<PAGE>

                                                                    EXHIBIT 10.2

                        SUPPLEMENTAL SECURITY AGREEMENT
                        -------------------------------

          SUPPLEMENTAL SECURITY AGREEMENT, dated as of May 24, 1999, by WILSONS
LEATHER HOLDINGS INC., a Minnesota corporation ("Borrower") and the other
grantors listed on the signature pages hereto (collectively "Grantors"), in
favor of GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, in its
capacity as Agent for Lenders.

                             W I T N E S S E T H:
                             - - - - - - - - - -

          WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement dated as of the date hereof by and among Borrower (and certain of
Borrower's corporate Affiliates), Agent and Lenders (including all appendices,
exhibits or schedules thereto, as from time to time amended, restated,
supplemented or otherwise modified, the "Credit Agreement"), Lenders have agreed
                                         ----------------
to continue to make the Loans and to incur Letter of Credit Obligations and
Eligible Trade L/C Obligations on behalf of Borrower;

          WHEREAS, pursuant to Guaranties dated May 25, 1996 (the "Guaranties")
entered into by the Grantors (other than Borrower) in favor of Agent for the
benefit of Lenders, such other Grantors have guaranteed payment of Borrower's
Obligations under the Credit Agreement;

          WHEREAS, pursuant to a Security Agreement dated as of May 25, 1996,
various of the Grantors granted to Agent a security interest in the Collateral
in which they had an interest (the "Prior Security Agreement");

          WHEREAS, pursuant to Joinder Agreements, various Store Guarantors
formed or acquired after May 25, 1996, have joined in and become parties to the
Guaranties and the Prior Security Agreement;

          WHEREAS, Agent and Lenders are willing to make the Loans and to incur
Letter of Credit Obligations and Eligible Trade L/C Obligations as provided for
in the Credit Agreement, but only upon the condition, among others, that
Grantors shall have executed and delivered this Supplemental Security Agreement
to Agent, for itself and the ratable benefit of Lenders;

          NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

          1.  DEFINED TERMS. All capitalized terms used but not otherwise
              -------------
defined herein have the meaning given to them in the Credit Agreement or in
Schedule A thereto. All other undefined terms contained in this Supplemental
----------
Security Agreement, unless the context indicates otherwise, have the meanings
provided for by Article 9 of the Commercial Code as in effect in the State of
Illinois (the "Code") to the extent the same are used or defined therein.
               ----
<PAGE>

          2.     GRANT OF SECURITY INTEREST.
                 --------------------------

          (a)    Grantors hereby reaffirm the grants of security interests in
the Collateral given by the Grantors pursuant to the Prior Security Agreement,
as amended, and as a supplement to, rather than a substitution for, those prior
grants of security interests and to secure the prompt and complete payment,
performance and observance of all of the Obligations, and to induce Agent and
Lenders to enter into the Credit Agreement and to make the Loans and incur
Letter of Credit Obligations and Eligible Trade L/C Obligations as provided for
therein in accordance with the terms and conditions thereof, each Grantor hereby
grants, assigns, conveys, mortgages, pledges, hypothecates and transfers to
Agent, for itself and the ratable benefit of Lenders, a security interest in its
right, title and interest in, to and under the following, whether now owned by
or owing to, or hereafter acquired by or arising in favor of such Grantor
(including under any trade names, styles or derivations thereof), and whether
owned or consigned by or to, or leased from or to, such Grantor, and regardless
of where located (all of which being hereinafter collectively referred to as the
"Collateral"):
 ----------

          (i)    all Accounts;

          (ii)   all Chattel Paper;

          (iii)  all Contracts;

          (iv)   all deposit accounts now or hereafter established by Borrower,
                 all cash deposited therein from time to time and all other
                 monies, cash, cash equivalents and property of Borrower or any
                 other Grantor in the possession or under the control of Agent
                 or any Lenders;

          (v)    all Documents;

          (vi)   all General Intangibles;

          (vii)  all Instruments;

          (viii) all Inventory;

          (ix)   all Investment Property;

          (x)    all books, records, ledger cards, files, correspondence,
                 computer programs, tapes, disks and related data processing
                 software that at any time evidence or contain information
                 relating to any of the property described in (i) through (ix)
                 above or are otherwise necessary or helpful in the collection
                 thereof or realization thereon; and

          (xi)   all Proceeds of and all accessions to, substitutions and
                 replacements for, and rents, profits and products of all or any
                 of the property described in (i) through (x) above.

                                       2
<PAGE>

          (b)    In addition, to secure the prompt and complete payment,
performance and observance of the Obligations and in order to induce Agent and
Lenders as aforesaid, each Grantor hereby grants to Agent, for itself and the
ratable benefit of Lenders, a security interest in the property of such Grantor
held by Agent or any Lender, consisting of property described above in Section
                                                                       -------
2(a) now or hereafter in the possession or custody of or in transit to Agent or
----
any Lender, for any purpose, including safekeeping, collection or pledge, for
the account of such Grantor, or as to which such Grantor may have any right or
power.

          3.   AGENT'S AND LENDER'S RIGHTS;  LIMITATIONS ON AGENTS AND LENDERS'
               ----------------------------------------------------------------
OBLIGATIONS.
-----------

          (a)  It is expressly agreed by each Grantor that, anything herein to
the contrary notwithstanding, each Grantor shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the conditions and
obligations to be observed and performed by it thereunder. Neither Agent nor any
Lender shall have any obligation or liability under any Contract or License by
reason of or arising out of this Supplemental Security Agreement or the granting
herein of a security interest therein or the receipt by Agent or any Lender of
any payment relating to any Contract or License pursuant hereto. Neither Agent
nor any Lender shall be required or obligated in any manner to perform or
fulfill any of the obligations of any Grantor under or pursuant to any Contract
or License, or to make any payment, or to make any inquiry as to the nature or
the sufficiency of any payment received by it or the sufficiency of any
performance by any party under any Contract or License, or to present or file
any claims, or to take any action to collect or enforce any performance or the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.

          (b)  Agent may at any time after an Event of Default shall have
occurred and be continuing, immediately upon notice to Borrower, notify Account
Debtors, parties to the Contracts and obligors in respect of Instruments and
Chattel Paper, that the Accounts and the right, title and interest of each
Grantor in and under such Contracts, Instruments and Chattel Paper have been
assigned to Agent, for itself and the ratable benefit of Lenders, and that
payments shall be made directly to Agent, for itself and the ratable benefit of
Lenders. Upon the request of Agent, if an Event of Default shall have occurred
and is continuing, each Grantor shall so notify Account Debtors, parties to
Contracts and obligors in respect of Instruments and Chattel Paper.

          (c)  Subject to the limitations contained in the Credit Agreement,
Agent shall have the right to make test verifications of the Accounts and
physical verifications and appraisals of the Inventory and other Collateral, at
Borrower's expense in any manner and through any medium that it considers
advisable, and each Grantor agrees to furnish all such information and
assistance as Agent may require in connection therewith. Agent may at any time
in Agent's own name (on behalf of itself and Lenders), or in the name of a
Grantor communicate with Account Debtors, parties to Contracts, obligors in
respect of Instruments and obligors in respect of Chattel Paper to verify with
such Persons, to Agent's satisfaction, the existence, amount and terms of any
such Accounts, Contracts, Instruments or Chattel Paper. If an Event of Default
shall have occurred and be continuing, Borrower or Ultimate Parent, at their own
expense, shall cause the certified

                                       3
<PAGE>

independent public accountants then engaged by Borrower or Ultimate Parent to
prepare and deliver to Agent at any time and from time to time promptly upon
Agent's request (on behalf of itself and Lenders), the following reports with
respect to each Grantor: (i) a reconciliation of all Accounts; (ii) an aging of
all Accounts; (iii) trial balances; (iv) a test verification of such Accounts as
Agent may request; and (v) a summary of all intercompany accounts. Each Grantor,
at its own expense, shall deliver to Agent the results of each physical
verification, if any, which such Grantor may in its discretion have made, or
caused any other Person to have made on its behalf, of all or any portion of its
Inventory.

          4.   REPRESENTATIONS AND WARRANTIES.  Each Grantor represents and
               ------------------------------
warrants that:

          (a)  Each Grantor is the sole owner of each item of the Collateral in
which it purports to grant a security interest hereunder, and has good and
marketable title thereto free and clear of any and all Liens other than
Permitted Encumbrances.

          (b)  No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except such as
may have been filed (i) by a Grantor in favor of Agent, for itself and the
ratable benefit of Lenders, pursuant to the Prior Security Agreement or this
Supplemental Security Agreement, (ii) in connection with any other Permitted
Encumbrances; and (iii) to evidence Borrower's interest as Consignor under the
Consignment Agreement.

          (c)  The Prior Security Agreement, as supplemented by this
Supplemental Security Agreement is effective to create a valid and continuing
Lien on and, upon the filing of the appropriate financing statements listed on
Schedule I hereto, a perfected security interest in favor of Agent, for itself
----------
and the ratable benefit of Lenders, in the Collateral with respect to which a
security interest may be perfected by filing pursuant to the Code. That Lien is
prior to all other Liens, except Permitted Encumbrances that would be prior to
Liens in favor of Agent for the benefit of Agent and Lenders as a matter of law,
and is enforceable as such as against any and all creditors of and purchasers
from any Grantor (other than purchasers of Inventory in the ordinary course of
business). All actions by each Grantor necessary or desirable to protect and
perfect such security interest in each item of the Collateral have been duly
taken.

          (d)  Schedule II hereto lists all Instruments (other than certificated
               -----------
securities) and Chattel Paper of each Grantor outstanding on the date hereof.
All actions by each Grantor necessary or desirable to protect and perfect the
security interest of Agent, for the benefit of Agent and Lenders, in each item
set forth on Schedule II (including the delivery of all originals thereof to
             -----------
Agent (or to a bank or other Person acting as agent for Agent) and the legending
of all Chattel Paper as required by Section 5(b) hereof) has been duly taken.
                                    ------------
The security interest of Agent, for the benefit of Agent and Lenders, in the
Collateral listed on Schedule II hereto is prior to all other Liens, except
                     -----------
Permitted Encumbrances, and is enforceable as such against any and all creditors
of and purchasers from each Grantor.

                                       4
<PAGE>

          (e)  Each Grantor's chief executive office, principal place of
business, corporate offices, all warehouses and premises where Collateral is
stored or located, and the locations of all of its books and records concerning
the Collateral are set forth on Schedule III-A hereto.
                                --------------

          (f)  With respect to the Accounts, (i) they represent bona fide sales
of Inventory or rendering of services to Account Debtors in the ordinary course
of any Grantor's business completed in accordance with the terms and provisions
contained in the documents available to Agent with respect thereto and are not
evidenced by a judgment, instrument or Chattel Paper; (ii) the amounts shown on
such deliveries to Agent and on such records and all invoices, statements and
Collateral Reports which may be delivered to the Agent with respect thereto are
actually and absolutely owing to any Grantor as indicated thereon and are not in
any way contingent and  (iii) no payments have been or shall be made thereon
except payments immediately delivered to the applicable Grantor's account and
transferred to Borrower's Concentration Account or the Agent as required
pursuant to the terms of Schedule E to the Credit Agreement.
                         ----------

          (g)  With respect to any Eligible Inventory, (i) such Inventory is
located at one of the applicable Grantor's locations set forth on Schedule III-A
                                                                  --------------
hereto or constitutes Eligible In-Transit Inventory, (ii) no Inventory is now,
or shall at any time or times hereafter be stored with a bailee, warehouseman or
similar party without Agent's prior consent, and if Agent gives such consent,
each Grantor will concurrently therewith cause any such bailee, warehouseman or
similar party to issue and deliver to Agent in form and substance acceptable to
Agent, warehouse receipts therefor in Agent's name, (iii) each Grantor has good,
indefeasible and merchantable title to such property and such property is not
subject to any Lien or security interest or document whatsoever except for the
perfected, first priority security interest granted to Agent, for the benefit of
Agent and Lenders, hereunder, and except for Permitted Encumbrances, (iv) except
as specifically disclosed in a Collateral Report delivered to Agent, such
Inventory is Eligible Inventory of good and merchantable quality, free from any
defects, (v) such property is not subject to any licensing, patent, royalty,
trademark, trade name or copyright agreements with any third parties which would
require any consent of any third party upon sale or disposition of that
Inventory or the payment of any monies to any third party as a precondition of
such sale or other disposition, and (vi) the completion of manufacture, sale or
other disposition of such property by Agent following an Event of Default shall
not require the consent of any Person and shall not constitute a breach or
default under any contract or agreement to which any Grantor is a party or to
which such property is subject. No Inventory shall be moved to any location not
listed on Schedule III-A or disclosed to Agent in advance. No Inventory shall be
          --------------
moved to any location which would cause Agent to lose its perfected security
interest therein, except that up to 3% of Borrower's finished goods inventory at
any time may be on consignment with retailers other than Store Guarantors. As to
kiosks, holiday stores and other temporary sales locations, Grantors shall not
cause or permit such sales locations (i) to be operated by any entity other than
a Person that is a Grantor hereunder and a party to the Consignment Agreement
with Borrower, or (ii) to be operated in a jurisdiction in which an effective
UCC- I consignment filing in favor of Borrower (and assigned to Agent) and an
effective UCC- 1 filing in favor of Agent, in each case signed by the applicable
Grantor, are not on file in the appropriate filing offices.

                                       5
<PAGE>

          (h)  No Grantor owns any Trademark which is registered or pending in
the United States Patent Office and which is material to its business except as
set forth in Schedule IV hereto.  The Prior Security Agreement, as supplemented
             -----------
by this Supplemental Security Agreement is effective to create a valid and
continuing Lien on and, upon filing of the Trademark Security Agreements with
the United States Patent and Trademark Office, perfected security interests in
favor of Agent, for itself and the ratable benefit of Lenders, in each Grantor's
Trademarks which are registered or pending in such office, and such perfected
security interests are enforceable as such as against any and all creditors of
and purchasers from each Grantor. Upon filing of the Trademark Security
Agreements with the United States Patent and Trademark Office, and upon filing
financing statements under the Code with respect to General Intangibles, all
action necessary or desirable to protect and perfect Agent's security interest
in each Grantor's Trademarks shall have been duly taken. The foregoing shall
apply only to those Grantors that own Trademarks.

          5.   COVENANTS.  Each Grantor covenants and agrees with Agent, for the
               ---------
benefit of Agent and Lenders, that from and after the date of this Supplemental
Security Agreement and until the Termination Date:

          (a)  Further Assurances; Pledge of Instruments. At any time and from
               -----------------------------------------
time to time, upon the written request of Agent and at the sole expense of each
Grantor, such Grantor shall promptly and duly execute and deliver any and all
such further instruments and documents and take such further actions as Agent
may deem desirable to obtain the full benefits of this Supplemental Security
Agreement and of the rights and powers herein granted, including (i) using its
reasonable efforts to secure all consents and approvals necessary or appropriate
for the assignment to or for the benefit of Agent, for itself and the ratable
benefit of Lenders, of any License or Contract held by such Grantor or in which
such Grantor has any rights not heretofore assigned, (ii) filing any financing
or continuation statements under the Code with respect to the Liens and security
interests granted hereunder or under any other Loan Document, (iii) transferring
Collateral to Agent's possession (for the benefit of Agent and Lenders) if such
Collateral consists of Chattel Paper, Instruments or if a security interest in
such Collateral can be perfected only by possession, or if requested by Agent,
and (iv) using its reasonable efforts to obtain waivers of Liens, if any exist,
from landlords and mortgagees, but only to the extent required by the Credit
Agreement. Each Grantor also hereby authorizes Agent, for itself and the ratable
benefit of Lenders, to file any such financing or continuation statements
without the signature of any Grantor to the extent permitted by applicable law.
If any amount payable under or in connection with any of the Collateral is or
shall become evidenced by any Instrument, such Instrument, other than checks and
notes received in the ordinary course of business, shall be duly endorsed in a
manner satisfactory to Agent immediately upon a Grantor's receipt thereof.

          (b)  Maintenance of Records. Each Grantor shall keep and maintain, at
               ----------------------
its own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. Each Grantor shall mark its books and records pertaining to the
Collateral to evidence the Prior Security Agreement, as supplemented by this
Supplemental Security Agreement and the security interests granted hereby. All
Chattel Paper shall be marked

                                       6
<PAGE>

with the following legend: "This writing and the obligations evidenced or
secured hereby are subject to the security interest of General Electric Capital
Corporation, as Agent, for the benefit of itself as a Lender and certain other
Lenders." For Agent's further security, each Grantor agrees that Agent, for
itself and the ratable benefit of Lenders, shall have a special property right
and security interest in all of each Grantor's books and records pertaining to
the Collateral and, upon the occurrence and during the continuance of any Event
of Default, each Grantor shall deliver and turn over any such books and records
to Agent or to its representatives at any time on demand of Agent. Prior to the
occurrence of a Default or Event of Default and upon notice from Agent, each
Grantor shall permit any representative of Agent to inspect such books and
records and shall provide photocopies thereof to Agent, for the benefit of Agent
and Lenders, as more specifically set forth in Section 5(c) below.
                                               -----------

          (c)  Right of Inspection.  Subject to the limitations contained in the
               --------------------
Credit Agreement, upon reasonable notice to Borrower, Agent and its employees,
officers, agents and representatives shall have the right (and without any
notice to any Grantor upon the occurrence and during the continuance of any
Event of Default) to enter into and upon any premises where any of the Inventory
or other Collateral is located for the purpose of inspecting the same, observing
its use or otherwise protecting Agent's interests (for the benefit of Agent and
Lenders) in the Collateral.

          (d)  Continuous Perfection.  No Grantor shall change its chief
               ---------------------
executive office, principal place of business, corporate offices, or warehouses
or other Collateral locations, or remove any such Books and Records from such
locations, other than in compliance with Section 6.15 of the Credit Agreement.
                                         ------------
In addition, no Grantor shall change its name, identity or corporate structure
in any manner which might make any financing or continuation statement filed in
connection herewith seriously misleading within the meaning of Section 9.402(7)
                                                               ----------------
of the Code or any other then applicable provision of the Code except in
compliance with the provisions of Section 6.15 of the Credit Agreement.
                                  ------------

          (e)  Covenants Regarding Trademark Collateral.
               ----------------------------------------

               (i)   Borrower shall notify Agent immediately if it knows that
     any application or registration relating to any Trademark material to its
     business (now or hereafter existing) may become abandoned, or of any
     adverse determination or development (including the institution of, or any
     such determination or development in, any proceeding in the United States
     Patent and Trademark Office or any court) regarding any Grantor's ownership
     of any Trademark material to its business, its right to register the same,
     or to keep and maintain the same.

               (ii)  In no event shall any Grantor, either itself or through any
     agent, employee, licensee or designee, file an application for the
     registration of any Trademark with the United States Patent and Trademark
     Office or any similar office or agency without giving Agent written notice
     thereof within twenty (20) days of such filing, and, upon request of Agent,
     such Grantor shall execute and deliver any and all Trademark Security
     Agreements as Agent may request to evidence Agent's security interest (for
     the

                                       7
<PAGE>

     benefit of Agent and Lenders) in such Trademark and the General Intangibles
     of any Grantor relating thereto or represented thereby.

               (iii)  Each Grantor shall take all actions that such Grantor
     determines, in its reasonable business judgment, are necessary to register,
     protect, maintain and enforce each of the Trademarks that are material to
     its business.

          (f)  Indemnification. In any suit, proceeding or action brought by
               ---------------
Agent or any Lender relating to any Account, Chattel Paper, Contract, Document,
General Intangible or Instrument for any sum owing thereunder or to enforce any
provision of any Account, Chattel Paper, Contract, Document, General Intangible
or Instrument, Grantors, jointly and severally, will save, indemnify and keep
Agent and Lenders harmless from and against all expense, loss or damage suffered
by reason of any defense, setoff, counterclaim, recoupment or reduction of
liability whatsoever of the obligor thereunder, arising out of a breach by any
Grantor of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to, or in favor of, such obligor or
its successors from any Grantor, except in the case of Agent or any Lender, to
the extent such expense, loss, or damage is attributable solely to the gross
negligence or willful misconduct of Agent or such Lender as finally determined
by a court of competent jurisdiction. All such obligations of Grantors shall be
and remain enforceable against and only against Grantors and shall not be
enforceable against Agent or any Lender.

          (g)  Compliance with Terms of Accounts. etc.  In all material
               ---------------------------------------
respects, each Grantor will perform and comply with all obligations in respect
of its Accounts, Chattel Paper, Contracts and Licenses and all other agreements
to which it is a party or by which it is bound relating to the Collateral.

          (h)  Limitation on Liens on Collateral.  Grantors will not create,
               ---------------------------------
permit or suffer to exist, and each Grantor will defend the Collateral against,
and take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Encumbrances, and will defend the right, title and interest of
Agent and Lenders in and to any of such Grantor's rights in the Collateral
against the claims and demands of all Persons whomsoever.

          (i)  Limitations on Modifications of Accounts. Each Grantor shall
               ----------------------------------------
promptly notify Agent if such Grantor grants any extension of the time of
payment of any of the Accounts, Chattel Paper or Instruments or compromises,
compounds or settles the same for less than the full amount thereof, or if such
Grantor releases, wholly or partly, any Person liable for the payment thereof,
or allows any credit or discount whatsoever thereon, in each case, other than
any such action taken in the ordinary course of business of such Grantor.

          (j)  Limitations on Disposition.  No Grantor will sell, lease,
               --------------------------
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.

          (k)  Notices. Each Grantor will advise Agent promptly, in reasonable
               -------
detail, (i) of any Lien (other than Permitted Encumbrances) made or asserted
against any of the Collateral,

                                       8
<PAGE>

and (ii) of the occurrence of any other event which would have a material
adverse effect on the aggregate value of the Collateral or on the security
interests created hereunder.

          6.   AGENTS APPOINTMENT AS ATTORNEY-IN-FACT.
               --------------------------------------

          (a)  Each Grantor hereby irrevocably constitutes and appoints Agent,
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of any Grantor and in the name of such Grantor or in its own
name, from time to time in Agent's sole discretion for the purpose of carrying
out the terms of this Supplemental Security Agreement, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Supplemental Security Agreement and, without limiting the generality of the
foregoing, hereby grants to Agent, the power and right, on behalf of each
Grantor, without notice to or assent by any Grantor except as otherwise
specifically provided for herein or in the Credit Agreement, and at any time, to
do the following (provided, however, that Agent may only take the actions in
clauses (i), (iii). (iv), (vi) and (vii) through (xiv) so long as any Event of
------------------------------------------------------
Default shall have occurred and be continuing):

               (i)   in the name of each Grantor, in its own name or otherwise,
     take possession of, endorse and receive payment of any checks, drafts,
     notes, acceptances, or other Instruments for the payment of monies due
     under any Collateral;

               (ii)  upon Grantor's failure to maintain the insurance required
     by the Credit Agreement, continue any insurance existing pursuant to the
     terms of this Supplemental Security Agreement, the Credit Agreement or any
     other Loan Document, and pay all or any part of the premiums therefor and
     the costs thereof;

               (iii) receive payment of any and all monies, claims, and other
     amounts due or to become due at any time arising out of or in respect of
     any Collateral;

               (iv)  ask, demand, collect, receive and give acquittances and
     receipts for any and all money due or to become due under any Collateral;

               (v)   upon Grantor's failure to take any such action when
     required under the Credit Agreement, pay or discharge taxes, Liens,
     security interests or other encumbrances levied or placed on or threatened
     against the Collateral to the extent that any such action may be necessary
     or desirable to protect or preserve the Collateral or the first priority,
     perfected security interest of Agent, in the Collateral;

               (vi)  effect any repairs;

               (vii) direct any party liable for any payment under or in
     respect of any of the Collateral to make payment of any and all monies due
     or to become due thereunder, directly to Agent or as Agent shall direct;

                                       9
<PAGE>

               (viii)  sign and endorse any invoices, freight or express bills,
     bills of lading, storage or warehouse receipts, drafts against debtors,
     assignments, verifications and notices in connection with Accounts and
     other documents constituting or related to the Collateral.

               (ix)    settle, compromise or adjust any suit, action, or
     proceeding described herein and, in connection therewith, give such
     discharges or releases as Agent may deem appropriate;

               (x)     file any claim or take or commence any other action or
     proceeding in any court of law or equity or otherwise deemed appropriate by
     Agent for the purpose of collecting any and all such monies due under any
     Collateral whenever payable;

               (xi)    commence and prosecute any suits, actions or proceedings
     at law or in equity in any court of competent jurisdiction to collect the
     Collateral or any part thereof and to enforce any other right in respect of
     any Collateral;

               (xii)   defend any suit, action or proceeding brought against any
     Grantor with respect to any Collateral if such Grantor does not defend such
     suit, action or proceeding or if Agent believes that such Grantor is not
     pursuing such defense in a manner that will maximize the recovery with
     respect to such Collateral;

               (xiii)  license or, to the extent permitted by an applicable
     license, sublicense whether general, specific or otherwise, and whether on
     an exclusive or non-exclusive basis, any Trademark for such consideration
     and on such terms and conditions and in such manner as Agent shall, in its
     sole discretion, determine; and

               (xiv)   sell, transfer, pledge, make any agreement with respect
     to or otherwise deal with any of the Collateral as fully and completely as
     though Agent were the absolute owner thereof for all purposes.

          (b)  Each Grantor hereby ratifies, to the extent permitted by law, all
that said attorneys shall lawfully do or cause to be done by virtue hereof. The
power of attorney granted pursuant to this Section 6 is a power coupled with an
                                           ---------
interest and shall be irrevocable until all of the Obligations are indefeasibly
paid or otherwise satisfied in full.

          (c)  The powers conferred on Agent hereunder are solely to protect
Agent's interests in the Collateral and shall not impose any duty upon Agent to
exercise any such powers. Agent shall not be accountable for any amount other
than amounts that it actually receives as a result of the exercise of such
powers and none of Agent's officers, directors, employees, agents or
representatives shall be responsible to any Grantor for any act or failure to
act, except individually (and not jointly and severally) for their own gross
negligence or willful misconduct as finally determined by a court of competent
jurisdiction after all possible appeals have been exhausted.

                                       10
<PAGE>

          (d)  Each Grantor also authorizes Agent at any time and from time to
time upon the occurrence and during the continuation of any Event of Default, to
(i) communicate in its own name with any party to any Contract with regard to
the assignment of the right, title and interest of any Grantor in and under the
Contracts and other matters relating thereto, and (ii) execute, in connection
with any sale provided for in Section 7 hereof, any endorsements, assignments or
                              ---------
other instruments of conveyance or transfer with respect to the Collateral.

          7.   REMEDIES; RIGHTS UPON DEFAULT.
               -----------------------------

          (a)  If any Event of Default shall have occurred and be continuing,
Agent may exercise in addition to all other rights and remedies granted to it
under this Supplemental Security Agreement, the Credit Agreement, the other Loan
Documents and under any other instrument or agreement securing, evidencing or
relating to any of the Obligations, all rights and remedies of a secured party
under the Code. Without limiting the generality of the foregoing, each Grantor
expressly agrees that in any such event Agent, without demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale) to or upon any Grantor or any
other Person (all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the Code and other
applicable law), may forthwith enter upon the premises of each Grantor where any
Collateral is located through self-help, without judicial process, without first
obtaining a final judgment or giving any Grantor or any other Person notice and
opportunity for a hearing on Agent's claim or action (on behalf of Agent and
Lenders), and may collect, receive, assemble, process, appropriate and realize
upon the Collateral, or any part thereof, and may forthwith sell, lease, assign,
give an option or options to purchase, or sell or otherwise dispose of and
deliver said Collateral (or contract to do so), or any part thereof, in one or
more parcels at a public or private sale or sales, at any exchange at such
prices as it may deem acceptable, for cash or on credit or for future delivery
without assumption of any credit risk. Agent or any Lender shall have the right
upon any such public sale or sales and, to the extent permitted by law, upon any
such private sale or sales, to purchase for the benefit of Agent or any Lenders,
the whole or any part of said Collateral so sold, free of any right or equity of
redemption, which equity of redemption each Grantor hereby releases. Such sales
may be adjourned and continued from time to time with or without notice. Agent
shall have the right to conduct such sales on each Grantor's premises or
elsewhere and shall have the right to use each Grantor's premises without charge
for such time or times as Agent deems necessary or advisable.

          Each Grantor further agrees, if any Event of Default shall have
occurred and be continuing, at Agent's request, to assemble the Collateral and
make it available to Agent, for the benefit of Agent and Lenders, at places
which Agent shall select, whether at such Grantor's premises or elsewhere. Until
Agent is able to effect a sale, lease, or other disposition of Collateral, Agent
shall have the right to use Collateral, or any part thereof, to the extent that
it deems appropriate for the purpose of preserving Collateral or its value or
for any other purpose deemed appropriate by Agent. Agent shall have no
obligation to any Grantor to maintain or preserve the rights of such Grantor as
against third parties with respect to Collateral while Collateral is in the
possession of Agent. Agent may, if it so elects, seek the appointment of a
receiver or keeper to take possession of Collateral and to enforce any of
Agent's remedies (for

                                       11
<PAGE>

the benefit of Agent and Lenders), with respect to such appointment without
prior notice or hearing. Agent shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale to the
Obligations as provided in Section 1.11 of the Credit Agreement, and only after
                           ------------
so paying over such net proceeds, and after the payment by Agent of any other
amount required by any provision of law, including Section 9-504(l)(c) of the
                                                   -------------------
Code (but only after Agent has received what it considers reasonable proof of a
subordinate party's security interest), need Agent account for the surplus, if
any, to any Grantor. To the maximum extent permitted by applicable law, each
Grantor waives all claims, damages, and demands against Agent or any Lender
arising out of the repossession, retention or sale of the Collateral except such
as arise solely out of the gross negligence or willful misconduct of Agent or
such Lender as finally determined by a court of competent jurisdiction. Each
Grantor agrees that ten (10) days prior notice by Agent of the time and place of
any public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Each Grantor shall remain liable for
any deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which Agent, for itself and the ratable
benefit of Lenders, is entitled, each Grantor also being liable for any
attorneys' fees incurred by Agent or any Lender to collect such deficiency.

          (b)  Each Grantor, jointly and severally, agrees to pay any and all
costs of Agent or any Lender, including attorneys' fees and expenses, incurred
in connection with the enforcement of any of its rights and remedies hereunder.

          (c)  Except as otherwise specifically provided herein, each Grantor
hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Supplemental
Security Agreement or any Collateral.

          8.   GRANT OF LICENSE TO USE PATENT, TRADEMARK AND COPYRIGHT
               -------------------------------------------------------
COLLATERAL.  For the purpose of enabling Agent to exercise rights and remedies
----------
under Section 7 hereof (including, without limiting the terms of Section 7
      ---------                                                  ---------
hereof, in order to take possession of, hold, preserve, process, assemble,
prepare for sale, market for sale, sell or otherwise dispose of Collateral) at
such time as Agent, for itself and the ratable benefit of Lenders, shall be
lawfully entitled to exercise such rights and remedies, each Grantor hereby
grants to Agent, for the benefit of Agent and Lenders, an irrevocable, non-
exclusive license (exercisable without payment of royalty or other compensation
to any Grantor) to use, license or sublicense any Trademark or trade secret now
owned or hereafter acquired by such Grantor, and wherever the same may be
located, and including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof.

          9.   LIMITATION ON AGENTS AND LENDERS' DUTY IN RESPECT OF COLLATERAL.
               ---------------------------------------------------------------
Agent and each Lender shall use reasonable care with respect to the Collateral
in its possession or under its control. Neither Agent nor any Lender shall have
any other duty as to any Collateral in its possession or control or in the
possession or control of any agent or

                                       12
<PAGE>

nominee of Agent or such Lender, or any income thereon or as to the preservation
of rights against prior parties or any other rights pertaining thereto.

          10.  REINSTATEMENT.  This Supplemental Security Agreement shall remain
               -------------
in full force and effect and continue to be effective should any petition be
filed by or against any Grantor for liquidation or reorganization, should any
Grantor become insolvent or make an assignment for the benefit of any creditor
or creditors or should a receiver or trustee be appointed for all or any
significant part of any Grantor's assets, and shall continue to be effective or
be reinstated, as the case may be, if at any time payment and performance of the
Obligations, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
the Obligations, whether as a "voidable preference," "fraudulent conveyance," or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.

          11.  NOTICES. Except as otherwise provided herein, whenever it is
               -------
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give and
serve upon any other party any communication with respect to this Supplemental
Security Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given in the
manner, and deemed received, as provided for in Section 11.10 of the Credit
                                                -------------
Agreement.

          12.  SEVERABILITY. Whenever possible, each provision of this
               ------------
Supplemental Security Agreement shall be interpreted in a manner as to be
effective and valid under applicable law, but if any provision of this
Supplemental Security Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Supplemental Security Agreement. This
Supplemental Security Agreement is to be read, construed and applied together
with the Prior Security Agreement and the Credit Agreement and the other Loan
Documents which, taken together, set forth the complete understanding and
agreement of Agent, Lenders and the Grantors with respect to the matters
referred to herein and therein.

          13.  NO WAIVER; CUMULATIVE REMEDIES.  Neither Agent nor any Lender
               ------------------------------
shall by any act, delay, omission or otherwise be deemed to have waived any of
its rights or remedies hereunder, and no waiver shall be valid unless in
writing, signed by Agent and then only to the extent therein set forth. A waiver
by Agent, for itself and the ratable benefit of Lenders, of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which Agent would otherwise have had on any future occasion. No failure
to exercise nor any delay in exercising on the part of Agent or any Lender, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are

                                       13
<PAGE>

cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Supplemental Security Agreement may be waived, altered, modified or amended
except by an instrument in writing, duly executed by Agent and Grantors.  Any
such amendment to this Supplemental Security Agreement shall constitute an
amendment of any corresponding provision of the Prior Security Agreement.

          14.  LIMITATION BY LAW. All rights, remedies and powers provided in
               -----------------
this Supplemental Security Agreement may be exercised only to the extent that
the exercise thereof does not violate any applicable provision of law, and all
the provisions of this Supplemental Security Agreement are intended to be
subject to all applicable mandatory provisions of law that may be controlling
and to be limited to the extent necessary so that they shall not render this
Supplemental Security Agreement invalid, unenforceable, in whole or in part, or
not entitled to be recorded, registered or filed under the provisions of any
applicable law.

          15   TERMINATION OF THIS SUPPLEMENTAL SECURITY AGREEMENT. Subject to
               ---------------------------------------------------
Section 10 hereof, this Supplemental Security Agreement shall terminate upon the
----------
Termination Date.

          16.  SUCCESSORS AND ASSIGNS. This Supplemental Security Agreement and
               ----------------------
all obligations of each Grantor hereunder shall be binding upon the successors
and assigns of any Grantor (including any debtor-in-possession on behalf of any
Grantor) and shall, together with the rights and remedies of Agent, for the
benefit of Agent and Lenders, hereunder, inure to the benefit of Agent and
Lenders, all future holders of any instrument evidencing any of the Obligations
and their respective successors and assigns. No sales of participations, other
sales. assignments, transfers or other dispositions of any agreement governing
or instrument evidencing the Obligations or any portion thereof or interest
therein shall in any manner affect the security interest granted to Agent, for
the benefit of Agent and Lenders, hereunder. No Grantor may assign, sell or
otherwise transfer any interest in or obligation under this Supplemental
Security Agreement.

          17.  COUNTERPARTS. This Supplemental Security Agreement may be
               ------------
executed in any number of separate counterparts, each of which shall
collectively and separately constitute one and the same agreement.

          18.  GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
               -------------
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SUPPLEMENTAL SECURITY AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO
CONFLICT OF LAW PROVISIONS), AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. EACH GRANTOR HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN COOK COUNTY, CITY OF CHICAGO, ILLINOIS, SHALL HAVE EXCLUSIVE

                                       14
<PAGE>

JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY GRANTOR,
AGENT AND LENDERS PERTAINING TO THIS SUPPLEMENTAL SECURITY AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
SUPPLEMENTAL SECURITY AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED,
                                                                    --------
THAT AGENT, LENDERS AND EACH GRANTOR ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY, CITY OF
CHICAGO, ILLINOIS, AND, PROVIDED, FURTHER NOTHING IN THIS AGREEMENT SHALL BE
                        --------  -------
DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF AGENT. EACH GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH GRANTOR
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
                                ----- --- ----------
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. EACH GRANTOR HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO SUCH GRANTOR AT THE ADDRESS OF BORROWER SET FORTH ON SCHEDULE
                                                                       --------
J TO THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
-
UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN
THE U.S. MAILS, PROPER POSTAGE PREPAID.

          19.  WAIVER OF JURY TRIAL.  BECAUSE DISPUTES ARISING IN CONNECTION
               --------------------
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
DISPUTES ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG AGENT, LENDERS, AND ANY
GRANTOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS SUPPLEMENTAL SECURITY
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO
OR THERETO.

                                       15
<PAGE>

          20.  SECTION TITLES.  The Section titles contained in this
               --------------
Supplemental Security Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.

          21.  NO STRICT CONSTRUCTION.  The parties hereto have participated
               ----------------------
jointly in the negotiation and drafting of this Supplemental Security Agreement.
In the event an ambiguity or question of intent or interpretation arises, this
Supplemental Security Agreement shall be construed as if drafted jointly by the
parties hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Supplemental Security Agreement.

          22.  ADVICE OF COUNSEL. Each of the parties represents to each other
               -----------------
party hereto that it has discussed this Supplemental Security Agreement and,
specifically, the provisions of Section 18 and Section 19, with its counsel.
                                ----------     ----------

          23.  BORROWER AS AGENT. Each Grantor (other than Borrower) hereby
               -----------------
appoints Borrower as its agent and attorney-in-fact for purposes of giving and
receiving notices under this Supplemental Security Agreement and agrees that any
notice hereunder delivered to Borrower shall be deemed to have been delivered to
each Grantor.

          24.  PRIOR SECURITY AGREEMENT.  Notwithstanding anything to the
               ------------------------
contrary contained herein or in the Prior Security Agreement, Grantors'
compliance with the terms hereof, as the same may be amended or further
supplemented from time to time, shall constitute full compliance with all of the
terms of the Prior Security Agreement.

                           [signature pages follow]

                                       16
<PAGE>

          IN WITNESS WHEREOF, each Grantor has caused this Supplemental Security
Agreement to be executed and delivered by its duly authorized officer as of the
date first set forth above.

                            WILSONS THE LEATHER EXPERTS INC.

                            BERMANS THE LEATHER EXPERTS INC.

                            RIVER HILLS WILSONS, INC.

                            ROSEDALE WILSONS, INC

                            WILSONS INTERNATIONAL INC

                            WILSONS LEATHER OF AIRPORTS INC.

                            WILSONS LEATHER OF ALABAMA INC.

                            WILSONS LEATHER OF ARKANSAS INC.

                            WILSONS LEATHER OF CANADA LTD.

                            WILSONS LEATHER OF CONNECTICUT INC.

                            WILSONS LEATHER OF DELAWARE INC.

                            WILSONS LEATHER OF FLORIDA INC.

                            WILSONS LEATHER OF GEORGIA INC.

                            WILSONS LEATHER HOLDINGS INC.

                            WILSONS LEATHER OF INDIANA INC.

                            WILSONS LEATHER OF IOWA INC.

                            WILSONS LEATHER OF LOUISIANA INC.

                            WILSONS LEATHER OF MARYLAND INC.

                            WILSONS LEATHER OF MASSACHUSETTS INC

                            WILSONS LEATHER OF MICHIGAN INC.

                            WILSONS LEATHER OF MISSISSIPPI INC.

                            WILSONS LEATHER OF MISSOURI INC.

                                      S-1
<PAGE>

                            WILSONS LEATHER OF NEW JERSEY INC.

                            WILSONS LEATHER OF NEW YORK INC.

                            WILSONS LEATHER OF NORTH CAROLINA INC.

                            WILSONS LEATHER OF OHIO INC.

                            WILSONS LEATHER OF PENNSYLVANIA INC.

                            WILSONS LEATHER OF RHODE ISLAND INC.

                            WILSONS LEATHER OF SOUTH CAROLINA INC.

                            WILSONS LEATHER OF TENNESSEE INC.

                            WILSONS LEATHER OF TEXAS INC.

                            WILSONS LEATHER OF VERMONT INC.

                            WILSONS LEATHER OF VIRGINIA INC.

                            WILSONS LEATHER OF WEST VIRGINIA INC.

                            WILSONS LEATHER OF WISCONSIN INC.


                            By:   /s/ Daniel R. Thorson
                                 ----------------------------------------

                            Name:     Daniel R. Thorson
                                 ----------------------------------------
                                    The authorized officer of each of the
                                    foregoing corporations

Accepted and Acknowledged by:

GENERAL ELECTRIC CAPITAL
CORPORATION, AS AGENT

By: /s/ Paul M. Feehan
   ---------------------------------

Name:   Paul M. Feehan
     -------------------------------

Title: Duly Authorized Signatory
      ------------------------------

                                      S-2