**Exhibit 10.3**
**STAY BONUS AGREEMENT**
     This Agreement is made as of April 5, 2004 by and between Wilsons TheLeather Experts Inc., a Minnesota corporation (hereinafter, “Wilsons”) andPeter G. Michielutti (hereinafter, the “Executive”).
**RECITALS**
     A. Wilsons has determined that it is in the best interests of Wilsons toretain the services of the Executive, and
     B. Wilsons has determined to increase the likelihood of retaining theExecutive and to provide further incentives for the Executive to assist Wilsonsin achieving its objectives by agreeing to make certain bonus payments to theExecutive if certain conditions are satisfied, and
     C. Wilsons desires to set out in writing the terms and conditions underwhich those bonuses will be paid, and
     D. By signing this Agreement, the Executive is accepting the terms andconditions of those bonuses.
     **NOW, THEREFORE**, the parties agree as follows:
1. Total Bonus Payment. The total amount of bonuses that are potentiallypayable to the Executive under this Agreement is $212,000 (hereinafter,the “Bonus Amount”). Each payment of any portion of the Bonus Amountunder this Agreement will be reduced by applicable withholdings for taxesand other legally required items. 2. Payment of Bonuses. The Executive will receive the following paymentswith respect to the Bonus Amount, provided the conditions specified foreach payment are satisfied.
 a. The Executive will be entitled to payment of $100,000 if (i)both of the performance criteria contained in subparagraphs 2(a)(i)and 2(a)(ii) below (the “June Performance Criteria”) are achieved onor before June 15, 2004 and Executive is employed by Wilsons on theday on which the June Performance Criteria are achieved or (ii) theExecutive is terminated by Wilsons without Cause prior to June 15,2004. For purposes of this Agreement, the June Performance Criteriaare:
 (i) at least $25.0 million in principal amount of the11 1/4% senior notes due August 15, 2004 (the “SeniorNotes”) shall have been paid in full, including all accruedinterest thereon, or shall have been refunded, renewed,refinanced or extended for other securities, provided that (A)any refunding, renewal, refinancing or extension of the SeniorNotes with debt or equity securities shall have termsproviding for no mandatory payment or repayment of principalor mandatory redemption in whole or in part prior to January28, 2006, and (B) of the remaining $5.6 million or less inprincipal amount of the Senior Notes, no default shall existthereunder, the payment when due of all principal and accruedinterest thereon would not, with or without notice or lapse oftime or both, constitute a default under any otherindebtedness of Wilsons, and the Board of Directors shall havedetermined, in good faith, that Wilsons will be able to makesuch repayment of such remaining Senior Notes in full whendue; and
 

 

 (ii) the Fourth Amended and Restated Credit Agreementdated as of April 23, 2002 among Wilsons Leather Holding Inc.,the Lenders signatory thereto from time to time, GeneralElectric Capital Corporation, GECC Capital Markets Group,Inc., The CIT Group/Business Credit, Inc. and Wells FargoRetail Finance LLC, as amended by amendments prior to andafter the date of this Agreement (the “Credit Agreement”), orany revolving credit agreement entered into by Wilsons insubstitution therefor, (A) shall be in full force and effect,and no defaults shall exist thereunder that have not beenwaived, (B) shall permit Wilsons to finance all of itsprojected borrowing and letter of credit needs throughout theremainder of the fiscal year ending January 29, 2005 and allof the fiscal year ending January 28, 2006 without furtheramendments or waivers, as determined by the Board of Directorsof Wilsons in good faith, and (C) shall permit the payments,refundings, renewals, refinancings or extensions referred toin subparagraph 2(a)(i) above without the occurrence of anyevent that, with or without notice or lapse of time or both,would constitute a default under the Credit Agreement orsubstitute therefor;
   provided, however, that nothing stated herein shall require theBoard of Directors to authorize any refundings, renewals,refinancings or extensions, agreements or amendments of the naturereferred to in subparagraphs 2(a)(i) or 2(a)(ii) above that theBoard, in good faith, does not deem to be in the best interests ofWilsons.    Any payment due to Executive under the provisions of thissubparagraph 2(a) will be made as soon as administratively feasiblefollowing the attainment of the June Performance Criteria.  b. The Executive will be entitled to payment of $112,000 if (i)the performance criteria contained in subparagraph 2(b)(i) below andthe specific position performance criteria contained in subparagraph2(b)(ii) below (collectively, the “Year-End Performance Criteria”)are achieved on or before January 29, 2005, as determined by theChief Executive Officer and the President of Wilsons, and Executiveis employed by Wilsons on January 29, 2005 or (ii) the Executive isterminated by Wilsons without Cause prior to January 29, 2005.
 (i) For purposes of this subparagraph 2(b), theperformance criteria are:
 (a) Executive shall demonstrate effectiveleadership in a difficult environment;  (b) Executive shall collaborateeffectively with others on the leadership team;  (c) Executive shall proactively engage inthe strategies and tactical plans to deliver results;  (d) Executive shall model appropriatebehavior and require the same of direct reports; and  (e) Executive shall prepare regularstatus reports identifying progress toward goals andobjectives.
 (ii) For purposes of this subparagraph 2(b), thespecific position performance criteria are:
 (a) Executive shall maximize cash flow,capital and selling, general and administrative expenseinitiatives;
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 (b) Executive shall develop measurable,predictive business performance metrics to enableWilsons to better manage results for the fiscal yearending January 29, 2005 and to be used for fiscal year2005 objectives;  (c) Executive shall develop analyses toenable Wilsons to better understand fall merchandisingrisk and incorporate into receipt mix;  (d) Executive shall track reversecannibalization of store closures; and  (e) Executive shall proactively meet withthe Chairman and President of Wilsons on a regularlyscheduled basis to identify specific approaches toenhance Wilsons’ performance during the fiscal yearending January 29, 2005.
   Any payment due to the Executive under the provisions of thissubparagraph 2(b) will be made as soon as administratively feasiblefollowing January 29, 2005.  c. If the Executive becomes disabled while employed by Wilsonsafter the date hereof and remains so disabled until the date a bonusis payable under either subparagraph 2(a) or 2(b), the Executivewill be deemed to be employed by Wilsons on the applicable datesolely for purposes of applying subparagraph 2(a) and/or 2(b), asthe case may be, and the June Performance Criteria and/or theYear-End Performance Criteria, as the case may be, shall be deemedto have been achieved. To be “disabled” for purposes of thissubparagraph 2(c), the Executive must be prevented from engaging inactive employment by an illness or injury that meets therequirements for receiving benefits under the short term disabilityprogram sponsored by Wilsons during the period that program applies,and thereafter must meet the requirements for receiving disabilitybenefits under the Social Security Act.  d. If the Executive dies while employed by Wilsons during theperiod commencing on the date hereof through and including January29, 2005, the Executive will be deemed to have survived andcontinued in the employ of Wilsons solely for purposes of applyingsubparagraph 2(a) and/or 2(b), as the case may be, and the JunePerformance Criteria and/or the Year-End Performance Criteria, asthe case may be, shall be deemed to have been achieved, but anybonus payable under such subparagraphs shall be paid to theExecutive’s estate.
3. Incentive Plan. Any Bonus Amount payable to Executive pursuant to thisAgreement shall be in addition to, and not in lieu of, any incentive awardpayable to Executive for the fiscal year ending January 29, 2005 underWilsons’ Executive and Key Management Incentive Plan. 4. Not an Employment Contract. This Agreement does not constitute acontract of employment with Wilsons or guarantee that the Executive willremain employed by Wilsons for any particular period of time. Nothing inthis Agreement changes the Executive’s status as an “at will” employee ofWilsons or interferes in any way with the right of Wilsons to terminatethe Executive’s employment at any time, with or without Cause and with orwithout notice. 5. Cause Definition. “Cause” shall mean:
 a. the commission by the Executive of any act of embezzlementagainst Wilsons or any of its subsidiaries;  b. the conviction of the Executive for, or entry by theExecutive of a guilty plea to, any felony which has a materialadverse effect upon the business, operating results, financialcondition or employee, supplier or customer relations generally ofWilsons and its
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   subsidiaries, taken as a whole, or which precludes the Executivefrom performing his duties for at least 90 days;  c. the conviction of the Executive for any crime involvingdishonesty with respect to Wilsons (i) intended by the Executive toresult in personal enrichment of the Executive at the expense ofWilsons or its subsidiaries or (ii) which has a material adverseeffect upon the business, operating results, financial condition oremployee, supplier or customer relations generally of Wilsons andits subsidiaries, taken as a whole;  d. the absence by the Executive from employment with Wilsons fora period of more than 90 days after the date of this Agreementwithout the approval of the Board of Directors of Wilsons other thanfor vacations, illness, injury or disability; or  e. willful misconduct by the Executive, which misconduct has notbeen cured within 20 days following notification thereof to theExecutive (or if such misconduct is cured within 20 days after suchnotice of misconduct is received, but the same misconduct occursagain at any time thereafter).
6. Assignment. Wilsons may in its sole discretion assign this Agreement toany entity or individual which succeeds to some or all of the business ofWilsons through merger, consolidation, a sale of some or all of the assetsof Wilsons, or any similar transaction. The Executive acknowledges thatthe services to be rendered by Executive to Wilsons are unique andpersonal, and that the Executive therefore may not assign any ofExecutive’s rights or obligations under this Agreement to anyone. 7. Successors. Subject to Paragraph 6, the provisions of this Agreementshall be binding on the parties hereto, on any successor or assign ofWilsons, and on the Executive’s heirs or any personal representative ofthe Executive or the Executive’s estate. 8. Governing Law. This Agreement shall be interpreted and enforced inaccordance with the laws of the State of Minnesota, without giving effectto conflict of law principles. 9. Amendment. This Agreement may be amended only in writing, signed by bothparties.
     **IN WITNESS HEREOF**, the parties have executed this Agreement effective asof the date set forth above.         EXECUTIVE WILSONS THE LEATHER EXPERTS INC. /s/ Peter G. Michielutti By /s/ David L. Rogers     Peter G. Michielutti    Its President       
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