Document:

Exhibit 10.3

	
 

	

	
 

	
SECURITY AGREEMENT

	
 

	
by

	
 

	
FOOT LOCKER, INC.

	
as Borrower

	
 

	
and

	
 

	
THE GUARANTORS PARTY HERETO

	
FROM TIME TO TIME

	
 

	
and

	
 

	
BANK OF AMERICA, N.A.,

	
as Collateral Agent

	
 

	
Dated as of March 20, 2009

	
 

	

	
 

TABLE OF CONTENTS

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Page

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
PREAMBLE

	
 

	
 

	
 

	
1

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
RECITALS

	
 

	
 

	
 

	
1

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
AGREEMENT

	
 

	
 

	
 

	
2

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE I

	
 

	
 

	
 

	
 

	
 

	
 

	
DEFINITIONS AND INTERPRETATION

	
 

	
 

	
 

	
 

	
 

	
 

	
SECTION 1.1.

	
 

	
Definitions

	
 

	
2

	
 

	
SECTION 1.2.

	
 

	
Interpretation

	
 

	
7

	
 

	
SECTION 1.3.

	
 

	
Due
 Diligence Certificate

	
 

	
7

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE II

	
 

	
 

	
 

	
 

	
 

	
 

	
GRANT OF SECURITY AND SECURED OBLIGATIONS

	
 

	
 

	
 

	
 

	
 

	
 

	
SECTION 2.1.

	
 

	
Pledge

	
 

	
7

	
 

	
SECTION 2.2.

	
 

	
Secured
 Obligations

	
 

	
8

	
 

	
SECTION 2.3.

	
 

	
Security
 Interest

	
 

	
8

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE III

	
 

	
 

	
 

	
 

	
 

	
 

	
PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;

	
USE OF PLEDGED COLLATERAL

	
 

	
 

	
 

	
 

	
 

	
 

	
SECTION 3.1.

	
 

	
Delivery of Pledged Securities and
 Intercompany Notes

	
 

	
9

	
 

	
SECTION 3.2.

	
 

	
Perfection of Uncertificated Securities
 Collateral

	
 

	
9

	
 

	
SECTION 3.3.

	
 

	
Financing Statements and Other Filings;
 Maintenance of Perfected Security Interest

	
 

	
10

	
 

	
SECTION 3.4.

	
 

	
Other Actions

	
 

	
10

	
 

	
SECTION 3.5.

	
 

	
Joinder of Additional Borrowers or
 Guarantors

	
 

	
13

	
 

	
SECTION 3.6.

	
 

	
Supplements; Further Assurances

	
 

	
14

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE IV

	
 

	
 

	
 

	
 

	
 

	
 

	
REPRESENTATIONS,
 WARRANTIES AND COVENANTS

	
 

	
SECTION 4.1.

	
 

	
Title

	
 

	
14

	
 

-i-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Page

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
SECTION 4.2.

	
 

	
Limitation on Liens; Defense of Claims;
 Transferability of Pledged Collateral

	
 

	
14

	
 

	
SECTION 4.3.

	
 

	
Chief Executive Office; Change of Name;
 Jurisdiction of Organization

	
 

	
15

	
 

	
SECTION 4.4.

	
 

	
Due Authorization and Issuance

	
 

	
15

	
 

	
SECTION 4.5.

	
 

	
No Conflicts, Consents, etc.

	
 

	
15

	
 

	
SECTION 4.6.

	
 

	
Pledged Collateral

	
 

	
16

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE V

	
 

	
 

	
 

	
 

	
 

	
 

	
CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL

	
 

	
 

	
 

	
 

	
 

	
 

	
SECTION 5.1.

	
 

	
Pledge of Additional Securities Collateral

	
 

	
16

	
 

	
SECTION 5.2.

	
 

	
Voting Rights; Distributions; Etc.

	
 

	
16

	
 

	
SECTION 5.3.

	
 

	
Defaults, Etc.

	
 

	
18

	
 

	
SECTION 5.4.

	
 

	
Certain Agreements of Pledgors As Issuers
 and Holders of Equity Interests

	
 

	
18

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE VI

	
 

	
 

	
 

	
 

	
 

	
 

	
CERTAIN PROVISIONS CONCERNING

	
INTELLECTUAL PROPERTY

	
 

	
 

	
 

	
 

	
 

	
 

	
SECTION 6.1.

	
 

	
Grant of License

	
 

	
19

	
 

	
SECTION 6.2.

	
 

	
No Violations

	
 

	
19

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE VII

	
 

	
 

	
 

	
 

	
 

	
 

	
CERTAIN PROVISIONS CONCERNING ACCOUNTS

	
 

	
 

	
 

	
 

	
 

	
 

	
SECTION 7.1.

	
 

	
Special Representations and Warranties

	
 

	
19

	
 

	
SECTION 7.2.

	
 

	
Maintenance of Records

	
 

	
19

	
 

	
SECTION 7.3.

	
 

	
Legend

	
 

	
20

	
 

	
SECTION 7.4.

	
 

	
Modification of Terms, Etc.

	
 

	
20

	
 

	
SECTION 7.5.

	
 

	
Collection

	
 

	
20

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE VIII

	
 

	
 

	
 

	
 

	
 

	
 

	
REMEDIES

	
 

	
 

	
 

	
 

	
 

	
 

	
SECTION 8.1.

	
 

	
Remedies

	
 

	
20

	
 

	
SECTION 8.2.

	
 

	
Notice of Sale

	
 

	
22

	
 

	
SECTION 8.3.

	
 

	
Waiver of Notice and Claims

	
 

	
22

	
 

-ii-

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Page

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
SECTION 8.4.

	
 

	
Certain Sales of Pledged Collateral

	
 

	
23

	
 

	
SECTION 8.5.

	
 

	
No Waiver; Cumulative Remedies

	
 

	
24

	
 

	
SECTION 8.6.

	
 

	
Application of Proceeds

	
 

	
24

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE IX

	
 

	
 

	
 

	
 

	
 

	
 

	
MISCELLANEOUS

	
 

	
 

	
 

	
 

	
 

	
 

	
SECTION 9.1.

	
 

	
Concerning Collateral Agent

	
 

	
25

	
 

	
SECTION 9.2.

	
 

	
Collateral Agent May Perform; Collateral
 Agent Appointed Attorney-in-Fact

	
 

	
26

	
 

	
SECTION 9.3.

	
 

	
Continuing Security Interest; Assignment

	
 

	
26

	
 

	
SECTION 9.4.

	
 

	
Termination; Release

	
 

	
27

	
 

	
SECTION 9.5.

	
 

	
Modification in Writing

	
 

	
28

	
 

	
SECTION 9.6.

	
 

	
Notices

	
 

	
28

	
 

	
SECTION 9.7.

	
 

	
GOVERNING LAW

	
 

	
28

	
 

	
SECTION 9.8.

	
 

	
CONSENT TO JURISDICTION; SERVICE OF
 PROCESS; WAIVER OF JURY TRIAL

	
 

	
28

	
 

	
SECTION 9.9.

	
 

	
Severability

	
 

	
29

	
 

	
SECTION 9.10.

	
 

	
Execution in Counterparts

	
 

	
30

	
 

	
SECTION 9.11.

	
 

	
No Credit for Payment of Taxes or
 Imposition

	
 

	
30

	
 

	
SECTION 9.12.

	
 

	
No Claims Against Collateral Agent

	
 

	
30

	
 

	
SECTION 9.13.

	
 

	
No Release

	
 

	
30

	
 

	
SECTION 9.14.

	
 

	
Obligations Absolute

	
 

	
30

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
SIGNATURES

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
SCHEDULE I

	
 

	
Intercompany Notes

	
 

	
 

	
 

	
SCHEDULE II

	
 

	
Filings, Registrations and Recordings

	
 

	
 

	
 

	
SCHEDULE III

	
 

	
Initial Pledged Interests and Initial
 Pledged Shares

	
 

	
 

	
 

	
SCHEDULE IV

	
 

	
Instruments and Tangible Chattel Paper

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
EXHIBIT 1

	
 

	
Form of Securities Pledge Amendment

	
 

	
 

	
 

-iii-

SECURITY AGREEMENT

                    SECURITY
AGREEMENT dated as of March 20, 2009 (as amended, restated, amended and
restated, supplemented or otherwise modified and in effect from time to time,
this “Agreement”) made by (i) FOOT LOCKER, INC., a New York corporation
(the “Borrower”), (ii) THE GUARANTORS LISTED ON THE SIGNATURE PAGES
HERETO (the “Original Guarantors”) OR FROM TIME TO TIME PARTY HERETO BY
EXECUTION OF A JOINDER AGREEMENT (the “Additional Guarantors,” and
together with the Original Guarantors, the “Guarantors”) (the Borrower,
together with the Guarantors, and together with any successors, the “Pledgors,”
and each, a “Pledgor”), in favor of BANK OF AMERICA, N.A., having an
office at 100 Federal Street, 9th Floor, Boston, Massachusetts 02110, in its
capacity as collateral agent for the Credit Parties (as defined in the Credit
Agreement defined below) pursuant to the Credit Agreement (as hereinafter
defined) (in such capacity and together with any successors in such capacity,
the “Collateral Agent”). 

RECITALS:

                    A.
The Pledgors, the Collateral Agent, Bank of America, N.A., as  Administrative
Agent, the Lenders party thereto, and Bank of America, N.A., as L/C Issuer and
as Swing Line Lender, among others, have, in connection with the execution and
delivery of this Agreement, entered into that certain Credit Agreement dated as
of the date hereof (as amended, restated, amended and restated supplemented or
otherwise modified and in effect from time to time, the “Credit Agreement”).

                    B.
Each Original Guarantor has, pursuant to that certain Guaranty dated as of the
date hereof (as amended, restated, amended and restated, supplemented or
otherwise modified from time to time, the “Guaranty”), among other things,
unconditionally guaranteed the obligations of the Borrower under the Credit
Agreement and the other Loan Documents (as defined in the Credit Agreement)
(the “Guaranteed Obligations”).  

                    C.
The Borrower and each Original Guarantor will receive substantial benefits from
the execution, delivery and performance of the obligations under the Credit
Agreement, the Guaranty and the other Loan Documents and each is, therefore,
willing to enter into this Agreement. 

                    D.
Each Pledgor is or, as to Pledged Collateral (as hereinafter defined) acquired
by such Pledgor after the date hereof, will be the legal and/or beneficial
owner of the Pledged Collateral pledged by it hereunder. 

                    F.
This Agreement is given by each Pledgor in favor of the Collateral Agent for
the benefit of the Credit Parties to secure the payment and performance of all
of the Secured Obligations (as hereinafter defined). 

                    G.
It is a condition to the obligations of the Lenders to make the Loans under the
Credit Agreement and a condition to the L/C Issuer issuing Letters of Credit
(as such term is 

defined in the
Credit Agreement) under the Credit Agreement that each Pledgor execute and
deliver the applicable Loan Documents, including this Agreement. 

AGREEMENT: 

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

ARTICLE I

DEFINITIONS AND INTERPRETATION

                    SECTION
1.1. Definitions. 

                    (a)
Unless otherwise defined herein or in the Credit Agreement, capitalized terms
used herein that are defined in the UCC shall have the meanings assigned to
them in the UCC. 

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

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

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

                    “Additional
Pledged Interests” shall mean, collectively, with respect to each Pledgor,
(i) all Equity Interests of whatever class of any issuer of Initial Pledged
Interests or any interest in any such issuer, together with all rights,
privileges, authority and powers of such Pledgor relating to such Equity
Interests in each such issuer or under the Organization Documents of any such
issuer, and the certificates, instruments and agreements representing such
Equity Interests and any and all interest of such Pledgor in the entries on the
books of any securities intermediary pertaining to such Equity Interests from
time to time acquired by such Pledgor in any manner and (ii) all Equity
Interests, as applicable, of each Unrestricted Subsidiary (to the extent such
Unrestricted Subsidiary is not a corporation) hereafter acquired or formed by
such Pledgor and all Equity Interests of whatever class of such Unrestricted
Subsidiary, together with all rights, privileges, authority and powers of such
Pledgor relating to such interests or under the Organization Documents of any
such Unrestricted Subsidiary, and the certificates, instruments and agreements
representing such Equity Interests and any and all interest of such Pledgor in
the entries on the books of any securities intermediary pertaining to such
Equity Interests, from time to time acquired by such Pledgor in any manner.
Notwithstanding anything 

2

to the
contrary contained herein, the term “Additional Pledged Interests” shall not
include any Excluded Property. 

                    “Additional
Pledged Shares” shall mean, collectively, with respect to each Pledgor, (i)
all options, warrants, rights, agreements, additional shares of capital stock
of whatever class of any issuer of the Initial Pledged Shares or any other
Equity Interest in any such issuer, together with all rights, privileges,
authority and powers of such Pledgor relating to such Equity Interests issued
by any such issuer under the Organization Documents of any such issuer, and the
certificates, instruments and agreements representing such Equity Interests and
any and all interest of such Pledgor in the entries on the books of any
securities intermediary pertaining to such Equity Interests, from time to time
acquired by such Pledgor in any manner and (ii) all the issued and outstanding
shares of capital stock of each Unrestricted Subsidiary (to the extent such
Unrestricted Subsidiary is a corporation) hereafter acquired or formed by such
Pledgor and all options, warrants, rights, agreements or additional shares of
capital stock of whatever class of such Unrestricted Subsidiary, together with
all rights, privileges, authority and powers of such Pledgor relating to such
shares or under the Organization Documents of such Unrestricted Subsidiary, and
the certificates, instruments and agreements representing such shares and any
and all interest of such Pledgor in the entries on the books of any securities
intermediary pertaining to such shares, from time to time acquired by such
Pledgor in any manner. Notwithstanding anything to the contrary contained
herein, the term “Additional Pledged Shares” shall not include any Excluded
Property. 

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

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

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

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

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

                    “Control
Agreement” shall mean, with respect to a Securities Account or Commodities
Account established by a Pledgor, an agreement, in form and substance
reasonably 

3

satisfactory
to the Collateral Agent, establishing Control of such Securities Account or
Commodities Account by the Collateral Agent. 

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

                    “Distributions”
shall mean, collectively, with respect to each Pledgor, all dividends, cash,
options, warrants, rights, instruments, distributions, returns of capital or
principal, income, interest, profits and other property, interests (debt or
equity) or proceeds, including as a result of a split, revision,
reclassification or other like change of the Pledged Securities, from time to
time received, receivable or otherwise distributed to such Pledgor in respect
of or in exchange for any or all of the Pledged Securities or Intercompany Notes.

                    “Due
Diligence Certificate” shall mean that certain due diligence certificate
dated as of the date hereof, executed and delivered by the Borrower in favor of
the Collateral Agent for the benefit of the Credit Parties, and each other Due
Diligence Certificate (which shall be substantially in the form of such due
diligence certificate dated the date hereof or otherwise in form and substance
reasonably acceptable to the Collateral Agent) executed and delivered by the
applicable Guarantor in favor of the Collateral Agent for the benefit of the
Credit Parties contemporaneously with the execution and delivery of each
Joinder Agreement executed in accordance with Section 6.12 of the Credit
Agreement, in each case, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the Credit Agreement. 

                    “Excluded
Property” shall mean, with respect to any Pledgor, (i) any lease, contract
or agreement to which such Pledgor is a party, any of its rights or interests
thereunder or any assets subject thereto or any property rights of such Pledgor
of any nature if the grant of such security interest shall constitute or result
in (A) the abandonment, invalidation or unenforceability of any right, title or
interest of such Pledgor therein or result in such Pledgor’s loss of use of
such asset or (B) in a breach or termination pursuant to the terms of, or a
default under, any such lease, contract, property rights or agreement (other
than to the extent that any such term would be rendered ineffective pursuant to
Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or
provisions) of any relevant jurisdiction or any other applicable law (including
the Bankruptcy Code) or principles of equity); (ii) any lease, contract,
property rights or agreement to which such Pledgor is a party, any of its
rights or interests thereunder or any assets subject thereto to the extent that
any applicable law prohibits the creation of a security interest thereon (other
than to the extent that any such term would be rendered ineffective pursuant to
Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or
provisions) of any relevant jurisdiction or any other applicable Law or
principles of equity); (iii) any voting Equity Interests of a Subsidiary that
is a CFC in excess of 65% of the voting Equity Interests of such Subsidiary;
(iv) any of Pledgor’s right, title, and interest in Intellectual Property and
rights to sue for past, present or future infringements thereof; and (v) any
Equity Interests of any Restricted Subsidiary (as such term is defined in the
Indenture); provided that in each case described in clauses (i), (ii),
and (v) of this definition, such 

4

property shall
constitute “Excluded Property” only to the extent and for so long as such
lease, contract, property right or other agreement or applicable Law or
Organization Document validly prohibits the creation of a Lien on such property
in favor of the Collateral Agent (or, in the case of the property described in
clause (v) of this definition, so long as any such Person is a Restricted
Subsidiary (as such term is defined in the Indenture)) and, upon the
termination of such prohibition (howsoever occurring) (or, in the case of the
property described in clause (v) of this definition, upon such Person’s ceasing
to be a Restricted Subsidiary (as such term is defined in the Indenture)), such
property shall cease to constitute “Excluded Property” and provided further that all Proceeds, substitutions or replacements of any Excluded
Property described in clauses (i) through (v) (unless such Proceeds,
substitutions or replacements would constitute Excluded Property) shall
constitute Pledged Collateral hereunder.  

                    “General
Intangibles” shall mean, collectively, with respect to each Pledgor, all
“general intangibles,” as such term is defined in the UCC, of such Pledgor and,
in any event, shall include, without limitation, (i) all of such Pledgor’s
rights, title and interest in, to and under all insurance policies and
Contracts, (ii) all know-how and warranties relating to any of the Pledged
Collateral, (iii) any and all other rights, claims, choses-in-action and causes
of action of such Pledgor against any other Person and the benefits of any and
all collateral or other security given by any other Person in connection
therewith, (iv) all guarantees, endorsements and indemnifications on, or of,
any of the Pledged Collateral, (v) all lists, books, records, correspondence,
ledgers, print-outs, files (whether in printed form or stored electronically),
tapes and other papers or materials containing information relating to any of
the Pledged Collateral, including, without limitation, all customer or tenant
lists, identification of suppliers, data, plans, blueprints, specifications,
designs, drawings, appraisals, recorded knowledge, surveys, studies,
engineering reports, test reports, manuals, standards, processing standards,
performance standards, catalogs, research data, computer and automatic
machinery software and programs and the like, field repair data, accounting
information pertaining to such Pledgor’s operations or any of the Pledged
Collateral and all media in which or on which any of the information or knowledge
or data or records may be recorded or stored and all computer programs used for
the compilation or printout of such information, knowledge, records or data,
(vi) all licenses, consents, permits, variances, certifications, authorizations
and approvals, however characterized, of any Governmental Authority (or any
Person acting on behalf of a Governmental Authority) now or hereafter acquired
or held by such Pledgor pertaining to operations now or hereafter conducted by
such Pledgor or any of the Pledged Collateral including, without limitation,
building permits, certificates of occupancy, environmental certificates,
industrial permits or licenses and certificates of operation and (vii) all
rights to reserves, deferred payments, deposits, refunds, indemnification of
claims to the extent the foregoing relate to any Pledged Collateral and claims
for tax or other refunds against any Governmental Authority relating to any
Pledged Collateral. 

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

5

                    “Initial
Pledged Interests” shall mean, with respect to each Pledgor, all Equity
Interests (other than in a corporation), as applicable, of each issuer which is
an Unrestricted Subsidiary and described in Schedule III hereof,
together with all rights, privileges, authority and powers of such Pledgor in
and to each such issuer or under the Organization Documents of each such
issuer, and the certificates, instruments and agreements representing such
Equity Interests and any and all interest of such Pledgor in the entries on the
books of any securities intermediary pertaining to any of the foregoing.
Notwithstanding anything to the contrary contained herein, the term “Initial
Pledged Interests” shall not include any Excluded Property. 

                    “Initial
Pledged Shares” shall mean, collectively, with respect to each Pledgor, the
issued and outstanding shares of capital stock of each issuer which is an
Unrestricted Subsidiary and described in Schedule III hereof, together with all
rights, privileges, authority and powers of such Pledgor relating to such
interests in each such issuer or under the Organization Documents of each such
issuer, and the certificates, instruments and agreements representing such
shares of capital stock and any and all interest of such Pledgor in the entries
on the books of any securities intermediary pertaining to the Initial Pledged
Shares. Notwithstanding anything to the contrary contained herein, the term
“Initial Pledged Shares” shall not include any Excluded Property.  

                    “Instruments”
shall mean, collectively, with respect to each Pledgor, all “instruments,” as
such term is defined in Article 9 of the UCC, and shall include, without
limitation, all promissory notes, drafts, bills of exchange or acceptances. 

                    “Intercompany
Notes” shall mean, with respect to each Pledgor, all intercompany notes
described on Schedule I hereto and all promissory notes hereafter
acquired by such Pledgor evidencing loans made by such Pledgor to any other
Pledgor or any Subsidiary of any Pledgor, all certificates or instruments
evidencing such intercompany notes, and all amendments, restatements,
supplements, extensions, renewals, replacements or modifications thereof to the
extent not prohibited by the terms of the Credit Agreement, in each case to the
extent not constituting Excluded Property. 

                    “Letter
of Credit” shall mean “Letter of Credit” as defined in Section 5-102(a)(10)
of the UCC. 

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

                    “Pledged
Interests” shall mean, collectively, the Initial Pledged Interests and the
Additional Pledged Interests. 

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

                    “Pledged
Shares” shall mean, collectively, the Initial Pledged Shares and the
Additional Pledged Shares. 

6

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

                    “Secured
Obligations” shall mean the Obligations (as defined in the Credit
Agreement), the Other Liabilities (as defined in the Credit Agreement) and the
Guaranteed Obligations; provided, however, that (x) Other Liabilities
shall be Secured Obligations solely to the extent that there is sufficient
Pledged Collateral following satisfaction of the Obligations, and (y) Other
Liabilities shall be Secured Obligations solely to the extent that, and for so
long as, the Obligations are secured and guaranteed. 

                    “Securities
Collateral” shall mean, collectively, the Pledged Securities, the
Intercompany Notes and the Distributions. 

                    “Unrestricted
Subsidiary” shall mean any Subsidiary that is not a Restricted Subsidiary
(as such term is defined in the Indenture). 

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

                    SECTION
1.3. Due Diligence Certificate. The Collateral Agent and each Pledgor
agree that the Due Diligence Certificate and all descriptions of Pledged
Collateral, schedules, amendments and supplements thereto are and shall at all
times remain a part of this Agreement. 

ARTICLE II

GRANT OF SECURITY AND SECURED OBLIGATIONS

                    SECTION
2.1. Pledge. As collateral security for the payment and performance in
full of all the Secured Obligations, each Pledgor hereby pledges and grants to
the Collateral Agent for its benefit and for the benefit of the other Credit
Parties, a lien on and security interest in and to all of the right, title and
interest of such Pledgor in, to and under the following personal property and
interests in property, wherever located, and whether now existing or hereafter
arising or acquired from time to time (collectively, the “Pledged Collateral”):

	
 

	
 

	
 

	
 

	
(i)

	
all
 Accounts; 

	
 

	
 

	
 

	
 

	
(ii)

	
all
 Equipment, Goods, Inventory and Fixtures; 

	
 

	
 

	
 

	
 

	
(iii)

	
all
 Documents, Instruments and Chattel Paper; 

	
 

	
 

	
 

	
 

	
(iv)

	
all Letters
 of Credit and Letter-of-Credit Rights; 

	
 

	
 

	
 

	
 

	
(v)

	
all
 Securities Collateral; 

7

	
 

	
 

	
 

	
 

	
(vi)

	
all
 Investment Property; 

	
 

	
 

	
 

	
 

	
(vii)

	
the
 Commercial Tort Claims described in Section V of the Due Diligence
 Certificate; 

	
 

	
 

	
 

	
 

	
(viii)

	
all General
 Intangibles; 

	
 

	
 

	
 

	
 

	
(ix)

	
all Deposit
 Accounts; 

	
 

	
 

	
 

	
 

	
(x)

	
all
 Supporting Obligations; 

	
 

	
 

	
 

	
 

	
(xi)

	
all books
 and records relating to any of the Pledged Collateral; and 

	
 

	
 

	
 

	
 

	
(xii)

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

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

                    The
Pledgors shall from time to time, at the reasonable request of the Collateral
Agent after the occurrence of an Event of Default give written notice to the
Collateral Agent identifying in reasonable detail the Excluded Property and
shall provide to the Collateral Agent such other information regarding the
Excluded Property as the Collateral Agent may reasonably request. 

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

                    SECTION
2.3. Security Interest. (a) Each Pledgor hereby irrevocably authorizes
the Collateral Agent at any time and from time to time to authenticate and file
in any relevant jurisdiction any initial financing statements (including
fixture filings) and amendments thereto that contain the information required
by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for
the filing of any financing statement or amendment relating to the Pledged
Collateral, including, without limitation, (i) whether such Pledgor is an
organization, the type of organization and any organizational identification
number issued to such Pledgor, (ii) any financing or continuation statements or
other documents without the signature of such Pledgor where permitted by law,
including, without limitation, the filing of a financing statement describing
the Pledged Collateral as “all assets of the debtor, wherever located, whether
now 

8

owned or
hereafter acquired or arising,” or words of similar import, and (iii) in the
case of a financing statement filed as a fixture filing or covering Pledged
Collateral constituting minerals or the like to be extracted or timber to be
cut, a sufficient description of the real property to which such Pledged
Collateral relates. Each Pledgor agrees to provide all information described in
clause (i) or (iii) of the immediately preceding sentence to the Collateral
Agent promptly upon request. 

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

ARTICLE III

PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES; 

USE OF PLEDGED COLLATERAL

                    SECTION
3.1. Delivery of Pledged Securities and Intercompany Notes. Each Pledgor
represents and warrants that all certificates or instruments representing or
evidencing Pledged Securities or Intercompany Notes in existence on the date
hereof have been delivered to the Collateral Agent in suitable form for
transfer by delivery or accompanied by duly executed instruments of transfer or
assignment in blank and that the Collateral Agent has a perfected first
priority security interest therein. Each Pledgor hereby agrees that all
certificates or instruments representing or evidencing Pledged Securities or
Intercompany Notes acquired by such Pledgor after the date hereof, shall, in
the manner required by Section 6.12 of the Credit Agreement, be delivered to
and held by or on behalf of the Collateral Agent pursuant hereto. All
certificated Securities Collateral shall be in suitable form for transfer by
delivery or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance reasonably satisfactory to the
Collateral Agent. The Collateral Agent shall have the right, at any time upon
the occurrence and during the continuance of any Event of Default, to endorse,
assign or otherwise transfer to or to register in the name of the Collateral
Agent or any of its nominees or endorse for negotiation any or all of the
Pledged Securities and Intercompany Notes, without any indication that such
Pledged Securities and Intercompany Notes are subject to the security interest
hereunder. In addition, the Collateral Agent shall have the right with written
notice to exchange certificates representing or evidencing Pledged Securities
or Intercompany Notes for certificates of smaller or larger denominations. 

                    SECTION
3.2. Perfection of Uncertificated Securities Collateral. Each Pledgor
represents and warrants that the Collateral Agent has a perfected first
priority security interest in all uncertificated Pledged Securities pledged by
it hereunder that is in existence on the date hereof and that the applicable
Organization Documents do not require the consent of the other shareholders,
members, partners or other Person to permit the Collateral Agent or its
designee to be substituted for the applicable Pledgor as a shareholder, member,
partner or other equity 

9

owner, as
applicable, thereto. Each Pledgor hereby agrees that if any of the Pledged
Securities are at any time not evidenced by certificates of ownership, then
each applicable Pledgor shall, to the extent permitted by applicable Law and
upon the request of the Collateral Agent, cause such pledge to be recorded on
the equityholder register or the books of the issuer, execute customary pledge
forms or other documents necessary or reasonably requested to complete the
pledge and give the Collateral Agent the right to transfer such Pledged
Securities under the terms hereof. 

                    SECTION
3.3. Financing Statements and Other Filings; Maintenance of Perfected
Security Interest. Each Pledgor represents and warrants that the only
filings, registrations and recordings necessary and appropriate to create,
preserve, protect, publish notice of and perfect the security interest granted
by each Pledgor to the Collateral Agent (for the benefit of the Credit Parties)
pursuant to this Agreement in respect of the Pledged Collateral in which the
security interest may be perfected by filing, recording or registration in the
United States (or any political subdivision thereof) and its territories and
possessions are listed on Schedule II hereto. Each Pledgor represents
and warrants that all such filings, registrations and recordings have been
delivered to the Collateral Agent in completed and, to the extent necessary or
appropriate, duly executed form for filing in each governmental, municipal or
other office specified in Schedule II. Each Pledgor agrees that at the
sole cost and expense of the Pledgors, (i) to the extent required by this
Agreement or the Credit Agreement, such Pledgor will maintain the security
interest created by this Agreement in the Pledged Collateral as a perfected
first priority (subject only to Permitted Encumbrances having priority under
applicable Law) security interest and shall defend such security interest
against the claims and demands of all Persons (other than with respect to
Permitted Encumbrances), and (ii) to the extent required by this Agreement or
the Credit Agreement, at any time and from time to time, upon the written request
of the Collateral Agent, such Pledgor shall promptly and duly execute and
deliver, and file and have recorded, such further instruments and documents and
take such further action as the Collateral Agent may reasonably deem necessary
for the purpose of obtaining or preserving the full benefits of this Agreement
and the rights and powers herein granted, including the filing of any financing
statements, continuation statements and other documents (including this
Agreement) under the UCC (or other applicable Laws) in effect in any
jurisdiction with respect to the security interest created hereby and the
execution and delivery of Blocked Account Agreements, all in form reasonably
satisfactory to the Collateral Agent and in such offices wherever required by
applicable Law to perfect, continue and maintain a valid, enforceable, first
priority (subject only to Permitted Encumbrances having priority under
applicable Law) security interest in the Pledged Collateral as provided herein
and to preserve the other rights and interests granted to the Collateral Agent
hereunder, as against third parties (other than with respect to Permitted
Encumbrances), with respect to the Pledged Collateral. 

                    SECTION
3.4. Other Actions. In order to further insure the attachment,
perfection and priority of, and the ability of the Collateral Agent to enforce,
the Collateral Agent’s security interest in the Pledged Collateral, each
Pledgor represents, warrants and agrees, in each case at such Pledgor’s own
expense, with respect to the following Pledged Collateral that: 

10

	
 

	
 

	
 

	
          (a)
Instruments and Tangible Chattel Paper. As of the date hereof (i) no
amount payable under or in connection with any of the Pledged Collateral is
evidenced by any Instrument or Tangible Chattel Paper other than such
Instruments and Tangible Chattel Paper listed in Schedule IV hereof and (ii)
each Instrument and each item of Tangible Chattel Paper listed in Schedule IV
hereof, to the extent requested by the Collateral Agent, has been properly
endorsed, assigned and delivered to the Collateral Agent, accompanied by
instruments of transfer or assignment duly executed in blank. If any amount
payable under or in connection with any of the Pledged Collateral shall be
evidenced by any Instrument or Tangible Chattel Paper, the Pledgor acquiring
such Instrument or Tangible Chattel Paper shall forthwith endorse, assign and
deliver the same to the Collateral Agent, accompanied by such instruments of
transfer or assignment duly executed in blank as the Collateral Agent may
reasonably request from time to time.  

	
 

	
 

	
 

	
          (b)
 Deposit Accounts. As of the date hereof (i) it does not maintain any
 Deposit Accounts other than the accounts listed in Schedule 5.21(a) of the
 Credit Agreement or Section III.C of the Due Diligence Certificate and (ii)
 the Collateral Agent has a perfected first priority security interest in each
 Blocked Account. No Pledgor shall grant Control of any Deposit Account or any
 Blocked Account to any Person other than the Collateral Agent. The Pledgors
 shall at all times comply with the cash receipt provisions set forth in
 Section 6.13 of the Credit Agreement. 

	
 

	
 

	
 

	
          (c)
 Investment Property. (i) As of the date hereof (1) it has no
 Securities Accounts or Commodity Accounts other than those listed in Section
 III of the Due Diligence Certificate, (2) it does not directly (A) hold, (B)
 own or (C) have any interest in any certificated securities or uncertificated
 securities other than those constituting Pledged Securities and those
 maintained in Securities Accounts listed in Section III.B of the Due
 Diligence Certificate, except for (x) Equity Interests of Restricted
 Subsidiaries (as such term is defined in the Indenture, (y) any Equity
 Interests held by it which constitute Permitted Investments, and (z) Equity
 Interests of Foot Locker Spain S.L. On or before January 31, 2010 (or such
 later date as the Collateral Agent may agree), the Borrower shall (A)
 transfer the Equity Interests of Foot Locker Spain S.L. to a Subsidiary of
 the Borrower which is not a Loan Party or (B) cause such Equity Interests of
 Foot Locker Spain S.L. to become Pledged Securities hereunder in accordance
 with the terms of this Agreement. 

	
 

	
 

	
 

	
                    (ii)
 If any Pledgor shall at any time hold or acquire any certificated securities
 constituting Investment Property, other than any securities of Subsidiaries
 not required to be pledged hereunder, such Pledgor shall promptly endorse,
 assign and deliver the same to the Collateral Agent, accompanied by such
 instruments of transfer or assignment duly executed in blank, all in form and
 substance reasonably satisfactory to the Collateral Agent. If any securities
 now or hereafter acquired by any Pledgor constituting Investment Property,
 other than any securities of Subsidiaries not required to be pledged
 hereunder, are uncertificated and are issued to such Pledgor or its nominee
 directly by the issuer thereof, such Pledgor shall promptly notify the
 Collateral Agent 

11

	
 

	
 

	
 

	
thereof and
 pursuant to an agreement in form and substance reasonably satisfactory to the
 Collateral Agent, cause the issuer to agree to comply with instructions from
 the Collateral Agent as to such securities, without further consent of any
 Pledgor or such nominee, or (b) arrange for the Collateral Agent to become
 the registered owner of the securities. If at any time any Revolving Credit
 Loans are outstanding, the applicable Pledgors shall, within sixty (60) days
 following the making of any such Revolving Credit Loan (or such longer period
 as to which the Collateral Agent may agree, but in any event not to exceed
 ninety (90) days following the making of any such Revolving Credit Loan),
 duly execute and deliver a Control Agreement with respect to each Securities
 Account or Commodity Account with any Securities Intermediary or Commodity
 Intermediary, as the case may be. Each Pledgor shall accept any cash and
 Investment Property which are proceeds of the Pledged Interests in trust for
 the benefit of the Collateral Agent and within five (5) Business Days of
 actual receipt thereof, deposit any cash or Investment Property and any new
 securities, instruments, documents or other property by reason of ownership
 of the Investment Property received by it into an account in which the
 Collateral Agent has Control. The Collateral Agent agrees with each Pledgor
 that the Collateral Agent shall not give any instructions or directions to
 any issuer of uncertificated securities, Securities Intermediary or
 Commodities Intermediary and shall not withhold its consent to the exercise
 of any withdrawal or dealing rights by such Pledgor, unless a Triggering
 Event has occurred and is continuing. No Pledgor shall grant Control over any
 Investment Property to any Person other than the Collateral Agent. 

	
 

	
 

	
 

	
                    (iii)
 As between the Collateral Agent and the Pledgors, the Pledgors shall bear the
 investment risk with respect to the Investment Property and Pledged
 Securities, and the risk of loss of, damage to, or the destruction of the
 Investment Property and Pledged Securities, whether in the possession of, or
 subject to the control of, the Collateral Agent, any Pledgor or any other
 Person. Each Pledgor shall promptly pay all Claims and fees of whatever kind
 or nature with respect to the Investment Property and Pledged Securities
 pledged by it under this Agreement. In the event any Pledgor shall fail to
 make such payment contemplated in the immediately preceding sentence, the
 Collateral Agent may do so for the account of such Pledgor and the Pledgors
 shall promptly reimburse and indemnify the Collateral Agent for all costs and
 expenses incurred by the Collateral Agent under this SECTION 3.4(c). 

	
 

	
 

	
 

	
          (d)
 Electronic Chattel Paper and Transferable Records. As of the date
 hereof no amount payable under or in connection with any of the Pledged
 Collateral is evidenced by any Electronic Chattel Paper or any “transferable
 record” (as that term is defined in Section 201 of the Federal Electronic
 Signatures in Global and National Commerce Act, or in Section 16 of the
 Uniform Electronic Transactions Act as in effect in any relevant
 jurisdiction). If any amount payable under or in connection with any of the
 Pledged Collateral shall be evidenced by any Electronic Chattel Paper or any
 transferable record with a face value in excess of $2,000,000 individually,
 the Pledgor acquiring such Electronic Chattel Paper or transferable record
 shall promptly notify the Collateral Agent thereof and shall take such action
 as the Collateral Agent may 

12

	
 

	
 

	
 

	
reasonably
 request to vest in the Collateral Agent control under UCC Section 9-105 of
 such Electronic Chattel Paper or control under Section 201 of the Federal
 Electronic Signatures in Global and National Commerce Act or, as the case may
 be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in
 such jurisdiction, of such transferable record. The Collateral Agent agrees
 with such Pledgor that the Collateral Agent will arrange, pursuant to
 procedures reasonably satisfactory to the Collateral Agent and so long as
 such procedures will not result in the Collateral Agent’s loss of control,
 for such Pledgor to make alterations to the Electronic Chattel Paper or
 transferable record permitted under UCC Section 9-105 or, as the case may be,
 Section 201 of the Federal Electronic Signatures in Global and National
 Commerce Act of Section 16 of the Uniform Electronic Transactions Act for a
 party in control to allow without loss of control, unless an Event of Default
 has occurred and is continuing or would occur after taking into account any
 action by such Pledgor with respect to such Electronic Chattel Paper or
 transferable record. 

	
 

	
 

	
 

	
          (e)
 Letter-of-Credit Rights. If such Pledgor is at any time a beneficiary
 under a Letter of Credit with a face value in excess of $1,000,000
 individually now or hereafter issued in favor of such Pledgor, other than a
 Letter of Credit issued pursuant to the Credit Agreement, such Pledgor shall
 promptly notify the Collateral Agent thereof and such Pledgor shall, at the
 request of the Collateral Agent, pursuant to an agreement in form and
 substance reasonably satisfactory to the Collateral Agent, either (i) arrange
 for the issuer and any confirmer of such Letter of Credit to consent to an
 assignment to the Collateral Agent of the proceeds of any drawing under the
 Letter of Credit or (ii) arrange for the Collateral Agent to become the
 transferee beneficiary of such Letter of Credit, with the Collateral Agent
 agreeing, in each case, that the proceeds of any drawing under the Letter of
 Credit are to be applied as provided in the Credit Agreement. 

	
 

	
 

	
 

	
          (f)
 Commercial Tort Claims. As of the date hereof it holds no Commercial
 Tort Claims other than those listed in Section V of the Due Diligence
 Certificate. If any Pledgor shall at any time hold or acquire a Commercial
 Tort Claim with a value in excess of $2,000,000 individually, such Pledgor
 shall promptly notify the Collateral Agent in writing signed by such Pledgor
 of the brief details thereof and grant to the Collateral Agent in such
 writing a security interest therein and in the Proceeds thereof, all upon the
 terms of this Agreement, with such writing to be in form and substance
 reasonably satisfactory to the Collateral Agent. 

                      SECTION
3.5. Joinder of Additional Borrowers or Guarantors. The Pledgors shall
cause each direct or indirect Subsidiary of the Borrower from time to time,
after the date hereof to the extent required under Section 6.12 of the Credit
Agreement to become a Loan Party thereunder, to execute and deliver to the
Collateral Agent a Due Diligence Certificate and such other documents and
agreements as are required under Section 6.12 of the Credit Agreement, in each
case, within thirty (30) days (or such longer period as the Administrative
Agent shall agree) of the date on which it was acquired or created, and upon
such execution and delivery, such 

13

Subsidiary
shall constitute a “Pledgor” for all purposes hereunder with the same force and
effect as if originally named as a Pledgor herein. 

                    SECTION
3.6. Supplements; Further Assurances. Each Pledgor shall take such
further actions, and execute and deliver to the Collateral Agent such
additional assignments, agreements, supplements, powers and instruments, as the
Collateral Agent may in its reasonable judgment deem necessary or appropriate,
wherever required by law, in order to perfect, preserve and protect the
security interest in the Pledged Collateral and to the extent required and as
provided herein and the rights and interests granted to the Collateral Agent
hereunder, to carry into effect the purposes hereof or better to assure and
confirm unto the Collateral Agent or permit the Collateral Agent to exercise
and enforce its rights, powers and remedies hereunder with respect to any
Pledged Collateral. If an Event of Default has occurred and is continuing, the
Collateral Agent may institute and maintain, in its own name or in the name of
any Pledgor, such suits and proceedings as the Collateral Agent may be advised
by counsel shall be necessary or expedient to prevent any impairment of the
security interest in or the perfection thereof in the Pledged Collateral. All
of the foregoing shall be at the sole cost and expense of the Pledgors. The
Pledgors and the Collateral Agent acknowledge that this Agreement is intended
to grant to the Collateral Agent for the benefit of the Credit Parties a
security interest in and Lien upon the Pledged Collateral and shall not
constitute or create a present assignment of any of the Pledged Collateral. 

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND COVENANTS

                    Each
Pledgor represents, warrants and covenants as follows:

                    SECTION
4.1. Title. No valid financing statement or other public notice indicating
the existence of a valid Lien on all or any part of the Pledged Collateral is
on file or of record in any public office, except such as have been filed in
favor of the Collateral Agent pursuant to this Agreement or as are permitted by
the Credit Agreement. No Person other than the Collateral Agent has Control or
possession of all or any part of the Pledged Collateral consisting of
Instruments, Securities Collateral, Investment Property, and Deposit Accounts,
except as permitted by the Credit Agreement. 

                    SECTION
4.2. Limitation on Liens; Defense of Claims; Transferability of Pledged
Collateral. Each Pledgor is as of the date hereof, and, as to Pledged
Collateral acquired by it from time to time after the date hereof, such Pledgor
will be, the sole direct and beneficial owner of all Pledged Collateral pledged
by it hereunder free from any Lien or other right, title or interest of any
Person other than the Liens and security interest created by this Agreement and
Permitted Encumbrances. Each Pledgor shall, at its own cost and expense, defend
title to the Pledged Collateral pledged by it hereunder and the security
interest therein and Lien thereon 

14

granted to the
Collateral Agent and the priority thereof against all claims and demands of all
Persons, at its own cost and expense, at any time claiming any interest therein
adverse to the Collateral Agent or any other Credit Party other than Permitted
Encumbrances. There is no agreement, and no Pledgor shall enter into any
agreement or take any other action, that would restrict the transferability of
any of the Pledged Collateral or otherwise impair or conflict with such
Pledgors’ obligations or the rights of the Collateral Agent hereunder. 

                    SECTION
4.3. Chief Executive Office; Change of Name; Jurisdiction of Organization.
(a) The exact legal name, type of organization, jurisdiction of organization,
federal taxpayer identification number, organizational identification number
(if any) and chief executive office of such Pledgor is indicated next to its
name in Sections I.A and I.B of the Due Diligence Certificate. 

                    (b)
The Collateral Agent may rely on opinions of counsel as to whether any or all
UCC financing statements of the Pledgors need to be amended as a result of any
of the changes described in Section 6.14 of the Credit Agreement. If any
Pledgor fails to provide information to the Collateral Agent about such changes
on a timely basis, the Collateral Agent shall not be liable or responsible to any
party for any failure to maintain a perfected security interest in such
Pledgor’s property constituting Pledged Collateral, for which the Collateral
Agent needed to have information relating to such changes. The Collateral Agent
shall have no duty to inquire about such changes if any Pledgor does not inform
the Collateral Agent of such changes, the parties acknowledging and agreeing
that it would not be feasible or practical for the Collateral Agent to search
for information on such changes if such information is not provided by any
Pledgor. 

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

                    SECTION
4.5. No Conflicts, Consents, etc. No consent of any party (including,
without limitation, equity holders or creditors of such Pledgor) and no
consent, authorization, approval, license or other action by, and no notice to
or filing with, any Governmental Authority or regulatory body or other Person
is required (A) for the pledge by such Pledgor of the Pledged Collateral
pledged by it pursuant to this Agreement or for the execution, delivery or
performance hereof by such Pledgor, (B) for the exercise by the Collateral
Agent of the voting or other rights provided for in this Agreement or (C)
subject to Section 6.1 hereof, for the exercise by the Collateral Agent of the
remedies in respect of the Pledged Collateral pursuant to this Agreement.
Following the occurrence and during the continuation of an Event of Default, if
the Collateral Agent desires to exercise any remedies, voting or consensual
rights or attorney-in-fact powers set forth in this Agreement and determines it

15

necessary to
obtain any approvals or consents of any Governmental Authority or any other
Person therefor, then, upon the reasonable request of the Collateral Agent,
such Pledgor agrees to use commercially reasonable efforts to assist and aid
the Collateral Agent to obtain as soon as commercially practicable any
necessary approvals or consents for the exercise of any such remedies, rights
and powers. 

                    SECTION
4.6. Pledged Collateral. All information set forth herein, including the
schedules annexed hereto, and all information contained in any documents,
schedules and lists heretofore delivered to any Credit Party in connection with
this Agreement, in each case, relating to the Pledged Collateral, is accurate
and complete as of the date hereof (or, if such information is required to be
accurate as of a certain date, then as of such date) in all material respects.
The Pledged Collateral described on the schedules annexed hereto constitutes
all of the property of such type of Pledged Collateral (other than Excluded
Property) owned or held by the Pledgors. 

ARTICLE V

CERTAIN PROVISIONS CONCERNING SECURITIES
COLLATERAL

                    SECTION
5.1. Pledge of Additional Securities Collateral. Each Pledgor shall,
upon obtaining any Pledged Securities or Intercompany Notes of any Person
required to be pledged hereunder, accept the same in trust for the benefit of
the Collateral Agent and forthwith deliver to the Collateral Agent a pledge
amendment, duly executed by such Pledgor, in substantially the form of Exhibit
1 annexed hereto (each, a “Pledge Amendment”), and the certificates
and other documents required under SECTION 3.1 and SECTION 3.2 hereof in
respect of the additional Pledged Securities or Intercompany Notes which are to
be pledged pursuant to this Agreement, and confirming the attachment of the
Lien hereby created on and in respect of such additional Pledged Securities or
Intercompany Notes. Each Pledgor hereby authorizes the Collateral Agent to
attach each Pledge Amendment to this Agreement and agrees that all Pledged
Securities or Intercompany Notes listed on any Pledge Amendment delivered to
the Collateral Agent shall for all purposes hereunder be considered Pledged
Collateral. 

                    SECTION
5.2. Voting Rights; Distributions; Etc. 

                    (i)
So long as no Triggering Event shall have occurred and be continuing, each
Pledgor shall be entitled to receive and retain, and to utilize free and clear
of the Lien hereof, any and all Distributions, but only if and to the extent
made in accordance with the provisions of the Credit Agreement; provided,
however, that any and all such Distributions consisting of rights or
interests in the form of securities shall be forthwith delivered to the
Collateral Agent to hold as Pledged Collateral and shall, if received by any
Pledgor, be received in trust for the benefit of the Collateral Agent, be
segregated from the other property or funds of such Pledgor and be forthwith
delivered to the Collateral Agent as Pledged Collateral in the same 

16

form as so
received (with any necessary endorsement). The Collateral Agent shall be deemed
without further action or formality to have granted to each Pledgor all
necessary consents relating to voting rights and shall, if necessary, upon
written request of any Pledgor and at the sole cost and expense of the Pledgors,
from time to time execute and deliver (or cause to be executed and delivered)
to such Pledgor all such instruments as such Pledgor may reasonably request in
order to permit such Pledgor to receive the Distributions which it is
authorized to receive and retain pursuant to this SECTION 5.2(i). 

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

                    (iii)
Upon the occurrence and during the continuance of any Triggering Event, all
rights of each Pledgor to receive Distributions which it would otherwise be
authorized to receive and retain pursuant to SECTION 5.2(i) hereof shall cease
and all such rights shall thereupon become vested in the Collateral Agent,
which shall thereupon have the sole right to receive and hold as Pledged
Collateral such Distributions. After such Triggering Event has been cured, each
Pledgor shall have the right to receive the payments, proceeds, dividends,
distributions, monies, compensation, property, assets, instruments or rights
which it would be authorized to receive and retain pursuant to SECTION 5.2(i)
hereof. 

                    (iv)
Upon the occurrence and during the continuance of any Event of Default, all
rights of each Pledgor to exercise the voting and other consensual rights it
would otherwise be entitled to exercise pursuant to SECTION 5.2(ii) hereof
without any action, other than, in the case of any Securities Collateral, or the
giving of any notice shall immediately cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall thereupon have the
sole right to exercise such voting and other consensual rights; provided that
the Collateral Agent shall have the right, in its sole discretion, from time to
time following the occurrence and continuance of an Event of Default to permit
such Pledgor to exercise such rights under SECTION 5.2(ii). If no Event of
Default exists, each Pledgor shall have the right to exercise the voting,
managerial and other consensual rights and powers that it would otherwise be
entitled to pursuant to SECTION 5.2(ii). 

                    (v)
Each Pledgor shall, at its sole cost and expense, from time to time execute and
deliver to the Collateral Agent appropriate instruments as the Collateral Agent
may reasonably request in order to permit the Collateral Agent to receive all
Distributions which it 

17

may be
entitled to receive under SECTION 5.2(i) hereof and to exercise the voting and
other rights which it may be entitled to exercise pursuant to SECTION 5.2(ii)
hereof. 

                    (vi)
All Distributions which are received by any Pledgor contrary to the provisions
of SECTION 5.2(i) hereof shall be received in trust for the benefit of the
Collateral Agent, shall be segregated from other funds of such Pledgor and
shall promptly be paid over to the Collateral Agent as Pledged Collateral in
the same form as so received (with any necessary endorsement). 

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

                    SECTION
5.4. Certain Agreements of Pledgors As Issuers and Holders of Equity
Interests. 

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

                    (ii)
In the case of each Pledgor which is a partner in a partnership, limited
liability company or other entity that is an issuer of Equity Interests pledged
hereunder, such Pledgor hereby consents to the extent required by the
applicable Organization Document of such issuer to the pledge by each other
Pledgor, pursuant to the terms hereof, of the Pledged Interests in such
partnership, limited liability company or other entity and, upon the occurrence
and during the continuance of an Event of Default, to the transfer of such
Pledged Interests to the Collateral Agent or its nominee and to the
substitution of the Collateral Agent or its nominee as a substituted partner or
member in such partnership, limited liability company or other entity with all
the rights, powers and duties of a general partner or a limited partner or
member, as the case may be. 

18

ARTICLE VI

CERTAIN PROVISIONS CONCERNING 

INTELLECTUAL PROPERTY

                    SECTION
6.1. Grant of License. For the purpose of enabling the Collateral Agent,
during the continuance of an Event of Default, to exercise rights and remedies
under Article VIII hereof at such time as the Collateral Agent shall be
lawfully entitled to exercise such rights and remedies, and for no other
purpose, each Pledgor hereby grants to the Collateral Agent, to the extent
sublicenseable with respect to Intellectual Property licensed to such Pledgor
(and to the extent permitted under the terms of the applicable license), an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to such Pledgor) to use, license or sublicense any of the
Intellectual Property now owned or hereafter acquired by such Pledgor, wherever
the same may be located, including in such license access to all media in which
any of the licensed Intellectual Property may be recorded or stored and to all
computer programs used for the compilation or printout hereof, and subject in
the case of licenses of trademarks and service marks, to rights of quality
control and inspection in favor of such Pledgor solely to the extent necessary
to avoid risk of invalidation of such licenses of such trademarks and service
marks. 

                    SECTION
6.2. No Violations. No Pledgor shall knowingly use any Intellectual
Property in a manner that violates the Intellectual Property rights of any
other Person with respect to such Intellectual Property except, in each case,
as could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect. 

ARTICLE VII

CERTAIN PROVISIONS CONCERNING ACCOUNTS

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

                    SECTION
7.2. Maintenance of Records. Each Pledgor shall keep and maintain at its
own cost and expense materially complete records of each Account, in a manner
consistent with prudent business practice, including, without limitation,
records of all payments received, all credits granted thereon, all merchandise
returned and all other documentation relating thereto. 

19

Each Pledgor
shall, at such Pledgor’s sole cost and expense, upon the Collateral Agent’s
written demand made at any time after the occurrence and during the continuance
of any Event of Default, deliver all tangible evidence of Accounts in its
possession or control, including, without limitation, all documents evidencing
Accounts and any books and records relating thereto to the Collateral Agent or
to its representatives (copies of which evidence and books and records may be
retained by such Pledgor). 

                    SECTION
7.3. Legend. Each Pledgor shall legend, at the request of the Collateral
Agent made at any time after the occurrence and during the continuance of any Event
of Default and in form and manner reasonably satisfactory to the Collateral
Agent, the Instruments, Documents and Chattel Paper of such Pledgor with an
appropriate reference to the fact that such Pledged Collateral have been
assigned to the Collateral Agent for the benefit of the Credit Parties and that
the Collateral Agent has a security interest therein. 

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

                    SECTION
7.5. Collection. Each Pledgor shall use commercially reasonable efforts
to cause to be collected from the account debtor of each of the Accounts, as
and when due in the ordinary course of business consistent with prudent
business practice (including, without limitation, Accounts that are delinquent,
such Accounts to be collected in accordance with generally accepted commercial
collection procedures), any and all amounts owing under or on account of such
Account, and apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Account. The costs and expenses
(including, without limitation, reasonable attorneys’ fees) of collection, in
any case, whether incurred by any Pledgor or the Collateral Agent or any other
Credit Party, shall be paid by the Pledgors, in accordance with the terms of
the Loan Documents. 

ARTICLE VIII

REMEDIES

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

20

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

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

                    (iii)
Sell, assign, lease or otherwise liquidate, or direct any Pledgor to sell,
assign, lease or otherwise liquidate, any and all investments made in whole or
in part with the Pledged Collateral or any part thereof, and take possession of
the proceeds of any such sale, assignment, lease or liquidation; 

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

                    (v)
Withdraw all moneys, instruments, securities and other property in any bank,
financial securities, deposit or other account of any Pledgor constituting
Pledged Collateral for application to the Secured Obligations as provided in
SECTION 8.6 hereof; 

                    (vi)
Retain and apply the Distributions to the Secured Obligations as provided in
SECTION 8.6 hereof; 

21

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

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

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

                    SECTION
8.3. Waiver of Notice and Claims. Each Pledgor hereby waives, to the
fullest extent permitted by applicable Law, notice or judicial hearing in
connection with the 

22

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

                    SECTION
8.4. Certain Sales of Pledged Collateral. 

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

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

23

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

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

                    SECTION
8.5. No Waiver; Cumulative Remedies. 

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

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

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

24

ARTICLE IX

MISCELLANEOUS

                    SECTION
9.1. Concerning Collateral Agent. 

                    (i)
The Collateral Agent has been appointed as collateral agent pursuant to the
Credit Agreement. The actions of the Collateral Agent hereunder are subject to
the provisions of the Credit Agreement. The Collateral Agent shall have the
right hereunder to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking action (including,
without limitation, the release or substitution of the Pledged Collateral), in
accordance with this Agreement and the Credit Agreement. The Collateral Agent
may employ agents and attorneys-in-fact in connection herewith and shall not be
liable for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith. The Collateral Agent may resign and a successor
Collateral Agent may be appointed in the manner provided in the Credit
Agreement. Upon the acceptance of any appointment as the Collateral Agent by a
successor Collateral Agent, that successor Collateral Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Collateral Agent under this Agreement, and the retiring
Collateral Agent shall thereupon be discharged from its duties and obligations
under this Agreement. After any retiring Collateral Agent’s resignation, the
provisions hereof shall inure to its benefit as to any actions taken or omitted
to be taken by it under this Agreement while it was the Collateral Agent. 

                    (ii)
The Collateral Agent shall be deemed to have exercised reasonable care in the
custody and preservation of the Pledged Collateral in its possession if such
Pledged Collateral is accorded treatment substantially equivalent to that which
the Collateral Agent, in its individual capacity, accords its own property
consisting of similar instruments or interests, it being understood that
neither the Collateral Agent nor any of the other Credit Parties shall have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Securities Collateral, whether or not the Collateral Agent or any other Credit
Party has or is deemed to have knowledge of such matters or (ii) taking any
necessary steps to preserve rights against any Person with respect to any
Pledged Collateral. 

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

                    (iv)
If any item of Pledged Collateral also constitutes collateral granted to
Collateral Agent under any Mortgage or other deed of trust, mortgage, security
agreement, pledge or instrument of any type, in the event of any conflict
between the provisions hereof and 

25

the provisions
of such other deed of trust, mortgage, security agreement, pledge or instrument
of any type in respect of such collateral (other than the Credit Agreement),
Collateral Agent, in its reasonable discretion, shall select which provision or
provisions shall control. 

                    SECTION
9.2. Collateral Agent May Perform; Collateral Agent Appointed
Attorney-in-Fact. If any Pledgor shall fail to perform any covenants
contained in this Agreement or in the Credit Agreement after written notice
from the Collateral Agent (including, without limitation, such Pledgor’s covenants
to (i) pay the premiums in respect of all required insurance policies
hereunder, (ii) pay Claims, (iii) make repairs, (iv) discharge Liens or (v) pay
or perform any obligations of such Pledgor under any Pledged Collateral) or if
any warranty on the part of any Pledgor contained herein shall be breached
after written notice from the Collateral Agent, the Collateral Agent may (but
shall not be obligated to) do the same or cause it to be done or remedy any
such breach, and may expend funds for failure to perform such covenant; provided,
however, that Collateral Agent shall in no event be bound to inquire
into the validity of any tax, lien, imposition or other obligation which such
Pledgor fails to pay or perform as and when required hereby and which such
Pledgor does not contest in accordance with the provisions of the Credit
Agreement. Any and all amounts so expended by the Collateral Agent shall be
paid by the Pledgors in accordance with the provisions of Section 10.04 of the
Credit Agreement. Neither the provisions of this SECTION 9.2 nor any action
taken by Collateral Agent pursuant to the provisions of this SECTION 9.2 shall
prevent any such failure to observe any covenant contained in this Agreement
nor any breach of warranty form constituting an Event of Default. Each Pledgor
hereby appoints the Collateral Agent its attorney-in-fact, with full authority
in the place and stead of such Pledgor and in the name of such Pledgor, or
otherwise, from time to time after the occurrence and during the continuation
of an Event of Default in the Collateral Agent’s discretion to take any action
and to execute any instrument consistent with the terms of the Credit Agreement
and the other Security Documents which the Collateral Agent may deem necessary
to accomplish the purposes hereof. The foregoing grant of authority is a power
of attorney coupled with an interest and such appointment shall be irrevocable
for the term hereof. Each Pledgor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof. 

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

26

                    SECTION
9.4. Termination; Release. 

                    (a)
This Agreement, the Lien in favor of the Collateral Agent (for the benefit of
itself and the other Credit Parties) and all other security interests granted
hereby shall terminate with respect to all Secured Obligations when (i) the
Commitments shall have expired or been terminated, (ii) the principal of and
interest on each Loan and all fees and other Secured Obligations (other than
the Other Liabilities) shall have been indefeasibly paid in full in cash, (iii)
all Letters of Credit (as such term is defined in the Credit Agreement) shall
have (A) expired or terminated and have been reduced to zero, (B) been Cash
Collateralized in accordance with the Credit Agreement, or (C) been supported
by another letter of credit in a manner satisfactory to the L/C Issuer and the
Administrative Agent, and (iv) all Unreimbursed Amounts shall have been paid in
full, provided, however, that in connection with the termination
of this Agreement, the Collateral Agent may require such indemnities as it
shall reasonably deem necessary or appropriate to protect the Credit Parties
against (x) loss on account of credits previously applied to the Secured
Obligations that may subsequently be reversed or revoked, and (y) any
obligations that may thereafter arise with respect to the Other Liabilities to
the extent not provided for thereunder. 

                    (b)
A Pledgor shall automatically be released from its obligations hereunder and
the Lien in favor of the Collateral Agent (for the benefit of itself and the
other Credit Parties) on the Pledged Collateral of such Pledgor shall be
automatically released upon the consummation of any transaction not prohibited
by the Credit Agreement as a result of which such Pledgor ceases to be a
Subsidiary; provided that each Lender shall have consented to such
transaction (if and to the extent required by the Credit Agreement) and the
terms of such consent did not provide otherwise; provided further that
any release of Pledged Collateral or any Pledgor in the manner permitted by
this Agreement and the Credit Agreement shall not require the consent of
holders of Other Liabilities under such transactions. 

                    (c)
Upon any Permitted Disposition by any Pledgor of any Pledged Collateral, or
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Pledged Collateral pursuant to Section 10.01 of
the Credit Agreement, the security interest in such Pledged Collateral shall be
automatically released. 

                    (d)
The Pledged Collateral shall be released from the Lien of this Agreement in
accordance with the provisions of this Agreement and the Credit Agreement. Upon
termination hereof or any release of Pledged Collateral in accordance with this
SECTION 9.4, the Collateral Agent shall, upon the request and at the sole cost
and expense of the Pledgors, assign, transfer and deliver to the Pledgors,
against receipt and without recourse to or warranty by the Collateral Agent
except as to the fact that the Collateral Agent has not encumbered the released
assets, such of the Pledged Collateral to be released (in the case of a
release) or all of the Pledged Collateral (in the case of termination of this
Agreement) as may be in possession of the Collateral Agent and as shall not
have been sold or otherwise applied pursuant to the terms hereof, and, with
respect to any other Pledged Collateral, proper documents and instruments
(including UCC-3 termination statements or releases) acknowledging the
termination hereof or the release of such Pledged Collateral, as the case may
be. 

27

                    (e)
The Collateral Agent shall have no liability whatsoever to any Credit Party as
the result of any release of Pledged Collateral by it as permitted (or which
the Collateral Agent in good faith believes to be permitted) by this SECTION
9.4. 

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

                    SECTION
9.6. Notices. Unless otherwise provided herein or in the Credit
Agreement, any notice or other communication herein required or permitted to be
given shall be given in the manner and become effective as set forth in the
Credit Agreement, as to any Pledgor, addressed to it at the address of the
Borrower set forth in the Credit Agreement and as to the Collateral Agent,
addressed to it at the address set forth in the Credit Agreement, or in each
case at such other address as shall be designated by such party in a written
notice to the other parties hereto complying as to delivery with the terms of
this SECTION 9.6. 

                    SECTION
9.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (EXCEPT FOR THE CONFLICT
OF LAWS RULES THEREOF, BUT INCLUDING GENERAL OBLIGATIONS LAW SECTIONS 5-1401
AND 5-1402). 

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

                    (a)
EACH PLEDGOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE
SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH
PLEDGOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF
ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK
STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH
FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE 

28

ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY
RIGHT THAT THE COLLATERAL AGENT OR ANY OTHER CREDIT PARTY MAY OTHERWISE HAVE TO
BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AGAINST ANY PLEDGOR OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION. 

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

                    (c)
EACH PLEDGOR IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED
FOR NOTICES IN SECTION 9.6. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF
ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE
LAW.  

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

                    SECTION
9.9. Severability. If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the legality,
validity and enforceability of the remaining provisions of this Agreement and
the other Loan Documents shall not be affected or impaired thereby and (b) the
parties shall endeavor in good faith negotiations to replace the illegal,
invalid or unenforceable provisions with valid provisions the

29

economic
effect of which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. 

                    SECTION
9.10. Execution in Counterparts. This Agreement and any amendments,
waivers, consents or supplements hereto may be executed in any number of
counterparts and by different parties hereto in different counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. Delivery of an executed counterpart of a
signature page of this Agreement by telecopy or other electronic image scan
transmission (e.g., “pdf” or “tiff” via email) shall be as effective as
delivery of a manually executed counterpart of this Agreement. 

                    SECTION
9.11. No Credit for Payment of Taxes or Imposition. No Pledgor shall be
entitled to any credit against the principal, premium, if any, or interest
payable under the Credit Agreement, and no Pledgor shall be entitled to any
credit against any other sums which may become payable under the terms thereof
or hereof, by reason of the payment of any Tax on the Pledged Collateral or any
part thereof. 

                    SECTION
9.12. No Claims Against Collateral Agent. Nothing contained in this
Agreement shall constitute any consent or request by the Collateral Agent,
express or implied, for the performance of any labor or services or the
furnishing of any materials or other property in respect of the Pledged
Collateral or any part thereof, nor as giving any Pledgor any right, power or
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against the Collateral Agent in respect thereof
or any claim that any Lien based on the performance of such labor or services
or the furnishing of any such materials or other property is prior to the Lien
hereof. 

                    SECTION
9.13. No Release. Nothing set forth in this Agreement shall relieve any
Pledgor from the performance of any term, covenant, condition or agreement on
such Pledgor’s part to be performed or observed under or in respect of any of
the Pledged Collateral or from any liability to any Person under or in respect
of any of the Pledged Collateral or shall impose any obligation on the
Collateral Agent or any other Credit Party to perform or observe any such term,
covenant, condition or agreement on such Pledgor’s part to be so performed or
observed or shall impose any liability on the Collateral Agent or any other
Credit Party for any act or omission on the part of such Pledgor relating
thereto or for any breach of any representation or warranty on the part of such
Pledgor contained in this Agreement, the Credit Agreement or the other Loan
Documents, or under or in respect of the Pledged Collateral or made in
connection herewith or therewith. The obligations of each Pledgor contained in
this SECTION 9.13 shall survive the termination hereof and the discharge of
such Pledgor’s other obligations under this Agreement, the Credit Agreement and
the other Loan Documents. 

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

30

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (v)
 any exercise, non-exercise or waiver of any right, remedy, power or privilege
 under or in respect hereof, the Credit Agreement or any other Loan Document
 except as specifically set forth in a waiver granted pursuant to the
 provisions of SECTION 9.5 hereof; or 

	
 

	
 

	
 

	
          (vi)
 any other circumstances which might otherwise constitute a defense available
 to, or a discharge of, any Pledgor (other than indefeasible payment in full
 in cash of Secured Obligations). 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT
BLANK]

31

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

	
 

	
 

	
PLEDGORS:

	
FOOT LOCKER, INC.

	
 

	
FOOT LOCKER RETAIL, INC. 

	
 

	
TEAM EDITION APPAREL, INC. 

	
 

	
FOOT LOCKER STORES, INC. 

	
 

	
FOOT LOCKER SPECIALTY, INC. 

	
 

	
ROBBY’S SPORTING GOODS, INC. 

	
 

	
FOOT LOCKER CORPORATE SERVICES, INC. 

	
 

	
FOOT LOCKER HOLDINGS, INC. 

	
 

	
FOOT LOCKER SOURCING, INC. 

	
 

	
FOOT LOCKER OPERATIONS, LLC 

	
 

	
FL RETAIL OPERATIONS LLC 

	
 

	
FL SPECIALTY OPERATIONS LLC 

	
 

	
FL EUROPE HOLDINGS, INC. 

	
 

	
FL CANADA HOLDINGS, INC. 

	
 

	
FOOT LOCKER ASIA, INC. 

	
 

	
FL CORPORATE NY, LLC 

	
 

	
FL RETAIL NY, LLC 

	
 

	
FL SPECIALTY NY, LLC 

	
 

	
FOOT LOCKER CARD SERVICES LLC 

	
 

	
as to each
 of the foregoing

	
 

	
 

	
 

	
 

	
By:

	
/s/ John A.
 Maurer

	
 

	
 

	

	
 

	
Name: 

	
John A.
 Maurer 

	
 

	
Title: 

	
Vice
 President and Treasurer 

Signature Page to Security Agreement

	
 

	
 

	
 

	
COLLATERAL AGENT:

	
BANK OF AMERICA, N.A.

	
 

	
 

	
 

	
 

	
By:

	
/s/
 Christine Hutchinson

	
 

	
 

	

	
 

	
Name: 

	
Christine
 Hutchinson

	
 

	
Title:

	
Principal

Signature Page to Security Agreement

EXHIBIT 1 

[Form of]

SECURITIES PLEDGE AMENDMENT

                    This
Securities Pledge Amendment, dated as of _________, is delivered pursuant to
SECTION 5.1 of that certain security agreement (as amended, amended and
restated, restated, supplemented or otherwise modified from time to time, the “Security
Agreement;” capitalized terms used but not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement), dated as
of March 20, 2009, made by (i) FOOT LOCKER, INC., a New York corporation (the “Borrower”),
(ii) THE GUARANTORS party thereto from time to time (the “Guarantors”) (the
Borrower, together with the Guarantors, and together with any successors, the “Pledgors,”
and each, a “Pledgor”), in favor of BANK OF AMERICA, N.A., having an
office at 100 Federal Street, 9th Floor, Boston, Massachusetts
02110, in its capacity as collateral agent for the Credit Parties (as defined
in the Credit Agreement) (in such capacity and together with any successors in
such capacity, the “Collateral Agent”). The undersigned hereby agrees
that this Securities Pledge Amendment may be attached to the Security Agreement
and that the Pledged Securities and/or Intercompany Notes listed on this
Securities Pledge Amendment shall be deemed to be and shall become part of the
Pledged Collateral and shall secure all Secured Obligations.  

Signature Page to Security Agreement

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
PLEDGED SECURITIES  

	
  

	
PLEDGOR 

	
  

	
ISSUER 

	
  

	
CLASS

OF STOCK

OR

INTERESTS 

	
  

	
PAR

VALUE 

	
  

	
CERTIFICATE

NO(S). 

	
  

	
NUMBER
OF

SHARES

OR

INTERESTS 

	
  

	
PERCENTAGE
OF

ALL ISSUED CAPITAL

OR OTHER EQUITY

INTERESTS OF ISSUER 

	

	
 

	

	
 

	

	
 

	

	
 

	

	
 

	

	
 

	

Exhibit 1 to Security Agreement

INTERCOMPANY NOTES

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
PLEDGOR 

	
  

	
ISSUER 

	
  

	
PRINCIPAL AMOUNT 

	
  

	
DATE OF ISSUANCE 

	
  

	
INTEREST
RATE 

	
  

	
MATURITY
DATE 

	

	
 

	

	
 

	

	
 

	

	
 

	

	
 

	

	
 

	
 

	
 

	
 

	
 

	
[_________________________________________],

	
 

	
 

	
as Pledgor

	
 

	
 

	
 

	
 

	
 

	
 

	
By:  

	
 

	
 

	
 

	
 

	

	
 

	
 

	
 

	
Name:

	
 

	
 

	
 

	
Title:

	
 

AGREED TO AND
ACCEPTED:

BANK OF
AMERICA, N.A., as Collateral Agent

	
 

	
 

	
By:  

	
 

	
 

	

	
 

	
Name:

	
 

	
Title:

Exhibit 1 to Security AgreementExhibit 10.3

	
 

	
Seconded
 Amended

	
EMPLOYMENT
 AGREEMENT BETWEEN

	
SMARTPROS
 LTD.

	
AND

	
JACK
 FINGERHUT

	
 

	
 

	
 

	
 

	
This seconded amended employment agreement (the
 “Agreement”) dated as of October 1, 2008 is by and between SmartPros Ltd., a
 Delaware corporation (the “Company”), and Jack Fingerhut, an individual
 residing at 32 Charles Street, Apt 2C Westwood, New Jersey 07675 (the
 “Executive”).

	
 

	
 

	
 

	
 

	
1.

	
Employment. The Company shall
 employ the Executive, and the Executive agrees to serve the Company, on the
 terms and conditions set forth herein. The Executive shall serve as President
 of the Company and shall be based at the Company’s headquarters in Hawthorne,
 New York. The Executive hereby accepts such employment hereunder, except for
 absences occasioned by illness and reasonable vacation periods, and agrees to
 undertake the duties and responsibilities inherent in such position and such
 other duties and responsibilities as the Company shall from time to time
 reasonably assign to him. The Executive shall report to and be supervised by
 the Chief Executive Officer of the Company or any other person who may be
 designated by the Board of Directors of the Company (the “Board”) from time
 to time. The Executive shall use his best efforts, including the highest
 standards of professional competence and integrity, and shall devote his full
 business time and effort to the performance of his duties hereunder. The
 Executive shall not engage in any other business activity except that the
 Executive may engage from time to time in such personal investment activities
 as do not interfere with his day to day responsibilities to the Company. The
 Executive shall be allowed to serve as an independent member of the boards of
 directors of other companies with the prior approval of the Board.

	
 

	
 

	
 

	
 

	
2.

	
Compensation and Benefits.

	
 

	
 

	
 

	
 

	
 

	
2.1

	
Salary. During the Term (as
 defined below) of this Agreement, the Executive shall be paid a salary at the
 rate of $212,500 per annum (“the Base Salary”), payable as customarily paid
 by the Company. During the Term of this Agreement, executive’s base salary
 shall be reviewed at least annually by the Board. 

	
 

	
 

	
 

	
 

	
 

	
2.2

	
Bonus. In addition to his Base
 Salary, the Executive may be entitled to bonuses at times and in amounts
 determined in the discretion of the Board. The target bonus shall equal 50%
 of Base Salary. The bonus

	
 

	
 

	
 

	
 

	
 

	
 

	
will be based 50% on Company performance
 and 50% on individual performance. Incentive bonuses shall be paid as soon as practicable after each
 year-end, and in all events by March 15 of the year following the year for
 which the bonus was determined.

	
 

	
 

	
 

	
 

	
 

	
2.3

	
Benefits. The Executive shall be
 entitled to participate in all employee benefit programs or plans maintained
 by the Company from time to time on the same basis as other similarly
 situated executive employees of the Company. The Executive shall be entitled
 to family medical coverage. The Company will pay or reimburse the lease cost
 of the automobile currently leased by the Executive, and upon expiration or
 termination of the lease, will continue to provide the Executive with a
 suitable automobile for his business and/or personal use for the term of this
 Agreement. The Company will pay or reimburse the Executive for all repairs,
 gas, maintenance and insurance expenses of the automobile currently leased by
 Executive or any replacement provided by the Company hereunder including any
 excess mileage charges within 30 days after Executive incurs such expenses.
 The Executive will be entitled to 4 weeks paid vacation per year.

	
 

	
 

	
 

	
 

	
 

	
2.4

	
Reimbursement of Expenses. The
 Company shall reimburse the Executive in accordance with its general
 reimbursement policies for all ordinary and necessary expenses incurred by
 the Executive on behalf of the Company upon the presentation of appropriate
 supporting documentation.

	
 

	
 

	
 

	
 

	
3.

	
Term; Termination; Rights upon Termination.

	
 

	
 

	
 

	
 

	
 

	
3.1

	
Term. The Company agrees to employ
 the Executive, and the Executive agrees to serve the Company for a period
 commencing on October 1, 2008 and continuing until September 30, , 2011 (the
 “End Date”) unless otherwise amended or terminated pursuant to the terms
 hereof (the “Term”).

	
 

	
 

	
 

	
 

	
 

	
3.2

	
Termination. The Company may at
 any time, terminate the employment of the Executive under this Agreement for
 Cause (as defined below), or without Cause, immediately and without any
 requirement of notice. The rights and obligations of the parties upon any
 termination of the Executive’s employment shall be as set forth in Section
 3.3. For purposes of this Agreement the term “Cause” shall mean (i) any act
 of dishonesty or gross and willful misconduct with respect to the Company,
 including without limitation, fraud or theft, on the part of the Executive,
 (ii) conviction of the Executive of a felony, or (iii) the Executive’s
 failure to perform his assigned duties hereunder after written notice and a
 30 day opportunity to cure.

	
 

	
 

	
 

	
 

	
 

	
3.3

	
Rights Upon Termination. In the
 event that:

2

	
 

	
 

	
 

	
 

	
 

	
 

	
(a)

	
          The
 employment of the Executive is terminated by the Company without Cause, then,
 for the remainder of the then current Term of employment hereunder, then,
 (subject to Section 3.3(e)) within 30 days after the date of such termination
 of employment, the Company shall pay to the Executive (x) a cash lump sum
 equal to Executive’s Base Salary at the rate in effect at the time of
 termination calculated through the remainder of the then-current term of
 employment, and (y) a bonus equal to the average of the last two years annual
 bonuses received by the Executive multiplied by the amount of whole and
 partial years remaining on the contract. In addition, the Company shall
 provide to Executive all benefits described in section 2.3 through the
 remainder of the then-current term of employment. The obligations of the
 Company pursuant to this Section 3.3(a) shall be in lieu of any other rights
 of the Executive hereunder to compensation or benefits in respect of any
 period before or after the date of such termination.

	
 

	
 

	
 

	
 

	
 

	
 

	
(b)

	
          The
 Executive’s employment terminates by reason of death or disability, then the
 Company shall pay and provide to the Executive or Executive’s estate or other
 successor in interest at the time otherwise due under Section 2 all Base
 Salary and benefits due to the Executive under Section 2 through the end of
 the sixth month after the month in which the termination occurs, but reduced
 in the case of disability by any payments received under any disability plan,
 program or policy paid for by the Company. The obligations of the Company pursuant
 to this Section 3.3(b) shall be in lieu of any other rights of the Executive
 hereunder to compensation or benefits (excluding any tax-qualified retirement
 plan benefits) in respect of any period before or after the date of such
 termination and in lieu of any severance payment, and no other compensation
 of any kind or any other amounts shall be due to the Executive by the Company
 under this Agreement. For purposes of this Agreement, the term “disability”
 shall mean: (i) the Company’s determination that Executive will be unable to
 engage in any substantial gainful activity by reason of any medically
 determinable physical or mental impairment that can be expected to result in
 death, or last for a continuous period of not less than 12 months; (ii) by
 reason of any medically determinable physical or mental impairment that can
 be expected to result in death, or last for a continuous period of not less
 than 12 months, Executive is receiving income replacement benefits for a
 period of not less than three months under an accident and health plan
 covering employees of the Company; or (iii) Executive is determined to be
 totally disabled by the Social Security Administration.

	
 

	
 

	
 

	
 

	
 

	
 

	
(c)

	
          The
 employment of the Executive is terminated by the Company for Cause, or by the
 Executive other than under circumstances 

3

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
described in Section 3.3(a) or (b) above, the
 Executive shall not be entitled to compensation or benefits granted hereunder
 beyond the date of the termination of the Executive’s employment.

	
 

	
 

	
 

	
 

	
 

	
 

	
(d)

	
          If
 a Change in Control, as defined in Section 7, shall occur at any time between
 October 1, 2008 and September 30, 2011 then upon the occurrence of such
 Change in Control the Executive shall be entitled to one year’s severance pay
 in lieu of any other payments that would be due under any other section of
 this contract in the event that, within 30 days after the Change in Control,
 the Executive is not continued in a position at the same or greater salary as
 stated in the contract. Such payment shall be made no later than 60 days
 after the Change in Control.

	
 

	
 

	
 

	
 

	
 

	
 

	
(e)

	
          If
 Executive shall be entitled to a payment or payments under Section 3.3 and at such time the Executive is a
 “specified employee” of the Company within the meaning of Section
 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (the
 “Code”) (or any successor provision), to the extent the amount payable
 pursuant to Section 3.3(a) exceeds the limits set forth in Section
 1.409A-1(b)(9)(iii) of the Income Tax Regulations (or any successor
 provision), no payment in excess of those limits shall be made until the
 earliest to occur of the following (the earliest to occur of such dates being
 hereafter referred to as the “End Date”) unless any other provision under
 Section 409A of the Code, and the regulations promulgated thereunder, would
 allow any other payment or portion of payment without triggering the
 penalties under Section 409A of the Code: (a) the date that is six (6) months
 after the date Employee’s employment is terminated within the meaning set
 forth in Section 1.409A-1(h) of the Income Tax Regulations; and (b) the date
 of the Employee’s death. Except as provided in the following sentence, any
 amounts deferred under this Section 3.3(e) shall be due and payable no later
 than the fifth business day after the End Date. If the Company determines,
 based upon written advice of counsel, that any such payment, if made during
 the calendar year that includes the date Employee’s employment is terminated,
 would not be deductible in whole or in part by reason of Code Section 162(m),
 such payment shall be made on January 2 of the following calendar year (or
 such later date as may be required under the preceding proviso if the
 Employee is a “specified employee”).

	
 

	
 

	
 

	
 

	
4.

	
Proprietary Information.

	
 

	
 

	
 

	
 

	
 

	
4.1

	
The Executive agrees that all information and know
 how, whether or not in writing, of a private, secret or confidential nature
 concerning the business or financial affairs of the Company and its
 subsidiaries (collectively, for purposes of this Section 4, the “Company”)
 and not within Executive’s possession or 

4

	
 

	
 

	
 

	
 

	
 

	
 

	
knowledge prior to his employment with the Company
 (collectively, “Proprietary Information”), is and shall be the exclusive
 property of the Company. By way of illustration, but not limitation,
 Proprietary Information may include inventions, products, processes, methods,
 techniques, projects, developments, plans, research data, financial data, and
 personnel data. The Executive will not disclose any Proprietary Information
 to others outside of the Company or use the same for any unauthorized
 purposes without the written consent of the Company, either during or after
 his employment, unless and until such Proprietary Information has become
 public knowledge without fault of the Executive.

	
 

	
 

	
 

	
 

	
 

	
4.2

	
The Executive agrees that all files, letters,
 memoranda, reports, records, data, sketches, drawings, or other written,
 photographic, or other tangible material containing Proprietary Information,
 whether created by the Executive or others, which shall come into his custody
 or possession, shall be and are the exclusive property of the Company to be
 used by the Executive only in the performance of his duties for the Company.

	
 

	
 

	
 

	
 

	
 

	
4.3

	
The Executive agrees that his obligation not to
 disclose or use Proprietary Information and records of the type set forth
 herein also extends to such types of Proprietary Information, records and
 tangible property of other third parties who may have disclosed or entrusted
 the same to the Company or to the Executive in the course of the Company’s
 business.

	
 

	
 

	
 

	
 

	
5.

	
Other Agreements. The Executive
 hereby represents that his performance of all the terms of this Agreement and
 as an employee of the Company does not and will not breach any agreement to
 keep in confidence proprietary information, knowledge or data acquired by him
 in confidence or in trust prior to his employment with the Company.

	
 

	
 

	
 

	
 

	
6.

	
Non-Competition, Non- Solicitation.

	
 

	
 

	
 

	
 

	
 

	
6.1

	
Non-solicitation of Employees and Customers.
 The Executive agrees that during the Term of the Executive’s employment with
 the Company and for a period of one year thereafter, the Executive shall not
 directly or indirectly (i) recruit, solicit or otherwise induce or attempt to
 induce any employees of the Company or any of its subsidiaries to leave their
 employment or (ii) call upon, solicit, divert or take away, or attempt to
 divert or take away, the business or patronage of any customer licensee,
 vendor, collaborator or corporate partner of the Company or any of its
 subsidiaries that had a business relationship with the Company or any of its
 subsidiaries at the time of termination of Executive’s employment with the
 Company and that did not have a business or personal relationship or was
 known to Executive prior to his employment with the Company. 

5

	
 

	
 

	
 

	
 

	
 

	
6.2

	
Non-competition. The Executive
 agrees that during the Term of the Executive’s employment with the Company,
 the Executive shall not directly or indirectly, engage in competition with
 the Company or any subsidiaries, or own or control any interest in, or act as
 director, officer or employee of, or consultant to, any firm, corporation or
 institution directly engaged in competition with the Company or any of its
 subsidiaries; provided that the Company or one of its subsidiaries is
 actively engaged in such business at the time the Executive’s employment by
 the Company is terminated; and provided that the foregoing shall not prevent
 the Executive from holding shares as a passive investor in a publicly held
 company which do not constitute more than 5% of the outstanding shares of
 such company. In the event that the Executive (i) voluntarily terminates his
 employment, (including at any time on or after the End Date) other than
 provided for in this agreement, or (ii) is terminated by the Company for
 Cause, the Executive agrees to not compete in the E-Learning marketplace
 until one year from the date of such termination.

	
 

	
 

	
 

	
 

	
7.

	
Change in Control Protection. For
 purposes of this Agreement, a “Change in Control” of the Company shall mean a
 change in the ownership or effective control of the Company or in the
 ownership of a substantial portion of the assets of the Company as determined
 under Section 1.409A-3((i)(5) of the Income Tax Regulations, as amended from
 time to time (or any successor provision).”

	
 

	
 

	
 

	
 

	
8.

	
Miscellaneous.

	
 

	
 

	
 

	
 

	
 

	
8.1 Notices. All notices required or
 permitted under this Agreement shall be in writing and shall be deemed
 effective upon personal delivery or upon deposit in the United States Post
 Office, by registered or certified mail, postage prepaid, addressed if to the
 Executive, at the address shown above and if to the Company, at its principal
 place of business at 12 Skyline Drive, Hawthorne, New York, or at such other
 address or addresses as either party shall designate to the other in
 accordance with this Section 8.1.

	
 

	
 

	
 

	
 

	
 

	
8.2 Pronouns. Wherever the context may
 require, any pronouns used in this Agreement shall include the corresponding
 masculine, feminine or neuter forms, and the singular forms of nouns and
 pronouns shall include the plural, and vice versa.

	
 

	
 

	
 

	
 

	
 

	
8.3 Entire Agreements. This Agreement
 constitutes the entire agreement between the parties and supercedes all prior
 agreements and understandings, whether written or oral, relating to the
 subject matter of this Agreement.

	
 

	
 

	
 

	
 

	
 

	
8.4 Amendment. This Agreement may be amended
 or modified only by a written instrument executed by both the Company and the
 Executive.

6

	
 

	
 

	
 

	
 

	
 

	
8.5 Governing Law. This Agreement shall be
 construed, interpreted and enforced in accordance with the laws of the State
 of New York.

	
 

	
 

	
 

	
 

	
 

	
8.6 Successors and Assigns. This Agreement
 shall be binding upon and inure to the benefit of both parties and their
 respective successors and assigns, including any corporation with which or
 into which the Company may be merged or which may succeed to its assets or
 business, provided, however, that the obligations of the Executive are
 personal and shall not be assigned by him.

	
 

	
 

	
 

	
 

	
 

	
8.7 Waivers. No delay or omission by the
 Company in exercising any right under this Agreement shall operate as a
 waiver of that or any other right. A waiver or consent given by the Company
 on any one occasion shall be effective only in this instance and shall not be
 construed as a bar or waiver of any right on any other occasion. This
 agreement supersedes all previous agreements.

	
 

	
 

	
 

	
 

	
 

	
8.8 Captions. The captions of the sections of
 this Agreement are for convenience of reference only and in no way define,
 limit or affect the scope or substance of any section of this Agreement.

	
 

	
 

	
 

	
 

	
 

	
8.9 Severability. In case any provision of
 this Agreement shall be invalid, illegal or otherwise unenforceable, the
 validity, legality and enforceability of the remaining provisions shall in no
 way be affected or impaired thereby.

	
 

	
 

	
 

	
 

	
 

	
8.10 Specific Enforcement. The parties
 acknowledge that the Executive’s breach of the provisions of Section 4 and 6
 of this Agreement will cause irreparable harm to the Company. It is agreed
 and acknowledged that the remedy of damages will not be adequate for the
 enforcement of such provisions and that such provisions may be enforced by
 equitable relief, including injunctive relief, which relief shall be
 cumulative and in addition to any other relief to which the Company may be
 entitled.

	
 

	
 

	
 

	
 

	
9. Arbitration. Any claims, controversies,
 demands, disputes or differences between or among the parties hereto or any
 persons bound hereby arising out of, or by virtue of, or in connection with,
 or otherwise relating to this Agreement shall be submitted to and settled by
 arbitration conducted in New York, New York before one or three arbitrators
 each of which shall be knowledgeable in employment law. Such arbitration
 shall otherwise be conducted in accordance with the rules then obtaining of
 the American Arbitration Association. The parties hereto agree to share
 equally the responsibility for all fees of the arbitrators, abide by any
 decision rendered as final and binding, and waive the right to appeal the
 decision or otherwise submit the dispute to a court of law for a jury or
 non-jury trial. The parties hereto specifically agree that neither party may
 appeal or subject the award or decision of any such arbitrator(s) to appeal
 or review in any court of law or in equity or by any other tribunal, arbitration
 system or otherwise. Judgment upon any award granted by such an arbitrator(s)
 may be enforced in any court having jurisdiction thereof. If the arbitration
 decision holds that the Company is 

7

	
 

	
at fault, the Executive shall be entitled to reimbursement
 of fees and expenses from the Company in an amount not to exceed $50,000. If
 the arbitration decision holds that the Company is not at fault, the Company
 shall be entitled to reimbursement of fees and expenses from the Executive in
 an amount not to exceed $25,000. Such amounts shall be paid to Executive
 within 30 days after the arbitration decision is made.

IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year set forth above

	
 

	
 

	
 

	
 

	
 

	
 

	
SmartPros Ltd.

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ Allen S. Greene

	
 

	
 

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
Title:

	
Chief Executive Officer

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
/s/ Jack Fingerhut

	
 

	
 

	
 

	

	
 

	
 

	
 

	
          JACK
 FINGERHUT

8

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