Exhibit 10.1

AMENDED & RESTATED AGENCY AGREEMENT

This Agency Agreement (the “Agreement”) is entered into as of this 22nd day of
December, 2014, by and between DELIA*S, INC., a Delaware corporation
(“Merchant”), and a joint venture composed of GORDON BROTHERS RETAIL PARTNERS,
LLC, a Delaware limited liability company, and HILCO MERCHANT RESOURCES, LLC, a
Delaware limited liability company (collectively, the “Agent”; and collectively
with Merchant, the “Parties”).

RECITALS

WHEREAS, Merchant and Agent entered into that certain Agency Agreement dated
December 4, 2014 (the “Original Agreement”);

WHEREAS, Merchant operates certain retail stores in the United States and
desires that Agent act as Merchant’s exclusive agent for the limited purpose of
(a) selling all of the Merchandise (as hereinafter defined) located in
Merchant’s retail store location(s) identified on Exhibit A-1 attached hereto
(each individually a “Store”, and collectively the “Stores”) and in Merchant’s
distribution centers identified on Exhibit A-2 attached hereto (each
individually a “Distribution Center”, and collectively the “Distribution
Centers” and collectively with the Stores, the “Closing Locations”), through the
Stores and through the Merchant’s Direct Business Platform (as defined below),
and (b) selling all of the Owned FF&E (as hereinafter defined) located in the
Stores, Merchant’s corporate office and the Distribution Center (in each case
subject to Section 15 below), in each case by means of a “sale on everything”,
“everything must go”, or similarly themed sale, and, subject to entry of an
Approval Order, as a “store closing” or “going-out-of-business” sale (in each
case as further described below, the “Sale”);

WHEREAS, on December 7, 2014, the Merchant and certain affiliates filed
voluntary petitions for relief under title 11, United States Code (the
“Bankruptcy Code”) with the United States Bankruptcy Court for the Southern
District of New York (the “Bankruptcy Court”);

WHEREAS, on December 10, 2014, the Bankruptcy Court entered an order approving
the conduct of the Sale on an interim basis (the “Interim Approval Order”);

WHEREAS, on December 12, 2014, the Official Committee of Unsecured Creditors
(the “Committee”) was formed. Following formation of the Committee, the
Committee informally objected to various provisions of the Original Agreement
(the “Committee Objections”). Thereafter, representatives of the Merchant,
Committee, the Lender, and the Agent engaged in substantial, arm’s length, good
faith negotiations with respect to the Original Agreement and the Committee
Objections;

WHEREAS, the Merchant and Agent, with the consent of the Committee, desire to
amend and restate the Original Agreement with this Agreement.

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NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Agent and Merchant hereby agree as
follows:

 

Section 1. Definitions and Exhibits

1.1 Defined Terms. The terms set forth below are defined in the Sections
referenced of this Agreement:

 

Defined Term

  

Section Reference

Additional Agent Merchandise    Section 8.9(a) Additional Taxes and Penalties   
Section 8.3(a) Adjustment Amount    Section 3.3(a) Agency Accounts    Section
3.3(b)(ii) Agency Documents    Section 11.1(b) Agent    Preamble Agent Claim   
Section 12.5 Agent Collateral    Section 16.11(a) Agent Indemnified Parties   
Section 8.3(a) Agreement    Preamble All Inclusive Guaranty Percentage   
Section 3.1(a) Applicable General Laws    Section 2(c) Approval Order    Section
2(b) Bankruptcy Code    Section 2(b) Bankruptcy Court    Section 2(b) Benefits
Cap    Section 4.1(c) Bid Protections    Section 16.12(b) Break-Up Fee   
Section 16.12(b) Central Services    Section 4.1 Closing Locations    Preamble
Committee    Recitals Competing Bid    Section 16.12(a) Cost Factor    Section
3.1(d) Cost Factor Threshold    Section 3.1(d) Cost File    Section 5.3(a) Cost
Value    Section 5.3(a) DC FF&E Commission    Section 15(a) DC FF&E Commission
Option    Section 15(a) DC FF&E Disposition Budget    Section 15(a) DC FF&E
Disposition Expenses    Section 15(a) DC FF&E Guaranty Amount    Section 15(a)
DC FF&E Guaranty Option    Section 15(a) DC FF&E Sale Election Deadline   
Section 15(a) DC FF&E Sale Option    Section 15(a) Defective Merchandise   
Section 5.2(b) Designated Deposit Accounts    Section 3.3(b)(i) Direct Business
Expense Reimbursement    Section 8.10 Direct Business Platform    Section 8.10

 

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Distribution Center    Recitals Distribution Center Merchandise    Section
5.2(b) Distribution Center Services    Section 4.1 Estimated Guaranteed Amount
   Section 3.3(a) Events of Default    Section 14 Excluded Benefits    Section
4.1 Excluded Defective Merchandise    Section 5.2(b) Excluded Pricing
Adjustments    Section 3.1(c)(ii) Existing Vendors    Section 8.9(a) Expenses   
Section 4.1 Expense Reimbursement    Section 16.12(b) Final Inventory Report   
Section 3.3(a) Final Reconciliation    Section 8.7(b)(i) Final Reconciliation
Settlement Date    Section 8.7(b)(i) Force Majeure Event    Section 8.8 Gross
Rings    Section 5.3(b)(iii) Gross Rings Period    Section 5.3(b)(iii)
Guaranteed Amount    Section 3.1 Guaranty Percentage    Section 3.1 Hazardous
Materials    Section 15(d) In-Transit Merchandise    Section 5.2(b) In-Transit
Receipt Deadline    Section 5.2(b) Interim Guaranty Installments    Section
3.3(a) Initial Guaranty Payment    Section 3.3(a) Interim Sale Period    Section
2(c) Interim Sale Period Expenses    Section 3.3(a) Interim Sale Proceeds   
Section 3.3(a) Inventory Date    Section 5.1 Inventory Taking    Section 5.1
Inventory Taking Instructions    Section 5.1 Inventory Taking Service    Section
5.1 Lender    Section 3.3(f) Letter of Credit    Section 3.3(g) Liquidation Sale
Laws    Section 2(b)(v) Lowest Location Price    Section 3.1(c)(i) Membership
Program Discount    Section 8.6(b) Merchandise    Section 5.2(a) Merchandise
Ceiling    Section 3.1(b) Merchandise Threshold    Section 3.1(b) Merchant   
Preamble Merchant’s Designated Account    Section 3.3(a) Merchant Consignment
Goods    Section 5.4 Merchant Indemnified Parties    Section 8.3(a) Net DC FF&E
Proceeds    Section 15(a) Non-CAM Trash Removal Charges    Section 4.1 Occupancy
Expenses    Section 4.1(a)

 

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Owned FF&E    Section 15(a) Parties    Preamble Payment Date    Section 3.3(a)
POS    Section 3.1(c)(i) Proceeds    Section 3.3(b) Receipt Deadline    Section
5.2(a) Remaining Initial Guaranty Payment    Section 3.3(a) Remaining
Merchandise    Section 3.2 Retail Price    Section 3.1(c)(i) Retained Employee
   Section 9.1 Retention Bonus    Section 9.4 Returned Merchandise    Section
8.5 Sale    Recitals Sale Commencement Date    Section 6.1 Sale Guidelines   
Section 8.1(h) Sale Term    Section 6.1 Sale Termination Date    Section 6.1
Sales Taxes    Section 8.3(a) Sales Tax Account    Section 8.3(a) Signage Costs
   Section 16.12(a) Store(s)    Recitals Store Sale Guaranty Percentage   
Section 3.1(a) Third Party    Section 4.1 Third Party Vendors    Section 8.9(a)
UCC    Section 8.9(c) Unapplied Interim Sale Proceeds    Section 3.3(a) Vacate
Date    Section 6.2 WARN Act    Section 9.1

1.2 Exhibits. The Exhibits and Schedules annexed to this Agreement, as listed
below, are an integral part of this Agreement:

 

Exhibit

  

Section Reference

  

Description

Exhibit A-1    Recitals    Stores Exhibit A-2    Recitals    Distribution Center
Exhibit 3.1(b)    Section 3.1(b)    Merchandise Ceiling/Threshold Adjustment
Exhibit 3.1(c)    Section 3.1(d)    Cost Factor Adjustment Exhibit 3.3(a)   
Section 3.3(a)    Merchant’s Designated Account Exhibit 3.3(h)    Section 3.3(h)
   Form of Letter of Credit Exhibit 4.1(a)    Section 4.1(a)    Store Occupancy
Expense Schedule Exhibit 5.1(a)    Section 5.1    Inventory Taking Instructions
Exhibit 5.2(b)(1)    Section 5.2(b)(1)    Distribution Center Merchandise
Exhibit 5.2(b)(2)    Section 5.2(b)(1)    Direct Business Merchandise Exhibit
8.1    Section 8.1    Sale Guidelines Exhibit 10.1(c)    Section 10.1(c)    Form
of Approval Order

 

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Exhibit 11.1(d)    Section 11.1(c)    Pre-Existing Liens Exhibit 11.1 (k)   
Section 11.1(k)    Merchant’s Promotions Since 11/1/14 Exhibit 11.1(l)   
Section 11.1(l)    Pending Matters Exhibit 11.1 (o)    Section 11.1(o)   
Extraordinary POS Activity Exhibit 11.1(q)    Section 11.1(q)    Store Leases
Expiring During Sale Term Exhibit 11.1 (u)    Section 11.1(u)   
Promotions/Discounts

 

Section 2. Appointment of Agent/Liquidation Sale Laws/Approval Order

(a) Appointment of Agent. Effective on the date hereof and subject to the entry
of the Approval Order, Merchant hereby irrevocably appoints Agent, and Agent
hereby agrees to serve, as Merchant’s exclusive agent for the limited purpose of
conducting the Sale and disposing of Merchant’s Owned FF&E at the Closing
Locations and the corporate offices, in accordance with the terms and conditions
of this Agreement.

(b) Approval Order. The order approving assumption of this Agreement and the
Sale (the “Approval Order”) shall be in substantially the form annexed hereto as
Exhibit 10.1(c), and otherwise be reasonably satisfactory to the Merchant and
Agent, and provide, inter alia, that:

(i) Merchant is authorized and directed to assume this Agreement and that this
Agreement (and each of the transactions contemplated hereby) is approved in its
entirety;

(ii) Merchant and Agent shall be authorized to continue to take any and all
actions as may be necessary or desirable to implement this Agreement and each of
the transactions contemplated hereby;

(iii) Agent shall be entitled to sell all Merchandise, Additional Agent
Merchandise, Merchant Consignment Goods and Owned FF&E hereunder free and clear
of all liens, claims or encumbrances thereon, with any presently existing liens
encumbering all or any portion of the Merchandise, Additional Agent Merchandise,
Merchant Consignment Goods, Owned FF&E, the Proceeds or any proceeds of the
foregoing attaching only to the Guaranteed Amount and other amounts to be
received by Merchant under this Agreement;

(iv) Agent shall have the right to use the Stores and all related Store and/or
Distribution Center Services, furniture, fixtures, equipment and other assets of
Merchant as designated hereunder for the purpose of conducting the Sale, free of
any interference from any entity or person subject to compliance with the Sale
Guidelines and Approval Order with respect to the Assets;

(v) Agent, as agent for Merchant, is authorized to conduct, advertise, post
signs and otherwise promote the Sale as a “sale on everything”, “everything must
go,” or similar themed sale, in accordance with the Sale Guidelines (as the same
may be modified and approved by the Bankruptcy Court), and as provided in the
Interim Approval Order, as a “store closing sales” and “going out of business”
sale, and subject to entry of the Approval Order as a “going-out-of-business”
sale and/or “store closing” sale, without compliance

 

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with all applicable laws, rules and regulations in respect of “going out of
business,” “store closing” or similar-themed sales (collectively, the
“Liquidation Sale Laws”), subject to compliance with the Sale Guidelines, the
Interim Approval Order, and Approval Order;

(vi) Agent shall be granted a limited royalty-free sub-license and right to use
until the Sale Termination Date the trademarks, trade names, logos, customer
lists, website, URL, mailing lists and email lists relating to and used in
connection with the operation of the Stores and the Direct Business Platform
solely for the purposes of advertising the Sale, selling Merchandise, Additional
Agent Merchandise, Merchant Consignment Goods and Owned FF&E, and otherwise
conducting the Sale in accordance with the terms of this Agreement;

(vii) all newspapers and other advertising media in which the Sale is advertised
shall be directed to accept the Approval Order as binding and to allow Merchant
and Agent to consummate the transactions provided for in this Agreement,
including, without limitation, the conducting and advertising of the Sale in the
manner contemplated by this Agreement;

(viii) all utilities, landlords, creditors, website and other Direct Business
Platform services providers, and all persons acting for or on their behalf shall
not interfere with or otherwise impede the conduct or advertising of the Sale,
institute any action in any court (other than in the Bankruptcy Court) or before
any administrative body which in any way directly or indirectly interferes with
or obstructs or otherwise impedes the conduct or advertising of the Sale;

(ix) the Bankruptcy Court shall retain jurisdiction over the parties to enforce
this Agreement;

(x) Agent shall not be liable for any claims against the Merchant other than as
expressly provided for in this Agreement;

(xi) Agent shall be authorized to include Additional Agent Merchandise in the
Sale;

(xii) subject to Agent having satisfied its obligations hereunder, any amounts
owed by Merchant to Agent under this Agreement shall be granted the status of
superpriority claims in Merchant’s Bankruptcy Case pursuant to Section 364(c) of
Bankruptcy Code senior to all other superpriority claims, including, without
limitation, to the superpriority claims of the Lender; provided that until the
Merchant receives payment in full of the Guaranteed Amount and Expenses, and any
such other amounts due to Merchant hereunder, any superpriority claim granted to
Agent hereunder shall be junior and subordinate in all respects to the security
interests and superpriority claims of Lender but solely to the extent of the
amount of the unpaid portion of the Guaranteed Amount and Expenses, and such
other amounts due to Merchant hereunder;

(xiii) Agent shall be granted a valid, binding, enforceable and perfected
security interest as provided for in Section 16.11 hereof without the necessity
of filing financing statements to perfect the security interests;

 

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(xiv) the Bankruptcy Court finds that time is of the essence in effectuating
this Agreement and proceeding with the Sale at the Stores uninterrupted;

(xv) Merchant’s decisions to (a) enter into this Agreement and (b) perform under
and make payments required by this Agreement is a reasonable exercise of the
Merchant’s sound business judgment consistent with its fiduciary duties and is
in the best interests of the Merchant, its estate, its creditors, and other
parties in interest;

(xvi) this Agreement was negotiated in good faith and at arms’ length between
the Merchant and Agent and that Agent is entitled to the protection of
Section 363(m) of the Bankruptcy Code;

(xvii) Agent’s performance under this Agreement will be, and payment of the
Guaranteed Amount under this Agreement will be made, in good faith and for valid
business purposes and uses, as a consequence of which Agent is entitled to the
protection and benefits of Sections 363(m) and 364(e) of the Bankruptcy Code;

(xviii) this Agreement is approved pursuant to Section 363 of the Bankruptcy
Code; and

(xix) in the event any of the provisions of the Approval Order are modified,
amended or vacated by a subsequent order of the Bankruptcy Court or any other
court, Agent shall be entitled to the protections provided in Sections 363(m)
and 364(e) of the Bankruptcy Code, and no such appeal, modification, amendment
or vacatur shall affect the validity and enforceability of the sale or the liens
or priority authorized or created under this Agreement or the Approval Order.

(c) During the period between the Sale Commencement Date and the entry of the
Approval Order (the “Interim Sale Period”), Agent shall be authorized to
advertise and conduct the Sale as a “sale on everything”, “everything must go”,
or similar-themed sale, and Agent shall be required to comply with applicable
federal, state and local laws, regulations and ordinances, including, without
limitation, all laws and regulations relating to advertising, permitting,
privacy, consumer protection, occupational health and safety and the
environment, together with all applicable statutes, rules, regulations and
orders of, and applicable restrictions imposed by, governmental authorities
(collectively, the “Applicable General Laws”), including, the Liquidation Sale
Laws, provided that such Sale is conducted in accordance with the terms of this
Agreement and the Sale Guidelines. As provided in the Interim Approval Order,
Agent shall be authorized to advertise and conduct the Sale as a “store closing”
and “going out of business sale” sale from and after the entry of the Interim
Approval Order until the Approval Order is entered. Upon entry of the Approval
Order, Agent shall be authorized to advertise and conduct the Sale as
“going-out-of-business” sale and “store closing sale” from and after the entry
of the Approval Order through the Sale Termination Date (the “Remaining Sale
Period”) shall continue to be required to comply with Applicable General Laws,
other than Liquidation Sale Laws, and, provided the Sale is conducted in
accordance with the this Agreement, the Sale Guidelines, the Interim Approval
Order, and Approval Order, Agent shall be deemed to be in compliance with
Applicable General Laws.

(d) Authority. Except as otherwise specifically provided in this Agreement,
Agent shall have no authority, and shall not represent that it has any
authority, to enter into any contract, agreement, or other arrangement or take
any other action by or on behalf of Merchant, that would have the effect of
creating any obligation or liability, present or contingent, on behalf of or for
the account of Merchant without Merchant’s prior written consent.

 

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Section 3. Guaranteed Amount and Other Payments

3.1 Payments to Merchant and Agent.

(a) Provided the Approval Order is entered no later than December 24, 2014, as a
guaranty of Agent’s performance hereunder, in addition to the payment of
Expenses (as provided for in Section 4.1 hereof), Agent guarantees that Merchant
shall receive an amount (the “Guaranteed Amount”) equal to the following:
(a) ninety-one percent (91%) (the “Guaranty Percentage”) of the aggregate Cost
Value of Merchandise. The Guaranteed Amount will be calculated based upon the
product of (x) the Guaranty Percentage multiplied by (y) the aggregate Cost
Value of the Merchandise included in the Sale as determined by (A) the Final
Inventory Report at the conclusion of the Inventory Taking by the Inventory
Taking Service after written verification and reconciliation thereof by Agent
and Merchant, in consultation with Lender and, the Committee, (B) the aggregate
Cost Value of the Distribution Center Merchandise included in the Distribution
Center Shipments, (C) the aggregate Cost Value of Merchandise sold during of the
Gross Rings Period (as adjusted for shrinkage per this Agreement), (D) the
aggregate Cost Value of In-Transit Merchandise included in the Sale; and (E) the
aggregate Cost Value of Returned Merchandise (not otherwise included in the
Inventory Taking). Agent shall pay to Merchant (or its designee) the Guaranteed
Amount in the manner and at the times specified in Section 3.3 below.

(b) The Guaranteed Percentage has been fixed based upon the Merchant’s
representation that (i) the aggregate Cost Value of the Merchandise (other than
Direct Business Merchandise) is not less than $13.95 million (the “Retail
Merchandise Threshold”) and not greater than $14.35 million (the “Retail
Merchandise Ceiling”) and (ii) the aggregate Cost Value of the Direct Business
Merchandise is not less than $4.782 million (the “Direct Merchandise Threshold”)
and not greater than $4.882 million (the “Direct Merchandise Ceiling”);
provided, that, solely for purposes of determining whether the aggregate Cost
Value of the Merchandise (other than Direct Business Merchandise) included in
the Sale is less than the applicable Merchandise Threshold, no adjustment shall
be made to the applicable Cost Value to account for the effect of any Prevailing
Discount Adjustment (applied to Distribution Center Merchandise, In-Transfer
Merchandise and/or Returned Merchandise) or Excluded Pricing Adjustment. To the
extent that the aggregate Cost Value of the Merchandise (other than Direct
Business Merchandise) included in the Sale is less than the Retail Merchandise
Threshold or greater than the Retail Merchandise Ceiling, then such deviation
shall not constitute a breach of any representation or warranty, or an Event of
Default; provided, however, that, the Guaranty Percentage shall be adjusted in
accordance with Exhibit 3.1(b) attached hereto. In addition, to the extent that
the aggregate Cost Value of the

 

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Direct Business Merchandise included in the Sale is less than the Direct
Merchandise Threshold or greater than the Direct Merchandise Ceiling, then such
deviation shall not constitute a breach of any representation or warranty, or an
Event of Default; provided, however, that, the Guaranty Percentage shall be
adjusted in accordance with Exhibit 3.1(b) attached hereto. Any adjustment to
the Guaranty Percentage provided for under this Section 3.1(b) shall be
cumulative with, and in addition to, any other adjustment provided for under
this Section 3.1(b) and otherwise in this Agreement, including, but not limited
to, any adjustment provided for under Exhibit 3.1(d) hereof.

(c) To the extent that Proceeds exceed the sum of (x) the Guaranteed Amount,
plus (y) Expenses of the Sale, plus (z)(i) an amount equal to ten percent
(10.0%) of the aggregate Cost Value of the Merchandise included in the Sale and
(ii) eight percent (8.0%) of the aggregate Proceeds attributable to the sale of
the Additional Agent Merchandise included in the Sale (the aggregate of (z)(i)
and (ii) being collectively defined as the “Agent’s Fee”; and the sum of (x),
(y) and (z) being collectively defined as the “Sharing Threshold”), then all
remaining Proceeds of the Sale above the Sharing Threshold shall be shared fifty
percent (50%) to Merchant (Merchant’s share of Proceeds beyond the Sharing
Threshold is the “Sharing Amount”) and fifty percent (50%) to Agent. Agent shall
pay the Sharing Amount, if any, to Merchant (or its designee), on the first
business day after the completion of the Final Reconciliation conducted pursuant
to Section 8.7(b) and shall remit such payment to the Merchant’s Designated
Account.

(d) The Guaranty Percentage has also been fixed based upon the assumption that
the aggregate Cost Value of the Merchandise included in the Sale as a percentage
of Retail Price of the Merchandise included in the Sale (without taking into
account any Prevailing Discount Adjustment (applied to Distribution Center
Merchandise, In-Transfer Merchandise and/or Returned Merchandise) and/or
Excluded Price Adjustments) (the “Cost Factor”) attributable to the Merchandise,
excluding the Direct Business Merchandise, shall not be greater than
twenty-seven and three-quarters of one percent (27.75%) (the “Store/DC
Merchandise Cost Factor Threshold”), and the Cost Factor attributable to the
Direct Business Merchandise included in the Sale shall not be greater than
thirty-four and seventh-tenths of one percent (34.7%) (the “Direct Business
Merchandise Cost Factor Threshold” and with the Store/DC Merchandise Cost Factor
Threshold, as applicable the “Cost Factor Threshold”). In the event that the
Cost Factor for the Merchandise (other than the Direct Business Merchandise) is
greater than the Store/DC Merchandise Cost Factor Threshold, then such deviation
shall not constitute a breach of any representation or warranty, or an Event of
Default; provided, however, that, the Guaranty Percentage shall be adjusted in
accordance with Exhibit 3.1(d) attached hereto. In addition, in the event that
the Cost Factor for the Direct Business Merchandise is greater than the Direct
Business Merchandise Cost Factor Threshold, then such deviation shall not
constitute a breach of any representation or warranty, or an Event of Default;
provided, however, that, the Guaranty Percentage shall be adjusted in accordance
with Exhibit 3.1(d) attached hereto. Any adjustment to the Guaranty Percentage
provided for under this Section 3.1(d) shall be cumulative with, and in addition
to, any other adjustment provided for under this Section 3.1(d) and otherwise in
this Agreement, including, but not limited to, any adjustment provided for under
Exhibit 3.1(b) hereof. For purposes of this Agreement:

(i) “Retail Price” means, with respect to each item of Merchandise, the lowest
of the lowest ticketed price, determined as of the Sale Commencement Date,
“Style Chain Current

 

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Retail” as reflected on the Cost File, other file price, marked price, shelf
price, hang-tag price, stickered price, PLU price, or other hard-marked price,
excluding Excluded Price Adjustments; provided, however, that, with respect to
Aged Merchandise, the “Retail Price” shall be the lower of (x) the Retail Price
as determined in accordance with the sentence to which this proviso is attached;
or (y) the original retail price for such item of Aged Merchandise, multiplied
by (y) fifty percent (50%). For purposes of calculating Retail Price, if an item
of Merchandise has more than one ticketed price, “Style Chain Current Retail” as
reflected on the Cost File, other file price, marked price, shelf price,
hang-tag price, stickered price, PLU price, or other hard-marked price, or if
multiple items of the same SKU have different ticketed, “Style Chain Current
Retail” as reflected on the Cost, other file, marked, shelf, hang-tag,
stickered, PLU, or other hard-marked prices and such pricing does not otherwise
qualify as an Excluded Price Adjustment, the lowest ticketed price, “Style Chain
Current Retail” as reflected on the Cost File, other file price, marked price,
shelf price, hang-tag price, stickered price, PLU price, or other hard-marked
price on any such item shall prevail for such item or for all such items within
the same SKU, as the case may be, that are located within the same location (as
the case may be, the “Lowest Location Price”), unless it is reasonably
determined by Merchant or Agent that the applicable Lowest Location Price was
mismarked, normal course markdowns had not been reflected or taken, or such item
was priced because it was damaged or marked as “as is,” in which case the
correct price shall control; provided, however, in determining the Lowest
Location Price with respect to any item of Merchandise at a Store or
Distribution Centers, the Lowest Location Price shall be determined based upon
the lowest Retail Price for such item on a per location basis. No adjustment to
Retail Price shall be made with respect to different Retail Prices for items
located in different locations.

(ii) “Excluded Price Adjustments” means the following discounts or price
adjustments offered by the Merchant by any means: (i) point of sale discounts or
similar adjustments regardless of duration; (ii) employee discounts;
(iii) member or customer appreciation points or coupons; (iv) multi-unit
purchase discounts; (v) adjustments for damaged, defective or “as-is”” items;
(vi) coupons (Merchant’s or competitors’) or similar type coupons/promotions,
“groupons”, catalog, website, or circular prices, or “buy one get one” type
discounts, or similar type discounts or promotions; (vii) customer savings pass
discounts or “bounce back” coupons, or discounts for future purchases based on
dollar value of past purchases; (viii) obvious ticketing or marking errors;
(ix) instant (in-store) or mail in rebates; or (x) similar customer specific,
temporary, or employee non-product specific discounts or pricing accommodations.

(e) To ensure accurate sales audit functions, Agent shall use Merchant’s
existing point-of-sale system for recording all sales of Merchandise (including
any sales of Additional Agent Merchandise) in the Stores and through the Direct
Business Platform, all of Merchant’s existing systems for recording all sales
(including sales of any Additional Agent Merchandise).

3.2 Payments to Agent. Subject to Agent’s obligation to pay in full the
Guaranteed Amount, and all Expenses, Agent shall be entitled to the Agent’s Fee
and, if applicable, Agent’s share of Proceeds in excess of the Sharing
Threshold. Provided that no Event of Default has occurred and continues to exist
on the part of Agent, all Merchandise and Additional Agent Merchandise remaining
at the conclusion of the Sale (“Remaining Merchandise”) shall become the
property of Agent, free and clear of all liens, claims, and encumbrances of any
kind or nature.

 

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Agent and its affiliates shall be authorized to sell or otherwise dispose of the
Remaining Merchandise and MOOS Inventory with all logos, brand names, and other
intellectual property on the Merchandise and MOOS Inventory intact, and shall be
authorized to advertise the sale of the Remaining Merchandise and MOOS Inventory
using Merchant’s name and logo.

3.3 Time of Payments; Proceeds; Control of Proceeds

(a) During the Interim Sale Period, as part of each weekly reconciliation as
provided for in Section 8.7(a), Merchant shall collect all of the Proceeds (the
“Interim Sale Proceeds”) and (x) all Interim Sale Proceeds shall first be
applied to the payment of Expenses that are incurred during the Interim Sale
Period and become due and owing (collectively, the “Interim Sale Period
Expenses”) and (y) all remaining Interim Sale Proceeds after payment of Interim
Sale Period Expenses (the “Unapplied Interim Sale Proceeds”) shall be retained
and applied by Merchant against the Guaranteed Amount (collectively, the
“Interim Guaranty Installments”) until the earlier of (i) receipt by Merchant of
the balance of the Estimated Guaranteed Amount, or (ii) entry of the Approval
Order. On the first business day after entry of the Approval Order (the “Payment
Date”), Agent shall pay to Merchant an amount equal to the difference between
(i) eighty percent (80%) of the Estimated Guaranteed Amount (as defined below)
(the “Initial Guaranty Payment”); and (ii) the aggregate amount of the Interim
Guaranty Installments retained by Merchant (with such differential being the
“Remaining Initial Guaranty Payment”). The Estimated Guaranteed Amount shall be
calculated by taking product of (x) the Guaranty Percentage multiplied by
(y) the estimated aggregate Cost Value of the Merchandise to be included in the
Sale (inclusive of Direct Business Merchandise), excluding any amounts
attributable to In-Transit Merchandise, if applicable) as reflected on
Merchant’s books and records at the close of business on the last business day
immediately preceding the Sale Commencement Date (the “Estimated Guaranteed
Amount”). On the Payment Date, the Remaining Initial Guaranty Payment shall be
made by wire transfer of immediately available funds to the account designated
on Exhibit 3.3(a) attached hereto (the “Merchant’s Designated Account”). The
balance of the Guaranteed Amount (including any amounts attributable to
In-Transit Merchandise not otherwise paid for or attributable to the inclusion
of the Direct Business Merchandise in the Sale), shall be paid by Agent by wire
transfer of immediately available funds to the Merchant’s Designated Account on
the earlier of: (x) the second business day following the issuance of the final
report of the aggregate Cost Value of the Merchandise counted by the Inventory
Taking Service following the completion of the Inventory Taking, after review,
reconciliation and mutual written verification thereof by Agent and Merchant, in
consultation with Lender (the “Final Inventory Report”); (y) the date that is
thirty (30) days after the Sale Commencement Date (in the case of (y) above,
Agent shall tender payment of the undisputed portion only on account of any
remaining portion of the Guaranteed Amount). With respect to the Direct Business
Merchandise, the balance of the Guaranteed Amount shall be paid as part of the
Final Reconciliation. In the event of a dispute as to the calculation of the
portion of the Guaranteed Amount, any such dispute shall be resolved in the
manner and at the times set forth in 8.7(b)(ii) hereof, and Agent’s failure to
pay such balance or undisputed portion shall entitle the Merchant and the Lender
(individually or collectively) to draw upon the Letter of Credit in accordance
with Section 3.3(g) hereof to the extent of such balance or undisputed portion.
Merchant and Agent shall exercise reasonable best efforts to reconcile the
Inventory Taking within ten (10) days after its completion. In the event that
the Initial Guaranty Payment is either less than or exceeds the Guaranteed
Amount, as applicable,

 

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Agent or Merchant, as the case may be, shall pay to Merchant or Agent, as the
case may be, the amount (the “Adjustment Amount”) by which the actual Guaranteed
Amount exceeds or is less than the sum of the Initial Guaranty Payment.

For purposes of this Agreement, “Proceeds” shall mean the aggregate of (i) the
total amount (in dollars) of all sales of Merchandise in the Stores and/or
through the Direct Business Platform provided for in Section 8.10 hereof;
(ii) all service revenue received by Merchant from the Stores and/or through the
Direct Business Platform (if applicable), in each case during the Sale Term and
exclusive of Sales Taxes; (iii) the total amount (in dollars) of all sales of
Additional Agent Merchandise (exclusive of Sales Taxes); (iv) all proceeds of
Merchant’s insurance for loss or damage to Merchandise arising from events
occurring during the Sale Term relating to the Merchandise and Additional Agent
Merchandise; (v) all amounts received from customers or other third parties on
account of postage, overnight delivery or other shipping charges related to the
delivery of Merchandise and Additional Agent Merchandise to the consumers; and
(vi) any and all proceeds received by Agent from the disposition of Remaining
Merchandise. For the avoidance of doubt: (1) proceeds from the sales at
Merchant’s Stores or through the Direct Business Platform for periods prior to
the Sale Commencement Date; (2) the proceeds from the sale of Merchant
Consignment Goods pursuant to Section 5.4 hereof (subject to Agent’s right to
receive the commission under Section 5.4 below); (3) all proceeds of Merchant’s
insurance for loss or damage to Merchandise arising from events occurring prior
to the Sale Commencement Date; (4) proceeds from the sale or other disposition
of Owned FF&E; (5) MOOS Proceeds; and (6) payments made by Agent on account of
the Guaranteed Amount, Expenses, Sharing Amount, MOOS Sharing Amount, and the
Letter of Credit, shall, in each case, not constitute “Proceeds” hereunder.

(b) Following the earlier of (i) payment of the Guaranteed Amount in full; or
(ii) entry of the Approval Order, all Proceeds shall be controlled by Agent in
the manner provided for below:

(i) Prior to the date Agent establishes the Agency Accounts (see clause
(ii) below), all Proceeds (including credit card Proceeds) shall be collected by
Merchant and deposited on a daily basis into depository accounts designated by,
owned and in the name of, Merchant for the Stores, which accounts shall be
designated for the deposit of Proceeds (including all cash, credit card
payments, checks and similar items of payment, deposits and any other amounts
contemplated by this Agreement (including proceeds from the sale of Additional
Agent Merchandise)), and the disbursement of amounts payable to or by Agent
hereunder (the “Designated Deposit Accounts”). Subject to the provisions of
Section 16.11 hereof, the Approval Order shall provide (a) that Merchant grants
to Agent a first priority security interest in and lien upon each Designated
Deposit Account to the extent of any Proceeds and any other amounts payable to
Agent deposited therein, and (b) for turnover to Agent of any such Proceeds (and
any other amounts payable to Agent deposited therein) in accordance with the
terms and provisions of this Agreement and the Approval Order, as applicable.
If, notwithstanding the provisions of this Section, Merchant or Lender receives
or otherwise has dominion over or control of any Proceeds, or other amounts due
to Agent (including proceeds from the sale of Additional Agent Merchandise),
Merchant and Lender shall hold the same and other amounts in trust for Agent,
and shall not deposit such Proceeds or other amounts due Agent hereunder in any
account except a Designated Deposit Account or as otherwise instructed by Agent.
Until such time as Agent

 

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establishes the Agency Accounts (see clause (ii) below), Merchant, Agent and
Lender shall cooperate with each other to establish and implement appropriate
steps and procedures to accomplish a daily reconciliation, and remittance to
Agent, of all Proceeds (including credit card Proceeds) and other amounts
contemplated by this Agreement that are deposited into the Designated Deposit
Accounts.

(ii) After payment of the Initial Guaranty Payment and delivery of the Letter of
Credit, Agent may establish its own accounts (including without limitation
credit card accounts and systems), dedicated solely for the deposit of the
Proceeds (including credit card Proceeds), and the disbursement of amounts
payable to Agent hereunder (the “Agency Accounts”), and Merchant shall promptly,
upon Agent’s reasonable request, execute and deliver all necessary documents to
open and maintain the Agency Accounts; provided, however, Agent may elect to
continue to use Merchant’s Designated Deposit Accounts as the Agency Accounts.
The Agency Accounts shall be dedicated solely to the deposit of Proceeds
(including credit card Proceeds) and other amounts contemplated by this
Agreement, and the distribution of amounts payable hereunder; provided that, in
the event (a) Agent elects to continue to use Merchant’s Designated Deposit
Accounts as the Agency Accounts, and (b) such accounts have amounts deposited
therein by Merchant that do not constitute Proceeds and/or other amounts payable
to Agent under this Agreement, then Merchant, Agent, upon its appointment, the
Committee and Lender shall cooperate with each other to establish and implement
appropriate steps and procedures to accomplish a daily reconciliation, and
remittance to Agent, of all Proceeds (including credit card Proceeds) and other
such amounts. Upon request, Agent shall deliver to Merchant and Lender copies of
all bank statements and other information relating to the Agency Accounts;
provided that, in the event Agent elects to continue to use Merchant’s
Designated Deposit Accounts as the Agency Accounts, Merchant shall deliver to
Agent copies of all bank statements and other information relating to such
accounts to enable Agent to track and trace deposited funds that constitute
Proceeds (including credit card Proceeds) and other amounts contemplated by this
Agreement. The Merchant shall not be responsible for, and Agent shall pay as an
Expense hereunder, all bank fees and charges, including wire transfer charges,
related to the Sale and Agency Accounts, whether received during or after the
Sale Term. Upon Agent’s notice to Merchant of Agent’s designation of the Agency
Accounts, all Proceeds of the Sale (including credit card Proceeds) shall be
deposited into the Agency Accounts.

(iii) Agent shall have the right to use Merchant’s credit card facilities,
including Merchant’s credit card terminals and processor(s), credit card
processor coding, and Merchant identification number(s) and existing bank
accounts for credit card Proceeds solely for purposes of the Sale, and for
processing transactions relating to Additional Agent Merchandise. In the event
that Agent elects to use Merchant’s credit card facilities, Merchant shall
process credit card transactions on behalf of Agent and for Agent’s account,
applying customary practices and procedures. Without limiting the foregoing,
Merchant shall cooperate with Agent to download data from all credit card
terminals each day during the Sale Term to effect settlement with Merchant’s
credit card processor(s), and shall take such other actions necessary to process
credit card transactions on behalf of Agent under Merchant’s identification
number(s). At Agent’s request, Merchant shall cooperate with Agent to establish
Merchant’s identification numbers under Agent’s name to enable Agent to process
all such credit card Proceeds (and proceeds from Additional Agent Merchandise)
for Agent’s own account. Merchant shall not be responsible for,

 

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and Agent shall pay as an Expense hereunder, all credit card fees, charges, and
chargebacks related to Merchandise and Additional Agent Merchandise sold during
the Sale, whether received during or after the Sale Term. Agent shall not be
responsible for, as an Expense or otherwise, any credit card fees, charges, or
chargebacks that do not relate to the Sale, whether received, prior to, during
or after the Sale Term.

(iv) Commencing on the first business day following the Payment Date, and
continuing on each business day thereafter, Merchant shall promptly pay to Agent
by wire transfer of immediately available funds all funds constituting Proceeds
(including, without limitation, Proceeds from credit card sales), and proceeds
from Additional Agent Merchandise that are deposited into the Designated Deposit
Accounts for the prior day. Agent shall, within a reasonable period of time
after the date of each such payment by Merchant, notify Merchant and Lender of
any shortfall in such payment, in which case, Merchant shall promptly pay to
Agent funds in the amount of any undisputed shortfall.

(c) Merchant and Agent further agree that if at any time during the Sale Term,
(i) Agent holds any amounts due to Merchant under this Agreement, Agent may, in
its discretion, after two (2) business days’ notice to Merchant, offset such
amounts being held by Agent against any undisputed amounts due and owing by, or
required to be paid by, Merchant hereunder, and (ii) Merchant holds any amounts
due to Agent under this Agreement, Merchant may, in its discretion, after two
(2) business days’ notice to Agent, offset such amounts being held by Merchant
against any undisputed amounts due and owing by, or required to be paid by,
Agent hereunder.

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

(e) Upon Agent’s failure to timely pay (i) the Adjustment Amount in the event
the Guaranteed Amount exceeds the Initial Guaranty Payment, (ii) Expenses, or
(iii) other undisputed amounts due by Agent under this Agreement, Lender or
Merchant, as applicable, shall be entitled to immediately draw upon the Letter
of Credit to the extent of such undisputed amount.

(f) If, and to the extent, the Agent over-funds any amounts in respect of the
Guaranteed Amount or the MOOS Guaranteed Amount hereunder (as determined
pursuant to the express terms of this Agreement) and such funding or payment
cannot be recovered by the Agent from Merchant under Section 3.3(a) or
Section 3.3(c), by means of an offset or otherwise, then Merchant agrees (or if
Merchant shall be unable to or otherwise for any reason fails to, and Salus
Capital Partners, LLC, in its capacity as administrative agent and collateral
agent (the “Lender”), has received such funding or payment, the Lender agrees)
to reimburse such undisputed amount of such overfunded amount to Agent within
two (2) business days of written demand thereof by Agent.

 

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(g) Guaranty Security. To secure payment of the balance of any unpaid portion of
the Guaranteed Amount, MOOS Guaranteed Amount, Expenses and other amounts due to
Merchant hereunder, on the first business day following the entry of the Interim
Approval Order, Agent shall deliver to Lender, as Merchant’s designee, an
irrevocable standby letter of credit, substantially in the form of Exhibit
3.3(h) attached hereto, in an original stated amount equal to the aggregate of
(x) twenty percent (20%) of the estimated Guaranteed Amount and MOOS Guaranteed
Amount (based upon Merchant’s books and records maintained in the ordinary
course as of the date immediately preceding the Payment Date), and (y) three
(3) weeks’ estimated Expenses (the “Letter of Credit”). The Letter of Credit
shall name Merchant as beneficiary. The Letter of Credit shall be delivered to
Lender, no later than the second business day following the Sale Commencement
Date, and shall be issued by a U.S. national bank selected by Agent and
reasonably acceptable to Merchant and Lender; for the avoidance of doubt, Bank
of America, N.A. or its affiliate shall be deemed acceptable to Merchant and
Lender. In the event that Agent fails to timely pay any undisputed amount
hereunder in respect of the Guaranteed Amount, the MOOS Guaranteed Amount,
Expenses and/or other amounts due to Merchant, as required under this Agreement,
Merchant shall be entitled to draw on the Letter of Credit to fund such
undisputed amount or obligation after five (5) business days’ written notice to
Agent. Merchant and Agent agree that, from time to time upon Agent’s request,
the face amount of the Letter of Credit shall be reduced by the aggregate amount
of payments made by Agent on account of the Guaranteed Amount and MOOS
Guaranteed Amount; provided, however, until the Final Reconciliation has been
completed, under no circumstances shall the face amount of the Letter of Credit
be reduced to an amount less than two (2) weeks’ estimated Expenses (and
Merchant and Lender shall cooperate with respect to each such request). The
Letter of Credit shall expire no earlier than sixty (60) days after the Sale
Termination Date; provided that, if, as of the tenth (10th) business day prior
to the scheduled expiration date of the Letter of Credit, there remains any
unresolved dispute as to the Guaranteed Amount and MOOS Guaranteed Amount,
Expenses and/or other amounts due to Merchant under this Agreement, Agent shall
cause the expiration date of the Letter of Credit to be extended for successive
thirty (30) day intervals (or such other longer duration as Merchant and Agent
may agree) until the subject dispute has been resolved and any additional
amounts due hereunder on account of the Guaranteed Amount, Expenses and/or other
amounts due to Merchant, have been paid to Merchant. If Agent has for any reason
not so extended the expiration date of the Letter of Credit by the date that is
ten (10) business days prior to the expiration date of the Letter of Credit (as
may have been extended previously), Merchant shall have the right to make a
drawing under the Letter of Credit in an amount equal to the amount(s) Merchant
asserts are then owing to Merchant. After completion of the Final Reconciliation
and payment in full of all amounts owing by Agent (including but not limited to
the Guaranteed Amount, MOOS Guaranteed Amount, and Expenses), Merchant and
Lender shall surrender the original Letter of Credit to the issuer thereof
together with written notification that the Letter of Credit may be terminated.
Upon Lender’s receipt of payment in full of its claims against the Merchant,
Lender shall promptly deliver the Letter of Credit to Merchant.

(h) Agent and Merchant hereby acknowledge that, by December 5, 2014, Merchant
funded an Expense retainer to Agent in the amount of $600,000 (the “Retainer”)
to secure payment of Expenses, which Retainer shall be used to pay or reimburse
Agent for certain Expenses paid or to be paid by Agent prior to entry of the
Approval Order (inclusive of signage costs, supervision and Agent 50% share of
the Inventory Taking). During the first Weekly Sale Reconciliation following
entry of the Approval Order, Merchant shall be reimbursed or credited by Agent
for the Retainer.

 

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3.4 Additional Provisions Concerning MOOS Inventory

(a) “MOOS Inventory” means those goods referenced in the file “MOOS
Inventory.xlsx”, which file was provided by Merchant to Agent by email on
December 17, 2014 at 9:36 a.m. CT, and located at the “hilton annex” facility as
of the Sale Commencement Date.

(b) Provided the Approval Order is entered no later than December 24, 2014,
Agent guarantees that Merchant shall receive an amount (the “MOOS Guaranteed
Amount”) equal to thirty-six percent (36%) (the “MOOS Guaranty Percentage”) of
the aggregate Cost Value of MOOS Inventory, plus payment of the 3PL Expenses.

(c) The MOOS Guaranteed Amount will be calculated based upon the product of
(x) the MOOS Guaranty Percentage multiplied by (y) the aggregate Cost Value of
the MOOS Inventory as determined by a count of the MOOS Inventory conducted by a
third party logistics company (the “3PL”) designated by Agent, which 3PL shall
be reasonably acceptable to Merchant, Lender, and the Committee (the “MOOS
Inventory Count”). The MOOS Inventory Count shall be conducted by the 3PL in
accordance with instructions mutually acceptable to the 3PL, on the one hand,
and Agent, Merchant, Lender, and Committee, on the other hand (with each party
acting reasonably and taking into consideration the 3PL’s input and the costs
and expenses the 3PL may charge for atypical requirements); provided, further,
that representatives of the Agent, Merchant, the Committee, and Lender shall
have the right to be present during the MOOS Inventory Count. The 3PL shall be
responsible for picking up the MOOS Inventory from the Merchant, receiving the
MOOS Inventory at the 3PL’s facility, processing, counting, sorting, and
refurbishing the MOOS Inventory, and shipping the MOOS Inventory to buyers
(collectively, the “3PL Services”). The documented costs and expenses of the 3PL
for the 3PL Services shall be paid by the Agent (the “3PL Expenses”).

(d) Agent shall pay to Merchant (or its designee) the MOOS Guaranteed Amount as
follows: (i) eighty percent (80%) on the Payment Date and (ii) twenty percent
(20%) within two (2) business days after the MOOS Inventory Count is approved by
Agent, Merchant, Lender, and the Committee, with each party acting reasonably

(e) To the extent that proceeds (less applicable Sales Taxes) from the sale of
the MOOS Inventory (the “MOOS Proceeds”) exceed the sum of (x) the MOOS
Guaranteed Amount, plus (y) 3PL Expenses, plus (z) five percent (5.0%) of the
aggregate Cost Value of MOOS Inventory (as determined based on the MOOS
Inventory Count) (the “MOOS Agent’s Fee” and the sum of (x), (y) and (z) being
collectively defined as the “MOOS Sharing Threshold”), then all remaining MOOS
Proceeds above the MOOS Sharing Threshold shall be shared eighty percent
(80%) to Merchant (“MOOS Sharing Amount”) and twenty percent (20%) to Agent.
Agent shall pay the MOOS Sharing Amount, if any, to Merchant (or its designee)
as part of the Final Reconciliation or as otherwise agreed to by the Merchant
and Agent.

 

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Section 4. Expenses of the Sale

4.1 Expenses. Subject to the entry of the Approval Order by December 24, 2014,
Agent shall be unconditionally responsible for all Expenses, which expenses
shall be paid by Agent in accordance with Section 4.2 below. Agent and/or
Merchant and/or Lender may review or audit the Expenses at any time. Effective
from and after the Payment Date, Agent shall be obligated to pre-fund (i) any
payroll-related expenses consistent with Merchant’s customary payroll funding
practices and timing; and (ii) Occupancy Expenses for the Stores weekly in
advance. As used herein, “Expenses” shall mean the Store-level (and where
expressly applicable, Distribution Center-level) operating expenses of the Sale
which arise during the Sale Term and are attributable to the Sale, limited to
the following:

(a) (i) actual Occupancy Expenses for the Stores (that are in operation of each
such date) on aggregate per diem basis in an amount up to the aggregate per diem
amount set forth on Exhibit 4.1(a) hereto; plus (ii) the portion of any
percentage rent obligations allocable to the sale of Merchandise during the Sale
to the extent set forth on Exhibit 4.1(a), plus (iii) the portion of any
percentage rent obligations attributable to the sale of Additional Agent
Merchandise during the Sale to the extent set forth on Exhibit 4.1(a) (in each
case as determined in the manner described in the definition of “Occupancy
Expenses” below in this Section 4.1);

(b) actual wages and commissions for all Store-level Retained Employees used in
conducting the Sale; provided that, Agent shall only be obligated to pay 50% of
the payroll wages for Store-level Retained Employees used during the Inventory
Taking, and Merchant shall pay the remaining 50% of the wages for Retained
Employees used during the Inventory Taking;

(c) actual amounts payable by Merchant for benefits for Retained Employees
(including payroll taxes, FICA, unemployment taxes, workers’ compensation and
health care insurance benefits, but excluding Excluded Benefits) for Store-level
Retained Employees used in the Sale, in an amount up to sixteen percent
(16.0%) of base payroll (including commissions) for all Retained Employees in
the Stores (the “Benefits Cap”);

(d) Retention Bonuses for Retained Employees, as provided for in Section 9.4
below;

(e) all costs and expenses associated with Agent’s on-site supervision of the
Closing Locations, including but not limited to any and all fees, wages,
bonuses, deferred compensation, taxes, and third party payroll costs and
expenses of Agent’s field personnel, travel to, from or between the Closing
Locations, and all out-of-pocket and commercially reasonable expenses relating
thereto;

(f) all signage, banners, sign walkers, and in-Store signs that are produced for
the Sale (inclusive of the Signage Costs provided for in Section 16.11);

(g) promotional costs including, without limitation, email blasts, television,
and any other advertising and/or direct mail attributable to the Sale and
ordered or requested by Agent;

(h) the costs and expenses of obtaining additional supplies used at the Stores
as may be required by Agent in the conduct of the Sale;

 

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(i) Intentionally omitted;

(j) postage/overnight delivery/courier charges to and from or among the Stores
to the extent relating to the Sale;

(k) credit card and bank card fees, chargebacks, and discounts attributable to
the Sale at the Stores;

(l) any and all costs of moving, transferring, or consolidating Merchandise
and/or Additional Agent Merchandise and/or Direct Business Merchandise (to the
extent such goods are included in the Sale and Agent elects to transfer Direct
Business Merchandise to the Stores) between and among the Stores;

(m) a pro rata portion for the Sale Term of Merchant’s premiums in respect of
general liability, casualty, property, inventory, and other insurance policies
attributable to the Merchandise and Additional Agent Merchandise;

(n) third-party payroll processing fees for the Stores and the Direct Business
Platform;

(o) armored car service and security personnel;

(p) actual cost of Agent’s capital, reasonable and documented legal expenses,
letter of credit fees and insurance (as provided in Section 12.4 hereof);

(q) Cost of transferring the Distribution Center Merchandise to the Stores up to
an aggregate amount of $100,000;

(r) Agent’s 50% of the third party fees and costs of the Inventory Taking;

(s) Actual Central Service Expenses in an amount equal to $10,000 per week
(pro-rated for partial weeks) for the Sale Term (payable to Merchant) in respect
of the cost of Merchant providing Central Services in accordance with
Section 8.1 hereof;

(t) Store cash thefts and other Store cash shortfalls in registers;

(u) actual costs and expenses associated with operating the Direct Business
Platform in an amount up to $45,000 per week (prorated for partial weeks);

(v) actual Distribution Center Expenses (prorated for partial weeks);

(w) actual costs and expenses of postage, overnight delivery or other shipping
charges related to the delivery of Merchandise and Additional Agent Merchandise
to the consumers;

 

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(x) any costs and expenses incurred in connection with the acquisition
(including costs of goods), shipping, delivery, processing and transfer of any
Additional Agent Merchandise;

(y) costs and expenses associated with temporary labor requested or obtained by
Agent for purposes of the Sale;

(z) All costs and expenses incurred by Agent in order to comply with Applicable
General Laws and/or Liquidation Sale Laws unless and until entry of the Approval
Order; and

(aa) the actual costs and expenses of Agent providing such additional services
as the Agent reasonably deems appropriate for the Sale.

“Expenses” shall not include: (i) Central Service Expenses in excess of the
amount set forth in Section 4.1(s); (ii) Excluded Benefits; (iii) any rent or
other occupancy expenses other than Occupancy Expenses in accordance with
Section 4.1(a) hereof; (iv) Distribution Center Expenses in excess of amounts
provided for in Section 4.1(v); (v) costs of maintaining and operating
Merchant’s websites and Direct Business Platform in excess of the amounts
provided for in Section 4.1(u); (vi) costs or expenses of postage, overnight
delivery or other shipping charges related to the delivery of Merchandise and
Additional Agent Merchandise to the consumers (except to the extent sold through
the Direct Business Platform in which case Agent shall be responsible for
payment in accordance with section 4.1(w) only), (vii) 3PL Expenses, or
(viii) any costs, expenses or liabilities arising during the Sale Term, other
than the Expenses listed above. All costs or expenses related to the Sale not
included as Expenses shall be paid by Merchant promptly when due during the Sale
Term. Notwithstanding anything to the contrary herein, (x) to the extent that
any Expense listed in Section 4.1 is also included on Exhibit 4.1(a), then
Exhibit 4.1(a) shall control and such Expense shall not be double counted.
Except as provided in this Section 4.1, no Expenses shall be paid with respect
to any distribution center/warehouses other than the Distribution Centers
Expenses.

As used herein, the following terms have the following meanings:

“Central Service Expenses” means costs and expenses for Merchant’s Central
Services.

“Central Services” means those Merchant central administrative services
necessary for the conduct and support of the Sale, including, but not limited
to, use or and access to Merchant’s: (i) inventory control system, (ii) payroll
system, (iii ) accounting system, (iv) office facilities, (v) central MIS and
POS services, (vi) cash reconciliation, (vii) central administrative services
and personnel to process and perform sales audit, banking, and other normal
course administrative services customarily provided to or for the benefit of
operating the Distribution Centers and/or the Stores, (viii) such other central
office services reasonably necessary for the Sale, and (ix) use by Agent
reasonably sized offices located at Merchant’s central office facility to effect
the Sale.

 

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“Distribution Center Expenses” means an amount up to (i) $25,000 per week
(prorated for partial weeks) in respect of Merchant’s provision of Distribution
Center Services during the period of the Sale (during which the Agent is
utilizing the Distribution Centers, in each case for the period commencing on
the Sale Commencement Date and concluding on the earliest to occur of (x) the
Sale Termination Date or (y) the Vacate Date for the applicable Distribution
Center; plus (ii) incremental costs and expenses associated with Additional
Agent Merchandise, including, without limitation, the receipt, tagging,
processing and/or transfer of the Additional Agent Merchandise from the
Distribution Centers to the Stores. Agent shall pay Merchant any such
Distribution Center Expense amount that may be due on a weekly basis as part of
the weekly Sale reconciliation provided for under Section 8.7(a) hereof.

“Distribution Center Services” means those services customarily performed by
Merchant in operating and maintaining the Distribution Centers in the ordinary
course of business and in the course of receiving and distributing goods and
supplies to the Stores, including, but not limited to, with respect to
(i) payroll and related employee benefits of all Distribution Centers employees;
(ii) rent and other occupancy costs and expenses associated with the
Distribution Centers; (iii) the handling, receiving, in-take, storage, ticketing
and processing of any Merchandise, Distribution Center Merchandise, In-Transit
Merchandise, or Additional Agent Merchandise at the Distribution Centers;
(iv) any required supplies in connection with the foregoing; (v) any Central
Services required to operate and maintain the Distribution Centers during the
Sale Term applicable thereto; and (vi) costs and expenses of moving,
transferring, or consolidating Merchandise or Additional Agent Merchandise
between the Distribution Centers and the Stores. Merchant hereby covenants and
agrees to provide the Distribution Center Services throughout the Sale Term and,
except as provided and solely to the extent set forth in section 4.1(v),
Merchant shall be responsible for the payment of all costs and expenses
associated with the Distribution Centers and the Distribution Center Services.

“Excluded Benefits” means (i) the following benefits arising, accruing or
attributable to the period prior to, during, or after the Sale Term:
(w) vacation days or vacation pay, (x) sick days or sick leave or any other form
of paid time off, (y) maternity leave or other leaves of absence and (z) ERISA
coverage and similar contributions and/or (ii) any other benefits in excess of
the Benefits Cap, including, without limitation, any payments due under the WARN
Act.

“Occupancy Expenses” means rent, percentage rent, common-area maintenance,
landlord promotional fees, real estate and use taxes, HVAC, utilities,
telecom/telephone charges, point-of-sale systems maintenance, store security
systems, routine repairs and maintenance, taxes and licenses, costs of all
local, long-distance, and international telephone, satellite broadband
connections, T-1 lines, broadband internet, and other telecommunications
services, trash removal (to the extent excluded as a fixed charge component of
lease obligation), snow removal, and ordinary course third-party cleanings, pest
control services, plus any percentage rent obligations incurred by Merchant
under applicable leases or occupancy agreements that are allocable to the sales
as part of the Sale during the Sale Term of: (x) Merchandise and (y) Additional
Agent Merchandise included in the Sale. Merchant and Agent agree that Exhibit
4.1(a) shall specify the actual applicable percentage and any applicable sales
thresholds in respect of percentage rent under any applicable Store lease(s) or
other occupancy agreement(s). Merchant and Agent further

 

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agree that in the event Exhibit 4.1(a) does not specify the actual applicable
percentage and/or the applicable sales thresholds in respect of percentage rent
under any applicable Store lease(s) or other occupancy agreement(s), Agent shall
have no obligation to pay percentage rent other than as set forth on Exhibit
4.1(a). Notwithstanding anything to the contrary set forth in this Agreement,
Merchant and Agent further agree that to the extent that, in connection with the
conduct of the Sale and/or Agent’s vacating of the Stores (but not in connection
with the disposition of any unsold Owned FF&E or other non-Merchandise assets
being abandoned or otherwise disposed of by Merchant), Merchant incurs
additional trash removal charges at a Store, other than the fixed charge
component of Merchant’s lease obligation for a particular Store provided for on
Exhibit 4.1(a) (the “Non-CAM Trash Removal Charges”), such Non-CAM Trash Removal
Charges shall be paid by Agent as an Expense of the Sale, in addition to any
trash removal charges as may be set forth in Exhibit 4.1(a) hereof.

“Third-party” means, with reference to any Expenses, a party that is not
affiliated with or related to Merchant.

4.2 Payment of Expenses. From and after the Payment Date, Agent shall be
responsible for the payment of all Expenses, whether or not there are sufficient
Proceeds collected to pay such Expenses after the payment of the Guaranteed
Amount. All Expenses incurred during each week of the Sale (i.e., Sunday through
Saturday) shall be paid by Agent to or on behalf of Merchant immediately
following the weekly Sale reconciliation by Merchant and Agent pursuant to
Section 8.7(a) below, based upon invoices and other documentation reasonably
satisfactory to Merchant and Agent.

 

Section 5. Inventory Valuation; Merchandise.

5.1 Inventory Taking. Commencing on the Sale Commencement Date, Merchant and
Agent shall cause to be taken a SKU-level and Retail Price physical inventory of
the Merchandise located in the Stores and shall count the Distribution Centers
in accordance with the below (collectively, the “Inventory Taking”). Subject to
the availability of the Inventory Taking Service, Merchant and Agent shall use
commercially reasonable efforts to complete the Inventory Taking as follows:
(x) as to Merchandise located in the Stores, in each Store no later than twenty
one (21) days after the Sale Commencement Date (the date of the Inventory Taking
at each Store being the “Inventory Date” for such Store); (y) with regard to
Distribution Center Merchandise and In-Transit Merchandise, when such
Merchandise is shipped from the applicable Distribution Center to the Stores,
and (z) with regard to Direct Business Platform Merchandise, (1) as such
Merchandise is shipped to the customers or (2) in the case of Direct Business
Platform Merchandise that is not sold to customers, as such Merchandise is
shipped from the applicable Distribution Center to the Stores. Merchant and
Agent shall jointly employ RGIS or another mutually acceptable independent
inventory taking service (the “Inventory Taking Service”) to conduct the
Inventory Taking in the Stores, and Merchant and Agent shall agree upon
procedures for Merchandise that is counted at the Distribution Centers before it
is shipped to the Stores. The Inventory Taking shall be conducted in accordance
with the procedures and instructions to be mutually agreed upon by Merchant (in
consultation with the Lender) and Agent and made a part of this Agreement as
Exhibit 5.1(a) (the “Inventory Taking Instructions”). As an Expense, Agent shall
be responsible for fifty percent (50%) of the fees and expenses of the Inventory
Taking

 

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Service. The balance of such fees and expenses shall be paid by Merchant. Except
as provided in the immediately preceding sentence, Merchant and Agent shall each
bear their respective costs and expenses related to the Inventory Taking;
provided that, Agent shall be obligated to pay fifty percent (50%) of the
payroll and related benefit costs (subject to the Benefits Cap) for Retained
Employees used during the Inventory Taking, and Merchant shall pay the remaining
fifty percent (50%) of the payroll and related benefit costs for Retained
Employees used during the Inventory Taking. Merchant, Agent, upon its
appointment, the Committee, and Lender shall each have the right to have
representatives present during the Inventory Taking, and shall each have the
right to review and verify the listing and tabulation of the Inventory Taking
Service. Merchant agrees that during the Inventory Taking in each of the Stores,
the applicable Store shall be closed to the public and no sales or other
transactions shall be conducted until the Inventory Taking has been completed,
as agreed by Merchant and Agent. Merchant and Agent further agree that until the
Inventory Taking in each particular Store is complete, Agent shall not
(i) transfer any Merchandise to or from that Store, (ii) deliver any Additional
Agent Merchandise to such Store, (iii) move Merchandise within or about the
Stores, or (iv) remove any Merchant hang tags, price tickets, inventory control
tags, or other indicia of pricing affixed to or related to any
Merchandise. Agent and Merchant (in consultation with the Lender) shall use
their reasonable best efforts to reconcile the Inventory Taking (including, but
not limited to, the determination of the aggregate Cost Value of the
Merchandise), within ten (10) days after its completion. In the event there is
any dispute with respect to the reconciliation of the aggregate Cost Value of
the Merchandise following completion of the Inventory Taking, then any such
dispute shall be resolved in the manner and at the times set forth in
Section 8.7(b)(ii) hereof).

5.2 Merchandise Subject to this Agreement.

(a) For purposes of this Agreement, including but not limited to the calculation
of the Guaranteed Amount, “Merchandise” means all new, first quality (other than
as expressly set forth below), finished goods inventory that is owned by
Merchant and customarily sold to customers in the ordinary course of Merchant’s
business, including, but not limited to, (i) Merchandise subject to Gross Rings;
(ii) Merchandise located in the Stores on the Sale Commencement Date (other than
Direct Business Merchandise); (iii) Direct Business Merchandise;
(iv) Distribution Center Merchandise received in the Stores on or before
January 10, 2015 (the “Receipt Deadline”) in accordance with the Allocation
Schedule; (v) In-Transit Merchandise received at the Stores on or before the
Receipt Deadline in accordance with the Allocation Schedule, (vi) Aged
Merchandise; (vii) Defective Merchandise (to the extent Merchant and Agent can
mutually agree on the Cost Value applicable thereto). Notwithstanding the
foregoing, “Merchandise” shall not include (i) goods that belong to sublessees,
licensees, or concessionaires of Merchant; (ii) goods held by Merchant on memo,
on consignment, or as bailee; (iii) Excluded Defective Merchandise;
(iv) Additional Agent Merchandise; (v) MOOS Inventory; and (vi) furnishings,
trade fixtures furniture, and equipment and improvements to real property that
are located in the Closing Locations or the corporate offices; (vi) if
applicable, Distribution Center Merchandise that is not received at the Stores
on or before the Receipt Deadline; and/or (vii) In-Transit Merchandise that is
not received at the Stores on or before to the Receipt Deadline.

 

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(b) As used in this Agreement, the following terms have the respective meanings
set forth below:

“Aged Merchandise” means items of Merchandise located in the Stores and the
Distribution Center Merchandise (but not Direct Business Merchandise) for which
the “Style Last Receipt Date” was on or before May 31, 2014 as reflected on the
applicable Cost File.

“Defective Merchandise” means any item of Merchandise identified and agreed upon
by Merchant and Agent (with each party acting reasonably) as defective in that
it is damaged, defective, scratched, soiled, ripped, torn, stained, faded,
discolored, dented, out of box (if normally sold as new in-the-box), missing
pieces, mismatched, mis-mated or near-sized, parts, items typically sold as a
set which are incomplete, or gift with purchase items, or otherwise affected by
other similar defenses rendering it not first quality. Sample merchandise and
merchandise on display in the Stores shall not per se be deemed to be Defective
Merchandise.

“Direct Business Merchandise” means those items of inventory identified on
Exhibit 5.2(b)(2) that are located in Merchant’s Distribution Centers on the
Sale Commencement Date, which have been ear-marked and/or ticketed in the
ordinary course of business for sale through the Direct Business Platform.

“Distribution Center Merchandise” means those items of inventory identified on
Exhibit 5.2(b)(1) that are located in Merchant’s Distribution Centers on the
Sale Commencement Date that do not constitute Direct Business Merchandise.
Merchant shall be responsible for providing the Distribution Center Services
with respect to the Distribution Center Merchandise.

“Excluded Defective Merchandise” means (a) any item of Defective Merchandise
that is not saleable in the ordinary course because it is so damaged or
defective that it cannot reasonably be used or sold for its intended purpose,
(b) any item of Defective Merchandise for which the parties cannot mutually
agree upon a Cost Value, and/or (c) packaway merchandise. Excluded Defective
Merchandise located in the Stores shall be identified and counted during the
Inventory Taking and thereafter removed from the sales floor and segregated. To
the extent that goods in the Distribution Centers or in transit to the Stores
constitute Excluded Defective Merchandise and such goods arrive at the Stores
despite Merchant’s covenant not to ship such goods to the Stores, such goods
shall be identified during the Inventory Taking or, to the extent such goods
arrive in a Store after the Inventory Date for such Store, such goods shall be
reasonably identified by Agent within five (5) business days of receipt of at
such Store and thereafter removed from the sales floor and/or segregated.

“In-Transit Merchandise” means items of inventory purchased by Merchant prior to
the date of this Agreement, which goods are either subject to a Letter of Credit
issued by Merchant and cannot be cancelled as of the date of this Agreement,
and/or are already in transit to Merchant from the vendor as of the Sale
Commencement Date.

 

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“Allocation Schedule” means the allocation schedule of Distribution Center
Merchandise and In-Transit Merchandise that has been mutually agreed upon by
Merchant and Agent.

5.3 Valuation.

(a) For purposes of this Agreement, “Cost Value” shall mean, with respect to
each item of Merchandise, other than the Additional Agent Merchandise, the lower
of (i)(x) the lower of the Merchant’s actual cost of such item and (y) the cost
of such item as reflected in the SKU for such item of Merchandise as reflected
on (1) Merchant’s inventory cost file attributable to the Merchandise (other
than the Direct Business Merchandise) identified on Exhibit 5.3(a)(1); and
(2) Merchant’s inventory cost file attributable to the Direct Business
Merchandise identified on Exhibit 5.3(a)(2); and (ii) the Retail Price.

(b) Anything in Section 5.3(a) to the contrary notwithstanding, Merchant and
Agent further agree as follows:

(i) The Cost Value and Retail Price of any item of Distribution Center
Merchandise and In-Transit Merchandise that is not received at a Store on or
before January 3, 2015 shall be the otherwise applicable Cost Value and Retail
Price of such item (determined in accordance with Sections 5.3(a) above and
3.1(e)), multiplied by the inverse of the prevailing Sale discount in effect on
the date such item arrives in the Store (the “Prevailing Discount Adjustment”).
In agreeing upon the Allocation Schedule, Merchant and Agent used commercially
reasonable and good faith efforts to allocate and schedule shipments of
Distribution Center Merchandise and In-Transit Merchandise from the Distribution
Centers to the Stores so as to minimize, where practicable (i.e., giving due
consideration to the needs and capacity of the Stores) the effect of the
Prevailing Discount Adjustment;

(ii) Defective Merchandise shall be valued by mutual agreement of the parties;
if the parties are unable to so agree, or if an item is determined to be
Excluded Defective Merchandise, such goods shall be excluded from the Sale and
treated as Excluded Defective Merchandise for all purposes hereunder, including,
without limitation, calculation of the Guaranteed Amount and Proceeds;

(iii) Excluded Pricing Adjustments shall not be taken into account in
determining the Cost Value of any item of Merchandise; and

(iv) If the Sale commences prior to the completion of the Inventory Taking at
any Store or the Distribution Centers, then for the period from the Sale
Commencement Date until the Inventory Date for such Store (the “Gross Rings
Period”), Agent and Merchant shall jointly keep (i) a strict count of gross
register receipts less applicable Sales Taxes but excluding any prevailing
discounts (“Gross Rings”) and (ii) cash reports of sales within such Store and
or Direct Business Platform (if applicable) utilized by the subject Distribution
Center. Agent and Merchant shall keep a strict count of register receipts and
reports to determine the actual Cost Value and Retail Price of the

 

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Merchandise sold by SKU. All such records and reports shall be made available to
Merchant and Agent during regular business hours upon reasonable notice. Any
Merchandise included in the Sale using the Gross Rings method shall be included
in Merchandise using the actual Cost Value of the Merchandise sold plus one
percent (1.0%) shrink provision.

5.4 Excluded Goods. Merchant shall retain all rights and responsibility for any
goods not included as “Merchandise” hereunder and shall remove, at Merchant’s
expense, such goods from the Stores and the Distribution Centers prior to the
Sale Commencement Date, or as soon thereafter as reasonably practicable. If
Merchant so elects at the beginning of the Sale Term, Agent shall accept those
goods not included as “Merchandise” hereunder and as identified by Merchant for
sale as “Merchant Consignment Goods”. Merchant Consignment Goods shall be sold
at prices mutually agreed upon by Merchant and Agent. Agent shall retain twenty
percent (20%) of the sale price (less applicable Sales Taxes) for all sales of
Merchant Consignment Goods, and Merchant shall receive eighty percent (80%) of
the sale price (less applicable Sales Taxes) in respect of sales of Merchant
Consignment Goods. Merchant shall receive its share of the receipts of sales of
Merchant Consignment Goods on a weekly basis, immediately following the weekly
reconciliation by Merchant and Agent pursuant to Section 8.7(a) below. Except as
expressly provided in this Section 5.4, Agent shall have no cost, expense, or
responsibility in connection with any goods not included in Merchandise,
including but not limited to sales commissions and percentage rent.

5.5 Distribution Center Services.

(a) On and after the Sale Commencement Date, Agent shall be responsible for
allocating and designating the shipment of the Distribution Center Merchandise
and In-Transit Merchandise to the Stores. Notwithstanding anything to the
contrary herein, except as provided in Section 4.1(v), Agent shall not be
responsible to pay any cost or expenses associated with the operation of the
Distribution Centers.

(b) Agent’s obligation to pay Distribution Center Expenses in accordance with
Section 4.1(v) shall be limited to the period commencing on the Sale
Commencement Date and concluding on the earliest to occur of (i) the Sale
Termination Date or (ii) the Vacate Date for the applicable Distribution Center.
Merchant agrees and covenants that it shall be responsible for performing and
providing all Distribution Center Services.

 

Section 6. Sale Term.

6.1 Term. The Sale commenced at each of the Stores on December 4, 2014 (the
“Sale Commencement Date”). Agent shall complete the Sale and vacate the premises
of each Store and the Direct Business Platform in favor of Merchant or its
representative or assignee on or before the date that is the earlier of
(i) April 15, 2015; and (ii) the date that is 120 twenty days after entry of an
order for relief in Merchant’s bankruptcy case (the earlier of (i) and (ii), the
“Sale Termination Date”). The period beginning on the Sale Commencement Date
through and including the Sale Termination Date shall be referred to herein as
the “Sale Term”. The Sale Termination Date as to

 

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any Store or Distribution Center may be (a) extended by mutual written agreement
of Agent and Merchant, in consultation with the Lender or (b) accelerated by
Agent, in which case Agent shall provide Merchant and the Lender with not less
than seven (7) days’ advance written notice of any such planned accelerated Sale
Termination Date (each such notice being a “Vacate Notice”). If Agent fails to
provide Merchant and the Lender with timely notice of an acceleration of the
Sale Termination Date for a Store, Agent shall be liable for and shall pay any
Occupancy Expenses resulting from such untimely notice.

6.2 Vacating the Closing Stores and Distribution Centers. Subject to the terms
of Section 6.1 hereof, Agent shall provide Merchant and the Lender with not less
than seven (7) days’ advance written notice of its intention to vacate any Store
or Distribution Center) (as to each such Store and/or Distribution Center, as
applicable, the “Vacate Date”). On the Vacate Date, Agent shall vacate such
Store and/or Distribution Center in favor of Merchant or its representatives or
assignee, (subject to Agent’s right to abandonment) remove all Remaining
Merchandise (including any unsold Additional Agent Merchandise) from the Store
and/or the Distribution Center in “broom clean” condition (ordinary wear and
tear excepted) subject to the right to abandon, neatly in place, any unsold
Owned FF&E. Agent’s obligations to pay all Expenses, including Occupancy
Expenses, for each Store and/or Distribution Center) (as and to the extent
applicable) subject to Vacate Notice shall continue until the earlier of (a) the
applicable Vacate Date for such Store and/or Distribution Center; and (b) the
Sale Termination Date. All assets of Merchant used by Agent in the conduct of
the Sale (e.g., FF&E, supplies, etc.) shall be returned by Agent to Merchant or
left at the Stores and/or the Distribution Centers), to the extent same have not
been used in the conduct of the Sale or have not been otherwise disposed of
through no fault of Agent. Any reference in this Section 6 to vacating the
Stores and/or the Distribution Centers means vacating the Stores and/or
Distribution Centers, as applicable, in favor of Merchant, its representatives,
or assignee and shall not mean vacating possession or disclaimer of lease in
favor of landlord or owner of the Store and/or Distribution Center premises.
Agent agrees that it shall be obligated to repair any damage caused by Agent (or
any representative, agent, or licensee thereof) to any Store and/or Distribution
Center during the Sale Term, ordinary wear and tear excepted. Agent shall have
the right to abandon in place any asset of Merchant.

 

  Section 7. Designation Rights.

7.1 Certain Defined Terms. The following terms have the following meanings:

(a) “Assets” means the Membership Interests and the Merchant’s rights title and
interests in and to the Intellectual Property.

(b) “Asset Proceeds” means all cash and non-cash consideration received by
Merchant or Agent from the sale or other disposition of the Assets, which for
the avoidance of doubt shall exclude Proceeds, MOOS Proceeds, and FF&E Proceeds.

(c) “Asset Sharing Amount” means an amount equal to (i) forty percent (40%) of
the Asset Proceeds in excess of $1,200,000 and up to $2,500,000, plus (ii) sixty
percent (60%) of the Asset Proceeds in excess of $2,500,000, which amount (if
any) shall be paid by Agent to Merchant promptly after receipt by Agent of Asset
Proceeds in excess thereof.

 

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(d) “Cure Amount” means, with respect to each executory contract included within
the meaning of Intellectual Property, the amount required to cure pre-Petition
Date monetary defaults or compensate a counterparty for actual pre-Petition Date
pecuniary loss, as required by Bankruptcy Code sections 365(b)(1)(A) and (B).

(e) “Customer Lists” means any and all lists of current and past customers of
Merchant and/or any business of Merchant, including any and all information
relating in any way to the use of such lists for or by Merchant and/or any
business of Merchant, including (x) personal information, such as name, address,
telephone number, email address, website and any other database information and
(y) customer purchase history at a transaction level (including with respect to
dollar amounts, dates, and items purchased) but excluding from the foregoing any
credit card numbers or related customer payment source or financial information
prohibited by law.

(f) “Intellectual Property” means any and all worldwide rights in and to all
tangible and intangible intellectual property assets of Merchant (whether
arising under statutory or common law, contract, or otherwise), which include
without limitation all of the following items owned by Merchant, for which
Merchant is a licensee, sub-licensee, licensor, sub-licensor, assignee,
assignor, or in which Merchant has an interest or right (and Schedule 1 hereto
lists all issued or registered Intellectual Property and applications therefor
owned by Merchant): (a) inventions, discoveries, processes, designs, techniques,
developments and related improvements whether or not patentable; (b) patents,
patent applications, industrial design registrations and applications therefor,
divisions, divisionals, continuations, continuations-in-part, reissues,
substitutes, renewals, registrations, confirmations, re-examinations, extensions
and any provisional applications, or any such patents or patent applications,
and any foreign or international equivalent of any of the foregoing;
(c) trademarks (whether registered, unregistered or pending), trade dress,
service marks, service names, trade names, brand names, product names, logos,
domain names, internet rights (including, without limitation IP Addresses and AS
numbers), corporate names, fictitious names, other names, symbols (including
business symbols), slogans, translations of any of any of the foregoing and any
foreign or international equivalent of any of the foregoing and all goodwill
associated therewith and (to the extent transferable by law) any applications
and/or registrations in connection with the foregoing and all advertising and
marketing collateral including any of the foregoing; (d) work specifications,
databases and artwork; (e) technical, scientific and other know-how and
information (including promotional material), trade secrets, confidential
information, methods, processes, practices, formulas, designs, patterns,
assembly procedures, specifications owned or used by Merchant; (f) rights
associated with works of authorship including copyrights, moral rights, design
rights, rights in databases, copyright applications, copyright registrations,
rights existing under any copyright laws and rights to prepare derivative works;
(g) work for hire; (h) any and all rights of Merchant to the name “dELiA*s” or
any derivation thereof, (i) Merchant’s entire customer list and database
(including all Customer Lists), and all assets used or useful by Merchant in the
conduct of its catalog business and its business over the internet and/or in any
other electronic medium, including (without limitation) any websites, social
media sites and accounts (including the content contained therein, user names
and passwords), diagrams, drawings, domain names, and all advertising and
marketing materials and collateral (including all physical, digital, or
electronic imagery and design files), samples, product catalogs, product designs
and specifications (including tech specifications) vendor and merchandise
supplier data and information, (j) software used in the operation of the

 

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Direct Business Platform, (k) all goodwill, rights and contracts (including all
licenses and sublicenses granted or obtained with respect thereto) related to
the foregoing, (k) the right to sue for infringement and other remedies against
infringement of any of the foregoing, and (l) rights to protection of interests
in the foregoing under the laws of all jurisdictions.

(g) “Membership Interests” means all of Merchant’s rights, title, and interests
in and to the ownership interests in dELiA*s Brand, LLC.

7.2 Designation Rights. In partial consideration, and as a material component of
the payment of the Guaranteed Amount and the Asset Sharing Amount (if any),
during the Sale Term (the “Designation Rights Period”) Agent shall have the
exclusive right to direct Merchant to designate the ultimate purchaser,
acquirer, assignee, transferee, licensee, or designee, which, for the avoidance
of doubt, may be the Agent or one or more affiliates of the Agent, as determined
by Agent in Agent’s sole and absolute discretion, of each of the Assets
(collectively the “Designation Rights”) and shall retain all Asset Proceeds
(other than the Asset Sharing Amount) for Agent’s sole and exclusive benefit.
Merchant, in consultation with the Committee, shall, upon such election by
Agent, take such actions as may be reasonably required to effectuate all
Designation Rights. Merchant and Committee agree to cooperate with Agent to
arrange for the sale or other disposition of the Assets, with such sales and
dispositions to be on such terms as Agent shall determine in its sole and
absolute discretion, subject to Section 7.10 of this Agreement with respect to
sale or transfer of the Customer List. Without limiting the generality of the
foregoing, Merchant and Committee agree to cooperate with Agent, its agents and
any potential purchasers, acquirers, assignees, transferees, licensees, or
designees of any of the Assets and provide unlimited access to the locations
thereof.

7.3 Agent Dropout Rights. At any time prior to the expiration of the Designation
Rights Period, Agent shall have the right, upon seven (7) days’ written notice
(the “Dropout Notice Period”), which right may be exercised at any time and from
time to time in Agent’s sole and absolute discretion, to provide notice to
Merchant and the Committee (each such notice, a “Dropout Notice”) of Agent’s
election not to designate the ultimate purchaser, acquirer, assignee,
transferee, licensee, or designee any Asset (each, a “Dropout Asset” and,
collectively, the “Dropout Assets”). Upon the effective date of any Dropout
Notice, (i) Agent shall have no further obligation or liability with respect to
the subject Dropout Asset, and (ii) Merchant shall thereafter be solely
responsible for all such Dropout Asset(s) from and after the effective date of
the Dropout Notice. Upon Agent’s delivery of a Dropout Notice, all rights to the
Dropout Assets shall revert to Merchant, and Merchant may dispose of such
Dropout Asset in such manner as Merchant may elect, and one hundred percent
(100%) of all proceeds realized upon a disposition of such Dropout Asset shall
be the exclusive property of Merchant (and shall not constitute Asset Proceeds,
FF&E Proceeds, or Proceeds). The delivery of a Dropout Notice shall not result
in a reduction of the Guaranteed Amount (as defined below) payable hereunder
unless such Asset(s) was excluded due to a Merchant breach of this Agreement.
Prior to the expiration of the Dropout Notice Period, the Agent, in its sole and
absolute discretion, may withdraw any Dropout Notice upon written notice to
Merchant.

7.4 At any time prior to the expiration of the Designation Rights Period, Agent
shall have the right, which right may be exercised at any time and from time to
time, in Agent’s sole and absolute discretion, to provide notice to Merchant and
Committee (each such notice, a

 

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“Sale Notice”) of Agent’s election to require Merchant to seek Bankruptcy Court
authority to designate the ultimate purchaser, acquirer, assignee, transferee,
licensee, or designee any the Assets identified in the subject Sale Notice(s)
(each, a “Designated Third Party Asset” and, collectively, the “Designated Third
Party Assets”) and sell, transfer, license, transfer, assign, or otherwise
dispose of same to the purchaser, acquirer, assignee, transferee, licensee, or
designee identified by Agent. Within three (3) business days following the date
Agent delivers a Sale Notice and related information (including the applicable
transaction documents) to Merchant, Merchant, in consultation with the
Committee, shall take all requisite actions (including, without limitation,
actions required under Sections 363 and Section 365 of the Bankruptcy Code) to
promptly sell, assume and assign the applicable Designated Third Party Asset(s)
to the applicable designee identified in such Sale Notice(s). Other than in
respect of the initial sale notice contemplated by Section 7.5 (excluding “the
subsequent Sale Notice” referenced in the proviso therein), Agent shall
reimburse Merchant (or Merchant’s successor in interest, if applicable) for all
reasonable and documented costs incurred by Merchant with respect to
effectuating a Sale Notice and obtaining approval of the associated sale or
other disposition of the Assets in such Sale Notice (including, but not limited
to, reasonable attorneys’ fees and costs and noticing and copying fees and
costs) (the “Transfer Costs”). Without limiting the generality of the foregoing,
upon receipt of a Sale Notice, Merchant, in consultation with the Committee,
shall use commercially reasonable efforts to obtain the expedited entry of an
order of the Court approving the sale or other disposition of the Designated
Third Party Asset(s) and the sale or other disposition of such asset(s) to the
specified designee, each in a form and substance reasonably acceptable to Agent,
its designee, and Merchant.

7.5 Adequate Assurances. If applicable, Agent shall cause the designee for the
Assets to provide adequate assurance of future performance with respect to such
Designated Third Party Asset in accordance with the Bankruptcy Code.
Additionally, Agent or such designee, as applicable, shall pay all Cure Amounts.

7.6 Carrying Costs and Expenses. Except with respect to the payment (or
reimbursement to Merchant) of Expenses, Cure Amounts (if any and if applicable),
the Transfer Costs, and costs or expenses associated with Agent’s advertising or
marketing with respect to the Assets, Merchant (or Merchant’s successor in
interest, if applicable) shall be responsible for paying costs and expenses
customarily or historically incurred or paid by Merchant and associated with
each Asset from and after the Petition Date through and including the earlier of
(i) the closing of a transaction, subject to a Sale Notice or otherwise, with
respect to each such Asset and (ii) the end of the Designation Rights Period.

7.7 Rejection. Regardless of whatever elections Agent shall make under the this
Agreement, the legal cost and expenses of the rejection at any time of any one
or more Assets, including, without limitation, the filing and prosecution of any
motions or other papers with respect to the same and/or the amount and priority
of any claim arising from such rejection (collectively, the “Rejection Costs”),
shall be borne solely by the Merchant. For the avoidance of doubt, if and to the
extent that the Agent’s actions (other than actions related to operation of the
Direct Business Platform as contemplated by this Agreement) in respect of an
executory contract result in Merchant incurring an allowed administrative
expense not subject to defenses Merchant otherwise would not have incurred but
for such actions, Agent shall be liable to reimburse Merchant for the allowed
amount of such administrative expense.

 

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7.8 Procedures for Closings. Agent and Merchant, in consultation with the
Committee, shall cooperate and use best efforts to consummate the closing of any
sale or other disposition of any Asset as promptly as possible. All Asset
Proceeds (other than the Asset Sharing Amount) shall be retained by Agent for
Agent’s sole and exclusive benefit. All payments to Agent and all rights to
Asset Proceeds (other than the Asset Sharing Amount) shall be free and clear of
liens, claims, encumbrances and interests and shall not require any further
Bankruptcy Court order. At each closing, Merchant, in consultation with the
Committee, will deliver to the Agent’s designee such documents and agreements as
are provided for in the applicable transaction agreements to consummate the sale
of the applicable Assets. Agent will prepare (and deliver to Merchant for its
execution) the assignments, bills of sale, deeds, transfer tax declarations, and
other closing documents to be delivered in connection with the closing in the
forms contemplated in the applicable transaction agreements or otherwise in form
reasonably acceptable to Merchant, in consultation with the Committee; provided,
however, that Merchant will reasonably cooperate with Agent in such preparation.

7.9 Privacy. In connection with the transfer of the Customer List, any designee
shall remain bound by and shall comply with the Merchant’s privacy policy
(“Privacy Policy”) as currently set forth on Merchant’s licensed website,
“delias.com”. Any designee, as successor-in-interest as to the personally
identifiable information in the customer file, shall be liable for post-sale
violations of the Privacy Policy. Should a designee propose to make any change
to the Privacy Policy, such designee shall provide those listed on the Customer
List with notice of the change and the opportunity to “opt-out”. Any designee
shall be bound by (a) the provisions of this Section 7.9; and (b) the Approval
Order. The Approval Order shall provide, among other things, that any designee
is the successor in interest to the Customer List; such designee shall be bound
by the provisions of the Privacy Policy; such designee shall be responsible for
any violation of the Privacy Policy after the date of the transfer; such
designee shall provide notice to all customers on the Customer List that their
email addresses are being transferred; such designee shall not disclose, sell or
transfer customers’ personally identifiable information to any third party in a
manner inconsistent with the Privacy Policy; within 30 days of the entry of the
Approval Order, the designee shall file a certification with the Bankruptcy
Court that the notice described herein has been provided to Merchant’s
customers; and nothing in the Approval Order shall prevent or prohibit any
designee or subsequent transferee of the Customer Lists from modifying the
Privacy Policy in accordance with such Privacy Policy’s terms and conditions.

 

Section 8. Conduct of the Sale.

8.1 Rights of Agent and Merchant. Subject to the Interim Approval Order, the
Approval Order and the Sale Guidelines, Agent shall be permitted to conduct a
“going out of business”, “store closing” or similarly themed sale at the Stores
and the Distribution Centers throughout the Sale Term. Agent shall conduct the
Sale in the name of and on behalf of Merchant in a commercially reasonable
manner and in compliance with the terms of this Agreement and, except as
modified by the Approval Order, all governing laws and applicable agreements to
which Merchant is a party. Agent shall conduct the Sale in accordance with the
Sale Guidelines annexed hereto as Exhibit 8.1 and approved by the Approval Order
(as and when applicable), whether by in-store promotion, media advertising, or
other promotional materials. Merchant and Lender shall have the right to monitor
the Sale and activities attendant thereto and to be present in the Stores during
the hours when the Stores are open for business, so long as Merchant’s and/or
Lender’s

 

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presence does not unreasonably disrupt the conduct of the Sale. Merchant and
Lender shall also have a right of access to the Stores at any time in the event
of an emergency situation and shall promptly notify Agent of such emergency. In
addition to any other rights granted to Agent hereunder, in conducting the Sale,
Agent, in the exercise of its sole discretion, shall have the following rights,
limited by the Sale Guidelines:

(a) except as otherwise provided in the Approval Order (as and when applicable),
to establish Stores’ hours, which are consistent with the terms of applicable
leases, mortgages, or other occupancy agreements and local laws or regulations,
including, without limitation, Sunday closing laws; provided, however, to the
extent that Agent extends the hours of operation at one or more of the Stores
beyond the hours historically operated by Merchant, which results in additional
utilities charges and increased Occupancy Expenses in excess of the average
utilities charges and Occupancy Expenses for such Stores over the twelve
(12) months preceding the Sale Commencement Date, Agent shall reimburse Merchant
the amounts, if any, of such additional costs and such additional costs shall
constitute Expenses;

(b) to use without charge during the Sale Term (except where otherwise
designated as an Expense pursuant to Section 4.1 hereof), (i) all furniture,
fixtures and equipment, (ii) bank accounts, (iii) Store-level and/or
Distribution Center-level (and to the extent available, corporate) computer
hardware and software, (iv) customer lists, mailing lists, email lists, and web
and social networking sites utilized by Merchant in connection with its business
(but solely in connection with the Sale and pursuant to such reasonable
restrictions requested by Merchant in order for Merchant to comply with its
privacy policy and applicable laws governing the use and dissemination of
confidential consumer personal data), (v) existing supplies located at the
Stores and/or Distribution Centers, (vi) intangible assets (including Merchant’s
names, logos, and tax identification numbers), (vii) Stores’ and/or Distribution
Center keys, case keys, security codes, and safe and lock combinations required
to gain access to and operate the Stores and the Distribution Centers, and
(viii) any other assets of Merchant located at the Stores and/or Distribution
Centers (whether owned, leased, or licensed) consistent with applicable terms of
leases or licenses. Agent shall exercise due care and return to Merchant
immediately at the end of the Sale all materials and supplies except materials
or supplies expended;

(c) subject to Agent’s payment (if applicable) in accordance with Sections
4.1(s) and (v) above in respect of Central Services and Distribution Center
Services, Merchant agrees and covenants that it shall be responsible for
performing and providing to Agent such Central Services necessary or incident to
the conduct of the Sale, including, but not limited to, use of Merchant’s
central office facilities, central administrative services, and personnel to
process payroll, perform MIS, and provide other central office services
necessary for the Sale to the extent that such services are normally provided by
Merchant in house; provided, however, that, in the event Agent expressly
requests Merchant to provide services other than those normally provided to the
Stores and/or Distribution Centers and relating to the sale of Merchandise by
Merchant in the ordinary course of business and as expressly contemplated by
this Agreement, Agent shall be responsible to reimburse Merchant for the actual
incremental cost of such services incurred by Merchant as an Expense of the Sale
hereunder;

 

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(d) to establish Sale prices and implement advertising, signage (including
exterior banners and signs and sign walkers), and promotional programs
consistent with the sale theme described herein, and as otherwise provided in
the Approval Order (as and when applicable and the Sale Guidelines (including,
without limitation, by means of media advertising, A-frame, interior and
exterior banners, use of sign walkers and similar signage).

(e) once the Inventory Taking is complete at both the transferring Store and the
receiving Store, to transfer Merchandise between and among the Stores;

(f) to transfer Merchandise between and among the Distribution Centers and the
Stores; provided, however Merchant and Agent shall mutually agree upon a
methodology for tracking the shipments and receipts of Distribution Center
Merchandise and In-Transit Merchandise in the Stores

(g) to supplement the Merchandise at the Stores with Additional Agent
Merchandise in accordance with Section 8.9 hereof;

(h) to sell the Direct Business Merchandise through the Direct Business Platform
and/or sell the Direct Business Merchandise from the Stores; and

(i) to conduct the Sale in accordance with the sale guidelines attached hereto
as Exhibit 8.1 (the “Sale Guidelines”).

8.2 Terms of Sales to Customers. Subject to Agent’s compliance with applicable
law (as determined with reference to the Approval Order, as and when
applicable), all sales of Merchandise will be “final sales” and “as is” and all
advertisements and sales receipts will reflect the same. Agent shall not warrant
the Merchandise in any manner, but will, to the extent legally permissible, pass
on all manufacturers’ warranties to customers. All sales will be made only for
cash or nationally recognized credit and debit cards. Agent shall accept and
honor coupons during the Sale Term, if any, as well as groupons and Merchant’s
employee discount terms as are in effect immediately prior to the commencement
of the Sale Term. Merchant shall reimburse Agent in cash for all amounts related
to coupons, as well as groupons and Merchant’s employee discount terms, during
each weekly sale reconciliation provided for in Section 8.7; provided that,
Merchant shall only be obligated to reimburse Agent for Merchant’s coupons, as
well as groupons and Merchant’s employee discount terms, honored by Agent during
the first thirty (30) days of the Sale. Agent shall clearly mark all receipts
for the Merchandise sold at the Stores during the Sale Term, so as to
distinguish such Merchandise from the merchandise sold prior to the Sale
Commencement Date. Agent may elect, in Agent’s sole discretion, to accept
returns of Merchandise or Additional Agent Merchandise sold using the Direct
Business Platform during the Sale Term according to return policies established
by Agent (in which case Agent shall be responsible for the costs and expenses
associated with such returns of Merchandise and Additional Agent Merchandise
sold using Merchant’s e-commerce business platform during the Sale Term as an
Expense).

8.3 Sales Taxes. (a) During the Sale Term, all sales, excise, gross receipts,
and other taxes attributable to sales of Merchandise, Additional Agent
Merchandise, Merchant Consignment Goods, and/or Owned FF&E as indicated on
Merchant’s point of sale equipment (other than taxes

 

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on income, but specifically including, without limitation, gross receipts taxes)
payable to any taxing authority having jurisdiction (collectively, “Sales
Taxes”) shall be added to the sales price of Merchandise, Additional Agent
Merchandise, Merchant Consignment Goods, and/or Owned FF&E and collected by
Agent in trust for Merchant at time of sale and paid over to Merchant. All Sales
Taxes shall be deposited into a segregated account designated by Merchant and
Agent solely for the deposit of such Sales Taxes (the “Sales Taxes Account”). If
Agent does not timely remit Sales Taxes to Merchant, Merchant shall be permitted
to immediately draw on the Letter of Credit in the full amount of Sales Taxes
collected by Agent in the preceding week. Provided that Agent has collected all
Sales Taxes during the Sale and remitted the proceeds thereof to Merchant,
Merchant shall promptly pay all Sales Taxes and file all applicable reports and
documents required by the applicable taxing authorities. Notwithstanding
anything to the contrary herein, Agent shall reimburse Merchant for any
additional Sales Taxes, interest, fines, penalties, and similar amounts payable
to any taxing authority as the result of a Sales Tax audit conducted by or on
behalf of such authority which discloses that the Sales Taxes collected by Agent
and paid over to Merchant for any period during the Sale Term were less than
those mandated by applicable law for the sale of Merchandise, Additional Agent
Merchandise, Merchant Consignment Goods, and/or Owned FF&E, if any, that is sold
by Agent under this Agreement (any such additional Sales Taxes and other amounts
are collectively referred to herein as “Additional Taxes and Penalties”).
Merchant will be given access to the computation of gross receipts for
verification of all such Sales Tax collections. Agent shall add Sales Tax to the
sales price of all Additional Agent Merchandise sold and Agent shall collect
Sales Taxes attributable to the sales of Additional Agent Merchandise and
deposit such amounts into existing accounts, trust accounts, or other accounts
designated by Agent, for remittance by Merchant, on behalf of Agent, to the
appropriate taxing authority. If Agent fails to perform its responsibilities in
accordance with this Section 8.3, and provided Merchant complies with its
obligations in accordance with this Section 8.3, Agent shall indemnify and hold
harmless Merchant and its officers, directors, employees, agents and independent
contractors (collectively, “Merchant Indemnified Parties”) from and against any
and all costs, including, but not limited to, reasonable attorneys’ fees,
assessments, fines, or penalties (including but not limited to all Additional
Taxes and Penalties) that Merchant sustains or incurs as a result or consequence
of the failure by Agent to collect Sales Taxes and remit them to Merchant
and/or, to the extent Agent is required hereunder to prepare reports and other
documents, the failure by Agent to promptly deliver any and all reports and
other documents required to enable Merchant to file any requisite returns with
such taxing authorities. Provided that Agent performs its responsibilities in
accordance with this Section 8.3, Agent shall have no further obligation to the
Merchant, the Lender, any taxing authority, or any other party, and Merchant
(and Lender to the extent it has received any funds on account of Sales Taxes)
shall indemnify and hold harmless Agent and its officers, directors, employees,
agents and Supervisors (collectively, “Agent Indemnified Parties”) from and
against all claims, demands, assessments, penalties, losses, liability or
damage, including, without limitation, reasonable attorneys’ fees and expenses,
directly or indirectly asserted against, resulting from or related to the
failure by Merchant to promptly pay such taxes to the proper taxing authorities
and/or the failure by Merchant to promptly file with such taxing authorities all
reports and other documents required by applicable law to be filed with or
delivered to such taxing authorities.

(b) Without limiting the generality of Section 8.3(a) hereof, the Parties agree
that because Agent will conduct the Sale solely as agent for Merchant, the
various payments that this Agreement contemplates (including the payment by
Agent of the Guaranteed Amount) do not represent the sale of tangible personal
property and, accordingly, are not subject to Sales Taxes.

 

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8.4 Supplies. Agent shall have the right to use all existing supplies necessary
to conduct the Sale (e.g., boxes, bags, and twine, but not gift certificates,
rain checks, merchandise credits, or the like) located at the Stores and/or the
Distribution Centers and in connection with the Direct Business Platform at no
charge to Agent. In the event that additional supplies are required in any of
the Stores or the Direct Business Platform, during the Sale Term, the
acquisition of such additional supplies shall be the responsibility of Agent as
an Expense; provided, however, that if reasonably requested by Agent, Merchant
shall assist Agent in obtaining supplies, at Agent’s expense, from Merchant’s
vendors at Merchant’s usual and customary costs for such supplies. Merchant does
not warrant that Merchant’s existing supplies as of the Sale Commencement Date
are adequate for purposes of the Sale.

8.5 Returns of Merchandise. During the first thirty (30) days of the Sale, Agent
shall accept returns of Merchandise sold by Merchant prior to the Sale
Commencement Date in accordance with Merchant’s return policies in effect at the
time of purchase (to the extent presented in accordance with the foregoing
terms, each such item being defined herein as “Returned Merchandise”). Merchant
shall reimburse Agent in cash or credit against the following week’s payment for
the amount of any store credit or refund given to any customer in respect of
Returned Merchandise. To the extent Returned Merchandise is salable as first
quality merchandise, it shall be included in Merchandise and for purposes of the
calculation of the Guaranteed Amount and shall be as follows: (i) to the extent
that such item of Returned Merchandise is received during the first fourteen
(14) days following the Sale Commencement Date, at the Cost Value and Retail
Price provided for above applicable to such item; and (ii) to the extent that
such item of Returned Merchandise is received during the period between the 15th
day following the Sale Commencement Date and the 30th day following the Sale
Commencement Date, at a value equal to the product of (x) the applicable Cost
Value and Retail Price attributable to such item as provided for above,
multiplied by (y) the Prevailing Discount Adjustment applicable to such item.
Subject to Merchant’s reimbursement to Agent of the amount of any store credit
or refund granted for any such Returned Merchandise, the aggregate Cost Value of
the Merchandise and the Guaranteed Amount shall be adjusted accordingly. If the
Returned Merchandise is not first quality goods, Merchant and Agent shall
negotiate in good faith to determine an appropriate Cost Value applicable to
such merchandise for purposes of determining the Cost Value attributable
thereto; provided that, in the event Merchant and Agent cannot agree on the Cost
Value to be attributed to any particular item(s) of Returned Merchandise, then
such item(s) shall be segregated form Merchandise and excluded from the Sale and
treated as Excluded Defective Merchandise for all purposes hereunder. Any
reimbursements due to Agent as a result of Returned Merchandise shall be
accounted for and paid by Merchant immediately following the weekly Sale
reconciliation pursuant to Section 8.7(a) hereof. Any increases in payment on
account of the Guaranteed Amount as a result of Returned Merchandise shall be
paid by Agent as part of the final Sale reconciliation provided for under
Section 8.7(b) hereof.

 

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8.6. Gift Cards; Merchandise Credits; Membership Program.

(a) During the period between the Sale Commencement Date and the date that is
thirty (30) days after entry of the Approval Order, Agent shall accept
Merchant’s gift cards, gift certificates, merchandise credits and other similar
Merchant-issued credits, if any. Merchant shall reimburse Agent in cash for gift
card, gift certificate, merchandise credit, and other similar Merchant issued
credit amounts redeemed during the Sale Term as part of the weekly sale
reconciliation provided for in Section 8.7(a).

(b) To the extent Merchant maintains any customer membership or customer loyalty
discount programs, said customers may take advantage of discounts afforded
customers in connection with Merchant’s customer membership or customer loyalty
discount programs (“Membership Program Discounts”) in addition to the
then-prevailing Sale discounts being offered by Agent (for example, a “take an
additional 10% off Membership Program Discount” may be combined with Agent’s 30%
prevailing sale discount, such that the affected customer would receive an
effective discount of 37%); provided that, Merchant shall reimburse Agent in
cash for the incremental increased discount received as a consequence of the
recognition of such Membership Program Discounts (on a weekly basis as part of
each weekly reconciliation).

8.7. Sale Reconciliation.

(a) Weekly Reconciliation. On each Wednesday during the Sale Term, commencing on
the second Wednesday after the Sale Commencement Date, Agent and Merchant (in
consultation with Lender and Committee) shall cooperate to reconcile Expenses,
Gross Rings, and such other Sale-related items as either party shall reasonably
request, in each case for the prior week or partial week (i.e., Sunday through
Saturday), pursuant to procedures agreed upon by Merchant (in consultation with
Lender and Committee) and Agent. On a weekly basis, Agent shall also provide
Merchant (and a copy to Lender and Committee) with a report (in electronic
format acceptable to Merchant) of all sales of Additional Agent Merchandise,
which report shall detail by Store, at a minimum, gross and net sales and type
of items sold. To ensure accurate sales audit functions, Agent shall use
Merchant’s existing point-of-sale system for recording all sales (including any
sales of Additional Agent Merchandise) in the Stores.

(b) Final Reconciliation.

(i) Within thirty (30) days after the Sale Termination Date applicable to the
last Store in which the Sale is concluded, Agent and Merchant (in consultation
with the Lender and Committee) shall jointly prepare a final reconciliation of
the Sale including, without limitation, a summary of Proceeds, Sales Taxes,
Expenses, and any other accountings required hereunder (the “Final
Reconciliation”). Within five (5) days after completion of the Final
Reconciliation, any undisputed and unpaid Expenses shall be paid by Agent (the
“Final Reconciliation Settlement Date”). In the absence of an order of the
Bankruptcy Court to the contrary, no disputed amounts owing hereunder shall be
paid until the dispute has been resolved by agreement of the parties or as
determined in the manner prescribed in Section 8.7(b)(ii) hereof. During the
Sale Term, and until all of Agent’s obligations under this Agreement have been
satisfied, Merchant (in consultation with the Lender and Committee) and Agent
shall have reasonable access to Merchant’s and Agent’s records with respect to
Proceeds, Sales Taxes, Expenses, and other Sale-related items to review and
audit such records.

 

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(ii) In the event that there is any dispute with respect to either (x) the
determination of the aggregate Cost Value of the Merchandise as reflected in the
Final Inventory Report and/or (y) the Final Reconciliation, such dispute shall
be promptly (and in no event later than the fifth (5th) business day following a
request by either Merchant or Agent) submitted to the Bankruptcy Court for
resolution. In the event of a dispute as to (x) or (y) above, Agent shall extend
the Letter of Credit in accordance with the provisions of Sections 3.4 or 4.2(b)
hereof, as applicable. If Agent has for any reason not so extended the
expiration date of the Letter of Credit by the date that is ten (10) business
days prior to the applicable expiration date (as may have been extended
previously), Merchant and/or Lender shall have the right to make a drawing under
the Letter of Credit in an amount or amounts equal to the undisputed amounts
Merchant asserts are then owing to Merchant.

8.8 Force Majeure. If any casualty, act of war or terrorism, or act of God
prevents the conduct of business in the ordinary course at any Store and/or
Distribution Center for a period in excess of ten (10) consecutive days (a
“Force Majeure Event”), such Store and/or Distribution Center and the
Merchandise located at such Store and/or Distribution Center shall be eliminated
from the Sale and considered to be deleted from this Agreement as of the first
date of such event, and Agent and Merchant shall have no further rights or
obligations hereunder with respect thereto; provided, however, that (i) the
proceeds of any insurance attributable to such Merchandise shall constitute
Proceeds hereunder, and (ii) the Guaranteed Amount shall be reduced to account
for any Merchandise eliminated from the Sale that is not the subject of
insurance proceeds or consolidated by Agent into another Store(s) and/or
Distribution Center(s) and, to the extent Agent has paid the Guaranteed Amount,
Merchant (or Lender, to the extent Lender has received such amount(s)), to the
extent such insurance proceeds are actually received, shall reimburse Agent for
the amount by which the Guaranteed Amount is so reduced prior to the end of the
Sale Term. If a Store and/or Distribution Center is eliminated from the Sale due
to a Force Majeure Event, Agent will use its commercially reasonable efforts to
transfer therefrom all Merchandise that is not the subject of insurance proceeds
and include such Merchandise in the Sale at other Stores and/or Distribution
Centers.

8.9 Additional Agent Merchandise

(a) Agent shall be entitled to include in the Sale additional merchandise
procured by Agent which is of like kind, and no lesser quality to the
Merchandise located in the Stores (“Additional Agent Merchandise”). Agent agrees
that Additional Agent Merchandise, if any, shall be procured from either
Merchant’s existing vendors (“Existing Vendors”) or third party vendors who are
not Existing Vendors (“Third Party Vendors”) that sell merchandise of like kind,
and no lesser quality to the Merchandise; provided however that, in the event
Agent desires to include Additional Agent Merchandise that is not of like kind
and of equal quality to the Merchandise, the inclusion of any such merchandise
shall be subject to the mutual agreement of Agent and Merchant. Agent shall be
responsible for payment of the costs associated with procuring any Additional
Agent Merchandise as an Expense. Agent shall pay for all costs and expenses
related to, or incurred in connection with, the marketing and sale of the
Additional Agent Merchandise as an Expense of the Sale. Agent further agrees
that if it elects to include Additional Agent Merchandise in the Sale, Agent
shall be authorized to utilize the Distribution Centers for the receipt,
processing, handling and distribution of such Additional Agent Merchandise as
part of the Sale.

 

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(b) The Additional Agent Merchandise shall be at all times subject to the
control of Agent, and Merchant and Lender shall cooperate with Agent with
respect to all filings (including, without limitation, UCC-1 financing
statements) and other actions to the extent reasonably requested by Agent in
connection with the Additional Agent Merchandise. If requested by Agent,
Merchant shall, at Agent’s expense as an Expense, insure the Additional Agent
Merchandise and, if required, promptly file any proofs of loss with regard to
same with Merchant’s insurers.

(c) Any transactions relating to the Additional Agent Merchandise are, and shall
be construed as, a true consignment from Agent to Merchant. Merchant
acknowledges, and the Approval Order (as and when applicable) shall provide,
that the Additional Agent Merchandise shall be consigned to Merchant as a true
consignment under Article 9 of the Uniform Commercial Code in effect in the
State of Utah (the “UCC”). Agent is hereby granted a first priority security
interest in (i) the Additional Agent Merchandise and (ii) the Additional Agent
Merchandise proceeds, which security interest Agent shall be authorized to
perfect prior to entry of the Approval Order, but which security interest shall,
if not sooner perfected, be deemed perfected pursuant to the Approval Order (as
and when applicable) without the requirement of filing UCC financing statements
or providing notifications to any prior secured parties (provided that Agent is
hereby authorized to deliver any notices and file any financing statements and
amendments thereof under the applicable UCC identifying Agent’s interest in the
Additional Agent Merchandise (and any proceeds from the sale thereof) as
consigned goods thereunder and the Merchant as the consignee therefor, and
Agent’s security interest in such Additional Agent Merchandise and Additional
Agent Merchandise proceeds).

(d) Lender hereby consents to the inclusion of the proceeds from the Sale of
Additional Agent Merchandise as “Proceeds” hereunder.

(e) In order to distinguish the Additional Agent Merchandise from the
Merchandise located in the Stores, Agent shall affix distinctive tags and/or
other identifying markings on all items of Additional Agent Merchandise, which
shall enable Merchant and Agent to distinguish sales of the Additional Agent
Merchandise from sales of the Merchandise. Additionally, Agent shall provide
signage in the Stores and the Direct Business Platform notifying customers that
the Additional Agent Merchandise has been included in the Sale.

8.10 Direct Business Platform. Agent shall have the right to conduct the Sale
using Merchant’s e-commerce based direct business platform (the “Direct Business
Platform”) In addition to, and without limiting, any other provision of this
Agreement, Merchant hereby grants Agent a royalty-free sub-license (exclusive
during the Sale Term) to use Merchant’s Direct Business Platform and related
platform (“Direct Business Platform”) to fulfill customer orders for
purchases/sales of Merchandise and Additional Agent Merchandise (in Agent’s
capacity as Agent hereunder). All proceeds of such sales shall constitute
Proceeds under this Agreement. Merchant shall provide Agent with all customary
operations, systems, and services associated with the performance, operation and
functionality of the Direct Business Platform and the fulfillment of sales
therefrom; provided, however, that Agent shall reimburse Merchant, as an
Expense, the

 

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amounts contemplated by Sections 4.1(u), (v), and (w). Merchant and Agent shall
mutually agree on the date and procedures required to complete the Inventory
Taking at the affected Distribution Center(s).

 

Section 9. Employee Matters.

9.1 Merchant’s Employees. Subject to the applicable provisions of the Approval
Order (as and when applicable) and any other provisions in this Agreement
relating to employees, Agent may use Merchant’s Store and Distribution Center
employees in the conduct of the Sale to the extent Agent deems expedient, and
Agent may select and, with Merchant, schedule the number and type of Merchant’s
employees required for the Sale. Agent shall identify any such Store employees
to be used in connection with the Sale (each such employee, a “Retained
Employee”) prior to the Sale Commencement Date. Retained Employees shall at all
times remain employees of Merchant, and shall not be considered or deemed to be
employees of Agent. Merchant and Agent agree that except to the extent that
wages, payroll taxes, benefits, and other costs relating to the employment of
Retained Employees constitute Expenses hereunder and except as otherwise
expressly provided in this Agreement, nothing contained in this Agreement and
none of Agent’s actions taken in respect of the Sale shall be deemed to
constitute an assumption by Agent of any of Merchant’s obligations relating to
any of Merchant’s employees including, without limitation, Excluded Benefits,
Worker Adjustment Retraining Notification Act (“WARN Act”) claims, and other
termination-type claims and obligations, or any other amounts required to be
paid by statute or law (except to the extent such items are amounts for which
Merchant is entitled to indemnification pursuant hereto), nor shall Agent become
liable under any collective bargaining or employment agreement or be deemed a
joint or successor employer with respect to such employees. Merchant shall not,
without Agent’s prior written consent, raise the salary or wages or increase the
benefits for, or pay any bonuses or make any other extraordinary payments to,
any of the Retained Employees, except as otherwise provided in this Agreement.

9.2 Termination of Employees by Merchant. Agent may in its discretion stop using
any Retained Employee at any time during the Sale. In the event Agent determines
to discontinue its use of any Retained Employee in connection with the conduct
of the Sale, Agent will provide written notice to Merchant at least seven
(7) days prior thereto, except for termination “for cause” (such as dishonesty,
fraud, or breach of employee duties), in which case the seven (7) day notice
period shall not apply; provided, however, that Agent shall immediately notify
Merchant of the basis for such “cause”. During the Sale Term, Merchant shall not
transfer or dismiss employees of the Stores except “for cause” without Agent’s
prior consent (which consent shall not be unreasonably withheld).
Notwithstanding any other provision hereof, Agent will indemnify Merchant with
respect to any claims by Retained Employees arising from Agent’s treatment of
such Retained Employees.

9.3 Payroll Matters. Subject to Section 4.1 hereof, during the Sale Term
Merchant shall process the payroll for all Retained Employees and any former
employees and temporary labor engaged for the Sale. Each Wednesday prior to the
date on which such payroll is payable (or such other date as may be reasonably
requested by Merchant to permit the funding of the payroll accounts before such
payroll is due and payable) during the Sale Term, Agent shall transfer to
Merchant’s payroll accounts an amount equal to the base payroll for Retained
Employees plus related payroll taxes, workers’ compensation and benefits for
such week, in the amount equal to the Benefits Cap.

 

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9.4 Employee Retention Bonuses. Agent shall pay, as an Expense hereunder,
retention bonuses (“Retention Bonuses”) (which bonuses shall be inclusive of
payroll taxes but as to which no benefits shall be payable) up to a maximum of
approximately ten percent (10%) of base payroll, to certain Retained Employees
who do not voluntarily leave employment and are not terminated “for cause”, as
Agent shall determine in its sole discretion. The amount of such Retention
Bonuses, which will be payable within thirty (30) days after the Sale
Termination Date, shall be in an amount to be determined by Agent, in its
discretion, and shall be processed through Merchant’s payroll system. Agent
shall provide Merchant with a copy of Agent’s Retention Bonus plan within two
(2) business days after the Sale Commencement Date. Agent shall not utilize the
Retention Bonus as a mechanism to encourage Retained Employees to act contrary
to Merchant’s best interests.

 

Section 10. Conditions Precedent.

10.1 Conditions to Agent’s Obligations. The willingness of Agent to enter into
the transactions contemplated under this Agreement is directly conditioned upon
the satisfaction of the following conditions at the time or during the time
periods indicated, unless specifically waived in writing by Agent:

(a) All representations and warranties of Merchant hereunder shall be true and
correct in all material respects and no Event of Default shall have occurred at
and as of the date hereof and as of the Sale Commencement Date;

(b) No injunction, stay or restraining order shall be in effect prohibiting the
consummation of the transactions contemplated by this Agreement (including,
without limitation, the Sale);

(c) The Lender shall have executed this Agreement in the space provided
therefor; and

(d) Notwithstanding anything in this Agreement or any Agency Document to the
contrary, the enforceability of this Agreement is subject in all respects to
Agent’s express written approval and acceptance of any Exhibit or Agency
Document not fully executed by the parties and attached hereto.

10.2 Conditions to Merchant’s Obligations. The willingness of Merchant to enter
into the transactions contemplated under this Agreement is directly conditioned
upon the satisfaction of the following conditions at the time or during the time
periods indicated, unless specifically waived in writing by Merchant:

(a) All representations and warranties of Agent hereunder shall be true and
correct in all material respects and no Event of Default shall have occurred at
and as of the date hereof and as of the Sale Commencement Date; and

(b) Notwithstanding anything in this Agreement or any Agency Document to the
contrary, the enforceability of this Agreement is subject in all respects to
Merchant’s express written approval and acceptance of any Exhibit or Agency
Document not fully executed by the parties and attached hereto.

 

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Section 11. Representations, Warranties and Covenants.

11.1 Merchant’s Representations, Warranties, and Covenants. Merchant hereby
represents, warrants, and covenants in favor of Agent as follows:

(a) Merchant (i) is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware; (ii) has all requisite power
and authority to own, lease, and operate its assets and properties and to carry
on its business as presently conducted; and (iii) is, and during the Sale Term
will continue to be, duly authorized and qualified to do business and in good
standing in each jurisdiction where the nature of its business or properties
requires such qualification, including all jurisdictions in which each
Distribution Center and each Store is/are located, except, in each case, to the
extent that the failure to be in good standing or so qualified could not
reasonably be expected to have a material adverse effect on the ability of
Merchant to execute and deliver this Agreement and perform fully its obligations
hereunder.

(b) Merchant has the right, power, and authority to execute and deliver this
Agreement and each other document and agreement contemplated hereby
(collectively, together with this Agreement, the “Agency Documents”) and to
perform fully its obligations hereunder. Merchant has taken and, in the event of
a bankruptcy filing shall take, all necessary actions required to authorize the
execution, delivery, and performance of the Agency Documents, and no further
consent or approval on the part of Merchant is required for Merchant to enter
into and deliver the Agency Documents, to perform its obligations thereunder,
and to consummate the Sale. Each of the Agency Documents has been duly executed
and delivered by Merchant and constitutes the legal, valid, and binding
obligation of Merchant, enforceable in accordance with its terms. Except as
provided in this Agreement, no court order or decree of any federal, state,
local, or provincial governmental authority or regulatory body is in effect that
would prevent or materially impair, or is required for Merchant’s consummation
of, the transactions contemplated by this Agreement, and no consent of any third
party that has not been obtained is required therefor, other than as shall be
obtained prior to the Sale Commencement Date, except for any such consent the
failure of which to be obtained could not reasonably be expected to have a
material adverse effect on the ability of Merchant to execute and deliver this
Agreement and perform fully its obligations hereunder. Other than for any
consent as shall be obtained prior to the Sale Commencement Date, and any
contracts or agreements identified by Merchant to Agent on or prior to the Sale
Commencement Date, no contract or other agreement to which Merchant is a party
or by which Merchant is otherwise bound will prevent or materially impair the
consummation of the Sale and the other transactions contemplated by this
Agreement.

(c) As of the date of this Agreement, Merchant has continued normal
replenishment of Merchandise and supplies in and to the Stores.

 

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(d) Merchant (i) except as set forth on Exhibit 11.1(d), owns and will own at
all times during the Sale Term, good and marketable title to all of the
Merchandise free and clear of all liens, claims, and encumbrances of any nature;
provided that, the liens identified in Exhibit 11.1(d) shall attach to the
Guaranteed Amount, and such other amounts due Merchant hereunder in the same
extent and priority that such liens had in the Merchandise and Owned FF&E; and
(ii) Merchant shall not create, incur, assume, or suffer to exist any security
interest, lien, or other charge or encumbrance upon or with respect to any of
the Merchandise or the Proceeds, in each case, except for such pre-existing
liens and security interests as shall have been disclosed by Merchant to Agent
and identified in Exhibit 11.1(d) hereof, which liens and security interests
shall attach only to the Guaranteed Amount Expenses and any other amounts
payable to Merchant hereunder.

(e) Merchant has maintained its pricing files, including without limitation, the
Cost File, at and in respect of all Stores and in respect of the Direct Business
Platform in the ordinary course of business, and prices charged to the public
for goods (whether in-store, by advertisement, online, or otherwise) are the
same in all material respects as set forth in such pricing files for the periods
indicated therein (without consideration of any point of sale markdowns,
advertised sales, and other customary in-store, online, promotional or clearance
activities). Each pricing file, including (without limitation) the Cost File,
does not include or reflect Excluded Pricing Adjustments. With regard to pricing
files attributable to the Direct Business Merchandise, all such files were
updated on or about November 29, 2014 to reflect the current selling price for
such items of Merchandise.

(f) Merchant shall ticket or mark all items of inventory received at the Stores
prior to the Sale Commencement Date in a manner consistent with similar
Merchandise located at the Stores and in accordance with Merchant’s past
practices and policies relative to pricing and marking inventory.

(g) To the best of Merchant’s knowledge, all Merchandise is in material
compliance with all applicable federal, state, and local product safety laws,
rules, and standards. Merchant shall provide Agent with its historic policies
and practices, if any, regarding product recalls prior to the Sale Commencement
Date.

(h) Agent shall have the right during the Sale Term to the unencumbered use and
occupancy of, and peaceful and quiet possession of, the Stores and the
Distribution Centers, the assets currently located at the Closing Locations, and
the utilities and other services provided at the Closing Locations. Merchant
shall, throughout the Sale Term, maintain in good working order, condition and
repair all cash registers, heating systems, air conditioning systems, elevators,
escalators and all other mechanical devices necessary or appropriate for the
conduct of the Sale at the Stores. Except as otherwise restricted by the
Bankruptcy Code or as provided herein and absent a bona fide dispute, throughout
the Sale Term Merchant shall remain current on all expenses and payables
necessary for the conduct of the Sale.

(i) Merchant has paid and shall continue to pay until entry of an order for
relief under the Bankruptcy Code, and, subject to the Approval Order, Merchant
shall continue to pay throughout the Sale Term, all self-insured or
Merchant-funded employee benefit programs for Stores’ employees, including
health and medical benefits and insurance and all proper claims made or to be
made in accordance with such programs.

 

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(j) Supplies have not been, since November 1, 2014, and shall not be, prior to
the Sale Commencement Date, transferred by Merchant to or from the Stores so as
to alter the mix or quantity of supplies at the Stores from that existing on
such date, other than in the ordinary course of business.

(k) Since November 1, 2014, Merchant (i) has not (and shall not, up to the Sale
Commencement Date) marked up or raised the price of any items of Merchandise,
(ii) has not reduced has the price of any items of Merchandise, (iii) has sold
inventory during such period at customary prices consistent with the ordinary
course of business, and has not promoted or advertised any sales or in-store
promotions (including POS promotions) to the public other than as described on
Exhibit 11.1(k) (in all cases whether or not consistent with Merchant’s ordinary
course of business consistent with historic periods), and (iv) has not removed
or altered any tickets or any indicia of clearance merchandise or POS promotion,
except in the ordinary course of business.

(l) Except for (i) the Bankruptcy Case and (ii) the matters set forth on Exhibit
11.1(l), no action, arbitration, suit, notice, or legal, administrative, or
other proceeding before any court or governmental body has been instituted by or
against Merchant, or has been settled or resolved, or to Merchant’s knowledge,
is threatened against or affects Merchant, relative to Merchant’s business or
properties, or which questions the validity of this Agreement, or that if
adversely determined, would adversely affect the conduct of the Sale.

(m) Merchant is not a party to any collective bargaining agreements with its
employees. No labor unions represent Merchant’s employees at the Distribution
Centers or at any Store. There are currently no strikes, work stoppages, or
other labor disturbances affecting the any Distribution Center or any Store, or
Merchant’s central office facilities.

(n) Since November 1, 2014, Merchant has not taken, and shall not throughout the
Sale Term take, any actions with the intent of increasing the Expenses of the
Sale, including without limitation increasing salaries or other amounts payable
to employees; except to the extent an employee was due an annual raise in the
ordinary course.

(o) Since November 1, 2014, Merchant has operated, and, except as otherwise
restricted by the Bankruptcy Code or as provided herein (including as described
in Section 11.1(c)), through the Sale Commencement Date, Merchant covenants to
continue to operate, the Stores in all material respects in the ordinary course
of business including without limitation by: (i) selling inventory during such
period at customary prices consistent with the ordinary course of business and
not promoting or advertising any sales or in-store promotions (including POS
promotions) to the public other than as described on Exhibit 11.1(o) (in all
cases whether or not consistent with Merchant’s ordinary course of business
consistent with historic periods); (ii) not returning inventory to vendors and
not transferring inventory or supplies out of or to the Stores; or (iii) except
as may occur in the ordinary course of business, not making any management
personnel moves or changes at the Stores; and (iv) not making any management
personnel moves or changes that would have a material adverse effect on the
operation of the Direct Business Platform.

 

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(p) To Merchant’s knowledge, formed after reasonable inquiry, all documents,
information and supplements provided by Merchant to Agent in connection with
Agent’s due diligence and the negotiation of this Agreement were true and
accurate in all material respects at the time provided.

(q) Except as identified on Exhibit 11.1(q), no Store lease or similar occupancy
agreement has expired, nor shall expire at any time until the conclusion of the
Sale Term in such Store (by its terms or otherwise).

(r) [Intentionally Omitted]

(s) Merchant has not since November 1, 2014 knowingly shipped any Excluded
Defective Merchandise from the Distribution Centers to the Stores. Merchant will
not ship any Excluded Defective Merchandise from the date of this Agreement from
the Distribution Centers to the Stores.

(t) Merchant (i) at the Sale Commencement Date will have, sufficient internal
funds (without giving effect to any unfunded financing regardless of whether any
such financing is committed) to consummate the transactions contemplated by this
Agreement and the other Agency Documents, (ii) at the Sale Commencement Date
will have, the resources and capabilities (financial or otherwise) to perform
its obligations hereunder and under the other Agency Documents, and (iii) at the
Sale Commencement Date, will not have incurred any obligation, commitment,
restriction or liability of any kind which would impair or adversely affect such
funds, resources and capabilities.

(u) Merchant shall not, prior to the Sale Termination Date, offer any promotions
or discounts at the Stores or through the Direct Business Platform except as
detailed on Exhibit 11.1(u).

11.2 Agent’s Representations, Warranties and Covenants. Agent hereby represents,
warrants, and covenants in favor of Merchant as follows:

(a) Each entity composing Agent (i) is a limited liability company duly and
validly existing and in good standing under the laws of the State of Delaware;
(ii) has all requisite power and authority to carry on its business as presently
conducted and to consummate the transactions contemplated hereby; and (iii) is
and during the Sale Term will continue to be duly authorized and qualified as a
foreign company to do business and in good standing in each jurisdiction where
the nature of its business or properties requires such qualification.

(b) Agent has the right, power, and authority to execute and deliver each of the
Agency Documents to which it is a party and to perform fully its obligations
thereunder. Agent has taken all necessary actions required to authorize the
execution, delivery, and performance of the Agency Documents, and no further
consent or approval is required on the part of Agent for

 

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Agent to enter into and deliver the Agency Documents, to perform its obligations
thereunder, and to consummate the Sale. Each of the Agency Documents has been
duly executed and delivered by Agent and constitutes the legal, valid, and
binding obligation of Agent enforceable in accordance with its terms. No court
order or decree of any federal, provincial, state, or local governmental
authority or regulatory body is in effect that would prevent or impair or is
required for Agent’s consummation of the transactions contemplated by this
Agreement, and no consent of any third party which has not been obtained is
required therefor other than as provided herein. No contract or other agreement
to which Agent is a party or by which Agent is otherwise bound will prevent or
impair the consummation of the transactions contemplated by this Agreement.

(c) No action, arbitration, suit, notice, or legal, administrative, or other
proceeding before any court or governmental body has been instituted by or
against Agent, or has been settled or resolved, or to Agent’s knowledge, has
been threatened against or affects Agent, which questions the validity of this
Agreement or any action taken or to be taken by Agent in connection with this
Agreement, or which if adversely determined, would have a material adverse
effect upon Agent’s ability to perform its obligations under this Agreement.

 

Section 12. Insurance.

12.1 Merchant’s Liability Insurance. Merchant shall continue until the Sale
Termination Date, in such amounts as it currently has in effect, all of its
liability insurance policies including, but not limited to, products liability,
comprehensive public liability, auto liability, and umbrella liability
insurance, covering injuries to persons and property in, or in connection with
Merchant’s operation of the Stores, and shall use best efforts to cause Agent to
be named an additional insured with respect to all such policies. Prior to the
Sale Commencement Date, Merchant shall deliver to Agent certificates evidencing
such insurance setting forth the duration thereof and naming Agent as an
additional named insured, in form reasonably satisfactory to Agent. All such
policies shall require at least thirty (30) days’ prior notice to Agent of
cancellation, non-renewal, or material change. In the event of a claim under any
such policies, (a) Merchant shall be responsible for the payment of all
deductibles, retentions, or self-insured amounts to the extent such claim arises
from or relates to the alleged acts or omissions of Merchant or its employees
(other than Retained Employees), agents (other than Agent’s employees), or
independent contractors (other than Agent and Supervisors hired by Agent in
conjunction with the Sale) and (b) Agent shall be responsible for the payment of
all deductibles, retentions, or self-insured amounts (which amounts shall
constitute Expenses) to the extent such claim arises from or relates to the
alleged acts or omissions of Agent or its employees, agents, or independent
contractors, including Retained Employees.

12.2 Merchant’s Casualty Insurance. Merchant shall continue until the Sale
Termination Date, in such amounts as it currently has in effect, fire, flood,
theft, and extended coverage casualty insurance covering the Merchandise in a
total amount equal to no less than the Cost Value thereof, which coverage shall
be reduced from time to time to take into account the sale of Merchandise. In
the event of a loss to the Merchandise on or after the date of this Agreement,
the proceeds of such insurance attributable to the Merchandise and/or Additional
Agent Merchandise (net of any deductible) shall constitute Proceeds. Prior to
the Sale Commencement Date, Merchant shall deliver to Agent certificates
evidencing such insurance setting forth the duration thereof, in form and
substance reasonably satisfactory to Agent. All such policies shall require at
least thirty

 

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(30) days’ prior notice to Agent of cancellation, non-renewal, or material
change. Merchant shall not make any change in the amount of any deductibles or
self-insurance amounts prior to the Sale Termination Date (as may be extended
from time to time as set forth herein) without Agent’s prior written consent.

12.3 Worker’s Compensation Insurance. Merchant shall continue until the Sale
Termination Date, in such amounts as it currently has in effect, worker’s
compensation insurance (including employer liability insurance) covering all
Retained Employees in compliance with all statutory requirements. Prior to the
Sale Commencement Date, Merchant shall deliver to Agent a certificate of its
insurance broker or carrier evidencing such insurance.

12.4 Agent’s Insurance. As an Expense of the Sale, Agent shall maintain
throughout the Sale Term, in such amounts as it currently has in effect,
comprehensive public liability and automobile liability insurance policies
covering injuries to persons and property in or in connection with Agent’s
agency at the Stores, and shall cause Merchant to be named an additional insured
with respect to such policies. Prior to the Sale Commencement Date, Agent shall
deliver to Merchant certificates evidencing such insurance policies, setting
forth the duration thereof and naming Merchant as an additional insured, in form
and substance reasonably satisfactory to Merchant. In the event of a claim under
such policies, Agent shall be responsible for the payment of all deductibles,
retentions, or self-insured amounts thereunder, to the extent such claim arises
from or relates to the alleged acts or omissions of Agent or Agent’s employees,
agents or Supervisors.

12.5 Risk of Loss. Without limiting any other provision of this Agreement,
Merchant acknowledges that Agent is conducting the Sale on behalf of Merchant
solely in the capacity of an agent, and that in such capacity (i) Agent shall
not be deemed to be in possession or control of the Stores or the assets located
therein or associated therewith, or of Merchant’s employees located at the
Stores, and (ii) except as expressly provided in this Agreement, Agent does not
assume any of Merchant’s obligations or liabilities with respect to any of the
foregoing. Agent shall not be deemed to be a successor employer. Merchant and
Agent agree that, subject to the terms of this Agreement, Agent shall bear all
responsibility for liability claims of customers, employees, and other persons
arising from events occurring at the Stores during and after the Sale Term (an
“Agent Claim”). In the event of any liability claim other than an Agent Claim,
Merchant shall administer such claim and shall present such claim to Merchant’s
liability insurance carrier in accordance with Merchant’s policies and
procedures existing immediately prior to the Sale Commencement Date, and shall
provide a copy of the initial documentation relating to such claim to Agent at
the address listed in this Agreement. To the extent that Merchant and Agent
agree that a claim constitutes an Agent Claim, Agent shall administer such claim
and shall present such claim to its liability insurance carrier, and shall
provide copies of the initial documentation relating to such claim to Merchant.
In the event that Merchant and Agent cannot agree whether a claim constitutes an
Agent Claim, each party shall present the claim to its own liability insurance
carrier, and a copy of the initial claim documentation shall be delivered to the
other party to the address designated for delivery of notices hereunder.

 

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Section 13. Indemnification.

13.1 Merchant Indemnification. Merchant shall indemnify and hold Agent and each
Agent Indemnified Party harmless from and against all claims, demands,
penalties, losses, liability, or damage, including, without limitation,
reasonable attorneys’ fees and expenses, asserted directly or indirectly against
Agent resulting from or related to:

(a) Merchant’s material breach of or failure to comply with any of its
agreements, covenants, representations or warranties contained in any Agency
Document;

(b) any failure of Merchant to pay to its employees any wages, salaries, or
benefits due to such employees during the Sale Term or other claims asserted
against Agent by Merchant’s employees resulting from Merchant’s (and not
Agent’s) treatment of its employees;

(c) subject to Agent’s compliance with its obligations under Section 8.3 hereof,
any failure by Merchant to pay any Sales Taxes to the proper taxing authorities
or to properly file with any taxing authorities any reports or documents
required by applicable law to be filed in respect thereof;

(d) any consumer warranty or products liability claims relating to Merchandise
and/or Additional Agent Merchandise;

(e) any liability or other claims asserted by customers, any of Merchant’s
employees, or any other person against any Agent Indemnified Party (including,
without limitation, claims by employees arising under collective bargaining
agreements, worker’s compensation or under the WARN Act);

(f) any harassment or any other unlawful, tortious, or otherwise actionable
treatment of any customers, employees or agents of Agent by Merchant or any of
its representatives; and

(g) the gross negligence or willful misconduct of Merchant or any of its
officers, directors, employees, agents (other than Agent), or representatives.

The indemnification obligations set forth in this Section 13.1 shall be in
addition to (and shall not limit) any other indemnification obligations of
Merchant set forth in this Agreement, including without limitation those set
forth in Section 8.3(a).

13.2 Agent Indemnification. Agent shall jointly and severally indemnify and hold
harmless Merchant and the Merchant Indemnified Parties from and against all
claims, demands, penalties, losses, liability, or damage, including, without
limitation, reasonable attorneys’ fees and expenses, asserted directly or
indirectly against Merchant resulting from or related to (including acts or
omissions of persons or entities affiliated with or acting on behalf of Agent):

(a) Agent’s material breach of or failure to comply with any Safety Laws or any
of its agreements, covenants, representations, or warranties contained in any
Agency Document;

 

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(b) any harassment, discrimination, or violation of any laws or regulations or
any other unlawful, tortious, or otherwise actionable treatment of any employees
or agents of Merchant by Agent or any of its employees, agents, independent
contractors, Supervisors, or other officers, directors, or representatives of
Agent;

(c) any claims by any party engaged by Agent as an employee or independent
contractor arising out of such engagement;

(d) any Agent Claims;

(e) any Additional Taxes and Penalties arising out of Agent’s failure to collect
and/or remit to Merchant correct amounts of Sales Taxes (including any such
failure resulting from Agent’s use of any system other than Merchant’s point of
sale system to compute Sales Taxes relating to the Sale);

(h) the gross negligence, willful misconduct, or fraud of Agent or any of its
officers, directors, employees, agents, or representatives; and

(i) any consumer warranty or products liability claims arising out of or related
to the sale of Additional Agent Merchandise.

The indemnification obligations set forth in this Section 13.2 shall be in
addition to (and shall not limit) any other indemnification obligations of Agent
set forth in this Agreement, including without limitation those set forth in
Section 8.3(a).

 

Section 14. Defaults.

The following shall constitute “Events of Default” hereunder:

(a) Merchant’s or Agent’s failure to perform any of their respective material
obligations hereunder, which failure shall continue uncured seven (7) days after
receipt of written notice thereof to the defaulting party; or

(b) Any representation or warranty made by Merchant or Agent proves untrue in
any material respect as of the date made or at any time and throughout the Sale
Term;

(c) The Approval Order is not entered by the Bankruptcy Court by December 24,
2014;

(d) The filing of a motion by any party to covert or the conversion of the
Merchant’s bankruptcy case to a case under another chapter of the Bankruptcy
Code (other than chapter 11) or the filing of a motion by any party to appoint
or the appointment of a chapter 11 trustee; or

(e) Subject to Section 8.8 hereof, the Sale is terminated or materially
interrupted or impaired at any Store or the Direct Business Platform or the
Distribution Centers for any reason other than (i) an Event of Default by Agent
or (ii) any other material breach or action by Agent not authorized hereunder;
or

(f) Once executed by Merchant, Agent, and Lender, Merchant or Lender consider
competing bids or Merchant or Lender hereby continue, begin, or initiate
communications with any third party who expressed or who may express an interest
in selling (including in capacity as an agent), acquiring, or disposing of
Merchant’s assets that are the subject of this Agreement.

 

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In the event of an Event of Default, the non-defaulting party (in the case of
(a) or (b) above, or the Agent in the case of (c), (d), (e) or (f) above) may,
in its discretion, elect to terminate this Agreement upon seven (7) business
days’ written notice to the other party and pursue any and all rights and
remedies and damages resulting from such default hereunder in the event such
cure is not effected by the defaulting party.

 

Section 15. Fixtures.

(a) In partial consideration, and as a material component of the payment of the
Guaranteed Amount, with respect to any furniture, fixtures and equipment
(including, but not limited to (i) machinery, rolling stock, office equipment,
computers, servers, and hardware used or utilized in connection with or
associated with the Direct Business Platform, and personal property owned by
Merchant and located at the Stores or Merchant’s corporate offices and, solely
with respect to computers, servers, and hardware used or utilized in connection
with or associated with the Direct Business Platform, at the Distribution
Centers; and (ii) such other items in the file entitled “FF&E Assets” provided
by Merchant to Agent (exclusive in all instances of Owned DC FF&E referenced in
such file (collectively, the “Owned FF&E”), Agent shall have the sole and
exclusive right to sell the Owned FF&E for Agent’s sole and exclusive benefit
and at Agent’s sole cost and expense (other than rent and other occupancy
expenses associated with the corporate office, which amounts shall be paid by
Merchant); provided, further, that, in that regard, Agent shall be entitled to
retain all proceeds (which for the avoidance of doubt shall not constitute
Proceeds or Asset Proceeds) from the sale or other disposition of the Owned
FF&E, and Agent shall be responsible for the payment of all costs and expenses
associated with the sale or other disposition of the Owned FF&E (other than rent
and other occupancy expenses associated with the corporate office, which amounts
shall be paid by Merchant). In addition, with respect to furniture, fixtures and
equipment (including, but not limited to, machinery, rolling stock, office
equipment, conveyors, racking, and personal property (other than computers,
servers, and hardware used or utilized in connection with or associated with the
Direct Business Platform) owned by Merchant and located at the Distribution
Centers (collectively without the computers, servers, and hardware used or
utilized in connection with or associated with the Direct Business Platform, the
“Owned DC FF&E”)), if Merchant requests and at Merchant’s election (in
consultation with the Lender and the Committee) (the “DC FF&E Sale Option”),
Agent shall either (i) sell the Owned DC FF&E strictly on a commission basis
(the “DC FF&E Commission Option”), or (ii) sell the Owned DC FF&E on a
guaranteed fee basis (the “DC FF&E Guaranty Option”); provided that, the DC FF&E
Guaranty Option shall be subject to the Merchant (in consultation with the
Lender and the Committee) and Agent agreeing on a mutually acceptable Owned DC
FF&E/asset listing and DC FF&E Guaranty Amount (as defined below). Merchant (in
consultation with the Lender and

 

48

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the Committee) shall exercise the aforementioned Owned FF&E Sale Option by
written notice to Agent. In the event Merchant elects the DC FF&E Commission
Option, Agent shall be entitled to receive a commission equal to twenty percent
(20%) of the gross proceeds from the sale of such Owned DC FF&E (“Agent’s DC
FF&E Commission”); provided, however, in such case Merchant shall be responsible
for payment of expenses incurred in connection with the disposition of the Owned
DC FF&E (“DC FF&E Disposition Expenses”) in accordance with a budget to be
mutually agreed upon between Merchant (in consultation with the Lender and the
Committee) and Agent (“DC FF&E Disposition Budget”), and all proceeds realized
from the disposition of the Owned DC FF&E, after deduction of applicable sales
taxes, Agent’s DC FF&E Commission, and the DC FF&E Disposition Expenses
(collectively, the “Net DC FF&E Proceeds”), shall be paid to Lender, as
Merchant’s designee to the extent that the Lender has not been paid in full. In
the event Merchant (in consultation with the Committee) elects the DC FF&E
Guaranty Option, Agent shall pay Merchant a lump sum payment in an amount to be
agreed upon between Agent and Merchant, in consultation with Lender and the
Committee (hereinafter, the “DC FF&E Guaranty Amount”), in which case all costs
and expenses associated with the disposition of Owned DC FF&E (other than rent
and other occupancy expenses associated with the Distribution Centers, which
amounts shall be paid by Merchant) shall be borne by Agent, and all proceeds
realized from the sale or other disposition of the Owned DC FF&E (after payment
of the applicable DC FF&E Guaranty Amount and net of any applicable sales taxes)
shall be retained by Agent for its sole and exclusive benefit and shall not
constitute Proceeds or Asset Sale Proceeds.

(b) Anything in this Agreement to the contrary notwithstanding, Agent shall be
authorized to abandon any and all unsold Owned FF&E or Owned DC FF&E (and all
other furniture, fixtures, and equipment at the Stores, Distribution Centers and
corporate offices) in place without any cost or liability to Agent. Agent shall
have no responsibility whatsoever with respect to furniture, fixtures, and
equipment located at the Stores, Distribution Centers and/or corporate offices
which are not owned by Merchant.

(c) Merchant hereby represents to Agent that: (i) all Owned FF&E and Owned DC
FF&E may be sold by Agent on Merchant’s behalf, free and clear of all claims,
liens and encumbrances of any kind; and (ii) all such Owned FF&E and Owned DC
FF&E is devoid of Hazardous Materials.

(d) Anything in this Agreement to the contrary notwithstanding, Agent will not
have any obligation whatsoever to purchase, sell, make, store, handle, treat,
dispose, generate, transport or remove any Hazardous Materials that may be
located at the Stores, Distribution Centers and/or Merchant’s corporate offices
or otherwise. Agent shall have no liability to any party for any environmental
action brought: (i) that is related to the storage, handling, treatment,
disposition, generation, or transportation of Hazardous Materials, or (ii) in
connection with any remedial actions associated therewith or the Stores,
Distribution Centers and/or Merchant’s corporate offices. Merchant (and not
Agent) shall be solely responsible to remove from the Stores, Distribution
Centers and Merchant’s corporate offices all Hazardous Materials. For purposes
of this Agreement, the term “Hazardous Materials” means, collectively, any
chemical, solid, liquid, gas, or other substance having the characteristics
identified in, listed under, or designated pursuant to (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C.A. 9601(14), as a “hazardous substance”, (ii) the Resource Conservation
and

 

49

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Recovery Act, 42 U.S.C.A. 6903(5) and 6921, as a “hazardous waste”, or (iii) any
other laws, statutes or regulations of a government or political subdivision or
agency thereof, as presenting an imminent and substantial danger to the public
health or welfare or to the environment or as otherwise requiring special
handling, collection, storage, treatment, disposal, or transportation.

(e) In respect of the sale of Owned FF&E at or from the corporate offices, the
effective date of any such sale of Owned FF&E shall not become effective until
Merchant has discontinued use of such Owned FF&E. From time to time, Merchant
shall cooperate with Agent to identify Owned FF&E at the corporate offices for
which Merchant has discontinued use or will discontinue use in the then near
future. Once Merchant has discontinued the use of all or substantially all Owned
FF&E, Merchant and Agent shall mutually agree upon a reasonably period of time
during which the Agent may complete remaining sales of Owned FF&E and the
corporate offices and provide purchasers thereof with reasonable access to
remove such purchased Owned FF&E.

 

Section 16. Miscellaneous.

16.1 Notices. All notices and communications provided for pursuant to this
Agreement shall be in writing, and sent by hand, by e-mail, and/or a recognized
overnight delivery service, as follows:

If to Agent:

Gordon Brothers Retail Partners, LLC

Prudential Tower

800 Boylston Street

Boston, MA 02119

Attn:       Michael Chartock

Tel:         617.210.7116

Email:     mchartock@gordonbrothers.com

-and-

Hilco Merchant Resources, LLC

5 Revere Drive, Suite 206

Northbrook, IL 60062

Attn:       Ian S. Fredericks

Tel:         847.418.2075

Email:     ifredericks@hilcotrading.com

If to Merchant:

Delia*s, Inc.

50 W 23rd Street – 10th Floor

New York, NY 10010

Attn:      Ryan Schreiber, Esq.

              President, General Counsel & Secretary

Tel:        212.590-6204

Email:    rschreiber@deliasinc.com

 

50

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With a copy to (which shall not constitute notice):

DLA Piper

1251 Avenue of the Americas

New York, New York 10020-1104

Attn:       Gregg M. Galardi, Esq.

Tel:         212.335.4640

Email:     Gregg.Galardi@dlapiper.com

If to Lender:

Salus Capital Partners, LLC

197 First Avenue, suite 250

Needham Heights, MA 02494

Attn:       Kyle C. Shonak

Tel:         617.420.2663

Email:     kshonak@saluscapital.com

With a copy to (which shall not constitute notice):

Choate Hall & Stewart, LLP

Two International Place

Boston, MA 02110

Attn:       John F. Ventola, Esq.

Tel:         617.248.5085

Email:     jventola@choate.com

-and-

DiConza Traurig Kadish, LLP

630 Third Avenue – 7th Floor

New York, NY 10017

Attn:       Maura I. Russell, Esq.

Tel:         212.682.4940

Email:     mailto:mrussell@dtklawgroup.com

If to Committee:

Kelley Drye & Warren LLP

101 Park Avenue, 27th Floor

New York, NY 10178

o: (212) 808-7573 | m: (646) 263-9536

Attn: Robert LeHane

Tel: (212) 808-7573

Email: rlehane@kelleydrye.com

 

51

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16.2 Governing Law; Consent to Jurisdiction. This Agreement shall be governed
and construed in accordance with the laws of the State of New York, without
regard to conflicts of laws principles thereof. The parties hereto agree that
the Bankruptcy Court (and the District Court and Circuit Court of Appeal with
appellate jurisdiction over the Bankruptcy Court) shall retain exclusive
jurisdiction to hear and finally determine any disputes arising from or under
this Agreement, and by execution of this Agreement each party hereby irrevocably
accepts and submits to the jurisdiction of such court with respect to any such
action or proceeding and to service of process by certified mail, return receipt
requested to the address listed above for each party.

16.3 Entire Agreement. This Agreement, the Exhibits hereto, and the Agency
Documents (subject, in each instance, to the Approval Order as and where
applicable) contain the entire agreement between the Parties with respect to the
transactions contemplated hereby and supersede and cancel all prior agreements,
including but not limited to all proposals, letters of intent, or
representations, written or oral, with respect thereto.

16.4 Amendments. This Agreement, the Exhibits hereto, and the Agency Documents
may not be modified except in a written instrument executed by each of the
Merchant (in consultation with the Committee) and Agent; provided, however, that
no modification may be made to this Agreement without the express consent of the
Lender.

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

16.6 Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of Agent and Merchant, including but not
limited to any chapter 11 or chapter 7 trustee. No party to this Agreement shall
be permitted to assign its obligations under this Agreement.

16.7 Execution in Counterparts. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one agreement. This Agreement may be executed by
facsimile or other electronic means, and such facsimile or electronic signature
shall be treated as an original signature hereunder.

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

 

52

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16.9 Survival. All representations, warranties, covenants and agreements made
herein shall be continuing, shall be considered to have been relied upon by the
Parties and shall survive the execution, delivery, and performance of this
Agreement.

16.10. Termination. This Agreement shall remain in full force and effect until
the first to occur of (i) receipt by Merchant of written notice from Agent that
any of the conditions specified in Section 10 hereof have not been satisfied or
(ii) termination upon the occurrence of an Event of Default in accordance with
Section 14 of this Agreement, or (iii) the expiration of the Sale Term and
completion and certification by Merchant and Agent of the Final Reconciliation
pursuant to Section 8.7(b) above. Notwithstanding the foregoing, (a) the
representations, warranties, and indemnities of Merchant and Agent contained
herein and the provisions of Section 11 above, and (b) any claim arising from a
breach of this Agreement prior to its termination, shall survive the termination
of this Agreement pursuant to this Section 16.10.

16.11 Agent’s Security Interest.

(a) In consideration of and subject to and effective upon payment by Agent of
the Initial Guaranty Payment and the initial portion of the MOOS Guaranteed
Amount on the Payment Date and delivery of the Letter of Credit to the Lender,
as Merchant’s designee, Merchant hereby grants to Agent first priority, senior
security interests in and liens (subject to the subordination provisions set
forth herein below) upon: (i) the Merchandise; (ii) the Additional Agent
Merchandise; (iii) all Proceeds (including, without limitation, credit card
Proceeds); (iv) the Agent’s commission regarding the sale or other disposition
of Merchant Consignment Goods under Section 5.4 hereof and DC FF&E Commission;
(v) the Owned FF&E and the proceeds realized from the sale or other disposition
of Owned FF&E; (vi) Agent’s percentage share in excess of the Sharing Threshold,
and (vii) all “proceeds” (within the meaning of Section 9-102(a)(64) of the UCC)
of each of the foregoing (all of which are collectively referred to herein as
the “Agent Collateral”), to secure the full payment and performance of all
obligations of Merchant to Agent hereunder. Upon entry of the Approval Order,
payment of the Initial Guaranty Payment and the initial portion of the MOOS
Guaranteed Amount on the Payment Date, and delivery of the Letter of Credit to
the Lender, the security interest granted to the Agent hereunder shall be deemed
properly perfected without the necessity of filing UCC-1 financing statements or
any other documentation.

(b) Without any further act by or on behalf of the Agent or any other party
(including (without limitation) the Lender and Merchant), the Agent’s security
interests and liens in the Agent Collateral created hereunder are (i) validly
created, (ii) effective upon entry of the Approval Order, perfected, and
(iii) senior to all other liens and security interests, provided, however, that
(x) until the Merchant receives payment in full of the Guaranteed Amount, the
MOOS Guaranteed Amount, the 3PL Expenses (to the extent the Agent does not pay
them to the 3PL directly), Expenses, and such other amounts due to Merchant
hereunder, the security interest granted to Agent hereunder shall be junior and
subordinate in all respects to the security interests of Lender in the Agent
Collateral but solely to the extent and amount of the unpaid portion of the any
of the Guaranteed Amount and MOOS Guaranteed Amount, Expenses, the 3PL Expenses
(to the extent the Agent does not pay them to the 3PL directly), and such other
amounts due to Merchant hereunder, and (y) upon payment in full of the
Guaranteed Amount, the MOOS

 

53

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Guaranteed Amount, Expenses, the 3PL Expenses (to the extent the Agent does not
pay them to the 3PL directly), and such other amounts due to Merchant hereunder,
any security interest or lien of the Lender in the Agent Collateral shall be
junior and subordinate in all respects to the security interest and liens of
Agent in the Agent Collateral. Merchant and Lender shall cooperate with Agent
with respect to all filings (including, without limitation, UCC-1 financing
statements) and other actions to the extent reasonably requested by Agent in
connection with the security interests and liens granted under this Agreement.

(c) Merchant will not sell, grant, assign or transfer any security interest in,
or permit to exist any encumbrance on, any of the Agent Collateral other than in
favor of the Agent and Lender.

(d) In the event of a Default by the Merchant hereunder, in any jurisdiction
where the enforcement of its rights hereunder is sought, the Agent shall have,
in addition to all other rights and remedies, the rights and remedies of a
secured party under the UCC.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

54

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IN WITNESS WHEREOF, Agent and Merchant hereby execute this Agency Agreement as
of the day and year first written above.

 

AGENT: GORDON BROTHERS RETAIL PARTNERS, LLC By:  

/s/ Richard Edwards

  Name:   Richard Edwards   Title:   Co-President - Retail HILCO MERCHANT
RESOURCES, LLC By:  

/s/ Ian Fredericks

  Name:   Ian Fredericks   Title:   VP & Assistant General Counsel, Managing
Member MERCHANT: DELIA*S, INC. By:  

/s/ Ryan Schreiber

  Name:   Ryan Schreiber   Title:   President, General Counsel & Secretary

 

THE PROVISIONS OF THIS AGREEMENT ARE HEREBY CONSENTED AND AGREED TO, INCLUDING
SECTIONS 3.3(c), 3.3(d), 3.3(g), 3.3(h), 4.1, 8.3, 8.8, 8.9, 15, 16.11 and
16.12: SALUS CAPITAL PARTNERS, LLC, As Lender By:  

/s/ Kyle Shonak

  Name:   Kyle Shonak   Title:   Executive Vice President-Special Opportunities

 

55

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Delia’s

Store List

Exhibit A-1

 

Store No.

 

Store

 

Address

 

Address 2

 

City

 

State

 

Zip Code

 

Telephone No.

 

Square Ft

202   Willowbrook Mall   2165 Willowbrook Mall     Wayne   NJ   07470     3,818
207   Menlo Park Mall   100 Menlo Park Road   Suite 1540B   Edison   NJ   08837
    4,057 210   Natick Mall   1245 Worcester Street   Space 2146   Natick   MA  
01760     3,729 215   Towson Town Center   825 Dulaney Valley Rd   Space 1045  
Towson   MD   21204     4,326 216   The Plaza at King of Prussia   160 N. Gulph
Road   Suite 1307   King of Prussia   PA   19406     3,936 219   Woodfield
Shopping Center   5 Woodfield Shopping Center   Space L301   Schaumburg   IL  
60173     3,055 229   Roosevelt Field Mall   630 Old Country Rd   Space 1034  
Garden City   NY   11530     3,953 233   Bridgewater Commons   400 Commons Way  
Space 3395   Bridgewater   NJ   08807     2,610 241   Lehigh Valley Mall   250
Lehigh Valley Mall   Space 2036B   Whitehall   PA   18052     3,316 242   The
Mall at Robinson   100 Robinson Center Drive   Space 2410   Pittsburgh   PA  
15205     3,552 250   Crossgates Mall   1 Crossgates Mall Road   Space B-105  
Albany   NY   12203     3,500 251   The Parks at Arlington   3811 S. Cooper
Street   Space 1410   Arlington   TX   76015     3,593 256   Easton Town Center
  136 Easton Town Center   Space C-102   Columbus   OH   43219     3,500 257  
Wolfchase Galleria   2760 N. Germantown Parkway   Space 2210   Memphis   TN  
38133     3,372 260   Riverchase Galleria   2000 Riverchase Galleria   Space
276A   Hoover   AL   35244     3,460 265   Mall of Georgia   3333 Buford Drive  
Space 1026   Buford   GA   30519     4,200 267   Short Pump Town Center   11800
West Broad St.   Suite 2032   Richmond   VA   23233     3,706 268   Coastal
Grand   2000 Coastal Grand Circle   Suite 400   Myrtle Beach   SC   29577    
3,434 269   Montgomery Mall   130 Montgomery Mall     North Wales   PA   19454  
  3,950 270   Deptford Mall   1750 Deptford Center Rd.   Suite 2066   Deptford  
NJ   08096     3,661 271   Twelve Oaks   27666 Novi Road   Space C175   Novi  
MI   48377     3,289 273   Northlake Mall   6801 Northlake Mall Drive   Suite
159/157   Charlotte   NC   28216     3,500 274   Mall of America   270 North
Garden     Bloomington   MN   55425     4,292 275   The Mall at Wellington Green
  10300 West Forest Hill Blvd   Suite 172   Wellington   FL   33414     3,626
276   Hamilton Mall   4403 Black Horse Pike   Suite 2042A   Mays Landing   NJ  
08330     3,318 277   The Town Center at Cobb   400 Ernest Barrett Parkway  
Space 166   Kennesaw   GA   30144     3,369 278   NorthPark Center  
8687 North Central Expressway   Suite 2104   Dallas   TX   75225     4,550 279  
Southlake Town Square   331 Grand Avenue East     Southlake   TX   76092    
3,542 280   Firewheel Town Center   490 Cedar Sage Drive   Space L01   Garland  
TX   75040     3,950 281   Pheasant Lane Mall   310 Daniel Webster Highway  
Space E211B   Nashua   NH   03060     4,018 282   Connecticut Post   1201 Boston
Post Rd   Space 2424   Milford   CT   06460     3,757 283   Clay Terrace   14511
Clay Terrace Blvd   Space 100   Carmel   IN   46032     4,055 284   The Shops at
Willowbend   6121 W. Park Blvd   Space A-113   Plano   TX   75093     3,647 285
  Galleria @ Ft. Lauderdale   2368 East Sunrise Blvd   Space A-08   Ft.
Lauderdale   FL   33304     4,517 286   The Greene   81 Chestnut St.   Space
B-118   Beavercreek   OH   45440     3,723 287   Staten Island Mall   2655
Richmond Ave   Space 2165   Staten Island   NY   10314     3,918 288   Annapolis
Mall   1516 Annapolis Mall     Annapolis   MD   21401     4,134 289   Bayshore
Mall   5770 North Bayshore Drive   Space Q-112   Glendale   WI   53217     3,500
290   Marketplace Mall   261 Miracle Mile Drive   Space A-10   Rochester   NY  
14623     4,000 291   The Avenue Carriage Crossing   4670 Merchants Park Circle
  Suite 626   Collierville   TN   38017     4,000 292   Palisades Center   2740
Palisades Center Drive   Space C201   West Nyack   NY   10994     4,251 294  
Circle Center   49 West Maryland St.   Space G15A   Indianapolis   IN   46204  
  3,925 295   Holyoke Mall   50 Holyoke St.   Space H208   Holyoke   MA   01041
    3,800 296   Hanes Mall   3320 Silas Creek Parkway   Space 416  
Winston-Salem   NC   27103     4,205

 

56

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297   Sarasota Square   8201 South Tamiami Trail North   Space A-19   Sarasota  
FL   34238     3,602 298   Jordan Creek Town Center   101 Jordan Creek Parkway  
Space 12565   West Des Moines   IA   50266     3,987 299   The Avenues   10300
Southside Boulevard   Space 2125   Jacksonville   FL   32256     3,454 301  
Independence Center   2092 Independence Center   Space K04A   Independence   MO
  64057     3,595 303   Promenade @ Bolingbrook   627 East Boughton Road   Suite
105   Bolingbrook   IL   60440     4,214 304   Shops @ Sunset Place   5701
Sunset Drive   Suite 126   South Miami   FL   33143     4,426 305   Charleston
Town Center   2015 Charleston Town Center   Space 2015   Charleston   WV   25312
    4,121 306   Chesterfield Mall   43’ Chesterfield Mall   Space 156  
Chesterfield   MO   63017     3,756 307   Polaris Fashion Place   1500 Polaris
Parkway   Space 2178   Columbus   OH   43240     4,220 309   Walden Galleria   1
Walden Galleria   Space TH102   Cheektowaga   NY   14225     3,913 311   Coconut
Point   23106 Fashion Drive   Space W13   Estero   FL   33928     3,603 313  
Zona Rosa   7101 NW 86th Terrace   Space A-107   Kansas City   MO   64153    
3,787 315   The Shops at Highland Village   1700 Cottonwood Creek   Suite 150  
Highland Village   TX   75077     3,600 316   Southlake 2   1975 Southlake Mall
  Unit # DO-408   Merrillville   IN   46410     3,955 318   The Shoppes at
Buckland Hills   194 Buckland Hills Drive   Space 1150   Manchester   CT   06040
    3,604 319   The Avenue Murfreesboro   2615 Medical Center Parkway   Suite
1360   Murfreesboro   TN   37129     3,800 320   Mall at Partridge Creek   17420
Hall Road   Space 147   Clinton Township   MI   48038     3,593 321   Lakeline
Mall   11200 Lakeline Mall Drive   Space C01   Cedar Park   TX   78613     4,100
322   Emerald Square   999 S. Washington Street   Space 144   North Attleboro  
MA   02760     3,817 323   North Point   2112 North Point Circle     Alpharetta
  GA   30022     3,736 324   South Park Center   428 South Park Center    
Strongsville   OH   44136     4,039 325   The Mall in Columbia   10300 Little
Patuxent Parkway   Space 2610   Columbia   MD   21044     3,421 332   Beachwood
Place   26300 Cedar Road   Space 2095   Beachwood   OH   44122     3,631 335  
Yorktown Center   205A Yorktown Mall     Lombard   IL   60148     3,961 336  
Burlington Mall   75 Middlesex Turnpike   Space 1025B   Burlington   MA   01803
    4,066 339   Galleria @ Roseville   1151 Galleria Blvd   Suite 2170  
Roseville   CA   95678     4,069 340   La Plaza Mall   2200 South 10th Street  
Space F15A   McAllen   TX   78503     4,921 341   Mall of Louisiana   6401
Bluebonnet Blvd   Space 1104   Baton Rouge   LA   70836     3,456 342   Fox
Valley Mall   2428 Fox Valley Center   Space B9A   Aurora   IL   60504     3,775
343   The Mall at Rockingham   99 Rockingham Park Blvd   Space W245   Salem   NH
  03079     3,397 344   Northshore Mall   210 Andover Street   Space W108A  
Peabody   MA   01960     3,901 345   The Maine Mall   364 Maine Mall Road  
Space S171   South Portland   ME   04106     3,733 350   Smith Haven Mall   450
Smith Haven Mall   Space D03B   Lake Grove   NY   11755     4,086 351  
Livingston Mall   112 Eisenhower Parkway   Space 1021A   Livingston   NJ   07039
    3,600 352   Fox River Mall   4301 W. Wisconsin Ave   Space 511   Appleton  
WI   54913     3,749 353   West Town Mall   7600 Kingston Pike   Space 1098A  
Knoxville   TN   37919     3,672 354   South Shore Plaza   250 Granite Street  
Space 2047A   Braintree   MA   02184     4,082 356   Christiana Mall   150
Christiana Mall     Newark   DE   19702     3,978 359   Garden State Plaza   1
Garden State   Space 1037   Paramus   NJ   07652     4,761 362   Plaza Bonita  
3030 Plaza Bonita Rd   Space 2082   National City   CA   91950     3,600 363  
RiverTown Crossing   3700 Rivertown Pkwy S.W.   Space 1144   Grandville   MI  
49418     4,273 364   Bangor Mall   663 Stillwater Avenue   Space 1097A   Bangor
  ME   04401     3,844 368   Peninsula Town Center   2561 McMenamin St    
Hampton   VA   23666     3,500 373   Rockaway Town Square   301 Mt. Hope Ave  
Space 2093A   Rockaway   NJ   07866     3,422 374   The Westchester   125
Westchester Ave   Suite 3060   White Plains   NY   10601     4,352 375  
Providence Place   127 Providence Place   Space 5080   Providence   RI   02903  
  3,730 376   Hawthorn Center   122 Hawthorn Center   Space 304   Vernon Hills  
IL   60061     5,047 377   Fashion Outlets of Niagara   1734 Military Road  
Space 28   Niagara Falls   NY   14304     2,862

 

57

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Delia’s

Store List

Exhibit A-2

 

Store No.

 

Store

 

Address

 

Address 2

 

City

 

State

 

Zip Code

   

Telephone No.

 

Square Ft

DC   Distribution Center   348 Poplar St     Hanover   PA     17331       

 

58

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dELiA*s, Inc.

Exhibit 3.1(b)

Retail

Merchandise Threshold Schedule

 

Cost
Value     Adjustment
Points     15,350,000        0.45 %    15,250,000        0.45 %    15,150,000   
    0.42 %    15,050,000        0.42 %    14,950,000        0.40 %    14,850,000
       0.40 %    14,750,000        0.38 %    14,650,000        0.38 %   
14,550,000        0.38 %    14,450,000        0.38 % 

 

 

   

 

 

    14,350,000        13,950,000     

 

 

   

 

 

    13,850,000        0.28 %    13,750,000        0.28 %    13,650,000       
0.28 %    13,550,000        0.30 %    13,450,000        0.30 %    13,350,000   
    0.30 %    13,250,000        0.32 %    13,150,000        0.32 %    13,050,000
       0.35 %    12,950,000        0.35 % 

 

Note(s):

 

1. Adjustments between the increments shall be on a prorata basis.

2. In the event that the Cost value of the Merchandise is greater than
$15,350,000, each $100,000 (or pro rata portion thereof) increment shall
decrease the Guaranty by 0.50%.

3. In the event that the Cost value of the Merchandise is less than $12,950,000,
each $100,000 (or pro rata portion thereof) increment shall decrease the
Guaranty by 0.40%.

 

59

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dELiA*s, Inc.

Exhibit 3.1(b)

Direct

Merchandise Threshold Schedule

 

Cost
Value      Adjustment
Points     5,132,000         0.03 %    5,107,000         0.03 %    5,082,000   
     0.03 %    5,057,000         0.03 %    5,032,000         0.03 %    5,007,000
        0.03 %    4,982,000         0.03 %    4,957,000         0.03 %   
4,932,000         0.03 %    4,907,000         0.03 % 

 

 

    

 

 

    4,882,000         4,782,000      

 

 

    

 

 

    4,757,000         0.05 %    4,732,000         0.05 %    4,707,000        
0.05 %    4,682,000         0.05 %    4,657,000         0.05 %    4,632,000   
     0.05 %    4,607,000         0.05 %    4,582,000         0.05 %    4,557,000
        0.05 %    4,532,000         0.05 % 

 

Note(s):

 

1. Adjustments between the increments shall be on a prorata basis.

2. In the event that the Cost value of the Merchandise is greater than
$5,132,000, each $25,000 (or pro rata portion thereof) increment shall decrease
the Guaranty by 0.03%.

3. In the event that the Cost value of the Merchandise is less than $4,532,000,
each $25,000 (or pro rata portion thereof) increment shall decrease the Guaranty
by 0.05%.

 

60

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dELiA*s, Inc.

Exhibit 3.1(c)

Retail

Cost Factor

 

Cost
Factor     Adjustment
Points     27.75 %   

 

 

   

 

 

    27.80 %      0.32 %    27.85 %      0.32 %    27.90 %      0.32 %    27.95
%      0.32 %    28.00 %      0.32 %    28.05 %      0.32 %    28.10 %      0.32
%    28.15 %      0.32 %    28.20 %      0.32 %    28.25 %      0.32 % 

 

Notes:

 

1. Adjustments between the increments shall be on a prorata basis.

2. In the event that the Cost Factor of Merchandise is greater than 28.25%, each
0.05% (or pro rata portion thereof) increment shall decrease the Guaranty by
0.35%.

 

61

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dELiA*s, Inc.

Exhibit 3.1(c)

Direct

Cost Factor

 

Cost
Factor     Adjustment
Points     34.70 %   

 

 

   

 

 

    34.75 %      0.10 %    34.80 %      0.10 %    34.85 %      0.10 %    34.90
%      0.10 %    34.95 %      0.10 %    35.00 %      0.10 %    35.05 %      0.10
%    35.10 %      0.10 %    35.15 %      0.10 %    35.20 %      0.10 % 

 

Notes:

 

1. Adjustments between the increments shall be on a prorata basis.

2. In the event that the Cost Factor of Merchandise is greater than 35.20%, each
0.05% (or pro rata portion thereof) increment shall decrease the Guaranty by
0.13%.

 

62

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Exhibit 3.3(a)

Merchant’s Designated Account

JPMorgan Chase Bank

Funds Transfer Services

1 Chase Manhattan Plaza, 8th Floor

New York, NY 10005

 

ABA#    021000021 Account #    958172090 Re:    Delia’s Inc.

 

63

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EXHIBIT 3.3(h)

Proposed Form of Letter of Credit

 

64

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

FORM OF AGENT LETTER OF CREDIT

[NAME OF ISSUING BANK]

[ADDRESS]

Date:             , 2014

Irrevocable Standby Letter of Credit Number:             

 

Co-Beneficiaries:   

dELiA*s, Inc.

50 W 23rd Street – 10th Floor

New York, NY 10010

Attn:    Ryan Schreiber, Esq.

SVP, General Counsel & Secretary

  

SALUS CAPITAL PARTNERS, LLC

197 First Avenue, Suite 250

Needham Heights, MA 02494

Attn:    Kyle C. Shonak

Credit No.:             

Opener’s Reference No.:             

 

Gentlemen:    BY ORDER OF:    [Gordon Brothers Retail Partners, LLC][Hilco
Merchant Resources, LLC]

We hereby open in your favor our Irrevocable Standby Letter of Credit (the
“Letter of Credit”) for the account of: [Gordon Brothers Retail Partners,
LLC][Hilco Merchant Resources, LLC] for a sum or sums not exceeding a total of
                     U.S. Dollars (                     ) available by your
draft(s) at SIGHT on OURSELVES effective immediately and expiring at OUR
COUNTERS on             , 2014, or such earlier date on which the beneficiaries
shall notify us in writing that this Letter of Credit shall be terminated
accompanied by the original Letter of Credit (the “Expiry Date”).

Draft(s) must be accompanied by the original Letter of Credit and a signed
statement by either (a) an officer of Salus Capital Partners, LLC, individually,
in the form attached hereto as Exhibit A-1 or (b) an officer of both of the
Co-Beneficiaries in the form attached hereto as Exhibit A-2.

Partial and/or multiple drawings are permitted.

 

65

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The Co-Beneficiaries may collectively, or Salus Capital Partners, LLC,
individually, draw on the Letter of Credit if Agent fails to pay any amounts due
by Agent to the Co-Beneficiaries pursuant to, and as such terms are defined in,
that certain Agency Agreement dated as of                      among the
Co-Beneficiaries and Agent.

This Letter of Credit may be increased or reduced from time to time when
accompanied by a signed statement from the Co-Beneficiaries in the form attached
as Exhibit B.

If a drawing is received by [                    ] at or prior to 12:00 noon,
Eastern Time, on a Business Day, and provided that such drawing conforms to the
terms and conditions hereof, payment of the drawing amount shall be made to the
account designated by Salus Capital Partners, LLC, individually, as directly
below, in immediately available funds on the same Business Day. If however, a
drawing is received by [                    ] after 12:00 noon, Eastern Time, on
a Business Day, and provided that such drawing conforms to the terms and
conditions hereof, payment of the drawing amount shall be made to the account
designated by Salus Capital Partners, LLC, individually, in immediately
available funds on the next Business Day.

As used in the Letter of Credit “Business Day” shall mean any day other than a
Saturday, Sunday, or a day on which Banking Institutions in Massachusetts are
required or authorized to close.

Each draft must bear upon its face the clause “Drawn under Letter of Credit No.
            , dated      of [         ],         

Except so far as otherwise expressly stated herein, this Letter of Credit is
subject to the “Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 600.”

We hereby agree that drafts drawn under and in compliance with the terms of this
Letter of Credit will be duly honored if presented to the above-mentioned drawee
bank on or before the Expiry Date.

Kindly address all correspondence regarding this Letter of Credit to the
attention of our Letter of Credit Operations, [                     ],
                    , mentioning our reference number as it appears above.
Telephone inquiries can be made to                      at (        )
        -        .

 

Very truly yours, Authorized official

 

66

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TO IRREVOCABLE LETTER OF CREDIT NO.            

Re: Drawing for Amounts Due to Salus Capital Partners, LLC:

Ladies and Gentlemen:

I refer to your Letter of Credit No.              (the “Letter of Credit”). The
undersigned duly authorized officer of Salus Capital Partners, LLC, in its
capacity as a Co-Beneficiary of the Letter of Credit hereby certify to you that:

 

  (i) Gordon Brothers Retail Partners, LLC and Hilco Merchant Resources, LLC
(collectively, the “Agent”) have not made a payment when due of or for the
Guaranteed Amount, Sharing Amount, Expenses, or other amounts due by Agent to
the Co-Beneficiaries pursuant to, and as such terms are defined in, that certain
Agency Agreement dated as of December 4, 2014, between among the
Co-Beneficiaries on the one hand, and Agent, on the other.

 

  (ii) The amount to be drawn is $         (the “Amount Owing”).

 

  (iii) Payment is hereby demanded in an amount equal to the lesser of (a) the
Amount Owing and (b) the face amount of the Letter of Credit, less any prior
drawings, as of the date hereof.

 

  (iv) The Letter of Credit has not expired prior to the delivery of this letter
and the accompanying sight draft.

 

  (v) In accordance with the terms of the Letter of Credit, the payment hereby
demanded is requested to be made by wire transfer to the following account:

[Account]

IN WITNESS WHEREOF, this instrument has been executed and delivered as of this
     day of         , 2014.

 

Very truly yours,

Salus Capital Partners, LLC,

A Co-Beneficiary

By:  

 

  Duly Authorized Officer   Print Name:                     

 

67

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EXHIBIT A-2

TO IRREVOCABLE LETTER OF CREDIT NO.            

Re: Drawing for Amounts Due to Salus Capital Partners, LLC and dELiA*s, Inc.:

Ladies and Gentlemen:

The undersigned refer to your Letter of Credit No.              (the “Letter of
Credit”). The undersigned duly authorized officers of Salus Capital Partners,
LLC and dELiA*s, Inc., respectively, in their capacity as Co-Beneficiaries of
the Letter of Credit, hereby certify to you that:

 

  (i) Gordon Brothers Retail Partners, LLC and Hilco Merchant Resources, LLC
(collectively, the “Agent”) have not made a payment when due of or for the
Guaranteed Amount, Sharing Amount, Expenses, or other amounts due by Agent to
the Co-Beneficiaries pursuant to, and as such terms are defined in, that certain
Agency Agreement dated as of December 4, 2014, 2014 among the Co-Beneficiaries
on the one hand, and Agent, on the other.

 

  (ii) The amount to be drawn is $         (the “Amount Owing”).

 

  (iii) Payment is hereby demanded in an amount equal to the lesser of (a) the
Amount Owing and (b) the face amount of the Letter of Credit, less any prior
drawings, as of the date hereof.

 

  (iv) The Letter of Credit has not expired prior to the delivery of this letter
and the accompanying sight draft.

 

  (v) In accordance with the terms of the Letter of Credit, the payment hereby
demanded is requested to be made by wire transfer to the following account:

[Account]

IN WITNESS WHEREOF, this instrument has been executed and delivered as of this
     day of         , 2014.

 

Very truly yours, Salus Capital Partners, LLC,
A Co-Beneficiary By:  

 

  Duly Authorized Officer   Print Name:                     

 

68

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

dELiA*s, Inc.,

A co-Beneficiary

By:  

 

  Duly Authorized Officer   Print Name:                     

 

69

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

EXHIBIT B

TO IRREVOCABLE STANDBY LETTER OF CREDIT NO.             

Re: Reduction of Face Amount:

Ladies and Gentlemen:

The undersigned refer to your Letter of Credit No. (the “Letter of Credit”). The
undersigned, as Co-Beneficiaries of the Letter of Credit, hereby confirm to you
that the face amount of the Letter of Credit hereby shall be reduced from its
present face amount to a new face amount of $        .

IN WITNESS WHEREOF, this instrument has been executed and delivered as of this
     day of         , 2014.

 

Very truly yours,

dELiA*s, Inc.,

A co-Beneficiary

By:  

 

  Duly Authorized Officer   Print Name:                     

Salus Capital Partners, LLC,

A co-Beneficiary

By:  

 

  Duly Authorized Officer   Print Name:                     

 

70

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Exhibit 4.1(a) Store Occupancy Expense Schedule

[Intentionally omitted due to illegible copy]

 

71

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dELiA*s AGENCY AGREEMENT

EXHIBIT 5.1(a)

INVENTORY TAKING INSTRUCTIONS

[TO BE AGREED UPON BY MERCHANT, AGENT AND LENDER]

 

72

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Exhibit 5.2(b)(1)

File of Distribution Center Merchandise in Data Room

5.2(b)(1) Distribution Center Merchandise

 

73

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

Exhibit 5.2(b)(2)

File of Direct Business Merchandise in Data Room

5.2(b)(2) Direct Business Merchandise

 

74

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Exhibit 5.3(a)(1) – Cost File for Store Merchandise and Distribution Center
Merchandise

11.29 319-320-321-322-323.xlsx

11.29 353-354-356-359-362.xlsx

11.29 375-376-377.xlsx

11.29 339-340-341-342-343.xlsx

11.29 291-292-294-296-297.xlsx

11.29 281-282-283-284-285-286-287-288-289-290.xlsx

11.29 304-305-306-307-309-311-313-316-318.xlsx

11.29 270-271-273-274-275-276-277-278-279-280.xlsx

11.29 002-202-207-210-215-216-219-229-233-241.xlsx

11.29 295-315.xlsx

11.29 242-250-251-256-257-260-265-267-268-269.xlsx

 

75

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EXHIBIT 5.3(a)(2) Cost File for Direct Business Merchandise

Direct Aged Inv 11.29.14.xlsx

 

76

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

EXHIBIT 8.1

SALE GUIDELINES

 

77

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

dELiA*s, INC. SALE GUIDELINES

A. The Sale shall be conducted so that the Stores in which sales are to occur
will remain open no longer than during the normal hours of operation provided
for in the respective leases for the Stores.

B. The Sale shall be conducted in accordance with applicable state and local
“Blue Laws”, where applicable, so that no Sale shall be conducted on Sunday
unless the Merchant had been operating such Store on a Sunday.

C. On “shopping center” property, the Agent shall not distribute handbills,
leaflets or other written materials to customers outside of any Store’s
premises, unless permitted by the lease or, if distribution is customary in the
“shopping center” in which such Store is located; provided that Agent may
solicit customers in the Stores themselves. On “shopping center” property, the
Agent shall not use any flashing lights or amplified sound to advertise the Sale
or solicit customers, except as permitted under the applicable lease or agreed
to by the landlord.

D. At the conclusion of the Sale, the Agent shall vacate the Stores in broom
clean condition, and shall leave the Locations in the same condition as on Sale
Commencement Date, ordinary wear and tear excepted, in accordance with Section 6
of the Agency Agreement, provided, however, that the Merchant and the Agent
hereby do not undertake any greater obligation than as set forth in an
applicable lease with respect to a Store. The Agent and Merchant may abandon any
FF&E not sold in the Sale at the Stores at the conclusion of the Sale. Any
abandoned FF&E left in a Store after a lease is rejected shall be deemed
abandoned to the landlord having a right to dispose of the same as the landlord
chooses without any liability whatsoever on the part of the landlord to any
party and without waiver of any damage claims against the Merchant. For the
avoidance of doubt, as of the Sale Termination Date, the Agent may abandon, in
place and without further responsibility, any FF&E located at a Store.

E. During the Interim Sale Period, Agent may advertise the sale as a “sale on
everything”, “everything must go”, or similar themed sale. Following, and
subject to, the entry of the Interim Approval Order and the Approval Order, the
Agent may advertise the sale as a “store closing” and/or “going-out-of-business”
sale, as dictated by the respective Interim Approval Order and Approval Order.

F. Agent shall be permitted to utilize display, hanging signs, and interior
banners in connection with the Sale; provided, however, that such display,
hanging signs, and interior banners shall be professionally produced and hung in
a professional manner. The Merchant and the Agent shall not use neon or day-glo
on its display, hanging signs, or interior banners. Furthermore, with respect to
enclosed mall locations, no exterior signs or signs in common areas of a mall
shall be used unless otherwise expressly permitted in these Sale Guidelines. In
addition, the Merchant and the Agent shall be permitted to utilize exterior
banners at (i) non-enclosed mall Stores and (ii) enclosed mall Stores to the
extent the entrance to the applicable Store does not require entry into the
enclosed mall common area; provided, however, that such banners shall be located
or hung so as to make clear that the Sale is being conducted only at the
affected Store, shall not be wider than the storefront of the Store, and shall
not be larger than 4 feet x 40 feet. In addition, the Merchant and the Agent
shall be permitted to utilize sign walkers in a safe and professional manner and
in accordance with the terms of the Approval Order. Nothing contained in these
Sale Guidelines shall be construed to create or impose upon the Agent any
additional restrictions not contained in the applicable lease agreement.

 

78

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

F. Conspicuous signs shall be posted in the cash register areas of each of the
affected Stores to effect that “all sales are final.”

G. Except with respect to the hanging of exterior banners, the Agent shall not
make any alterations to the storefront or exterior walls of any Stores.

H. The Agent shall not make any alterations to interior or exterior Store
lighting. No property of the landlord of a Store shall be removed or sold during
the Sale. The hanging of exterior banners or in-Store signage and banners shall
not constitute an alteration to a Store.

I. The Agent shall keep Store premises and surrounding areas clear and orderly
consistent with present practices.

J. Subject to the provisions of the Agency Agreement the Agent shall have the
right to sell all furniture, fixtures, and equipment located at the Stores and
Distribution Center(s) (the “FF&E”). The Agent may advertise the sale of the
FF&E in a manner consistent with these guidelines at the Stores and Distribution
Center(s). The purchasers of any FF&E sold during the sale shall be permitted to
remove the FF&E either through the back shipping areas at any time, or through
other areas after Store business hours. For the avoidance of doubt, as of the
Sale Termination Date, the Agent may abandon, in place and without further
responsibility, any FF&E.

K. The Agent shall be entitled to include Additional Agent Goods in the Sale in
accordance with the terms of the Approval Order and the Agency Agreement.

L. At the conclusion of the Sale at each Store, pending assumption or rejection
of applicable leases, the landlords of the Stores shall have reasonable access
to the Store’s premises as set forth in the applicable leases. The Merchant, the
Agent and their agents and representatives shall continue to have exclusive and
unfettered access to the Stores.

M. Post-petition rents shall be paid by the Merchant as required by the
Bankruptcy Code until the rejection or assumption and assignment of each lease.
Other than Agent’s obligations under Section 4.1 of the Agency Agreement with
respect to payment of Expenses, Agent shall have no responsibility therefor.

N. The rights of landlords against Merchant for any damages to a Store shall be
reserved in accordance with the provisions of the applicable lease.

O. If and to the extent that the landlord of any Store affected hereby contends
that the Agent or Merchant is in breach of or default under these Sale
Guidelines, such landlord shall email or deliver written notice by overnight
delivery on the Merchant’s counsel and the Agent’s counsel as follows:

 

  If to Agent:   Goulston & Storrs PC   400 Atlantic Avenue   Boston, MA
02110-3333   Attn:    James F. Wallack, Esq.      Gregory O. Kaden, Esq.   Tel:
   617.482.1776   Email:   

jwallack@goulstonstorrs.com

gkaden@goulstonstorrs.com

 

79

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

  If to Merchant:   Delia*s, Inc.   50 W 23rd Street – 10th Floor   New York, NY
10010   Attn:    Ryan Schreiber, Esq.      SVP, General Counsel & Secretary  
Tel:    212.590-6204   Email:    rschreiber@deliasinc.com   With a copy to
(which shall not constitute notice):   DLA Piper   1251 Avenue of the Americas  
New York, New York 10020-1104   Attn:    Gregg M. Galardi, Esq.   Tel:   
212.335.4640   Email:    Gregg.Galardi@dlapiper.com

 

80

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

dELiA*s AGENCY AGREEMENT

EXHIBIT 10.1(c)

FORM OF APPROVAL ORDER

[TO BE AGREED UPON BY MERCHANT, AGENT AND LENDER]

 

81

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Exhibit 11.1(d)

Purported Existing Liens1

 

NAME

  

DESCRIPTION2

Eklecco Newco LLC    Pursuant to the Standard Shopping Center Lease, dated
February 13, 2006, a first lien on all Merchandise and Owned FF&E in Store 292.
Holyoke Mall Company, L.P.    Pursuant to the Standard Shopping Center Lease,
dated February 14, 2006, a first lien on all Merchandise and Owned FF&E in Store
295. Pyramid Walden Company, L.P., successor in interest to Pyramid Company of
Buffalo    Pursuant to the Standard Shopping Center Lease, dated February 6,
2002, a first lien on all Merchandise and Owned FF&E in Store 309. Salus Capital
Partners LLC    Pursuant to the prepetition Credit Agreement, dated June 14,
2013, a first lien on substantially all of the assets with the exception of the
Merchandise and Owned FF&E in Stores 292, 295 and 309, which Salus Capital
Partners LLC holds a second lien.

 

1  The following list of purported existing lienholders are subject to
continuing review by the Merchant based on UCC filings and its books and
records.

2  The Merchant makes no admission as to the validity, perfection or priority of
any lien purported to be granted or perfected with respect to the assets
described herein.

 

82

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Exhibit 11.1(k)

Promotional Calendar – November, 2014

 

Q4

       

DEPT

  

2014

NOVEMBER    WK 1    TOPS    BOGO Free Graphics, $25 Sweaters, 2 Fors       RTW
   BOGO 50% Denim/Pants, 30% off O/W & denim Jkts,       N/A    BOGO Free
Jewelry/Hair       TOTAL    $8/$15 Rounders - Markdowns 50% off    Wk 2    TOPS
   BOGO 50% Graphics, $25 Sweaters, 2 Fors       RTW    BOGO Free Denim/Pants,
30% O/W, 40% Select Dresses       N/A    BOGO Free Jewlery, BOGO 50% Scarves, $5
Baggus       TOTAL    $8/$15 Rounders - Markdowns 50% off    Wk 3    TOPS   
BOGO 50 Graphics, $16.9 Brushed, Select sweaters at $25, 30% outerwear, 2 fors
      RTW    BOGO Free denim, BOGO Free Dresses       N/A    Non Apparel Jewelry
and Scarves BOGO 50       TOTAL    $8/$15 Rounders, 50% MDs    Wk 4    TOPS   
Graphic Tee Black Friday deals $15 plus entire store discount       RTW    Woven
Top Black Friday deal $20 plus entire store discount       N/A    Pricepointed
Black Friday deals excluded from entire store discount       TOTAL    Wed - 40%
off entire store, Thurs/Fri - 50% off entire store, Sat - 40% off entire store

 

83

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dELiA*s AGENCY AGREEMENT

EXHIBIT 11.1(I)

LIST OF PENDING MATTERS

[BELIEVED TO BE NONE, BUT TO BE CONFIRMED BY MERCHANT]

 

84

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

dELiA*s AGENCY AGREEMENT

EXHIBIT 11.1(o)

EXTRORDINARY POS ACTIVITY

[BELIEVED TO BE NONE, BUT TO BE CONFIRMED BY MERCHANT]

 

85

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dELiA*s AGENCY AGREEMENT

EXHIBIT 11.1(q)

LIST OF STORES WITH LEASE EXPIRATION/TERMINATION DATES DURING THE SALE TERM

[TO BE FINALIZED BY MERCHANT, AGENT AND LENDER]

 

86

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Exhibit 11.1(u)

Promotions/Discounts Calendar

Delia’s 2014

 

         

Email Offer Direct - 2014

Fri    12/5/2014    40% Off Full Price Styles (exclude Branded Styles) + 50% Off
Clearance Styles + FS $75 Sat    12/6/2014    40% Off Everything (exclude
Branded Styles) + FS $75    December Week 1 Sun    12/7/2014   

Email #1: 40% Off Everything (exclude Branded Styles) + FS No Min

VIP Email #1: Spend $100 After 40% Off Discount, Get Free Muk Luks (Style
#316274)

Mon    12/8/2014   

Email #1: 40% Off Everything (exclude Branded Styles) + FS No Min

VIP Email #1: Spend $100 After 40% Off Discount, Get Free Muk Luks (Style
#316274)

Tue    12/9/2014    40% Off Everything (exclude Branded Styles) + FS No Min Wed
   12/10/2014    50% Off Everything (exclude Branded Styles) + FS $75 Thu   
12/11/2014    50% Off Everything (exclude Branded Styles) + FS $75 Fri   
12/12/2014    50% Off Everything (exclude Branded Styles) + FS $75 Sat   
12/13/2014    50% Off Everything (exclude Branded Styles) + FS $75    December
Week 2 Sun    12/14/2014   

Email #1: 50% Off Everything (exclude Branded Styles) + FS $75

VIP Email #1: TBD

Mon    12/15/2014   

Email #1: 50% Off Everything (exclude Branded Styles) + FS $75

VIP Email #1: TBD

Tue    12/16/2014    50% Off Everything (exclude Branded Styles) + FS $75 Wed   
12/17/2014    50% Off Everything (exclude Branded Styles) + FS $75 Thu   
12/18/2014    50% Off Everything (exclude Branded Styles) + FS $75 Fri   
12/19/2014    50% Off Everything (exclude Branded Styles) + FS $75 Sat   
12/20/2014    50% Off Everything (exclude Branded Styles) + FS $75 + Shipping
Cutoff?    December Week 3 Sun    12/21/2014   

Email #1: 50% Off Everything (exclude Branded Styles) + FS $75

VIP Email #1: TBD

Mon    12/22/2014   

Email #1: 50% Off Everything (exclude Branded Styles) + FS $75

VIP Email #1: TBD

Tue    12/23/2014    50% Off Everything (exclude Branded Styles) + FS $75 +
Order by 1PM (via upgraded shipping) Wed    12/24/2014    50% Off Everything Thu
   12/25/2014    BOGO Free Jeans and Graphic Tees + BOGO 50% Off Tops + Extra
40% Off Clearance Fri    12/26/2014    BOGO Free Jeans and Graphic Tees + BOGO
50% Off Tops + Extra 40% Off Clearance Sat    12/27/2014    BOGO Free Jeans and
Graphic Tees + BOGO 50% Off Tops + Extra 40% Off Clearance    December Week 4
Sun    12/28/2014    BOGO Free Jeans and Graphic Tees + BOGO 50% Off Tops +
Extra 40% Off Clearance Mon    12/29/2014    BOGO Free Jeans and Graphic Tees +
BOGO 50% Off Tops + Extra 40% Off Clearance Tue    12/30/2014    BOGO Free Jeans
and Graphic Tees + BOGO 50% Off Tops + Extra 40% Off Clearance Wed    12/31/2014
   BOGO Free Jeans and Graphic Tees + BOGO 50% Off Tops + Extra 40% Off
Clearance Thu    1/1/2015    BOGO Free Jeans and Graphic Tees + BOGO 50% Off
Tops + Extra 40% Off Clearance Fri    1/2/2015    BOGO Free Jeans and Graphic
Tees + BOGO 50% Off Tops + Extra 40% Off Clearance Sat    1/3/2015    BOGO Free
Jeans and Graphic Tees + BOGO 50% Off Tops + Extra 40% Off Clearance    December
Week 5

 

87

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11.1(u) Continued

 

Store Promotion Calendar

 

         

DEPT

  

2014

DECEMBER    WK 1    TOPS    Sunday - 40% off entire store, Cyber Monday - 50%
off entire store          Excluding Sun/Monday - BOGO 50% TOPS, BOGO free
Graphics       RTW    Sunday - 40% off entire store, Cyber Monday - 50% off
entire store          Excluding Sun/Monday - BOGO 50% TOPS, BOGO free Graphics
      N/A    Sunday - 40% off entire store, Cyber Monday - 50% off entire store
         Excluding Sun/Monday - BOGO 50% TOPS, BOGO free Graphics       TOTAL   
Sunday - 40% off entire store, Cyber Monday - 50% off entire store    Wk 2   
TOPS          RTW          N/A          TOTAL    50% off Entire Store    Wk 3   
TOPS          RTW          N/A          TOTAL    50% off Entire Store    Wk 4   
TOPS    BOGO 50% FP graphics       RTW    BOGO free Denim,       N/A    BOGO
Free jewlery, hair & socks, BOGO free MDS       TOTAL    All Graphic MDS $5   
Wk 5    TOPS    BOGO 50% FP graphics, 2 Fors       RTW    BOGO free Denim,      
N/A    BOGO Free jewlery, hair & socks, BOGO free MDS       TOTAL    $5 Graphic
Mds, $10 L/S, $15 Sweaters          

DEPT

  

2015

JANUARY    WK 1    TOPS    BOGO 50% FP graphics, 2 Fors, Pricepoints       RTW
   BOGO 50% Denim       N/A    BOGO Free jewlery, hair & socks, $1 MD Jewelry,
Cold weather 50%       TOTAL    30% off MDS    Wk 2    TOPS    BOGO 50% FP
graphics, 2 Fors, Pricepoints       RTW    BOGO 50% Denim

 

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