<PAGE>
ANY TEXT REMOVED PURSUANT TO THE COMPANY'S CONFIDENTIAL TREATMENT REQUEST HAS
BEEN SEPARATELY SUBMITTED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND
IS MARKED [***] HEREIN.


                                                                  EXHIBIT 10.7

                        VENDOR PAYMENT SERVICES AGREEMENT

THIS VENDOR PAYMENT SERVICES AGREEMENT ("Agreement") is made as of the 29th day
of June, 2005 ("Effective Date")

BETWEEN

1. EDDIE BAUER, INC., a Delaware corporation, with its principal place of
business located at 15010 NE 36th Street, Redmond, WA 98052 USA ("EB"); and

2. OTTO INTERNATIONAL (HONG KONG) LIMITED, a Hong Kong corporation whose
registered office is at 6th Floor Alexandra House, 16-20 Chater Road, Central,
Hong Kong ("OIHK").

WHEREAS,

(A) EB enters into contracts to purchase goods from various vendors with the
assistance of Eddie Bauer International Ltd ("EBI"), a buying agent.

(B) Such contracts are comprised of a purchase order form ("PO") and various
other documents and information incorporated into such contract.

(C) Some of such contracts may specify that payment for the subject goods shall
be made by OIHK within a time frame listed on the PO at a price equal to the
price listed on the PO minus (a) EB's Volume Discount (as referenced in such
purchase contract) and (b) the below defined Service Fee ("Net Purchase Price").

(D) Such contracts that satisfy the above conditions shall be referred to as
"Subject Contract(s)."

(E) Each Subject Contract requires the vendor to prepare and submit to EBI for
its review and approval various documents ("Required Documents").

(F) Prior to delivery of the goods ( as defined and identified in the Subject
Contracts), EBI performs other functions, including inspections, testing, and
certifications (collectively "EBI Pre-Delivery Functions").

(G) After review and approval of the Required Documents by EBI and completion of
the EBI Pre-Delivery Functions, EBI provides copies of the Required Documents to
OIHK, together with EBI's approval thereof (collectively "EBI Submission").

(H) Subject to the terms and conditions hereof, EB desires that OIHK pay the Net
Purchase Price of the invoices listed on the EBI Submissions on EB's behalf and
OIHK desires to make such payments on EB's behalf.

THEREFORE, EB and OIHK agree as follows:

1. EB and OIHK agree to the accuracy of the above recitals. Exhibit A attached
hereto is hereby incorporated herein.

2. On each Submission Day, OIHK shall provide a Payment List to EB. "Submission
Day" shall mean each Tuesday and Thursday of each week; provided that, if a
Submission Day shall fall on a legal holiday under the laws of Washington State,
the United States or Hong Kong (or any political subdivision of the foregoing),
the Submission Day shall be deferred until the next business day. "Payment List"
shall mean a list (in a form as EB shall specify from time to time) of the
following items with respect to each invoice identified on each EBI Submission
received by OIHK since the prior Submission Day: (a) the vendor, (b) invoice
number, (c) applicable PO number(s), (d) the

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ANY TEXT REMOVED PURSUANT TO THE COMPANY'S CONFIDENTIAL TREATMENT REQUEST HAS
BEEN SEPARATELY SUBMITTED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND
IS MARKED [***] HEREIN.


purchase price listed on the applicable PO's, (e) the EB Volume Discount
applicable thereto, (f) the Service Fee applicable thereto, and (g) the
applicable Net Purchase Price. The Payment List shall by sent to EB by email
(or, if email shall be temporarily interrupted, by fax) to such email address
(or fax number) as EB shall hereafter specify from time to time.

3. Within one (1) business day of its receipt of the Payment List, EB shall, by
wire transfer to such account as OIHK shall hereafter specify from time to time,
pay the Net Purchase Price, plus the Service Fee, for each invoice listed on
Payment List; provided EB shall not be obligated to pay the Net Purchase Price
or Service Fee if, pursuant to the Subject Contract, EB is entitled to withhold,
defer or reduce payment of the Net Purchase Price, including such entitlement
arising out of the failure of the subject vendor to perform its obligations
under any contract with EB (collectively "Elected Remedy"); provided, if EB
shall exercise an Elected Remedy, EB shall communicate such exercise, including
the reasons therefor to OIHK. EB's payment of the Net Purchase Price and the
Service Fee for an invoice shall constitute EB's permission to OIHK to pay such
Net Purchase Price to the vendor listed on the subject invoice. Upon receipt of
such permission, OIHK shall pay the Net Purchase Price for each invoice in
compliance with the payment provisions listed on the applicable PO(`s). In no
event shall OIHK make any payment without such permission from EB. OIHK shall
provide confirmation (in such form as EB shall reasonably require) for each
payment made pursuant to this Agreement within one (1) business day of such
payment.

4. This Agreement shall commence on the Effective Date and shall continue until
terminated. This Agreement may be terminated for any reason by either party
hereto upon 180 days prior written notice. This Agreement may be terminated
after 30 days prior written notice and opportunity to cure by any party if,
after the expiration of such 30 day period, the other party hereto shall
continue to be in breach of its obligations hereunder.

5. Adjusted Purchase Price shall mean the total vendor cost listed on the PO(`s)
for each item listed on the invoice minus the Volume Discount applicable
thereto. The Service Fee for any invoice shall be the lesser of (a) [***]% of
the Adjusted Purchase Price for the invoice or (b) [***]. The parties hereto
acknowledge that one invoice may reference multiple PO's and that the Service
Fee is calculated on a "per invoice," not a "per PO" basis.

6. OIHK covenants, represents and warrants that, except for any payment to EBI
made pursuant to EB's Buying Agency Agreement, neither OIHK nor any Affiliate
shall directly or indirectly receive any compensation, consideration, rebate,
gift, remuneration or any other item, including any reduction in the Net
Purchase Price, with respect to any Subject Contract.

7. In the event that EB shall exercise an Elected Remedy or there shall exist a
dispute between EB and any vendor with whom EB shall have entered into a Subject
Contract (collectively "Dispute"), OIHK shall cooperate with EB to (a)
facilitate EB's exercised of an Elected Remedy or any other remedy available to
EB under any Subject Contract and (b) achieve resolution of any Dispute on terms
and conditions acceptable to EB in its sole discretion. In no event shall OIHK
(i) waive, limit, or prejudice any right, remedy or position of EB or (ii)
modify any Subject Contract.

8. OIHK shall indemnify EB for all losses, damage, expenses, damages, claims,
expenses and costs, including any attorney's fees, expert fees, court costs or
other fees and costs incurred in connection therewith, arising directly or
indirectly from the breach of OIHK's obligations under this Agreement.

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ANY TEXT REMOVED PURSUANT TO THE COMPANY'S CONFIDENTIAL TREATMENT REQUEST HAS
BEEN SEPARATELY SUBMITTED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND
IS MARKED [***] HEREIN.


9. OIHK hereby assumes, for the benefit of EB and the vendor of any Subject
Contract, the obligation to pay the Net Purchase Price of any invoice for a
Subject Contract, which payment shall be made only (a) if it is due under the
Subject Contract (as determined by EB), (b) if EB has provided permission for
such payment as described herein, and (c) EB has paid OIHK the Adjusted Purchase
Price of such invoice. EB may disclose and provide written evidence of this
assumption to any potential vendor. OIHK acknowledges receipt of $500,000.00
(U.S. Dollars) paid by EB to OIHK ("Fund"). OIHK shall hold the Fund in a
segregated account until termination of this Agreement. OIHK may use the Fund to
pay the Net Purchase Price of any invoice only if (1) payment of such Net
Purchase Price of such invoice is then due, (2) payment of such Net Purchase
Price is not subject to any deferral, reduction, offset, any Elected Remedy or
other remedy (as determined by EB in good faith), and (3) EB fails to pay the
Adjusted Purchase Price of such invoice after ten days written demand therefor
by OIHK, which demand shall be subsequent to and different from the Payment
List. If OIHK shall use such Fund as provided above, upon ten (10) days demand
from OIHK, the Fund shall be replenished by EB so that the total amount of U.S.
Dollars in the Fund is $500,000. Upon termination of this Agreement, the Fund
shall be immediately paid by OIHK to EB.

EDDIE BAUER, INC.

By: /s/ Barbara Caalim
---------------------------------------------------

OTTO INTERNATIONAL (HONG KONG) LIMITED

By: /s/ J. K. Tulleners
     J. K. Tulleners, its Managing Director

                                        3
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ANY TEXT REMOVED PURSUANT TO THE COMPANY'S CONFIDENTIAL TREATMENT REQUEST HAS
BEEN SEPARATELY SUBMITTED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND
IS MARKED [***] HEREIN.


                 EXHIBIT A to: Vendor Payment Services Agreement

               (Standard Eddie Bauer, Inc. Contractual Provisions)

      The below provisions are incorporated into the attached Agreement by and
between Eddie Bauer, Inc, ("EB") and Otto International (Hong Kong) Limited
("Principal").

      1. Principal Conduct. When performing its obligations under this Agreement
("Subject Conduct"), Principal shall comply with all applicable law, including
(without limitation) the United States Foreign Corrupt Practices Act. With
respect to Subject Conduct, applicable law shall mean any law applicable in any
country, including any political subdivision thereof, (a) in which Principal is
deemed to conduct business on behalf of EB, or (b) that asserts jurisdiction
over any aspect of Subject Conduct. Principal shall not obtain a direct or
indirect ownership interest in, or any control of, or any financial interest in,
any vendor under a Subject Contract or an Affiliate thereof (hereinafter
"Vendor"), receive directly or indirectly any payment, rebate, gift or other
form of remuneration or other item from any Vendor, provide any release or
waiver to a Vendor, agree to any modification of any term or condition of a
subject Contract, cause EB to incur any obligations beyond those to which EB has
expressly agreed in a Subject Contract, conduct business under any trade name
owned, used by or licensed to EB, including the trade name "EB" except as
provided, if at all, in any separate written license agreement (the parties
hereto acknowledge that this subparagraph shall not modify such license in any
way); provided that the foregoing restriction shall not prohibit Principal from
accurately explaining to a Vendor its role and obligations pursuant to this
Agreement, participate in, allow any Vendor or EBI to engage in, or fail to
provide prompt notice to EB of any conduct by a Vendor or EBI related to, any
fraudulent, unlawful or unethical conduct, or permit or engage in conduct
prohibited by or inconsistent with the Subject Contract.

      2. Confidentiality. Information shall be deemed proprietary or
confidential if (a) it is considered by EB to be proprietary or confidential and
Principal or its Affiliate(s) know or has reason to know that EB considers it to
be proprietary or confidential, or (b) it is the type of information that is
treated as proprietary or confidential by regional or national retailers in the
United States. Without limiting the foregoing, any information concerning the
design, specifications, or manufacture of goods, the contents of the following
Agreements: this Agreement and the Subject Contracts referenced herein,
merchandising or other retail strategies, including cost and pricing data, and
customer lists shall be conclusively deemed to be proprietary or confidential.
Any and all information disclosed by EB that is proprietary or confidential and
is disclosed in any manner (and regardless of whether such information is
specifically labeled as such) is considered confidential information, unless
such information falls within the exceptions set forth below (hereinafter
"Confidential Information"). Principal agrees to hold any Confidential
Information disclosed to it in confidence, to cause its employees, agents or
other third parties to hold such Confidential Information in confidence, and to
use its best efforts (and, in all events, no less than the same standard of care
and procedures used to protect its own proprietary and confidential information)
to protect the confidential nature of the Confidential Information. Principal
shall not disclose Confidential Information to others or use it for purposes
other than to perform its obligations under this Agreement. Principal agrees to
limit disclosure of Confidential Information to those employees or agents
necessary for the performance of Principal's obligations hereunder and only to
such employees and agents who have agreed to be bound by the obligations herein.
Principal hereby acknowledges that it is aware, and agrees that it will advise
all of those persons who are involved in the performance of Principal's
obligations hereunder, that applicable law, including securities laws, may
prohibit any person who has received material, non-public information concerning
EB (including information about EB or its business that is not generally
available to the public) from purchasing or selling securities of EB while in
possession of such non-public information, and from communicating that
information to any other person who may purchase or sell securities of EB or who
may otherwise violate such laws by the use or communication thereof. Buying
Agent specifically acknowledges these obligations and agrees to be bound
thereby. Confidential Information shall not include any information which (a)
was publicly available at the time of disclosure; (b) became publicly available
after disclosure without breach of this Agreement by the Principal; (c) was in
Principal's possession prior to disclosure, as evidenced by Principal's written
records, and was not the subject of an earlier confidential relationship with
EB; (d) was rightfully acquired by Principal after disclosure by EB from a third
party who was lawfully in possession of the information and was under no
obligation to EB to maintain its confidentiality; (e) is independently developed
by Principal's employees or agents who have not had access to the Confidential
Information; or (f) is required to be disclosed by Principal pursuant to
judicial order or other compulsion of law, provided that Principal shall provide
to EB prompt notice of such order and comply with any protective order imposed
on such disclosure. At any time requested by EB, Principal Agent shall return or
destroy all documents, samples or other materials embodying Confidential
Information, shall retain no copies thereof, and shall certify in writing that
such destruction or return has been accomplished.

      3. Conflict Resolution. In the event of a breach of this Agreement by
Principal, EB shall be entitled to all rights and remedies contained in this
Agreement or as otherwise provided under applicable law. To the greatest extent
allowed under applicable law, all of EB's remedies under this Agreement or
applicable law shall be cumulative and the election of a particular remedy shall
not preclude or limit EB from electing or relying upon any other such remedy.
Without regard to any conflicts of law provisions, this Agreement shall, for all
purposes, be governed by and be construed in accordance with the laws of the
State of Washington; provided that the foregoing agreement concerning choice of
law applicable to the construction of this Agreement shall not limit Principal's
obligation to comply with any other law applicable to the Payment Conduct. In
the event of a dispute arising out of this Agreement (whether or not an action
is commenced), the prevailing party in such dispute shall be entitled to recover
from the other party its reasonable attorneys fees and costs (including, without
limitation, expert fees) incurred in connection with such dispute. Principal
submits to the jurisdiction of a court of competent jurisdiction sitting in King
County, Washington, U.S.A. in connection with any dispute arising out of this
Agreement or matters related hereto, and, unless specifically waived in writing
signed by EB, venue shall be proper in the event of such a dispute only in such
a court.

      4. Amendments. Any future amendments to this Agreement or waiver of the
rights or remedies hereunder must be agreed to in a writing signed by both
parties. Principal's interest in this Contract may not be assigned and its
obligations hereunder may not be delegated without the written consent of EB.
The invalidity or unenforceability of any provision in this Agreement shall not
limit the enforcement of any other provision. This Agreement shall be binding
upon and benefit the parties hereto, their personal representatives, successors
and assigns. This Agreement contains the complete statement of the parties'
agreement as of the date hereof with respect to any matter mentioned herein. No
prior agreement, correspondence, negotiations or understanding pertaining to any
such matter shall be effective to construe, interpret or modify the terms
hereof. Whenever EB is entitled to approve or consent under this Agreement, it
shall be entitled to withhold, provide and/or condition its

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ANY TEXT REMOVED PURSUANT TO THE COMPANY'S CONFIDENTIAL TREATMENT REQUEST HAS
BEEN SEPARATELY SUBMITTED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND
IS MARKED [***] HEREIN.


approval or consent in its sole discretion. No waiver of any right or remedy of
EB shall be effective unless provided by EB in writing signed by EB's Authorized
Officer. A waiver by EB or a failure by Principal to perform one or more of any
term or condition of this Agreement shall not constitute a waiver or excuse for
nonperformance of any future performance pursuant to such term or condition and
shall not constitute a waiver or excuse of nonperformance as to any other term
or condition of the Agreement. If EB shall consent to or approve any conduct or
condition, such consent or approval shall not be deemed to render unnecessary
obtaining EB's consent or approval to any subsequent conduct or condition. Any
proposed change or exception to the Agreement shall be sent to EB's Authorized
Officer at EB's address listed in the Agreement or such other address as EB
shall hereafter specify. Principal acknowledges that no change, exception or
other modification to this Agreement may be made except in writing (including
email) by EB's Authorized Officer. Notices given pursuant to this Agreement to
Principal shall be provided to Principal address listed in the Agreement unless
and until such different address is provided by Principal to EB's Authorized
Officer in writing. Without limiting the other provisions hereof, all notices
given pursuant to this Agreement shall be in writing and deemed received upon
delivery to or receipt by the address or when delivery is declined.

      5. Execution. This Agreement may be executed in counterparts. The parties
specifically agree that facsimile signatures shall be effective to bind the
parties hereto. Each person who executes this Agreement represents that he or
she is duly authorized to execute this Agreement in the capacity signed below
and, as such, to bind the principal, if any, on whose behalf the signatory signs
this document.

      6. Performance. The parties recognize and agree that time is of the
essence in the performance of obligations under this Agreement. Without limiting
any of EB's other remedies, EB may offset any amount owed to EB by Principal or
its Affiliates (under this Agreement, another contract or applicable law)
against any amount owed by EB to Principal or its Affiliates (under this
Agreement, another contract or applicable law).

      7. Construction. This Agreement shall be interpreted in accordance with
the fair and reasonable meaning of the words of this Agreement and, in that
connection, Principal and EB respectively represent that it has been represented
or has had the opportunity to be represented by its counsel in connection with
the negotiation and execution of this Agreement and that each has become
familiar with the provisions of this Agreement, which provisions have been fully
negotiated between EB and Principal. EB and Principal agree that the provisions
hereof are not to be construed either for or against either party as the
drafting party. Except as expressly stated herein, this Agreement is not
intended to confer any rights or remedies upon any person or entity that is not
a party hereto. Without limiting the foregoing, except as expressly stated
herein, Vendor is not a third party beneficiary of this Agreement and no
obligation of Principal hereunder shall modify Vendor's obligations under the
Subject Contract applicable law or limit Vendor's obligation for any breach of
the Subject Contract or applicable law. In order to ensure compliance with this
Agreement and the Subject Contracts, EB shall be entitled to audit the records
of the Principal upon reasonable notice at any location(s) at which Principal
conducts or has conducted business and Principal shall fully cooperate in such
audit, including collecting such requested documents as EB shall request at the
location specified for the audit.

      8. Communication. In the event that EB shall institute any communication
or other system, including electronic data interchange (EDI), related to the
Subject Contracts, at Principal's sole cost and expense, Principal shall
acquire, install and maintain in good operating condition any such hardware,
software and other items as are necessary to effectively participate in and
facilitate communication related thereto. Without limiting the foregoing,
Principal shall use its best efforts to maintain continuous email communication
with EB.

      9. Miscellaneous Definitions. "Affiliate" shall mean a person or entity
controlling, controlled by, or under common control with the subject person or
entity, as well as any person or entity that has any material, economic or
financial relationship or association with the subject entity. "Authorized
Officer" shall mean EB's __________________ (or such successor position, if any,
hereafter specified by EB in writing). "Law" shall mean any statute, code, court
decision, court order, regulation, or other governmental directive or order. The
word "including" shall be deemed to mean "including, but not limited to."

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