Document:

Exhibit
4.2

 

CONFORMED
VERSION

 

 

SECURITY AGREEMENT

 

by and among

 

J. CREW OPERATING CORP.

J. CREW INC.

GRACE HOLMES, INC.

H.F.D. NO. 55, INC.

J. CREW INTERNATIONAL, INC.

and

J. CREW INTERMEDIATE LLC

as Grantors

 

and

 

U.S. BANK NATIONAL ASSOCIATION

as Collateral Agent

 

 

Dated: November 21, 2004

 

 

TABLE OF
CONTENTS

 

	
  SECTION 1.

  	
   

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
   

  	
  GRANT
  AND PERFECTION OF SECURITY INTEREST

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Grant of Security
  Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.2

  	
   

  	
  Perfection of
  Security Interests

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
   

  	
  POWER OF ATTORNEY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.1

  	
   

  	
  Power of Attorney of the
  J. Crew Companies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.2

  	
   

  	
  Power
  of Attorney of Intermediate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
   

  	
  ADMINISTRATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Collection of Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Corporate
  Existence, Power and Authority

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.2

  	
   

  	
  Name;
  State of Organization; Chief Executive Office; Collateral Locations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.3

  	
   

  	
  Priority
  of Liens; Title to Properties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.4

  	
   

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.5

  	
   

  	
  Subsidiaries;
  Capitalization

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.6

  	
   

  	
  Accuracy
  and Completeness of Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.7

  	
   

  	
  Survival of
  Warranties; Cumulative

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
   

  	
  AFFIRMATIVE
  AND NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Maintenance of Existence

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.2

  	
   

  	
  Records

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.3

  	
   

  	
  Protection of Security

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.4

  	
   

  	
  Taxes;
  Encumbrances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.5

  	
   

  	
  Continuing
  Obligations of the Grantors

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.6

  	
   

  	
  Use and Disposition of
  Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.7

  	
   

  	
  Limitation
  on Modification of Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.8

  	
   

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.9

  	
   

  	
  Legend

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.10

  	
   

  	
  Covenants
  Regarding the Intellectual Property Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.11

  	
   

  	
  Costs
  and Expenses

  	
   

  

 

i

 

	
  6.12

  	
   

  	
  Further
  Assurances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.13

  	
   

  	
  Additional Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.14

  	
   

  	
  Right to
  Cure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.15

  	
   

  	
  Access
  to Premises

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
   

  	
  VOTING RIGHTS
  AND DIVIDENDS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Voting Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.2

  	
   

  	
  Dividends

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.3

  	
   

  	
  Rights of the
  Collateral Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
   

  	
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.1

  	
   

  	
  Remedies
  Upon Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.2

  	
   

  	
  Application of Proceeds

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.3

  	
   

  	
  Compliance
  With Certain Requirements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
   

  	
  JURY
  TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.1

  	
   

  	
  Governing
  Law; Choice of Forum; Service of Process; Jury Trial Waiver

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.2

  	
   

  	
  Waiver
  of Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.3

  	
   

  	
  Amendments and Waivers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
   

  	
  THE COLLATERAL AGENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.1

  	
   

  	
  Appointment, Powers and Immunities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.2

  	
   

  	
  Reliance by the
  Collateral Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.3

  	
   

  	
  Concerning the
  Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.4

  	
   

  	
  Collateral
  Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.5

  	
   

  	
  Agency for Perfection

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.6

  	
   

  	
  Successor Collateral Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11.

  	
   

  	
  TERM OF
  AGREEMENT; MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.1

  	
   

  	
  Effectiveness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.2

  	
   

  	
  Term

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.3

  	
   

  	
  Interpretative
  Provisions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.4

  	
   

  	
  Subject to
  the Intercreditor Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.5

  	
   

  	
  Notices

  	
   

  

 

ii

 

	
  11.6

  	
   

  	
  Partial
  Invalidity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.7

  	
   

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.8

  	
   

  	
  Entire
  Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.9

  	
   

  	
  Counterparts, Etc

  	
   

  

 

iii

 

INDEX TO EXHIBITS 

 

	
   

  	
   

  	
  Exhibit A

  	
   

  	
  Information
  Certificate

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

iv

 

SECURITY
AGREEMENT

 

This Security
Agreement, dated November 21, 2004, is entered into by and among J. Crew Operating Corp.,
a Delaware corporation (“Operating”), J. Crew Inc., a New Jersey
corporation (“J. Crew”), Grace Holmes, Inc., a Delaware corporation
doing business as J. Crew Retail (“Retail”), H.F.D. No. 55, Inc., a
Delaware corporation doing business as J. Crew Factory (“Factory”), J.
Crew International, Inc., a Delaware corporation (“JCI”, and together
with Operating, J. Crew, Retail, and Factory, the “J. Crew Companies”),
J. Crew Intermediate LLC, a Delaware limited liability company (“Intermediate”
and, together with Operating, J. Crew, Retail, Factory, and JCI, “Grantors”),
and U.S. Bank National Association, as Collateral Agent (as defined below).

 

W  I  T  N  E  S
S  E  T  H:

 

WHEREAS,
Intermediate, certain lenders from time to time party thereto, and U.S. Bank
National Association, as trustee (the “Contingent Principal Notes Trustee”),
are parties to that certain indenture, dated May 6, 2003 (the “Contingent
Principal Notes Indenture”), pursuant to which Intermediate issued
$120,000,000 aggregate principal amount of 16% Senior Discount Contingent
Principal Notes due 2008 (the “Contingent Principal Notes”);

 

WHEREAS, the
J. Crew Companies, Intermediate and U.S. Bank National Association, as
administrative agent for the Junior Creditors (as defined below), have entered
into a Senior Subordinated Loan Agreement, dated as of the date hereof (as
amended, supplemented or otherwise modified from time to time, the “Loan
Agreement”), pursuant to which the Junior Creditors will make certain loans
to Operating;

 

WHEREAS,
pursuant to the terms of the Loan Agreement, the J. Crew Companies and
Intermediate have agreed, upon the occurrence of certain events, to enter into
an indenture (the “Indenture”) with U.S. Bank National Association as
trustee for the noteholders thereunder, pursuant to which Operating will issue
to the Junior Creditors its 93⁄4% Senior Subordinated Notes due 2014 (the “Notes”),
whereupon the Loan Agreement will terminate;

 

WHEREAS, the
J. Crew Companies and Intermediate are required under the Loan Agreement and
will be required under the Indenture to grant liens on certain assets to secure
the obligations of the Grantors under the Loan Agreement, the Indenture and the
related Notes;

 

WHEREAS,
pursuant to Section 4.12 of the Contingent Principal Notes Indenture, the
Contingent Principal Notes are required to be secured equally and ratably with
the obligations under the Loan Agreement and the Indenture; and

 

WHEREAS, the
J. Crew Companies, Intermediate, the Senior Credit Agent (as defined below) and
the Collateral Agent have entered into an Intercreditor Agreement dated as of
the date hereof (the “Intercreditor Agreement”);

 

NOW,
THEREFORE, in consideration of the mutual conditions and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

 

1

 

SECTION 1.                            DEFINITIONS

 

For purposes
of this Agreement, the following terms shall have the respective meanings given
to them below:

 

“Accounts”
shall mean, as to the J. Crew Companies, all present and future rights of the
J. Crew Companies to payment of a monetary obligation, whether or not earned by
performance, which is not evidenced by chattel paper or an instrument, (a) for
property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (b) for services rendered or to be rendered, (c) for a
secondary obligation incurred or to be incurred, or (d) consisting of Credit
Card Receivables.

 

“Affiliate”
shall have the meaning assigned to such term in the Loan Agreement or the
Indenture, as then in effect.

 

“Agreement”
shall mean this Security Agreement, as it may be amended or modified from time
to time.

 

“Borrower
Agent” shall mean Operating in its capacity as an agent for the Grantors, and
its successors and assigns in such capacity.

 

“Business Day”
shall have the meaning assigned to such term in the Loan Agreement or the
Indenture, as then in effect.

 

“Cash
Equivalents” shall have the meaning assigned to such term in the Contingent
Principal Notes Indenture.

 

“Collateral”
shall mean the J. Crew Companies’ Collateral and Intermediate’s Collateral,
collectively.

 

“Collateral
Agent” shall mean U.S. Bank National Association in its capacity as collateral
agent under the Loan Agreement, the Indenture (as then in effect) and with
respect to Other Second-Lien Obligations.

 

“Consolidated
Accounts” shall mean have the meaning assigned to it in Section 4.1(a)(ii)
of this Agreement.

 

“Contingent
Principal Notes” shall have the meaning assigned to such term in the recitals
to this Agreement.

 

“Contingent Principal
Notes Indenture” shall have the meaning assigned to such term in the recitals
to this Agreement.

 

“Contingent
Principal Notes Obligations” shall mean Obligations of Intermediate under the
Contingent Principal Notes Indenture and the Contingent Principal Notes.

 

“Contingent
Principal Notes Trustee” shall have the meaning assigned to such term in the
recitals to this Agreement.

 

2

 

“Credit Card
Agreements” shall mean all agreements now or hereafter entered into by any of
the J. Crew Companies for the benefit of any of the J. Crew Companies with any
Credit Card Issuer or any Credit Card Processor, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or replaced,
including, but not limited to, the agreements set forth in Schedule 2.3 to
the Information Certificate.

 

“Credit Card
Issuer” shall mean any person (other than the J. Crew Companies) who issues or
whose members issue credit cards, including, without limitation, MasterCard or
VISA bank credit or debit cards or other bank credit or debit cards issued
through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa
International and American Express, Discover, Diners Club, Carte Blanche and
other non-bank credit or debit cards, including, without limitation, credit or
debit cards issued by or through American Express Travel Related Services
Company, Inc., Novus Services, Inc. and the Private Label Card.

 

“Credit Card
Processor” shall mean any servicing or processing agent or any factor or
financial intermediary who facilitates, services, processes or manages the
credit authorization, billing transfer and/or payment procedures with respect
to any of the J. Crew Companies’ sales transactions involving credit card or
debit card purchases by customers using credit cards or debit cards issued by
any Credit Card Issuer.

 

“Credit Card
Receivables” shall mean, collectively, (a) all present and future rights of the
J. Crew Companies to payment from any Credit Card Issuer, Credit Card Processor
or other third party arising from sales of goods or rendition of services to
customers who have purchased such goods or services using a credit or debit
card and (b) all present and future rights of any of the J. Crew Companies to
payment from any Credit Card Issuer, Credit Card Processor or other third party
in connection with the sale or transfer of Accounts arising pursuant to the
sale of goods or rendition of services to customers who have purchased such
goods or services using a credit card or a debit card, including, but not
limited to, all amounts at any time due or to become due from any Credit Card
Issuer or Credit Card Processor under the Credit Card Agreements or otherwise.

 

“Credit
Documents” shall have the meaning assigned to such term in the Loan Agreement.

 

“Default”
shall mean an act, condition or event, which with notice or passage of time or
both would constitute an Event of Default.

 

“Determined
Amount” shall have the meaning assigned to such term in Section 8.3 of
this Agreement.

 

“Equipment”
shall mean, as to the J. Crew Companies, all of the J. Crew Companies’ now
owned and hereafter acquired equipment, wherever located, including machinery,
data processing and computer equipment (whether owned or licensed and including
embedded software), vehicles, tools, furniture, fixtures, all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, and substitutions and replacements thereof, wherever located.

 

“Event of Default”
shall mean any “Event of Default” under the Loan Agreement and subsequent to
the termination of the Loan Agreement, under the Indenture, as then in effect.

 

3

 

“Exchange Date”
shall have the meaning assigned to such term in the Loan Agreement.

 

“Existing
Credit Agreement” shall have the meaning assigned to it in the Intercreditor
Agreement.

 

“Equity
Interests” shall have the meaning assigned to such term in the Loan Agreement
or the Indenture, as then in effect.

 

 “Financing Agreements” shall mean,
collectively, this Agreement, the Loan Agreement, the Indenture, the Notes, the
Intercreditor Agreement and any other related agreement, document or instrument
now or at any time hereafter executed and/or delivered by any Grantor in
connection with this Agreement.

 

“First-Lien
Obligations” shall have the meaning assigned to such term in the Loan Agreement
or the Indenture, as then in effect.

 

“First-Lien
Termination Period” shall mean any period during which there are no First-Lien
Obligations in effect.

 

“Grantors”
shall have the meaning assigned to such term in the preamble to this Agreement.

 

“Holder” shall
have the meaning assigned to it in the Indenture, as then in effect.

 

“Indebtedness”
shall mean and include, without duplication, all Obligations that constitute “Indebtedness”
within the meaning of any of the Loan Agreement, the Indenture, the Contingent
Principal Notes Indenture or the Existing Credit Agreement, in each case as
then in effect.

 

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

 

“Information
Certificate” shall mean a certificate substantially in the form set forth in
Exhibit A hereto, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by an authorized signatory of each of
the Grantors.

 

“Intellectual
Property” shall mean, as to each of the J. Crew Companies, such J. Crew Company’s
now owned and hereafter arising or acquired: patents, patent rights, patent
applications, copyrights, works which are the subject matter of copyrights,
copyright registrations, trademarks, trade names, trade styles, trademark and
service mark applications, and licenses and rights to use any of the foregoing;
all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to sue for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints,
surveys, reports, manuals, and operating standards; goodwill (including any
goodwill associated with any trademark or the license of any trademark);
customer and other lists in whatever form maintained; trade secret rights,
copyright rights, rights in works of authorship, domain names and domain name
registration; software and contract rights relating to computer software
programs, in whatever form created or maintained.

 

4

 

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

 

“Intermediate”
shall have the meaning assigned to such term in the preamble to this Agreement.

 

“Intermediate’s
Collateral” shall have the meaning assigned to such term in Section 2.1(b)
of this Agreement.

 

“Inventory”
shall mean, as to the J. Crew Companies, all of the J. Crew Companies’ now
owned and hereafter existing or acquired goods, wherever located, which (a) are
leased by any of the J. Crew Companies as lessor; (b) are held by any of the J.
Crew Companies for sale or lease or to be furnished under a contract of
service; (c) are furnished by any of the J. Crew Companies under a contract of
service; or (d) consist of raw materials, work in process, finished goods or materials
used or consumed in its business.

 

“J. Crew
Companies” shall have the meaning assigned to such term in the preamble to this
Agreement.

 

“J. Crew
Companies’ Collateral” shall have the meaning assigned to such term in Section 2.1(a)
of this Agreement.

 

“J. Crew Japan,
Inc.” shall mean J. Crew Japan, Inc., a company incorporated under the laws of
Japan.

 

“Junior
Creditors” shall have the meaning assigned to such term in the Intercreditor
Agreement.

 

“Junior
Creditor Claims” shall have the meaning assigned to such term in the
Intercreditor Agreement.

 

“Lender” shall
have the meaning assigned to such terms in the Loan Agreement.

 

“Level” shall
have the meaning assigned to such term in Section 8.3 of this Agreement.

 

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

 

“Loan
Agreement Obligations” shall mean Obligations of Operating and the other
Grantors under the Credit Documents.

 

 “Notes” have the meaning assigned to such term
in the recitals to this Agreement.

 

“Notes
Obligations” shall mean Obligations of Operating and the other Grantors under
the Transaction Documents.

 

“Notes Trustee”
shall mean U.S. Bank National Association, in its capacity as trustee under the
Indenture, and any of its successors or assigns.

 

“Obligations”
shall mean shall have the meaning assigned to such term in the Loan Agreement
or the Indenture, as then in effect.

 

5

 

“Operating”
shall have the meaning assigned to such term in the preamble to this Agreement.

 

“Operating
Equity Securities” shall mean Equity Interests of Operating owned by
Intermediate as of the date hereof or from time to time acquired by
Intermediate.

 

“Other
Second-Lien Obligations” shall have the meaning assigned to such term in the
Loan Agreement or the Indenture, as then in effect.

 

“Person” or “person”
shall have the meaning assigned to such term in the Loan Agreement or the
Indenture, as then in effect.

 

“Private Label
Card” shall mean the private label credit card issued by World Financial
Network National Bank pursuant to the Credit Card Agreement of any of the J.
Crew Companies with such Bank (or any subsequent Credit Card Issuer with
respect to such private label credit card) to customers or prospective customers
of any of the J. Crew Companies or their affiliates.

 

“Ratio” shall
mean, with respect to the Contingent Principal Notes Obligations, at any time,
the ratio of (i) (x) prior to November 15, 2005, the Accreted Value of
such Contingent Principal Notes Obligations (as defined in the Contingent
Principal Notes Indenture) and (y) thereafter, the principal amount at maturity
of such Contingent Principal Notes Obligations plus accrued and unpaid interest
thereon to (ii) the principal amount outstanding under the Loan
Agreement or the Notes plus accrued and unpaid interest thereon, as in effect
at such time.

 

“Receivables”
shall mean all of the following now owned or hereafter arising or acquired
property of the J. Crew Companies: (a) all Accounts; (b) all interest, fees,
late charges, penalties, collection fees and other amounts due or to become due
or otherwise payable in connection with any Account; (c) all payment
intangibles of the J. Crew Companies; (d) letters of credit, indemnities,
guarantees, security or other deposits and proceeds thereof issued payable to
any of the J. Crew Companies or otherwise in favor of or delivered to any of
the J. Crew Companies in connection with any Account or any Credit Card
Receivables; or (e) all other accounts, contract rights, chattel paper,
instruments, notes, general intangibles and other forms of obligations owing to
any of the J. Crew Companies, whether from the sale and lease of goods or other
property, licensing of any property (including Intellectual Property or other
general intangibles), rendition of services or from loans or advances by any of
the J. Crew Companies or to or for the benefit of any third person (including
loans or advances to any Affiliates or Subsidiaries of any of the J. Crew
Companies) or otherwise associated with any Accounts, Inventory or general
intangibles of any of the J. Crew Companies (including, without limitation,
choses in action, causes of action, tax refunds, tax refund claims, any funds
which may become payable to any of the J. Crew Companies in connection with the
termination of any employee benefit plan and any other amounts payable to any
of the J. Crew Companies from any employee benefit plan, rights and claims
against carriers and shippers, rights to indemnification, business interruption
insurance and proceeds thereof, casualty or any similar types of insurance and
any proceeds thereof and proceeds of insurance covering the lives of employees
on which any of the J. Crew Companies is a beneficiary).

 

6

 

“Records”
shall mean all of the J. Crew Companies’ present and future books of account of
every kind or nature, purchase and sale agreements, invoices, ledger cards,
bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the J. Crew Companies’
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of any of the J.
Crew Companies with respect to the foregoing maintained with or by any other
person).

 

“Required
Holders” shall mean the Holders of a majority in aggregate principal amount of
the Notes.

 

“Required
Lenders” shall have the meaning assigned to it in the Loan Agreement.

 

“Secured
Obligations” shall mean, without duplication, (a) the Loan Agreement
Obligations; (b) the Notes Obligations; and (c) the Other Second-Lien
Obligations.

 

“Senior Credit
Agent” means Congress Financial Corporation in its capacity as administrative
and collateral agent for lenders party to the Senior Credit Agreement and the
Financing Documents (as defined therein), and any successor thereto, or, any
Person otherwise designated the “Senior Credit Agent” pursuant to the
Intercreditor Agreement.

 

“Senior Credit
Agreement” shall have the meaning assigned to it in the Intercreditor
Agreement.

 

 “Senior Creditors” shall mean the Persons
holding Senior Creditor Claims, including the Senior Credit Agent.

 

“Senior
Creditor Claims” shall have the meaning assigned to such term in the
Intercreditor Agreement.

 

“Senior
Creditor Documents” shall have the meaning assigned to such term in the
Intercreditor Agreement.

 

“Store
Accounts” shall have the meaning set forth in Section 4.1(a) to this
Agreement.

 

“Subsidiary”
or “subsidiary” shall mean, with respect to any Person, any corporation,
limited liability company, limited liability partnership or other limited or
general partnership, trust, association or other business entity of which an
aggregate of at least a majority of the outstanding Equity Interests or other
interests entitled to vote in the election of the board of directors of such
corporation (irrespective of whether, at the time, Equity Interests of any
other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency), managers, trustees or
other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person
and/or one or more subsidiaries of such Person.

 

“Subsidiary
Equity Securities” shall mean Equity Interests of each of the Subsidiaries of
Operating and J. Crew, as of the date hereof as listed on Schedule 5.5 to
the Information Certificate or from time to time acquired by Operating.

 

7

 

“Transaction
Documents” shall have the meaning assigned to such term in the Indenture.

 

SECTION 2.                            GRANT
AND PERFECTION OF SECURITY INTEREST

 

2.1                                 Grant
of Security Interest.

 

(a)  To secure payment and performance of all
Secured Obligations, the J. Crew Companies hereby grant to the Collateral
Agent, for the ratable benefit of the Junior Creditors, a security interest in,
a lien upon, and a right of set off against, and hereby assign to the
Collateral Agent, for the ratable benefit of the Junior Creditors, as security,
all personal property of the J. Crew Companies described below, whether now
owned or hereafter acquired or existing, and wherever located (“J. Crew
Companies’ Collateral”), including:

 

(i)  all Accounts;

 

(ii)  all general intangibles, including, without
limitation, all Intellectual Property;

 

(iii)  (A) all Subsidiary Equity Securities that
Operating or J. Crew owns and any certificates representing such Subsidiary
Equity Securities; (B) all dividends, cash, instruments and other property from
time to time received or receivable by or otherwise distributed to Operating or
J. Crew in respect of or exchange for any and all of Subsidiary Equity
Securities; and (C) all other rights and privileges of Operating or J. Crew relating
to the property described in clauses (A) and (B) above (including, without
limitation, voting rights);

 

(iv)  all goods, including, without limitation,
Inventory and Equipment;

 

(v)  all chattel paper, including, without
limitation, all tangible and electronic chattel paper;

 

(vi)  all instruments, including, without
limitation, all promissory notes;

 

(vii)  all documents;

 

(viii)  all deposit accounts;

 

(ix)  all letters of credit, banker’s acceptances
and similar instruments, including all letter-of-credit rights;

 

(x)  all supporting obligations and all present
and future liens, security interests, rights, remedies, title and interest in,
to and in respect of Receivables and other J. Crew Companies’ Collateral,
including (A) rights and remedies under or relating to guaranties, contracts of
suretyship, letters of credit and credit and other insurance related to J. Crew
Companies’ Collateral, (B) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (C) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Receivables or other J. Crew Companies’ Collateral, including returned,
repossessed

 

8

 

and reclaimed
goods, and (D) deposits by and property of account debtors or other persons
securing the obligations of account debtors;

 

(xi)  all (A) investment property (including
securities, whether certificated or uncertificated, securities accounts,
security entitlements, commodity contracts or commodity accounts) (but
excluding any Equity Interests owned by JCI in J. Crew Japan, Inc.) and (B)
monies, credit balances, deposits and other property of any J. Crew Company now
or hereafter held or received by or in transit to the Collateral Agent, any
Junior Creditor or its Affiliates or at any other depository or other
institution from or for the account of any J. Crew Company, whether for
safekeeping, pledge, custody, transmission, collection or otherwise;

 

(xii)  all commercial tort claims, including,
without limitation, those identified in the Information Certificate;

 

(xiii)  to the extent not otherwise described above,
all Receivables;

 

(xiv)  all Records; and

 

(xv)  all products and proceeds of the foregoing,
in any form, including insurance proceeds and all claims against third parties
for loss or damage to or destruction of or other involuntary conversion of any
kind or nature of any or all of the other J. Crew Companies’ Collateral.

 

(b)  To secure payment and performance of all
Secured Obligations, upon the occurrence of the Exchange Date, Intermediate
grants to the Collateral Agent, for the ratable benefit of the Junior
Creditors, a security interest in, a lien upon, and a right of set off against,
and assigns to the Collateral Agent, for the ratable benefit of the Junior
Creditors, as security, all of Intermediate’s right, title and interest in, to
and under each of the following (“Intermediate’s Collateral”):

 

(i)  Operating Equity Securities and any
certificates representing Operating Equity Securities;

 

(ii)  all dividends, cash, instruments and other
property from time to time received or receivable by or otherwise distributed
to Intermediate in respect of or exchange for any and all of the Operating
Equity Securities; and

 

(iii)  all other rights and privileges of
Intermediate relating to the property described in clauses (a) and (b) above
(including, without limitation, voting rights);

 

provided, however, that such grant
shall only become effective upon the occurrence of the Exchange Date.

 

(c)  Notwithstanding anything to the contrary set
forth in Sections 2.1(a) and (b) above, the types or items of the Collateral
described in such Sections shall not include any rights or interests in any
contract, lease, permit, license, charter or license agreement covering any
property, if under the terms of such contract, lease, permit, license, charter
or license agreement, or applicable law with respect thereto, the valid grant
of a security interest or lien therein to the Collateral Agent is prohibited or
requires the consent of any party and such prohibition has not

 

9

 

been or is not waived or the consent of the other party to such
contract, lease, permit, license, charter or license agreement has not been or
is not otherwise obtained or under applicable law such prohibition cannot be
waived; provided, that, the foregoing exclusion shall in no way
be construed (i) to apply if any such prohibition is unenforceable under
Sections 9-406, 9-407 or 9-408 of the UCC or other applicable law or (ii) so as
to limit, impair or otherwise affect the Collateral Agent’s unconditional
continuing security interests in and liens upon any rights or interests of any
of the J. Crew Companies in or to monies paid under any such contract, lease,
permit, license, charter or license agreement (including any Receivables).  Notwithstanding anything to the contrary set
forth in Section 2.1(a) above, in no event shall there be any security interest
in favor of the Collateral Agent in any investment property consisting of
Equity Interests in any Subsidiary or Affiliate of any J. Crew Company, in each
case not organized in the United States, to the extent that such investment
property is not pledged under any Senior Creditor Document.

 

2.2                                 Perfection
of Security Interests.

 

(a)  Upon the execution of this Agreement, the J.
Crew Companies shall make all UCC filings necessary to perfect the security
interests granted to the Collateral Agent hereunder and to maintain such
perfection by filing all necessary continuation statements.  The J. Crew Companies irrevocably and
unconditionally authorize the Collateral Agent (or its agent) to file at any
time and from time to time such financing statements with respect to the J.
Crew Companies’ Collateral naming the Collateral Agent or its designee as the
secured party and the J. Crew Companies as debtor, as the Collateral Agent may
require, and including any other information with respect to the J. Crew
Companies or otherwise required by part 5 of Article 9 of the Uniform
Commercial Code of such jurisdiction as the Collateral Agent may determine,
together with any amendment and continuations with respect thereto.  The Collateral Agent hereby designates
Private Capital Partners LLC and Canpartners Investments IV, LLC, or their
designees, as its designee to file on the Closing Date financing statements
with respect to J. Crew Companies’ Collateral. 
In the event that the description of the J. Crew Companies’ Collateral
in any financing statement naming the Collateral Agent or its designee as the
secured party and the J. Crew Companies as debtor includes assets and
properties of the J. Crew Companies that do not at any time constitute
Collateral, whether hereunder, under any of the other Financing Agreements or
otherwise, the filing of such financing statement shall nonetheless be deemed
authorized by the J. Crew Companies to the extent of the J. Crew Companies’
Collateral included in such description and it shall not render the financing
statement ineffective as to any of the J. Crew Companies’ Collateral or
otherwise affect the financing statement as it applies to any of the J. Crew
Companies’ Collateral.  In no event shall
the J. Crew Companies at any time without the consent of the Collateral Agent
file, or permit or cause to be filed, any correction statement or termination
statement with respect to any financing statement (or amendment or continuation
with respect thereto) naming the Collateral Agent or its designee as secured
party and such J. Crew Companies as debtor.

 

(b)  As of the date hereof, the J. Crew Companies
do not have (i) any item of chattel paper (whether tangible or electronic) in
excess of $50,000 or (ii) any instrument in excess of $50,000 other than those
received by any of the J. Crew Companies in the ordinary course of business, except
as set forth in the Information Certificate. 
In the event that after the date hereof any of the J. Crew Companies
shall be entitled to or shall receive (i) any item of chattel paper in excess
of $50,000 or (ii) any instrument in excess of $50,000 received by any of the
J. Crew Companies other than in the ordinary course of business, the J. Crew
Companies shall promptly upon the receipt thereof by or on behalf of any of the
J. Crew Companies (including by any agent or representative), deliver, or cause
to be delivered to the Senior Credit Agent to the extent required under the
Intercreditor Agreement or the Senior Credit Agreement

 

10

 

to the Collateral Agent, all such items of tangible chattel paper and
instruments accompanied by such instrument of transfer or assignment duly
executed in blank as the Collateral Agent may from time to time reasonably
specify, in each case except as the Collateral Agent may otherwise agree.

 

(c)  The J. Crew Companies do not have any deposit
accounts as of the date hereof, except as set forth in the Information
Certificate.

 

(d)  The J. Crew Companies do not own or hold,
directly or indirectly, beneficially or as record owner or both, any investment
property, as of the date hereof, or have any investment account, securities
account, commodity account or other similar account with any bank or other
financial institution or other securities intermediary or commodity
intermediary as of the date hereof, in each case except as set forth in the
Information Certificate.

 

(e)  The J. Crew Companies are not the
beneficiaries or otherwise entitled to any right to payment under any letter of
credit, banker’s acceptance or similar instrument as of the date hereof, except
as set forth in the Information Certificate or as may constitute a supporting
obligation.

 

(f)  The J. Crew Companies do not have any
commercial tort claim as of the date hereof, in excess of $1,000,000, with
respect to which the J. Crew Companies shall have filed a complaint in a court
of law in the United States, except as set forth in the Information
Certificate.  In the event that any of
the J. Crew Companies shall at any time after the date hereof have any
commercial tort claim in excess of $1,000,000, with respect to which such J.
Crew Companies shall have filed a complaint in a court of law in the United
States, such J. Crew Companies shall notify the Collateral Agent thereof in
writing, which notice shall (i) include a copy of the filed complaint and (ii)
include the express grant by such J. Crew Companies to the Collateral Agent of
a security interest in such commercial tort claim (and the proceeds
thereof).  In the event that such notice
does not include such grant of a security interest, the sending thereof by the
J. Crew Companies to the Collateral Agent shall be deemed to constitute such
grant to the Collateral Agent.  Upon the
sending of such notice, any commercial tort claim described therein shall
constitute part of the J. Crew Companies’ Collateral and shall be deemed
included therein.  Without limiting the
authorization of the Collateral Agent provided in Section 2.2(a) hereof or
otherwise arising by the execution by the J. Crew Companies of this Agreement
or any of the other Financing Agreements, the Collateral Agent is hereby
irrevocably authorized from time to time and at any time to file such financing
statements naming the Collateral Agent or its designee as secured party and the
J. Crew Companies as debtor, or any amendments to any financing statements, covering
any such commercial tort claim as Collateral. 
In addition, the J. Crew Companies shall promptly upon the Collateral
Agent’s request, execute and deliver, or cause to be executed and delivered, to
the Collateral Agent such other agreements, documents and instruments as the
Collateral Agent may require in connection with such commercial tort claim.

 

(g)  The J. Crew Companies do not have any goods,
documents of title or other J. Crew Companies’ Collateral in the custody,
control or possession of a third party in the United States as of the date
hereof, except (i) as set forth in the Information Certificate, (ii) goods
located in the United States in transit in the ordinary course of business of
the J. Crew

 

11

 

Companies in the possession of the carrier transporting such goods,
(iii) goods held by customs authorities, (iv) goods held at paper mills and
printers and (v) other goods of de minimus value.

 

(h)  The J. Crew Companies shall take any other
actions reasonably requested by the Collateral Agent from time to time to cause
the attachment, perfection and priority of and the ability of the Collateral
Agent to enforce, the security interest of the Collateral Agent in any and all
of the Collateral, including, without limitation, executing (to the extent, if
any, that the J. Crew Companies’ signature thereupon is required), delivering
and, where appropriate, filing financing statements and amendments relating
thereto under the UCC or other applicable law; provided that the J. Crew
Companies shall not be required to deliver to the Collateral Agent any
certificate of title with respect to any motor vehicle constituting Collateral,
or to stamp or otherwise mark any such certificate of title to reflect the
security interest therein granted to the Collateral Agent pursuant to this
Agreement and provided  further, that no fixture filings and no
filings in respect of the Intellectual Property other than in UCC filing
records shall be required; and provided  further that no control
agreements or other agreements with any third parties shall be required except
as set forth explicitly in this Agreement.

 

SECTION 3.                            POWER
OF ATTORNEY

 

3.1                                 Power
of Attorney of the J. Crew Companies.  The J. Crew Companies hereby irrevocably designate
and appoint the Collateral Agent (and all persons designated by the Collateral
Agent) as their true and lawful attorney-in-fact, and authorize the Collateral
Agent, in the J. Crew Companies’ name, upon the occurrence of an Event of
Default, to (i) demand payment on Receivables or other J. Crew Companies’
Collateral, (ii) enforce payment of Receivables by legal proceedings or
otherwise, (iii) exercise all of the J. Crew Companies’ rights and remedies to
collect any Receivable or other Collateral, (iv) sell or assign any Receivable
upon such terms, for such amount and at such time or times as the Collateral
Agent deems advisable, (v) settle, adjust, compromise, extend or renew any
Account, (vi) discharge and release any Receivable, (vii) prepare, file and
sign the J. Crew Companies’ name on any proof of claim in bankruptcy or other
similar document against an account debtor or other obligor in respect of any
Receivables or other J. Crew Companies’ Collateral, (viii) notify the post
office authorities to change the address for delivery of remittances from
account debtors or other obligors in respect of Receivables or other proceeds
of the J. Crew Companies’ Collateral to an address designated by the Collateral
Agent, and open and dispose of all mail addressed to the J. Crew Companies and
handle and store all mail relating to the J. Crew Companies’ Collateral; (ix)
sign the J. Crew Companies’ name on any verification of Receivables and notices
thereof to account debtors or any secondary obligors or other obligors in
respect thereof, (x) complete any stock or bond power, receive, endorse and
collect all instruments made payable to Operating representing any dividend or
other distribution in respect of Subsidiary Equity Securities or any part
thereof and give full discharge for the same, (xi) do all acts and things which
are necessary, in the Collateral Agent’s determination, to fulfill the J. Crew
Companies’ obligations under this Agreement and the other Financing Agreements,
(xii) take control in any manner of any item of payment in respect of
Receivables or constituting the J. Crew Companies’ Collateral or otherwise
received in or for deposit in the Consolidated Accounts or otherwise received
by the Collateral Agent or the Junior Creditors, (xiii) have access to any
lockbox or postal box into which remittances from account debtors or other
obligors in respect of Receivables or other proceeds of the J. Crew Companies’
Collateral are sent or received, (xiv) endorse the J. Crew

 

12

 

Companies’ name upon any items of payment in respect of Receivables or
constituting the J. Crew Companies’ Collateral or otherwise received by the
Collateral Agent or the Junior Creditors and deposit the same in the Collateral
Agent’s account for application to the Secured Obligations, (xv) endorse the J.
Crew Companies’ name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Receivable or any goods
pertaining thereto or any other Collateral, including any warehouse or other
receipts, or bills of lading and other negotiable or non-negotiable documents,
and (xvi) clear Inventory through U.S. Customs or foreign export control
authorities in the J. Crew Companies’ name, the Collateral Agent’s name or the
name of the Collateral Agent’s designee, and to sign and deliver to customs
officials powers of attorney in the J. Crew Companies’ name for such purpose,
and to complete in such J. Crew Companies’ or the Collateral Agent’s name, any
order, sale or transaction, obtain the necessary documents in connection
therewith and collect the proceeds thereof. 
The J. Crew Companies hereby release the Collateral Agent, the Junior
Creditors and their respective officers, employees and designees from any liabilities
arising from any act or acts under this power of attorney and in furtherance
thereof, whether of omission or commission, except as a result of the
Collateral Agent’s or any of the Junior Creditor’s own gross negligence or
wilful misconduct, as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.

 

3.2                                 Power
of Attorney of Intermediate. 
Upon the occurrence of the Exchange Date, Intermediate appoints the
Collateral Agent and the Collateral Agent accepts such appointment as
Intermediate’s attorney-in-fact, with full authority in the place and stead of
Intermediate and in the name of Intermediate, upon the occurrence of an Event
of Default, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to complete any stock or bond
power, to receive, endorse and collect all instruments made payable to
Intermediate representing any dividend or other distribution in respect of
Intermediate’s Collateral or any part thereof and to give full discharge for
the same.  Intermediate releases the
Collateral Agent and its respective officers, employees and designees from any
liabilities arising from any act or acts under this power of attorney and in
furtherance thereof, whether of omission or commission, except as a result of
the Collateral Agent’s own gross negligence or wilful misconduct.

 

SECTION 4.                            ADMINISTRATION

 

4.1                                 Collection
of Accounts.

 

(a)  Schedule 2.2 to the Information
Certificate sets forth all of the banks with which the J. Crew Companies have
deposit account arrangements and merchant payment arrangements as of the date
hereof and identifies each of the deposit accounts at such banks that are used
for receiving store receipts from a retail store location of the J. Crew Companies
(together with any other deposit accounts at any time established or used by
the J. Crew Companies for receiving such store receipts from any retail store
location, collectively, the “Store Accounts” and each individually, a “Store
Account”) or otherwise describes the nature of the use of such deposit
account by the J. Crew Companies.

 

(i)  The J. Crew Companies shall deposit all
proceeds from sales of Inventory in every form, including, without limitation,
cash, checks, credit card sales drafts, credit card sales or charge slips or
receipts and other forms of daily store receipts, from each retail store

 

13

 

location of such J. Crew Companies in accordance with the J. Crew
Companies’ usual business practices into its Store Accounts used for such
purpose.  All such funds deposited into
the Store Accounts shall be sent by wire transfer or other electronic funds
transfer to the Consolidated Accounts, as provided in Section 4.1(a)(ii)
below, in accordance with the J. Crew Companies’ usual business practices or
more frequently upon the Collateral Agent’s request at any time upon the
occurrence of an Event of Default, except for the nominal amounts which are
required to be maintained in such Store Accounts under the terms of the J. Crew
Companies’ arrangements with the bank at which such Store Accounts are
maintained, which nominal amounts shall be determined in accordance with the J.
Crew Companies’ usual business practices as to any individual Store Account at
any time.

 

(ii)  The J. Crew Companies shall maintain, at
their expense, deposit accounts with such banks as they shall select (the “Consolidated
Accounts”), a list of which is set forth on Schedule 2.2 to the
Information Certificate as of the date hereof, into which the J. Crew Companies
shall either cause all amounts on deposit in the Store Accounts of the J. Crew
Companies to be sent as provided in Section 4.1(a)(i) above or shall
themselves deposit or cause to be deposited in accordance with the J. Crew
Companies’ usual business practices all proceeds from sales of Inventory, all
amounts payable from Credit Card Issuers and Credit Card Processors and all
other proceeds of Collateral.

 

(iii)  Upon the occurrence of an Event of Default,
any of the Grantors shall, acting as trustee for the Collateral Agent, receive,
as the property of the Collateral Agent, any monies, checks, notes, drafts or
any other payments relating to and/or proceeds of Receivables or other
Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Consolidated Accounts, or remit the same or cause the same to
be remitted, in kind, to the Collateral Agent.

 

SECTION 5.                            REPRESENTATIONS
AND WARRANTIES

 

Each of the
Grantors hereby represents and warrants as of the date hereof and as of the
Exchange Date with respect to the representations made by Intermediate relating
to itself, to the Collateral Agent and the Junior Creditors the following
(which shall survive the execution and delivery of this Agreement):

 

5.1                                 Corporate
Existence, Power and Authority. 
The execution, delivery and performance of this Agreement and the
transactions contemplated hereunder (a) are all within each of Grantor’s corporate
powers and (b) have been duly authorized. 
This Agreement and the other Financing Agreements to which any Grantor
is a party constitute valid, binding and enforceable obligations of any such
Grantor.

 

5.2                                 Name;
State of Organization; Chief Executive Office; Collateral Locations.

 

(a)  The exact legal name of each such Grantor is
as set forth on the signature page of this Agreement and in the Information
Certificate.  The J. Crew Companies have
not, during the past five years, been known by or used any other corporate or
fictitious name or been a party to any merger or consolidation, or acquired all
or substantially all of the assets of any

 

14

 

Person, or acquired any of its property or assets out of the ordinary
course of business, except as set forth in the Information Certificate.

 

(b)  Each Grantor is an organization of the type
and organized in the jurisdiction set forth in the Information
Certificate.  The Information Certificate
accurately sets forth the organizational identification number of each Grantor
or accurately states that such Grantor has none and accurately sets forth the
federal employer identification number of each Grantor.

 

(c)  The chief executive office and mailing
address of each Grantor and the location of the J. Crew Companies’ Records
concerning Accounts are located only at the addresses identified as such in the
Information Certificate and the only other places of business and the only
other locations of Collateral, including inventory or other assets, but
excluding (i) goods located in the United States in transit in the ordinary
course of business of the J. Crew Companies in the possession of the carrier
transporting such goods, (ii) goods held by customs authorities, (iii) goods
held at paper mills and printers and (iv) other goods of de minimus value, are
the addresses set forth in the Information Certificate.  The Information Certificate correctly
identifies any of such locations, which are not owned by the J. Crew Companies
and sets forth the owners and/or operators thereof.

 

5.3                                 Priority
of Liens; Title to Properties.  The
security interests and liens granted by the J. Crew Companies to the Collateral
Agent under this Agreement and the other Financing Agreements (other than
Collateral subject to certificate of title laws, Collateral subject to the laws
of any foreign jurisdiction for the creation or perfection of a security
interest and any Collateral consisting of intellectual property, perfection of
which requires a filing with a federal office in the United States) constitute
valid and upon the filing of a financing statement in the appropriate
jurisdiction, control or possession by the Collateral Agent, perfected liens
and security interests in and upon the J. Crew Companies’ Collateral subject
only to liens permitted under the Loan Agreement (or under the Indenture, if
then in effect) or the Senior Creditor Documents or the security interest
granted under the Senior Creditor Documents. 
Each Grantor owns its other properties and assets subject to no liens,
mortgages, pledges, security interests, encumbrances or charges of any kind,
except those permitted under the Loan Agreement (or under the Indenture, if
then in effect) or the Senior Creditor Documents or the security interest
granted hereby and under the Senior Creditor Documents.  Upon the occurrence of the Exchange Date, the
grant hereunder by Intermediate will constitute a valid perfected lien in
Intermediate’s Collateral.

 

5.4                                 Intellectual
Property.  The J. Crew Companies
do not have any Intellectual Property registered, or subject to pending
applications, in the United States Patent and Trademark Office, United States
Copyright Office or any similar office or agency in the United States, any
State thereof, any political subdivision thereof or in any other country, other
than the Intellectual Property described on Schedule 5.4 to the
Information Certificate.

 

5.5                                 Subsidiaries;
Capitalization.

 

(a)  Each of Intermediate, Operating and J. Crew
is the record and beneficial owner of all of the issued and outstanding Equity
Interests of each of the Subsidiaries as listed on Schedule 5.5 to the
Information Certificate as being owned by Intermediate, Operating or J. Crew
and there are no proxies, irrevocable or otherwise, with respect to such shares
and no equity securities of any of the Subsidiaries that are or may become
required to be issued by reason of any options, warrants, rights to subscribe
to, calls or commitments of any kind or

 

15

 

nature and there are no contracts, commitments, understandings or
arrangements by which any Subsidiary is or may become bound to issue additional
Equity Interests.

 

(b)  The issued and outstanding Equity Interests
of each of J. Crew, Retail and Factory are directly and beneficially owned and
held by Operating, and all of such shares have been duly authorized and are
fully paid and non-assessable, free and clear of all claims, liens, pledges and
encumbrances of any kind, except for those permitted under the Loan Agreement
(or under the Indenture, if then in effect) or the Senior Creditor Documents or
the security interest granted hereby and under the Senior Creditor Documents.

 

(c)  The issued and outstanding Equity Interests
of Operating are directly and beneficially owned and held by Intermediate, and
all of such shares have been duly authorized and are fully paid and
non-assessable, free and clear of all claims, liens, pledges and encumbrances
of any kind, except for those permitted under the Loan Agreement (or under the
Indenture, if then in effect) or the Senior Creditor Documents or the security
interest granted hereby and under the Senior Creditor Documents.

 

(d)  The issued and outstanding Equity Interests
of JCI are directly and beneficially owned and held by J. Crew, and all of such
shares have been duly authorized and are fully paid and non-assessable, free
and clear of all claims, liens, pledges and encumbrances of any kind, except
for those permitted under the Loan Agreement (or under the Indenture, if then
in effect) or the Senior Creditor Documents or the security interest granted
hereby and under the Senior Creditor Documents.

 

5.6                                 Accuracy
and Completeness of Information. 
All information in the Information Certificate is true and correct in
all material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make such
information not misleading.

 

5.7                                 Survival
of Warranties; Cumulative. 
All representations and warranties contained in this Agreement shall
survive the execution and delivery of this Agreement.  The representations and warranties set forth
herein shall be cumulative and in addition to any other representations or
warranties which any Grantor shall now or hereafter give, or cause to be given,
to the Collateral Agent or any of the Junior Creditors.

 

SECTION 6.                            AFFIRMATIVE
AND NEGATIVE COVENANTS

 

6.1                                 Maintenance
of Existence.

 

(a)  No Grantor shall change its name unless each
of the following conditions is satisfied: (i) the Collateral Agent shall have
received not less than thirty (30) days prior written notice from such Grantor
of such proposed change in its corporate name, which notice shall accurately
set forth the new name; and (ii) the Collateral Agent shall have received a
copy of the amendment to the certificate of incorporation of such Grantor
providing for the name change certified by the Secretary of State of the
jurisdiction of incorporation or organization of such Grantor as soon as it is available.

 

16

 

(b)  No Grantor shall change its chief executive
office or its mailing address or organizational identification number (or if it
does not have one, shall not acquire one) unless the Collateral Agent shall
have received not less than thirty (30) days’ prior written notice from such
Grantor of such proposed change, which notice shall set forth such information
with respect thereto as the Collateral Agent may require and the Collateral
Agent shall have received such agreements as the Collateral Agent may
reasonably require in connection therewith. 
No Grantor shall change its type of organization or jurisdiction of
organization unless the Collateral Agent shall have received not less than
thirty (30) days’ prior written notice, or change its legal structure unless
the Collateral Agent shall have received not less than five (5) days’ prior
written notice, from such Grantor of such proposed change, which notice shall
set forth such information with respect thereto as the Collateral Agent may
reasonably require in connection therewith.

 

6.2                                 Records.  Upon the occurrence and during the
continuance of a First-Lien Termination Period, each Grantor agrees to
maintain, at its own cost and expense, such complete and accurate records with
respect to the Collateral owned by it as is consistent with its ordinary
business practices, but in any event to include complete accounting records
indicating all material payments and proceeds received with respect to any part
of the Collateral, and, at such time or times as the Collateral Agent may
reasonably request (and the Collateral Agent shall not be obligated to make
such a request unless directed to do so by the Required Lenders or the Required
Holders, if the Indenture is then in effect), promptly to prepare and deliver
to the Collateral Agent an updated Information Certificate, noting all material
changes, if any, since the date of the most recent Information Certificate, but
not more often than once in a calendar year.

 

6.3                                 Protection
of Security.  Each Grantor
shall, at its own cost and expense, take actions consistent with its ordinary
business practices to defend title to Collateral against all persons and to
defend the security interest of the Collateral Agent in Collateral and the
priority thereof against any lien other than liens permitted under the Loan
Agreement (or the Indenture, if then in effect).

 

6.4                                 Taxes;
Encumbrances.  Upon the
occurrence and during the continuance of a First-Lien Termination Period, in
accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, at its option, the Collateral Agent may discharge past
due taxes, assessments, charges, fees, liens, security interests or other
encumbrances at any time levied or placed on the Collateral and not permitted
under the Loan Agreement (or the Indenture, if then in effect), and may pay for
the maintenance and preservation of the Collateral, in each case to the extent
any Grantor fails to do so as required by the Loan Agreement (or the Indenture,
if then in effect) or this Agreement, and each Grantor jointly and severally
agrees to reimburse the Collateral Agent on demand for any payment made or any
expense incurred by the Collateral Agent pursuant to the foregoing authorization;
provided, however, that nothing in
this Section 6.4 shall be interpreted as excusing any Grantor from the
performance of, or imposing any obligation on the Collateral Agent or any
Junior Creditors to cure or perform, any covenants or other promises of any
Grantor with respect to taxes, assessments, charges, fees, liens, security
interests or other encumbrances and maintenance as set forth herein or in the
other Financing Documents.

 

6.5                                 Continuing
Obligations of the Grantors. 
Each Grantor shall remain liable to observe and perform all material
conditions and obligations to be observed and performed by it

 

17

 

under each contract, agreement or instrument relating to the
Collateral, in each case material to its business and in accordance with its
ordinary business practices, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the Junior Creditors from and against any and
all liability for such performance.

 

6.6                                 Use
and Disposition of Collateral.  None of the Grantors shall make or permit to
be made an assignment, pledge or hypothecation of the Collateral or shall grant
any other lien in respect of the Collateral, except as expressly permitted by
the Loan Agreement (or the Indenture, if then in effect).  None of the Grantors shall make or permit to
be made any transfer of the Collateral and each Grantor shall remain at all
times in possession of the Collateral owned by it, except that (a) Inventory
may be sold in the ordinary course of business and (b) the Grantors may sell,
convey, lease, assign, transfer, use or otherwise dispose of any Collateral in
any manner not inconsistent with the provisions of this Agreement, the Loan
Agreement  (or the Indenture, if then in
effect).  Upon the occurrence and during
the continuance of a First-Lien Termination Period, without limiting the
generality of the foregoing, each Grantor agrees to make reasonable efforts to
obtain from any warehouseman, bailee, agent or processor in possession of
material Inventory an agreement in writing to hold the Inventory subject to the
security interest and the instructions of the Collateral Agent and to waive and
release any lien held by it with respect to such Inventory, whether arising by
operation of law or otherwise; provided  that there shall be no
such agreement with respect to the Inventory (i) located in the United States
in transit in the ordinary course of business of the J. Crew Companies in the
possession of the carrier transporting such goods, (ii) held by customs
authorities, or (iv) held at paper mills and printers.

 

6.7                                 Limitation
on Modification of Accounts. 
Upon the occurrence and during the continuance of a First-Lien
Termination Period, none of the J. Crew Companies will, without the prior
written consent of the Collateral Agent, grant any extension of the time of
payment of any of the Accounts Receivable, compromise, compound or settle the
same for less than the full amount thereof, release, wholly or partly, any
Person liable for the payment thereof or allow any credit or discount
whatsoever thereon, other than extensions, credits, discounts, compromises or
settlements granted or made in the ordinary course of business and consistent
with its ordinary business practices.

 

6.8                                 Insurance.  Upon the occurrence and during the
continuance of a First-Lien Termination Period, the J. Crew Companies, at their
own expense, shall maintain or cause to be maintained insurance covering
physical loss or damage to the Inventory and Equipment with financially sound
and reputable insurance companies in such amounts (with no greater risk
retention) and against such risks as are customarily maintained by companies of
established repute engaged in the same or similar businesses operating in the
same or similar locations.  Each J. Crew
Company irrevocably makes, constitutes and appoints the Collateral Agent (and
all officers, employees or agents designated by the Collateral Agent) as such
J. Crew Company’s true and lawful agent (and attorney-in-fact) for the purpose,
during the continuance of an Event of Default, of making, settling and
adjusting claims in respect of Collateral under policies of insurance,
endorsing the name of such J. Crew Company on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto.  In the event that any J. Crew Company at any
time or times shall fail to obtain or maintain any of the policies of insurance
required hereby or to pay any

 

18

 

premium in whole or part relating thereto, the Collateral Agent may,
without waiving or releasing any obligation or liability of the J. Crew
Companies hereunder or any Event of Default, in its sole discretion, obtain and
maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as the Collateral Agent deems advisable.  All sums disbursed by the Collateral Agent in
connection with this Section 6.8, including reasonable attorneys’ fees,
court costs, expenses and other charges relating thereto, shall be payable,
upon demand, by the J. Crew Companies to the Collateral Agent and shall be
additional Obligations secured hereby.

 

6.9                                 Legend.  Upon the occurrence and during the
continuance of a First-Lien Termination Period, if any Accounts Receivable of
any J. Crew Company are evidenced by any item of chattel paper each in excess
of $50,000, such J. Crew Company shall legend, in form and manner reasonably
satisfactory to the Collateral Agent, such Accounts Receivable and its books,
records and documents evidencing or pertaining thereto with an appropriate
reference to the fact that such Accounts Receivable have been assigned to the
Collateral Agent for the benefit of the Junior Creditors.

 

6.10                           Covenants
Regarding the Intellectual Property Collateral.

 

(a)  Upon the occurrence and during the
continuance of a First-Lien Termination Period, each J. Crew Company (either
itself or through its licensees or its sublicensees) will, for each trademark
registered with the United States Patent and Trademark Office material to the
conduct of such J. Crew Company’s business, (i) maintain such trademark in full
force free from any claim of abandonment or invalidity for non-use, (ii)
maintain the quality of products and services offered under such trademark
sufficient to preclude any findings of abandonment, (iii) display such
trademark with notice of Federal or foreign registration to the extent
necessary and sufficient to establish and preserve its maximum rights under
applicable law pursuant to which each such trademark is issued and (iv) not
knowingly use or knowingly permit the use of such trademark in violation of any
third party rights.

 

(b)  Upon the occurrence and during the
continuance of a First-Lien Termination Period, each J. Crew Company shall
notify the Collateral Agent as soon as practicable if it knows that any
trademark registered with the United States Patent and Trademark Office
material to the conduct of its business will or has become abandoned, lost or
dedicated to the public, or of any adverse determination or development
(including the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office regarding such J.
Crew Company’s ownership of any trademark, its right to register the same, or
to keep and maintain the same.

 

(c)  Upon the occurrence and during the continuance
of a First-Lien Termination Period, each J. Crew Company will take all
necessary steps that are consistent with its practice in any proceeding before
the United States Patent and Trademark Office to maintain and pursue each
material application relating to the trademarks (and to obtain the relevant
grant or registration) and to maintain each registration of the trademarks
registered with the United States Patent and Trademark Office that is material
to the conduct of any J. Crew Company’s business, including timely filings of
application for renewal, affidavits of use, affidavits of incontestability

 

19

 

and payment of maintenance fees, and, if consistent with good business
judgment, to initiate opposition, interference and cancellation proceedings
against third parties.

 

6.11                           Costs
and Expenses.  The J. Crew
Companies shall pay to the Collateral Agent on demand all reasonable costs,
expenses, filing fees and taxes paid or payable in connection with the exercise
by the Collateral Agent of its rights in Collateral under this Agreement and
all other documents related hereto or thereto, including any amendments,
supplements or consents which may hereafter be contemplated (whether or not
executed) or entered into in respect hereof and thereof, including:  (a) all out-of-pocket costs and expenses of
filing or recording (including Uniform Commercial Code financing statement
filing taxes and fees, documentary taxes and intangibles taxes, if applicable);
(b) costs and expenses of preserving and protecting the Collateral; (c) costs
and expenses paid or incurred in connection with enforcing the security
interests and liens of the Collateral Agent, selling or otherwise realizing
upon the Collateral, and otherwise enforcing the provisions of this Agreement
or defending any claims made or threatened against the Collateral Agent or any
Junior Creditor thereby (including preparations for and consultations
concerning any such matters) arising out of the transactions contemplated
hereby or thereby; and (d) the reasonable fees and disbursements of counsel
(including legal assistants) to the Collateral Agent in connection with any of
the foregoing.  Notwithstanding the
foregoing, in no event shall the J. Crew Companies be obligated to pay any
amounts in respect of any fixture filings or any of Intellectual Property
filings (other than UCC financing statement fees) or any amounts to comply with
any certificate of title laws or laws of any foreign jurisdiction.

 

6.12                           Further
Assurances.  At the request of
the Collateral Agent at any time and from time to time, Grantors shall, at
their expense, duly execute and deliver, or cause to be duly executed and
delivered, such further agreements, documents and instruments, and do or cause
to be done such further acts as may be necessary or proper to evidence,
perfect, maintain and enforce the security interests and the priority thereof
in the J. Crew Companies’ Collateral or Intermediate’s Collateral, as
applicable, and to otherwise effectuate the provisions or purposes of this
Agreement, as the Collateral Agent may from time to time request to better
assure, preserve, protect and perfect the security interest and the rights and
remedies created hereby.  Notwithstanding
the foregoing, in no event shall the J. Crew Companies be obligated to do or
cause to be done any acts in respect of any fixture filings or any of
Intellectual Property filings (other than UCC financing statements) or acts
required to comply with any certificate of title laws or laws of any foreign
jurisdiction.

 

6.13                           Additional
Collateral.  From and after
the date of this Agreement, if any J. Crew Company creates any additional
security interest upon any of its assets or property not already pledged
hereunder to secure any Obligations under the Senior Credit Agreement, it shall
concurrently grant a security interest (subject to liens permitted under the
Loan Agreement (or under the Indenture if then in effect)) upon such assets and
property as security for the Secured Obligations and, subject to the
Intercreditor Agreement, execute any and all further security documents,
financing statements, agreements and instruments that grant the Collateral
Agent a security interest in such assets and property for the ratable benefit
of the Junior Creditors, and shall take all such actions (including the filing
and recording of financing statements, fixture filings, mortgages and other
documents) that may be required under any applicable law, or which the
Collateral Agent may reasonably request to create such security interest, all
at the expense of

 

20

 

the J. Crew Companies, including all reasonable fees and expenses of
counsel incurred by the Collateral Agent in connection therewith; provided
that no such J. Crew Company shall be required to grant a security
interest upon such property as security for the Secured Obligations if
(i) a security interest in such property cannot be granted or perfected
under applicable law or (ii) such grant requires the consent of any third
party, which consent such J. Crew Company is unable to obtain using
commercially reasonable efforts.

 

6.14                           Right
to Cure.  The Collateral Agent
may, at its option, upon the occurrence of an Event of Default, (a) cure any
default by any of J. Crew Companies under any material agreement with a third
party that affects the Collateral, its value or the ability of the Collateral
Agent to collect, sell or otherwise dispose of the J. Crew Companies’
Collateral or the rights and remedies of the Collateral Agent or the Junior
Creditors therein or the ability of the J. Crew Companies to perform its
obligations hereunder or under any of the other Financing Agreements, (b) pay
or bond on appeal any judgment entered against any of the J. Crew Companies,
(c) discharge taxes, liens, security interests or other encumbrances at any
time levied on or existing with respect to the J. Crew Companies’ Collateral
and pay any amount, incur any expense or perform any act which, in the
Collateral Agent’s good faith judgment, is necessary or appropriate to
preserve, protect, insure or maintain the J. Crew Companies’ Collateral and the
rights of the Collateral Agent and the Junior Creditors with respect
thereto.  The Collateral Agent may add
any amounts so expended to the Secured Obligations and charge the J. Crew
Companies’ account therefor, such amounts to be repayable by the J. Crew
Companies on demand.  The Collateral
Agent and the Junior Creditors shall be under no obligation to effect such
cure, payment or bonding and shall not, by doing so, be deemed to have assumed
any obligation or liability of the J. Crew Companies.  Any payment made or other action taken by the
Collateral Agent or any Junior Creditor under this Section shall be
without prejudice to any right to assert an Event of Default hereunder and to
proceed accordingly.

 

6.15                           Access
to Premises.  From time to
time at reasonable intervals and as reasonably requested by the Collateral
Agent (and the Collateral Agent shall not be obligated to make such a request
unless directed to do so by the Required Lenders or the Required Holders, if
the Indenture is then in effect), at the cost and expense of the J. Crew
Companies, (a) the Collateral Agent or its designee or the Junior Creditors
shall have access to the J. Crew Companies’ premises during normal business
hours, or at any time and without notice to the J. Crew Companies upon the
occurrence of an Event of Default, for the purposes of inspecting and verifying
the J. Crew Companies’ Collateral, including the Records, and (b) in connection
with any such inspection, the J. Crew Companies shall promptly furnish to the
Collateral Agent such copies of such books and records or extracts therefrom as
the Collateral Agent may reasonably request, and the Collateral Agent or the
Junior Creditors or the Collateral Agent’s designee may use during normal
business hours such of the J. Crew Companies’ personnel, equipment, supplies
and premises as may be reasonably necessary for the foregoing  (provided, that, the J. Crew Companies
shall only be obligated to make such personnel, equipment, supplies and
premises available to the Collateral Agent or its designee or the Junior
Creditor in such manner so as to minimize any interference with the operations
of the J. Crew Companies) and upon the occurrence of an Event of Default, for
the collection of Receivables and realization of other J. Crew Companies’
Collateral.

 

21

 

SECTION 7.                            VOTING RIGHTS AND DIVIDENDS

 

7.1                                 Voting
Rights.  Unless and until an
Event of Default occurs, Intermediate shall be entitled to exercise any and all
voting rights and/or other consensual rights and powers inuring to an owner of
Operating Equity Securities or any part thereof for any purpose consistent with
the terms of this Agreement; provided, however, that, upon the
occurrence of the Exchange Date, Intermediate will not be entitled to exercise
any such right if the result or purpose thereof is solely to interfere with the
rights and remedies of the Collateral Agent under this Agreement;

 

7.2                                 Dividends.  Intermediate and Operating shall be
entitled to receive and retain any and all cash dividends and distributions
(except cash dividends paid or payable in respect of the total or partial
liquidation of an issuer) paid on Operating Equity Securities or Subsidiary
Equity Securities, respectively; provided, however, that until
dividends and distributions are actually paid, all rights to such dividends and
distributions shall remain subject to the security interest of this Agreement
but only in the case of Intermediate, if the Operating Equity Securities are
then subject to such security interest. 
All dividends and distributions (other than cash dividends and
distributions which Intermediate and Operating may retain pursuant to the
immediately preceding sentence) in respect of, or in exchange for, any of
Operating Equity Securities or Subsidiaries Equity Securities, shall forthwith
be paid or delivered to the Collateral Agent and held by the Collateral Agent
subject to the security interest of this Agreement and, if received by
Intermediate or Operating, respectively, shall, until paid or delivered to the
Collateral Agent, be segregated from the other funds and property of
Intermediate or Operating, respectively, and be held in trust for the
Collateral Agent subject to the security interest of this Agreement; provided,
however, that such payment delivery and segregation requirements shall
only apply to Intermediate upon the occurrence of the Exchange Date.

 

7.3                                 Rights
of the Collateral Agent.  Upon
the occurrence of an Event of Default and in the case of the Operating Equity
Securities, only after the Exchange Date, the Collateral Agent shall have the
right (in its sole and absolute discretion) to hold Operating Equity Securities
and Subsidiary Equity Securities in its own name as the Collateral Agent or in
the name of its nominee.  Intermediate or
Operating, respectively, will promptly give to the Collateral Agent copies of
any notices or other communications received by each of them as shareholders
with respect to the Operating Equity Securities or Subsidiary Equity Securities
registered in the names of Intermediate or Operating, respectively.

 

SECTION 8.                            REMEDIES

 

8.1                                 Remedies
Upon Default.  Upon the
occurrence of an Event of Default, the Collateral Agent may from time to time
and shall, if directed by the Required Lenders (or the Required Holders if the
Indenture is in effect), in respect of the Collateral, in addition to the other
rights and remedies provided for herein or otherwise available to it:

 

(a)  Upon the occurrence of an Event of Default,
the Collateral Agent and the Junior Creditors shall have all rights and
remedies provided in this Agreement, the other Financing Agreements, the UCC
and other applicable law, all of which rights and remedies may be exercised
without notice to or consent by any Grantor, except as such notice or consent
is expressly provided for hereunder or required by applicable law.  All rights, remedies and powers

 

22

 

granted to the Collateral Agent and the Junior Creditors hereunder,
under any of the other Financing Agreements, the UCC or other applicable law,
are cumulative, not exclusive and enforceable, in the Collateral Agent’s
discretion, alternatively, successively, or concurrently on any one or more
occasions, and shall include, without limitation, the right to apply to a court
of equity for an injunction to restrain a breach or threatened breach by any
Grantor of this Agreement or any of the other Financing Agreements.  Subject to this Section 8 hereof, the
Collateral Agent may, and at the direction of the Required Lenders (or the
Required Holders, if the Indenture is then in effect) shall at any time or
times, proceed directly against the J. Crew Companies or any other Obligor to
collect the Secured Obligations without prior recourse to the Collateral.

 

(b)  Without limiting the foregoing, upon the
occurrence of an Event of Default, the Collateral Agent may, at its discretion,
or upon the direction of the Required Lenders (or the Required Holders, if the
Indenture is then effect), shall (i) with or without judicial process or the
aid or assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(ii) require any Grantor, at such Grantor’s expense, to assemble and make
available to the Collateral Agent any part or all of the Collateral at any
place and time designated by the Collateral Agent, (iii) collect, foreclose,
receive, appropriate, setoff and realize upon any and all of the Collateral,
(iv) remove any or all of the Collateral from any premises on or in which the
same may be located for the purpose of effecting the sale, foreclosure or other
disposition thereof or for any other purpose, or (v) sell, lease, transfer,
assign, deliver or otherwise dispose of any and all of the Collateral
(including entering into contracts with respect thereto, public or private
sales at any exchange, broker’s board, at any office of the Collateral Agent or
elsewhere) at such prices or terms as the Collateral Agent may deem reasonable,
for cash, upon credit or for future delivery, with the  Collateral Agent having the right to purchase
the whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of the J. Crew
Companies, which right or equity of redemption is hereby expressly waived and
released by the J. Crew Companies.  If
any of the J. Crew Companies’ Collateral is sold or leased by the Collateral
Agent upon credit terms or for future delivery, the Secured Obligations shall
not be reduced as a result thereof until payment therefor is finally collected
by the Collateral Agent.  If notice of
disposition of Collateral is required by law, ten (10) days prior notice by the
Collateral Agent to the Borrower Agent or to each Grantor designating the time
and place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and each Grantor waives any other notice.  In the event the Collateral Agent institutes
an action to recover any Collateral or seeks recovery of any Collateral by way
of prejudgment remedy, each Grantor waives the posting of any bond which might
otherwise be required.

 

(c)  Upon the occurrence of an Event of Default,
the Collateral Agent may, in its discretion, or upon the direction of Required
Lenders (or Required Holders, if the Indenture is in effect at that time) shall
enforce the rights of the J. Crew Companies against any account debtor,
secondary obligor or other obligor in respect of any of the Accounts or other
Receivables.  Without limiting the
generality of the foregoing, the Collateral Agent may, upon its discretion, or
upon the direction of the Required Lenders (or Required Holders, if the
Indenture is in effect at that time), shall at such time or times (i) notify
any or all account debtors (including Credit Card

 

23

 

Issuers and Credit Card Processors), secondary obligors or other
obligors in respect thereof that the Receivables have been assigned to the
Collateral Agent and that the Collateral Agent has a security interest therein
and the Collateral Agent may direct any or all accounts debtors (including
Credit Card Issuers and Credit Card Processors), secondary obligors and other
obligors to make payment of Receivables directly to the Collateral Agent, (ii)
extend the time of payment of, compromise, settle or adjust for cash, credit,
return of merchandise or otherwise, and upon any terms or conditions, any and
all Receivables or other obligations included in the Collateral and thereby
discharge or release the account debtor or any secondary obligors or other
obligors in respect thereof without affecting any of the Secured
Obligations,  (iii) demand, collect or
enforce payment of any Receivables or such other obligations, but without any
duty to do so, and the Collateral Agent shall not be liable for any failure to
collect or enforce the payment thereof nor for the negligence of its agents or
attorneys with respect thereto and (iv) take whatever other action the
Collateral Agent may deem necessary or desirable for the protection of its
interests and the interests of the Junior Creditors.

 

(d)  Upon the occurrence of an Event of Default,
at the Collateral Agent’s request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have
been assigned to the Collateral Agent and are payable directly and only to the
Collateral Agent and the J. Crew Companies shall deliver to the Collateral
Agent such originals of documents evidencing the sale and delivery of goods or
the performance of services giving rise to any Accounts as the Collateral Agent
may require.  In the event any account
debtor returns Inventory upon the occurrence of an Event of Default, the J.
Crew Companies shall, upon the Collateral Agent’s request, hold the returned
Inventory in trust for the Collateral Agent, segregate all returned Inventory
from all of its other property, dispose of the returned Inventory solely
according to the Collateral Agent’s instructions, and not issue any credits,
discounts or allowances with respect thereto without the Collateral Agent’s
prior written consent.

 

(e)  To the extent that applicable law imposes
duties on the Collateral Agent or any Junior Creditors to exercise remedies in
a commercially reasonable manner (which duties cannot be waived under such
law), each Grantor acknowledges and agrees that it is not commercially
unreasonable for the Collateral Agent or any Junior Creditor (i) to fail to
incur expenses reasonably deemed significant by the Collateral Agent or any
Junior Creditor to prepare Collateral for disposition or otherwise to complete
raw material or work in process into finished goods or other finished products
for disposition, (ii) to fail to obtain third party consents for access to
Collateral to be disposed of or to obtain or, if not required by other law, to
fail to obtain consents of any governmental authority or other third party for
the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against account debtors,
secondary obligors or other persons obligated on Collateral or to remove liens
or encumbrances on or any adverse claims against Collateral, (iv) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (vi) to contact other persons, whether or not in the
same business as any Guarantor, for expressions of interest in acquiring all or
any portion of the Collateral, (vii) to 
hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the collateral is of a specialized nature, (viii)
to dispose of Collateral by utilizing Internet sites that provide for the
auction of assets of the types included in the Collateral or that have the

 

24

 

reasonable capability of doing so, or that match buyers and sellers of
assets, (ix) to dispose of assets in wholesale rather than retail markets, (x)
to disclaim disposition warranties, (xi) to purchase insurance or credit
enhancements to insure the Collateral Agent or Junior Creditors against risks
of loss, collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by the Collateral Agent, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist the
Collateral Agent in the collection or disposition of any of the
Collateral.  Each Grantor acknowledges
that the purpose of this Section is to provide non-exhaustive indications
of what actions or omissions by the Collateral Agent or any Junior Creditor
would not be commercially unreasonable in the exercise by the Collateral Agent
or any Junior Creditor of remedies against the Collateral and that other
actions or omissions by the Collateral Agent or any Junior Creditor shall not
be deemed commercially unreasonable solely on account of not being indicated in
this Section.  Without limitation of the
foregoing, nothing contained in this Section shall be construed to grant
any rights to any Grantor or to impose any duties on the Collateral Agent or
the Junior Creditors that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section.

 

(f)  For the purpose of enabling the Collateral
Agent to exercise the rights and remedies hereunder and solely to the extent
permitted by any agreements each of the J. Crew Companies may have with third
parties, each J. Crew Company hereby grants to the Collateral Agent an
irrevocable, non-exclusive license (exercisable at any time an Event of Default
shall exist or have occurred and for so long as the same is continuing) without
payment of royalty or other compensation to any J. Crew Company, to use any of
the trademarks, service-marks, trade names, business names, trade styles,
designs, logos and other source of business identifiers and other Intellectual
Property and general intangibles now owned or hereafter owned by any of the J.
Crew Companies, wherever the same may be located, including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof; provided that the Collateral Agent agrees that any use of any
such trademarks or service-marks by it shall conform to quality standards
employed by each of the J. Crew Companies with respect to such marks.

 

8.2                                 Application
of Proceeds.  The Collateral
Agent may, upon the occurrence of an Event of Default, apply any cash held in the
Accounts and apply the proceeds of any sale or other disposition of all or any
part of the Collateral, as applicable, in the following order of priorities:

 

(a)  FIRST, to pay all costs and expenses incurred
by the Collateral Agent, the administrative agent under the Loan Agreement or
the trustee under the Indenture, as then in effect, in connection with such
collection or sale or otherwise in connection with this Agreement or any of the
Secured Obligations, including all court costs and the reasonable fees and
expenses of its agents and legal counsel, the repayment of all advances made by
the Collateral Agent hereunder on behalf of any Grantor and any other costs or
expenses incurred in connection with the exercise of any right or remedy
hereunder and any other amounts due to the Collateral Agent;

 

(b)  SECOND, to pay in full the due and unpaid
principal and due and unpaid interest (including any Accreted Value (as defined
in the Contingent Principal Notes Indenture)), where and as applicable, of the
Secured Obligations owed to the Junior Creditors (the amount so

 

25

 

applied to be distributed pro rata in accordance with the amount of
such Secured Obligations owed), subject to the provisions of Section 8.3 hereof;

 

(c)  THIRD, to pay in full all other due and
unpaid Secured Obligations (the amount so applied to be distributed pro rata in
accordance with the amount of such Secured Obligations owed), subject to the
provisions of Section 8.3 hereof; and

 

(d)  FOURTH, to Grantors, their successors or
assigns, or as a court of competent jurisdiction may otherwise direct.

 

8.3                                 Compliance
With Certain Requirements.

 

(a)  With respect to any Contingent Principal
Notes Obligations, an amount (the “Determined Amount”) shall be required
to be paid or held by the Collateral Agent for such Contingent Principal Notes
Obligations with respect to each of Sections 8.2(b) and 8.2(c) (each, a “Level”)
equal to (x) the Ratio multiplied by (y) the proceeds of any sale or other disposition
of Collateral that would be applied by the Collateral Agent to Loan Agreement
Obligations or Note Obligations at the applicable Level under the provisions of
Section 8.2 were the provisions of this Section 8.3 to be
inapplicable.  Notwithstanding the
foregoing, if the amount to be applied to the Contingent Principal Notes
Obligations at any Level would be greater if the Ratio were calculated by
reference to the outstanding principal of and accrued and unpaid interest on an
Other Second-Lien Obligation (other than the Contingent Principal Note
Obligations), rather than the Loan Agreement Obligations or the Notes
Obligations, such Other Second-Lien Obligation shall be used in order to
determine the amount to be applied to the Contingent Principal Notes
Obligations at such Level.

 

(b)  This Section 8 of this Agreement is
intended to comply with equal and ratable negative pledge provisions of the
Contingent Principal Notes Indenture and shall be construed to give effect to
such intention.  The Collateral Agent
shall be obligated to offer to pay to the Contingent Principal Notes Trustee
any portion of such Determined Amounts that are, in fact, due and payable at
such time such Determined Amounts are calculated, and the Collateral Agent
shall deposit any remaining portion of such Determined Amounts and any amounts
not accepted by the Contingent Principal Notes Trustee in a segregated account
solely for the benefit of the holders of such Contingent Principal Notes (and
all amounts on deposit in such account shall be invested in Cash Equivalents
maturing within 30 days after the investment is made).  Notwithstanding the foregoing, if at any time
the Contingent Principal Notes Trustee shall advise the Collateral Agent that no
Contingent Principal Notes Obligations of the type in respect of which monies
and proceeds are held by the Collateral Agent pursuant to this 8.3(b) will or
may any longer be outstanding or owing for any reason, then such monies and any
monies that constitute proceeds of such investments will be applied by the
Collateral Agent in accordance with Section 8.2.  The Collateral Agent shall not be responsible
for any diminution in funds resulting from investments made in Cash Equivalents
or from holding such monies uninvested.

 

(c)  In making the payments and allocations
required by this Section 8, the Collateral Agent may rely upon information
supplied to it pursuant to the requirements under this Agreement or provided to
the Collateral Agent in writing by the Contingent Principal Notes Trustee.  All distributions made by the Collateral
Agent pursuant to this Section 8 shall be final

 

26

 

(except in the event of manifest error) and the Collateral Agent shall
have no duty to inquire as to the application by any Junior Creditor of any
amount distributed to it.

 

SECTION 9.                            JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

 

9.1                                 Governing
Law; Choice of Forum; Service of Process; Jury Trial Waiver.

 

(a)  The validity, interpretation and enforcement
of this Agreement and any dispute arising out of the relationship between the
parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of New York but excluding any
principles of conflicts of law or other rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
New York.

 

(b)  Each of the Grantors and the Collateral Agent
irrevocably consents and submits to the non-exclusive jurisdiction of the
Supreme Court of the State of New York for New York County and the United
States District Court for the Southern District of New York, whichever the
Collateral Agent may elect, and waives any objection based on venue or forum
non  conveniens with respect to any action instituted therein
arising under this Agreement or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement
or the transactions related hereto or thereto, in each case whether now existing
or hereafter arising, and whether in contract, tort, equity or otherwise, and
agree that any dispute with respect to any such matters shall be heard only in
the courts described above (except that the Collateral Agent and Junior
Creditors shall have the right to bring any action or proceeding against any
Grantor or its or their property in the courts of any other jurisdiction which
the Collateral Agent deems necessary or appropriate in order to realize on the
Collateral or to otherwise enforce its rights against any Grantor or its or
their property).

 

(c)  Each Grantor hereby waives personal service
of any and all process upon it and consents that all such service of process
may be made by certified mail (return receipt requested) directed to its address
set forth herein and service so made shall be deemed to be completed five (5)
days after the same shall have been so deposited in the U.S. mails, or, at the
Collateral Agent’s option, by service upon such Grantor (or the Borrower Agent
on behalf of such Grantors) in any other manner provided under the rules of any
such courts.  Within thirty (30) days
after such service, such Grantor shall appear in answer to such process,
failing which such Grantor shall be deemed in default and judgment may be
entered by the Collateral Agent against such Grantor for the amount of the
claim and other relief requested.

 

(d)  GRANTORS AND THE COLLATERAL AGENT EACH HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION ARISING UNDER THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT
OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  GRANTORS AND THE COLLATERAL AGENT EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF

 

27

 

ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT
OPERATING, INTERMEDIATE, THE COLLATERAL AGENT OR THE JUNIOR CREDITORS MAY FILE
AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.

 

(e)  The Collateral Agent and the Junior Creditors
shall not have any liability to any Grantor (whether in tort, contract, equity
or otherwise) for losses suffered by any Grantor in connection with, arising
out of, or in any way related to the transactions or relationships contemplated
by this Agreement, or any act, omission or event occurring in connection
herewith, unless it is determined that by a final non-appealable judgment of
court order binding on the Collateral Agent and Junior Creditors that  the losses were the result of acts or
omissions constituting gross negligence or willful misconduct.  Each Grantor: 
(i) certifies that neither the Collateral Agent, any Junior Creditor nor
any representative, agent or attorney acting for or on behalf of the Collateral
Agent or any Junior Creditor has represented, expressly or otherwise, that the
Collateral Agent and the Junior Creditors would not, in the event of
litigation, seek to enforce any of the waivers provided for in this Agreement
and (ii) acknowledges that in entering into this Agreement and the other
Financing Agreements, the Collateral Agent and the Junior Creditors are relying
upon, among other things, the waivers and certifications set forth in this Section 9.1
and elsewhere herein and therein.

 

9.2                                 Waiver
of Notices.  Each Grantor
hereby expressly waives demand, presentment, protest and notice of protest and
notice of dishonor with respect to any and all instruments and chattel paper,
included in or evidencing any of the Secured Obligations or the Collateral, and
any and all other demands and notices of any kind or nature whatsoever with
respect to the Secured Obligations, the Collateral and this Agreement, except
such as are expressly provided for herein. 
No notice to or demand on any Grantor which the Collateral Agent or any
Junior Creditor may elect to give shall entitle such Grantor to any other or
further notice or demand in the same, similar or other circumstances.

 

9.3                                 Amendments
and Waivers.

 

(a)  Neither this Agreement nor any provision hereof
may be waived, amended, terminated or discharged or modified except by
Collateral Agent, acting upon the instructions of the Required Lenders (or the
Required Holders, if the Indenture is in effect at that time) pursuant to an
agreement or agreements in writing entered into by the Collateral Agent and
each Grantor to the extent such Grantor is directly affected by such amendment,
with respect to which such waiver, amendment, termination, discharge or
modification is to apply; provided, that, without the consent of any
Junior Creditor, the Grantors and the Collateral Agent may amend or supplement
this Agreement (i) to cure any ambiguity, defect or inconsistency or (ii) to
make any change that would provide any additional rights or benefits to the
Junior Creditors or that does not adversely affect the legal rights hereunder
of any Junior Creditor.

 

(b)  The Collateral Agent and the Junior Creditors
shall not, by any act, delay, omission or otherwise be deemed to have expressly
or impliedly waived any of its or their rights, powers and/or remedies unless
such waiver shall be in writing and signed as provided herein.  Any such waiver shall be enforceable only to
the extent specifically set forth therein. 
A waiver

 

28

 

by the Collateral Agent or any Junior Creditor of any right, power
and/or remedy hereunder on any one occasion shall not be construed as a bar to
or waiver of any such right, power and/or remedy which the Collateral Agent or
any Junior Creditor would otherwise have on any future occasion, whether
similar in kind or otherwise.

 

SECTION 10.                     THE
COLLATERAL AGENT

 

10.1                           Appointment,
Powers and Immunities. 
Pursuant to Section 11.08 of the Loan Agreement (or Section 11.09
of the Indenture, as then in effect), U.S. Bank National Association is
irrevocably designated, appointed and authorized to act as the Collateral Agent
hereunder with such powers as are specifically delegated to the Collateral
Agent by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto.  The
Collateral Agent (a) shall have no duties or responsibilities except those
expressly set forth in this Agreement, and shall not by reason of this
Agreement be a trustee or fiduciary for the Junior Creditors; (b) shall not be
responsible to the Junior Creditors for any recitals, statements,
representations or warranties contained in this Agreement, or in any
certificate or other document referred to or provided for in, or received by
any of them under, this Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
document referred to or provided for herein or therein or for any failure by
any of the Grantors or any other Person to perform any of its obligations
hereunder or thereunder; (c) shall not be responsible to the Junior Creditors
for any action taken or omitted to be taken by it hereunder or under any other
document or instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful
misconduct and (d) shall not be required to exercise its rights and remedies
against the Collateral unless directed to do so by the Required Lenders (or the
Required Holders, if the Indenture is then in effect).  The Collateral Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith.  The Collateral Agent may deem and treat the
payee of any note as the holder thereof for all purposes hereof unless and
until the assignment thereof pursuant to an agreement (if and to the extent
permitted herein) in form and substance satisfactory to the Collateral Agent
shall have been delivered to and acknowledged by the Collateral Agent.

 

10.2                           Reliance
by the Collateral Agent.  The
Collateral Agent shall be entitled to rely upon any certification, notice or
other communication (including any thereof by telephone, telecopy, telex, telegram
or cable) believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Collateral Agent.  As to any
matters not expressly provided for by this Agreement or any other Financial
Agreement, the Collateral Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder or thereunder in accordance
with instructions given by the Required Lenders (or the Required Holders, if
the Indenture is then in effect) as is required in such circumstances, and such
instructions of such Collateral Agent and any action taken or failure to act
pursuant thereto shall be binding on all lenders or holders under the Loan
Agreement or the Indenture, if then in effect, respectively.

 

10.3                           Concerning
the Collateral.  Pursuant to Section 11.08
of the Loan Agreement (or Section 11.09 of the Indenture, if then in
effect), the Collateral Agent is authorized and directed

 

29

 

by each Junior Creditor to enter into this Agreement.  Pursuant to the terms of the Loan Agreement
(and the Indenture, as then in effect), each action taken by the Collateral
Agent in accordance with the terms of this Agreement and the exercise by the
Collateral Agent of its respective powers set forth herein or therein, together
with such other powers that are reasonably incidental thereto, shall be binding
upon all Junior Creditors.

 

10.4                           Collateral
Matters.

 

(a)  The Collateral Agent is authorized to release
any security interest in or lien upon, any of the Collateral (i) upon payment
and satisfaction of all of the Secured Obligations,  (ii) constituting property being sold or
disposed of if the Borrower Agent or any Grantor certifies to the Collateral
Agent that the sale or disposition is made in compliance with the applicable
terms of the Loan Agreement (or the Indenture if then in effect), including Section 4.09
of the Loan Agreement (or Section 4.10 or Section 5.01 of the
Indenture, if then in effect) (and the Collateral Agent may rely conclusively
on any such certificate, without further inquiry), (iii) if the Borrower Agent
or any Grantor certifies to the Collateral Agent that the release of lien or
security interest upon Collateral is required or permitted by Section 11.03
of the Loan Agreement (or Section 11.03 of the Indenture if then in
effect), (iv) required by the terms of the Intercreditor Agreement, or (v) approved,
authorized or ratified in writing by the Required Lenders (or the Required
Holders, if the Indenture is then in effect); provided that, if at such
time the Trust Indenture Act of 1939, as amended, is applicable, the
requirements of Section 314(d) of such Act have been complied with.  Except as provided above, the Collateral
Agent will not release any security interest in or lien upon any of the
Collateral.  Upon request by the
Collateral Agent at any time, Lenders (or Holders, as applicable) will promptly
confirm in writing the Collateral Agent’s authority to release particular types
or items of Collateral pursuant to this Section.  The Collateral Agent shall execute (to the
extent required) and deliver to the J. Crew Companies, at the J. Crew Companies’
expense, all UCC termination statements and similar documents, which the J.
Crew Companies shall reasonably request to evidence the termination of the
security interest in the J. Crew Companies’ Collateral.

 

(b)  The Collateral Agent shall execute such
documents as may be necessary to evidence the release of the security interest,
mortgage or liens granted to the Collateral Agent upon any Collateral to the
extent set forth above.

 

(c)  The Collateral Agent shall have no obligation
whatsoever to the Junior Creditors or any other Person to investigate, confirm
or assure that the Collateral exists or is owned by any of the Grantors or is
cared for, protected or insured or has been encumbered, or that any particular
items of Collateral meet the eligibility criteria applicable in respect of the
Secured Obligations hereunder, or whether any particular reserves are
appropriate, or that the liens and security interests granted to the Collateral
Agent pursuant hereto or otherwise have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to the Collateral Agent in
this Agreement or in any of the other Financing Agreements, it being understood
and agreed that in respect of the Collateral or any act, omission or event
related thereto, the Collateral Agent may act in any manner it may deem
appropriate, in

 

30

 

its discretion, given the Collateral Agent’s own interest in the
Collateral as a trustee and that the Collateral Agent shall have no duty or
liability whatsoever to any other trustee.

 

10.5                           Agency
for Perfection.  Should any
Junior Creditor obtain possession of any Collateral, such Junior Creditor shall
notify the Collateral Agent thereof, and, promptly upon the Collateral Agent’s
request therefor shall deliver such Collateral to the Collateral Agent or in
accordance with the Collateral Agent’s instructions.

 

10.6                           Successor
Collateral Agent.  The
Collateral Agent may resign as the Collateral Agent upon thirty (30) days’
notice to each Grantor.  If the Collateral
Agent resigns under this Agreement, the Required Lenders (or the Required
Holders, if the Indenture is then in effect) shall appoint a successor
Collateral Agent.  Upon the acceptance by
the collateral agent so selected of its appointment as successor agent
hereunder, such successor agent shall succeed to all of the rights, powers and
duties of the retiring the Collateral Agent and the term “Collateral Agent” as
used herein and in the other Financing Agreements shall mean such successor
agent and the retiring Collateral Agent’s appointment, powers and duties as the
Collateral Agent shall be terminated. 
After a retiring Collateral Agent’s resignation hereunder as the
Collateral Agent, the provisions of this Section 10.6 shall inure to its
benefit as to any actions taken or omitted by it while it was the Collateral
Agent under this Agreement.  If no
successor agent has accepted appointment as the Collateral Agent by the date
which is thirty (30) days after the date of a retiring the Collateral Agent’s
notice of resignation, the retiring Collateral Agent’s resignation shall
nonetheless thereupon become effective and the retiring Collateral Agent may
appoint a successor collateral agent reasonably acceptable to the Junior
Creditors or may apply to a court of competent jurisdiction to have a successor
collateral agent appointed.  If the
Collateral Agent merges or consolidates with another corporation or transfers
substantially all of its corporate trust business to another corporation, the
surviving entity or such transferee, as applicable, shall be the Collateral
Agent hereunder without further act.

 

SECTION 11.                     TERM OF
AGREEMENT; MISCELLANEOUS

 

11.1                           Effectiveness.  This Agreement shall become effective on the
Closing Date (as defined in the Loan Agreement).

 

11.2                           Term.

 

(a)  This Agreement shall continue in full force
and effect until the claims and obligations arising under the Loan Agreement
and the Indenture, as then in effect, have been paid in full, at which time the
Collateral Agent shall execute and deliver to the J. Crew Companies, at the J.
Crew Companies’ expense, all UCC termination statements and similar documents,
including, without limitation, authorization for the J. Crew Companies to file
UCC termination statements, which the J. Crew Companies shall reasonably
request to evidence such termination. 
Any execution and delivery of termination statements or documents
pursuant to this Section 11.1 shall be without recourse to or warranty by
the Collateral Agent.

 

(b)  No termination of this Agreement shall
relieve or discharge Grantors of their respective duties, obligations and
covenants under this Agreement until all monetary Secured Obligations have been
fully and finally discharged and paid, and the Collateral Agent’s

 

31

 

continuing security interest in the Collateral and the rights and
remedies of the Collateral Agent and Junior Creditors hereunder and under
applicable law, shall remain in effect until all such monetary Secured
Obligations have been so paid. 
Accordingly, the J. Crew Companies waive any rights they may have under
the UCC to demand the filing of termination statements with respect to the
Collateral and the Collateral Agent shall not be required to send such
termination statements to the J. Crew Companies, or to file them with any
filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all monetary Secured Obligations paid in full in
immediately available funds.

 

11.3                           Interpretative
Provisions.

 

(a)  All terms used herein which are defined in Article 1,
Article 8 or Article 9 of the UCC shall have the meanings given
therein unless otherwise defined in this Agreement.

 

(b)  All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless
the context otherwise requires.

 

(c)  All references to Grantors, the Collateral
Agent and Junior Creditors pursuant to the definitions set forth in the
recitals hereto, or to any other person herein, shall include their respective
successors and assigns.

 

(d)  The words “hereof”, “herein”, “hereunder”, “this
Agreement” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not any particular provision of this Agreement
and as this Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

 

(e)  The word “including” when used in this
Agreement shall mean “including, without limitation”.

 

(f)  All references to “store” or “retail store”
as applied to the J. Crew Companies shall include both factory outlet stores
and other retail stores operated by the J. Crew Companies.

 

(g)  All references to the term “good faith” used
herein or the term “reasonable” or “reasonably” when applicable to the
Collateral Agent or any Junior Creditor shall be based upon the manner in which
a comparable asset-based lender similarly situated, with similar rights and
providing a credit facility of the type and with the Collateral and information
then available to it set forth herein, would act in such circumstances.

 

(h)  Any accounting term used in this Agreement
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the financial statements of J.
Crew Group, Inc. most recently received by the Collateral Agent prior to the
date hereof.

 

(i)  In the computation of periods of time from a
specified date to a later specified date, the word “from” means “from and
including”, the words “to” and “until” each mean “to but excluding” and the
word “through” means “to and including”.

 

32

 

(j)  Unless otherwise expressly provided herein,
(i) references herein to any agreement, document or instrument shall be deemed
to include all subsequent amendments, modifications, supplements, extensions,
renewals, restatements or replacements with respect thereto, but only to the
extent the same are not prohibited by the terms hereof or of any other
Financing Agreement, and (ii) references to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, recodifying, supplementing or interpreting the statute or
regulation.

 

(k)  The captions and headings of this Agreement
are for convenience of reference only and shall not affect the interpretation
of this Agreement.

 

(l)  This Agreement and other Financing Agreements
may use several different limitations, tests or measurements to regulate the
same or similar matters.  All such
limitations, tests and measurements are cumulative and shall each be performed
in accordance with their terms.

 

(m)  This Agreement and the other Financing
Agreements are the result of negotiations among and have been reviewed by
counsel to the J. Crew Companies and the other parties, and are the products of
all parties.  Accordingly, this Agreement
and the other Financing Agreements shall not be construed against the
Collateral Agent or the Junior Creditors merely because of the Collateral Agent’s
or the Junior Creditors’ involvement in their preparation.

 

11.4                           Subject
to the Intercreditor Agreement.

 

(a)  Notwithstanding anything herein to the
contrary, the lien and security interest granted to the Collateral Agent
pursuant to this Agreement and the exercise of any right or remedy by the
Collateral Agent hereunder are subject to the terms of the Intercreditor
Agreement.  In the event of any conflict
between the terms of the Intercreditor Agreement and this Agreement, the terms
of the Intercreditor Agreement shall govern.

 

(b)  Upon the occurrence of and during the
continuance of a First-Lien Termination Period, the Required Lenders shall have
the right to request and the J. Crew Companies shall consent to any assignment
by the Senior Credit Agent to the Collateral Agent of the Senior Credit Agent’s
rights under any control agreement or other agreement entered into by the
Senior Collateral Agent with a third party relating to the Collateral; provided
that if any such third party requests the execution of a new
substantially similar agreement, the J. Crew Companies will use reasonable
efforts to enter into such agreement.

 

(c)  The covenants with respect to Section 6,
set forth in Sections 6.2, 6.4, last sentence of 6.6, 6.7, 6.8, 6.9, and 6.10
hereof shall become effective only upon the occurrence of and during the
continuance of the First-Lien Termination Date.

 

(d)  While the Senior Creditor Documents are in
effect, (i) any requirement to endorse, assign or deliver Collateral to the
Collateral Agent shall be satisfied by the endorsement, assignment or delivery
thereof to the Senior Credit Agent in accordance with the terms of the Senior
Creditor Documents, (ii) any requirement hereunder that the Collateral Agent
provides its consent or agreement with respect to Collateral shall be deemed
satisfied if the Senior Credit Agent has given its consent or agreement in accordance
with the terms of the

 

33

 

Senior Creditor Documents, and (iii) any requirement hereunder that the
Collateral Agent shall receive any monies, checks, notes, drafts or any other
payments relating to and/or proceeds of Receivables or other Collateral from
any of the Grantors shall be deemed satisfied if the Senior Credit Agent receives
any such monies, checks, notes, drafts or any other payments in accordance with
the terms of the Senior Creditor Documents; provided  that the
foregoing requirements shall all be satisfied if the Grantors have exercised
reasonable efforts to cause the Senior Creditor Agent to accept such
endorsement, assignment, delivery or receipt or give its consent or agreement,
as applicable, and the Senior Creditor Agent has failed to do so.

 

11.5                           Notices.  All notices, requests and demands hereunder
shall be in writing and deemed to have been given or made:  if delivered in person, immediately upon
delivery; if by nationally recognized overnight courier service with
instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, five (5) days
after mailing.  All notices, requests and
demands upon the parties are to be given to the following addresses (or to such
other address as any party may designate by notice in accordance with this
Section):

 

	
  If to Operating,

  J. Crew, Retail, Factory,

  JCI or Intermediate:

  	
   

  	
   

  
	
   

  	
   

  	
  [name of the respective Grantor]

  770 Broadway

  New York, New York 10003

  Attention: Chief Financial Officer

  Telephone No.: 212-209-2667

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  J. Crew Group, Inc.

  770 Broadway

  New York, New York 10003

  
	
   

  	
   

  	
  Attention: General Counsel

  Telephone No.: 212-209-8254

  
	
   

  	
   

  	
   

  
	
  If to the Collateral

  Agent:

  	
   

  	
  U.S. Bank National Association

  Goodwin Square

  225 Asylum Street

  Hartford, CT 06103

  Attention: M. Hopkins, Corporate

  Trust

  Telephone No.: 860-241-6820

  

 

11.6                           Partial
Invalidity.  If any provision
of this Agreement is held to be invalid or unenforceable, such invalidity or
unenforceability shall not invalidate this Agreement as a whole, but this
Agreement shall be construed as though it did not contain the particular
provision held to be invalid or unenforceable and the rights and obligations of
the parties shall be construed and enforced only to such extent as shall be
permitted by applicable law.

 

34

 

11.7                           Successors.  This Agreement and any other document
referred to herein shall be binding upon and inure to the benefit of and be
enforceable by the Collateral Agent, the Junior Creditors, each Grantor and
their respective successors and assigns, except that the Grantors shall not
assign their rights under this Agreement without the prior consent of the
Collateral Agent and the Junior Creditors. 
Any such purported assignment without such prior express consent shall
be void.  The terms and provisions of
this Agreement are for the purpose of defining the relative rights and
obligations of Grantors, the Collateral Agent and Junior Creditors with respect
to the transactions contemplated hereby and there shall be no third party
beneficiaries of any of the terms and provisions of this Agreement or any of
the other Financing Documents.

 

11.8                           Entire
Agreement.  This Agreement,
the other Financing Agreements, any supplements hereto or thereto, and any
instruments or documents delivered or to be delivered in connection herewith or
therewith represents the entire agreement and understanding concerning the
subject matter hereof and thereof between the parties hereto, and supersede all
other prior agreements, understandings, negotiations and discussions, representations,
warranties, commitments, proposals, offers and contracts concerning the subject
matter hereof, whether oral or written. 
In the event of any inconsistency between the terms of this Agreement
and any schedule or exhibit hereto, the terms of this Agreement shall
govern.

 

11.9                           Counterparts, Etc.  This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall
be an original, but all of which taken together shall constitute one and the
same agreement.  Delivery of an executed
counterpart of this Agreement or any of the other Financing Agreements by
telefacsimile shall have the same force and effect as the delivery of an
original executed counterpart of this Agreement or any of such other Financing
Agreements.  Any party delivering an
executed counterpart of any such agreement by telefacsimile shall also deliver
an original executed counterpart, but the failure to do so shall not affect the
validity, enforceability or binding effect of such agreement.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

35

 

IN WITNESS
WHEREOF, each of the Grantors and the Collateral Agent have caused these
presents to be duly executed as of the day and year first above written.

 

	
   

  	
  OPERATING

  
	
   

  	
   

  
	
   

  	
  J. CREW OPERATING CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Amanda J. Bokman

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  J. CREW

  
	
   

  	
   

  
	
   

  	
  J. CREW INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Amanda J. Bokman

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RETAIL

  
	
   

  	
   

  
	
   

  	
  GRACE HOLMES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Amanda J. Bokman

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FACTORY

  
	
   

  	
   

  
	
   

  	
  H.F.D. NO. 55, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Amanda J. Bokman

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JCI

  
	
   

  	
   

  
	
   

  	
  J. CREW INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Nicholas P. Lamberti

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  VP Controller

  
					

 

36

 

	
   

  	
  INTERMEDIATE

  
	
   

  	
   

  
	
   

  	
  J. CREW INTERMEDIATE LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Amanda J. Bokman

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
				

 

37

 

	
   

  	
  COLLATERAL AGENT

  
	
   

  	
   

  
	
   

  	
  U.S. Bank National Association

  as the Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael M. Hopkins

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  
				

 

38

 

Exhibit A

 

Information Certificate

 

A-1Exhibit 4.3

 

[CONFORMED COPY]

 

INTERCREDITOR AGREEMENT

 

INTERCREDITOR
AGREEMENT, dated as of November 21, 2004, among CONGRESS FINANCIAL
CORPORATION, as Senior Credit Agent, U.S. BANK NATIONAL ASSOCIATION, as
Collateral Agent, J. CREW OPERATING CORP., J. CREW, INC., GRACE HOLMES, INC.,
H.F.D. NO. 55, INC., J. CREW INTERNATIONAL, INC. and J. CREW INTERMEDIATE LLC.

 

WITNESSETH:

 

WHEREAS, the
J. Crew Companies (such term and each other capitalized term used herein having
the meanings set forth in Section 1 below), Intermediate, J. Crew Group
Inc., certain lenders, Congress Financial Corporation, as administrative and
collateral agent, and certain other parties are parties to the Loan and
Security Agreement dated December 23, 2002, as amended (as further amended,
supplemented or otherwise modified from time to time, the “Existing Credit
Agreement”);

 

WHEREAS, the
Obligations of Operating and the other obligors under the Existing Credit
Agreement are secured (together with certain other obligations) by various assets
of the J. Crew Companies and Intermediate;

 

WHEREAS, the
J. Crew Companies, Intermediate and U.S. Bank National Association, as
administrative and collateral agent for the Junior Lenders, have entered into a
Senior Subordinated Loan Agreement, dated of even date herewith (as amended,
supplemented or otherwise modified from time to time, the “Junior Credit
Agreement”), pursuant to which the Junior Lenders will make certain loans to
Operating;

 

WHEREAS,
pursuant to the terms of the Junior Credit Agreement, the J. Crew Companies and
Intermediate have agreed, upon the occurrence of certain events, to enter into
an indenture (the “Junior Indenture”) with U.S. Bank National Association, as
trustee and collateral agent for the noteholders thereunder, pursuant to which
Operating will issue to the Junior Lenders its 93⁄4% Senior Subordinated Notes due 2014 (the “Junior Notes”);

 

WHEREAS, the
J. Crew Companies, Intermediate and the Collateral Agent have entered into the
Junior Security Agreement dated of even date herewith (as amended, supplemented
or otherwise modified from time to time, the “Junior Security Agreement”),
pursuant to which the Grantors have granted to the Collateral Agent, for itself
and on behalf of the Junior Creditors, second priority Liens in respect of the
Common Collateral to secure the Junior Creditor Claims;

 

WHEREAS, Agent
and Lenders under the Existing Credit Agreement have entered into Amendment No.
3 to Loan and Security Agreement dated of even date herewith (the “Existing
Agreement Amendment”), to certain provisions of the Existing Credit Agreement
that, among other things, permits the entry into the Junior Credit Agreement,
the Junior Indenture and the Junior Security Agreement by the J. Crew Companies
and Intermediate, and the granting of the second priority Liens in favor of the
Junior Creditors under the Junior Security Agreement; and

 

 

 

WHEREAS, it is
a condition precedent to the effectiveness of the Existing Agreement Amendment
that the parties hereto enter into this Agreement;

 

NOW,
THEREFORE, 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.                                            (a) Definitions.  As used in this Agreement, the following
terms have the meanings specified below:

 

“Accession
Agreement” means an Accession Agreement in substantially the form of Annex
I hereto.

 

“Agreement”
means this Agreement, as amended, renewed, extended, supplemented or otherwise
modified from time to time in accordance with the terms hereof.

 

“Bankruptcy
Law” means Title 11 of the United States Code and any similar Federal,
state or foreign law for the relief of debtors.

 

“Business
Day” means any day other than a Saturday, a Sunday or a day that is a legal
holiday under the laws of the State of New York or on which banking
institutions in the State of New York are required or authorized by law or
other governmental action to close.

 

“Collateral
Agent” means U.S. Bank National Association in its capacity as collateral
agent under the Junior Collateral Documents, and also includes any successor,
replacement or agent acting on its behalf as collateral agent for the Junior
Creditors under the Junior Collateral Documents.

 

“Collateral
Document” means any Senior Creditor Collateral Document or Junior Creditor
Collateral Document.

 

“Common
Collateral” means all of the assets of any Grantor, whether real, personal
or mixed, constituting both Senior Creditor Collateral and Junior Creditor
Collateral.

 

“Comparable
Junior Creditor Collateral Document” means, in relation to any Common
Collateral subject to any Lien created under any Senior Collateral Document,
that Junior Creditor Collateral Document which creates a Lien on the same
Common Collateral, granted by the same Grantor.

 

“Contingent
Principal Notes” means the 16% Senior Discount Contingent Principal Notes
due 2008 issued under the Contingent Principal Notes Indenture.

 

“Contingent
Principal Notes Indenture” means that certain indenture, dated as of May 6,
2003, between Intermediate and the Contingent Principal Notes Trustee, pursuant

 

2

 

to which
Intermediate issued $120,000,000 aggregate principal amount of 16% Senior
Discount Contingent Principal Notes due 2008.

 

“Contingent
Principal Notes Trustee” means U.S. Bank National Association, in its
capacity as trustee under the Contingent Principal Notes Indenture.

 

“Discharge
of First-Lien Obligations” means, except to the extent otherwise provided
in Section 5.6, payment in full in cash of the principal of and interest
and premium, if any, on all Indebtedness in respect of the outstanding
First-Lien Obligations or, with respect to Hedging Obligations or letters of
credit outstanding thereunder, delivery of cash collateral or backstop letters
of credit in respect thereof in compliance with such First-Lien Obligations, in
each case after or concurrently with termination of all commitments to extend
credit thereunder, and payment in full in cash of any other Obligations in
respect of the First-Lien Obligations that are due and payable or otherwise
accrued and owing.  If after receipt of
any payment of, or proceeds of collateral applied to the payment of, any of the
Senior Creditor Claims (whether by or on behalf of any Grantor, as proceeds of
security, enforcement of any right of set-off or otherwise), Senior Credit
Agent or any Senior Creditor is required to surrender or return such payment or
proceeds to any person for any reason or 
such payment or proceeds are set aside, then the Senior Creditor Claim
intended to be satisfied by such payment or proceeds shall be reinstated and
continue and this Intercreditor Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Senior Credit
Agent or such Senior Creditor, as the case may be, and no Discharge of
First-Lien Obligations shall be deemed to have occurred.

 

“Exchange
Date” means the date on which the outstanding Loans (as defined in the
Junior Credit Agreement) are exchanged for any of the Junior Notes to be
issued, authenticated and delivered pursuant to the Junior Indenture pursuant
to Section 2.10 of the Junior Credit Agreement, as in effect on the date
hereof.

 

“Existing
Agreement Amendment” has the meaning set forth in the recitals hereto.

 

“Existing
Credit Agreement” has the meaning set forth in the recitals hereto.

 

“First-Lien
Obligations” means (a) the Obligations arising under
or pursuant to the Senior Credit Agreement and (b) any other Indebtedness
designated by Operating as a “First-Lien Obligation” for purposes of and in
compliance with the terms of the Junior Credit Agreement or the Junior
Indenture, as then in effect.

 

“Grantors”
means each of the J. Crew Companies and upon the occurrence of the Exchange
Date, Intermediate.

 

“Hedging
Obligations” means, with respect to any Person, the obligations of such
Person under (i) interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or the
value of foreign currencies.

 

3

 

“Indebtedness”
means and includes all Obligations that constitute “Indebtedness” within the
meaning of any of the Junior Credit Agreement, the Junior Indenture, the
Contingent Principal Notes Indenture or the Senior Credit Agreement, in each
case as then in effect.

 

“Insolvency
or Liquidation Proceeding” means (a) any voluntary or involuntary case or
proceeding under any Bankruptcy Law with respect to any Grantor, (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 any Grantor or with respect to any of their
respective assets, (c) any liquidation, dissolution, reorganization or winding
up of any Grantor whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy or (d) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of any Grantor.

 

“Intermediate”
means J. Crew Intermediate LLC, a Delaware LLC.

 

“J. Crew
Companies” means Operating, J. Crew Inc., a New Jersey corporation, Grace
Holmes, Inc., a Delaware corporation doing business as J. Crew Retail, H.F.D.
No. 55, Inc., a Delaware corporation doing business as J. Crew Factory, and J.
Crew International, Inc., a Delaware corporation.

 

“Junior
Creditor Claims” means all Obligations in respect
of the Junior Credit Agreement, the Junior Indenture or the Contingent
Principal Notes or arising under the Junior Creditor Documents or any of them.

 

“Junior
Creditor Collateral” means all of the assets of any Grantor, whether real,
personal or mixed, with respect to which a Lien is granted as security for any
Junior Creditor Claim.

 

“Junior
Creditor Collateral Documents” means the Junior Security Agreement and any other
document or instrument pursuant to which a Lien is granted by any Grantor to
secure any Junior Creditor Claims or under which rights or remedies with
respect to any such Lien are governed.

 

“Junior
Creditor Documents” means (a) the Junior Credit Agreement and the notes
issued thereunder, the Junior Indenture and the Junior Notes issued thereunder,
the Contingent Principal Notes Indenture, the Contingent Principal Notes, the
Junior Creditor Collateral Documents and any document or instrument evidencing
or governing any Other Second-Lien Obligations and any (b) other related
document or instrument executed and delivered pursuant to any Junior Creditor
Document described in clause (a) above evidencing or governing any Obligations
thereunder.

 

“Junior
Creditors” means the Persons holding Junior
Creditor Claims.

 

“Junior
Credit Agreement” has the meaning set forth in the recitals hereto.

 

“Junior
Indenture” has the meaning set forth in the recitals hereto.

 

4

 

“Junior
Lender” means a “Lender” within the meaning of the Junior Credit Agreement.

 

“Junior
Noteholder” means a holder of the Junior Notes.

 

“Junior
Notes” has the meaning set forth in the recitals hereto.

 

“Junior
Security Agreement” has the meaning set forth in the recitals hereto.

 

“Lien”
means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

 

“Obligations”
means any and all obligations with respect to the payment of (a) any principal
of or interest or premium on any Indebtedness, including any reimbursement
obligation in respect of any letter of credit, (b) any fees, indemnification
obligations, expense reimbursement obligations or other liabilities payable
under the documentation governing any Indebtedness or (c) any obligation to
post cash collateral or provide a backstop letter of credit in respect of
letters of credit and any other obligations. 
The term “Obligations” includes any principal, interest, fees, costs,
expenses and other amounts arising after the commencement of any Insolvency or
Liquidation Proceeding, whether or not such amounts have ceased to accrue under
applicable law or whether or not allowed or allowable in whole or in part, in
any such case or similar proceeding.

 

“Other
Second-Lien Obligations” means (a) the Contingent Principal Notes and (b)
any other Indebtedness designated by Operating as a “Second-Lien Obligation”
for purposes of and in compliance with the terms of the Junior Credit Agreement
or the Junior Indenture, as then in effect.

 

“Person”
means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, entity
or other party, including any government and any political subdivision, agency
or instrumentality thereof.

 

“Pledged
Collateral” means (a) the “Operating Equity Securities” and “Subsidiary
Equity Securities” under, and as defined in, the Junior Security Agreement, and
(b) any other tangible Common Collateral in the possession of the Senior Credit
Agent (or its agents or bailees), to the extent that possession thereof is
necessary to perfect a Lien thereon under the Uniform Commercial Code.

 

“Recovery”
has the meaning set forth in Section 6.5 hereof.

 

“Senior
Credit Agent” means Congress Financial Corporation in its capacity as
collateral agent under the Senior Credit Agreement and the other Financing
Agreements (as defined therein), and any successor thereto or replacement
thereof and any agent appointed by it, or in its capacity as Senior Credit
Agent hereunder (acting in such capacity

 

5

 

for and on behalf of any Senior Creditors under any of the Senior
Creditor Documents), or any other single agent for the Senior Creditors under
the Senior Creditor Documents (including their respective collateral agents or
other representatives) executing and delivering an Accession Agreement in
substantially the form of Annex I hereto.

 

“Senior
Credit Agreement” means the Existing Credit Agreement and all other
Financing Agreements (as defined therein) and any amendments, supplements,
modifications, extensions, renewals, restatements or refundings thereof and any
indentures or credit facilities or commercial paper facilities with banks or
other institutional lenders that replace, refund or refinance any part of the
loans, notes, other credit facilities or commitments thereunder.

 

“Senior
Creditor Claims” means (a) all Indebtedness outstanding under one or more
of the Senior Creditor Documents or (b) all other Obligations (not constituting
Indebtedness) of any Grantor under the Senior Creditor Documents. Senior
Creditor Claims shall include all interest accrued or accruing (or which would,
absent the commencement of an Insolvency or Liquidation Proceeding, accrue)
after the commencement of an Insolvency or Liquidation Proceeding in accordance
with and at the rate specified in the relevant Senior Creditor Document whether
or not the claim for such interest is allowed as a claim in such Insolvency or
Liquidation Proceeding and any other amounts arising after the commencement of
any Insolvency or Liquidation Proceeding, whether or not such amounts cease to
accrue under applicable law and whether or not allowed or allowable in any case
or proceeding. If after receipt of any payment of, or proceeds of collateral
applied to the payment of, any of the Senior Creditor Claims (whether by or on
behalf of any Grantor, as proceeds of security, enforcement of any right of
set-off or otherwise), Senior Credit Agent or any Senior Creditor is required
to surrender or return such payment or proceeds to any person for any reason or
such payment or proceeds are set aside, then the Senior Creditor Claim intended
to be satisfied by such payment or proceeds shall be reinstated and continue
and this Intercreditor Agreement shall continue in full force and effect as if
such payment or proceeds had not been received by Senior Credit Agent or such
Senior Creditor, as the case may be.

 

“Senior
Creditor Collateral” means all of the assets of any Grantor, whether real,
personal or mixed, with respect to which a Lien is granted as security for any
Senior Creditor Claim.

 

“Senior
Creditor Collateral Documents” means the Financing Agreements (as defined
in the Existing Credit Agreement), including without limitation the documents
set forth on the Schedule attached hereto and any other agreement,
document or instrument pursuant to which a Lien is granted securing any Senior
Creditor Claims or under which rights or remedies with respect to such Liens
are governed.

 

“Senior
Creditor Documents” means the Senior Credit Agreement, the Senior Creditor
Collateral Documents, and each of the other agreements, documents and
instruments providing for or evidencing any other Obligation in respect of any
First-Lien Obligation, and any other related document or instrument executed or
delivered pursuant to any Senior Creditor Document at any time or otherwise
evidencing any Senior Creditor Claims.

 

6

 

“Senior
Creditors” means the Persons holding Senior
Creditor Claims, including the Senior Credit Agent.

 

“Subsidiary”
means any “Subsidiary” of Intermediate or Operating, as defined in the Junior
Indenture, the Contingent Principal Notes Indenture or the Senior Credit
Agreement.

 

“Uniform
Commercial Code” or “UCC” means the Uniform Commercial Code as from time to
time in effect in the State of New York.

 

(b)                                 Terms
Generally.  The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”. The word “will” shall be construed to
have the same meaning and effect as the word “shall”. Unless the context
requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified, (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, and as to
any Grantor shall be deemed to include a receiver, trustee or
debtor-in-possession on behalf of any of such person or on behalf of any such
successor or assign, (c) the words “herein”, “hereof” and “hereunder”, and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references herein
to 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 contract rights.

 

Section 2.                                            Lien Priorities.

 

2.1                                 Subordination.  Notwithstanding the date, manner or order of
grant, attachment or perfection of any Liens granted to the Collateral Agent or
the Junior Creditors on the Common Collateral or of any Liens granted to the
Senior Credit Agent or the Senior Creditors on the Common Collateral and
notwithstanding any provision of the UCC, or any applicable law or the Junior
Creditor Documents or the Senior Creditor Documents or any other circumstance
whatsoever, the Collateral Agent, for itself and on behalf of the Junior
Creditors, hereby agrees that: (a) any Lien on the Common Collateral securing
any Senior Creditor Claims now or hereafter held by or on behalf of the Senior
Credit Agent or any Senior Creditors or any agent or trustee therefor shall be
senior in all respects and prior to any Lien on the Common Collateral securing
any of the Junior Creditor Claims; and (b) any Lien on the Common Collateral
now or hereafter held by or on behalf of the Collateral Agent or any Junior Creditors
or any agent or trustee therefor regardless of how acquired, whether by grant,
statute, operation of law, subrogation or otherwise, shall be junior and
subordinate in all respects to all Liens on the Common Collateral securing any
Senior Creditor Claims. All Liens on the Common Collateral securing any Senior
Creditor Claims shall be and remain senior in all respects and prior to all
Liens on the Common Collateral securing any Junior Creditor Claims for all

 

7

 

purposes,
whether or not such Liens securing any Senior Creditor Claims are subordinated
to any Lien securing any other obligation of any Grantor or any other Person.

 

2.2                                 Prohibition
on Contesting Liens.  Each of the
Collateral Agent, for itself and on behalf of each Junior Creditor, and the
Senior Credit Agent, for itself and on behalf of each Senior Creditor, agrees
that it shall not (and hereby waives any right to) contest or support any other
Person in contesting, in any proceeding (including any Insolvency or
Liquidation Proceeding), the priority, validity or enforceability of a Lien
held by or on behalf of any of the Senior Creditors in the Senior Creditor
Collateral or by or on behalf of any of the Junior Creditors in the Common
Collateral, as the case may be; provided that nothing in this Agreement shall
be construed to prevent or impair the rights of the Senior Credit Agent or any
Senior Creditor to enforce this Agreement, including the priority of the Liens
securing the Senior Creditor Claims as provided in Section 2.1.

 

2.3                                 No
New Liens.  So long as the Discharge
of First-Lien Obligations has not occurred, the parties hereto agree that,
after the date hereof, if the Collateral Agent shall hold any Lien on any
assets of any Grantor securing any Junior Creditor Claims that are not also
subject to the first-priority Lien of the Senior Credit Agent under the Senior
Creditor Documents, the Collateral Agent, upon demand by the Senior Credit
Agent or such Grantor, will, at Senior Credit Agent’s option, either release
such Lien or assign it to the Senior Credit Agent as security for the Senior
Creditor Claims or such Grantor shall grant a Lien thereon to Senior Credit
Agent in a manner and on terms satisfactory to Senior Credit Agent.

 

Section 3.                                            Enforcement.

 

3.1                                 Exercise
of Remedies.

 

(a)                                  So
long as the Discharge of First-Lien Obligations has not occurred, whether or
not any Insolvency or Liquidation Proceeding has been commenced by or against
any Grantor, (i) the Collateral Agent agrees, for itself and on behalf of the
Junior Creditors, that it will not (A) exercise or seek to exercise any rights
or remedies (including set-off or by notification of account debtors) with
respect to any Common Collateral, or institute any action or proceeding with respect
to such rights or remedies (including any action of foreclosure), (B) contest,
protest or object to any foreclosure proceeding or action brought by the Senior
Credit Agent or any Senior Creditor, or the exercise any right under any
lockbox agreement, control agreement, landlord waiver or bailee’s letter or
similar agreement or arrangement to which the Collateral Agent or any Junior
Creditor is a party, or any other exercise by any such party, of any rights and
remedies relating to the Common Collateral under the Senior Creditor Documents
or otherwise, or (C) contest, protest or object to the forbearance by the
Senior Creditors from bringing or pursuing any foreclosure proceeding or action
or any other exercise of any rights or remedies relating to the Common
Collateral and (ii) the Senior Credit Agent and the Senior Creditors shall have
the exclusive right to enforce rights, exercise remedies (including set-off and
the right to credit bid their debt) and make determinations regarding the
release, disposition, or restrictions with respect to the Common Collateral
without any consultation with or the consent of the Collateral Agent or any
Junior Creditor; provided, that (A) in any Insolvency or
Liquidation Proceeding commenced by or against any Grantor, the Collateral
Agent may file a claim or statement of interest with respect to the Junior
Creditor

 

8

 

Claims, (B) the Collateral
Agent may send such notices of the existence of, or any evidence or
confirmation of, the Junior Creditor Claims under the Junior Creditor Documents
or the Liens of Collateral Agent in the Common Collateral to any court or
governmental agency, or file or record any such notice or evidence to the
extent necessary to prove or preserve the Liens of Collateral Agent in the
Collateral and (C) the Collateral Agent may commence legal proceedings against
a Grantor (but not any of the Common Collateral); provided, that, such legal
proceeding does not interfere with the rights of Senior Credit Agent or any
Senior Creditor in and to the Common Collateral or the Senior Creditor Claims
or the exercise by Senior Credit Agent or any Senior Creditor or of such rights
or involve any contest or challenge to the validity, perfection, priority or
enforceability of the Liens of Senior Credit Agent or of the Senior Creditor
Claims and in any event the Collateral Agent may not enforce any judgment
against any of the Common Collateral. The Collateral Agent, for itself and on
behalf of the Junior Creditors, agrees that the Senior Credit Agent and the
Senior Creditors, in exercising rights and remedies with respect to the Common
Collateral, may enforce the provisions of the Senior Creditor 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 the rights of an agent appointed by them to sell or
otherwise dispose of Common Collateral upon foreclosure, to incur expenses in
connection with such sale or disposition, and to exercise all the rights and
remedies of a secured lender under the Uniform Commercial Code of any
applicable jurisdiction and of a secured creditor under Bankruptcy Laws of any
applicable jurisdiction.

 

(b)                                 The
Collateral Agent, for itself and on behalf of the Junior Creditors, agrees that
it will not take or receive any Common Collateral or any proceeds of Common
Collateral in connection with the exercise of any right or remedy (including
set-off) with respect to any Common Collateral, unless and until the Discharge
of First-Lien Obligations has occurred. Without limiting the generality of the
foregoing, unless and until the Discharge of First-Lien Obligations has
occurred, except as expressly provided in the proviso in clause (ii) of Section 3.1(a)
above, the sole right of the Collateral Agent and the Junior Creditors with
respect to the Common Collateral is to hold a Lien on the Common Collateral
pursuant to the Junior Creditor Documents for the period and to the extent granted
therein and to receive a share of the proceeds thereof, if any, after the
Discharge of the First-Lien Obligations has occurred.

 

(c)                                  The
Collateral Agent, for itself and on behalf of the Junior Creditors, agrees that
it will not take any action that would hinder any exercise of remedies
undertaken by the Senior Credit Agent under the Senior Loan Documents,
including any sale, lease, exchange, transfer or other disposition of the
Common Collateral, whether by foreclosure or otherwise, and the Collateral
Agent, for itself and on behalf of the Junior Creditors, hereby waives any and
all rights it may have as a junior lien creditor or otherwise to object to the
manner in which the Senior Credit Agent or the Senior Creditors seek to enforce
or collect the Senior Creditor Claims or the Liens granted in any of the Senior
Creditor Collateral, regardless of whether any action or failure to act by or
on behalf of the Senior Credit Agent or Senior Creditors is adverse to the
interest of the Junior Creditors.

 

(d)                                 The
Collateral Agent hereby acknowledges and agrees that no covenant, agreement or
restriction contained in any Junior Creditor Document shall be deemed to
restrict in any way the rights and remedies of the Senior Credit Agent or the
Senior Creditors

 

9

 

with
respect to the Common Collateral as set forth in this Agreement and the Senior
Creditor Documents.

 

3.2                                 Cooperation.  Subject to the proviso in clause (ii) of Section 3.1(a)
above, the Collateral Agent, for itself and on behalf of the Junior Creditors,
agrees that, unless and until the Discharge of First-Lien Obligations has
occurred, it will not commence, or join with any Person (other than the Senior
Creditors and the Senior Credit Agent upon the request thereof) in commencing,
any enforcement, collection, execution, levy or foreclosure action or
proceeding with respect to any Lien held by it under any of the Junior Creditor
Documents or otherwise.

 

Section 4.                                            Payments.

 

4.1                                 Application
of Proceeds.   As long as the
Discharge of First-Lien Obligations has not occurred, the Common Collateral or
proceeds thereof received in connection with the sale or other disposition of,
or collection on, such Common Collateral upon the exercise of remedies, shall
be applied by the Senior Credit Agent to the Senior Creditor Claims in such
order as specified in the relevant Senior Creditor Documents until the
Discharge of First-Lien Obligations has occurred. Upon the Discharge of
First-Lien Obligations, to the extent permitted under applicable law and
without risk of legal liability to Senior Credit Agent or any Senior Creditor,
the Senior Credit Agent shall deliver to the Collateral Agent any proceeds of
Common Collateral held by it at such time in the same form as received, with
any necessary endorsements or as a court of competent jurisdiction may
otherwise direct to be applied by the Collateral Agent to the Junior Creditor
Claims in such order as specified in the relevant Junior Creditor Documents.  The foregoing provisions of this Agreement
are intended solely to govern the respective lien priorities as between the
Collateral Agent and the Senior Credit Agent and shall not impose on Senior
Credit Agent or any Senior Creditor any obligations in respect of the
disposition of proceeds of foreclosure on any Common Collateral which would
conflict with prior perfected claims therein in favor of any other person or
any order or decree of any court or other governmental authority or any
applicable law.

 

4.2                                 Payments
Over.   Any Common Collateral or
proceeds thereof received by the Collateral Agent in connection with the
exercise of any right or remedy (including set-off) relating to the Common
Collateral prior to the Discharge of First-Lien Obligations shall be segregated
and held in trust and promptly paid over to the Senior Credit Agent for the
benefit of the Senior Creditors in the same form as received, with any
necessary endorsements or assignments or as a court of competent jurisdiction
may otherwise direct. The Senior Credit Agent is hereby authorized to make any
such endorsements or assignments as agent for the Collateral Agent.  This authorization is coupled with an
interest and is irrevocable.

 

Section 5.                                            Other Agreements.

 

5.1                                 Releases.

 

(a)                                  If
in connection with:

 

(i)                                     the exercise of the Senior Credit Agent’s remedies in
respect of the Common Collateral provided for in Section 3.1, including
any sale, lease, exchange, transfer or other disposition of any such Common
Collateral;

 

10

 

(ii)                                  any
sale, lease, exchange, transfer or other disposition of any Common Collateral
permitted under the terms of the Senior Creditor Documents (whether or not an
event of default or equivalent event thereunder, and as defined therein, has
occurred and is continuing); or

 

(iii)                               any
agreement between the Senior Credit Agent and any Grantor to release the Senior
Credit Agent’s Lien on any portion of the Common Collateral (provided that
after giving effect to the release, Obligations secured by the first priority
Liens on the remaining Common Collateral remain outstanding);

 

the Senior Credit Agent, for itself or on behalf of
any of the Senior Creditors, releases any of its Liens on any part of the
Common Collateral, (A) the Liens, if any, of the Collateral Agent, for itself
or for the benefit of the Junior Creditors, on such Common Collateral shall be
automatically, unconditionally and simultaneously released to the same extent
as the release of Senior Credit Agent’s Lien, provided, that,
until the Indebtedness under the Contingent Principal Notes is repaid in full
or the Contingent Principal Notes Indenture ceases to be qualified under the
Trust Indenture Act of 1939, as amended (the “TIA”) or if at any time on or
after the execution and delivery of the Junior Indenture such indenture is
qualified under the TIA, and if and only to the extent necessary to comply with
Section 314(d) of the TIA as to any such release, (1) any Grantor that is
required under the TIA to do so shall provide, or Senior Credit Agent may, at
its option (but shall have no obligation to) provide on behalf of any such
Grantor, to the trustee or appropriate representative in respect of the
Contingent Principal Notes or the Junior Notes, as the case may be, a
certificate or opinion by an engineer, appraiser or other expert (which person
may, except as otherwise required under the TIA, be an officer or other
employee of any Grantor) of the fair value of the property to be released, and
a certificate or opinion of an engineer, appraiser or other expert (including
any attorney, and which person may, except as otherwise required under the TIA,
be an officer or employee of any Grantor) that shall state that in the opinion
of such person such release will not impair the security under the Contingent
Principal Notes Indenture or the Junior Indenture, as the case may be, in
contravention of the provisions thereof, or, if the fair value of the Common
Collateral released since the commencement of the then current calendar year is
ten (10%) percent or more of the aggregate principal amount of the Contingent
Principal Notes at the time outstanding (until the Indebtedness under the
Contingent Principal Notes is repaid in full or the Contingent Principal Notes
Indenture ceases to be qualified under the TIA) or ten (10%) percent or more of
the aggregate principal amount of the Junior Notes at the time outstanding (if
at any time on or after the execution and delivery of the Junior Indenture such
indenture is qualified under the TIA), Grantors shall, to the extent required
under Section 314(d) of the TIA, cause an independent engineer, appraiser
or other expert to deliver such certificates or opinions, promptly upon the
request of Senior Credit Agent, (2) in the event that such certifications or
opinions are at any time required to be delivered by any Grantor under the TIA,
Senior Credit Agent is hereby authorized to obtain such documentation on behalf
of each such Grantor at such Grantor’s expense, and to deliver it to the
trustee or appropriate representative in respect of the Contingent Principal
Notes or the Junior Notes, as the case may be, on behalf of such Grantor, and
(3) each Grantor hereby confirms and agrees, for the benefit of any person
providing such documentation upon the direction of Senior Credit Agent on
behalf of such Grantor, that such release of the Common Collateral will not
impair the security under the Contingent Principal Notes Indenture or the
Junior Indenture, as the case may be, in contravention of the provisions
thereof, (B) the

 

11

 

Collateral Agent, for itself or on behalf of any such
Junior Creditor, shall promptly upon the request of Senior Credit Agent execute
and deliver such release documents and confirmations of the authorization to
file UCC amendments and terminations provided for herein, in each case as
Senior Credit Agent may require in connection with such sale or other
disposition by Senior Credit Agent, Senior Credit Agent’s agents or any Grantor
with the consent of Senior Credit Agent to evidence and effectuate such
termination and release, provided, that, any such release or UCC amendment or
termination by Collateral Agent shall not extend to or otherwise affect any of
the rights, if any, of Collateral Agent to the proceeds from any such sale or
other disposition of Collateral, (C) the Collateral Agent, for itself or on
behalf of any such Junior Creditor, shall be deemed to have authorized Senior
Credit Agent to file UCC amendments and terminations covering the Common Collateral
so sold or otherwise disposed of as to UCC financing statements between any
Debtor and Junior Creditor to evidence such release and termination, and (D)
the Collateral Agent, for itself or on behalf of any such Junior Creditor,
shall be deemed to have consented under the Junior Creditor Documents to such
sale or other disposition to the same extent as the Senior Credit Agent’s and
Senior Creditors’ consent.

 

(b)                                 The
Collateral Agent, for itself and on behalf of the Junior Creditors, hereby
irrevocably constitutes and appoints the Senior Credit Agent and any officer or
agent of the Senior Credit Agent, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the Collateral Agent or such holder or in the Senior Credit
Agent’s own name, from time to time in the Senior Credit Agent’s discretion,
for the purpose of carrying out the terms of this Section 5.1, to take any
and all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this Section 5.1,
including any termination statements, endorsements or other instruments of
transfer or release.

 

5.2                                 Insurance.  Unless and until the Discharge of First-Lien
Obligations has occurred, the Senior Credit Agent and the Senior Creditors
shall have the sole and exclusive right, subject to the rights of the Grantors
under the Senior Creditor Documents, to adjust settlement for any insurance
policy covering the Common Collateral in the event of any loss thereunder and
to approve any award granted in any condemnation or similar proceeding
affecting the Common Collateral. Unless and until the Discharge of First-Lien
Obligations has occurred, all proceeds of any such policy and any such award if
in respect to the Common Collateral shall be paid to the Senior Credit Agent
for the benefit of the Senior Creditors to the extent required under the Senior
Creditor Documents and thereafter to the Collateral Agent for the benefit of
the Junior Creditors to the extent required under the applicable Junior
Creditor Documents and then to the owner of the subject property or as a court
of competent jurisdiction may otherwise direct. If the Collateral Agent shall,
at any time, receive any proceeds of any such insurance policy or any such
award in contravention of this Agreement, it shall pay such proceeds over to
the Senior Credit Agent in accordance with the terms of Section 4.2.

 

5.3                                 Amendments
to Junior Creditor Collateral Documents. 
Without the prior written consent of the Senior Credit Agent, no Junior
Creditor Collateral Document may be amended, supplemented or otherwise modified
or entered into to the extent such amendment, supplement or modification, or
the terms of any new Junior Creditor Collateral Document, would be prohibited
by or inconsistent with any of the terms of the Senior Creditor Documents. The

 

12

 

Collateral Agent agrees that
each Junior Creditor Collateral Document shall include the following language
(or language to similar effect approved by the Senior Credit Agent):

 

“Notwithstanding anything herein to the
contrary, the lien and security interest granted to the Collateral Agent
pursuant to this Agreement and the exercise of any right or remedy by the
Collateral Agent hereunder are subject to the provisions of the Intercreditor
Agreement, dated as of November 21, 2004 (as amended, supplemented or
otherwise modified from time to time, the “Intercreditor Agreement”), among
Congress Financial Corporation, as Senior Credit Agent, U.S. Bank National
Association, as Collateral Agent, J. Crew Operating Corp., J. Crew, Inc., Grace
Holmes, Inc., H.F.D. No. 55, Inc., J. Crew International, Inc. and J. Crew
Intermediate LLC. In the event of any conflict between the terms of the
Intercreditor Agreement and this Agreement, the terms of the Intercreditor
Agreement shall govern.”.

 

5.4                                 Rights
As Unsecured Creditors.  Notwithstanding anything to the contrary in
this Agreement, the Collateral Agent and the Junior Creditors may exercise
rights and remedies as an unsecured creditor against any Grantor or any
Subsidiary that has guaranteed the Junior Creditor Claims in accordance with
the terms of the Junior Creditor Documents and applicable law. Nothing in this
Agreement shall prohibit the receipt by the Collateral Agent or any Junior
Creditors of the required payments of interest and principal so long as such
receipt is not the direct or indirect result of the exercise by the Collateral
Agent or any Junior Creditor of foreclosure rights or remedies as a secured
creditor or enforcement in contravention of this Agreement of any Lien held by
any of them.  Nothing in this Agreement
impairs or otherwise adversely affects any rights or remedies the Senior Credit
Agent or the Senior Creditors may have with respect to the Senior Creditor
Collateral and the foregoing shall not be construed to limit or otherwise
affect any of the rights of Senior Credit Agent or any Senior Creditor under the
subordination provisions in the Junior Creditor Documents or under any other
provisions thereof or any of the obligations and duties of Collateral Agent,
Junior Creditors or any Grantor thereunder or under any of the Senior Creditor
Documents.

 

5.5                                 Bailee
for Perfection.

 

(a)                                  The
Senior Credit Agent agrees to hold any Pledged Collateral that is part of the
Common Collateral that is in its possession or control (or in the possession or
control of its agents or bailees) as bailee and agent for and on behalf of the
Collateral Agent solely for the purpose of perfecting the security interest
granted in such Pledged Collateral pursuant to any Junior Creditor Collateral
Document, subject to the terms and conditions of this Section 5.5.

 

(b)                                 Until
the Discharge of First-Lien Obligations has occurred, the Senior Credit Agent
shall be entitled to deal with the Pledged Collateral in accordance with the
terms of the Senior Creditor Documents as if the Liens of the Collateral Agent
under the Junior Creditor Collateral Documents did not exist. The rights of the
Collateral Agent shall at all times

 

13

 

be
subject to the terms of this Agreement and to the Senior Credit Agent’s rights
under the Senior Creditor Documents.

 

(c)                                  The
Senior Credit Agent shall have no obligation whatsoever to the Collateral Agent
or any Junior Creditor to assure that the Pledged Collateral is genuine or
owned by any of the Grantors or to preserve rights or benefits of any Person
except as expressly set forth in this Section 5.5. The duties or
responsibilities of the Senior Credit Agent under this Section 5.5 shall
be limited solely to holding the Pledged Collateral as bailee and agent for and
on behalf of the Collateral Agent for purposes of perfecting the Lien held by
the Collateral Agent.

 

(d)                                 The
Senior Credit Agent shall not have by reason of the Junior Creditor Collateral
Documents or this Agreement or any other document a fiduciary relationship in
respect of the Collateral Agent or any Junior Creditor and shall not have any
liability to Collateral Agent or any Junior Creditor in connection with its
holding the Pledged Collateral, other than for its gross negligence or willful
misconduct as determined by a final, non-appealable order of a court of competent
jurisdiction.

 

(e)                                  Upon
the Discharge of First-Lien Obligations, to the extent permitted under
applicable law and without risk of legal liability to Senior Credit Agent or
any Senior Creditor, the Senior Credit Agent shall deliver to the Collateral
Agent the remaining Pledged Collateral (if any) together with any necessary
endorsements (or otherwise so as to allow the Collateral Agent to obtain
control of such Pledged Collateral) in accordance with the instructions of the
Collateral Agent or as a court of competent jurisdiction may otherwise direct.
The foregoing provision shall not impose on Senior Credit Agent or any Senior
Creditor any obligations which would conflict with prior perfected claims
therein in favor of any other person or any order or decree of any court or
other governmental authority or any applicable law.

 

5.6                                 When
Discharge of First-Lien Obligations Deemed to Not Have Occurred.  If at any time after the Discharge of
First-Lien Obligations has occurred Operating designates any First-Lien
Obligations for purposes hereof, then such Indebtedness shall automatically be
treated as a First-Lien Obligation for all purposes of this Agreement,
including for purposes of the Lien priorities and rights in respect of Common
Collateral set forth herein. Upon receipt of notice of such designation
(including the identity of the new Senior Credit Agent), the Collateral Agent
shall promptly (i) enter into such documents and agreements (including
amendments or supplements to this Agreement) as Operating or such new Senior
Credit Agent shall reasonably request in order to provide to the new Senior
Credit Agent the rights of the Senior Credit Agent contemplated hereby and (ii)
deliver to the Senior Credit Agent the Pledged Collateral together with any necessary
endorsements (or otherwise allow such Senior Credit Agent to obtain control of
such Pledged Collateral).

 

5.7                                 Preference
Issues.  If any Senior Creditor is
required in any Insolvency or Liquidation Proceeding or otherwise to turn over
or otherwise pay to the estate of any Grantor any amount (a “Recovery”), then
the Senior Creditor Claims shall be reinstated to the extent of such Recovery
and the Senior Creditors shall be entitled to a Discharge of First-Lien
Obligations with respect to all such recovered amounts. If this Agreement shall
have been terminated prior to such Recovery, this Agreement shall be reinstated
in full force and effect, and such prior

 

14

 

termination
shall not diminish, release, discharge, impair or otherwise affect the
obligations of the parties hereto from such date of reinstatement.

 

5.8                                 Successor
Senior Credit Agent.  At any time, in
compliance with the terms of the Senior Creditor Documents, and with the prior
written consent of the then existing Senior Credit Agent, Operating may
designate a replacement Senior Credit Agent, and the existing Senior Credit
Agent shall be replaced by such replacement Senior Credit Agent upon execution
and delivery of an Accession Agreement.

 

Section 6.                                            Reliance; Waivers; etc.

 

6.1                                 Reliance.  The consent by the Senior Creditors to the
execution and delivery of the Junior Creditor Documents and the grant to the
Collateral Agent on behalf of the Junior Creditors of a Lien on the Common
Collateral and all loans and other extensions of credit made or deemed made on
and after the date hereof by the Senior Creditors to any Grantor shall be
deemed to have been given and made in reliance upon this Agreement.

 

6.2                                 No
Warranties or Liability.  The
Collateral Agent, for itself and on behalf of the Junior Creditors,
acknowledges and agrees that each of the Senior Credit Agent and the Senior
Creditors 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 Senior Creditor Documents, the ownership of any
Common Collateral or the perfection or priority of any Liens thereon. The
Collateral Agent agrees, for itself and on behalf of the Junior Creditors, that
the Senior Creditors will be entitled to manage and supervise their respective
loans and extensions of credit under the Senior Creditor Documents in
accordance with law and as they may otherwise, in their sole discretion, deem
appropriate, and the Senior Creditors may manage their loans and extensions of
credit without regard to any rights or interests that the Collateral Agent or
any of the Junior Creditors have in the Common Collateral or otherwise, except
as otherwise provided in this Agreement. Neither the Senior Credit Agent nor
any Senior Creditor shall have any duty to the Collateral Agent or any of the
Junior Creditors 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 Operating or Intermediate or any Subsidiary thereof
(including the Junior Creditor Documents), regardless of any knowledge thereof
which they may have or be charged with.

 

6.3                                 No
Waiver of Lien Priorities.

 

(a)                                  No
right of the Senior Creditors, the Senior Credit Agent or any of them to
enforce any provision of this Agreement or any Senior Creditor Document shall
at any time in any way be prejudiced or impaired by any act or failure to act
on the part of any Grantor or by any act or failure to act by any Senior
Creditor or the Senior Credit Agent, or by any noncompliance by any Person with
the terms, provisions and covenants of this Agreement, any of the Senior
Creditor Documents or any of the Junior Creditor Documents, regardless of any
knowledge thereof which the Senior Credit Agent or the Senior Creditors, or any
of them, may have or be otherwise charged with.

 

15

 

(b)                                 Without
in any way limiting the generality of the foregoing paragraph (but subject to
the rights of the Grantors under the Senior Creditor Documents), the Senior
Creditors, the Senior Credit Agent and any of them, may, at any time and from
time to time, without the consent of, or notice to, the Collateral Agent or any
Junior Creditor, without incurring any liabilities to the Collateral Agent or
any Junior Creditor 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 Collateral Agent or any Junior Creditor is
affected, impaired or extinguished thereby) do any one or more of the
following:

 

(i)                                     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
Senior Creditor Claims or any Lien on any Senior Creditor Collateral or
guaranty thereof or any liability of any Grantor, or any liability incurred
directly or indirectly in respect thereof (including any increase in or
extension of the Senior Creditor Claims, without any restriction as to the
amount, 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 Senior Credit Agent or any of the Senior Creditors, the Senior Creditor
Claims or any of the Senior Creditor Documents;

 

(ii)                                  sell,
exchange, release, surrender, realize upon, enforce or otherwise deal with in
any manner and in any order any part of the Senior Creditor Collateral or any
liability of any Grantor to the Senior Creditors or the Senior Credit Agent, or
any liability incurred directly or indirectly in respect thereof;

 

(iii)                               settle
or compromise any Senior Creditor Claim or any other liability of any Grantor
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 Senior Creditor Claims) in any manner or order;
and

 

(iv)                              exercise
or delay in or refrain from exercising any right or remedy against any Grantor
or any other Person, elect any remedy and otherwise deal freely with any
Grantor or any Senior Creditor Collateral and any security and any guarantor or
any liability of any Grantor to the Senior Creditors or any liability incurred
directly or indirectly in respect thereof.

 

(c)                                  The
Collateral Agent, for itself and on behalf of the Junior Creditors, also agrees
that the Senior Creditors and the Senior Credit Agent shall have no liability
with respect to any actions which the Senior Creditors or the Senior Credit
Agent may take or permit or omit to take with respect to: (i) the Senior
Creditor Documents, (ii) the collection of the Senior Creditor Claims or (iii)
the foreclosure upon, or sale, liquidation or other disposition of, any Senior
Creditor Collateral. The Collateral Agent, for itself and on behalf of the
Junior Creditors, agrees that the Senior Creditors and the Senior Credit Agent
have no duty to them in respect of the maintenance or preservation of the
Senior Creditor Collateral, the Senior Creditor Claims or otherwise.

 

(d)                                 The
Collateral Agent agrees not to assert and hereby waives, to the fullest extent
permitted by law, any right to demand, request, plead or otherwise assert or

 

16

 

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
Common Collateral or any other similar rights a junior secured creditor may
have under applicable law.

 

6.4                                 Obligations
Unconditional.  All rights,
interests, agreements and obligations of the Senior Credit Agent and the Senior
Creditors and the Collateral Agent and the Junior Creditors, respectively,
hereunder shall remain in full force and effect irrespective of:

 

(a)                                  any lack of validity or enforceability of any Senior
Creditor Documents or any Junior Creditor Documents;

 

(b)                                 any
change in the time, manner or place of payment of, or in any other terms of,
all or any of the Senior Creditor Claims or Junior Creditor Claims, 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 the Senior
Credit Agreement or any other Senior Creditor Document or of the terms of the
Junior Credit Agreement, the Junior Indenture or any other Junior Creditor
Document;

 

(c)                                  any
exchange of any security interest in any Common 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 Senior Creditor Claims or Junior
Creditor Claims or any guarantee thereof;

 

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

 

(e)                                  any
other circumstances which otherwise might constitute a defense available to, or
a discharge of, any Grantor in respect of the Senior Creditor Claims, or of the
Collateral Agent or any Junior Creditor in respect of this Agreement.

 

Section 7.                                            Miscellaneous.

 

7.1                                 Conflicts.  In the event of any conflict between the
provisions of this Agreement and the provisions of the Senior Creditor
Documents or the Junior Creditor Documents, the provisions of this Agreement
shall govern.

 

7.2                                 Continuing
Nature of this Agreement; Severability. 
This Agreement shall continue to be effective until the Discharge of
First-Lien Obligations shall have occurred. This is a continuing agreement of
lien subordination and the Senior Creditors may continue, at any time and
without notice to the Collateral Agent or any Junior Creditor, to extend credit
and other financial accommodations and lend monies to or for the benefit of any
Grantor constituting Senior Creditor Claims on reliance hereof. The Collateral
Agent, for itself and on behalf of the Junior Creditors, 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 or Liquidation
Proceeding. The relative rights of Senior Creditors and Junior Creditor to
repayment of the Senior Creditor Claims and the Junior Creditor Claims,
respectively, and in or to any distributions from or in respect of any Grantor
or any Collateral or proceeds of Collateral, shall continue after the filing

 

17

 

thereof on the same basis as
prior to the date of the petition, subject to any court order approving the
financing of, or use of cash collateral by, such Grantor as debtor in
possession.  Any provision of this
Agreement which 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.

 

7.3                                 Bankruptcy
Financing.  If any Grantor shall
become subject to a proceeding under the U.S. Bankruptcy Code and if a Senior
Creditor desires to permit the use of cash collateral or to provide financing
to such Grantor under either Section 363 or Section 364 of the U.S.
Bankruptcy Code, Collateral Agent, on behalf of itself and each Junior
Creditor, agrees as follows: (a) adequate notice to Collateral Agent and Junior
Creditors shall have been provided for such financing or use of cash collateral
if Collateral Agent receives notice two (2) business days prior to the entry of
the order approving such financing or use of cash collateral and (b) no
objection will be raised by Collateral Agent or any Junior Creditor to any such
financing or use of cash collateral on the ground of a failure to provide “adequate
protection” for Collateral Agent’s junior Liens on the Common Collateral or any
other grounds, provided Collateral Agent retains a Lien on the post petition
Common Collateral with the same priority as existed prior to the commencement
of the proceeding under the U.S. Bankruptcy Code to the extent entitled thereto.  For purposes of this Section, notice of a
proposed financing or use of cash collateral shall be deemed given when given,
in the manner prescribed by Section 7.7 hereof, to Collateral Agent.

 

7.4                                 Amendments;
Waivers.  No amendment, modification
or waiver of any of the provisions of this Agreement by the Collateral Agent or
the Senior Credit Agent shall be deemed to be made unless the same shall be in
writing signed on behalf of the party making the same 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. The Grantors 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 their rights or obligations are directly
affected.

 

7.5                                 Subrogation.  The Collateral Agent, for itself and on behalf
of the Junior Creditors, hereby waives any rights of subrogation it may acquire
as a result of any payment hereunder until the Discharge of First-Lien
Obligations has occurred.

 

7.6                                 Consent
to Jurisdiction; Waivers.  The
parties hereto consent to the jurisdiction of any state or federal court
located in New York, New York, and consent that all service of process may be
made by registered mail directed to such party as provided in Section 7.7
below for such party. Service so made shall be deemed to be completed three
days after the same shall be posted as aforesaid. The parties hereto waive any
objection to any action instituted hereunder based on forum non conveniens, and
any objection to the venue of any action instituted hereunder. Each of the
parties hereto waives any right it may have to trial by jury in respect of any
litigation based on, or arising out of, under or in connection with this
Agreement or any other Loan Document, or any course of conduct, course of
dealing, verbal or written statement or action of any party hereto.

 

18

 

7.7                                 Notices.  All notices to the Junior Creditors and the
Senior Creditors permitted or required under this Agreement may be sent to the
Collateral Agent and the Senior Credit Agent, respectively. Unless otherwise
specifically provided herein, any notice or other communication herein required
or permitted to be given shall be in writing and may be personally served,
electronically mailed or sent by courier service, facsimile transmission or
U.S. mail and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of a facsimile transmission or electronic mail or
four Business Days after deposit in the U.S. mail (registered or certified,
with postage prepaid and properly addressed). For the purposes hereof, the
addresses of the parties hereto shall be as set forth below, or, as to each
party, at such other address as may be designated by such party in a written
notice to all of the other parties.

 

	
  Collateral
  Agent:

  
	
   

  	
   

  
	
   

  	
  U.S. Bank
  National Association

  
	
   

  	
  Goodwin
  Square

  
	
   

  	
  225 Asylum
  Street

  
	
   

  	
  Hartford,
  Connecticut 06103

  
	
   

  	
  Facsimile No.: 860-241-6897

  
	
   

  	
  Attention:
  Corporate Trust Department / Michael Hopkins

  
	
   

  	
   

  
	
  Senior
  Credit Agent:

  
	
   

  	
   

  
	
   

  	
  Congress
  Financial Corporation

  
	
   

  	
  1133 Avenue
  of the Americas

  
	
   

  	
  New York,
  New York 10036

  
	
   

  	
  Attention:
  Portfolio Manager

  
	
   

  	
  Telephone No.:
  212-840-2000

  
	
   

  	
  Facsimile No.:
  212-545-4283

  
	
   

  	
   

  
	
  Each
  Grantor:

  
	
   

  	
   

  
	
   

  	
  J. Crew
  Operating Corp.

  
	
   

  	
  770 Broadway

  
	
   

  	
  New York,
  New York 10003

  
	
   

  	
  Facsimile No.:
  (212) 209-2666

  
	
   

  	
  Atterntion:
  Cheif Financial Officer

  
	
   

  	
   

  
	
  With a copy
  to:

  
	
   

  	
   

  
	
   

  	
  Cleary
  Gottlieb, Steen & Hamilton

  
	
   

  	
  One Liberty
  Plaza

  
	
   

  	
  New York,
  New York 10006

  
	
   

  	
  Facsimile No.:
  (212) 225-3999

  
	
   

  	
  Attention:
  Michael L. Ryan

  

 

7.8                                 Further
Assurances.  The Collateral Agent
agrees that it shall, for itself and on behalf of the Junior Creditors, take
such further action and shall execute and deliver to the Senior Credit Agent
and the Senior Creditors such additional documents and instruments (in recordable
form, if requested) as the Senior Credit Agent or the Senior Creditors may
reasonably request to effectuate the terms of and the lien priorities
contemplated by this Agreement.

 

7.9                                 Governing
Law.  The internal law of the State
of New York shall govern and be used to construe this Agreement.

 

7.10                           Binding
on Successors and Assigns.  This
Agreement shall be binding upon the Senior Credit Agent, the Senior Creditors, the Collateral Agent, Grantors and their respective
permitted successors and assigns.

 

7.11                           Specific
Performance.  The Senior Credit Agent
may demand specific performance of this Agreement. The Collateral Agent, for
itself and on behalf of the Junior Creditors, hereby irrevocably waives 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 Senior Credit Agent.

 

7.12                           Section Titles;
Time Periods.  The section titles
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this Agreement.

 

7.13                           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
together constitute one and the same document.

 

7.14                           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.

 

7.15                           No
Third Party Beneficiaries.  This
Agreement and the rights and benefits hereof shall inure to the benefit of each
of the parties hereto and their respective successors and assigns and shall
inure to the benefit of each of the holders of Senior Creditor Claims and Junior
Creditor Claims. No other Person shall have or be entitled to assert rights or
benefits hereunder.

 

19

 

7.16                           Effectiveness.  This
Agreement shall become effective on the Closing Date (as defined in the Junior
Credit Agreement). This Agreement shall be effective both before and
after the commencement of any Insolvency or Liquidation Proceeding. 

 

7.17                           Senior
Credit Agent and Collateral Agent. 
It is understood and agreed that (a) Congress Financial Corporation is
entering into this Agreement in its capacity as Senior Credit Agent and the
provisions of Article 7 of the Existing Credit Agreement applicable to
Congress Financial Corporation as administrative agent thereunder shall also
apply to Congress Financial Corporation as Senior Credit Agent hereunder, and
(b) U.S. Bank National Association is entering into this Agreement in its
capacity as Collateral Agent and the provisions of Article 7 of the Junior
Credit Agreement and Article 7 of the Junior Indenture applicable to the
Collateral Agent thereunder shall also apply to U.S. Bank National Association
as Collateral Agent hereunder.

 

7.18                           Designations.  For purposes of the provisions hereof and the
Junior Credit Agreement and the Junior Indenture requiring Operating to
designate Indebtedness as “First-Lien Obligations” or to make any other
designation for any other purpose hereunder or under the Junior Credit
Agreement or the Junior Indenture, as then in effect, any such designation
shall be sufficient if the relevant designation is set forth in writing, signed
on behalf of Operating by an officer thereof and delivered to the Collateral
Agent and the Senior Credit Agent..

 

20

 

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

 

 

	
  SENIOR CREDIT AGENT

  	
  OPERATING

  
	
   

  	
   

  
	
  CONGRESS FINANCIAL

  CORPORATION,

  	
  J. CREW OPERATING CORP.  

  
	
  as Senior Credit Agent

  	
  By:

  	
  /s/ Amanda J. Bokman 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jason Searle

  	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  Assistant Vice President

  	
   

  	
   

  
	
   

  	
  J. CREW

  
	
   

  	
   

  
	
   

  	
  J. CREW, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Amanda J. Bokman

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
  RETAIL

  
	
   

  	
   

  
	
   

  	
  GRACE HOLMES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Amanda J. Bokman

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
  FACTORY

  
	
   

  	
   

  
	
   

  	
  H.F.D. NO.
  55, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Amanda J. Bokman

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
  JCI

  
	
   

  	
   

  
	
   

  	
  J. CREW INTERNATIONAL, INC.  

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas P. Lamberti

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  VP Controller

  	
   

  
											

 

21

 

	
   

  	
  INTERMEDIATE

  
	
   

  	
   

  
	
   

  	
  J. CREW INTERMEDIATE LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Amanda J. Bokman

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
					

 

22

 

	
   

  	
  COLLATERAL AGENT

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
  as the Collateral Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael M. Hopkins

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
					

 

23

 

Annex I

 

FORM OF ACCESSION AGREEMENT

 

This ACCESSION
AGREEMENT, dated as of [DATE] (this “Agreement”), is entered into by and
among [name of Collateral Agent] in its capacity as Collateral Agent for the
benefit of the Junior Creditors under the terms of the Intercreditor Agreement;
Intermediate and each of the J. Crew Companies; [name of existing Senior Credit
Agent] (the “Existing Senior Credit Agent”), as Senior Credit Agent for
the benefit of the Senior Creditors under the terms of the Intercreditor
Agreement and [name of new Senior Credit Agent] (the “New Senior Credit
Agent”), as replacement Senior Credit Agent for the benefit of the Senior
Creditors under the terms of the Intercreditor Agreement.  Capitalized terms used but not otherwise
defined herein shall have the meanings set forth in the Intercreditor
Agreement.

 

WHEREAS, Congress Financial Corporation, as Senior
Credit Agent, U.S. Bank National Association, as Collateral Agent, J. Crew
Operating Corp., J. Crew Inc., Grace Holmes, Inc., H.F.D. No. 55, J. Crew
International, Inc. and J. Crew Intermediate LLC, as Grantors, are parties to
that certain Intercreditor Agreement, dated as of November 21, 2004 (the “Intercreditor
Agreement”);

 

WHEREAS pursuant to Section 5.8 of the
Intercreditor Agreement, Operating has designated [new Senior Credit Agent] as “Senior
Credit Agent” for purposes thereof, to replace [existing Senior Credit Agent]
in such capacity;

 

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

 

1.                                       Consent
and Agreement.  The New Senior Credit
Agent hereby consents and agrees to be made a party to, and to be bound as the
Senior Credit Agent by all of the terms of, the Intercreditor Agreement, and
ratifies any and all amendments, supplements, modifications, renewals and
extensions heretofore made thereto, and shall have, on behalf of itself and
each of the Senior Creditors, all the rights and obligations of the Senior
Credit Agent as specified therein.

 

2.                                       Resignation
and Removal.  The Existing Senior
Credit Agent hereby resigns and withdraws as Senior Credit Agent under the
Intercreditor Agreement, in accordance with the terms thereof.

 

3.                                       Miscellaneous.  Each of the provisions of Sections 7.6, 7.7,
7.9, 7.10, 7.12 and 7.14 of the Intercreditor Agreement shall apply, mutatis mutandis, to this Agreement.

 

[Signatures on following
page]

 

I-1

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective officers as of the day
and year first above written.

 

	
   

  	
  NEW SENIOR
  CREDIT AGENT

  
	
   

  	
   

  
	
   

  	
  [                                  ],

  
	
   

  	
  as Senior
  Credit Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXISTING
  SENIOR CREDIT AGENT

  
	
   

  	
   

  
	
   

  	
  [                                  ]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Acknowledged
  and Agreed:

  	
   

  
	
   

  	
   

  
	
  COLLATERAL
  AGENT

  	
   

  
	
   

  	
   

  
	
  [                                  ],

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  J. CREW
  OPERATING CORP.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
													

 

I-2

 

	
  J. CREW,
  INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
  GRACE
  HOLMES, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
  H.F.D. NO.
  55, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
  J. CREW
  INTERNATIONAL, INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
  J. CREW
  INTERMEDIATE LLC

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
				

 

I-3

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