Exhibit 10.2

 

 

 

 

SECURITY AGREEMENT

 

by

 

CHRISTOPHER & BANKS CORPORATION,

as Lead Borrower

 

and

 

THE OTHER BORROWERS AND GUARANTORS PARTY HERETO

FROM TIME TO TIME

 

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Lender

 

Dated as of July 12, 2012

 

 

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I DEFINITIONS AND INTERPRETATION

 

2

 

 

 

 

 

SECTION 1.1. Definitions

 

2

 

SECTION 1.2. Interpretation

 

6

 

SECTION 1.3. Perfection Certificate

 

6

 

 

 

 

ARTICLE II GRANT OF SECURITY AND SECURED OBLIGATIONS

 

6

 

 

 

 

 

SECTION 2.1. Pledge; Grant of Security Interest

 

6

 

SECTION 2.2. Secured Obligations

 

7

 

SECTION 2.3. Security Interest

 

7

 

 

 

 

ARTICLE III PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES; USE OF COLLATERAL

 

8

 

 

 

 

 

SECTION 3.1. Delivery of Certificated Securities Collateral

 

8

 

SECTION 3.2. Perfection of Uncertificated Securities Collateral

 

9

 

SECTION 3.3. Financing Statements and Other Filings; Maintenance of Perfected
Security Interest

 

9

 

SECTION 3.4. Other Actions

 

9

 

SECTION 3.5. Supplements; Further Assurances

 

12

 

 

 

 

ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS

 

12

 

 

 

 

 

SECTION 4.1. Title

 

12

 

SECTION 4.2. Limitation on Liens; Defense of Claims; Transferability of
Collateral

 

13

 

SECTION 4.3. Chief Executive Office; Change of Name; Jurisdiction of
Organization

 

13

 

SECTION 4.4. Location of Inventory and Equipment

 

14

 

SECTION 4.5. Condition and Maintenance of Equipment

 

14

 

SECTION 4.6. Due Authorization and Issuance

 

14

 

SECTION 4.7. No Conflicts, Consents, etc.

 

14

 

SECTION 4.8. Collateral

 

14

 

SECTION 4.9. Insurance

 

15

 

SECTION 4.10. Payment of Taxes; Compliance with Laws; Contested Liens; Claims

 

15

 

 

 

 

ARTICLE V CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL

 

15

 

 

 

 

 

SECTION 5.1. Pledge of Additional Securities Collateral

 

15

 

SECTION 5.2. Voting Rights; Distributions; etc.

 

16

 

SECTION 5.3. Organization Documents

 

17

 

SECTION 5.4. Defaults, Etc.

 

17

 

SECTION 5.5. Certain Agreements of Grantors As Issuers and Holders of Equity
Interests

 

17

 

 

 

 

ARTICLE VI CERTAIN PROVISIONS CONCERNING INTELLECTUAL PROPERTY COLLATERAL

 

18

 

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SECTION 6.1. Grant of License

 

18

 

SECTION 6.2. Registrations

 

18

 

SECTION 6.3. No Violations or Proceedings

 

18

 

SECTION 6.4. Protection of Lender’s Security

 

18

 

SECTION 6.5. After-Acquired Property

 

19

 

SECTION 6.6. Modifications

 

19

 

SECTION 6.7. Litigation

 

20

 

SECTION 6.8. Third Party Consents

 

20

 

 

 

 

ARTICLE VII CERTAIN PROVISIONS CONCERNING ACCOUNTS

 

20

 

 

 

 

 

SECTION 7.1. Special Representations and Warranties

 

20

 

SECTION 7.2. Maintenance of Records

 

21

 

SECTION 7.3. Legend

 

21

 

SECTION 7.4. Modification of Terms, Etc.

 

21

 

SECTION 7.5. Collection

 

21

 

 

 

 

ARTICLE VIII REMEDIES

 

22

 

 

 

 

 

SECTION 8.1. Remedies

 

22

 

SECTION 8.2. Notice of Sale

 

23

 

SECTION 8.3. Waiver of Notice and Claims

 

24

 

SECTION 8.4. Certain Sales of Collateral

 

24

 

SECTION 8.5. No Waiver; Cumulative Remedies

 

25

 

SECTION 8.6. Certain Additional Actions Regarding Intellectual Property

 

25

 

SECTION 8.7. Application of Proceeds

 

26

 

SECTION 8.8. Third Party Agreements

 

26

 

 

 

 

ARTICLE IX MISCELLANEOUS

 

26

 

 

 

 

 

SECTION 9.1. Concerning Lender

 

26

 

SECTION 9.2. Lender May Perform; Lender Appointed Attorney-in-Fact

 

27

 

SECTION 9.3. Expenses

 

27

 

SECTION 9.4. Continuing Security Interest; Assignment

 

27

 

SECTION 9.5. Termination; Release

 

28

 

SECTION 9.6. Modification in Writing

 

28

 

SECTION 9.7. Notices

 

29

 

SECTION 9.8. GOVERNING LAW

 

29

 

SECTION 9.9. CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL

 

29

 

SECTION 9.10. Severability of Provisions

 

30

 

SECTION 9.11. Execution in Counterparts; Effectiveness

 

30

 

SECTION 9.12. No Release

 

31

 

SECTION 9.13. Obligations Absolute

 

31

 

SECTION 9.14. Confirmation and Ratification

 

31

 

 

 

EXHIBIT 1

Form of Securities Pledge Amendment

 

 

SCHEDULE I

Intercompany Notes

 

 

SCHEDULE II

Filings, Registrations and Recordings

 

 

SCHEDULE III

Pledged Interests

 

 

 

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SECURITY AGREEMENT

 

SECURITY AGREEMENT dated as of July 12, 2012 (as amended, restated, supplemented
or otherwise modified from time to time in accordance with the provisions
hereof, this “Security Agreement”) made by (i) CHRISTOPHER & BANKS CORPORATION,
a Delaware corporation having an office at 2400 Xenium Lane North, Plymouth,
Minnesota, as Lead Borrower for itself and the other Borrowers (the “Lead
Borrower”), (ii) the other Borrowers listed on the signature pages hereto
(together with the Lead Borrower, the “Original Borrowers”) or from time to time
party hereto by execution of Joinder Agreement (the “Additional Borrowers,” and
together with the Original Borrowers, the “Borrowers”), and (iii) the Guarantors
from time to time party hereto by execution of a Joinder Agreement (the
“Guarantors”), as pledgors, assignors and debtors (the Borrowers, together with
the Guarantors, in such capacities and together with any successors in such
capacities, the “Grantors,” and each, a “Grantor”), in favor of WELLS FARGO
BANK, NATIONAL ASSOCIATION, having an office at One Boston Place, 18th Floor,
Boston, MA 02108, for its own benefit and the benefit of the other Credit
Parties, as pledgee, assignee and secured party (in such capacities and together
with any successors in such capacities, the “Lender”).

 

R E C I T A L S

 

A.                                    The Borrowers, the L/C Issuer and the
Lender have, in connection with the execution and delivery of this Security
Agreement, entered into that certain Credit Agreement dated as of the date
hereof (as amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”).

 

B.                                    The Borrowers and the Guarantors will
receive substantial benefits from the execution, delivery and performance of the
Credit Agreement and each is, therefore, willing to enter into this Security
Agreement.

 

C.                                    This Security Agreement is given by each
Grantor in favor of the Lender for its own benefit and the benefit of the Credit
Parties to secure the payment and performance of all of the Secured Obligations
(as hereinafter defined).

 

D.                                    It is a condition to the obligations of
the Lender to make the Loans under the Credit Agreement and a condition to the
L/C Issuer issuing Letters of Credit under the Credit Agreement that each
Grantor execute and deliver this Security Agreement.

 

A G R E E M E N T

 

NOW THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Grantor and the Lender hereby agree as follows:

 

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ARTICLE I

 

DEFINITIONS AND INTERPRETATION

 

SECTION 1.1.  Definitions.  Unless otherwise defined herein or in the Credit
Agreement, capitalized terms used herein that are defined in the UCC shall have
the meanings assigned to them in the UCC.

 

(a)                                 Capitalized terms used but not otherwise
defined herein that are defined in the Credit Agreement shall have the meanings
given to them in the Credit Agreement.

 

(b)                                 The following terms shall have the following
meanings:

 

“Borrowers” shall have the meaning assigned to such term in the Preamble hereof.

 

“Claims” shall mean any and all property taxes and other taxes, assessments and
special assessments, levies, fees and all governmental charges imposed upon or
assessed against, and all claims (including, without limitation, landlords’,
carriers’, mechanics’, workmen’s, repairmen’s, laborers’, materialmen’s,
suppliers’ and warehousemen’s Liens and other claims arising by operation of
law) against, all or any portion of the Collateral.

 

“Collateral” shall have the meaning assigned to such term in SECTION 2.1 hereof.

 

“Contracts” shall mean, collectively, with respect to each Grantor, all sale,
service, performance, equipment or property lease contracts, agreements and
grants and all other contracts, agreements or grants (in each case, whether
written or oral, or third party or intercompany), between such Grantor and any
other party, and all assignments, amendments, restatements, supplements,
extensions, renewals, replacements or modifications thereof.

 

“Control” shall mean (i) in the case of each DDA, “control,” as such term is
defined in Section 9-104 of the UCC, and (ii) in the case of any security
entitlement, “control,” as such term is defined in Section 8-106 of the UCC.

 

“Control Agreements” shall mean, collectively, the Blocked Account Agreements
and the Securities Account Control Agreements.

 

“Copyrights” shall mean, collectively, with respect to each Grantor, all
copyrights (whether statutory or common Law, whether established or registered
in the United States or any other country or any political subdivision thereof
whether registered or unregistered and whether published or unpublished) and all
copyright registrations and applications made by such Grantor, in each case,
whether now owned or hereafter created or acquired by or assigned to such
Grantor, together with any and all (i) rights and privileges arising under
applicable Law with respect to such Grantor’s use of such copyrights, (ii)
reissues, renewals, continuations and extensions thereof, (iii) income, fees,
royalties, damages, claims and payments now or hereafter due and/or payable with
respect thereto, including, without limitation, damages and payments for past,

 

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present or future infringements thereof, (iv) rights corresponding thereto
throughout the world and (v) rights to sue for past, present or future
infringements thereof.

 

“Credit Agreement” shall have the meaning assigned to such term in Recital A
hereof.

 

“Distributions” shall mean, collectively, with respect to each Grantor, all
Restricted Payments from time to time received, receivable or otherwise
distributed to such Grantor in respect of or in exchange for any or all of the
Pledged Securities or Intercompany Notes, if any.

 

“Excluded Property” shall mean the following:

 

(a)                                 any license, permit or lease held by any
Grantor (i) that validly prohibits the creation by such Grantor of a security
interest therein or thereon or (ii) to the extent that applicable Law prohibits
the creation of a security interest therein or thereon;

 

(b)                                 any Intellectual Property Collateral
consisting of intent-to-use trademark applications, for which the creation by a
Grantor of a security interest therein is prohibited without the consent of
third party or by applicable Law;

 

provided, however, that in each case described in clauses (a) and (b) of this
definition, such property shall constitute “Excluded Property” only to the
extent and for so long as such license, permit, lease or applicable Law validly
prohibits the creation of a Lien on such property in favor of the Lender and,
upon the termination of such prohibition (howsoever occurring), such property
shall cease to constitute “Excluded Property”; provided further, that “Excluded
Property” shall not include the right to receive any proceeds arising therefrom
or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of
the UCC or any Proceeds, substitutions or replacements of any Excluded Property
(unless such Proceeds, substitutions or replacements would otherwise constitute
Excluded Property).

 

“Goodwill” shall mean, collectively, with respect to each Grantor, the goodwill
connected with such Grantor’s business including, without limitation, (i) all
goodwill connected with the use of and symbolized by any of the Trademarks in
which such Grantor has any interest, (ii) all know-how, trade secrets, customer
and supplier lists, proprietary information, inventions, methods, procedures,
formulae, descriptions, compositions, technical data, drawings, specifications,
name plates, catalogs, confidential information and the right to limit the use
or disclosure thereof by any Person, pricing and cost information, business and
marketing plans and proposals, consulting agreements, engineering contracts and
such other assets which relate to such goodwill and (iii) all product lines of
such Grantor’s business.

 

“Grantor” shall have the meaning assigned to such term in the Preamble hereof.

 

“Guaranteed Obligations” shall have the meaning assigned to such term in any
Facility Guaranty.

 

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“Guarantors” shall have the meaning assigned to such term in the Preamble
hereof.

 

“Intellectual Property Collateral” shall mean, collectively, the Patents,
Trademarks, Copyrights, Licenses and Goodwill.

 

“Intercompany Notes” shall mean, with respect to each Grantor, all intercompany
notes described on Schedule I hereto, if any, and each intercompany note
hereafter acquired by such Grantor and all certificates, instruments or
agreements evidencing such intercompany notes, if any, and all assignments,
amendments, restatements, supplements, extensions, renewals, replacements or
modifications thereof to the extent permitted pursuant to the terms hereof.

 

“Lead Borrower” shall have the meaning assigned to such term in the Preamble
hereof.

 

“Letters of Credit” unless the context otherwise requires, shall have the
meaning given to such term in the UCC.

 

“Licenses” shall mean, collectively, with respect to each Grantor, all license
and distribution agreements with any other Person with respect to any Patent,
Trademark or Copyright or any other patent, trademark or copyright, whether such
Grantor is a licensor or licensee, distributor or distributee under any such
license or distribution agreement, together with any and all (i) renewals,
extensions, supplements and continuations thereof, (ii) income, fees, royalties,
damages, claims and payments now and hereafter due and/or payable thereunder and
with respect thereto including, without limitation, damages and payments for
past, present or future infringements or violations thereof, (iii) rights to sue
for past, present and future infringements or violations thereof and (iv) other
rights to use, exploit or practice any or all of the Patents, Trademarks or
Copyrights or any other patent, trademark or copyright.

 

“Patents” shall mean, collectively, with respect to each Grantor, all patents
issued or assigned to and all patent applications made by such Grantor (whether
established or registered or recorded in the United States or any other country
or any political subdivision thereof), including, without limitation, those
patents and patent applications listed in Section III of the Perfection
Certificate, together with any and all (i) rights and privileges arising under
applicable Law with respect to such Grantor’s use of any patents, (ii)
inventions and improvements described and claimed therein, (iii) reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, (iv) income, fees, royalties, damages, claims and payments now or
hereafter due and/or payable thereunder and with respect thereto including,
without limitation, damages and payments for past, present or future
infringements thereof, (v) rights corresponding thereto throughout the world and
(vi) rights to sue for past, present or future infringements thereof.

 

“Perfection Certificate” shall mean that certain perfection certificate dated as
of the date hereof, executed and delivered by each Grantor in favor of the
Lender for its own benefit and the benefit of the Credit Parties, and each other
Perfection Certificate (which shall be in form and substance reasonably
acceptable to the Lender) executed and delivered by the applicable Borrower or
Guarantor in favor of the Lender for its own benefit and the benefit of the
Credit

 

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Parties contemporaneously with the execution and delivery of a joinder agreement
executed in accordance with Section 6.12 of the Credit Agreement, in each case,
as the same may be amended, amended and restated, restated, supplemented or
otherwise modified from time to time in accordance with the Credit Agreement.

 

“Pledged Interests” shall mean, collectively, with respect to each Grantor, all
Equity Interests in any issuer now existing or hereafter acquired or formed,
including, without limitation, all Equity Interests of such issuer described in
Schedule III hereof, together with all rights, privileges, authority and powers
of such Grantor relating to such Equity Interests issued by any such issuer
under the Organization Documents of any such issuer, and the certificates,
instruments and agreements representing such Equity Interests and any and all
interest of such Grantor in the entries on the books of any financial
intermediary pertaining to such Equity Interests, from time to time acquired by
such Grantor in any manner, and all other Investment Property owned by such
Grantor; provided, however, that to the extent applicable, Pledged Interests
shall not include any interest possessing more than 65% of the voting power or
control of all classes of interests entitled to vote of any CFC to the extent
such pledge would result in an adverse tax consequence to the Grantor.

 

“Pledged Securities” shall mean, collectively, the Pledged Interests and the
Successor Interests.

 

“Secured Obligations” shall mean the Obligations (as defined in the Credit
Agreement) and the Guaranteed Obligations; provided, however, that Other
Liabilities shall be Secured Obligations solely to the extent that there is
sufficient Collateral following satisfaction of the Obligations described in
clause (a) of the definition of Obligations.

 

“Securities Account Control Agreement” shall mean an agreement in form and
substance satisfactory to the Lender with respect to any Securities Account of a
Grantor.

 

“Securities Act” means the Securities Exchange Act of 1934 and the applicable
regulations promulgated by the Securities and Exchange Commission pursuant to
such Act.

 

“Securities Collateral” shall mean, collectively, the Pledged Securities, the
Intercompany Notes (if any) and the Distributions.

 

“Security Agreement” shall have the meaning assigned to such in the Preamble
hereof.

 

“Successor Interests” shall mean, collectively, with respect to each Grantor,
all shares of each class of the capital stock of the successor corporation or
interests or certificates of the successor limited liability company,
partnership or other entity owned by such Grantor (unless such successor is such
Grantor itself) formed by or resulting from any consolidation or merger in which
any Person listed in Schedule III hereof is not the surviving entity; provided,
however, that Successor Interests shall not include shares or interests
possessing more than 65% of the voting power or control of all classes of
capital stock or interests entitled to vote of any foreign Subsidiaries to the
extent such pledge would result in an adverse tax consequence to such Grantor.

 

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“Trademarks” shall mean, collectively, with respect to each Grantor, all
trademarks (including service marks), slogans, logos, certification marks, trade
dress, uniform resource locations (URLs), domain names, corporate names and
trade names, whether registered or unregistered, owned by or assigned to such
Grantor and all registrations and applications for the foregoing (whether
statutory or common Law and whether established or registered in the United
States or any other country or any political subdivision thereof), including,
without limitation, the registrations and applications listed in Section III of
the Perfection Certificate, together with any and all (i) rights and privileges
arising under applicable Law with respect to such Grantor’s use of any
trademarks, (ii) reissues, continuations, extensions and renewals thereof, (iii)
income, fees, royalties, damages and payments now and hereafter due and/or
payable thereunder and with respect thereto, including, without limitation,
damages, claims and payments for past, present or future infringements thereof,
(iv) rights corresponding thereto throughout the world and (v) rights to sue for
past, present and future infringements thereof.

 

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in
effect from time to time in the State of New York; provided, however, that if a
term is defined in Article 9 of the Uniform Commercial Code differently than in
another Article thereof, the term shall have the meaning set forth in Article 9;
provided further that, if by reason of mandatory provisions of law, perfection,
or the effect of perfection or non-perfection, of a security interest in any
Collateral or the availability of any remedy hereunder is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than the State of
New York, “Uniform Commercial Code” means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection or availability of
such remedy, as the case may be.

 

SECTION 1.2.  Interpretation.  The rules of interpretation specified in Article
I of the Credit Agreement shall be applicable to this Security Agreement.

 

SECTION 1.3.  Perfection Certificate.  The Lender and each Grantor agree that
the Perfection Certificate, and all schedules, amendments and supplements
thereto are and shall at all times remain a part of this Security Agreement.

 

ARTICLE II

 

GRANT OF SECURITY AND SECURED OBLIGATIONS

 

SECTION 2.1.  Pledge; Grant of Security Interest.  As collateral security for
the payment and performance in full of all the Secured Obligations, each Grantor
hereby ratifies, affirms, pledges and grants to the Lender for its benefit and
for the benefit of the other Credit Parties, a lien on and security interest in
and to all of the right, title and interest of such Grantor in, to and under all
personal property and interests in such personal property, wherever located, and
whether now existing or hereafter arising or acquired from time to time
(collectively, the “Collateral”), including, without limitation:

 

(a)                                 all Accounts;

 

(b)                                 all Goods, including Equipment, Inventory
and Fixtures;

 

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(c)                                  all Documents, Instruments and Chattel
Paper;

 

(d)                                 all Letters of Credit and Letter-of-Credit
Rights;

 

(e)                                  all Securities Collateral;

 

(f)                                   all Investment Property;

 

(g)                                  all Intellectual Property Collateral;

 

(h)                                 all Commercial Tort Claims, including,
without limitation, those described in any notice provided by a Grantor to the
Lender pursuant to SECTION 3.4(e);

 

(i)                                     all General Intangibles;

 

(j)                                    all Deposit Accounts;

 

(k)                                 all Supporting Obligations;

 

(l)                                     all books and records relating to the
Collateral; and

 

(m)                             to the extent not covered by clauses (a) through
(l) of this sentence, all other personal property of such Grantor, whether
tangible or intangible and all Proceeds and products of each of the foregoing
and all accessions to, substitutions and replacements for, and rents, profits
and products of, each of the foregoing, any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to such Grantor from time to time with
respect to any of the foregoing.

 

Notwithstanding anything to the contrary contained in clauses (a) through (m)
above, the security interest created by this Security Agreement shall not extend
to, and the term “Collateral” shall not include, any Excluded Property.

 

SECTION 2.2.  Secured Obligations.  This Security Agreement secures, and the
Collateral is collateral security for, the payment and performance in full when
due of the Secured Obligations.

 

SECTION 2.3.  Security Interest.

 

(a)                                 Each Grantor hereby irrevocably authorizes
the Lender at any time and from time to time to authenticate and file in any
relevant jurisdiction any financing statements (including fixture filings) and
amendments thereto that contain the information required by Article 9 of the
Uniform Commercial Code of each applicable jurisdiction for the filing of any
financing statement or amendment relating to the Collateral, including, without
limitation, (i) whether such Grantor is an organization, the type of
organization and any organizational identification number issued to such
Grantor, (ii) a description of the Collateral as “all assets of the Grantor,
wherever located, whether now owned or hereafter acquired” and (iii) in the case
of a financing statement filed as a fixture filing, a sufficient description of
the real property to

 

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which such Collateral relates.  Each Grantor agrees to provide all information
described in the immediately preceding sentence to the Lender promptly upon
request.

 

(b)                                 Each Grantor hereby ratifies its prior
authorization for the Lender to file in any relevant jurisdiction any financing
statements or amendments thereto relating to the Collateral if filed prior to
the date hereof.

 

(c)                                  Each Grantor hereby further authorizes the
Lender to file filings with the United States Patent and Trademark Office (or
any successor office or any similar office in any other country) or other
necessary documents for the purpose of perfecting, confirming, continuing,
enforcing or protecting the security interest granted by such Grantor hereunder
in any Patents or Trademarks, without the signature of such Grantor, and naming
such Grantor, as debtor, and the Lender, as secured party.

 

(d)                                 Each Grantor hereby further authorizes the
Lender to file filings with the United States Copyright Office (or any successor
office or any similar office in any other country) or other necessary documents
for the purpose of perfecting, confirming, continuing, enforcing or protecting
the security interest granted by such Grantor hereunder in any Copyright
described in Section 6.17(e) of the Credit Agreement, without the signature of
such Grantor, and naming such Grantor, as debtor, and the Lender, as secured
party.  No action to perfect the Lender’s security interest in any Copyright,
other than as set forth in Section 6.17(e) of the Credit Agreement, shall be
authorized or required.

 

ARTICLE III

 

PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;
USE OF COLLATERAL

 

SECTION 3.1.  Delivery of Certificated Securities Collateral.  Each Grantor
represents and warrants that all certificates, agreements or instruments
representing or evidencing the Securities Collateral in existence on the date
hereof have been delivered to the Lender in suitable form for transfer by
delivery or accompanied by duly executed instruments of transfer or assignment
in blank and that the Lender has a perfected first priority security interest
therein.  Each Grantor hereby agrees that all certificates, agreements or
instruments representing or evidencing Securities Collateral acquired by such
Grantor after the date hereof, shall promptly (and in any event within three
(3) Business Days) upon receipt thereof by such Grantor be delivered to and held
by or on behalf of the Lender pursuant hereto.  All certificated Securities
Collateral shall be in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance reasonably satisfactory to the Lender.  The Lender shall
have the right, at any time upon the occurrence and during the continuance of
any Event of Default, to endorse, assign or otherwise transfer to or to register
in the name of the Lender or any of its nominees or endorse for negotiation any
or all of the Securities Collateral, without any indication that such Securities
Collateral is subject to the security interest hereunder.  In addition, the
Lender shall have the right with written notice to exchange certificates
representing or evidencing Securities Collateral for certificates of smaller or
larger denominations, accompanied by instruments of transfer or assignment and
letters of direction duly executed in blank.

 

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SECTION 3.2.  Perfection of Uncertificated Securities Collateral.  Each Grantor
represents and warrants that the Lender has a perfected first priority security
interest in all uncertificated Pledged Securities pledged by it hereunder that
is in existence on the date hereof and that the applicable Organization
Documents do not require the consent of the other shareholders, members,
partners or other Person to permit the Lender or its designee to be substituted
for the applicable Grantor as a shareholder, member, partner or other equity
owner, as applicable, thereto.  Each Grantor hereby agrees that if any of the
Pledged Securities are at any time not evidenced by certificates of ownership,
then each applicable Grantor shall, to the extent permitted by applicable Law
and upon the request of the Lender, cause such pledge to be recorded on the
equityholder register or the books of the issuer, execute customary pledge forms
or other documents necessary or reasonably requested to complete the pledge and
give the Lender the right to transfer such Pledged Securities under the terms
hereof, and provide to the Lender an opinion of counsel, in form and substance
reasonably satisfactory to the Lender, confirming such pledge and perfection
thereof.

 

SECTION 3.3.  Financing Statements and Other Filings; Maintenance of Perfected
Security Interest.  Each Grantor represents and warrants that the only filings,
registrations and recordings necessary and appropriate to create, preserve,
protect, publish notice of and perfect the security interest granted by each
Grantor to the Lender (for its own benefit and the benefit of the Credit
Parties) pursuant to this Security Agreement in respect of the Collateral are
listed on Schedule II hereto (except with respect to Copyrights).  Each Grantor
represents and warrants that all such filings, registrations and recordings have
been delivered to the Lender in completed and, to the extent necessary or
appropriate, duly executed form for filing in each governmental, municipal or
other office specified in Schedule II.  Each Grantor agrees that at the sole
cost and expense of the Grantors, (i) subject to SECTION 2.3(d) with respect to
Copyrights, such Grantor will maintain the security interest created by this
Security Agreement in the Collateral as a perfected first priority security
interest and shall defend such security interest against the claims and demands
of all Persons (other than with respect to Permitted Encumbrances), (ii) such
Grantor shall furnish to the Lender from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Lender may reasonably request, all in
reasonable detail and (iii) subject to SECTION 2.3(d) with respect to Copyrights
at any time and from time to time, upon the written request of the Lender, such
Grantor shall promptly and duly execute and deliver, and file and have recorded,
such further instruments and documents and take such further action as the
Lender may reasonably request, including the filing of any financing statements,
continuation statements and other documents (including this Security Agreement)
under the UCC (or other applicable Laws) in effect in any jurisdiction with
respect to the security interest created hereby and the execution and delivery
of Control Agreements, all in form reasonably satisfactory to the Lender and in
such offices (including, without limitation, the United States Patent and
Trademark Office) wherever required by applicable Law in each case to perfect,
continue and maintain a valid, enforceable, first priority security interest in
the Collateral as provided herein and to preserve the other rights and interests
granted to the Lender hereunder, as against the Grantors and third parties
(other than with respect to Permitted Encumbrances), with respect to the
Collateral.

 

SECTION 3.4.  Other Actions.  In order to further evidence the attachment,
perfection and priority of, and the ability of the Lender to enforce, the
Lender’s security interest in the

 

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Collateral, each Grantor represents, warrants and agrees, in each case at such
Grantor’s own expense, with respect to the following Collateral that:

 

(a)                                 Instruments and Tangible Chattel Paper.  As
of the date hereof (i) no amount payable under or in connection with any of the
Collateral is evidenced by any Instrument or Tangible Chattel Paper.  If any
amount payable under or in connection with any of the Collateral shall be
evidenced by any Instrument or Tangible Chattel Paper, the Grantor acquiring
such Instrument or Tangible Chattel Paper shall forthwith endorse, assign and
deliver the same to the Lender, accompanied by such instruments of transfer or
assignment duly executed in blank as the Lender may reasonably request from time
to time.

 

(b)                                 Investment Property.

 

(i)                                     As of the date hereof (1) it has no
Securities Accounts, and (2) it does not hold, own or have any interest in any
certificated securities or uncertificated securities other than those
constituting Pledged Securities with respect to which the Lender has a perfected
first priority security interest in such Pledged Securities.

 

(ii)                                  If any Grantor shall at any time hold or
acquire any certificated securities, other than any securities of any CFC not
required to be pledged hereunder, such Grantor shall promptly (a) notify the
Lender thereof and endorse, assign and deliver the same to the Lender,
accompanied by such instruments of transfer or assignment duly executed in
blank, all in form and substance reasonably satisfactory to the Lender or
(b) deliver such securities into a Securities Account with respect to which a
Securities Account Control Agreement is in effect in favor of the Lender.  If
any securities now or hereafter acquired by any Grantor, other than any
securities of any CFC not required to be pledged hereunder, are uncertificated,
such Grantor shall promptly notify the Lender thereof and pursuant to an
agreement in form and substance reasonably satisfactory to the Lender, either
(a) grant Control to the Lender and cause the issuer to agree to comply with
instructions from the Lender as to such securities, without further consent of
any Grantor or such nominee, (b) cause a security entitlement with respect to
such uncertificated security to be held in a Securities Account with respect to
which the Lender has Control or (c) arrange for the Lender to become the
registered owner of the securities.  Grantor shall not hereafter establish and
maintain any Securities Account with any Securities Intermediary unless (1) the
applicable Grantor shall have given the Lender ten (10) Business Days’ prior
written notice of its intention to establish such new Securities Account with
such Securities Intermediary, (2) such Securities Intermediary shall be
reasonably acceptable to the Lender and (3) such Securities Intermediary and
such Grantor shall have duly executed and delivered a Control Agreement with
respect to such Securities Account.  Each Grantor shall accept any cash and
Investment Property which are proceeds of the Pledged Interests in trust for the
benefit of the Lender and, promptly upon receipt thereof, deposit any cash
received by it into an account in which the Lender has Control, or with respect
to any Investment Properties or additional securities, take such actions as
required above with respect to such securities.  The Lender agrees with each
Grantor that the Lender shall not give any entitlement orders or instructions or
directions to any issuer of uncertificated securities or Securities
Intermediary, and shall not withhold its consent to the exercise of any
withdrawal or

 

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dealing rights by such Grantor, unless an Event of Default has occurred and is
continuing.  No Grantor shall grant control over any Pledged Securities to any
Person other than the Lender.

 

(iii)                               As between the Lender and the Grantors, the
Grantors shall bear the investment risk with respect to the Investment Property
and Pledged Securities, and the risk of loss of, damage to, or the destruction
of the Investment Property and Pledged Securities, whether in the possession of,
or maintained as a security entitlement or deposit by, or subject to the control
of, the Lender, a Securities Intermediary, any Grantor or any other Person;
provided, however, that nothing contained in this SECTION 3.4(b) shall release
or relieve any Securities Intermediary of its duties and obligations to the
Grantors or any other Person under any Control Agreement or under applicable
Law.  Each Grantor shall promptly pay all Claims and fees of whatever kind or
nature with respect to the Pledged Securities pledged by it under this Security
Agreement.  In the event any Grantor shall fail to make such payment
contemplated in the immediately preceding sentence, the Lender may do so for the
account of such Grantor and the Grantors shall promptly reimburse and indemnify
the Lender for all costs and expenses incurred by the Lender under this
SECTION 3.4(b) and under SECTION 9.3 hereof.

 

(c)                                  Electronic Chattel Paper and Transferable
Records.  As of the date hereof no amount payable under or in connection with
any of the Collateral is evidenced by any Electronic Chattel Paper or any
“transferable record” (as that term is defined in Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act, or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction).  If any amount payable under or in connection with any of the
Collateral shall be evidenced by any Electronic Chattel Paper or any
transferable record, the Grantor acquiring such Electronic Chattel Paper or
transferable record shall promptly notify the Lender thereof and shall take such
action as the Lender may reasonably request, to the extent practicable, to vest
in the Lender control under UCC Section 9-105 of such Electronic Chattel Paper
or control under Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, Section 16 of the Uniform
Electronic Transactions Act, as so in effect in such jurisdiction, of such
transferable record.  The Lender agrees with such Grantor that the Lender will
arrange, pursuant to procedures reasonably satisfactory to the Lender and so
long as such procedures will not result in the Lender’s loss of control, for the
Grantor to make alterations to the Electronic Chattel Paper or transferable
record permitted under UCC Section 9-105 or, as the case may be, Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act of
Section 16 of the Uniform Electronic Transactions Act for a party in control to
allow without loss of control, unless an Event of Default has occurred and is
continuing or would occur after taking into account any action by such Grantor
with respect to such Electronic Chattel Paper or transferable record.

 

(d)                                 Letter-of-Credit Rights.  If such Grantor is
at any time a beneficiary under a Letter of Credit now or hereafter issued in
favor of such Grantor, (which, for the avoidance of doubt, shall not include any
Letter of Credit issued pursuant to the Credit Agreement), such Grantor shall
promptly notify the Lender thereof and such Grantor shall, at the request of the
Lender, pursuant to an agreement in form and substance reasonably satisfactory
to the Lender, either (i) arrange for the issuer and any confirmer of such
Letter of Credit to consent to an

 

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assignment to the Lender of, and to pay to the Lender, the proceeds of any
drawing under the Letter of Credit or (ii) arrange for the Lender to become the
beneficiary of such Letter of Credit, with the Lender agreeing, in each case,
that the proceeds of any drawing under the Letter of Credit are to be applied as
provided in the Credit Agreement.

 

(e)                                  Commercial Tort Claims.  As of the date
hereof it holds no Commercial Tort Claims in an amount greater than $500,000
(either individually or in the aggregate).  If any Grantor shall at any time
hold or acquire a Commercial Tort Claim in an amount greater than $500,000
(either individually or in the aggregate), such Grantor shall immediately notify
the Lender in writing signed by such Grantor of the brief details thereof and
grant to the Lender in such writing a security interest therein and in the
Proceeds thereof, all upon the terms of this Security Agreement, with such
writing to be in form and substance reasonably satisfactory to the Lender.

 

SECTION 3.5.  Supplements; Further Assurances.  Each Grantor shall take such
further actions, and execute and deliver to the Lender such additional
assignments, agreements, supplements, powers and instruments, as the Lender may
in its reasonable judgment deem necessary or appropriate, wherever required by
Law, in order to grant, perfect, preserve, enforce and protect the security
interest in the Collateral as provided herein and the rights and interests
granted to the Lender hereunder, or better to assure and confirm unto the Lender
or permit the Lender to exercise and enforce its rights, powers and remedies
hereunder with respect to any Collateral.  Without limiting the generality of
the foregoing, each Grantor shall make, execute, endorse, acknowledge, file or
refile and/or deliver to the Lender from time to time upon reasonable request
such lists, descriptions and designations of the Collateral, copies of warehouse
receipts, receipts in the nature of warehouse receipts, bills of lading,
documents of title, vouchers, invoices, schedules, confirmatory assignments,
supplements, additional security agreements, conveyances, financing statements,
transfer endorsements, powers of attorney, certificates, reports and other
assurances or instruments, subject to SECTION 2.3(d) with respect to
Copyrights.  If an Event of Default has occurred and is continuing, the Lender
may institute and maintain, in its own name or in the name of any Grantor, such
suits and proceedings as the Lender may be advised by counsel shall be necessary
or expedient to prevent any impairment of the security interest in or the
perfection thereof in the Collateral.  All of the foregoing shall be at the sole
cost and expense of the Grantors.  The Grantors and the Lender acknowledge that
this Security Agreement is intended to grant to the Lender for its own benefit
and the benefit of the Credit Parties a security interest in and Lien upon the
Collateral and shall not constitute or create a present assignment of any of the
Collateral.

 

ARTICLE IV

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

In addition to, and without limitation of, each of the representations,
warranties and covenants set forth in the Credit Agreement and the other Loan
Documents, each Grantor represents, warrants and covenants as follows:

 

SECTION 4.1.  Title.  No financing statement or other public notice with respect
to all or any part of the Collateral is on file or of record in any public
office, except such as have been

 

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filed in favor of the Lender pursuant to this Security Agreement or as are
permitted by the Credit Agreement.  No Person other than the Lender has control
or possession of all or any part of the Collateral, except as permitted by the
Credit Agreement.

 

SECTION 4.2.  Limitation on Liens; Defense of Claims; Transferability of
Collateral.  Each Grantor is as of the date hereof, and, as to Collateral
acquired by it from time to time after the date hereof, such Grantor will be,
the sole direct and beneficial owner of all Collateral pledged by it hereunder
free from any Lien or other right, title or interest of any Person other than
the Liens and security interest created by this Security Agreement and Permitted
Encumbrances.  Each Grantor shall, at its own cost and expense, defend title to
the Collateral pledged by it hereunder and the security interest therein and
Lien thereon granted to the Lender and the priority thereof against all claims
and demands of all Persons, at its own cost and expense, at any time claiming
any interest therein adverse to the Lender or any other Credit Party other than
Permitted Encumbrances.  There is no agreement, and no Grantor shall enter into
any agreement or take any other action, that would restrict the transferability
of any of the Collateral or otherwise impair or conflict with such Grantors’
obligations or the rights of the Lender hereunder.

 

SECTION 4.3.  Chief Executive Office; Change of Name; Jurisdiction of
Organization.

 

(a)                                 The exact legal name, type of organization,
jurisdiction of organization, federal taxpayer identification number,
organizational identification number and chief executive office of such Grantor
is indicated next to its name in Schedule 5.01 to the Credit Agreement.  Such
Grantor shall furnish to the Lender prompt written notice of any change in
(i) its corporate name, (ii) the location of its chief executive office, its
principal place of business, any office in which it maintains books or records
relating to Collateral owned by it or any office or facility at which Collateral
owned by it is located (including the establishment of any such new office or
facility), other than any Store or any location of a third-party carrier,
(iii) its identity or type of organization or corporate structure, (iv) its
federal taxpayer identification number or organizational identification number
or (v) its jurisdiction of organization (in each case, including, without
limitation, by merging with or into any other entity, reorganizing, dissolving,
liquidating, reincorporating or incorporating in any other jurisdiction).  Such
Grantor agrees (A) not to effect or permit any such change unless all filings
have been made under the UCC or otherwise that are required in order for the
Lender to continue at all times following such change to have a valid, legal and
perfected first priority security interest in all the Collateral (subject to,
with respect to priority, Permitted Encumbrances having priority by operation of
law) and (B) to take all action reasonably satisfactory to the Lender to
maintain the perfection and priority of the security interest of the Lender for
its own benefit and the benefit of the Credit Parties in the Collateral intended
to be granted hereunder.  Each Grantor agrees to promptly provide the Lender
with certified Organization Documents reflecting any of the changes described in
the preceding sentence.

 

(b)                                 The Lender may rely on opinions of counsel
as to whether any or all UCC financing statements of the Grantors need to be
amended as a result of any of the changes described in SECTION 4.3(a).  If any
Grantor fails to provide information to the Lender about such changes on a
timely basis, the Lender shall not be liable or responsible to any party for any
failure to maintain a perfected security interest in such Grantor’s property
constituting Collateral,

 

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for which the Lender needed to have information relating to such changes.  The
Lender shall have no duty to inquire about such changes if any Grantor does not
inform the Lender of such changes, the parties acknowledging and agreeing that
it would not be feasible or practical for the Lender to search for information
on such changes if such information is not provided by any Grantor.

 

SECTION 4.4.  Location of Inventory and Equipment.  As of the Closing Date, all
Equipment and Inventory of such Grantor is located at the chief executive office
or such other location listed in Schedule 5.08(b)(1) and Schedule 5.08(b)(2) of
the Credit Agreement, except for third-party locations set forth in Section I of
the Perfection Certificate.

 

SECTION 4.5.  Condition and Maintenance of Equipment.  The Equipment of such
Grantor is in good repair, working order and condition, reasonable wear and tear
excepted.  Each Grantor shall cause the Equipment to be maintained and preserved
in good repair, working order and condition, reasonable wear and tear excepted,
and shall as quickly as commercially reasonable make or cause to be made all
repairs, replacements and other improvements which are necessary in the conduct
of such Grantor’s business.

 

SECTION 4.6.  Due Authorization and Issuance.  All of the Pledged Interests have
been, and to the extent any Pledged Interests are hereafter issued, such shares
or other equity interests will be, upon such issuance, duly authorized, validly
issued and, to the extent applicable, fully paid and non-assessable.  All of the
Pledged Interests have been fully paid for, and there is no amount or other
obligation owing by any Grantor to any issuer of the Pledged Interests in
exchange for or in connection with the issuance of the Pledged Interests or any
Grantor’s status as a partner or a member of any issuer of the Pledged
Interests.

 

SECTION 4.7.  No Conflicts, Consents, etc.  No consent of any party (including,
without limitation, equity holders or creditors of such Grantor) and no consent,
authorization, approval, license or other action by, and no notice to or filing
with, any Governmental Authority or regulatory body or other Person is required
(A) for the grant of the security interest by such Grantor of the Collateral
pledged by it pursuant to this Security Agreement or for the execution, delivery
or performance hereof by such Grantor, (B) for the exercise by the Lender of the
voting or other rights provided for in this Security Agreement or (C) for the
exercise by the Lender of the remedies in respect of the Collateral pursuant to
this Security Agreement except, in each case, for such consents which have been
obtained prior to the date hereof.  Following the occurrence and during the
continuation of an Event of Default, if the Lender desires to exercise any
remedies, voting or consensual rights or attorney-in-fact powers set forth in
this Security Agreement and determines it necessary to obtain any approvals or
consents of any Governmental Authority or any other Person therefor, then, upon
the reasonable request of the Lender, such Grantor agrees to use commercially
reasonable efforts to assist and aid the Lender to obtain as soon as
commercially practicable any necessary approvals or consents for the exercise of
any such remedies, rights and powers.

 

SECTION 4.8.  Collateral.  All information set forth herein, including the
schedules annexed hereto, and all information contained in any documents,
schedules and lists heretofore delivered to any Credit Party in connection with
this Security Agreement, in each case, relating to the Collateral, is accurate
and complete in all material respects as of the date hereof.  The

 

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Collateral described on the schedules annexed hereto constitutes all of the
property of such type of Collateral owned or held by the Grantors as of the date
hereof.

 

SECTION 4.9.  Insurance.  Such Grantor shall (i) maintain or shall cause to be
maintained such insurance as is required pursuant to Section 6.07 of the Credit
Agreement; (ii) maintain such other insurance as may be required by applicable
Law; and (iii) furnish to the Lender, upon written request, full information as
to the insurance carried.  Each Grantor hereby irrevocably makes, constitutes
and appoints the Lender (and all officers, employees or agents designated by the
Lender) as such Grantor’s true and lawful agent (and attorney-in-fact),
exercisable only after the occurrence and during the continuance of an Event of
Default, for the purpose of making, settling and adjusting claims in respect of
the Collateral under policies of insurance, endorsing the name of such Grantor
on any check, draft, instrument or other item of payment for the proceeds of
such policies of insurance and for making all determinations and decisions with
respect thereto.  In the event that any Grantor at any time or times shall fail
to obtain or maintain any of the policies of insurance required hereby or to pay
any premium in whole or in part relating thereto, the Lender may, without
waiving or releasing any obligation or liability of the Grantors hereunder or
any Default or Event of Default, in its sole discretion, obtain and maintain
such policies of insurance and pay such premium and take any other actions with
respect thereto as the Lender deems advisable.  All sums disbursed by the Lender
in connection with this SECTION 4.9, including reasonable attorneys’ fees, court
costs, expenses and other charges relating thereto, shall be payable, upon
demand, by the Grantors to the Lender and shall be additional Secured
Obligations secured hereby.

 

SECTION 4.10.  Payment of Taxes; Compliance with Laws; Contested Liens; Claims. 
Each Grantor represents and warrants that all Claims imposed upon or assessed
against the Collateral have been paid and discharged except to the extent such
Claims constitute a Lien not yet due and payable or a Permitted Encumbrance. 
Each Grantor shall comply with all applicable Law relating to the Collateral the
failure to comply with which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.  Each Grantor may at its own
expense contest the validity, amount or applicability of any Claims so long as
the contest thereof shall be conducted in accordance with, and permitted
pursuant to the provisions of, the Credit Agreement.  Notwithstanding the
foregoing provisions of this SECTION 4.10, no contest of any such obligation may
be pursued by such Grantor if such contest would expose the Lender or any other
Credit Party to (i) any possible criminal liability or (ii) any additional civil
liability for failure to comply with such obligations unless such Grantor shall
have furnished a bond or other security therefor satisfactory to the Lender, or
such other Credit Party, as the case may be.

 

ARTICLE V

 

CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL

 

SECTION 5.1.  Pledge of Additional Securities Collateral.  Each Grantor shall,
upon obtaining any Pledged Securities or Intercompany Notes of any Person
required to be pledged hereunder, accept the same in trust for the benefit of
the Lender and forthwith deliver to the Lender a pledge amendment, duly executed
by such Grantor, in substantially the form of Exhibit 1 annexed hereto (each, a
“Pledge Amendment”), and the certificates and other documents required under
SECTION 3.1 and SECTION 3.2 hereof in respect of the additional Pledged

 

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Securities or Intercompany Notes (if any) which are to be pledged pursuant to
this Security Agreement, and confirming the attachment of the Lien hereby
created on and in respect of such additional Pledged Securities or Intercompany
Notes (if any).  Each Grantor hereby authorizes the Lender to attach each Pledge
Amendment to this Security Agreement and agrees that all Pledged Securities or
Intercompany Notes (if any) listed on any Pledge Amendment delivered to the
Lender shall for all purposes hereunder be considered Collateral.

 

SECTION 5.2.  Voting Rights; Distributions; etc.

 

(a)                                 So long as no Event of Default shall have
occurred and be continuing, each Grantor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Securities Collateral
or any part thereof for any purpose that would not violate the terms or purposes
hereof, the Credit Agreement or any other Loan Document evidencing the Secured
Obligations.  The Lender shall be deemed without further action or formality to
have granted to each Grantor all necessary consents relating to voting rights
and shall, if necessary, upon written request of any Grantor and at the sole
cost and expense of the Grantors, from time to time execute and deliver (or
cause to be executed and delivered) to such Grantor all such instruments as such
Grantor may reasonably request in order to permit such Grantor to exercise the
voting and other rights which it is entitled to exercise pursuant to this
SECTION 5.2(a).

 

(b)                                 Upon the occurrence and during the
continuance of any Event of Default, all rights of each Grantor to exercise the
voting and other consensual rights it would otherwise be entitled to exercise
pursuant to SECTION 5.2(a) hereof shall immediately cease, without any action,
or the giving of any notice, and all such rights shall thereupon become vested
in the Lender, which shall thereupon have the sole right to exercise such voting
and other consensual rights; provided, that the Lender shall have the right, in
its sole discretion, from time to time following the occurrence and continuance
of an Event of Default to permit such Grantor to exercise such rights under
SECTION 5.2(a).  After such Event of Default is no longer continuing, each
Grantor shall have the right to exercise the voting, managerial and other
consensual rights and powers that it would otherwise be entitled to pursuant to
SECTION 5.2 hereof.

 

(c)                                  Unless there shall occur and be continuing
a Cash Dominion Event (in which case SECTION 5.2(d) hereof, as modified by
Section 7.06(a) of the Credit Agreement, shall govern the right of each Grantor
to receive Distributions), each Grantor shall be entitled to receive and retain,
and to utilize free and clear of the Lien hereof, any and all Distributions, but
only if and to the extent made in accordance with, and to the extent permitted
by, the provisions of the Credit Agreement; provided, however, that any and all
such Distributions consisting of rights or interests in the form of securities
shall be forthwith delivered to the Lender to hold as Collateral and shall, if
received by any Grantor, be received in trust for the benefit of the Lender, be
segregated from the other property or funds of such Grantor and be forthwith
delivered to the Lender as Collateral in the same form as so received (with any
necessary endorsement).  The Lender shall, if necessary, upon written request of
any Grantor and at the sole cost and expense of the Grantors, from time to time
execute and deliver (or cause to be executed and delivered) to such Grantor all
such instruments as such Grantor may reasonably request in order to permit such
Grantor to receive the Distributions which it is authorized to receive and
retain pursuant to this SECTION 5.2(c).

 

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(d)                                 Upon the occurrence and during the
continuance of any Cash Dominion Event (but subject to Section 7.06(a) of the
Credit Agreement), all rights of each Grantor to receive Distributions which it
would otherwise be authorized to receive and retain pursuant to
SECTION 5.2(c) hereof shall cease and all such rights shall thereupon become
vested in the Lender, which shall thereupon have the sole right to receive and
hold as Collateral such Distributions.  After such Cash Dominion Event is no
longer continuing, each Grantor shall have the right to receive the
Distributions which it would be authorized to receive and retain pursuant to
SECTION 5.2(b).

 

(e)                                  Each Grantor shall, at its sole cost and
expense, from time to time execute and deliver to the Lender appropriate
instruments as the Lender may reasonably request in order to permit the Lender
to exercise the voting and other rights which it may be entitled to exercise
pursuant to SECTION 5.2(b) hereof and to receive all Distributions which it may
be entitled to receive under SECTION 5.2(c) hereof.

 

(f)                                   All Distributions which are received by
any Grantor contrary to the provisions of SECTION 5.2(b) hereof shall be
received in trust for the benefit of the Lender, shall be segregated from other
funds of such Grantor and shall immediately be paid over to the Lender as
Collateral in the same form as so received (with any necessary endorsement).

 

SECTION 5.3.  Organization Documents.  Each Grantor has delivered to the Lender
true, correct and complete copies of its Organization Documents.  The
Organization Documents are in full force and effect.  No Grantor will terminate
or agree to terminate any Organization Documents or make any amendment or
modification to any Organization Documents in a manner adverse to the Credit
Parties, including electing to treat any Pledged Interests of such Grantor as a
security under Section 8-103 of the UCC.

 

SECTION 5.4.  Defaults, Etc.  Such Grantor is not in default in the payment of
any portion of any mandatory capital contribution, if any, required to be made
under any agreement to which such Grantor is a party relating to the Pledged
Securities pledged by it, and such Grantor is not in violation of any other
provisions of any such agreement to which such Grantor is a party, or otherwise
in default or violation thereunder.  As of the date hereof, no Securities
Collateral pledged by such Grantor is subject to any defense, offset or
counterclaim, nor have any of the foregoing been asserted or alleged against
such Grantor by any Person with respect thereto, and as of the date hereof,
there are no certificates, instruments, documents or other writings (other than
the Organization Documents and certificates, if any, delivered to the Lender)
which evidence any Pledged Securities of such Grantor.

 

SECTION 5.5.  Certain Agreements of Grantors As Issuers and Holders of Equity
Interests.

 

(a)                                 In the case of each Grantor which is an
issuer of Securities Collateral, such Grantor agrees to be bound by the terms of
this Security Agreement relating to the Securities Collateral issued by it and
will comply with such terms insofar as such terms are applicable to it.

 

(b)                                 In the case of each Grantor which is a
partner in a partnership, limited liability company or other entity, such
Grantor hereby consents to the extent required by the

 

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applicable Organization Documents to the pledge by each other Grantor, pursuant
to the terms hereof, of the Pledged Interests in such partnership, limited
liability company or other entity and, upon the occurrence and during the
continuance of an Event of Default, to the transfer of such Pledged Interests to
the Lender or its nominee and to the substitution of the Lender or its nominee
as a substituted partner or member in such partnership, limited liability
company or other entity with all the rights, powers and duties of a general
partner or a limited partner or member, as the case may be.

 

ARTICLE VI

 

CERTAIN PROVISIONS CONCERNING INTELLECTUAL
PROPERTY COLLATERAL

 

SECTION 6.1.  Grant of License.  Without limiting the rights of Lender as the
holder of a Lien on the Intellectual Property Collateral, for the purpose of
enabling the Lender, during the continuance of an Event of Default, to exercise
rights and remedies under ARTICLE VIII hereof at such time as the Lender shall
be lawfully entitled to exercise such rights and remedies, and for no other
purpose, each Grantor hereby grants to the Lender, to the extent assignable, an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to such Grantor) to use, assign, license or sublicense any of
the Intellectual Property Collateral now owned or hereafter acquired by such
Grantor, wherever the same may be located, including in such license access to
all media in which any of the licensed items may be recorded or stored and to
all computer programs used for the compilation or printout hereof.

 

SECTION 6.2.  Registrations.  Except pursuant to licenses and other user
agreements entered into by any Grantor in the ordinary course of business, on
and as of the date hereof (i) each Grantor owns and possesses the right to use,
and has done nothing to authorize or enable any other Person to use, any
material Patent or Trademark listed in Section III of the Perfection
Certificate, and (ii) all registrations listed in Section III of the Perfection
Certificate are valid and in full force and effect in all material respects.

 

SECTION 6.3.  No Violations or Proceedings.  To each Grantor’s knowledge, on and
as of the date hereof, there is no violation by others of any right of such
Grantor with respect to any Patent or Trademark listed in Section III of the
Perfection Certificate, respectively, pledged by it under the name of such
Grantor.

 

SECTION 6.4.  Protection of Lender’s Security.  On a continuing basis, each
Grantor shall, at its sole cost and expense, (i) promptly following its becoming
aware thereof, notify the Lender of (A) any adverse determination in any
proceeding in the United States Patent and Trademark Office or the United States
Copyright Office with respect to any Patent, Trademark or Copyright necessary
for the conduct of business of such Grantor or (B) the institution of any
proceeding or any adverse determination in any federal, state or local court or
administrative body regarding such Grantor’s claim of ownership in or right to
use any of the Intellectual Property Collateral material to the use and
operation of the Collateral, its right to register such Intellectual Property
Collateral or its right to keep and maintain such registration in full force and
effect, (ii) maintain and protect the Intellectual Property Collateral necessary
for the conduct of business of such Grantor, (iii) not permit to lapse or become
abandoned any Intellectual Property

 

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Collateral necessary for the conduct of business of such Grantor, and not settle
or compromise any pending or future litigation or administrative proceeding with
respect to such Intellectual Property Collateral, in each case except as shall
be consistent with commercially reasonable business judgment and, if any Event
of Default has occurred and is continuing, with the prior approval of the Lender
(such approval not to be unreasonably withheld, conditioned or delayed),
(iv) upon such Grantor’s obtaining knowledge thereof, promptly notify the Lender
in writing of any event which may be reasonably expected to materially and
adversely affect the value or utility of the Intellectual Property Collateral or
any portion thereof material to the use and operation of the Collateral, the
ability of such Grantor or the Lender to dispose of the Intellectual Property
Collateral or any portion thereof or the rights and remedies of the Lender in
relation thereto including, without limitation, a levy or threat of levy or any
legal process against the Intellectual Property Collateral or any portion
thereof, (v) not license the Intellectual Property Collateral other than
licenses entered into by such Grantor in, or incidental to, the ordinary course
of business, or amend or permit the amendment of any of the material licenses in
a manner that materially and adversely affects the right to receive payments
thereunder, or in any manner that would materially impair the value of the
Intellectual Property Collateral or the Lien on and security interest in the
Intellectual Property Collateral intended to be granted to the Lender for its
own benefit and the benefit of the Credit Parties, without the consent of the
Lender, (vi) furnish to the Lender from time to time upon the Lender’s
reasonable request therefor detailed statements and amended schedules further
identifying and describing the Intellectual Property Collateral (other than with
respect to Copyrights not subject to Section 6.17(e) of the Credit Agreement)
and such other materials evidencing or reports pertaining to the Intellectual
Property Collateral (other than with respect to Copyrights not subject to
Section 6.17(e) of the Credit Agreement) as the Lender may from time to time
request.  Notwithstanding the foregoing, nothing herein shall prevent any
Grantor from selling, disposing of or otherwise using any Intellectual Property
Collateral as permitted under the Credit Agreement.

 

SECTION 6.5.  After-Acquired Property.  If any Grantor shall, at any time before
this Security Agreement shall have been terminated in accordance with
SECTION 9.5(a), (i) obtain any rights to any additional Intellectual Property
Collateral or (ii) become entitled to the benefit of any additional Intellectual
Property Collateral or any renewal or extension thereof, including any reissue,
division, continuation, or continuation-in-part of any Intellectual Property
Collateral, or any improvement on any Intellectual Property Collateral, the
provisions hereof shall automatically apply thereto and any such item enumerated
in clause (i) or (ii) of this SECTION 6.5 with respect to such Grantor shall
automatically constitute Intellectual Property Collateral if such would have
constituted Intellectual Property Collateral at the time of execution hereof and
be subject to the Lien and security interest created by this Security Agreement
without further action by any party.  With respect to any federally registered
Patents and Trademarks, and Copyrights to the extent provided in
Section 6.17(e) of the Credit Agreement, each Grantor shall promptly (a) provide
to the Lender written notice of any of the foregoing and (b) confirm the
attachment of the Lien and security interest created by this Security Agreement
to any rights described in clauses (i) and (ii) of the immediately preceding
sentence of this SECTION 6.5 by execution of an instrument in form reasonably
acceptable to the Lender.

 

SECTION 6.6.  Modifications.  Each Grantor authorizes the Lender to modify this
Security Agreement by amending Section III of the Perfection Certificate to
include any Intellectual Property Collateral (but, with respect to Copyrights,
only those Copyrights described

 

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in Section 6.17(e) of the Credit Agreement) acquired or arising after the date
hereof of such Grantor including, without limitation, any of the items listed in
SECTION 6.5 hereof.

 

SECTION 6.7.  Litigation.  Unless there shall occur and be continuing any Event
of Default and as a result thereof the Lender has determined to exercise its
rights under the immediately following sentence, each Grantor shall have the
right to commence and prosecute in its own name, as the party in interest, for
its own benefit and at the sole cost and expense of the Grantors, such
applications for protection of the Intellectual Property Collateral and suits,
proceedings or other actions to prevent the infringement, counterfeiting, unfair
competition, dilution, diminution in value or other damage as are necessary to
protect the Intellectual Property Collateral.  Upon the occurrence and during
the continuance of any Event of Default, the Lender shall have the right but
shall in no way be obligated to file applications for protection of the
Intellectual Property Collateral and/or bring suit in the name of any Grantor,
the Lender or the other Credit Parties to enforce the Intellectual Property
Collateral and any license thereunder.  In the event of such suit, each Grantor
shall, at the reasonable request of the Lender, do any and all lawful acts and
execute any and all documents requested by the Lender in aid of such enforcement
and the Grantors shall promptly reimburse and indemnify the Lender, as the case
may be, for all costs and expenses incurred by the Lender in the exercise of its
rights under this SECTION 6.7 in accordance with SECTION 9.3 hereof.  In the
event that the Lender shall elect not to bring suit to enforce the Intellectual
Property Collateral, each Grantor agrees, at the request of the Lender, to take
all commercially reasonable actions necessary, whether by suit, proceeding or
other action, to prevent the infringement, counterfeiting, unfair competition,
dilution, diminution in value of or other damage to any of the Intellectual
Property Collateral by others and for that purpose agrees to diligently maintain
any suit, proceeding or other action against any Person so infringing necessary
to prevent such infringement.

 

SECTION 6.8.  Third Party Consents.  Each Grantor shall use reasonable
commercial efforts to obtain the consent of third parties to the extent such
consent is necessary or desirable to create a valid, perfected security interest
in favor of the Lender in any Intellectual Property Collateral.

 

ARTICLE VII

 

CERTAIN PROVISIONS CONCERNING ACCOUNTS

 

SECTION 7.1.  Special Representations and Warranties.  As of the time when each
of its Accounts is included in the Borrowing Base as an Eligible Credit Card
Receivable each Grantor shall be deemed to have represented and warranted that
such Account and all records, papers and documents relating thereto (i) are
genuine and correct and in all material respects what they purport to be,
(ii) represent the legal, valid and binding obligation of the account debtor,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar Laws relating to or limiting creditors’
rights generally or by equitable principles relating to enforceability
(including limitations on the enforceability of fraudulent credit card charges),
evidencing indebtedness unpaid and owed by such account debtor, arising out of
the performance of labor or services or the sale, lease, license, assignment or
other disposition and delivery of the goods or other property listed therein or
out of an advance or a loan, and (iii) are in all material

 

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respects in compliance and conform with all applicable material federal, state
and local Laws and applicable Laws of any relevant foreign jurisdiction.

 

SECTION 7.2.  Maintenance of Records.  Each Grantor shall keep and maintain at
its own cost and expense materially complete records of each Account, in a
manner consistent with prudent business practice, including, without limitation,
records of all payments received, all credits granted thereon, all merchandise
returned and all other documentation relating thereto.  Each Grantor shall, at
such Grantor’s sole cost and expense, upon the Lender’s demand made at any time
after the occurrence and during the continuance of any Event of Default, deliver
all tangible evidence of Accounts, including, without limitation, all documents
evidencing Accounts and any books and records relating thereto to the Lender or
to its representatives (copies of which evidence and books and records may be
retained by such Grantor).  Upon the occurrence and during the continuance of
any Event of Default, the Lender may transfer a full and complete copy of any
Grantor’s books, records, credit information, reports, memoranda and all other
writings relating to the Accounts to and for the use by any Person that has
acquired or is contemplating acquisition of an interest in the Accounts or the
Lender’s security interest therein in accordance with applicable Law without the
consent of any Grantor.

 

SECTION 7.3.  Legend.  To the extent reasonably practicable, each Grantor shall
legend, at the request of the Lender made at any time after the occurrence and
during the continuance of any Event of Default and in form and manner reasonably
satisfactory to the Lender, the Accounts and the other books, records and
documents of such Grantor evidencing or pertaining to the Accounts with an
appropriate reference to the fact that the Accounts have been collaterally
assigned to the Lender for its own benefit and the benefit of the Credit Parties
and that the Lender has a security interest therein.

 

SECTION 7.4.  Modification of Terms, Etc.  No Grantor shall rescind or cancel
any indebtedness evidenced by any Account or modify any term thereof or make any
adjustment with respect thereto except in the ordinary course of business
consistent with prudent business practice, or extend or renew any such
indebtedness except in the ordinary course of business consistent with prudent
business practice or compromise or settle any dispute, claim, suit or legal
proceeding relating thereto or sell any Account or interest therein except in
the ordinary course of business consistent with prudent business practice or in
accordance with the Credit Agreement without the prior written consent of the
Lender.

 

SECTION 7.5.  Collection.  Each Grantor shall cause to be collected from the
account debtor of each of the Accounts, as and when due in the ordinary course
of business consistent with prudent business practice and such Grantor’s
policies as in effect on the date hereof (or such Grantor’s policies after the
date hereof so long as any modification to Grantor’s policies after the date
hereof is (i) not adverse to the Lender or any other Credit Party; or (ii) not
material and adverse to the Lender or any other Credit Party and is required by
the rules unilaterally instituted by a Credit Card Processor or Credit Card
Issuer) (including, without limitation, Accounts that are delinquent, such
Accounts to be collected in accordance with generally accepted commercial
collection procedures), any and all amounts owing under or on account of such
Account, and apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Account.  The costs and expenses
(including, without limitation, attorneys’ fees)

 

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of collection, in any case, whether incurred by any Grantor, the Lender or any
other Credit Party, shall be paid by the Grantors.

 

ARTICLE VIII

 

REMEDIES

 

SECTION 8.1.  Remedies.  Upon the occurrence and during the continuance of any
Event of Default the Lender may, from time to time in respect of the Collateral,
in addition to the other rights and remedies provided for herein, under
applicable Law or otherwise available to it:

 

(a)                                 Personally, or by agents or attorneys,
immediately take possession of the Collateral or any part thereof, from any
Grantor or any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon any
Grantor’s premises where any of the Collateral is located, remove such
Collateral, remain present at such premises to receive copies of all
communications and remittances relating to the Collateral and use in connection
with such removal and possession any and all services, supplies, aids and other
facilities of any Grantor;

 

(b)                                 Demand, sue for, collect or receive any
money or property at any time payable or receivable in respect of the Collateral
including, without limitation, instructing the obligor or obligors on any
agreement, instrument or other obligation constituting part of the Collateral to
make any payment required by the terms of such agreement, instrument or other
obligation directly to the Lender, and in connection with any of the foregoing,
compromise, settle, extend the time for payment and make other modifications
with respect thereto; provided, however, that in the event that any such
payments are made directly to any Grantor, prior to receipt by any such obligor
of such instruction, such Grantor shall segregate all amounts received pursuant
thereto in trust for the benefit of the Lender and shall promptly pay such
amounts to the Lender;

 

(c)                                  Sell, assign, grant a license to use or
otherwise liquidate, or direct any Grantor to sell, assign, grant a license to
use or otherwise liquidate, any and all investments made in whole or in part
with the Collateral or any part thereof, and take possession of the proceeds of
any such sale, assignment, license or liquidation;

 

(d)                                 Take possession of the Collateral or any
part thereof, by directing any Grantor in writing to deliver the same to the
Lender at any place or places so designated by the Lender, in which event such
Grantor shall at its own expense:  (A) forthwith cause the same to be moved to
the place or places designated by the Lender and therewith delivered to the
Lender, (B) store and keep any Collateral so delivered to the Lender at such
place or places pending further action by the Lender and (C) while the
Collateral shall be so stored and kept, provide such security and maintenance
services as shall be necessary to protect the same and to preserve and maintain
them in good condition.  Each Grantor’s obligation to deliver the Collateral as
contemplated in this SECTION 8.1 is of the essence hereof.  Upon application to
a court of equity having jurisdiction, the Lender shall be entitled to a decree
requiring specific performance by any Grantor of such obligation;

 

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(e)                                  Withdraw all moneys, instruments,
securities and other property in any bank, financial securities, deposit or
other account of any Grantor constituting Collateral for application to the
Secured Obligations as provided in ARTICLE VIII hereof;

 

(f)                                   Retain and apply the Distributions to the
Secured Obligations as provided in ARTICLE VIII hereof;

 

(g)                                  Exercise any and all rights as beneficial
and legal owner of the Collateral, including, without limitation, perfecting
assignment of and exercising any and all voting, consensual and other rights and
powers with respect to any Collateral; and

 

(h)                                 Exercise all the rights and remedies of a
secured party under the UCC, and the Lender may also in its sole discretion,
without notice except as specified in SECTION 8.2 hereof, sell, assign or grant
a license to use the Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker’s board or at any of the
Lender’s offices or elsewhere, for cash, on credit or for future delivery, and
at such price or prices and upon such other terms as the Lender may deem
commercially reasonable.  The Lender or any other Credit Party or any of their
respective Affiliates may be the purchaser, licensee, assignee or recipient of
any or all of the Collateral at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold, assigned or licensed at such sale, to
use and apply any of the Secured Obligations owed to such Person as a credit on
account of the purchase price of any Collateral payable by such Person at such
sale.  Each purchaser, assignee, licensee or recipient at any such sale shall
acquire the property sold, assigned or licensed absolutely free from any claim
or right on the part of any Grantor, and each Grantor hereby waives, to the
fullest extent permitted by Law, all rights of redemption, stay and/or appraisal
which it now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.  The Lender shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given.  The
Lender may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.  To the fullest
extent permitted by Law, each Grantor hereby waives any claims against the
Lender arising by reason of the fact that the price at which any Collateral may
have been sold, assigned or licensed at such a private sale was less than the
price which might have been obtained at a public sale, even if the Lender
accepts the first offer received and does not offer such Collateral to more than
one offeree.

 

SECTION 8.2.  Notice of Sale.  Each Grantor acknowledges and agrees that, to the
extent notice of sale or other disposition of Collateral shall be required by
applicable Law and unless the Collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market (in
which event the Lender shall provide such Grantor such advance notice as may be
practicable under the circumstances), ten (10) days’ prior notice to such
Grantor of the time and place of any public sale or of the time after which any
private sale or other intended disposition is to take place shall be
commercially reasonable notification of such matters.  No notification need be
given to any Grantor if it has signed, after the occurrence of an Event of
Default, a statement renouncing or modifying (as permitted under Law) any right
to notification of sale or other intended disposition.

 

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SECTION 8.3.  Waiver of Notice and Claims.  Each Grantor hereby waives, to the
fullest extent permitted by applicable Law, notice or judicial hearing in
connection with the Lender’s taking possession or the Lender’s disposition of
any of the Collateral, including, without limitation, any and all prior notice
and hearing for any prejudgment remedy or remedies and any such right which such
Grantor would otherwise have under law, and each Grantor hereby further waives,
to the fullest extent permitted by applicable Law:  (i) all damages occasioned
by such taking of possession, (ii) all other requirements as to the time, place
and terms of sale or other requirements with respect to the enforcement of the
Lender’s rights hereunder and (iii) all rights of redemption, appraisal,
valuation, stay, extension or moratorium now or hereafter in force under any
applicable Law.  The Lender shall not be liable for any incorrect or improper
payment made pursuant to this ARTICLE VIII in the absence of gross negligence or
willful misconduct.  Any sale of, or the grant of options to purchase, or any
other realization upon, any Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the applicable
Grantor therein and thereto, and shall be a perpetual bar both at law and in
equity against such Grantor and against any and all Persons claiming or
attempting to claim the Collateral so sold, optioned or realized upon, or any
part thereof, from, through or under such Grantor.

 

SECTION 8.4.  Certain Sales of Collateral.

 

(a)                                 Each Grantor recognizes that, by reason of
certain prohibitions contained in law, rules, regulations or orders of any
Governmental Authority, the Lender may be compelled, with respect to any sale of
all or any part of the Collateral, to limit purchasers to those who meet the
requirements of such Governmental Authority.  Each Grantor acknowledges that any
such sales may be at prices and on terms less favorable to the Lender than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agrees that any such restricted sale shall be deemed to have
been made in a commercially reasonable manner and that, except as may be
required by applicable Law, the Lender shall have no obligation to engage in
public sales.

 

(b)                                 Each Grantor recognizes that, by reason of
certain prohibitions contained in the Securities Act, and applicable state
securities Laws, the Lender may be compelled, with respect to any sale of all or
any part of the Securities Collateral and Investment Property, to limit
purchasers to Persons who will agree, among other things, to acquire such
Securities Collateral or Investment Property for their own account, for
investment and not with a view to the distribution or resale thereof.  Each
Grantor acknowledges that any such private sales may be at prices and on terms
less favorable to the Lender than those obtainable through a public sale without
such restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the Lender
shall have no obligation to engage in public sales and no obligation to delay
the sale of any Securities Collateral or Investment Property for the period of
time necessary to permit the issuer thereof to register it for a form of public
sale requiring registration under the Securities Act or under applicable state
securities Laws, even if such issuer would agree to do so.

 

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(c)                                  If the Lender determines to exercise its
right to sell any or all of the Securities Collateral or Investment Property,
upon written request, the applicable Grantor shall from time to time furnish to
the Lender all such information as the Lender may reasonably request in order to
determine the number of securities included in the Securities Collateral or
Investment Property which may be sold by the Lender as exempt transactions under
the Securities Act and the rules of the Securities and Exchange Commission
thereunder, as the same are from time to time in effect.

 

(d)                                 Each Grantor further agrees that a breach of
any of the covenants contained in this SECTION 8.4 will cause irreparable injury
to the Lender and the other Credit Parties, that the Lender and the other Credit
Parties have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this SECTION 8.4 shall be
specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of Default has occurred and
is continuing.

 

SECTION 8.5.  No Waiver; Cumulative Remedies.

 

(a)                                 No failure on the part of the Lender to
exercise, no course of dealing with respect to, and no delay on the part of the
Lender in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy; nor shall the Lender be required
to look first to, enforce or exhaust any other security, collateral or
guaranties.  The remedies herein provided are cumulative and are not exclusive
of any remedies provided by law.

 

(b)                                 In the event that the Lender shall have
instituted any proceeding to enforce any right, power or remedy under this
Security Agreement by foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Lender, then and in every such case, the Grantors,
the Lender and each other Credit Party shall, subject to applicable law, be
restored to their respective former positions and rights hereunder with respect
to the Collateral, and all rights, remedies and powers of the Lender and the
other Credit Parties shall continue as if no such proceeding had been
instituted.

 

SECTION 8.6.  Certain Additional Actions Regarding Intellectual Property.  If
any Event of Default shall have occurred and be continuing, upon the written
demand of Lender, each Grantor shall execute and deliver to Lender an assignment
or assignments of the registered Patents, Trademarks and/or Copyrights and such
other documents as are necessary or appropriate to carry out the intent and
purposes hereof to the extent such assignment does not result in any loss of
rights therein under applicable Law.  Within five (5) Business Days of written
notice thereafter from Lender, each Grantor shall make available to Lender, to
the extent within such Grantor’s power and authority, such personnel in such
Grantor’s employ on the date of the Event of Default as Lender may reasonably
designate to permit such Grantor to continue, directly or indirectly, to
produce, advertise and sell the products and services sold by such Grantor under
the registered Patents, Trademarks and/or Copyrights, and such Persons shall be
available to perform their prior functions on Lender’s behalf.

 

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SECTION 8.7.  Application of Proceeds.  The proceeds received by the Lender in
respect of any sale of, collection from or other realization upon all or any
part of the Collateral pursuant to the exercise by the Lender of its remedies
shall be applied, together with any other sums then held by the Lender pursuant
to this Security Agreement, in accordance with and as set forth in Section 8.03
of the Credit Agreement.

 

SECTION 8.8.  Third Party Agreements.  Pursuant to the Collateral Access
Agreements, DDA Notifications and Credit Card Notifications, the Lender has the
right to give notice to certain Persons who are parties thereto or recipients
thereof.  With respect to each DDA Notification and Credit Card Notification,
the Lender hereby acknowledges and agrees that it will not deliver any notice
instructing the recipient thereof to transfer funds to any account other than
the account identified in such notice until after the occurrence and during the
continuance of a Cash Dominion Event.  With respect to each Collateral Access
Agreement, the Lender hereby acknowledges and agrees that it will not deliver
any notice to such Persons in connection with the exercise of its rights and
remedies under the Credit Agreement, this Security Agreement and the other Loan
Documents until after the occurrence and during the continuance of an Event of
Default.

 

ARTICLE IX

 

MISCELLANEOUS

 

SECTION 9.1.  Concerning Lender.

 

(a)                                 The actions of the Lender hereunder are
subject to the provisions of the Credit Agreement.  The Lender shall have the
right hereunder to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking action (including,
without limitation, the release or substitution of the Collateral), in
accordance with this Security Agreement and the Credit Agreement.  The Lender
may employ agents and attorneys-in-fact in connection herewith and shall not be
liable for the negligence or misconduct of any such agents or attorneys-in-fact.

 

(b)                                 The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if such Collateral is accorded treatment substantially equivalent to
that which the Lender, in its individual capacity, accords its own property
consisting of similar instruments or interests, it being understood that neither
the Lender nor any of the other Credit Parties shall have responsibility for,
without limitation (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Securities Collateral, whether or not the Lender or any other Credit Party has
or is deemed to have knowledge of such matters or (ii) taking any necessary
steps to preserve rights against any Person with respect to any Collateral.

 

(c)                                  The Lender shall be entitled to rely upon
any written notice, statement, certificate, order or other document or any
telephone message believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person, and, with respect to all matters
pertaining to this Security Agreement and its duties hereunder, upon advice of
counsel selected by it.

 

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(d)                                 If any item of Collateral also constitutes
collateral granted to Lender under any other deed of trust, mortgage, security
agreement, pledge or instrument of any type, in the event of any conflict
between the provisions hereof and the provisions of such other deed of trust,
mortgage, security agreement, pledge or instrument of any type in respect of
such collateral, Lender, in its sole discretion, shall select which provision or
provisions shall control.

 

SECTION 9.2.  Lender May Perform; Lender Appointed Attorney-in-Fact.  If any
Grantor shall fail to perform any covenants contained in this Security Agreement
or in the Credit Agreement (including, without limitation, such Grantor’s
covenants to (i) pay the premiums in respect of all required insurance policies
hereunder, (ii) pay Claims, (iii) make repairs, (iv) discharge Liens or (v) pay
or perform any other obligations of such Grantor with respect to any Collateral)
or if any warranty on the part of any Grantor contained herein shall be
breached, the Lender may (but shall not be obligated to) do the same or cause it
to be done or remedy any such breach, and may expend funds for such purpose;
provided, however, that Lender shall in no event be bound to inquire into the
validity of any tax, lien, imposition or other obligation which such Grantor
fails to pay or perform as and when required hereby.  Any and all amounts so
expended by the Lender shall be paid by the Grantors in accordance with the
provisions of SECTION 9.3 hereof.  Neither the provisions of this SECTION 9.2
nor any action taken by Lender pursuant to the provisions of this SECTION 9.2
shall prevent any such failure to observe any covenant contained in this
Security Agreement nor any breach of warranty from constituting an Event of
Default.  Each Grantor hereby appoints the Lender its attorney-in-fact, with
full authority in the place and stead of such Grantor and in the name of such
Grantor, or otherwise, from time to time after the occurrence and during the
continuation of an Event of Default in the Lender’s discretion to take any
action and to execute any instrument consistent with the terms of the Credit
Agreement and the other Security Documents which the Lender may deem necessary
to accomplish the purposes hereof.  The foregoing grant of authority is a power
of attorney coupled with an interest and such appointment shall be irrevocable
for the term hereof.  Each Grantor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof.

 

SECTION 9.3.  Expenses.  Each Grantor will upon demand pay to the Lender the
amount of any and all amounts required to be paid pursuant to Section 9.04 of
the Credit Agreement.

 

SECTION 9.4.  Continuing Security Interest; Assignment.  This Agreement shall
create a continuing security interest in the Collateral and shall (i) be binding
upon the Grantors, their respective successors and assigns, and (ii) inure,
together with the rights and remedies of the Lender hereunder, to the benefit of
the Lender and the other Credit Parties and each of their respective successors,
transferees and assigns.  No other Persons (including, without limitation, any
other creditor of any Grantor) shall have any interest herein or any right or
benefit with respect hereto.  Without limiting the generality of the foregoing
clause (ii), any Credit Party may assign or otherwise transfer any indebtedness
held by it secured by this Agreement to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to such Credit Party, herein or otherwise, subject, however, to the provisions
of the Credit Agreement.

 

27

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SECTION 9.5.  Termination; Release.

 

(a)                                  This Security Agreement, the Lien in favor
of the Lender (for the benefit of itself and the other Credit Parties) and all
other security interests granted hereby shall terminate with respect to all
Secured Obligations when (i) the Commitments shall have expired or been
terminated, (ii) the principal of and interest on each Loan and all fees and
other Secured Obligations shall have been indefeasibly paid in full in cash,
(iii) all Letters of Credit (as defined in the Credit Agreement) shall have
(A) expired or terminated and have been reduced to zero, (B) been Cash
Collateralized to the extent required by the Credit Agreement, or (C) been
supported by another letter of credit in a manner reasonably satisfactory to the
L/C Issuer, and (iv) all unreimbursed amounts shall have been indefeasibly paid
in full in cash, provided, however, that in connection with the termination of
this Security Agreement, the Lender may require such indemnities from the
Grantors as it shall reasonably deem necessary or appropriate to protect the
Credit Parties against (x) loss on account of credits previously applied to the
Secured Obligations that may subsequently be reversed or revoked, (y) any
obligations that may thereafter arise with respect to the Other Liabilities, and
(z) any Secured Obligations that may thereafter arise under Section 9.04 of the
Credit Agreement.

 

(b)                                 The Collateral shall be released from the
Lien of this Security Agreement in accordance with the provisions of the Credit
Agreement.  Upon termination hereof or any release of Collateral in accordance
with the provisions of the Credit Agreement, the Lender shall, upon the request
and at the sole cost and expense of the Grantors, assign, transfer and deliver
to the Grantors, against receipt and without recourse to or warranty by the
Lender, such of the Collateral to be released (in the case of a release) or all
of the Collateral (in the case of termination of this Security Agreement) as may
be in possession of the Lender and as shall not have been sold or otherwise
applied pursuant to the terms hereof, and, with respect to any other Collateral,
proper documents and instruments (including UCC 3 termination statements or
releases) acknowledging the termination hereof or the release of such
Collateral, as the case may be.

 

(c)                                  At any time that the respective Grantor
desires that the Lender take any action described in clause (b) of this
SECTION 9.5, such Grantor shall, upon request of the Lender, deliver to the
Lender an officer’s certificate certifying that the release of the respective
Collateral is permitted pursuant to clause (a) or (b) of this SECTION 9.5.  The
Lender shall have no liability whatsoever to any other Credit Party as the
result of any release of Collateral by it as permitted (or which the Lender in
good faith believes to be permitted) by this SECTION 9.5.

 

SECTION 9.6.  Modification in Writing.  No amendment, modification, supplement,
termination or waiver of or to any provision hereof, nor consent to any
departure by any Grantor therefrom, shall be effective unless the same shall be
made in accordance with the terms of the Credit Agreement and unless in writing
and signed by the Lender and the Grantors.  Any amendment, modification or
supplement of or to any provision hereof, any waiver of any provision hereof and
any consent to any departure by any Grantor from the terms of any provision
hereof shall be effective only in the specific instance and for the specific
purpose for which made or given.  Except where notice is specifically required
by this Security Agreement or any other document evidencing the Secured
Obligations, no notice to or demand on any Grantor

 

28

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in any case shall entitle any Grantor to any other or further notice or demand
in similar or other circumstances.

 

SECTION 9.7.  Notices.  Unless otherwise provided herein or in the Credit
Agreement, any notice or other communication herein required or permitted to be
given shall be given in the manner and become effective as set forth in the
Credit Agreement, as to any Grantor, addressed to it at the address of the Lead
Borrower set forth in the Credit Agreement and as to the Lender, addressed to it
at the address set forth in the Credit Agreement, or in each case at such other
address as shall be designated by such party in a written notice to the other
parties hereto complying as to delivery with the terms of this SECTION 9.7.

 

SECTION 9.8.  GOVERNING LAW.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF, BUT INCLUDING SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

SECTION 9.9.  CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL.

 

(a)                                  EACH GRANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH GRANTOR IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH GRANTOR
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.  NOTHING IN THIS SECURITY AGREEMENT OR IN
ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE LENDER MAY OTHERWISE
HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS SECURITY AGREEMENT OR
ANY OTHER LOAN DOCUMENT AGAINST ANY GRANTOR OR ITS PROPERTIES IN THE COURTS OF
ANY JURISDICTION IF REQUIRED TO REALIZE UPON ANY COLLATERAL.

 

(b)                                 EACH GRANTOR IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT
IN ANY COURT REFERRED TO IN PARAGRAPH (A) OF THIS SECTION.  EACH GRANTOR HEREBY

 

29

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IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.

 

(c)                                  EACH GRANTOR AND, EXCEPT AS PROVIDED IN THE
LAST SENTENCE OF SECTION 9.9(a), EACH CREDIT PARTY, AGREES THAT ANY ACTION
COMMENCED BY IT ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN
CONNECTION WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
BROUGHT SOLELY IN A COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR
ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

 

(d)                                 EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.7.  NOTHING
IN THIS SECURITY AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

(e)                                  EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY AND WHETHER INITIATED BY OR AGAINST ANY SUCH PERSON OR IN WHICH
ANY SUCH PERSON IS JOINED AS A PARTY LITIGANT).  EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SECURITY
AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 9.10.  Severability of Provisions.  Any provision hereof which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

SECTION 9.11.  Execution in Counterparts; Effectiveness.  This Security
Agreement may be executed in any number of counterparts (and by different
parties hereto in different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.  Delivery of an executed counterpart of a signature page of this
Security Agreement by telecopy, pdf or other electronic transmission shall be as
effective as delivery of a manually executed counterpart of this Security
Agreement.

 

30

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SECTION 9.12.  No Release.  Nothing set forth in this Security Agreement shall
relieve any Grantor from the performance of any term, covenant, condition or
agreement on such Grantor’s part to be performed or observed under or in respect
of any of the Collateral or from any liability to any Person under or in respect
of any of the Collateral or shall impose any obligation on the Lender or any
other Credit Party to perform or observe any such term, covenant, condition or
agreement on such Grantor’s part to be so performed or observed or shall impose
any liability on the Lender or any other Credit Party for any act or omission on
the part of such Grantor relating thereto or for any breach of any
representation or warranty on the part of such Grantor contained in this
Security Agreement, the Credit Agreement or the other Loan Documents, or under
or in respect of the Collateral or made in connection herewith or therewith. 
The obligations of each Grantor contained in this SECTION 9.12 shall survive the
termination hereof and the discharge of such Grantor’s other obligations under
this Security Agreement, the Credit Agreement and the other Loan Documents.

 

SECTION 9.13.  Obligations Absolute.  All obligations of each Grantor hereunder
shall be absolute and unconditional irrespective of:

 

(a)                                  any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of any Grantor;

 

(b)                                 any lack of validity or enforceability of
the Credit Agreement or any other Loan Document, or any other agreement or
instrument relating thereto;

 

(c)                                  any change in the time, manner or place of
payment of, or in any other term of, all or any of the Secured Obligations, or
any other amendment or waiver of or any consent to any departure from the Credit
Agreement or any other Loan Document or any other agreement or instrument
relating thereto;

 

(d)                                 any pledge, exchange, release or
non-perfection of any other collateral, or any release or amendment or waiver of
or consent to any departure from any guarantee, for all or any of the Secured
Obligations;

 

(e)                                  any exercise, non-exercise or waiver of any
right, remedy, power or privilege under or in respect hereof, the Credit
Agreement or any other Loan Document except as specifically set forth in a
waiver granted pursuant to the provisions of SECTION 9.6 hereof; or

 

(f)                                    any other circumstances which might
otherwise constitute a defense available to, or a discharge of, any Grantor
(other than the termination of this Security Agreement in accordance with
SECTION 9.5(a) hereof).

 

SECTION 9.14.  Confirmation and Ratification.  Each of the Borrowers hereby
ratifies and confirms in all respects the prior grant of a security interest
under the Existing Credit Agreement and the other “Loan Documents” (as defined
in the Existing Credit Agreement) executed in connection therewith, and
acknowledges, agrees and confirms that any and all collateral previously pledged
to the Lender pursuant thereto shall secure the Secured Obligations.

 

[Signature Pages to Follow]

 

31

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IN WITNESS WHEREOF, the Grantors and the Lender have caused this Security
Agreement to be duly executed and delivered by their duly authorized officers as
of the date first above written.

 

 

 

CHRISTOPHER & BANKS CORPORATION, as a Grantor

 

 

 

 

 

 

By:

/s/ Peter Michielutti

 

Name:

Peter Michielutti

 

Title:

Senior Vice President and Chief Financial Officer

 

 

 

 

 

 

 

CHRISTOPHER & BANKS, INC.,

 

as a Grantor

 

 

 

 

 

 

By:

/s/ Peter Michielutti

 

 

Name:

Peter Michielutti

 

Title:

Senior Vice President and Chief Financial Officer

 

 

 

 

 

 

 

CHRISTOPHER & BANKS COMPANY,

 

as a Grantor

 

 

 

 

 

 

By:

/s/ Peter Michielutti

 

Name:

Peter Michielutti

 

Title:

Senior Vice President and Chief Financial Officer

 

 

[Signature Page to Security Agreement]

 

--------------------------------------------------------------------------------

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender

 

 

 

 

 

 

By:

/s/ Jason Searle

 

Name:

Jason Searle

 

Title:

Director

 

 

[Signature Page to Security Agreement]

 

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EXHIBIT 1

 

[Form of]

 

SECURITIES PLEDGE AMENDMENT

 

This Securities Pledge Amendment, dated as of                   , is delivered
pursuant to SECTION 5.1 of that certain Security Agreement (as amended, amended
and restated, restated, supplemented or otherwise modified from time to time,
the “Security Agreement;” capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Security
Agreement), dated as of                         , made by (i) CHRISTOPHER &
BANKS CORPORATION, as lead borrower for itself and the other Borrowers (the
“Lead Borrower”), (ii) THE BORROWERS party thereto from time to time (together
with the Lead Borrower, the “Borrowers”, and (iii) THE GUARANTORS party thereto
from time to time (the “Guarantors”), as pledgors, assignors and debtors (the
Borrowers, together with the Guarantors, in such capacities and together with
any successors in such capacities, the “Grantors,” and each, a “Grantor”), in
favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, having an office at One Boston
Place, 18th Floor, Boston, Massachusetts 02108, as pledgee, assignee and secured
party (in such capacities and together with any successors in such capacities,
the “Lender”).  The undersigned hereby agrees that this Securities Pledge
Amendment may be attached to the Security Agreement and that the Pledged
Securities and/or Intercompany Notes, if any, listed on this Securities Pledge
Amendment shall be deemed to be and shall become part of the Collateral and
shall secure all Secured Obligations.

 

--------------------------------------------------------------------------------

 

PLEDGED SECURITIES

 

ISSUER

 

CLASS
OF STOCK
OR
INTERESTS

 

PAR
VALUE

 

CERTIFICATE
NO(S).

 

NUMBER
OF
SHARES
OR
INTERESTS

 

PERCENTAGE OF
ALL ISSUED
CAPITAL
OR OTHER
EQUITY
INTERESTS OF
ISSUER

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

INTERCOMPANY NOTES

 

ISSUER

 

PRINCIPAL
AMOUNT

 

DATE OF
ISSUANCE

 

INTEREST
RATE

 

MATURITY
DATE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

[                                                   ], as Guarantor

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

AGREED TO AND ACCEPTED:

 

 

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

--------------------------------------------------------------------------------

 

SCHEDULE I

 

Intercompany Notes

 

None

 

--------------------------------------------------------------------------------

 

SCHEDULE II

 

Filings, Registrations and Recordings

 

Grantor Name

 

Filing Office

Christopher & Banks Corporation

 

Delaware Secretary of State

Christopher & Banks, Inc.

 

Minnesota Secretary of State

Christopher & Banks Company

 

Minnesota Secretary of State

Christopher & Banks Corporation

 

U.S. Patent and Trademark Office

Christopher & Banks, Inc.

 

U.S. Patent and Trademark Office

Christopher & Banks Company

 

U.S. Patent and Trademark Office

 

--------------------------------------------------------------------------------

 

SCHEDULE III

 

Pledged Interests

 

Grantor

 

Issuer

 

Type of
Organization

 

# of
Shares
Owned

 

Total
Shares
Outstanding

 

% of
Interest
Pledged

 

Certificate
No.
(if
uncertificated,
please
indicate so)

 

Christopher & Banks Corporation

 

Christopher & Banks, Inc.

 

Corporation

 

1,000

 

1,000

 

100

%

3

 

Christopher & Banks, Inc.

 

Christopher & Banks Company

 

Corporation

 

1,000

 

1,000

 

100

%

1

 

 

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