Target Zellers Hudson’s Bay Company Transaction Agreement

ZELLERS INC.,

HUDSON153S BAY COMPANY,

TARGET CORPORATION,

and

TARGET CANADA CO.

TRANSACTION AGREEMENT

January 12, 2011

TABLE OF CONTENTS

		Page

ARTICLE 1 INTERPRETATION		1
Section 1.1	Defined Terms	1
Section 1.2	Gender and Number	9
Section 1.3	Headings, etc.	9
Section 1.4	Currency	9
Section 1.5	Certain Phrases, etc.	9
Section 1.6	Knowledge	9
Section 1.7	Disclosure Letter	9
Section 1.8	References to Persons and Agreements	10
Section 1.9	Statutes	10
Section 1.10	Non-Business Days	10
Section 1.11	Time Periods	11
Section 1.12	Designation of Target Canada	11
Section 1.13	Leasehold Interests	11

ARTICLE 2 AGREEMENT OF PURCHASE AND SALE		11
Section 2.1	First Tranche Subject Leased Properties	11
Section 2.2	Second Tranche Subject Leased Properties	12
Section 2.3	Right to Terminate Leases	13
Section 2.4	Vacancy Date	13
Section 2.5	Ordinary Course Operations	14
Section 2.6	Pharmacy Records	15
Section 2.7	Target Canada Assignment of Rights	15
Section 2.8	Access and Additional Information Relating to Leased Properties	18
Section 2.9	Winnipeg Lease Option	19

ARTICLE 3 PURCHASE PRICE		19
Section 3.1	Purchase Price	19
Section 3.2	Payment of the Purchase Price	20
Section 3.3	Adjustments	20
Section 3.4	Sales and Transfer Taxes	22
Section 3.5	Goods and Services Tax and Harmonized Sales Tax	22
Section 3.6	Self-Assessment of GST and HST on Real Property	23
Section 3.7	Tax Refunds	23
Section 3.8	Note Purchase Facility	24

ARTICLE 4 ASSUMED LIABILITIES		26
Section 4.1	Assumed Liabilities	26
Section 4.2	Excluded Liabilities	26
Section 4.3	“As Is, Where Is”	27

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ZELLERS		28

TABLE OF CONTENTS

(continued)

		Page

Section 5.1	Representations and Warranties of Zellers	28

ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF TARGET CANADA AND TARGET		32
Section 6.1	Representations and Warranties of Target Canada and Target	32

ARTICLE 7 COVENANTS OF THE PARTIES		33
Section 7.1	Actions to Satisfy Closing Conditions	33
Section 7.2	Request for Consents	34
Section 7.3	Filings and Authorizations	35
Section 7.4	Risk of Loss	36
Section 7.5	Confidentiality	36
Section 7.6	Lease Amendments, Renewals and Notices	37
Section 7.7	Zellers Entity Cooperation	38

ARTICLE 8 CONDITIONS OF CLOSING		41
Section 8.1	Conditions for the Benefit of Target and Target Canada	41
Section 8.2	Conditions for the Benefit of Zellers	42

ARTICLE 9 CLOSING		43
Section 9.1	Date, Time and Place of Closing	43
Section 9.2	Zellers153 Closing Deliveries	43
Section 9.3	Target Canada153s Closing Deliveries	44
Section 9.4	Closing Procedures	45

ARTICLE 10 TERMINATION		46
Section 10.1	Termination Rights	46
Section 10.2	Effect of Termination	46

ARTICLE 11 INDEMNIFICATION		46
Section 11.1	Liability for Representations and Warranties	46
Section 11.2	Indemnification in Favour of Target and Target Canada	47
Section 11.3	Indemnification in Favour of Zellers	48
Section 11.4	Bulk Sales and Retail Sales Tax Waiver	48
Section 11.5	Limitations	48
Section 11.6	Notification	49
Section 11.7	Limitation Periods	49
Section 11.8	Procedure for Direct Claims	50
Section 11.9	Procedure for Third Party Claims	50
Section 11.10	Remedies	51
Section 11.11	One Recovery	52
Section 11.12	Duty to Mitigate	52
Section 11.13	Adjustment to Purchase Price	52

TABLE OF CONTENTS

(continued)

		Page

ARTICLE 12 OTHER COVENANTS		53
Section 12.1	Guarantee by HBC	53
Section 12.2	Target Guarantee	54
Section 12.3	Further Assurances	54

ARTICLE 13 MISCELLANEOUS		55
Section 13.1	Notices	55
Section 13.2	Time of the Essence	56
Section 13.3	Brokers	56
Section 13.4	Announcements	57
Section 13.5	Third Party Beneficiaries	57
Section 13.6	Expenses	57
Section 13.7	Amendments	57
Section 13.8	Waiver	57
Section 13.9	Non-Merger	58
Section 13.10	Subdivision Laws	58
Section 13.11	Entire Agreement	58
Section 13.12	Successors and Assigns	59
Section 13.13	Severability	59
Section 13.14	Governing Law	59
Section 13.15	Counterparts	59

iii

TRANSACTION AGREEMENT

Transaction Agreement dated January 12, 2011 between Zellers Inc.
(“Zellers”), Hudson153s Bay Company (“HBC“),
Target Corporation (“Target“), and Target Canada Co.

RECITALS:

A. Zellers operates a chain of retail
department stores throughout Canada under the “Zellers” banner.

B. Target operates a chain of retail
department stores throughout the United States.

C. Zellers wishes to assign certain of
the leasehold interests that it currently uses in its operations subject to
subleases back to it so as to allow it to continue to operate its business on
such leased premises for varying periods of time.

D. Target wishes to obtain an assignment
of the aforesaid leasehold interests from Zellers to use for itself or to allow
it to assign certain of such leasehold interests to other parties on terms that
it may negotiate, subject in each case to the aforesaid subleases to Zellers.

E. The Parties wish to set out their
agreement regarding certain matters relating to such transactions.

THEREFORE, the Parties agree as follows:

ARTICLE 1
INTERPRETATION

Section 1.1 Defined Terms.

As used in this Agreement, the following terms have the following meanings:

“Accrued Interest” has the meaning specified in
Section 3.8(3).

“Affiliate” of any Person means, at the time such
determination is being made, any other Person controlling, controlled by or
under common control with such first Person, in each case, whether directly or
indirectly, and “control” and any derivation of such term means
the possession, directly or indirectly, of the power to direct the management
and policies, business or affairs of a Person whether through the ownership of
voting securities or otherwise.

“Agreement” means this transaction agreement.

“Ancillary Agreements” means the Lease Assignment and
Assumption Agreements, the Subleases, the Designee Assignment and Assumption
Agreements, and the Brand Waiver.

“Assignee” has the meaning specified in Section 12.2(1).

“Assumed Liabilities” has the meaning specified in
Section 4.1.

“Authorization” means, with respect to any Person, any
order, permit, approval, consent, waiver, license, no action letter or similar
authorization of any Governmental Entity having jurisdiction over the Person.

“Books and Records” means all books, records, files, reports
and documents (including all correspondence, real estate and engineering data,
facilities reports, blueprints and other property records), in whatever format.

“Brand Waiver” has the meaning specified in Section 9.2(e).

“Business Day” means any day of the year, other than a
Saturday, Sunday or any day on which major banks are closed for business in
Toronto, Ontario or Minneapolis, Minnesota.

“Closing Date” means, as applicable, the First Tranche
Closing Date or the Second Tranche Closing Date.

“Commissioner of Competition” means the Commissioner of
Competition appointed pursuant to the Competition Act and includes Persons
authorized by the Commissioner of Competition.

“Competition Act” means the Competition Act
(Canada).

“Competition Act Approval” has the meaning
specified in Section 7.3(4).

“Competition Tribunal” means the Competition Tribunal
established under the Competition Act.

“Cost Basis” has the meaning specified in Section 3.8(2).

“Damages” means any losses, liabilities, damages, out of
pocket expenses or costs (including reasonable legal fees and expenses),
contingent or otherwise, whether liquidated or unliquidated, whether resulting
from an action, suit, proceeding, arbitration, application, cause of action,
claim or demand that is instituted or asserted by a third party, including a
Governmental Entity, or a cause, matter, thing, act, omission or state of facts
not involving a third party.

“Default Notice” means any written notice given by the
Landlord under any Lease claiming or alleging that Zellers (or any Affiliate of
Zellers) is or may be in default of its obligations under such Lease and which
default or allegation of default remains uncured.

“Delivery Date” has the meaning specified in Section 2.1(4).

“Designee” has the meaning specified in Section 2.7(1).

“Designee Assignment and Assumption Agreement” has the
meaning specified in Section 2.7(1)(a).

“Direct Claim” means any cause, matter, thing, act, omission
or state of facts not involving a Third Party Claim which entitles an
Indemnified Party to make a claim for indemnification under this Agreement.

“Disclosure Letter” means the disclosure letter dated the
Execution Date and delivered by Zellers to Target with this Agreement.

“Due Diligence File” means the electronic files (other than
those contained in the folder entitled “Bay Lease Info”) on a computer hard
drive created by Zellers and provided to Target (as updated by the electronic
files on a computer hard drive created by Target and provided to Zellers on
January 11, 2011) consisting of documents and information related to the Leases
(including copies of all leases, occupancy agreements and amendments thereto and
all other documents and correspondence in the possession or control of Zellers
which relate to the Leases and the Leased Properties) assembled and made
available by Zellers to Target.

“Effective Time” means 12:01 a.m. (Toronto time) on the
relevant Closing Date, Vacancy Date or Delivery Date, as the case may be.

“Encumbrances” means pledges, liens, charges, security
interests, leases, title retention agreements, mortgages, hypothecs,
restrictions, development or similar agreements, easements, rights-of-way, title
defects, options or adverse claims or encumbrances of any kind or character
whatsoever.

“Excluded Liabilities” has the meaning specified in
Section 4.2.

“Execution Date” means the date upon which the last of
Zellers, HBC, Target, and Target Canada Co. executed this Agreement.

“Failure to Operate” means a reduction, change or cessation
in Zellers153 operations at a Leased Property which, were it to continue, would
give rise to a Landlord Recapture Right and which is not caused by a force
majeure.

“Final Adjustments” has the meaning specified in
Section 3.3.

“First Four Fiscal Quarters” means the four full Fiscal
Quarters ending immediately following the Execution Date.

“Fiscal Quarter” means any of the quarterly accounting
periods of Zellers, ending on or about April 30, July 31, October 31 and
January 31 of each year.

“First Tranche Closing Date” means the date that is 10
Business Days following the later of (i) the last day of the First Tranche
Selection Period or (ii) the date that Competition Act Approval is obtained, but
in either case subject to the satisfaction or waiver by the applicable Party or
Parties of all conditions at the Effective Time on the First Tranche Closing
Date.

“First Tranche Purchase Price” has the meaning specified in
Section 3.1(1)(a).

“First Tranche Selection List” has the meaning specified in
Section 2.1(1).

“First Tranche Selection Period” means the 120-day period
following the Execution Date.

“First Tranche Subject Leases” means the Leases pertaining
to the First Tranche Subject Leased Properties, subject to Sections 2.1(4) and
7.2(3).

“First Tranche Subject Leased Properties” means the Leased
Properties listed on the First Tranche Selection List, subject to
Section 2.1(4).

“Governmental Entity” means (i) any international,
multinational, national, federal, provincial, state, municipal, local or other
governmental or public department, central bank, court, minister,
governor-in-council, cabinet, commission, board, bureau, agency, commissioner,
tribunal or instrumentality, domestic or foreign, (ii) any subdivision or
authority of any of the above, (iii) any stock exchange, and (iv) any
quasi-governmental or private body exercising any regulatory, expropriation or
taxing authority under or for the account of any of the above.

“HBC” means Hudson153s Bay Company.

“HST Declaration and Indemnity” means the HST declaration
and indemnity in the form attached as Section 9.3(g) to the Disclosure Letter.

“Indemnified Party” means a Party with indemnification
rights or benefits under this Agreement, including pursuant to Article 11.

“Indemnifying Party” means a Party against which a claim may
be made for indemnification under this Agreement, including pursuant to
Article 11.

“Intercreditor Agreement” means that certain Intercreditor
Agreement dated as of October 2, 2006 among U.S. Bank National Association, as
Trustee for the benefit of the holders of Merrill Lynch Floating Trust
Pass-Through Certificates, Series 2006-1, and the lenders under the Notes.

“Investment Grade Designee” means a Designee that, at the
time of such Designee153s execution of a Designee Assignment and Assumption
Agreement pursuant to Section 2.7(1)(a) or other assumption document pursuant to
Section 2.7 with respect to the Subject Lease to be assigned and transferred to
such Designee, has outstanding senior debt rated by at least two of the
following rating agencies with minimum ratings as follows:

(i) at least BBB– as
determined by Standard & Poors,

(ii) at least Baa3 as determined by Moody153s,
or

(iii) at least BBB low as determined by the
Dominion Bond Rating Service;

and in each case such rating is not subject to a negative watch or other
similar notice suggesting a possible downgrade to below such level, and in each
case Target Canada has provided to Zellers evidence reasonably satisfactory to
Zellers of such ratings.

“Landlord” means the Person from time to time holding the
landlord153s interest under any Lease.

“Landlord Recapture Right” means the right of a Landlord
(through the exercise of an express right under a Lease) to terminate a Lease by
reason of Zellers153 Failure to Operate.

“Laws” means any and all applicable (i) laws, constitutions,
treaties, statutes, codes, ordinances, orders, decrees, rules, regulations, and
by-laws, (ii) judgments, orders, writs, injunctions, decisions, awards and
directives of any Governmental Entity, and (iii) policies, guidelines, notices
and protocols, to the extent that they have the force of law.

“Lease Assignment and Assumption Agreement” has the meaning
specified in Section 9.2(a).

“Lease Default” means an event which with the passage of
time or the giving of notice or both would constitute a default or event of
default of the tenant under a Lease, in each case where the relevant Landlord
has provided written notice of such default, provided that any default arising
as a result of the failure to obtain the consent of the applicable Landlords
under the Subject Leases to the transactions contemplated by this Agreement
(inclusive of the Wind-Down Actions, the Subleases and the rights of Zellers
therein) shall not constitute a Lease Default.

“Leased Properties” means the leasehold lands, premises,
buildings, and leasehold improvements pertaining to the Leases, which premises
are listed and described in Section 5.1(i)(i) of the Disclosure Letter by
reference to their mall name or municipal address, as applicable, and Zellers
store number.

“Leases” means all agreements of Zellers to lease or
otherwise occupy the Leased Properties.

“Material Lease Default” means (i) a Lease Default which
would result in an express termination of a Lease as a result of a Landlord
having provided a termination notice on or prior to the relevant Closing Date;
or (ii) a Lease Default which could reasonably be expected to give rise to the
termination of a Lease by the relevant Landlord or which could reasonably be
expected to give rise to Zellers153 loss of possession under the Subject Lease by
the Landlord; except in the case of (i) and (ii) a Lease Default where such
breach or termination could be remedied by Target Canada or its Designee within
12 months after the relevant Closing Date with an expenditure of money not
exceeding $50,000. For certainty, any default arising under the Leases as a
result of the failure to obtain the consent of the applicable Landlords under
the Leases to the transactions contemplated by this Agreement (inclusive of the
Wind-Down Actions, the Subleases and the rights of Zellers therein) shall not
constitute a Material Lease Default.

“Monetary Lien” means (1) any Encumbrance that secures the
payment of borrowed money, (2) any registered construction or mechanic153s lien,
any execution upon a judgment or any pre-fixture or fixture filing under
personal property legislation and (3) any Encumbrance (other than an inchoate or
statutory Encumbrance in favour of any Governmental Entity or public or private
utility for amounts not then due) that secures the payment of any cost or amount
which is Zellers153 responsibility to pay under this

Agreement or under Laws and which is overdue or in default and, payment of
which is not subject to the allocation provisions of this Agreement (unless in
the case of (3) Zellers otherwise gives Target Canada credit therefor whether or
not allocation thereof is contemplated by this Agreement).

“Mortgages” means any mortgage of Zellers153 leasehold
interest in the Leased Properties.

“Notes” means interests in (a) that certain Mezzanine A Loan
Agreement dated as of October 2, 2006, as amended, between LT Mezz A LLC, a
Delaware limited liability company, and Wells Fargo Bank, National Association,
as custodian for the Participation Holders (as defined therein), and (b) that
certain Mezzanine B Loan Agreement dated as of October 2, 2006, as amended,
between LT Mezz B LLC, a Delaware limited liability company and GSRE-BS
II, Ltd., as lender.

“Notice” has the meaning specified in Section 13.1.

“Notice Date” means the date upon which Target, Target
Canada or a Designee gives Notice to Zellers of the Vacancy Date for any
Subleases as contemplated by Section 2.4(1).

“Outside Date” means September 30, 2011, provided that if
the Competition Act Approval is not obtained by August 15, 2011, Zellers or
Target may elect to extend from time to time the Outside Date by specified
periods of not less than 30 days to no later than December 31, 2011.

“Participation Agreement” means that certain Mezzanine Loan
Participation Agreement dated as of December 12, 2006 among Wells Fargo Bank,
National Association, as custodian, and the holders of the Notes associated with
the Mezzanine A Loan Agreement.

“Parties” means Zellers, HBC, Target, Target Canada and any
other Person who becomes a party to this Agreement.

“Permitted Encumbrances” means the Encumbrances identified
in Section 5.1(i)(iv) of the Disclosure Letter.

“Person” means a natural person, partnership, limited
partnership, limited liability partnership, corporation, limited liability
company, unlimited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity or Governmental Entity, and pronouns
have a similarly extended meaning.

“Pharmacy Notice Date” has the meaning specified in
Section 2.6.

“Pharmacy Records” means all of the prescription files and
prescription records, including patient profiles and refill histories, with
respect to the pharmacies operated at the Subject Leased Properties.

“Purchase Price” means the aggregate of the First Tranche
Purchase Price and the Second Tranche Purchase Price.

“Second Tranche Closing Date” means the date that is 10
Business Days following the last day of the Second Tranche Selection Period, but
subject to the satisfaction or waiver by the applicable Party or Parties of all
conditions at the Effective Time on the Second Tranche Closing Date.

“Second Tranche Purchase Price” has the meaning specified in
Section 3.1(1)(a).

“Second Tranche Selection List” has the meaning specified in
Section 2.2(1).

“Second Tranche Selection Period” means the 240-day period
following the Execution Date.

“Second Tranche Subject Leases” means the Leases pertaining
to the Second Tranche Subject Leased Properties, subject to Section 7.2(3).

“Second Tranche Subject Leased Properties” means the Leased
Properties listed on the Second Tranche Selection List.

“Subject Leases” means the First Tranche Subject Leases and
the Second Tranche Subject Leases, subject to Section 7.2(3).

“Subject Leased Properties” means the First Tranche Subject
Leased Properties and the Second Tranche Subject Leased Properties.

“Subleases” means the subleases in respect of each of the
Subject Leased Properties by and between Zellers and Target Canada or its
Designee, pursuant to which Zellers shall sublet from Target Canada or its
Designee the Subject Leased Properties for a term commencing on the applicable
Closing Date and expiring on the earlier of (i) one day prior to the expiry or
earlier termination of the term of the applicable Subject Leases, and (ii) the
applicable Vacancy Date, and which subleases shall be in the form (and based on
the terms and conditions set forth therein) attached as Section 1.1 to the
Disclosure Letter (or may be in the form of licenses, occupancy agreement, or
other agreements providing substantially all of the benefits and burdens as said
form of Sublease, provided such licenses, occupancy agreements or other
agreements are satisfactory in form to Zellers and Target Canada, each acting
reasonably).

“Target” means Target Corporation.

“Target Canada” means, collectively, Target Canada Co. and
one or more other subsidiaries (within the meaning of the Business
Corporations Act (Ontario)) of Target incorporated under the laws of Canada
or a province of Canada, as may be designated by Target in accordance with
Section 1.12 prior to the First Tranche Closing Date.

“Target Canada Liabilities” has the meaning specified in
Section 12.2(1).

“Target Entity” has the meaning specified in Section 7.7(2).

“Tax Act” means the Income Tax Act, R.S.C. 1985
(5th Supp.) c.1.

“Tax Refund” has the meaning specified in Section 3.7.

“Tax Returns” means any and all returns, reports,
declarations and elections (including any amendments, schedules and attachments
to them), made or filed or required to be made or filed in respect of Taxes.

“Taxes” means (i) any and all taxes, duties, fees, excises,
premiums, assessments, imposts, levies and other charges or assessments of any
kind whatsoever imposed by any Governmental Entity, and (ii) all interest,
penalties, fines, additions to tax or other additional amounts imposed by any
Governmental Entity on or in respect of amounts of the type described in clause
(i) above or this clause (ii).

“Third Party Claim” means any action, suit, proceeding,
arbitration, application, cause of action, claim or demand that is instituted or
asserted by a third party, including a Governmental Entity, against an
Indemnified Party which entitles the Indemnified Party to make a claim for
indemnification under this Agreement.

“Vacancy Date” means, with respect to a particular Sublease,
the date that is 270 days following the Notice Date with respect to such
Sublease; provided, Target or Target Canada may designate up to 20 particular
Subleases in each of the First Four Fiscal Quarters for which the Vacancy Date
would mean the date that is 180 days following the Notice Date with respect to
each such Sublease; and provided further that:

(i) no Vacancy Date shall be earlier than
January 31, 2012; and

(ii) no Vacancy Date shall be later than
March 31, 2013.

“Wind-Down Actions” means the (i) conduct of liquidation
sales at a Subject Leased Property the period for which shall not exceed, in the
aggregate, 12 weeks and (ii) winding-down and closure of Zellers153 business and
operations (including any action reasonably taken in connection therewith) so as
to satisfy the provisions of Section 2.4(2), the period for which shall not
exceed, in the aggregate, two weeks; provided however, that if a Landlord
refuses to allow the conduct of a liquidation sale pursuant to clause (i) above
and Target Canada has provided Notice at least 120 days prior to the applicable
Vacancy Date, then (a) with respect to up to 10 Subject Leased Properties
designated by Target Canada in such Notice from time to time, Zellers shall
complete such activities at such Subject Leased Properties within eight weeks
and (b) with respect to up to an additional 10 Subject Leased Properties
designated by Target Canada in such Notice from time to time, Zellers shall not
be permitted to conduct any liquidation sales at such Subject Leased Properties.

“Winnipeg Premises” means the portion of the premises known
municipally as 450 Portage Avenue, Winnipeg, Manitoba and more particularly
described in Section 2.9 of the Disclosure Letter.

“Zellers” means Zellers Inc.

“Zellers Entity” has the meaning specified in
Section 7.7(1).

“Zellers Entity Location” has the meaning specified in
Section 7.7(1).

“Zellers Liabilities” has the meaning specified in
Section 12.1(1).

Section 1.2 Gender and Number.

Any reference in this Agreement or any Ancillary Agreement to gender includes
all genders. Words importing the singular number only include the plural and
vice versa.

Section 1.3 Headings, etc.

The provision of a Table of Contents, the division of this Agreement into
Articles and Sections and the insertion of headings are for convenient reference
only and do not affect the interpretation of this Agreement.

Section 1.4 Currency.

All references in this Agreement or any Ancillary Agreement to dollars, or to
$ are expressed in Canadian currency unless otherwise specifically indicated.

Section 1.5 Certain Phrases, etc.

In this Agreement and any Ancillary Agreement (i) the words
“including“, “includes” and
“include” mean “including (or includes or include)
without limitation“, and (ii) the phrase “the aggregate
of“, “the total of“, “the sum of“, or
a phrase of similar meaning means “the aggregate (or total or sum),
without duplication, of“. Unless otherwise specified, the words
“Article” and “Section” followed by a number
mean and refer to the specified Article or Section of this Agreement.

Section 1.6 Knowledge.

Where any representation or warranty contained in this Agreement or any
Ancillary Agreement is qualified by reference to the knowledge of:

(1) Zellers, it refers to the actual
knowledge (without further inquiry) of Mark Foote, as Chief Executive Officer of
Zellers, Michael Culhane, as Senior Vice-President and Chief Financial Officer
of Zellers, David Mock, as Senior Vice-President, Merchandise Hardlines of
Zellers, and Bruce Moore, as Senior Vice-President, Real Estate of HBC;

(2) Target, it refers to the actual
knowledge (without further inquiry) of Douglas Scovanner, as Executive
Vice-President and Chief Financial Officer of Target, and Timothy Baer, as
Executive Vice-President and General Counsel of Target;

in each case, without personal liability on the part of any of them.

Section 1.7 Disclosure Letter.

(1) The Disclosure Letter forms an integral
part of this Agreement for all purposes of it.

(2) The purpose of the Disclosure Letter is
to set out the qualifications, exceptions and other information called for in
this Agreement. The Parties acknowledge and agree that the

Disclosure Letter and the information and disclosures contained in it do not
constitute or imply, and will not be construed as:

(a) any representation, warranty, covenant
or agreement which is not expressly set out in this Agreement;

(b) an admission of any liability or
obligation of any Party;

(d) a standard of materiality, a standard for
what is or is not in the ordinary course of business, or any other standard
contrary to the standards contained in the Agreement; or

(e) an expansion of the scope of effect of
any of the representations, warranties and covenants set out in the Agreement.

(3) Disclosure of any information in the
Disclosure Letter that is not strictly required under this Agreement has been
made for informational purposes only and does not imply disclosure of all
matters of a similar nature. Inclusion of an item in any section of the
Disclosure Letter is deemed to be disclosure for all purposes for which
disclosure is required under this Agreement to the extent that the relevance of
such disclosure to such other purposes is reasonably apparent.

(4) The Disclosure Letter itself is
confidential information and may not be disclosed unless (i) it is required to
be disclosed pursuant to applicable Law, unless such Law permits the Parties to
refrain from disclosing the information for confidentiality or other purposes or
(ii) a Party needs to disclose it in order to enforce or exercise its rights
under this Agreement.

Section 1.8 References to Persons and
Agreements.

Any reference in this Agreement to a Person includes its successors and
permitted assigns. The term “Agreement” and any reference to this Agreement or
any other agreement or document includes, and is a reference to, this Agreement
or such other agreement or document as it may have been, or may from time to
time be amended, restated, replaced, supplemented or novated and includes all
schedules to it.

Section 1.9 Statutes.

Except as otherwise provided in this Agreement, any reference in this
Agreement to a statute refers to such statute and all rules and regulations made
under it, as it or they may have been or may from time to time be amended or
re-enacted.

Section 1.10 Non-Business Days.

Whenever payments are to be made or an action is to be taken on a day which
is not a Business Day, such payment shall be made or such action shall be taken
on or not later than the next succeeding Business Day.

Section 1.11 Time Periods.

Unless otherwise specified, time periods within or following which any
payment is to be made or act is to be done shall be calculated by excluding the
day on which the period commences and including the day on which the period ends
and by extending the period to the next Business Day following if the last day
of the period is not a Business Day.

Section 1.12 Designation of Target Canada.

Target may, by Notice to Zellers given at least 10 Business Days prior to the
First Tranche Closing Date, designate one or more other subsidiaries of Target
as Target Canada and shall cause such subsidiaries to enter into and become
bound by this Agreement as Target Canada on or prior to the First Tranche
Closing Date. Upon such designation, such entities together with Target Canada
Co. shall be deemed for purposes of this Agreement and all Ancillary Agreements
to be “Target Canada”.

Section 1.13 Leasehold Interests.

Notwithstanding any provision of this Agreement or Ancillary Agreements to
the contrary, for purposes of this Agreement and each Ancillary Agreement,
(i) all references to “Lease” include any sublease or agreement to sublease by
which Zellers (as subtenant) holds its interest in the related Leased Property,
(ii) for the Leased Properties which are subject to a sublease or agreement to
sublease (rather than a lease) in favour of Zellers, all references to Zellers153
“leasehold” interest in such Leased Property shall mean Zellers153 “subleasehold”
interest (rather than a leasehold interest) in such Leased Property, any
reference to “Landlord” shall mean the sublandlord under the applicable
sublease or agreement to sublease pursuant to which Zellers (as subtenant) holds
its interest in such Leased Property, and any reference to “Sublease” shall mean
a sub-sublease in such Leased Property in favour of Zellers, and (iii) all other
similar references relating to the Leases and Leased Properties shall be
interpreted and construed in a similar manner.

ARTICLE 2
AGREEMENT OF PURCHASE AND SALE

Section 2.1 First Tranche Subject Leased
Properties.

(1) From time to time during the First
Tranche Selection Period, Target or Target Canada shall deliver to Zellers a
Notice designating up to 110 Leases that shall be assigned and transferred on
the First Tranche Closing Date (such list, as updated from time to time,
including in accordance with Section 2.1(4), the “First Tranche
Selection List“).

(2) Subject to the terms and conditions of
this Agreement, Zellers agrees to assign and transfer to Target Canada or at the
direction of Target Canada to a Designee and Target Canada agrees to acquire and
assume or cause to be acquired and assumed by a Designee on the First Tranche
Closing Date in accordance with the terms of this Agreement, effective as of the
Effective Time of the First Tranche Closing Date, the First Tranche Subject
Leases, including all rights of Zellers relating thereto or arising thereunder

(inclusive of any options of Zellers therein). On or before the First
Tranche Closing Date:

(i) each of Zellers and Target Canada
shall enter into a Lease Assignment and Assumption Agreement with respect to
those First Tranche Subject Leases to be assigned to Target Canada; and

(ii) Zellers shall, and Target Canada shall
cause its Designees to, enter into a Designee Assignment and Assumption
Agreement with respect to those First Tranche Subject Leases to be assigned to a
Designee;

in respect of each of the First Tranche Subject Leases to effect the
aforesaid assignment, transfer and assumption thereof.

(3) Contemporaneous with the assignment and
transfer of the First Tranche Subject Leases, each of Zellers and Target Canada
shall enter into (or Target Canada shall cause its Designee to enter into)
Subleases in respect of each of the First Tranche Subject Leased Properties the
terms of which will commence as of the Effective Time of the First Tranche
Closing Date.

(4) If at the end of the First Tranche
Selection Period the First Tranche Selection List includes fewer than 110
Subject Leases, Target Canada shall have the right to continue to designate
additional Leases as First Tranche Subject Leases (and the relevant Leased
Properties shall be First Tranche Subject Leased Properties), provided that the
number of Leases designated on the First Tranche Selection List plus the number
of additional Leases designated as First Tranche Subject Leases pursuant to this
Section 2.1(4) may not exceed 110. Target Canada shall have the right to take
assignments of one or more First Tranche Subject Leases on one or more dates
(each, a “Delivery Date”) after the First Tranche Closing Date,
provided (i) Zellers and Target Canada shall reasonably cooperate in executing,
on the applicable Delivery Date, all documents and instruments contemplated
under this Agreement to be delivered on a Closing Date, (ii) all such documents,
when delivered, shall provide the Parties with all rights and obligations with
respect to each Subject Leased Property that the Parties would have had if such
documents and instruments had been delivered on the First Tranche Closing Date,
(iii) such documents shall in all events be executed and delivered by the
Parties on the earlier of (a) a date selected by Target Canada on at least 10
days advance written notice from Target Canada, and (b) the Second Tranche
Closing Date, and (iv) no Delivery Date shall be within 10 Business Days of the
Second Tranche Closing Date.

Section 2.2 Second Tranche Subject Leased
Properties.

(1) From time to time during the Second
Tranche Selection Period, Target or Target Canada shall deliver to Zellers a
written notice designating additional Leases that shall be assigned and
transferred on the Second Tranche Closing Date (such list, as updated from time
to time, the “Second Tranche Selection List“), provided that
the number of Leases designated on the Second Tranche Selection List when added
to the number of Leases designated on the First Tranche Selection List shall not
be more than 220.

(2) Subject to the terms and conditions of
this Agreement, Zellers agrees to assign and transfer to Target Canada or at the
direction of Target Canada to a Designee and Target Canada agrees to acquire and
assume or cause to be acquired and assumed by a Designee on the Second Tranche
Closing Date in accordance with the terms of this Agreement, effective as of the
Effective Time of the Second Tranche Closing Date, the Second Tranche Subject
Leases, including all rights of Zellers relating thereto or arising thereunder
(inclusive of any options of Zellers therein). On or before the Second Tranche
Closing Date:

(i) each of Zellers and Target Canada
shall enter into a Lease Assignment and Assumption Agreement with respect to
those Second Tranche Subject Leases to be assigned to Target Canada; and

(ii) Zellers shall, and Target Canada shall
cause its Designees to, enter into a Designee Assignment and Assumption
Agreement with respect to those Second Tranche Subject Leases to be assigned to
a Designee;

in respect of each of the Second Tranche Subject Leases to effect the
aforesaid assignment, transfer and assumption thereof.

(3) Contemporaneous with the assignment and
transfer of the Second Tranche Subject Leases, each of Zellers and Target Canada
shall enter into (or Target Canada shall cause its Designee to enter into)
Subleases in respect of each of the Second Tranche Subject Leased Properties the
terms of which will commence as of the Effective Time of the Second Tranche
Closing Date.

Section 2.3 Right to Terminate Leases.

Instead of taking an assignment of any Subject Lease (or directing the
assignment of such Subject Lease to a Designee) on the applicable Closing Date,
Target Canada may negotiate with the applicable Landlord for the termination of
such Subject Lease, provided that (i) no such termination shall be effective
prior to the applicable Closing Date with respect to such Subject Lease;
(ii) from and after the applicable Closing Date to and including the applicable
Vacancy Date, Zellers shall have the same right to use and occupy the Subject
Leased Property relating to such Subject Lease under a Sublease (or other
agreement providing substantially similar rights) on all the same terms and
conditions that would have applied had such Subject Lease been assigned to
Target Canada (instead of terminated) and subleased to Zellers under a Sublease,
except that all amounts that would have been paid as rent under such Sublease
shall be paid to the Landlord, or as Target Canada may direct; (iii) such
Subject Lease shall count as one of the Leases that Target Canada is entitled to
designate under Section 2.1(1) or 2.2(1), notwithstanding Target Canada153s
election to arrange for the termination (rather than assignment) of such Subject
Lease; and (iv) the Vacancy Date for such Subject Leased Property shall be
established by Target Canada giving a Notice in accordance with Section 2.4.

Section 2.4 Vacancy Date.

(1) Target Canada, Target or a Designee may
from time to time provide Notice to Zellers establishing the Vacancy Date for
one or more Subleases.

(2) On each Vacancy Date, effective as of the
applicable Effective Time, the Sublease(s) identified in the Notice shall be
terminated and Target Canada or a Designee shall accept and take possession of
the relevant Subject Leased Properties, which Subject Leased Properties shall be
(i) empty of all inventory, trade fixtures (including all store shelving, racks,
display cases and stockroom shelving systems), personal property and debris, and
(ii) free from any subtenants, licensees or other Persons in possession of all
or any portion of the relevant Subject Leased Properties. Notwithstanding the
foregoing or any other provision of this Agreement, the Subject Leases or any
Ancillary Agreement, Zellers shall have no obligation (a) to restore the Subject
Leased Properties to a base building condition or standard, (b) to remove any
leasehold improvements from the Subject Leased Properties, or (c) to repair,
patch or replace any walls, ceilings or flooring damaged by the removal of trade
fixtures, provided such removal is accomplished in a commercially reasonable
manner.

Section 2.5 Ordinary Course Operations.

From the Execution Date until the expiration of the Second Tranche Selection
Period, Zellers shall operate and cause to be operated the operations currently
conducted by it and its Affiliates, and use commercially reasonable efforts to
cause its licensees and subtenants to operate the operations currently operated
by each of them, in and on the Leased Properties in the ordinary course of
Zellers153 business and consistent with Zellers153 and Zellers153 Affiliates153,
licensees153 and subtenants153 past practices (including maintaining and updating
all Pharmacy Records in accordance with customary practices of the applicable
pharmacy operator or required by Laws), Laws and in accordance with and subject
to the terms of the Leases (including, with respect to any Lease as to which
there exists a dispute or default that is disclosed in Section 5.1(i)(iii),
5.1(i)(vii) or 5.1(i)(viii) of the Disclosure Letter, using commercially
reasonable efforts to resolve or cure such dispute or default), in each case in
all material respects. As to the Subject Leases and the Subject Leased
Properties only, from the expiration of the Second Tranche Selection Period
until the applicable Vacancy Date, Zellers shall operate and cause to be
operated the operations currently conducted by it and its Affiliates, and use
commercially reasonable efforts to cause its pharmacy licensees and subtenants
to operate the operations currently operated by each of them, in and on the
Subject Leased Properties in the ordinary course of Zellers153 business and
consistent with Zellers153 and Zellers153 Affiliates153, pharmacy licensees153 and
subtenants153 past practices (including maintaining and updating all Pharmacy
Records in accordance with customary practices of the applicable pharmacy
operator or required by Laws), Laws and in accordance with and subject to the
terms of the Subleases, in each case in all material respects. Notwithstanding
the foregoing, (i) nothing in this Section 2.5 will derogate from Zellers153
rights contained in the Subleases or in Section 2.4 during the applicable
portion of the time period during the conduct of the Wind-Down Actions, nor
shall the exercise of such rights constitute a breach of this Section 2.5,
(ii) the Wind-Down Actions shall not constitute a breach of this Section 2.5,
provided such actions are taken in accordance with the terms of the respective
Sublease and all Laws, (iii) the period during which liquidation sales may be
conducted (as established pursuant to the definition of Wind-Down Actions) shall
not be limited as described in such definition with respect to any Subject
Leased Property as to which the conduct of a liquidation sale for such extended
period will not and does not (a) give rise to a Landlord Recapture Right,
(b) give rise to a Lease Default; or (c) diminish or limit any right or
privilege of the tenant under the applicable Subject Lease, and (iv) Zellers has
the right to terminate any sublease, license, concession or other occupancy
agreement relating to the Leased

Property at any time following the applicable Closing Date, excluding any
pharmacy sublease, license, concession or other occupancy agreement.

Section 2.6 Pharmacy Records.

At the option of Target Canada, which may be exercised by Notice given by
Target Canada to Zellers from time to time no later than 90 days prior to the
applicable Vacancy Date (the “Pharmacy Notice Date“), but
subject to Laws, Zellers shall and shall cause its Affiliates and shall use
commercially reasonable efforts to cause any third-party operator of the
pharmacy in the applicable Subject Leased Property to transfer to or upon the
direction of Target Canada all or any portion of the Pharmacy Records specified
in such Notice (to the extent a pharmacy is operating in the applicable Subject
Leased Property), including paper file backup and a backup tape for all
prescriptions (to the extent such exist), without retaining any copies of such
Pharmacy Records other than such copies as Zellers or applicable pharmacy
operator is required to retain by Laws (and, in such case, only to the extent
and for so long as required by Laws). No additional consideration shall be
payable by Target or Target Canada in connection with such transfer of Pharmacy
Records. Zellers shall, and shall cause its Affiliates to and use commercially
reasonable efforts to cause the applicable pharmacy operator to, make such
transfer in respect of each applicable Subject Leased Property (i) in a format
reasonably requested by Target Canada, (ii) free and clear of all Encumbrances,
(iii) on the applicable Vacancy Date (or such earlier date as is specified in
such Notice, which date shall not be less than 30 days after the date such
Notice is given) in respect of such Subject Leased Property provided Target
Canada has provided appropriate notice by the applicable Pharmacy Notice Date,
and (iv) if requested by Target Canada, pursuant to a mutually agreed upon file
transfer agreement with terms consistent with those set forth in this
Section 2.6. The Parties shall cooperate to effect any such transfers in
accordance with Laws. Neither Zellers nor any of its Affiliates will directly
or indirectly solicit the transfer of any of the Pharmacy Records that may be
transferred to or upon the direction of Target Canada pursuant to this Agreement
to any stores or pharmacies operated by Zellers or any of its Affiliates or,
subject to Laws, provide to any other Person any of the Pharmacy Records that
are to be transferred to or upon the direction of Target Canada pursuant to this
Agreement. Zellers shall use commercially reasonable efforts to enforce any
contractual rights it may have with the third-party operator of a pharmacy in
each applicable Subject Leased Property restricting the solicitation or transfer
of any of the Pharmacy Records that are to be transferred to or upon the
direction of Target Canada pursuant to this Agreement where Zellers has
knowledge of any actual or threatened breach of such provisions. For purposes of
this Section 2.6 only, knowledge of Zellers shall include the actual knowledge
of the General Merchandise Manager, Pharmacy of Zellers.

Section 2.7 Target Canada Assignment of
Rights.

(1) Target Canada may from time to time
designate one or more Persons (each, a “Designee“) to be an
immediate or subsequent assignee(s) of the Subject Leases, as follows:

(a) If Target Canada wishes to have one or
more Subject Leases assigned directly by Zellers to one or more Designee(s),
Target Canada may upon at least 10 Business Days153 written notice in advance of a
Delivery Date or a Closing Date, as the case may be, identify the
Designee(s) that is or are to be the assignee(s) of the Subject

Leases to be assigned and transferred by Zellers on the applicable Closing
Date or Delivery Date, in which case, on such date, with respect to the Subject
Lease(s) so identified:

(i) the Designee(s) will execute and
deliver an Assignment and Assumption of Lease Agreement in substantially the
form specified in Section 2.7(1) of the Disclosure Letter (as such form may be
modified in accordance with Section 2.7(5) of this Agreement, a
“Designee Assignment and Assumption Agreement“) (and Zellers
and Target Canada will not execute a Lease Assignment and Assumption Agreement)
with respect to such Subject Leases(s), and

(ii) such Designee(s) (and not Target
Canada) will execute and deliver the Sublease(s) in favour of Zellers with
respect to the applicable Subject Leased Properties.

Zellers need not make any assignment directly to a Designee unless such
Designee executes and delivers a Designee Assignment and Assumption Agreement on
the applicable Closing Date or Delivery Date. If any Designee shall fail or
refuse to execute and deliver a Designee Assignment and Assumption Agreement and
Sublease with respect to any Subject Lease, Target Canada and Zellers shall,
upon Target Canada153s request, enter into a Lease Assignment and Assumption
Agreement and a corresponding Sublease in respect of the applicable Subject
Lease on the Closing Date or Delivery Date.

(b) If Target Canada wishes to assign to one
or more Designee(s) one or more Subject Lease(s) previously assigned to Target
Canada, Target Canada may at any time and from time to time do so without limit
or qualification of any kind, except that any such assignment by Target Canada
shall be subject to the rights of Zellers under any applicable Sublease then in
effect.

(2) In connection with the assignment of any
Subject Lease(s) to any Designee(s) pursuant to Section 2.7(1), Target Canada
and/or Target may by separate agreement with such Designee(s) provide
representations and warranties in such form and content as Target Canada and/or
Target may elect. Zellers shall have no direct liability or obligation to any
Designee on account of any such representations or warranties. The assignment
of a Subject Lease(s) to Designee(s) does not relieve Zellers of liability for a
breach of any of the representations or warranties contained in Section 5.1 to
the extent that such breach results in Damages to Target Canada or Target,
subject, in all events, to the limitations contained in this Agreement,
including Section 11.5.

(3) Upon assignment of a Subject Lease
(whether by Zellers pursuant to Section 2.7(1)(a) or by Target Canada pursuant
to Section 2.7(1)(b)) to an Investment Grade Designee at any time up to the
second anniversary of the applicable Vacancy Date for such Subject Lease, Target
Canada and Target shall be released from all Subject Lease
Obligations relating to such Subject Lease, to the extent, and only to the
extent, (i) assumed by such Investment Grade Designee and (ii) an indemnity has
been provided by such Designee with respect to such Subject Lease Obligation
assumed by such Designee, in each case, in writing. Such assumption and
indemnity by an Investment Grade Designee may be accomplished:

(a) in the case of an assignment pursuant to
Section 2.7(1)(a), pursuant to a Designee Assignment and Assumption Agreement,
or pursuant to an assumption and indemnity agreement by the Investment Grade
Designee in favour of Zellers in a form which is acceptable to Zellers, acting
reasonably; or

(b) in the case of an assignment by Target
Canada pursuant to Section 2.7(1)(b), pursuant to an assumption and indemnity
agreement by the Investment Grade Designee in favour of Zellers in a form which
is acceptable to Zellers, acting reasonably. If pursuant to an instrument of
assignment between Target Canada and a Designee, such Designee (i) assumes some
or all Subject Lease Obligations with respect to a Subject Lease, and
(ii) confirms in writing with Zellers that such assumption and indemnity runs in
favour of Zellers, then Zellers shall join in (by attached joinder or otherwise)
such instrument in order to (x) accept such assumption and (y) confirm the
release of Target and Target Canada to the extent of the Subject Lease
Obligations so assumed and indemnified.

Any release provided for in this Section 2.7(a)(3) shall be effective upon
the execution by the Investment Grade Designee and receipt by Zellers of the
aforesaid Designee Assignment and Assumption Agreement or other assumption and
indemnity agreement, and shall require no further act, deed or writing. Zellers
agrees from time to time upon request of Target or Target Canada to confirm such
releases, but the failure of Target or Target Canada to request any such
confirmation, and the failure of Zellers to provide any such confirmation, shall
not affect the automatic release provided in the preceding sentence. For
purposes hereof, “Subject Lease Obligations” means all
obligations arising under (i) a Subject Lease assigned to a Designee, (ii) the
Lease Assignment and Assumption Agreement or Designee Assignment and Assumption
Agreement, as applicable, pursuant to which such Subject Lease was assigned,
(iii) the Sublease entered into or to be entered into with respect to such
Subject Lease, and (iv) Sections 11.3(d) and 11.3(e) with respect to such
Subject Lease.

(4) No assignment of a Subject Lease to a
Designee that is not an Investment Grade Designee at the time of assignment
shall release Target Canada or Target from any Subject Lease Obligations.

(5) The form of Designee Assignment and
Assumption Agreement may be varied and modified by Target Canada in its
discretion from time to time so long as such variations and modifications do not
(a) expand upon any representations, warranties, covenants, obligations, or
liabilities of Zellers beyond those contained in the form of Designee Assignment
and Assumption Agreement specified in Section 2.7(1) of the Disclosure Letter,
or (b) alter in any material respect the provisions of Section 5 of the form of
Designee Assignment and Assumption Agreement specified in Section 2.7(1) of the
Disclosure Letter.

(6) Target and Target Canada shall remain
responsible for and shall not, in any event, be released from any of their
covenants and obligations under this Agreement in relation to the payment of the
entire Purchase Price by reason of any assignments made pursuant to this
Section 2.7.

Section 2.8 Access and Additional Information
Relating to Leased Properties.

(1) Subject to Target Canada complying with
Laws, prior to the final Vacancy Date, Zellers shall, upon reasonable prior
Notice, permit Target Canada and its representatives and advisers reasonable
access to the Leased Properties during the period commencing two hours prior to
the Leased Property opening for business to the public and ending two hours
after the close of business, subject to the rights of all subtenants, licensees
and concessionaires in the Leased Property (excluding, however, such subtenants,
licensees and concessionaires that are Affiliates of Zellers) in order to make
such reasonable investigations as Target Canada shall reasonably determine are
necessary or advisable. Target Canada shall perform such investigations in
compliance with Laws. Subject to Laws, and at the sole cost and expense of
Target Canada, Zellers shall give Target Canada153s representatives and agents
reasonable means necessary to effect such investigations and shall cause its
agents, employees, officers and directors to aid such representatives and agents
in such investigations. Zellers is not required to disclose any information to
Target Canada where such disclosure is prohibited by Laws or by the terms of any
agreement. Any investigations or tests which require drilling or other invasive
actions shall be performed outside of the hours when the Leased Property is open
for business to the public and shall be done only with the prior written consent
of Zellers, acting reasonably, and all such inspections and tests contemplated
by this Agreement shall not unduly interfere (and Target Canada and Target shall
use their reasonable commercial efforts not to so interfere) with the use,
access, operation and enjoyment by Zellers and its subtenants, licensees,
concessionaries, customers and suppliers of the Leased Properties.

(2) Except as necessary to perform the
investigations contemplated by this Section 2.8, Target Canada and Target shall
not make contact with any store employees of Zellers without the prior written
consent of Zellers, such consent not to be unreasonably withheld.

(3) Prior to entry onto the Leased
Properties, Target Canada or Target, as applicable, shall have in effect a
policy of general liability insurance with a reputable national insurance
company and with coverages in accordance with normal commercial practices in
Toronto, Ontario; provided, however, that such insurance may be carried under a
blanket policy or pursuant to Target153s self-insurance program. At Zellers153
request, Target Canada or Target Canada153s representatives and agents, as the
case may be, shall provide evidence of such insurance or self-insurance prior to
any entry onto any of the Leased Properties. Target Canada and Target each
agree in favour of Zellers to repair forthwith any damage to the Leased
Properties arising from such access or investigations (including by any Designee
or potential Designee pursuant to Section 2.8(6)) at Target Canada and Target153s
expense and shall jointly and severally indemnify and hold Zellers harmless from
and against any and all losses, Damages (including, for greater certainty, lost
profits), claims, costs (including costs on a solicitor and client basis) or
liabilities in respect of physical injury or property damage that may be
directly or indirectly suffered or incurred by Zellers directly arising from or
in respect of the access or investigations by Target Canada, Target and/or any
Designee, potential Designee and each of their representatives and advisors.

(4) Zellers shall, within five days after
receipt of a request from Target Canada or Target Canada153s counsel, execute and
deliver to Target Canada all consents reasonably necessary to permit Target
Canada to have inspections made by and to have existing records released to
Target Canada by the municipal building and zoning departments, fire
departments, public works departments, environmental agencies, elevator
inspections branch of the provincial or territorial departments of labour and
other appropriate authorities as Target Canada may consider advisable, acting
reasonably, between the Execution Date and the Vacancy Date, respectively, for
each Subject Lease.

(5) From the Execution Date until the
applicable Closing Date or Delivery Date, Zellers shall afford Target, Target
Canada, and their respective representatives and advisers reasonable access to
all Books and Records in Zellers153 possession or control relating to the Leased
Properties or the Leases.

(6) Each Designee and each Person identified
by Target Canada as a potential Designee shall have the same access and
inspection rights afforded to Target Canada under this Section 2.8, on and
subject to the terms, conditions and requirements of this Section 2.8, provided
that such potential Designee executes and delivers in favour of Zellers an
access, confidentiality and indemnification agreement in the form attached as
Section 2.8(6) to the Disclosure Letter and that the covenants and indemnity of
Target and Target Canada in favour of Zellers and set out in
Section 2.8(3) shall equally apply in respect of the examinations,
investigations and testing undertaken by any Designee or any Person designated
as a potential Designee. For greater certainty, nothing in this Section will in
any way limit the indemnification obligations of Target and Target Canada in
favour of Zellers under Section 2.8(3).

Section 2.9 Winnipeg Lease Option.

Target Canada has the option to enter into an agreement with HBC to lease the
Winnipeg Premises, which agreement will be based on the terms and conditions set
forth in Section 2.9 to the Disclosure Letter. If Target Canada and HBC have
not executed such lease by the Second Tranche Closing Date, the Purchase Price
shall increase by $12,500,000, which additional $12,500,000 shall be payable on
the Second Tranche Closing Date.

ARTICLE 3
PURCHASE PRICE

Section 3.1 Purchase Price.

(1) The Purchase Price for the Subject Leases
is $1,825,000,000, payable as follows:

(a) the consideration payable by Target
Canada to Zellers for the First Tranche Subject Leases on the First Tranche
Closing Date is $912,500,000 (the “First Tranche Purchase
Price”), subject to adjustment in accordance with Section 3.3; and

(b) the consideration payable by Target
Canada to Zellers for the Second Tranche Subject Leases on the Second Tranche
Closing Date is $912,500,000 (the

“Second Tranche Purchase Price”), subject to adjustment
pursuant to Section 2.9 and in accordance with Section 3.3.

(2) Zellers and Target Canada agree to
allocate the entire amount of the Purchase Price to the leasehold interests. The
Parties agree to (and agree to cause each of their Affiliates to) execute and
file all Tax Returns and prepare all of their own financial statements and other
instruments on the basis of this allocation.

Section 3.2 Payment of the Purchase Price.

(1) On the First Tranche Closing Date, the
First Tranche Purchase Price will be paid and satisfied, subject to adjustment
in accordance with Section 3.3, as follows:

(a) as to the Cost Basis of the Notes
transferred and assigned to or on the direction of Zellers on the First Tranche
Closing Date pursuant to Section 3.8(4), if any, plus any Accrued Interest on
such Notes that has not been paid to Target Canada, by such transfer of such
Notes; and

(b) as to the balance, by Target Canada
paying to or to the order of Zellers such amount by wire transfer of immediately
available funds in accordance with a direction delivered by Zellers to Target
Canada prior to the First Tranche Closing Date.

(2) On the Second Tranche Closing Date, the
Second Tranche Purchase Price will be paid and satisfied, subject to adjustment
in accordance with Section 3.3, as follows:

(a) as to the Cost Basis of the Notes
transferred and assigned to or on the direction of Zellers on the Second Tranche
Closing Date pursuant to Section 3.8(5), if any, plus any Accrued Interest on
such Notes that has not been paid to Target Canada, by such transfer of such
Notes; and

(3) For purposes of this Section 3.2, the
conversion of the Cost Basis of any Note to be transferred and assigned,
together with the Accrued Interest thereon, from United States dollars to
Canadian dollars shall be determined by reference to the applicable exchange
rate, as reported by Bloomberg as of noon (Eastern Time) on the Business Day
immediately preceding the date on which such Note was acquired by Target or
Target Canada.

Section 3.3 Adjustments.

(1) Except as otherwise provided in this
Section 3.3 and subject to the rights and obligations of Zellers and Target
Canada under the Subleases, all adjustments for basic rent, additional rents,
damage/security deposits paid or payable to Landlords and interest thereon, if
any, prepaid rents and interest thereon, if any, and operating expenses,
utilities

and realty taxes, payable or receivable under the Subject Leases, shall be
made as of the relevant Vacancy Date (with all expenses, liabilities and
revenues for the Vacancy Date being allocated to Zellers) and shall be paid on
the relevant Vacancy Date pursuant to a statement of adjustments in respect of
the relevant Leased Property to be prepared by Zellers and approved by Target
Canada, each acting reasonably, at least 10 days prior to the relevant Vacancy
Date (a “Statement of Adjustments“).

(2) If the final cost or amount of any item
which is to be adjusted cannot be determined at the relevant Vacancy Date, then
(unless otherwise provided in this Section 3.3) an initial adjustment for such
item shall be made at the relevant Vacancy Date, such amount to be estimated by
Zellers, acting reasonably, as of the relevant Vacancy Date on the basis of the
best evidence available at such Vacancy Date as to what the final cost or amount
of such item will be. Additional rents and operating cost adjustments to be
determined by a Landlord following a fiscal or calendar year end shall not be
adjusted until such determination. All amounts which have been estimated
because they have not been finally determined by the relevant Vacancy Date shall
be finally adjusted in accordance with this Section 3.3(2) (such final
adjustments being the “Post-Vacancy Adjustments“). In each
case when such cost or amount is determined, Zellers or Target Canada, as the
case may be, shall within 30 days thereafter provide a complete statement of
such final determination to the other and within 30 days after such 30-day
period (or if there is a dispute over such amount, after the matter is
determined by the Auditor pursuant to this Section) the necessary Post-Vacancy
Adjustment shall be made. In the case of any dispute between the Parties with
respect to any Post-Vacancy Adjustments, the final cost or amount of an item
shall be determined by a national audit firm (the “Auditor“)
appointed jointly by Zellers and Target Canada within 10 Business Days after the
issue is referred by one of the Parties to the Auditor for such determination.
The cost of such determination shall be shared equally between the relevant
Parties. Zellers and Target Canada agree to execute and deliver on the relevant
Vacancy Date an undertaking to re-adjust and pay the amount of any Post-Vacancy
Adjustments as may be owing pursuant to the provisions of this Agreement.
Notwithstanding any other provision of this Section 3.3, save and except for
those Post-Vacancy Adjustments being determined by the Auditor in the manner set
out herein (the “Audited Claim“), all adjustments and
Post-Vacancy Adjustments to be made pursuant to this Section 3.3 shall, in any
event, be completed on or before the date which is no later than the second
anniversary of the relevant Vacancy Date (the “Final Adjustment
Date“) and no claim for any re-adjustment may be made by either party
thereafter, unless and only to the extent such claim is an Audited Claim or is
an adjustment pursuant to Section 3.3(3) or Section 3.5. Subject to the terms
of the applicable Sublease, Zellers shall, without delay, be responsible to
conclude all final reconciliations of all sums payable or receivable by the
tenant under the Subject Leases in accordance with the terms of each Subject
Lease and Target Canada shall provide such assistance as may be reasonably
required. Subject to the terms of the applicable Sublease, Zellers and Target
Canada agree that Target Canada shall not be responsible for any percentage
rents attributable to Zellers153 sales, special service costs (such as additional
janitorial services, additional HVAC supplied) and other costs for special
services provided at the request of Zellers to a standard higher than the norm
called for by the terms of the relevant Lease, or penalties and interest charged
by the Landlord in respect of amounts owing which are attributable to the period
prior to the Vacancy Date.

(3) Zellers shall be entitled after the
Vacancy Date to any amounts payable to Zellers and responsible for any amounts
owing by Zellers, pursuant to, or in respect of any agreements with Governmental
Entities or any owners of property adjoining the Leased Properties or under or
in respect of the Subject Leases or the Leased Properties whereby any other
Person is required to pay, reimburse, refund or otherwise contribute any amount
to Zellers in respect of any improvements, work, services or costs that have
been supplied, constructed, installed, performed or paid by Zellers prior to the
relevant Vacancy Date (in each case, a “Prepaid Cost Refund“)
or whereby any other Person is entitled to be paid any such similar amount by
Zellers. This obligation survives the relevant Vacancy Date and the Final
Adjustment Date, notwithstanding any other provision of this Agreement or any
Ancillary Agreement. To the extent Target Canada receives any Prepaid Cost
Refund, Target Canada shall hold such Prepaid Cost Refund in trust for Zellers
and shall endorse in favour of Zellers and deliver to Zellers the Prepaid Cost
Refund forthwith upon receipt. Nothing in this Agreement, the Subject Leases or
the Ancillary Agreements, shall preclude Zellers from commencing or maintaining
an action against a third party from whom Zellers is entitled to receive a
Prepaid Cost Refund. Any such amount payable by Zellers shall be paid within 10
days following a request for payment from Target Canada or the applicable
recipient. Notwithstanding the foregoing, Zellers may, upon prior consultation
with Target Canada, deal directly with a Landlord following the applicable
Closing Date in connection with all claims and disputes (including
reconciliation of all payments and charges thereunder) between the Landlord and
Zellers with respect to the Leased Property arising prior to the applicable
Closing Date; provided, however, such actions shall in no event adversely impact
Target Canada153s rights or obligations under the Subject Lease.

Section 3.4 Sales and Transfer Taxes.

Target Canada or the applicable Designee or Designees shall be liable for and
pay all sales and transfer taxes (including land transfer taxes), registration
charges and transfer fees payable (i) by the assignee in respect of the
assignment of the Subject Leases from Zellers to Target Canada or a Designee or
Designees and (ii) in connection with any transfer of Pharmacy Records. Zellers
and Target Canada shall each be liable for and shall pay 50% of any sales and
transfer taxes (including land transfer taxes), registration charges and
transfer fees payable in connection with the registration of any of the Subject
Leases and any transfer thereof occurring prior to the applicable Closing Date
(to the extent that Target Canada or Target has requested such registration by
reason of such registration being reasonably required in order for Target Canada
or a Designee to register the assignment to Target Canada or such Designee or
obtain title insurance or a title opinion reasonably satisfactory to Target
Canada or such Designee). Zellers shall provide such assistance and execute
such documents as Target Canada may reasonably require to complete such
registrations.

Section 3.5 Goods and Services Tax and Harmonized
Sales Tax.

Subject to Section 3.6, Target Canada shall be liable for and shall pay, or
shall cause the applicable Designee or Designees to be liable for and pay, to
Zellers an amount equal to any goods and services tax and harmonized sales tax
payable by Target Canada and collectible by Zellers under the Excise Tax
Act (Canada), plus an amount equal to any similar value added or
multi-staged tax imposed (including, for greater certainty, any applicable
Quebec Sales Tax) by any applicable provincial or territorial legislation, in
respect of the assignment of the Subject

Leases to Target Canada or the Designee or Designees. Any such taxes shall
be paid to Zellers no later than three Business Days before such taxes, if any,
are due to be remitted by Zellers.

Section 3.6 Self-Assessment of GST and HST on Real
Property.

To the extent permitted under subsection 221(2) of the Excise Tax
Act (Canada) and any equivalent or corresponding provision under any
applicable provincial or territorial legislation and provided that Target Canada
delivers or causes to be delivered by the applicable Designee or Designees on
the Closing Date to Zellers the HST Declaration and Indemnity, Target Canada or
the applicable Designee or Designees shall self-assess and remit, where
applicable, directly to the appropriate Governmental Entity any goods and
services tax and harmonized sales tax imposed under the Excise Tax Act
(Canada) and any similar value added or multi-staged tax imposed by any
applicable provincial or territorial legislation payable in connection with the
assignment of the Subject Leases under this Agreement. Target Canada or the
applicable Designee or Designees shall make and file any returns in accordance
with the requirements of subsection 228(4) of the Excise Tax Act
(Canada) and any equivalent or corresponding provision under any applicable
provincial or territorial legislation.

Section 3.7 Tax Refunds.

In the event that there are any realty tax appeals in respect of any Subject
Leased Property for any tax year prior to and including the year in which the
applicable Vacancy Date for such Subject Leased Property occurs (but not any
subsequent tax year), Zellers may, at its option, at no cost to Target Canada,
and provided that it does not and will not materially and adversely affect
future assessments, continue such appeals (or, at Zellers153 election, require
Target Canada to pursue such appeals in good faith at Zellers153 expense, and
without Target Canada being required to incur any liabilities or obligations)
and shall be entitled to receive any rebate, refund, credit, reassessment,
readjustment, payment and/or the like from time to time (the full amounts of
each being a “Tax Refund“) resulting therefrom to the extent
relating to the period prior to the applicable Vacancy Date; provided that
Zellers shall consult with Target Canada (or Target Canada with Zellers as the
case may be) with respect to, and Target Canada (or Zellers as the case may be)
acting reasonably shall have the right to approve, any final settlement or
disposition of any such appeal (such approval shall be deemed to have been given
by Target Canada (or Zellers as the case may be) if Target Canada (or Zellers as
the case may be) has not responded within 15 Business Days of a request by
Zellers (or Target Canada as the case may be) for such approval). Each of Target
Canada and Zellers agrees to co-operate with the other with respect to all such
appeals or reassessments and to provide the other with access to any necessary
documents or materials required to continue any such appeals or reassessments.
Target Canada shall cooperate with Zellers as to any tax appeals and shall, if
requested to do so, execute such applications, authorizations or other documents
as may be necessary for Zellers to undertake and pursue the appeal. To the
extent Target Canada receives any Tax Refund in respect of the period prior to
the applicable Vacancy Date, Target Canada shall hold such Tax Refund in trust
for Zellers and shall endorse in favour of Zellers and deliver to Zellers the
Tax Refund promptly upon receipt; provided that, in all cases, readjustments
with the Landlords under the Subject Leases as the result of any Tax Refund may
be effected by Target Canada prior to the payment of any Tax Refund to Zellers
and the amount otherwise owing to Zellers in accordance with the foregoing shall
be reduced by any amount payable to any Landlord as a result of any such
adjustments (it being agreed that Target Canada shall provide Zellers with
copies of any written communication with the Landlord in respect of the
foregoing). Similarly, to the extent Zellers

receives any Tax Refund for the period following the relevant Vacancy Date,
Zellers shall hold such Tax Refund in trust for Target Canada and shall endorse
in favour of Target Canada and deliver to Target Canada the Tax Refund forthwith
upon receipt. If Target Canada sells or otherwise disposes of its interest in
the Subject Lease to any Person (including to any Designee), it shall obtain a
covenant from such Person in favour of Zellers in which such Person agrees to
observe and be bound by the terms of this Section.

Section 3.8 Note Purchase Facility.

(1) Target shall, or shall cause Target
Canada or one or more other Affiliates of Target to, acquire Notes for an
acquisition cost of up to $200,000,000 subject to and in accordance with the
terms set out in this Section 3.8 and procedures to be agreed upon by the
Parties.

(2) The acquisition cost to Target, Target
Canada or such Affiliate of any Notes (the “Cost Basis” of such
Notes) shall not exceed the principal amount of such Notes plus any interest
that has accrued and is unpaid on such Notes at the time of such acquisition.

(3) Any interest accruing on any Notes from
the time of acquisition of such Notes pursuant to this Section 3.8 to the
applicable Closing Date upon which such Notes are transferred in accordance with
Section 3.2 (the “Accrued Interest“) shall accrue to the
benefit of Target, Target Canada or the applicable Affiliates, as the case may
be. Any interest that is paid to Target, Target Canada or any such Affiliate on
the Notes shall be retained by them.

(4) Subject to the terms and conditions of
this Agreement, on the First Tranche Closing Date Target Canada shall transfer
and assign or cause to be transferred and assigned to or at the direction of
Zellers all right, title and interest of Target, Target Canada and such
Affiliates, as the case may be, in and to any and all Notes acquired pursuant to
this Section 3.8 prior to such time.

(5) Subject to the terms and conditions of
this Agreement, on the Second Tranche Closing Date Target Canada shall transfer
and assign or cause to be transferred and assigned to or at the direction of
Zellers all right, title and interest of Target, Target Canada and such
Affiliates, as the case may be, in and to any and all Notes acquired pursuant to
this Section 3.8 that have not been transferred and assigned pursuant to
Section 3.8(4).

(6) All Notes transferred and assigned
pursuant to Section 3.8(4) and Section 3.8(5) shall be free and clear of any
Encumbrances other than any such Encumbrances that existed when such Notes were
acquired by Target, Target Canada or such Affiliates, as the case may be.

(7) Target and Target Canada shall not be
required to acquire any Notes pursuant to this Section 3.8 prior to the date
that is 14 days after the conditions set forth in Section 3.8(8)(d) and (e) have
been satisfied or after the date that is 14 days before the Second Tranche
Closing Date.

(8) The obligations pursuant to this
Section 3.8 shall be subject to the following:

(a) the availability of Notes for purchase
in the market at prices and on other terms and conditions consistent with this
Section 3.8;

(b) compliance by the Parties with Laws;

(c) each of the Parties being satisfied, in
its own discretion, with respect to any proposed purchase of Notes contemplated
by this Section 3.8:

(i) that such purchase is in the best
interests of such Party in the context of the transactions contemplated by this
Agreement;

(ii) that such Notes may be acquired and
transferred as contemplated by this Section 3.8;

(iii) with the assets, liabilities,
obligations, collateral, conditions, obligors and guarantors associated with
such Notes and any acquisition or transfer of such Notes; and

(iv) with the tax treatment of the transactions
contemplated by this Section 3.8;

(d) in connection with each purchase of
Notes, Zellers has obtained and delivered to Target Canada a Rating Agency
Confirmation (as defined in the Intercreditor Agreement and in the Participation
Agreement) with respect to the transfer of such Notes to Target Canada; and

(e) in connection with each purchase of
Notes, Zellers has obtained the consent of all of the holders of such Notes, and
if required, the consent of the Senior Lender (as defined in the Intercreditor
Agreement) and any other consents as may be required, to allow the transfer of
such Notes from Target Canada to Zellers or its designee without any conditions
(except as may be acceptable to each Party in its own discretion) and has caused
to be amended all agreements that restrict the transfer of such Notes to Zellers
or its designee (including the Intercreditor Agreement and Participation
Agreement) to allow such transfer without any conditions (except as may be
acceptable to each Party in its own discretion), and if required, has delivered
a Rating Agency Confirmation with respect to such amendments; provided that
Target Canada agrees to consent to elimination of any restrictions on transfer
of the Notes to Zellers or its designee.

(9) If, for any reason, Target Canada is not
able to transfer and assign any Notes acquired as contemplated by this
Section 3.8 in satisfaction of a portion of the Purchase Price as contemplated
by Section 3.2, HBC will indemnify and save Target, Target Canada and Target153s
other Affiliates harmless from and against, and shall reimburse them for, the
amount, if any, by which the Cost Basis of such Notes and any Accrued Interest
in respect of such Notes exceeds the amount realized by them upon disposition of
such Notes.

ARTICLE 4
ASSUMED LIABILITIES

Section 4.1 Assumed Liabilities.

Target Canada agrees to discharge, perform and fulfil the following, except
for the Excluded Liabilities (collectively, the “Assumed
Liabilities“):

(a) all obligations and liabilities incurred
or accruing after the Effective Time on the applicable Closing Date relating to
or arising under the Subject Leases, except obligations and liabilities related
to any Lease Default existing prior to the relevant Closing Date;

(b) any defaults, obligations or claims
arising solely as a result of the failure to obtain the consent of the
applicable Landlords under the Subject Leases to: (i) the transactions
contemplated by this Agreement, (ii) the assignment of the Subject Leases as
contemplated by this Agreement, (iii) the entering into the Subleases, and/or
(iv) the Wind-Down Actions; and

Section 4.2 Excluded Liabilities.

Target Canada shall not assume, and shall have no obligation to discharge,
perform or fulfil, the following liabilities and obligations (the
“Excluded Liabilities“):

(a) except as otherwise expressly provided
in Section 4.1(b), liabilities incurred or accruing prior to the Effective Time
on the applicable Closing Date relating to or arising under the Subject Leases,
unless otherwise agreed to by the Parties;

(b) any Taxes, other than (i) Taxes incurred
or accruing after the Effective Time on the applicable Closing Date relating to
or arising under the Subject Leases, and (ii) Taxes allocated to Target Canada
under Sections 3.5, 3.6, and 3.7; and

(c) any other obligation or liability which
Target Canada has not expressly agreed to discharge, perform or fulfil under
this Agreement.

For the avoidance of doubt:

(d) any liabilities and obligations of
Zellers under the Subleases shall be deemed to be Excluded Liabilities; and

(e) Target Canada shall not assume, and
shall have no obligation to discharge, perform or fulfil, any liabilities or
obligations relating to:

(i) contracts or agreements entered into
by Zellers or its Affiliates (other than the Subject Leases); or

(ii) employees of Zellers or its Affiliates
or benefits relating to those employees.

Section 4.3 “As Is, Where Is”.

Except for the representations, warranties, covenants and certifications of
Zellers and HBC expressly set out in (i) this Agreement, (ii) the Ancillary
Agreements and (iii) any closing documents delivered by Zellers on any Closing
Date or Delivery Date, Target Canada irrevocably acknowledges and agrees,
without condition, reservation or qualification of any kind whatsoever, that:

(a) in entering into this Agreement and
completing the purchase of the Subject Leases by Target Canada contemplated
hereby, Target Canada and Target have relied and will continue to rely solely
and exclusively upon their own inspections, investigations and due diligence
with respect to the Subject Leases and the Subject Leased Properties;

(b) the Subject Leases are being purchased by
Target Canada and the Subject Leased Properties are being delivered strictly on
an “as is, where is” basis, at Target and Target Canada153s sole risk and peril,
without any express or implied agreement or representation and warranty or
certification of any kind whatsoever or any liability or obligation by or on
behalf of Zellers as to any matter concerning or relating to the Subject Leases
or the Subject Leased Properties, including its or their physical or financial
condition, suitability for development, fitness for a particular purpose,
marketability, title, title liens and Encumbrances (registered or otherwise),
physical condition or characteristics, profitability, use or zoning,
environmental condition, existence of latent defects, quality, or any other
condition or characteristic thereof, or availability or non-availability of any
Landlord consent required for any assignment of the Subject Leases unless such
non-availability is due to a Lease Default; and

(c) as part of Target Canada153s agreement to
purchase the Subject Leases and accept the Subject Leases and the Leased
Properties “as-is, where-is”, and not as a limitation on such agreement, Target
Canada and Target hereby unconditionally and irrevocably waive any and all
actual or potential rights or Damages Target Canada or Target might have against
Zellers pursuant to any warranty, express or implied, of any kind or type, other
than those representations, warranties, covenants and certifications expressly
set forth in this Agreement, the Ancillary Agreements and any closing documents
delivered by Zellers or HBC on any Closing Date or Delivery Date. Such waiver
includes waiver of express warranties, implied warranties, warranties of fitness
for a particular use, warranties of merchantability, warranties of occupancy,
strict liability and claims of every kind and type, including claims regarding
defects, whether or not discoverable, product liability claims, or similar
claims, and to all other extent or later created or conceived of strict
liability or strict liability type claims and rights.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ZELLERS

Section 5.1 Representations and Warranties of
Zellers.

Zellers represents and warrants as follows to Target and Target Canada and
acknowledges that Target and Target Canada are relying upon the representations
and warranties in connection with Target Canada153s purchase of the Subject Leases
and the assumption by Target Canada of the Assumed Liabilities:

Corporate Matters

(a) Incorporation and
Qualification. Zellers is a corporation incorporated and existing
under the Laws of its jurisdiction of incorporation and has the corporate power
to own and operate its property, carry on its business and enter into and
perform its obligations under this Agreement.

(b) Corporate
Authorization. The execution and delivery of, and performance by
Zellers of, this Agreement and the Ancillary Agreements have been authorized by
all necessary corporate action on the part of Zellers.

(c) No Conflict. The
execution and delivery of this Agreement and the Ancillary Agreements, and the
performance by Zellers of the transactions contemplated by this Agreement and
the Ancillary Agreements, do not constitute or result in a violation or breach
of, or conflict with, or default under, or give rise to or create an Encumbrance
(other than any Permitted Encumbrance) on any Lease under, or allow any Person
to exercise any rights under, any of the terms or provisions of:

(i) its constating documents or by-laws,
or

(ii) any Law applicable to Zellers.

(d) Required
Authorizations. Except for the Competition Act Approval and as
disclosed in Section 5.1(d) of the Disclosure Letter, no material filing with,
notice to, or Authorization of, any Governmental Entity is required on the part
of Zellers, as a condition to the lawful completion of the transactions
contemplated by this Agreement, except with respect to any filing related to the
transfer of the Pharmacy Records or except for filings or Authorizations
required as a result of the status or identity of Target Canada.

(e) Execution and Binding
Obligation. This Agreement has been duly executed and delivered by
Zellers and constitutes legal, valid and binding agreements of it enforceable
against it in accordance with its terms, subject to any limitation under
applicable laws relating to (i) bankruptcy, winding-up, insolvency, arrangement,
fraudulent preference and conveyance, assignment and preference and other
similar Laws of general application affecting the enforcement of creditors153
rights, and (ii) the discretion that a court may exercise in the granting of
equitable remedies such as specific performance and injunction.

(f) Residence of
Zellers. Zellers is not a non-resident of Canada within the meaning of
the Tax Act.

General Matters

(g) Compliance with Laws.
Other than as disclosed in the Due Diligence File or Section 5.1(g) of the
Disclosure Letter, Zellers is operating the stores on the Leased Properties in
compliance with all Laws in all material respects; provided, nothing in this
Section 5.1(g) shall expand the scope of any representation or warranty
contained in Section 5.1(i).

(h) No Options, etc. to Purchase
Assets. Except for Target Canada153s right under this Agreement, and
except as disclosed in the Due Diligence File and in Section 5.1(h) of the
Disclosure Letter, no Person has any contractual right or privilege for the
purchase or other acquisition from Zellers or any of its Affiliates of any of
the Subject Leases or to Zellers153 knowledge, as of the Execution Date, any of
the Pharmacy Records.

(i) Leases and Leased
Properties

(i) Section 5.1(i)(i) of the Disclosure
Letter sets forth a true, accurate and complete list of each Lease by reference
to its municipal address or the name of the shopping centre at which the Leased
Properties are located.

(ii) Except as disclosed in
Section 5.1(i)(ii) of the Disclosure Letter, the Due Diligence File contains
true, accurate and complete copies of the Leases and all Default Notices, in
each case in all material respects. Except as disclosed in
Section 5.1(i)(ii) of the Disclosure Letter or in the Due Diligence File, and
except for any amendment or other instrument entered into after the Execution
Date with Target Canada153s consent pursuant to Section 7.6, the Leases have not
been altered or amended in any material respect.

(iii) Except as disclosed in
Section 5.1(i)(iii) of the Disclosure Letter, each of the Leases creates a valid
and binding leasehold interest which interest is in full force and effect,
excluding any failure of title arising from non-compliance with the
Planning Act (Ontario) or any similar Laws governing subdivision or
severance of real property in other provinces.

(iv) Zellers is the sole legal and beneficial
owner of the leasehold interest in the Leased Properties pursuant to the Leases
and has leasehold title under each of the Leases subject only to the Permitted
Encumbrances, excluding any failure of title arising from non-compliance with
the Planning Act (Ontario) or any similar Laws governing subdivision or
severance of real property in other provinces.

(v) Except as set forth in the Due Diligence
File or Section 5.1(i)(v) of the Disclosure Letter, to Zellers153 knowledge as of
the Execution Date, there are no prohibitions or material restrictions that have
impaired the use of a

Leased Property for a department store or junior department store including
pharmacy and food sales operations, to the extent that such uses and operations
exist on such Leased Property as of the Execution Date as currently operated by
Zellers, but excluding operations which are not typically conducted in a
“Target” store.

(vi) Zellers has not entered into any agreement
to sell, transfer, mortgage, or otherwise dispose of the leasehold right, title
and interest of Zellers in and to any Leased Property or the air or density
rights relating to any Leased Property other than as set out in the Due
Diligence File or in Section 5.1(i)(vi) of the Disclosure Letter.

(vii) To Zellers153 knowledge, all Material Lease
Defaults are listed in Section 5.1(i)(vii) of the Disclosure Letter.

(viii) Except as disclosed in Section 5.1(i)(viii) of
the Disclosure Letter or in the Due Diligence File:

(1) all payments owed by Zellers under each
of the Leases are not overdue and will not be overdue as of the applicable
Closing Date or will be adjusted in accordance with Section 3.3;

(2) there is no Material Lease Default under
any Lease;

(3) except in respect of any Failure to
Operate caused by force majeure (to Zellers153 knowledge no such force majeure
exists as of the Execution Date), at each of the Leased Properties with respect
to which the Landlord has a Landlord Recapture Right under the applicable Lease,
there is no Failure to Operate; and

(4) as of the Execution Date, Zellers has
not given notice to the Landlord of a material default by the Landlord under any
Lease.

(ix) Except as disclosed in the Due Diligence
File or in Section 5.1(i)(ix) of the Disclosure Letter, Zellers has not
exercised any option to terminate or right to terminate any Lease.

(x) Except as disclosed in
Section 5.1(i)(x) of the Disclosure Letter neither Zellers nor any of Zellers153
Affiliates has any option to purchase, right of first refusal or other similar
right to acquire any Leased Property, other than as set out in the Due Diligence
File.

(xi) Except as disclosed in the Due Diligence
File or Section 5.1(i)(xi) of the Disclosure Letter, Zellers has not expressly
waived any material rights under any Lease (i) relating to the use of the Leased
Property or (ii) impairing the visibility, signage, parking or access to the
Leased Property

in any material respect, which remain uncompleted as of the Execution Date.

(xii) Except as disclosed in the Due Diligence File
or in Section 5.1(i)(xii) of the Disclosure Letter, to the knowledge of Zellers,
no written order or directive (that has not been satisfied) has been received by
Zellers from any Governmental Entity (a) prohibiting the operation of any Leased
Property or (b) requiring the cure or rectification of any material defects in
the construction of the building or improvements on or forming a part of any of
the Leased Properties or relating to any work, in order to comply with any
building codes, land use, zoning by-laws, fire codes, environmental protection
registration or any other Laws which, if not cured or rectified, would have a
material adverse effect on any of the Leased Properties.

(xiii) Except as disclosed in Section 5.1(i)(xiii) of
the Disclosure Letter, no Person has any right to purchase, option to purchase,
right of first offer, right of first refusal or other similar right to acquire
the Leased Properties in favour of any Person which will prevent Target Canada153s
acquisition of Zellers153 leasehold interest of any Leased Property other than
Target Canada pursuant to this Agreement, and subject to generally applicable
statutory rights of a Governmental Entity, no Person other than Zellers and its
subtenants, licensees and concessionaires whose occupancies will be terminated
by Zellers by the applicable Vacancy Date is using or has any right to use, or
is in possession or occupancy of, any part of such Leased Property.

(xiv) Except as disclosed in the Due Diligence File,
there is not presently outstanding in respect of any Leased Property any
judgment, decree, injunction or order of any Governmental Entity or in favour of
any Person which would have a material adverse effect on such Leased Property.

(xv) Except as disclosed in the Due Diligence File
or in Section 5.1(i)(xv) of the Disclosure Letter, Zellers has no knowledge of
any expropriation or condemnation or similar proceeding pending or threatened
against any of the Leased Properties.

Other Matters

(j) Litigation. There
are no actions, suits, appeals, claims, applications, investigations, orders,
proceedings, grievances, arbitrations or alternative dispute resolution
processes in progress, pending, or to Zellers153 knowledge, threatened against
Zellers, which, to the extent outstanding or if determined adversely to Zellers,
would prohibit a material portion of the transactions contemplated by this
Agreement.

(k) Taxes. No failure, if
any, of Zellers to duly and timely withhold, collect, report, remit or pay any
Taxes as required by Laws will result in an Encumbrance of any nature on the
Subject Leases or the Pharmacy Records. There are no proceedings,

investigations, audits or claims now pending or threatened against Zellers in
respect of any Taxes, and there are no matters under discussion, audit or appeal
with any Governmental Entity relating to Taxes, that may result in an
Encumbrance of any nature on the Subject Leases or the Pharmacy Records.
Zellers is duly registered under Subdivision (d) of Division V of Part IX of the
Excise Tax Act (Canada) with respect to the goods and services tax and
harmonized sales tax and under Division I of Chapter VIII of Title I of An
Act Respecting the Quebec Sales Tax with respect to the Quebec sales tax,
and its registration numbers are: 12196 8549 RT0001 and 101049 4016 TQ1002,
respectively.

(l) Brokers. No broker,
agent or other intermediary is entitled to any fee, commission or other
remuneration in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Zellers or any of its
Affiliates.

ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF TARGET CANADA AND TARGET

Section 6.1 Representations and Warranties of Target
Canada and Target.

Target Canada and Target represent and warrant as follows to Zellers and
acknowledge and confirm that Zellers is relying on such representations and
warranties in connection with the sale by Zellers of the Subject Leases and the
Pharmacy Records:

(a) Incorporation and Corporate
Power. Target is and Target Canada is or will be a corporation
incorporated and existing under the laws of its jurisdiction of incorporation
and it has or will have the corporate power to enter into and perform its
obligations under this Agreement and the Ancillary Agreements.

(b) Corporate
Authorization. The execution and delivery of and performance by Target
and Target Canada of this Agreement and the Ancillary Agreements have been or
will be at or prior to the First Tranche Closing Date authorized by all
necessary corporate action on the part of Target and each Target Canada.

(c) No Conflict. The
execution and delivery of this Agreement and the Ancillary Agreements, and the
performance by Target and Target Canada of the transactions contemplated by this
Agreement and the Ancillary Agreements, do not constitute or result in a
violation or breach of, or conflict with, or default under, or allow any Person
to exercise any rights under, any of the terms or provisions of:

(i) its constating documents or by-laws;
or

(ii) any Laws applicable to Target or a
Target Canada, as applicable.

(d) Required
Authorizations. Except for the Competition Act Approval, no material
filing with, notice to or Authorization of, any Governmental Entity is required
on the part of Target or Target Canada as a condition to the lawful

completion of the transactions contemplated by this Agreement, except with
respect to any filing related to the transfer of the Pharmacy Records.

(e) Execution and Binding
Obligation. This Agreement has been duly executed and delivered by
Target and constitutes legal, valid and binding agreements of it, enforceable
against it in accordance with its terms, subject to any limitation under
applicable Laws relating to (i) bankruptcy, winding-up insolvency, arrangement,
fraudulent preference and conveyance, assignment and preference and other
similar Laws of general application affecting the enforcement of creditors153
rights, and (ii) the discretion that a court may exercise in the granting of
equitable remedies including specific performance and injunction.

(f) Financing. Target
has, and will have at the relevant Closing Date, sufficient funds on hand or
available to fund the payment of the Purchase Price by Target Canada.

(g) Litigation. There are no
actions, suits, appeals, claims, applications, investigations, orders,
proceedings, grievances, arbitrations or alternative dispute resolution
processes in progress, pending, or to Target153s knowledge, threatened against
Target or Target Canada, which, to the extent outstanding or if determined
adversely to Target or Target Canada, would prohibit any of the transactions
contemplated by this Agreement.

(h) Brokers. No broker,
agent or other intermediary is entitled to any fee, commission or other
remuneration in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Target or Target Canada.

(i) Due Diligence.
Target and Target Canada have conducted to their satisfaction an
independent investigation of the Subject Leases and Subject Leased Properties
(including all matters relating to the leasehold and underlying freehold title
thereto), and, in making the determination to proceed with the transactions
contemplated by the Agreement, has relied solely on the results of their own
independent investigation, the representations and warranties of Zellers in this
Agreement and the covenants of Zellers pursuant to this Agreement and the
Ancillary Agreements; provided that nothing in this Section 6.1(i) shall be
construed as limiting the scope of Zellers153 representations, warranties, and
covenants pursuant to this Agreement and the Ancillary Agreements or the ability
of Target or Target Canada to rely upon them.

ARTICLE 7
COVENANTS OF THE PARTIES

Section 7.1 Actions to Satisfy Closing
Conditions.

Subject to this Article 7, Zellers will use its commercially reasonable
efforts to ensure compliance with all of the conditions set forth in Section 8.1
(provided that, solely for purposes of this Section 7.1, the condition set forth
in Section 8.1(a)(ii) shall be deemed to require the representations and
warranties contained in Section 5.1(i) to be true and correct in all material

respects as of the relevant Closing Date with respect to each of the First
Tranche Subject Leases or the Second Tranche Subject Leases, as the case may be)
and Target will use its commercially reasonable efforts to ensure compliance
with all of the conditions set forth in Section 8.2.

Section 7.2 Request for Consents.

(1) From and after the Execution Date, Target
and Target Canada shall request such consents, approvals, licenses and
agreements (including amendments to Leases) from such Landlords and other
Persons as Target may determine to be necessary or desirable. Subject to
Section 7.2(4), Zellers agrees to reasonably cooperate with Target and Target
Canada in such efforts, as Target may from time to time request.

(2) Target agrees that, if it elects to
approach a Landlord with a request for a consent or approval, Target will
include among its requests to such Landlord a request that Zellers be released
from all Lease obligations accruing after the relevant Closing Date (provided
that nothing in this Section 7.2(2) shall limit the obligations of Zellers as
subtenant under the Subleases). Obtaining the agreement of any Landlord to any
such request shall not be a condition to Closing and in no event will Target
have any liability to Zellers if any request for such release is not granted.

(3) If Target or Target Canada has designated
a Lease as a Subject Lease for assignment on a Closing Date but has not obtained
all consents and approvals determined by Target or Target Canada to be necessary
or desirable, Target shall have the option to exclude such Lease from the
Subject Leases to be assigned at the Closing and such excluded Lease shall no
longer be a Subject Lease, but there shall be no reduction in the Purchase Price
on account of such exclusion.

(4) In no event shall Zellers or HBC be
obligated to bear any expense or pay any fee or grant any concession in
connection with Target or Target Canada seeking to obtain consents,
authorizations or approvals to the assignment of Subject Leases. All fees,
costs and expenses payable to third parties in connection with obtaining
consents, including increased rents, landlord administration and consent fees
and landlord counsel fees shall be paid by Target Canada.

(5) If any Landlord fails or refuses to
provide any consent requested by Target or Target Canada (or requested by
Zellers, at the request of Target or Target Canada), Zellers shall assign to
Target Canada with respect to Subject Leases that are assigned to Target Canada
or its Designee any rights, claims or Damages that may be available by reason of
such failure or refusal (including any right to commence and prosecute any legal
action against such Landlord on account of such failure or refusal), and Zellers
will cooperate with Target Canada153s efforts in connection with any such action.

(6) Target and Target Canada acknowledge and
agree as follows:

(a) Target Canada and Target shall be solely
responsible for any costs, fees, Damages, Lease Defaults, any increase in any
base rent, operating costs, additional rents, percentage rents, and other
charges payable under any of the Subject Leases and any other consequences as a
result of the failure to request or to obtain any consents, authorizations or
approvals to the assignment of the

Subject Leases to Target Canada or a Designee or Designees (whether on or any
time after the relevant Closing Date) or to the Subleases or to the Wind-Down
Actions of Zellers and furthermore that such failure to request or obtain said
consents, authorizations or approvals does not in any way limit or otherwise
impact the obligations of Target or Target Canada under this Agreement,
including Target Canada153s obligation to complete the transactions contemplated
herein on the relevant Closing Date; and

(b) that it shall indemnify and hold harmless
Zellers and HBC of and from any costs, fees and Damages resulting from the
actions of Target or Target Canada or any Designee or those acting by or on
behalf of Target or Target Canada or any Designees in seeking consents and
approvals to assign the Subject Leases to Target Canada or its Designee or
Designees (whether on or anytime after the relevant Closing Dates), the
Subleases and the Wind-Down Actions (including under Section 7.2(6)(a) and
Section 7.2(4)).

Section 7.3 Filings and Authorizations.

(1) Each of Zellers and Target Canada, as
promptly as practicable after the execution of this Agreement, will use its
commercially reasonable efforts to make, or cause to be made, all filings with,
give all notices to, and obtain all Authorizations from, Governmental Entities
that are necessary and desirable for the lawful completion of the assignment of
the Subject Leases to Target Canada or applicable Designee or Designees and
where the failure to do so would have a material adverse effect on the business
of Target Canada, after the First Tranche Closing Date, taken as a whole.
Target Canada will pay all filing fees incurred in connection with any such
required Authorization, including Competition Act Approval.

(2) Notwithstanding any other provision in
this Agreement, Target will take and will cause Target Canada to take all
actions necessary to obtain as expeditiously as possible (and in any event so as
to permit the First Tranche Closing Date to occur as soon as possible), at its
own expense, all Authorizations (including Competition Act Approval) required in
connection with the lawful assignment of the Subject Leases to Target Canada or
applicable Designee or Designees, including negotiating and effecting by consent
agreement or order, hold separate arrangement, undertakings or any form of
behavioural remedy or commitment.

(3) The Parties will coordinate and cooperate
in exchanging information and supplying assistance that is reasonably requested
in connection with this Section 7.3(3) and Section 7.3(2) including providing
each other with advance copies and reasonable opportunity to comment on all
notices and information supplied to or filed with any Governmental Entity
(including notices and information which Zellers or Target Canada, in each case
acting reasonably, consider highly confidential and sensitive, which notices and
information may be provided on a confidential and privileged basis to outside
counsel of the other Party), and all notices and correspondences received from
any Governmental Entity. Each of Zellers and Target Canada shall keep the other
apprised of the status of any such communications with, and any such inquiries
or requests for additional information from, any Governmental Entities, and each
Party shall comply promptly with such inquiry or request. No Party shall
independently participate in any meeting,

negotiation or material discussion with any Governmental Entity in respect of
any such filings, inquiries, or requests, without giving the other prior notice
of the meeting and, to the extent permitted by such Governmental Entity, the
opportunity to attend and participate.

(4) As used in this Agreement,
“Competition Act Approval” means the earlier of:

(a) either (A) the issuance to Target Canada
of an advance ruling certificate by the Commissioner of Competition under
Subsection 102(1) of the Competition Act to the effect that the Commissioner of
Competition is satisfied that she would not have sufficient grounds upon which
to apply to the Competition Tribunal for an order under Section 92 of the
Competition Act with respect to the transactions contemplated by this Agreement,
or (B) Target Canada shall have been advised in writing by the Commissioner of
Competition that she is of the view that grounds do not exist as of the date of
the advice to initiate proceedings under the merger provisions of the
Competition Act in respect of the transactions contemplated by this Agreement;
and

(b) the waiting period, including any
extension thereof, under Section 123 of the Competition Act shall have expired
or been terminated or the obligation to provide a pre-merger notification in
accordance with Part IX of the Competition Act shall have been waived in
accordance with paragraph 113(c) of the Competition Act.

Section 7.4 Risk of Loss.

If, prior to the relevant Closing Date, all or any part of the Subject Leased
Properties are destroyed or damaged by fire or any other casualty or are
appropriated, expropriated or seized by any Governmental Entity, the
representations and warranties of Zellers that are not true and correct in all
material respects as of the relevant Closing Date solely as a result of such
destruction, damage, appropriation, expropriation or seizure will be deemed to
be true and correct in all material respects as of the relevant Closing Date for
all purposes of this Agreement, and Target Canada will complete the transactions
contemplated by this Agreement without reduction of the Purchase Price, in which
event all proceeds of any insurance (or which would have been available except
for Zellers153 election of deductibles or self-insurance, which amounts Zellers
shall be responsible to contribute) or compensation will be payable to Target
Canada and all right and claim of Zellers to any such amounts not paid by the
relevant Closing Date will be assigned to Target Canada.

Section 7.5 Confidentiality.

Target acknowledges having signed a confidentiality agreement between Target
and Zellers. Subject to Section 7.2, Target Canada agrees that except as
provided in this Agreement and the Ancillary Agreements, the confidentiality
agreement continues to apply and Target Canada is bound by its terms. The
confidentiality agreement will cease to apply with respect to each Subject Lease
and Subject Leased Property upon the assignment of such Subject Lease in
accordance with this Agreement, and following the Second Tranche Closing Date
the confidentiality agreement will terminate except as to Leases that are not
Subject Leases. Zellers

acknowledges that Target will be filing a copy of this Agreement with the
United States Securities and Exchange Commission in accordance with Laws.

Section 7.6 Lease Amendments, Renewals and
Notices.

(1) From and after the Execution Date to and
including the Second Tranche Closing Date Zellers will not amend, modify,
consent to, grant any approval or take any action, or omit to take any action,
under or with respect to any Lease (other than the enforcement of rights under
or with respect to any Lease), without the prior written consent of Target
Canada, provided (i) if the action taken with respect to the Lease in question
is required to allow the continued operation of the Zellers store, then Target
Canada153s consent may not be unreasonably conditioned or withheld, and (ii) if
the immediately preceding clause (i) does not apply, then Target Canada may
provide, condition or withhold such consent in its sole and absolute discretion.
For the purposes of each of the foregoing matters referred to in this
Section 7.6(1) in respect of any Lease and/or any other matter relating to the
operation and administration of any Leased Property prior to the Second Tranche
Closing Date that require Target Canada153s consent or approval (each a
“Consent Matter“), Zellers, through Brian Pall or Bruce Moore
(each an “Authorized Zellers Representative“), may make
requests from time to time for Target Canada153s consent or approval with respect
to any Consent Matter directly to Joan Ahrens (the “Authorized Target
Representative“). For the purposes of this Agreement, any consent or
approval with respect to any Consent Matter given by the Authorized Target
Representative to an Authorized Zellers Representative from time to time, by
email or other form of written communication (which email or other communication
shall clearly reference this Section 7.6), shall constitute written consent of
Target Canada for all purposes with respect to such Consent Matter.

(2) Section 7.6(2) of the Disclosure Letter
lists each Lease (if any) that requires Zellers to deliver notice or otherwise
take steps in order to extend or renew the term of such Lease after the
Execution Date and prior to December 31, 2011, and the last date (the
“Renewal Notice Expiration Date“) by which such notice must be
given or such steps taken. Target Canada shall elect by Notice given to Zellers
no later than 30 days (or 14 days, with respect to Leases with a Renewal Notice
Expiration Date prior to February 28, 2011) prior to the Renewal Notice
Expiration Date as to whether the Lease is a Subject Lease and if so, whether
Target Canada wishes to have the term extended or renewed. Failing delivery of
Target Canada153s Notice as aforesaid, Zellers may elect whether or not to renew
or extend such Lease in its discretion, and in no event will Zellers have any
liability to Target or Target Canada if such Notice is not delivered.

(3) From and after the Execution Date, to and
including the Second Tranche Closing Date, Zellers will use its commercially
reasonable efforts to provide to Target Canada (a) a copy of each Default Notice
relating to the Leased Properties within two Business Days of receipt by Zellers
or any Affiliate of Zellers of such Default Notice, and (b) a copy of each
notice of default or claimed default sent by Zellers to any Landlord within two
Business Days of the date any such notice is sent.

(4) The terms of this Section 7.6 do not
apply in respect of any Lease which Target Canada or Target notifies Zellers
will not be a Subject Lease.

Section 7.7 Zellers Entity Cooperation.

(1) Zellers, HBC and their Affiliates (each,
a “Zellers Entity“) currently own, lease, ground lease or hold
other similar interests in one or more of the developments in which a Subject
Leased Property was or is located (each, a “Subject
Development“).

(2) Zellers and HBC, on behalf of each
Zellers Entity, agree to fully cooperate, subject to the
allocation of costs set out in Section 7.7(2)(h), in order to allow Target
Canada, Target, any Designee permitted under Section 2.7 and any of their
respective Affiliates (each, a “Target Entity“), to enter,
operate, develop, remodel and/or redevelop each Subject Development for any uses
which are consistent with a first class retail shopping centre in Canada,
including a Target discount department store (which store may include, pharmacy,
restaurant and food sales operations without restriction as to product types or
size of areas devoted to such items) as is typically operated, from time to
time, in the United States or Canada (the “Permitted Use“).
Zellers and HBC will cause each Zellers Entity on its own behalf and on behalf
of those claiming, by, through and under such Zellers Entity, with respect to a
Subject Development only:

(a) to modify, waive, release and terminate
all use restrictions and use exclusives benefiting or enforceable by the Zellers
Entity that would limit or prohibit the operation of any Permitted Use by a
Target Entity.

(b) to consent to the temporary reduction,
cessation or reasonable modification of operations of the Target Entity at any
Subject Leased Property so as to allow for the remodelling, development or
redevelopment of such Subject Leased Property which consent shall be given
without such Zellers Entity availing itself of any rights in connection with
such consent, including a reduction of rent, right to cease operations, right of
termination or any other similar provision, if such consent relates to any
Subject Development;

(c) to grant all consents and approvals for
the remodelling, developing or redeveloping the interior of any building
(provided that any change to the location or size of such building shall be
subject to the provisions of Section 7.7(2)(e)) located or to be located on or
within a Subject Development;

(d) to grant all consents and approvals for
the remodelling, developing or redeveloping the exterior elevations of any
building (including building signage, branding, architectural details and
closure of entrances to the Target Entity153s building) located or to be located
on or within a Subject Development (provided that any change to the location or
size of such building shall be subject to the provisions of Section 7.7(2)(e)),
as well as any appurtenances immediately adjacent to the Target Entity153s
building (e.g., sidewalks, landscaping and loading docks), but not other common
areas;

(e) to grant all consents and approvals for
remodelling, developing or redeveloping any Subject Development (including the
relocation or any change in the size of any building) and any freestanding
signage; provided however, that notwithstanding the foregoing, the Zellers
Entities shall have no obligation under this Section 7.7(2)(e) to (i) incur any
Damages, liability, costs or expenses from a

third party claim (other than those contemplated to be incurred by a Zellers
Entity pursuant to Section 7.7(2)(h)); (ii) take or to refrain from taking any
action, or to consent, approve, support or withhold objection to any matter or
thing, which would or could reasonably be expected to result in Damages,
liability, costs or expenses to any Zellers Entity from a third party claim
(other than those contemplated to be incurred by a Zellers Entity pursuant to
Section 7.7(2)(h)), in connection with the breach of any Laws or any
Encumbrances existing as of the Execution Date by or to which a Zellers Entity
is a party or to which it is subject, or which affects a Subject Development; or
(iii) take or to refrain from taking any action, or to consent, approve, support
or withhold objection to any matter or thing which would, or could reasonably be
expected to, materially adversely affect the use, operation, signage, parking
rights in any “primary parking field”, access to common areas, full pedestrian
and vehicular access to all existing internal and external roadways and walkways
of any Bay store or the business conducted therein (clauses (i), (ii) and
(iii) are collectively, the “Approval Restrictions“). If any
Approval Restrictions do exist under item (ii) above, each Zellers Entity will
use its commercially reasonable efforts (without payment of consideration or
repayment of debt) to (a) obtain the consent from any Person benefiting from
such Approval Restriction and/or (b) allow for the requested co-operation of the
Zellers Entity to be given in accordance with this Section 7.7;

(f) to join in applications for all
permits, variances, special uses, licenses or authorizations deemed necessary or
desirable by the Target Entity in connection with remodelling, development or
redevelopment of the Subject Leased Property for the foregoing purposes, and to
the extent such request is in compliance with Section 7.7(2)(e), the balance of
any Subject Development; provided however, that no Zellers Entity shall have any
obligation to join in any of the foregoing to the extent that such item would
expose such Zellers Entity to Damages, liability, costs or expenses except to
the extent the foregoing relate to the Zellers Entity153s authority to issue such
authorization or the Target Entity agrees to protect the Zellers Entity with
respect to risks through an indemnity or other arrangement satisfactory to
Zellers;

(g) not to seek, request or demand any charge
or concession from any Target Entity or any other third party in connection with
fulfilling its obligations under this Section 7.7, except as set forth in
Section 7.7(2)(h); and

(h) for each of the first 10 locations
selected by any Target Entity (on an aggregate basis for all Target Entities)
for cooperation by any Zellers Entity under this Section 7.7, such Zellers
Entity shall be responsible and pay for all of the out of pocket costs incurred
by such Zellers Entity in connection with any requests for cooperation made by
such Target Entity relating to the initial redevelopment of such location by the
Target Entity. Thereafter, all requests for cooperation by any Target Entity
relating to (i) each additional location, or (ii) to the extent unrelated to the
initial redevelopment, each of the initial 10 locations, the related Zellers
Entity and the Target Entity shall each be responsible for paying 50% of the out
of pocket costs incurred by such Zellers Entity with respect to any such
requests, and the Target Entity shall reimburse the Zellers Entity for its share
of such costs

in accordance with arrangements to be made between the related Target Entity
and the Zellers Entity each acting reasonably.

(3) Target Canada acknowledges that five
Subject Developments (which are the following: Devonshire Mall, Windsor; Square
One, Mississauga; Centrepoint Mall, North York; Les Promenades, St Bruno; and
downtown Winnipeg, Manitoba) held by Zellers Entity Affiliates are subject to an
existing Mortgage in favour of GE Capital Canada Finance Inc. which may be
breached by the actions contemplated under Sections 7.7(2)(a) through
(d) above. The remaining Subject Developments are not subject to any other
material restrictions relating to such actions under any Mortgage known to
Zellers relating to the Subject Development as of the Execution Date. If the
Zellers Entity reasonably determines that such a breach will occur, then the
Zellers Entity will use its commercially reasonable efforts (without payment of
consideration or repayment of debt) to (i) obtain the consent from the Mortgage
holder benefiting from the Approval Restriction in Section 7.7(2)(e)(ii) and/or
(ii) allow for the requested co-operation of the Zellers Entity to be given in
accordance with this Section 7.7.

(4) So as to allow each Target Entity to
confirm a Zellers Entity153s compliance with the provisions of this Section 7.7
prior to commencing any of the above activities, each Zellers Entity will, upon
a request of a Target Entity, enter into reasonable written documentation
evidencing its agreement with respect to all approvals, consents and other
requests of such Target Entity with respect to such contemplated location prior
to the acquisition by such party.

(5) Zellers and HBC, on behalf of each
Zellers Entity, each agree that no Zellers Entity will subordinate its interest
(or further restrict its rights to comply with the provisions of this
Section 7.7) in any Subject Development to any future encumbrance unless such
Zellers Entity receives a written non-disturbance agreement from the holder of
such encumbrance with respect to the provisions of this Section 7.7.

(6) The obligations of Zellers, HBC and each
Zellers Entity pursuant to this Section 7.7 shall be binding upon the successors
and assigns of each such Zellers Entity, including each successor owner of the
Zellers Entity153s interest in the Subject Development to which such obligations
may now or in the future relate. Such obligations shall bind and benefit, as
the case may require, the heirs, legal representatives, assigns and successors
of the respective parties, and all covenants, conditions and agreements
contained in this Section 7.7 shall be construed (to the extent permitted by
Laws) as covenants running with the land with respect to each Subject
Development. Without limiting the generality of the foregoing, each Zellers
Entity shall, at its sole cost and expense (a) inform in writing each successor,
assign and purchaser of each Subject Development of the provisions of this
Section 7.7, and (b) cause each such successor, assign and purchaser to assume
in writing the obligations of this Section 7.7.

(7) Zellers and HBC, on behalf of each
Zellers Entity, each agree that upon the request of any Target Entity, it shall
execute, or cause the relevant Zellers Entity to execute, to the extent
permitted by Laws (with such recordation being at the sole cost of such Target
Entity), a recordable memorandum evidencing (i) the agreements contained in this
Section 7.7 which may (at the Target Entity153s option and cost) be registered on
title in the

applicable real estate records and (ii) all actions taken by such Zellers
Entity pursuant to this Section 7.7.

(8) Notwithstanding anything to the contrary
in this Agreement, the obligations of each Zellers Entity and Target Entity
under this Section 7.7 shall commence on the Execution Date and expire on that
date that is 10 years after the Second Tranche Closing Date.

ARTICLE 8
CONDITIONS OF CLOSING

Section 8.1 Conditions for the Benefit of Target and
Target Canada.

The assignment and transfer of the Subject Leases and the payment of the
applicable portion of the Purchase Price are subject to the following conditions
being satisfied on or prior to the relevant Closing Date, which conditions are
for the exclusive benefit of Target Canada and Target and may be waived, in
whole or in part, by Target in its sole discretion:

(a) Truth of Representations and
Warranties.

(i) The representations and warranties of
Zellers contained in this Agreement other than the representations and
warranties contained in Sections 5.1(g), 5.1(h) and 5.1(i) must be true and
correct in all material respects as of the relevant Closing Date with the same
force and effect as if such representations and warranties were made on and as
of such date. However, (A) any such representations or warranties relating to
Subject Leases as of the First Tranche Closing Date need only be true and
correct in all material respects as they relate to the First Tranche Subject
Leases, (B) any such representations or warranties relating to Subject Leases as
of the Second Tranche Closing Date need only be true and correct in all material
respects as they relate to the Second Tranche Subject Leases, (C) if any such
representation and warranty is qualified by materiality, it must be true and
correct in all respects after giving effect to such qualification and (D) if any
such representation and warranty speaks only as of a specific date it only needs
to be true and correct as of that date.

(ii) The failure of the representations and
warranties of Zellers contained in Sections 5.1(g), 5.1(h) and 5.1(i) (without
regard, in the case of the representations and warranties contained in Sections
5.1(i)(iii), 5.1(i)(vii), and 5.1(i)(viii), to any qualification to such
representations and warranties made in the Disclosure Letter) to be true and
correct in all material respects as of the relevant Closing Date shall not
affect 100 or more Leases designated at any time on (even if later removed from)
the First Tranche Selection List or the Second Tranche Selection List in the
aggregate for all Closing Dates. However, (A) any such representations or
warranties relating to Subject Leases as of the First Tranche Closing Date need
only be true and correct in all material respects as they relate to the First
Tranche Subject Leases, (B) any such representations or warranties relating to
Subject Leases as of the Second Tranche Closing Date need only be true and
correct in all material respects as they relate to the Second

Tranche Subject Leases, (C) if any such representation and warranty is
qualified by materiality, it must be true and correct in all respects after
giving effect to such qualification, and (D) if any such representation and
warranty speaks only as of a specific date it only needs to be true and correct
as of that date.

(iii) Target Canada must receive a certificate
of a senior officer of Zellers as to the matters in this Section 8.1(a).

(b) Performance of
Covenants. Zellers must have fulfilled, or complied with, in all
material respects, all covenants contained in this Agreement to be fulfilled or
complied with by it at or prior to the relevant Closing Date (except for any
such covenants requiring Zellers to use commercially reasonable or similar
efforts), and Target Canada must receive a certificate of a senior officer of
Zellers to that effect.

(d) No Legal Action. No
action, proceeding, order or notice will have been made, issued or delivered by
any Governmental Entity prohibiting a material portion of the transactions
contemplated by this Agreement.

(e) Release of Monetary
Liens. Target shall have received evidence reasonably satisfactory to
it of the release of any Monetary Liens on Zellers153 leasehold interest in any of
the First Tranche Subject Leased Properties (as of the First Tranche Closing
Date) or the Second Tranche Subject Leased Properties (as of the Second Tranche
Closing Date), except that, with respect to any Monetary Lien under clause
(3) of the definition of Monetary Lien, Target shall have received evidence
reasonably satisfactory to it of the payment of the obligation underlying such
Monetary Lien or such underlying obligation shall be the subject of an
adjustment under Section 3.3.

Section 8.2 Conditions for the Benefit of
Zellers.

The assignment and transfer of the Subject Leases and the payment of the
applicable portion of the Purchase Price are subject to the following conditions
being satisfied on or prior to the relevant Closing Date, which conditions are
for the exclusive benefit of Zellers and may be waived, in whole or in part, by
Zellers in its sole discretion:

(a) Truth of Representations and
Warranties. The representations and warranties of each of Target
Canada and Target contained in this Agreement must be true and correct in all
material respects as of the relevant Closing Date with the same force and effect
as if such representations and warranties had been made on and as of such date.
However, if a representation and warranty is qualified by materiality, it must
be true and correct in all respects after giving effect to such qualification.
Zellers must receive a certificate of a senior officer of each of Target Canada
and Target to the matters in this paragraph.

(b) Performance of
Covenants. Each of Target Canada and Target must have fulfilled or
complied with all covenants contained in this Agreement to be fulfilled or
complied with by it at or prior to the relevant Closing Date (except for any
such covenants requiring Target or Target Canada to use commercially reasonable
or similar efforts), and Zellers must receive a certificate of a senior officer
of each of Target Canada and Target to that effect.

(d) No Legal Action. No
action, proceeding, order or notice will have been made, issued or delivered by
any Governmental Entity prohibiting a material portion of the transactions
contemplated by this Agreement.

(e) Tax Registration.
Target Canada will be duly registered under subdivision (d) of Division V of
Part IX of the Excise Tax Act (Canada) with respect to goods and
service tax and harmonized sales tax and, where applicable, under Division I of
Chapter VIII of Title I of An Act Respecting the Quebec Sales Tax, and
its registration numbers will have been provided to Zellers prior to the First
Tranche Closing Date.

ARTICLE 9
CLOSING

Section 9.1 Date, Time and Place of
Closing.

The completion of the transaction of purchase and sale contemplated by this
Agreement will take place at the offices of Stikeman Elliott LLP, Suite 5300,
Commerce Court West, Toronto, Ontario, at 10:00 a.m. (Toronto time) on each
Closing Date or at such other place, on such other date and at such other time
as Zellers and Target Canada may agree to in writing.

Section 9.2 Zellers153 Closing Deliveries.

On each Closing Date Zellers shall deliver or cause to be delivered to Target
Canada the following documents (other than the Brand Waiver, which shall only be
delivered on the First Tranche Closing Date), executed by Zellers or such other
necessary Persons where applicable:

(a) (i) an assignment and assumption agreement
with respect to each of the relevant Subject Leases which Target Canada has not
identified for assignment to a Designee, substantially in the form attached as
Section 9.2(a) of the Disclosure Letter (the “Lease Assignment and
Assumption Agreement“), and (ii) a Designee Assignment and Assumption
Agreement with respect to each of the relevant Subject Leases which Target
Canada has identified for assignment to a Designee;

(b) the Subleases with respect to the relevant
Subject Leased Properties;

(c) a certificate of a duly authorized
officer of Zellers certifying: (i) the constating documents and by-laws of
Zellers; (ii) resolutions of the directors of Zellers

authorizing this Agreement and the consummation of the transactions
contemplated by this Agreement; (iii) the incumbency and signatures of the
officers of Zellers executing this Agreement; and (iv) the matters set forth in
Section 8.1(a) and Section 8.1(b);

(d) a certificate of a duly authorized officer
of HBC certifying: (i) the constating documents and by-laws of HBC;
(ii) resolutions of the directors of HBC authorizing this Agreement and its
obligations under this Agreement; (iii) the incumbency and signatures of the
officers of HBC executing this Agreement;

(e) an agreement waiving exclusivity by
Zellers and HBC, on their own behalf and on behalf of their Affiliates, with
respect to brands licensed to or controlled by Zellers and agreeing not to
enforce by any means any of their current trademarks against any trademarks used
by, applied for, or registered to Target, in the form attached as
Section 9.2(e) of the Disclosure Letter (the “Brand Waiver“);

(f) such documentation, including
declarations and certificates, as may be customarily required by any title
insurer (provided Zellers and any officer thereof shall not be required to
provide any such documentation to the extent same expands the scope of any
representation or covenant furnished to Target Canada in this Agreement or which
creates personal liability to the title insurer) and shall execute the
statements required of a vendor in s. 50(22) of the Planning Act
(Ontario) and similar legislation in other provinces (to the extent Zellers does
not have knowledge contrary to such statements);

(g) an undertaking by Zellers to re-adjust
the Final Adjustments in accordance with Section 3.3;

(h) all Books and Records of Zellers and its
Affiliates in their possession or control relating to the relevant Subject
Leased Properties or the relevant Subject Leases; provided that, subject to
Zellers153 execution of a confidentiality agreement in a form reasonably
acceptable to Zellers and Target Canada with respect to such Books and Records,
Zellers shall have the right to retain a copy of any Books and Records for use
in compliance with Laws or in connection with investigations or litigation; and

(i) all other documents which Target
Canada reasonably requests to give effect to the transactions contemplated by
this Agreement.

Section 9.3 Target Canada153s Closing
Deliveries.

On each Closing Date Target Canada shall deliver or cause to be delivered to
Zellers the following documents (other than the Brand Waiver, which shall only
be delivered on the First Tranche Closing Date), executed by Target Canada or
such other necessary Persons (other than Zellers or Affiliate of Zellers that is
transferring Pharmacy Records hereunder) where applicable:

(a) a wire transfer in satisfaction of the
First Tranche Purchase Price or the Second Tranche Purchase Price, as
applicable, in accordance with Section 3.2;

(b) (i) a Lease Assignment and Assumption
Agreement with respect to each of the relevant Subject Leases which Target
Canada has not identified for assignment to a Designee, and (ii) a Designee
Assignment and Assumption Agreement, duly executed by the applicable Designee
(and not by Target Canada), with respect to each of the relevant Subject Leases
which Target Canada has identified for assignment to a Designee;

(c) the Subleases with respect to the
relevant Subject Leased Properties duly executed by Target Canada, or if
applicable, its Designees;

(d) a certificate of a duly authorized
officer of Target Canada certifying: (i) the constating documents and by-laws of
Target Canada; (ii) resolutions of the directors of Target Canada authorizing
this Agreement and the consummation of the transactions contemplated by Target
Canada; (iii) the incumbency and signatures of the officers of Target Canada
executing this Agreement; and (iv) the matters set forth in Section 8.2(a) and
Section 8.2(b);

(e) a certificate of a duly authorized
officer of Target certifying: (i) the constating documents and by-laws of
Target; (ii) resolutions of the directors of Target authorizing this Agreement
and its obligations under this Agreement; (iii) the incumbency and signatures of
the officers of Target executing this Agreement; and (iv) the matters set forth
in Section 8.2(a) and Section 8.2(b);

(f) an undertaking by Target Canada to
re-adjust the Final Adjustments in accordance with Section 3.3;

(g) a Goods and Services Tax, Harmonized
Sales Tax and Quebec Sales Tax Declaration and Indemnity in the form specified
in Section 9.3(g) of the Disclosure Letter; and

(h) all other documents which Zellers
reasonably requests to give effect to the transactions contemplated by this
Agreement.

Section 9.4 Closing Procedures.

(1) Subject to satisfaction or waiver by the
relevant Party of the conditions of closing, on each Closing Date, Zellers will
deliver the instruments of conveyance described in Section 9.2 to Target Canada
and upon such delivery Target Canada will pay or satisfy the Purchase Price in
accordance with Section 3.2. The assignment of a Subject Lease will take effect
at the Effective Time on the applicable Closing Date or Delivery Date.

(2) Zellers and Target Canada covenant and
agree to enter into and to cause their respective solicitors to enter into a
closing arrangement as is customary for each province providing for the delivery
of closing documents, the electronic submission or physical submission of
documents for registration, as applicable, and other details relating to closing
and registration.

ARTICLE 10
TERMINATION

Section 10.1 Termination Rights.

This Agreement may, by notice in writing, be terminated on the Outside Date:

(a) by Target Canada if any of the conditions
in Section 8.1 have not been satisfied in respect of the First Tranche Subject
Leased Properties as of the Outside Date and Target Canada has not waived such
conditions at or prior to the First Tranche Closing Date, provided that Target
Canada may not terminate this Agreement under this Section 10.1(a) to the extent
that such conditions have not been satisfied as a result of the failure of
Target or Target Canada to perform any one or more of its obligations or
covenants under this Agreement to be performed at or prior to the First Tranche
Closing Date; or

(b) by Zellers if any of the conditions in
Section 8.2 have not been satisfied as in respect of the First Tranche Subject
Leased Properties as of the Outside Date and Zellers has not waived such
condition at or prior to the First Tranche Closing Date, provided that Zellers
may not terminate this Agreement under this Section 10.1(b) to the extent that
such conditions have not been satisfied as a result of a failure of Zellers or
HBC to perform any one or more of its obligations or covenants under this
Agreement to be performed at or prior to the First Tranche Closing
Date.

Section 10.2 Effect of Termination.

If a Party waives compliance with any of the conditions, obligations or
covenants contained in this Agreement, the waiver will be without prejudice to
any of its rights in the event of non-fulfilment, non-observance or
non-performance of any other representation, warranty, condition, obligation or
covenant in whole or in part or to its rights to recover Damages for any
incorrectness in or breach of any representation, warranty, condition,
obligation or covenant in whole or in part.

ARTICLE 11
INDEMNIFICATION

Section 11.1 Liability for Representations and
Warranties.

The representations and warranties contained in this Agreement and the
certificates delivered pursuant to Section 8.1(a) and Section 8.2(a) continue in
full force and effect for a period of one year after the relevant Closing Date,
except that:

(a) the representations and warranties set
out in Section 5.1(a), Section 5.1(b), Section 5.1(e), Section 5.1(f),
Section 6.1(a), Section 6.1(b), and Section 6.1(e) and the corresponding
representations and warranties set out in the certificates delivered pursuant to
Section 8.1(a) and Section 8.2(a) survive and continue in full force and effect
without limitation of time;

(b) the representations and warranties set
out in Section 5.1(k) (and the corresponding representations and warranties set
out in the certificates to be delivered pursuant to Section 8.1(a)), will
survive and continue in full force and effect until 6 months after the
expiration of the period during which any tax assessment may be issued by a
Governmental Entity in respect of any taxation year to which such
representations and warranties extend. Such period will be determined without
regard to any consent, waiver, agreement or other document, made or filed after
the Closing Date that extends the period during which a Governmental Entity may
issue a tax assessment. A tax assessment includes any assessment, reassessment
or other form of recognized document assessing liability for Taxes under Laws;

(c) the representations and warranties set
out in Section 5.1(h) and Section 5.1(i) (and the corresponding representations
and warranties set out in the certificates to be delivered pursuant to
Section 8.1(a)) as they relate to a Subject Lease will survive and continue in
full force and effect until the date that is one year after the relevant Vacancy
Date for such Subject Lease; and

(d) there is no limitation as to time for
claims against a Party based on fraudulent misrepresentation by that Party.

Section 11.2 Indemnification in Favour of Target and
Target Canada.

Subject to Section 11.5, Zellers will indemnify and save Target and Target
Canada and their respective directors, officers, employees, agents and
shareholders harmless from and against, and will pay for, all Damages suffered
by, imposed upon or asserted against any of them as a result of, in respect of,
connected with, or arising out of, under, or pursuant to:

(a) any failure of any representation or
warranty in Article 5 to be true and correct as of the Execution Date or to be
true and correct in all material respects as of the relevant Closing Date (or,
with respect to any such representation or warranty that speaks only as of a
specific date, any failure of such representation or warranty to be true and
correct as of such date), in each case for which a notice of claim under
Section 11.6 has been provided to Zellers within the applicable time period
specified in Section 11.1;

(b) any failure of Zellers to perform or
fulfil any of its covenants or obligations under this Agreement;

(d) the ownership, management or control of
the operations conducted on any Subject Leased Property on or prior to the
relevant Closing Date by Zellers (or any of its Affiliates, subtenants or
licensees) where such ownership, management or control results in the release of
contaminants for which Target or Target Canada is found liable by a Governmental
Entity; and

(e) any Excluded Liabilities.

Section 11.3 Indemnification in Favour of
Zellers.

Subject to Section 11.5, Target Canada will indemnify and save Zellers and
its directors, officers, employees, agents and shareholders harmless from and
against, and will pay for, all Damages suffered by, imposed upon or asserted
against any of them as a result of, in respect of, connected with, or arising
out of, under, or pursuant to:

(a) any failure of any representation or
warranty in Article 6 to be true and correct as of the Execution Date or to be
true and correct in all material respects as of the relevant Closing Date (or,
with respect to any such representation or warranty that speaks only as of a
specific date, any failure of such representation or warranty to be true and
correct as of such date), in each case for which a notice of claim under
Section 11.6 has been provided to Target Canada within the applicable time
period specified in Section 11.1;

(b) any failure of Target Canada to perform
or fulfil any of its covenants or obligations under this Agreement;

(d) the use or occupancy of any Subject
Leased Property after the applicable Closing Date, subject to the obligations of
Zellers under the applicable Sublease; and

(e) the ownership, management or control of
the operations conducted on any of the Subject Leased Properties after the
relevant Closing Date by Target Canada (or any of its Affiliates, subtenants or
licensees) where such ownership, management or control results in the release of
contaminants for which Zellers is found liable by a Governmental Entity, subject
to the obligations of Zellers under the applicable Sublease.

Section 11.4 Bulk Sales and Retail Sales Tax
Waiver.

In respect of the transactions contemplated by this Agreement, Target Canada
and the applicable Designee or Designees shall not require Zellers to comply, or
to assist Target Canada or the applicable Designee or Designees to comply, with
the requirements of (a) the Bulk Sales Act (Ontario), if applicable, or
(b) section 6 of the Retail Sales Tax Act (Ontario) or any equivalent
or corresponding provisions under any other applicable legislation.
Notwithstanding the foregoing, Zellers shall indemnify and save harmless Target,
Target Canada and the applicable Designee or Designees and their respective
directors, officers, employees, agents and shareholders, on an after-Tax basis,
from and against, and will pay for, all Damages suffered by, imposed upon or
asserted against any of them as a result of, in respect of, connected with, or
arising out of, under or pursuant to such non-compliance.

Section 11.5 Limitations.

(1) A Party has no obligation or liability
for indemnification or otherwise with respect to any representation or warranty
made by such Party in this Agreement, or the certificates delivered pursuant to
Section 8.1(a) and Section 8.2(a), after the end of the applicable

time period specified in Section 11.1, except for claims relating to the
representations and warranties that the Party has been notified of prior to the
end of the applicable time period.

(2) A Party has no liability for, or
obligation with respect to, any punitive or aggravated damages, except to the
extent awarded to a third party in a Third Party Claim.

(3) A Party has no obligation to make any
payment for Damages for indemnification or otherwise with respect to the matters
described in Section 11.2 or Section 11.3, as applicable:

(a) until the total of all Damages with
respect to such matters exceeds $18 million, after which such Party shall be
liable to make payment for all such Damages including such $18 million; and

(b) to the extent such Damages exceed a
maximum of $450 million;

provided that the forgoing limitations shall not apply to Damages with
respect to any breach of covenant, Excluded Liabilities, Assumed Liabilities or
any of the matters referred to in Section 11.1(a), Section 11.1(b),
Section 11.1(d), Section 11.2(c), Section 11.2(d), Section 11.3(d) or
Section 11.3(e).

(4) A Party has no obligation to make any
payment for Damages for indemnification or otherwise to the extent such Damages
exceed a maximum of $1,825,000,000.

Section 11.6 Notification.

(1) If a Third Party Claim is instituted or
asserted against an Indemnified Party, the Indemnified Party will promptly
notify the Indemnifying Party in writing of the Third Party Claim. The notice
must specify in reasonable detail, the identity of the Person making the Third
Party Claim and, to the extent known, the nature of the Damages and the
estimated amount needed to investigate, defend, remedy or address the Third
Party Claim.

(2) If an Indemnified Party becomes aware of
a Direct Claim, the Indemnified Party will promptly notify the Indemnifying
Party in writing of the Direct Claim.

(3) Notice to an Indemnifying Party under
this Section 11.6 of a Direct Claim or a Third Party Claim is assertion of a
claim for indemnification against the Indemnifying Party under this Agreement.
Upon receipt of such notice, the provisions of Section 11.9 will apply to any
Third Party Claim and the provisions of Section 11.8 will apply to any Direct
Claim.

Section 11.7 Limitation Periods.

Notwithstanding the provisions of the Limitations Act, 2002
(Ontario) or any other statute, a proceeding in respect of a claim for
indemnification or otherwise arising from any breach or inaccuracy of any
representation or warranty in this Agreement may be commenced in accordance with
this Agreement. Any applicable limitation period is extended or varied to the
full extent permitted by law to give effect to this Section 11.7.

Section 11.8 Procedure for Direct Claims.

(1) Following receipt of notice of a Direct
Claim, the Indemnifying Party has 60 days to investigate the Direct Claim and
respond in writing. For purposes of the investigation, the Indemnified Party
shall make available to the Indemnifying Party the information relied upon by
the Indemnified Party to substantiate the Direct Claim, together with such other
information as the Indemnifying Party may reasonably request.

(2) If the Indemnifying Party disputes the
validity or amount of the Direct Claim, the Indemnifying Party shall provide
written notice of the dispute to the Indemnified Party within the 60-day period
specified in Section 11.8(1). The dispute notice must describe in reasonable
detail the nature of the Indemnifying Party153s dispute. During the 30-day period
immediately following receipt of a dispute notice by the Indemnified Party, the
Indemnifying Party and the Indemnified Party shall attempt in good faith to
resolve the dispute. If the Indemnifying Party and the Indemnified Party fail to
resolve the dispute within that 30-day time period, the Indemnified Party is
free to pursue all rights and remedies available to it, subject to this
Agreement. If the Indemnifying Party fails to respond in writing to the Direct
Claim within the 60-day period specified in Section 11.8(1), the Indemnifying
Party is deemed to have rejected the Direct Claim, in which event the
Indemnified Party is free to pursue all rights remedies available to it, subject
to this Agreement.

Section 11.9 Procedure for Third Party
Claims.

(1) Upon receiving notice of a Third Party
Claim, the Indemnifying Party may participate in the investigation and defence
of the Third Party Claim and may also elect to assume the investigation and
defence of the Third Party Claim.

(2) In order to assume the investigation and
defence of a Third Party Claim, the Indemnifying Party must give the Indemnified
Party written notice of its election within 30 days of Indemnifying Party153s
receipt of notice of the Third Party Claim and acknowledge that the Third Party
Claim is within the scope of its obligation to indemnify the Indemnified Party
in accordance with and subject to the terms of this Article 11.

(3) If the Indemnifying Party assumes the
investigation and defence of a Third Party Claim:

(a) the Indemnifying Party will pay for all
costs and expenses of the investigation and defence of the Third Party Claim
except that the Indemnifying Party will not, so long as it diligently conducts
such defence, be liable to the Indemnified Party for any fees of other counsel
or any other expenses with respect to the defence of the Third Party Claim,
incurred by the Indemnified Party after the date the Indemnifying Party validly
exercised its right to assume the investigation and defence of the Third Party
Claim; provided, however, that if the defendants named in the Third Party Claim
include both the Indemnified Party and the Indemnifying Party, and the
Indemnified Party shall have reasonably concluded that there are legal defences
or rights available to it that are in actual or potential conflict with those
available to the Indemnifying Party, then the Indemnified Party shall have the
right to select one law firm to act, at the Indemnifying Party153s expense, as
separate counsel on behalf of the Indemnified Party; and

(b) the Indemnifying Party will reimburse the
Indemnified Party for all costs and expenses incurred by the Indemnified Party
in connection with the investigation and defence of the Third Party Claim prior
to the date the Indemnifying Party validly exercised its right to assume the
investigation and defence of the Third Party Claim.

(4) If the Indemnified Party undertakes the
defence of the Third Party Claim, the Indemnifying Party will not be bound by
any compromise or settlement of the Third Party Claim effected without the
consent of the Indemnifying Party (which consent may not be unreasonably
withheld or delayed).

(5) The Indemnifying Party will not be
permitted to compromise and settle or to cause a compromise and settlement of a
Third Party Claim without the prior written consent of the Indemnified Party,
which consent may not be unreasonably withheld or delayed, unless:

(a) the terms of the compromise and
settlement require only the payment of money for which the Indemnified Party is
entitled to full indemnification under this Agreement; and

(b) the Indemnified Party is not required to
admit any wrongdoing, take or refrain from taking any action, acknowledge any
rights of the Person making the Third Party Claim or waive any rights that the
Indemnified Party may have against the Person making the Third Party Claim.

(6) The Indemnified Party and the
Indemnifying Party agree to keep the other fully informed of the status of any
Third Party Claim and any related proceedings. If the Indemnifying Party
assumes the investigation and defence of a Third Party Claim, the Indemnified
Party will, at the request and expense of the Indemnifying Party, use its
reasonable efforts to make available to the Indemnifying Party, on a timely
basis, those employees whose assistance, testimony or presence is necessary to
assist the Indemnifying Party in investigating and defending the Third Party
Claim. The Indemnified Party shall, at the request and expense of the
Indemnifying Party, make available to the Indemnifying Party, or its
representatives, on a timely basis all documents, records and other materials in
the possession, control or power of the Indemnified Party, reasonably required
by the Indemnifying Party for its use solely in defending any Third Party Claim
which it has elected to assume the investigation and defence of. The
Indemnified Party shall cooperate on a timely basis with the Indemnifying Party
in the defence of any Third Party Claim.

Section 11.10 Remedies.

(1) Except as provided in this Section 11.10,
the indemnities provided in this Agreement constitute the only remedy of a Party
against another Party in the event of any breach of a representation, warranty,
covenant or agreement of such Party contained in this Agreement.

(2) The Parties may exercise their rights of
termination in Section 10.1 and their rights of indemnity in Section 13.3.

(3) Target and Target Canada may set off
against any amounts payable by either or both of them to Zellers or HBC under
this Agreement, any amounts owing to either or both of them by Zellers, HBC or
any of their Affiliates under this Agreement or any Ancillary Agreement,
including any amounts so owing under any indemnification obligations, up to a
maximum aggregate amount to be so set off of $90 million.

(4) The Parties acknowledge that the failure
to comply with a covenant or obligation contained in this Agreement may give
rise to irreparable injury to a Party inadequately compensable in damages.
Accordingly, a Party may seek to enforce the performance of this Agreement by
injunction or specific performance upon application to a court of competent
jurisdiction without proof of actual damage (and without requirement of posting
a bond or other security).

(5) Each of the Parties expressly waives and
renounces any other remedies whatsoever, whether at law or in equity, which it
would otherwise be entitled to as against any other Party.

Section 11.11 One Recovery.

An Indemnified Party is not entitled to double recovery for any claims even
though they may have resulted from the breach, inaccuracy or failure to perform
of more than one of the representations, warranties, covenants and obligations
of the Indemnifying Party in this Agreement.

Section 11.12 Duty to Mitigate.

Nothing in this Agreement in any way restricts or limits the general
obligation at Law of an Indemnified Party to mitigate any loss which it may
suffer or incur by reason of the breach, inaccuracy or failure to perform of any
representation, warranty, covenant or obligation of the Indemnifying Party under
this Agreement. If any claim can be reduced by any recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other Person, the Indemnified
Party shall take all appropriate steps to enforce such recovery, settlement or
payment and the amount of any Damages of the Indemnified Party will be reduced
by the amount of insurance proceeds actually recovered by the Indemnified Party,
net of any out-of-pocket costs incurred in obtaining such recovery and net of
the present value of any increase in insurance premiums reasonably attributable
to such recovery.

Section 11.13 Adjustment to Purchase Price.

Any payment made by Zellers or HBC to Target Canada under this Article 11
shall be deemed to be a dollar-for-dollar decrease in the Purchase Price. A
payment made by Target Canada or Target under this Article 11 shall be deemed to
be a dollar-for-dollar increase in the Purchase Price.

ARTICLE 12
OTHER COVENANTS

Section 12.1 Guarantee by HBC.

(1) HBC hereby unconditionally, absolutely,
continuingly and irrevocably guarantees to Target Canada and the Indemnified
Parties listed in Section 11.2 the timely payment, if any, and performance by
Zellers (and its permitted assignees) of its obligations and liabilities arising
under or pursuant to this Agreement and the Ancillary Agreements whether direct
or indirect, absolute or contingent, now or hereafter existing, or due or to
become due (collectively, the “Zellers Liabilities”).

(2) Target Canada shall not be required to
prosecute collection or seek to enforce or resort to any remedies against
Zellers or any other Person liable to Target Canada or any such Indemnified
Parties on account of Zellers Liabilities or any guaranty thereof. HBC153s
liabilities shall in no way be impaired, affected, reduced or released by reason
of (i) the failure or delay by Target Canada or any of such Indemnified Parties
to do or take any of the actions or things described in this Agreement, (ii) the
voluntary or involuntary liquidation, dissolution, sale or other disposition of
all or substantially all the assets of Zellers (or its permitted assignees) or
the marshalling of assets and liabilities, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition with creditors or readjustment of, or other similar proceedings or
any other inability to pay or perform affecting, Zellers (or its permitted
assignees) or any of its respective assets, or (iii) any allegation concerning,
or contest of the legality or validity of, the indemnification obligations under
this Agreement.

(3) HBC hereby expressly waives the right to
interpose all substantive and procedural defences of the law of guaranty,
indemnification and suretyship, except the defences of prior payment or prior
performance.

(4) Without limiting the generality of
Section 12.1(1), Section 12.1(2) or Section 12.1(3), the liability of HBC under
this Section 12.1 shall not be deemed to have been waived, released, discharged,
impaired or affected by (a) the granting of any indulgence or extension of time
to Zellers as subtenant under any Sublease, (b) the assignment of any Sublease,
or the subletting of the premises under any Sublease by Zellers as subtenant
under any Sublease, with or without Target Canada153s consent, (c) the expiration
of the term of any Sublease, (d) if Zellers, as subtenant under any Sublease,
holds over beyond the term of the Sublease, (e) the rejection, disaffirmance or
disclaimer of any Sublease by any party in any action or proceeding, (f) any
defect or invalidity of any Sublease, or (g) any amendment, supplement or
replacement of any Sublease. The liability of HBC shall not be affected by any
repossession, re-entry or re-letting of any Subject Leased Property by Target
Canada as sublandlord under any Sublease.

(5) In addition to the guarantee specified in
Section 12.1(1), HBC shall indemnify and save Target Canada and the Indemnified
Parties listed in Section 11.2 harmless from and against all Damages it or they
may suffer as a result or consequence of any inability by Target Canada or such
Indemnified Parties to recover the ultimate balance due or

remaining due or remaining unpaid to Target Canada and such Indemnified
Parties in respect of Zellers Liabilities.

Section 12.2 Target Guarantee.

(1) Target hereby unconditionally,
absolutely, continuingly and irrevocably guarantees to Zellers, HBC, and the
Indemnified Parties listed in Section 11.3 the timely payment, if any, and
performance by Target Canada (and its permitted assignees, including any
Designee pursuant to Section 2.7, but excluding each Investment Grade Designee
who enters into a Designee Assignment and Assumption Agreement or other
assumption document pursuant to Section 2.7 (the
“Assignees“)), of its obligations and liabilities arising under
or pursuant to this Agreement and the Ancillary Agreements, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or to become
due (collectively, the “Target Canada Liabilities”).

(2) Zellers shall not be required to
prosecute collection or seek to enforce or resort to any remedies against Target
Canada, any Assignee or any other Person liable to Zellers or any such
Indemnified Parties on account of Target Canada Liabilities or any guaranty
thereof. Target153s liabilities shall in no way be impaired, affected, reduced or
released by reason of (i) the failure or delay by Zellers or any of such
Indemnified Parties to do or take any of the actions or things described in this
Agreement, (ii) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets of Target Canada (or
Assignees153) or the marshalling of assets and liabilities, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment of, or other similar
proceedings or any other inability to pay or perform affecting, Target Canada
(or its Assignees) or any of its respective assets, or (iii) any allegation
concerning, or contest of the legality or validity of, the indemnification
obligations under this Agreement.

(3) Target hereby expressly waives the right
to interpose all substantive and procedural defences of the law of guaranty,
indemnification and suretyship, except the defences of prior payment or prior
performance.

(4) In addition to the guarantee specified in
Section 12.2(1), Target shall indemnify and save Zellers, HBC and the
Indemnified Parties listed in Section 11.3 harmless from and against all Damages
it or they may suffer as a result or consequence of any inability by Zellers,
HBC or such Indemnified Parties to recover the ultimate balance due or remaining
due or remaining unpaid to Zellers, HBC and such Indemnified Parties in respect
of Target Canada Liabilities.

Section 12.3 Further Assurances.

From time to time before and after the relevant Closing Date, each Party
will, at the request of any other Party, execute and deliver such additional
conveyances, transfers, documents, instruments and other assurances as may be
reasonably required to effectively consummate the transactions contemplated by
this Agreement and carry out the intent of this Agreement.

ARTICLE 13
MISCELLANEOUS

Section 13.1 Notices.

Any notice, direction or other communication given regarding the matters
contemplated by this Agreement or any Ancillary Agreement (each a
“Notice”) must be in writing, sent by personal delivery,
courier or facsimile (but not by electronic mail) and addressed:

(a) to Zellers and HBC at:

401 Bay Street
Suite 500
Toronto, Ontario M5H 2Y4

Attention:		General Manager, Legal Services
Telephone:		(416) 861-6932
Facsimile:		(416) 861-4200

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

Hudson153s Bay Trading Company, LP
3 Manhattanville Road, 2nd Floor
Purchase, New York 10577

Attention:		Vice President and Secretary
Telephone:		(914) 272-8067
Facsimile:		(914) 272-8088

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

Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, Ontario M5L 1B9

Attention:		Ian Putnam
Telephone:		(416) 869-5506
Facsimile:		(416) 947-0866

(b) to Target Canada and Target at:

Target Corporation

1000 Nicollet Mall, TPS-2670

Minneapolis, MN 55403

Attention:

Timothy R. Baer, Executive Vice-President, General Counsel,

Sean D. Kelly, Senior Group Counsel, and

		Alexander G. Tselos, Senior Counsel, Real Estate
Telephone:		(612) 696-6908
Facsimile:		(612) 696-6909

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

Osler, Hoskin & Harcourt LLP
Box 50, Suite 6100
1 First Canadian Place
Toronto, Ontario M5X 1B8

Attention:		Terry Burgoyne and Heather McKean
Telephone:		(416) 362-2111
Facsimile:		(416) 862-6666

with a further copy (which shall not constitute notice) to:

Faegre & Benson LLP
2200 Wells Fargo Center
90 South Seventh Street
Minneapolis, Minnesota 55402

Attention: Michael A. Stanchfield and John R. Wheaton
Telephone: (612) 766-7000
Facsimile: (612) 766-1600

A Notice is deemed to be given and received (i) if sent by personal delivery
or same-day courier, on the date of delivery if it is a Business Day and the
delivery was made prior to 4:00 p.m. (local time in place of receipt) and
otherwise on the next Business Day, (ii) if sent by overnight courier, on the
next Business Day, or (iii) if sent by facsimile, on the Business Day following
the date of confirmation of transmission by the originating facsimile. A Party
may change its address for service from time to time by providing a Notice in
accordance with the foregoing. Any subsequent Notice must be sent to the Party
at its changed address. Any element of a Party153s address that is not
specifically changed in a Notice will be assumed not to be changed.

Section 13.2 Time of the Essence.

Time is of the essence in this Agreement.

Section 13.3 Brokers.

Zellers shall indemnify and save harmless Target Canada and Target from and
against any and all Damages and Third Party Claims whatsoever for any fee,
commission or other remuneration payable or alleged to be payable to any broker,
agent or other intermediary who purports to act or have acted for Zellers or any
of its Affiliates. Target Canada shall indemnify and save harmless Zellers and
HBC from and against any and all Damages and Third Party Claims whatsoever for
any fee, commission or other remuneration payable or alleged to be payable to
any broker, agent or other intermediary who purports to act or have acted for
Target Canada or any of its Affiliates. These indemnities are not subject to
any of the limitations set out in Article 11.

Section 13.4 Announcements.

No press release, public statement or announcement or other public disclosure
with respect to this Agreement or the transactions contemplated in this
Agreement may be made except with the prior written consent and approval of
Target, or except if required by Law or a Governmental Entity. Where the public
disclosure is required by Law or a Governmental Entity, the Party required to
make the public disclosure (if not Target) will use its commercially reasonable
efforts to obtain the approval of Target as to the form, nature and extent of
the disclosure. The initial announcements of the transactions contemplated by
this Agreement will be made in the form of attached as Section 13.4 of the
Disclosure Letter.

Section 13.5 Third Party Beneficiaries.

Except as provided in Section 7.7, Zellers, HBC, Target and Target Canada
intend that this Agreement will not benefit or create any right or cause of
action directly in favour of any Person, other than the Parties; provided
however, that the foregoing shall not limit or prohibit (i) Target or Target
Canada from pursuing any and all claims, damages, remedies and rights provided
hereunder on behalf of itself or for the benefit of any Designee or other
assignee of Target Canada or (ii) any Designee from directly pursuing any rights
under any Ancillary Agreements to which such Designee is a party. Except for
the Indemnified Parties, no Person, other than the Parties, shall be entitled to
directly rely on the provisions of this Agreement in any action, suit,
proceeding, hearing or other forum. To the extent required by law to give full
effect to these direct rights, Target Canada agrees and acknowledges that it is
acting as agent and/or as trustee of its Indemnified Parties. The Parties
reserve their right, subject to unanimous agreement among the Parties, to vary
or rescind the rights, granted by or under this Agreement to any Person who is
not a Party, at any time and in any way whatsoever, without notice to or consent
of that Person, including any Indemnified Party.

Section 13.6 Expenses.

Except as otherwise expressly provided in this Agreement, each Party will pay
for its own costs and expenses incurred in connection with this Agreement and
the transactions contemplated by this Agreement. The fees and expenses referred
to in this Section are those which are incurred in connection with the
negotiation, preparation, execution and performance of this Agreement and the
Ancillary Agreements, and the transactions contemplated by this Agreement and
the Ancillary Agreements, including the fees and expenses of legal counsel,
investment advisers and accountants.

Section 13.7 Amendments.

This Agreement may only be amended, supplemented or otherwise modified by
written agreement signed by Zellers and Target.

Section 13.8 Waiver.

No waiver of any of the provisions of this Agreement will constitute a waiver
of any other provision (whether or not similar). No waiver will be binding
unless executed in writing by the Party to be bound by the waiver. A Party153s
failure or delay in exercising any right under this Agreement will not operate
as a waiver of that right. A single or partial exercise of any right will

not preclude a Party from any other or further exercise of that right or the
exercise of any other right.

Section 13.9 Non-Merger.

Except as otherwise expressly provided in this Agreement, the covenants,
representations and warranties shall not merge on and shall survive each of the
relevant Closing Dates.

Section 13.10 Subdivision Laws.

This Agreement shall only be effective to create an interest in the Subject
Leased Properties if the subdivision control provisions of the Planning
Act (Ontario) and similar Laws governing the subdivision or severance of
real property in other provinces are complied with on or before the relevant
Closing Date in respect of such Subject Leased Properties. If necessary at any
time and from time to time, Zellers shall forthwith apply for and use reasonable
commercial efforts to obtain all necessary consents under such Laws as required
in order to carry out the transactions contemplated by this Agreement in respect
of the Subject Leased Properties including, without limitation:

(i) any necessary consents that were or
are required in respect of any Subject Lease and any transfer occurring prior to
the Execution Date; and

(ii) any necessary consents that were or are
required to allow Target Canada to obtain the benefit of the full term
(including renewal rights) in excess of any reduced term that is deemed to be
incorporated in the Subject Lease in the event a required consent was not
obtained;

on or before the relevant Closing, and comply with any and all conditions
imposed in respect of such consent, at its sole cost and expense. Nothing in
this Section 13.10, including non-compliance with the Planning Act
(Ontario) and similar Laws governing subdivision or severance of real property
in other provinces, will in any way affect Target Canada153s obligation to
complete the transactions contemplated by this Agreement, including paying the
entire Purchase Price as contemplated by Section 3.1 without deduction or
abatement of any kind; provided, however, that if such a consent will not
reasonably be obtained by the relevant Closing Date, Target or Target Canada may
take such interest, subject to such consent being obtained by Target or Target
Canada at its expense following the relevant Closing Date or select another
Subject Lease by notice given to Zellers.

Section 13.11 Entire Agreement.

This Agreement, together with Ancillary Agreements, constitutes the entire
agreement between the Parties with respect to the transactions contemplated by
this Agreement and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties. There are no
representations, warranties, covenants, conditions or other agreements, express
or implied, collateral, statutory or otherwise, between the Parties in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement or the Ancillary Agreements. The Parties have not
relied and are not relying on any other information, discussion or understanding
in entering into and completing the transactions contemplated by this Agreement.

Section 13.12 Successors and Assigns.

(1) This Agreement becomes effective only
when executed by Zellers, HBC and Target. After that time, it is binding on and
enures to the benefit of Zellers, HBC and Target, and Target Canada upon
compliance with Section 1.12, and their respective successors and permitted
assigns.

(2) Other than as contemplated in
Section 13.12 and Section 2.7, neither this Agreement nor any of the rights or
obligations under this Agreement are assignable or transferable by any Party
without the prior written consent of the other Parties.

Section 13.13 Severability.

If, in any jurisdiction, any provision of this Agreement or its application
to any Party or circumstance is restricted, prohibited or unenforceable, such
provision shall, as to such jurisdiction, be ineffective only to the extent of
such restriction, prohibition or unenforceability without invalidating the
remaining provisions of this Agreement and without affecting the validity or
enforceability of such provision in any other jurisdiction or without affecting
its application to other Parties or circumstances.

Section 13.14 Governing Law.

(1) This Agreement is governed by and
interpreted and enforced in accordance with the laws of the Province of Ontario
and the federal laws of Canada applicable therein.

(2) Each Party irrevocably attorns and
submits to the exclusive jurisdiction of the Ontario courts situated in the City
of Toronto and waives objection to the venue of any proceeding in such court or
that such court provides an inconvenient forum.

Section 13.15 Counterparts.

This Agreement may be executed in any number of counterparts (including
counterparts by facsimile) and all such counterparts taken together shall be
deemed to constitute one and the same instrument.

[Remainder of page intentionally left blank.
Signature page follows.]

IN WITNESS WHEREOF the Parties have executed this
Transaction Agreement.

	ZELLERS INC.

	By:	/s/ Richard Baker
		Authorized Signing Officer

	By:	/s/ Francis Casale
		Authorized Signing Officer

	Dated:	1/12/2011

	HUDSON153S BAY COMPANY

	By:	/s/ Richard Baker
		Authorized Signing Officer

	By:	/s/ Francis Casale
		Authorized Signing Officer

	Dated:	1/12/2011

	TARGET CORPORATION

	By:	/s/ Gregg Steinhafel
		Authorized Signing Officer

	Dated:	1/12/2011

	TARGET CANADA CO.

	By:	/s/ John Griffith
		Authorized Signing Officer

	Dated:	1/12/2011

EXHIBIT (2)A

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