{"id":42102,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/borders-agency-agreement.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"borders-agency-agreement","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/operations\/borders-agency-agreement.html","title":{"rendered":"Borders Agency Agreement"},"content":{"rendered":"<\/p>\n

EXECUTION VERSION<\/p>\n<\/p>\n

AGENCY AGREEMENT<\/u><\/strong><\/p>\n<\/p>\n

This Agency Agreement (this “Agreement<\/u>“) is made as of July 13, 2011,
\nby and between Borders Group, Inc., a Michigan corporation, with executive
\noffices located at 100 Phoenix Drive, Ann Arbor, MI 48108, and its affiliated
\ncompanies set forth in Exhibit A<\/u><\/strong> hereto (collectively,
\nthe “Merchant<\/u>“) and Hilco Merchant Resources, LLC, Gordon Brothers Retail
\nPartners, LLC, SB Capital Group, LLC, Tiger Capital Group, LLC and Great
\nAmerican Group, LLC (collectively, the “Agent<\/u>“).<\/p>\n<\/p>\n

R E C I T A L S<\/strong><\/p>\n<\/p>\n

WHEREAS, on February 16, 2011, the Merchant commenced voluntarily bankruptcy
\ncases (the “Bankruptcy Cases<\/u>“) under Chapter 11 of Title 11 of the United
\nStates Code (the “Bankruptcy Code<\/u>“) in the United States Bankruptcy Court
\nfor the Southern District of New York (the “Bankruptcy Court<\/u>“);<\/p>\n<\/p>\n

WHEREAS, the Merchant operates retail stores in the United States and desires
\nthat the Agent act as the Merchant153s exclusive agent for the limited purpose of
\n(a) selling all of the Merchandise located in Merchant153s retail store
\nlocation(s) identified on Exhibit 1<\/u> attached hereto (each individually a
\n“Store<\/u>” and collectively, the “Stores<\/u>“) by means of a
\npromotional “going out of business,” “store closing” or similar themed sale;
\n(b) selling Distribution Center Inventory; and (c) disposing of the Agent Sale
\nFF&E, Corporate FF&E, News Stand Inventory and Caf \/Candy Inventory (as
\nfurther described below, the “Sale<\/u>“); and<\/p>\n<\/p>\n

WHEREAS, Merchant had entered into an Asset Purchase Agreement, dated as of
\nJune 30, 2011 (the “APA<\/u>“), by and among Borders Group, Inc., Borders,
\nInc. and BB Brands, LLC (the “Proposed Buyer<\/u>“), which APA is no longer
\nthe stalking horse bid under the Sale Motion; and<\/p>\n<\/p>\n

WHEREAS, notwithstanding Merchant’s entry into the APA, this Agreement is
\nintended to be effective in the event (i) the Approval Order does not approve a
\ngoing concern transaction or (ii) the Approval Order approves a going concern
\ntransaction and the going concern buyer fails to close such transaction on or
\nprior to July 29, 2011 (a “GC Failure<\/u>“);<\/p>\n<\/p>\n

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
\nforth herein, and for other good and valuable consideration, the receipt and
\nsufficiency of which is hereby acknowledged, the Agent and the Merchant hereby
\nagree as follows:<\/p>\n<\/p>\n

Section 1. Defined Terms<\/u>. All capitalized terms shall have the
\nmeaning as defined herein.<\/p>\n<\/p>\n

Section 2. Appointment of Agent\/Approval Order<\/u>.<\/p>\n<\/p>\n

(a) Effective on the date hereof and subject to the entry of the
\nApproval Order, the Merchant hereby appoints the Agent, and the Agent hereby
\nagrees to serve, as the Merchant’s exclusive agent for the limited purpose of
\nconducting the Sale at the Stores and Merchant153s distribution centers
\n(collectively referred to as the “Distribution Centers<\/u>“) in accordance
\nwith the terms and conditions of this Agreement.<\/p>\n<\/p>\n

(b) On June 30, 2011, Merchant filed a motion (the “Sale
\nMotion<\/u>“) with the Bankruptcy Court for entry of an order approving this
\nAgreement and authorizing Merchant to conduct the Sale in accordance with the
\nterms hereof (the “Approval Order<\/u>“). The Approval Order shall be in
\nsubstantially the form annexed hereto as Exhibit 2(b)<\/u> and shall provide
\nthat on the Payment Date the Debtors shall repay or cause to be repaid the DIP
\nFacility in full in cash indefeasibly.<\/p>\n<\/p>\n

(c) Subject to entry of the Approval Order, Agent shall be
\nauthorized to advertise the Sale as a “going out of business,” “store closing”
\nor similar-themed sale, and the Approval Order shall provide that Agent shall be
\nrequired to comply with applicable federal, state and local laws, regulations
\nand ordinances, including, without limitation, all laws and regulations relating
\nto advertising, permitting, privacy, consumer protection, occupational health
\nand safety and the environment, together with all applicable statutes, rules,
\nregulations and orders of, and applicable restrictions imposed by, governmental
\nauthorities (collectively, the “Applicable General Laws<\/u>“), other than all
\napplicable laws, rules and regulations in respect of “going out of business,”
\n“store closing” or similar-themed sales (collectively, the “Liquidation Sale
\nLaws<\/u>“), provided that such Sale is conducted in accordance with the terms of
\nthis Agreement, the Sale Guidelines and Approval Order; and provided further
\nthat the Approval Order shall provide that so long as the Sale is conducted in
\naccordance with the Sale Guidelines and in a safe and professional manner, Agent
\nshall be deemed to be in compliance with any Applicable General Laws.<\/p>\n<\/p>\n

Section 3. Consideration to Merchant and Agent<\/u>.<\/p>\n<\/p>\n

3.1 Payments to Merchant<\/u>.<\/p>\n<\/p>\n

(a) As a guaranty of Agent153s performance hereunder, Agent
\nguarantees that Merchant shall receive: (i) seventy two percent (72%) (the
\n“Guaranty Percentage<\/u>“) of the aggregate Cost Value of the Merchandise
\nincluded in the Sale (the “Guaranteed Amount<\/u>“) plus (ii) the aggregate
\namount calculated in accordance with Section 7.4 and (iii) the amounts set forth
\nin Section 15.9.<\/p>\n<\/p>\n

(b) Subject to Section 6.1 hereof, the Guaranteed Amount shall be
\npaid in the manner and at the times specified in Section 3.3 below. The
\nGuaranteed Amount will be calculated based upon the aggregate Cost Value of the
\nMerchandise as determined by (A) the final certified report of the Inventory
\nTaking Service after verification and reconciliation thereof by Agent and
\nMerchant plus<\/u> (B) amount of Gross Rings, as adjusted for shrinkage per
\nthis Agreement.<\/p>\n<\/p>\n

(c) The Guaranty Percentage has been fixed based upon the aggregate
\nCost Value of the Merchandise not being less than $350,000,000 and no more than
\n$395,000,000 (the “Merchandise Threshold<\/u>“) as of the Sale Commencement
\nDate, excluding On-Order Goods, News Stand Inventory and Caf \/ Candy Inventory,
\nperiodical items, and other caf items. To the extent that the aggregate Cost
\nValue of the Merchandise included in the Sale is less than or more than the
\nMerchandise Threshold, the Guaranty Percentage shall be adjusted in accordance
\nwith Exhibit 3.1(c)<\/u><\/strong> annexed hereto (in addition to any
\nadjustment applicable pursuant to section 11.1(m) hereof), as and where
\napplicable. The aggregate Cost Value of the Return to Vendor Inventory shall be
\nno more than $10,800,000, provided that, such amount can increase by an amount
\nup to $1,700,000 to the extent the Schuler Goods are returned to the Merchant
\n(the “RTV Threshold<\/u>“). To the extent that the aggregate Cost Value of
\nthe Return to Vendor Inventory included in the Sale is more than the RTV
\nThreshold, any excess Return to Vendor Inventory shall be valued fifty percent
\n(50%) of the Cost Value of such inventory (the “RTV Adjustment<\/u>“) (in
\naddition to any adjustment applicable pursuant to this section and section
\n11.1(m) hereof), as and where applicable.<\/p>\n

(d) To the extent that Proceeds exceed the sum of (i) the
\nGuaranteed Amount and (ii) Expenses of the Sale (the sum of (i) and (ii), the
\n“Sharing Threshold<\/u>“), then all Proceeds of the Sale above the Sharing
\nThreshold shall be shared fifty percent (50%) to Merchant and fifty percent
\n(50%) to Agent. All amounts, if any, to be received by Merchant from Proceeds
\nin excess of the Sharing Threshold shall be referred to as the “Recovery
\nAmount<\/u>” and amounts to be received by Agent from Proceeds in excess of the
\nSharing Threshold shall be referred to as the “Agent Recovery
\nAmount”<\/u>. To the extent that Merchant is entitled to receive the Recovery
\nAmount, such Recovery Amount shall be paid as part of the weekly and Final
\nReconciliation under Section 8.6.<\/p>\n<\/p>\n

(e) In addition to the Guaranteed Amount and the Recovery Amount,
\nAgent shall pay the Merchant an amount equal to four percent (4%) of the gross
\nproceeds (net of sales taxes) of the sale of Additional Agent Merchandise (the
\n“Merchant153s Additional Goods Recovery Amount<\/u>“). All proceeds of the sale
\nof Additional Agent Merchandise in excess of the Merchant153s Additional Goods
\nRecovery Amount shall be retained by Agent and be referred to as the “Agent153s
\nAdditional Goods Recovery Amount.”<\/p>\n<\/p>\n

3.2 Compensation to Agent<\/u>. Subject to the entry of the
\nApproval Order, Agent shall be entitled to the Agent Recovery Amount and the
\nAgent153s Additional Goods Recovery Amount. Agent shall also be entitled to
\nreceive all proceeds of the sale of the Agent Sale FF&E as provided for in
\nSection 15.9 hereof and a commission based on the sale of the Corporate
\nFF&E, News Stand Inventory and Caf \/Candy Inventory and any other Merchant
\nConsignment Goods as provided for hereunder.<\/p>\n<\/p>\n

(b) Provided that no Event of Default has occurred and continues
\nto exist on the part of the Agent, and after all payments are made to Merchant
\nas required hereunder, all Merchandise remaining at the Sale Termination Date
\n(the “Remaining Merchandise<\/u>“) shall become the property of Agent, free
\nand clear of all liens, claims and encumbrances of any kind or nature, and the
\nproceeds received by Agent from the disposition, in a commercially reasonable
\nmanner, of such unsold Merchandise shall constitute Proceeds
\nhereunder. Notwithstanding the foregoing, Agent shall exercise commercially
\nreasonable efforts to dispose of all of the Merchandise during the Sale
\nTerm. Merchant shall have the right to audit Agent153s books and records to
\nverify its share of the Proceeds. Agent shall not sell any Remaining
\nMerchandise to wholesalers for return to publishers. To the extent that Agent
\ndesires to sell any Merchandise or Remaining Merchandise in bulk to a non-retail
\ncustomer or abandon the Remaining Merchandise Agent shall provide 48 hours
\nwritten notice, via e-mail, to the official committee of unsecured creditors so
\nthat the committee may verify that the prospective purchaser does not have
\nreturn to vendor privileges or approve of the proposed abandonment. If the
\nofficial committee of unsecured creditors objects to the proposed sale or the
\nproposed abandonment, the parties will request the Bankruptcy Court resolve the
\nmatter on an emergent basis.<\/p>\n<\/p>\n

3.3 Time of Payments<\/u>.<\/p>\n<\/p>\n

(a) On the Sale Commencement Date or the next business day if
\nthe Sale Commencement Date is on a non-business day (the “Payment
\nDate<\/u>“), Agent shall pay (i) 90% of the estimated Guaranteed Amount to
\nMerchant (the “Guaranteed Amount Deposit<\/u>“) by wire transfer to the
\naccount(s) designated on Exhibit 3.3(a)<\/u> annexed hereto (the “Merchant
\nAccount<\/u>“), (ii) the Agent Sale FF&E Guarantee and (iii) the aggregate
\namount calculated in accordance with Section 7.4. Subject to Section 6.1
\nhereof, the Guaranteed Amount Deposit shall be based on the estimated Cost Value
\n(as determined in accordance with Section 5.1 of the Agreement) of the
\nMerchandise on the Sale Commencement Date as reflected in the master inventory
\nfile(s) provided to Agent on June 19, 2011, which shall be rolled forward to the
\nSale Commencement Date (the “Perpetual Inventory File<\/u>“), provided that,
\nthe Guaranteed Amount Deposit shall not take into account any On-Order Goods or
\nSchuler Goods, which shall be paid when received in the applicable weekly
\nreconciliation.<\/p>\n<\/p>\n

(b) The balance of the Guaranteed Amount (the “Remaining
\nGuaranteed Amount<\/u>“), shall be paid as follows: Agent shall pay the unpaid
\nand undisputed balance of the Guaranteed Amount, which amount shall be paid to
\nthe Merchant Account no later than the earlier of (i) the date that is forty
\nfive (45) days after the Sale Commencement Date (in which case payment shall be
\nof the undisputed portion of the balance of the estimated Guaranteed Amount) and
\n(ii) the second business day following the issuance of the Final Inventory
\nReport, and Agent’s failure to pay such balance or undisputed portion shall
\nentitle the Merchant and GECC to draw upon the Agent Letter of Credit (as
\ndefined below) in accordance with section 3.4 to the extent of such balance or
\nundisputed portion. In the event that after the issuance of the Final Inventory
\nReport as verified and reconciled, the Guaranteed Amount is greater than the sum
\nof the Guaranteed Amount Deposit plus the payment of the undisputed portion of
\nthe estimated Guaranteed Amount, Agent shall pay the remainder of the Guaranteed
\nAmount to the Merchant within two (2) business days after the Final Inventory
\nReport has been issued as verified and reconciled. In the event that there is a
\ndispute with respect to the reconciliation of the aggregate Cost Value of the
\nMerchandise following the Inventory Taking, then any such dispute shall be
\nresolved in the manner and at the times set forth in Section 8.6 hereof.<\/p>\n<\/p>\n

(c) All amounts required to be paid by Agent or Merchant under
\nany provision of this Agreement shall be made by wire transfer of immediately
\navailable funds which shall be wired by Agent or Merchant, as applicable, no
\nlater than 2:00 p.m. (Eastern Time) on the date that such payment is due;
\nprovided<\/u>, however<\/u>, that all of the information necessary to
\ncomplete the wire transfer has been received by Agent or Merchant, as
\napplicable, by 10:00 a.m. (Eastern Time) on the date that such payment is
\ndue. In the event that the date on which any such payment is due is not a
\nbusiness day, then such payment shall be made by wire transfer on the next
\nbusiness day.<\/p>\n<\/p>\n

(d) Merchant agrees that if at any time during the Sale Term,
\nMerchant holds any undisputed amounts due to Agent as Proceeds hereunder, Agent
\nmay, in its discretion, offset such Proceeds being held by Merchant against any
\namounts due and owing to Merchant pursuant to this Section 3.3 or otherwise
\nunder this Agreement. In addition, Merchant and Agent further agree that except
\nas provided in the following sentence, if at any time during the Sale Term,
\nAgent holds any undisputed amounts due to Merchant under this Agreement, Agent
\nmay, in its discretion, offset such amounts being held by it against any amounts
\ndue and owing by, or required to be paid by, Merchant hereunder. Notwithstanding
\nthe foregoing or any other provision to the contrary herein, in no event shall
\nAgent offset any amounts against the proceeds realized from the disposition of
\nthe Agent Sale FF&E.<\/p>\n<\/p>\n

(e) If and to the extent that Agent over-funds any amounts in
\nrespect of the Guaranteed Amount based on the results of the Final Inventory
\nReport as reviewed, verified and reconciled by Merchant and Agent, then Merchant
\nagrees to promptly reimburse such undisputed overpayment amounts (the “Over
\nPayment Amount<\/u>“) to Agent.<\/p>\n<\/p>\n

3.4 Letter of Credit<\/u>. In order to secure the Agent153s
\nobligations under this Agreement, in respect of (x) the payment of the Remaining
\nGuaranteed Amount, and (y) Expenses of the Sale, on the Payment Date Agent shall
\nfurnish Merchant an irrevocable standby letter of credit naming Merchant and
\nGECC as co-beneficiaries (collectively, the “Beneficiaries<\/u>“) as
\nbeneficiary in the aggregate original face amount equal to the sum of (i) ten
\npercent (10%) of the estimated Guaranteed Amount, plus (ii) three (3) weeks
\nestimated Expenses that would be payable by Merchant, which shall be in the form
\nof Exhibit 3.4<\/u> hereof (collectively, the “Letter of
\nCredit<\/u>“). The Letter of Credit shall have an expiry date of no earlier than
\nsixty (60) days after the latest possible Sale Termination Date. Unless the
\nparties shall have mutually agreed, in consultation with GECC, that they have
\ncompleted the final reconciliation under this Agreement, then, at least thirty
\n(30) days prior to the initial or any subsequent expiry date, the Beneficiaries
\nshall receive an amendment to the Letter of Credit solely extending (or further
\nextending, as the case may be) the expiry date by at least sixty (60) days. If
\nthe Beneficiaries fail to receive such amendment to the Letter of Credit no
\nlater than thirty (30) days before the expiry date, then all amounts hereunder
\nshall become immediately due and payable and the Beneficiaries, individually or
\ncollectively, shall be permitted to draw under the Letter of Credit in payment
\nof amounts owed and the Beneficiaries shall hold the balance of the amount drawn
\nunder the Letter of Credit as security for amounts that may become due and
\npayable to Merchant hereunder. At Agent153s request, the Beneficiaries shall take
\nall actions reasonably required to reduce the amount available to be drawn under
\nthe Letter of Credit by amounts credited against the Guaranteed Amount;
\nprovided, however, that the Letter of Credit shall not be reduced below three
\n(3) weeks of estimated Expenses of the Sale. In the event that Agent, after
\nreceipt of three (3) business days notice (which notice shall not be required if
\nAgent or any member of Agent shall be a debtor under title 11, United States
\nCode), fails to pay the Guaranteed Amount, or portion thereof or any Expenses
\nwhen due, the Beneficiaries, individually or collectively, may draw on the
\nLetter of Credit in an amount equal to the unpaid, past due, amount of the
\nAgent153s obligations hereunder that is not the subject of a reasonable dispute.\n<\/p>\n<\/p>\n

3.5 Inventory Reconciliation<\/u>. Within thirty (30) days
\nafter the completion of the Inventory Taking, Merchant, Agent and General
\nElectric Capital Corporation (“GECC<\/u>“), in its capacity as administrative
\nagent for itself and the other lenders (the “Lenders<\/u>“) party to the
\nMerchant153s senior secured, super-priority debtor-in-possession credit facility
\n(the “DIP Facility<\/u>“), shall review, reconcile and verify the final report
\nof the aggregate Cost Value of the Merchandise by the Inventory Taking Service
\n(the “Final Inventory Report<\/u>“).<\/p>\n<\/p>\n

Section 4. Expenses of the Sale<\/u>.<\/p>\n<\/p>\n

4.1 Expenses<\/u>. Agent shall be unconditionally responsible
\nfor all Expenses incurred in conducting the Sale during the Sale Term, which
\nexpenses shall be paid by Agent in accordance with Section 4.2 below. As used
\nherein, “Expenses<\/u>” shall mean the Store-level operating expenses of the
\nSale which arise during the Sale Term limited to those set forth below:<\/p>\n<\/p>\n

(a) all payroll and commissions, if applicable, for all Retained
\nEmployees used in conducting the Sale for actual days\/hours worked during the
\nSale Term as well as payroll, to the extent retained by Agent for the Sale, for
\nany of Merchant153s former employees or temporary labor;<\/p>\n<\/p>\n

(b) any amounts payable by Merchant for benefits for Retained
\nEmployees in respect of FICA, unemployment taxes, workers153 compensation and
\nhealthcare insurance, and vacation benefits that accrue during the Sale Term,
\nexclusive of Excluded Benefits for Retained Employees used in the Sale, in an
\namount up to 24% of the base payroll for each Retained Employee on a per store,
\nper month basis (the “Benefits Cap<\/u>“);<\/p>\n<\/p>\n

(c) costs of all security (to the extent customarily provided in
\nthe Stores) including, without limitation, security systems, courier and guard
\nservice, building alarm service and alarm service maintenance;<\/p>\n<\/p>\n

(d) 100% of the fees and costs of the Inventory Taking Service
\nto conduct the Inventory Taking at the Stores and the Distribution Centers to
\nthe extent a third-party service is used;<\/p>\n<\/p>\n

(e) Retention Bonuses for Retained Employees, as provided for in
\nSection 9.4 below;<\/p>\n<\/p>\n

(f) except as included in Section 4.1 (s), advertising and
\ndirect mailings relating to the Sale, signwalking expenses, and Store interior
\nand exterior signage and banners relating to the Sale;<\/p>\n<\/p>\n

(g) local and long-distance telephone and internet\/wifi expenses
\nincurred at the Stores;<\/p>\n<\/p>\n

(h) credit card fees, chargebacks and discounts with respect to
\nMerchandise and other goods sold in the Sale;<\/p>\n<\/p>\n

(i) bank service charges (for Store accounts), check guarantee
\nfees, and bad check expenses to the extent attributable to the Sale;<\/p>\n

(j) costs for additional Supplies used to the extent requested
\nby Agent;<\/p>\n<\/p>\n

(k) Intentionally Omitted;<\/p>\n<\/p>\n

(l) Store cash theft and other store cash shortfalls in the
\nregisters;<\/p>\n<\/p>\n

(m) any and all costs relating to the processing, transfer and
\nconsolidation of Merchandise between and among the Stores, including delivery
\nand freight costs, it being understood that Agent shall be responsible for
\ncoordinating such transfer of Merchandise;<\/p>\n<\/p>\n

(n) housekeeping and cleaning expenses related to the Stores;\n<\/p>\n<\/p>\n

(o) trash and snow removal;<\/p>\n<\/p>\n

(p) on-site supervision of the Stores and the Distribution
\nCenters, including base fees and bonuses of Agent153s field personnel, travel to
\nand from the Stores or the Distribution Centers and incidental out-of-pocket and
\ncommercially reasonable travel expenses relating thereto (including reasonable
\nand documented corporate travel to monitor and manage the Sale), provided that,
\nthe supervision costs shall not exceed a budget that is mutually agreed to by
\nMerchant and Agent;<\/p>\n<\/p>\n

(q) postage, courier and overnight mail charges to and from or
\namong the Stores and central office to the extent relating to the Sale;<\/p>\n<\/p>\n

(r) Occupancy Expenses for the Stores listed on Exhibit 4.1(r)
\non a per location and per diem basis in an amount up to the per Store per diem
\namount set forth therein plus for the Stores designated on Exhibit 4.1(r) hereto
\nas “Percentage Rent Stores,” on a per location basis, the amount calculated
\nusing the percentage rent for such Store set forth therein;<\/p>\n<\/p>\n

(s) Central Service Expenses equal to $50,000 per week plus the
\ncharges with respect to e-mail distribution set forth on Exhibit 4.1(s);<\/p>\n<\/p>\n

(t) Agent153s actual cost of capital (including Letter of Credit
\nfees), insurance and legal fees;<\/p>\n<\/p>\n

(u) a pro-rata portion of Merchant153s insurance attributable to
\nthe Merchandise and other goods located in the Stores; and<\/p>\n<\/p>\n

(v) seventy two percent (72%) of the aggregate cost value of the
\nBooks in Storage included in the Sale, which cost value was fixed in accordance
\nwith the reconciliation of the transactions contemplated by that certain Agency
\nAgreement by and between Merchant and a joint venture composed of Hilco Merchant
\nResources, LLC, SB Capital Group, LLC, Tiger Capital Group, LLC and Gordon
\nBrothers Retail Partners, LLC, dated February 16, 2011, provided that, the cost
\nvalue shall not exceed $3,800,000 and the Books in Storage shall be counted as
\nsuch goods leave the storage facility.<\/p>\n<\/p>\n

Notwithstanding anything herein to the contrary, to the extent that any
\nExpense category listed in Section 4.1 is also included on Exhibit
\n4.1(r)<\/u>, then Exhibit 4.1(r)<\/u> shall control, and such Expenses shall
\nnot be double counted. There will be no double payment of Expenses to the
\nextent that Expenses appear or are contained in more than one Expense category.\n<\/p>\n<\/p>\n

As used herein, the following terms have the following respective meanings:\n<\/p>\n<\/p>\n

(i) “Central Service Expenses<\/u>” means costs and expenses for
\nMerchant153s central administrative services necessary for the Sale, including,
\nbut not limited to, MIS services, payroll processing, cash reconciliation,
\ninventory processing and handling, data processing and reporting, loss
\nprevention reporting (including XBR Research), and, subject to separate charges
\nset forth in Exhibit 4.1(s), e-mail distribution.<\/p>\n<\/p>\n

(ii) “Excluded Benefits<\/u>” means benefits in excess of the
\nBenefits Cap.<\/p>\n<\/p>\n

(iii) “Occupancy Expenses<\/u>” means base rent, percentage rent,
\nHVAC, utilities, CAM, storage costs, real estate and use taxes, merchant153s
\nassociation dues and expenses, and a pro rata portion of comprehensive public
\nliability insurance attributable to the Stores , personal property leases
\n(including, without limitation, point of sale equipment), cash register
\nmaintenance, building maintenance and rental for furniture, fixtures and
\nequipment, all of the foregoing only as categorized and reflected on Exhibit
\n4.1(r)<\/u> hereto.<\/p>\n<\/p>\n

“Expenses” shall not include: (i) Excluded Benefits; (ii) Central Service
\nExpenses, except as provided in Section 4.1(s); (iii) Occupancy Expenses, except
\nas provided in Section 4.1(r); and (iv) any other costs, expenses or liabilities
\npayable by Merchant not provided for herein.<\/p>\n<\/p>\n

4.2 Payment of Expenses<\/u>. Effective from the Sale
\nCommencement Date:<\/p>\n<\/p>\n

(a) Agent shall be responsible for the payment of all Expenses,
\nwhether or not there are sufficient Proceeds collected to pay such Expenses
\nafter the payment of the Guaranteed Amount. All Expenses incurred during each
\nweek of the Sale (i.e. Sunday through Saturday) shall be paid by Agent to or on
\nbehalf of Merchant immediately following the weekly Sale reconciliation by
\nMerchant and Agent pursuant to Section 8.6 below; provided<\/u>,
\nhowever<\/u>, in the event that the actual amount of an Expense is unavailable
\non the date of the reconciliation (such as payroll), Merchant and Agent shall
\nagree to an estimate of such amounts, which amounts will be reconciled once the
\nactual amount of such Expense becomes available. Agent and\/or Merchant may
\nreview or audit the Expenses at any time.<\/p>\n<\/p>\n

(b) Notwithstanding anything herein to the contrary, (i)
\nMerchant shall not be required to fund or otherwise pay any Expenses of Sale
\nexcept to the extent there are sufficient Proceeds and (ii) without limitation
\non Expenses that may be funded in advance by Agent at Merchant153s reasonable
\nrequest, to the extent that Proceeds are insufficient, Agent shall fund, in
\nadvance, all payroll and related expenses for Retained Employees at least two
\n(2) business days prior to the date that such payments are due by Merchant.<\/p>\n<\/p>\n

Section 5. Inventory Valuation; Merchandise<\/u>.<\/p>\n<\/p>\n

5.1 Inventory Taking<\/u>.<\/p>\n<\/p>\n

(a) To determine the aggregate Cost Value of the Merchandise
\nlocated in the Stores, commencing on the Sale Commencement Date, Merchant and
\nAgent shall cause to be taken a SKU level and Retail Price level physical
\ninventory of the Merchandise located in the Stores, which Inventory Taking,
\nsubject to the availability of the Inventory Taking Service, shall be completed
\nin each of the Stores no later than twenty-one (21) days after the Sale
\nCommencement Date (the “Inventory Completion Date<\/u>“, and the date of the
\nInventory Taking at each Store being the “Inventory Date<\/u>” for each such
\nStore). Merchant and Agent shall jointly employ RGIS and\/or another mutually
\nacceptable independent inventory taking service (the “Inventory Taking
\nService<\/u>“) in consultation with GECC to conduct the Inventory Taking. The
\nInventory Taking shall be conducted in accordance with the procedures and
\ninstructions set forth in Exhibit 5.1(a)<\/u> (the “Inventory Taking
\nInstructions<\/u>“). Merchant, Agent, and at its election, GECC, shall each have
\nrepresentatives present during the Inventory Taking, and shall each have the
\nright to review and verify the listing and tabulation of the Inventory Taking
\nService. Merchant and Agent agree that during the conduct of the Inventory
\nTaking in each of the Stores, the applicable Stores shall be closed to the
\npublic and no sales or other transactions shall be conducted. Merchant and
\nAgent agree to cooperate with each other to conduct the Inventory Taking
\ncommencing at a time that would minimize the number of hours that such locations
\nwould be closed for business.<\/p>\n<\/p>\n

(b) With respect to Distribution Center Inventory and Return to Vendor
\nInventory that is allocated to be sent to the Stores in accordance with the
\nPre-Sale Allocation, such Distribution Center Inventory and Return to Vendor
\nInventory shall be counted as such inventory leaves the Distribution Centers in
\naccordance with the procedures to be mutually agreed to by Merchant and Agent,
\nwhich procedures shall determine the aggregate Cost Value of such inventory.\n<\/p>\n<\/p>\n

(c) With respect to On-Order Goods and Schuler Goods, such On-Order
\nGoods and Schuler Goods shall be counted as such inventory is received in
\naccordance with the procedures to be mutually agreed to by Merchant and Agent.\n<\/p>\n<\/p>\n

(d) The Agent and Merchant agree that they will, and agree to
\ncause their respective representatives to, cooperate and assist in the
\npreparation and the calculation of the aggregate Cost Value of the Merchandise
\nincluded in the Sale, including, without limitation, making available to the
\nextent necessary, books, records, work papers and personnel.<\/p>\n<\/p>\n

(e) In the event that the Sale commences at any Store prior to
\nthe completion of the Inventory Taking at such Store, then, for the period from
\nthe Sale Commencement Date for such Store until the Inventory Date for such
\nStore, Agent and Merchant shall jointly keep (i) a strict count of gross
\nregister receipts less applicable Sales Taxes but excluding any prevailing
\ndiscounts (“Gross Rings<\/u>“), and (ii) cash reports of sales within such
\nStore. Agent and Merchant shall keep a strict count of register receipts and
\nreports to determine the actual Cost Value and Retail Price of the Merchandise
\nsold by SKU and the markdown, if any, granted by the Agent. All such records
\nand reports shall be made available to Agent and Merchant during regular
\nbusiness hours upon reasonable notice. Any Merchandise included in the Sale
\nusing the Gross Rings shall be included in Merchandise using the average landed
\ncost of such Merchandise as set forth in the Perpetual Inventory File. Agent
\nshall pay that portion of the Guaranteed Amount calculated on the Gross Rings
\nbasis to account for shrinkage on the basis of 103% of the aggregate Cost Value
\nof the Merchandise (without taking into account any of Agent153s point of sale
\ndiscounts or point of sale markdowns) sold during the Gross Rings period.<\/p>\n<\/p>\n<\/p>\n

5.2 Merchandise Subject to This Agreement<\/u>.<\/p>\n<\/p>\n

(a) For purposes of this Agreement, “Merchandise<\/u>” shall
\nmean: all finished goods inventory that is owned by Merchant wherever located
\nas of the Sale Commencement Date, including (A) Defective Merchandise; (B)
\nDisplay Merchandise, (C) Distribution Center Inventory to the extent received by
\nthe DC Receipt Deadline, (D) Merchandise subject to Gross Rings, (E) Return to
\nVendor Inventory to the extent received by the DC Shipment Deadline; (F)
\nOn-Order Goods to the extent received by the On-Order Receipt Deadline; (G)
\nSchuler Goods to the extent received by the On-Order Receipt Deadline; and (H)
\nCalendar Inventory. Notwithstanding the foregoing, “Merchandise” shall not
\ninclude: (1) goods which belong to sublessees, licensees, department lessees, or
\nconcessionaires of Merchant; (2) goods held by Merchant on memo, on consignment,
\nor as bailee; (3) supplies not packaged for retail sale to customers,
\nfurnishings, trade fixtures, equipment and\/or improvements to real property
\n(collectively, “FF&E<\/u>“); provided<\/u> that, Agent shall sell Agent
\nSale FF&E as set forth in Section 15.9; (4) Excluded Defective Merchandise;
\n(5) Merchant Consignment Goods which includes News Stand Inventory and
\nCaf \/Candy Inventory; (6) Books in Storage; and (7) DC Damaged Goods.<\/p>\n<\/p>\n

(b) As used in this Agreement, the following terms have the
\nrespective meanings set forth below:<\/p>\n<\/p>\n

“Books in Storage<\/u>” means those items of merchandise located on the
\nSale Commencement Date at a storage facility in North Carolina not to exceed
\n$3,800,000 at cost, which goods shall not be deemed Merchant Consignment Goods
\nor Additional Agent Merchandise.<\/p>\n<\/p>\n

“Caf \/Candy Inventory<\/u>” means items of inventory designated by
\nMerchant, in the ordinary course of business, as “caf and candy”.<\/p>\n<\/p>\n

“Calendar Inventory<\/u>” means any 2012 calendar inventory located in the
\nStores and Distribution Centers up to an aggregate Cost Value of $200,000.<\/p>\n<\/p>\n

“DC Damaged Goods<\/u>” means those items of merchandise designated
\nas “Saleable, Damaged and Refused Returns” located at each of the Distribution
\nCenters as identified on Exhibit 5.2(i).<\/u><\/p>\n<\/p>\n

“Defective Merchandise<\/u>” means any item of Merchandise that is
\ndefective or otherwise not saleable in the ordinary course because it is worn,
\nscratched, broken, faded, torn, mismatched, tailored or affected by other
\nsimilar defenses rendering it not first quality. Display Merchandise shall not
\nper se be deemed to be Defective Merchandise.<\/p>\n<\/p>\n

“Display Merchandise<\/u>” means those items of inventory used in the
\nordinary course of business as displays or floor models, including inventory
\nthat has been removed from its original packaging for the purpose of putting
\nsuch item on display but not customarily sold or saleable by Merchant, which
\ngoods are not otherwise damaged or defective. For the avoidance of doubt,
\nMerchandise created for display and not saleable in the ordinary course of
\nbusiness shall not constitute Display Merchandise.<\/p>\n<\/p>\n

“Distribution Center Inventory<\/u>” means those items of merchandise
\nlocated on the Sale Commencement Date at each of the Distribution Centers as
\nidentified on Exhibit 5.2(ii)<\/u> attached hereto other than any stripped
\nbooks (i.e., covers of books only) (the “Stripped Books<\/u>“). Merchant and
\nAgent will use commercially reasonable efforts to identify and exclude all
\nStripped Books inventory from the Distribution Center Inventory. To the extent
\nthat Stripped Books are received in Stores, and have not already been excluded
\nfrom the inventory at the Distribution Centers, the aggregate Cost Value of the
\nDistribution Center Inventory shall be adjusted to exclude the Stripped Books
\nprovided that Agent provides Merchant with at least five (5) business days
\nnotice of receipt of any Stripped Books at the Stores.<\/p>\n<\/p>\n

“Excluded Defective Merchandise<\/u>” means (i) those items of Defective
\nMerchandise that are not saleable in the ordinary course because they are so
\ndamaged or defective that such inventory cannot reasonably be used for their
\nintended purpose, (ii) DC Damaged Goods, and (iii) Out-Dated Goods.<\/p>\n<\/p>\n

“News Stand Inventory<\/u>” means items of inventory designated by
\nMerchant, in the ordinary course of business, as “news stand.”<\/p>\n<\/p>\n

“On-Order Goods<\/u>” mean items of inventory that were ordered by Merchant
\nin the ordinary course of business as identified on Exhibit 5.2(iii)<\/u>
\nannexed hereto, which inventory was not received in the Stores or Distribution
\nCenters as of the Sale Commencement Date, but which may be received in the
\nStores by the On-Order Receipt Deadline, provided that, the aggregate Cost Value
\nof the On-Order Goods shall not exceed $17,000,000.<\/p>\n<\/p>\n

“Out-Dated Goods<\/u>” means 2011 calendars, previous year almanacs,
\nbatteries and other dated materials that are out of date.<\/p>\n<\/p>\n

“Return to Vendor Inventory<\/u>” means those items of inventory designated
\n“Return to Vendor” by Merchant in the ordinary course of its business as
\nreflected on Exhibit 5.2(iv)<\/u> to the extent located in the Distribution
\nCenters as of the Sale Commencement Date. For the avoidance of doubt,
\nMerchandise located in the Stores as of the Sale Commencement Date bearing the
\nsame SKU as Return to Vendor Inventory shall not constitute Return to Vendor
\nInventory.<\/p>\n<\/p>\n

“Schuler Goods<\/u>” means items of inventory as identified on Exhibit
\n5.2(v)<\/u> that may be returned by Merchant153s customer, Schuler, provided that,
\nthe aggregate Cost Value of the Schuler Goods shall not exceed $1,700,000.<\/p>\n<\/p>\n

5.3 Valuation<\/u>.<\/p>\n<\/p>\n

(a) For purposes of this Agreement, “Cost Value<\/u>” shall mean
\nwith respect to each item of Merchandise, the lower of (i) average landed actual
\ncost for such item of Merchandise, as reflected in the Perpetual Inventory File;
\nwhich landed actual costs values include vendor cost, freight from the vendor to
\nthe Distribution Centers, duties, harbor maintenance fees, drayage, brokers
\nfees, insurance, commissions, processing costs and other costs directly
\nassociated with landing the product in the Distribution Centers or (ii) the
\nRetail Price for such item of Merchandise. The Perpetual Inventory File does
\nnot account for any advertising co-op allowances or discounts associated with
\nexpedited payment terms offered by any vendor.<\/p>\n<\/p>\n

(b) Other than Excluded Defective Merchandise, in lieu of any other
\nadjustments to the Cost Value of Merchandise under this Agreement
\n(e.g.<\/em>, adjustments for Defective Merchandise, clearance merchandise,
\nmis-mates and near-mates, sample merchandise and\/or Excluded Price Adjustments),
\nthe aggregate Cost Value of the Merchandise shall be adjusted (i.e.<\/em>,
\nreduced) by means of a single global downward adjustment equal to one half of
\none percent (0.5%) of the aggregate Cost Value of the Merchandise in the Stores
\nand any On-Order Goods and one and one half of one percent (1.5%) of the
\naggregate Cost Value of the Distribution Center Inventory, Return to Vendor
\nInventory and Schuler Goods (the “Global Inventory Adjustment<\/u>“).<\/p>\n<\/p>\n

For the purposes of this Agreement, “Excluded Price Adjustments<\/u>” means
\nthe following discounts or price adjustments offered by the Merchant: (i) point
\nof sale discounts or similar adjustments regardless of duration for which the
\ncurrent selling price is reflective of point of sale discounts, as reflected on
\nthe Perpetual Inventory File other than discounts for the following e-readers,
\nCDs, DVDs and Blue Ray; (ii) Borders Rewards Plus Loyalty Program discounts;
\n(iii) multi-unit purchase discounts; (iv) adjustments for damaged, defective or
\n“as-is” items; (v) gift cards; (vi) obvious ticketing or marking errors; (vii)
\ninstant (in-store) or mail in rebates; or (viii) similar customer specific,
\ntemporary, or employee non-product specific discounts or pricing accommodations.\n<\/p>\n<\/p>\n

(c) Excluded Defective Merchandise located in the Stores shall be
\nidentified and counted during the Inventory Taking and thereafter removed from
\nthe sales floor and segregated. To the extent that Excluded Defective
\nMerchandise is sent from the Distribution Centers to the Stores, it shall be
\nidentified once received and thereafter segregated.<\/p>\n<\/p>\n

(d) Items of Distribution Center Inventory and Return to Vendor
\nInventory received in the Stores on or prior to the date that is thirty (30)
\ndays after the Sale Commencement Date (excluding the Sale Commencement Date for
\npurposes of such calculation) (the “DC Interim Receipt Deadline<\/u>“), will
\nbe included in Merchandise at the applicable Cost Value for each such
\nitem. Items of Distribution Center Inventory and Return to Vendor Inventory
\nreceived at the Stores after the DC Interim Receipt Deadline but prior to a date
\nthat is forty five (45) days after the Sale Commencement Date (excluding the
\nSale Commencement Date for purposes of such calculation) (the “DC Receipt
\nDeadline<\/u>“) shall be included in Merchandise at the applicable Cost Value for
\neach such item multiplied by the inverse of the prevailing discount on similar
\nitems of Merchandise as of the date of receipt in the Stores. Items of
\nDistribution Center Inventory and Return to Vendor Inventory received in the
\nStores after the DC Receipt Deadline shall not constitute Merchandise, shall be
\ngiven no Cost Value, and shall be excluded from Merchandise, and shall be sold
\nby Agent as Merchant Consignment Goods pursuant to Section 5.4 hereof.<\/p>\n<\/p>\n

(e) Items of On-Order Goods and Schuler Goods received in the
\nStores on or prior to the date that is fourteen (14) days after the Sale
\nCommencement Date (excluding the Sale Commencement Date for purposes of such
\ncalculation) (the “On-Order Interim Receipt Deadline<\/u>“), will be included
\nin Merchandise at the applicable Cost Value for each such item. Items of
\nOn-Order Goods and Schuler Goods received at the Stores after the On-Order
\nInterim Receipt Deadline but prior to a date that is thirty (30) days after the
\nSale Commencement Date (excluding the Sale Commencement Date for purposes of
\nsuch calculation) (the “On-Order Receipt Deadline<\/u>“) shall be included in
\nMerchandise at the applicable Cost Value for each such item multiplied by the
\ninverse of the prevailing discount on similar items of Merchandise as of the
\ndate of receipt in the Stores. Items of On-Order Goods and Schuler Goods
\nreceived in the Stores after the On-Order Receipt Deadline shall not constitute
\nMerchandise, shall be given no Cost Value, and shall be excluded from
\nMerchandise, and shall be sold by Agent as Merchant Consignment Goods pursuant
\nto Section 5.4 hereof.<\/p>\n<\/p>\n

5.4 Excluded Goods<\/u>. Merchant shall retain all
\nresponsibility for any goods not included as “Merchandise” hereunder. If
\nMerchant elects at the beginning of the Sale Term, Agent shall accept goods not
\nincluded as “Merchandise” hereunder for sale as “Merchant Consignment Goods” at
\nprices established by the Agent. News Stand Inventory, Caf \/Candy Inventory, DC
\nDamaged Goods, calendar inventory located in the Stores and Distribution Centers
\nwith a Cost Value exceeding $200,000, those items referenced by SKU on
\nExhibit 5.4<\/u> or items otherwise identified herein shall be deemed Merchant
\nConsignment Goods. The Agent shall retain 20% of the sale price for all sales
\nof Merchant Consignment Goods, and Merchant shall receive 80% of the receipts in
\nrespect of such sales. Merchant shall receive its share of the receipts of
\nsales of Merchant Consignment Goods on a weekly basis in accordance with Section
\n3.3, immediately following the weekly Sale reconciliation by Merchant and Agent
\npursuant to Section 8.6 below. If Merchant does not elect to have Agent sell
\ngoods not included as Merchandise, then all such items will be removed by
\nMerchant from the Stores at its expense as soon as practicable after the Sale
\nCommencement Date.<\/p>\n<\/p>\n

5.5 Distribution<\/u> Center<\/u> Expenses<\/u>. Agent shall
\nbe responsible for allocating and designating the shipment of the Distribution
\nCenter Inventory and Return to Vendor Inventory to the Stores and shall do so
\npursuant to the Pre-Sale Allocation. The actual costs and expenses, including
\nuse and occupancy at the Distribution Centers, transfer and delivery (ticketed
\nin the ordinary course consistent with historic practices), related to the
\nprocessing, transfer and consolidation of Distribution Center Inventory and
\nReturn to Vendor Inventory from the Distribution Center to the Stores
\n(collectively, the “Distribution Center Expenses<\/u>“) for a period
\ncommencing on the Sale Commencement Date through the Sale Termination Date shall
\nbe the obligation of the Merchant; provided however, that in the event Agent
\nchooses to use a method of picking-up or transportation in a manner that is not
\nconsistent with Merchant153s ordinary course method of transport, then Agent shall
\nbe solely responsible for all increased costs and expenses associated with such
\nmodification (such additional costs shall be treated as an Expense hereunder);
\nprovided further, no Distribution Center Inventory or Return to Vendor Inventory
\nshall be shipped to the Stores prior to the Inventory Date for any applicable
\nStore unless Merchant and Agent can mutually agree on a method to account for
\nsuch inventory. On or prior to July 19, 2011, Merchant and Agent shall
\ncooperate with each other and shall mutually agree upon a schedule and
\nallocation of the Distribution Center Inventory and Return to Vendor Inventory
\nto the Stores (the “Pre-Sale Allocation<\/u>“).<\/p>\n<\/p>\n

Section 6. Sale<\/u> Term<\/u>.<\/p>\n<\/p>\n

6.1 Term<\/u>. Subject to satisfaction of the conditions
\nprecedent set forth in Section 10 hereof, (a) if the Approval Order does not
\napprove the APA, then the Sale shall commence at all Stores by not later than
\nJuly 22, 2011 or (b) if the Approval Order approves the APA or a similar going
\nconcern transaction, then in the event of a GC Failure on or prior to July 29,
\n2011, the Sale shall commence at all Stores on the earlier of (i) one day
\nfollowing notice of a GC Failure and (ii) August 1, 2011 (the “Sale
\nCommencement Date<\/u>“). Subject to the prior expiration of the term of any
\nStore Lease or expiration of the deadline for the Merchant to assume or reject
\nany Store Lease pursuant to section 365(d)(4) of the Bankruptcy Code or, if
\nearlier, the date by which the Merchant must vacate a Store to avoid triggering
\na “holiday protection” payment (as reflected on Exhibit 6.1<\/u>), the Agent
\nshall complete the Sale at each Store and vacate such Store in broom-clean
\ncondition by no later than November 13, 2011, unless the Sale is extended by
\nmutual written agreement of Agent, Merchant and GECC (the “Sale Termination
\nDate<\/u>“; the period from the Sale Commencement Date to the Sale Termination
\nDate as to each Store being the “Sale Term<\/u>“). The Agent may, in its
\ndiscretion, terminate the Sale at any Store upon not less than seven (7) days153
\nprior written notice (a “Vacate Notice<\/u>“) to Merchant. In the event the
\nAgent fails to provide Merchant with such timely notice, Agent shall be liable
\nfor and pay Occupancy Expenses for the days by which notice of a Store closing
\nwas less than seven (7) days.<\/p>\n<\/p>\n

6.2 Vacating the Stores<\/u>. At the conclusion of the Sale,
\nAgent agrees to leave the Stores in “broom clean” condition, ordinary wear and
\ntear excepted, except for unsold items of FF&E, Caf \/Candy Inventory and
\nNews Stand Inventory and remaining Supplies. Agent shall vacate the Stores on
\nor before the Sale Termination Date, as provided for herein, at which time Agent
\nshall surrender and deliver the Store premises and Store keys to
\nMerchant. Agent153s obligations to pay Occupancy Expenses, for each Store shall
\ncontinue until the later of (i) the date specified in the Vacate Notice (which
\nmust be at least seven days from the date of the Vacate Notice) and (ii) the
\ndate the Agent vacates such Store. All assets of Merchant used by Agent in the
\nconduct of the Sale (e.g. FF&E, Cafe\/Candy Inventory, News Stand Inventory,
\netc.) shall be returned by Agent to Merchant at the end of the Sale Term to the
\nextent the same have not been consumed in the conduct of the Sale (e.g.,
\nSupplies) or sold. Agent shall be responsible for all Occupancy Expenses
\n(irrespective of any per diem cap on Occupancy Expenses) for a Store for which
\nMerchant is or becomes obligated resulting from Agent153s failure to vacate such
\nStore in a satisfactory and timely manner.<\/p>\n<\/p>\n

Section 7. Sale<\/u> Proceeds<\/u>.<\/p>\n<\/p>\n

7.1 Proceeds<\/u>. For purposes of this Agreement,
\n“Proceeds<\/u>” shall mean the aggregate of (a) the total amount (in dollars)
\nof all sales of Merchandise made under this Agreement, exclusive of Sales Taxes;
\n(b) the total amount (in dollars) of all sales of Books in Storage made under
\nthis Agreement, exclusive of Sales Taxes; and (c) all proceeds of Merchant153s
\ninsurance for loss or damage to Merchandise or Books in Storage or loss of cash
\narising from events occurring during the Sale Term. Proceeds shall also include
\nany and all proceeds received by Agent from the disposition, in a commercially
\nreasonable manner, of unsold Merchandise at the end of the Sale, whether through
\nsalvage, bulk sale or otherwise.<\/p>\n<\/p>\n

7.2 Deposit of Proceeds<\/u>.<\/p>\n<\/p>\n

(a) All Proceeds of the Sale, Agent Sale FF&E, News Stand
\nInventory and Caf \/Candy Inventory (including credit card proceeds) shall be
\ncollected by Agent and deposited on a daily basis into depository accounts
\ndesignated by Merchant for the Stores, which accounts shall be designated solely
\nfor the deposit of Proceeds of the Sale (including credit card proceeds), and
\nthe disbursement of amounts payable by Agent hereunder (the “Designated
\nDeposit Accounts<\/u>“), and Merchant shall exercise sole signatory authority and
\ncontrol with respect to the Designated Deposit Accounts. Upon request, Merchant
\nshall deliver to Agent copies of all bank statements and other information
\nrelating to such accounts. Merchant shall not be responsible for, and Agent
\nshall pay as an Expense hereunder, all bank fees and charges, including wire
\ntransfer charges, related to the Designated Deposit Accounts, whether notice of
\nsuch expense is received during or after the Sale Term.<\/p>\n<\/p>\n

(b) Agent may establish its own accounts, dedicated solely for the
\ndeposit of the Proceeds and the disbursement of amounts payable to Agent
\nhereunder (the “Agency Accounts<\/u>“) and Merchant shall promptly upon
\nAgent153s request execute and deliver all necessary documents to open and maintain
\nthe Agency Accounts; provided<\/u>, however<\/u>, Agent may elect to
\ncontinue to use Merchant153s Designated Deposit Accounts (as defined above) as the
\nAgency Accounts. The Agency Accounts shall be dedicated solely to the deposit
\nof Proceeds and the disbursement of amounts payable hereunder, and Agent shall
\nexercise sole signatory authority and control with respect to the Agency
\nAccounts. Upon request, Agent shall deliver to Merchant and GECC copies of all
\nbank statements and other information relating to such accounts. Merchant shall
\nnot be responsible for, and Agent shall pay as an Expense hereunder, all bank
\nfee and charges, including wire transfer charges, related to the Agency
\nAccounts, whether received during or after the Sale Term. Upon Agent153s
\ndesignation of the Agency Accounts, all Proceeds of the Sale (including credit
\ncard proceeds) shall be deposited into the Agency Accounts. To the extent that
\nAgent uses the Merchant153s Designated Accounts as the Agency Accounts, Merchant
\nshall pay by wire funds transfer, on a daily basis, to Agent all collected funds
\nconstituting Proceeds (including credit card proceeds) deposited in Merchant153s
\nDesignated Deposit Accounts (but not any other funds, including, without
\nlimitation, any proceeds of Merchant153s inventory sold prior to the Sale
\nCommencement Date).<\/p>\n<\/p>\n

7.3 Credit Card Proceeds<\/u>. To the extent available, Agent
\nshall use Merchant153s credit card facilities (including Merchant153s credit card
\nterminals and processor(s), credit card processor coding, Merchant
\nidentification number(s) and existing bank accounts) for credit card Proceeds
\nrelating solely to the Sale. Merchant shall process credit card transactions on
\nbehalf of Agent and for Agent153s account, applying customary practices and
\nprocedures. Agent may accept Merchant153s proprietary card. Merchant shall
\ncooperate with Agent to down-load data from all credit card terminals each day
\nduring the Sale Term and to effect settlement with Merchant153s credit card
\nprocessor(s) and shall take such other actions necessary to process credit card
\ntransactions on behalf of Agent under Merchant153s identification
\nnumber(s). Merchant shall not be responsible for, and Agent shall pay as an
\nExpense hereunder, all credit card fees, charges and chargebacks related to the
\nSale, whether received during or after the Sale Term. Merchant shall cooperate
\nwith Agent to instruct its credit card processors to change the daily deposit of
\ncredit card proceeds to an account controlled by Agent.<\/p>\n<\/p>\n

7.4 Petty Cash<\/u>. In addition to the Guaranteed Amount, Agent
\nshall purchase all cash in the Stores on and as of the start of business on the
\nSale Commencement Date and shall reimburse Merchant on a dollar for dollar basis
\ntherefor.<\/p>\n<\/p>\n

Section 8. Conduct of the Sale<\/u>. Subject to the entry
\nof the Approval Order, the Agent shall be permitted to conduct the Sale in
\naccordance with the Approval Order. In addition to any other rights granted to
\nAgent hereunder, in conducting the Sale, Agent, in the exercise of its sole
\ndiscretion, shall have the following rights, limited only by the Sale
\nGuidelines:<\/p>\n<\/p>\n

8.1 Rights of Agent<\/u>. Subject to the Approval Order, the
\nAgent shall be permitted to conduct the Sale as a “going out of business,”
\n“store closing” or similar themed sale throughout the Sale Term. The Agent
\nshall conduct the Sale in the name of and on behalf of the Merchant in a
\ncommercially reasonable manner and in compliance with the terms of this
\nAgreement and, except as modified by the Approval Order, all governing laws and
\napplicable agreements to which Merchant is a party. The Agent shall conduct the
\nSale in accordance with the sale guidelines annexed hereto as Exhibit
\n8.1(a)<\/u> (the “Sale Guidelines<\/u>“). In addition to any other rights
\ngranted to Agent hereunder in conducting the Sale, but subject to any applicable
\nagreements to which Merchant is a party except as modified by the Approval
\nOrder, as applicable, the Agent, in the exercise of its reasonable discretion,
\nshall have the right:<\/p>\n<\/p>\n

(a) to establish Sale prices and Store hours which are
\nconsistent with the terms of applicable leases and local laws or regulations,
\nincluding without limitation Sunday closing laws; provided<\/u>
\nhowever<\/u>, to the extent that Agent extends the hours of operation at one
\nor more of the Stores beyond the hours historically operated by Merchant, which
\nresults in additional utilities and increased Occupancy Expenses in excess of
\nthe amounts set forth on Exhibit 4.1(r), Agent shall reimburse Merchant the
\namounts, if any, of such additional costs and such additional costs shall
\nconstitute Expenses of the Sale.<\/p>\n<\/p>\n<\/p>\n

(b) except as otherwise expressly included as an Expense and
\nsubject to applicable privacy and other laws, to use without charge during the
\nSale Term all FF&E, Store-level customer lists, mailing lists and email
\nlists for the Stores (provided<\/u>, however<\/u>, such access shall be
\nprovided solely through Merchant153s outside advertisement services for which
\nMerchant shall use commercially reasonable efforts to cause such outside service
\nproviders to cooperate with and assist Agent, and the Agent shall not have
\ndirect access to any personally identifiable information contained therein),
\nwebsites (including social media sites), computer hardware and software,
\nexisting supplies located at the Stores, intangible assets (including Merchant153s
\nname, logo and tax identification numbers), Store keys, case keys, security
\ncodes and safe and lock combinations required to gain access to and operate the
\nStores, and any other assets of Merchant located at the Stores (whether owned,
\nleased, or licensed) consistent with applicable terms of leases or licenses
\n(except as modified by the Approval Order);<\/p>\n<\/p>\n

(c) so long as such access does not unreasonably disrupt the
\nbusiness operations of Merchant, to use (i) Merchant153s central office
\nfacilities, central administrative services and personnel to process payroll,
\nperform MIS and provide other central office services necessary for the Sale to
\nthe extent that such services are normally provided by Merchant in house, at no
\nadditional cost to Agent (except where otherwise designated as an Expense
\npursuant to Section 4.1(s) hereof); provided<\/u>, however<\/u>, that, in
\nthe event that Agent expressly requests Merchant to provide services other than
\nthose normally provided to the Stores and relating to the sale of merchandise by
\nMerchant, Agent shall be responsible for the actual incremental cost of such
\nservices as an Expense; and (ii) sufficient office space located at Merchant153s
\ncentral office facility;<\/p>\n<\/p>\n

(d) to establish and implement advertising, signage and
\npromotion programs consistent with “going out of business,” “store closing” or
\nsimilar theme (including, without limitation, by means of media advertising,
\nA-frame and similar interior and exterior signs and banners and use of sign
\nwalkers) in a manner consistent with the Sale Guidelines and the Approval Order;\n<\/p>\n<\/p>\n

(e) to transfer Merchandise between and among the Stores;
\nprovided<\/u>, however<\/u>, the Agent shall not transfer Merchandise
\nbetween Stores unless the Inventory Taking at the transferring Store has been
\ncompleted; provided, further,<\/u> that Agent shall provide Merchant with
\nprior written notice of all such transfers; and<\/p>\n<\/p>\n

(f) to supplement the Merchandise at the Stores with Additional
\nAgent Merchandise in accordance with Section 8.9 hereof and with the Books in
\nStorage.<\/p>\n<\/p>\n

8.2 Terms of Sales to Customers<\/u>.<\/p>\n<\/p>\n

(a) All sales will be “final sales” and “as is,” and all
\nadvertisements and sales receipts will reflect the same. Agent shall not
\nwarrant any inventory in any manner, but will, to the extent legally
\npermissible, pass on all manufacturers153 warranties to customers. All sales will
\nbe made only for cash, nationally recognized bank credit cards and, in Agent153s
\ndiscretion, personal checks, provided<\/u>, however<\/u>, if Agent
\ndetermines to accept personal checks, Agent shall bear the risk of nonpayment or
\nloss with respect thereto. Agent shall clearly mark all tickets and receipts
\nfor items sold at the Stores during the Sale Term, so as to distinguish such
\nitems from the merchandise sold prior to the Sale Commencement Date and shall
\nuse commercially reasonable efforts to have all UPC codes blacked out with a
\nmarker at the point of sale.<\/p>\n<\/p>\n

(b) Gift Cards\/Borders Rewards Plus Loyalty
\nProgram\/Discounts<\/u>. During the Sale Term, Agent shall accept Merchant153s gift
\ncards and Merchandise credits issued by Merchant prior to the Sale Commencement
\nDate and Merchant shall reimburse Agent for such amounts during the weekly sale
\nreconciliation provided for in Section 8.6.<\/p>\n<\/p>\n

8.3 Sales Taxes<\/u>.<\/p>\n<\/p>\n

(a) During the Sale Term, all sales, excise, gross receipts and
\nother taxes attributable to sales of Merchandise, Books in Storage, Additional
\nAgent Merchandise, sales of News Stand Inventory and Caf \/Candy Inventory and
\nAgent Sale FF&E, as indicated on Merchant153s point of sale equipment (other
\nthan taxes on income) payable to any taxing authority having jurisdiction
\n(collectively, “Sales Taxes<\/u>“) shall be added to the sales price of such
\nitems and collected by Agent, on Merchant153s behalf, at the time of sale. All
\nSales Taxes shall be deposited into a segregated account designated by Merchant
\nand Agent solely for the deposit of such Sales Taxes (the “Sales Taxes
\nAccount<\/u>“). Provided that Agent has collected all Sales Taxes during the
\nSale and remitted the proceeds thereof to Merchant, Merchant shall prepare and
\nfile all applicable reports and documents required by the applicable taxing
\nauthorities, and Merchant shall promptly pay all Sales Taxes from the Sales
\nTaxes Account. Merchant will be given access to the computation of gross
\nreceipts for verification of all such tax collections. If Agent fails to
\nperform its responsibilities in accordance with this Section 8.3, Agent shall
\nindemnify and hold harmless Merchant from and against any and all costs,
\nincluding, but not limited to, reasonable attorneys153 fees, assessments, fines or
\npenalties which Merchant sustains or incurs as a result or consequence of the
\nfailure by Agent to collect and\/or remit Sales Taxes and\/or the failure by Agent
\nto promptly deliver any and all reports and other documents required to enable
\nMerchant to file any requisite returns with such taxing authorities.<\/p>\n<\/p>\n

(b) Without limiting the generality of Section 8.3(a) hereof, it
\nis hereby agreed that, as Agent is conducting the Sale solely as agent for
\nMerchant, various payments that this Agreement contemplates that one party may
\nmake to the other party (including the payment by Agent of the Guaranteed
\nAmount) do not represent the sale of tangible personal property and,
\naccordingly, are not subject to Sales Taxes.<\/p>\n<\/p>\n

8.4 Supplies<\/u>. Agent shall have the right to use, without
\ncharge, all existing supplies located at the Stores, including, without
\nlimitation, boxes, bags, paper, twine and similar sales materials (collectively,
\n“Supplies<\/u>“). In the event that additional Supplies are required in any
\nof the Stores during the Sale, Merchant agrees to promptly provide the same to
\nAgent to the extent reasonably practicable and if available, which shall
\nconstitute an Expense pursuant to Section 4.1(j) hereof. Merchant does not
\nwarrant that the existing Supplies as of the Sale Commencement Date are adequate
\nfor the purposes of the Sale.<\/p>\n<\/p>\n

8.5 Returns of Merchandise<\/u>. During the Sale Term, Agent
\nshall accept returns of merchandise sold by Merchant prior to the Sale
\nCommencement Date (“Returned Merchandise<\/u>“), provided<\/u> that such
\nreturn is accompanied by the original Store register receipt and is otherwise in
\ncompliance with Merchant153s return and price adjustment policy in effect as of
\nthe date such item was purchased. Subject to Merchant153s right to return such
\ndefective goods to Merchant153s vendors, if such Returned Merchandise is saleable
\nas first-quality Merchandise, it shall be included in Merchandise and valued at
\nthe Cost Value applicable to such item multiplied by the difference between 100%
\nand the prevailing discount on similar items of Merchandise as of the date such
\nitem is returned to a Store. In the event that Returned Merchandise constitutes
\nDefective Merchandise (“Returned Defective Merchandise<\/u>“), Merchant and
\nAgent shall mutually agree upon the Cost Value for such item of Returned
\nDefective Merchandise; provided<\/u>, however<\/u>, in the event that
\nMerchant and Agent cannot mutually agree upon the Cost Value for such Returned
\nDefective Merchandise, or such Returned Defective Merchandise constitutes
\nExcluded Defective Merchandise, then such Returned Defective Merchandise shall
\nconstitute Merchant Consignment Goods or Excluded Defective Merchandise and
\nexcluded from the Sale. The aggregate Cost Value of the Merchandise shall be
\nincreased by the Cost Value of any Returned Merchandise included in Merchandise
\n(determined in accordance with this Section 8.5), and the Guaranteed Amount
\nshall be adjusted accordingly. Merchant shall promptly reimburse Agent in cash
\nfor any refunds Agent is required to issue to customers in respect of any
\nReturned Merchandise. Returned Merchandise not included in Merchandise shall be
\ndisposed of by Agent in accordance with instructions received from Merchant or,
\nin the absence of such instructions, treated as Merchant Consignment Goods. Any
\nincreases in the Guaranteed Amount in connection with returned Merchandise shall
\nbe accounted for on a weekly basis. Except to the extent that Merchant and
\nAgent agree that Merchant153s POS or other applicable systems can account for
\nreturns of Merchandise, all returns must be noted and described in a detailed
\nlog and shall identify the receipt number for the original receipt and the date
\nthe item was purchased (the “Returned Merchandise Log<\/u>“), to be maintained
\nby Agent in a form acceptable to Merchant. Agent shall provide Merchant with a
\ncopy of any Returned Merchandise Log on a weekly basis during the Sale. Agent
\nshall not be entitled to any adjustment, credit or payment for Returned
\nMerchandise which is not properly noted and described in the Returned
\nMerchandise Log (or otherwise reflected in Merchant153s POS systems).<\/p>\n<\/p>\n

8.6. Sale<\/u> Reconciliation<\/u>. On each Wednesday during
\nthe Sale Term, commencing on the second Wednesday after the Sale Commencement
\nDate, Agent and Merchant shall cooperate to reconcile Proceeds, Expenses,
\nDistribution Center Inventory, if any, and all other items identified herein for
\nweekly reconciliation, and such other Sale-related items as either party shall
\nreasonably request, in each case for the prior week or partial week (i.e.<\/u>
\nSunday through Saturday), all pursuant to procedures agreed upon by Merchant and
\nAgent (with a copy thereof to be provided to GECC). Within thirty (30) days
\nafter the end of the Sale Term, Agent and Merchant shall complete a final
\nreconciliation of the Sale, the written results of which shall be certified by
\nrepresentatives of each of Merchant and Agent as a final settlement of accounts
\nbetween Merchant and Agent (with a copy thereof to be provided to GECC).<\/p>\n<\/p>\n

8.7 Force Majeure<\/u>. If any casualty, act of terrorism, or
\nact of God prevents or substantially inhibits the conduct of business in the
\nordinary course at any Store, such Store and the Merchandise located at such
\nStore shall, in Agent153s discretion, be eliminated from the Sale and considered
\nto be deleted from this Agreement as of the date of such event, and Agent and
\nMerchant shall have no further rights or obligations hereunder with respect
\nthereto; provided<\/u>, however<\/u>, that (i) subject to the terms of
\nSection 7.1 above, the proceeds of any insurance attributable to such
\nMerchandise shall constitute Proceeds hereunder, and (ii) the Guaranteed Amount
\nshall be reduced to account for any Merchandise eliminated from the Sale which
\nis not the subject of insurance proceeds, and, to the extent the Agent has paid
\nthe Guaranteed Amount, Merchant shall reimburse Agent for the amount the
\nGuaranteed Amount is so reduced prior to the end of the Sale Term.<\/p>\n<\/p>\n

8.8 Merchant153s Right to Monitor<\/u>. Merchant shall have the
\nright to monitor the Sale and activities attendant thereto and to be present in
\nthe Stores during the hours when the Stores are open for business;
\nprovided<\/u> that Merchant153s presence does not unreasonably disrupt the
\nconduct of the Sale. Merchant shall also have a right of access to the Stores
\nat any time in the event of an emergency situation and shall promptly notify
\nAgent of such emergency.<\/p>\n<\/p>\n

8.9 Additional Merchandise<\/u>.<\/p>\n<\/p>\n

(a) Agent shall be entitled, at its expense, to include in the Sale
\nat the Stores additional non-book merchandise procured by Agent which is of like
\nkind, and no lesser quality to the Merchandise located in the Stores
\n(“Additional Agent Merchandise<\/u>“); provided<\/u>, however<\/u>, that
\nthe aggregate Cost Value of the Additional Agent Merchandise shall not exceed 2%
\nof the aggregate Cost Value of the Merchandise.<\/p>\n<\/p>\n

(b) At all times and for all purposes, the Additional Agent
\nMerchandise and its proceeds shall be the exclusive property of Agent. The
\ntransactions relating to the Additional Agent Merchandise are, and shall be
\nconstrued as, a true consignment from Agent to Merchant. The Additional Agent
\nMerchandise shall be at all times subject to the control of Agent.<\/p>\n<\/p>\n

(c) In order to distinguish the Additional Agent Merchandise from
\nthe Merchandise located in the Stores, Agent shall mark the Additional Agent
\nMerchandise using either a “dummy” SKU or department number or in such other
\nmanner so as to distinguish the sale of Additional Agent Merchandise from the
\nsale of Merchandise.<\/p>\n<\/p>\n

Section 9. Employee Matters<\/u>.<\/p>\n<\/p>\n

9.1 Merchant153s Employees<\/u>. Agent may use Merchant153s
\nemployees in the conduct of the Sale to the extent Agent deems expedient, and
\nAgent may select and schedule the number and type of Merchant153s employees
\nrequired for the Sale. Agent shall identify any such employees to be used in
\nconnection with the Sale (each such employee, a “Retained Employee<\/u>“)
\nprior to the Sale Commencement Date. Notwithstanding the foregoing, Merchant153s
\nemployees shall at all times remain employees of Merchant. Agent153s selection
\nand scheduling of Merchant153s employees shall at all times comply with all
\napplicable laws and regulations. Merchant and Agent agree that, except to the
\nextent that wages and benefits of Retained Employees constitute Expenses
\nhereunder, nothing contained in this Agreement and none of Agent153s actions taken
\nin respect of the Sale shall be deemed to constitute an assumption by Agent of
\nany of Merchant153s obligations relating to any of Merchant153s employees including,
\nwithout limitation, Excluded Benefits, WARN Act claims and other termination
\ntype claims and obligations, or any other amounts required to be paid by statute
\nor law; nor shall Agent become liable under any employment agreement or be
\ndeemed a joint or successor employer with respect to such employees. Agent
\nshall comply in the conduct of the Sale with all applicable laws and Merchant153s
\nemployee rules, regulations, guidelines and policies which have been provided to
\nAgent in writing. Merchant shall not, without the prior consent of Agent, raise
\nthe salary or wages or increase the benefits for, or pay any bonuses or other
\nextraordinary payments to, any Store employees prior to the Sale Termination
\nDate. Merchant shall not transfer any Retained Employee during the Sale Term
\nwithout Agent153s prior consent, which consent shall not be unreasonably withheld
\nor delayed.<\/p>\n<\/p>\n<\/p>\n

9.2 Termination of Employees<\/u>. Agent may in its discretion
\nstop using any Retained Employee at any time during the Sale, subject to the
\nconditions provided for herein. In the event that Agent desires to cease using
\nany Retained Employee, Agent shall notify Merchant at least seven (7) days prior
\nthereto, so that Merchant may coordinate the termination of such employee;
\nprovided<\/u>, however<\/u>, that, in the event that Agent determines to
\ncease using an employee “for cause” (which shall consist of dishonesty, fraud or
\nbreach of employee duties), the seven (7) day notice period shall not apply,
\nprovided<\/u> further<\/u>, however<\/u>, that Agent shall immediately
\nnotify Merchant of the basis for such “cause” so that Merchant can arrange for
\ntermination of such employee. From and after the date of this Agreement and
\nuntil the Sale Termination Date, Merchant shall not transfer or dismiss Retained
\nEmployees except “for cause” without Agent153s prior consent. Notwithstanding the
\nforegoing, Agent shall not have the right to terminate the actual employment of
\nany Retained Employee, but rather may only cease using such employee in the Sale
\nand paying any Expenses with respect to such employee.<\/p>\n<\/p>\n

9.3 Payroll Matters<\/u>. During the Sale Term, Merchant shall
\nprocess the base payroll for all Retained Employees as well as payroll for any
\nof Merchant153s former employees or temporary labor retained by Agent for the
\nSale. Each Wednesday (or such other date as may be reasonably requested by
\nMerchant to permit the funding of the payroll accounts before such payroll is
\ndue and payable) during the Sale Term, Merchant shall transfer, or, to the
\nextent that the Payment Date has passed or existence of any shortfall, Agent
\nshall transfer, to Merchant153s payroll accounts an amount equal to the base
\npayroll for Retained Employees plus related payroll taxes, workers153 compensation
\nand benefits for such week which constitute Expenses hereunder.<\/p>\n<\/p>\n

9.4 Employee Retention Bonuses<\/u>. Agent may pay, as an
\nExpense, retention bonuses (“Retention Bonuses<\/u>“) (which bonuses shall be
\ninclusive of payroll taxes, but as to which no benefits shall be payable), up to
\na maximum of ten percent (10%) of base payroll for all Retained Employees, to
\nsuch Retained Employees who do not voluntarily leave employment and are not
\nterminated “for cause,” as it may determine in its discretion. The amount of
\nsuch Retention Bonuses shall be in an amount to be determined by Agent, in its
\ndiscretion, and shall be payable within thirty (30) days after the Sale
\nTermination Date, and shall be processed through Merchant153s payroll
\nsystem. Agent shall provide Merchant with a copy of Agent153s Retention Bonus
\nplan prior to the Sale Commencement Date.<\/p>\n<\/p>\n

Section 10. Conditions Precedent and Subsequent<\/u>. The
\nwillingness of Agent and Merchant to enter into the transactions contemplated
\nunder this Agreement is directly conditioned upon the satisfaction of the
\nfollowing conditions at the time or during the time periods indicated, unless
\nspecifically waived in writing by the applicable party:<\/p>\n<\/p>\n

(a) All representations and warranties of Merchant and Agent
\nhereunder shall be true and correct in all material respects and no Event of
\nDefault shall have occurred at and as of the date hereof and as of the Sale
\nCommencement Date; and<\/p>\n<\/p>\n

(b) Merchant shall have obtained the Approval Order on or before
\nJuly 21, 2011;<\/p>\n<\/p>\n

(c) Except as set forth on Exhibit 6.1, the time to assume or
\nreject each Store Lease, pursuant to section 365(d)(4) of the Bankruptcy Code,
\ndoes not expire prior to the Sale Termination Date for such Store.<\/p>\n<\/p>\n

Section 11. Representations, Warranties and Covenants<\/u>.\n<\/p>\n<\/p>\n

11.1 Merchant153s Representations, Warranties and Covenants<\/u>.
\nMerchant hereby represents, warrants and covenants in favor of Agent as follows:\n<\/p>\n<\/p>\n

(a) each entity comprising Merchant (i) is a corporation duly
\norganized, validly existing and in good standing under the laws of the state or
\nprovince of its formation (except as may be a result of the commencement and\/or
\npendency of the Merchant153s Chapter 11 Cases); (ii) subject to compliance with
\nthe Bankruptcy Code, has all requisite corporate power and authority to own,
\nlease and operate its assets and properties and to carry on its business as
\npresently conducted; and (iii) is, and during the Sale Term will continue to be,
\nduly authorized and qualified to do business and in good standing in each
\njurisdiction where the nature of its business or properties requires such
\nqualification, including all jurisdictions in which the Stores are located,
\nexcept, in each case, to the extent that the failure to be in good standing or
\nso qualified could not reasonably be expected to have a material adverse effect
\non the ability of Merchant to execute and deliver this Agreement and perform
\nfully its obligations hereunder.<\/p>\n<\/p>\n

(b) Except as may be required in connection with the issuance of
\nthe Approval Order: (i) the Merchant has the right, power and authority to
\nexecute and deliver this Agreement and each other document and agreement
\ncontemplated hereby (collectively, together with this Agreement, the “Agency
\nDocuments<\/u>“) and to perform fully its obligations thereunder; (ii) Merchant
\nhas taken all necessary actions required to authorize the execution, delivery
\nand performance of the Agency Documents, and no further consent or approval is
\nrequired for Merchant to enter into and deliver the Agency Documents, to perform
\nits obligations thereunder and to consummate the Sale, except for any such
\nconsent the failure of which to be obtained could not reasonably be expected to
\nhave a material adverse effect on the ability of Merchant to execute and deliver
\nthis Agreement and perform fully its obligations hereunder; and (iii) each of
\nthe Agency Documents has been duly executed and delivered by Merchant and
\nconstitutes the legal, valid and binding obligation of Merchant enforceable in
\naccordance with its terms.<\/p>\n<\/p>\n

(c) Merchant owns, and will own at all times during the Sale
\nTerm, good and marketable title to all of the Merchandise and Owned FF&E
\n(such Owned FF&E being identified in Exhibit 11.1(c)<\/u>) to be included
\nin the Sale, free and clear of all liens, claims and encumbrances of any nature,
\nother than the liens listed on Exhibit 11.1(c)(i)<\/u>, <\/u>any applicable
\nstatutory liens, and any super-priority liens, claims or encumbrances approved
\nby Bankruptcy Code in connection with the Merchant153s debtor-in-possession
\nfinancing. Merchant shall not create, incur, assume or suffer to exist any
\nsecurity interest, lien or other charge or encumbrance upon or with respect to
\nany of the Merchandise, the Owned FF&E or the Proceeds other than as
\nprovided for herein (including those listed on Exhibit 11.1(c)(i)<\/u>). Any
\nApproval Order shall provide that all such liens shall be transferred to and
\nattach only to the Guaranteed Amount or other amounts payable to Merchant
\nhereunder.<\/p>\n<\/p>\n<\/p>\n

(d) Merchant has maintained its pricing files in the ordinary
\ncourse of business (including the Perpetual File), and prices charged to the
\npublic for goods are the same in all material respects as set forth in such
\npricing files (including Perpetual File) for the periods indicated therein
\n(without consideration of any point of sale markdowns where the point of sale
\nmarkdown is reflected in the price files (including Perpetual File)), and all
\npricing files (including Perpetual File)and records are true and accurate in all
\nmaterial respects as to the actual cost to Merchant for purchasing the goods
\nreferred to therein, the costs related thereto and as to the selling price to
\nthe public for such goods (without consideration of any point of sale markdowns)
\nas of the dates and for the periods indicated therein. Merchant represents that
\nto its knowledge (i) the ticketed prices of all items of Merchandise do not and
\nshall not include any Sales Taxes and (ii) all registers located at the Stores
\nare programmed to correctly compute materially all Sales Taxes required to be
\npaid by the customer under applicable law, as such calculations have been
\nidentified to Merchant by its retained service provider.<\/p>\n<\/p>\n

(e) Except with respect to Merchant153s termination of point of
\nsale events prior to the Sale Commencement Date in the manner previously
\ndisclosed to Agent, to its knowledge Merchant has not marked up or raised, and
\nshall not up to the Sale Commencement Date mark up or raise, the price of any
\nitems of Merchandise, or removed or altered any tickets or any indicia of
\nclearance merchandise, except in the ordinary course of business and except for
\nthe effects of the termination of promotional events.<\/p>\n<\/p>\n

(f) Through the Sale Commencement Date, Merchant shall use
\nreasonable efforts to ticket or mark all items of inventory received at the
\nStores prior to the Sale Commencement in a manner consistent with similar
\nMerchandise located at the Stores and in accordance with Merchant153s ordinary
\ncourse past practices and policies relative to pricing and marking inventory.\n<\/p>\n<\/p>\n

(g) Since June 19, 2011, Merchant has not, and through the
\ncompletion of the Inventory Taking, Merchant shall not purchase for or transfer
\nto or from the Stores any Merchandise or Excluded Defective Merchandise outside
\nthe ordinary course except for the transfer of Distribution Center Inventory,
\nprovided that, since June 19, 2011, Merchant has not, and through the completion
\nof the Inventory Taking, Merchant shall not transfer to or from the Stores any
\nReturn to Vendor Inventory unless Agent has agreed to such
\ntransfers. Merchant153s replenishment has not and will not be consistent with
\nhistoric and customary levels or practices, as a result of, among other things,
\nMerchant153s Chapter 11 filing and\/or delays in procuring shipments from its
\nvendors. From and after July 19, 2011, Merchant shall discontinue issuing new
\norders for replenishment for the Stores, provided that, if the Sale Commencement
\nDate is not July 22, 2011, the Merchant shall continue to replenish such Stores
\nup until the Sale Commencement Date for such Stores in the ordinary course and
\nconsistent with historical practices.<\/p>\n<\/p>\n<\/p>\n

(h) To the best of Merchant153s knowledge, all Merchandise is in
\ncompliance with all applicable federal, state or local product safety laws,
\nrules and standards. Merchant shall use reasonable efforts to provide Agent
\nwith its historic policies and practices, if any, regarding product recalls
\nprior to the Sale Commencement Date.<\/p>\n<\/p>\n

(i) Subject to the provisions of the Approval Order, throughout
\nthe Sale Term, the Agent shall have the right to the unencumbered use and
\noccupancy of, and peaceful and quiet possession of, each of the Stores, the
\nassets currently located at the Stores and the utilities and other services
\nprovided at the Stores. Throughout the Sale Term and subject to Agent complying
\nwith its obligations to reimburse Merchant, the Merchant shall use commercially
\nreasonable efforts to (a) maintain or (b) cause any applicable landlord to
\ncomply with its obligations under applicable Lease and occupancy agreements to
\nmaintain, in good working order, condition and repair all cash registers,
\nheating systems, air conditioning systems, elevators, escalators and all other
\nmechanical devices, but solely to the extent that the Merchant reasonably deems
\nnecessary for the Sale to be conducted without material interruption and in a
\nmanner that is safe and in compliance with applicable laws at the Stores;
\nprovided that<\/u>, it is understood that the maintenance of cash registers,
\nheating systems, air conditioning systems, elevators, and escalators are
\nnecessary for the Sale to be conducted without material interruption. Except as
\nmay be impacted by the Chapter 11 Case filing or otherwise restricted by the
\nChapter 11 Case filing or as otherwise provided in this Agreement, and absent a
\nbona fide dispute, throughout the Sale Term, Merchant shall remain current on
\nall expenses and payables necessary for the conduct of the Sale.<\/p>\n<\/p>\n

(j) Except as may be impacted by the Chapter 11 Case filing or
\notherwise restricted by the Chapter 11 Case filing, Merchant had paid, and will
\ncontinue to pay throughout the Sale Term, all self-insured or Merchant funded
\nemployee benefit programs for Store employees, including health and medical
\nbenefits and insurance and all proper claims made or to be made in accordance
\nwith such program.<\/p>\n<\/p>\n

(k) Since June 19, 2011, Merchant has not intentionally taken,
\nand shall not throughout the Sale Term intentionally take, any actions with the
\nintent of increasing the Expenses of Sale, including, without limitation,
\nincreasing salaries or other amounts payable to employees, except (i) there may
\nhave been instances that, in an effort to encourage one or more employees to
\nremain in Merchant153s employ, Merchant increased the salaries of such employees
\n(such action not being with any intent to increase any Expense of the Sale or in
\nanticipation thereof); and (ii) to the extent an employee was due an annual
\nraise.<\/p>\n<\/p>\n

(l) Except as may be impacted by the filing for Chapter 11
\nprotection or otherwise restricted by the Chapter 11 filing, Merchant covenants
\nto continue to operate the Stores in all material respects in the ordinary
\ncourse of business from the date of this Agreement to the Sale Commencement Date
\nby: (i) selling inventory during such period at customary prices consistent with
\nthe ordinary course of business; (ii) not promoting or advertising any sales or
\nin-store promotions (including POS promotions) to the public (except for
\nMerchant153s pending advertisements as of the date of this Agreement and\/or
\nMerchant153s promotions for the period through the Sale Commencement Date, as
\nreflected on Exhibit 11.1(l))<\/u>; (iii) except as may occur in the ordinary
\ncourse of business or as may be required by applicable law, not returning
\ninventory to vendors and not transferring inventory or supplies between or among
\nStores; and (iv) except as may occur in the ordinary course of business, not
\nmaking any management personnel moves or changes at the Stores without prior
\nwritten notice to and consultation with (but not approval of) Agent.<\/p>\n<\/p>\n

(m) The aggregate Cost Value of the Merchandise as a percentage
\nof the aggregate Retail Price of the Merchandise (as determined in accordance
\nwith Sections 5.1 and 5.3) (the “Cost Factor<\/u>“) shall not be greater than
\n51.1% (the “Cost Factor Threshold<\/u>“). To the extent that the actual Cost
\nFactor for the Merchandise is greater than the Cost Factor Threshold, then such
\ndeviation shall not constitute a breach of any representation or warranty, or an
\nEvent of Default; provided<\/u>, however<\/u>, that, then the Guaranty
\nPercentage shall adjust (in addition to any adjustment applicable pursuant to
\nsection 3.1(c) hereof) in accordance with Exhibit 11.1(m)<\/u>. For the
\npurposes of this Agreement, “Retail Price<\/u>” means the lower of (i) the
\nlowest ticketed, marked or shelf price, (ii) the current selling price for such
\nitem of Merchandise, excluding in each instance Excluded Price Adjustments or
\n(iii) the current retail or aged price, as applicable, for each item of
\nMerchandise, as reflected in the Merchant153s Perpetual File. If an item of
\nMerchandise has more than one ticketed price, or if multiple items of the same
\nSKU are ticketed at different prices, or have a different PLU price, and such
\npricing does not otherwise qualify as an Excluded Price Adjustment, the lowest
\nticketed, marked or PLU price on any such item shall prevail for such item or
\nfor all such items within the same SKU, as the case may be, that are located
\nwithin the same location (as the case may be, the “Lowest Location
\nPrice<\/u>“), unless it is reasonably determined by Merchant and Agent that the
\napplicable Lowest Location Price was mismarked or such item was priced because
\nit was damaged or marked as “as is,” in which case the higher price shall
\ncontrol; provided<\/u>, however<\/u>, in determining the Lowest Location
\nPrice with respect to any item of Merchandise at a Store, the Lowest Location
\nPrice shall be determined based upon the lowest ticketed, marked or PLU price
\nfor such item on a per Store basis. No adjustment to Retail Price shall be made
\nwith respect to different ticketed price, marked price, or PLU prices for items
\nlocated in different Stores. For purposes of this Agreement, the Cost Factor
\nshall be calculated by dividing the aggregate Cost Value of the Merchandise by
\nthe aggregate Retail Price of the Merchandise.<\/p>\n<\/p>\n

(n) To the best of Merchant153s knowledge, all documents, written
\ninformation and supplements provided by Merchant to Agent in connection with
\nAgent153s due diligence and the negotiation of this Agreement were true and
\naccurate in all material respects at the time provided.<\/p>\n<\/p>\n

(o) To the best of Merchant153s knowledge, Merchant has not since
\nJune 19, 2011 shipped any Excluded Defective Merchandise from the Distribution
\nCenters to the Stores. Merchant will not ship any Excluded Defective
\nMerchandise from the date of this Agreement from the Distribution Centers to the
\nStores.<\/p>\n<\/p>\n

(p) Since June 19, 2011, Merchant has not, and through the
\ncompletion of the Inventory Taking, Merchant shall not transfer any Distribution
\nCenter Inventory or any other merchandise to the Stores without Agent153s consent
\nother than ordinary course replenishment, provided that, Merchant has not, and
\nthrough the completion of the Inventory Taking, Merchant shall not transfer to
\nor from the Stores any Return to Vendor Inventory unless Agent has agreed to
\nsuch transfers.<\/p>\n<\/p>\n

11.2 Agent153s Representations, Warranties and
\nCovenants<\/u>. Agent hereby represents, warrants and covenants in favor of
\nMerchant as follows:<\/p>\n<\/p>\n

(a) Agent: (i) is a limited partnership, corporation or limited
\nliability company (as the case may be) duly and validly existing and in good
\nstanding under the laws of the State of its organization; and (ii) has all
\nrequisite power and authority to carry on its business as presently conducted
\nand to consummate the transactions contemplated hereby.<\/p>\n<\/p>\n

(b) Agent has the right, power and authority to execute and
\ndeliver each of the Agency Documents to which it is a party and to perform fully
\nits obligations thereunder. Agent has taken all necessary actions required to
\nauthorize the execution, delivery and performance of the Agency Documents, and
\nno further consent or approval is required on the part of Agent for Agent to
\nenter into and deliver the Agency Documents, to perform its obligations
\nthereunder and to consummate the Sale. Each of the Agency Documents has been
\nduly executed and delivered by the Agent and constitutes the legal, valid and
\nbinding obligation of Agent enforceable in accordance with its terms. No court
\norder or decree of any federal, state or local governmental authority or
\nregulatory body is in effect that would prevent or impair, or is required for,
\nAgent153s consummation of the transactions contemplated by this Agreement (other
\nthan the Approval Order), and no consent of any third party which has not been
\nobtained is required therefor, other than as provided herein. No contract or
\nother agreement to which Agent is a party or by which Agent is otherwise bound
\nwill prevent or impair the consummation of the transactions contemplated by this
\nAgreement.<\/p>\n<\/p>\n

(c) No action, arbitration, suit, notice or legal administrative
\nor other proceeding before any court or governmental body has been instituted by
\nor against Agent, or has been settled or resolved or, to Agent153s knowledge, has
\nbeen threatened against or affects Agent, which questions the validity of this
\nAgreement or any action taken or to be taken by Agent in connection with this
\nAgreement or which, if adversely determined, would have a material adverse
\neffect upon Agent153s ability to perform its obligations under this Agreement.\n<\/p>\n<\/p>\n

(d) The Sale shall be conducted in compliance with all
\napplicable state and local laws, rules and regulations and Merchant153s leases and
\nother agreements, except as provided for in the Sale Guidelines and Approval
\nOrder.<\/p>\n<\/p>\n

(e) Absent prior consent by the Merchant, Agent will not cause
\nany non-emergency repairs or maintenance (emergency repairs are repairs
\nnecessary to preserve the security of a premise or to ensure customer safety) to
\nbe conducted at the Stores.<\/p>\n<\/p>\n

(f) To the best of Agent153s knowledge, all Additional Agent
\nMerchandise is in compliance with all applicable federal, state or local product
\nsafety laws, rules and standards. All Additional Agent Merchandise shall be
\nnon-book merchandise of like kind and no lesser quality to the Merchandise
\nlocated in the Stores.<\/p>\n<\/p>\n<\/p>\n

Section 12. Insurance<\/u>.<\/p>\n<\/p>\n

12.1 Merchant153s Liability Insurance<\/u>. Merchant shall continue
\nuntil the Sale Termination Date, at Agent153s cost as an Occupancy Expense
\nhereunder and in such amounts as it currently has in effect, all of its
\nliability insurance policies covering injuries to persons and property in, or in
\nconnection with, Merchant153s operation of the Stores and shall endeavor to cause
\nAgent to be named as an additional named insured (as its interest may appear)
\nwith respect to all such policies. Merchant shall deliver to Agent certificates
\nevidencing such insurance setting forth the duration thereof and naming Agent as
\nan additional named insured, in form reasonably satisfactory to Agent. All such
\npolicies shall require at least thirty (30) days153 prior notice to Agent of
\ncancellation, non-renewal or material change during the Sale Term. In the event
\nof a claim under any such policies, Merchant shall be responsible for the
\npayment of all deductibles, retentions or self-insured amounts thereunder (which
\namounts shall be paid by Agent as an Occupancy Expense), unless it is determined
\nthat liability arose by reason of the wrongful acts or omissions or negligence
\nof Agent, or Agent153s employees, independent contractors or agents (including
\nMerchant153s employees being supervised by Agent).<\/p>\n<\/p>\n

12.2 Merchant153s Casualty Insurance<\/u>. Merchant will provide
\nthroughout the Sale Term, at Agent153s cost as an Occupancy Expense hereunder,
\nfire, flood, theft and extended coverage casualty insurance covering the
\nMerchandise in a total amount equal to no less than the retail value
\nthereof. In the event of a loss to the Merchandise on or after the date of this
\nAgreement, the Proceeds of such insurance attributable to the Merchandise, plus
\nany self insurance amounts and the amount of any deductible or self-insured
\nretention (which amounts shall be paid by Agent as an Expense), shall constitute
\nProceeds hereunder. Merchant shall deliver to Agent certificates evidencing
\nsuch insurance, setting forth the duration thereof, in form and substance
\nreasonably satisfactory to Agent. All such policies shall require at least
\nthirty (30) days153 prior notice to the Agent of cancellation, non-renewal or
\nmaterial change during the Sale Term. Merchant shall not make any change in the
\namount of any deductibles or self insurance amounts prior to the Sale
\nTermination Date without Agent153s prior written consent.<\/p>\n<\/p>\n

12.3 Agent153s Insurance<\/u>. Agent shall maintain as an Expense
\nhereunder throughout the Sale Term, in such amounts as it currently has in
\neffect and as set forth in Exhibit 12.3<\/u> hereto, comprehensive public
\nliability insurance policies covering injuries to persons and property in or in
\nconnection with Agent153s agency at the Stores, and shall cause Merchant and GECC
\nto be named as additional insureds and loss payees with respect to such
\npolicies. Agent shall deliver to Merchant certificates evidencing such
\ninsurance policies setting forth the duration thereof and naming Merchant as
\nadditional insureds, in form and substance reasonably satisfactory to
\nMerchant. In the event of a claim under any such policies, Agent shall be
\nresponsible for the payment of all deductibles, retentions or self-insured
\namounts thereunder, unless it is determined that liability arose by reason of
\nthe wrongful acts or omissions or negligence of Merchant or Merchant153s
\nindependent contractors or agents, other than Agent or Agent153s employees, agents
\nor independent contractors (including Merchant153s employees under Agent153s
\nsupervision). All such policies shall require at least thirty (30) days153 prior
\nnotice to the Merchant of cancellation, non-renewal or material change during
\nthe Sale Term. Agent shall not make any change in the amount of any deductibles
\nor self insurance amounts prior to the Sale Termination Date without Merchant153s
\nprior written consent.<\/p>\n<\/p>\n

12.4 Worker153s Compensation Insurance<\/u>. Merchant shall at all
\ntimes during the Sale Term maintain in full force and effect workers153
\ncompensation insurance (including employer liability insurance) covering all
\nRetained Employees in compliance with all statutory requirements and subject to
\napproval of the Bankruptcy Court.<\/p>\n<\/p>\n

Section 13. Indemnification<\/u><\/p>\n<\/p>\n

13.1 Merchant Indemnification<\/u>. Merchant shall indemnify and
\nhold Agent and its officers, directors, employees, agents and independent
\ncontractors (collectively, “Agent Indemnified Parties<\/u>“) harmless from and
\nagainst all claims, demands, penalties, losses, liability or damage, including,
\nwithout limitation, reasonable attorneys’ fees and expenses, directly or
\nindirectly asserted against, resulting from, or related to: (i) Merchant153s
\nmaterial breach of or failure to comply with any of its agreements, covenants,
\nrepresentations or warranties contained in any Agency Document; (ii) subject to
\nAgent153s satisfaction of its obligations pursuant to Section 4.1(a) and (b)
\nhereof, any failure of Merchant to pay to its employees any wages, salaries or
\nbenefits due to such employees during the Sale Term; (iii) subject to Agent’s
\ncompliance with its obligations under Section 8.3 hereof, any failure by
\nMerchant to pay any Sales Taxes to the proper taxing authorities or to properly
\nfile with any taxing authorities any reports or documents required by applicable
\nlaw to be filed in respect thereof; (iv) any liability or other claims asserted
\nby customers, any of Merchant’s employees, or in connection with the
\nperformance of the terms of this Agreement any other person against any Agent
\nIndemnified Party (including, without limitation, claims by employees arising
\nunder collective bargaining agreements, worker’s compensation or under the WARN
\nAct); or (v) the gross negligence (including omissions) or willful misconduct of
\nMerchant, or its officers, directors, employees agents or representatives.<\/p>\n<\/p>\n

13.2 Agent Indemnification<\/u>. Agent shall indemnify and hold
\nMerchant and its officers, directors, employees, agents and representatives
\nharmless from and against all claims, demands, penalties, losses, liability or
\ndamage, including, without limitation, reasonable attorneys153 fees and expenses,
\ndirectly or indirectly asserted against, resulting from, or related to: (i)
\nAgent153s material breach of or failure to comply with any of its agreements,
\ncovenants, representations or warranties contained in any Agency Document; (ii)
\nany claims by any party engaged by Agent as an employee, agent, representative
\nor independent contractor arising out of such engagement; (iii) any harassment
\nor any other unlawful, tortious or otherwise actionable treatment of any of the
\nMerchant153s employees or agents by Agent or any of its employees, agents,
\nrepresentatives or independent contractors; (iv) as set forth in Section 8.3
\nhereof and (v) the gross negligence (including omissions) or willful misconduct
\nof Agent, its officers, directors, employees, agents, representatives or
\nindependent contractors.<\/p>\n<\/p>\n

Section 14. Defaults<\/u>. The following shall constitute
\n“Events of Default<\/u>” hereunder:<\/p>\n<\/p>\n

(a) The Merchant or Agent shall fail to perform any of their
\nrespective material obligations hereunder if such failure remains uncured seven
\n(7) days after receipt of written notice thereof to the defaulting party;<\/p>\n<\/p>\n

(b) Any representation or warranty made by Merchant or Agent
\nproves untrue in any material respect as of the date made and, to the extent
\ncurable, continues uncured seven (7) days after written notice to the defaulting
\nparty;<\/p>\n<\/p>\n

(c) The Sale is terminated or materially interrupted or impaired
\nfor any reason other than (i) an Event of Default by Agent; or (ii) any other
\nmaterial breach or action by Agent not authorized under the Agency Agreement;
\nprovidedhowever<\/u>, it is expressly understood that Merchant153s conduct of
\n“going out of business”, “store closing”, “total liquidation”, “everything must
\ngo”, or similar themed sales at stores other than the Stores (the “Other
\nStore Closings<\/u>“) during a period that overlaps with the Sale Term shall not
\nbe deemed an Event of Default, or a material interruption of impairment of the
\nSale or this Agreement and Agent acknowledges that it has no remedies under this
\nAgreement in connection with, or a result of, such Other Store Closings.<\/p>\n<\/p>\n

In the event of an Event of Default, the non-defaulting party may, in its
\ndiscretion, elect to terminate this Agreement upon seven (7) business days’
\nwritten notice to the other party.<\/p>\n<\/p>\n

Any party153s damages or entitlement to equitable relief on account of an Event
\nof Default shall be determined by the Bankruptcy Court.<\/p>\n<\/p>\n

Section 15. Miscellaneous.<\/u><\/p>\n<\/p>\n

15.1 Notices<\/u>. All notices and communications provided for
\npursuant to this Agreement shall be in writing and sent (i) by email and (ii) by
\nhand, by facsimile or by Federal Express or other recognized overnight delivery
\nservice, as follows (with Merchant and Agent to receive all notices regardless
\nof their origin):<\/p>\n<\/p>\n

15.2 Governing Law<\/u>. This Agreement shall be governed and
\nconstrued in accordance with the laws of New York without regard to conflicts of
\nlaws principles thereof, except where governed by the Bankruptcy Code. Each of
\nthe parties hereto irrevocably and unconditionally submits, for itself and its
\nproperties, to the exclusive jurisdiction of the Bankruptcy Court, in any action
\nor proceeding arising out of or relating to this Agreement.<\/p>\n<\/p>\n

15.3 Entire Agreement<\/u>. This Agreement contains the entire
\nagreement between the parties hereto with respect to the transactions
\ncontemplated hereby and supersedes and cancels all prior agreements, including,
\nbut not limited to, all proposals, letters of intent or representations, written
\nor oral, with respect thereto.<\/p>\n<\/p>\n

15.4 Amendments<\/u>. This Agreement may not be modified except in
\na written instrument executed by each of the parties hereto and with the prior
\nwritten consent of GECC.<\/p>\n<\/p>\n

15.5 No Waiver<\/u>. No consent or waiver by any party, express or
\nimplied, to or of any breach or default by the other in the performance of its
\nobligations hereunder shall be deemed or construed to be a consent or waiver to
\nor of any other breach or default in the performance by such other party of the
\nsame or any other obligation of such party. Failure on the part of any party to
\ncomplain of any act or failure to act by the other party or to declare the other
\nparty in default, irrespective of how long such failure continues, shall not
\nconstitute a waiver by such party of its rights hereunder.<\/p>\n<\/p>\n

15.6 Successors and Assigns<\/u>. This Agreement shall inure to
\nthe benefit of and be binding upon Agent and Merchant and their respective
\nsuccessors and assigns; provided, however, that this Agreement may not be
\nassigned by Merchant or Agent to any party without the prior written consent of
\nthe other.<\/p>\n<\/p>\n

15.7 Execution in Counterparts<\/u>. This Agreement may be
\nexecuted in two or more counterparts, each of which shall be deemed an original
\nbut all of which together shall constitute but one agreement. This Agreement
\nshall be effective upon delivery of original signature pages or “pdf” or
\nfacsimile copies thereof executed by each of the parties.<\/p>\n<\/p>\n

15.8 Section Headings<\/u>. The headings of sections of this
\nAgreement are inserted for convenience only and shall not be considered for the
\npurpose of determining the meaning or legal effect of any provisions hereof.\n<\/p>\n<\/p>\n

15.9 FF&E<\/u>. With respect to furniture, fixtures and
\nequipment owned by Merchant and located at the Stores (collectively, the “Agent
\nSale FF&E”), Agent shall sell the Agent Sale FF&E and shall retain all
\nproceeds therefrom. In consideration thereof, Agent shall: (i) pay Merchant on
\nthe Payment Date ten million three hundred thousand dollars $10,300,000 (the
\n“Agent Sale FF&E Guarantee”); and (ii) pay the selling and marketing
\nexpenses determined by Agent to be reasonably necessary to sell the Agent Sale
\nFF&E (which for purposes of the avoidance of doubt shall not include any
\noccupancy or occupancy-related expenses associated with the Distribution Center
\nand\/or Merchant153s home office, which occupancy and occupancy-related expenses
\nshall be paid by Merchant). As of the Sale Termination Date, Agent may abandon
\nin place any unsold Agent Sale FF&E at the Stores in the manner set forth in
\nSection 6.2 hereof.<\/p>\n<\/p>\n

Agent shall sell FF&E owned by Merchant located at the Distribution
\nCenters (excluding the Carlisle, PA Distribution Center) and Merchant153s
\ncorporate office (the “Corporate FF&E<\/u>“). Agent shall be entitled to
\nreceive a commission equal to 20% of the net proceeds from the sale of Corporate
\nFF&E (net of Sales Taxes and the expenses of disposing of the Corporate
\nFF&E); providedhowever<\/u> that Merchant shall be responsible for payment
\nof expenses incurred in connection with the disposition of the Corporate
\nFF&E in accordance with a budget to be mutually agreed upon between Merchant
\nand Agent (in consultation with GA with copies to be provided to GECC). As of
\nthe Sale Termination Date, Agent may abandon in place any FF&E located at
\nthe Distribution Centers and any FF&E located in the Merchant153s corporate
\noffice in a neat and orderly manner. All proceeds from the disposition of the
\nCorporate FF&E shall be deposited in a segregated account designated solely
\nfor the deposit of the proceeds from the Corporate FF&E which shall be a
\nMerchant153s Designated Deposit Account.<\/p>\n<\/p>\n

15.10 Reporting<\/u>. Agent shall furnish Merchant and GECC with
\nweekly reports (including reports that comply with Merchant153s current weekly
\ncash reporting to its central office) reflecting the progress of the Sale, which
\nshall specify the Proceeds (including proceeds from the sale of News Stand and
\nCaf \/Candy Inventory) received to date and shall furnish Merchant and GECC with
\nsuch other information regarding the Sale as Merchant reasonably requests. The
\nAgent will maintain and provide to Merchant and GECC sales records to permit
\ncalculation of and compliance with any percentage of rent obligations under
\nStore leases. During the course of the Sale, Merchant and GECC shall have the
\nright to have representatives continually act as observers of the Sale in the
\nStores, so long as they do not interfere with the conduct of the Sale.<\/p>\n<\/p>\n

15.11 Agent<\/u>. All references to “Agent<\/u>” hereunder shall
\nmean a joint venture composed of Hilco Merchant Resources, LLC, SB Capital
\nGroup, LLC, Gordon Brothers Retail Partners, LLC, Tiger Capital Group, LLC and
\nGreat American Group, LLC.<\/p>\n<\/p>\n<\/p>\n

Section 16. Security Interest<\/u>. In consideration of
\nAgent153s payment of the Guaranteed Amount Deposit, Expenses, Agent Sale FF&E
\nGuarantee and the provision of services hereunder to Merchant, upon issuance of
\nthe Letter of Credit and effective as of the Payment Date, Merchant hereby
\ngrants to Agent (x) a valid and perfected first priority security interest in
\nand lien (subject to the subordination provisions set forth herein below) upon
\n(i) the Merchandise, (ii) Books in Storage, (iii) Additional Agent Merchandise
\nand the proceeds thereof, (iv) Agent Sale FF&E and the proceeds realized
\nfrom the disposition of the Agent Sale FF&E, (v) proceeds realized from the
\ndisposition of the Corporate FF&E up to the amount of the Agent153s
\ndisposition commission related to Corporate FF&E as provided for in Section
\n15.9 and (vi) the Proceeds, to secure all obligations of Merchant to Agent
\nhereunder and (y) to secure Merchant153s obligations pursuant to Section 3.3(e) to
\nrepay any Over Payment Amount to the Agent, a superpriority administrative
\nexpense claim payable from, and a valid and perfected first priority security
\ninterests in and lien upon, each of the following, as defined in the APA: (i)
\nIntellectual Property, (ii) the Kobo Interest, (iii) proceeds of Real Property
\nLeases, (iv) Corporate FF&E (as defined herein), (v) Merchant153s Additional
\nGoods Recovery Amount (as defined herein), (vi) Merchant’s portion of proceeds
\nrelated to Merchant Consignment Goods (as defined herein) and (vii) proceeds
\nrelated to any the foregoing (the “Over Payment Collateral<\/u>“);
\nprovided<\/u>, however<\/u>, that the security interest and administrative
\nexpense claims granted to Agent hereunder shall remain junior and subordinate in
\nall respects to (a) Merchant153s rights to receive payment of the Guaranteed
\nAmount, Agent Sale FF&E Guarantee and, Expenses and any other undisputed
\namounts due from Agent to Merchant hereunder (collectively, the “Agent153s
\nPayment Obligations<\/u>“) and (b) the liens, security interests and claims of
\nthe GECC and the Lenders, to the to the extent of the unpaid portion of Agent153s
\nPayment Obligations. Upon the entry of the Approval Order and upon payment of
\nthe Guaranteed Amount Deposit and Agent Sale FF&E Guarantee pursuant to
\nSection 3.3(a) hereof, and the issuance of the Letter of Credit, the security
\ninterests granted to the Agent hereunder shall be deemed properly perfected
\nwithout the necessity of filing financing statements or other
\ndocumentation. Upon the earlier occurrence of (a) date of the Final Inventory
\nReport as reviewed, verified and reconciled by Merchant and Agent and payment of
\nany Over Payment Amount, if any, (b) Agent153s express written waiver of its
\nrights to the Over Payment Amount or (c) entry by the Court of an Order finding
\nthat the Merchant satisfied its obligations to the Agent pursuant to Section
\n3.3(e) hereof, (the “Over Payment Collateral Release Date<\/u>“), the Agent153s
\nliens on the Over Payment Collateral shall be deemed automatically released and
\nthe Agent will immediately disburse all amounts held in the Over Payment Escrow
\n(as defined below) to the Merchant. Notwithstanding any provision in this
\nAgreement to the contrary, during the period commencing on the Sale Commencement
\nDate and after payment of the Guaranteed Amount Deposit and Agent Sale FF&E
\nGuarantee and ending on the Over Payment Collateral Release Date (a) the
\nMerchant shall not sell, assign or otherwise dispose of any item of Over Payment
\nCollateral without Agent153s consent, which consent will not be unreasonably
\nwithheld, (b) the proceeds of the sale of any Over Payment Collateral shall be
\nplaced in a segregated account with Agent (the “Over Payment Escrow<\/u>“) and
\nAgent153s liens shall attach to such proceeds in the same priority, validity and
\nextent they encumbered such collateral, and (c) the Agent is authorized to hold
\nall proceeds due to the Merchant with respect to the Recovery Amount, Merchant153s
\nAdditional Goods Recovery Amount and Merchant’s portion of proceeds related to
\nMerchant Consignment Goods in the Over Payment Escrow.<\/p>\n<\/p>\n

Section 17. Lenders Rights. Any rights or remedies accorded
\nto GECC or GA herein shall exist only so long as the DIP Facility has not been
\nindefeasibly paid in full in cash.<\/p>\n<\/p>\n

IN WITNESS WHEREOF, the Agent and Merchant hereby execute this Agreement by
\ntheir duly authorized representatives as a sealed instrument as of the day and
\nyear first written above.<\/p><\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[6925],"corporate_contracts_industries":[9501],"corporate_contracts_types":[9613,9620],"class_list":["post-42102","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-borders-group-inc","corporate_contracts_industries-retail__misc","corporate_contracts_types-operations","corporate_contracts_types-operations__services"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/42102","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=42102"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=42102"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=42102"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=42102"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}