Prentice Capital Management, LP – ‘SC 13D’ on 10/13/05 re: Whitehall Jewellers Inc

On:  Thursday, 10/13/05, at 11:41am ET   ·   Accession #:  902664-5-2003   ·   File #:  5-46037

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General Statement of Beneficial Ownership   —   Schedule 13D
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SC 13D      Whitehall Jewellers, Inc.                             48    180K 

Document Table of Contents

SC 13D
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------------------------------------------------------------------------------- 
SEC            POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF        
1746 (11-02)   INFORMATION  CONTAINED IN THIS FORM  ARE NOT REQUIRED TO RESPOND 
            UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.
------------------------------------------------------------------------------- 

                                          --------------------------------
UNITED STATES                           OMB APPROVAL
 SECURITIES AND EXCHANGE COMMISSION       --------------------------------
WASHINGTON, D.C. 20549              OMB Number:  3235-0145  
                                          --------------------------------
                                      Expires: December 31, 2005
                                          --------------------------------
                                    Estimated average burden
                                         hours per response . . . . 11
                                          --------------------------------

SCHEDULE 13D

 Under the Securities Exchange Act of 1934

 Whitehall Jewellers, Inc.
--------------------------------------------------------------------------------
 (Name of Company)

 Common Stock, $.001 par value
--------------------------------------------------------------------------------
(Title of Class of Securities)

 965063100
--------------------------------------------------------------------------------
 (CUSIP Number of Class of Securities)

 Marc Weingarten, Esq.
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
(212) 756-2280
--------------------------------------------------------------------------------
 (Name, Address and Telephone Number of Person
 Authorized to Receive Notices and Communications)

 October 3, 2005
--------------------------------------------------------------------------------
 (Date of Event which Requires
Filing of this Schedule)

If the filing person has previously filed a statement on Schedule 13G to report 
the acquisition that is the subject of this Schedule 13D, and is filing this    
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the 
following box. [ ]                                                              

NOTE: Schedules filed in paper format shall include a signed original and five  
copies of the schedule, including all exhibits. See ss.240.13d-7 for other      
parties to whom copies are to be sent.                                          

* The remainder of this cover page shall be filled out for a reporting person's 
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter           
disclosures provided in a prior cover page.                                     

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The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of   
1934 ("Act") or otherwise subject to the liabilities of that section of the Act 
but shall be subject to all other provisions of the Act (however, see the       
Notes).                                                                         

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SCHEDULE 13D

--------------------------------                          ----------------------
CUSIP NO.      965063100                                  PAGE 2 OF 14 PAGES    
--------------------------------                          ----------------------

----------- --------------------------------------------------------------------
1       NAME OF REPORTING PERSON                                        
   I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

   Prentice Capital Management, LP      I.R.S. ID:  73-1728931
----------- --------------------------------------------------------------------
2       CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP        (a) [ ] 
                                                               (b) [X]

----------- --------------------------------------------------------------------
3       SEC USE ONLY                                                    

----------- --------------------------------------------------------------------
4       SOURCE OF FUNDS*                                                

AF                                                      
----------- --------------------------------------------------------------------
   5       CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
       ITEMS 2(d) or 2(e)                                          [ ]

----------- --------------------------------------------------------------------
6       CITIZENSHIP OR PLACE OF ORGANIZATION                            

Delaware                                                
--------------------- --------- ------------------------------------------------
7      SOLE VOTING POWER      

0               
                      --------- ------------------------------------------------
8      SHARED VOTING POWER    
NUMBER OF                                                                     
SHARES                       70,115,161 shares (including 2,094,346 shares
BENEFICIALLY                    issuable upon exercise of warrants and          
OWNED BY                      68,020,815 shares upon conversion of notes and
  EACH                        payable as shares of interest under the notes)
REPORTING                      (see Item 5)                                   
PERSON WITH           --------- ------------------------------------------------
9      SOLE DISPOSITIVE POWER 

0               
                      --------- ------------------------------------------------
 10     SHARED DISPOSITIVE POWER

                             70,115,161 shares (including 2,094,346 shares
                      issuable upon exercise of warrants and
                              68,020,815 shares upon conversion of notes and
                              payable as shares of interest under the notes)
(see Item 5)    
----------- --------------------------------------------------------------------
11      AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON              

            70,115,161 shares (including 2,094,346 shares issuable upon exercise
      of warrants and 68,020,815 shares upon conversion of notes and
   payable as shares of interest under the notes) (see Item 5)
----------- --------------------------------------------------------------------
12      CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)                   
       EXCLUDES CERTAIN SHARES*                                    [ ]

----------- --------------------------------------------------------------------
13      PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (see Item 5) 

65.25% (see Item 5)                                     
----------- --------------------------------------------------------------------
14      TYPE OF REPORTING PERSON*                                       

PN                                                      
----------- --------------------------------------------------------------------

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SCHEDULE 13D

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CUSIP NO.      965063100                                  PAGE 3 OF 14 PAGES    
--------------------------------                          ----------------------

----------- --------------------------------------------------------------------
1       NAME OF REPORTING PERSON                                        
   I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

   PWJ Lending LLC                      I.R.S. ID:  02-0751960
----------- --------------------------------------------------------------------
2       CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP        (a) [ ] 
                                                               (b) [X]

----------- --------------------------------------------------------------------
3       SEC USE ONLY                                                    

----------- --------------------------------------------------------------------
4       SOURCE OF FUNDS*                                                

AF                                                      
----------- --------------------------------------------------------------------
   5       CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
       ITEMS 2(d) or 2(e)                                          [ ]

----------- --------------------------------------------------------------------
6       CITIZENSHIP OR PLACE OF ORGANIZATION                            

Delaware                                                
--------------------- --------- ------------------------------------------------
7      SOLE VOTING POWER      

0               
                      --------- ------------------------------------------------
8      SHARED VOTING POWER    
NUMBER OF                                                                     
SHARES                       2,094,346 shares issuable upon exercise of   
BENEFICIALLY                    warrants (see Item 5)                           
  OWNED BY            --------- ------------------------------------------------
EACH                 9      SOLE DISPOSITIVE POWER                      
REPORTING                      0                                              
PERSON WITH                                                                     
                      --------- ------------------------------------------------
 10     SHARED DISPOSITIVE POWER

                          2,094,346 shares issuable upon exercise of
     warrants (see Item 5)
----------- --------------------------------------------------------------------
11      AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON              

        2,094,346 shares issuable upon exercise of warrants (see Item 5)
----------- --------------------------------------------------------------------
12      CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)                   
       EXCLUDES CERTAIN SHARES*                                    [ ]

----------- --------------------------------------------------------------------
13      PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)              

   1.95% (assuming issuance of the notes and 14.99% otherwise)
(see Item 5)                                            
----------- --------------------------------------------------------------------
14      TYPE OF REPORTING PERSON*                                       

OO                                                      
----------- --------------------------------------------------------------------

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SCHEDULE 13D

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CUSIP NO.      965063100                                  PAGE 4 OF 14 PAGES    
--------------------------------                          ----------------------

----------- --------------------------------------------------------------------
1       NAME OF REPORTING PERSON                                        
   I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

    PWJ Funding LLC                      I.R.S. ID:  61-149-4137
----------- --------------------------------------------------------------------
2       CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP        (a) [ ] 
                                                               (b) [X]

----------- --------------------------------------------------------------------
3       SEC USE ONLY                                                    

----------- --------------------------------------------------------------------
4       SOURCE OF FUNDS*                                                

AF                                                      
----------- --------------------------------------------------------------------
   5       CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
       ITEMS 2(d) or 2(e)                                          [ ]

----------- --------------------------------------------------------------------
6       CITIZENSHIP OR PLACE OF ORGANIZATION                            

Delaware                                                
--------------------- --------- ------------------------------------------------
7      SOLE VOTING POWER      

0               
                      --------- ------------------------------------------------
8      SHARED VOTING POWER    
NUMBER OF                                                                     
SHARES                       68,020,815 shares issuable upon conversion of
BENEFICIALLY                    notes and payable as shares of interest under   
OWNED BY                      the notes (see Item 5)                        
    EACH              --------- ------------------------------------------------
REPORTING               9      SOLE DISPOSITIVE POWER                         
PERSON WITH                                                                     
0               
                      --------- ------------------------------------------------
 10     SHARED DISPOSITIVE POWER

                             68,020,815 shares issuable upon conversion of
                             notes and payable as shares of interest under
      the notes (see Item 5)
----------- --------------------------------------------------------------------
11      AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON              

          68,020,815 shares issuable upon conversion of notes and payable as
shares of interest under the notes (see Item 5)         
----------- --------------------------------------------------------------------
12      CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)                   
       EXCLUDES CERTAIN SHARES*                                    [ ]

----------- --------------------------------------------------------------------
13      PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)              

63.3% (see Item 5)                                      
----------- --------------------------------------------------------------------
14      TYPE OF REPORTING PERSON*                                       

OO                                                      
----------- --------------------------------------------------------------------

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SCHEDULE 13D

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CUSIP NO.      965063100                                  PAGE 5 OF 14 PAGES    
--------------------------------                          ----------------------

----------- --------------------------------------------------------------------
1       NAME OF REPORTING PERSON                                        
   I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

Michael Zimmerman                                       
----------- --------------------------------------------------------------------
2       CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP        (a) [ ] 
                                                               (b) [X]

----------- --------------------------------------------------------------------
3       SEC USE ONLY                                                    

----------- --------------------------------------------------------------------
4       SOURCE OF FUNDS*                                                

AF                                                      
----------- --------------------------------------------------------------------
   5       CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
       ITEMS 2(d) or 2(e)                                          [ ]

----------- --------------------------------------------------------------------
6       CITIZENSHIP OR PLACE OF ORGANIZATION                            

U.S.                                                    
--------------------- --------- ------------------------------------------------
7      SOLE VOTING POWER      

0               
                      --------- ------------------------------------------------
8      SHARED VOTING POWER    
NUMBER OF                                                                     
SHARES                       70,115,161 shares (including 2,094,346 shares
BENEFICIALLY                    issuable upon exercise of warrants and          
OWNED BY                      68,020,815 shares upon conversion of notes and
  EACH                        payable as shares of interest under the notes)
REPORTING                      (see Item 5)                                   
PERSON WITH           --------- ------------------------------------------------
9      SOLE DISPOSITIVE POWER 

0               
                      --------- ------------------------------------------------
 10     SHARED DISPOSITIVE POWER

                             70,115,161 shares (including 2,094,346 shares
                      issuable upon exercise of warrants and
                              68,020,815 shares upon conversion of notes and
                              payable as shares of interest under the notes)
(see Item 5)    
----------- --------------------------------------------------------------------
11      AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON              

            70,115,161 shares (including 2,094,346 shares issuable upon exercise
      of warrants and 68,020,815 shares upon conversion of notes and
   payable as shares of interest under the notes) (see Item 5)
----------- --------------------------------------------------------------------
12      CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)                   
       EXCLUDES CERTAIN SHARES*                                    [ ]

----------- --------------------------------------------------------------------
13      PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)              

65.25% (See item 5)                                     
----------- --------------------------------------------------------------------
14      TYPE OF REPORTING PERSON*                                       

IN                                                      
----------- --------------------------------------------------------------------

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SCHEDULE 13D

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CUSIP NO.      965063100                                  PAGE 6 OF 14 PAGES    
--------------------------------                          ----------------------

     This  Schedule  13D is  being  filed by  Prentice  Capital  Management,  LP
("PRENTICE CAPITAL  MANAGEMENT"),  PWJ Lending LLC ("PWJ LENDING"),  PWJ Funding
LLC ("PWJ FUNDING") and Michael  Zimmerman ("MR.  ZIMMERMAN" and,  together with
Prentice  Capital  Management,  PWJ  Lending  and PWJ  Funding,  the  "REPORTING
PERSONS") relating to the Common Stock, par value $.001 per share (the "SHARES")
of Whitehall Jewellers, Inc., a Delaware corporation (the "COMPANY").           

     The Reporting Persons are making this single, joint filing because they may
be deemed to constitute a "group" within the meaning of Section  13(d)(3) of the
Act.  The  agreement  among the  Reporting  Persons to file  jointly (the "JOINT
FILING  AGREEMENT")  is  attached  hereto as  Exhibit A. Each  Reporting  Person
disclaims  beneficial  ownership of all shares of Common Stock, other than those
reported herein as being owned by it.                                           

     Prentice  Capital  Management  serves as investment  manager to a number of
investment  funds and  manages  investments  for  certain  entities  in  managed
accounts with respect to which it has voting and dispositive  authority over the
Shares  reported in this  Schedule 13D. PWJ Lending and PWJ Funding are entities
directly controlled by Prentice Capital Management,  its manager.  Mr. Zimmerman
is the Managing Member of (a) Prentice Management GP, LLC the general partner of
Prentice  Capital  Management  and (b)  Prentice  Capital GP,  LLC,  the general
partner  of  certain  investment  funds.  As such,  he may be deemed to  control
Prentice  Capital  Management and certain of the investment  funds and therefore
may be deemed to be the  beneficial  owner of the  securities  reported  in this
Schedule 13D. Each of Mr.  Zimmerman and Prentice Capital  Management  disclaims
beneficial ownership of all of the Shares reported in this Schedule 13D.        

ITEM 1      SECURITY AND COMPANY                                                

     This  statement on Schedule  13D relates to the Shares,  and is being filed
pursuant to Rule 13d-1 under the Act. The Company's  principal  executive office
is located at 155 North Wacker Drive, Suite 500, Chicago, Illinois 60606.       

ITEM 2      IDENTITY AND BACKGROUND                                             

(a) This statement is filed on behalf of the Reporting Persons.       

     (b) The address of the principal  business office of each Reporting  Person
is 623 Fifth Avenue, 32nd Floor, New York, New York 10022.                      

     (c)  Prentice   Capital   Management  is  a  private   investment   limited
partnership.  The principal  business of Prentice Capital Management is to serve
as investment  manager to a variety of private  investment  funds and to control
the investing and trading in securities of these private  investment  funds. The
principle  business of PWJ Lending is to make  certain  loans to the Company and
receive  warrants  from the  Company  in  connection  therewith.  The  principal
business  of PWJ  Funding  is to  purchase  secured  convertible  notes from the
Company.  The  principal  business of Mr.  Zimmerman is to act as a principal of
Prentice Capital Management.                                                    

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SCHEDULE 13D

--------------------------------                          ----------------------
CUSIP NO.      965063100                                  PAGE 7 OF 14 PAGES    
--------------------------------                          ----------------------

     (d) None of the Reporting  Persons,  nor, to the knowledge of the Reporting
Persons,  any of Prentice Capital  Management's,  PWJ Lending's or PWJ Funding's
executive officers or members has during the last five years been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).     

     (e) None of the Reporting  Persons,  nor, to the knowledge of the Reporting
Persons,  any of Prentice Capital  Management's,  PWJ Lending's or PWJ Funding's
executive officers or members has, during the last five years, been a party to a
civil proceeding of a judicial or administrative body of competent  jurisdiction
and as a result of such  proceeding  was or is subject to a judgment,  decree or
final  order  enjoining  future  violations  of,  or  prohibiting  or  mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.                                                      

     (f) Prentice Capital Management is a Delaware limited partnership.  Each of
PWJ  Lending  and PWJ  Funding  is a Delaware  limited  liability  company.  Mr.
Zimmerman is a United States citizen.                                           

ITEM 3      SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.                  

     As of the date  hereof,  the  following  persons  may be  deemed to own the
amount of Shares set forth below:                                               

PWJ Lending. 2,094,346 Shares issuable upon exercise of warrants.     

     PWJ Funding.  68,020,815  Shares  issuable  upon  conversion  of the notes,
including  interest  shares if  interest  is paid in Common  Stock for the first
three years of the note at a conversion price of $.75.                          

     Each of PWJ Lending and PWJ Funding  purchased  the Warrants and the Notes,
as applicable, with investment capital.                                         

ITEM 4.     PURPOSE OF TRANSACTION.                                             

     On October 3, 2005,  the  Company  entered  into a Bridge  Term Loan Credit
Agreement (the "CREDIT  AGREEMENT")  with PWJ Lending,  an entity  controlled by
Prentice Capital Management,  and Holtzman  Opportunity Fund, L.P.  ("HOLTZMAN")
(together with any other lenders under such Credit  Agreement from time to time,
the "LENDERS").                                                                 

     Under the Credit  Agreement,  the  Lenders  provided a term loan (the "Term
Loan") to the Company in the  aggregate  principal  amount of  $30,000,000  (the
"Commitment  Amount"),  which bears interest at a fixed rate of 18.0% per annum,
payable  monthly,  and has a stated initial  maturity date of December 31, 2005.
The  proceeds  of the Term Loan were  used,  among  other  purposes,  to repay a
portion of the  revolving  credit  loans then  outstanding  under the  Company's
Second Amended and Restated Revolving Credit and Gold Consignment Agreement (the
"Senior Credit Agreement"),  dated as of July 29, 2003 and amended on October 3,
2005 (the "Fourth  Amendment"),  to fund a segregated account that will promptly
be disbursed  into a third party                                                

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SCHEDULE 13D

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CUSIP NO.      965063100                                  PAGE 8 OF 14 PAGES    
--------------------------------                          ----------------------

escrow  account  established  for the benefit of certain of the Company's  trade
vendors and to pay fees and expenses associated with the transaction.           

     The Company's  obligations under the Credit Agreement are secured by a lien
on  substantially  all of the Company's assets which ranks junior in priority to
the liens securing the Company's  obligations under the Senior Credit Agreement.
The Credit Agreement contains a number of affirmative and restrictive  covenants
and  representations  and warranties  that  generally are consistent  with those
contained in the  Company's  Senior  Credit  Agreement (as amended by the Fourth
Amendment).                                                                     

     The Company may prepay the Term Loan at any time, provided,  however,  that
if the Term Loan is prepaid  with funds from any source  other than the proceeds
of the Notes (as defined below), then the Company will be required to pay to the
Lenders  an  exit  fee of  4.0%  of the  Commitment  Amount.  Under  the  Credit
Agreement, the Company is required to use the proceeds of a sale of the Notes to
retire the Term Loan.  While the Lenders may accelerate  the  obligations of the
Company  under the Credit  Agreement to be  immediately  due and payable upon an
Event of Default (as defined in the Credit Agreement), the rights of the Lenders
to enforce the  obligations are subject to an  intercreditor  agreement with the
holders of debt under the Senior Credit Agreement.                              

     In connection with the Credit Agreement, the Company issued 7-year warrants
(the "WARRANTS"), which are immediately exercisable at an exercise price of $.75
per share,  to the Lenders to purchase  2,792,462  Shares  (i.e.,  19.99% of the
number of Shares currently outstanding). The exercise price of the Warrants will
be reduced,  subject to certain limited exceptions,  if the Company subsequently
issues  Shares or the right to  acquire  Shares at a price of less than $.75 per
share.                                                                          

     The Credit Agreement and the Warrants are incorporated  herein by reference
to Exhibits B and E of this Schedule 13D.                                       

     Contemporaneously  with the entry into the Credit  Agreement,  the Company,
PWJ Funding and  Holtzman  entered  into a Securities  Purchase  Agreement  (the
"PURCHASE  AGREEMENT," and PWJ Funding and Holtzman are collectively referred to
herein as the "INVESTORS").                                                     

     Subject  to  certain  terms  and  conditions  set  forth  in  the  Purchase
Agreement,  the  Company  has  agreed to sell to the  Investors  $50,000,000  of
secured  convertible notes (the "NOTES").  The stated maturity of the Notes will
be three  years  after the date of  issuance  which  maturity  generally  may be
extended by the Company for up to two years.  The Investors will have the option
to extend the maturity  date in the event and for so long as an Event of Default
(as defined in the Purchase  Agreement)  shall have  occurred and be  continuing
under  the  Notes or  through  the date  that is ten  business  days  after  the
consummation  of a change of  control  of the  Company  in the event a change of
control is publicly  announced  prior to the  maturity  date.  The Notes will be
secured by the same second security interest that secures the Term Loan.        

     The  Notes  will  bear  interest  at a rate of  12.0%  per  annum,  payable
quarterly.  During the initial  three year term of the Notes,  interest  will be
paid in  Shares  at the  conversion  price                                      

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SCHEDULE 13D

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CUSIP NO.      965063100                                  PAGE 9 OF 14 PAGES    
--------------------------------                          ----------------------

(initially $0.75 per share).  The conversion  price will be reduced,  subject to
certain limited  exceptions,  if the Company  subsequently  issues Shares or the
right to acquire  Shares at a price of less than $.75 per share.  Interest  that
becomes  payable  after the initial three year term of the Notes will be paid in
cash.                                                                           

     Upon a change of control of the  Company,  the holder of a Note may require
the  Company to redeem all or any  portion of the Note for a price  equal to (i)
the  outstanding  principal  amount of the Notes,  together with any accrued and
unpaid  interest or late charges  thereon  MULTIPLIED by (ii) 125.0% (unless the
change of control is not approved by a majority of the disinterested  members of
the Company's board of directors, in which case the 125.0% will be 100.0%).     

     The  issuance  of the Notes  under the  Purchase  Agreement  is  subject to
certain conditions including (i) the approval by the stockholders of the Company
of (A) the  issuance of the Shares  pursuant  to the terms of the Notes,  (B) an
amendment to the Company's certificate of incorporation  providing for a 1-for-2
reverse stock split, and (C) the election of persons designated by the Investors
to the Company's board of directors (the "BOARD NOMINEES"),  (ii) upon election,
such  Board  Nominees  constituting  a majority  of the  members of the board of
directors,  and (iii) no  occurrence  of an event,  circumstance  or fact  which
resulted in, would  result in or could  reasonably  be expected to a result in a
extremely  detrimental  event on the  Company.  The Notes will  contain  certain
covenants,  including limitations on indebtedness and liens and a prohibition on
dividends.                                                                      

     Under the Purchase Agreement, the Company may not solicit offers, inquiries
or  proposals  or  conduct  negotiations  with any  third  parties  regarding  a
transaction that involves debt or equity  fundraising or that would otherwise be
done in lieu of the  transaction  with the  Investors,  subject to the Company's
board of directors fulfilling its fiduciary duties to the Company's stockholders
and creditors.  The Company may terminate the Purchase  Agreement  under certain
circumstances in order to accept a superior  proposal.                          

     The shares of common stock issuable (i) upon exercise of the Warrants, (ii)
upon conversion of the Notes,  and (iii) in payment of interest under the Notes,
will  represent  approximately  87.0%  of the  issued  and  outstanding  Shares,
assuming (A) no anti-dilution adjustment to the conversion price of the Notes or
the exercise  price of the Warrants and (B) no issuance of Shares or  securities
convertible,  exercisable or exchangeable for Shares prior to the closing of the
transaction, other than pursuant to the Notes and Warrants. To the extent any of
the principal amount of the Notes is converted into Shares prior to the original
3-year maturity date of the Notes,  the holder is entitled to interest Shares on
such principal amount that have not been paid prior to the date of conversion as
if such  principal  amount  continued  to accrue  interest  through the original
3-year anniversary maturity date of the Notes.                                  

     The  proceeds to be received by the Company upon the sale of the Notes will
be used to retire the Term Loan and for general working capital purposes.       

     Contemporaneously with the entry into the Credit Agreement and the Purchase
Agreement,  the Company and the  Investors  entered into a  Registration  Rights
Agreement   pursuant  to  which  the  Company  has  agreed  to  provide  certain
registration rights with respect to                                             

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SCHEDULE 13D

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CUSIP NO.      965063100                                  PAGE 10 OF 14 PAGES   
--------------------------------                          ----------------------

the Shares  issuable (i) upon exercise of the Warrants,  (ii) upon conversion of
the Notes, and (iii) in payment of interest under the Notes.                    

     Copies of the  Purchase  Agreement,  form of Note and  Registration  Rights
Agreement are  incorporated  herein by reference to Exhibits C, D, and F of this
Schedule 13D.                                                                   

     The  Company,  Prentice  Capital  Management,  and  LaSalle  Bank  National
Association,  as administrative and collateral agent for the banks listed in the
Senior  Credit  Agreement,  executed a term sheet dated as of September 29, 2005
(the "TERM SHEET") with certain trade vendors. Vendors holding over 90.0% of the
Company's  aggregate trade debt to inventory  suppliers  ("SUPPLIERS")  have now
executed  the Term  Sheet.  The Term  Sheet  provides  a  mechanism  for (i) the
Company's satisfaction of its current trade debt ("TRADE DEBT") to participating
Suppliers,  and (ii) the participating Suppliers' prompt delivery of merchandise
to the Company for the upcoming holiday season. Under the provisions of the Term
Sheet,  the  Company  will make  payments  totaling  50.0% of the Trade  Debt at
various time up to January 16,  2006. A final  payment in the amount of 50.0% of
the Trade Debt,  plus accrued  interest at 6.0% from and after January 17, 2006,
is required to be made on or about  September 30, 2007.  The  obligations to pay
the final  50.0% of the Trade Debt will be secured  by a  security  interest  in
substantially  all of the  Company's  assets  ranking  junior  to the  interests
securing the Senior Credit  Agreement,  the Bridge Loan Agreement and the Notes.
The Term Sheet is subject to and  conditioned  upon the  execution of definitive
documentation among the Parties.                                                

     A copy of the Term Sheet is  incorporated  herein by reference to Exhibit G
of this Schedule 13D.                                                           

     The  Reporting  Persons  intend to  continue to review and  evaluate  their
investment  in the Company.  Depending on the price and  availability  of funds,
subsequent  developments  affecting the Company,  the Company's business,  other
investment  and business  opportunities  available to the Reporting  Persons and
general stock market,  economic and other factors that the Reporting Persons may
deem  relevant  from time to time,  the  Reporting  Persons may  maintain  their
investment  at  current  levels  or sell all or a part of their  investment,  or
acquire  additional  Shares or other  securities  of  Company  (pursuant  to the
transaction or otherwise) at any time. Any  acquisition or disposition of shares
of Common Stock by the Reporting  Persons may be effected through open market or
privately negotiated transactions, or otherwise.                                

     Except to the extent set forth  above,  or in any other  Item  hereof,  the
Reporting  Persons do not have any present plans or proposals  that relate to or
would  result in any of the actions  required to be  described in Item 4 of this
Schedule 13D.  However,  the Reporting Persons may, at any time and from time to
time,  review or reconsider  their  position  (including the  transaction)  with
respect to the  Company,  and  formulate  (and modify)  plans or proposals  with
respect to any such matters,  subject to the terms and  conditions  set forth in
the Securities Purchase Agreement.                                              

ITEM 5.     INTEREST IN SECURITIES OF THE COMPANY.                              

     (a) The aggregate percentage of Shares reported to be beneficially owned by
the Reporting Persons is based upon 13,969,297 Shares outstanding,  which is the
total  number of Shares  outstanding  as set  forth in the  Company's  quarterly
report on Form 10-Q for the fiscal  quarter                                     

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SCHEDULE 13D

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CUSIP NO.      965063100                                  PAGE 11 OF 14 PAGES   
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ending  July 31,  2005.  None of the  foregoing  share  calculations  takes into
account the 1 for 2 reverse stock split contemplated by the Purchase Agreement. 

     As  described  in Item 3, as of the  date  of this  Schedule  13D,  (i) PWJ
Lending  may be  deemed to  beneficially  own  2,094,346  Shares  issuable  upon
exercise  of the  Warrants,  representing  approximately  1.95%  of  the  Shares
outstanding  (assuming  issuance  of the Notes and 14.99%  otherwise),  (ii) PWJ
Funding will be deemed to  beneficially  own  68,020,815  Shares  issuable  upon
conversion of the Notes,  including  interest shares if interest will be paid in
Common  Stock for the first three years of the note,  at a  conversion  price of
$.75, which shall represent  approximately 63.3% of the Shares then outstanding,
(iii) each of Prentice  Capital  Management  and Mr.  Zimmerman may be deemed to
beneficially own 70,115,161 Shares, including the 2,094,346 Shares issuable upon
exercise of the Warrants and the 68,020,815  Shares  issuable upon conversion of
the Notes, which combined represent beneficial ownership of approximately 65.25%
of the Shares. None of the foregoing share calculations takes into account the 1
for 2 reverse stock split contemplated by the Purchase Agreement.               

     The Reporting Persons are making this single, joint filing because they may
be deemed to constitute a "group" within the meaning of Section  13(d)(3) of the
Act. Each Reporting Persons expressly disclaims  beneficial  ownership of any of
the shares of Common  Stock other than those  reported  herein as being owned by
it.                                                                             

     (b) Certain of the Reporting  Persons share voting and  dispositive  powers
over the Shares beneficially owned to the extent reported herein.               

     (c) On October 3, 2005, in connection  with the execution of the Securities
Purchase  Agreement,  the  Company  (i)  issued to PWJ  Lending  the  Warrant to
purchase  2,094,346  Shares  at an  exercise  price of $.75 per  share  and (ii)
entered into the Securities  Purchase  Agreement whereby the Company would issue
to PWJ Funding notes convertible into 68,020,815  Shares,  including the payment
of  interest  shares  for the first  three  years of the term of the note,  at a
conversion  price of $.75 per share.  None of the foregoing  share  calculations
takes into account the 1 for 2 reverse stock split  contemplated by the Purchase
Agreement.                                                                      

     (d) No person (other than the Reporting Persons) is known to have the right
to receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the Shares.                                                   

(e) Not applicable.                                                   

ITEM 6.     CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH       
RESPECT TO SECURITIES OF THE COMPANY.                   

     As  described  in Item 4 above,  on October 3, 2005,  the  Company  and PWJ
Lending entered into the Credit Agreement,  Purchase Agreement, and Registration
Rights  Agreement,  copies of which are  incorporated  herein  by  reference  to
Exhibits B, C, and F of this Schedule  13D, and an  Intercreditor  Agreement,  a
copy of which is incorporated by reference to Exhibit H of this Schedule 13D.   

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SCHEDULE 13D

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CUSIP NO.      965063100                                  PAGE 12 OF 14 PAGES   
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     As  described  in Item 4 above,  on October 3, 2005,  the  Company  and PWJ
Funding,  together with Holtzman,  entered into a Securities  Purchase Agreement
and  Registration  Right Agreement,  copies of which are incorporated  herein by
reference to Exhibits C and F of this Schedule 13D.                             

     Pursuant to Rule 13d-1(k)  promulgated under the Act, the Reporting Persons
have  entered  into an  agreement  with  respect  to the  joint  filing  of this
statement, and any amendment or amendments hereto.                              

     Except as otherwise set forth herein, the Reporting Persons do not have any
contract,  arrangement,  understanding  or  relationship  with any  person  with
respect to securities of the Company.                                           

ITEM 7.     MATERIAL TO BE FILED AS EXHIBITS.                                   

1. Exhibit A Joint Filing Agreement dated October 12, 2005, signed by each of   
the Reporting Persons in order to confirm that this statement is being filed on 
behalf of each of the Reporting Persons, attached hereto as Exhibit A.          

2. Exhibit B Credit Agreement dated October 3, 2005, by and among the Company,  
PWJ Lending and Holtzman Opportunity Fund, L.P. (incorporated by reference to   
Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 6,    
2005).                                                                          

2. Exhibit C Securities Purchase Agreement dated October 3, 2005, by and among  
the Company, PWJ Lending LLC, PWJ Funding LLC and Holtzman Opportunity Fund, LP.
(incorporated by reference to Exhibit 10.3 of the Company's Current Report on   
Form 8-K filed on October 6, 2005).                                             

3.  Exhibit D Form of Note  (incorporated  by  reference  to Exhibit 10.4 to the
Company's Current Report on Form 8-K filed on October 6, 2005).                 

4. Exhibit E Form of Warrant (incorporated by reference to Exhibit 10.2 to the  
Company's Current Report on Form 8-K filed on October 6, 2005).                 

5. Exhibit F Registration Rights Agreement dated October 3, 2005, by and among  
the Company, PWJ Lending LLC, PWJ Funding LLC and Holtzman Opportunity Fund,    
L.P. (incorporated by reference to Exhibit 10.5 to the Company's Current Report 
on Form 8-K filed on October 6, 2005).                                          

6. Exhibit G Term Sheet dated September 29, 2005, among the Company, Prentice   
Capital Management, LP and certain vendors as set forth therein (incorporated by
reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on  
October 6, 2005).                                                               

7. Exhibit H  Intercreditor  and Lien  Subordination  Agreement dated October 3,
2005, by and among the Company's  senior  lenders and the lenders for the Bridge
Facility, attached hereto as Exhibit H.                                         

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SCHEDULE 13D

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CUSIP NO.      965063100                                  PAGE 13 OF 14 PAGES   
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SIGNATURES

     After reasonable inquiry and to the best of his knowledge and belief,  each
of the undersigned certifies that the information set forth in this statement is
true, complete and correct.                                                     

Dated:  October 12, 2005                                                        

PRENTICE CAPITAL MANAGEMENT, LP                                                 

By:  /s/ Michael Weiss                                                          
---------------------------------------------------                       
Name: Michael Weiss                                                   
Title: Chief Financial Officer                                        

PWJ FUNDING LLC                                                                 

By: Prentice Capital Management, LP, its Manager                                

By:  /s/ Michael Weiss                                                          
---------------------------------------------------                       
Name: Michael Weiss                                                   
Title: Chief Financial Officer                                        

PWJ LENDING LLC                                                                 

By:  /s/ Jonathan Duskin                                                        
---------------------------------------------------                       
Name:  Jonathan Duskin                                                
Title: Managing Director                                              

MICHAEL ZIMMERMAN                                                               

/s/ Michael Zimmerman                                                           
-----------------------------------                                             
Michael Zimmerman                                                               

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SCHEDULE 13D

--------------------------------                          ----------------------
CUSIP NO.      965063100                                  PAGE 14 OF 14 PAGES   
--------------------------------                          ----------------------

 EXHIBIT INDEX

1. Exhibit A Joint Filing Agreement dated October 12, 2005, signed by each of   
the Reporting Persons in order to confirm that this statement is being filed on 
behalf of each of the Reporting Persons, attached hereto as Exhibit A.          

 Exhibit B Credit Agreement dated October 3, 2005, by and among the Company,
PWJ Lending and Holtzman Opportunity Fund, L.P. (incorporated by reference to   
Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 6,    
2005).                                                                          

2. Exhibit C Securities Purchase Agreement dated October 3, 2005, by and among  
the Company, PWJ Lending LLC, PWJ Funding LLC and Holtzman Opportunity Fund, LP.
(incorporated by reference to Exhibit 10.3 to the Company's Current Report on   
Form 8-K filed on October 6, 2005).                                             

3.  Exhibit D Form of Note  (incorporated  by  reference  to Exhibit 10.4 to the
Company's Current Report on Form 8-K filed on October 6, 2005).                 

4. Exhibit E Form of Warrant (incorporated by reference to Exhibit 10.2 to the  
Company's Current Report on Form 8-K filed on October 6, 2005).                 

5. Exhibit F Registration Rights Agreement dated October 3, 2005, by and among  
the Company, PWJ Lending LLC, PWJ Funding LLC and Holtzman Opportunity Fund,    
L.P. (incorporated by reference to Exhibit 10.5 to the Company's Current Report 
on Form 8-K filed on October 6, 2005).                                          

6. Exhibit G Term Sheet dated September 29, 2005, among the Company, Prentice   
Capital Management, LP and certain vendors as set forth therein (incorporated by
reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on  
October 6, 2005).                                                               

7. Exhibit H  Intercreditor  and Lien  Subordination  Agreement dated October 3,
2005, by and among the Company's  senior  lenders and the lenders for the Bridge
Facility, attached hereto as Exhibit H.                                         

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 EXHIBIT A
JOINT FILING AGREEMENT

This will confirm the agreement by and among the undersigned that the schedule  
13D filed with the Securities and Exchange Commission on or about the date      
hereof with respect to the beneficial ownership by the undersigned of the Common
Stock, par value $0.001 per share, of Whitehall Jewellers, Inc., a Delaware     
corporation, is being filed, and all amendments thereto will be filed, on behalf
of each of the persons and entities named below, in accordance with Rule 13d-1  
under the Securities Exchange Act of 1934, as amended. This Agreement may be    
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.         

Dated:  October 12, 2005                                                        

PRENTICE CAPITAL MANAGEMENT, LP                                                 

By:  /s/ Michael Weiss                                                          
---------------------------------------------------                       
Name: Michael Weiss                                                   
Title: Chief Financial Officer                                        

PWJ FUNDING LLC                                                                 

By: Prentice Capital Management, LP, its Manager                                

By:  /s/ Michael Weiss                                                          
---------------------------------------------------                       
Name: Michael Weiss                                                   
Title: Chief Financial Officer                                        

PWJ LENDING LLC                                                                 

By:  /s/ Jonathan Duskin                                                        
---------------------------------------------------                       
Name:  Jonathan Duskin                                                
Title: Managing Director                                              

MICHAEL ZIMMERMAN                                                               

/s/ Michael Zimmerman                                                           
-----------------------------------                                             
Michael Zimmerman                                                               

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 EXHIBIT H

INTERCREDITOR AND LIEN SUBORDINATION AGREEMENT

     THIS INTERCREDITOR AND LIEN  SUBORDINATION  AGREEMENT (this "AGREEMENT") is
entered into as of October 3, 2005,  between LaSalle Bank National  Association,
as  Administrative  Agent and Collateral  Agent (the "FIRST LIEN AGENT") for the
Banks and the  Accommodation  Banks  (collectively,  and together with the First
Lien Agent and any of their  successors and assigns,  including any other lender
or lenders that at any time refinance or replace the Bank Group Debt referred to
below,  the "FIRST  LIEN  LENDERS")  pursuant  to the First Lien Debt  Documents
referred to below,  and PWJ Lending LLC, a Delaware  limited  liability  company
(together with its successors and assigns, including any other lender or lenders
that at any time  refinance  or replace the Second Lien Debt  referred to below,
individually   the  "SECOND  LIEN  LENDER"  or  collectively  the  "SECOND  LIEN
LENDERS").                                                                      

 R E C I T A L S

     A. Whitehall Jewellers,  Inc. (the "BORROWER"),  a Delaware corporation and
the First Lien  Agent and the First Lien  Lenders  are  parties to that  certain
Second  Amended and Restated  Revolving  Credit and Gold  Consignment  Agreement
dated as of July 29, 2003, as amended by that certain First  Amendment to Second
Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of
March 23, 2004,  that certain  Second  Amendment to Second  Amended and Restated
Revolving  Credit and Gold  Consignment  Agreement dated as of January 31, 2005,
that certain Third Amendment to Second Amended and Restated Revolving Credit and
Gold  Consignment  Agreement dated as of April 6, 2005, and that certain Waiver,
Consent,  and that  certain  Waiver,  Consent,  and Fourth  Amendment  to Second
Amended and Restated Revolving Credit and Gold Consignment Agreement dated as of
October 3, 2005 (collectively,  the "FIRST LIEN CREDIT AGREEMENT"),  pursuant to
which the First  Lien  Lenders  have made and may make loans and  provide  other
financial accommodations to the Borrower.                                       

     B. The  Borrower  and the Second Lien  Lenders are parties to that  certain
Bridge  Term Loan  Credit  Agreement  dated as of October 3, 2005 (as amended or
otherwise  modified from time to time, the "SECOND LIEN CREDIT  AGREEMENT",  and
together with the First Lien Credit Agreement, the "LOAN AGREEMENTS"),  pursuant
to which the Second Lien Lenders are making a term loan to the Borrower.        

     C. The First Lien  Lenders and the Second  Lien  Lenders  (individually,  a
"LENDER" and  collectively,  the "LENDERS")  desire to enter into this Agreement
(a) to confirm the relative priority of the security interests of the First Lien
Lenders, on the one hand, and the Second Lien Lenders, on the other hand, in the
assets and  properties  of the  Borrower,  and (b) to provide for certain  other
rights and interests for the respective benefit of the Lenders.                 

     NOW THEREFORE,  in consideration of the premises set forth above, the terms
and conditions contained herein, and other good and valuable consideration,  the
receipt and sufficiency of which are hereby acknowledged,  and each intending to
be bound                                                                        

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hereby, the Lenders hereby agree as follows:                                    

     1.  DEFINITIONS.  The following terms shall have the following  meanings in
this Agreement:                                                                 

     "ADDITIONAL  INTEREST" means, at the time of determination,  an increase in
applicable interest with respect to the First Lien Debt in excess of the rate of
interest  assessed  by the First Lien Agent  pursuant  to the terms of the First
Lien Debt  Documents  as of the date  hereof plus 200 basis  points,  except any
increases  in  connection  with the  imposition  of default  rate of interest in
accordance  with the terms of the First  Lien Debt  Documents  and as  expressly
contemplated  by the  definitions  of the terms  "Base  Rate" and "LIBOR  Rate",
respectively,  in each case as set forth in the First Lien Debt Documents (as in
effect on the date hereof).                                                     

     "ACCOMMODATION  FACILITY" shall mean the "Accommodation Facility as defined
in the First Lien Credit Agreement.                                             

     "AGREEMENT" means this Intercreditor and Lien Subordination  Agreement,  as
the same may be amended, restated,  supplemented or otherwise modified from time
to time.                                                                        

     "ASSET SALE REVOLVER  RESERVE"  shall have the meaning set forth in Section
2.4 (a) hereof.  Notwithstanding  the foregoing,  no Asset Sale Revolver Reserve
shall be established in connection with any non-chain wide store closing program
implemented with the assent of the First Lien Lenders.                          

     "BACK-IN-O/A"  shall mean First Lien  Principal  Obligations  exceeding the
Maximum  First Lien Debt  following a  recalculation  of Maximum First Lien Debt
when the Borrowing  Base Report  delivered to the First Lien Agent prior to such
recalculation  showed  that  First  Lien  Principal  Obligations  were less than
Maximum First Lien Debt.                                                        

     "BANK GROUP DEBT" shall mean all obligations,  liabilities and indebtedness
of every  nature of each Credit Party from time to time owed to First Lien Agent
or any First Lien Lender under the First Lien Debt Documents, including, without
limitation, the principal amount of all debts, claims and indebtedness,  accrued
and unpaid interest accruing thereon (including,  without  limitation,  interest
accruing after the  commencement  of a Proceeding,  without regard to whether or
not  such  interest  is an  allowed  claim)  and  all  fees  (including  without
limitation,  all Early Termination Fees),  costs and expenses,  whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and from time
to time hereafter owing, due or payable,  (including,  without  limitation,  all
obligations, liabilities and indebtedness arising from or in connection with any
transactions which arise out of cash management,  depository, investment, letter
of credit, hedging arrangement,  or other banking or financial services) whether
before or after the filing of a Proceeding  under the Bankruptcy Code (including
without limitation a DIP Financing)                                             

     "BANKRUPTCY  CODE"  shall  mean the  provisions  of Title 11 of the  United
States  Code,  as amended  from time to time and any  successor  statute and all
rules and                                                                       

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regulations  promulgated  thereunder or any state  insolvency,  debtor relief or
assignment for the benefit of creditor law.                                     

     "BORROWING  BASE"  means the  Borrowing  Base as  defined in the First Lien
Credit Agreement.                                                               

     "BORROWING  BASE REPORT" means the Borrowing  Base Report as defined in the
First Lien Credit Agreement (as in effect on the date hereof).                  

     "BUSINESS DAY" means any day that is not a Saturday, Sunday or other day on
which commercial banks in Chicago, Illinois or New York, New York are authorized
or required by law to remain closed.                                            

     "COLLATERAL"  shall  mean,  collectively,  the  Collateral  granted  by the
Borrower  and any and all  additional  property and  interests in property  that
secures all or any portion of the Bank Group Debt and/or the Second Lien Debt.  

     "CREDIT PARTIES" shall mean,  collectively,  the Borrower and any guarantor
of all or any portion of the Bank Group Debt and/or the Second Lien Debt.       

    "DIP FINANCING" shall have the meaning set forth in SECTION 2.2(A) hereof.

     "ENFORCEMENT  ACTION"  shall mean (a) to  foreclose  on,  collect  on, take
possession of or control of, or sell or otherwise  realize upon  (judicially  or
non-judicially)  any  Collateral  or  otherwise  enforce  rights with respect to
Collateral  under any applicable  agreement,  document or instrument  pertaining
thereto  (including,  without  limitation,  by way of  setoff,  notification  of
account debtors,  notification of depositary banks under deposit account control
agreements  or exercise of rights  under  landlord  consents),  (b) to receive a
transfer of Collateral in  satisfaction of any  indebtedness  secured thereby or
(c) to  otherwise  enforce  any  security  interest  or other  right  or  remedy
pertaining  to the  Collateral  at law,  in equity or  pursuant  to a First Lien
Security Document or Second Lien Security  Document,  as applicable  (including,
without limitation, the commencement of any applicable legal proceedings against
or with  respect  to all or any of the  Collateral  to  facilitate  the  actions
described in the immediately preceding CLAUSE (A) and CLAUSE (B), commencing any
applicable  Proceeding  and  exercising  voting  rights in respect of any equity
interests comprising Collateral).                                               

     "ENFORCEMENT  EVENT" shall mean the occurrence of: (a) the First Lien Agent
diligently pursuing in good faith an Enforcement Action on a material portion of
the Collateral; or (b) the Credit Parties undertaking a voluntary liquidation of
a material portion of the Collateral with the consent of the First Lien Agent.  

     "EXCLUDED  FIRST LIEN DEBT" shall mean,  (a) that portion of the First Lien
Principal  Obligations  (including  interest  due  thereon)  which  when made or
incurred caused the First Lien Principal Obligations to exceed the Maximum First
Lien Debt and (b) any  Additional  Interest.  Excluded First Lien Debt shall not
include any portion of the First Lien  Principal  Obligations  (and interest due
thereon) which, (x) on the date of funding by the First Lien Lenders in the case
of the Revolving  Credit Loans or the date of                                   

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issuance,  renewal or amendment in the case of the Letter of Credit  Liabilities
represented by the outstanding  Letters of Credit,  did not cause the First Lien
Principal  Obligations to exceed the Maximum First Lien Debt as calculated based
upon the most  recent  Borrowing  Base  Report  received by the First Lien Agent
prior to such funding or issuance,  renewal or amendment (even if such Borrowing
Base Report  proved to be  inaccurate  based upon,  but not limited to,  errors,
fraud or changes in  collateral  values) or (y) to the extent that the Revolving
Credit  Loans are funded or the Letter of Credit  Liabilities  are incurred at a
time  following a  Back-in-O/A  up to an amount not to exceed the sum of (i) the
Maximum First Lien Debt as calculated  based upon the most recent Borrowing Base
Report (not showing a Back-in-O/A) received by the First Lien Agent prior to the
occurrence  of a Back-in-O/A  MINUS (ii) the amount of the First Lien  Principal
Obligations  outstanding on such date,  prior to giving effect to such Revolving
Credit  Loans  funded on such date or Letter of Credit  Liabilities  incurred on
such date or (z) consist of any Early Termination Fee.                          

     "FIRST LIEN AGENT" shall mean LaSalle Bank National  Association,  as First
Lien Agent for the First Lien  Lenders,  or any other  Person  appointed  by the
holders  of the Bank  Group  Debt as agent for  purposes  of the First Lien Debt
Documents and this  Agreement;  PROVIDED  THAT,  after the  consummation  of any
Permitted  Refinancing,  the term "First  Lien Agent"  shall refer to any Person
appointed  by the  holders  of the Bank  Group  Debt at such  time as agent  for
themselves for purposes of, among other things, this Agreement.                 

     "FIRST LIEN DEBT" shall mean all Bank Group Debt other than Excluded  First
Lien Debt.                                                                      

     "FIRST LIEN DEBT DOCUMENTS"  shall mean the First Lien Credit Agreement and
all other  agreements,  documents and instruments  executed from time to time in
connection  therewith  (including  without  limitation  each First Lien Security
Document),  as the same may be  amended,  restated,  supplemented  or  otherwise
modified from time to time as permitted herein.                                 

     "FIRST LIEN DEFAULT" shall mean an "Event of Default" that arises  pursuant
to Section 13 of the First Lien Credit Agreement,  or otherwise under any of the
First Lien Debt Documents.                                                      

     "FIRST LIEN LENDER PARTIES" shall mean the First Lien Agent and each of the
First Lien Lenders.                                                             

     "FIRST  LIEN  LENDERS"  shall mean the holders of the Bank Group Debt Debt,
and shall  include,  without  limitation,  the  "Banks"  and the  "Accommodation
Banks", as such terms are defined in the First Lien Credit Agreement.           

     "FIRST LIEN PRINCIPAL OBLIGATIONS" shall mean the (a) outstanding principal
amount of the Revolving Credit Loans and the Accommodation  Facility and (b) the
Letter of Credit Liabilities.                                                   

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     "FIRST  LIEN  SECURITY  DOCUMENTS"  means  any  agreement,   document,   or
instrument executed  concurrently with the First Lien Credit Agreement or at any
time thereafter or hereafter pursuant to which one or more Credit Parties or any
other Person either (i) guarantees  payment or performance of all or any portion
of the Bank Group Debt and/or (ii) provides,  as security for all or any portion
of the Bank Group Debt, a Lien on any of its Property in favor of the First Lien
Agent (for the benefit of the First Lien Lenders), as any or all of the same may
be amended, supplemented, restated, or otherwise modified from time to time.    

   "INSURANCE RESERVE" shall have the meaning set forth in Section 7 hereof.

     "LETTER OF CREDIT  LIABILITIES"  shall mean all "Letter of Credit Fees" (as
defined in the First Lien  Credit  Agreement)  and all other  Indebtedness  that
arises in connection with the issuance,  renewal, or extension of any "Letter of
Credit" pursuant to the terms of the First Lien Credit Agreement.               

     "LIEN" shall mean, with respect to any asset, any mortgage,  lien,  pledge,
charge,  security  interest,  or  encumbrance  of any kind, or any other type of
preferential  arrangement  that has the practical  effect of creating a security
interest, in respect of such asset.                                             

     "MAXIMUM FIRST LIEN DEBT" shall mean on any date of determination  thereof,
Bank Group Debt in an amount equal to (a) the lesser of (1) $155,000,000.00 PLUS
all amounts due with respect to cash  management and bank products,  and (2) the
result  of (A) the  Borrowing  Base  (as  such  term  (including  the  component
definitions  thereof)  is defined in the First Lien Credit  Agreement  as of the
date hereof) MINUS (B) the Minimum Excess  Availability (as such term (including
the component definitions thereof) is defined in the First Lien Credit Agreement
as of the date hereof);  PLUS (C)  $5,000,000.00,  or if an Enforcement Event is
pending,  $10,000,000.00,  PLUS, (D) the Permitted Overadvance Amount, MINUS (E)
all Asset  Sale  Revolver  Reserves  and all  Insurance  Reserves,  PLUS (F) all
amounts due with respect to cash management and bank products.                  

     "MINIMUM EXCESS  AVAILABILITY"  shall mean that amount set forth in Section
10.1 of the First Lien Credit Agreement.                                        

"NEW DEBT" shall have the meaning provided in SECTION 2.11 hereof.    

     "PAID IN FULL" OR "PAYMENT IN FULL" shall mean the indefeasible  payment in
full in cash of all First Lien Debt (provided that cash  collateral in an amount
of 103% of the aggregate  undrawn amount of the letters of credit provided under
the First Lien Debt  Documents  may be  furnished in lieu of payment in cash for
such related Letter of Credit Liabilities),  the provision of cash collateral in
amounts determined by and acceptable to the First Lien Lender Parties in respect
of bona fide outstanding  contingent claims and claims for indemnification;  and
termination of all  commitments to lend or make other  financial  accommodations
under the First Lien Debt Documents.                                            

"PERMITTED OVERADVANCE AMOUNT" shall mean up to $12,000,000.00.       

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     "PERMITTED REFINANCING" shall mean any refinancing, in whole or in part, of
the Bank  Group  Debt  under the First  Lien Debt  Documents  PROVIDED  THAT the
financing  documentation  entered into by the Credit Parties in connection  with
such Permitted  Refinancing  constitutes  Permitted  Refinancing First Lien Debt
Documents.                                                                      

     "PERMITTED  REFINANCING FIRST LIEN DEBT DOCUMENTS" shall mean any financing
documentation which replaces the First Lien Debt Documents and pursuant to which
the First Lien Debt under the First Lien Debt  Documents is refinanced  (whether
together with or separate from a refinancing  of other Bank Group Debt) in whole
or  in  part,  as  such  financing  documentation  may  be  amended,   restated,
supplemented,  or otherwise  modified from time to time in compliance  with this
Agreement,  but specifically  excluding any such financing  documentation to the
extent that it contains, either initially or by amendment or other modification,
any material terms,  conditions,  covenants,  or defaults other than those which
(a)  exist at the time of the  Permitted  Refinancing  in the  First  Lien  Debt
Documents  or (b) could be  included  in the First  Lien  Debt  Documents  by an
amendment or other  modification  that would not be  prohibited  by the terms of
this Agreement.                                                                 

     "PERSON"  shall mean any natural  person,  corporation,  general or limited
partnership,  limited liability company, firm, trust,  association,  government,
governmental agency, or other entity, whether acting in an individual, fiduciary
or other capacity.                                                              

     "PROCEEDING"   shall  mean  any   voluntary  or   involuntary   insolvency,
bankruptcy,    receivership,     custodianship,     liquidation,    dissolution,
reorganization,  assignment  for the  benefit  of  creditors,  appointment  of a
custodian,  receiver, trustee, or other officer with similar powers or any other
proceeding for the liquidation, dissolution or other winding up of a Person.    

     "PROPERTY" shall mean, with respect to any Person, all assets, property and
interests in property of such Person,  whether real, personal or mixed,  whether
now owned or existing or hereafter acquired or arising and wheresoever located. 

     "PURCHASE  OPTION  NOTICE" shall have the meaning set forth in SECTION 8(A)
hereof.                                                                         

     "REVOLVING CREDIT LOANS" shall mean the "Revolving Credit Loans" as defined
in the First Lien Credit Agreement.                                             

     "SALE  EVENT"  shall mean the date upon which both (i) a First Lien Default
has  occurred and is  continuing  and (ii) First Lien Agent or Second Lien Agent
has  retained,  or has caused or  directed a Credit  Party to retain,  or Credit
Party has with the  consent of the First Lien  Agent has  retained,  a broker or
investment  banker or  liquidating  agent or agent to sell all or a  substantial
portion of a Credit Party's business or operations and/or the Collateral. A Sale
Event shall be deemed  terminated when First Lien Agent or Second Lien Agent who
has commenced  such Sale Event has so advised the Borrower in writing,  has been
consummated.                                                                    

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     "SECOND LIEN  ACTIONABLE  DEFAULT" shall mean,  collectively  to the extent
that such events have not been cured or waived,  (a) an "Event of Default"  that
arises pursuant to the incurrence of  indebtedness  that is pari passu or senior
in right of payment to the Second Lien Debt in  contravention  of Section 9.1 or
9.2 of the Second Lien Credit  Agreement (as in effect on the date hereof),  (b)
the First Lien  Principal  Obligations  exceeds the Maximum First Lien Debt, (c)
after the occurrence of a First Lien Default (which shall not have been cured or
waived) if at such time the First Lien Agent shall be in breach of any  material
term or  provision of this  Agreement  and such breach shall not have been cured
within five (5) Business  Days of the date of receipt of written  notice of such
breach from the Second Lien Agent, (d) the Borrower shall have failed to deliver
the  Borrowing  Base Report  required  pursuant to Section 8.4 of the First Lien
Credit  Agreement  (as in effect on the date  hereof) for three (3)  consecutive
Business Days, (e) the occurrence of a Second Lien Payment Block Event,  and (f)
the  Borrower  shall fail to pay current pay interest on the Second Lien Debt as
and when due in accordance with the Second Lien Debt Documents.                 

     "SECOND  LIEN  AGENT"  shall  mean PWJ  Lending  LLC,  a  Delaware  limited
liability  company,  as Second  Lien Agent for the Second Lien  Lenders,  or any
other  Person  appointed  by the  holders of the  Second  Lien Debt as agent for
purposes of the Second Lien Debt Documents and this Agreement.                  

     "SECOND LIEN DEBT" shall mean all obligations, liabilities and indebtedness
of every nature of each Credit Party from time to time owed to Second Lien Agent
or any Second  Lien  Lender  under the Second  Lien Debt  Documents,  including,
without limitation,  the principal amount of all debts, claims and indebtedness,
accrued and unpaid interest,  including capitalized  interest,  accruing thereon
(including,  without  limitation,  interest accruing after the commencement of a
Proceeding,  without  regard to whether or not such interest is an allowed claim
and all fees  (including  without  limitation the Exit Fee under the Second Lien
Debt  Documents),  costs  and  expenses,  whether  primary,  secondary,  direct,
contingent, fixed or otherwise,  heretofore, now and from time to time hereafter
owing, due or payable,  whether before or after the filing of a Proceeding under
the Bankruptcy Code.                                                            

     "SECOND LIEN DEBT DOCUMENTS"  shall mean the Second Lien Credit  Agreement,
the Second Lien  Guaranty,  any other  guaranty  with respect to the Second Lien
Debt,  each  other  Second  Lien  Security  Document  and all  other  documents,
agreements and instruments  now existing or hereinafter  entered into evidencing
or pertaining to all or any portion of the Second Lien Debt.                    

     "SECOND LIEN DEFAULT  NOTICE" shall mean a written  notice from Second Lien
Agent to First Lien Agent  pursuant to which First Lien Agent is notified of the
occurrence of a Second Lien  Actionable  Default,  which notice  incorporates  a
reasonably  detailed  description  of such  Second Lien  Actionable  Default and
states that such notice is a "Second Lien  Default  Notice" for purposes of this
Agreement.                                                                      

     "SECOND LIEN LENDER  PARTIES"  shall mean the Second Lien Agent and each of
the Second Lien Lenders.                                                        

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     "SECOND  LIEN  LENDERS"  shall  mean  holders  of  the  Second  Lien  Debt.

     "SECOND LIEN PAYMENT BLOCK EVENT" shall mean the occurrence of the Maturity
Date (as defined in the Second Lien Credit Agreement).                          

     "SECOND LIEN  SECURITY  DOCUMENTS"  shall mean any  agreement,  document or
instrument executed concurrently with the Second Lien Credit Agreement or at any
time hereafter  pursuant to which one or more Credit Parties or any other Person
either (i) guarantees payment or performance of all or any portion of the Second
Lien Debt and/or (ii) provides, as security for all or any portion of the Second
Lien Debt, a Lien on any of its Property in favor of the Second Lien Agent,  for
the benefit of the Second Lien Lenders and itself, as any or all of the same may
be amended, supplemented, restated or otherwise modified from time to time.     

2. LIEN SUBORDINATION.                                                

          2.1.  SUBORDINATION  OF  LIENS  SECURING  SECOND  LIEN  DEBT TO  LIENS
     SECURING FIRST LIEN DEBT.  Each Credit Party,  each First Lien Lender Party
     and each  Second  Lien  Lender  Party  hereby  acknowledge  and agree that,
     notwithstanding  the time,  date,  manner or order of grant,  attachment or
     perfection of the Liens on all or any part of the Collateral granted to the
     First  Lien  Agent or the Second  Lien  Agent,  as the case may be, (i) all
     Liens  granted on all or any part of the  Collateral  pursuant to the First
     Lien  Security  Documents  to the First Lien  Agent for the  benefit of the
     First Lien Lender Parties shall be a "first"  prior,  senior and continuing
     Lien on all such  Collateral to the extent of the First Lien Debt, and (ii)
     all Liens  granted  on all or any part of the  Collateral  pursuant  to the
     Second Lien Security Documents to any Second Lien Lender Party,  regardless
     of when or how  acquired,  whether  by grant,  statute,  operation  of law,
     subrogation  or  otherwise,  shall be in all  respects and for all purposes
     subject to,  junior to and  subordinate  to all Liens on all or any part of
     the  Collateral in favor of any First Lien Lender  Party,  to the extent of
     the  First  Lien  Debt,  on the  terms  and  conditions  set  forth in this
Agreement.                                                            

          2.2.  LIQUIDATION,  DISSOLUTION,  BANKRUPTCY.  The  provisions of this
     Agreement will be applicable both before and after the  commencement of any
     Proceeding  involving  any Credit  Party and all  references  herein to any
     Credit  Party shall be deemed to apply to the trustee for such Credit Party
     and such Credit Party as a debtor-in-possession. The relative rights of the
     First  Lien  Parties  and the  Second  Lien  Parties  as set  forth in this
     Agreement in or to any  distributions  in respect of the  Collateral  shall
     continue  after the filing of any  Proceeding on the same basis as prior to
     the date of such  filing.  In the  event of any  Proceeding  involving  any
Credit Party:                                                         

               (a) Except as otherwise specifically permitted in this Agreement,
          until the First  Lien Debt  shall  have been Paid in Full,  the Second
          Lien Agent and each Second Lien Lender  shall not assert,  without the
          prior  written  consent of the First Lien  Agent,  any claim,  motion,

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          objection or argument in respect of all or any part of the  Collateral
          in connection with such  Proceeding  which could otherwise be asserted
          or raised in  connection  with such  Proceeding  by such  Second  Lien
          Lender  Party as a  secured  creditor  of any  Credit  Party.  Without
          limiting the generality of the foregoing,  the Second Lien Agent,  for
          itself and each  Second  Lien  Lender,  agrees  that they will (i) not
          object to or oppose (or support any other  Person in  objecting  to or
          opposing)  any  sale or  other  disposition  of all or any part of the
          Collateral  free and clear of Liens or other claims of the Second Lien
          Agent and each Second Lien Lender under Section 363 of the  Bankruptcy
          Code, under any plan of  reorganization  or liquidation,  or any other
          provision of the  Bankruptcy  Code or any other law applicable to such
          Proceeding if the requisite  number of First Lien Lender Parties under
          the  First  Lien  Debt  Documents  have  consented  to  such  sale  or
          disposition,  (ii) subject to Section 2.11 hereof,  not  challenge (or
          support any other Person in challenging) any use of cash collateral or
          debtor-in-possession  financing  consented to or provided by any First
          Lien Lender  Parties  (whether  consented  to or provided by the First
          Lien Lender Parties, a "DIP FINANCING") it being agreed by each Second
          Lien Lender Party that such DIP  Financing  shall be on such terms and
          conditions and in such amounts as such First Lien Lender  Parties,  in
          their sole discretion,  may decide and, in connection  therewith,  any
          Credit Party may grant to such participating First Lien Lender Parties
          (or  any  agent  or  representative  thereof)  Liens  upon  all of the
          Property of such Credit Party, which Liens (A) shall secure payment of
          all Bank Group Debt  whether  such Bank Group Debt arose  prior to the
          commencement  of such  Proceeding  or at any time  thereafter  and all
          other  financing  provided by any First Lien Lender Parties during the
          Proceeding  (provided  that, to the extent that such Liens secure Bank
          Group Debt which arose prior to the  commencement of such  Proceeding,
          such Liens  shall also  secure  the Second  Lien Debt,  subject to the
          conditions  and terms set forth  herein)  and (B) shall be superior in
          priority  to the liens and  security  interests,  if any,  in favor of
          Second Lien Agent for the benefit of the Second Lien Lender Parties on
          the Property of such Credit Party on the same terms and  conditions as
          provided  herein;  PROVIDED,  HOWEVER that in connection with any such
          use of cash  collateral  or DIP  Financing,  the  Second  Lien  Lender
          Parties shall have received as adequate  protection of their interests
          a replacement Lien in post-petition assets of the Credit Parties which
          shall be junior and subordinate to all Liens granted  pursuant to such
          consent  to  use  cash  collateral  or DIP  Financing  with  the  same
          priorities  afforded  the  Liens  granted  to the  Second  Lien  Agent
          pursuant to this Agreement;  (iii) not to assert (or support any other
          Person in asserting) any right they may have to "adequate  protection"
          of its  interest  in any  Collateral  in any  Proceeding  beyond  that
          accorded in clause (ii) hereof, (iv) turn over to the First Lien Agent
          for  the pro  rata  benefit  of the  First  Lien  Lender  Parties  any
          "adequate  protection" of their  interest in any Collateral  that they
receive in any Proceeding for  application to the First     

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          Lien Debt owed to the First Lien Lender  Parties,  and (v) not seek to
          have the automatic stay of Section 362 of the  Bankruptcy  Code lifted
          or modified  with respect to any  Collateral,  to appoint a trustee or
          examiner  under Section 1104 of the  Bankruptcy  Code or to convert or
          dismiss (or support any other Person in converting or dismissing) such
          Proceeding  under  Section 1112 of the  Bankruptcy  Code, in each case
          without the prior written  consent of the First Lien Agent;  PROVIDED,
          THAT, in the case of this CLAUSE (V), if the First Lien Lender Parties
          seek such aforementioned relief, the Second Lien Lender Parties hereby
          irrevocably  consents  thereto  and shall  join in any such  motion or
          application  seeking such relief if requested by the First Lien Agent.
          The Second Lien Agent,  for each Second Lien Lender Party,  waives any
          claim they may now or  hereafter  have  arising out of the election of
          the First Lien Lender Parties, in any Proceeding  instituted under the
          Bankruptcy  Code,  of  the  application  of  Section  1111(b)  of  the
          Bankruptcy   Code.  The  Second  Lien  Agent  shall  be  permitted  to
          participate on any  creditor's  committee;  provided,  that the Second
          Lien  Agent  or any  other  Person  participating  on such  creditor's
          committee  shall not directly or indirectly take any action or vote in
          any  manner  that  would  be  in  violation   of  this   Agreement  or
          inconsistent  with or result in a breach of this Agreement,  including
without limitation, the provisions of Section 2.7.          

               (b) Except as otherwise  expressly  set forth  herein,  the First
          Lien Agent shall have the exclusive  right to file proofs of claim and
          other  pleadings  and motions  with respect to any  Collateral  in any
          Proceeding.  Subject to the  limitations  set forth in this Agreement,
          the First Lien Agent may (but  shall  have no  obligation  or duty to)
          file appropriate  proofs of claim and other pleadings and motions with
          respect to any Second Lien Debt in any Proceeding if and to the extent
          a proper  proof of claim with respect to such Second Lien Debt has not
          been  filed by the  Second  Lien Agent for and on behalf of the Second
          Lien Lender  Parties in the form required in such  Proceeding at least
          ten (10) days prior to the expiration of the time for filing  thereof.
          In  furtherance  of the  foregoing,  the Second Lien  Agent,  for each
          Second  Lien Lender  Party,  hereby  appoints  the First Lien Agent as
          their attorney-in-fact,  with full authority in the place and stead of
          such Second Lien Lender  Party and full power of  substitution  and in
          the name of such Second Lien Lender  Party or  otherwise,  to execute,
          file and deliver any document or instrument  that the First Lien Agent
          is required or permitted  to file or deliver  pursuant to this SECTION
          2.2(B),   such   appointment   being  coupled  with  an  interest  and
irrevocable.                                                

               (c) The Second Lien Agent shall  execute and deliver to the First
          Lien  Agent  all such  agreements,  instruments  and  other  documents
          confirming  the  above  authorizations  and all such  proofs of claim,
          assignments  of claim and other  instruments  and  documentation,  and
          shall take all such other action as may be reasonably requested by the
          First Lien Agent to  enforce  such  claims and carry out the intent of
this SECTION 2.2.                                           

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               (d) The First Lien Debt shall continue to be treated as the First
          Lien Debt is to be treated under this  Agreement and the provisions of
          this  Agreement  shall  continue  to govern  the  relative  rights and
          priorities of the First Lien Lender Parties and the Second Lien Lender
          Parties  even if all or  part  of the  First  Lien  Debt or the  Liens
          securing same are  subordinated,  set aside,  avoided,  invalidated or
disallowed in connection with any Proceeding or otherwise.  

               (e) To the  extent  that any First  Lien  Lender  Party  receives
          payments  (whether in cash,  Property or securities) on the Bank Group
          Debt or proceeds of  Collateral  which are  subsequently  invalidated,
          declared to be fraudulent or  preferential,  set aside and/or required
          to be repaid to a  trustee,  receiver  or any  other  party  under any
          bankruptcy law, state or federal law,  common law or equitable  cause,
          then,  to the extent of such  payment or proceeds  received,  the Bank
          Group Debt, or part thereof, intended to be satisfied shall be revived
          and continue in full force and effect as if such  payments or proceeds
had not been received by such First Lien Lender Party.      

               (f) The  Second  Lien  Agent  shall be  entitled  to (i) file any
          necessary  responsive  or  defensive  pleadings in  opposition  to any
          motion,  claim,  adversary  proceeding  or other  pleading made by any
          Person  objecting  to or  otherwise  seeking the  disallowance  of the
          claims of the Second  Lien Agent,  including  without  limitation  any
          claims  secured by the  Collateral,  if any, (ii) file any  pleadings,
          objections,  motions or  agreements  which assert  rights or interests
          available to unsecured  creditors of the Credit Parties  arising under
          either the Bankruptcy Code or applicable non-bankruptcy law, and (iii)
          file any proof of claim and other  filings and make any  arguments and
          motions that are, in each case, in  accordance  with the terms of this
          Agreement and necessary to preserve their rights,  in accordance  with
          the terms of this Agreement,  with respect to the Second Lien Debt and
          the  Collateral;  PROVIDED,  THAT  notice  of  intent to take any such
          action shall be given by the Second Lien Agent to the First Lien Agent
          not less than the earlier of (x) five (5)  Business  Days prior to the
          taking  of such  action  and (y) five (5)  Business  Days  before  the
          deadline  under  any  applicable  law  or  rule  or any  order  of any
          applicable  court in which to file any such claim,  filing,  pleading,
          objection,  motion  or  agreement,  as the case may be;  and  provided
          further  that nothing  contained  in this Section  2.2(f) shall limit,
          modify,  affect,  or impair the Second Lien Agent's  obligation not to
          directly or indirectly  take any action in any manner that would be in
          violation of this Agreement or inconsistent with or result in a breach
          of this Agreement,  including  without  limitation,  the provisions of
Section 2.7.                                                

2.3. LIEN ENFORCEMENT PROVISIONS.                           

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          The First Lien Lender Parties shall have the exclusive right, prior to
     the Payment in Full of all First Lien Debt,  to direct the  enforcement  by
     the Second Lien Lender  Parties of all of their  rights and  remedies  with
     respect to all or any part of the Second Lien Debt or the  Collateral,  (i)
     by judicial  proceedings for the enforcement of the Liens created under the
     Second Lien Security  Documents,  (ii) by the sale of the Collateral or any
     part thereof, (iii) otherwise by the exercise of the power of entry or sale
     conferred  by the Second Lien Debt  Documents,  or (iv) by taking any other
     Enforcement Action against, or exercising any other rights or remedies with
     respect  to,  all or any part of the  Collateral;  PROVIDED,  THAT upon the
     Payment in Full of all First Lien Debt,  the Second Lien Agent may exercise
     the rights or remedies specified in this SECTION 2.3 and in the Second Lien
     Security  Documents.  Except as the same  pertains to the  Collateral or as
     otherwise expressly prohibited by this Agreement, the Second Lien Agent may
     exercise  any right or  power,  enforce  any  remedy,  give any  direction,
     consent  or waiver or make any  determination,  under or in  respect of any
     provision of any Second Lien Debt Document.  Notwithstanding the foregoing,
     subject at all times to the  provisions  of SECTION  2.1 and SECTION 2.9 of
     this Agreement, if a Second Lien Actionable Default shall have occurred and
     be  continuing,  the Second  Lien Lender  Parties may take any  Enforcement
     Action under the Second Lien Debt Documents, including, without limitation,
     any  Enforcement  Action with respect to all or any part of the Collateral,
     after the passage of thirty (30) days from the date of delivery of a Second
     Lien Default Notice to the First Lien Agent (to the extent that such Second
     Lien  Actionable  Default  described  therein  shall not have been cured or
     waived within such  period),  PROVIDED  that no  Enforcement  Action may be
     taken by any Second Lien Lender Party at any time if an  Enforcement  Event
     has occurred and is continuing, PROVIDED FURTHER, THAT such ninety (90) day
     period  shall be tolled for any period  during  which the First Lien Lender
     Parties and Second Lien Lender Parties are prevented by applicable law from
     exercising their default and enforcement rights and remedies against all or
     any part of the Collateral;  and PROVIDED,  FURTHER,  THAT if following the
     acceleration  of the First  Lien Debt by any First Lien  Lender  Party such
     acceleration  is  rescinded  (whether or not any other  existing  "Event of
     Default" (as such term is defined in the First Lien Credit  Agreement)  has
     been cured or waived),  then all  Enforcement  Actions  taken by the Second
     Lien Lender Parties shall likewise be rescinded if such Enforcement  Action
     by the Second Line Lender  Parties is based solely on the  acceleration  of
the First Lien Debt.                                                  

          2.4.  RELEASE  OF  LIENS.  In the  event  that  all or any part of the
     Collateral  is sold,  transferred  or  otherwise  disposed of by any Credit
     Party  or a  trustee  of any  Credit  Party or the  Collateral  (including,
     without  limitation,  under  any plan of  liquidation  or  reorganization),
     acting with the consent of the First Lien Lender  Parties,  or by the First
     Lien Lender  Parties,  in each case pursuant to the terms of the First Lien
Debt Documents:                                                       

               (a) prior to the  commencement of a Proceeding  (whether or not a
          Default or Event of Default  (each as defined in the First Lien Credit
          Agreement) has occurred),  in any sale or other  disposition of assets
          so long as the proceeds (net of transaction  costs,  including without
          limitation any fees paid to any broker or investment  banker) received
          by the  Credit  Parties  from any such  sale or other  disposition  of
assets  (other than sales                                   

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          or  dispositions  in the  ordinary  course  of  business)  are used to
          permanently reduce the amount that the Credit Parties are permitted to
          borrow under the First Lien Credit  Agreement,  as  determined  by the
          First Lien  Lender  Parties,  through  the  establishment  of reserves
          against the  Borrowing  Base in an amount equal to the total  proceeds
          (net of transaction costs,  including without limitation any fees paid
          to any broker or  investment  banker)  received by the Credit  Parties
          minus the amount by which the  Borrowing  Base was reduced (if any) in
          connection  with  such  sale or other  disposition  (the  "ASSET  SALE
REVOLVER RESERVE"); or                                      

               (b) following  the  commencement  of a Proceeding,  in connection
with:                                                       

                    (i) the entry of an order by a bankruptcy court  authorizing
               the sale,  transfer or other  disposition of all or substantially
all of the Collateral of any Credit Party; or     

     (ii) the occurrence of any Enforcement Event;

          then, in any such case,  concurrently upon the release of any Liens of
          the First Lien Lender  Parties  with respect to such  Collateral,  the
          Liens of the Second Lien Lender  Parties on such  Collateral  shall be
          automatically released and terminated, without any action by or notice
          to the Second Lien Lender Parties  required  hereunder,  and the First
          Lien Agent shall be  authorized  by the Second Lien Agent on behalf of
          the Second Lien Lender Parties (and is hereby  authorized and directed
          by the Second Lien Agent on behalf of the Second Lien Lender  Parties)
          to  file  UCC  termination   statements  or  any  other  documents  or
          instruments  to  terminate  the  Second  Lien  Agent's  Lien  on  such
          Collateral to evidence such  automatic  release and  termination.  The
          Second Lien Agent agrees that no further act or documentation shall be
          necessary to evidence the release and  termination  by the Second Lien
          Agent of such Lien,  PROVIDED  THAT,  such  Second  Lien  Agent  shall
          promptly execute and deliver to the First Lien Agent such releases and
          terminations  as the First  Lien  Agent  shall  reasonably  request to
          evidence such automatic release and termination of the Liens of Second
          Lien Agent on such  Collateral.  In furtherance of the foregoing,  the
          Second Lien Agent, on behalf of the Second Lien Lender Parties, hereby
          irrevocably  appoints  First Lien Agent their  attorney-in-fact,  with
          full authority in the place and stead of such Second Lien Lender Party
          and in the name of such  Second  Lien Lender  Party or  otherwise,  to
          execute and deliver any document or instrument  which such Second Lien
         Lender Party may be required to deliver pursuant to this SECTION 2.4.

          2.5.  FIRST LIEN  AGENT'S  ACTIONS  WITH  RESPECT  TO THE  COLLATERAL.
     Subject to Section  2.2(f) as the following may relate to a Proceeding,  in
     furtherance and not in limitation of the other terms and provisions of this
     Agreement,  each of the Second Lien Lender  Parties agrees that (i) it will
     not take any action (or support any other Person in taking any action) that
     would hinder,  delay, limit or prohibit any exercise of rights and remedies
     by any of the First Lien Lender Parties under or pursuant to the First Lien
Debt Documents to the                                                 

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     extent permitted thereunder and hereunder,  including,  without limitation,
     any collection, sale, lease, exchange, transfer or other disposition of the
     Collateral,  whether by  foreclosure  or  otherwise,  or that would  limit,
     invalidate,  avoid or set aside any Lien or First Lien Security Document or
     subordinate  the priority of the First Lien Debt to the Second Lien Debt or
     grant the Liens  securing  the Second Lien Debt equal  ranking to the Liens
     securing  the First Lien Debt and (ii) it hereby  waives any and all rights
     it or the  other  Second  Lien  Lender  Parties  may have as a junior  lien
     creditor or otherwise (whether arising under the Uniform Commercial Code or
     under any other law) to object to the manner in which the First Lien Lender
     Parties seek to enforce or collect the Bank Group Debt or the Liens granted
     in any of the  Collateral,  regardless  of whether any action or failure to
     act by or on behalf of the First  Lien  Lender  Parties  is  adverse to the
     interests  of any  Second  Lien  Lender  Party.  Furthermore,  and  without
     limiting any other  provision of any First Lien Debt  Document,  so long as
     the  Payment in Full of all First Lien Debt has not  occurred,  in no event
     shall any Second Lien Lender  Party (i)  contest,  protest or object to any
     Enforcement  Event,  any Sale  Event,  or any other  action  brought  by or
     consented  to by any First Lien  Lender  Party or any other  exercise  by a
     First  Lien  Lender  Party  of any  rights  and  remedies  relating  to the
     Collateral  under the First Lien  Security  Documents  or otherwise or (ii)
     object to the forbearance by the First Lien Lender Parties from bringing or
     pursuing any Enforcement Action, any Sale Event, or any other action or any
     other  exercise of any rights or remedies  relating to the  Collateral,  in
     each case so long as such action or inaction  does not  constitute a breach
     of the  obligations  of the First Lien Lender  Parties under this Agreement
     and the respective interests of such Second Lien Lender Party attach to the
     proceeds(net of transaction  costs,  including without  limitation any fees
     paid to any broker or investment  banker)  thereof  subject to the relative
     priorities set forth in this Agreement.  In exercising  rights and remedies
     with respect to the  Collateral,  the First Lien Lender Parties may enforce
     the  provisions  of the First Lien Debt  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 Collateral  upon  foreclosure,  to incur  expenses in connection
     with such sale or disposition,  and to exercise all the rights and remedies
     of a secured  creditor under the Uniform  Commercial Code of any applicable
     jurisdiction  or any other  applicable law and of a secured  creditor under
     the Bankruptcy Code or any  jurisdiction  pursuant to which a Proceeding is
then being conducted.                                                 

          2.6. TURNOVER PROVISIONS. In the event that any proceeds of Collateral
     are received by any Second Lien Lender Party at a time when such payment is
     not expressly  permitted by the terms of this Agreement,  any such proceeds
     shall not be  commingled  with any of the assets of any Second  Lien Lender
     Party,  shall be  received  and held in trust for the  benefit of the First
     Lien  Lender  Parties  and shall be  promptly  paid over to the First  Lien
     Agent,  for the benefit of the First Lien Lender  Parties,  or delivered in
     the same form as received, with any necessary endorsements or as a court of
     competent  jurisdiction  may otherwise  direct,  to the extent necessary to
make Payment in Full of all First Lien Debt in  accordance            

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     with its terms.  In the event that any Second  Lien  Lender  Party fails to
     provide any  endorsement,  as  contemplated  by the  immediately  preceding
     sentence,  the First Lien Agent,  or any of its officers or  employees,  is
     hereby irrevocably authorized to make the same (which authorization,  being
     coupled with an interest, is irrevocable). After the Payment in Full of all
     First Lien Debt, any remaining proceeds of Collateral shall be delivered to
     the Second Lien Agent for application to the Second Lien Debt in accordance
     with the Second Lien Debt Documents,  except as otherwise required pursuant
to applicable law.                                                    

          2.7.  AGREEMENT NOT TO CONTEST.  Each of the First Lien Lender Parties
     and each of the Second Lien Lender Parties  hereby agrees not to,  directly
     or indirectly,  whether in connection with a Proceeding or otherwise,  take
     any  action  or  vote  in  any  way  that  would  be in  violation  of,  or
     inconsistent with, or result in a breach of, this Agreement or challenge or
     contest  (i)  the  payment  terms,   validity,   perfection,   priority  or
     enforceability  of any Bank Group Debt or Second Lien Debt or the Lien held
     by the First Lien Agent,  for the benefit of the First Lien Lender Parties,
     or the Lien held by the Second  Lien  Agent,  for the benefit of the Second
     Lien Lender  Parties,  to secure the payment,  performance or observance of
     all or any part of the Bank Group Debt or the  Second  Lien Debt,  (ii) the
     rights of the First Lien Lender  Parties or the Second Lien Lender  Parties
     set  forth in any of the  First  Lien Debt  Documents  or Second  Lien Debt
     Documents,  respectively,  with  respect  to any such  Lien,  or (iii)  the
     validity or  enforceability  of any of the First Lien Debt Documents or any
     of the Second Lien Debt  Documents;  PROVIDED  THAT nothing in this SECTION
     2.7 is  intended  or shall be deemed or  construed  to limit in any way the
     ability of the parties hereto to enforce all of the terms and provisions of
this Agreement.                                                       

 2.8. SALE, TRANSFER OR OTHER DISPOSITION OF SECOND LIEN DEBT.

               (a) No First Lien Lender  Party or Second Lien Lender Party shall
          sell,  assign,  pledge,  dispose of or  otherwise  transfer all or any
          portion  of the Bank Group  Debt or any First  Lien Debt  Document  or
          Second Lien Debt or any Second Lien Debt Document, as the case may be:
          (i) without  giving prior  written  notice of such action to the First
          Lien Agent or the Second Lien Agent,  respectively,  and (ii)  unless,
          concurrently with the consummation of any such action,  the transferee
thereof shall agree to be bound by this Agreement.          

               (b)  Notwithstanding  the failure of any transferee to execute or
          deliver an agreement  substantially  identical to this  Agreement  (or
          joinder to this to this Agreement),  the subordination effected hereby
          shall  survive  any sale,  assignment,  pledge,  disposition  or other
          transfer of all or any portion of the Second Lien Debt,  and the terms
          of this Agreement  shall be binding upon the successors and assigns of
   any Second Lien Lender Party, as provided in SECTION 13 hereof.

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               (c) The Credit  Parties shall not refinance the Second Lien Debt,
          or otherwise  prepay the Second Lien Debt in violation of the terms of
          the First Lien Credit  Agreement,  and the Second Lien Lender  Parties
          shall  not  accept  any such  prepayment,  unless  (i) the  terms  and
          conditions of such refinancing  documentation  are acceptable to First
          Lien Agent and (ii) the lenders thereunder and the Credit Parties have
          executed and delivered to First Lien Agent an agreement  substantially
similar to this Agreement.                                  

          2.9.  APPLICATION  OF PROCEEDS FROM SALE OR OTHER  DISPOSITION  OF THE
COLLATERAL.                                                           

               (a) Prior to a First Lien Default,  to the extent  required under
          the First Lien Documents,  all proceeds of dispositions of Collateral,
          insurance   proceeds  in   connection   with  a  casualty   event  and
          condemnation awards with respect to any Collateral shall be applied to
the Bank Group Debt.                                        

               (b) After the  occurrence  and during the  continuance of a First
          Lien Default and/or a Second Lien Payment Block Event, all proceeds of
          Collateral collected by any First Lien Lender Party or any Second Lien
          Lender  Party,  shall,  in each case,  be applied as  follows:  FIRST,
          Payment  in Full of the First Lien  Debt;  SECOND,  payment in full in
          cash of the Second Lien Debt;  and THIRD,  to any Excluded  First Lien
          Debt;  provided that,  notwithstanding the occurrence of a Second Lien
          Payment  Block Event,  proceeds of the Secured  Convertible  Notes (as
          defined in the Second  Lien Credit  Agreement)  or proceeds of another
          equity  transaction,  may be used to repay the Second  Lien Debt.  Any
          balance  remaining  shall be  delivered  to the  Credit  Parties or to
          whomever  may be  lawfully  entitled to receive  such  balance or as a
          court  of  competent   jurisdiction  may  direct.  Each  Credit  Party
          acknowledges the foregoing application of proceeds and agrees to same.
          In carrying out the foregoing,  (a) amounts  received shall be applied
          in  the  numerical   order  provided  until  exhausted  prior  to  the
          application  to the  next  succeeding  category  and  (b)  each of the
          Persons entitled to receive a payment in any particular category shall
          receive an amount equal to its pro rata share of amounts  available to
be applied pursuant thereto.                                

          2.10.  LEGENDS.  Until the termination of this Agreement in accordance
     with  SECTION 20 hereof,  each Second  Lien  Lender  Party will cause to be
     clearly,  conspicuously and prominently  inserted in the Second Lien Credit
     Agreement  and any other  Second Lien Debt  Document  that grants a Lien or
     evidences  the Second Lien Debt,  as well as any  renewals or  replacements
thereof, the following legend in substantially the form hereof:       

          "The liens and security  interests securing the indebtedness and other
 obligations  incurred or arising under or evidenced by this  instrument

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     and the rights and obligations  evidenced hereby with respect to such liens
     are  subordinate  in the manner and to the extent set forth in that certain
     Intercreditor and Lien Subordination  Agreement (as the same may be amended
     or otherwise modified from time to time pursuant to the terms thereof,  the
     "SUBORDINATION  AGREEMENT")  dated as of October 3, 2005 among PWJ  Lending
     LLC,  a limited  liability  company  organized  under the laws of  Delaware
     ("SECOND LIEN AGENT"),  Whitehall  Jewellers,  Inc., a Delaware corporation
     (the  "Borrower"),  LaSalle Bank National  Association,  as  Administrative
     Agent and  Collateral  Agent  ("FIRST  LIEN  AGENT"),  under the First Lien
     Credit Agreement  hereinafter described to the liens and security interests
     securing indebtedness (including interest) owed by the Borrower pursuant to
     that  certain  Second  Amended  and  Restated  Revolving  Credit  and  Gold
     Consignment Agreement dated as of July 29, 2003, as amended by that certain
     First  Amendment to Second Amended and Restated  Revolving  Credit and Gold
     Consignment  Agreement  dated as of March 23,  2004,  that  certain  Second
     Amendment  to  Second  Amended  and  Restated  Revolving  Credit  and  Gold
     Consignment  Agreement  dated as of January 31, 2005,  that  certain  Third
     Amendment  to  Second  Amended  and  Restated  Revolving  Credit  and  Gold
     Consignment  Agreement  dated as of April 6, 2005, and that certain Waiver,
     Consent,  and Fourth  Amendment to Second  Amended and  Restated  Revolving
     Credit  and  Gold  Consignment  Agreement  dated  as  of  October  3,  2005
     (collectively, the "FIRST LIEN CREDIT AGREEMENT") among the Borrower, First
     Lien  Agent,  the  lenders  from time to time party  thereto,  and  certain
     guarantees of the indebtedness evidenced thereby, as such First Lien Credit
     Agreement  and such  guarantees  have been and  hereafter  may be  amended,
     restated, supplemented or otherwise modified from time to time as permitted
     under the Subordination  Agreement and to the liens and security  interests
     securing indebtedness refinancing the indebtedness under such agreements as
     permitted  by  the  Subordination   Agreement;  and  each  holder  of  this
     instrument, by its acceptance hereof, irrevocably agrees to be bound by the
provisions of the Subordination Agreement."                           

          2.11. ANTILAYERING.  The First Lien Agent, on behalf of the First Lien
     Lender  Parties,  hereby  agrees not to create any  indebtedness  under the
     First  Lien  Debt  Documents  or  create or  consent  to any DIP  Financing
     (collectively,  "NEW  DEBT")  (whether  entered  into  before  or after the
     commencement of a Proceeding) unless such New Debt constitutes either First
Lien Debt or Excluded First Lien Debt.                                

3. MODIFICATIONS.                                                     

          3.1. MODIFICATIONS TO FIRST LIEN DEBT DOCUMENTS. The First Lien Lender
     Parties  may at any time and from time to time  without  the  consent of or
     notice to any Second Lien Lender Party,  without incurring liability to any
     Second Lien Lender Party and without impairing or releasing the obligations
of any                                                                

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     Second Lien Lender Party under this  Agreement,  change the manner or place
     of  payment  or extend  the time of payment of or renew or alter any of the
     terms of the Bank Group Debt,  or amend or  otherwise  modify in any manner
     any of the First Lien Debt  Documents;  PROVIDED THAT the First Lien Lender
     Parties shall not (a) increase any applicable interest rate with respect to
     the Bank Group  Debt by more than 200 basis  points,  except in  connection
     with (i) the  imposition of a default rate of interest in  accordance  with
     the  terms  of  the  First  Lien  Debt   Documents  or  (ii)  as  expressly
     contemplated  by the definitions of the terms "Base Rate" and "LIBOR Rate",
     respectively, in each case as set forth in the First Lien Debt Documents as
     in effect on the date hereof; or (b) a release of any Asset Sale Reserve or
Insurance Reserve.                                                    

          3.2. MODIFICATIONS TO SECOND LIEN DEBT DOCUMENTS. Until the First Lien
     Debt has been Paid in Full,  and  notwithstanding  anything to the contrary
     contained in the Second Lien Debt Documents, the Second Lien Lender Parties
     shall not, without the prior written consent of First Lien Agent,  agree to
     any amendment, modification or supplement to the Second Lien Debt Documents
     the effect of which is to (i) increase the maximum  principal amount of the
     Second Lien Debt (other than as a result of the capitalization of interest)
     or rate of interest or paid in kind nature of interest on any of the Second
     Lien  Debt,  (ii)  change the dates upon which  payments  of  principal  or
     interest on the Second  Lien Debt are due,  except in  connection  with the
     imposition  of the default rate of interest in  accordance  with the Second
     Lien Debt Documents as in effect on the date hereof; PROVIDED, HOWEVER that
     the maturity date of the Second Lien Debt may be extended through and until
     January 31, 2006,  (iii) change or add any event of default or any covenant
     with  respect  to the Second  Lien Debt,  (iv)  change  any  redemption  or
     prepayment  provisions of the Second Lien Debt, (v)  subordinate the Second
     Lien Debt to any other indebtedness, (vi) take any Liens on any Property of
     any Credit  Party  unless the same has been offered in writing to the First
     Lien Agent for the benefit of the First Lien Lender Parties or (vii) change
     or amend any other term of the Second Lien Debt Documents if such change or
     amendment would result in a First Lien Default, increase the obligations of
     any Credit Party or confer  additional  material  rights on any Second Lien
     Lender  Party or any  other  holder  of the  Second  Lien  Debt in a manner
     adverse in any  material  respect  to any Credit  Party or any of the First
Lien Lender Parties.                                                  

          3.3.  WAIVER OF EVENTS OF DEFAULT.  Until the First Lien Debt has been
     Paid in Full, and notwithstanding anything to the contrary contained in the
     Second Lien Debt Documents,  the Second Lien Agent, on behalf of the Second
     Lien  Lender  Parties,  hereby  agrees  to waive  any  "Event  of  Default"
     contained  or arising  under the Second Lien Debt  Documents  to the extent
     that the First Lien Lender Parties shall have waived any counterpart "Event
     of  Default"  contained  or arising  under the First  Lien Debt  Documents;
     PROVIDED,  HOWEVER  that the Second  Lien  Lender  Parties  shall not, as a
     result of this  SECTION 3.3 (a) be  obligated  to waive an event of default
     arising  under  clauses (a) through (c) of the  definition  of "Second Lien
     Actionable  Default" or (b) be deemed to have waived the  imposition of the
default rate of interest set forth in the Second Lien Debt            

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     Documents  (as in effect on the date hereof)  which would arise but for the
foregoing  waiver  provisions  of this  SECTION  3.3.                 

4. WAIVER OF CERTAIN RIGHTS BY THE SECOND LIEN LENDER PARTIES         

          4.1.  ACCEPTANCE.  The Second Lien Agent, on behalf of the Second Lien
     Lender  Parties,  hereby waives all notice of the  acceptance by First Lien
     Lender  Parties  of the lien  subordination  and other  provisions  of this
     Agreement  and all the notices not  specifically  required  pursuant to the
     terms of this  Agreement  or under  the  Uniform  Commercial  Code or other
     applicable  law in  connection  with  foreclosure  on or sale of all or any
     portion of the Collateral,  and the Second Lien Agent expressly consents to
     the reliance by the First Lien Lender  Parties upon the  subordination  and
other agreements as herein provided.                                  

4.2. MARSHALING.                                            

               (a) The Second  Lien  Agent,  on behalf of the Second Lien Lender
          Parties,  hereby waives any rights it may have under applicable law to
          assert the doctrine of  marshaling  or to otherwise  require the First
          Lien  Agent or any  other  First  Lien  Lender  Party to  marshal  any
          Property of any Credit Party for the benefit of any Second Lien Lender
          Party.  The Second  Lien  Agent,  on behalf of the Second  Lien Lender
          Parties,  further  waives  any  right  to  demand,  request,  plead or
          otherwise  assert or  otherwise  claim the  benefit of any  appraisal,
          valuation or other similar right that may otherwise be available under
          applicable  law with respect to the  Collateral  or any other  similar
rights a junior creditor may have under applicable law.     

               (b) The Second  Lien  Agent,  on behalf of the Second Lien Lender
          Parties,  agrees  that no  First  Lien  Lender  Party  shall  have any
          liability to any Second Lien Lender Party, and such Second Lien Lender
          Party hereby  waives any claims  against any First Lien Lender  Party,
          arising out of any and all actions  which any First Lien Lender  Party
          may take or permit or omit to take with  respect to (i) the First Lien
          Debt  Documents,  (ii) the  collection of the Bank Group Debt or (iii)
          the  foreclosure  upon, or sale,  liquidation or other  disposition or
          realization  of,  any  Collateral,  in each  case,  except  for  gross
          negligence or willful  misconduct  as  determined  pursuant to a final
          non-appealable order of a court of competent jurisdiction.  The Second
          Lien Agent, on behalf of the Second Lien Lender  Parties,  agrees that
          no First Lien Lender  Party  shall have any duty,  express or implied,
          fiduciary  or  otherwise,  to it in  respect  of  the  maintenance  or
          preservation of any Collateral, any Second Lien Debt or otherwise. The
          First Lien Agent, on behalf of the First Lien Lender  Parties,  agrees
          that no Second  Lien  Lender  Party  shall  have any duty,  express or
          implied,  fiduciary or otherwise,  to it in respect of the maintenance
          or preservation  of any Collateral,  any Bank Group Debt or otherwise.
   No First Lien Lender  Party,  no Second  Lien Lender  Party nor

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          any of their respective directors,  officers, employees or agents will
          be liable for  failure to demand,  collect or realize  upon any of the
          Collateral  or for any  delay  in  doing  so,  or will  be  under  any
          obligation  to sell or otherwise  dispose of any  Collateral  upon the
          request of a Credit  Party,  any First Lien Lender  Party,  any Second
          Lien  Lender  Party or any other  Person  or to take any other  action
 whatsoever with regard to the Collateral or any part thereof.

5. REPRESENTATIONS AND WARRANTIES.                                    

          5.1.  REPRESENTATIONS  AND WARRANTIES OF SECOND LIEN AGENT.  To induce
     First Lien Agent to execute and  deliver  this  Agreement,  the Second Lien
     Agent  hereby  represents  and  warrants to First Lien Agent that as of the
     date hereof: (a) the Second Lien Agent is an entity duly formed and validly
     existing  under the laws of  Delaware;  (b) the  Second  Lien Agent has the
     power and authority to enter into, execute, deliver and carry out the terms
     of this Agreement, all of which have been duly authorized by all proper and
     necessary  action;  (c) the execution of this  Agreement by the Second Lien
     Agent will not violate or conflict with the organizational documents of the
     Second Lien Agent,  any  material  agreement  binding  upon the Second Lien
     Agent or any law,  regulation  or order or require  any consent or approval
     which has not been  obtained;  (d) this  Agreement is the legal,  valid and
     binding obligation of the Second Lien Agent, enforceable against the Second
     Lien Agent, in accordance with its terms, except as such enforceability may
     be limited by applicable bankruptcy, insolvency, reorganization, moratorium
     or similar laws affecting the  enforcement of creditors'  rights  generally
     and by  equitable  principles;  and (e) the  Second  Lien Agent is the sole
     owner,  beneficially and of record,  of its portion of the Second Lien Debt
Documents and the Second Lien Debt.                                   

          5.2. REPRESENTATIONS AND WARRANTIES OF FIRST LIEN AGENT. To induce the
     Second Lien Agent to execute and deliver this  Agreement,  First Lien Agent
     hereby represents and warrants to the Second Lien Agent that as of the date
     hereof:  (a) First Lien Agent is a national  bank duly  formed and  validly
     existing  under the laws of the United  States of  America;  (b) First Lien
     Agent has the power and authority to enter into, execute, deliver and carry
     out the terms of this Agreement,  all of which have been duly authorized by
     all proper and necessary  action;  (c) the  execution of this  Agreement by
     First Lien  Agent will not  violate  or  conflict  with the  organizational
     documents of First Lien Agent,  any material  agreement  binding upon First
     Lien  Agent or any law,  regulation  or order or  require  any  consent  or
     approval which has not been obtained;  and (d) this Agreement is the legal,
     valid and binding obligation of First Lien Agent, enforceable against First
     Lien Agent in accordance with its terms,  except as such enforceability may
     be   limited  by   applicable   bankruptcy,   insolvency,   reorganization,
     moratorium,  or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles.                                 

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     6. NO NEW LIEN. Each of the First Lien Lender  Parties,  each of the Second
Lien Lender  Parties and each Credit  Party  hereby  agrees that no Credit Party
shall,  or shall permit its  Subsidiaries  to, grant or permit any Lien, or take
any action to perfect a Lien,  on any  Property  to secure any of the Bank Group
Debt or the Second  Lien Debt  unless  such Lien is granted to each of the First
Lien Agent,  for the benefit of the First Lien  Lender  Parties,  and the Second
Lien Agent,  for the benefit of the Second  Lien Lender  Parties,  respectively;
provided  that nothing in this Section 6 shall limit the rights of (i) the First
Lien Lender  Parties from holding cash  collateral  pursuant to the terms of the
First Lien Debt Documents and exercising  their rights and remedies against such
cash collateral, or (ii) the First Lien Lender Parties from exercising customary
rights of setoff  against  accounts  maintained  with such Person,  in each case
pursuant  to the  terms and  provisions  of the First  Lien Debt  Documents.  In
addition,  the Second Lien Lender Parties shall not be permitted to restrict, in
any manner,  a Credit Party from granting a Lien on any Property for the benefit
of the First Lien Lenders.                                                      

     7.  INSURANCE  PROCEEDS.  Until the Payment in Full of all First Lien Debt,
the First Lien Agent  shall have the sole and  exclusive  right,  as against the
Second Lien Lender  Parties,  to adjust  settlement  of insurance  claims in the
event  of  any  covered  loss  (including,  without  limitation,  any  theft  or
destruction of any or any part of such Collateral) or condemnation awards in the
event of a  condemnation  or to  permit  the  Credit  Parties  to  reinvest  any
insurance proceeds in replacement assets;  PROVIDED,  HOWEVER that following any
Enforcement  Event,  the First Lien Agent shall establish  reserves  against the
Borrowing Base in an amount of such proceeds (the "INSURANCE  RESERVE").  At the
request of the First Lien Agent,  the Second Lien Lender Parties shall cooperate
in a  reasonable  manner in  effecting  the payment of  insurance  proceeds  and
condemnation  awards to the First Lien  Lender  Parties.  In the event the First
Lien Lender Parties,  in their  discretion or pursuant to any agreement with any
Credit  Party,  permit such Credit Party to utilize the proceeds of insurance or
condemnation award to replace  Collateral,  the consent of the First Lien Lender
Parties shall be deemed to include the consent of each Second Lien Lender Party.

8. SECOND LIEN LENDER PARTY PURCHASE OPTION.                          

               (a) Notwithstanding anything herein to the contrary, (i) at least
          two (2) Business Days' prior to the  commencement  of any  Enforcement
          Action by any First  Lien  Lender  Party  constituting  a  foreclosure
          (including  a sale under the  Uniform  Commercial  Code) of all or any
          material portion of the Collateral or consent by any First Lien Lender
          Party to any other Enforcement  Event, (ii) at least five (5) Business
          Days prior to a proposed sale or other disposition of Collateral in an
          amount to exceed  $20,000,000.00 in the aggregate from the date hereof
          (but  excluding  any such  sales or other  disposition  of  Collateral
          conducted  in  connection  with  or  as a  result  of  store  closures
          permitted under the First Lien Credit Agreement) or (iii) in the event
          three (3)  consecutive  Business  Days have elapsed  during which time
          First Lien Lenders with a Revolving Loan Credit Commitment (as defined
          in the First Lien Credit  Agreement) have failed to advance  Revolving
Credit Loans (as defined in the First                       

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          Lien Credit Agreement)  following the Borrower's request therefor as a
          result of a failure to satisfy the conditions  precedent thereto,  the
          First Lien Agent  shall  provide  the Second  Lien Agent with  written
          notice thereof (a "PURCHASE OPTION NOTICE") and afford the Second Lien
          Agent the  opportunity  to purchase all, but not less than all, of the
          First Lien Debt pursuant to this SECTION 8. The Purchase Option Notice
          will   indicate  the   aggregate   amount  of  First  Lien  Debt  then
outstanding.                                                

               (b) The Second Lien Agent shall have five (5) Business Days after
          receipt of such Purchase  Option Notice to notify the First Lien Agent
          of its  intention  to exercise  its option to purchase  the First Lien
          Debt  pursuant to this SECTION 8. If no such notice is received from a
          Second Lien Agent within such five (5) Business Day period, the option
          granted  pursuant  to this  SECTION  8 to the  Second  Lien  Agent  to
          purchase the First Lien Debt shall irrevocably  expire and such Second
          Lien Lender  Party shall have no further  rights  under this SECTION 8
          except if the Sale Event or such  Enforcement  Event is not  commenced
          or, if commenced, is permanently terminated, in which event the option
          contained herein continue until a subsequent Purchase Option Notice is
issued by First Lien Agent.                                 

               (c) If a Second  Lien  Agent  delivers  notice to the First  Lien
          Agent that it or any Second Lien Lender Party is exercising its option
          to  purchase  the First  Lien Debt  pursuant  to this  SECTION 8, such
          notice delivered to the First Lien Agent shall be irrevocable and such
          holder  shall be required  to purchase  the First Lien Debt within two
          (2) Business Days after the First Lien Agent's receipt of such notice.

               (d) Upon the date of such  purchase  and sale,  the  purchaser or
purchasers of the First Lien Debt shall,                    

                    (i) pay to the First  Lien  Agent,  for the  benefit  of the
               First Lien Lender  Parties,  as the purchase  price  therefor the
               full  amount of all First Lien Debt (with all debt  purchased  at
               par)  outstanding  as of the date of such  purchase  and sale and
               unpaid  (including  all  documented  principal,   interest,  fees
               (including without limitation all Early Termination Fees), costs,
               charges and expenses,  including  reasonable  attorneys' fees and
legal expenses),                                  

                    (ii) furnish cash collateral to the First Lien Agent in such
               amounts  as  the  First  Lien  Agent   determines  is  reasonably
               necessary to secure the First Lien Lender  Parties in  connection
               with any issued and  outstanding  letters of credit  provided  by
               First Lien Agent (or  letters of credit that First Lien Agent has
               arranged  to  be  provided  by  third  parties  pursuant  to  the
               financing  arrangements  of the First  Lien Agent with the Credit
               Parties) for the benefit of any Credit Party  entered into by any
First Lien                                        

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               Lender Party for the benefit of any Credit Party  (provided  that
               such amount shall not exceed 103% of the aggregate undrawn amount
and), and                                         

                    (iii) provide cash  collateral  acceptable to the First Lien
               Lender  Parties in respect  of bona fide  outstanding  claims for
               indemnification;  PROVIDED,  HOWEVER  that the First  Lien  Agent
               shall release any such cash collateral upon the determination, in
               the First Lien  Agent's  sole  discretion,  that the claim giving
               rise to such indemnification right shall no longer be asserted or
assertable.                                       

               (e) Such purchase  price and cash  collateral  shall be remitted,
          without  set-off or  counterclaim  or  otherwise,  by wire transfer in
          federal  funds to such bank  account of the First Lien  Agent,  as the
          First Lien  Agent may  designate  in writing to Second  Lien Agent for
          such  purpose.  Interest  shall be  calculated  to but  excluding  the
          business  day on  which  such  purchase  and sale  shall  occur if the
          amounts  so paid by the  purchasers  of  First  Lien  Debt to the bank
          account  designated  by First  Lien  Agent are  received  in such bank
          account  prior  to 1:00  p.m.,  Chicago  time  and  interest  shall be
          calculated to and  including  such business day if the amounts so paid
          by such Persons to the bank account designated by First Lien Agent are
     received in such bank account later than 1:00 p.m., Chicago time.

               (f) Each Second Lien Lender  Party will have the right,  pursuant
          to this  SECTION 8, to  purchase up to its pro rata share of the First
          Lien Debt;  PROVIDED  THAT if any  Second  Lien  Lender  elects not to
          exercise it option to purchase the First Lien Debt,  that holder's pro
          rata  share  shall  be  allocated  to any  other  Second  Lien  Lender
          exercising its option under this SECTION 8. Each notice delivered by a
          Second Lien Lender to the First Lien Agent  pursuant to this SECTION 8
          shall  indicate what portion of the First Lien Debt such holder elects
          to purchase. First Lien Debt purchased hereunder will be purchased pro
          rata from each  First  Lien  Lender  based on the amount of First Lien
          Debt held by such First Lien  Lender.  In the event that the amount of
          First  Lien  Debt  that the  Second  Lien  Lenders  elect to  purchase
          pursuant  to this  SECTION 8, (a) exceeds  the  aggregate  outstanding
          amount of First Lien Debt, each holder of Second Lien Debt electing to
          purchase  the First Lien Debt will be  permitted  to purchase  its pro
          rata portion of such First Lien Debt based on the amount of First Lien
          Debt that each such holder  elected to  purchase,  or (b) is less than
          all of the First  Lien,  then the option  set forth in this  SECTION 8
          (including  with respect to options which have been  exercised)  shall
          irrevocably  expire and this SECTION 8 shall be of no further force or
effect.                                                     

               (g) Upon notice to the Credit  Parties that the purchase of First
          Lien Debt has been  consummated  by delivery of the purchase  price to
          the First Lien  Agent,  each Credit  Party shall treat the  applicable
holders                                                     

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          of  Second  Lien Debt as  holders  of the  First  Lien Debt  purchased
          pursuant to this SECTION 8 for all purposes  hereunder  and under each
          agreement,  document and  instrument  relating to the First Lien Debt.
          Any  sale  will be made  without  recourse  or  warranty,  other  than
          customary  representations by each holder of First Lien Debt as to its
          authority to sell its First Lien Debt and its  ownership  thereof.  In
          connection  with any  purchase  of First  Lien Debt  pursuant  to this
          SECTION 8, each holder of First Lien Debt  agrees,  at the cost of the
          Credit Parties, to enter into all agreement, instruments and documents
          necessary  or  desirable  to evidence  the transfer of such First Lien
Debt hereunder.                                             

9. APPRAISALS/INTEREST/EXPENSES.                                      

          (a)  Notwithstanding  anything to the contrary in the Second Lien Debt
     Documents,  neither the Second Lien Agent nor any Second Lien Lender  Party
     (whether  directly  or by virtue of third  parties  retained by such Second
     Lien Lender Party) shall  conduct any  appraisals;  PROVIDED,  HOWEVER upon
     request of the Second Lien  Agent,  the First Lien Agent  hereby  agrees to
     provide the Second Lien Agent with copies of  appraisals  conducted  by the
     First Lien Agent upon delivery by Second Lien Agent of a release  letter in
     form and substance satisfactory to the First Lien Agent; PROVIDED, FURTHER,
     HOWEVER  that (x) the  failure of the First Lien Agent to provide a copy of
     any such appraisals shall not impair the effectiveness of this Agreement or
     be deemed a breach  hereof and (y) the Second Lien Agent may not in any way
     use or rely on any information set forth in such appraisal to challenge the
     First Lien Agent's computation and other evaluations of the Borrowing Base.

          (b)  Notwithstanding  anything to the contrary in the Second Lien Debt
     Documents,  the Second  Lien  Agent,  on behalf of the Second  Lien  Lender
     Parties,  hereby  acknowledges  and  agrees  that until the First Lien Debt
     shall have been Paid in Full, from and after the occurrence of a First Lien
     Default,  the  Credit  Parties  may not make,  and the Second  Lien  Lender
     Parties shall not be entitled to receive,  (x) any cash  interest  payments
     pursuant to the Second Lien Debt Documents (whether as regularly  scheduled
     payments of interest or as a result of the  imposition of a default rate of
     interest under the Second Lien Debt Documents) and that solely  capitalized
     interest is permitted to accrue  under the Second Lien Debt  Documents  and
     (y) any  payments in  connection  with  mandatory  or  optional  redemption
provisions set forth under the Second Lien Debt Documents.            

          (c)  Notwithstanding  anything to the contrary set forth in the Second
     Lien Debt  Documents,  the Second Lien Agent,  on behalf of the Second Lien
     Lender Parties,  hereby  acknowledges  and agrees that until the First Lien
     Debt  shall  have  been  Paid in Full,  the  Credit  Parties  shall  not be
     permitted to make, and the Second Lien Lender Parties shall not be entitled
     to  receive,  any  cash  reimbursement  of  expenses  (including  fees  and
     disbursements  of counsel)  other than cash  reimbursement  of the fees and
disbursements   of  counsel  to  the  Second                          

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     Lien Agent PLUS fees and disbursements of counsel of one additional counsel
     representing  all other Second Lien Lender Parties,  to the extent that the
     other  Second Lien Lender  parties  are not all  affiliates  of Second Lien
     Agent.  Any other  expenses  and fees and  disbursements  of counsel to the
     Second Lien Lender  Parties  arising  under the Second Lien Debt  Documents
     shall be capitalized and added to the outstanding  principal  amount of the
Second Lien Debt.                                                     

     10. SUBROGATION. Subject to the Payment in Full of all First Lien Debt, the
Second Lien Lender  Parties shall be subrogated to the extent of any payments or
distributions  made by the Second Lien Lender Parties to the First Lien Agent on
behalf of the First Lien Lender Parties, or otherwise applied to payment of such
First Lien Debt solely by reason of the  provisions  of this  Agreement,  to any
rights of the First Lien Lender Parties to receive  payments and distribution of
cash,  securities and other property  applicable to the First Lien Debt, if any,
until the Second  Lien Debt shall have been paid in full.  For  purposes of such
subrogation,  no payments or  distributions  to the First Lien Lender Parties of
any cash,  securities or other  property to which the Second Lien Lender Parties
would have been entitled,  except for the provisions of this  Agreement,  and no
payments pursuant to the provisions of this Agreement to the First Lien Agent on
behalf of the First Lien Lender  Parties by any Second Lien Lender Party,  shall
be deemed to be a payment or  distribution  by any Credit Party to or on account
of the First Lien Debt, it being  understood  and agreed that the  provisions of
this Agreement are solely for the purpose of defining the relative rights of the
First Lien Lender Parties on the one hand, and the Second Lien Lender Parties on
the other hand.                                                                 

     11.  MODIFICATION.  Any  modification  or waiver of any  provision  of this
Agreement,  or any consent to any  departure by any party from the terms hereof,
shall not be  effective in any event unless the same is in writing and signed by
each  Credit  Party,  First Lien  Agent and the Second  Lien Agent and then such
modification, waiver or consent shall be effective only in the specific instance
and for the specific  purpose given. Any notice to or demand on any party hereto
in any event not  specifically  required  hereunder  shall not entitle the party
receiving  such notice or demand to any other or further notice or demand in the
same, similar or other circumstances unless specifically required hereunder.    

     12. FURTHER ASSURANCES.  Each party to this Agreement promptly will execute
and deliver such further instruments and agreements and do such further acts and
things as may be reasonably  requested in writing by any other party hereto that
may be  necessary  or  desirable  in order to effect  fully the purposes of this
Agreement.                                                                      

     13. NOTICES.  Unless otherwise  specifically  provided  herein,  any notice
delivered under this Agreement  shall be in writing  addressed to the respective
party  as set  forth  below  and may be  personally  served,  sent by  facsimile
transmission  or sent by overnight  courier  service or certified or  registered
United  States mail and shall be deemed to have been given (a) if  delivered  in
person, when delivered; (b) if delivered by facsimile transmission,  on the date
of transmission if transmitted on a business day before 4:00 p.m. (Chicago time)
or, if not, on the next  succeeding  business day; (c) if delivered by overnight
courier, one business day after delivery to such courier properly addressed;  or

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(d) if by United  States mail,  four  business  days after deposit in the United
States mail, postage prepaid and properly addressed.                            

Notices shall be addressed as follows:                        

If to any Second Lien Lender Party:                                             

PWJ Lending LLC                                               
c/o Prentice Capital Management, LP                           
623 Fifth Avenue, 32nd Floor                                  
New York, New York 10022                                      
Attention: Michael Weiss                                      
Fax:  212-756-1480                                            

With a copy to:                                                                 

Schulte Roth & Zabel LLP                                      
919 Third Avenue                                              
New York, New York 10022                                      
Attention:  Nancy Finkelstein, Esquire                        
Fax:  212 593 5955                                            
E-mail:  nancy.finkelstein@srz.com                            

If to any First Lien Lender Party:                                              

LaSalle Bank National Association                             
c/o LaSalle Retail Finance                                    
25 Braintree Hill Office Park, Suite 205                      
Braintree, Massachusetts 02184                                
Attention:  Loan Administration                               
Fax:  781 353 6101                                            

--and--                                     

Back Bay Capital Funding, LLC                                 
40 Broad Street (10th floor - MA5-505-10-1)                   
Boston, MA 02109                                              
Attention: Kristan M. O'Connor, Managing Director             
Fax: 617-434-4185                                             

With a copy to:                                                                 

Riemer & Braunstein, LLP                                      
3 Center Plaza                                                
Boston, Massachusetts 02108                                   
Attention:  Donald E. Rothman, Esquire                        
Fax:  617 880 3456                                            
E-mail:    drothman@riemerlaw.com                             

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--and--                                                       

Brown Rudnick Berlack Israels, LLP                            
One Financial Center                                          
Boston, Massachusetts 02111                                   
Attention: Andrew P. Strehle, Esquire                         
Fax: 617-856-8201                                             

or in any  case,  to such  other  address  as the  party  addressed  shall  have
previously  designated  by  written  notice  to  the  serving  party,  given  in
accordance with this SECTION 13.                                                

     14.  SUCCESSORS AND ASSIGNS.  This Agreement shall inure to the benefit of,
and shall be binding upon, the  respective  successors and assigns of each First
Lien Lender Party,  each Second Lien Lender Party and each Credit Party.  To the
extent  permitted under the First Lien Debt  Documents,  First Lien Lenders may,
from time to time,  with  notice to any  Second  Lien  Lender  Party,  assign or
transfer any or all of the Bank Group Debt or any interest therein to any Person
and,  notwithstanding  any  such  assignment  or  transfer,  or  any  subsequent
assignment or transfer,  the Bank Group Debt shall, subject to the terms hereof,
be and  remain  Bank  Group  Debt for  purposes  of this  Agreement,  and  every
permitted  assignee  or  transferee  of any of the  Bank  Group  Debt  or of any
interest therein shall, to the extent of the interest of such permitted assignee
or  transferee in the Bank Group Debt, be entitled to rely upon and be the third
party  beneficiary of the lien  subordination  provided under this Agreement and
shall be entitled to enforce the terms and provisions  hereof to the same extent
as if such assignee or transferee were initially a party hereto.                

15. RELATIVE RIGHTS; NO THIRD PARTIES BENEFITED.                      

               (a) This Agreement  shall define the relative rights of the First
          Lien Lender Parties and the Second Lien Lender Parties,  respectively.
          Nothing  in this  Agreement  shall (a)  impair,  as among  the  Credit
          Parties  and the First Lien  Lender  Parties  on the one hand,  and as
          between the Credit Parties and the Second Lien Lender Parties,  on the
          other hand,  the  obligation of the Credit Parties with respect to the
          payment of the Bank Group Debt and the Second  Lien Debt,  as the case
          may be, in accordance  with their  respective  terms or (b) affect the
          relative  rights of the First Lien  Lender  Parties or the Second Lien
          Lender  Parties  with  respect  to any other  creditors  of the Credit
          Parties.  The terms of this Agreement  shall govern even if all or any
          part of the Bank  Group  Debt or the Liens in favor of the First  Lien
          Agent or any other First Lien Lender  Party are  avoided,  disallowed,
          unperfected,  set  aside  or  otherwise  invalidated  in any  judicial
proceeding or otherwise.                                    

               (b) It is not the  intention of the parties  hereto to confer any
          third-party  beneficiary  rights,  and  this  Agreement  shall  not be
          construed  so as to confer any such  rights  upon any other  Person or
Persons not                                                 

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          party hereto.  Notwithstanding the foregoing, neither the Borrower nor
          any of their  respective  subsidiaries nor any other Person or Persons
          (other  than a party  hereto)  shall be a  direct  or  indirect  legal
          beneficiary  of,  or have any  direct or  indirect  cause of action or
claim in connection with, this Agreement.                   

     16. CONTRACTUAL REPRESENTATIVE FOR PURPOSES OF PERFECTION. Each Second Lien
Lender Party hereby  appoints the First Lien Agent as such Person's  contractual
representative  solely for purposes of perfecting  such Person's Liens on any of
the Collateral in the possession or under the "control" (as such term is defined
in the  Uniform  Commercial  Code) of the First Lien  Agent,  and the First Lien
Agent hereby  acknowledges that it holds possession of or otherwise controls any
such  Collateral  as the  contractual  representative  of the Second Lien Lender
Parties for such purposes;  provided,  that, the First Lien Agent shall not have
any duty or liability to protect or preserve any rights pertaining to any of the
Collateral and, except for gross negligence or willful  misconduct as determined
pursuant to a final non-appealable  order of a court of competent  jurisdiction,
each Second Lien Lender  Party  hereby  waives and releases the First Lien Agent
and each of the other First Lien Lender Parties from, and hereby indemnifies and
agrees to hold  harmless  the First Lien Agent and each of the other  First Lien
Lender Parties against,  all claims and liabilities arising as a result of or in
connection with the First Lien Agent's role as contractual  representative agent
with respect to the Collateral.  At the expense of the Credit Parties,  promptly
upon the  Payment  in Full of all First Lien  Debt,  the First Lien Agent  shall
deliver the remainder of the Collateral, if any, in its possession to the Second
Lien Agent and, to the extent practicable,  transfer control of the remainder of
the  Collateral,  if any,  under its control to the Second  Lien Agent,  in each
case,  except as may otherwise be required by applicable  law or court order (it
being  understood  that prior to the Payment in Full of all First Lien Debt, the
provisions of this  Agreement  shall apply to all such  documents and each other
document  relating  to all or any  part of the  Collateral,  including,  without
limitation,  the provisions restricting the Second Lien Agent from taking action
to  enforce  rights  in  and to  the  Collateral  pursuant  to  such  documents)
(including,  without  limitation,  cooperate  with  the  Second  Lien  Agent  in
assigning  or  transferring  any rights of the First Lien Agent  under  landlord
agreements,  bailee agreements,  cash management control agreements or any other
similar agreements to the extend that such rights are assignable).              

     17. CONFLICT.  In the event of any conflict  between any term,  covenant or
condition of this  Agreement  and any term,  covenant or condition of any of the
First  Lien  Debt  Documents  or any of the  Second  Lien  Debt  Documents,  the
provisions of this Agreement shall control and govern.                          

     18.  HEADINGS.  The  paragraph  headings  used  in this  Agreement  are for
convenience  only  and  shall  not  affect  the  interpretation  of  any  of the
provisions hereof.                                                              

     19. COUNTERPARTS.  This Agreement may be executed in multiple counterparts,
each of which  shall be  deemed an  original,  but all of which  together  shall
constitute one and the same instrument. Delivery of photocopies of the signature
pages                                                                           

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to this  Agreement  by  facsimile  shall be  effective as delivery of a manually
executed counterpart hereof.                                                    

     20.  SEVERABILITY.  In the event that any  provision  of this  Agreement is
deemed to be invalid, illegal or unenforceable by reason of the operation of any
law  or by  reason  of  the  interpretation  placed  thereon  by  any  court  or
governmental  authority,  the  validity,  legality  and  enforceability  of  the
remaining  provisions  of this  Agreement  shall not in any way be  affected  or
impaired  thereby,  and the affected  provision shall be modified to the minimum
extent  permitted  by law so as most  fully to  achieve  the  intention  of this
Agreement.                                                                      

     21. CONTINUATION OF SUBORDINATION; TERMINATION OF AGREEMENT. This Agreement
shall  remain in full force and effect  until  Payment in Full of the First Lien
Debt,  after which this Agreement shall terminate  without further action on the
part of the parties  hereto;  provided,  however that if upon Payment in Full of
the First Lien Debt there remains outstanding any Excluded First Lien Debt, then
following the Payment in full of the First Lien Debt, the rights and obligations
of the First Lien  Agent and First Lien  Lenders  hereunder  shall  inure to the
Second Lien Agent and Second Lien Lenders  hereunder  with respect to the Second
Lien Debt,  and the rights and  obligations  of the Second Lien Agent and Second
Lien  Lenders  hereunder  shall  inure to the First  Lien  Agent and First  Lien
Lenders  with  respect  to the  Excluded  First  Lien Debt and  thereafter  this
Agreement  shall  terminate  without  further  action on the part of the parties
hereto upon the Payment in Full of the Second Lien Debt.                        

     22.  GOVERNING LAW;  SUBMISSION TO  JURISDICTION.  THIS AGREEMENT  SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE  WITH, THE LAW OF
THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. EACH PARTY
HERETO HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
THEREIN AND IRREVOCABLY AGREES THAT, SUBJECT TO FIRST LIEN AGENT'S ELECTION, ALL
ACTIONS OR  PROCEEDINGS  ARISING OUT OF OR RELATING TO THIS  AGREEMENT  SHALL BE
LITIGATED IN SUCH COURTS.  EACH PARTY HERETO  EXPRESSLY  SUBMITS AND CONSENTS TO
THE  JURISDICTION  OF THE  AFORESAID  COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS.  EACH PARTY HERETO  HEREBY  WAIVES  PERSONAL  SERVICE OF ANY AND ALL
PROCESS  AND AGREES  THAT ALL SUCH  SERVICE  OF  PROCESS  MAY BE MADE UPON IT BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH PARTY,
AS THE CASE MAY BE, AT SUCH  PERSON'S  ADDRESS SET FORTH IN THIS  AGREEMENT  AND
SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED. 

     23. WAIVER OF JURY TRIAL.  EACH SECOND LIEN LENDER PARTY, EACH CREDIT PARTY
AND FIRST  LIEN  AGENT  (FOR  ITSELF  AND FOR AND ON BEHALF OF EACH  FIRST  LIEN
LENDER)  HEREBY  IRREVOCABLY  WAIVES  ANY AND ALL  RIGHT TO TRIAL BY JURY IN ANY

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LEGAL  ACTION OR  PROCEEDING  ARISING OUT OF OR RELATING TO THIS  AGREEMENT  AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING  SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.  EACH SECOND LIEN LENDER PARTY,  EACH CREDIT PARTY AND FIRST LIEN
AGENT (FOR ITSELF AND FOR AND ON BEHALF OF THE FIRST LIEN LENDERS)  ACKNOWLEDGES
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP,
THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS  AGREEMENT,  THE SECOND
LIEN DEBT DOCUMENTS AND THE FIRST LIEN DEBT  DOCUMENTS,  AS THE CASE MAY BE, AND
THAT SUCH  PERSONS  WILL  CONTINUE  TO RELY ON THIS  WAIVER IN THEIR  RESPECTIVE
RELATED  FUTURE  DEALINGS.  EACH OF EACH SECOND LIEN LENDER  PARTY,  EACH CREDIT
PARTY AND FIRST LIEN AGENT (FOR  ITSELF AND FOR AND ON BEHALF OF EACH FIRST LIEN
LENDER)  WARRANTS AND  REPRESENTS  THAT SUCH PERSON HAS HAD THE  OPPORTUNITY  OF
REVIEWING  THIS JURY WAIVER WITH LEGAL COUNSEL,  AND THAT SUCH PERSON  KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.                                   

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     IN WITNESS  WHEREOF,  the  Second  Lien Agent and the First Lien Agent have
caused this Agreement to be executed as of the date first above written.        

PWJ LENDING LLC                                                                 
("Second Lien Agent")                                                           

By:  /s/ Jonathan Duskin                                                        
---------------------------------                                         

Name:  Jonathan Duskin                                                          

Title: Managing Director                                                        

LASALLE BANK NATIONAL ASSOCIATION                                               
("Agent" on behalf of all First Lien Lenders)                                   

By:  /s/ Daniel O'Rourke                                                        
---------------------------------                                         

Name:  Daniel O'Rourke                                                          

Title: First Vice President                                                     

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 ACKNOWLEDGMENT AND ASSENT BY BORROWER

The undersigned  hereby  acknowledges  and agrees to the terms and provisions of
the foregoing  Intercreditor and Lien Subordination  Agreement. By its signature
below,  the  undersigned  agrees that it will,  together with its successors and
assigns, be bound by the provisions hereof.                                     

The  undersigned  agrees  that any  First  Lien  Lender or  Second  Lien  Lender
(hereinafter,  individually  and  collectively,  the "Lender" or the  "Lenders")
holding  or  controlling  Collateral  does  so  as  bailee  (under  the  Uniform
Commercial Code) for such other Lender and is hereby authorized to, and may turn
over to such other Lender upon request therefor any such  Collateral,  after all
obligations  and  indebtedness of the undersigned to the bailee Lender have been
fully paid and performed.                                                       

The  undersigned  acknowledges  and  agrees  that:  (i) it is not a party to the
Intercreditor  Agreement and Lien Subordination  Agreement and does not and will
not receive any right,  benefit,  priority, or interest under, or because of the
existence of the foregoing Intercreditor and Lien Subordination  Agreement,  and
(ii) it will  execute  and  deliver  such  additional  documents  and take  such
additional action as may be necessary or desirable in the reasonable  opinion of
any of the Lenders to effectuate  the  provisions  and purposes of the foregoing
Intercreditor and Lien Subordination Agreement.                                 

WHITEHALL JEWELLERS, INC.                                                       
("Borrower")                                                                    

By:  /s/ John R. Desjardins                                                     
---------------------------------                                         

Name:  John R. Desjardins                                                       

Title: Executive Vice President and Chief Financial Officer                     

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘SC 13D’ Filing		Date		First		Last			Other Filings
		9/30/07		11					13F-HR
		1/31/06		34					10-K
		1/17/06		11					4,  SC 13D/A
		1/16/06		11
		12/31/05		1		8			13F-HR,  13F-HR/A
Filed on:		10/13/05							3
		10/12/05		13		16			4,  SC 13D/A,  SC 13G/A
		10/6/05		13		15			8-K,  DEFA14A,  SC 13D
		10/3/05		1		33			3,  8-K
		9/29/05		11		15			SC 13G
		7/31/05		12					10-Q,  NT 10-Q
		4/6/05		17		33			4,  8-K
		1/31/05		17		33			10-K,  10-K/A,  4,  8-K,  SC 13G/A
		3/23/04		17		33			8-K
		7/29/03		8		33
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