Document:

exv10w22

Exhibit 10.22

April 21, 2011

Bluestem Brands, Inc.

6509 Flying Cloud Drive

Eden Prairie, Minnesota 55344

Attn: Chief Financial Officer

Ladies and Gentlemen:

     Reference is made to that certain Securities Purchase Agreement, dated as of March 23, 2006,
as amended by that certain letter agreement dated as of June 21, 2007, that certain letter
agreement dated as of May 15, 2008, that certain letter agreement dated as of July 31, 2009 and
that certain letter agreement dated as of August 20, 2010 (the “Purchase Agreement”), between
Bluestem Brands, Inc. (formerly known as Fingerhut Direct Marketing, Inc.), a Delaware corporation
(the “Company”), and the purchasers named on the Purchaser Schedule attached thereto (the
“Purchasers”). Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Purchase Agreement.

     The Company has requested that the Purchasers (i) amend the Purchase Agreement pursuant to the
terms and conditions set forth herein and (ii) waive any Default or Event of Default under the
Purchase Agreement which may have resulted solely from the restatement or correction of any
quarterly or annual historical financial statements, or any inaccuracy of any monthly financial
statements, in each case as a consequence of any mark-to-market valuation of (A) the contingent
financing fee arrangement entered into on May 15, 2008, and/or (B) any derivatives or embedded
derivatives in any Equity Interest of the Company or its Subsidiaries, in each case to the extent
required under GAAP, including any financial covenant set forth in paragraph 6J of the Purchase
Agreement, and including in connection with any representation and warranty relating thereto set
forth in the Purchase Agreement or pursuant to any certificate or other document, each of which
shall be deemed to have taken into account the effect of this letter agreement and any such
restatement or correction of previously delivered financial statements, compliance certificates,
financial officer certifications, or other certificates and other deliverables required to be
delivered concurrently therewith (the “Specified Defaults”);

     Subject to the terms and conditions hereof, and effective upon the satisfaction of the
conditions set forth herein, the Purchasers are willing to agree to such requests. Accordingly,
and in accordance with the provisions of paragraph 12C of the Purchase Agreement, the parties
hereto agree as follows:

     SECTION 1. Limited Waiver. Effective upon the Effective Date (as defined in Section 4
hereof) (i) the Purchasers waive the Specified Defaults and (ii) any representation and warranty
set forth in the Purchase Agreement or pursuant to any certificate or other document shall be
deemed to have taken into account the effect of this letter agreement and any such restatement or

 

 

correction of previously delivered financial statements, compliance certificates, financial
officer certifications, or other certificates and other deliverables required to be delivered
concurrently therewith.

     SECTION 2. Amendments to the Purchase Agreement. Upon the Effective Date, each
Purchaser and the Company agree that the Purchase Agreement shall be amended as follows:

     2.1 Clause (iv) of paragraph 6J is amended in its entirety to read as follows:

     “(iv) Net Worth. The Company and its Subsidiaries shall have a Tangible Net Worth
(measured as of the last day of each Fiscal Quarter) equal to or greater than the sum of (i)
$108,000,000, plus (ii) 75% of its Consolidated Net Income (if positive) for each full
Fiscal Year after the Fourth Amendment Effective Date before any non-cash gain (loss) (net
of any income taxes) relating to the mark-to-market valuation of (A) the contingent
financing fee arrangement entered into on May 15, 2008 and/or (B) without duplication,
derivatives or embedded derivatives in any Equity Interest of the Company or any of its
Subsidiaries, in each case to the extent required under GAAP, plus (iii) 85% of the
gross proceeds actually received in cash by the Company and its Subsidiaries from the
proceeds of any issuance of Equity Interests by the Company or any Subsidiary after the
Fourth Amendment Effective Date.”

     2.1 Paragraph 11B of the Purchase Agreement is hereby amended by amending and restating the
following definitions contained therein to read as follows:

     “Consolidated Adjusted EBITDA” shall mean, for any period, Consolidated Net Income for
such period plus (a) without duplication and to the extent deducted in determining
Consolidated Net Income for such period, the sum of (i) Consolidated Interest Expense for
such period, (ii) income tax expense for such period net of tax refunds, (iii) all amounts
attributable to depreciation and amortization expense for such period, (iv) for any period
including the period in which such amounts were paid, fees or expenses of the administrative
agent and any lender or arranger in connection with the SPV Credit Documents or the Bank
Agent or any Bank in connection with the Credit Agreement, in each case paid on or prior to
the Fourth Amendment Effective Date, (v) for any period (other than the period specified in
the following clause (vi)) including the period in which such amounts were paid, other fees
or expenses in an amount not to exceed $1,000,000 paid in connection with the SPV Credit
Documents, the Credit Agreement or the Transaction Documents and the transactions
contemplated therein, (vi) for the period from, and including, the Fourth Amendment
Effective Date to, and including, the last day of the first Fiscal Quarter to end after the
Fourth Amendment Effective Date, other fees and expenses in an amount not to exceed
$6,500,000 paid in connection with the SPV Credit Documents and the transactions
contemplated therein and the refinancing or replacement of credit facilities existing prior
to the Fourth Amendment Effective Date, (vii) any other non-cash charges for such period
(but excluding any non-cash charge in respect of an item that was included in Consolidated
Net Income in a prior period and any non-cash charge that relates to the write-down or
write-off of inventory) in an amount not to exceed $2,000,000 and other non-cash

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charges relating to the mark-to-market valuation of (A) the contingent financing fee
arrangement entered into on May 15, 2008 and/or (B) without duplication, derivatives or
embedded derivatives in any Equity Interest of the Company or any of its Subsidiaries, in
each case to the extent required under GAAP, (viii) reasonable fees and expenses in
connection with an Initial Public Offering by the Company in an amount not to exceed the
lesser of (A) 12.5% of the gross proceeds thereof and (B) the actual fees and expenses
incurred in connection therewith, or any additional amounts approved by the Required
Holder(s) and (ix) the amount of any prepayment premiums or other similar fees paid in
connection with the Credit Agreement or the SPV Credit Documents, minus (b) without
duplication and to the extent included in Consolidated Net Income, (i) any cash payments
made during such period in respect of non-cash charges described in clause (a)(vii) taken in
a prior period and (ii) any extraordinary gains and any non-cash items of income for such
period, all calculated for the Company and its Subsidiaries on a consolidated basis in
accordance with GAAP, including, without limitation, any non-cash gains or items of income
relating to the mark-to-market valuation of (A) the contingent financing fee arrangement
entered into on May 15, 2008 and/or (B) without duplication, derivatives or embedded
derivatives in any Equity Interest of the Company and its Subsidiaries, in each case to the
extent required under GAAP.

     “Swap Agreement” means any agreement with respect to any swap, forward, future or
derivatives transaction or option or similar agreement involving, or settled by reference
to, one or more rates, currencies, commodities, equity or debt instruments or securities, or
economic, financial or pricing indices or measures of economic, financial or pricing risk or
value or any similar transaction or any combination of these transactions; provided
that no phantom stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employees or consultants of the Company
or the Subsidiaries shall be a Swap Agreement. For the avoidance of doubt, the contingent
financing fee arrangement entered into on May 15, 2008 and Equity Interests of the Company
or any of its Subsidiaries shall not constitute a Swap Agreement regardless of treatment of
such contingent financing fee arrangement or such Equity Interests, or any portion thereof,
as an embedded derivative under GAAP.

     “Tangible Net Worth” shall mean, with respect to a Person, as of any date of
determination, the result of (a) such Person’s total stockholder’s or other equity
(including preferred stock, but excluding treasury stock and subscribed but unissued capital
stock and excluding any asset or liability resulting from the mark-to-market valuation of
(A) the contingent financing fee arrangement entered into on May 15, 2008, and/or (B)
without duplication, any derivatives or embedded derivatives in any Equity Interest of the
Company or any of its Subsidiaries, in each case to the extent required under GAAP), minus
(b) the sum of (i) all Intangible Assets of such Person, (ii) all of such Person’s prepaid
expenses and (iii) all amounts due to such Person from its Affiliates.

     SECTION 3. Representations and Warranties. The Company represents and warrants to the
Purchasers that, after giving effect hereto (a) each representation and warranty set forth in
paragraph 8 of the Purchase Agreement is true and correct as of the date of the execution and
delivery of this letter by the Company with the same effect as if made on such date (except

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to the extent such representations and warranties expressly refer to an earlier date, in which
case they were true and correct as of such earlier date), (b) no Event of Default or Default
exists, and (c) neither the Company nor any of its Subsidiaries have paid or agreed to pay, nor
will pay or agree to pay, any fees or other compensation with respect to the amendments to the
Servicing Agreement or Credit Agreement referred to in Section 4(ii) hereof (other than
reimbursement of costs and expenses as required under such documentation).

     SECTION 4. Effectiveness. The waiver in Section 1 hereof and the amendments described
in Section 2 above shall become effective upon the date (the “Effective Date”) the Required
Holder(s) have received the following documents:

     (i) a counterpart of this letter agreement duly executed by the Company; and

     (ii) fully executed copies of an amendment to the Servicing Agreement and an amendment
to the Credit Agreement, in form and substance satisfactory to the Required Holder(s), and
all conditions precedent to the effectiveness of such amendments.

     SECTION 5. Compliance with Paragraph 5A. In connection with the restatement or
correction of the historical financial statements of the Company and its Subsidiaries as a
consequence of any mark-to-market valuation of (A) the contingent financing fee arrangement entered
into on May 15, 2008, and/or (B) any derivatives or embedded derivatives in any Equity Interest of
the Company or any of its Subsidiaries, in each case to the extent required under GAAP, the Company
shall be deemed to have satisfied its obligations under clauses (i), (ii) and (iv) of paragraph 5A
of the Purchase Agreement, including in respect of the Fiscal Year ended January 28, 2011, upon
delivery of the following:

     (a) On or prior to the date hereof, the Company shall have delivered to the holders of
the Subordinated Notes restated or corrected versions of (i) the consolidated balance sheets
of the Company and its Subsidiaries as at the end of each of the Fiscal Years ended January
29, 2010 and January 28, 2011 and the related consolidated statements of income,
stockholders’ equity and cash flows of the Company and its Subsidiaries, as the case may be,
for each such Fiscal Year, setting forth in each case in comparative form the corresponding
figures of the previous Fiscal Year, subject to normal year-end audit adjustments and the
absence of footnotes all in reasonable detail, together with a certificate signed by a
Responsible Officer certifying that such financial statements fairly present, in all
material respects, the financial condition of the Company and its Subsidiaries as at the
dates indicated and the results of their operations and cash flows for the periods
indicated; and (ii) a duly executed and completed certificate of a Responsible Officer in
the form of Exhibit P to the Purchase Agreement in respect of the consolidated financial
statements in item (i) relating to the Fiscal Year ended January 28, 2011; and

     (b) As soon as available, and in any event within 120 days after the end of the Fiscal
Year ended January 28, 2011, the Company shall deliver to the holders of the Subordinated
Notes (i) the consolidated and consolidating balance sheets of the Company and its
Subsidiaries as at the end of each of the Fiscal Years ended January 29, 2010 and January
28, 2011 and the related consolidated (and with respect to statements of income,

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consolidating) statements of income, stockholders’ equity and cash flows of the Company
and its Subsidiaries, as the case may be, for each such Fiscal Year, setting forth in each
case in comparative form the corresponding figures for the previous Fiscal Year, in
reasonable detail, together with a certificate signed by a Responsible Officer certifying
that such financial statements fairly present, in all material respects, the financial
condition of the Company and its Subsidiaries as at the dates indicated and the results of
their operations and cash flows for the periods indicated (such financial statements shall
also include (x) a detailed summary of any audit adjustments; (y) a reconciliation of any
material audit adjustments or reclassifications to the previously provided quarterly
financials; and (z) restated quarterly financials for any periods that are required to be
restated pursuant to GAAP); (ii) with respect to such consolidated financial statements a
report thereon of Deloitte & Touche LLP or other independent certified public accountants of
recognized national standing selected by the Company, and reasonably satisfactory to the
Required Holders (which report shall be unqualified as to going concern and scope of audit,
and shall state that such consolidated financial statements fairly present, in all material
respects, the consolidated financial position of the Company and its Subsidiaries, as the
case may be, as at the dates indicated and the results of their operations and their cash
flows for the periods indicated in conformity with GAAP applied on a basis consistent with
prior years (except as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated financial statements
has been made in accordance with generally accepted auditing standards) together with a
written statement by such independent certified public accountants stating that in the
course of their audit, nothing has come to their attention that caused them to believe that
the Company has failed to comply with the terms, covenants, provisions or conditions of
paragraph 6J of the Purchase Agreement, in each case insofar as they relate to financial and
accounting matters, and if any such failure has come to their attention, specifying the
nature and period of existence thereof; and (iii) a duly executed and completed certificate
of a Responsible Officer in the form of Exhibit P to the Purchase Agreement in respect of
the consolidated financial statements in item (i) relating to the Fiscal Year ended January
28, 2011.

     SECTION 6. Reference to and Effect on Purchase Agreement. Upon the effectiveness of
this letter agreement, each reference in the Purchase Agreement or any other document, instrument
or agreement to the “Purchase Agreement” shall mean and be a reference to the Purchase Agreement
as modified by this letter agreement. Except as specifically set forth in Sections 1 and 2 hereof,
the Purchase Agreement shall remain in full force and effect and is hereby ratified and confirmed
in all respects. Except as specifically stated in Section 1 and Section 2 of this letter, the
execution, delivery and effectiveness of this letter shall not (a) amend the Purchase Agreement or
any Subordinated Note, (b) operate as a waiver of any other Default or Event of Default or as a
waiver of any right, power or remedy of any holder of the Subordinated Notes, or (c) constitute a
waiver of, or consent to any departure from, any provision of the Subordinated Note Agreement or
any Subordinated Note at any time. The execution, delivery and effectiveness of this letter shall
not be construed as a course of dealing or other implication that any holder of the Subordinated
Notes has agreed to or is prepared to grant any consents or agree to any waiver to the Purchase
Agreement in the future, whether or not under similar circumstances.

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     SECTION 7. Expenses. The Company hereby confirms its obligations under the Purchase
Agreement, whether or not the transactions hereby contemplated are consummated, to pay, promptly
after request by the Purchasers, all reasonable out-of-pocket costs and expenses, including
attorneys’ fees and expenses, incurred by the Purchasers in connection with this letter agreement
or the transactions contemplated hereby, in enforcing any rights under this letter agreement, or in
responding to any subpoena or other legal process or informal investigative demand issued in
connection with this letter agreement or the transactions contemplated hereby. The obligations of
the Company under this Section 7 shall survive transfer by the Purchasers of any Subordinated Note
and payment of any Subordinated Note.

     SECTION 8. Consent to Amendments to the Credit Agreement and the Servicing Agreement.
By their execution of this letter agreement, the Purchasers hereby consent (to the extent required)
to the execution and delivery by the Company of amendments to each of the Credit Agreement and the
Servicing Agreement which are substantially similar to the Amendments set forth herein, and this
letter agreement shall constitute proper notice under the Transaction Documents (to the extent
required) with respect to such amendments.

     SECTION 9. Governing Law. THIS LETTER AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS OF SUCH STATE WHICH WOULD OTHERWISE CAUSE THIS LETTER AGREEMENT TO BE CONSTRUED OR
ENFORCED OTHER THAN IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

     SECTION 10. Counterparts; Section Titles. This letter agreement may be executed via
facsimile or electronic transmission in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute but one and the same instrument. The
section titles contained in this letter agreement are and shall be without substance, meaning or
content of any kind whatsoever and are not a part of the agreement between the parties hereto.

[signature page follows]

6

 

	 	 	 	 	 
	 	Very truly yours,

PRUDENTIAL CAPITAL PARTNERS II, L.P.
 	 
	 	By:  	Stetson Street Partners, L.P.,
its general partner 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	/s/ G. Anthony Coletta
 	 
	 	 	Vice President 	 
	 	 	 	 
	 
	 	PRUDENTIAL CAPITAL PARTNERS

MANAGEMENT FUND II, L.P.

 	 
	 	By:  	Mulberry Street Holdings, LLC,
its general partner
 	 
	 
	 	By:  	Prudential Investment Management, Inc.,
its managing member
 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	/s/ G. Anthony Coletta 	 
	 	 	Vice President 	 
	 	 	 	 
	 
	 	PRUDENTIAL CAPITAL PARTNERS
(PARALLEL FUND) II, L.P.

 	 
	 	By:  	Stetson Street Partners, L.P.,
its general partner
 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	                    /s/ G. Anthony Coletta
 	 
	 	 	President 	 
	 	 	 	 
	 

Signature Page

Letter Agreement to Securities Purchase Agreement

 

 

	 	 	 	 	 
	AGREED AND ACCEPTED:

BLUESTEM BRANDS, INC.

 	 	 
	By:  	/s/ Mark P. Wagener 	 	 
	Title:  	EVP, CFO 	 	 
	 	 	 	 
	 

Signature Page

Letter Agreement to Securities Purchase Agreementexv10w23

EXHIBIT 10.23 

EXECUTION VERSION

THIRD AMENDED AND RESTATED

PLEDGE AND SECURITY AGREEMENT

     THIS THIRD AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (as it may be amended, restated,
supplemented or otherwise modified from time to time, the “Security Agreement”) is entered
into as of August 20, 2010 by and between Bluestem Brands, Inc. (f/k/a Fingerhut Direct Marketing,
Inc.), a Delaware corporation (the “Grantor”), and Prudential Capital Partners II, L.P., as
collateral agent for the Holders referenced below (in such capacity, the “Subordinated
Collateral Agent”).

PRELIMINARY STATEMENTS

     A. The Grantor entered into that certain Securities Purchase Agreement, dated as of March 23,
2006 (as amended by that certain letter agreement dated as of June 21, 2007 (the “First
Amendment”), that certain letter agreement dated as of May 15, 2008 (the “Second
Amendment”), that certain letter agreement dated as of July 31, 2009 (the “Third
Amendment”), that certain letter agreement dated as of August 20, 2010 (the “Fourth
Amendment”) and as the same may from time to time hereafter be further amended, modified,
supplemented or restated, the “Purchase Agreement”), by and among the Grantor and the
purchasers party thereto (collectively, the “Purchasers” and, together with any person who
becomes a holder of any Subordinated Note (as defined below) the “Holders”), pursuant to
which the Purchasers, among other things, purchased $30,000,000 initial aggregate principal amount
of the 13.00% Senior Subordinated Secured Notes due November 21, 2013 (the “Subordinated
Notes”) of the Grantor on the terms and subject to the conditions set forth in the Purchase
Agreement.

     B. Pursuant to the Purchase Agreement, the Grantor entered into that certain Security
Agreement, dated as of March 23, 2006 with the Subordinated Collateral Agent (the “Original
Security Agreement”) to secure the Secured Obligations in order to induce the Purchasers to
enter into the Purchase Agreement and purchase the Subordinated Notes. In order to induce the
Purchasers to enter into the First Amendment and amend the Purchase Agreement as set forth therein,
the Grantor and the Subordinated Collateral Agent amended and restated the Original Security
Agreement to be the Amended and Restated Pledge and Security Agreement dated as of June 21, 2007
(the “Amended Security Agreement”). In order to induce the Purchasers to enter into the
Second Amendment and amend the Purchase Agreement as set forth therein, the Grantor and the
Subordinated Collateral Agent amended and restated the Amended Security Agreement to be the Second
Amended and Restated Pledge and Security Agreement dated as of May 15, 2008 (the “Second
Amended Security Agreement”).

     C. In order to induce the Purchasers to enter into the Fourth Amendment and amend the Purchase
Agreement as set forth therein, the Grantor is willing to amend and restate the Second Amended
Security Agreement pursuant to this Security Agreement.

     ACCORDINGLY, the Grantor and the Subordinated Collateral Agent, on behalf of the Holders,
hereby agree as follows:

ARTICLE I

DEFINITIONS

     1.1. Terms Defined in Purchase Agreement. All capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Purchase Agreement.

     1.2. Terms Defined in UCC. Terms defined in the UCC which are not otherwise defined
in this Security Agreement are used herein as defined in the UCC.

 

 

     1.3. Definitions of Certain Terms Used Herein. As used in this Security Agreement, in
addition to the terms defined in the Preliminary Statement, the following terms shall have the
following meanings:

     “Accounts” shall have the meaning set forth in Article 9 of the UCC.

	 	 	“Amended Security Agreement” has the meaning ascribed thereto in the Preamble.

     “Article” means a numbered article of this Security Agreement, unless another document
is specifically referenced.

	 	 	“Bluestem SPV” means Fingerhut Receivables I, LLC.

	 	 	“Bluestem SPV Stock” has the meaning ascribed thereto in Section
11.1.

	 	 	“Chattel Paper” shall have the meaning set forth in Article 9 of
the UCC.

	 	 	“Collateral” shall have the meaning set forth in Article II.

     “Collateral Access Agreement” means any landlord waiver or other agreement, in form
and substance satisfactory to the Subordinated Collateral Agent, between the Subordinated
Collateral Agent and any third party (including any bailee, consignee, customs broker, or other
similar Person) in possession of any Collateral or any landlord of the Grantor or any Subsidiary
for any real property where any Collateral is located, as such landlord waiver or other agreement
may be amended, restated, or otherwise modified from time to time.

	 	 	“Collateral Deposit Account” shall have the meaning set forth in Section 7.1(a).

     “Collateral Report” means any certificate, report or other document delivered by the
Grantor to the Subordinated Collateral Agent or any Holder with respect to the Collateral pursuant
to any Note Document.

     “Commercial Tort Claim” means any “commercial tort claim,” as such term is defined in
Section 9-102(a)(13) of the UCC (or any other then applicable provision of the UCC).

     “Contracts” means all contracts, undertakings, franchise agreements or other
agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under
which the Grantor may now or hereafter have any right, title or interest, including, without
limitation, with respect to an Account, any agreement relating to the terms of payment or the terms
of performance thereof.

     “Control” shall have the meaning set forth in Article 8 or, if applicable, in Section
9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.

     “Default” means any event or condition which constitutes an Event of Default or which
upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

     “Deposit Account Control Agreement” means an agreement, in form and substance
satisfactory to the Subordinated Collateral Agent, among any Obligor, a banking institution holding
such Obligor’s funds, and the Subordinated Collateral Agent with respect to collection and control
of all deposits and balances held in a deposit account maintained by any Obligor with such banking
institution.

     “Deposit Accounts” shall have the meaning set forth in Article 9 of
the UCC.

     “Documents” shall have the meaning set forth in Article 9 of the UCC.

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     “Equipment” means any “equipment,” as such term is defined in Section 9-102(a)(33) of
the UCC (or any other then applicable provision of the UCC), now or hereafter owned or acquired by
the Grantor or in which the Grantor now holds or hereafter acquires any interest and, in any event,
shall include, without limitation, all machinery, equipment, fixtures, furniture, furnishings,
trade fixtures, vehicles, trucks, mainframe, personal and other computers, terminals and printers
and related components and accessories, all copiers, telephonic, video, electronic data-processing,
data storage equipment and other equipment of any nature whatsoever, and any and all additions,
substitutions and replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or affixed thereto.

     “Event of Default” means an event described in Section 5.1.

     “Excluded Payments” has the meaning ascribed thereto in Section 4.6(d)(iii).

     “Exhibit” refers to a specific exhibit to this Security Agreement, unless another
document is specifically referenced.

     “General Intangibles” shall have the meaning set forth in Article 9 of
the UCC.

     “Grantor” has the meaning ascribed thereto in the Preamble.

     “Instruments” shall have the meaning set forth in Article 9 of the UCC.

     “Intercreditor Agreement” means the Amended and Restated Intercreditor Agreement dated
as of August 20, 2010, by and among SPV Collateral Agent, Subordinated Collateral Agent, Bluestem
SPV and Grantor, as the same may be further amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms thereof.

     “Inventory” shall have the meaning set forth in Article 9 of the UCC.

     “Investment Property” shall have the meaning set forth in Article 9 of the
UCC.

     “Letter-of-Credit Rights” shall have the meaning set forth in Article 9 of the
UCC.

      “Lock Box Agreement” shall have the meaning set forth in Section 7.1(a).  

      “Lock Boxes” shall have the meaning set forth in Section 7.1(a).

     “Merchant Deposit Account” has the meaning ascribed thereto in Section 7.1(a).

     “Note Documents” means Transaction Documents (as defined in the Purchase
Agreement). 

      “Payment Intangibles” shall have the meaning set forth in Article 9 of the UCC.

     “Pledged Collateral” means all Securities consisting of Equity Interests of
Subsidiaries of the Grantor, whether or not physically delivered to the Subordinated Collateral
Agent pursuant to this Security Agreement.

     “Proceeds” means “proceeds,” as such term is defined in Section 9-102(a)(64) of the
UCC (or any other then applicable provision of the UCC), and, in any event, shall include, without
limitation, (a) any and all Accounts, Chattel Paper, Instruments, cash or other forms of money or
currency or other proceeds payable to the Grantor from time to time in respect of the Collateral,
(b) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Grantor
from time to time with respect to any of the Collateral, (c) any and all payments (in any form
whatsoever) made or due and payable to the Grantor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral
by any governmental authority (or any Person acting under color of governmental authority), (d) all
certificates,

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dividends, cash, Instruments and other property received or distributed in respect of or in
exchange for any Investment Property, and (e) any and all other amounts from time to time paid or
payable under or in connection with any of the Collateral.

     “Purchase Agreement” has the meaning ascribed thereto in the Preamble.

     “Purchased Assets” means (i) Underlying Receivables and (ii) other “Purchased Assets”
(as such term is defined in Section 2.1(a) of the Receivables Purchase Agreement as in effect on
the Fourth Amendment Effective Date or in any other Receivables Purchase Agreement or similar
agreement entered into after the Fourth Amendment Effective Date which is substantially in the form
of the Receivables Purchase Agreement as in effect on the Fourth Amendment Effective Date, mutatis
mutandis, or otherwise reasonably acceptable to the Required Holder(s).

     “Receivables Account” means each consumer revolving credit account established
pursuant to a Receivables Account Agreement (as defined in the Servicing Agreement as in effect on
the Fourth Amendment Effective Date) between a Receivables Account Owner and any Receivables
Obligor (as defined in the Servicing Agreement as in effect on the Fourth Amendment Effective
Date).

     “Receivables Account Owner Documents” means (i) with respect to WebBank, the Amended
and Restated Receivables Sale Agreement dated as of August 20, 2010, by and between WebBank and the
Grantor (as it may be amended or modified from time to time) and the Amended and Restated Revolving
Loan Product Program Agreement, dated as of August 20, 2010, by and between WebBank and the Grantor
(as it may be amended or modified from time to time) (ii) with respect to MetaBank, the Amended and
Restated Program Agreement, dated as of August 20, 2010, by and between MetaBank and the Grantor
(as it may be amended or modified from time to time) and the Amended and Restated Receivables Sale
Agreement, dated as of August 20, 2010, by and between MetaBank and the Grantor (as it may be
amended or modified from time to time) and (iii) with respect to any other Receivables Account
Owner, each receivables sales agreement, product program agreement and any other similar agreements
between such Receivables Account Owner and the Grantor (as such agreements may be amended or
modified from time to time).

     “Receivables Purchase Agreement” means that certain Receivables Purchase Agreement
dated as of the date hereof among the Grantor and Bluestem SPV, as the same may be amended,
modified or supplemented from time to time, in accordance with the terms thereof.

     “Receivables Property” means Receivables Accounts and Purchased Assets, and all books,
records, ledger cards, files, correspondence, computer programs, tapes, disks and related data that
evidence or contain information relating to the Receivables Account and Purchased Assets, and all
proceeds and products thereof (specifically excluding proceeds and products received by the Grantor
from the transfer of assets to Bluestem SPV pursuant to the SPV Credit Documents).

     “Retained Receivables” means all rights to payment of any kind arising from the sale
or other disposition of Inventory (including (i) all Accounts, Chattel Paper, Instruments and
General Intangibles constituting the foregoing and (ii) all Letter of Credit Rights and all other
Supporting Obligations supporting the payment and performance of the foregoing) but excluding any
such rights to payment that are effectively transferred (whether by sale or pledge) pursuant to the
Receivables Purchase Agreement.

     “Sales Receivables” all rights under the Receivables Purchase Agreement, including
without limitation all the Payment Intangibles owing to Grantor and arising from sales of
Underlying Receivables and other Purchased Assets to Bluestem SPV pursuant to the Receivables
Purchase Agreement “Section” means a numbered section of this Security Agreement, unless another
document is specifically referenced.

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     “Secured Obligations” shall mean and include (a) the Obligations and (b) all
liabilities and obligations, howsoever arising, owed by the Grantor to Subordinated Collateral
Agent or the Holders (excluding the Warrants, the Investor Rights Agreement, the Stockholders
Agreement, the Equityholder Agreement and the VCOC Letter) or any one or more of them of every kind
and description (whether evidenced by any note or instrument and whether or not for the payment of
money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter
arising pursuant to the terms of this Security Agreement.

     “Securities Account” means “securities account,” as such term is defined in Section
8-501(a) of the UCC (or any other then applicable provision of the UCC).

	 	 	“Security” has the meaning set forth in Article 8 of the UCC.

     “Servicing Accounts” means all rights under the Servicing Agreement, including without
limitation, all Accounts owing to Grantor and arising for services rendered or to be rendered by it
under the Servicing Agreement.

     “Servicing Agreement” means the Servicing Agreement dated as of August 20, 2010 by and
among Bluestem SPV, Grantor, as Servicer, and Goldman Sachs Bank USA, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance with the terms
thereof.

     “SPV Collateral Agent” means Goldman Sachs Bank USA, together with any successors or
assigns, as collateral agent under the SPV Security Agreement.

     “SPV Credit Documents” means the SPV Credit Agreement, the Receivables Purchase
Agreement, the Servicing Agreement, the SPV Security Agreement, the Holdings Bad Acts
Guaranty, the Holdings Letter Agreement and each additional Credit Document (as defined in the SPV
Credit Agreement as in effect on the Fourth Amendment Effective Date).

     “SPV Security Agreement” means that certain Security Agreement (as amended, restated,
supplemented or otherwise modified from time to time in accordance with the terms thereof) between
Bluestem SPV and the SPV Collateral Agent dated August 20, 2010.

     “SPV Share Pledge” means that certain Equity Pledge Agreement dated as of August 20,
2010, by and between Grantor and the SPV Collateral Agent, as may be further amended, modified and
supplemented in accordance with the terms thereof.

     “Supporting Obligations” shall have the meaning set forth in Article 9 of the UCC.

     “UCC” means the Uniform Commercial Code, as in effect from time to time, of the State
of Illinois or of any other state the laws of which are required as a result thereof to be applied
in connection with the attachment, perfection or priority of, or remedies with respect to, the
Subordinated Collateral Agent’s or any Holder’s Lien on any Collateral.

     “Underlying Receivables” means all amount payable by a Receivables Obligor (as defined
in the Servicing Agreement as in effect on the Fourth Amendment Effective Date) on the related
Receivables Account from time to time, and purchased by or contributed to Bluestem SPV from the
Grantor under the Receivables Purchase Agreement.

     The foregoing definitions shall be equally applicable to both the singular and plural forms of
the defined terms.

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ARTICLE II

GRANT OF SECURITY INTEREST

     To secure payment and performance of the Secured Obligations, the Grantor hereby confirms its
prior grant under the Original Security Agreement, the Amended Security Agreement and the Second
Amended Security Agreement, as amended and restated hereby, and pledges, assigns and grants to the
Subordinated Collateral Agent, on behalf of and for the ratable benefit of the Holders, a security
interest in all of its right, title and interest in, to and under certain personal property and
other assets, whether now owned by or owing to, or hereafter acquired by or arising in favor of the
Grantor (including under any trade name or derivations thereof), and whether owned or consigned by
or to, or leased from or to, the Grantor, and regardless of where located (all of which will be
collectively referred to as the “Collateral”), consisting of:

               (a) All Accounts;

               (b) All Chattel Paper;

               (c) All Commercial Tort Claims;

               (d) All Contracts;

               (e) All Deposit Accounts;

               (f) All Documents;

               (g) All Equipment;

               (h) All General Intangibles (including Payment Intangibles);

               (i) All Instruments;

               (j) All Inventory;

               (k) All Investment Property;

               (l) All Letter-of-Credit Rights;

               (m) All Securities Accounts;

               (n) All Supporting Obligations;

               (o) All property of the Grantor held by Subordinated Collateral Agent or any Holder,
including, without limitation, all property of every description now or hereafter in the possession
or custody of or in transit to the Subordinated Collateral Agent or any Holder for any purpose,
including, without limitation, safekeeping, collection or pledge, for the account of the Grantor,
or as to which the Grantor may have any right or power;

               (p) All other goods and personal property of the Grantor whether tangible or
intangible and whether now or hereafter owned or existing, leased, consigned by or to, or acquired
by the Grantor and wherever located; and

               (q) All Proceeds of each of the foregoing and all accessions to, substitutions and
replacements for, and rents, profits and products of each of the foregoing;

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excluding, however, in each case, the Receivables Property now existing or hereafter arising. To
the extent that any security interest arises in any Receivables Account or in any asset under this
Security Agreement prior to its becoming Receivables Property, such security interest is deemed to
have terminated automatically on the date it becomes a Receivables Account or Receivables Property;
provided that such security interest shall be automatically reinstated on the date when any such
Receivables Property is reconveyed to the Grantor and ceases to be Receivables Property pursuant to
the terms of the SPV Credit Documents.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

     The Grantor represents and warrants to the Subordinated Collateral Agent and each Holder that:

     3.1. Title, Perfection and Priority. The Grantor has good and valid rights in or the
power to transfer the Collateral and title to the Collateral with respect to which it has purported
to grant a security interest hereunder, free and clear of all Liens except for Liens permitted
under Section 4.1(e), and has full power and authority to grant to the Subordinated Collateral
Agent the security interest in such Collateral pursuant hereto. When financing statements have been
filed in the appropriate offices against the Grantor in the locations listed on Exhibit E,
as such exhibit may be amended with the consent of the Required Holder(s), not to be unreasonably
withheld or delayed, the Subordinated Collateral Agent will have a fully perfected security
interest in that Collateral in which a security interest may be perfected by filing, subject only
to Liens permitted under Section 4.1(e).

     3.2. Type and Jurisdiction of Organization, Organizational and Identification Numbers.
The type of entity of the Grantor, its state of organization, the organizational number issued to
it by its state of organization and its federal employer identification number are set forth on
Exhibit A, as such exhibit may be amended with the consent of the Required Holder(s), not
to be unreasonably withheld or delayed.

     3.3. Principal Location. The Grantor’s mailing address and the location of its place
of business (if it has only one) or its chief executive office (if it has more than one place of
business), are disclosed in Exhibit A, as such exhibit may be amended with the consent of the
Required Holder(s), not to be unreasonably withheld or delayed; the Grantor has no other places of
business except those set forth in Exhibit A.

     3.4. Collateral Locations. All of the Grantor’s locations where Collateral is located
are listed on Exhibit A, as such exhibit may be amended with the consent of the Required Holder(s),
not to be unreasonably withheld or delayed. All of said locations are owned by the Grantor except
for locations (i) which are leased by the Grantor as lessee and designated in Part VII(b)
of Exhibit A and (ii) at which Inventory is held in a public warehouse or is otherwise held
by a bailee or on consignment as designated in Part VII(c) of Exhibit A.

     3.5. Deposit Accounts. All of the Grantor’s Deposit Accounts are listed on
Exhibit B, as such exhibit may be amended with the consent of the Required Holder(s), not to be
unreasonably withheld or delayed.

     3.6. Exact Names. The Grantor’s name in which it has executed this Security Agreement
is, as of the date hereof, the exact name as it appears in the Grantor’s organizational documents,
as amended, as filed with the Grantor’s jurisdiction of organization. Except for its former name
“Fingerhut Direct Marketing, Inc.”, the Grantor has not, during the past five years, been known by
or used any other corporate or fictitious name, or been a party to any merger or consolidation, or
been a party to any acquisition.

     3.7. Letter of Credit Rights and Chattel Paper. Exhibit C, as such exhibit may be amended with
the consent of the Required Holder(s), not to be unreasonably withheld or delayed, lists all Letter
of Credit Rights and Chattel Paper of the Grantor. All action by the Grantor necessary or desirable
to protect and perfect the Subordinated Collateral Agent’s Lien on each item listed on Exhibit
C (including the delivery of all originals and the placement of a legend on all Chattel Paper
as required hereunder) has been duly taken. The

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Subordinated Collateral Agent will have a fully perfected security interest in the Collateral
listed on Exhibit C, subject only to Liens permitted under Section 4.1(e).

     3.8. Commercial Tort Claims. Commercial Torts Claims of the Grantor are set forth on
Exhibit F.

     3.9. Inventory. With respect to any Inventory scheduled or listed on the most recent
Collateral Report, (a) such Inventory (other than Inventory in transit) is located at one of the
Grantor’s locations set forth on Exhibit A, (b) no Inventory (other than Inventory in transit) is
now, or shall at any time or times hereafter be stored at any other location except as permitted by
Section 4.1(g), (c) the Grantor has good, indefeasible and merchantable title to such Inventory and
such Inventory is not subject to any Lien or security interest or document whatsoever except for
the Lien granted to the Subordinated Collateral Agent, for the benefit of the Subordinated
Collateral Agent and the Holders, and except as permitted under the Purchase Agreement, (d) except
as specifically disclosed in the most recent Collateral Report, such Inventory is of good and
merchantable quality, free from any defects, (e) such Inventory 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 other disposition of that Inventory or the
payment of any monies to any third party upon such sale or other disposition, and (f) sale or other
disposition of such Inventory by the Subordinated Collateral 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 the Grantor is a party or to which such property is subject.

     3.10. Filing Requirements. None of the Collateral is of a type for which security
interests or liens may be perfected by filing under any federal statute.

     3.11. No Financing Statements, Security Agreements. No financing statement or security
agreement describing all or any portion of the Collateral which has not lapsed or been terminated
naming the Grantor as debtor has been filed or is of record in any jurisdiction except (a) for
financing statements or security agreements naming the Subordinated Collateral Agent on behalf of
the Holders as the secured party and (b) as permitted by Section 4.1(e).

     3.12. Pledged Collateral.

          (a) Exhibit D, as such exhibit may be amended with the consent of the Required
Holder(s), not to be unreasonably withheld or delayed, sets forth a complete and accurate list of
all of the Pledged Collateral. The Grantor is the direct, sole beneficial owner and sole holder of
record of the Pledged Collateral listed on Exhibit D as being owned by it, free and clear
of any Liens, except for (i) with respect to the Bluestem SPV Stock only, the security interest of
the SPV Collateral Agent and (ii) with respect to all Pledged Collateral (including the Bluestem
SPV Stock) the security interest granted to the Subordinated Collateral Agent for the benefit of
the Holders hereunder and security interest granted to the Bank Agent. The Grantor further
represents and warrants that (i) all Pledged Collateral constituting an Equity Interest has been
(to the extent such concepts are relevant with respect to such Pledged Collateral) duly authorized,
validly issued, are fully paid and non-assessable, (ii) with respect to any certificates delivered
to the Subordinated Collateral Agent representing an Equity Interest, either such certificates are
Securities as defined in Article 8 of the UCC as a result of actions by the issuer or otherwise,
or, if such certificates are not Securities, the Grantor has so informed the Subordinated
Collateral Agent so that the Subordinated Collateral Agent may take steps to perfect its security
interest therein as a General Intangible, and (iii) all Pledged Collateral held by a securities
intermediary is covered by a control agreement among the Grantor, the securities intermediary and
the Subordinated Collateral Agent pursuant to which the Subordinated Collateral Agent has Control.

          (b) In addition, (i) none of the Pledged Collateral has been issued or transferred in
violation of the securities registration, securities disclosure or similar laws of any jurisdiction
to which such issuance or transfer may be subject, (ii) there are existing no options, warrants,
calls or commitments of any character whatsoever relating to the Pledged Collateral or which
obligate the issuer of any Equity Interest included in the Pledged Collateral to issue additional
Equity Interests, and (iii) no consent, approval, authorization, or other

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action by, and no giving of notice to or, filing with, any governmental authority or any other
Person is required for the pledge by the Grantor of the Pledged Collateral pursuant to this
Security Agreement or for the execution, delivery and performance of this Security Agreement by the
Grantor, or for the exercise by the Subordinated Collateral Agent of the voting or other rights
provided for in this Security Agreement or for the remedies in respect of the Pledged Collateral
pursuant to this Security Agreement, except as may be required in connection with such disposition
by laws affecting the offering and sale of securities generally.

          (c) Except as set forth in Exhibit D, as such exhibit may be amended with the consent
of the Required Holder(s), not to be unreasonably withheld or delayed, the Grantor
owns 100% of the issued and outstanding Equity Interests which constitute Pledged Collateral.

     3.13. Securities Accounts. The names and addresses of all institutions at which the
Grantor maintains its Securities Accounts and the account numbers and account names of such
Securities Accounts are listed on Exhibit G. The Company shall amend Exhibit G from time
to time within twenty (20) Business Days after opening any additional Securities Account or closing
or changing the account number or account name on any existing Securities Account.

ARTICLE IV

COVENANTS

     From the date of this Security Agreement, and thereafter until this Security Agreement is
terminated, the Grantor agrees that:

     4.1. General.

          (a) Collateral Records. The Grantor will maintain complete and accurate
books and records with respect to the Collateral, and furnish to the Subordinated Collateral Agent,
with sufficient copies for each of the Holders, such reports relating to the Collateral as the
Subordinated Collateral Agent shall from time to time request.

          (b) Authorization to File Financing Statements; Ratification. The Grantor
hereby authorizes the Subordinated Collateral Agent to file, and if requested will deliver to the
Subordinated Collateral Agent, all financing statements and other documents and take such other
actions as may from time to time be requested by the Subordinated Collateral Agent in order to
maintain a first perfected security interest in and, if applicable, Control of, the Collateral. Any
financing statement filed by the Subordinated Collateral Agent may be filed in any filing office in
any UCC jurisdiction and may (i) indicate the Collateral by any description which reasonably
approximates the description contained in this Security Agreement or may contain an indication or
description of collateral that describes such property in any other manner as the Subordinated
Collateral Agent may determine, including describing such property as “all assets” or “all personal
property” and may add thereto “whether now owned or hereafter acquired” or words of similar import,
and (ii) contain any other information required by part 5 of Article 9 of the UCC for the
sufficiency or filing office acceptance of any financing statement or amendment, including whether
the Grantor is an organization, the type of organization and any organization identification number
issued to the Grantor. The Grantor also agrees to furnish any such information to the Subordinated
Collateral Agent promptly upon request. The Grantor also ratifies its authorization for the
Subordinated Collateral Agent to have filed in any UCC jurisdiction any initial financing
statements or amendments thereto if filed prior to the date hereof.

          (c) Further Assurances. The Grantor will, if so requested by the
Subordinated Collateral Agent, furnish to the Subordinated Collateral Agent, as often as the
Subordinated Collateral Agent requests, statements and schedules further identifying and describing
the Collateral and such other reports and information in connection with the Collateral as the
Subordinated Collateral Agent may reasonably request, all in such detail as the Subordinated
Collateral Agent may specify. The Grantor also agrees to take any and all actions necessary to
defend title to the Collateral against all persons and to defend the security interest of the

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Subordinated Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted hereunder.

          (d) Disposition of Collateral. The Grantor will not sell, lease or otherwise
dispose of the Collateral except for dispositions specifically permitted pursuant to paragraph 6E
of the Purchase Agreement.

          (e) Liens. The Grantor will not create, incur, or suffer to exist any Lien
on the Collateral except (i) the security interest created by this Security Agreement, and (ii)
other Liens permitted under the terms of the Purchase Agreement.

          (f) Other Financing Statements. The Grantor will not authorize the filing of
any financing statement naming it as debtor covering all or any portion of the Collateral, except
as permitted by Section 4.1(e). The Grantor acknowledges that it is not authorized to file
any financing statement or amendment or termination statement with respect to any financing
statement without the prior written consent of the Subordinated Collateral Agent, subject to the
Grantor’s rights under Section 9-509(d)(2) of the UCC.

          (g) Compliance with Terms. The Grantor will perform and comply with all
obligations in respect of the Collateral and all agreements to which it is a party or by which it
is bound relating to the Collateral.

          (h) Commercial Tort Claims and Letter of Credit Rights. The Grantor shall
amend (i) Exhibit F from time to time within twenty (20) Business Days after obtaining any
additional Commercial Tort Claims and (ii) Exhibit C from time to time within twenty (20)
Business Days after obtaining any additional Letter-of-Credit Rights.

          (i) Contracts. The Grantor shall use its commercially reasonable efforts to
secure all consents and approvals necessary or appropriate for the grant of a security interest to
the Subordinated Collateral Agent in any Contract or license held by the Grantor or in which the
Grantor has any rights not heretofore assigned.

     4.2. Retained Receivables.

          (a) Certain Agreements on Retained Receivables. The Grantor will not make or agree to
make any discount, credit, rebate or other reduction in the original amount owing on a Retained
Receivable or accept in satisfaction of a Retained Receivable less than the original amount
thereof, except that, prior to the occurrence of an Event of Default, the Grantor may reduce the
amount of Retained Receivables in accordance with its present policies and in the ordinary course
of business.

          (b) Collection of Retained Receivables. Except as otherwise provided in this Security
Agreement, the Grantor will collect and enforce, at the Grantor’s sole expense, all amounts due or
hereafter due to the Grantor under the Retained Receivables.

          (c) Electronic Chattel Paper. The Grantor shall take all steps necessary to grant the
Subordinated Collateral Agent Control of all electronic Chattel Paper in accordance with the UCC
and all “transferable records” as defined in each of the Uniform Electronic Transactions Act and
the Electronic Signatures in Global and National Commerce Act.

     4.3. Inventory.

          (a) Maintenance of Inventory. The Grantor will do all things necessary to maintain,
preserve, protect and keep the Inventory in saleable condition, except for damaged or defective
goods arising in the ordinary course of the Grantor’s business.

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          (b) Returned Inventory. If an Account Debtor returns any Inventory to the Grantor when
no Event of Default exists, then the Grantor shall promptly determine the reason for such return
and shall issue a credit memorandum to the Account Debtor in the appropriate amount. All returned
Inventory shall be subject to the Subordinated Collateral Agent’s Liens thereon.

          (c) Perpetual Inventory System. The Grantor will maintain a perpetual
inventory reporting system at all times.

     4.4. Delivery of Instruments, Securities, Chattel Paper and Documents. As to all
Chattel Paper and Instruments constituting part of the Collateral, the Grantor will (a) deliver to
the Subordinated Collateral Agent immediately upon execution of this Security Agreement the
originals of all Chattel Paper, Securities (other than the Bluestem SPV Stock, while the
Intercreditor Agreement and the SPV Credit Documents are in effect) and Instruments constituting
Collateral (if any then exist), (b) hold in trust for the Subordinated Collateral Agent upon
receipt and immediately thereafter deliver to the Subordinated Collateral Agent any Chattel Paper,
Securities (other than the Bluestem SPV Stock, while the Intercreditor Agreement and the SPV Credit
Documents are in effect) and Instruments constituting Collateral, and (c) upon the Subordinated
Collateral Agent’s request, deliver to the Subordinated Collateral Agent (and thereafter hold in
trust for the Subordinated Collateral Agent upon receipt and immediately deliver to the
Subordinated Collateral Agent) any Document evidencing or constituting Collateral. The Grantor
hereby authorizes the Subordinated Collateral Agent to attach each Amendment to this Security
Agreement and agrees that all additional Collateral set forth in such Amendments shall be
considered to be part of the Collateral.

     4.5. Uncertificated Pledged Collateral. The Grantor will permit the Subordinated
Collateral Agent from time to time to cause the appropriate issuers (and, if held with a securities
intermediary, such securities intermediary) of uncertificated securities or other types of Pledged
Collateral not represented by certificates to mark their books and records with the numbers and
face amounts of all such uncertificated securities or other types of Pledged Collateral not
represented by certificates and all rollovers and replacements therefor to reflect the Lien of the
Subordinated Collateral Agent granted pursuant to this Security Agreement. The Grantor will take
any actions necessary to cause (a) the issuers of uncertificated securities which are Pledged
Collateral and (b) any securities intermediary which is the holder of any Pledged Collateral, to
cause the Subordinated Collateral Agent to have and retain Control over such Pledged Collateral.
Without limiting the foregoing, the Grantor will, with respect to Pledged Collateral held with a
securities intermediary, cause such securities intermediary to enter into a control agreement with
the Subordinated Collateral Agent, in form and substance satisfactory to the Subordinated
Collateral Agent, giving the Subordinated Collateral Agent Control.

     4.6. Pledged Collateral.

          (a) Changes in Capital Structure of Issuers. The Grantor will not (i) permit
or suffer any issuer of an Equity Interest constituting Pledged Collateral to dissolve, merge,
liquidate or retire any of its Equity Interests, or (ii) vote any Pledged Collateral in favor of
any of the foregoing.

          (b) Issuance of Additional Securities. The Grantor will not permit or suffer the
issuer of an Equity Interest constituting Pledged Collateral to issue additional Equity Interests,
any right to receive the same or any right to receive earnings, except to the Grantor.

          (c) Registration of Pledged Collateral. The Grantor will permit any registerable
Pledged Collateral to be registered in the name of the Subordinated Collateral Agent or its nominee
at any time at the option of the Required Holder(s).

          (d) Exercise of Rights in Pledged Collateral.

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          (i) Without in any way limiting the foregoing and subject to clause (ii) below, the
Grantor shall have the right to exercise all voting rights or other rights relating to the
Pledged Collateral for all purposes not inconsistent with this Security Agreement, the
Purchase Agreement or any other Note Document; provided however, that no vote or other
right shall be exercised or action taken which would have the effect of impairing the
rights of the Subordinated Collateral Agent in respect of the Pledged Collateral.

          (ii) The Grantor will permit the Subordinated Collateral Agent or its nominee at any
time after the occurrence of an Event of Default, without notice, to exercise all voting
rights or other rights relating to Pledged Collateral, including, without limitation,
exchange, subscription or any other rights, privileges, or options pertaining to any Equity
Interest or Investment Property constituting Pledged Collateral as if it were the absolute
owner thereof.

          (iii) The Grantor shall be entitled to collect and receive for its own use all cash
dividends and interest paid in respect of the Pledged Collateral to the extent not in
violation of the Purchase Agreement other than any of the following distributions
and payments (collectively referred to as the “Excluded Payments”): (A) dividends
and interest paid or payable other than in cash in respect of any Pledged Collateral, and
instruments and other property received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Collateral; (B) dividends and other distributions paid or
payable in cash in respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital surplus or
paid-in capital of an issuer; and (C) cash paid, payable or otherwise distributed, in
respect of principal of, or in redemption of, or in exchange for, any Pledged Collateral;
provided however, that until actually paid, all rights to such distributions shall remain
subject to the Lien created by this Security Agreement; and

          (iv) All Excluded Payments and all other distributions in respect of any of the
Pledged Collateral, whenever paid or made, shall be delivered to the Subordinated
Collateral Agent to hold as Pledged Collateral and shall, if received by the Grantor, be
received in trust for the benefit of the Subordinated Collateral Agent, be segregated from
the other property or funds of the Grantor, and be forthwith delivered to the Subordinated
Collateral Agent as Pledged Collateral in the same form as so received (with any necessary
endorsement).

     4.7. No Interference. The Grantor agrees that it will not interfere with any right,
power and remedy of the Subordinated Collateral Agent provided for in this Security Agreement or
now or hereafter existing at law or in equity or by statute or otherwise, or the exercise or
beginning of the exercise by the Subordinated Collateral Agent of any one or more of such rights,
powers or remedies.

     4.8. Insurance. (a) In the event any Collateral is located in any area that has been
designated by the Federal Emergency Management Agency as a “Special Flood Hazard Area”, the Grantor
shall purchase and maintain flood insurance on such Collateral (including any personal property
which is located on any real property leased by the Grantor within a “Special Flood Hazard Area”).
The amount of flood insurance required by this Section shall be in an amount equal to the lesser of
the total outstanding principal amount of the Subordinated Notes or the total replacement cost
value of the Inventory at such location.

          (b) All insurance policies required hereunder and under paragraph 5F of the Purchase Agreement
shall name the Subordinated Collateral Agent (for the benefit of the Subordinated Collateral Agent
and the Holders) as an additional insured or as loss payee, as applicable, and shall contain loss
payable clauses or mortgagee clauses, through endorsements in form and substance satisfactory to
the Subordinated Collateral Agent, which provide that: (i) all proceeds thereunder with respect to
any Collateral shall be payable to the Subordinated Collateral Agent; (ii) no such insurance shall
be affected by any act or neglect of the insured or owner of the property described in such policy;
and (iii) such policy and loss payable or mortgagee clauses may be canceled, amended, or terminated
only upon at least thirty days prior written notice given to the Subordinated Collateral Agent.

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          (c) All premiums on such insurance shall be paid when due by the Grantor, and copies of
the policies delivered to the Subordinated Collateral Agent upon request. If the Grantor fails to
obtain any insurance as required by this Section, the Subordinated Collateral Agent may obtain such
insurance at the Grantor’s expense. By purchasing such insurance, the Subordinated Collateral Agent
shall not be deemed to have waived any Default arising from the Grantor’s failure to maintain such
insurance or pay any premiums therefor.

     4.9. Collateral Access Agreements. The Grantor shall use commercially reasonable
efforts to obtain a Collateral Access Agreement, from the lessor of each leased property, mortgagee
of owned property or bailee or consignee with respect to any warehouse, processor or converter
facility or other location where Collateral is stored or located, which agreement or letter shall
provide access rights, contain a waiver or subordination of all Liens or claims that the landlord,
mortgagee, bailee or consignee may assert against the Collateral at that location, and shall
otherwise be reasonably satisfactory in form and substance to the Subordinated Collateral Agent.
After the First Amendment Effective Date, no real property or warehouse space shall be leased by
the Grantor and no Inventory shall be shipped to a processor or converter under arrangements
established after the First Amendment Effective Date, unless and until a satisfactory Collateral
Access Agreement shall first have been obtained with respect to such location. The Grantor shall
timely and fully pay and perform its obligations under all leases and other agreements with respect
to each leased location or third party warehouse where any Collateral is or may be located.

     4.10. Change of Name or Location. The Grantor shall not (a) change (i) its name as it
appears in official filings in the state of its incorporation or organization, (ii) the type of
entity that it is, or (iii) its organization identification number, if any, issued by its state of
incorporation or other organization, in each case, which would make any financing statement or
continuation statement filed in connection herewith seriously misleading within the meaning of
Section 9-506 of the UCC as in effect in the State of Delaware, unless the Subordinated Collateral
Agent shall have received notice of any such change and file such financing statements or
amendments as may be necessary to continue the perfection of any Liens in favor of the Subordinated
Collateral Agent, on behalf of the Holders, in any Collateral within thirty days after any such
change, or (b) change its (i) chief executive office, principal place of business, mailing address,
corporate offices or warehouses or locations at which Collateral is held or stored, or the location
of its records concerning the Collateral as set forth in this Security Agreement or (ii) state of
incorporation or organization, in each case, without giving the Subordinated Collateral Agent
prompt written notice of any such change and whether, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement and shall file such financing
statements or amendments as may be necessary to continue the perfection of any Liens in favor of
the Subordinated Collateral Agent, on behalf of the Holders, in any Collateral and will execute any
documents necessary to perfect or preserve the validity, perfection or priority of such security
interest, provided that, any new location shall be in the continental U.S.

     4.11. Securities Accounts. The Grantor shall use its commercially reasonable efforts
to assist the Subordinated Collateral Agent in obtaining control under the UCC with respect to any
Collateral consisting of Securities Accounts (with investment or other assets that currently exceed
or are at any time expected to exceed $25,000).

ARTICLE V

EVENTS OF DEFAULT AND REMEDIES

     5.1. Events of Default. The occurrence of any one or more of the following events
shall constitute an Event of Default hereunder:

          (a) Any representation or warranty made by or on behalf of the Grantor under or in connection
with this Security Agreement shall be materially false as of the date on which made.

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          (b) The breach by the Grantor of any of the terms or provisions of Article
IV or Article VII.

          (c) The breach by the Grantor (other than a breach which constitutes an Event of Default under
any other Section of this Article V) of any of the terms or provisions of this Security Agreement
which is not remedied within ten days after such breach.

          (d) The occurrence of any “Event of Default” under, and as defined in, the Purchase Agreement.

          (e) Subject to the provisions of the Intercreditor Agreement, any Equity Interest which is
included within the Collateral shall at any time constitute a Security or the issuer of any such
Equity Interest shall take any action to have such interests treated as a Security unless (i) all
certificates or other documents constituting such Security have been delivered to the Subordinated
Collateral Agent and such Security is properly defined as such under Article 8 of the UCC of the
applicable jurisdiction, whether as a result of actions by the issuer thereof or otherwise, or (ii)
the Subordinated Collateral Agent has entered into a control agreement with the issuer of such
Security or with a securities intermediary relating to such Security and such Security is defined
as such under Article 8 of the UCC of the applicable jurisdiction, whether as a result of actions
by the issuer thereof or otherwise.

	 	5.2.	 	Remedies.

          (a) Upon the occurrence of an Event of Default, the Subordinated Collateral Agent may exercise
any or all of the following rights and remedies:

          (i) those rights and remedies provided in this Security Agreement, the
Purchase Agreement, or any other Note Document; provided that, this Section 5.2(a) shall
not be understood to limit any rights or remedies available to the Subordinated Collateral
Agent and the Holders prior to an Event of Default;

          (ii) those rights and remedies available to a secured party under the UCC
(whether or not the UCC applies to the affected Collateral) or under any other applicable
law (including, without limitation, any law governing the exercise of a bank’s right of
setoff or bankers’ lien) when a debtor is in default under a security agreement;

          (iii) give notice of sole control or any other instruction under any Deposit
Account Control Agreement or and other control agreement with any securities intermediary
and take any action therein with respect to such Collateral;

          (iv) without notice (except as specifically provided in Section 8.1 or
elsewhere herein), demand or advertisement of any kind to the Grantor or any other Person,
enter the premises of the Grantor where any Collateral is located (through self-help and
without judicial process) to collect, receive, assemble, process, appropriate, sell, lease,
assign, grant an option or options to purchase or otherwise dispose of, deliver, or realize
upon, the Collateral or any part thereof in one or more parcels at public or private sale
or sales (which sales may be adjourned or continued from time to time with or without
notice and may take place at the Grantor’s premises or elsewhere), for cash, on credit or
for future delivery without assumption of any credit risk, and upon such other terms as the
Subordinated Collateral Agent may deem commercially reasonable; and

          (v) except as limited by Section 11.1, concurrently with written notice to
the Grantor, transfer and register in its name or in the name of its nominee the whole or
any part of the Pledged Collateral, to exchange certificates or instruments representing or
evidencing Pledged

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Collateral for certificates or instruments of smaller or larger denominations, to exercise
the voting and all other rights as a holder with respect thereto, to collect and receive
all cash dividends, interest, principal and other distributions made thereon and to
otherwise act with respect to the Pledged Collateral as though the Subordinated Collateral
Agent was the outright owner thereof.

          (b) The Subordinated Collateral Agent, on behalf of the Holders, may comply with any
applicable state or federal law requirements in connection with a disposition of the Collateral and
compliance will not be considered to adversely affect the commercial reasonableness of any sale of
the Collateral.

          (c) The Subordinated Collateral Agent 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 the Subordinated Collateral Agent and the Holders, the whole or any part of the
Collateral so sold, free of any right of equity redemption, which equity redemption the Grantor
hereby expressly releases.

          (d) Until the Subordinated Collateral Agent is able to effect a sale, lease, or other
disposition of Collateral, the Subordinated Collateral Agent shall have the right to hold or 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 the Subordinated
Collateral Agent. The Subordinated Collateral Agent may, if it so elects, seek the appointment of
a receiver or keeper to take possession of Collateral and to enforce any of the Subordinated
Collateral Agent’s remedies (for the benefit of the Subordinated Collateral Agent and Holders),
with respect to such appointment without prior notice or hearing as to such appointment.

          (e) [Intentionally Omitted].

          (f) Notwithstanding the foregoing, neither the Subordinated Collateral Agent nor the Holders
shall be required to (i) make any demand upon, or pursue or exhaust any of their rights or remedies
against, the Grantor, any other obligor, guarantor, pledgor or any other Person with respect to the
payment of the Secured Obligations or to pursue or exhaust any of their rights or remedies with
respect to any Collateral therefor or any direct or indirect guarantee thereof, (ii) marshal the
Collateral or any guarantee of the Secured Obligations or to resort to the Collateral or any such
guarantee in any particular order, or (iii) effect a public sale of any Collateral.

          (g) The Grantor recognizes that the Subordinated Collateral Agent may be unable to effect a
public sale of any or all the Pledged Collateral and may be compelled to resort to one or more
private sales thereof in accordance with clause (a) above. The Grantor also acknowledges
that any private sale may result in prices and other terms less favorable to the seller than if
such sale were a public sale and, notwithstanding such circumstances, agrees that any such private
sale shall not be deemed to have been made in a commercially unreasonable manner solely by virtue
of such sale being private. The Subordinated Collateral Agent shall be under no obligation to delay
a sale of any of the Pledged Collateral for the period of time necessary to permit the Grantor or
the issuer of the Pledged Collateral to register such securities for public sale under the
Securities Act of 1933, as amended, or under applicable state securities laws, even if the Grantor
and the issuer would agree to do so.

     5.3. Grantor’s Obligations Upon Default. Upon the request of the Subordinated
Collateral Agent after the occurrence and during the continuance of an Event of Default, the
Grantor will:

          (a) assemble and make available to the Subordinated Collateral Agent the Collateral and all
books and records relating thereto at any place or places specified by the Subordinated Collateral
Agent, whether at the Grantor’s premises or elsewhere;

          (b) permit the Subordinated Collateral Agent, by the Subordinated Collateral Agent’s
representatives and agents, to enter, occupy and use any premises where all or any part of the
Collateral, or the books and records relating thereto, or both, are located, to take possession of
all or any part of the Collateral or

15

 

the books and records relating thereto, or both, to remove all or any part of the Collateral or the
books and records relating thereto, or both, and to conduct sales of the Collateral, without any
obligation to pay the Grantor for such use and occupancy;

          (c) prepare and file, or cause an issuer of Pledged Collateral to prepare and file, with the
Securities and Exchange Commission or any other applicable government agency, registration
statements, a prospectus and such other documentation in connection with the Pledged Collateral as
the Subordinated Collateral Agent may request, all in form and substance satisfactory to the
Subordinated Collateral Agent, and furnish to the Subordinated Collateral Agent, or cause an issuer
of Pledged Collateral to furnish to the Subordinated Collateral Agent, any information regarding
the Pledged Collateral in such detail as the Subordinated Collateral Agent may specify;

          (d) take, or cause an issuer of Pledged Collateral to take, any and all actions necessary to
register or qualify the Pledged Collateral to enable the Subordinated Collateral Agent to
consummate a public sale or other disposition of the Pledged Collateral; and

          (e) at its own expense, cause the independent certified public accountants then engaged by the
Grantor to prepare and deliver to the Subordinated Collateral Agent and each Holder, at any time,
and from time to time, promptly upon the Subordinated Collateral Agent’s request, the following
reports with respect to the Grantor: (i) a reconciliation of all Accounts; (ii) an aging of all
Accounts; (iii) trial balances; and (iv) a test verification of such Accounts.

     5.4. Grant of Intellectual Property License. For the purpose of enabling the
Subordinated Collateral Agent to exercise the rights and remedies under this Article V at
such time as the Subordinated Collateral Agent shall be lawfully entitled to exercise such rights
and remedies, the Grantor hereby (a) grants to the Subordinated Collateral Agent, for the benefit
of the Subordinated Collateral Agent and the Holders, an irrevocable, nonexclusive license
(exercisable without payment of royalty or other compensation to the Grantor) to use, license or
sublicense any intellectual property rights now owned or hereafter acquired by the 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 and (b) irrevocably agrees that the Subordinated Collateral Agent
may sell any of the Grantor’s Inventory directly to any person, including without limitation
persons who have previously purchased the Grantor’s Inventory from the Grantor and in connection
with any such sale or other enforcement of the Subordinated Collateral Agent’s rights under this
Security Agreement, may sell Inventory which bears any trademark owned by or licensed to the
Grantor and any Inventory that is covered by any copyright owned by or licensed to the Grantor and
the Subordinated Collateral Agent may finish any work in process and affix any trademark owned by
or licensed to the Grantor and sell such Inventory as provided herein.

ARTICLE VI

ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY

     6.1. Account Verification. The Subordinated Collateral Agent may at any time, in the
Subordinated Collateral Agent’s own name, in the name of a nominee of the Subordinated Collateral
Agent, or in the name of the Grantor communicate (by mail, telephone, facsimile or otherwise) with
the Account Debtors of such Grantor, parties to contracts with the Grantor and obligors in respect
of Instruments of the Grantor to verify with such Persons, to the Subordinated Collateral Agent’s
satisfaction, the existence, amount, terms of, and any other matter relating to, Retained
Receivables subject to applicable laws.

	 	6.2.	 	Authorization for Subordinated Collateral Agent to Take Certain Action.

          (a) The Grantor irrevocably authorizes the Subordinated Collateral Agent at any time and from
time to time in the sole discretion of the Subordinated Collateral Agent and appoints the
Subordinated Collateral Agent as its attorney in fact (i) to execute on behalf of the Grantor as
debtor and to file financing

16

 

statements necessary or desirable in the Subordinated Collateral Agent’s sole discretion to perfect
and to maintain the perfection and priority of the Subordinated Collateral Agent’s security
interest in the Collateral, (ii) to endorse and collect any cash proceeds of the Collateral, (iii)
to file a carbon, photographic or other reproduction of this Security Agreement or any financing
statement with respect to the Collateral as a financing statement and to file any other financing
statement or amendment of a financing statement (which does not add new collateral or add a debtor)
in such offices as the Subordinated Collateral Agent in its sole discretion deems necessary or
desirable to perfect and to maintain the perfection and priority of the Subordinated Collateral
Agent’s security interest in the Collateral, (iv) to contact and enter into one or more agreements
with the issuers of uncertificated securities which are Pledged Collateral or with securities
intermediaries holding Pledged Collateral as may be necessary or advisable to give the Subordinated
Collateral Agent Control over such Pledged Collateral, (v) to apply the proceeds of any Collateral
received by the Subordinated Collateral Agent to the Secured Obligations as provided in Section
7.2, (vi) to discharge past due taxes, assessments, charges, fees or Liens on the Collateral
(except for such Liens as are specifically permitted hereunder), (vii) to contact Account Debtors
for any reason, (viii) to demand payment or enforce payment of the Retained Receivables in the name
of the Subordinated Collateral Agent or the Grantor and to endorse any and all checks, drafts, and
other instruments for the payment of money relating to the Retained Receivables, (ix) to sign the
Grantor’s name on any invoice or bill of lading relating to the Retained Receivables, drafts
against any Account Debtor of the Grantor, assignments and verifications of Retained Receivables,
(x) to exercise all of the Grantor’s rights and remedies with respect to the collection of the
Retained Receivables and any other Collateral, (xi) to settle, adjust, compromise, extend or renew
the Retained Receivables, (xii) to settle, adjust or compromise any legal proceedings brought to
collect Retained Receivables, (xiii) to prepare, file and sign the Grantor’s name on a proof of
claim in bankruptcy or similar document against any Account Debtor of the Grantor, (xiv) to
prepare, file and sign the Grantor’s name on any notice of Lien, assignment or satisfaction of Lien
or similar document in connection with the Retained Receivables, (xv) to change the address for
delivery of mail addressed to the Grantor to such address as the Subordinated Collateral Agent may
designate and to receive, open and dispose of all mail addressed to the Grantor, and (xvi) to do
all other acts and things necessary to carry out this Security Agreement; and the Grantor agrees to
reimburse the Subordinated Collateral Agent on demand for any payment made or any expense incurred
by the Subordinated Collateral Agent in connection with any of the foregoing; provided that, this
authorization shall not relieve the Grantor of any of its obligations under this Security Agreement
or under the Purchase Agreement.

          (b) All acts of said attorney or designee are hereby ratified and approved. The
powers conferred on the Subordinated Collateral Agent, for the benefit of the Subordinated
Collateral Agent and Holders, under this Section 6.2 are solely to protect the Subordinated
Collateral Agent’s interests in the Collateral and shall not impose any duty upon the Subordinated
Collateral Agent or any Holder to exercise any such powers. The Subordinated Collateral Agent
agrees that, except for the powers granted in Section 6.2(a)(i)-(vi) and Section 6.2(a)(xvi), it
shall not exercise any power or authority granted to it unless an Event of Default has occurred and
is continuing.

     6.3. Proxy. THE GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE SUBORDINATED
COLLATERAL AGENT AS THE PROXY AND ATTORNEY-IN-FACT (AS SET FORTH IN SECTION 6.2 ABOVE) OF THE
GRANTOR WITH RESPECT TO THE PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE SUCH PLEDGED
COLLATERAL, WITH FULL POWER OF SUBSTITUTION TO DO SO. IN ADDITION TO THE RIGHT TO VOTE ANY SUCH
PLEDGED COLLATERAL, THE APPOINTMENT OF THE SUBORDINATED COLLATERAL AGENT AS PROXY AND
ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND
REMEDIES TO WHICH A HOLDER OF SUCH PLEDGED COLLATERAL WOULD BE ENTITLED (INCLUDING GIVING OR
WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING
AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY
ACTION (INCLUDING ANY TRANSFER OF ANY SUCH PLEDGED COLLATERAL ON THE RECORD BOOKS OF THE ISSUER
THEREOF) BY ANY PERSON (INCLUDING THE ISSUER OF SUCH PLEDGED COLLATERAL OR ANY OFFICER OR AGENT

17

 

THEREOF), UPON THE OCCURRENCE OF A DEFAULT, SUBJECT TO THE INTERCREDITOR AGREEMENT.

     6.4. Nature of Appointment; Limitation of Duty. THE APPOINTMENT OF THE SUBORDINATED
COLLATERAL AGENT AS PROXY AND ATTORNEY-IN-FACT IN THIS ARTICLE VI IS COUPLED WITH AN INTEREST AND
SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS SECURITY AGREEMENT IS TERMINATED IN ACCORDANCE
WITH SECTION 8.14. NOTWITHSTANDING ANYTHING CONTAINED HEREIN, NEITHER THE SUBORDINATED COLLATERAL
AGENT, NOR ANY HOLDER, NOR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS OR REPRESENTATIVES SHALL HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED HEREUNDER OR
OTHERWISE OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY DELAY
IN DOING SO, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION; PROVIDED THAT, IN NO
EVENT SHALL THEY BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

ARTICLE VII

COLLECTION AND APPLICATION OF COLLATERAL PROCEEDS; DEPOSIT ACCOUNTS

	 	7.1.	 	Collection of Retained Receivables.

          (a) On or before the Fourth Amendment Effective Date, the Grantor shall execute and
deliver to the Subordinated Collateral Agent a Deposit Account Control Agreement for account number
104774082853, in the name of the Grantor maintained by the Grantor at U.S. Bank National
Association (such account, or such other accounts as are reasonably acceptable to the Subordinated
Collateral Agent, the “Merchant Deposit Account”), which Merchant Deposit Account is
identified as such on Exhibit B. The Grantor shall cause to be deposited in that Merchant Deposit
Account on each Business Day all proceeds of Collateral other than proceeds of Sales Receivables
and Servicing Accounts and Retained Receivables. On or before the Fourth Amendment Effective Date,
the Grantor shall execute and deliver to the Subordinated Collateral Agent a Deposit Control
Account Agreement for a deposit account with account number 758660021 in the name of the Grantor
maintained with JPMorgan Chase Bank, N.A. (such account, or such other accounts as are reasonably
acceptable to the Subordinated Collateral Agent, the “Collateral Deposit Account”). The
Grantor shall cause to be deposited in the Collateral Deposit Account on each Business Day all
proceeds of Servicing Accounts, Sales Receivables and settlement payments from each Receivables
Account Owner under the Receivables Account Owner Documents and Retained Receivables. On each
Business Day, all funds on deposit in the Merchant Deposit Account shall be transferred to the
Collateral Deposit Account.

          (b) At any time after the “Senior Debt” has been “Paid in Full” (as each such term
is defined in the Intercreditor Agreement (as defined in the Purchase Agreement)), the Subordinated
Collateral Agent shall hold and apply funds received into the Collateral Deposit Account as
provided by the terms of Section 7.2.

     7.2. Application of Proceeds; Deficiency. All amounts deposited in the
Collateral Deposit Account shall be applied by the Subordinated Collateral Agent against the
Secured Obligations. Any such proceeds of the Collateral shall be applied as determined by the
Holders. The balance, if any, after all of the Secured Obligations have been satisfied, shall be
deposited by the Subordinated Collateral Agent into the Grantor’s general operating account. The
Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay all Secured Obligations, including any attorneys’ fees and
other expenses incurred by the Subordinated Collateral Agent or any Holder to collect such
deficiency.

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ARTICLE VIII

GENERAL PROVISIONS

     8.1. Waivers. The Grantor hereby waives notice of the time and place of any
public sale or the time after which any private sale or other disposition of all or any part of the
Collateral may be made. To the extent such notice may not be waived under applicable law, any
notice made shall be deemed reasonable if sent to the Grantor, addressed as set forth in Article
IX, at least ten days prior to (i) the date of any such public sale or (ii) the time after which
any such private sale or other disposition may be made. To the maximum extent permitted by
applicable law, the Grantor waives all claims, damages, and demands against the Subordinated
Collateral Agent or any Holder 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 the
Subordinated Collateral Agent or such Holder as finally determined by a court of competent
jurisdiction. To the extent it may lawfully do so, the Grantor absolutely and irrevocably waives
and relinquishes the benefit and advantage of, and covenants not to assert against the Subordinated
Collateral Agent or any Holder, any valuation, stay, appraisal, extension, moratorium, redemption
or similar laws and any and all rights or defenses it may have as a surety now or hereafter
existing which, but for this provision, might be applicable to the sale of any Collateral made
under the judgment, order or decree of any court, or privately under the power of sale conferred by
this Security Agreement, or otherwise. Except as otherwise specifically provided herein, the
Grantor hereby waives presentment, demand, protest or any notice (to the maximum extent permitted
by applicable law) of any kind in connection with this Security Agreement or any Collateral.

     8.2. Limitation on Subordinated Collateral Agent’s and Holders’ Duty with
Respect to the Collateral. The Subordinated Collateral Agent shall have no obligation
to clean-up or otherwise prepare the Collateral for sale. The Subordinated Collateral Agent and
each Holder shall use reasonable care with respect to the Collateral in its possession or under its
control. Neither the Subordinated Collateral Agent nor any Holder shall have any other duty as to
any Collateral in its possession or control or in the possession or control of any agent or nominee
of the Subordinated Collateral Agent or such Holder, or any income thereon or as to the
preservation of rights against prior parties or any other rights pertaining thereto. To the extent
that applicable law imposes duties on the Subordinated Collateral Agent to exercise remedies in a
commercially reasonable manner, the Grantor acknowledges and agrees that it is commercially
reasonable for the Subordinated Collateral Agent (i) to fail to incur expenses deemed significant
by the Subordinated Collateral Agent to prepare Collateral for disposition or otherwise to
transform raw material or work in process into finished goods or other finished products for
disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or disposed of, (iii) to
fail to exercise collection remedies against Account Debtors or other Persons obligated on
Collateral or to remove Liens on or any adverse claims against Collateral, (iv) to exercise
collection remedies against Account Debtors and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other Persons, whether or not in the same
business as the Grantor, for expressions of interest in acquiring all or any portion of such
Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the Collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of the types included
in the Collateral or that have the reasonable capacity of doing so, or that match buyers and
sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase
insurance or credit enhancements to insure the Subordinated Collateral Agent against risks of loss,
collection or disposition of Collateral or to provide to the Subordinated Collateral Agent a
guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by the Subordinated Collateral Agent, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist the Subordinated Collateral Agent
in the collection or disposition of any of the Collateral. The Grantor acknowledges that the
purpose of this Section 8.2 is to provide non-exhaustive indications of what actions or omissions
by the Subordinated Collateral Agent would be commercially reasonable in the Subordinated
Collateral Agent’s exercise of remedies against the Collateral and that other actions or omissions
by the Subordinated Collateral Agent shall not be deemed commercially

19

 

unreasonable solely on account of not being indicated in this Section 8.2. Without limitation upon
the foregoing, nothing contained in this Section 8.2 shall be construed to grant any rights to the
Grantor or to impose any duties on the Subordinated Collateral Agent that would not have been
granted or imposed by this Security Agreement or by applicable law in the absence of this Section
8.2.

     8.3. Compromises and Collection of Collateral. The Grantor and the
Subordinated Collateral Agent recognize that setoffs, counterclaims, defenses and other claims may
be asserted by obligors with respect to certain of the Retained Receivables, that certain of the
Retained Receivables may be or become uncollectible in whole or in part and that the expense and
probability of success in litigating a disputed Retained Receivable may exceed the amount that
reasonably may be expected to be recovered with respect to a Retained Receivable. In view of the
foregoing, the Grantor agrees that the Subordinated Collateral Agent may at any time and from time
to time, if an Event of Default has occurred and is continuing, compromise with the obligor on any
Retained Receivable, accept in full payment of any Retained Receivable such amount as the
Subordinated Collateral Agent in its sole discretion shall determine or abandon any Retained
Receivable, and any such action by the Subordinated Collateral Agent shall be commercially
reasonable so long as the Subordinated Collateral Agent acts in good faith based on information
known to it at the time it takes any such action.

     8.4. Secured Party Performance of Debtor Obligations. Without having any
obligation to do so, the Subordinated Collateral Agent may perform or pay any obligation which the
Grantor has agreed to perform or pay in this Security Agreement and the Grantor shall reimburse the
Subordinated Collateral Agent for any amounts paid by the Subordinated Collateral Agent pursuant to
this Section 8.4. The Grantor’s obligation to reimburse the Subordinated Collateral Agent pursuant
to the preceding sentence shall be a Secured Obligation payable on demand.

     8.5. Specific Performance of Certain Covenants. The Grantor acknowledges
and agrees that a breach of any of the covenants contained in Sections 4.1(d), 4.1(e), 4.4, 4.5,
4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 5.3, or 8.7 or in Article VII will cause irreparable injury to the
Subordinated Collateral Agent and the Holders, that the Subordinated Collateral Agent and the
Holders have no adequate remedy at law in respect of such breaches and therefore agrees, without
limiting the right of the Subordinated Collateral Agent or the Holders to seek and obtain specific
performance of other obligations of the Grantor contained in this Security Agreement, that the
covenants of the Grantor contained in the Sections referred to in this Section 8.5 shall be
specifically enforceable against the Grantor.

     8.6. Dispositions Not Authorized. The Grantor is not authorized to sell or
otherwise dispose of the Collateral except as set forth in Section 4.1(d) and notwithstanding any
course of dealing between the Grantor and the Subordinated Collateral Agent or other conduct of the
Subordinated Collateral Agent, no authorization to sell or otherwise dispose of the Collateral
(except as set forth in Section 4.1(d)) shall be binding upon the Subordinated Collateral Agent or
the Holders unless such authorization is in writing signed by the Subordinated Collateral Agent
with the consent or at the direction of the Required Holder(s).

     8.7. No Waiver; Amendments; Cumulative Remedies. No delay or omission of the
Subordinated Collateral Agent or any Holder to exercise any right or remedy granted under this
Security Agreement shall impair such right or remedy or be construed to be a waiver of any Default
or an acquiescence therein, and any single or partial exercise of any such right or remedy shall
not preclude any other or further exercise thereof or the exercise of any other right or remedy. No
waiver, amendment or other variation of the terms, conditions or provisions of this Security
Agreement whatsoever shall be valid unless in writing signed by the Subordinated Collateral Agent
(with the written approval of the Required Holder(s) or such other Person, if such approval is
required under the Purchase Agreement). All rights and remedies contained in this Security
Agreement or by law afforded shall be cumulative and all shall be available to the Subordinated
Collateral Agent and the Holders until the Secured Obligations have been paid in full.

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     8.8. Limitation by Law; Severability of Provisions. All rights, remedies and
powers provided in this 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 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 Security
Agreement invalid, unenforceable or not entitled to be recorded or registered, in whole or in part.
Any provision in this Security Agreement that is held to be inoperative, unenforceable, or invalid
in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the operation, enforceability,
or validity of that provision in any other jurisdiction, and to this end the provisions of this
Security Agreement are declared to be severable.

     8.9. Reinstatement. This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against the Grantor for
liquidation or reorganization, should the 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 the 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 Secured 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 Secured 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 Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.

     8.10. Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Grantor, the Subordinated
Collateral Agent and the Holders and their respective successors and assigns (including all persons
who become bound as a debtor to this Security Agreement), except that the Grantor shall not have
the right to assign its rights or delegate its obligations under this Security Agreement or any
interest herein, without the prior written consent of the Subordinated Collateral Agent. No sales
of participations, assignments, transfers, or other dispositions of any agreement governing the
Secured Obligations or any portion thereof or interest therein shall in any manner impair the Lien
granted to the Subordinated Collateral Agent, for the benefit of the Subordinated Collateral Agent
and the Holders, hereunder.

     8.11. Survival of Representations. All representations and warranties of the
Grantor contained in this Security Agreement shall survive the execution and delivery of this
Security Agreement.

     8.12. Taxes and Expenses. Any taxes (including income taxes) payable or
ruled payable by Federal or State authority in respect of this Security Agreement shall be paid by
the Grantor, together with interest and penalties, if any. The Grantor shall reimburse the
Subordinated Collateral Agent for any and all out-of-pocket expenses and internal charges
(including reasonable attorneys’, auditors’ and accountants’ fees and reasonable time charges of
attorneys, paralegals, auditors and accountants who may be employees of the Subordinated Collateral
Agent) paid or incurred by the Subordinated Collateral Agent in connection with the preparation,
execution, delivery, administration, collection and enforcement of this Security Agreement and in
the audit, analysis, administration, collection, preservation or sale of the Collateral (including
the expenses and charges associated with any periodic or special audit of the Collateral). Any and
all costs and expenses incurred by the Grantor in the performance of actions required pursuant to
the terms hereof shall be borne solely by the Grantor.

     8.13. Headings. The title of and section headings in this Security Agreement
are for convenience of reference only, and shall not govern the interpretation of any of the terms
and provisions of this Security Agreement.

     8.14. Termination. This Security Agreement shall continue in effect
(notwithstanding the fact that from time to time there may be no Secured Obligations outstanding)
until (i) the Purchase Agreement has terminated pursuant to its express terms and (ii) all of the
Secured Obligations have been indefeasibly paid and

21

 

performed in full and no commitments of the Subordinated Collateral Agent or the Holders which
would give rise to any Secured Obligations are outstanding.

     8.15. Entire Agreement. This Security Agreement embodies the entire
agreement and understanding between the Grantor and the Subordinated Collateral Agent relating to
the Collateral and supersedes all prior agreements and understandings between the Grantor and the
Subordinated Collateral Agent relating to the Collateral.

     8.16. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS.

     8.17. CONSENT TO JURISDICTION. THE GRANTOR HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO,
ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY
OTHER NOTE DOCUMENT AND THE GRANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE SUBORDINATED COLLATERAL AGENT OR ANY HOLDER TO BRING PROCEEDINGS AGAINST THE GRANTOR
IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE GRANTOR AGAINST THE
SUBORDINATED COLLATERAL AGENT OR ANY HOLDER OR ANY AFFILIATE OF THE SUBORDINATED COLLATERAL AGENT
OR ANY HOLDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS SECURITY AGREEMENT OR ANY OTHER NOTE DOCUMENT SHALL BE BROUGHT ONLY IN A
COURT IN CHICAGO, ILLINOIS.

     8.18. WAIVER OF JURY TRIAL. THE GRANTOR, THE SUBORDINATED COLLATERAL AGENT
AND EACH HOLDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS SECURITY AGREEMENT OR ANY OTHER NOTE DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.

     8.19. Indemnity. The Grantor hereby agrees to indemnify the Subordinated
Collateral Agent and the Holders, and their respective successors, assigns, agents and employees,
from and against any and all liabilities, damages, penalties, suits, costs, and expenses of any
kind and nature (including, without limitation, all expenses of litigation or preparation therefor
whether or not the Subordinated Collateral Agent or any Holder is a party thereto) imposed on,
incurred by or asserted against the Subordinated Collateral Agent or the Holders, or their
respective successors, assigns, agents and employees, in any way relating to or arising out of this
Security Agreement, or the manufacture, purchase, acceptance, rejection, ownership, delivery,
lease, possession, use, operation, condition, sale, return or other disposition of any Collateral
(including, without limitation, latent and other defects, whether or not discoverable by the
Subordinated Collateral Agent or the Holders or the Grantor, and any claim for trademark
infringement).

     8.20. Counterparts. This Security Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and any of the parties
hereto may execute this Security Agreement by signing any such counterpart.

22

 

     8.21. Effect of Changes in SPV Credit Documents. The SPV Credit Documents
may be amended, modified, supplemented, restated, refinanced or extended from time to time (each, a
“change”); provided that, for purposes of this Agreement, no such change shall affect the defined
terms in the SPV Credit Documents as such terms have been incorporated herein by reference in a
manner which impairs or diminishes the Collateral in any material respect. Notwithstanding
anything herein to the contrary, and for the avoidance of doubt, the parties hereto expressly agree
that any conveyance, assignment, reconveyance or reassignment executed in accordance with the
provisions of any such SPV Credit Document shall not be considered to be a change to such SPV
Credit Document.

     8.22. Springing Account Agreement. To the extent the Subordinated Collateral
Agent enters into a springing account control agreement with U.S. Bank National Association
pertaining to Account No. 104757791017 (or such other account as is reasonably acceptable to the
Subordinated Collateral Agent), the Subordinated Collateral Agent will not deliver a written notice
pursuant thereto terminating Grantor’s access to, and granting the Subordinated Collateral Agent
exclusive control over, such account until the occurrence and continuance of an Event Default.

ARTICLE IX

NOTICES

     Except as otherwise specified herein, all notices, requests, demands, consents, instructions
or other communications to or upon the Grantor or Subordinated Collateral Agent under this Security
Agreement shall be given as provided in paragraph 12I of the Purchase Agreement.

ARTICLE X

SUBORDINATED COLLATERAL AGENT

     Prudential Capital Partners II, L.P. has been appointed Subordinated Collateral Agent for the
Purchasers pursuant to the Collateral Agency Agreement. It is expressly understood and agreed by
the parties to this Security Agreement that any authority conferred upon the Subordinated
Collateral Agent hereunder is subject to the terms of the delegation of authority made by the
Purchasers to the Subordinated Collateral Agent pursuant to the Collateral Agency Agreement, and
that the Subordinated Collateral Agent has agreed to act (and any successor Subordinated Collateral
Agent shall act) as such hereunder only on the express conditions contained in the Collateral
Agency Agreement. Any successor Subordinated Collateral Agent appointed pursuant to the Collateral
Agency Agreement shall be entitled to all the rights, interests and benefits of the Subordinated
Collateral Agent hereunder.

ARTICLE XI

STOCK OF BLUESTEM SPV; LIMITATION ON ACTIONS

     11.1 The parties hereto acknowledge that the pledge hereunder of the membership interests (the
“Bluestem SPV Stock”) of Grantor in the Bluestem SPV is (i) junior in priority to the
pledge of the Bluestem SPV Stock to the SPV Secured Parties under the SPV Share Pledge and (ii)
prohibited by the terms of the Receivables Purchase Agreement, unless certain limitations with
respect to the pledge of the Bluestem SPV Stock as set forth herein are observed. Accordingly, in
order to induce the SPV Collateral Agent to permit the pledge of the Bluestem SPV Stock, the
parties hereto agree to the following limitations relating only to the pledge of the Bluestem SPV
Stock and not to any other Pledged Collateral.

     To induce the SPV Collateral Agent to permit the pledge of the Bluestem SPV Stock, the parties
hereto agree to the following limitations:

          (a) Notwithstanding anything to the contrary contained herein:

23

 

               (i) Prior to the date that is one year and one day after all Obligations under (and as defined
in) the SPV Credit Agreement have been paid in full, the Subordinated Collateral Agent, for itself
and for the Holders, agrees that, with respect to the Bluestem SPV Stock, it will not, without the
prior written consent of the SPV Collateral Agent, take any action adverse to the SPV Collateral
Agent or the SPV Secured Parties, including, without limitation, (A) causing the Bluestem SPV to
violate or breach any term or provision in any SPV Credit Document, (B) amending or altering any of
the Bluestem SPV’s organizational documents, (C) causing the Bluestem SPV to incur any debt, other
than, in each case, as may be allowed in the SPV Credit Documents or (D) otherwise take any action
which would compromise or call into question the intended bankruptcy remote structure of the
transactions contemplated by the Receivables Purchase Agreement and the other SPV Credit Documents;
provided, that any termination of the Receivables Purchase Agreement in accordance with the terms
thereof shall not be deemed to be adverse to the interests of the SPV Collateral Agent or the SPV
Secured Parties;

               (ii) Prior to the date on which the Obligations under (and as defined in) the SPV
Credit Documents have been paid in full, in the event that the Subordinated Collateral Agent
receives any payments or funds constituting Receivables Property, the Subordinated Collateral Agent
shall hold such payments or funds in trust for the benefit of the SPV Collateral Agent, and shall
promptly transfer such payments or funds to the SPV Collateral Agent;

               (iii) Prior to the date on which the Obligations under (and as defined in) the SPV Credit Documents have been paid in full,
(A) this Article XI shall not be amended, restated, supplemented or otherwise modified without the
prior written consent of the SPV Collateral Agent and the provisions of this Article XI shall be
contained in any agreement that amends and restates this Security Agreement and (B) the
Subordinated Collateral Agent for itself and for the Holders agrees that no such party shall enter
into any additional agreement that would adversely affect the rights of any SPV Secured Party under
the SPV Credit Agreement set forth in Article XI hereof;

               (iv) Prior to the date that is one year and one day after all Obligations under (and as defined in) the SPV Credit Documents have been paid
in full, neither the Subordinated Collateral Agent nor any Holder shall object to or contest in any
administrative, legal or equitable action or proceeding (including, without limitation, any
insolvency, bankruptcy, receivership, liquidation, reorganization, winding up, readjustment,
composition or other similar proceeding relating to the Grantor or the Bluestem SPV or their
respective property) or object to or contest in any other manner (1) the interests of the Bluestem
SPV and its successors and assigns in any of the assets transferred (or purported to be
transferred) by Grantor to the Bluestem SPV pursuant to the Receivables Purchase Agreement and/or
(2) the interests of the SPV Collateral Agent, and/or any SPV Secured Party in the Receivables
Property or otherwise take any action which would compromise or call into question the intended
bankruptcy remote structure of the transactions contemplated by the SPV Credit Documents. Neither
the Subordinated Collateral Agent nor any Holder shall object to or contest in any manner the
receipt of any payment by the SPV Collateral Agent with respect to the Receivables Property in
accordance with the terms of the SPV Credit Documents; and

               (v) Prior to the date that is ninety-five (95) days after all Obligations under (and as defined in) the SPV Credit Documents have
been paid in full, neither the Subordinated Collateral Agent nor any Holder shall exercise or seek
to exercise any rights or remedies, including any action of foreclosure, with respect to the
Bluestem SPV Stock or institute any action or proceeding with respect to such rights or remedies,
including any action of foreclosure.

     The provisions of this Article XI shall continue to be effective or be reinstated, as the case
may be, if at any time any payment made pursuant to the Receivables Purchase Agreement is rescinded
or must otherwise be returned by the SPV Collateral Agent or any of the lenders upon the
insolvency, bankruptcy or reorganization of the Grantor or the Bluestem SPV or otherwise, all as
though such payment had not been made.

24

 

          (b) The SPV Collateral Agent shall be a third-party beneficiary with respect to this Article
XI.

          (c) The provisions of this Article XI provide for relative rights of the Subordinated
Collateral Agent and the SPV Collateral Agent, respectively, and are not intended for the benefit
of the Grantor or the Bluestem SPV, nor shall such provisions limit or modify the obligations of
the Grantor under the Note Documents or the SPV Credit Documents, respectively.

ARTICLE XII

AMENDMENT AND RESTATEMENT

     This Security Agreement is intended to and does amend and restate the Second Amended Security
Agreement in its entirety and the Liens under the Second Amended Security Agreement shall be
continuing in all respects.

ARTICLE XIII

COLLATERAL HELD BY BANK AGENT

     Notwithstanding any provision to the contrary herein, any Collateral that constitutes Pledged
Collateral that is held by, or required to be delivered to, the Subordinated Collateral Agent
hereunder shall be deemed to be held by, or such requirement shall be deemed to be satisfied by
delivery to, the Bank Agent in accordance with the Intercreditor Agreement.

ARTICLE XIV

INTERCREDITOR AGREEMENT

     Notwithstanding anything herein to the contrary, the lien and security interest in the
Bluestem SPV Stock granted to the Subordinated Collateral Agent, for the benefit of the Holders,
pursuant to this Security Agreement and the exercise of any right or remedy in respect of the
Bluestem SPV Stock by the Subordinated Collateral Agent and the Holders hereunder are subject to
the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency
between a provision of the Intercreditor Agreement and this Security Agreement that relates solely
to the rights or obligations of, or relationships between, the SPV Secured Parties and the
Subordinated Collateral Agent, the provisions of the Intercreditor Agreement shall control.

ARTICLE XV

CONFIRMATION OF GRANT OF SECURITY INTEREST

     The Grantor hereby confirms the grant to the Subordinated Collateral Agent, for the ratable
benefit of the Holders, after giving effect to this Security Agreement, under the Original Security
Agreement, the Amended Security Agreement and the Second Amended Security Agreement.

[Signature Page Follows]

25

 

     IN WITNESS WHEREOF, the Grantor and the Subordinated Collateral Agent have executed
this Security Agreement as of the date first above written.

	 	 	 	 	 
	 	GRANTOR:

BLUESTEM BRANDS, INC.

 	 
	 	By:  	/s/ [ILLEGIBLE]
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	SUBORDINATED COLLATERAL AGENT:

PRUDENTIAL CAPITAL PARTNERS II, L.P., 
       as
Subordinated Collateral Agent

By: Stetson Street Partners, L.P., its general partner

 	 
	 	By:  	 	 
	 	 	     Vice President 	 
	 	 	 	 
	 

[Signature Page to Third Amended and Restated Security Agreement]

 

 

     IN WITNESS WHEREOF, the Grantor and the Subordinated Collateral Agent have executed this
Security Agreement as of the date first above written.

	 	 	 	 	 
	 	GRANTOR:

BLUESTEM BRANDS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	SUBORDINATED COLLATERAL AGENT:

PRUDENTIAL CAPITAL PARTNERS II, L.P., 
      as
Subordinated Collateral Agent

By: Stetson Street Partners, L.P., its general partner

 	 
	 	By:  	[ILLEGIBLE]	 
	 	 	     Vice President 	 
	 	 	 	 
	 

[Signature Page to Third Amended and Restated Security Agreement]

 

 

EXHIBIT A

(See Sections 3.2, 3.3, 3.4, 3.9 and 9.1 of Security Agreement)

GRANTOR’S INFORMATION AND COLLATERAL LOCATIONS

	I.	 	Name of Grantor: Bluestem Brands, Inc.
	 
	II.	 	State of Incorporation or Organization: Delaware
	 
	III.	 	Type of Entity: Corporation
	 
	IV.	 	Organizational Number assigned by State of Incorporation or Organization: 3567832 
V. Federal
Employer Identification Number: 61—1425164 

VI. Place of Business (if it has only one) or Chief
Executive Office (if more than one place of business) and Mailing Address:
	 
	 	 	6509 Flying Cloud Drive 

Eden Prairie, MN 55344

Attention: Chief Financial Officer
	 
	VII.	 	Locations of Collateral:

	 	(a)	 	Properties Owned by the Grantor:
	 
	 	 	 	None.
	 
	 	(b)	 	Properties Leased by the Grantor (Include Landlord’s Name):

	 	 	 	 	 
	 	 	Address	 	Landlord
	1. Warehouse

	 	6250 Ridgewood Road

St. Cloud, MN
	 	Welsh Fingerhut MN,

LLC
	 
	 	 	 	 
	2. Returns Center

	 	20 McLeland Road

St. Cloud, MN
	 	Albo, LLC
	 
	 	 	 	 
	3. Data Center

	 	5480 Feltl Road

Minnetonka, MN
	 	Time Warner Telecom
Inc.
	 
	 	 	 	 
	4. Secondary Data
Center

	 	511 11th Avenue South

Minneapolis, MN
	 	Time Warner Telecom,
Inc.
	 
	 	 	 	 
	5. Corporate
Headquarters

	 	6509 Flying Cloud Drive

Eden Prairie, MN
	 	Superior Eden Prairie

Holdings LLC
	 
	 	 	 	 
	6. Call Center

	 	11 McLeland Road
St. Cloud, MN
	 	Sundance III, LLC

 

 

	(c)	 	Public Warehouses or other Locations pursuant to Bailment or Consignment Arrangements
(include name of Warehouse Operator or other Bailee or Consignee):
	 
	 	 	None.

 

 

EXHIBIT B

(See Section 3.5 of Security Agreement)

DEPOSIT ACCOUNTS

BLUESTEM BANK ACCOUNTS

	 	 	 	 	 	 	 	 	 
	Bank Name	 	Account Number	 	Reason for Account	 	Source of Funding
	DEPOSIT
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	US Bank

	 	 	104757791017	 	 	Main operating account
	 	Main operating account. No funds flow from this account to
JPM unless significant amount of excess cash. If excess cash,
then line would be paid down from this account.
	 
	 	 	 	 	 	 	 	 
	US Bank

	 	 	104774082853	 	 	“Merchant Deposit Account” Restricted account used for
payments on sales/order
	 	Payments into this account are related to non-CIT credit sales
(i.e., merchant credit cards). Cash is swept from this account
on a periodic basis by JPM.
	 
	 	 	 	 	 	 	 	 
	US Bank

	 	 	152100019321	 	 	Operating Controlled Disbursement
	 	Check clearing account
	 
	 	 	 	 	 	 	 	 
	US Bank

	 	 	152100019313	 	 	Health Care Reimbursement Controlled Disbursement
	 	Check clearing account
	 
	 	 	 	 	 	 	 	 
	US Bank

	 	 	152100019263	 	 	A/R Refunds Controlled Disbursement
	 	Check clearing account
	 
	 	 	 	 	 	 	 	 
	US Bank

	 	 	152100019644	 	 	Gettington Refunds Account Controlled Disbursement
	 	Check clearing account
	 
	 	 	 	 	 	 	 	 
	US Bank

	 	 	104757791504	 	 	AR Refunds Account Controlled Disbursement
	 	Check clearing account
	 
	 	 	 	 	 	 	 	 
	JP Morgan Chase

	 	 	758660021	 	 	“Cash Collateral Account” Inventory loan account —
Collection account
	 	N/A
	 
	 	 	 	 	 	 	 	 
	JP Morgan Chase

	 	 	737302588	 	 	Funding account — Money is swept from this account to US
Bank operating account — Funding Account
	 	N/A
	 
	 	 	 	 	 	 	 	 
	MetaBank

	 	 	1700015966	 	 	Cash collateral account
	 	Cash collateral account related to MetaBank Agreements
	 
	 	 	 	 	 	 	 	 
	WebBank

	 	 	08240462	 	 	Cash collateral account
	 	Cash collateral account related to WebBank Agreements

 

 

EXHIBIT C

(See Section 3.7 of Security Agreement)

LETTER OF CREDIT RIGHTS

None.

CHATTEL PAPER

None.

 

 

EXHIBIT D

(See Section 3.12 of Security Agreement and Definition of “Pledged Collateral”)

LIST OF PLEDGED COLLATERAL, SECURITIES AND OTHER INVESTMENT PROPERTY

STOCKS

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Percentage of
	 	 	Certificate	 	Number of	 	Class of	 	Outstanding
	Issuer	 	Number(s)	 	Shares	 	Stock	 	Shares
	Fingerhut Receivables I, LLC

	 	 	2	 	 	N/A
	 	Limited

Liability

Company

Interests
	 	 	100	%

 

 

EXHIBIT E

(See Section 3.1 of Security Agreement)

OFFICES IN WHICH FINANCING STATEMENTS HAVE BEEN FILED

Delaware Secretary of State

 

 

EXHIBIT F

(See Section 3.8 of Security Agreement)

COMMERCIAL TORT CLAIMS

None.

 

 

EXHIBIT G

(See Section 3.13 of Security Agreement)

SECURITIES ACCOUNTS

None.

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