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Exhibit 10.1

 
EXECUTION VERSION

AGENCY AGREEMENT
 
This Agency Agreement (“Agreement”), effective upon the closing (the “Closing”)
of the transactions contemplated by the APA (as defined below), is made as of
September 12, 2016, by and among Aéropostale, Inc., a Delaware corporation
(“Aéropostale”), and the other direct and indirect wholly-owned Subsidiaries of
Aéropostale that are signatory hereto (together with Aéropostale, “Merchant”), a
contractual joint venture composed of Hilco Merchant Resources, LLC and Gordon
Brothers Retail Partners, LLC (together, “Agent”), and Aero OpCo LLC (the
“Buyer”).  Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the APA.

Section 1.  Recitals.
 
WHEREAS, on May 4, 2016, Merchant filed a chapter 11 case in the United States
Bankruptcy Court for the Southern District of New York (such case, the
“Bankruptcy Case” and such court, or other court of competent jurisdiction in
which the Bankruptcy Case is filed, the “Bankruptcy Court”);
 
WHEREAS, simultaneously with the execution hereof, Buyer, Merchant, and certain
other entities affiliated with Merchant entered into an Asset Purchase Agreement
(the “APA”) pursuant to which Buyer will acquire certain assets of the Merchant
and its subsidiaries, as set forth more particularly therein;
 
WHEREAS, currently, Merchant operates six hundred twenty-three retail stores
(each a “Store” and collectively, the “Stores”); and
 
WHEREAS, Merchant and Buyer desire that the Agent act as Buyer’s and Merchant’s
exclusive agent for the limited purposes of: (a) selling all of the Merchandise
and Inventory subject to the Open Purchase Orders from (i) the Closing Stores
(as defined below) by means of a “store closing”, “sale on everything”,
“everything must go”, or similar sale, but expressly excluding “going out of
business” and “total inventory liquidation” sales at the Closing Stores
(“Closing Store Advertising”), (ii) the Continuing Stores (as defined below)
through a “sale on everything,” “everything must go”, or similar sale, but
expressly excluding “store closing,” and “total inventory liquidation” sales at
the Continuing Stores absent the consent of each of Authentic Brands Group LLC,
Simon Aero, LLC and GGP Aero NewCo, and expressly excluding “going out of
business,” sales at the Continuing Stores, and provided that the Agent shall
include “new Aeropostale store coming” or similar themed signage at the
Continuing Stores (“Continuing Store Advertising”), and (iii) through the
e-commerce websites (collectively, the “E-Commerce Sites”) in accordance with
the terms of this Agreement; and (b) disposing of the Designated F&E at the
Closing Stores only (the foregoing and as further described below, the “Sale”).
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Agent, Buyer, and Merchant
hereby agree as follows:
 
Section 2.  Appointment of Agent/Approval Order.
 
(a)           Upon the Closing, effective as of September 2, 2016, Merchant and
Buyer hereby appoint the Agent, and the Agent hereby agrees to serve, as
Merchant’s and Buyer’s exclusive agent for the limited purpose of conducting the
Sale in accordance with the terms and conditions of this Agreement.
 

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(b)           Upon Closing, effective as of September 2, 2016, Agent shall be
authorized to use (i) Closing Store Advertising with respect to Closing Stores
and (ii) Continuing Store Advertising for Continuing Stores and the E-Commerce
Sites, and the Approval Order shall provide that Agent shall be required to
comply with applicable federal, state and local laws, regulations and
ordinances, including, without limitation, all laws and regulations relating to
advertising, privacy, consumer protection, occupational health and safety and
the environment, together with all applicable statutes, rules, regulations and
orders of, and applicable restrictions imposed by, governmental authorities
(collectively, the “Applicable General Laws”), other than all applicable laws,
rules and regulations in respect of “going out of business”, "store closing" or
similar-themed sales and permitting (collectively, the “Liquidation Sale Laws”),
provided that the Sale is conducted in accordance with the terms of this
Agreement, the Sale Guidelines and the Approval Order; and provided further that
the Approval Order shall provide that so long as the Sale is conducted in
accordance with the Sale Guidelines and the Approval Order and in a safe and
professional manner, Agent shall be deemed to be in compliance with any
Applicable General Laws.
 
(c)           Closing Stores.  As used in this Agreement, “Closing Stores” shall
mean the Closing Stores under and as defined in the APA, as such Stores are from
time to time designated as Closing Stores thereunder pursuant to the procedures
set forth in the APA.  Each Store that is not a Closing Store shall be referred
to as a “Continuing Store” and, collectively, the “Continuing Stores”.
 
Section 3.  Proceeds.
 
3.1           Intentionally Omitted.
 
3.2           Intentionally Omitted:
 
3.3           Proceeds; Control of Proceeds.
 
(a)           For purposes of this Agreement, “Proceeds” shall mean the
aggregate of (i) the total amount (in dollars) of all sales of Merchandise made
under this Agreement and all service and shipping revenue, in each case during
the Sale Term and exclusive of Sales Taxes; and (ii) all proceeds of Merchant’s
or Buyer’s insurance for loss or damage to Merchandise arising from events
occurring during the Sale Term.  For purposes of this Agreement, “Other
Proceeds” shall mean (i) the total amount (in dollars) of all sales of
Designated F&E made under this Agreement; (ii) the total amount (in dollars) of
all sales of Excluded Goods; (iii) the total amount (in dollars) of all sales of
Inventory under the Open Purchase Orders; (iv) all proceeds of Merchant’s or
Buyer’s insurance for loss or damage to Inventory under Open Purchase Orders
arising from events occurring during the Sale Term; and (v) the total amount (in
dollars) of all sales of Additional Agent Goods made under this Agreement. 
Subject to the terms and conditions of that certain letter agreement between the
Agent and Buyer (the “Letter Agreement”), the Merchant and Buyer hereby
irrevocably agree that, as compensation for Agent’s services hereunder, Agent
shall receive and retain for its sole and exclusive benefit all Proceeds and
Other Proceeds.
 
(b)           Intentionally Omitted.
 
(c)           Upon Closing, all Proceeds and Other Proceeds shall be controlled
by Agent in the manner provided for below.
 
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(1)          Agent may (but shall not be required to) establish its own accounts
(including without limitation credit card accounts and systems), dedicated
solely for the deposit of the Proceeds and Other Proceeds and the disbursement
of amounts payable to Agent hereunder (the “Agency Accounts”), and Merchant or
Buyer, as applicable, shall promptly, upon Agent’s reasonable request, execute
and deliver all necessary documents to open and maintain the Agency Accounts (at
Agent’s sole cost and expense, with any such costs and expenses constituting
Expenses hereunder); provided, however, Agent shall have the right, in its sole
and absolute discretion, to continue to use Merchant’s Designated Deposit
Accounts (as defined below) as the Agency Accounts in which case Merchant’s
Designated Deposit Accounts shall be deemed to be Agency Accounts.  Agent shall
exercise sole signatory authority and control with respect to the Agency
Accounts.  The Agency Accounts shall be dedicated solely to the deposit of
Proceeds and Other Proceeds and other amounts contemplated by this Agreement and
the distribution of amounts payable hereunder.  Upon request, Agent shall
deliver to Merchant or Buyer copies of all bank statements and other information
relating to such accounts.  Neither Merchant nor Buyer, as applicable, shall be
responsible for, and Agent shall pay as an Expense hereunder, any bank fees and
charges, including wire transfer charges, related to the Sale and the Agency
Accounts, whether received during or after the Sale Term.  Upon Agent’s notice
to Merchant and Buyer of Agent’s designation of the Agency Accounts (other than
Merchant’s Designated Deposit Accounts), all Proceeds and Other Proceeds of the
Sale (including processor receivables and credit card Proceeds and Other
Proceeds) shall be deposited into the Agency Accounts.
 
(2)          Agent shall have the right to use Merchant’s or Buyer’s, as
applicable, credit card facilities, including Merchant’s or Buyer’s credit card
terminals and processor(s), credit card processor coding, Merchant’s or Buyer’s
identification number(s) and existing bank accounts for credit card transactions
relating solely to the Sale.  In the event that Agent elects to use Merchant’s
or Buyer’s credit card facilities, Merchant or Buyer, as the case may be, shall
process credit card transactions on behalf of Agent and for Agent’s account,
applying customary practices and procedures.  Without limiting the foregoing,
Merchant or Buyer, as applicable, shall cooperate with Agent to download data
from all credit card terminals each day during the Sale Term to effect
settlement with Merchant’s or Buyer’s, as applicable, credit card processor(s),
and shall take such other actions necessary to process credit card transactions
on behalf of Agent under Merchant’s or Buyer’s, as applicable, identification
number(s).  At Agent’s request, Merchant or Buyer, as applicable, shall
cooperate with Agent to establish Merchant’s or Buyer’s identification numbers
under Agent’s name to enable Agent to process all such credit card Proceeds and
Other Proceeds for Agent’s account.  Neither Merchant nor Buyer, as applicable,
shall be responsible for, and Agent shall pay as an Expense hereunder, any
credit card fees, charges, and chargebacks related to the Sale, whether received
during or after the Sale Term.  Agent shall not be responsible for, as an
Expense or otherwise, any credit card fees, charges, or chargebacks that do not
relate to the Sale, whether received prior to, during or after the Sale Term.
 
(3)          Unless and until Agent establishes its own Agency Accounts (other
than Merchant’s Designated Deposit Accounts), all Proceeds, Other Proceeds, and
other amounts contemplated by this Agreement (including processor receivables
and credit card Proceeds and Other Proceeds), shall be collected by Merchant
and/or Buyer, as applicable, and deposited on a daily basis into depository
accounts designated by, and owned and in the name of, Merchant or Buyer, as the
case may be, for the Stores, which accounts shall be designated solely for the
deposit of Proceeds and Other Proceeds and other amounts contemplated by this
Agreement (including processor receivables and credit card Proceeds and Other
Proceeds), and the disbursement of amounts payable to or by Agent hereunder (the
“Designated Deposit Accounts”).  The Designated Deposit Accounts shall be cash
collateral accounts, with all cash, credit card payments, checks and similar
items of payment, deposits and any other amounts in such accounts being
Proceeds, Other Proceeds, or other amounts contemplated hereunder, and each of
Merchant and Buyer, subject to the security interests liens of the DIP Lenders
until the DIP Obligations (as defined in the DIP Order) are paid in full, hereby
grants to Agent a first priority senior security interest in each Designated
Deposit Account and all proceeds (including Proceeds and Other Proceeds) in such
accounts from and after the Sale Commencement Date.  If requested by Agent, each
account shall be subject to an agreement between and among the Agent and
Merchant or Buyer (as applicable), and the subject bank, providing for, among
other things, that such bank will comply with instructions originated by Agent
directing the disposition of funds in such account without further consent of
Merchant or Buyer, as applicable (a “Control Agreement”).  If, notwithstanding
the provisions of this Section 3.3(c), Merchant or Buyer receives or otherwise
has dominion over or control of any Proceeds, Other Proceeds, or other amounts
due to Agent under this Agreement, Merchant or Buyer, as applicable, shall be
deemed to hold such Proceeds, Other Proceeds, and other amounts “in trust” for
Agent and shall not commingle Proceeds, Other Proceeds, or other amounts due to
Agent with any of Merchant’s or Buyer’s other funds or deposit such Proceeds,
Other Proceeds, or other amounts in any account except a Designated Deposit
Account or as otherwise instructed by Agent.
 
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(4)          On each Business Day, Merchant and/or Buyer, as applicable, shall
promptly pay to Agent by wire funds transfer all funds in the Designated Deposit
Accounts (including, without limitation, Proceeds (including from credit card
sales), Other Proceeds, and all other amounts) deposited into the Designated
Deposit Accounts for the prior day(s) without any offset or netting of Expenses
or other amounts that may be due to Merchant or Buyer.  Agent shall notify
Merchant and/or Buyer, as applicable, of any shortfall in such payment, in which
case, Merchant (or Buyer, as the case may be) shall promptly pay to Agent funds
in the amount of such shortfall.
 
(d)           Agent shall purchase all cash in the Stores on and as of the start
of business on the Sale Commencement Date on a dollar for dollar basis, which
shall be paid to the Buyer as soon as practicable after the cash can be counted.
 
3.4           Bulk Sales.  Agent shall be authorized to sell Merchandise and
Inventory under Open Purchase Orders in bulk to one or more purchasers, in which
case Merchant shall execute any such documents of transfer prepared by Agent at
Agent’s sole cost and expense.
 
3.5           Open Purchase Orders.  Agent agrees to pay the vendors (or to
reimburse Merchant, as the case may be) amounts due (less any discounts obtained
by Agent or its Representatives) under the Open Purchase Orders for Inventory
for which Merchant has taken receipt, with such payment made as and when such
Open Purchase Orders become due and payable.
 
Section 4.  Expenses of the Sale.
 
4.1           Expenses.  Agent shall be unconditionally responsible for all
“Expenses,” which expenses shall be paid by Agent in accordance with Section 4.2
below.  Agent hereby agrees to pre-fund (x) any payroll-related expenses
consistent with Merchant’s customary payroll funding practices and timing and
(y) an amount equal to Occupancy Expenses payable by Merchant or Buyer for the
period from September 2, 2016 through September 30, 2016 by no later than
September 16, 2016 and for the period from October 1, 2016 through October 31,
2016 by no later than September 28, 2016 ((i) and (ii), collectively, the
“Prefunding Obligations”); provided, however, that to the extent the actual
Expenses related to the Prefunding Obligations are less than the Prefunding
Obligations, Agent shall be entitled to a dollar for dollar credit against other
Expenses or entitled to a refund of such overfunding.  As used herein,
“Expenses” shall mean the Store-level operating expenses of the Sale which arise
during the Sale Term and are attributable to the Sale, limited to the following:
 
(a)           actual payroll (including overtime) with respect to all Retained
Employees used in connection with conducting the Sale for actual days/hours
worked at a Store during the Sale Term (including hours worked by those
employees performing the Inventory Taking) as well as payroll (including
overtime) for any temporary employees/labor engaged for the Sale;
 
(b)           any amounts payable by Merchant or Buyer for benefits for Retained
Employees (including FICA, unemployment taxes, workers’ compensation and
healthcare insurance, but excluding Excluded Payroll Benefits) for Retained
Employees used in the Sale, in an amount not to exceed 13.1% of the base payroll
for each Retained Employee in the Stores (the “Payroll Benefits Cap”);
 
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(c)           (i) the actual Occupancy Expenses categorized on Exhibit 4.1(c) in
all cases limited on a per Store, per category, and per diem basis not to exceed
the respective categories and amounts shown on Exhibit 4.1(c), and (ii) the
portion of the actual Occupancy Expenses in excess of the Occupancy Expense Cap
payable by Agent pursuant to Section 4.1(4);
 
(d)           Retention Bonuses for Retained Employees, as provided for in
Section 9.4 below;
 
(e)           advertising and direct mailings relating to the Sale, Store
interior and exterior signage and banners, and signwalkers, in each case
relating to the Sale;
 
(f)            credit card fees, bank card fees, and chargebacks and credit/bank
card discounts with respect to Merchandise and Inventory under Open Purchase
Orders sold in the Sale;
 
(g)           bank service charges (for Store, corporate accounts, and Agency
Accounts), check guarantee fees, wire transfer costs, and bad check expenses to
the extent attributable to the Sale;
 
(h)           costs for additional Supplies at the Stores necessary to conduct
the Sale as requested by Agent;
 
(i)            all fees and charges required to comply with applicable laws in
connection with the Sale as agreed to by Agent;
 
(j)            Store cash theft and other store cash shortfalls in the
registers;
 
(k)           all costs and expenses associated with Agent’s on-site supervision
of the Stores, Merchant’s and Buyer’s distribution centers (the “Distribution
Centers”), and corporate offices, including (but not limited to) any and all
fees, wages, taxes, third party payroll costs and expenses, and deferred
compensation of Agent’s field personnel, travel to, from or between the Stores,
Distribution Centers, and corporate offices, and costs and expenses relating
thereto (including reasonable and documented corporate travel to monitor and
manage the Sale);
 
(l)            postage, courier and overnight mail charges requested by Agent to
the extent relating to the Sale;
 
(m)          one hundred percent (100%) of cost of the Inventory Taker;
 
(n)           Agent’s actual cost of capital (including letter of credit fees)
and insurance;
 
(o)           Agent’s costs and expenses associated with this Agreement, the
APA, the Sale, or the transactions contemplated by this Agreement, including,
but not limited to, legal fees and expenses incurred in connection with the
review of data, preparation, negotiation, and execution of this Agreement and
any ancillary documents, and the Sale, and further including all costs and
expenses associated with Inventory under Open Purchase Orders and Additional
Agent Goods included in the Sale, if any;
 
(p)           third party payroll processing expenses associated with the Sale;
 
(q)           costs of transfers initiated by Agent of Merchandise and Inventory
under Open Purchase Orders between and among the Stores during the Sale Term,
including delivery and freight costs, it being understood that Agent shall be
responsible for coordinating such transfer of Merchandise and Inventory under
Open Purchase Orders, subject, however, to the provisions of Section 8.1(e);
 
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(r)            per unit processing and shipping costs for Merchandise and
Inventory under Open Purchase Orders shipped from the Distribution Centers to
the Stores in an amount not to exceed $0.22 per unit so shipped, it being
understood that Agent shall be responsible for coordinating such transfer of
such Merchandise and Inventory under Open Purchase Orders;
 
(s)           Merchant’s insurance premium obligations under Sections 12.1 and
12.2 of this Agreement for the period between the Sale Commencement Date and the
Sale Termination Date equal to the per diem amount of $3,914.00 during the Sale
Term;
 
(t)            actual costs and expenses attributable to the operation of the
E-Commerce Sites, not to exceed amounts payable to GSI on account of operating
the E-Commerce Sites as follows:  (1) shipping costs and expenses in an amount
equal to twelve percent (12%) of the Cost Value of Merchandise sold through the
E-Commerce Sites and shipped by GSI; plus (2) fees in an amount equal to
twenty-two percent (22%) of gross sales (net of Sales Taxes) made through the
E-Commerce Sites;
 
(u)           to the extent not included in CAM or otherwise included on Exhibit
4.1(c), cash register maintenance, routine repairs, trash and snow removal,
housekeeping and cleaning expenses, local and long-distance telephone and
internet/wifi expenses, security (including, without limitation, security
systems, courier and guard service, building alarm service and alarm service
maintenance); and
 
(v)           the actual costs and expenses of Agent providing such additional
services as the Agent deems appropriate for the Sale.
 
Notwithstanding anything herein to the contrary, to the extent that any Expense
category listed in Section 4.1 is also included on Exhibit 4.1(c), Exhibit
4.1(c) shall control and such Expenses shall not be double counted.   There will
be no double counting or payment of Expenses to the extent that Expenses appear
or are contained in more than one Expense category or are payable to Merchant
and Buyer.
 
As used herein, the following terms have the following respective meanings:
 
(1)          “Central Service Expenses” means costs and expenses for Merchant’s
or Buyer’s central administrative services necessary for the Sale, including,
but not limited to, internal payroll processing, MIS services, cash and
inventory reconciliation, data processing and reporting, email preparation and
distribution, information technology and E-Commerce Site operations, updates,
maintenance and other services related thereto, and accounting (collectively,
“Central Services”).
 
(2)          “Excluded Payroll Benefits” means (i) the following benefits
arising, accruing or attributable to the period prior to, during, or after the
Sale Term:  (w) vacation days or vacation pay, (x) sick days or sick leave or
any other form of paid time off, (y) maternity leave or other leaves of absence
and (z) ERISA coverage and similar contributions and/or (ii) any other benefits
in excess of the Payroll Benefits Cap, including, without limitation, any
payments due under the WARN Act.
 
(3)          “Occupancy Expenses” means, with respect to the Stores, base rent,
percentage rent, HVAC, utilities, common area maintenance (“CAM”), storage
costs, real estate and use taxes, Merchant’s/Buyer’s association dues and
expenses, utilities expenses, cash register maintenance, routine repairs,
building maintenance, trash and snow removal, housekeeping and cleaning
expenses, local and long-distance telephone and internet/wifi expenses, security
(including, without limitation, security systems, courier and guard service,
building alarm service and alarm service maintenance), and rental for furniture,
fixtures and equipment.
 
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(4)          Notwithstanding any other provision of this Agreement to the
contrary, “Expenses” shall not include: (i) Excluded Payroll Benefits; (ii)
Central Service Expenses (other than amounts payable relative to the E-Commerce
Sites pursuant to Section 4.1(t) above), (iii) Occupancy Expenses or any
occupancy-related expenses of any kind or nature in excess of the respective per
Store, per diem occupancy-related categories and amounts expressly provided for
as an Expense under Section 4.1(c) above to the extent actually incurred; (iv)
any expenses of any kind relating to or arising from Merchant’s or Buyer’s home
office or Distribution Centers, including (without limitation) the Distribution
Center Expenses, (v) any item other than the Expenses specifically listed in
Sections 4.1(a)-(v) (including, for the avoidance of doubt, any costs and
expenses in excess of any monetary caps set forth in Sections 4.1(a)-(v)); and
(vi) any other costs, expenses or liabilities payable by Merchant or Buyer
(subject to the last sentence of this clause (4)) not provided for herein, all
of which shall be paid solely by Merchant or Buyer (subject to the last sentence
of this clause (4)), as applicable, promptly when due, subject to the provisions
of the Bankruptcy Code, the APA, and the Approval Order.  For the avoidance of
doubt, all costs, expenses and liabilities incurred in connection with the Sale
and the transactions contemplated hereby (including those paid by Merchant) that
do not constitute Expenses, including those expressly set forth in the
immediately preceding sentence, shall be the responsibility of, and borne by,
Buyer (or to the extent paid by Merchant, promptly reimbursed by Buyer);
provided, however, that if the actual Occupancy Expenses for the Sale Term
exceed the aggregate Occupancy Expenses set forth on Exhibit 4.1(c) calculated
by (I) multiplying the aggregate per diem for each Store by the number of days
beginning on the Sale Commencement Date and ending on the applicable Vacate Date
for each such Store and (II) adding together the result of the equation in (I)
for all Stores (such aggregate amount, “Occupancy Expense Cap”), the Agent shall
be obligated to pay 50% of the amount by which the actual Occupancy Expenses
exceed the Occupancy Expense Cap not to exceed $850,000 (and Buyer shall be
obligated to pay the balance thereof).
 
4.2           Payment of Expenses.
 
Agent shall be responsible for the payment of all Expenses out of Proceeds (or
from Agent’s own accounts if and to the extent there are insufficient
Proceeds).  All Expenses incurred during each week of the Sale (i.e. Sunday
through Saturday) shall be paid by Agent to or on behalf of Merchant or Buyer,
as the case may be, or paid by Merchant or Buyer, as the case may be, and
thereafter reimbursed by Agent as provided for herein, immediately following the
Weekly Sale Reconciliation; provided, however, in the event that the actual
amount of an Expense is unavailable on the date of the reconciliation (such as
payroll), Merchant and Agent or Buyer and Agent, as the case may be, shall agree
to an estimate of such amounts, which amounts will be reconciled once the actual
amount of such Expense becomes available.  Agent, Buyer, and/or Merchant may
review or audit the Expenses at any time.
 
4.3           Distribution Center Expenses
 
All Distribution Center Merchandise and certain Inventory under Open Purchase
Orders (as agreed to by Agent and Buyer) shall be delivered from the
Distribution Centers to the Stores in accordance with the Allocation Schedule
and, solely as between Agent and Buyer, the Letter Agreement.  Notwithstanding
the foregoing, all costs and expenses of operating the Distribution Centers,
including, but not limited to, use and occupancy expenses, Distribution Center
employee payroll and other obligations, and/or processing, transferring,
consolidating, shipping, and/or delivering goods within or from the Distribution
Centers (the “Distribution Center Expenses”), shall remain the sole obligation
of Merchant for the period prior to Closing and Buyer after the Closing.
 
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Section 5.  Excluded Goods.
 
5.1           Intentionally Omitted.
 
5.2           Intentionally Omitted.
 
5.3           Intentionally Omitted
 
5.4           Excluded Goods.  If requested at the beginning of the Sale Term,
Agent shall accept goods not included as “Merchandise” or not included as
Inventory under Open Purchase Orders under the APA for sale at prices and
through sale channels established by Agent (such goods, “Excluded Goods”) and
the compensation payable to Agent in connection therewith as well as the
division and distribution of proceeds from the sale of Excluded Goods shall be
addressed in the Letter Agreement; otherwise, Agent shall have no responsibility
whatsoever for Excluded Goods and Merchant (if prior to the Closing) or Buyer
(if following the Closing) shall remove them from the sales floor.  In no event
shall Excluded Goods be shipped to the Stores absent Agent’s express written
consent.  Agent shall have no cost, expense or responsibility in connection with
any goods not included in Merchandise or that are not Inventory under Open
Purchase Orders.
 
Section 6.  Sale Term.
 
6.1           Term.  Subject to satisfaction of the conditions precedent set
forth in Section 10 hereof, the Sale shall commence on September 2, 2016 (the
“Sale Commencement Date”).  Agent shall complete the Sale (i) at each Store no
later than December 31, 2016 and (ii) at each Closing Store no later than
November 30, 2016 (subject to Agent’s ability to negotiate with the applicable
landlord an extension thereof a Closing Store by Closing Store basis, but in no
event later than December 31, 2016) (each such date, the “Sale Termination
Date”, and the period from the Sale Commencement Date to the applicable Sale
Termination Date as to each such Store being the “Sale Term”).  Notwithstanding
the foregoing, Agent may, in its discretion, terminate the Sale earlier on a
store-by-store basis upon not less than five (5) days’ prior written notice (a
“Vacate Notice”) to Merchant or Buyer, as applicable, (the “Vacate Date”),
provided, that the Agent's obligations to pay all Expenses, including Occupancy
Expenses, for each Store subject to a Vacate Notice shall continue until the
applicable Vacate Date for such Store.
 
6.2           Vacating the Stores.  At the conclusion of the Sale at each Store,
Agent agrees to leave each Store in “broom clean” condition, ordinary wear and
tear excepted, except for (i) all FF&E located in the Continuing Stores shall be
left in place for the benefit the Buyer and (ii) unsold items of Designated F&E
and other assets or property of the Merchant or Buyer, as applicable, which may
(upon notice to the Pre-Petition Term Agent ) be abandoned by Agent in place in
a neat and orderly manner pursuant to Section 7 below.  Agent shall vacate each
Store on or before the Sale Termination Date as provided for herein, at which
time Agent shall surrender and deliver the Store premises, and Store keys, to
Merchant or, in the case of the Continuing Stores, to the Buyer.  Agent’s
obligations to pay all Expenses for the Stores shall continue until the
applicable Vacate Date for each Store.
 
Section 7.  FF&E.
 
7.1           Designated F&E.  Agent shall sell all Furnishings and Equipment at
the Closing Stores (collectively, “Designated F&E”) and shall be responsible for
the costs and expenses incurred in connection with the disposition of the
Designated F&E; provided, that the Agent shall not commence the sale of
Designated F&E until October 31, 2016 (or such earlier date as Buyer and Agent
may agree).  For the avoidance of doubt, the Agent shall not sell any
Furnishings and Equipment at any Continuing Store unless otherwise directed by
the Buyer.  If Buyer has an interest in acquiring Designated F&E from one or
more Closing Stores after the sale thereof is commenced by Agent, Agent agrees
to cease selling such Furnishings and Equipment if requested by Buyer.
 
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7.2           Abandonment of Designated F&E.  Upon five days prior written
notice to Merchant or Buyer, as applicable, and the Pre-Petition Term Agent,
Agent shall be authorized to abandon any and all unsold Designated F&E in place
without any cost or liability to any party.
Section 8.  Conduct of the Sale.
 
8.1           Rights of Agent.  In addition to any other rights granted to Agent
elsewhere in this Agreement, Agent shall be permitted to conduct the Sale as
follows:  (i) at the Closing Stores by means of Closing Store Advertising, (ii)
at the Continuing Stores through Continuing Store Advertising, and (iii) through
E-Commerce Sites through Continuing Store Advertising, in each case throughout
the Sale Term without compliance with any Liquidation Sale Laws.  The Agent
shall conduct the Sale in the name of and on behalf of the Merchant or Buyer, as
applicable, in a commercially reasonable manner and in compliance with the terms
of this Agreement and subject to the Approval Order.  Agent shall conduct the
Sale in accordance with the sale guidelines attached hereto as Exhibit 8.1 (the
“Sale Guidelines”).  In addition to any other rights granted to Agent hereunder
in conducting the Sale the Agent, in the exercise of its reasonable discretion
shall have the right, subject to the limitations set forth herein:
 
(a)           to establish Sale prices and discounts and Store hours;
 
(b)           except as otherwise expressly included as an Expense, to use
without charge during the Sale Term all FF&E, computer hardware and software,
existing Supplies, intangible assets (including Merchant’s name, logo and tax
identification numbers), Store keys, case keys, security codes and safe and lock
combinations required to gain access to and operate the Stores, and any other
assets of the Merchant or Buyer, as applicable, located at the Stores (whether
owned, leased, or licensed);
 
(c)           (i) to be provided by Merchant or Buyer, as applicable, (at no
additional cost to Agent) with central office facilities, central administrative
services and personnel to process and perform Central Services and provide other
central office services reasonably necessary for the Sale; (ii) to use
reasonably sized offices located at Merchant’s or Buyer’s, as applicable,
central office facility to effect the Sale; and (iii) to use all Intellectual
Property (but solely in connection with the Sale and pursuant to such reasonable
restrictions requested by Merchant and/or Buyer in order for Merchant and/or
Buyer to comply with its privacy policy and applicable laws governing the use
and dissemination of confidential consumer personal data and the Letter
Agreement);
 
(d)           to establish and implement advertising, signage and promotion
programs consistent with this Agreement, including without limitation by means
of media advertising, and similar interior and exterior signs and banners, and
the use of sign walkers consistent with the provisions herein;
 
(e)           to transfer Merchandise and Inventory under Open Purchase Orders
between and among the Stores at Agent's expense; provided, however, the Agent
shall not transfer Merchandise between and among Stores so as to make the
Merchandise unavailable for purposes of the Inventory Taking or otherwise take
any action to prevent compliance by Buyer with Section 2.6 of the APA; and
 
(f)            subject to the provisions of Section 8.10 below, to include
Additional Agent Goods as part of the Sale.
 
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8.2           Terms of Sales to Customers; Final/As Is Sales.  All sales of
Merchandise and Inventory under Open Purchase Orders will be “final sales” and
“as is,” and appropriate signage and sales receipts will reflect the same. 
Agent shall not warrant the Merchandise or Inventory under Open Purchase Orders
in any manner, but will, to the extent legally permissible, pass on all
manufacturers’ warranties to customers.  All sales will be made only for cash,
nationally recognized bank debit and credit cards, or Gift Certificates.  Agent
shall accept and honor Merchant’s or Buyer’s coupons during the Sale Term,
including, but not limited to, Merchant’s or Buyer’s membership program as well
as Merchant’s employee discount terms as are in effect immediately prior to the
commencement of the Sale Term (collectively, “Discount Items”).  The Agent shall
clearly mark all receipts for the Merchandise and Inventory under Open Purchase
Orders sold at the Stores during the Sale Term so as to distinguish such
Merchandise and Inventory under Open Purchase Orders from the goods sold prior
to the Sale Commencement Date.  For Discount Items accepted during the Sale
Term, the Buyer shall reimburse Agent in cash for all amounts related to such
Discount Items during each Weekly Sale Reconciliation provided for in Section
8.7.
 
8.3           Sales Taxes.
 
(a)           During the Sale Term, all sales, excise, gross receipts and other
taxes attributable to sales of Merchandise and Inventory under Open Purchase
Orders, as indicated on Merchant’s and/or Buyer’s point of sale equipment (other
than taxes on income) payable to any taxing authority having jurisdiction
(collectively, “Sales Taxes”) shall be added to the sales price of Merchandise
and Inventory under Open Purchase Orders and collected by Agent, on Merchant’s
and Buyer’s behalf, at the time of sale.  All Sales Taxes shall be deposited
into a segregated account designated by Merchant, Buyer,  and Agent solely for
the deposit of such Sales Taxes (the “Sales Taxes Account”).  For the avoidance
of doubt, Merchant will have payment authority on the Sales Tax Account from
inception until Merchant no longer has any obligation with respect to the
payment of Sales Taxes hereunder, and Buyer will have payment authority on the
Sales Taxes Account after the Closing Date.  Merchant shall prepare and file all
applicable reports and documents required by the applicable taxing authorities
with respect to Sales Taxes incurred prior to the Closing, and Merchant shall
promptly pay all such Sales Taxes from the Sales Taxes Account.  Buyer shall
prepare and file all applicable reports and documents required by the applicable
taxing authorities with respect to Sales Taxes incurred after the Closing, and
Buyer shall promptly pay all such Sales Taxes from the Sales Taxes Account. 
Merchant and Buyer will be given access to the computation of gross receipts for
verification of all such tax collections.  Provided that Agent performs its
responsibilities in accordance with this Section 8.3, Agent shall have no
further obligation to the Merchant, the Buyer, any taxing authority, or any
other party, and Merchant and Buyer, as applicable, shall each indemnify and
hold harmless Agent from and against any and all costs, including, but not
limited to, reasonable attorneys’ fees, assessments, fines or penalties which
Agent sustains or incurs as a result or consequence of the failure by such party
to promptly pay such Sales Taxes to the proper taxing authorities and/or the
failure by such party to promptly file with such taxing authorities all reports
and other documents required by applicable law to be filed with or delivered to
such taxing authorities.  If Agent fails to perform its responsibilities in
accordance with this Section 8.3, and provided Merchant and/or Buyer, as
applicable, comply with their obligations hereunder, Agent shall indemnify and
hold harmless Merchant and/or Buyer, as applicable, from and against any and all
costs, including, but not limited to, reasonable attorneys’ fees, assessments,
fines or penalties which Merchant and/or Buyer, as applicable, sustains or
incurs as a result or consequence of the failure by Agent to collect Sales Taxes
and/or the failure by Agent to promptly deliver any and all reports and other
documents required to enable Merchant and/or Buyer, as applicable, to file any
requisite returns with such taxing authorities.
 
(b)           Without limiting the generality of Section 8.3(a) hereof, it is
hereby agreed that, as Agent is conducting the Sale solely as agent for the
Merchant and Buyer, various payments that this Agreement and the Letter
Agreement contemplate that one party may make to the other party do not
represent the sale of tangible personal property and, accordingly, are not
subject to Sales Taxes.
 
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8.4           Supplies.  Agent shall have the right to use, without charge, all
existing supplies located at the Stores, Distribution Centers and corporate
office(s), including, without limitation, boxes, bags, paper, twine and similar
sales materials (collectively, “Supplies”).  In the event that additional
Supplies are required in any of the Stores during the Sale, Merchant prior to
Closing and Buyer from and after Closing agree to promptly provide the same to
Agent at Merchant’s or Buyer’s, as applicable, cost therefor, if available, for
which Agent shall promptly reimburse Buyer or Merchant, as applicable.
 
8.5           Returns of Merchandise.  During the first sixty (60) days of the
Sale Term (the “Return Deadline”) Agent shall accept Returned Merchandise,
provided that such return is in compliance with Merchant’s return policy in
effect immediately prior to the Sale Commencement Date.  If such Returned
Merchandise is first quality finished goods capable of being sold at normal
retail price it shall be included in the Sale, but shall not be included for
purposes of determining the Inventory Purchase Price Adjustment.   For refunds
issued in respect of each item of Returned Merchandise that is first quality
finished goods capable of being sold at normal retail price, Buyer shall
promptly reimburse Agent in cash for the difference between (x) the refund Agent
is required to issue to customers in respect of each such item of Returned
Merchandise and (y) the Cost Value of each such item of Returned Merchandise. 
For refunds issued in respect of each item of Returned Merchandise that is NOT
first quality finished goods capable of being sold at normal retail price, but
nonetheless capable of being resold, Buyer shall promptly reimburse Agent in
cash the difference between (x) the refund Agent is required to issue to
customers in respect of each such item of Returned Merchandise and (y) a Cost
Value mutually agreed upon by Agent and Buyer for each such item of Returned
Merchandise.  Buyer shall reimburse Agent on account of refunds issued by Agent
in accordance with the previous two sentences during each Weekly Sale
Reconciliation provided for in Section 8.7.  Except to the extent that Merchant
and/or Buyer, as applicable, and Agent agree that Merchant’s and/or Buyer’s, as
applicable, POS or other applicable systems can account for returns of goods,
all returns must be noted and described in a mutually agreeable Returned
Merchandise log on a weekly basis during the Sale.
 
8.6           Gift Certificates; Membership Program.
 
(a)           During the Sale Term, Agent shall accept Merchant’s gift
certificates, gift cards, return credits, and similar merchandise credits issued
by Merchant (collectively, the “Gift Certificates”). Agent shall not sell any
Gift Certificates.  For Gift Certificates redeemed during the Sale Term, Buyer
shall reimburse Agent in cash for redeemed Gift Certificates during the Weekly
Sale Reconciliation provided for in Section 8.7.
 
(b)           During the Sale Term, customers may elect to take advantage of (i)
discounts afforded customers in connection with Merchant’s or Buyer’s membership
program benefits and/or Merchant’s or Buyer’s then valid coupons (collectively,
“ Discounts”); or (ii) the then-prevailing Sale discounts being offered by
Agent, but not both on a cumulative basis.
 
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8.7           Sale Reconciliation.  On each Wednesday during the Sale Term,
Agent, Buyer, and Merchant shall cooperate (in reasonable consultation with the
DIP Agent and the Pre-Petition Term Agent) to reconcile Expenses of the Sale,
Proceeds and Other Proceeds of the Sale, and reconcile such other Sale-related
items as any party shall reasonably request, in each case for the prior week or
partial week (i.e. Sunday through Saturday), all pursuant to procedures
reasonably agreed upon by Buyer, Merchant and Agent (the “Weekly Sale
Reconciliation”).  Within thirty (30) days after the end of the Sale Term, or as
soon as practicable thereafter, Agent, Buyer, and Merchant shall (in reasonable
consultation with the DIP Agent and the Pre-Petition Term Agent) complete a
final reconciliation of the Sale (the “Final Reconciliation”), the written
results of which shall be certified by representatives of each of the Merchant,
Buyer, and Agent as a final settlement of accounts between the Merchant, Buyer
and Agent.  Within five (5) days after the completion of the Final
Reconciliation and execution of a settlement letter including an appropriate
mutual release, all unpaid amounts pursuant to the Final Reconciliation shall be
paid to and by the appropriate parties.  Once executed by Merchant, Buyer, and
Agent, such settlement and Final Reconciliation shall be deemed approved without
further order of the Bankruptcy Court (other than the Approval Order).  During
the Sale Term, and thereafter until all of Merchant’s, Buyer’s and Agent’s
obligations under this Agreement have been satisfied, Merchant, Buyer, and Agent
shall have reasonable access to Merchant’s, Buyer’s and Agent’s records with
respect to the Sale (including, but not limited to, Merchandise, Inventory under
Open Purchase Orders, Expenses, and Proceeds and Other Proceeds) to review and
audit such records.  During the Pre-Closing Period, the Agent and Merchant shall
conduct the applicable Weekly Sale Reconciliations in accordance with this
Section 8.7; provided, however, that no amounts shall be payable by or to
Merchant or Agent on account of such Weekly Sale Reconciliations pending the
Closing.  At Closing, (i) the Pre-Closing Proceeds Credit shall be applied
against the Purchase Price as and to the extent provided for in the APA, and
(ii) the Agent shall reimburse Merchant under this Agreement for Expenses due to
Merchant on account of the Weekly Sale Reconciliations completed prior to the
Closing (for the avoidance of doubt, without reducing such Expenses by the
Pre-Closing Proceeds Credit).
 
8.8           Force Majeure.  If any casualty, act or threatened act of
terrorism, or act of God prevents or substantially inhibits the conduct of
business in the ordinary course at any of the Stores for a period of five (5)
consecutive days, the Merchandise located at such Store shall, in Agent’s
reasonable discretion (after consultation with the Merchant and Buyer), be
eliminated from the Sale and considered to be deleted from this Agreement as of
the date of such event, and Agent, Buyer, and Merchant shall have no further
rights or obligations hereunder with respect thereto; provided, however, that
the proceeds of any insurance attributable to such Merchandise shall constitute
Proceeds hereunder.
 
8.9           Right to Monitor.  Merchant, Buyer and the DIP Agent and the
Pre-Petition Term Agent shall have the right to monitor the Sale and activities
attendant thereto and to be present in the Stores during the hours when the
Stores are open for business; provided that Merchant’s, Buyer’s and or the DIP
Agent’s and Pre-Petition Term Agent’s presence does not unreasonably disrupt the
conduct of the Sale.  Merchant and Buyer shall also have a right of access to
the Stores at any time in the event of an emergency situation and shall promptly
notify Agent of such emergency.
 
8.10         Additional Agent Goods.
 
(a)           Agent shall have the right to supplement the Merchandise in the
Sale with additional goods procured by Agent which are of like kind, and no
lesser quality to the Merchandise and Inventory under Open Purchase Orders in
the Sale (“Additional Agent Goods”).  The Additional Agent Goods shall be
purchased by Agent as part the Sale at Agent’s sole expense (and such purchase
price shall not constitute an Expense).  Sales of Additional Agent Goods shall
be run through Merchant’s or Buyer’s cash register systems, provided however,
Agent shall mark the Additional Agent Goods using either a “dummy” SKU or
department number, or in such other manner so as to distinguish the sale of
Additional Agent Goods from the sale of Merchandise and Inventory under Open
Purchase Orders.  Agent and Buyer and/or Merchant, as applicable, shall also
cooperate so as to ensure that the Additional Agent Goods are marked in such a
way that a reasonable consumer could identify the Additional Agent Goods as
non-Merchant/Buyer goods.  Additionally, Agent shall provide signage in the
Stores notifying customers that the Additional Agent Goods have been included in
the Sale.
 
(b)           Agent, Buyer, and Merchant intend that the transactions relating
to the Additional Agent Goods are, and shall be construed as, a true consignment
from Agent to Merchant or Buyer, as applicable, in all respects and not a
consignment for security purposes.  At all times and for all purposes the
Additional Agent Goods and their proceeds shall be the exclusive property of
Agent, and no other person or entity shall have any claim against any of the
Additional Agent Goods or their proceeds.  The Additional Agent Goods shall at
all times remain subject to the exclusive control of Agent.
 
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(c)           Merchant shall until the Closing, and Buyer shall until the Sale
Termination Date, at Agent’s sole expense (and not as an Expense), insure the
Additional Agent Goods and, if required, promptly file any proofs of loss with
regard to same with Merchant’s insurers.  Agent shall be responsible for payment
of any deductible under any such insurance in the event of any casualty
affecting the Additional Agent Goods, which amount shall be deemed an Additional
Agent Goods expense.
 
(d)           Merchant and Buyer acknowledge, and the Approval Order shall
provide, that the Additional Agent Goods shall be consigned to Merchant and/or
Buyer, as applicable, as a true consignment under Article 9 of the Code.  Agent
is hereby granted a first priority security interest in and lien upon (i) the
Additional Agent Goods and (ii) the Additional Agent Goods proceeds, which
security interest shall be deemed perfected pursuant to the Approval Order
without the requirement of filing UCC financing statements or providing
notifications to any prior secured parties (provided that Agent is hereby
authorized to deliver all required notices and file all necessary financing
statements and amendments thereof under the applicable UCC identifying Agent’s
interest in the Additional Agent Goods as consigned goods thereunder and the
Merchant and Buyer as the consignee therefor, and Agent’s security interest in
and lien upon such Additional Agent Goods and Additional Agent Goods proceeds).
 
8.11         Collective Bargaining Agreements; Leases.  Merchant hereby
represents and warrants that Merchant is not and has not been within the prior
twelve months a party to any collective bargaining agreement.  To the extent
Buyer enters into any collective bargaining agreement Agent shall not be
obligated to comply with Buyer’s collective bargaining agreements or
leases/occupancy agreements; except as provided for in Sections 4.1(a) and
4.1(c) herein.
 
Section 9.  Employee Matters.
 
For purposes of this Section 9, all references to employees shall be deemed
references to (i) employees of Merchant until such employees are terminated by
Merchant to be hired by Buyer and (ii) employees of Buyer once hired.
 
9.1           Merchant’s Employees.  Agent may use all of Merchant’s or Buyer’s,
as applicable, Store level employees in the conduct of the Sale to the extent
Agent deems reasonably necessary for the Sale (each such employee, a “Retained
Employee”), and Agent may select and schedule the number and type of Retained
Employees.  Notwithstanding the foregoing, Merchant’s or Buyer’s, as applicable,
employees shall at all times remain employees of the Merchant or Buyer, as
applicable.  Agent’s selection and scheduling of Merchant’s or Buyer’s, as
applicable, employees shall at all times comply with all applicable laws and
regulations.  Merchant, Buyer and Agent agree that, except to the extent that
wages and benefits of Retained Employees constitute Expenses hereunder, nothing
contained in this Agreement and none of Agent’s actions taken in respect of the
Sale shall be deemed to constitute an assumption by Agent of any of Merchant’s
or Buyer’s, as applicable, obligations relating to any of Merchant’s or Buyer’s,
as applicable, employees including, without limitation, Excluded Payroll
Benefits, Worker Adjustment Retraining Notification Act (“WARN Act”) claims and
other termination type claims and obligations, or any other amounts required to
be paid by statute or law; nor shall Agent become liable under any employment
agreement, collective bargaining agreement, or be deemed a joint or successor
employer with respect to such employees.  Neither Merchant nor Buyer, as
applicable, shall, without the prior consent of Agent, raise the salary or wages
or increase the benefits for, or pay any bonuses or other extraordinary payments
to, any Store employees prior to the Sale Termination Date.  Other than in the
ordinary course of business, Merchant shall not transfer any employee in
anticipation of the Sale nor any Retained Employee during the Sale Term, in each
case without Agent’s prior consent.
 
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9.2           Termination of Employees.  Agent may in its discretion stop using
any Retained Employee at any time during the Sale, subject to the conditions
provided for herein.  In the event that Agent desires to cease using any
Retained Employee, Agent shall notify Merchant or Buyer, as applicable, at least
five (5) days prior thereto; provided, however, that, in the event that Agent
determines to cease using an employee “for cause” (such as dishonesty, fraud or
breach of employee duties), the five (5) day notice period shall not apply;
provided, further, however, that Agent shall immediately notify Merchant or
Buyer, as applicable, of the basis for such “cause.”  From and after the date of
this Agreement and until the Sale Termination Date, neither Merchant nor Buyer,
as applicable, shall transfer or dismiss employees of the Stores except “for
cause” without Agent’s prior consent.  Notwithstanding the foregoing, Agent
shall not have the right to terminate the actual employment of any employee, but
rather may only cease using such employee in the Sale and paying any Expenses
with respect to such employee (and all decisions relating to the termination or
non-termination of such employees shall at all times rest solely with Merchant
or Buyer, as applicable).
 
9.3           Payroll Matters.  During the Sale Term, Merchant or Buyer, as
applicable, shall process the payroll for all Retained Employees and any former
employees and temporary labor engaged for the Sale.  Each Wednesday (or such
other date as may be reasonably requested by Merchant or Buyer, as applicable,
to permit the funding of the payroll accounts before such payroll is due and
payable) during the Sale Term, Agent shall transfer to Merchant’s or Buyer’s, as
applicable, payroll accounts an amount equal to the base payroll for Retained
Employees plus related payroll taxes, workers’ compensation and benefits for
such week, to the extent such amount constitutes Expenses hereunder.
 
9.4           Employee Retention Bonuses.  Agent may pay, as an Expense,
retention bonuses (“Retention Bonuses”) (which bonuses shall be inclusive of
payroll taxes, but as to which no benefits shall be payable), up to a maximum of
ten percent (10%) of base payroll for all Retained Employees, to such Retained
Employees who do not voluntarily leave employment and are not terminated “for
cause,” as Agent may determine in its discretion.  The amount of such Retention
Bonuses shall be in an amount to be determined by Agent, in its discretion, and
shall be payable within thirty (30) days after the Sale Termination Date, and
shall be processed through Merchant’s or Buyer’s (as applicable) payroll system.
 
Section 10.  Conditions Precedent and Subsequent.
 
(a)           The willingness of Agent to enter into the transactions
contemplated under this Agreement is directly conditioned upon the satisfaction
of the following conditions at the time or during the time periods indicated,
unless specifically waived in writing by Agent:
 
(1)          All representations and warranties of the Merchant and Buyer
hereunder shall be true and correct in all material respects and no Event of
Default shall have occurred at and as of the date hereof and on the Sale
Commencement Date.
 
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(2)          No later than September 15, 2016 (or September 22, 2016 in the
event that the proviso in Section 8.1(b)(ii) of the APA is applicable) or such
later date as mutually agreed upon by the Merchant, Buyer, DIP Agent,
Pre-Petition Term Agent, and the Agent  (such date, the “Approval Order
Deadline”), the Bankruptcy Court shall have entered an order (the “Approval
Order”) in a form reasonably satisfactory to Buyer, Merchant, Agent,
Pre-Petition Term Agent, and DIP Agent that authorizes Buyer, Merchant, and
Agent to enter into this Agreement and authorizes Merchant to conduct the Sale
in accordance with the terms of this Agreement and provides, inter alia,
that subject to the Closing and the repayment in full and in cash of all DIP
Obligations owed to the DIP Lenders at Closing, (i) this Agreement is in the
best interest of the Merchant, Merchant’s estates, creditors, and other parties
in interest, (ii) this Agreement (and each of the transactions contemplated
hereby) is approved in its entirety; (iii) Merchant, the Buyer, and Agent shall
be authorized to continue to take any and all actions deemed necessary or
desirable to implement this Agreement and each of the transactions contemplated
hereby; (iv) upon payment of the Estimated Purchase Price, Agent shall be
entitled to sell all Merchandise, Inventory under Open Purchase Orders and
Designated F&E hereunder free and clear of all liens, claims or encumbrances
thereon; (v) Agent shall have the right to use the Stores and all related Store
services, furniture, fixtures, equipment and other assets of the Merchant or
Buyer, as applicable, as designated hereunder for the purpose of conducting the
Sale, free of any interference from any entity or person, subject to compliance
with the Sale Guidelines (as defined below) and Approval Order; (vi) Agent, as
agent for Merchant and Buyer, is authorized to conduct, advertise, post signs,
utilize signwalkers, and otherwise promote the Sale consistent with the Closing
Store Advertising and Continuing Store Advertising, in accordance with the Sale
Guidelines (as the same may be modified and approved by the Bankruptcy Court)
and without further compliance with the Liquidation Sale Laws (as defined
below), subject to compliance with the Sale Guidelines and Approval Order; (vii)
Agent shall be granted a limited, non-exclusive license and right to use until
the Sale Termination Date all Intellectual Property in connection with the Sale;
(viii) all newspapers and other advertising media in which the Sale is
advertised shall be directed to accept the Approval Order as binding and to
allow Merchant, the Buyer, and Agent to consummate the transactions provided for
in this Agreement, including, without limitation, the conducting and advertising
of the Sale in the manner contemplated by this Agreement; (ix) all utilities,
landlords, creditors and other interested parties and all persons acting for or
on their behalf shall not interfere with or otherwise impede the conduct of the
Sale, or institute any action in any court (other than in the Bankruptcy Court)
with respect to Merchandise, Inventory under Open Purchase Orders or the
Designated F&E or before any administrative body which in any way directly or
indirectly interferes with or obstructs or impedes the conduct of the Sale; (x)
the Bankruptcy Court shall retain jurisdiction over the parties to enforce this
Agreement; (xi) Agent shall not be liable for any claims against Merchant or
Buyer other than as expressly provided for in this Agreement; (xii) subject to
Agent having satisfied its payment obligations hereunder, any amounts owed by
Merchant to Agent under this Agreement shall be granted the status of
superpriority claims in Merchant’s Bankruptcy Case pursuant to section 364(c) of
Title 11, United States Code, 11 U.S.C. §§ 101-1330 (the “Bankruptcy Code”)
senior to all other superpriority claims; (xiii) Agent shall be granted a valid,
binding, enforceable and perfected security interest for the obligations of
Merchant as provided for in Section 16 hereof (without the necessity of filing
financing statements to perfect the security interests); (xiv) the Bankruptcy
Court finds that time is of the essence in effectuating this Agreement and
proceeding with the Sale uninterrupted; (xv) the Bankruptcy Court finds that the
Merchant’s decisions to (a) enter into this Agreement and (b) perform under and
make payments required by this Agreement is a reasonable exercise of the
Merchant’s sound business judgment consistent with its fiduciary duties and is
in the best interests of the Merchant, its estate, its creditors, and other
parties in interest; (xvi) the Bankruptcy Court finds that this Agreement was
negotiated in good faith and at arms' length between the Merchant, Buyer, and
Agent and that Agent is entitled to the protection of section 363(m) of the
Bankruptcy Code; (xvii) the Bankruptcy Court finds that Agent's performance
under this Agreement will be in good faith and for valid business purposes and
uses, as a consequence of which Agent is entitled to the protection and benefits
of sections 363(m) and 364(e) of the Bankruptcy Code; (xviii) this Agreement is
approved pursuant to Bankruptcy Code section 363; and (xix) in the event any of
the provisions of the Approval Order are modified, amended or vacated by a
subsequent order of the Bankruptcy Court or any other court, Agent shall be
entitled to the protections provided in Bankruptcy Code sections 363(m) and
364(e) and, no such appeal, modification, amendment or vacatur shall affect the
validity and enforceability of the sale or the liens or priority authorized or
created under this Agreement or the Approval Order.
 
(b)          The willingness of Merchant to enter into the transactions
contemplated under this Agreement is directly conditioned upon the satisfaction
of the following conditions at the time or during the time periods indicated,
unless specifically waived in writing by the Merchant:
 
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(1)          All representations and warranties of Agent and Buyer hereunder
shall be true and correct in all material respects and no Event of Default shall
have occurred at and as of the date hereof and on the Sale Commencement Date.
 
Section 11. Representations, Warranties and Covenants.
 
11.1         Merchant’s Representations, Warranties and Covenants.  Merchant
hereby represents, warrants and covenants in favor of Agent and Buyer as
follows:
 
(a)           Merchant (i) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware (except as may be a
result of the commencement and/or pendency of the Bankruptcy Cases); (ii) has
all requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as presently conducted; and (iii)
is, and during the Sale Term will continue to be, duly authorized and qualified
to do business and in good standing in each jurisdiction where the nature of its
business or properties requires such qualification, including, prior to the
Closing, all jurisdictions in which the Stores are located, except, in each
case, to the extent that the failure to be in good standing or so qualified
would not reasonably be expected to have a material adverse effect on the
ability of Merchant to execute and deliver this Agreement and perform fully its
obligations hereunder.
 
(b)           Subject to entry of the Approval Order, the Merchant has the
right, power and authority to execute and deliver this Agreement and each other
document and agreement contemplated hereby (collectively, together with this
Agreement, the “Agency Documents”) and to perform fully its obligations
thereunder.  Subject to entry of the Approval Order, Merchant has taken all
necessary actions required to authorize the execution, delivery and performance
of the Agency Documents, and no further consent or approval is required for
Merchant to enter into and deliver the Agency Documents, to perform its
obligations thereunder and to consummate the Sale, except for any such consent
the failure of which to be obtained would not reasonably be expected to have a
material adverse effect on the ability of Merchant to execute and deliver this
Agreement and perform fully its obligations hereunder.  Subject to entry of the
Approval Order, each of the Agency Documents has been duly executed and
delivered by the Merchant and constitutes the legal, valid and binding
obligation of the Merchant enforceable against it in accordance with its terms.
 
(c)           Merchant owns, and will own at all times prior to the Closing,
good and marketable title to all of the Merchandise, Inventory under Open
Purchase Orders and Designated F&E to be included in the Sale, free and clear of
all Liens (other than Permitted Liens and Liens granted to the Agent
hereunder).  Merchant shall not create, incur, assume or suffer to exist any
security interest, lien or other charge or encumbrance upon or with respect to
any of the Merchandise, Inventory under Open Purchase Orders or the Proceeds (or
the Designated F&E or Other Proceeds) other than as provided herein (including
the Permitted Liens).
 
(d)           The Sellers have maintained their pricing files (including the
File) in the Ordinary Course of Business. All pricing files and records are
accurate in all material respects as to the actual cost to the Sellers for
purchasing the goods referred to therein and as to the selling price to the
public for such goods without consideration of any point of sale discounts. 
Merchant represents that (i) the ticketed prices of all items of Merchandise do
not and shall not include any Sales Taxes and (ii) all registers located at the
Stores are programmed to correctly compute all Sales Taxes required to be paid
by the customer under applicable law with respect to the Merchandise, as such
calculations have been identified to Merchant by its retained service provider.
 
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(e)           Through the Sale Commencement Date, Merchant shall continue to
ticket or mark all items of inventory received at the Stores in a manner
consistent with similar Merchandise located at the Stores, and in accordance
with Merchant’s ordinary course past practices and policies relative to pricing
and marking inventory.  Since August 1, 2016, Merchant has not removed any POS
promotions, sale stickers, or other markings indicating items are on sale or on
clearance from the Merchandise prior to the Sale Commencement Date, and has not
raised, and will not raise, prices of any Merchandise, in each case, in
contemplation of the Sale.
 
(f)           Since August 1, 2016, Merchant has not, and through the Sale
Commencement Date Merchant shall not, purchase for or transfer to or from the
Stores any merchandise or goods outside the ordinary course; provided, however,
that in no event shall Merchant transfer any goods into the Stores without
Agent’s consent from and after the date hereof other than replenishing goods in
the Stores in the ordinary course of business prior to the Sale Commencement
Date or pursuant to the Allocation Schedule.
 
(g)           To Sellers’ Knowledge, all Merchandise is in compliance in all
material respects with all applicable federal, state and local product safety
laws, rules and standards.  Merchant shall provide Agent with its historic
policies and practices, if any, regarding product recalls prior to the Sale
Commencement Date.
 
(h)           Subject to the provisions of the Approval Order, Agent shall have
the right to the unencumbered use and occupancy of, and peaceful and quiet
possession of, the Stores, the assets currently located at the Stores, and the
utilities and other services provided at the Stores.  Merchant shall, until the
Closing, maintain in good working order, condition and repair all cash
registers, heating systems, air conditioning systems, elevators, escalators and
all other mechanical devices necessary for the conduct of the Sale at the
Store.  Except as otherwise restricted by the Bankruptcy Code or as provided
herein and absent a bona fide dispute, until the Closing, Merchant shall remain
current on all expenses and payables necessary or appropriate for the conduct of
the Sale (other than those relating to any period prior to the commencement of
the Bankruptcy Cases).
 
(i)            Subject to approval by the Bankruptcy Court or the Approval
Order, Merchant will continue to pay until the Closing (or such later date as
Merchant and Buyer may agree and, effective such date, Buyer will continue to
pay throughout the Sale Term) all self-insured or Merchant-funded employee
benefit programs for Retained Employees, including health and medical benefits
and insurance and all proper claims made or to be made in accordance with such
programs.
 
(j)            Since August 1, 2016, Merchant has not intentionally taken, and
shall not until the Closing take, any actions with the intent of increasing the
Expenses of the Sale, including without limitation increasing salaries or other
amounts payable to employees, except to the extent an employee was due an annual
raise in the ordinary course or in an effort to encourage one or more employees
to remain in Merchant’s employ (such action not being taken with any intent to
increase any expense in anticipation of the Sale).
 
(k)           Except as otherwise restricted by the Bankruptcy Code, in
connection with any “store closing”, “inventory liquidation” or similar sales
conducted by Merchant in connection with the Bankruptcy Cases or as provided
herein and absent a bona fide dispute, since August 1, 2016, through the Sale
Commencement Date Merchant covenants to continue to operate through the Sale
Commencement Date, the Stores in all material respects in the ordinary course of
business including without limitation by: (i) selling inventory during such
period at customary prices consistent with the ordinary course of business; (ii)
not promoting or advertising any sales or in-store promotions (including POS
promotions) to the public outside of the Merchant’s ordinary course of business;
(iii) except as may occur in the ordinary course of business, not returning
inventory to vendors and not transferring inventory or supplies out of or to the
Stores; (iv) except as may occur in the ordinary course of business, not making
any management personnel moves or changes at the Stores; and (v) replenishing
the Stores in the ordinary course of business.
 
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(l)            To Sellers’ Knowledge, Merchant has not since August 1, 2016
shipped any Excluded Defective Merchandise from the Distribution Centers to the
Stores.  Merchant will not knowingly ship any Excluded Defective Merchandise
from the date of this Agreement from the Distribution Centers to the Stores.
 
(m)          Other than filing the Bankruptcy Case, as of the date of this
Agreement, no action, arbitration, suit, notice, or legal, administrative or
other proceeding before any court or governmental body has been instituted by or
against the Merchant, or has been settled or resolved, or to Sellers’ Knowledge,
is threatened against or affects Merchant, which questions the validity of this
Agreement, or that, if adversely determined, would have a material adverse
effect on the ability of Merchant to perform its obligations under this
Agreement.
 
(n)           Merchant shall not, from or after September 6, 2016, offer any
promotions or discounts at the Stores, E-Commerce Sites, any other retail store
location, or any other retail sales channel, except in the ordinary course of
business or in connection with any “store closing,”  liquidation or similar
sales commenced prior to the Sale Commencement Date.
 
11.2         Agent’s Representations, Warranties and Covenants.  Agent hereby
represents, warrants and covenants in favor of Merchant and Buyer as follows:
 
(a)           Each entity comprising Agent: (i) is a limited liability company
duly and validly existing and in good standing under the laws of the State of
Delaware; (ii) has all requisite power and authority to carry on its business as
presently conducted and to consummate the transactions contemplated hereby;
(iii) is, and during the Sale Term will continue to be, duly authorized and
qualified to do business and in good standing in each jurisdiction where the
nature of its business or properties requires such qualification, including all
jurisdictions in which the Stores are located, except, in each case, to the
extent that the failure to be in good standing or so qualified could not
reasonably be expected to have a material adverse effect on the ability of Agent
to execute and deliver this Agreement and perform fully its obligations
hereunder.
 
(b)           Agent has the right, power and authority to execute and deliver
each of the Agency Documents to which it is a party and to perform fully its
obligations thereunder.  Agent has taken all necessary actions required to
authorize the execution, delivery and performance of the Agency Documents, and
no further consent or approval is required on the part of Agent for Agent to
enter into and deliver the Agency Documents, to perform its obligations
thereunder and to consummate the Sale.  Each of the Agency Documents has been
duly executed and delivered by the Agent and constitutes the legal, valid and
binding obligation of Agent enforceable in accordance with its terms.  No court
order or decree of any federal, state or local governmental authority or
regulatory body is in effect that would prevent or impair, or is required for,
Agent’s consummation of the transactions contemplated by this Agreement, and no
consent of any third party which has not been obtained is required therefor,
other than as provided herein.  No contract or other agreement to which Agent is
a party or by which Agent is otherwise bound will prevent or impair the
consummation of the transactions contemplated by this Agreement.
 
(c)           No action, arbitration, suit, notice or legal administrative or
other proceeding before any court or governmental body has been instituted by or
against Agent, or has been settled or resolved or, to Agent’s Knowledge, has
been threatened against or affects Agent, which questions the validity of this
Agreement or any action taken or to be taken by Agent in connection with this
Agreement or which, if adversely determined, would have a material adverse
effect upon Agent’s ability to perform its obligations under this Agreement.
 
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(d)          The Sale shall be conducted in compliance with all applicable state
and local laws, rules and regulations and Merchant’s leases and other
agreements, except as otherwise provided for in the Sale Guidelines and Approval
Order.
 
(e)           Absent prior consent by the Merchant, Agent will not cause any
non-emergency repairs or maintenance (emergency repairs are repairs necessary to
preserve the security of a Store premise or to ensure customer safety) to be
conducted at the Stores.
 
(f)           To the best of Agent's Knowledge, all Additional Agent Goods are
in compliance with all applicable federal, state or local product safety laws,
rules and standards.  All Additional Agent Goods shall be of like kind and no
lesser quality to the Merchandise or Inventory under Open Purchase Orders
located in the Stores.
 
11.3         Buyer’s Representations, Warranties, and Covenants.  Buyer hereby
represents, warrants and covenants in favor of Merchant and Agent as follows:
 
(a)           Buyer:  (i) is a limited liability company duly organized, validly
existing and in good standing under the laws of the state of its organization;
and (ii) has all requisite power and authority to carry on its business as
presently conducted and to consummate the transactions contemplated hereby.
 
(b)           Buyer has the right, power, and authority to execute and deliver
each of the Agency Documents to which it is a party and to perform fully its
obligations thereunder.  Buyer has taken all necessary actions required to
authorize the execution, delivery, and performance of the Agency Documents, and
no further consent or approval is required on the part of Buyer for Buyer to
enter into and deliver the Agency Documents, to perform its obligations
thereunder, and to consummate the Sale.  Each of the Agency Documents has been
duly executed and delivered by Buyer and, constitutes the legal, valid and
binding obligation of Agent enforceable in accordance with its terms.  No court
order or decree of any federal, provincial, state or local governmental
authority or regulatory body is in effect that would prevent or impair or is
required for Buyer’s consummation of the transactions contemplated by this
Agreement, and no consent of any third party which has not been obtained is
required therefor other than as provided herein.  No contract or other agreement
to which Buyer is a party or by which Buyer is otherwise bound will prevent or
impair the consummation of the transactions contemplated by this Agreement.
 
(c)           No action, arbitration, suit, notice, or legal administrative or
other proceeding before any court or governmental body has been instituted by or
against Buyer, or has been settled or resolved, or to Buyer’s Knowledge, has
been threatened against or affects Buyer, which questions the validity of this
Agreement or any action taken or to be taken by Buyer in connection with this
Agreement, or which if adversely determined, would have a material adverse
effect upon Buyer’s ability to perform its obligations under this Agreement.
 
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Section 12. Insurance.
 
12.1         Merchant’s Liability Insurance.  Subject to (a) Agent’s obligations
to reimburse Merchant under Section 4.1(s) of this Agreement and (b) Buyer’s
obligations to reimburse Sellers under Section 4.1(4) of this Agreement and
Section 6.6 of the APA, Merchant and Buyer shall each continue at its respective
cost and expense until the Sale Termination Date, in each case, in such amounts
as it currently has in effect (or in the case of Buyer, in effect as of the
Closing Date), all of its respective liability insurance policies, including,
but not limited to, commercial general liability, products liability,
comprehensive public liability, auto liability and umbrella liability insurance,
covering injuries to persons and property in, or in connection with, Merchant’s
or Buyer’s, as applicable, operation of the Stores and E-Commerce Sites, in each
case, in effect on the date hereof (collectively, the “Liability Insurance
Policies”); and Merchant and Buyer, as applicable, shall cause Agent to be named
as an additional named insured (as its interest may appear) with respect to all
such policies.  Merchant and Buyer, as applicable, shall deliver to Agent
certificates evidencing such insurance setting forth the duration thereof and
naming Agent as an additional named insured, in form reasonably satisfactory to
Agent.  All such policies shall require at least thirty (30) days’ prior notice
to Agent of cancellation, non-renewal or material change during the Sale Term. 
In the event of a claim under any such policies, Buyer  shall be responsible for
the payment of all deductibles, retentions or self-insured amounts thereunder,
unless it is determined that liability arose by reason of the willful misconduct
or grossly negligent acts or omissions of Agent, or Agent’s employees,
independent contractors or agents.  Neither Merchant nor Buyer, as applicable,
shall make any change in the amount of any deductibles or self-insurance amounts
prior to Sale Termination Date without Agent’s prior written consent.  Buyer’s
obligations under this Section 12.1 may be satisfied through the insurance
coverage provided by Sellers pursuant to Section 6.6 of the APA.
 
12.2         Merchant’s Casualty Insurance.  Subject to (a) Agent’s obligations
to reimburse Merchant under Section 4.1(s) of this Agreement and (b) Buyer’s
obligations to reimburse Sellers under Section 4.1(s) of this Agreement and
Section 6.6 of the APA, Merchant and Buyer shall continue until the Sale
Termination Date fire, flood, theft and extended coverage casualty insurance, in
each case, in effect on the date hereof (collectively, the “Casualty Insurance
Policies”) covering the Merchandise and Inventory under Open Purchase Orders in
a total amount equal to no less than the Cost Value thereof.  From and after the
date of this Agreement until the Closing and the Sale Termination Date, as
applicable, all such policies will also name Agent as loss payee (as its
interest may appear).  In the event of a loss to the Merchandise or Inventory
under Open Purchase Orders on or after the date of this Agreement, the proceeds
of such insurance attributable to the Merchandise shall constitute Proceeds
hereunder, and the proceeds of such insurance attributable to the Inventory
under Open Purchase Orders shall constitute Other Proceeds.  Merchant or Buyer,
as applicable, shall deliver to Agent certificates evidencing such insurance,
setting forth the duration thereof and naming the Agent as loss payee, in form
and substance reasonably satisfactory to Agent.  All such policies shall require
at least thirty (30) days’ prior notice to the Agent of cancellation,
non-renewal or material change during the Sale Term.  Neither Merchant nor Buyer
shall make any change in the amount of any deductibles or self-insurance amounts
prior to the Closing or the Sale Termination Date, as applicable, without
Agent’s prior written consent.  Buyer’s obligations under this Section 12.2 may
be satisfied through the insurance coverage provided by the Sellers pursuant to
Section 6.6 of the APA.
 
12.3         Agent’s Insurance.  Agent shall maintain at Agent’s cost as an
Expense hereunder throughout the Sale Term, in such amounts as it currently has
in effect, commercial general liability policies covering injuries to persons
and property in or in connection with Agent’s agency at the Store, and shall
cause Merchant or Buyer, as applicable, to be named as an additional insured
with respect to such policies.  Agent shall deliver to Merchant or Buyer, as
applicable, certificates evidencing such insurance policies setting forth the
duration thereof and naming Merchant or Buyer, as applicable, as an additional
insured, in form and substance reasonably satisfactory to Merchant or Buyer, as
applicable.  In the event of a claim under any such policies, Agent shall be
responsible for the payment of all deductibles, retentions or self-insured
amounts thereunder, unless it is determined that liability arose by reason of
the willful misconduct or grossly negligent acts or omissions of Merchant or
Buyer or Merchant’s or Buyer’s employees, as applicable, independent contractors
or agents (other than Agent or Agent’s employees, agents or independent
contractors).  Agent shall not make any change in the amount of any deductibles
or self insurance amounts prior to the Sale Termination Date without Merchant’s
or Buyer’s, as applicable, prior written consent.
 
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12.4         Worker’s Compensation Insurance.  Merchant shall continue until the
Benefits TSA Expiration Date and, thereafter, Buyer shall maintain, in full
force and effect workers’ compensation insurance (including employer liability
insurance) covering all Retained Employees in compliance with all statutory
requirements.  For the avoidance of doubt, all cost, expenses and liabilities
incurred in connection with such continuation and maintenance of workers’
compensation insurance shall be the responsibility of, and borne by, Buyer (or
to the extent paid by Merchant, promptly reimbursed by Buyer), pursuant to
Section 4.1(4).
 
Section 13. Indemnification.
 
13.1         Merchant’s and Buyer’s Indemnification.  Merchant and Buyer shall,
severally as to themselves only,  indemnify and hold Agent and its officers,
directors, employees, agents, representatives, and independent contractors
(collectively, “Agent Indemnified Parties”) harmless from and against all
claims, causes of action, demands, penalties, losses, liability, damage, or
other obligations, including, without limitation, reasonable attorneys’ fees and
expenses, directly or indirectly asserted against, resulting from or related to:
(i) Merchant’s or Buyer’s, as applicable, material breach of or failure to
comply with any of its agreements, covenants, representations or warranties
contained in this Agreement; (ii) subject to Agent’s compliance with its
obligations under Section 8.3 hereof, any failure by Merchant (for which
Merchant shall have the indemnity obligations hereunder) or Buyer (for which
Buyer shall have the indemnity obligations hereunder), to pay any Sales Taxes to
the proper taxing authorities or to properly file with any taxing authorities
any reports or documents required by applicable law to be filed in respect
thereof; (iii) any failure of Merchant or Buyer, as applicable, to pay to its
employees any wages, salaries or benefits due to such employees during the Sale
Term; (iv) any consumer warranty or products liability claims relating to
Merchandise or Inventory under Open Purchase Orders (in the case of Merchant,
with respect to any such claims that arose prior to the Closing); (v) any
liability or other claims asserted by customers, any of Merchant’s or Buyers, as
applicable, employees, or any other person against any Agent Indemnified Party
(including, without limitation ), claims by employees arising under collective
bargaining agreements, worker’s compensation or under the WARN Act); (vi) any
harassment or any other unlawful, tortious, or otherwise actionable treatment of
any customers, employees or agents of Agent by Merchant or Buyer, as applicable,
or any of their respective representatives (other than Agent); (vi) any failure
of Merchant or Buyer to pay to any Occupancy Expenses or Central Service
Expenses during the Sale Term; and (vii) the gross negligence (including
omissions) or willful misconduct of the Merchant or Buyer, as applicable, or
their respective officers, directors, employees, agents (other than Agent) or
representatives.
 
13.2         Agent Indemnification.  Agent shall indemnify and hold the Merchant
and Buyer and their officers, directors, employees, agents and representatives
harmless from and against all claims, causes of action, demands, penalties,
losses, liability, damage, or other obligations, including, without limitation,
reasonable attorneys’ fees and expenses, directly or indirectly asserted
against, resulting from, or related to: (i) Agent’s material breach of or
failure to comply with any of its agreements, covenants, representations or
warranties contained in this Agreement; (ii) any claims by any party engaged by
Agent as an employee or independent contractor arising out of such employment;
(iii) any harassment or any other unlawful, tortious or otherwise actionable
treatment of any customers, employees or agents of the Merchant or Buyer, as
applicable, by Agent or any of its representatives; (iv) any consumer warranty
or products liability claims relating to Additional Agent Goods; (v) as set
forth in Section 8.3 above; and (vi) the gross negligence (including omissions)
or willful misconduct of Agent, its officers, directors, employees, agents or
representatives.
 
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Section 14. Defaults.  The following shall constitute “Events of Default”
hereunder:
 
(a)           Merchant, Buyer or Agent shall fail to perform any material
obligation hereunder if such failure remains uncured ten (10) days after receipt
of written notice thereof;
 
(b)          Any representation or warranty made by Merchant, Buyer or Agent
proves untrue in any material respect as of the date made and, to the extent
curable, continues uncured ten (10) days after written notice to the defaulting
party;
 
(c)           The entry of an order converting the Merchant’s bankruptcy case to
a case under another chapter of the Bankruptcy Code (other than chapter 11) or
the entry of an order appointing a chapter 11 trustee; or
 
(d)           The Sale is terminated prior to the Sale Termination Date or
materially interrupted or impaired for any reason other than (i) an Event of
Default by Agent, or (ii) any other material breach or action by Agent not
authorized hereunder.
 
Upon an Event of Default, the non-defaulting party (in the case of (a) or (b)
above), or Agent (in the case of (c) above) may in its discretion elect to
terminate this Agreement, and any party’s damages or entitlement to equitable
relief on account of an Event of Default shall (in addition to the right to
terminate as provided above) be determined by a court of competent jurisdiction.
 
Section 15. Agent’s Security Interest.
 
(a)          Subject to entry of the Approval Order and payment of the Estimated
Purchase Price at Closing (and the repayment in full at Closing from the
Estimated Purchase Price of all DIP Obligations owed the DIP Lenders), each of
Merchant and Buyer hereby grants to Agent first priority, senior security
interests in and liens upon: (i) the Merchandise; (ii) the Additional Agent
Goods; (iii) all Proceeds (including, without limitation, processor receivables
and credit card Proceeds); (iv) the Designated F&E; (v) Inventory under Open
Purchase Orders; (vi) Other Proceeds; and (vii) all “proceeds” (within the
meaning of Section 9-102(a)(64) of the Code) of each of the foregoing (all of
which are collectively referred to herein as the “Agent Collateral”).  Upon
entry of the Approval Order, but subject to the Closing and to the preceding
sentence, the security interests and liens granted to the Agent hereunder shall
be deemed properly perfected without the necessity of filing UCC-1 financing
statements or any other documentation.
 
(b)          Subject to entry of the Approval Order and payment of the Estimated
Purchase Price at Closing (and the repayment in full at Closing from the
Estimated Purchase Price of all DIP Obligations owed the DIP Lenders), neither
Merchant nor Buyer shall sell, grant, assign or transfer any security interest
in, or permit to exist any lien or encumbrance on, any of the Agent Collateral
other than in favor of the Agent.
 
(c)           In the event of an occurrence of an Event of Default other than by
Agent, in any jurisdiction where the enforcement of its rights hereunder is
sought, the Agent shall have, in addition to all other rights and remedies, the
rights and remedies of a secured party under the Code.
 
(d)          “Code” shall mean the Uniform Commercial Code as the same may be in
effect from time to time in the State of New York.
 
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Section 16. Intentionally Omitted.

Section 17. Miscellaneous.

17.1         Notices.  All notices and communications provided for pursuant to
this Agreement shall be in writing and sent by email, by hand, by facsimile or
by Federal Express or other recognized overnight delivery service, as follows:

If to the Agent:
 
HILCO MERCHANT RESOURCES, LLC
   
5 Revere Drive, Suite 206
   
Northbrook, IL 60062
   
Attention: Ian S. Fredericks
   
Tel: (847) 418-2075
   
Fax: (847) 897-0859
   
Email: ifredericks@hilcotrading.com
         
GORDON BROTHERS RETAIL PARTNERS, LLC
   
Prudential Tower
   
800 Boylston Street
   
Boston, MA 02119
   
Attn: Michael Chartock
   
Tel: 617.210.7116
   
Email: mchartock@gordonbrothers.com
         
With a copy (which shall not constitute notice to Agent) to:
         
Paul Hastings LLP
   
71 South Wacker Drive, Suite 4500
   
Chicago, Illinois 60606
   
Attn: Chris Dickerson
   
Tel:   (312) 499-6045
   
Email: chrisdickerson@paulhastings.com
     
If to Merchant:
 
Aéropostale, Inc.
   
112 West 34th Street
   
22nd Floor
   
New York, NY 10120
   
Attention: Marc Schuback
   
E-mail: mschuback@aeropostale.com
         
With a copy (which shall not constitute notice to Sellers) to:
         
Weil, Gotshal & Manges LLP
   
767 Fifth Avenue
   
New York, New York 10153
   
Attention: Michael J. Aiello , Ray C. Schrock, P.C., and Gavin Westerman
   
Facsimile: (212) 310-8007
   
E-mail: michael.aiello@weil.com;
    ray.schrock@weil.com; gavin.westerman@weil.com

 
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If to Buyer:
 
Authentic Brands Group
   
1411 Broadway
   
New York, New York 10001
   
Attention:  Jay Dubiner
   
General Counsel
   
Phone:  (212) 760-2418
   
E-mail:   jdubiner@abg-nyc.com
         
Simon Aero, LLC
   
c/o Simon Property Group
   
225 West Washington Street
   
Indianapolis, Indiana 46204
   
Attention: Stanley Shashoua
   
Steven Fivel
   
E-Mail:   SShashoua@simon.com
   
SFivel@simon.com
   
GGP-Aero, LLC
   
c/o General Growth Properties
   
110 N. Wacker Dr.
   
Chicago, IL 60606
   
Attention: Shobi Kahn, Marvin Levine
   
shobi.kahn@generalgrowth.com
   
marvin.levine@generalgrowth.com
         
With a copy (which shall not constitute notice to Buyer) to:
         
DLA Piper LLP (US)
   
1251 Avenue of the Americas
   
New York, New York 10020
   
Attention: John K. Lyons
   
Ann Lawrence
   
E-mail: John.Lyons@dlapiper.com
   
Ann.Lawrence@dlapiper.com
         
Paul, Weiss, Rifkind, Wharton & Garrison LLP
   
1285 Avenue of the Americas
   
New York, New York 10019
   
Attention: Brian Hermann
   
Edward T. Ackerman
   
E-mail: bhermann@paulweiss.com
   
eackerman@paulweiss.com
         
Kelley Drye & Warren LLP
   
101 Park Avenue, 27th Floor
   
New York, NY 10178
   
Attention: Robert L. LeHane
   
Email:  rlehane@kelleydrye.com

 
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17.2         Governing Law; Exclusive Jurisdiction.  This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New
York, without reference to any conflict of laws provisions thereof, except where
governed by the Bankruptcy Code.  Each of the parties hereto irrevocably and
unconditionally submits, for itself and its properties, to the exclusive
jurisdiction of the Bankruptcy Court, in any action or proceeding arising out of
or relating to this Agreement.

17.3         Amendments; Third Party Rights.  This Agreement may not be modified
except in a written instrument executed by each of the parties hereto; provided,
however, that, (a) until the DIP Agent has received payment in full of all DIP
Obligations, the DIP Agent’s and Pre-Petition Term Agent’s consent shall be
required to amend provisions of this Agreement pertaining to either or both of
the DIP Agent or Pre-Petition Term Agent (b) upon payment in full of the DIP
Obligations, the Pre-Petition Term Agent’s consent shall be required to amend
provisions of this Agreement if such amendment would adversely affect the rights
or interests of the Pre-Petition Term Loan Agent for the duration of the Sale
Term.  Additionally, the DIP Agent, DIP Lenders, the Pre-Petition Term Agent,
and the Pre-Petition Term Loan Lenders shall be third party beneficiaries with
respect to those provisions of this Agreement that expressly reference them.

17.4         No Waiver.  No consent or waiver by any party, express or implied,
to or of any breach or default by the other in the performance of its
obligations hereunder shall be deemed or construed to be a consent or waiver to
or of any other breach or default in the performance by such other party of the
same or any other obligation of such party.  Failure on the part of any party to
complain of any act or failure to act by the other party or to declare the other
party in default, irrespective of how long such failure continues, shall not
constitute a waiver by such party of its rights hereunder.

 
17.5         Currency.  All reference to dollars in this Agreement and all
schedules, exhibits, and ancillary documents related to this Agreement shall
refer to US dollars.

17.6         Successors and Assigns.  This Agreement shall inure to the benefit
of and be binding upon Agent, Buyer and Merchant and their respective successors
and permitted assigns, including, but not limited to, any chapter 11 or chapter
7 trustee; provided, however, that this Agreement may not be assigned by
Merchant, Buyer, or Agent to any party without the prior written consent of the
other.

17.7         Execution in Counterparts.  This Agreement may be executed in one
or more counterparts.  Each such counterpart shall be deemed an original but all
such counterparts together shall constitute one and the same agreement.  This
Agreement, to the extent signed and delivered by means of a facsimile machine,
electronic mail or other electronic transmission in which the actual signature
is evident, shall be treated in all manner and respects as an original agreement
or instrument and shall be considered to have the same binding legal effect as
if it were the original signed version thereof delivered in person.  At the
request of any party hereto, each other party hereto or thereto shall re-execute
original forms hereof and deliver them to all other parties.  No party hereto
shall raise the use of a facsimile machine, electronic mail, or other electronic
transmission in which the actual signature is evident to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of a facsimile machine, electronic mail or other
electronic transmission in which the actual signature is evident as a defense to
the formation of a contract and each party forever waives such defense.  In
proving this Agreement, it shall not be necessary to produce or account for more
than one such counterpart signed by the party against which enforcement is
sought.

25

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17.8         Section Headings.  The headings of sections of this Agreement are
inserted for convenience only and shall not be considered for the purpose of
determining the meaning or legal effect of any provisions hereof.

17.9         Wiring of Funds.  All amounts required to be paid by Merchant,
Agent or Buyer under any provision of this Agreement shall be made by wire
transfer of immediately available funds which shall be wired by Merchant, Agent
or Buyer, as applicable, no later as 2:00 p.m. (Eastern Time) on the date that
such payment is due; provided, however, that all of the information necessary to
complete the wire transfer has been received by Merchant, Agent or Buyer, as
applicable, by 10:00 a.m. (Eastern Time) on the date that such payment is due. 
In the event that the date on which any such payment is due is not a business
day, then such payment shall be made by wire transfer on the next business day.

17.10       Nature of Remedies.  No failure to exercise and no delay in
exercising, on the part of the Agent, any right, remedy, power, privilege or
adjustment hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power, privilege, or adjustment hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power, privilege, or adjustment.

17.11       Effectiveness.  For the avoidance, unless otherwise agreed to by the
Merchant, Buyer, and Agent in writing, this Agreement shall only become
effective upon the Closing.

17.12       APA Obligations.  Agent hereby covenants and agrees to comply with
the provisions of the APA applicable to Agent, including, without limitation, to
comply with its obligations under Section 2.3(b), Section 2.6, Section
2.7(b)(iii), Section 2.8(d) and Section 9.11 of the APA and clause (q) of the
definition of “Excluded Liabilities” in the APA.

17.13       Entire Agreement.  This Agreement and the APA contain the entire
agreement between the Merchant and Agent, and this Agreement, the APA, the
Letter Agreement, and such other written agreements executed between the Buyer
and Agent contain the entire agreement between the Buyer and Agent with respect
to the transactions contemplated hereby and supersedes and cancels all prior
agreements, including, but not limited to, all proposals, letters of intent or
representations, written or oral, with respect thereto.  In the event of any
ambiguity, conflict or inconsistency between the terms of this Agreement and the
terms of the APA, the applicable terms of the Agency Agreement will govern and
control in all respects, except that in the event of any ambiguity, conflict or
inconsistency between the terms of this Agreement and Section 2.3(b), Section
2.6, Section 2.7(b)(iii), Section 2.8(d) or Section 9.11 of the APA or clause
(q) of the definition of “Excluded Liabilities” in the APA, the applicable
provisions of the APA will govern and control in all respects.
 
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IN WITNESS WHEREOF, the Agent, Merchant and Buyer hereby execute this Agreement
by their duly authorized representatives as a sealed instrument as of the day
and year first written above.

 
AGENT:
               
HILCO MERCHANT RESOURCES, LLC
             
By:
/s/ Ian S. Fredericks
     
Name:
 Ian S. Fredericks
     
Title:
SVP & CLO
             
GORDON BROTHERS RETAIL PARTNERS, LLC
             
By:
/s/ Richard Edwards
     
Name:
 Richard Edwards
     
Title:
Co-President - Retail
 

 
[Signature Page to Agency Agreement]
 

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MERCHANT:
     
AÉROPOSTALE, INC.
 
AÉROPOSTALE WEST, INC.
 
AEROPOSTALE PROCUREMENT COMPANY, INC.
 
JIMMY’Z SURF CO., LLC
 
AEROPOSTALE HOLDINGS, INC.
 
AERO GC MANAGEMENT LLC
 
AEROPOSTALE PUERTO RICO, INC.
 
AEROPOSTALE LICENSING, INC.
 
P.S. FROM AEROPOSTALE, INC.
 
GOJANE LLC

 
By:
/s/ David Dick
     
Name:
David Dick
     
Title:
Senior Vice President and Chief Financial Officer
 

 
[Signature Page to Agency Agreement]
 

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BUYER:
             
AERO OPCO LLC
             
By:
/s/ Stanley Shashoua
     
Name:
Stanley Shashoua
     
Title:
 Authorized Signatory
 

 
[Signature Page to Agency Agreement]
 
 

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