EX-10.1












Exhibit 10.1




 





ASSET PURCHASE AGREEMENT




BY AND AMONG




AM RETAIL GROUP, INC.




AND




WILSONS THE LEATHER EXPERTS, INC.

ROSEDALE WILSONS, INC.

WILSONS LEATHER OF DELAWARE INC.

RIVER HILLS WILSONS, INC.

WILSONS LEATHER OF FLORIDA INC.

WILSONS LEATHER DIRECT INC.

WILSONS LEATHER OF GEORGIA INC.

WILSONS LEATHER OF ALABAMA INC.

WILSONS LEATHER OF INDIANA INC.

WILSONS LEATHER OF CONNECTICUT INC.

WILSONS LEATHER OF IOWA INC.

WILSONS LEATHER OF LOUISIANA INC.

WILSONS LEATHER OF NEW JERSEY INC.

WILSONS LEATHER OF MARYLAND INC.

WILSONS LEATHER OF NEW YORK INC.

WILSONS LEATHER OF MASSACHUSETTS INC.

WILSONS LEATHER OF NORTH CAROLINA INC.

WILSONS LEATHER OF MICHIGAN INC.

WILSONS LEATHER OF OHIO INC.

WILSONS LEATHER OF MISSISSIPPI INC.

WILSONS LEATHER OF PENNSYLVANIA INC.

WILSONS LEATHER OF MISSOURI INC.

WILSONS LEATHER OF SOUTH CAROLINA INC.

WILSONS LEATHER OF TENNESSEE INC.

WILSONS LEATHER OF WISCONSIN INC.

WILSONS LEATHER OF TEXAS INC.

WILSONS LEATHER OF VIRGINIA INC.

WILSONS LEATHER HOLDINGS INC.

BERMANS THE LEATHER EXPERTS INC.




 





 









 





TABLE OF CONTENTS




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






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






ii









 






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






Exhibits




	 	 	 
	Exhibit 1.1(a)(1)

	 	Assumed Contracts
	Exhibit 1.1(a)(6)

	 	Intellectual Property in Acquired Assets
	Exhibit 1.1(b)(1)

	 	Certain Excluded Contracts
	Exhibit 1.1(b)(15)

	 	Certain Excluded Assets
	Exhibit 2.2

	 	Sellers’ Calculation of Estimated Purchase Price and Other Payments
	Exhibit 2.3

	 	Landlord Payment Schedule
	Exhibit 2.4(j)

	 	Allocation of Purchase Price
	Exhibit 5.5(a)

	 	Certain Eligible Employees and Non-Eligible Employees
	Exhibit 5.12-1

	 	Transition Services Agreement for Services to Seller
	Exhibit 5.12-2

	 	Transition Services Agreement for Services to Buyer
	Exhibit 5.14

	 	Letters of Credit
	Exhibit 6.2(a)

	 	Bill of Sale, Assignment and Assumption Agreement
	Exhibit 6.2(b)(1)

	 	Trademark Assignment
	Exhibit 6.2(b)(2)

	 	Domain Name Assignment
	Exhibit 6.2(g)

	 	Assignment and Assumption Agreement for Leases
	Exhibit 7.1(b)

	 	Encumbrances to be Released
	Exhibit 10

	 	Outlet Stores







iii









 








ASSET PURCHASE AGREEMENT




     THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into effective as of July
8, 2008, by and among AM Retail Group, Inc., a Delaware corporation (“Buyer”), Wilsons The
Leather Experts Inc., a Minnesota corporation (“Parent”), Rosedale Wilsons, Inc., a
Minnesota corporation, Wilsons Leather of Delaware Inc., a Delaware corporation, River Hills
Wilsons, Inc., a Minnesota corporation, Wilsons Leather of Florida Inc., a Florida corporation,
Wilsons Leather Direct Inc., a Delaware corporation, Wilsons Leather of Georgia Inc., a Georgia
corporation, Wilsons Leather of Alabama Inc., an Alabama corporation, Wilsons Leather of Indiana
Inc., an Indiana corporation, Wilsons Leather of Connecticut Inc., a Connecticut corporation,
Wilsons Leather of Iowa Inc., an Iowa corporation, Wilsons Leather of Louisiana Inc., a Louisiana
corporation, Wilsons Leather of New Jersey Inc., a New Jersey corporation, Wilsons Leather of
Maryland Inc., a Maryland corporation, Wilsons Leather of New York Inc., a New York corporation,
Wilsons Leather of Massachusetts Inc., a Massachusetts corporation, Wilsons Leather of North
Carolina Inc., a North Carolina corporation, Wilsons Leather of Michigan Inc., a Michigan
corporation, Wilsons Leather of Ohio Inc., an Ohio corporation, Wilsons Leather of Mississippi
Inc., a Mississippi corporation, Wilsons Leather of Pennsylvania Inc., a Pennsylvania corporation,
Wilsons Leather of Missouri Inc., a Missouri corporation, Wilsons Leather of South Carolina Inc., a
South Carolina corporation, Wilsons Leather of Tennessee Inc., a Tennessee corporation, Wilsons
Leather of Wisconsin Inc., a Wisconsin corporation, Wilsons Leather of Texas Inc., a Texas
corporation, Wilsons Leather of Virginia Inc., a Virginia corporation, Wilsons Leather Holdings
Inc., a Minnesota corporation, and Bermans The Leather Experts Inc., a Delaware corporation (each
such Person, other than Buyer, is a “Seller”, and collectively, such Persons are
“Sellers”). Certain capitalized terms used in this Agreement are defined in
Article 10.



Recitals




     A. Sellers, collectively, are engaged in the business of selling leather outerwear,
accessories and apparel through mall stores, airport stores and outlet stores and on the internet.



     B. Sellers, collectively, desire to sell, convey, transfer and assign to Buyer, and Buyer
desires to purchase from Sellers, certain assets of the Outlet Business (which includes Sellers’
e-commerce business as described herein), upon and subject to the terms herein.



Agreement




     In consideration of the foregoing and the representations, warranties, covenants and
agreements in this Agreement, each Party hereby agrees as follows:



ARTICLE 1

PURCHASE OF ACQUIRED ASSETS AND RELATED TERMS




     1.1 Certain Definitions Relating to Transactions. For purposes of this Agreement, the
following definitions apply:



          (a) Acquired Assets Defined. “Acquired Assets” means, under and subject to the terms
herein, all right, title and interest of each Seller, in each case as of the Effective Time, in and
to each item listed below in this Section 1.1(a), except that no Excluded Asset is an



 









 







Acquired Asset. The Acquired Assets include the following (to the extent not expressly listed
as an Excluded Asset):




               (1) each Assumed Contract (with “Assumed Contract” meaning, other than any
Excluded Contract, each Contract to which any Seller is a party that is (i) listed or
referred to on Exhibit 1.1(a)(1), (ii) Principally Related to the Outlet Business
that is terminable at will or upon not more than 90 days’ notice by the applicable Seller
without any Liability or other obligation of such Seller (other than with respect to actions
before the termination thereof), (iii) Principally Related to the Outlet Business that
involves aggregate future payments of less than $10,000 or (iv) orders for merchandise
inventory, materials or supplies with respect to the Outlet Business for which the
associated value is not included in the calculation of Final Transferred Inventory, other
than orders for any Undelivered Inventory (it being acknowledged that (A) any such item that
Buyer pays for under such an order in this clause (iv) is an asset of Buyer and (B) if such
associated value was included in the calculation of Final Transferred Inventory, then the
applicable Seller would retain the associated payment obligation to the applicable third
party under such order);




               (2) all furniture, fixtures, improvements and equipment (including computer equipment,
but excluding any related software or information except to the extent any right, title or
interest in or to any such software or information is an Acquired Asset pursuant to another
clause in this Section 1.1(a)) (A) physically located in any Outlet Store, Sellers
Distribution Facility or, except as stated in Section 1.1(b)(12) and
1.1(b)(15), Seller’s Headquarters at the Effective Time or (B) wherever physically
located that are Principally Related to the Outlet Business;




               (3) all merchandise inventory that, at the Effective Time, is (A) located in any Outlet
Store (or in such Outlet Store’s storage space), (B) located in Sellers Distribution
Facility (or in transit from Sellers Distribution Facility to an Outlet Store) that has a
SKU and location identifier designating such inventory for sale in any Outlet Store,
(C) located at (or in transit from Sellers Distribution Facility to) the third party
fulfillment center engaged by Sellers that is designated for sale in Sellers’ e-commerce
business or (D) located in Sellers Distribution Facility that has a SKU and location
identifier designating such inventory for sale in Sellers e-commerce business (provided,
however, that the merchandise inventory (x) in such clauses (a)(3)(C) and (a)(3)(D) does not
include any merchandise inventory with respect to which, at the Effective Time, a customer
of a Seller has ordered such inventory and such inventory has not yet shipped to such
customer and (y) does not include any inventory on order (or in transit) for sale in any
Outlet Store or in Sellers e-commerce business, in each case which, at the Effective Time,
has not been previously delivered to Sellers Distribution Facility or a third party
fulfillment center engaged by Sellers that is designated for sale in Sellers’ e-commerce
business (collectively, the “Undelivered Inventory”), which Undelivered Inventory
will be subject to Section 5.25));




               (4) all office materials or supplies (other than inventory defined as an Acquired Asset
pursuant to clause (a)(3) above) located in, or on order for, any Outlet Store (or in such
Outlet Store’s storage space) at the Effective Time, including routine office supplies,
bags, boxes and similar items Principally Related to the Outlet Business



2









 






(except for office materials and supplies that are located in Sellers Distribution
Facility and are not “Wilsons Leather” branded, which office materials and supplies are not
Acquired Assets);




               (5) all Register Cash (with “Register Cash” meaning any currency or coin, but
not checks, money orders or similar draft instruments, in each case to the extent physically
located at any Outlet Store at the Effective Time that is held at such Outlet Store for
actual use in transactions with customers in such Outlet Store’s operations during the next
day after the Cut-Off Date that such Outlet Store is open in the Ordinary Course of Business
of the applicable Seller);




               (6) all Intellectual Property listed in Exhibit 1.1(a)(6);




               (7) all leasehold improvements in any Outlet Store (subject to the terms hereof and any
applicable Real Property Lease);




               (8) all rights Principally Related to the Outlet Business under any representation,
warranty or guarantee by any manufacturer or supplier to the Outlet Business to the extent
with respect to any of the Acquired Assets or Assumed Liabilities;




               (9) all goodwill, going concern value and enterprise value Principally Related to the
Outlet Business;




               (10) all of the following, to the extent Principally Related to the Outlet Business and
in existence: (A) sales records, accounting records, records of purchases by any Seller and
supplier lists and correspondence with supplier and potential suppliers; (B) customer lists
and related records and correspondence with customers and potential customers and all
related documents, to the extent permitted by Applicable Law and to the extent contemplated
in, and subject to, Section 5.15; (C) advertising and promotional materials;
(D) records regarding any examination by a Governmental Authority; (E) personnel and payroll
records of Transferred Employees, to the extent permitted by Applicable Law; and (F) general
correspondence and any similar document or record;




               (11) all of the following that is with respect to any Outlet Store, Sellers
Headquarters or Sellers Distribution Facility: (A) telephone numbers, including cellular
telephone numbers (but only to the extent such cellular telephone number is issued to any
Transferred Employee); (B) facsimile numbers; (C) postal addresses; and (D) postal boxes;




               (12) subject to Section 2.4(i), all of the following: (A) security deposits
given to any landlord under any Real Property Lease; and (B) Prepaid Items;




               (13) all Permits and rights and privileges associated with such Permits, in each case
to the extent both transferable and solely used with respect to Sellers Distribution
Facility or any Outlet Store;




               (14) a pro rata portion (as contemplated in Section 2.4(i)) of all claims and
rights of any Seller with respect to Tax refunds, Tax credits and Tax deposits, in each case
only with respect to Real Property Lease Taxes; and



3









 






               (15) all other assets (other than any asset that is excluded pursuant to any of the
preceding clauses in this Section 1.1(a) or any other Excluded Asset) that are, at
the Effective Time, Principally Related to the Outlet Business, whether or not located in
any Outlet Store.



          (b) Excluded Assets Defined. “Excluded Assets” means, under and subject to the terms
herein, all assets in or to which any Seller has any right, title or interest that are not
described in Section 1.1(a) or are otherwise excluded from the Acquired Assets by any other
term herein. The Excluded Assets include each item listed below in this Section 1.1(b)
(and all right title and interest of any Seller, or any Affiliate of any Seller, in or to any such
item listed below):




               (1) each Contract to which any Seller is a party that is not an Assumed Contract (each
such Contract, including any Contract for any Intercompany Service and each Contract listed
in Exhibit 1.1(b)(1), is an “Excluded Contract”);




               (2) all minute books, ownership records and seals of any Seller and all other documents
relating to the organization, maintenance or existence of any Seller;




               (3) all bank accounts, cash accounts, investment accounts, deposit accounts, lockboxes
and similar accounts of Sellers;




               (4) all cash, cash equivalents, checks and similar instruments (whether or not cleared)
and short-term securities of Sellers, in each case other than any Register Cash;




               (5) all accounts receivable, including credit card-related receivables for sales of
Sellers before the Effective Time;




               (6) (A) all Taxpayer and other identification numbers of Sellers; (B) all Tax Returns
and Tax records of Sellers; and (C) duplicate copies of all books and records that are an
Acquired Asset (including any such item that any Seller or any Affiliate of any Seller is
required to retain in its possession by any Governmental Authority);




               (7) all claims and rights of any Seller with respect to: (A) Tax refunds, Tax credits
and Tax deposits, in each case other than with respect to Real Property Lease Taxes to the
extent stated in Section 1.1(a)(14); and (B) Tax loss carry forwards;




               (8) all insurance policies and insurance coverage and all rights in connection
therewith;




               (9) all Seller Plans and all rights in connection with and assets of any Seller Plan;




               (10) all rights of any Seller under this Agreement or any other Contract or item
executed or delivered by or on behalf of any Party in connection with the transactions
contemplated under this Agreement;




               (11) any equity interest or other security of any kind (or right to receive any equity
interest or other security) in or of any Person (including any Seller);



4









 






               (12) any asset physically located at Sellers Headquarters that is not Principally
Related to the Outlet Business or physically located at any store of any Seller that is not
an Outlet Store (for the avoidance of doubt, for each employee who is not an Eligible
Employee, any asset issued to such employee or any asset that is primarily used by such
employee in the performance of such employee’s employment duties for a Seller is an Excluded
Asset, including any personal desktop or laptop computer, pager, cellular telephone,
BlackBerry or other telephone, desk or other office furniture or equipment);




               (13) all of the following that is not with respect to any Outlet Store, Sellers
Headquarters or Sellers Distribution Facility: (A) telephone numbers, including cellular
telephone numbers issued to employees that are not a Transferred Employee; (B) facsimile
numbers; (C) postal addresses; and (D) postal boxes;




               (14) all inventory, materials or supplies not defined as an Acquired Asset pursuant to
Section 1.1(a)(3) or 1.1(a)(4), including all leather or any, if any, other
production materials or sub-materials that, at the Effective Time, is in the possession of
any Seller that has not yet been manufactured into a product for sale (provided that
Undelivered Inventory will be subject to Section 5.25);




               (15) any other asset listed in Exhibit 1.1(b)(15); or




               (16) all leasehold improvements, other than leasehold improvements in any Outlet Store.



          (c) Assumed Liabilities Defined. “Assumed Liabilities” means, under and subject to
the terms herein, only those Liabilities and other obligations of any Seller arising out of,
relating to or resulting from any Assumed Contract (including any Real Property Lease) that is, by
the terms of such Assumed Contract, to be paid, performed, satisfied or observed after the
Effective Time.



          (d) Assumption of Assumed Liabilities; Non-Assumption of Other Liabilities. Under and subject
to the terms of this Agreement, Buyer hereby assumes, effective as of the Effective Time, and
agrees to pay, perform and satisfy when due, and observe fully and timely, all Assumed Liabilities
(as defined above). Except as specifically set forth in this Section 1.1(d) or to the
extent expressly stated in this Agreement or any Ancillary Document, Buyer expressly does not, and
shall not, assume or be deemed to have assumed under this Agreement or by reason of any transaction
contemplated hereunder, any debts, liabilities (contingent or otherwise) or obligations of any of
the Sellers of any nature whatsoever. The Assumed Liabilities shall not include (i) subject to
Section 2.4(i), any debts, liabilities (contingent or otherwise) or obligations of any of
the Sellers (including, without limitation, trade accounts payable and liabilities that should be
accrued in accordance with GAAP up to and including the Effective Time) arising out of any Contract
that is not an Assumed Contract (with the Parties acknowledging that that any Contract Principally
Related to the Outlet Business that is required to be listed on Exhibit 1.1(a)(1) to avoid
a breach of the first sentence of Section 3.10(b), but is not listed on Exhibit
1.1(a)(1) (regardless of any Knowledge thereof on the part of Buyer), is not an Assumed
Contract and no right, title or interest therein is an Acquired Asset), (ii) any liabilities of
Sellers arising from customer complaints or any related customer chargebacks (including all
deductions of any kind) relating to the Outlet Business prior to the Effective Time



5









 




(except to the extent provided in Section 5.18), (iii) except as otherwise specified
in this Agreement, any liability or obligation for Taxes of Sellers, whether or not accrued,
assessed or currently due and payable, including without limitation any liability for Taxes (A) of
Sellers, whether or not it relates to the operation of Sellers’ businesses, (B) of Sellers arising
from the operation of Sellers’ business or the ownership of the Acquired Assets prior to the
Effective Time, or (C) of Sellers arising out of the consummation of the transactions contemplated
hereby (for purposes of this Section 1.1(d), all real property Taxes, personal property
Taxes and similar ad valorem obligations levied with respect to the Acquired Assets for a Tax
period that includes (but does not end on) the Cut-Off Date shall be apportioned between Sellers
and Buyer based upon the number of days of such period included in the Tax period before (and
including) the Cut-Off Date and the number of days of such Tax period after the Cut-Off Date), (iv)
any Liability or other obligation of any Seller (A) under any Seller Plan or (B) to or with respect
to any current or former employee of any Seller, or (v) other than under Section 2.4(i) and
any related payment hereunder, any Liability or other obligation of any Seller under any Assumed
Contract (including any Real Property Lease) that is, by the terms of such Assumed Contract, to be
paid, performed, satisfied or observed on or prior to the Effective Time.




     1.2 Sale and Purchase of Acquired Assets. Under and subject to the terms of this
Agreement, effective as of the Effective Time, each Seller hereby sells, conveys, transfers and
assigns to Buyer, and Buyer hereby purchases from each Seller, all of such Seller’s right, title
and interest in and to the Acquired Assets. None of the Excluded Assets are sold, conveyed,
transferred or assigned to Buyer.



     1.3 Unassignable Contracts and Related Matters. Notwithstanding anything herein to
the contrary other than Section 5.1 (and subject to Section 5.1), if (a) any
Assumed Contract is not capable of being sold, conveyed, transferred or assigned hereunder, or
(whether or not in connection with an Assumed Contract) if Buyer is not permitted to provide or
Parent and its applicable Affiliates are not permitted to receive any license, sublicense or
related service under section 3.1 of the Transition Services Agreement under which Parent is the
service recipient, in each case in the absence of the approval, consent or waiver of any other
Person (without breaching, violating, defaulting under, conflicting with, giving rise to or
creating any right to accelerate, increase, terminate, modify or cancel any material right or
obligation or creating any Encumbrance, other than a Permitted Encumbrance, under, such
Assumed Contract, or without otherwise violating any right of such other Person) and (b) all
necessary approvals, consents or waivers of any such other Person (including any party to such
Assumed Contract) have not been obtained at or before the Closing, then the applicable Seller and
Buyer will cooperate to obtain such approvals, consents, or waivers as soon as reasonably possible
and shall act with respect to each such Assumed Contract, and with respect to section 3.1 of such
Transition Services Agreement (as applicable), such that Buyer shall obtain the rights and benefits
of such Assumed Contract and assume the corresponding Assumed Liabilities, and Parent and its
Affiliates will obtain the rights and benefits under section 3.1 of such Transition Services
Agreement (and related rights and benefits under such Transition Services Agreement) and pay the
amounts owed to Buyer with respect thereto, so that the Parties are, to the greatest extent
possible, put in the same position they would have been had such approval, consent or waiver been
obtained unconditionally. Such actions by Buyer or such Seller may be in the form of a
subcontract, sublicense or sublease appointing Buyer as agent to the applicable Seller to perform
such Assumed Contract, or any other arrangement under which Buyer could enforce for the benefit of
Buyer any and all rights and benefits of the applicable Seller against the third party thereto.
For



6









 




the avoidance of doubt, the foregoing actions will be performed on an Assumed Contract by Assumed
Contract basis, and in accordance with Applicable Law.




ARTICLE 2

PURCHASE PRICE AND ADJUSTMENT




     2.1 Purchase Price. Upon and subject to the terms herein, Buyer will pay to Sellers
the aggregate amount of $20,646,575 (the “Initial Purchase Price”), as such amount is
adjusted pursuant to the terms herein (such amount, as adjusted pursuant to any term herein, is the
final purchase price for the Acquired Assets and is referred to herein as the
“Purchase Price”).



     2.2 Calculation of Estimated Purchase Price for Closing. On or before the Closing
Date, Sellers have delivered to Buyer a statement in form acceptable to Buyer (including supporting
documentation therefor acceptable to Buyer), attached hereto as Exhibit 2.2, containing
Sellers’ reasonable estimate of (a) Transferred Inventory and (b) the Purchase Price (which, for
Closing, is (1) the Initial Purchase Price plus any amount by which such estimated Transferred
Inventory contained in such statement exceeds the sum of Target Transferred Inventory plus $6,500,
(2) the Initial Purchase Price minus any amount by which such estimated Transferred Inventory
contained in such statement is less than the sum of Target Transferred Inventory plus $6,500 or
(3) the Initial Purchase Price in the instance where such estimated Transferred Inventory contained
in such statement equals the sum of Target Transferred Inventory plus $6,500 (as applicable), plus
in the applicable case under such clause (1), (2) or (3), as the case may be, the amount of
Sellers’ good faith estimate of the amount of Register Cash, which amount shall be included in the
Estimated Purchase Price). The amount of such estimated Purchase Price from Sellers is the
“Estimated Purchase Price”.



     2.3 Payment of Estimated Purchase Price at Closing and Related Payments. Upon and
subject to the terms herein, Buyer will pay the Estimated Purchase Price to Sellers (to be
allocated among Sellers, as determined by Sellers consistent with the terms herein) as described in
this Section 2.3. Buyer will pay to Sellers, in cash, by wire transfer of immediately
available funds, the amount of $16,943,809 (which includes amounts paid pursuant to
Section 2.4(i) and the sentence of this Section 2.3 below that describes certain
reimbursements regarding Transferred Employees) at the Closing and on the Closing Date to the
account designated by Sellers on or before the Closing Date. Buyer will withhold from the
Estimated Purchase Price the amount of $3,773,502 (the “Landlord Retention Amount”) at the
Closing and on the Closing Date, which is so withheld with respect matters contemplated herein
regarding the landlords identified on Exhibit 2.3 (the “Landlord Payment Schedule”)
and which will be held and paid pursuant to Section 5.30. The Buyer will withhold, and
shall not pay to Sellers at Closing, the following components of the Estimated Purchase Price
(however, the amount of such components will be paid or withheld pursuant and subject to the terms
of this Agreement): (1) the sum of $1,000,000 (the “Gift Card Holdback Amount”), which
amount shall be held by Buyer to secure certain Gift Card Item Reimbursable Amounts, as further
provided in Section 5.18; and (2) the sum of $500,000 (the
“Vendor Loss Holdback Amount”), which amount shall be held by Buyer to secure Vendor
Losses, as further provided in Section 5.26. Additionally, at Closing and on the Closing
Date, Buyer will pay to Sellers (to be allocated by Sellers based on Sellers’ determination of the
amount owing to the applicable Sellers) the amount stated in Exhibit 2.2 for reimbursement
for such Sellers in connection with such Sellers agreeing not to obtain reimbursement from certain
Transferred Employees for excess used (but unearned)




7












 




vacation time, sick leave or other time off by such Transferred Employees as of the Effective
Time. For each such amount so withheld by Buyer from the Estimated Purchase Price as the Landlord
Retention Amount or under any of clause (1) or (2) of this Section 2.3, in each case that
is subsequently required to be paid to any Seller after Closing (including as contemplated in
Section 5.18, 5.26 or 5.30), Buyer will pay to such Seller interest on each
such portion of such withheld amount that is so subsequently required to be paid to such Seller.
Buyer will pay such interest at the time Buyer is required to pay such portion of such withheld
amount to such Seller. Such interest will be calculated at an annual rate equal to 3.0% and based
on the number of actual days elapsed from (but not including) the Closing Date to (and including)
the date of such payment, divided by 365.




     2.4 Purchase Price Adjustment.



          (a) Sellers’ Preparation of the Statement. Within 60 days after the Closing Date, Sellers
will prepare and deliver to Buyer a statement (the “Statement”) setting forth, in
reasonable detail, Sellers’ determination of Transferred Inventory and of the amount of Register
Cash at the Effective Time. Buyer will assist Sellers and their representatives in all reasonable
respects in preparing the Statement and will give Sellers and their representatives reasonable
access, upon reasonable prior request, to the personnel, properties, books and records regarding
the Outlet Business for such purpose and the other matters in this Section 2.4. The final
determination of Transferred Inventory pursuant to this Section 2.4 is
“Final Transferred Inventory” and the final determination of Register Cash pursuant to this
Section 2.4 is “Final Register Cash.”




          (b) Buyer’s Response to the Statement. The Transferred Inventory and Register Cash in the
Statement will become final and binding upon the Parties (and become Final Transferred Inventory
and Final Register Cash, respectively) 60 days after Sellers give the Statement to Buyer, unless
Buyer gives written notice, in reasonable detail, of its disagreement (a
“Notice of Disagreement”) to Sellers before the end of such 60-day period. If Buyer gives
Notice of Disagreement before the end of such 60-day period stated above, then Final Transferred
Inventory and Final Register Cash (as finally determined in accordance with clause (b)(1) or (b)(2)
below) will become final and binding on the Parties upon the earlier of (1) the date the Parties
resolve in writing any differences they have with respect to the amount of the Transferred
Inventory or Register Cash or (2) the date any disputed items are finally resolved in writing by
the Arbitrator pursuant to Section 2.4(c). Sellers will not modify the Statement in any
manner adverse to Buyer. Buyer will not modify the Notice of Disagreement in any manner adverse to
Sellers. Any item or amount in, or omitted from, the Statement that Buyer does not disagree with
in the Notice of Disagreement will be final and binding on the Parties in the manner stated in, or
omitted from, the Statement.




          (c) Resolving Matters in Notice of Disagreement. During the 30-day period after a Notice of
Disagreement is given, Sellers and Buyer will attempt to resolve in writing any differences that
they have regarding any item in such Notice of Disagreement. If, at the end of such 30-day period,
Sellers and Buyer have not reached agreement on all such items, then any Party may require that the
items that remain in dispute be promptly submitted to an arbitrator (the “Arbitrator”) for
review and resolution. The Arbitrator will be a nationally recognized public accounting firm
agreed upon by the Parties in writing; provided that the Arbitrator will not be an accounting firm
used by any Seller or Buyer (or any Affiliate of any of them) within




8









 







the three years preceding the Closing Date for any purpose. The Arbitrator will determine
procedures for such arbitration, subject to the terms hereof. The Arbitrator will only consider
the items that remain in dispute. The Arbitrator will render a decision resolving such items in
dispute within 30 days after completion of submissions to the Arbitrator. The Arbitrator will
determine Final Transferred Inventory and Final Register Cash solely based on submissions made by
Sellers and Buyer consistent with the terms hereof (and not by independent review). The Arbitrator
will not assign a value to any item that is greater than the greater value for such item claimed by
any Party or less than the lesser value for such item claimed by any Party.




          (d) Allocation of Fees and Expenses. Each Party shall pay its own and its Affiliates’ fees
and expenses incurred with respect to such Arbitration; provided, however, that the Non-Prevailing
Party in such arbitration will also pay the fees and expenses of the Arbitrator. A Party is the
“Prevailing Party” if the Arbitrator’s determination of the items in dispute is closer to
such Party’s determination of such items than it is to the other Party’s determination of such
items (in each case in the aggregate and as submitted to the Arbitrator). A Party is the
“Non-Prevailing Party” if the other Party is the Prevailing Party.




          (e) Adjustment to Purchase Price Based on Final Transferred Inventory and Final Register Cash.
The Purchase Price will be, and automatically will be adjusted to be, equal to the sum of the
Initial Purchase Price plus Final Register Cash, and then as such sum is (1) increased by the
amount, if any, by which Final Transferred Inventory exceeds Target Transferred Inventory or
(2) decreased by the amount, if any, by which Final Transferred Inventory is less than
Target Transferred Inventory. However, if no such adjustment is required pursuant to clause (1) or
(2) of this Section 2.4(e), then the Purchase Price will equal the sum of the
Initial Purchase Price plus Final Register Cash.




          (f) Reconciliation Payment. Within five Business Days after Final Transferred Inventory and
Final Register Cash become final and binding on the Parties, the following will occur:





          (1) if the Estimated Purchase Price (as paid at Closing but excluding components not
paid at the Closing on the Closing Date as described in Section 2.3) is less than
the Purchase Price (excluding components not paid at the Closing on the Closing Date as
described in Section 2.3 and as adjusted, if at all, under Section 2.4(e)),
then Buyer will pay to Sellers, in the aggregate, the amount of such difference, without
interest, in cash, by wire transfer of immediately available funds; and




          (2) if the Estimated Purchase Price (as paid at Closing but excluding components not
paid at the Closing on the Closing Date as described in Section 2.3) is more than
the Purchase Price (excluding components not paid at the Closing on the Closing Date as
described in Section 2.3 and as adjusted, if at all, under Section 2.4(e)),
then Sellers, in the aggregate, will pay to Buyer the amount of such excess, without
interest, in cash, by wire transfer of immediately available funds.



          (g) Target Transferred Inventory Defined. “Target Transferred Inventory” means the
amount of $18,552,575.




          (h) Transferred Inventory Defined. “Transferred Inventory” means an amount equal to
the amount of inventory, materials and supplies that are an Acquired Asset




9









 







pursuant to Section 1.1(a)(3) or 1.1(a)(4). Transferred Inventory described
in Section 1.1(a)(3) will be calculated at average cost, in a manner consistent with
Sellers’ past practices and stock ledger, including with respect to the calculation of any reserve
for shrinkage (which reserve for shrinkage would be a reduction to the total amount of Transferred
Inventory, consistent with such past practices and stock ledger). With respect to office materials
and supplies described in Section 1.1(a)(4), the applicable amount shall be fixed at $65,000.




          (i) Proration. In addition to the foregoing matters in this Article 2, Sellers, on
the one hand, and Buyer, on the other hand, will pro rate, as of the Effective Time, based on the
number of days elapsed in the applicable period, all Prepaid Items. “Prepaid Item” means,
to the extent with respect to any Acquired Asset or Assumed Liability, any: (1) rent, utility
(unless and to the extent that Buyer shall be billed directly for post-Closing usage), Real
Property Lease Tax, common area maintenance, marketing or advertising allocation or other similar
amount paid or payable with respect to any Real Property Lease; (2) prepaid cost or expense,
advance payment or similar prepayment; (3) charge or payment based on performance or possession
under any lease (other than any Real Property Lease), service Contract, maintenance Contract,
marketing or advertising Contract or similar Contract, in each case that is included within or
under any Assumed Contract; or (4) other similar prepaid amount that is or was an obligation to any
third party. In connection with the foregoing, Sellers will be given full credit for all amounts
paid or otherwise satisfied by any Seller for which Buyer receives the benefit (including any
prepaid amount that is an Acquired Asset). The Parties will use their commercially reasonable
efforts to cause all providers of utility services to bill the applicable Seller for all costs owed
by such Seller hereunder and to bill Buyer for all costs owed by Buyer hereunder (to the extent the
Parties would be billed directly). At Closing, Buyer will pay to Sellers or Sellers will pay to
Buyer (as applicable) an amount equal to 90% of Sellers’ good faith estimate of the Prepaid Items
(other than the Prepaid Items described in clause (i)(1) above, as to which 100% shall be paid), as
set forth on Exhibit 2.2. Thirty (30) days after Closing, Buyer will pay to Sellers or
Sellers will pay to Buyer (as applicable) an amount to properly allocate such pro rated
Prepaid Items under this Section 2.4(i) (net of the payment made pursuant to the preceding
sentence), without interest, in cash, by wire transfer of immediately available funds.




          (j) Allocation of Purchase Price. Each Party will allocate the Purchase Price among the
Acquired Assets and the covenant described in Section 5.8 in accordance with
Exhibit 2.4(j) and Applicable Law. After Closing, the Parties will make consistent use of
such allocation, as adjusted to reflect any adjustments needed to remain consistent with Final
Transferred Inventory, Final Register Cash and the Prepaid Items under Section 2.4(i) and
the resulting adjustment to the Purchase Price, for all Tax and financial reporting purposes. With
respect to such allocation, as so adjusted, each Party will (1) be bound by such allocation,
(2) act in accordance with such allocation in the preparation and the filing of all Tax Returns and
in the course of any Tax audit, Tax review or other Tax Proceeding relating thereto, (3) take no
position, and cause its Affiliates to take no position, inconsistent with such allocation for Tax
or financial reporting purposes (including in connection with any Proceeding), unless in each case
otherwise required pursuant to a “determination” within the meaning of section 1313(a) of the Code,
and (4) not later than 30 days before any filing of any IRS Form 8594 by or on behalf of such Party
(whether initial or supplemental) relating to the transactions contemplated herein, deliver to each
other Party a copy of such IRS Form. In furtherance of the foregoing, if any Governmental
Authority, on its own initiative, makes or proposes an allocation of the Purchase Price among the
Acquired Assets and the covenant described in Section 5.8 hereof which differs




10









 







materially from the allocation contemplated by this Section 2.4(j), each of Buyer, on
the one hand, and Sellers, on the other hand, shall have the right, at its or their election and
expense, to contest such Governmental Authority’s determination. In the event of such a contest,
the other Party or Parties hereto shall cooperate reasonably with the contesting Party, but shall
have the right to file such protective claims or Tax Returns as may be reasonably required to
protect its or their interests.




          (k) Actions of Sellers in Unison. Each Seller will act in unison and in agreement with each
other Seller with respect to all matters in this Section 2.4. Additionally, for purposes
of Section 2.4(c) and 2.4(d), all Sellers are treated as a single Party.




ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF EACH SELLER




     Except as disclosed in the Disclosure Schedule and subject to Section 9.11, each
Seller, jointly and severally, hereby represents and warrants to Buyer as follows:



     3.1 Organization and Good Standing. Each Seller is a duly organized and validly
existing corporation in good standing under the laws of the jurisdiction in which it was organized,
each as listed in Section 3.1 of the Disclosure Schedule. Each Seller is duly qualified and in
good standing to do business as a foreign corporation in each jurisdiction in which the ownership
or leasing of its properties or assets or the conduct of its business requires such qualification,
except where the failure to be so qualified or in good standing either individually or in the
aggregate has not had and is not reasonably likely to have a Material Adverse Effect and will not
materially and adversely affect such Seller’s ability to consummate the transactions contemplated
herein, with each such jurisdiction being listed in Section 3.1 of the Disclosure Schedule. Each
Seller has full corporate power and authority to own and lease its properties and assets and
conduct its business as now conducted.



     3.2 Authority and Authorization. The execution, delivery and performance of this
Agreement and each Ancillary Document of each Seller have been duly authorized and approved by all
necessary corporate action with respect to such Seller, and each such authorization and approval
remains in full force and effect. This Agreement and each Ancillary Document of each Seller has
been duly executed by such Seller. Assuming due authorization, execution and delivery by Buyer of
this Agreement and each Ancillary Document of Buyer, this Agreement is, and each Ancillary Document
of each Seller is, the legal, valid and binding obligation of each Seller, enforceable against such
Seller in accordance with its terms, except to the extent enforceability may be limited by any
Enforceability Limitation. Each Seller and has all requisite corporate power and authority to
enter into this Agreement and each Ancillary Document to be executed and delivered by such Seller
and to consummate the transactions contemplated herein and therein to be consummated by such
Seller.



     3.3 Organizational Documents. A copy of the articles or certificate of incorporation
as amended to the date hereof (certified by the Secretary or Department of State of the applicable
State) and the bylaws of each Seller has been delivered to Buyer and such documents are complete
and correct and represent the presently effective articles or certificate of incorporation and
bylaws of Sellers. The minutes of the meetings (or proper written consents) of the boards of
directors of Sellers authorizing the execution and delivery of this Agreement and the



11









 




consummation of the transactions contemplated hereby (certified by a duly authorized officer
of the applicable Seller), copies of which have been delivered to Buyer, are true, accurate and
complete as of the Closing Date.




     3.4 Ownership of Sellers. Section 3.4 of the Disclosure Schedule lists the names of
the owners of all capital stock of each Seller, other than Parent, as of the date hereof.



     3.5 Conflicts and Consents.



          (a) Conflicts. Neither the execution or delivery by any Seller of this Agreement or by any
Seller of any Ancillary Document nor consummation by any Seller of the transactions contemplated
herein or therein does or will (with or without the passage of time or giving of notice):
(1) constitute a breach of, violate, conflict with or give rise to or create any right or
obligation under any Organizational Document of any Seller; (2) violate any Applicable Law material
to such Seller or violate in any material respect any Order applicable to such Seller; or
(3) constitute a material breach or violation of or a material default under, conflict with or give
rise to or create any right of any Person other than any Seller to accelerate, increase, terminate,
modify or cancel any material right or obligation or result in the creation of any Encumbrance,
other than a Permitted Encumbrance, under, any Major Contract that is an Assumed Contract.




          (b) Consents. Section 3.5(b) of the Disclosure Schedule sets forth each approval by,
notification to or filing with any Person required in connection with any Seller’s execution,
delivery or performance of this Agreement or any Ancillary Document of such Seller or such Seller’s
consummation of the transactions contemplated herein or therein, except (1) with respect to any
Contract not required to be disclosed in the Disclosure Schedule to avoid a breach of
Section 3.10 or (2) for any consent, approval, notice or filing, the absence of which will
not materially and adversely affect such Seller’s ability to consummate the transactions
contemplated herein. “Consent” means the consents, approvals, notices or filings listed in
Section 3.5(b) of the Disclosure Schedule.




     3.6 Financial Information and Undisclosed Liabilities.



          (a) Financial Information Defined. Section 3.6(a) of the Disclosure Schedule contains
the following: (1) unaudited statements, as of May 3, 2008 (the “Financial Information
Date”), of inventory, furniture, fixtures and equipment of the Outlet Business; (2) unaudited
profit and loss statements of the Outlet Business for Parent’s fiscal years ended February 3, 2007
and February 2, 2008 and for the three-month period ended on the Financial Information Date; (3)
unaudited profit and loss statements of the Outlet Business for each fiscal quarter in Parent’s
fiscal years ended February 3, 2007 and February 2, 2008; and (4) a schedule reflecting the
allocations of shared direct and indirect expenses among Parent’s divisions for the three-month
period ending on the Financial Information Date (such statements are, collectively, the
“Financial Information”).




          (b) Financial Information. The Financial Information is true, correct and complete, in all
material respects, and fairly presents, in all material respects, at their respective dates and for
the respective periods covered thereby, the assets of the Outlet Business with respect to the
specific items presented in the Financial Information and results of operations of the Outlet
Business. The Financial Information is consistent in all material respects with the




12









 







books and records of Parent, which books and records of Parent are in all material respects
correct and complete. Except as set forth in Section 3.6(b) of the Disclosure Schedule, each
statement included in the Financial Information has been prepared on a consistent basis throughout
the periods involved. Sellers acknowledge and agree that Buyer is relying on the accuracy and
completeness of the Financial Information in making its determination as to whether it must file
the Financial Information, or any portion thereof, with the SEC.




          (c) Undisclosed Liabilities. No Seller has any Liability with respect to the Outlet Business
that at the Effective Time would be an Assumed Liability, except for Liabilities (1) under any
Major Contract that is an Assumed Contract (or a Contract not required to be disclosed in the
Disclosure Schedule to avoid a breach of Section 3.10) or that is otherwise disclosed in or
contemplated by this Agreement, including the Disclosure Schedule, (2) that have arisen in the
Ordinary Course of Business of such Seller since the Financial Information Date, or (3) under this
Agreement or any Ancillary Document or otherwise in connection with the transactions contemplated
herein or therein.




     3.7 Taxes.



          (a) Such Seller has timely filed all Tax Returns that it has been required to file, and all
such Tax Returns were correct and complete in all material respects and were prepared in
substantial compliance with Applicable Law. None of such Tax Returns has been examined or audited
by any Governmental Authority or is currently the subject of a Proceeding. Such Seller has paid,
or made provisions in accordance with GAAP for the payment of, all Taxes due (whether or not shown
or required to be shown on any Tax Return) through and including the Closing Date, including, but
not limited to, with respect to 2008. Sufficient reserves have been established on the books and
records of such Seller and are reflected in the Financial Information of such Seller to cover any
unpaid Taxes of such Seller. There are no Encumbrances with respect to any of the Acquired Assets
owned by such Seller that arose in connection with any failure (or alleged failure) to pay any Tax,
other than Permitted Encumbrances. There is not currently pending any Proceeding or any dispute or
claim by a Governmental Authority concerning the Tax liability of such Seller with respect to the
income, business, operations or property of such Seller. No claim has been made by a Governmental
Authority in a jurisdiction where such Seller does not file Tax Returns that it is or may be
subject to Tax in that jurisdiction.




          (b) All Taxes which such Seller was required by law to withhold, deposit or collect in
connection with any amount paid or owing to any employee, independent contractor, creditor, partner
or other third party have been duly withheld, deposited and collected and, to the extent required,
have been paid to the relevant Governmental Authority, and all Forms W-2 and 1099 required with
respect thereto have been properly completed and timely filed.




          (c) None of the directors, officers or other Person responsible for Taxes of such Seller has
Knowledge, based upon personal contact with any agent of any Governmental Authority, that such
Governmental Authority intends to assess any additional Taxes for any period for which Tax Returns
have been filed by such Seller.




13









 








          (d) None of the Acquired Assets owned by such Seller is (i) “tax-exempt use property” within
the meaning of section 168(h)(1) of the Code, or (ii) “tax-exempt bond financed property” within
the meaning of section 168(g) of the Code.




          (e) None of the Acquired Assets owned by such Seller is an interest in any Person that is
treated as a partnership for U.S. federal income Tax purposes or would be treated as a pass-through
or disregarded entity for any Tax purpose.




          (f) None of the Assumed Liabilities is an obligation to make a payment that is not deductible
under section 280G of the Code. Such Seller has no liability for the Taxes of any Person under
§1.1502-6 of the United States Income Tax Regulations (or any similar provision of state, local or
foreign law), other than another Seller or any other member of the affiliated group of corporations
of which Parent is the common parent, or as a transferee or successor, by contract or otherwise.




     3.8 Litigation and Orders. Except as set forth in Section 3.8 of the
Disclosure Schedule, there is no Proceeding pending or, to any Seller’s Knowledge, Threatened
against any Seller, as of the date of this Agreement, that (a) relates to the Outlet Business or
any of the Acquired Assets (other than (1) workers’ compensation claims or (2) challenges by
governmental Intellectual Property office examiners as part of the related application process)
that, if decided adversely to such Seller, is reasonably likely to result in an adverse effect upon
the business or operations or condition, financial or otherwise, of the Outlet Business or the
Acquired Assets or (b) seeks to enjoin, prohibit or otherwise challenge the transactions
contemplated hereby. As of the date of this Agreement, no Seller is subject to any material
restriction or limitation on the Outlet Business under any Order and no unsatisfied Order rendered
against or affecting Sellers or any of the Acquired Assets might reasonably result in an adverse
effect upon the business or operations or condition, financial or otherwise, of the Outlet Business
or any of the Acquired Assets or adversely affect the validity or enforceability of any of the
Assumed Contracts.



     3.9 Compliance with Law. At all times since January 28, 2006, each Seller has been
operated in compliance with all Applicable Laws (including those relating to maintaining Permits
required of such Seller to conduct its business), except as does not relate to the Outlet Business
or as set forth on Section 3.9 of the Disclosure Schedule and except for any non-compliance that
has not had and is not reasonably likely to have a Material Adverse Effect.



     3.10 Contracts.



          (a) Section 3.10(a) of the Disclosure Schedule lists the following Contracts, in effect as of
the date of this Agreement, to which any Seller is a party that is Principally Related to the
Outlet Business (each Contract so listed and each Real Property Lease is a
“Major Contract”):





          (1) each employment agreement (other than those that are terminable at will by any
Seller without any Liability or other obligation to any Seller, except any Liability or
other obligation with respect to services rendered before the termination thereof);



14









 






          (2) each covenant not to compete that restricts the Outlet Business as presently
conducted;




          (3) each operating lease (as lessor or lessee) of tangible personal property (other
than any such lease calling for payments of less than $10,000 per 12-month period);




          (4) each Contract to pay or receive any royalty or license fee or to license (either as
licensor or licensee) any Intellectual Property (other than any (A) license with any Seller
or any Affiliate of any Seller, but no other Person, that terminates at the Effective Time,
(B) license for Intellectual Property embedded in any equipment or fixture,
(C) non-exclusive implied license of Intellectual Property or (D) non-exclusive license for
the use of any commercially available off-the-shelf software);




          (5) each Contract regarding any management, personal service or consulting or other
similar type of Contract under which there exists aggregate future payments in excess of
$10,000 per Contract (other than those (A) that are terminable at will or upon not more than
90 days’ notice by any Seller without any Liability or other obligation to any Seller,
except any Liability or other obligation with respect to services rendered before the
termination thereof, or (B) entered into in connection with a license);




          (6) each Contract for the purchase by any Seller of any supply or product that calls
for performance over a period of more than 12 months (other than those that are terminable
at will or upon not more than 90 days’ notice by any Seller without any Liability or other
obligation to any Seller, except any Liability or other obligation with respect to any
supply or product purchased before the termination thereof);




          (7) each mortgage agreement, deed of trust, security agreement, purchase money
agreement, conditional sales contract or capital lease created or assumed by, or permitted
to be created by written document made or accepted by, any Seller (other than any
(A) purchase money agreement, conditional sales contract or capital lease evidencing any
Encumbrance only on tangible personal property under which there exists aggregate future
payments less than $10,000 per Contract or (B) protective filing of any financing statement
under the Uniform Commercial Code);




          (8) each Contract under which any Seller is obligated to repay or has guaranteed any
outstanding indebtedness for borrowed money or remains obligated to lend to or make any
investment in (in the form of a loan, capital contribution or otherwise) any other Person,
other than any other Seller;




          (9) each Contract under which any Seller has advanced or loaned any other Person, other
than any other Seller, outstanding amounts in the aggregate for such Person exceeding
$10,000;




          (10) each outstanding power of attorney with respect to any Seller (other than those
entered into in its Ordinary Course of Business in connection with any Intellectual Property
or Tax matter);



15









 






          (11) each Contract with any distributor or broker of any product or service offered by
any Seller;




          (12) each Contract for any advertising or promotional service or website design or
hosting;




          (13) each Contract for the sale of any product or service offered by any Seller that
calls for performance over a period of more than six months (other than those that are
terminable at will or upon not more than 90 days’ notice by any Seller without any Liability
or other obligation to any Seller except any Liability or other obligation with respect to
products or services ordered before the termination thereof);




          (14) agreements of any Seller for mergers, consolidations or reorganizations or for the
purchase or sale of material assets (other than in its Ordinary Course of Business) or all
or substantially all of a Person’s business and assets;




          (15) each Contract with finders, brokers or underwriters (other than under which Buyer
will have no obligation); and




          (16) each other Contract not entered into in the Ordinary Course of Business of the
applicable Seller (other than any Contract calling for payments by or to any Seller of less
than $10,000 per 12-month period).



          (b) Exhibit 1.1(a)(1) sets forth a true and complete list of all Contracts to which
any Seller is a party that is Principally Related to the Outlet Business, other than Excluded
Contracts and Contracts that are terminable at will or upon not more than 90 days’ notice by the
applicable Seller without any Liability or other obligation of such Seller (other than with respect
to actions before the termination thereof) or which involve aggregate future payments of less than
$10,000 (and other than any (A) license with any Seller or any Affiliate of any Seller, but no
other Person, that terminates at the Effective Time, (B) license for Intellectual Property embedded
in any equipment or fixture, (C) non-exclusive implied license of Intellectual Property
(D) non-exclusive license for the use of any commercially available off-the-shelf software or
(E) order described in Section 1.1(a)(1)(iv)). Sellers have made available to Buyer a
true, correct and complete copy of each such Contract required to be so listed (or, to the extent
that such an Assumed Contract is oral, an accurate summary thereof). With respect to each
Major Contract (and with the following assuming that each Consent has been obtained, which, for any
Consent that is a filing or notice, means the making of such filing or notice), (1) such
Major Contract is legal, valid and binding, in full force and effect and enforceable (except to the
extent enforceability may be limited by any Enforceability Limitation) in accordance with its terms
against the Seller that is a party thereto and, to such Seller’s Knowledge, against each other
party thereto, (2) such Seller is not and, to such Seller’s Knowledge, no other party thereto is in
material breach of or default under such Major Contract, (3) no event, occurrence or condition
exists or has occurred that (with or without the passage of time or giving of notice) would
constitute a material breach or default of, or permit termination, modification, acceleration or
cancellation of, such Major Contract or of any material right, Liability or other obligation
thereunder, (4) such Seller has not waived any material right under such Major Contract and (5) no
party to such Major Contract has terminated, modified, accelerated or canceled such Major Contract
or any material right, Liability or other obligation thereunder or communicated in writing such
party’s




16









 







intent to do so. Seller has not granted any release or waiver in writing or that is otherwise
material under or with respect to any of the Major Contracts. Seller has not assigned or otherwise
transferred any of its rights under any of the Major Contracts.




     3.11 Certain Assets.



          (a) Title. Each Seller has good and marketable title to, or a valid leasehold interest in or
valid license for, the tangible Acquired Assets to be conveyed by it pursuant to this Agreement,
free and clear of any Encumbrance other than any Permitted Encumbrance.




          (b) Condition. The tangible Acquired Assets, other than supplies and inventory, have been
maintained in accordance with normal applicable industry practice, are in good operating condition
and repair (except normal wear and tear) and is sufficient in all material respects for the
purposes for which they are used.




          (c) Inventory. Subject to the applicable reserves in the determination of Final Transferred
Inventory and other than inventory for liquidation located at, held for or in transit to the Outlet
Store at 3117 West Magnolia Boulevard, Burbank, California, substantially all of the
On-Hand Inventory is merchantable. None of the On-Hand Inventory is on consignment (other than
from one Seller to another). “On-Hand Inventory” means the finished goods inventory that
is an Acquired Asset pursuant to Section 1.1(a)(3)(A), 1.1(a)(3)(B) or
1.1(a)(3)(D). Except as set forth on Section 3.11 of the Disclosure Schedule and
except for such inventory for liquidation and subject to reserves consistent with Sellers’ past
practices, On-Hand Inventory does not include any items below standard quality, damaged or spoiled,
or of a quality or quantity not usable or saleable in the normal course of the Outlet Business.




     3.12 Certain Business Relationships. No Seller is a party to any Contract that is an
Assumed Contract with any of its Affiliates (other than any other Seller). None of Sellers’
officers owns, directly or indirectly, individually or collectively, an interest in any entity
which is a competitor or supplier of the Outlet Business, other than owning or holding less than 2%
of the outstanding shares of any class of stock that is regularly traded on a recognized domestic
or foreign securities exchange or over-the-counter market. Since January 30, 2005, except as set
forth in Section 3.12 of the Disclosure Schedule, no officer of any Seller, while such an officer,
received income from any source other than a Seller that should have properly been paid to the
Outlet Business.



     3.13 Certain Payments. No Seller nor any director, officer, agent, or employee of any
Seller, or, to the Knowledge of the Sellers, any other Person associated with our acting for or on
behalf of any Seller, has directly or indirectly (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable treatment in securing
business for the Outlet Business, (ii) to pay for favorable treatment for business secured for the
Outlet Business or (iii) to obtain special concessions, or for special concessions already
obtained, for or in respect of the Outlet Business, in each case in violation of Applicable Law, or
(b) established or maintained any fund or asset for any purpose described in clause (a) above that
has not been recorded in the books and records of Sellers.



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     3.14 Real Property. Other than the leased or occupied real property listed in
Section 3.14 of the Disclosure Schedule (the “Leased Real Property,” and each Contract
under which any Leased Real Property is leased or occupied by any Seller is a
“Real Property Lease”), no Seller owns any right, title or interest in any real property
that is used in any manner in connection with the Outlet Business or that will become an Acquired
Asset. Sellers, considered collectively, have a valid leasehold interest in each Leased Real
Property, free and clear of any Encumbrance other than any Permitted Encumbrance. There are no
parties in possession of the Leased Real Property other than the applicable Seller. No Leased Real
Property has suffered any material damage by fire or other casualty that has not been repaired and
restored in all material respects. As of the date hereof, no party to any Real Property Lease has
exercised any termination right with respect thereto. All rent and other sums and charges payable
by the applicable Seller as tenant thereunder are current. No Seller has received written notice
from any insurance company that such insurance company will require any alteration to any Leased
Real Property for continuance of a policy insuring such property (other than any notice of
alteration that has been completed), to the extent that such alteration is the responsibility of
the applicable Seller. No Seller is contesting any operating cost, real estate Tax or assessment
or other charge payable by such Seller under any Real Property Lease. No Seller has exercised any
(if any) option under any Real Property Lease to purchase the real property subject to such Real
Property Lease. There are no material capital expenditures, to any Sellers’ Knowledge, required to
be made by Buyer in connection with the Leased Real Property in order to comply with any Real
Property Lease or Applicable Laws or any insurance requirements of any Seller or any landlord under
any Real Property Lease. All buildings, structures, facilities, and other improvements
(collectively, “Improvements”) are in good operating condition and repair, subject to
normal wear and maintenance given their relative ages. To any Seller’s Knowledge, all Permits that
are required or appropriate to use or occupy the Leased Real Property as currently conducted
thereon have been issued and are in full force and effect.



     3.15 Environmental Matters.



          (a) Sellers have made available to Buyer a true, correct and complete copy of all Phase I and
Phase II environmental site assessments (if any) related to any of the Leased Real Property that
are in any Seller’s possession or control.




          (b) One or more of the Sellers has obtained all material Permits that are required under any
Environmental Law, except as does not relate to the Outlet Business or any Acquired Asset. Each
Seller is in compliance with all material Environmental Laws and the terms of all material Permits
issued pursuant to any Environmental Law, except as does not relate to the Outlet Business or any
Acquired Asset.




          (c) Except as does not relate to the Outlet Business or any Acquired Asset, there is no
Environmental Claim pending or, to any Seller’s Knowledge, Threatened as of the date of this
Agreement against any Seller.




          (d) In connection with the Outlet Business or any Acquired Asset, no Seller has installed,
used, generated, treated, disposed of or arranged for the disposal of any Hazardous Substance in a
manner reasonably likely to create any material Liability or other obligation for such Seller under
any Environmental Law with respect to any Leased Real Property.




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     3.16 Intellectual Property.



          (a) Section 3.16(a) of the Disclosure Schedule lists all (i) Intellectual Property owned by
any Seller (including, as applicable for each item listed, the record owner, the jurisdiction, the
application and registration numbers, the filing date, the issuance or registration date, the
registrar and the expiration date) that constitutes an Acquired Asset and is registered with any
Governmental Authority (or with any Person that maintains domain name registrations) and all
applications for any such registration; (ii) common law trademarks owned by any Seller that are
Principally Related to the Outlet Business and material to the conduct of the Outlet Business; and
(iii) common law copyrights owned by any Seller that are Principally Related to the Outlet Business
and material to the conduct of the Outlet Business. Each such registration or application has been
maintained effective by all requisite filings, renewals and payments, and remains in full force and
effect. Except as indicated therein, none of the Intellectual Property identified in Section
3.16(a) of the Disclosure Schedule has been abandoned or cancelled.




          (b) One or more of the Sellers owns all right, title and interest in and to, free and clear of
all Encumbrances, other than any Permitted Encumbrance, or has the right to use without payment of
any royalty, license fee or similar fee (other than pursuant to a Major Contract or a Contract not
required to be disclosed in the Disclosure Schedule to avoid a breach under Section 3.10),
the Intellectual Property identified in Section 3.16(a) of the Disclosure Schedule that has not
been abandoned or cancelled. Except as disclosed in Section 3.16(b) of the Disclosure Schedule,
(i) no Seller has granted to any Person (other than any other Seller), and no other Person (other
than any other Seller) has, any license, option or other rights in or to such Intellectual
Property; (ii) since February 3, 2002, no Seller has received notice of any pending or, to any
Seller’s Knowledge, Threatened action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand that challenges the legality, validity, enforceability, registrations, use or
ownership of such Intellectual Property, other than office actions in connection with the
prosecution of applications for the registration or issuance of such Intellectual Property; (iii)
other than any Major Contract (if applicable), no Seller is a party to any co-existence, consent,
settlement or similar agreements limiting or modifying the rights of any Seller in such
Intellectual Property anywhere in the world; (iv) no Seller has brought any Proceeding that is now
pending against any Person, nor provided notice to any Person (including by cease and desist
letter), that such Person is infringing such Intellectual Property, and to the Sellers’ Knowledge,
no Person is infringing such Intellectual Property; and (v) no Seller has received written notice,
as of the date hereof, that any of such Intellectual Property has been declared unenforceable or
otherwise invalid by any Governmental Authority.




          (c) To each Seller’s Knowledge, no Seller has received any charge, complaint, claim, demand or
notice since February 3, 2002, whether written or oral, alleging that any use, sale or offer to
sell any good or service of any Seller with respect to the Outlet Business infringes upon,
misappropriates or violates any Intellectual Property right of any other Person (including any
claim that any Seller must license or refrain from using any Intellectual Property right of any
other Person in connection therewith or any offer by any other Person to license any Intellectual
Property right of any other Person in connection therewith). To each Seller’s Knowledge, no Seller
is, with respect to the Outlet Business, infringing upon, misappropriating or violating the
Intellectual Property of any other Person. To each Seller’s Knowledge, no other Person is
infringing upon, misappropriating or violating the Intellectual Property of any Seller constituting
an Acquired Asset.




19









 








          (d) Notwithstanding the foregoing, no representation or warranty is made in this Agreement
regarding any infringement, misappropriation or violation with, upon, of, by or otherwise relating
to any (1) license for Intellectual Property embedded in any equipment or fixture,
(2) non-exclusive implied license of Intellectual Property or (3) non-exclusive license for the use
of any commercially available off-the-shelf software.




     3.17 Treatment of Acquired Assets and Source Code.



          (a) Sellers have not knowingly permitted (including but not limited to actions by its
employees and contractors) Sellers’ rights in any Acquired Asset that is material to the conduct of
the Outlet Business, the value of which to any Seller is dependent on it being maintained as a
trade secret, to enter into the public domain or otherwise to become publicly available without
cost.




          (b) Sellers have obtained from all of their consultants and other third parties who have
independently or jointly contributed to the conception, reduction to practice, creation or
development of the Intellectual Property that is an Acquired Asset unencumbered and unrestricted
exclusive ownership (subject to any Permitted Encumbrance) of, or a license sufficient for Sellers’
current use for, all such third party’s intellectual property rights in such contribution,
excluding moral rights that are not assignable.




          (c) Except as does not relate to the Outlet Business, Sellers have obtained from all current
and former employees agreements requiring disclosure and assignment of inventions, and
non-disclosure agreements. Except as does not relate to the Outlet Business, to Sellers’
Knowledge, no current or former employee is in violation of such agreement.




          (d) To the Knowledge of Sellers, no current or former employee, consultant or other third
party has developed any material technology, software or other intellectual property that is an
Acquired Asset for Sellers that is subject to any agreement under which such individual has
assigned or otherwise granted to any third party (other than any Seller) any material rights in or
to such technology, software or other intellectual property.




          (e) To the extent that the Acquired Assets that are software owned by any Seller incorporate,
integrate with, dynamically or statically link to, or use any third party intellectual property in
the development, testing, pre-production, production, support or disaster recovery of the Acquired
Assets, Sellers have (subject to any Permitted Encumbrance) (i) obtained all right, title and
interest in and to such third party intellectual property by operation of law or by valid
assignment or (ii) obtained perpetual (except in the event of breach) rights to use, modify,
reproduce, display, prepare derivative works upon, perform, and distribute such third party
intellectual property.




          (f) Except as does not relate to the Outlet Business, Sellers use no software that is
distributed by Sellers as open source software (including but not limited to software distributed
under the GNU General Public License (GPL) (all versions), the GNU Lesser General Public License
(LGPL) (all versions) or the Artistic License, Apache 2.0).




          (g) To the Knowledge of Sellers, no current or former employee, consultant or other third
party has contributed any Intellectual Property that is an Acquired Asset to any open source
project.




20









 








          (h) Neither Sellers nor any current or former employee acting on Sellers’ behalf has
contributed to any standards organization or similar entity that requires Sellers to grant or offer
to grant third parties any rights in the Acquired Assets.




          (i) Except as does not relate to the Outlet Business, to the Knowledge of Sellers, the
software owned or used by Sellers accurately recognizes, calculates, processes and stores all same
century and multi-century formulas, dates, date notations (including leap years), time zones and
any “day-light savings” formulas and resolves ambiguities in date and time input and output.




          (j) Except as does not relate to the Outlet Business, the software owned or used by Sellers
accurately recognizes, calculates, processes and stores all numbers, whether expressed in decimal
form, fraction form or both, in each case to the extent and in the manner sufficient for Sellers’
current use thereof.




          (k) No Seller or any of its employees has intentionally introduced into any software that is
an Acquired Asset any code, device, criteria, mechanism or function for the purpose of adversely
restricting, disabling, damaging, destroying or otherwise shutting down, or adversely altering the
functionality of, specifications for, or access to, all or any portion of the software that is an
Acquired Asset (including any computer code, programs or programming devices that are designed to,
or which disrupt, modify, delete, deactivate, harm or otherwise impede any portion of such software
in any material manner), all of the foregoing excluding documented access control functions.
Sellers use the virus-scanning software listed on Section 3.17(k) of the Disclosure Schedule as
well as security measures listed thereon.




     3.18 Privacy and Data Security Matters.



          (a) Except as does not relate to the Outlet Business, Sellers have not been required under
Applicable Law to issue, and have not issued, any notifications under any Applicable Law relating
to the actual or suspected unauthorized access or acquisition of personally identifiable
information.




          (b) Except as does not relate to the Outlet Business, Sellers have not undergone any audit or
regulatory inquiry from any Governmental Authority with respect to privacy or data security of
personally identifiable information and, to Sellers’ Knowledge, no inquiry from any Governmental
Authority (including as a result of complaints from any individuals provided to such Governmental
Authority) is Threatened regarding same.




          (c) Except as does not relate to the Outlet Business, Sellers are in compliance in all
material respects with all requirements under Applicable Law and applicable industry standards
(including but not limited to Payment Card Industry standards and including regulatory requirements
of Governmental Authorities) governing personally identifiable information and data security.




          (d) Except as does not relate to the Outlet Business, Sellers have obtained all consents
required by Applicable Law with respect to current uses of individually identifiable data.




21









 








     3.19 Insurance. Sellers have made available to Buyer a true, correct and complete
copy of all insurance policies (or, when not reasonably available, the corresponding insurance
binders) in force on the date hereof that are maintained by or cover any material aspect of the
Outlet Business. Such policies are in full force and effect, and no Seller is in default under any
of them. No Seller has received any notice of non-renewal, cancellation or intent to cancel, not
renew or increase premiums or deductibles with respect to such insurance policies, nor, to the
Knowledge of Sellers, is there any basis for such action.



     3.20 Absence of Certain Events. From the Financial Information Date through the date
hereof, there has not been any Material Adverse Effect. Since the Financial Information Date, the
Outlet Business, taken has a whole, has been operated in all material respects in the Ordinary
Course of Business of each Seller. From the Financial Information Date to the date of this
Agreement, no Seller has done any of the following:



          (a) except in its Ordinary Course of Business, (1) except for cash distributions to any
Seller, made any sale, lease to any other Person, license to any other Person or other disposition
of any asset that relates to the Outlet Business or any Acquired Asset, (2) failed to use its
commercially reasonable efforts to preserve and maintain the Leased Real Property in substantially
the same condition as existed on the Financial Information Date, ordinary wear and tear excepted,
(3) made any capital expenditure or purchase or otherwise acquired any material asset that relates
to the Outlet Business or any Acquired Asset (other than purchases of inventory in its Ordinary
Course of Business and capital expenditures that did not exceed $10,000 (individually or in the
aggregate)), licensed any intangible asset that relates to the Outlet Business or any Acquired
Asset from any other Person (other than any (A) license for Intellectual Property embedded in any
equipment or fixture, (B) non-exclusive implied license of Intellectual Property or
(c) non-exclusive license for the use of any commercially available off-the-shelf software), leased
any real property from any other Person that relates to the Outlet Business or any Acquired Asset
or leased any tangible personal property from any other Person that relates to the Outlet Business
or any Acquired Asset (other than leases of tangible personal property in its Ordinary Course of
Business under which the payments do not exceed $10,000 (individually or in the aggregate)) or
(4) disclosed any material confidential, proprietary or non-public information that relates to the
Outlet Business or any Acquired Asset (other than as is reasonably protected under a customary
non-disclosure Contract);




          (b) granted any Encumbrance on any asset that relates to the Outlet Business or any Acquired
Asset, other than (1) pursuant to a Major Contract (or a Contract not required to be disclosed in
the Disclosure Schedule to avoid a breach under Section 3.10) or (2) any Permitted
Encumbrance;




          (c) became a guarantor with respect to any obligation of any other Person, other than any
other Seller, or assumed any obligation of any such Person for borrowed money, in each case other
than guarantees or obligations that will not become Assumed Liabilities;




          (d) incurred any indebtedness for borrowed money that will become an Assumed Liability and
cannot be prepaid at any time without penalty;




          (e) except in its Ordinary Course of Business, amended or terminated in any respect that is
adverse to the Outlet Business, taken as a whole, any Major Contract;





22












 





          (f) (1) adopted or changed any material accounting method or principle used by such Seller,
except as required under GAAP, the Code or any rule or regulation of the SEC or (2) changed any
annual accounting period;




          (g) failed to use its commercially reasonable efforts to preserve, and prevent any material
degradation in, such Seller’s relationship with its material suppliers and others having material
business relations with such Seller relating to the Outlet Business;




          (h) entered into any employment agreement with any individual who is an Eligible Employee
(other than oral arrangements for employment at will), or, except in its Ordinary Course of
Business granted any bonus or otherwise increased the compensation or benefits payable or to become
payable to any individual who is an Eligible Employee;




          (i) (1) paid, discharged, settled or satisfied any material claim that would have become an
Acquired Asset, except (A) in its Ordinary Course of Business or (B) the payment, discharge,
settlement or satisfaction of any claim to the extent reflected or reserved for on the Financial
Information or (2) otherwise waived, released, assigned or transferred any right of material value
that will be or would have become an Acquired Asset; or




          (j) agreed, by entering into a Contract or legally binding commitment, to do any of the
foregoing.




     3.21 Employee Benefits.



          (a) Section 3.21 of the Disclosure Schedule lists all Seller Plans. Sellers have delivered to
Buyer an accurate summary of each Seller Plan.




          (b) Each Seller Plan is in compliance in all material respects with its terms and with all
applicable requirements of Applicable Law, including the Code and ERISA. As of the Closing Date,
all contributions (including all premiums, employer contributions and employee salary reduction
contributions) required to be made to, under or with respect to each Seller Plan with respect to
individuals who may become Eligible Employees (and their dependents and beneficiaries) will have
been made, other than immaterial amounts that will be made after Closing by a Seller without
adverse effect on Buyer. There are no pending or threatened claims or proceedings against or
relating to any Seller Plan (other than routine claims for benefits). No Seller or any ERISA
Affiliate nor any director, officer or employee of any Seller or of any ERISA Affiliate has engaged
in any unresolved Prohibited Transaction or committed any breach of fiduciary responsibility under
ERISA, except for any Prohibited Transaction for which a specific exemption is provided under or
pursuant to ERISA or the Code.




          (c) Each Seller Plan that is intended to be qualified under section 401 of the Code has been
determined by the IRS to be so qualified.




          (d) No Seller has incurred or may incur, whether directly or indirectly, any liability or
obligation under Title IV of ERISA with respect to any “employee pension plan” (within the meaning
of Section 3(2) of ERISA), including, without limitation, any multiemployer plan described in
Section 3(37) of ERISA. No Encumbrance has been imposed on the Acquired Assets pursuant to Section
302, 303 or Title IV of ERISA or Section 412 or 430 of the Code and no fact exists that would
reasonably be expected to give rise to such Encumbrance. No Seller




23









 




has contributed to or has had an obligation to contribute to a multiemployer plan as described
in Section 3(37) of ERISA.




          (e) No Seller Plan provides for continuing benefits or coverage for any participant or any
beneficiary of a participant after such participant’s termination of employment, except as may be
required by COBRA at such participant’s or such beneficiary’s expense. The requirements of section
4980B of the Code and Part 6 of Subtitle B of Title I of ERISA relating to COBRA continuation of
health coverage have been satisfied with respect to each Seller Plan that is subject to such
requirements.




          (f) No Seller is bound by any collective bargaining agreement to maintain any Plan. No Seller
Plan is subject to the laws of, or maintained primarily for the benefit of employees whose
principal employment is located in, a country other than the United States.




     3.22 Employees and Labor Relations.



          (a) As of the date hereof, no Seller is a party to or is bound by any collective bargaining
agreement or other similar Contract with any labor union representing any employee of any Seller
who would be an Eligible Employee. No labor strike, lockout or material labor dispute or work
stoppage has occurred or, to any Seller’s Knowledge, has been Threatened, in each case from January
28, 2006 through the date of this Agreement with respect to any employee of any Seller who would be
an Eligible Employee. To each Seller’s Knowledge, no union organizing campaign exists or has
occurred from January 28, 2006 through the date of this Agreement with respect to any employee of
any Seller who would be an Eligible Employee. Section 3.22(a) of the Disclosure Schedule contains,
as of the date stated in Section 3.22(a) of the Disclosure Schedule, a true, correct and complete
list of each Eligible Employee and with respect to each such Eligible Employee the following
information: (a) the employer of such Eligible Employee, (b) the amount of salary currently being
paid on a gross annualized basis (if applicable), the hourly pay rate (if applicable) of such
Eligible Employee and the amount of compensation paid in the fiscal year ended February 2, 2008;
and (c) the nature and amount of any material perquisites or employee benefits currently being
provided to or for the account of such Eligible Employee, other than the Seller Plans described
herein. Set forth in Section 3.22(a) of the Disclosure Schedule is a list of individuals, whose
duties are Principally Related to the Outlet Business, who are (A) “leased employees” within the
meaning of Section 414(n) of the Code or (B) “independent contractors” within the meaning of the
Code and the rules and regulations promulgated thereunder.




          (b) To the Knowledge of the Sellers, no Eligible Employee is a party to any confidential
information or other agreement that in any way restricts the ability of such Eligible Employee to
perform his or her duties for the Sellers.




          (c) Each of the Sellers has complied in all material respects with all Applicable Laws
relating to the employment of labor in connection with the conduct of the Outlet Business,
including provisions thereof relating to wages, hours, equal opportunity, collective bargaining,
nondiscrimination, harassment, and the payment of social security and other Taxes. All persons who
have performed services for the Sellers in connection with the conduct of the Outlet Business and
have been classified as independent contractors have satisfied the requirements of all Applicable
Laws to be so classified, and as applicable the Sellers have




24









 




fully and accurately reported their compensation on IRS Forms 1099 or other applicable tax
forms for independent contractors when required to do so.




          (d) Except as set forth in Section 3.22(d) of the Disclosure Schedule, there are no
proceedings pending or, to the Knowledge of the Sellers, Threatened, between the Sellers, on the
one hand, and any current or former employees thereof who were employed in connection with the
conduct of the Outlet Business, on the other hand, including any claims for actual or alleged
harassment or discrimination based on race, national origin, age, sex, sexual orientation,
religion, disability, or similar tortuous conduct, wage and hour claims, breach of contract,
wrongful termination, defamation, intentional or negligent infliction of emotional distress,
interference with contract or interference with actual or prospective economic advantage. There
are no claims pending or, to the Knowledge of the Sellers, Threatened, against any of the Sellers
under any workers’ compensation plan applicable to any individual who is an Eligible Employee.




          (e) Sellers have provided all of their employees who would be an Eligible Employee with all
wages, benefits, relocation benefits, stock options, bonuses and incentives and all other
compensation which became due and payable through the date of this Agreement. No Seller has
instituted any “freeze” of, or delayed or deferred the grant of, any cost-of-living or other salary
adjustments for any of its employees who would be an Eligible Employee.




          (f) Set forth on Section 3.22(f) of the Disclosure Schedule is a list of all employees
terminated by any Seller within 60 days before the Closing Date, the dates of the terminations, and
the location in which all such employees worked. At all times prior to Closing, each Seller has
complied in all material respects with the WARN Act and all similar state Applicable Laws, and
other than the termination of the employees listed on Section 3.22(f) of the Disclosure Schedule,
no Seller has taken any action which could affect the Parties’ obligations under the WARN Act.




     3.23 Suppliers.



          (a) Section 3.23(a) of the Disclosure Schedule sets forth, for the years ended February 2,
2008 and February 3, 2007 and for the quarter ended May 3, 2008, the names of each supplier that
accounted for more than $100,000 of the operating expenses of the Outlet Business during any such
period.




          (b) No supplier identified on Section 3.23(a) of the Disclosure Schedule with respect to the
quarter ended May 3, 2008, has, since the start of such quarter, canceled or otherwise terminated,
or threatened in writing to a Seller to cancel or terminate, its relationship with Sellers, or its
business done with Sellers.




     3.24 Brokers. No Seller has any Liability or other obligation to any broker, finder
or similar intermediary in connection with the purchase or sale of Acquired Assets hereunder that
would cause Buyer to become liable for payment of any fee or expense with respect thereto.



     3.25 Projections. Sellers have provided Buyer with the projections for the Outlet
Business included in the Greene Holcomb & Fisher “Confidential Executive Summary—Wilsons Leather
Outlet” (the “Projections”). The Projections were prepared in good faith and are based upon
assumptions and estimates that the Sellers believed to be reasonable at the time of preparation; it
being understood by the Buyer that projections such as the Projections are



25









 




inherently subject to risks, uncertainties and other factors that may cause actual results to
differ from those stated in such Projections.




     3.26 Disclosure. To Sellers’ Knowledge, no information furnished by or on behalf of
Sellers to Buyer in connection with this Agreement (including the Disclosure Schedule) contains any
untrue statement of a material fact or omits to state a material fact necessary to make such
statement, in the light of the circumstances under which it was made, not misleading.



     3.27 Certain General Exceptions. Notwithstanding any term of this Agreement, no
representation or warranty is made by any Seller in this Agreement regarding any product (including
with respect to the non-infringement of any Intellectual Property of any third party relating to
such product) purchased from or through, or otherwise supplied by or through, G-III Apparel Group,
Ltd., an Affiliate of Buyer (“G-III”), or any Affiliate of G-III.



ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BUYER




     Buyer hereby represents and warrants to each Seller as follows:



     4.1 Organization and Good Standing. Buyer is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware. Buyer is duly qualified and
in good standing to do business as a foreign corporation in each jurisdiction in which the
ownership and leasing of its properties or assets or the conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing will not materially
and adversely affect Buyer’s ability to consummate the transactions contemplated herein. Buyer has
full corporate power and authority to own and lease its properties and assets and conduct its
business as now conducted.



     4.2 Authority and Authorization. The execution, delivery and performance of this
Agreement and each Ancillary Document of Buyer have been duly authorized and approved by all
necessary corporate action with respect to Buyer, and each such authorization and approval remains
in full force and effect. This Agreement and each Ancillary Document of Buyer has been duly
executed by Buyer. Assuming due authorization, execution and delivery by each Seller of this
Agreement and each Ancillary Document of any Seller, this Agreement is, and each Ancillary Document
of Buyer is, the legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except to the extent enforceability may be limited by any Enforceability
Limitation. Buyer has all requisite corporate power and authority to enter into this Agreement and
each Ancillary Document to be executed and delivered by Buyer and to consummate the transactions
contemplated herein and therein to be consummated by Buyer.



     4.3 Conflicts and Consents.



          (a) Conflicts. Neither the execution or delivery by Buyer of this Agreement or by Buyer of
any Ancillary Document nor consummation by Buyer of the transactions contemplated herein or therein
does or will (with or without the passage of time or giving of notice): (1) constitute a breach
of, violate, conflict with or give rise to or create any right or obligation under any
Organizational Document of Buyer; (2) violate any Applicable Law or Order; or (3) constitute a
breach or violation of or a default under, conflict with or give rise to or create any right of any
Person other than Buyer to accelerate, increase, terminate, modify or



26









 






cancel any right or obligation under, any Contract to which Buyer is a party, except where
such a breach, violation, default, conflict or right described in clause (a)(2) or (a)(3) above
will not materially and adversely affect Buyer’s ability to consummate the transactions
contemplated herein.




          (b) Consents. No consent or approval by, notification to or filing with any Person is
required in connection with Buyer’s execution, delivery or performance of this Agreement or any
Ancillary Document of Buyer or Buyer’s consummation of the transactions contemplated herein or
therein, except for any consent, approval, notice or filing, the absence of which will not
materially and adversely affect Buyer’s ability to consummate the transactions contemplated herein.




     4.4 Litigation and Orders. There is no Proceeding pending or, to Buyer’s Knowledge,
Threatened against Buyer, as of the date of this Agreement, that, if decided adversely to Buyer,
will materially and adversely affect Buyer’s ability to consummate the transactions contemplated
herein. As of the date of this Agreement, Buyer is not subject to any Order that will materially
and adversely affect Buyer’s ability to consummate the transactions contemplated herein.



     4.5 Availability of Funds. Buyer has available cash or existing available borrowing
capacity under committed borrowing facilities on the date hereof, and Buyer will have available
cash at Closing, in each case that is sufficient to enable Buyer to consummate the transactions
contemplated herein. Buyer’s obligations hereunder are not contingent upon procuring any
financing.



     4.6 Forward-Looking Statements. Buyer and its representatives have received certain
estimates, budgets, forecasts, plans and financial projections (collectively,
“Forward-Looking Statements”). There are uncertainties inherent in the Forward-Looking
Statements, and Buyer is familiar with such uncertainties.



     4.7 Brokers. Buyer has no Liability or other obligation to any broker, finder or
similar intermediary in connection with the purchase or sale of the Acquired Assets hereunder that
would cause any Seller to become liable for payment of any fee or expense with respect thereto.



     4.8 Capitalization. Buyer’s capitalization consists of equity of $15,000,000 and
long-term debt of $10,000,000.



ARTICLE 5

CERTAIN COVENANTS




     5.1 No Liability for Unobtained Consents and Governmental Permits. Buyer acknowledges
and agrees that (1) certain Consents may be necessary from parties to Contracts in connection with
the transactions contemplated herein in order to not constitute at Closing a breach or violation of
or a default under, conflict with or give rise to or create any right or obligation under or create
any Encumbrance (other than a Permitted Encumbrance) under, such Contracts, which Consents have not
been obtained, (2) certain Permits may be required as a result of the transactions contemplated
herein for Buyer to conduct the Outlet Business after Closing in the manner in which the Outlet
Business was conducted before Closing and (3) except



27









 




to the extent expressly stated in Article 3, no Seller has made (and no Person on
behalf of any Seller has made) any representation or warranty or similar assurance regarding the
need for or desirability of any consent or approval by, notification to or filing with any Person,
nor regarding the need for or desirability of any Permit. Buyer agrees that, except as otherwise
expressly provided in this Section 5.1 (or as a result of a breach of any representation or
warranty in Article 3), no Seller will have any Liability or other obligation whatsoever to
Buyer or any of Buyer’s Other Indemnified Persons arising out of, relating to or resulting from the
failure to obtain any such Consent or Permit (provided that each Seller has performed its related
obligations hereunder). Buyer further agrees that no term herein will be breached as a result of
(a) failure to obtain any such Consent or Permit or (b) any claim or Proceeding commenced or
Threatened by or on behalf of any Person arising out of, relating to or resulting from the failure
to obtain any such Consent or Permit.




     5.2 Access to Information.



          (a) Certain Removals of Certain Information and Other Assets. After Closing, if any
information or other asset of any Seller (or any Affiliate of any Seller) that is not an Acquired
Asset was included in the Acquired Assets, or if Buyer (or any of its Affiliates) otherwise retains
access to or use of any such information or other asset in connection with its acquisition of the
Outlet Business hereunder, then Buyer will cooperate with Sellers in all reasonable respects, at
Sellers’ expense, to maintain the confidentiality of such information or other asset (if
applicable), not use such information or other asset and redact or otherwise remove such
information or other asset from such Acquired Asset (or to otherwise cause Buyer and its Affiliates
to no longer have access thereto or use thereof).




          (b) Post-Closing Access for Sellers. Throughout the seven-year period after Closing, subject
to Buyer’s reasonable confidentiality precautions, Buyer will, during normal business hours and
upon reasonable notice from any Seller: (1) cause any Seller and any Seller’s representatives to
have reasonable access to the books and records (including financial and Tax records, Tax Returns,
files, papers and related items) relating to the Outlet Business and to the personnel responsible
for preparing and maintaining such books and records, in each case to the extent necessary or
reasonably desirable to (A) defend or pursue any Proceeding, (B) defend or pursue indemnification
matters hereunder, (C) prepare or audit financial statements, (D) prepare or file Tax Returns or
(E) address other Tax, accounting, financial or legal matters or respond to any investigation or
other inquiry by or under the control of any Governmental Authority; and (2) permit any Seller and
any Seller’s representatives to make copies of such books and records for the foregoing purposes,
at such Seller’s expense.




          (c) Post-Closing Access for Buyer. Throughout the seven-year period after Closing, subject to
any Seller’s reasonable confidentiality precautions, each Seller will, during normal business hours
and upon reasonable notice from Buyer: (1) cause Buyer and Buyer’s representatives to have
reasonable access to any (if any) portion of the books and records (including financial and Tax
records, Tax Returns, files, papers and related items) of any Seller relating to the Outlet
Business that were not an Acquired Asset and to the personnel responsible for preparing and
maintaining such books and records, in each case to the extent necessary or reasonably desirable
for Buyer to take any action of the type contemplated in any of clauses (c)(1)(A) through (c)(1)(E)
of Section 5.2(b); and (2) permit Buyer and Buyer’s




28









 




representatives to make copies of such portion of such books and records for the foregoing
purposes, at Buyer’s expense.




          (d) Post-Closing Retention of Information by Sellers. At and after Closing, without limiting
the definition of Excluded Assets, each Seller may retain in such Seller’s (or any of its
Affiliates’) possession, subject to Buyer’s reasonable confidentiality precautions, any copies of
any books or records of such types described in Section 5.2(b)(1) that are in any Seller’s
possession or control (or the possession or control of any of its Affiliates), including for any
purpose described in Section 5.2(b)(1).




     5.3 Further Assurances. If after Closing any further action is necessary, proper or
desirable to carry out any purpose of this Agreement, then each Party will take such further action
(including, without limitation, the execution and delivery of further documents to effect the
transfer of Intellectual Property or other Acquired Assets to Buyer) as any other Party reasonably
requests to carry out such purpose. The foregoing will be at the expense of such requesting Party,
except to the extent such requesting Party is entitled to indemnification therefor or to the extent
this Agreement otherwise allocates such expense to any other Party. Sellers will provide to Buyer
applicable copies of employee benefits records to the extent permitted by Applicable Law, without
cost to Buyer.



     5.4 Confidentiality and Publicity.



          (a) Confidentiality Agreement. Subject to the other terms of this Section 5.4, the
Confidentiality Agreement, dated March 31, 2008, to which G-III and Parent are a party (the
“Confidentiality Agreement”), will remain in full force and effect pursuant to its terms,
except that, after the Closing Date, information that G-III is required to keep confidential under
the Confidentiality Agreement, for purposes of the obligations of G-III under the Confidentiality
Agreement, will be deemed not to refer to any information then Principally Relating to the Outlet
Business.




          (b) Publicity. Except as stated in this Section 5.4(b) or 5.4(c), each Party
will not, and each Party will cause each of its Affiliates not to, make any public release or
announcement regarding this Agreement or any of the transactions contemplated herein without the
prior written approval thereof of each other Party (which will not be unreasonably withheld). Each
Party will cooperate with each other Party in issuing, promptly after entering into this Agreement,
its press release (with mutually agreed upon text) that announces the Parties’ entry into this
Agreement and the transactions contemplated herein generally.




          (c) Certain Permitted Disclosures. Notwithstanding the foregoing, nothing in this
Section 5.4 will prevent any of the following at any time:





          (1) a Party or any of its Affiliates disclosing any information to the extent required
under Applicable Law (other than due to any requirement of the SEC or the rules and
regulations of any national securities exchange, which is addressed in one or more clauses
below); provided, however, that if a Party or any of such Party’s Affiliates is so required
to so disclose any information that otherwise would be prohibited in the absence of this
Section 5.4(c), then (A) such Party will provide to each other Party prompt written
notice thereof and cooperate (and cause such Affiliate, as applicable, to



29









 






cooperate) with each other Party, to the extent any other Party reasonably requests, so
that such other Party may seek a protective order or other remedy or waive compliance with
the terms of this Agreement (subject, in each case, to legal requirements to the contrary)
and (B) if such protective order or other remedy is not obtained, or if each such applicable
other Party waives compliance with the terms of this Agreement, then such Party will (and
will cause such Affiliate, as applicable, to) disclose only the portion of such information
that is so required to be disclosed, and such Party will (and will cause such Affiliate, as
applicable, to) use its commercially reasonable efforts, at the expense of such other Party,
to obtain reasonable assurance that confidential treatment will be accorded such
information;




          (2) a Party or any of its Affiliates making any release or announcement that is
required by the SEC or the rules or regulations of any national securities exchange, in
which case such Party will (or will cause such Affiliate to), if practicable under the
circumstances, allow each other Party reasonable time to comment on such release or
announcement in advance;




          (3) any Seller communicating with any of its suppliers on a need to know basis
regarding the transactions contemplated herein, including regarding any change to any
document, requirement or process relating to any product or service of any Seller;




          (4) a Party or any of its Affiliates making a statement or disclosure (A) as part of
its or any of its Affiliate’s financial statements or, notwithstanding clause (c)(1) above,
Tax Returns or filing with the SEC or any national securities exchange or (B) to the extent
reasonably necessary to enforce or comply with this Agreement; or




          (5) a Party making a statement or disclosure to (A) such Party’s (or any of its
Affiliate’s) paid legal, accounting and financial advisers to the extent reasonably
necessary for any such adviser to perform its paid legal, accounting and financial services,
respectively, for such Party (or such Affiliate) or (B) any lender or prospective lender of
such Party (or such Affiliate) to the extent reasonably required as part of such lending
relationship.



     5.5 Employee Matters.



          (a) Definitions.





          (1) “Eligible Employee” means, as of immediately before the Effective Time, any
employee of any Seller who is: (A) primarily rendering services in one or more Outlet
Stores; (B) a district or regional manager dedicated primarily to the Outlet Business; or
(C) listed as such in Exhibit 5.5(a). Notwithstanding the foregoing, the definition
of Eligible Employee excludes any employee of any Seller who is listed as not being Eligible
Employee in Exhibit 5.5(a), who are individuals that Sellers may determine to
retain.




          (2) “Transferred Employee” means each Eligible Employee who accepts Buyer’s
offer of employment as contemplated in Section 5.5(b). Notwithstanding the
foregoing, an Eligible Employee will become a “Transferred Employee,” if at all, on or as
of: (1) immediately after the Effective Time on the Cut-Off Date, if such Eligible



30









 






Employee is then actively a worker; (2) immediately after the Effective Time on the
Cut-Off Date, if such Eligible Employee is absent from work on such date due to authorized
vacation or jury duty and returns to active employment following the end of the vacation or
the completion of jury duty, as the case may be; or (3) the date such Eligible Employee
returns to active employment, in the case of an Eligible Employee who, on the Cut-Off Date,
is absent from work due to sick leave, short term disability, maternity leave, military
leave or other authorized leave of absence with a right to return to his or her job, and who
returns to active employment within the time required under the original terms and
conditions applicable to such absence.



          (b) Offers of Employment with Buyer. Prior to the Closing, to be effective immediately after
the Effective Time, Buyer has made or will have made bona fide offers of employment to all Eligible
Employees, including each Eligible Employee on medical, disability, family, military or other leave
of absence as of the Effective Time (but not any employment offer to, or hiring of, any employee of
any Seller that is not an Eligible Employee), and Buyer will hire each Eligible Employee that
accepts such offer of employment. Such offered employment will have been, in each case, on terms
(other than regarding employee benefits, which are the subject of other terms of this
Section 5.5) that are comparable, as a whole for each individual, to the terms of
employment provided to each such Eligible Employee immediately before the Effective Time by the
applicable Seller. Not later than the Closing Date, Sellers notified or will notify each Eligible
Employee to be hired by Buyer, in writing, that his/her employment with Sellers is terminated as of
the Effective Time.




          (c) Employee Retention. Subject to the other obligations of Buyer in this
Section 5.5, nothing in this Section 5.5 otherwise obligates Buyer to continue the
employment of any Transferred Employee for any specific period after the Effective Time.




          (d) Statutory Notices. At all times after the Effective Time, Buyer will comply in all
material respects with the WARN Act and all similar state Applicable Laws. Buyer and Sellers
acknowledge and agree that they are relying on the foregoing for purposes of assessing any
obligations to give notice to employees of the transactions contemplated herein or to take any
other action under Applicable Law.




          (e) COBRA and Other Obligations. The “selling group” (within the meaning of paragraph (a) of
Q&A-3 of Treasury Regulation §54.4980B-9) will continue to maintain group health plan coverage
available to its employees after the Closing such that Buyer will not become a “successor
employer,” as that term is defined in paragraph (c) of Q&A-8 of Treasury Regulation §54.4980B-9.
Except as specifically provided in this subsection (but without limiting Buyer’s express
obligations under Section 5.5(h)), Buyer does not and will not assume the sponsorship of,
the responsibility for contributions to, or any liability under or in connection with, any Seller
Plan. Without limiting the foregoing, Buyer shall have no obligation whatsoever to pay all or any
part of, and Sellers shall remain responsible for, (i) any severance benefits that a Seller is or
may be obligated to pay in connection with the termination of employment by Seller of any of its
employees, (ii) accrued but unpaid salaries, wages, bonuses, incentive compensation or other
compensation owing by any Seller or (iii) any bonuses or other amounts due to employees of any
Seller with respect to their employment by any Seller arising from or related to the transactions
contemplated herein or any other types of stay or change in control bonus payments. After Closing,
Buyer will make available group medical, dental and vision coverage to Transferred




31









 




Employees and their eligible dependents. Seller will be responsible for offering and, if
elected, providing COBRA health coverage continuation to all individuals who are “M&A qualified
beneficiaries” with respect to the transactions contemplated herein (within the meaning of Treasury
Regulation section 54.4980B-9, Q&A-4). For the avoidance of doubt, Seller shall not be responsible
for satisfying COBRA continuation coverage obligations arising after the Closing with respect to
Transferred Employees and their dependents who have become covered by Buyer’s group health plan.
Sellers shall remain solely responsible for all liabilities relating to or arising in connection
with (1) claims for welfare benefits incurred by Transferred Employees and their qualified
beneficiaries and dependents before the date they become Transferred Employees, and (2) claims by
Transferred Employees for workers’ compensation benefits arising in connection with any
occupational injury or disease occurring on or prior to the Effective Time. At the Effective Time
for any employee that becomes a Transferred Employee on the Cut-Off Date, and at the close of
Business on the date any other employee becomes a Transferred Employee, such employee and his or
her dependents shall cease participation in all Seller Plans, except with respect to benefits
accrued as of, or claims incurred and payable as of, such time or as contemplated in
Section 5.5(h).




          (f) No Transfer of Plan Assets. No portion of the assets of any trust or other fund
maintained by any Seller or any Affiliate of any Seller for the purpose of paying benefits under
any Seller Plan will be transferred to Buyer or any Plan of Buyer or any of Buyer’s Affiliates.




          (g) No Amendment of Benefits nor Third-Party Beneficiary. Without limiting
Section 9.4, (1) no Plan or other employee benefit is, or will be deemed to be, amended by
any term hereof and (2) no Person, including any employee (or dependent thereof) of any Party or
any Affiliate of any Party, is a third party beneficiary of any term of this Section 5.5.




          (h) Employee Benefits Transition. The Parties agree to the following arrangements for the
provision of certain welfare benefits to Transferred Employees and their dependents during the
period from the Effective Time until 11:59 p.m. on July 31, 2008 (the “Transition Period”):





          (1) Insured Plans. The Seller Plans that are fully insured and that will continue to
provide coverage for Transferred Employees and their dependents during the Transition Period
are medical insurance for Sellers Headquarters and Sellers Distribution Facility employees,
and life insurance. To the extent that Buyer deducts employee contributions for the
employee share of such coverages with respect to coverage provided during the Transition
Period, Buyer will pay the amounts so deducted to Sellers within three Business Days
following each payroll date on which such amounts are deducted. Sellers will be responsible
for the employer share of the premiums for such coverages during the portion of the month of
July 2008 from July 1 until the Effective Time. Buyer will be responsible for the employer
share of the premiums for such coverages during the Transition Period. Within three
Business Days following the payroll date on which the employee share of said premiums are
deducted (or would have been so deducted, it being Buyer’s option as to whether so deducted)
with respect to coverage provided for a portion of the Transition Period, Buyer will pay to
Sellers an amount equal to the employer share of the premium for the coverage provided
during that portion of the Transition Period. Sellers will transmit to the respective
insurance carriers



32









 






all premium amounts received from Buyer pursuant to this clause (1), which payments
will occur not later than the payment date for each such premium under the historical
practices of Sellers.




          (2) Self-Insured Plans. The Seller Plans that are self-insured and that will continue
to provide coverage for Transferred Employees and their dependents during the Transition
Period are medical coverage for field employees, dental coverage and vision coverage. To
the extent that Buyer deducts employee contributions for the employee share of such
coverages with respect to coverage provided during the Transition Period, Buyer will pay the
amounts so deducted to Sellers within three Business Days following each payroll date on
which such amounts are deducted. In addition, within three Business Days following July 31,
2008, Buyer will pay to Sellers an amount equal to the pro rata share of the July 2008
premium paid to Sellers’ stop-loss carrier attributable to such coverage provided during the
Transition Period. Sellers will be responsible for the costs covered by said Seller Plans
with respect to claims of Transferred Employees and their dependents that are incurred due
to the provision of services during the portion of the month of July 2008 from July 1 until
the Effective Time. Buyer will be responsible for the costs covered by said Seller Plans
with respect to claims of Transferred Employees and their dependents that are incurred due
to the provision of services during the Transition Period. As soon as administratively
feasible following the end of each month during the period from July through December of
2008, Sellers will provide to Buyer a statement showing (A) the aggregate amount of claims
paid by Sellers (disregarding any such claims to the extent reimbursed to Sellers by
Sellers’ stop-loss carrier) under such self-insured plans with respect to coverage provided
to Transferred Employees and their dependents during the Transition Period, (B) the
aggregate amount of employee contributions received by Sellers (through payroll deduction or
by payment from Buyer under the foregoing provisions of this clause (2)) with respect to
such self-insured coverage provided to Transferred Employees and their dependents during the
Transition Period and (C) for months following July 2008, the aggregate amount of
reimbursements received from Buyer under the next sentence of this clause (2) with respect
to months preceding the month to which the statement relates. Within three Business Days
following its receipt of the statement for a month, Buyer will pay to Sellers the amount, if
any, by which the amount in clause (A) of the previous sentence exceeds the sum of the
amounts in clauses (B) and (C) of such sentence.




          (3) Proration. To the extent that it is necessary to prorate premiums or contributions
under the preceding provisions of this Section 5.5(h) with respect to a particular
period (such as a month or a payroll period), proration will be based on the number of
calendar days in each portion of the period divided by the total number of calendar days in
the applicable period.



          (i) Seller Plans. Within 30 days after the Closing, Sellers shall deliver to Buyer true,
correct and complete copies of (a) the governing documents of each Seller Plan, (b) where
applicable, the most recent summary plan description of each Seller Plan, and (c) any employee
handbook or similar materials furnished to Seller employees who are Eligible Employees.




33









 








     5.6 Mail, Receivables and Other Items to be Given to Proper Party. After Closing,
(a) each Party will promptly deliver to the proper Party the original of any mail or other
communication received by such Party that is or should properly be the property of such other Party
and (b) at least monthly, each Party will deliver to the proper Party any monies, checks or other
instruments of payment received by such Party to which such other Party is entitled.



     5.7 Transfer Taxes. Buyer will, on the one hand, and Sellers, on the other hand, will
each pay when due 50% of all Transfer Taxes. Each Seller and Buyer will cooperate in all
reasonable respects in timely making all filings, returns, reports and forms as may be required to
comply with the provisions of Applicable Law relating to any Transfer Tax and in executing and
delivering certificates that accurately set forth relevant facts to entitle any Seller or Buyer to
exemptions from the payment of Transfer Taxes (if applicable). “Transfer Tax” means any
sales, use, value-added, business, goods and services, transfer (including any stamp duty or other
similar tax chargeable in respect of any instrument transferring property), documentary,
conveyancing or similar tax or expense or any recording fee, in each case that is imposed as a
result of any transaction contemplated herein, together with any penalty, interest and addition to
any such item with respect to such item.



     5.8 Covenant Not to Compete and Related Covenants.



          (a) To further ensure that Buyer receives the expected benefits of acquiring the Acquired
Assets, each Seller agrees that (subject to the other terms of this Section 5.8),
throughout the period that begins at the Effective Time and ends on the second anniversary of the
Closing Date (but excluding any period between the Effective Time and the occurrence of Closing, in
the case where the Effective Time precedes Closing), such Seller will not, and such Seller will
cause each of its Subsidiaries not to, directly or indirectly,





          (1) own or hold any equity interest in or manage or otherwise operate any Person that
owns or operates any Restricted Business in the Restricted Area, where




          (A) “Restricted Business” means any outlet store, or group of outlet
stores owned by the same Person or by Persons that are Affiliates, in each case with
respect to which greater than 50% of the revenue from such outlet store, or group of
outlet stores, is directly derived from the retail sale of leather outerwear, and




          (B) “Restricted Area” means the geographical area of the United States;
or




          (2) employ in the Restricted Area any individual who, immediately before the Effective
Time, was an Eligible Employee who was (at such time) an officer or management-level
employee of any Seller or any Affiliate of any Seller.



          (b) Notwithstanding Section 5.8(a), nothing in this Agreement prohibits or otherwise
restricts any Seller or any of its Subsidiaries from performing, permitting or otherwise being
involved in, any of the following:





          (1) any Permitted Investment, where “Permitted Investment” means: (A) owning
or holding less than 2% of the outstanding shares of any class of stock that is



34









 






regularly traded on a recognized domestic or foreign securities exchange or
over-the-counter market; or (B) an acquisition after Closing of any of a Person’s assets or
equity interests or any of such Person’s or its Affiliates’ businesses (such Person or
businesses so acquired being the “Permitted Acquired Business”) if the portion of
the Permitted Acquired Business that is engaged in the Restricted Business generated less
than 20% of the total revenue of such Permitted Acquired Business during the most recently
completed fiscal year of such Permitted Acquired Business preceding the date of such
acquisition; or




          (2) (A) general solicitation for employment (including in any newspaper or magazine,
over the internet or by any search or employment agency) if not specifically directed
towards any employee of Buyer of any of its Affiliates, (B) hiring an individual (x) where
the initial contact with such individual regarding such hiring primarily arose from any such
general solicitation or (y) whose employment with Buyer or any Affiliate or Buyer ceased
under circumstances that did not involve any solicitation (other than any solicitation
contemplated under clause (b)(2)(A) above) by any Seller or any Affiliate of any Seller or
(C) hiring or retaining any individual that Buyer did not offer to hire as of the Cut-Off
Date or the following day or involuntarily terminated on or after the Cut-Off Date.



          (c) Each Seller specifically acknowledges and agrees that (1) this Section 5.8 is
reasonable and necessary to ensure that Buyer receives the expected benefits of acquiring the
Acquired Assets, (2) Buyer has refused to enter into this Agreement in the absence of this
Section 5.8 and (3) breach of this Section 5.8 will harm Buyer to such an extent
that monetary damages alone may be an inadequate remedy. Therefore, in the event of a breach by
any Seller of this Section 5.8, Buyer (in addition to all other remedies Buyer may have)
will be entitled to seek a temporary restraining order, injunction and other equitable relief (and
seek that it be without posting any bond or other security) restraining such Seller from committing
or continuing such breach.




     5.9 Intercompany Accounts. Each Seller will cause all intercompany accounts in effect
immediately before the Effective Time between or among any of the Sellers with respect to the
Outlet Business that relate to any Acquired Asset or Assumed Liability, to be paid in full or
otherwise fully satisfied, effective at or before the Effective Time.



     5.10 Bulk Sales Laws. Without limiting any right of Buyer under Article 8,
Buyer (a) acknowledges that the Parties or any of them may not comply with the provisions of any
bulk transfer law or Tax law relating to bulk sales or bulk transfers of any jurisdiction in
connection with any Acquired Asset or the transactions contemplated by this Agreement and
(b) hereby waives any requirement of compliance with such laws; provided, however, that no such
waiver shall relieve Parent and Sellers or liability for any pre-Closing Taxes.



     5.11 License Back and Name Changes.



          (a) License Back of Names. Upon and subject to the terms of this Section 5.11,
effective as of the Effective Time, Buyer hereby grants to each Seller the non-transferable (except
to any Affiliate of such Seller, which is permitted), royalty-free, non-exclusive license and right
to use, during the License Period, each Mark in any location.




35









 








          (b) Additional Terms Regarding License Back. Each Seller agrees that, during the License
Period, (1) the nature and quality of all products and services sold by such Seller (or Affiliate
of such Seller) under any Mark will conform in all material respects to such Seller’s (or
Affiliate’s) past practices, standards and specifications followed prior to Closing, (2) the use of
any Mark by any Seller (or any such Affiliate) will conform in all material respects to such
Seller’s (or Affiliate’s) past practices, standards and specifications followed prior to Closing,
(3) it will not do anything to materially and negatively impact the value of any Mark or the
reputation and goodwill associated therewith and (4) such Seller will (and will cause each such
Affiliate to) diligently pursue a process that gradually decreases the use of any Mark. Should
Buyer believe that any Seller is not complying with Section 5.11(b), Buyer shall notify
such Seller in writing of its concerns. Such Seller will then have 10 Business Days to cure its
defect in all material respects. If such Seller acknowledges and agrees that it is in default, but
refuses to cure its defect, the License Period shall immediately terminate and Sellers shall
immediately cease use of the Marks. If, however, there is a good faith dispute as to whether such
Seller is in default or whether such a default has been cured, nothing in this Section limits
Buyer’s right to seek indemnification for such non-compliance or to seek (including before the end
of such period) injunctive relief to stop such non-compliance.




          (c) Definitions. The following definitions apply:





          (1) “License Period” means the period that begins at the Effective Time and
ends on the 180th day after the Closing Date.




          (2) “Mark” means each trademark, service mark, trade name, trade dress, design,
logo or other similar Intellectual Property used by any Seller in the conduct of the
Outlet Business that is an Acquired Asset.



          (d) Name Changes. Within 10 Business Days after Closing (or, for any Seller or Affiliate of
any Seller that is not incorporated in any state of the United States or with respect to Parent’s
ticker symbol on the NASDAQ stock market, as soon as practicable after such 10th Business Day),
each applicable Seller will, and cause each of its applicable Affiliates to, take the corporate
action necessary to change such Seller’s, or such Affiliate’s, name to a name that does not contain
the word “Wilsons” or any term confusingly similar thereto by making all required filing with the
applicable Governmental Authority of an amendment to such Seller’s, or Affiliate’s, charter,
certificate of incorporation or other applicable document reflecting such name change. Promptly
thereafter, each applicable Seller will, and will cause each of its applicable Affiliates to, file
with the applicable Governmental Authorities in each jurisdiction in which it is qualified to do
business as a foreign corporation appropriate forms reflecting such name change.




     5.12 Transition Services. At Closing, Parent and Buyer will enter into agreements
substantially in the form of Exhibit 5.12-1 and 5.12-2, each dated the Closing
Date, and each providing for certain transition services after the Effective Time under and subject
to the terms thereof (each a “Transition Services Agreement”).



36









 





     5.13 Insurance and Insurance Proceeds.



          (a) Post-Closing and Assumed Liabilities. To the extent existing and permitted by their
terms, Sellers shall maintain in full force and effect their general liability and product
liability insurance policies relating to the pre-Closing operation of the Outlet Business for one
year after the Closing. Without limiting the foregoing, if after Closing Buyer reasonably
determines that any Liability or other obligation that is an Assumed Liability is then covered by
any insurance policy relating to the Outlet Business of any Seller (or any Affiliate of any Seller)
and such Liability or other obligation is not covered by any insurance policy of Buyer (or any
Affiliate of Buyer), then Buyer may give a notice to Sellers that states such determination and
describes such Liability or other obligation in reasonable detail. If Buyer gives such a notice,
then the following will apply:





          (1) The applicable Parties will cooperate in all reasonable respects, at Buyer’s
expense, to determine if the following conditions are satisfied: (A) such Liability or
other obligation is covered by any such insurance policy of any Seller (or Affiliate of any
Seller), (B) any Seller (or Affiliate of any Seller) has the right to obtain any insurance
proceeds with respect thereto and (C) such Liability or other obligation is not covered by
any insurance policy of Buyer (or any Affiliate of Buyer).




          (2) If all of the conditions in the preceding clause (b)(1) are satisfied or there is a
reasonable likelihood that all of such conditions are satisfied, then, at Buyer’s expense,
the applicable Sellers will use commercially reasonable efforts to obtain such proceeds from
the provider of such insurance of such Sellers (or their applicable Affiliates).




          (3) To the extent any Seller (or any Affiliate of any Seller) actually recovers any
such insurance proceeds (which, for the avoidance of doubt, would be the amount in excess of
any deductible, retention or self-insurance amount), then such Seller will pay (or cause
such Affiliate to pay) to Buyer an amount equal to the difference of (1) such amount of such
recovered proceeds (but not to exceed the amount of such associated Liability or other
obligation that is an Assumed Liability) minus (2) the costs and expenses of any Seller (or
Affiliate of any Seller) incurred in connection with the foregoing (to the extent not
already reimbursed by Buyer), including with respect to any Tax.



     5.14 Substitution of Seller Collateral. For and at Closing, and to the extent not
accomplished at Closing then as soon thereafter as is reasonably possible after any Seller’s
request, Buyer will use its commercially reasonable efforts to secure the unconditional release
and, as appropriate, return to the applicable Seller, of any Seller Collateral (with
“Seller Collateral” meaning any letter of credit and any collateral given to the issuer
thereof, escrowed funds, guarantee, bond or other collateral given by or on behalf of any Seller,
in each case to the extent pertaining to any of the Acquired Assets, but not meaning any such
collateral that is an Acquired Asset). Exhibit 5.14 identifies such letters of credit as
of the date hereof. Until any such release is secured, all costs of any Seller for the
continuation of any Seller Collateral relating thereto after the Effective Time will be paid by
Buyer within three Business Days after such Seller informs Buyer thereof. Nothing in this
Section 5.14 will limit or otherwise affect the assumption by Buyer of any Liability or
other obligation that is an Assumed Liability.




37












 





     5.15 Customer Data. No information in any customer list or related record will be an
Acquired Asset, to the extent the Person to which such information pertains has requested or
required that such information not be shared with or provided to any Person in a manner that would
preclude giving such information to Buyer hereunder, including by making (whether by act or
omission) such request or requirement via any Contract, applicable privacy policy or other means of
communication with any Seller or any Affiliate of any Seller. At all times after Closing, Buyer
will (a) cause all customer lists and related records that are an Acquired Asset to only be used in
compliance with Applicable Law and (b) act in a manner consistent with, and cause to be honored,
all applicable Contracts, privacy policies and other means of communication in connection with
which any Seller (or any Affiliate of any Seller) collected such information, including all
customer opt out requests, flags and similar items existing in connection with any such customer
list or record that are identifiable to Buyer in connection therewith.



     5.16 Transaction Confidentiality Agreements. After the Closing Date, to the extent
reasonably requested by Buyer, Parent will use its commercially reasonable efforts to enforce the
terms of each Transaction Confidentiality Agreement for Buyer’s benefit; provided that, within
three Business Days after Parent informs Buyer thereof, Buyer will reimburse Parent for all costs
(including reasonable attorneys’ fees and expenses) of Parent or any of its Affiliates arising out
of, relating to or resulting from such requested enforcement.
“Transaction Confidentiality Agreement” means a confidentiality agreement that Parent
entered into after January 1, 2008 with any prospective purchaser (other than Buyer) of the Outlet
Business.



     5.17 Post-Closing Releases of Sellers. After Closing, with respect to any Real
Property Lease under which any Seller has any obligation after Closing, Buyer will cooperate with
the applicable Seller in all reasonable respects, at such Sellers’ expense, to obtain the full
release, in writing and in a form reasonably satisfactory to the applicable Seller, of all of the
obligations (of every kind and nature whatsoever, whether known or unknown, asserted or unasserted,
absolute or contingent and whenever arising) of such Seller (and to the extent applicable, of each
Affiliate of such Seller) first arising after the Effective Time under or in connection with such
Real Property Lease.



     5.18 Certain Obligations Regarding Customers.



          (a) Gift Card Items. Buyer will have no obligation to honor any Gift Card Item; however, if
there is honored, in a transaction with a customer at an Outlet Store after the Effective Time but
on or before May 31, 2009, any gift certificate, gift card, voucher or similar item giving such
customer, as the holder of such item, the right to apply the monetary value of such item to any
purchased product from any Seller (or any Affiliate of any Seller), in each case that was sold or
issued by any Seller (or any Affiliate of any Seller) prior to the Effective Time (each such item
being a “Gift Card Item”), then (i) Buyer shall use commercially reasonable efforts to
prevent duplicate charges and (ii) Sellers will reimburse Buyer for the dollar amount properly
applied (as determined under this Section 5.18(a)) by Buyer to such customer’s purchase
from Buyer of such purchased product pursuant to such Gift Card Item (the
“Reimbursable Amount”) as and to the extent provided in Section 5.18(a)(2).





          (1) Within 30 days after May 31, 2009, Buyer will deliver to Parent a



38









 







statement (the “Gift Card Statement”) setting forth (A) the aggregate
Reimbursable Amount with respect to the period commencing at the Effective Time and ending
on May 31, 2009 (the “Total Reimbursable Amount”) and (B) information Sellers
reasonably require to confirm Buyer’s calculations of the amounts owed under this Section
(which may include the serial numbers or other identifying information establishing that a
Gift Card Item was sold or issued by a Seller or an Affiliate of a Seller prior to the
Effective Time, the date such Gift Card Item was used by Buyer’s customer, the amount
remaining on such Gift Card Item before and after such transaction, and the Reimbursable
Amount with respect to each transaction).




     (2) (A) If the Total Reimbursable Amount equals or exceeds the sum of the Gift
Card Holdback Amount plus any amounts paid by any Seller or any Affiliate of any
Seller to Buyer with respect to any Reimbursable Amounts, Sellers shall not be
entitled to the return of any portion of the Gift Card Holdback Amount. If the
Total Reimbursable Amount is less than the sum of the Gift Card Holdback Amount plus
any amounts paid by any Seller or any Affiliate of any Seller to Buyer with respect
to any Reimbursable Amounts, Buyer shall, along with the Gift Card Statement,
deliver to Parent, by check or by wire transfer of immediately available funds to an
account designated by Parent in writing, the amount by which the Total Reimbursable
Amount is less than the sum of the Gift Card Holdback Amount plus any amounts paid
by any Seller or any Affiliate of any Seller to Buyer with respect to any
Reimbursable Amounts.




          (B) If, in connection with any of the actions contemplated in this
Section 5.18(a)(2), the Parties determine that a payment is owed to Sellers,
but the amount of such payment is in dispute, then the portion of such amount not in
dispute will be paid when required under clause 2(A) above (without limiting any
Party’s rights or obligations). The Parties will resolve any dispute in connection
with this Section 5.18 as contemplated in Section 5.18(a)(3).




          (3) For a period of one year after Parent’s receipt of the Gift Card Statement, Sellers
and their designated representatives will have the right, upon reasonable notice and during
business hours, to review the books and records of Buyer and its Affiliates with respect to
all information reasonably related to Gift Card Items under such Gift Card Statement and any
other matter reasonably relating to this Section 5.18(a) and to reasonably consult
with employees and agents of Buyer and its Affiliates having knowledge or responsibility
with respect to such matters, and Buyer will cooperate with Sellers in all reasonable
respects in connection therewith. In the event that Buyer and Sellers have a dispute with
respect to any Reimbursable Amount claimed by Buyer, they will attempt to resolve the
dispute in good faith. If it is finally determined that a greater or lesser amount was owed
by Sellers than the amount to be paid or already paid by Sellers (including if withheld by
Buyer), then Sellers will promptly pay to Buyer, or Buyer will promptly pay to Sellers (as
applicable and in each case without interest), the amount of such underpayment or
overpayment (as applicable). If Buyer and Sellers are unable to resolve any such dispute
within 60 days, they shall submit such dispute to an Arbitrator using substantially the same
procedures described in Sections 2.4(c) and 

2.4(d).



39









 






          (4) Notwithstanding the foregoing provisions of this Section 5.18(a), in no
event will any Seller have any Liability or other obligation under this
Section 5.18(a) with respect to any Gift Card Item honored by Buyer (A) to the
extent in excess of the dollar amount remaining on such Gift Card Item as of the Effective
Time or otherwise validly remaining on such Gift Card Item at any other time or (B) in a
manner otherwise inconsistent with the terms and conditions of such Gift Card Item
established by the applicable Seller or Affiliate of a Seller prior to the Effective Time.
Notwithstanding any other term of this Agreement, in no event will any Party (or any of its
Affiliates) have any Liability or other obligation to any other Party (or any of its
Affiliates) relating to honoring or satisfying any coupon or similar item (including that
Buyer will have no obligation to honor or satisfy any coupon or similar item issued by any
Seller, and Sellers will have no obligation to reimburse or otherwise pay Buyer if Buyer
honors or satisfies any such coupon or similar item).



          (b) Returns, Refunds and Exchanges. Buyer will pay, perform and satisfy (as applicable) all
obligations (if any) of each Seller, pursuant to such Seller’s return, refund and exchange policies
or Applicable Law (as applicable), regarding the return or exchange of, or the granting of a refund
with respect to, any product that is of a type sold at an Outlet Store as of the Effective Time.
Each Seller will be deemed to assign and transfer to Buyer, without any further action by any
Seller, any rights of such Seller (1) in and to any such product with respect to which Buyer or any
of its Affiliates grants a refund or permits a return or exchange and (2) against the manufacturer
or supplier of such product to the extent of and relating to such refund, return or exchange. In
no event will any Seller or any Affiliate of any Seller have any Liability or other obligation to
Buyer or any of its Affiliates regarding any such refund, return or exchange.




     5.19 Closing Date Financial Statements. Within 60 days after the Closing, Sellers
will cooperate with Buyer, at Buyer’s expense, for Buyer to prepare, in accordance with general
accepted accounting principles and consistent with past practices, unaudited financial statements,
including balance sheets and income statements, of the Outlet Business as of the Effective Time.



     5.20 SEC and National Securities Exchange Requirements. Each Seller and Buyer will
cooperate with each other in all reasonable respects to fulfill any applicable requirement of the
SEC or any national securities exchange in connection with the transactions contemplated herein,
including to perform in sufficient time to meet any applicable filing deadline that any of them may
have. Sellers shall, if requested by Buyer, cooperate with Buyer in the preparation, at Buyer’s
cost and expense, of audited financial statements concerning the Outlet Business with respect to
such periods as Buyer may be required to file or make available pursuant to any applicable
requirement of the SEC or any national securities exchange, and shall furnish Buyer and its
representatives reasonable access to their books, records and work papers in connection with the
foregoing.



     5.21 Tax Proceedings. Each Seller and Buyer shall provide each other with such
assistance as may reasonably be requested by the other in connection with the preparation of any
Tax Return, any Tax audit or other examination by any Governmental Authority or any judicial or
administrative Proceeding relating to Taxes, and each shall provide the other with any records or
information that are relevant to such Tax Return, Tax audit, examination or Proceeding. Such
assistance shall include making employees reasonably available on a mutually convenient basis



40









 







to provide additional information and explanation of material provided hereunder and shall
include providing copies of any relevant Tax Returns and supporting work schedules. The Party
requesting assistance hereunder shall reimburse the other for reasonable expenses incurred in
providing such assistance.



     5.22 Cooperation Regarding Certain Intellectual Property. After Closing, Buyer will
cooperate with Sellers, at Sellers’ reasonable request and expense, in Sellers’ efforts to obtain
from JDA Software, Inc. or its applicable Affiliates (collectively, “JDA”) a separate,
non-exclusive license directly from JDA for Sellers and their Affiliates with respect to the
software (and any related Intellectual Property) that is among the Acquired Assets (in each case
only to the extent such software and Intellectual Property relates to JDA).



     5.23 License Back of Certain Software. Upon and subject to the terms of this
Section 5.23, effective as of the Effective Time, Buyer hereby grants back to each Seller a
non-exclusive, perpetual, irrevocable, paid-up worldwide right and license to use the Licensed
Software for Sellers’, and any Seller’s Affiliate’s, internal use only with the right and license
to create derivative works based upon the Licensed Software for Sellers’, and any Seller’s
Affiliate’s, internal use only the Licensed Software and such derivative works, including all
intellectual property rights related thereto, including both source code and object code versions
of any computer software included among the Licensed Software or to allow a third party to do any
of the foregoing for any Seller or any such Affiliate. Without limiting the foregoing, each Seller
or any such Affiliate has the right to reproduce, improve, revise, change, adapt, modify, make,
merge into other software, enhance, deliver, install, composite with other products and support,
distribute and otherwise use the Licensed Software solely for Sellers’, and any Seller’s
Affiliate’s, internal use only. This Section 5.23 does not grant any Party or any of its
Affiliates, sublicensees or customers any right to any improvement, revision, change, derivative
work, adaptation or other modification (collectively, “Licensed Software Improvements”)
made by or on behalf of any other Party (including any of its Affiliates, successors, assigns,
agents or other licensees) to the Licensed Software and all right, title and interest in and to
Licensed Software Improvements will be owned by the Party responsible for creating such Licensed
Software Improvement. This Section 5.23 does not impose any obligation on any Party to
maintain or support the Licensed Software. “Licensed Software” means all software
developed by or specifically for any Seller or any of its Affiliates in which any Seller or any of
its Affiliates owns, subject to any Permitted Encumbrance, all right, title and interest, that is
an Acquired Asset (collectively, along with all source code, object code, documentation, programmer
notes and the like related thereto).



     5.24 Filing of Releases of Security Interests. Sellers shall, within 10 Business Days
after the Closing, cause to be filed Form UCC-3s with respect to the termination of the security
interest of General Electric Capital Corporation in the Acquired Assets, in each jurisdiction in
which a UCC-1 Financing Statement was filed with respect thereto, and shall furnish written
evidence thereof to Buyer. In addition, Sellers shall, within 10 Business Days after the Closing,
cause to be filed all necessary releases with any Governmental Authority with respect to the
termination of the security interests relating to any Intellectual Property.



     5.25 Certain Undelivered Inventory. This Section 5.25 refers only to any
merchandise inventory that, at the Effective Time, is Undelivered Inventory. If, after the
Closing, any Undelivered Inventory is delivered to Sellers Distribution Facility or a third party



41









 







fulfillment center engaged by Sellers prior to the Effective Time (which Undelivered Inventory
delivered to such fulfillment center was designated for sale in Sellers’ e-commerce business), then
(1) Buyer will notify Parent thereof, (2) Buyer will pay to the applicable Seller (as designated by
Parent), within two Business Days after such notification, an amount equal to (without duplication)
all of any Sellers’ purchase price for, and additional freight and other costs and expenses with
respect to the purchase and delivery of, such Undelivered Inventory, in cash, by wire transfer of
immediately available funds to an account designated by Parent, and (3) subject to the foregoing,
effective at the time such wire transfer is received by such Seller, such Seller will, and hereby
does, sell, convey, transfer and assign to Buyer, and Buyer will, and hereby does, purchase from
such Seller, all of such Seller’s right, title and interest in and to such Undelivered Inventory,
free and clear of Encumbrances, other than Permitted Encumbrances or Encumbrances arising from any
act or omission by Buyer.



     5.26 Vendor Matters. (a) Within 60 days after the Closing Date, Buyer shall furnish
to Sellers a statement (the “Vendor Loss Statement”) setting forth (A) the aggregate amount
of any Losses incurred by Buyer arising from (but without solicitation or encouragement or initial
contact relating thereto from or on behalf of Buyer or any of Buyer’s Affiliates) Sellers’ payment
defaults or other disputes of Sellers with vendors in the 30 day period after the Closing (the
“Vendor Losses”) and (B) information Sellers reasonably require to confirm Buyer’s
calculation of the Vendor Losses.



          (b) If the Vendor Losses are less than the Vendor Loss Holdback Amount, Buyer shall, along
with the Vendor Loss Statement, deliver to Parent, by check or by wire transfer of immediately
available funds to an account designated by Parent in writing, the amount by which the Vendor
Losses are less than the Vendor Loss Holdback Amount. If the Vendor Losses are greater than or
equal to the Vendor Loss Holdback Amount, Sellers shall not be entitled to the return of any
portion of the Vendor Loss Holdback Amount, and Buyer shall be entitled to recover, in accordance
with Article 8, Vendor Losses in excess of the Vendor Loss Holdback Amount.




          (c) Notwithstanding the other terms of this Section 5.26 (and in addition to the terms
of Section 5.26(d)), before Buyer incurs any Loss contemplated under
Section 5.26(a), (1) Buyer will give notice (with reasonable detail) to Sellers, as early
as practicable under the circumstances, that such Loss is Threatened or otherwise reasonably
expected, (2) the Parties will cooperate in all reasonable respects to determine the amount owed to
such vendor (if any) and to mitigate such Loss (if any). Thereafter, either (A) Buyer will not
incur such Loss, except to the extent (x) mutually agreed upon by the Parties (such agreement not
to be unreasonably withheld), (y) Buyer is required to pay such Loss pursuant to any Order or
(z) determined by an Arbitrator under Section 5.26(d) or (B) Buyer may incur such Loss
voluntarily; provided that Sellers’ obligation to Buyer hereunder will not be established unless
(and only to the extent) established under the preceding clauses (A)(x), (A)(y) or (A)(z).




          (d) For a period of 90 days after Sellers’ receipt of the Vendor Loss Statement, Sellers and
their designated representatives will have the right, upon reasonable notice and during business
hours, to review the books and records of Buyer with respect to all information reasonably related
to the Vendor Losses and any other matter reasonably relating to this Section 5.26 and to
reasonably consult with employees and agents of Buyer having knowledge or responsibility with
respect to such matters, and Buyer will cooperate with Sellers




42









 




in all reasonable respects in connection therewith. In the event that Buyer and Sellers have
a dispute with respect to the Vendor Losses claimed by Buyer, they will attempt to resolve the
dispute in good faith. If it is finally determined that a greater or lesser amount was owed to
Buyer than the amount to be paid or already paid by Sellers, then Sellers will promptly pay to
Buyer, or Buyer will promptly pay to Sellers (as applicable), the amount of such underpayment or
overpayment (as applicable). If Buyer and Sellers are unable to resolve any such dispute within 60
days, they shall submit such dispute to an Arbitrator using substantially the same procedures
described in Sections 2.4(c) and 2.4(d).




     5.27 Credit Card and Bank Account Matters.



          (a) Buyer shall open credit card processing accounts and bank accounts for the use in the
Outlet Business as soon as practicable after the Effective Time, but in no event later than 30 days
after Closing. Sellers will receive cash and credit card receivables in their existing accounts
with respect to sales occurring in the Outlet Business after the Effective Time (to the extent
Buyer causes such amounts to be so deposited, which Sellers will facilitate) until a date, to be
specified by Buyer in writing, but in no event later than 30 days after Closing, as of which date
Buyer shall transition to the use its own accounts (such period, the “Collection Period”).
Within 30 days after such transition date, Sellers shall furnish to Buyer a statement (the
“Reconciliation”) setting forth (A) the aggregate amount of cash and credit card
receivables of the Outlet Business in the Collection Period so received by Sellers (the
“Collected Amount”) and (B) information Buyer reasonably requires to confirm Sellers’
calculation of the Collected Amount.




          (b) Each Business Day from the day after the Closing Date through the Business Day after the
end of the Collection Period (and thereafter, if necessary, to pay any Collected Amount owed to
Buyer as contemplated herein), Sellers will give written direction to their lender (which sweeps
such accounts) to remit to Buyer all Collected Amounts so received through the day prior to each
such direction (without duplication), such that the Collected Amounts are paid to Buyer.




          (c) For a period of one year after Buyer’s receipt of the Reconciliation, Buyer and its
designated representatives will have the right, upon reasonable notice and during business hours,
to review the books and records of Sellers with respect to all information reasonably related to
the Collected Amount and any other matter reasonably relating to this Section 5.27 and to
reasonably consult with employees and agents of Sellers having knowledge or responsibility with
respect to such matters, and Sellers will cooperate with Buyer in all reasonable respects in
connection therewith. In the event that Buyer and Sellers have a dispute with respect to the
Collected Amount claimed by Sellers, they will attempt to resolve the dispute in good faith. If it
is finally determined that a greater or lesser amount was owed by Sellers than the amount to be
paid or already paid by Sellers, then Sellers will promptly pay to Buyer, or Buyer will promptly
pay to Sellers (as applicable and in each case without interest), the amount of such underpayment
or overpayment (as applicable). If Buyer and Sellers are unable to resolve any dispute within 60
days, they shall submit such dispute to an Arbitrator using substantially the same procedures
described in Sections 2.4(c) and 2.4(d).




     5.28 Liens. Within 30 days after the Closing, Sellers shall furnish to Buyer written
documentation evidencing the satisfaction and release of all tax or judgment liens identified in



43









 







the Disclosure Schedule.



     5.29 Racking in Sellers Distribution Facility. During the period from the Effective
Time until May 31, 2009, Buyer will have the right to use the racking in the Sellers Distribution
Facility (which is an Excluded Asset) as part of Buyer’s normal operations at the Sellers
Distribution Facility. Buyer will maintain such racking during such period and cause such racking
to be in the same general condition at the end of such period as exists on the Effective Date
(including with respect to normal wear and tear). Notwithstanding the foregoing, if Buyer enters
into a new lease with the landlord of the Sellers Distribution Facility to extend Buyer’s occupancy
of the Sellers Distribution Facility beyond May 31, 2009, Sellers will transfer to Buyer all right,
title and interest in and to such racking (on an “AS IS, WHERE IS” basis), without additional
consideration, free and clear of any liens or encumbrances of any lender to Sellers, including,
without limitation, General Electric Capital Corporation, as lender and as agent for other
lenders.



     5.30 Landlord Retention Amount. This Section 5.30 will govern the retention
and payment of the Landlord Retention Amount. From and after the Effective Time, Sellers will use
commercially reasonable efforts to negotiate and enter into written settlement agreements with the
landlords listed on Exhibit 2.3 (the “Subject Landlords”) with respect to the
closing of certain of Sellers’ mall stores. Promptly after entering into any such settlement
agreement with any Subject Landlord (but while Buyer still holds any portion of the
Landlord Retention Amount), Sellers will (a) provide written notice to Buyer of the execution of
such settlement agreement, the aggregate amount payable by any Seller or Affiliate of any Seller
pursuant to such settlement agreement, net of any amount otherwise paid by or on behalf of any
Seller or such an Affiliate (each, a “Settlement Payment Amount”), the name of the
recipient to whom such payment will be made and wire transfer instructions for payment to such
recipient (if available to Sellers) or the address where a check is to be sent to such recipient
for the amount of such Settlement Payment Amount and (b) direct Buyer to pay such Settlement
Payment Amount to such recipient on behalf of the applicable Seller or such an Affiliate (provided
that such payment obligation of Buyer will not exceed the portion of the Landlord Retention Amount
then held by Buyer). Within one Business Day after Sellers give any such notice and direction to
Buyer, Buyer will pay to the recipient named in such notice and direction (in the manner stated
above and in such notice and direction) the applicable Settlement Payment Amount on behalf of the
applicable Seller or such an Affiliate. Notwithstanding any other term of this Agreement, in no
event will any portion of the Landlord Retention Amount (or any interest thereon) be available to
Buyer or any of its Affiliates to satisfy any Liability or other obligation of any Seller or any
Affiliate of any Seller under this Agreement or any Ancillary Document (including pursuant to
Section 8.3(h)), nor will Buyer retain any of the Landlord Retention Amount except to the
extent permitted in this Section 5.30.



     5.31 Certain Lease Matters. After Closing, Buyer will give to Parent written notice
if Buyer is actually evicted from an Outlet Store by the landlord with respect thereto because of
the Parties’ failure to obtain such landlord’s consent to the assignment of the Real Property Lease
covering such Outlet Store to Buyer pursuant to this Agreement, such notice to be given within five
Business Days after such actual eviction occurs (each, if any, an “Outlet Store Eviction”).
If, but only if, more than six Outlet Store Evictions occur, Sellers will pay to Buyer an
amount equal to $17,241.00 (which amount equals 1/116 multiplied by $2,000,000) with respect to
each such Outlet Store Eviction (including the first six Outlet Store Evictions), such



44









 







payment to be made by wire transfer of immediately available funds to the account designated
in writing by Buyer within ten Business Days after the seventh Outlet Store Eviction (in the case
of payments owed by Sellers with respect to the first seven Outlet Store Evictions) or, as and if
applicable, within ten Business Days after each Outlet Store Eviction to occur after the seventh
Outlet Store Eviction. For the avoidance of doubt, in no event will Sellers (or any of them) have
any Liability or other obligation under this Section 5.31 if six or fewer Outlet Store
Evictions occur. In addition, after Closing, in the event that one or more landlords contest the
assignment of any Real Property Lease covering an Outlet Store to Buyer pursuant to this Agreement
or litigate or threaten to litigate such assignment, the assignment of such Real Property Lease by
such Seller to Buyer hereunder shall be deemed not to have occurred, at Buyer’s option, but without
limiting and subject to Section 1.3, and such Seller and Buyer shall negotiate an operating
agreement, on mutually agreeable terms, with respect to the applicable Real Property Lease.



ARTICLE 6

CLOSING, AND CLOSING DELIVERIES




     6.1 Closing. Closing of the transactions contemplated herein (“Closing”) will
take place at the offices of Fulbright & Jaworski L.L.P., New York, New York, beginning at
9:00 a.m. local time on date hereof (the “Closing Date”). The sale, conveyance, transfer,
assignment and purchase of the Acquired Assets, and the assumption of the Assumed Liabilities, will
be effective as of 11:59 p.m. Minneapolis time (the “Effective Time”) on July 5, 2008 (the
“Cut-Off Date”). To the extent the Parties agree, documents may be delivered at Closing by
facsimile or other electronic means.



     6.2 Closing Deliveries by Sellers. At Closing, each Seller will deliver, or cause to
be delivered, to Buyer (or as Buyer or this Agreement otherwise directs), the following:



          (a) a Bill of Sale, Assignment and Assumption Agreement in the form attached hereto as
Exhibit 6.2(a), dated the Closing Date (the “Bill of Sale”), executed by each
Seller;




          (b) a (1) Trademark Assignment in the form attached hereto as Exhibit 6.2(b)(1), dated
the Closing Date (the “Trademark Assignment”), and (2) Domain Name Assignment in the form
attached hereto as Exhibit 6.2(b)(2), dated the Closing Date (the “Domain Name
Assignment”), each executed by the applicable Sellers;




          (c) each Transition Services Agreement, each executed by Parent, pursuant to
Section 5.12;




          (d) an officer’s certificate of a duly authorized officer of each Seller, each in a form
approved by Buyer (such approval not to be unreasonably withheld), dated the Closing Date, executed
by such officer, each certifying (1) that attached thereto are true, correct and complete copies of
the certificate or articles of incorporation (including all amendments thereto) of each Seller, and
that the same are in full force and effect; (2) that attached thereto are true, correct and
complete copies of the bylaws of each Seller, and that the same are full force and effect and were
in full force and effect on the date of the resolutions described below; (3) that attached thereto
is a true, correct and complete copy of the requisite resolutions of the Board of Directors and of
the requisite (if any are required) shareholders of such Seller approving and




45









 




authorizing the execution, delivery and performance by such Seller of this Agreement and each
Ancillary Document of such Seller and the transactions contemplated herein and therein, and that
such resolutions are the only resolutions of such Board of Directors or shareholders with respect
to such matters and have not been modified, rescinded or amended and remain in full force and
effect; and (4) that each person who, as an officer of such Seller, signed and delivered this
Agreement or any Ancillary Document was at the time of such signing and delivery duly elected and
appointed, qualified and acting as such officer;




          (e) a certificate of good standing of each Seller, issued by the Secretary of State (or
equivalent) of its state of incorporation or organization on a recent date;




          (f) a FIRPTA Certificate complying in all respects with section 1445(b)(2) of the Code;




          (g) the Assignment and Assumption Agreements with respect to the Real Property Leases in the
form attached hereto as Exhibit 6.2(g), dated the Closing Date (the “Assignments of
Leases”), each executed by the applicable Seller;




          (h) all keys of any Seller to all locks to the Leased Real Property, together with all
security codes for any Leased Real Property or space therein (which will be considered delivered if
in the possession of the Persons reasonably designated by Buyer);




          (i) a consent, executed by Lawson Software, Inc., to the assignment of Sellers’ contracts with
Lawson Software, Inc. to Buyer, in form and substance satisfactory to Buyer (however, if Buyer
effects the Closing without the delivery of such item, then the requirement to make such delivery
is deemed to be fully waived);




          (j) a consent, executed by JDA Software, Inc., to the assignment of Sellers’ contracts that
are Assumed Contracts with JDA Software, Inc. to Buyer, in form and substance satisfactory to Buyer
(however, if Buyer effects the Closing without the delivery of such item, then the requirement to
make such delivery is deemed to be fully waived);




          (k) a Sublease Agreement, dated the Closing Date (the “Sublease Agreement”), executed
by Bermans The Leather Experts Inc., in form and substance satisfactory to Buyer; and




          (l) all other documents and items required by this Agreement to be delivered, or caused to be
delivered, by any Seller at Closing.




     6.3 Closing Deliveries by Buyer. At Closing, Buyer will deliver, or cause to be
delivered, to the applicable Seller (or as the applicable Seller or this Agreement otherwise
directs), the following:



          (a) payment of the Estimated Purchase Price, pursuant to Section 2.3;




          (b) the Bill of Sale and Assignments of Leases, each executed by Buyer;




          (c) the Trademark Assignment and the Domain Name Assignment, each executed by Buyer;




46









 








          (d) each Transition Services Agreement, each executed by Buyer, pursuant to
Section 5.12;




          (e) an officer’s certificate of a duly authorized officer of Buyer, in a form approved by
Parent (such approval not to be unreasonably withheld), dated the Closing Date, executed by such
officer, each certifying (1) that attached thereto are true, correct and complete copies of the
certificate or articles of incorporation (including all amendments thereto) of Buyer, and that the
same are in full force and effect; (2) that attached thereto are true, correct and complete copies
of the bylaws of Buyer, and that the same are full force and effect and were in full force and
effect on the date of the resolutions described below; (3) that attached thereto is a true, correct
and complete copy of the requisite resolutions of the Board of Directors of Buyer approving and
authorizing the execution, delivery and performance by Buyer of this Agreement and each Ancillary
Document of Buyer and the transactions contemplated herein and therein, and that such resolutions
are the only resolutions of such Board of Directors with respect to such matters and have not been
modified, rescinded or amended and remain in full force and effect; and (4) that each person who,
as an officer of Buyer, signed and delivered this Agreement or any Ancillary Document was at the
time of such signing and delivery duly elected and appointed, qualified and acting as such officer;




          (f) the Sublease Agreement, executed by Buyer, in form and substance satisfactory to Sellers;
and




          (g) all other documents and items required by this Agreement to be delivered, or caused to be
delivered, by Buyer at Closing.




ARTICLE 7

CONDITIONS TO OBLIGATIONS TO CLOSE




     7.1 Conditions to Obligation of Buyer to Close. The obligation of Buyer to effect the
closing of the transactions contemplated herein is subject to the satisfaction at or before Closing
of all of the following conditions, any one or more of which may be waived by Buyer, in Buyer’s
sole discretion (and, for any such condition not satisfied, if Buyer effects the Closing, then
Buyer will be deemed to have waived such condition, with no associated Liability or other
obligation resulting therefrom for any Seller):



          (a) Releases. Sellers will have delivered to Buyer a written document in a form reasonably
acceptable to each Party, each dated on or before the Closing Date and executed by each Person to
whom, at Closing, any Seller owes any indebtedness for borrowed money or with whom Seller has a
contractual right to borrow money, even if Seller does not owe any indebtedness for borrowed money
to such Person at Closing (or, if applicable, executed by such Person’s agent or similar
representative), in each case under which such Person (or such agent or representative on such
Person’s behalf) (1) consents to the transactions contemplated herein (to the extent required) and
(2) agrees to release each Encumbrance of such Person on any Acquired Asset upon the satisfaction
of the conditions in such document (each such document being a “Lender Release”).




          (b) Other Releases. Sellers shall have delivered to Buyer written evidence of the release of
the Encumbrances set forth on Exhibit 7.1(b).




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          (c) Other Documents. Sellers shall have delivered to Buyer the documents described in
Section 6.2.




     7.2 Conditions to Obligation of Sellers to Close. The obligation of each Seller to
effect the closing of the transactions contemplated herein is subject to the satisfaction at or
before Closing of all of the following conditions, any one or more of which may be waived by all
Sellers, in each Seller’s sole discretion (and, for any such condition not satisfied, if Sellers
effect the Closing, then Sellers will be deemed to have waived such condition, with no associated
Liability or other obligation resulting therefrom for Buyer):



          (a) Lender Release. Sellers will have obtained each Lender Release.




          (b) Letters of Credit or Other Seller Collateral. Buyer will have put in place and caused to
be fully effective replacement, standby or substitute letters of credit that replace, backstop or
substitute for letters of credit of any Seller (or Affiliate of any Seller) or other Seller
Collateral regarding which all Sellers (and all Affiliates of any Seller), as applicable, have not
been released, in each case to the extent required to cause, at all times at and after the
Effective Time, any Liability or other obligation with respect to any such letter of credit of any
Seller (or Affiliate of any Seller) or other Seller Collateral arising out of, relating to or
resulting from any Assumed Liability or activity or operation of Buyer (or any Affiliate of Buyer)
to be automatically fully satisfied by such a replacement, standby or substitute letter of credit
put in place by Buyer.




          (c) Other Documents. Buyer shall have delivered to Sellers the documents described in
Section 6.3.




ARTICLE 8

INDEMNIFICATION AND RESOLUTION OF CERTAIN DISPUTES




     8.1 General. Except as otherwise provided herein, the several representations,
warranties, covenants, and agreements of the Parties contained in this Agreement (or in any
document delivered at Closing in connection herewith, except to the extent stated therein) shall be
deemed to have been made on the Closing Date and shall be deemed to be material and to have been
relied upon by Buyer and Sellers notwithstanding any investigation made by Buyer or Sellers.



     8.2 Indemnification.



          (a) Each of the Sellers shall, jointly and severally, indemnify and hold Buyer and its Other
Indemnified Persons harmless from and against: (i) any and all loss, cost, liability, damage and
expense (including reasonable legal fees, expert costs and other expenses incident thereto) (each a
“Loss” and, collectively, “Losses”) arising out of or resulting from any
inaccuracy, misrepresentation or breach of any representation or warranty of any Seller under this
Agreement; (ii) any and all Losses arising out of any breach or non-fulfillment of any covenant or
agreement of any Seller under this Agreement; (iii) any and all liabilities and obligations of
Sellers (other than Assumed Liabilities or any other liability or obligation of Buyer hereunder) of
any nature whatsoever, whether accrued, absolute, fixed, contingent, or otherwise known or unknown
to Sellers, whether arising before or after the Closing, including, but not limited to, Losses with
respect to any liability of Sellers deemed to have been assumed by Buyer by virtue of common law,
statute or regulation or failure to comply therewith, which liability or



48









 






obligation Buyer has not expressly agreed to assume or pay hereunder, including without
limitation, bulk transfer laws in effect in any State; (iv) except to the extent expressly stated
herein, any liability or obligation for Taxes of any Seller, whether or not accrued, assessed or
currently due and payable (including without limitation any such liability for Taxes of Sellers,
(a) whether or not it relates to the operation of the Outlet Business, (b) arising from the
operation of the Outlet Business or the ownership of the Acquired Assets on or prior to the
Effective Time or (c) arising out of the consummation of the transactions contemplated hereby (for
purposes of this Section 8.2(a)(iv), all real property Taxes, personal property Taxes and
similar ad valorem obligations levied with respect to the Acquired Assets for a Tax period that
includes (but does not end on) the Cut-Off Date shall be apportioned between Sellers and Buyer in
the manner stated in this Agreement)); (v) any and all liabilities and obligations of any Seller or
any Affiliate of any Seller regarding any product sold by any Seller or any Affiliate of any Seller
before the Effective Time, except to the extent any of the foregoing is an Assumed Liability or an
obligation of Buyer pursuant to any other term hereof; and (vi) all claims, actions, suits,
proceedings, demands, assessments, judgments, costs and expenses, including, without limitation,
any reasonable legal fees and expenses, incident to any of the foregoing.




          (b) Buyer shall indemnify and hold each Seller and its Other Indemnified Persons harmless from
and against: (i) any and all Losses arising out of or resulting from any inaccuracy,
misrepresentation or breach of any representation or warranty of Buyer under this Agreement; (ii)
any and all Losses arising out of any breach or non-fulfillment of any covenant or agreement of
Buyer under this Agreement; (iii) any and all Losses arising out of or in connection with the
ownership or operation of the Acquired Assets or the Assumed Liabilities, in each case with respect
to periods after the Effective Time; (iv) any and all liabilities and obligations of Buyer or any
Affiliate of Buyer regarding any product sold by Buyer or any Affiliate of Buyer after the
Effective Time, except to the extent any Seller has any indemnification obligation therefor
pursuant to Section 8.2(a)(i) or 8.2(a)(ii); (v) any and all Losses arising out of
any failure to secure the unconditional release or, as appropriate, return to the applicable
Seller, of any letter of credit or any other Seller Collateral, including any amount that any
Seller is obligated to pay with respect to any letter of credit that pertains to any Acquired
Asset, Assumed Liability or operation or activity of Buyer (or any of its Affiliates) after the
Effective Time; and (vi) all claims, actions, suits, proceedings, demands, assessments, judgments,
costs and expenses, including, without limitation, any reasonable legal fees and expenses, incident
to any of the foregoing.




     8.3 Certain Limitations and Other Matters Regarding Claims.



          (a) Deductible on Sellers’ Obligations. No Seller will have any obligation under
Section 8.2(a)(i) (or 8.2(a)(vi) to the extent incident to 8.2(a)(i)),
unless and until the aggregate amount of Losses for which all Sellers are obligated thereunder
exceeds $200,000 (the “Deductible”), and then only for the amount of such Losses in excess
of the Deductible, subject to the other terms of this Article 8.




          (b) Cap on Sellers’ Obligations. The obligations of all Sellers under
Section 8.2(a)(i) (or 8.2(a)(vi) to the extent incident to 8.2(a)(i)), in
the aggregate, will not exceed an amount equal to $3,500,000 (the “Cap”), subject to the
other terms of this Article 8.




49









 








          (c) Deductible on Buyer’s Obligations. Buyer will not have any obligation under
Section 8.2(b)(i) (or 8.2(b)(vi) to the extent incident to 8.2(b)(vi))
unless and until the aggregate amount of Losses for which Buyer is obligated thereunder exceeds the
Deductible, and then only for the amount of such Losses in excess of the Deductible, subject to the
other terms of this Article 8.




          (d) Cap on Buyer’s Obligations. The obligations of Buyer under Section 8.2(b)(i) (or
8.2(b)(vi) to the extent incident to 8.2(b)(vi)), in the aggregate, will not exceed
an amount equal to the Cap, subject to the other terms of this Article 8.




          (e) Certain Treatment of Special Representations. Notwithstanding the foregoing terms of this
Section, (1) Section 8.3(a), 8.3(b), 8.3(c) or 8.3(d) will not
limit any Liability or other obligation with respect to any Special Representation or Critical
Representation and (2) the amount of Losses hereunder with respect to any Special Representation or
Critical Representation will not be used in determining if the Deductible or Cap has been reached
or exceeded. “Special Representation” means any representation or warranty in Section
3.7 or 3.21. “Critical Representation” means any representation or warranty
(A) in Section 3.2, 3.11(a), 3.24, 4.2 or 4.7 or (B) that
is made with fraud (of which intent is an element).




          (f) Sole and Exclusive Remedies. The sole and exclusive remedy of the Parties for money
damages in the event of any inaccuracy, misrepresentation or breach of any representation or
warranty of a Party under this Agreement or any Ancillary Document delivered to another Party in
connection herewith will be strictly limited to indemnification pursuant to this Article 8;
provided, however, that this Section 8.3(f) will not restrict the right of a party hereto
to bring an action for fraud (of which intent is an element) or to seek recovery with respect to
Losses arising out of or resulting from the breach of any covenant or agreement contained in this
Agreement or any Ancillary Document (but not from any inaccuracy, misrepresentation or breach of
any representation or warranty of a Party under this Agreement or any Ancillary Document).




          (g) Specific Performance. Each Party acknowledges and agrees that each other Party may be
damaged irreparably if this Agreement is not performed in accordance with its terms or otherwise is
breached and that a Party will be entitled to seek injunctive relief to prevent breaches hereof and
to enforce specifically this Agreement and its terms (including Section 5.8) in addition to
any other remedy to which such Party may be entitled hereunder.




          (h) Buyer’s Setoff Right. To the extent that Buyer is entitled to indemnification for Losses,
Buyer may satisfy any portion of such Losses by offsetting against any amount payable by Buyer to
any Seller or any Affiliate thereof pursuant to this Agreement or the Transition Services
Agreements, in each case subject to the following:





          (1) With respect to each such Loss which Buyer intends to satisfy under this
Section 8.3(h), Buyer must first make a bona fide claim for indemnification pursuant
to Section 8.5(a) on or before the date that such amount is otherwise payable by
Buyer pursuant to this Agreement or the Transition Services Agreements.




          (2) If Buyer and Sellers have a dispute with respect to such claim by Buyer, then they
will attempt to resolve such dispute in good faith. If Buyer and Sellers



50









 







are unable to resolve any such dispute within 60 days, then they will submit such
dispute to an Arbitrator using substantially the same procedures described in Sections
2.4(c) and 2.4(d) in which event the date on which any such amount otherwise
payable by Buyer to any Seller or any Affiliate thereof shall be required to be paid shall
be extended to the third business day after the later of the agreement of Buyer and Sellers
with respect to such dispute or the resolution of such dispute through arbitration and shall
then be payable only to the extent not reduced by such resolution of such indemnification
claim.



          (i) Exclusion of Vendor Losses. The limitations and restrictions on indemnification set forth
in Sections 8.3(a) and 8.3(b) shall be inapplicable to the first portion of Vendor
Losses which are up to the amount of the Vendor Loss Holdback Amount that are payable by Sellers
pursuant to Section 5.26.




     8.4 Certain Survival Periods.



          (a) Survival of Representations and Warranties. Subject to Section 8.4(b), each
representation or warranty herein will survive the execution and delivery of this Agreement and
remain in full force and effect until the date that is 18 months after the Closing Date, at which
time such representation or warranty will expire and terminate and no indemnification obligation
will be associated therewith or based thereon, except that each Special Representation will survive
until 90 days after all Liabilities and other obligations hereunder relating thereto are barred by
all applicable statutes of limitation (including periods of extension, whether automatic or
permissive) and each Critical Representation will survive indefinitely.




          (b) Survival of Representations and Warranties Until Final Determination. For each claim for
indemnification hereunder regarding a representation or warranty that is validly made before
expiration of such representation or warranty, such claim and associated right to indemnification
will not terminate before final determination and satisfaction of such claim.




          (c) Survival of Covenants and Agreements. Each covenant and agreement (other than
representations and warranties) herein, and all associated rights to indemnification, will survive
Closing and will continue in full force thereafter until all Liabilities and other obligations
hereunder relating thereto are barred by all applicable statutes of limitation, subject to any
applicable limitation stated herein.




     8.5 Notice of Claims and Procedures.



          (a) Notice of Claims. A Party entitled to indemnification hereunder (the
“Claiming Party”) will give the Party obligated to provide such indemnification (the
“Indemnifying Party”) prompt notice of any claim, for which such Claiming Party proposes to
demand indemnification, (1) by a Person that is not a Party nor an Other Indemnified Person (such a
claim being a “Third Party Claim” and such notice of such Third Party Claim being the
“Initial Claim Notice”) or (2) that does not involve a Third Party Claim, in each case
specifying the amount and nature of such claim (to the extent known). Thereafter, the Claiming
Party will give the Indemnifying Party, promptly after the Claming Party’s (or any of its
applicable Other Indemnified Person’s) receipt or delivery thereof copies of all documents
(including court papers) received or delivered by the Claiming Party (or any such Other Indemnified
Person)



51









 






relating to any such Third Party Claim. The failure to promptly give such notice or to
promptly give such copies will not relieve the Indemnifying Party of any Liability or other
obligation hereunder, except if the Indemnifying Party was prejudiced thereby, but only to the
extent of such prejudice.




          (b) Access and Cooperation. Each Party will, and will cause its Other Indemnified Persons to,
cooperate and assist in all reasonable respects regarding such Third Party Claim, including by
promptly making available to such other Party (and its legal counsel and other professional
advisers with a reasonable need to know) all books and records of such Person relating to such
Third Party Claim, subject to reasonable confidentiality precautions.




          (c) Defense and Participation Regarding Third Party Claims. This Section 8.5(c)
relates only to Third Party Claims.





          (1) Election to Conduct Defense. Promptly after receiving an Initial Claim Notice
under Section 8.5(a), the Indemnifying Party will have the option to conduct the
Defense of such Third Party Claim, at the expense of the Indemnifying Party. To elect to
conduct such Defense, the Indemnifying Party must give written notice of such election to
the Claiming Party within 10 days (or within the shorter period, if any, during which a
Defense must be commenced for the preservation of rights) after the Claiming Party gives the
corresponding Initial Claim Notice to the Indemnifying Party.




          (2) Conduct of Defense, Participation and Settlement. If the Indemnifying Party
conducts the Defense of such Third Party Claim, then (A) the Claiming Party may participate
(including by retaining separate counsel), at its own expense, in such Defense (including
any Proceeding regarding such Third Party Claim) and will have the right to receive copies
of all notices, pleadings or other similar submissions regarding such Defense, (B) each
Party will keep each other Party reasonably informed of all matters material to such Defense
and Third Party Claim at all stages thereof, (C) the Claiming Party will not (and will cause
its Other Indemnified Persons not to) admit Liability or other obligation with respect to,
or compromise or settle, such Third Party Claim without the Indemnifying Party’s prior
written consent (which consent will not be unreasonably withheld) and (D) the Indemnifying
Party will not compromise or settle such Third Party Claim, without the consent of the
Claiming Party (which consent will not be unreasonably withheld), if such compromise or
settlement (x) involves any material limitation on any future operations of the Claiming
Party (or any of its Other Indemnified Persons), (y) affects in a manner materially adverse
to the Claiming Party (or any of its Other Indemnified Persons) any other existing Third
Party Claim or (z) does not release the Claiming Party (and any applicable Other Indemnified
Person) from all Liabilities and other obligations regarding such Third Party Claim, other
than any Liability or other obligation being satisfied by the Indemnifying Party hereunder.




          (3) Indemnifying Party Does Not Conduct Defense. If the Indemnifying Party does not
elect to conduct the Defense of such Third Party Claim, then the Claiming Party may conduct
the Defense of such Third Party Claim in any manner that the Claiming Party reasonably deems
appropriate, at the expense of the Indemnifying Party, which expenses shall be reasonable
and documented (subject to the other




52












 






limitations of this Article 8), and the Claiming Party will have the right to
compromise or settle such Third Party Claim after receiving the consent of the Indemnifying
Party (which consent will not be unreasonably withheld).



     8.6 Reduction for Insurance, Taxes and Other Offsets.



          (a) The obligations of each Indemnifying Party hereunder regarding any Loss will be reduced,
including retroactively, by the amount of any insurance proceeds, benefit regarding Taxes (a
“Tax Benefit”) or other amount or benefit received, directly or indirectly, by the Claiming
Party (or any of its Other Indemnified Persons) regarding such Loss. Without limiting the
generality of the foregoing, if (1) the Claiming Party (or such Other Indemnified Person) receives
from or on behalf of an Indemnifying Party, or an Indemnifying Party pays on behalf of the Claiming
Party (or such Other Indemnified Person), a payment regarding a Loss and (2) the Claiming Party (or
such Other Indemnified Person) subsequently receives, directly or indirectly, any insurance
proceeds, Tax Benefit or other amount or benefit regarding such Loss, then such Claiming Party (for
itself or on behalf of such Other Indemnified Person, as applicable) will promptly pay to the
Indemnifying Party the amount of such insurance proceeds, Tax Benefit or other amount or benefit,
or, if less, the amount of such payment. The amount of such insurance proceeds, Tax Benefit or
other amount or benefit received will be net of any costs and expenses incurred or that would be
incurred by the Claiming Party (or such Other Indemnified Person) in procuring the same.




          (b) In computing the amount of any such Tax Benefit, the Claiming Party (or such Other
Indemnified Person) will be deemed to have received only the Tax Benefit actually realized by the
Claiming Party (or such Other Indemnified Person) as a result of the Tax items arising from the
incurrence or payment of any indemnified Losses.




     8.7 Subrogation. Each Party hereby waives (and agrees to cause its applicable Other
Indemnified Persons to waive), to the extent permitted under its (and their) insurance policies,
any subrogation rights that its (or their) insurer may have against the Indemnifying Party with
respect to any Loss. If an Indemnifying Party makes an indemnification payment to a Claiming Party
(or to any of its Other Indemnified Persons) with respect to any Loss, then such Indemnifying Party
will be subrogated, to the extent of such payment, to all related rights and remedies of such
Claiming Party (or, if applicable, of such Other Indemnified Person) under any insurance policy or
otherwise against or with respect to such Loss, except with respect to amounts not yet recovered by
such Claiming Party (or such Other Indemnified Person) under any such insurance policy or otherwise
that already have been netted against such Loss for purposes of determining the indemnifiable
amount of such Loss. Promptly following such Indemnifying Party’s request, such Claiming Party
will (and such Claiming Party will cause each such Other Indemnified Person to) take all reasonably
necessary, proper or desirable actions (including the execution and delivery of any document
reasonably requested) to accomplish the foregoing.



     8.8 Effect of Purchase Price Adjustment. Any Loss for which a Party would otherwise
be obligated to provide indemnification hereunder will be offset to the extent (but only to the
extent) such Loss is reflected in the adjustments to the Purchase Price under Article 2.



53









 





     8.9 Indemnification Adjusts Purchase Price for Tax Purposes. Each Party will,
including retroactively, treat indemnification payments under this Agreement as adjustments to the
Purchase Price for Tax purposes to the extent permitted under Applicable Law.



     8.10 Effect of Officer’s Certificates. For the avoidance of doubt, any written
certification by a Person (or any officer thereof) of the accuracy of any representation or
warranty in this Agreement (or of the accuracy, occurrence or non-occurrence of any other matter),
including any certification contemplated in Section 7.1 or 7.2, will be deemed to
constitute the making or re-making of such representation or warranty by such Person (or a
representation or warranty hereunder regarding such other matter) at the time of such certification
in the manner and to the extent stated in such certification, including for purposes of
Section 8.2(a)(i) and 8.2(b)(i). Any written certification by such an officer is
made in such capacity, and no Person will have any recourse against such officer in any personal
capacity in connection therewith, other than for fraud (of which intent is an element).



ARTICLE 9

CERTAIN GENERAL TERMS AND OTHER AGREEMENTS




     9.1 Notices. All notices or other communications required or permitted to be given
hereunder will be in writing and will be (a) delivered by hand, (b) sent by United States
registered or certified mail or (c) sent by nationally recognized overnight delivery service for
next Business Day delivery, in each case as stated below in this Section. Such notices or
communications will be deemed given (1) if so delivered by hand, when so delivered, (2) if sent by
such mail, three Business Days after mailing, or (3) if sent by such nationally recognized
overnight courier service, one Business Day after delivery to such service. A Party may change the
address to which such notices and other communications are to be given by giving the other Party
notice in the foregoing manner.



	 	 	 	 	 
	(A)

	 	If to any Seller, to:
	 	with a copy to:
	 
	 	 	 	 
	 

	 	Wilsons The Leather Experts Inc.
	 	Faegre & Benson LLP
	 

	 	7401 Boone Ave. N.
	 	2200 Wells Fargo Center
	 

	 	Brooklyn Park, Minnesota 55428
	 	90 S. 7th Street
	 

	 	Attn: Chief Financial Officer
	 	Minneapolis, Minnesota 55402
	 

	 	 	 	Attn: Philip S. Garon, Esq.
	 

	 	 	 	         Chris E. Hofstad, Esq.
	 
	 	 	 	 
	(B)

	 	If to Buyer, to:
	 	with a copy to:
	 
	 	 	 	 
	 

	 	G-III Apparel Group, Ltd.
	 	Fulbright & Jaworski, L.L.P.
	 

	 	512 Seventh Avenue
	 	666 Fifth Avenue
	 

	 	New York, New York 10018
	 	New York, New York 10103
	 

	 	Attn: Wayne S. Miller
	 	Attn: Neil Gold, Esq.






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



54









 





     9.3 Interpretation; Construction. In this Agreement:



          (a) the table of contents and headings are for convenience of reference only and will not
affect the meaning or interpretation of this Agreement;




          (b) the words “herein,” “hereunder,” “hereby” and similar words refer to this Agreement as a
whole (and not to the particular sentence, paragraph or Section where they appear);




          (c) terms used in the plural include the singular, and vice versa, unless the context clearly
requires otherwise;




          (d) unless expressly stated herein to the contrary, reference to any document means such
document as amended or modified and as in effect from time to time in accordance with the terms
thereof;




          (e) unless expressly stated herein to the contrary, reference to any Applicable Law means such
Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and as
in effect from time to time, including any rule or regulation promulgated thereunder;




          (f) the words “including,” “include” and variations thereof are deemed to be followed by the
words “without limitation”;




          (g) “or” is used in the sense of “and/or”; and “any” is used in the sense of “any or all”;




          (h) unless expressly stated herein to the contrary, reference to a document, including this
Agreement, will be deemed to also refer to each annex, addendum, exhibit, schedule or other
attachment thereto;




          (i) unless expressly stated herein to the contrary, reference to an Article, Section or
Exhibit is to an article, section or exhibit, respectively, of this Agreement;




          (j) all dollar amounts are expressed in United States dollars and will be paid in cash (unless
expressly stated herein to the contrary) in United States currency;




          (k) when calculating a period of time, the day that is the initial reference day in
calculating such period will be excluded and, if the last day of such period is not a Business Day,
such period will end on the next day that is a Business Day;




          (l) with respect to all dates and time periods in or referred to in this Agreement, time is of
the essence;




          (m) the phrase “the date hereof” means the date of this Agreement, as stated in the first
paragraph hereof; and




          (n) the Parties participated jointly in the negotiation and drafting of this Agreement and the
documents relating hereto, and each Party was represented by legal counsel




55









 




in connection with this Agreement and such other documents and each Party and each Party’s
counsel has reviewed and revised (or had ample opportunity to review and revise) this Agreement and
such other documents; therefore, if an ambiguity or question of intent or interpretation arises,
then this Agreement and such other documents will be construed as if drafted jointly by the Parties
and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the
authorship of any of the terms hereof or thereof.




     9.4 Parties in Interest; No Third-Party Beneficiaries. Nothing in this Agreement
(whether express or implied, including Section 5.5) will or is intended to confer any right
or remedy under or by reason of this Agreement on any Person (including any Other Indemnified
Person or any employee), except each Party and their respective permitted successors and assigns.



     9.5 Governing Law. This Agreement will be construed and enforced in accordance with
the substantive laws of the State of New York without reference to principles of conflicts of law.



     9.6 Jurisdiction, Venue and Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN MINNEAPOLIS,
MINNESOTA, OR NEW YORK, NEW YORK, IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY ANCILLARY DOCUMENT AND TO THE RESPECTIVE COURT TO WHICH AN APPEAL OF THE DECISIONS OF ANY SUCH
COURT MAY BE TAKEN. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE THEREIN OF SUCH A PROCEEDING. EACH PARTY
HEREBY AGREES THAT A FINAL JUDGMENT IN ANY SUCH PROCEEDING WILL BE CONCLUSIVE AND MAY BE ENFORCED
IN ANY JURISDICTION BY SUIT ON THE JUDGMENT OR BY ANY OTHER MANNER PROVIDED BY APPLICABLE LAW.
EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN ANY SUCH PROCEEDING.



     9.7 Entire Agreement; Amendment; Waiver. This Agreement, including the
Disclosure Schedule, constitutes the entire Agreement among the Parties pertaining to the subject
matter herein and supersedes any prior representations, warranties, covenants, agreements and
understandings of any of the Parties regarding such subject matter. No supplement, modification or
amendment hereof will be binding unless expressed as such and executed in writing by each Party
(except as contemplated in Section 9.9). No waiver of any term hereof will be binding
unless expressed as such in a document executed by the Party making such waiver. No waiver of any
term hereof will be a waiver of any other term hereof, whether or not similar, nor will any such
waiver be a continuing waiver beyond its stated terms. Failure to enforce strict compliance with
any term hereof will not be a waiver of, or estoppel with respect to, any existing or subsequent
failure to comply.



     9.8 Assignment; Binding Effect. Neither this Agreement nor any right or obligation
hereunder will be assigned, delegated or otherwise transferred by any Party without the prior
written consent of each other Party (which consent will not be unreasonably withheld), except that
each Party will have the right to assign or otherwise transfer this Agreement or any right
hereunder or delegate any obligation hereunder to: (a) a Person that does all of the following:



56









 




(1) acquires or otherwise succeeds to all or substantially all of such Party’s business and
assets; (2) assumes all of such Party’s obligations hereunder; and (3) agrees to perform or cause
performance of all such assumed obligations when due; (b) any of its Affiliates; or (c) any source
of financing for such Party or any of its Affiliates; provided that no such assignment, delegation
or transfer under clause (a), (b) or (c) above will relieve the assigning, delegating or
transferring Party of any obligation hereunder. This Agreement will be binding on and inure to the
benefit of the respective permitted successors and assigns of the Parties. Any purported
assignment, delegation or other transfer not permitted by this Section is void.




     9.9 Severability; Blue-Pencil. The terms of this Agreement will, where possible, be
interpreted and enforced so as to sustain their legality and enforceability, read as if they cover
only the specific situation to which they are being applied and enforced to the fullest extent
permissible under Applicable Law. If any term of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced, then all other terms
of this Agreement will nevertheless remain in full force and effect, and such term automatically
will be amended so that it is valid, legal and enforceable to the maximum extent permitted by
Applicable Law, but as close to the Parties’ original intent as is permissible.



     9.10 Counterparts. This Agreement may be executed in counterparts, each of which will
be deemed an original, but all of which together will constitute one and the same instrument.



     9.11 Disclosure Schedules. Each matter disclosed in any section of the Disclosure
Schedule, representation or warranty in a manner that makes its relevance to one or more other
sections of the Disclosure Schedule, representations or warranties reasonably apparent on the face
of such disclosure will be deemed to have been appropriately included in each such other section of
the Disclosure Schedule, representation or warranty (notwithstanding the presence or absence of any
reference in or to any section of the Disclosure Schedule, representation or warranty).



ARTICLE 10

CERTAIN DEFINITIONS




     “Acquired Assets” is defined in Section 1.1(a).



     “Affiliate” means, with respect to any Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by or is under common
control with, such Person. For purposes of this definition, “control,” “controlled by” and “under
common control with,” as applied to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, by Contract or otherwise. Notwithstanding the
foregoing, no shareholder of Parent is an Affiliate of any Seller.



     “Agreement” is defined in the first paragraph of this Agreement.



     “Ancillary Document” means, with respect to a Person, any document executed and
delivered by or on behalf of such Person or any Affiliate of such Person, in connection with the
execution and delivery of this Agreement or Closing, pursuant to the terms of this Agreement (but
not including this Agreement).



57









 





     “Applicable Law” means any applicable provision of any constitution, treaty, statute,
law (including the common law), rule, regulation, ordinance, code or order enacted, adopted, issued
or promulgated by any Governmental Authority.



     “Arbitrator” is defined in Section 2.4(c).



     “Assignments of Leases” is defined in Section 6.2(g).



     “Assumed Contract” is defined in Section 1.1(a)(1).



     “Assumed Liabilities” is defined in Section 1.1(c).



     “Bill of Sale” is defined in Section 6.2(a).



     “Business Day” means any day, other than a Saturday or Sunday and other than a day
that banks in the State of New York are generally authorized or required by Applicable Law to be
closed.



     “Buyer” is defined in the first paragraph of this Agreement.



     “Buyer DC Plan” is defined in Section 5.5(h).



     “Cap” is defined in Section 8.3(b).



     “Claiming Party” is defined in Section 8.5(a).



     “Closing” is defined in Section 6.1.



     “Closing Date” is defined in Section 6.1.



     “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985.



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



     “Collected Amount” is defined in Section 5.27(a).



     “Collection Period” is defined in Section 5.27(a).



     “Confidentiality Agreement” is defined in Section 5.4(a).



     “Consent” is defined in Section 3.5(b).



     “Contract” means any contract, agreement, purchase order, warranty or guarantee,
license, use agreement, lease (whether for real estate, a capital lease, an operating lease or
other), sublease, instrument or note, in each case that creates a legally binding obligation, and
in each case whether oral or written, and all amendments, supplements and modifications thereof.



     “Critical Representation” is defined in Section 8.3(e).



     “Cut-Off Date” is defined in Section 6.1.



58









 





     “Deductible” is defined in Section 8.3(a).



     “Defense” means legal defense (which may include related counterclaims) reasonably
conducted by reputable legal counsel of good standing selected with the consent of the Claiming
Party (which consent will not be unreasonably withheld).



     “Disclosure Schedule” means the disclosure schedule delivered and made a part of this
Agreement on the date hereof.



     “Domain Name Assignment” is defined in Section 6.2(b).



     “Effective Time” is defined in Section 6.1.



     “Eligible Employee” is defined in Section 5.5(a)(1).



     “Encumbrance” means any mortgage, pledge, security interest, charge, lien, lease,
license, occupancy, option or other right to purchase, easement, restriction or reservation or any
other encumbrance whatsoever.



     “Enforceability Limitation” means any applicable bankruptcy, reorganization,
insolvency, moratorium or other similar Applicable Law affecting creditors’ rights generally and
principles governing the availability of equitable remedies.



     “Environmental Claim” means any written notice by a Governmental Authority alleging
potential Liability or other obligation (including potential Liability or other obligation for
investigatory cost, cleanup cost, governmental response cost, natural resources damage, property
damage, personal injury or penalty) arising out of, relating to or resulting from (a) the presence,
or release into the environment, of any material or form of energy at any location, whether or not
owned by any Seller or (b)  any violation, or alleged violation, of any Environmental Law.



     “Environmental Law” means any applicable federal, state or local law or other legal
requirement relating to pollution or protection of the environment, including any law relating to
any emission, discharge, release or possible release of any pollutant, contaminant, hazardous or
toxic material, substance or waste into air, surface water, groundwater or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of any pollutant, contaminant or hazardous or toxic material, substance or waste.



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



     “ERISA Affiliate” means any (if any) corporation, trade or business (whether or not
incorporated) that is under common control with any Seller pursuant to section 414(b) or (c) of the
Code.



     “Estimated Purchase Price” is defined in Section 2.2.



     “Excluded Assets” is defined in Section 1.1(b).



     “Excluded Contract” is defined in Section 1.1(b)(1).



59









 





     “Final Transferred Inventory” is defined in Section 2.4(a).



     “Final Register Cash” is defined in Section 2.4(a).



     “Financial Information” is defined in Section 3.6(a).



     “Financial Information Date” is defined in Section 3.6(a).



     “Forward-Looking Statements” is defined in Section 4.6.



     “GAAP” means generally accepted United States accounting principles as have been
consistently applied by Sellers.



     “G-III” is defined in Section 3.27.



     “Gift Card Holdback Amount” is defined in Section 2.3.



     “Gift Card Item” is defined in Section 5.18(a).



     “Gift Card Statement” is defined in Section 5.18(a).



     “Governmental Authority” means any: (a) nation, state, county, city, district or
other similar jurisdiction of any nature; (b) federal, state, local or foreign government;
(c) governmental or quasi-governmental authority of any nature (including any governmental agency,
branch, commission, bureau, instrumentality, department, official, entity, court or tribunal);
(d) multi-national organization or body; or (e) body or other Person directed by Applicable Law to
exercise any arbitrative, administrative, executive, judicial, legislative, police, regulatory or
Taxing authority or power.



     “Hazardous Substance” means any pollutant, contaminant, hazardous substance, hazardous
waste or petroleum or fraction thereof, and any other chemical, waste, substance or material
regulated by any Environmental Law.



     “Improvements” is defined in Section 3.14.



     “Indemnifying Party” is defined in Section 8.5(a).



     “Initial Claim Notice” is defined in Section 8.5(a).



     “Initial Purchase Price” is defined in Section 2.1.



     “Intellectual Property” means any trademark, service mark, trade name, trade dress,
goodwill, patent, copyright, design, logo, formula, invention (whether or not patentable or reduced
to practice), concept, domain name, website, trade secret, know-how, confidential information, mask
work, product right, software, technology or other intangible asset of any nature, whether in use,
under development or design or inactive (including any registration, application or renewal
regarding any of the foregoing).



     “Intercompany Service” means any service provided or received by any Seller or any of
its Affiliates to or from any Seller or any of its Affiliates that are consistent with the types of



60









 







services customarily provided or received between a company and its Affiliates, including
human resources, Tax, accounting, legal, risk management and similar administrative services.



     “IRS” means the United States’ Internal Revenue Service.



     “JDA” is defined in Section 5.22.



     “Knowledge” has the following meaning: (a) an individual will have “Knowledge” of a
particular fact or other matter if such individual is actually consciously aware of such fact or
matter; and (b) a Person, other than an individual, will have “Knowledge” of a particular fact or
other matter if any individual who is serving as a director or officer (or similar executive) of
such Person currently has Knowledge, as stated in clause (a) above, of such fact or other matter.



     “Landlord Payment Schedule” is defined in Section 2.3.



     “Landlord Retention Amount” is defined in Section 2.3.



     “Leased Real Property” is defined in Section 3.14.



     “Lender Release” is defined in Section 7.1(a).



     “Liability” means any existing liability or obligation of any nature, whether accrued,
absolute, contingent, direct or indirect, perfected, inchoate, unliquidated or otherwise (including
any obligation under any Contract).



     “License Period” is defined in Section 5.11(c)(1).



     “Licensed Software” is defined in Section 5.23.



     “Licensed Software Improvements” is defined in Section 5.23.



     “Loss” and “Losses” are defined in Section 8.2(a).



     “Major Contract” is defined in Section 3.10(a).



     “Mark” is defined in Section 5.11(c)(2).



     “Material Adverse Effect” means any event or condition that, individually or in the
aggregate, has had or is reasonably likely to have a materially adverse effect on the Outlet
Business, taken as a whole, or the ability of the Sellers to perform their obligations under this
Agreement, except that none of the following will be deemed to constitute, and none of the
following will be taken into account in determining the occurrence (or possible occurrence) of a
Material Adverse Effect: (a) the reaction (including subsequent actions) of any Person not a Party
to any transaction contemplated herein; (b) any event or condition generally affecting any of the
industries in which Sellers operate, the United States economy as a whole or any foreign economy in
any location that materially affects the Outlet Business, provided that such events or conditions
in this clause do not have a materially disproportionate effect on the Outlet Business (relative to
other participants in the Sellers’ industry); (c) any national or international political or social
event or condition, including the engagement by the United States in hostilities, whether



61









 







or not pursuant to the declaration of a national emergency or war, or the occurrence of any
military or terrorist attack upon the United States or any of its territories, possessions or
diplomatic or consular offices or upon any military installation, equipment or personnel of the
United States, provided that such events or conditions in this clause do not have a materially
disproportionate effect on the Outlet Business (relative to other participants in the Sellers’
industry); (d) any financial, banking or securities market (including any disruption thereof or any
decline in the price of any security or any market index); or (e) any compliance with any term of,
or the taking of any action required by, this Agreement.



     “Multiemployer Plan” has the meaning given in section 3(37) of ERISA.



     “Non-Prevailing Party” is defined in Section 2.4(d).



     “Notice of Disagreement” is defined in Section 2.4(b).



     “On-Hand Inventory” is defined in Section 3.11(c).



     “Order” means any order, writ, injunction, decree, judgment, award or determination,
whether or not exclusive to the applicable Person, of or from any Governmental Authority.



     “Ordinary Course of Business” means any action (which includes, for this definition,
any failure to take action), condition, circumstance or status of or regarding a Person that is:
(a) consistent with the past practices of such Person and is taken or exists in the ordinary course
of the normal operations of such Person; or (b) similar in nature and magnitude to actions
customarily taken (or not taken) without any specific authorization by the board of directors (or
by any Person or group of Persons exercising similar authority) of such Person.



     “Organizational Document” means, for any Person: (a) the articles or certificate of
incorporation, formation or organization (as applicable) and the by-laws or similar governing
document of such Person; (b) any limited liability company agreement, partnership agreement,
operating agreement, shareholder agreement, voting agreement, voting trust agreement or similar
document of or regarding such Person; (c) any other charter or similar document adopted or filed in
connection with the incorporation, formation, organization or governance of such Person; (d) any
Contract regarding the governance of such Person or the relations among any of its equity holders
with respect to such Person; or (e) any amendment to any of the foregoing.



     “Other Indemnified Person” means, for any Person, such Person’s Affiliates and each of
such Person’s and each of such Affiliate’s stockholders, officers, directors, partners, members,
governors, managers, employees, agents and successors and assigns.



     “Outlet Business” means Sellers’ business of selling leather outerwear, accessories
and apparel through the outlet stores listed in Exhibit 10 which, as used in this
Agreement, includes Sellers’ e-commerce business for the sale of leather outerwear, accessories and
apparel.



     “Outlet Store” means an outlet store listed on Exhibit 10.



     “Parent” is defined in the first paragraph of this Agreement.



     “Party” means any Seller or Buyer.



62









 





     “Permit” means any license or permit from a Governmental Authority.



     “Permitted Acquired Business” is defined in Section 5.8(b)(1).



     “Permitted Encumbrance” means any: (a) Encumbrance listed in the Disclosure Schedule
or reflected or disclosed in any of the Financial Information; (b) Encumbrance for any Tax,
assessment or other governmental charge that is not yet due and payable or that may thereafter be
paid without interest or penalty; (c) Encumbrance arising under any original purchase price
conditional sales contract or equipment lease; (d) easement, covenant, condition or restriction of
public record identified in the Disclosure Schedule; (e) pledge or deposit to secure any obligation
under any workers or unemployment compensation law or to secure any other public or statutory
obligation; (f) mechanic’s, materialmen’s, landlord’s, carrier’s, supplier’s or vendor’s lien or
similar Encumbrance arising or incurred in the Ordinary Course of Business of the applicable Person
that secures any amount that is not overdue for a period of more than 90 days; or (g) other
imperfection of title or license or other Encumbrance, if any, that does not materially impair the
use or operation of any asset to which it relates in the conduct of the business of the applicable
Person as presently conducted.



     “Permitted Investment” is defined in Section 5.8(b)(1).



     “Person” means any individual, partnership, corporation, limited liability company,
association, joint stock company, trust, joint venture, unincorporated organization or any other
business entity or association or any Government Authority.



     “Plan” means an “employee benefit plan” (as such term is defined in section 3(3) of
ERISA) and any employment, severance, retention, change in control, incentive (equity or
otherwise), deferred compensation, vacation, holiday, sick leave, fringe benefit, educational
assistance, flexible spending or other compensatory agreement, plan, program or arrangement that is
not an “employee benefit plan” as so defined.



     “Prepaid Item” is defined in Section 2.4(i).



     “Prevailing Party” is defined in Section 2.4(d).



     “Principally Related to the Outlet Business” means, with respect to any item (whether
tangible, intangible or mixed), event or condition, that such item, event or condition is primarily
(other than any immaterial or minor occasional exception) used, possessed, derived or in existence
with respect to the Outlet Business, which includes certain operations at Sellers Headquarters and
Sellers Distribution Facility.



     “Proceeding” means any action, arbitration, audit, demand, hearing, inquiry,
investigation, litigation, proceeding or suit in each case (other than arbitration) that is or is
to be commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental
Authority.



     “Prohibited Transaction” has the meaning given in section 406 of ERISA and 4975 of the
Code.



     “Projections” is defined in Section 3.25.



63









 





     “Purchase Price” is defined in Section 2.1.



     “Real Property Lease” is defined in Section 3.14.



     “Real Property Lease Tax” means any ad valorem Tax regarding real estate that is a
direct or indirect obligation pursuant to the terms of a Real Property Lease.



     “Reconciliation” is defined in Section 5.27(a).



     “Register Cash” is defined in Section 1.1(a)(5).



     “Reimbursable Amount” is defined in Section 5.18(a).



     “Restricted Area” is defined in Section 5.8(a)(1)(B).



     “Restricted Business” is defined in Section 5.8(a)(1)(A).



     “SEC” means the Securities and Exchange Commission.



     “Seller” is defined in the first paragraph of this Agreement.



     “Seller Collateral” is defined in Section 5.14.



     “Seller Plan” means a Plan that is made or maintained with or for the benefit of or
otherwise covers one, or more than one, individual who may become a Transferred Employee (or any
beneficiary or dependent of any such individual).



     “Sellers Distribution Facility” means the distribution facility of Parent and its
Affiliates located at 7401 Boone Ave. N., Brooklyn Park, Minnesota.



     “Sellers Headquarters” means the headquarters and office facility of Parent and its
Affiliates located at 7401 Boone Ave. N., Brooklyn Park, Minnesota.



     “Settlement Payment Amount” is defined in Section 5.30.



     “Special Representation” is defined in Section 8.3(e).



     “Statement” is defined in Section 2.4(a).



     “Subject Landlords” is defined in Section 5.30.



     “Sublease Agreement” is defined in Section 6.2(k).



     “Subsidiary” means, with respect to any Person, any other Person of which at least a
majority of the securities or other interests, having by their terms ordinary voting power to elect
a majority of the board of directors of such other Person (or others performing similar functions
with respect to such other Person), is directly or indirectly owned or controlled by such first
Person or by any one or more of such first Person’s Subsidiaries.



     “Target Transferred Inventory” is defined in Section 2.4(g).



64









 





     “Tax” means any federal, state, local or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated
or other tax of any kind whatsoever, including any interest, fine, penalty or similar addition
thereto, whether disputed or not and including any obligation to indemnify or otherwise assume or
succeed to the Tax liability of any other Person.



     “Tax Benefit” is defined in Section 8.6(a).



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



     “Third Party Claim” is defined in Section 8.5(a).



     “Threatened” means, with respect to any matter, that a demand, notice or statement has
been made or given, in writing or otherwise, that states that such matter is being or will be
asserted, commenced, taken or otherwise pursued.



     “Total Reimbursable Amount” is defined in Section 5.18(a).



     “Trademark Assignment” is defined in Section 6.2(b).



     “Transaction Confidentiality Agreement” is defined in Section 5.16.



     “Transfer Tax” is defined in Section 5.7.



     “Transferred Employee” is defined in Section 5.5(a)(2).



     “Transferred Employee Leave Obligation” is defined in Section 1.1(c)(2).



     “Transferred Inventory” is defined in Section 2.4(h).



     “Transition Period” is defined in Section 5.5(h).



     “Transition Services Agreement” is defined in Section 5.12.



     “Undelivered Inventory” is defined in Section 1.1(a)(3).



     “Vendor Loss Holdback Amount” is defined in Section 2.3.



     “Vendor Loss Statement” is defined in Section 5.26(a).



     “Vendor Losses” is defined in Section 5.26(a).



65









 





     “WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988.



* * * * *




[Signature Pages Follow]




66









 








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



	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Wilsons The Leather Experts Inc.	 	 	 	AM Retail Group, Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Michael Brady
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Michael Brady
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Vice President and Controller
	 
	 	 	 	 	 	 	 	 
	Rosedale Wilsons, Inc.	 	 	 	Wilsons Leather of Delaware Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 
	River Hills Wilsons, Inc.	 	 	 	Wilsons Leather of Florida Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 
	Wilsons Leather Direct Inc.	 	 	 	Wilsons Leather of Georgia Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 
	Wilsons Leather of Alabama Inc.	 	 	 	Wilsons Leather of Indiana Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 





[Signature Page to Asset Purchase Agreement]




 









 








	 	 	 	 	 	 	 	 	 
	Wilsons Leather of Connecticut Inc.	 	 	 	Wilsons Leather of Iowa Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 
	Wilsons Leather of Louisiana Inc.	 	 	 	Wilsons Leather of New Jersey Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 
	Wilsons Leather of Maryland Inc.	 	 	 	Wilsons Leather of New York Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 
	Wilsons Leather of Massachusetts Inc.	 	 	 	Wilsons Leather of North Carolina Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 
	Wilsons Leather of Michigan Inc.	 	 	 	Wilsons Leather of Ohio Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 





[Signature Page to Asset Purchase Agreement]




 









 








	 	 	 	 	 	 	 	 	 
	Wilsons Leather of Mississippi Inc.	 	 	 	Wilsons Leather of Pennsylvania Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 
	Wilsons Leather of Missouri Inc.	 	 	 	Wilsons Leather of South Carolina Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 
	Wilsons Leather of Tennessee Inc.	 	 	 	Wilsons Leather of Wisconsin Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 
	Wilsons Leather of Texas Inc.	 	 	 	Wilsons Leather of Virginia Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 
	Wilsons Leather Holdings Inc.	 	 	 	Bermans The Leather Experts Inc.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Stacy Kruse
	 	 	 	By:
	 	/s/ Stacy Kruse
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	Stacy A. Kruse
	 	 	 	Name:
	 	Stacy A. Kruse
	Title:

	 	Chief Financial Officer and
Treasurer
	 	 	 	Title:
	 	Chief Financial Officer and
Treasurer
	 
	 	 	 	 	 	 	 	 





[Signature Page to Asset Purchase Agreement]