PURCHASE AGREEMENT

Exhibit 2.1

PURCHASE AGREEMENT

          PURCHASE AGREEMENT, dated as of October 29, 2005 (this “ Agreement ”), by and between Saks Incorporated, a Tennessee corporation (“ Seller ”), and The Bon-Ton Stores, Inc., a Pennsylvania corporation (“ Buyer ”).

PRELIMINARY STATEMENT:

          WHEREAS, Seller is the owner of all of the outstanding equity interests of Herberger’s Department Stores, LLC, a Minnesota limited liability company, and Parisian, Inc., an Alabama corporation (each, a “ Company ” and, collectively, the “ Companies ”); and

          WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, all of the equity interests of the Companies, all on the terms and subject to the conditions set forth herein.

          NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, it is hereby agreed between Seller and Buyer as follows:

ARTICLE I
DEFINITIONS

          Section 1.1 Definitions . In this Agreement, the following terms have the meanings specified or referred to in this Section 1.1 .

           “ Adjustment Amount ” has the meaning specified in Section 2.4(a)(v) .

           “ Affiliate ” means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, such Person. As used herein, “control” means the power to direct the management or affairs of a Person and “ownership” means the beneficial ownership of more than 50% of the equity securities of the Person.

           “ Aggregate Flex Plan Balances ” has the meaning specified in Section 7.3(i) .

           “ Agreed NUBL Principles ” means the principles applied in connection with the calculation of the Reference Net Unfunded Benefit Liabilities, as set forth on Schedule 1.1(a) .

           “ Agreed Rate ” means an annual rate equal to the three-month LIBOR rate in effect as of the third business day prior to the date such payment is made.

           “ Allocation Schedule ” has the meaning specified in Section 7.2(e)(ii) .

           “ Alternative Proposal ” has the meaning specified in Section 6.14(b) .

           “ Approved Capital Expenditures ” means all Capital Expenditures (other than Pre-Approved Capital Expenditures) approved in writing after the date of this Agreement by Buyer for the Business.

           “ Assigned Contracts ” has the meaning specified in Section 2.6(a) .

           “ Assumed Contract Liabilities ” has the meaning specified in Section 2.6(a) .

           “ Bridge Facility ” means the senior unsecured bridge facility contemplated by the Commitment Letters.

           “ Business ” means the retail store business conducted under the trade names of Carson Pirie Scott, Younkers, Herberger’s, Boston Store and Bergner’s, together with all administrative and distribution activities associated therewith.

           “ Business Agreements ” has the meaning specified in Section 4.15 .

           “ Business Employees ” means all employees of the Business located at the stores of the Business (whether full- time, part- time or otherwise) and all employees engaged in the Business listed on Exhibit K (which exhibit excludes the names and any other personally identifying information), excluding (a) any employees identified on Exhibit L and (b) all employees of the Club Libby Lu business.

           “ Buyer ” has the meaning specified in the first paragraph of this Agreement.

           “ Buyer Ancillary Agreements ” means all agreements, instruments and documents being or to be executed and delivered by Buyer under this Agreement or in connection herewith.

           “ Buyer Appraiser ” has the meaning specified in Section 7.2(e)(iii) .

           “ Buyer Disclosure Schedule ” has the meaning specified in Section 5.2(b) .

           “ Buyer Group Member ” means (a) Buyer and its Affiliates, (b) directors, officers and employees of Buyer and its Affiliates and (c) the successors and assigns of the foregoing.

           “ Buyer’s DC Plan ” has the meaning specified in Section 7.3(j)(ii) .

           “ Buyer’s Flex Plans ” has the meaning specified in Section 7.3(i) .

           “ Buyer’s Plans ” has the meaning specified in Section 7.3(c)(ii) .

           “ Buyer Transition Services Agreement ” has the meaning specified in Section 6.8(a).

           “ Capital Expenditures ” means (i) any additions to or replacements of property, plant and/or equipment and (ii) any other expenditures, in each case, other than routine repair and maintenance in the ordinary course of business consistent with past practice, that would be capitalized on Seller’s balance sheet in accordance with Seller’s capitalization policy.

           “ Change In Law ” means the adoption, promulgation, modification or reinterpretation of any law, rule, regulation, ordinance or order or any other Requirements of Law of any Governmental Body which occurs subsequent to the date of this Agreement.

           “ CIM ” has the meaning specified in Section 4.5 .

           “ Claim Notice ” has the meaning specified in Section 10.3 .

           “ CLL Licensed Department Agreements ” has the meaning specified in Section 6.8(f) .

           “ Closing ” means the closing of the transfer of the Securities from Seller to Buyer.

           “ Closing Date ” has the meaning specified in Section 3.1 .

           “ COBRA ” has the meaning specified in Section 7.3(h) .

           “ Code ” means the Internal Revenue Code of 1986, as amended.

          “ Commitment Letters ” has the meaning specified in Section 5.4 .

           “ Companies ” has the meaning specified in the Preliminary Statement to this Agreement.

           “ Company Plan ” means any Pension Plan or Welfare Plan that is sponsored by any Company or any Transferring Subsidiary in which (i) any Business Employees are participating or under which any current or former employees of the Business have accrued any benefits while employed by the Companies and the Transferring Subsidiaries to which they remain entitled or (ii) with respect to which any Company or any Transferring Subsidiary has any liability in connection with the Business.

           “ Confidential Information ” has the meaning specified in Section 7.13 .

           “ Confidentiality Agreement ” means that certain letter agreement dated June 3, 2005, between Seller and Buyer.

           “ Contracts ” means all contracts, guarantees, leases, licenses (including those relating to concessions or licensed departments), Software licenses, commitments (including purchase orders) and other agreements (exclusive of Lease Agreements and Real Estate Agreements).

           “ Copyrights ” means all subject matter falling within the scope of the U.S. Copyright Act (17 U.S.C. §101 et seq. ), including copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto in the United States.

           “ Court Order ” means any judgment, order, award or decree of any foreign, federal, state, local or other court, agency or tribunal or other Governmental Body, and any award in any arbitration proceeding.

           “ Covered Persons ” has the meaning specified in Section 7.3(c)(ii) .

           “ Credit Agreement ” means the Amended and Restated Credit Agreement dated as of November 26, 2003, as amended, among Seller, as borrower, Fleet Retail Group, Inc., as Agent, and the other financial institutions party thereto, as lenders.

           “ Cut-Off Date ” has the meaning specified in Section 3.1 .

           “ Cut-Off Date NUBL Statement ” has the meaning specified in Section 2.4(b)(i) .

           “ Cut-Off Date Working Capital Statement ” has the meaning specified in Section 2.4(a)(i) .

           “ DOJ ” has the meaning specified in Section 6.5 .

           “ Effective Time ” has the meaning specified in Section 3.1 .

           “ Employment Agreement ” means any employment contract, termination or severance agreement, change of control agreement or any other agreement respecting the terms and conditions of employment or payment of compensation in respect to any current or former officer or employee of the Business.

           “ Encumbrance ” means any lien, charge, security interest, encumbrance, mortgage, pledge, easement, conditional sale or other title retention agreement, title exception, defect in title or other restriction of a similar kind.

           “ Environmental Law ” means all Requirements of Law relating to or addressing protection of the environment, including protection of surface or ground water, drinking water supply, soil, surface or subsurface strata or medium, ambient air, pollution control, Hazardous Materials or chemical use.

           “ Environmental Permits ” means all permits, licenses or authorizations required pursuant to any Environmental Law.

           “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

           “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

           “ Excluded Taxes ” has the meaning specified in Section 7.2(a)(i) .

           “ Expenses ” means any and all reasonable out-of-pocket expenses incurred in connection with defending or asserting any claim, action, suit or proceeding hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees and reasonable fees and disbursements of legal counsel, expert witnesses, accountants and other professionals).

           “ Final Net Unfunded Benefit Liabilities ” has the meaning specific in Section 2.4(b)(i) .

           “ Final Purchase Price ” has the meaning specified in Section 2.4(c)(iii) .

           “ Final Working Capital ” has the meaning specified in Section 2.4(a) .

           “ Financial Statements ” has the meaning specified in Section 4.5 .

           “ Financial Statements Date ” means January 29, 2005.

           “ Financing ” has the meaning specified in Section 5.4 .

           “ Fixed Amount ” has the meaning specified in Exhibit 2.6(b)(i) .

           “ FTC ” has the meaning specified in Section 6.5 .

           “ GAAP ” means United States generally accepted accounting principles, consistently applied by Seller, in effect at the date of the financial statement to which it refers.

           “ Governmental Body ” means any foreign, federal, state, local or other governmental authority or regulatory body.

           “ Governmental Permits ” has the meaning specified in Section 4.8 .

           “ Hazardous Materials ” means any waste, pollutant, contaminant, hazardous substance, toxic, ignitable, reactive or corrosive substance, hazardous waste, hazardous chemical, petroleum or petroleum derived-substance or waste or any constituent of any such substance or waste, the use, handling or disposal of which is in any way governed by or subject to any applicable Environmental Law.

           “ HIPAA ” has the meaning specified in Section 7.9 .

           “ Household Bank ” has the meaning specified in Section 6.9 .

           “ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

           “ Income Taxes ” means Taxes imposed upon or based upon net income.

           “ Indemnified Party ” has the meaning specified in Section 10.3 .

           “ Indemnitor ” has the meaning specified in Section 10.3 .

           “ Identified Guaranties ” has the meaning specified in Section 6.7 .

           “ Indentures ” means the (a) Indenture, dated as of November 9, 1998, among Seller, the Subsidiary Guarantors and JPMorgan Chase Bank, N.A. (successor to The First National Bank of Chicago), (b) Indenture, dated as of December 2, 1998, among Seller, the Subsidiary Guarantors and JPMorgan Chase Bank, N.A. (successor to The First National Bank of Chicago), (c) Indenture, dated as of February 17, 1999, among Seller, the Subsidiary Guarantors and JPMorgan Chase Bank, N.A. (as successor to The First National Bank of Chicago), (d) Indenture, dated as of October 4, 2001, among Seller, the Subsidiary Guarantors and JP Morgan Chase Bank, N.A. (successor to Bank One Trust Company, National Association), (e) Indenture, dated as of December 8, 2003, among Seller, the Subsidiary Guarantors and the Bank of New York, and (f) Indenture, dated as of March 23, 2004, among Seller, the Subsidiary Guarantors and The Bank of New York Trust Company, N.A.

           “ Independent Appraiser ” has the meaning specified in Section 7.2(e)(iii) .

           “ Initiation Date ” has the meaning specified in Section 6.15(a) .

           “ Intellectual Property ” means (i) Copyrights, (ii) Patent Rights, (iii) Trademarks, (iv) Trade Secrets, (v) databases and data collections and all rights therein in the United States, (vi) rights of publicity and privacy in the United States and (vii) any similar or equivalent rights to any of the foregoing in the United States.

           “ Intercompany Agreements ” has the meaning specified in Section 6.6(b) .

           “ Inventory Schedule ” has the meaning specified in Section 2.4(a)(vii) .

           “ January Inventory ” has the meaning specified in Section 2.4(a)(vii) .

           “ Key Employees ” has the meaning specified in Section 4.18(a) .

           “ Knowledge of Buyer ” means, as to a particular matter, the current actual knowledge of the executive officers of Buyer (as the term “executive officer” is defined in Rule 3b-7 under the Exchange Act).

           “ Knowledge of Seller ” means, as to a particular matter, the current actual knowledge of the executive officers of Seller (as the term “executive officer” is defined in Rule 3b-7 under the Exchange Act), the Chief Executive Officer of the Business and the Vice President — Real Estate with responsibilities for the Business.

           “ Lease Agreement Amount ” means the Fixed Amount or the Variable Amount, as applicable.

           “ Lease Agreements ” has the meaning specified in Section 4.9(c) .

           “ Leased Real Estate ” the leasehold and subleasehold interests of the Companies and the Subsidiaries in all real property listed on Schedule 4.9(a)(i) of the Seller Disclosure Schedule.

           “ License Agreement ” has the meaning specified in Section 6.13 .

           “ Losses ” means any and all losses, liabilities, costs, settlement payments, awards, judgments, fines, penalties, damages, expenses, deficiencies or other charges.

           “ Marketing Period ” has the meaning specified in Section 6.15(a) .

           “ Material Adverse Effect ” means any change or effect that, when taken together with all other changes or effects, has or is reasonably likely to have a material adverse effect on the assets, results of operations or financial condition of the Business taken as a whole, other than any change or effect resulting from or relating to (a) general economic conditions, (b) global financial or capital markets, (c) the retail department store industry generally, (d) the public disclosure of the transactions contemplated by this Agreement, (e) the consummation of the transactions contemplated by this Agreement or compliance with the terms of this Agreement (exclusive of the transactions contemplated by the Plan of Reorganization), (f) any Change In Law or (g) acts of terrorism or war (whether or not declared); provided , however , that in the case of each of clauses (f) and (g), only to the extent that the material adverse effect on the Business is not materially disproportionate to the adverse effect on the retail department store industry generally.

           “ NDSG Owned Brands ” means the brands set forth in Exhibit A .

           “ Net Unfunded Benefit Liabilities ” has the meaning specified in Section 2.4(b)(v) .

          “ Non-Exclusive Period ” has the meaning specified in Section 6.13 .

           “ Non-Prevailing NUBL Party ” has the meaning specified in Section 2.4(b)(iv) .

           “ Non-Prevailing WC Party ” has the meaning specified in Section 2.4(a)(iv) .

           “ Note Offering ” means the offering of senior unsecured notes contemplated by the Commitment Letters.

           “ Notes ” means the senior unsecured notes contemplated by the Note Offering.

           “ NUBL Arbitrator ” has the meaning specified in Section 2.4(b)(iii) .

           “ NUBL Notice of Disagreement ” has the meaning specified in Section 2.4(b)(ii) .

           “ Other Company Guaranties ” has the meaning specified in Section 6.7 .

           “ Other Guaranties ” has the meaning specified in Section 6.7 .

           “ Owned Real Estate ” means the real property listed on Schedule 4.9(a)(ii) of the Seller Disclosure Schedule, together with all interests of the Companies and the Subsidiaries in the buildings, structures, installations, fixtures, trade fixtures and other improvements situated thereon and all easements, rights of way and other rights, interests and appurtenances of the Companies and the Subsidiaries therein or thereunto pertaining.

           “ Patent Rights ” means all United States patents and applications therefor and all reissues, reexaminations, divisions, renewals, extensions, provisionals, continuations and continuations in part thereof.

           “ PBGC ” has the meaning specified in Section 4.16(i) .

           “ Pension Plan ” means any pension plan, as defined in Section 3(2) of ERISA, applied without regard to the exceptions from coverage contained in Sections 4(b)(4) or 4(b)(5) thereof.

           “ Permitted Encumbrances ” means (a) liens for Taxes and other governmental charges and assessments which are not yet due and payable, or which are being contested in good faith in accordance with applicable Requirements of Law; (b) liens of landlords and liens of carriers, warehousemen, mechanics and materialmen and other like liens arising in the ordinary course of business for sums not yet due and payable and which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (c) Encumbrances identified on Schedule 1.1(b) of the Seller Disclosure Schedule; (d) source code escrow agreements for Software owned by the Companies or any of the Subsidiaries listed on Schedule 4.14 of the Seller Disclosure Schedule; (e) Encumbrances evidenced by any security agreement, financing statement, purchase money agreement, conditional sales contract, capital lease or operating lease, or by any license, coexistence agreement, undertaking, declaration, limitation of use or consent to use, in each case that is described in Schedule 4.14 of the Seller Disclosure Schedule or the non-disclosure of which therein does not constitute a misrepresentation under Section 4.14; and (f) other Encumbrances or imperfections on property which are not material in amount and do not materially detract from the value, title or possession of or materially impair the existing use of the property affected by such lien or imperfection.

           “ Permitted Real Property Exceptions ” means, collectively, (a) liens, charges, encumbrances and exceptions for Taxes and other governmental charges and assessments (including special assessments) that are not yet due and payable; (b) all Real Estate Agreements; (c) all matters and exceptions set forth in the title insurance policies or commitments set forth in Schedule 1.1(c) of the Seller Disclosure Schedule; (d) liens, charges, encumbrances or title exceptions or imperfections with respect to the Real Estate created by or resulting from the acts or omissions of Buyer or any of its Affiliates, employees, officers, directors, agents, representatives, contractors, invitees or licensees; (e) liens, charges, encumbrances and/or title exceptions or imperfections created by any of the documents to be executed in connection with the Closing or this Agreement whether prior to, at or after the Closing resulting from the acts or omissions of Buyer or any of its Affiliates (including the Companies and the Transferring Subsidiaries at the direction of Buyer pursuant to Section 6.15(b) ) or any of their respective employees, officers, directors, agents, representatives, contractors, invitees or licensees; (f) all matters that may be shown by a current, accurate survey of the Real Estate; (g) Requirements of Law, including building and zoning laws, ordinances and regulations now or hereafter in effect relating to the Real Estate; (h) any and all service contracts and agreements affecting the Real Estate as of the date hereof, and any and all service contracts and agreements entered into after the date of this Agreement in accordance with the provisions of this Agreement, in each case, to the extent in effect as of the Closing; (i) violations of laws, regulations, ordinances, orders or requirements, if any, arising out of any Change in Law; (j) all matters disclosed prior to the date hereof in or readily ascertainable from the materials, documents and reports made available to Buyer in the virtual data room maintained by Seller in Section 9.04 thereof (Real Estate Documents) and Section 9.05 thereof (Existing Title Policies and Commitments); (k) any Permitted Encumbrance to the extent applicable or relating to, or otherwise affecting, the Real Estate; and (l) easements, rights of way, restrictions, covenants or other similar matters that are not material in amount or do not materially detract from the value, title or possession or

materially impair the existing use of the Real Estate affected by such easement, right of way, restriction, covenant or other matter.

           “ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or Governmental Body, or any department, agency or political subdivision thereof.

           “ Plan of Reorganization ” means the Plan of Reorganization, dated as of the date hereof, in the form attached hereto as Exhibit M , among Seller, Carson Pirie Holdings, Inc., CP Holdings Virginia, LLC, Parisian Virginia, LLC, McRae’s, Inc., McRae’s of Alabama, Inc., McRae’s Stores Services, Inc., Saks Distribution Centers, Inc., McRIL, LLC, North Park Fixtures, Inc. and Parisian, Inc., as it may be amended, supplemented or modified after the date hereof (provided, that if any such amendment, supplement or modification would reasonably be expected to have an adverse effect on Buyer or any of the Companies or the Transferring Subsidiaries, then it shall not be effectuated without the prior written consent of Buyer), allowing Seller and its Affiliates (other than the Companies and the Transferring Subsidiaries) to retain (i) certain assets not primarily related to the Business, including assets relating primarily to the operation of the Parisian stores and the Club Libby Lu business, (ii) assets that are used by Seller to perform its obligations under the Private Brands Agreement and (iii) assets used by Seller to provide services pursuant to the Buyer Transition Services Agreement.

           “ Plans ” means the Company Plans and Seller Plans.

           “ Pre-Approved Capital Expenditures ” has the meaning specified in Section 6.11 .

           “ Preliminary Purchase Price ” means the Purchase Price, either (a) plus the difference between Preliminary Working Capital and Reference Working Capital, if Preliminary Working Capital exceeds Reference Working Capital or (b) minus the difference between Reference Working Capital and Preliminary Working Capital, if Reference Working Capital exceeds Preliminary Working Capital.

           “ Preliminary Working Capital ” has the meaning specified in Section 2.2 .

           “ Prior Year-End Financial Statements ” has the meaning specified in Section 4.5 .

           “ Private Brands Agreement ” has the meaning specified in Section 6.8(c) .

           “ Program Agreement ” has the meaning specified in Section 6.9 .

           “ Purchase Price ” has the meaning specified in Section 2.3 .

           “ PWC ” has the meaning specified in Section 4.5 .

           “ Real Estate ” means the Owned Real Estate and the Leased Real Estate.

           “ Real Estate Agreements ” means all reciprocal easement and operating agreements, agreements supplemental thereto, easements, Seller’s and each Company’s and Subsidiary’s interests under any leases or subleases, licenses, occupancy agreements, purchase and lease-termination options, rights of first refusal or first offer, subordination, non-disturbance and attornment agreements, and other agreements that run with the land and in each case are appurtenant to the Real Estate and other agreements (other than Lease Agreements) that relate to the occupancy or operation of the Real Estate.

           “ Reference Net Unfunded Benefit Liabilities ” means $45,273,575.

           “ Reference Net Unfunded Benefit Liabilities Statement ” means the net unfunded benefit liabilities statement set forth in Schedule 1.1(d) of the Seller Disclosure Schedule, together with supporting documentation.

           “ Reference Working Capital ” has the meaning specified in Section 2.4(a)(v) .

           “ Reference Working Capital Statement ” means the working capital statement set forth in Schedule 1.1(e) of the Seller Disclosure Schedule, together with supporting documentation.

           “ Register Cash ” means the " register ” cash for each store of the Business in the amount set forth on Exhibit B .

           “ Required Consents ” has the meaning specified in Section 7.6 .

           “ Required Financial Information ” has the meaning specified in Section 6.16(b) .

           “ Requirements of Law ” means any foreign, federal, state and local laws, statutes, regulations, rules, codes, orders, decrees, directives, decisions, judgments, injunctions, writs or ordinances enacted, adopted, issued or promulgated by any Governmental Body.

           “ Retained Employees ” has the meaning specified in Section 7.3(a) .

           “ Retained Names and Marks ” has the meaning specified in Section 7.1(a) .

           “ SEC ” means the United States Securities and Exchange Commission.

           “ Section 338(h)(10) Elections ” has the meaning specified in Section 7.2(e)(i) .

           “ Section 338 Taxes ” shall mean Taxes imposed by any taxing jurisdiction with respect to which a Section 338(h)(10) Election is expressly made in accordance with Section 7.2(e) , or by any other taxing jurisdiction if expressly making a Section 338(h)(10) Election has the effect of making a Section 338(h)(10) Election in such other jurisdiction, in all cases to the extent such Taxes are imposed as a result of such Section 338(h)(10) Election.

           “ Securities ” has the meaning specified in Section 2.1 .

           “ Securities Act ” means the Securities Act of 1933, as amended.

           “ Seller ” has the meaning specified in the first paragraph of this Agreement.

           “ Seller Acquisition Proposal ” means any proposal or offer with respect to a merger, acquisition, consolidation or similar transaction involving any purchase of all or substantially all of the common stock, par value $0.10 per share, of Seller .

           “ Seller Ancillary Agreements ” means all agreements, instruments and documents being or to be executed and delivered by Seller under this Agreement or in connection herewith.

           “ Seller Appraiser ” has the meaning specified in Section 7.2(e)(iii) .

           “ Seller Disclosure Schedule ” has the meaning specified in Section 4.3 .

           “ Seller Flex Plans ” has the meaning specified in Section 7.3(i) .

           “ Seller Group ” means any affiliated group of corporations as defined in Section 1504(a) of the Code of which Seller or any predecessor of Seller is or was a member, or any similar or analogous group of corporations under state, local or foreign tax law of which Seller or any predecessor of Seller is or was a member.

           “ Seller Group Member ” means (a) Seller and its Affiliates, (b) directors, officers and employees of Seller and its Affiliates and (c) the successors and assigns of the foregoing.

           “ Seller Plan ” means any Pension Plan or Welfare Plan that is sponsored by Seller in which any Business Employees are participating or under which any current or former employees of the Business have accrued any benefits while employed by the Companies and the Subsidiaries and engaged in the Business to which they remain entitled or with respect to which Seller has any liability.

           “ Seller’s DC Plan ” has the meaning specified in Section 7.3(j)(i) .

           “ Seller Transition Services Agreement ” has the meaning specified in Section 6.8(b).

           “ Severance Pay Plan ” has the meaning specified in Section 4.16(f) .

           “ Software ” means computer software programs and related documentation and materials, whether in source code, object code or human readable form; provided , however , that Software does not include (a) software that is available generally through retail stores, distribution networks or is otherwise subject to “shrink-wrap” license or “click-through” agreements, including any software pre-installed in the ordinary course of business as a standard part of hardware, equipment or fixtures purchased by Seller, the Companies or any Subsidiary and used in the Business, or (b) any software that is used by Seller in connection with providing services under the Buyer Transition Services Agreement.

           “ Software License Agreement ” has the meaning specified in Section 6.8(e) .

           “ Straddle Period ” means any taxable year or period beginning on or before and ending after the Cut-Off Date.

           “ Subject Lease Agreement ” has the meaning specified in Exhibit 2.6(b) .

           “ Subject Store ” has the meaning specified in Section 2.6(b) .

           “ Subsidiaries ” means McRae’s, Inc., a Mississippi corporation, Saks Distribution Centers, Inc., an Illinois corporation, McRIL, LLC, a Virginia limited liability company, Carson Pirie Holdings, Inc., a Delaware corporation, CP Holdings Virginia, LLC, a Virginia limited liability company, PMIN General Partnership, a Virginia general partnership, McRae’s Stores Services, Inc., an Illinois corporation and North Park Fixtures, Inc., a Delaware corporation.

           “ Tax ” (and, with correlative meaning, “ Taxes ” ) means any federal, state, local or foreign taxes imposed by any Governmental Body, however denominated, including income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, value added, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any Governmental Body.

           “ Tax Package ” has the meaning specified in Section 7.2(b)(iii) .

           “ Tax Return ” means any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including any information return, claim for refund, amended return or declaration of estimated Tax.

           “ Tax Sharing Agreement ” means any written agreement or arrangement for the allocation or payment of Tax liabilities or payment for Tax benefits with respect to a consolidated, combined or unitary Tax Return which Tax Return includes or included any Company or any Subsidiary.

           “ Third Party Brand Licensors ” has the meaning specified in Section 6.13 .

           “ Trademark License Agreement ” has the meaning specified in Section 6.8(d) .

           “ Trademarks ” means (i) registered United States federal and state trademarks, service marks and trade names, (ii) pending applications to register the foregoing, (iii) industrial designs and any registrations and applications therefor in the United States, (iv) all internet uniform resource locators and domain names, and (v) all other rights in the United States in trade names, logos, slogans, designs, trade dress, common law trademarks and service marks in the United States.

           “ Trade Secrets ” means confidential ideas, trade secrets, know-how, concepts, methods, processes, formulae, reports, data, customer lists, mailing lists, business plans, inventions (whether patentable or not), improvements, technical data or other proprietary information that provides a competitive advantage and all documentation relating to any of the foregoing.

           “ Transferring Subsidiaries ” means McRae’s, Inc., Saks Distribution Centers, Inc. and McRIL, LLC.

           “ Transfer Taxes ” has the meaning specified in Section 7.2(a)(vi) .

           “ Variable Amount ” has the meaning specified in Exhibit 2.6(b)(i) .

           “ WC Arbitrator ” has the meaning specified in Section 2.4(a)(iii) .

           “ WC Notice of Disagreement ” has the meaning specified in Section 2.4(a)(ii) .

           “ Welfare Plan ” means any welfare plan, as defined in Section 3(1) of ERISA, applied without regard to the exceptions from coverage contained in Sections 4(b)(4) or 4(b)(5) thereof.

           “ Working Capital ” has the meaning specified in Section 2.4(a)(vi) .

           “ Year-End Balance Sheet ” has the meaning specified in Section 4.5 .

           “ Year-End Financial Statements ” has the meaning specified in Section 4.5 .

          Section 1.2 Interpretation . In this Agreement (including the Seller Disclosure Schedule):

          (a) words denoting the singular include the plural and vice versa and words denoting any gender include all genders;

          (b) “including” means “including without limitation”;

          (c) “business day” means any day other than a Saturday, Sunday, or a day that is a statutory holiday under the laws of the United States or the State of Tennessee;

          (d) the use of headings is for convenience of reference only and shall not affect the meaning or interpretation of this Agreement (including the Seller Disclosure Schedule and the Buyer Disclosure Schedule);

          (e) when calculating the period of time within which or following which any act is to be done or step taken, the date that is the reference day in calculating such period shall be excluded and, if the last day of such period is not a business day, the period shall end on the next day that is a business day;

          (f) all dollar amounts are expressed in United States funds, and all amounts payable hereunder shall be paid in United States funds;

          (g) money shall be tendered by wire transfer of immediately available federal funds to the account designated in writing by the party that is to receive such money;

          (h) the words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not only to a particular Section in which such words appear; and

          (i) references herein to articles, sections, exhibits and schedules mean the articles and sections of, and the exhibits and schedules attached to, this Agreement.

ARTICLE II
PURCHASE AND SALE

          Section 2.1 Purchase and Sale of the Securities . On the terms and subject to the conditions of this Agreement, on the Closing Date, Seller shall sell, transfer, assign, convey and deliver to Buyer, free and clear of all Encumbrances, and Buyer shall purchase and accept from Seller, all of the issued and outstanding equity interests of the Companies (the “ Securities ”).

          Section 2.2 Determination of Preliminary Working Capital . At least two business days prior to the Closing Date, Seller shall deliver to Buyer a certificate executed on behalf of Seller by the Chief Financial Officer of Seller, dated the date of its delivery, stating that there has been conducted under the supervision of such officer a review of all relevant information and data then available, including the scanned physical inventory contemplated by Section 2.4(a)(vii ), and setting forth Seller’s good faith estimate of Final Working Capital (“ Preliminary Working Capital ”).

          Section 2.3 Purchase Price . The purchase price for the Securities shall be equal to $1,150,000,000 minus the Reference Net Unfunded Benefit Liabilities and, if applicable, the applicable Lease Agreement Amount (the “ Purchase Price ”), subject to adjustment in accordance with Section 2.4 .

          Section 2.4 Adjustment of Purchase Price .

          (a) Purchase Price Adjustment — Working Capital

     (i) Within the later of 60 days after the Closing Date and 30 days after delivery to Buyer pursuant to Section 6.16(c) of the audited balance sheet of the Business as of January 28, 2006, Seller shall prepare and deliver to Buyer a statement (the “ Cut-Off Date Working Capital Statement ”) setting forth Working Capital as of the Effective Time and each of the line items reflected therein as set forth on the Reference Working Capital Statement (the determination of Working Capital, as it may be adjusted under this Section 2.4(a) in the event of a WC Notice of Disagreement, is referred to as “ Final Working Capital ”). Buyer shall reasonably assist Seller and its representatives in the preparation of the Cut-Off Date Working Capital Statement and shall provide Seller and its representatives reasonable access at all reasonable times to the personnel, properties, books and records of Buyer, the Companies and the Transferring Subsidiaries for such purpose. Seller shall provide Buyer and its representatives reasonable access at all reasonable times to the personnel, properties, books and records (including work papers) of Seller and its Affiliates for purposes of reviewing the Cut-Off Date Working Capital Statement.

     (ii) The Cut-Off Date Working Capital Statement shall become final and binding upon the parties on the later of (1) the 30th day following receipt thereof by Buyer and (2) the 90 ^th day after the Closing Date, unless Buyer gives written notice of its disagreement (“ WC Notice of Disagreement ”) to Seller before such date. A WC Notice of Disagreement must set forth Buyer’s determination of Final Working Capital and specify in reasonable detail the nature of any disagreement with Seller’s determination. The only disagreements that may be set forth in the WC Notice of Disagreement pursuant to this Section 2.4(a) are those that relate to (x) any claimed inconsistencies between the principles used in the preparation of the Cut-Off Date Working Capital Statement and the principles used in the preparation of the Reference Working Capital Statement; (y) any disputes regarding the Inventory Schedule pursuant to Section 2.4(a)(viii) ; or (z) errors in mathematical computation. Notwithstanding anything to the contrary in this Section 2.4(a) , no disagreement set forth in the WC Notice of Disagreement may relate to the principles used in the preparation of the Cut-Off Date Working Capital Statement, so long as those principles are consistently applied with the Reference Working Capital Statement. If a valid WC Notice of Disagreement is received by Seller in a timely manner, then the Cut-Off Date Working Capital Statement and the Final Working Capital shall become final and binding upon the parties on the earlier of (i) the date the parties resolve in writing any differences they have with respect to all matters specified in the WC Notice of Disagreement and (ii) the date any disputed matters are finally resolved in writing by the WC Arbitrator.

     (iii) During the 30-day period following the delivery of a WC Notice of Disagreement, Seller and Buyer shall seek in good faith to resolve in writing any differences that they may have with respect to any matter specified in the WC Notice of Disagreement. If, at the end of such 30-day period, Seller and Buyer have not reached agreement on all such matters, then the matters that remain in dispute shall be promptly submitted to an arbitrator (the “ WC Arbitrator ”) for review and resolution. The WC Arbitrator shall be Ernst & Young LLP, or if Ernst & Young LLP is not available, the WC

Arbitrator shall be a nationally recognized independent public accounting firm as shall be agreed upon by the parties in writing, provided that the WC Arbitrator will not be an accounting firm used by either Seller or Buyer or any of their respective Affiliates for audit or valuation purposes. The procedures for the arbitration shall be determined by the WC Arbitrator. The WC Arbitrator shall render a decision resolving the matters in dispute within 30 days following completion of the submissions to the WC Arbitrator. Any item not specifically referred to in the WC Notice of Disagreement shall be deemed final and binding on Buyer and Seller in the manner set forth in the Cut-Off Date Working Capital Statement. The WC Arbitrator shall determine Final Working Capital based solely on presentations made by Seller and Buyer (and not by independent review).

     (iv) The Non-Prevailing WC Party in any arbitration before the WC Arbitrator shall pay the fees and expenses of the WC Arbitrator. A party is the “ Non-Prevailing WC Party ” if the WC Arbitrator’s determination of Final Working Capital is closer to the other party’s determination of Final Working Capital, as submitted to the WC Arbitrator, than it is to that party’s determination of Final Working Capital, as submitted to the WC Arbitrator. In resolving any matter specified in the WC Notice of Disagreement, the WC Arbitrator shall not assign a value to any item greater than the greatest value for such item claimed by either party or less than the smallest value for such item claimed by either party.

     (v) For purposes of this Agreement, “ Reference Working Capital ” means $313,817,851, and “ Adjustment Amount ” means $4,600,000.

     (vi) The term “ Working Capital ” means (i) the sum of the asset accounts of the Business included in the Reference Working Capital Statement, less (ii) the sum of the liability accounts of the Business included in the Reference Working Capital Statement, less (iii) the Adjustment Amount. The computation of Working Capital will be done in a manner consistent with the methods used in the preparation of the Reference Working Capital Statement, and the governing principle will be that the adjustment contemplated by this Section 2.4(a) can be appropriately measured only when the Reference Working Capital and the Final Working Capital are computed on the same basis, using the same principles and methodologies consistently applied. The parties intend for the asset accounts and the liability accounts included in the Reference Working Capital Statement and the Cut-Off Date Working Capital Statement to be prepared in accordance with GAAP, applied on a consistent basis with the policies used by Seller in connection with the preparation of the Year-End Balance Sheet, it being understood and agreed that (v) only selected accounts are being included in the Reference Working Capital Statement and the Cut-Off Date Working Capital Statement, (w) the Reference Working Capital Statement is an average of the specified account balances during fiscal 2004, certain of which have been averaged on a monthly basis and certain of which have been averaged on a quarterly basis, and the Cut-Off Date Working Capital Statement shall be as of the Cut-Off Date (and not an average), (x) allocations relating to corporate overhead and shared services are not included in the Reference Working Capital Statement and shall not be included in the Cut-Off Date Working Capital Statement, (y) the Reference Working Capital Statement does not, and the Cut-Off Date Working Capital Statement shall not, include any property Tax accounts relating to property Taxes that are past due

and payable and (z) the Reference Working Capital Statement does not, and the Cut-Off Date Working Capital Statement shall not, include any asset or liability that is retained following the Cut-Off Date by Seller and its Affiliates (other than the Companies and the Transferring Subsidiaries) pursuant to the terms of this Agreement. To the extent the Reference Working Capital Statement has not been prepared in accordance with the preceding sentence, the parties shall work together in good faith to make appropriate adjustments to such statement. If any such adjustment is made, the Final Working Capital will be computed on the same basis, using the same principles and methodologies consistently applied.

     (vii) Seller will perform a scanned physical inventory within thirty (30) calendar days prior to January 30, 2006 to determine the quantity of inventory of the Business located on the Real Estate (the “ January Inventory ”). Immediately upon completion of any such inventory tabulation, Seller shall furnish Buyer with a copy of the physical inventory data. Seller shall prepare a schedule that contains a roll forward of the physical inventory data to the Cut-Off Date, using Seller’s standard procedures for rolling forward physical inventory data (the “ Inventory Schedule ”), and promptly following the completion of such Inventory Schedule, Seller shall deliver to Buyer a copy of the Inventory Schedule.

     (viii) The procedures performed pursuant to Section 2.4(a)(vii) shall be taken in accordance with Seller’s typical inventory procedures. The cost of taking any such inventory shall be borne by Seller. At its sole expense, each party may have a reasonable number of representatives present to observe the taking of the January Inventory and may verify the January Inventory tabulation as conducted. In the event that there is any dispute regarding an Inventory Schedule prepared pursuant to Section 2.4(a)(vii) , such dispute shall be resolved in connection with the determination of Final Working Capital, as set forth in Sections 2.4(a)(ii) — (a)(iv) . Subject to the resolution of any such dispute, the Inventory Schedule as of the Cut-Off Date shall be used for determination of the applicable line items of the Cut-Off Date Working Capital Statement.

     (b) Purchase Price Adjustment — Net Unfunded Benefit Liabilities .

     (i) Within the later of 60 days after the Closing Date and 30 days after delivery to Buyer pursuant to Section 6.16(c) of the audited balance sheet of the Business as of January 28, 2006, Seller shall prepare and deliver to Buyer a statement (the “ Cut-Off Date NUBL Statement ”) setting forth the Net Unfunded Benefit Liabilities and other information, in each case substantially in the format used in the Reference Net Unfunded Benefit Liabilities Statement, as of the Cut-Off Date (the determination of Net Unfunded Benefit Liabilities, as it may be adjusted under this Section 2.4(b) in the event of a NUBL Notice of Disagreement, is referred to as “ Final Net Unfunded Benefit Liabilities ”). Buyer shall reasonably assist Seller and its representatives in the preparation of the Cut-Off Date NUBL Statement and shall provide Seller and its representatives reasonable access at all reasonable times to the personnel, properties, books and records of Buyer, the Companies and the Subsidiaries for such purpose. Seller shall provide Buyer and its representatives reasonable access at all reasonable times to the personnel, properties, books and records (including work papers) of Seller and its Affiliates for purposes of reviewing the Cut-Off Date NUBL Statement.

     (ii) The Cut-Off Date NUBL Statement shall become final and binding upon the parties on the later of (1) the 30th day following receipt thereof by Buyer and (2) the 90 ^th day after the Closing Date, unless Buyer gives written notice of its disagreement (“ NUBL Notice of Disagreement ”) to Seller before such date. A NUBL Notice of Disagreement must set forth Buyer’s determination of Final Net Unfunded Benefit Liabilities and specify in reasonable detail the nature of any disagreement with Seller’s determination. The only disagreements that may be set forth in the NUBL Notice of Disagreement pursuant to this Section 2.4(b) are those that relate to (x) any claimed inconsistencies between the principles used in the preparation of the Cut-Off Date NUBL Statement and the Agreed NUBL Principles or (y) errors in mathematical computation. Notwithstanding anything to the contrary in this Section 2.4(b) , no disagreement set forth in the NUBL Notice of Disagreement may relate to the Agreed NUBL Principles. If a valid NUBL Notice of Disagreement is received by Seller in a timely manner, then the Cut-Off Date NUBL Statement and the Final Net Unfunded Benefit Liabilities shall become final and binding upon the parties on the earlier of (i) the date the parties resolve in writing any differences they have with respect to all matters specified in the NUBL Notice of Disagreement and (ii) the date any disputed matters are finally resolved in writing by the NUBL Arbitrator.

     (iii) During the 30-day period following the delivery of a NUBL Notice of Disagreement, Seller and Buyer shall seek in good faith to resolve in writing any differences that they may have with respect to any matter specified in the NUBL Notice of Disagreement. If, at the end of such 30-day period, Seller and Buyer have not reached agreement on all such matters, then the matters that remain in dispute shall be promptly submitted to an arbitrator (the “ NUBL Arbitrator ”) for review and resolution. The NUBL Arbitrator shall be a nationally recognized actuarial firm as shall be agreed upon by the parties in writing, provided that the NUBL Arbitrator will not be an actuarial firm used by either Seller or Buyer or any of their respective Affiliates. The procedures for the arbitration shall be determined by the NUBL Arbitrator. The NUBL Arbitrator shall render a decision resolving the matters in dispute within 30 days following completion of the submissions to the NUBL Arbitrator. Any item not specifically referred to in the NUBL Notice of Disagreement shall be deemed final and binding on Buyer and Seller in the manner set forth in the Cut-Off Date NUBL Statement. The NUBL Arbitrator shall determine Final Net Unfunded Benefit Liabilities based solely on presentations made by Seller and Buyer (and not by independent review).

     (iv) The Non-Prevailing NUBL Party in any arbitration before the NUBL Arbitrator shall pay the fees and expenses of the NUBL Arbitrator. A party is the “ Non-Prevailing NUBL Party ” if the NUBL Arbitrator’s determination of Final Net Unfunded Benefit Liabilities is closer to the other party’s determination of Final Net Unfunded Benefit Liabilities, as submitted to the NUBL Arbitrator, than it is to that party’s determination of Final Net Unfunded Benefit Liabilities, as submitted to the NUBL Arbitrator. In resolving any matter specified in the NUBL Notice of Disagreement, the NUBL Arbitrator shall not assign a value to any item greater than the greatest amount for such item claimed by either party or less than the smallest amount for such item claimed by either party.

     (v) The term “ Net Unfunded Benefit Liabilities ” means, as of the Effective Time, the aggregate amount of the net unfunded benefit liabilities relating to the plans, agreements and arrangements set forth on the Reference Net Unfunded Benefits Liabilities Statement calculated using the same items as the Reference Net Unfunded Benefit Liabilities Statement and in accordance with the Agreed NUBL Principles. Without limiting the generality of the foregoing, the computation of Net Unfunded Benefit Liabilities will be done in a manner consistent with methods used in the preparation of the Reference Net Unfunded Benefit Liabilities, and the governing principle will be that the adjustment contemplated by this Section 2.4(b) can be appropriately measured only when the Reference Net Unfunded Benefit Liabilities and the Final Net Unfunded Benefit Liabilities are computed on the same basis, using the Agreed NUBL Principles.

     (c) Purchase Price Adjustment — Settlement .

     (i) If Final Working Capital exceeds Reference Working Capital, the Purchase Price (but not the Preliminary Purchase Price) shall be increased by the amount by which Final Working Capital exceeds Reference Working Capital. If Reference Working Capital exceeds Final Working Capital, the Purchase Price (but not the Preliminary Purchase Price) shall be reduced by the amount by which Reference Working Capital exceeds Final Working Capital.

     (ii) If Final Net Unfunded Benefit Liabilities exceeds Reference Net Unfunded Benefit Liabilities, the Purchase Price (but not the Preliminary Purchase Price) shall be reduced by the amount by which Final Net Unfunded Benefit Liabilities exceeds Reference Net Unfunded Benefit Liabilities. If Reference Net Unfunded Benefit Liabilities exceeds Final Net Unfunded Benefit Liabilities, the Purchase Price (but not the Preliminary Purchase Price) shall be increased by the amount by which Reference Net Unfunded Benefit Liabilities exceeds Final Net Unfunded Benefit Liabilities.

     (iii) The Purchase Price, as increased or decreased by the adjustments provided for in paragraphs (i) and (ii) of this Section 2.4(c) , is referred to as the “ Final Purchase Price .”

     (iv) If the Preliminary Purchase Price is less than the Final Purchase Price, Buyer shall, and if the Preliminary Purchase Price is more than the Final Purchase Price, Seller shall, within five business days after both the Cut-Off Date Working Capital Statement and Cut-Off Date NUBL Statement have become final and binding on the parties, make payment to the other party of the amount of such difference, together with interest thereon at the Agreed Rate, calculated on the basis of the number of days elapsed from the Closing Date through but excluding the payment date. Notwithstanding the foregoing, if one but not both of the Cut-Off Date Working Capital Statement or the Cut-Off Date NUBL Statement has become final and binding on the parties, either party may elect to cause settlement of an adjustment to the Purchase Price in an amount consistent with the first sentence of this paragraph (iv) and pursuant to Section 2.4(c)(i) or 2.4(c)(ii) , as applicable, within five business days after the Cut-Off Date Working Capital Statement or the Cut-Off Date NUBL Statement, as the case may be, has become final and binding on the parties. Except in respect of an adjustment made pursuant to the

immediately preceding sentence, this Section 2.4 shall remain applicable, and the parties shall each comply, as to the determination of the Final Working Capital or the Final Net Unfunded Benefit Liabilities, as the case may be, including any resulting adjustment to the Purchase Price pursuant to Section 2.4(c)(i) or 2.4(c)(ii) , as applicable.

          Section 2.5 Leased Department Agreements and Certain Other Agreements . (a) Exhibit C sets forth each leased department agreement relating both to the Business and to other businesses of Seller and its Affiliates. The parties agree to use commercially reasonable efforts to either amend the existing agreements and/or enter into new leased department agreements with the parties identified in Exhibit C such that each party’s rights and obligations relate exclusively to its own stores; provided , however , that neither Buyer and its Affiliates nor Seller and its Affiliates shall be required to make any payments or offer or grant any accommodation (financial or otherwise) to any third party to effect the foregoing. If such new leased department agreements are not in effect as of the Effective Time, the parties agree that, to the maximum extent permitted by Requirements of Law or any such applicable leased department agreement, to the extent related to the Business, Buyer shall be solely responsible for the obligations and liabilities of the Business arising under such agreement (but not such agreement itself), and Buyer shall receive the claims, rights and benefits of Seller and its Affiliates arising under such agreement or resulting therefrom (but not such agreement itself). Each party agrees to use commercially reasonable efforts to effect the foregoing.

          (a) Exhibit D sets forth certain agreements relating both to the Business and to other businesses of Seller and its Affiliates. The parties agree to use commercially reasonable efforts to obtain the necessary approvals, consents and waivers to assign to Buyer that portion of such agreements (and any applicable schedules thereto) that relate exclusively to the stores of the Business; provided , however , that neither Buyer and its Affiliates nor Seller and its Affiliates shall be required to make any payments or offer or grant any accommodation (financial or otherwise) to any third party to obtain any approval, consent or waiver. If, prior to the Closing, all necessary approvals, consents and waivers are not obtained with respect to any such agreement, then (to the maximum extent permitted by Requirements of Law or any such applicable agreement) to the extent related to the Business, Buyer shall be solely responsible for the obligations and liabilities of the Business arising under such agreement (but not such agreement itself), and Buyer shall receive the claims, rights and benefits of Seller and its Affiliates arising under such agreement or resulting therefrom (but not such agreement itself). Each party agrees to use commercially reasonable efforts to effect the foregoing.

          Section 2.6 Assignment of Certain Contracts . (a) At the Closing, Seller agrees to, and to cause Seller’s Affiliates to, assign, sell, transfer, convey and deliver to Buyer, and Buyer agrees to acquire from Seller and its Affiliates, all of Seller’s and its Affiliates’ right, title and interest as of the Effective Time in all Contracts which, although neither the Companies nor any of the Transferring Subsidiaries is the contracting party thereto, is in each case solely related to the Business (other than with respect to purchase orders, which shall be transferred to Buyer to the extent they relate to the Business), together with those Contracts set forth on Exhibit 2.6(a) hereto (collectively, the “ Assigned Contracts ”). At the Closing, Buyer shall assume, and hereby agrees to pay, perform and observe fully and timely, effective as of the Effective Time, all liabilities and obligations relating to or arising out of the Assigned Contracts (collectively, the liabilities and obligations so assumed being referred to as the “ Assumed Contract Liabilities ”). Notwithstanding the foregoing, in no event will the Assumed Contract Liabilities include any

liabilities or obligations in respect of indebtedness for borrowed money incurred prior to the Closing Date (which shall not be deemed to include capital leases) or any equity or equity-based awards relating to equity securities of Seller.

          (b) Prior to the Closing, Seller shall use its commercially reasonable efforts to obtain the necessary landlord consent to assign to one of the Companies or the Transferring Subsidiaries the Subject Lease Agreement and Buyer shall cooperate with the reasonable requests of Seller in obtaining such consent; provided , however , that (i) neither Seller and its Affiliates nor Buyer and its Affiliates shall be required to make any payments or offer or grant any accommodation (financial or otherwise) to any third party to obtain such landlord consent, (ii) neither Seller nor any of its Affiliates shall be required to make any proposal or request to assign the Subject Lease Agreement and (iii) no proposal or request to assign the Subject Lease Agreement shall be made by Buyer or any of its Affiliates without the prior written consent of Seller. If, prior to the Closing, the necessary landlord consent with respect to the Subject Lease Agreement has not been obtained (in a form (other than in respect of the amount of rent) reasonably acceptable to Buyer) or a court or other Governmental Body having jurisdiction over Seller shall have issued any order, decree or ruling that is then in effect and has the effect of restraining or prohibiting the assignment of the Subject Lease Agreement, then (v) all assets and liabilities of Seller, the Companies or the Transferring Subsidiaries solely related to the store (the “ Subject Store ”) leased by Seller pursuant to the Subject Lease Agreement shall be excluded from the transactions contemplated by this Agreement, and the Subject Store shall be deemed for all purposes of this Agreement not to be included in the Business, (w) all customer lists and credit card customers who had more purchases at the Subject Store in the most recent month ended prior to the date hereof (determined by percentage of the total amount charged on the proprietary credit card bearing the Subject Store’s trade name) than at any other location bearing the same trade name) shall be excluded from the transactions contemplated by this Agreement, (x) all employees located at the Subject Store shall not be deemed to be Business Employees, (y) all assets and liabilities solely related to the Subject Store shall be excluded from the calculations of Reference Working Capital and Final Working Capital and (z) the Purchase Price shall be reduced by the Fixed Amount. If the landlord’s consent is obtained (in a form (other than in respect of the amount of rent) reasonably acceptable to Buyer) and no court or other Governmental Body shall have issued an order, decree or ruling that is then in effect and has the effect of restraining or prohibiting the assignment of the Subject Lease Agreement, then the Subject Lease Agreement shall be assigned to one of the Companies or the Transferring Subsidiaries prior to Closing. In such case, and if there is an increase in the rent to be paid to such landlord under the Subject Lease Agreement, then the Purchase Price shall be reduced by the Variable Amount. Certain obligations of the parties contained in Exhibit 2.6(b)(ii) with respect to the Subject Store are hereby incorporated by reference herein.

ARTICLE III
CLOSING

          Section 3.1 Closing Date . The Closing shall be held at the offices of Sidley Austin Brown & Wood LLP, 10 South Dearborn Street, Chicago, Illinois 60603, at 10:00 a.m. Chicago time on the first business day immediately following the end of one of Seller’s fiscal weeks and following the date on which all conditions to Closing set forth in Articles VIII and IX shall have been satisfied or waived (other than those conditions that are intended to be satisfied at Closing), or at such other place, time and day as shall be agreed upon

by Buyer and Seller; provided , however , that notwithstanding anything contained herein to the contrary, the parties acknowledge and agree that the Closing shall not occur before January 30, 2006. The date on which the Closing is actually held is referred to herein as the “ Closing Date ,” although the transfer of the Securities shall be effective (other than for Tax purposes) as of 12:01 a.m., Chicago time (the “ Effective Time ”) on the Sunday immediately preceding the Closing Date (the Saturday immediately preceding the Closing Date being the “ Cut-Off Date ”).

          Section 3.2 Payment on the Closing Date . Subject to fulfillment or waiver (where permissible) of the conditions set forth in Articles VIII and IX , at the Closing Buyer shall pay Seller an amount equal to the Preliminary Purchase Price by wire transfer of immediately available funds to the bank account or accounts specified by Seller.

          Section 3.3 Buyer’s Additional Closing Date Deliveries . Subject to fulfillment or waiver (where permissible) of the conditions set forth in Articles VIII and IX , at the Closing Buyer shall deliver to Seller all of the following:

          (a) Certificate of the secretary or an assistant secretary of Buyer, dated the Closing Date, in form and substance reasonably satisfactory to Seller, as to (i) no amendments to the articles of incorporation of Buyer since a specified date; (ii) the bylaws of Buyer; (iii) the resolutions of the Board of Directors of Buyer authorizing the execution and performance of this Agreement, any Buyer Ancillary Agreement and the transactions contemplated hereby and thereby; and (iv) incumbency and signatures of the officers of Buyer executing this Agreement and any Buyer Ancillary Agreement;

          (b) The certificate contemplated by Section 9.5 , duly executed by a duly authorized officer of Buyer;

          (c) The Private Brands Agreement, Trademark License Agreement, Software License Agreement, the Buyer Transition Services Agreement and the Seller Transition Services Agreement, in each case duly executed on behalf of Buyer;

          (d) Any real estate transfer Tax declarations required to be executed or filed;

          (e) Internal Revenue Service Form 8023, with Section A thereof completed and duly executed by a duly authorized officer of Buyer; and

          (f) The letter of credit required by Section 3(e) of the Private Brands Agreement.

          Section 3.4 Seller’s Closing Date Deliveries . Subject to fulfillment or waiver (where permissible) of the conditions set forth in Articles VIII and IX , at the Closing Seller shall deliver to Buyer all of the following:

          (a) Certificate of the secretary or an assistant secretary of Seller, dated the Closing Date, in form and substance reasonably satisfactory to Buyer, as to (i) no amendments to the amended and restated charter of Seller since a specified date; (ii) the amended and restated bylaws of Seller; (iii) the resolutions of the Board of Directors of Seller authorizing the execution and performance of this Agreement, any Seller Ancillary Agreement to which Seller is

a party and the transactions contemplated hereby and thereby; and (iv) incumbency and signatures of the officers of Seller executing this Agreement and any Seller Ancillary Agreement to which Seller is a party;

          (b) Certificate of the secretary or an assistant secretary of each Company and McRae’s, Inc., Saks Distribution Centers, Inc. and McRIL, LLC, dated the Closing Date, in form and substance reasonably satisfactory to Buyer, as to (i) the certificate of incorporation or similar organizational document of such entity and (ii) the by-laws or similar organizational document of such entity;

          (c) The certificate(s), if any, representing all of the Securities, duly endorsed to Buyer or accompanied by duly executed stock powers or similar instruments of assignment with regard to uncertificated Securities;

          (d) The certificate contemplated by Section 8.5 , duly executed by a duly authorized officer of Seller;

          (e) The Private Brands Agreement, Trademark License Agreement, Software License Agreement, the Buyer Transition Services Agreement, the CLL Licensed Department Agreements (if not previously executed) and the Seller Transition Services Agreement, in each case, duly executed on behalf of Seller and, where applicable, the Companies;

          (f) The written resignations of the directors or managers, as applicable, of the Companies and the Transferring Subsidiaries;

          (g) Any real estate transfer Tax declarations required to be executed or filed; and

          (h) Internal Revenue Service Form 8023, with Sections B and C thereof completed and duly executed by a duly authorized officer of Seller.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER

          As an inducement to Buyer to enter into this Agreement and to consummate the transactions contemplated hereby, Seller represents and warrants to Buyer as follows (it being understood that Seller makes no representation or warranty regarding matters that do not arise out of or relate to the Business, other than with respect to those matters relating to Seller’s organization, power and authority set forth in Sections 4.1 and 4.4 and other than with respect to tax matters to the extent set forth in Section 4.7 ).

          Section 4.1 Organization of Seller . Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee.

          Section 4.2 Organization; Power and Authority; Capital Structure of the Companies. (a) Each of the Companies and the Subsidiaries is a corporation or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation. Each of the Companies and the Subsidiaries is duly qualified to transact business and is in good standing in each jurisdiction where the character of its properties

owned or held under lease or the nature of its activities makes such qualifications necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Companies and the Subsidiaries has the corporate or other organizational power and authority to own or lease and operate its assets and to carry on the Business in the manner that it was conducted immediately prior to the date of this Agreement.

          (b) The authorized capital stock of Parisian, Inc. consists of 100 shares of common stock, par value $.01 per share, of which 100 shares are issued and outstanding. Seller is the sole member of Herberger’s Department Stores, LLC. Seller owns all the outstanding equity interests of Herberger’s Department Stores, LLC and Parisian, Inc., free and clear of all Encumbrances. All such capital stock (or, in the case of Herberger’s Department Stores, LLC, membership interests) is duly authorized, validly issued and outstanding, fully paid and nonassessable, and free of preemptive rights. Except for this Agreement, there are no commitments to issue or sell any shares of capital stock or membership interests, as the case may be, or any securities or obligations convertible into or exchangeable for, or giving any Person any right to acquire from Seller or the Companies, any shares of capital stock or membership interests, as the case may be, of the Companies, and no such securities, commitments or obligations are outstanding.

          Section 4.3 Subsidiaries and Investments . Except for ownership of capital stock of the Subsidiaries or as set forth on Schedule 4.3 of the disclosure schedule delivered by Seller to Buyer concurrently with the execution and delivery of this Agreement (the “ Seller Disclosure Schedule ”), the Companies do not, directly or indirectly, own, of record or beneficially, any outstanding equity interests in any corporation, partnership, limited liability company joint venture or other entity. Parisian, Inc. owns, directly or indirectly, all the outstanding capital stock or membership interests, as applicable, of each Subsidiary, free and clear of all Encumbrances. All such capital stock and other equity interests are duly authorized, validly issued and outstanding, fully paid and nonassessable, and free of preemptive rights. Other than pursuant to the Plan of Reorganization, none of the Subsidiaries has any commitment to issue or sell any shares of its capital stock or other equity interests or securities or any securities or obligations convertible into or exchangeable for, or giving any Person any right to acquire from such Subsidiary, any shares of its capital stock or other equity interests or securities, and no such equity interests or securities or obligations are outstanding.

          Section 4.4 Authority of Seller; Conflicts . (a) On or prior to the date of this Agreement, the Board of Directors of Seller has approved the transactions contemplated in this Agreement. Seller has all requisite corporate power to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Seller and each of the Seller Ancillary Agreements has been duly authorized by Seller. No vote of the shareholders of Seller is required to approve this Agreement or to consummate the transactions contemplated hereby under any Requirements of Law. This Agreement has been duly executed and delivered by Seller and (assuming the valid authorization, execution and delivery of this Agreement by Buyer and the validity and binding effect of this Agreement on Buyer) constitutes the valid and binding obligation of Seller enforceable against Seller in accordance with its terms, and each of the Seller Ancillary Agreements, upon execution and delivery by Seller will be (assuming the

valid authorization, execution and delivery by Buyer, where Buyer is a party, and any other party or parties thereto) a legal, valid and binding obligation of Seller enforceable in accordance with its terms, subject, in the case of this Agreement and each of the Seller Ancillary Agreements, to bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating to or affecting creditors’ rights generally and to general equity principles.

          (b) Except as set forth in Schedule 4.4 of the Seller Disclosure Schedule, the execution and delivery of this Agreement or any of the Seller Ancillary Agreements by Seller, the consummation of any of the transactions contemplated hereby or thereby by Seller or compliance with or fulfillment of the terms, conditions and provisions hereof or thereof by Seller will not:

     (i) assuming the receipt of all necessary consents and approvals and the filing of all necessary documents as described in Section 4.4(b)(ii) , result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance upon any of the Securities or any of the assets of the Companies or the Subsidiaries with respect to the Business, under (1) the charter, bylaws or similar organizational documents of Seller, the Companies or any Subsidiary, (2) any Business Agreement, (3) any Court Order to which Seller, the Companies or any Subsidiary (with respect to the Business) is a party or by which Seller, the Companies or any Subsidiary (with respect to the Business) is bound or (4) any Requirements of Law affecting Seller, the Companies or any Subsidiary (with respect to the Business), other than, in the case of clauses (2) and (4) above, any such breaches, defaults, rights, loss of rights or Encumbrances that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or would not prevent the consummation of any of the transactions contemplated hereby, or

     (ii) require the approval, consent, authorization or act of, or the making by Seller, the Companies or any Subsidiary of any declaration, filing or registration with, any Governmental Body, except (1) in connection, or in compliance, with the provisions of the HSR Act, (2) the filing with the SEC of such reports under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, (3) applicable requirements, if any, of the New York Stock Exchange, (4) such consents, approvals, filings and notices as may be required under any Requirements of Law with respect to environmental matters pertaining to any notification, disclosure or required approval triggered by the transactions contemplated by this Agreement, (5) such filings as may be required in connection with the Taxes described in Section 7.2(a)(vi) , and (6) such other approvals, consents, authorizations, declarations, filings or registrations the failure of which to be obtained or made would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or would not prevent the consummation of any of the transactions contemplated hereby.

No representation or warranty is made in this Section 4.4 as to whether any new governmental approvals, consents, licenses, permits, orders, authorizations, declarations, filings or registrations will be required as a result of the sale of the Securities to Buyer in order for Buyer to continue to conduct the Business following the Cut-Off Date in the manner in which the Business was conducted on or before the Cut-Off Date.

          Section 4.5 Financial Statements . Schedule 4.5 of the Seller Disclosure Schedule contains (i) the audited balance sheet of the Business as of January 29, 2005 (the “ Year-End Balance Sheet ”) and the related audited statement of income, changes in intercompany investment and cash flows of the Business for the fiscal year then ended (collectively, the “ Year-End Financial Statements ”), (ii) the audited balance sheets of the Business as of January 31, 2004 and the related audited statements of income, changes in intercompany investment and cash flows of the Business for the fiscal years ended January 31, 2004 and February 1, 2003 (the “ Prior Year-End Financial Statements ” and, together with the Year-End Financial Statements, the “ Financial Statements ”) and (iii) the unqualified report of PricewaterhouseCoopers LLP (“ PWC ”) on the Year-End Financial Statements and the Prior Year-End Financial Statements. Except as expressly disclosed therein, the Financial Statements fairly present, in all material respects, the assets, liabilities and financial condition of the Business at their respective dates and the results of operations and cash flows of the Business for the respective periods covered thereby, and have been prepared in accordance with GAAP on a basis consistent with the principles historically applied by Seller. Except as expressly provided in this Agreement, no representation or warranty is made by Seller as to any financial information of the Companies, the Subsidiaries or the Business provided to Buyer or any of its representatives, including any financial information provided to Buyer in its due diligence investigation of the Business or set forth in the Confidential Information Memorandum regarding the Business provided to Buyer by Goldman, Sachs & Co and/or Citigroup Global Markets Inc. (the “ CIM ”). Without limiting the generality of the foregoing, no representation or warranty is made as to the accuracy, fairness or reasonableness of any projections provided to Buyer or the assumptions used in preparing the same, or as to the likelihood that such projections will be achieved.

          Section 4.6 Operations Since Financial Statements Date . Since the Financial Statements Date, there has been no Material Adverse Effect. Except as set forth in Schedule 4.6 of the Seller Disclosure Schedule, since the Financial Statements Date through the date of this Agreement, the Companies and the Subsidiaries have conducted the Business in the ordinary course substantially consistent with past practice. Without limiting the generality of the preceding sentence, except as set forth on Schedule 4.6 of the Seller Disclosure Schedule, since the Financial Statement Date through the date of this Agreement, the Companies and the Subsidiaries (with respect to the Business) have not:

          (a) made any material change in the Business or their operations, except such changes as may be required to comply with any applicable Requirements of Law;

          (b) purchased or otherwise acquired any assets or made any Capital Expenditures, in each case that are material, individually or in the aggregate, to the Business (other than (i) purchases of inventory in the ordinary course of business consistent with past practice, (ii) Capital Expenditures in the ordinary course of business consistent with past practice or as contemplated by the fiscal 2005 capital budget made available to Buyer and (iii) Capital Expenditures required under any Real Estate Agreement or Lease Agreement for capital improvements that are not controlled exclusively by Seller, the Companies or the Subsidiaries);

          (c) transferred any material assets (other than cash) to Seller or any of its Affiliates (other than the Companies or any Subsidiary);

          (d) redeemed or otherwise acquired any of its membership interests or shares of its capital stock or issued any capital stock or membership interests or any option, warrant or right relating thereto;

          (e) (i) granted to any Key Employee any increase in compensation or other material benefits (other than with respect to any amounts set forth in Schedule 4.18(e) under retention agreements that do not involve payments by Buyer, the Companies or the Transferring Subsidiaries to any such Key Employee after the Closing) or granted to any Business Employee any material increase in compensation or other benefit (other than with respect to any amounts set forth in Schedule 4.18(e) under retention agreements that do not involve payments by Buyer, the Companies or the Transferring Subsidiaries to any such Key Employee after the Closing) except as required under existing agreements or in the ordinary course of business consistent with past practice or (ii) designated any Business Employee as a participant in the Severance Pay Plan pursuant to Section 2.A(ii) of the Severance Pay Plan;

          (f) acquired by merging or consolidating with, or by purchasing a substantial portion of the stock, other equity securities or assets of, any business or any corporation, partnership, limited liability company association or other business organization or division thereof;

          (g) made any material change in the accounting methods or policies applied in the preparation of the Financial Statements, unless such change is required by GAAP;

          (h) sold or otherwise disposed of any assets that are material, either individually or in the aggregate, to the Business (other than sales of inventory in the ordinary course of business consistent with past practice);

          (i) materially adversely modified or amended any Business Agreement;

          (j) amended their articles of incorporation, by-laws or similar organizational documents;

          (k) created, incurred or assumed, or agreed to create, incur or assume, any indebtedness for borrowed money (other than money borrowed or advances from any of its Affiliates in the ordinary course of business) or granted any Encumbrance with respect to the assets of the Business, in each case other than Permitted Encumbrances, Permitted Real Property Exceptions and Encumbrances imposed by the Credit Agreement; or

          (l) other than this Agreement and the Plan of Reorganization, agreed to do any of the foregoing.

          Section 4.7 Taxes . Except as set forth on Schedule 4.7 of the Seller Disclosure Schedule, (i) the Companies and each Subsidiary have filed all material Tax Returns required to have been filed on or before the date hereof and all such Tax Returns are true, complete and accurate in all material respects; (ii) the Seller Group has filed all material consolidated federal, and material consolidated combined or unitary state, Income Tax Returns required to have been filed by it on or before the date hereof for periods during which any Company or any Subsidiary was a member of the Seller Group and all such Tax Returns are true, complete and accurate in all

material respects; (iii) all Taxes shown to be due on the Tax Returns referred to in clauses (i) and (ii), and all Taxes due prior to the date hereof with respect to which no Tax Return is required, have been timely paid; (iv) neither Seller nor any of its Affiliates, including the Companies and each Subsidiary, has waived in writing any statute of limitations in respect of Taxes of the Companies or such Subsidiary which waiver is currently in effect; (v) the Tax Returns referred to in clauses (i) and (ii) relating to federal and state Income Taxes have been examined by the Internal Revenue Service or the appropriate state taxing authority or the period for assessment of the Taxes in respect of which such Tax Returns were required to be filed has expired; (vi) no material issues that have been raised in writing by the relevant taxing authority in connection with the examination of the Tax Returns referred to in clauses (i) and (ii) are currently pending; (vii) all material deficiencies asserted in writing or material assessments made in writing as a result of any examination of the Tax Returns referred to in clauses (i) and (ii) by any taxing authority have been paid in full; (viii) neither any of the Companies nor any of the Subsidiaries has been required to make any disclosure to the IRS with respect to a “listed transaction” within the meaning of § 1.6011-4(b)(2) of the Treasury Regulations; (ix) within the past three years, neither any of the Companies nor any of the Subsidiaries has participated in any Tax-related amnesty program established under federal, state, local or foreign Tax law; (x) no Company or Subsidiary has any liability for Taxes of any Person under § 1.1502-6 of the Treasury Regulations or any similar provision of state, local or foreign law (other than Seller and the Seller Group members); (xi) there is no contract, agreement, plan or arrangement to which any Company or any Subsidiary is a party as of the date of this Agreement covering any employee or former employee of any Company or any Subsidiary that, individually or in the aggregate, would reasonably be expected to give rise to the payment of any amount as a result of the transactions contemplated by this Agreement that would not be deductible pursuant to Section 162(m) of the Code; (xii) no Company or Subsidiary that is a limited liability company has elected to be taxed as other than a “partnership” or a “disregarded entity” for federal income tax purposes; and (xiii) as a direct or indirect result of the transactions contemplated by this Agreement or effected by the Plan of Reorganization, no payment or other benefit, and no acceleration of the vesting of any options, payments or other benefits, will be, an “excess parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code and the Treasury Regulations thereunder. Notwithstanding anything to the contrary in this Agreement, nothing in this Section 4.7 shall cause Seller to be liable for any Taxes for which Seller is not expressly liable pursuant to Section 7.2 (relating to Tax matters).

          Section 4.8 Governmental Permits . Except as set forth in Schedule 4.8 of the Seller Disclosure Schedule, the Companies and the Subsidiaries own, hold or possess all licenses, franchises, permits, privileges, immunities, approvals and other authorizations from a Governmental Body that are necessary to entitle them to own or lease, operate and use their assets and to carry on and conduct the Business substantially as conducted immediately prior to the date of this Agreement (collectively, “ Governmental Permits ”), except for such Governmental Permits as to which the failure to so own, hold or possess would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Companies and the Subsidiaries (with respect to the Business) has complied with all terms and conditions of the Governmental Permits, other than those instances of noncompliance which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. All material Governmental Permits owned, held or possessed by the Companies and the Subsidiaries with respect to the Business are set forth in Schedule 4.8 of the Seller Disclosure

Schedule. In addition, except as disclosed on Schedule 4.8 of the Seller Disclosure Schedule, no material Governmental Permits set forth in Schedule 4.8 of the Seller Disclosure Schedule will expire or terminate as a result of the consummation of the transactions contemplated by this Agreement.

          Section 4.9 Real Property . (a) Schedules 4.9(a)(i) and 4.9(a)(ii) of the Seller Disclosure Schedule set forth a complete and accurate list by property or project name, city and state of all Leased Real Estate and Owned Real Estate, respectively. Each of the entities identified in Schedule 4.9(a)(ii) of the Seller Disclosure Schedule owns fee simple title to such Owned Real Estate, subject only to Permitted Real Property Exceptions. None of Seller or its Affiliates (including the Companies and the Transferring Subsidiaries) has granted any Encumbrance in respect of its leasehold interest in the Leased Real Estate, except for any Permitted Real Property Exceptions.

          (b) Except as set forth in Schedule 4.9(b) of the Seller Disclosure Schedule, to the Knowledge of Seller, (i) within the immediately preceding 12 month period, there have not been actual, threatened (in writing) or imminent changes in the zoning of any of the Real Estate or any part thereof materially and adversely affecting the current use, occupancy or value thereof, (ii) there is no pending or threatened (in writing) condemnation, expropriation, requisition (temporary or permanent) or similar proceeding with respect to any Real Estate or any part thereof, which would materially detract from the value of the Real Estate or materially impair the existing use thereof and (iii) neither Seller nor any Company or Subsidiary has received any written notice from any Governmental Body asserting that any Real Estate is not in compliance in all material respects with all Requirements of Law and any covenants, restrictions or other agreements with or in favor of any Governmental Body or other Person limiting in any material respect the use of any of the Real Estate for the purposes permitted by any Requirements of Law governing the applicable zoning district. The transfers from the applicable Companies and Transferring Subsidiaries of (i) the two outparcels located at the Yorktown Shopping Center in Lombard, Illinois and (ii) the two outparcels located at Southridge Mall in Greendale, Wisconsin, in each case as contemplated by the Plan of Reorganization, will not cause any Real Estate to fail to be in compliance with all Requirements of Law and any covenants, restrictions or other agreements with or in favor of any Governmental Body or other Person limiting in any material respect the use of any of the Real Estate for the purposes permitted by any Requirements of Law governing the applicable zoning district. To the Knowledge of Seller, Seller has delivered to or otherwise made available for inspection by Buyer true, complete and correct copies of environmental reports in possession of Seller and its Affiliates pertaining to the Owned Real Estate.

          (c) Except as set forth in Schedule 4.9(c) of the Seller Disclosure Schedule, each tenant lease and other agreement for the use and occupancy by Seller, the Companies or any Subsidiary of the Leased Real Estate (collectively, the “ Lease Agreements ”) and Real Estate Agreements pertaining to any Real Estate is in full force and effect. Neither Seller nor any of the Companies or any of the Subsidiaries is in, or to the Knowledge of Seller, is alleged to be in, material breach or default under any material Lease Agreement or material Real Estate Agreement pertaining to any Real Estate, and there is no event that, but for the passage of time or the giving of notice or both would constitute or result in any such material breach or default. Except as provided in the Lease Agreements (and all guaranties relating thereto) and Real Estate Agreements, the consummation of the transactions contemplated by this Agreement will not

result in any loss or impairment of any of the Companies’ or the Transferring Subsidiaries’ rights under any of the Lease Agreements pertaining to any Real Estate. Seller has made available to Buyer true, complete and correct copies in all material respects of any and all: (i) Lease Agreements (and all guaranties relating thereto) and (ii) Real Estate Agreements.

          Section 4.10 Personal Property Leases . Schedule 4.10 of the Seller Disclosure Schedule contains as of the date of this Agreement a list of each material lease or other agreement or right under which either the Companies or any of the Subsidiaries, with respect to the Business, is lessee of, or holds or operates, any machinery, equipment, vehicle or other tangible personal property owned by a third Person, except those which are terminable by the Companies or the Subsidiaries without penalty on 90 days’ or less notice or which provide for annual rental payments of less than $400,000.

          Section 4.11 Intellectual Property . (a) Schedule 4.11(a) of the Seller Disclosure Schedule contains a list, including the owner, user or licensee, of all (i) registered Copyrights (excluding for these purposes any Copyrights with respect to Software), (ii) Patent Rights and (iii) Trademark registrations and pending applications to register Trademarks, in each case which are either owned, used exclusively in the Business or licensed by the Companies or the Subsidiaries and which are material to the conduct of the Business as currently conducted (on Schedule 4.11(a) of the Seller Disclosure Schedule all such owned Trademarks are listed under the heading “Copyrights, Patent Rights and Trademarks” or “List of Private Brand Marks” and all such licensed Trademarks are listed under the heading “Licensed Marks”).

          (b) Schedule 4.11(b) of the Seller Disclosure Schedule sets forth all Software owned, licensed to or used by Seller, the Companies or the Subsidiaries and which is material to the conduct of the Business as currently conducted. There have not been any claims, allegations or demands of any kind against Seller, the Companies or the Subsidiaries concerning any of the owned or licensed Software set forth in Schedule 4.11(b) of the Seller Disclosure Schedule and, to the Knowledge of Seller, such owned and licensed Software does not infringe upon or violate any rights of any other Person. Seller has the right to grant the license contemplated by the Software License Agreement.

          (c) Except as disclosed in Schedule 4.11(c) of the Seller Disclosure Schedule, to the Knowledge of Seller, the Companies or the Subsidiaries either: (i) own the entire right, title and interest in and to the Copyrights, Patent Rights and Trademarks listed in Schedule 4.11(a) of the Seller Disclosure Schedule, free and clear of any Encumbrance (other than Permitted Encumbrances); or (ii) have a valid contractual right or license to use the same in the conduct of the Business as currently conducted.

          (d) Except as disclosed in Schedule 4.11(d) of the Seller Disclosure Schedule, to the Knowledge of Seller: (i) all registrations for Copyrights, Patent Rights and Trademarks identified in Schedule 4.11(a) as being owned by the Companies or the Subsidiaries are in force, and all registration and renewal fees have been paid, and all applications to register any unregistered Copyrights, Patent Rights and Trademarks owned by the Companies or the Subsidiaries are pending and in good standing, all without challenge of any kind; and (ii) the Companies and the Subsidiaries have the right to bring actions for infringement or unauthorized use of such Copyrights, Patent Rights, Trademarks and Software owned by the Companies or the Subsidiaries.

          (e) Except as disclosed in Schedule 4.11(e) of the Seller Disclosure Schedule, to the Knowledge of Seller, since January 1, 2002 and prior thereto with respect to any matter that has not been resolved, (i) no infringement by the Companies and the Subsidiaries of, or violation of any agreements with respect to, any Intellectual Property of any other Person has occurred or resulted in any way from the conduct of the Business and (ii) no written notice of a claim or written allegation of any infringement of, or violation of any agreements with respect to, any Intellectual Property of any other Person has been made or asserted to Seller or any of its Affiliates, including the Companies and the Subsidiaries, in respect of the conduct of the Business as currently conducted.

          (f) Except as disclosed in Schedule 4.11(f) of the Seller Disclosure Schedule, no material proceedings are pending or, to the Knowledge of Seller, threatened against the Companies or the Subsidiaries which challenge the validity or ownership of any Copyright, Patent Rights or Trademarks owned by the Companies or the Subsidiaries.

          (g) Except as disclosed in Schedule 4.11(g) of the Seller Disclosure Schedule or except in connection with the operation of any leased department, none of the Companies or the Subsidiaries has licensed any Copyrights, Patent Rights or Trademarks identified on Schedule 4.11(a) of the Seller Disclosure Schedule to any Person (other than their respective Affiliates).

          (h) The consummation of the transactions contemplated by this Agreement will not result in any material loss or impairment of any of the Companies’ or the Subsidiaries’ rights to use any Copyrights, Patent Rights or Trademarks identified on Schedule 4.11(a) of the Seller Disclosure Schedule as being owned by the Companies or the Subsidiaries or Software identified on Schedule 4.11(b) of the Seller Disclosure Schedule as being owned or licensed by Seller, the Companies or the Subsidiaries.

          (i) None of the Companies or the Subsidiaries has entered into or is otherwise bound by any consent, forbearance or any settlement agreement that limits the Companies’ or the Subsidiaries’ rights to use any Copyrights, Patent Rights or Trademarks identified on Schedule 4.11(a) of the Seller Disclosure Schedule or Software identified on Schedule 4.11(b) of the Seller Disclosure Schedule.

          (j) Except as disclosed in Schedule 4.11(j) of the Seller Disclosure Schedule, to the Knowledge of Seller, no Person is infringing or misappropriating any of the Copyrights, Patent Rights or Trademarks identified on Schedule 4.11(a) of the Seller Disclosure Schedule as being owned by the Companies or the Subsidiaries or Software identified on Schedule 4.11(b) of the Seller Disclosure Schedule identified as being owned or licensed by Seller, the Companies or the Subsidiaries.

          (k) Schedule 4.11(k) of the Seller Disclosure Schedule contains a list of the trademark registrations in Canada owned by the Companies and the Transferring Subsidiaries. Except as disclosed in Schedule 4.11(k) of the Seller Disclosure Schedule, no material proceedings are pending or, to the Knowledge of Seller, threatened against the Companies or the Subsidiaries which challenge the validity or ownership of any trademark listed on Schedule 4.11(k) of the Seller Disclosure Schedule.

          (l) Schedule 4.11(l) of the Seller Disclosure Schedule contains a list of trademark registrations and applications that may previously have been used in connection with the conduct of the Business and which, to the Knowledge of Seller, are owned by one of the Companies or the Transferring Subsidiaries.

          Section 4.12 Title to Property . Except for assets disposed of in the ordinary course of business consistent with past practice, the Companies and the Subsidiaries have valid title to each item of equipment and other tangible personal property reflected on the Financial Statements as owned by the Companies and the Subsidiaries, free and clear of all Encumbrances, except for Permitted Encumbrances.

          Section 4.13 No Violation, Litigation or Regulatory Action . Except as set forth in Schedule 4.13 of the Seller Disclosure Schedule:

     (i) to the Knowledge of Seller, the Companies and the Subsidiaries have complied with all applicable Requirements of Law and Court Orders in respect of the Business, other than (A) those instances of noncompliance that are not material to the Business and (B) matters relating to Taxes or compliance with Environmental Laws or Environmental Permits, all representations with respect to which are the subject of Sections 4.7 and 4.17 , respectively;

     (ii) as of the date hereof, there are no lawsuits, claims, suits, proceedings or investigations pending (with respect to which the Companies or any Subsidiary has been served or notified) or, to the Knowledge of Seller, threatened against the Companies or any of the Subsidiaries in respect of the Business which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and

     (iii) as of the date hereof, there is no action, suit or proceeding pending or, to the Knowledge of Seller, threatened that questions the legality of the transactions contemplated by this Agreement or any of the Seller Ancillary Agreements.

          Section 4.14 Contracts . Except as set forth in Schedule 4.14 of the Seller Disclosure Schedule, as of the date of this Agreement, neither the Companies nor any of the Subsidiaries (with respect to the Business) is a party to or bound by:

     (i) any Contract for the future purchase or sale of real property;

     (ii) any Contract for the purchase by the Companies or any of the Subsidiaries of services (including advertising), supplies, components or equipment which involved the payment of more than $500,000 in the fiscal year ended January 29, 2005 or is reasonably expected to involve the payment of more than $500,000 in the current fiscal year (other than Contracts relating to the purchase of merchandise in the ordinary course);

     (iii) any Contract for the sale by the Companies or any of the Subsidiaries of any services or products which involved the payment of more than $500,000 in the fiscal year ended January 29, 2005 or is reasonably expected to involve the payment of more than $500,000 in fiscal 2005;

     (iv) any loan agreements, promissory notes, indentures, letters of comfort, letters of credit, bonds or other instruments involving indebtedness for borrowed money in an amount in excess of $500,000 or any guaranties of any such indebtedness;

     (v) any mortgage agreement, deed or trust, security agreement, purchase money agreement, conditional sales contract or capital lease created or assumed by, or permitted to be created by written instrument made or accepted by, the Companies or the Subsidiaries (other than (1) any purchase money agreement, conditional sales contract or capital lease evidencing liens only on tangible personal property under which there exists an aggregate future liability not in excess of $500,000 per contract or lease, (2) protective filings of financing statements under the Uniform Commercial Code, (3) agreements evidencing Encumbrances created by a landlord of Leased Properties and (4) any Permitted Real Property Exceptions);

     (vi) any license of Intellectual Property or Software received from or granted to third parties which is material to the conduct of the Business as currently conducted, including source code escrow agreements for Software (other than (1) any Intellectual Property or Software being provided to Buyer pursuant to the Buyer Transition Services Agreement and (2) non-exclusive implied licenses and non-exclusive, non-negotiated licenses for the use of third-party Intellectual Property in connection with the sale of products or services);

     (vii) any material partnership, joint venture or other similar agreement or arrangement;

     (viii) any Tax Sharing Agreement;

     (ix) any Contract relating to business acquisitions or dispositions not yet consummated; or

     (x) any covenant not to compete that materially restricts the operation of the Business as presently conducted, other than those providing for non-competition with a licensed department within a particular store location.

           Schedule 4.14 of the Seller Disclosure Schedule also sets forth those Assigned Contracts that would be required to be set forth pursuant to clauses (i)-(x) above.

          Section 4.15 Status of Contracts . Except as set forth in Schedule 4.15 of the Seller Disclosure Schedule, each of the leases, contracts, licenses and other agreements listed in Schedules 4.10 and 4.14 of the Seller Disclosure Schedule and Exhibit 2.6(a) (collectively, the “ Business Agreements ”) is in full force and effect. Neither the Companies nor any of the Subsidiaries is in, or, to the Knowledge of Seller, is alleged to be in, material breach or default under any of the Business Agreements. Seller has made available in all material respects true, complete and correct copies of all Business Agreements to Buyer.

          Section 4.16 ERISA . (a) Each Welfare Plan and Pension Plan maintained in connection with the Business or in which at least one Business Employee participates is listed on Schedule 4.16(a) of the Seller Disclosure Schedule, and Seller has made available to Buyer either

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a true and correct copy of each such plan or a summary plan description used in connection with such plan. With respect to each Company Plan, Seller has also made available to Buyer (as applicable) the most recent actuarial and trust reports, the most recent Form 5500 and all schedules thereto, the most recent IRS determination letter and, in the case of a Company Plan that is funded through a trust, copies of such trust.

          (b) Except as set forth in Schedule 4.16(b) of the Seller Disclosure Schedule, to the Knowledge of Seller, with respect to each Welfare Plan and Pension Plan required to be listed on Schedule 4.16(a) of the Seller Disclosure Schedule, (i) each such plan has been maintained and operated in compliance in all material respects with the applicable requirements of the Code and ERISA and the regulations issued thereunder and (ii) no material litigation or asserted claims against the Companies or any of the Subsidiaries (with respect to the Business) exist with respect to any such plan other than claims for benefits in the normal course of business.

          (c) Except as set forth in Schedule 4.16(c) of the Seller Disclosure Schedule, each Company Plan which is intended to be “qualified” within the meaning of Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service as to its qualification under the Code, and Seller has no Knowledge of an occurrence of an event since the date of such determination letter that would reasonably be expected to materially adversely affect such qualification.

          (d) None of the Company Plans has incurred any “accumulated funding deficiency” (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each of the Company Plans ended prior to the date of this Agreement.

          (e) Any material employee benefits other than those listed in Schedule 4.16(a) of the Seller Disclosure Schedule relating to the Business which are in effect as of the Cut-Off Date and as to which the Companies or any of the Subsidiaries (with respect to the Business) has or may have in the future any liability (other than regular wages or salary), such as any bonus, incentive or annual profit sharing programs, any fringe benefits described in Section 132 of the Code, any education assistance plans under Section 127 of the Code and any dependent care assistance plans under Section 129 of the Code are listed in Schedule 4.16(e) of the Seller Disclosure Schedule, and any written document which exists with respect to any such employee benefit has been made available to Buyer by Seller.

          (f) Schedule 4.16(f) of the Seller Disclosure Schedule identifies (i) the position of each Business Employee who is a participant in the Saks Incorporated Amended and Restated 2000 Change in Control and Material Transaction Severance Plan (the “ Severance Pay Plan ”) and (ii) the category of severance benefits to which each such Business Employee is entitled under the Severance Pay Plan. A revised Schedule 4.16(f) , which shall include the names of the individuals who are participants in the Severance Pay Plan, shall be delivered by Seller to Buyer at the Closing. Except as set forth in Schedule 4.16(f) of the Seller Disclosure Schedule, the execution of, and performance of the transactions contemplated in, this Agreement will not constitute an event under any Company Plan that will result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,

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increase in benefits or obligation to fund benefits with respect to any current or former employee or beneficiary thereof.

          (g) Except as set forth in Schedule 4.16(g) of the Seller Disclosure Schedule, neither any Company nor any Subsidiary maintains or is obligated to provide benefits under any life, medical or health Company Plan (other than as an incidental benefit under a Company Plan qualified under Section 401(a) of the Code) that provides benefits to retirees or other terminated employees other than benefit continuation rights under COBRA.

          (h) Neither any Company, any Subsidiary nor any other Person controlled by or under common control with any of the foregoing within the meaning of Section 4001 of ERISA has at any time within the six years preceding the Closing Date contributed to any “multiemployer plan,” as that term is defined in Section 4001 of ERISA.

          (i) No action by Seller or any of its Affiliates, including the Companies and the Subsidiaries, pursuant to this Agreement will result in any liability to the Pension Benefit Guaranty Corporation (“ PBGC ”) under Section 4062, 4063, 4064 or 4069 of ERISA, or otherwise, with respect to any Company or any Subsidiary or any Person controlled by or under common control with any of the foregoing within the meaning of Section 4001 of ERISA, and, to the Knowledge of Seller, no event or condition exists or has existed which would reasonably be expected to result in any material liability to the PBGC with respect to any Company, any Subsidiary or any other such entities. Except as set forth in Section 4.16(i) of the Seller Disclosure Schedule, no “reportable event” (other than a reportable event for which the 30-day notice requirement has been waived) within the meaning of Section 4043 of ERISA has occurred prior to the date hereof with respect to any Company Plan that is a defined benefit plan under Section 3(35) of ERISA.

          Section 4.17 Environmental Compliance . Except as set forth in Schedule 4.17 of the Seller Disclosure Schedule: (i) to the Knowledge of Seller, each of the Companies and Subsidiaries is and has been in compliance in all material respects with all applicable Environmental Laws and Environmental Permits; (ii) there are no material actions or proceedings pending, or to the Knowledge of Seller, threatened, against any Company or any Subsidiary with respect to the Business (or against Seller relating to any Company or any Subsidiary with respect to the Business) alleging noncompliance with or liability under any Environmental Law and neither any Company nor any Subsidiary is subject to any order, decree, injunction or lien by any Governmental Body or any claim filed by any third Person relating to liability under any Environmental Law; and (iii) none of the Companies or any of the Subsidiaries has received written notice that such Company or Subsidiary is liable under Environmental Laws relating to the off-site disposal of wastes generated by the operations of any Company or any Subsidiary and, to the Knowledge of Seller, neither the Companies nor the Subsidiaries has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any Hazardous Materials in a manner that has given or would to give rise to material liabilities under applicable Environmental Laws, including any material liability for response costs, corrective action costs, personal injury, property damage, natural resources damage or attorney or consultant fees under Environmental Laws; (iv) to the Knowledge of Seller, none of the Real Estate (including soils, groundwater, surface water, buildings, or other structures) is contaminated with any Hazardous Material in such a manner or concentration that any Company or any Subsidiary would be required under any Environmental

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Laws to remedy the existence of such Hazardous Material and all properties formerly owned, leased or operated by the Company or any Subsidiary were not contaminated with Hazardous Material during the period of ownership or operation by any Company or any Subsidiary in such a manner or concentration that any Company or Subsidiary would be required under any Environmental Law to remedy the existence of such Hazardous Material.

          Section 4.18 Employee Relations and Agreements . (a) Schedule 4.18(a) of the Seller Disclosure Schedule contains a true and complete listing (excluding names and any other personally identifying information), as of a recent date, of all Business Employees whose annual base salaries exceed $150,000 (“ Key Employees ”), their annual base salary and date of hire.

          (b) Since the Financial Statements Date through the date of this Agreement, except as disclosed on Schedule 4.18(b) of the Seller Disclosure Schedule or as has occurred in the ordinary course of business consistent with past practices, neither the Companies nor any Subsidiary has: (i) increased in any material respect the compensation payable or to become payable to or for the benefit of any Business Employees, (ii) provided any Business Employees with any material increase in security or tenure of employment, (iii) increased in any material respect the amount payable to any Business Employees upon the termination of such persons’ employment, or (iv) increased, augmented or improved in any material respect the benefits granted to or for the benefit of its Business Employees under any bonus, profit sharing, pension, retirement, deferred compensation, insurance or other direct or indirect benefit plan or arrangement, in each case, except as may be required under existing agreements.

          (c) Except as set forth in Schedule 4.18(c) of the Seller Disclosure Schedule, neither the Companies nor any of the Subsidiaries is a party to any collective bargaining agree