EXHIBIT 10.1

 

 

 

ASSET PURCHASE AGREEMENT

by and among

THE WET SEAL, INC.,

THE OTHER SELLERS NAMED HEREIN,

and

MADOR LENDING, LLC

March 12, 2015

 

 

 

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TABLE OF CONTENTS

 

          Page   Article I Definitions      1    Article II Purchase and Sale   
  14   

Section 2.1

   Purchase and Sale of Acquired Assets      14   

Section 2.2

   Excluded Assets      17   

Section 2.3

   Assumption of Assumed Liabilities      17   

Section 2.4

   Excluded Liabilities      17   

Section 2.5

   Consideration      19   

Section 2.6

   Assumption and Assignment of Contracts      19   

Section 2.7

   Closing      23   

Section 2.8

   Deliveries at Closing      23   

Section 2.9

   Allocation      24   

Section 2.10

   Non-Continuing Stores, Designated Stores and Continuing Stores      25   

Section 2.11

   Deposit      27    Article III Sellers’ Representations and Warranties     
28   

Section 3.1

   Organization of Sellers; Good Standing      28   

Section 3.2

   Authorization of Transaction      28   

Section 3.3

   Noncontravention; Consents and Approvals      29   

Section 3.4

   Financial Statements; No Undisclosed Liabilities      30   

Section 3.5

   Compliance with Laws      30   

Section 3.6

   Title to Acquired Assets      30   

Section 3.7

   Contracts      31   

Section 3.8

   Intellectual Property      32   

Section 3.9

   Litigation      33   

Section 3.10

   Environmental, Health and Safety Matters      33   

Section 3.11

   Employees and Employment Matters      34   

Section 3.12

   Employee Benefit Plans      34   

Section 3.13

   Real Property      35   

Section 3.14

   Permits      35   

Section 3.15

   Insurance      36   

Section 3.16

   Brokers’ Fees      36   

Section 3.17

   No Other Representations or Warranties      36    Article IV Buyer’s
Representations and Warranties      37   

Section 4.1

   Organization of Buyer      37   

Section 4.2

   Authorization of Transaction      37   

Section 4.3

   Noncontravention      37   

Section 4.4

   Financial Capacity      38   

Section 4.5

   Adequate Assurances Regarding Executory Contracts      38   

Section 4.6

   Good Faith Purchaser      38   

Section 4.7

   Brokers’ Fees      38   

Section 4.8

   Condition of Business      38   

 

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Article V Pre-Closing Covenants   39   

Section 5.1

Certain Efforts; Cooperation   39   

Section 5.2

Notices and Consents   40   

Section 5.3

Bankruptcy Actions   41   

Section 5.4

Conduct of Business   42   

Section 5.5

Notice of Developments   44   

Section 5.6

Access   44   

Section 5.7

Press Releases and Public Announcements   45   

Section 5.8

Bulk Transfer Laws   45   

Section 5.9

Suppliers   45   

Section 5.10

No Competing Transactions   45   

Section 5.11

Delivery of Disclosure Schedule   46    Article VI Other Covenants   46   

Section 6.1

Cooperation   46   

Section 6.2

Further Assurances   46   

Section 6.3

Availability of Business Records   46   

Section 6.4

Employee Matters   47   

Section 6.5

Recording of Intellectual Property Assignments   49   

Section 6.6

Transfer Taxes   49   

Section 6.7

Wage Reporting   49   

Section 6.8

Acknowledgements   49   

Section 6.9

Certain Avoidance Actions   49   

Section 6.10

Insurance Policies   50   

Section 6.11

Collection of Accounts Receivable   50   

Section 6.12

Name Changes   51   

Section 6.13

Treatment of Certain Claims; Plan   51    Article VII Conditions to Closing   51
  

Section 7.1

Conditions to Buyer’s Obligations   51   

Section 7.2

Conditions to Sellers’ Obligations   52   

Section 7.3

No Frustration of Closing Conditions   53    Article VIII Termination   53   

Section 8.1

Termination of Agreement   53   

Section 8.2

Procedure Upon Termination   54   

Section 8.3

Effect of Termination   54   

Section 8.4

Deposit   55    Article IX Miscellaneous   55   

Section 9.1

Expenses   55   

Section 9.2

Entire Agreement   55   

Section 9.3

Incorporation of Schedules, Exhibits and Disclosure Schedule   55   

Section 9.4

Amendments and Waivers   56   

Section 9.5

Succession and Assignment   56   

Section 9.6

Notices   56   

Section 9.7

Governing Law; Jurisdiction   57   

 

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Section 9.8

Consent to Service of Process   57   

Section 9.9

WAIVERS OF JURY TRIAL   57   

Section 9.10

Specific Performance   58   

Section 9.11

Severability   58   

Section 9.12

No Third Party Beneficiaries   58   

Section 9.13

No Survival of Representations, Warranties and Agreements   58   

Section 9.14

Construction   58   

Section 9.15

Computation of Time   59   

Section 9.16

Mutual Drafting   59   

Section 9.17

Disclosure Schedule   59   

Section 9.18

Headings; Table of Contents   60   

Section 9.19

Counterparts; Facsimile and Email Signatures   60   

Section 9.20

Time of Essence   60   

Section 9.21

General Releases   60   

 

Exhibit A

- Form of Sale Order Exhibit B - Form of Bill of Sale Exhibit C - Form of
Assignment and Assumption Agreement Exhibit D - Form of Trademark Assignment
Agreement Exhibit E - Form of Copyright Assignment Agreement Exhibit F - Form of
Domain Name Assignment Agreement Appendix A - Cash Budget Appendix B - Letter
Agreement Schedule 2.3 - Certain Assumed Liabilities

Disclosure Schedule

 

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ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into as of
March 12, 2015, by and among The Wet Seal, Inc., a Delaware corporation (“WSI”),
The Wet Seal Retail, Inc., a Delaware corporation (“WSR”), Wet Seal Catalog,
Inc., a Delaware corporation (“WSC”), and Wet Seal GC, LLC, a Virginia limited
liability company (“WSGC,” and together with WSI, WSR and WSC, “Sellers,” and
each individually, a “Seller”), and Mador Lending, LLC, a Delaware limited
liability company (together with its permitted successors, designees and
assigns, “Buyer”). Sellers and Buyer are referred to collectively herein as the
“Parties.” Capitalized terms used but not otherwise defined herein shall have
the meanings assigned to them in Article I.

WHEREAS, Sellers are debtors and debtors-in-possession under title 11 of the
United States Code, 11 U.S.C. § 101 et seq. (the “Bankruptcy Code”) in jointly
administered bankruptcy cases under Chapter 11 of the Bankruptcy Code captioned
In re The Wet Seal, Inc., a Delaware corporation et al. (Case Number
15-10081(CSS)) (the “Chapter 11 Cases”) in the United States Bankruptcy Court
for the District of Delaware (the “Bankruptcy Court”);

WHEREAS, Sellers engage in the business of the retail sale of, including
developing, producing, distributing, marketing and selling, girl’s and women’s
clothing, footwear, apparel and accessories (the “Business”);

WHEREAS, (i) Sellers wish to sell, transfer and assign to Buyer, and Buyer
wishes to purchase, acquire and assume from Sellers, the Acquired Assets as of
the Closing, and (ii) Buyer wishes to assume from Sellers the Assumed
Liabilities as of the Closing, all on the terms and subject to the conditions
set forth herein and in accordance with sections 105, 363 and 365 and other
applicable provisions of title 11 of the Bankruptcy Code;

WHEREAS, Sellers have agreed to file the Sale Motion (as defined below) with the
Bankruptcy Court to implement the transactions contemplated hereby upon the
terms and subject to the conditions set forth herein; and

WHEREAS, simultaneously with the execution hereof, Versa Capital Fund III, L.P.
has entered into that certain funding commitment letter dated as of the date
hereof (“Guarantee”) in favor of Buyer pursuant to which Versa Capital Fund III,
L.P. has guaranteed, on the terms set forth therein, the obligations of Buyer
hereunder.

NOW, THEREFORE, in consideration of the mutual promises herein made, and in
consideration of the representations, warranties and covenants herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by the Parties, the Parties agree as follows:

ARTICLE I

DEFINITIONS

“Accounts Receivable” means (a) all trade accounts receivable and other rights
to payment from customers of Sellers, (b) all other accounts receivable, notes
receivable, negotiable instruments, chattel paper (including completed work
which has not yet been billed) and other

 

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receivables of Sellers, whether current or non-current (including in respect of
goods shipped, products sold, licenses granted, services rendered or otherwise
associated with the Business and all amounts that may be returned or returnable
with respect to letters of credit drawn down prior to the Closing), and (c) any
security interest, claim, remedy or other right related to any of the foregoing,
in each case, arising out of the operation of the Business prior to the Closing.

“Acquired Assets” means all of Sellers’ right, title and interest in and to all
of Sellers’ properties, assets and rights of every nature, kind and description,
tangible and intangible, whether real, personal or mixed, whether accrued,
contingent or otherwise, wherever situated or located, existing as of the
Closing, including all rights to bring claims for past, present or future
infringement of the Intellectual Property owned by Sellers; provided, however,
that, notwithstanding the foregoing or anything contained in this Agreement to
the contrary, the Acquired Assets shall not include any Excluded Assets.

“Acquired Avoidance Actions” means all causes of action, lawsuits, claims,
rights of recovery and other similar rights of any Seller, including avoidance
claims or causes of action under Chapter 5 of the Bankruptcy Code, (i) against
landlords, vendors or other counterparties who are party to any Assumed
Contract, (ii) against any Participating Vendor and/or (iii) relating in any way
to any party who was a beneficiary of a letter of credit or holding proceeds of
a letter of credit on or before the Closing Date.

“Acquisition Proposal” shall mean any inquiry, proposal or offer relating to a
Competing Transaction.

“Administrative Claim” means a Claim arising under sections 503(b), 507(a)(2),
507(b), or 1114(e)(2) of the Bankruptcy Code.

“Affiliate” when used with reference to another Person means any Person,
directly or indirectly, through one or more intermediaries, Controlling,
Controlled by, or under common Control with, such other Person.

“Agreement” has the meaning set forth in the preamble.

“Assignment and Assumption Agreement” has the meaning set forth in
Section 2.8(a)(ii).

“Assumed Contracts” means those Leases and other Contracts that have been
assigned to and assumed by Buyer pursuant to Section 2.6 and section 365 of the
Bankruptcy Code. For the avoidance of doubt, “Assumed Contracts” shall not
include any Non-Real Property Contract or Lease that is excluded and rejected
pursuant to Section 2.6.

“Assumed Liabilities” means those liabilities and obligations enumerated on
Schedule 2.3 attached hereto.

“Assumed Permits” means all Permits relating to the Business that are
transferable in accordance with their terms, but excluding all Permits to the
extent related to any Excluded Asset (including any Lease that is not an Assumed
Contract).

“Assumption Approval” has the meaning set forth in Section 2.6(g).

 

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“Audited Financial Statements” has the meaning set forth in Section 3.4(a).

“Bankruptcy Code” has the meaning set forth in the recitals.

“Bankruptcy Court” has the meaning set forth in the recitals.

“Bankruptcy Events” means, the commencement of the Chapter 11 Cases and any
events that lead up to, and typically result from, the commencement of a case
under Chapter 11 of the Bankruptcy Code.

“Bill of Sale” has the meaning set forth in Section 2.8(a)(i).

“BofA Accounts” means each of the following accounts of Sellers: (a) the Cash
Management/Indemnity Account and (b) the L/C Cash Collateral Account.

“BofA Liens” means the security interests of Bank of America in the DIP
Collateral, including the BofA Accounts.

“Break-Up Fee Payment” has the meaning set forth in Schedule 2.3.

“Business Day” means any day other than a Saturday, a Sunday or a day on which
banks located in New York, New York shall be authorized or required by Law to
close.

“Business” has the meaning set forth in the recitals.

“Buyer” has the meaning set forth in the preamble.

“Cash” means cash (including all cash located at any Continuing Store,
Designated Store or Non-Continuing Store or in Sellers’ or their designee’s bank
accounts, lock-boxes and cash in transit), cash equivalents and liquid
investments, excluding (i) any cash in the BofA Accounts or the Escrow Account
and (ii) any retainers or professional fee escrows held by the Sellers’ and/or
the estates’ professionals.

“Cash Budget” means the “Approved Budget” as defined in and under the DIP
Financing, a copy of which initial Approved Budget is attached hereto as
Appendix A.

“Cash Management/Indemnity Account” shall have the meaning set forth in that
certain Final Order Pursuant to Sections 105, 361, 362, 363 and 364 of the
Bankruptcy Code and Bankruptcy Rules 2002, 4001 and 9014: (1) Authorizing the
Post-Petition L/C Financing Facility, (2) Granting Liens and Providing
Superpriority Administrative Expense Priority, (3) Authorizing Use of Cash
Collateral and Providing for Adequate Protection and (4) Modifying the Automatic
Stay entered by the United States Bankruptcy Court for the District of Delaware.
[Docket No. 249] (the “BofA DIP Order”).

“Cash Payment” has the meaning set forth in Section 2.5(a).

“Chapter 11 Cases” has the meaning set forth in the recitals.

 

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“Claim” means a “claim” as defined in section 101(5) of the Bankruptcy Code,
whether arising before or after the Petition Date.

“Closing” has the meaning set forth in Section 2.7.

“Closing Assumed Contract List” has the meaning set forth in Section 2.6(b).

“Closing Date” has the meaning set forth in Section 2.7.

“COBRA” means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the
IRC, and any similar state Law.

“Committee” means the official committee of unsecured creditors appointed in the
Chapter 11 Cases.

“Competing Transaction” shall mean any or all of the following, other than an
Excluded Transaction: (i) a sale, transfer or other disposition of assets of any
of the Sellers (other than sales of inventory in the Ordinary Course of
Business) in a single transaction or a series of related transactions; (ii) a
sale, transfer or assignment of capital stock or other equity interests of any
of the Sellers (including by means of a merger); (iii) any Chapter 11 plan of
reorganization, any conversion of any of Sellers’ Chapter 11 Cases to a Chapter
7 bankruptcy case, or any other liquidation or equivalent event with respect to
any or all Sellers; (iv) a transaction that, directly or indirectly, competes
with, or otherwise would prohibit or frustrate, the transactions contemplated
hereby; or (v) a public announcement of a proposal, plan, intention or agreement
to do any of the foregoing.

“Confidentiality Agreement” means that certain letter agreement, dated as of
January 21, 2015, by and between Versa Capital Management, LLC and WSI,
regarding the terms and conditions on which Sellers would make available certain
information.

“Consent” means any approval, consent, ratification, permission, clearance,
designation, qualification, waiver or authorization, or an order of the
Bankruptcy Court that deems or renders unnecessary the same.

“Consumer Liabilities” means Sellers’ obligations to (a) provide merchandise
refunds and exchanges, (b) honor store or customer credits, customer prepayments
and customer loyalty programs and (c) provide customer refunds, in each case, to
customers of the Business in a manner consistent with the customer policies of
the Business.

“Continuing Store” means any of Sellers’ store locations with respect to which
the associated Leases have been designated by Buyer as Assumed Contracts, as
such store locations may be changed in accordance with Section 2.6(b) and
Section 2.10.

“Contract” means any written or oral agreement, contract, lease, sublease,
indenture, mortgage, instrument, guaranty, loan or credit agreement, note, bond,
customer order, purchase order, sales order, sales agent agreement, supply
agreement, development agreement, joint venture agreement, promotion agreement,
license agreement, contribution agreement, partnership agreement or other
arrangement, understanding, permission or commitment that, in each case, is
legally-binding.

 

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“Control” means, when used with reference to any Person, the power to direct the
management or policies of such Person, directly or indirectly, by or through
stock or other equity ownership, agency or otherwise, or pursuant to or in
connection with any Contract; and the terms “Controlling” and “Controlled” shall
have meanings correlative to the foregoing.

“Credit Bid” has the meaning set forth in Section 2.5(b).

“Credit Card Receivables” means all accounts receivable and other amounts owed
to any Seller (whether current or non-current) in connection with any customer
purchases from any Seller or stores operated thereby that are made with credit
cards or any other amounts owing (including deposits or holdbacks to secure
chargebacks, offsets or otherwise) from credit card processors to Sellers, in
each case which are not subject to offset, chargeback or other reduction.

“Cure Amounts” has the meaning set forth in Section 2.6(f).

“Cure Notice” has the meaning set forth in Section 5.3(c).

“Current Employees” means all employees of Sellers employed as of the day before
the Closing Date, whether active or not (including those on short-term
disability, leave of absence, paid or unpaid, or long-term disability).

“Data Room” means that certain Project Jumpsuit virtual data room operated by RR
Donnelly Venue, and made available to Buyer and its Representatives.

“Decree” means any judgment, decree, ruling, decision, opinion, injunction,
assessment, attachment, undertaking, award, charge, writ, executive order,
judicial order, administrative order or any other order of any Governmental
Entity.

“Deposit” has the meaning set forth in Section 2.11.

“Designated Deposit Accounts” has the meaning set forth in Section 2.10(c).

“Designated Store” means any of Sellers’ store locations with respect to which
the associated Leases have not yet been designated by Buyer as Assumed Contracts
or Excluded Contracts, as such store locations may be changed in accordance with
Section 2.6(b) and Section 2.10.

“Designated Store Proceeds” has the meaning set forth in Section 2.10(c).

“Designation Deadline” means May 15, 2015; provided, however, that Buyer may
extend such date until June 30, 2015 if Buyer funds the costs to be incurred by
the Sellers during the period following May 15, 2015 until June 30, 2015.
Notwithstanding the foregoing, the “Designation Deadline” with respect to the
Lease for the Headquarters shall be the earlier of August 13, 2015 and 90 days
after the entry of an order confirming the Plan (or such later date as may be
agreed to by Buyer, Sellers and the landlord under the Lease for the
Headquarters).

 

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“DIP Collateral” has the meaning set forth in the BofA DIP Order.

“DIP Financing” means that certain Senior Secured, Super-Priority
Debtor-in-Possession Credit Agreement, dated as of March 12, 2015, among Buyer,
as lender, The Wet Seal, Inc., as lead borrower for The Wet Seal, Inc., The Wet
Seal Retail, Inc., and Wet Seal Catalog, Inc., as borrowers and debtors in
possession, and the guarantors party thereto, as the same may have been or be
amended, modified, restated, or supplemented and in effect from time to time,
and as approved by the Bankruptcy Court.

“DIP Financing Obligations” means the “Obligations” as defined under the DIP
Financing.

“Disclosure Schedule” has the meaning set forth in Article III.

“Employee Benefit Plan” means any “employee benefit plan” (as such term is
defined in Section 3(3) of ERISA) and any other benefit or compensation plan,
program, agreement or arrangement of any kind, in each case, maintained or
contributed to by any Seller or in which any Seller participates or participated
and that provides benefits to any Current Employee or Former Employee.

“End Date” means April 15, 2015.

“Enforcing Parties” has the meaning set forth in Section 9.10(a).

“Environmental, Health and Safety Requirements” means, as enacted and in effect
on or prior to the Closing Date, all applicable Laws concerning worker health
and safety, pollution or the protection of the environment.

“ERISA” means the United States Employee Retirement Income Security Act of 1974.

“Escrow Account” has the meaning set forth in Section 2.11.

“Escrow Agent” has the meaning set forth in Section 2.11.

“Excluded Assets” means, collectively, the following assets of Sellers: (a) all
of Sellers’ and their respective Affiliates’ certificates of incorporation and
other organizational documents, qualifications to conduct business as a foreign
entity, arrangements with registered agents relating to foreign qualifications,
taxpayer and other identification numbers, seals, minute books, stock transfer
books, stock certificates and other documents relating to the organization,
maintenance and existence of any Seller or any of its Affiliates as a
corporation, limited liability company or other entity; (b) all equity
securities of any Seller and all net operating losses of any Seller (it being
understood, however, that any such net operating losses shall, to the extent
possible, be applied so as to reduce any Taxes that are Assumed Liabilities
hereunder); (c) all Leases (and related Leased Real Property) and Contracts, in
each case, other than the Assumed Contracts; (d) the Excluded Claims; (e) any
loans or notes payable to any Seller or any of its Affiliates from any employee
of any Seller or any of its Affiliates (other than Ordinary Course of Business
employee advances and other than loans or notes from any Transferred Employees);
(f) any (1) confidential personnel and medical Records pertaining to any Current
Employees or

 

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Former Employees to the extent the disclosure of such information is prohibited
by applicable Law, (2) other Records that Sellers are required by Law to retain
and (3) any Records or other documents relating to the Chapter 11 Cases that are
protected by the attorney-client privilege; provided that Buyer shall have the
right to make copies of any portions of such retained Records to the extent that
such portions relate to the Business or any Acquired Asset; (g) all Permits
other than the Assumed Permits; (h) all assets maintained pursuant to or in
connection with any Employee Benefit Plan (other than the Health Plans); and
(i) the rights of Sellers under this Agreement and all cash and non-cash
consideration payable or deliverable to Sellers under this Agreement.

“Excluded Contract” has the meaning set forth in Section 2.6(b).

“Excluded Claims” means all (a) litigation, claims and causes of action against
any former officer and/or director of any Seller who was not an officer and/or
director on the Petition Date (but not any Person who is a Transferred
Employee); (b) avoidance claims or causes of action arising under Chapter 5 of
the Bankruptcy Code (other than the Acquired Avoidance Actions); (c) all rights
of Sellers with respect to the litigation captioned In re Payment Card
Interchange Fee and Merchant Discount Antitrust Litigation, 1:05-md-01720
(E.D.N.Y), in which Sellers are plaintiffs; and (d) all rights (including rights
of set-off and rights of recoupment), refunds, claims, counterclaims, demands,
causes of action and rights to collect damages of Sellers against third parties
to the extent related to any Excluded Asset or Excluded Liability.

“Excluded Employee” has the meaning set forth in Section 6.4(b).

“Excluded Liabilities” has the meaning set forth in Section 2.4.

“Excluded Transaction” means the transaction described in this Agreement or any
other transaction with Buyer.

“Final Order” means an order, judgment, or other decree of the Bankruptcy Court
that has not been vacated, reversed, modified, amended, or stayed, and for which
the time to further appeal or seek review or rehearing has expired with no
appeal, review or rehearing having been filed or sought.

“Former Employees” means all individuals who have been employed by the Sellers
(or any of their predecessors) who are not Current Employees.

“Furnishings and Equipment” means tangible personal property (other than
Inventory and Intellectual Property), which is used or held for use in the
operation of the Business.

“GAAP” means generally accepted accounting principles in the United States as
set forth in accounting rules and standards promulgated by the Financial
Accounting Standards Board or any organization succeeding to any of its
principal functions.

“Governmental Entity” means any United States federal, state or local or
non-United States governmental or regulatory authority, agency, commission,
court, body or other governmental entity.

 

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“Guarantee” has the meaning set forth in the recitals.

“Hazardous Substance” means any substance that is listed, defined, designated or
classified as hazardous, toxic or otherwise harmful under applicable Laws or is
otherwise regulated by a Governmental Entity, including petroleum products and
byproducts, asbestos-containing material, polychlorinated biphenyls,
lead-containing products and mold.

“Headquarters” means the offices of the Business located at 26972 Burbank,
Foothill Ranch, CA 92610.

“Health Plans” means each of the following (as in effect on the Closing Date):
(a) Sellers’ self-insured medical and prescription drug program provided to
full-time employees, which program is administered by United Healthcare (except
that for full-time employees in Puerto Rico, the program is administered by
Triple S, Inc., and for full-time employees in Hawaii, the program is
administered by HMSA); and (b) Sellers’ self-insured dental program provided to
full-time employees, which program is administered by Cigna.

“Historical Financial Statements” has the meaning set forth in Section 3.4(a).

“Indebtedness” of any Person means, without duplication, (a) the principal of
and premium (if any) in respect of (i) indebtedness of such Person for money
borrowed and (ii) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable, (b) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable for goods and services and other accrued
current liabilities arising in the Ordinary Course of Business), (c) all
obligations of such Person under leases required to be capitalized in accordance
with GAAP, (d) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker’s acceptance or similar credit
transaction, (e) the liquidation value of all redeemable preferred stock of such
Person, (f) all obligations of the type referred to in clauses (a) through
(e) of any Persons for the payment of which such Person is responsible or
liable, directly or indirectly, as obligor, guarantor, surety or otherwise,
including guarantees of such obligations, and (g) all obligations of the type
referred to in clauses (a) through (f) of other Persons secured by any lien on
any property or asset of such Person (whether or not such obligation is assumed
by such Person).

“Insurance Policy” means each primary, excess and umbrella insurance policy,
bond and other forms of insurance owned or held by or on behalf, or providing
insurance coverage to the Business, Sellers and their operations, properties and
assets, including, without limitation, all stop-loss insurance policies with
respect to Sellers’ self-insured medical and/or dental insurance programs.

“Intellectual Property” means any and all rights, title and interest in or
relating to intellectual property of any type, which may exist or be created
under the Laws of any jurisdiction throughout the world, including: (a) patents
and patent applications, together with all reissues, continuations,
continuations-in-part, divisionals, extensions and reexaminations in connection
therewith; (b) trademarks, service marks, trade dress, logos, slogans, trade
names,

 

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service names, brand names (including the name “Wet Seal”), Internet domain
names and all other source or business identifiers and general intangibles of a
like nature, along with all applications, registrations and renewals in
connection therewith, and all goodwill associated with any of the foregoing;
(c) rights associated with works of authorship, including exclusive exploitation
rights, mask work rights, copyrights, database and design rights, whether or not
registered or published, all registrations and recordations thereof and
applications in connection therewith, along with all extensions and renewals
thereof; (d) trade secrets; and (e) all other intellectual property rights
arising from or relating to Technology.

“Intellectual Property Assignments” has the meaning set forth in
Section 2.8(a)(iii).

“Interim Financial Statements” has the meaning set forth in Section 3.4(a).

“Inventory” means inventories of raw materials and supplies, manufactured, spare
and purchased parts, goods in process and finished goods, in each case, that are
used or held for use in the operation of the Business, whether or not prepaid
and whether in transit to or from Sellers and whether in Sellers’ warehouses,
distributions facilities, stores, outlets, held by third parties or otherwise.

“IRC” means the United States Internal Revenue Code of 1986, as amended.

“Law” means any federal, state, provincial, local, municipal, foreign or other
law, statute, legislation, constitution, principle of common law, resolution,
ordinance (including with respect to zoning or other land use matters), code,
treaty, convention, rule, regulation, requirement, edict, directive,
pronouncement, determination, proclamation or Decree of any Governmental Entity.

“L/C Cash Collateral Account” has the meaning set forth in the BofA DIP Order.

“Leased Real Property” means all leasehold or subleasehold estates and other
rights to use or occupy any land, buildings, structures, improvements, fixtures
or other interest in real property of Sellers or any of its Affiliates which is
used in the Business.

“Leases” means all leases, subleases, licenses, concessions and other Contracts,
including all amendments, extensions, renewals, guaranties and other agreements
with respect thereto, in each case pursuant to which any Seller holds any Leased
Real Property.

“Letter Agreement” means that certain letter agreement dated March 12, 2015 by
and among Sellers, Buyer and the Committee, a copy of which is attached hereto
as Appendix B.

“Liability” means any liability, Indebtedness, guaranty, claim, loss, damage,
deficiency, assessment, responsibility or obligation of whatever kind or nature
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
whether due or to become due, whether determined or determinable, whether choate
or inchoate, whether secured or unsecured, whether matured or not yet matured).

 

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“Lien” means any mortgage, deed of trust, hypothecation, contractual
restriction, pledge, lien, encumbrance, interest, charge, security interest,
put, call, other option, right of first refusal, right of first offer,
servitude, right of way, easement, conditional sale or installment contract,
finance lease involving substantially the same effect, security agreement or
other encumbrance or restriction on the use, transfer or ownership of any
property of any type (including real property, tangible property and intangible
property and including any “Lien” as defined in the Bankruptcy Code).

“Litigation” means any action, cause of action, suit, claim, investigation,
mediation, audit, grievance, demand, hearing or proceeding, whether civil,
criminal, administrative or arbitral, whether at law or in equity and whether
before any Governmental Entity or arbitrator.

“Material Adverse Effect” means any change, event, effect, development,
condition, circumstance or occurrence (when taken together with all other
changes, events, effects, developments, conditions, circumstances or
occurrences), that (a) is materially adverse to the financial condition or
results of operations of the Business (taken as a whole); provided, however,
that no change, event, effect, development, condition, circumstance or
occurrence related to any of the following shall be deemed to constitute, and
none of the following shall be taken into account in determining whether there
has been a Material Adverse Effect: (i) national or international business,
economic, political or social conditions, including the engagement by the United
States of America in hostilities, affecting (directly or indirectly) the
industry in which the Business operates, whether 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 of America or any of its territories,
possessions or diplomatic or consular offices or upon any military installation,
equipment or personnel of the United States of America, except to the extent
that such change has a materially disproportionate adverse effect on the
Business relative to the adverse effect that such changes have on other
companies in the industry in which the Business operates; (ii) financial,
banking or securities markets (including any disruption thereof or any decline
in the price of securities generally or any market or index), except to the
extent that such change has a materially disproportionate adverse effect on
Business relative to the adverse effect that such changes have on other
companies in the industry in which the Business operates; (iii) any change in
GAAP or Law; (iv) compliance with this Agreement or any Related Agreement,
including the taking of any action required hereby or thereby or the failure to
take any action that is not permitted hereby or thereby; (v) any changes
directly attributable to the announcement of this Agreement or any Related
Agreement; (vi) resulting from any act of God or other force majeure event
(including natural disasters); (vii) in the case of Sellers or the Business,
(A) the failure to meet or exceed any projection or forecast or (B) changes in
the business or operations of Sellers or any of their respective Affiliates
(including changes in credit terms offered by suppliers or financing sources)
resulting from the announcement or the filing of the Chapter 11 Cases or
Sellers’ and their respective Affiliates’ financial condition or Sellers’ and
certain of their respective Affiliates’ status as debtors under Chapter 11 of
the Bankruptcy Code; (viii) seasonal changes in the results of operations
(provided that such seasonal changes are consistent with the historic experience
of the Business); or (ix) inaction by Sellers due to Buyer’s refusal to consent
to a request for consent by Seller under Section 5.4 hereof; or (b) would
reasonably be expected to prevent, materially delay or materially impair to the
ability of any Seller to consummate the transactions contemplated by this
Agreement or the Related Agreements on the terms set forth herein and therein.

 

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“Non-Continuing Store” means any of Sellers’ store locations with respect to
which the associated Leases have been designated by Buyer as Excluded Contracts,
as such store locations may be changed in accordance with Section 2.6(b) and
Section 2.10.

“Non-Real Property Contracts” means the Contracts to which any Seller is a party
other than the Leases.

“Offeree” has the meaning set forth in Section 6.4(a).

“Operational Expenses” means all expenses of the Business, including, but not
limited to, employee and occupancy expenses, all costs and expenses associated
with any Lease or Non-Real Property Contract, including rent, ground lease rent,
common area maintenance, utilities, real estate Taxes, insurance, security,
other actual out-of-pocket costs.

“Ordinary Course of Business” means the ordinary course of business consistent
with past custom and practice.

“Participating Vendor” means a vendor that executes a Participating Vendor
Agreement with Buyer.

“Participating Vendor Agreement” means an agreement with Buyer, in form and
substance acceptable to Buyer, to continue to participate in and extend trade
credit going forward in connection with the operation of the Business by Buyer.

“Party” has the meaning set forth in the preamble.

“Permit” means any franchise, approval, permit, license, order, registration,
certificate, variance, Consent, exemption or similar right issued, granted,
given or otherwise obtained from or by any Governmental Entity, under the
authority thereof or pursuant to any applicable Law.

“Permitted Liens” means (a) Liens for Taxes not yet delinquent or which are
being contested in good faith by appropriate proceedings; (b) with respect to
leased or licensed personal property, the terms and conditions of the lease or
license applicable thereto to the extent constituting an Assumed Contract;
(c) mechanics liens and similar liens for labor, materials or supplies provided
with respect to real property incurred in the Ordinary Course of Business for
amounts which are not delinquent and which are not material or which are being
contested in good faith by appropriate proceedings; (d) with respect to real
property, zoning, building codes and other land use Laws regulating the use or
occupancy of such real property or the activities conducted thereon which are
imposed by any Governmental Entity having jurisdiction over such real property
which are not violated by the current use or occupancy of such real property or
the operation of the Business, except where any such violation would not,
individually or in the aggregate, materially impair the use, operation or
transfer of the affected property or the conduct of the Business thereon as it
is currently being conducted; (e) easements, covenants, conditions, restrictions
and other similar matters affecting title to real property and other
encroachments and title and survey defects that do not or would not materially
impair value or the use or occupancy of such real property or materially
interfere with the operation of the Business at such real property; and
(f) matters that would be disclosed on an accurate survey or inspection of the
real property but which do not interfere in any material respect with the right
or ability to use the property as currently used or operated or to convey fee
simple title.

 

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“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or any other entity, including any Governmental
Entity or any group or syndicate of any of the foregoing.

“Petition Date” means January 15, 2015.

“Plan” means a plan of reorganization proposed by the Sellers and/or the
Committee.

“Plan Effective Date” means the effective date of the Plan.

“Priority Claim” means a Claim entitled to priority pursuant to section 507(a)
of the Bankruptcy Code.

“Products” means, collectively, all clothing, footwear, apparel and accessories
developed, produced, distributed, marketed and/or sold in connection with the
Business.

“Professional Services” has the meaning set forth in Section 2.4(b).

“Purchase Price” has the meaning set forth in Section 2.5.

“Records” means the books, records, information, ledgers, files, invoices,
documents, work papers, correspondence, lists (including customer lists,
supplier lists and mailing lists), plans (whether written, electronic or in any
other medium), drawings, designs, specifications, creative materials,
advertising and promotional materials, marketing plans, studies, reports, data
and similar materials related to the Business.

“Registered” means issued by, registered with, renewed by or the subject of a
pending application before any Governmental Entity or domain name registrar.

“Rejection Effective Date” has the meaning set forth in Section 2.6(b).

“Related Agreements” means the Bill of Sale, the Assignment and Assumption
Agreement, the Intellectual Property Assignments and the Letter Agreement.

“Related Party” means, with respect to any Seller, each of such Seller’s direct
and indirect Subsidiaries, each of their respective officers, directors,
managers and equity holders, and each member of the immediate family of the
foregoing Persons.

“Representative” of a Person means such Person’s Subsidiaries and the officers,
directors, managers, employees, advisors, representatives (including its legal
counsel and its accountants) and agents of such Person or its Subsidiaries.

“Sale Motion” has the meaning set forth in Section 5.3(a).

 

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“Sale Order” means an order of the Bankruptcy Court entered in the Chapter 11
Cases in substantially the form of Exhibit A attached hereto (or otherwise
agreed to in writing by Buyer and Sellers).

“Selected Employee” has the meaning set forth in Section 6.4(d).

“Seller” or “Sellers” has the meaning set forth in the preamble.

“Sellers’ Accounts” has the meaning set forth in Section 2.8(b).

“Sellers’ Knowledge” (or words of similar import) means the actual knowledge of
Ed Thomas and/or Thomas Hillebrandt.

“Subsidiary” means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(a) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof (or other persons performing
similar functions with respect to such corporation) is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (b) if a limited
liability company, partnership, association or other business entity (other than
a corporation), a majority of partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more Subsidiaries of that Person or a combination thereof and
for this purpose, a Person or Persons owns a majority ownership interest in such
a business entity (other than a corporation) if such Person or Persons shall be
allocated a majority of such business entity’s gains or losses or shall be or
control any managing director, managing member, or general partner of such
business entity (other than a corporation). The term “Subsidiary” shall include
all Subsidiaries of such Subsidiary.

“Tax” or “Taxes” means any United States federal, state or local or non-United
States income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Section 59A of the IRC), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, real property,
personal property, ad valorem, escheat, sales, use, transfer, value added,
alternative or add-on minimum, estimated or other tax of any kind whatsoever,
whether computed on a separate or consolidated, unitary or combined basis or in
any other manner, including any interest, penalty or addition thereto, whether
or not disputed.

“Tax Return” means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

“Technology” means, collectively, all algorithms, APIs, designs, net lists,
data, databases, data collections, diagrams, inventions (whether or not
patentable), know-how, methods, processes, proprietary information, protocols,
schematics, specifications, tools, systems, servers, hardware, computers, point
of sale equipment, inventory management equipment, software, software code (in
any form, including source code and executable or object code), subroutines,
techniques, user interfaces, URLs, web sites, works of authorship and other
similar materials,

 

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including all documentation related to any of the foregoing, including
instruction manuals, laboratory notebooks, prototypes, samples, studies and
summaries, whether or not embodied in any tangible form and whether or not
specifically listed herein, and all related technology, that are used in,
incorporated in, embodied in, displayed by or relate to, or are used in
connection with the foregoing.

“Transfer Tax” has the meaning set forth in Section 6.6.

“Transferred Employee” has the meaning set forth in Section 6.4(a).

“Trustee” means the trustee or post-confirmation officer appointed in connection
with the Plan.

“WARN Act” means the United States Worker Adjustment and Retraining Notification
Act, or any similar applicable federal, state, provincial, local, municipal,
foreign or other Law.

“WSC” has the meaning set forth in the preamble.

“WSGC” has the meaning set forth in the preamble.

“WSI” has the meaning set forth in the preamble.

“WSR” has the meaning set forth in the preamble.

ARTICLE II

PURCHASE AND SALE

Section 2.1 Purchase and Sale of Acquired Assets. Pursuant to sections 105, 363
and 365 of the Bankruptcy Code, on the terms and subject to the conditions set
forth in this Agreement, at the Closing, Buyer shall purchase, acquire and
accept from Sellers, and Sellers shall sell, transfer, assign, convey and
deliver to Buyer, all of the Acquired Assets, free and clear of all Liens (other
than Permitted Liens expressly identified in the Sale Order), for the
consideration specified in Section 2.5. Without limiting the generality of the
foregoing, the Acquired Assets shall include the following (except to the extent
included as an Excluded Asset):

(a) all (i) Cash of Sellers as of the Closing, (ii) restricted cash deposits of
Sellers held by any Person and relating to Acquired Assets or securing
chargebacks, credit card processing claims or similar claims, (iii) cash
deposits in cash collateral, indemnity or other accounts, including cash
deposits supporting letters of credit (except for the cash in the BofA Accounts,
the Escrow Account and any retainers and professional fee escrows held by the
Sellers’ and/or the estates’ professionals), and (iv) bank accounts and
lock-boxes of Sellers (except for the BofA Accounts and any bank account(s)
opened by the Sellers to hold the Cash Payment and handle any disbursements of
the Sellers after the Closing); provided that, notwithstanding the foregoing,
(1) upon the release of the BofA Liens in the BofA Accounts, any cash remaining
in such BofA Accounts shall be deemed to be an Acquired Asset hereunder and
promptly paid over by the Sellers to the Buyer and (2) any remaining cash
retainer or professional fee escrow held by Sellers’ and/or the estates’
professionals

 

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shall be deemed to be an Acquired Asset hereunder and promptly paid over by the
Sellers to the Buyer after the professional services for which such retainer or
escrow were held shall have been rendered or the professional relationship
terminated;

(b) all Accounts Receivable of Sellers as of the Closing, and all receivables
and other amounts payable by any Seller to any other Seller;

(c) all Inventory, supplies and materials of Sellers as of the Closing,
including all rights of Sellers to receive such Inventory, supplies and
materials which are on order as of the Closing;

(d) without duplication of the above, all royalties (except for any royalties
under any Excluded Asset), advances, prepaid assets and deferred items
(including all prepaid Taxes, prepaid rentals, unbilled charges, fees and
deposits, prepaid insurance premiums), and other prepayments of Sellers as of
the Closing relating to the Business;

(e) all Assumed Contracts that have been assumed by and assigned to Buyer
pursuant to Section 2.6;

(f) all Intellectual Property owned by Sellers;

(g) all open purchase orders with suppliers related to the Business;

(h) all items of machinery, equipment, supplies, furniture, fixtures, leasehold
improvements (to the extent of Sellers’ rights to any leasehold improvements
under the Leases that are Assumed Contracts) owned by Sellers and all other
Furnishings and Equipment as of the Closing;

(i) all Records, including Records related to Taxes paid or payable by any
Seller (provided that Sellers are entitled to retain copies of all Records);

(j) except for the Excluded Claims, all claims (including all rights to bring
claims for past, present or future infringement of the Intellectual Property
owned by Sellers) and causes of action of Sellers as of the Closing against any
Persons (regardless of whether or not such claims and causes of action have been
asserted by Sellers) and all guaranties, rights of indemnity, warranty rights,
rights of contribution, rights to refunds, rights of reimbursement and other
rights of recovery, including rights to insurance proceeds, possessed by Sellers
as of the Closing (regardless of whether such rights are currently exercisable);

(k) all goodwill associated with the Business or the Acquired Assets, including
all goodwill associated with the Intellectual Property owned by Sellers and all
rights under any confidentiality agreements executed by any third party for the
benefit of any of Sellers to the extent relating to the Acquired Assets and/or
the Assumed Liabilities (or any portion thereof);

 

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(l) all rights of Sellers under non-disclosure or confidentiality, noncompete,
or nonsolicitation agreements with current or former employees, directors,
consultants, independent contractors and agents of any of Sellers or any of
their Affiliates or with third parties to the extent relating to the Acquired
Assets and/or the Assumed Liabilities (or any portion thereof);

(m) subject to Section 2.6(i), all of the Assumed Permits, or, to the extent
provided in Section 2.6(i), all of the rights and benefits accruing under any
Permits relating to the Business;

(n) the amount of, and all rights to any, insurance proceeds received by any of
Sellers after the date hereof in respect of (i) the loss, destruction or
condemnation of any Acquired Assets of a type set forth in Section 2.1(c),
Section 2.1(f) or Section 2.1(h), occurring prior to, on or after the Closing or
(ii) any Assumed Liabilities;

(o) all other rights, demands, claims, credits, allowances, rebates or other
refunds (including any vendor or supplier rebates), rights in respect of
promotional allowances or rights of setoff and rights of recoupment of every
kind and nature (whether or not known or unknown or contingent or
non-contingent), other than against Sellers, arising out of or relating to the
Business as of the Closing, including all deposits (including customer deposits
and security deposits (whether maintained in escrow or otherwise) for rent,
electricity, telephone or otherwise), advances and prepayments;

(p) to the extent transferable, all Insurance Policies that, on or prior to the
Closing, Buyer designates in writing to Sellers as Acquired Assets hereunder,
and all rights and benefits of any Seller of any nature (except for any rights
to insurance recoveries thereunder required to be paid to other Persons under
any order of the Bankruptcy Court or relating to the DIP Financing) with respect
thereto, including, without limitation of Section 2.1(n), all insurance
recoveries thereunder and rights to assert claims with respect to any such
insurance recoveries;

(q) except for the Excluded Claims, all causes of action, lawsuits, judgments,
claims, refunds, rights of recovery, rights of set-off, counterclaims, defenses,
demands, warranty claims, rights to indemnification, contribution, advancement
of expenses or reimbursement, or similar rights of any Seller (at any time or in
any manner arising or existing, whether choate or inchoate, known or unknown,
now existing or hereafter acquired, contingent or noncontingent), including,
without limitation, the Acquired Avoidance Actions;

(r) all assets, rights and claims arising from or with respect to Taxes of any
Seller, including all rights arising from any refunds due from federal, state
and/or local Governmental Entities with respect to Taxes paid by Sellers, all
deferred tax assets, Tax deposits, Tax prepayments and estimated Tax payments;

 

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(s) all Credit Card Receivables as of the Closing and all Cash or other property
on deposit at credit card processors as of Closing related to the Business;

(t) all rights under or pursuant to all warranties, representations and
guarantees made by suppliers, manufacturers, contractors and any other Person to
the extent relating to products sold, or services provided, to Sellers or to the
extent affecting any Acquired Assets and/or Assumed Liabilities;

(u) the right to receive and retain mail, Accounts Receivable payments and other
communications of Sellers and the right to bill and receive payment for products
shipped or delivered and services performed but unbilled or unpaid as of the
Closing;

(v) all telephone numbers, fax numbers, e-mail addresses, websites, URLs and
internet domain names;

(w) without duplication of the above, all other current assets of Sellers as of
the Closing;

(x) all assets maintained or held (including all deposits) pursuant to or in
connection with the Health Plans; and

(y) all other assets that are related to or used in connection with the Acquired
Assets or the Business (but excluding all of the Excluded Assets).

Section 2.2 Excluded Assets. Nothing contained herein shall be deemed to sell,
transfer, assign or convey any of the Excluded Assets to Buyer, and each Seller
shall retain all of its right, title and interest to, in and under, and all
obligations with respect to the Excluded Assets.

Section 2.3 Assumption of Assumed Liabilities. On the terms and subject to the
conditions of this Agreement, at the Closing (or, with respect to Assumed
Liabilities under Assumed Contracts or Assumed Permits that are assumed by Buyer
after the Closing, such later date of assumption as provided in Sections 2.6),
Buyer shall assume and become responsible for the Assumed Liabilities and no
other Liabilities of Sellers or any of their Affiliates, and from and after the
Closing agrees to timely pay, honor and discharge, or cause to be timely paid,
honored and discharged, all Assumed Liabilities in accordance with the terms
thereof.

Section 2.4 Excluded Liabilities. Notwithstanding anything herein to the
contrary, the Parties expressly acknowledge and agree that Buyer shall not
assume, be obligated to pay, perform or otherwise discharge or in any other
manner be liable or responsible for any Liabilities of Sellers, whether existing
on the Closing Date or arising thereafter, other than the Assumed Liabilities
(all such Liabilities that Buyer is not assuming being referred to collectively
as the “Excluded Liabilities”). Without limiting the foregoing, Buyer shall not
be obligated to assume, does not assume, and hereby disclaims all the Excluded
Liabilities, including the following Liabilities of any Seller, any predecessor
of any Seller or any other Person, whether incurred or accrued before or after
the Petition Date or the Closing:

(a) except to the extent enumerated in Schedule 2.3, all Taxes of Sellers,
including Taxes imposed on Sellers under Treasury Regulations Section 1.1502-6
and similar provisions of state, local or foreign Tax Law;

 

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(b) except to the extent enumerated in item 10 on Schedule 2.3, all Liabilities
of Sellers relating to legal services, accounting services, financial advisory
services, investment banking services or any other professional services
(“Professional Services”) performed in connection with this Agreement and any of
the transactions contemplated, hereby, and any claims for such Professional
Services, whether arising before or after the Petition Date;

(c) all Liabilities of Sellers relating to or arising from any collective
bargaining agreement (including any related multiemployer pension plan);

(d) except to the extent enumerated in Schedule 2.3, all Liabilities relating to
(i) payroll (including salary, wages and commissions), vacation, sick leave,
parental leave, long service leave, workers’ compensation claims (provided that,
and for the avoidance of doubt, any letter(s) of credit issued on behalf of any
Seller in support of such workers’ compensation claims are an Excluded Asset)
and unemployment benefits of any Current Employee and/or Former Employee and
(ii) all severance, retention and termination agreements with Current Employees
and/or Former Employees;

(e) except to the extent enumerated in item 4 on Schedule 2.3, all Liabilities
arising out of, relating to, or with respect to any notice pay or benefits
(including under COBRA unless otherwise required by applicable Law) and claims
under the WARN Act with respect to any Current Employees and/or Former
Employees;

(f) except to the extent enumerated in items 13 and 14 on Schedule 2.3, all
Liabilities arising out of, relating to, or with respect to any Employee Benefit
Plan (including any Liabilities related to any Employee Benefit Plan which is an
“employee pension benefit plan” (as defined in Section 3(2) of ERISA) that is
subject to Section 302 or Title IV of ERISA or IRC Section 412);

(g) except to the extent enumerated in item 9 on Schedule 2.3, all Liabilities
of Sellers in respect of Indebtedness (except to the extent of any Cure Amounts
under any Assumed Contracts, and except with respect to any capitalized leases
that are Assumed Contracts);

(h) all Liabilities arising in connection with any violation of any applicable
Law relating to the period prior to the Closing, including any Environmental,
Health and Safety Requirements;

(i) any and all Liabilities and obligations (i) that are the subject of any
dispute, litigation, arbitration, judgment, order, decree or other proceeding as
of the Closing Date, (ii) with respect to periods prior to the Closing Date and
are or could be asserted as a claim in litigation or arbitration after the
Closing Date, (iii) relating to

 

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any bodily injury, or damage to property, incurred by any Person or (iv) arising
as a result of actions or omissions with respect to services provided to
customers prior to the Closing; provided that nothing herein shall prevent,
prohibit or otherwise impair any Seller’s right to make any claim for any
insurance recovery after the Closing under any applicable Insurance Policy, as
provided under Section 6.10(b);

(j) any Liabilities or obligations which Buyer may or could become liable for as
a result of or in connection with any “defacto merger” or
“successor-in-interest” theories of liability (other than the Assumed
Liabilities);

(k) all Liabilities of Sellers under this Agreement and the Related Agreements
and the transactions contemplated hereby or thereby (excluding all the Assumed
Liabilities);

(l) all Liabilities and other amounts payable by any Seller to any other Seller
and/or its Affiliates; and

(m) all other Liabilities of Sellers that are not expressly included in the
Assumed Liabilities.

Section 2.5 Consideration. In consideration of the sale of the Business and the
Acquired Assets to Buyer, and in reliance upon the representations, warranties,
covenants and agreements of Sellers set forth herein, and upon the terms and
subject to the conditions set forth herein, the aggregate consideration for the
sale and transfer of the Acquired Assets (the “Purchase Price”) shall be
composed of the following:

(a) the payment of an amount in cash (the “Cash Payment”) equal to
(i) $7,500,000, less (ii) the Deposit;

(b) (i) a credit bid pursuant to Section 363(k) of the Bankruptcy Code (a
“Credit Bid”) of all the DIP Financing Obligations held by Buyer, (ii) a Credit
Bid of a portion of the DIP Financing Obligations held by Buyer plus the
assumption by the Buyer of the remaining outstanding DIP Financing Obligations
and/or (iii) the assumption by Buyer of all of the outstanding DIP Financing
Obligations; and

(c) the assumption by Buyer of the Assumed Liabilities.

Section 2.6 Assumption and Assignment of Contracts.

(a) The Sale Order shall provide for the assumption by Sellers, and the
assignment to the extent legally capable of being assigned by Sellers to Buyer,
of the Assumed Contracts on the terms and conditions set forth in the remainder
of this Section 2.6, and shall provide for the Designation Deadline as defined
herein. At Buyer’s request, and at Buyer’s cost and expense, Sellers shall
reasonably cooperate from the date hereof forward with Buyer as reasonably
requested by Buyer (i) to allow Buyer to enter into an amendment of any Lease
upon assumption of such Lease by Buyer (and Sellers shall reasonably cooperate
with Buyer to the extent reasonably requested with Buyer in negotiations with
the landlords thereof), or (ii) to otherwise

 

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amend any Lease to the extent such amendments would not adversely affect any
Seller; provided that Sellers shall not be required to enter into any such
amendment if such amendment would result in an assumption by any Seller of such
Lease, unless such Lease will be assigned to Buyer at the time of such
assumption.

(b) Buyer shall, prior to the hearing on the Sale Motion, identify the Non-Real
Property Contracts and Leases that Buyer has decided will be Assumed Contracts
to be assumed and assigned to Buyer on the Closing Date by providing a list
thereof to Sellers (as updated in accordance with this Agreement, the “Closing
Assumed Contract List”). Up to 3 Business Days prior to the Closing Date, Buyer
may, in its sole discretion, add or remove any Non-Real Property Contract or
Lease as an Assumed Contract to be assumed and assigned to Buyer on the Closing
Date by amending the Closing Assumed Contract List, and, in connection with the
Closing, the applicable Seller shall move in the Bankruptcy Court to assign any
such Non-Real Property Contract or Lease on the Closing Assumed Contract List to
Buyer, and at the Closing shall assume and assign to, and Buyer shall accept the
assignment of and assume such Non-Real Property Contract or Lease. In advance of
the Closing Date, Buyer may, in its sole discretion, designate a Non-Real
Property Contract or Lease for exclusion and rejection by delivering written
notice to Sellers and, in connection with the Closing, the applicable Seller
shall move to reject any such Non-Real Property Contract or Lease as of the
Closing Date (which date shall constitute the Rejection Effective Date with
respect thereto). From and after the Closing Date until the Designation
Deadline, with respect to any Non-Real Property Contract or Lease that was
neither included on the Closing Assumed Contract List nor excluded and rejected
as of the Closing Date, Buyer may, in its sole discretion, (i) designate such
Non-Real Property Contract or Lease as an Assumed Contract by providing written
notice to Sellers, specifying the Non-Real Property Contracts or Leases to be
assumed by Sellers and assigned to Buyer or (ii) designate such Non-Real
Property Contract or Lease for exclusion and rejection for purposes of this
Agreement and, if executory, to be rejected by providing written notice to
Sellers, specifying the Non-Real Property Contracts or Leases to be excluded and
rejected by the applicable Seller and the date that such rejection shall be
effective, which rejection shall be effective upon the delivery of such notice
to Sellers (each, a “Rejection Effective Date”); provided, however, that,
notwithstanding anything herein to the contrary, Buyer may not designate any
Lease for exclusion and rejection if such exclusion and rejection would result
in fewer than 140 Leases being assumed and assigned to Buyer. Upon delivery of a
notification by Buyer with respect to any Non-Real Property Contract or Lease
under Section 2.6(b)(i), the applicable Seller shall move in the Bankruptcy
Court within 5 days of receipt of such notice to assign such Non-Real Property
Contract or Lease to Buyer and shall assume and assign to, and Buyer shall
accept the assignment of and assume such Non-Real Property Contract or Lease.
Upon delivery of a notification by Buyer with respect to any Non-Real Property
Contract or Lease under Section 2.6(b)(ii), the applicable Seller shall move in
the Bankruptcy Court within 5 days of receipt of such notice to reject such
Non-Real Property Contract or Lease as of the applicable Rejection Effective
Date. In the event that Buyer has not provided a written designation to assume
and assign or reject any Non-Real Property Contract or Lease pursuant to this
Section 2.6(b) by the Designation Deadline, then such

 

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Non-Real Property Contract or Lease shall be deemed to be excluded and rejected
and Sellers may move in the Bankruptcy Court to reject such Non-Real Property
Contract or Lease as of the Designation Deadline (which Designation Deadline
shall constitute the Rejection Effective Date with respect thereto), and no
Seller shall have any obligation to assign any such Non-Real Property Contract
or Lease to Buyer hereunder. Any Non-Real Property Contract or Lease that is
designated (or deemed to be designated) for exclusion and rejection pursuant to
this Section 2.6(b) shall constitute an “Excluded Contract” as of the Closing
Date or, if thereafter, as of the Rejection Effective Date. To the extent that a
Non-Real Property Contract or Lease has not at Closing been designated as an
Excluded Contract or an Assumed Contract, then, until the Rejection Effective
Date, Buyer shall be obligated to perform or cause to be performed all of
Sellers’ obligations under such Non-Real Property Contract or Lease, and Buyer
shall be entitled to all benefits of Sellers thereunder; provided that no Cure
Amount shall be due with respect to such Non-Real Property Contract or Lease
until the permanent assumption thereof at Assumption Approval in accordance with
Section 2.6(g). Notwithstanding anything to the contrary contained herein, prior
to the Designation Deadline, Buyers shall have designated for assumption by
Sellers and assignment to Buyers such number of Leases that when added to any
Leases included in the Assumed Contracts as of the Closing equals at least 140
Leases. In determining the total number of Leases assumed and assigned to Buyer,
the following shall be included (in addition to Leases actually assumed and
assigned to Buyer): (x) store locations that were previously closed by Sellers
but reopened by Buyer (provided that Buyer pays the Cure Amounts due with
respect to the Lease for such store); and (y) any Lease for which the landlord
thereunder objects to the assignment and assumption of such Lease for any reason
(other than payment of the Cure Amount) and such objection is not resolved in a
manner acceptable to Buyer.

(c) After the Closing and prior to the Designation Deadline, Sellers shall not
terminate, amend, supplement, modify, waive any rights under, or create any Lien
with respect to any Non-Real Property Contract or any Lease, or take any
affirmative action not required by the terms thereof, without the prior written
consent of Buyer (not to be unreasonably withheld or delayed), unless Buyer has
provided notice to Sellers in writing designating such Non-Real Property
Contract or Lease for rejection pursuant to Section 2.6(b).

(d) Within three (3) Business Days of Buyer’s delivery of any notice of removal
or designation of any Non-Real Property Contract or Lease as an Assumed Contract
by Buyer pursuant to Section 2.6(b), or such lesser time as is approved by the
Bankruptcy Court, Sellers shall give notice of the removal or designation of
such Non-Real Property Contract or Lease as an Assumed Contract to the other
parties thereto.

(e) As part of the Sale Motion (or as necessary in one or more separate
motions), Sellers shall request that, by virtue of any Seller providing ten
(10) Business Days’ prior notice of its intent to assume and assign any
Contract, the Bankruptcy Court deem any non-debtor party to such Contract that
does not file an objection with the Bankruptcy Court during such notice period
to have given any required Consent to the assumption of the Contract by the
relevant Seller and assignment to Buyer.

 

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(f) In connection with the assumption and assignment to Buyer of any Assumed
Contract that is executory pursuant to this Section 2.6, the cure amounts, as
determined by the Bankruptcy Court, if any (such amounts, the “Cure Amounts”),
necessary to cure all defaults, if any, and to pay all actual or pecuniary
losses that have resulted from such defaults under the Assumed Contracts,
including any amounts payable to any landlord under any Lease that is an Assumed
Contract that relates to the period prior to the Assumption Approval, shall be
paid by Buyer, on or before the Assumption Approval, and not by Sellers and
Sellers shall have no liability therefor, and neither the Cure Amounts paid by
nor the expense of any other obligation set forth in this Section 2.6(f) shall
reduce, directly or indirectly, any consideration received by Sellers hereunder;
provided that any applicable Cure Amounts with regard to Assumed Contracts
listed in the Closing Assumed Contract List shall be paid by Buyer at the
Closing.

(g) Sellers shall use their respective commercially reasonable efforts to obtain
an order of the Bankruptcy Court to assign the Assumed Contracts to Buyer (the
“Assumption Approval”) on the terms set forth in this Section 2.6. In the event
Sellers are unable to assign any such Assumed Contract to Buyer pursuant to an
order of the Bankruptcy Court, then the Parties shall use their commercially
reasonable efforts until the Designation Deadline to obtain, and to cooperate in
obtaining, all Consents from Governmental Entities and third parties necessary
to assume and assign such Assumed Contracts to Buyer, including, in the case of
Buyer, paying any applicable Cure Amounts.

(h) To the extent that any Consent that is required to assign to Buyer any
Assumed Contract is not obtained by the Designation Deadline, each Seller shall,
with respect to each such Assumed Contract, from and after the Closing and until
the earliest to occur of (x) the date on which such applicable Consent is
obtained (which Consents the Parties shall use their reasonable best efforts,
and cooperate with each other, to obtain promptly; provided, however, that none
of the Parties or any of their respective Affiliates shall be required to pay
any consideration therefor other than filing, recordation or similar fees, which
shall be borne by Buyer), and (y) the date on which such Contract is rejected
following the written request of Buyer, use commercially reasonable efforts
during the term of such Assumed Contract to (i) provide to Buyer the benefits
under such Assumed Contract, (ii) cooperate in any reasonable and lawful
arrangement (including holding such Contract in trust for Buyer pending receipt
of the required Consent) designed to provide such benefits to Buyer and
(iii) use its commercially reasonable efforts to enforce for the account of
Buyer any rights of such Seller under such Assumed Contract (including the right
to elect to terminate such Assumed Contract in accordance with the terms thereof
upon the written direction of Buyer). Buyer shall reasonably cooperate with
Sellers in order to enable Sellers to provide to Buyer the benefits contemplated
by this Section 2.6(h).

 

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(i) Notwithstanding the foregoing, a Contract shall not be an Assumed Contract
hereunder and shall not be assigned to, or assumed by, Buyer to the extent that
such Contract (i) is rejected by a Seller or terminated by a Seller in
accordance with the terms hereof or by the other party thereto, or terminates or
expires by its terms, on or prior to the Designation Deadline and is not
continued or otherwise extended upon assumption, or (ii) requires a Consent of
any Governmental Entity or other third party (other than, and in addition to,
that of the Bankruptcy Court) in order to permit the sale or transfer to Buyer
of Sellers’ rights under such Contract, and no such Consent has been obtained
prior to the Designation Deadline. In addition, a Permit shall not be assigned
to, or assumed by, Buyer to the extent that such Permit requires a Consent of
any Governmental Entity or other third party (other than, and in addition to,
that of the Bankruptcy Court) in order to permit the sale or transfer to Buyer
of Sellers’ rights under such Permit, and no such Consent has been obtained
prior to the Closing.

Section 2.7 Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall take place remotely by electronic exchange of
counterpart signature pages commencing at 11:00 a.m. local time on the date (the
“Closing Date”) that is the third Business Day after the date on which all
conditions to the obligations of Sellers and Buyer to consummate the
transactions contemplated hereby set forth in Article VII (other than conditions
with respect to actions Sellers and/or Buyer will take at the Closing itself,
but subject to the satisfaction or waiver of those conditions) have been
satisfied or waived, or at such other time or on such other date as shall be
mutually agreed upon by Sellers and Buyer prior thereto. The Closing shall be
deemed to have occurred at 11:59 p.m. (prevailing Eastern time) on the Business
Day prior to the Closing Date.

Section 2.8 Deliveries at Closing.

(a) At the Closing, Sellers shall deliver to Buyer the following documents and
other items, duly executed by Sellers, as applicable:

(i) one or more Bills of Sale substantially in the form of Exhibit B attached
hereto (“Bill of Sale”);

(ii) one or more Assignment and Assumption Agreements substantially in the form
of Exhibit C attached hereto (“Assignment and Assumption Agreement”);

(iii) instruments of assignment substantially in the forms of Exhibit D, Exhibit
E and Exhibit F attached hereto for each registered trademark, registered
copyright and domain name, respectively, transferred or assigned hereby and for
each pending application therefor (collectively, the “Intellectual Property
Assignments”);

(iv) a copy of the Sale Order;

 

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(v) a certificate signed by an authorized officer of WSI to the effect that each
of the conditions specified in Section 7.1(a), Section 7.1(b) and Section 7.1(f)
is satisfied in accordance with the terms thereof; and

(vi) to the extent applicable, a non-foreign affidavit from each Seller dated as
of the Closing Date, sworn under penalty of perjury and in form and substance
required under Treasury Regulations issued pursuant to Section 1445 of the IRC
stating that such Seller is not a “foreign person” as defined in Section 1445 of
the IRC.

(b) At the Closing, Buyer shall deliver to Sellers, or the designated
third-party recipients pursuant to Section 2.5, the following documents, cash
amounts and other items, duly executed by Buyer, as applicable:

(i) the Assignment and Assumption Agreement(s);

(ii) a certificate to the effect that each of the conditions specified in
Section 7.2(a) and Section 7.2(b) is satisfied in accordance with the terms
thereof;

(iii) the Cash Payment by wire transfer of immediately available funds to one or
more bank accounts designated by Sellers or the designated third-party
recipients thereof (including to such other third party recipients as provided
in Section 2.5(a)) in writing to Buyer (the “Sellers’ Accounts”);

(iv) a letter evidencing that all of the outstanding DIP Financing Obligations
have been satisfied in full and/or assumed by Buyer, that the DIP Financing has
been terminated and that all Liens thereunder against Sellers and the Excluded
Assets have been fully discharged and released; and

(v) evidence that Buyer has obtained from a third party lender (or Buyer or its
Affiliates have committed to provide) an exit credit facility that provides
Buyer with undrawn availability of at least $10 million on the Closing Date,
which exit credit facility shall not be used to fund the Cash Payment.

Section 2.9 Allocation. Within thirty (30) calendar days after the Closing Date,
Buyer shall in good faith prepare an allocation of the Purchase Price (and all
capitalized costs and other relevant items) among the Acquired Assets in
accordance with Section 1060 of the IRC and the Treasury Regulations thereunder
(and any similar provision of United States state or local or non-United States
Law, as appropriate), which allocation shall be binding upon Sellers and Buyer.
Buyer and Sellers shall report, act and file Tax Returns (including Internal
Revenue Service Form 8594) in all respects and for all purposes consistent with
such allocation. Neither Buyer nor Sellers shall take any position (whether in
audits, Tax Returns or otherwise) which is inconsistent with such allocation
unless required to do so by applicable Law.

 

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Section 2.10 Non-Continuing Stores, Designated Stores and Continuing Stores.

(a) As of the Closing, (i) any of Sellers’ store locations with respect to which
the associated Leases have been designated by Buyer as Assumed Contracts in
accordance with Section 2.6(b) shall be deemed to have been classified as
Continuing Stores, (ii) any of Sellers’ store locations with respect to which
the associated Leases have been classified as Excluded Contracts in accordance
with Section 2.6(b) shall be deemed to have been classified as Non-Continuing
Stores, and (iii) any of Sellers’ store locations with respect to which the
associated Leases have not yet been designated by Buyer as Assumed Contracts or
Excluded Contracts shall be deemed to have been classified as Designated Stores.
From time to time after the Closing Date, in accordance with Section 2.6(b),
Buyer may reclassify any Designated Store (x) as a Continuing Store by
designating the Lease associated with such store as an Assumed Contract in
accordance with Section 2.6(b) or (y) as a Non-Continuing Store by designating
the Lease associated with such store as an Excluded Contract in accordance with
Section 2.6(b).

(b) At any time prior to the Designation Deadline, Buyer may reclassify a
Non-Continuing Store as a Continuing Store by designating the Lease associated
with such store as an Assumed Contract in accordance with Section 2.6(b) (except
to the extent such Lease has already been moved for exclusion and rejection
pursuant to the terms of Section 2.6(b) or this Section 2.10). Upon such
designation, such Non-Continuing Store shall be deemed to be a Continuing Store.

(c) Operation of Designated Stores.

(i) From and after the Closing until any Designated Store becomes a Continuing
Store or a Non-Continuing Store in accordance with Section 2.6(b) and this
Section 2.10, Sellers hereby appoint Buyer, and Buyer shall serve, in accordance
with the terms of this Section 2.10(c), as Sellers’ exclusive agent for the
purpose of running the Business at such the Designated Stores. During such
period, (x) Buyer shall have sole and complete authority, in its sole
discretion, to oversee, manage, direct the operation of, control the day-to-day
activities of, and make and implement all business decisions with respect to,
any such Designated Stores, (y) Buyer shall receive all proceeds generated by
operation of any such Designated Stores (the “Designated Store Proceeds”),
including to the extent arising from the sale of Products (exclusive of sales
Tax), and (z) Buyer shall pay, and shall be solely responsible for, any and all
Operational Expenses of Sellers that are directly related to the operation of
such Designated Stores; provided, that, all Operational Expenses constituting
employee Liabilities shall be treated as set forth in Section 6.4. For the
avoidance of doubt and subject to Section 6.4, the Operational Expenses owed by
Sellers described above shall include those Operational Expenses that are
obligations of Sellers that accrue at any point during the period from the
Closing until either (A) the Lease associated with such Designated Store is
assumed and assigned to Buyer or (B) the Rejection Effective Date of the Lease
associated with such store has occurred; provided, that Buyer has exited the
store premises and turned possession of the store premises over to the landlord,
the condition of such store premises to be turned over in accordance with the
Lease associated with such store premises. In addition, Buyer shall perform, or
shall cause to be performed, any and all obligations of Sellers arising
following the Closing under any Non-Real Property Contract or Lease related to

 

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the operation of any Designated Store (other than any such Non-Real Property
Contract that has previously been designated for rejection and exclusion
pursuant to Section 2.6(b)) from and after the Closing until either (1) the
Lease associated with such Designated Store is assumed and assigned to Buyer or
(2) the Rejection Effective Date of the Lease associated with such Designated
Store has occurred.

(ii) To the extent deemed necessary by Buyer:

(A) Buyer may establish new accounts (the “Buyer Accounts”) for the deposit of
the Designated Store Proceeds and the disbursement of amounts payable to Sellers
under this Section 2.10(c), and Sellers shall promptly upon Buyer’s reasonable
request execute and deliver all necessary documents to open and maintain such
accounts; provided, however, that Buyer may elect to continue to use the
Designated Deposit Accounts as the Buyer Accounts. The Buyer Accounts shall be
dedicated solely to the deposit of the Designated Store Proceeds and the
disbursement of amounts payable under this Section 2.10(c), and Buyer shall
exercise sole signatory authority and control with respect to the Buyer
Accounts. Sellers shall not be responsible for, and Buyer shall pay as an
Operational Expense hereunder, all bank fees and charges, including wire
transfer charges, related to the Buyer Accounts. Upon Buyer’s designation of the
Buyer Accounts, all Designated Store Proceeds (including credit card proceeds)
shall be deposited into the Buyer Accounts. During the period between the
Closing and the date Buyer establishes the Buyer Accounts, if any, all
Designated Store Proceeds (including credit card proceeds), shall be collected
by Buyer and deposited on a daily basis into depository accounts (as determined
by Buyer) for the Designated Stores, which accounts shall be designated solely
for the deposit of Designated Store Proceeds (including credit card proceeds),
and the disbursement of amounts payable by Buyer under this Section 2.10(c) (the
“Designated Deposit Accounts”). Notwithstanding anything to the contrary
contained herein, Sellers shall have no ownership interest in, and shall not be
entitled to withdraw any, Designated Store Proceeds.

(B) Buyer shall have the right to use Sellers’ credit card facilities (including
credit card terminals and processors, credit card processor coding, the merchant
identification numbers and existing bank accounts) for Designated Store Proceeds
derived from credit card purchases (including Sellers’ proprietary credit card).
In the event that Buyer elects to use Sellers’ credit card facilities, Sellers
shall process credit card transactions on behalf of Buyer and for Buyer’s
account, applying customary practices and procedures. Without limiting the
foregoing, Sellers shall cooperate with Buyer to download data from all credit
card terminals in the Designated Stores each day and to effect settlement with
Sellers’ credit card processors, and shall take such other actions as are
necessary to process credit card transactions on behalf of Buyer under Sellers’
merchant identification numbers. At Buyer’s request,

 

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Sellers shall cooperate with Buyer to establish Sellers’ merchant identification
numbers under Buyer’s name to enable Buyer to process all Designated Store
Proceeds derived from credit card purchases for Buyer’s account.

(iii) For the avoidance of doubt, nothing contained in this Section 2.10(c)
shall require Buyer to become, or to be considered or deemed, the employer of
any person, and Buyer shall not become, or be considered or deemed to be, the
employer of any person, unless and until Buyer, in its discretion, chooses to
employ such a person, it being understood that all agreements with respect to
such matters are set forth exclusively in Section 6.4.

(iv) Notwithstanding anything herein to the contrary, without the prior written
consent of Sellers, Buyer may assign any or all of its rights and obligations
under this Section 2.10(c) to any Person; provided that Buyer remains liable for
performance under this Section 2.10(c).

(d) Buyer shall indemnify and hold each Seller and its Representatives harmless
from and against all claims, demands, penalties, losses, liability or damage to
the extent arising from or relating to the operation of any of the Designated
Stores, Non-Continuing Stores or the Continuing Stores by Buyer after the
Closing Date, including, without limitation, reasonable attorneys’ fees and
expenses, resulting from, or related to: (i) Buyer’s breach of or failure to
comply with any of its agreements, covenants, representations or warranties
contained in this Agreement and the Related Agreements or applicable Law;
(ii) any harassment or any other unlawful, tortious or otherwise actionable
treatment of any customers or Representatives of any Seller by Buyer or any of
its Representatives; (iii) any claims by any party engaged by Buyer as an
employee or independent contractor arising out of such employment; (iv) the
gross negligence (including omissions) or willful misconduct of Buyer, its
officers, directors, employees, agents or representatives; and (v) violations of
Law by Buyer, its officers, directors, employees, agents or representatives.

Section 2.11 Deposit. Prior to the date hereof, Buyer made a cash deposit in the
amount of $1,500,000 (the “Initial Deposit”) by wire transfer of immediately
available funds and is being held by KTBS (as defined herein) as described
below. Upon entry of the Sale Order by the Bankruptcy Court, Buyer shall make an
additional cash deposit in the amount of $1,000,000 (the “Additional Deposit”)
by wire transfer of immediately available funds in accordance with such wire
transfer instructions as are provided by the Escrow Agent (as defined herein).
The Initial Deposit, plus the Additional Deposit, plus any interest accrued
thereon, is referred to herein as the “Deposit”. The Deposit is initially to be
held in escrow by Klee Tuchin Bogdanoff & Stern LLP, as trustee (“KTBS”), it
being understood that no later than March 17, 2015, the Buyer will select a
commercial bank, agreeable to the Sellers, as escrow agent (the “Escrow Agent”),
to hold the Deposit in escrow (the “Escrow Account”), and the Parties will
direct KTBS to release the Deposit to the Escrow Agent. In the event that the
Closing occurs, the Deposit (less any amounts used, with prior written consent
of Buyer, to satisfy obligations owed to B. Riley Financial, Inc.) will be
applied to satisfy an equal portion of the Closing Payment, and Buyer shall
direct the Escrow Agent to release the Deposit to Sellers at the Closing. In any
other

 

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event, the Deposit shall be released by the Escrow Agent to the Party entitled
thereto in accordance with Section 8.4, and the Parties shall promptly direct
the Escrow Agent to release the Deposit accordingly. The Deposit shall only
constitute property of the Sellers’ bankruptcy estates in the event that the
Deposit is required to be released to Sellers by the Escrow Agent in accordance
with the terms of this Agreement.

ARTICLE III

SELLERS’ REPRESENTATIONS AND WARRANTIES.

Each of the Sellers jointly and severally represents and warrants to Buyer that
except as set forth in the disclosure schedule accompanying this Agreement (the
“Disclosure Schedule”):

Section 3.1 Organization of Sellers; Good Standing.

(a) Each Seller (other than WSGC) is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware, and WSGC
is a limited liability company duly organized, validly existing and in good
standing under the Laws of the Commonwealth of Virginia.

(b) Each Seller has all requisite corporate or similar power and authority to
own, lease and operate its assets and to carry on the Business as currently
conducted.

(c) Each Seller is duly authorized to do business and is in good standing as a
foreign corporation in each jurisdiction where the ownership or operation of the
Acquired Assets or the conduct of the Business requires such qualification,
except for failures to be so authorized or be in such good standing, as would
not, individually or in the aggregate, have a Material Adverse Effect.

(d) None of the Sellers has any Subsidiaries (other than other Sellers, if
applicable).

Section 3.2 Authorization of Transaction. Subject to the Sale Order having been
entered and still being in effect and not subject to any stay pending appeal at
the time of Closing:

(a) each Seller has all requisite corporate power and authority to execute and
deliver this Agreement and all Related Agreements to which it is a party and to
perform its obligations hereunder and thereunder; the execution, delivery and
performance of this Agreement and all Related Agreements to which a Seller is a
party have been duly authorized by such Seller and no other corporate action on
the part of any Seller is necessary to authorize this Agreement or the Related
Agreements to which it is party or to consummate the transactions contemplated
hereby or thereby; and

(b) this Agreement has been duly and validly executed and delivered by each
Seller, and, upon their execution and delivery in accordance with the terms of
this Agreement, each of the Related Agreements to which any Seller is a party
will have been duly and validly executed and delivered by each such Seller, as
applicable.

 

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Assuming that this Agreement constitutes a valid and legally-binding obligation
of Buyer, this Agreement constitutes the valid and legally-binding obligations
of Sellers, enforceable against Sellers in accordance with its terms and
conditions, subject to applicable bankruptcy, insolvency, moratorium or other
similar Laws relating to creditors’ rights and general principles of equity.
Assuming, to the extent that it is a party thereto, that each Related Agreement
constitutes a valid and legally-binding obligation of Buyer, each Related
Agreement to which any Seller is a party, when executed and delivered,
constituted or will constitute the valid and legally-binding obligations of such
Seller, as applicable, enforceable against Sellers, as applicable, in accordance
with their respective terms and conditions, subject to applicable bankruptcy,
insolvency, moratorium or other similar Laws relating to creditors’ rights and
general principles of equity.

Section 3.3 Noncontravention; Consents and Approvals.

(a) Neither the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby (including the assignments and
assumptions referred to in Article II), will, subject to the Sale Order having
been entered and still being in effect and not subject to any stay pending
appeal at the time of Closing, (i) conflict with or result in a breach of the
certificate of incorporation, by-laws or other organizational documents of any
Seller, (ii) violate any Law to which any Seller is, or its respective assets or
properties are, subject, or (iii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel or require any notice under
any Contract to which any Seller is a party or by which it is bound or to which
any of the Acquired Assets is subject, after giving effect to the Sale Order and
any applicable order of the Bankruptcy Court authorizing the assignment and
assumption of any such Contract that is an Assumed Contract hereunder, and, in
the case of clause (ii) or (iii), for such conflicts, breaches, defaults,
accelerations, rights or failures to give notice as would not, individually or
in the aggregate, have a Material Adverse Effect.

(b) Subject to the Sale Order having been entered and still being in effect (and
not subject to any stay pending appeal at the time of Closing), no Consent,
notice or filing is required to be obtained by any Seller from, or to be given
by any Seller to, or made by any Seller with, any Governmental Entity in
connection with the execution, delivery and performance by any Seller of this
Agreement or any Related Agreement. After giving effect to the Sale Order and
any applicable order of the Bankruptcy Court authorizing the assignment and
assumption of any Contract that is an Assumed Contract hereunder, no Consent,
notice or filing is required to be obtained by any Seller from, or to be given
by any Seller to, or made by any Seller with, any Person that is not a
Governmental Entity in connection with the execution, delivery and performance
by any Seller of this Agreement or any Related Agreement, except where the
failure to give notice, file or obtain such authorization, consent or approval
would not, individually or in the aggregate, be material to the Business as a
whole.

 

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Section 3.4 Financial Statements; No Undisclosed Liabilities.

(a) The Data Room or Sellers’ public securities filings contain true, correct
and complete copies of the consolidated, audited financial statements of Sellers
for the fiscal years ended February 2, 2013 and February 1, 2014 (collectively,
the “Audited Financial Statements”) as well as the unaudited, consolidated
balance sheets, statements of income, changes in stockholders’ equity and cash
flows of Sellers for the fiscal year period ended January 31, 2015 (such
statements, the “Interim Financial Statements” and, collectively, with the
Audited Financial Statements, the “Historical Financial Statements”). The
Historical Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved, and fairly present,
in all material respects, the financial condition and results of operations and
cash flows of the Business as of the dates thereof or the periods then ended,
except, in each case, as expressly indicated in such Historical Financial
Statements, and subject, in the case of the Interim Financial Statements, to
normal year-end adjustments that will not be material in amount or effect and
the absence of footnotes.

(b) Except as set forth in Section 3.4(b) of the Disclosure Schedule, Sellers do
not have any material Indebtedness or other Liabilities of a nature (whether
accrued, absolute, contingent or otherwise) that would be required by GAAP to be
reflected on a consolidated balance sheet of the Business (or in the notes
thereto) that were not disclosed or reserved against in the Historical Financial
Statements, except for Indebtedness or other Liabilities that (i) were incurred
on or after November 1, 2014 in the Ordinary Course of Business, (ii) arise
under this Agreement or the Related Agreements, or (iii) will be or are
Liabilities of Sellers as debtors in the Chapter 11 Cases and that will not
result in any Lien (other than Liens expressly contemplated by the Sale Order)
on the Acquired Assets following the entry of the Sale Order.

Section 3.5 Compliance with Laws. Sellers are in compliance with all material
Laws applicable to the Business or the Acquired Assets, except in any such case
where the failure to be in compliance would not have a Material Adverse Effect,
and no Seller has received any written notice within the past twelve months
relating to violations or alleged violations or material defaults under any
Decree or any Permit, in each case, with respect to the Business.

Section 3.6 Title to Acquired Assets. Sellers, as of the Closing, have good and
valid title to, or, in the case of leased assets, have good and valid leasehold
interests in, the Acquired Assets, free and clear of all Liens (except for
Permitted Liens and except for BofA Liens). At the Closing or such time as title
is conveyed under Section 2.6, Sellers will convey, subject to the Sale Order
having been entered and still being in effect and not subject to any stay
pending appeal at the time of Closing, good and valid title to, or valid
leasehold interests in, all of the Acquired Assets, free and clear of all Liens
(except for Permitted Liens and except for BofA Liens), to the fullest extent
permissible under section 363(f) of the Bankruptcy Code and subject to the
rights of licensees under section 365(n) of the Bankruptcy Code.

 

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Section 3.7 Contracts.

(a) Section 3.7 of the Disclosure Schedule and the Sellers’ schedules of assets
and liabilities filed with the Bankruptcy Court by Sellers in the Chapter 11
Cases, taken together, include an accurate list of the following Contracts to
which a Seller is a party with respect to the Business as of the date hereof
(and Sellers have made available, or within five (5) days of the date hereof
shall make available, to Buyer true and complete copies of all such Contracts):

(i) any Contracts for the lease of personal property to or from any Person
providing for lease payments in excess of $50,000 per annum;

(ii) any Contracts for the purchase or sale of equipment, supplies, products or
other personal property, the performance of which will extend over a period of
more than six months after the Closing Date or involves consideration in excess
of $50,000 per annum;

(iii) any Contracts for services involving consideration in excess of $50,000
per annum;

(iv) any Contracts that is a collective bargaining agreement;

(v) any material licenses of Intellectual Property to or from any Person (other
than licenses for commercially-available, off-the-shelf or click-wrap software);

(vi) any employment Contracts as to which an employee is entitled to receive an
annual salary in excess of $100,000, and all material severance Contracts;

(vii) any material Contracts prohibiting the Company from freely engaging in any
material business (other than pursuant to any radius restriction contained in
any lease, reciprocal easement or development, construction, operating or
similar agreement);

(viii) any Contracts relating to Indebtedness;

(ix) any Contracts that involve the lease of real property or that obligate the
Company to purchase real property;

(x) any Contracts that create or govern a partnership, joint venture, strategic
alliance or similar arrangement;

(xi) any Contracts (other than purchase orders accepted or confirmed in the
Ordinary Course of Business) with the ten (10) largest customers of the
Business, based on revenues during the twelve (12) month period ended
February 1, 2014 and January 31, 2015;

(xii) any Contracts (other than purchase or equipment orders entered into in the
Ordinary Course of Business) with the ten (10) largest suppliers of the
Business, based on expenditures during the twelve (12) month period ended
February 1, 2014 and January 31, 2015;

 

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(xiii) any Contracts with any Related Party; and

(xiv) Contracts of or relating to employment or severance with any Current
Employees (as determined as of the date of this Agreement).

(b) With respect to each Contract listed on the schedules of assets and
liabilities filed with the Bankruptcy Court by Sellers in the Chapter 11 Cases
or on Section 3.7 of the Disclosure Schedule: (i) to the Sellers’ Knowledge,
such Contract is in full force and effect and constitutes the valid and
legally-binding obligation of a Seller and, to Sellers’ Knowledge, the
counterparty thereto, enforceable against such Seller and, to Sellers’
Knowledge, the counterparty thereto in accordance with its terms and conditions,
subject to applicable bankruptcy, insolvency, moratorium or other similar Laws
relating to creditors’ rights and general principles of equity; and (ii) except
for breaches or defaults caused by or resulting from the Bankruptcy Events,
neither the Seller party thereto nor, to Sellers’ Knowledge, the counterparty
thereto is in material breach or default thereof that presently would permit or
give rise to a right of termination, modification or acceleration thereunder,
except, in the case of either clause (i) or (ii), for such failure to be in full
force and effect, breaches or defaults which would not, individually or in the
aggregate, have a Material Adverse Effect on the Business.

Section 3.8 Intellectual Property.

(a) Section 3.8 of the Disclosure Schedule sets forth a true and complete list
of (i) all Registered Intellectual Property that is owned by any Seller and used
in or related to the Business, (ii) all material Contracts pursuant to which any
Seller obtains the right to use any Intellectual Property, and (iii) all
material Contracts pursuant to which any Seller grants to any other Person the
right to use any Intellectual Property. Sellers own all such Registered
Intellectual Property free and clear of all Liens (except for Permitted Liens),
and all such Registered Intellectual Property is valid, subsisting and, to
Sellers’ Knowledge, enforceable, and is not subject to any outstanding Decree
adversely affecting Sellers’ use thereof or rights thereto. Immediately after
the Closing, Buyer will own or have the right to, subject to the Sale Order
having been entered and still being in effect and not subject to any stay
pending appeal at the time of Closing, use all of the Intellectual Property
included in the Acquired Assets on the same terms and conditions as in effect
for Sellers immediately prior to the Closing, to the fullest extent permissible
under section 363(f) of the Bankruptcy Code and subject to the rights of
licensees under section 365(n) of the Bankruptcy Code.

(b) To Sellers’ Knowledge and except as set forth on Section 3.8 of the
Disclosure Schedule, none of the use of the Intellectual Property included in
the Acquired Assets, the conduct of the Business as currently conducted, nor any
of the Products sold or services provided by Sellers or any of their Affiliates
in connection therewith, infringes upon or otherwise violates the Intellectual
Property of any other Person. To Sellers’ Knowledge, no third party is
infringing any Intellectual Property owned by any Seller and included in the
Acquired Assets, except as would not reasonably be expected to have a Material
Adverse Effect.

 

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(c) Except as set forth in the statements of financial affairs filed with the
Bankruptcy Court by Sellers in the Chapter 11 Cases, as of the date hereof, no
Litigation is currently pending or, to Sellers’ Knowledge, threatened against
any Seller that challenges the validity, ownership, registerability,
enforceability, infringement or use of any material Intellectual Property owned
by any Seller.

(d) All Technology that is material to the Business operates and performs in all
material respects in accordance with its documentation and functional
specifications and otherwise as required in connection with the Business, and
has not malfunctioned or failed within the past twelve (12) months in any manner
that (i) resulted in a material disruption to the conduct of the Business or
(ii) has had or could reasonably be expected to have a Material Adverse Effect.
To Sellers’ Knowledge, such Technology does not contain any “time bombs,”
“Trojan horses,” “back doors,” “trap doors,” “worms,” viruses, bugs, faults or
other devices or effects that (A) enable or assist any Person to access without
authorization such Technology, or (B) otherwise significantly adversely affect
the functionality of such Technology. To Sellers’ Knowledge, in the past twelve
(12) months, no Person has gained unauthorized access to the Technology that is
material to the Business. Sellers have implemented commercially reasonable
security measures and backup and disaster recovery plans with respect to the
Technology that is material to the Business. Sellers are in material compliance
with any privacy policies publicly posted by Sellers and any Laws relating to
personal data.

Section 3.9 Litigation. The statements of financial affairs filed with the
Bankruptcy Court by Sellers in the Chapter 11 Cases set forth all Litigation
brought by or against any Seller, and to Sellers’ Knowledge, there is no other
Litigation threatened in writing, before any Governmental Entity against any
Seller.

Section 3.10 Environmental, Health and Safety Matters.

(a) Sellers are in compliance with all applicable Environmental, Health and
Safety Requirements with respect to the Leased Real Property, except in any such
case where the failure to be in compliance would not have a Material Adverse
Effect, and there are no Liabilities under any Environmental, Health and Safety
Requirements with respect to the Business which would have a Material Adverse
Effect.

(b) To the Sellers’ Knowledge, no Seller has received any written notice or
report regarding any violation of Environmental, Health and Safety Requirements
or any Liabilities relating to the Business or any Leased Real Property arising
under Environmental, Health and Safety Requirements which violation has not been
appropriately addressed and/or cured in accordance with such Environmental,
Health and Safety Requirements. There are no Decrees outstanding, or any
Litigations pending or, to Sellers’ Knowledge, threatened, relating to
compliance with or Liability under any Environmental, Health and Safety
Requirements affecting the Business or any Leased Real Property.

 

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(c) Sellers have made available to Buyer such environmental reports, documents,
studies, analyses, investigations, audits and reviews in any Seller’s possession
as necessary to reasonably disclose to Buyer any environmental, health or safety
Liability known to Sellers with respect to the Leased Real Property which would
have a Material Adverse Effect.

(d) To Sellers’ Knowledge, there has been no release, threatened release,
contamination or disposal of Hazardous Substances at any Leased Real Property,
or waste generated by any Seller or any legally responsible predecessor
corporation thereof, that has given or could reasonably be expected to give rise
to any Liability under any Environmental, Health and Safety Requirement which
would have a Material Adverse Effect. There are no underground storage tanks,
asbestos-containing materials, lead-based products or polychlorinated biphenyls
on any of the Leased Real Property which could be reasonably expected to have a
Material Adverse Effect. To Sellers’ Knowledge, no property currently or
formerly owned or operated in connection with the Business has been contaminated
with any Hazardous Substance that could reasonably be expected to require any
investigation or remediation under Environmental, Health and Safety
Requirements.

(e) To Sellers’ Knowledge, no Seller has entered into any indemnification or
other agreements with any third party relating to any Liability or potential
Liability under any Environmental, Health and Safety Requirements.

Section 3.11 Employees and Employment Matters. No Seller is a party to or bound
by any collective bargaining agreement covering the Current Employees (as
determined as of the date of this Agreement), nor is there any ongoing strike,
walkout, work stoppage, or other material collective bargaining dispute
affecting any Seller with respect to the Business. To Sellers’ Knowledge, there
is no organizational effort being made or threatened by or on behalf of any
labor union with respect to the Current Employees (as determined as of the date
of this Agreement). Except for potential violations that are the subject of
ongoing Litigation as set forth in the statements of financial affairs filed
with the Bankruptcy Court by Sellers in the Chapter 11 Cases, within the ninety
(90) day period ending on the date hereof, no Seller has implemented any plant
closing or layoff of the Current Employees (as determined as of the date of this
Agreement) in violation of the United States Worker Adjustment and Retraining
Notification Act, or any similar applicable Law (collectively, the “WARN Act”).
Within five (5) days of the date hereof, Sellers shall make available to Buyer a
list of all Current Employees.

Section 3.12 Employee Benefit Plans.

(a) Section 3.12 of the Disclosure Schedule lists each material Employee Benefit
Plan that Sellers maintain or to which Sellers contribute. With respect to each
such Employee Benefit Plan:

(i) such Employee Benefit Plan, if intended to meet the requirements of a
“qualified plan” under Section 401(a) of the IRC, has received a favorable
determination letter from the United States Internal Revenue Service or may rely
on a favorable opinion letter issued by the Unites States Internal Revenue
Service; and

 

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(ii) Sellers have made available to Buyer accurate summaries of all such
Employee Benefit Plans.

(b) Each Employee Benefit Plan has been established, funded, maintained and
administered, in each case, in all material respects, in accordance with its
terms and all applicable Laws. As of the date hereof, there is no material
pending or, to Sellers’ Knowledge, threatened, Litigation relating to the
Employee Benefit Plans.

Section 3.13 Real Property.

(a) Sellers do not own any real property.

(b) Section 3.13(b) of the Disclosure Schedule sets forth the address of each
Leased Real Property, and a true and complete list of all Leases for such Leased
Real Property. Sellers have made available, or within seven (7) days of the date
hereof shall make available, to Buyer true and complete copies of such Leases
and all other material Contracts or instruments entered into or delivered in
connection therewith, as amended through the date hereof. With respect to each
of the Leases:

(i) such Lease is legal, valid, binding, enforceable and, to Sellers’ Knowledge,
in full force and effect against a Seller subject to proper authorization and
execution of such Lease by the other party thereto and the application of any
bankruptcy or other creditor’s rights Laws;

(ii) no Seller is in breach or default under such Lease and, to Sellers’
Knowledge, no event has occurred or circumstance exists which, with the delivery
of notice, the passage of time or both, would constitute such a breach or
default, except to the extent such breach or default would not, individually or
in the aggregate, materially impair, the continued use and operation of the
Leased Real Property to which it relates in the conduct of the Business as
presently conducted, and except for breaches or defaults caused by or resulting
from the Bankruptcy Events; and

(iii) the current and intended use of the Leased Real Property complies with all
applicable Laws.

Section 3.14 Permits. Section 3.14 of the Disclosure Schedule contains a list of
all material Permits that Sellers hold as of the date hereof in connection with
the operations of the Business. As of the date hereof, there is no Litigation
pending or, to Sellers’ Knowledge, threatened that seeks the revocation,
cancellation, suspension, failure to renew or adverse modification of any
material Assumed Permits, except where a failure of this representation and
warranty to be so true and correct could not reasonably be expected to have a
Material Adverse Effect. To Sellers’ Knowledge, all required filings with
respect to the material Assumed Permits have been made and all required
applications for renewal thereof have been filed, except where a failure of this
representation and warranty to be so true and correct could not reasonably be
expected to have a Material Adverse Effect.

 

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Section 3.15 Insurance. Section 3.15 of the Disclosure Schedule contains a list,
as of the date hereof, of all material Insurance Policies. The term “Insurance
Policies” does not include policies of insurance that fund or relate to any
Employee Benefit Plan. The material Insurance Policies (including the amounts
and deductibles thereunder) are, in the good faith judgment of Sellers,
commercially reasonable for the Business. To Sellers’ Knowledge, all of the
material Insurance Policies are in full force and effect and no written notice
of cancellation or termination has been received by Sellers with respect to any
of such Insurance Policies. All premiums due and payable by Sellers or their
Affiliates under the material Insurance Policies prior to the date hereof have
been duly paid. Except as disclosed on Section 3.15 of the Disclosure Schedule,
there is no material claim pending under any of the material Insurance Policies.

Section 3.16 Brokers’ Fees. Except for amounts due to Houlihan Lokey Capital,
Inc. (all of which shall be paid by Sellers), no Seller has entered into any
Contract to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which Buyer could
become liable or obligated to pay.

Section 3.17 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article III (as qualified,
amended, supplemented and modified by the Disclosure Schedule), neither a Seller
nor any other Person makes (and Buyer is not relying upon) any other express or
implied representation or warranty with respect to Sellers, the Business, the
Acquired Assets (including the value, condition or use of any Acquired Asset),
the Assumed Liabilities or the transactions contemplated by this Agreement, and
Sellers disclaim any other representations or warranties, whether made by
Sellers, any Affiliate of Sellers or any of their respective officers,
directors, employees, agents or Representatives. Except for the representations
and warranties contained in this Article III (as qualified, amended,
supplemented and modified by the Disclosure Schedule), each Seller (i) expressly
disclaims and negates any representation or warranty, express or implied, at
common law, by statute or otherwise, relating to the condition of the Acquired
Assets (including any implied or expressed warranty of title, merchantability or
fitness for a particular purpose, or of the probable success or profitability of
the ownership, use or operation of the Business or the Acquired Assets by Buyer
after the Closing), and (ii) disclaims all liability and responsibility for any
representation, warranty, projection, forecast, statement or information made,
communicated or furnished (orally or in writing) to Buyer or its Affiliates or
Representatives (including any opinion, information, projection or advice that
may have been or may be provided to Buyer by any director, officer, employee,
agent, consultant or Representative of any Seller or any of their Affiliates).
The disclosure of any matter or item in the Disclosure Schedule shall not be
deemed to constitute an acknowledgment that any such matter is required to be
disclosed or is material or that such matter would result in a Material Adverse
Effect.

 

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ARTICLE IV

BUYER’S REPRESENTATIONS AND WARRANTIES

Buyer represents and warrants to Sellers as follows:

Section 4.1 Organization of Buyer. Buyer is a limited liability company duly
organized, validly existing and in good standing under the Laws of the State of
Delaware and has all requisite limited liability company power and authority to
own, lease and operate its assets and to carry on its business as now being
conducted.

Section 4.2 Authorization of Transaction.

(a) Buyer has full limited liability company power and authority to execute and
deliver this Agreement and all Related Agreements to which it is a party and to
perform its obligations hereunder and thereunder.

(b) The execution, delivery and performance of this Agreement and all other
Related Agreements to which Buyer is a party have been duly authorized by Buyer,
and no other limited liability company action on the part of Buyer is necessary
to authorize this Agreement or the Related Agreements to which it is a party or
to consummate the transactions contemplated hereby or thereby.

(c) This Agreement has been duly and validly executed and delivered by Buyer,
and, upon their execution and delivery in accordance with the terms of this
Agreement, each of the Related Agreements to which Buyer is a party will have
been duly and validly executed and delivered by Buyer. Assuming that this
Agreement constitutes a valid and legally-binding obligation of Sellers, this
Agreement constitutes a valid and legally-binding obligation of Buyer,
enforceable against Buyer in accordance with its terms and conditions, subject
to applicable bankruptcy, insolvency, moratorium or other similar Laws relating
to creditors’ rights and general principles of equity. Assuming, to the extent
that they are a party thereto, that each Related Agreement constitutes a valid
and legally-binding obligation of Sellers, each Related Agreement to which Buyer
is a party, when executed and delivered, constituted or will constitute the
valid and legally-binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms and conditions, subject to applicable
bankruptcy, insolvency, moratorium or other similar Laws relating to creditors’
rights and general principles of equity.

Section 4.3 Noncontravention. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Article II) will
(i) conflict with or result in a breach of the certificate of incorporation or
bylaws, or other organizational documents, of Buyer, (ii) subject to any
consents required to be obtained from any Governmental Entity, violate any Law
to which Buyer is, or its assets or properties are subject, or (iii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under any Contract to which Buyer is a party or
by which it is bound, except, in the case of either clause (ii) or (iii), for
such

 

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conflicts, breaches, defaults, accelerations, rights or failures to give notice
as would not, individually or in the aggregate, reasonably be expected to
prevent, materially delay or materially impair to the ability of Buyer to
consummate the transactions contemplated by this Agreement or by the Related
Agreements. Buyer is not required to give any notice to, make any filing with,
or obtain any authorization, consent or approval of any Governmental Entity in
order for the Parties to consummate the transactions contemplated by this
Agreement or any of the Related Agreement, except where the failure to give
notice, file or obtain such authorization, consent or approval would not,
individually or in the aggregate, reasonably be expected to prevent, materially
delay or materially impair to the ability of Buyer to consummate the
transactions contemplated by this Agreement or by the Related Agreements.

Section 4.4 Financial Capacity. As of the Closing, Buyer (i) will have the
resources (including sufficient funds available to pay the Purchase Price and
any other expenses and payments incurred by Buyer in connection with the
transactions contemplated by this Agreement) and capabilities (financial or
otherwise) to perform its obligations hereunder, and (ii) will not have incurred
any obligation, commitment, restriction or Liability of any kind, that would
impair or adversely affect such resources and capabilities.

Section 4.5 Adequate Assurances Regarding Executory Contracts. Buyer as of the
Closing will be capable of satisfying the conditions contained in sections
365(b)(1)(C) and 365(f) of the Bankruptcy Code with respect to the Assumed
Contracts.

Section 4.6 Good Faith Purchaser. Buyer is a “good faith” purchaser, as such
term is used in the Bankruptcy Code and the court decisions thereunder. Buyer is
entitled to the protections of section 363(m) of the Bankruptcy Code with
respect to all of the Acquired Assets. Buyer has negotiated and entered into
this Agreement in good faith and without collusion or fraud of any kind.

Section 4.7 Brokers’ Fees. Neither Buyer nor any of its Affiliates has entered
into any Contract to pay any fees or commissions to any broker, finder or agent
with respect to the transactions contemplated by this Agreement for which any
Seller could become liable or obligated to pay.

Section 4.8 Condition of Business. Buyer hereby acknowledges and agrees that
notwithstanding anything expressed or implied herein to the contrary, except as
expressly set forth in Article III of this Agreement, Sellers (including each of
their directors, officers, employees, agents, shareholders, Affiliates,
consultants, counsel, accountants and other representatives) make no express or
implied representations or warranties whatsoever, including, without limitation,
any representation or warranty as to physical condition or value of any of the
Acquired Assets or the future profitability or future earnings performance of
the Business. Buyer will accept the Acquired Assets and assume the Assumed
Liabilities at the Closing “AS IS,” “WHERE IS” AND “WITH ALL FAULTS”.

 

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ARTICLE V

PRE-CLOSING COVENANTS

The Parties agree as follows with respect to the period between the execution of
this Agreement and the Closing (except as otherwise expressly stated to apply to
a different period):

Section 5.1 Certain Efforts; Cooperation.

(a) Each of the Parties shall use its commercially reasonable efforts, subject
to the orders of the Bankruptcy Court, to make effective the transactions
contemplated by this Agreement on or prior to the End Date (including
satisfaction, but not waiver, of the conditions to the obligations of the
Parties to consummate the transactions contemplated hereby set forth in Article
VII), except as otherwise provided in Section 5.2. Without limiting the
generality of the foregoing, each of the Parties shall use its commercially
reasonable efforts not to take any action, or permit any of its Subsidiaries to
take any action, to materially diminish the ability of any other Party to
consummate, or materially delay any other Party’s ability to consummate, the
transactions contemplated hereby, including taking any action that is intended
or would reasonably be expected to result in any of the conditions to any other
Party’s obligations to consummate the transactions contemplated hereby set forth
in Article VII to not be satisfied.

(b) Buyer undertakes to ensure, that there shall be no amendment, modification,
termination, replacement, restatement, cancellation or other change made to the
Guarantee that could adversely affect the ability of Buyer to satisfy its
obligations under this Agreement or otherwise prevent or adversely affect or
delay the Closing.

(c) On and after the Closing, Sellers and Buyer shall use their commercially
reasonable efforts to take, or cause to be taken by themselves or any of their
respective Affiliates, all appropriate action, to do or cause to be done by
Sellers and Buyer or any of their respective Affiliates all things necessary,
proper or advisable under applicable Law, and to execute and deliver such
documents, ancillary agreements and other papers as may be required to carry out
the provisions of this Agreement and consummate and make effective the
transactions contemplated hereby, including in order to more effectively vest in
Buyer all of Sellers’ right, title and interest to the Acquired Assets, free and
clear of all Liens (other than Permitted Liens expressly contemplated by the
Sale Order).

(d) From and after the Closing Date until the Designation Deadline, Sellers
agree to reasonably cooperate, and shall not interfere, with Buyer or its
Representatives with respect to the operation of the Continuing Stores,
Designated Stores or Non-Continuing Stores. From and after the Closing Date, no
Seller shall voluntarily convert its Chapter 11 Bankruptcy Case to a Chapter 7
bankruptcy case, or otherwise cause a liquidation or equivalent event with
respect to any Seller, without providing Buyer with at least twenty (20) days’
prior written notice.

 

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Section 5.2 Notices and Consents.

(a) To the extent required by the Bankruptcy Code or the Bankruptcy Court,
Sellers shall give any notices to third parties, and each Seller shall use its
reasonable best efforts to obtain any third party consents or sublicenses.

(b) Sellers and Buyer shall cooperate with one another (a) in promptly
determining whether any filings are required to be or should be made or
consents, approvals, permits or authorizations are required to be or should be
obtained under any applicable Law in connection with this Agreement and the
transactions contemplated hereby and (b) in promptly making any such filings,
furnishing information required in connection therewith and seeking to obtain
timely any such consents, permits, authorizations, approvals or waivers.

(c) Subject to the terms and conditions set forth in this Agreement and
applicable Law, Buyer and Sellers shall (A) promptly notify the other Party of
any communication to that Party from any Governmental Entity in respect of any
filing, investigation or inquiry concerning this Agreement or the transactions
contemplated by this Agreement, (B) if practicable, permit the other Party the
opportunity to review in advance all the information relating to Sellers and
their respective Subsidiaries or Buyer and its Affiliates, as the case may be,
that appears in any filing made with, or written materials submitted to, any
third party and/or any Governmental Entity in connection with the Agreement and
the transactions contemplated by this Agreement and incorporate the other
Party’s reasonable comments, (C) not participate in any substantive meeting or
discussion with any Governmental Entity in respect of any filing, investigation,
or inquiry concerning this Agreement and the transactions contemplated by this
Agreement unless it consults with the other Party in advance, and, to the extent
permitted by such Governmental Entity, gives the other Party the opportunity to
attend, and (D) furnish the other Party with copies of all correspondences,
filings, and written communications between them and their Subsidiaries and
Representatives, on the one hand, and any Governmental Entity or its respective
staff, on the other hand, with respect to this Agreement and the transactions
contemplated by this Agreement, provided, however, that any materials or
information provided pursuant to any provision of this Section 5.2(c) may be
redacted before being provided to the other Party (i) to remove references
concerning the valuation of Buyer, Sellers, or any of their Subsidiaries,
(ii) financing arrangements, (iii) as necessary to comply with contractual
arrangements, and (iv) as necessary to address reasonable privilege or
confidentiality issues. Sellers and Buyer may, as each deems advisable and
necessary, reasonably designate any competitively sensitive material provided to
the other under this Section 5.2(c) as “outside counsel only.” Such materials
and the information contained therein shall be given only to the outside legal
counsel and any retained consultants or experts of the recipient and shall not
be disclosed by such outside counsel to employees, officers or directors of the
recipient, unless express written permission is obtained in advance from the
source of the materials (Sellers or Buyer, as the case may be). Each of Sellers
and Buyer shall promptly notify the other Party if such Party becomes aware that
any third party has any objection to the Agreement on antitrust or
anti-competitive grounds.

 

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Section 5.3 Bankruptcy Actions.

(a) On or before March 16, 2015, Sellers shall serve and file a motion (the
“Sale Motion”) in the Chapter 11 Cases requesting that the Bankruptcy Court
enter the Sale Order at a hearing on the Sale Motion. Thereafter, Buyer and
Sellers shall take all actions as may be reasonably necessary to cause the Sale
Order to be issued, entered and become a Final Order. Each of Sellers and Buyer
agree to take any action reasonably necessary or appropriate to obtain the
issuance and entry of the Sale Order, including furnishing affidavits,
declarations or other documents or information for filing with the Bankruptcy
Court.

(b) Sellers shall provide appropriate notice of the hearings on the Sale Motion,
as is required by the Bankruptcy Code and the Bankruptcy Rules to all Persons
entitled to notice, including, but not limited to, all Persons that have
asserted Liens in the Acquired Assets, all parties to the Assumed Contracts and
all Taxing and environmental authorities in jurisdictions applicable to Sellers.
Sellers shall be responsible for making all appropriate filings relating thereto
with the Bankruptcy Court, which filings shall be submitted, to the extent
practicable, to Buyer prior to their filing with the Bankruptcy Court for
Buyer’s prior review.

(c) On or before March 18, 2015, Sellers shall serve a cure notice (the “Cure
Notice”) by first class mail on all non-debtor counterparties to all Non-Real
Property Contracts and Leases and provide a copy of the same to Buyer. The Cure
Notice shall inform each recipient that its respective Non-Real Property
Contract or Lease may be designated by Buyer as either assumed or rejected, and
the timing and procedures relating to such designation, and, to the extent
applicable (i) the title of the Non-Real Property Contract or Lease, (ii) the
name of the counterparty to the Non-Real Property Contract or Lease,
(iii) Sellers’ good faith estimates of the Cure Amounts required in connection
with such Non-Real Property Contract or Lease, (iv) the identity of Buyer and
(v) the deadline by which any such Non-Real Property Contract or Lease
counterparty may file an objection to the proposed assumption and assignment
and/or cure, and the procedures relating thereto.

(d) The Parties (in consultation with the Committee) shall consult with each
other regarding pleadings that any of them intends to file with the Bankruptcy
Court in connection with, or which might reasonably affect the Bankruptcy
Court’s approval of the Sale Order. Each Seller shall promptly provide Buyer and
its counsel with copies of all notices, filings and orders of the Bankruptcy
Court that such Seller has in its possession (or receives) pertaining to the
motion for approval of the Sale Order, or any other order related to any of the
transactions contemplated by this Agreement, but only to the extent such papers
are not publicly available on the docket of the Bankruptcy Court or otherwise
made available to Buyer and its counsel. No Seller shall seek any modification
to the Sale Order by the Bankruptcy Court or any other Governmental Entity of
competent jurisdiction to which a decision relating to the Chapter 11 Cases has
been appealed, in each case, without the prior written consent of Buyer.

 

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(e) If the Sale Order, or any other orders of the Bankruptcy Court relating to
this Agreement or the transactions contemplated hereby shall be appealed by any
Person (or if any petition for certiorari or motion for reconsideration,
amendment, clarification, modification, vacation, stay, rehearing or reargument
shall be filed with respect to the Sale Order, or other such order), subject to
rights otherwise arising from this Agreement, Sellers shall use their reasonable
best efforts to prosecute such appeal, petition or motion and obtain an
expedited resolution of any such appeal, petition or motion.

(f) Notwithstanding anything expressed or implied herein to the contrary,
Sellers shall not consent or agree to the allowance or re-classification of any
Claim as an Administrative Claim or a Priority Claim without the prior written
consent of Buyer.

Section 5.4 Conduct of Business. Except as may be required by the Bankruptcy
Court or as agreed to in writing by Buyer, from the date hereof until the
Closing, Sellers shall use their commercially reasonable efforts to: (i) operate
the Business in the Ordinary Course of Business, including ordering and
purchasing Inventory, and making capital, sales and marketing expenditures,
(ii) preserve in all material respects the Acquired Assets (excluding sales of
Inventory in the Ordinary Course of Business), and (iii) preserve its current
relationships with the suppliers, vendors, customers, clients, contractors and
other Persons having business dealings with the Business. For the avoidance of
doubt, the Parties acknowledge that the foregoing shall not require Sellers to
breach any of the covenants set forth in this Agreement which obligate Sellers
to operate the Business in the Ordinary Course of Business. Without limiting the
generality of the foregoing, except as expressly required or contemplated in
this Agreement, from the date hereof until the Closing, without the prior
written consent of Buyer (which consent shall not be unreasonably withheld or
delayed), Sellers shall not, and shall not permit any of their Affiliates to:

(a) sell, lease (as lessor), transfer or otherwise dispose of (or permit to
become subject to any additional Lien, other than Liens expressly contemplated
by Sale Order, Liens arising under any Bankruptcy Court orders relating to the
use of cash collateral (as defined in the Bankruptcy Code), Liens arising in
connection with the DIP Financing and Liens that will not be enforceable against
any Acquired Asset following the Closing in accordance with the Sale Order) any
material Acquired Assets, other than (A) the sale of Inventory in the Ordinary
Course of Business, (B) the collection of receivables, (C) the use of prepaid
assets and Records in the conduct of the Business in the Ordinary Course of
Business, and (D) in connection with store closings listed on Section 5.4 of the
Disclosure Schedule or otherwise consented to by Buyer;

(b) conduct any store closings or “going out of business,” liquidation or
similar sales, other than those listed on Section 5.4 of the Disclosure Schedule
(or otherwise consented to by Buyer) or made with respect to stores with Leases
which by their terms or pursuant to a court order terminate prior to the
Closing;

 

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(c) declare, set aside, make or pay any dividend or other distribution
(excluding any payments made in accordance with the provisions of any applicable
services agreement between any Seller or any of its subsidiaries in the Ordinary
Course of Business) of any assets (including Cash) to any Affiliate or other
Person holding direct or indirect equity interests in any Seller;

(d) (i) grant or provide any severance or termination payments or benefits to
any Current Employee of Sellers or any of their Affiliates, except, in the case
of employees who are not officers, in the Ordinary Course of Business consistent
with past practice, (ii) increase the compensation, bonus or pension, welfare,
severance or other benefits of, pay any bonus to, or make any new equity awards
to any Current Employee of Sellers or any of their Affiliates, except for
increases in base salary in the Ordinary Course of Business consistent with past
practice for employees who are not officers, (iii) establish, adopt, amend or
terminate any Employee Benefit Plan or amend the terms of any outstanding
equity-based awards, (iv) take any action intended to accelerate the vesting or
payment, or fund or in any other way secure the payment, of compensation or
benefits under any Employee Benefit Plan, to the extent not already provided in
any such Employee Benefit Plan, (v) enter into any employment, severance, change
in control, termination, deferred compensation or other similar agreement with
any Current Employee of Sellers or their Affiliates, (vi) change any actuarial
or other assumptions used to calculate funding obligations with respect to any
Employee Benefit Plan or to change the manner in which contributions to such
plans are made or the basis on which such contributions are determined, except
as may be required by GAAP, (vii) forgive any loans to Current Employees of
Sellers or any of their Affiliates, or (viii) relocate any Current Employees to
the Headquarters;

(e) solely with respect to any action which could have an adverse effect on
Buyer or any of its Affiliates following the Closing, make or rescind any
material election relating to Taxes, settle or compromise any material claim,
Litigation or controversy relating to Taxes, or except as may be required by
applicable Law or GAAP, make any material change to any of its methods of Tax
accounting, methods of reporting income or deductions for Tax or Tax accounting
practice or policy from those employed in the preparation of its most recent Tax
Returns;

(f) acquire, dispose of, or allow to lapse any material assets or properties
(other than Excluded Assets) or make any other material investment in any such
event outside the Ordinary Course of Business;

(g) enter into or agree to enter into any merger or consolidation with any
corporation or other entity;

(h) except in the Ordinary Course of Business, cancel or compromise any material
Indebtedness or claim or waive or release any material right, in each case, that
is Indebtedness or a claim or right that is an Acquired Asset or Assumed
Liability;

 

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(i) introduce any material change with respect to the operation of the Business,
including any material change in the types, nature, composition or quality of
products or services sold in the Business, other than, in each case, in the
Ordinary Course of Business;

(j) enter into any material new Contract or modify, terminate, amend, restate,
supplement, renew or waive any rights under or with respect to any existing
material Contract or the DIP Financing;

(k) terminate, amend, restate, supplement, renew or waive any rights under or
with respect to, any Lease, or, other than in the Ordinary Course of Business,
any material Contract or Permit, or increase any payments required to be paid
thereunder (whether or not in connection with obtaining any Consents) by Buyer
after the Closing, or increase, or take any affirmative action not required by
the terms thereof that would result in any increase in, any operating expenses
of any Leases without Buyer’s written consent, not to be unreasonably withheld,
conditioned or delayed, provided, that such consent of Buyer may be conditioned
on a reasonable valuation adjustment based on the increased costs in an amount
to be determined in good faith;

(l) deviate from past practice in the Ordinary Course of Business with respect
to ordering or maintenance of Inventory;

(m) file any motion to pay any pre-Petition claims of any Person without the
express written consent of Buyer, unless such payments are consistent with the
terms and conditions of the DIP Financing and with the Cash Budget; or

(n) prepay any expenses unless expressly set forth in the Cash Budget.

Section 5.5 Notice of Developments. From the date hereof until the Closing Date,
Sellers (with respect to itself), as the case may be, shall promptly disclose to
Buyer, on the one hand, and Buyer shall promptly disclose to Sellers, on the
other hand, in writing (in the form of an updated Disclosure Schedule, if
applicable) after attaining knowledge (as applicable to each of Sellers and
Buyer) of any material failure of any of Sellers or Buyer to comply with or
satisfy any of their respective covenants, conditions or agreements to be
complied with or satisfied by it under this Agreement in any material respect;
provided, however, that the delivery of any notice pursuant to this Section 5.5
shall not limit or otherwise affect the remedies available to the party
receiving such notice under this Agreement.

Section 5.6 Access.

(a) Upon reasonable advance written request by Buyer, Sellers shall permit Buyer
and its Representatives to have reasonable access during normal business hours,
and in a manner so as not to interfere unreasonably with the normal business
operations of Sellers, to all premises, properties, personnel, Records and

 

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Contracts related to the Business, in each case, for the sole purpose of
evaluating the Business; provided, however, that, for avoidance of doubt, the
foregoing shall not require any Party to waive, or take any action with the
effect of waiving, its attorney-client privilege or any confidentiality
obligation to which it is bound with respect thereto or take any action in
violation of applicable Law.

(b) All information obtained pursuant to this Section 5.6 shall be subject to
the terms and conditions of the Confidentiality Agreement.

Section 5.7 Press Releases and Public Announcements. Prior to the Closing and
for a period of ninety days following the Closing Date, no Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of each of Buyer and WSI;
provided, however, that (a) any Party may disclose that this Agreement exists
(but not the terms hereof) and (b) any Party may make (and permit the making of)
any public disclosure that it believes in good faith is required by applicable
Law or court process (in which case the disclosing Party, as applicable, shall
use its reasonable best efforts to advise the other Parties, as applicable,
prior to making the disclosure).

Section 5.8 Bulk Transfer Laws. Buyer acknowledges that Sellers will not comply
with the provisions of any bulk transfer Laws of any jurisdiction in connection
with the transactions contemplated by this Agreement, and hereby waives all
claims related to the non-compliance therewith. The Parties intend that pursuant
to section 363(f) of the Bankruptcy Code, the transfer of the Acquired Assets
shall be free and clear of any Liens in the Acquired Assets, including any Liens
arising out of the bulk transfer Laws, and the Parties shall take such steps as
may be necessary or appropriate to so provide in the Sale Order.

Section 5.9 Suppliers. Sellers shall, following the request thereof by Buyer,
seek and use their respective commercially reasonable efforts to arrange
meetings and telephone conferences with material suppliers of Sellers as may be
reasonably requested by Buyer and necessary and appropriate for Buyer to
coordinate transition of such suppliers following the Closing. For the avoidance
of doubt, Buyer shall be permitted to contact any customers, suppliers or
licensors of the Business in connection with or pertaining to any matter;
provided, however, that during the period from the date hereof until the
Closing, (i) Buyer shall give prior notice to Sellers, and (ii) Sellers shall be
permitted, but shall not be obligated, to attend and participate in any meeting
or telephone conference with such customers, suppliers or licensors to the
extent reasonably requested.

Section 5.10 No Competing Transactions. Sellers shall not, and shall cause the
their Representatives not to: (a) initiate, solicit or encourage any inquiries
concerning an Acquisition Proposal or a Competing Transaction; (b) engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any Person relating to an Acquisition Proposal or a
Competing Transaction; (c) facilitate any effort or attempt to make or implement
an Acquisition Proposal; or (d) consummate or agree or commit to consummate an
Acquisition Proposal or a Competing Transaction. Sellers shall, and shall cause
their Representatives to, immediately cease or cause to be terminated any
existing activities, discussions or negotiations with any Person relating to any
of the foregoing activities.

 

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Section 5.11 Delivery of Disclosure Schedule. No later than March 20, 2015,
Sellers shall deliver to Buyer the “Disclosure Schedule”, which shall be in form
and substance reasonably acceptable to Buyer (it being understood that if any
disclosure set forth thereon is materially inconsistent with, or would cause the
representations and warranties of Sellers in this Agreements to be materially
inconsistent with, the information contained in the Data Room prior to the date
hereof or the schedules filed by Sellers in the Bankruptcy Court in connection
with the Chapter 11 Cases prior to the date hereof, then a Material Adverse
Effect shall be deemed to have occurred and Buyer shall be entitled to terminate
this Agreement pursuant to Section 8.1(b)(ii)).

ARTICLE VI

OTHER COVENANTS.

The Parties agree as follows with respect to the period from and after the
Closing:

Section 6.1 Cooperation. Each of the Parties shall cooperate with each other,
and shall use their commercially reasonable efforts to cause their respective
Representatives to cooperate with each other, to provide an orderly transition
of the Acquired Assets and Assumed Liabilities from Sellers to Buyer and to
minimize the disruption to the Business resulting from the transactions
contemplated hereby.

Section 6.2 Further Assurances. In case at any time from and after the Closing
any further action is necessary or reasonably required to carry out the purposes
of this Agreement, subject to the terms and conditions of this Agreement and the
terms and conditions of the Sale Order, at any Party’s request and sole cost and
expense, each Party shall take such further action (including the execution and
delivery to any other Party of such other reasonable instruments of sale,
transfer, conveyance, assignment, assumption and confirmation and providing
materials and information) as another Party may reasonably request as shall be
necessary to transfer, convey and assign to Buyer all of the Acquired Assets, to
confirm Buyer’s assumption of the Assumed Liabilities and to confirm Sellers’
retention of the Excluded Assets and Excluded Liabilities. Without limiting the
generality of this Section 6.2, to the extent that either Buyer or Sellers
discovers any additional assets or properties which should have been transferred
or assigned to Buyer as Acquired Assets but were not so transferred or assigned,
Buyer and Sellers shall cooperate and execute and deliver any instruments of
transfer or assignment necessary to transfer and assign such asset or property
to Buyer.

Section 6.3 Availability of Business Records. From and after the Closing, Buyer
shall promptly provide to Sellers and their respective Representatives and the
Trustee (after reasonable notice and during normal business hours and without
charge to Sellers) access to all Records included in the Acquired Assets for
periods prior to the Closing and reasonable access to Transferred Employees to
the extent such access is necessary in order for Sellers or the Trustee (as
applicable) to comply with applicable Law or any contract to which it is a
party, for liquidation, winding up, Tax reporting or other proper purposes and
so long as such access is subject to an obligation of confidentiality, and shall
preserve such Records until the latest of (i) seven years after the Closing
Date, (ii) the required retention period for all government contact information,
records or documents, (iii) the conclusion of all bankruptcy proceedings
relating to the Chapter 11 Cases or (iv) in the case of Records related to
Taxes, the expiration of the statute

 

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of limitation applicable to such Taxes. Such access shall include access to any
information in electronic form to the extent reasonably available. Buyer
acknowledges that Sellers have the right to retain originals or copies of all of
Records included in the Acquired Assets for periods prior to the Closing. Prior
to destroying any Records included in the Acquired Assets for periods prior to
the Closing, Buyer shall notify Sellers thirty days in advance of any such
proposed destruction of its intent to destroy such Records, and Buyer shall
permit Sellers to retain such Records, at Sellers’ cost and expense. With
respect to any Litigation and claims that are Excluded Liabilities, Buyer shall
render all reasonable assistance that Sellers and the Trustee may request in
defending or prosecuting such Litigation or claim and shall make available to
Sellers and the Trustee such personnel as are most knowledgeable about the
matter in question, all without charge.

Section 6.4 Employee Matters.

(a) With the exception of the Selected Employees, each Seller shall, effective
as of the day prior to the Closing Date, discharge all Current Employees. Prior
to the Closing, Buyer (through and in consultation with Ed Thomas in his
capacity as chief executive officer of Buyer) shall offer (or cause a designee
of Buyer to offer) to employ those Current Employees (i) to operate the
Continuing Stores (once so designated) (provided that such Current Employees
will be advised that such offer may be rescinded if the Lease for such
Designated Store is rejected), with employment commencing as of the date that
such Designated Store becomes a Continuing Store and such Lease is assumed or
(ii) to be employed in the Buyer’s head office with employment commencing on the
Closing Date. For purposes of this Agreement, each Current Employee who receives
such an offer of employment shall be referred to as an “Offeree.” Prior to the
Closing Date, Buyer will provide Sellers with a schedule setting forth a list of
the names of all Offerees. Each Offeree who accepts such offer prior to the
Closing shall be referred to herein as a “Transferred Employee.” Except to the
extent Sellers fail to comply in any material respects with Section 6.4(c)(i)
and Section 6.4(c)(iii), Buyer hereby agrees that the offer to an Offeree shall
include a level of base salary, wages and benefits that are substantially
comparable in the aggregate to the base salary, wages and benefits provided to
such Offeree by Sellers as of the Closing Date.

(b) Each Current Employee of Sellers who is not a Transferred Employee shall be
referred to herein as an “Excluded Employee.”

(c) Following the date of this Agreement,

(i) Sellers shall allow Buyer or any of its Representatives reasonable access
upon reasonable advance notice to meet with and interview the Current Employees
who are members of executive management and other employees reasonably requested
during normal business hours; provided, however, that such access shall not
unduly interfere with the operation of the Business prior to the Closing;

 

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(ii) Sellers shall not, nor shall any Seller authorize or direct or give express
permission to any Affiliate, officer, director or employee of any Seller or any
Affiliate, to (A) interfere with Buyer’s or its Representatives rights under
Section 6.4(a) to make offers of employment to any Offeree, or (B) solicit or
encourage any Offeree not to accept, or to reject, any such offer of employment;
and

(iii) Sellers shall provide reasonable cooperation and information to Buyer or
the relevant Representative as reasonably requested by Buyer or such
Representative with respect to its determination of appropriate terms and
conditions of employment for any Offeree.

(d) Notwithstanding anything in this Agreement to the contrary,

(i) Sellers shall process the payroll for and pay, or cause to be paid, the base
wages, base salary and benefits that are due and payable on or prior to the
Closing Date with respect to all employees of Sellers;

(ii) from the Closing Date until (x) the date upon which a Designated Store or a
Non-Continuing Store becomes a Continuing Store or (y) the Rejection Effective
Date associated with such store has occurred, Buyer shall (or shall cause its
designee to) process the payroll for, and Buyer shall be liable for and shall
pay, or cause to be paid, the base wages, base salary and benefits that accrue
after the Closing Date with respect to all employees of Sellers that are
required, in Buyer’s sole discretion, to remain employed by Sellers to operate
such Designated Store or Non-Continuing Store (the “Selected Employees”); and

(iii) Buyer shall process the payroll for and shall pay, or cause to be paid,
base wages, base salary and benefits that accrue after the Closing Date with
respect to all Transferred Employees. Buyer shall withhold and remit all
applicable payroll taxes as required by Law after the Closing Date with respect
to Transferred Employees. In addition, Buyer shall (or shall cause its designee
to) process all employee and Tax reporting covering the periods prior to the
Closing in connection with the Excluded Employees and the Transferred Employees
that will be required to be prepared and delivered after the Closing.

For the avoidance of doubt, and without limiting the effect of any other term of
this Agreement, if Buyer prior to the Closing Date has designated a Lease for a
store for rejection by providing written notice to Sellers in accordance with
Section 2.6, Buyer shall not be liable for any employee/employment related
Liabilities with respect to the employees of such store, with the exception of
Buyer’s payment obligations to Seller as expressly set out in this Section 6.4.
Likewise, Buyer shall not be liable for any employee/employment Liabilities
related to the employment of Selected Employees in Designated Stores or
Non-Continuing Stores, with the exception of Buyer’s payment obligations to
Seller as expressly set out in this Section 6.4.

(e) Nothing contained herein shall be construed as requiring, and neither
Sellers nor any of their Affiliates shall take any affirmative action that would
have the effect of requiring, Buyer to continue any specific employee benefit
plan or to continue

 

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the employment of any specific person. Nothing in this Agreement is intended to
establish, create or amend, nor shall anything in this Agreement be construed as
establishing, creating or amending, any employee benefit plan, practice or
program of Buyer, any of its Affiliates or any of Sellers’ Employee Benefit
Plans, nor shall anything in this Agreement create or be construed as creating
any contract of employment or as conferring upon any Transferred Employee or
upon any other person, other than the parties to this Agreement in accordance
with its terms, any rights to enforce any provisions of this Agreement under
ERISA or otherwise.

(f) From and after the Closing Date until the Designation Deadline, Sellers
shall not voluntarily terminate any Selected Employee of Sellers without the
prior written consent of Buyer.

(g) At Closing, Buyer will offer employment to Ed Thomas, Christine Lee, Jon
Kubo, Rachel Page, Tom Hillebrandt and Kim Bajrech, on the terms outlined in the
email exchange between Ed Thomas and Greg Segall on March 7, 2015 concluding at
4:21 pm Pacific Time.

Section 6.5 Recording of Intellectual Property Assignments. All of the
Intellectual Property Assignments shall be recorded and filed by Buyer with the
appropriate Governmental Entities as promptly as practicable following the
Closing.

Section 6.6 Transfer Taxes. To the extent not exempt under section 1146 of the
Bankruptcy Code, then Buyer shall pay any stamp, documentary, registration,
transfer, added-value or similar Tax (each, a “Transfer Tax”) imposed under any
applicable Law in connection with the transactions contemplated by Article II of
this Agreement. Sellers and Buyer shall cooperate to prepare and timely file any
Tax Returns required to be filed in connection with Transfer Taxes described in
the immediately preceding sentence.

Section 6.7 Wage Reporting. Buyer and Sellers agree to utilize, or cause their
respective Affiliates to utilize, the standard procedure set forth in Internal
Revenue Service Revenue Procedure 2004-53 with respect to wage reporting.

Section 6.8 Acknowledgements. Buyer acknowledges that it has received from
Sellers certain projections, forecasts and prospective or third party
information relating to Sellers, the Business, the Acquired Assets, the Assumed
Liabilities or any related topics. Buyer acknowledges that (i) there are
uncertainties inherent in attempting to make such projections and forecasts and
in such information, (ii) Buyer is familiar with such uncertainties and is
taking full responsibility for making its own evaluation of the adequacy and
accuracy of all projections, forecasts and information so furnished, and
(iii) neither Buyer nor any other Person shall have any claim against any
Seller, its Affiliates or their respective Representatives with respect thereto.
Accordingly, without limiting the generality of Section 3.4, Sellers make no
representations or warranties with respect to such projections, forecasts or
information.

Section 6.9 Certain Avoidance Actions. The Parties acknowledge and agree that:
(a) upon execution of a Participating Vendor Agreement (in form and substance
acceptable to Buyer) with Buyer no later than ninety (90) days following the
Closing Date, the applicable

 

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Participating Vendor shall be entitled to a waiver and release of any and all
claims and causes of action against such Participating Vendor arising under
section 547 of the Bankruptcy Code; and (b) Sellers shall not pursue any
litigation, claims and/or causes of action (including causes of action under
Chapter 5 of the Bankruptcy Code) against any Participating Vendor (or any
vendor who could be a Participating Vendor, unless and until it is determined
that such vendor is not a Participating Vendor, in which case, Sellers may only
pursue a claim or cause of action against such vendor to the extent such claim
or cause of action is an Excluded Asset hereunder).

Section 6.10 Insurance Policies.

(a) To the extent that any current or prior Insurance Policy is not transferable
to Buyer at the Closing in accordance with the terms thereof, each Seller, as
applicable, shall hold such Insurance Policy for the benefit of Buyer, shall
reasonably cooperate with Buyer (at Buyer’s cost and expense) in pursuing any
claims thereunder, and shall pay over to Buyer promptly any insurance proceeds
paid or recovered thereunder with respect to the Acquired Assets or the Assumed
Liabilities. In the event Buyer determines to purchase replacement coverage with
respect to any such Insurance Policy, Sellers shall reasonably cooperate with
Buyer to terminate such Insurance Policy to the extent only applicable to the
Acquired Assets, and Sellers shall, at the option of Buyer, promptly pay over to
Buyer any refunded or returned insurance premiums received by any Sellers in
connection therewith (or, if applicable, Buyer’s pro rata portion thereof) or
cause such premiums to be applied by the applicable carrier to the replacement
coverage arranged by Buyer.

(b) To the extent that any current or prior Insurance Policy of any Seller
relates to the Acquired Assets or Assumed Liabilities and the Excluded Assets or
the Excluded Liabilities, and such Insurance Policy is transferred to Buyer at
the Closing, Buyer shall hold such Insurance Policy with respect to the Excluded
Assets or Excluded Liabilities, as applicable, for the benefit of Sellers, shall
reasonably cooperate with Sellers in pursuing any claims thereunder, and shall
pay over to Sellers promptly any insurance proceeds paid or recovered thereunder
with respect to the Excluded Assets or the Excluded Liabilities.

Section 6.11 Collection of Accounts Receivable.

(a) As of the Closing Date, each Seller hereby (i) authorizes Buyer to open any
and all mail addressed to any Seller relating to the Business or the Acquired
Assets and delivered to the offices of the Business or otherwise to Buyer if
received on or after the Closing Date and (ii) appoints Buyer or its
attorney-in-fact to endorse, cash and deposit any monies, checks or negotiable
instruments received by Buyer after the Closing Date with respect to Accounts
Receivable that are Acquired Assets or accounts receivable relating to work
performed by Buyer after the Closing, as the case may be, made payable or
endorsed to any Seller or Seller’s order, for Buyer’s own account.

 

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(b) As of the Closing Date, each Seller agrees that any monies, checks or
negotiable instruments received by any Seller after the Closing Date with
respect to Accounts Receivable (including, without limitation, Credit Card
Receivables) that are Acquired Assets or accounts receivable relating to work
performed by Buyer after the Closing, as the case may be, shall be held in trust
by such Seller for Buyer’s benefit and account, and promptly upon receipt by a
Seller of any such payment (but in any event within five (5) Business Days of
such receipt), such Seller shall pay over to Buyer or its designee the amount of
such payments. In addition, Buyer agrees that, after the Closing, it shall hold
and shall promptly transfer and deliver to Sellers, from time to time as and
when received by Buyer or its Affiliates, any cash, checks with appropriate
endorsements, or other property that Buyer or its Affiliates may receive on or
after the Closing which properly belongs to Sellers hereunder, including any
Excluded Assets.

(c) As of the Closing Date, Buyer shall have the sole authority to bill and
collect Accounts Receivable that are Acquired Assets and accounts receivable
relating to work performed by Buyer after the Closing.

Section 6.12 Name Changes. Neither Sellers nor any of their Affiliates shall
use, license or permit any third party to use, any name, slogan, logo or
trademark which is similar or deceptively similar to any of the names,
trademarks or service marks included in the Intellectual Property included in
the Acquired Assets, and within 21 days following the Closing Date, each Seller
shall change its corporate name to a name which (a) does not use the name “Wet
Seal”, “WTSL” or any other name that references or reflects any of the foregoing
in any manner whatsoever, (b) is otherwise substantially dissimilar to its
present name and (c) is approved in writing by Buyer.

Section 6.13 Treatment of Certain Claims; Plan.

(a) Notwithstanding anything expressed or implied herein to the contrary,
(i) neither Sellers nor Trustee shall consent or agree to the allowance or
re-classification of any Claim as an Administrative Claim or a Priority Claim
without the prior written consent of Buyer and (ii) no Administrative Claims or
Priority Claims can be classified or re-classified as a general unsecured claim
without the consent of the Sellers or the Trustee, as applicable, or an order of
the Bankruptcy Court.

(b) The Plan shall be (i) consistent with the terms of this Agreement and the
Letter Agreement and (ii) reasonably acceptable to Buyer.

ARTICLE VII

CONDITIONS TO CLOSING

Section 7.1 Conditions to Buyer’s Obligations. Subject to Section 7.3, Buyer’s
obligation to consummate the transactions contemplated hereby in connection with
the Closing is subject to satisfaction or waiver of the following conditions:

(a) as of the date hereof and as of the Closing (in each case, except for any
representation or warranty that is expressly made as of a specified date, in
which case as of such specified date), (i) each representation or warranty
contained in Section 3.1,

 

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Section 3.2 or Section 3.3 shall be true and correct in all respects, and
(ii) each other representation or warranty set forth in Article III shall be
true and correct in all respects, except where the failure of such
representations and warranties referred to in this clause (ii) to be true and
correct, individually or in the aggregate with other such failures, has not had,
and would not reasonably be expected to have, a Material Adverse Effect;
provided, however, that for purposes of determining the accuracy of
representations and warranties referred to in clause (ii) for purposes of this
condition, all qualifications as to “materiality” and “Material Adverse Effect”
contained in such representations and warranties shall be disregarded;

(b) Sellers shall have performed and complied with their covenants and
agreements hereunder to the extent required to be performed prior to the Closing
in all material respects, and Sellers shall have caused the documents and
instruments required by Section 2.8(a) to be delivered to Buyer (or tendered
subject only to Closing);

(c) Sellers shall have performed and complied with all their respective
obligations under the Employee Benefit Plans through the Closing in all material
respects;

(d) no Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Decree that is in effect and that has the
effect of making the Closing illegal or otherwise prohibiting the consummation
of the Closing;

(e) the Sale Order entered by the Bankruptcy Court shall have become a Final
Order and shall not be materially different than the form of Sale Order set
forth on Exhibit A attached hereto;

(f) from the date of this Agreement until the Closing Date, there shall not have
occurred and be continuing any Material Adverse Effect; and

(g) Sellers shall have delivered a certificate from an authorized officer of
Sellers to the effect that each of the conditions specified in Section 7.1(a),
Section 7.1(b) and Section 7.1(f) has been satisfied.

Section 7.2 Conditions to Sellers’ Obligations. Subject to Section 7.3, Sellers’
obligation to consummate the transactions contemplated hereby in connection with
the Closing are subject to satisfaction or waiver of the following conditions:

(a) as of the date hereof and as of the Closing (in each case, except for any
representation or warranty that is expressly made as of a specified date, in
which case as of such specified date), (i) each representation or warranty
contained in Section 4.1, Section 4.2 or Section 4.3 shall be true and correct
in all respects, and (ii) each other representation or warranty set forth in
Article IV shall be true and correct in all respects, except where the failure
of such representations and warranties referred to in this clause (ii) to be
true and correct, individually or in the aggregate with other such failures,
would not reasonably be expected to materially prevent, restrict or delay the

 

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consummation of the transactions contemplated hereby or by any Related
Agreement; provided, however, that for purposes of determining the accuracy of
representations and warranties referred to in clause (ii) for purposes of this
condition, all qualifications as to “materiality” and “Material Adverse Effect”
contained in such representations and warranties shall be disregarded;

(b) Buyer shall have performed and complied with its covenants and agreements
hereunder to the extent required to be performed prior to the Closing in all
material respects, and Buyer shall have caused the documents, instruments and
payments required by Section 2.8(b) to be delivered to Sellers (or tendered
subject only to Closing);

(c) no Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Decree that is in effect and that has the
effect of making the Closing illegal or otherwise prohibiting the consummation
of the Closing;

(d) the Sale Order entered by the Bankruptcy Court shall have become a Final
Order and shall not be materially different than the form of Sale Order set
forth on Exhibit A attached hereto except to the extent that Buyer has waived
any deviation from the Sale Order attached as Exhibit A; and

(e) Buyer shall have delivered a certificate from an authorized officer of Buyer
to the effect that each of the conditions specified in Section 7.2(a) and
Section 7.2(b) has been satisfied.

Section 7.3 No Frustration of Closing Conditions. Neither Buyer nor Sellers may
rely on the failure of any condition to its obligation to consummate the
transactions contemplated hereby set forth in Section 7.1 or Section 7.2, as the
case may be, to be satisfied if such failure was caused by such Party’s failure
to use its reasonable best efforts or commercially reasonable efforts, as
applicable, with respect to those matters contemplated by the applicable
Sections of this Agreement to satisfy the conditions to the consummation of the
transactions contemplated hereby or other breach of a representation, warranty
or covenant hereunder.

ARTICLE VIII

TERMINATION.

Section 8.1 Termination of Agreement. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing:

(a) by the mutual written consent of Buyer, on the one hand, and Sellers, on the
other hand;

(b) by Buyer by giving written notice to Sellers at any time prior to Closing
(i) in the event Sellers have breached any material covenant contained in this
Agreement in any material respect, Buyer has notified Sellers of the breach, and
the breach has continued without cure for a period of ten (10) Business Days
after the notice of the breach, or (ii) in the event that any condition set
forth in Section 7.1

 

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shall become incapable of being satisfied by the Closing, unless such failure
shall be due to the failure of Buyer to perform or comply with any of the
covenants hereof to be performed or complied with by it prior to the Closing,
and such condition is not waived by Buyer;

(c) by Sellers by giving written notice to Buyer at any time prior to Closing
(i) in the event Buyer has breached any material covenant contained in this
Agreement in any material respect, Sellers have notified Buyer of the breach,
and the breach has continued without cure for a period of ten (10) Business Days
after the notice of the breach, or (ii) in the event that any condition set
forth in Section 7.2 shall become incapable of being satisfied by the Closing,
unless such failure shall be due to the failure of Sellers to perform or comply
with any of the covenants hereof to be performed or complied with by them prior
to the Closing, and such condition is not waived by Sellers;

(d) by Buyer, on the one hand, or Sellers, on the other hand, on any date that
is after the End Date if the Closing shall not have occurred by the End Date;
provided, however, that (i) Buyer shall not have the right to terminate this
Agreement under this Section 8.1(d) or Section 8.1(b) if, at the time of such
termination, Sellers would then be entitled to terminate this agreement pursuant
to Section 8.1(c) (subject only to delivery of notice and the opportunity to
cure, if curable, required by Section 8.1(c)), and (ii) Sellers shall not have
the right to terminate this Agreement under this Section 8.1(d) or
Section 8.1(c) if, at the time of such termination, Buyer would then be entitled
to terminate this agreement pursuant to Section 8.1(b) (subject only to delivery
of notice and the opportunity to cure, if curable, required by Section 8.1(b));
or

(e) by Buyer if (i) the Sale Order shall not have been entered by the Bankruptcy
Court by the End Date or (ii) the Sale Order shall not have become a Final Order
by the 15th day following entry of the Sale Order on the Bankruptcy Court
docket.

Section 8.2 Procedure Upon Termination. In the event of termination and
abandonment by Buyer, on the one hand, or Sellers, on the other hand, or both,
pursuant to Section 8.1, written notice thereof shall forthwith be given to the
other Party or Parties, and this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned, without further action by Buyer or
Sellers.

Section 8.3 Effect of Termination.

(a) If any Party terminates this Agreement pursuant to Section 8.1, then all
rights and obligations of the Parties hereunder shall terminate upon such
termination and shall become null and void (except that Article I (Definitions),
Article IX (Miscellaneous), and this Article VIII (Termination) shall survive
any such termination) and no Party shall have any Liability to any other Party,
as applicable, hereunder except as otherwise expressly set forth in this
Agreement.

 

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(b) Except as otherwise expressly set forth in this Agreement, nothing herein
shall relieve any Party from Liability for any breach of covenant occurring
prior to any termination of this Agreement.

(c) The Confidentiality Agreement shall survive any termination of this
Agreement and nothing in this Section 8.3 shall relieve Buyer or Sellers of
their respective obligations under the Confidentiality Agreement.

Section 8.4 Deposit.

(a) If this Agreement is terminated pursuant to any provision of Section 8.1,
other than Section 8.1(c)(i), then the Deposit shall be returned to Buyer within
two Business Days of such termination.

(b) If this Agreement is terminated pursuant to Section 8.1(c)(i) and Buyer is
in material breach of this Agreement at the time of termination, then the
Deposit shall be disbursed to Sellers within two Business Days of such
termination (it being understood and agreed that disbursement of the Deposit to
Sellers shall be liquidated damages and Sellers shall not have any other rights
or remedies at law or in equity).

(c) Buyer and Sellers hereby acknowledge that the obligation to deliver the
Deposit (to the extent due hereunder) shall survive the termination of this
Agreement and shall be paid pursuant to the terms herein.

ARTICLE IX

MISCELLANEOUS.

Section 9.1 Expenses. Except as otherwise provided in this Agreement or a
Related Agreement, Sellers and Buyer shall bear their own expenses, including
attorneys’ fees, incurred in connection with the negotiation and execution of
this Agreement, the Related Agreements and each other agreement, document and
instrument contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby. Notwithstanding the foregoing, in
the event of any action or proceeding to interpret or enforce this Agreement,
the prevailing Party in such action or proceeding (i.e., the Party who, in light
of the issues contested or determined in the action or proceeding, was more
successful) shall be entitled to have and recover from the non-prevailing Party
such costs and expenses (including, but not limited to, all court costs and
reasonable attorneys’ fees) as the prevailing Party may incur in the pursuit or
defense thereof.

Section 9.2 Entire Agreement. This Agreement constitutes the entire agreement
among the Parties and supersedes any prior understandings, agreements or
representations (whether written or oral) by or among the Parties, written or
oral, with respect to the subject matter hereof, except for the Guarantee and
the Related Agreements.

Section 9.3 Incorporation of Schedules, Exhibits and Disclosure Schedule. The
schedules, appendices and exhibits to this Agreement, the documents and other
information made available in the Disclosure Schedule are incorporated herein by
reference and made a part hereof.

 

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Section 9.4 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by each
Party except as expressly provided herein. No waiver of any breach of this
Agreement shall be construed as an implied amendment or agreement to amend or
modify any provision of this Agreement. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver, nor shall such waiver be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent default, misrepresentation or breach of warranty or
covenant. No conditions, course of dealing or performance, understanding or
agreement purporting to modify, vary, explain or supplement the terms or
conditions of this Agreement shall be binding unless this Agreement is amended
or modified in writing pursuant to the first sentence of this Section 9.4 except
as expressly provided herein. Except where a specific period for action or
inaction is provided herein, no delay on the part of any Party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof.

Section 9.5 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and
permitted assigns. None of the Parties may assign either this Agreement or any
of its rights, interests or obligations hereunder without the prior written
approval of all Parties; provided, however, that Buyer shall be permitted to
assign any of its rights hereunder to one or more of its Affiliates, as
designated by Buyer in writing to Sellers; provided, however, Buyer shall remain
liable for all of its obligations under this Agreement after any such
assignment.

Section 9.6 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing except as expressly provided
herein. Any notice, request, demand, claim or other communication hereunder
shall be deemed duly given (i) when delivered personally to the recipient;
(ii) one Business Day after being sent to the recipient by reputable overnight
courier service (charges prepaid); (iii) when sent by email (with written
confirmation of transmission); or (iv) three Business Days after being mailed to
the recipient by certified or registered mail, return receipt requested and
postage prepaid, and addressed to the intended recipient as set forth below:

If to any Sellers, then to:

Edmond S. Thomas, CEO

The Wet Seal, Inc.

26972 Burbank

Foothill Ranch, CA 92610

Email: Ed.Thomas@wetseal.com

with a copy to:

Michael Tuchin

Klee, Tuchin, Bogdanoff & Stern LLP

1999 Avenue of the Stars

39th Floor

Los Angeles, CA 90067

Email: mtuchin@ktbslaw.com

 

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If to Buyer, then to:

c/o Versa Capital Management, LLC

Cira Centre

2929 Arch Street

Philadelphia, PA 19104

Attention: General Counsel

Email: tkennedy@versa.com

with copies (which shall not constitute notice) to:

Greenberg Traurig, LLP

77 W. Wacker Drive Suite 3100

Chicago, Illinois 60601

Attention: Nancy A. Peterman

Email: petermann@gtlaw.com

Any Party may change the mailing address or email address to which notices,
requests, demands, claims and other communications hereunder are to be delivered
by giving the other Party notice in the manner set forth in this Section 9.6.

Section 9.7 Governing Law; Jurisdiction. This Agreement shall in all aspects be
governed by and construed in accordance with the internal Laws of the State of
Delaware without giving effect to any choice or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction) that would
cause the application of the Laws of any jurisdiction other than the State of
Delaware, and the obligations, rights and remedies of the Parties shall be
determined in accordance with such Laws. The Parties agree that any Litigation
one Party commences against any other Party pursuant to this Agreement shall be
brought exclusively in the Bankruptcy Court; provided that if the Bankruptcy
Court is unwilling or unable to hear any such Litigation, then the courts of the
State of Delaware, sitting in New Castle County, Delaware, and the federal
courts of the United States of America sitting in in New Castle County,
Delaware, shall have exclusive jurisdiction over such Litigation.

Section 9.8 Consent to Service of Process. Each of the Parties hereby consents
to process being served by any Party, respectively, in any suit, action or
proceeding by delivery of a copy thereof in accordance with the provisions of
Section 9.6.

Section 9.9 WAIVERS OF JURY TRIAL. EACH OF THE PARTIES IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, THE RELATED AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.

 

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Section 9.10 Specific Performance.

(a) Each of the Parties acknowledges and agrees that the other Parties
(collectively, the “Enforcing Parties”) would be damaged irreparably in the
event any provision of this Agreement is not performed in accordance with its
specific terms or otherwise breached, so that, in addition to any other remedy
that each of the Parties may have under Law or equity, each of the Parties shall
be entitled to injunctive relief to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof (except as otherwise expressly set forth herein).

(b) Each of the Parties agrees that it shall not oppose the granting of specific
performance or an injunction sought in accordance with this Section 9.10 on the
basis that the Enforcing Parties have an adequate remedy at law or that any
award of specific performance is, for any reason, not an appropriate remedy
(except as otherwise expressly set forth herein). The Enforcing Parties shall
not be required to provide any bond or other security in connection with any
such injunction or other equitable remedy. The End Date shall be tolled from the
date any of the Enforcing Parties files a petition seeking specific performance
or an injunction under this Section 9.10 until a final, non-appealable, decision
regarding this matter is obtained from a court of competent jurisdiction.

Section 9.11 Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement. If any provision of this Agreement, or the
application thereof to any Person or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision, and (b) the
remainder of this Agreement and the application of such provision to other
Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability in any one
jurisdiction affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.

Section 9.12 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.

Section 9.13 No Survival of Representations, Warranties and Agreements. None of
the Parties’ representations, warranties, covenants and other agreements in this
Agreement, including any rights of the other Party or any third party arising
out of any breach of such representations, warranties, covenants and other
agreements, shall survive the Closing, except for (i) those covenants and
agreements contained herein that by their terms apply or are to be performed in
whole or in part after the Closing, (ii) this Article IX, and (iii) all defined
terms set forth in Article I that are referenced in the foregoing provisions
referred to in clauses (i) and (ii) above.

Section 9.14 Construction. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms. Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular

 

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form of names and pronouns shall include the plural and vice versa. The word
“including” and “include” and other words of similar import shall be deemed to
be followed by the phrase “without limitation.” The words “herein,” “hereto” and
“hereby,” and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision of this
Agreement. Unless expressly stated in connection therewith or the context
otherwise requires, the phrase “relating to the Business” and other words of
similar import shall be deemed to mean “relating to the operation of the
Business as conducted as of the date hereof.” Except as otherwise provided
herein, references to Articles, Sections, clauses, subclauses, subparagraphs,
Schedules, Exhibits, Appendices and the Disclosure Schedule herein are
references to Articles, Sections, clauses, subclauses, subparagraphs, Schedules,
Appendices, Exhibits and the Disclosure Schedule of this Agreement. Any
reference herein to any Law (or any provision thereof) shall include such Law
(or any provision thereof) and any rule or regulation promulgated thereunder, in
each case, including any successor thereto, and as it may be amended, modified
or supplemented from time to time. Any reference herein to “dollars” or “$”
means United States dollars.

Section 9.15 Computation of Time. In computing any period of time prescribed by
or allowed with respect to any provision of this Agreement that relates to
Sellers or the Chapter 11 Cases, the provisions of rule 9006(a) of the Federal
Rules of Bankruptcy Procedure shall apply.

Section 9.16 Mutual Drafting. Each of the Parties has participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement.

Section 9.17 Disclosure Schedule. All capitalized terms not defined in the
Disclosure Schedule shall have the meanings ascribed to them in this Agreement.
The representations and warranties of Sellers in this Agreement are made and
given, and the covenants are agreed to, subject to the disclosures and
exceptions set forth in the Disclosure Schedule. The disclosure of any matter in
any section of the Disclosure Schedule shall be deemed to be a disclosure with
respect to any other sections of the Disclosure Schedule to which such disclosed
matter reasonably relates, but only to the extent that such relationship is
reasonably apparent on the face of the disclosure contained in the Disclosure
Schedule. The listing of any matter shall expressly not be deemed to constitute
an admission by Sellers, or to otherwise imply, that any such matter is
material, is required to be disclosed under this Agreement or falls within
relevant minimum thresholds or materiality standards set forth in this
Agreement. No disclosure in the Disclosure Schedule relating to any possible
breach or violation of any Contract or law shall be construed as an admission or
indication that any such breach or violation exists or has actually occurred. In
no event shall the disclosure of any matter in the Disclosure Schedule be deemed
or interpreted to expand the scope of Sellers’ representations, warranties
and/or covenants set forth in this Agreement. All attachments to the Disclosure
Schedule are incorporated by reference into the Disclosure Schedule in which
they are directly or indirectly referenced. The information contained in the
Disclosure Schedule is in all events subject to the Confidentiality Agreement.

 

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Section 9.18 Headings; Table of Contents. The section headings and the table of
contents contained in this Agreement and the Disclosure Schedule are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

Section 9.19 Counterparts; Facsimile and Email Signatures. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same instrument. This
Agreement or any counterpart may be executed and delivered by facsimile or email
with scan attachment copies, each of which shall be deemed an original.

Section 9.20 Time of Essence. Time is of the essence of this Agreement.

Section 9.21 General Releases.

(a) Effective upon the Closing, Sellers, on behalf of themselves and their
respective past, present and future subsidiaries, parents, divisions,
Affiliates, agents, representatives, insurers, attorneys, successors and assigns
(collectively, the “Seller Releasing Parties”), hereby release, remise, acquit
and forever discharge the Buyer and its past, present and future subsidiaries,
parents, divisions, Affiliates, agents, representatives, insurers, attorneys,
successors and assigns, and each of its and their respective directors,
managers, officers, employees, shareholders, members, agents, representatives,
attorneys, contractors, subcontractors, independent contractors, owners,
insurance companies and partners (collectively, the “Buyer Released Parties”),
from any and all claims, contracts, demands, causes of action, disputes,
controversies, suits, cross-claims, torts, losses, attorneys’ fees and expenses,
obligations, agreements, covenants, damages, Liabilities, costs and expenses,
whether known or unknown, whether anticipated or unanticipated, whether claimed
or suspected, whether fixed or contingent, whether yet accrued or not, whether
damage has resulted or not, whether at law or in equity, whether arising out of
agreement or imposed by statute, common law of any kind, nature, or description,
including, without limitation as to any of the foregoing, any claim by way of
indemnity or contribution, which any Seller Releasing Party has, may have had or
may hereafter assert against any Buyer Released Party arising from or related in
any way, either directly or indirectly, to any action or inaction of any Buyer
Released Party relating in any way to Sellers and/or the Business, including
without limitation, any action or inaction of any Buyer Released Party relating
to the Chapter 11 Cases; provided, however, that the foregoing release shall not
apply to the Sellers’ rights or the Buyer’s obligations under this Agreement
(including Section 6.10 hereof), any Related Agreements and/or any other
agreements entered into in connection with the transactions contemplated hereby.

(b) Effective upon the Closing, Buyer, on behalf of itself and its past, present
and future subsidiaries, parents, divisions, successors and assigns
(collectively, the “Buyer Releasing Parties”), hereby releases, remises, acquits
and forever discharges each Seller and its past and present subsidiaries,
parents, divisions, agents, representatives, attorneys, successors and assigns,
and each of its and their respective directors, managers, officers, employees,
shareholders, members, agents, representatives, attorneys, owners and partners
(collectively, the “Seller Released Parties”), from any and all claims,

 

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contracts, demands, causes of action, disputes, controversies, suits,
cross-claims, torts, losses, attorneys’ fees and expenses, obligations,
agreements, covenants, damages, Liabilities, costs and expenses, whether known
or unknown, whether anticipated or unanticipated, whether claimed or suspected,
whether fixed or contingent, whether yet accrued or not, whether damage has
resulted or not, whether at law or in equity, whether arising out of agreement
or imposed by statute, common law of any kind, nature, or description
(including, without limitation as to any of the foregoing, any claim by way of
indemnity or contribution), in each case, which any Buyer Releasing Party has,
may have had or may hereafter assert against any Seller Released Party to the
extent arising from or related in any way, either directly or indirectly, to any
action or inaction of any Seller Released Party with respect to the operation of
the Business prior to the Closing Date, including without limitation, any action
or inaction of any Seller Released Party relating to the Chapter 11 Cases prior
to the Closing Date; provided, however, that the foregoing release shall not
apply to (i) the Buyer’s rights or the Sellers’ obligations under or with
respect to this Agreement (including Section 6.10 hereof), any Related
Agreements, the DIP Financing and/or any other agreements entered into in
connection with the transactions contemplated hereby or thereby, (ii) the rights
of Buyer Releasing Parties under any Insurance Policy and/or (iii) any matter to
the extent not related to the Business.

[END OF PAGE]

[SIGNATURE PAGES FOLLOW]

 

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SIGNATURE PAGE TO

ASSET PURCHASE AGREEMENT

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

 

SELLERS:

THE WET SEAL, INC.

THE WET SEAL RETAIL, INC.

WET SEAL CATALOG, INC.

WET SEAL GC, LLC

By

/s/ Edmond S. Thomas

Name: Edmond S. Thomas Title: Chief Executive Officer BUYER: MADOR LENDING, LLC
By

/s/ Paul Halpern

Name: Paul Halpern Title: Authorized Representative

--------------------------------------------------------------------------------

MADOR LENDING, LLC

March 12, 2015

The Wet Seal, Inc.

The Wet Seal Retail, Inc.

Wet Seal Catalog, Inc.

Wet Seal GC, LLC

c/o Lee R. Bogdanoff

Klee, Tuchin & Bogdanoff LLP

1999 Avenue of the Stars

Thirty-Ninth Floor

Los Angeles, California 90067

The Official Committee of Unsecured Creditors

c/o Jeffrey N. Pomerantz

Pachulski Stang Ziehl & Jones

10100 Santa Monica Boulevard

13th Floor

Los Angeles, CA 90067-4003

 

Re: The Wet Seal, Inc., et al. (collectively, the “Debtors”) Case No. 15-10081
(CSS) (Jointly Administered)

This Letter Agreement sets forth certain agreements reached between the Debtors,
the Official Committee of Unsecured Creditors (the “Committee”) and Mador
Lending, LLC (the “Buyer”), the Successful Bidder at the Auction conducted by
the Debtors on March 10, 2015 and concluded on March 12, 2015, in accordance
with those certain Bid Procedures approved by that Order Approving Certain Bid
Procedures Governing the Submission of Competing Proposals to (I)(A) Sponsor a
Plan of Reorganization for the Debtors or (B) Acquire All or Substantially All
of the Debtors’ Assets Pursuant to Section 363 of the Bankruptcy Code and (II)
Provide Debtor-In-Possession Financing entered by the United States Bankruptcy
Court for the District of Delaware (the “Bankruptcy Court”) on February 18, 2015
[Docket No. 329]:

 

  1. Any plan of reorganization to be proposed by the Debtors and/or the
Committee in connection with the above-referenced cases and confirmed in such
cases shall be consistent with the terms and conditions of that certain Asset
Purchase Agreement by and among the Debtors and Buyer, dated March 12, 2015 (the
“Asset Purchase Agreement”), and this Letter Agreement, and in a form reasonably
acceptable to Buyer (the “Plan”). Any capitalized terms used herein and not
otherwise defined shall have those meanings set forth in the Asset Purchase
Agreement.

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  2. The Plan shall contain releases and exculpations, including, without
limitation, for (a) Buyer, (b) all current and former members of the Committee,
(c) the Debtors and (d) each of their respective officers, directors, members,
affiliates, subsidiaries, professionals, advisors, representatives, agents,
successors and assigns.

 

  3. Buyer shall cause those claims previously held by Hudson Bay to be voted in
favor of the Plan (the “Claims”).

 

  4. The Claims shall be subordinated for distribution purposes under the Plan.

 

  5. Buyer shall not consent or agree to the allowance or reclassification of
any claim as a general unsecured claim without the written consent of the
Debtors and Committee or any trustee of a trust appointed in connection with the
Plan (the “Trustee”), as applicable, or by Order of Court.

 

  6. No amendments to the Plan shall be made by any party that adversely affects
the rights or recoveries of the general unsecured creditors without the
Committee’s consent.

 

  7. The consideration paid by Buyer under the Asset Purchase Agreement is the
only consideration to be provided by Buyer in connection with the Plan.

 

  8. There shall be no option for the general unsecured creditors or any other
creditors to receive equity in or from Buyer or any of its affiliates under the
Plan.

 

  9. Neither the Debtors nor the Trustee shall consent or agree to the allowance
or reclassification of any claim as an Administrative Claim (as defined in the
Asset Purchase Agreement) or Priority Claim (as defined in the Asset Purchase
Agreement) without the written consent of Buyer.

 

  10. At Buyer’s election, in accordance with the Asset Purchase Agreement, any
priority tax claim shall be retained by the Debtors’ estates and paid in
accordance with Section 1129(a)(9) of the Bankruptcy Code; provided that Buyer
shall be obligated to make any and all such payments.

 

  11. The Trustee and any oversight committee members shall be selected by the
Committee, in the Committee’s sole discretion.

 

  12. Buyer shall have no liability for any costs of administering any trust
established under the Plan.

 

  13. Buyer shall have the ability to designate any of the Debtors’ executory
contracts or unexpired leases for assumption or rejection to and including
May 15, 2015 subject to the terms and conditions of the Asset Purchase
Agreement; provided, however, that Buyer may extend such date until June 30,
2015 if Buyer funds the costs to be incurred by the Debtors during the period
following May 15, 2015 and to and including June 30, 2015 (the “Extended
Designation Deadline”).

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  14. The Plan shall be effective no earlier than May 15, 2015, unless agreed by
Buyer. To the extent that Buyer exercises its option for the Extended
Designation Deadline, the Plan shall be effective no earlier than June 30, 2015,
unless agreed by Buyer. Further, as provided in the Asset Purchase Agreement,
the Buyer shall fund the costs incurred by the Debtors that arise from and
during the Extended Designation Period.

 

  15. Notwithstanding the foregoing, with respect to the Debtors’ lease for the
offices located at 26972 Burbank, Foothill Ranch, CA 92610 (the “Headquarters
Lease”), Buyer shall be entitled to assume or reject the Headquarters Lease
until the earlier of (a) August 13, 2015 and (b) 90 days after the entry of an
order confirming the Plan (or such later date as may be agreed to by Buyer, the
Debtors and the landlord under the Headquarters Lease).

In exchange for the agreements set forth in this Letter Agreement and the terms
of the Asset Purchase Agreement, the Debtors and the Committee shall not and
shall cause their Representatives not to: (a) initiate, solicit or encourage any
inquiries concerning an Acquisition Proposal or a Competing Transaction;
(b) engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any Person relating to an
Acquisition Proposal or a Competing Transaction; (c) facilitate any effort or
attempt to make or implement an Acquisition Proposal; or (d) consummate or agree
or commit to consummate an Acquisition Proposal or a Competing Transaction.
Debtors and the Committee shall, and shall cause their Representatives to,
immediately cease or cause to be terminated any existing activities, discussions
or negotiations with any Person relating to any of the foregoing activities. The
Debtors and Committee shall use commercially reasonable efforts to obtain the
approval of this Letter Agreement and the Asset Purchase Agreement by the
Bankruptcy Court.

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By signing in the space below, the Debtors (subject to any necessary approval of
the Bankruptcy Court) and the Committee are agreeing to the terms of this Letter
Agreement and shall be deemed bound to such terms.

Very truly yours,

 

MADOR LENDING, LLC By:

/s/ Paul Halpern

Name: Paul Halpern Title: Authorized Signatory

The foregoing is accepted and agreed to on this 12th day of March, 2015:

 

THE WET SEAL, INC., THE WET SEAL RETAIL, INC., WET SEAL CATALOG, INC. AND WET
SEAL GC, INC. By:

/s/ Ed Thomas

Name: Ed Thomas Title: Chief Executive Officer THE OFFICIAL COMMITTEE OF
UNSECURED CREDITORS By:

/s/ Ronald M. Tucker

Name: Ronald M. Tucker Title: Chairperson of the Committee of Unsecured
Creditors

The following person is signing this Letter Agreement solely for purposes of
agreeing to Paragraphs 3 and 4 of this Letter Agreement:

 

RODAM, LLC By:

/s/ David Lorry

Name: David Lorry Title: Assistant Secretary of Versa Capital Management, LLC,
its Manager