Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 1 of 12

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1 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 1 of 12 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA In re: Case No (GLT rue21, inc., et al., 1 Chapter 11 Debtors. (Jointly Administered rue21, inc., et al., Movants, v. The CIT Group/Commercial Services, Inc. Respondent. DEBTORS EXPEDITED MOTION FOR ENTRY OF AN ORDER (I APPROVING A SETTLEMENT AGREEMENT WITH THE CIT GROUP/COMMERCIAL SERVICES, INC. PURSUANT TO FEDERAL RULE OF BANKRUPTCY PROCEDURE 9019 AND (II GRANTING RELATED RELIEF rue21, inc. and its debtor affiliates, as debtors and debtors-in-possession in the above-captioned chapter 11 cases (collectively, the Debtors, 2 respectfully state the following: 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are: rue21, inc. (1645; Rhodes Holdco, Inc. (6922; r services llc (9425; and rue services corporation (0396. The location of the Debtors service address is: 800 Commonwealth Drive, Warrendale, Pennsylvania A detailed description of the Debtors and their business is set forth in greater detail in the Declaration of Todd M. Lenhart, Acting Chief Financial Officer and Senior Vice President of Accounting of rue21, inc. in Support of Chapter 11 Petitions and First Day Motions [Docket No. 8], filed contemporaneously with the Debtors voluntary petitions for relief filed under chapter 11 of title 11 of the United States Code, 11 U.S.C (the Bankruptcy Code, on May 15, 2017 (the Petition Date, as supplemented by the Addendum to Declaration of Todd M. Lenhart, Acting Chief Financial Officer and Senior Vice President of Accounting of rue21, Inc., In Support of Debtors Chapter 11 Petitions and First Day Motions [Docket No. 194] (the First Day Declaration. The First Day Declaration is fully incorporated herein by reference.

2 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 2 of 12 Relief Requested 3 1. By this motion (this Motion, the Debtors seek entry of an order substantially in the form attached hereto as Exhibit A (the Order : (a approving the proposed settlement between rue21, inc. ( rue21 and The CIT Group/Commercial Services, Inc. ( CIT provided for in this Motion (the Settlement ; and (b granting related relief. Jurisdiction 2. The United States Bankruptcy Court for the Western District of Pennsylvania (the Bankruptcy Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This is a core proceeding pursuant to 28 U.S.C. 157(b. The Debtors confirm their consent, pursuant to rule 7008 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules, to the entry of a final order by the Bankruptcy Court in connection with this Motion to the extent that it is later determined that the Bankruptcy Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution. 3. Venue is proper pursuant to 28 U.S.C and The statutory bases for the relief requested herein are sections 363(b of title 11 of the United States Code (the Bankruptcy Code, Bankruptcy Rule 9019, and rules (a and of the Local Bankruptcy Rules of the United States Bankruptcy Court for the Western District of Pennsylvania (the W.PA.LBR. 3 Capitalized terms used in this Motion and not immediately defined have the meanings given to such terms elsewhere in this Motion or the First Day Declaration, as applicable. 2

3 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 3 of 12 Background 5. rue21, inc. ( rue21 is a specialty fashion retailer of girls and guys apparel and accessories. As of the Petition Date, the Debtors had approximately 1,179 stores in various strip centers, regional malls, and outlet centers throughout the contiguous 48 states. The Debtors have various core rue21 brands in girls apparel (rue21, intimate apparel (true, girls accessories (etc!, girls cosmetics (ruebeauté!, guys apparel and accessories (Carbon, girls plus-size apparel (rue+, and girls swimwear (ruebleu. These rue21 brands focus on Fashion Meets Value providing quality, yet affordable, young adult clothing. The Debtors sell their merchandise to customers in the contiguous United States through their online store as well as in typical brick and mortar locations. The Debtors are headquartered in Warrendale, Pennsylvania and have one distribution center located in Weirton, West Virginia. 6. On the Petition Date, each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The Debtors are operating their business and managing their properties as debtors-in-possession pursuant to sections 1107(a and 1108 of the Bankruptcy Code. On May 23, 2017, the United States Trustee for the Western District of Pennsylvania (the U.S. Trustee appointed an Official Committee of Unsecured Creditors (the Creditors Committee. No request for the appointment of a trustee or examiner has been made in these chapter 11 cases. 7. On June 1, 2017, the Debtors filed their Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code (the Plan [Docket No. 316] and Disclosure Statement for the Debtors' Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code (the Disclosure Statement [Docket No. 315]. 8. On June 12, 2017, after motion by the Debtors and final hearing, the Bankruptcy Court entered the Final Order (I Authorizing, but not Directing Debtors to Pay Certain 3

4 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 4 of 12 Prepetition Claims of Lien Claimants and 503(b(9 Claimants and (II Granting Related Relief [Docket No. 514] (the 503(b(9 Order, under the terms of which the Debtors are authorized, but not directed to make payment of claims asserted under Bankruptcy Code Section 503(b(9 on terms and conditions agreed to between the Debtors and any such claimant, without further order of the Bankruptcy Court. Settlement Background 9. In the ordinary course of their business, the Debtors purchase merchandise from vendors for the purpose of supplying rue21 stores with apparel and accessories. Many of those vendors use factoring companies because they are unable to directly extend credit to the Debtors. For example, CIT is engaged in the business of accounts receivable factoring, which ostensibly helps companies, like rue21 s vendors, accelerate cash flow, improve collections, and control exposure. Prior to the Petition Date, CIT factored approximately 70 of the Debtors merchandise vendors. 10. CIT alleges that as of the Petition Date, the Debtors were indebted to CIT in the amount of $16,660, and, that of that amount, $7,586, is entitled to administrative claim status under Bankruptcy Code Section 503(b(9 (the CIT Filed 503(b(9 Claim. CIT filed four (4 proofs of claim in each of the Debtors chapter 11 cases (the CIT Proofs of Claim, including: (1 In re rue21, inc., Case No , Claim No. 374; (2 In re r services llc, Case No , Claim No. 375; (3 In re Rhodes HoldCo, Inc., Case No , Claim No. 376; and (4 In re rue services corporation, Case No , Claim No The CIT Proofs of Claim reflect the CIT Filed 503(b(9 Claim as well as certain general unsecured claims. 11. Since the Petition Date, the Debtors have negotiated in good faith with their vendors and factors on various issues, including the CIT Filed 503(b(9 Claim, for purposes of increasing liquidity, minimizing the administrative costs of these chapter 11 cases, and maximizing value of 4

5 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 5 of 12 their estates. The Debtors have reached an agreement with CIT, one of their largest factoring companies, which will provide CIT s factored client vendors with credit accommodations to enable such vendors to ship goods to the Debtors on terms more favorable to the Debtors. In exchange for the settlement of avoidance claims, including potential preference actions and accelerated payment of the reconciled CIT Filed 503(b(9 Claims, CIT has agreed to provide financial accommodations to its factored clients to permit such vendors to conduct business with the Debtors on acceptable trade terms, thereby improving liquidity, maximizing the value of the Debtors business, and eventually increasing the equity recoveries of all impaired creditors in these cases. 12. The terms of the proposed settlement are as follows: 4 a. CIT 503(b(9 Claim. The CIT Filed 503(b(9 Claim will be fixed and allowed in an amount to be agreed upon between CIT and the Debtors prior to the entry of the 9019 Order, but in no event later than August 4, 2017, which amount will not exceed the amount of the CIT Filed 503(b(9 Claim (the CIT Allowed 503(b(9 Claim. Any payment in whole or part of the CIT Filed 503(b(9 Claim or the CIT Allowed 503(b(9 Claim shall be absolute and indefeasible and shall not be subject to recapture, recoupment, avoidance or recovery under chapter 5 of the Bankruptcy Code or otherwise, including but not limited to, sections 544, 547, 548, 549, and 550 of the Bankruptcy Code. The Debtors have paid and shall pay the CIT Allowed 503(b(9 Claim as follows: (i within two (2 business days of execution of the Stipulation Pursuant to Sections 105 and 363 of the United States Bankruptcy Code and Rule 9019 of the Federal Rules of Bankruptcy Procedure Between the Debtors and the CIT Group/Commercial Services, Inc., attached to the Order as Schedule 1 (the Settlement Agreement, and pursuant to existing authority under the 503(b(9 Order, the Debtors paid to CIT (in accordance with payment instructions to be provided by CIT $3,750,000 in partial satisfaction of the CIT Filed 503(b(9 Claim on a dollar-for-dollar basis, and (ii within two (2 business days of the entry of the Order sought herein, the Debtors shall pay the balance of the CIT Allowed 503(b(9 Claim to 4 The summaries of the Settlement Agreement set forth in this section are qualified in their entirety by the provisions of the Settlement Agreement. To the extent there exists any inconsistency between this summary and the Settlement Agreement, the Settlement Agreement shall govern. 5

6 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 6 of 12 CIT (in accordance with payment instructions to be provided by CIT in full and final satisfaction of the CIT Allowed 503(b(9 Claim on a dollar-fordollar basis. b. CIT Proofs of Claim. Upon the receipt by CIT of the full amount of the CIT Allowed 503(b(9 Claim, any portion of the CIT Allowed 503(b(9 Claim reflected in the CIT Proofs of Claim shall be deemed withdrawn and expunged (as to that paid amount and the Debtors claims register shall be updated accordingly. c. Credit. Immediately following the payment of $3,750,000 in accordance with the Settlement Agreement, CIT agreed to approve, in its discretion applied in good faith and consistent with the ordinary course of past practice, credit risk for orders by CIT client-vendors of up to $3,750,000, on twenty (20 day terms, on a revolving basis. Immediately following the payment of the balance of the CIT Allowed 503(b(9 Claim in accordance with the Settlement Agreement, CIT agrees to approve, in its discretion applied in good faith and consistent with the ordinary course of past practice, credit risk for orders by CIT client-vendors of up to the amount of the CIT Allowed 503(b(9 Claim, on twenty (20 day terms, on a revolving basis. In no event shall CIT be required to approve credit risk for orders in excess of the CIT Allowed 503(b(9 Claim. d. Release & Waiver. Upon entry of the Order, CIT, its client-vendors, its refactoring clients, and any CIT refactoring client-vendors and each of the foregoing s predecessors, successors, assigns, subsidiaries, affiliates, current and former officers, directors, principals, shareholders, members, partners, employees, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, management companies, fund advisors and other professionals shall be deemed released, acquitted and discharged by the Debtors and their estates, each on behalf of itself and its predecessors, successors, assigns, subsidiaries, affiliates, current and former officers, directors, principals, shareholders, members, partners, employees, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, management companies, fund advisors and other professionals, from any and all avoidance or recovery actions against any such party under chapter 5 of the Bankruptcy Code, including, but not limited to, sections 544, 547, 548, 549, and 550 (including any derivative claims, asserted or assertable on behalf of any of the Debtors, their Estates or the Reorganized Debtors, as applicable whether known or unknown, foreseen or unforeseen, asserted or unasserted, accrued or unaccrued, matured or unmatured, determined or determinable, disputed or undisputed, liquidated or unliquidated, or due or to become due, in law, equity, or otherwise, that the Debtors, the Estates, the Reorganized Debtors, or such other releasing party would have been legally entitled to assert in their own 6

7 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 7 of 12 right (whether individually or collectively, or on behalf of the Holder of any Claim or Interest or other Entity. Nothing in this release is intended to limit any release or injunction which may be granted to such same parties in connection with any confirmation of the Plan. Basis for Relief I. The Settlement Represents a Favorable Resolution for the Debtors. 13. The Settlement favorably resolves the preference and Section 503(b(9 issues discussed above, which could otherwise result in contentious protracted litigation. In addition, CIT is providing much-needed credit accomodations, which will allow the Debtors to procure merchandise from vendors. The decision to approve a particular settlement lies within the sound discretion of the Bankruptcy Court. In exercising its discretion, the Bankruptcy Court must make an independent determination that the settlement is fair and reasonable. In re Zambrano Corp., No. ADV JAD, 2014 WL , at *3 (Bankr. W.D. Pa. Feb. 13, 2014 ( Pursuant to Bankruptcy Rule 9019(a, the authority to approve a compromise settlement is within the sound discretion of the bankruptcy court. ; Urmann v. Walsh (In re Diana M. Urmann, 523 B.R. 472, 479 (Bankr. W.D. Pa ( Pursuant to Bankruptcy Rule 9019(a, courts may approve settlements if they find that the compromise is fair and equitable.. To aid in this analysis, the court may consider the opinions of the debtor in possession and its counsel that the settlement is fair and reasonable. In re Purified Down Prods. Corp., 150 B.R. 519, 522 (S.D.N.Y Importantly, the bankruptcy court s discretion should be exercised in light of the general public policy favoring settlements. In re Capmark Fin. Grp. Inc., 438 B.R. 471, 515 (Bankr. D. Del (quoting In re Hibbard Brown & Co., 217 B.R. 41, 46 (Bankr. S.D.N.Y When evaluating a proposed settlement, a bankruptcy court need not decide the numerous issues of law and fact raised by the settlement, but rather should canvass the issues and see whether the settlement fall[s] below the lowest point in the range of reasonableness. In 7

8 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 8 of 12 re W.R. Grace & Co., 475 B.R. 34, (Bankr. D. Del However, the settlement need not be the best that the debtor could have obtained. In re Nutritional Sourcing Corp., 398 B.R. 816, 833 (Bankr. D. Del In deciding whether a particular settlement falls within the range of reasonableness, courts consider the following Martin factors, which include: a. the probability of success in litigation; b. the likely difficulties in collection; c. the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and d. the paramount interest of the creditors The Debtors submit that the Settlement with CIT represents a fair and equitable compromise, falls well within the range of reasonableness, and satisfies each of the Martin factors. Significantly, the Debtors Plan incorporates both a waiver of preference actions and a requirement of payment of Section 503(b(9 claims on the effective date of the Plan. While the Settlement provides these terms to CIT in advance of the effective date of the Plan and notwithstanding confirmation of the Plan, the Debtors have a high degree of confidence that the Plan will be confirmed as scheduled. Therefore CIT is receiving substantially similar benefits to those which it will otherwise receive upon confirmation of the Plan. Accordingly, the Debtors believe that the benefits of the credit accommodations being provided by CIT outweigh any burden represented by advance reconciliation of the CIT Filed 503(b(9 Claim and accelerated waiver of avoidance claims. 16. With respect to the first Martin factor, although the Debtors believe that they would have been able to succeed in any litigation concerning the amount and allowance of the CIT Filed 503(b(9 Claim, as well as any avoidance actions released by the Settlement, such litigation 5 In re Martin, 91 F.3d 389, 393 (3d Cir. 1996; see also In re Park, 2017 WL , at *2 (3d Cir. March 16, 2017 (applying the Martin factors. 8

9 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 9 of 12 would likely require a significant investment of resources. Indeed CIT has advised the Debtors that it vigorously disputes any liability with respect to avoidance actions and maintains that it has meritorious defenses to all such potential claims. The Settlement resolves any potential disputes without any adversarial process, while also providing the Debtors estates with valuable trade credit and thus providing value to the estates. 17. With respect to the second Martin factor, the Debtors ability to collect on any potential avoidance actions against CIT, CIT has further advised the Debtors that even if the Debtors were to secure a favorable judgment through litigation on this and other issues, CIT may appeal such a ruling, which appeals may continue for an unknown period of time. 18. With respect to the third Martin factor, the potential litigation issues resolved by the Settlement are complex, and litigating the issues would necessarily result in great expense, inconvenience, and delay. The time and expense necessary to carry out protracted litigation is especially important to consider here, where a swift and efficient exit from bankruptcy is essential to maximizing the value of the Debtors estates and maintaining the Debtors as a going concern. 19. With respect to the fourth Martin factor, the terms of the Settlement are beneficial to the Debtors estates and their stakeholders because: (a the Settlement is fair and reasonable; and (b the Settlement will provide the Debtors with valuable trade credit with which to purchase merchandise during the important back to school shopping season. Therefore, the proposed Settlement is in the best interests of the Debtors creditors and the interests of all parties are best served by the Court s approval of the Settlement. 20. The Debtors have determined, in their sound business judgment, that the Settlement represents a compromise that is fair, reasonable, and beneficial to the Debtors estates and their stakeholders. The Debtors therefore submit that the Settlement falls well above the lowest point 9

10 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 10 of 12 in the range of reasonableness. Accordingly, the Debtors respectfully request that the Court approve the Settlement pursuant to Bankruptcy Rule Request for Expedited Relief 21. The Debtors believe that just cause exists to support its request for an expedited hearing on the Motion and respectfully request that a hearing on the Motion on August 4, 2017, or as soon thereafter as the Bankruptcy Court deems appropriate. 22. The Debtors are currently in the process of purchasing merchandise for the critical back to school shopping season, a process which will continue until mid-august. The additional liquidity that will be provided upon payment of the balance of the CIT Allowed 503(b(9 Claim upon entry of the Order will provide the Debtors with the means to stock additional inventory during one of their busiest seasons of the year. Absent expedited relief, the Debtors will not be able to obtain this additional trade credit until after the back to school season is over, and will have missed an excellent opportunity to strengthen their liquidity position in the lead up to the hearing on confirmation of the Plan scheduled for August 29, Furthermore, the Debtors have discussed the Settlement with, and have provided copies of the Settlement Agreement to, the Creditors Committee as well as counsel to the lenders under their postpetition debtor-in-possession credit facilities (the DIP Lenders. The DIP Lenders and the Creditors Committee have indicated to the Debtors that they are supportive of the Settlement. Accordingly, the Debtors do not believe that any stakeholders will be prejudiced by an expedited hearing and respectfully request that the Bankruptcy Court grant such relief. Motion Practice 24. This Motion is accompanied by a proposed Order attached hereto as Exhibit A. Accordingly, the Debtors submit that this Motion satisfies W.PA.LBR (a and Notice 10

11 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 11 of The Debtors will provide notice of this Motion to: (a the Office of the United States Trustee for the Western District of Pennsylvania (the U.S. Trustee ; (b counsel to the Creditors Committee; (c counsel to the ABL Agent and the DIP ABL Agent; (d counsel to the Term Loan Agent and the DIP Term Loan Agent; (e counsel to the Indenture Trustee; (f counsel to the Sponsor Entities; (g the United States Attorney s Office for the Western District of Pennsylvania; (h the Internal Revenue Service; (i the office of the attorneys general for the states in which the Debtors operate; (j the Securities and Exchange Commission; (k the non-debtor parties to the Actions; and (l any party that has requested notice pursuant to Bankruptcy Rule The Debtors submit that, in light of the nature of the relief requested, no other or further notice need be given. No Prior Request 26. No prior request for the relief sought in this Motion has been made to this or any other court. [Remainder of Page Intentionally Left Blank] 11

12 Case GLT Doc 756 Filed 07/21/17 Entered 07/21/17 10:46:13 Desc Main Document Page 12 of 12 WHEREFORE, the Debtors respectfully request that the Bankruptcy Court enter the Order granting the relief requested herein and such other relief as the Bankruptcy Court deems appropriate under the circumstances. Dated: July 21, 2017 Jonathan S. Henes, P.C. (admitted pro hac vice Nicole L. Greenblatt, P.C. (pro hac vice admission pending Robert A. Britton (admitted pro hac vice George Klidonas (admitted pro hac vice KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP 601 Lexington Avenue New York, New York Telephone: ( Facsimile: ( /s/ Eric A. Schaffer Eric A. Schaffer (PA I.D. #30797 Jared S. Roach (PA I.D. # REED SMITH LLP 225 Fifth Avenue Pittsburgh, Pennsylvania Telephone: ( Facsimile: ( Local Counsel to the Debtors and Debtors in Possession Counsel to the Debtors and Debtors in Possession

13 Proposed Order Page 1 of 15 Exhibit A Proposed Order

14 Proposed Order Page 2 of 15 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA In re: Case No (GLT rue21, inc., et al., 1 Chapter 11 Debtors. (Jointly Administered rue21, inc., et al., Related to Docket No. Movants, v. The CIT Group/Commercial Services, Inc. Respondent. ORDER (I APPROVING A SETTLEMENT AGREEMENT WITH THE CIT GROUP/COMMERCIAL SERVICES, INC. PURSUANT TO FEDERAL RULE OF BANKRUPTCY PROCEDURE 9019 AND (II GRANTING RELATED RELIEF Upon the motion (the Motion 2 of the above-captioned debtors and debtors-in-possession (collectively, the Debtors for entry of an order (this Order (a approving the Settlement Agreement, a copy of which is attached hereto as Schedule 1 and (b granting related relief, all as more fully described in the Motion; and this Court having jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; and this Court having found that this is a core proceeding pursuant to 28 U.S.C. 157(b; and this Court having found that it may enter a final order consistent with 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, include: rue21, inc. (1645; Rhodes Holdco, Inc. (6922; r services llc (9425; and rue services corporation (0396. The location of the Debtors service address is: 800 Commonwealth Drive, Warrendale, Pennsylvania Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Motion.

15 Proposed Order Page 3 of 15 Article III of the United States Constitution; and this Court having found that venue of this proceeding and the Motion in this district is proper pursuant to 28 U.S.C and 1409; and this Court having found that the Debtors notice of the Motion and opportunity for a hearing on the Motion were appropriate under the circumstances and that no other notice need be provided; and this Court having reviewed the Motion and having heard the statements in support of the relief requested therein at a hearing before this Court (the Hearing ; and this Court having determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before this Court; and after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. The Motion is granted to the extent set forth herein. 2. Pursuant to Bankruptcy Rule 9019, the Settlement Agreement is hereby approved, including but not limited to the releases set forth in paragraph 4 of the Settlement Agreement. 3. The parties are authorized to enter into, perform, execute, and deliver all documents, and take all actions, necessary to immediately continue and fully implement the Settlement Agreement in accordance with the terms, conditions, agreements, and releases set forth or provided for therein, all of which are approved. 4. The notice requirements under Bankruptcy Rule 6004(a are hereby waived. 5. Notwithstanding Bankruptcy Rule 6004(h, the terms and conditions of this Order shall be immediately effective and enforceable upon its entry. 6. The Debtors are authorized to take all actions necessary to effectuate the relief granted pursuant to this Order in accordance with the Motion. 2

16 Proposed Order Page 4 of The Court retains exclusive jurisdiction with respect to all matters arising from or related to the implementation of this Order. Prepared by: Kirkland & Ellis LLP (Proposed Counsel to the Debtors and Debtors in Possession Pittsburgh, Pennsylvania Dated:, 2017 THE HONORABLE GREGORY L. TADDONIO UNITED STATES BANKRUPTCY JUDGE 3

17 Proposed Order Page 5 of 15 Schedule 1 Settlement Agreement

18 Proposed Order Page 6 of 15 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA In re: Case No (GLT rue21, inc., et al., 1 Chapter 11 Debtors. (Jointly Administered rue21, inc., et al., Movants, v. The CIT Group/Commercial Services, Inc. Respondent. STIPULATION PURSUANT TO SECTIONS 105 AND 363 OF THE UNITED STATES BANKRUPTCY CODE AND RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE BETWEEN THE DEBTORS AND THE CIT GROUP/COMMERCIAL SERVICES, INC. 2 This Stipulation (this Stipulation is made pursuant to (a existing authority under the Final Order (I Authorizing, but not Directing Debtors to Pay Certain Prepetition Claims of Lien Claimants and 503(b(9 Claimants and (II Granting Related Relief [Docket No. 514] (the 503(b(9 Order and (b authority to be obtained under sections 105 and 363 of title 11 of the United States Code (the Bankruptcy Code and Rule 9019 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules (the 9019 Order, between rue21, inc. ( rue21 and the above-captioned debtors and debtors in possession (collectively with rue21, the Debtors and 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are: rue21, inc. (1645; Rhodes Holdco, Inc. (6922; r services llc (9425; and rue services corporation (0396. The location of the Debtors service address is: 800 Commonwealth Drive, Warrendale, Pennsylvania

19 Proposed Order Page 7 of 15 The CIT Group /Commercial Services, Inc. ( CIT. The Debtors and CIT (each, a Party and collectively, the Parties hereby stipulate and agree as follows: 3 A. On May 15, 2017 (the Petition Date, each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Western District of Pennsylvania (the Bankruptcy Court. The Debtors are operating their business and managing their properties as debtors in possession pursuant to sections 1107(a and 1108 of the Bankruptcy Code. B. On June 12, 2017, after motion by the Debtors and final hearing, the Bankruptcy Court entered the 503(b(9 Order, under the terms of which the Debtors are authorized but not directed to make payment of claims asserted under Bankruptcy Code Section 503(b(9 on terms and conditions agreed to between the Debtors and any such claimant, without further order of the Bankruptcy Court. C. Prior to the Petition Date, CIT was engaged in the business of factoring accounts receivable arising out of the sale of goods to the Debtors by certain of the Debtors vendors and thereby providing trade credit to the Debtors. Prior to the Petition Date, CIT factored approximately 70 of the Debtors merchandise vendors. D. CIT alleges that as of the Petition Date, the Debtors were indebted to CIT in the amount of $16,660, and, that of that amount, $7,586, is entitled to administrative claim status under Bankruptcy Code Section 503(b(9 (the CIT Filed 503(b(9 Claim. E. CIT filed four (4 proofs of claim in each of the Debtors chapter 11 cases (the CIT Proofs of Claim, including: (1 In re rue21, inc., Case No , Claim No. 3 Capitalized terms used but not defined in this Stipulation shall have the meanings set forth in the Debtors' First Amended Joint Plan of Reorganization Pursuant To Chapter 11 of The Bankruptcy Code (the Plan [Docket No. 695]. 2

20 Proposed Order Page 8 of ; (2 r services llc, Case No , Claim No. 375; (3 In re Rhodes HoldCo, Inc., Case No , Claim No. 376; and (4 rue services corporation, Case No , Claim No The CIT Proofs of Claim reflect the CIT Filed 503(b(9 Claim as well as certain general unsecured claims. F. Following arms -length and good faith negotiations, the Parties have reached an agreement to settle certain claims against one another on the terms and conditions set forth herein, certain of which terms the Debtors are authorized to agree to under the existing Section 503(b(9 Order and certain of which terms require entry of the 9019 Order. NOW, THEREFORE, it is hereby stipulated and agreed to by each of the Parties, that: 1. CIT 503(b(9 Claim. The CIT Filed 503(b(9 Claim will be fixed and allowed in the amount to be agreed upon between CIT and the Debtors prior to the entry of the 9019 Order, but in no event later than August 4, 2017, which amount will not exceed the amount of the CIT Filed 503(b(9 Claim (the CIT Allowed 503(b(9 Claim. Any payment in whole or part of the CIT Filed 503(b(9 Claim or the CIT Allowed 503(b(9 Claim shall be absolute and indefeasible and shall not be subject to recapture, recoupment, avoidance or recovery under chapter 5 of the Bankruptcy Code or otherwise, including but not limited to, sections 544, 547, 548, 549, and 550 of the Bankruptcy Code. The Debtors shall pay the CIT Allowed 503(b(9 Claim as follows: (i within two (2 business days of execution of this Stipulation, and pursuant to the 503(b(9 Order, the Debtors shall pay to CIT (in accordance with payment instructions to be provided by CIT $3,750,000 in partial satisfaction of the CIT Filed 503(b(9 Claim on a dollar-for-dollar basis, and (ii within two (2 business days of the entry of the 9019 Order, the Debtors shall pay the balance of the CIT Allowed 503(b(9 Claim to CIT (in accordance with 3

21 Proposed Order Page 9 of 15 payment instructions to be provided by CIT in full and final satisfaction of the CIT Allowed 503(b(9 Claim on a dollar-for-dollar basis. 2. CIT Proofs of Claim. Upon the receipt by CIT of the full amount of the CIT Allowed 503(b(9 Claim, any portion of the CIT Allowed 503(b(9 Claim reflected in the CIT Proofs of Claim shall be deemed withdrawn and expunged (as to that paid amount and the Debtors claims register shall be updated accordingly. 3. Credit. Immediately following the payment of $3,750,000 in accordance with Paragraph 1 of this Stipulation, CIT agrees to approve, in its discretion applied in good faith and consistent with the ordinary course of past practice, credit risk for orders by CIT clientvendors of up to $3,750,000, on twenty (20 day terms, on a revolving basis. Immediately following the payment of the balance of the CIT Allowed 503(b(9 Claim in accordance with Paragraph 1 of this Stipulation, CIT agrees to approve, in its discretion applied in good faith and consistent with the ordinary course of past practice, credit risk for orders by CIT client-vendors of up to the amount of the CIT Allowed 503(b(9 Claim, on twenty (20 day terms, on a revolving basis. In no event shall CIT be required to approve credit risk for orders in excess of the CIT Allowed 503(b(9 Claim. 4. Release and Waiver. Upon entry of the 9019 Order, CIT, its clientvendors, its refactoring clients, and any CIT refactoring client-vendors and each of the foregoing s predecessors, successors, assigns, subsidiaries, affiliates, current and former officers, directors, principals, shareholders, members, partners, employees, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, management companies, fund advisors and other professionals shall be deemed released, acquitted and discharged by the Debtors and their estates, each on behalf of itself and 4

22 Proposed Order Page 10 of 15 its predecessors, successors, assigns, subsidiaries, affiliates, current and former officers, directors, principals, shareholders, members, partners, employees, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives, management companies, fund advisors and other professionals, from any and all avoidance or recovery actions against any such party under chapter 5 of the Bankruptcy Code, including, but not limited to, sections 544, 547, 548, 549, and 550 (including any derivative claims, asserted or assertable on behalf of any of the Debtors, their Estates or the Reorganized Debtors, as applicable whether known or unknown, foreseen or unforeseen, asserted or unasserted, accrued or unaccrued, matured or unmatured, determined or determinable, disputed or undisputed, liquidated or unliquidated, or due or to become due, in law, equity, or otherwise, that the Debtors, the Estates, the Reorganized Debtors, or such other releasing party would have been legally entitled to assert in their own right (whether individually or collectively, or on behalf of the Holder of any Claim or Interest or other Entity. Nothing in this release is intended to limit any release or injunction which may be granted to such same parties in connection with any confirmation of the Plan. 5. Further Assurances. The Debtors and CIT shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions as CIT and the Debtors may reasonably deem necessary or desirable to consummate the transactions contemplated hereunder. 6. Notice. Any notice given pursuant to this Stipulation shall be in writing and delivered by hand delivery or overnight courier addressed as follows: 5

23 Proposed Order Page 11 of 15 if to the Debtors: with a copy to: rue21, inc. 800 Commonwealth Dr. Warrendale, Pennsylvania Attn: Benjamin R. Gross Telephone: ( Kirkland & Ellis LLP 601 Lexington Avenue New York, New York Attention: Jonathan S. Henes, P.C., Robert A. Britton, and George Klidonas Telephone: ( Facsimile: ( if to CIT: The CIT Group/Commercial Services, Inc. 301 South Tryon Street Charlotte, North Carolina Attn: Tim Cropper Telephone: ( with a copy to: Hahn & Hessen LLP 488 Madison Avenue New York, New York Attention: Rosanne T. Matzat Telephone: ( Facsimile: ( Governing Law. This Stipulation, and any disputes related thereto, shall be governed by and be construed in accordance with: (a applicable federal law; or (b to the extent federal law does not apply, the laws of the state of New York without regard to the rule of conflict of laws of the state of New York or any other jurisdiction that would require the application of the law of another jurisdiction. The Parties hereto consent to submit to the jurisdiction of the Bankruptcy Court for any litigation arising out of or relating to this Stipulation 6

24 Proposed Order Page 12 of 15 and agree not to commence any litigation relating to this Stipulation except in the Bankruptcy Court. 8. Authority. Subject to the entry of the 9019 Order as to those provisions requiring the entry of such order, each of the Parties hereto represents and warrants that it has all requisite authority to enter into this Stipulation and to undertake the transactions contemplated hereunder. 9. Successors and Assigns. The rights and obligations of each of the Parties under this Stipulation shall be binding upon, and inure to the benefit of, any successor or assign of each such Party. 10. Entire Understanding. This Stipulation constitutes the entire understanding of the Parties hereto in connection with the subject matter covered herein, and may not be amended, modified, or altered except by an agreement in writing signed by each of the Parties. 11. Amendments and Modifications. This Stipulation may be amended or modified only upon the written approval of the Parties. 12. No Party Deemed Drafter. This Stipulation is being entered into by and among competent persons, each of whom is experienced in commercial matters and represented by sophisticated counsel. Therefore, any ambiguous language in this Stipulation will not be construed against any particular Party as the drafter of such language. 13. Failure to Enforce. The failure of any Party to enforce a provision of this Stipulation will not constitute a waiver of the Party s right to enforce that provision. 14. Counterparts. This Stipulation may be executed in any number of counterparts and by the different Parties hereto in separate counterparts, each of which shall be 7

25 Proposed Order Page 13 of 15 deemed to be an original, but all of which taken together shall constitute one and the same document. Delivery of an executed counterpart of this Stipulation by facsimile or electronic mail shall be equally effective as delivery of an original executed counterpart. [Signature Pages Follow] 8

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