Section 2. Appointment of Agent. The Merchant hereby appoints the Agent, and theAgent hereby agrees to serve, as the Merchant’s exclusive agent for the limited purpose ofconducting the Comprehensive Sale in accordance with the terms and conditions of this Agreement.     Section 3. Consideration to Merchant and Agent for Store Closing Sale.          3.1 Payment(s) to Merchant.           (a) (i) As a guaranty of Agent’s performance hereunder, Merchant shall receive from Agent thesum of 77% of the aggregate Cost Price of the Merchandise, except for Transfer Merchandise andWarehouse Merchandise received at the Stores on and after the Cutoff Date, as to which suchpercentage shall be the product of 77% times the complement of the then prevailing Store ClosingSale discount at the time of the receipt of such Merchandise at the Stores (the “GuaranteedAmount”). The “Cutoff Date” shall mean twenty-one (21) days after the SaleCommencement Date, provided that, the aggregate Cost Price of Transfer Merchandise, On-OrderMerchandise, and Warehouse Merchandise received at the Stores between the 14th and21st day after the Sale Commencement Date shall not exceed $1,000,000. In addition,Agent guarantees that Proceeds shall be no less than the sum of the Guaranteed Amount and Expenseshereunder.               (ii) To the extent that Proceeds exceed the sum of the Guaranteed Amount, plus all Expenses,plus the Agent’s Fee (“Sharing Threshold”), Merchant shall receive from Agent 50% of suchexcess Proceeds (the “Recovery Amount”).               (iii) Agent shall pay to Merchant the Guaranteed Amount and the Recovery Amount, if any, inthe manner and at the times specified in Section 3.3 below. TheGuaranteed Amount, the Recovery Amount and the Agent’s Fee will be calculated based upon (A)the aggregate Cost Price of items of Merchandise established in accordance with Section 5.1
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hereof and (B) reconciliation by Merchant and Agent of Transfer Merchandise and WarehouseMerchandise received at the Stores in the manner provided herein.          (b) The Guaranteed Amount and Recovery Amount have been calculated and agreed upon based uponMerchant’s representation that (i) the aggregate Cost Price of the Merchandise in the Stores on theSale Commencement Date will not be more than 20.8 million (the “Merchandise Ceiling”) and(ii) all such Merchandise will conform to Merchant’s representations and warranties containedherein, and that no representations, warranties or covenants of Merchant hereunder have beenbreached. Merchant and Agent agree that in the event that the Cost Price of Merchandise is morethan the Merchandise Ceiling, then the percentage on which the Guaranteed Amount is based shall bereduced as provided in Exhibit 3.1 attached hereto.          3.2 Compensation to Agent. Agent shall receive as its base compensation for servicesrendered to Merchant in connection with the Store Closing Sale, excess Proceeds of the StoreClosing Sale after payment of the Guaranteed Amount and all Expenses, in an amount up to 7.3% ofthe aggregate Cost Price of the Merchandise (the “Agent’s Fee”). In addition, followingpayment of the Guaranteed Amount, all Expenses and the Agent’s Fee, if any, Agent shall receiveand/or retain 50% of any excess Proceeds of the Store Closing Sale above the Sharing Threshold(“Agent’s Additional Fee”).     Provided that no Event of Default has occurred and continues to exist on the part of theAgent, all Merchandise remaining at the conclusion of the Store Closing Sale shall become theproperty of Agent, free and clear of all liens, claims and encumbrances of any kind or nature;provided, however, that Agent shall use commercially reasonable efforts to sell all Merchandise tothe piece by the conclusion of the Store Closing Sale.
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          3.3 Time of Payments. Immediately following the weekly Store Closing Salereconciliation by Merchant and Agent pursuant to Section 8.8 below, until the GuaranteedAmount has been paid in full, Merchant shall retain the Proceeds from sales of Merchandise duringthe prior week (i.e., Sunday through Saturday) less the Expenses incurred during such week (the“Weekly Net Proceeds”), which Weekly Net Proceeds shall be applied to and credited againstthe Guaranteed Amount. After the amount of Weekly Net Proceeds applied and credited against theGuaranteed Amount equals the Guaranteed Amount, all Weekly Net Proceeds collected by Merchant shallbe paid by Merchant to Agent. Any Expenses incurred directly by Agent shall be paid by Merchant toAgent by wire transfer of immediately available funds on such weekly basis.     The Guaranteed Amount attributable to Transfer Merchandise, Warehouse Merchandise and ReturnedMerchandise received at the Stores after the Cutoff Date shall be reconciled on a weekly basis forall such items received during the prior week (i.e., Sunday through Saturday). Any such paymentshall be made immediately following the weekly Store Closing Sale reconciliation by Merchant andAgent pursuant to Section 8.8 below.     Within ten (10) days after completion by Merchant and Agent of the final Store Closing Salereconciliation pursuant to Section 8.8 below, Agent shall pay to Merchant any unpaidportion of the Guaranteed Amount and the Recovery Amount due hereunder, if any.     All payments by Merchant to Agent or Agent to Merchant hereunder shall be by wire transfer ofimmediately available funds; provided, however, Merchant agrees that any amounts due by Agent toMerchant pursuant to this Section 3 may in Agent’s discretion be offset by the amount ofProceeds which have not, as of the applicable date of payment by Agent to Merchant, beentransferred by Merchant to Agent.
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          3.4 Agent Letter of Credit. To secure payment of the Guaranteed Amount, Expenses, andany other amounts due from Agent to Merchant hereunder, Agent shall deliver to Merchant anirrevocable standby letter of credit in the original face amount of $5,000,000 naming Merchant asbeneficiary, substantially in the form of Exhibit 3.4 attached hereto (the “AgentLetter of Credit”). Agent shall use its best efforts to cause the Agent Letter of Credit to bedelivered no later than two (2) business days following the Sale Commencement Date. The AgentLetter of Credit shall be issued by a bank selected by Agent and reasonably acceptable to Merchant,and shall contain terms, provisions and conditions mutually acceptable to Agent and Merchant. Inthe event that Agent shall fail to pay to Merchant any amount required to be paid hereunder,Merchant shall be entitled to draw on the Agent Letter of Credit to fund such amount following five(5) days’ written notice to Agent of Merchant’s intention to do so, provided that no materialdefault or Event of Default has then occurred on the part of the Merchant hereunder and iscontinuing. The Agent Letter of Credit shall expire on June 30, 2008, provided that in the eventthat Agent shall have paid to Merchant the Guaranteed Amount prior to such date, Merchant agrees tosurrender the original Agent Letter of Credit to the issuer thereof together with writtennotification that the Agent Letter of Credit may be terminated. Merchant and Agent agree that theface amount of the Agent Letter of Credit may be reduced from time to time after payment of amountsdue hereunder upon mutual agreement of Agent and Merchant in good faith.          3.5 Merchant Letter of Credit. To secure payment of the Agent’s Fee, Agent’sAdditional Fee, Expenses paid by Agent and any other amounts due from Merchant to Agent hereunder,including, without limitation, amounts paid by Agent or required to be paid to Agent underSection 17 hereof, Merchant shall deliver to Agent an irrevocable standby letter of
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credit in the original face amount of $3,000,000 naming Agent as beneficiary, substantially in theform of Exhibit 3.5 attached hereto (the “Merchant Letter of Credit”). Merchantshall use its best efforts to cause the Merchant Letter of Credit to be delivered no later than two(2) business days following the Sale Commencement Date. The Merchant Letter of Credit shall beissued by a bank selected by Merchant and reasonably acceptable to Agent, and shall contain terms,provisions and conditions mutually acceptable to Agent and Merchant. In the event that Merchantshall fail to pay to Agent any amount required to be paid hereunder, Agent shall be entitled todraw on the Merchant Letter of Credit to fund such amount following five (5) days’ written noticeto Merchant of Agent’s intention to do so, provided that no material default or Event of Defaulthas then occurred on the part of the Agent hereunder. On the day that is five (5) days after thefinal reconciliation of the Store Closing Sale pursuant to Section 8.8 hereof, but in noevent later than June 30, 2008, the face amount of the Merchant Letter of Credit shall be reducedto $1,000,000, provided, that, as of such date, the Agent’s Fee, Agent’s Additional Fee, and theExpenses have been paid to or escrowed on behalf of Agent. The Merchant Letter of Credit shallexpire on January 31, 2009, provided that in the event that the final reconciliation of the StoreClosing Sale pursuant to Section 8.8 hereof shall have been completed and all amounts paidby Agent or required to be paid to Agent under Section 17 hereof shall have been paid priorto such date, Agent agrees to surrender the original Merchant Letter of Credit to the issuerthereof together with written notification that the Merchant Letter of Credit may be terminated.     Section 4. Expenses of the Store Closing Sale.          4.1 Expenses. Agent shall be solely responsible for all Expenses incurred inconducting the Store Closing Sale; provided, however, that Expenses shall be paid by
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Merchant as provided in Section 3.3 hereof. Notwithstanding the foregoing, Agent shall beresponsible for all Expenses, even if Proceeds are insufficient. To the extent the incurrence ofany Expense is discretionary, Agent shall consult with Merchant with respect to the amount and typeof such Expense utilized during the Sale Term. Agent shall provide an accounting to Merchant ofall Expenses from time to time upon Merchant’s request during the Sale Term and as part of thefinal reconciliation. As used herein, “Expenses” shall mean Store-level operating expensesof the Store Closing Sale that arise during the Sale Term at the Stores limited to the following:          (a) base payroll and commissions for Retained Employees for actual days/hours worked duringthe Sale Term;          (b) amounts actually payable in respect of FICA, unemployment taxes, worker’s compensation andhealth care insurance benefits for Retained Employees (excluding vacation days or vacation pay,sick days or sick leave, maternity leave or other leaves of absence, termination or severance pay,union dues, pension benefits, ERISA coverage and similar contributions), in an amount not to exceed22% of base payroll (exclusive of Retention Bonuses) for the Retained Employees in the aggregate(the “Benefits Cap”);          (c) Agent’s commercially reasonable supervision fees and expenses (including, withoutlimitation, travel costs and bonuses);          (d) advertising and signage expenses (at Agent’s actual documented cost);          (e) long distance telephone expenses incurred in the conduct of the Store Closing Sale;
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          (f) credit card and bank card fees and discounts (at Merchant’s actual costs), chargebacks andcosts of returned checks;          (g) costs of security personnel in the Stores and for armored car service;          (h) a pro-rata portion of Merchant’s casualty insurance premiums attributable to theMerchandise;          (i) costs of transfers of Merchandise during the Sale Term between the Stores, excluding anycost associated with transferring Transfer Merchandise, On-Order Merchandise and WarehouseMerchandise to the Stores;          (j) Retention Bonuses as described in Section 9.4 below;          (k) Agent’s documented letter of credit fees for the Agent Letter of Credit;          (l) Agent’s reasonable legal fees and expenses and other transaction reasonable costs,including, without limitation, Agent’s out-of-pocket costs, such as travel and other incidentalcosts incurred by Agent in connection with performance of the transactions contemplated hereby andin accordance with Merchant’s Travel Policy, which shall be provided to Agent;          (m) costs and expenses of additional Supplies as provided in Section 8.4;          (n) Occupancy Expenses, limited on a per diem per Store basis and limited to those amounts andcategories as described in Exhibit 4.1 attached hereto;          (o) Actual costs incurred by Agent of obtaining all permits, licenses, consents and approvalsrequired under Section 10(a) hereof;
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          (p) the costs and expenses of providing such additional services that the Agent in itsreasonable discretion deems appropriate; and          (q) 50% of the fees and costs of the inventory taking service to conduct the Inventory Taking.     “Expenses” shall not include: (i) Excluded Benefits; (ii) any rent or occupancy expensesrelated to the Stores other than Occupancy Expenses; (iii) Central Service Expenses; (iv) any rent,occupancy and other expenses relating to the Warehouse or for the transfer of Transfer Merchandise,On-Order Merchandise or Warehouse Merchandise to the Stores; (v) any costs, expenses andliabilities that would otherwise constitute “Expenses” hereunder but that were not disclosed toAgent prior to the date of this Agreement and (vi) except for costs, expenses or liabilitiessubject to bona fide disputes, any other costs, expenses or liabilities payable by Merchant, all ofwhich shall be paid by Merchant promptly when due for and during the Sale Term. Notwithstandinganything herein to the contrary, to the extent that any Expense listed in Section 4.1 is alsoincluded on Exhibit 4.1, then Exhibit 4.1 shall control and such Expense shall not be doublecounted.     As used herein, the following terms have the following respective meanings:          “Central Service Expenses” means costs and expenses for Merchant’s centraladministrative services necessary for the Store Closing Sale, including, but not limited to, salesaudit, MIS services, POS systems, payroll processing, cash reconciliation, inventory processing andhandling and data processing and reporting.          “Excluded Benefits” means (i) vacation days or vacation pay, sick days or sick leave,maternity leave or other leaves of absence, termination or severance pay, union dues,
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pension benefits, ERISA coverage and similar contributions and (ii) payroll taxes, worker’scompensation and health insurance benefits in excess of the Benefits Cap.          “Occupancy Expenses” means base rent, percentage rent, HVAC, utilities, CAM, realestate and use taxes, merchant’s association dues, merchant’s marketing and promotional funds,merchant’s sprinkler fees and building insurance relating to the Stores, limited on a per diem, perStore basis and limited to those amounts and categories as described on Exhibit 4.1attached hereto.          4.2 Payment of Expenses. All Expenses incurred during each week of the Store ClosingSale (i.e., Sunday through Saturday) shall be paid by Merchant out of Proceeds as provided inSection 3.3 above, immediately following the weekly Store Closing Sale reconciliation byMerchant and Agent pursuant to Section 8.8 below, based upon invoices and otherdocumentation reasonably satisfactory to Agent and Merchant.     Section 5. Inventory Valuation; Merchandise.          5.1 Inventory Taking     Merchant and Agent shall cause to be taken a SKU or “scan” price inventory ofthe Merchandise and an audit of the Ticketed Price of the Merchandise (the “InventoryTaking”) commencing at the close of business at each of the Stores on a date mutually agreedupon by Agent and Merchant (the date of the Inventory Taking at each Store being the “InventoryDate” for such Store). Merchant and Agent shall jointly employ RGIS, WIS or another mutuallyacceptable inventory taking service to conduct the Inventory Taking. Agent shall be responsiblefor 50% of the costs and fees of the inventory taking service as an Expense hereunder, and thebalance of such costs and fees shall be paid by Merchant, provided, however, that Merchant shallnot be responsible for out-of-pocket costs (which costs shall be treated as an Expense hereunder)
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incurred by Agent in connection with the presence of Agent’s employees or representatives atthe Inventory Taking. Except as provided in the immediately preceding sentence, Merchant and Agentshall bear their respective costs and expenses relative to the Inventory Taking. Merchant andAgent shall each have representatives present during the Inventory Taking, and shall each have theright to review and verify the listing and tabulation of the inventory taking service. Merchantagrees that during the conduct of the Inventory Taking at each Store such Store shall be closed tothe public and no sales or other transactions shall be conducted. The procedures to be used in theconduct of the Inventory Taking and its verifications are set forth on Exhibit 5.1 attachedhereto. In order to facilitate the Inventory Taking, Merchant agrees to make its SKU data filesand related computer hardware and software available to Agent and the inventory taking servicecommencing prior to the Inventory Date. In connection with the Inventory Taking, but prior to thefinal verification thereof, Agent and Merchant shall perform an audit of the Ticketed Price bycomparing a sample of SKU selling prices of items of Merchandise ascertained from the InventoryTaking with the actual prices at which such items of Merchandise were offered to the public at theStores as of the Inventory Date. The procedures for this audit shall be agreed upon betweenMerchant and Agent in good faith. If the SKU selling price is greater than the actual price atwhich items of Merchandise were offered to the public as of the Inventory Date, Merchant and Agentshall agree on an adjustment to the Cost Price to account for such discrepancy in good faith.          5.2 In the event that the Store Closing Sale commences at any Storeprior to the completion of the Inventory Taking at such Store, then for the period from the SaleCommencement Date for such Store until the Inventory Date for such Store, Agent and Merchant shalljointly keep (i) a strict count of gross register receipts less applicable Sales Taxes (“Gross
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Rings”) and (ii) cash reports of sales within such Store. Register receipts shall show foreach item sold, the SKU and price paid for such item in connection with such sale. All suchrecords and reports, including the master inventory file, shall be made available to Agent andMerchant during regular business hours upon reasonable notice. Merchant and Agent will reconcileeach item of Merchandise reflected in the Gross Rings against the master inventory file of Merchantas of the Sale Commencement Date to establish the unadjusted Retail Price, Ticketed Price and CostPrice of such item of Merchandise. The unadjusted Retail Price, Ticketed Price, and Cost Pricedetermined in accordance with the above, will each be adjusted (i) to account for shrinkage bymultiplying them by 101.3% and (ii) to address Defective Merchandise by a process to be agreed toby Merchant and Agent..          5.3 Merchandise Subject to this Agreement. (a) For purposes of this Agreement,“Merchandise” shall mean all: (i) first quality finished goods inventory that is locatedat the Stores as of the Sale Commencement Date saleable in the ordinary course of business; (ii)Repair and Special Order Merchandise that is not picked up by customers prior to the Cutoff Date;(iii) Transfer Merchandise; (iv) Warehouse Merchandise; and (v) On-Order Merchandise.Notwithstanding the foregoing, “Merchandise” shall not include: (1) Defective Merchandise; (2)goods that belong to third party sublessees, licensees or concessionaires of Merchant other thanMerchant; (3) goods held by Merchant on memo, on consignment or as bailee for a third party otherthan Merchant; (4) furnishings, trade fixtures, equipment and improvements to real property whichare located in the Stores or the Warehouse (collectively, “FF&E”); (5) TransferMerchandise, On-Order Merchandise and Warehouse Merchandise received at any Store after the CutoffDate, unless Agent in its discretion elects to include such goods in Merchandise; (6) goods sodamaged that they are not saleable in the ordinary course of
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business at any price; (7) Returned Defective Merchandise; and (8) Repair and Special OrderMerchandise picked up by customers prior the Cutoff Date.          (b) As used in this Agreement, the following terms have the respective meanings set forthbelow:          “Defective Merchandise” means any item of Merchandise that is agreed upon andidentified by Agent and Merchant as defective or otherwise not saleable in the ordinary coursebecause it is dented, worn, scratched, broken, faded, torn, mismatched or affected by other similardefects rendering it not first quality, but that is not so damaged that it is not saleable in theordinary course of business at any price. Sample merchandise and merchandise on display shall notper se be deemed to be Defective Merchandise so long as (x) the original packaging (includingwarranty information, if any warranty applies, and all supplied accessories) for such Merchandiseis intact and available if needed to make the item saleable in the ordinary course, and (y) suchMerchandise remains subject to its original warranty, if applicable.          “Repair and Special Order Merchandise” means all items of Merchandise held at theStores for repair, or customer-specific special orders for goods, in each case where (i) thedocumentation is clear as to the name, address, telephone number, date of last payment and balancedue from the customer, and (ii) the goods subject to repair or special order are properlyidentified, segregated and in a condition as described in the documentation.          “Transfer Merchandise” means first quality seasonal store Merchandise, outletdistribution center Merchandise, and closing store Merchandise (i) received at the Stores no laterthan the Cutoff Date, (ii) ticketed at Merchant’s expense and in accordance with Merchant’shistoric ticketing practices upon delivery to the Warehouse or the Stores, and (iii) set forth onExhibit 5.2(b) attached hereto. The Cost Price for Transfer Merchandise received at the
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Stores on or after Cutoff Date shall be reduced by a number equal to the Cost Price multipliedby the complement of the prevailing discount at the Store on the day on which such TransferMerchandise is received by such Store.          “Warehouse Merchandise” means first-quality, in season goods located at Merchant’swarehouse in Minneapolis, Minnesota (the “Warehouse”) on the Sale Commencement Date andwhich (i) at Merchant’s cost (including, without limitation, costs of labor, freight and supplies)are transferred to the Stores from the Warehouse on or before the Cutoff Date, (ii) are ticketed byMerchant at its expense and in accordance with Merchant’s historic ticketing practices prior to orupon delivery to the Stores, (iii) are consistent as to type, quality and assortment as Merchandisepresently located at the Stores, and (iv) are set forth on Exhibit 5.2(b) attached hereto. TheCost Price for Warehouse Merchandise received at the Stores on or after Cutoff Date shall bereduced by a number equal to the Cost Price multiplied by the complement of the prevailing discountat the Store on the day on which such Warehouse Merchandise is received by such Store.          “On-Order Merchandise” means first-quality, in season goods, ordered by Merchant forsale in the Stores in the ordinary course of business prior to the Sale Commencement Date andlisted on Exhibit 5.2(b), but that have not been received at the Stores by the Cutoff Date.The Cost Price for On Order Merchandise received at the Stores on or after Cutoff Date shall bereduced by a number equal to the Cost Price multiplied by the complement of the prevailing discountat the Store on the day on which such On Order Merchandise is received by such Store.
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          5.4 Valuation.          (a) For purposes of this Agreement, “Retail Price” shall mean, with respect to eachitem of Merchandise, the file price of such item identified as “Retail” on Merchant’s books andrecords as provided during the due diligence period.          (b) For purposes of this Agreement, “Cost Price” shall mean, with respect to each itemof Merchandise, the current weighted average cost for such item reflected in any of Merchant’sbooks and records.          (c) For purposes of this Agreement, “Ticketed Price” shall mean the lowest ticketed or markedprice set forth on each item of Merchandise identified as “Ticket” on Merchant’s books and recordsas provided during the due diligence period.     The Ticketed Price, Retail Price and the Cost Price of any item of Merchandise shall excludeall Sales Taxes, and Merchant represents that (a) the ticketed prices of all items of Merchandisedo not and shall not include any Sales Taxes and (b) all registers located at the Stores areprogrammed to correctly compute all Sales Taxes required to be paid by the customer underapplicable law. If an item of Merchandise has more than one Ticketed Price or Retail Price, asapplicable, or if multiple items of the same SKU are marked at different prices, the lowest RetailPrice on any such item shall prevail for such item or for all such items within the same SKU, asthe case may be, unless it is clear that the lowest Ticketed Price or Retail Price, as applicable,was mismarked.          5.5 Excluded Goods. Merchant shall retain all responsibility for any goods notincluded as “Merchandise” hereunder. Defective Merchandise will be segregated and
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transferred out of the Stores at Merchant’s sole cost and expense. Agent shall have no cost,expense or responsibility in connection with any goods not included in Merchandise.     Section 6. Store Closing Sale Term.          6.1 Term. Subject to satisfaction of the conditions precedent set forth inSection 10 hereof, the Store Closing Sale shall commence at each Store on February 15, 2008(such date with respect to each Store being the “Sale Commencement Date”). The Agentshall complete the Store Closing Sale at each Store no later than May 31, 2008, unless the StoreClosing Sale is extended pursuant to Section 8.10 hereof or by mutual written agreement ofAgent and Merchant (the “Sale Termination Date;” the period from the Sale Commencement Dateto the Sale Termination Date as to each Store being the “Sale Term”). The Agent may, inits discretion, terminate the Store Closing Sale at any Store or Stores at any time or from time totime within the Sale Term (a) upon the occurrence of an Event of Default by Merchant that continuesbeyond any applicable period for cure or (b) upon not less than ten (10) days’ prior written noticeto Merchant.          6.2 Vacating the Stores. At the conclusion of the Store Closing Sale, Agent agrees toleave the Stores in “broom clean” condition, ordinary wear and tear excepted, except for remainingSupplies and unsold items of FF&E.          6.3 Intentionally Omitted..     Section 7. Store Closing Sale Proceeds.          7.1 Proceeds. For purposes of this Agreement, “Proceeds” shall mean theaggregate of: (a) the total amount (in dollars) of all sales of Merchandise made under this
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Agreement, exclusive of (i) Sales Taxes and (ii) returns, allowances and customer credits and (b)all proceeds of Merchant’s insurance for loss or damage to Merchandise or loss of Store casharising from events occurring during the Sale Term.          7.2 Deposit of Proceeds. All cash Proceeds shall be deposited in existing accounts ofMerchant (such accounts, the “Agency Accounts”). Merchant and its lender, General ElectricCapital Corporation (“GECC”) shall exercise sole signatory authority and control with respect tothe Agency Accounts. Proceeds collected in the Agency Accounts shall be reconciled weekly inaccordance with Section 8.8 hereof and, immediately after such reconciliation, Merchantshall pay to Agent any amounts due under Section 3.3 hereof. After payment of theGuaranteed Amount, (a) Agent shall have the right (but not the obligation) to open new accounts forwhich Agent shall exercise sole signatory authority into which all cash Proceeds of the StoreClosing Sale shall be deposited, and (b) to the extent that Agent shall elect to continue to usethe Agency Accounts, (i) all Proceeds deposited in such accounts will constitute the property ofAgent and shall be held in trust by Merchant for Agent, and (ii) commencing on the first businessday following the date upon which the Guaranteed Amount is paid in full, and on each business daythereafter, Merchant shall pay to Agent by wire funds transfer all collected funds constitutingProceeds deposited in such accounts. At any time during the Sale Term, upon request by Agent,Merchant shall deliver to Agent documentation reflecting the deposit and wire transfers of suchProceeds. Merchant shall not be responsible for and Agent shall pay as an Expense hereunder, allbank fees and charges, including wire transfer charges, related to the Agency Accounts, whetherreceived during or after the Sale Term.          7.3 Credit Card Proceeds. Prior to the payment of the Guaranteed Amount, Agent shalluse Merchant’s credit card facilities (including Merchant’s credit card
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terminals and processor(s), credit card processor coding, merchant identification number(s) andexisting bank accounts) for credit card Proceeds. Merchant shall continue to process credit cardtransactions applying customary practices and procedures. Without limiting the foregoing, Merchantshall cooperate with Agent to down-load data from all credit card terminals each day during theSale Term and to effect settlement with Merchant’s credit card processor(s), and shall take suchother actions necessary to process credit card transactions under Merchant’s merchantidentification number(s). Prior to payment in full of the Guaranteed Amount, Merchant and Agentshall reconcile credit card Proceeds weekly as provided in Section 8.8 of this Agreement.After payment in full of the Guaranteed Amount, (a) all credit card Proceeds will constitute theproperty of the Agent and shall be held by Merchant in trust for Agent and (b) Merchant shalldeposit all credit card Proceeds into a designated account and shall transfer such Proceeds toAgent daily (on the date received by Merchant if received prior to 12:00 noon, or otherwise withinone business day) by wire transfer of immediately available funds. In addition, after payment infull of the Guaranteed Amount, at Agent’s request, Merchant shall cooperate with Agent to establishmerchant identification numbers under Agent’s name to enable Agent to process all credit cardProceeds for Agent’s account. Merchant shall not be responsible for and Agent shall pay as anExpense hereunder, all credit card fees, charges and chargebacks related to the Store Closing Sale,whether received during or after the Sale Term; provided, however, the Merchant shall inform Agentof any chargebacks as promptly as practicable.     Section 8. Conduct of the Store Closing Sale.          8.1 Rights of Agent. Subject to the terms of all leases, reciprocal easementagreements and other similar agreements relating to the occupancy of the Stores and/or theWarehouse (collectively, “Occupancy Agreements”), Agent shall be permitted to conduct the
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Store Closing Sale as a “store closing” or similar sale throughout the Sale Term; provided,however, that notwithstanding anything set forth in any Occupancy Agreement, Agent shall attempt toconduct the Store Closing Sale as a “store closing” or similar sale throughout the Sale Term,;provided further, in no event shall Agent be precluded from using the “Everything Must Go” handleduring the Sale Term with industry standard signage reflecting such message. To the extent thatAgent is precluded from using the “Everything Must Go” handle during the Sale Term, Agent andMerchant shall mutually agree on a remedy to address such a situation. Merchant shall use its bestefforts to assist Agent in connection with implementing the Store Closing Sale as contemplated bythis Agreement. Agent shall conduct the Comprehensive Sale in the name of and on behalf ofMerchant in a commercially reasonable manner and in compliance with (i) the terms of this Agreementand (ii) provisions of applicable laws, regulations and ordinances. In addition to any otherrights granted to Agent hereunder, in conducting the Store Closing Sale, Agent, in the exercise ofits sole discretion, shall have the right, subject to the immediately preceding sentence:          (a) to establish and implement advertising, signage and promotion programs consistent with the“store closing” theme (including, without limitation, by means of media advertising, banners,A-frame and similar interior and exterior signs and use of sign walkers), provided, that Agentshall not use the term “going out of business” in any signage and, subject to the preamble to thisSection, be responsive to Merchant’s reasonable requests regarding alteration or modification ofany signage;          (b) to establish Store Closing Sale prices and Store hours;          (c) to use without charge during the Sale Term all FF&E, advertising materials, bank accounts,Store-level customer lists and mailing lists, computer hardware and
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software, Supplies, intangible assets (including Merchant’s name, logo and tax identificationnumbers), Store keys, case keys, security codes, and safe and lock combinations required to gainaccess to and operate the Stores and any other assets of Merchant located at the Stores or theWarehouse (whether owned, leased or licensed); and          (d) to have the benefit of, without charge, (i) Merchant’s central office facilities, POSsystems, central and administrative services and personnel to process payroll, perform MISservices, sales audit and cash reconciliation and provide other central office services, necessaryfor the Comprehensive Sale and (ii) one office located at Merchant’s central office facility.          8.2 Terms of Sales to Customers. All sales of Merchandise will be “final sales” and“as is,” and all advertisements and sales receipts will reflect the same. In addition, Agent shallindicate on any Merchandise sold that such sale is “final,” “as is,” and shall be marked in such away as to prevent consumers from returning the goods at other of Merchant’s stores. Agent shallnot warrant the Merchandise in any manner, but will, to the extent legally permissible, pass on allmanufacturer’s warranties to customers. All sales will be made only (a) for cash, or (b) by bankcredit cards currently accepted by Merchant. Agent shall accept Merchant gift certificates/giftcards, Store credits, and other promotional items providing the customer with an additionaldiscount on Store Merchandise that have been issued by Merchant prior to the Sale CommencementDate, provided that Merchant agrees to reimburse Agent in cash for the face amount of any suchitems within five (5) days after Agent’s request therefor.          8.3 Sales Taxes. During the Sale Term, all sales, excise, gross receipts and othertaxes attributable to sales of Merchandise (other than taxes on income) payable to any
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taxing authority having jurisdiction (collectively, “Sales Taxes”) shall be added to thesales price of Merchandise and collected by Agent on behalf of Merchant at the time of sale. TheAgent shall draw checks on the Agency Accounts payable to the applicable taxing authorities in theamount so collected, which shall be delivered together with accompanying schedules to Merchant on atimely basis for payment of taxes when due. Merchant shall promptly pay all Sales Taxes and fileall applicable reports and documents required by the applicable taxing authorities. Merchant willbe given access to the computation of gross receipts for verification of all such tax collections.          8.4 Supplies. Agent shall have the right to use, without charge, all existingsupplies located at the Stores and the Warehouse, including, without limitation, boxes, bags,paper, twine and similar sales materials (collectively, “Supplies”). In the event thatadditional Supplies are required in any of the Stores during the Store Closing Sale, Merchantagrees promptly to provide the same to Agent, if available, for which Agent shall reimburseMerchant at Merchant’s cost therefor. Merchant does not warrant that the existing Supplies in theStores as of the Sale Commencement Date are adequate for the purposes of the Store Closing Sale.Supplies have not been since January 1, 2008, and shall not be prior to the Sale Commencement Date,transferred by Merchant between or among the Stores and/or the Warehouse, so as to alter the mix orquantity of Supplies at the Stores from that existing on such date, other than in the ordinarycourse of business.          8.5 Returns of Merchandise. During the Sale Term, the Agent shall accept returns onlyof defective goods sold by Merchant from the Stores prior to the Sale Commencement Date(“Returned Merchandise”), provided such goods are accompanied by the original Store receipt.Merchant shall reimburse Agent in cash for the amount of any store credit
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or refund given to any customer in respect of Returned Defective Merchandise. Any ReturnedDefective Merchandise shall be disposed of by Agent in accordance with instructions received fromMerchant and at Merchant’s sole cost and expense. Any reimbursements due to Agent as result ofReturned Defective Merchandise shall be accounted for and paid by Merchant immediately followingthe weekly Store Closing Sale reconciliation pursuant to Section 8.8 hereof.          8.6 Repair and Special Order Merchandise. Promptly after the execution of thisAgreement, Merchant shall notify each customer for which Merchant holds Repair and Special OrderMerchandise of the Store Closing Sale and request such customers to pick up and pay for theapplicable item(s) by the Cutoff Date. Any amounts paid for Repair and Special Order Merchandiseon or before the close of business on the Cutoff Date shall be for the sole account of Merchant.Subject to applicable law, any Repair and Special Order Merchandise unclaimed by customers by theCutoff Date shall be included in Merchandise and the Guaranteed Amount shall be adjusted to accountfor such items in accordance with this Agreement. Prior to the Cutoff Date, Agent shalladminister all Repair and Special Order Merchandise in accordance with the documents and agreementsrelating thereto, provisions of applicable law and Merchant’s historic policies. In the event thatAgent is required to issue refunds to customers in respect of Repair and Special Order Merchandise,Merchant shall reimburse Agent in cash for all such amounts. At the end of the Sale Term, Agentshall transfer responsibility for any remaining items of Layaway, Repair and Special OrderMerchandise back to Merchant after appropriate and legally required communications to customers andreconciliation between Agent and Merchant. All payments by Agent and Merchant required under thisSection 8.6 shall be made
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immediately following the weekly Store Closing Sale reconciliation by Agent and Merchantpursuant to Section 8.8 hereof.     8.7 Compliance with Law. Agent shall comply in the conduct of the Comprehensive Salewith (i) all applicable statutes, rules, regulations and orders of, and applicable restrictionsimposed by, governmental authorities, including, without limitation, all so called “going out ofbusiness laws” and all laws and regulations relating to treatment of employees and (ii) all ofMerchant’s employee rules, regulations, guidelines and policies, which have been provided to Agentin writing and which are listed in Exhibit 8.7 attached hereto. Merchant agrees tocooperate with Agent to facilitate Agent’s obtaining all required permits and otherwise comply withsuch laws and regulations.     8.8 Store Closing Sale Reconciliation. On each Wednesday during the Sale Term,commencing on the second Wednesday after the Sale Commencement Date, Agent and Merchant shallcooperate to reconcile sales, Expenses, credit card Proceeds, receipts of Transfer Merchandise,On-Order Merchandise, Warehouse Merchandise and Returned Defective Merchandise at the Stores(including quantities and Cost Price thereof), Gross Rings and such other Store ClosingSale-related items as either party shall reasonably request, in each case for the prior week orpartial week (i.e., Sunday through Saturday), all pursuant to procedures agreed upon by Merchantand Agent. Immediately thereafter, Merchant shall pay to Agent all amounts due to Agent pursuantto Section 3.3 hereof. Within thirty (30) days after the end of the Sale Term, Agent andMerchant shall complete a final reconciliation of the Store Closing Sale, the written results ofwhich shall be certified by representatives of each of Merchant and Agent as a final settlement ofaccounts between Merchant and Agent with respect to the Store Closing Sale.
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          8.9 Force Majeure. If any casualty or act of God prevents or substantially inhibitsthe conduct of business in the ordinary course at any Store, such Store and the Merchandise locatedat such Store shall, in Agent’s discretion, be eliminated from the Comprehensive Sale andconsidered to be deleted from this Agreement as of the date of such event (unless Agent andMerchant otherwise agree in writing), and Agent and Merchant shall have no further rights orobligations hereunder with respect thereto; provided, however, that (i) theproceeds of any insurance attributable to such Merchandise shall constitute Proceeds hereunder and(ii) the Guaranteed Amount shall be reduced to account for any Merchandise eliminated from theStore Closing Sale which is not the subject of insurance proceeds, and Merchant shall reimburseAgent for the amount the Guaranteed Amount is so reduced prior to the end of the Sale Term.          8.10 Extraordinary Events. If any extraordinary external event occurs that may bereasonably expected to have a material adverse effect upon the Store Closing Sale (e.g., terroristattack), notwithstanding anything set forth in this Agreement to the contrary, Agent shall have theright, but not the obligation, to extend the Sale Term for any Store (provided, Agent pays allExpenses during such extended Sale Term in accordance with the provisions hereof) and/or to removeMerchandise from the Stores and sell it through other channels (provided, all proceeds of suchsales through other channels shall be treated as Proceeds of the Store Closing Sale hereunder).          8.11 Early Closures. If Agent is unable to operate the Sale for the Sale Term due tolease expirations for the Stores set forth on Exhibit 8.11 or if Agent is unable to operate theSale for the Sale Term at any Store due to an action by a landlord, such Store and the
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Merchandise located at such Store shall, in Agent’s discretion, be eliminated from theComprehensive Sale and considered to be deleted from this Agreement as of the date of such leaseexpiration or order precluding the Sale (unless Agent and Merchant otherwise agree in writing), andAgent shall have no further rights or obligations hereunder with respect thereto, provided,however, that Agent will use commercially reasonable efforts to remain in the Store premises forthe Sale Term, provided further, in the event that 66% of the Cost Price of the Merchandise locatedat such Store as of the Cutoff Date has been sold by the date of such lease expiration or orderprecluding the Sale, Agent shall have the right, but not the obligation, to remove Merchandise fromthe Store and sell it through other Stores (provided, all proceeds of such sales through otherStores shall be treated as Proceeds of the Store Closing Sale hereunder) and/or to extend the SaleTerm for any other Store (provided, Agent pays all Expenses during such extended Sale Term inaccordance with the provisions hereof and such extension does not extend beyond the SaleTermination Date).     Section 9. Employee Matters.          9.1 Merchant’s Employees. Agent may use Merchant’s employees in the conduct of theComprehensive Sale to the extent Agent in its sole discretion deems expedient, and Agent may selectand schedule the number and type of Merchant’s employees required for the Comprehensive Sale.Agent shall identify any such employees to be used in connection with the Comprehensive Sale (eachsuch employee, a “Retained Employee”) prior to the Sale Commencement Date; provided,however, that Agent acknowledges that all Store-level employees shall be Retained Employees.Retained Employees shall at all times remain employees of Merchant, and shall not be considered ordeemed to be employees of Agent. Merchant and Agent agree that except to the extent that wages andbenefits of Retained
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Employees constitute Expenses hereunder, nothing contained in this Agreement and none of Agent’sactions taken in respect of the Comprehensive Sale shall be deemed to constitute an assumption byAgent of any of Merchant’s obligations relating to any of Merchant’s employees including, withoutlimitation, Excluded Benefits, Worker Adjustment Retraining Notification Act (“WARN Act”)claims and other termination type claims and obligations or any other amounts required to be paidby statute or law; nor shall Agent become liable under any collective bargaining or employmentagreement or be deemed a joint or successor employer with respect to such employees. Merchantshall not, without Agent’s prior written consent, raise the salary or wages or increase thebenefits for, or pay any bonuses or make any other extraordinary payments to, any of its employeeson or after the date of this Agreement.          9.2 Termination of Employees. Agent may in its discretion stop using any RetainedEmployee at any time during the Comprehensive Sale. In the event of termination of any RetainedEmployee, Agent will use all reasonable efforts to notify Merchant at least five (5) days priorthereto, except for termination “for cause” (such as dishonesty, fraud or breach of employeeduties), in which event no prior notice to Merchant shall be required, provided Agent shall notifyMerchant as soon as practicable after such termination. From and after the date of this Agreement,Merchant shall not transfer or dismiss employees of the Stores outside the ordinary course ofbusiness without Agent’s prior consent except “for cause”. Without limiting the foregoing,Merchant has not distributed, and shall not distribute, any notice to its employees under the WARNAct without Agent’s prior written consent.          9.3 Payroll Matters. During the Sale Term, Merchant shall process the base payroll for all Retained Employees.On Wednesday of each week a payroll is to be paid during the Sale Term, Merchant or Agent, as thecase may be, shall transfer from the Agency
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Accounts to Merchant’s payroll accounts an amount equal to the base payroll for Retained Employeesplus related payroll taxes, worker’s compensation and benefits for such week that constituteExpenses hereunder.          9.4 Employee Retention Bonuses. In Agent’s sole discretion, Proceeds may be used topay, as an Expense, retention bonuses (“Retention Bonuses”) (which bonuses shall beinclusive of payroll taxes but as to which no benefits shall be payable) to Retained Employees whodo not voluntarily leave employment and are not terminated “for cause.” Such Retention Bonusesshall be processed through Merchant’s payroll system.     Section 10. Conditions Precedent. The willingness of Agent to enter into thetransactions contemplated under this Agreement are directly conditioned upon the satisfaction ofthe following conditions at the time or during the time periods indicated, unless specificallywaived in writing by Agent:          (a) Prior to the Sale Commencement Date, Agent shall have made or initiated all requiredfilings and registrations and shall obtain all permits, licenses, consents, authorizations andapprovals required under applicable laws, rules, regulations and court or administrative orders forMerchant to execute and deliver this Agreement and to consummate the Comprehensive Sale; providedthat Merchant agrees to cooperate fully with Agent in obtaining such permits, licenses, consents,authorizations and approvals.          (b) All representations and warranties of Merchant hereunder shall be true and correct in allmaterial respects and no Event of Default by Merchant shall have occurred at and as of the datehereof and as of the Sale Commencement Date.          (c) Prior to the Sale Commencement Date, Merchant shall have provided Agent reasonable accessto all pricing and cost files, computer hardware, software and
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data files, inter-Store transfer logs, markdown schedules, invoices, style runs and all otherdocuments relative to the price, mix and quantities of inventory located at the Stores.          (d) Agent shall have had the opportunity to inspect the Stores, the Warehouse and theinventory preceding the Sale Commencement Date.     Section 11. Representations, Warranties and Covenants.          11.1 Merchant Representations, Warranties and Covenants. Merchant hereby represents,warrants and covenants in favor of Agent as follows:          (a) Each of the entities of which Merchant is jointly and severally composed: (i) is acorporation duly organized, validly existing and in good standing under the laws of the state ofits incorporation; (ii) has all requisite corporate power and authority to own, lease and operateits assets and properties and to carry on its business as presently conducted and (iii) is, anduntil the end of the Marketing Period with respect to all of the Leases will continue to be, dulyauthorized and qualified as a foreign corporation to do business and in good standing in eachjurisdiction where the nature of its business or properties requires such qualification.          (b) Each of the entities of which Merchant is jointly and severally composed has the right,power and authority to execute and deliver this Agreement and each other document and agreementincorporated herein (collectively, together with this Agreement, the “Agency Documents”)and to perform fully its obligations thereunder. Each of the entities of which Merchant is jointlyand severally composed has taken all necessary actions required to authorize the execution,delivery and performance of the Agency Documents, and no further consent or approval is requiredfor any of them to enter into and deliver the Agency Documents, to perform its obligationsthereunder and to consummate the Comprehensive Sale. Each of the Agency Documents has been dulyexecuted and delivered by each of the entities of which
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Merchant is jointly and severally composed and constitutes the legal, valid and bindingobligation of each of them enforceable in accordance with its terms. No court order or decree ofany federal, state or local governmental authority or regulatory body is in effect that wouldprevent or impair, or is required for the Merchant’s consummation of, the transactions contemplatedby this Agreement, and no consent of any third party that will not be obtained prior to the SaleCommencement Date is required therefor except for consents under the Occupancy Agreements. Subjectto Merchant’s obtaining the consent of GECC, no contract or other agreement to which the Merchantis a party or by which the Merchant is otherwise bound will prevent or impair the consummation ofthe Comprehensive Sale and the transactions contemplated by this Agreement.          (c) From January 1, 2008 through the Sale Commencement Date, the Merchant has operated andwill operate the Stores in the ordinary course of business consistent with historical operations.Without limiting the foregoing, from January 1, 2008 through the Sale Commencement Date (unlessotherwise agreed by Agent), (i) Merchant has not conducted and will not conduct any promotions oradvertised sales at the Stores except promotions and sales in the ordinary course of businessconsistent with historic promotions and sales for comparable periods last year, all as described inExhibit 11.1(c) attached hereto, (ii) Merchant has continued and will continue to replenishthe Stores with new Merchandise in a manner consistent with historic practices and (iii) all rackjobbers and service vendors have continued and will continue to service the Stores in the ordinarycourse; provided, however, that Agent acknowledges that Merchant will transfer the WarehouseMerchandise and Transfer Merchandise to the Stores in accordance herewith.
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          (d) Merchant owns and will own at all times during the Sale Term, good and marketable title toall of the inventory at the Stores and the Warehouse and all inventory on order by the Merchant,including, without limitation, the Merchandise free and clear of all liens, claims and encumbrancesof any nature except liens granted to GECC. Merchant shall not create, incur, assume or suffer toexist any security interest, lien or other charge or encumbrance upon or with respect to any of theMerchandise or the Proceeds except for the lien in favor of GECC.          (e) Merchant has maintained its pricing files in the ordinary course of business, and pricescharged to the public for goods (whether in-Store, by advertisement or otherwise) are the same inall material respects as set forth in such pricing files for the periods indicated therein, exceptfor the promotions and sales described in Section 11.1(c). All pricing files and recordssince January 1, 2008 relative to the Merchandise have been made available to Agent and are listedin Exhibit 11.1(e). All such pricing files, including, but not limited to, files relatedto Cost Price, Retail Price and Ticket Price, and records are true and accurate in all materialrespects as to the actual cost to Merchant for purchasing the goods referred to therein and as tothe selling price to the public for such goods as of the dates and for the periods indicatedtherein.          (f) As of the Sale Commencement Date, the levels of goods (as to quantity) and the mix ofgoods (as to type, category, style, brand and description) at the Stores, the On-Order Merchandise,Warehouse Merchandise and the Transfer Merchandise are in all material respects described inExhibit 11.1(f) attached hereto. To the extent that the levels of goods (as to quantity)and the mix of goods (as to type, category, style, brand and description) at the Stores as of theSale Commencement Date are materially different from that described on
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Exhibit 11.1(f), the Merchant and Agent shall mutually agree on a downward adjustment to theCost Price of the Merchandise.          (g) As of the Sale Commencement Date, all normal course permanent markdowns on inventorylocated at the Stores will have been taken on a basis consistent with Merchant’s historicalpractices and policies and consistent with Merchant’s other stores in the comparable mall or outletchannel.          (h) Merchant has not and will not have from January 1, 2008 through the Sale CommencementDate, marked up or raised the price of any items of Merchandise, or removed or altered any ticketsor any indicia of clearance merchandise, except in the ordinary course of business.          (i) Merchant shall ticket or mark all items of inventory received at the Stores prior to theSale Commencement Date (including, without limitation, all On-Order Merchandise, TransferMerchandise and Warehouse Merchandise), in a manner consistent with similar Merchandise located atthe Stores and in accordance with Merchant’s historic practices and policies relative to pricingand marking inventory and consistent with Merchant’s other stores in the comparable mall or outletchannel.          (j) Unless otherwise agreed by Agent and contemplated by Section 5.2(b), Merchant hasnot and shall not purchase or transfer to or from the Stores any merchandise or goods outside theordinary course in anticipation of the Store Closing Sale.          (k) [Intentionally omitted.]          (l) No action, arbitration, suit, notice or legal, administrative or other proceeding beforeany court or governmental body has been instituted by or against the Merchant, or has been settledor resolved, or to Merchant’s knowledge, is threatened against or
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affects Merchant that if adversely determined, would adversely affect the conduct of theComprehensive Sale.          (m) Exhibit 11.1(m) attached hereto sets forth (i) historic sales at the Stores forthe months ending January 2007 through December 2007 and (ii) the levels and mix of inventories atthe Stores during such periods.          (n) Merchant covenants that from January 1, 2008 through the Sale Commencement Date, it hasand will continue to operate the Stores in the ordinary course of business, including, specifically(i) selling inventory during such period at customary prices, (ii) not promoting or advertising anysales or in-store promotions (including POS promotions) to the public (except for Merchant’shistoric and customary promotions for all of its locations as set forth in Exhibit 11.1(c)attached hereto), (iii) not returning inventory to vendors and not transferring inventory orsupplies between or among Stores and the Warehouse outside the ordinary course of business, exceptas permitted under Section 8.4 above and except for cancellations of orders of goods byMerchant and (iv) not making any management personnel moves or changes at the Stores outside theordinary course of business without Agent’s prior written consent (which consent will not beunreasonably withheld).          (o) To the best of Merchant’s knowledge, all Merchandise is in compliance with all applicablefederal, state or local product safety laws, rules and standards.          (p) As of the date of the Agreement, no event of default or event which with the giving ofnotice, the passage of time or both has occurred on the part of the Merchant under any OccupancyAgreement that could have a material adverse effect on the Comprehensive Sale. From and after theSale Commencement Date, except as provided in Section 8.11 and subject to Section 8.1, the Agentshall have the right to the unencumbered use
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and occupancy of, and peaceful and quiet possession of, each of the Stores, the assetscurrently located at the Stores and the utilities and other services provided at the Stores.Merchant shall maintain in good working order, condition and repair, at its sole expense, all cashregisters, heating systems, air conditioning systems, elevators, escalators, Store alarm systemsand all other mechanical devices used in the ordinary course of operation of the Stores.          (q) Subject to Agent’s obligation to fund Expenses hereunder, Merchant has paid and willcontinue to pay throughout the Sale Term, (i) all self-insured or Merchant funded employee benefitprograms for employees, including health and medical benefits and insurance and all proper claimsmade or to be made in accordance with such programs, (ii) all casualty, liability, worker’scompensation and other insurance premiums, (iii) all utilities provided to the Stores and (iv) allapplicable taxes. Following the conclusion of the Comprehensive Sale, Merchant shall pay allearned but unused vacation to applicable Retained Employees in the ordinary course in accordancewith Merchant’s policies.          (r) Merchant has not and shall not throughout the Sale Term take any actions the result ofwhich is to materially increase the cost of operating the Comprehensive Sale, including, withoutlimitation, increasing salaries or other amounts payable to employees.          (s) Except as disclosed on Exhibit 11.1(s) attached hereto, (i) Merchant is not aparty to any collective bargaining agreements with its employees, (ii) to the best of Merchant’sknowledge, no labor unions represent Merchant’s employees at the Stores and (iii) to the best ofMerchant’s knowledge, there are currently no strikes, work stoppages or other labor disturbancesaffecting the Stores, Merchant’s central office facilities or the Warehouse.          (t) As of the date of this Agreement, Merchant is not delinquent in payment of all telephone,utilities, taxes, insurance and advertising liabilities such that any
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delinquency would detrimentally impact the Comprehensive Sale. Merchant agrees that in theevent that Agent receives notice that any such liability is materially overdue or unpaid, or Agentis unable to advertise the Comprehensive Sale with any newspapers, magazines, radio or televisionstations or other media providers which target or serve the market areas of the Stores or is unableto obtain Merchant’s contract rate with any such provider as a result of the Merchant’s failure topay its outstanding balances with such providers, Merchant shall immediately pay such applicablebalances in full.          (u) (i) As of the Sale Commencement Date, the aggregate Cost Price of the Merchandise dividedby the aggregate Retail Price of the Merchandise (the “Cost Factor”) shall be no greaterthan 34.5%. In the event the Cost Factor is greater than 34.5%, the Cost Price shall be adjustedas set forth on Exhibit 11.1(u) hereto and (ii) as of the Sale Commencement Date, theaggregate Cost Price of the Merchandise divided by the aggregate Ticketed Price of the Merchandise(the “Ticket Factor”) shall be no greater than 21.3%. In the event the Ticket Factor isgreater than 21.3%, the Cost Price shall be adjusted as set forth on Exhibit 11.1(u)hereto. In the event that the representation and warranty set forth in the immediately precedingsentence of this Section 11.1(u) is breached by Merchant with respect to any item ofMerchandise, Merchant and Agent shall use reasonable efforts to agree on an adjustment to the CostPrice of such item of Merchandise in good faith during the five (5) day cure period set forth inSection 14 hereof.          (v) Merchant has provided Agent with all information requested by Agent and all information soprovided is true, correct and complete in all material respects.          (w) Merchant has maintained each of the Leased Properties, including, without limitation, theroof, foundation and structure of all improvements thereon and all mechanical systems thereatincluding heating, cooling, ventilating, electrical and plumbing
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fixtures and systems and all appliances, in good working order, condition and repair, exceptfor those for which the respective landlords are responsible under the Leases governing the LeasedProperties. To the best of Merchant’s knowledge, to the extent any landlord is responsible formaintenance of any of the foregoing under the Lease governing such landlord’s Leased Property, suchlandlord has fulfilled its obligations under the applicable lease to maintain the foregoing. Inthe event any repairs or maintenance with respect to any of the foregoing are required on or afterthe Sale Commencement Date in order to avoid a detrimental impact on the Store Closing Sale,Merchant shall immediately perform such repairs or maintenance; provided, however, that in theevent the landlord with respect to any Leased Property is responsible for performing such repairsor maintenance under the Lease governing such Leased Property, Merchant shall use its best effortsto immediately cause such landlord to perform such repairs or maintenance.          (x) Merchant’s relationship with Agent is solely that of agent and principal, not that ofjoint venturers or partners.          (y) There has not occurred any unauthorized or illegal emission, leak, discharge, spill orrelease into the environment of any Hazardous Materials (as defined below) by Merchant or any useof Hazardous Materials on or from any Leased Property which, in any material respect, violates anyapplicable federal, state or local law, rule, regulation governing the use, storage, treatment,handling, production or disposal of such Hazardous Materials or any other Environmental Laws (asdefined below) that would result in liability to Merchant or such Leased Property. For purposes ofthis Section 11.1(y), the term “Hazardous Materials” shall include, withoutlimitation, any asbestos, PCBs, pollutants, contaminants, chemicals, wastes and other carcinogenic,ignitable, corrosive, reactive, toxic or otherwise hazardous substance or materials (whether solid,liquid or gaseous) subject to regulation, control or remediation under
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the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended,the Hazardous Materials Transportation Act, as amended, the Resources Conservation and RecoveryAct, as amended, the Toxic Substances Control Act, as amended, the Clean Water Act, as amended, theSafe Drinking Water Act, as amended, the Clean Air Act, as amended, the Occupational Safety andHealth Act, as amended, the Atomic Energy Act of 1954, as amended, and all analogous or relatedlaws and in the regulations adopted and publications promulgated pursuant thereto, or any otherfederal, state or local environmental law, ordinance, rule or regulation (collectively, the“Environmental Laws”).          (z) No action, arbitration, suit, notice or legal, administrative or other proceeding beforeany court or governmental body has been instituted by or against Merchant or any Leased Property,or has been settled or resolved, or has been threatened against or affects Merchant or any LeasedProperty, which if adversely determined, would give rise to a lien or other encumbrance on anyLeased Property, or have a material adverse effect upon any Leased Property, Merchant’s ability toperform its obligations under this Agreement or the conduct of the Comprehensive Sale.          (aa) The relationship between Cost Price and Ticketed Price shall be as set forth on Exhibit11.1(aa).          (bb) The information concerning the Leases set forth on Exhibit 1C hereto is true and correctin all material respects.          (cc) The Merchant has delivered to the Agent, or shall have delivered to the Agent no laterthan fifteen (15) calendar days after the date of this Agreement, true, complete and correct copiesof all Leases and any writings concerning any current actual defaults or breaches thereunder.Merchant shall also use commercially reasonable efforts to provide Agent
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with all correspondence with the landlords under the Leases, including without limitation, anywritings in printed or electronic format concerning any proposed modification, assignment ortermination of the Leases.          (dd) No third party (other than Rosedale Wilsons, Inc.) (“Guarantor”)) has guaranteed or isresponsible for any of the Merchant’s obligations under any of the Leases.          (ee) The Merchant has not received notice of any claim, action, suit, or proceeding withrespect to any of the Leases that remains unresolved.          11.2 Agent Representations and Warranties. Agent hereby represents, warrants andcovenants in favor of the Merchant as follows:          (a) Each member of Agent: (i) is a limited liability company duly organized, validly existingand in good standing under the laws of the State of Delaware; (ii) has all requisite power andauthority under its operating agreement to consummate the transactions contemplated hereby and(iii) is and until the end of the Marketing Period with respect to all of the Leases will continueto be, duly authorized and qualified as a foreign limited liability company to do business and ingood standing in each jurisdiction where the nature of its business or properties requires suchqualification.          (b) Agent has the right, power and authority to execute and deliver each of the AgencyDocuments to which it is a party and to perform fully its obligations thereunder. Agent has takenall necessary actions required to authorize the execution, delivery and performance of the AgencyDocuments. Each of the Agency Documents has been duly executed and delivered by Agent andconstitutes the legal, valid and binding obligation of Agent enforceable in accordance with itsterms. No contract or other agreement to which Agent is a
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party or by which Agent is otherwise bound will prevent or impair the consummation of thetransactions contemplated by this Agreement.          (c) No action, arbitration, suit, notice or legal, administrative or other proceeding beforeany court or governmental body has been instituted by or against Agent, or has been settled orresolved, or to Agent’s knowledge, has been threatened against or affects Agent, which questionsthe validity of this Agreement or any action taken or to be taken by the Agent in connection withthis Agreement, or which if adversely determined, would have a material adverse effect upon theAgent’s ability to perform its obligations under this Agreement.     Section 12. Insurance.          12.1 Merchant’s Liability Insurance. Merchant shall continue at its cost and expenseuntil the end of the Marketing Period with respect to all of the Leases, in such amounts as itcurrently has in effect, all of its liability insurance policies including, but not limited to,products liability, comprehensive public liability, auto liability and umbrella liabilityinsurance, covering injuries to persons and property in, or in connection with Merchant’s operationof the Stores, and shall cause Agent to be named an additional named insured with respect to allsuch policies. Exhibit 12.1 attached hereto contains a description of all such policies.Prior to the Sale Commencement Date, Merchant shall deliver to Agent certificates evidencing suchinsurance setting forth the duration thereof and naming Agent as an additional named insured, inform reasonably satisfactory to Agent. All such policies shall require at least thirty (30) days’prior notice to Agent of cancellation, non-renewal or material change. In the event of a claimunder any such policies Merchant shall be responsible for the payment of all deductibles,retentions or self-insured amounts thereunder, unless it is determined that liability
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arose by reason of the wrongful acts or omissions or negligence of Agent, or Agent’semployees, independent contractors or agents (other than Merchant’s employees).          12.2 Merchant’s Casualty Insurance. Merchant will provide during the Sale Term, atAgent’s cost as an Expense hereunder, fire, flood, theft and extended coverage casualty insurancecovering the unsold Merchandise in a total amount equal to no less than the Cost Price thereof.Exhibit 12.2 attached hereto contains a description of all such policies. From and afterthe date of this Agreement until the end of the Sale Term, all such policies will name Agent asloss payee. In the event of a loss to the Merchandise on or after the date of this Agreement, theproceeds of such insurance attributable to the Merchandise plus any self insurance amounts and theamount of any deductible (which amounts shall be paid by Merchant), shall constitute Proceedshereunder and shall be paid to Agent; provided, however, in no event shall Agent receive more thanCost Price of the Merchandise. In the event of such a loss, Agent and Merchant shall work jointlyto adjust the loss with the Insurer. Prior to the Sale Commencement Date, Merchant shall deliverto Agent certificates evidencing such insurance setting forth the duration thereof and naming theAgent as loss payee, in form and substance reasonably satisfactory to Agent. All such policiesshall require at least thirty (30) days’ prior notice to the Agent of cancellation, non-renewal ormaterial change. Merchant shall not agree to any increases in the amount of any deductibles orself insurance amounts prior to the end of the Sale Term without Agent’s prior written consent.          12.3 Agent’s Insurance. Agent shall maintain at Agent’s cost and expense until theend of the Marketing Period with respect to all of the Leases, in such amounts as it currently hasin effect, comprehensive public liability and automobile liability insurance policies coveringinjuries to persons and property in or in connection with Agent’s agency at the
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Stores, and shall cause Merchant to be named an additional insured with respect to such policies.Exhibit 12.3 attached hereto contains a description of all such policies. Prior to theSale Commencement Date, Agent shall deliver to Merchant certificates evidencing such insurancepolicies setting forth the duration thereof and naming Merchant as an additional insured, in formand substance reasonably satisfactory to Merchant. In the event of a claim under any suchpolicies, Agent shall be responsible for the payment of all deductibles, retentions or self-insuredamounts thereunder, unless it is determined that liability arose by reason of the wrongful acts oromissions or negligence of Merchant or Merchant’s employees, independent contractors or agents(other than Agent or Agent’s employees, agents or independent contractors).          12.4 Worker’s Compensation Insurance. Merchant shall at all times maintain in fullforce and effect worker’s compensation insurance (including employer liability insurance) coveringall Retained Employees in compliance with all statutory requirements. Prior to the SaleCommencement Date, Merchant shall deliver to Agent a certificate of Merchant’s insurance broker orcarrier evidencing such insurance.          12.5 Risk of Loss. Without limiting any other provision of this Agreement, Merchantacknowledges that Agent is conducting the Comprehensive Sale on behalf of Merchant solely in thecapacity of an agent, and that in such capacity (i) Agent shall not be deemed to be in possessionor control of the Stores or the assets located therein or associated therewith, or of Merchant’semployees located at the Stores and (ii) except as expressly provided in this Agreement, Agent doesnot assume any of Merchant’s obligations or liabilities with respect to any of the foregoing.Merchant and Agent agree that Merchant shall bear all responsibility for liability claims ofcustomers, employees and other persons arising from events occurring at the Stores during and afterthe Sale Term, except to the extent any such claim arises
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from the acts or omissions of Agent, or its supervisors or employees located at the Stores (an“Agent Claim”). In the event of any such liability claim other than an Agent Claim,Merchant shall administer such claim and shall present such claim to Merchant’s liability insurancecarrier in accordance with Merchant’s historic policies and procedures, and shall provide a copy ofthe initial documentation relating to such claim to Agent. To the extent that Merchant and Agentagree that a claim constitutes an Agent Claim, Agent shall administer such claim and shall presentsuch claim to its liability insurance carrier, and shall provide a copy of the initialdocumentation relating to such claim to Merchant. In the event that Merchant and Agent cannotagree whether a claim constitutes an Agent Claim, each party shall present the claim to its ownliability insurance carrier, and a copy of the initial claim documentation shall be delivered tothe other party.          12.6 Non-Assumption of Liability. Agent shall not assume any debt, liability orobligation of Merchant, except as expressly agreed to herein. Even with respect to such expresslyassumed debts, liabilities and obligations, Agent’s only liability for such amounts shall be itsobligations to Merchant hereunder. Under no circumstances shall Agent have any direct liability toany third party by virtue of this Agreement. Without limiting the foregoing, Agent does not assumeany liability to third parties with respect to any Leased Property. Agent does not hereby assumeany control or possession of any Leased Property, and no property rights in favor of Agent aregranted hereby other than the rights to payment of fees and reimbursement of expenses set forthherein.     Section 13. Indemnification.          13.1 Merchant Indemnification. Provided that Agent makes a written demand on Merchantfor indemnification on or prior to January 31, 2009, Merchant shall
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indemnify and hold Agent and its members, managers, officers, directors, employees, agents andindependent contractors (collectively, “Agent Indemnified Parties”) harmless from andagainst all claims, demands, penalties, losses, liability or damage, including, without limitation,reasonable attorneys’ fees and expenses, directly or indirectly asserted against, resulting from,or related to:          (a) Merchant’s material breach of or failure to comply with any of its agreements, covenants,representations or warranties contained in any Agency Document;          (b) any failure of Merchant to pay to its employees any wages, salaries or benefits due tosuch employees during the Sale Term;          (c) subject to Agent’s compliance with its obligations under Section 8.3 hereof, anyfailure by Merchant to pay any Sales Taxes to the proper taxing authorities or to properly filewith any taxing authorities any reports or documents required by applicable law to be filed inrespect thereof;          (d) any consumer warranty or products liability claims relating to Merchandise or MerchantConsignment Goods;          (e) any liability or other claims asserted by customers, any of Merchant’s employees, or anyother person against any Agent Indemnified Party (including, without limitation, claims byemployees arising under collective bargaining agreements, worker’s compensation or under the WARNAct), except for Agent Claims and          (f) the gross negligence or willful misconduct of Merchant or any of its officers, directors,employees, agents or representatives.          13.2 Agent Indemnification. Provided that Merchant makes a written demand on Agentfor indemnification on or prior to January 31, 2009, Agent shall indemnify and
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hold Merchant and its officers, directors, employees, agents and representatives harmless form andagainst all claims, demands, penalties, losses, liability or damage, including, without limitation,reasonable attorneys’ fees and expenses, directly or indirectly asserted against, resulting from orrelated to:          (a) Agent’s material breach of or failure to comply with any of its agreements, covenants,representations or warranties contained in any Agency Document;          (b) any harassment or any other unlawful, tortious or otherwise actionable treatment of anyemployees or agents of Merchant by Agent or any of its representatives;          (c) any claims by any party engaged by Agent as an employee or independent contractor arisingout of such employment;          (d) any Agent Claims and          (e) the gross negligence or willful misconduct of Agent or any of its officer, directors,employees, agents or representatives.     Section 14. Defaults. The following shall constitute “Events of Default” hereunder:          (a) Merchant’s or Agent’s failure to perform any of their respective material obligationshereunder which failure is not cured within five (5) days after receipt by the non-performing partyof written notice specifying the failure;          (b) Any representation or warranty made by Merchant or Agent proves untrue in any materialrespect as of the date made;          (c) A bankruptcy, reorganization, receivership or other similar proceeding is filed by oragainst Merchant or Agent or
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          (d) Except as set forth in Section 6.1 above, the Store Closing Sale is terminated ata Store for any reason other than (i) an Event of Default by Agent, (ii) any other breach or actionby Agent not authorized hereunder, (iii) removal of a Store from the Store Closing Sale inaccordance with Section 8.11 hereof, or (iv) an event administered pursuant to Section8.9 above.     In the event of an Event of Default, the non-defaulting party or, in the case of an Event ofDefault under Section 14(d), the Agent, may, in its discretion, upon five (5) days’ writtennotice to the other party (or in the case of an Event of Default under Section 14(c),without any notice), (x) elect to terminate this Agreement and (y) exercise any rights otherwiseavailable to it under applicable law. Any party’s damages or entitlement to equitable reliefhereunder shall be determined by a court of competent jurisdiction located in the State ofIllinois.     Section 15. Intentionally Omitted.     Section 16. Sale of FF&E. Agent shall advertise in the context of advertising for theStore Closing Sale that items of FF&E at the Stores are for sale, and shall contact and solicitknown purchasers and dealers of furniture and fixtures. Merchant shall notify Agent if any suchitems of FF&E are to be excluded from sale and/or if terms and conditions of sale are to be set orrestricted in any manner. In consideration of providing such services, Agent shall retaintwenty-two and one half percent (22.5%) of receipts (net of Sales Taxes) from all sales or otherdispositions of FF&E. In addition, Merchant shall reimburse Agent for Agent’s reasonabledocumented out-of-pocket expenses incurred in connection with the liquidation of FF&E that havebeen previously approved by Merchant, including, without limitation, costs of commissions andadvertising. Merchant and Agent shall mutually agree on an expense budget for the sale of the FF&E prior toincurring FF&E sale related expenses. Agent shall have the right to abandon
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any unsold FF&E at the Stores or to cause Merchant to transfer title to any FF&E at any Store thatremains unsold as of the date of termination or assignment of any Store lease to the landlord orDesignee with respect to such lease for no consideration. Agent shall have no liability toMerchant for its failure to sell any or all of the FF&E.     Section 17. Leases.          17.1 Agent for Disposition of Leases. Agent shall serve as the Merchant’s exclusiveagent for the purpose of selling, assigning or terminating the Leases. All communications andinquiries regarding the sale, assignment or termination of the Leases, whether directed to theMerchant (including but not limited to its officers, agents and employees) shall be redirected toAgent. Agent shall promptly advise the Merchant of all offers made with respect to the Leases.Agent is authorized only to negotiate the terms of a termination or subleasing agreement at thedirection and on the behalf of the Merchant, but not to commit the Merchant to any such agreementor arrangement or to sign any instrument on behalf of the Merchant. The Merchant and Agent maydesignate additional leasehold interests as a “Leased Property” or drop Leased Properties uponmutual consent. Merchant and Agent shall mutually agree on a compensation structure for thepurpose of selling, assigning or terminating the leases set forth on Exhibit 17.1 within 7 days ofthis Agreement.          17.2 Term.     The authority granted to Agent in Section 17.1 shall commence upon theexecution hereof and shall expire twelve (12) months from the date of this Agreement. Thereafterthe Agreement shall automatically renew for successive sixty (60) day periods until cancelled byeither party upon thirty (30) days prior written notice to the other party.
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          17.3 Marketing Period for Leased Properties.          (a) For each Leased Property, the period commencing on the Sale Commencement Date and endingon the Leased Property Termination Date, shall be known as the “Marketing Period” for suchLeased Property.          (b) With respect to each Leased Property, the “Leased Property Termination Date” shallbe the first to occur of (i) the closing date of the assignment or termination of the Lease withrespect to such Leased Property, (ii) the stated termination date of the Lease with respect to suchLeased Property, and (iii) the term, as may be extended, as set forth in Section 17.2.          17.4 Marketing Period Costs.     On the Sale Commencement Date, the Merchant shall allocate an amount (the“Lease Fund”) for the payment of Occupancy Expenses (excluding Occupancy Expenses payableto third parties other than landlords), termination fees and assignment fees with respect to theLeased Properties. The Lease Fund equals the aggregate of, for each Lease, the lesser of (i) seven(7) months’ Occupancy Expenses, or (ii) Occupancy Expenses for the number of months remaining onthe term of the applicable lease (excluding Occupancy Expenses payable to third parties other thanlandlords) for each of the Leased Properties. The Lease Fund shall not be used to pay anyOccupancy Expenses of any Store arising during the Sale Term for such Store. In addition, from theSale Termination Date through the end of the Marketing Period for each Store Lease (collectively,the “Lease Fund Period”), unless Merchant and Agent otherwise agree, Merchant shall payOccupancy Expenses (excluding Occupancy Expenses payable to third parties other than landlords) foreach of the Leased Properties from the Lease Fund. All othercosts and expenses relating to the Leased Properties arising during the Lease Fund Period,including, without limitation, extraordinary or structural maintenance and repairs for which
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Merchant is responsible under the Leases of the Leased Properties, shall be paid by Merchant, butshall not be paid or deducted from the Lease Fund.          17.5 Procedures for Dispositions of Leases.          (a) During the Marketing Period for each of the Leased Properties, unless otherwise mutuallyagreed by the parties, Agent shall use reasonable commercial efforts to market and attempt toassign the Leases, to obtain agreements from landlords to terminate the Leases, or to otherwisemitigate Merchant’s damages with respect to the Leases.          (b) Following the Sale Commencement Date, Merchant agrees to cooperate with Agent to arrangefor the sale of the leasehold interests of Merchant in the Leased Properties as provided in thisAgreement. Without limiting the generality of the foregoing, Merchant agrees (i) to provide Agentwith all such diligence materials and information in Merchant’s possession as Agent shallreasonably request in connection with its efforts to market and attempt to sell the Leases(including, without limitation, existing real property surveys, environmental reports, real estatetax and utility records) and (ii) to cooperate with Agent, its agents and any potential purchasersof any of the Leases to provide reasonable access to the Leased Properties. Agent shall provideMerchant with copies of all written offers and letters of intent for the Leases. Likewise, in theevent Merchant receives any written offer or letter of intent for any of the Leases, Merchant shallprovide Agent with a copy of such offer or letter of intent.          (c) From the date hereof through and until the applicable Leased Property Termination Date,Merchant shall not enter into, extend, reject or otherwise terminate any material agreement withrespect to any Leased Property, or grant any party a lien or security interest in any or all of theLeases or Leased Properties, in each case without the prior written consent of Agent.
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          17.6 Reconciliation; Agent’s Lease Disposition Fees (a) As compensation for Agent’sservices, upon disposition, by assignment, sale, sublease, termination or otherwise of a LeasedProperty, Agent shall earn a base fee of [***] (the “Base Fee”). In the event that (a) [***] ormore of the Leases are terminated, sold or assigned during the Marketing Period and (b) theaggregate amount paid by Merchant to obtain landlord consent to assignment or termination of theLeases, including any payments (not otherwise indemnifiable under this Agreement) arising from orin satisfaction of any breach of any Lease caused by Agent or occurring in furtherance of thepurposes of this Agreement (the “Buyout Amount”) is less than the aggregate amount of theLease Fund minus the aggregate amount of the Lease Fund utilized to pay Occupancy Expenses for theLeased Properties during the Lease Fund Period (the “Net Lease Fund”), Agent’s Base Feeshall be adjusted as follows:   **Buyout Amount** **Base Fee**[***] [***][***] [***][***] [***][***] [***]  For purposes hereof:     “Gross Occupancy Cost” is defined as the sum of all prime rent, common area maintenanceexpenses, real estate taxes, insurance, tenant improvements, advertising allowance, and otherobligations of Merchant which would otherwise have been due and payable by the Merchant had itperformed its obligations as they came due under each Lease.
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     “Gross Occupancy Cost Savings” is defined as the sum of (a) the amount of Total Occupancy Costthat will not have to be paid, by the Merchant, as a result of all of the Leased Properties whichare assigned, transferred, subleased, terminated, or otherwise disposed of by Agent pursuant to theterms of this Agreement, and (b) any amounts received by the Merchant in consideration fortransferring or assigning any Leased Property to a third party.  “Total Occupancy Cost” is defined as the sum of Gross Occupancy Cost for all LeasedProperties.          17.7 Calculation of Net Lease Fund and Buyout Amount.     For purposes hereof, neither the amount subtracted from the Lease Fund to arrive at the NetLease Fund nor the Buyout Amount shall include any amounts paid to the subject landlord on accountof unpaid amounts due under the Lease but relating to periods prior to the Lease Fund Period,including, without limitation, CAM and tax reconciliations for periods prior to the Lease FundPeriod, non-depreciated/amortized tenant improvements or brokerage commissions, all of which shallbe paid by Merchant. To the extent that Agent is not successful in completing transactions for allof the Leases, the funds required to buyout the balance of the Leases shall not impact the BuyoutAmount or Net Lease Fund.          17.8 Reimbursement of Expenses in Performing Lease Services.     Merchant shall reimburse Agent for all reasonable and customary ReimbursableExpenses (defined below) incurred in connection with Agent’s efforts to sell, terminate orotherwise mitigate Merchant’s damages with respect to the Leases. “Reimbursable Expenses” meansall out-of-pocket expenses, approved in advance by Merchant, and incurred in connection withAgent’s performance of the contemplated services, including reasonable expenses related
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economy travel and transportation in accordance with Merchant’s Travel Policy, which shall beprovided to Agent.          17.9 Vacating the Stores and Leased Properties.          (a) Agent shall vacate each Store whose Occupancy Agreements do not include a Lease to bemarketed by Agent pursuant to this Agreement on or before the Sale Termination Date with respect tosuch Store, at which time Agent shall surrender and deliver the Store premises and Store keys toMerchant. From and after the Sale Termination Date with respect to each such Store, Agent shallhave no further liability with respect to such Store whatsoever.          (b) Agent shall vacate each Leased Property whose Lease is not assigned or terminated and hasnot expired prior to the end of the Marketing Period for such Lease on the day following the end ofthe Marketing Period for such Lease, at which time Agent shall surrender and deliver the LeasedProperty premises and keys to Merchant. From and after the day following the Marketing Period withrespect to each such Leased Property, Agent shall have no further liability with respect to suchLeased Property whatsoever.     Section 18. Miscellaneous.          18.1 Notices. All notices and communications provided for pursuant to this Agreementshall be in writing, and sent by hand, by facsimile or by Federal Express or other recognizedovernight delivery service, as follows:
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       If to the Agent: Hilco Merchant Resources, LLC     One Northbrook Place     5 Revere Drive, Suite 206     Northbrook, Illinois 60062     Attn: Cory Lipoff     Telecopy No. (847) 509-1150           Hilco Real Estate, LLC     One Northbrook Place     5 Revere Drive, Suite 320     Northbrook, IL 60062     Attn: Gregory Apter     Telecopy No. (847) 897-0867           and           c/o Hilco Merchant Resources, LLC     Hilco Real Estate, LLC     One Northbrook Place     5 Revere Drive, Suite 206     Northbrook, Illinois 60062     Attn: Joseph Malfitano     Telecopy No. (847) 897-0868         If to the Merchant: Rosedale Wilsons, Inc.     7401 Boone Avenue North     Brooklyn Park, MN 55428     Attn: Corrie Lapinsky     Telecopy No. (763) 391-4343           Wilsons Leather Holdings Inc.     7401 Boone Avenue North     Brooklyn Park, MN 55428     Attn: Corrie Lapinsky     Telecopy No. (763) 391-4343            18.2 Governing Law; Consent to Jurisdiction. This Agreement shall be governed andconstrued in accordance with the laws of the State of Illinois without regard to conflicts of lawsprinciples thereof. The parties hereto agree that any legal action or proceeding arising out of orin connection with this Agreement may be brought in the federal or state courts
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located in the State of Illinois, and by executionof this Agreement each party hereby irrevocably accepts and submits to the jurisdiction of suchcourts in personam with respect to any such action or proceeding.          18.3 Termination. This Agreement shall remain in full force and effect until thefirst to occur of: (a) receipt by Merchant of written notice from Agent that any of the conditionsspecified in Section 10 hereof have not been satisfied; (b) termination by thenon-defaulting party after an Event of Default pursuant to Section 14 hereof or (c) the endof the Marketing Period with respect to all of the Leases and completion and certification byMerchant and Agent of the final reconciliation pursuant to Section 17.6 hereof.Notwithstanding the foregoing, the representations and warranties of Merchant and Agent containedherein and the provisions Section 13 above shall survive the termination of this Agreementpursuant to this Section 18.3.          18.4 Entire Agreement. This Agreement contains the entire agreement between theparties hereto with respect to the transactions contemplated hereby and supersedes and cancels allprior agreements, including, but not limited to, all proposals, letters of intent orrepresentations, written or oral, with respect thereto.          18.5 Amendments. This Agreement may not be modified except in a written instrumentexecuted by each of the parties hereto.          18.6 No Waiver. No consent or waiver by any party, express or implied, to or of anybreach or default by the other in the performance of its obligations hereunder shall be deemed orconstrued to be a consent or waiver to or of any other breach or
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default in the performance by such other party of the same or any other obligation of such party.Failure on the part of any party to complain of any act or failure to act by the other party or todeclare the other party in default, irrespective of how long such failure continues, shall notconstitute a waiver by such party of its rights hereunder.          18.7 Successors and Assigns. This Agreement shall inure to the benefit of and bebinding upon Agent and Merchant, and their respecting successors and assigns; provided, however,that this Agreement may not be assigned by Merchant or Agent to any party without the prior writtenconsent of the other.          18.8 Execution in Counterparts; Facsimile. This Agreement may be executed in two ormore counterparts, each of which shall be deemed an original but all of which together shallconstitute but one agreement. This Agreement may be executed by facsimile, and such facsimilesignature shall be treated as an original signature hereunder.          18.9 Section Headings. The headings of sections of this Agreement are inserted forconvenience only and shall not be considered for the purpose of determining the meaning or legaleffect of any provisions hereof.          18.10 Survival. All representations, warranties, covenants and agreements made by theparties hereto shall be considered to have been relied upon by the parties and shall survive theexecution, delivery and performance of this Agreement.          18.11 Severability. Wherever possible, each provision of this Agreement shall beinterpreted in such manner as to be effective and valid under applicable law, but if any
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provision of this Agreement shall be prohibited by or invalid under applicable law, such provisionshall be ineffective only to the extent of such prohibition or invalidity, without invalidating theremainder of such provision or the remaining provisions of this Agreement.          18.12 Joint and Several Liability. The undersigned members of Agent, jointly andseverally, guarantee the prompt payment by, and performance of the obligations of Agent, including,without limitation, Agent’s indemnification obligations contained herein, as set forth in thisAgreement.          18.13 Confidentiality. Agent agrees (a) not to use any ConfidentialInformation (as defined below) for any purpose except in furtherance of its obligations under thisAgreement, (b) that it shall disclose Confidential Information only to its employees, contractors,attorneys and accountants on a need-to-know basis, and (c) to treat all Confidential Information ofthe other party with the same degree of care as it accords its own Confidential Information of asimilar nature, but in no event with less than a reasonable degree of care. “ConfidentialInformation” as used in this Agreement means any and all proprietary and non-public informationdisclosed by Merchant regardless of the form of such information. Confidential Information shallnot include information that (i) was in the public domain at the time it was disclosed or hassubsequently entered the public domain through no fault of Agent; (ii) was rightfully in Agent’spossession free of any obligation of confidentiality at the time of disclosure; or (iii) isdisclosed pursuant to a valid order by a court or governmental body or otherwise pursuant to legalprocess.
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          IN WITNESS WHEREOF, Agent and Merchant hereby execute this Agreement by their duly authorizedrepresentatives as of the day and year first written above.       JOINT VENTURE COMPOSED OF  HILCO MERCHANT RESOURCES, LLC, HILCO REAL   ESTATE, LLC AND GORDON BROTHERS  RETAIL PARTNERS, LLC         /s/ Cory Lipoff       By:  Cory Lipoff  Its: Executive Vice President and Principal of HilcoMerchant Resources for the Joint Venture       ROSEDALE WILSONS, INC., on behalf of itself  and on behalf of those entities listed on  Exhibit 1A hereto        /s/ Stacy A. Kruse       By: Stacy A. Kruse  Its: Chief Financial Officer and Treasurer       WILSONS LEATHER HOLDINGS INC.         /s/ Stacy A. Kruse       By: Stacy A. Kruse  Its: Chief Financial Officer and Treasurer
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 AGENCY AGREEMENTDated as ofFebruary 14, 2008BetweenA JOINT VENTURE COMPOSED OF