Exhibit 10.1
 
ASSET PURCHASE AGREEMENT
BY AND AMONG
AM RETAIL GROUP, INC.
AND
WILSONS THE LEATHER EXPERTS, INC.
ROSEDALE WILSONS, INC.
WILSONS LEATHER OF DELAWARE INC.
RIVER HILLS WILSONS, INC.
WILSONS LEATHER OF FLORIDA INC.
WILSONS LEATHER DIRECT INC.
WILSONS LEATHER OF GEORGIA INC.
WILSONS LEATHER OF ALABAMA INC.
WILSONS LEATHER OF INDIANA INC.
WILSONS LEATHER OF CONNECTICUT INC.
WILSONS LEATHER OF IOWA INC.
WILSONS LEATHER OF LOUISIANA INC.
WILSONS LEATHER OF NEW JERSEY INC.
WILSONS LEATHER OF MARYLAND INC.
WILSONS LEATHER OF NEW YORK INC.
WILSONS LEATHER OF MASSACHUSETTS INC.
WILSONS LEATHER OF NORTH CAROLINA INC.
WILSONS LEATHER OF MICHIGAN INC.
WILSONS LEATHER OF OHIO INC.
WILSONS LEATHER OF MISSISSIPPI INC.
WILSONS LEATHER OF PENNSYLVANIA INC.
WILSONS LEATHER OF MISSOURI INC.
WILSONS LEATHER OF SOUTH CAROLINA INC.
WILSONS LEATHER OF TENNESSEE INC.
WILSONS LEATHER OF WISCONSIN INC.
WILSONS LEATHER OF TEXAS INC.
WILSONS LEATHER OF VIRGINIA INC.
WILSONS LEATHER HOLDINGS INC.
BERMANS THE LEATHER EXPERTS INC.
 

 

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TABLE OF CONTENTS

              ARTICLE 1 PURCHASE OF ACQUIRED ASSETS AND RELATED TERMS     1  
1.1
  Certain Definitions Relating to Transactions     1  
1.2
  Sale and Purchase of Acquired Assets     6  
1.3
  Unassignable Contracts and Related Matters     6  
 
            ARTICLE 2 PURCHASE PRICE AND ADJUSTMENT     7  
2.1
  Purchase Price     7  
2.2
  Calculation of Estimated Purchase Price for Closing     7  
2.3
  Payment of Estimated Purchase Price at Closing and Related Payments     7  
2.4
  Purchase Price Adjustment     8  
 
            ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF EACH SELLER     11  
3.1
  Organization and Good Standing     11  
3.2
  Authority and Authorization     11  
3.3
  Organizational Documents     11  
3.4
  Ownership of Sellers     12  
3.5
  Conflicts and Consents     12  
3.6
  Financial Information and Undisclosed Liabilities     12  
3.7
  Taxes     13  
3.8
  Litigation and Orders     14  
3.9
  Compliance with Law     14  
3.10
  Contracts     14  
3.11
  Certain Assets     17  
3.12
  Certain Business Relationships     17  
3.13
  Certain Payments     17  
3.14
  Real Property     18  
3.15
  Environmental Matters     18  
3.16
  Intellectual Property     19  
3.17
  Treatment of Acquired Assets and Source Code     20  
3.18
  Privacy and Data Security Matters     21  
3.19
  Insurance     22  
3.20
  Absence of Certain Events     22  
3.21
  Employee Benefits     23  
3.22
  Employees and Labor Relations     24  
3.23
  Suppliers     25  
3.24
  Brokers     25  
3.25
  Projections     25  
3.26
  Disclosure     26  
3.27
  Certain General Exceptions     26  
 
            ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER     26  
4.1
  Organization and Good Standing     26  
4.2
  Authority and Authorization     26  
4.3
  Conflicts and Consents     26  
4.4
  Litigation and Orders     27  
4.5
  Availability of Funds     27  
4.6
  Forward-Looking Statements     27  

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4.7
  Brokers     27  
4.8
  Capitalization     27  
 
            ARTICLE 5 CERTAIN COVENANTS     27  
5.1
  No Liability for Unobtained Consents and Governmental Permits     27  
5.2
  Access to Information     28  
5.3
  Further Assurances     29  
5.4
  Confidentiality and Publicity     29  
5.5
  Employee Matters     30  
5.6
  Mail, Receivables and Other Items to be Given to Proper Party     34  
5.7
  Transfer Taxes     34  
5.8
  Covenant Not to Compete and Related Covenants     34  
5.9
  Intercompany Accounts     35  
5.10
  Bulk Sales Laws     35  
5.11
  License Back and Name Changes     35  
5.12
  Transition Services     36  
5.13
  Insurance and Insurance Proceeds     37  
5.14
  Substitution of Seller Collateral     37  
5.15
  Customer Data     38  
5.16
  Transaction Confidentiality Agreements     38  
5.17
  Post-Closing Releases of Sellers     38  
5.18
  Certain Obligations Regarding Customers     38  
5.19
  Closing Date Financial Statements     40  
5.20
  SEC and National Securities Exchange Requirements     40  
5.21
  Tax Proceedings     40  
5.22
  Cooperation Regarding Certain Intellectual Property     41  
5.23
  License Back of Certain Software     41  
5.24
  Filing of Releases of Security Interests     41  
5.25
  Certain Undelivered Inventory     41  
5.26
  Vendor Matters     42  
5.27
  Credit Card and Bank Account Matters     43  
5.28
  Liens     43  
5.29
  Racking in Sellers Distribution Facility     44  
5.30
  Landlord Retention Amount     44  
5.31
  Certain Lease Matters     44  
 
            ARTICLE 6 CLOSING, AND CLOSING DELIVERIES     45  
6.1
  Closing     45  
6.2
  Closing Deliveries by Sellers     45  
6.3
  Closing Deliveries by Buyer     46  
 
            ARTICLE 7 CONDITIONS TO OBLIGATIONS TO CLOSE     47  
7.1
  Conditions to Obligation of Buyer to Close     47  
7.2
  Conditions to Obligation of Sellers to Close     48  
 
            ARTICLE 8 INDEMNIFICATION AND RESOLUTION OF CERTAIN DISPUTES     48
 
8.1
  General     48  
8.2
  Indemnification     48  
8.3
  Certain Limitations and Other Matters Regarding Claims     49  
8.4
  Certain Survival Periods     51  

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8.5
  Notice of Claims and Procedures     51  
8.6
  Reduction for Insurance, Taxes and Other Offsets     53  
8.7
  Subrogation     53  
8.8
  Effect of Purchase Price Adjustment     53  
8.9
  Indemnification Adjusts Purchase Price for Tax Purposes     54  
8.10
  Effect of Officer’s Certificates     54  
 
            ARTICLE 9 CERTAIN GENERAL TERMS AND OTHER AGREEMENTS     54  
9.1
  Notices     54  
9.2
  Expenses     54  
9.3
  Interpretation; Construction     55  
9.4
  Parties in Interest; No Third-Party Beneficiaries     56  
9.5
  Governing Law     56  
9.6
  Jurisdiction, Venue and Waiver of Jury Trial     56  
9.7
  Entire Agreement; Amendment; Waiver     56  
9.8
  Assignment; Binding Effect     56  
9.9
  Severability; Blue-Pencil     57  
9.10
  Counterparts     57  
9.11
  Disclosure Schedules     57  
 
            ARTICLE 10 CERTAIN DEFINITIONS     57  

Exhibits

     
Exhibit 1.1(a)(1)
  Assumed Contracts
Exhibit 1.1(a)(6)
  Intellectual Property in Acquired Assets
Exhibit 1.1(b)(1)
  Certain Excluded Contracts
Exhibit 1.1(b)(15)
  Certain Excluded Assets
Exhibit 2.2
  Sellers’ Calculation of Estimated Purchase Price and Other Payments
Exhibit 2.3
  Landlord Payment Schedule
Exhibit 2.4(j)
  Allocation of Purchase Price
Exhibit 5.5(a)
  Certain Eligible Employees and Non-Eligible Employees
Exhibit 5.12-1
  Transition Services Agreement for Services to Seller
Exhibit 5.12-2
  Transition Services Agreement for Services to Buyer
Exhibit 5.14
  Letters of Credit
Exhibit 6.2(a)
  Bill of Sale, Assignment and Assumption Agreement
Exhibit 6.2(b)(1)
  Trademark Assignment
Exhibit 6.2(b)(2)
  Domain Name Assignment
Exhibit 6.2(g)
  Assignment and Assumption Agreement for Leases
Exhibit 7.1(b)
  Encumbrances to be Released
Exhibit 10
  Outlet Stores

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ASSET PURCHASE AGREEMENT
     THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into effective
as of July 8, 2008, by and among AM Retail Group, Inc., a Delaware corporation
(“Buyer”), Wilsons The Leather Experts Inc., a Minnesota corporation (“Parent”),
Rosedale Wilsons, Inc., a Minnesota corporation, Wilsons Leather of Delaware
Inc., a Delaware corporation, River Hills Wilsons, Inc., a Minnesota
corporation, Wilsons Leather of Florida Inc., a Florida corporation, Wilsons
Leather Direct Inc., a Delaware corporation, Wilsons Leather of Georgia Inc., a
Georgia corporation, Wilsons Leather of Alabama Inc., an Alabama corporation,
Wilsons Leather of Indiana Inc., an Indiana corporation, Wilsons Leather of
Connecticut Inc., a Connecticut corporation, Wilsons Leather of Iowa Inc., an
Iowa corporation, Wilsons Leather of Louisiana Inc., a Louisiana corporation,
Wilsons Leather of New Jersey Inc., a New Jersey corporation, Wilsons Leather of
Maryland Inc., a Maryland corporation, Wilsons Leather of New York Inc., a New
York corporation, Wilsons Leather of Massachusetts Inc., a Massachusetts
corporation, Wilsons Leather of North Carolina Inc., a North Carolina
corporation, Wilsons Leather of Michigan Inc., a Michigan corporation, Wilsons
Leather of Ohio Inc., an Ohio corporation, Wilsons Leather of Mississippi Inc.,
a Mississippi corporation, Wilsons Leather of Pennsylvania Inc., a Pennsylvania
corporation, Wilsons Leather of Missouri Inc., a Missouri corporation, Wilsons
Leather of South Carolina Inc., a South Carolina corporation, Wilsons Leather of
Tennessee Inc., a Tennessee corporation, Wilsons Leather of Wisconsin Inc., a
Wisconsin corporation, Wilsons Leather of Texas Inc., a Texas corporation,
Wilsons Leather of Virginia Inc., a Virginia corporation, Wilsons Leather
Holdings Inc., a Minnesota corporation, and Bermans The Leather Experts Inc., a
Delaware corporation (each such Person, other than Buyer, is a “Seller”, and
collectively, such Persons are “Sellers”). Certain capitalized terms used in
this Agreement are defined in Article 10.
Recitals
     A. Sellers, collectively, are engaged in the business of selling leather
outerwear, accessories and apparel through mall stores, airport stores and
outlet stores and on the internet.
     B. Sellers, collectively, desire to sell, convey, transfer and assign to
Buyer, and Buyer desires to purchase from Sellers, certain assets of the
Outlet Business (which includes Sellers’ e-commerce business as described
herein), upon and subject to the terms herein.
Agreement
     In consideration of the foregoing and the representations, warranties,
covenants and agreements in this Agreement, each Party hereby agrees as follows:
ARTICLE 1
PURCHASE OF ACQUIRED ASSETS AND RELATED TERMS
     1.1 Certain Definitions Relating to Transactions. For purposes of this
Agreement, the following definitions apply:
          (a) Acquired Assets Defined. “Acquired Assets” means, under and
subject to the terms herein, all right, title and interest of each Seller, in
each case as of the Effective Time, in and to each item listed below in this
Section 1.1(a), except that no Excluded Asset is an

 

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Acquired Asset. The Acquired Assets include the following (to the extent not
expressly listed as an Excluded Asset):
               (1) each Assumed Contract (with “Assumed Contract” meaning, other
than any Excluded Contract, each Contract to which any Seller is a party that is
(i) listed or referred to on Exhibit 1.1(a)(1), (ii) Principally Related to the
Outlet Business that is terminable at will or upon not more than 90 days’ notice
by the applicable Seller without any Liability or other obligation of such
Seller (other than with respect to actions before the termination thereof),
(iii) Principally Related to the Outlet Business that involves aggregate future
payments of less than $10,000 or (iv) orders for merchandise inventory,
materials or supplies with respect to the Outlet Business for which the
associated value is not included in the calculation of Final Transferred
Inventory, other than orders for any Undelivered Inventory (it being
acknowledged that (A) any such item that Buyer pays for under such an order in
this clause (iv) is an asset of Buyer and (B) if such associated value was
included in the calculation of Final Transferred Inventory, then the applicable
Seller would retain the associated payment obligation to the applicable third
party under such order);
               (2) all furniture, fixtures, improvements and equipment
(including computer equipment, but excluding any related software or information
except to the extent any right, title or interest in or to any such software or
information is an Acquired Asset pursuant to another clause in this
Section 1.1(a)) (A) physically located in any Outlet Store, Sellers Distribution
Facility or, except as stated in Section 1.1(b)(12) and 1.1(b)(15), Seller’s
Headquarters at the Effective Time or (B) wherever physically located that are
Principally Related to the Outlet Business;
               (3) all merchandise inventory that, at the Effective Time, is
(A) located in any Outlet Store (or in such Outlet Store’s storage space),
(B) located in Sellers Distribution Facility (or in transit from Sellers
Distribution Facility to an Outlet Store) that has a SKU and location identifier
designating such inventory for sale in any Outlet Store, (C) located at (or in
transit from Sellers Distribution Facility to) the third party fulfillment
center engaged by Sellers that is designated for sale in Sellers’ e-commerce
business or (D) located in Sellers Distribution Facility that has a SKU and
location identifier designating such inventory for sale in Sellers e-commerce
business (provided, however, that the merchandise inventory (x) in such
clauses (a)(3)(C) and (a)(3)(D) does not include any merchandise inventory with
respect to which, at the Effective Time, a customer of a Seller has ordered such
inventory and such inventory has not yet shipped to such customer and (y) does
not include any inventory on order (or in transit) for sale in any Outlet Store
or in Sellers e-commerce business, in each case which, at the Effective Time,
has not been previously delivered to Sellers Distribution Facility or a third
party fulfillment center engaged by Sellers that is designated for sale in
Sellers’ e-commerce business (collectively, the “Undelivered Inventory”), which
Undelivered Inventory will be subject to Section 5.25));
               (4) all office materials or supplies (other than inventory
defined as an Acquired Asset pursuant to clause (a)(3) above) located in, or on
order for, any Outlet Store (or in such Outlet Store’s storage space) at the
Effective Time, including routine office supplies, bags, boxes and similar items
Principally Related to the Outlet Business

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(except for office materials and supplies that are located in Sellers
Distribution Facility and are not “Wilsons Leather” branded, which office
materials and supplies are not Acquired Assets);
               (5) all Register Cash (with “Register Cash” meaning any currency
or coin, but not checks, money orders or similar draft instruments, in each case
to the extent physically located at any Outlet Store at the Effective Time that
is held at such Outlet Store for actual use in transactions with customers in
such Outlet Store’s operations during the next day after the Cut-Off Date that
such Outlet Store is open in the Ordinary Course of Business of the applicable
Seller);
               (6) all Intellectual Property listed in Exhibit 1.1(a)(6);
               (7) all leasehold improvements in any Outlet Store (subject to
the terms hereof and any applicable Real Property Lease);
               (8) all rights Principally Related to the Outlet Business under
any representation, warranty or guarantee by any manufacturer or supplier to the
Outlet Business to the extent with respect to any of the Acquired Assets or
Assumed Liabilities;
               (9) all goodwill, going concern value and enterprise value
Principally Related to the Outlet Business;
               (10) all of the following, to the extent Principally Related to
the Outlet Business and in existence: (A) sales records, accounting records,
records of purchases by any Seller and supplier lists and correspondence with
supplier and potential suppliers; (B) customer lists and related records and
correspondence with customers and potential customers and all related documents,
to the extent permitted by Applicable Law and to the extent contemplated in, and
subject to, Section 5.15; (C) advertising and promotional materials; (D) records
regarding any examination by a Governmental Authority; (E) personnel and payroll
records of Transferred Employees, to the extent permitted by Applicable Law; and
(F) general correspondence and any similar document or record;
               (11) all of the following that is with respect to any Outlet
Store, Sellers Headquarters or Sellers Distribution Facility: (A) telephone
numbers, including cellular telephone numbers (but only to the extent such
cellular telephone number is issued to any Transferred Employee); (B) facsimile
numbers; (C) postal addresses; and (D) postal boxes;
               (12) subject to Section 2.4(i), all of the following:
(A) security deposits given to any landlord under any Real Property Lease; and
(B) Prepaid Items;
               (13) all Permits and rights and privileges associated with such
Permits, in each case to the extent both transferable and solely used with
respect to Sellers Distribution Facility or any Outlet Store;
               (14) a pro rata portion (as contemplated in Section 2.4(i)) of
all claims and rights of any Seller with respect to Tax refunds, Tax credits and
Tax deposits, in each case only with respect to Real Property Lease Taxes; and

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               (15) all other assets (other than any asset that is excluded
pursuant to any of the preceding clauses in this Section 1.1(a) or any other
Excluded Asset) that are, at the Effective Time, Principally Related to the
Outlet Business, whether or not located in any Outlet Store.
          (b) Excluded Assets Defined. “Excluded Assets” means, under and
subject to the terms herein, all assets in or to which any Seller has any right,
title or interest that are not described in Section 1.1(a) or are otherwise
excluded from the Acquired Assets by any other term herein. The Excluded Assets
include each item listed below in this Section 1.1(b) (and all right title and
interest of any Seller, or any Affiliate of any Seller, in or to any such item
listed below):
               (1) each Contract to which any Seller is a party that is not an
Assumed Contract (each such Contract, including any Contract for any
Intercompany Service and each Contract listed in Exhibit 1.1(b)(1), is an
“Excluded Contract”);
               (2) all minute books, ownership records and seals of any Seller
and all other documents relating to the organization, maintenance or existence
of any Seller;
               (3) all bank accounts, cash accounts, investment accounts,
deposit accounts, lockboxes and similar accounts of Sellers;
               (4) all cash, cash equivalents, checks and similar instruments
(whether or not cleared) and short-term securities of Sellers, in each case
other than any Register Cash;
               (5) all accounts receivable, including credit card-related
receivables for sales of Sellers before the Effective Time;
               (6) (A) all Taxpayer and other identification numbers of Sellers;
(B) all Tax Returns and Tax records of Sellers; and (C) duplicate copies of all
books and records that are an Acquired Asset (including any such item that any
Seller or any Affiliate of any Seller is required to retain in its possession by
any Governmental Authority);
               (7) all claims and rights of any Seller with respect to: (A) Tax
refunds, Tax credits and Tax deposits, in each case other than with respect to
Real Property Lease Taxes to the extent stated in Section 1.1(a)(14); and
(B) Tax loss carry forwards;
               (8) all insurance policies and insurance coverage and all rights
in connection therewith;
               (9) all Seller Plans and all rights in connection with and assets
of any Seller Plan;
               (10) all rights of any Seller under this Agreement or any other
Contract or item executed or delivered by or on behalf of any Party in
connection with the transactions contemplated under this Agreement;
               (11) any equity interest or other security of any kind (or right
to receive any equity interest or other security) in or of any Person (including
any Seller);

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               (12) any asset physically located at Sellers Headquarters that is
not Principally Related to the Outlet Business or physically located at any
store of any Seller that is not an Outlet Store (for the avoidance of doubt, for
each employee who is not an Eligible Employee, any asset issued to such employee
or any asset that is primarily used by such employee in the performance of such
employee’s employment duties for a Seller is an Excluded Asset, including any
personal desktop or laptop computer, pager, cellular telephone, BlackBerry or
other telephone, desk or other office furniture or equipment);
               (13) all of the following that is not with respect to any Outlet
Store, Sellers Headquarters or Sellers Distribution Facility: (A) telephone
numbers, including cellular telephone numbers issued to employees that are not a
Transferred Employee; (B) facsimile numbers; (C) postal addresses; and
(D) postal boxes;
               (14) all inventory, materials or supplies not defined as an
Acquired Asset pursuant to Section 1.1(a)(3) or 1.1(a)(4), including all leather
or any, if any, other production materials or sub-materials that, at the
Effective Time, is in the possession of any Seller that has not yet been
manufactured into a product for sale (provided that Undelivered Inventory will
be subject to Section 5.25);
               (15) any other asset listed in Exhibit 1.1(b)(15); or
               (16) all leasehold improvements, other than leasehold
improvements in any Outlet Store.
          (c) Assumed Liabilities Defined. “Assumed Liabilities” means, under
and subject to the terms herein, only those Liabilities and other obligations of
any Seller arising out of, relating to or resulting from any Assumed Contract
(including any Real Property Lease) that is, by the terms of such
Assumed Contract, to be paid, performed, satisfied or observed after the
Effective Time.
          (d) Assumption of Assumed Liabilities; Non-Assumption of Other
Liabilities. Under and subject to the terms of this Agreement, Buyer hereby
assumes, effective as of the Effective Time, and agrees to pay, perform and
satisfy when due, and observe fully and timely, all Assumed Liabilities (as
defined above). Except as specifically set forth in this Section 1.1(d) or to
the extent expressly stated in this Agreement or any Ancillary Document, Buyer
expressly does not, and shall not, assume or be deemed to have assumed under
this Agreement or by reason of any transaction contemplated hereunder, any
debts, liabilities (contingent or otherwise) or obligations of any of the
Sellers of any nature whatsoever. The Assumed Liabilities shall not include
(i) subject to Section 2.4(i), any debts, liabilities (contingent or otherwise)
or obligations of any of the Sellers (including, without limitation, trade
accounts payable and liabilities that should be accrued in accordance with GAAP
up to and including the Effective Time) arising out of any Contract that is not
an Assumed Contract (with the Parties acknowledging that that any Contract
Principally Related to the Outlet Business that is required to be listed on
Exhibit 1.1(a)(1) to avoid a breach of the first sentence of Section 3.10(b),
but is not listed on Exhibit 1.1(a)(1) (regardless of any Knowledge thereof on
the part of Buyer), is not an Assumed Contract and no right, title or interest
therein is an Acquired Asset), (ii) any liabilities of Sellers arising from
customer complaints or any related customer chargebacks (including all
deductions of any kind) relating to the Outlet Business prior to the Effective
Time

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(except to the extent provided in Section 5.18), (iii) except as otherwise
specified in this Agreement, any liability or obligation for Taxes of Sellers,
whether or not accrued, assessed or currently due and payable, including without
limitation any liability for Taxes (A) of Sellers, whether or not it relates to
the operation of Sellers’ businesses, (B) of Sellers arising from the operation
of Sellers’ business or the ownership of the Acquired Assets prior to the
Effective Time, or (C) of Sellers arising out of the consummation of the
transactions contemplated hereby (for purposes of this Section 1.1(d), all real
property Taxes, personal property Taxes and similar ad valorem obligations
levied with respect to the Acquired Assets for a Tax period that includes (but
does not end on) the Cut-Off Date shall be apportioned between Sellers and Buyer
based upon the number of days of such period included in the Tax period before
(and including) the Cut-Off Date and the number of days of such Tax period after
the Cut-Off Date), (iv) any Liability or other obligation of any Seller
(A) under any Seller Plan or (B) to or with respect to any current or former
employee of any Seller, or (v) other than under Section 2.4(i) and any related
payment hereunder, any Liability or other obligation of any Seller under any
Assumed Contract (including any Real Property Lease) that is, by the terms of
such Assumed Contract, to be paid, performed, satisfied or observed on or prior
to the Effective Time.
     1.2 Sale and Purchase of Acquired Assets. Under and subject to the terms of
this Agreement, effective as of the Effective Time, each Seller hereby sells,
conveys, transfers and assigns to Buyer, and Buyer hereby purchases from each
Seller, all of such Seller’s right, title and interest in and to the
Acquired Assets. None of the Excluded Assets are sold, conveyed, transferred or
assigned to Buyer.
     1.3 Unassignable Contracts and Related Matters. Notwithstanding anything
herein to the contrary other than Section 5.1 (and subject to Section 5.1), if
(a) any Assumed Contract is not capable of being sold, conveyed, transferred or
assigned hereunder, or (whether or not in connection with an Assumed Contract)
if Buyer is not permitted to provide or Parent and its applicable Affiliates are
not permitted to receive any license, sublicense or related service under
section 3.1 of the Transition Services Agreement under which Parent is the
service recipient, in each case in the absence of the approval, consent or
waiver of any other Person (without breaching, violating, defaulting under,
conflicting with, giving rise to or creating any right to accelerate, increase,
terminate, modify or cancel any material right or obligation or creating any
Encumbrance, other than a Permitted Encumbrance, under, such Assumed Contract,
or without otherwise violating any right of such other Person) and (b) all
necessary approvals, consents or waivers of any such other Person (including any
party to such Assumed Contract) have not been obtained at or before the Closing,
then the applicable Seller and Buyer will cooperate to obtain such approvals,
consents, or waivers as soon as reasonably possible and shall act with respect
to each such Assumed Contract, and with respect to section 3.1 of such
Transition Services Agreement (as applicable), such that Buyer shall obtain the
rights and benefits of such Assumed Contract and assume the corresponding
Assumed Liabilities, and Parent and its Affiliates will obtain the rights and
benefits under section 3.1 of such Transition Services Agreement (and related
rights and benefits under such Transition Services Agreement) and pay the
amounts owed to Buyer with respect thereto, so that the Parties are, to the
greatest extent possible, put in the same position they would have been had such
approval, consent or waiver been obtained unconditionally. Such actions by Buyer
or such Seller may be in the form of a subcontract, sublicense or sublease
appointing Buyer as agent to the applicable Seller to perform such Assumed
Contract, or any other arrangement under which Buyer could enforce for the
benefit of Buyer any and all rights and benefits of the applicable Seller
against the third party thereto. For

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the avoidance of doubt, the foregoing actions will be performed on an Assumed
Contract by Assumed Contract basis, and in accordance with Applicable Law.
ARTICLE 2
PURCHASE PRICE AND ADJUSTMENT
     2.1 Purchase Price. Upon and subject to the terms herein, Buyer will pay to
Sellers the aggregate amount of $20,646,575 (the “Initial Purchase Price”), as
such amount is adjusted pursuant to the terms herein (such amount, as adjusted
pursuant to any term herein, is the final purchase price for the Acquired Assets
and is referred to herein as the “Purchase Price”).
     2.2 Calculation of Estimated Purchase Price for Closing. On or before the
Closing Date, Sellers have delivered to Buyer a statement in form acceptable to
Buyer (including supporting documentation therefor acceptable to Buyer),
attached hereto as Exhibit 2.2, containing Sellers’ reasonable estimate of
(a) Transferred Inventory and (b) the Purchase Price (which, for Closing, is
(1) the Initial Purchase Price plus any amount by which such estimated
Transferred Inventory contained in such statement exceeds the sum of
Target Transferred Inventory plus $6,500, (2) the Initial Purchase Price minus
any amount by which such estimated Transferred Inventory contained in such
statement is less than the sum of Target Transferred Inventory plus $6,500 or
(3) the Initial Purchase Price in the instance where such estimated Transferred
Inventory contained in such statement equals the sum of Target Transferred
Inventory plus $6,500 (as applicable), plus in the applicable case under such
clause (1), (2) or (3), as the case may be, the amount of Sellers’ good faith
estimate of the amount of Register Cash, which amount shall be included in the
Estimated Purchase Price). The amount of such estimated Purchase Price from
Sellers is the “Estimated Purchase Price”.
     2.3 Payment of Estimated Purchase Price at Closing and Related Payments.
Upon and subject to the terms herein, Buyer will pay the
Estimated Purchase Price to Sellers (to be allocated among Sellers, as
determined by Sellers consistent with the terms herein) as described in this
Section 2.3. Buyer will pay to Sellers, in cash, by wire transfer of immediately
available funds, the amount of $16,943,809 (which includes amounts paid pursuant
to Section 2.4(i) and the sentence of this Section 2.3 below that describes
certain reimbursements regarding Transferred Employees) at the Closing and on
the Closing Date to the account designated by Sellers on or before the Closing
Date. Buyer will withhold from the Estimated Purchase Price the amount of
$3,773,502 (the “Landlord Retention Amount”) at the Closing and on the Closing
Date, which is so withheld with respect matters contemplated herein regarding
the landlords identified on Exhibit 2.3 (the “Landlord Payment Schedule”) and
which will be held and paid pursuant to Section 5.30. The Buyer will withhold,
and shall not pay to Sellers at Closing, the following components of the
Estimated Purchase Price (however, the amount of such components will be paid or
withheld pursuant and subject to the terms of this Agreement): (1) the sum of
$1,000,000 (the “Gift Card Holdback Amount”), which amount shall be held by
Buyer to secure certain Gift Card Item Reimbursable Amounts, as further provided
in Section 5.18; and (2) the sum of $500,000 (the
“Vendor Loss Holdback Amount”), which amount shall be held by Buyer to secure
Vendor Losses, as further provided in Section 5.26. Additionally, at Closing and
on the Closing Date, Buyer will pay to Sellers (to be allocated by Sellers based
on Sellers’ determination of the amount owing to the applicable Sellers) the
amount stated in Exhibit 2.2 for reimbursement for such Sellers in connection
with such Sellers agreeing not to obtain reimbursement from certain Transferred
Employees for excess used (but unearned)

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vacation time, sick leave or other time off by such Transferred Employees as of
the Effective Time. For each such amount so withheld by Buyer from the Estimated
Purchase Price as the Landlord Retention Amount or under any of clause (1) or
(2) of this Section 2.3, in each case that is subsequently required to be paid
to any Seller after Closing (including as contemplated in Section 5.18, 5.26 or
5.30), Buyer will pay to such Seller interest on each such portion of such
withheld amount that is so subsequently required to be paid to such Seller.
Buyer will pay such interest at the time Buyer is required to pay such portion
of such withheld amount to such Seller. Such interest will be calculated at an
annual rate equal to 3.0% and based on the number of actual days elapsed from
(but not including) the Closing Date to (and including) the date of such
payment, divided by 365.
     2.4 Purchase Price Adjustment.
          (a) Sellers’ Preparation of the Statement. Within 60 days after the
Closing Date, Sellers will prepare and deliver to Buyer a statement (the
“Statement”) setting forth, in reasonable detail, Sellers’ determination of
Transferred Inventory and of the amount of Register Cash at the Effective Time.
Buyer will assist Sellers and their representatives in all reasonable respects
in preparing the Statement and will give Sellers and their representatives
reasonable access, upon reasonable prior request, to the personnel, properties,
books and records regarding the Outlet Business for such purpose and the other
matters in this Section 2.4. The final determination of Transferred Inventory
pursuant to this Section 2.4 is “Final Transferred Inventory” and the final
determination of Register Cash pursuant to this Section 2.4 is
“Final Register Cash.”
          (b) Buyer’s Response to the Statement. The Transferred Inventory and
Register Cash in the Statement will become final and binding upon the Parties
(and become Final Transferred Inventory and Final Register Cash, respectively)
60 days after Sellers give the Statement to Buyer, unless Buyer gives written
notice, in reasonable detail, of its disagreement (a “Notice of Disagreement”)
to Sellers before the end of such 60-day period. If Buyer gives Notice of
Disagreement before the end of such 60-day period stated above, then
Final Transferred Inventory and Final Register Cash (as finally determined in
accordance with clause (b)(1) or (b)(2) below) will become final and binding on
the Parties upon the earlier of (1) the date the Parties resolve in writing any
differences they have with respect to the amount of the Transferred Inventory or
Register Cash or (2) the date any disputed items are finally resolved in writing
by the Arbitrator pursuant to Section 2.4(c). Sellers will not modify the
Statement in any manner adverse to Buyer. Buyer will not modify the Notice of
Disagreement in any manner adverse to Sellers. Any item or amount in, or omitted
from, the Statement that Buyer does not disagree with in the Notice of
Disagreement will be final and binding on the Parties in the manner stated in,
or omitted from, the Statement.
          (c) Resolving Matters in Notice of Disagreement. During the 30-day
period after a Notice of Disagreement is given, Sellers and Buyer will attempt
to resolve in writing any differences that they have regarding any item in such
Notice of Disagreement. If, at the end of such 30-day period, Sellers and Buyer
have not reached agreement on all such items, then any Party may require that
the items that remain in dispute be promptly submitted to an arbitrator (the
“Arbitrator”) for review and resolution. The Arbitrator will be a nationally
recognized public accounting firm agreed upon by the Parties in writing;
provided that the Arbitrator will not be an accounting firm used by any Seller
or Buyer (or any Affiliate of any of them) within

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the three years preceding the Closing Date for any purpose. The Arbitrator will
determine procedures for such arbitration, subject to the terms hereof. The
Arbitrator will only consider the items that remain in dispute. The Arbitrator
will render a decision resolving such items in dispute within 30 days after
completion of submissions to the Arbitrator. The Arbitrator will determine
Final Transferred Inventory and Final Register Cash solely based on submissions
made by Sellers and Buyer consistent with the terms hereof (and not by
independent review). The Arbitrator will not assign a value to any item that is
greater than the greater value for such item claimed by any Party or less than
the lesser value for such item claimed by any Party.
          (d) Allocation of Fees and Expenses. Each Party shall pay its own and
its Affiliates’ fees and expenses incurred with respect to such Arbitration;
provided, however, that the Non-Prevailing Party in such arbitration will also
pay the fees and expenses of the Arbitrator. A Party is the “Prevailing Party”
if the Arbitrator’s determination of the items in dispute is closer to such
Party’s determination of such items than it is to the other Party’s
determination of such items (in each case in the aggregate and as submitted to
the Arbitrator). A Party is the “Non-Prevailing Party” if the other Party is the
Prevailing Party.
          (e) Adjustment to Purchase Price Based on Final Transferred Inventory
and Final Register Cash. The Purchase Price will be, and automatically will be
adjusted to be, equal to the sum of the Initial Purchase Price plus Final
Register Cash, and then as such sum is (1) increased by the amount, if any, by
which Final Transferred Inventory exceeds Target Transferred Inventory or
(2) decreased by the amount, if any, by which Final Transferred Inventory is
less than Target Transferred Inventory. However, if no such adjustment is
required pursuant to clause (1) or (2) of this Section 2.4(e), then the Purchase
Price will equal the sum of the Initial Purchase Price plus Final Register Cash.
          (f) Reconciliation Payment. Within five Business Days after
Final Transferred Inventory and Final Register Cash become final and binding on
the Parties, the following will occur:
          (1) if the Estimated Purchase Price (as paid at Closing but excluding
components not paid at the Closing on the Closing Date as described in
Section 2.3) is less than the Purchase Price (excluding components not paid at
the Closing on the Closing Date as described in Section 2.3 and as adjusted, if
at all, under Section 2.4(e)), then Buyer will pay to Sellers, in the aggregate,
the amount of such difference, without interest, in cash, by wire transfer of
immediately available funds; and
          (2) if the Estimated Purchase Price (as paid at Closing but excluding
components not paid at the Closing on the Closing Date as described in
Section 2.3) is more than the Purchase Price (excluding components not paid at
the Closing on the Closing Date as described in Section 2.3 and as adjusted, if
at all, under Section 2.4(e)), then Sellers, in the aggregate, will pay to Buyer
the amount of such excess, without interest, in cash, by wire transfer of
immediately available funds.
          (g) Target Transferred Inventory Defined. “Target Transferred
Inventory” means the amount of $18,552,575.
          (h) Transferred Inventory Defined. “Transferred Inventory” means an
amount equal to the amount of inventory, materials and supplies that are an
Acquired Asset

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pursuant to Section 1.1(a)(3) or 1.1(a)(4). Transferred Inventory described in
Section 1.1(a)(3) will be calculated at average cost, in a manner consistent
with Sellers’ past practices and stock ledger, including with respect to the
calculation of any reserve for shrinkage (which reserve for shrinkage would be a
reduction to the total amount of Transferred Inventory, consistent with such
past practices and stock ledger). With respect to office materials and supplies
described in Section 1.1(a)(4), the applicable amount shall be fixed at $65,000.
          (i) Proration. In addition to the foregoing matters in this Article 2,
Sellers, on the one hand, and Buyer, on the other hand, will pro rate, as of the
Effective Time, based on the number of days elapsed in the applicable period,
all Prepaid Items. “Prepaid Item” means, to the extent with respect to any
Acquired Asset or Assumed Liability, any: (1) rent, utility (unless and to the
extent that Buyer shall be billed directly for post-Closing usage), Real
Property Lease Tax, common area maintenance, marketing or advertising allocation
or other similar amount paid or payable with respect to any Real Property Lease;
(2) prepaid cost or expense, advance payment or similar prepayment; (3) charge
or payment based on performance or possession under any lease (other than any
Real Property Lease), service Contract, maintenance Contract, marketing or
advertising Contract or similar Contract, in each case that is included within
or under any Assumed Contract; or (4) other similar prepaid amount that is or
was an obligation to any third party. In connection with the foregoing, Sellers
will be given full credit for all amounts paid or otherwise satisfied by any
Seller for which Buyer receives the benefit (including any prepaid amount that
is an Acquired Asset). The Parties will use their commercially reasonable
efforts to cause all providers of utility services to bill the applicable Seller
for all costs owed by such Seller hereunder and to bill Buyer for all costs owed
by Buyer hereunder (to the extent the Parties would be billed directly). At
Closing, Buyer will pay to Sellers or Sellers will pay to Buyer (as applicable)
an amount equal to 90% of Sellers’ good faith estimate of the Prepaid Items
(other than the Prepaid Items described in clause (i)(1) above, as to which 100%
shall be paid), as set forth on Exhibit 2.2. Thirty (30) days after Closing,
Buyer will pay to Sellers or Sellers will pay to Buyer (as applicable) an amount
to properly allocate such pro rated Prepaid Items under this Section 2.4(i) (net
of the payment made pursuant to the preceding sentence), without interest, in
cash, by wire transfer of immediately available funds.
          (j) Allocation of Purchase Price. Each Party will allocate the
Purchase Price among the Acquired Assets and the covenant described in
Section 5.8 in accordance with Exhibit 2.4(j) and Applicable Law. After Closing,
the Parties will make consistent use of such allocation, as adjusted to reflect
any adjustments needed to remain consistent with Final Transferred Inventory,
Final Register Cash and the Prepaid Items under Section 2.4(i) and the resulting
adjustment to the Purchase Price, for all Tax and financial reporting purposes.
With respect to such allocation, as so adjusted, each Party will (1) be bound by
such allocation, (2) act in accordance with such allocation in the preparation
and the filing of all Tax Returns and in the course of any Tax audit, Tax review
or other Tax Proceeding relating thereto, (3) take no position, and cause its
Affiliates to take no position, inconsistent with such allocation for Tax or
financial reporting purposes (including in connection with any Proceeding),
unless in each case otherwise required pursuant to a “determination” within the
meaning of section 1313(a) of the Code, and (4) not later than 30 days before
any filing of any IRS Form 8594 by or on behalf of such Party (whether initial
or supplemental) relating to the transactions contemplated herein, deliver to
each other Party a copy of such IRS Form. In furtherance of the foregoing, if
any Governmental Authority, on its own initiative, makes or proposes an
allocation of the Purchase Price among the Acquired Assets and the covenant
described in Section 5.8 hereof which differs

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materially from the allocation contemplated by this Section 2.4(j), each of
Buyer, on the one hand, and Sellers, on the other hand, shall have the right, at
its or their election and expense, to contest such Governmental Authority’s
determination. In the event of such a contest, the other Party or Parties hereto
shall cooperate reasonably with the contesting Party, but shall have the right
to file such protective claims or Tax Returns as may be reasonably required to
protect its or their interests.
          (k) Actions of Sellers in Unison. Each Seller will act in unison and
in agreement with each other Seller with respect to all matters in this
Section 2.4. Additionally, for purposes of Section 2.4(c) and 2.4(d), all
Sellers are treated as a single Party.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EACH SELLER
     Except as disclosed in the Disclosure Schedule and subject to Section 9.11,
each Seller, jointly and severally, hereby represents and warrants to Buyer as
follows:
     3.1 Organization and Good Standing. Each Seller is a duly organized and
validly existing corporation in good standing under the laws of the jurisdiction
in which it was organized, each as listed in Section 3.1 of the Disclosure
Schedule. Each Seller is duly qualified and in good standing to do business as a
foreign corporation in each jurisdiction in which the ownership or leasing of
its properties or assets or the conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing
either individually or in the aggregate has not had and is not reasonably likely
to have a Material Adverse Effect and will not materially and adversely affect
such Seller’s ability to consummate the transactions contemplated herein, with
each such jurisdiction being listed in Section 3.1 of the Disclosure Schedule.
Each Seller has full corporate power and authority to own and lease its
properties and assets and conduct its business as now conducted.
     3.2 Authority and Authorization. The execution, delivery and performance of
this Agreement and each Ancillary Document of each Seller have been duly
authorized and approved by all necessary corporate action with respect to such
Seller, and each such authorization and approval remains in full force and
effect. This Agreement and each Ancillary Document of each Seller has been duly
executed by such Seller. Assuming due authorization, execution and delivery by
Buyer of this Agreement and each Ancillary Document of Buyer, this Agreement is,
and each Ancillary Document of each Seller is, the legal, valid and binding
obligation of each Seller, enforceable against such Seller in accordance with
its terms, except to the extent enforceability may be limited by any
Enforceability Limitation. Each Seller and has all requisite corporate power and
authority to enter into this Agreement and each Ancillary Document to be
executed and delivered by such Seller and to consummate the transactions
contemplated herein and therein to be consummated by such Seller.
     3.3 Organizational Documents. A copy of the articles or certificate of
incorporation as amended to the date hereof (certified by the Secretary or
Department of State of the applicable State) and the bylaws of each Seller has
been delivered to Buyer and such documents are complete and correct and
represent the presently effective articles or certificate of incorporation and
bylaws of Sellers. The minutes of the meetings (or proper written consents) of
the boards of directors of Sellers authorizing the execution and delivery of
this Agreement and the

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consummation of the transactions contemplated hereby (certified by a duly
authorized officer of the applicable Seller), copies of which have been
delivered to Buyer, are true, accurate and complete as of the Closing Date.
     3.4 Ownership of Sellers. Section 3.4 of the Disclosure Schedule lists the
names of the owners of all capital stock of each Seller, other than Parent, as
of the date hereof.
     3.5 Conflicts and Consents.
          (a) Conflicts. Neither the execution or delivery by any Seller of this
Agreement or by any Seller of any Ancillary Document nor consummation by any
Seller of the transactions contemplated herein or therein does or will (with or
without the passage of time or giving of notice): (1) constitute a breach of,
violate, conflict with or give rise to or create any right or obligation under
any Organizational Document of any Seller; (2) violate any Applicable Law
material to such Seller or violate in any material respect any Order applicable
to such Seller; or (3) constitute a material breach or violation of or a
material default under, conflict with or give rise to or create any right of any
Person other than any Seller to accelerate, increase, terminate, modify or
cancel any material right or obligation or result in the creation of any
Encumbrance, other than a Permitted Encumbrance, under, any Major Contract that
is an Assumed Contract.
          (b) Consents. Section 3.5(b) of the Disclosure Schedule sets forth
each approval by, notification to or filing with any Person required in
connection with any Seller’s execution, delivery or performance of this
Agreement or any Ancillary Document of such Seller or such Seller’s consummation
of the transactions contemplated herein or therein, except (1) with respect to
any Contract not required to be disclosed in the Disclosure Schedule to avoid a
breach of Section 3.10 or (2) for any consent, approval, notice or filing, the
absence of which will not materially and adversely affect such Seller’s ability
to consummate the transactions contemplated herein. “Consent” means the
consents, approvals, notices or filings listed in Section 3.5(b) of the
Disclosure Schedule.
     3.6 Financial Information and Undisclosed Liabilities.
          (a) Financial Information Defined. Section 3.6(a) of the Disclosure
Schedule contains the following: (1) unaudited statements, as of May 3, 2008
(the “Financial Information Date”), of inventory, furniture, fixtures and
equipment of the Outlet Business; (2) unaudited profit and loss statements of
the Outlet Business for Parent’s fiscal years ended February 3, 2007 and
February 2, 2008 and for the three-month period ended on the Financial
Information Date; (3) unaudited profit and loss statements of the Outlet
Business for each fiscal quarter in Parent’s fiscal years ended February 3, 2007
and February 2, 2008; and (4) a schedule reflecting the allocations of shared
direct and indirect expenses among Parent’s divisions for the three-month period
ending on the Financial Information Date (such statements are, collectively, the
“Financial Information”).
          (b) Financial Information. The Financial Information is true, correct
and complete, in all material respects, and fairly presents, in all material
respects, at their respective dates and for the respective periods covered
thereby, the assets of the Outlet Business with respect to the specific items
presented in the Financial Information and results of operations of the Outlet
Business. The Financial Information is consistent in all material respects with
the

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books and records of Parent, which books and records of Parent are in all
material respects correct and complete. Except as set forth in Section 3.6(b) of
the Disclosure Schedule, each statement included in the Financial Information
has been prepared on a consistent basis throughout the periods involved. Sellers
acknowledge and agree that Buyer is relying on the accuracy and completeness of
the Financial Information in making its determination as to whether it must file
the Financial Information, or any portion thereof, with the SEC.
          (c) Undisclosed Liabilities. No Seller has any Liability with respect
to the Outlet Business that at the Effective Time would be an Assumed Liability,
except for Liabilities (1) under any Major Contract that is an Assumed Contract
(or a Contract not required to be disclosed in the Disclosure Schedule to avoid
a breach of Section 3.10) or that is otherwise disclosed in or contemplated by
this Agreement, including the Disclosure Schedule, (2) that have arisen in the
Ordinary Course of Business of such Seller since the Financial Information Date,
or (3) under this Agreement or any Ancillary Document or otherwise in connection
with the transactions contemplated herein or therein.
     3.7 Taxes.
          (a) Such Seller has timely filed all Tax Returns that it has been
required to file, and all such Tax Returns were correct and complete in all
material respects and were prepared in substantial compliance with Applicable
Law. None of such Tax Returns has been examined or audited by any Governmental
Authority or is currently the subject of a Proceeding. Such Seller has paid, or
made provisions in accordance with GAAP for the payment of, all Taxes due
(whether or not shown or required to be shown on any Tax Return) through and
including the Closing Date, including, but not limited to, with respect to 2008.
Sufficient reserves have been established on the books and records of such
Seller and are reflected in the Financial Information of such Seller to cover
any unpaid Taxes of such Seller. There are no Encumbrances with respect to any
of the Acquired Assets owned by such Seller that arose in connection with any
failure (or alleged failure) to pay any Tax, other than Permitted Encumbrances.
There is not currently pending any Proceeding or any dispute or claim by a
Governmental Authority concerning the Tax liability of such Seller with respect
to the income, business, operations or property of such Seller. No claim has
been made by a Governmental Authority in a jurisdiction where such Seller does
not file Tax Returns that it is or may be subject to Tax in that jurisdiction.
          (b) All Taxes which such Seller was required by law to withhold,
deposit or collect in connection with any amount paid or owing to any employee,
independent contractor, creditor, partner or other third party have been duly
withheld, deposited and collected and, to the extent required, have been paid to
the relevant Governmental Authority, and all Forms W-2 and 1099 required with
respect thereto have been properly completed and timely filed.
          (c) None of the directors, officers or other Person responsible for
Taxes of such Seller has Knowledge, based upon personal contact with any agent
of any Governmental Authority, that such Governmental Authority intends to
assess any additional Taxes for any period for which Tax Returns have been filed
by such Seller.

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          (d) None of the Acquired Assets owned by such Seller is (i)
“tax-exempt use property” within the meaning of section 168(h)(1) of the Code,
or (ii) “tax-exempt bond financed property” within the meaning of section 168(g)
of the Code.
          (e) None of the Acquired Assets owned by such Seller is an interest in
any Person that is treated as a partnership for U.S. federal income Tax purposes
or would be treated as a pass-through or disregarded entity for any Tax purpose.
          (f) None of the Assumed Liabilities is an obligation to make a payment
that is not deductible under section 280G of the Code. Such Seller has no
liability for the Taxes of any Person under §1.1502-6 of the United States
Income Tax Regulations (or any similar provision of state, local or foreign
law), other than another Seller or any other member of the affiliated group of
corporations of which Parent is the common parent, or as a transferee or
successor, by contract or otherwise.
     3.8 Litigation and Orders. Except as set forth in Section 3.8 of the
Disclosure Schedule, there is no Proceeding pending or, to any Seller’s
Knowledge, Threatened against any Seller, as of the date of this Agreement, that
(a) relates to the Outlet Business or any of the Acquired Assets (other than
(1) workers’ compensation claims or (2) challenges by governmental Intellectual
Property office examiners as part of the related application process) that, if
decided adversely to such Seller, is reasonably likely to result in an adverse
effect upon the business or operations or condition, financial or otherwise, of
the Outlet Business or the Acquired Assets or (b) seeks to enjoin, prohibit or
otherwise challenge the transactions contemplated hereby. As of the date of this
Agreement, no Seller is subject to any material restriction or limitation on the
Outlet Business under any Order and no unsatisfied Order rendered against or
affecting Sellers or any of the Acquired Assets might reasonably result in an
adverse effect upon the business or operations or condition, financial or
otherwise, of the Outlet Business or any of the Acquired Assets or adversely
affect the validity or enforceability of any of the Assumed Contracts.
     3.9 Compliance with Law. At all times since January 28, 2006, each Seller
has been operated in compliance with all Applicable Laws (including those
relating to maintaining Permits required of such Seller to conduct its
business), except as does not relate to the Outlet Business or as set forth on
Section 3.9 of the Disclosure Schedule and except for any non-compliance that
has not had and is not reasonably likely to have a Material Adverse Effect.
     3.10 Contracts.
          (a) Section 3.10(a) of the Disclosure Schedule lists the following
Contracts, in effect as of the date of this Agreement, to which any Seller is a
party that is Principally Related to the Outlet Business (each Contract so
listed and each Real Property Lease is a “Major Contract”):
          (1) each employment agreement (other than those that are terminable at
will by any Seller without any Liability or other obligation to any Seller,
except any Liability or other obligation with respect to services rendered
before the termination thereof);

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          (2) each covenant not to compete that restricts the Outlet Business as
presently conducted;
          (3) each operating lease (as lessor or lessee) of tangible personal
property (other than any such lease calling for payments of less than $10,000
per 12-month period);
          (4) each Contract to pay or receive any royalty or license fee or to
license (either as licensor or licensee) any Intellectual Property (other than
any (A) license with any Seller or any Affiliate of any Seller, but no other
Person, that terminates at the Effective Time, (B) license for Intellectual
Property embedded in any equipment or fixture, (C) non-exclusive implied license
of Intellectual Property or (D) non-exclusive license for the use of any
commercially available off-the-shelf software);
          (5) each Contract regarding any management, personal service or
consulting or other similar type of Contract under which there exists aggregate
future payments in excess of $10,000 per Contract (other than those (A) that are
terminable at will or upon not more than 90 days’ notice by any Seller without
any Liability or other obligation to any Seller, except any Liability or other
obligation with respect to services rendered before the termination thereof, or
(B) entered into in connection with a license);
          (6) each Contract for the purchase by any Seller of any supply or
product that calls for performance over a period of more than 12 months (other
than those that are terminable at will or upon not more than 90 days’ notice by
any Seller without any Liability or other obligation to any Seller, except any
Liability or other obligation with respect to any supply or product purchased
before the termination thereof);
          (7) each mortgage agreement, deed of trust, security agreement,
purchase money agreement, conditional sales contract or capital lease created or
assumed by, or permitted to be created by written document made or accepted by,
any Seller (other than any (A) purchase money agreement, conditional sales
contract or capital lease evidencing any Encumbrance only on tangible personal
property under which there exists aggregate future payments less than $10,000
per Contract or (B) protective filing of any financing statement under the
Uniform Commercial Code);
          (8) each Contract under which any Seller is obligated to repay or has
guaranteed any outstanding indebtedness for borrowed money or remains obligated
to lend to or make any investment in (in the form of a loan, capital
contribution or otherwise) any other Person, other than any other Seller;
          (9) each Contract under which any Seller has advanced or loaned any
other Person, other than any other Seller, outstanding amounts in the aggregate
for such Person exceeding $10,000;
          (10) each outstanding power of attorney with respect to any Seller
(other than those entered into in its Ordinary Course of Business in connection
with any Intellectual Property or Tax matter);

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          (11) each Contract with any distributor or broker of any product or
service offered by any Seller;
          (12) each Contract for any advertising or promotional service or
website design or hosting;
          (13) each Contract for the sale of any product or service offered by
any Seller that calls for performance over a period of more than six months
(other than those that are terminable at will or upon not more than 90 days’
notice by any Seller without any Liability or other obligation to any Seller
except any Liability or other obligation with respect to products or services
ordered before the termination thereof);
          (14) agreements of any Seller for mergers, consolidations or
reorganizations or for the purchase or sale of material assets (other than in
its Ordinary Course of Business) or all or substantially all of a Person’s
business and assets;
          (15) each Contract with finders, brokers or underwriters (other than
under which Buyer will have no obligation); and
          (16) each other Contract not entered into in the Ordinary Course of
Business of the applicable Seller (other than any Contract calling for payments
by or to any Seller of less than $10,000 per 12-month period).
          (b) Exhibit 1.1(a)(1) sets forth a true and complete list of all
Contracts to which any Seller is a party that is Principally Related to the
Outlet Business, other than Excluded Contracts and Contracts that are terminable
at will or upon not more than 90 days’ notice by the applicable Seller without
any Liability or other obligation of such Seller (other than with respect to
actions before the termination thereof) or which involve aggregate future
payments of less than $10,000 (and other than any (A) license with any Seller or
any Affiliate of any Seller, but no other Person, that terminates at the
Effective Time, (B) license for Intellectual Property embedded in any equipment
or fixture, (C) non-exclusive implied license of Intellectual Property
(D) non-exclusive license for the use of any commercially available
off-the-shelf software or (E) order described in Section 1.1(a)(1)(iv)). Sellers
have made available to Buyer a true, correct and complete copy of each such
Contract required to be so listed (or, to the extent that such an Assumed
Contract is oral, an accurate summary thereof). With respect to each
Major Contract (and with the following assuming that each Consent has been
obtained, which, for any Consent that is a filing or notice, means the making of
such filing or notice), (1) such Major Contract is legal, valid and binding, in
full force and effect and enforceable (except to the extent enforceability may
be limited by any Enforceability Limitation) in accordance with its terms
against the Seller that is a party thereto and, to such Seller’s Knowledge,
against each other party thereto, (2) such Seller is not and, to such Seller’s
Knowledge, no other party thereto is in material breach of or default under such
Major Contract, (3) no event, occurrence or condition exists or has occurred
that (with or without the passage of time or giving of notice) would constitute
a material breach or default of, or permit termination, modification,
acceleration or cancellation of, such Major Contract or of any material right,
Liability or other obligation thereunder, (4) such Seller has not waived any
material right under such Major Contract and (5) no party to such Major Contract
has terminated, modified, accelerated or canceled such Major Contract or any
material right, Liability or other obligation thereunder or communicated in
writing such party’s

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intent to do so. Seller has not granted any release or waiver in writing or that
is otherwise material under or with respect to any of the Major Contracts.
Seller has not assigned or otherwise transferred any of its rights under any of
the Major Contracts.
     3.11 Certain Assets.
          (a) Title. Each Seller has good and marketable title to, or a valid
leasehold interest in or valid license for, the tangible Acquired Assets to be
conveyed by it pursuant to this Agreement, free and clear of any Encumbrance
other than any Permitted Encumbrance.
          (b) Condition. The tangible Acquired Assets, other than supplies and
inventory, have been maintained in accordance with normal applicable industry
practice, are in good operating condition and repair (except normal wear and
tear) and is sufficient in all material respects for the purposes for which they
are used.
          (c) Inventory. Subject to the applicable reserves in the determination
of Final Transferred Inventory and other than inventory for liquidation located
at, held for or in transit to the Outlet Store at 3117 West Magnolia Boulevard,
Burbank, California, substantially all of the On-Hand Inventory is merchantable.
None of the On-Hand Inventory is on consignment (other than from one Seller to
another). “On-Hand Inventory” means the finished goods inventory that is an
Acquired Asset pursuant to Section 1.1(a)(3)(A), 1.1(a)(3)(B) or 1.1(a)(3)(D).
Except as set forth on Section 3.11 of the Disclosure Schedule and except for
such inventory for liquidation and subject to reserves consistent with Sellers’
past practices, On-Hand Inventory does not include any items below standard
quality, damaged or spoiled, or of a quality or quantity not usable or saleable
in the normal course of the Outlet Business.
     3.12 Certain Business Relationships. No Seller is a party to any Contract
that is an Assumed Contract with any of its Affiliates (other than any other
Seller). None of Sellers’ officers owns, directly or indirectly, individually or
collectively, an interest in any entity which is a competitor or supplier of the
Outlet Business, other than owning or holding less than 2% of the outstanding
shares of any class of stock that is regularly traded on a recognized domestic
or foreign securities exchange or over-the-counter market. Since January 30,
2005, except as set forth in Section 3.12 of the Disclosure Schedule, no officer
of any Seller, while such an officer, received income from any source other than
a Seller that should have properly been paid to the Outlet Business.
     3.13 Certain Payments. No Seller nor any director, officer, agent, or
employee of any Seller, or, to the Knowledge of the Sellers, any other Person
associated with our acting for or on behalf of any Seller, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business for the Outlet Business, (ii) to pay for
favorable treatment for business secured for the Outlet Business or (iii) to
obtain special concessions, or for special concessions already obtained, for or
in respect of the Outlet Business, in each case in violation of Applicable Law,
or (b) established or maintained any fund or asset for any purpose described in
clause (a) above that has not been recorded in the books and records of Sellers.

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     3.14 Real Property. Other than the leased or occupied real property listed
in Section 3.14 of the Disclosure Schedule (the “Leased Real Property,” and each
Contract under which any Leased Real Property is leased or occupied by any
Seller is a “Real Property Lease”), no Seller owns any right, title or interest
in any real property that is used in any manner in connection with the Outlet
Business or that will become an Acquired Asset. Sellers, considered
collectively, have a valid leasehold interest in each Leased Real Property, free
and clear of any Encumbrance other than any Permitted Encumbrance. There are no
parties in possession of the Leased Real Property other than the applicable
Seller. No Leased Real Property has suffered any material damage by fire or
other casualty that has not been repaired and restored in all material respects.
As of the date hereof, no party to any Real Property Lease has exercised any
termination right with respect thereto. All rent and other sums and charges
payable by the applicable Seller as tenant thereunder are current. No Seller has
received written notice from any insurance company that such insurance company
will require any alteration to any Leased Real Property for continuance of a
policy insuring such property (other than any notice of alteration that has been
completed), to the extent that such alteration is the responsibility of the
applicable Seller. No Seller is contesting any operating cost, real estate Tax
or assessment or other charge payable by such Seller under any Real Property
Lease. No Seller has exercised any (if any) option under any Real Property Lease
to purchase the real property subject to such Real Property Lease. There are no
material capital expenditures, to any Sellers’ Knowledge, required to be made by
Buyer in connection with the Leased Real Property in order to comply with any
Real Property Lease or Applicable Laws or any insurance requirements of any
Seller or any landlord under any Real Property Lease. All buildings, structures,
facilities, and other improvements (collectively, “Improvements”) are in good
operating condition and repair, subject to normal wear and maintenance given
their relative ages. To any Seller’s Knowledge, all Permits that are required or
appropriate to use or occupy the Leased Real Property as currently conducted
thereon have been issued and are in full force and effect.
     3.15 Environmental Matters.
          (a) Sellers have made available to Buyer a true, correct and complete
copy of all Phase I and Phase II environmental site assessments (if any) related
to any of the Leased Real Property that are in any Seller’s possession or
control.
          (b) One or more of the Sellers has obtained all material Permits that
are required under any Environmental Law, except as does not relate to the
Outlet Business or any Acquired Asset. Each Seller is in compliance with all
material Environmental Laws and the terms of all material Permits issued
pursuant to any Environmental Law, except as does not relate to the Outlet
Business or any Acquired Asset.
          (c) Except as does not relate to the Outlet Business or any Acquired
Asset, there is no Environmental Claim pending or, to any Seller’s Knowledge,
Threatened as of the date of this Agreement against any Seller.
          (d) In connection with the Outlet Business or any Acquired Asset, no
Seller has installed, used, generated, treated, disposed of or arranged for the
disposal of any Hazardous Substance in a manner reasonably likely to create any
material Liability or other obligation for such Seller under any Environmental
Law with respect to any Leased Real Property.

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     3.16 Intellectual Property.
          (a) Section 3.16(a) of the Disclosure Schedule lists all
(i) Intellectual Property owned by any Seller (including, as applicable for each
item listed, the record owner, the jurisdiction, the application and
registration numbers, the filing date, the issuance or registration date, the
registrar and the expiration date) that constitutes an Acquired Asset and is
registered with any Governmental Authority (or with any Person that maintains
domain name registrations) and all applications for any such registration;
(ii) common law trademarks owned by any Seller that are Principally Related to
the Outlet Business and material to the conduct of the Outlet Business; and
(iii) common law copyrights owned by any Seller that are Principally Related to
the Outlet Business and material to the conduct of the Outlet Business. Each
such registration or application has been maintained effective by all requisite
filings, renewals and payments, and remains in full force and effect. Except as
indicated therein, none of the Intellectual Property identified in Section
3.16(a) of the Disclosure Schedule has been abandoned or cancelled.
          (b) One or more of the Sellers owns all right, title and interest in
and to, free and clear of all Encumbrances, other than any Permitted
Encumbrance, or has the right to use without payment of any royalty, license fee
or similar fee (other than pursuant to a Major Contract or a Contract not
required to be disclosed in the Disclosure Schedule to avoid a breach under
Section 3.10), the Intellectual Property identified in Section 3.16(a) of the
Disclosure Schedule that has not been abandoned or cancelled. Except as
disclosed in Section 3.16(b) of the Disclosure Schedule, (i) no Seller has
granted to any Person (other than any other Seller), and no other Person (other
than any other Seller) has, any license, option or other rights in or to such
Intellectual Property; (ii) since February 3, 2002, no Seller has received
notice of any pending or, to any Seller’s Knowledge, Threatened action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand that
challenges the legality, validity, enforceability, registrations, use or
ownership of such Intellectual Property, other than office actions in connection
with the prosecution of applications for the registration or issuance of such
Intellectual Property; (iii) other than any Major Contract (if applicable), no
Seller is a party to any co-existence, consent, settlement or similar agreements
limiting or modifying the rights of any Seller in such Intellectual Property
anywhere in the world; (iv) no Seller has brought any Proceeding that is now
pending against any Person, nor provided notice to any Person (including by
cease and desist letter), that such Person is infringing such Intellectual
Property, and to the Sellers’ Knowledge, no Person is infringing such
Intellectual Property; and (v) no Seller has received written notice, as of the
date hereof, that any of such Intellectual Property has been declared
unenforceable or otherwise invalid by any Governmental Authority.
          (c) To each Seller’s Knowledge, no Seller has received any charge,
complaint, claim, demand or notice since February 3, 2002, whether written or
oral, alleging that any use, sale or offer to sell any good or service of any
Seller with respect to the Outlet Business infringes upon, misappropriates or
violates any Intellectual Property right of any other Person (including any
claim that any Seller must license or refrain from using any Intellectual
Property right of any other Person in connection therewith or any offer by any
other Person to license any Intellectual Property right of any other Person in
connection therewith). To each Seller’s Knowledge, no Seller is, with respect to
the Outlet Business, infringing upon, misappropriating or violating the
Intellectual Property of any other Person. To each Seller’s Knowledge, no other
Person is infringing upon, misappropriating or violating the Intellectual
Property of any Seller constituting an Acquired Asset.

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          (d) Notwithstanding the foregoing, no representation or warranty is
made in this Agreement regarding any infringement, misappropriation or violation
with, upon, of, by or otherwise relating to any (1) license for Intellectual
Property embedded in any equipment or fixture, (2) non-exclusive implied license
of Intellectual Property or (3) non-exclusive license for the use of any
commercially available off-the-shelf software.
     3.17 Treatment of Acquired Assets and Source Code.
          (a) Sellers have not knowingly permitted (including but not limited to
actions by its employees and contractors) Sellers’ rights in any Acquired Asset
that is material to the conduct of the Outlet Business, the value of which to
any Seller is dependent on it being maintained as a trade secret, to enter into
the public domain or otherwise to become publicly available without cost.
          (b) Sellers have obtained from all of their consultants and other
third parties who have independently or jointly contributed to the conception,
reduction to practice, creation or development of the Intellectual Property that
is an Acquired Asset unencumbered and unrestricted exclusive ownership (subject
to any Permitted Encumbrance) of, or a license sufficient for Sellers’ current
use for, all such third party’s intellectual property rights in such
contribution, excluding moral rights that are not assignable.
          (c) Except as does not relate to the Outlet Business, Sellers have
obtained from all current and former employees agreements requiring disclosure
and assignment of inventions, and non-disclosure agreements. Except as does not
relate to the Outlet Business, to Sellers’ Knowledge, no current or former
employee is in violation of such agreement.
          (d) To the Knowledge of Sellers, no current or former employee,
consultant or other third party has developed any material technology, software
or other intellectual property that is an Acquired Asset for Sellers that is
subject to any agreement under which such individual has assigned or otherwise
granted to any third party (other than any Seller) any material rights in or to
such technology, software or other intellectual property.
          (e) To the extent that the Acquired Assets that are software owned by
any Seller incorporate, integrate with, dynamically or statically link to, or
use any third party intellectual property in the development, testing,
pre-production, production, support or disaster recovery of the Acquired Assets,
Sellers have (subject to any Permitted Encumbrance) (i) obtained all right,
title and interest in and to such third party intellectual property by operation
of law or by valid assignment or (ii) obtained perpetual (except in the event of
breach) rights to use, modify, reproduce, display, prepare derivative works
upon, perform, and distribute such third party intellectual property.
          (f) Except as does not relate to the Outlet Business, Sellers use no
software that is distributed by Sellers as open source software (including but
not limited to software distributed under the GNU General Public License (GPL)
(all versions), the GNU Lesser General Public License (LGPL) (all versions) or
the Artistic License, Apache 2.0).
          (g) To the Knowledge of Sellers, no current or former employee,
consultant or other third party has contributed any Intellectual Property that
is an Acquired Asset to any open source project.

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          (h) Neither Sellers nor any current or former employee acting on
Sellers’ behalf has contributed to any standards organization or similar entity
that requires Sellers to grant or offer to grant third parties any rights in the
Acquired Assets.
          (i) Except as does not relate to the Outlet Business, to the Knowledge
of Sellers, the software owned or used by Sellers accurately recognizes,
calculates, processes and stores all same century and multi-century formulas,
dates, date notations (including leap years), time zones and any “day-light
savings” formulas and resolves ambiguities in date and time input and output.
          (j) Except as does not relate to the Outlet Business, the software
owned or used by Sellers accurately recognizes, calculates, processes and stores
all numbers, whether expressed in decimal form, fraction form or both, in each
case to the extent and in the manner sufficient for Sellers’ current use
thereof.
          (k) No Seller or any of its employees has intentionally introduced
into any software that is an Acquired Asset any code, device, criteria,
mechanism or function for the purpose of adversely restricting, disabling,
damaging, destroying or otherwise shutting down, or adversely altering the
functionality of, specifications for, or access to, all or any portion of the
software that is an Acquired Asset (including any computer code, programs or
programming devices that are designed to, or which disrupt, modify, delete,
deactivate, harm or otherwise impede any portion of such software in any
material manner), all of the foregoing excluding documented access control
functions. Sellers use the virus-scanning software listed on Section 3.17(k) of
the Disclosure Schedule as well as security measures listed thereon.
     3.18 Privacy and Data Security Matters.
          (a) Except as does not relate to the Outlet Business, Sellers have not
been required under Applicable Law to issue, and have not issued, any
notifications under any Applicable Law relating to the actual or suspected
unauthorized access or acquisition of personally identifiable information.
          (b) Except as does not relate to the Outlet Business, Sellers have not
undergone any audit or regulatory inquiry from any Governmental Authority with
respect to privacy or data security of personally identifiable information and,
to Sellers’ Knowledge, no inquiry from any Governmental Authority (including as
a result of complaints from any individuals provided to such Governmental
Authority) is Threatened regarding same.
          (c) Except as does not relate to the Outlet Business, Sellers are in
compliance in all material respects with all requirements under Applicable Law
and applicable industry standards (including but not limited to Payment Card
Industry standards and including regulatory requirements of Governmental
Authorities) governing personally identifiable information and data security.
          (d) Except as does not relate to the Outlet Business, Sellers have
obtained all consents required by Applicable Law with respect to current uses of
individually identifiable data.

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     3.19 Insurance. Sellers have made available to Buyer a true, correct and
complete copy of all insurance policies (or, when not reasonably available, the
corresponding insurance binders) in force on the date hereof that are maintained
by or cover any material aspect of the Outlet Business. Such policies are in
full force and effect, and no Seller is in default under any of them. No Seller
has received any notice of non-renewal, cancellation or intent to cancel, not
renew or increase premiums or deductibles with respect to such insurance
policies, nor, to the Knowledge of Sellers, is there any basis for such action.
     3.20 Absence of Certain Events. From the Financial Information Date through
the date hereof, there has not been any Material Adverse Effect. Since the
Financial Information Date, the Outlet Business, taken has a whole, has been
operated in all material respects in the Ordinary Course of Business of each
Seller. From the Financial Information Date to the date of this Agreement, no
Seller has done any of the following:
          (a) except in its Ordinary Course of Business, (1) except for cash
distributions to any Seller, made any sale, lease to any other Person, license
to any other Person or other disposition of any asset that relates to the Outlet
Business or any Acquired Asset, (2) failed to use its commercially reasonable
efforts to preserve and maintain the Leased Real Property in substantially the
same condition as existed on the Financial Information Date, ordinary wear and
tear excepted, (3) made any capital expenditure or purchase or otherwise
acquired any material asset that relates to the Outlet Business or any Acquired
Asset (other than purchases of inventory in its Ordinary Course of Business and
capital expenditures that did not exceed $10,000 (individually or in the
aggregate)), licensed any intangible asset that relates to the Outlet Business
or any Acquired Asset from any other Person (other than any (A) license for
Intellectual Property embedded in any equipment or fixture, (B) non-exclusive
implied license of Intellectual Property or (c) non-exclusive license for the
use of any commercially available off-the-shelf software), leased any real
property from any other Person that relates to the Outlet Business or any
Acquired Asset or leased any tangible personal property from any other Person
that relates to the Outlet Business or any Acquired Asset (other than leases of
tangible personal property in its Ordinary Course of Business under which the
payments do not exceed $10,000 (individually or in the aggregate)) or
(4) disclosed any material confidential, proprietary or non-public information
that relates to the Outlet Business or any Acquired Asset (other than as is
reasonably protected under a customary non-disclosure Contract);
          (b) granted any Encumbrance on any asset that relates to the Outlet
Business or any Acquired Asset, other than (1) pursuant to a Major Contract (or
a Contract not required to be disclosed in the Disclosure Schedule to avoid a
breach under Section 3.10) or (2) any Permitted Encumbrance;
          (c) became a guarantor with respect to any obligation of any other
Person, other than any other Seller, or assumed any obligation of any such
Person for borrowed money, in each case other than guarantees or obligations
that will not become Assumed Liabilities;
          (d) incurred any indebtedness for borrowed money that will become an
Assumed Liability and cannot be prepaid at any time without penalty;
          (e) except in its Ordinary Course of Business, amended or terminated
in any respect that is adverse to the Outlet Business, taken as a whole, any
Major Contract;

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          (f) (1) adopted or changed any material accounting method or principle
used by such Seller, except as required under GAAP, the Code or any rule or
regulation of the SEC or (2) changed any annual accounting period;
          (g) failed to use its commercially reasonable efforts to preserve, and
prevent any material degradation in, such Seller’s relationship with its
material suppliers and others having material business relations with such
Seller relating to the Outlet Business;
          (h) entered into any employment agreement with any individual who is
an Eligible Employee (other than oral arrangements for employment at will), or,
except in its Ordinary Course of Business granted any bonus or otherwise
increased the compensation or benefits payable or to become payable to any
individual who is an Eligible Employee;
          (i) (1) paid, discharged, settled or satisfied any material claim that
would have become an Acquired Asset, except (A) in its Ordinary Course of
Business or (B) the payment, discharge, settlement or satisfaction of any claim
to the extent reflected or reserved for on the Financial Information or
(2) otherwise waived, released, assigned or transferred any right of material
value that will be or would have become an Acquired Asset; or
          (j) agreed, by entering into a Contract or legally binding commitment,
to do any of the foregoing.
     3.21 Employee Benefits.
          (a) Section 3.21 of the Disclosure Schedule lists all Seller Plans.
Sellers have delivered to Buyer an accurate summary of each Seller Plan.
          (b) Each Seller Plan is in compliance in all material respects with
its terms and with all applicable requirements of Applicable Law, including the
Code and ERISA. As of the Closing Date, all contributions (including all
premiums, employer contributions and employee salary reduction contributions)
required to be made to, under or with respect to each Seller Plan with respect
to individuals who may become Eligible Employees (and their dependents and
beneficiaries) will have been made, other than immaterial amounts that will be
made after Closing by a Seller without adverse effect on Buyer. There are no
pending or threatened claims or proceedings against or relating to any Seller
Plan (other than routine claims for benefits). No Seller or any ERISA Affiliate
nor any director, officer or employee of any Seller or of any ERISA Affiliate
has engaged in any unresolved Prohibited Transaction or committed any breach of
fiduciary responsibility under ERISA, except for any Prohibited Transaction for
which a specific exemption is provided under or pursuant to ERISA or the Code.
          (c) Each Seller Plan that is intended to be qualified under
section 401 of the Code has been determined by the IRS to be so qualified.
          (d) No Seller has incurred or may incur, whether directly or
indirectly, any liability or obligation under Title IV of ERISA with respect to
any “employee pension plan” (within the meaning of Section 3(2) of ERISA),
including, without limitation, any multiemployer plan described in Section 3(37)
of ERISA. No Encumbrance has been imposed on the Acquired Assets pursuant to
Section 302, 303 or Title IV of ERISA or Section 412 or 430 of the Code and no
fact exists that would reasonably be expected to give rise to such Encumbrance.
No Seller

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has contributed to or has had an obligation to contribute to a multiemployer
plan as described in Section 3(37) of ERISA.
          (e) No Seller Plan provides for continuing benefits or coverage for
any participant or any beneficiary of a participant after such participant’s
termination of employment, except as may be required by COBRA at such
participant’s or such beneficiary’s expense. The requirements of section 4980B
of the Code and Part 6 of Subtitle B of Title I of ERISA relating to COBRA
continuation of health coverage have been satisfied with respect to each Seller
Plan that is subject to such requirements.
          (f) No Seller is bound by any collective bargaining agreement to
maintain any Plan. No Seller Plan is subject to the laws of, or maintained
primarily for the benefit of employees whose principal employment is located in,
a country other than the United States.
     3.22 Employees and Labor Relations.
          (a) As of the date hereof, no Seller is a party to or is bound by any
collective bargaining agreement or other similar Contract with any labor union
representing any employee of any Seller who would be an Eligible Employee. No
labor strike, lockout or material labor dispute or work stoppage has occurred
or, to any Seller’s Knowledge, has been Threatened, in each case from January
28, 2006 through the date of this Agreement with respect to any employee of any
Seller who would be an Eligible Employee. To each Seller’s Knowledge, no union
organizing campaign exists or has occurred from January 28, 2006 through the
date of this Agreement with respect to any employee of any Seller who would be
an Eligible Employee. Section 3.22(a) of the Disclosure Schedule contains, as of
the date stated in Section 3.22(a) of the Disclosure Schedule, a true, correct
and complete list of each Eligible Employee and with respect to each such
Eligible Employee the following information: (a) the employer of such Eligible
Employee, (b) the amount of salary currently being paid on a gross annualized
basis (if applicable), the hourly pay rate (if applicable) of such Eligible
Employee and the amount of compensation paid in the fiscal year ended
February 2, 2008; and (c) the nature and amount of any material perquisites or
employee benefits currently being provided to or for the account of such
Eligible Employee, other than the Seller Plans described herein. Set forth in
Section 3.22(a) of the Disclosure Schedule is a list of individuals, whose
duties are Principally Related to the Outlet Business, who are (A) “leased
employees” within the meaning of Section 414(n) of the Code or (B) “independent
contractors” within the meaning of the Code and the rules and regulations
promulgated thereunder.
          (b) To the Knowledge of the Sellers, no Eligible Employee is a party
to any confidential information or other agreement that in any way restricts the
ability of such Eligible Employee to perform his or her duties for the Sellers.
          (c) Each of the Sellers has complied in all material respects with all
Applicable Laws relating to the employment of labor in connection with the
conduct of the Outlet Business, including provisions thereof relating to wages,
hours, equal opportunity, collective bargaining, nondiscrimination, harassment,
and the payment of social security and other Taxes. All persons who have
performed services for the Sellers in connection with the conduct of the Outlet
Business and have been classified as independent contractors have satisfied the
requirements of all Applicable Laws to be so classified, and as applicable the
Sellers have

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fully and accurately reported their compensation on IRS Forms 1099 or other
applicable tax forms for independent contractors when required to do so.
          (d) Except as set forth in Section 3.22(d) of the Disclosure Schedule,
there are no proceedings pending or, to the Knowledge of the Sellers,
Threatened, between the Sellers, on the one hand, and any current or former
employees thereof who were employed in connection with the conduct of the Outlet
Business, on the other hand, including any claims for actual or alleged
harassment or discrimination based on race, national origin, age, sex, sexual
orientation, religion, disability, or similar tortuous conduct, wage and hour
claims, breach of contract, wrongful termination, defamation, intentional or
negligent infliction of emotional distress, interference with contract or
interference with actual or prospective economic advantage. There are no claims
pending or, to the Knowledge of the Sellers, Threatened, against any of the
Sellers under any workers’ compensation plan applicable to any individual who is
an Eligible Employee.
          (e) Sellers have provided all of their employees who would be an
Eligible Employee with all wages, benefits, relocation benefits, stock options,
bonuses and incentives and all other compensation which became due and payable
through the date of this Agreement. No Seller has instituted any “freeze” of, or
delayed or deferred the grant of, any cost-of-living or other salary adjustments
for any of its employees who would be an Eligible Employee.
          (f) Set forth on Section 3.22(f) of the Disclosure Schedule is a list
of all employees terminated by any Seller within 60 days before the Closing
Date, the dates of the terminations, and the location in which all such
employees worked. At all times prior to Closing, each Seller has complied in all
material respects with the WARN Act and all similar state Applicable Laws, and
other than the termination of the employees listed on Section 3.22(f) of the
Disclosure Schedule, no Seller has taken any action which could affect the
Parties’ obligations under the WARN Act.
     3.23 Suppliers.
          (a) Section 3.23(a) of the Disclosure Schedule sets forth, for the
years ended February 2, 2008 and February 3, 2007 and for the quarter ended
May 3, 2008, the names of each supplier that accounted for more than $100,000 of
the operating expenses of the Outlet Business during any such period.
          (b) No supplier identified on Section 3.23(a) of the Disclosure
Schedule with respect to the quarter ended May 3, 2008, has, since the start of
such quarter, canceled or otherwise terminated, or threatened in writing to a
Seller to cancel or terminate, its relationship with Sellers, or its business
done with Sellers.
     3.24 Brokers. No Seller has any Liability or other obligation to any
broker, finder or similar intermediary in connection with the purchase or sale
of Acquired Assets hereunder that would cause Buyer to become liable for payment
of any fee or expense with respect thereto.
     3.25 Projections. Sellers have provided Buyer with the projections for the
Outlet Business included in the Greene Holcomb & Fisher “Confidential Executive
Summary—Wilsons Leather Outlet” (the “Projections”). The Projections were
prepared in good faith and are based upon assumptions and estimates that the
Sellers believed to be reasonable at the time of preparation; it being
understood by the Buyer that projections such as the Projections are

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inherently subject to risks, uncertainties and other factors that may cause
actual results to differ from those stated in such Projections.
     3.26 Disclosure. To Sellers’ Knowledge, no information furnished by or on
behalf of Sellers to Buyer in connection with this Agreement (including the
Disclosure Schedule) contains any untrue statement of a material fact or omits
to state a material fact necessary to make such statement, in the light of the
circumstances under which it was made, not misleading.
     3.27 Certain General Exceptions. Notwithstanding any term of this
Agreement, no representation or warranty is made by any Seller in this Agreement
regarding any product (including with respect to the non-infringement of any
Intellectual Property of any third party relating to such product) purchased
from or through, or otherwise supplied by or through, G-III Apparel Group, Ltd.,
an Affiliate of Buyer (“G-III”), or any Affiliate of G-III.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
     Buyer hereby represents and warrants to each Seller as follows:
     4.1 Organization and Good Standing. Buyer is a duly organized and validly
existing corporation in good standing under the laws of the State of Delaware.
Buyer is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which the ownership and leasing of its
properties or assets or the conduct of its business requires such qualification,
except where the failure to be so qualified or in good standing will not
materially and adversely affect Buyer’s ability to consummate the transactions
contemplated herein. Buyer has full corporate power and authority to own and
lease its properties and assets and conduct its business as now conducted.
     4.2 Authority and Authorization. The execution, delivery and performance of
this Agreement and each Ancillary Document of Buyer have been duly authorized
and approved by all necessary corporate action with respect to Buyer, and each
such authorization and approval remains in full force and effect. This Agreement
and each Ancillary Document of Buyer has been duly executed by Buyer. Assuming
due authorization, execution and delivery by each Seller of this Agreement and
each Ancillary Document of any Seller, this Agreement is, and each Ancillary
Document of Buyer is, the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except to the extent
enforceability may be limited by any Enforceability Limitation. Buyer has all
requisite corporate power and authority to enter into this Agreement and each
Ancillary Document to be executed and delivered by Buyer and to consummate the
transactions contemplated herein and therein to be consummated by Buyer.
     4.3 Conflicts and Consents.
          (a) Conflicts. Neither the execution or delivery by Buyer of this
Agreement or by Buyer of any Ancillary Document nor consummation by Buyer of the
transactions contemplated herein or therein does or will (with or without the
passage of time or giving of notice): (1) constitute a breach of, violate,
conflict with or give rise to or create any right or obligation under any
Organizational Document of Buyer; (2) violate any Applicable Law or Order; or
(3) constitute a breach or violation of or a default under, conflict with or
give rise to or create any right of any Person other than Buyer to accelerate,
increase, terminate, modify or

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cancel any right or obligation under, any Contract to which Buyer is a party,
except where such a breach, violation, default, conflict or right described in
clause (a)(2) or (a)(3) above will not materially and adversely affect Buyer’s
ability to consummate the transactions contemplated herein.
          (b) Consents. No consent or approval by, notification to or filing
with any Person is required in connection with Buyer’s execution, delivery or
performance of this Agreement or any Ancillary Document of Buyer or Buyer’s
consummation of the transactions contemplated herein or therein, except for any
consent, approval, notice or filing, the absence of which will not materially
and adversely affect Buyer’s ability to consummate the transactions contemplated
herein.
     4.4 Litigation and Orders. There is no Proceeding pending or, to Buyer’s
Knowledge, Threatened against Buyer, as of the date of this Agreement, that, if
decided adversely to Buyer, will materially and adversely affect Buyer’s ability
to consummate the transactions contemplated herein. As of the date of this
Agreement, Buyer is not subject to any Order that will materially and adversely
affect Buyer’s ability to consummate the transactions contemplated herein.
     4.5 Availability of Funds. Buyer has available cash or existing available
borrowing capacity under committed borrowing facilities on the date hereof, and
Buyer will have available cash at Closing, in each case that is sufficient to
enable Buyer to consummate the transactions contemplated herein. Buyer’s
obligations hereunder are not contingent upon procuring any financing.
     4.6 Forward-Looking Statements. Buyer and its representatives have received
certain estimates, budgets, forecasts, plans and financial projections
(collectively, “Forward-Looking Statements”). There are uncertainties inherent
in the Forward-Looking Statements, and Buyer is familiar with such
uncertainties.
     4.7 Brokers. Buyer has no Liability or other obligation to any broker,
finder or similar intermediary in connection with the purchase or sale of the
Acquired Assets hereunder that would cause any Seller to become liable for
payment of any fee or expense with respect thereto.
     4.8 Capitalization. Buyer’s capitalization consists of equity of
$15,000,000 and long-term debt of $10,000,000.
ARTICLE 5
CERTAIN COVENANTS
     5.1 No Liability for Unobtained Consents and Governmental Permits. Buyer
acknowledges and agrees that (1) certain Consents may be necessary from parties
to Contracts in connection with the transactions contemplated herein in order to
not constitute at Closing a breach or violation of or a default under, conflict
with or give rise to or create any right or obligation under or create any
Encumbrance (other than a Permitted Encumbrance) under, such Contracts, which
Consents have not been obtained, (2) certain Permits may be required as a result
of the transactions contemplated herein for Buyer to conduct the Outlet Business
after Closing in the manner in which the Outlet Business was conducted before
Closing and (3) except

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to the extent expressly stated in Article 3, no Seller has made (and no Person
on behalf of any Seller has made) any representation or warranty or similar
assurance regarding the need for or desirability of any consent or approval by,
notification to or filing with any Person, nor regarding the need for or
desirability of any Permit. Buyer agrees that, except as otherwise expressly
provided in this Section 5.1 (or as a result of a breach of any representation
or warranty in Article 3), no Seller will have any Liability or other obligation
whatsoever to Buyer or any of Buyer’s Other Indemnified Persons arising out of,
relating to or resulting from the failure to obtain any such Consent or Permit
(provided that each Seller has performed its related obligations hereunder).
Buyer further agrees that no term herein will be breached as a result of
(a) failure to obtain any such Consent or Permit or (b) any claim or Proceeding
commenced or Threatened by or on behalf of any Person arising out of, relating
to or resulting from the failure to obtain any such Consent or Permit.
     5.2 Access to Information.
          (a) Certain Removals of Certain Information and Other Assets. After
Closing, if any information or other asset of any Seller (or any Affiliate of
any Seller) that is not an Acquired Asset was included in the Acquired Assets,
or if Buyer (or any of its Affiliates) otherwise retains access to or use of any
such information or other asset in connection with its acquisition of the Outlet
Business hereunder, then Buyer will cooperate with Sellers in all reasonable
respects, at Sellers’ expense, to maintain the confidentiality of such
information or other asset (if applicable), not use such information or other
asset and redact or otherwise remove such information or other asset from such
Acquired Asset (or to otherwise cause Buyer and its Affiliates to no longer have
access thereto or use thereof).
          (b) Post-Closing Access for Sellers. Throughout the seven-year period
after Closing, subject to Buyer’s reasonable confidentiality precautions, Buyer
will, during normal business hours and upon reasonable notice from any Seller:
(1) cause any Seller and any Seller’s representatives to have reasonable access
to the books and records (including financial and Tax records, Tax Returns,
files, papers and related items) relating to the Outlet Business and to the
personnel responsible for preparing and maintaining such books and records, in
each case to the extent necessary or reasonably desirable to (A) defend or
pursue any Proceeding, (B) defend or pursue indemnification matters hereunder,
(C) prepare or audit financial statements, (D) prepare or file Tax Returns or
(E) address other Tax, accounting, financial or legal matters or respond to any
investigation or other inquiry by or under the control of any Governmental
Authority; and (2) permit any Seller and any Seller’s representatives to make
copies of such books and records for the foregoing purposes, at such Seller’s
expense.
          (c) Post-Closing Access for Buyer. Throughout the seven-year period
after Closing, subject to any Seller’s reasonable confidentiality precautions,
each Seller will, during normal business hours and upon reasonable notice from
Buyer: (1) cause Buyer and Buyer’s representatives to have reasonable access to
any (if any) portion of the books and records (including financial and Tax
records, Tax Returns, files, papers and related items) of any Seller relating to
the Outlet Business that were not an Acquired Asset and to the personnel
responsible for preparing and maintaining such books and records, in each case
to the extent necessary or reasonably desirable for Buyer to take any action of
the type contemplated in any of clauses (c)(1)(A) through (c)(1)(E) of
Section 5.2(b); and (2) permit Buyer and Buyer’s

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representatives to make copies of such portion of such books and records for the
foregoing purposes, at Buyer’s expense.
          (d) Post-Closing Retention of Information by Sellers. At and after
Closing, without limiting the definition of Excluded Assets, each Seller may
retain in such Seller’s (or any of its Affiliates’) possession, subject to
Buyer’s reasonable confidentiality precautions, any copies of any books or
records of such types described in Section 5.2(b)(1) that are in any Seller’s
possession or control (or the possession or control of any of its Affiliates),
including for any purpose described in Section 5.2(b)(1).
     5.3 Further Assurances. If after Closing any further action is necessary,
proper or desirable to carry out any purpose of this Agreement, then each Party
will take such further action (including, without limitation, the execution and
delivery of further documents to effect the transfer of Intellectual Property or
other Acquired Assets to Buyer) as any other Party reasonably requests to carry
out such purpose. The foregoing will be at the expense of such requesting Party,
except to the extent such requesting Party is entitled to indemnification
therefor or to the extent this Agreement otherwise allocates such expense to any
other Party. Sellers will provide to Buyer applicable copies of employee
benefits records to the extent permitted by Applicable Law, without cost to
Buyer.
     5.4 Confidentiality and Publicity.
          (a) Confidentiality Agreement. Subject to the other terms of this
Section 5.4, the Confidentiality Agreement, dated March 31, 2008, to which G-III
and Parent are a party (the “Confidentiality Agreement”), will remain in full
force and effect pursuant to its terms, except that, after the Closing Date,
information that G-III is required to keep confidential under the
Confidentiality Agreement, for purposes of the obligations of G-III under the
Confidentiality Agreement, will be deemed not to refer to any information then
Principally Relating to the Outlet Business.
          (b) Publicity. Except as stated in this Section 5.4(b) or 5.4(c), each
Party will not, and each Party will cause each of its Affiliates not to, make
any public release or announcement regarding this Agreement or any of the
transactions contemplated herein without the prior written approval thereof of
each other Party (which will not be unreasonably withheld). Each Party will
cooperate with each other Party in issuing, promptly after entering into this
Agreement, its press release (with mutually agreed upon text) that announces the
Parties’ entry into this Agreement and the transactions contemplated herein
generally.
          (c) Certain Permitted Disclosures. Notwithstanding the foregoing,
nothing in this Section 5.4 will prevent any of the following at any time:
          (1) a Party or any of its Affiliates disclosing any information to the
extent required under Applicable Law (other than due to any requirement of the
SEC or the rules and regulations of any national securities exchange, which is
addressed in one or more clauses below); provided, however, that if a Party or
any of such Party’s Affiliates is so required to so disclose any information
that otherwise would be prohibited in the absence of this Section 5.4(c), then
(A) such Party will provide to each other Party prompt written notice thereof
and cooperate (and cause such Affiliate, as applicable, to

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cooperate) with each other Party, to the extent any other Party reasonably
requests, so that such other Party may seek a protective order or other remedy
or waive compliance with the terms of this Agreement (subject, in each case, to
legal requirements to the contrary) and (B) if such protective order or other
remedy is not obtained, or if each such applicable other Party waives compliance
with the terms of this Agreement, then such Party will (and will cause such
Affiliate, as applicable, to) disclose only the portion of such information that
is so required to be disclosed, and such Party will (and will cause such
Affiliate, as applicable, to) use its commercially reasonable efforts, at the
expense of such other Party, to obtain reasonable assurance that confidential
treatment will be accorded such information;
          (2) a Party or any of its Affiliates making any release or
announcement that is required by the SEC or the rules or regulations of any
national securities exchange, in which case such Party will (or will cause such
Affiliate to), if practicable under the circumstances, allow each other Party
reasonable time to comment on such release or announcement in advance;
          (3) any Seller communicating with any of its suppliers on a need to
know basis regarding the transactions contemplated herein, including regarding
any change to any document, requirement or process relating to any product or
service of any Seller;
          (4) a Party or any of its Affiliates making a statement or disclosure
(A) as part of its or any of its Affiliate’s financial statements or,
notwithstanding clause (c)(1) above, Tax Returns or filing with the SEC or any
national securities exchange or (B) to the extent reasonably necessary to
enforce or comply with this Agreement; or
          (5) a Party making a statement or disclosure to (A) such Party’s (or
any of its Affiliate’s) paid legal, accounting and financial advisers to the
extent reasonably necessary for any such adviser to perform its paid legal,
accounting and financial services, respectively, for such Party (or such
Affiliate) or (B) any lender or prospective lender of such Party (or such
Affiliate) to the extent reasonably required as part of such lending
relationship.
     5.5 Employee Matters.
          (a) Definitions.
          (1) “Eligible Employee” means, as of immediately before the Effective
Time, any employee of any Seller who is: (A) primarily rendering services in one
or more Outlet Stores; (B) a district or regional manager dedicated primarily to
the Outlet Business; or (C) listed as such in Exhibit 5.5(a). Notwithstanding
the foregoing, the definition of Eligible Employee excludes any employee of any
Seller who is listed as not being Eligible Employee in Exhibit 5.5(a), who are
individuals that Sellers may determine to retain.
          (2) “Transferred Employee” means each Eligible Employee who accepts
Buyer’s offer of employment as contemplated in Section 5.5(b). Notwithstanding
the foregoing, an Eligible Employee will become a “Transferred Employee,” if at
all, on or as of: (1) immediately after the Effective Time on the Cut-Off Date,
if such Eligible

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Employee is then actively a worker; (2) immediately after the Effective Time on
the Cut-Off Date, if such Eligible Employee is absent from work on such date due
to authorized vacation or jury duty and returns to active employment following
the end of the vacation or the completion of jury duty, as the case may be; or
(3) the date such Eligible Employee returns to active employment, in the case of
an Eligible Employee who, on the Cut-Off Date, is absent from work due to sick
leave, short term disability, maternity leave, military leave or other
authorized leave of absence with a right to return to his or her job, and who
returns to active employment within the time required under the original terms
and conditions applicable to such absence.
          (b) Offers of Employment with Buyer. Prior to the Closing, to be
effective immediately after the Effective Time, Buyer has made or will have made
bona fide offers of employment to all Eligible Employees, including each
Eligible Employee on medical, disability, family, military or other leave of
absence as of the Effective Time (but not any employment offer to, or hiring of,
any employee of any Seller that is not an Eligible Employee), and Buyer will
hire each Eligible Employee that accepts such offer of employment. Such offered
employment will have been, in each case, on terms (other than regarding employee
benefits, which are the subject of other terms of this Section 5.5) that are
comparable, as a whole for each individual, to the terms of employment provided
to each such Eligible Employee immediately before the Effective Time by the
applicable Seller. Not later than the Closing Date, Sellers notified or will
notify each Eligible Employee to be hired by Buyer, in writing, that his/her
employment with Sellers is terminated as of the Effective Time.
          (c) Employee Retention. Subject to the other obligations of Buyer in
this Section 5.5, nothing in this Section 5.5 otherwise obligates Buyer to
continue the employment of any Transferred Employee for any specific period
after the Effective Time.
          (d) Statutory Notices. At all times after the Effective Time, Buyer
will comply in all material respects with the WARN Act and all similar state
Applicable Laws. Buyer and Sellers acknowledge and agree that they are relying
on the foregoing for purposes of assessing any obligations to give notice to
employees of the transactions contemplated herein or to take any other action
under Applicable Law.
          (e) COBRA and Other Obligations. The “selling group” (within the
meaning of paragraph (a) of Q&A-3 of Treasury Regulation §54.4980B-9) will
continue to maintain group health plan coverage available to its employees after
the Closing such that Buyer will not become a “successor employer,” as that term
is defined in paragraph (c) of Q&A-8 of Treasury Regulation §54.4980B-9. Except
as specifically provided in this subsection (but without limiting Buyer’s
express obligations under Section 5.5(h)), Buyer does not and will not assume
the sponsorship of, the responsibility for contributions to, or any liability
under or in connection with, any Seller Plan. Without limiting the foregoing,
Buyer shall have no obligation whatsoever to pay all or any part of, and Sellers
shall remain responsible for, (i) any severance benefits that a Seller is or may
be obligated to pay in connection with the termination of employment by Seller
of any of its employees, (ii) accrued but unpaid salaries, wages, bonuses,
incentive compensation or other compensation owing by any Seller or (iii) any
bonuses or other amounts due to employees of any Seller with respect to their
employment by any Seller arising from or related to the transactions
contemplated herein or any other types of stay or change in control bonus
payments. After Closing, Buyer will make available group medical, dental and
vision coverage to Transferred

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Employees and their eligible dependents. Seller will be responsible for offering
and, if elected, providing COBRA health coverage continuation to all individuals
who are “M&A qualified beneficiaries” with respect to the transactions
contemplated herein (within the meaning of Treasury Regulation section
54.4980B-9, Q&A-4). For the avoidance of doubt, Seller shall not be responsible
for satisfying COBRA continuation coverage obligations arising after the Closing
with respect to Transferred Employees and their dependents who have become
covered by Buyer’s group health plan. Sellers shall remain solely responsible
for all liabilities relating to or arising in connection with (1) claims for
welfare benefits incurred by Transferred Employees and their qualified
beneficiaries and dependents before the date they become Transferred Employees,
and (2) claims by Transferred Employees for workers’ compensation benefits
arising in connection with any occupational injury or disease occurring on or
prior to the Effective Time. At the Effective Time for any employee that becomes
a Transferred Employee on the Cut-Off Date, and at the close of Business on the
date any other employee becomes a Transferred Employee, such employee and his or
her dependents shall cease participation in all Seller Plans, except with
respect to benefits accrued as of, or claims incurred and payable as of, such
time or as contemplated in Section 5.5(h).
          (f) No Transfer of Plan Assets. No portion of the assets of any trust
or other fund maintained by any Seller or any Affiliate of any Seller for the
purpose of paying benefits under any Seller Plan will be transferred to Buyer or
any Plan of Buyer or any of Buyer’s Affiliates.
          (g) No Amendment of Benefits nor Third-Party Beneficiary. Without
limiting Section 9.4, (1) no Plan or other employee benefit is, or will be
deemed to be, amended by any term hereof and (2) no Person, including any
employee (or dependent thereof) of any Party or any Affiliate of any Party, is a
third party beneficiary of any term of this Section 5.5.
          (h) Employee Benefits Transition. The Parties agree to the following
arrangements for the provision of certain welfare benefits to Transferred
Employees and their dependents during the period from the Effective Time until
11:59 p.m. on July 31, 2008 (the “Transition Period”):
          (1) Insured Plans. The Seller Plans that are fully insured and that
will continue to provide coverage for Transferred Employees and their dependents
during the Transition Period are medical insurance for Sellers Headquarters and
Sellers Distribution Facility employees, and life insurance. To the extent that
Buyer deducts employee contributions for the employee share of such coverages
with respect to coverage provided during the Transition Period, Buyer will pay
the amounts so deducted to Sellers within three Business Days following each
payroll date on which such amounts are deducted. Sellers will be responsible for
the employer share of the premiums for such coverages during the portion of the
month of July 2008 from July 1 until the Effective Time. Buyer will be
responsible for the employer share of the premiums for such coverages during the
Transition Period. Within three Business Days following the payroll date on
which the employee share of said premiums are deducted (or would have been so
deducted, it being Buyer’s option as to whether so deducted) with respect to
coverage provided for a portion of the Transition Period, Buyer will pay to
Sellers an amount equal to the employer share of the premium for the coverage
provided during that portion of the Transition Period. Sellers will transmit to
the respective insurance carriers

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all premium amounts received from Buyer pursuant to this clause (1), which
payments will occur not later than the payment date for each such premium under
the historical practices of Sellers.
          (2) Self-Insured Plans. The Seller Plans that are self-insured and
that will continue to provide coverage for Transferred Employees and their
dependents during the Transition Period are medical coverage for field
employees, dental coverage and vision coverage. To the extent that Buyer deducts
employee contributions for the employee share of such coverages with respect to
coverage provided during the Transition Period, Buyer will pay the amounts so
deducted to Sellers within three Business Days following each payroll date on
which such amounts are deducted. In addition, within three Business Days
following July 31, 2008, Buyer will pay to Sellers an amount equal to the pro
rata share of the July 2008 premium paid to Sellers’ stop-loss carrier
attributable to such coverage provided during the Transition Period. Sellers
will be responsible for the costs covered by said Seller Plans with respect to
claims of Transferred Employees and their dependents that are incurred due to
the provision of services during the portion of the month of July 2008 from July
1 until the Effective Time. Buyer will be responsible for the costs covered by
said Seller Plans with respect to claims of Transferred Employees and their
dependents that are incurred due to the provision of services during the
Transition Period. As soon as administratively feasible following the end of
each month during the period from July through December of 2008, Sellers will
provide to Buyer a statement showing (A) the aggregate amount of claims paid by
Sellers (disregarding any such claims to the extent reimbursed to Sellers by
Sellers’ stop-loss carrier) under such self-insured plans with respect to
coverage provided to Transferred Employees and their dependents during the
Transition Period, (B) the aggregate amount of employee contributions received
by Sellers (through payroll deduction or by payment from Buyer under the
foregoing provisions of this clause (2)) with respect to such self-insured
coverage provided to Transferred Employees and their dependents during the
Transition Period and (C) for months following July 2008, the aggregate amount
of reimbursements received from Buyer under the next sentence of this clause (2)
with respect to months preceding the month to which the statement relates.
Within three Business Days following its receipt of the statement for a month,
Buyer will pay to Sellers the amount, if any, by which the amount in clause (A)
of the previous sentence exceeds the sum of the amounts in clauses (B) and
(C) of such sentence.
          (3) Proration. To the extent that it is necessary to prorate premiums
or contributions under the preceding provisions of this Section 5.5(h) with
respect to a particular period (such as a month or a payroll period), proration
will be based on the number of calendar days in each portion of the period
divided by the total number of calendar days in the applicable period.
          (i) Seller Plans. Within 30 days after the Closing, Sellers shall
deliver to Buyer true, correct and complete copies of (a) the governing
documents of each Seller Plan, (b) where applicable, the most recent summary
plan description of each Seller Plan, and (c) any employee handbook or similar
materials furnished to Seller employees who are Eligible Employees.

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     5.6 Mail, Receivables and Other Items to be Given to Proper Party. After
Closing, (a) each Party will promptly deliver to the proper Party the original
of any mail or other communication received by such Party that is or should
properly be the property of such other Party and (b) at least monthly, each
Party will deliver to the proper Party any monies, checks or other instruments
of payment received by such Party to which such other Party is entitled.
     5.7 Transfer Taxes. Buyer will, on the one hand, and Sellers, on the other
hand, will each pay when due 50% of all Transfer Taxes. Each Seller and Buyer
will cooperate in all reasonable respects in timely making all filings, returns,
reports and forms as may be required to comply with the provisions of Applicable
Law relating to any Transfer Tax and in executing and delivering certificates
that accurately set forth relevant facts to entitle any Seller or Buyer to
exemptions from the payment of Transfer Taxes (if applicable). “Transfer Tax”
means any sales, use, value-added, business, goods and services, transfer
(including any stamp duty or other similar tax chargeable in respect of any
instrument transferring property), documentary, conveyancing or similar tax or
expense or any recording fee, in each case that is imposed as a result of any
transaction contemplated herein, together with any penalty, interest and
addition to any such item with respect to such item.
     5.8 Covenant Not to Compete and Related Covenants.
          (a) To further ensure that Buyer receives the expected benefits of
acquiring the Acquired Assets, each Seller agrees that (subject to the other
terms of this Section 5.8), throughout the period that begins at the Effective
Time and ends on the second anniversary of the Closing Date (but excluding any
period between the Effective Time and the occurrence of Closing, in the case
where the Effective Time precedes Closing), such Seller will not, and such
Seller will cause each of its Subsidiaries not to, directly or indirectly,
          (1) own or hold any equity interest in or manage or otherwise operate
any Person that owns or operates any Restricted Business in the Restricted Area,
where
          (A) “Restricted Business” means any outlet store, or group of outlet
stores owned by the same Person or by Persons that are Affiliates, in each case
with respect to which greater than 50% of the revenue from such outlet store, or
group of outlet stores, is directly derived from the retail sale of leather
outerwear, and
          (B) “Restricted Area” means the geographical area of the United
States; or
          (2) employ in the Restricted Area any individual who, immediately
before the Effective Time, was an Eligible Employee who was (at such time) an
officer or management-level employee of any Seller or any Affiliate of any
Seller.
          (b) Notwithstanding Section 5.8(a), nothing in this Agreement
prohibits or otherwise restricts any Seller or any of its Subsidiaries from
performing, permitting or otherwise being involved in, any of the following:
          (1) any Permitted Investment, where “Permitted Investment” means:
(A) owning or holding less than 2% of the outstanding shares of any class of
stock that is

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regularly traded on a recognized domestic or foreign securities exchange or
over-the-counter market; or (B) an acquisition after Closing of any of a
Person’s assets or equity interests or any of such Person’s or its Affiliates’
businesses (such Person or businesses so acquired being the
“Permitted Acquired Business”) if the portion of the Permitted Acquired Business
that is engaged in the Restricted Business generated less than 20% of the total
revenue of such Permitted Acquired Business during the most recently completed
fiscal year of such Permitted Acquired Business preceding the date of such
acquisition; or
          (2) (A) general solicitation for employment (including in any
newspaper or magazine, over the internet or by any search or employment agency)
if not specifically directed towards any employee of Buyer of any of its
Affiliates, (B) hiring an individual (x) where the initial contact with such
individual regarding such hiring primarily arose from any such general
solicitation or (y) whose employment with Buyer or any Affiliate or Buyer ceased
under circumstances that did not involve any solicitation (other than any
solicitation contemplated under clause (b)(2)(A) above) by any Seller or any
Affiliate of any Seller or (C) hiring or retaining any individual that Buyer did
not offer to hire as of the Cut-Off Date or the following day or involuntarily
terminated on or after the Cut-Off Date.
          (c) Each Seller specifically acknowledges and agrees that (1) this
Section 5.8 is reasonable and necessary to ensure that Buyer receives the
expected benefits of acquiring the Acquired Assets, (2) Buyer has refused to
enter into this Agreement in the absence of this Section 5.8 and (3) breach of
this Section 5.8 will harm Buyer to such an extent that monetary damages alone
may be an inadequate remedy. Therefore, in the event of a breach by any Seller
of this Section 5.8, Buyer (in addition to all other remedies Buyer may have)
will be entitled to seek a temporary restraining order, injunction and other
equitable relief (and seek that it be without posting any bond or other
security) restraining such Seller from committing or continuing such breach.
     5.9 Intercompany Accounts. Each Seller will cause all intercompany accounts
in effect immediately before the Effective Time between or among any of the
Sellers with respect to the Outlet Business that relate to any Acquired Asset or
Assumed Liability, to be paid in full or otherwise fully satisfied, effective at
or before the Effective Time.
     5.10 Bulk Sales Laws. Without limiting any right of Buyer under Article 8,
Buyer (a) acknowledges that the Parties or any of them may not comply with the
provisions of any bulk transfer law or Tax law relating to bulk sales or bulk
transfers of any jurisdiction in connection with any Acquired Asset or the
transactions contemplated by this Agreement and (b) hereby waives any
requirement of compliance with such laws; provided, however, that no such waiver
shall relieve Parent and Sellers or liability for any pre-Closing Taxes.
     5.11 License Back and Name Changes.
          (a) License Back of Names. Upon and subject to the terms of this
Section 5.11, effective as of the Effective Time, Buyer hereby grants to each
Seller the non-transferable (except to any Affiliate of such Seller, which is
permitted), royalty-free, non-exclusive license and right to use, during the
License Period, each Mark in any location.

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          (b) Additional Terms Regarding License Back. Each Seller agrees that,
during the License Period, (1) the nature and quality of all products and
services sold by such Seller (or Affiliate of such Seller) under any Mark will
conform in all material respects to such Seller’s (or Affiliate’s) past
practices, standards and specifications followed prior to Closing, (2) the use
of any Mark by any Seller (or any such Affiliate) will conform in all material
respects to such Seller’s (or Affiliate’s) past practices, standards and
specifications followed prior to Closing, (3) it will not do anything to
materially and negatively impact the value of any Mark or the reputation and
goodwill associated therewith and (4) such Seller will (and will cause each such
Affiliate to) diligently pursue a process that gradually decreases the use of
any Mark. Should Buyer believe that any Seller is not complying with
Section 5.11(b), Buyer shall notify such Seller in writing of its concerns. Such
Seller will then have 10 Business Days to cure its defect in all material
respects. If such Seller acknowledges and agrees that it is in default, but
refuses to cure its defect, the License Period shall immediately terminate and
Sellers shall immediately cease use of the Marks. If, however, there is a good
faith dispute as to whether such Seller is in default or whether such a default
has been cured, nothing in this Section limits Buyer’s right to seek
indemnification for such non-compliance or to seek (including before the end of
such period) injunctive relief to stop such non-compliance.
          (c) Definitions. The following definitions apply:
          (1) “License Period” means the period that begins at the Effective
Time and ends on the 180th day after the Closing Date.
          (2) “Mark” means each trademark, service mark, trade name, trade
dress, design, logo or other similar Intellectual Property used by any Seller in
the conduct of the Outlet Business that is an Acquired Asset.
          (d) Name Changes. Within 10 Business Days after Closing (or, for any
Seller or Affiliate of any Seller that is not incorporated in any state of the
United States or with respect to Parent’s ticker symbol on the NASDAQ stock
market, as soon as practicable after such 10th Business Day), each applicable
Seller will, and cause each of its applicable Affiliates to, take the corporate
action necessary to change such Seller’s, or such Affiliate’s, name to a name
that does not contain the word “Wilsons” or any term confusingly similar thereto
by making all required filing with the applicable Governmental Authority of an
amendment to such Seller’s, or Affiliate’s, charter, certificate of
incorporation or other applicable document reflecting such name change. Promptly
thereafter, each applicable Seller will, and will cause each of its applicable
Affiliates to, file with the applicable Governmental Authorities in each
jurisdiction in which it is qualified to do business as a foreign corporation
appropriate forms reflecting such name change.
     5.12 Transition Services. At Closing, Parent and Buyer will enter into
agreements substantially in the form of Exhibit 5.12-1 and 5.12-2, each dated
the Closing Date, and each providing for certain transition services after the
Effective Time under and subject to the terms thereof (each a
“Transition Services Agreement”).

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     5.13 Insurance and Insurance Proceeds.
          (a) Post-Closing and Assumed Liabilities. To the extent existing and
permitted by their terms, Sellers shall maintain in full force and effect their
general liability and product liability insurance policies relating to the
pre-Closing operation of the Outlet Business for one year after the Closing.
Without limiting the foregoing, if after Closing Buyer reasonably determines
that any Liability or other obligation that is an Assumed Liability is then
covered by any insurance policy relating to the Outlet Business of any Seller
(or any Affiliate of any Seller) and such Liability or other obligation is not
covered by any insurance policy of Buyer (or any Affiliate of Buyer), then Buyer
may give a notice to Sellers that states such determination and describes such
Liability or other obligation in reasonable detail. If Buyer gives such a
notice, then the following will apply:
          (1) The applicable Parties will cooperate in all reasonable respects,
at Buyer’s expense, to determine if the following conditions are satisfied:
(A) such Liability or other obligation is covered by any such insurance policy
of any Seller (or Affiliate of any Seller), (B) any Seller (or Affiliate of any
Seller) has the right to obtain any insurance proceeds with respect thereto and
(C) such Liability or other obligation is not covered by any insurance policy of
Buyer (or any Affiliate of Buyer).
          (2) If all of the conditions in the preceding clause (b)(1) are
satisfied or there is a reasonable likelihood that all of such conditions are
satisfied, then, at Buyer’s expense, the applicable Sellers will use
commercially reasonable efforts to obtain such proceeds from the provider of
such insurance of such Sellers (or their applicable Affiliates).
          (3) To the extent any Seller (or any Affiliate of any Seller) actually
recovers any such insurance proceeds (which, for the avoidance of doubt, would
be the amount in excess of any deductible, retention or self-insurance amount),
then such Seller will pay (or cause such Affiliate to pay) to Buyer an amount
equal to the difference of (1) such amount of such recovered proceeds (but not
to exceed the amount of such associated Liability or other obligation that is an
Assumed Liability) minus (2) the costs and expenses of any Seller (or Affiliate
of any Seller) incurred in connection with the foregoing (to the extent not
already reimbursed by Buyer), including with respect to any Tax.
     5.14 Substitution of Seller Collateral. For and at Closing, and to the
extent not accomplished at Closing then as soon thereafter as is reasonably
possible after any Seller’s request, Buyer will use its commercially reasonable
efforts to secure the unconditional release and, as appropriate, return to the
applicable Seller, of any Seller Collateral (with “Seller Collateral” meaning
any letter of credit and any collateral given to the issuer thereof, escrowed
funds, guarantee, bond or other collateral given by or on behalf of any Seller,
in each case to the extent pertaining to any of the Acquired Assets, but not
meaning any such collateral that is an Acquired Asset). Exhibit 5.14 identifies
such letters of credit as of the date hereof. Until any such release is secured,
all costs of any Seller for the continuation of any Seller Collateral relating
thereto after the Effective Time will be paid by Buyer within three Business
Days after such Seller informs Buyer thereof. Nothing in this Section 5.14 will
limit or otherwise affect the assumption by Buyer of any Liability or other
obligation that is an Assumed Liability.

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     5.15 Customer Data. No information in any customer list or related record
will be an Acquired Asset, to the extent the Person to which such information
pertains has requested or required that such information not be shared with or
provided to any Person in a manner that would preclude giving such information
to Buyer hereunder, including by making (whether by act or omission) such
request or requirement via any Contract, applicable privacy policy or other
means of communication with any Seller or any Affiliate of any Seller. At all
times after Closing, Buyer will (a) cause all customer lists and related records
that are an Acquired Asset to only be used in compliance with Applicable Law and
(b) act in a manner consistent with, and cause to be honored, all applicable
Contracts, privacy policies and other means of communication in connection with
which any Seller (or any Affiliate of any Seller) collected such information,
including all customer opt out requests, flags and similar items existing in
connection with any such customer list or record that are identifiable to Buyer
in connection therewith.
     5.16 Transaction Confidentiality Agreements. After the Closing Date, to the
extent reasonably requested by Buyer, Parent will use its commercially
reasonable efforts to enforce the terms of each Transaction Confidentiality
Agreement for Buyer’s benefit; provided that, within three Business Days after
Parent informs Buyer thereof, Buyer will reimburse Parent for all costs
(including reasonable attorneys’ fees and expenses) of Parent or any of its
Affiliates arising out of, relating to or resulting from such requested
enforcement. “Transaction Confidentiality Agreement” means a confidentiality
agreement that Parent entered into after January 1, 2008 with any prospective
purchaser (other than Buyer) of the Outlet Business.
     5.17 Post-Closing Releases of Sellers. After Closing, with respect to any
Real Property Lease under which any Seller has any obligation after Closing,
Buyer will cooperate with the applicable Seller in all reasonable respects, at
such Sellers’ expense, to obtain the full release, in writing and in a form
reasonably satisfactory to the applicable Seller, of all of the obligations (of
every kind and nature whatsoever, whether known or unknown, asserted or
unasserted, absolute or contingent and whenever arising) of such Seller (and to
the extent applicable, of each Affiliate of such Seller) first arising after the
Effective Time under or in connection with such Real Property Lease.
     5.18 Certain Obligations Regarding Customers.
          (a) Gift Card Items. Buyer will have no obligation to honor any Gift
Card Item; however, if there is honored, in a transaction with a customer at an
Outlet Store after the Effective Time but on or before May 31, 2009, any gift
certificate, gift card, voucher or similar item giving such customer, as the
holder of such item, the right to apply the monetary value of such item to any
purchased product from any Seller (or any Affiliate of any Seller), in each case
that was sold or issued by any Seller (or any Affiliate of any Seller) prior to
the Effective Time (each such item being a “Gift Card Item”), then (i) Buyer
shall use commercially reasonable efforts to prevent duplicate charges and
(ii) Sellers will reimburse Buyer for the dollar amount properly applied (as
determined under this Section 5.18(a)) by Buyer to such customer’s purchase from
Buyer of such purchased product pursuant to such Gift Card Item (the
“Reimbursable Amount”) as and to the extent provided in Section 5.18(a)(2).
          (1) Within 30 days after May 31, 2009, Buyer will deliver to Parent a

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statement (the “Gift Card Statement”) setting forth (A) the aggregate
Reimbursable Amount with respect to the period commencing at the Effective Time
and ending on May 31, 2009 (the “Total Reimbursable Amount”) and (B) information
Sellers reasonably require to confirm Buyer’s calculations of the amounts owed
under this Section (which may include the serial numbers or other identifying
information establishing that a Gift Card Item was sold or issued by a Seller or
an Affiliate of a Seller prior to the Effective Time, the date such Gift Card
Item was used by Buyer’s customer, the amount remaining on such Gift Card Item
before and after such transaction, and the Reimbursable Amount with respect to
each transaction).
     (2) (A) If the Total Reimbursable Amount equals or exceeds the sum of the
Gift Card Holdback Amount plus any amounts paid by any Seller or any Affiliate
of any Seller to Buyer with respect to any Reimbursable Amounts, Sellers shall
not be entitled to the return of any portion of the Gift Card Holdback Amount.
If the Total Reimbursable Amount is less than the sum of the Gift Card Holdback
Amount plus any amounts paid by any Seller or any Affiliate of any Seller to
Buyer with respect to any Reimbursable Amounts, Buyer shall, along with the Gift
Card Statement, deliver to Parent, by check or by wire transfer of immediately
available funds to an account designated by Parent in writing, the amount by
which the Total Reimbursable Amount is less than the sum of the Gift Card
Holdback Amount plus any amounts paid by any Seller or any Affiliate of any
Seller to Buyer with respect to any Reimbursable Amounts.
          (B) If, in connection with any of the actions contemplated in this
Section 5.18(a)(2), the Parties determine that a payment is owed to Sellers, but
the amount of such payment is in dispute, then the portion of such amount not in
dispute will be paid when required under clause 2(A) above (without limiting any
Party’s rights or obligations). The Parties will resolve any dispute in
connection with this Section 5.18 as contemplated in Section 5.18(a)(3).
          (3) For a period of one year after Parent’s receipt of the Gift Card
Statement, Sellers and their designated representatives will have the right,
upon reasonable notice and during business hours, to review the books and
records of Buyer and its Affiliates with respect to all information reasonably
related to Gift Card Items under such Gift Card Statement and any other matter
reasonably relating to this Section 5.18(a) and to reasonably consult with
employees and agents of Buyer and its Affiliates having knowledge or
responsibility with respect to such matters, and Buyer will cooperate with
Sellers in all reasonable respects in connection therewith. In the event that
Buyer and Sellers have a dispute with respect to any Reimbursable Amount claimed
by Buyer, they will attempt to resolve the dispute in good faith. If it is
finally determined that a greater or lesser amount was owed by Sellers than the
amount to be paid or already paid by Sellers (including if withheld by Buyer),
then Sellers will promptly pay to Buyer, or Buyer will promptly pay to Sellers
(as applicable and in each case without interest), the amount of such
underpayment or overpayment (as applicable). If Buyer and Sellers are unable to
resolve any such dispute within 60 days, they shall submit such dispute to an
Arbitrator using substantially the same procedures described in Sections 2.4(c)
and
2.4(d).

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          (4) Notwithstanding the foregoing provisions of this Section 5.18(a),
in no event will any Seller have any Liability or other obligation under this
Section 5.18(a) with respect to any Gift Card Item honored by Buyer (A) to the
extent in excess of the dollar amount remaining on such Gift Card Item as of the
Effective Time or otherwise validly remaining on such Gift Card Item at any
other time or (B) in a manner otherwise inconsistent with the terms and
conditions of such Gift Card Item established by the applicable Seller or
Affiliate of a Seller prior to the Effective Time. Notwithstanding any other
term of this Agreement, in no event will any Party (or any of its Affiliates)
have any Liability or other obligation to any other Party (or any of its
Affiliates) relating to honoring or satisfying any coupon or similar item
(including that Buyer will have no obligation to honor or satisfy any coupon or
similar item issued by any Seller, and Sellers will have no obligation to
reimburse or otherwise pay Buyer if Buyer honors or satisfies any such coupon or
similar item).
          (b) Returns, Refunds and Exchanges. Buyer will pay, perform and
satisfy (as applicable) all obligations (if any) of each Seller, pursuant to
such Seller’s return, refund and exchange policies or Applicable Law (as
applicable), regarding the return or exchange of, or the granting of a refund
with respect to, any product that is of a type sold at an Outlet Store as of the
Effective Time. Each Seller will be deemed to assign and transfer to Buyer,
without any further action by any Seller, any rights of such Seller (1) in and
to any such product with respect to which Buyer or any of its Affiliates grants
a refund or permits a return or exchange and (2) against the manufacturer or
supplier of such product to the extent of and relating to such refund, return or
exchange. In no event will any Seller or any Affiliate of any Seller have any
Liability or other obligation to Buyer or any of its Affiliates regarding any
such refund, return or exchange.
     5.19 Closing Date Financial Statements. Within 60 days after the Closing,
Sellers will cooperate with Buyer, at Buyer’s expense, for Buyer to prepare, in
accordance with general accepted accounting principles and consistent with past
practices, unaudited financial statements, including balance sheets and income
statements, of the Outlet Business as of the Effective Time.
     5.20 SEC and National Securities Exchange Requirements. Each Seller and
Buyer will cooperate with each other in all reasonable respects to fulfill any
applicable requirement of the SEC or any national securities exchange in
connection with the transactions contemplated herein, including to perform in
sufficient time to meet any applicable filing deadline that any of them may
have. Sellers shall, if requested by Buyer, cooperate with Buyer in the
preparation, at Buyer’s cost and expense, of audited financial statements
concerning the Outlet Business with respect to such periods as Buyer may be
required to file or make available pursuant to any applicable requirement of the
SEC or any national securities exchange, and shall furnish Buyer and its
representatives reasonable access to their books, records and work papers in
connection with the foregoing.
     5.21 Tax Proceedings. Each Seller and Buyer shall provide each other with
such assistance as may reasonably be requested by the other in connection with
the preparation of any Tax Return, any Tax audit or other examination by any
Governmental Authority or any judicial or administrative Proceeding relating to
Taxes, and each shall provide the other with any records or information that are
relevant to such Tax Return, Tax audit, examination or Proceeding. Such
assistance shall include making employees reasonably available on a mutually
convenient basis

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to provide additional information and explanation of material provided hereunder
and shall include providing copies of any relevant Tax Returns and supporting
work schedules. The Party requesting assistance hereunder shall reimburse the
other for reasonable expenses incurred in providing such assistance.
     5.22 Cooperation Regarding Certain Intellectual Property. After Closing,
Buyer will cooperate with Sellers, at Sellers’ reasonable request and expense,
in Sellers’ efforts to obtain from JDA Software, Inc. or its applicable
Affiliates (collectively, “JDA”) a separate, non-exclusive license directly from
JDA for Sellers and their Affiliates with respect to the software (and any
related Intellectual Property) that is among the Acquired Assets (in each case
only to the extent such software and Intellectual Property relates to JDA).
     5.23 License Back of Certain Software. Upon and subject to the terms of
this Section 5.23, effective as of the Effective Time, Buyer hereby grants back
to each Seller a non-exclusive, perpetual, irrevocable, paid-up worldwide right
and license to use the Licensed Software for Sellers’, and any Seller’s
Affiliate’s, internal use only with the right and license to create derivative
works based upon the Licensed Software for Sellers’, and any Seller’s
Affiliate’s, internal use only the Licensed Software and such derivative works,
including all intellectual property rights related thereto, including both
source code and object code versions of any computer software included among the
Licensed Software or to allow a third party to do any of the foregoing for any
Seller or any such Affiliate. Without limiting the foregoing, each Seller or any
such Affiliate has the right to reproduce, improve, revise, change, adapt,
modify, make, merge into other software, enhance, deliver, install, composite
with other products and support, distribute and otherwise use the Licensed
Software solely for Sellers’, and any Seller’s Affiliate’s, internal use only.
This Section 5.23 does not grant any Party or any of its Affiliates,
sublicensees or customers any right to any improvement, revision, change,
derivative work, adaptation or other modification (collectively,
“Licensed Software Improvements”) made by or on behalf of any other Party
(including any of its Affiliates, successors, assigns, agents or other
licensees) to the Licensed Software and all right, title and interest in and to
Licensed Software Improvements will be owned by the Party responsible for
creating such Licensed Software Improvement. This Section 5.23 does not impose
any obligation on any Party to maintain or support the Licensed Software.
“Licensed Software” means all software developed by or specifically for any
Seller or any of its Affiliates in which any Seller or any of its Affiliates
owns, subject to any Permitted Encumbrance, all right, title and interest, that
is an Acquired Asset (collectively, along with all source code, object code,
documentation, programmer notes and the like related thereto).
     5.24 Filing of Releases of Security Interests. Sellers shall, within 10
Business Days after the Closing, cause to be filed Form UCC-3s with respect to
the termination of the security interest of General Electric Capital Corporation
in the Acquired Assets, in each jurisdiction in which a UCC-1 Financing
Statement was filed with respect thereto, and shall furnish written evidence
thereof to Buyer. In addition, Sellers shall, within 10 Business Days after the
Closing, cause to be filed all necessary releases with any Governmental
Authority with respect to the termination of the security interests relating to
any Intellectual Property.
     5.25 Certain Undelivered Inventory. This Section 5.25 refers only to any
merchandise inventory that, at the Effective Time, is Undelivered Inventory. If,
after the Closing, any Undelivered Inventory is delivered to Sellers
Distribution Facility or a third party

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fulfillment center engaged by Sellers prior to the Effective Time (which
Undelivered Inventory delivered to such fulfillment center was designated for
sale in Sellers’ e-commerce business), then (1) Buyer will notify Parent
thereof, (2) Buyer will pay to the applicable Seller (as designated by Parent),
within two Business Days after such notification, an amount equal to (without
duplication) all of any Sellers’ purchase price for, and additional freight and
other costs and expenses with respect to the purchase and delivery of, such
Undelivered Inventory, in cash, by wire transfer of immediately available funds
to an account designated by Parent, and (3) subject to the foregoing, effective
at the time such wire transfer is received by such Seller, such Seller will, and
hereby does, sell, convey, transfer and assign to Buyer, and Buyer will, and
hereby does, purchase from such Seller, all of such Seller’s right, title and
interest in and to such Undelivered Inventory, free and clear of Encumbrances,
other than Permitted Encumbrances or Encumbrances arising from any act or
omission by Buyer.
     5.26 Vendor Matters. (a) Within 60 days after the Closing Date, Buyer shall
furnish to Sellers a statement (the “Vendor Loss Statement”) setting forth
(A) the aggregate amount of any Losses incurred by Buyer arising from (but
without solicitation or encouragement or initial contact relating thereto from
or on behalf of Buyer or any of Buyer’s Affiliates) Sellers’ payment defaults or
other disputes of Sellers with vendors in the 30 day period after the Closing
(the “Vendor Losses”) and (B) information Sellers reasonably require to confirm
Buyer’s calculation of the Vendor Losses.
          (b) If the Vendor Losses are less than the Vendor Loss Holdback
Amount, Buyer shall, along with the Vendor Loss Statement, deliver to Parent, by
check or by wire transfer of immediately available funds to an account
designated by Parent in writing, the amount by which the Vendor Losses are less
than the Vendor Loss Holdback Amount. If the Vendor Losses are greater than or
equal to the Vendor Loss Holdback Amount, Sellers shall not be entitled to the
return of any portion of the Vendor Loss Holdback Amount, and Buyer shall be
entitled to recover, in accordance with Article 8, Vendor Losses in excess of
the Vendor Loss Holdback Amount.
          (c) Notwithstanding the other terms of this Section 5.26 (and in
addition to the terms of Section 5.26(d)), before Buyer incurs any Loss
contemplated under Section 5.26(a), (1) Buyer will give notice (with reasonable
detail) to Sellers, as early as practicable under the circumstances, that such
Loss is Threatened or otherwise reasonably expected, (2) the Parties will
cooperate in all reasonable respects to determine the amount owed to such vendor
(if any) and to mitigate such Loss (if any). Thereafter, either (A) Buyer will
not incur such Loss, except to the extent (x) mutually agreed upon by the
Parties (such agreement not to be unreasonably withheld), (y) Buyer is required
to pay such Loss pursuant to any Order or (z) determined by an Arbitrator under
Section 5.26(d) or (B) Buyer may incur such Loss voluntarily; provided that
Sellers’ obligation to Buyer hereunder will not be established unless (and only
to the extent) established under the preceding clauses (A)(x), (A)(y) or (A)(z).
          (d) For a period of 90 days after Sellers’ receipt of the Vendor Loss
Statement, Sellers and their designated representatives will have the right,
upon reasonable notice and during business hours, to review the books and
records of Buyer with respect to all information reasonably related to the
Vendor Losses and any other matter reasonably relating to this Section 5.26 and
to reasonably consult with employees and agents of Buyer having knowledge or
responsibility with respect to such matters, and Buyer will cooperate with
Sellers

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in all reasonable respects in connection therewith. In the event that Buyer and
Sellers have a dispute with respect to the Vendor Losses claimed by Buyer, they
will attempt to resolve the dispute in good faith. If it is finally determined
that a greater or lesser amount was owed to Buyer than the amount to be paid or
already paid by Sellers, then Sellers will promptly pay to Buyer, or Buyer will
promptly pay to Sellers (as applicable), the amount of such underpayment or
overpayment (as applicable). If Buyer and Sellers are unable to resolve any such
dispute within 60 days, they shall submit such dispute to an Arbitrator using
substantially the same procedures described in Sections 2.4(c) and 2.4(d).
     5.27 Credit Card and Bank Account Matters.
          (a) Buyer shall open credit card processing accounts and bank accounts
for the use in the Outlet Business as soon as practicable after the Effective
Time, but in no event later than 30 days after Closing. Sellers will receive
cash and credit card receivables in their existing accounts with respect to
sales occurring in the Outlet Business after the Effective Time (to the extent
Buyer causes such amounts to be so deposited, which Sellers will facilitate)
until a date, to be specified by Buyer in writing, but in no event later than
30 days after Closing, as of which date Buyer shall transition to the use its
own accounts (such period, the “Collection Period”). Within 30 days after such
transition date, Sellers shall furnish to Buyer a statement (the
“Reconciliation”) setting forth (A) the aggregate amount of cash and credit card
receivables of the Outlet Business in the Collection Period so received by
Sellers (the “Collected Amount”) and (B) information Buyer reasonably requires
to confirm Sellers’ calculation of the Collected Amount.
          (b) Each Business Day from the day after the Closing Date through the
Business Day after the end of the Collection Period (and thereafter, if
necessary, to pay any Collected Amount owed to Buyer as contemplated herein),
Sellers will give written direction to their lender (which sweeps such accounts)
to remit to Buyer all Collected Amounts so received through the day prior to
each such direction (without duplication), such that the Collected Amounts are
paid to Buyer.
          (c) For a period of one year after Buyer’s receipt of the
Reconciliation, Buyer and its designated representatives will have the right,
upon reasonable notice and during business hours, to review the books and
records of Sellers with respect to all information reasonably related to the
Collected Amount and any other matter reasonably relating to this Section 5.27
and to reasonably consult with employees and agents of Sellers having knowledge
or responsibility with respect to such matters, and Sellers will cooperate with
Buyer in all reasonable respects in connection therewith. In the event that
Buyer and Sellers have a dispute with respect to the Collected Amount claimed by
Sellers, they will attempt to resolve the dispute in good faith. If it is
finally determined that a greater or lesser amount was owed by Sellers than the
amount to be paid or already paid by Sellers, then Sellers will promptly pay to
Buyer, or Buyer will promptly pay to Sellers (as applicable and in each case
without interest), the amount of such underpayment or overpayment (as
applicable). If Buyer and Sellers are unable to resolve any dispute within 60
days, they shall submit such dispute to an Arbitrator using substantially the
same procedures described in Sections 2.4(c) and 2.4(d).
     5.28 Liens. Within 30 days after the Closing, Sellers shall furnish to
Buyer written documentation evidencing the satisfaction and release of all tax
or judgment liens identified in

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the Disclosure Schedule.
     5.29 Racking in Sellers Distribution Facility. During the period from the
Effective Time until May 31, 2009, Buyer will have the right to use the racking
in the Sellers Distribution Facility (which is an Excluded Asset) as part of
Buyer’s normal operations at the Sellers Distribution Facility. Buyer will
maintain such racking during such period and cause such racking to be in the
same general condition at the end of such period as exists on the Effective Date
(including with respect to normal wear and tear). Notwithstanding the foregoing,
if Buyer enters into a new lease with the landlord of the Sellers Distribution
Facility to extend Buyer’s occupancy of the Sellers Distribution Facility beyond
May 31, 2009, Sellers will transfer to Buyer all right, title and interest in
and to such racking (on an “AS IS, WHERE IS” basis), without additional
consideration, free and clear of any liens or encumbrances of any lender to
Sellers, including, without limitation, General Electric Capital Corporation, as
lender and as agent for other lenders.
     5.30 Landlord Retention Amount. This Section 5.30 will govern the retention
and payment of the Landlord Retention Amount. From and after the Effective Time,
Sellers will use commercially reasonable efforts to negotiate and enter into
written settlement agreements with the landlords listed on Exhibit 2.3 (the
“Subject Landlords”) with respect to the closing of certain of Sellers’ mall
stores. Promptly after entering into any such settlement agreement with any
Subject Landlord (but while Buyer still holds any portion of the
Landlord Retention Amount), Sellers will (a) provide written notice to Buyer of
the execution of such settlement agreement, the aggregate amount payable by any
Seller or Affiliate of any Seller pursuant to such settlement agreement, net of
any amount otherwise paid by or on behalf of any Seller or such an Affiliate
(each, a “Settlement Payment Amount”), the name of the recipient to whom such
payment will be made and wire transfer instructions for payment to such
recipient (if available to Sellers) or the address where a check is to be sent
to such recipient for the amount of such Settlement Payment Amount and
(b) direct Buyer to pay such Settlement Payment Amount to such recipient on
behalf of the applicable Seller or such an Affiliate (provided that such payment
obligation of Buyer will not exceed the portion of the Landlord Retention Amount
then held by Buyer). Within one Business Day after Sellers give any such notice
and direction to Buyer, Buyer will pay to the recipient named in such notice and
direction (in the manner stated above and in such notice and direction) the
applicable Settlement Payment Amount on behalf of the applicable Seller or such
an Affiliate. Notwithstanding any other term of this Agreement, in no event will
any portion of the Landlord Retention Amount (or any interest thereon) be
available to Buyer or any of its Affiliates to satisfy any Liability or other
obligation of any Seller or any Affiliate of any Seller under this Agreement or
any Ancillary Document (including pursuant to Section 8.3(h)), nor will Buyer
retain any of the Landlord Retention Amount except to the extent permitted in
this Section 5.30.
     5.31 Certain Lease Matters. After Closing, Buyer will give to Parent
written notice if Buyer is actually evicted from an Outlet Store by the landlord
with respect thereto because of the Parties’ failure to obtain such landlord’s
consent to the assignment of the Real Property Lease covering such Outlet Store
to Buyer pursuant to this Agreement, such notice to be given within five
Business Days after such actual eviction occurs (each, if any, an “Outlet Store
Eviction”). If, but only if, more than six Outlet Store Evictions occur, Sellers
will pay to Buyer an amount equal to $17,241.00 (which amount equals 1/116
multiplied by $2,000,000) with respect to each such Outlet Store Eviction
(including the first six Outlet Store Evictions), such

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payment to be made by wire transfer of immediately available funds to the
account designated in writing by Buyer within ten Business Days after the
seventh Outlet Store Eviction (in the case of payments owed by Sellers with
respect to the first seven Outlet Store Evictions) or, as and if applicable,
within ten Business Days after each Outlet Store Eviction to occur after the
seventh Outlet Store Eviction. For the avoidance of doubt, in no event will
Sellers (or any of them) have any Liability or other obligation under this
Section 5.31 if six or fewer Outlet Store Evictions occur. In addition, after
Closing, in the event that one or more landlords contest the assignment of any
Real Property Lease covering an Outlet Store to Buyer pursuant to this Agreement
or litigate or threaten to litigate such assignment, the assignment of such Real
Property Lease by such Seller to Buyer hereunder shall be deemed not to have
occurred, at Buyer’s option, but without limiting and subject to Section 1.3,
and such Seller and Buyer shall negotiate an operating agreement, on mutually
agreeable terms, with respect to the applicable Real Property Lease.
ARTICLE 6
CLOSING, AND CLOSING DELIVERIES
     6.1 Closing. Closing of the transactions contemplated herein (“Closing”)
will take place at the offices of Fulbright & Jaworski L.L.P., New York, New
York, beginning at 9:00 a.m. local time on date hereof (the “Closing Date”). The
sale, conveyance, transfer, assignment and purchase of the Acquired Assets, and
the assumption of the Assumed Liabilities, will be effective as of 11:59 p.m.
Minneapolis time (the “Effective Time”) on July 5, 2008 (the “Cut-Off Date”). To
the extent the Parties agree, documents may be delivered at Closing by facsimile
or other electronic means.
     6.2 Closing Deliveries by Sellers. At Closing, each Seller will deliver, or
cause to be delivered, to Buyer (or as Buyer or this Agreement otherwise
directs), the following:
          (a) a Bill of Sale, Assignment and Assumption Agreement in the form
attached hereto as Exhibit 6.2(a), dated the Closing Date (the “Bill of Sale”),
executed by each Seller;
          (b) a (1) Trademark Assignment in the form attached hereto as
Exhibit 6.2(b)(1), dated the Closing Date (the “Trademark Assignment”), and
(2) Domain Name Assignment in the form attached hereto as Exhibit 6.2(b)(2),
dated the Closing Date (the “Domain Name Assignment”), each executed by the
applicable Sellers;
          (c) each Transition Services Agreement, each executed by Parent,
pursuant to Section 5.12;
          (d) an officer’s certificate of a duly authorized officer of each
Seller, each in a form approved by Buyer (such approval not to be unreasonably
withheld), dated the Closing Date, executed by such officer, each certifying
(1) that attached thereto are true, correct and complete copies of the
certificate or articles of incorporation (including all amendments thereto) of
each Seller, and that the same are in full force and effect; (2) that attached
thereto are true, correct and complete copies of the bylaws of each Seller, and
that the same are full force and effect and were in full force and effect on the
date of the resolutions described below; (3) that attached thereto is a true,
correct and complete copy of the requisite resolutions of the Board of Directors
and of the requisite (if any are required) shareholders of such Seller approving
and

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authorizing the execution, delivery and performance by such Seller of this
Agreement and each Ancillary Document of such Seller and the transactions
contemplated herein and therein, and that such resolutions are the only
resolutions of such Board of Directors or shareholders with respect to such
matters and have not been modified, rescinded or amended and remain in full
force and effect; and (4) that each person who, as an officer of such Seller,
signed and delivered this Agreement or any Ancillary Document was at the time of
such signing and delivery duly elected and appointed, qualified and acting as
such officer;
          (e) a certificate of good standing of each Seller, issued by the
Secretary of State (or equivalent) of its state of incorporation or organization
on a recent date;
          (f) a FIRPTA Certificate complying in all respects with section
1445(b)(2) of the Code;
          (g) the Assignment and Assumption Agreements with respect to the Real
Property Leases in the form attached hereto as Exhibit 6.2(g), dated the Closing
Date (the “Assignments of Leases”), each executed by the applicable Seller;
          (h) all keys of any Seller to all locks to the Leased Real Property,
together with all security codes for any Leased Real Property or space therein
(which will be considered delivered if in the possession of the Persons
reasonably designated by Buyer);
          (i) a consent, executed by Lawson Software, Inc., to the assignment of
Sellers’ contracts with Lawson Software, Inc. to Buyer, in form and substance
satisfactory to Buyer (however, if Buyer effects the Closing without the
delivery of such item, then the requirement to make such delivery is deemed to
be fully waived);
          (j) a consent, executed by JDA Software, Inc., to the assignment of
Sellers’ contracts that are Assumed Contracts with JDA Software, Inc. to Buyer,
in form and substance satisfactory to Buyer (however, if Buyer effects the
Closing without the delivery of such item, then the requirement to make such
delivery is deemed to be fully waived);
          (k) a Sublease Agreement, dated the Closing Date (the “Sublease
Agreement”), executed by Bermans The Leather Experts Inc., in form and substance
satisfactory to Buyer; and
          (l) all other documents and items required by this Agreement to be
delivered, or caused to be delivered, by any Seller at Closing.
     6.3 Closing Deliveries by Buyer. At Closing, Buyer will deliver, or cause
to be delivered, to the applicable Seller (or as the applicable Seller or this
Agreement otherwise directs), the following:
          (a) payment of the Estimated Purchase Price, pursuant to Section 2.3;
          (b) the Bill of Sale and Assignments of Leases, each executed by
Buyer;
          (c) the Trademark Assignment and the Domain Name Assignment, each
executed by Buyer;

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          (d) each Transition Services Agreement, each executed by Buyer,
pursuant to Section 5.12;
          (e) an officer’s certificate of a duly authorized officer of Buyer, in
a form approved by Parent (such approval not to be unreasonably withheld), dated
the Closing Date, executed by such officer, each certifying (1) that attached
thereto are true, correct and complete copies of the certificate or articles of
incorporation (including all amendments thereto) of Buyer, and that the same are
in full force and effect; (2) that attached thereto are true, correct and
complete copies of the bylaws of Buyer, and that the same are full force and
effect and were in full force and effect on the date of the resolutions
described below; (3) that attached thereto is a true, correct and complete copy
of the requisite resolutions of the Board of Directors of Buyer approving and
authorizing the execution, delivery and performance by Buyer of this Agreement
and each Ancillary Document of Buyer and the transactions contemplated herein
and therein, and that such resolutions are the only resolutions of such Board of
Directors with respect to such matters and have not been modified, rescinded or
amended and remain in full force and effect; and (4) that each person who, as an
officer of Buyer, signed and delivered this Agreement or any Ancillary Document
was at the time of such signing and delivery duly elected and appointed,
qualified and acting as such officer;
          (f) the Sublease Agreement, executed by Buyer, in form and substance
satisfactory to Sellers; and
          (g) all other documents and items required by this Agreement to be
delivered, or caused to be delivered, by Buyer at Closing.
ARTICLE 7
CONDITIONS TO OBLIGATIONS TO CLOSE
     7.1 Conditions to Obligation of Buyer to Close. The obligation of Buyer to
effect the closing of the transactions contemplated herein is subject to the
satisfaction at or before Closing of all of the following conditions, any one or
more of which may be waived by Buyer, in Buyer’s sole discretion (and, for any
such condition not satisfied, if Buyer effects the Closing, then Buyer will be
deemed to have waived such condition, with no associated Liability or other
obligation resulting therefrom for any Seller):
          (a) Releases. Sellers will have delivered to Buyer a written document
in a form reasonably acceptable to each Party, each dated on or before the
Closing Date and executed by each Person to whom, at Closing, any Seller owes
any indebtedness for borrowed money or with whom Seller has a contractual right
to borrow money, even if Seller does not owe any indebtedness for borrowed money
to such Person at Closing (or, if applicable, executed by such Person’s agent or
similar representative), in each case under which such Person (or such agent or
representative on such Person’s behalf) (1) consents to the transactions
contemplated herein (to the extent required) and (2) agrees to release each
Encumbrance of such Person on any Acquired Asset upon the satisfaction of the
conditions in such document (each such document being a “Lender Release”).
          (b) Other Releases. Sellers shall have delivered to Buyer written
evidence of the release of the Encumbrances set forth on Exhibit 7.1(b).

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          (c) Other Documents. Sellers shall have delivered to Buyer the
documents described in Section 6.2.
     7.2 Conditions to Obligation of Sellers to Close. The obligation of each
Seller to effect the closing of the transactions contemplated herein is subject
to the satisfaction at or before Closing of all of the following conditions, any
one or more of which may be waived by all Sellers, in each Seller’s sole
discretion (and, for any such condition not satisfied, if Sellers effect the
Closing, then Sellers will be deemed to have waived such condition, with no
associated Liability or other obligation resulting therefrom for Buyer):
          (a) Lender Release. Sellers will have obtained each Lender Release.
          (b) Letters of Credit or Other Seller Collateral. Buyer will have put
in place and caused to be fully effective replacement, standby or substitute
letters of credit that replace, backstop or substitute for letters of credit of
any Seller (or Affiliate of any Seller) or other Seller Collateral regarding
which all Sellers (and all Affiliates of any Seller), as applicable, have not
been released, in each case to the extent required to cause, at all times at and
after the Effective Time, any Liability or other obligation with respect to any
such letter of credit of any Seller (or Affiliate of any Seller) or other Seller
Collateral arising out of, relating to or resulting from any Assumed Liability
or activity or operation of Buyer (or any Affiliate of Buyer) to be
automatically fully satisfied by such a replacement, standby or substitute
letter of credit put in place by Buyer.
          (c) Other Documents. Buyer shall have delivered to Sellers the
documents described in Section 6.3.
ARTICLE 8
INDEMNIFICATION AND RESOLUTION OF CERTAIN DISPUTES
     8.1 General. Except as otherwise provided herein, the several
representations, warranties, covenants, and agreements of the Parties contained
in this Agreement (or in any document delivered at Closing in connection
herewith, except to the extent stated therein) shall be deemed to have been made
on the Closing Date and shall be deemed to be material and to have been relied
upon by Buyer and Sellers notwithstanding any investigation made by Buyer or
Sellers.
     8.2 Indemnification.
          (a) Each of the Sellers shall, jointly and severally, indemnify and
hold Buyer and its Other Indemnified Persons harmless from and against: (i) any
and all loss, cost, liability, damage and expense (including reasonable legal
fees, expert costs and other expenses incident thereto) (each a “Loss” and,
collectively, “Losses”) arising out of or resulting from any inaccuracy,
misrepresentation or breach of any representation or warranty of any Seller
under this Agreement; (ii) any and all Losses arising out of any breach or
non-fulfillment of any covenant or agreement of any Seller under this Agreement;
(iii) any and all liabilities and obligations of Sellers (other than Assumed
Liabilities or any other liability or obligation of Buyer hereunder) of any
nature whatsoever, whether accrued, absolute, fixed, contingent, or otherwise
known or unknown to Sellers, whether arising before or after the Closing,
including, but not limited to, Losses with respect to any liability of Sellers
deemed to have been assumed by Buyer by virtue of common law, statute or
regulation or failure to comply therewith, which liability or

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obligation Buyer has not expressly agreed to assume or pay hereunder, including
without limitation, bulk transfer laws in effect in any State; (iv) except to
the extent expressly stated herein, any liability or obligation for Taxes of any
Seller, whether or not accrued, assessed or currently due and payable (including
without limitation any such liability for Taxes of Sellers, (a) whether or not
it relates to the operation of the Outlet Business, (b) arising from the
operation of the Outlet Business or the ownership of the Acquired Assets on or
prior to the Effective Time or (c) arising out of the consummation of the
transactions contemplated hereby (for purposes of this Section 8.2(a)(iv), all
real property Taxes, personal property Taxes and similar ad valorem obligations
levied with respect to the Acquired Assets for a Tax period that includes (but
does not end on) the Cut-Off Date shall be apportioned between Sellers and Buyer
in the manner stated in this Agreement)); (v) any and all liabilities and
obligations of any Seller or any Affiliate of any Seller regarding any product
sold by any Seller or any Affiliate of any Seller before the Effective Time,
except to the extent any of the foregoing is an Assumed Liability or an
obligation of Buyer pursuant to any other term hereof; and (vi) all claims,
actions, suits, proceedings, demands, assessments, judgments, costs and
expenses, including, without limitation, any reasonable legal fees and expenses,
incident to any of the foregoing.
          (b) Buyer shall indemnify and hold each Seller and its Other
Indemnified Persons harmless from and against: (i) any and all Losses arising
out of or resulting from any inaccuracy, misrepresentation or breach of any
representation or warranty of Buyer under this Agreement; (ii) any and all
Losses arising out of any breach or non-fulfillment of any covenant or agreement
of Buyer under this Agreement; (iii) any and all Losses arising out of or in
connection with the ownership or operation of the Acquired Assets or the Assumed
Liabilities, in each case with respect to periods after the Effective Time;
(iv) any and all liabilities and obligations of Buyer or any Affiliate of Buyer
regarding any product sold by Buyer or any Affiliate of Buyer after the
Effective Time, except to the extent any Seller has any indemnification
obligation therefor pursuant to Section 8.2(a)(i) or 8.2(a)(ii); (v) any and all
Losses arising out of any failure to secure the unconditional release or, as
appropriate, return to the applicable Seller, of any letter of credit or any
other Seller Collateral, including any amount that any Seller is obligated to
pay with respect to any letter of credit that pertains to any Acquired Asset,
Assumed Liability or operation or activity of Buyer (or any of its Affiliates)
after the Effective Time; and (vi) all claims, actions, suits, proceedings,
demands, assessments, judgments, costs and expenses, including, without
limitation, any reasonable legal fees and expenses, incident to any of the
foregoing.
     8.3 Certain Limitations and Other Matters Regarding Claims.
          (a) Deductible on Sellers’ Obligations. No Seller will have any
obligation under Section 8.2(a)(i) (or 8.2(a)(vi) to the extent incident to
8.2(a)(i)), unless and until the aggregate amount of Losses for which all
Sellers are obligated thereunder exceeds $200,000 (the “Deductible”), and then
only for the amount of such Losses in excess of the Deductible, subject to the
other terms of this Article 8.
          (b) Cap on Sellers’ Obligations. The obligations of all Sellers under
Section 8.2(a)(i) (or 8.2(a)(vi) to the extent incident to 8.2(a)(i)), in the
aggregate, will not exceed an amount equal to $3,500,000 (the “Cap”), subject to
the other terms of this Article 8.

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          (c) Deductible on Buyer’s Obligations. Buyer will not have any
obligation under Section 8.2(b)(i) (or 8.2(b)(vi) to the extent incident to
8.2(b)(vi)) unless and until the aggregate amount of Losses for which Buyer is
obligated thereunder exceeds the Deductible, and then only for the amount of
such Losses in excess of the Deductible, subject to the other terms of this
Article 8.
          (d) Cap on Buyer’s Obligations. The obligations of Buyer under
Section 8.2(b)(i) (or 8.2(b)(vi) to the extent incident to 8.2(b)(vi)), in the
aggregate, will not exceed an amount equal to the Cap, subject to the other
terms of this Article 8.
          (e) Certain Treatment of Special Representations. Notwithstanding the
foregoing terms of this Section, (1) Section 8.3(a), 8.3(b), 8.3(c) or 8.3(d)
will not limit any Liability or other obligation with respect to any Special
Representation or Critical Representation and (2) the amount of Losses hereunder
with respect to any Special Representation or Critical Representation will not
be used in determining if the Deductible or Cap has been reached or exceeded.
“Special Representation” means any representation or warranty in Section 3.7 or
3.21. “Critical Representation” means any representation or warranty (A) in
Section 3.2, 3.11(a), 3.24, 4.2 or 4.7 or (B) that is made with fraud (of which
intent is an element).
          (f) Sole and Exclusive Remedies. The sole and exclusive remedy of the
Parties for money damages in the event of any inaccuracy, misrepresentation or
breach of any representation or warranty of a Party under this Agreement or any
Ancillary Document delivered to another Party in connection herewith will be
strictly limited to indemnification pursuant to this Article 8; provided,
however, that this Section 8.3(f) will not restrict the right of a party hereto
to bring an action for fraud (of which intent is an element) or to seek recovery
with respect to Losses arising out of or resulting from the breach of any
covenant or agreement contained in this Agreement or any Ancillary Document (but
not from any inaccuracy, misrepresentation or breach of any representation or
warranty of a Party under this Agreement or any Ancillary Document).
          (g) Specific Performance. Each Party acknowledges and agrees that each
other Party may be damaged irreparably if this Agreement is not performed in
accordance with its terms or otherwise is breached and that a Party will be
entitled to seek injunctive relief to prevent breaches hereof and to enforce
specifically this Agreement and its terms (including Section 5.8) in addition to
any other remedy to which such Party may be entitled hereunder.
          (h) Buyer’s Setoff Right. To the extent that Buyer is entitled to
indemnification for Losses, Buyer may satisfy any portion of such Losses by
offsetting against any amount payable by Buyer to any Seller or any Affiliate
thereof pursuant to this Agreement or the Transition Services Agreements, in
each case subject to the following:
          (1) With respect to each such Loss which Buyer intends to satisfy
under this Section 8.3(h), Buyer must first make a bona fide claim for
indemnification pursuant to Section 8.5(a) on or before the date that such
amount is otherwise payable by Buyer pursuant to this Agreement or the
Transition Services Agreements.
          (2) If Buyer and Sellers have a dispute with respect to such claim by
Buyer, then they will attempt to resolve such dispute in good faith. If Buyer
and Sellers

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are unable to resolve any such dispute within 60 days, then they will submit
such dispute to an Arbitrator using substantially the same procedures described
in Sections 2.4(c) and 2.4(d) in which event the date on which any such amount
otherwise payable by Buyer to any Seller or any Affiliate thereof shall be
required to be paid shall be extended to the third business day after the later
of the agreement of Buyer and Sellers with respect to such dispute or the
resolution of such dispute through arbitration and shall then be payable only to
the extent not reduced by such resolution of such indemnification claim.
          (i) Exclusion of Vendor Losses. The limitations and restrictions on
indemnification set forth in Sections 8.3(a) and 8.3(b) shall be inapplicable to
the first portion of Vendor Losses which are up to the amount of the Vendor Loss
Holdback Amount that are payable by Sellers pursuant to Section 5.26.
     8.4 Certain Survival Periods.
          (a) Survival of Representations and Warranties. Subject to
Section 8.4(b), each representation or warranty herein will survive the
execution and delivery of this Agreement and remain in full force and effect
until the date that is 18 months after the Closing Date, at which time such
representation or warranty will expire and terminate and no indemnification
obligation will be associated therewith or based thereon, except that each
Special Representation will survive until 90 days after all Liabilities and
other obligations hereunder relating thereto are barred by all applicable
statutes of limitation (including periods of extension, whether automatic or
permissive) and each Critical Representation will survive indefinitely.
          (b) Survival of Representations and Warranties Until Final
Determination. For each claim for indemnification hereunder regarding a
representation or warranty that is validly made before expiration of such
representation or warranty, such claim and associated right to indemnification
will not terminate before final determination and satisfaction of such claim.
          (c) Survival of Covenants and Agreements. Each covenant and agreement
(other than representations and warranties) herein, and all associated rights to
indemnification, will survive Closing and will continue in full force thereafter
until all Liabilities and other obligations hereunder relating thereto are
barred by all applicable statutes of limitation, subject to any applicable
limitation stated herein.
     8.5 Notice of Claims and Procedures.
          (a) Notice of Claims. A Party entitled to indemnification hereunder
(the “Claiming Party”) will give the Party obligated to provide such
indemnification (the “Indemnifying Party”) prompt notice of any claim, for which
such Claiming Party proposes to demand indemnification, (1) by a Person that is
not a Party nor an Other Indemnified Person (such a claim being a
“Third Party Claim” and such notice of such Third Party Claim being the
“Initial Claim Notice”) or (2) that does not involve a Third Party Claim, in
each case specifying the amount and nature of such claim (to the extent known).
Thereafter, the Claiming Party will give the Indemnifying Party, promptly after
the Claming Party’s (or any of its applicable Other Indemnified Person’s)
receipt or delivery thereof copies of all documents (including court papers)
received or delivered by the Claiming Party (or any such Other Indemnified
Person)

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relating to any such Third Party Claim. The failure to promptly give such notice
or to promptly give such copies will not relieve the Indemnifying Party of any
Liability or other obligation hereunder, except if the Indemnifying Party was
prejudiced thereby, but only to the extent of such prejudice.
          (b) Access and Cooperation. Each Party will, and will cause its Other
Indemnified Persons to, cooperate and assist in all reasonable respects
regarding such Third Party Claim, including by promptly making available to such
other Party (and its legal counsel and other professional advisers with a
reasonable need to know) all books and records of such Person relating to such
Third Party Claim, subject to reasonable confidentiality precautions.
          (c) Defense and Participation Regarding Third Party Claims. This
Section 8.5(c) relates only to Third Party Claims.
          (1) Election to Conduct Defense. Promptly after receiving an Initial
Claim Notice under Section 8.5(a), the Indemnifying Party will have the option
to conduct the Defense of such Third Party Claim, at the expense of the
Indemnifying Party. To elect to conduct such Defense, the Indemnifying Party
must give written notice of such election to the Claiming Party within 10 days
(or within the shorter period, if any, during which a Defense must be commenced
for the preservation of rights) after the Claiming Party gives the corresponding
Initial Claim Notice to the Indemnifying Party.
          (2) Conduct of Defense, Participation and Settlement. If the
Indemnifying Party conducts the Defense of such Third Party Claim, then (A) the
Claiming Party may participate (including by retaining separate counsel), at its
own expense, in such Defense (including any Proceeding regarding such Third
Party Claim) and will have the right to receive copies of all notices, pleadings
or other similar submissions regarding such Defense, (B) each Party will keep
each other Party reasonably informed of all matters material to such Defense and
Third Party Claim at all stages thereof, (C) the Claiming Party will not (and
will cause its Other Indemnified Persons not to) admit Liability or other
obligation with respect to, or compromise or settle, such Third Party Claim
without the Indemnifying Party’s prior written consent (which consent will not
be unreasonably withheld) and (D) the Indemnifying Party will not compromise or
settle such Third Party Claim, without the consent of the Claiming Party (which
consent will not be unreasonably withheld), if such compromise or settlement
(x) involves any material limitation on any future operations of the Claiming
Party (or any of its Other Indemnified Persons), (y) affects in a manner
materially adverse to the Claiming Party (or any of its Other Indemnified
Persons) any other existing Third Party Claim or (z) does not release the
Claiming Party (and any applicable Other Indemnified Person) from all
Liabilities and other obligations regarding such Third Party Claim, other than
any Liability or other obligation being satisfied by the Indemnifying Party
hereunder.
          (3) Indemnifying Party Does Not Conduct Defense. If the Indemnifying
Party does not elect to conduct the Defense of such Third Party Claim, then the
Claiming Party may conduct the Defense of such Third Party Claim in any manner
that the Claiming Party reasonably deems appropriate, at the expense of the
Indemnifying Party, which expenses shall be reasonable and documented (subject
to the other

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limitations of this Article 8), and the Claiming Party will have the right to
compromise or settle such Third Party Claim after receiving the consent of the
Indemnifying Party (which consent will not be unreasonably withheld).
     8.6 Reduction for Insurance, Taxes and Other Offsets.
          (a) The obligations of each Indemnifying Party hereunder regarding any
Loss will be reduced, including retroactively, by the amount of any insurance
proceeds, benefit regarding Taxes (a “Tax Benefit”) or other amount or benefit
received, directly or indirectly, by the Claiming Party (or any of its Other
Indemnified Persons) regarding such Loss. Without limiting the generality of the
foregoing, if (1) the Claiming Party (or such Other Indemnified Person) receives
from or on behalf of an Indemnifying Party, or an Indemnifying Party pays on
behalf of the Claiming Party (or such Other Indemnified Person), a payment
regarding a Loss and (2) the Claiming Party (or such Other Indemnified Person)
subsequently receives, directly or indirectly, any insurance proceeds, Tax
Benefit or other amount or benefit regarding such Loss, then such Claiming Party
(for itself or on behalf of such Other Indemnified Person, as applicable) will
promptly pay to the Indemnifying Party the amount of such insurance proceeds,
Tax Benefit or other amount or benefit, or, if less, the amount of such payment.
The amount of such insurance proceeds, Tax Benefit or other amount or benefit
received will be net of any costs and expenses incurred or that would be
incurred by the Claiming Party (or such Other Indemnified Person) in procuring
the same.
          (b) In computing the amount of any such Tax Benefit, the Claiming
Party (or such Other Indemnified Person) will be deemed to have received only
the Tax Benefit actually realized by the Claiming Party (or such Other
Indemnified Person) as a result of the Tax items arising from the incurrence or
payment of any indemnified Losses.
     8.7 Subrogation. Each Party hereby waives (and agrees to cause its
applicable Other Indemnified Persons to waive), to the extent permitted under
its (and their) insurance policies, any subrogation rights that its (or their)
insurer may have against the Indemnifying Party with respect to any Loss. If an
Indemnifying Party makes an indemnification payment to a Claiming Party (or to
any of its Other Indemnified Persons) with respect to any Loss, then such
Indemnifying Party will be subrogated, to the extent of such payment, to all
related rights and remedies of such Claiming Party (or, if applicable, of such
Other Indemnified Person) under any insurance policy or otherwise against or
with respect to such Loss, except with respect to amounts not yet recovered by
such Claiming Party (or such Other Indemnified Person) under any such insurance
policy or otherwise that already have been netted against such Loss for purposes
of determining the indemnifiable amount of such Loss. Promptly following such
Indemnifying Party’s request, such Claiming Party will (and such Claiming Party
will cause each such Other Indemnified Person to) take all reasonably necessary,
proper or desirable actions (including the execution and delivery of any
document reasonably requested) to accomplish the foregoing.
     8.8 Effect of Purchase Price Adjustment. Any Loss for which a Party would
otherwise be obligated to provide indemnification hereunder will be offset to
the extent (but only to the extent) such Loss is reflected in the adjustments to
the Purchase Price under Article 2.

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     8.9 Indemnification Adjusts Purchase Price for Tax Purposes. Each Party
will, including retroactively, treat indemnification payments under this
Agreement as adjustments to the Purchase Price for Tax purposes to the extent
permitted under Applicable Law.
     8.10 Effect of Officer’s Certificates. For the avoidance of doubt, any
written certification by a Person (or any officer thereof) of the accuracy of
any representation or warranty in this Agreement (or of the accuracy, occurrence
or non-occurrence of any other matter), including any certification contemplated
in Section 7.1 or 7.2, will be deemed to constitute the making or re-making of
such representation or warranty by such Person (or a representation or warranty
hereunder regarding such other matter) at the time of such certification in the
manner and to the extent stated in such certification, including for purposes of
Section 8.2(a)(i) and 8.2(b)(i). Any written certification by such an officer is
made in such capacity, and no Person will have any recourse against such officer
in any personal capacity in connection therewith, other than for fraud (of which
intent is an element).
ARTICLE 9
CERTAIN GENERAL TERMS AND OTHER AGREEMENTS
     9.1 Notices. All notices or other communications required or permitted to
be given hereunder will be in writing and will be (a) delivered by hand,
(b) sent by United States registered or certified mail or (c) sent by nationally
recognized overnight delivery service for next Business Day delivery, in each
case as stated below in this Section. Such notices or communications will be
deemed given (1) if so delivered by hand, when so delivered, (2) if sent by such
mail, three Business Days after mailing, or (3) if sent by such nationally
recognized overnight courier service, one Business Day after delivery to such
service. A Party may change the address to which such notices and other
communications are to be given by giving the other Party notice in the foregoing
manner.

         
(A)
  If to any Seller, to:   with a copy to:
 
       
 
  Wilsons The Leather Experts Inc.   Faegre & Benson LLP
 
  7401 Boone Ave. N.   2200 Wells Fargo Center
 
  Brooklyn Park, Minnesota 55428   90 S. 7th Street
 
  Attn: Chief Financial Officer   Minneapolis, Minnesota 55402
 
      Attn: Philip S. Garon, Esq.
 
               Chris E. Hofstad, Esq.
 
       
(B)
  If to Buyer, to:   with a copy to:
 
       
 
  G-III Apparel Group, Ltd.   Fulbright & Jaworski, L.L.P.
 
  512 Seventh Avenue   666 Fifth Avenue
 
  New York, New York 10018   New York, New York 10103
 
  Attn: Wayne S. Miller   Attn: Neil Gold, Esq.

     9.2 Expenses. Except as is expressly stated otherwise herein, each Party
will bear its own costs and expenses incurred in connection with the
transactions contemplated herein.

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     9.3 Interpretation; Construction. In this Agreement:
          (a) the table of contents and headings are for convenience of
reference only and will not affect the meaning or interpretation of this
Agreement;
          (b) the words “herein,” “hereunder,” “hereby” and similar words refer
to this Agreement as a whole (and not to the particular sentence, paragraph or
Section where they appear);
          (c) terms used in the plural include the singular, and vice versa,
unless the context clearly requires otherwise;
          (d) unless expressly stated herein to the contrary, reference to any
document means such document as amended or modified and as in effect from time
to time in accordance with the terms thereof;
          (e) unless expressly stated herein to the contrary, reference to any
Applicable Law means such Applicable Law as amended, modified, codified,
replaced or reenacted, in whole or in part, and as in effect from time to time,
including any rule or regulation promulgated thereunder;
          (f) the words “including,” “include” and variations thereof are deemed
to be followed by the words “without limitation”;
          (g) “or” is used in the sense of “and/or”; and “any” is used in the
sense of “any or all”;
          (h) unless expressly stated herein to the contrary, reference to a
document, including this Agreement, will be deemed to also refer to each annex,
addendum, exhibit, schedule or other attachment thereto;
          (i) unless expressly stated herein to the contrary, reference to an
Article, Section or Exhibit is to an article, section or exhibit, respectively,
of this Agreement;
          (j) all dollar amounts are expressed in United States dollars and will
be paid in cash (unless expressly stated herein to the contrary) in United
States currency;
          (k) when calculating a period of time, the day that is the initial
reference day in calculating such period will be excluded and, if the last day
of such period is not a Business Day, such period will end on the next day that
is a Business Day;
          (l) with respect to all dates and time periods in or referred to in
this Agreement, time is of the essence;
          (m) the phrase “the date hereof” means the date of this Agreement, as
stated in the first paragraph hereof; and
          (n) the Parties participated jointly in the negotiation and drafting
of this Agreement and the documents relating hereto, and each Party was
represented by legal counsel

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in connection with this Agreement and such other documents and each Party and
each Party’s counsel has reviewed and revised (or had ample opportunity to
review and revise) this Agreement and such other documents; therefore, if an
ambiguity or question of intent or interpretation arises, then this Agreement
and such other documents will be construed as if drafted jointly by the Parties
and no presumption or burden of proof will arise favoring or disfavoring any
Party by virtue of the authorship of any of the terms hereof or thereof.
     9.4 Parties in Interest; No Third-Party Beneficiaries. Nothing in this
Agreement (whether express or implied, including Section 5.5) will or is
intended to confer any right or remedy under or by reason of this Agreement on
any Person (including any Other Indemnified Person or any employee), except each
Party and their respective permitted successors and assigns.
     9.5 Governing Law. This Agreement will be construed and enforced in
accordance with the substantive laws of the State of New York without reference
to principles of conflicts of law.
     9.6 Jurisdiction, Venue and Waiver of Jury Trial. EACH PARTY HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL
COURT SITTING IN MINNEAPOLIS, MINNESOTA, OR NEW YORK, NEW YORK, IN ANY
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY ANCILLARY
DOCUMENT AND TO THE RESPECTIVE COURT TO WHICH AN APPEAL OF THE DECISIONS OF ANY
SUCH COURT MAY BE TAKEN. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
THEREIN OF SUCH A PROCEEDING. EACH PARTY HEREBY AGREES THAT A FINAL JUDGMENT IN
ANY SUCH PROCEEDING WILL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY JURISDICTION
BY SUIT ON THE JUDGMENT OR BY ANY OTHER MANNER PROVIDED BY APPLICABLE LAW. EACH
PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN ANY SUCH
PROCEEDING.
     9.7 Entire Agreement; Amendment; Waiver. This Agreement, including the
Disclosure Schedule, constitutes the entire Agreement among the Parties
pertaining to the subject matter herein and supersedes any prior
representations, warranties, covenants, agreements and understandings of any of
the Parties regarding such subject matter. No supplement, modification or
amendment hereof will be binding unless expressed as such and executed in
writing by each Party (except as contemplated in Section 9.9). No waiver of any
term hereof will be binding unless expressed as such in a document executed by
the Party making such waiver. No waiver of any term hereof will be a waiver of
any other term hereof, whether or not similar, nor will any such waiver be a
continuing waiver beyond its stated terms. Failure to enforce strict compliance
with any term hereof will not be a waiver of, or estoppel with respect to, any
existing or subsequent failure to comply.
     9.8 Assignment; Binding Effect. Neither this Agreement nor any right or
obligation hereunder will be assigned, delegated or otherwise transferred by any
Party without the prior written consent of each other Party (which consent will
not be unreasonably withheld), except that each Party will have the right to
assign or otherwise transfer this Agreement or any right hereunder or delegate
any obligation hereunder to: (a) a Person that does all of the following:

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(1) acquires or otherwise succeeds to all or substantially all of such Party’s
business and assets; (2) assumes all of such Party’s obligations hereunder; and
(3) agrees to perform or cause performance of all such assumed obligations when
due; (b) any of its Affiliates; or (c) any source of financing for such Party or
any of its Affiliates; provided that no such assignment, delegation or transfer
under clause (a), (b) or (c) above will relieve the assigning, delegating or
transferring Party of any obligation hereunder. This Agreement will be binding
on and inure to the benefit of the respective permitted successors and assigns
of the Parties. Any purported assignment, delegation or other transfer not
permitted by this Section is void.
     9.9 Severability; Blue-Pencil. The terms of this Agreement will, where
possible, be interpreted and enforced so as to sustain their legality and
enforceability, read as if they cover only the specific situation to which they
are being applied and enforced to the fullest extent permissible under
Applicable Law. If any term of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced,
then all other terms of this Agreement will nevertheless remain in full force
and effect, and such term automatically will be amended so that it is valid,
legal and enforceable to the maximum extent permitted by Applicable Law, but as
close to the Parties’ original intent as is permissible.
     9.10 Counterparts. This Agreement may be executed in counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.
     9.11 Disclosure Schedules. Each matter disclosed in any section of the
Disclosure Schedule, representation or warranty in a manner that makes its
relevance to one or more other sections of the Disclosure Schedule,
representations or warranties reasonably apparent on the face of such disclosure
will be deemed to have been appropriately included in each such other section of
the Disclosure Schedule, representation or warranty (notwithstanding the
presence or absence of any reference in or to any section of the Disclosure
Schedule, representation or warranty).
ARTICLE 10
CERTAIN DEFINITIONS
     “Acquired Assets” is defined in Section 1.1(a).
     “Affiliate” means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such Person. For purposes of this
definition, “control,” “controlled by” and “under common control with,” as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by Contract or
otherwise. Notwithstanding the foregoing, no shareholder of Parent is an
Affiliate of any Seller.
     “Agreement” is defined in the first paragraph of this Agreement.
     “Ancillary Document” means, with respect to a Person, any document executed
and delivered by or on behalf of such Person or any Affiliate of such Person, in
connection with the execution and delivery of this Agreement or Closing,
pursuant to the terms of this Agreement (but not including this Agreement).

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     “Applicable Law” means any applicable provision of any constitution,
treaty, statute, law (including the common law), rule, regulation, ordinance,
code or order enacted, adopted, issued or promulgated by any Governmental
Authority.
     “Arbitrator” is defined in Section 2.4(c).
     “Assignments of Leases” is defined in Section 6.2(g).
     “Assumed Contract” is defined in Section 1.1(a)(1).
     “Assumed Liabilities” is defined in Section 1.1(c).
     “Bill of Sale” is defined in Section 6.2(a).
     “Business Day” means any day, other than a Saturday or Sunday and other
than a day that banks in the State of New York are generally authorized or
required by Applicable Law to be closed.
     “Buyer” is defined in the first paragraph of this Agreement.
     “Buyer DC Plan” is defined in Section 5.5(h).
     “Cap” is defined in Section 8.3(b).
     “Claiming Party” is defined in Section 8.5(a).
     “Closing” is defined in Section 6.1.
     “Closing Date” is defined in Section 6.1.
     “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985.
     “Code” means the Internal Revenue Code of 1986, as amended.
     “Collected Amount” is defined in Section 5.27(a).
     “Collection Period” is defined in Section 5.27(a).
     “Confidentiality Agreement” is defined in Section 5.4(a).
     “Consent” is defined in Section 3.5(b).
     “Contract” means any contract, agreement, purchase order, warranty or
guarantee, license, use agreement, lease (whether for real estate, a capital
lease, an operating lease or other), sublease, instrument or note, in each case
that creates a legally binding obligation, and in each case whether oral or
written, and all amendments, supplements and modifications thereof.
     “Critical Representation” is defined in Section 8.3(e).
     “Cut-Off Date” is defined in Section 6.1.

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     “Deductible” is defined in Section 8.3(a).
     “Defense” means legal defense (which may include related counterclaims)
reasonably conducted by reputable legal counsel of good standing selected with
the consent of the Claiming Party (which consent will not be unreasonably
withheld).
     “Disclosure Schedule” means the disclosure schedule delivered and made a
part of this Agreement on the date hereof.
     “Domain Name Assignment” is defined in Section 6.2(b).
     “Effective Time” is defined in Section 6.1.
     “Eligible Employee” is defined in Section 5.5(a)(1).
     “Encumbrance” means any mortgage, pledge, security interest, charge, lien,
lease, license, occupancy, option or other right to purchase, easement,
restriction or reservation or any other encumbrance whatsoever.
     “Enforceability Limitation” means any applicable bankruptcy,
reorganization, insolvency, moratorium or other similar Applicable Law affecting
creditors’ rights generally and principles governing the availability of
equitable remedies.
     “Environmental Claim” means any written notice by a Governmental Authority
alleging potential Liability or other obligation (including potential Liability
or other obligation for investigatory cost, cleanup cost, governmental response
cost, natural resources damage, property damage, personal injury or penalty)
arising out of, relating to or resulting from (a) the presence, or release into
the environment, of any material or form of energy at any location, whether or
not owned by any Seller or (b)  any violation, or alleged violation, of any
Environmental Law.
     “Environmental Law” means any applicable federal, state or local law or
other legal requirement relating to pollution or protection of the environment,
including any law relating to any emission, discharge, release or possible
release of any pollutant, contaminant, hazardous or toxic material, substance or
waste into air, surface water, groundwater or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of any pollutant, contaminant or hazardous or toxic
material, substance or waste.
     “ERISA” means the Employee Retirement Income Security Act of 1974.
     “ERISA Affiliate” means any (if any) corporation, trade or business
(whether or not incorporated) that is under common control with any Seller
pursuant to section 414(b) or (c) of the Code.
     “Estimated Purchase Price” is defined in Section 2.2.
     “Excluded Assets” is defined in Section 1.1(b).
     “Excluded Contract” is defined in Section 1.1(b)(1).

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     “Final Transferred Inventory” is defined in Section 2.4(a).
     “Final Register Cash” is defined in Section 2.4(a).
     “Financial Information” is defined in Section 3.6(a).
     “Financial Information Date” is defined in Section 3.6(a).
     “Forward-Looking Statements” is defined in Section 4.6.
     “GAAP” means generally accepted United States accounting principles as have
been consistently applied by Sellers.
     “G-III” is defined in Section 3.27.
     “Gift Card Holdback Amount” is defined in Section 2.3.
     “Gift Card Item” is defined in Section 5.18(a).
     “Gift Card Statement” is defined in Section 5.18(a).
     “Governmental Authority” means any: (a) nation, state, county, city,
district or other similar jurisdiction of any nature; (b) federal, state, local
or foreign government; (c) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, commission, bureau,
instrumentality, department, official, entity, court or tribunal);
(d) multi-national organization or body; or (e) body or other Person directed by
Applicable Law to exercise any arbitrative, administrative, executive, judicial,
legislative, police, regulatory or Taxing authority or power.
     “Hazardous Substance” means any pollutant, contaminant, hazardous
substance, hazardous waste or petroleum or fraction thereof, and any other
chemical, waste, substance or material regulated by any Environmental Law.
     “Improvements” is defined in Section 3.14.
     “Indemnifying Party” is defined in Section 8.5(a).
     “Initial Claim Notice” is defined in Section 8.5(a).
     “Initial Purchase Price” is defined in Section 2.1.
     “Intellectual Property” means any trademark, service mark, trade name,
trade dress, goodwill, patent, copyright, design, logo, formula, invention
(whether or not patentable or reduced to practice), concept, domain name,
website, trade secret, know-how, confidential information, mask work, product
right, software, technology or other intangible asset of any nature, whether in
use, under development or design or inactive (including any registration,
application or renewal regarding any of the foregoing).
     “Intercompany Service” means any service provided or received by any Seller
or any of its Affiliates to or from any Seller or any of its Affiliates that are
consistent with the types of

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services customarily provided or received between a company and its Affiliates,
including human resources, Tax, accounting, legal, risk management and similar
administrative services.
     “IRS” means the United States’ Internal Revenue Service.
     “JDA” is defined in Section 5.22.
     “Knowledge” has the following meaning: (a) an individual will have
“Knowledge” of a particular fact or other matter if such individual is actually
consciously aware of such fact or matter; and (b) a Person, other than an
individual, will have “Knowledge” of a particular fact or other matter if any
individual who is serving as a director or officer (or similar executive) of
such Person currently has Knowledge, as stated in clause (a) above, of such fact
or other matter.
     “Landlord Payment Schedule” is defined in Section 2.3.
     “Landlord Retention Amount” is defined in Section 2.3.
     “Leased Real Property” is defined in Section 3.14.
     “Lender Release” is defined in Section 7.1(a).
     “Liability” means any existing liability or obligation of any nature,
whether accrued, absolute, contingent, direct or indirect, perfected, inchoate,
unliquidated or otherwise (including any obligation under any Contract).
     “License Period” is defined in Section 5.11(c)(1).
     “Licensed Software” is defined in Section 5.23.
     “Licensed Software Improvements” is defined in Section 5.23.
     “Loss” and “Losses” are defined in Section 8.2(a).
     “Major Contract” is defined in Section 3.10(a).
     “Mark” is defined in Section 5.11(c)(2).
     “Material Adverse Effect” means any event or condition that, individually
or in the aggregate, has had or is reasonably likely to have a materially
adverse effect on the Outlet Business, taken as a whole, or the ability of the
Sellers to perform their obligations under this Agreement, except that none of
the following will be deemed to constitute, and none of the following will be
taken into account in determining the occurrence (or possible occurrence) of a
Material Adverse Effect: (a) the reaction (including subsequent actions) of any
Person not a Party to any transaction contemplated herein; (b) any event or
condition generally affecting any of the industries in which Sellers operate,
the United States economy as a whole or any foreign economy in any location that
materially affects the Outlet Business, provided that such events or conditions
in this clause do not have a materially disproportionate effect on the Outlet
Business (relative to other participants in the Sellers’ industry); (c) any
national or international political or social event or condition, including the
engagement by the United States in hostilities, whether

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or not pursuant to the declaration of a national emergency or war, or the
occurrence of any military or terrorist attack upon the United States or any of
its territories, possessions or diplomatic or consular offices or upon any
military installation, equipment or personnel of the United States, provided
that such events or conditions in this clause do not have a materially
disproportionate effect on the Outlet Business (relative to other participants
in the Sellers’ industry); (d) any financial, banking or securities market
(including any disruption thereof or any decline in the price of any security or
any market index); or (e) any compliance with any term of, or the taking of any
action required by, this Agreement.
     “Multiemployer Plan” has the meaning given in section 3(37) of ERISA.
     “Non-Prevailing Party” is defined in Section 2.4(d).
     “Notice of Disagreement” is defined in Section 2.4(b).
     “On-Hand Inventory” is defined in Section 3.11(c).
     “Order” means any order, writ, injunction, decree, judgment, award or
determination, whether or not exclusive to the applicable Person, of or from any
Governmental Authority.
     “Ordinary Course of Business” means any action (which includes, for this
definition, any failure to take action), condition, circumstance or status of or
regarding a Person that is: (a) consistent with the past practices of such
Person and is taken or exists in the ordinary course of the normal operations of
such Person; or (b) similar in nature and magnitude to actions customarily taken
(or not taken) without any specific authorization by the board of directors (or
by any Person or group of Persons exercising similar authority) of such Person.
     “Organizational Document” means, for any Person: (a) the articles or
certificate of incorporation, formation or organization (as applicable) and the
by-laws or similar governing document of such Person; (b) any limited liability
company agreement, partnership agreement, operating agreement, shareholder
agreement, voting agreement, voting trust agreement or similar document of or
regarding such Person; (c) any other charter or similar document adopted or
filed in connection with the incorporation, formation, organization or
governance of such Person; (d) any Contract regarding the governance of such
Person or the relations among any of its equity holders with respect to such
Person; or (e) any amendment to any of the foregoing.
     “Other Indemnified Person” means, for any Person, such Person’s Affiliates
and each of such Person’s and each of such Affiliate’s stockholders, officers,
directors, partners, members, governors, managers, employees, agents and
successors and assigns.
     “Outlet Business” means Sellers’ business of selling leather outerwear,
accessories and apparel through the outlet stores listed in Exhibit 10 which, as
used in this Agreement, includes Sellers’ e-commerce business for the sale of
leather outerwear, accessories and apparel.
     “Outlet Store” means an outlet store listed on Exhibit 10.
     “Parent” is defined in the first paragraph of this Agreement.
     “Party” means any Seller or Buyer.

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     “Permit” means any license or permit from a Governmental Authority.
     “Permitted Acquired Business” is defined in Section 5.8(b)(1).
     “Permitted Encumbrance” means any: (a) Encumbrance listed in the Disclosure
Schedule or reflected or disclosed in any of the Financial Information;
(b) Encumbrance for any Tax, assessment or other governmental charge that is not
yet due and payable or that may thereafter be paid without interest or penalty;
(c) Encumbrance arising under any original purchase price conditional sales
contract or equipment lease; (d) easement, covenant, condition or restriction of
public record identified in the Disclosure Schedule; (e) pledge or deposit to
secure any obligation under any workers or unemployment compensation law or to
secure any other public or statutory obligation; (f) mechanic’s, materialmen’s,
landlord’s, carrier’s, supplier’s or vendor’s lien or similar Encumbrance
arising or incurred in the Ordinary Course of Business of the applicable Person
that secures any amount that is not overdue for a period of more than 90 days;
or (g) other imperfection of title or license or other Encumbrance, if any, that
does not materially impair the use or operation of any asset to which it relates
in the conduct of the business of the applicable Person as presently conducted.
     “Permitted Investment” is defined in Section 5.8(b)(1).
     “Person” means any individual, partnership, corporation, limited liability
company, association, joint stock company, trust, joint venture, unincorporated
organization or any other business entity or association or any Government
Authority.
     “Plan” means an “employee benefit plan” (as such term is defined in section
3(3) of ERISA) and any employment, severance, retention, change in control,
incentive (equity or otherwise), deferred compensation, vacation, holiday, sick
leave, fringe benefit, educational assistance, flexible spending or other
compensatory agreement, plan, program or arrangement that is not an “employee
benefit plan” as so defined.
     “Prepaid Item” is defined in Section 2.4(i).
     “Prevailing Party” is defined in Section 2.4(d).
     “Principally Related to the Outlet Business” means, with respect to any
item (whether tangible, intangible or mixed), event or condition, that such
item, event or condition is primarily (other than any immaterial or minor
occasional exception) used, possessed, derived or in existence with respect to
the Outlet Business, which includes certain operations at Sellers Headquarters
and Sellers Distribution Facility.
     “Proceeding” means any action, arbitration, audit, demand, hearing,
inquiry, investigation, litigation, proceeding or suit in each case (other than
arbitration) that is or is to be commenced, brought, conducted or heard by or
before, or otherwise involving, any Governmental Authority.
     “Prohibited Transaction” has the meaning given in section 406 of ERISA and
4975 of the Code.
     “Projections” is defined in Section 3.25.

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     “Purchase Price” is defined in Section 2.1.
     “Real Property Lease” is defined in Section 3.14.
     “Real Property Lease Tax” means any ad valorem Tax regarding real estate
that is a direct or indirect obligation pursuant to the terms of a Real Property
Lease.
     “Reconciliation” is defined in Section 5.27(a).
     “Register Cash” is defined in Section 1.1(a)(5).
     “Reimbursable Amount” is defined in Section 5.18(a).
     “Restricted Area” is defined in Section 5.8(a)(1)(B).
     “Restricted Business” is defined in Section 5.8(a)(1)(A).
     “SEC” means the Securities and Exchange Commission.
     “Seller” is defined in the first paragraph of this Agreement.
     “Seller Collateral” is defined in Section 5.14.
     “Seller Plan” means a Plan that is made or maintained with or for the
benefit of or otherwise covers one, or more than one, individual who may become
a Transferred Employee (or any beneficiary or dependent of any such individual).
     “Sellers Distribution Facility” means the distribution facility of Parent
and its Affiliates located at 7401 Boone Ave. N., Brooklyn Park, Minnesota.
     “Sellers Headquarters” means the headquarters and office facility of Parent
and its Affiliates located at 7401 Boone Ave. N., Brooklyn Park, Minnesota.
     “Settlement Payment Amount” is defined in Section 5.30.
     “Special Representation” is defined in Section 8.3(e).
     “Statement” is defined in Section 2.4(a).
     “Subject Landlords” is defined in Section 5.30.
     “Sublease Agreement” is defined in Section 6.2(k).
     “Subsidiary” means, with respect to any Person, any other Person of which
at least a majority of the securities or other interests, having by their terms
ordinary voting power to elect a majority of the board of directors of such
other Person (or others performing similar functions with respect to such other
Person), is directly or indirectly owned or controlled by such first Person or
by any one or more of such first Person’s Subsidiaries.
     “Target Transferred Inventory” is defined in Section 2.4(g).

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     “Tax” means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under section 59A of the Code),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, fine,
penalty or similar addition thereto, whether disputed or not and including any
obligation to indemnify or otherwise assume or succeed to the Tax liability of
any other Person.
     “Tax Benefit” is defined in Section 8.6(a).
     “Tax Return” means any return, declaration, report, filing, claim for
refund or information return or statement relating to any Tax, including any
schedule or attachment thereto and including any amendment thereof.
     “Third Party Claim” is defined in Section 8.5(a).
     “Threatened” means, with respect to any matter, that a demand, notice or
statement has been made or given, in writing or otherwise, that states that such
matter is being or will be asserted, commenced, taken or otherwise pursued.
     “Total Reimbursable Amount” is defined in Section 5.18(a).
     “Trademark Assignment” is defined in Section 6.2(b).
     “Transaction Confidentiality Agreement” is defined in Section 5.16.
     “Transfer Tax” is defined in Section 5.7.
     “Transferred Employee” is defined in Section 5.5(a)(2).
     “Transferred Employee Leave Obligation” is defined in Section 1.1(c)(2).
     “Transferred Inventory” is defined in Section 2.4(h).
     “Transition Period” is defined in Section 5.5(h).
     “Transition Services Agreement” is defined in Section 5.12.
     “Undelivered Inventory” is defined in Section 1.1(a)(3).
     “Vendor Loss Holdback Amount” is defined in Section 2.3.
     “Vendor Loss Statement” is defined in Section 5.26(a).
     “Vendor Losses” is defined in Section 5.26(a).

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     “WARN Act” means the Worker Adjustment and Retraining Notification Act of
1988.
* * * * *
[Signature Pages Follow]

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     IN WITNESS WHEREOF, each Party has executed this Asset Purchase Agreement
effective as of the date first written above.

                 
 
                Wilsons The Leather Experts Inc.       AM Retail Group, Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Michael Brady
 
               
Name:
  Stacy A. Kruse       Name:   Michael Brady
Title:
  Chief Financial Officer and Treasurer       Title:   Vice President and
Controller
 
                Rosedale Wilsons, Inc.       Wilsons Leather of Delaware Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
                River Hills Wilsons, Inc.       Wilsons Leather of Florida Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
                Wilsons Leather Direct Inc.       Wilsons Leather of Georgia
Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
                Wilsons Leather of Alabama Inc.       Wilsons Leather of Indiana
Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
               

[Signature Page to Asset Purchase Agreement]

 

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                  Wilsons Leather of Connecticut Inc.       Wilsons Leather of
Iowa Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
                Wilsons Leather of Louisiana Inc.       Wilsons Leather of New
Jersey Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
                Wilsons Leather of Maryland Inc.       Wilsons Leather of New
York Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
                Wilsons Leather of Massachusetts Inc.       Wilsons Leather of
North Carolina Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
                Wilsons Leather of Michigan Inc.       Wilsons Leather of Ohio
Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
               

[Signature Page to Asset Purchase Agreement]

 

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                  Wilsons Leather of Mississippi Inc.       Wilsons Leather of
Pennsylvania Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
                Wilsons Leather of Missouri Inc.       Wilsons Leather of South
Carolina Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
                Wilsons Leather of Tennessee Inc.       Wilsons Leather of
Wisconsin Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
                Wilsons Leather of Texas Inc.       Wilsons Leather of Virginia
Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
                Wilsons Leather Holdings Inc.       Bermans The Leather Experts
Inc.
 
               
By:
  /s/ Stacy Kruse       By:   /s/ Stacy Kruse
 
               
Name:
  Stacy A. Kruse       Name:   Stacy A. Kruse
Title:
  Chief Financial Officer and Treasurer       Title:   Chief Financial Officer
and Treasurer
 
               

[Signature Page to Asset Purchase Agreement]