exhibit10-2.htm


     

     

    Exhibit
10.2

     

    


      INTERCREDITOR
AGREEMENT

       

      This
INTERCREDITOR AGREEMENT
(“Agreement”), is dated as of February 18,
2009, and entered into by and among CITICORP NORTH AMERICA, INC.,
a Delaware corporation, in its capacity as program agent for the First Lien
Claimholders (as defined below), including its successors and assigns from time
to time (the “First Lien
Agent”) and CITICORP
NORTH AMERICA, INC., a Delaware corporation, in its capacity as
administrative agent and collateral processing agent for the Second Lien
Claimholders (as defined below), including its successors and assigns from time
to time (the “Second Lien
Agent”), and acknowledged and agreed to by RITE AID FUNDING II, a Cayman
Islands exempted company incorporated with limited liability (the “Borrower”).  Capitalized
terms used in this Agreement have the meanings assigned to them in Section 1
below.

       

      RECITALS

       

      The
Borrower, the investors, banks, agents, originators, collection agent and
trustee party thereto, and First Lien Agent in its capacity as program agent for
the holders of the First Lien Obligations (as defined below), have entered into
that Receivables Financing Agreement dated as of September 21, 2004, providing
for a revolving credit facility (as amended, restated, supplemented or modified
from time to time, the “First
Lien Credit Agreement”);

       

      The
Borrower, the lenders party thereto, the collection agent party thereto, the
originators and Second Lien Agent in its capacity as administrative agent and
collateral processing agent for the holders of the Second Lien Obligations (as
defined below), entered into that Credit Agreement dated as of the date hereof
providing for a term loan (as amended, restated, supplemented or modified from
time to time, the “Second Lien
Credit Agreement”);

       

      The
obligations of the Borrower under the First Lien Credit Agreement are secured on
a first priority basis by liens on substantially all the assets of the Borrower,
pursuant to the terms of the First Lien Loan Documents;

       

      The
obligations of the Borrower under the Second Lien Credit Agreement are secured
on a second priority basis by liens on substantially all the assets of the
Borrower pursuant to the terms of the Second Lien Loan Documents;
and

       

      The
First Lien Collateral Agent and the Second Lien Collateral Agent have agreed to
the intercreditor and other provisions set forth in this Agreement.

       

      AGREEMENT

       

      In
consideration of the foregoing, the mutual covenants and obligations herein set
forth and for other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:

       


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      


       

      SECTION
1.     Definitions.

       

      1.1      Defined
Terms.  As used in the Agreement, the following terms shall
have the following meanings:

       

      “Affiliate” means, as to any
Person, any other Person that, directly or indirectly, is in control of, is
controlled by or is under common control with such Person or is a director or
officer of such Person.

       

      “Agreement” means this
Intercreditor Agreement, as amended, restated, renewed, extended, supplemented
or otherwise modified from time to time.

       

      “Bankruptcy Code” means
Title 11 of the United States Code entitled “Bankruptcy,” as now and
hereafter in effect, or any successor statute.

       

      “Bankruptcy Law” means the
Bankruptcy Code and any state, foreign or other federal bankruptcy, insolvency,
receivership or similar law affecting creditors’ rights generally.

       

      “Borrower” has the meaning
assigned to that term in the Preamble to this Agreement.

       

      “Business Day” means a day
other than a Saturday, Sunday or other day on which commercial banks in New York
City are authorized or required by law to close.

       

      “Collateral” means all of the
property of the Borrower, whether real, personal or mixed, constituting (or
required to constitute) both First Lien Collateral and Second Lien Collateral,
including any Liens granted pursuant to Section 6 to
secure both First Lien Obligations and Second Lien Obligations.

       

      “Collateral Sale”
means:

       

      (1)      any
public or private sale or other similar disposition of Collateral pursuant to
the UCC or other applicable law, or

       

      (2)      any
Enforcement Action of the type described in clause (3) of the definition of
Enforcement Action.

       

      “Creditors” means,
collectively, the First Lien Agent, on behalf of itself and the First Lien
Claimholders, and the Second Lien Agent, on behalf of itself and the Second Lien
Claimholders, and their respective successors and assigns.

       

      “Discharge of First Lien
Obligations” means:

       

      (a)      payment
in full in cash of the principal of and interest (including interest accruing on
or after the commencement of any Insolvency Proceeding, whether or not such
interest would be allowed in such Insolvency Proceeding), on all First Lien
Obligations;

       


      
        
           


        

        
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      (b)      payment
in full in cash of all other First Lien Obligations that are due and payable or
otherwise accrued and owing at or prior to the time such principal and interest
are paid (other than any indemnification obligations for which no claim or
demand for payment, whether oral or written, has been made at such time);
and

       

      (c)      termination
or expiration of all commitments, if any, to extend credit that would constitute
First Lien Obligations.

       

      “Enforcement Action” means any
action under applicable law:

       

      (1)      to
foreclose, execute or levy on, collect on, take possession of or control of, or
sell or otherwise realize upon (judicially or non-judicially) or to lease,
license or otherwise dispose of (whether publicly or privately), any Collateral
or otherwise to exercise or enforce remedial rights with respect to Collateral
under the First Lien Loan Documents or the Second Lien Loan Documents, as
applicable, or any other applicable agreement, document or instrument pertaining
thereto (including, without limitation, by way of setoff, noticing of any public
or private sale or other disposition pursuant to the UCC or other applicable
law, notification of account debtors or notification of depositary
banks),

       

      (2)      to
solicit bids from third parties to conduct the liquidation or disposition of any
Collateral or to engage or retain sales brokers, marketing agents, investment
bankers, accountants, appraisers, auctioneers or other third parties for the
purposes of valuing, marketing, promoting and selling any
Collateral,

       

      (3)      to
receive a transfer of Collateral in satisfaction of any indebtedness or other
obligation secured thereby, or

       

      (4)      to
otherwise enforce any security interest or exercise any other right or remedy,
as a secured creditor or otherwise, pertaining to the Collateral at law, in
equity or pursuant to the First Lien Loan Documents or the Second Lien Loan
Documents, as applicable, or any other applicable agreement, document or
instrument pertaining thereto (including, without limitation, the commencement
of any applicable legal proceedings or other actions against or with respect to
all or any portion of the Collateral to facilitate the actions described in the
immediately preceding clauses (1),
(2) and (3), and exercising
voting rights in respect of any equity interests comprising
Collateral);

       

      provided that “Enforcement Action” shall be
deemed to include the commencement of, or joinder in filing of a petition for
commencement of, an Insolvency Proceeding against the owner of
Collateral.

       

      “Event of Default” means “Event of Termination” as
defined in the First Lien Credit Agreement and/or “Event of Default” as defined
in the Second Lien Credit Agreement.

       

      “First Lien Agent” has the
meaning assigned to that term in the Recitals to this Agreement.

       


      
        
           


        

        
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      “First Lien Cap” means the
aggregate principal amount of First Lien Obligations up to, but not in excess
of, the lesser of (i) $345,000,000 and (ii) the aggregate “Bank
Commitments” (as such term is defined in the First Lien Credit
Agreement).

       

      “First Lien Claimholders”
means, at any relevant time, the holders of First Lien Obligations at that time,
including the First Lien Lenders and the agents under the First Lien Loan
Documents.

       

      “First Lien Collateral” means
all of the assets and property of the Borrower, whether real, personal or mixed,
with respect to which a Lien is granted as security for any First Lien
Obligations.

       

      “First Lien Credit Agreement”
has the meaning assigned to that term in the Recitals to this
Agreement.

       

      “First Lien Lenders” means the
“Investors” and “Banks” under and as defined in the First Lien Credit
Agreement.

       

      “First Lien Loan Documents”
means the First Lien Credit Agreement, the “Transaction Documents” (as defined
in the First Lien Credit Agreement), and each of the other agreements, documents
and instruments providing for or evidencing any other First Lien Obligation, and
any other document or instrument executed or delivered at any time in connection
with any First Lien Obligations, including any intercreditor, liquidity or
joinder agreement among holders of First Lien Obligations, to the extent such
are effective at the relevant time, as each may be amended, restated,
supplemented, modified, renewed or extended from time to time in accordance with
the provisions of this Agreement.

       

      “First Lien Obligations” means
all Obligations of Borrower outstanding under (i) the First Lien Credit
Agreement, and (ii) the other First Lien Loan Documents, in each case
whether or not allowed or allowable in an Insolvency Proceeding; provided that the
aggregate principal amount, without duplication, of any revolving credit
commitments or revolving credit loans provided for under the First Lien Credit
Agreement or any other First Lien Loan Document in excess of the First Lien Cap
shall not constitute First Lien Obligations for purposes of this Agreement,
except for Inadvertent Excess Advances not exceeding an aggregate amount of
$7,000,000 outstanding at any time.  “First Lien Obligations” shall
include, without limitation, all of the following (none of which shall be
included within the First Lien Cap) (x) all interest accrued or accruing
(or which would, absent commencement of an Insolvency Proceeding, accrue) in
accordance with the rate specified in the relevant First Lien Loan Document
(including any capitalized interest) and (y) all fees, costs, indemnities,
expenses or charges (including, without limitation, reasonable fees and expenses
of legal counsel) arising under the First Lien Loan Documents and provided for
thereunder, in the case of each of clause (x) and
clause (y)
whether before or after commencement of an Insolvency Proceeding, and
irrespective of whether any claim for such interest, fees, costs, indemnities,
expenses or charges (including, without limitation, reasonable fees and expenses
of legal counsel) is allowed as a claim in such Insolvency
Proceeding.  To the extent any payment with respect to the First Lien
Obligations (whether by or on behalf of Borrower, as proceeds of security,
enforcement of any right of set-off or otherwise) is declared to be fraudulent
or preferential in any respect, set aside or required

       


      
        
           


        

        
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      to
be paid to a debtor in possession, trustee, receiver or similar Person, then the
obligation or part thereof originally intended to be satisfied shall be deemed
to be reinstated and outstanding as if such payment had not
occurred.

       

      “Governmental Authority” means
any federal, state, municipal, national or other government, governmental
department, commission, board, bureau, court, agency or instrumentality or
political subdivision thereof or any entity or officer exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to any government or any court, in each case whether associated with a state of
the United States, the United States, or a foreign entity or
government.

       

      “Inadvertent Excess Advance”
means an advance by a First Lien Claimholder:  (i) in excess of the
First Lien Cap, (ii) made erroneously and not in accordance with the
limitations contained in the First Lien Credit Agreement, and (iii) as to
which, the First Lien Claimholder that made such excess advance demands
repayment, and exercises commercially reasonable steps to obtain repayment,
within three Business Days after making such advance.

       

      “Insolvency Proceeding”
means:

       

      (a)      any
voluntary or involuntary case or proceeding under the Bankruptcy Code with
respect to Borrower;

       

      (b)      any
other voluntary or involuntary insolvency, reorganization or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding with respect to Borrower or with respect to a material
portion of its property;

       

      (c)      any
liquidation, dissolution, reorganization or winding up of Borrower whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy;
or

       

      (d)      any
assignment for the benefit of creditors or any other marshaling of assets and
liabilities of Borrower.

       

      “Lien” means any lien
(including, without limitation judgment liens and liens arising by operation of
law), mortgage or deed of trust, pledge, hypothecation, assignment, security
interest, charge or encumbrance of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement, and
any lease in the nature thereof) and any option, call, trust, UCC financing
statement or other preferential arrangement having the practical effect of any
of the foregoing, including any right of setoff or recoupment.

       

      “Obligations” means all
obligations of every nature of Borrower from time to time owed to the First Lien
Agent, the Second Lien Agent, the First Lien Claimholders, the Second Lien
Claimholders or any of them or their respective Affiliates under the First Lien
Loan Documents or the Second Lien Loan Documents, whether for principal,
interest, fees, expenses, indemnification or otherwise (including, without
limitation, reasonable fees and expenses of legal counsel) and all guarantees of
any of the foregoing, whether absolute or contingent, due or to become due, now
existing or hereafter arising and including interest and fees that accrue after
the commencement by or against any Person or any Affiliate thereof of any
proceeding under

       


      
        
           


        

        
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      any
Bankruptcy Law naming such Person as the debtor in such proceeding, regardless
of whether such interest and fees are allowed claims in such
proceeding.

       

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

       

      “Pledged Collateral” has the
meaning set forth in Section 5.4.

       

      “Post-Petition Claims” means
interest, fees, costs, expenses and other charges that pursuant to the First
Lien Credit Agreement or the Second Lien Credit Agreement, continue to accrue
after the commencement of any Insolvency Proceeding, whether or not such
interest, fees, expenses and other charges are allowed or allowable under the
Bankruptcy Law or in any such Insolvency Proceeding.

       

      “Proceeds” means (a) all
“Proceeds” as defined in Article 9 of the UCC with respect to the
Collateral, and (b) whatever is recoverable or recovered when Collateral is
sold, exchanged, collected, or disposed of, whether voluntarily or
involuntarily.

       

      “Purchase Period” has the
meaning set forth in Section 3.4.

       

      “Recovery” has the meaning set
forth in Section 6.6.

       

      “Reserve” means any of the
“Commingling Reserve,” “Dilution Reserve,” “Loss Reserve” or “Yield and Fee
Reserve” as such terms are defined in the First Lien Credit
Agreement.

       

      “Second Lien Agent” has the
meaning assigned to that term in the Preamble of this Agreement.

       

      “Second Lien Claimholders”
means, at any relevant time, the holders of Second Lien Obligations at that
time, including the Second Lien Lenders and the agents under the Second Lien
Loan Documents.

       

      “Second Lien Collateral” means
all of the assets and property of Borrower, whether real, personal or mixed,
with respect to which a Lien is granted as security for any Second Lien
Obligations.

       

      “Second Lien Credit Agreement”
has the meaning assigned to that term in the Recitals to this
Agreement.

       

      “Second Lien Lenders” means the
“Lenders” under and as defined in the Second Lien Credit Agreement.

       

      “Second Lien Loan Documents”
means the Second Lien Credit Agreement, the “Transaction Documents” (as defined
in the Second Lien Credit Agreement), and each of the other agreements,
documents and instruments providing for or evidencing any other Second Lien
Obligation, and any other document or instrument executed or delivered at any
time in

       


      
        
           


        

        
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      connection
with any Second Lien Obligations, including any intercreditor or joinder
agreement among holders of Second Lien Obligations to the extent such are
effective at the relevant time, as each may be amended, restated, supplemented,
modified, renewed or extended from time to time in accordance with the
provisions of this Agreement.

       

      “Second Lien Obligations” means
all Obligations of Borrower outstanding under the Second Lien Credit Agreement
and the other Second Lien Loan Documents, in each case whether or not allowed or
allowable in an Insolvency Proceeding.  “Second Lien Obligations”
shall include, without limitation, all of the following (x) all interest
accrued or accruing (or which would, absent commencement of an Insolvency
Proceeding, accrue) after commencement of an Insolvency Proceeding in accordance
with the rate specified in the relevant Second Lien Loan Document (including any
capitalized interest) and (y) all fees, costs, indemnities, expenses or
charges (including, without limitation, reasonable fees and expenses of legal
counsel) arising under the Second Lien Loan Documents and provided for
thereunder, in the case of each of clause (x) and
clause (y)
whether before or after commencement of an Insolvency Proceeding, and
irrespective of whether any claim for such interest, fees, costs, indemnities,
expenses or charges (including, without limitation, reasonable fees and expenses
of legal counsel) is allowed as a claim in such Insolvency
Proceeding.  To the extent any payment with respect to the Second Lien
Obligations (whether by or on behalf of Borrower, as proceeds of security,
enforcement of any right of set-off or otherwise) is declared to be fraudulent
or preferential in any respect, set aside or required to be paid to a debtor in
possession, trustee, receiver or similar Person, then the obligation or part
thereof originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred.

       

      “Standstill Period” has the
meaning set forth in Section 3.1.

       

      “UCC” means the Uniform
Commercial Code (or any similar or equivalent legislation) as in effect in any
applicable jurisdiction.

       

      “Yield” has the meaning set
forth in the First Lien Credit Agreement.

       

      1.2     Terms
Generally.  The definitions of terms in this Agreement shall
apply equally to the singular and plural forms of the terms
defined.  Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms.  The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation.”  The word “will” shall be construed to
have the same meaning and effect as the word “shall.”  Unless the
context requires otherwise:

       

      (a)      any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, restated, supplemented, modified, renewed or
extended;

       

      (b)      any
reference herein to any Person shall be construed to include such Person’s
permitted successors and assigns;

       

      (c)      the
words “herein,” “hereof” and “hereunder,” and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof;

       


      
        
           


        

        
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      (d)      all
references herein to Sections shall be construed to refer to Sections of this
Agreement; and

       

      (e)      the
words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and general
intangibles.

       

      SECTION
2.     Lien
Priorities.

       

      2.1      Relative
Priorities.  Notwithstanding the date, time, method, manner or
order of grant, attachment or perfection of any Liens securing the Second Lien
Obligations granted on the Collateral or of any Liens securing the First Lien
Obligations granted on the Collateral and notwithstanding any provision of the
UCC, or any other applicable law or the Second Lien Loan Documents, the Second
Lien Agent, on behalf of itself and the Second Lien Claimholders, hereby agrees
that:

       

      (a)      any
Lien on the Collateral securing any First Lien Obligations now or hereafter held
by or on behalf of the First Lien Agent or any First Lien Claimholders or any
agent or trustee therefor, regardless of how acquired, whether by grant,
possession, statute, operation of law, subrogation or otherwise, shall be senior
in all respects and prior to any Lien on the Collateral securing any Second Lien
Obligations; and

       

      (b)      any
Lien on the Collateral securing any Second Lien Obligations now or hereafter
held by or on behalf of the Second Lien Agent, any Second Lien Claimholders or
any agent or trustee therefor regardless of how acquired, whether by grant,
possession, statute, operation of law, subrogation or otherwise, shall be junior
and subordinate in all respects to all Liens on the Collateral securing any
First Lien Obligations.

       

      (c)      All
Liens on the Collateral securing any First Lien Obligations shall be and remain
senior in all respects and prior to all Liens on the Collateral securing any
Second Lien Obligations for all purposes, notwithstanding any defect or
deficiencies in, or failure to perfect or lapse in perfection of, the Liens
securing the First Lien Obligations, the subordination of any Lien on the
Collateral securing any First Lien Obligations to any Lien securing any other
obligation of the Borrower or any other Person, the avoidance, invalidation or
lapse of any Lien on the Collateral securing any First Lien Obligations or any
defect or deficiencies in the Liens securing the First Lien Obligations or any
other circumstance whatsoever.

       

      2.2     Prohibition on Contesting
Liens.  Second Lien Agent, for itself and on behalf of each
Second Lien Claimholder, and the First Lien Agent, for itself and on behalf of
each First Lien Claimholder, agrees that it will not (and hereby waives any
right to) contest or support any other Person in contesting, in any proceeding
(including any Insolvency Proceeding), the validity, enforceability, perfection
or priority (as set forth in Section 2.1) of
a Lien held by or on behalf of any of the First Lien Claimholders in the First
Lien Collateral or by or on behalf of any of the Second Lien Claimholders in the
Second Lien Collateral, as the case may be; provided that nothing in this
Agreement shall be construed to prevent or impair the rights of the First Lien
Agent or any First Lien Claimholder or of the Second Lien Agent or any Second
Lien Claimholder to enforce this Agreement, including the provisions of this
Agreement

       


      
        
           


        

        
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      relating
to the priority of the Liens securing the First Lien Obligations and Second Lien
Obligations as provided in Section 2.1 and
the provisions related to enforcement in Section 3.1.

       

      2.3      [Intentionally
Omitted].

       

      2.4      [Intentionally
Omitted].

       

      2.5      [Intentionally
Omitted].

       

      2.6      Nature of First Lien and
Second Lien Obligations.

       

      (a)       Subject
to any limitations on the aggregate principal amount of First Lien Obligations
set forth in the definition of “First Lien Obligations” and the limitations in
Section 7.3, the
Second Lien Agent acknowledges that, (i) the First Lien Obligations are
revolving in nature, (ii) the amount thereof that may be outstanding at any
time or from time to time may be increased or reduced and subsequently
reborrowed, (iii) the terms of the First Lien Obligations may be modified,
extended or amended from time to time, and (iv) the aggregate amount of the
First Lien Obligations may be increased without notice to or consent by the
Second Lien Claimholders and without affecting the provisions
hereof.

       

      (b)      The
First Lien Agent acknowledges that (i) the terms of the Second Lien
Obligations may be modified, extended or amended from time to time, and
(ii) the aggregate amount of the Second Lien Obligations may be increased
without notice to or consent by the First Lien Claimholders and without
affecting the provisions hereof.

       

      (c)      Subject
to any limitations on the aggregate principal amount of First Lien Obligations
set forth in the definition of “First Lien Obligations” and the limitation in
Section 7.3, the
lien priorities provided in Sections 2.1 and
2.2 shall not
be altered or otherwise affected by any such amendment, modification,
supplement, extension, repayment, reborrowing, increase, replacement, renewal or
restatement of either the First Lien Obligations or the Second Lien Obligations,
or any portion thereof.

       

      2.7      Limitations on Duties and
Obligations.  Each of the Second Lien Agent, for itself and on
behalf of each Second Lien Claimholder, and the First Lien Agent, for itself and
on behalf of each First Lien Claimholder, agrees that, except in the case of
(i) the obligations of the First Lien Agent under Section 5.4 as
bailee and agent for perfection for the Second Lien Agent and (ii) the
obligations of the Second Lien Agent under Section 5.4 as
bailee and agent for perfection for the First Lien Agent, each of the First Lien
Agent (on behalf of the First Lien Claimholders) and the Second Lien Agent (on
behalf of the Second Lien Claimholders) shall be solely responsible for
perfecting and maintaining the perfection of its Lien in and to each item
constituting the Collateral in which the First Lien Agent (on behalf of the
First Lien Claimholders) or the Second Lien Agent (on behalf of the Second Lien
Claimholders) has been granted a Lien.  The foregoing provisions of
this Agreement are intended solely to govern the respective Lien priorities as
between the Creditors and shall not impose on either the First Lien Agent (on
behalf of the First Lien Claimholders) or the Second Lien Agent (on behalf of
the Second Lien Claimholders) any obligations in respect of the disposition of
proceeds of foreclosure on any Collateral that would conflict with prior
perfected claims therein in favor of

       


      
        
           


        

        
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      any
other Person or any order or decree of any court or other Governmental Authority
or any applicable law.

       

      SECTION
3.     Enforcement.

       

      3.1     Exercise of
Remedies.

       

      (a)      Until
the Discharge of First Lien Obligations has occurred, whether or not any
Insolvency Proceeding has been commenced by or against the Borrower, the Second
Lien Agent and the Second Lien Claimholders:

       

      (1)      will
not take any Enforcement Action with respect to any Lien held by it under any
Second Lien Loan Document or otherwise; provided, however, that the
Second Lien Agent may take Enforcement Action at any time after a period of 30
days has elapsed since the date on which the First Lien Agent shall have
received written notice from the Second Lien Agent of the existence of any Event
of Default under the Second Lien Credit Agreement and the Second Lien
Obligations are currently due and payable in full as a result of acceleration or
otherwise (the “Standstill
Period”); provided, in no event
shall the Second Lien Agent or any Second Lien Claimholder take any Enforcement
Action with respect to any Lien held by it under any Second Lien Loan Document
or otherwise if, notwithstanding the expiration of the Standstill Period,
(i) the First Lien Agent or First Lien Claimholders shall have commenced
and are diligently pursuing an Enforcement Action with respect to all or any
material portion of the Collateral or shall be diligently attempting to vacate
any stay or prohibition against such exercise (prompt written notice of the
initial commencement of such exercise to be given to the Second Lien Agent provided, that the
First Lien Agent shall incur no liability for, and the rights of the First Lien
Agent hereunder or in respect of the Collateral shall be unaffected by, the
failure of the First Lien Agent to give any such notice); (ii) the
“Amortization Period” (as defined in the First Lien Credit Agreement) shall then
exist and collections of the Collateral are being applied and distributed
pursuant to Sections 2.04(c) and 2.04A(b) of the First Lien Credit
Agreement; or (iii) the acceleration of the Second Lien Obligations (if
any) is rescinded in accordance with the terms of the Second Lien Credit
Agreement or by court order;

       

      (2)      subject
to their rights under Section 3.1(b),
will not contest, protest or object to any Enforcement Action brought by the
First Lien Agent or any First Lien Claimholder or any other exercise by the
First Lien Agent or any First Lien Claimholder of any rights and remedies
relating to the Collateral under the First Lien Loan Documents or otherwise so
long as the Liens granted to secure the Second Lien Obligations of the Second
Lien Claimholders attach to the Proceeds thereof subject to the relative
priorities described in Section 2.1;
and

       

      (3)      subject
to their rights under clause (a)(1)
above, will not contest, protest or object to (and waive any and all claims with
respect to) the forbearance by the First Lien Agent or the First Lien
Claimholders from bringing or pursuing any Enforcement Action so long as the
Liens granted to secure the Second Lien Obligations

       


      
        
           


        

        
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      of
the Second Lien Claimholders attach to the Proceeds thereof subject to the
relative priorities described in Section 2.1.

       

      (b)      Whether
or not any Insolvency Proceeding has been commenced by or against the Borrower,
the First Lien Agent and the First Lien Claimholders agree that they will not
effectuate any Collateral Sale during the first 45 days after the occurrence of
the “Amortization Period” (as defined in the First Lien Credit Agreement) unless
either (1) such Collateral Sale will result in the payment in full in cash of
the First Lien Obligations and the Second Lien Obligations or (2) the Second
Lien Agent shall have consented thereto.  If the First Lien Agent
desires to arrange a Collateral Sale at any time after such 45-day period, First
Lien Agent will first offer the Second Lien Claimholders the option to purchase
the First Lien Obligations in accordance with the provisions of Section 3.4 by giving
the Second Lien Agent notice thereof (the “Purchase Notice”), which the
Second Lien Agent will promptly forward to each Second Lien
Claimholder.

       

      (c)      Until
the Discharge of First Lien Obligations has occurred, whether or not any
Insolvency Proceeding has been commenced by or against the Borrower, but subject
to the first proviso of Section 3.1(a)(1)
and to Section 3.1(b),
the First Lien Agent and the First Lien Claimholders shall have the exclusive
right to enforce rights and remedies with respect to the Collateral, commence,
and if applicable, maintain an Enforcement Action (including set-off) and,
subject to Section 5.1,
make determinations regarding the release, disposition, or restrictions with
respect to the Collateral without any consultation with or the consent of the
Second Lien Agent or any Second Lien Claimholder.  In exercising
rights and remedies with respect to the Collateral and Enforcement Actions with
respect to the Collateral, the First Lien Agent and the First Lien Claimholders
may, subject to Section 3.1(b),
enforce the provisions of the First Lien Loan Documents and exercise remedies
thereunder, all in such order and in such manner as they may determine in the
exercise of their sole discretion.  Such exercise and enforcement
shall include, subject to Section 3.1(b), the
right to exercise all the rights and remedies of a secured creditor under the
UCC and of a secured creditor under Bankruptcy Laws of any applicable
jurisdiction.

       

      (d)      Notwithstanding
the foregoing, the Second Lien Agent and any Second Lien Claimholder
may:

       

      (1)      file
a claim or statement of interest with respect to the Second Lien Obligations in
any Insolvency Proceeding commenced by or against the Borrower;

       

      (2)      take
any action (not adverse to the priority status of Liens on the Collateral
securing the First Lien Obligations, or the rights of the First Lien Agent or
the First Lien Claimholders to exercise remedies in respect thereof) in order to
create, perfect, preserve or protect its Lien on the Collateral;

       

      (3)      file
any necessary responsive or defensive pleadings in opposition to any motion,
claim, adversary proceeding or other pleading made by any person objecting to or
otherwise seeking the disallowance of the claims of the Second Lien
Claimholders, including any claims secured by the Collateral, if any, in each
case in a manner not inconsistent with any other provisions of this
Agreement;

       


      
        
           


        

        
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      (4)      vote
on any plan of reorganization (including, without limitation, vote to accept or
reject any plan of partial or complete liquidation, reorganization, arrangement,
composition or extension), file any proof of claim, make other filings and make
any arguments and motions that are, in each case, not inconsistent with any
other provisions of this Agreement, with respect to the Second Lien Obligations
and the Collateral;

       

      (5)      exercise
any of its rights or remedies with respect to the Collateral after the
termination of the Standstill Period to the extent permitted by Section 3.1(a)(1);
and

       

      (6)      join
(but not exercise any control with respect to) any judicial foreclosure
proceeding or other judicial lien enforcement proceeding with respect to the
Collateral initiated by the First Lien Agent to the extent that any such action
could not reasonably be expected, in any material respect, to restrain, hinder,
limit, delay for any material period or otherwise interfere with the Enforcement
Action by the First Lien Agent (it being understood that any Liens attaching to
the proceeds thereof shall be subject to the relative priorities described in
Section 2.1).

       

      The
Second Lien Agent, on behalf of itself and the Second Lien Claimholders, agrees
that it will not take or receive any Collateral or any Proceeds of Collateral in
connection with any Enforcement Action against any Collateral in its capacity as
a creditor, unless and until the Discharge of First Lien Obligations has
occurred, except in connection with any Enforcement Action expressly permitted
by Section 3.1(a)(1)
to the extent the Second Lien Agent and Second Lien Claimholders are permitted
to retain the Proceeds thereof in accordance with Section 4.2 of
this Agreement.

       

      (e)           Subject
to Sections 3.1(a),
(b) and (d) and Section 6.4(b):

       

      (1)      except
as otherwise permitted hereunder, the Second Lien Agent, for itself and on
behalf of the Second Lien Claimholders, agrees that the Second Lien Agent and
the Second Lien Claimholders will not take any action that would hinder any
exercise of remedies under the First Lien Loan Documents;

       

      (2)      except
as otherwise permitted hereunder, the Second Lien Agent, for itself and on
behalf of the Second Lien Claimholders, hereby waives any and all rights it or
the Second Lien Claimholders may have as a junior lien creditor or otherwise to
object to the manner in which the First Lien Agent or the First Lien
Claimholders seek to enforce or collect the First Lien Obligations or the Liens
securing the First Lien Obligations granted in any of the First Lien Collateral
undertaken in accordance with this Agreement, regardless of whether any action
or failure to act by or on behalf of the First Lien Agent or First Lien
Claimholders is adverse to the interest of the Second Lien Claimholders;
and

       

      (3)      the
Second Lien Agent hereby acknowledges and agrees that no covenant, agreement or
restriction contained in any Second Lien Loan Document (other than this
Agreement) shall be deemed to restrict in any way the rights and remedies of
the

       


      
        
           


        

        
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      First
Lien Agent or the First Lien Claimholders with respect to the Collateral as set
forth in this Agreement and the First Lien Loan Documents.

       

      (f)       Except
as specifically set forth in Sections 3.1(a)
and (d), the
Second Lien Agent and the Second Lien Claimholders may exercise rights and
remedies as unsecured creditors against the Borrower in accordance with the
terms of the Second Lien Loan Documents and applicable law; provided that in the
event that any Second Lien Claimholder becomes a judgment lien creditor in
respect of Collateral as a result of its enforcement of its rights as an
unsecured creditor with respect to the Second Lien Obligations, such judgment
lien shall be subject to the terms of this Agreement for all purposes (including
in relation to the First Lien Obligations) as the other Liens securing the
Second Lien Obligations are subject to this Agreement.

       

      (g)      Except
as specifically set forth in Sections 3.1(a)
and (d),
nothing in this Agreement shall prohibit the receipt by the Second Lien Agent or
any Second Lien Claimholders of the required payments of interest, principal and
other amounts owed in respect of the Second Lien Obligations so long as such
receipt is not the direct or indirect result of any Enforcement Action by the
Second Lien Agent or any Second Lien Claimholders of rights or remedies as a
secured creditor in contravention of this Agreement or any Lien held by any of
them.

       

      3.2     Actions Upon
Breach.  If any Second Lien Claimholder, in contravention of
the terms of this Agreement, in any way takes, attempts to or threatens to take
or participate in any Enforcement Action with respect to the Collateral, or
fails to take any action required by this Agreement, the First Lien Agent or the
Borrower may obtain relief against such Second Lien Claimholder by injunction,
specific performance and/or other appropriate equitable relief, it being
understood and agreed by the Second Lien Agent on behalf of each Second Lien
Claimholder that (i) the First Lien Claimholders’ damages from its actions
may at that time be difficult to ascertain and may be irreparable, and
(ii) each Second Lien Claimholder waives any defense that the Borrower
and/or the First Lien Claimholders cannot demonstrate damage and/or be made
whole by the awarding of damages.

       

      3.3     Commercially Reasonable
Dispositions; Notice of Exercise.  First Lien Agent agrees that
any Enforcement Action by First Lien Agent with respect to Collateral subject to
Article 9 of the UCC shall be conducted by First Lien Agent in a
commercially reasonable manner.  Second Lien Agent agrees that any
Enforcement Action by Second Lien Agent with respect to Collateral subject to
Article 9 of the UCC shall be conducted by Second Lien Agent in a
commercially reasonable manner.  First Lien Agent shall provide to
Second Lien Agent prompt notice of any acceleration of the First Lien
Obligations and reasonable prior notice of its initial Enforcement
Action.  Second Lien Agent shall provide to First Lien Agent prompt
notice of any acceleration of the Second Lien Obligations and reasonable prior
notice of its initial Enforcement Action.  Second Lien Agent and
Second Lien Claimholders acknowledge that they have been advised by the First
Lien Agent that the delivery by the Second Lien Agent of the notice referred to
in Section 3.1(a)(1)
which triggers the start of the Standstill Period will automatically cause the
“Amortization Period” to commence under the First Lien Credit Agreement,
whereupon the taking of any Enforcement Action by the Second Lien Agent will be
prohibited, subject to the provisions of clauses (i), (ii) or (iii) of
Section 3.1(a)(1).

       


      
        
           


        

        
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      3.4     Purchase
Option.  The Second Lien Claimholders will have the option,
exercisable (a) at any time following the occurrence of the “Amortization
Period” (as such term is defined in the First Lien Credit Agreement) and prior
to receipt of the Purchase Notice referred to in Section 3.1(b) or (b)
within ten (10) Business Days following receipt of the Purchase Notice, to
purchase all, but not less than all, of the First Lien Obligations, without
warranty, representation or recourse of any kind (except for representations and
warranties required to be made by assigning banks  pursuant to the
“Assignment and Acceptance” (as such term is defined in the First Lien Credit
Agreement)).  The purchase price for any such purchase shall be equal
to the aggregate outstanding amount of  First Lien Obligations due and
payable on the closing date of such purchase (including, without limitation,
accrued interest, fees, costs, indemnities and expenses) and shall be payable
all in cash in immediately available funds.  If one or more of the
Second Lien Claimholders choose to exercise such right, each of them must
irrevocably notify the First Lien Agent thereof (and any such notice given
following delivery of the Purchase Notice must be given within ten (10) Business
Days following the date of the Purchase Notice), and the parties shall endeavor
to close promptly thereafter, but in any event within ten (10) Business Days
following notice of the exercise of the Second Lien Claimholders’ purchase right
(the “Purchase
Period”).  Each Second Lien Claimholder that gives notice of
its intention to exercise its purchase right shall concurrently provide a copy
of such notice to the Second Lien Agent and the other Second Lien
Claimholders.  If more than one Second Lien Claimholder elects to
exercise its purchase option in accordance with this Section 3.4, the
First Lien Obligations shall be purchased by such Second Lien Claimholders on a
pro rata basis according to the amount of Second Lien Obligations owing to each
Second Lien Claimholder that has exercised its purchase right relative to the
aggregate amount of Second Lien Obligations owing to all Second Lien
Claimholders that have exercised their purchase right.  If any Second
Lien Claimholders choose to exercise their purchase right, such purchase shall
be effected pursuant to documentation mutually acceptable to each of the First
Lien Agent and the Second Lien Agent (and, in the event more than one Second
Lien Claimholder has exercised its purchase right, in a single
closing).  If the Second Lien Claimholders elect not to exercise their
purchase right under this Section 3.4 following receipt of the Purchase
Notice (or do not irrevocably provide notice of such exercise within the
required timeframe or close the purchase within the Purchase Period, unless such
failure is to due solely to breach by the First Lien Claimholders of this
Agreement), the First Lien Claimholders shall have no further obligations
pursuant to this Section 3.4.  Each
Second Lien Claimholder which exercises its purchase right hereunder agrees to
indemnify the First Lien Claimholders from and against any loss, liability,
claim, damage or expense (including, without limitation, reasonable fees and
expenses of legal counsel) arising out of any claim asserted by a third party
against the First Lien Claimholders as a direct result of any acts by such
Second Lien Claimholder occurring after the date of such purchase.

       

      


      SECTION 4.     Payments.

       

      4.1     Application of
Proceeds.  Whether or not any Insolvency Proceeding has been
commenced by or against the Borrower, except as otherwise provided in Section 4.2, any
Collateral or Proceeds thereof received upon the exercise of remedies in
connection with any Enforcement Action shall be
applied:  (a) first, so long as the Discharge of First Lien
Obligations has not occurred, to the payment in full in cash of the First Lien
Obligations in such order as specified in the relevant First Lien Loan Documents
or as otherwise determined by the First Lien Claimholders, and (b) second,
upon the Discharge of First Lien Obligations, to the payment in

       


      
        
           


        

        
          14

          
            

          

        

        
           


        

      


      full
in cash of the Second Lien Obligations in such order as specified in the Second
Lien Loan Documents or as otherwise determined by the Second Lien Claimholders,
or, in each case, as a court of competent jurisdiction may otherwise
direct.

       

      4.2     Payment
Turnover.  So long as the Discharge of First Lien Obligations
has not occurred, whether or not any Insolvency Proceeding has been commenced by
or against the Borrower, any Collateral or Proceeds thereof received by the
Second Lien Agent or any Second Lien Claimholders in connection with any
Enforcement Action relating to the Collateral shall be segregated and held in
trust and forthwith paid over to the Trustee (as defined in the First Lien
Credit Agreement) for deposit to the Trustee’s Account (as defined in the First
Lien Credit Agreement) and for allocation pursuant to Section 2.04A(b) of the
First Lien Credit Agreement for the benefit of the First Lien Claimholders in
the same form as received, with any necessary endorsements or as a court of
competent jurisdiction may otherwise direct.  The First Lien Agent is
hereby authorized to make any such endorsements as agent for the Second Lien
Agent or any such Second Lien Claimholders in connection with any payment over
described in the prior sentence.  This authorization is coupled with
an interest and is irrevocable until the Discharge of First Lien
Obligations.  For the avoidance of doubt, the deposit of Proceeds of
the Collateral into the Trustee’s Account and the application of such Proceeds,
in each case in accordance with Section 2.04A(b) of the First Lien Credit
Agreement, shall not constitute an Enforcement Action and the Second Lien Agent
and the Second Lien Claimholders shall have no obligation to pay over to the
Trustee, the First Lien Agent or First Lien Claimholders any payment received by
the Second Lien Agent or the Second Lien Claimholders on account of the Second
Lien Obligations that is paid out of any amount that, in accordance with the
First Lien Credit Agreement, is permitted to be deposited into the “Borrower’s
Account” (as defined therein) or is otherwise permitted under the First Lien
Credit Agreement to be paid to or on behalf of the Borrower, notwithstanding
that such amount constitutes Proceeds of any Collateral.

       

      SECTION
5.     Other
Agreements.

       

      5.1     Releases.

       

      If,
in connection with an Enforcement Action by the First Lien Agent, the First Lien
Agent, for itself or on behalf of any of the First Lien Claimholders, releases
any of its Liens on any part of the Collateral, then the Liens, if any, of the
Second Lien Agent, for itself or for the benefit of the Second Lien
Claimholders, on such Collateral shall be automatically, unconditionally and
simultaneously released (the “Second Lien Release”) and the
Second Lien Agent, for itself or on behalf of any such Second Lien Claimholders,
promptly shall execute and deliver to the First Lien Agent or the Borrower such
termination statements, releases and other documents as the First Lien Agent or
the Borrower may request to effectively confirm such release; provided, however, that the
Second Lien Release shall not occur without the consent of the Second Lien Agent
as to any Collateral the net proceeds of the disposition of which will not be
applied to repay (and, to the extent applicable, to reduce permanently
commitments with respect to) the First Lien Obligations.

       

      5.2     [Intentionally
Omitted].

       

      5.3     Legend; Benefit of
Agreement.  (a)  [Intentionally
Omitted].

       


      
        
           


        

        
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      (b)      [Intentionally
Omitted].

       

      (c)      The
Second Lien Agent agrees that the Second Lien Credit Agreement shall include the
following language (or language to similar effect approved by the First Lien
Agent):

       

      “Notwithstanding
anything herein to the contrary, the lien and security interest granted to the
Second Lien Agent pursuant to this Agreement and the exercise of any right or
remedy by the Second Lien Agent hereunder are subject to the provisions of the
Intercreditor Agreement, dated as of February ___, 2009 (as amended, restated,
supplemented or otherwise modified from time to time, the “Intercreditor Agreement”),
among Citicorp North America, Inc., as First Lien Agent and Citicorp North
America, Inc., as Second Lien Agent and Rite Aid Funding II, as
Borrower.  In the event of any conflict between the terms of the
Intercreditor Agreement and this Agreement, the terms of the Intercreditor
Agreement shall govern and control.”

       

      (d)      [Intentionally
Omitted].

       

      (e)      Except
as otherwise expressly set forth in any First Lien Loan Document, no Person who
obtains the benefit of the provisions of this Agreement or any Collateral by
virtue of the provisions hereof or any First Lien Loan Document shall have any
right to notice of any amendment of this Agreement or any action hereunder or to
consent to, direct or object to any action hereunder or under any First Lien
Loan Document in respect of the Collateral (including the release or impairment
of any Collateral) other than in its capacity as a First Lien Lender and, in
such case, only to the extent expressly provided in the First Lien Loan
Documents.

       

      5.4     Gratuitous Bailee for
Perfection.  (a)  The First Lien Agent agrees to hold
that part of the Collateral that is in its possession or control (or in the
possession or control of its agents or bailees) to the extent that possession or
control thereof is taken to perfect a Lien thereon under the UCC (such
Collateral being the “Pledged
Collateral”) as collateral agent for the First Lien Claimholders and as
gratuitous bailee and agent for perfection for the Second Lien Agent (such
bailment and agency for perfection being intended, among other things, to
satisfy the requirements of Sections 8-106(d)(3), 8-301(a)(2) and 9-313(c)
of the UCC) and any assignee solely for the purpose of perfecting the security
interest granted under the First Lien Loan Documents and the Second Lien Loan
Documents, respectively, subject to the terms and conditions of this Section 5.4.  Solely
with respect to any deposit accounts under the control (within the meaning of
Section 9-104 of the UCC) of the First Lien Agent, the First Lien Agent agrees
to also hold control over such deposit accounts as gratuitous agent for the
Second Lien Agent, subject to the terms and conditions of this Section
5.4.

       

      (b)      The
First Lien Agent shall have no obligation whatsoever to the First Lien
Claimholders, the Second Lien Agent or any Second Lien Claimholder to ensure
that the Pledged Collateral is genuine or owned by the Borrower or to preserve
rights or benefits of any Person except as expressly set forth in this Section 5.4.  The
duties or responsibilities of the First Lien Agent under this Section 5.4
shall be limited solely to holding the Pledged Collateral as bailee (and with
respect to deposit accounts, agent) in accordance with this Section 5.4 and
delivering

       


      
        
           


        

        
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      the
Pledged Collateral upon a Discharge of First Lien Obligations as provided in
paragraph (d)
below.

       

      (c)      The
First Lien Agent shall not have by reason of the First Lien
Loan  Documents, the Second Lien Loan Documents, this Agreement or any
other document a fiduciary relationship in respect of the First Lien
Claimholders, the Second Lien Agent or any Second Lien Claimholder and the
Second Lien Agent and the Second Lien Claimholders hereby waive and release the
First Lien Agent from all claims and liabilities arising pursuant to the First
Lien Agent’s role under this Section 5.4 as
gratuitous bailee and gratuitous agent with respect to the Pledged
Collateral.  It is understood and agreed that the interests of the
First Lien Agent and the Second Lien Agent may differ and the First Lien Agent
shall be fully entitled to act in its own interest without taking into account
the interests of the Second Lien Agent or Second Lien Claimholders.

       

      (d)      Upon
the Discharge of First Lien Obligations, the First Lien Agent shall deliver the
remaining Pledged Collateral in its possession (if any) together with any
necessary endorsements (such endorsement shall be without recourse and without
any representation or warranty), first, to the Second
Lien Agent to the extent Second Lien Obligations remain outstanding, and second, to the
Borrower to the extent no First Lien Obligations or Second Lien Obligations
remain outstanding (in each case, so as to allow such Person to obtain
possession or control of such Pledged Collateral).  The First Lien
Agent further agrees to take all other action reasonably requested by the Second
Lien Agent at the expense of the Second Lien Agent or the Borrower in connection
with the Second Lien Agent obtaining a first-priority interest in the Collateral
(including, without limitation, cooperating with the Second Lien Agent in the
transfer of control to the Second Lien Agent of any deposit account under the
control of the First Lien Agent) or as a court of competent jurisdiction may
otherwise direct.

       

      (e)      Pursuant
to the First Lien Credit Agreement, First Lien Agent (either in its individual
capacity or in its capacity as “Program Agent”), as assignee of Borrower, is the
secured party of record with respect to certain UCC-1 financing statements (the
“Assigned Financing
Statements”) filed against the “Originators” (as defined in the First
Lien Credit Agreement), Rite Aid Hdqtrs. Funding, Inc., a Delaware corporation,
and Rite Aid Funding I, a Cayman Islands exempted company incorporated with
limited liability.  First Lien Agent agrees that it is secured party
of record with respect to the Assigned Financing Statements for the benefit of
the First Lien Claimholders and the Second Lien Claimholders.  Except
as provided in Section
5.1, First Lien Agent shall not (and shall not authorize any other Person
to) terminate any of the Assigned Financing Statements, or release any
collateral therefrom, in each case, without the prior consent of the Second Lien
Agent.  Upon the Discharge of First Lien Obligations, if any Second
Lien Obligations remain outstanding, First Lien Agent shall (and Borrower hereby
authorizes First Lien Agent to) assign to Second Lien Agent, First Lien Agent’s
rights as secured party of record with respect to the Assigned Financing
Statements.

       

      SECTION
6.     Insolvency
Proceedings.

       

      6.1     Use of Cash Collateral and
DIP Financing.

       


      
        
           


        

        
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      (a)      In
its capacity as the holder of a Lien on the Collateral, the Second Lien Agent,
for itself and on behalf of the Second Lien Claimholders, shall not contest,
protest or object to, and shall be deemed to have consented to, any use of “cash
collateral” (as defined in Section 363(a) of the Bankruptcy Code) in any
Insolvency Proceeding if First Lien Agent has consented in writing to such use,
provided that (i) Second Lien Claimholders shall have the right to seek
adequate protection permitted by Section 6.4 and (ii) such cash
collateral shall be used and applied to pay any customary “carve-out” or other
similar administrative priority expense or claim (at the same or higher level of
priority as is applicable to trustee’s fees and expenses in clause (i) of
Section 2.04A(b) of the First Lien Credit Agreement) and otherwise in
accordance with the order of priority set forth in Section 2.04A(b) of the
First Lien Credit Agreement applicable during the “Amortization Period” (as
defined therein).

       

      (b)      If
Borrower shall be subject to any Insolvency Proceeding, nothing in this
Agreement shall limit the rights of any First Lien Claimholder or Second Lien
Claimholder, as applicable, to object to or agree to post-petition financing or
the use of cash collateral, except as otherwise provided in Section 6.1(a), 6.1(c), 6.4 or 6.8.

       

      (c)      Second
Lien Agent, on behalf of itself and the Second Lien Claimholders, agrees that it
shall not, directly or indirectly, provide, offer to provide or support any DIP
financing secured by a Lien senior to or pari passu with the Liens
securing the First Lien Obligations.

       

      6.2     [Intentionally
Omitted].

       

      6.3     [Intentionally
Omitted].

       

      6.4     Adequate
Protection.

       

      (a)      In
any Insolvency Proceeding, the Second Lien Agent, on behalf of itself and the
Second Lien Claimholders, agrees that none of them shall contest, protest or
object to (or support any other Person contesting or objecting to) (i) any
request by the First Lien Agent or the First Lien Claimholders for “adequate
protection” (within the meaning of the Bankruptcy Code or any similar Bankruptcy
Law) or any agreement between the Borrower and First Lien Claimholders providing
for adequate protection to First Lien Claimholders; or (ii) any objection
by the First Lien Agent or the First Lien Claimholders to any motion, relief,
action or proceeding based on the First Lien Agent or the First Lien
Claimholders claiming a lack of adequate protection.

       

      (b)      Notwithstanding
the foregoing provisions in this Section 6.4, in
any Insolvency Proceeding:

       

      (i)       except
as permitted in this Section 6.4, the
Second Lien Claimholders may not seek or request adequate protection and may not
seek relief from the automatic stay imposed by Section 362 of the
Bankruptcy Code (or similar Bankruptcy Law) or other relief based upon a lack of
adequate protection;

       

      (ii)       if
the First Lien Claimholders (or any subset thereof) are granted adequate
protection in the form of additional Collateral, then the Second
Lien

       


      
        
           


        

        
          18

          
            

          

        

        
           


        

      


      Agent,
on behalf of itself and the Second Lien Claimholders, may seek or request
adequate protection in the form of a Lien on such additional or replacement
Collateral, which Lien will be subordinated to the Liens at any time securing
the First Lien Obligations on the same basis as the other Liens securing the
Second Lien Obligations are so subordinated to the First Lien Obligations under
this Agreement (and the First Lien Claimholders will not contest or object
thereto); and

       

      (iii)      any
claim of the Second Lien Claimholders under Section 507(b) of the
Bankruptcy Code (or similar Bankruptcy Law) shall be subordinate in right of
payment to any claim of the First Lien Claimholders under Section 507(b) of
the Bankruptcy Code (or similar Bankruptcy Law).

       

      6.5     No
Waiver.  Subject to Sections 3.1(a)
and (d) and
6.8(b), nothing
contained herein shall prohibit or in any way limit the First Lien Agent or any
First Lien Claimholder from objecting in any Insolvency Proceeding or otherwise
to any action taken by the Second Lien Agent or any of the Second Lien
Claimholders, including the seeking by the Second Lien Agent or any Second Lien
Claimholders of adequate protection or the asserting by the Second Lien Agent or
any Second Lien Claimholders of any of its rights and remedies under the Second
Lien Loan Documents or otherwise.

       

      6.6     Avoidance
Issues.  To the extent any First Lien Claimholder receives
payment or any property on account of any First Lien Obligations and such
transfer is subsequently invalidated, avoided, declared to be fraudulent or
preferential, set aside or otherwise required to be transferred to a trustee,
receiver, or the estate of the Borrower (a “Recovery”), then, to the
extent of such Recovery, such First Lien Obligations intended to have been
satisfied by such transfer shall be reinstated as First Lien Obligations from
and after the date of such Recovery and the Discharge of First Lien Obligations
shall be deemed not the have occurred for all purposes hereunder.  If
this Agreement shall have been terminated prior to such Recovery, this Agreement
shall be reinstated in full force and effect, and such prior termination shall
not diminish, release, discharge, impair or otherwise affect the obligations of
the parties hereto from such date of reinstatement.

       

      6.7     Reorganization
Securities.  Nothing in this Agreement shall in any way
prohibit or limit the right of any Second Lien Claimholder to receive and retain
any debt or equity securities that are issued by any reorganized debtor pursuant
to any plan of reorganization or similar dispositive restructuring plan in
connection with any Insolvency Proceeding.  If, in any Insolvency
Proceeding, debt obligations of the reorganized debtor secured by Liens upon any
property of the reorganized debtor are distributed pursuant to a plan of
reorganization or similar dispositive restructuring plan, both on account of
First Lien Obligations and on account of Second Lien Obligations, then, to the
extent the debt obligations distributed on account of the First Lien Obligations
and on account of the Second Lien Obligations are secured by Liens upon the same
property, the provisions of this Agreement will survive the distribution of such
debt obligations pursuant to such plan and will apply with like effect to the
Liens securing such debt obligations.

       


      
        
           


        

        
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      6.8     Post-Petition
Claims.  (a)  Neither the Second Lien Agent nor any
Second Lien Claimholder shall oppose or seek to challenge any claim by the First
Lien Agent or any First Lien Claimholder for allowance or payment in any
Insolvency Proceeding of First Lien Obligations consisting of Post-Petition
Claims to the extent of the value of any Collateral securing the First Lien
Obligations without regard to the existence of the Lien securing the Second Lien
Obligations.

       

      (b)      Neither
the First Lien Agent nor any other First Lien Claimholder shall oppose or seek
to challenge any claim by the Second Lien Agent or any Second Lien Claimholder
for allowance in any Insolvency Proceeding of Second Lien Obligations consisting
of Post-Petition Claims to the extent of the value of any Collateral securing
the Second Lien Obligations after taking into account the amount of the First
Lien Obligations.

       

      6.9     Valuation of
Collateral.  In any Insolvency Proceeding, the First Lien Agent
and First Lien Claimholders agree not to contest the characterization of the
Second Lien Obligations as secured claims under Section 506(b) of the Bankruptcy
Code or otherwise seek a valuation of the Collateral for the purpose of
determining whether the Second Lien Obligations constitute secured claims under
the Bankruptcy Code in each case for a period of 60 days following the
commencement of the “Amortization Period” (as defined in the First Lien Credit
Agreement).

       

      6.10   Separate Grants of Security
and Separate Classification.  The Second Lien Agent, for itself
and on behalf of the Second Lien Claimholders, and the First Lien Agent for
itself and on behalf of the First Lien Claimholders, acknowledges and agrees
that (i) the grants of Liens pursuant to the First Lien Loan Documents and
the Second Lien Loan Documents constitute two separate and distinct grants of
Liens and (ii) because of, among other things, their differing rights in
the Collateral, the Second Lien Obligations, to the extent deemed to be “secured
claims” within the meaning of Section 506(b) of the Bankruptcy Code (or any
similar Bankruptcy Law), are fundamentally different from the First Lien
Obligations and must be separately classified in any plan of reorganization in
an Insolvency Proceeding.  The Second Lien Claimholders shall not seek
in any Insolvency Proceeding to be treated as part of the same class of
creditors as the First Lien Claimholders and shall not oppose or contest any
pleading by the First Lien Claimholders seeking separate classification of their
respective secured claims.

       

      6.11   Effectiveness in Insolvency
Proceedings.  This Agreement, which the parties hereto
expressly acknowledge is a “subordination agreement” under Section 510(a)
of the Bankruptcy Code, shall be effective before, during and after the
commencement of an Insolvency Proceeding.  All references in this
Agreement to the Borrower shall include the Borrower as a debtor-in-possession
and any receiver or trustee for the Borrower in any Insolvency
Proceeding.

       

      SECTION
7.     Reliance; Waivers; Etc.

       

      7.1     Reliance.  Other
than any reliance on the terms of this Agreement, the First Lien Agent, on
behalf of itself and the First Lien Claimholders under its First Lien Loan
Documents, acknowledges that it and such First Lien Claimholders have,
independently and without reliance on the Second Lien Agent or any Second Lien
Claimholders, and based on

       


      
        
           


        

        
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      documents
and information deemed by them appropriate, made their own credit analysis and
decision to enter into such First Lien Loan Documents and be bound by the terms
of this Agreement and they will continue to make their own credit decision in
taking or not taking any action under the First Lien Loan Documents or this
Agreement.  The Second Lien Agent, on behalf of itself and the Second
Lien Claimholders, acknowledges that it and the Second Lien Claimholders have,
independently and without reliance on the First Lien Agent or any First Lien
Claimholder, and based on documents and information deemed by them appropriate,
made their own credit analysis and decision to enter into each of the Second
Lien Loan Documents and be bound by the terms of this Agreement and they will
continue to make their own credit decision in taking or not taking any action
under the Second Lien Loan Documents or this Agreement.

       

      7.2     No Warranties or
Liability.  The First Lien Agent, on behalf of itself and the
First Lien Claimholders under the First Lien Loan Documents, acknowledges and
agrees that each of the Second Lien Agent and the Second Lien Claimholders have
made no express or implied representation or warranty, including with respect to
the execution, validity, legality, completeness, collectibility or
enforceability of any of the Second Lien Loan Documents, the ownership of any
Collateral or the perfection or priority of any Liens thereon.  Except
as otherwise provided herein, the Second Lien Claimholders will be entitled to
manage and supervise their respective loans and extensions of credit under the
Second Lien Loan Documents in accordance with law and as they may otherwise, in
their sole discretion, deem appropriate.  Except as otherwise provided
herein, the Second Lien Agent, on behalf of itself and the Second Lien
Claimholders, acknowledges and agrees that the First Lien Agent and the First
Lien Claimholders have made no express or implied representation or warranty,
including with respect to the execution, validity, legality, completeness,
collectibility or enforceability of any of the First Lien Loan Documents, the
ownership of any Collateral or the perfection or priority of any Liens
thereon.  Except as otherwise provided herein, the First Lien
Claimholders will be entitled to manage and supervise their respective loans and
extensions of credit under their respective First Lien Loan Documents in
accordance with law and as they may otherwise, in their sole discretion, deem
appropriate.  The Second Lien Agent and the Second Lien Claimholders
shall have no duty to the First Lien Agent or any of the First Lien
Claimholders, and the First Lien Agent and the First Lien Claimholders shall
have no duty to the Second Lien Agent or any of the Second Lien Claimholders, to
act or refrain from acting in a manner which allows, or results in, the
occurrence or continuance of an Event of Default or default under any agreements
with the Borrower (including the First Lien Loan Documents and the Second Lien
Loan Documents), regardless of any knowledge thereof which they may have or be
charged with.

       

      7.3     No Waiver of Lien
Priorities.

       

      (a)      No
right of the First Lien Claimholders, the First Lien Agent or any of them to
enforce any provision of this Agreement or any First Lien Loan Document shall at
any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Borrower or by any act or failure to act by any First Lien
Claimholder or the First Lien Agent, or by any noncompliance by any Person with
the terms, provisions and covenants of this Agreement, any of the First Lien
Loan Documents or any of the Second Lien Loan Documents, regardless of any
knowledge thereof which the First Lien Agent or the First Lien Claimholders, or
any of them, may have or be otherwise charged with.

       

      
        
          
          

        

        
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      (b)      Without
in any way limiting the generality of the foregoing paragraph (but subject to
the rights of the Borrower under the First Lien Loan Documents and subject to
the other provisions herein, including Section 3.1(b)),
the First Lien Claimholders, the First Lien Agent and any of them may, at any
time and from time to time in accordance with the First Lien Loan Documents
and/or applicable law, without the consent of, or notice to, the Second Lien
Agent or any Second Lien Claimholders, without incurring any liabilities to the
Second Lien Agent or any Second Lien Claimholders and without impairing or
releasing the Lien priorities and other benefits provided in this Agreement
(even if any right of subrogation or other right or remedy of the Second Lien
Agent or any Second Lien Claimholders is affected, impaired or extinguished
thereby) do any one or more of the following:

       

      (1)      change
the manner, place or terms of payment or change or extend the time of payment
of, or amend, renew, exchange, increase or alter, the terms of any of the First
Lien Obligations or any Lien on any First Lien Collateral or guaranty thereof or
any liability of the Borrower or any liability incurred directly or indirectly
in respect thereof (including any increase in or extension of the First Lien
Obligations, without any restriction as to the tenor or terms of any such
increase or extension) or otherwise amend, renew, exchange, extend, modify or
supplement in any manner any Liens held by the First Lien Agent or any of the
First Lien Claimholders, the First Lien Obligations or any of the First Lien
Loan Documents; provided that
(x) any such increase in the First Lien Obligations shall not increase the
amount of First Lien Obligations constituting principal under the First Lien
Credit Agreement to an amount in excess of the First Lien Cap, except for
Inadvertent Excess Advances not exceeding an aggregate amount of $7,000,000
outstanding at any time and (y) the scheduled termination date under the First
Lien Credit Agreement (i.e., the “Facility
Termination Date” and the “Commitment Termination Date” referred to therein)
shall not be extended to a date later than September 14, 2010;

       

      (2)      sell,
exchange, release, surrender, realize upon, enforce or otherwise deal with in
any manner and in any order any part of the First Lien Collateral or any
liability of the Borrower to the First Lien Claimholders or the First Lien
Agent, or any liability incurred directly or indirectly in respect
thereof;

       

      (3)      settle
or compromise any First Lien Obligation or any other liability of the Borrower
or any security therefor or any liability incurred directly or indirectly in
respect thereof and apply any sums by whomsoever paid and however realized to
any liability (including the First Lien Obligations) in any manner or order;
and

       

      (4)      exercise
or delay in or refrain from exercising any right or remedy against the Borrower
or any security or any other Person, elect any remedy and otherwise deal freely
with the Borrower or any First Lien Collateral and any security and any
guarantor or any liability of the Borrower to the First Lien Claimholders or any
liability incurred directly or indirectly in respect thereof.

       

      (c)      Except
with respect to actions taken by any of the First Lien Agent or First Lien
Claimholders in contravention of the provisions of this Agreement, the Second
Lien Agent, on behalf of itself and the Second Lien Claimholders, also agrees
that the First Lien

       


      
        
           


        

        
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      Claimholders
and the First Lien Agent shall have no liability to the Second Lien Agent or any
Second Lien Claimholders, and the Second Lien Agent, on behalf of itself and the
Second Lien Claimholders, hereby waives all claims against any First Lien
Claimholder or the First Lien Agent, arising out of any and all actions which
the First Lien Claimholders or the First Lien Agent may take or permit or omit
to take with respect to:

       

      (1)      the
First Lien Loan Documents;

       

      (2)      the
collection of the First Lien Obligations; or

       

      (3)      the
foreclosure upon, or sale, liquidation or other disposition of, any First Lien
Collateral.

       

      Except
as otherwise provided herein, the Second Lien Agent, on behalf of itself and the
Second Lien Claimholders, agrees that the First Lien Claimholders and the First
Lien Agent have no duty to them in respect of the maintenance or preservation of
the First Lien Collateral, the First Lien Obligations or otherwise.

       

      (d)      Unless
otherwise specifically permitted herein, until the Discharge of First Lien
Obligations, the Second Lien Agent, on behalf of itself and the Second Lien
Claimholders, 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 Collateral or any other similar rights a junior secured creditor may have
under applicable law.

       

      7.4     Obligations
Unconditional.  All rights, interests, agreements and
obligations of the First Lien Agent and the First Lien Claimholders and the
Second Lien Agent and the Second Lien Claimholders, respectively, hereunder
shall remain in full force and effect irrespective of:

       

      (a)      any
lack of validity or enforceability of any First Lien Loan Documents or any
Second Lien Loan Documents or any setting aside or avoidance of any
Lien;

       

      (b)      except
as otherwise expressly set forth in this Agreement, any change in the time,
manner or place of payment of, or in any other terms of, all or any of the First
Lien Obligations or Second Lien Obligations, or any amendment or waiver or other
modification, including any increase in the amount thereof, whether by course of
conduct or otherwise, of the terms of any First Lien Loan Document or any Second
Lien Loan Document;

       

      (c)      except
as otherwise expressly set forth in this Agreement, any exchange of any security
interest in any Collateral or any other collateral, or any amendment, waiver or
other modification, whether in writing or by course of conduct or otherwise, of
all or any of the First Lien Obligations or Second Lien Obligations or any
guaranty thereof;

       

      (d)      the
commencement of any Insolvency Proceeding in respect of the Borrower;
or

       


      
        
           


        

        
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      (e)      any
other circumstances which otherwise might constitute a defense available to, or
a discharge of, the Borrower in respect of the First Lien Agent, the First Lien
Obligations, any First Lien Claimholder, the Second Lien Agent, the Second Lien
Obligations or any Second Lien Claimholder in respect of this
Agreement.

       

      SECTION
8.     Miscellaneous.

       

      8.1     Conflicts.  In
the event of any conflict between the provisions of this Agreement and the
provisions of the First Lien Loan Documents or the Second Lien Loan Documents,
the provisions of this Agreement shall govern and control.

       

      8.2     Effectiveness; Continuing
Nature of this Agreement; Severability.  This Agreement shall
become effective when executed and delivered by the parties
hereto.  This is a continuing agreement of lien subordination and the
First Lien Claimholders may continue, at any time and without notice to the
Second Lien Agent or any Second Lien Claimholder subject to the Second Lien Loan
Documents, to extend credit and other financial accommodations and lend monies
to or for the benefit of the Borrower constituting First Lien Obligations in
reliance hereof.  The First Lien Agent, on behalf of itself and the
First Lien Claimholders, and the Second Lien Agent, on behalf of itself and the
Second Lien Claimholders, each hereby waives any right it may have under
applicable law to revoke this Agreement or any of the provisions of this
Agreement.  The terms of this Agreement shall survive, and shall
continue in full force and effect, in any Insolvency Proceeding.  Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall not invalidate the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.  This
Agreement shall terminate and be of no further force and effect:

       

      (a)      with
respect to the First Lien Agent, the First Lien Claimholders and the First Lien
Obligations, on the date of Discharge of First Lien Obligations, subject to the
rights of the First Lien Claimholders under Section 6.6;
and

       

      (b)      with
respect to the Second Lien Agent, the Second Lien Claimholders and the Second
Lien Obligations, upon the later of (1) the date upon which the obligations
under the Second Lien Credit Agreement terminate if there are no other Second
Lien Obligations outstanding on such date and (2) if there are other Second Lien
Obligations outstanding on such date, the date upon which such Second Lien
Obligations are paid in full in cash and terminate.

       

      8.3     Amendments;
Waivers.  No amendment, modification or waiver of any of the
provisions of this Agreement by the Second Lien Agent or the First Lien Agent
shall be deemed to be made unless the same shall be in writing signed on behalf
of each party hereto or its authorized agent and each waiver, if any, shall be a
waiver only with respect to the specific instance involved and shall in no way
impair the rights of the parties making such waiver or the obligations of the
other parties to such party in any other respect or at any other
time.  Notwithstanding the foregoing, the Borrower shall not have any
right to consent to or approve any amendment, modification or waiver of any
provision of this Agreement except to the extent its rights are directly
affected.

       


      
        
           


        

        
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      8.4     Information Concerning
Financial Condition of the Borrower.  The First Lien Agent and
the First Lien Claimholders, on the one hand, and the Second Lien Claimholders
and the Second Lien Agent, on the other hand, shall each be responsible for
keeping themselves informed of (a) the financial condition of the Borrower
and all endorsers and/or guarantors of the First Lien Obligations or the Second
Lien Obligations and (b) all other circumstances bearing upon the risk of
nonpayment of the First Lien Obligations or the Second Lien
Obligations.  The First Lien Agent and the First Lien Claimholders
shall have no duty to advise the Second Lien Agent or any Second Lien
Claimholder of information known to it or them regarding such condition or any
such circumstances or otherwise, and the Second Lien Agent and the Second Lien
Claimholders shall have no duty to advise the First Lien Agent or any First Lien
Claimholder of information known to it or them regarding such condition or any
such circumstance or otherwise.  In the event the First Lien Agent or
any of the First Lien Claimholders, in its or their sole discretion, undertakes
at any time or from time to time to provide any such information to the Second
Lien Agent or any Second Lien Claimholder, it or they shall be under no
obligation:

       

      (a)      to
make, and the First Lien Agent and the First Lien Claimholders shall not make,
any express or implied representation or warranty, including with respect to the
accuracy, completeness, truthfulness or validity of any such information so
provided;

       

      (b)      to
provide any additional information or to provide any such information on any
subsequent occasion;

       

      (c)      to
undertake any investigation; or

       

      (d)      to
disclose any information, which pursuant to accepted or reasonable commercial
finance practices, such party wishes to maintain confidential or is otherwise
required to maintain confidential.

       

      In
the event the Second Lien Agent or any of the Second Lien Claimholders, in its
or their sole discretion, undertakes at any time or from time to time to provide
any such information to the First Lien Agent or any First Lien Claimholder, it
or they shall be under no obligation:

       

      (a)      to
make, and the Second Lien Agent and the Second Lien Claimholders shall not make,
any express or implied representation or warranty, including with respect to the
accuracy, completeness, truthfulness or validity of any such information so
provided;

       

      (b)      to
provide any additional information or to provide any such information on any
subsequent occasion;

       

      (c)      to
undertake any investigation; or

       

      (d)      to
disclose any information, which pursuant to accepted or reasonable commercial
finance practices, such party wishes to maintain confidential or is otherwise
required to maintain confidential.

       

      8.5     Subrogation.  With
respect to the value of any payments or distributions in cash, property or other
assets that any of the Second Lien Claimholders or the Second Lien

       


      
        
           


        

        
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      Agent
pays over to the First Lien Agent or the First Lien Claimholders under the terms
of this Agreement, the Second Lien Claimholders and the Second Lien Agent shall
be subrogated to the rights of the First Lien Agent and the First Lien
Claimholders; provided that, the Second Lien Agent, on behalf of itself and the
Second Lien Claimholders, hereby waives all such rights of subrogation it may
acquire as a result of any payment hereunder until the Discharge of First Lien
Obligations has occurred.  The Borrower acknowledges and agrees that
the value of any payments or distributions in cash, property or other assets
received by the Second Lien Agent or the Second Lien Claimholders that are paid
over to the First Lien Agent or the First Lien Claimholders pursuant to this
Agreement shall not reduce any of the Second Lien Obligations.

       

      8.6     Application of
Payments.  All payments received by the First Lien Agent or the
First Lien Claimholders may be applied, reversed and reapplied, in whole or in
part, to such part of the First Lien Obligations provided for in the First Lien
Loan Documents.

       

      8.7     SUBMISSION TO JURISDICTION;
WAIVERS.  (a) ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY
PARTY ARISING OUT OF OR RELATING HERETO MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW
YORK.  BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY:

       

      (1)      ACCEPTS GENERALLY AND UNCONDITIONALLY
THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;

       

      (2)      WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS;

       

      (3)      AGREES THAT SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE PARTY AT ITS ADDRESS PROVIDED
IN ACCORDANCE WITH SECTION
8.8;
AND

       

      (4)      AGREES
THAT SERVICE AS PROVIDED IN CLAUSE (3) ABOVE
IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE PARTY IN ANY
SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT.

       

      (b)      EACH PARTY HERETO HEREBY WAIVES, TO
THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS AGREEMENT OR ANY OTHER FIRST LIEN LOAN DOCUMENT OR SECOND LIEN LOAN
DOCUMENT.

       

      8.8     Notices.  All
notices to the Second Lien Claimholders and the First Lien Claimholders
permitted or required under this Agreement shall also be sent to the Second
Lien

       


      
        
           


        

        
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      Agent
and the First Lien Agent, respectively.  Unless otherwise specifically
provided herein, any notice hereunder shall be in writing and may be personally
served or sent by telefacsimile or United States mail or courier service and
shall be deemed to have been given when delivered in person or by courier
service and signed for against receipt thereof, upon receipt of telefacsimile,
or three Business Days after depositing it in the United States mail with
postage prepaid and properly addressed.  For the purposes hereof, the
addresses of the parties hereto shall be as set forth below each party’s name on
the signature pages hereto, 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.

       

      8.9     Further
Assurances.  The First Lien Agent, on behalf of itself and the
First Lien Claimholders under the First Lien Loan Documents, and the Second Lien
Agent, on behalf of itself and the Second Lien Claimholders under the Second
Lien Loan Documents, and the Borrower, agree that each of them shall take such
further action and shall execute and deliver such additional documents and
instruments (in recordable form, if requested) as the First Lien Agent or the
Second Lien Agent may reasonably request to effectuate the terms of and the Lien
priorities contemplated by this Agreement.

       

      8.10   GOVERNING
LAW.  THIS AGREEMENT SHALL, IN ACCORDANCE WITH
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR
THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

       

      8.11   Binding on Successors and
Assigns.  This Agreement shall be binding upon the First Lien
Agent, the First Lien Claimholders, the Second Lien Agent, the Second Lien
Claimholders and their respective successors and assigns.  If either
of the First Lien Agent or the Second Lien Agent resigns or is replaced pursuant
to the First Lien Credit Agreement or the Second Lien Credit Agreement, as
applicable, its successor shall be deemed to be a party to this Agreement and
shall have all the rights of, and be subject to all the obligations of, this
Agreement.  Notwithstanding any other provision of this Agreement, it
is acknowledged and agreed that this provision shall not be assignable to any
Person except as expressly contemplated above, and that no party is a third
party beneficiary hereof.  Without limitation, no provision of this
Agreement shall inure to the benefit of a trustee, debtor-in-possession,
creditor trust or any other representative of any estate or creditors of the
Borrower, including where such estate or creditor representative is the
beneficiary of any Liens securing any Collateral by virtue of any avoidance of
such Liens in any Insolvency Proceeding.

       

      8.12   Specific
Performance.  Each of the First Lien Agent and the Second Lien
Agent may demand specific performance of this Agreement.  The First
Lien Agent, on behalf of itself and the First Lien Claimholders under the First
Lien Loan Documents, and the Second Lien Agent, on behalf of itself and the
Second Lien Claimholders, hereby irrevocably waive any defense based on the
adequacy of a remedy at law and any other defense which might be asserted to bar
the remedy of specific performance in any action which may be brought by the
First Lien Agent or the First Lien Claimholders or the Second Lien Agent or the
Second Lien Claimholders, as the case may be.

       


      
        
           


        

        
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      8.13   Headings.  Section headings
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose or be given
any substantive effect.

       

      8.14   Counterparts.  This
Agreement may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single
contract.  Delivery of an executed counterpart of a signature page of
this Agreement or any document or instrument delivered in connection herewith by
telecopy or by electronic transmission in portable document format (.pdf) shall
be effective as delivery of a manually executed counterpart of this Agreement or
such other document or instrument, as applicable.

       

      8.15   Authorization.  By
its signature, each Person executing this Agreement on behalf of a party hereto
represents and warrants to the other parties hereto that it is duly authorized
to execute this Agreement.

       

      8.16   No Third Party
Beneficiaries.  This Agreement and the rights and benefits
hereof shall inure to the benefit of each of the parties hereto and its
respective successors and assigns and shall inure to the benefit of each of the
First Lien Claimholders and the Second Lien Claimholders.  Nothing in
this Agreement shall impair, as between the Borrower and the First Lien Agent
and the First Lien Claimholders, or as between the Borrower and the Second Lien
Agent and the Second Lien Claimholders, the obligations of the Borrower to pay
principal, interest, fees and other amounts as provided in the First Lien Loan
Documents and the Second Lien Loan Documents, respectively.

       

      8.17   Provisions Solely to Define
Relative Rights.  The provisions of this Agreement are and are
intended solely for the purpose of defining the relative rights of the First
Lien Agent and the First Lien Claimholders on the one hand and the Second Lien
Agent and the Second Lien Claimholders on the other hand.  None of the
Borrower or any other creditor thereof shall have any rights hereunder and the
Borrower may not rely on the terms hereof, except, in the case of the Borrower,
for the provisions of Section 3.2.  Nothing in this Agreement is
intended to or shall impair the obligations of the Borrower, which are absolute
and unconditional, to pay the First Lien Obligations and the Second Lien
Obligations as and when the same shall become due and payable in accordance with
their terms.

       

      8.18   No
Proceedings.  (a) The Second Lien Agent and each Second
Lien Claimholder agrees that it will not institute, or join any other Person in
instituting, any Insolvency Proceeding prior to the 91st day
following the Discharge of First Lien Obligations.

       

      (b)      The
Second Lien Agent and each Second Lien Claimholder agrees that it will not
institute against, or join any other Person in instituting against, any First
Lien Lender that is an “Investor” (as defined in the First Lien Credit
Agreement), any bankruptcy, reorganization, insolvency or liquidation proceeding
under the Bankruptcy Code so long as any commercial paper or other senior
indebtedness issued by such Investor shall be outstanding or there shall not
have elapsed one year plus one day since the last day on which any such
commercial paper or other senior indebtedness shall have been
outstanding.

       


      
        
           


        

        
          28

          
            

          

        

        
           


        

      


      (c)      The
First Lien Agent and the First Lien Claimholders shall not commence any
Insolvency Proceeding during the Purchase Period.

       


      
        
           


        

        
          29

          
            

          

        

        
           


        

      


      IN
WITNESS WHEREOF, the parties hereto have executed this Intercreditor Agreement
as of the date first written above.

       

      
        	 
      	
                First
      Lien Agent:

              
	 
      	 
      	 
      
	 
      	
                CITICORP NORTH AMERICA,
      INC., as First Lien Agent,

              
	 
      	 
      
	 
      	 
      	 
      
	 
      	
                By:

              	/s/
      Tom Sullivan	 
      
	 
      	 
      	
                Name:
      Tom Sullivan

              
	 
      	 
      	
                Title:   
      Director, VP

              
	 
      	 
      	 
      
	 
      	
                750
      Washington Blvd.

              
	 
      	
                8th
      Floor

              
	 
      	
                Stamford,
      CT  06901

              
	 
      	
                Facsimile
      No. (914) 274-9038

              
	 
      	
                Attn:
      Global Securitization

              
	 
      	 
      
	 
      	 
      
	 
      	
                Second
      Lien Agent:

              
	 
      	 
      
	 
      	
                CITICORP NORTH AMERICA,
      INC.,

                as
      Second Lien Agent

              
	 
      	 
      
	 
      	 
      	 
      
	 
      	
                By:

              	/s/
      Thomas M. Halsch	 
      
	 
      	 
      	
                Name:
      Thomas M. Halsch

              
	 
      	 
      	
                Title:   
      Vice President

              
	 
      	 
      	 
      
	 
      	 
      	
                390
      Greenwich Street

              
	 
      	 
      	
                1st
      Floor

              
	 
      	 
      	
                New
      York, NY  10013

              
	 
      	 
      	
                Facsimile
      No.  (646) 291-3363

              
	 
      	 
      	
                Attn:  Brendan
      Mackay

              


      

      



      
        
           


        

        
          S-1

          
            

          

        

        
           


        

      


      Acknowledged
and Agreed to by:

      


      RITE
AID FUNDING II

      


      


      


      
        	
                By:

              	/s/
      James J. Comitale	 
      	 
      
	 
      	
                Name:
      James J. Comitale

              	 
      
	 
      	
                Title:   
      Vice President

              	 
      


      

      


      30
Hunter Lane

      Camp
Hill, Pennsylvania  17011

      Attention:  Robert
Sari

      Facsimile
No. (717) 760-7867

       

       

       

      S-2