AGENCY AGREEMENT

EXHIBIT 10.1

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AGENCY AGREEMENT

This Agency Agreement (the "Agreement") is made as of this 10th day

of March, 2005, by and between GSNW, LLC, a Delaware limited liability

company, with a principal place of business at 40 Broad Street, Boston, MA

02109 (the "Agent") and Friedman's, Inc., a Delaware corporation, on behalf of

itself and its affiliated debtors and debtors-in-possession (collectively, the

"Merchant") each with a principal place of business at 171 Crossroads Parkway,

Savannah, Georgia 31422.

RECITALS

WHEREAS, Merchant desires that Agent act as Merchant's exclusive

agent for the purpose of (a) selling all of the Merchandise (as hereinafter

defined) located in one hundred and sixty four (164) retail store locations

set forth on Exhibit 1 attached hereto (each a "Store", and collectively, the

"Stores"), and (b) to the extent elected by Merchant pursuant to Section 16

hereof, dispose of Merchant's owned FF&E located at the Stores. The group 1

stores (the "Group 1 Stores") represent those stores in markets that will be

closed in their entirety, and the group 2 stores (the "Group 2 Stores")

represent those stores in continuing markets.

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 is hereby acknowledged, Agent and

Merchant hereby agree as follows:

Section 1. Defined Terms. The terms set forth below are defined in

the Sections referenced of this Agreement:

Defined Term Section Reference

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Agency Account Section 7.2(a)

Agency Documents Section 12.1(b)

Agent Preamble

Agent's Base Fee Section 3.2

Agent Claim Section 13.5

Agent's Fee Section 3.1(b)

Agent Letter of Credit Section 3.3(b)

Agent's Incentive Fee Section 3.2

Agent Indemnified Parties Section 14.1

Aggregate Cost Value of Section 3.2

Remaining Merchandise

Agreed Expenses Section 3.1(c)

Approval Order Section 2

Augmented Merchandise Section 17(a)

Benefits Cap Section 4.1(A)(1)

Central Expenses Section 3.1(B)(i)

Cost File Section 5.2

Cost Value Section 5.2

Defective Merchandise Section 5.1(b)

Designated Merchant Accounts Section 7.2(b)

Estimated Guarantee Amount Section 3.3(a)

Events of Default Section 15

Excluded Benefits Section 4.1(B)(ii)

Expenses Section 4.1

Expense Budget Section 4.3

Expense Cap Section 3.1(c)

Expense L/C Section 4.2(b)

FF&E Section 5.1(b)

FF&E Agent Section 16

Final Reconciliation Section 3.6(b)

Gross Rings Section 3.5

Group 1 Stores Recitals

Group 2 Stores Recitals

Guaranteed Amount Section 3.1(a)

Guaranteed Amount Deposit Section 3.3(a)

Guaranty Percentage Section 3.1(a)

Inventory Completion Date Section 3.4

Inventory Date Section 3.4

Inventory Report Section 3.3(a)

Inventory Taking Section 3.4

Inventory Taking Instructions Section 3.4

Inventory Taking Service Section 3.4

Inventory Threshold Section 3.1(c)

Lender Agent Section 3.3(b)

Memo Merchandise Section 5.1(b)

Merchandise Section 5.1(a)

Merchant Preamble

Merchant Account Usage Period Section 7.2(a)

Occupancy Expenses Section 4.1(B)(iii)

Payment Date Section 3.3(a)

Proceeds Section 7.1

Recovery Amount Section 3.1(b)

Remaining Merchandise Section 3.2

Retained Employee Section 10.1

Retention Bonus Section 10.4

Sale Recitals

Sale Commencement Date Section 6.1

Sale Guidelines Section 2

Sale Term Section 6.1

Sale Termination Date Section 6.1

Sales Taxes Section 9.3

Sharing Threshold Section 3.1(b)

Stores Recitals

Supplies Section 9.4

Transfer Goods Section 5.1(b)

WARN Act Section 10.1

Section 2. Appointment of Agent. 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 to the extent designated by

Merchant, disposing of Merchant's owned FF&E, in accordance with the terms and

conditions of this Agreement. Merchant's and Agent's obligations hereunder are

subject to approval of the Bankruptcy Court and shall be of no force and

effect in the event that it is not so approved. As soon as practicable after

Merchant's execution of this Agreement, Merchant shall apply to the Bankruptcy

Court for an order approving this Agreement in its entirety in form and

substance satisfactory to Agent (the "Approval Order"). The Approval Order

shall provide, among other things, that: (i) this Agreement is in the best

interests of Merchant, Merchant's estate, creditors and other parties in

interest; (ii) this Agreement (and each of the transactions contemplated

hereby) is approved in its entirety; (iii) Merchant and Agent shall be

authorized to take any and all actions as may be necessary or desirable to

implement this Agreement and each of the transactions contemplated hereby;

(iv) Agent shall be authorized to sell all Merchandise and Merchant's owned

FF&E hereunder free and clear of all liens, claims or encumbrances thereon;

(v) any presently existing liens encumbering all or any portion of the

Merchandise or the Proceeds attaching only to the Guaranteed Amount, the

Recovery Amount, if any, and amounts reimbursed to Merchant on account of

Expenses; (vi) 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; (vii) Agent, as agent for Merchant, is

authorized to conduct, advertise, post signs, hang interior, and with respect

to non-enclosed malls, exterior, banners, and otherwise promote the Sale as a

"store closing" or similar type sale without further consent of any person,

other than Merchant, which consent shall not be unreasonably withheld, in a

manner consistent with the sale guidelines for Group 1 Stores and the sale

guidelines for Group 2 Stores, attached hereto as Exhibit 2 (the "Sale

Guidelines"), (viii) Agent shall be granted a limited license and right to use

until the Sale Termination Date the trade names, logos and customer 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 the

Agreement; (ix) each and every federal, state or local agency, department or

governmental authority with regulatory authority over the Sale and 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, and no further approval, license or

permit of any governmental authority shall be required; (x) all utilities,

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

interfere with or otherwise impede the conduct 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 impedes the conduct of the Sale; (xi) the Bankruptcy Court shall

retain jurisdiction over the parties to enforce this Agreement; (xii) Agent

shall not be liable for any claims against the Merchant other than as

expressly provided for in this Agreement, and Agent shall have no

successorship liabilities whatsoever; (xiii) sales of Merchandise shall be

protected by Section 363(m) of the Bankruptcy Code in the event that the

Approval Order is reversed or modified on appeal; and (xiv) any amounts owed

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

superpriority claims in Merchant's Chapter 11 Case pursuant to section 364(a)

of the Bankruptcy Code and secured by valid and perfected first-priority

security interests in the Merchandise and the Proceeds granted pursuant to

section 364(d) of the Bankruptcy Code junior only to an amount equal to the

unpaid portion of the Guaranteed Amount (without the necessity of filing

financing statements to perfect the security interests).

Section 3. Guaranteed Amount and Other Payments.

3.1 Payments to Merchant.

(a) As a guaranty of Agent's performance hereunder, Agent

guarantees to Merchant that the Proceeds of the Sale shall equal or exceed 41%

(the "Guaranty Percentage") of the aggregate Cost Value (as defined below) of

the Merchandise as determined under Sections 3.4 and 3.5 hereof (the

"Guaranteed Amount") plus an amount sufficient to pay all Expenses.

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

Guaranteed Amount, (y) the Agreed Expenses of the Sale (as defined below) and

(z) two percent (2%) of the aggregate Cost Value of the Merchandise (the

"Agent's Base Fee") (the sum of (x), (y) and (z), the "Sharing Threshold"),

then all remaining Proceeds of the Sale above the Sharing Threshold shall be

shared sixty percent (60%) to Merchant and forty percent (40%) to Agent. All

amounts, if any, to be received by Merchant from Agent in excess of the

Sharing Threshold shall be referred to as the "Recovery Amount". Agent shall

pay to Merchant the Guaranteed Amount, unreimbursed Expenses due to Merchant,

and the Recovery Amount, if any, in the manner and at the times specified in

Sections 3.3 and 3.4 below. The Guaranteed Amount and the Recovery Amount will

be calculated based upon the aggregate Cost Value of the Merchandise as

determined by (A) the Final Inventory Report (as defined below), (B) the

aggregate amount of Gross Rings (as adjusted for shrinkage per this

Agreement), and (C) with respect to the Recovery Amount, the Agreed Expenses

of the Sale.

(c) Subject to the Expense Cap adjustment set forth in Exhibit

3.1(d), the "Expense Cap" shall mean 45% of the aggregate Cost Value of the

Merchandise. The Expense Cap and the Guaranty Percentage have been calculated

and agreed upon based upon the aggregate Cost Value of the Merchandise not

being less than $32,500,000 (the "Inventory Threshold"). To the extent that

the aggregate Cost Value of the Merchandise is greater than or less than the

Inventory Threshold the Expense Cap and the Guaranty Percentage shall be

adjusted in accordance with Exhibit 3.1(d) hereto, as and where applicable.

The "Agreed Expenses" shall mean the lower of the aggregate amount of actual

Expenses of the Sale and the Expense Cap.

3.2 Payments to Agent. As its compensation for services rendered

to Merchant, after sufficient Proceeds have been generated to pay the

Guaranteed Amount and all Expenses, which do not exceed the Expense Cap, Agent

shall be entitled to receive such excess Proceeds up to amount of the Agent's

Base Fee. In addition, if sufficient Proceeds are generated from the Sale,

Agent shall be entitled to receive 40% of any Proceeds remaining after payment

of the Guaranteed Amount, all Expenses which do not exceed the Expense Cap,

and the Agent's Base Fee ("Agent's Incentive Fee"). Subject to Merchant's

rights with respect to the Recovery Amount, all Merchandise remaining, if any,

at the Sale Termination Date (the "Remaining Merchandise") shall become the

property of Agent, free and clear of all liens, claims and encumbrances,

provided however, that Agent shall use its best efforts to sell all of the

Merchandise during the Sale. Any proceeds received from the sale of any

Remaining Merchandise shall be deemed Proceeds under this Agreement, provided

that, for the purposes of tracking Proceeds to received by Agent from the

subsequent disposition of the Remaining Merchandise, at the conclusion of the

Sale, Merchant and Agent shall jointly conduct a physical inventory taking of

the Remaining Merchandise as an Expense of the Sale, to calculate the

aggregate Cost Value of such Remaining Merchandise (the "Aggregate Cost Value

of Remaining Merchandise").

3.3 Time of Payments.

(a) No later than two (2) business days after the later of (x)

entry of the Approval Order and (y) execution hereof (the "Payment Date"),

Agent shall pay seventy-five percent (75%) of the Guaranteed Amount (the

"Guaranteed Amount Deposit") in cash, which amount shall be wired to the

account to be designated by the Merchant. Agent shall calculate the amount of

the Guaranteed Amount Deposit based upon the Cost Value of the Merchandise as

of the Sale Commencement Date as reflected in Merchant's books and records

(the "Estimated Guarantee Amount"). Agent shall pay the unpaid and undisputed

balance of the Guaranteed Amount in cash to Merchant no later than the earlier

of (i) the date ten (10) business days after the Sale Commencement Date (in

which case payment shall be of the undisputed portion of the balance of the

Estimated Guaranteed Amount) and (ii) the second business day following the

issuance of the audit report of the aggregate Cost Value of the Merchandise by

the Inventory Taking Service, after verification thereof by the Agent and the

Merchant (the "Inventory Report"), and the Agent's failure to pay such balance

or undisputed portion shall entitle the Lender Agent on behalf of the Merchant

may draw upon the Agent Letter of Credit (as defined below) to the extent of

such balance or undisputed portion. To the extent that the Merchant is

entitled to receive a Recovery Amount from Proceeds, such Recovery Amount

shall be paid to the Merchant as earned weekly. In the event that after the

issuance of the Inventory Report, the Guaranteed Amount is greater than the

sum of the Guaranteed Amount Deposit plus the payment of the undisputed

portion of the Estimated Guaranteed Amount, the Agent shall pay the remainder

of the Guaranteed Amount to the Lender Agent for the benefit of the Merchant

within two (2) business days after the Inventory Report has been issued. In

the event there is a dispute with respect to the reconciliation of the

aggregate Cost Value of the Merchandise following the Inventory Taking, then

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

Section 3.6 hereof. To the extent that the Final Reconciliation as provided

for below shows that the Agent has overpaid the Guaranteed Amount, then the

Merchant, the Lenders and the Lenders Agent, shall cause any overpayment to be

immediately refunded to Agent.

(b) To secure payment of the unpaid portion of the Guaranteed

Amount and any other amounts due from Agent to Merchant hereunder, Agent shall

deliver to Merchant an irrevocable standby letter of credit, naming those

parties to be designated by the Merchant (the "x") as beneficiary,

substantially in the form of Exhibit 3.3(b) attached hereto, in the original

face amount equal to the unpaid portion of the Estimated Guaranteed Amount as

of the Payment Date, (the "Agent Letter of Credit"). Agent shall use its best

efforts to cause the Agent Letter of Credit to be delivered no later than the

Payment Date. In the event that Agent shall fail to pay to those parties

designated by Merchant or any successor agent under the Merchant's prepetition

and debtor-in-possession credit facilities (the "Lender Agent"), for the

benefit of Merchant, any amount required to be paid hereunder, the Lender

Agent shall be entitled to draw on the Agent Letter of Credit to fund such

amount following five (5) days' written notice to Agent of the Lender Agent's

intention to do so. The Agent Letter of Credit shall expire 60 days after the

Sale Termination Date; provided however; the Lender Agent, Merchant and Agent

agree that after payment of the unpaid portion of the Guaranteed Amount

(whether the Estimated Guaranteed Amount or the Guaranteed Amount calculated

pursuant to the Inventory Report) pursuant to Section 3.3(a), the face amount

of the Agent Letter of Credit shall be reduced in an amount(s) to be agreed

upon by Merchant, Lender Agent, and Agent.

3.4 Inventory Taking. Merchant and Agent shall cause to be taken

a SKU and "Retail Price" physical inventory of the Merchandise located in the

Stores (the "Inventory Taking"), which Inventory Taking shall be completed in

all of the Stores pursuant to a schedule mutually agreed upon between Merchant

and Agent, but in no later than ten (10) days after the Sale Commencement Date

(the "Inventory Completion Date"), and the date of the Inventory Taking at

each Store being the "Inventory Date" for each such Store). Merchant and Agent

shall jointly employ RGIS or another mutually acceptable independent inventory

taking service (the "Inventory Taking Service") to conduct the Inventory

Taking. The Inventory Taking shall be conducted in accordance with the

procedures and instructions attached hereto as Exhibit 3.4, including a

requirement that senior representatives of Merchant and Agent shall be

personally present at the Inventory Taking at the first Stores as mutually

agreed to by the Agent and Merchant in order to establish the standards for

the Inventory Taking in the remaining Stores (the "Inventory Taking

Instructions"). Agent shall be responsible for fifty percent (50%) of the fees

and expenses of the Inventory Taking Service. Except for the Inventory Taking

costs payable to RGIS or other third party, Merchant and Agent shall each bear

their respective costs and expenses relative to the Inventory Taking. Merchant

and Agent may each 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 conduct of

the Inventory Taking in each of the Stores, the applicable Stores shall be

closed to the public and no sales or other transactions shall be conducted.

Merchant and Agent agree to cooperate with each other to conduct the Inventory

Taking commencing at a time that would minimize the number of hours that such

locations would be closed for business.

3.5 Gross Rings. For the period from the Sale Commencement Date

until the Inventory Date for each Store, Agent and Merchant shall keep a

strict count of register receipts and reports to determine the actual Cost

Value of the merchandise sold by SKU. All such records and reports shall be

made available to Agent and Merchant during regular business hours upon

reasonable notice. Agent shall pay that portion of the Guaranteed Amount

calculated on the Gross Rings basis, to account for shrinkage, on the basis of

102% of the aggregate Cost Value of Merchandise sold during the Gross Rings

period.

3.6 Reconciliation.

(a) On each Thursday during the Sale Term, commencing on the

second Thursday after the Sale Commencement Date, Agent and Merchant shall

cooperate to jointly prepare a reconciliation of the weekly Proceeds of the

Sale, Expenses and any other Sale related items that either party may

reasonably request.

(b) Within thirty (30) days after the Sale Termination Date,

Agent and Merchant shall jointly prepare a final reconciliation of the Sale,

including, without limitation, a summary of Proceeds, Expenses, and any other

accounting required hereunder (the "Final Reconciliation"). Within five (5)

days of completion of the Final Reconciliation, Agent shall pay to Merchant,

or Merchant shall pay to Agent, as the case may be, any and all amounts due

the other pursuant to the Final Reconciliation. During the Sale Term, and

until all of the 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 and Expenses to review and audit such

records.

(c) In the event that there is a dispute with respect to the

Final Reconciliation, such dispute shall be promptly (and in no event later

than the third business day following the request by either Merchant or Agent)

submitted to the Bankruptcy Court for a determination. Merchant and Agent

hereby agree to submit to the jurisdiction of the Bankruptcy Court for such

determination.

Section 4. Sale Expenses.

4.1 Expenses. The Merchant is obligated to pay, subject to its right

to receive reimbursement on a weekly basis pursuant to the reconciliation

procedures set forth in Section 4.2, all expenses directly incurred in

connection with and attributable to the Sale (collectively, the "Expenses"),

limited to:

(A) (1) (a) base payroll, which has been adjusted to include SPIFS as

set forth as Premium Base Compensation (only) in the Merchant's Store

Liquidation Compensation Plan, dated February, 2005, which includes Merchant's

estimate of SPIFS ("Base Payroll"), of Merchant's Retained Employees used in

connection with the Sale for actual days worked (or in the case of hourly

employees, the hours worked); plus (b) an amount not to exceed 11.3% of such

Base Payroll (the "Benefits Cap") for the payment of all related payroll

taxes, workers' compensation and benefits of Merchant's Retained Employees

used in connection with the Sale (including, without limitation, medical and

dental benefits, group life insurance, accidental death and dismemberment

insurance, short and long term disability, accrual for sick pay, and accrual

for vacation and holiday pay) for all such Retained Employees used, in

aggregate, which are either due or accrue during the period of the Sale and

are attributable to the Sale, plus (c) actual costs payable to third party

payroll processors;

(2) costs of all security in the Stores including, without

limitation, courier and guard service;

(3) Retention Bonuses for Retained Employees, plus payroll taxes, as

provided for in Section 10.4 below;

(4) (a) advertising and direct mailings relating to the Sale and (b)

Store interior and exterior signage and banners;

(5) [intentionally omitted];

(6) bank card fees, bank card error fees, credit card fees, and

chargebacks in respect of disputed sales (however there shall be cooperation

between Merchant and Agent to resolve chargeback of any kind in respect of any

authorized sale on a credit card where Agent or Merchant produces a receipt

evidencing that the sale subject to such chargeback was a final sale);

(7) bank service charges (for Store and corporate accounts), check

guarantee fees, and bad check expenses;

(8) costs for additional supplies in accordance with Section 9.4

hereof;

(9) except to the extent that compliance is waived pursuant to the

Approval Order, all fees and charges required to comply with all laws and

regulations applicable to the Sale;

(10) any and all costs, including delivery and freight costs, related

to the processing, transfer and consolidation of Merchandise between the

Stores (excluding all costs, including delivery and freight costs, to deliver

the Transfer Goods to the Stores, but including, from and after the Sale

Commencement Date, all costs of processing the Transfer Goods upon its arrival

at the Stores to the extent such goods are delivered to the Stores after the

Sale Commencement Date);

(11) housekeeping and cleaning expenses related to the Stores;

(12) all travel expenses, including living expenses, payable to

Merchant's

employees relating to travel by such employees at the direction of Agent,

which shall include, without limitation, the costs of transferring Merchant's

employees between Stores;

(13) on-site supervision during the Sale, including base fees and

reasonable and customary bonuses of Agent's field personnel, travel to and

from the Stores, and incidental out-of-pocket and commercially reasonable

travel expenses relating thereto;

(14) all costs and expenses of providing such additional Store-level

services, including, without limitation, the employment of temporary help

(which shall be coordinated and implemented through Merchant's human resources

department), which the Agent in its discretion considers appropriate, and

other approved miscellaneous Store-level expenses incurred by Agent;

(15) postage, courier and overnight mail charges to and from or among

the Stores and central office (solely to the extent relating to the Sale);

(16) actual Occupancy Expenses on a per diem, per store basis and up

to and limited to the per diem total, by Store as described in Exhibit 4.1;

(17) Central Expenses of $25.00 per Store per week during the Sale

Term;

(18) Agent's legal fees and cost of capital;

(19) Agent's due diligence in connection with the Sale, including

travel related expenses, in an aggregate amount not to exceed $50,000;

(20) [intentionally left blank];

(21) Actual cost of Agent's insurance required under Section 13.4

hereof; and

(22) any other expense approved by Merchant directly incurred by

Agent in connection with the Sale.

(B) As used herein, the following terms have the following respective

meanings:

(i) "Central Expenses" means costs and expenses for Merchant's

central administrative services necessary for the Sale consisting of sales

audit, MIS services, POS systems, payroll processing, cash reconciliation,

inventory processing and handling, data processing and reporting and any

similar services.

(ii) "Excluded Benefits" means the following benefits, except as provided in

Section 4.1(A)(1), in excess of the Benefits Cap: vacation days or vacation

pay, sick days or sick leave, maternity leave or other leaves of absence,

termination or severance pay, union dues or other amounts due under any union

contract or collective bargaining agreement, pension benefits, ERISA coverage

and similar contributions, and payroll taxes, worker's compensation and health

insurance benefits.

(iii) "Occupancy Expenses" means base rent, percentage rent,

HVAC, utilities, CAM, real estate and use taxes, merchant's association dues

and expenses, personal property leases (including, without limitation, point

of sale equipment), cash register maintenance, telephone base fees, rental for

furniture, fixtures and equipment, security systems, building alarm service,

alarm service maintenance and store trash and snow removal expenses, all of

the foregoing as categorized or reflected on Exhibit 4.1 hereto.

"Expenses" shall not include: (i) Excluded Benefits; (ii) any rent or

occupancy expenses related to the Stores other than Occupancy Expenses as

limited to those categories as described in Exhibit 4.l; and (iii) any other

costs, expenses or liabilities payable by Merchant, all of which shall be paid

by Merchant promptly when due for and during the Sale Term.

4.2 Payment of Expenses. (a) Merchant shall be responsible for the

payment of all Expenses up to the amount of the Agreed Expenses during the

Sale; provided, however, Agent shall be responsible to reimburse Merchant for

all Expenses of the Sale (whether or not in excess of the Agreed Expenses).

All Expenses up to the amount of the Agreed Expenses incurred during each week

of the Sale (i.e., Sunday through Saturday) shall be paid by Merchant as

provided for herein, subject to reimbursement by Agent immediately following

the weekly Sale reconciliation pursuant to Section 3.6. Agent and/or Merchant

may review or audit the Expenses at any time. To the extent that any Expenses

may be described in more than one section hereof, then such Expenses shall be

paid, reimbursed or accounted for only once.

(b) To secure payment of the Expenses, Agent shall deliver to

Lender Agent an irrevocable and unconditional standby letter of credit, naming

Lender Agent, as beneficiary, in the original face amount equal to three (3)

weeks estimated Occupancy Expenses and payroll Expenses, substantially in the

form of Exhibit 4.2(b) attached hereto (the "Expense L/C"). The Expense L/C

shall be delivered to Lender Agent no later than two (2) business days after

the Sale Commencement Date, shall be issued by a bank selected by Agent and

reasonably acceptable to Merchant and Lender Agent, and shall contain terms,

provisions and conditions mutually acceptable to Merchant, Lender Agent, and

Agent. The Expense L/C shall expire no earlier than sixty (60) days after the

Sale Termination Date. Unless the parties shall have mutually agreed that they

have completed the final reconciliation under this Agreement, then, at least

thirty (30) days prior to the initial or any subsequent expiry date, Lender

Agent or Merchant, as the case may be, shall receive an amendment to the

Expense L/C solely extending (or further extending, as the case may be) the

expiry date by at least sixty (60) days. If Lender Agent does not receive such

amendment to the Expense L/C no later than thirty (30) days before the expiry

date, then all amounts hereunder shall become immediately due and payable and

Lender Agent shall be permitted to draw under the Expense L/C in payment of

amounts owed and Merchant shall hold the balance of the amount drawn under the

Expense L/C as security for amounts that may become due and payable to

Merchant hereunder.

4.3 Expense Budget. On the Sale Commencement Date, Agent shall

deliver is the budget (the "Expense Budget") to Merchant, setting forth in

reasonable detail Agent's estimated budget for the Expenses (as defined above)

of the Sale.

Section 5. Merchandise.

5.1 Merchandise Subject to this Agreement.

(a) For purposes of this Agreement, "Merchandise" shall mean:

(i) all finished goods inventory that is owned by Merchant and located at the

Stores as of the Sale Commencement Date; or (ii) goods held by Merchant on

memo, on consignment, or as bailee (unless excluded by Merchant) ("Memo

Merchandise"). Merchandise shall include, Transfer Goods, Defective

Merchandise, Layaway Merchandise that is not picked up by customer on or prior

to the Layaway Pick-Up Date, and Merchandise subject to Gross Rings.

(b) Notwithstanding the foregoing, Merchandise shall not

include: (1) goods which belong to sublessees, licensees or concessionaires of

Merchant; (2) Defective Merchandise for which Merchant and Agent cannot agree

upon a Cost Value; and (3) furnishings, trade fixtures, equipment and

improvements to real property which are located in the Store (collectively,

"FF&E"). As used in this Agreement the following terms have the respective

meanings set forth below:

(i) "Transfer Goods" means those items of merchandise

identified by Merchant and substantially similar to the merchandise identified

on Exhibit 5.1(b)(i) annexed hereto, that Merchant has transferred, or will

transfer to the Stores, from Merchant's on-going stores and/or distribution

centers on or before March 15, 2005 (the "Store Receipt Deadline").

(ii) "Defective Merchandise" means any item of merchandise

agreed upon and identified by Agent and Merchant as defective or otherwise not

salable in the ordinary course because it is dented, worn, scratched, broken,

broken sets, faded, torn, mismatched, non-redeemed or layaway altered

merchandise or merchandise affected by other similar defects rendering it not

first quality (such as, for example, watches that are not running, watches

without boxes, watches without applicable instructions, and pierced earrings

without backs), that is sold by Agent during the Sale Term, and as to which

Agent and Merchant mutually agree on its value to define its Cost Value.

(iii) "Layaway Merchandise" means all items of Merchandise

held at the Stores on layaway, in each case, where the goods subject to

layaway are properly identified, segregated, and in a condition as described

in the documentation.

5.2 Valuation.

(a) For purposes of this Agreement, "Cost Value" shall mean,

with respect to each item of Merchandise, other than Defective Merchandise and

Transfer Goods received in the Stores after March 9, 2005 (the "Non-Adjustment

Receipt Deadline"), the average standard cost (determined by applicable

merchant accounting unit for such item of Merchandise as reflected in

Merchant's master cost file as of the Sale Commencement Date (the "Cost

File"), which average cost is inclusive of freight and shipping charges (the

"Unadjusted Cost Value"). With respect to Defective Merchandise, "Cost Value"

shall mean the value the Merchant and Agent agree upon for such item during

the Inventory Taking. With respect to Transfer Goods received in the Stores

after the Non-Adjustment Receipt Deadline, "Cost Value" shall mean the

Unadjusted Cost Value multiplied by the inverse of the prevailing discount in

effect on the date such Transfer Goods is received in the Stores. Merchant and

Agent agree that the Cost File does not account for any volume discounts,

advertising co-op discounts, rebates or discounts associated with expedited

payment terms offered by any vendor (collectively, the "Buying Discounts"),

and further that the Cost Value of any item of Merchandise shall not be

adjusted for any such amounts.

(b) For purposes of this Agreement, "Retail Price" shall mean

with respect to each item of Merchandise, other than Transfer Goods received

in the Stores after the Non-Adjustment Receipt Deadline, ticketed price for

such item of Merchandise (the "Base Retail Price"). With regard to Transfer

Goods that are received in the Stores after the Non-Adjustment Receipt

Deadline, "Retail Price" shall mean the Base Retail price for such item of

Merchandise multiplied by the inverse of the prevailing discount in effect on

the date such Transfer Goods were received in the Stores.

5.3 Excluded Goods. Merchant shall retain all responsibility for any

goods not included as Merchandise hereunder.

Section 6. Sale Term.

6.1 Term. The Sale shall commence at the Stores on the first business

day after entry of the Approval Order (the "Sale Commencement Date"). The

Agent shall complete the Sale at the Stores, and shall vacate all of the Store

premises on or before the ninety-eighth (98th) day after the Sale Commencement

Date, but, in no event sooner than March 31, 2005 (the "Sale Termination

Date"), unless the Sale is extended by further order of the Bankruptcy Court

following the filing of a motion on no less than ten (10) days notice to the

affected landlord and Governmental Units (as defined in the Approval Order),

with an opportunity to be heard. Agent may terminate the Sale at any Store

upon ten day's notice to Merchant. The period for the Sale Commencement Date

to the Sale Termination Date shall be referred to herein as the "Sale Term."

The Sale Termination Date may be extended by mutual written agreement of Agent

and Merchant.

6.2 Vacating the Stores. On the Sale Termination Date, the Agent

shall leave the Stores in "broom clean" condition (ordinary wear and tear

excepted). 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 premises at the end of the Sale Term to the extent the same have

not been used in the conduct of the Sale or have not been otherwise disposed

of through no fault of Agent; provided however, Agent shall remove all unsold

Merchandise at the end of the Sale Term at each of the Stores and Agent shall

retain title of the unsold Merchandise.

Section 7. Sale Proceeds.

7.1 Proceeds. For purposes of this Agreement, "Proceeds" shall

mean the aggregate of: (a) the total amount (in U.S. dollars) of all sales of

Merchandise made under this Agreement