INVESTMENT AGREEMENT between GOTTSCHALKS INC., and EVERBRIGHT DEVELOPMENT OVERSEAS SECURITIES LTD. November 20, 2008

TABLE OF CONTENTS

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TABLE OF CONTENTS
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INDEX OF DEFINED TERMS

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INDEX OF DEFINED TERMS
(continued)

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INDEX OF DEFINED TERMS
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INDEX OF DEFINED TERMS
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Exhibit A        Form of Milestone Warrant

Exhibit B        Form of Additional Warrant

Exhibit C        Form of Escrow Agreement

Exhibit D        Form of Everbright Asia Assignment and Stock Power

Exhibit E        Form of Deed

Exhibit F        Form of Amended and Restated Certificate of Incorporation

Exhibit G        Representations and Warranties Relating to Everbright Asia and the
                             Luichi Sourcing Business

Exhibit H        Form of Investor Rights Agreement

Exhibit I        Everbright Asia Subordinated Guaranty of ECI Note

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THIS INVESTMENT AGREEMENT, dated as of November 20, 2008 (this "Agreement"), is entered into by and between Gottschalks Inc., a Delaware corporation (the "Company"), and Everbright Development Overseas Securities Ltd. d/b/a Everbright Development Overseas, Ltd., a British Virgin Islands corporation (together with any of its permitted assignees pursuant to this Agreement, "Everbright" or the "Investor").

A. The Investment. The Company intends to sell to the Investor, and the Investor intends to purchase from the Company, as an investment in the Company, (1) a total of 69,444,444 shares of common stock, par value $0.01 per share, of the Company (the "Common Stock") at the price of $1.80 per share, (2) a warrant to purchase 60,000,000 shares of Common Stock in the form set forth on Exhibit A attached hereto (the "Milestone Warrant"), and (3) a warrant to purchase up to 30,000,000 shares of Common Stock in the form set forth on Exhibit B attached hereto (the "Additional Warrant" and, together with the Milestone Warrant, the "Warrants"), all as further described herein (such sale and purchase, the "Investment").

B. The Securities. The term "Securities" refers collectively to (1) the shares of Common Stock purchased, and the Warrants issued, under this Agreement, and (2) any securities (including shares of Common Stock) into which any of the Warrants are exercised in accordance with the terms thereof and of this Agreement.

C. The Stock Transfer. The Investor owns all of the issued and outstanding capital stock of Everbright Asia Limited, a British Virgin Islands corporation ("Everbright Asia"), which consists of one share of capital stock, $1.00 par value per share (the "Everbright Asia Stock"). In connection with, and upon the consummation of, the Investment, the Investor intends to transfer, assign, convey and deliver the Everbright Asia Stock to the Company, and the Company intends to receive and accept the Everbright Asia Stock, all as further described herein.

D. The Capital Contribution. In connection with the Investment, the Investor has entered into that certain Capital Call Agreement, dated as of November 20, 2008 (the "Capital Call Agreement"), by and among the Investor, the Company and General Electric Capital Corporation ("GECC"), pursuant to which the Investor has committed to provide the Company periodic capital contributions from and after the consummation of the Investment, in an aggregate amount not to exceed $15,000,000.

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements set forth herein, the parties agree as follows:

1.1    Investment. On the terms and subject to the conditions set forth herein, the Investor agrees to (i) purchase from the Company, and the Company agrees to sell to the Investor, a total of 40,000,000 shares of Common Stock, at the price of $1.80 per share (such shares of Common Stock, the "Closing Company Stock"), (ii) purchase from the Company, and the Company agrees to cause to be deposited with the Escrow Agent on behalf of the Investor, a

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total of 29,444,444 shares of Common Stock, at the price of $1.80 per share (such shares of Common Stock, the "Escrow Company Stock" and, together with the Closing Company Stock, the "Purchased Company Stock"), and (iii) receive from the Company, and the Company agrees to deliver to the Investor, the Warrants.

1.2    Purchased Company Stock.

1. Closing Company Stock. At the Closing, the Company shall issue to the Investor one or more share certificates (each, a "Closing Company Stock Certificate"), representing the Closing Company Stock acquired by the Investor upon the terms specified in this Agreement.

2. Escrow Company Stock. At the Closing, the Company shall cause to be deposited with an escrow agent, to be mutually selected by the Company and the Investor reasonably in advance of the Closing (such escrow agent so selected, the "Escrow Agent"), one or more share certificates (each, an "Escrow Company Stock Certificate"), representing the Escrow Company Stock acquired by the Investor upon the terms specified in this Agreement, with such Escrow Company Stock Certificates, and any dividends or other distributions attributable thereto (whether payable in cash, stock, property or any combination thereof), to be held in escrow and administered by the Escrow Agent pursuant this Section 1.2(b) and in accordance with the terms and conditions of an escrow agreement substantially in the form set forth on Exhibit C attached hereto (the "Escrow Agreement"). Subject to the terms and conditions of the Escrow Agreement, the Escrow Agent shall release the Escrow Company Stock Certificates, and any dividends or other distributions attributable thereto, as follows:

   1. If, during any consecutive 12-month period beginning on or after the Closing Date and ending on or before December 31, 2010 (any such consecutive 12-month period, a "Measurement Period"), Everbright Asia generates $1,000,000 or more in Pre-Tax Income, the Escrow Agent shall release to the Investor (A) all Escrow Company Stock Certificates representing the Escrow Company Stock, and (B) all dividends or other distributions attributable thereto, no later than 30 days following the last day of the Measurement Period in which such Pre-Tax Income threshold was achieved. As used herein, "Pre-Tax Income" means net income, as determined in accordance with GAAP, prior to the subtraction of all applicable Taxes; provided, however, that in computing Pre-Tax Income (i) all payments received by Everbright Asia pursuant to contracts entered into with manufacturers, customers or distributors participating in the Luichi Sourcing Business that should be amortized over some period of time shall, instead, be deemed to be recognized as revenue in the month in which payment is received and such payment is deemed earned pursuant to the terms of the contract, and (ii) all depreciation, amortization and other non-cash charges shall be excluded from expenses.

   2. If Everbright Asia fails to generate at least $1,000,000 in Pre-Tax Income during any Measurement Period, the Investor shall forfeit all right, title and interest in and to the Escrow Company Stock and all dividends or other distributions attributable thereto, without consideration therefor, and the Escrow Agent shall release to the Company (A) all Escrow Company Stock Certificates representing the Escrow Company Stock, and (B) all dividends or other distributions attributable thereto, no later than January 31, 2011. Upon receipt

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thereof, the Company shall cause such Escrow Company Stock Certificates to be cancelled and the Escrow Company Stock represented thereby to be retired or held as treasury stock for reissue.

1.3    Warrants. At the Closing, the Company shall issue to the Investor the Warrants acquired by the Investor upon the terms specified in this Agreement.

ARTICLE II

INVESTMENT CONSIDERATION; CLOSING

2.1    Investment Consideration.

1. Aggregate Investment Consideration. The aggregate consideration (the "Aggregate Investment Consideration") payable by the Investor to the Company for the Investment, and for the representations, warranties, covenants and agreements contained herein and in the other agreements to be delivered at Closing, shall be:

   1. the payment to the Company of an amount equal to (A) the Closing Cash Consideration, plus (B) the Post-Closing Cash Addition, if any (collectively, the "Aggregate Cash Consideration");

   2. the transfer, assignment, conveyance and delivery to the Company of the Everbright Asia Stock; and

   3. the commitment by the Investor to provide the Company periodic capital contributions from and after the Closing, in an aggregate amount not to exceed $15,000,000, pursuant to the Capital Call Agreement.

2. Closing Consideration. At the Closing, the Investor shall:

   1. pay to the Company, by wire transfer of immediately available funds to such accounts as are designated by the Company, an amount in cash equal to (A) $10,000,000, plus (B) the Closing Cash Addition, if any (collectively, the "Closing Cash Consideration"); and

   2. pursuant to, and in accordance with the terms of, an assignment and stock power in the form set forth on Exhibit D attached hereto (the "Everbright Asia Assignment and Stock Power"), transfer, assign, convey and deliver to the Company all right, title and interest in and to the Everbright Asia Stock (such transfer, assignment, conveyance and delivery of the Everbright Asia Stock, the "Everbright Asia Stock Consideration" and, together with the Closing Cash Consideration, the "Closing Consideration").

2.2    Aggregate Cash Consideration Adjustment.

1. Adjustment to the Aggregate Cash Consideration. The Aggregate Cash Consideration shall be adjusted as and to the extent the Closing Cash of Everbright Asia as of the Closing Date is less than $5,000,000 (the "Minimum Closing Cash"), as provided below in this Section 2.2. As used herein, "Closing Cash" means, as of a given time, (i) the cash and cash

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equivalent assets of Everbright Asia, including bank accounts, banker's acceptances, Treasury bills and money market mutual funds, minus (ii) the liabilities of Everbright Asia, in each case calculated in accordance with GAAP applied in a manner consistent with past principles and policies used by the Investor and its Affiliates.

2. Adjustment at Closing. On or before the fifth business day prior to the Closing Date, the Investor shall deliver to the Company an estimated closing balance sheet for Everbright Asia (the "Preliminary Everbright Asia Closing Balance Sheet"), prepared by the Investor in accordance with GAAP applied in a manner consistent with past principles and policies used by the Investor and its Affiliates for the fiscal year ended December 31, 2007 and the nine-month period ended September 30, 2008. The Preliminary Everbright Asia Closing Balance Sheet shall be certified by the Chief Financial Officer of the Investor, and shall estimate and present, in good faith, the financial position of Everbright Asia as of the Closing Date, as well as set forth in reasonable detail the calculation, as of the Closing Date, of the estimated Closing Cash of Everbright Asia (the "Estimated Closing Cash"), based upon the Preliminary Everbright Asia Closing Balance Sheet and the definition of Closing Cash set forth above. At the Closing, the Closing Cash Consideration shall be increased by the amount, if any, by which the Minimum Closing Cash exceeds the Estimated Closing Cash (such increase, the "Closing Cash Addition").

3. Adjustment after Closing.

   1. As soon as practicable after the Closing, but no later than 120 days following the Closing Date, the Company shall deliver to the Investor the final closing balance sheet for Everbright Asia (the "Final Everbright Asia Closing Balance Sheet") and the calculation of the final Closing Cash of Everbright Asia determined as of the Closing Date (the "Final Closing Cash"), based upon the Final Everbright Asia Closing Balance Sheet and the definition of Closing Cash set forth above, in each case accompanied by a description in reasonable detail of all variances between the Preliminary Everbright Asia Closing Balance Sheet and Estimated Closing Cash, on the one hand, and the Final Everbright Asia Closing Balance Sheet and Final Closing Cash, on the other. The Final Everbright Asia Closing Balance Sheet shall be prepared in accordance with GAAP applied in a manner consistent with past principles and policies used by the Investor and its Affiliates for the fiscal year ended December 31, 2007 and the nine-month period ended September 30, 2008, provided that the allowance for bad debt and reserve for contractuals related to accounts receivable shall reflect the then current best estimate of the allowance and reserve. If the Investor objects to the Company's calculation of the Final Closing Cash as presented on the Final Everbright Asia Closing Balance Sheet, then the Investor shall, within 45 business days after receipt of the Final Everbright Asia Closing Balance Sheet, notify the Company of the same in writing and deliver its proposed modification of the Final Everbright Asia Closing Balance Sheet and calculation of the Final Closing Cash to the Company, together with a written statement explaining in reasonable detail the reasons for the objection and the basis for the proposed modification and calculation. If the Investor does not deliver such notice of objection within such 45 business day period, then the Final Everbright Asia Closing Balance Sheet and the Company's calculation of the Final Closing Cash as shown thereon shall be final, conclusive and binding on the parties hereto.

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2. If the Company disagrees with all or any portion of the Investor's proposed modification of the Final Everbright Asia Closing Balance Sheet or calculation of the Final Closing Cash, then it shall notify the Investor and the parties shall negotiate in good faith to reach an agreement during the 30 day period following delivery of the Investor's proposed modification and calculation. If the Company and the Investor shall reach such an agreement, such agreement shall be final, conclusive and binding on the parties hereto.

3. If the Company and the Investor are unable to reach an agreement on the Final Everbright Asia Closing Balance Sheet and the Final Closing Cash within the 30 day period referenced in Section 2.2(c)(2), they shall promptly thereafter cause an accounting firm of internationally recognized stature (the "Independent Accountant") reasonably satisfactory to the Investor and the Company to review this Agreement and the disputed items or amounts for the purpose of calculating the Final Closing Cash. In making such calculation, the Independent Accountant shall consider only those items or amounts in the Final Everbright Asia Closing Balance Sheet or the calculation of the Final Closing Cash as to which the Company and the Investor have disagreed. The Independent Accountant shall deliver to the Investor and the Company, as promptly as practicable, a report setting forth its calculations. Such report shall be final and binding upon the parties hereto and their respective Affiliates. The cost of such review and report shall be paid one-half by the Company and one-half by the Investor.

4. If the Final Closing Cash (as finally agreed upon or determined pursuant to this Section 2.2(c)) is less than the Minimum Closing Cash, then the Investor shall pay to the Company an amount in cash (a "Post-Closing Cash Addition") equal to the amount that the Minimum Closing Cash exceeds the Final Closing Cash, provided, however, that any Closing Cash Addition previously paid by the Investor pursuant to Section 2.2(b) shall be taken into account in determining the final amount of any Post-Closing Addition to be paid by the Investor pursuant to this Section 2.2(c)(4). Any Post-Closing Cash Addition shall be paid by the Investor by wire transfer of immediately available funds within five business days following the final determination of the Final Closing Cash pursuant to this Section 2.2(c).
4. Cooperation. The parties hereto agree that they will cooperate and assist in the preparation of the balance sheets and the calculations of Closing Cash and in the conduct of the reviews referred to above, including, without limitation, the making available, to the extent reasonably necessary, of books, records, work papers and personnel.

2.3    Charge Over Bank Account. On or prior to the date hereof, the Investor has entered into with Company a Charge Over Bank Account or similar agreement, attached hereto as Exhibit E (the "Deed"), whereby Investor shall (a) maintain an account, as designated further in the Deed, with a minimum balance in cash of $10,000,000 (the "Bank Account") and (b) charge to the Company, by way of first fixed charge, all its right, title, interest and benefit, present or future, in each and every sum of money for the time being standing to the credit of the Bank Account, as a continuing security for the performance by the Investor of its payment obligations under this Article II. The Investor hereby acknowledges and agrees that the Company may, without further notice to the Investor or any other restriction, withdraw, transfer or otherwise dispose of all or any part of the monies in the Bank Account in or towards the payment or discharge of such payment obligations, in the event that the Investor fails to satisfy such payment obligations in full at the Closing if, at the time of such failure, the conditions to the

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Investor's obligations to consummate the transactions contemplated by this Agreement set forth in Sections 6.1 and 6.2 have been satisfied.

2.4    Closing. The closing of the Investment (the "Closing") shall occur at 11:00 a.m., New York City time, on a date to be specified by the parties, such date to be no later than the second business day after satisfaction or waiver of all of the conditions set forth in Article VI, at the offices of O'Melveny & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another date or place is agreed to in writing by the parties hereto. The date of the Closing is referred to as the "Closing Date."

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1    Disclosure.

1. On or prior to the date hereof, the Company delivered to the Investor and the Investor delivered to the Company a schedule ("Disclosure Schedule") setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Section 3.2 with respect to the Company, or in Sections 3.3 and 3.4 with respect to the Investor and Everbright Asia, or to one or more of its covenants contained in Article IV.

2. As used in this Agreement, the term "Material Adverse Effect" means any circumstance, event, change, development or effect that, considered together with all other such facts, changes, circumstances or effects, (1) is material and adverse to the business, assets, results of operations or financial condition of the Company taken as a whole or (2) would materially impair the ability of the Company to perform its obligations under this Agreement or to consummate the Closing; provided, however, that in determining whether a Material Adverse Effect has occurred, there shall be excluded any effect relating to the following: (A) changes, after the date hereof, in United States generally accepted accounting principles, (B) compliance with the terms of, or the taking of any action required by, this Agreement, or the failure to take any action prohibited by this Agreement, (C) changes in general U.S. economic, monetary or financial conditions, including changes in prevailing interest rates, credit availability, and the credit markets generally, as well as changes in the commercial and residential real estate markets in the geographic regions in which the Company operates, to the extent that such changes do not have a materially disproportionate effect on the Company taken as a whole, relative to other companies operating in its industry, (D) changes in the retail and/or regional department store industry, in general, to the extent that such change does not have a materially disproportionate effect on the Company taken as a whole, relative to other companies operating in its industry, (E) changes in the Dow ▇▇▇▇▇ Industrial Average, S&P 500 Index or similar stock performance indices, (F) changes in the market price or trading volumes of the Common Stock (but not the underlying causes of such changes), (G) any change in the stock exchange or automated quotation system upon which the Common Stock is listed, traded or quoted, (H) the failure of the Company to meet any internal projections, forecasts, or estimates for any period ending on or

after August 2, 2008 (but not the underlying causes of such failure), and (I) the public disclosure of this Agreement or the transactions contemplated hereby.

3. "Previously Disclosed" with regard to a party means information set forth on its Disclosure Schedule, which information shall be deemed set forth and disclosed for (1) the indicated section of this Agreement and (2) all other sections of this Agreement so long as the relevance of such information to such other section of this Agreement is reasonably apparent on its face. The fact that any item of information is disclosed by a party on its Disclosure Schedule shall not be construed to mean that such information is required to be disclosed by this Agreement. Such information and any dollar thresholds set forth herein shall not be used as a basis for interpreting the terms "material" or "Material Adverse Effect" or other similar terms in this Agreement

3.2    Representations and Warranties of the Company. The Company represents and warrants to the Investor that:

1. Organization and Authority.

   1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of State of Delaware and has the requisite corporate power and authority to conduct its business as now being conducted, except for those jurisdictions where the failure to be so organized, existing or in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Company is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or to be in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Company has delivered to the Investor prior to the execution of this Agreement true and complete copies of the Company Governing Documents. The Company is in compliance with the terms of the Certificate of Incorporation of the Company (as amended, the "Company Certificate of Incorporation"), the Bylaws of the Company (as amended, the "Company Bylaws", and together with the Company Certificate of Incorporation, the "Company Governing Documents").

   2. As of the date hereof, the Company has no Subsidiaries. In addition, except as Previously Disclosed, the Company does not directly or indirectly Beneficially Own any Equity Interests in any other person. As used herein, "Subsidiary" means, with respect to any person, any corporation, partnership, joint venture, limited liability company or other entity (x) of which such person or a subsidiary of such person is a general partner or (y) of which a majority of the voting securities or other voting interests, or a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or persons performing similar functions with respect to such entity, is directly or indirectly owned by such person and/or one or more subsidiaries thereof.

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2. Capitalization.

   1. The authorized capital stock of the Company consists of 30,000,000 shares of Common Stock and 2,000,000 shares of preferred stock, par value $0.10 per share (the "Preferred Stock"). As of the close of business on November 17, 2008 (the "Capitalization Date"), (A) 13,296,115 shares of Common Stock were issued and outstanding, (B) no shares of Preferred Stock were issued and outstanding, (C) 417,800 shares of Common Stock were issued and held in the treasury of the Company or otherwise owned by the Company, and (D) 1,432,500 shares of Common Stock were reserved for issuance pursuant to the Company 2005 Stock Option Plan (together with the Company 1998 Stock Option Plan and the Amended and Restated Company 1998 Employee Stock Purchase Plan, each as amended to date, the "Company Stock Plans"), of which 987,500 shares of Common Stock were subject to outstanding and unexercised options ("Company Options") to purchase shares of Common Stock granted under the Company Stock Plans. All of the outstanding shares of the Company's capital stock are, and all shares of Common Stock which may be issued pursuant to the exercise of outstanding Company Options will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and non-assessable. Except for issuances of shares of Common Stock pursuant to Company Options described in the first sentence of Section 3.2(b)(2), since November 17, 2008, the Company has not issued any shares of Common Stock or designated or issued any shares of Preferred Stock. There are no bonds, debentures, notes or other indebtedness having general voting rights (or convertible into securities having such rights) ("Voting Debt") of the Company issued and outstanding. Except for the Company Options described in the first sentence of Section 3.2(b)(2), there are no (x) options, warrants, calls, pre-emptive rights, subscriptions or other rights, agreements, arrangements or commitments of any kind, including any stockholder rights plan, relating to the issued or unissued capital stock of the Company, obligating the Company to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or Voting Debt of, or other equity interest in, the Company or securities convertible into or exchangeable for such shares or equity interests, or obligating the Company to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment (collectively, "Equity Interests") or (y) outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of Common Stock or any other capital stock of, or other Equity Interests in, the Company or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in the Company.

   2. As of November 17, 2008, the Company had outstanding Company Options to purchase 987,500 shares of Common Stock granted under Company Stock Plans. All of such Company Options have been granted to employees and directors of the Company in the ordinary course of business pursuant to the Company Stock Plans. Section 3.2(b)(2) of the Company's Disclosure Schedule sets forth a listing of all outstanding Company Options as of November 17, 2008 and (i) the date of their grant and the portion of which that is vested as of November 17, 2008 and if applicable, the exercise price therefor, and (ii) the date upon which each Company Option would normally be expected to expire absent termination of employment or other acceleration.

   3. Except as Previously Disclosed, there are no voting trusts or other agreements to which the Company is a party with respect to the voting of any Common Stock or

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any capital stock of, or other equity interest of the Company. The Company has not granted any preemptive rights, anti-dilutive rights or rights of first refusal or similar rights.

3. Authorization.

   1. The Company has the corporate power and authority necessary to enter into this Agreement and each of the other Transaction Documents to which it is a party and to carry out its obligations hereunder and thereunder. The execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly and unanimously authorized by the board of directors of the Company (the "Board of Directors"). This Agreement and each of the other Transaction Documents to which the Company is a party have been duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by the Investor, are valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors' rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. No other corporate proceedings are necessary for the execution and delivery by the Company of this Agreement and each of the other Transaction Documents to which it is a party, the performance by it of its obligations hereunder and thereunder or the consummation by it of the transactions contemplated hereby and thereby, subject, in the case of the authorization and issuance of (i) the Purchased Company Stock to be sold under this Agreement and (ii) the Warrants to be sold under this Agreement and the shares of Common Stock to be issued on exercise thereof, to receipt of the Company Stockholders' Approval and the filing of the Amended and Restated Certificate of Incorporation with the Delaware Secretary of State. The only vote of the stockholders of the Company required (i) to approve the authorization and issuance of the Purchased Company Stock and the Warrants to be sold under this Agreement, as well as the exercise of the Warrants for Common Stock, for purposes of Section 312.03 of the New York Stock Exchange Listed Company Manual, if applicable, is a majority of the votes cast on such proposal, provided that the total vote cast on the proposal represents over 50% in interest of all securities entitled to vote thereon, and (ii) to approve and adopt the Third Amended and Restated Certificate of Incorporation, in the form set forth on Exhibit F attached hereto (the "Amended and Restated Certificate of Incorporation"), amending and restating the Company Certificate of Incorporation to, among other things, increase the number of authorized shares of Common Stock to at least such number as shall be sufficient to permit the full exercise of the Warrants for Common Stock, is the affirmative vote of the holders of more than 50% of the issued and outstanding Common Stock (the foregoing approvals and adoption by the stockholders of the Company, collectively, the "Company Stockholders' Approval"). For purposes of this Agreement, the term "Transaction Documents" shall mean this Agreement, the Milestone Warrant, the Additional Warrant, the Escrow Agreement, the Investor Rights Agreement and the Capital Call Agreement.

   2. Neither the execution and delivery by the Company of this Agreement or any of the other Transaction Documents, nor the consummation of the transactions contemplated hereby or thereby, nor compliance by the Company with any of the provisions

hereof or thereof (including, without limitation, the exercise provisions of the Warrants), will (i) subject in the case of (A) the authorization and issuance of the Purchased Company Stock and the Warrants (including the shares of Common Stock to be issued upon exercise of the Warrants) to be sold or issued under this Agreement, and (B) the filing of the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, to receipt of the Company Stockholders' Approval, conflict with or result in any breach of any provision of the Company Governing Documents, (ii) require any filing by the Company with, or the permit, authorization, consent or approval of, any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, federal, state or local entity (a "Governmental Entity") (except for (A) compliance with any applicable requirements of the Securities Act, the Exchange Act and any other applicable federal or state securities Legal Requirements, (B) the filing of the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, or (C) compliance with the rules and regulations of any applicable stock exchange or automated quotation system), (iii) automatically result in a modification, violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right, including, but not limited to, any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any Company Material Contract, or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its properties or assets; except in the case of clauses (ii), (iii) or (iv) where (x) any failure to obtain such permits, authorizations, consents or approvals, (y) any failure to make such filings or (z) any such modifications, violations, rights, breaches or defaults have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

4. Company Reports. The Company has in a timely manner filed or furnished (as applicable) with the Securities and Exchange Commission ("SEC") all forms, reports, schedules, statements and other documents required by it to be filed or furnished (as applicable) since and including January 1, 2007 through the date hereof, under the Securities Exchange Act of 1934 (as amended, and together with the rules and regulations of the SEC promulgated thereunder, the "Exchange Act") or the Securities Act of 1933 (as amended, and together with the rules and regulations of the SEC promulgated thereunder, the "Securities Act"), together with all certifications required pursuant to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act") (such documents, as amended since the time of their filing, collectively, the "Company Reports"). As of their respective filing dates (or as of the date of filing an amendment thereto, to the extent any filing was amended), the Company Reports (i) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading and (ii) complied in all material respects with the applicable requirements of the Exchange Act or the Securities Act, as the case may be, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the applicable rules and regulations of the SEC thereunder.

5. Financial Statements. All of the audited financial statements and unaudited interim financial statements of the Company included in the Company Reports (collectively, the "Company Financial Statements"), (A) have been prepared from, are in accordance with, and accurately reflect the books and records of the Company in all material respects, (B) have been prepared in accordance with applicable accounting requirements and rules and regulations of the SEC and United States generally accepted accounting principles

("GAAP") applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of interim financial statements, for normal and recurring year-end adjustments and as may be permitted by the SEC on Form 10-Q, 8-K or any successor or like form under the Exchange Act) and (C) fairly present in all material respects the financial position and the results of operations and cash flows of the Company as of the times and for the periods referred to therein.
6. Internal Controls; ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. The Company has designed and maintained a system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company (i) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and is accumulated and communicated to the Company's management as appropriate to allow timely decisions regarding required disclosure and (ii) has disclosed to the Company's auditors and the audit committee of the Board of Directors (and made summaries of such disclosures available to the Investor) (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect the Company's ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting. The Company is in compliance in all material respects with all effective provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.

7. Tangible Property; Real Property; Leases; Encumbrances.

   1. Except as Previously Disclosed, the Company has good and marketable title to, or valid leasehold interests in, all of its tangible properties and assets, including real properties, to conduct its business as currently conducted or as contemplated to be conducted, in each case subject to no liens, charges, encumbrances, adverse rights or claims and security interests ("Liens"), except for (i) Liens set forth on Section 3.2(g)(1) of the Company's Disclosure Schedule, (ii) Liens consisting of zoning or planning restrictions, easements, permits, restrictions under any Environmental Permit and other restrictions or limitations on the use of real property or irregularities in title thereto, which do not materially impair the value of such properties or the use of such property by the Company in the operation of its business, (iii) Liens for current Taxes, assessments or governmental charges or levies on property not yet due and payable and Liens for Taxes that are being contested in good faith by appropriate proceedings and for which an adequate reserve has been provided on the appropriate financial statements, (iv) purchase money Liens securing payments under capital lease arrangements, (v) Liens securing the Second Amended and Restated Credit Agreement, dated as of July 24, 2008 (as

11

subsequently amended, the "GE Credit Agreement"), by and among the Company, GECC, CIT Group Business Credit Inc., and the other lenders signatory thereto, and (vi) Liens that are not material to the business, assets, results of operations or financial condition of the Company, taken as a whole (the foregoing Liens (i)-(vi), "Permitted Liens"). The Company has caused its tangible properties and assets that are used in the conduct of the business of the Company to be maintained in accordance with good business practice, and all such assets are adequate for the purposes for which they are used and intended.

2. Except as Previously Disclosed, no parcel of real property owned, occupied or leased by the Company is subject in any material respect to any governmental decree or order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the knowledge of the Company, has any such condemnation, expropriation or taking been proposed. All real property owned, occupied or leased by the Company is, to the Company's knowledge, maintained in material compliance with all applicable Legal Requirements.

3. Section 3.2(g)(3) of the Company's Disclosure Schedule lists (a) all real property owned by the Company, and (b) all leases (including all amendments and modifications thereto) pursuant to which the Company leases real or personal property, true, correct and complete copies of which have previously been delivered or made available to the Investor. All leases of real property leased for the use or benefit of the Company to which the Company is a party and all amendments and modifications thereto are in full force and effect and have not been modified or amended, and there exists no default under any such lease by the Company, nor any event which with notice or lapse of time or both would constitute a default thereunder by the Company, except as would not materially and adversely affect the use of the property by the Company.
8. Taxes. Except as Previously Disclosed or except as would not individually or in the aggregate have a Material Adverse Effect:

   1. The Company has timely filed with the appropriate Governmental Entity all Tax Returns required to be filed by it. All such Tax Returns are complete and accurate in all respects. All Taxes due and owing by the Company on or before the date hereof have been paid, except such Taxes the payment of which is being contested in good faith and Taxes which are reserved for in accordance with GAAP on the Company Financial Statements.

   2. For purposes of this Agreement, "Tax" or "Taxes" shall mean any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. For purposes of this Agreement, "Tax Return" shall mean any return, report, certificate, form or similar statement or document or other communication required or permitted to be supplied to, or filed with, a Governmental Entity in connection with the determination, assessment or collection of any Tax or the administration of any laws relating to any Tax.

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9. Absence of Certain Changes. Except as Previously Disclosed or contemplated by this Agreement or the other Transaction Documents, since August 2, 2008 (the "Balance Sheet Date"), the Company has conducted its business in the ordinary course of business consistent with past practice. Except as Previously Disclosed or contemplated by this Agreement or the other Transaction Documents, from the Balance Sheet Date through the date of this Agreement, (1) no fact(s), change(s), event(s), development(s) or circumstance(s) has or have occurred, arisen, come into existence or become known, which have had or are reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (2) the Company has not incurred any liabilities (contingent or otherwise), other than trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice, that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (3) the Company has not altered its method of accounting; (4) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock; (5) the Company has not (A) sold, assigned, transferred, abandoned, mortgaged, pledged or subjected to any Lien (other than Permitted Liens) any of its material properties, tangible or intangible, or rights under any Material Contract or (B) waived or cancelled any material amounts of indebtedness or other obligations owed to the Company; (6) other than in the ordinary and usual course of business consistent with past practice, the Company has not (A) granted any material severance or termination pay to any director or officer of the Company, (B) entered into any material employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any director or officer of the Company, (C) materially increased benefits payable to any director or officer of the Company under any existing severance or termination pay policies or employment agreements, or (D) materially increased the compensation, bonus or other benefits payable to directors or officers of the Company, other than merit increases in salaries at regularly scheduled times in customary amounts consistent with past practices; (7) the Company has not amended any term of any outstanding security of the Company that would materially increase the obligations of the Company under such security; and (8) the Company has not issued any Equity Interests to any person, except (A) grants made and Previously Disclosed prior to the date hereof pursuant to existing Company Stock Plans; and (B) issuances of Common Stock upon the exercise of Company Options. The Company does not have pending before the SEC any request for confidential treatment of information.

10. No Undisclosed Liabilities. Except (1) as reflected or otherwise reserved against on the Company Financial Statements, (2) for liabilities and obligations incurred since the Balance Sheet Date in the ordinary course of business, (3) for liabilities and obligations incurred under this Agreement or in connection with the transactions contemplated hereby, (4) for contractual liabilities and obligations incurred under (other than liabilities arising from any breach or violation of) any Company Material Contract Previously Disclosed, but only to the extent such liabilities are readily ascertainable (in nature, scope and amount) from the copies delivered or made available to the Investor, and (5) liabilities that have not had and would not reasonably be expected to have a Material Adverse Effect, the Company has not incurred any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, which are required by GAAP to be recognized or disclosed on a consolidated balance sheet of the Company or in the notes thereto.

11. Commitments and Contracts.

    1. Except as Previously Disclosed, there is no agreement to which the Company is a party:

       1. which provides for the employment of any officer, individual employee or other person relating to the Company on a full-time, part-time, consulting or other basis or relating to loans to members, managers, officers, directors or affiliates of the Company;

       2. under which the Company has advanced or loaned or agreed to advance or loan to any other person amounts exceeding $50,000 in the aggregate, other than (1) from the Company in the ordinary course of business, and (2) in connection with the construction of stores pursuant to a lease agreement in the ordinary course of business, which is set forth on Section 3.2(g)(3) of the Company's Disclosure Schedule;

       3. relating to borrowed money or other indebtedness or the mortgaging, pledging or otherwise placing a Lien on any material asset or material group of assets of the Company;

       4. under which the Company guarantees, endorses or otherwise becomes or is contingently liable upon the liability of any other person (other than by endorsements of instruments in the ordinary course of collection);

       5. under which the Company is lessee of or holds or operates any property, real or personal, owned by any other person, except for any lease of real or personal property under which the aggregate annual rental payments do not exceed $100,000;

       6. under which the Company is lessor of or permits any other person to hold or operate any property, real or personal, owned or controlled by the Company (other than immaterial rights of way, easements, covenants or similar rights to real property);

       7. that is a settlement, conciliation or similar agreement requiring payment as of or after the execution date of this Agreement of consideration in excess of $100,000;

       8. relating to any intangible property, including any (i) patents, inventions, trademarks, trade names, industrial designs, trade secrets, and proprietary know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (ii) proprietary business, technical and know-how information; (iii) works of authorship (including computer programs, source code, object code, whether embodied in software, firmware or otherwise); (iv) URLs and domain names; and (v) any similar or equivalent property of any of the foregoing (as applicable) (collectively, "Intellectual Property") used by the Company in the conduct of

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its business, or any other agreements affecting the Company's ability to use or disclose any such Intellectual Property;

9. which has a term of more than one year and is not terminable by the Company upon less than 30 days' notice without material penalty and involves a consideration in excess of $100,000 in the aggregate annually;

10. which involves a consideration in excess of $250,000 in the aggregate annually (other than purchase orders for inventory in the ordinary course of business consistent with past practices of the Company);

11. under which any of the benefits to any party will be increased, or the vesting of the benefits to any party will be accelerated, by the occurrence of any of the Investment or the other transactions contemplated by this Agreement; or

12. which, as of the date hereof, (i) is a "material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), or (ii) would prohibit or materially delay the consummation of the Investment or any of the other transactions contemplated hereby.
2. Each contract of the type described above in this Section 3.2(k) is referred to herein as a "Company Material Contract." Assuming due authorization, execution, delivery and performance by the other parties thereto, each Company Material Contract is valid, binding and enforceable by or against the Company, in accordance with its respective terms (except that (A) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors' rights generally and (B) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought). With respect to each of the Company Material Contracts, to the knowledge of the Company, no event or condition presently exists that constitutes a material default or material breach by the Company or any other party thereto or, after notice or lapse of time or both, would constitute a material default or material breach by the Company or any other party thereto.

3. The Company has delivered or made available to the Investor for review, prior to the execution of this Agreement, true and complete copies of all of the Company Material Contracts required to be disclosed on Section 3.2(k) of the Company's Disclosure Schedule, which are not filed as exhibits to the Company Reports and the Company Material Contracts required to be disclosed on Section 3.2(k) of the Company's Disclosure Schedule or filed as exhibits to the Company Reports are true and complete copies of such contracts.
12. Inventories. Except as Previously Disclosed, all inventories reflected on the Company Financial Statements (other than inventory sold or disposed of since the Balance Sheet Date) are, subject to any reserves relating thereto, (i) in good, useable and marketable condition in accordance with the practices of the Company, (ii) in compliance in all material respects with all applicable Legal Requirements currently enacted and in effect as of the date of this Agreement, and (iii) valued on a LIFO basis using the retail LIFO inventory method of

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accounting in accordance with generally acceptable accounting principles consistently applied. The quantities of each item of inventory (whether raw materials, work-in-progress or finished goods) do not materially exceed inventory levels historically maintained by the Company in the ordinary course of business (subject to seasonal fluctuations), and the Company maintains adequate reserves relating thereto.

13. Suppliers. As of the date of this Agreement, except as Previously Disclosed, the Company has not received any written notice that any supplier of a material portion of merchandise inventory (i) will cease to do business with the Company, (ii) will materially reduce its supply arrangements with the Company or (iii) will materially increase the price it will charge the Company for the merchandise it supplies to the Company.

14. Offering of Securities. Neither the Company nor any person acting on its behalf has taken any action (including any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of any of the Securities to be issued pursuant to this Agreement under the Securities Act and the rules and regulations of the SEC thereunder) which might subject the offering, issuance or sale of any of the Securities to the Investor pursuant to this Agreement to the registration requirements of the Securities Act.

15. Status of Securities. The Purchased Company Stock and the Warrants to be issued pursuant to this Agreement have been duly authorized by all necessary corporate action. When issued and/or sold against receipt of the consideration therefor as provided in this Agreement, (i) the Purchased Company Stock and the Warrants will be validly issued, (ii) the Purchased Company Stock and the Warrants will be fully paid and nonassessable, and (iii) the Purchased Company Stock and the Warrants will not subject the holder thereof to personal liability and will not be subject to preemptive rights of any other shareholder of the Company. The shares of Common Stock issuable upon the exercise of the Warrants will, upon receipt of the Company Stockholders' Approval and filing of the Amended and Restated Certificate of Incorporation with the Delaware Secretary of State, have been duly authorized by all necessary corporate action and when so issued upon such exercise will be validly issued, fully paid and nonassessable, will not subject the holder thereof to personal liability and will not be subject to preemptive rights of any other stockholder of the Company.

16. Litigation and Other Proceedings. There is no pending or, to the knowledge of the Company, threatened, claim, action, suit, investigation or proceeding (each an "Action"), against the Company or to which any of its assets are subject, nor is the Company subject to any order, judgment or decree, in each case except as would not reasonably be expected to have a Material Adverse Effect. As of the date hereof, neither the Company nor, to the Company's knowledge, any current or former director or officer thereof is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities Legal Requirements or a claim of breach of fiduciary duty, nor has there been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company or, to the Company's knowledge, any current or former director or officer of the Company. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Securities Act. There is no unresolved violation, criticism or exception by any Governmental

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Entity with respect to any report or relating to any examinations or inspections of the Company, except as would not reasonably be expected to have a Material Adverse Effect.

17. Compliance with Laws; Permits.

    1. Except as Previously Disclosed, Company has complied and is in compliance with all statutes, ordinances, codes, laws, rules, regulations, orders or other requirements, standards or procedures enacted, adopted or applied by any Governmental Entity ("Legal Requirements"), which affect the business, properties or assets of the Company, except for instances of possible noncompliance that have not had and are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. No notice, charge or assertion has been received by the Company or threatened against the Company alleging any violation of any of the foregoing, except for instances of possible noncompliance that have not had and are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. All licenses, authorizations, consents, permits, certificates and approvals required under such laws, rules and regulations are in full force and effect except where the failure to be in full force and effect have not had and is not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

    2. The Company is in possession of all authorizations, licenses, permits, Environmental Permits, certificates, approvals and clearances of any Governmental Entity necessary for the Company to own, lease and operate its properties or to carry on its business substantially in the manner described in the Company Reports filed prior to the date hereof and substantially as it is being conducted as of the date hereof (the "Company Permits"), and all such Company Permits are valid, and in full force and effect, except where the failure to have, or the suspension or cancellation of, or failure to be valid or in full force and effect of, any of the Company Permits is not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

18. Labor.

    1. No persons employed by the Company are covered by any collective bargaining or other labor union or foreign work council contract with respect to their employment with the Company (each a "Company Collective Bargaining Agreement"), and (i) no Company Collective Bargaining Agreement is being negotiated by the Company, (ii) as of the date of this Agreement, there is no strike or work stoppage against the Company pending or, to the knowledge of the Company, threatened that may interfere with the respective business activities of the Company, and (iii) as of the date of this Agreement, to the knowledge of the Company, the Company has not committed any material unfair labor practice in connection with the operation of the business of the Company.

    2. The Company has complied in all material respects with applicable Legal Requirements with respect to employment, employment practices, and terms, conditions and classification of employment (including applicable laws, rules and regulations regarding wage and hour requirements, immigration status, discrimination in employment, employee health and safety, and the Workers' Adjustment and Retraining Notification Act), except for such

17

noncompliance as has not had and is not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

19. Company Benefit Plans; ERISA.

    1. The Company has Previously Disclosed all material employee benefit plans, programs, agreements or arrangements, including pension, retirement, profit sharing, deferred compensation, stock option, change in control, retention, equity or equity-based compensation, stock purchase, employee stock ownership, severance pay, vacation, bonus or other incentive plans, all medical, vision, dental or other health plans, all life insurance plans, and all other employee benefit plans or fringe benefit plans, including "employee benefit plans" as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), in each case, whether oral or written, funded or unfunded, or insured or self-insured, maintained by the Company, or to which the Company contributes or is obligated to contribute thereunder, or with respect to which the Company has or may have any liability (contingent or otherwise), in each case, for or to any current or former employees, directors or officers of the Company and/or their dependents (collectively, the "Benefit Plans").

    2. All Benefit Plans that are intended to be subject to Section 401(a) of the Internal Revenue Code of 1986 (as amended, the "Code") and any trust agreement that is intended to be tax exempt under Code Section 501(a) have been determined by the Internal Revenue Service to be qualified under Code Section 401(a) and exempt from taxation under Code Section 501(a) or have been established under one or more prototype plans or arrangements for which the IRS has issued to the prototype sponsor favorable determination letter(s) having similar effect and upon which the Company may rely and, to the knowledge of the Company, nothing has occurred that would adversely affect the qualification of any such plan. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect: (i) each Benefit Plan and any related trust subject to ERISA complies in all material respects with and has been administered in substantial compliance with, (A) the provisions of ERISA, (B) all provisions of the Code, (C) all other applicable Legal Requirements, and (D) its terms; (ii) the Company has not received any written notice from any Governmental Entity questioning or challenging such compliance; (iii) there are no unresolved claims or disputes under the terms of, or in connection with, the Benefit Plans other than claims for benefits which are payable in the ordinary course; (iv) to the knowledge of the Company, there has not been any non-exempt "prohibited transaction" (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Benefit Plan; (v) no litigation has been commenced with respect to any Benefit Plan and, to the knowledge of the Company, no such litigation is threatened (other than routine claims for benefits in the normal course); (vi) there are no governmental audits or investigations pending or, to the knowledge of the Company, threatened in connection with any Benefit Plan; and (vii) to the knowledge of the Company, there are not any facts that could give rise to any liability in the event of any governmental audit or investigation.

    3. Neither the Company nor any ERISA Affiliate of the Company (i) has an "obligation to contribute" (as defined in ERISA Section 4212) to a Benefit Plan that is a "multiemployer plan" (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)); and (ii) sponsors, maintains or contributes to any plan, program or arrangement that provides for

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post-retirement or other post-employment welfare benefits (other than health care continuation coverage as required by applicable law). As used herein, "ERISA Affiliate" means any trade or business, whether or not incorporated, that together with the Company would be deemed a single employer for purposes of Section 4001 of ERISA or Sections 414(b), (c), (m), (n) or (o) of the Code.

4. Neither the Company nor any ERISA Affiliate has, within the past 6 years, ever maintained, established, sponsored, participated in, or contributed to, any defined benefit plan (as defined in ERISA Section 3(35)) subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code.

5. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, all reports, returns and similar documents with respect to all Benefit Plans required to be filed by the Company with any Governmental Entity or distributed to any Benefit Plan participant have been duly and timely filed or distributed.

6. The Company has Previously Disclosed each Benefit Plan that is an employee welfare benefit plan which is (i) unfunded or self-insured or (ii) funded through a "welfare benefit fund", as such term is defined in Code Section 419(e) or other funding mechanism. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, each such employee welfare benefit plan may be amended or terminated (including with respect to benefits provided to retirees and other former employees) without liability (other than benefits then payable under such plan without regard to such amendment or termination) to the Company at any time. The Company complies in all material respects with the applicable requirements of Section 4980B(f) of the Code or any similar state statute with respect to each Benefit Plan that is a group health plan within the meaning of Section 5000(b)(1) of the Code or such state statute.

7. The Company has Previously Disclosed (i) each material payment (including any bonus, severance, unemployment compensation, deferred compensation, forgiveness of indebtedness or golden parachute payment) becoming due to any employee under any Benefit Plan; (ii) any increase in any material respect of any benefit otherwise payable under any Benefit Plan; (iii) any acceleration in any material respect of the time of payment or vesting of any such benefits under any Benefit Plan; or (iv) any material obligation to fund any trust or other arrangement with respect to compensation or benefits under a Benefit Plan, in each of clauses (i), (ii), (iii) and (iv) if caused or triggered by the execution and delivery of this Agreement or the consummation of the Investment and the other transactions contemplated hereby. Except as Previously Disclosed, no payment or benefit which has been, will or may be made by the Company with respect to any employee in connection with the execution and delivery of this Agreement or the consummation of the Investment and the other transactions contemplated hereby would fail to be deductible under Section 162(m) of the Code. Neither this Agreement (or the consummation of the Investment and the other transactions contemplated hereby) nor any other agreement, plan, arrangement or other contract between the Company and an employee or other service provider that, considered individually or considered collectively with any other such agreements, plans, arrangements or other contracts, could reasonably be expected to, give rise directly or indirectly to the payment of any amount that would be

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characterized as an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code.

8. Correct and complete copies have been delivered or made available to the Investor by the Company of all material Benefit Plans (including all amendments and attachments thereto); written summaries of any material Benefit Plan not in writing; all related trust documents; all insurance contracts or other funding arrangements to the degree applicable; the most recent determination letter from the Internal Revenue Service (where required); and the most recent summary plan descriptions for the Benefit Plans (where required).

9. The Company has not entered into any contract, agreement, arrangement or understanding with any officer or director of the Company in connection with or in contemplation of the Investment, except as Previously Disclosed or as contemplated by this Agreement, the Investment or the other transactions contemplated hereby.

10. To the knowledge of the Company, no payment pursuant to any Benefit Plans or other arrangement between the Company and any "service provider" (as such term is defined in Section 409A of the Code and the United States Treasury Regulations and IRS guidance thereunder), including, without limitation, the grant, vesting or exercise of any stock option, would subject any person to a tax pursuant to Section 409A of the Code, whether pursuant to the consummation of the Investment, any other transactions contemplated by this Agreement or otherwise.
20. Environmental Laws and Regulations. Except as has not had and is not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect, (i) to the knowledge of the Company, Hazardous Materials have not been generated, used, treated or stored on, transported to or from or disposed of on, any Company Property, except in the ordinary course of the Company's business and in accordance with applicable Environmental Laws and Environmental Permits, (ii) to the Company's knowledge, no Release of any Hazardous Material on any Company Property has occurred; (iii) to the Company's knowledge, the Company is in material compliance with all applicable Environmental Laws and the requirements of any Environmental Permits with respect to any Company Property, and (iv) there are no past, pending or, to the Company's Knowledge, threatened Environmental Claims against the Company or any Company Property. As used in this Agreement, "Environmental Law" means any federal, state or local statute, law, rule, regulation, ordinance, code or rule of common law and any judicial or administrative interpretation thereof binding on the Company or its operations or Company Property as of the date hereof and Closing Date, including any judicial or administrative order, consent decree or judgment, relating to the Environment, Hazardous Materials or exposure of any person to Hazardous Materials including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. sec. 9601 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. sec. 6901 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. sec. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et seq.; the Clean Air Act, 42 U.S.C. sec. 7401 et seq.; Oil Pollution Act of 1990, 33 U.S.C. sec. 2701 et seq.; the Safe Drinking Water Act, 42 U.S.C. sec. 300f et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. sec. 1801 et seq.; the Occupational Safety and Health Act of 1970, 29 U.S.C. sec. 651 et seq.; California's Air Quality Act; and California's Safe Drinking Water

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and Toxic Enforcement Act of 1986 (commonly called "Proposition 65"). As used in this Agreement, "Environmental Permit" means any permit required by or pursuant to any applicable Environmental Law. As used in this Agreement, "Hazardous Materials" means (A) any petroleum or petroleum products, radioactive materials, asbestos that is friable, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (B) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "extremely hazardous substances," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminant," "carcinogen," "reproductive toxicant," "biohazard," "air contaminant," "controlled substance," "pesticide," "rodenticide," "volatile organic compound," "toxic air contaminant," or terms of similar import, under any applicable Environmental Law. As used in this Agreement, "Release" means disposing, discharging, spilling, leaking, leaching, dumping, emitting, escaping, pouring, releasing, injecting, emptying or seeping into or upon any land or water or air, or otherwise entering into the environment.

21. Takeover Statutes. The Board of Directors and the Company have taken all action necessary to render inapplicable to the Investment and the other transactions contemplated by this Agreement each and every state takeover statute or similar statute or regulation that applies to the Company with respect to this Agreement, the Investment or any other transaction contemplated hereby, including the restrictions on "business combinations" set forth in Section 203 of the General Corporation Law of the State of Delaware (the "DGCL").

22. Intellectual Property.

    1. To the knowledge of the Company, the Company owns or otherwise has a valid right to use all Intellectual Property Rights needed to conduct the business of the Company as conducted prior to the Closing Date. "Intellectual Property Rights" means any or all of the following and all worldwide common law and statutory rights in, arising out of, or associated therewith: (i) patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof ("Patents"); (ii) copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto throughout the world including moral and economic rights of authors and inventors, however denominated ("Copyrights"); (iii) industrial designs and any registrations and applications therefor; (iv) trade names, logos, brand names, trade dress, common law trademarks and service marks and other indications of origin, trademark and service ▇▇▇▇ registrations and applications therefor ("Trademarks"); (v) trade secrets (including, those trade secrets defined in the Uniform Trade Secrets Act and under corresponding foreign statutory and common law), and proprietary business, technical and know- how information ("Trade Secrets"); and (vi) any similar or equivalent rights to any of the foregoing (as applicable).

    2. The Company does not own any material Patents. Section 3.2(v)(2) of the Company's Disclosure Schedule sets forth a true and correct list of all Trademarks owned by the Company (the "Owned Company IP"). To the knowledge of the Company, none of the Company or any of its current products or services or other operations of the Company's business has infringed upon or otherwise violated, or is infringing upon or otherwise violating, in any respect the Intellectual Property Rights of any third party. To the knowledge of the Company as of the date hereof, no person or any of such person's products or services or other

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operation of such person's business is infringing upon or otherwise violating any Owned Company IP in any material respect.

3. As of the date hereof, the Company has not received any unresolved notice or other communication relating to any actual, alleged, or suspected infringement, misappropriation, or violation of any Intellectual Property Right of another person by the Company.
23. Information in the Proxy Statement. The proxy statement to be distributed to the stockholders of the Company in connection with the Investment (including any preliminary proxy statement, definitive proxy statement or supplement or amendment thereto, in each case as filed with the SEC in accordance with applicable Legal Requirements, the "Proxy Statement"), at the date mailed to the Company's stockholders and at the time of the Company Stockholders' Meeting, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by the Company with respect to statements made therein based on information supplied by the Investor expressly for inclusion in the Proxy Statement. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder.

24. Insurance. The Company maintains insurance coverage with insurers, or maintains self-insurance practices, in such amounts and covering such risks as are in accordance with normal industry practice for companies engaged in businesses similar to that of the Company (taking into account the cost and availability of such insurance). All such policies are in full force and effect, all premiums due and payable have been paid, and no written notice of cancellation or termination has been received with respect to any such policy. The Company is not in material breach or default, and the Company has not taken any action or failed to take any action which, with notice or the lapse of time, would constitute such a breach or default, or permit termination or material modification of any such insurance policies. The consummation of the Investment and the other transactions contemplated by this Agreement will not, in and of itself, cause the revocation, cancellation or termination of any such insurance policy.

25. Brokers and Finders; Expenses. Except for Financo, Inc. (the "Company Financial Advisor"), no broker, investment banker, financial advisor or other person, other than the Company Financial Advisor, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the Investment based upon arrangements made by or on behalf of Company. Section 3.2(y) of the Company's Disclosure Schedule sets forth the amount of the fee payable to the Company Financial Advisor based on the consummation of the transactions contemplated by this Agreement.

26. Purchase for Investment. The Company acknowledges that the Everbright Asia Stock has not been registered under the Securities Act or under any state securities Legal Requirements. The Company (1) is acquiring the Everbright Asia Stock pursuant to an exemption from registration under the Securities Act solely for investment with no present intention to distribute any shares of the Everbright Asia Stock to any person, (2) will not sell or otherwise dispose of any shares of the Everbright Asia Stock, except in compliance with the

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registration requirements or exemption provisions of the Securities Act and any other applicable securities laws, (3) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of its investment in the Everbright Asia Stock and of making an informed investment decision and (4) is an "accredited investor" (as that term is defined by Rule 501 of the Securities Act).

27. Transactions with Affiliates and Employees. Except as Previously Disclosed, none of the officers or directors of the Company or, to the knowledge of the Company, no person that Beneficially Owns 10% or more of the capital stock of the Company is presently a party to any transaction with the Company (other than for services as officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer or director or, to the knowledge of the Company, any entity in which any officer or director has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $60,000, other than (x) for payment of salary, (y) reimbursement for expenses properly incurred on behalf of the Company and (z) for other bona fide employee benefits, including Company Stock Options.

3.3    Representations and Warranties of the Investor. The Investor represents and warrants to the Company that:

1. Organization and Authority. The Investor is a corporation duly incorporated, validly existing and in good standing under the laws of the British Virgin Islands and has the requisite corporate power and authority to conduct its business as now being conducted, except, for those jurisdictions where the failure to be so organized, existing or in good standing would not reasonably be expected, individually or in the aggregate, to materially impair the ability of the Company to perform its obligations under this Agreement or to consummate the Closing.

2. Authorization.

   1. The Investor has the corporate power and authority necessary to enter into this Agreement and each of the other Transaction Documents to which it is a party and to carry out its obligations hereunder and thereunder. The execution, delivery and performance by the Investor of this Agreement and each of the other Transaction Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly and unanimously authorized by the board of directors of the Investor. This Agreement and each of the other Transaction Documents to which the Investor is a party have been duly and validly executed and delivered by the Investor and, assuming due authorization, execution and delivery by the Company, are valid and binding obligations of the Investor enforceable against the Investor in accordance with their respective terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors' rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. No other corporate proceedings are necessary for the execution and delivery by the Investor of this Agreement and each of the

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other Transaction Documents to which it is a party, the performance by it of its obligations hereunder and thereunder or the consummation by it of the transactions contemplated hereby.

2. Neither the execution and delivery by the Investor of this Agreement or any of the other Transaction Documents to which it is a party, nor the consummation of the transactions contemplated hereby or thereby, nor compliance by the Investor with any of the provisions hereof or thereof, will (i) conflict with or result in any breach of any provision of the organizational documents of the Investor, (ii) require any filing by the Investor with, or the permit, authorization, consent or approval of, any Governmental Entity (except for (A) compliance with any applicable requirements of the Securities Act, the Exchange Act and any other applicable federal or state securities Legal Requirements, or (B) compliance with the rules and regulations of any applicable stock exchanges or automated quotation system), or (iii)  violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Investor or any of its properties or assets; except in the case of clauses (ii) or (iii) where (x) any failure to obtain such permits, authorizations, consents or approvals, (y) any failure to make such filings or (z) any such violations have not had and would not reasonably be expected to have, individually or in the aggregate, a material adverse affect on the Investor's ability to perform its obligations under this Agreement or consummate the transactions contemplated hereby on a timely basis.
3. Purchase for Investment. The Investor acknowledges that the Securities have not been registered under the Securities Act or under any state securities Legal Requirements. The Investor (1) is acquiring the Securities pursuant to an exemption from registration under the Securities Act solely for investment with no present intention to distribute any of the Securities to any person, (2) will not sell or otherwise dispose of any of the Securities, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws, (3) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of its investment in the Securities and of making an informed investment decision and (4) is an "accredited investor" (as that term is defined by Rule 501 of the Securities Act).

4. Litigation and Other Proceedings. As of the date hereof, there is no pending or, to the knowledge of the Investor, threatened, Action against the Investor, nor is the Investor subject to any order, judgment or decree, in each case except as have not had and would not reasonably be expected to have, individually or in the aggregate, a material adverse affect on the Investor's ability to perform its obligations under this Agreement or consummate the transactions contemplated hereby on a timely basis. As of the date hereof, neither the Investor nor, to the Investor's knowledge, any current or former director or officer thereof is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities Legal Requirements or a claim of breach of fiduciary duty, nor has there been, and to the knowledge of the Investor, there is not pending or contemplated, any investigation by the SEC involving the Investor or, to the Investor's knowledge, any current or former director or officer of the Investor. As of the date hereof, there is no unresolved violation, criticism or exception by any Governmental Entity with respect to any report or relating to any examinations or inspections of the Investor, except as have not had and would not reasonably be expected to have, individually or in the aggregate, a material adverse affect on the Investor's ability to

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perform its obligations under this Agreement or consummate the transactions contemplated hereby on a timely basis.

5. Information in the Proxy Statement. None of the information supplied by the Investor in writing expressly for inclusion or incorporation by reference in the Proxy Statement (and any amendment thereof or supplement thereto) will, at the date mailed to the Company's stockholders and at the time of the Company Stockholders' Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

6. Ownership. The Investor and its Affiliates are the owners of record or the Beneficial Owners of the number of shares of Common Stock or securities convertible into or exchangeable for Common Stock set forth opposite the Investor's or its Affiliates' names on Schedule 3.3(f) of the Investor's Disclosure Schedules. For purposes of this Agreement, a person shall be deemed to "Beneficially Own" any securities of which such person is considered to be a "Beneficial Owner" under Rule 13d-3 under the Exchange Act.

7. Financial Capability. The Investor currently has or at Closing will have available funds necessary to consummate the transactions contemplated hereby, including the Investment, and to perform its obligations under this Agreement on the terms and subject to the conditions contemplated by this Agreement.

8. Financial Condition. The total assets of the Investor and its Subsidiaries on a consolidated basis as of June 30, 2008 (the "Investor Balance Sheet Date") were no less than $400,000,000, and the total liabilities of the Investor and its Subsidiaries on a consolidated basis as of the Investor Balance Sheet Date were no more than $35,000,000. The total revenue of the Investor and its Subsidiaries on a consolidated basis for the 12 month period ending on the Investor Balance Sheet Date was no less than $200,000,000, and the Investor and its Subsidiaries had a total, combined annual free cash flow from operations of at least $55,000,000 for the 12 month period ending on the Investor Balance Sheet Date.

9. Absence of Certain Changes. Except as Previously Disclosed or contemplated by this Agreement, since the Investor Balance Sheet Date, each of the Investor and its Subsidiaries has conducted its respective business in the ordinary course of business consistent with past practice. From the Investor Balance Sheet Date through the date of this Agreement, no fact(s), change(s), event(s), development(s) or circumstance(s) has or have occurred, arisen, come into existence or become known, which would or are reasonably expected to, individually or in the aggregate, materially impair the ability of the Investor to perform its obligations under this Agreement or to consummate the Closing.

10. Real Property; Leases; Encumbrances.

    1. Except as Previously Disclosed, the Investor and the Luichi Affiliates have good and marketable title to, or valid leasehold interests in, all their tangible properties and assets, including real properties, used in the Luichi Sourcing Business, as currently conducted or as contemplated to be conducted, in each case subject to no Liens, except

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for (i) Liens set forth on Section 3.3(j)(1) of the Investor's Disclosure Schedule, (ii) Liens consisting of zoning or planning restrictions, easements, permits, restrictions under any Environmental Permit and other restrictions or limitations on the use of real property or irregularities in title thereto, which do not materially impair the value of such properties or the use of such property by the Investor and the Luichi Affiliates in the ownership, management, operation and development of the Luichi Sourcing Business, (iii) Liens for current Taxes, assessments or governmental charges or levies on property not yet due and payable and Liens for Taxes that are being contested in good faith by appropriate proceedings and for which an adequate reserve has been provided on the appropriate financial statements, (iv) purchase money Liens securing payments under capital lease arrangements, and (v) Liens which would not reasonably be expected to, individually or in the aggregate, materially impair (a) the ability of the Investor and the Luichi Affiliates to conduct the Luichi Sourcing Business as currently conducted or as contemplated to be conducted, or (b) the ability of the Investor to perform its obligations under this Agreement or to consummate the Closing. The Investor and the Luichi Affiliates have caused their respective tangible properties and assets used in the conduct of the Luichi Sourcing Business to be maintained in accordance with good business practices, and all such assets used in the conduct of the Luichi Sourcing Business are adequate for the purposes for which they are used and intended.

2. Except as Previously Disclosed, no parcel of real property owned, occupied or leased by the Investor or the Luichi Affiliates and used in the Luichi Sourcing Business, as currently conducted or as contemplated to be conducted, is subject in any material respect to any governmental decree or order to be sold nor is being condemned, expropriated or otherwise taken by any public authority with or without payment of compensation therefor, nor, to the knowledge of the Investor, has any such condemnation, expropriation or taking been proposed. All real property owned, occupied or leased by the Investor or the Luichi Affiliates and used in the Luichi Sourcing Business is, to the Investor's knowledge, maintained in material compliance with all applicable Legal Requirements.

3. Section 3.3(j)(3) of the Investor's Disclosure Schedule lists (a) all real property owned by the Investor and the Luichi Affiliates, and (b) all leases (including all amendments and modifications thereto) pursuant to which the Investor and the Luichi Affiliates lease real or personal property, in each case that is used in the Luichi Sourcing Business, as currently conducted or as contemplated to be conducted, and true, correct and complete copies of such leases have previously been delivered or made available to the Company. All leases of such real property to which the Investor or any of the Luichi Affiliates is a party, and all amendments and modifications thereto, are in full force and effect and have not been modified or amended, and there exists no default under any such lease by the Investor or any of the Luichi Affiliates, nor any event which with notice or lapse of time or both would constitute a default thereunder by the Investor or any of the Luichi Affiliates, except as would not materially and adversely affect the use of such real property by the Investor or any of the Luichi Affiliates, as the case may be.
11. Intellectual Property.

    1. To the knowledge of the Investor, the Investor and the Luichi Affiliates own or otherwise have a valid right to use all Intellectual Property Rights needed to

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conduct the Luichi Sourcing Business, as currently conducted or as contemplated to be conducted.

2. Section 3.3(k)(2) of the Investor's Disclosure Schedule sets forth a true and correct list of all Intellectual Property Rights owned by the Investor and/or any of the Luichi Affiliates that is used in the Luichi Sourcing Business, as currently conducted or as contemplated to be conducted (the "Owned Investor IP"). To the knowledge of the Investor, none of the Investor or any of the Luichi Affiliates or any of its or their current ownership, management, operation and development of the Luichi Sourcing Business has infringed upon or otherwise violated, or is infringing upon or otherwise violating, in any respect the Intellectual Property Rights of any third party. To the knowledge of the Investor as of the date hereof, no person or any of such person's products or services or other operation of such person's business is infringing upon or otherwise violating any Owned Investor IP in any material respect.

3. As of the date hereof, neither the Investor nor any of the Luichi Affiliates has received any unresolved notice or other communication relating to any actual, alleged, or suspected infringement, misappropriation, or violation of any Intellectual Property Right of another person by Investor or any of the Luichi Affiliates.
12. Everbright Asia Stock. The Investor is the record and beneficial owner of, has good and valid title to, and has the full right to transfer, assign, convey and deliver to the Company all right, title and interest in and to the Everbright Asia Stock. The Everbright Asia Stock is free and clear of any Liens (including any contractual obligation that might result in Liens upon or after any transfer of the Everbright Asia Stock). Except as contemplated by this Agreement or by the Everbright Asia Assignment and Stock Power, there is no contractual obligation or other right pursuant to which the Investor or any of its Affiliates has (i) granted any option, warrant or other right to any Person to acquire any shares of the Everbright Asia Stock or any other Equity Interest in Everbright Asia, (ii) entered into any transaction that would have the same effect, including directly or indirectly, de jure or de facto, by merger, consolidation, reorganization or other business combination or sale of assets involving Everbright Asia, or (iii) agreed to repurchase, redeem or otherwise acquire any shares of Everbright Asia Stock or any other Equity Interest in Everbright Asia, or that would obligate Everbright Asia to make any investment (in the form of a loan, capital contribution or otherwise) in, any other person. Except as contemplated by this Agreement or by the Everbright Asia Assignment and Stock Power, there are no voting trusts, agreements or understandings in effect with respect to the voting or transfer of the Everbright Asia Stock or any other Equity Interest in Everbright Asia. Upon the Closing and the consummation of the transactions contemplated by the Everbright Asia Assignment and Stock Power, the Company will acquire good and valid title to the Everbright Asia Stock free and clear of any Liens or other restrictions of any kind whatsoever.

13. Knowledge as to Conditions. As of the date of this Agreement, the Investor knows of no reason why any regulatory approvals and, to the extent necessary, any other approvals, authorizations, filings, registrations, and notices required or otherwise a condition to the consummation of the transactions contemplated by this Agreement will not be obtained.

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3.4    Representations and Warranties Relating to Everbright Asia and the Luichi Sourcing Business. The Investor represents and warrants to the Company as to the matters set forth on Exhibit G attached hereto.

ARTICLE IV

COVENANTS

4.1    Conduct of the Business. Except as Previously Disclosed, as required pursuant to this Agreement or the other Transaction Documents, or as agreed in writing by the Investor (which agreement shall not be unreasonably withheld or delayed), prior to the earlier of the Closing Date and the termination of this Agreement pursuant to Section 7.1 (the "Pre-Closing Period"), the Company shall use commercially reasonable efforts to carry on its business in the ordinary course of business and use commercially reasonable efforts to maintain and preserve its business (including its organization, assets, properties, goodwill and insurance coverage) and preserve its business relationships with customers, strategic partners, suppliers, distributors and others having business dealings with it; provided that nothing in this sentence shall limit or require any actions that the Board of Directors may, in good faith, determine to be inconsistent with their duties or the Company's obligations under applicable Legal Requirements. Without limiting the generality of the foregoing, except as Previously Disclosed, as required pursuant to this Agreement or as agreed in writing by the Investor (which agreement shall not be unreasonably withheld or delayed), during the Pre- Closing Period the Company shall not:

1. amend the Company Governing Documents;

2. split, combine, subdivide or reclassify any shares of capital stock of the Company;

3. redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise acquire, any Common Stock or Equity Interests, except (i) for the acceptance of previously owned shares of Common Stock in payment of all or a portion of the exercise price delivered by one or more optionees in the course of exercising all or portions of any Company Options, (ii) for the withholding of otherwise deliverable shares of Common Stock in the course of effecting one or more optionees' tax withholding elections pursuant to the exercise of all or portions of any Company Options, (iii) for the repurchase of any shares of Common Stock subject to a repurchase right for terminated employees of the Company, or (iv) pursuant to any Previously Disclosed share repurchase program of the Company;

4. declare, set aside or pay any dividend or other distribution payable in cash, stock or property (or any combination thereof) with respect to the Company's capital stock;

5. acquire (whether pursuant to merger, stock or asset purchase or otherwise) in one transaction or any series of related transactions any equity interests in any person or any business or division of any person or all or substantially all of the assets of any person (or business or division thereof);

6. sell, lease, license, mortgage or otherwise subject to any Lien (other than Permitted Liens) or dispose of any of its properties or assets that are material to the Company,

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other than (i) sales of inventory in the ordinary course of business consistent with past practice, and (ii) dispositions of equipment and property no longer used in the operation of the Company's business;

7. except for short-term trade indebtedness made in the ordinary course of business consistent with past practice and for intercompany indebtedness between the Company and any Subsidiary or between any of the Subsidiaries of the Company, (i) incur any indebtedness (except for borrowings under any existing credit facility incurred in the ordinary course of business consistent with past practice) or (ii) enter into any financing arrangements or modify the terms of any existing indebtedness or financing arrangements or (iii) prepay any interest on any indebtedness;

8. other than in the ordinary course of business consistent with past practice, or except as, individually or in the aggregate, does not have and is not reasonably expected to have, a Material Adverse Effect, enter into, modify, amend or terminate any Company Material Contract or waive, release or assign any rights or claims thereunder;

9. make any change to its accounting methods, principles or practices materially affecting its assets, liabilities or business, except as may be required by GAAP;

10. merge or consolidate with or into any other legal entity or dissolve or liquidate;

11. except as required by the terms and provisions of written contracts between the Company, on the one hand, and an officer or director of the Company, on the other hand, as in existence on the date of this Agreement, (i) adopt, amend or terminate any employee benefit plan, (ii) enter into any new, or amend any existing, employment, severance, consulting or salary continuation agreements with any officers or directors of the Company, or (iii) materially increase in any manner the aggregate compensation or benefits (including, without limitation, commissions) or severance or termination pay payable to any officer or director of the Company;

12. issue, sell, grant options or rights to purchase, pledge, or authorize the issuance, sale, grant of options or rights to purchase or pledge any of the shares of the Company or any Subsidiary, other than (i) shares of Common Stock issued upon the exercise of options or warrants outstanding as of the date hereof, or (ii) options granted after the date hereof in the ordinary course of business consistent with past practice and pursuant to any of the Company Stock Plans;

13. change any material Tax election;

14. settle or agree to settle any suit, action, claim, proceeding or investigation (excluding any suit, action, claim, proceeding or investigation relating to this Agreement or the other Transaction Documents or the transactions contemplated hereby or thereby and which (1) arises out of or results from any statements or disclosures with respect to this Agreement or the other Transaction Documents or the transactions contemplated hereby or thereby that are made by the Company pursuant to the Exchange Act, the Securities Act or any other applicable securities Legal Requirement, (2) settlement thereof does not involve the admission by the

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Company of any fault or wrongdoing, or (3) settlement thereof involves only the payment of monetary damages, fines or penalties that are insured under, and do not materially exceed the coverage limits of, the insurance coverage maintained by the Company), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice, of such suits, actions, claims, proceedings or investigations that have been (i) Previously Disclosed, (ii) reserved against in the Company Financial Statements, or (iii) incurred in the ordinary course of business consistent with past practice since the Company Balance Sheet Date; or

15. authorize, or commit or agree to take, any of the foregoing actions.

4.2    Preparation of the Proxy Statement.

1. As promptly as reasonably practicable following the execution of this Agreement, the Company shall prepare and file the Proxy Statement with the SEC. Thereafter, the Company shall use its reasonable best efforts to have the Proxy Statement cleared by the SEC and to be mailed to its stockholders as promptly as reasonably practicable. The Investor shall furnish all information concerning its participation in the Investment and itself and its Subsidiaries and Affiliates to the Company as may be reasonably requested in connection with the Investment and the preparation, filing and distribution of the Proxy Statement. The Company shall cause the Proxy Statement to comply as to form and substance in all material respects with the applicable requirements of (i) the Exchange Act, including Section 14(A) thereof, and the respective regulations promulgated thereunder, (ii) the rules and regulations of any applicable stock exchange or automated quotation system and (iii) the DGCL.

2. The Proxy Statement shall include the Company Recommendation, except as otherwise permitted by Section 4.5(c) of this Agreement.

3. The parties shall cooperate in good faith in preparing and filing the Proxy Statement and any amendments or supplements thereto (including responding to any related requests for additional information and comments from the SEC or its staff). Prior to filing or mailing the Proxy Statement and any amendments or supplements thereto, or responding to any related comments or requests from the SEC or its staff, the Company shall provide the Investor and its advisors with a reasonable opportunity to review and comment on such materials to be filed or mailed, or such responses to be given, and the Company shall make all changes to such materials and responses as reasonably may be requested by the Investor; provided, however, that the Company shall not be required to make such changes requested by the Investor to the extent such requests are related to (i) the characterization by the Company of any Competing Proposal if the Company believes in good faith that its characterization of any such Competing Proposal is factually accurate with respect to the terms and conditions of such Competing Proposal or (ii) the Company Recommendation. The Company shall, as promptly as practicable, notify the Investor following receipt of any requests for additional information and comments from, and supply the Investor with copies of all correspondence with, the SEC or the staff thereof in connection with the Proxy Statement and any amendments or supplements thereto.

4. If, at any time after the mailing of the definitive Proxy Statement and prior to the Company Stockholders' Meeting, any event should occur that results in the Proxy Statement containing an untrue statement of a material fact or omitting to state any material fact

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required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading, or that otherwise should be described in an amendment or supplement to the Proxy Statement, the Company and Parent shall promptly notify each other of the occurrence of such event and then promptly prepare and file with the SEC such amendment or supplement and the Company shall, as may be required by the SEC, mail to its stockholders each such amendment or supplement.

4.3    Company Stockholders' Meeting. The Company shall establish a record date for and cause a meeting of its stockholders to be duly called and held as soon as reasonably practicable for the purpose of obtaining the Company Stockholders' Approval (such meeting, the "Company Stockholders' Meeting"). In connection with the Company Stockholders' Meeting, the Company, acting through the Board of Directors, will, subject to Section 4.5(c), (i) recommend the approval of this Agreement, each of the other Transaction Documents and transactions contemplated hereby and thereby, including the Investment, (ii) recommend the approval of the Amended and Restated Certificate of Incorporation, (iii) recommend the election to the Board of Directors, effective as of the Closing, of the initial Investor Nominees (as such term is defined in the Investor Rights Agreement) set forth in Section 4.3 of the Investor's Disclosure Schedule, and (iv) otherwise comply with all Legal Requirements applicable to such meeting. Without limiting the generality of the foregoing, but subject to the termination rights of the parties, the Company's obligations pursuant to this Section 4.3 shall not be affected by the commencement, proposal, disclosure or communication to the Company or otherwise of any Competing Proposal (including a Superior Proposal).

4.4    No Solicitation; Unsolicited Proposals.

1. From the date of this Agreement until the Closing or, if earlier, the valid termination of this Agreement in accordance with its terms, the Company shall not, shall cause all of the Company's officers and directors not to, and shall not authorize or permit its non-officer employees, investment bankers, attorneys, accountants or other agents or representatives (collectively, "Representatives") to, directly or indirectly, (i) solicit, initiate, knowingly encourage or facilitate (including by way of furnishing non-public information) the making or submission of, or any inquiry, offer, proposal or indication of interest that constitutes a Competing Proposal (as defined below), (ii) participate or engage in any discussions or negotiations with, or disclose or provide any non-public information or data relating to the Company to any person, or "group" (as defined under Section 13(d) of the Exchange Act ) other than the Investor and its Representatives (any such person or "group" and its Representatives (excluding the Company's and the Investor's Representatives in their capacity as such), a "Third Party") relating to a Competing Proposal, (iii) accept, approve, endorse or recommend a Competing Proposal, or (iv) enter into any agreement, arrangement, undertaking, contract, commitment or understanding (including any agreement in principle or letter of intent or understanding) providing for or contemplating a Competing Proposal. The Company shall, and shall cause the Company's Representatives to, immediately cease and terminate any existing solicitation, encouragement, activity, discussion or negotiation with any Third Party heretofore conducted by the Company or its Representatives with respect to a Competing Proposal or Competing Transaction (as defined below).

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As used in this Agreement, "Competing Proposal" means any inquiry, offer, proposal or indication of interest, whether or not in writing, as the case may be, by any person that relates to a Competing Transaction. As used in this Agreement, "Competing Transaction" means any transaction or series of transactions (other than the transactions contemplated by this Agreement) involving: (i) a merger, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction or series of related transactions involving the Company; (ii) any sale, lease, exchange, transfer or other disposition (including by way of merger, consolidation or exchange), in a single transaction or a series of related transactions, of the assets of the Company constituting 15% or more of the consolidated assets of the Company or accounting for 15% or more of the consolidated revenues of the Company; or (iii) any tender offer, exchange offer or other offer for, or acquisition or other similar transaction or series of related transactions by any person or "group" (within the meaning of Regulation 13D under the Exchange Act) that, if consummated, would result in such person or group becoming the beneficial owner of, 15% or more of the outstanding Common Stock.

2. Notwithstanding the restrictions set forth in Section 4.4(a), if, at any time prior to the Closing, (i) the Company receives an unsolicited bona fide written Competing Proposal from a Third Party and under circumstances in which the Company and its Representatives have complied with the Company's obligations under Section 4.4(a) and (ii) the Board of Directors determines in good faith (after consultation with its financial advisors and outside legal counsel) (such consultation with financial advisors and outside legal counsel, "After Consultation") that such Competing Proposal is, or is reasonably likely to lead to, a Superior Proposal, the Company may, subject to its giving the Investor at least 48 hours prior written notice (which notice shall contain the identity of such Third Party, a description of the material terms of such Competing Proposal and a statement to the effect that the Board of Directors has made the determination required by this Section 4.4(b) and the Company intends to furnish non-public information to, or enter into discussions or negotiations with, such Third Party), (x) furnish non-public information with respect to the Company to such Third Party, and (y) participate in discussions or negotiations with such Third Party regarding such Competing Proposal. Prior to furnishing any such nonpublic information to, or entering into discussions with, such Third Party concerning a Superior Proposal, the Company shall receive from such Third Party an executed confidentiality agreement containing provisions (including nondisclosure provisions, use restrictions, non- solicitation provisions and no hire provisions) at least as favorable to the Company as those obtained from the Investor and prior to or concurrent with furnishing any such nonpublic information to such Third Party, the Company furnishes such nonpublic information to Investor (to the extent such nonpublic information has not been previously furnished by the Company to the Investor).

   As used in this Agreement, "Superior Proposal" means any bona fide, unsolicited written Competing Proposal from a Third Party (i) for more than 50% of the voting power of the Company or 50% of the consolidated assets of the Company, (ii) which a majority of the Board of Directors determines in good faith After Consultation, taking into account the person making the Competing Proposal and the likelihood and timing of consummation (including the financial, legal, regulatory and other aspects of the Competing Proposal deemed relevant by the Board of Directors in good faith), would, if implemented on the fundamental economic terms as initially proposed by such Third Party, result in a transaction that is superior from a financial point of view to the Company's stockholders to the Investment, including any proposed alterations of the

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terms of this Agreement proposed by the Investor in response to such proposal and (iii) that is not subject to any material contingency, including any contingency related to financing, unless, in the good faith judgment of the Board of Directors, such contingency is reasonably capable of being satisfied by such Third Party within a reasonable period of time.

3. In addition to any prior notice obligations contained in Section 4.4(b), the Company shall as promptly as practicable (and in any event within 24 hours) notify the Investor of any Competing Proposal that the Company receives or of any request for information or inquiry that the Company receives which relates to or would reasonably be expected to lead to a Competing Proposal, which notification shall include, (i) a description of the material terms and conditions of such Competing Proposal, request or inquiry, and (ii) the identity of the person making such Competing Proposal, request or inquiry. The Company shall keep the Investor informed on a reasonably current basis (but in any event within 48 hours) of the status and material terms and conditions (including all amendments or proposed amendments) of any such Competing Proposal, request or inquiry. The Company shall provide the Investor with at least 48 hours prior notice of a meeting of the Board of Directors (or such lesser notice as is provided to the members of the Company Board of Directors) at which the Board of Directors is reasonably expected to consider a Competing Proposal.

4. Nothing contained in this Agreement shall prohibit the Company from (i) issuing a "stop-look-and-listen communication" pursuant to Rule 14d-9(f) or taking and disclosing to its stockholders a position as required by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act or (ii) otherwise disclosing any information to its stockholders that the Board of Directors determines in good faith (after consultation with its outside legal counsel) it is required to disclose in order to not breach its fiduciary duties to the Company's stockholders under applicable law, subject to complying with its obligations under Section 4.5.

4.5    Company Recommendation.

1. Subject to the terms of Section 4.5(c) hereof, the Board of Directors (including a majority of the "Disinterested Directors" (as such term is defined in Section 1(F) of Article IX of the Company Certificate of Incorporation)) then serving on the Board of Directors) shall (i) recommend that the holders of outstanding shares of Common Stock (A) adopt and approve this Agreement, each of the other Transaction Documents and transactions contemplated hereby and thereby, including the Investment, (B) adopt and approve the Amended and Restated Certificate of Incorporation, and (C) elect to the Board of Directors, effective as of the Closing, the initial Investor Nominees (as such term is defined in the Investor Rights Agreement) set forth in Section 4.3 of the Investor's Disclosure Schedule, in each case in accordance with the applicable provisions of DGCL (collectively, the "Company Recommendation"), and take such lawful action (including the solicitation of proxies) to solicit the adoption, approval and election of the foregoing, and (ii) include the Company Recommendation in the Proxy Statement.

2. Subject to Section 4.5(c), neither the Board of Directors nor any committee thereof shall withdraw, qualify, modify, change or amend in any manner adverse to the Investor (including pursuant to the Proxy Statement or any amendment thereto), the Company Recommendation or the approval by the Board of Directors of this Agreement and the

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transactions contemplated hereby, including the Investment (a "Company Change in Recommendation").

3. Notwithstanding anything to the contrary set forth in this Agreement, the Board of Directors may effect a Company Change in Recommendation at any time prior to the Closing, if either:

   1. (A) the Board of Directors has received a Competing Proposal (that has not been withdrawn) and such Competing Proposal shall not have resulted from a breach or violation of the terms of Section 4.4(a) or (c), (B) the Board of Directors determines in good faith After Consultation that such Competing Proposal is a Superior Proposal, (C) at least two business days prior to such Company Change in Recommendation, the Company shall have provided to the Investor a written notice (a "Notice of Recommendation Change") of its intention to make such Company Change in Recommendation (which notice shall not be deemed to be, in and of itself, a Company Change in Recommendation), specifying the material terms and conditions of such Superior Proposal, including a copy of such Superior Proposal and identifying the person making such Superior Proposal (it being understood and agreed that any amendment to the financial terms or any other material terms of such Superior Proposal shall require the delivery of a new Notice of Recommendation Change and a new two business day period), (D) during the two business day period following the Investor's receipt of a Notice of Recommendation Change, the Company shall have given the Investor the opportunity to meet with the Company and its Representatives regarding the terms of possible revisions to the terms of this Agreement, and (E) the Investor shall not, within two business days of the Investor's receipt of a Notice of Recommendation Change, have made an offer that the Board of Directors determines in good faith After Consultation to be at least as favorable to the Company's stockholders as such Superior Proposal; or

   2. other than in connection with a Superior Proposal (it being understood and hereby agreed that the Board of Directors shall not effect a Company Change of Recommendation in connection with a Superior Proposal other than pursuant to the immediately preceding clause (1) of this Section 4.5(c)), (A) the Board of Directors determines in good faith After Consultation that the failure to effect a Company Change in Recommendation would be a breach of its fiduciary duties to the Company's stockholders under applicable Legal Requirements and (B) at least three business days prior to such Company Change in Recommendation, the Company shall have provided to the Investor a Notice of Recommendation Change of its intention to make such Company Change in Recommendation (which notice shall not be deemed to be, in and of itself, a Company Change in Recommendation), specifying in sufficient detail the circumstances for such proposed Company Change in Recommendation (it being understood and agreed that any change to such circumstances or any additional circumstances shall require the delivery of a new Notice of Recommendation Change and a new three business day period), and (C) during the three business day period following the Investor's receipt of a Notice of Recommendation Change, the Company shall have given the Investor the opportunity to meet with the Company and its Representatives regarding the terms of possible revisions to the terms of this Agreement.

4. Notwithstanding anything to the contrary in this Section 4.5, the Company shall not be entitled to enter into any agreement (other than a confidentiality agreement as

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contemplated by Section 4.4(b) (a "Confidentiality Agreement")), including a letter of intent, with respect to a Superior Proposal unless this Agreement has been or concurrently is validly terminated by its terms pursuant to Section 7.1 and the Investor has received, by wire transfer of immediately available funds, any amounts due to the Investor pursuant to Section 7.3(b).

4.6    Notification of Certain Matters. The Company shall give prompt notice to the Investor, and the Investor shall give prompt notice to the Company, of (a) the occurrence or non-occurrence of any event whose occurrence or non- occurrence, as the case may be, would be likely to cause either (i) any representation or warranty of the other contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Closing or (ii) any condition or requirement set forth in Sections 6.1, 6.2 or 6.3, as applicable, to be unsatisfied at any time from the date hereof to the Closing Date (except to the extent it refers to a specific date) and (b) any material failure of the Company or the Investor as the case may be, or any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 4.6 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice or the representations or warranties of the parties, or the conditions to the obligations of the parties hereto; and provided further that a failure to comply with this Section 4.6 shall not constitute a breach of this Agreement or the failure of any condition set forth in Sections 6.1, 6.2 or 6.3, as applicable, to be satisfied unless the underlying material breach would independently result in the failure of a condition set forth in Sections 6.1, 6.2 or 6.3, as applicable, to be satisfied

4.7    Filings; Other Actions.

1. From the date of this Agreement until the earlier of the Closing or the termination of this Agreement pursuant to Section 7.1, the Investor, on the one hand, and the Company, on the other hand, will cooperate and consult with the other and use reasonable best efforts to prepare and file all necessary documentation, to effect all necessary applications, notices, petitions, filings and other documents, and to obtain all necessary permits, consents, orders, approvals and authorizations of, or any exemption by, all third parties and Governmental Entities, and the expiration or termination of any applicable waiting periods, necessary or advisable to consummate the Investment and the other transactions contemplated by this Agreement, and to perform the covenants contemplated by this Agreement. Each party shall execute and deliver both before and after the Closing such further certificates, agreements and other documents and take such other actions as the other parties may reasonably request to consummate or implement such transactions or to evidence such events or matters. In particular, each of the parties hereto will use its respective reasonable best efforts to promptly obtain or submit, and each of the parties hereto will cooperate as may reasonably be requested by the other party to help the such party promptly obtain or submit, as the case may be, as promptly as practicable, the approvals and authorizations of, filings and registrations with, and notifications to, or expiration or termination of any applicable waiting period, under any applicable competition or merger control Legal Requirements. The Investor and the Company will have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to applicable Legal Requirements relating to the exchange of information, all the information relating to such other party, and any of their respective Affiliates, which appears in any filing made with, or written materials submitted to, any third party or any Governmental

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Entity in connection with the transactions to which it will be party contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto agrees to act reasonably and as promptly as practicable. Each party hereto agrees to keep the other party apprised of the status of matters referred to in this Section 4.7. The Investor and the Company shall promptly furnish the other with copies of written communications received by it or its Subsidiaries from, or delivered by any of the foregoing to, any Governmental Entity in respect of the Investment and the other transactions contemplated by this Agreement (other than any portions thereof that relate to confidential matters).

2. From the date of this Agreement until the earlier of the Closing or the termination of this Agreement pursuant to Section 7.1, each of the Company and the Investor shall promptly notify the other in writing of any pending or, to the knowledge of the Investor or the Company (as the case may be), threatened action, suit, arbitration or other proceeding or investigation by any Governmental Entity or any other person (i) challenging or seeking material damages in connection with the Investment or the other transactions contemplated by this Agreement, or (ii) seeking to restrain or prohibit the consummation of the Investment or the other transactions contemplated by this Agreement. The Company shall give the Investor the opportunity to consult with the Company regarding the defense or settlement of any stockholder litigation and shall consider the Investor's views with respect to such stockholder litigation. Notwithstanding the foregoing, the Company shall not be required to provide any notice or information to Parent the provision of which the Company in good faith determines may adversely affect the Company's or any other person's attorney client or other privilege with respect to such information.

3. If any administrative or judicial action or proceeding is instituted (or threatened to be instituted) by a Governmental Entity challenging the Investment or the other transactions contemplated by this Agreement as violative of any applicable Legal Requirement, each of the Company and the Investor shall, and shall cause their respective Affiliates to, cooperate and use their reasonable best efforts to contest and resist, except insofar as the Company and the Investor may otherwise agree, any such action or proceeding, including any action or proceeding that seeks a temporary restraining order or preliminary injunction that would prohibit, prevent or restrict consummation of the Investment or the other transactions contemplated by this Agreement.

4.8    Access, Information and Confidentiality

1. During the Pre-Closing Period, the Company will permit the Investor to visit and inspect, at the Investor's expense, the properties of the Company, to examine the corporate books and to discuss the affairs, finances and accounts of the Company with the principal officers of the Company, all upon reasonable notice and at such reasonable times and as often as the Investor may reasonably request. Any investigation pursuant to this Section shall be conducted during normal business hours and in such manner as not to interfere unreasonably with the conduct of the business of the Company, and nothing herein shall require the Company to disclose any information to the extent (i) prohibited by applicable Legal Requirements, (ii) that the Company reasonably believes such information to be competitively sensitive proprietary information (except to the extent the Investor provides assurances reasonably acceptable to the Company that such information shall not be used by the Investor or its

Affiliates to compete with the Company), or (iii) that such disclosure would reasonably be expected to cause a violation of any agreement to which the Company is a party or would cause a risk of a loss of privilege to the Company (provided that the Company shall use commercially reasonable efforts to make appropriate substitute disclosure arrangements under circumstances where the restrictions in this clause (iii) apply).

2. Each party to this Agreement will hold, and will cause its respective Affiliates and their directors, officers, employees, agents, consultants and advisors to hold, in strict confidence, unless disclosure to a regulatory authority is necessary or appropriate in connection with any necessary regulatory approval or unless disclosure is required by judicial or administrative process or, in the written opinion of its counsel, by other Legal Requirement or the applicable requirements of any regulatory agency or relevant stock exchange, all non-public records, books, contracts, instruments, computer data and other data and information (collectively, "Information") concerning the other party furnished to it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) previously known by such party on a non- confidential basis, (2) in the public domain through no fault of such party or (3) later lawfully acquired from other sources by the party to which it was furnished), and neither party shall release or disclose such Information to any other person, except its auditors, attorneys, financial advisors, other consultants and advisors.

4.9    Publicity. So long as this Agreement is in effect, neither the Company nor the Investor, nor any of their respective Affiliates, shall issue or cause the publication of any press release or other announcement with respect to the Investment or this Agreement without the prior consent of the other party, unless such party determines, after consultation with outside counsel, that it is required by applicable law or by any listing agreement with or the listing rules of a national securities exchange or trading market to issue or cause the publication of any press release or other announcement with respect to the Investment or this Agreement, in which event such party shall endeavor, on a basis reasonable under the circumstances, to provide a meaningful opportunity to the other parties to review and comment upon such press release or other announcement and shall give due consideration to all reasonable additions, deletions or changes suggested thereto; provided, however, that the party seeking to issue or cause the publication of any press release or other announcement with respect to the Investment or this Agreement shall not be required to provide any such review or comment to the other party in connection with any disclosure contemplated by Section 4.4 or Section 4.5.

4.10    State Takeover Laws. If any "control share acquisition", "fair price" or other anti-takeover laws or regulations enacted under state or federal Legal Requirements becomes or is deemed to become applicable to the Company, the Investment or any other transaction contemplated by this Agreement, then the Board of Directors shall take all action necessary to render such statute inapplicable to the foregoing.

4.11    Continued Listing. The Company shall appeal the decision of the staff of the New York Stock Exchange (the "NYSE") that the Common Stock be removed from listing on the NYSE and the Company shall use it commercially reasonable efforts to obtain a favorable ruling from the Listing Committee of the NYSE's Board of Directors and the relisting of the Common Stock on the NYSE. In the event the NYSE denies the Company's appeal of the decision to

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remove the Common Stock from listing on the NYSE, the Company shall, in consultation with the Investor, use its commercially reasonable efforts to obtain a listing of the Common Stock on the Nasdaq Stock Market.

ARTICLE V

ADDITIONAL AGREEMENTS

5.1    Legend.

1. The Investor agrees that all certificates or other instruments representing the Securities subject to this Agreement will bear a legend substantially to the following effect:

   1. THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.

   2. THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS SET FORTH IN AN INVESTOR RIGHTS AGREEMENT, DATED AS OF ___________, 2008, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE ISSUER.

2. Upon request of the Investor, following receipt by the Company of an opinion of counsel reasonably satisfactory to the Company to the effect that such legend is no longer required under the Securities Act and applicable state Legal Requirements, the Company shall cause clause (1) of the legend to be removed from any certificate for any Securities to be transferred in accordance with the terms of the Investor Rights Agreement and clause (2) of the legend shall be removed upon the expiration of such transfer and other restrictions set forth in the Investor Rights Agreement. The Investor acknowledges that the Securities have not been registered under the Securities Act or under any state securities Legal Requirements and agrees that it will not sell or otherwise dispose of any of the Securities, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities Legal Requirements.

5.2    Amended and Restated Certificate of Incorporation. In connection with, and as a condition to, the Closing, the Company shall, subject to receipt of the Company Stockholders' Approval, file the Amended and Restated Certificate of Incorporation with the Delaware Secretary of State.

5.3    Investor Rights Agreement. At the Closing, the Company and the Investor shall enter into an Investor Rights Agreement, in the form set forth on Exhibit H attached hereto (the "Investor Rights Agreement"), which shall govern the respective rights and obligations of the Company and the Investor with respect to, among other matters, the Securities and all other shares of Common Stock the Investor may otherwise acquire, including the registration thereof.

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5.4    Termination of Stockholders' Agreement. The Company shall use its best reasonable business efforts to cause that certain Amended and Restated Stockholders' Agreement, dated as of July 18, 2008 (the "Stockholders' Agreement"), by and among the Company, El Corte Ingles, S.A. ("ECI"), and ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ (together, the "Levy Family Members") to be terminated as of the Closing.

5.5    Transfer of Luichi Sourcing Business to Everbright Asia. The Investor and certain of its Affiliates (the "Luichi Affiliates") are engaged in the development, operation and maintenance of the "Luichi" product sourcing network (the "Luichi Network"), consisting of manufacturers (the "Luichi Manufacturers") located in the People's Republic of China (the "PRC") who, in return for payment of a periodic membership fee to the Investor, may participate in the Luichi Network and its AssurePay payment facilitation system for the purpose of exporting and selling manufactured products, including the export and sale through the Investor on a wholesale basis, acting as agent and representative for such Luichi Manufacturers, to retailers located outside of the PRC, including the United States (such business of the Investor and the Luichi Affiliates, the "Luichi Sourcing Business"). In connection therewith, and as a material inducement to the Company to enter into this Agreement and to consummate the Investment and the other transactions contemplated hereunder, the Investor shall, and shall cause the Luichi Affiliates to, transfer to Everbright Asia, on or prior to the Closing Date, all of the assets, properties, rights and interests, whether tangible or intangible, of the Investor and the Luichi Affiliates necessary in order for Everbright Asia to assume the ownership, management, operation and development of the Luichi Sourcing Business on and after the Closing Date.

5.6    Tax Election. Promptly upon the Closing, the Company shall cause Everbright Asia to make an election on IRS Form 8832 to be disregarded as a separate entity for United States income tax purposes.

ARTICLE VI

CONDITIONS

6.1    Conditions to Each Party's Obligations. The respective obligations of each party to this Agreement to complete the transactions provided for herein (including the Investment) shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the Company and the Investor, as the case may be, to the extent permitted by applicable law:

1. Company Stockholders' Approval. The Company Stockholders' Approval shall have been obtained in accordance with applicable Legal Requirements, the Company Organizational Documents and the provisions of this Agreement.

2. Legal Prohibition. No Legal Prohibition shall have been enacted and be in effect, provided, however, that each of the parties shall use their reasonable best efforts to prevent any such Legal Prohibition and to cause any such Legal Prohibition to be vacated or otherwise rendered of no effect, and to take such other actions as are consistent therewith to the extent necessary to remove the Legal Prohibition.

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3. Receipt of Government Consents. All consents, approvals, authorizations, qualifications and orders of any Governmental Entity set forth on Section 6.1 of the Company's Disclosure Schedule shall have been obtained and evidence thereof, in form reasonably satisfactory to the parties, shall have been delivered to the Parties and shall be in full force and effect as of the Closing and any waiting period (and any extension thereof) under any applicable antitrust or anti-competitive Legal Requirements shall have expired.

6.2    Conditions to the Investor's Obligations. The obligations of the Investor to complete the transactions provided for herein (including the Investment) shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the Investor to the extent permitted by applicable Legal Requirement:

1. Truth of Representations and Warranties. Each of the representations and warranties of the Company contained in this Agreement (i) if specifically qualified by "materiality," "Material Adverse Effect" or other similar terms shall be true and correct in all respects as of the date when made and at and as of the date of Closing, as though such representations and warranties were made at and as of such date (other than those representations and warranties that address matters as of particular dates which shall be true and correct (as qualified) at and as of such dates) and (ii) if not qualified by "materiality," "Material Adverse Effect" or other similar terms shall be true and correct in all material respects as of the date when made and at and as of the date of Closing as though then made (other than those representations and warranties that address matters as of particular dates which shall be true and correct in all material respects at and as of such dates).

2. Performance by the Company. The Company shall have performed in all material respects all of its agreements and covenants contained in this Agreement required to be performed by it at or prior to the Closing.

3. Company's Closing Certificate. The Company shall have delivered to the Investor at Closing an officer's certificate of the Company (the "Company's Closing Certificate"), solely in such capacity on behalf of the Company, certifying (i) as to the incumbency and signatures of the officers of the Company who executed this Agreement, (ii) as to the adoption of resolutions of the Board of Directors of the Company being correct, complete and in full force and effect on the Closing Date (though not necessarily dated as of the Closing Date), authorizing (A) the execution and delivery of this Agreement, and (B) the performance of the obligations of the Company hereunder, (iii) as to the Company Bylaws and all amendments thereto as being correct, complete and in full force and effect on the Closing Date and (iv) that the conditions to the Investor's obligations to consummate the transactions contemplated by this Agreement set forth in Sections 6.1 and 6.2 have been satisfied.

4. Third Party Consents. All consents, approvals and authorizations listed on Section 6.2(d) of the Company's Disclosure Schedules shall have been obtained and evidence thereof, in form reasonably satisfactory to the Investor, shall have been delivered to the Investor and shall be in full force and effect as of the Closing.

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5. Material Adverse Effect. Since the date of this Agreement there shall not have been or occurred any Material Adverse Effect, or any event, change, effect or circumstance that, individually or in the aggregate, reasonably would be expected to have a Material Adverse Effect. In determining whether there has been a Material Adverse Effect, any event, change, effect or circumstance will be considered individually and in the aggregate with all other events, changes, effects or circumstances.

6. Escrow Agreement. The execution and delivery by the Company and the Escrow Agent of the Escrow Agreement.

7. Amended and Restated Certificate of Incorporation. The Amended and Restated Certificate of Incorporation shall have been filed with the Delaware Secretary of State and declared effective.

8. Investor Rights Agreement. The execution and delivery by the Company of the Investor Rights Agreement.

9. Termination of Stockholders' Agreement. The termination of the Stockholders' Agreement by the Company, ECI and the Levy Family Members.

10. Amendment of ▇▇▇▇▇▇ Subordinated Note. That certain First Amendment to the Non-Negotiable, Subordinated Note Due May 30, 2010, dated as of November 20, 2008 (such amendment, the "Note Amendment"), by and between the Company and The ▇▇▇▇▇▇ Company ("▇▇▇▇▇▇") shall be in full force and effect.

11. Amendment to GE Credit Agreement. That certain Amendment to the GE Credit Agreement, dated as of November 20, 2008, by and among the Company, GECC, CIT Group Business Credit Inc., and the other lenders signatory thereto, and each of the other agreements contemplated thereby which are to have been executed and delivered by the parties thereto prior to the Closing shall be in full force and effect.

12. Investor Nominees. The initial Investor Nominees (as such term is defined in the Investor Rights Agreement) set forth in Section 4.3 of the Investor's Disclosure shall have been elected to the Board of Directors effective as of the Closing.

6.3    Conditions to the Company's Obligations. The obligations of the Company to complete the transactions provided for herein (including the Investment) shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the Company to the extent permitted by applicable Legal Requirement:

1. Truth of Representations and Warranties. Each of the representations and warranties of the Investor contained in this Agreement (i) if specifically qualified by "materiality," "material adverse effect" or other similar terms shall be true and correct in all respects as of the date when made and at and as of the date of Closing, as though such representations and warranties were made at and as of such date (other than those representations and warranties that address matters as of particular dates which shall be true and correct (as qualified) at and as of such dates) and (ii) if not qualified by "materiality," "material adverse

41

effect" or other similar terms shall be true and correct in all material respects as of the date when made and at and as of the date of Closing as though then made (other than those representations and warranties that address matters as of particular dates which shall be true and correct in all material respects at and as of such dates).

2. Performance by the Investor. The Investor shall have performed in all material respects all of its agreements and covenants contained in this Agreement required to be performed by it at or prior to the Closing.

3. Investor's Closing Certificate. The Investor shall have delivered to the Company at Closing an officer's certificate of the Investor (the "Investor's Closing Certificate"), solely in such capacity on behalf of the Investor, certifying (i) as to the incumbency and signatures of the officers of the Investor who executed this Agreement, (ii) as to the adoption of resolutions of the board of directors of the Investor being correct, complete and in full force and effect on the Closing Date (though not necessarily dated as of the Closing Date), authorizing (A) the execution and delivery of this Agreement, and (B) the performance of the obligations of the Investor hereunder, (iii) as to the Investor's bylaws and all amendments thereto as being correct, complete and in full force and effect on the Closing Date and (iv) that the conditions to the Company's obligations to consummate the transactions contemplated by this Agreement set forth in Sections 6.1 and 6.3 have been satisfied.

4. Third Party Consents. All consents, approvals and authorizations listed on Section 6.3(d) of the Investor's Disclosure Schedules shall have been obtained and evidence thereof, in form reasonably satisfactory to the Company, shall have been delivered to the Company and shall be in full force and effect as of the Closing.

5. Material Adverse Effect. Since the date of this Agreement there shall not have been or occurred any event, change, effect or circumstance that, individually or in the aggregate, reasonably would be expected to materially impair the ability of the Investor to perform its obligations under this Agreement or to consummate the Closing. In determining whether there has been such a material impairment to the ability of the Investor to perform its obligations under this Agreement or to consummate the Closing, any event, change, effect or circumstance will be considered individually and in the aggregate with al other events, changes, effects or circumstances.

6. Capital Call Agreement. The Capital Call Agreement shall be in full force and effect.

7. Escrow Agreement. The execution and delivery by the Investor and the Escrow Agent of the Escrow Agreement.

8. Everbright Asia Assignment and Stock Power. The execution and delivery by the Investor of the Everbright Asia Assignment and Stock Power.

9. Investor Rights Agreement. The execution and delivery by the Investor of the Investor Rights Agreement.

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10. Termination of Stockholders' Agreement. The termination of the Stockholders' Agreement by ECI and the Levy Family Members.

11. Amendment of ▇▇▇▇▇▇ Subordinated Note. The Note Amendment shall be in full force and effect.

12. Everbright Asia Subordinated Guaranty of ECI Note. The execution and delivery by Everbright Asia of a guaranty, issued by Everbright Asia in favor of ▇▇▇▇▇▇ with respect to the obligations of the Company under the 8% Non-Negotiable, Extendable, Subordinated Note, due May 30, 2010, issued by the Company in favor of ▇▇▇▇▇▇ (as amended by the Note Amendment), in the form set forth on Exhibit I attached hereto (the "Everbright Asia Subordinated Guaranty of ECI Note").

6.4    Obligations of the Investor at Closing. At Closing, the Investor shall deliver or cause to be delivered to the Company the following in form and substance reasonably satisfactory to the Company:

1. Aggregate Investment Consideration. The Investor shall deliver to the Company the Closing Consideration upon the terms specified in this Agreement.

2. Investor's Closing Certificate. The Investor shall deliver to the Company the Investor's Closing Certificate, executed on behalf of the Investor.

3. Escrow Agreement. The Investor shall deliver to the Company the Escrow Agreement, executed by the Investor.

4. Everbright Asia Assignment and Stock Power. The Investor shall deliver to the Company the Everbright Asia Assignment and Stock Power, executed by the Investor.

5. Documents Relating to Title. The Investor shall execute, acknowledge and deliver to the Company:

   1. Stock certificates representing all of the Everbright Asia Stock, registered in the name of, and duly endorsed by, the Investor, free and clear of all Liens and any other restrictions and imperfections of title of any nature whatsoever, and accompanied by such instruments of transfer and conveyance reasonably requested by the Company in form and substance reasonably satisfactory to the Company and its counsel evidencing and effecting the transfer of the Everbright Asia Stock to the Company.

   2. The resignation of each member of the Board of Directors of Everbright Asia and each officer of Everbright Asia, effective as of the Closing.

6. Investor Rights Agreement. The Investor shall deliver to the Company the Investor Rights Agreement, executed by the Investor.

7. Everbright Asia Subordinated Guaranty of ECI Note. The Investor shall, and shall cause Everbright Asia to, deliver to ▇▇▇▇▇▇ the Everbright Asia Subordinated Guaranty of ECI Note, executed by Everbright Asia.

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6.5    Obligations of the Company at Closing. At Closing, the Company shall deliver or cause to be delivered to the Investor the following in form and substance reasonably satisfactory to the Investor:

1. Closing Company Stock Certificates. The Company shall issue to the Investor one or more Closing Company Stock Certificates, representing the Closing Company Stock acquired by the Investor upon the terms specified in this Agreement.

2. Escrow Company Stock Certificates. The Company shall deliver to the Escrow Agent one or more Escrow Company Stock Certificates, representing the Escrow Company Stock acquired by the Investor upon the terms specified in this Agreement.

3. Warrants. The Company shall issue to the Investor the Warrants acquired by the Investor upon the terms specified in this Agreement.

4. Company's Closing Certificate. The Company shall deliver to the Investor the Company's Closing Certificate, executed on behalf of the Company.

5. Escrow Agreement. The Company shall deliver to the Investor the Escrow Agreement, executed by the Company.

6. Amended and Restated Certificate of Incorporation. The Company shall deliver to the Investor evidence that the Amended and Restated Certificate of Incorporation has been filed with the Delaware Secretary of State and declared effective.

7. Investor Rights Agreement. The Company shall deliver to the Investor the Investor Rights Agreement, executed by the Company.

7.1    Termination. This Agreement may be terminated at any time prior to the Closing (any such date, the "Termination Date"):

1. by the mutual written agreement of the Company and the Investor;

2. by either the Company or the Investor upon written notice to the other party:

   1. if the Investment has not been consummated on or before February 28, 2009 (such date, as it may be extended as set forth below, the "End Date"); provided that the right to terminate this Agreement pursuant to this Section 7.1(b)(i) shall not be available to a party whose breach of any provision of this Agreement results in the failure of the Investment to be consummated by the End Date;

   2. after the date of this Agreement, if any Governmental Entity shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive

44

order, decree, judgment, injunction or other order, in any case that is in effect, final and non-appealable and that prevents or prohibits consummation of the Investment (a "Legal Prohibition"); or

3. if the Company Stockholders' Approval shall not have been obtained following a vote at the Company Stockholders' Meeting (or any adjournment or postponement thereof);
3. by the Investor upon written notice to the Company:

   1. at any time after a Change in the Company Recommendation or if the Board of Directors (or any committee thereof) shall have (x) approved or recommended or announced a neutral position with respect to any Competing Proposal or (y) resolved to do the foregoing;

   2. (A) if any of the Company's representations and warranties shall have been inaccurate as of the date of this Agreement, such that the condition set forth in Section 6.2(a) would not be satisfied, or (B) if any of the Company's representations and warranties become inaccurate as of a date subsequent to the date of this Agreement (as if made on such subsequent date), such that the condition set forth in Section 6.2(a) would not be satisfied, or (C) if any of the Company's covenants contained in this Agreement shall have been breached, such that the condition set forth in Section 6.2(b) would not be satisfied; provided that no such inaccuracy or breach under the foregoing clauses shall give rise to a right to terminate, unless such inaccuracy or breach cannot be or is not cured within 30 days of written notice of such inaccuracy or breach from the Investor (or, if sooner, the date prior to the End Date); or

   3. at any time on or prior to December 1, 2008, if, based on the legal, financial and business due diligence inquiry of the Company by the Investor and its advisors, the Investor discovers any circumstance, event, change, development or effect that is a Material Adverse Effect or that, individually or in the aggregate, reasonably would be expected to have a Material Adverse Effect (in each case considered individually and in the aggregate with all other events, changes, effects or circumstances), which circumstance, event, change, development or effect was not Previously Disclosed on or prior to the date hereof;

4. by the Company upon written notice to the Investor:

   1. if the Board of Directors effects a Company Change in Recommendation in accordance with the terms and subject to the conditions of Section 4.5(c); provided that such termination under this clause (d)(1) shall not be effective until the Company has tendered payment of the fee required pursuant to Section 7.3(d); or

   2. (A) if any of the Investor's representations and warranties shall have been inaccurate as of the date of this Agreement, such that the condition set forth in Section 6.3(a) would not be satisfied, or (B) if any of the Investor's representations and warranties become inaccurate as of a date subsequent to the date of this Agreement (as if made on such subsequent date), such that the condition set forth in Section 6.3(a) would not be satisfied, or (C) if any of the Investor's covenants contained in this Agreement shall have been breached, such that the condition set forth in Section 6.3(b) would not be satisfied; provided that no such

45

inaccuracy or breach under the foregoing clauses shall give rise to a right to terminate, unless such inaccuracy or breach cannot be or is not cured within 30 days of written notice of such inaccuracy or breach from the Company (or, if sooner, the date prior to the End Date).

7.2    Effect of Termination. If this Agreement is terminated pursuant to Section 7.1, this Agreement shall become void and of no effect without liability of any party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other parties hereto, except that (i) the agreements contained in Section 7.2, Section 7.3 and Article VIII of this Agreement shall survive the termination hereof and (ii) no such termination shall relieve any party of any liability for damages resulting from any willful breach by such party of this Agreement.

7.3    Fees and Expenses.

1. Each of the parties will bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated pursuant to this Agreement, whether or not the Investment is consummated; provided, however, that in the event the Transaction is consummated, the Company shall, after receipt from the Investor of a reasonably-detailed invoice therefor, reimburse the Investor for all reasonable out-of-pocket costs actually incurred by it in connection with the negotiation and consummation of the Investment, up to a maximum aggregate amount not to exceed $300,000.

2. Under the circumstances and at the times specified in this Section 7.3, the Company shall pay to the Investor a termination fee of $500,000 in cash (the "Termination Fee").

3. If (i) this Agreement is terminated pursuant to Section 7.1(b)(1), 7.1(b)(3), Section 7.1(c)(1) after a Change in Recommendation, or 7.1(c)(2)(C) by reason of a breach of Section 4.2(a) or (b), Section 4.3 or Section 4.4, (ii) prior to such termination, a Competing Proposal is made by any Third Party and (iii) within twelve (12) months after such termination, either (1) the Company enters into any letter of intent, agreement in principle, acquisition agreement or other similar arrangement with any Third Party with respect to, or consummates, a Competing Proposal or (2) if the Company has not entered into an agreement or other arrangement contemplated in clause (iii)(1) and any Third Party commences a tender or exchange offer that, if consummated, would result in the acquisition by such Third Party, or any affiliate thereof, making the tender or exchange offer of fifty percent (50%) or more of the Common Stock, then in either case the Company shall pay the Termination Fee to the Investor at the times provided in Section 7.3(e). The parties agree that if a Termination Fee is paid by the Company to the Investor pursuant to the terms of this Section 7.3(c), then such Termination Fee shall be the Investor's exclusive remedy for the matters covered by this Section 7.3(c).

4. If this Agreement is terminated (i) by the Company pursuant to Section 7.1(d)(1), whether by reason of Section 4.5(c)(1) or by reason of Section 4.5(c)(2), or (ii) by the Investor pursuant to Section 7.1(c)(1) by reason of Section 4.5(c)(2), then the Company shall pay the Termination Fee to the Investor simultaneously with such termination.

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5. If the Termination Fee becomes payable pursuant to Section 7.3(c)(iii)(1), then the Company shall pay the Termination Fee within one Business Day after the earlier to occur of (i) the date upon which the Company enters into such letter of intent, agreement in principle, acquisition agreement or other similar arrangement with a Third Party with respect to a Competing Proposal, and (ii) the date upon which the Company consummates such Competing Proposal. If the Termination Fee becomes payable pursuant to Section 7.3(c)(iii)(2), then the Company shall pay the Termination Fee within one Business Day after the closing of such tender or exchange offer.

6. Any payment of the Termination Fee shall be made by wire transfer of immediately available funds to an account specified by the Investor.

The Company acknowledges that the agreements contained in this Section 7.3 are an integral part of the transactions contemplated in this Agreement, and that, without these agreements, the Investor would not have entered into this Agreement.

8.1    Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Purchased Company Stock and the Warrants and continue in full force and effect until the first anniversary of the Closing.

8.2    Amendment. No amendment or waiver of any provision of this Agreement will be effective with respect to any party unless made in writing and signed by an officer of a duly authorized representative of such party. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

8.3    Waivers. The conditions to each party's obligation to consummate the Closing are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable Legal Requirement. No waiver of any party to this Agreement, as the case may be, will be effective unless it is in a writing signed by a duly authorized officer of the waiving party that makes express reference to the provision or provisions subject to such waiver.

8.4    Counterparts and Facsimile. For the convenience of the parties hereto, this Agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. Executed signature pages to this Agreement may be delivered by facsimile and such facsimiles will be deemed as sufficient as if actual signature pages had been delivered.

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8.5    Governing Law; Jurisdiction.

1. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to conflicts of laws principles that would result in the application of the law of any other state.

2. Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Delaware Court of Chancery, or, if no such state court has proper jurisdiction, the Federal court of the United States of America, sitting in Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware Court of Chancery court or, if no such state court has proper jurisdiction, then in such Federal court, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware Court of Chancery or Federal court, and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware Court of Chancery or Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.7. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. Each party hereto agrees not to commence any legal proceedings relating to or arising out of this Agreement or the transactions contemplated hereby in any jurisdiction or courts other than as provided herein.

8.6    WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE INVESTMENT CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.6.

8.7    Notices. Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally or by telecopy or facsimile, upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a recognized next-day

48

courier service, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

1. If to the Investor:

   Everbright Development Overseas Securities Ltd.
   ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
   ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
   Attention: Ms. Mi Wang, Chairman
   Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇

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

   ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
   ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
   ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
   Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
   Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇

2. If to the Company:

   Gottschalks Inc.
   ▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
   ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
   Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
   Chairman and Chief Executive Officer
   Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇

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

   O'Melveny & ▇▇▇▇▇ LLP
   ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
   ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
   Attention: C. ▇▇▇▇▇ ▇▇▇▇▇, Esq.
   Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇

8.8    Entire Agreement, Etc. (a) This Agreement (including the Exhibits and Disclosure Schedules hereto) constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, among the parties, with respect to the subject matter hereof; and (b) this Agreement will not be assignable by operation of law or otherwise (any attempted assignment in contravention hereof being null and void); provided that the Investor may assign its rights and obligations under this Agreement to any Affiliate under common control with the Investor's ultimate parent entity or general partner of the Investor, but in each case only if the transferee agrees in writing for the benefit of the Company (with a copy thereof to be furnished to the Company) to be bound by the terms of this Agreement (any such transferee shall be included in the term "Investor"); provided, further,

49

that no such assignment shall relieve the Investor of its obligations hereunder. Without limiting the foregoing, none of the rights of the Investor hereunder shall be assigned to, or enforceable by, any person to whom the Investor may transfer any Securities (including any shares of Common Stock issued upon exercise of the Warrants).

8.9    Other Definitions. Wherever required by the context of this Agreement, the singular shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa, and references to any agreement, document or instrument shall be deemed to refer to such agreement, document or instrument as amended, supplemented or modified from time to time.

1. the term "Affiliate" means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") when used with respect to any person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such person, whether through the ownership of voting securities by contract or otherwise;

2. the word "or" is not exclusive;

3. the words "including," "includes," "included" and "include" are deemed to be followed by the words "without limitation";

4. the terms "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision;

5. "business day" means any day, other than Saturday, Sunday or a United States federal holiday, and shall consist of the time period from 12:01 a.m. through 12:00 midnight New York City time;

6. "person" has the meaning given to it in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act;

7. all references to dollar amounts shall be to United States dollars; and

8. all article, section, paragraph or clause references not attributed to a particular document shall be references to such parts of this Agreement, and all exhibit, annex and schedule references not attributed to a particular document shall be references to such exhibits, annexes and schedules to this Agreement.

8.10    Captions. The article, section, paragraph and clause captions herein are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof.

8.11   Severability. If any provision of this Agreement or the application thereof to any person (including, the officers and directors of the Investor and the Company) or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

8.12   No Third Party Beneficiaries. Nothing contained in this Agreement, expressed or implied, is intended to confer upon any person or entity other than the parties hereto, any benefit right or remedies. In some instances, the representations and warranties set forth in this Agreement may represent an allocation of risk among the parties, regardless of knowledge, so no persons, other than the parties to this Agreement, should rely upon the representations or warranties or characterizations of actual facts.

8.13   Time of Essence. Time is of the essence in the performance of each and every term of this Agreement.

8.14   Certain Adjustments. If the representations and warranties set forth in Section 3.2(b) shall not be true and correct as of the Closing Date, the number of shares of Purchased Company Stock, and the number of shares of Common Stock that may be issued to the Investor upon exercise of the Warrants shall be, at the Investor's option, proportionately adjusted to provide the Investor with the same economic effect as contemplated by this Agreement in the absence of such failure to be true and correct.

8.15   Specific Performance. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at law or equity.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first herein above written.

By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer

By: /s/ ▇▇▇ ▇▇▇▇
Name: ▇▇▇ ▇▇▇▇
Title: Chairman

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[Signature Page to Investment Agreement]

Exhibit A