
respect to Term Priority Collateral and the Term Agent shall not interfere with
the enforcement actions of the ABL Agent with respect to ABL Priority
Collateral, (iii) filing any necessary or responsive pleadings in
opposition to any motion, adversary proceeding or other pleading filed by any
Person objecting to or otherwise seeking disallowance of the claim or Lien of
such Agent or Secured Party, (iv) filing any pleadings, objections,
motions, or agreements which assert rights available to unsecured creditors of
the ABL Obligors or Term Obligors


 


17

















 


arising under any Insolvency Proceeding or applicable
non-bankruptcy law, (v) exercising rights and remedies as unsecured
creditors against any Obligor in accordance with the terms of the Term
Documents or ABL Documents, including the acceleration of any Indebtedness or
other obligations owing under the Term Documents or ABL Documents or the demand
for payment under the Term Guaranty or ABL Guaranty, in each case in accordance
with the terms of the applicable Term Documents or ABL Documents and applicable
law, (vi) voting
on any plan of reorganization, proposal, or plan of arrangement or filing any
proof of claim in any Insolvency Proceeding of any Obligor, (vii) making a
cash bid on all or any portion of the Collateral in which such other Agent has
a priority Lien in any private or judicial foreclosure proceeding or action or
sale, or (viii) objecting to the proposed retention of, or taking title
to, Collateral by the other Agent or any other Secured Party in full or partial
satisfaction of any ABL Obligations or Term Obligations due to such other Agent
or Secured Party (the foregoing not being deemed to limit the right of the
Agent having a prior Lien in such Collateral from credit bidding therefor), in
each case (i) through (viii) above to the extent not inconsistent
with the terms of this Agreement.


 


Section 2.4                                   Exercise
of Rights.


 


(a)                                  No Other Restrictions. 
Except as expressly set forth in this Agreement, each Term Secured Party
and each ABL Secured Party shall have any and all rights and remedies it may
have as a creditor under applicable law, including the right to the Exercise of
Secured Creditor Remedies; provided, however, that the Exercise
of Secured Creditor Remedies with respect to the Collateral shall be subject to
the provisions of this Agreement.  The
ABL Agent may enforce the provisions of the ABL Documents, the Term Agent may
enforce the provisions of the Term Documents and each may Exercise Any Secured
Creditor Remedies, all in such order and in such manner as each may determine
in the exercise of its sole discretion, consistent with the terms of this
Agreement and mandatory provisions of applicable law; provided, however,
that each of the ABL Agent and the Term Agent agrees to provide to the other (x) an
Enforcement Notice prior to the commencement of an Exercise Any Secured
Creditor Remedies, (y) use reasonable efforts to advise the other at
reasonable intervals of the status of any Exercise of Secured Creditor Remedies
by it, and (z) copies of any notices that it is required under applicable
law to deliver to any ABL Obligor; provided  further, however,
that the ABL Agent’s failure to provide any such copies or updates to the Term
Agent (but not the Enforcement Notice) shall not impair any of the ABL Agent’s
rights hereunder or under any of the ABL Documents and the Term Agent’s failure
to provide any such copies or updates to the ABL Agent (but not the Enforcement
Notice) shall not impair any of the Term Agent’s rights hereunder or under any
of the Term Documents.  Each of the Term
Agent (on behalf of itself and the Term Secured Parties) and the ABL Agent (on
behalf of itself and the ABL Secured Parties) agrees (i) that it will not
institute any suit or other proceeding or assert in any suit, Insolvency
Proceeding or other proceeding any claim, in the case of the Term Agent and
each Term Secured Party, against either the ABL Agent or any other ABL Secured
Party, and in the case of the ABL Agent and each other ABL Secured Party,
against either the Term Agent or any other Term Secured Party, seeking damages
from or other relief by way of specific performance, instructions or otherwise,
with respect to, any action taken or omitted to be taken by such Person with
respect to the Collateral which is consistent with the terms of this Agreement,
and none of such Parties shall be liable for any such action taken or omitted
to be taken, or (ii) it will not be a petitioning creditor or otherwise
assist in the filing of an involuntary Insolvency Proceeding.


 


18

















 


(b)                                 Release of Liens.


 


(i)                                     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 ABL
Obligors with the consent of the ABL Agent, 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 and the Term Documents (without giving effect to any amendments to
the Term Documents which add further restrictions to dispositions beyond those
which are in effect on the date hereof) or consented to by the requisite ABL
Lenders and the requisite Term Lenders, 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 deemed automatically released
and discharged without further action concurrently with, and to the same extent
as, the release and discharge of the ABL Secured Parties’ Liens on such ABL
Priority Collateral; provided, that the Liens of the Parties shall
attach to the proceeds of any such disposition of the ABL Priority Collateral
with the same relative priority as the Liens which attached to the ABL Priority
Collateral so released and discharged. 
In furtherance of, and subject to, the foregoing, the Term Agent agrees
that it will promptly execute any and all Lien releases, discharges, termination
statements 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 in the place and stead
of the Term Agent and in the name of the Term Agent or in the ABL Agent’s own
names, 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, termination statements, discharges,
endorsements, assignments, releases or other documents or instruments of
transfer (which appointment, being coupled with an interest, is irrevocable).


 


(ii)                                  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 or with the consent of the
Term Agent, 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 and the ABL Documents
(without giving effect to any amendments to the ABL Documents which add further
restrictions to dispositions beyond those which are in effect on the date
hereof) or consented to by the requisite Term Lenders or the requisite ABL
Lenders, as applicable, the ABL Agent agrees, on behalf of itself and the ABL
Lenders, 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’ and the ABL Secured Parties’ Liens with respect to the Term Priority
Collateral so sold, transferred, or disposed shall terminate and be deemed
automatically released and discharged without further action concurrently with,
and to the same extent as, the release and discharge of the Term Secured
Parties’ Liens on such Term Priority Collateral; provided, that the
Liens of the Parties shall attach to the proceeds of any such disposition of
the Term Priority Collateral with the same relative priority as the Liens which
attached to the Term Priority Collateral so released and


 


19
















 


discharged.  In furtherance of,
and subject to, the foregoing, the ABL Agent agrees that it will promptly
execute any and all Lien releases, discharges, termination statements 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 their true and lawful attorney-in-fact with full irrevocable
power of attorney 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 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,
termination statements, discharges, 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)                                  Until the Discharge of ABL Obligations,
and for so long as the Term Obligations are secured by any ABL Priority
Collateral, the parties hereto agree that no Term Secured Party shall acquire
or hold any Lien on any assets of any Term Obligor 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 nonetheless acquire or hold any Lien on any assets of any Term Obligor
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, or any Term Obligor 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)                                 Until the Discharge of Term Obligations,
and for so long as the ABL Obligations are secured by any Term Priority
Collateral, the parties hereto agree that no ABL Secured Party shall acquire or
hold any Lien on any assets of any ABL Obligor 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 nonetheless acquire or hold any Lien on any assets of any ABL Obligor
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, or any ABL Obligor 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 


 


20

















 


rights a junior secured creditor may have under
applicable law with respect to the ABL Priority Collateral.


 


(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 with respect to the Term Priority Collateral.


 


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 other Term Secured Party of the
required payments of principal, interest, fees, indemnities, and expense reimbursements
so long as such receipt is not the direct or indirect result of (a) the
exercise by the Term Agent or any other Term Secured Party of rights or
remedies as a secured creditor in respect of ABL Priority Collateral or (b) the
enforcement in contravention of this Agreement of any Lien in respect of Term
Obligations held by any of them.  Nothing
in this Agreement shall prohibit the receipt by the ABL Agent or any other ABL
Secured Party of the required payments of principal, interest, fees, indemnities,
and expense reimbursements so long as such receipt is not the direct or
indirect result of (a) the exercise by the ABL Agent or any other ABL
Secured Party of rights or remedies as a secured creditor in respect of Term
Priority Collateral or (b) the enforcement in contravention of this
Agreement of any Lien in respect of ABL Obligations 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 agree
to hold all Collateral in their respective possession, custody, or control (or
in the possession, custody, or control of agents or bailees for either) as
agent for 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.  Without limiting the
foregoing, the ABL Agent agrees to act as agent for the benefit of the Term
Agent and the Term Secured Parties under each account control agreement with
respect to any Deposit Accounts or Securities Accounts of a Borrower or an ABL
Guarantor.  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 ABL Obligor, Term Obligor 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 Collateral described in this Section 3.2
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 


 


21

















 


kind
for the Term Secured Parties or any other Person.  Without limiting the generality of the
foregoing, but subject to the provisions of Sections 3.6, 3.7, and 4.1(a), 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
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.


 


Section 3.3                                   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.  Until
Discharge of the ABL Obligations, the ABL Agent shall have the sole and
exclusive right, as against the Term Agent, to adjust settlement of insurance
claims in the event of any covered loss, theft or destruction of ABL Priority
Collateral and take other such actions with respect to insurance covering the
ABL Priority Collateral as set forth in the ABL Credit Agreement.  Until Discharge of the Term Obligations, the
Term Agent shall have the sole and exclusive right, as against the ABL Agent,
to adjust settlement of insurance claims in the event of any covered loss,
theft or destruction of Term Priority Collateral and take other such actions
with respect to insurance covering the Term Priority Collateral as set forth in
the Term Credit Agreement.  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 3.4                                   No
Additional Rights For the Obligors Hereunder.  If any ABL Secured Party or
Term Secured Party shall enforce its rights or remedies in violation of the
terms of this Agreement, the Obligors 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 3.5                                   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 connection with the exercise of any of such rights, including,
without limitation, in the event of any liquidation 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 to Exercise Any Secured Creditor Remedies of the
Term Agent, the ABL Agent or any other Person (including any ABL Obligor)
acting with the consent, or on behalf, of the ABL Agent, shall have the right (a) during
normal business hours on any Business Day, to access ABL Priority Collateral
that (i) is stored or located in or on, or (ii) has become an
accession with respect to (within the meaning of Section 9-335 of the
Uniform Commercial Code), or (iii) has been commingled with (within the
meaning of Section 9-336 of the Uniform Commercial Code), Term Priority
Collateral, and (b) during the Use Period, shall have the right to use the
Term Priority Collateral, each of the foregoing in order to assemble, inspect,
copy or download information stored on, take action to perfect its Liens on,
complete a production run of inventory, take possession of, move, prepare and
advertise for sale, sell (by public auction, private sale or a 


 


22

















 


“store closing”, “going out of business” or similar
sale, whether in bulk, in lots or to customers in the ordinary course of
business or otherwise and which sale may include augmented Inventory of the
same type sold in the any ABL Obligor’s business), store or otherwise deal with
the ABL Priority Collateral, in each case without notice to, the involvement of
or interference by any Term Secured Party or liability to any Term Secured
Party, provided that the ABL Agent shall, furnish prompt written notice to the
Term Agent of the exercise of any rights of the ABL Agent and ABL Secured
Parties hereunder.  In the event that any
ABL Secured Party has commenced and is continuing the Exercise of Any Secured
Creditor Remedies with respect to any ABL Priority Collateral or any other sale
or liquidation of the ABL Priority Collateral has been commenced by an ABL Obligor
(with the consent of the ABL Agent), the Term Agent may not sell, assign or
otherwise transfer the related Term Priority Collateral prior to the expiration
of the Use Period, unless the purchaser, assignee or transferee thereof agrees
to be bound by the provisions of this Section 3.5.


 


(b)                                 In furtherance of the ABL Agent’s rights
under Section 3.5(a), at all times during 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 and (ii) hereby
grants to the ABL Agent a nonexclusive, irrevocable, royalty-free, worldwide
license to use any and all Intellectual Property as is or may be necessary to
sell or otherwise liquidate the ABL Priority Collateral.  The Term Agent (A) acknowledges and
consents to the grant to the ABL Agent by the ABL Obligors on the date hereof
of a continuing, limited, non-exclusive royalty-free license for the uses
described in clauses (b)(i) and (b)(ii) above at any time (the “Effective Date License”) and (B) agrees that its Liens
on the Term Priority Collateral shall be subject to the Effective Date License
as set forth herein.  Furthermore, the
Term Agent agrees that, in connection with any foreclosure sale conducted by
the Term Agent in respect of the Intellectual Property, (1) 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 (2) 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 the such transferred Collateral are subject to the Effective Date License.


 


(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 to repair at their expense any physical damage (but not any other
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.  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 3.5 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 Section 3.5 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 


 


23

















 


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 3.5.  The ABL Agent shall cooperate and use reasonable
efforts to ensure that its activities during the Use Period as described above
do not interfere materially with the activities of the Term Agent as described
above, including the right of the Term Agent to commence foreclosure of the
Term Priority Collateral, to show the Term Priority Collateral to prospective
purchasers and to ready the Term Priority Collateral for sale.


 


(d)                                 The ABL Agent and the ABL Secured Parties
shall not be obligated to pay any rent, fee or other 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 Obligors, for or in respect of the use by the ABL Agent and the
ABL Secured Parties of the Term Priority Collateral.


 


(e)                                  The ABL Secured Parties shall (i) use
the Term Priority Collateral in accordance with applicable law; (ii) insure
for damage to property and liability to persons, including property and
liability insurance for the benefit of the Term Secured Parties; and (iii) indemnify
and hold harmless the Term Secured Parties from any claim, loss, damage, cost
or liability arising from the ABL Secured Parties’ use of the Term Priority
Collateral (except for those arising from the gross negligence or willful
misconduct of any Term Secured Party).


 


(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 3.5(a) hereof.


 


Section 3.6                                   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 a bankruptcy or insolvency
Event of Default then exists), any proceeds of Collateral, whether or not
deposited under control agreements, which are used by any Obligor 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. Each of the
ABL Agent and the Term Agent agrees that after an issuance of an Enforcement
Notice, each such Person shall cooperate in good faith to identify the proceeds
of the ABL Priority Collateral and the Term Priority Collateral, as the case
may be; provided, however, that neither ABL Agent nor Term Agent
shall be liable or in any way responsible for any claims or damages from
conversion of the ABL Priority Collateral or Term Priority Collateral, as the
case may be (it being understood and agreed that the only obligation of any
holder of a junior Lien on any Collateral is to pay over to the holder of the
senior Lien on such Collateral, in the same form as received, with any necessary
endorsements, all proceeds that such holder of a junior Lien received that have
been identified as proceeds of Collateral on which such holder does not have
priority).


 


24

















 


Section 3.7                                   Payments
Over.


 


(a)                                  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 connection with the exercise of any right or remedy
(including set off) relating to the ABL Priority Collateral in contravention of
this Agreement or actually known to the Term Agent to be proceeds of ABL
Priority Collateral (without any obligation to undertake any independent
investigation as to the source of such Proceeds) 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.


 


(b)                                 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 connection with the exercise of any right or remedy
(including set off) relating to the Term Priority Collateral in contravention
of this Agreement or actually known to the ABL Agent to be proceeds of Term
Priority Collateral (without any obligation to undertake any independent
investigation as to the source of such Proceeds) 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 terms.


 


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 by the ABL Agent upon any portion of the Collateral in connection
with a permitted disposition by the ABL Obligors under any ABL Credit Agreement
shall constitute the Exercise of Secured Creditor Remedies under this
Agreement; (ii) subject to the terms hereof, 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; and (iii) all
Collateral received by the ABL Agent (other than through the Exercise of Any
Secured Creditor Remedies or actually known to the ABL Agent to be proceeds of
Term Priority Collateral (without any obligation to undertake any independent
investigation as to the source of such Proceeds)) may be applied, reversed,
reapplied 


 


25

















 


or credited, 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 Sections 4.1(b) and (c).  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, ABL Priority Proceeds and all other Proceeds
thereof, received by either of them in connection with any Exercise of Secured
Creditor Remedies with respect to the ABL Priority Collateral shall be applied,


 


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


 


second, to the
payment of the ABL Obligations (other than Excess ABL Obligations) in
accordance with the ABL Documents,


 


third, to the
payment of the Term Obligations in accordance with the Term Documents until the
Discharge of 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, and


 


fifth, the balance,
if any, to the ABL Obligors or as a court of competent jurisdiction may direct.


 


(c)                                  Application of Proceeds of Term Priority
Collateral.  The ABL Agent and the Term Agent hereby agree
that all Term Priority Collateral, Term Priority Proceeds and all other
Proceeds thereof, received by either of them in connection with any Exercise of
Secured Creditor Remedies with respect to the Term Priority Collateral shall be
applied,


 


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


 


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


 


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


 


fourth, the balance,
if any, to the Term Obligors or as a court of competent jurisdiction may
direct.


 


26

















 


(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 in
every respect as required by the Uniform Commercial Code.


 


(e)                                  Turnover of Collateral. 
Upon the Discharge of the 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 Borrower) 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,
subject to the reinstatement provisions of Section 5.3 below.  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 ABL Borrowers) 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, subject to the reinstatement provisions of Section 5.3 hereof.


 


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 Obligor shall have complied
with any of the provisions of any of the 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 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 the Term Borrower
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 


 


27

















 


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 have knowledge
that the honoring of (or failure to honor) any such request would constitute a
default under the terms of any Term Credit 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 express 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 express terms and provisions of this Agreement or mandatory
provisions of applicable law).  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
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 an act, condition, or
event that, with the giving of notice or the passage of time, or both, would
constitute an Event of Default under any ABL Document, 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 express 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 express terms and provisions of this Agreement or mandatory
provisions of applicable law).  The Term
Agent and the Term Secured Parties shall be entitled to manage and supervise
their loans and extensions of credit under the Term Documents as they may, in
their sole discretion, deem 


 


28

















 


appropriate, and may manage their loans and extensions
of credit 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 Term Agent, on behalf of itself and
the Term Secured Parties, hereby agrees that, without affecting the obligations
of the Term Agent and the Term Secured Parties hereunder, the ABL Agent and the
ABL Secured Parties may, at any time and from time to time, in their sole
discretion without the consent of or notice to the Term Agent or any Term
Secured Party, and without incurring any liability to the Term Agent or any
Term Secured Party or impairing or releasing the Lien Priority provided for
herein, amend, restate, supplement, replace, refinance, extend, consolidate,
restructure, or otherwise modify any of the ABL Documents in any manner
whatsoever, other than in a manner which would have the effect of contravening
the terms of this Agreement, provided, however, without the consent of the Term
Agent, the ABL Agent and the ABL Lenders shall not agree to any amendment or
modification of the ABL Credit Agreement which would (i) increase the
Total Commitments (as defined in the ABL Credit Agreement as in effect on the
date hereof) to an amount in excess of the amounts set forth in clause (a) of
the definition of Maximum ABL Obligations, (ii) directly increase the
interest rates on the ABL Obligations to a rate greater than 2.0% per annum
above rates as are in effect on the date hereof (excluding, without limitation,
fluctuations in underlying rate indices, pricing grid level changes due to
changes in average daily Excess Availability, and imposition of a default rate
of interest not greater than 2.0% per annum), (iii) directly or indirectly
prohibit or restrict the payment of principal of, interest on, the Term
Obligations, in a manner more restrictive than the prohibitions and
restrictions contained in the ABL Credit Agreement as in effect on the date
hereof, (iv) except as a result of the Permitted Insolvency Increase
Amount, change the definition of “Borrowing Base”, “Overadvance”, “Inadvertent
Overadvance”, or “Permitted Overadvance” contained in the ABL Credit Agreement
or any component definition thereof by increasing advance rates or changing the
eligibility criteria for the assets included therein if such change would
result in an increase of the amounts available to be borrowed thereunder, or (v) reduce
the amount of Excess Availability (as defined in the ABL Credit Agreement as in
effect on the date hereof) that is required to be maintained in Section 6.8(b) of
the ABL Credit Agreement as in effect on the date hereof.  The ABL Agent agrees that upon the request of
the Term Agent, it shall make itself available for discussion with the Term
Agent regarding the amount or computation of any Reserves (as defined in the
ABL Credit Agreement as in effect on the date hereof) that are permitted to be
established pursuant to the ABL Credit Agreement, provided that, except
as provided below, the foregoing agreement shall not limit or impair the ABL
Agent’s rights to establish, increase, reduce or eliminate any such Reserves or
require any prior notice to, or consent from, the Term Agent or the Term
Secured Parties thereto; provided further that the ABL Agent shall not eliminate
any category of Reserves existing as of the date hereof or change the
methodology for the calculation of such Reserves without the consent of the
Term Agent.  Furthermore, the ABL Agent
agrees that, if and to the extent that


 


29






 












 


Excess Availability (as defined in the ABL Credit
Agreement as of the date hereof) is less than $75,000,000 at any time, upon the
request of the Term Agent, the ABL Agent shall establish a Reserve (the “Term
Reserve”) in an amount equal to two and one-half percent (2.5%) of the
Borrowing Base as calculated as of the time of the Term Agent’s request (it
being understood that the Term Agent may make additional requests due to
increases in the Borrowing Base so that the Term Reserve is at all times equal
to two and one-half percent (2.5%) of the Borrowing Base if Excess Availability
is less than $75,000,000).  Once
established, except as otherwise permitted in the Term Credit Agreement, the
Term Reserve shall not be eliminated or reduced by the ABL Agent without the
prior written consent of the Term Agent.


 


(b)                                 The ABL Agent, on behalf of itself and
the ABL Secured Parties, hereby agrees that, without affecting the obligations
of the ABL Agent and the ABL Secured Parties hereunder, the Term Agent and the
Term Secured Parties may, at any time and from time to time, in their sole
discretion without the consent of or notice to the ABL Agent or any ABL Secured
Party, and without incurring any liability to the ABL Agent or any ABL Secured
Party or impairing or releasing the Lien Priority provided for herein, amend,
restate, supplement, replace, refinance, extend, consolidate, restructure, or
otherwise modify any of the Term Documents in any manner whatsoever other than
in a manner which would have the effect of contravening the terms of this
Agreement, provided, however, without the consent of the ABL Agent, the Term Agent and
the Term Lenders shall not agree to any amendment or modification of the Term
Credit Agreement which would (i) increase the amount of the Term Loan
(other than through the capitalization of PIK Amounts (as defined in the Term
Credit Agreement as amended, restated, supplemented or otherwise modified in
accordance with the terms hereof)) in excess of the sum of $150,000,000 less
any principal payments made on account thereof, (ii) directly increase the
interest rates on the Term Obligations to a rate greater than 2.0% per annum
above rates as are in effect on the date hereof (excluding imposition of a
default rate of interest not greater than 2.0% per annum), (iii) terminate
the Term Borrower’s right to the PIK Election (as defined in the Term Credit
Agreement as in effect on the date hereof); provided that the foregoing
shall not be deemed to limit any amendments which increase the accrued interest
which may become a PIK Amount, (iv) directly or indirectly prohibit or
restrict the payment of principal of, interest on, the ABL Obligations, in a
manner more restrictive than the prohibitions and restrictions contained in the
Term Credit Agreement as in effect on the date hereof, (v) shorten the
scheduled maturity of the Term Obligations, (vi) require any scheduled
principal payments or other mandatory principal payments on account of the Term
Obligations (other than for mandatory prepayments under the Term Credit
Agreement (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, or (vii) change any provisions of Sections 7.05 or 7.08(d) of
the Term Credit Agreement that would be more restrictive than those in effect
under the Term Documents as of the date hereof.


 


(c)                                  No consent furnished by the ABL Agent or
the Term Agent pursuant to Sections 5.2(a) or 5.2(b) hereof shall be
deemed to constitute the modification or waiver of any provisions of the ABL
Documents or the Term Documents, each of which remain in full force and
effect.  Without limiting the foregoing,
the ABL Agent and the ABL Lenders may continue to make loans and advances and
issue letters of credit for the account of the ABL Borrowers notwithstanding
that an Event of Default exists or may arise therefrom under the Term Documents
and neither the ABL Agent nor the ABL Secured Parties shall have any liability
to the Term Agent or the Term Secured Parties on account thereof.


 


30

















 


(d)                                 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 pursuant
to Section 5.2(a) or (b) above or 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 Priority 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 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 Obligor 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.  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 Obligor or any other circumstance which otherwise might constitute
a defense available to, or a discharge of any Obligor 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 Obligor 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 Obligor 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. 
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 Obligor or any other
circumstance which otherwise


 


31

















 


might constitute a defense available to, or a
discharge of any Obligor 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 Obligor 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.


 


ARTICLE 6


INSOLVENCY
PROCEEDINGS


 


Section 6.1                                   DIP
Financing.


 


(a)                                  This Agreement shall be applicable with
respect to the ABL Obligations and Term Obligations both before and after the
filing of any petition by or against any of the Obligors under any Insolvency
Proceeding, and all references herein to the Obligors shall be deemed to apply
to the Obligors as debtors-in-possession.


 


(b)                                 If any Obligor shall be subject to any
Insolvency Proceeding at any time prior to the Discharge of ABL Obligations,
and the ABL Agent or any of the ABL Secured Parties shall seek to provide any
Obligor 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 interim financing or similar 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 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 any basis, including, without limitation, on the
grounds of a failure to provide “adequate protection” for the Liens of the Term
Agent 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, and will not offer or support any
debtor-in-possession or interim financing which would compete with such DIP
Financing); provided that (i) the Term Agent retains its Lien on
the ABL Priority Collateral to secure the Term Obligations (in each case,
including Proceeds thereof arising after the commencement of the case under the
any Debtor Relief Laws) (to the extent such Liens were valid,
perfected, enforceable and not avoided) subject to the Liens in favor of the ABL Secured
Parties on the ABL Priority Collateral existing prior to the commencement of
such Insolvency Proceeding, to any adequate protection Liens granted in favor
of the ABL Obligations, to the senior priority of the DIP Financing and, to the extent a
reserve therefor is maintained in the Borrowing Base, to any carve-out amount
for professionals and directors and officers following the occurrence of any
event of default under any such DIP Financing or the United States Trustee or
any other insolvency officer and its counsel, or, with respect to any Canadian
Insolvency Proceeding, to the extent a reserve therefor is maintained in the
Borrowing Base, any other prior charges permitted under applicable law relating
to the Insolvency Proceeding that have been agreed upon by the ABL Agent, and (ii) unless it shall otherwise
consent, the Term Agent shall retain its Lien on the Term Priority Collateral
with the same priority as existed prior to the


 


32

















 


commencement of the case under the subject Debtor
Relief Laws and any Lien of the ABL Agent (or other provider of DIP Financing)
(to the extent such Liens were valid, perfected, enforceable and not
avoided) 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 (to the extent of
the Term Obligations), (iii) all Liens on ABL Priority Collateral securing
any such DIP Financing shall be senior to or on a parity with the Liens of the
ABL Agent and the ABL Secured Parties securing the ABL Obligations on ABL
Priority Collateral, (iv) the DIP Financing shall not
seek to permit the making, issuance or incurrence of loans or letter of credit
accommodations pursuant to such DIP Financing that would cause the sum of (A) the
aggregate outstanding principal amount of such loans and letter of credit
accommodations made pursuant to such DIP Financing plus (B) the
outstanding principal amount of pre-petition ABL Obligations to exceed the amounts set forth in clause (a) of
the definition of Maximum ABL Obligations, (v) the DIP Financing
shall be on terms which would not result in a violation of the provisions of Section 5.2(a) hereof
(it being understood that the increase of the Borrowing Base by the Permitted
Insolvency Increase Amount shall not be violative thereof) and (vi) the foregoing provisions of
this Section 6.1(a) shall not prevent the Term Agent and the Term
Secured Parties from objecting to any provision in any DIP Financing relating
to any provision or content of a plan of reorganization, arrangement, proposal,
or other plan of similar effect under any Debtor Relief Laws.


 


(c)                                  All Liens granted to the ABL Agent or the
Term Agent 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)                                 The Term Agent and the Term Secured
Parties hereby agree that they shall not offer, and shall not permit any
Affiliate of any of them to offer, to provide any DIP Financing to any Obligor
in any Insolvency Proceeding or endorse the provision of any DIP Financing to
any Obligor in any Insolvency Proceeding other than (i) any DIP Financing
provided by or consented to by the ABL Agent, (ii) if the ABL Agent and
the ABL Lenders fail to offer to provide DIP Financing to any Obligor within
five (5) Business Days after the commencement of any Insolvency
Proceeding, any DIP Financing provided by the Term Agent or any Term Lenders,
or (iii) any DIP Financing consisting solely of a “rollover” of the
pre-petition Term Obligations on the same terms as existed prior to the
commencement of the Insolvency Proceeding. 
Except for DIP Financings permitted under clauses (d)(i) and (iii),
nothing in this Intercreditor Agreement shall limit the rights of the
ABL Secured Parties to object to the terms of any post-petition financing
provided by the Term Agent and/or the Term Secured Parties following any
Insolvency Proceeding 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 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


 


33

















 


relief from the automatic stay or any other stay with respect to any
Collateral without providing three (3) 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, (ii) subject to Section 6.1(b) above,
any proposed provision of DIP Financing by the ABL Agent and the ABL Secured
Parties (or any other Person proposing to provide DIP Financing with the
consent of the ABL Agent) 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 any Liens granted to the
ABL Agent as adequate protection of its interests are subject to this
Agreement.


 


(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(b) above or 6.3(c) below), (ii) any
offer to provide DIP Financing pursuant to clauses (i) through (iii) of
Section 6.1(d) above by the Term Agent and the Term Secured Parties
(or any other Person proposing to provide DIP Financing with the consent of the
Term Agent), subject to the right of the ABL Secured Parties to object to the
terms of any such DIP Financing in accordance with the last sentence of Section 6.1(d) 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(b) above) are not adequately protected
(or any other similar request under any law applicable to an Insolvency
Proceeding), so long as any Liens granted to the Term Agent as adequate
protection of its interests are subject to this Agreement.


 


(c)                                  Notwithstanding
the foregoing provisions in this Section 6.3, in any Insolvency
Proceeding:


 


(i)                                     if the ABL
Secured Parties (or any subset thereof) are 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;


 


34

















 


(ii)                                  in the event
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 any of 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; and


 


(iii)                               except as otherwise
expressly set forth in Section 6.1 or in connection with the exercise of
remedies with respect to (A) the ABL Priority Collateral, nothing herein
shall limit the rights of the Term Agent or the Term Secured Parties from
seeking adequate protection with respect to their rights in the Collateral in
any Insolvency Proceeding (including adequate protection in the form of a cash
payment, periodic cash payments or otherwise) or (B) the Term Priority
Collateral, nothing herein shall limit the rights of the ABL Agent or the ABL
Secured Parties from seeking adequate protection with respect to their rights
in the Collateral in any Insolvency Proceeding (including adequate protection
in the form of a cash payment, periodic cash payments or otherwise).


 


Section 6.4                                   Asset
Sales.


 


(a)                                  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 Liens of the Parties attach to the
proceeds of such sale consistent with the Lien Priority on the assets sold and
such proceeds are otherwise applied in accordance with this Agreement. The ABL
Agent agrees, on behalf of itself and the ABL Secured Parties, that they 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 Liens of the Parties attach to the
proceeds of such sale consistent with the Lien Priority on the assets sold, the
purchaser assumes and agrees to the provisions of  Section 3.5 hereof as set forth therein
and such proceeds are otherwise applied in accordance with this Agreement.  If
such sale of Collateral includes both ABL Priority Collateral and Term Priority
Collateral, and if the Parties are unable after negotiating in good faith to
agree on the allocation of the purchase price between the ABL Priority
Collateral and Term Priority Collateral, either Party may apply to the court in
such Insolvency Proceeding to make a determination of such allocation, and the
court’s determination shall be binding upon the Parties.


 


(b)                                 Upon the
Discharge of the ABL Obligations (or if the Discharge of the ABL Obligations
will occur immediately upon the consummation of any such bid) the Term Agent
and each Term Secured Party at any sale under a plan of reorganization or plan
of liquidation, or any sale under Section 363 of the Bankruptcy Code or
similar provision under any Debtor Relief Law shall be entitled to credit bid
for or purchase the ABL Priority Collateral.


 


35

















 


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 Security Documents and the Term Security 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 Obligors, 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 the other Secured Parties hereby acknowledging and agreeing to turn over
to the respective other Secured Parties 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.


 


Section 6.6                                   Enforceability.  The provisions of this Agreement are intended
to be and shall be enforceable under Section 510(a) of the Bankruptcy
Code and all other similar provisions of applicable 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 Obligors (to the
extent applicable) hereunder, shall, except as otherwise specifically provided
herein, remain in full force and effect irrespective of:


 


(i)                                     any lack of validity or enforceability of
any ABL Document;


 


(ii)                                  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 (but solely to the extent permitted pursuant to
Section 5.2(a) above);


 


(iii)                               any exchange, release, voiding, avoidance
or non perfection of any security interest in or Lien on any Collateral or any
other collateral, or any release, amendment, waiver or other modification,
whether by course of conduct or otherwise, or any refinancing, replacement,
refunding, restatement or increase of all or any portion of the ABL Obligations
or any guarantee or guaranty thereof; or


 


36

















 


(iv)                              any other circumstances that otherwise
might constitute a defense available to, or a discharge of, any ABL Obligor in
respect of the ABL Obligations, or of any of the Term Agent or any Term
Obligor, to the extent applicable, in respect of this Agreement.


 


Section 6.8                                   Term
Obligations Unconditional.  All rights of the Term Agent hereunder, all
agreements and obligations of the ABL Agent and the Obligors (to the extent
applicable) hereunder, shall, except as otherwise specifically provided herein,
remain in full force and effect irrespective of:


 


(i)                                     any lack of validity or enforceability of
any Term Document;


 


(ii)                                  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 (but solely to the extent permitted pursuant
to Section 5.2(b) above);


 


(iii)                               any exchange, release, voiding, avoidance
or non perfection of any security interest in or Lien on any Collateral, or any
other collateral, or any release, amendment, waiver or other modification,
whether by course of conduct or otherwise, or any refinancing, replacement,
refunding, restatement or increase of all or any portion of the Term
Obligations or any guarantee or guaranty thereof; or


 


(iv)                              any other circumstances that otherwise
might constitute a defense available to, or a discharge of, any Term Obligor in
respect of the Term Obligations, or of any of the ABL Agent or any ABL Obligor,
to the extent applicable, in respect of this Agreement.


 


ARTICLE 7


PURCHASE
OPTION


 


Section 7.1                                   Option
to Purchase ABL Obligations.


 


(a)                                  Option to
Purchase of Term Secured Parties.  (i) If all of the ABL Obligations shall
have been accelerated by vote of the ABL Agent or the ABL Lenders (and not by
an automatic acceleration upon the commencement of an Insolvency Proceeding),
or (ii) following the non-payment of the ABL Obligations after the
Extended Term Maturity Date (as such term is defined in the ABL Credit
Agreement) or (iii) if the ABL Agent has delivered an Enforcement Notice
(each a “Trigger Event”), the Term Secured Parties shall have the option
to purchase all, and not less than all, of the ABL Obligations from the ABL
Agent and the ABL Secured Parties. The ABL Agent shall furnish the Term Agent
with prompt notice of the occurrence of any Trigger Event under clauses (a)(i) and
(ii) hereof.


 


(b)                                 Exercise
of Option to Purchase of Term Secured Parties — Sale Without Consent.  In order to exercise their option to purchase
described in Section 7.1(a), the Term Agent shall furnish irrevocable
written notice to the ABL Agent (with copies to the Borrowers) of the election
of the Term Secured Parties to purchase the ABL Obligations, which notice shall


 


37

















 


be received by the ABL
Agent within five (5) Business Days’ after the first occurrence of a
Trigger Event. On the date specified by the Term Agent in such notice (which
shall not be more than ten (10) Business Days after the receipt by the ABL
Agent of the notice from the Term Agent of the election by the Term Secured
Parties to exercise such option), the ABL Agent and the ABL Secured Parties
shall sell to the Term Secured Parties exercising such option, and such Term
Secured Parties shall purchase from the ABL Agent and the ABL Secured Parties,
all of the ABL Obligations without the prior written consent of the Borrowers
or any other ABL Obligor. During the period commencing on the date such notice is received by
the ABL Agent and ending on the date specified in such notice for the
consummation of the purchase, absent Exigent Circumstances, the ABL Agent shall
not Exercise Any Secured Creditor Remedies without the consent of the Term
Agent (such consent not to be unreasonably withheld or delayed).


 


(c)                                  Payment of
Purchase Price.  Upon
the date of such purchase and sale, the Term Secured Parties that have
exercised such option shall, pursuant to documentation in form and substance
reasonably satisfactory to the ABL Agent, (i) pay to the ABL Secured
Parties as the purchase price therefor the full amount of all the ABL
Obligations then outstanding and unpaid (including, without limitation,
principal, reimbursement obligations in respect of any letters of credit,
interest, fees, indemnities and expenses, including reasonable attorneys’ fees
and legal expenses) at par, (ii) cash collateralize any letters of credit
outstanding under the ABL Credit Agreement in an amount equal to 103% of the
aggregate undrawn face amount thereof, (iii) agree to reimburse the ABL
Agent and the ABL Secured Parties for any loss, cost, damage or expense
(including reasonable attorneys’ fees and legal expenses) in connection with
any commissions, fees, costs or expenses related to any issued and outstanding
letters of credit as described above, (iv) cash collateralize any
Obligations with respect to Bank Products, Cash Management Services in an
amount equal to 103% of the aggregate amount thereof, and (v) the delivery or provision of cash
collateral or backstop letters of credit for any Asserted Known Bank
Indemnification Claims, in an amount reasonably estimated by the ABL Agent but
in any event not to exceed 100% of the ABL Obligors’ obligations to the ABL Agent
and the ABL Secured Parties in respect thereof.  Such purchase price and cash collateral shall
be remitted by wire transfer in federal funds to such bank account of the ABL
Agent for the ratable account of the ABL Agent and the ABL Secured Parties, as
the ABL Agent may designate in writing to the Term Agent for such purpose.  Interest shall be calculated to but excluding
the Business Day on which such purchase and sale shall occur if the amounts so
paid by the Term Secured Parties that have exercised such option to the bank
account designated by the ABL Agent are received in such bank account prior to
2:00 p.m., Eastern time and interest shall be calculated to and including
such Business Day if the amounts so paid by such Term Secured Parties to the
bank account designated by the ABL Agent are received in such bank account
later than 2:00 p.m., Eastern time on such Business Day.


 


(d)                                 Exclusion
of Representations and Warranties; No Recourse.  Such purchase shall be expressly made without
recourse, representation or warranty of any kind by the ABL Agent or any ABL
Secured Parties as to the ABL Documents or the ABL Obligations owed to such
Person or otherwise (including, without limitation, as to the validity or
enforceability thereof, the collectability of such ABL Obligations, or the
attachment or perfection of any Liens thereunder), except that each such Person
shall represent and warrant:  (i) the
amount of the ABL Obligations being sold by it, (ii) that such Person has
not created any Lien on any ABL


 


38

















 


Obligation being sold
by it and (iii) that such Person has the right to assign such ABL
Obligations being assigned by it and its assignment is duly authorized.


 


ARTICLE 8


MISCELLANEOUS


 


Section 8.1                                   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.  Thereafter, 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.  Thereafter, 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. Each ABL Obligor and Term Obligor acknowledges and agrees that, to the
extent permitted by applicable law, the value of any payments or distributions
in cash, property or other assets received by the ABL Agent and the ABL Secured
Parties or Term Agent and the Term Secured Parties that are paid over to other
Secured Parties pursuant to this Agreement shall not reduce the amounts the ABL
Obligors or the Term Obligors, as applicable, shall be obligated to pay to the
Persons making such payment.


 


Section 8.2                                   Further
Assurances.  The Parties
will, at their own expense and at any time and from time to time, 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 their 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 8.3                                   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


 


39
















 


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 8.4            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 consent shall be effective only in the
specific instance and for the specific purpose for which given.


 


Section 8.5            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, or sent by overnight express courier service or
mail and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of a telecopy or three (3) days after
deposit in the 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:     

  	
  Bank of America, N.A.

  
	
   

  	
  100 Federal Street

  
	
   

  	
  Boston, Massachusetts
  02109

  
	
   

  	
  Attention:
  Andrew Cerussi

  
	
   

  	
  Fax:
  (617) 434-4131

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
  Riemer &
  Braunstein, LLP

  
	
   

  	
  Three
  Center Plaza

  
	
   

  	
  Boston,
  MA 02108

  
	
   

  	
  Attention:
  David S. Berman, Esquire

  
	
   

  	
  Fax:
  (617) 880-3456

  



 


40

















 


	
  Term
  Agent:     

  	
  Z
  investments Holdings, LLC

  
	
   

  	
  One
  Embarcadero Center, 39th Floor

  
	
   

  	
  San
  Francisco, California 94111

  
	
   

  	
  Attention:  Stefan Kaluzny

  
	
   

  	
  Fax:  (415) 983-2701

  
	
   

  	
   

  
	
   

  	
  With
  a copy to:

  
	
   

  	
   

  
	
   

  	
  Kirkland &
  Ellis, LLP

  
	
   

  	
  555
  California Street

  
	
   

  	
  San
  Francisco, California 94104

  
	
   

  	
  Attention:  John E. Friedrichs, Esquire

  
	
   

  	
  Fax:  (415) 439-1500

  



 


Section 8.6            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 8.7            Continuing
Agreement, Transfer of Secured Obligations.  This Agreement is a continuing agreement and
shall (a) remain in full force and effect until the earlier of the
Discharge of ABL Obligations or the Discharge of Term Obligations, (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
Obligor shall include any Obligor as debtor-in-possession and any receiver or
trustee for such Obligor 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 portion of
the ABL Obligations or the Term Obligations, as applicable, to any other Person
(other than any Obligor or any Affiliate of any Obligor and any Subsidiary of
any Obligor) 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 Borrower on the faith hereof.


 


Section 8.8            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.  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.


 


41

















 


Section 8.9            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.


 


Section 8.10         No Third Party Beneficiaries.  This Agreement is solely for the benefit of
the ABL Agent, ABL Secured Parties, Term Agent and Term Secured Parties.  No other Person (including any Obligor or any
Affiliate of any Obligor, or any Subsidiary of any Obligor) shall be deemed to
be a third party beneficiary of this Agreement.


 


Section 8.11         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 8.12         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 8.13         Attorneys’ Fees.  The Parties agree that if any dispute,
arbitration, litigation, or other proceeding is brought with respect to the
enforcement of this Agreement or any provision hereof, the prevailing party in
such dispute, arbitration, litigation, or other proceeding shall be entitled to
recover its reasonable attorneys’ fees and all other costs and expenses
incurred in the enforcement of this Agreement, irrespective of whether suit is
brought.


 


Section 8.14         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 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 OBLIGOR OR ITS PROPERTIES IN THE
COURTS OF ANY JURISDICTION.


 


42

















 


(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 8.15         Intercreditor Agreement.  This Agreement is the Intercreditor Agreement
referred to in the ABL Credit Agreement and the Term Credit 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 8.16         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 Borrower in accordance with law and their usual practices,
modified from time to time as they deem appropriate.


 


Section 8.17         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 8.18         Information Concerning Financial
Condition of the Obligors.


 


(a)           Each of the Term Agent and the ABL Agent hereby
assumes responsibility for keeping itself informed of the financial condition
of the Obligors 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 their 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, (ii) to undertake any investigation not a part of its regular
business routine, or (iii) to disclose any 


 


43

















 


other information, (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 agrees to hold the providing 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.


 


(b)           The Obligors agree that any information provided to
the ABL Agent, the Term Agent, any ABL Secured Party or any Term Secured Party
may be shared by such Person with any ABL Secured Party, any Term Secured
Party, the ABL Agent or the Term Agent notwithstanding a request or demand by
such Obligors that such information be kept confidential; provided that
such information shall otherwise be subject to the respective confidentiality
provisions in the ABL Credit Agreement and the Term Credit Agreement, as
applicable


 


[SIGNATURE
PAGES FOLLOW]


 


44

















 


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.


 


	
   

  	
  BANK OF AMERICA, N.A., in its capacity as ABL
  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ANDREW CERUSSI

  
	
   

  	
  Name:

  	
  Andrew Cerussi

  
	
   

  	
  Title:

  	
  SVP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Z INVESTMENT HOLDINGS, LLC, in its
  capacity as the Term Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ PETER MORROW

  
	
   

  	
  Name:

  	
  Peter Morrow

  
	
   

  	
  Title:

  	
  Manager

  



 


Signature Page to Intercreditor
Agreement


 

















 


ACKNOWLEDGMENT


 


Each ABL Obligor and Term
Obligor 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 and the Term Agent, and will not do any act or perform any obligation
which is not in accordance with the agreements set forth in this Agreement.
Each ABL Obligor and Term Obligor 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 and the ABL Obligors, 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 Term Obligors,
the Term Documents remain in full force and effect as written and are in no way
modified hereby.  Without limiting the
foregoing, the Obligors acknowledge and agree that the Discharge of ABL
Obligations and/or the Discharge of Term Obligations shall not limit, impair,
reduce or otherwise modify their liability to the Secured Parties for any
amounts which thereafter may become due under the Credit Documents.


 


	
   

  	
  ZALE DELAWARE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZGCO, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  



 


Acknowledgement
— Intercreditor Agreement


 

















 


	
   

  	
  TXDC, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   ZALE DELAWARE, INC.

  
	
   

  	
   

  	
  Its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE PUERTO RICO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE CANADA CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE CANADA DIAMOND SOURCING INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZAP, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE CANADA HOLDING, LP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  



 


Acknowledgement
— Intercreditor Agreement


 

















 


	
   

  	
  ZCSC, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE EMPLOYEES’ CHILD CARE ASSOCIATION, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE CANADA FINCO 2, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FINCO HOLDING LP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FINCO PARTNERSHIP LP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ZALE CANADA FINCO, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice President and Treasurer

  



 


Acknowledgement
— Intercreditor Agreement


 

















 


	
   

  	
  ZALE CANADA FINCO 1, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ STEVE MASSANELLI

  
	
   

  	
  Name: Steve Massanelli

  
	
   

  	
  Title: Senior Vice
  President and Treasurer

  



 


Acknowledgement
— Intercreditor Agreement