16-22035-rdd doc 43 filed 01/14/16 entered 01/14/16 20:36

Kevin J. Nash

Evan M. Lazerowitz

Goldberg Weprin Finkel Goldstein LLP

1501 Broadway, 22nd Floor

New York, New York 10036

Telephone: (212) 221-5700

Facsimile: (212) 335-4501 Proposed Counsel for the Debtor

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

In re:

Chapter 11

Joyce Leslie, Inc. Case No. 16- 22035 (RDD)

Debtor.

DEBTOR’S MOTION FOR ORDERS (I)(A) AUTHORIZING ENTRY

INTO AGENCY AGREEMENT WITH SB CAPITAL, AND APPROVING

PROPOSED SELECT LEASE AGREEMENT WITH MADRAGS,

(B) AUTHORIZING BIDDING PROCEDURES AND AUCTION AND

(C) SCHEDULING SALE HEARING AND APPROVING NOTICE

THEREOF; (II) AUTHORIZING (A) SALE OF ASSETS

AND (B) STORE CLOSING SALES AND (III) GRANTING RELATED RELIEF

Joyce Leslie, Inc. (the “Debtor”) hereby moves (the “Motion”) for entry of orders

(a) authorizing the Debtor to enter into two proposed stalking horse contracts denominated as

follows: (i) that certain Agency Agreement, dated January 14, 2016 (the “Agency Agreement”),

attached hereto as Exhibit A (which is inclusive of the Sale Guidelines (the “Sale Guidelines”),

attached hereto as Exhibit B), between the Debtor and a joint venture composed of SB Capital

Group LLC, Tiger Capital Group, LLC, and 360 Debtor Solutions, LLC (together, “SB Capital”)

providing for a liquidation sale of the Debtor’s store inventory and furniture, fixtures, and

equipment, and (ii) that certain Asset Purchase Agreement (the “Select Lease Purchase

Agreement”) dated January 14, 2016 with 618 Main Street Corp. an affiliate of Madrag/10 Spot

16-22035-rdd Doc 43 Filed 01/14/16 Entered 01/14/16 20:36:12 Main Document Pg 1 of 34

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Clothing, Inc. (herewith, “Madrag”), attached hereto as Exhibit C, providing for the sale of up to

a minimum of 12 designated leases, and up to 20 of the designated leases, to close after

completion of the store liquidation sales (the Agency Agreement and Select Lease Purchase

Agreement are, collectively the “Stalking Horse Agreements”); (b) authorizing the related

bidding procedures for an auction to consider higher and better proposals for the liquidation

process and sale of leases; (c) scheduling a sale hearing and approving notice thereof (the

“Bidding Procedures Order”, annexed hereto as Exhibit D); (d) approving the auction results and

authorizing (i) sale of Assets (defined below) and (ii) store closing sales, and (e) granting related

relief, including approval of a pre-petition consulting agreement with SB Capital (the “Approval

Order”). In support of the Motion, the Debtor represents as follows:

Background

1. On January 9, 2016 (the “Petition Date”), the Debtor commenced its

Chapter 11 case (the “Chapter 11 Case”) by filing a voluntary petition for relief under Chapter 11

of the Bankruptcy Code. The Debtor continues to manage and operate its business as a debtor-

in-possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. No official

committee of unsecured creditors has yet been appointed in this Chapter 11 case but one is

expected to be formed by the return date hereof.

2. The factual background regarding the Debtor, including its business

operations, capital and debt structure, and the events leading up to the filing of this Chapter 11

case, are set forth in detail in the First Day Declaration and accompanying bankruptcy petition

and schedules (See Dkt. No. 1).


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3. The Debtor operates a chain of 47 women’s retail clothing stores located

throughout New York, New Jersey, Pennsylvania, and Connecticut. Five of those stores1 are

slated to close on or before January 31, 2016, based upon a pre-petition agency agreement with

SB Capital. Thus, this Motion is aimed at establishing procedures to sell the Debtor’s assets

relating to its remaining 42 stores (chiefly inventory, furniture, fixtures and equipment [FF&E]

and leases). The Motion will run in tandem with the Debtor’s continuing efforts to solicit a

potential going concern buyer for the company. However, since the Debtor has looked for a

possible going concern buyer for over a year’s time without success, the prospects do not appear

bright. Nevertheless, with the Debtor’s Chapter 11 filing, there is renewed hope that a going

concern buyer could emerge to bid at the Auction2 and make a bid on the company as a going

concern buyer to save as many jobs as possible.

4. In the interim, the Debtor must also prepare to pursue liquidation and lease

sales and has negotiated two stalking horse contracts to establish a baseline price at the Auction

with respect to liquidation bids and/or bids to acquire leases once the stores are emptied of

inventory. Proceeding on a dual track will promote asset recoveries and minimize expenses.

5. The first proposed stalking horse, SB Capital, is comprised of well-known

liquidation firms and is prepared to conduct going out of business sales at the Debtor’s 42

locations, utilizing many of the Debtor’s current store employees. Under the Agency

Agreement, the Debtor stands to receive a guaranteed minimum payment of 62% of the cost

value of its remaining inventory at the start of liquidation, plus 50% of additional revenues

1 The five closing locations are (i) Store #6 in Morris Plains, NJ; (ii) Store #7 in Carle Place, NY; (iii) Store #12 in

Jersey City, NJ; (iv) Store #56 in Bricktown, NJ; and (v) Store #87 in Ridgewood, NY (collectively, the “Closing

Stores”).

2 All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Agency

Agreement or the Select Lease Purchase Agreement, as applicable.


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generated from the liquidation after reimbursement of expenses and payment of an agency fee.

Pre-petition, SB Capital was engaged to conduct going out of business sales for five locations on

a fee basis (as opposed to a guaranteed minimum) and has performed well in that role.

6. Since these going out of business sales are continuing but about to come to

an end, the Debtor requests that the Court formally approve the assumption of the Debtor’s

existing Consulting Agreement with SB Capital (attached hereto as Exhibit E). Pursuant to the

Consulting Agreement, SB Capital began going out of business sales at the 5 locations on

November 14, 2015, and same will be completed by the end of January, if not sooner. SB

Capital receives a fee equal to 2% of the gross proceeds of the sale of merchandise at each of the

Closing Stores, and 15% of the proceeds from the sale of FF&E. The terms of the Consulting

Agreement are reasonable and customary, and SB Capital’s services are necessary to conclude

store closing sales already in progress at the Closing Stores.

7. Given the existing relationship, it was logical for the Debtor to concentrate

on SB Capital to negotiate a stalking horse agreement to liquidate the remaining stores. Since

that time, the Debtor has also been in contact with other national liquidation firms and they will

be given notice of the bidding procedures, and hopefully competing bids will be received from

other liquidators at the Auction.

8. The Debtor also sees value in its store leases and is soliciting a bid from a

separate lease buyer(s) or multiple lease buyer(s) for all or some of its locations. Again, to jump-

start the process, the Debtor has entered into a stalking horse contract with Madrag (defined

herein as the “Select Lease Purchase Agreement”), which provides that Madrag will purchase a

minimum of 12 designated store leases, together with the associated fixtures, and intellectual

property, for a purchase price of $720,000, plus the funding of all pre-petition rent arrears.


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Madrag may, in its discretion, also purchase up to an additional 8 leases for an additional

$60,000 per lease, plus the funding of pre-petition rent arrears (for a total of 20).

9. SB Capital recognizes the Madrag offer described above and has carved

out, at the Debtor’s option, the FF&E in some or all of the stores listed in Schedule 15(a) to the

Agency Agreement (the “Excluded Store FF&E”).

10. The Debtor hopes to obtain approval of the respective stalking horse

contracts on January 26, 2016, complete an Auction by February 3, 2016, and obtain entry of the

Approval Order by February 4, 2016. Entry of the Approval Order by February 4 is imperative

because SB Capital needs to commence liquidation sales before the start of the following

weekend (February 6-7) to maximize asset recoveries.

A. Summary of the Agency Agreement

11. Pursuant to the Agency Agreement, SB Capital will serve as the Debtor’s

exclusive agent to (a) sell the remaining merchandise (the “Merchandise”) located at the

Debtor’s 42 retail locations (the “Sale”) and (b) dispose of any owned fixtures, furnishings and

equipment (the “Owned FF&E”) in the retail locations, warehouse and corporate offices

(together with the Sale, the “Transaction”). The Sale will include inventory and merchandise,

furniture, fixtures and equipment, and assignment of real property store leases (each, an “Asset

Class” and collectively, the “Assets”), either on a going-concern basis or via chain-wide store

closing sale program (the “Store Closing Sales”).


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12. The significant terms of the Agency Agreement are as follows:3

Provision Description of Provision

Sale

SB Capital shall be retained as the Debtor’s exclusive agent for the purpose of (a) selling the

Merchandise located in the Debtor’s retail store

location(s) identified on Exhibit A-1 to the Agency

Agreement, less the five Excluded Stores currently

undergoing going out of business sales and slated to

close on or before January 31, 2016; and (b) selling

all of the Owned FF&E located in the Stores and the

Debtor’s corporate offices, by means of a “going out

of business,” “store closing”, “sale on everything”,

“everything must go”, or similarly themed sale.

“Merchandise” means all new first quality (other than

as expressly set forth), finished goods inventory that

is owned by Debtor, customarily sold to customers in

the ordinary course of Debtor’s business and located

in the Stores on the Sale Commencement Date (or,

with respect to Returned Merchandise, received in the

Stores by the dates specified in this Agreement),

including, but not limited to, (i) Merchandise subject

to Gross Rings; (ii) Merchandise located in the Stores

on the Sale Commencement Date; (iii) Display

Merchandise; and (iv) Defective Merchandise (to the

extent Debtor and SB Capital can mutually agree on

the Cost Value applicable thereto).

See Agency Agreement Section 5.2(a).

Guaranteed Amount

SB Capital guarantees that Debtor shall receive an

amount (the “Guaranteed Amount”) equal to sixty-two

percent (62%) (the “Guaranty Percentage”) of the

aggregate Cost Value of Merchandise. The Guaranteed

Amount will be calculated based upon the product of (x)

the Guaranty Percentage multiplied by (y) the aggregate

Cost Value of the Merchandise (in the case of (y), as

determined by (A) the Final Inventory Report at the

conclusion of the Inventory Taking by the Inventory

3 This summary is provided in accordance with Local Rule 6004-1 and General Order M-383, and is qualified in its

entirety by reference to the provisions of the Agency Agreement and the Sale Guidelines. Each capitalized term

used and not otherwise defined herein shall have the meaning assigned thereto in the Agency Agreement and the

Sale Guidelines. To the extent there exists any inconsistency between this summary and the provisions of the

Agency Agreement and the Sale Guidelines, the provisions of the Agency Agreement and the Sale Guidelines, as

applicable, shall control.


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Taking Service after verification and reconciliation

thereof by Debtor and SB Capital, (B) the aggregate

amount of Gross Rings (as adjusted for shrinkage per this

Agreement), (C) the aggregate Cost Value of Display

Merchandise included in the Sale; and (E) the aggregate

Cost Value of Returned Merchandise included in the Sale

and not otherwise included in the Inventory Taking. SB

Capital shall pay to Debtor (or its designee) the

Guaranteed Amount on the first business day after entry

of the Approval Order.

See Agency Agreement Sections 3.1(a), 3.1(c), 3.3.

Sharing Amount

To the extent that Proceeds exceed the sum of (x) the

Guaranteed Amount, plus (y) Expenses of the Sale, plus

(z) an amount equal to the sum of (i) six percent (6%) of

the sum of the aggregate Cost Value of the Merchandise

included in the Sale; plus (ii) five percent (5%) of the

gross sale Proceeds from the sale of Additional Agent

Merchandise (exclusive of sale taxes) (the amount set

forth in clause (z), the “Agent’s Fee” and the sum of

clauses (x), (y) and (z) being collectively defined as the

“Sharing Threshold”), then all remaining Proceeds of

the Sale above the Sharing Threshold shall be shared

fifty percent (50%) to Debtor (Debtor’s share of

Proceeds beyond the Sharing Threshold is the “Sharing

Amount”) and fifty percent (50%) to SB Capital.

See Agency Agreement Section 3.1(b).

Additional Merchandise

All Merchandise and Additional Agent Merchandise

remaining at the conclusion of the Sale (“Remaining

Merchandise”) shall become the property of SB Capital,

free and clear of all liens, claims, interests and

encumbrances of any kind or nature; provided, however,

the proceeds realized upon a sale or other disposition of

the Remaining Merchandise shall constitute Proceeds

hereunder for purposes of, inter alia, calculating the

Sharing Amount (if any) the due the Debtor.

SB Capital shall be entitled to include in the Sale

supplemental merchandise procured by SB Capital

which is of like kind, and no lesser quality than

Merchandise located in the stores (the “Additional

Agent Merchandise”).


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See Agency Agreement Sections 3.2 and 8.9.

Sale of Owned FF&E

With respect to Owned FF&E, SB Capital shall, at the

Debtor’s election (the “FF&E Sale Option”), either (i)

sell the Owned FF&E strictly on a commission basis

(the “FF&E Commission Option”), or (ii) sell the

Owned FF&E on a guaranteed fee basis (the “FF&E

Guaranty Option”); provided that, the FF&E Guaranty

Option shall be subject to the Debtor and SB Capital

agreeing on a mutually acceptable FF&E/asset listing.

See Agency Agreement Section 15(a).

Cost Value of Merchandise

The Guaranty Percentage has been fixed based upon the

Debtor’s statement that the aggregate Cost Value of the

Merchandise is not less than $3,000,000 and not greater

than $3,500,000, subject to certain adjustments if the

Cost Value changes.

See Agency Agreement Section 3.1(c).

Store Closing Sales Expenses

SB Capital will pay Expenses of the Sale to the extent

set forth in Section 4.1 of the Agency Agreement. In

addition, the Debtor may be liable for budgeted

expenses incurred in connection with the Sale of FF&E,

in the event that it elects to execute the FF&E

Commission option.

See Agency Agreement Sections 4 and 15.


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Sale Period

The Sale shall commence at each of the stores on the first business day after the entry of the Approval Order, but not later than February 5, 2016 (the “Sale

Commencement Date”). SB Capital shall complete the Sale on or before March 31, 2016 (the “Sale Termination Date”). The Sale Termination Date as to

any Store may be (a) extended by mutual written agreement of the Debtor, in consultation with SB Capital or (b) accelerated by SB Capital, in which case

SB Capital shall provide the Debtor with not less than seven (7) days’ advance written notice of any such planned accelerated Sale Termination Date (each such

notice being a “Vacate Notice”). If SB Capital fails to provide the Debtor with timely notice of an acceleration of the Sale Termination Date for a Store, SB Capital

shall be liable for and shall pay any Occupancy Expenses resulting from such untimely notice.

See Agency Agreement Section 6.

Bidding Protections

SB Capital shall receive (1) a breakup fee of $75,000,

(the “Bid Protections”) plus (2) reimbursement of the

reasonable costs, fees, and expenses actually incurred

and paid by SB Capital in acquiring signage and other

advertising and promotional material in connection

with the Sale (excluding any cost of capital incurred in

connection therewith), in an aggregate amount not to

exceed $60,000 (the “Signage Costs Reimbursement”).

See Agency Agreement Section 16.11.

Store Lease Assumption The Debtor shall not assign, reject or otherwise

terminate any lease relating to any Store where such

assignment, rejection, or termination would have an

effective date on or prior to the applicable Sale

Termination Date or Vacate Date for such Store

See Agency Agreement Section 2(b)(xxvi)(B).

Superpriority Liens Subject to the SB Capital having satisfied its obligation

to tender payment of the Initial Guaranty Payment and

to deliver the Letter of Credit, any amounts owed by the

Debtor to the SB Capital shall be granted the status of

superpriority claims senior to all other superpriority


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claims; provided that until the Debtor receives payment

in full of the Guaranteed Amount, the Sharing Amount

(if any), Expenses, the proceeds realized upon a sale of

Owned FF&E (less the Agent FF&E Commission) or

the FF&E Guaranty Amount, as applicable, and such

other amounts due to the Debtor, any superpriority claim

granted to the SB Capital (other than any such claim for

the Bid Protections and Bid Reimbursements), shall be

junior and subordinate to the security interests and

superpriority claims any existing security interest and

superpriority claim, but solely to the extent of the

amount of the unpaid portion of such amounts and such

other amounts due to the Debtor.

Upon payment of the Initial Guaranty Payment on the

Payment Date and delivery of the Letter of Credit, the

Debtor grants to the SB Capital first priority, senior

security interests in and liens (subject to certain

subordination provisions) upon: (i) the Merchandise; (ii)

the Additional Agent Merchandise; (iii) all Proceeds

(including, without limitation, credit card Proceeds); (iv)

the SB Capital’s commission regarding the sale or other

disposition of Merchant Consignment Goods; (v) in the

event the Debtor elects the FF&E Guaranty Option, the

Owned FF&E and the proceeds realized from the sale or

other disposition of Owned FF&E after payment of the

FF&E Guaranty Amount; or, alternatively, the SB

Capital’s FF&E Commission; (vi) the SB Capital’s

percentage share of Proceeds in excess of the Sharing

Threshold, and (vii) all “proceeds” (within the meaning

of Section 9-102(a)(64) of the UCC) of each of the

foregoing to secure the full payment and performance of

all obligations of the Debtor to the SB Capital.

See Agency Agreement Sections 2(b)(xii) and 16.12.


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B. Summary of the Select Lease Purchase Agreement

13. On the lease side, the significant terms of the Select Lease Purchase

Agreement are as follows:


Sale

Madrag’s assumption and assignment of a minimum of 12

designated store leases, and up to 8 additional store leases,

together with all existing FF&E at the designated sites, plus

the Debtor’s intellectual property, assets, trademarks, and

trade names.

See Select Lease Purchase Agreement, Article 1, Sections 1-2.

Consideration $720,000, plus funding of pre-petition rent cure amounts.

Each additional lease above the minimum of 12 to be acquired

for $60,000, plus the funding of pre-petition rent cure

amounts.

See Select Lease Purchase Agreement, Article 2, Sections 1-3.

Designation Period Leases to be designated by Madrag no later than 5 days prior

to the start of the Auction.

See Select Lease Purchase Agreement, Article 1, Section 3.

Closing Closing will take place no later than seven (7) days after the

Sale Termination Date.

Bidding Protections Expense reimbursement up to $35,000 (the “Expense

Reimbursement Fee”).

See Select Lease Purchase Agreement, Article 9, Section 3.

C. Summary of the Bidding Procedures

14. The significant terms of the Bidding Procedures, which are applicable to

both Stalking Horse Agreements, are set forth below. At the Auction, the Debtor will first seek a

potential buyer for all of the company’s assets as a going concern or via a global offer to


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purchase all assets (i.e., inventory, FF&E and leases in bulk). The Debtor will then seek higher

and better bids to compete with the Agency Agreement. Finally, the Debtor will seek bids on the

Debtor’s leases, in bulk or separately, to compete with the Select Lease Purchase Agreement.

Thereafter, the Debtor will determine which bids or combination of bids generate the greatest

recovery and proceed accordingly.


Delivery of Financial Information and Confidentiality of Debtor Information

Competing bidders that wish to participate in the bidding

process (a “Potential Bidder”) must deliver the following:

(a) a written disclosure of the identity of each entity,

including involvement in any joint venture, that will

be bidding (or participating in a bid) on the Assets

or certain Asset Classes;

(b) adequate assurance information, including (a)

adequate information (in the Debtor’s reasonable

business judgment) about the financial condition of

the Potential Bidder, such as federal tax returns for

the previous two years, a current financial

statement, and/or current bank account statements;

and (ii) information demonstrating (in the Debtor’s

reasonable business judgment) that the Potential

Bidder has the financial capacity to consummate the

proposed transaction;

(c) an executed confidentiality agreement in form and

substance satisfactory to the Debtor; and

(d) a bona fide non-binding letter of intent.

Qualified Bids Deadline

Bidders must submit their bid by 4:00 p.m. prevailing Eastern

time two business days prior to the Auction. The Debtor will

notify all Qualified Bidders by not later than one business day

after the Bid Deadline as to whether or not any bids constitute

Qualified Bids with respect to any Asset Class and whether

such Qualified Bidder’s bid constitutes a Qualified Bid. The

Debtor may extend the Bid Deadline at its discretion.

Qualified Bids Form

Qualified Bids must include a duly authorized and executed

copy of the Agency Agreement, Alternative Transaction

Agreement, or Select Lease Purchase Agreement, as


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applicable (including all exhibits and schedules thereto),

together with copies marked to show any amendments and

modifications thereto.

Good Faith Deposit

Qualified Bids must be accompanied by a good faith deposit

in the form of a wire transfer (to a bank account specified

by the Debtor), certified check or such other form

acceptable to the Debtor, in an amount equal to ten percent

of the value of such Qualified Bidder’s Qualified Bid (as

quantified by the Debtor

A Successful Bidder that breaches any of its obligations

under the applicable Successful Bidder Agreement shall

forfeit its Deposit, which shall become property of the

Debtor’s estate without any further order of the Bankruptcy

Court. The forfeiture of the Deposit shall be in addition to

any other rights, claims and remedies that the Debtor and its

estate may have against such Successful Bidder.

Qualified Bids and Qualified Bidders

A bid will be considered a qualified bid only if the bid is

submitted by a Qualified Bidder and complies with all of

the following in the Debtor’s reasonable discretion:

(a) states with specificity the Asset Classes such

Qualified Bidder offers to purchase, in cash;

(b) disclose any connection or agreements with the

Debtor, SB Capital, Madrag, any other known

Potential Bidder and/or any officer, director or

equity security holder of Joyce Leslie, Inc.;

(c) includes a signed writing that the Qualified Bidder’s

offer is irrevocable until the selection of the

Successful Bidder and the Back-Up Bidder;

provided that if such Qualified Bidder is selected as

the Successful Bidder or Back-Up Bidder, its offer

will remain irrevocable until the conclusion of the

Sale Hearing;

(d) contains written confirmation that there are no

conditions precedent to the Qualified Bidder’s

ability to enter into a definitive agreement,

including, but not limited to, any additional due

diligence, inventory evaluation or financing

conditions, and that all necessary approvals have

been obtained prior to the date of submission of the


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bid;

(e) includes evidence, in form and substance reasonably

satisfactory to the Debtor, of authorization and

approval from the Qualified Bidder’s board of

directors (or comparable governing body) with

respect to the submission, execution, delivery and

closing of the Alternative Transaction Agreement;

(f) includes written evidence of a firm, irrevocable

commitment for financing, or other evidence of

ability to consummate the Sale, that will allow the

Debtor to make a reasonable determination as to the

Qualified Bidder’s financial and other capabilities to

consummate the Sale;

(g) includes an acknowledgement and representation

that the Qualified Bidder: (a) has had an

opportunity to conduct any and all required due

diligence regarding the Assets prior to making its

offer; (b) has relied solely upon its own independent

review, investigation and/or inspection of any

documents and/or the Assets; (c) did not rely upon

any written or oral statements, representations,

promises, warranties or guaranties whatsoever,

whether express or implied, regarding the Assets or

the completeness of any information provided

except as expressly stated in the Alternative

Transaction Agreement; and (d) is not entitled to

any expense reimbursement, break-up fee or similar

type of payment in connection with its bid;

(h) is accompanied by a good faith deposit in the form

of a wire transfer (to a bank account specified by the

Debtor), certified check or such other form

acceptable to the Debtor, in an amount equal to

ten percent of the value of such Qualified Bidder’s

Qualified Bid (as quantified by the Debtor) (the

“Deposit”);

(i) contains such other information as is requested by

the Debtor in its business judgment; and

(j) is received prior to the Bid Deadline.

Bids on Individual Leases To be considered at the Auction so long as they exceed


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Madrag’s minimum bid of $720,000 for the aggregate

designated leases, plus the funding of pre-petition rent cure

amounts.

No Shop or No Solicitation

Neither the Agency Agreement, Select Lease Purchase

Agreement nor the Bidding Procedures limit the Debtor’s

ability to solicit higher or otherwise better bids.

Break Up Fee and Expense Reimbursement

If the Court approves a Successful Bidder, other than SB Capital or Madrags, to ultimately consummate the transaction, SB Capital or Madrags will be entitled to a Break-Up Fee and Signage Costs Obligations, as applicable.

Bidding Increments

For the Asset Classes of Merchandise and Owned FF&E,

to the extent that there is more than one Qualified Bid for

such Asset Class, all initial overbids beyond SB Capital bid

(i) must exceed SB Capital bid by an amount at least equal

to one percent (1%) of the Cost Value (as defined in the

Agency Agreement) of the Merchandise (as determined by

Debtor in its reasonable discretion) plus cash in the amount

of the Bid Protections (as defined in the Agency

Agreement) (as quantified by the Debtor) (the “Minimum

Overbid,” projected to be at least $105,000) and (ii) agree

to payment of the Signage Costs Reimbursement (as

defined in the Agency Agreement) (either through direct

reimbursement to SB Capital and/or assumption of

obligation and payment to the vendor(s)). Bidding at the

Auction will continue in increments of at least 0.10% (each

successive bid, an “Inventory Overbid”). An Inventory

Overbid shall remain open and binding on the Qualified

Bidder(s) in accordance with its terms until and unless the

Debtor accepts an alternate Qualified Bid as the Highest or

Best Asset Bid for the Asset Class (or for a group of Asset

Classes containing the Asset Class). During the course of

the Auction, the Debtor shall, after submission of each

Inventory Overbid, promptly inform each participant

which Inventory Overbid reflects, in the Debtor’s view, the

highest or otherwise best offer.

For each Asset Class other than inventory and Owned

FF&E, to the extent that there is more than one Qualified

Bid for a particular Asset Class, the Auction shall

commence with bidding on such Asset Class at the amount

equal to the Highest or Best Asset Class Bid applicable to

such Asset Class. Bidding on such Asset Class will


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continue in increments of at least $100,000, or such other

amount as determined by the Debtor in its business

judgment (each successive bid, an “Asset Class Overbid”).

An Asset Class Overbid shall remain open and binding on

the Qualified Bidder(s) until and unless the Debtor accepts

an alternate Qualified Bid as the Highest or Best Asset

Class Bid on such Asset Class. During the course of the

Auction, the Debtor shall, after submission of each Asset

Class Overbid, promptly inform each participant which

Asset Class Overbid reflects, in the Debtor’s view, the

highest or otherwise best offer for such Asset Class. When

bidding on individual Asset Classes for which more than

one Qualified Bid was received concludes, the Debtor,

after consultation with the Committee and the Secured

Lenders, shall determine a highest or otherwise best bid

with respect to each Asset Class (each highest or best bid

after conclusion of the auction, the “Winning Asset Class

Bid”). To the extent a particular Asset Class did not

receive more than one Qualified Bid (and accordingly, was

not subject to the auction procedures set forth above in this

paragraph), the Highest or Best Asset Class Bid shall be

deemed to be the Winning Asset Class Bid for such Asset

Class, subject to the provisions of these Bidding

Procedures. In all events, the Debtor shall not be required

to accept any bids made with respect to Assets in those

Asset Classes that are not subject to the Agency

Agreement (i.e. Asset Classes other than Merchandise and

Owned FF&E).

If there is a Highest or Best Asset Bid, after determination

of each Winning Asset Class Bid, the Debtor shall hold an

auction for the Assets. If the Winning Asset Class Bids, in

the aggregate, or a Qualified Bidder for the Assets, are

selected as the Highest or Best Asset Bid, then bidding will

start at the aggregate consideration for the Winning Asset

Class Bids or such Qualified Bidder’s bid, plus 0.10%.

Bidding at the Auction will continue in increments of at

least 0.10% (each successive bid, an “All Assets

Overbid”). A bidder seeing to purchase the Assets subject

to the Agency Agreement as part of an All Assets Overbid

must agree to the payment of the Signage Costs

Reimbursement (either through direct reimbursement to SB

Capital and/or assumption of obligation and payment to the

vendor(s)). An All Assets Overbid shall remain open and


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binding on the Qualified Bidder(s) until and unless the

Debtor accepts an alternate Qualified Bid(s) as the Highest

or Best Asset Bid. During the course of the Auction, the

Debtor shall, after submission of each All Assets Overbid,

promptly inform each participant, which All Assets

Overbid reflects, in the Debtor’s view, the highest or

otherwise best offer. For the avoidance of doubt, Asset

Class bidders may make joint All Assets Overbids.

For the leases, to the extent that there is more than one

Qualified Bid for such leases, all initial overbids beyond

Madrag’s bid must exceed Madrag’s bid by at least

$100,000, with bidding to continue in increments of at

least $100,000 (each a “Lease Overbid”). The Debtor will

entertain offers for a group of leases or individual leases in

addition to the designated leases. A Lease Overbid shall

remain open and binding on the Qualified Bidder(s) in

accordance with its terms until and unless the Debtor

accepts an alternate Qualified Bid as the Highest or Best

Asset Bid for the Assigned Leases. During the course of

the Auction, the Debtor shall, after submission of each

Lease Overbid, promptly inform each participant which

Lease Overbid reflects, in the Debtor’s view, the highest or

otherwise best offer.

Break Up Fee and Expense Reimbursement at Auction

SB Capital and Madrag will not receive a “credit” equal to

the Break Up Fee at the Auction.

Modification of Bidding Procedures

The Bid Deadline may be extended by the Debtor in

consultation with SB Capital, Madrag and each of the Notice

Parties.

Closing with Alternative Backup Bidders

If an Auction is conducted, the Qualified Bidder(s) with the

second highest or otherwise best Qualified Bid at the

Auction for the Assets or for any Asset Class, as determined

by the Debtor in the exercise of its business judgment, and

upon consultation with the Secured Parties, will be required

to serve as a back-up bidder (a “Back-Up Bidder”) and

keep such bid open and irrevocable until the date that is

three business days after the commencement of the Store

Closing Sales or, if a going-concern bid is the Successful


18


Bid, until the closing of the Sale; provided that SB Capital

and Madrag shall be required to serve as Back-Up Bidder

only subject to the terms and conditions set forth in its bid

(including, without limitation, any outside dates, milestones

or termination events). Following the Sale Hearing, if the

Successful Bidder fails to consummate the Sale because of a

breach or failure to perform on the part of such Successful

Bidder, the applicable Back-Up Bidder will be deemed to

be the new Successful Bidder for the Assets or applicable

Asset Class, and the Debtor will be authorized but not

required, to consummate the Sale with such Back-Up

Bidder without further order of the Bankruptcy Court. The

Back-Up Bidder shall be required to close within three (3)

business days following receipt of notice from the Debtor

provided, however, that in the event SB Capital or Madrag

is the Back-Up Bidder, SB Capital or Madrag shall be

required to close only if such closing occurs prior to March

31, 2016 or May 14, 2016 respectively.

15. The Debtor believes that conducting the Auction is critical to the integrity

of its search process for the highest and/or best bid. Accordingly, within one business day of

entry of the Bidding Procedures Order, the Debtor will serve a notice (the “Auction Notice”),

attached as Exhibit 2 to the Bidding Procedures Order, by e-mail and/or first class mail upon: (a)

the Office of the United States Trustee for the Southern District of New York (the “U.S.

Trustee”); (b) all the Debtor’s landlords; (c) all applicable federal, state, and local taxing

authorities; (d) all applicable state attorneys general; (e) all other government agencies required

to receive notice under the Bankruptcy Rules; (f) the 20 largest unsecured creditors of the

Debtor; (g) any other party that files a notice of opposition in the case; (h) any parties known by

the Debtor to be potentially interested in participating in the proposed auction; and (i) any other

party appearing on the Debtor’s creditor matrix.


19

16. In order to maximize notice, the Debtor is providing notice of this Motion

to (a) the Office of the United States Trustee; (b) the Debtor’s twenty (20) largest unsecured

creditors; (c) counsel to SB Capital; (d) counsel to Madrag; (e) all the Debtor’s landlords; (e) all

applicable state attorneys general; (f) any potentially interested parties; and (g) parties entitled to

notice pursuant to Bankruptcy Rule 2002.

17. Any bidder that desires to make a bid will deliver written copies of its bid

to (a) proposed counsel to the Debtor, Goldberg Weprin, Finkel Goldstein LLP, 1501 Broadway,

22nd Floor, New York, New York 10036, Attn: Kevin J. Nash; (b) counsel to SB Capital,

DiConza Traurig Kadish LLP, 630 Third Avenue, 7th Floor, New York, New York 10017, Attn:

Maura Russell; (c) counsel to Madrag, Rosen & Associates, 747 Third Avenue, New York, New

York 10017, Attn: Nancy Kourland; and (d) counsel to the Official Committee of Unsecured

Creditors, so as to be received not later than 4:00 p.m. on February 1, 2016 (the “Bid Deadline”).

18. Any objections to the Motion should be in writing, state the basis of such

objection with specificity, be filed with the Court in compliance with the Bankruptcy Rules and

the Local Rules and served upon the following (the “Bid and Objection Notice Parties”): (c) the

proposed counsel to the Debtor, Goldberg Weprin, Finkel Goldstein LLP, 1501 Broadway, 22nd

Floor, New York, New York 10036, Attn: Kevin J. Nash; (b) counsel for any committee

appointed in this chapter 11 case; (c) the U.S. Trustee, U.S. Federal Office Building, 201 Varick

Street, Suite 1006, New York, New York 10014, Attn: Susan Golden; (d) counsel to SB Capital,

DiConza Traurig Kadish LLP, 630 Third Avenue, 7th Floor, New York, New York 10017, Attn:

Maura Russell; and (g) counsel to Madrag, Rosen & Associates, 747 Third Avenue, New York,

New York 10017, Attn: Nancy Kourland.


20

Legal Basis For Relief Requested

A. Authorizing Entry into Stalking Horse Agreements, Bidding Protections and

Bidding Procedures and Auction

19. Section 363(b)(l) of the Bankruptcy Code provides that a debtor, “after

notice and a hearing, may use, sell, or lease, other than in the ordinary course of business,

property of the estate. . . .“ 11 U.S.C. § 363(b)(l); see also Fed. R. Bankr. P. 6004(f)(1)

(authorizing sales outside of the ordinary course of business to be conducted privately or by

public auction). A debtor-in-possession is given these rights by section 1107(a) of the

Bankruptcy Code.

20. Section 363 of the Bankruptcy Code does not set forth a standard for

determining when it is appropriate to authorize the sale or disposition of a debtor’s assets prior to

confirmation of a plan. However, it is well settled that a sale of a debtor’s assets should be

authorized pursuant to section 363 of the Bankruptcy Code if a sound business judgment exists

for such a sale. In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983), considering the

following factors:

Sound business reason for the sale;

Accurate and reasonable notice;

Proportionate value of the asset to the estate as a whole (fair and

reasonable);

The amount of elapsed time since the filing;

The likelihood that a plan of reorganization will be proposed and

confirmed in the near future;

The effect of the proposed disposition on the future plan;

The amount of proceeds to be obtained from the sale versus the appraised

value of the property sold; and

Whether the asset is decreasing or increasing in value.

Lionel, 722 F.2d at 1071.

21. Courts have made clear that a debtor’s showing of a sound business

justification does not have to be unduly exhaustive. Rather, a debtor is “simply required to


21

justify the proposed disposition with sound business reason . . . .” In re Baldwin United Corp.,

43 B.R. 888, 906 (Bankr. S.D. Ohio 1984). Moreover, the paramount goal in any proposed sale

of property of the estate is to maximize the value received by the estate. See In re Food Barn

Stores, Inc., 107 F.3d at 564-65 (8th Cir. 1997)(stating that in bankruptcy sales, “a primary

objective of the Code [is] to enhance the value of the estate at hand”); In re Integrated Res., Inc.,

147 B.R. 650, 659 (S.D.N.Y. 1992)(“It is a well-established principle of bankruptcy law that the.

. . [debtors’] duty with respect to such sales is to obtain the highest price or greatest overall

benefit possible for the estate.” (quoting In re Atlanta Packaging Prods., Inc., 99 B.R. 124, 130

(Bankr. N.D. Ga. 1988)).

22. Liquidation sales are a routine part of retail chapter 11 cases. See, e.g., In

re Ames Dept. Stores, Inc., 136 B.R. at 359 (holding that “going-out-of-business” sales are an

important part of “overriding federal policy requiring Debtor to maximize estate assets”).

Bankruptcy courts in this and other districts have approved similar liquidation sales. See, e.g., In

re Borders Grp., Inc., No. 11-10614 (MG) (Bankr. S.D.N.Y. July 21, 2011) (authorizing debtors’

entry into agency agreement to conduct full-scale liquidation of stores); In re Borders Grp., Inc.,

No. 11-10614 (MG) (Bankr. S.D.N.Y. Feb. 18, 2011) (authorizing debtors’ entry into agency

agreement to conduct store closing sales on first day); In re G&G Retail, Inc., No. 06-10152

(RDD) (Bankr. S.D.N.Y. Feb. 17, 2006) (same).

1. The Bidding Protections Requested Are Reasonable and Justified

23. If SB Capital or Madrag are not the Successful Bidders, the Debtor

proposes to provide each of them with certain Bidding Protections as outlined above. The

Bidding Protections are in consideration for SB Capital and Madrag conducting its due diligence,

entering into the Agency Agreement and Select Lease Purchase Agreement, and agreeing to


22

subject their respective bids to the Auction. The Bidding Protections were negotiated at arm’s-

length and in good faith, are reasonable, and are necessary to secure the respective stalking

horse’s participation in the Debtor’s sale process. The Bidding Protections should be approved

and accorded administrative expense status under sections 503(b)(1)(A) and 507 of the

Bankruptcy Code because they provide a clear benefit to the Debtor’s estate and both SB Capital

and Madrag expressly conditioned their willingness to enter into the Stalking Horse Agreements

upon the Debtor’s agreement to, and Court approval of, the Bidding Protections.

2. Entry into the Stalking Horse Agreements Is a Sound Exercise of the Debtor’s Business Judgment

24. Entry into the Stalking Horse Agreements is a sound exercise of the

Debtor’s business judgment. Utilizing a professional liquidating agent with substantial

experience and expertise in conducting orderly simultaneous Store Closing Sales will maximize

proceeds for the Debtor’s estate in the event no higher and/or better Alternative Transaction is

consummated. Additionally, it is more cost effective for the Debtor to allow SB Capital or

another liquidator that becomes a Successful Bidder to conduct the Store Closing Sales than for

the Debtor to conduct such sales on its own because the Debtor is not responsible for the

operating expenses of the liquidator.

25. Likewise, once the stores are emptied of inventory, it is more economical

to attempt to obtain assignees for the leases, rather than expose the estate to pre-petition rent

arrears or substantial rejection claims which will eat away at recovery for the trade creditors.

26. The Debtor has and will demonstrate that the Stalking Horse Agreements

are the result of good faith arms’-length negotiations. Additionally, certain financial

accommodations provided by the Stalking Horse Agreements constitute the extension of credit in

good faith under section 364(e) of the Bankruptcy Code.


23

27. Moreover, the Debtor submits that the consideration provided pursuant to

the Stalking Horse Agreements is fair and constitutes reasonably equivalent value under the

Bankruptcy Code, the Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act

and other applicable Federal and State laws.

3. Bidding Procedures

28. The Debtor believes that the solicitation of bids to serve as the Debtor’s

agent in connection with the Store Closing Sales or to serve as a going-concern buyer, or to buy

some or all of the store leases, is the best way to maximize the value of the Debtor’s estate.

Accordingly, the Debtor respectfully requests that the Court approve the proposed Bidding

Procedures.

29. The Debtor submits that the form of Auction Notice, substantially in the

form attached as an exhibit to the Bidding Procedures Order, is reasonably calculated to provide

timely and adequate notice of the proposed Store Closing Sales, the Bidding Procedures, the

Auction and the Sale Hearing to the Debtor’s creditors and all other parties-in-interest that are

entitled to notice, as well as those parties that have expressed a bona fide interest in acquiring the

Assets on a going concern or liquidation basis.

D. The Store Closing Sales

1. Approval of Store Closing Sales Under Section 363 of the Bankruptcy Code is Warranted 30. The Debtor, exercising its business judgment has determined that, in the

event there is no viable higher and/or better Alternative Transaction with a going concern buyer,

it is in the best interests of the Debtor and its creditors to conduct Store Closing Sales as quickly

as possible. In fact, delays in the liquidation process would result in added expense and could

cause portions of the Debtor’s inventory to become less valuable.


24

31. Section 363(b) of the Bankruptcy Code provides that a debtor-in-

possession “after notice and a hearing, may use, sell, or lease, other than in the ordinary course

of business, property of the estate.” 11 U.S.C. § 363(b). See In re Ames Dept. Stores., Inc., 136

B.R. 357, 359 (Bankr. S.D.N.Y. 1992) (noting that “going-out-of-business” sales are governed

by section 363(b)). To obtain court approval to use property under section 363(b) of the

Bankruptcy Code for the purpose of a liquidation sale at auction, the Debtor need only show a

legitimate business justification for the proposed action. See, e.g., In re Martin, 91 F.3d 389, 395

(3d Cir. 1996).

32. If a valid business justification exists, the law vests the debtor’s decision

to use property out of the ordinary course of business with a strong presumption “that in making

a business decision the directors of a corporation acted on an informed basis, in good faith and in

the honest belief that the action taken was in the best interests of the company.” In re Integrated

Resources, Inc., 147 B.R. 650, 656 (S.D.N.Y. 1990) (quoting Smith v. Van Gorkom, 488 A.2d

858, 872 (Del. 1985)). Accordingly, parties challenging a debtor’s decision must make a

showing of “bad faith, self-interest or gross negligence.” Integrated Resources, 147 B.R. at 656

(citations omitted).

33. Courts examine four factors in determining whether a sound business

purpose or justification exists for a sale of assets under section 363(b) of the Bankruptcy Code:

(i) whether a sound business reason exists for the proposed transaction; (ii) whether fair and

reasonable consideration will be provided; (iii) whether the transaction has been proposed and

negotiated in good faith; and (iv) whether adequate and reasonable notice has been provided.

See Lionel, 722 F2d at 1071.


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34. The Debtor and its advisors have analyzed the Debtor’s business and

various strategic alternatives and determined that an immediate liquidation of the Debtor’s retail

locations and a sale of the leases is the only realistic alternative to maximize recoveries for the

creditors in the event a going concern buyer is not identified at or prior to the Auction.

35. Perhaps equally important is pursuit of immediate Store Closing Sales to

reduce the accrued administrative expenses since SB Capital or another Successful Bidder is

assuming a significant portion of the risks and costs of the Store Closing Sales and will pay

expenses as of February 5, 2016.

36. Moreover, since the Debtor has no secured creditors, the ability to proceed

with Store Closing Sales is made easier and the provisions of Section 363(f) of the Bankruptcy

Code are not implicated.

2. Restrictive Provisions Impeding Store Closing Sales are Unenforceable

37. The Debtor leases all of its retail store locations and thus, the Store

Closing Sales may be inconsistent with certain provisions of the governing leases or other

documents to which the Debtor is a party, whether or not filed of record, with respect to any of

the leased retail store locations, including, for example, reciprocal easements, “go dark”

provisions, landlord recapture rights, and other covenants that purport to restrict or prohibit the

Debtor from conducting store closing or similar themed sales. Such restrictive provisions are

unenforceable in bankruptcy as they constitute an impermissible restraint on a debtor’s ability to

effectively administer its estate and maximize the value of its assets under the Bankruptcy Code.

See In re Ames Dep’t Stores, 136 B.R. at 359 (holding that enforcement of lease restrictions

would “contravene overriding federal policy requiring Debtor to maximize estate assets”); In re

R.H. Macy and Co., Inc., 170 B.R. 69, 73-74 (Bankr. S.D.N.Y. 1994) (finding that landlord


26

could not recover for breach of covenant to stay open because debtor had a duty to maximize

value to the estate by conducting a store closing sale and closing the store).

38. Similarly, to the extent there are restrictive provisions in any of the

governing leases dictating the manner, method, dimensions relating to or otherwise prohibiting

the use of advertising materials or signage to be used relating to the conduct of the Store Closing

Sales, the Debtor requests that such restrictive provisions be invalidated as improper interference

with the Debtor’s ability to effectively conduct the Store Closing Sales and maximize the

liquidation value of the Assets. Courts in this District have routinely granted similar relief and

held that restrictive lease provisions affecting store closing sales in chapter 11 cases are

unenforceable. See, e.g., In re Great Atl. & Pac. Tea Co., No. 15-23007 (RDD) (Bankr.

S.D.N.Y. Aug. 11, 2015); In re dELiA*s, Inc., No. 14-23678 (RDD) (Bankr. S.D.N.Y. Jan. 28,

2015).

39. Accordingly, to the extent that any provisions or restrictions exist in any

of the leases governing the retail store locations or other documents, the Debtor respectfully

requests that the Court override such provisions and authorize the Debtor and/or the Successful

Bidder to conduct the Store Closing Sales in accordance with the Sale Guidelines without

interference by any landlords or other persons affected in any way, directly or indirectly, by the

Store Closing Sales.

3. Store Closing Sales Should be Exempt from Federal, State, and Local Laws, Statutes, Rules and Ordinances Relating to Liquidations 40. The Debtor operates retail locations across four states (New York, New

Jersey, Pennsylvania and Connecticut) that may have state and local laws, statutes, regulations,

rules and ordinances governing store closing, liquidation, or similar themed sales, that require

waiting periods, special licenses and permits, or restrictions against bulk sales and augmentation


27

(collectively, the “Liquidation Laws”). The Bankruptcy Code preempts state and local laws that

conflict with its underlying policies, and the Court has the authority, under section 105(a) of the

Bankruptcy Code, to permit the Store Closing Sales notwithstanding contrary Liquidation Laws.

See generally Belculfine v. Aloe (In re Shenango Grp., Inc.), 186 B.R. 623, 628 (Bankr. W.D. Pa.

1995) (noting that debtors have unique fiduciary and legal obligations pursuant to the

Bankruptcy Code and that state statutes “cannot place burdens on them where the result would

contradict the priorities established by the federal bankruptcy code.”).

41. Here, the Debtor’s ability to use and sell the Merchandise pursuant to

section 363 of the Bankruptcy Code, in order to maximize recovery for their estate and creditors,

would be severely undermined if the Court does not provide for a waiver of the Liquidation

Laws. Courts in this and other Districts have routinely granted comparable relief. See, e.g., In re

Great Atl. & Pac. Tea Co., No. 15-23007 (RDD) (Bankr. S.D.N.Y. Aug. 11, 2015); In re

dELiA*s, Inc., No. 14-23678 (RDD) (Bankr. S.D.N.Y. Jan. 28, 2015).

42. Requiring the Debtor to comply with each state’s applicable local

Liquidation Laws would be extremely burdensome and adjudication of disputes with local

authorities over the application and interpretation of local laws would be tremendously expensive

for the estate. Moreover, in the context of a bankruptcy proceeding, waiving compliance with

Liquidations Laws is entirely appropriate as the Debtor and its Assets are subject to the Court’s

exclusive jurisdiction and the Court would be able to supervise and ensure proper conduct of the

Store Closing Sales. Additionally, governmental units and parties-in-interest will receive notice

of this Motion and the opportunity to be heard on any objections. Thus, the Debtor respectfully

requests that the Court expressly approve the Sale Guidelines and authorize the Debtor and/or the


28

Successful Bidder to conduct the Store Closing Sales without the added costs and delay of

complying with applicable local Liquidation Laws.

43. The requested waiver is narrowly tailored to facilitate the successful

conduct of the Sale. The Debtor is not seeking a general waiver of all state and local laws, but

only those specifically governing liquidation or similarly themed sales. The Debtor fully intends

to comply with applicable state and local environmental, tax, employment, public health and

safety laws, and consumer protection laws (regulating deceptive practices), except as explicitly

set forth in this Motion.

E. Other Related Relief

1. The Debtor Should be Authorized to Abandon Certain Property Following the Conclusion of the Store Closing Sales 44. After notice and a hearing, a debtor “may abandon any property of the

estate that is burdensome to the estate or that is of inconsequential value and benefit to the

estate.” 11 U.S.C. § 554(a); see also Hanover Ins. Co. v. Tyco Indus., Inc., 500 F.2d 654, 657

(3d Cir. 1974) (stating that a trustee “may abandon his claim to any asset, including a cause of

action, he deems less valuable than the cost of asserting that claim”).

45. Pursuant to the Agency Agreement, the Successful Bidder is authorized to

sell Owned FF&E remaining in the retail store locations following the conclusion of the Store

Closing Sales. However, the Debtor (or the Successful Bidder) may determine that the costs

associated with holding and/or selling certain property and/or Owned FF&E exceeds the

proceeds that will be realized upon its sale, or that such property is not sellable at all. In such

event, the property is of inconsequential value and benefit to the estate and/or may be

burdensome to retain.


29

46. To maximize the value of the Debtor’s Assets and to minimize the costs to

the estate, the Debtor respectfully requests authority to abandon any of remaining Owned FF&E

or other property located at the retail store locations without incurring liability to any person or

entity. The Debtor further requests that the landlords of each retail store location with any

abandoned Owned FF&E or other property be authorized to dispose of such property without

liability to any third parties.

2. Sale of the Assets Does Not Require the Appointment of a Consumer Privacy Ombudsman 47. Section 363(b)(1) of the Bankruptcy Code provides that a debtor may not

sell or release personally identifiable information about individuals unless such sale or lease is

consistent with its policies as of the date of the commencement of the case, or upon appointment

of a consumer privacy ombudsman pursuant to section 332 of the Bankruptcy Code.

48. Pursuant to the Agency Agreement, the Successful Bidder will be

permitted only to use the Debtor’s customer lists when acting as the Debtor’s agent and in

connection with the Sale. The Successful Bidder will be subject to reasonable restrictions by the

Debtor in order to comply with the Debtor’s privacy policy and applicable laws governing the

use and dissemination of confidential consumer personal data. While the Debtor may sell or

lease any personally identifiable information to the Successful Bidder, such transfer would be

consistent with the Debtor’s policies as of the Petition Date. Therefore, appointment of a

consumer privacy ombudsman is unwarranted.

Good Faith Under Section 363(m) of the Bankruptcy Code;

Sale Not In Violation of Section 363(n) of the Bankruptcy Code

49. Section 363(m) of the Bankruptcy Code provides:


30

The reversal or modification on appeal of an authorization under

subsection (b) or (c) of this section of a sale or lease of Property

does not affect the validity of a sale or lease under such

authorization to an entity that purchased or leased such Property in

good faith, whether or not such entity knew of the pendency of the

appeal, unless such authorization and such sale or lease were

stayed pending appeal.

11 U.S.C. § 363(m). Section 363(n) of the Bankruptcy Code, among other things, provides, in

turn, that a trustee may avoid a sale under such section if the sale price was controlled by an

agreement among potential bidders at the sale.

50. The Stalking Horse Agreements were negotiated, arm’s length

transactions, in which SB Capital and Madrag have acted in good faith, without collusion or

fraud. SB Capital and Madrag are not “insiders” or “affiliates” of the Debtor as those terms are

defined in the Bankruptcy Code. Neither SB Capital nor Madrag has engaged in any conduct

that would prevent the application of section 363(m) of the Bankruptcy Code or otherwise

implicate section 363(n) of the Bankruptcy Code. In addition, if a party other than SB Capital or

Madrag is the Successful Bidder, the Debtor intends to make an appropriate showing at the Sale

Hearing that the purchase agreement(s) with the other Successful Bidder(s) is a negotiated, arm’s

length transaction, in which the Successful Bidder at all times has acted in good faith under and

otherwise in accordance with such standards.

Authorization of Assumption and Assignment of Assumed Leases

51. As discussed above, the Stalking Horse Agreements contemplate a process

whereby the Debtor would solicit offers for the store leases. Thus, the Debtor requests

authorization to assume and assign the commercial leases designated by Madrag, or by another

Successful Bidder (the “Assumed Leases”).

52. If a lease is assumed and assigned pursuant to the Approval Order, then

unless the affected landlord properly files and serves an objection to the proposed Cure Costs,


31

the landlord will receive at the time of the closing (or as soon as reasonably practicable

thereafter), the Cure Costs.

53. Madrag or another Successful Bidder(s), on behalf of the Debtor, shall

promptly pay or cause to be paid the Cure Costs with respect to the Assumed Leases, other than

those Cure Costs, if any, which are to be paid by the Debtor pursuant to the agreement with

Madrag or another Successful Bidder(s). Madrag or another Successful Bidder(s) shall be

responsible for satisfying any requirements regarding adequate assurances of future performance

that may be imposed under section 365(b) of the Bankruptcy Code in connection with the

proposed assignment of any Assumed Leases. The Debtor requests that Cure Costs disputed by

any landlord be resolved by the Court at the Sale Hearing or at such other hearing to approve

assumption and assignment of the relevant lease.

54. Except to the extent otherwise provided in the agreement(s) entered into

with Madrag or another Successful Leases(s), subject to the payment of any Cure Costs, the

assignee of any Assumed Leases will not be subject to any liability to the landlord that accrued

or arose before the closing date of the sale of the Assets and the Debtor shall be relieved of all

liability accruing or arising thereafter pursuant to section 365(k) of the Bankruptcy Code.

55. The Debtor further requests that the Sale Order provide that the Assumed

Leases will be assigned to, and remain in full force and effect without default for the benefit of

Madrag, or another Successful Bidder(s).

56. Although section 365 of the Bankruptcy Code does not set forth standards

for courts to apply in determining whether to approve a debtor in possession’s decision to

assume an executory contract, courts have consistently applied a “business judgment” test when

reviewing such a decision. See, e.g., Group of Institutional Investors v. Chicago, Milwaukee, St.


32

Paul & Pacific Railroad Co., 318 U.S. 523, 550 (1953). Accordingly, assumption or rejection of

an executory contract is appropriate where the assumption or rejection would benefit the estate.

The assumption and assignment of the Assumed Leases will benefit the Debtor’s estate for the

reasons set forth above.

57. As set forth above with respect to Assumed Leases to be assumed and

assigned pursuant to the Sale, the Debtor will have sent a cure notice (the “Cure Notice”) to all

landlords at least 1 day prior to the Auction, notifying such landlords of the intended assumption

by the Debtor and assignment to Madrag or another Successful Bidder(s).

58. The landlords will have sufficient opportunity to file an objection to the

proposed cure costs (the “Cure Costs”) set forth on the Cure Notice. To the extent no objection

is filed with regard to a particular cure amount, such cure amount shall be binding on the

applicable landlord. The payment of the Cure Costs set forth in the Cure Notice (or a different

amount either agreed to by the Debtor or resolved by the Court as a result of a timely-filed

objection filed by a landlord) will be in full and final satisfaction of all obligations to cure

defaults and compensate the landlords for any pecuniary losses under such leases pursuant to

section 365(b)(1) of the Bankruptcy Code.

59. Madrag or another Successful Bidder(s) is responsible for providing

evidence of “adequate assurance of future performance” to the extent required in connection with

the assumption and assignment of any Assumed Leases. The meaning of “adequate assurance of

future performance” for the purpose of the assumption of executory contracts and unexpired

leases pursuant to section 365 of the Bankruptcy Code depends on the facts and circumstances of

each case, but should be given “practical, pragmatic construction.” See Carlisle Homes, Inc. v.

Arrari (In re Carlisle Homes, Inc.), 103 B.R. 524, 538 (Bankr. D.N.J. 1989); see also, e.g., In re


33

Natco Indus., Inc., 54 B.R. 436, 440 (Bankr. S.D.N.Y. 1985) (adequate assurance of future

performance does not mean an absolute assurance that debtor will thrive and pay rent); In re Bon

Ton Rest. & Pastry Shop, Inc., 53 B.R. 789, 803 (Bankr. N.D. Ill. 1985).

Further Relief

60. The Debtor requests that the Court waive the stay imposed by Bankruptcy

Rule 6004(h), which provides that “[a]n order authorizing the use, sale or lease of property other

than cash collateral is stayed until the expiration of 14 days after entry of the order, unless the

court orders otherwise.” Time is of the essence and it is imperative that the Debtor be able to

assume the Agency Agreement or, in the alternative, enter into the Alternative Transaction

Agreement, and commence the Store Closing Sales on the timeline proposed. In order to

maximize the value of the Assets and minimize the estate’ unnecessary administrative expenses,

the Debtor believes a waiver of the 14-day stay imposed by Bankruptcy Rules 4001(a), 6004(h)

and 6006(d), to the extent that they apply, is in the best interest of the Debtor’s estate and

stakeholders.

Notice

61. Notice of this Motion has or will be provided to: (a) the Office of the

United States Trustee; (b) the Debtor’s twenty (20) largest unsecured creditors; (c) counsel to SB

Capital; (d) counsel to Madrag; (e) all the Debtor’s landlords; (e) all applicable state attorneys

general; (f) any potentially interested parties and (g) parties entitled to notice pursuant to

Bankruptcy Rule 2002.

No Prior Request

62. No prior motion for the relief requested herein has been made to this or

any other Court.


34

WHEREFORE, the Debtor respectfully requests that the Court grant relief

consistent with the foregoing; and grant such other and further relief as the Court deems

appropriate.

Dated: New York, New York

January 14, 2016

Respectfully submitted,

/s/ Kevin J. Nash

Kevin J. Nash

Evan M. Lazerowitz


Proposed Counsel for the Debtor

1501 Broadway – 22nd

Floor


Telephone: (212) 221-5700

[email protected]

x:\gwfg\new data\yen\word\joyce leslie\second day motions\motion to employ liquidation agent 1-14-16 - v2.docx


EXHIBIT “A”

16-22035-rdd Doc 43-1 Filed 01/14/16 Entered 01/14/16 20:36:12 Exhibit A - Agency Agreement Pg 1 of 64

AGENCY AGREEMENT

This Agency Agreement (the “Agreement”) is entered into as of this 14 day of

January, 2016, by and between and JOYCE LESLIE Inc., a Delaware Corporation, with a

principal place of business at 170 W Commercial Avenue, Moonachie, NJ 07074 (the

“Merchant”) and a joint venture among SB CAPITAL GROUP, LLC, TIGER CAPITAL

GROUP, LLC and 360 MERCHANT SOLUTIONS, LLC (collectively, the “Agent”, and

collectively with Merchant, the “Parties”).

RECITALS

WHEREAS, Merchant operates certain retail store locations and desires that Agent act as

Merchant’s exclusive agent for the limited purpose of (a) selling all of the Merchandise (as

hereinafter defined) located in Merchant’s retail store location(s) identified on Exhibit A-1

attached hereto, (each a “Store”, and collectively, the “Stores”) through the Stores, and (b)

selling all of the Owned FF&E (as hereinafter defined) located in the Stores and Merchant’s

corporate offices (collectively, the “Closing Locations”), by means of a “going out of business,”

“store closing”, “sale on everything”, “everything must go”, or similarly themed sale (in each

case as further described below, the “Sale”); and

WHEREAS, Merchant intends to file a voluntary petition on January 9, 2016 for relief

under chapter 11 of Title 11, United States Code (the “Bankruptcy Code”), initiating a chapter

11 case (the “Bankruptcy Case”) in the United States Bankruptcy Court for the Southern District

of New York (the “Bankruptcy Court”)

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth

herein, and for other good and valuable consideration, the receipt and sufficiency of which are

hereby acknowledged, Agent and Merchant hereby agree as follows:

Section 1. Definitions and Exhibits

1.1 Defined Terms. The terms set forth below are defined in the Sections referenced

of this Agreement:

Defined Term Section Reference

Additional Agent Merchandise Section 8.9

Adjustment Amount Section 3.3(a)

Agency Accounts Section 3.3(c)(ii)

Agency Documents Section 11.1(b)

Agent Preamble

Agent’s Fee Section 3.1(b)

Agent’s FF&E Commission Section 15(a)

Agent Claim Section 12.5

Agent Collateral Section 16.11(a)


2

Agent Indemnified Parties Section 8.3(a)

Agreement Preamble

Applicable General Laws Section 2(c)

Approval Order Section 2(b)

Bankruptcy Code Recitals

Bankruptcy Court Recitals

Benefits Cap Section 4.1(c)

Bidding Procedures Order Section 10.1(b)

Bid Protections Section 16.12(b)

Central Services Section 4.1

Competing Bid Section 16.12(a)

Cost File Section 5.3(a)

Cost Value Section 5.3(a)

Defective Merchandise Section 5.2(b)

Designated Deposit Accounts Section 3.3(c)(i)

Distribution Center Section 5.5

Distribution Center Expenses Section 4.1

Distribution Center Services Section 5.5

Estimated Guaranteed Amount Section 3.3(a)

Events of Default Section 14

Excluded Benefits Section 4.1

Excluded Defective Merchandise Section 5.2(b)

Excluded Pricing Adjustments Section 3.1(c)(ii)

Existing Vendors Section 8.9(a)

Expenses Section 4.1

Excluded Store FF&E Section 15(a)

Final Inventory Report Section 3.3(a)

Final Reconciliation Section 8.7(b)(i)

Final Reconciliation Settlement Date Section 8.7(b)(i)

Force Majeure Event Section 8.8

FF&E Commission Option Section 15(a)

FF&E Disposition Budget Section 15(a)

FF&E Disposition Expenses Section 15(a)

FF&E Guaranty Amount Section 15(a)

FF&E Guaranty Option Section 15(a)

FF&E Sale Election Deadline Section 15(a)

FF&E Sale Option Section 15(a)

Gross Rings Section 5.3(b)(vi)

Gross Rings Period Section 5.3(b)(vi)

Guaranteed Amount Section 3.1(a)

Guaranty Percentage Section 3.1(a)

Hazardous Materials Section 15(d)

Initial Guaranty Payment Section 3.3(a)

Inventory Date Section 5.1(a)

Inventory Reconciliation Date Section 3.3(a)

Inventory Taking Section 5.1(a)


3

Inventory Taking Instructions Section 5.1(a)

Inventory Taking Service Section 5.1(a)

Lease Extension Motion Section 10.1(d)

Letter of Credit Section 3.1(h)

Liquidation Sale Laws Section 2(c)

Lowest Location Price Section 3.1(e)(i)

Membership Program Discount Section 8.6(b)

Merchandise Section 5.2(a)

Merchandise Ceiling Section 3.1(d)

Merchandise Receipt Deadline Section 5.2(a)

Merchandise Threshold Section 3.1(d)

Merchant Preamble

Merchant’s Designated Account Section 3.3(a)

Merchant Indemnified Parties Section 8.3(a)

Net FF&E Proceeds Section 15(a)

Non-CAM Trash Removal Charges Section 4.1

Occupancy Expenses Section 4.1

Owned FF&E Section 15(a)

Owned FF&E Guaranty Amount Section 15(a)

Parties Preamble

Payment Date Section 3.3(a)

POS Section 3.1(e)(i)

Prevailing Discount Adjustment Section 5.3(b)(iii)

Proceeds Section 3.3(b)

Reconciled DC Merchandise Receipts Section 5.1(b)

Remaining Merchandise Section 3.2

Retail Price Section 5.3(b)

Retained Employee Section 9.1

Retention Bonus Section 9.4

Returned Merchandise Section 8.5

Sale Recitals

Sale Commencement Date Section 6.1

Sale Guidelines Section 8.1

Sale Term Section 6.1

Sale Termination Date Section 6.1

Sales Taxes Section 8.3(a)

Sales Tax Account Section 8.3(a)

Sharing Amount Section 3.1(b)

Sharing Threshold Section 3.1(b)

Shipping Variance Section 5.1(b)

Shipping Variance Response Section 5.1(b)

Signage Costs Reimbursement Section 16.12(b)

Store(s) Recitals

Third Party Section 4.1

Third Party Vendors Section 8.9(a)

UCC Section 8.9(c)


4

Vacate Date Section 6.2

WARN Act Section 9.1

1.2 Exhibits. The Exhibits and Schedules annexed to this Agreement, as listed below,

are an integral part of this Agreement:

Exhibit Section Reference Description

Exhibit A-1 Recitals Stores

Exhibit 3.1(c) Section 3.1(c) Merchandise Ceiling/Threshold Adjustment

Exhibit 3.1(d) Section 3.1(d) Cost Factor Adjustment

Exhibit 3.3(a) Section 3.3(a) Merchant’s Designated Account

Exhibit 3.3(h) Section 3.3(h) Form of Letter of Credit

Exhibit 4.1(a) Section 4.1(a) Store Occupancy Expense Schedule

Exhibit 5.1(a) Section 5.1 Inventory Taking Instructions

Exhibit 8.1 Section 8.1 Sale Guidelines

Exhibit 10.1(b) Section 10.1(b) Form of Bidding Procedures Order

Exhibit 10.1(c) Section 10.1(c) Form of Approval Order

Exhibit 11.1(d) Section 11.1(c) Pre-Existing Liens

Exhibit 11.1(k) Section 11.1(k) Planned Promotional Activity January

Exhibit 11.1 (l) Section 11.1(l) Pending Matters

Exhibit 11.1(q) Section 11.1(1) List of Store Leases that Expire During Sale

Exhibit 15 Section 15 Excluded Store FF&E Option Stores

Section 2. Appointment of Agent/Liquidation Sale Laws/Approval Order

(a) Appointment of Agent. Effective on the date hereof and subject to the entry of

the Approval Order, Merchant hereby irrevocably appoints Agent, and Agent hereby agrees to

serve, as Merchant’s exclusive agent for the limited purpose of conducting the Sale and

disposing of Merchant’s Owned FF&E at the Closing Locations, in accordance with the terms

and conditions of this Agreement.

(b) Approval Order. On the date of the commencement of the Bankruptcy Case,

Merchant shall file a motion with the Bankruptcy Court, which motion shall seek (I) entry of Bid

Procedures Order approving Bidding Procedures and all of the Bid Protections (each as further

described in Section 16.10 hereof) and (II) entry of an order , inter alia, approving this

Agreement and authorizing Merchant and Agent to conduct the Sale in accordance with the

terms hereof (the “Approval Order”). The Bid Procedures Order shall be substantially in the

form annexed hereto as Exhibit 10.1(b) and the Approval Order shall be in substantially the form

annexed hereto as Exhibit 10.1(c), and otherwise be reasonably satisfactory to the Merchant and

Agent, and provide, inter alia, that:

(i) this Agreement (and the Sale and each of the other transactions

contemplated hereby) is approved in its entirety;


5

(ii) Merchant and Agent shall be authorized to continue to take any and all

actions as may be necessary or desirable to implement this Agreement and the Sale and

each of the other transactions contemplated hereby;

(iii) Agent shall be entitled to sell all Merchandise, the Additional Agent

Merchandise, and Owned FF&E hereunder free and clear of all liens, claims, interests or

encumbrances thereon ,with any such presently existing liens, claims, interests or

encumbrances encumbering all or any portion of the Merchandise, Additional Agent

Merchandise, Owned FF&E or the Proceeds or any other proceeds of the foregoing

attaching only to the Guaranteed Amount and other amounts to be received by Merchant

under this Agreement;

(iv) Agent shall have the right to use the Stores and all related Store services,

furniture, fixtures, equipment and other assets of Merchant as designated hereunder for

the purpose of conducting the Sale, free of any interference from any entity or person

subject to compliance with the Sale Guidelines and Approval Order;

(v) Agent, as agent for Merchant, is authorized to conduct, advertise, post

signs and otherwise promote the Sale as a “going out of business,” “store closing,” “sale

on everything,” “everything must go,” or similarly themed sale (including, without

limitation, by means of media advertising, interior and exterior banners, A-frames, and

similar signage and the use of sign walkers) without further consent of any person, in

accordance with the Sale Guidelines (as the same may be modified and approved by the

Bankruptcy Court) and without compliance with the Liquidation Sale Laws, subject to

compliance with the Sale Guidelines and Approval Order;

(vi) Agent shall be granted a limited royalty free license and right to use until

the Sale Termination Date the trademarks, trade names, logos, customer lists, website,

URL, mailing lists and email lists relating to and used in connection with the operation of

the Stores, solely for the purpose of advertising the Sale in accordance with the terms of

this Agreement;

(vii) all newspapers and other advertising media in which the Sale is advertised

shall be directed to accept the Approval Order as binding and to allow Merchant and

Agent to consummate the transactions provided for in this Agreement, including, without

limitation, the conducting and advertising of the Sale in the manner contemplated by this

Agreement;

(viii) all utilities, Internet service providers, website service or hosting

providers, landlords, creditors and all persons acting for or on their behalf shall not

interfere with or otherwise impede the conduct or advertising of the Sale, institute any

action in any court (other than in the Bankruptcy Court) or before any administrative

body which in any way directly or indirectly interferes with or obstructs or otherwise

impedes the conduct or advertising of the Sale;


6

(ix) the Bankruptcy Court shall retain jurisdiction over the parties to enforce

this Agreement;

(x) Agent shall not be liable for any claims against the Merchant other than as

expressly provided for in this Agreement;

(xi) subject to the terms and provisions of this Agreement, Agent shall be

authorized to include Additional Agent Merchandise in the Sale;

(xii) subject to Agent having satisfied its obligations under this Agreement to

tender payment of the Initial Guaranty Payment and to deliver the Letter of Credit, any

amounts owed by Merchant to Agent under this Agreement shall be granted the status of

superpriority claims in Merchant’s Bankruptcy Case pursuant to section 364(c) of

Bankruptcy Code senior to all other superpriority claims;

(xiii) Agent shall be granted a valid, binding, enforceable and perfected security

interest as provided for in Section 16.11 hereof without the necessity of filing financing

statements to perfect the security interests;

(xiv) the Bankruptcy Court finds that time is of the essence in effectuating this

Agreement and proceeding with the Sale at the Stores uninterrupted;

(xv) Merchant’s decisions to (A) enter into this Agreement and (B) perform

under and make payments required by this Agreement is a reasonable exercise of

Merchant’s sound business judgment consistent with its fiduciary duties and is in the best

interests of the Merchant, its estate, its creditors, and other parties in interest;

(xvi) this Agreement was negotiated in good faith and at arms’ length between

Merchant and Agent and that Agent is entitled to the protection of Section 363(m) of the

Bankruptcy Code;

(xvii) Agent’s performance under this Agreement will be, and payment of the

Guaranteed Amount, the Sharing Amount (if any) under this Agreement will be made, in

good faith and for valid business purposes and uses, as a consequence of which Agent is

entitled to the protection and benefits of Sections 363(m) and 364(e) of the Bankruptcy

Code;

(xviii) this Agreement is approved pursuant to Section 363 of the Bankruptcy

Code; and

(xix) in the event any of the provisions of the Approval Order are modified,

amended or vacated by a subsequent order of the Bankruptcy Court or any other court,

Agent shall be entitled to the protections provided in Sections 363(m) and 364(e) of the

Bankruptcy Code, and no such appeal, modification, amendment or vacatur shall affect

the validity and enforceability of the sale or the liens or priority authorized or created

under this Agreement or the Approval Order.


7

(xx) (A) the terms of this Agreement shall be binding on any trustee appointed

for the Merchant under any provision of the Bankruptcy Code, whether the Bankruptcy

Case of the Merchant is proceeding under chapter 7 or chapter 11 of the Bankruptcy

Code (the “Trustee”); (B) any such Trustee shall be authorized to operate the business of

Merchant to the fullest extent necessary to permit compliance with the terms of this

Agreement; and (C) Agent and any such Trustee shall be authorized to perform under this

Agreement upon the appointment of a Trustee without the need for further order of the

Bankruptcy Court;

(xxi) the application of any automatic stay of enforcement of the Approval

Order is waived;

(xxii) the Approval Order constitutes an authorization of the conduct of

Merchant and Agent in connection herewith;

(xxiii) through and including completion of the Final Reconciliation, Agent

shall be entitled to be heard on all issues in the Bankruptcy Case related to this

Agreement or the transactions contemplated thereby;

(xxiv) nothing contained in this Agreement and none of Agent’s actions taken in

respect of this Agreement or the transactions contemplated hereby shall be deemed to

constitute an assumption by Agent of any of Merchant’s obligations relating to any of

Merchant’s employees (except for Agent’s obligations to pay Expenses), nor shall Agent

become liable under any collective bargaining or employment agreement or be deemed a

joint or successor employer with respect to such employees;

(xxv) in the event Merchant notifies Agent of its intention to draw on the Letter

of Credit, Agent shall be entitled to an emergency hearing by the Bankruptcy Court

sufficient to determine whether such draw is permitted under the terms of this Agreement

prior to the occurrence of such draw;

(xxvi) during the Sale Term applicable to any Store and for purposes of

conducting the Sale at such Store, (A) Agent shall have the right to the unencumbered use

and occupancy of, and peaceful and quiet possession of, such Store and the assets

currently located at such Store, in each case subject to the extent of Merchant’s rights and

entitlement to use the same, and the services provided at such Store to the extent

Merchant is entitled to such services and (B) Merchant shall not assign, reject or

otherwise terminate any lease relating to any such Store where such assignment,

rejection, or termination would have an effective date on or prior to the applicable Sale

Termination Date or Vacate Date for such Store; and

(xxvii) directing the Merchant to establish the Guaranty Reserve pending the

final reconciliation of the Final Inventory Report, and to the extent Agent is owed any

amounts in respect of overfunding of the Guaranteed Amount (including, without


8

limitation, the Adjustment Amount) Merchant is authorized and directed to refund such

overpayment from the Guaranty Reserve and other funds available to Merchant.

(c) Subject to entry of the Approval Order, Agent shall be authorized to advertise the

Sale as a “going out of business,” “store closing”, “sale on everything”, “everything must go”, or

similar-themed sale, and the Approval Order shall provide that Agent shall be required to comply

with applicable federal, state and local laws, regulations and ordinances, including, without

limitation, all laws and regulations relating to advertising, permitting, privacy, consumer

protection, occupational health and safety and the environment, together with all applicable

statutes, rules, regulations and orders of, and applicable restrictions imposed by, governmental

authorities (collectively, the “Applicable General Laws”), other than all applicable laws, rules

and regulations in respect of “going out of business,” “store closing” “sale on everything”,

“everything must go” or similar-themed sales, including laws restricting safe, professional and

non-deceptive, customary advertising such as signs, banners, posting of signage, and use of sign-

walkers solely in connection with the Sale and including ordinances establishing license or

permit requirements, waiting periods, time limits or bulk sale restrictions that would otherwise

apply to the Sale, but excluding those designed to protect public health and safety (collectively,

the “Liquidation Sale Laws”), provided that such Sale is conducted in accordance with the terms

of this Agreement, the Sale Guidelines and the Approval Order.

(d) Authority. Except as otherwise specifically provided in this Agreement, Agent

shall have no authority, and shall not represent that it has any authority, to enter into any

contract, agreement, or other arrangement or take any other action by or on behalf of Merchant,

that would have the effect of creating any obligation or liability, present or contingent, on behalf

of or for the account of Merchant without Merchant’s prior written consent.

Section 3. Guaranteed Amount and Other Payments

3.1 Payments to Merchant and Agent.

(a) As a guaranty of Agent’s performance hereunder, in addition to the

payment of Expenses (as provided for in Section 4.1 hereof), Agent guarantees that Merchant

shall receive an amount (the “Guaranteed Amount”) equal to sixty-two percent (62%) (the

“Guaranty Percentage”) of the aggregate Cost Value of Merchandise. The Guaranteed Amount

will be calculated based upon the product of (x) the Guaranty Percentage multiplied by (y) the

aggregate Cost Value of the Merchandise (in the case of (y), as determined by (A) the Final

Inventory Report at the conclusion of the Inventory Taking by the Inventory Taking Service after

verification and reconciliation thereof by Merchant and Agent, (B) the aggregate amount of

Gross Rings (as adjusted for shrinkage per this Agreement), (C) the aggregate Cost Value of

Display Merchandise included in the Sale; and (E) the aggregate Cost Value of Returned

Merchandise included in the Sale and not otherwise included in the Inventory Taking. Agent

shall pay to Merchant (or its designee) the Guaranteed Amount in the manner and at the times

specified in Section 3.3 below.

(b) To the extent that Proceeds exceed the sum of (x) the Guaranteed Amount,

plus (y) Expenses of the Sale, plus (z) an amount equal to the sum of (i) six percent (6%) of the


9

sum of the aggregate Cost Value of the Merchandise included in the Sale; plus (ii) five percent

(5%) of the gross sale Proceeds from the sale of Additional Agent Merchandise (exclusive of

sale taxes) (the amount set forth in clause (z), the “Agent’s Fee” and the sum of clauses (x), (y)

and (z) being collectively defined as the “Sharing Threshold”), then all remaining Proceeds of

the Sale above the Sharing Threshold shall be shared fifty percent (50%) to Merchant

(Merchant’s share of Proceeds beyond the Sharing Threshold is the “Sharing Amount”) and fifty

percent (50%) to Agent.

(c) The Guaranty Percentage has been fixed based upon the Merchant’s

representation that the aggregate Cost Value (as defined in Section 5.3(a) of this Agreement) of

the Merchandise is not less than $3,000,000 (the “Merchandise Threshold”) and not greater than

$3,500,000 (the “Merchandise Ceiling”). To the extent that the aggregate Cost Value of the

Merchandise included in the Sale is less than or greater than the Merchandise Threshold or

Merchandise Ceiling, as applicable, then such deviation shall not constitute a breach of any

representation or warranty, or an Event of Default; provided, however, that, the Guaranty

Percentage shall be adjusted in accordance with Exhibit 3.1(c) attached hereto. Any adjustment

to the Guaranty Percentage provided for under this Section 3.1(c) shall be cumulative with, and

in addition to, any other adjustment provided for under this Agreement, including, without

limitation, any adjustment provided for under Sections 3.1(d) hereof.

(d) The Guaranty Percentage has also been fixed based upon the assumption

that the aggregate Cost Value of the Merchandise included in the Sale as a percentage of Retail

Price (as defined in Section 5.3(b) of this Agreement) of the Merchandise included in the Sale

(without taking into account any Shrink Provision, Prevailing Discount Adjustment and/or

Excluded Price Adjustments) (the “Cost Factor”) shall not be greater than forty-two and eight

tenths of one percent (42.80%) (the “Cost Factor Threshold”). In the event that the Cost Factor

is greater than the Cost Factor Threshold, then such deviation shall not constitute a breach of any

representation or warranty, or an Event of Default; provided, however, that, the Guaranty

Percentage shall be adjusted (in addition to any applicable adjustment hereunder) in accordance

with Exhibit 3.1(d). Any adjustment to the Guaranty Percentage provided for under this Section

3.1(d) shall be cumulative with, and in addition to, any other adjustment provided for under this

Agreement, including, without limitation, any adjustment provided for under Sections 3.1(c)

hereof. For purposes of this Agreement:

(e) To ensure accurate sales audit functions, as well as accurate calculations

of the Sharing Amount (if any) and Agent shall use Merchant’s existing point-of-sale system for

recording all sales (including any sales of Additional Agent Merchandise) in the Stores.

3.2 Payments to Agent. Subject to Agent’s obligation to pay in full the Guaranteed

Amount, the Sharing Amount (if any), and all Expenses, Agent shall be entitled to retain any

remaining Proceeds (inclusive of the Agent’s Fee). Provided that no Event of Default has

occurred and continues to exist on the part of Agent, all Merchandise and Additional Agent

Merchandise remaining at the conclusion of the Sale (“Remaining Merchandise”) shall become

the property of Agent, free and clear of all liens, claims, interests and encumbrances of any kind

or nature; provided, however, the proceeds realized upon a sale or other disposition of the

Remaining Merchandise shall constitute Proceeds hereunder for purposes of, inter alia,


10

calculating the Sharing Amount (if any) the due Merchant. Agent and its affiliates shall be

authorized to sell or otherwise dispose of the Remaining Merchandise with all logos, brand

names, and other intellectual property on the Merchandise intact, and shall be authorized to

advertise the sale of the Remaining Merchandise using Merchant’s name and logo.

3.3 Time of Payments; Proceeds; Control of Proceeds

(a) On the first (1st) business day after entry of the Approval Order (the

“Payment Date”), Agent shall pay to Merchant an amount (the “Initial Guaranty Payment”) equal

to seventy-five percent (75%) of the product of (i) the Guaranty Percentage multiplied by (ii) the

sum of (x) estimated aggregate Cost Value of the Merchandise to be included in the Sale as

reflected on Merchant’s books and records at the close of business on the last business day

immediately preceding the Sale Commencement Date; minus (y) an estimated shrink amount in

an amount equal to (3.86%) of Merchant’s aggregate cost of sales per the Merchant’s stock

ledger (not inclusive of financial accruals for shrink) in the Stores the twelve month period

immediately preceding the Sale Commencement Date (the “Estimated Guaranteed Amount”);

provided that, the Estimated Guaranteed Amount payable by Agent on the Payment Date shall be

calculated based on Merchandise located in the Stores as of the close of business on the last

business day immediately preceding the Sale Commencement Date. On the Payment Date, the

Initial Guaranty Payment shall be made by wire transfer of immediately available funds to the

account designated on Exhibit 3.3(a) attached hereto (the “Merchant’s Designated Account”).

The balance of the Guaranteed Amount, if any, shall be paid by Agent by wire transfer of

immediately available funds to the Merchant’s Designated Account on the second (2nd) business

day following the issuance of the final report of the aggregate Cost Value of the Merchandise

counted by the Inventory Taking Service following the completion of the Inventory Taking, after

review, reconciliation and mutual written verification thereof by Merchant and Agent (the “Final

Inventory Report”). In the event of a dispute as to the calculation of any portion of the

Guaranteed Amount, any such dispute shall be resolved in the manner and at the times set forth

in Section 8.7(b)(ii) hereof. Agent’s failure to pay such balance (if there is no dispute as to any

portion of the Guaranteed Amount) shall entitle the Merchant to draw upon the Letter of Credit

in accordance with Section 3.3(i) hereof to the extent of such balance or undisputed portion, as

applicable. Merchant and Agent shall exercise commercially reasonable efforts to reconcile the

Inventory Taking within twenty-one (21) days after its completion. In the event that the Initial

Guaranty Payment is either less than or exceeds the Guaranteed Amount, as applicable, Agent or

Merchant, as the case may be, shall pay to Merchant or Agent, as the case may be, the amount

(the “Adjustment Amount”) by which the actual Guaranteed Amount exceeds or is less than the

Initial Guaranty Payment.

(b) For purposes of this Agreement, “Proceeds” shall mean the aggregate of

(i) the total amount (in dollars) of all sales of Merchandise made under this Agreement, and all

service revenue received by Merchant from the Stores, in each case during the Sale Term and

exclusive of Sales Taxes; (ii) the total amount (in dollars) of all sales of Additional Agent

Merchandise (exclusive of Sales Taxes); (iii) all proceeds of Merchant’s insurance for loss or

damage to Merchandise arising from events occurring during the Sale Term relating to the

Merchandise and Additional Agent Merchandise; and (iv)) any and all proceeds received by

Agent from the disposition of Remaining Merchandise. For the avoidance of doubt: (1) proceeds

from the sales at the Stores for periods prior to the Sale Commencement Date; and (2) all


11

proceeds of Merchant’s insurance for loss or damage to Merchandise arising from events

occurring prior to the Sale Commencement Date; (4) proceeds from the sale or other disposition

of Owned FF&E (subject to Agent’s right to receive Agent’s FF&E Commission under Section

15 below) or the FF&E Guaranty Amount, as applicable; and (5) payments made by Agent on

account of the Guaranteed Amount, the Sharing Amount (if any), Expenses, the Letter of Credit,

shall, in each case, not constitute “Proceeds” hereunder.

(c) All Proceeds shall be controlled by Agent in the manner provided for

below:

(i) From and after the Sale Commencement Date and prior to the date

Agent establishes the Agency Accounts (see clause (ii) below), all Proceeds (including credit

card Proceeds) and proceeds of the sale Owned FF&E shall be collected by Merchant and

deposited on a daily basis into depository accounts designated by, owned and in the name of,

Merchant for the Stores, which accounts shall be designated for the deposit of Proceeds

(including all cash, credit card payments, checks and similar items of payment, deposits and any

other amounts contemplated by this Agreement) and proceeds from the sale Owned FF&E and

the disbursement of amounts payable to or by Agent hereunder (the “Designated Deposit

Accounts”). Subject to the provisions of Section 16.11 hereof, the Approval Order shall provide

(a) that Merchant grants to Agent a first priority security interest in and lien upon each

Designated Deposit Account to the extent of any Proceeds and any other amounts payable to

Agent deposited therein, and (b) for turnover to Agent of any such Proceeds (and any other

amounts payable to Agent deposited therein) in accordance with the terms and provisions of this

Agreement and the Approval Order, as applicable. If, notwithstanding the provisions of this

Section, Merchant receives or otherwise has dominion over or control of any Proceeds, or other

amounts due to Agent (including proceeds from the sale of Additional Agent Merchandise),

Merchant shall hold the same and other amounts in trust for Agent, and shall not deposit such

Proceeds or other amounts due Agent hereunder in any account except a Designated Deposit

Account or as otherwise instructed by Agent. Until such time as Agent establishes the Agency

Accounts (see clause (ii) below), Merchant and Agent shall cooperate with each other to

establish and implement appropriate steps and procedures to accomplish a daily reconciliation,

and remittance to Agent, of all Proceeds (including credit card Proceeds) and other amounts

contemplated by this Agreement that are deposited into the Designated Deposit Accounts.

(ii) After payment of the Initial Guaranty Payment and delivery of the

Letter of Credit, Agent may establish its own accounts (including without limitation credit card

accounts and systems), dedicated solely for the deposit of the Proceeds (including credit card

Proceeds) and other amounts contemplated by this Agreement, and the disbursement of amounts

payable to Agent hereunder (the “Agency Accounts”), and Merchant shall promptly, upon

Agent’s reasonable request, execute and deliver all necessary documents to open and maintain

the Agency Accounts; provided, however, Agent may elect to continue to use Merchant’s

Designated Deposit Accounts as the Agency Accounts. Agent shall exercise sole signatory

authority and control with respect to the Agency Accounts. The Agency Accounts shall be

dedicated solely to the deposit of Proceeds (including credit card Proceeds) and other amounts

contemplated by this Agreement, and the distribution of amounts payable hereunder; provided

that, in the event (a) Agent elects to continue to use Merchant’s Designated Deposit Accounts as


12

the Agency Accounts, and (b) such accounts have amounts deposited therein by Merchant that

do not constitute Proceeds and/or other amounts payable to Agent under this Agreement, then

Merchant and Agent shall cooperate with each other to establish and implement appropriate steps

and procedures to accomplish a daily reconciliation, and remittance to Agent, of all Proceeds

(including credit card Proceeds) and other such amounts. Upon request, Agent shall deliver to

Merchant copies of all bank statements and other information relating to the Agency Accounts;

provided that, in the event Agent elects to continue to use Merchant’s Designated Deposit

Accounts as the Agency Accounts, Merchant shall deliver to Agent copies of all bank statements

and other information relating to such accounts to enable Agent to track and trace deposited

funds that constitute Proceeds (including credit card Proceeds) and other amounts contemplated

by this Agreement. The Merchant shall not be responsible for, and Agent shall pay as an Expense

hereunder, all bank fees and charges, including wire transfer charges, related to the Sale and

Agency Accounts, whether received during or after the Sale Term. Upon Agent’s notice to

Merchant of Agent’s designation of the Agency Accounts, all Proceeds of the Sale (including

credit card Proceeds) shall be deposited into the Agency Accounts.

(iii) Agent shall have the right to use Merchant’s credit card facilities,

including Merchant’s credit card terminals and processor(s), credit card processor coding, and

Merchant identification number(s) and existing bank accounts for credit card Proceeds solely for

purposes of the Sale, and for processing transactions the sale of the Owned FF&E. In the event

that Agent elects to use Merchant’s credit card facilities, Merchant shall process credit card

transactions on behalf of Agent and for Agent’s account, applying customary practices and

procedures. Without limiting the foregoing, Merchant shall cooperate with Agent to download

data from all credit card terminals each day during the Sale Term to effect settlement with

Merchant’s credit card processor(s), and shall take such other actions necessary to process credit

card transactions on behalf of Agent under Merchant’s identification number(s). At Agent’s

request, Merchant shall cooperate with Agent to establish Merchant’s identification numbers

under Agent’s name to enable Agent to process all such credit card Proceeds (and proceeds from

the sale of Owned FF&E) for Agent’s own account. Merchant shall not be responsible for, and

Agent shall pay as an Expense hereunder, all credit card fees, charges, and chargebacks related to

Merchandise and Additional Agent Merchandise sold during the Sale, whether received during

or after the Sale Term. Agent shall not be responsible for, as an Expense or otherwise, any credit

card fees, charges, or chargebacks that do not relate to the Sale, whether received, prior to,

during or after the Sale Term.

(d) Commencing on the first (1st) business day following the Payment Date,

and continuing on each business day thereafter, Merchant shall, on a daily basis, pay to Agent by

wire transfer of immediately available funds all funds constituting Proceeds (including, without

limitation, Proceeds from credit card sales), and proceeds from Additional Agent Merchandise

that are deposited into the Designated Deposit Accounts for the prior day. Agent shall, within a

reasonable period of time after the date of each such payment by Merchant, notify Merchant of

any shortfall in such payment, in which case, Merchant shall promptly pay to Agent funds in the

amount of any undisputed shortfall.

(e) Merchant and Agent further agree that if at any time during the Sale Term,

(i) Agent holds any amounts due to Merchant under this Agreement, Agent may, in its discretion,


13

after two (2) business days’ notice to Merchant, offset such amounts being held by Agent against

any undisputed amounts due and owing by, or required to be paid by, Merchant hereunder, and

(ii) Merchant holds any amounts due to Agent under this Agreement, Merchant may, in its

discretion, after two (2) business days’ notice to Agent, offset such amounts being held by

Merchant against any undisputed amounts due and owing by, or required to be paid by, Agent

hereunder.

(f) All amounts required to be paid by Agent or Merchant under any

provision of this Agreement shall be made by wire transfer of immediately available funds which

shall be wired by Agent or Merchant, as applicable, no later than 2:00 p.m. (prevailing Eastern

Time) on the date that such payment is due; provided that, that all of the information necessary to

complete the wire transfer has been received by Agent or Merchant, as applicable, by 10:00 a.m.

(prevailing Eastern Time) on the date that such payment is due. In the event that the date on

which any such payment is due is not a business day, then such payment shall be made by wire

transfer on the next business day.

(g) If, and to the extent, the Agent over-funds any amounts in respect of the

Guaranteed Amount hereunder (as determined pursuant to the express terms of this Agreement)

and such funding or payment cannot be recovered by the Agent from Merchant under Section

3.3(a) or Section 3.3(d), by means of an offset or otherwise, then Merchant agrees to disgorge

and remit to Agent the portion, if any, of such amount that is undisputed or that has been

determined to be owing to Agent by the Bankruptcy Court within two (2) business days of

written demand thereof by Agent.

(h) Guaranty Security. To secure payment of the balance of any unpaid

portion of the Guaranteed Amount, Sharing Amount (if any), Expenses and other amounts due

to Merchant hereunder, Agent shall deliver to the Merchant an irrevocable standby letter of

credit, substantially in the form of Exhibit 3.3(g) attached hereto, in an original stated amount

equal to the aggregate of (x) twenty-five percent (25%) of the Estimated Guaranteed Amount,

and (y) three (3) weeks’ estimated Expenses (the “Letter of Credit”). The Letter of Credit shall

name Merchant as beneficiary. The Letter of Credit shall be delivered no later than the second

(2nd) business day following the Sale Commencement Date, and shall be issued by a U.S.

national bank selected by Agent and reasonably acceptable to Merchant. In the event that Agent

fails to timely pay any undisputed amount hereunder in respect of the Guaranteed Amount,

Sharing Amount (if any), Expenses and/or any other undisputed amounts due by Agent as

required under this Agreement, Merchant shall be entitled to draw on the Letter of Credit to fund

such undisputed amount after five (5) business days’ written notice to Agent. The Merchant and

Agent agree that, from time to time upon Agent’s request, the face amount of the Letter of Credit

shall be reduced by the aggregate amount of payments made by Agent on account of the

Guaranteed Amount; provided, however, until the Final Reconciliation has been completed,

under no circumstances shall the face amount of the Letter of Credit be reduced to an amount

less than two (2) weeks’ estimated Expenses (and Merchant shall cooperate with respect to each

such request). The Letter of Credit shall expire no earlier than sixty (60) days after the Sale

Termination Date; provided that, if, as of the tenth (10th) business day prior to the scheduled

expiration date of the Letter of Credit, there remains any unresolved dispute as to the Guaranteed

Amount, Sharing Amount, and/or Expenses Agent shall cause the expiration date of the Letter of


14

Credit to be extended for successive thirty (30) day intervals (or such other longer duration as

Merchant and Agent may agree) until the subject dispute has been resolved and any additional

amounts due hereunder on account of the Guaranteed Amount, Sharing Amount, and/or

Expenses have been paid to Merchant. If Agent has for any reason not so extended the expiration

date of the Letter of Credit by the date that is ten (10) business days prior to the expiration date

of the Letter of Credit (as may have been extended previously), Merchant shall have the right to

make a drawing under the Letter of Credit in an amount equal to the undisputed amount(s)

Merchant asserts are then owing to Merchant. After completion of the Final Reconciliation and

payment in full of all amounts owing by Agent (including but not limited to the Guaranteed

Amount, the Sharing Amount, and Expenses), Merchant shall surrender the original Letter of

Credit to the issuer thereof together with written notification that the Letter of Credit may be

terminated.

(i) Escrow of Initial Guaranty Payment. In order to protect Agent’s right to

be reimbursed for any overpayment of the Guaranteed Amount, pending Merchant’s and Agent’s

reconciliation of the Final Inventory Report, Merchant shall escrow an amount equal to: (i) the

Initial Guaranty Payment, less (ii) an amount necessary to fund an agreed upon budget for

Merchant’s chapter 11 obligations (the “Guaranty Reserve”). Absent agreement from the Agent,

or an order from the Bankruptcy Court, Merchant agrees not to spend or otherwise disburse

funds from the Guaranty Reserve until such time as the Final Inventory Report has been

reconciled.

Section 4. Expenses of the Sale

4.1 Expenses. Agent shall be unconditionally responsible for all “Expenses,” which

expenses shall be paid by Agent in accordance with Section 4.2 below. Agent and Merchant

may review or audit the Expenses at any time. Agent shall be obligated to pre-fund any payroll-

related expenses consistent with Merchant’s customary payroll funding practices and timing. As

used herein, “Expenses” shall mean the Store-level (and where expressly applicable, Distribution

Center-level) operating expenses of the Sale which arise during the Sale Term and are

attributable to the Sale, limited to the following:

(a) (i) actual Occupancy Expenses for the Stores (that are in operation of each

such date) on a per location, per category, and per diem basis in an amount not to exceed the per

location, per category, per diem amount set forth on Exhibit 4.1(a) hereto plus (ii) the portion of

any percentage rent obligations allocable to the sale of Merchandise during the Sale to the extent

set forth on Exhibit 4.1(a), solely to the extent set forth on Exhibit 4.1(a) (in each case as

determined in the manner described in the definition of “Occupancy Expenses” below in this

Section 4.1);

(b) actual wages and commissions for all Store-level Retained Employees

used in conducting the Sale for actual days/hours worked during the Sale Term including during

the Inventory Taking at the respective Stores;

(c) actual amounts payable by Merchant for benefits for Retained Employees

(including payroll taxes, FICA, unemployment taxes, workers’ compensation and health care


15

insurance benefits, but excluding Excluded Benefits) for Store-level Retained Employees used in

the Sale, in an amount up to twenty-two percent (22%) of base payroll (including commissions)

for the Retained Employee in the Stores (the “Benefits Cap”);

(d) Retention Bonuses for Retained Employees, as provided for in Section 9.4

below;

(e) regardless of whether incurred prior to the Sale Commencement Date, all

costs and expenses associated with Agent’s on-site supervision of the Stores and Distribution

Center (to the extent applicable), including but not limited to any and all fees, wages, bonuses,

deferred compensation, taxes, and third party payroll costs and expenses of Agent’s field

personnel, travel to, from or between the Stores and Distribution Center (to the extent

applicable), and all out-of-pocket and commercially reasonable expenses relating thereto;

(f) regardless of whether incurred prior to the Sale Commencement Date, the

costs and expenses associated with all signage, banners, sign walkers, and interior and exterior

signs that are produced for the Sale (inclusive of the Signage Costs provided for in Section

16.11), the cost of email blasts and operating the website;

(g) regardless of whether incurred prior to the Sale Commencement Date,

promotional costs including, without limitation, sign walkers, television, ROP, other advertising

and direct mail attributable to the Sale and ordered or requested by Agent;

(h) the costs and expenses of obtaining additional supplies used at the Stores

as may be required by Agent in the conduct of the Sale;

(i) postage/overnight delivery/courier charges to and from or among the

Stores to the extent relating to the Sale;

(j) credit card and bank card fees, chargebacks, and discounts;

(k) any and all costs of moving, transferring, or consolidating Merchandise

between the Stores and/or Additional Agent Merchandise to and between the Stores;

(l) a pro rata portion for the Sale Term of Merchant’s premiums in respect of

general liability, casualty, property, inventory, and other insurance policies attributable to the

Merchandise and the Stores;

(m) third-party payroll processing fees;

(n) armored car service and security personnel;

(o) actual cost of Agent’s capital, reasonable legal expenses in connection

with the negotiation, entrance into and performance under this Agreement and the transactions

contemplated hereby (even if incurred prior to the Sale Commencement Date or after the Sale


16

Termination Date), letter of credit fees and insurance (as provided in Section 12.4 hereof);

(p) Agent’s fifty percent (50%) of the third party fees and costs of the

Inventory Taking;

(q) Central Service Expenses in an amount equal to $10,000 per week (pro-

rated for partial weeks) for the Sale Term (payable to Merchant) in respect of the cost of

Merchant providing Central Services in accordance with Section 8.1 hereof;

(r) except to the extent resulting from Agent’s gross negligence, Store cash

thefts and other Store cash shortfalls in registers;

(s) costs and expenses associated with temporary labor requested or obtained

by Agent for purposes of the Sale;

(t) to the extent Agent elects to use the Distribution Center as provided for in

Section 5.5 hereof, Distribution Centers Expenses;

(u) any costs and expenses incurred in connection with the acquisition,

ticketing, processing, transporting and delivering of any Additional Agent Merchandise

(including costs of goods, any/buyer commissions, shipping costs, supervision fees, travel

expenses as they relate to preparation of the Additional Agent Merchandise, and legal expenses);

and

(v) the actual costs and expenses of providing such additional services that

Agent in its sole discretion deems appropriate for the Sale.

“Expenses” shall not include: (i) Central Service Expenses in excess of the

amount set forth in Section 4.1(s); (ii) Excluded Benefits; (ii) any rent or other occupancy

expenses other than Occupancy Expenses in accordance with Section 4.1(a) hereof; or (iii) any

costs, expenses or liabilities arising during the Sale Term, other than the Expenses listed above

or as otherwise expressly provided for in this Agreement. All costs or expenses related to the

Sale not included as Expenses shall be paid by Merchant promptly when due during the Sale

Term. Notwithstanding anything to the contrary herein, (x) to the extent that any Expense listed

in Section 4.1 is also included on Exhibit 4.1(a), then Exhibit 4.1(a) shall control and such

Expense shall not be double counted. Notwithstanding anything herein to the contrary, Agent

shall not have any obligation to pay any Expenses (including, without limitation, Occupancy

Expenses and Distribution Center Expenses, to the extent applicable) with respect to any Store or

the Distribution Center after the earlier of the Sale Termination Date and the applicable Vacate

Date for such Store or Distribution Center. Notwithstanding anything herein to the contrary,

Agent shall not have any obligations to pay any Expenses with respect to Distribution Center

other than the Distribution Center Expenses, and in such instance only to the extent Agent elects

to use the Distribution Center as provided for in Section 5.5 hereof.

As used herein, the following terms have the following meanings:


17

“Distribution Center Expenses” means actual expenses paid in connection with

the provision of Distribution Center Services during period between the date Agent elects to use

the Distribution Center pursuant to Section 5.5 hereof, and the effective date of any written

notice from Agent during the Sale Term that states that Agent that it no longer needs access to or

use of the Distribution Center.

“Central Service Expenses” means costs and expenses for Merchant’s Central

Services.

“Central Services” means those Merchant central administrative services

necessary for the conduct and support of the Sale, including, but not limited to, use or and access

to Merchant’s: (i) inventory control system, (ii) payroll system, (iii ) accounting system, (iv)

office facilities, (v) central administrative services and personnel to process and perform sales

audit, banking, and other normal course administrative services customarily provided to or for

the benefit of operating the Distribution Center and/or the Stores, (vi) such other central office

services reasonably necessary (in the reasonable judgment of Agent) for the Sale (including,

without limitation, MIS and POS Services and cash reconciliation), and (vii) to use reasonably

sized offices located at Merchant’s central office facility to effect the Sale.

“Excluded Benefits” means (i) the following benefits to the extent accruing or

attributable to the period prior to the Sale Commencement Date or after the Sale Term:

(w) vacation days or vacation pay, (x) sick days or sick leave or any other form of paid time off,

(y) maternity leave or other leaves of absence and (z) ERISA coverage and similar contributions

and/or (ii) any other benefits in excess of the Benefits Cap, including, without limitation, any

payments due under the WARN Act.

“Occupancy Expenses” means rent, percentage rent, common-area maintenance,

landlord promotional fees, real estate and use taxes, merchant association dues and charges,

HVAC, utilities, telecom/telephone charges, Store security systems, routine repairs and

maintenance, taxes and licenses, costs of all local, long-distance and international telephone,

satellite or broadband connections, T-1 lines, broadband internet, and other telecommunications

services, trash removal, snow removal, third party cleaning, pest control services, and all other

categories of expenses at the Stores as set forth on Exhibit 4.1(a) attached hereto and in an

amount up to the specific amounts set forth on Exhibit 4.1(a) attached hereto and calculated in

accordance with Section 4.1(a), plus any percentage rent obligations incurred by Merchant under

applicable leases or occupancy agreements that are allocable to the sales as part of the Sale

during the Sale Term of: (x) Merchandise, and (y) Additional Agent Merchandise included in

the Sale. Merchant and Agent agree that Exhibit 4.1(a) shall specify the actual applicable

percentage and any applicable sales thresholds in respect of percentage rent under any applicable

Store lease(s) or other occupancy agreement(s). Merchant and Agent further agree that in the

event Exhibit 4.1(a) does not specify the actual applicable percentage and/or the applicable sales

thresholds in respect of percentage rent under any applicable Store lease(s) or other occupancy

agreement(s), Agent shall have no obligation to pay percentage rent other than as set forth on

Exhibit 4.1(a).


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“Third-party” means, with reference to any Expenses, a party that is not affiliated

with or related to Merchant.

4.2 Payment of Expenses. From and after the Sale Commencement Date, Agent shall

be responsible for the payment of all Expenses, whether or not there are sufficient Proceeds

collected to pay such Expenses after the payment of the Guaranteed Amount. All Expenses

incurred during each week of the Sale (i.e., Sunday through Saturday) shall be paid by Agent to

or on behalf of Merchant, or paid by Merchant and thereafter reimbursed by Agent as provided

herein, immediately following the weekly Sale reconciliation by Merchant and Agent pursuant to

Section 8.7(a) below, based upon invoices and other documentation reasonably satisfactory to

Merchant and Agent.

Section 5. Inventory Valuation; Merchandise.

5.1 Inventory Taking.

(a) Commencing on the Sale Commencement Date, Merchant and Agent shall

cause to be taken a keyed retail and SKU-level physical inventory of the Merchandise located in

the Stores and Distribution Center (collectively, the “Inventory Taking”). Subject to the

availability of the Inventory Taking Service, Merchant and Agent shall use commercially

reasonable efforts to complete the Inventory Taking no later than fourteen (14) days after the

Sale Commencement Date (the date of the Inventory Taking at each location being the

“Inventory Date” for such location). Merchant and Agent shall jointly employ RGIS or another

mutually acceptable independent inventory taking service (the “Inventory Taking Service”) to

conduct the Inventory Taking in the Stores. The Inventory Taking shall be conducted in

accordance with the procedures and instructions to be mutually agreed upon by Merchant and

Agent and made a part of this Agreement as Exhibit 5.1(a) (the “Inventory Taking Instructions”).

As an Expense, Agent shall be responsible for fifty percent (50%) of the fees and expenses of the

Inventory Taking Service. The balance of such fees and expenses shall be paid by Merchant.

Except as provided in the immediately preceding sentence, Merchant and Agent shall each bear

their respective costs and expenses related to the Inventory Taking; provided that, Agent shall be

obligated to pay the payroll and related benefit costs (subject to the Benefits Cap) for Retained

Employees used during the Inventory Taking. Merchant and Agent shall each have the right to

have representatives present during the Inventory Taking, and shall each have the right to review

and verify the listing and tabulation of the Inventory Taking Service. Merchant agrees that

during the Inventory Taking in each of the Stores, the applicable Store shall be closed to the

public and no sales or other transactions shall be conducted until the Inventory Taking has been

completed, as agreed by Merchant and Agent. The Inventory Taking shall not take place on

Saturdays, Sundays and federal holidays. Merchant and Agent further agree that until the

Inventory Taking in each particular Store is complete, neither Merchant nor Agent shall (i)

transfer any Merchandise to or from that Store, (ii) move Merchandise within or about the

Stores, or (iii) remove any Merchant hang tags, price tickets, inventory control tags, or other

indicia of pricing affixed to or related to any Merchandise. Merchant and Agent shall use their

reasonable best efforts to reconcile the Inventory Taking (including, but not limited to, the

determination of the aggregate Cost Value of the Merchandise), within twenty-one (21) days

after its completion. In the event there is any dispute with respect to the reconciliation of the


19

aggregate Cost Value of the Merchandise following completion of the Inventory Taking, then

any such dispute shall be resolved in the manner and at the times set forth in Section 8.7(b)(ii)

hereof).

5.2 Merchandise Subject to this Agreement.

(a) For purposes of this Agreement, including but not limited to the

calculation of the Guaranteed Amount, “Merchandise” means all new first quality (other than as

expressly set forth below), finished goods inventory that is owned by Merchant, customarily sold

to customers in the ordinary course of Merchant’s business and located in the Stores on the Sale

Commencement Date (or, with respect to Returned Merchandise, received in the Stores by the

dates specified in this Agreement), including, but not limited to, (i) Merchandise subject to Gross

Rings; (ii) Merchandise located in the Stores on the Sale Commencement Date; (iii) Display

Merchandise; and (iv) Defective Merchandise (to the extent Merchant and Agent can mutually

agree on the Cost Value applicable thereto). Notwithstanding the foregoing, “Merchandise”

shall not include (1) goods that belong to sublessees, licensees, or concessionaires of Merchant;

(2) goods held by Merchant on memo, on consignment, or as bailee; (3) Additional Agent

Merchandise; and (4) furnishings, trade fixtures furniture, and equipment and improvements to

real property that are located in the Stores and Distribution Center.

(b) As used in this Agreement, the following terms have the respective

meanings set forth below:

“Clearance Merchandise” means those items of Merchandise identified in

the Merchant’s Cost File as having been offer for sale through any means other than “buy one

get one” discounts, multi-unit discounts, or “entire store” discounts, at a discount of 50% or

greater.

“Defective Merchandise” means any item of Merchandise identified and

agreed upon by Merchant and Agent during the Inventory Taking as defective in that it is

damaged, defective, scratched, soiled, ripped, torn, stained, faded, discolored, dented, out of box

(if normally sold as new in-the-box), missing pieces, mismatched, mis-mated or near-sized,

parts, items typically sold as a set which are incomplete, or gift with purchase items, or otherwise

affected by other similar defenses rendering it not first quality. Display Merchandise shall not

per se be deemed to be Defective Merchandise.

“Display Merchandise” means those items of inventory used in the

ordinary course of business as displays or floor models, including inventory that has been

removed from its original packaging for the purpose of putting such item on display.

“Excluded Defective Merchandise” means (a) any item of Defective

Merchandise that is not saleable in the ordinary course because it is so damaged or defective that

it cannot reasonably be used for its intended purpose, (b) any item of Defective Merchandise for

which the Parties cannot mutually agree upon a Cost Value, or (c) inventory of any kind or

nature, wherever located, that was, is, or becomes during the Sale Term subject to a bona fide,

credible, written claim of trademark (or other intellectual property) infringement by any third


20

party. Excluded Defective Merchandise located in the Stores shall be identified and counted

during the Inventory Taking and thereafter removed from the sales floor and segregated. To the

extent that goods in transit to the Stores constitute Excluded Defective Merchandise and such

goods arrive at the Stores (despite Merchant’s covenant not to ship such goods), such goods shall

be identified during the Inventory Taking or, to the extent such goods arrive in a Store after the

Inventory Date for such Store, such goods shall be reasonably identified by Agent in writing

within five (5) business days of receipt of at such Store.

5.3 Valuation.

(a) For purposes of this Agreement, “Cost Value” shall mean, with respect to

each item of Merchandise, other than Clearance Merchandise, the lower of (x) Merchant’s actual

cost without load of such item; (y) Merchant’s cost of such item as reflected in the SKU file for

such item of Merchandise as reflected on Merchant’s inventory item master cost file, entitled

“Inventory as of 12-20-15 all stores” (together with all updated files received on or prior to the

Sale Commencement Date, the “Cost File”); and (z) the Retail Price for such item of

Merchandise. With respect to Clearance Merchandise, Cost Value shall mean fifty percent

(50%) of the actual cost without load of such item as reflected on the Cost File.

(b) “Retail Price” means (i) with respect to each item of Merchandise (other

than “Clearance Merchandise” and “Defective Merchandise”, the lowest of the lowest ticketed,

selling price, file price, original price, chain retail price, marked, shelf price, hang-tag, stickered,

PLU, or other hard-marked price since December 1, 2015 (determined, where applicable, by

reference to the Cost File), including any and all point of sale (“POS”) activity, but excluding

Excluded Price Adjustment (the “Base Retail Price”); (ii) with respect to Clearance Merchandise,

the lower of (x) the Base Retail Price; or (y) the original retail price as reflected in the Cost File.

(c) For purposes of calculating Retail Price, if an item of Merchandise has

more than one ticketed price, other file price, marked price, shelf price, hang-tag price, stickered

price, PLU price, or other hard-marked price, or if multiple items of the same SKU have

different ticketed, file price, marked, shelf, hang-tag, stickered, PLU, or other hard-marked

prices and such pricing does not otherwise qualify as an Excluded Price Adjustment, the lowest

ticketed price, other file price, marked price, shelf price, hang-tag price, stickered price, PLU

price, or other hard-marked price on any such item shall prevail for such item or for all such

items within the same SKU, as the case may be, that are located within the same location (as the

case may be, the “Lowest Location Price”), unless it is reasonably determined by Merchant or

Agent that the applicable Lowest Location Price was mismarked, normal course markdowns had

not been reflected or taken, or such item was priced because it was damaged or marked as “as

is,” in which case the correct price shall control; provided, however, in determining the Lowest

Location Price with respect to any item of Merchandise at a Store, the Lowest Location Price

shall be determined based upon the lowest Retail Price for such item on a per Store basis. No

adjustment to Retail Price shall be made with respect to different Retail Prices for items located

in different locations.

(d) “Excluded Price Adjustments” means the following discounts or price

adjustments offered by the Merchant: (i) other than with respect to Clearance Merchandise”,


21

point of sale discounts or similar adjustments prior to December 1, 2015; (ii) employee

discounts; (iii) member or customer appreciation points or coupons; (iv) multi-unit purchase

discounts; (v) adjustments for Display Merchandise, damaged, defective or “as-is” items; (vi)

coupons (Merchant’s or competitors’)or “buy one get one” type discounts; (vii) obvious ticketing

or marking errors; (viii) instant (in-store) or mail-in rebates; or (ix) similar customer-specific,

temporary, or employee non-product specific discounts or pricing accommodations.

(b) Anything in Section 5.3(a) to the contrary notwithstanding, Merchant and

Agent further agree as follows:

(i) The Cost Value and Retail Price of any item Returned

Merchandise shall be the otherwise applicable Cost Value and Retail Price of such item

(determined in accordance with Sections 3.1(d) and 5.3(a) above), multiplied by the inverse of

the prevailing Sale discount in effect on the date such item arrives in the Store (the “Prevailing

Discount Adjustment”);

(ii) Defective Merchandise shall be valued by mutual agreement of the

Parties; if the Parties are unable to so agree, or if an item is determined to be Excluded Defective

Merchandise, such goods shall be excluded from the Sale and treated as Excluded Defective

Merchandise for all purposes hereunder, including, without limitation, calculation of the

Guaranteed Amount, Proceeds and the Sharing Amount;

(ii) Excluded Price Adjustments shall not be taken into account in

determining the Cost Value of any item of Merchandise.

(iii) If the Sale commences prior to the completion of the Inventory

Taking at any Store, then for the period from the Sale Commencement Date until the Inventory

Date for such Store (the “Gross Rings Period”), Agent and Merchant shall jointly keep (i) a strict

count of gross register receipts less applicable Sales Taxes but excluding any prevailing

discounts (“Gross Rings”) and (ii) cash reports of sales within such Store. Agent and Merchant

shall keep a strict count of register receipts and reports to determine the actual Cost Value and

Retail Price of the Merchandise sold by SKU. All such records and reports shall be made

available to Merchant and Agent during regular business hours upon reasonable notice. Any

Merchandise included in the Sale using the Gross Rings method shall be included in

Merchandise using the actual Cost Value of the Merchandise sold plus two percent (2%) shrink

provision (the “Shrink Provision”).

5.4 Excluded Goods. Merchant shall retain all rights and responsibility for any goods

not included as “Merchandise” hereunder and shall remove, at Merchant’s expense, such goods

from the Stores prior to the Sale Commencement Date, or as soon thereafter as reasonably

practicable.

5.5 Distribution Center Election. Agent may, in its discretion, elect to resume

operations at Merchant’s distribution center facility located at 170 W Commercial Avenue,

Moonachie, NJ 07074 (the “Distribution Center”) for purposes of receiving and processing

Additional Agent Merchandise. To the extent that Agent makes such election, Merchant shall


22

exercise reasonable best efforts to assist Agent in procuring Merchant’s former employees who

worked in the Distribution Center and Agent shall be responsible to reimburse Merchant as a

Distribution Center Expense provided for in Section 4.1(t) for the following services: (i) payroll

and related employee benefits of all Distribution Center employees as may be designated from

time to time by Agent; (ii) the handling, receiving, in-take, storage, ticketing and processing of

any Additional Agent Merchandise, (iii) any required supplies in connection with the foregoing;

and (iv) the costs of moving, transferring, or consolidating Additional Agent Merchandise

between Distribution Center and the Stores (collectively, the “Distribution Center Services”).

Section 6. Sale Term.

6.1 Term. The Sale shall commence at each of the Stores on the first business day

after the entry of the Approval Order, but not later than February 5, 2016 (the “Sale

Commencement Date”). Agent shall complete the Sale and vacate the premises of each Store in

favor of Merchant or its representative or assignee on or before March 31, 2016 (the “Sale

Termination Date”). The period beginning on the Sale Commencement Date through and

including the Sale Termination Date shall be referred to herein as the “Sale Term”. The Sale

Termination Date as to any Store may be (a) extended by mutual written agreement of Merchant

and Agent or (b) accelerated by Agent, in which case Agent shall provide Merchant with not less

than seven (7) days’ advance written notice of any such planned accelerated Sale Termination

Date (each such notice being a “Vacate Notice”). If Agent fails to provide Merchant with timely

notice of an acceleration of the Sale Termination Date for a Store, Agent shall be liable for and

shall pay any Occupancy Expenses resulting from such untimely notice.

6.2 Vacating the Stores. Subject to the terms of Section 6.1 hereof, Agent

shall provide Merchant with not less than seven (7) days’ advance written notice of its intention

to vacate any Store (as to each such Store, as applicable, the “Vacate Date”). On the Vacate

Date, Agent shall vacate such Store in favor of Merchant or its representatives or assignee,

(subject to Agent’s right to abandonment) remove all Remaining Merchandise (including any

unsold Additional Agent Merchandise) from the Store, and leave such Store in “broom clean”

condition (ordinary wear and tear excepted) subject to the right to abandon, neatly in place, any

unsold Owned FF&E. Agent’s obligations to pay all Expenses, including Occupancy Expenses,

for each Store (as and to the extent applicable) subject to Vacate Notice shall continue only until

the earlier of (a) the applicable Vacate Date for such Store or (b) the Sale Termination Date. All

assets of Merchant used by Agent in the conduct of the Sale (e.g., FF&E, supplies, etc.) shall be

returned by Agent to Merchant or left at the Stores, to the extent same have not been used in the

conduct of the Sale or have not been otherwise disposed of through no fault of Agent. Any

reference in this Section 6 to vacating the Stores means vacating the Stores, as applicable, in

favor of Merchant, its representatives, or assignee and shall not mean vacating possession or

disclaimer of lease in favor of the landlord or owner of the Store premises, as applicable. Agent

agrees that it shall be obligated to repair any damage caused by Agent (or any representative,

agent, or licensee thereof) to any Store during the Sale Term, ordinary wear and tear excepted.

Agent shall have the right to abandon in place any asset (other than Merchandise and/or

Additional Agent Merchandise) of Merchant (including, without limitation, any unsold Owned

FF&E).


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Section 7. [Intentionally Omitted]

Section 8. Conduct of the Sale.

8.1 Rights of Agent and Merchant. Subject to the Approval Order and the Sale

Guidelines, Agent shall be permitted to conduct a “going out of business,” “store closing,” “sale

on everything,” “everything must go” or similarly themed sale at the Stores throughout the Sale

Term. Agent shall conduct the Sale in the name of and on behalf of Merchant in a commercially

reasonable manner and in compliance with the terms of this Agreement and, except as modified

by the Approval Order, all governing laws and applicable leases to which Merchant is a party.

Agent shall conduct the Sale in accordance with the Sale Guidelines annexed hereto as Exhibit

8.1 and approved by the Approval Order (the “Sale Guidelines”), whether by in-Store promotion,

media advertising, or other promotional materials. Merchant shall have the right to monitor the

Sale and activities attendant thereto and to be present in the Stores during the hours when the

Stores are open for business, so long as Merchant’s presence does not unreasonably disrupt the

conduct of the Sale. Merchant shall also have a right of access to the Stores at any time in the

event of an emergency situation and shall promptly notify Agent of such emergency. In addition

to any other rights granted to Agent hereunder, in conducting the Sale, Agent, in the exercise of

its sole discretion, shall have the following rights, limited by the Sale Guidelines:

(a) except as otherwise provided in the Approval Order, to establish Stores’

hours, which are consistent with the terms of applicable leases, mortgages, or other occupancy

agreements and local laws or regulations, including, without limitation, Sunday closing laws;.

(b) to use without charge during the Sale Term (except where otherwise

designated as an Expense pursuant to Section 4.1 hereof), (i) all furniture, fixtures and

equipment, (ii) bank accounts, (iii) Store-level (and to the extent available, corporate) computer

hardware and software, (iv) customer lists, mailing lists, email lists, website and web and social

networking sites utilized by Merchant in connection with its business (but solely in connection

with the Sale and pursuant to such reasonable restrictions requested by Merchant in order for

Merchant to comply with its privacy policy and applicable laws governing the use and

dissemination of confidential consumer personal data), (v) existing supplies located at the Stores,

(vi) intangible assets (including Merchant’s names, logos, and tax identification numbers), (vii)

Stores’ and, to the extent Agent exercises its election under Section 5.5 of this Agreement,

Distribution Center’s keys, case keys, security codes, and safe and lock combinations required to

gain access to and operate the Stores and, to the extent Agent exercises its election under Section

5.5 of this Agreement, the Distribution Center, and (viii) any other assets of Merchant located at

the Stores or, to the extent Agent exercises its election under Section 5.5 of this Agreement,

Distribution Center (whether owned, leased, or licensed) consistent with applicable terms of

leases or licenses. Agent shall exercise due care and return to Merchant immediately at the end

of the Sale all materials and supplies except materials or supplies expended;

(c) subject to Agent’s payment (if applicable) in accordance with Section

4.1(s) above in respect of Central Services, Merchant agrees and covenants that it shall be

responsible for performing and providing to Agent such Central Services necessary or incident to

the conduct of the Sale, including, but not limited to, use of Merchant’s central office facilities,


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central administrative services, and personnel to process payroll, perform MIS, and provide other

central office services necessary for the Sale to the extent that such services are normally

provided by Merchant in house; provided, however, that, in the event Agent expressly requests

Merchant to provide Central Services other than those normally provided to the Stores and/or

Distribution Center and relating to the sale of Merchandise by Merchant in the ordinary course of

business and as expressly contemplated by this Agreement, Agent shall be responsible to

reimburse Merchant for the actual incremental cost of such services incurred by Merchant as an

Expense of the Sale hereunder;

(d) to establish Sale prices and implement advertising, signage (including A-

frame, interior and exterior banners and signs and sign walkers), and promotional programs

consistent with the sale theme described herein, and as otherwise provided in the Approval Order

and the Sale Guidelines, as and where applicable (including, without limitation, by means of

media advertising, A-frame, interior and exterior banners, and signs and use of sign walkers and

similar signage).

(e) once the Inventory Taking is complete at both the transferring Store and

the receiving Store, to transfer Merchandise between and among the Stores;

(f) to supplement the Merchandise at the Stores with Additional Agent

Merchandise in accordance with Section 8.9 hereof; and

(g) to conduct the Sale in accordance with the Sale Guidelines attached hereto

as Exhibit 8.1.

8.2 Terms of Sales to Customers. Subject to Agent’s compliance with applicable law

(as determined with reference to the Approval Order), all sales of Merchandise will be “final

sales” and “as is” and all advertisements and sales receipts will reflect the same. Agent shall not

warrant the Merchandise in any manner, but will, to the extent legally permissible, pass on all

manufacturers’ warranties to customers. All sales will be made only for cash or nationally

recognized credit and debit cards. Agent shall accept and honor coupons during the Sale Term,

if any, and Merchant’s employee discount terms as are in effect immediately prior to the

commencement of the Sale Term. Merchant shall reimburse Agent in cash for all amounts

related to coupons, and Merchant’s employee discount terms, during each weekly sale

reconciliation provided for in Section 8.7. Agent shall clearly mark all receipts for the

Merchandise sold at the Stores during the Sale Term, so as to distinguish such Merchandise from

the merchandise sold prior to the Sale Commencement Date.

8.3 Sales Taxes. (a) During the Sale Term, all sales, excise, gross receipts, and other

taxes attributable to sales of Merchandise, Additional Agent Merchandise, and/or Owned FF&E

(except to the extent such sales are exempt) as indicated on Merchant’s point of sale equipment

(other than taxes on income, but specifically including, without limitation, gross receipts taxes)

payable to any taxing authority having jurisdiction (collectively, “Sales Taxes”) shall be added to

the sales price of Merchandise, Additional Agent Merchandise, and/or Owned FF&E and

collected by Agent in trust for Merchant at time of sale and paid over to Merchant. All Sales

Taxes shall be deposited into a segregated account designated by Merchant and Agent solely for


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the deposit of such Sales Taxes (the “Sales Taxes Account”). If Agent does not timely remit

Sales Taxes to Merchant, Merchant shall be permitted to draw on the Letter of Credit in the full

amount of Sales Taxes collected by Agent in the preceding week in accordance with Section

3.3(g). Provided that Agent has collected all Sales Taxes during the Sale and remitted the

proceeds thereof to Merchant, Merchant shall promptly pay all Sales Taxes and file all applicable

reports and documents required by the applicable taxing authorities Merchant will be given

access to the computation of gross receipts for verification of all such Sales Tax collections.

Agent shall add Sales Tax to the sales price of all Additional Agent Merchandise sold and Agent

shall collect Sales Taxes attributable to the sales of Additional Agent Merchandise and deposit

such amounts into existing accounts, trust accounts, or other accounts designated by Agent, for

remittance by Merchant, on behalf of Agent, to the appropriate taxing authority. If Agent fails to

perform its responsibilities in accordance with this Section 8.3, and provided Merchant complies

with its obligations in accordance with this Section 8.3, Agent shall indemnify and hold harmless

Merchant and its officers, directors, employees, agents and independent contractors (collectively,

“Merchant Indemnified Parties”) from and against any and all costs, including, but not limited to,

reasonable attorneys’ fees, assessments, fines, or penalties that Merchant sustains or incurs as a

result or consequence of the failure by Agent to collect Sales Taxes and remit them to Merchant

(including, without limitation, any collection of Sales Taxes in an amount less than required

under applicable Law) and/or, to the extent Agent is required hereunder to prepare reports and

other documents, the failure by Agent to promptly deliver any and all reports and other

documents required to enable Merchant to file any requisite returns with such taxing authorities.

Provided that Agent performs its responsibilities in accordance with this Section 8.3, Agent shall

have no further obligation to the Merchant, any taxing authority, or any other party, and

Merchant shall indemnify and hold harmless Agent and its officers, directors, employees, agents

and Supervisors (collectively, “Agent Indemnified Parties”) from and against all claims,

demands, assessments, penalties, losses, liability or damage, including, without limitation,

reasonable attorneys’ fees and expenses, directly or indirectly asserted against, resulting from or

related to the failure by Merchant to promptly pay such taxes to the proper taxing authorities

and/or the failure by Merchant to promptly file with such taxing authorities all reports and other

documents required by applicable law to be filed with or delivered to such taxing authorities.

(b) Without limiting the generality of Section 8.3(a) hereof (including without

limitation, Agent’s obligation to collect and pay over to Merchant an amount equal to all Sales

Taxes payable in connection with the Sale), the Parties agree that because Agent will conduct the

Sale solely as agent for Merchant, the various payments that this Agreement contemplates

(including the payment by Agent of the Guaranteed Amount) do not represent the sale of

tangible personal property and, accordingly, are not subject to Sales Taxes.

8.4 Supplies. Agent shall have the right to use all existing supplies necessary to

conduct the Sale (e.g., boxes, bags, and twine, but not gift certificates, rain checks, merchandise

credits, or the like) located at the Stores at no charge to Agent. In the event that additional

supplies are required in any of the Stores during the Sale Term, the acquisition of such additional

supplies shall be the responsibility of Agent as an Expense; provided, however, that if reasonably

requested by Agent, Merchant shall assist Agent in obtaining supplies, at Agent’s expense, from

Merchant’s vendors at Merchant’s usual and customary costs for such supplies. Merchant does


26

not warrant that Merchant’s existing supplies as of the Sale Commencement Date are adequate

for purposes of the Sale.

8.5 Returns of Merchandise. During the Sale Term (the “Pre-Sale Merchandise

Return Period”), Agent shall accept returns of Merchandise sold by Merchant prior to the Sale

Commencement Date in accordance with Merchant’s return policies in effect at the time of

purchase (to the extent presented in accordance with the foregoing terms, each such item being

defined herein as “Returned Merchandise”). Merchant shall reimburse Agent in cash or credit

against the following week’s payment for the amount of any store credit or refund given to any

customer in respect of Returned Merchandise. To the extent Returned Merchandise is salable as

first quality merchandise, it shall be included in Merchandise and for purposes of the calculation

of the Guaranteed Amount and shall be as follows: at a value equal to the product of (x) the

applicable Cost Value and Retail Price attributable to such item as provided for above, multiplied

by (y) the Prevailing Discount Adjustment applicable to such item. Subject to Merchant’s

reimbursement to Agent of the amount of any Store credit or refund granted for any such

Returned Merchandise, the aggregate Cost Value of the Merchandise shall be increased by the

Cost Value of any Returned Merchandise, and the Guaranteed Amount shall be adjusted

accordingly. If the Returned Merchandise is not first quality goods, Merchant and Agent shall

negotiate in good faith to determine an appropriate Cost Value applicable to such merchandise

for purposes of determining the Cost Value attributable thereto; provided that, in the event

Merchant and Agent cannot agree on the Cost Value to be attributed to any particular item(s) of

Returned Merchandise, than such item(s) shall be segregated form Merchandise and excluded

from the Sale and treated as Excluded Defective Merchandise for all purposes hereunder. Any

reimbursements due to Agent as a result of Returned Merchandise shall be accounted for and

paid by Merchant immediately following the weekly Sale reconciliation pursuant to Section

8.7(a) hereof. Any increases in payment on account of the Guaranteed Amount as a result of

Returned Merchandise shall be paid by Agent as part of the weekly Sale reconciliation provided

for under Section 8.7(a) hereof.

8.6. Gift Cards; Merchandise Credits;

(a) Agent shall accept Merchant’s gift cards, gift certificates, merchandise

credits, “fast cash” and other similar Merchant-issued credits until February 9, 2015. Merchant

shall reimburse Agent in cash for gift card, gift certificate, merchandise credit, and other similar

Merchant issued credit amounts redeemed during the Sale Term as part of the weekly sale

reconciliation provided for in Section 8.7(a).

8.7. Sale Reconciliation.

(a) Weekly Reconciliation. On each Wednesday during the Sale Term,

commencing on the second Wednesday after the Sale Commencement Date, Merchant and

Agent shall cooperate to reconcile Expenses, Gross Rings, and such other Sale-related items as

either party shall reasonably request, in each case for the prior week or partial week (i.e., Sunday

through Saturday), pursuant to procedures agreed upon by Merchant and Agent. On a weekly

basis, Agent shall also provide Merchant with a report (in electronic format acceptable to

Merchant) of all sales of Additional Agent Merchandise, which report shall detail by Store, at a


27

minimum, gross and net sales and type of items sold. To ensure accurate sales audit functions, as

well as accurate calculations of the Sharing Amount (if any) and Agent shall use Merchant’s

existing point-of-sale system for recording all sales (including any sales of Additional Agent

Merchandise) in the Stores.

(b) Final Reconciliation.

(i) Within thirty (30) days after the Sale Termination Date applicable

to the last Store in which the Sale is concluded, Merchant and Agent shall jointly prepare a final

reconciliation of the Sale including, without limitation, a summary of Proceeds, Sales Taxes,

Expenses, sales of proceeds of Owned FF&E and any other accountings required hereunder (the

“Final Reconciliation”). Within five (5) days after completion of the Final Reconciliation, any

undisputed and unpaid Expenses shall be paid by Agent (the “Final Reconciliation Settlement

Date”). In the absence of an order of the Bankruptcy Court to the contrary, no disputed amounts

owing hereunder shall be paid until the dispute has been resolved by agreement of the Parties or

as determined in the manner prescribed in Section 8.7(b)(ii) hereof. During the Sale Term, and

until all of Agent’s obligations under this Agreement have been satisfied, Merchant) and Agent

shall have reasonable access to Merchant’s and Agent’s records with respect to Proceeds, Sales

Taxes, Additional Agent Merchandise, proceeds of Owned FF&E, Expenses, and other Sale-

related items to review and audit such records.

(ii) In the event that there is any dispute with respect to either (x) the

determination of the aggregate Cost Value of the Merchandise as reflected in the Final Inventory

Report and/or (y) the Final Reconciliation, such dispute shall be promptly (and in no event later

than the fifth (5th

) business day following a request by either Merchant or Agent) submitted to

the Bankruptcy Court for resolution. In the event of a dispute as to (x) or (y) above, Agent shall

extend the Letter of Credit in accordance with the provisions of Sections 3.3 hereof. If Agent

has for any reason not so extended the expiration date of the Letter of Credit by the date that is

ten (10) business days prior to the applicable expiration date (as may have been extended

previously), Merchant shall have the right to make a drawing under the Letter of Credit in an

amount or amounts equal to the undisputed amounts Merchant asserts are then owing to

Merchant in accordance with the terms of Section 3.3(g).

8.8 Force Majeure. If any casualty, act of war or terrorism, or act of God prevents the

conduct of business in the ordinary course at any Store for a period in excess of five (5)

consecutive days (a “Force Majeure Event”), such Store and the Merchandise located at such

Store shall be eliminated from the Sale and considered to be deleted from this Agreement as of

the first date of such event, and Agent and Merchant shall have no further rights or obligations

hereunder with respect thereto; provided, however, that (i) the proceeds of any insurance

attributable to such Merchandise shall constitute Proceeds hereunder, and (ii) the Guaranteed

Amount shall be reduced to account for any Merchandise eliminated from the Sale that is not the

subject of insurance proceeds or consolidated by Agent into another Store(s) and, to the extent

Agent has paid the Guaranteed Amount, Merchant to the extent such insurance proceeds are

actually received, shall reimburse Agent for the amount by which the Guaranteed Amount is so

reduced prior to the end of the Sale Term. If a Store is eliminated from the Sale due to a Force

Majeure Event, Agent will use its commercially reasonable efforts to transfer therefrom all


28

Merchandise that is not the subject of insurance proceeds and include such Merchandise in the

Sale at other Stores.

8.9 Additional Agent Merchandise

(a) Agent shall be entitled to include in the Sale supplemental merchandise

procured by Agent which is of like kind, and no lesser quality than Merchandise located in the

Stores (the “Additional Agent Merchandise”).

(b) Agent agrees that Additional Agent Merchandise, if any, shall be procured

from either Merchant’s existing vendors (“Existing Vendors”) or third party vendors who are not

Existing Vendors (“Third Party Vendors”) that sell merchandise of like kind, and no lesser

quality to the Merchandise. Agent shall be responsible for payment of the costs associated with

procuring, marketing and selling the Additional Agent Merchandise as an Expense of the Sale.

(c) The Additional Agent Merchandise shall be at all times subject to the

control of Agent. If requested by Agent, Merchant shall, at Agent’s expense as an Expense,

insure the Additional Agent Merchandise and, if required, promptly file any proofs of loss with

regard to same with Merchant’s insurers.

(d) Any transactions relating to the Additional Agent Merchandise are, and

shall be construed as, a true consignment from Agent to Merchant. Merchant acknowledges, and

the Approval Order shall provide, that the Additional Agent Merchandise shall be consigned to

Merchant as a true consignment under Article 9 of the Uniform Commercial Code in effect in the

State of New York (the “UCC”). Subject to Agent’s obligation to pay the Sharing Amount (if

any), Agent is hereby granted a first priority security interest in (i) the Additional Agent

Merchandise and (ii) the Additional Agent Merchandise proceeds, which security interest shall

be deemed perfected pursuant to the Approval Order without the requirement of filing UCC

financing statements or providing notifications to any prior secured parties (provided that Agent

is hereby authorized to deliver any notices and file any financing statements and amendments

thereof under the applicable UCC identifying Agent’s interest in the Additional Agent

Merchandise (and any proceeds from the sale thereof) as consigned goods thereunder and the

Merchant as the consignee therefor, and Agent’s security interest in such Additional Agent

Merchandise and Additional Agent Merchandise proceeds).

Section 9. Employee Matters.

9.1 Merchant’s Employees. Subject to the applicable provisions of the Approval

Order and any other provisions in this Agreement relating to employees, Agent may use

Merchant’s Store employees in the conduct of the Sale to the extent Agent deems expedient, and

Agent may select and, with Merchant, schedule the number and type of Merchant’s employees

required for the Sale. Agent shall identify any such Store employees to be used in connection

with the Sale (each such employee, a “Retained Employee”) prior to the Sale Commencement

Date. Retained Employees shall at all times remain employees of Merchant, and shall not be

considered or deemed to be employees of Agent. Merchant and Agent agree that except to the


29

extent that wages, payroll taxes, benefits, and other costs relating to the employment of Retained

Employees constitute Expenses hereunder and except as otherwise expressly provided in this

Agreement, nothing contained in this Agreement and none of Agent’s actions taken in respect of

the Sale shall be deemed to constitute an assumption by Agent of any of Merchant’s obligations

relating to any of Merchant’s employees including, without limitation, Excluded Benefits,

Worker Adjustment Retraining Notification Act (“WARN Act”) claims, and other termination-

type claims and obligations, or any other amounts required to be paid by statute or law (except to

the extent such items are amounts for which Merchant is entitled to indemnification pursuant

hereto), nor shall Agent become liable under any collective bargaining or employment agreement

or be deemed a joint or successor employer with respect to such employees. Merchant shall not,

without Agent’s prior written consent, raise the salary or wages or increase the benefits for, or

pay any bonuses or make any other extraordinary payments to, any of the Retained Employees,

except as otherwise provided in this Agreement.

9.2 Termination of Employees by Merchant. Agent may in its discretion stop using

any Retained Employee at any time during the Sale. In the event Agent determines to

discontinue its use of any Retained Employee in connection with the conduct of the Sale, Agent

will provide written notice to Merchant at least seven (7) days prior thereto, except for

termination “for cause” (such as dishonesty, fraud, or breach of employee duties), in which case

the seven (7) day notice period shall not apply; provided, however, that Agent shall promptly

notify Merchant of the basis for such “cause”. During the Sale Term, Merchant shall not transfer

or dismiss employees of the Stores except “for cause” without Agent’s prior consent (which

consent shall not be unreasonably withheld). Notwithstanding any other provision hereof, Agent

will indemnify Merchant with respect to any claims by Retained Employees arising from

Agent’s treatment of such Retained Employees.

9.3 Payroll Matters. Subject to Section 4.1 hereof, during the Sale Term Merchant

shall process the payroll for all Retained Employees and any former employees and temporary

labor engaged for the Sale. Each Wednesday prior to the date on which such payroll is payable

(or such other date as may be reasonably requested by Merchant to permit the funding of the

payroll accounts before such payroll is due and payable) during the Sale Term, Agent shall

transfer to Merchant’s payroll accounts an amount equal to the base payroll for Retained

Employees plus related payroll taxes, workers’ compensation and benefits for such week, in the

amount to the extent required by Section 4.1.

9.4 Employee Retention Bonuses. Agent shall pay, as an Expense hereunder,

retention bonuses (“Retention Bonuses”) (which bonuses shall be inclusive of payroll taxes but

as to which no benefits shall be payable) up to a maximum of approximately fifteen percent

(15%) of base payroll, to certain Retained Employees who do not voluntarily leave employment

and are not terminated “for cause”, as Agent shall determine. The amount of such Retention

Bonuses, which will be payable within thirty (30) days after the Sale Termination Date, shall,

subject to the limitations set forth above, be in an amount to be determined by Agent, in its

discretion, and shall be processed through Merchant’s payroll system. Agent shall provide

Merchant with a copy of Agent’s Retention Bonus plan within five (5) business days after the

Sale Commencement Date. Agent shall not utilize the Retention Bonus as a mechanism to

encourage Retained Employees to act contrary to Merchant’s best interests.


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Section 10. Conditions Precedent.

10.1 Conditions to Agent’s Obligations. The willingness of Agent to enter into the

transactions contemplated under this Agreement is directly conditioned upon the satisfaction of

the following conditions at the time or during the time periods indicated, unless specifically

waived in writing by Agent:

(a) All representations and warranties of Merchant hereunder shall be true and

correct in all material respects and no Event of Default shall have occurred at and as of the date

hereof and as of the Sale Commencement Date;

(b) No injunction, stay or restraining order shall be in effect prohibiting the

consummation of the transactions contemplated by this Agreement (including, without

limitation, the Sale);

(c) On or before January 26, 2016, the Bankruptcy Court shall have entered

an order, inter alia, approving the Bid Protections and Signage Costs Reimbursements (a

“Bidding Procedures Order”), in substantially the form annexed hereto as Exhibit 10.1(b), and

which Bidding Procedures Order shall otherwise be in form and substance reasonably

satisfactory to the Agent and Merchant;

(d) The Bankruptcy Court shall have entered the Approval Order, in

substantially the form annexed hereto as Exhibit 10.1(c), on or before February 4, 2016; and

(e) Merchant shall have executed this Agreement in the space provided

therefor.

10.2 Conditions to Merchant’s Obligations. The willingness of Merchant to enter into

the transactions contemplated under this Agreement is directly conditioned upon the satisfaction

of the following conditions at the time or during the time periods indicated, unless specifically

waived in writing by Merchant:

(a) All representations and warranties of Agent hereunder shall be true and

correct in all material respects and no Event of Default shall have occurred solely as a result of

Agent’s conduct at and as of the date hereof and as of the Sale Commencement Date;

(b) The Bankruptcy Court shall have entered the Bidding Procedures Order on

or prior to January 26, 2016 and the Approval Order on or prior to February 4, 2016;

(c) No injunction, stay or restraining order shall be in effect prohibiting the

consummation of the transactions contemplated by this Agreement (including, without

limitation, the Sale); and

(d) Agent shall have executed this Agreement in the space provided therefor.


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Section 11. Representations, Warranties and Covenants.

11.1 Merchant’s Representations, Warranties, and Covenants. Merchant hereby

represents, warrants, and covenants in favor of Agent as follows:

(a) Merchant (i) is a corporation duly organized, validly existing, and in good

standing under the laws of the State of Delaware; (ii) has all requisite power and authority to

own, lease, and operate its assets and properties and to carry on its business as presently

conducted and to grant the rights intended to be granted herein as provided herein; and (iii) is,

and during the Sale Term will continue to be, duly authorized and qualified to do business and in

good standing in each jurisdiction where the nature of its business or properties requires such

qualification, including all jurisdictions in which each Store is/are located, except, in each case,

to the extent that the failure to be in good standing or so qualified could not reasonably be

expected to have a material adverse effect on the ability of Merchant to execute and deliver this

Agreement and perform fully its obligations hereunder. Merchant is not in violation of

certificate of incorporation or bylaws, or in violation (or with or without notice or lapse of time

or both would be in violation), in any way with any term or provision of any law, statute,

ordinance, rule, regulation, order, writ, judgment, injunction, permit or decree applicable to

Merchant or any of its assets, operations or properties that would prevent or materially impair

Merchant’s consummation of the transactions contemplated by this Agreement. Subject to the

entry of the Approval Order, the execution and delivery by Merchant of this Agreement and the

other agreements and instruments contemplated hereby does not, and compliance by the

Merchant with the terms hereof and thereof compliance by Merchant with the terms hereof and

consummation of the transactions contemplated hereby will not, require Merchant to obtain any

authorization, consent, approval, exemption or action of, or make any filing with or give any

notice to, any court or administrative or governmental body or any other person or entity

pursuant to the certificate of incorporation or bylaws Merchant or any law, statute, rule,

regulation, agreement, permit, license, instrument, order, judgment or decree to which the

Merchant or any of their assets is subject, except for any such authorization, consent, approval,

exemption, action of or filing with the failure of which to be obtained could not reasonably be


Agreement and perform fully its obligations hereunder.

(b) Subject to the entry of the Approval Order, Merchant has the right, power,

and authority to execute and deliver this Agreement and each other document and agreement

contemplated hereby (collectively, together with this Agreement, the “Agency Documents”) and

to perform fully its obligations hereunder. Subject to the entry of the Approval Order, Merchant

has taken all necessary actions required to authorize the execution, delivery, and performance of

the Agency Documents, and no further consent or approval on the part of Merchant is required

for Merchant to enter into and deliver the Agency Documents, to perform its obligations

thereunder, and to consummate the Sale except for any such authorization, consent, approval,

exemption, action of or filing with the failure of which to be obtained could not reasonably be


Agreement and perform fully its obligations hereunder. Subject to the issuance and entry of the

Approval Order, each of the Agency Documents has been duly executed and delivered by

Merchant and constitutes the legal, valid, and binding obligation of Merchant, enforceable in


32

accordance with its terms. Subject to the entry of the Approval Order, no court order or decree

of any federal, state, local, or provincial governmental authority or regulatory body is in effect

that would prevent or materially impair, or is required for Merchant’s consummation of, the

transactions contemplated by this Agreement, and no consent of any third party that has not been

obtained is required therefor, other than as shall be obtained prior to the Sale Commencement

Date, except for any such consent the failure of which to be obtained could not reasonably be


Agreement and perform fully its obligations hereunder. Other than any consent as shall be

obtained prior to the Sale Commencement Date, and any contracts or agreements identified by

Merchant to Agent on or prior to the Sale Commencement Date, subject to entry of the Approval

Order, no contract or other agreement to which Merchant is a party or by which Merchant is

otherwise bound will prevent or materially impair the consummation of the Sale and the other

transactions contemplated by this Agreement.

(c) Merchant has not replenished the Stores in the normal course consistent

with its normal course since December 24, 2015.

(d) Merchant (i) except as set forth on Exhibit 11.1(d), owns and will own at

all times during the Sale Term, good and marketable title to all of the Merchandise, and Owned

FF&E which, subject to entry of the Approval Order, will be free and clear of all liens, claims,

and encumbrances of any nature other than any of the foregoing created hereunder; provided

that, the liens identified in Exhibit 11.1(d) shall attach to the Guaranteed Amount, Sharing

Amount (if any) and such other amounts due Merchant hereunder in the same extent and priority

that such liens had in the Merchandise and Owned FF&E; and (ii) Merchant shall not create,

incur, assume, or suffer to exist any security interest, lien, or other charge or encumbrance upon

or with respect to any of the Merchandise, Owned FF&E or the Proceeds or the proceeds of the

sale of the Owned FF&E, in each case, except for such pre-existing liens and security interests as

are created hereunder or as shall have been disclosed by Merchant to Agent and identified in

Exhibit 11.1(d) hereof, which liens and security interests shall, pursuant to the Approval Order,

attach only to the Guaranteed Amount, the Sharing Amount (if any), Expenses, and any other

amounts payable to Merchant hereunder.

(e) Merchant has maintained its pricing files at all Stores in the ordinary

course of business, and prices charged to the public for goods (whether in-Store, by

advertisement, or otherwise) are the same in all material respects as set forth in such pricing files

for the periods indicated therein (without consideration of any point of sale markdowns,

advertised sales, and other customary in-Store promotional or clearance activities). All pricing

files and records (including, without limitation, the Cost File) are, to the Merchant’s best

knowledge, true and accurate in all material respects as to the actual cost to Merchant for

purchasing the goods referred to therein and as to the selling price to the public for such goods

(without consideration of any point of sale markdowns, advertised sales, and other customary in-

store promotional or clearance activities) as of the dates and for the periods indicated therein.

All pricing files and records relative to the Merchandise (including, without limitation, the Cost

File) have been made available to Agent. Merchant represents that (i) the ticketed prices of all

items of Merchandise do not and shall not include any Sales Taxes and (ii) all registers located at

the Stores are programmed to correctly compute all Sales Taxes required to be paid by the


33

customer under applicable law, as such calculations have been identified to Merchant by its

retained service provider. Merchant has taken hard markdowns (including, without limitation,

on clearance inventory) in the ordinary course of business and, to the best of Merchant’s

knowledge, such hard markdowns are reflected in Merchant’s pricing and records (including,

without limitation, the Cost File).

(f) Merchant shall ticket or mark all items of inventory received at the Stores

following the date of this Agreement but prior to the Sale Commencement Date in a manner

consistent with similar Merchandise located at the Stores and in accordance with Merchant’s past

practices and policies relative to pricing and marking inventory.

(g) To the best of Merchant’s knowledge, all Merchandise is in material

compliance with all applicable federal, state, and local product safety laws, rules, and standards.

Merchant shall provide Agent with its historic policies and practices, if any, regarding product

recalls prior to the Sale Commencement Date. Merchant owns or possesses all right, title and

interest in and to all material permits, licenses, franchises, orders, consents, authorizations,

registrations, certificates, variances, exceptions, approvals and similar rights obtained from

governments and governmental agencies relating to the Stores or the operations conducted at the

Stores, and all deposits or bonds in connection therewith (collectively, the “Permits”) that are

necessary to own and operate the Stores, including, without limitation, all Permits required

under any federal, state or local law relating to public health and safety, employee health and

safety, pollution or protection of the environment, other than in each case failures to so own or

possess all right, title and interest that would not prevent or materially impair the Merchant’s

consummation of the transactions contemplated by this Agreement. The Merchant is in

compliance with the terms and conditions of such material Permits and has received no notices

(nor does it have any knowledge of any threatened notice) that it is in violation of any of the

terms or conditions of such Permits, except for any noncompliance or violation that would not

prevent or materially impair the Merchant’s consummation of the transactions contemplated by

this Agreement. Merchant has conducted and continues to conduct its business, in all material

respects, in accordance with all applicable laws and governmental orders applicable to Merchant

or any of its assets or properties, and to the best of its knowledge Merchant is not in material

violation of any such law or governmental order, including, without limitation, any law, now in

effect, and any judicial or administrative interpretation thereof, including any judicial or

administrative order, consent decree or judgment, relating to the environment, labor, health,

safety or hazardous materials, except for any noncompliance or violation that would not prevent

or materially impair the Merchant’s consummation of the transactions contemplated by this

Agreement.

(h) Subject to the provisions of the Approval Order, during the Sale Term,

Agent shall have (i) the right to the unencumbered use and occupancy of, and peaceful and quiet

possession of the Stores, the utilities and other services provided at the Stores and the assets

currently located at the Stores; and (ii) access to, and, to the extent Agent exercises its election

under Section 5.5 of this Agreement, the right to use, the Distribution Center and the

Distribution Center Services (which access and right to use shall be ensured by Merchant) for

purposes of receiving and processing Additional Agent Merchandise. Merchant shall,

throughout the Sale Term, maintain in good working order, condition and repair (at its own


34

expense) all cash registers, heating systems, air conditioning systems, elevators, escalators, alarm

systems and all other mechanical devices necessary or appropriate for the conduct of the Sale at

the Stores. Except as otherwise restricted by the Bankruptcy Code or as provided herein and

absent a bona fide dispute, throughout the Sale Term, Merchant shall remain current on all post-

petition expenses and payables necessary for the conduct of the Sale.

(i) Subject to the Approval Order, Merchant has paid and shall continue to

pay throughout the Sale Term, all self-insured or Merchant-funded employee benefit programs

for Stores’ employees, including health and medical benefits and insurance and all proper claims

made or to be made in accordance with such programs.

(j) Supplies have not been, since December 1, 2015, and shall not be, prior to

the Sale Commencement Date, transferred by Merchant to or from the Stores so as to alter the

mix or quantity of supplies at the Stores from that existing on such date, other than in the

ordinary course of business (as Merchant has been operating the business during the period

immediately preceding the execution of this Agreement).

(k) Since December 1, 2015, Merchant (i) has not marked up or raised (and

shall not, up to the Sale Commencement Date, mark up or raise) the price of any items of

Merchandise, (ii) has continued to mark down prices of Merchandise in accordance with normal

course activity, (iii) has sold inventory during such period at customary prices consistent with the

ordinary course of business, and has not promoted or advertised any sales or in-Store promotions

(including, without limitation, POS promotions) to the public other than as described on Exhibit

11.1(k) (in all cases whether or not consistent with Merchant’s ordinary course of business

consistent with historic periods), and (iv) has not removed or altered any tickets or any indicia of

clearance merchandise or POS promotion, except in the ordinary course of business (as Merchant

has been operating the business during the period immediately preceding the execution of this

Agreement).

(l) Except for (i) the Bankruptcy Case and (ii) the matters set forth on Exhibit

11.1(l), no action, arbitration, suit, notice, or legal, administrative, or other proceeding before

any court or governmental body has been instituted by or against Merchant, or has been settled

or resolved, or to Merchant’s knowledge, is threatened against or affects Merchant, relative to

Merchant’s business or properties, or which questions the validity of this Agreement, or that

would reasonably be expected, if adversely determined, to materially impair or prevent the

conduct of the Sale.

(m) Except as set forth in Exhibit 11.1(m): (i) Merchant is not a party to any

collective bargaining agreements with its employees; (ii) no labor unions represent Merchant’s

employees at Distribution Center or at any Store; and (iii) to Merchant’s knowledge, there are

currently no strikes, work stoppages, or other labor disturbances affecting Distribution Center or

any Store, or Merchant’s central office facilities.

(n) Since December 1, 2015, Merchant has not taken, and, except as expressly

permitted pursuant to the other terms and provisions of this Agreement, shall not throughout the

Sale Term take, any actions with the intent of increasing (or the result of which is to increase


35

materially) the Expenses of the Sale, including without limitation increasing salaries or other

amounts payable to employees; except to the extent an employee was due an annual raise in the

ordinary course.

(o) Since December 1, 2015, Merchant has operated, and, except as otherwise

restricted by the Bankruptcy Code or as provided herein (including as described in Sections 8.10

and 11.1(c)), through the Sale Commencement Date Merchant covenants to continue to operate,

the Stores in all material respects in the ordinary course of business (as operated as of the date

hereof) including without limitation by: (i) selling inventory during such period at customary

prices consistent with the ordinary course of business and not promoting or advertising any sales

or in-Store promotions (including, without limitation, POS promotions) to the public other than

as described on Exhibit 11.1(o) (in all cases whether or not consistent with Merchant’s ordinary

course of business consistent with historic periods); (ii) not returning inventory, supplies,

fixtures, furniture or equipment to vendors and not transferring inventory or supplies out of or to

the Stores; and (iii) except as may occur in the ordinary course of business (as Merchant is

operating immediately prior to the date hereof), not making any management personnel moves or

changes at the Stores.

(p) To Merchant’s knowledge, formed after reasonable inquiry, all

documents, written information and written supplements provided by Merchant to Agent in

connection with Agent’s due diligence and the negotiation of this Agreement were true and

accurate in all material respects at the time provided.

(q) Except as indicated on Schedule 11.1(q) hereto, no Store lease or similar

occupancy agreement has expired, nor shall expire at any time until the conclusion of the Sale

Term in such Store (by its terms or otherwise).

(r) Merchant has not since December 1, 2015, knowingly shipped any

Excluded Defective Merchandise from the Distribution Center to the Stores. Merchant will use

all commercially reasonable efforts to avoid shipping any Excluded Defective Merchandise from

the date of this Agreement from the Distribution Center to the Stores.

(s) Merchant (i) at the Sale Commencement Date will have sufficient internal

funds (without giving effect to any unfunded financing regardless of whether any such financing

is committed) to consummate the transactions contemplated by this Agreement and the other

Agency Documents, (ii) at the Sale Commencement Date will have, the resources and

capabilities (financial or otherwise) to perform its obligations hereunder and under the other

Agency Documents, and (iii) at the Sale Commencement Date, will not have incurred any

obligation, commitment, restriction or liability of any kind which would impair or adversely

affect such funds, resources and capabilities.

(t) Merchant shall not from the date of this Agreement forward, offer any

promotions or discounts at the Stores except as detailed on Exhibit 11.1k).

(u) No investigation or due diligence conducted by Agent shall limit, modify

or negate any of the foregoing representations or warranties.


36

11.2 Agent’s Representations, Warranties and Covenants. Agent hereby represents,

warrants, and covenants in favor of Merchant as follows:

(a) Each member of Agent (i) is a limited liability company duly and validly

existing and in good standing under the laws of each of their formation; (ii) has all requisite

power and authority to carry on its business as presently conducted and to consummate the

transactions contemplated hereby; and (iii) is and during the Sale Term will continue to be duly

authorized and qualified as a foreign company to do business and in good standing in each

jurisdiction where the nature of its business or properties requires such qualification.

(b) Agent has the right, power, and authority to execute and deliver each of

the Agency Documents to which it is a party and to perform fully its obligations thereunder.

Agent has taken all necessary actions required to authorize the execution, delivery, and

performance of the Agency Documents, and no further consent or approval is required on the

part of Agent for Agent to enter into and deliver the Agency Documents, to perform its

obligations thereunder, and to consummate the Sale. Each of the Agency Documents has been

duly executed and delivered by Agent and constitutes the legal, valid, and binding obligation of

Agent enforceable in accordance with its terms, except as such enforceability may be limited by

applicable bankruptcy, reorganization, moratorium or other similar laws affecting creditors’

rights generally and by general principles of equity (regardless of whether enforceability is

consider in a proceeding in equity or at law). No court order or decree of any federal, provincial,

state, or local governmental authority or regulatory body is in effect that would prevent or impair

or is required for Agent’s consummation of the transactions contemplated by this Agreement,

and no consent of any third party which has not been obtained is required therefor other than as

provided herein. No contract or other agreement to which Agent is a party or by which Agent is

otherwise bound will prevent or impair the consummation of the transactions contemplated by

this Agreement.

(c) No action, arbitration, suit, notice, or legal, administrative, or other

proceeding before any court or governmental body has been instituted by or against Agent, or

has been settled or resolved, or to Agent’s knowledge, has been threatened against or affects

Agent, which questions the validity of this Agreement or any action taken or to be taken by

Agent in connection with this Agreement, or which if adversely determined, would have a

material adverse effect upon Agent’s ability to perform its obligations under this Agreement.

(d) Agent has committed, immediately available funds sufficient to enable

Agent to pay the Guaranteed Amount and fully pay, perform, and satisfy all of Agent’s

obligations under this Agreement.

Section 12. Insurance.

12.1 Merchant’s Liability Insurance. Merchant shall continue until the Sale

Termination Date, in such amounts as it currently has in effect, all of its liability insurance

policies including, but not limited to, products liability, comprehensive public liability, auto

liability, and umbrella liability insurance, covering injuries to persons and property in, or in


37

connection with Merchant’s operation of the Stores, and shall use commercially reasonable

efforts to cause Agent to be named an additional insured with respect to all such policies. Prior

to the Sale Commencement Date, Merchant shall deliver to Agent certificates evidencing such

insurance setting forth the duration thereof and naming Agent as an additional named insured, in

form reasonably satisfactory to Agent. All such policies shall require at least thirty (30) days

prior notice to Agent of cancellation, non-renewal, or material change. In the event of a claim

under any such policies, (a) Merchant shall be responsible for the payment of all deductibles,

retentions, or self-insured amounts to the extent such claim arises from or relates to the alleged

acts or omissions of Merchant or its employees (other than Retained Employees), agents (other

than Agent’s employees), or independent contractors (other than Agent and Supervisors hired by

Agent in conjunction with the Sale) and (b) Agent shall be responsible for the payment of all

deductibles, retentions, or self-insured amounts (which amounts shall constitute Expenses) to the

extent such claim arises from or relates to the alleged acts or omissions of Agent or its

employees, agents, or independent contractors, including Retained Employees.

12.2 Merchant’s Casualty Insurance. Merchant shall continue until the Sale

Termination Date, in such amounts as it currently has in effect, fire, flood, theft, and extended

coverage casualty insurance covering the Merchandise in a total amount equal to no less than the

Cost Value thereof, which coverage shall be reduced from time to time to take into account the

sale of Merchandise, and shall use best efforts to cause Agent to be named an additional insured

with respect to all such policies. In the event of a loss to the Merchandise on or after the date of

this Agreement, the proceeds of such insurance attributable to the Merchandise and/or Additional

Agent Merchandise (net of any deductible) shall constitute Proceeds. Prior to the Sale

Commencement Date, Merchant shall deliver to Agent certificates evidencing such insurance

setting forth the duration thereof, in form and substance reasonably satisfactory to Agent. All

such policies shall require at least thirty (30) days prior notice to Agent of cancellation, non-

renewal, or material change. Merchant shall not make any change in the amount of any

deductibles or self-insurance amounts prior to the Sale Termination Date (as may be extended

from time to time as set forth herein) without Agent’s prior written consent.

12.3 Worker’s Compensation Insurance. Merchant shall continue until the Sale

Termination Date, in such amounts as it currently has in effect, worker’s compensation insurance

(including employer liability insurance) covering all Retained Employees in compliance with all

statutory requirements. Prior to the Sale Commencement Date, Merchant shall deliver to Agent

a certificate of its insurance broker or carrier evidencing such insurance.

12.4 Agent’s Insurance. As an Expense of the Sale, Agent shall maintain throughout

the Sale Term, in such amounts as it currently has in effect, comprehensive public liability

insurance policies covering injuries to persons and property in or in connection with Agent’s

agency at the Stores, and shall cause Merchant to be named an additional insured with respect to

such policies. Prior to the Sale Commencement Date, Agent shall deliver to Merchant certificates

evidencing such insurance policies, setting forth the duration thereof and naming Merchant as an

additional insured, in form and substance reasonably satisfactory to Merchant. In the event of a

claim under such policies, Agent shall be responsible for the payment of all deductibles,

retentions, or self-insured amounts thereunder, to the extent such claim arises from or relates to

the alleged acts or omissions of Agent or Agent’s employees, agents or Supervisors.


38

12.5 Risk of Loss. Without limiting any other provision of this Agreement, Merchant

acknowledges that Agent is conducting the Sale on behalf of Merchant solely in the capacity of

an agent, and that in such capacity (i) Agent shall not be deemed to be in possession or control of

the Stores or the assets located therein or associated therewith, or of Merchant’s employees

located at the Stores, and (ii) except as expressly provided in this Agreement, Agent does not

assume any of Merchant’s obligations or liabilities with respect to any of the foregoing. Agent

shall not be deemed to be a successor employer. Merchant and Agent agree that, subject to the

terms of this Agreement, Merchant shall bear all responsibility for liability claims of customers,

employees, and other persons arising from events occurring at the Stores during and after the

Sale Term except to the extent any such claim arises directly from the acts or omissions of

Agent, or its supervisors, agents, independent contractors, or employees located at the Stores (an

“Agent Claim”). In the event of any liability claim other than an Agent Claim, Merchant shall

administer such claim and shall present such claim to Merchant’s liability insurance carrier in

accordance with Merchant’s policies and procedures existing immediately prior to the Sale

Commencement Date, and shall provide a copy of the initial documentation relating to such

claim to Agent at the address listed in this Agreement. To the extent that Merchant and Agent

agree that a claim constitutes an Agent Claim, Agent shall administer such claim and shall

present such claim to its liability insurance carrier, and shall provide copies of the initial

documentation relating to such claim to Merchant. In the event that Merchant and Agent cannot

agree whether a claim constitutes an Agent Claim, each party shall present the claim to its own

liability insurance carrier, and a copy of the initial claim documentation shall be delivered to the

other party to the address designated for delivery of notices hereunder.

Section 13. Indemnification.

13.1 Merchant Indemnification. Merchant shall indemnify and hold Agent and each

Agent Indemnified Party harmless from and against all claims, demands, penalties, losses,

liability, or damage, including, without limitation, reasonable attorneys’ fees and expenses,

asserted directly or indirectly against Agent resulting from or related to:

(a) Merchant’s material breach of or failure to comply with any of its

agreements, covenants, representations or warranties contained in any Agency Document;

(b) Subject to Agents’ performance of its payment obligations under this

Agreement, any failure of Merchant to pay to its employees any wages, salaries, or benefits due

to such employees during the Sale Term or other claims asserted against Agent by Merchant’s

employees resulting from Merchant’s (and not Agent’s) treatment of its employees;

(c) subject to Agent’s compliance with its obligations under Section 8.3

hereof, any failure by Merchant to pay any Sales Taxes to the proper taxing authorities or to

properly file with any taxing authorities any reports or documents required by applicable law to

be filed in respect thereof;

(d) any consumer warranty or products liability claims relating to

Merchandise;


39

(e) any liability or other claims asserted by customers, any of Merchant’s

employees or any other person against any Agent Indemnified Party (including, without

limitation, claims by employees arising under collective bargaining agreements, worker’s

compensation or the WARN Act) in connection with the Sale and/or from events occurring at the

Stores during and after the Sale Term (except to the extent constituting an Agent Claim);

(f) any harassment or any other unlawful, tortious, or otherwise actionable

treatment of any customers, employees or agents of Agent by Merchant or any of its

representatives; and

(g) the gross negligence or willful misconduct of Merchant or any of its

officers, directors, employees, agents (other than Agent), or representatives.

The indemnification obligations set forth in this Section 13.1 shall be in addition to (and shall not

limit) any other indemnification obligations of Merchant set forth in this Agreement, including

without limitation those set forth in Section 8.3(a).

13.2 Agent Indemnification. Agent shall jointly and severally indemnify and hold

harmless Merchant and the Merchant Indemnified Parties from and against all claims, demands,

penalties, losses, liability, or damage, including, without limitation, reasonable attorneys’ fees

and expenses, asserted directly or indirectly against Merchant resulting from or related to

(including acts or omissions of persons or entities affiliated with or acting on behalf of Agent):

(a) Agent’s material breach of or failure to comply with any Safety Laws (as

defined in the Approval Order) or any of its agreements, covenants, representations, or

warranties contained in any Agency Document;

(b) any harassment, discrimination, or violation of any laws or regulations or

any other unlawful, tortious, or otherwise actionable treatment of any employees or agents of

Merchant by Agent or any of its employees, agents, independent contractors, Supervisors, or

other officers, directors, or representatives of Agent;

(c) any claims by any party engaged by Agent as an employee or independent

contractor arising out of such engagement;

(d) any Agent Claims;

(e) any taxes and penalties arising out of Agent’s failure to collect and/or

remit to Merchant correct amounts of Sales Taxes (including any such failure resulting from

Agent’s use of any system other than Merchant’s point of sale system to compute Sales Taxes

relating to the Sale);


40

(h) the gross negligence, willful misconduct, or fraud of Agent or any of its

officers, directors, employees, agents, or representatives; and

(i) any consumer warranty or products liability claims arising out of or

related to the sale of Additional Agent Merchandise.

The indemnification obligations set forth in this Section 13.2 shall be in addition to (and shall not

limit) any other indemnification obligations of Agent set forth in this Agreement, including

without limitation those set forth in Section 8.3(a).

Section 14. Defaults.

The following shall constitute “Events of Default” hereunder:

(a) Merchant’s or Agent’s failure to perform any of their respective material

obligations hereunder, which failure shall continue uncured seven (7) days after receipt of

written notice thereof to the defaulting party; or

(b) Any representation or warranty made by Merchant or Agent proves untrue

in any material respect as of the date made or at any time and throughout the Sale Term;

(c) The filing of a motion by any party to covert or the conversion of the

Merchant’s bankruptcy case to a case under another chapter of the Bankruptcy Code (other than

chapter 11) or the filing of a motion by any party to appoint or the appointment of a chapter 11

trustee; or

(d) Subject to Section 8.8 hereof, the Sale is terminated or materially

interrupted or impaired at three (3) or more Stores for any reason other than (i) an Event of

Default by Agent or (ii) any other material breach or action by Agent not authorized hereunder.

In the event of an Event of Default, the non-defaulting party (in the case of (a) or (b)

above, or the Agent in the case of (c) or (d) above) may, in its discretion, elect to terminate this

Agreement upon seven (7) business days’ written notice to the other party and pursue any and all

rights and remedies and damages resulting from such default hereunder in the event such cure is

not effected by the defaulting party.

Section 15. Fixtures.

(a) With respect to any furniture, fixtures and equipment (including, but not limited

to, machinery, rolling stock, office equipment and personal property, and conveyor systems and

racking owned by Merchant and located at the Closing Locations (collectively, the “Owned

FF&E”), Agent shall, at Merchant’s election (the “FF&E Sale Option”) to be exercised on the

date immediately prior to the Sale Commencement Date, either (i) sell the Owned FF&E strictly

on a commission basis (the “FF&E Commission Option”), or (ii) sell the Owned FF&E on a

guaranteed fee basis (the “FF&E Guaranty Option”); provided that, the FF&E Guaranty Option

shall be subject to the Merchant and Agent agreeing on a mutually acceptable FF&E/asset


41

listing; provided further that, prior to Merchant’s exercise of the FF&E Sale Option, Merchant

shall have the right to exclude the FF&F located in some or all of the Stores identified on Exhibit

15(a) attached hereto, in which case the FF&E in such locations shall be excluded from the

FF&E Commission Option and/or the FF&E Guaranty Option (the “Excluded Store FF&E”) and

Agent shall not sell such Excluded Store FF&E and it shall be left in place at the affected Stores

on the applicable Sale Termination Date. For the avoidance of doubt, Merchant must exercise

either the FF&E Commission Option or the FF&E Guaranty Option. Merchant shall exercise

the aforementioned FF&E Sale Option by written notice to Agent by the date that is not later

than ten (10) calendar days after the Sale Commencement Date (such date being defined as the

“FF&E Sale Election Deadline”). In the event Merchant elects the FF&E Commission Option,

Agent shall be entitled to receive a commission equal to twenty percent (20%) of the gross

proceeds from the sale of such Owned FF&E (“Agent’s FF&E Commission”); provided,

however, in such case Merchant shall be responsible for payment of expenses incurred in

connection with the disposition of the Owned FF&E (“FF&E Disposition Expenses”) in

accordance with a budget to be mutually agreed by Merchant and Agent (“FF&E Disposition

Budget”), and all proceeds realized from the disposition of the Owned FF&E, after deduction of

applicable sales taxes, Agent’s FF&E Commission, and the FF&E Disposition Expenses

(collectively, the “Net FF&E Proceeds”), shall be paid to Merchant. In the event Merchant elects

the FF&E Guaranty Option, Agent shall pay Merchant a lump sum payment in an amount to be

agreed upon between Merchant and Agent (hereinafter, the “FF&E Guaranty Amount”), in

which case all costs and expenses associated with the disposition of Owned FF&E shall be borne

by Agent, and all proceeds realized from the sale or other disposition of the Owned FF&E (after

payment of the applicable FF&E Guaranty Amount and net of any applicable sales taxes) shall

be retained by Agent for its sole account.

(b) Anything in this Agreement to the contrary notwithstanding, Agent shall be

authorized to abandon any and all unsold Owned FF&E (and all other furniture, fixtures, and

equipment at the Stores and the corporate office) in place without any cost or liability to Agent.

Agent shall have no responsibility whatsoever with respect to furniture, fixtures, and equipment

located at the Stores and/or corporate office which are not owned by Merchant.

(c) Merchant hereby represents to Agent that: (i) subject to the Approval Order, all

Owned FF&E may be sold by Agent on Merchant’s behalf, free and clear of all claims, liens and

encumbrances of any kind; and (ii) all such Owned FF&E is devoid of Hazardous Materials.

(d) Anything in this Agreement to the contrary notwithstanding, Agent will not have

any obligation whatsoever to purchase, sell, make, store, handle, treat, dispose, generate,

transport or remove any Hazardous Materials that may be located at the Stores and/or corporate

office. Agent shall have no liability to any party for any environmental action brought: (i) that is

related to the storage, handling, treatment, disposition, generation, or transportation of Hazardous

Materials, or (ii) in connection with any remedial actions associated therewith or the Stores

and/or corporate office. Merchant (and not Agent) shall be solely responsible to remove from the

Stores and/or corporate office all Hazardous Materials. For purposes of this Agreement, the term

“Hazardous Materials” means, collectively, any chemical, solid, liquid, gas, or other substance

having the characteristics identified in, listed under, or designated pursuant to (i) the

Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended,


42

42 U.S.C.A. 9601(14), as a “hazardous substance”, (ii) the Resource Conservation and Recovery

Act, 42 U.S.C.A. 6903(5) and 6921, as a “hazardous waste”, or (iii) any other laws, statutes or

regulations of a government or political subdivision or agency thereof, as presenting an imminent

and substantial danger to the public health or welfare or to the environment or as otherwise

requiring special handling, collection, storage, treatment, disposal, or transportation.

Section 16. Miscellaneous.

16.1 Notices. All notices and communications provided for pursuant to this

Agreement shall be in writing, and sent by hand, by e-mail, and/or a recognized overnight

delivery service, as follows:

If to Agent:

SB CAPITAL GROUP, LLC

1010 Northern Blvd., Suite 340

Great Neck, NY 11021

Attn: Robert Raskin

Tel: 516.829.2400

Email: [email protected]

360 MERCHANT SOLUTIONS, LLC

22 Squaws Lane

Mashpee MA 02649 -0658

Attn: Stephen G. Miller

Tel: 617.803.4949


TIGER CAPITAL GROUP, LLC

84 State Street – 4th

Floor

Boston, MA 02109

Attn: Michael McGrail

John Cronin


[email protected]

Tel: 617.523.4822

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


mailto:[email protected]




43

DICONZA TRAURIG KADISH LLP

630 Third Avenue – 7th

Floor

New York, NY 10017

Attn: Maura I. Russell


Facsimile: 212.682.4942

If to Merchant:

JOYCE LESLIE, INC.

170 W Commercial Avenue

Moonachie, NJ 07074

Attn: _______________________

Tel: _________________________

Email: ____________________________]

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

16.2 Governing Law; Consent to Jurisdiction. This Agreement shall be governed and

construed in accordance with the laws of the State of New York, without regard to conflicts of

laws principles thereof. The Parties hereto agree that the Bankruptcy Court (and the District

Court and Circuit Court of Appeal with appellate jurisdiction over the Bankruptcy Court) shall

retain exclusive jurisdiction to hear and finally determine any disputes arising from or under this

Agreement, and by execution of this Agreement each party hereby irrevocably accepts and

submits to the jurisdiction of such court with respect to any such action or proceeding and to

service of process by certified mail, return receipt requested to the address listed above for each

party.

16.3 Entire Agreement. This Agreement, the Exhibits hereto, and the Agency

Documents (subject, in each instance, to the Approval Order) contain the entire agreement

between the Parties with respect to the transactions contemplated hereby and supersede and

cancel all prior agreements, including but not limited to all proposals, letters of intent, or

representations, written or oral, with respect thereto.

16.4 Amendments. This Agreement, the Exhibits hereto, and the Agency Documents

may not be modified except in a written instrument executed by each of Merchant and Agent.

16.5 No Waiver. No party’s consent to or waiver of any breach or default by the other

in the performance of its obligations hereunder shall be deemed or construed to be a consent or

waiver to or of any other breach or default in the performance by such other party of the same or

any other obligation of such party. Failure on the part of any party to complain of any act or

failure to act by the other party or to declare the other party in default, irrespective of how long

such failure continues, shall not constitute a waiver by such party of its rights hereunder.



44

16.6 Successors and Assigns. This Agreement shall inure to the benefit of and be

binding upon the successors and assigns of Agent and Merchant, including but not limited to any

chapter 11 or chapter 7 trustee. No party to this Agreement shall be permitted to assign its

obligations under this Agreement.

16.7 Execution in Counterparts. This Agreement may be executed in two (2) or more

counterparts, each of which shall be deemed an original and all of which together shall constitute

but one agreement. This Agreement may be executed by facsimile, and such facsimile signature

shall be treated as an original signature hereunder.

16.8 Section Headings. The headings of sections of this Agreement are inserted for

convenience only and shall not be considered for the purpose of determining the meaning or

legal effect of any provisions hereof.

16.9 Survival. All representations, warranties, covenants and agreements made herein

shall be continuing, shall be considered to have been relied upon by the Parties and shall survive

the execution, delivery, and performance of this Agreement; provided, however, the

representations and warranties of the Parties shall survive and continue only until completion of

the Final Reconciliation, after which such representations and warranties shall lapse and cease to

be of any further force effect except to the extent that the Party in whose favor they are given

delivers written notice of breach thereof to the Party asserted to be in breach prior thereto.

16.10. Termination. This Agreement may be terminated at any time before the Sale

Commencement Date as follows:

(a) upon written notice by Agent or Merchant, if the Sale

Commencement Date has not occurred on or prior to February 4, 2016 and the failure of the

Sale Commencement Date to occur is not caused by or the result of a material breach of this

Agreement by the party giving such notice;

(b) by mutual written consent of the Merchant and the Agent;

(c) automatically and without any action or notice by either Agent or

Merchant, immediately upon the occurrence of any of the following events:

(i) the issuance of a final and non-appealable order by any

agency, division, subdivision, audit group, procuring office, or governmental or

regulatory authority, or any adjudicatory body thereof, of the United States or any state

thereof, any foreign government or state or any municipal or other political subdivision

thereof to restrain, enjoin, or otherwise prohibit the transaction(s) contemplated hereby;

or

(ii) approval by the Bankruptcy Court of, or the filing by or on

behalf of Merchant of a motion or other request to approve, any financing, refinancing,

acquisition, divestiture, sale, public offering, recapitalization, business combination or

reorganization of or involving all or any material part of the Merchandise (other than any

transaction with Agent or an affiliate of Agent) or any standalone plan of reorganization


45

for Merchant involving the retention of any material portion of the Merchandise (an

“Alternative Transaction”); or

(iii) Agent is not approved by the Bankruptcy Court as the

Successful Bidder after completion of the Auction (each as defined in the Bid

Procedures), if any, conducted pursuant to the Bid Procedures and the Bid Procedures

Order; or

(iv) Merchant’s Bankruptcy Case being converted into a case

under Chapter 7 of the Bankruptcy Code or dismissed;

(d) upon written notice by Agent:

(i) if Agent is not in material breach of this Agreement and

there has been a material violation or breach by Merchant of any representation,

warranty, covenant or agreement contained in this Agreement that (A) has rendered the

satisfaction of any condition to the obligations of Agent set forth in Section 10.1

impossible, (B) has not been waived by Agent, and (C) is not capable of being cured or, if

capable of being cured, is not cured in all material respects within seven (7) days

following receipt of written notification thereof by Agent; or

(ii) if Merchant fails to file with the Bankruptcy Court in the

Bankruptcy Case, on or prior to the date that is two (2) business days after the date of this

Agreement, a motion (the “Bid Procedures Motion”) seeking entry of an order or orders,

reasonably acceptable in form and substance to Agent and Merchant (the “Bid Procedures

Order”): (A) approving (1) the Agent as stalking-horse bidder and the Bid Protections

and Signage Costs Reimbursements to Agent set forth in this Agreement, (2) bid

procedures reasonably acceptable in form and substance to Agent and Merchant (the “Bid

Procedures”), which shall (x) provide that, for any bidder (or bidders) that is (or are)

making a bid(s) to liquidate substantially all of the Stores to top the Agent's stalking

horse bid, such single bid or combination of bids received by qualified bidders must,

individually or in the aggregate, provide for (1) a minimum overbid in excess of the

Agent's stalking horse bid of one percent (1%) of the Cost Value of the Merchandise (as

determined by Merchant in its reasonable discretion) plus (2) cash in the amount of the

Bid Protections plus (3) payment of the Signage Costs Reimbursement; and (B) expressly

making the Bid Procedures Order binding on any Trustee appointed for the Merchant

under any provision of the Bankruptcy Code, whether the Merchant’s Bankruptcy Case is

proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code; or

(iii) if the Bankruptcy Court does not enter the Bid Procedures

Order on or prior to January 26, 2016; or

(iv) if the Bankruptcy Court does not enter the Approval Order

on or prior to February 4, 2016.

(e) upon written notice by Merchant:


46

(i) if Merchant is not in material breach of this Agreement and

there has been a material violation or breach by Agent of any representation, warranty,

covenant or agreement contained in this Agreement that (A) has rendered the satisfaction

of any condition to the obligations of Merchant set forth in Section 10.2 impossible, (B)

has not been waived by Merchant, and (C) is not capable of being cured or, if capable of

being cured, is not cured in all material respects within seven (7) calendar days following

receipt of notification thereof by Merchant;

(ii) if the Bankruptcy Court does not enter the Bid Procedures

Order on or prior to January 26, 2016; or

(iii) if the Bankruptcy Court does not enter the Approval Order

on or prior to February 4, 2016.

In the event that this Agreement is validly terminated as provided herein, then each of the Parties

shall be relieved of its duties and obligations arising under this Agreement after the date of such

termination; provided, however, that the provisions of Section 16 (including, without limitation,

the Bid Protections and the Signage Costs Reimbursements) shall survive any such termination

and shall be enforceable hereunder with the exception of the Bid Protections and Signage Costs

Reimbursements in the event of a termination pursuant to Section 16.10(e)(i) or 16.10(e)(ii);

provided further, however, that nothing in this Section 16.10 shall be deemed to release any party

from liability for any breach of its obligations under this Agreement; provided further that

Agent’s sole and exclusive remedy in connection with any termination of this Agreement by

reason of Merchant’s breach prior to the Sale Commencement Date shall be the right to enforce

the Bid Protections and Signage Costs Reimbursements as provided in this Agreement.

16.11 Bid Protections and Signage Costs Reimbursements.

(a) Subject to approval of the Bankruptcy Court in the Bidding Procedures

Order, in consideration for Agent having expended considerable time and expense in connection

with this Agreement and the negotiation thereof and the identification and quantification of the

assets of Merchant and to compensate Agent as a stalking-horse bidder, in the event that this

Agreement is terminated pursuant to Section 16.10(a), Section 16.10(e)(iii), Section 16.10(c)(ii),

Section 16.10(c)(iii) or Section 16.10(d)(i), Merchant shall pay and Agent shall receive, (1) a

breakup fee plus reimbursement of customary, reasonable documented third-party fees, costs and

expenses, including legal fees, incurred by Agent in connection with this transaction in an

aggregate amount equal to $75,000 (collectively, the “Bid Protections”) plus (2) reimbursement

of the reasonable costs, fees, and expenses actually incurred and paid by Agent in acquiring

signage and other advertising and promotional material in connection with the Sale (excluding

any cost of capital incurred in connection therewith), in an aggregate amount not to exceed

$60,000 (the “Signage Costs Reimbursement”); (provided however that, in the event of a

termination prior to January 26, 2016, Agent shall not be entitled to any reimbursement for

Signage Costs Reimbursement).

(b) Upon a Successful Bidder’s or Merchant’s either reimbursement to Agent

directly for any Signage Costs Reimbursement (incurred after January 26, 2016) and/or


47

assumption and payment of Agent’s obligations to the signage vendor (as the case may be),

Agent shall make any such signage and other promotional materials available to such Successful

Bidder or Merchant, as applicable; provided further that the costs of shipping and/or delivery

associated with the aforementioned signage shall be borne by Merchant or such Successful

Bidder as the case may be.

(c) Subject to approval of the Bankruptcy Court, the Bid Protections and the

Signage Costs Reimbursements shall have administrative expense claim status in the Bankruptcy

Cases pursuant to Section 507 of the Bankruptcy Code, senior to all other administrative expense

priority claims, shall be secured by a first-priority lien on the Agent Collateral and any deposit

posted by a Successful Bidder (the “Deposit”), solely to the extent of Merchant’s interest therein

(which lien shall be deemed properly perfected without the need for further filings or

documentation), and shall be paid in cash within three (3) business days after the termination

hereof giving rise to such Bid Protections and the Signage Costs Reimbursements. Following the

occurrence of the Sale Commencement Date for a Sale conducted by Agent, Merchant shall have

no liability with respect to the Bid Protections or Signage Costs Reimbursements. The Bid

Protections and Signage Costs Reimbursements constitute liquidated damages and not a penalty

and are the exclusive remedy of Agent for any termination of this Agreement pursuant to a

termination provision under which either the Bid Protections or the Signage Costs

Reimbursements are payable. Agent shall not bring any cause of action against or otherwise

seek remedies from, Merchant or any of their affiliates or any other party hereto (other than for

payment of the applicable Bid Protections when payable hereunder), whether in equity or at law,

for breach of contract, in tort or otherwise, in the event of any termination of this Agreement

pursuant to a termination provision under which either the Bid Protections or the Signage Costs

Reimbursements are payable.

16.12 Agent’s Security Interest.

(a) In consideration of and effective upon payment by Agent of the Initial

Guaranty Payment on the Payment Date and delivery of the Letter of Credit, Merchant hereby

grants to Agent first priority, senior security interests in and liens upon: (i) the Merchandise; (ii)

all Proceeds (including, without limitation, credit card Proceeds); (iii) in the event Merchant

elects the FF&E Guaranty Option, the Owned FF&E and the proceeds realized from the sale or

other disposition of Owned FF&E after payment of the FF&E Guaranty Amount; or,

alternatively, Agent’s FF&E Commission; (iv) Agent’s percentage share of Proceeds in excess of

the Sharing Threshold, and (v) all “proceeds” (within the meaning of Section 9-102(a)(64) of the

UCC) of each of the foregoing (all of which are collectively referred to herein as the “Agent

Collateral”), to secure the full payment and performance of all obligations of Merchant to Agent

hereunder. Upon entry of the Approval Order, payment of the Initial Guaranty Payment on the

Payment Date, and delivery of the Letter of Credit, the security interest granted to the Agent

hereunder shall be deemed properly perfected without the necessity of filing UCC-1 financing

statements or any other documentation.

(b) Without any further act by or on behalf of the Agent or any other party

(including (without limitation) Merchant), the Agent’s security interests and liens in the Agent

Collateral created hereunder are (i) validly created, (ii) effective upon entry of the Approval


48

Order, perfected, and (iii) senior to all other liens and security interests Merchant shall cooperate

with Agent with respect to all filings (including, without limitation, UCC-1 financing statements)

and other actions to the extent reasonably requested by Agent in connection with the security

interests and liens granted under this Agreement.

(c) Merchant will not sell, grant, assign or transfer any security interest in, or

permit to exist any encumbrance on, any of the Agent Collateral other than in favor of the Agent.

(d) In the event of a Default by the Merchant hereunder, in any jurisdiction

where the enforcement of its rights hereunder is sought, the Agent shall have, in addition to all

other rights and remedies, the rights and remedies of a secured party under the UCC.

16.12 Further Assurances. From time to time, and without further consideration, the

parties hereto covenant and agree that they shall execute and deliver, or shall cause to be

executed and delivered to the other, such other instruments of transfer and conveyance and other

documents and take such other actions as the other may reasonably request as necessary, proper

or advisable under applicable laws and regulations to consummate and make effective the

transactions contemplated by this Agreement (including satisfaction of all closing conditions that

are within their respective control and reasonably cooperating with the Sale), and shall lend all

reasonable assistance to the other in the carrying out of the intentions and purposes of this

Agreement. Each party further covenants and agrees that it shall promptly deliver to the other all

such information and documents in their respective possession or control as the other shall

reasonably request. For the avoidance of doubt, nothing in this Section 16.13 shall be deemed to

require any party hereto to (i) execute or deliver any document or instrument under this Section

16.13 or take any action which would impose on them any monetary or other obligations or

liability not directly imposed upon them pursuant to the other provisions of this Agreement, (ii)

join in any litigation or proceeding not expressly contemplated or required by the other

provisions of this Agreement.

16.13 Joint and Several Liability. The obligations of the Agent hereunder shall be the

joint and several liability of each entity comprising Agent.

[REMAINDER OF PAGE INTENTIONALLY BLANK]


49

IN WITNESS WHEREOF, Agent and Merchant hereby execute this Agency Agreement as of the day and year first written above.

AGENT: SB CAPITAL GROUP, LLC

By: ________________________________ Name: Title:


By: ________________________________ Name: Michael McGrail Title: COO


By: ________________________________ Name: Title: MERCHANT: JOYCE LESLIE, INC. By: ________________________________ Name:

Title:


Store Name Address City St Zip Sq ft

8 Airport Plaza 213 Airport Plaza Farmingdale NY 11735 15,250

9 Commack Corners 6500 Jericho Turnpike Commack NY 11725 9,580

18 Bayonne 494-496 Broadway Bayonne NJ 07002 7,500

19 Port Chester SC 561 Boston Post Rd Port Chester NY 10573 12,400

23 Hawley Lane Mall 100 Hawley Lane Trumbull CT 06611 6,500

24 Marketplace at Rockaway 214 Enterprise Drive Rockaway NJ 07866 10,515

25 Blue Star Shopping Center 1701-63 Rt 22 West Watchung NJ 07060 7,283

26 Hillside Shopping Center Rt 119 250 Tarrytown Rd White Plains NY 10603 18,000

27 Collegetown Shopping Center 765 N Delsea Dr, Heston Rd Glassboro NJ 08028 8,000

28 Legrand Place 1350 Deer Park Ave N Babylon NY 11703 8,000

30 East Cedarbrook Plaza 3001 Cheltenham Rd, Suite 2000 Wyncote PA 19095 9,000

31 Edgewater Commons 493 River Road Edgewater NJ 07020-1145 9,318

32 Pond Road Plaza-North 4345 US Highway 9, Unit 2 Freehold NJ 07728 8,000

33 Georgetown SC 2109 Ralph Avenue Brooklyn NY 11234 9,500

35 Hadley Center 4979 Stelton Road South Plainfield NJ 07080 9,000

36 New Century Plaza 264 N Middle Country Rd Coram NY 11727 8,000

37 Roosevelt Mall 22-33 Cottman Avenue Philadelphia PA 19149 17,040

38 Aramingo Super Center 2539 Castor Avenue Philadelphia PA 19134 10,000

39 East Meadow Commons 2575 Hempstead Turnpike East Meadow NY 11554 10,800

41 86th St 2147 86th St Brooklyn NY 11214 5,932

43 Echelon Mall 1126 Echelon Mall Vorhees NJ 08043 9,304

45 Paramus 145 West Route 4 Paramus NJ 08043 22,470

46 Tices Corner 333 State Rt 18 East Brunswick NJ 08818 8,016

48 Marlton Crossing SC 159 Route 73 South Marlton NJ 08053 8,800

49 The Court at Deptford II 1555 Almonesson Road Deptford NJ 08096 7,950

51 Passaic 656 Main Avenue Passaic NJ 07055 8,310

58 Columbus Crossing 1851 Columbus Blvd Philadelphia PA 19134 8,040

59 Meadowbrook Commons 254 East Sunrise Highway Freeport NY 11520 8,037

61 Bakers Centre 2920 Fox Street Philadelphia PA 19129 8,660

63 Woodbridge Mall 236 Woodbridge Center Woodbridge NJ 07095 8,145

66 Indian Head Plaza 1334 Lakewood Road Toms River NJ 08753 11,600

67 Wrangleboro Consumer Sq 260 Consumer Square Mays Landing NJ 08330 12,000

68 Middletown Plaza 1439 State Rd #35 Middletown NJ 07748 9,600

75 The Plaza 35 1825 Highway 35, Suite #6 Wall Township NJ 07719 12,300

78 North Haven Pavilion 220 Universal Drive North North Haven CT 06473 10,052

79 Pelham Shopping Plaza 814 Pelham Parkway Pelham NY 10803 8,201

82 Flushing 37-28 Main Street Flushing NY 11354 5,708

84 Plaza 46 West 1650 Rt 46 West Woodland Park NJ 07424 15,490

85 The Plaza at Cherry Hill 2100 Route 38 Cherry Hill NJ 08002 13,350

88 Milford Crossing 1393 Boston Post Road Milford CT 06460 8,670

93 Orange Plaza 470 Route 211 East, Suite 8 Middletown NY 10940 10,000

95 Whitehall Square Mall 2180 Macarthur Road Whitehall PA 18052 9,475

JOYCE LESLIE

Exhibit A-1

Store List



99 JL Headquarters/Whse 170 W. Commercial Ave Moonachie NJ 07074 60,040

JOYCE LESLIE

Exhibit A-2

Distribution Center


Cost Adjustment Adjusted Value Points Guaranty

4,100,000 -0.20% 61.15%4,000,000 -0.20% 61.35%3,900,000 -0.15% 61.55%3,800,000 -0.15% 61.70%3,700,000 -0.10% 61.85%3,600,000 -0.05% 61.95%3,500,000 NO ADJUSTMENT 62.00%3,400,000 NO ADJUSTMENT 62.00%3,300,000 NO ADJUSTMENT 62.00%

3,300,000 62.00%

3,300,000 NO ADJUSTMENT 62.00%3,200,000 NO ADJUSTMENT 62.00%3,100,000 NO ADJUSTMENT 62.00%3,000,000 NO ADJUSTMENT 62.00%2,900,000 -0.25% 61.75%2,800,000 -0.30% 61.45%2,700,000 -0.50% 60.95%2,600,000 -0.50% 60.45%2,500,000 -0.75% 59.70%2,400,000 -0.75% 58.95%

Note(s):1. Adjustments between the increments shall be on a pro rata basis.

JOYCE LESLIEExhibit 3.1 (c)

Merchandise Threshold Schedule

2. In the event that the Cost Value of Merchandise is greater than $4,100,000 each $100,000 (or pro rata portion therof) increment shall decrease the Guaranty by .30%.

3. In the event that the Cost Value of Merchandise is less than $2,400,000, each $100,000 (or pro rata portion therof) increment shall decrease the Guaranty by .90%.


Cost Adjustment Adjusted

Factor Points Guaranty

42.80% 62.00%

42.90% -0.30% 61.70%

43.00% -0.30% 61.40%

43.10% -0.30% 61.10%

43.20% -0.30% 60.80%

43.30% -0.30% 60.50%

43.40% -0.30% 60.20%

43.50% -0.30% 59.90%

43.60% -0.30% 59.60%

43.70% -0.30% 59.30%

43.80% -0.30% 59.00%

43.90% -0.30% 58.70%

44.00% -0.30% 58.40%

44.10% -0.30% 58.10%

Note(s):

1. Adjustments between the increments shall be on a pro rata basis.

JOYCE LESLIE

Exhibit 3.1(d)

Cost Factor

2. In the event that the Cost Factor is greater than 44.1%, each .1% (or pro rata portion therof)

increment shall decrease the Guaranty by 0.5%.


1

FORM OF LETTER OF CREDIT

[Name of Bank]

[Address Line 1]

[Address Line 2]

Irrevocable Standby Letter of Credit Number:

Beneficiary

JOYCE LESLIE, INC.

[Insert address]

Credit Number:

Opener’s Reference No:

Ladies and Gentlemen:

BY ORDER OF: [SB CAPTIAL GROUP, LLC] [TIGER CAPITAL GROUP, LLC] [360 MERCHANT

SOLUTIONS, LLC]

We hereby open in your favor our Irrevocable Standby Letter of Credit for the account of [SB CAPTIAL

GROUP, LLC] [TIGER CAPITAL GROUP, LLC] [360 MERCHANT SOLUTIONS, LLC] for a sum or

sums not exceeding a total of $_____________ US dollars available by your draft(s) at SIGHT on

OURSELVES, effective immediately, and expiring at OUR COUNTERS on ___________, __2016, or

such earlier date on which the Beneficiary shall notify us in writing that this Standby Letter of Credit shall

be terminated accompanied by the original Letter of Credit (the “Expiry Date”).

Draft(s) must be accompanied by the original Letter of Credit and a signed statement from an officer of

Beneficiary in the form attached hereto as Exhibit A-1.

Partial and/or multiple drawings are permitted.

The Beneficiary may draw on the Letter of Credit if Agent fails to pay any amounts due by Agent to the

Beneficiary pursuant to, and as such terms are defined in, that certain Agency Agreement dated as of

______ among the Beneficiary and Agent.

This Letter of Credit may be increased or reduced from time to time when accompanied by a signed

statement from the Beneficiary in the form attached as Exhibit B.

If a drawing is received by [Bank Name] at or prior to 12:00 noon, Eastern Time, on a Business Day, and

provided that such drawing conforms to the terms and conditions hereof, payment of the drawing amount

shall be made to the account designated by Beneficiary, as directed below, in immediately available funds

on the same Business Day. If however, a drawing is received by [Bank Name] after 12:00 noon, Eastern

Time, on a Business Day, and provided that such drawing conforms to the terms and conditions hereof,


2

payment of the drawing amount shall be made to the account designated, in immediately available funds

on the next Business Day.

As used in the Letter of Credit “Business Day” shall mean any day other than a Saturday, Sunday, or a

day on which Banking Institutions in Massachusetts are required or authorized to close.

Each draft must bear upon its face the clause “Drawn under Letter of Credit No.____________, dated

_________ of [Bank Name], ______________.”

Except so far as otherwise expressly stated herein, this Letter of Credit is subject to the “Uniform

Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce

Publication No. 600.”

We hereby agree that drafts drawn under and in compliance with the terms of this Letter of Credit will be

duly honored if presented to the above-mentioned drawee bank on or before the Expiry Date.

Kindly address all correspondence regarding this Letter of Credit to the attention of our Letter of Credit

Operations, [Bank Name], __________________, mentioning our reference number as it appears above.

Telephone inquiries can be made to _____________ at (___) ___-____.

Very truly yours,

Authorized Official

Authorized Official


3

EXHIBIT A-1

EXHIBIT A-1

TO IRREVOCABLE LETTER OF CREDIT NO.________________

Re: Drawing for Amounts Due to JOYCE LESLIE, INC.


I refer to your Letter of Credit No. _____________ (the “Letter of Credit”). The undersigned

duly authorized office or Joyce Leslie, Inc., in its capacity as Beneficiary of the Letter of Credit hereby

certifies to you that:

(i) [SB CAPTIAL GROUP, LLC] [TIGER CAPITAL GROUP, LLC] [360

MERCHANT SOLUTIONS, LLC] (the “Agent”) has not made a payment when

due of undisputed amounts of or for the Guaranteed Amount, Sharing Amount,

AAM Fee, Expenses, or FF&E Guaranty Amount (where applicable) due by

Agent to the Beneficiary pursuant to, and as such terms are defined in, that certain

Agency Agreement dated as of ________ among the Beneficiary on the one hand,

and Agent, on the other.

(ii) The amount to be drawn is $_______ (the “Amount Owing”).

(iii) Payment is hereby demanded in an amount equal to the lesser of (a) the Amount

Owing and (b) the face amount of the Letter of Credit, less any prior drawings, as

of the date hereof.

(iv) The Letter of Credit has not expired prior to the delivery of this letter and the

accompanying sight draft.

(v) Merchant is not in material default of its obligations under the Agency Agreement.

(vi) In accordance with the terms of the Letter of Credit, the payment hereby

demanded is requested to be made by wire transfer to the following account:

[Account]

IN WITNESS WHEREOF, this instrument has been executed and delivered as of this _________

day of _____________________, 2016.

Very truly yours,

JOYCE LESLIE, INC.

By: ____________________________________

Duly Authorized Officer

Print Name:


4

EXHIBIT B

TO IRREVOCABLE STANDBY LETTER OF CREDIT NO.

Re: Reduction of Face Amount:


I refer to your Letter of Credit No. (the “Letter of Credit”). The undersigned, as Beneficiary of

the Letter of Credit, hereby confirms to you that the face amount of the Letter of Credit hereby shall be

reduced from its present face amount to a new face amount of $__________.

IN WITNESS WHEREOF, this instrument has been executed and delivered as of this _________

day of _____________________, 2016.

Very truly yours,

JOYCE LESLIE, INC.

Beneficiary

By: ____________________________________

Duly Authorized Officer

Print Name:


Store City St Sq ft % Rent Gross rentREAL ESTATE

TAXES

Common area

etcSecurity alarms

Security

guards

Light, heat and

power

Repairs and

maintenance

electric

Repairs and

maintenance air

cond

Repairs and

maintenance

other

Store cleaning InsuranceWater and sewer

taxes

Telephone and

telegraph

State and local

taxes

Total per

diemPlus % Rent

8 Farmingdale NY 15,250 757 345 164 2 - 128 3 32 23 23 64 3 3 - 1,548

9 Commack NY 9,580 410 165 53 3 - 110 - 6 9 7 46 0 6 - 815

18 Bayonne NJ 7,500 276 105 - 2 - 77 4 4 8 8 37 4 2 - 528

19 Port Chester NY 12,400 984 238 170 4 - 136 - 50 5 10 55 3 5 - 1,661

23 Trumbull CT 6,500 628 94 373 3 - 64 - 5 8 - 36 - 6 - 1,217

24 Rockaway NJ 10,515 573 104 97 4 - 84 1 4 5 - 46 3 2 - 923

25 Watchung NJ 7,283 385 54 49 2 - 56 1 10 4 8 34 4 2 - 611

26 White Plains NY 18,000 952 458 134 2 - 116 - 19 8 - 61 - 3 - 1,753

27 Glassboro NJ 8,000 222 35 42 3 - 64 5 45 18 6 28 5 2 - 474

28 N Babylon NY 8,000 296 90 15 3 - 116 - 8 5 1 26 - 4 - 564

30 Wyncote PA 9,000 476 95 91 4 25 56 86 91 5 11 49 - 3 8 1,001

31 Edgewater NJ 9,318 629 110 93 3 - 65 - 5 10 6 24 8 2 - 955

32 Freehold NJ 8,000 402 55 96 5 - 54 - 4 17 - 24 2 3 - 662

33 Brooklyn NY 9,500 767 222 96 2 32 138 10 12 10 7 66 5 5 - 1,371

35 South Plainfield NJ 9,000 417 81 74 - - 56 5 4 7 9 33 6 3 - 694

36 Coram NY 8,000 381 94 18 3 16 82 7 159 4 7 33 0 4 - 807

37 Philadelphia PA 17,040 1,195 89 192 2 17 112 6 2 10 35 134 2 7 48 1,850

38 Philadelphia PA 10,000 586 17 50 3 26 69 - 2 5 11 67 14 3 32 885

39 East Meadow NY 10,800 429 238 131 2 - 98 - 10 6 11 31 - 6 - 961

41 Brooklyn NY 5,932 417 105 - 2 - 107 3 40 11 10 34 3 3 - 735

43 Vorhees NJ 9,304 3.0% - - - - - - 2 - 4 20 23 2 3 - 54 Plus 3% percentage rent.

45 Paramus NJ 22,470 1,486 306 36 2 3 143 5 6 291 15 136 19 4 - 2,452

46 East Brunswick NJ 8,016 520 83 73 4 - 59 - 2 22 8 27 2 3 - 803

48 Marlton NJ 8,800 466 79 64 4 - 76 - 4 37 5 27 2 4 - 767

49 Deptford NJ 7,950 368 79 32 4 - 79 - 4 7 6 38 10 2 - 631

51 Passaic NJ 8,310 484 120 - 2 - 102 34 10 23 1 48 27 4 - 856

58 Philadelphia PA 8,040 455 53 - 5 57 46 4 1 26 8 46 15 3 39 759

59 Freeport NY 8,037 489 206 56 15 - 92 3 9 5 6 42 - 7 - 930

61 Philadelphia PA 8,660 458 89 142 3 15 60 - 2 8 8 44 11 3 45 889

63 Woodbridge NJ 8,145 668 288 738 3 - 76 - 2 10 23 61 3 3 - 1,873

66 Toms River NJ 11,600 10.0% - - - 2 - 91 - 4 18 6 18 1 3 - 141 Plus 10% percentage rent.

67 Mays Landing NJ 12,000 444 100 103 3 - 95 5 4 27 6 38 3 3 - 831

68 Middletown NJ 9,600 425 64 37 3 - 72 3 4 11 8 35 1 3 - 667

75 Wall Township NJ 12,300 10.0% - - - 2 - 75 - 4 6 7 20 4 3 - 120 Plus 10% percentage rent.

78 North Haven CT 10,052 532 95 66 3 - 82 - 18 8 9 52 4 6 - 875

79 Pelham NY 8,201 542 220 291 7 71 84 2 5 13 13 53 1 6 - 1,308

82 Flushing NY 5,708 486 248 - 2 42 95 - 4 5 6 59 5 3 - 955

84 Woodland Park NJ 15,490 900 374 92 2 - 94 - 8 7 7 88 2 4 - 1,577

85 Cherry Hill NJ 13,350 308 95 65 2 56 76 - 16 5 6 31 2 3 - 665

88 Milford CT 8,670 528 132 38 3 - 79 - 13 5 8 33 3 10 - 851

93 Middletown NY 10,000 476 90 98 3 - 149 - 5 5 1 51 1 4 - 885

95 Whitehall PA 9,475 439 79 62 2 - 49 - 4 6 7 37 4 3 7 699

21,655 5,598 3,930 130 359 3,564 189 639 727 353 1,933 185 160 180 39,601

Total Per Diem

JOYCE LESLIE

Exhibit 4.1 (a) Occupancy - Per Diem16-22035-rdd Doc 43-1 Filed 01/14/16 Entered 01/14/16 20:36:12 Exhibit A - Agency Agreement Pg 61 of 64

12/28/2015

1 2 3 4 5

6 7 8 9 10 11 12

FRE BOUNCEBACK REDEMPTION

13 14 15 16 17 18 19

20 21 22 23 24 CHRISTMAS EVE 25 CHRISTMAS DAY 26

27 28 29 30 31 NEW YEAR'S EVE Notes:

◄ Nov 2015 ~ December 2015 ~ Jan 2016 ►

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

$20DENIM --- 2/$10 FLATS

FREE LEGGING W/SWEATER BOGO 1/2 OFF ALL HAIR

GWP EARRINGS W/ $50 PURCHASE -- DIAMOND CONTEST

$20 DENIM --- 2/$10 FLATS

$20 SWEATER DRESSES

50% OFF ORIGINAL PRICE CLEARAMCE

50% COATS & BOOTS


GWP EARRINGS W/ $50 PURCHASE -- DIAMOND CONTEST

BOUNCE BACK COUPON SPEND $50 GET $10 50% OFF XMAS MERCH

$20 SWEATER DRESSES


SWEATERS II FLOOR SET

DRESSY II FLOOR SET

50% OFF COATS --- 50% OFF BOOTS

BOUNCE BACK COUPON SPEND $50 GET $10

FREE LEGGING WITH A SWEATER PURCHASE

50% OFF COATS & BOOTS GWP EARRINGS W/ $50 PURCHASE -- DIAMOND CONTEST


GIFT CARD PUSH/ GWP XMAS CARD HOLDER

BOUNCEBACK REDEMPTION SPEND $50 GET $10 OFF

$10 GIFTS FLOOR SET

ACTIVE FLOOR SET

$20 SWEATER DRESSES

50% OFF COATS & BOOTS


$5 OFF HANDBAGS OVER $14.99

$10 HOT GIFTS DEALS

$20 SWEATER DRESSES

BOGO 1/2 OFF ALL HAIR

50% OFF COATS & BOOTS

$20 SWEATER DRESSES

Exhibit 11.1 (k)

$20 DENIM --- $2/$10 FLATS



$10 HOT GIFTS DEALS


$5 OFFF HANDBAGS OVER $14.99

$5 OFFF HANDBAGS OVER $14.99

BOGO 1/2 OFF ALL HAIR




http://www.wincalendar.com/November-Calendar/November-2015-Calendar.html

http://www.wincalendar.com/January-Calendar/January-2016-Calendar.html

12/28/2015

1 NEW YEAR'S DAY 2

3 4 5 6 7 8 9

10 11 12 13 14 15 16

17 18 MLK DAY 19 20 21 22 23

24 25 26 27 28 29 30

31 Notes:

$10 DENIM & TWILL

50% OFF PLUSH, SWEATERS, COLD WEATHER

50% OFF PLUSH, SWEATERS, COLD WEATHER

BOUNCEBACK REDEMPTION SPEND $50 GET $10

◄ Dec 2015 ~ January 2016 ~ Feb 2016 ►

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

BOUNCEBACK REDEMPTION SPEND $50 GET $10 OFF

MARKDOWNS TAKEN MD/REFRESH FLOOR SET

MARKDOWNS TAKEN MLK SALE FLOOR SET MLK DAY SALE

BOUNCEBACK REDEMPTION SPEND $50 GET $10 OFF $10 DENIM & TWILL

V-DAY FLOOR SET

MLK DAY SALE

PLUSH,COLD WEATHER ACCESSORIES,SWEATERS MD TO .98 ENDINGS MLK DAY

Exhibit 11.1 (k)


http://www.wincalendar.com/December-Calendar/December-2015-Calendar.html

http://www.wincalendar.com/February-Calendar/February-2016-Calendar.html


9 Commack Corners 6500 Jericho Turnpike Commack NY 11725 9,580 18 Bayonne 494-496 Broadway Bayonne NJ 07002 7,500 19 Port Chester SC 561 Boston Post Rd Port Chester NY 10573 12,400 26 Hillside Shopping Center Rt 119 250 Tarrytown Rd White Plains NY 10603 18,000 27 Collegetown Shopping Center 765 N Delsea Dr, Heston Rd Glassboro NJ 08028 8,000 33 Georgetown SC 2109 Ralph Avenue Brooklyn NY 11234 9,500 36 New Century Plaza 264 N Middle Country Rd Coram NY 11727 8,000 38 Aramingo Super Center 2539 Castor Avenue Philadelphia PA 19134 10,000 39 East Meadow Commons 2575 Hempstead Turnpike East Meadow NY 11554 10,800 45 Paramus 145 West Route 4 Paramus NJ 08043 22,470 51 Passaic 656 Main Avenue Passaic NJ 07055 8,310 58 Columbus Crossing 1851 Columbus Blvd Philadelphia PA 19134 8,040 59 Meadowbrook Commons 254 East Sunrise Highway Freeport NY 11520 8,037 61 Bakers Centre 2920 Fox Street Philadelphia PA 19129 8,660 78 North Haven Pavilion 220 Universal Drive North North Haven CT 06473 10,052 79 Pelham Shopping Plaza 814 Pelham Parkway Pelham NY 10803 8,201 82 Flushing 37-28 Main Street Flushing NY 11354 5,708 84 Plaza 46 West 1650 Rt 46 West Woodland Park NJ 07424 15,490 93 Orange Plaza 470 Route 211 East, Suite 8 Middletown NY 10940 10,000 95 Whitehall Square Mall 2180 Macarthur Road Whitehall PA 18052 9,475

JOYCE LESLIEExhibit 15 (a)

Excluded FF&E Store List


EXHIBIT “B”

16-22035-rdd Doc 43-2 Filed 01/14/16 Entered 01/14/16 20:36:12 Exhibit B - Sale Guidelines Pg 1 of 4

EXHIBIT 8.1

JOYCE LESLIE, INC. SALE GUIDELINES

A. The Sale shall be conducted so that the Stores in which sales are to occur will remain open no

longer than during the normal hours of operation provided for in the respective leases for the Stores.

B. The Sale shall be conducted in accordance with applicable state and local “Blue Laws”, where

applicable, so that no Sale shall be conducted on Sunday unless the Merchant had been operating such

Store on a Sunday.

C. On “shopping center” property, the Agent shall not distribute handbills, leaflets or other written

materials to customers outside of any Stores’ premises, unless permitted by the lease or, if distribution

is customary in the “shopping center” in which such Store is located; provided that Agent may solicit

customers in the Stores themselves. On “shopping center” property, the Agent shall not use any

flashing lights or amplified sound to advertise the Sale or solicit customers, except as permitted under

the applicable lease or agreed to by the landlord.

D. At the conclusion of the Sale, the Agent shall vacate the Stores in broom clean condition, and

shall leave the Stores in the same condition as on Sale Commencement Date, ordinary wear and tear

excepted, in accordance with Section 6.2 of the Agency Agreement, provided, however, that the

Merchant and the Agent hereby do not undertake any greater obligation than as set forth in an

applicable lease with respect to a Store. The Agent and Merchant may abandon any FF&E (as defined

below) not sold in the Sale at the Stores or the corporate office at the conclusion of the Sale at any

Store or corporate office. Any abandoned FF&E left in a Store or the corporate office after a lease is

rejected shall be deemed abandoned to the landlord having a right to dispose of the same as the

landlord chooses without any liability whatsoever on the part of the landlord to any party and without

waiver of any damage claims against the Merchant. For the avoidance of doubt, as of the Sale

Termination Date or the Vacate Date, as applicable, with respect to any Store or corporate office, the

Agent may abandon, in place and without further responsibility, any FF&E at such Store or corporate

office.

E. The Merchant and the Agent may advertise the Sale as a “going out of business,” “store

closing” “sale on everything”, “everything must go”, or similarly themed sale.

F. Agent shall be permitted to utilize display, hanging signs, and interior banners in connection

with the Sale; provided, however, that such display, hanging signs, and interior banners shall be

professionally produced and hung in a professional manner. The Merchant and the Agent shall not use

neon or day-glo on its display, hanging signs, or interior banners. Furthermore, with respect to

enclosed mall locations, no exterior signs or signs in common areas of a mall shall be used unless

otherwise expressly permitted in these Sale Guidelines. In addition, the Merchant and the Agent shall

be permitted to utilize exterior banners at (i) non-enclosed mall Stores and (ii) enclosed mall Stores to

the extent the entrance to the applicable Store does not require entry into the enclosed mall common

area; provided, however, that such banners shall be located or hung so as to make clear that the Sale is

being conducted only at the affected Store, shall not be wider than the storefront of the Store, and shall

not be larger than 4 feet x 40 feet. In addition, the Merchant and the Agent shall be permitted to utilize

sign walkers in a safe and professional manner and in accordance with the terms of the Approval

Order. Nothing contained in these Sale Guidelines shall be construed to create or impose upon the

Agent any additional restrictions not contained in the applicable lease agreement.


F. Conspicuous signs shall be posted in the cash register areas of each of the affected Stores to

effect that “all sales are final.”

G. Except with respect to the hanging of exterior banners, the Agent shall not make any alterations

to the storefront or exterior walls of any Stores.

H. The Agent shall not make any alterations to interior or exterior Store lighting. No property of

the landlord of a Store shall be removed or sold during the Sale. The hanging of exterior banners or in-

Store signage and banners shall not constitute an alteration to a Store.

I. The Agent shall keep Store premises and surrounding areas clear and orderly consistent with

present practices.

J. Subject to the provisions of the Agency Agreement the Agent shall have the right to sell all

furniture, fixtures, and equipment located at the Stores, Distribution Center and Merchant’s corporate

office (the “FF&E”). The Agent may advertise the sale of the FF&E in a manner consistent with these

guidelines at the Stores and Merchant’s corporate office. The purchasers of any FF&E sold during the

sale shall be permitted to remove the FF&E either through the back shipping areas at any time, or

through other areas after Store business hours. For the avoidance of doubt, as of the Sale Termination

Date or the Vacate Date, as applicable, with respect to any Store, the Agent may abandon, in place and

without further responsibility, any FF&E at such Store, Distribution Center or corporate office.

K. The Agent shall be entitled to include Additional Agent Merchandise in the Sale in accordance

with the terms of the Approval Order and the Agency Agreement.

L. At the conclusion of the Sale at each Store, pending assumption or rejection of applicable

leases, the landlords of the Stores shall have reasonable access to the Stores’ premises as set forth in

the applicable leases. The Merchant, the Agent and their agents and representatives shall continue to

have exclusive and unfettered access to the Stores.

M. Post-petition rents shall be paid by the Merchant as required by the Bankruptcy Code until the

rejection or assumption and assignment of each lease. Agent shall have no responsibility therefor.

N. The rights of landlords against Merchant for any damages to a Store shall be reserved in

accordance with the provisions of the applicable lease.

O. If and to the extent that the landlord of any Store affected hereby contends that the Agent or

Merchant is in breach of or default under these Sale Guidelines, such landlord shall email or deliver

written notice by overnight delivery on the Merchant’s counsel and the Agent’s counsel as follows:

If to the Merchant:

JOYCE LESLIE, Inc.

170 W Commercial Avenue

Moonachie, NJ 07074

Attn: Lee Diercks

(908) 431-2122

[email protected]



and its Counsel:

Kevin J. Nash, Esq.




(212) 221-5700

[email protected]

If to the Agent:

SB CAPITAL GROUP, LLC

1010 Northern Blvd., Suite 340

Great Neck, NY 11021

Attn: Robert Raskin

Tel: 516.829.2400



84 State Street – 4th

Floor

Boston, MA 02109

Attn: Michael McGrail

John Cronin

Tel: 617.523.4822


[email protected]


22 Squaws Lane

Mashpee MA 02649 -0658

Attn: Stephen G. Miller

Tel: 617.803.4949


3







EXHIBIT “C”

16-22035-rdd Doc 43-3 Filed 01/14/16 Entered 01/14/16 20:36:12 Exhibit C - Select Lease Purchase Agreement Pg 1 of 18

EXHIBIT “D”

16-22035-rdd Doc 43-4 Filed 01/14/16 Entered 01/14/16 20:36:12 Exhibit D - Proposed Order Pg 1 of 32

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

In re:

Chapter 11

Joyce Leslie, Inc. Case No. 16-22035 (RDD)

Debtor.

ORDER (I)(A) APPROVING VARIOUS STALKING HORSE AGREEMENTS,

(B) AUTHORIZING BID PROTECTIONS, (C) AUTHORIZING BIDDING

PROCEDURES AND AUCTION AND (D) SCHEDULING SALE HEARING AND

APPROVING NOTICE THEREOF AND (II) GRANTING RELATED RELIEF

Upon the motion (the “Motion”)1 of the debtor and debtor-in-possession in the

above-captioned case (the “Debtor”), for an order (this “Order”) (a) authorizing entry into

Agency Agreement and the Select Lease Purchase Agreement (collectively, the “Stalking Horse

Agreements”) with SB Capital and Madrag, respectively (collectively, the “Stalking Horses”),

(b) authorizing Bid Protections and Signage Costs Reimbursement to SB Capital, and the

Expense Reimbursement Fee to Madrag, (c) authorizing proposed auction procedures (the

“Bidding Procedures”) and setting the time, date and place of the auction (the “Auction”) and

(d) approving the form of notice of the Auction and notice of the Store Closing Sales (the

“Auction Notice”) and (ii) setting a hearing (the “Sale Hearing”), to be held on or prior to

February 4, 2016, to consider the entry of the Approval Order all as more fully set forth in the

Motion; and it appearing that this Court has jurisdiction to consider the Motion pursuant to 28

U.S.C. §§ 157(b) and 1334 as a core proceeding pursuant to 28 U.S.C. § 157(b); and this Court

1 Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Motion, the Agency

Agreement, or the Select Lease Purchase Agreement.


2

having determined that the relief requested in the Motion is in the best interests of the Debtor, its

estate, its creditors and other parties-in-interest; and it appearing that proper and adequate notice

of the Motion has been given and that no other or further notice is necessary; and after due

deliberation thereon; and good and sufficient cause appearing therefor,

IT IS HEREBY FOUND AND DETERMINED THAT:2

A. This Court has jurisdiction over the Motion pursuant to 28 U.S.C. §§ 157

and 1334, and this matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (N) and (0).

B. This Order constitutes a final and appealable order within the meaning of

28 U.S.C. § 158(a) with respect to the Bidding Procedures, the Auction Notice and the Cure

Notice and the approval of the Debtor’s entry into the Stalking Horse Agreements.

C. Good and sufficient notice of the Bidding Procedures and other related

relief sought pursuant to the Motion has been given to all interested persons and entities,

including, without limitation, (a) all parties provided with notice of the Motion; (b) the Office of

the United States Trustee; (c) the Debtor’s twenty (20) largest unsecured creditors; (c) counsel to

SB Capital; (d) counsel to Madrag; (e) all the Debtor’s landlords; (f) all applicable state attorneys

general; (g) any potentially interested parties and (h) parties entitled to notice pursuant to

Bankruptcy Rule 2002.

2 The findings and conclusions set forth herein constitute this Court’s findings of fact and conclusions of law

pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to Bankruptcy Rule 9014. To the

extent that any of the following findings of fact constitute conclusions of law, they are adopted as such. To the

extent any of the following conclusions of law constitute findings of fact, they are adopted as such.


3

D. Any remaining objections to the Motion with respect to the relief granted

in this Order, or the relief requested therein that have not been withdrawn, waived, or settled, and

all reservations of rights included in such objections are overruled in all respects and denied.

E. The Debtor has articulated good and sufficient reasons for, and the best

interests of the Debtor will be served by, this Court granting the preliminary relief requested in

the Motion.

F. The form of the Stalking Horse Agreements is hereby approved and is

appropriate and reasonably calculated under the circumstances to enable the Debtor and other

parties-in-interest to compare and contrast the differing terms of the bids presented at the

Auction.

G. The Bidding Procedures, substantially in the form attached hereto as

Exhibit 1, are fair, reasonable and appropriate under the circumstances and are designed to

maximize the Debtor’s recovery with respect to the sale of the respective Assets, while also

soliciting bids for an Alternative Transaction, including a going concern sale or bid on all assets

of the Debtor.

H. The Debtor’s proposed Auction Notice, substantially in the form attached

hereto as Exhibit 2, is appropriate and reasonably calculated under the circumstances to provide

all interested parties with timely and proper notice of the Bidding Procedures, the related

Auction (if necessary), the Sale Hearing, and any and all objection deadlines and no other or

further notice is required.


4

I. The proposed notice substantially in the form attached hereto as Exhibit 3,

to be served on counterparties to Assumed Contracts (“Cure Notice”) is reasonably calculated to

provide adequate notice concerning the proposed sale of the Assets and any proposed assumption

and assignment of Assumed Contracts and will provide due and adequate notice of the relief

sought in the Motion.

J. Under the circumstances, timing and procedures set forth herein, in the

Motion and in the Stalking Horse Agreements, the Debtor has demonstrated compelling and

sound business justifications for entry into the Stalking Horse Agreements and their terms,

including, as applicable, the Bid Protections and the Signage Costs Reimbursement for SB

Capital (collectively, the “Bid Protections and Signage Costs Reimbursement”) as provided in

Section 16 of the Agency Agreement, and the Expense Reimbursement Fee to Madrag (the

“Expense Reimbursement Fee”) as provided in Article 9, Section 3 of the Select Lease

Purchase Agreement.

K. The Bid Protections and Signage Costs Reimbursement: (a) were

negotiated by the Debtor and the respective Stalking Horses in good faith and at arm’s-length,

(b) are fair, reasonable and appropriate under the circumstances given, among other things, the

size and nature of the transaction and the efforts that have been expended and will continue to be

expended by the respective Stalking Horses, notwithstanding that the proposed sale is subject to

higher or better offers, and the substantial benefits the Stalking Horses have provided to the

Debtor, its estate and creditors and all parties in interest herein, including, among other things,

by increasing the likelihood that the best possible price for the Assets will be received, (c) are an


5

actual and necessary cost and expense of preserving the Debtor’s estate and (d) are a reasonable

inducement for, and a condition of, the Stalking Horses’ respective offers and compensation for

the risks and lost opportunity costs incurred by the Stalking Horses. The Bid Protections and

Signage Costs Reimbursement are commensurate with the real and substantial benefits conferred

upon the Debtor’s estate by the Stalking Horses and constitute actual and necessary costs and

expenses incurred by the Debtor in preserving the value of its estate within the meaning of

section 503(b) of the Bankruptcy Code.

L. Entry into the Stalking Horse Agreements is in the best interests of the

Debtor, its estate, creditors, and other parties-in-interest and, based on the information set forth

in the Motion and presented to the Court, is an appropriate exercise of the Debtor’s business

judgment. The Stalking Horse Agreements will enable the Debtor to secure an adequate

consideration floor for the Auction and will provide a clear benefit to the Debtor’s estate and all

other parties-in-interest.

M. The respective transactions do not require the appointment of a consumer

privacy ombudsman pursuant to section 363(b)(1) of the Bankruptcy Code.

N. No other or further notice shall be required. No finding or ruling is made

in this Bidding Procedures Order as to the adequacy of any proposed transaction, it being

intended that such approval will be sought at the Sale Hearing.

O. No person or entity, other than the Stalking Horses, shall be entitled to any

expense reimbursement, break-up fee, “topping,” termination or other similar fee or payment.


6

IT IS HEREBY ORDERED THAT:

1. The procedural relief requested in the Motion is GRANTED to the extent

set forth herein.

2. The Debtor is authorized to enter into the respective Stalking Horse

Agreements, and the proposed transactions with SB Capital and Madrag, together with the

Bidding Procedures and Auction Notice setting the time, date and place of Sale Hearing, are

hereby APPROVED, and fully incorporated into this Order, and shall apply with respect to the

proposed Auction. The Debtor is authorized to take any and all actions necessary or appropriate

to implement the Stalking Horse Agreements.

3. The Bidding Procedures attached hereto as Exhibit 1 are approved. The

Debtor is hereby authorized to conduct an auction of the respective assets and asset groups

pursuant to the Bidding Procedures and this Order. The Debtor is authorized to take any and all

actions necessary or appropriate to implement the Bidding Procedures.

4. SB Capital and Madrag shall be deemed Qualified Bidders pursuant to the

Bidding Procedures for all purposes and shall be permitted to participate and bid at the Auction.

5. The Bidding Procedures shall apply to the Qualified Bidders and the

conduct of the sale of the respective Assets and the Auction.

6. The Bid Protections and Signage Costs Reimbursement as set forth in

Section 16 of the Agency Agreement are hereby approved. The Bid Protections and Signage

Costs Reimbursement shall have administrative expense claim status pursuant to section 507 of

the Bankruptcy Code and shall be secured by a lien (which shall be deemed properly perfected


7

without the need for further filings or documentation) on the Agent Collateral and any Deposit

(each as defined in the Agency Agreement) in accordance with the terms of (and with the priority

set forth in) Section 16.11(d) of the Agency Agreement.

7. The Expense Reimbursement Fee as set forth in Article 9, Section 3 of the

Select Lease Purchase Agreement is hereby approved. The Expense Reimbursement Fee shall

have administrative expense claim status pursuant to section 507 of the Bankruptcy Code.

8. The Auction Notice, substantially in the form attached hereto as Exhibit 2,

shall be deemed good and sufficient notice of the Bidding Procedures and any related Auction,

the Sale Hearing and the associated objection periods, and is reasonably calculated to provide

notice to any affected party and afford the affected party the opportunity to exercise any rights

affected by the Motion as it relates to the Auction and Sale Hearing.

9. The Cure Notice, substantially in the form attached hereto as Exhibit 3 to

be served on counterparties to Assumed Contracts (“Cure Notice”) is reasonably calculated to

provide adequate notice concerning the proposed sale of the Assets and any proposed assumption

and assignment of Assumed Contracts and will provide due and adequate notice of the relief

sought in the Motion.

10. Within one (1) business day after entry of this Order, to the extent the

Debtor determines in its discretion that providing such notice is in the best interests of its estate,

the Debtor (or its agent) shall serve the Auction Notice upon all Notice Parties.

11. Within one (1) business day after entry of this Order, the Debtor shall file

and serve the Cure Notice to the counterparties to any Assumed Contracts. Counterparties to the


8

Assumed Contracts (each a “Counterparty,” and together, the “Counterparties”), subject to

any Counterparty’s right to object to adequate assurance for future performance under section

365 of the Bankruptcy Code, at or prior to the Sale Hearing, must file and serve any objection to

the assumption and assignment of any Assumed Contract, including objections to any Cure Cost,

so that such objections are received by __________ , 2016 at 5:00 p.m. (Eastern Standard

Time).

12. In the event that an objection to any Cure Cost is timely filed by a

Counterparty, such Counterparty’s objection must set forth (i) the basis for the objection, (ii)

with specificity, the amount the party asserts as the Cure Cost, and (iii) appropriate

documentation in support of the alleged alternative Cure Cost. In the event that the Debtor and

the Counterparty cannot consensually resolve the Counterparty’s objection to the Cure Cost, the

Successful Bidder or any other assignee will segregate any disputed cure amounts pending the

resolution of any such disputes by this Court or mutual agreement of the parties.

13. Any Counterparty failing to timely file an objection to the Cure Cost set

forth in the Cure Notice shall be forever barred from objecting to the Cure Costs and from

asserting any additional cure or other amounts against the Debtor, its estate, and the Successful

Bidder with respect to the Assumed Contract to which it is a Counterparty. For the avoidance of

doubt, no executory contract or unexpired lease will be assumed or assumed and assigned until

and unless a transaction closes that proposes assumption and assignment of such executory

contract and/or unexpired lease.


9

14. Any objection based upon adequate assurance of future performance under

section 365 of the Bankruptcy Code may be filed at or prior to the Sale Hearing.

15. All other objections to approval of the respective transactions and the

Approval Order must be in writing, state the basis of such objection with specificity and be filed

with this Court in compliance with the Bankruptcy Rules and the Local Rules and served so as to

be received by the Bid and Objection Notice Parties (as such term is defined in the Auction

Notice) on or before 5:00 p.m. (Eastern Standard Time) on __________ __, 2016.

16. Except as otherwise provided in the Agency Agreement, the Bidding

Procedures, the Select Lease Purchase Agreement or this Order, the Debtor may: (a) determine

which bidders are Qualified Bidders; (b) determine which bids are Qualified Bids; (c) determine

which Qualified Bid is the Successful Bid; (d) reject any bid that is (i) inadequate or insufficient,

(ii) not in conformity with the requirements of the Bidding Procedures or the Bankruptcy Code,

or (iii) contrary to the best interests of the Debtor or its estate; (d) remove any material assets

from the Auction; (e) waive terms and conditions set forth herein with respect to all potential

bidders; (f) impose additional terms and conditions with respect to all potential bidders;

(g) extend the deadlines set forth herein; (h) adjourn or cancel the Auction and/or Sale Hearing in

open Court without further notice; (i) modify the Bidding Procedures or (j) withdraw the Motion

at any time with or without prejudice. Solely with respect to bids to acquire the Assets subject to

the Agency Agreement, the Debtor may not waive without the consent of SB Capital (A) the

Minimum Overbid (as defined in the Bidding Procedures), (B) the requirement that all (i)

Inventory Overbids, (ii) All Assets Overbids, (iii) Successful Bids and agree to (x) payment of


10

the Signage Costs Reimbursement (as defined in the Agency Agreement) (either through direct

reimbursement to SB Capital and/or assumption of obligation and payment to the vendor(s)).

17. If no Qualified Bid other than the Qualified Bids submitted by the

respective Stalking Horses is received by the Bid Deadline, then the Auction will not be held and

the Debtor shall promptly seek this Court’s approval of the Agency Agreement with SB Capital

and/or the Select Lease Purchase Agreement with Madrag.

18. Each Qualified Bidder participating at the Auction will be required to

confirm that it has not engaged in any collusion with respect to the bidding.

19. Bidding at the Auction shall be transcribed.

20. Only Qualified Bidders will be permitted to submit bids at the Auction.

21. The Sale Hearing will be held in this Court on February __, 2016 at

10:00 a.m. The Sale Hearing may be adjourned or rescheduled by the Debtor, with the consent

of the Stalking Horses, without further notice by an announcement of the adjourned date at the

Sale Hearing or by the filing of a hearing agenda.

22. All Qualified Bidders at the Auction shall be deemed to have consented to

the core jurisdiction of this Court and waived any right to jury trial in connection with any

disputes relating to the Auction, the respective transactions and the construction and enforcement

of the Agency Agreement, Select Lease Purchase Agreement, or their particular agreement with

the Debtor.

23. In the event there is a conflict between this Order and the Motion, the

Agency Agreement or the Select Lease Purchase Agreement, this Order shall govern and control.


11

24. The Debtor is hereby authorized to take such steps and incur such

expenses as may be reasonably necessary or appropriate to effectuate the terms of this Order.

25. The provisions of this Order, and any actions taken pursuant hereto or

thereto shall survive the entry of any order which may be entered confirming or consummating

any plan(s) or reorganization or liquidation of the Debtor or converting the Debtor’s case from

chapter 11 to chapter 7, and the rights and interests granted pursuant to this Order, shall continue

in these or any superseding cases and shall be binding upon the Debtor and its successors and

permitted assigns, including any trustee or other fiduciary hereafter appointed as a legal

representative of the Debtor under chapter 7 or chapter 11 of the Bankruptcy Code. Any trustee

appointed in this case shall be and hereby is authorized to perform under this Order upon the

appointment of such trustee without the need for further order of this Court.

26. Notwithstanding any applicability of Bankruptcy Rules 6004 and 6006 or

otherwise, the terms and conditions of this Order shall be immediately effective and enforceable

upon its entry.

27. SB Capital’s right to receive payment of the Bid Protections and Signage

Costs Reimbursement as provided in Section 16.11 of the Agency Agreement shall be the sole

and exclusive remedy of SB Capital in the event of termination of the Agency Agreement.

28. Madrag’s right to receive payment of the Expense Reimbursement Fee as

provided in Article 9, Section 3 of the Select Lease Purchase Agreement shall be the sole and

exclusive remedy of Madrag in the event of termination of the Select Lease Purchase Agreement,

subject to Madrag’s right to seek specific performance under Article 8, Section 2.


12

29. This Court retains jurisdiction with respect to all matters arising from or

related to the implementation of this Order, including, but not limited to, any matter, claim or

dispute arising from or relating to the Bid Protections, Signage Costs Reimbursement, Expense

Reimbursement Fee, Agency Agreement or the Select Lease Purchase Agreement.

Dated: White Plains, New York

January __, 2016

United States Bankruptcy Judge


DOCS_DE:197868.1 11903/001

EXHIBIT 1

Bidding Procedures


YCST01:10575787.2 070040.1001

BIDDING PROCEDURES

Set forth below are the bidding procedures (the “Bidding Procedures”) to be

employed with respect to the sale (the “Sale”) of the following classes of assets (each, an “Asset

Class” and collectively, the “Assets”) of Joyce Leslie, Inc., debtor and debtor-in-possession (the

“Debtor”) in connection with its chapter 11 case pending in the United States Bankruptcy Court

for the Southern District of New York (the “Bankruptcy Court”), case number 16-22035

(RDD): (i) inventory, (ii) furniture, fixtures and equipment (“Owned FF&E”), (iii) intellectual

property, (iv) accounts receivable and cash on hand in the stores or other closing locations,

(v) real property leases and (vi) customer lists. For the avoidance of doubt, the Debtor may

solicit, and shall be entitled to consider and accept, bids for all or a portion of the Assets as part

of a going concern sale.

ANY PARTY INTERESTED IN BIDDING ON THE ASSETS SHOULD CONTACT

THE DEBTOR’S ADVISORS, AS FOLLOWS:

Joyce Leslie, Inc.

170 West Commercial Avenue

Moonachie, New Jersey 07074

Attn: Lee Diercks

(908) 431-2122

[email protected]

with a copy to:

Kevin J. Nash, Esq.




(212) 221-5700

[email protected]

A. Sale

The Debtor seeks to sell the Assets in all Asset Classes described above, pursuant

to the Bidding Procedures as set forth herein. At the Auction, the Debtor will first seek a

potential buyer for all of the company’s assets as a going concern or via a global offer to









2

B. Stalking Horse Agreements

With respect to the Debtor’s inventory (the “Merchandise”) and furniture,

fixtures and equipment (“Owned FF&E”), the Debtor and a contractual joint venture comprised

of SB Capital Group, LLC, Tiger Capital Group, LLC, and 360 Merchant Solutions, LLC

(collectively, the “Stalking Horse”) have entered into that certain Agency Agreement, dated as

of January 14, 2016 (the “Agency Agreement”), attached hereto as Exhibit 1, pursuant to which

SB Capital will, among other things, acquire the Merchandise and conduct chain-wide store

closing sales (the “Store Closing Sales”), as well as act as the Debtor’s exclusive agent to sell

Owned FF&E at the Debtor’s stores and corporate offices.

SB Capital recognizes the Madrag offer described below and has carved out, at

the Debtor’s option, the FF&E in some or all of the stores listed in Schedule 15(a) to the Agency

Agreement (the “Excluded Store FF&E”).

Pursuant to the Agency Agreement, the Debtor seeks to sell the Merchandise and

Owned FF&E from certain of its retail locations and corporate offices as described in the Agency

Agreement. The Sale is on an “as is, where is” basis and without representations or warranties of

any kind, nature or description by the Debtor, its agents or estate, except to the extent set forth in

the Agency Agreement and as approved by the Bankruptcy Court.

Further, except as otherwise provided in the Agency Agreement and as approved

by the Bankruptcy Court, all of the Debtor’s right, title and interest in and to the Assets will be

sold free and clear of all liens, claims, interests and encumbrances thereon to the maximum

extent permitted by section 363 of title 11 of the United States Code, 11 U.S.C. §§ 101 et seq.

(the “Bankruptcy Code”), with such liens to attach to the net proceeds of the Sale with the same

validity and priority as such liens had against the Assets.

With respect to the Debtor’s real property leases (the “Assigned Leases”), the

Debtor has entered into that certain Asset Purchase Agreement with 618 Main Street Corp. an

affiliate of Madrag/10 Spot Clothing, Inc. (herewith, “Madrag”), dated January 14, 2016, and

attached hereto as Exhibit 2 (the “Select Lease Purchase Agreement”). Pursuant to the Select

Lease Purchase Agreement, Madrag will buy up a minimum of 12 designated leases, and up to

20 of the designated leases, to close after completion of the store liquidation sales.

The ability to undertake and consummate the Sale pursuant to the Stalking Horse

Agreements shall be subject to competitive bidding as set forth herein and approval by the

Bankruptcy Court. The Debtor may consider bids for all or a portion of the Assets in a single bid

from a single bidder, or multiple bids from multiple bidders, including bids on individual Asset

Classes.

C. The Bidding Procedures

1. Provisions Governing Qualifications of Bidders

Unless otherwise ordered by the Bankruptcy Court, prior to 4:00 p.m. on

February 1, 2016 (the “Bid Deadline”), each entity, other than the respective Stalking Horses,


3

that wishes to participate in the bidding process (a “Potential Bidder”) must deliver the

following to the Notice Parties (defined below):

(a) a written disclosure of the identity of each entity, including involvement in

any joint venture, that will be bidding (or participating in a bid) on the

Assets or certain Asset Classes;

(b) adequate assurance information, including (a) adequate information (in the

Debtor’s reasonable business judgment) about the financial condition of

the Potential Bidder, such as federal tax returns for the previous two years,

a current financial statement, and/or current bank account statements; and

(ii) information demonstrating (in the Debtor’s reasonable business

judgment) that the Potential Bidder has the financial capacity to

consummate the proposed transaction;

(c) an executed confidentiality agreement in form and substance satisfactory

to the Debtor; and

(d) a bona fide non-binding letter of intent or expression of interest with

respect to a purchase of the Assets or certain Asset Classes which shall

describe, among other things, the cash, financing commitments, or other

sources of consideration that the Potential Bidder will use to consummate

the proposed transaction, which of the Debtor’s Assets or certain Asset

Classes are proposed to be acquired in the proposed transaction, and any

conditions to consummating the proposed transaction including any

required internal approvals, syndication requirements, or other

contingencies or approvals.

As soon as reasonably practicable after the Debtor receives a bid relating to the

Merchandise or Owned FF&E, the Debtor shall distribute a copy of such bid to counsel to SB

Capital by e-mail.

As soon as reasonably practicable after the Debtor receives a bid relating to the

Assigned Leases, the Debtor shall distribute a copy of such bid to counsel to Madrag by e-mail.

A Potential Bidder that the Debtor determines in its reasonable business

judgment, after consultation with any official committee of unsecured creditors appointed in this

case (the “Committee”) is likely (based on availability of financing, experience and other

considerations) to be able to consummate the sale, will be deemed a “Qualified Bidder.” The

Debtor will provide access to due diligence only to those parties they believe, in the exercise of

its reasonable business judgment are pursuing a proposed transaction in good faith.

As promptly as practicable after a Potential Bidder delivers the materials required

above, the Debtor will make its determination and notify the Potential Bidder if such Potential

Bidder is a Qualified Bidder.


4

2. Due Diligence

The Debtor will afford any Qualified Bidder such due diligence access or additional

information as the Debtor deem appropriate, in its reasonable discretion. Any due diligence

materials provided to any bidder shall be made available to bidders and the respective Stalking

Horses in the data room, subject to such protections as the Debtor determines in its reasonable

business judgment.

The due diligence period will extend through and including the Bid Deadline; provided,

however, that any Qualified Bid (defined below) submitted will be irrevocable until the selection

of the Successful Bidder (defined below) and the Back-Up Bidder (defined below) as described

herein.

3. Provisions Governing Qualified Bids

A bid will be considered a qualified bid only if the bid is submitted by a Qualified

Bidder and complies with all of the following (a “Qualified Bid”) as determined by the Debtor

in its business judgment, in consultation with the Committee:

(a) states with specificity the Asset Classes such Qualified Bidder offers to

purchase, in cash, (which shall consist of at least the Asset Classes

described in the non-binding letter of intent submitted by such Qualified

Bidder) and the liabilities and obligations to be assumed by the Qualified

Bidder upon the terms and conditions set forth in an agency agreement

based on the form of Agency Agreement submitted by the Stalking Horse,

as modified to reflect such Qualified Bidder’s proposed transaction or in

an asset purchase agreement that is not identical to the respective Stalking

Horse Agreement (an “Alternative Transaction Agreement”);

(b) disclose any connection or agreements with the Debtor, the Stalking

Horses, any other known Potential Bidder and/or any officer, director or

equity security holder of Joyce Leslie, Inc..;

(c) includes a signed writing that the Qualified Bidder’s offer is irrevocable

until the selection of the Successful Bidder and the Back-Up Bidder;

provided that if such Qualified Bidder is selected as the Successful Bidder

or Back-Up Bidder, its offer will remain irrevocable until the date that is

three business days after the commencement of the Store Closing Sales or,

if a going-concern bid is the Successful Bid, until the closing of the Sale,

or, if it is a lease bid, until the Sale Termination Date;

(d) contains written confirmation that there are no conditions precedent to the

Qualified Bidder’s ability to enter into a definitive agreement, including,

but not limited to, any additional due diligence, inventory evaluation or

financing conditions, and that all necessary approvals have been obtained

prior to the date of submission of the bid;


5

(e) includes evidence, in form and substance reasonably satisfactory to the

Debtor, of authorization and approval from the Qualified Bidder’s board

of directors (or comparable governing body) with respect to the

submission, execution, delivery and closing of the respective Stalking

Horse Agreement or Alternative Transaction Agreement;

(f) includes a duly authorized and executed copy of the respective Stalking

Horse Agreement or Alternative Transaction Agreement (including all

exhibits and schedules thereto), together with copies marked to show any

amendments and modifications to (a) the respective Stalking Horse

Agreement and (b) the proposed Approval Order;

(g) includes written evidence of a firm, irrevocable commitment for financing,

or other evidence of ability to consummate the Sale, that will allow the

Debtor to make a reasonable determination as to the Qualified Bidder’s

financial and other capabilities to consummate the Sale;

(h) includes an acknowledgement and representation that the Qualified

Bidder: (a) has had an opportunity to conduct any and all required due

diligence regarding the Assets prior to making its offer; (b) has relied

solely upon its own independent review, investigation and/or inspection of

any documents and/or the Assets; (c) did not rely upon any written or oral

statements, representations, promises, warranties or guaranties

whatsoever, whether express or implied, regarding the Assets or the

completeness of any information provided except as expressly stated in the

respective Stalking Horse Agreement or Alternative Transaction

Agreement; and (d) is not entitled to any expense reimbursement, break-

up fee or similar type of payment in connection with its bid;

(i) is accompanied by a good faith deposit in the form of a wire transfer (to a

bank account specified by the Debtor), certified check or such other form

acceptable to the Debtor, in an amount equal to ten percent of the value of

such Qualified Bidder’s Qualified Bid (as quantified by the Debtor) (the

“Deposit”);

(j) is accompanied by a letter (a) stating with specificity the Assets or Asset

Classes such Qualified Bidder wishes to bid on and the liabilities and

obligations to be assumed by such Qualified Bidder, (b) specifying all

material terms of the bid that are substantially the same as or better than

those of the respective Stalking Horse’s bid, to the extent the bid is on the

same Asset Class as the respective Stalking Horse’s bid, (c) stating that its

offer is a bona fide offer that it intends to consummate if it is selected as

the Successful Bidder and (d) stating that such Qualified Bidder has not

engaged in any collusion with respect to the bidding process;

(k) contains such other information as is requested by the Debtor in its

business judgment; and


6

(l) is received prior to the Bid Deadline.

The Debtor will notify all Qualified Bidders by not later than one business day

after the Bid Deadline as to whether or not any bids constitute Qualified Bids with respect to any

Asset Class and whether such Qualified Bidder’s bid constitutes a Qualified Bid. The Debtor

retains the right to waive or modify the terms of the Bidding Procedures when determining

which bids (other than the respective Stalking Horse Agreements, which shall constitute

Qualified Bids) may be deemed Qualified Bids. As soon as reasonably practicable after the

Debtor determines that a bid is a Qualified Bid, the Debtor shall distribute a copy of such bid to

counsel to the respective Stalking Horse by e-mail.

The respective Stalking Horse shall be deemed a Qualified Bidder for all purposes

with respect to any Asset Class proposed to be acquired by the respective Stalking Horse’s bid

and shall not be required to comply with the requirements in Section C.3 hereof (including,

without limitation, the requirement of delivery of a Deposit).

4. Bid Deadline

A Qualified Bidder that desires to make a bid must deliver written copies of its

bid to the following parties (collectively, the “Notice Parties”) so as to be received not later than

the Bid Deadline of 4:00 p.m. February 1, 2016:

(a) proposed counsel to the Debtor, Goldberg Weprin, Finkel Goldstein LLP, 1501

Broadway, 22nd Floor, New York, New York 10036, Attn: Kevin J. Nash; (b) counsel to SB

Capital, DiConza Traurig Kadish LLP, 630 Third Avenue, 7th Floor, New York, New York

10017, Attn: Maura Russell; (c) counsel to Madrag, Rosen & Associates, 747 Third Avenue,

New York, New York 10017, Attn: Nancy Kourland; and (d) counsel to the Official Committee

of Unsecured Creditors

The Bid Deadline may be extended by the Debtor in consultation with the Stalking

Horses and each of the Notice Parties.

5. Evaluation of Competing Bids

A Qualified Bid will be valued based upon several factors as determined by the

Debtor in its business judgment including, without limitation: (a) the amount of such bid; (b) the

Asset Classes included in such bid, (c) the risks and timing associated with consummating such

bid; (d) any proposed revisions from the respective Stalking Horse Agreement and/or the

Approval Order; and (e) any other factors deemed relevant by the Debtor in its reasonable

business judgment.

6. No Auction if No Qualified Bids

If the Debtor receives no more than one Qualified Bid (including the respective

Stalking Horse’s bid) on each Asset Class, the Debtor may not hold the Auction and may request

at the Sale Hearing (defined below) that the Bankruptcy Court approve the respective Stalking

Horse Agreement.


7

7. Auction Process

If the Debtor receives more than one Qualified Bid for the Assets or any Asset

Class (including the respective Stalking Horse’s bid), the Debtor will conduct an auction, which

will be transcribed, at 10:00 a.m. on February 3, 2016 (the “Auction”) at the offices of the

Debtor’s counsel, Goldberg Weprin Finkel Goldstein LLP, 1501 Broadway, 22nd Floor, New

York, New York 10036, or such other location as will be timely communicated to all entities

entitled to attend the Auction. The Auction will be conducted in accordance with the following

procedures:

(a) Only the Debtor, the Committee, any Qualified Bidder that submitted a

Qualified Bid, and the advisors to each of the foregoing, will be entitled to

attend the Auction, and only the Qualified Bidders will be entitled to make

any bids at the Auction.

(b) Each Qualified Bidder will be required to confirm that it has not engaged

in any collusion with respect to the bidding at the Auction.

(c) At least two business days prior to the Auction, each Qualified Bidder that

timely submitted a Qualified Bid must inform the Debtor whether it

intends to attend the Auction; provided that in the event a Qualified

Bidder elects not to attend the Auction, such Qualified Bidder’s Qualified

Bid nevertheless will remain fully enforceable until the date of the

selection of the Successful Bidder and the Back-Up Bidder.

(d) At least one business day prior to the Auction, the Debtor, in its

reasonable discretion, will determine which Qualified Bid(s) are the

highest or otherwise best Qualified Bid(s) for (x) the Assets (the “Highest

or Best Asset Bid”), and/or (y) each Asset Class (each highest or best

Qualified Bid for an Asset Class, the “Highest or Best Asset Class Bid”)

and will provide copies of the Highest or Best Asset Bid and/or the

Highest or Best Asset Class Bid to the other Qualified Bidders.

(e) For the Asset Classes of Merchandise and Owned FF&E, to the extent that

there is more than one Qualified Bid for such Asset Class, all initial

overbids beyond SB Capital’s bid (i) must exceed SB Capital’s bid by an

amount at least equal to one percent (1%) of the Cost Value (as defined in

the Agency Agreement) of the Merchandise (as determined by Debtor in

its reasonable discretion) plus cash in the amount of the Bid Protections

Break-Up Fee and the Cash Expense Reimbursement (each as defined in

the Agency Agreement) (as quantified by the Debtor) (the “Minimum

Overbid”) and (ii) agree to payment of the Signage Costs Reimbursement

(as defined in the Agency Agreement) (either through direct

reimbursement to SB Capital and/or assumption of obligation and

payment to the vendor(s)). Bidding at the Auction will continue in

increments of at least 0.10% (each successive bid, an “Inventory

Overbid”). An Inventory Overbid shall remain open and binding on the


8

Qualified Bidder(s) in accordance with its terms until and unless the

Debtor accepts an alternate Qualified Bid as the Highest or Best Asset Bid

for the Asset Class (or for a group of Asset Classes containing the Asset

Class). During the course of the Auction, the Debtor shall, after

submission of each Inventory Overbid, promptly inform each participant

which Inventory Overbid reflects, in the Debtor’s view, the highest or

otherwise best offer.

(f) For each Asset Class other than inventory and Owned FF&E, to the extent

that there is more than one Qualified Bid for a particular Asset Class, the

Auction shall commence with bidding on such Asset Class at the amount

equal to the Highest or Best Asset Class Bid applicable to such Asset

Class. Bidding on such Asset Class will continue in increments of at least

$100,000 or such other amount as determined by the Debtor in its business

judgment (each successive bid, an “Asset Class Overbid”). An Asset

Class Overbid shall remain open and binding on the Qualified Bidder(s)

until and unless the Debtor accepts an alternate Qualified Bid as the

Highest or Best Asset Class Bid on such Asset Class. During the course of

the Auction, the Debtor shall, after submission of each Asset Class

Overbid, promptly inform each participant which Asset Class Overbid

reflects, in the Debtor’s view, the highest or otherwise best offer for such

Asset Class. When bidding on individual Asset Classes for which more

than one Qualified Bid was received concludes, the Debtor shall determine

a highest or otherwise best bid with respect to each Asset Class (each

highest or best bid after conclusion of the auction, the “Winning Asset

Class Bid”). To the extent a particular Asset Class did not receive more

than one Qualified Bid (and accordingly, was not subject to the auction

procedures set forth above in this paragraph), the Highest or Best Asset

Class Bid shall be deemed to be the Winning Asset Class Bid for such

Asset Class, subject to the provisions of these Bidding Procedures. In all

events, the Debtor shall not be required to accept any bids made with

respect to Assets in those Asset Classes that are not subject to the Agency

Agreement (i.e. Asset Classes other than Merchandise and Owned FF&E).

(g) If there is a Highest or Best Asset Bid, after determination of each

Winning Asset Class Bid, the Debtor shall hold an auction for the Assets.

If the Winning Asset Class Bids, in the aggregate, or a Qualified Bidder

for the Assets, are selected as the Highest or Best Asset Bid, then bidding

will start at the aggregate consideration for the Winning Asset Class Bids

or such Qualified Bidder’s bid, plus 0.10%. Bidding at the Auction will

continue in increments of at least 0.10% (each successive bid, an “All

Assets Overbid”). A bidder seeing to purchase the Assets subject to the

Agency Agreement as part of an All Assets Overbid must agree to the

payment of the Signage Costs Reimbursement (either through direct

reimbursement to SB Capital and/or assumption of obligation and

payment to the vendor(s)). An All Assets Overbid shall remain open and

binding on the Qualified Bidder(s) until and unless the Debtor accepts an


9

alternate Qualified Bid(s) as the Highest or Best Asset Bid. During the

course of the Auction, the Debtor shall, after submission of each All

Assets Overbid, promptly inform each participant, which All Assets

Overbid reflects, in the Debtor’s view, the highest or otherwise best offer.

For the avoidance of doubt, Asset Class bidders may make joint All Assets

Overbids.

(h) For the Assigned Leases, to the extent that there is more than one

Qualified Bid for the Assigned Leases or a group of leases, all initial

overbids beyond Madrag’s bid must exceed Madrag’s bid by at least

$100,000, with bidding to continue in increments of at least $100,000

(each a “Lease Overbid”). The Debtor will entertain offers for a group of

leases or individual leases in addition to the Assigned Leases. A Lease

Overbid shall remain open and binding on the Qualified Bidder(s) in

accordance with its terms until and unless the Debtor accepts an alternate

Qualified Bid as the Highest or Best Asset Bid for the Assigned Leases.

During the course of the Auction, the Debtor shall, after submission of

each Lease Overbid, promptly inform each participant which Lease

Overbid reflects, in the Debtor’s view, the highest or otherwise best offer.

(i) The Debtor, after consultation with the Committee, may employ and

announce at the Auction additional procedural rules that are reasonable

under the circumstances for conducting the Auction; provided that such

rules are (a) not inconsistent with these Bidding Procedures, the

Bankruptcy Code or any order of the Bankruptcy Court entered in these

cases and (b) disclosed to each Qualified Bidder at or prior to the Auction.

(j) Except as specifically set forth herein, for the purpose of evaluating the

value of the consideration provided by the Asset Class Overbid and/or

Overbid, the Debtor will give effect to any additional costs to be assumed

by a Qualified Bidder and any additional costs or risks which may be

imposed on the Debtor by any such Asset Class Overbid and/or All Assets

Overbid.

All Qualified Bidders at the Auction and the Stalking Horses shall be deemed to

have consented and submitted to the core jurisdiction of the Bankruptcy Court and waive any

right to a jury trial in connection with any disputes relating to the marketing or solicitation

process, the Auction and the construction and enforcement of the Qualified Bidder’s

contemplated transaction documents, as applicable.

8. Selection of Successful Bid

At or prior to the conclusion of the Auction, the Debtor will review and evaluate

each Qualified Bid in accordance with these Bidding Procedures and determine in its reasonable

business judgment which offer is the highest or otherwise best offer from among the Qualified

Bids for the Assets, for each of the Asset Classes submitted at the Auction, or for the Assigned

Leases (each, a “Successful Bid” and the bidder(s) making such bid, the “Successful Bidder”),


10

and communicate to the other Qualified Bidders the identity of the Successful Bidder and the

details of the Successful Bids. A Successful Bid, as applicable, must include an agreement to

payment of the Signage Costs Reimbursement (either through direct reimbursement to SB

Capital and/or assumption of obligation and payment to the vendor(s)). The determination of the

Successful Bids by the Debtor at the conclusion of the Auction will be final, subject only to

approval by the Bankruptcy Court.

As soon as reasonably practicable after conclusion of the Auction, (a) the

Successful Bidder will complete and execute all agreements, contracts, instruments and other

documents evidencing and containing the terms and conditions of the Successful Bids and (b) the

Debtor will file a notice with the Bankruptcy Court identifying the Successful Bidder and the

Successful Bids, which will include copies of the respective Stalking Horse Agreement or

applicable Alternative Transaction Agreements and the proposed form of Approval Order, in

each case in the forms agreed to between the Debtor and the Successful Bidder marked to show

all amendments and modifications made to the respective Stalking Horse Agreement (the

“Successful Bidder Agreement”) and proposed Approval Order attached to the Motion.

The Debtor will sell the Assets to the Successful Bidder(s) pursuant to the terms

of the Successful Bid(s) as set forth in each Successful Bidder Agreement if and as approved by

the Bankruptcy Court at the Sale Hearing. The presentation of a particular Qualified Bid to the

Bankruptcy Court as a Successful Bid for approval does not constitute the Debtor’s acceptance

of the Qualified Bid. The Debtor will be deemed to have accepted a Qualified Bid as a

Successful Bid only after such bid has been approved by the Bankruptcy Court.

9. Return of Deposits

All Deposits will be returned to each Qualified Bidder not selected by the Debtor

as the Successful Bidder or the Back-Up Bidder no later than three business days after the

commencement of the Store Closing Sales or, if a going-concern bid is the Successful Bid, until

the closing of the Sale.

10. Forfeit of Deposits

A Successful Bidder that breaches any of its obligations under the applicable

Successful Bidder Agreement shall forfeit its Deposit, which shall become property of the

Debtor’s estate without any further order of the Bankruptcy Court. The forfeiture of the Deposit

shall be in addition to any other rights, claims and remedies that the Debtor and its estate may

have against such Successful Bidder.

11. Back-Up Bidder

If an Auction is conducted, the Qualified Bidder(s) with the second highest or

otherwise best Qualified Bid at the Auction for the Assets, for any Asset Class, or the Assigned

Leases, as determined by the Debtor in the exercise of its business judgment will be required to

serve as a back-up bidder (a “Back-Up Bidder”) and keep such bid open and irrevocable until

the date that is three business days after the commencement of the Store Closing Sales, if a

going-concern bid is the Successful Bid, until the closing of the Sale, or for the Assigned Leases,

until the Sale Termination Date; provided that the respective Stalking Horse shall be required to


11

serve as Back-Up Bidders only subject to the terms and conditions set forth in its bid (including,

without limitation, any outside dates, milestones or termination events). Following the Sale

Hearing, if the Successful Bidder fails to consummate the Sale because of a breach or failure to

perform on the part of such Successful Bidder, the applicable Back-Up Bidder will be deemed to

be the new Successful Bidder for the Assets or applicable Asset Class, and the Debtor will be

authorized but not required, to consummate the Sale with such Back-Up Bidder without further

order of the Bankruptcy Court. The Back-Up Bidder shall be required to close within three (3)

business days following receipt of notice from the Debtor of the Successful Bidder’s failure to

close, provided, however, that in the event the respective Stalking Horse is the Back-Up Bidder,

the respective Stalking Horse shall be required to close only if such closing occurs prior to

March 31, 2016 for the Merchandise and FF&E, and May 14, 2016 for the Assigned Leases.

D. The Sale Hearing

The Debtor will seek entry of the Approval Order from the Bankruptcy Court at a

hearing (the “Sale Hearing”) no later than February 4, 2016 to request the Bankruptcy Court

approve and authorize the Sale on terms and conditions determined in accordance with these

Bidding Procedures, the Auction and the executed form of Successful Bidder Agreement.

.


DOCS_DE:197868.1 11903/001

EXHIBIT 2

Auction Notice


YCST01:10575787.2 070040.1001

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT SOUTHERN DISTRICT OF NEW YORK

In re:

JOYCE LESLIE, INC.,

Debtor.

)

)

)

)

)

)

)

Chapter 11

Case No. 16-22035 (RDD)

AUCTION NOTICE

PLEASE TAKE NOTICE that Joyce Leslie, Inc., Inc., as Debtor and Debtor in

possession in the above-captioned case (the “Debtor”), on January __, 2016, filed a motion (the

“Motion”)1 for entry of an order (the “Bidding Procedures Order”), (i) authorizing entry into

Stalking Horse Agreements, (ii) authorizing proposed auction procedures (the “Bidding

Procedures”) and setting the time, date and place of the auction (the “Auction”); (iv) approving

the form of notice of the Auction and notice of the Store Closing Sales (the “Auction Notice”)

and (v) setting a hearing (the “Sale Hearing”), to be held on February __, 2016, to consider the

entry of the Approval Order.

PLEASE TAKE FURTHER NOTICE that, on January 26, 2016, the Court

entered an Order (the “Bidding Procedures Order”) approving, among other things, the

Bidding Procedures, attached to the Bidding Procedures Order as Exhibit 1, which Bidding

Procedures Order governs selection of one or more Successful Bidders for the Debtor’s Assets.

PLEASE TAKE FURTHER NOTICE that the Motion also seeks to sell

inventory, furniture, fixtures and equipment, intellectual property, accounts receivable and cash

on hand in the stores or other closing locations, real property leases and customer lists free and

clear of all liens, claims, interests and Liens pursuant to section 363 of the Bankruptcy Code, on

a going-concern basis or via chain-wide store closing sales and liquidation.

PLEASE TAKE FURTHER NOTICE that at the Auction the Debtor will first

seek a potential buyer for all of the company’s assets as a going concern or via a global offer to






PLEASE TAKE FURTHER NOTICE that any bidder that desires to make a bid

in the Auction must deliver written copies of its bid to the Bid and Objection Notice Parties

1 Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Motion.


2

(defined below) so as to be received not later than 4:00 p.m. February 1, 2016 (the “Bid

Deadline”).

PLEASE TAKE FURTHER NOTICE that the Auction will be held at 10:00

a.m. on February 3, 2016 at the offices of the Debtor’s proposed counsel, Goldberg Weprin

Finkel Goldstein LLP, 1501 Broadway, 22nd Floor, New York, New York 10036.

PLEASE TAKE FURTHER NOTICE that a hearing to consider, among other

things, the Stalking Horse Agreements or Alternative Transaction Agreements with the party or

parties submitting the highest or otherwise best bid at the Auction, will be held 10:00 a.m. on

February __, 2016 before the Honorable Robert D. Drain, United States Bankruptcy Judge, at

the United States Courthouse, 300 Quarropas Street, White Plains, New York 10601, or as soon

thereafter as the Debtor may be heard (the “Sale Hearing”). The Sale Hearing may be

adjourned or rescheduled by the Debtor, with the consent of the Stalking Horses, without further

notice by an announcement of the adjourned date at the Sale Hearing or by the filing of a hearing

agenda.

PLEASE TAKE FURTHER NOTICE that objections to the proposed sale must

be in writing, conform to the Bankruptcy Rules and the Local Rules of the Bankruptcy Court,

and be filed with the Bankruptcy Court and served upon the “Bid and Objection Notice

Parties”: (a) the proposed counsel to the Debtor, Goldberg Weprin, Finkel Goldstein LLP, 1501

Broadway, 22nd Floor, New York, New York 10036, Attn: Kevin J. Nash; (b) counsel for any

committee appointed in this chapter 11 case; (c) the U.S. Trustee, U.S. Federal Office Building,

201 Varick Street, Suite 1006, New York, New York 10014, Attn: Susan Golden; (d) counsel to

SB Capital, DiConza Traurig Kadish LLP, 630 Third Avenue, 7th Floor, New York, New York

10017, Attn: Maura Russell; and (e) counsel to Madrag, Rosen & Associates, 747 Third Avenue,

New York, New York 10017, Attn: Nancy Kourland.

PLEASE TAKE FURTHER NOTICE THAT THE FAILURE TO ABIDE

BY THE PROCEDURES AND DEADLINES SET FORTH IN THE BIDDING

PROCEDURES ORDER AND BIDDING PROCEDURES MAY RESULT IN THE

FAILURE OF THE COURT TO CONSIDER A COMPETING BID OR AN OBJECTION

TO THE PROPOSED SALE TRANSACTION.

PLEASE TAKE FURTHER NOTICE that this Auction Notice and the Sale

Hearing are subject to the fuller terms and conditions of the Motion, the Bidding Procedures

Order and the Bidding Procedures, which shall control in the event of any conflict and the

Debtor encourages parties-in-interest to review such documents in their entirety. The Motion,

Agency Agreement, Select Lease Purchase Agreement, Bidding Procedures Order, Bidding

Procedures or any other pleadings may be found at the website of the Debtor’s Claims and

Noticing Agent, Rust Consulting / Omni Bankruptcy, at http://www.omnimgt.com/joyceleslie/

or, for a fee, at the Court’s website, http://www.nysb.uscourts.gov, for registered users of the

Public Access to Court Electronic Records (PACER) System.


http://www.omnimgt.com/joyceleslie/

http://www.nysb.uscourts.gov/

3

Dated: ______, 2016

New York, New York

_________________________________

Kevin J. Nash




Floor


Telephone: (212) 221-5700

[email protected]


4

Exhibit 3

Cure Notice


YCST01:10575787.2 070040.1001

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT SOUTHERN DISTRICT OF NEW YORK

In re:

JOYCE LESLIE, INC.,

Debtor.

)

)

)

)

)

)

)

Chapter 11

Case No. 16-22035 (RDD)

CURE NOTICE

PLEASE TAKE NOTICE that Joyce Leslie, Inc., Inc., as Debtor and Debtor in

possession in the above-captioned case (the “Debtor”), on January __, 2016, filed a motion (the

“Motion”)1 for entry of an order (the “Bidding Procedures Order”), (i) authorizing entry into

Stalking Horse Agreements, (ii) authorizing Bid Protections and Signage Costs Reimbursement

(iii) authorizing proposed auction procedures (the “Bidding Procedures”) and setting the time,

date and place of the auction (the “Auction”); (iv) approving the form of notice of the Auction

and notice of the Store Closing Sales (the “Auction Notice”) and (v) setting a hearing (the “Sale

Hearing”), to be held on [____________, 2016], to consider the entry of the Approval Order.

You are receiving this Notice because you may be a party to an executory

contract or unexpired lease (the “Transferred Contracts”) that is proposed to be assumed

and assigned.

The Debtor has determined the current amounts owing (the “Cure Costs”) under

each Transferred Contract and has listed the applicable Cure Costs on Exhibit A hereto. The

Cure Costs are the only amounts proposed to be paid upon the assumption and assignment of the

Transferred Contracts.

To the extent that a Counterparty objects to the (i) assumption and assignment of

such party’s Transferred Contract; or (ii) the applicable Cure Costs, the Counterparty must file

and serve an objection in accordance with the Bidding Procedures Order so that such objection is

received by __________ , 2016 at 5:00 p.m. Copies of the Bidding Procedures Order are

available at the website of the Debtor’s Claims and Noticing Agent, Rust Consulting / Omni

Bankruptcy, at http://www.omnimgt.com/joyceleslie/ or, for a fee, at the Court’s website,

http://www.nysb.uscourts.gov, for registered users of the Public Access to Court Electronic

Records (PACER) System

If no objection is timely received, the Counterparty failing to timely file an

objection to the Cure Cost set forth in the Cure Notice shall be forever barred from objecting to

1 Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Motion.


http://www.nysb.uscourts.gov/

2

the Cure Costs and from asserting any additional cure or other amounts against the Debtor, its

estate, and the Successful Bidder with respect to the Assumed Contract to which it is a

Counterparty.

The hearings with respect to Cure Cost objections may be held (i) at the Sale

Hearing; or (ii) on such other date as the Bankruptcy Court may designate.

The Debtor has not made a decision on whether to assume and assign any

executory contracts or unexpired leases at this time. Inclusion of any document in Exhibit A

shall not constitute or be deemed to be a determination or admission by the Debtor or any

successful bidders at the Auction that such document is, in fact, an executory contract or

unexpired lease within the meaning of the Bankruptcy Code.

Dated: New York, NY

____________ [•], 2016

_________________________________

Kevin J. Nash




Floor


Telephone: (212) 221-5700

[email protected]


EXHIBIT “E”

16-22035-rdd Doc 43-5 Filed 01/14/16 Entered 01/14/16 20:36:12 Exhibit E - Consulting Agreement Pg 1 of 15