0001104659-07-034913.txt : 20070502 0001104659-07-034913.hdr.sgml : 20070502 20070502170546 ACCESSION NUMBER: 0001104659-07-034913 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 20070303 FILED AS OF DATE: 20070502 DATE AS OF CHANGE: 20070502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHRISTOPHER & BANKS CORP CENTRAL INDEX KEY: 0000883943 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 061195422 STATE OF INCORPORATION: DE FISCAL YEAR END: 0225 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31390 FILM NUMBER: 07811567 BUSINESS ADDRESS: STREET 1: 2400 XENIUM LANE NORTH CITY: PLYMOUTH STATE: MN ZIP: 55441-3626 BUSINESS PHONE: 6125515000 MAIL ADDRESS: STREET 1: 2400 XENIUM LN NORTH CITY: PLYMOUTH STATE: MN ZIP: 55441-3626 FORMER COMPANY: FORMER CONFORMED NAME: BRAUNS FASHIONS CORP DATE OF NAME CHANGE: 19930328 10-K 1 a07-12680_110k.htm 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the fiscal year ended March 3, 2007

	or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 001-31390

CHRISTOPHER & BANKS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		06 - 1195422
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

2400 Xenium Lane North, Plymouth, Minnesota		55441
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (763) 551-5000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.01 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YES x NO o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

YES o NO x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES x NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO x

The aggregate market value of the Common Stock, par value $0.01 per share, held by non-affiliates of the registrant as of August 26, 2006, was approximately $925,148,775 based on the closing price of such stock as quoted on the New York Stock Exchange ($25.00) on such date.

The number of shares outstanding of the registrant’s Common Stock, par value $0.01 per share, was 36,202,105 as of April 20, 2007 (excluding treasury shares of 8,841,918).

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held August 1, 2007 (the “Proxy Statement”) are incorporated by reference into Part III.

CHRISTOPHER & BANKS CORPORATION

2007 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

		Page

PART I

Item 1.	Business	1

Item 1A.	Risk Factors	5

Item 1B.	Unresolved Staff Comments	8

Item 2.	Properties	8

Item 3.	Legal Proceedings	10

Item 4.	Submission of Matters to a Vote of Security Holders	10

Item 4A.	Executive Officers of the Registrant	11

PART II

Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	12

Item 6.	Selected Consolidated Financial Data	14

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	25

Item 8.	Consolidated Financial Statements and Supplementary Data	26

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	47

Item 9A.	Controls and Procedures	48

Item 9B.	Other Information	49

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	49

Item 11.	Executive Compensation	49

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	49

Item 13.	Certain Relationships, Related Transactions and Director Independence	49

Item 14.	Principal Accountant Fees and Services	50

PART IV

Item 15.	Exhibits and Financial Statement Schedule	50

	Signatures	53

PART I

ITEM 1.

BUSINESS

General

Christopher & Banks Corporation is a Minneapolis-based retailer of women’s specialty apparel, which operates retail stores through its wholly-owned subsidiaries, Christopher & Banks, Inc., Christopher & Banks Company and Christopher & Banks Services Company, collectively referred to as “Christopher & Banks” or the “Company.” As of April 20, 2007, the Company operated 790 stores in 45 states, including 526 Christopher & Banks stores, 226 C.J. Banks stores and 38 Acorn stores. The Company’s Christopher & Banks stores offer distinctive fashions featuring exclusively designed, coordinated assortments of sportswear in sizes four to 16. The Company’s C.J. Banks stores offer similar assortments of women’s specialty apparel in sizes 14W and up. Acorn stores offer upscale women’s fashions along with complementary jewelry and accessories under private and branded labels.

During the fiscal year ended March 3, 2007 (“fiscal 2007”), the Company opened 22 new Christopher & Banks stores, 40 new C.J. Banks stores and 16 new Acorn stores. The Company closed five stores during fiscal 2007. The Company plans to grow its store base in fiscal 2008 by approximately 70 stores, including opening approximately 40 new C.J. Banks stores, 25 new Christopher & Banks stores and five new Acorn stores.

Effective January 1, 2007, the Company’s Board of Directors appointed Matthew P. Dillon President and Chief Executive Officer of the Company. Mr. Dillon previously served as the Company’s President and Chief Merchandising Officer. The Board of Directors also elected Mr. Dillon as an additional Class 2 director concurrent with his promotion to Chief Executive Officer. The Company’s former Chief Executive Officer, Joseph E. Pennington, resigned as Chief Executive Officer and as a member of the Company’s Board of Directors on December 31, 2006. After December 31, 2006, Mr. Pennington will continue to be employed by the Company as a non-officer employee in an advisory role through August 31, 2008.

The Company’s business strategy is to consistently provide a well focused apparel assortment in order to satisfy its target customer’s expectations for style, value and versatility. To differentiate itself from its competitors, the Company’s internal design group creates a diverse merchandise assortment which is manufactured exclusively for the Company under its proprietary Christopher & Banks and C.J. Banks brand names. In its Acorn stores, the Company currently sells private label, as well as branded apparel and accessories.

Target Customer

The target customer for Christopher & Banks and C.J. Banks is a segment of the female baby boomer demographic generally ranging in age from 40 to 60. Company research indicates this target customer has average annual household income of approximately $80,000. Further, this customer desires versatile fashions which are suitable for both work and leisure activities. Due to her busy lifestyle, management believes this customer prefers the convenience of shopping in regional malls.

The target customer of the Company’s Acorn stores is a more affluent female baby boomer with household income of approximately $80,000 and up. This target customer seeks more fashion forward merchandise to fit her active, multifaceted lifestyle.

Merchandise Assortment

Substantially all merchandise offered in the Company’s stores is developed by the Company’s buyers, working in conjunction with the Company’s product design group. The Company also has a technical design group which establishes technical specifications for the Company’s merchandise and inspects merchandise on a test basis for uniformity of size, color and overall manufacturing quality.

In fiscal 2007, the Company’s merchandise primarily included sportswear generally consisting of knit tops, shirtings, novelty jackets, sweaters, skirts, denim bottoms and bottoms of other fabrications. The Company’s Acorn stores sell a variety of accessories in addition to sportswear.

Sweaters comprised approximately 23% of the Company’s sales in fiscal 2007, compared to approximately 30% and 34% in fiscal 2006 and 2005, respectively. In fiscal 2008, the Company plans to continue to shift merchandise receipts away from its sweater category and expand its offering in other merchandise categories.

Merchandise Strategy

The Company has developed a variety of strategies and programs to distinguish itself from its competitors. Major elements of its merchandising strategy include:

Strong Visual Merchandise Presentation. The Company relies heavily on attracting mall traffic through appealing visual presentation. Front-of-store displays, supplemented with lifestyle graphics, are carefully designed to draw customers into its stores. To keep its fashions fresh, the Company introduces six different color stories each year. Merchandise from each color story is featured in the Company’s stores for approximately 12 to 16 weeks. Each color story is displayed in the front of the store for approximately two months. Remaining merchandise from the color story is then moved to the back of the store for liquidation.

Direct Import Program. During fiscal 2007, the Company directly imported approximately 75% of its total merchandise purchases. The Company anticipates that direct imports, as a percent of total purchases, will be approximately the same in fiscal 2008. Management believes direct importing allows Christopher & Banks to obtain high quality merchandise at a lower cost and gives the Company ability to bring product to market expediently.

Private Brand Clothing — Christopher & Banks, C.J. Banks. The use of private brand clothing produced exclusively for the Company creates a unique store identity and establishes a competitive “point of difference.” The Company’s design staff, guided by its merchants, continually develops new designs for the Company’s private brand merchandise. The Company uses its proprietary names exclusively for its private brand clothing. Sales of private brand clothing comprised substantially all of the Company’s sales in fiscal 2007 and 2006. The Company anticipates private brand clothing will account for substantially all of its sales again in fiscal 2008.

Quality Assurance. The Company employs a variety of quality control measures including color, fabric and construction analysis and sizing verification, to ensure that all merchandise meets the Company’s quality standards.

Systems and Inventory Management

The Company’s merchandise and financial information systems are updated daily with information from the Company’s point-of-sale (“POS”) registers. In fiscal 2008, the Company plans to upgrade its POS hardware to provide enhanced functionality and improved communications ability.

In order to accommodate current and planned growth, the Company intends to invest in various information technology tools and systems. In fiscal 2008, the Company plans to implement an enhanced data warehouse analytics tool and a new planning and allocation system.

The Company also utilizes a cost-effective program to efficiently deliver merchandise on a daily basis from the Company’s distribution center to each of its stores, which ensures a consistent flow of fresh merchandise to the stores and enables the Company to keep the aging of its inventory current. The Company’s inventory turnover, which is calculated by dividing sales by average retail inventory, was 3.5, 3.8 and 3.9 times in fiscal 2007, 2006 and 2005, respectively.

Store Expansion

The Company plans to expand its store base by approximately 70 new stores in fiscal 2008. Of these new stores, approximately 40 will be C.J. Banks stores, 25 will be Christopher & Banks stores and five will be Acorn stores. The majority of the new stores will be located in states where the Company currently operates.

Development of New Concepts

The Company intends to continue to evaluate different growth vehicles and new opportunities as it deems appropriate. Accordingly, in fiscal 2001 the Company launched its C.J. Banks concept. These stores serve the women’s large size market by offering coordinated assortments of exclusively designed sportswear in sizes 14W and up. In connection with this strategy, the Company developed a new C.J. Banks store prototype which is similar to, but slightly larger than, its Christopher & Banks store design. The Company has rapidly expanded the C.J. Banks concept and as of April 20, 2007 the Company operated 226 C.J. Banks stores in 35 states.

On November 1, 2004, the Company acquired the assets and assumed certain liabilities of Gilmore Brothers Inc., a privately-held women’s specialty retailer operating stores under the name “Acorn.” Acorn stores offer upscale women’s fashions along with complementary jewelry and accessories under private and branded labels. The Company believes the acquisition provides a differentiated yet complementary third retail concept to its business, which will enhance its growth potential. As of April 20, 2007, the Company operated 38 Acorn stores in 14 states.

Product Line Extensions

The Company intends to test product line extensions in certain of its locations which, if successful, could be expanded to a larger group of stores. In March 2007, the Company tested a collection of CBK Sport product in 168 Christopher & Banks stores. A second delivery of CBK Sport product is planned for May 2007 and in September 2007 the Company plans a delivery to a majority of its Christopher & Banks stores.

The Company plans to test accessories consisting primarily of handbags and small leather goods in certain of its Christopher & Banks locations in the fall of 2007. In October 2007, the Company plans to test petite sizes in certain of its Christopher & Banks stores. Test merchandise will include best selling styles across most of its merchandise categories, with an emphasis on woven bottoms.

Properties

The Company has developed a prototype store design which is currently used for approximately 95% of its Christopher & Banks and C.J. Banks store locations and approximately 60% of its Acorn stores. These store designs are regularly modified and updated. The store designs provide an open and inviting environment, which enables the Company to deliver a focused merchandise presentation to its customers. The Company typically completes a major or minor remodeling of each store on a ten-year cycle. However, during the interim, carpet replacement, painting and other minor improvements are made as needed. The Company completed ten store remodels in fiscal 2007 and plans to complete 25 store remodels in fiscal 2008.

Store Operations

The Company manages its stores in a manner that encourages participation by the store manager and employees in the execution of the Company’s business and operational strategies. Managers are eligible for Company incentive awards based upon exceeding planned store sales volume goals. The Company has begun a field-training program that is designed to enhance selling and management skills of its associates through a customized program that is scheduled to be completed in the second half of fiscal 2008.

Purchasing/Sources of Supply

Direct imports accounted for approximately 75% of the Company’s total merchandise purchases in fiscal 2007. During fiscal 2007, the Company purchased approximately 98% of its merchandise from 150 vendors and the Company’s ten largest vendors provided approximately 48% of the Company’s purchases. In addition, purchases from the Company’s largest overseas supplier accounted for approximately 17% of total purchases, compared to 31% in fiscal 2006.

In fiscal 2008, management plans to continue to make changes to its merchandise assortment and further diversify its vendor base. Although the Company believes that its relationship with its largest vendor is good, there can be no assurance that this relationship can be maintained in the future or that the vendor will continue to supply merchandise to the Company. If there should be any significant disruption in the supply of merchandise from this vendor, management believes that it will be able to shift production to other suppliers so as to continue to secure the required volume of product. Nevertheless, it is possible that any significant disruption in supply could have a material adverse impact on the Company’s financial position and results of operations. The Company intends to directly import approximately 75% of its purchases again in fiscal 2008.

Marketing

Historically, the Company has not engaged in significant television, radio or print advertising. Instead, the Company has relied heavily on mall traffic to draw customers into its locations. Beginning in fiscal 2008, the Company plans to expand its marketing efforts, with marketing related spending increasing to approximately 1% of sales.

During fiscal 2007, the Company sent periodic informational e-mail messages to customers primarily regarding new product arrivals and features. Beginning in October 2006, the Company began utilizing an outside service provider to build a Customer Relationship Management (“CRM”) database containing customer contact information and purchase history. The Company also began testing direct mail campaigns for Christopher & Banks and C.J. Banks customers as direct mail offers were sent to selected customers two times during the second half of fiscal 2007. As of March 3, 2007, the Company had collected information for approximately 1.4 million customers in its CRM program. In fiscal 2008, the Company anticipates that it will expand the number of direct mail pieces sent to its customers. Management expects that the largest portion of its marketing expenditures in fiscal 2008 will relate to contacting customers in its CRM database via direct mail.

The Acorn stores acquired from Gilmore Brothers, Inc. use direct mail and a preferred customer program to maintain contact with its customers. The Company intends to continue these programs in its Acorn stores.

The Company maintains websites at www.christopherandbanks.com, www.cjbanks.com and www.acornstores.com. The websites contain information about the Company’s merchandise assortment, business and history, investor relations, employment opportunities and store locations. Historically, the Company has not offered on-line purchasing of merchandise or gift cards through its websites.

In late fiscal 2008, the Company plans to begin selling its merchandise on-line with the launch of an e-commerce business. The Company believes that an e-commerce enabled website will provide a customer service for those who prefer shopping through this channel. Further, management believes the e-commerce channel will drive incremental customer traffic to its stores and strengthen its brands. In addition, the e-commerce channel will make the Company’s products available to customers in areas of the United States where the Company does not currently operate stores.

The Company’s website references above are for textual reference only and are not intended to incorporate the Company’s websites into this Annual Report on Form 10-K. The Company makes available free of charge, on or through its website, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission.

Seasonality

The Company’s quarterly results may fluctuate significantly depending on a number of factors including timing of new store openings, adverse weather conditions, shifts in the timing of certain holidays and customer response to the Company’s seasonal merchandise mix.

Competition

The women’s retail apparel business is highly competitive. The Company believes that the principal bases upon which it competes are unique merchandise selection, quality garment construction, store location, visual merchandise presentation and customer service. The Company competes with a broad range of national and regional retail chains that sell similar merchandise, including department stores and specialty stores. Many of these competitors are larger and have greater financial resources than the Company. The Company believes that its unique merchandise assortments, strong visual presentation, product quality, and customer service enable the Company to compete effectively.

Employees

As of April 20, 2007, the Company had approximately 2,200 full-time and 4,700 part-time employees. The number of part-time employees increases during peak selling periods. None of the Company’s employees are represented by a labor union or are subject to a collective bargaining agreement. The Company has never experienced a work stoppage and considers its relationship with its employees to be good.

Trademarks and Service Marks

The Company, through its wholly-owned subsidiary, Christopher & Banks Company, is the owner of the federally registered trademark and service mark “Christopher & Banks,” which is its predominant private brand, and “C.J. Banks,” its large size private brand. The Company uses the name “Acorn” for the stores it acquired from Gilmore Brothers, Inc., though it does not hold a federally registered trademark or service mark for that name. Common law rights have been established by the Company in other trademarks and service marks which it considers to be of lesser importance. Christopher & Banks believes its primary marks are important to its business and are recognized in the women’s retail apparel industry. Accordingly, the Company intends to maintain its marks and the related registrations. Management is not aware of any challenges to the Company’s right to use its marks in the United States.

ITEM 1A.
RISK FACTORS

Forward Looking Information and Risk

Information contained in this Form 10-K contains certain “forward-looking statements” which reflect the current view of the Company with respect to future events and financial performance. Wherever used, terminology such as “may”, “will”, “expect”, “intend”, “plan”, “anticipate”, “estimate” or “continue”, or the negative thereof, or other variations thereon or comparable terminology reflect such forward-looking statements.

There are certain important factors that could cause results to differ materially from those anticipated by some of these forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty. The factors, among others, that could cause actual results to differ materially include: changes in general economic conditions, including recessionary effects which may affect consumers’ spending and debt levels; the Company’s ability to execute its business plan including the successful expansion of its Christopher & Banks, C.J. Banks and Acorn concepts; the Company’s ability to open new stores on favorable terms and the timing of such store openings; the availability of quality store sites; the acceptance of the Company’s merchandising strategies by its target customers; the ability of the Company to anticipate fashion trends and consumer preferences; the loss of one or more of the Company’s key executives; the ability to hire and train qualified managerial employees and address management succession; continuity of a relationship with or purchases from major vendors, particularly those from whom the Company imports merchandise; increases in the cost of merchandise; timeliness of vendor production and deliveries; competitive pressures on sales and pricing; increases in other costs which cannot be recovered through improved pricing of merchandise; and the adverse effect of weather conditions from time to time on consumers’ ability or desire to purchase new clothing. Since the Company relies heavily on sourcing from foreign vendors, there are risks and uncertainties including transportation delays related to ocean, air and ground shipments, political instability, work stoppages, changes in import and export controls including quota restrictions and the expiration thereof. The Company assumes no obligation to publicly update or revise its forward looking statements to reflect events or circumstances that may arise after the date of this Form 10-K.

Certain Additional Risk Factors:

Investors in the Company should consider the following risk factors as well as the other information contained herein.

The Company’s efforts to select optimal retail store locations do not assure that its stores will succeed.

The success of individual retail stores will depend to a great extent on locating them in desirable shopping venues in markets where the Company’s target customers shop. The success of individual stores may depend on the success of the shopping malls or lifestyle centers in which they are located. In addition, the demographic and other marketing data the Company relies on in determining the location of its stores cannot predict future consumer preferences and buying trends with complete accuracy. As a result, retail stores the Company opens may not be profitable or may be less successful than anticipated.

The ability of the Company to effectively manage its growth is subject to factors beyond its control.

The Company’s continued growth depends on its ability to open and operate stores successfully and to manage the Company’s planned expansion. During fiscal 2008, the Company plans to open approximately 70 new stores, including approximately 25 Christopher & Banks stores, 40 C.J. Banks stores, and five Acorn stores. The Company’s planned expansion is dependent upon a number of factors, including locating suitable store sites, negotiating favorable lease terms, sourcing sufficient levels of inventory, hiring and training qualified management and other employees and integrating new stores into its existing operations. There can be no assurance that the Company will achieve its planned expansion or that such expansion will be profitable or that the Company will be able to manage its growth effectively.

The Company’s success is dependent on predicting and responding to changing customer preferences.

The Company’s future success will depend on its ability to continually select the right merchandise assortment, maintain appropriate inventory levels and creatively present merchandise in a way that is appealing to its customers. Consumer preferences cannot be predicted with certainty, as they continually change and vary from region to region. On average, the Company begins the design process for its apparel six to seven months before merchandise is available to its customers and the Company typically begins to make purchase commitments four to five months in advance. These lead times make it difficult for the Company to respond quickly to changing consumer preferences and amplify the consequences of any misjudgments it might make in anticipating customer preferences. Consequently, if the Company misjudges its customers’ merchandise preferences or purchasing habits, its sales may decline significantly, and the Company may be required to mark down certain products to significantly lower prices to sell excess inventory, which would result in lower margins.

Fluctuations in comparable store sales results may adversely affect the Company’s stock price.

The Company’s comparable store sales results have fluctuated in the past on a monthly, quarterly and annual basis, and are expected to continue to fluctuate in the future. A variety of factors affect comparable store sales results, including changes in fashion trends, changes in the Company’s merchandise mix, calendar shifts of holiday periods, actions by competitors, weather conditions and general economic conditions. Past comparable store sales results are not an indicator of future results, and there can be no assurance that the Company’s comparable store sales results will not decrease in the future. The Company’s comparable store sales results are likely to have a significant effect on the market price of the Company’s common stock.

The Company competes with many retail stores and chains that are larger and have greater financial resources.

The retail apparel industry is highly competitive. The Company competes with national and local department stores, specialty and discount store chains and independent retail stores that market similar lines of merchandise. Many competitors are significantly larger and have substantially greater financial, marketing and other resources and enjoy greater national, regional and local name recognition than does the Company. Depth of selection in sizes, colors and styles of merchandise, merchandise procurement and pricing, ability to anticipate fashion trends and consumer preferences, inventory control, reputation, quality of merchandise, store design and location, brand recognition and customer service are all important factors in competing successfully in the retail industry.

The Company relies on a single distribution center.

The Company relies on one distribution center, located in Plymouth, Minnesota, to receive and distribute merchandise to all of its stores. Any significant interruption in the operation of the distribution center due to natural disasters, accidents, system failures or other unforeseen causes could delay or impair the Company’s ability to distribute merchandise to its stores which could have a negative impact on sales.

Changes in general economic conditions may adversely affect results.

The Company’s business fluctuates according to changes in consumer preferences, which are dictated in part by fashion and season. In addition, certain economic conditions affect the level of consumer spending on merchandise offered by the Company, including, among others, unemployment levels, business conditions, interest rates and consumer confidence in future economic conditions. Consumer preference and economic conditions may differ or change from time to time in each market in which the Company operates and negatively affect the Company’s net sales and profitability.

The Company relies on foreign sources of production and so is exposed to possible delays, increased costs or reduced supplies.

The Company’s merchandise flow could also be adversely affected by political or financial instability in any of the countries where its merchandise is manufactured or by changes in the United States’ governmental policies toward such foreign countries. In addition, merchandise receipts could be delayed due to interruptions in air, ocean and ground shipments.

The Company’s business will be adversely affected if it is unable to hire and retain talented personnel.

The Company’s success and ability to properly manage its growth depends to a significant extent both upon the performance of its current executive and senior management team and its ability to attract, hire, motivate and retain additional qualified management personnel in the future. The Company’s inability to recruit and retain such additional personnel, or the loss of the services of any of its executive officers, could have a material adverse impact on the Company’s business, financial condition and results of operations.

The Company’s stock price is volatile.

The market price of the Company’s common stock has fluctuated substantially in the past and there can be no assurance that the market price of the common stock will not continue to fluctuate significantly.

Future announcements or management discussions concerning the Company or its competitors, sales and profitability results, quarterly variations in operating results or monthly comparable store net sales, changes in earnings estimates by analysts or changes in accounting policies, among other factors, could cause the market price of the common stock to fluctuate substantially. In addition, stock markets, in general, have experienced price and volume volatility in recent years. This volatility has had a substantial effect on the market prices of securities of many public companies for reasons frequently unrelated to the operating performance of the specific companies.

ITEM 1B.
UNRESOLVED STAFF COMMENTS

There are no matters which are required to be reported under Item 1B.

ITEM 2.
PROPERTIES

Store Locations

The Company’s Christopher & Banks and C.J. Banks stores are located primarily in regional shopping malls in mid-sized cities and suburban areas, which offer high-traffic by potential walk-in customers. All of the Company’s stores are company-owned. Approximately 85% of the Company’s stores are located in enclosed regional malls that typically have numerous specialty stores and two or more general merchandise chains or department stores as anchor tenants. The rest of the Company’s Christopher & Banks and C.J. Banks stores are located in lifestyle, community and strip shopping centers. The Company attempts to locate its stores strategically within each mall or shopping center to attract walk-in customers through attractive visual displays and the use of lifestyle graphics. Most of the Company’s 38 Acorn stores are located in upscale lifestyle centers and other distinctive shopping areas.

At April 20, 2007, Christopher & Banks stores averaged approximately 3,300 square feet, C. J. Banks stores averaged approximately 3,600 square feet and Acorn stores averaged approximately 2,400 square feet. The Company estimates approximately 85% of the total store square footage is allocated to selling space. At April 20, 2007, the Company operated 790 stores in 45 states as follows:

	Number of	Number of	Number of
	Christopher & Banks	C.J. Banks	Acorn
State	Stores	Stores	Stores	Total Stores
Alabama	1	—	—	1
Arizona	6	1	—	7
Arkansas	5	2	—	7
California	11	1	—	12
Colorado	19	4	2	25
Connecticut	4	—	1	5
Delaware	2	—	—	2
Florida	10	2	—	12
Georgia	4	—	4	8
Idaho	7	3	—	10
Illinois	26	14	5	45
Indiana	18	13	—	31
Iowa	24	11	—	35
Kansas	11	7	—	18
Kentucky	11	4	1	16
Maine	2	2	—	4
Maryland	7	2	—	9
Massachusetts	11	1	—	12
Michigan	30	16	2	48
Minnesota	36	12	3	51
Missouri	14	13	—	27
Montana	6	4	—	10
Nebraska	12	6	—	18
New Hampshire	3	—	—	3
New Jersey	2	—	2	4
New Mexico	4	2	—	6
New York	22	16	—	38
North Carolina	6	—	3	9
North Dakota	7	4	—	11
Ohio	37	23	6	66
Oklahoma	7	—	—	7
Oregon	8	2	—	10
Pennsylvania	41	19	—	60
Rhode Island	1	—	—	1
South Carolina	2	—	4	6
South Dakota	7	3	—	10
Tennessee	12	3	2	17
Texas	17	2	—	19
Utah	10	3	—	13
Vermont	2	1	—	3
Virginia	11	4	2	17
Washington	16	8	—	24
West Virginia	7	7	—	14
Wisconsin	24	9	1	34
Wyoming	3	2	—	5
Total	526	226	38	790

Store Leases

All of the Company’s store locations are leased. Management believes that the current commercial real estate market, combined with the Company’s relationship with nationally-recognized developers and established operating history, makes the Company an attractive tenant when negotiating terms with shopping center developers, owners or management companies.

Lease terms typically include a rental period of ten years and may contain a renewal option. Leases generally require payments of fixed minimum rent and contingent percentage rent, calculated based on a percent of sales in excess of a specified level. The following table, which covers all of the stores operated by the Company at April 20, 2007, indicates the number of leases expiring during the fiscal year indicated and the number of such leases with renewal options. The number of stores with leases expiring in fiscal 2008 includes those stores which currently are operating on month-to-month terms.

	Number of	Number with
Fiscal Year	Leases Expiring	Renewal Options
2008	47	6
2009	36	7
2010	50	3
2011	65	2
2012	95	7
2013-2017	475	7
2018-2022	22	—
Total	790	32

The Company currently plans to negotiate new leases in most of the locations which do not have renewal options.

Corporate Office and Distribution Center Facility

In fiscal 2002, the Company purchased its 210,000 square foot corporate office and distribution center facility, located in Plymouth, Minnesota. Prior to fiscal 2002, the Company leased this facility. The Company utilizes the entire facility for its corporate office and distribution center requirements.

ITEM 3.
LEGAL PROCEEDINGS

The Company is involved in various minor legal matters arising in the normal course of business. In the opinion of management, the outcome of such proceedings will not have a material adverse impact on the Company’s financial position or results of operations.

ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 2007.

ITEM 4A.
EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information regarding the executive officers of the Company as of April 20, 2007.

Name	Age	Positions and Offices
Matthew P. Dillon	47	President and Chief Executive Officer
Monica L. Dahl	40	Executive Vice President and Chief Operating Officer
Andrew K. Moller	48	Executive Vice President and Chief Financial Officer
Steven J. Danker	50	Senior Vice President of Information Systems and Strategy
Kim A. Decker	46	Senior Vice President of Store Operations

Matthew P. Dillon has served as President and Chief Executive Officer since January 2007. From December 2005 through December 2006, Mr. Dillon was the Company’s President and Chief Merchandising Officer. Mr. Dillon held the position of Executive Vice President and Chief Merchandising Officer upon joining the Company in May 2005. Prior to joining the Company, Mr. Dillon served as Vice President and Director of Merchandising for Coldwater Creek from June 2001 to April 2005. Prior to joining Coldwater Creek he served for three years as Senior Vice President of Merchandising and Marketing for The Mark Group which operates the Mark, Fore and Strike catalog and retail stores. Before that, Mr. Dillon was Vice President of Northwest Passages by Harry and David, a division of the Bear Creek Corporation, and held senior merchandise management positions at Spiegel. Mr. Dillon began his retail career with Bullock’s in Los Angeles.

Monica L. Dahl has served as Executive Vice President and Chief Operating Officer since December 2005. Ms. Dahl served as Vice President of Business Development from November 2004 to December 2005. Upon joining the Company in May 2004, Ms. Dahl was Director of Business Development. From January 1993 to April 2004, Ms. Dahl held various positions with Wilsons Leather including Director of Sourcing; Divisional Merchandise Manager Women’s Apparel; Director of Merchandise Planning; and several positions in the Finance department. Ms. Dahl was with Arthur Andersen LLP from December 1987 to December 1992.

Andrew K. Moller has served as Executive Vice President and Chief Financial Officer since December 2005. From March 1999 through December 2005, Mr. Moller served as Senior Vice President and Chief Financial Officer. From March 1998 through February 1999, Mr. Moller was Vice President and Chief Financial Officer. Mr. Moller was Controller from January 1995 through February 1998. From September 1992 through December 1994, Mr. Moller was Assistant Controller. Prior to joining the Company, Mr. Moller held managerial accounting positions with Ladbroke Racing Canterbury, Inc., a subsidiary of Ladbroke Group, and with B Dalton Bookstores. Mr. Moller also has previous experience with Arthur Andersen LLP.

Steven J. Danker has served as Senior Vice President, Information Systems and Strategy since October 2006 when he joined the Company. From 2005 to October 2006, Mr. Danker provided management and technology consulting services. From 2003 to 2004, Mr. Danker was Senior Vice President and Chief Information Officer for Value Vision Media, Inc. / Shop NBC. Mr. Danker was a consultant, Interim Chief Information Officer and Senior Vice President, Business Transformation for Waldo’s Dolar Mart de Mexico from 2001 to 2003. From 1998 to 2001, Mr. Danker was Senior Vice President and Chief Information Officer for Musicland Stores Corporation. From 1992 to 1998, Mr. Danker held various positions with Boston Chicken, Inc. Mr. Danker served in marketing and sales management positions with IBM from 1985 to 1992 and with NCR from 1978 to 1985.

Kim A. Decker has served as Senior Vice President, Store Operations since December 2005. From August 2002 to December 2005, Ms. Decker served as Vice President and Director of Stores, C.J. Banks Division. From March 1998 through July 2002, Ms. Decker was the Senior Regional Manager for the Company’s Christopher & Banks division. Ms. Decker held the position of Field Director of Store Operations with the Company from October 1996 until February 1998. From March 1993 to September 1996, Ms. Decker was a Regional Manager and from February 1987 to February 1993, Ms. Decker was a District Manager for the Company. From May 1980 to January 1987, Ms. Decker held various store level positions with the Company.

PART II

ITEM 5.

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

On July 17, 2002, the Company listed its common stock on the New York Stock Exchange and began trading under the symbol “CBK.” From July 27, 2000 to July 16, 2002, the Company’s common stock traded on the Nasdaq Stock Market under the symbol “CHBS.” The Company’s common stock traded on The Nasdaq Stock Market under the symbol “BFCI” from March 31, 1992 through July 26, 2000.

The quarterly high and low stock sales price information for the Company’s common stock for fiscal 2007 and 2006 are included in the table below.

	Market Price
Quarter Ended	High		Low
March 3, 2007	$	21.20	$	17.78
November 25, 2006	$	30.09	$	21.33
August 26, 2006	$	29.47	$	25.00
May 27, 2006	$	27.71	$	21.27
February 25, 2006	$	21.02	$	15.08
November 26, 2005	$	16.70	$	12.36
August 27, 2005	$	19.98	$	15.96
May 28, 2005	$	19.30	$	15.62

The number of holders of record of the Company’s common stock as of April 20, 2007 was 118. Based upon information received from the record holders, there are approximately 7,500 beneficial owners. The last reported sales price of the Company’s common stock on April 20, 2007 was $18.17.

In fiscal 2004, the Company’s Board of Directors declared the Company’s first cash dividend. The declaration provided for an on-going cash dividend of $0.04 per share to be paid quarterly, subject to Board approval. In July 2006, the Company’s Board of Directors authorized an increase in the quarterly cash dividend to $0.06 per share. The Company has declared and paid a dividend each quarter since the first declaration in fiscal 2004.

In July 2006, the Company’s Board of Directors authorized a stock repurchase program enabling the Company to purchase up to $20 million of its common stock, subject to market conditions. In December 2006, the Company’s Board of Directors authorized a $20 million increase in the repurchase program bringing the total dollar amount of stock that could be purchased to $40 million. During fiscal 2007, the Company repurchased 1,732,123 shares at a total cost, including commissions, of approximately $34.2 million. In March 2006, the Company completed the repurchase program by purchasing an additional 325,059 shares of its common stock for a total cost, including commissions, of $5.8 million, bringing the total number of shares repurchased under this program to 2,057,182 at a total cost, including commissions, of approximately $40.0 million.

The common stock repurchased under this program is being held in treasury and has reduced the number of shares of the Company’s common stock outstanding by approximately 5%. All of the Company’s share repurchases were executed in the open market and no shares were repurchased from related parties. In addition, all of the Company’s share repurchases were executed in accordance with the safe harbor provision of Rule 10b-18 of the Securities Exchange Act of 1934, as amended. Depending on market conditions and the Company’s cash position, the Company may participate in additional stock repurchase programs in the future.

The following table sets forth information concerning purchases made by the Company of its common stock for the periods indicated:

				Total Number	Approximate
				of Shares	Dollar Value
	Total Number	Average		Purchased as	of Shares that May
	of Shares	Price Paid		Part of a Publicly	Yet be Purchased
Period	Purchased	per Share		Announced Program	Under the Program

Fiscal December:
November 26, 2006 - December 23, 2006	602,523	$	19.25	968,523	$	20,000,075

Fiscal January:
December 24, 2006 - January 27, 2007	203,600	$	18.91	1,172,123	$	16,150,953

Fiscal February:
January 28, 2007 - March 3, 2007	560,000	$	18.45	1,732,123	$	5,819,657

In March 2007, the Company completed the repurchase program by purchasing an additional 325,059 shares of its common stock for a total cost, including commissions, of $5.8 million, bringing the total number of shares repurchased under this program to 2,057,182 at a total cost, including commissions, of approximately $40.0 million.

Comparative Stock Performance

The graph below compares the cumulative total shareholder return on the Common Stock of the Company (“C&B”) since March 2, 2002 to the cumulative total shareholder return of (i) the S&P 500 Index and (ii) the S&P Apparel Retail Index. The Comparisons assume $100 was invested on March 2, 2002 in the Company’s common stock, the S&P 500 Index and the S&P Apparel Retail Index and assumes reinvestment of dividends, if any. The information contained in this graph shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into any such filing.

ITEM 6.
SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data has been derived from the audited Consolidated Financial Statements of the Company and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related notes appearing in Item 8 of this Form 10-K.

	Fiscal Year Ended
	(In thousands, except per share amounts and selected operating data)
	Mar. 3,			Feb. 25,				Feb. 26,					Feb. 28,					Mar. 1,
	2007(1)			2006				2005					2004					2003
Income Statement Data:
Net sales	$		547,317	$			490,508	$				438,862	$				390,723	$			338,756
Merchandise, buying and occupancy costs, exclusive of depreciation and amortization	330,473			292,072				270,937					225,490					190,496
Selling, general and administrative expenses	145,229			131,955				108,856					89,316					76,673
Depreciation and amortization	21,687			18,847				16,157					13,633					10,876

Operating income	49,928			47,634				42,912					62,284					60,711

Interest income	5,123			2,094				1,041					875					903
Interest expense	8			2				2					2					8

Income before income taxes	55,043			49,726				43,951					63,157					61,606

Income tax provision	21,357			19,313				16,935					24,354					23,659

Net income	$		33,686	$			30,413	$				27,016	$				38,803	$			37,947

Basic earnings per common share: (2)
Net income	$		0.90	$			0.85	$			0.74		$			1.03		$			0.99
Basic shares outstanding	37,307			35,907				36,322					37,549					38,396

Diluted earnings per common share: (2)
Net income	$		0.89	$		0.84		$		0.73			$		1.01			$		0.95
Diluted shares outstanding	37,761			36,220				36,825					38,403					39,737

Dividends per share	$	0.20		$	0.16			$	0.16				$	0.08				$	—

(1) The year ended March 3, 2007 consisted of 53 weeks. All other years presented consisted of 52 weeks.

(2) All earnings per share amounts reported above reflect the effect of a 3-for-2 stock split effective August 27, 2003.

ITEM 6.
SELECTED CONSOLIDATED FINANCIAL DATA (Continued)

	Mar. 3,			Feb. 25,			Feb. 26,			Feb. 28,			Mar. 1,
	2007(1)			2006			2005			2004			2003

Balance Sheet Data (at end of each period in thousands):
Cash and short-term investments	$	102,266		$	92,385		$	60,812		$	88,799		$	64,092
Merchandise inventory	52,355			37,871			40,525			31,300			24,134
Total assets	307,323			263,463			229,204			223,376			179,103
Long-term debt	—			—			—			—			—
Stockholders’ equity	225,765			192,793			163,209			175,666			141,701
Working capital	128,854			104,856			81,558			106,040			78,641

Selected Operating Data:
Same-store sales increase (decrease) (2)	1		%	1		%	(2		)%	(2		)%	1		%
Stores at end of period	778			705			642			534			438
Net sales per gross square foot (3)	$	219		$	216		$	220		$	238		$	253

(1) The year ended March 3, 2007 contained 53 weeks. All other years presented contained 52 weeks.

(2) Same-store sales data is calculated based on the change in net sales for stores that have been open for more than 13 full months and includes stores, if any, that have been relocated within the same mall. The Company typically does not expand or relocate stores within a mall. Stores where square footage has been changed by more than 25 percent are excluded from the same-store sales calculation. Stores closed during the year are included in the same-store sales calculation only for the full months of the year during which the stores were open.

(3) The computation of net sales per gross square foot includes stores which were open for all 12 months of the fiscal year. Relocated and expanded stores, if any, are included in the calculation.

ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and related Notes of the Company included in Item 8 of this Form 10-K. Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain “forward-looking statements” that involve risks and uncertainties. The Company’s actual results could materially differ from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in Item 1A of this Annual Report on Form 10-K.

Executive Summary - Key Performance Indicators

The Company’s management evaluates the following items, which are considered key performance indicators, in assessing the Company’s performance:

Same-store sales

The Company’s same-store sales data is calculated based on the change in net sales for stores that have been open for more than 13 full months and includes stores, if any, that have been relocated within the same mall, though the Company typically does not expand or relocate stores within a mall. Stores where square footage has been changed by more than 25 percent are excluded from the same-store sales calculation. Stores closed during the year are included in the same-store sales calculation only for the full months of the year the stores were open.

Management considers same-store sales to be an important indicator of the Company’s performance. Same-store sales results are important in achieving leveraging of costs, including store payroll, store occupancy, depreciation and other general and administrative expenses. Positive same-store sales above a certain level contribute to greater leveraging of costs while negative same-store sales contribute to deleveraging of costs. Same-store sales also have a direct impact on the Company’s total net sales, cash and cash equivalents and working capital.

Merchandise, buying and occupancy costs, exclusive of depreciation and amortization

Merchandise, buying and occupancy costs, exclusive of depreciation and amortization, measure whether the Company is appropriately optimizing the price of its merchandise. Merchandise, buying and occupancy costs include the cost of merchandise, markdowns, shrink, freight into and out from the Company’s distribution center, buyer and distribution center salaries, buyer travel, rent and other occupancy related costs, various merchandise design and development costs, miscellaneous merchandise expenses and other costs related to the Company’s distribution network. Any inability to obtain acceptable levels of initial markups or any significant increase in the Company’s markdowns could have an adverse effect on the Company’s results of operations.

Operating income

The Company’s management views operating income as a key indicator of the Company’s success. The key drivers of operating income are same-store sales, merchandise, buying and occupancy costs and the Company’s ability to control operating costs.

Store productivity

Store productivity, including sales per square foot, average unit retail price, number of transactions per store, number of units per transaction and average retail per transaction, is evaluated by management in assessing the operational performance of the Company.

Inventory turnover

The Company’s management evaluates inventory turnover as a measure of how productively inventory is bought and sold. Inventory turnover is important as it can signal slow moving inventory, which can be critical in determining the need to take markdowns on merchandise.

Cash flow and liquidity

Management evaluates cash flow from operations, investing activities and financing activities in determining the sufficiency of the Company’s cash position. Cash flow from operations has historically been sufficient to cover the Company’s uses of cash. The Company expects its cash and short-term investments, combined with cash flows from operations, to be sufficient to fund anticipated capital expenditures, working capital and other requirements for liquidity for fiscal 2008.

Executive Overview

Christopher & Banks Corporation is a Minneapolis-based retailer of women’s specialty apparel, which operates retail stores through its wholly-owned subsidiaries; Christopher & Banks, Inc., Christopher & Banks Company and Christopher & Banks Services Company. The Company was incorporated in 1986 to acquire Braun’s Fashions, Inc., which had operated as a family-owned business since 1956. In fiscal 2001, the Company’s shareholders approved a change in the Company’s name from Braun’s Fashions Corporation to Christopher & Banks Corporation.

As of April 20, 2007, the Company operated 790 stores in 45 states, including 526 Christopher & Banks stores, 226 C.J. Banks stores and 38 Acorn stores. The Company’s Christopher & Banks stores offer distinctive fashions featuring exclusively designed, coordinated assortments of sportswear in sizes four to 16. The Company’s C.J. Banks stores offer similar assortments of women’s specialty apparel in sizes 14W and up. Acorn stores offer upscale women’s fashions along with complementary jewelry and accessories under private and branded labels.

On December 14, 2006, the Company announced it had amended its employment agreement with Matthew P. Dillon, President and Chief Merchandising Officer, naming him President and Chief Executive Officer effective January 1, 2007. Mr. Dillon was also appointed to the Company’s Board of Directors as an additional Class 2 director concurrent with his promotion to Chief Executive Officer. The Company had previously announced that Mr. Dillon would become Chief Executive Officer on March 1, 2007. The Company also announced that since the transition of responsibilities to Mr. Dillon was substantially completed, Joseph E. Pennington would resign as Chief Executive Officer and as a member of the Company’s Board of Directors on December 31, 2006. After December 31, 2006, Mr. Pennington will continue to be employed by the Company as a non-officer employee in an advisory role through August 31, 2008.

On October 3, 2006, the Company announced the election of Mark A. Cohn to its Board of Directors effective October 2, 2006. Mr. Cohn will serve as an additional Class 3 director. The election of Mr. Cohn increases the number of seats on the Company’s Board of Directors to eight and the number of independent Directors to seven.

In July 2006, the Company’s Board of Directors authorized a stock repurchase program enabling the Company to purchase up to $20 million of its common stock, subject to market conditions. In December 2006, the Company’s Board of Directors authorized a $20 million increase in the repurchase program bringing the total dollar amount of stock that could be purchased to $40 million. During fiscal 2007, the Company repurchased 1,732,123 shares at a total cost, including commissions, of approximately $34.2 million. In March 2007, the Company completed the repurchase program by purchasing an additional 325,059 shares of its common stock for a total cost, including commissions, of $5.8 million, bringing the total number of shares repurchased under this program to 2,057,182 at a total cost, including commissions, of approximately $40.0 million.

In July 2006, the Company’s Board of Directors also authorized an increase in the Company’s quarterly cash dividend. Beginning in October 2006, the Company paid a quarterly dividend of $0.06 per share of common stock. The dividend rate was previously $0.04 per share of common stock. The Company has declared and paid a dividend each quarter since its first declaration in fiscal 2004.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon the Company’s Consolidated Financial Statements and related Notes, which have been prepared in accordance with generally accepted accounting principles used in the United States of America. The preparation of these financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during a reporting period. Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable. As a result, actual results could differ because of the use of these estimates and assumptions.

The Company’s significant accounting policies can be found in Note 1 to the Consolidated Financial Statements contained in Item 8 of this Form 10-K. The Company believes the following accounting policies are most critical to aid in fully understanding and evaluating the Company’s reported financial condition and results of operations.

Revenue recognition

Sales are recognized by the Company at the point of purchase when the customer takes possession of the merchandise and pays for the purchase, typically with cash or credit card. Gift cards issued by the Company are recorded as a liability until they are redeemed, at which point a sale is recorded. The Company recognizes income for unredeemed gift cards when the likelihood of a gift card being redeemed by a customer is remote (“gift card breakage”) and the Company determines that it does not have a legal obligation to remit the value of the unredeemed gift card to the relevant jurisdiction as unclaimed property or abandoned property.

Inventory valuation

Merchandise inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out retail inventory method. Permanent markdowns of inventory are recorded monthly based on an evaluation by merchandising management, which includes analyzing inventory levels and aging, as well as rate of sale. The Company further reduces the value of inventory by recording an allowance for permanent markdowns based on inventory levels from the season which immediately precedes the current season as of the reporting date. Permanent markdowns on this merchandise take into account the future anticipated selling price of the inventory. To the extent that management’s estimates differ from actual results, additional markdowns may have to be recorded, which could reduce the Company’s operating income and adversely affect its financial position and results of operations.

Property, equipment and improvements

Property, equipment and improvements are stated at cost. Property and equipment is depreciated over its estimated useful life; three to five years for computer hardware and software, seven years for furniture, fixtures and other equipment, and 25 years for the Company’s corporate office and distribution center and related building improvements. Store leasehold improvements are amortized over the shorter of the useful life or the term of the related leases, which is typically ten years. Repairs and maintenance which do not extend an asset’s useful life are expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is reflected in income or expense for that period.

The Company reviews property, plant and equipment for impairment at least annually or whenever events or changes in circumstances indicate the net book value of an asset may not be recoverable. An impairment loss is recognized when the net book value of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The impairment loss recorded, which is reflected as depreciation expense in the Consolidated Statement of Income, is the excess of the asset’s net book value over its fair value. Fair value is determined based upon the best information available under the circumstances including quoted prices or other valuation techniques.

Stock-based compensation

Effective February 26, 2006, the Company adopted the provisions of Statement of Financial Accounting Standard (“SFAS”) No. 123R, “Share-Based Payment” (“SFAS 123R”) using the modified prospective transition method. Under this transition method, stock-based compensation expense recognized for share-based awards during the fiscal year ended March 3, 2007 includes: (a) compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of, February 25, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation expense for all stock-based compensation awards granted subsequent to February 25, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. In accordance with the modified prospective transition method, results for the prior period have not been restated. Prior to the adoption of SFAS 123R, the Company recognized stock-based compensation expense in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related Interpretations, as permitted by SFAS 123.

Rent expense, deferred rent obligations and deferred lease incentives

The Company leases all of its store locations under operating leases. Most of these lease agreements contain tenant improvement allowances funded by landlord incentives or rent holidays. Certain of the Company’s lease agreements contain rent escalation clauses which provide for scheduled rent increases during the lease term or for rental payments commencing at a date other than the date of initial occupancy. Such “stepped” rent expense is recorded in the Consolidated Statement of Income on a straight-line basis over the lease term, not including any renewal option periods, and the difference between the recognized rent expense and amounts payable under the lease are recorded as deferred rent obligations. In addition, the Company has a limited number of other lease agreements for retail space which include escalation in minimum rent based on increases in the Consumer Price Index, not to exceed 2.0%. For these leases, the Company utilizes the maximum annual increase of 2.0% for purposes of calculating rent expense and future minimum lease payments.

For purposes of recognizing landlord incentives and minimum rental expense the Company utilizes the date that it obtains the legal right to use and control the leased space, which is generally when the Company enters the space and begins to make improvements in preparation of opening the new store location. For tenant improvement allowances funded by landlord incentives and rent holidays, the Company records a deferred lease incentive liability in other noncurrent liabilities on the Consolidated Balance Sheet and amortizes the deferred liability as a reduction of rent expense on the Consolidated Statement of Income over the term of the lease.

The Company’s leases may also provide for contingent rents, which are determined as a percentage of revenues in excess of specified levels. The Company records an other accrued liability, within current liabilities on the Consolidated Balance Sheet, along with the corresponding rent expense in the Consolidated Statement of Income, when specified levels have been achieved or when management determines that achieving the specified levels during the fiscal year is probable.

Long-lived assets

The Company reviews long-lived assets with definite lives at least annually or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. This review includes the evaluation of individual under-performing stores and assessing the recoverability of the carrying value of the improvements and equipment related to the store. Future cash flows are projected for the remaining lease life considering such factors as future sales levels, operating income, changes in rent and other expenses, as well as the overall operating environment specific to that store. If the estimated undiscounted future cash flows are less than the carrying value of the assets, the Company records an impairment charge, reflected in depreciation expense in the Consolidated Statement of Income, equal to the difference between the assets’ fair value and carrying value. As the projection of future cash flows involves judgment and estimates, differences in circumstances or estimates could produce different results.

Goodwill

Fair values are estimated based on future discounted cash flows and are compared with the corresponding carrying value of the related assets. Impairment losses will be recognized if the fair value of a reporting unit is determined to be less than the reporting unit’s carrying value. Such estimates are subject to change and the Company may recognize impairment losses in the future.

Results of Operations

The following table sets forth operating statement data expressed as a percentage of net sales for the last three fiscal years and should be read in conjunction with “Selected Consolidated Financial Data.”

	Fiscal Year Ended
	March 3,		February 25,		February 26,
	2007		2006		2005

Net sales	100.0	%	100.0	%	100.0	%
Merchandise, buying and occupancy costs, exclusive of depreciation and amortization	60.4		59.5		61.7
Selling, general and administrative expenses	26.5		26.9		24.8
Depreciation and amortization	4.0		3.9		3.7
Operating income	9.1		9.7		9.8
Interest income	1.0		0.4		0.2
Income before income taxes	10.1		10.1		10.0
Income tax provision	3.9		3.9		3.8
Net income	6.2	%	6.2	%	6.2	%

Fiscal 2007 Compared to Fiscal 2006

Net Sales. Net sales for the 53 week period ended March 3, 2007 were $547.3 million, an increase of $56.8 million or 11.6%, from net sales of $490.5 million for the 52 week period ended February 25, 2006. In addition to the extra week of sales activity in fiscal 2007, the increase in net sales was attributable to an increase in the number of stores operated by the Company during the year, as well as a 1% increase in same-store sales. The Company operated 778 stores at March 3, 2007, compared to 705 stores at February 25, 2006. The 1% increase in same-store sales resulted from strong customer acceptance of the Company’s merchandise assortment in the first half of fiscal 2007, offset by softer performance in the second half of the year. The Company’s newer stores opened in fiscal 2004, 2005 and 2006 recorded a 5% increase in same-store sales, while the mature base of stores opened before fiscal 2004 posted a 1% decline in same-store sales.

Merchandise, Buying and Occupancy Costs, exclusive of depreciation and amortization. Merchandise, buying and occupancy costs, exclusive of depreciation and amortization, were $330.5 million, or 60.4% of net sales, during the fiscal year ended March 3, 2007, compared to $292.1 million, or 59.5% of net sales, during the fiscal year ended February 25, 2006. The increase in merchandising, buying and occupancy costs as a percent of net sales was mainly attributable to a higher level of markdowns experienced in the second half of fiscal 2007 as customers did not respond favorably to the Company’s merchandise assortment in the third and fourth quarters. This was partially offset by lower markdowns in the first and second quarters of the year when customer acceptance of the Company’s merchandise was much stronger.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $145.2 million, or 26.5% of net sales, in fiscal 2007, compared to $132.0 million, or 26.9% of net sales, in fiscal 2006, resulting in approximately 40 basis points of positive leverage. The Company gained positive leverage in fiscal 2007 by controlling store level payroll costs and from a lower level of self-insured medical and workers compensation claims. In addition, last year’s fourth quarter contained a $1.2 million charge related to contractual payments due to William J. Prange, the Company’s former Chief Executive Officer. These favorable items were partially offset by stock-based compensation expense which accounted for approximately 60 more basis points of selling, general and administrative expenses in fiscal 2007 than in fiscal 2006.

Depreciation and Amortization. Depreciation and amortization was $21.7 million, or 4.0% of net sales, in fiscal 2007, compared to $18.8 million, or 3.9% of net sales, in fiscal 2006. The increase in depreciation and amortization expense was primarily the result of capital expenditures made during the year as the Company opened 78 new stores and remodeled ten existing stores during fiscal 2007. In addition, the Company recorded approximately $1.1 million of accelerated depreciation in the fourth quarter of fiscal 2007 related to asset impairment charges for eight underperforming stores.

Operating Income. As a result of the foregoing factors, operating income for the year ended March 3, 2007 was $49.9 million, or 9.1% of net sales, compared to operating income of $47.6 million, or 9.7% of net sales, for the year ended February 25, 2006.

Interest Income. For the year ended March 3, 2007, net interest income increased to $5.1 million from $2.1 million for the year ended February 25, 2006. The increase resulted from higher interest rates on short-term investments combined with a larger average balance of cash equivalents and short-term investments in fiscal 2007 compared to fiscal 2006.

Income Taxes. Income tax expense was $21.4 million, with an effective tax rate of approximately 38.8%, in fiscal 2007, compared to $19.3 million, with an effective tax rate of approximately 38.8%, in fiscal 2006.

Net Income. As a result of the foregoing factors, net income for the year ended March 3, 2007 was $33.7 million, or 6.2% of net sales and $0.89 per diluted share, compared to net income of $30.4 million, or 6.2% of net sales and $0.84 per diluted share for the year ended February 25, 2006.

Fiscal 2006 Compared to Fiscal 2005

Net Sales. Net sales for the year ended February 25, 2006 were $490.5 million, an increase of $51.6 million or 12%, from net sales of $438.9 million for the year ended February 26, 2005. The increase in net sales was attributable to an increase in the number of stores operated by the Company during the year, as well as a 1% increase in same-store sales. The Company operated 705 stores at February 25, 2006, compared to 642 stores at February 26, 2005.

The Company’s same-store sales data is calculated based on the change in net sales for stores that have been open for more than 13 full months and includes stores, if any, that have been relocated within the same mall. The Company typically does not expand or relocate stores within a mall. Stores where square footage has been changed by more than 25 percent are excluded from the same-store sales calculation. Stores closed during the year are included in the same-store sales calculation only for the full months of the year the stores were open. Sales from the Acorn stores acquired by the Company in fiscal 2005 were included in the calculation of same-store sales beginning in December 2005 after the Company had operated the stores for 13 full months.

Merchandise, Buying and Occupancy Costs, exclusive of depreciation and amortization. Merchandise, buying and occupancy costs, exclusive of depreciation and amortization, were $292.1 million, or 59.5% of net sales, during the fiscal year ended February 25, 2006, compared to $270.9 million, or 61.7% of net sales, during the fiscal year ended February 26, 2005. The decline in merchandising, buying and occupancy costs as a percent of net sales was mainly attributable to reduced markdowns resulting from improved inventory control and stronger acceptance of the Company’s merchandise assortment and, to a lesser extent, improved initial markups.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $132.0 million, or 26.9% of net sales, in fiscal 2006, compared to $108.9 million, or 24.8% of net sales, in fiscal 2005. The approximate 210 basis point increase in selling, general and administrative expenses as a percent of net sales was primarily the result of the inclusion of Acorn-related expenses for the entire year, increased self-insured medical and workers’ compensation claims, contractual obligations of $1.2 million due to William Prange, the Company’s former Chief Executive Officer, and store salaries and other administrative costs which could not be leveraged with a 1% increase in same-store sales.

Depreciation and Amortization. Depreciation and amortization was $18.8 million, or 3.9% of net sales, in fiscal 2006 compared to $16.2 million, or 3.7% of net sales, in fiscal 2005. The increase in depreciation and amortization expense was a result of capital expenditures made during the past year. The Company opened 69 new stores and remodeled 12 existing stores during the year ended February 25, 2006.

Operating Income. As a result of the foregoing factors, operating income for the year ended February 25, 2006 was $47.6 million, or 9.7% of net sales, compared to operating income of $42.9 million, or 9.8% of net sales, for the year ended February 26, 2005.

Interest Income. For the year ended February 25, 2006, net interest income increased to $2.1 million from $1.0 million for the year ended February 26, 2005. The increase resulted from higher interest rates on short-term investments combined with a larger average balance of cash equivalents and short-term investments in fiscal 2006 compared to fiscal 2005.

Income Taxes. Income tax expense was $19.3 million, with an effective tax rate of approximately 38.8%, in fiscal 2006, compared to $16.9 million, with an effective tax rate of approximately 38.5%, in fiscal 2005. The increase in effective tax rate was due to an increase in state income taxes resulting from the estimated mix of apportionment of the Company’s income among the 45 states in which it operates.

Net Income. As a result of the foregoing factors, net income for the year ended February 25, 2006 was $30.4 million, or 6.2% of net sales and $0.84 per diluted share, compared to net income of $27.0 million, or 6.2% of net sales and $0.73 per diluted share for the year ended February 26, 2005.

Liquidity and Capital Resources

The Company’s principal on-going cash requirements are to finance the construction of new stores and the remodeling of certain existing stores, to make technology related and other capital expenditures, to purchase merchandise inventory and to fund other working capital requirements. Merchandise purchases vary on a seasonal basis, peaking in the fall. As a result, the Company’s cash requirements historically reach their peak in October or November. Conversely, cash balances peak in January after the holiday season is completed.

Net cash provided by operating activities totaled $45.2 million in fiscal 2007, down from $60.9 million in fiscal 2006. Significant fluctuations in the Company’s working capital accounts included a $14.7 million increase in merchandise inventory, a $7.6 million increase in prepaid expenses and a $5.9 million increase in accounts payable. The Company’s merchandise inventory increased as the Company operated 73 more stores at the end of fiscal 2007 compared to fiscal 2006. In addition, a larger balance of inventory in-transit resulted from timing of merchandise deliveries related to the Easter holiday, which occurred eight days earlier in fiscal 2008 than in fiscal 2007. The increase in accounts payable was directly related to the increase in merchandise inventory in-transit. The increase in prepaid expenses resulted primarily from March 2007 rent payments that were prepaid at the end of fiscal 2007.

The $48.8 million of net cash used in investing activities included $30.5 million of capital expenditures and net purchases of short-term investments of approximately $18.3 million. The Company opened 78 new stores and completed ten store remodels during the year ended March 3, 2007.

Net cash of $4.8 million was used in financing activities in fiscal 2007. The Company declared and paid four quarterly cash dividends together totaling $7.4 million, repurchased 1,732,123 shares of its common stock at a total cost, including commissions, of approximately $34.2 million and received approximately $31.0 million in cash as certain of the Company’s officers, directors and key employees exercised stock options in fiscal 2007.

The Company is planning to fund approximately $37 million of capital expenditures in fiscal 2008. Approximately $31 million will be invested in new store openings, store remodels, additional display fixtures and point-of-sale register upgrades. In fiscal 2008, the Company plans to open approximately 70 stores, comprised of 25 Christopher & Banks stores, 40 C.J. Banks stores and five Acorn stores. The Company also plans to spend approximately $6 million to make certain additional information technology investments and to reconfigure its Plymouth, Minnesota distribution center.

The Company maintains an Amended and Restated Revolving Credit facility with Wells Fargo Bank, National Association (the “Wells Fargo Revolver”) which expires on June 30, 2008. The Wells Fargo Revolver provides the Company with revolving credit loans and letters of credit of up to $50.0 million, subject to a borrowing base formula based on inventory levels. Loans under the Wells Fargo Revolver bear interest at Wells Fargo’s base rate, 8.25% as of March 3, 2007, plus 0.25%. Interest is payable monthly in arrears. The Wells Fargo Revolver carries a facility fee of 0.25% based on the unused portion as defined in the agreement. Facility fees totaled $7,229 in fiscal 2007.

The credit facility is collateralized by the Company’s equipment, general intangibles, inventory, inventory letters of credit and letter of credit rights. The Company had no revolving credit loan borrowings under the Wells Fargo Revolver during fiscal 2007 or fiscal 2006. Historically, the Wells Fargo Revolver has been utilized by the Company only to open letters of credit to facilitate the import of merchandise. The borrowing base at March 3, 2007 was $42.8 million. As of March 3, 2007, the Company had outstanding letters of credit in the amount of $28.8 million. Accordingly, the availability of revolving credit loans under the Wells Fargo Revolver was $14.0 million at March 3, 2007.

The Wells Fargo Revolver contains certain restrictive covenants, including restrictions on incurring additional indebtedness and limitations on certain types of investments, as well as requiring the maintenance of certain financial ratios. As of March 3, 2007, the most recent measurement date, the Company was in compliance with all covenants of the Wells Fargo Revolver.

Contractual Obligations

The following table summarizes the Company’s contractual obligations at March 3, 2007:

			Contractual obligations due in
			Less Than						More Than
	Total		1 Year		2-3 Years		4-5 Years		5 Years

Long-term debt	$	—	$	—	$	—	$	—	$	—

Capital lease obligations	—		—		—		—		—

Operating leases	333,184,322		51,050,311		99,325,809		88,718,430		94,089,772

Purchase obligations	28,846,369		28,846,369		—		—		—

Other liabilities	—		—		—		—		—

Total	$	362,030,691	$	79,896,680	$	99,325,809	$	88,718,430	$	94,089,772

The Company’s contractual obligations include operating leases for each of its retail store locations and vehicles. The amount for operating leases reflected in the table above includes future minimum rental commitments only and excludes common area maintenance charges, real estate taxes and other costs associated with operating leases. These types of costs, which are not fixed and determinable, totaled $31.0 million, $26.7 million and $22.6 million in fiscal 2007, 2006 and 2005, respectively. The Company’s contractual obligations also include purchase obligations consisting of $28.8 million of open purchase orders for goods currently in production with foreign suppliers. These open purchase orders are secured by letters of credit for which the Company is contingently liable.

As of March 3, 2007, the Company had no other contractual obligations relating to short or long-term debt, capital leases or non-cancelable purchase obligations. In addition, the Company had no contractual obligations relating to the other liabilities recorded in the Company’s balance sheet under accounting principles generally accepted in the United States of America. As of March 3, 2007, the Company’s other liabilities consisted of deferred rent, deferred lease incentives and deferred income taxes.

The Company does not have relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purposes entities, which would have been established for the purpose of facilitating off-balance sheet financial arrangements or other contractually narrow or limited purposes. As such, the Company is not materially exposed to any financing, liquidity, market or credit risk that could arise if the Company had engaged in such relationships.

The Company’s related party transactions are limited to employment agreements with certain officers. In addition, the Company does not maintain any long-term or exclusive commitments or arrangements to purchase merchandise from any of its suppliers.

Merchandise Sourcing

The Company directly imported approximately 75% of its total merchandise purchases in fiscal 2007. This reliance on sourcing from foreign countries may cause the Company to be exposed to certain risks. Import restrictions, including tariffs and quotas, and changes in such restrictions, could affect the import of apparel and might result in increased costs, delays in merchandise receipts or reduced supplies of apparel available to the Company and could possibly have an adverse effect on the Company’s business, financial condition and/or results of operations. The Company’s merchandise flow could also be adversely affected by political or financial instability in any of the countries where its merchandise is manufactured or by changes in the United States’ governmental policies toward such foreign countries. In addition, merchandise deliveries could be delayed due to interruptions in air, ocean and ground shipment transportation.

Substantially all of the Company’s directly imported merchandise is manufactured in Southeast Asia. The majority of these goods are produced in China, Hong Kong, Indonesia and Singapore. The Company is not currently importing merchandise produced in the Middle East.

During fiscal 2007, the Company purchased approximately 98% of its merchandise from 150 vendors and the Company’s ten largest vendors provided approximately 48% of the Company’s purchases. In addition, purchases from the Company’s largest overseas supplier accounted for approximately 17% of total purchases, compared to 31% in fiscal 2006. In fiscal 2008, management plans to continue to make changes to its merchandise assortment and further diversify its vendor base. Although the Company believes that its relationship with its largest vendor is good, there can be no assurance that this relationship can be maintained in the future or that the vendor will continue to supply merchandise to the Company. If there should be any significant disruption in the supply of merchandise from this vendor, management believes that it will be able to shift production to other suppliers so as to continue to secure the required volume of product. Nevertheless, it is possible that any significant disruption in supply could have a material adverse impact on the Company’s financial position and results of operations. The Company intends to directly import approximately 75% of its purchases again in fiscal 2008.

Quota Restrictions

In December 2004, quota restrictions expired on the importing of apparel to the United States from foreign countries which are members of the World Trade Organization. In November 2005, an agreement was reached between the United States and the People’s Republic of China regarding trade in textile and apparel products. The agreement, effective January 1, 2006 to December 31, 2008, established fixed quota levels for specific textile products manufactured in China. Management believes it can adjust to potential shifts in the availability of apparel resulting from the implementation of these quotas. However, the Company’s sourcing operations may be adversely affected by trade limits or political and financial instability resulting in the disruption of trade from exporting countries.

Quarterly Results and Seasonality

Inflation

Although the operations of the Company are influenced by general economic conditions, the Company does not believe that inflation had a material effect on the results of operations during fiscal 2007, 2006 and 2005.

Recently Issued Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109” (“FIN No. 48”), which clarifies the accounting for uncertain income tax positions by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. Additionally, FIN 48 provides guidance on derecognition, classification, interest, penalties, accounting in interim periods and disclosure related to uncertain income tax positions. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact of adopting FIN No. 48, but does not anticipate the adoption will have a material effect on its financial position, results of operations or cash flows.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, rather it is applicable under other accounting pronouncements that require or permit fair value measurements. The provisions of SFAS No. 157 are to be applied prospectively as of the beginning of the fiscal year in which it is initially applied, with any transition adjustment recognized as a cumulative-effect adjustment to the opening balance of retained earnings. The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact of adopting SFAS No. 157, but does not anticipate it will have a material effect on its financial position, results of operations or cash flows.

ITEM 7A.
QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK

The market risk inherent in the Company’s financial instruments and in its financial position represents the potential loss arising from adverse changes in interest rates. The Company’s results of operations could be negatively impacted by decreases in interest rates on its short-term investments.

The Company is potentially exposed to market risk from changes in interest rates relating to its Revolving Credit and Security Agreement with Wells Fargo Bank. Loans under the Wells Fargo Revolver bear interest at Wells Fargo’s fluctuating base rate, 8.25% as of March 3, 2007, plus 0.25%. However, the Company had no revolving credit loan borrowings under the Wells Fargo Revolver during fiscal 2007 or fiscal 2006 and, given its existing liquidity position, does not expect to utilize the Wells Fargo Revolver in the future except for its continuing use of the import letter of credit facility.

The Company enters into certain purchase obligations outside the United States, which are denominated and settled in U.S. dollars. Therefore, the Company has only minimal exposure to foreign currency exchange risks. The Company does not hedge against foreign currency risks and believes that its foreign currency exchange risk is immaterial.

The Company does not have any derivative financial instruments and does not hold any derivative financial instruments for trading purposes.

ITEM 8.
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

		Page

Index to Consolidated Financial Statements		26

Financial Statements:

Report of Independent Registered Public Accounting Firm		27

Consolidated Balance Sheet at March 3, 2007 and February 25, 2006		29

Consolidated Statement of Income for the three years ended March 3, 2007		30

Consolidated Statement of Stockholders’ Equity for the three years ended March 3, 2007		31

Consolidated Statement of Cash Flows for the three years ended March 3, 2007		32

Notes to Consolidated Financial Statements		33

Financial Statement Schedule:

Schedule II – Valuation and Qualifying Accounts		54

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Christopher & Banks Corporation:

We have completed integrated audits of Christopher & Bank Corporation’s consolidated financial statements and of its internal control over financial reporting as of March 3, 2007, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Christopher & Banks Corporation and its subsidiaries at March 3, 2007 and February 25, 2006, and the results of their operations and their cash flows for each of the three years in the period ended March 3, 2007 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 2, effective February 26, 2006, the Company adopted the provisions of Financial Accounting Standards Board Statement No. 123(R), Share-Based Payment.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under item 9A, that the Company maintained effective internal control over financial reporting as of March 3, 2007 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 3, 2007, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP

Minneapolis, Minnesota

May 2, 2007

CHRISTOPHER & BANKS CORPORATION

CONSOLIDATED BALANCE SHEET

	March 3,			February 25,
	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	53,991,398		$	62,384,999
Short-term investments	48,275,000			30,000,000
Accounts receivable	4,481,624			4,753,303
Merchandise inventory, net	52,354,944			37,871,375
Prepaid expenses	10,666,421			3,062,821
Income taxes receivable	2,076,717			—
Current deferred tax asset	3,257,919			2,567,888
Total current assets	175,104,023			140,640,386

Property, equipment and improvements, net	127,776,442			118,341,542

Other assets:
Goodwill	3,587,052			3,587,052
Intangible assets	575,281			684,445
Other	280,299			209,869
Total other assets	4,442,632			4,481,366

Total assets	$	307,323,097		$	263,463,294

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	16,287,931		$	9,853,345
Accrued salaries, wages and related expenses	7,574,930			5,449,508
Other accrued liabilities	22,387,281			20,480,816
Total current liabilities	46,250,142			35,783,669

Other liabilities:
Deferred lease incentives	23,646,261			21,802,869
Deferred rent obligations	10,678,341			9,609,999
Deferred tax liability	983,137			3,473,858
Total other liabilities	35,307,739			34,886,726

Commitments	—			—

Stockholders’ equity:
Preferred stock – $0.01 par value, 1,000,000 shares authorized, none outstanding	—			—
Common stock – $0.01 par value, 74,000,000 shares authorized, 45,038,310 and 43,006,151 shares issued, and 36,521,451 and 36,221,415 shares outstanding, in fiscal 2007 and fiscal 2006, respectively	450,383			430,062
Additional paid-in capital	106,806,885			65,940,956
Retained earnings	213,264,385			186,997,975
Common stock held in treasury, 8,516,859 and 6,784,736 shares at cost in fiscal 2007 and fiscal 2006, respectively	(94,756,437		)	(60,576,094		)
Total stockholders’ equity	225,765,216			192,792,899

Total liabilities and stockholders’ equity	$	307,323,097		$	263,463,294

The accompanying notes are an integral part of these consolidated financial statements.

CHRISTOPHER & BANKS CORPORATION

CONSOLIDATED STATEMENT OF INCOME

	Fiscal Year Ended
	March 3,		February 25,		February 26,
	2007		2006		2005

Net sales	$	547,316,832	$	490,508,054	$	438,861,687
Costs and expenses:
Merchandise, buying and occupancy, exclusive of depreciation and amortization	330,473,262		292,071,779		270,937,110
Selling, general and administrative	145,228,828		131,954,889		108,855,887
Depreciation and amortization	21,686,992		18,847,615		16,156,502

Total costs and expenses	497,389,082		442,874,283		395,949,499

Operating income	49,927,750		47,633,771		42,912,188

Interest income	5,115,525		2,092,411		1,038,408

Income before income taxes	55,043,275		49,726,182		43,950,596

Income tax provision	21,356,791		19,313,648		16,935,263

Net income	$	33,686,484	$	30,412,534	$	27,015,333

Basic earnings per common share:

Net income	$	0.90	$	0.85	$	0.74

Basic shares outstanding	37,306,742		35,907,028		36,322,264

Diluted earnings per common share:

Net income	$	0.89	$	0.84	$	0.73

Diluted shares outstanding	37,761,001		36,220,153		36,825,090

Dividends per share	$	0.20	$	0.16	$	0.16

The accompanying notes are an integral part of these consolidated financial statements.

CHRISTOPHER & BANKS CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

	Common Stock											Additional
	Shares	Shares Held	Shares		Amount			Amount Held				Paid-in			Retained
	Issued	in Treasury	Outstanding		Outstanding			in Treasury				Capital			Earnings			Total

February 28, 2004	42,217,943	4,696,500	37,521,443		$		422,191	$		(25,192,938	)	$		59,307,323	$	141,129,306		$		175,665,882

Stock issued on exercise of options	285,647	—	285,647		2,856			—				1,353,483			—			1,356,339
Tax benefit on exercise of stock options	—	—	—		—			—				374,939			—			374,939
Acquistion of common stock held in treasury, at cost	—	2,088,236	(2,088,236	)	—			(35,383,156			)	—			—			(35,383,156			)
Dividends paid ($0.16 per share)	—	—	—		—			—				—			(5,820,471		)	(5,820,471			)
Net income	—	—	—		—			—				—			27,015,333			27,015,333

February 26, 2005	42,503,590	6,784,736	35,718,854		425,047			(60,576,094			)	61,035,745			162,324,168			163,208,866

Stock issued on exercise of options	502,561	—	502,561		5,015			—				3,003,396			—			3,008,411
Tax benefit on exercise of stock options	—	—	—		—			—				1,641,463			—			1,641,463
Stock-based compensation expense	—	—	—		—			—				260,352			—			260,352
Dividends paid ($0.16 per share)	—	—	—		—			—				—			(5,738,727		)	(5,738,727			)
Net income	—	—	—		—			—				—			30,412,534			30,412,534

February 25, 2006	43,006,151	6,784,736	36,221,415		430,062			(60,576,094			)	65,940,956			186,997,975			192,792,899

Stock issued on exercise of options	1,740,076	—	1,740,076		17,400			—				30,992,575			—			31,009,975
Issuance of restricted shares, net of forfeitures	292,083	—	292,083		2,921			—				—			—			2,921
Excess tax benefit on exercise of stock options	—	—	—		—			—				5,785,587			—			5,785,587
Stock-based compensation expense	—	—	—		—			—				4,087,767			—			4,087,767
Acquisition of common stock held in treasury, at cost	—	1,732,123	(1,732,123	)	—			(34,180,343			)	—			—			(34,180,343			)
Dividends paid ($0.20 per share)	—	—	—		—			—				—			(7,420,074		)	(7,420,074			)
Net income	—	—	—		—			—				—			33,686,484			33,686,484

March 3, 2007	45,038,310	8,516,859	36,521,451		$	450,383		$	(94,756,437		)	$	106,806,885		$	213,264,385		$	225,765,216

The accompanying notes are an integral part of these consolidated financial statements.

CHRISTOPHER & BANKS CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

	Fiscal Year Ended
	March 3,			February 25,			February 26,
	2007			2006			2005
Cash flows from operating activities:
Net income	$	33,686,484		$	30,412,534		$	27,015,333
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	20,546,233			18,847,615			16,156,502
Excess income tax benefit on exercise of stock options	(5,785,587		)	1,641,463			374,939
Stock-based compensation expense	4,087,767			260,352			—
Deferred income taxes	(3,180,752		)	(2,954,487		)	1,551,349
Loss on disposal of furniture, fixtures and equipment	153,882			647,022			283,111
Impairment of fixed assets	1,080,743			237,764			837,768
Amortization of deferred revenue from lease termination	—			(106,250		)	(318,750		)
Increase (decrease) in allowance for markdowns	248,642			(441,501		)	202,607
Changes in operating assets and liabilities, net of effects of acquisition:
(Increase) decrease in accounts receivable	271,679			(1,008,815		)	(408,124		)
(Increase) decrease in merchandise inventory	(14,732,211		)	3,095,134			(7,838,466		)
(Increase) decrease in prepaid expenses	(7,603,600		)	789,386			(2,009,631		)
(Increase) decrease in income taxes receivable	2,731,358			1,527,451			(1,599,009		)
Increase in other assets	(70,430		)	(59,026		)	(68,568		)
Increase (decrease) in accounts payable	5,857,927			(1,757,817		)	4,921,280
Increase in accrued salaries, wages and related expenses	2,125,422			842,912			1,001,860
Increase in other accrued liabilities	2,904,298			6,354,874			4,160,019
Increase in deferred rent obligations	1,068,342			1,438,325			1,667,691
Increase in deferred lease incentives	1,843,392			1,154,827			3,818,998
Net cash provided by operating activities	45,233,589			60,921,763			49,748,909
Cash flows from investing activities:
Purchase of property, equipment and improvements	(30,529,935		)	(26,624,307		)	(30,464,398		)
Proceeds from sale of furniture, fixtures and equipment	—			6,152			1,300
Acquisition, net of cash acquired	—			—			(7,425,856		)
Purchases of short-term investments	(123,627,900		)	(44,842,729		)	(84,547,933		)
Redemptions of short-term investments	105,352,900			61,591,058			110,643,629
Net cash used in investing activities	(48,804,935		)	(9,869,826		)	(11,793,258		)
Cash flows from financing activities:
Exercise of stock options	30,992,575			3,008,411			1,356,339
Dividends paid	(7,420,074		)	(5,738,727		)	(5,820,471		)
Excess income tax benefit on exercise of stock options	5,785,587			—			—
Acquisition of common stock held in treasury	(34,180,343		)	—			(35,383,156		)
Net cash used in financing activities	(4,822,255		)	(2,730,316		)	(39,847,288		)

Net increase (decrease) in cash and cash equivalents	(8,393,601		)	48,321,621			(1,891,637		)
Cash and cash equivalents at beginning of year	62,384,999			14,063,378			15,955,015

Cash and cash equivalents at end of year	$	53,991,398		$	62,384,999		$	14,063,378
Supplemental cash flow information:
Interest paid	$	8,353		$	1,458		$	2,126
Income taxes paid	$	21,862,381		$	18,101,388		$	16,528,694
Purchases of equipment and improvements, accrued not paid	$	576,659		$	712,136		$	578,731

The accompanying notes are an integral part of these consolidated financial statements.

CHRISTOPHER & BANKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Christopher & Banks Corporation, through its wholly-owned subsidiaries Christopher & Banks, Inc., Christopher & Banks Company and Christopher & Banks Services Company (collectively referred to as “Christopher & Banks” or the “Company”) operates retail specialty stores selling women’s apparel in the United States. The Company operated 778, 705 and 642 stores at the end of fiscal 2007, 2006 and 2005, respectively.

Fiscal year and basis of presentation

The Company’s fiscal year ends on the Saturday nearest February 28. The fiscal year ended March 3, 2007 consisted of 53 weeks. The fiscal years ended February 25, 2006 and February 26, 2005 each consisted of 52 weeks. The Consolidated Financial Statements include the accounts of Christopher & Banks Corporation and its wholly-owned subsidiaries, Christopher & Banks, Inc., Christopher & Banks Company and Christopher & Banks Services Company. All intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during a reporting period. As a result, actual results could differ because of the use of these estimates and assumptions.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and in banks, and investments purchased with an original maturity of three months or less.

Short-term investments

In accordance with the Company’s investment policy, short-term investments consist of U.S. Government, corporate and asset-backed debt securities. Tax advantaged auction rate debt securities, classified as available for sale, have long-term stated contractual maturities, but have variable interest rates that reset at each auction period, typically 28 or 35 days. These securities trade in a broad, highly liquid market and the Company has never had difficulty liquidating any such investment at the end of a given auction period. The Company typically reinvests these securities multiple times during the year at each new auction period.

The Company has the positive intent and ability to hold its short-term investments, other than tax advantaged auction rate debt securities, to maturity. All of the Company’s short-term investments are recorded at amortized cost, which management believes approximates fair value, and the related amortization of premiums and discounts arising at acquisition are reported in earnings each period as a component of interest income.

Inventory valuation

Property, equipment and improvements

Repairs and maintenance which do not extend an asset’s useful life are expensed as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation or amortization are removed from the accounts, and any resulting gain or loss is reflected in income for that period.

Long-Lived Assets

Goodwill

The Company recognizes the excess cost of an acquired entity over the net amount assigned to assets acquired, including intangible assets, and liabilities assumed as goodwill. Goodwill is tested for impairment on an annual basis during the fourth quarter, and between annual tests whenever there is an impairment indicated. Fair values are estimated based on future discounted cash flows and are compared with the corresponding carrying value of the related assets. Impairment losses will be recognized if the fair value of a reporting unit is determined to be less than the reporting unit’s carrying value. Such estimates are subject to change and the Company may recognize impairment losses in the future.

Intangible Assets

Intangible assets comprised of customer lists and customer related information acquired through acquisition are recorded at cost net of accumulated amortization. Amortization is computed on a straight-line basis which reflects the economic benefits of these assets based on useful lives ranging from three to nine years.

Common stock held in treasury

The Company accounts for its treasury stock under the cost method, whereby stockholders’ equity is reduced for the total cost of the shares repurchased. The Company engages in treasury stock repurchases as a means to reduce the number of shares of the Company’s common stock outstanding, which in turn increases earnings per share.

Revenue recognition

Vendor allowances

From time to time, the Company receives certain allowances or credits from its vendors primarily related to defective merchandise or markdown allowances. These allowances or credits are reflected as a reduction of merchandise inventory in the period they are received.

The majority of the Company’s merchandise is produced exclusively for the Company and sold under the Christopher & Banks, C.J. Banks and Acorn private labels. Accordingly, the Company does not enter into any arrangements with vendors where payments or other consideration might be received in connection with the purchase or promotion of a vendor’s products, buy-down agreements or cooperative advertising programs.

Merchandise, buying and occupancy costs, exclusive of depreciation and amortization

Merchandise, buying and occupancy costs include the cost of merchandise, markdowns, shrink, freight from the Company’s distribution center to its stores, buyer and distribution center salaries, buyer travel, rent and other occupancy related costs, various merchandise design and development costs, miscellaneous merchandise related expenses and other costs related to the Company’s distribution network. Merchandise, buying and occupancy costs exclude all depreciation and amortization expense.

Selling, general and administrative expenses

Selling, general and administrative expenses include all salaries with the exception of buyer and distribution center salaries, other employee benefits, advertising, store supplies, credit card processing fees, information technology related costs, insurance, professional services, non-buyer travel and miscellaneous other selling and administrative related expenses. Selling, general and administrative expenses exclude all depreciation and amortization expense.

Store pre-opening costs

Non-capital expenditures such as payroll and training costs incurred prior to the opening of a new store are charged to selling, general and administrative expense in the period they are incurred.

Rent expense, deferred rent obligations and deferred lease incentives

Advertising

The Company expenses advertising costs as incurred. Advertising costs for the fiscal years ended March 3, 2007, February 25, 2006 and February 26, 2005 were $1,867,419, $1,640,125 and $920,398, respectively. The Company includes advertising expense in selling, general and administrative expenses in the Consolidated Statement of Income.

Fair value of financial instruments

The Company’s financial instruments consist of cash, receivables, payables and accrued liabilities, for which current carrying amounts approximate fair market value.

Stock-based compensation

Income taxes

Income taxes are recorded following the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Realization of deferred tax assets is ultimately dependent upon future taxable income. Inherent in the measurement of deferred balances are certain judgments and interpretations of tax laws and published guidance with respect to the Company’s operations. No valuation allowance has been provided for deferred tax assets because management believes the full amount of net deferred tax assets will be realized. The effective tax rate utilized by the Company reflects management’s estimation of the expected tax liabilities within various taxing jurisdictions.

Net income per common share

Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the applicable periods while diluted EPS is computed based on the weighted average number of shares of common and common equivalent shares (dilutive stock options) outstanding. The Company’s reconciliation of EPS includes the individual share effects of all securities affecting EPS which consist solely of the effects of dilution from awards granted under the Company’s stock-based compensation plans.

The following is a reconciliation of the number of shares and per share amounts used in the basic and diluted EPS computations.

	Fiscal Year Ended
	March 3, 2007				February 25, 2006				February 26, 2005
		Net				Net				Net
		Income				Income				Income
	Shares	Per Share			Shares	Per Share			Shares	Per Share

Basic	37,306,742	$	0.90		35,907,028	$	0.85		36,322,264	$	0.74

Effect of dilution from stock-based compensation plans	454,259	(0.01		)	313,125	(0.01		)	502,826	(0.01		)

Diluted	37,761,001	$	0.89		36,220,153	$	0.84		36,825,090	$	0.73

The effect of 241,501, 1,474,499 and 1,481,549 options were excluded from the shares used in the computation of diluted earnings per share for fiscal 2007, 2006 and 2005, respectively, as they were anti-dilutive.

Segment Reporting

The Company operates exclusively in the retail apparel industry in which it designs, sources and distributes ladies clothing catering to a segment of the female baby boomer demographic, generally ranging in age from 40 to 60, through primarily mall-based retail stores. The Company has identified three operating segments (Christopher & Banks stores, C.J. Banks stores and Acorn stores) as defined by Statement of Financial Accounting Standard No. 131, “Disclosures about Segments of an Enterprise and Related Information.” The three operating segments have been aggregated into one reportable segment based on the similar nature of products sold, methods of sourcing, merchandising and distribution processes involved, target customers, and economic characteristics among the three operating segments.

Recently issued accounting pronouncements

NOTE 2 — STOCK-BASED COMPENSATION

General

Effective February 26, 2006, the Company adopted the provisions of Statement of Financial Accounting Standard (“SFAS”) No. 123R, “Share-Based Payment” (“SFAS 123R”) using the modified prospective transition method. Under this transition method, stock-based compensation expense recognized for share-based awards during the year ended March 3, 2007 includes: (a) compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of, February 25, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation expense for all stock-based compensation awards granted subsequent to February 25, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. In accordance with the modified prospective transition method, results for the prior period have not been restated. Prior to the adoption of SFAS 123R, the Company recognized stock-based compensation expense in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related Interpretations, as permitted by SFAS 123.

Under various plans, the Company may grant options to purchase common stock to employees and non-employee members of its Board of Directors at a price not less than 100% of the fair market value of the Company’s common stock on the option grant date. In general, options granted to employees vest over two to five years and are exercisable up to ten years from the date of grant. In prior fiscal years, options granted to Directors vested immediately upon grant and were exercisable up to five years from the date of grant. Beginning in fiscal 2007, options granted to Directors vest immediately and are exercisable up to ten years from the grant date.

The Company may also grant shares of restricted stock to its employees and non-employee members of its Board of Directors. The Company holds the certificates for such shares in safekeeping during the vesting period and the grantee cannot transfer the shares before the respective shares vest. Shares of nonvested restricted stock are considered to be currently issued and outstanding. Restricted stock grants to employees vest over two to seven years, while restricted grants to Directors fully vest after six months.

All of the Company’s restricted stock awards are subject to forfeiture if employment or service terminates prior to the lapse of the restrictions. In addition, certain of the Company’s restricted stock awards have performance-based vesting provisions and are subject to forfeiture if these performance conditions are not achieved. The Company assesses, on an ongoing basis, the probability of whether the performance criteria will be achieved and, once it is deemed probable, the Company begins recognizing compensation expense over the relevant performance period. The Company recognized no expense related to performance-based restricted awards during fiscal 2007. For those awards not subject to performance criteria, the Company expenses the cost of the restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, on a straight-line basis over the vesting period. The fair market value of the Company’s restricted stock is determined based on the closing price of the Company’s common stock on the grant date.

The total compensation expense related to all stock-based awards for the year ended March 3, 2007, reflecting the impact of the implementation of the modified prospective transition method in accordance with SFAS 123R, was $4.1 million. Stock-based compensation expense in fiscal 2007 was included in merchandise, buying and occupancy expenses for the Company’s buying and distribution employees and in selling, general and administrative expense for all other employees. In addition, effective February 26, 2006, the Company began recognizing stock-based compensation costs net of a forfeiture rate for only those shares expected to vest on a straight-line basis over the requisite service period of the award. The Company estimated the forfeiture rate for fiscal 2007 based on its historical experience.

As a result of adopting SFAS 123R, the impact to the Consolidated Statement of Income for the year ended March 3, 2007 was a reduction in income before income taxes of $3.2 million and a reduction in net income of $2.0 million from what would have been presented if the Company had continued to account for stock-based compensation awards under APB 25. The impact on both basic and diluted earnings per share was $0.05 for the year ended March 3, 2007 from what would have been reported under APB 25.

Prior to the adoption of SFAS 123R, the Company presented all tax benefits related to deductions resulting from the exercise of stock options as cash flows from operating activities in the Consolidated Statement of Cash Flows. SFAS 123R requires that cash flows resulting from tax benefits attributable to tax deductions in excess of the compensation expense recognized for those options (excess tax benefits) be classified as financing cash flows. As a result, the Company classified approximately $5.8 million of excess tax benefits as financing cash flows for the year ended March 3, 2007.

The pro forma table below illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS No. 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure,” to all stock-based employee compensation for fiscal 2006 and 2005:

	Year Ended
	February 25,		February 26,
	2006		2005

Net income - as reported	$	30,412,534	$	27,015,333
Add stock-based compensation expense included in net income, net of related tax effects	158,815		—
Less total stock-based compensation expense determined under fair value method, net of related tax effects	4,688,553		3,536,593
Net income - pro forma	$	25,882,796	$	23,478,740
Basic earnings per common share:
As reported	$	0.85	$	0.74
Pro forma	$	0.72	$	0.65
Diluted earnings per common share:
As reported	$	0.84	$	0.73
Pro forma	$	0.71	$	0.64

In the fourth quarter of fiscal 2006, the Company accelerated the vesting and extended the exercise period of certain out-of-the-money stock options for William Prange, its former Chief Executive Officer, in conjunction with his resignation. This resulted in additional fourth quarter pro forma after-tax stock-based compensation expense of approximately $1.4 million, or $0.04 per basic and diluted share.

Methodology Assumptions

As part of its SFAS 123R adoption, the Company examined its historical pattern of option exercises in an effort to determine if there were any discernable activity patterns attributable to certain optionees. From this analysis, the Company identified two distinct populations of optionees, employees and non-employee directors. The Company uses the Black-Scholes option-pricing model to value the Company’s stock options for grants to its employees and non-employee directors. Using this option-pricing model, the fair value of each stock option award is estimated on the date of grant and is expensed on a straight-line basis over the vesting period, as the stock options are subject to pro-rata vesting. The expected volatility assumption is based on the historical volatility of the Company’s stock over a term equal to the expected term of the option granted.

The expected term of stock option awards granted is derived from historical exercise experience and represents the period of time that awards are expected to be outstanding. The expected term assumption incorporates the contractual term of an option grant, which for previously issued grants is ten years for employees and five or ten years for non-employee directors, as well as the vesting period of an award, which is most commonly pro-rata vesting over three years for employees and immediate vesting for non-employee directors. The risk-free interest rate is based on the implied yield on a U.S. Treasury constant maturity with a remaining term equal to the expected term of the option granted.

The weighted average assumptions relating to the valuation of the Company’s stock options for fiscal 2007, 2006 and 2005 were as follows:

	Fiscal Years Ended
	March 3,		February 25,		February 26,
	2007		2006		2005
Expected dividend yield	0.88	%	0.80	%	0.80	%
Expected volatility	46.64	%	48.24	%	53.15	%
Risk-free interest rate	4.65-5.09	%	3.80-4.67	%	2.16-3.69	%
Expected term in years	3.61		3.34		2.82

Stock-Based Compensation Activity

The following table presents a summary of the Company’s stock option activity for the year ended March 3, 2007:

									Weighted
			Weighted						Average
	Number		Average		Aggregate		Weighted		Remaining
	of		Exercise		Intrinsic		Average		Contractual
	Shares		Price		Value		Fair Value		Life

Outstanding, beginning of period	3,745,166		$	18.40	$	4,993,375	$	6.75
Vested	3,076,666		18.39		4,785,975		6.65
Unvested	668,500		18.43		207,400		7.18

Granted	160,350		25.90		—		9.76
Exercised	(1,740,074	)	17.82		16,191,486		6.85
Canceled - Vested	(5,000	)	18.33		—		7.57
Canceled - Unvested (Forfeited)	(87,566	)	19.06		25,500		7.68

Outstanding, end of period	2,072,876		19.44		2,027,772		6.85		5.31
Vested	1,765,038		19.30		1,932,522		6.69		4.71
Unvested	307,838		20.24		95,250		7.78		8.71

Exercisable, end of period	1,765,038		19.30		1,932,522		6.69		4.71

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of fiscal 2007 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 3, 2007.

As of March 3, 2007, there was approximately $1.8 million of total unrecognized compensation expense related to unvested stock options granted under the Company’s share-based compensation plans. That expense is expected to be recognized over a weighted average period of approximately one year.

The following table presents a summary of the Company’s stock option activity for fiscal 2006 and fiscal 2005:

	Fiscal Year Ended
	February 25, 2006				February 26, 2005
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding, beginning of period	3,806,177		$	17.03	3,904,024		$	16.24
Granted	445,200		18.66		229,500		16.31
Exercised	(438,861	)	6.85		(285,647	)	4.75
Cancelled	(67,350	)	18.17		(41,700	)	22.78

Outstanding, end of period	3,745,166		$	18.40	3,806,177		$	17.03

Exercisable, end of period	3,076,666		$	18.40	2,422,176		$	16.76

The weighted-average grant-date fair value was $6.01 and $5.47 for stock options granted in fiscal 2006 and 2005, respectively. The total intrinsic value of options exercised during fiscal 2006 and 2005 was $4.3 million and $2.6 million, respectively.

The following table presents a summary of the Company’s restricted stock activity for the years ended March 3, 2007 and February 25, 2006. The Company had no restricted stock activity for the year ended February 26, 2005.

	Fiscal 2007						Fiscal 2006
	Number		Aggregate		Weighted		Number		Aggregate
	of		Intrinsic		Average		of		Intrinsic
	Shares		Value		Fair Value		Shares		Value

Unvested, beginning of period	54,867		$	978,827	$	18.35	—		$	—
Granted	29,383		524,193		25.44		63,700		1,155,510
Vested	(25,333	)	451,941		22.36		(8,833	)	148,110
Canceled - Unvested (Forfeited)	(5,200	)	92,768		21.36		—		—
Unvested, end of period	53,717		958,311		20.04		54,867		978,827

The total fair value of shares of restricted stock that vested during fiscal 2007 and 2006 was $567,000 and $148,000, respectively. As of March 3, 2007, there was approximately $663,000 of unrecognized stock-based compensation expense related to nonvested restricted stock awards, which is expected to be recognized over a weighted average period of approximately one year.

NOTE 3 – ACQUISITION OF ACORN STORES

On November 1, 2004, the Company acquired the assets and assumed certain liabilities of Gilmore Brothers Inc., a privately held women’s specialty retailer operating stores under the name “Acorn,” for approximately $7.4 million in cash. The Company funded the purchase from current cash balances and redemptions of short-term investments. Of the $7.4 million purchase price, $2.3 million was placed in escrow to satisfy certain obligations of Gilmore Brothers, Inc. not assumed by the Company. As of March 3, 2007, none of the purchase price remained in escrow. The Company plans to continue to operate Acorn as a division of Christopher & Banks, Inc.

As of April 20, 2007, Acorn operated 38 stores in 14 states that offer upscale women’s fashions along with complementary jewelry and accessories under private and branded labels. The transaction was accounted for under the purchase method of accounting and accordingly, the results of operations of Acorn have been consolidated in the Company’s financial statements from the date of acquisition.

The total purchase price has been allocated to the assets acquired and liabilities assumed from Gilmore Brothers, Inc., based on their respective estimated fair values as of the date of acquisition. The purchase price allocation resulted in excess consideration, over the estimated fair value of the net assets acquired, of approximately $3.6 million, which has been assigned to goodwill. A summary of the allocation of the purchase price follows:

Cash	$	6,300
Accounts receivable	83,363
Merchandise inventory	1,589,133
Other current assets	121,601
Property, equipment and improvements	1,306,634
Intangible assets	830,000
Goodwill	3,587,052
Total assets acquired	7,524,083
Accrued liabilities assumed	(91,927		)
Net assets acquired	$	7,432,156

Pro forma financial information for Acorn has not been presented as the acquisition did not have a material impact on the Company’s financial position or results of operations.

NOTE 4 — SHORT-TERM INVESTMENTS

Short-term investments consisted of the following:

	March 3,		February 25,
Description	2007		2006

Tax advantaged auction rate securities	$	48,275,000	$	13,000,000
U.S. Government debt securities	—		17,000,000

	$	48,275,000	$	30,000,000

NOTE 5 – ACCOUNTS RECEIVABLE

The Company’s accounts receivable consisted of the following:

	March 3,		February 25,
Description	2007		2006

Credit card receivables	$	2,801,455	$	2,872,961
Construction allowances receivable from landlords	941,938		1,107,184
Other receivables	738,231		773,158

	$	4,481,624	$	4,753,303

The Company’s credit card receivables are collected one to five days after the related sale transaction occurs. Construction allowance receivables result from incentives offered to the Company by landlords to lease space within their properties. These allowances are typically collected 90 to 120 days after a store opens.

NOTE 6 — MERCHANDISE INVENTORY, NET

Merchandise inventory, net consisted of the following:

	March 3,			February 25,
Description	2007			2006

Merchandise inventory - in store	$	41,099,342		$	30,397,530
Merchandise inventory - in transit	11,888,367			7,857,968
Allowance for permanent markdowns	(632,765		)	(384,123		)

	$	52,354,944		$	37,871,375

NOTE 7 — PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET

Property, equipment and improvements, net consisted of the following:

		March 3,			February 25,
Description	Estimated Useful Life	2007			2006

Land	—	$	1,596,898		$	1,596,898
Corporate office, distribution center and related building improvements	25 years	11,663,704			11,412,094
Store leasehold improvements	Term of related lease,
	typically 10 years	87,288,395			75,854,008
Store furniture and fixtures	Seven years	101,486,350			87,073,269
Point of sale hardware and software	Five years	8,625,579			7,615,806
Corporate office and distribution center furniture, fixtures and equipment	Seven years	2,751,805			2,506,908
Computer hardware and software	Three to five years	5,771,237			4,248,354
Construction in progress	—	5,429,824			4,733,032
		224,613,792			195,040,369
Less accumulated depreciation and amortization		(96,837,350		)	(76,698,827		)
		$	127,776,442		$	118,341,542

As of March 3, 2007, construction in progress primarily consists of capital expenditures related to new stores planned to open in the first quarter of fiscal 2008.

As a result of an annual impairment analysis performed in fiscal 2007 and 2006, which included the evaluation of individual under-performing stores and assessing the recoverability of the carrying value of the improvements and equipment related to the stores, the Company determined that the carrying value of the improvements and equipment at certain under-performing stores exceeded the expected future undiscounted cash flows from the stores. As a result, the Company recorded asset impairments of $1,080,743 and $237,764 in fiscal 2007 and 2006, respectively.

NOTE 8 – INTANGIBLE ASSETS

Intangible assets consisted of the following:

	March 3,			February 25,
	2007			2006

Customer lists	$	830,000		$	830,000
Accumulated amortization	(254,719		)	(145,555		)
	$	575,281		$	684,445

Aggregate amortization expense for the year ended March 3, 2007 totaled $109,164. Estimated aggregate amortization expense for the next five fiscal years is as follows:

Fiscal 2008	$	100,278
Fiscal 2009	82,500
Fiscal 2010	82,500
Fiscal 2011	82,500
Fiscal 2012	82,500

NOTE 9 – ACCRUED LIABILITIES

Other accrued liabilities consisted of the following:

	March 3,		February 25,
Description	2007		2006

Gift card, certificate and store credit liability	$	13,174,041	$	11,090,927
Accrued income, sales and other taxes payable	2,499,410		3,231,408
Accrued occupancy related expenses	640,985		1,066,279
Other accrued liabilities	6,072,845		5,092,202

	$	22,387,281	$	20,480,816

NOTE 10 – LONG-TERM DEBT

Loans under the Wells Fargo Revolver bear interest at Wells Fargo’s base rate, 8.25% as of March 3, 2007, plus 0.25%. Interest is payable monthly in arrears. The Wells Fargo Revolver carries a facility fee of 0.25% based on the unused portion as defined in the agreement. Facility fees totaled $7,229 in fiscal 2007.

NOTE 11 — STOCKHOLDERS’ EQUITY

In July 2006, the Company’s Board of Directors authorized a stock repurchase program enabling the Company to purchase up to $20 million of its common stock, subject to market conditions. In December 2006, the Company’s Board of Directors authorized a $20 million increase in the repurchase program bringing the total dollar amount of stock that could be purchased to $40 million. During fiscal 2007, the Company repurchased 1,732,123 shares at a total cost, including commissions, of approximately $34.2 million. In March 2007, the Company completed the repurchase program by purchasing an additional 325,059 shares of its common stock for a total cost, including commissions, of $5.8 million, bringing the total number of shares repurchased under this program to 2,057,182 at a total cost, including commissions, of approximately $40.0 million.

NOTE 12 – INCOME TAXES

The provision for income taxes for the fiscal years ended March 3, 2007, February 25, 2006 and February 26, 2005 consisted of:

	2007			2006			2005
Current:
Federal	$	20,682,476		$	18,725,408		$	12,588,694
State	3,855,067			3,542,727			2,795,220
Current tax expense	24,537,543			22,268,135			15,383,914
Deferred tax expense (benefit)	(3,180,752		)	(2,954,487		)	1,551,349
Income tax provision	$	21,356,791		$	19,313,648		$	16,935,263

The Company’s effective income tax rate for fiscal 2007, 2006 and 2005 differs from the federal income tax rate as follows:

	2007		2006		2005

Federal income tax at statutory rate	35.0	%	35.0	%	35.0	%
State income tax, net of federal benefit	4.3		4.3		4.0
Tax exempt interest	(1.0	)	—		—
Other	0.5		(0.5	)	(0.5	)
	38.8	%	38.8	%	38.5	%

The net deferred tax asset (liability) included in the Consolidated Balance Sheet as of March 3, 2007 and February 25, 2006 is as follows:

	March 3,			February 25,
	2007			2006

Accrued liabilities	$	2,285,080		$	2,301,735
Inventory and other	972,839			266,153
Current deferred tax asset	3,257,919			2,567,888

Depreciation and amortization	(15,706,541		)	(16,217,150		)
Deferred rent obligations	13,238,347			12,116,074
Other	1,485,057			627,218
Non-current deferred tax liability, net	(983,137		)	(3,473,858		)

Net deferred tax asset (liability)	$	2,274,782		$	(905,970	)

Deferred income tax assets represent potential future income tax benefits. Realization of these assets is ultimately dependent upon future taxable income. No valuation allowance has been provided for deferred tax assets because management believes realization of the full amount of net deferred tax assets is more likely than not.

NOTE 13 — EMPLOYEE BENEFIT PLANS AND EMPLOYMENT AGREEMENTS

The Company has established a defined contribution plan qualified under Section 401(k) of the Internal Revenue Code for the benefit of all employees who meet certain eligibility requirements, primarily age, length of service and hours of service. The plan allows eligible employees to invest from 1% to 60% of their compensation, subject to dollar limits as established by the federal government. The plan allows for discretionary Company matching contributions. Company contributions for the fiscal years ended March 3, 2007, February 25, 2006 and February 26, 2005 totaled $493,162, $494,531 and $470,343, respectively. The Company does not offer any other post-retirement, post-employment or pension benefits to directors or employees.

The Company has entered into employment agreements with certain executives of the Company. These agreements provide for a specified base salary and that each executive is entitled to certain severance benefits in the event that their employment is terminated by the Company “without cause” or by such executive following a “change of control” (both as defined in the employment agreements). The employment agreements also provide for the immediate vesting of unvested stock options or restricted stock in the event of a change of control.

In the fourth quarter of fiscal 2006, the Company incurred a pre-tax charge of approximately $1.2 million related to remaining contractual obligations due to William Prange, the Company’s former Chief Executive Officer, in conjunction with his resignation in December 2005. In addition, modifications to accelerate the vesting and extend the exercise period of certain of Mr. Prange’s out of the money stock options resulted in additional fourth quarter pro forma after-tax stock-based compensation expense of approximately $1.4 million.

NOTE 14 — LEASE COMMITMENTS

The Company leases each of its store locations and vehicles under operating leases. The store lease terms, including rental period, renewal options, escalation clauses and rent as a percentage of sales, vary among the leases. Most store leases require the Company to pay real estate taxes and common area maintenance charges.

Total rental expense for all leases was as follows:

	Fiscal Year Ended
	March 3,			February 25,			February 26,
	2007			2006			2005

Minimum rent	$	49,166,786		$	44,996,597		$	38,447,957
Contingent rent—based on a percentage of sales	1,423,785			1,049,503			1,442,436
Maintenance, taxes and other	30,980,737			26,672,328			22,556,652
Amortization of deferred lease incentives	(3,587,221		)	(2,943,697		)	(2,581,719		)
	$	77,984,087		$	69,774,731		$	59,865,326

Future minimum rental commitments for all leases are as follows:

	Operating Leases
	Retail Store		Vehicles/
Fiscal Year	Facilities		Other		Total

2008	$	50,535,244	$	515,067	$	51,050,311
2009	50,333,236		161,350		50,494,586
2010	48,828,165		3,058		48,831,223
2011	46,211,484		—		46,211,484
2012	42,506,946		—		42,506,946
Thereafter	94,089,772		—		94,089,772

Total minimum lease payments	$	332,504,847	$	679,475	$	333,184,322

NOTE 15 — LEGAL PROCEEDINGS

NOTE 16 — SOURCES OF SUPPLY

The Company’s ten largest vendors represented approximately 48%, 64% and 68% of the Company’s total merchandise purchases in fiscal 2007, 2006 and 2005, respectively. Purchases from the Company’s largest overseas supplier accounted for 17%, 31% and 36% of total merchandise purchases in fiscal 2007, 2006 and 2005, respectively. Additionally, direct imports accounted for approximately 75%, 90% and 95% of the Company’s total merchandise purchases in fiscal 2007, 2006 and 2005, respectively.

NOTE 17 — QUARTERLY FINANCIAL DATA (UNAUDITED):

(In thousands, except per share data)

	Fiscal 2007 Quarters(1)
	First		Second		Third		Fourth(2)

Net sales	$	142,530	$	131,554	$	139,265	$	133,968
Operating income	$	22,906	$	11,622	$	13,723	$	1,677
Net income	$	14,607	$	7,924	$	9,227	$	1,929

Basic per share data: (5)
Net income	$	0.40	$	0.21	$	0.24	$	0.05

Diluted per share data:(5)
Net income	$	0.39	$	0.21	$	0.24	$	0.05

Dividends per share	$	0.04	$	0.04	$	0.06	$	0.06

	Fiscal 2006 Quarters(3)
	First		Second		Third		Fourth(4)

Net sales	$	122,678	$	110,806	$	130,453	$	126,571
Operating income	$	14,836	$	8,813	$	13,892	$	10,093
Net income	$	9,310	$	5,694	$	8,728	$	6,681

Basic per share data: (5)
Net income	$	0.26	$	0.16	$	0.24	$	0.19

Diluted per share data:(5)
Net income	$	0.26	$	0.16	$	0.24	$	0.18

Dividends per share	$	0.04	$	0.04	$	0.04	$	0.04

(1) Fiscal 2007 consisted of 53 weeks.

(2) The fourth quarter of fiscal 2007 consisted of 14 weeks.

(3) Fiscal 2006 consisted of 52 weeks.

(4) The fourth quarter of fiscal 2006 consisted of 13 weeks.

(5) The summation of quarterly per share data may not equate to the calculation for the full fiscal year as quarterly calculations are performed on a discrete basis.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

There are no matters which are required to be reported under Item 9.

ITEM 9A.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company has established and maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon the foregoing, as of March 3, 2007, the Company’s management concluded that the Company’s disclosure controls and procedures were effective as of March 3, 2007.

Because of inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a - 15(f) and 15d - 15(f) of the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of its management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

The Company’s management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on the evaluation, management has concluded the Company’s internal control over financial reporting was effective as of March 3, 2007.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of March 3, 2007 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Changes in Internal Control over Financial Reporting

There have been no changes during the Company’s fiscal quarter ended March 3, 2007 in the Company’s internal control over financial reporting that have materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION

There are no matters which are required to be reported under Item 9B.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE COVERNANCE

The information regarding the Company’s directors required by Item 10 is incorporated herein by reference to the section entitled, “Election of Directors,” in the Company’s proxy statement for its 2007 Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the Company’s fiscal year ended March 3, 2007. Information regarding the Company’s executive officers required by Item 10 is included in Part I of this Annual Report on Form 10-K as permitted by General Instruction G(3) to Form 10-K. Information required by this Item concerning compliance with Section 16(a) of the Securities Act of 1934 is included in the proxy statement under the section entitled “Section 16(a) Beneficial Ownership Compliance,” and such information is incorporated herein by reference. Information regarding the Company’s Audit Committee and Code of Ethics is included in the proxy statement under the sections entitled, “Information Regarding the Board of Directors and Corporate Governance – Code of Ethics and Business Conduct,” and “Information Regarding the Board of Directors and Corporate Governance – Committees of the Board – Audit Committee,” and such information is incorporated by reference.

ITEM 11.

EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated herein by reference to the sections entitled “Executive Compensation – Compensation Discussion and Analysis – Compensation Committee Report,” “Information Regarding the Board of Directors – Compensation Program for Non-Employee Directors” and “Certain Relationships and Related Transactions” in the Company’s proxy statement for its 2007 Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the Company’s fiscal year ended March 3, 2007.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is incorporated herein by reference to the sections entitled “Security Ownership – Beneficial Ownership of Directors, Nominees and Executive Officers” and “Equity Compensation Plan Table” in the Company’s proxy statement for its 2007 Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the Company’s fiscal year ended March 3, 2007.

ITEM 13.

CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 is incorporated herein by reference to the section entitled “Information Regarding the Board of Directors and Corporate Governance – Director Independence” in the Company’s proxy statement for its 2007 Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days of the Company’s fiscal year ended March 3, 2007.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required in response to this item is incorporated by reference to the section entitled “Audit Committee Report and Payment of Fees to Our Independent Auditors – Auditor Fees” in the Company’s proxy statement for its 2007 Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the Company’s fiscal year ended March 3, 2007.

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

(a) The following documents are filed as a part of this Report:

		Page
(1) Financial Statements:

Report of Independent Registered Public Accounting Firm		27
Consolidated Balance Sheet		29
Consolidated Statement of Income		30
Consolidated Statement of Stockholders’ Equity		31
Consolidated Statement of Cash Flows		32
Notes to Consolidated Financial Statements		33

(2) Financial Statement Schedule:

Schedule II – Valuation and Qualifying Accounts		54

All other schedules are omitted as they are not applicable or the required information is shown in the financial statements or notes thereto.

(3) Exhibits:

3.1		Restated Certificate of Incorporation of the Company, as amended (incorporated herein by reference as Exhibit 3.1 to Annual Report on Form 10-K for the fiscal year ended February 25, 2006 filed May 11, 2006)
3.2		Amended and Restated By-Laws of the Company (incorporated herein by reference as Exhibit 3.1 to Current Report on Form 8-K filed on February 28, 2007)
10.1		Christopher & Bank, Inc. Retirement Savings Plan (incorporated herein by reference to Registration Statement on Form S-1, Registration No. 33-45719)**
10.2		1997 Stock Incentive Plan (incorporated herein by reference as Exhibit 99.1 to Form S-8 (Registration No. 333-95109) filed January 20, 2000)**
10.3		Amendment No. 1 to 1997 Stock Incentive Plan (incorporated herein by reference as Exhibit 99.1 to Form S-8 (Registration No. 333-95553) filed January 27, 2000)**
10.4		1998 Director Stock Option Plan (incorporated herein by reference as Exhibit 10.25 to Annual Report on Form 10-K for the fiscal year ended February 27, 1999 filed May 28, 1999)**

10.5		Second Amendment to the Company’s 1997 Stock Incentive Plan dated as of July 28, 1999 (incorporated herein by reference as Exhibit 10.28 to Quarterly Report on Form 10-Q for the fiscal quarter ended August 28, 1999 filed October 12, 1999)**
10.6		Third Amendment to the 1997 Stock Incentive Plan dated as of July 26, 2000 (incorporated herein by reference as Exhibit 10.40 to Annual Report on Form 10-K for the fiscal year ended March 2, 2002 filed May 29, 2002)**
10.7		Fourth Amendment to the 1997 Stock Incentive Plan dated as of August 1, 2001 (incorporated herein by reference as Exhibit 10.41 to Annual Report on Form 10-K for the fiscal year ended March 2, 2002 filed May 29, 2002)**
10.8		First Amendment to the 1998 Director Stock Option Plan dated as of July 26, 2000 (incorporated herein by reference as Exhibit 10.42 to Annual Report on Form 10-K for the fiscal year ended March 2, 2002 filed May 29, 2002)**
10.9		Amended and Restated Executive Employment Agreement dated March 1, 2002 between Christopher & Banks Corporation and William J. Prange (incorporated herein by reference as Exhibit 10.43 to Annual Report on Form 10-K for the fiscal year ended March 2, 2002 filed May 29, 2002)**
10.10		Amended and Restated Executive Employment Agreement dated March 1, 2002 between Christopher & Banks Corporation and Joseph E. Pennington (incorporated herein by reference as Exhibit 10.44 to Annual Report on Form 10-K for the fiscal year ended March 2, 2002 filed May 29, 2002)**
10.11		Amended and Restated Executive Employment Agreement dated March 1, 2002 between Christopher & Banks Corporation and Ralph C. Neal (incorporated herein by reference as Exhibit 10.45 to Annual Report on Form 10-K for the fiscal year ended March 2, 2002 filed May 29, 2002)**
10.12		2002 Non-Employee Director Stock Option Plan (incorporated herein by reference as Exhibit 99.1 to Form S-8 filed March 13, 2006)**
10.13		Executive Employment Agreement dated March 1, 2004 between Christopher & Banks Corporation and Andrew K. Moller (incorporated herein by reference as Exhibit 10.49 to Annual Report on Form 10-K for the fiscal year ended February 28, 2004 filed May 13, 2004)**
10.14		2005 Stock Incentive Plan (incorporated herein by reference as Exhibit 99.1 to Form S-8, Registration No. 333-132378, filed March 13, 2006)**
10.15		Amendment to Amended and Restated Executive Employment Agreement between Christopher & Banks Corporation and Joseph E. Pennington dated September 22, 2005 (incorporated herein by reference as Exhibit 10.1 to Current Report on Form 8-K filed September 26, 2005)**
10.16		Employment Continuation Agreement between Christopher & Banks Corporation and Joseph E. Pennington dated September 22, 2005 (incorporated herein by reference as Exhibit 10.1 to Current Report on Form 8-K filed September 26, 2005)
10.17		Amendment No. 2 to Amended and Restated Executive Employment Agreement between Christopher & Banks Corporation and Joseph E. Pennington dated April 5, 2006 (incorporated herein by reference as Exhibit 10.1 to Current Report on Form 8-K filed April 7, 2006)
10.18		Amendment to Employment Continuation Agreement between Christopher & Banks Corporation and Joseph E. Pennington dated April 5, 2006 (incorporated herein by reference as Exhibit 10.1 to Current Report on Form 8-K filed April 7, 2006)
10.19		Amendment to Amended and Restated Executive Employment Agreement between Christopher & Banks Corporation and Ralph C. Neal dated September 22, 2005 (incorporated herein by reference as Exhibit 10.1 to Current Report on Form 8-K filed September 26, 2005)
10.20		Employment Continuation Agreement between Christopher & Banks Corporation and Ralph C. Neal dated September 22, 2005 (incorporated herein by reference as Exhibit 10.1 to Current Report on Form 8-K filed September 26, 2005)

10.21		Executive Employment Agreement Between Christopher & Banks Corporation and Matthew Dillon, effective as of June 12, 2006 (incorporated herein by reference as Exhibit 10.25 to Quarterly Report on Form 10-Q for the fiscal period ended May 27, 2006 filed July 6, 2006)**
10.22		Restricted Stock Agreement Between Christopher & Banks Corporation and Matthew P. Dillon, effective as of June 12, 2006 (incorporated herein by reference as Exhibit 10.26 to Quarterly Report on Form 10-Q for the fiscal period ended May 27, 2006 filed July 6, 2006)**
10.23		Amendment to the Company’s 2005 Stock Incentive Plan, dated as of July 26, 2006 (incorporated herein by reference as Exhibit 10.3 to Current Report on Form 8-K filed August 1, 2006)**
10.24		2006 Equity Incentive Plan for Non-Employee Directors (incorporated herein by reference as Appendix A to Definitive Proxy Statement filed June 14, 2006)**
10.25		Amendment to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors, dated as of July 26, 2006 (incorporated herein by reference as Exhibit 10.4 to Current Report on Form 8-K filed August 1, 2006)**
10.26		Form of Nonqualified Stock Option Agreement under the Company’s 2006 Equity Incentive Plan for Non-Employee Directors (incorporated herein by reference as Exhibit 10.1 to Current Report on Form 8-K filed August 1, 2006)**
10.27		Form of Restricted Stock Agreement under the Company’s 2006 Equity Incentive Plan for Non-Employee Directors (incorporated herein by reference as Exhibit 10.2 to Current Report on Form 8-K filed August 1, 2006)**
10.28		Executive Employment Agreement between Christopher & Banks Corporation and Monica Dahl, dated as of August 6, 2006 (incorporated herein by reference as Exhibit 10.1 to Current Report on Form 8-K filed August 9, 2006)**
10.29		Restricted Stock Agreement between Christopher & Banks Corporation and Monica Dahl, dated as of August 7, 2006 (incorporated herein by reference as Exhibit 10.2 to Current Report on Form 8-K filed on August 9, 2006)**
10.30		Amendment No. 2 to the Company’s 2005 Stock Incentive Plan dated as of September 21, 2006 (incorporated herein by reference as Exhibit 10.1 to Current Report on Form 8-K filed on September 26, 2006)**
10.31		Amendment No. 3 to Amended and Restated Executive Employment Agreement between the Company and Joseph E. Pennington dated as of December 14, 2006 (incorporated herein by reference as Exhibit 10.1 to Current Report on Form 8-K filed on December 19, 2006)**
10.32		Amendment No. 1 to Christopher & Banks Corporation Senior Executive Incentive Plan (incorporated herein by reference as Exhibit 10.1 to Current Report on Form 8-K filed on February 28, 2007)**
10.33		2006 Senior Executive Incentive Plan (incorporated herein by reference as Appendix B to Definitive Proxy Statement filed June 14, 2006)**
10.34*		Form of Incentive Stock Option Agreement under the Company’s 1997 Stock Incentive Plan
10.35*		Form of Nonqualified Stock Option Agreement under the Company’s 1997 Stock Incentive Plan
10.36*		Form of Restricted Stock Agreement under the Company’s 1997 Stock Incentive Plan
10.37*		Form of Incentive Stock Option Agreement under the Company’s 2005 Stock Incentive Plan
10.38*		Form of Nonqualified Stock Option Agreement under the Company’s 2005 Stock Incentive Plan
10.39*		Form of Restricted Stock Agreement under the Company’s 2005 Stock Incentive Plan
10.40*		Amended and Restated Credit and Security Agreement by and between Christopher & Banks, Inc., Christopher & Banks Company and Christopher & Banks Services Company and Wells Fargo Bank, National Association, acting through its Wells Fargo Business Credit Operating Division dated November 4, 2005
10.41*		Amendment to Executive Employment Agreement between the Company and Matthew Dillon, effective as of December 14, 2006
21.1*		Subsidiaries of Company
23.1*		Consent of Independent Registered Public Accounting Firm
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith

** Management agreement or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on May 2, 2007.

CHRISTOPHER & BANKS CORPORATION

	By:		/S/ MATTHEW P. DILLON
		Matthew P. Dillon
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/S/ MATTHEW P. DILLON	President and Chief Executive Officer	May 2, 2007
Matthew P. Dillon	(Principal Executive Officer)


/S/ ANDREW K. MOLLER	Executive Vice President and	May 2, 2007
Andrew K. Moller	Chief Financial Officer (Principal
	Financial and Accounting Officer)


/S/ LARRY C. BARENBAUM	Chairman	May 2, 2007
Larry C. Barenbaum


/S/ DONALD D. BEELER	Director	May 2, 2007
Donald D. Beeler


/S/ MARK A. COHN	Director	May 2, 2007
Mark A. Cohn


/S/ ROBERT EZRILOV	Director	May 2, 2007
Robert Ezrilov


/S/ JAMES J. FULD, JR.	Director	May 2, 2007
James J. Fuld, Jr.


/S/ ANNE L. JONES	Director	May 2, 2007
Anne L. Jones


/S/ ROBERT B. MANG	Director	May 2, 2007
Robert B. Mang

CHRISTOPHER & BANKS CORPORATION

FINANCIAL STATEMENT SCHEDULE

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

	Allowance
	for
	Permanent
	Markdowns(1)
Balance at February 28, 2004	$	623,017
Additions charged to costs and expenses(2)	796,562
Additions charged to other accounts	—
Deductions(2)	(593,955		)

Balance at February 26, 2005	825,624
Additions charged to costs and expenses(2)	109,287
Additions charged to other accounts	—
Deductions(2)	(550,788		)

Balance at February 25, 2006	384,123
Additions charged to costs and expenses(2)	675,310
Additions charged to other accounts	—
Deductions(2)	(426,668		)

Balance at March 3, 2007	$	632,765

(1) The allowance for permanent markdowns is deducted from merchandise inventory in the Company’s Consolidated Balance Sheet.

(2) Additions (deductions) to the allowance for permanent markdowns are recorded to markdowns expense and are included in cost of merchandise, buying and occupancy, exclusive of depreciation and amortization in the Consolidated Statement of Income.

EX-10.34 2 a07-12680_1ex10d34.htm EX-10.34

Exhibit 10.34

STOCK OPTION AGREEMENT

Pursuant to

CHRISTOPHER & BANKS CORP.

1997 Stock Incentive Plan

(Qualified Stock Option)

Name of Employee:

Date of Grant:

Number of Shares:

Exercise Price Per Share:

This STOCK OPTION AGREEMENT (the “Agreement”) made as of between Christopher & Banks Corp. (the “Company”) and the above-named individual, an employee of the Company or one of its subsidiaries (the “Employee”), to record the granting of an option pursuant to the Company’s 1997 Stock Incentive Plan (the “Plan”). Except as otherwise defined herein, capitalized terms contained in this Agreement shall have the same meaning as set forth in the Plan.

1. Grant of Option: In accordance with Plan, the Company hereby grants to the Employee, subject to the terms and conditions of the Plan and this Agreement, the option to purchase from the Company an aggregate of shares of Common Stock ($.01 par value) of the Company at the purchase price of $ per share, such adoption to be exercisable as hereinafter provided.

2. Expiration Date: This option shall expire on (the “Expiration Date”).

3. Exercise of Option: Subject to Section 8 hereof, this option shall become exercisable with respect to % of the shares of Common Stock subject hereto on the first anniversary date of the grant of this option ( ), and with respect to an additional % of such shares on each of the anniversary dates of the grant of this option.

This option may be partially exercised from time to time within such percentage limitations. This option may not be exercised after the Expiration Date. Notwithstanding the foregoing, this option shall not be exercisable for a fractional share of stock. Any exercise of this option shall be made in writing duly executed and delivered to the Company specifying the number of shares as to which the option is being exercised in the form of the Subscription Form for Exercise attached hereto. Schedule I of this Agreement shall be made available to the Company at the time of exercise for notation of any partial exercise.

4. Payment of Option Price: On the date of any exercise of this option, the purchase price of the shares as to which this option is being exercised shall be due and payable and shall be made in cash or by check or by delivery of shares of common stock of the Company held by the optionee for more than six (6) months and registered in the name of the Employee, duly assigned to the Company with the assignment guaranteed by a bank, trust company or member firm of the New York Stock Exchange, and with all necessary transfer tax stamps affixed, or by a combination of the foregoing, any such

shares so delivered to be deemed to have a value per share equal to the fair market value of the shares on such date, as determined by the Committee.

5. Option Nontransferable: This option is not transferable otherwise than by will or the law or descent or distribution and is exercisable during the Employee’s lifetime only by the Employee or his guardian or legal representative.

6. Rights as a Shareholder: The Employee shall have no rights as a shareholder with respect to any of the shares covered by this option until the date of issuance to the Employee of a stock certificate for such shares, and no adjustment shall be made for any dividends or other rights if the record date of such dividends or other rights is prior to the date such stock certificate is issued.

7. General Restrictions:

(1) At the time of any exercise of this option, the Employee shall furnish the Company with a representation that he is acquiring the shares issued upon such exercise as an investment and not with a view to, or for sale in connection with, the distribution of any such shares; provided, however, that such representation need not be furnished in the event the shares issued upon such exercise are registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended.

quoted or listed. In connection with any issuance or transfer, the person acquiring the shares shall, if requested by the Company, give assurances satisfactory to counsel to the Company regarding such matters as the Company may deem desirable to assure compliance with all legal requirements. This option shall be subject to the requirement that if at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of the shares subject to this option upon the New York Stock Exchange, any securities exchange or under any state or federal law, or that the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, this option or the issue or purchase of shares under this option, this option shall be subject to the condition that such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.

(3) Certificates evidencing shares of Common Stock issued pursuant to this Agreement shall bear a legend describing restrictions on transfer thereof unless the Company determines that such legend is not necessary or appropriate.

8. Termination of Employment:

the Employee’s retirement with the consent of the Company, such option may be exercised within three months of the date of termination and (ii) the Employee’s disability (as defined in Section 105(d)(4) of the Internal Revenue Code of 1986, as amended) or death, such option may be exercised by the Employee’s legal representative, heir or devisee, as appropriate within one year from the date of disability or death. Notwithstanding clause (i) of the preceding sentence, the Company may terminate and cancel such option during the three-month period referred to in such clause if the optionee engages in employment or activities contrary, in the opinion of the Company’s Board of Directors or the Committee, to the best interests of the Company or any subsidiary. In addition, the Committee shall, in each case in which clause (i) of the second preceding sentence may be applicable, determine whether a termination of employment shall be considered retirement with the consent of the Company. Notwithstanding the foregoing, (i) the option granted pursuant to this Agreement shall not be exercisable after the expiration date of such option and (ii) such option (or any portion thereof) which is not exercisable on the date of termination of employment shall not be exercisable thereafter without the consent of the Committee.

not extend such periods. Whether leave of absence shall constitute a termination of employment for purposes of this Agreement shall be determined by the Committee in its sole discretion.

9. Adjustment of Shares:

(1) In the event there is any recapitalization in the form of a stock dividend, distribution, split, subdivision or combination of shares of Common Stock of the Company, resulting in an increase or decease in the number of shares of Common Stock outstanding, the number of shares of Common Stock covered by this option and the exercise price per share under this option shall be increased or decreased proportionately, as the case may be, without change in the aggregate exercise price.

(2) If, pursuant to any reorganization, sale or exchange of assets, consolidation or merger, outstanding Common Stock of the Company is or would be exchanged for other securities of the Company or of another corporation which is a party to such transaction, or for property, this option shall apply to the securities or property into which the Common Stock covered hereby would have been changed or for which such Common Stock would have been exchanged had such Common Stock been outstanding at the time.

subsidiary by which the Employee is employed to terminate the employment of the Employee at any time, with or without cause.

11. Plan Controls: The Employee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all of the terms and provisions thereof including any which may conflict with those contained in this Agreement. The Plan is hereby incorporated by reference into this Agreement, and this Agreement is subject in all respect to the terms and conditions of the Plan. In the event of any conflict between this Agreement and the Plan, the terms of the Plan shall control. This option is intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended, and this Agreement and the Plan are to be construed accordingly.

12. Notices: All notices to the Company shall be in writing and sent by certified or registered mail, postage prepaid, to the Company at its offices at 2400 Xenium Lane North, Plymouth, Minnesota 55441 or such other address as the Company shall from time to time notify the Employee in writing. All notices to the Employee shall be in writing and sent by certified or registered mail, postage prepaid, to the Employee at the address set forth on the signature page(s) hereof or such address as the Employee shall from time to time notify the Company in writing. All notices shall be deemed to have been given when mailed.

the validity of the Plan, or to any option granted under the Plan, the Company may, in its discretion and without incurring any liability to the Employee terminate this Agreement and/or the option granted pursuant to this Agreement.

14. Tax Treatment: In the event the Employee seeks to qualify for the special capital gains treatment available for the Plan, the Employee must not dispose of any of the shares underlying the option within two (2) years following the date the option is granted or within one (1) year of the exercise and transfer of the shares to the Employee. Due to the complex nature of the tax laws, the Employee is urged to consult his personal tax advisor prior to exercising the option. THE CORPORATION MAKES NO WARRANTIES OR REPRESENTATIONS WHATSOEVER TO THE EMPLOYEE REGARDING THE TAX CONSEQUENCES OF THIS GRANT, THE EXERCISE OF ANY OPTIONS OR ANY OTHER MATTER.

IN WITNESS WHEREOF, the Company and the Employee has caused this Stock Option Agreement to be executed on the date set forth opposite the respective signatures. It is being further understood that the Date of Grant may differ from the date of signature.

Dated as of :						Christopher & Banks Corp.

						By:

						Its:

Dated as of:						Employee



						Address:

EX-10.35 3 a07-12680_1ex10d35.htm EX-10.35

Exhibit 10.35

STOCK OPTION AGREEMENT

Pursuant to

CHRISTOPHER & BANKS CORP.

1997 Stock Incentive Plan

(Nonqualified Stock Option)

Name of Employee:

Date of Grant:

Number of Shares:

Exercise Price Per Share:

This STOCK OPTION AGREEMENT (the “Agreement”) made as of between Christopher & Banks Corp. (the “Company”) and the above-named individual, an employee of the Company or one of its subsidiaries (the “Employee”), to record the granting of an option pursuant to the Company’s 1997 Stock Incentive Plan (the “Plan”). Except as otherwise defined herein, capitalized terms contained in this Agreement shall have the same meaning as set forth in the Plan.

2. Expiration Date: This option shall expire on (the “Expiration Date”).

7. General Restrictions:

(2) The Company will not be obligated to issue shares of Common Stock covered by this option if counsel to the Company determines that such issuance would violate any law or regulation of any governmental authority or any agreement between the Company and the New York Stock Exchange or any national securities exchange upon which the Common Stock is quoted or listed. In connection with any issuance or transfer, the person acquiring the shares shall, if requested by the Company, give assurances satisfactory to counsel to the Company regarding such matters as the Company may deem desirable to assure compliance with all legal requirements. This option shall be subject to the requirement that if at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of the shares subject to this option upon the New York Stock

Exchange, any securities exchange or under any state or federal law, or that the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, this option or the issue or purchase of shares under this option, this option shall be subject to the condition that such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.

8. Termination of Employment:

(1) The option granted pursuant to this Agreement shall terminate immediately upon the termination of the Employee’s employment by the Company or any subsidiary for any reason whatsoever; provided, however, that in the event such termination of employment results from (i) the Employee’s retirement with the consent of the Company, such option may be exercised within three months of the date of termination and (ii) the Employee’s disability (as defined in Section 105(d)(4) of the Internal Revenue Code of 1986, as amended) or death, such option may be exercised by the Employee’s legal representative, heir or devisee, as appropriate within one year from the date of disability or death. Notwithstanding clause (i) of the preceding sentence, the Company may terminate and cancel such option during the three-month period referred to in such clause if the optionee engages in employment or activities contrary, in the opinion of the Company’s Board of Directors or the Committee, to the best

interests of the Company or any subsidiary. In addition, the Committee shall, in each case in which clause (i) of the second preceding sentence may be applicable, determine whether a termination of employment shall be considered retirement with the consent of the Company. Notwithstanding the foregoing, (i) the option granted pursuant to this Agreement shall not be exercisable after the expiration date of such option and (ii) such option (or any portion thereof) which is not exercisable on the date of termination of employment shall not be exercisable thereafter without the consent of the Committee.

(2) Nothing contained in this Section shall be interpreted or have the effect of extending the period during which an option may be exercised beyond the terms or the Expiration Date provided in this Agreement or established by law or regulation. Death of the Employee subsequent to termination shall not extend such periods. Whether leave of absence shall constitute a termination of employment for purposes of this Agreement shall be determined by the Committee in its sole discretion.

9. Adjustment of Shares:

10. No Employment Rights: Neither the Plan nor this option shall confer upon the Employee any right with respect to continuance of employment by the Company or any subsidiary nor shall they interfere in any way with the right of the Company or any subsidiary by which the Employee is employed to terminate the employment of the Employee at any time, with or without cause.

11. Plan Controls: The Employee hereby acknowledges receipt of a copy of

hereof or such address as the Employee shall from time to time notify the Company in writing. All notices shall be deemed to have been given when mailed.

13. Conflicts: As a condition to the granting of the option contained herein, the Employee agrees that any dispute or disagreement with respect to the Plan, this Agreement or such option shall be determined by the Committee in its sole discretion, and that any interpretation by the Committee of the terms of this Agreement shall be final, binding and conclusive. In the event of the institution of any legal proceedings directed to the validity of the Plan, or to any option granted under the Plan, the Company may, in its discretion and without incurring any liability to the Employee terminate this Agreement and/or the option granted pursuant to this Agreement.

14. Tax Treatment: Due to the complex nature of the tax laws, the Employee is urged to consult his personal tax advisor prior to exercising the option. THE CORPORATION MAKES NO WARRANTIES OR REPRESENTATIONS WHATSOEVER TO THE EMPLOYEE REGARDING THE TAX CONSEQUENCES OF THIS GRANT, THE EXERCISE OF ANY OPTIONS OR ANY OTHER MATTER.

IN WITNESS WHEREOF, the Company and the Employee have caused this Stock Option Agreement to be executed on the date set forth opposite the respective signatures. It is being further understood that the Date of Grant may differ from the date of signature.

Dated as of :						Christopher & Banks Corp.

						By:

						Its:

Dated as of:						Employee



						Address:

EX-10.36 4 a07-12680_1ex10d36.htm EX-10.36

Exhibit 10.36

RESTRICTED STOCK AGREEMENT

THIS RESTRICTED STOCK AGREEMENT is made as of the day of , 200 , between Christopher & Banks Corporation, a Delaware corporation (the “Company”), and (“Employee”).

1. Award.

(a) Shares. Pursuant to the Christopher & Banks Corporation 1997 Stock Incentive Plan, as amended (the “Plan”), ( ) shares (the “Restricted Shares”) of the Company’s common stock, par value $0.01 per share (“Stock”), shall be issued as hereinafter provided in Employee’s name subject to certain restrictions thereon.

(b) Issuance of Restricted Shares. The Restricted Shares shall be issued upon acceptance hereof by Employee and upon satisfaction of the conditions of this Agreement.

(c) Plan Incorporated. Employee acknowledges receipt of a copy of the Plan, and agrees that this award of Restricted Shares shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement.

2. Restricted Shares. Employee hereby accepts the Restricted Shares when issued and agrees with respect thereto as follows:

(a) Forfeiture Restrictions. The Restricted Shares may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of to the extent then subject to the Forfeiture Restrictions (as hereinafter defined), and in the event of termination of Employee’s employment with the Company or employing subsidiary for any reason other than (i) normal retirement on or after age sixty-five, (ii) death or (iii) disability as determined by the Company or employing subsidiary, or except as otherwise provided in the last sentence of subparagraph (b) of this Paragraph 2, Employee shall, for no consideration, forfeit to the Company all Restricted Shares to the extent then subject to the Forfeiture Restrictions. The prohibition against transfer and the obligation to forfeit and surrender Restricted Shares to the Company upon termination of employment are herein referred to as “Forfeiture Restrictions.” The Forfeiture Restrictions shall be binding upon and enforceable against any transferee of Restricted Shares.

(b) Lapse of Forfeiture Restrictions. The Forfeiture Restrictions shall lapse as to the Restricted Shares in accordance with the following schedule provided that Employee has been continuously employed by the Company from the date of this Agreement through the lapse date:

	Percentage of Total
	Number of Restricted Shares
	as to which Forfeiture
Lapse Date	Restrictions Lapse

, 20		%

Notwithstanding the foregoing, the Forfeiture Restrictions shall lapse as to all of the Restricted Shares on the earlier of (i) the occurrence of a Corporate Change (as such term is defined in the Plan), or (ii) the date Employee’s employment with the Company is terminated by reason of death, disability (as determined by the Company or employing subsidiary) or normal retirement on or after age sixty-five. In the event Employee’s employment is terminated for any other reason, including retirement prior to age sixty-five with the approval of the Company or employing subsidiary, the Committee which administers the Plan (the “Committee”) or its delegate, as appropriate, may, in the Committee’s or such delegate’s sole discretion, approve the lapse of Forfeiture Restrictions as to any or all Restricted Shares still subject to such restrictions, such lapse to be effective on the date of such approval or Employee’s termination date, if later.

(c) Certificates. A certificate evidencing the Restricted Shares shall be issued by the Company in Employee’s name, or at the option of the Company, in the name of a nominee of the Company, pursuant to which Employee shall have voting rights and shall be entitled to receive all dividends unless and until the Restricted Shares are forfeited pursuant to the provisions of this Agreement. The certificate shall bear a legend evidencing the nature of the Restricted Shares, and the Company may cause the certificate to be delivered upon issuance to the Secretary of the Company or to such other depository as may be designated by the Company as a depository for safekeeping until the forfeiture occurs or the Forfeiture Restrictions lapse pursuant to the terms of the Plan and this award. Upon request of the Committee or its delegate, Employee shall deliver to the Company a stock power, endorsed in blank, relating to the Restricted Shares then subject to the Forfeiture Restrictions. Upon the lapse of the Forfeiture Restrictions without forfeiture, the Company shall cause a new certificate or certificates to be issued without legend in the name of Employee for the shares upon which Forfeiture Restrictions lapsed. Notwithstanding any other provisions of this Agreement, the issuance or delivery of any shares of Stock (whether subject to restrictions or unrestricted) may be postponed for such period as may be required to comply with applicable requirements of any national securities exchange or any requirements under any law or regulation applicable to the issuance or delivery of such shares. The Company shall not be obligated to issue or deliver any shares of Stock if the issuance or delivery thereof shall constitute a

violation of any provision of any law or of any regulation of any governmental authority or any national securities exchange.

3. Withholding of Tax. To the extent that the receipt of the Restricted Shares or the lapse of any Forfeiture Restrictions results in income to Employee for federal or state income tax purposes, Employee shall deliver to the Company at the time of such receipt or lapse, as the case may be, such amount of money as the Company may require to meet its withholding obligation under applicable tax laws or regulations, and, if Employee fails to do so, the Company is authorized to withhold from any cash or Stock remuneration then or thereafter payable to Employee any tax required to be withheld by reason of such resulting compensation income.

4. Status of Stock. Employee agrees that the Restricted Shares will not be sold or otherwise disposed of in any manner which would constitute a violation of any applicable federal or state securities laws. Employee also agrees (i) that the certificates representing the Restricted Shares may bear such legend or legends as the Company deems appropriate in order to assure compliance with applicable securities laws, (ii) that the Company may refuse to register the transfer of the Restricted Shares on the stock transfer records of the Company if such proposed transfer would be in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law and (iii) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the Restricted Shares.

5. Employment Relationship. Nothing in this Agreement shall be construed as constituting a commitment, guaranty, agreement, or understanding of any kind or nature that the Company or its subsidiaries shall continue to employ the Employee and this Agreement shall not affect in any way the right of the Company or its subsidiaries to terminate the employment of the Employee. For purposes of this Agreement, Employee shall be considered to be in the employment of the Company as long as Employee remains an employee of either the Company, any successor corporation or a parent or subsidiary corporation of the Company or any successor corporation. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee, or its delegate, as appropriate, and its determination shall be final.

6. Committee’s Powers. No provision contained in this Agreement shall in any way terminate, modify or alter, or be construed or interpreted as terminating, modifying or altering any of the powers, rights or authority vested in the Committee or, to the extent delegated, in its delegate pursuant to the terms of the Plan or resolutions adopted in furtherance of the Plan, including, without limitation, the right to make certain determinations and elections with respect to the Restricted Shares.

7. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all successors to Employee permitted under the terms of the Plan.

8. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Minnesota.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and Employee has executed this Agreement, all as of the date first above written.

	CHRISTOPHER & BANKS
	CORPORATION


	By:
		Matthew P Dillon
		Chief Executive Officer


	EMPLOYEE

	Signed:
	Printed Name:

Please Check Appropriate Item (One of the lines must be checked):

___ I do not desire the alternative tax treatment provided for in the Internal Revenue Code Section 83(b).

___ I do desire the alternative tax treatment provided for in Internal Revenue Code Section 83(b) and desire that forms for such purpose be forwarded to me.

* I acknowledge that the Company has suggested that before this block is checked that I check with a tax consultant of my choice.

Please furnish the following information for shareholder records:


(Given name and initial must be used				Social Security Number
for stock registry)				(if applicable)


Address (Street)				Birth Date
				Month/Day/Year


Address (City)				Name of Employer


Address (Zip Code)				Day phone number


United States Citizen: Yes No

PROMPTLY NOTIFY THIS OFFICE OF ANY CHANGE IN ADDRESS.

EX-10.37 5 a07-12680_1ex10d37.htm EX-10.37

Exhibit 10.37

STOCK OPTION AGREEMENT

Pursuant to

CHRISTOPHER & BANKS CORP.

2005 Stock Incentive Plan

(Qualified Stock Option)

Name of Employee:

Date of Grant:

Number of Shares:

Exercise Price Per Share: $

This STOCK OPTION AGREEMENT (the “Agreement”) made as of between Christopher & Banks Corp. (the “Company”) and the above-named individual, an employee of the Company or one of its subsidiaries (the “Employee”), to record the granting of an option pursuant to the Company’s 2005 Stock Incentive Plan (the “Plan”). Except as otherwise defined herein, capitalized terms contained in this Agreement shall have the same meaning as set forth in the Plan.

2. Expiration Date: This option shall expire on (the “Expiration Date”).

This option may be partially exercised from time to time within such percentage limitations. This option may not be exercised after the Expiration Date. Notwithstanding the foregoing, this option shall not be exercisable for a fractional share of stock. Any exercise of this option shall be made in writing duly executed and delivered to the Company specifying the number of shares as to which the option is being exercised in the form of the Subscription Form for Exercise attached hereto. Schedule I of this Agreement shall be made available to the Company at the time of exercise for notation of any partial exercise.

7. General Restrictions:

This option shall be subject to the requirement that if at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of the shares subject to this option upon the New York Stock Exchange, any securities exchange or under any state or federal law, or that the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, this option or the issue or purchase of shares under this option, this option shall be subject to the condition that such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.

8. Termination of Employment:

during the three-month period referred to in such clause if the optionee engages in employment or activities contrary, in the opinion of the Company’s Board of Directors or the Committee, to the best interests of the Company or any subsidiary. In addition, the Committee shall, in each case in which clause (i) of the second preceding sentence may be applicable, determine whether a termination of employment shall be considered retirement with the consent of the Company. Notwithstanding the foregoing, (i) the option granted pursuant to this Agreement shall not be exercisable after the expiration date of such option and (ii) such option (or any portion thereof) which is not exercisable on the date of termination of employment shall not be exercisable thereafter without the consent of the Committee.

9. Adjustment of Shares:

and the exercise price per share under this option shall be increased or decreased proportionately, as the case may be, without change in the aggregate exercise price.

11. Plan Controls: The Employee hereby acknowledges receipt of a copy of

the Plan and agrees to be bound by all of the terms and provisions thereof including any which may conflict with those contained in this Agreement. The Plan is hereby incorporated by reference into this Agreement, and this Agreement is subject in all respect to the terms and conditions of the Plan. In the event of any conflict between this Agreement and the Plan, the terms of the Plan shall control. This option is intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended, and this Agreement and the Plan are to be construed accordingly.

Dated as of :						Christopher & Banks Corp.

						By:

						Its:


Dated as of:						Employee



						Address:

EX-10.38 6 a07-12680_1ex10d38.htm EX-10.38

Exhibit 10.38

STOCK OPTION AGREEMENT

Pursuant to

CHRISTOPHER & BANKS CORP.

2005 Stock Incentive Plan

(Nonqualified Stock Option)

Name of Employee:

Date of Grant:

Number of Shares:

Exercise Price Per Share:

This STOCK OPTION AGREEMENT (the “Agreement”) made as of between Christopher & Banks Corp. (the “Company”) and the above-named individual, an employee of the Company or one of its subsidiaries (the “Employee”), to record the granting of an option pursuant to the Company’s 2005 Stock Incentive Plan (the “Plan”). Except as otherwise defined herein, capitalized terms contained in this Agreement shall have the same meaning as set forth in the Plan.

2. Expiration Date: This option shall expire on (the “Expiration Date”).

This option may be partially exercised from time to time within such percentage limitations. This option may not be exercised after the Expiration Date. Notwithstanding the foregoing, this option shall not be exercisable for a fractional share of stock. Any exercise of this option shall be made in writing duly executed and delivered to the Company specifying the number of shares as to which the option is being exercised in the form of the Subscription Form for Exercise attached hereto. Schedule I of this Agreement shall be made available to the Company at the time of exercise for notation of any partial exercise. Unless provided specifically to the contrary in any Employment Agreement between the Employee and the Company, Section 10.1 of the Plan regarding acceleration of vesting shall not apply to this Agreement.

4. Payment of Option Price: On the date of any exercise of this option, the purchase price of the shares as to which this option is being exercised shall be due and payable and shall be made (i) in cash or by cash equivalent acceptable to the Committee; (ii) by delivery of shares of common stock of the Company held by the optionee for more than six (6) months (or such period as the Committee may deem appropriate, for accounting purposes or otherwise) and registered in the name of the Employee, duly assigned to the Company with the assignment guaranteed by a bank, trust company or member firm of the New York Stock Exchange, and with

all necessary transfer tax stamps affixed, any such shares so delivered to be deemed to have a value per share equal to the Fair Market Value of the shares on such date; (iii) through an open-market, broker-assisted sales transaction pursuant to which the Company is promptly delivered the amount of proceeds necessary to satisfy the exercise price; or (iv) by a combination of the methods described above, as determined by the Committee.

7. General Restrictions:

Company and the New York Stock Exchange or any national securities exchange upon which the Common Stock is quoted or listed. In connection with any issuance or transfer, the person acquiring the shares shall, if requested by the Company, give assurances satisfactory to counsel to the Company regarding such matters as the Company may deem desirable to assure compliance with all legal requirements. This option shall be subject to the requirement that if at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of the shares subject to this option upon the New York Stock Exchange, any securities exchange or under any state or federal law, or that the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, this option or the issue or purchase of shares under this option, this option shall be subject to the condition that such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.

8. Termination of Employment:

(1) The option granted pursuant to this Agreement shall terminate immediately upon the termination of the Employee’s employment by the Company or any subsidiary for “cause” as that term is defined in the Plan unless the Employee is a party to an employment (or similar) agreement with the Company or any subsidiary that defines the word “cause,” in which case such definition shall

apply for purposes of this Agreement. If the Employee’s employment is terminated as a result of the Employee’s permanent and total disability (within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended) or death, the option granted pursuant to this Agreement may be exercised by the Employee’s legal representative, heir or devisee, as appropriate within one year from the date of disability or death. If Employee’s employment is terminated for any reason other than cause, permanent and total disability or death, such option may be exercised within three months following the date of termination. Notwithstanding the preceding sentence, the Company may terminate and cancel such option during the three-month period referred to in the preceding sentence if the optionee engages in employment or activities contrary, in the opinion of the Company’s Board of Directors or the Committee, to the best interests of the Company or any subsidiary. Notwithstanding the foregoing, (i) the option granted pursuant to this Agreement shall not be exercisable after the expiration date of such option and (ii) such option (or any portion thereof) which is not exercisable on the date of termination of employment shall not be exercisable thereafter without the consent of the Committee.

employment for purposes of this Agreement shall be determined by the Committee in its sole discretion.

9. Adjustment of Shares:

14. Tax Treatment: Due to the complex nature of the tax laws, the Employee is urged to consult his personal tax advisor prior to exercising the option. THE CORPORATION

MAKES NO WARRANTIES OR REPRESENTATIONS WHATSOEVER TO THE EMPLOYEE REGARDING THE TAX CONSEQUENCES OF THIS GRANT, THE EXERCISE OF ANY OPTIONS OR ANY OTHER MATTER.

IN WITNESS WHEREOF, the Company and the Employee have caused this Stock Option Agreement to be executed on the date set forth opposite the respective signatures. It is further understood that the Date of Grant may differ from the date of signature.

Dated as of :						Christopher & Banks Corp.

						By:

						Its:

Dated as of:						Employee



						Address:

EX-10.39 7 a07-12680_1ex10d39.htm EX-10.39

Exhibit 10.39

RESTRICTED STOCK AGREEMENT

THIS RESTRICTED STOCK AGREEMENT is made as of the day of , 200 , between Christopher & Banks Corporation, a Delaware corporation (the “Company”), and (“Employee”).

1. Award.

(a) Shares. Pursuant to the Christopher & Banks Corporation 2005 Stock Incentive Plan, as amended (the “Plan”), ( ) shares (the “Restricted Shares”) of the Company’s common stock, par value $0.01 per share (“Stock”), shall be issued as hereinafter provided in Employee’s name subject to certain restrictions thereon.

(b) Issuance of Restricted Shares. The Restricted Shares shall be issued upon acceptance hereof by Employee and upon satisfaction of the conditions of this Agreement.

2. Restricted Shares. Employee hereby accepts the Restricted Shares when issued and agrees with respect thereto as follows:

	Percentage of Total
	Number of Restricted Shares
	as to which Forfeiture
Lapse Date or Dates	Restrictions Lapse

, 20		%

Notwithstanding the foregoing, the Forfeiture Restrictions shall lapse as to all of the Restricted Shares on the earlier of (i) the occurrence of a Change in Control (as such term is defined in Section 10 of the Plan), or (ii) the date Employee’s employment with the Company is terminated by reason of death, disability (as determined by the Company or employing subsidiary) or normal retirement on or after age sixty-five. In the event Employee’s employment is terminated for any other reason, including retirement prior to age sixty-five with the approval of the Company or employing subsidiary, the Committee which administers the Plan (the “Committee”) or its delegate, as appropriate, may, in the Committee’s or such delegate’s sole discretion, approve the lapse of Forfeiture Restrictions as to any or all Restricted Shares still subject to such restrictions, such lapse to be effective on the date of such approval or Employee’s termination date, if later.

violation of any provision of any law or of any regulation of any governmental authority or any national securities exchange.

4. Status of Stock. Employee agrees that the Restricted Shares will not be sold or otherwise disposed of in any manner which would constitute a violation of any applicable federal or state securities laws. Employee also agrees (i) that the certificates representing the Restricted Shares may bear such legend or legends as the Company deems appropriate in order to assure compliance with applicable securities laws, (ii) that the Company may refuse to register the transfer of the Restricted Shares on the stock transfer records of the Company if such proposed transfer would, in the opinion of counsel satisfactory to the Company, constitute a violation of any applicable securities law and (iii) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the Restricted Shares.

7. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all lawful successors to Employee permitted under the terms of the Plan.

8. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware.

	CHRISTOPHER & BANKS
	CORPORATION


	By:
		Matthew P Dillon
		Chief Executive Officer


	EMPLOYEE

	Signed:
	Printed Name:

Please Check Appropriate Item (One of the lines must be checked):

___ I do not desire the alternative tax treatment provided for in the Internal Revenue Code Section 83(b).

___ I do desire the alternative tax treatment provided for in Internal Revenue Code Section 83(b) and desire that forms for such purpose be forwarded to me.

* I acknowledge that the Company has suggested that before this block is checked that I check with a tax consultant of my choice.

Please furnish the following information for shareholder records:


(Given name and initial must be used				Social Security Number
for stock registry)				(if applicable)


Address (Street)				Birth Date
				Month/Day/Year


Address (City)				Name of Employer


Address (Zip Code)				Day phone number


United States Citizen: Yes No

PROMPTLY NOTIFY THIS OFFICE OF ANY CHANGE IN ADDRESS.

EX-10.40 8 a07-12680_1ex10d40.htm EX-10.40

Exhibit 10.40

AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

BY AND BETWEEN

CHRISTOPHER & BANKS COMPANY AND
CHRISTOPHER & BANKS SERVICES COMPANY,

CHRISTOPHER & BANKS, INC.,
AND

WELLS FARGO BANK, NATIONAL ASSOCIATION

Acting through its WELLS FARGO BUSINESS CREDIT operating division

Dated November 4, 2005

TABLE OF CONTENTS

ARTICLE I – DEFINITIONS		1

Section 1.1	Definitions	1
Section 1.2	Other Definitional Terms; Rules of Interpretation	9

ARTICLE II – AMOUNT AND TERMS OF THE CREDIT FACILITY		9

Section 2.1	Revolving Advances	9
Section 2.2	Procedures for Requesting Advances	10
Section 2.3	Letters of Credit	10
Section 2.4	Special Account	11
Section 2.5	Interest; Default Interest Rate; Application of Payments; Participations; Usury	11
Section 2.6	Fees	12
Section 2.7	Time for Interest Payments; Payment on Non-Business Days; Computation of Interest and Fees	14
Section 2.8	Lockbox and Collateral Account; Sweep of Funds	15
Section 2.9	Voluntary Prepayment; Reduction of the Maximum Line Amount; Termination of the Credit Facility by the Borrower	15
Section 2.10	Mandatory Prepayment	16
Section 2.11	Revolving Advances to Pay Obligations	16
Section 2.12	Use of Proceeds	16
Section 2.14	Liability Records	16

ARTICLE III – SECURITY INTEREST; OCCUPANCY; SETOFF		16

Section 3.1	Grant of Security Interest	16
Section 3.2	Notification of Account Debtors and Other Obligors	17
Section 3.3	Assignment of Insurance	17
Section 3.4	Occupancy	17
Section 3.5	License	18
Section 3.6	Financing Statement	18
Section 3.7	Setoff	19
Section 3.8	Collateral	19

ARTICLE IV – CONDITIONS OF LENDING		19

Section 4.1	Conditions Precedent to the Initial Advances and Letter of Credit	19
Section 4.2	Conditions Precedent to All Advances and Letters of Credit	21

ARTICLE V – REPRESENTATIONS AND WARRANTIES		22

Section 5.1	Existence and Power; Name; Chief Executive Office; Inventory and Equipment Locations; Federal Employer Identification Number and Organizational Identification Number	22

Section 5.2	Capitalization	22
Section 5.3	Authorization of Borrowing; No Conflict as to Law or Agreements	22
Section 5.4	Legal Agreements	22
Section 5.5	Subsidiaries	23
Section 5.6	Financial Condition; No Adverse Change	23
Section 5.7	Litigation	23
Section 5.8	Regulation U	23
Section 5.9	Taxes	23
Section 5.10	Titles and Liens	23
Section 5.11	Intellectual Property Rights	23
Section 5.12	Plans	24
Section 5.13	Default	24
Section 5.14	Environmental Matters	24
Section 5.15	Submissions to Lender	25
Section 5.16	Financing Statements	25
Section 5.17	Rights to Payment	25

ARTICLE VI – COVENANTS		26

Section 6.1	Reporting Requirements	26
Section 6.2	Financial Covenants	28
Section 6.3	Permitted Liens; Financing Statements	29
Section 6.4	Indebtedness	30
Section 6.5	Guaranties	30
Section 6.6	Investments and Subsidiaries	31
Section 6.7	Dividends and Distributions	31
Section 6.8	Books and Records; Collateral Examination; Inspection and Appraisals	31
Section 6.9	Account Verification	32
Section 6.10	Compliance with Laws	32
Section 6.11	Payment of Taxes and Other Claims	33
Section 6.12	Maintenance of Properties	33
Section 6.13	Insurance	33
Section 6.14	Preservation of Existence	34
Section 6.15	Delivery of Instruments, etc.		34
Section 6.16	Sale or Transfer of Assets; Suspension of Business Operations		34
Section 6.17	Consolidation and Merger; Asset Acquisitions		34
Section 6.18	Sale and Leaseback		35
Section 6.19	Restrictions on Nature of Business		35
Section 6.20	Accounting		36
Section 6.21	Plans		36
Section 6.22	Place of Business; Name		36
Section 6.23	Constituent Documents; S Corporation Status		36
Section 6.24	Performance by the Lender		36

ARTICLE VII – EVENTS OF DEFAULT, RIGHTS AND REMEDIES		38

Section 7.1	Events of Default	37
Section 7.2	Rights and Remedies	39
Section 7.3	Certain Notices	40

ARTICLE VIII – MISCELLANEOUS		40

Section 8.1	No Waiver; Cumulative Remedies; Compliance with Laws	40
Section 8.2	Amendments, Etc.	40
Section 8.3	Notices; Communication of Confidential Information; Requests for Accounting	40
Section 8.4	Further Documents	41
Section 8.5	Costs and Expenses	41
Section 8.6	Indemnity	41
Section 8.7	Participants	42
Section 8.8	Execution in Counterparts; Telefacsimile Execution	42
Section 8.9	Retention of Borrower’s Records	42
Section 8.10	Binding Effect; Assignment; Complete Agreement; Sharing Information	42
Section 8.11	Severability of Provisions	43
Section 8.12	Headings	43
Section 8.13	Governing Law; Jurisdiction, Venue; Waiver of Jury Trial	43
Section 8.14	Confidentiality	43

iii

AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

Dated as of November 4, 2005

Christopher & Banks, Inc., Christopher & Banks Company and Christopher & Banks Services Company, each a Minnesota corporation (jointly and severally, the “Borrower” and each a “Borrower” as the context requires), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”) entered into that certain Amended and Restated Revolving Credit and Security Agreement dated March 15, 1999 (the “1999 Credit Agreement”). The Borrower and the Lender, through its WELLS FARGO BUSINESS CREDIT operating division, wish to extend the term of the 1999 Credit Agreement, increase the amount of the revolving credit commitment thereunder and make certain other changes in the terms and conditions under which the Lender provides to the Borrower the revolving credit commitment. In order to accomplish the foregoing, the parties have agreed to execute and deliver this Amended and Restated Credit and Security Agreement.

The parties hereby agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1 Definitions. Except as otherwise expressly provided in this Agreement, the following terms shall have the meanings given them in this Section:

“Accounts” shall have the meaning given it under the UCC.

“Advance” means a Revolving Advance.

“Affiliate” or “Affiliates” means Christopher & Banks, Inc., Christopher & Banks Company and Christopher & Banks Services Company, and any other Person controlled by, controlling or under common control with the Borrower, including any Subsidiary of the Borrower. For purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

“Aggregate Outstanding” means the sum of the outstanding principal balance of the Revolving Note and the L/C Amount.”

“Agreement” means this Amended and Restated Credit and Security Agreement.

“Availability” means the amount, if any, by which the Borrowing Base exceeds the sum of (i) the outstanding principal balance of the Revolving Note and (ii) the L/C Amount.

“Borrowing Base” means at any time the lesser of:

(a) The Maximum Line Amount; or

(b) Subject to change from time to time in the Lender’s sole discretion with prior written or telefacsimile notice to the Borrower, the sum of

(i) either (A) between June 1 and August 31 in any year, and so long as there are no outstanding Advances, 80% of Eligible Inventory, or (B) at all other times, 70% of Eligible Inventory; plus

(ii) 50% of Eligible In-Transit Inventory; less

(iii) Obligations that the Borrower owes to the Lender that have not yet been advanced on the Revolving Note, and the dollar amount that the Lender in its discretion believes are a reasonable determination of the Borrower’s credit exposure with respect to Wells Fargo Affiliate Obligations.

“Business Day” means a day on which the Federal Reserve Bank of New York is open for business.

“Capital Expenditures” means for a period, any expenditure of money during such period for the purchase or construction of assets, or for improvements or additions thereto, which are capitalized on the Borrower’s balance sheet.

“Cash Flow” means, for any period of determination, Net Income, plus depreciation and amortization, plus any Interest Expense that is accrued but not paid currently, minus Capital Expenditures to the extent such Capital Expenditures are paid in cash, minus all scheduled repayment of principal on Debt (whether or not actually paid), minus all funds expended for the repurchase, redemption or retirement of the Guarantor’s issued and outstanding capital stock to the extent permitted hereunder, minus cash stock dividends, all as determined in accordance with GAAP on a consolidated basis.

“Collateral” means all of the Borrower’s Equipment, General Intangibles, Inventory, letter-of-credit rights, letters of credit, all sums on deposit in any Collateral Account, and any items in any Lockbox; together with (i) all substitutions and replacements for and products of any of the foregoing; (ii) in the case of all goods, all accessions; (iii) all accessories, attachments, parts, equipment and repairs now or hereafter attached or affixed to or used in connection with any goods; (iv) all warehouse receipts, bills of lading and other documents of title now or hereafter covering such goods; (v) all collateral subject to the Lien of any Security Document; (vi) all sums on deposit in the Special Account; (vii) proceeds of any and all of the foregoing; and (viii) all of the foregoing, whether now owned or existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights.

“Collateral Account” means the “Lender Account” as defined in the Wholesale Lockbox and Collection Account Agreement.

“Commercial Letter of Credit Agreement” means an agreement governing the issuance of documentary letters of credit by the Lender, entered into between the Borrower as applicant and the Lender as issuer.

“Commitment” means the Lender’s commitment to make Advances to and to issue Letters of Credit for the account of, the Borrower.

“Constituent Documents” means with respect to any Person, as applicable, such Person’s certificate of incorporation, articles of incorporation, by-laws, certificate of formation, articles of organization, limited liability company agreement, management agreement, operating agreement, shareholder agreement, partnership agreement or similar document or agreement governing such Person’s existence, organization or management or concerning disposition of ownership interests of such Person or voting rights among such Person’s owners.

“Credit Facility” means the credit facility under which Revolving Advances and Letters of Credit may be made available to the Borrower by the Lender under Article II.

“Cut-off Time” means 1:00 p.m. Minneapolis, Minnesota time.

“Debt” means of a Person as of a given date, all items of indebtedness or liability which in accordance with GAAP would be included in determining total liabilities as shown on the liabilities side of a balance sheet for such Person and shall also include the aggregate payments required to be made by such Person at any time under any lease that is considered a capitalized lease under GAAP.

“Default” means an event that, with giving of notice or passage of time or both, would constitute an Event of Default.

“Default Period” means any period of time beginning on the day a Default or Event of Default occurs and ending on the date identified by the Lender in writing as the date that such Default or Event of Default has been cured or waived.

“Default Rate” means an annual interest rate in effect during a Default Period or following the Termination Date, which interest rate shall be equal to two percent (2.0%) over the applicable Floating Rate, as such rate may change from time to time.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is a member of a group which includes the Borrower and which is treated as a single employer under Section 414 of the IRC.

“Eligible In-Transit Inventory” means Eligible Inventory that is in-transit and backed by a documentary Letter of Credit issued by the Lender.

“Eligible Inventory” means all Inventory of the Borrower, valued at the lower of cost or market in accordance with GAAP; but excluding any Inventory having any of the following characteristics:

(i) Inventory that is: in-transit (except for Eligible In-Transit Inventory); located at any warehouse, job site or other premises not approved by the Lender in writing; not subject to a duly perfected first priority security interest in the Lender’s favor; subject to any lien or encumbrance that is subordinate to the Lender’s first priority security interest; covered by any negotiable or non-negotiable warehouse receipt, bill of lading or other document of title; on consignment from any Person; on consignment to any Person or subject to any bailment unless such consignee or bailee has executed an agreement with the Lender;

(ii) Supplies, packaging, parts or sample Inventory, or customer supplied parts or Inventory;

(iii) Work-in-process Inventory;

(iv) Inventory that is damaged, defective, obsolete, slow moving (that is, over four months old), or not currently saleable in the normal course of the Borrower’s operations;

(v) Inventory that the Borrower has returned, has attempted to return, is in the process of returning or intends to return to the vendor thereof;

(vi) Inventory that is perishable or live;

(vii) Inventory manufactured by the Borrower pursuant to a license unless the applicable licensor has agreed in writing to permit the Lender to exercise its rights and remedies against such Inventory;

(viii) Inventory that is subject to a Lien in favor of any Person other than the Lender;

(ix) Inventory otherwise deemed ineligible by the Lender in its sole discretion.

“Environmental Law” means any federal, state, local or other governmental statute, regulation, law or ordinance dealing with the protection of human health and the environment.

“Equipment” means all of the Borrower’s equipment, as such term is defined in the UCC, whether now owned or hereafter acquired, including all present and future machinery, vehicles, furniture, fixtures, manufacturing equipment, shop equipment, office and recordkeeping equipment, parts, tools, supplies, and including specifically the goods described in any equipment schedule or list herewith or hereafter furnished to the Lender by the Borrower.

“Event of Default” is defined in Section 7.1.

“Financial Covenants” means the covenants set forth in Section 6.2.

“Floating Rate” means an annual interest rate equal to the sum of the Prime Rate plus one-quarter percent (0.25%), which interest rate shall change when and as the Prime Rate changes.

“Floating Rate Advance” means an Advance bearing interest at the Floating Rate.

“Funding Date” is defined in Section 2.1.

“GAAP” means generally accepted accounting principles, applied on a basis consistent with the accounting practices applied in the financial statements described in Section 5.6.

“General Intangibles” shall have the meaning given it under the UCC.

“Guarantor(s)” means Christopher & Banks Corporation and any other Person now or in the future guaranteeing the Obligations.

“Guarantor Security Agreement” means the security agreement of even date executed by Guarantor in favor of the Lender.

“Guaranty” means each unconditional continuing guaranty or unconditional continuing guaranty by corporation executed by a Guarantor in favor of the Lender (collectively, the “Guaranties”)

“Hazardous Substances” means pollutants, contaminants, hazardous substances, hazardous wastes, petroleum and fractions thereof, and all other chemicals, wastes, substances and materials listed in, regulated by or identified in any Environmental Law.

“Indemnified Liabilities” is defined in Section 8.6

“Indemnitees” is defined in Section 8.6.

“Interest Expense” means, for the fiscal year-to-date period, the Borrower’s total gross interest expense during such period (excluding interest income), and shall in any event include, without limitation, (i) interest expensed (whether or not paid) on all Debt, (ii) the amortization of debt discounts, (iii) the amortization of all fees payable in connection with the incurrence of Debt to the extent included in interest expense, and (iv) the portion of any capitalized lease obligation allocable to interest expense.

“IRC” means the Internal Revenue Code of 1986, as amended from time to time.

“Infringement” or “Infringing” when used with respect to Intellectual Property Rights means any material infringement or other material violation of Intellectual Property Rights.

“Intellectual Property Rights” means all actual or prospective rights arising in connection with any intellectual property or other proprietary rights, including all rights arising in connection with copyrights, patents, service marks, trade dress, trade secrets, trademarks, trade names or mask works.

“Interest Payment Date” is defined in Section 2.7(a).

“Inventory” shall have the meaning given it under the UCC.

“Inventory Turns Ratio” means, for any period, the product obtained by dividing the total net sales for the prior 12-month period by the average month-end retail value of all Inventory for the same 12-month period, all as determined in accordance with GAAP.

“L/C Amount” means the sum of (i) the aggregate face amount of any issued and outstanding Letters of Credit and (ii) the unpaid amount of the Obligation of Reimbursement.

“L/C Application” means an application for the issuance of standby or documentary letters of credit pursuant to the terms of a Standby Letter of Credit Agreement or a Commercial Letter of Credit Agreement, in form acceptable to the Lender.

“Letter of Credit” is defined in 2.3(a).

“Licensed Intellectual Property” is defined in Section 5.11(c) .

“Lien” means any security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance, title retention agreement or analogous instrument or device, including the interest of each lessor under any capitalized lease and the interest of any bondsman under any payment or performance bond, in, of or on any assets or properties of a Person, whether now owned or subsequently acquired and whether arising by agreement or operation of law.

“Loan Documents” means this Agreement, the Revolving Note, the Guaranty, any L/C Applications and the Security Documents, together with every other agreement, note, document, contract or instrument to which the Borrower now or in the future may be a party and which is required by the Lender.

“Lockbox” means “Lockbox” as defined in the Wholesale Lockbox and Collection Account Agreement.

“Maturity Date” means June 30, 2008.

“Maximum Line Amount” means $50,000,000 unless this amount is reduced pursuant to Section 2.9, in which event it means such lower amount.

“Multiemployer Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to which the Borrower or any ERISA Affiliate contributes or is obligated to contribute.

“Net Cash Proceeds” means in connection with any asset sale, the cash proceeds (including any cash payments received by way of deferred payment whether pursuant to a note, installment receivable or otherwise, but only as and when actually received) from such asset sale, net of (i) attorneys’ fees, accountants’ fees, investment banking fees, brokerage commissions and amounts required to be applied to the repayment of any portion of the Debt secured by a Lien not prohibited hereunder on the asset which is the subject of such sale, and (ii) taxes paid or reasonably estimated to be payable as a result of such asset sale.

“Net Income” means fiscal year-to-date after-tax net income from continuing operations, but excluding extraordinary gains, all as determined in accordance with GAAP.

“Obligation of Reimbursement” means the obligation of the Borrower to reimburse the Lender pursuant to the terms of the Standby Letter of Credit Agreement or the Commercial Letter of Credit Agreement and any applicable L/C Application.

“Obligations” means the Revolving Note, the Obligation of Reimbursement and each and every other debt, liability and obligation of every type and description which the Borrower may now or at any time hereafter owe to the Lender, whether such debt, liability or obligation now exists or is hereafter created or incurred, whether it arises in a transaction involving the Lender alone or in a transaction involving other creditors of the Borrower, and whether it is direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or sole, joint, several or joint and several, and including all indebtedness of the Borrower arising under any Loan Document or guaranty between the Borrower and the Lender, whether now in effect or subsequently entered into and all Wells Fargo Affiliate Obligations.

“Officer” means with respect to the Borrower, William J. Prange, Chief Executive Officer, Joseph E. Pennington, President and Chief Operating Officer and Andrew K. Moller, Chief Financial Officer, or their successors.

“OFAC” is defined in Section 6.10(c).

“Overadvance” means the amount, if any, by which the outstanding principal balance of the Revolving Note , plus the L/C Amount, is in excess of the then-existing Borrowing Base.

“Owned Intellectual Property” is defined in Section 5.11(a).

“Owner” means with respect to the Borrower, each Person having legal or beneficial title to an ownership interest in the Borrower or a right to acquire such an interest.

“Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for employees of the Borrower or any ERISA Affiliate and covered by Title IV of ERISA.

“Permitted Lien” and “Permitted Liens” are defined in Section 6.3(a) .

“Person” means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained for employees of the Borrower or any ERISA Affiliate.

“Premises” means all locations where the Borrower conducts its business or has any rights of possession, including the locations legally described in Exhibit C attached hereto.

“Prime Rate” means at any time the rate of interest most recently announced by the Lender at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of the Lender’s base rates, and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof in such internal publication or publications as the Lender may designate. Each change in the rate of interest shall become effective on the date each Prime Rate change is announced by the Lender.

“Reportable Event” means a reportable event (as defined in Section 4043 of ERISA), other than an event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the Pension Benefit Guaranty Corporation.

“Revolving Advance” is defined in Section 2.1.

“Revolving Note” means the Borrower’s revolving promissory note, payable to the order of the Lender in substantially the form of Exhibit A hereto, as same may be renewed and amended from time to time, and all replacements thereto.

“Security Documents” means this Agreement, the Wholesale Lockbox and Collection Account Agreement, the Guarantor Security Agreement, and any other document delivered to the Lender from time to time to secure the Obligations.

“Security Interest” is defined in Section 3.1.

“Special Account” means a specified cash collateral account maintained with Lender or another financial institution acceptable to the Lender in connection with Letters of Credit, as contemplated by Section 2.4.

“Standby Letter of Credit Agreement” means an agreement governing the issuance of standby letters of credit by Lender entered into between the Borrower as applicant and Lender as issuer.

“Subsidiary” means any Person of which more than 50% of the outstanding ownership interests having general voting power under ordinary circumstances to elect a majority of the board of directors or the equivalent of such Person, regardless of whether or not at the time ownership interests of any other class or classes shall have or might have voting power by reason of the happening of any contingency, is at the time directly or indirectly owned by the Borrower, by the Borrower and one or more other Subsidiaries, or by one or more other Subsidiaries.

“Termination Date” means the earliest of (i) the Maturity Date, (ii) the date the Borrower terminates the Credit Facility, or (iii) the date the Lender demands payment of the Obligations, following an Event of Default, pursuant to Section 7.2.

“UCC” means the Uniform Commercial Code in effect in the state designated in this Agreement as the state whose laws shall govern this Agreement, or in any other state whose laws are held to govern this Agreement or any portion of this Agreement.

“Wells Fargo Affiliate Obligations” means all obligations, liabilities, contingent reimbursement obligations, fees, and expenses owing by the Borrower or its Subsidiaries to any Person that is owned in material part by the Lender, and that relates to any service or facility extended to the Borrower or its Subsidiaries, including: (a) credit cards, (b) credit card processing services, (c) debit cards, and (d) purchase cards, as well as any other services or facilities from time to time specified by the Lender, whether direct or indirect, absolute or contingent, due or to become due, and whether existing now or in the future.

“Wholesale Lockbox and Collection Account Agreement” means the Wholesale Lockbox and Collection Account Agreement by and between the Borrower and the Lender dated the same date as this Agreement.

Section 1.2 Other Definitional Terms; Rules of Interpretation. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP. All terms defined in the UCC and not otherwise defined herein have the meanings assigned to them in the UCC. References to Articles, Sections, subsections, Exhibits, Schedules and the like, are to Articles, Sections and subsections of, or Exhibits or Schedules attached to, this Agreement unless otherwise expressly provided. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. Unless the context in which used herein otherwise clearly requires, “or” has the inclusive meaning represented by the phrase “and/or”. Defined terms include in the singular number the plural and in the plural number the singular. Reference to any agreement (including the Loan Documents), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof (and, if applicable, in accordance with the terms hereof and the other Loan Documents), except where otherwise explicitly provided, and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor. Reference to any law, rule, regulation, order, decree, requirement, policy, guideline, directive or interpretation means as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect on the determination date, including rules and regulations promulgated thereunder.

ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY

Section 2.1 Revolving Advances. The Lender agrees, subject to the terms and conditions of this Agreement, to make advances (“Revolving Advances”) to the Borrower from time to time from the date that all of the conditions set forth in 4.1 are satisfied (the “Funding Date”) to and until (but not including) the Termination Date in an amount not in excess of the Maximum Line Amount. The Lender shall have no obligation to make a Revolving Advance to the extent that the amount of the requested Revolving Advance exceeds Availability. The

Borrower’s obligation to pay the Revolving Advances shall be evidenced by the Revolving Note and shall be secured by the Collateral. Within the limits set forth in this Section 2.1, the Borrower may borrow, prepay pursuant to Section 2.9, and reborrow.

Section 2.2 Procedures for Requesting Advances. The Borrower shall comply with the following procedures in requesting Revolving Advances:

(a) Time for Requests. The Borrower shall request each Advance not later than the Cut-off Time on the Business Day on which the Advance is to be made. Each request that conforms to the terms of this Agreement shall be effective upon receipt by the Lender, shall be in writing or by telephone or telecopy transmission, and shall be confirmed in writing by the Borrower if so requested by the Lender, by (i) an Officer of any Borrower; or (ii) a Person designated as any Borrower’s agent by an Officer of the Borrower in a writing delivered to the Lender; or (iii) a Person whom the Lender reasonably believes to be an Officer of any Borrower or such a designated agent. The Borrower shall repay all Advances even if the Lender does not receive such confirmation and even if the Person requesting an Advance was not in fact authorized to do so. Any request for an Advance, whether written or telephonic, shall be deemed to be a representation by the Borrower that the conditions set forth in Section 4.2 have been satisfied as of the time of the request.

(b) Disbursement. Upon fulfillment of the applicable conditions set forth in Article IV, the Lender shall disburse the proceeds of the requested Advance by crediting the same to the Borrower’s demand deposit account maintained with the Lender unless the Lender and the Borrower shall agree in writing to another manner of disbursement.

Section 2.3 Letters of Credit.

(a) The Lender agrees, subject to the terms and conditions of this Agreement, to issue, at any time after the Funding Date and prior to the Termination Date, one or more irrevocable standby or documentary letters of credit (each, a “Letter of Credit”) for the Borrower’s account. The Lender will not issue any Letter of Credit if the face amount of the Letter of Credit to be issued would exceed Availability.

Each Letter of Credit, if any, shall be issued pursuant to a separate L/C Application made by the Borrower to the Lender, which must be completed in a manner satisfactory to the Lender. The terms and conditions set forth in each such L/C Application shall supplement the terms and conditions of the Standby Letter of Credit Agreement or the Commercial Letter of Credit Agreement, as applicable.

(b) No Letter of Credit shall be issued with an expiration date later than one (1) year from the date of issuance or the Maturity Date in effect as of the date of issuance, whichever is earlier.

(c) Any request for issuance of a Letter of Credit shall be deemed to be a representation by the Borrower that the conditions set forth in Section 4.2 have been satisfied as of the date of the request.

(d) If a draft is submitted under a Letter of Credit when the Borrower is unable, because a Default Period exists or for any other reason, to obtain a Revolving Advance to pay the Obligation of Reimbursement, the Borrower shall pay to the Lender on demand and in immediately available funds, the amount of the Obligation of Reimbursement together with interest, accrued from the date of the draft until payment in full at the Default Rate. Notwithstanding the Borrower’s inability to obtain a Revolving Advance for any reason, the Lender is irrevocably authorized, in its sole discretion, to make a Revolving Advance in an amount sufficient to discharge the Obligation of Reimbursement and all accrued but unpaid interest thereon.

Section 2.4 Special Account. If the Credit Facility is terminated for any reason while any Letter of Credit is outstanding, the Borrower shall thereupon pay the Lender in immediately available funds for deposit in the Special Account an amount equal to the L/C Amount plus any anticipated fees and costs. If the Borrower fails to promptly make any such payment in the amount required hereunder, then the Lender may make a Revolving Advance against the Credit Facility in an amount sufficient to fulfill this obligation and deposit the proceeds to the Special Account. The Special Account shall be an interest bearing account either maintained with the Lender or with a financial institution acceptable to the Lender. Any interest earned on amounts deposited in the Special Account shall be credited to the Special Account. The Lender may apply amounts on deposit in the Special Account at any time or from time to time to the Obligations in the Lender’s sole discretion. The Borrower may not withdraw any amounts on deposit in the Special Account as long as the Lender maintains a security interest therein. The Lender agrees to transfer any balance in the Special Account to the Borrower when the Lender is required to release its security interest in the Special Account under applicable law.

Section 2.5 Interest; Default Interest Rate; Application of Payments; Participations; Usury.

(a) Interest. Except as provided in Section 2.5(b) and Section 2.5(e), the principal amount of each Advance shall bear interest at the Floating Rate.

(b) Default Interest Rate. At any time during any Default Period, in the Lender’s sole discretion and without waiving any of its other rights or remedies, the principal of the Revolving Note shall bear interest at the Default Rate or such lesser rate as the Lender may determine, effective for any periods designated by the Lender from time-to-time during the Default Period. The decision of the Lender to impose a rate that is less than the Default Rate or to not impose the Default Rate for the entire duration of the Default Period shall be made by the Lender in its sole discretion and shall not be a waiver of any of its other rights and remedies, including its right to retroactively impose the full Default Rate for the entirety of any such Default Period or following the Termination Date.

(c) Application of Payments. Payments shall be applied to the Obligations on the Business Day of receipt by the Lender in the Lender’s general account.

(d) Participations. If any Person shall acquire a participation in the Advances or the Obligation of Reimbursement, the Borrower shall be obligated to the Lender to pay the full amount of all interest calculated under this Section 2.5, along with all other fees, charges and

other amounts due under this Agreement, regardless if such Person elects to accept interest with respect to its participation at a lower rate than that calculated under this Section 2.5, or otherwise elects to accept less than its prorata share of such fees, charges and other amounts due under this Agreement.

(e) Usury. In any event no rate change shall be put into effect that would result in a rate greater than the highest rate permitted by law. Notwithstanding anything to the contrary contained in any Loan Document, all agreements which either now are or which shall become agreements between the Borrower and the Lender are hereby limited so that in no contingency or event whatsoever shall the total liability for payments in the nature of interest, additional interest and other charges exceed the applicable limits imposed by any applicable usury laws. If any payments in the nature of interest, additional interest and other charges made under any Loan Document are held to be in excess of the limits imposed by any applicable usury laws, it is agreed that any such amount held to be in excess shall be considered payment of principal hereunder, and the indebtedness evidenced hereby shall be reduced by such amount so that the total liability for payments in the nature of interest, additional interest and other charges shall not exceed the applicable limits imposed by any applicable usury laws, in compliance with the desires of the Borrower and the Lender. This provision shall never be superseded or waived and shall control every other provision of the Loan Documents and all agreements between the Borrower and the Lender, or their successors and assigns.

Section 2.6 Fees.

(a) Facility Fees. Borrower shall pay to Lender a fee (the “Facility Fees”) in an amount equal to one-quarter of one percent (0.25%) per annum of an amount equal to the average daily difference between the Aggregate Outstanding and Five Million Dollars ($5,000,000). To the extent the Aggregate Outstanding exceeds Five Million Dollars ($5,000,000) but is less than Seven Million Five Hundred Thousand Dollars ($7,500,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Seven Million Five Hundred Thousand Dollars ($7,500,000). To the extent the Aggregate Outstanding exceeds Seven Million Five Hundred Thousand Dollars ($7,500,000) but is less than Ten Million Dollars ($10,000,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Ten Million Dollars ($10,000,000). To the extent the Aggregate Outstanding exceeds Ten Million Dollars ($10,000,000) but is less than Twelve Million Five Hundred Thousand Dollars ($12,500,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Twelve Million Five Hundred Thousand Dollars ($12,500,000). To the extent the Aggregate Outstanding exceeds Twelve Million Five Hundred Thousand Dollars ($12,500,000) but is less than Fifteen Million Dollars ($15,000,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Fifteen Million Dollars ($15,000,000). To the extent the Aggregate Outstanding exceeds Fifteen Million Dollars ($15,000,000) but is less than Eighteen Million Dollars ($18,000,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Eighteen Million Dollars ($18,000,000). To the extent the Aggregate

Outstanding exceeds Eighteen Million Dollars ($18,000,000) but is less than Twenty-One Million Five Hundred Thousand Dollars ($21,500,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Twenty-One Million Five Hundred Thousand Dollars ($21,500,000). To the extent the Aggregate Outstanding exceeds Twenty-One Million Five Hundred Thousand Dollars ($21,500,000) but is less than Twenty-Five Million Dollars ($25,000,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Twenty-Five Million ($25,000,000). To the extent the Aggregate Outstanding exceeds Twenty- Five Million Dollars ($25,000,000) but is less than Thirty Million Dollars ($30,000,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Thirty Million ($30,000,000). To the extent the Aggregate Outstanding exceeds Thirty Million Dollars ($30,000,000) but is less than Thirty-Five Million Dollars ($35,000,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Thirty-Five Million ($35,000,000). To the extent the Aggregate Outstanding exceeds Thirty-Five Million Dollars ($35,000,000) but is less than Forty Million Dollars ($40,000,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Forty Million ($40,000,000). To the extent the Aggregate Outstanding exceeds Forty Million Dollars ($40,000,000) but is less than Forty-Five Million Dollars ($45,000,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Forty-Five Million ($45,000,000). To the extent the Aggregate Outstanding exceeds Forty-Five Million Dollars ($45,000,000) but is less than Fifty Million Dollars ($50,000,000), the Facility Fees shall be determined on the average daily difference between such Aggregate Outstanding and Fifty Million ($50,000,000).

Such fee shall be calculated monthly and paid in arrears commencing on the first Banking Day of the month immediately following execution of this Agreement and continuing on the first Banking Day of each month thereafter until Lender’s commitment to extend the Credit has terminated pursuant to Section 2.9 or Section 7.2(a). Borrower hereby authorizes Lender to make an Advance, subject to Availability, in an amount equal to the Facility Fees then due and payable and apply the same to the Facility Fees due.

(b) Collateral Monitoring Fees. So long as no Event of Default has occurred and is continuing, Borrower shall pay to Lender a monthly collateral monitoring fee of Two Hundred Fifty Dollars ($250) (the “Collateral Monitoring Fee”). The monthly Collateral Monitoring Fee shall be paid in arrears on the first Banking Day of each month until all of the Obligations have been paid in full in money and the Commitment has been terminated. Borrower hereby authorized Lender to make an Advance, subject to Availability, in an amount equal to the Collateral Monitoring Fee then due and payable and apply the same to the Collateral Monitoring Fee due.

(c) Standby Letter of Credit Fees. The Borrower shall pay to the Lender a fee with respect to each standby Letter of Credit, if any, accruing on a daily basis and computed at an

annual rate of two and one-half percent (2.5%) of the aggregate amount that may then be drawn, assuming compliance with all conditions for drawing (the “Aggregate Face Amount”), from and including the date of issuance of such standby Letter of Credit until such date as such standby Letter of Credit shall terminate by its terms or be returned to the Lender, due and payable monthly in arrears on the first day of each month and on the date that the standby Letter of Credit shall terminate by its terms or be returned to the Lender; provided, however, effective as of the first day of the fiscal quarter in which any Default Period begins through the last day of such Default Period, or any shorter time period that the Lender may determine, in the Lender’s sole discretion and without waiving any of its other rights and remedies, such fee shall increase to four and one-half percent (4.5%) of the Aggregate Face Amount. The foregoing fee shall be in addition to any and all fees, commissions and charges imposed by Lender with respect to or in connection with such standby Letter of Credit.

(d) Documentary Letter of Credit Fees. The Borrower agrees to pay the Lender fees with respect to each documentary Letter of Credit in accordance with the negotiated fee schedule with respect to documentary Letters of Credit.

(e) Letter of Credit Administrative Fees. The Borrower shall pay all administrative fees charged by Lender in connection with the honoring of drafts under any Letter of Credit, amendments thereto, transfers thereof and all other activity with respect to the Letters of Credit at the then — current rates published by Lender for such services rendered on behalf of customers of Lender generally.

(f) Other Fees and Charges; Payment of Fees. The Lender may from time to time impose additional fees and charges as consideration for Advances made in excess of Availability or for other events that constitute an Event of Default or a Default hereunder, including fees and charges for the administration of Collateral by the Lender, which may be assessed in the Lender’s sole discretion on either an hourly, periodic, or flat fee basis, and in lieu of or in addition to imposing interest at the Default Rate.

Section 2.7 Time for Interest Payments; Payment on Non-Business Days; Computation of Interest and Fees.

(a) Time For Interest Payments. Accrued and unpaid interest shall be due and payable on the first day of each month and on the Termination Date (each an “Interest Payment Date”), or if any such day is not a Business Day, on the next succeeding Business Day. Interest will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of advance to the Interest Payment Date. If an Interest Payment Date is not a Business Day, payment shall be made on the next succeeding Business Day.

(b) Payment on Non-Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest on the Advances or the fees hereunder, as the case may be.

(c) Computation of Interest and Fees. Interest accruing on the outstanding principal balance of the Advances and fees hereunder outstanding from time to time shall be computed on the basis of actual number of days elapsed in a year of 360 days.

Section 2.8 Lockbox and Collateral Account; Sweep of Funds.

(a) Lockbox and Collateral Account.

(i) (A) At any time Revolving Advances are outstanding, or (B) at any time that a Default or Event of Default has occurred and is continuing, or (C) at any time that the Lender notifies the Borrower in writing that Lender deems the Collateral to be insufficient to support the Obligations of the Borrower, the Borrower shall deposit all checks, drafts, cash and other remittances in payment or as proceeds of, or on account of Collateral regardless of source or nature directly into the Collateral Account and, until so deposited, the Borrower shall hold all such payments and cash proceeds in trust for and as the property of the Lender and shall not commingle such property with any of its other funds or property. All deposits in the Collateral Account shall constitute proceeds of Collateral and shall not constitute payment of the Obligations.

(ii) All items deposited in the Collateral Account shall be subject to final payment. If any such item is returned uncollected, the Borrower will immediately pay the Lender, or, for items deposited in the Collateral Account, the bank maintaining such account, the amount of that item, or such bank at its discretion may charge any uncollected item to the Borrower’s commercial account or other account. The Borrower shall be liable as an endorser on all items deposited in the Collateral Account, whether or not in fact endorsed by the Borrower.

(b) Sweep of Funds. The Lender shall from time to time, in accordance with the Wholesale Lockbox and Collection Account Agreement, cause funds in the Collateral Account to be transferred to the Lender’s general account for payment of the Obligations. Amounts deposited in the Collateral Account shall not be subject to withdrawal by the Borrower, except after payment in full and discharge of all Obligations.

Section 2.9 Voluntary Prepayment; Reduction of the Maximum Line Amount; Termination of the Credit Facility by the Borrower. Except as otherwise provided herein, the Borrower may prepay the Advances and Obligation of Reimbursement in whole at any time or from time to time in part. The Borrower may terminate the Credit Facility or reduce the Maximum Line Amount at any time if it gives the Lender at least 45 days advance written notice prior to the proposed Termination Date. Any reduction in the Maximum Line Amount shall be in multiples of $100,000 and with a minimum reduction of at least $500,000. If the Borrower terminates the Credit Facility or reduces the Maximum Line Amount to zero, all Obligations shall be due and payable on the effective date of the termination as stated in Borrower’s notice, and if the Borrower gives the Lender less than the required 45 days advance written notice, then the interest rate applicable to borrowings evidenced by Revolving Note shall be the Default Rate for the period of time commencing 45 days prior to the proposed Termination Date through the date that the Lender actually receives such written notice. If the Borrower does not wish the Lender to consider renewal of the Credit Facility on the next Maturity Date, then the Borrower

shall give the Lender at least 45 days written notice prior to the Maturity Date that it will not be requesting renewal. If the Borrower fails to give the Lender such timely notice, then the interest rate applicable to borrowings evidenced by the Revolving Note shall be the Default Rate for the period of time commencing 45 days prior to the Maturity Date through the date that the Lender actually receives such written notice. Upon termination of the Credit Facility and payment and performance of all Obligations, the Lender shall release or terminate the Security Interest and the Security Documents.

Section 2.10 Mandatory Prepayment. Without notice or demand, if the sum of the outstanding principal balance of the Revolving Advances plus the L/C Amount shall at any time exceed the Borrowing Base, the Borrower shall (i) first, immediately prepay the Revolving Advances to the extent necessary to eliminate such excess; and (ii) if prepayment in full of the Revolving Advances is insufficient to eliminate such excess, pay to the Lender in immediately available funds for deposit in the Special Account an amount equal to the remaining excess. Any payment received by the Lender hereunder or under Section 2.9 may be applied to the Obligations, in such order and in such amounts as the Lender in its sole discretion may determine from time to time.

Section 2.11 Revolving Advances to Pay Obligations. Notwithstanding the terms of Section 2.1, the Lender may, in its discretion at any time or from time to time, without the Borrower’s request and even if the conditions set forth in Section 4.2 would not be satisfied, make a Revolving Advance in an amount equal to the portion of the Obligations from time to time due and payable and may deliver the proceeds of any such Revolving Advance to any affiliate of the Lender in satisfaction of any Wells Fargo Affiliate Obligations.

Section 2.12 Use of Proceeds. The Borrower shall use the proceeds of Advances and each Letter of Credit for ordinary working capital and other general lawful corporate purposes.

Section 2.13 Liability Records. The Lender may maintain from time to time, at its discretion, records as to the Obligations. All entries made on any such record shall be presumed correct until the Borrower establishes the contrary. Upon the Lender’s demand, the Borrower will admit and certify in writing the exact principal balance of the Obligations that the Borrower then asserts to be outstanding. Any billing statement or accounting rendered by the Lender shall be conclusive and fully binding on the Borrower unless the Borrower gives the Lender specific written notice of exception within 45 days after receipt.

ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF

Section 3.1 Grant of Security Interest. The Borrower hereby pledges, assigns and grants to the Lender, for the benefit of itself and as agent for any affiliate of the Lender that may provide credit or services to the Borrower that constitute Wells Fargo Affiliate Obligations, a lien and security interest (collectively referred to as the “Security Interest”) in the Collateral, as security for the payment and performance of the Obligations. Upon request by the Lender, the Borrower will grant the Lender, for the benefit of itself and as agent for any affiliate of the Lender that may provide credit or services to the Borrower that constitute Wells Fargo Affiliate

Obligations, a security interest in all commercial tort claims that the Borrower may have against any Person. The security interests granted by the Borrower to the Lender under this Agreement are in addition to, and shall be consolidated with, the liens and security interests granted by the Borrower to the Lender under the 1999 Credit Agreement and any other prior security agreement, mortgage or other document, without affecting the lien, priority or effectiveness of those prior liens, security interests and agreements.

Section 3.2 Notification of Account Debtors and Other Obligors. The Lender may at any time during a Default Period notify any account debtor or other Person obligated to pay the amount due that such right to payment has been assigned or transferred to the Lender for security and shall be paid directly to the Lender. The Borrower will join in giving such notice if the Lender so requests. At any time after the Borrower or the Lender gives such notice to an account debtor or other obligor, after ten (10) days’ written notice to the Borrower, the Lender may, but need not, in the Lender’s name or in the Borrower’s name, demand, sue for, collect or receive any money or property at any time payable or receivable on account of, or securing, any such right to payment, or grant any extension to, make any compromise or settlement with or otherwise agree to waive, modify, amend or change the obligations (including collateral obligations) of any such account debtor or other obligor.

Section 3.3 Assignment of Insurance. As additional security for the payment and performance of the Obligations, the Borrower hereby assigns to the Lender any and all monies (including proceeds of insurance and refunds of unearned premiums) due or to become due under, and all other rights of the Borrower with respect to, any and all policies of insurance now or at any time hereafter covering the Collateral or any evidence thereof or any business records or valuable papers pertaining thereto, and the Borrower hereby directs the issuer of any such policy to pay all such monies directly to the Lender. At any time, whether or not a Default Period then exists, the Lender may (but need not), in the Lender’s name or in the Borrower’s name, execute and deliver proof of claim, receive all such monies, endorse checks and other instruments representing payment of such monies, and adjust, litigate, compromise or release any claim against the issuer of any such policy. Any monies received as payment for any loss under any insurance policy mentioned above (other than liability insurance policies) or as payment of any award or compensation for condemnation or taking by eminent domain, shall be paid over to the Lender to be applied, at the option of the Lender, either to the prepayment of the Obligations or shall be disbursed to the Borrower under staged payment terms reasonably satisfactory to the Lender for application to the cost of repairs, replacements, or restorations. Any such repairs, replacements, or restorations shall be effected with reasonable promptness and shall be of a value at least equal to the value of the items or property destroyed prior to such damage or destruction.

Section 3.4 Occupancy.(a) The Borrower hereby irrevocably grants to the Lender the right to take possession of the at any time during a Default Period notice .

(b) The Lender may use the Premises only to hold, process, sell, use, store, liquidate, realize upon or otherwise dispose of goods that are Collateral and for other purposes that the Lender may in good faith deem to be related or incidental purposes.

(c) The Lender’s right to use the Premises shall cease and terminate upon the earlier of (i) payment in full and discharge of all Obligations and termination of the Credit Facility, and (ii) final sale or disposition of all goods constituting Collateral and delivery of all such goods to purchasers.

(d) The Lender shall not be obligated to pay or account for any rent or other compensation for the occupancy or use of any of the Premises; provided, however, that if the Lender does pay or account for any rent or other compensation for the occupancy or use of any of the Premises, the Borrower shall reimburse the Lender promptly for the full amount thereof. In addition, the Borrower will pay, or reimburse the Lender for, all taxes, fees, duties, imposts, charges and expenses at any time incurred by or imposed upon the Lender by reason of the execution, delivery, existence, recordation, performance or enforcement of this Agreement or the provisions of this Section 3.4.

Section 3.5 License. Without limiting the generality of any other Security Document, the Borrower hereby grants to the Lender a non-exclusive, worldwide and royalty-free license to use or otherwise exploit all Intellectual Property Rights of the Borrower for the purpose of selling, leasing or otherwise disposing of any or all Collateral during any Default Period.

Section 3.6 Financing Statement. The Borrower authorizes the Lender to file from time to time, such financing statements against collateral described as “all personal property” or “all assets” or describing specific items of collateral including commercial tort claims as the Lender deems necessary or useful to perfect the Security Interest. All financing statements filed before the date hereof to perfect the Security Interest were authorized by the Borrower and are hereby re-authorized. A carbon, photographic or other reproduction of this Agreement or of any financing statements signed by the Borrower is sufficient as a financing statement and may be filed as a financing statement in any state to perfect the security interests granted hereby. For this purpose, the Borrower represents and warrants that the following information is true and correct:

Name and address of Debtors:

Christopher & Banks, Inc.

2400 Xenium Lane

Plymouth, Minnesota 55441

State Organizational Identification No. 1B-321

Christopher & Banks Company

2400 Xenium Lane

Plymouth, Minnesota 55441

State Organizational Identification No. 11X-528

Christopher & Banks Services Company

2400 Xenium Lane

Plymouth, Minnesota 55441

State Organizational Identification No. 1081636-2

Name and address of Secured Party:

Wells Fargo Business Credit

MAC 9312-040

Sixth & Marquette Street

Minneapolis, MN 55429

Section 3.7 Setoff. The Lender may at any time or from time to time, at its sole discretion and without demand and without notice to anyone, setoff any liability owed to the Borrower by the Lender, whether or not due, against any Obligation, whether or not due. In addition, each other Person holding a participating interest in any Obligations shall have the right to appropriate or setoff any deposit or other liability then owed by such Person to the Borrower, whether or not due, and apply the same to the payment of said participating interest, as fully as if such Person had lent directly to the Borrower the amount of such participating interest. Lender agrees to provide Borrower with prompt notice after exercising its rights under this Section 3.7.

Section 3.8 Collateral. This Agreement does not contemplate a sale of accounts, contract rights or chattel paper, and, as provided by law, the Borrower is entitled to any surplus and shall remain liable for any deficiency. The Lender’s duty of care with respect to Collateral in its possession (as imposed by law) shall be deemed fulfilled if it exercises reasonable care in physically keeping such Collateral, or in the case of Collateral in the custody or possession of a bailee or other third Person, exercises reasonable care in the selection of the bailee or other third Person, and the Lender need not otherwise preserve, protect, insure or care for any Collateral. The Lender shall not be obligated to preserve any rights the Borrower may have against prior parties, to realize on the Collateral at all or in any particular manner or order or to apply any cash proceeds of the Collateral in any particular order of application. The Lender has no obligation to clean up or otherwise prepare the Collateral for sale. The Borrower waives any right it may have to require the Lender to pursue any third Person for any of the Obligations.

ARTICLE IV
CONDITIONS OF LENDING

Section 4.1 Conditions Precedent to the Initial Advances and Letter of Credit. The Lender’s obligation to make the initial Advances or to cause any Letters of Credit to be issued shall be subject to the condition precedent that the Lender shall have received all of the following, each properly executed by the appropriate party and in form and substance satisfactory to the Lender:

(a) This Agreement.

(b) The Revolving Note.

(c) A Standby Letter of Credit Agreement and a Commercial Letter of Credit Agreement, and L/C Application for each Letter of Credit that the Borrower wishes to have issued thereunder.

(d) A complete and accurate list of all stores operated by the Borrower, with the following information for each such location: store number, address, and telephone number, name of landlord and, if applicable, property manager, together with such landlord’s and property manager’s address.

(e) A true and correct copy of any and all agreements pursuant to which the Borrower’s property is in the possession of any Person other than the Borrower, together with, in the case of any goods held by such Person for resale, (i) a consignee’s acknowledgment and waiver of Liens, (ii) UCC financing statements sufficient to protect the Borrower’s and the Lender’s interests in such goods, and (iii) UCC searches showing that no other secured party has filed a financing statement against such Person and covering property similar to the Borrower’s other than the Borrower, or if there exists any such secured party, evidence that each such secured party has received notice from the Borrower and the Lender sufficient to protect the Borrower’s and the Lender’s interests in the Borrower’s goods from any claim by such secured party.

(f) An acknowledgment and waiver of Liens from each warehouse in which the Borrower is storing Inventory.

(g) A true and correct copy of any and all agreements pursuant to which the Borrower’s property is in the possession of any Person other than the Borrower, together with, (i) an acknowledgment and waiver of Liens from each subcontractor who has possession of the Borrower’s goods from time to time, (ii) UCC financing statements sufficient to protect the Borrower’s and the Lender’s interests in such goods, and (iii) UCC searches showing that no other secured party has filed a financing statement covering such Person’s property other than the Borrower, or if there exists any such secured party, evidence that each such secured party has received notice from the Borrower and the Lender sufficient to protect the Borrower’s and the Lender’s interests in the Borrower’s goods from any claim by such secured party.

(h) The Wholesale Lockbox and Collection Account Agreement.

(i) Current searches of appropriate filing offices showing that (i) no Liens have been filed and remain in effect against the Borrower except Permitted Liens or Liens held by Persons who have agreed in writing that upon receipt of proceeds of the initial Advances, they will satisfy, release or terminate such Liens in a manner satisfactory to the Lender, and (ii) the Lender has duly filed all financing statements necessary to perfect the Security Interest, to the extent the Security Interest is capable of being perfected by filing.

(j) A certificate of the Borrower’s Secretary or Assistant Secretary certifying that attached to such certificate are (i) the resolutions of the Borrower’s Directors and, if required, Owners, authorizing the execution, delivery and performance of the Loan Documents, (ii) true, correct and complete copies of the Borrower’s Constituent Documents, and (iii) examples of the signatures of the Borrower’s Officers or agents authorized to execute and deliver the Loan Documents and other instruments, agreements and certificates, including Advance requests, on the Borrower’s behalf.

(k) A current certificate issued by the Secretary of State of Minnesota, certifying that each Borrower is in compliance with all applicable organizational requirements of the State of Minnesota.

(l) Evidence that the Borrower is duly licensed or qualified to transact business in all jurisdictions where the character of the property owned or leased or the nature of the business transacted by it makes such licensing or qualification necessary.

(m) A certificate of an Officer of the Borrower confirming, in his personal capacity, the representations and warranties set forth in Article V.

(n) Certificates of the insurance required hereunder, with all hazard insurance containing a lender’s loss payable endorsement in the Lender’s favor and with all liability insurance naming the Lender as an additional insured.

(o) The separate Guaranty of each Guarantor, pursuant to which each Guarantor unconditionally guarantees the full and prompt payment of all Obligations, together with the Guarantor Security Agreement.

(p) A certificate of the Guarantor’s Secretary or Assistant Secretary certifying that attached to such certificate are (i) the resolutions of the Guarantor’s Directors authorizing the execution, delivery and performance of the Loan Documents to which the Guarantor is a party, (ii) true, correct and complete copies of the Guarantor’s Constituent Documents, and (iii) examples of the signatures of the Guarantor’s Officers or agents authorized to execute and deliver the Loan Documents to which the Guarantor is a party and other instruments, agreements and certificates, including Advance requests, on the Borrower’s behalf.

(q) An opinion of counsel to each Borrower and the Guarantor, addressed to the Lender.

(r) Payment of the fees and commissions due under Section 2.6 through the date of the initial Advance or Letter of Credit and expenses incurred by the Lender through such date and required to be paid by the Borrower under Section 8.5, including all legal expenses incurred through the date of this Agreement.

(s) Such other documents as the Lender in its sole discretion may require.

Section 4.2 Conditions Precedent to All Advances and Letters of Credit. The Lender’s obligation to make each Advance or to cause the issuance of a Letter of Credit shall be subject to the further conditions precedent that:

(a) the representations and warranties contained in Article V are correct on and as of the date of such Advance or issuance of a Letter of Credit as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date; and

(b) no event has occurred and is continuing, or would result from such Advance or issuance of a Letter of Credit that constitutes a Default or an Event of Default.

ARTICLE V
REPRESENTATIONS AND WARRANTIES

Each Borrower each represents and warrants to the Lender as follows:

Section 5.1 Existence and Power; Name; Chief Executive Office; Inventory and Equipment Locations; Federal Employer Identification Number and Organizational Identification Number. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota and is duly licensed or qualified to transact business in all jurisdictions where the character of the property owned or leased or the nature of the business transacted by it makes such licensing or qualification necessary. The Borrower has all requisite power and authority to conduct its business, to own its properties and to execute and deliver, and to perform all of its obligations under, the Loan Documents. During its existence, the Borrower has done business solely under the names set forth in Schedule 5.1. The Borrower’s chief executive office and principal place of business is located at the address set forth in Schedule 5.1, and all of the Borrower’s records relating to its business or the Collateral are kept at that location. All Inventory and Equipment is located at that location or at one of the other locations listed in Schedule 5.1. The Borrower’s federal employer identification number and organization identification number are correctly set forth in Section 3.6.

Section 5.2 Capitalization. There are no rights to acquire ownership interests which if fully exercised would cause such Person to hold more than five percent (5%) of all ownership interests of the Borrower on a fully diluted basis.

Section 5.3 Authorization of Borrowing; No Conflict as to Law or Agreements. The execution, delivery and performance by the Borrower of the Loan Documents and the borrowings from time to time hereunder have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the Borrower’s Owners; (ii) require any authorization, consent or approval by, or registration, declaration or filing with, or notice to, any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or any third party, except such authorization, consent, approval, registration, declaration, filing or notice as has been obtained, accomplished or given prior to the date hereof; (iii) violate any provision of any law, rule or regulation (including Regulation X of the Board of Governors of the Federal Reserve System) or of any order, writ, injunction or decree presently in effect having applicability to the Borrower or of the Borrower’s Constituent Documents; (iv) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other material agreement, lease or instrument to which the Borrower is a party or by which it or its properties may be bound or affected; or (v) result in, or require, the creation or imposition of any Lien (other than the Security Interest) upon or with respect to any of the properties now owned or hereafter acquired by the Borrower.

Section 5.4 Legal Agreements. This Agreement constitutes and, upon due execution by the Borrower, the other Loan Documents will constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms.

Section 5.5 Subsidiaries. Christopher & Banks, Inc. has one Subsidiary, Christopher & Banks Company. Christopher & Banks Company has one Subsidiary, Christopher & Banks Services Company. There are no rights to acquire ownership interests which if fully exercised would cause such Person to hold more than five percent (5%) of all ownership interests of the Borrower on a fully diluted basis. Borrower will provide Lender not less than thirty (30) days’ notice prior to the creation of any new Subsidiary, provided further that such Subsidiary shall immediately execute and deliver to Lender a guaranty in favor of the Lender, in form and substance satisfactory to the Lender, guaranteeing the Obligations of the Borrower, or, at Lender’s discretion, such Subsidiary shall become a Borrower.

Section 5.6 Financial Condition; No Adverse Change. The Borrower has furnished to the Lender its audited financial statements for its fiscal year ended February 26, 2005, and unaudited financial statements for the fiscal-year-to-date period ended August 27, 2005, and those statements fairly present the Borrower’s financial condition on the dates thereof and the results of its operations and cash flows for the periods then ended and were prepared in accordance with GAAP. Since the date of the most recent financial statements, there has been no material adverse change in the Borrower’s business, properties or condition (financial or otherwise).

Section 5.7 Litigation. There are no actions, suits or proceedings pending or, to the Borrower’s knowledge, threatened against or affecting the Borrower or any of its Affiliates or the properties of the Borrower or any of its Affiliates before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which, if determined adversely to the Borrower or any of its Affiliates, would have a material adverse effect on the financial condition, properties or operations of the Borrower or any of its Affiliates.

Section 5.8 Regulation U. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock.

Section 5.9 Taxes. The Borrower and its Affiliates have paid or caused to be paid to the proper authorities when due all federal, state and local taxes required to be withheld by each of them. The Borrower and its Affiliates have filed all federal, state and local tax returns which to the knowledge of the Officers of the Borrower or any Affiliate, as the case may be, are required to be filed, and the Borrower and its Affiliates have paid or caused to be paid to the respective taxing authorities all taxes as shown on said returns or on any assessment received by any of them to the extent such taxes have become due.

Section 5.10 Titles and Liens. The Borrower has good and marketable title to all Collateral free and clear of all Liens other than Permitted Liens. No financing statement naming the Borrower as debtor is on file in any office except to perfect only Permitted Liens.

Section 5.11 Intellectual Property Rights. Schedule 5.11 is a complete list of all patents, applications for patents, trademarks, applications to register trademarks, service marks, applications to register service marks, mask works, trade dress and copyrights for which the

Borrower is the owner of record (the “Owned Intellectual Property”). Except as disclosed on Schedule 5.11, (i) the Borrower owns the Owned Intellectual Property free and clear of all restrictions (including covenants not to sue a third party), court orders, injunctions, decrees, writs or Liens, whether by written agreement or otherwise, (ii) no Person other than the Borrower owns or has been granted any right in the Owned Intellectual Property, (iii) all Owned Intellectual Property is valid, subsisting and enforceable and (iv) the Borrower has taken all commercially reasonable action necessary to maintain and protect the Owned Intellectual Property.

Section 5.12 Plans. Except as disclosed to the Lender in writing prior to the date hereof, neither the Borrower nor any ERISA Affiliate (i) maintains or has maintained any Pension Plan, (ii) contributes or has contributed to any Multiemployer Plan or (iii) provides or has provided post-retirement medical or insurance benefits with respect to employees or former employees (other than benefits required under Section 601 of ERISA, Section 4980B of the IRC or applicable state law). Neither the Borrower nor any ERISA Affiliate has received any notice or has any knowledge to the effect that it is not in full compliance with any of the requirements of ERISA, the IRC or applicable state law with respect to any Plan. No Reportable Event exists in connection with any Pension Plan. Each Plan that is intended to qualify under the IRC is so qualified, and no fact or circumstance exists which may have an adverse effect on the Plan’s tax-qualified status. Neither the Borrower nor any ERISA Affiliate has (i) any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the IRC) under any Plan, whether or not waived, (ii) any liability under Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal, reorganization or other event under any Multiemployer Plan or (iii) any liability or knowledge of any facts or circumstances which could result in any liability to the Pension Benefit Guaranty Corporation, the Internal Revenue Service, the Department of Labor or any participant in connection with any Plan (other than routine claims for benefits under the Plan).

Section 5.13 Default. The Borrower is in compliance with all provisions of all agreements, instruments, decrees and orders to which it is a party or by which it or its property is bound or affected, the breach or default of which could have a material adverse effect on the Borrower’s financial condition, properties or operations.

Section 5.14 Environmental Matters.

(a) Except as disclosed on Schedule 5.14, to the best of Borrower’s knowledge, (i) there are not present in, on or under the Borrower’s headquarters at 2400 Xenium Lane North, Plymouth, Minnesota any Hazardous Substances in such form or quantity as to create any material liability or obligation for either the Borrower or the Lender under the common law of any jurisdiction or under any Environmental Law, and (ii) no Hazardous Substances have ever been stored, buried, spilled, leaked, discharged, emitted or released in, on or under the Borrower’s headquarters at 2400 Xenium Lane North, Plymouth, Minnesota in such a way as to create any such material liability.

(b) Except as disclosed on Schedule 5.14, to the best of Borrower’s knowledge, the Borrower has not disposed of Hazardous Substances in such a manner as to create any material liability under any Environmental Law.

(c) Except as disclosed on Schedule 5.14, to the best of Borrower’s knowledge, there are no threatened or impending requests, claims, notices, investigations, demands, administrative proceedings, hearings or litigation relating in any way to the Borrower’s headquarters at 2400 Xenium Lane North, Plymouth, Minnesota or the Borrower, alleging material liability under, violation of, or noncompliance with any Environmental Law or any license, permit or other authorization issued pursuant thereto.

(d) Except as disclosed on Schedule 5.14, to the best of Borrower’s knowledge, the Borrower’s businesses are and have in the past always been conducted in accordance with all Environmental Laws and all licenses, permits and other authorizations required pursuant to any Environmental Law and necessary for the lawful and efficient operation of such businesses are in the Borrower’s possession and are in full force and effect, nor has the Borrower been denied insurance on grounds related to potential environmental liability. No permit required under any Environmental Law is scheduled to expire within 12 months and there is no threat that any such permit will be withdrawn, terminated, limited or materially changed.

(e) Except as disclosed on Schedule 5.14, to the best of Borrower’s knowledge, the Borrower’s headquarters at 2400 Xenium Lane North, Plymouth, Minnesota has not and has never been listed on the National Priorities List, the Comprehensive Environmental Response, Compensation and Liability Information System or any similar federal, state or local list, schedule, log, inventory or database.

(f) The Borrower has delivered to the Lender all environmental assessments, audits, reports, permits, licenses and other documents describing or relating in any way to the Borrower’s headquarters at 2400 Xenium Lane North, Plymouth, Minnesota or the Borrower’s businesses.

Section 5.15 Submissions to Lender. All financial and other information provided to the Lender by or on behalf of the Borrower in connection with the Borrower’s request for the credit facilities contemplated hereby (i) is true and correct in all material respects, (ii) does not omit any material fact necessary to make such information not misleading and, (iii) as to projections, valuations or proforma financial statements, presents a good faith opinion as to such projections, valuations and proforma condition and results.

Section 5.16 Financing Statements. The Borrower has authorized the filing of financing statements sufficient when filed to perfect the Security Interest and the other security interests created by the Security Documents. When such financing statements are filed in the offices noted therein, the Lender will have a valid and perfected security interest in all Collateral that is capable of being perfected by filing financing statements. None of the Collateral is or will become a fixture on real estate, unless a sufficient fixture filing is in effect with respect thereto.

Section 5.17 Rights to Payment. Each right to payment and each instrument, document, chattel paper and other agreement constituting or evidencing Collateral is (or, in the case of all future Collateral, will be when arising or issued) the valid, genuine and legally enforceable obligation, subject to no defense, setoff or counterclaim, of the account debtor or other obligor named therein or in the Borrower’s records pertaining thereto as being obligated to pay such obligation.

ARTICLE VI
COVENANTS

So long as the Obligations shall remain unpaid, or the Credit Facility shall remain outstanding, the Borrower will comply with the following requirements, unless the Lender shall otherwise consent in writing:

Section 6.1 Reporting Requirements. The Borrower will deliver, or cause to be delivered, to the Lender each of the following, which shall be in form and detail acceptable to the Lender, provided that all financial statements required to be submitted by the Borrower shall be submitted on an unconsolidated basis as well as on a consolidated basis including Borrower and Guarantor:

(a) Annual Financial Statements. As soon as available, and in any event within 120 days after the end of each fiscal year of the Borrower, the Borrower’s audited financial statements with the unqualified opinion of independent certified public accountants selected by the Borrower and acceptable to the Lender, which annual financial statements shall include the Borrower’s balance sheet as at the end of such fiscal year and the related statements of the Borrower’s income, retained earnings and cash flows for the fiscal year then ended, prepared, if the Lender so requests, on a consolidating and consolidated basis to include any Affiliates, all in reasonable detail and prepared in accordance with GAAP, together with (i) copies of all management letters prepared by such accountants; and (ii) a certificate of the Borrower’s chief financial officer stating that such financial statements have been prepared in accordance with GAAP, fairly represent the Borrower’s financial position and the results of its operations, and whether or not such Officer has knowledge of the occurrence of any Default or Event of Default and, if so, stating in reasonable detail the facts with respect thereto.

(b) Monthly Financial Statements. As soon as available and in any event within 20 days after the end of each month, the unaudited/internal balance sheet and statements of income and retained earnings of the Borrower as at the end of and for such month and for the year to date period then ended, prepared, if the Lender so requests, on a consolidating and consolidated basis to include any Affiliates, in reasonable detail and stating in comparative form the figures for the corresponding date and periods in the previous year, all prepared in accordance with GAAP, subject to year-end audit adjustments and which fairly represent the Borrower’s financial position and the results of its operations; and accompanied by a certificate of the Borrower’s chief financial officer, substantially in the form of Exhibit B hereto stating (i) that such financial statements have been prepared in accordance with GAAP, subject to year-end audit adjustments, and fairly represent the Borrower’s financial position and the results of its operations, (ii) whether or not such Officer has knowledge of the occurrence of any Default or Event of Default not theretofore reported and remedied and, if so, stating in reasonable detail the facts with respect thereto, and (iii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the Financial Covenants.

(c) Collateral Reports. Within twenty (20) days after the end of each moth or more frequently if the Lender so requires, agings of the Borrower’s accounts receivable and its accounts payable, and within fifteen (15) days after the end of each month, an inventory

certification report, and a calculation of the Borrower’s Accounts, Inventory, Eligible Inventory and Eligible In-Transit Inventory as of each month, or more frequently as the Lender requires.

(d) Projections. No later than forty-five (45) days after the last day of each fiscal year, the Borrower’s projected balance sheets, income statements, statements of cash flow and projected Availability for each month of the succeeding fiscal year, each in reasonable detail. Such items will be certified by the Officer who is the Borrower’s chief financial officer as being the most accurate projections available and identical to the projections used by the Borrower for internal planning purposes and be delivered with a statement of underlying assumptions and such supporting schedules and information as the Lender may in its discretion require.

(e) Litigation. Immediately after the commencement thereof, notice in writing of all litigation and of all proceedings before any governmental or regulatory agency affecting the Borrower (i) of the type described in Section 5.14(c) or (ii) which seek a monetary recovery against the Borrower in excess of $500,000.

(f) Defaults. When any Officer of the Borrower becomes aware of the occurrence of any Default or Event of Default, and no later than five (5) business days after such Officer becomes aware of such Default or Event of Default, notice of such occurrence, together with a detailed statement by a responsible Officer of the Borrower of the steps being taken by the Borrower to cure the effect thereof.

(g) Plans. As soon as possible, and in any event within 30 days after the Borrower knows or has reason to know that any Reportable Event with respect to any Pension Plan has occurred, a statement signed by the Officer who is the Borrower’s chief financial officer setting forth details as to such Reportable Event and the action which the Borrower proposes to take with respect thereto, together with a copy of the notice of such Reportable Event to the Pension Benefit Guaranty Corporation. As soon as possible, and in any event within 10 days after the Borrower fails to make any quarterly contribution required with respect to any Pension Plan under Section 412(m) of the IRC, the Borrower will deliver to the Lender a statement signed by the Officer who is the Borrower’s chief financial officer setting forth details as to such failure and the action which the Borrower proposes to take with respect thereto, together with a copy of any notice of such failure required to be provided to the Pension Benefit Guaranty Corporation. As soon as possible, and in any event within ten days after the Borrower knows or has reason to know that it has or is reasonably expected to have any liability under Sections 4201 or 4243 of ERISA for any withdrawal, partial withdrawal, reorganization or other event under any Multiemployer Plan, the Borrower will deliver to the Lender a statement of the Borrower’s chief financial officer setting forth details as to such liability and the action which the Borrower proposes to take with respect thereto.

(h) Officers. Promptly upon knowledge thereof, notice of the termination of employment of William Prange, Chief Executive Officer of Christopher & Banks, Inc., Joseph Pennington, President of Christopher & Banks, Inc., or Andrew Moller, Chief Financial Officer of Christopher & Banks, Inc.

(i) Collateral. Promptly upon knowledge thereof, notice of any loss of or material damage to any Collateral or of any substantial adverse change in any Collateral or the prospect of payment thereof.

(j) Commercial Tort Claims. Promptly upon knowledge thereof, notice of any commercial tort claims it may bring against any Person, including the name and address of each defendant, a summary of the facts, an estimate of the Borrower’s damages, copies of any complaint or demand letter submitted by the Borrower, and such other information as the Lender may request.

(k) Intellectual Property.

(i) 30 days prior written notice of Borrower’s intent to acquire material Intellectual Property Rights; except for transfers permitted under Section 6.16, the Borrower will give the Lender 30 days prior written notice of its intent to dispose of material Intellectual Property Rights and upon request shall provide the Lender with copies of all proposed documents and agreements concerning such rights.

(ii) Promptly upon knowledge thereof, notice of (A) any Infringement of its Intellectual Property Rights by others, (B) claims that the Borrower is Infringing another Person’s Intellectual Property Rights and (C) any threatened cancellation, termination or material limitation of its Intellectual Property Rights.

(iii) Promptly upon receipt, copies of all material registrations and filings with respect to its Intellectual Property Rights.

(l) Reports to Shareholders. Promptly upon their distribution, copies of all financial statements, reports and proxy statements which the Guarantor shall have sent to its shareholders.

(m) SEC Filings. If Lender so requests, promptly after the sending or filing thereof, copies of all regular and periodic reports which the Guarantor shall file with the Securities and Exchange Commission or any national securities exchange.

(n) Violations of Law. Promptly upon knowledge thereof, notice of the Borrower’s violation of any law, rule or regulation, the non-compliance with which could materially and adversely affect the financial condition, properties or operations of the Borrower.

(o) Other Reports. From time to time, with reasonable promptness, any and all receivables schedules, inventory reports, collection reports, deposit records, equipment schedules, copies of invoices to account debtors and such other material, reports, records or information as the Lender may request.

Section 6.2 Financial Covenants. The following financial covenants shall be calculated on a consolidated basis including the Borrower and the Guarantor:

(a) Minimum Cash Flow; Minimum Cash on Hand. The Borrower will maintain on a rolling twelve-month basis, determined as at the end of each fiscal quarter, Cash Flow at or above $0. Notwithstanding the foregoing, in the event the Borrower fails to maintain the

required level of Cash Flow set forth in the foregoing sentence, such failure will not constitute an Event of Default hereunder if the sum of Borrower’s cash, cash equivalents and short-term investments (as determined in accordance with GAAP) as of the end of such measurement prior equals or exceeds the following amounts during the periods set forth opposite such amounts:

Period	Minimum Cash, Cash Equivalents and Short-Term Investments

End of first fiscal quarter	$	20,000,000

End of second fiscal quarter	$	15,000,000

End of third fiscal quarter	$	10,000,000

End of fourth fiscal quarter	$	25,000,000

(b) Minimum Inventory Turns Ratio. The Borrower will maintain, on a rolling twelve-month basis, determined as at the end of each fiscal quarter, an Inventory Turns Ratio of not less than 3.0 to 1.0.

Section 6.3 Permitted Liens; Financing Statements.

(a) The Borrower will not create, incur or suffer to exist any Lien upon or of any of its assets, now owned or hereafter acquired, to secure any indebtedness; excluding, however, from the operation of the foregoing, the following (each a “Permitted Lien”; collectively, “Permitted Liens”):

(i) In the case of any of the Borrower’s property which is not Collateral, covenants, restrictions, rights, easements and minor irregularities in title which do not materially interfere with the Borrower’s business or operations as presently conducted;

(ii) Liens in existence on the date hereof and listed in Schedule 6.3 hereto, securing indebtedness for borrowed money permitted under Section 6.4;

(iii) The Security Interest and Liens created by the Security Documents and other liens in favor of the Lender or the Lender’s affiliates;

(iv) Purchase money Liens relating to indebtedness or capitalized lease obligations for the acquisition of machinery and equipment of the Borrower not exceeding the lesser of cost or fair market value thereof and so long as no Default Period is then in existence and none would exist immediately after such acquisition;

(v) mortgages, pledges, liens or security interests in that certain real property located at 2400 Xenium Lane North, Plymouth, Minnesota, provided, however, that Borrower shall have obtained the prior written consent of Lender, which consent shall not be unreasonably withheld, and provided that there is not an Event of Default;

(vi) Liens on property or assets acquired pursuant to a permitted acquisition under Section 6.17 provided that such Liens do not attach to any other asset of the Borrower or any of its Subsidiaries;

(vii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(viii) Liens encumbering leasehold improvements and fixtures granted in favor of Borrower’s landlords pursuant to leases;

(ix) inchoate Liens for taxes, assessments or governmental charges or levies not yet due or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with GAAP; and

(x) Liens in respect of property or assets of any Borrower imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers’, warehousemen’s, materialmen’s and mechanics’ liens and other similar Liens arising in the ordinary course of business, and (i) which do not in the aggregate materially detract from the value of any of Borrower’s property or assets or materially impair the use thereof in the operation of the business of Borrower or (ii) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien.

(b) The Borrower will not amend any financing statements in favor of the Lender except as permitted by law. Any authorization by the Lender to any Person to amend financing statements in favor of the Lender shall be in writing.

Section 6.4 Indebtedness. The Borrower will not incur, create, assume or permit to exist any indebtedness or liability on account of deposits or advances or any indebtedness for borrowed money or letters of credit issued on the Borrower’s behalf, or any other indebtedness or liability evidenced by notes, bonds, debentures or similar obligations, except:

(a) Indebtedness arising hereunder;

(b) Indebtedness of the Borrower in existence on the date hereof and listed in Schedule 6.4 hereto;

(c) Indebtedness relating to Permitted Liens;

(d) Trade debt owed to vendors incurred in the ordinary course of business.

Section 6.5 Guaranties. The Borrower will not assume, guarantee, endorse or otherwise become directly or contingently liable in connection with any obligations of any other Person, except:

(a) The endorsement of negotiable instruments by the Borrower for deposit or collection or similar transactions in the ordinary course of business; and

(b) Guaranties, endorsements and other direct or contingent liabilities in connection with the obligations of other Persons, in existence on the date hereof and listed in Schedule 6.4 hereto.

Section 6.6 Investments and Subsidiaries. The Borrower will not make or permit to exist any loans or advances to, or make any investment or acquire any interest whatsoever in, any other Person or Affiliate, including any partnership or joint venture, nor purchase or hold beneficially any stock or other securities or evidence of indebtedness of any other Person or Affiliate, except:

(a) Investments in direct obligations of the United States of America or any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of the United States of America having a maturity of one year or less, commercial paper issued by U.S. corporations rated “A-1” or “A-2” by Standard & Poor’s Ratings Services or “P-1” or “P-2” by Moody’s Investors Service, tax advantaged securities having a maturity of three (3) years or less issued by a municipality rated “A” by at least two rating agencies, corporate debt having a maturity of two (2) years or less rated “A” by at least two rating agencies, money market funds, repurchase agreements with a maturity of seven (7) days or less or certificates of deposit or bankers’ acceptances having a maturity of one year or less issued by members of the Federal Reserve System having deposits in excess of $100,000,000 (which certificates of deposit or bankers’ acceptances are fully insured by the Federal Deposit Insurance Corporation);

(b) Travel advances not exceeding at any one time an aggregate of $50,000; and

(c) Prepaid rent not exceeding two months or security deposits; and

(d) Current investments in the Subsidiaries in existence on the date hereof and listed in Schedule 5.5 hereto.

Borrower may create additional Subsidiaries provided that Borrower will provide Lender thirty (30) days notice prior to the creation of any Subsidiary; provided further that such Subsidiary shall immediately execute and deliver to the Lender a counterpart of this Agreement and become a Borrower.

Section 6.7 Dividends and Distributions. So long as no Event of Default exists or will occur as a result thereof, the Borrower may declare and pay dividends on its capital stock.

Section 6.8 Books and Records; Collateral Examination, Inspection and Appraisals.

(a) The Borrower will keep accurate books of record and account for itself pertaining to the Collateral and pertaining to the Borrower’s business and financial condition and such other matters as the Lender may from time to time request in which true and complete entries will be made in accordance with GAAP and, upon the Lender’s request, will permit any officer, employee, attorney, accountant or other agent of the Lender to audit, review, make extracts from

or copy any and all company and financial books and records of the Borrower at all times during ordinary business hours, to send and discuss with account debtors and other obligors requests for verification of amounts owed to the Borrower, and to discuss the Borrower’s affairs with any of its senior offices and independent accountants.

(b) Upon two (2) Banking Days’ notice to the Borrower, the Borrower will permit the Lender or its employees, accountants, attorneys or agents, to examine and inspect any Collateral or any other property of the Borrower at any time during ordinary business hours; provided, however, that if the Lender reasonably believes that a Default or an Event of Default may have occurred, Lender shall not be required to give prior notice of such inspections. For purposes of this subsection (c), visits by employees or agents of Lender to stores operated by Borrower shall not be deemed to be inspections requiring prior notice so long as such visits are conducted during normal business hours.

(c) The Lender may also obtain during the continuance of a Default or an Event of Default, obtain at the Borrower’s expense an appraisal of Inventory by an appraiser acceptable to the Lender in its sole discretion.

Section 6.9 Account Verification.

(a) During any Default Period, the Lender or its agent may at any time and from time to time send or require the Borrower to send requests for verification of accounts or notices of assignment to account debtors and other obligors. At any time during any Default Period, the Lender or its agent may also at any time and from time to time telephone account debtors and other obligors to verify accounts.

(b) The Borrower shall pay when due each account payable due to a Person holding a Permitted Lien (as a result of such payable) on any Collateral.

Section 6.10 Compliance with Laws.

(a) The Borrower shall (i) comply with the requirements of applicable laws and regulations, the non-compliance with which would materially and adversely affect its business or its financial condition and (ii) use and keep the Collateral, and require that others use and keep the Collateral, only for lawful purposes, without violation of any federal, state or local law, statute or ordinance.

(b) Without limiting the foregoing undertakings, the Borrower specifically agrees that it will comply with all applicable Environmental Laws and obtain and comply with all permits, licenses and similar approvals required by any Environmental Laws, and will not generate, use, transport, treat, store or dispose of any Hazardous Substances in such a manner as to create any material liability or obligation under the common law of any jurisdiction or any Environmental Law.

(c) The Borrower shall (i) ensure that no Owner shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or included in any Executive Orders, (ii) not use or permit the use of the proceeds of the Credit Facility or any other financial

accommodation from the Lender to violate any of the foreign asset control regulations of OFAC or other applicable law, (iii) comply with all applicable Bank Secrecy Act laws and regulations, as amended from time to time, and (iv) otherwise comply with the USA Patriot Act as required by federal law and the Lender’s policies and practices.

Section 6.11 Payment of Taxes and Other Claims. The Borrower will pay or discharge, when due, (a) all taxes, assessments and governmental charges levied or imposed upon it or upon its income or profits, upon any properties belonging to it (including the Collateral) or upon or against the creation, perfection or continuance of the Security Interest, prior to the date on which penalties attach thereto, (b) all federal, state and local taxes required to be withheld by it, and (c) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon any properties of the Borrower; provided, that the Borrower shall not be required to pay any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which proper reserves have been made.

Section 6.12 Maintenance of Properties.

(a) The Borrower will keep and maintain the Collateral and all of its other properties necessary or useful in its business in good condition, repair and working order (normal wear and tear excepted) and will from time to time replace or repair any worn, defective or broken parts; provided, however, that nothing in this covenant shall prevent the Borrower from discontinuing the operation and maintenance of any of its properties if such discontinuance is, in the Borrower’s judgment, desirable in the conduct of the Borrower’s business and not disadvantageous in any material respect to the Lender. The Borrower will take all commercially reasonable steps necessary to protect and maintain its Intellectual Property Rights.

(b) The Borrower will defend the Collateral against all Liens, claims or demands of all Persons (other than the Lender) claiming the Collateral or any interest therein. The Borrower will keep all Collateral free and clear of all Liens except Permitted Liens. The Borrower will take all commercially reasonable steps necessary to prosecute any Person Infringing its Intellectual Property Rights and to defend itself against any Person accusing it of Infringing any Person’s Intellectual Property Rights.

Section 6.13 Insurance. The Borrower will obtain and at all times maintain insurance with insurers acceptable to the Lender, in such amounts, on such terms (including any deductibles) and against such risks as may from time to time be required by the Lender, but in all events in such amounts and against such risks as is usually carried by companies engaged in similar business and owning similar properties in the same general areas in which the Borrower operates. Without limiting the generality of the foregoing, the Borrower will at all times maintain business interruption insurance for its headquarters at 2400 Xenium Lane North, Plymouth, Minnesota, including coverage for force majeure and keep all tangible Collateral insured against risks of fire (including so-called extended coverage), theft, collision (for Collateral consisting of motor vehicles) and such other risks and in such amounts as the Lender may reasonably request, with any loss payable to the Lender to the extent of its interest, and all policies of such insurance shall contain a lender’s loss payable endorsement for the Lender’s

benefit. All policies of liability insurance required hereunder shall name the Lender as an additional insured.

Section 6.14 Preservation of Existence. The Borrower will preserve and maintain its existence and all of its rights, privileges and franchises necessary or desirable in the normal conduct of its business and shall conduct its business in an orderly, efficient and regular manner.

Section 6.15 Delivery of Instruments, etc. Upon request by the Lender, the Borrower will promptly deliver to the Lender in pledge all instruments, documents and chattel paper constituting Collateral, duly endorsed or assigned by the Borrower.

Section 6.16 Sale or Transfer of Assets; Suspension of Business Operations. The Borrower will not sell, lease, assign, transfer or otherwise dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of its assets, or (iii) any Collateral or any interest therein (whether in one transaction or in a series of transactions) to any other Person other than the sale of Inventory in the ordinary course of business and will not liquidate, dissolve or suspend business operations, without the prior written consent of the Lender. The Borrower will not transfer any part of its ownership interest in any Intellectual Property Rights and will not permit any agreement under which it has licensed Licensed Intellectual Property to lapse, except that (i) the Borrower may transfer such rights or permit such agreements to lapse if it shall have reasonably determined that the applicable Intellectual Property Rights are no longer useful in its business and (ii) the Borrower may enter into intracompany transfers. If the Borrower transfers any Intellectual Property Rights for value, the Borrower will pay over the proceeds to the Lender for application to the Obligations. The Borrower will not license any other Person to use any of the Borrower’s Intellectual Property Rights, except that the Borrower may grant licenses in the ordinary course of its business in connection with sales of Inventory or provision of services to its customers.

Section 6.17 Consolidation and Merger; Asset Acquisitions. Neither a Borrower nor the Guarantor will consolidate with or merge into any Person, or permit any other Person to merge into it, acquire (in a transaction analogous in purpose or effect to a consolidation or merger) all or substantially all the assets of any other Person unless:

(a) the corporation formed by such consolidation or into which the Borrower or the Guarantor, as the case may be, is merged (if the Borrower or the Guarantor is not the surviving entity) or the Person that acquires by conveyance or transfer all or substantially all of the properties and assets of the Borrower or the Guarantor, as the case may be, (i) shall be a corporation organized and existing under the laws of the Unites States of America or any State or the District of Columbia, (ii) shall expressly assume by an amendment to or restatement of this Agreement, or the Guaranty, as applicable, the performance of every covenant of this Agreement on the part of the Borrower or of the Guaranty on the part the Guarantor to be performed or observed and (iii) if such corporation is a holding company with a significant portion of its operations conducted and assets held by one or more subsidiaries, shall provide for guaranties from such subsidiaries on substantially the same terms and conditions as are set forth in the Guaranty;

(b) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing;

(c) immediately after giving effect to such transaction, the corporation formed by such consolidation or into which the Borrower or the Guarantor, as the case may be, is merged or the Person that acquired by conveyance or transfer all or substantially of the properties and assets of the Borrower or the Guarantor, as the case may be, shall have a tangible net worth of not less than the consolidated tangible net worth of the Borrower and Guarantor immediately preceding such transaction;

(d) the Borrower and the Guarantor have delivered to the Lender an officer’s certificate and opinion of counsel (which opinion may rely, as to factual matters, upon a certificate of an executive officer of the Borrower or the Guarantor) stating that such consolidation , merger conveyance or transfer and such amendment or restatement complies with this Section 6.17 and that all conditions precedent herein relating to such transaction have been complied with; and

(e) such merger, consolidation or sale has been approved prior to the transaction in writing by the Lender.

Upon any consolidation or merger of the Borrower or the Guarantor into another entity, or any conveyance or transfer of all or substantially all of the properties and assets of the Borrower or the Guarantor in accordance herewith, the successor entity formed by such consolidation or into which the Borrower or the Guarantor, as the case may be, is merged or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of the Borrower under this Agreement with the same effect as if such successor entity had been named as the Borrower herein.

Any Borrower may acquire another Person or substantially all the assets of another Person so long as the cash consideration for such acquisition does not exceed $20,000,000 for all such transactions in any fiscal year of the Borrowers; and further provided that immediately after giving effect to such transaction, (i) no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing and (ii) the Borrowers’ actual amount of aggregate cash and marketable securities that are permitted investments under Section 6.6 as of the measurement date immediately following such transaction, shall not be less than 60% of the aggregate of such items set forth in the Borrowers’ projections delivered to Lender for the applicable period.

Section 6.18 Sale and Leaseback. The Borrower will not enter into any arrangement, directly or indirectly, with any other Person whereby the Borrower shall sell or transfer any real or personal property, whether now owned or hereafter acquired, and then or thereafter rent or lease as lessee such property or any part thereof or any other property which the Borrower intends to use for substantially the same purpose or purposes as the property being sold or transferred; provided, however, that the Borrower may enter into such transaction with respect to the real property on which its headquarters is presently located and with respect to any personal property related thereto.

Section 6.19 Restrictions on Nature of Business. Without the advance written consent of the Lender, which consent shall not be unreasonably withheld, the Borrower will not engage in any line of business except for retail and direct apparel and accessory sales and will not purchase, lease or otherwise acquire assets not related to its business.

Section 6.20 Accounting. The Borrower will not adopt any material change in accounting principles other than as required by GAAP. The Borrower will not adopt, permit or consent to any change in its fiscal year unless such change is made in accordance with GAAP and all applicable tax laws and regulations.

Section 6.21 Plans. Unless disclosed to the Lender pursuant to Section 5.12, neither the Borrower nor any ERISA Affiliate will (i) adopt, create, assume or become a party to any Pension Plan, (ii) incur any obligation to contribute to any Multiemployer Plan, (iii) incur any obligation to provide post-retirement medical or insurance benefits with respect to employees or former employees (other than benefits required by law) or (iv) amend any Plan in a manner that would materially increase its funding obligations.

Section 6.22 Place of Business; Name. The Borrower will not transfer its chief executive office or principal place of business. The Borrower will not permit any tangible Collateral or any records pertaining to the Collateral to be located in any state or area in which, in the event of such location, a financing statement covering such Collateral would be required to be, but has not in fact been, filed in order to perfect the Security Interest. The Borrower will not change its name or jurisdiction of organization without the prior written consent of Lender, which consent shall not be unreasonably withheld.

Section 6.23 Constituent Documents; S Corporation Status. The Borrower will not amend its Constituent Documents in a manner adverse to the interests of Lender or become an S Corporation.

Section 6.24 Performance by the Lender. If the Borrower at any time fails to perform or observe any of the foregoing covenants contained in this Article VI or elsewhere herein, and if such failure shall continue for a period of ten calendar days after the Lender gives the Borrower written notice thereof (or in the case of the agreements contained in Section 6.11 and Section 6.13, immediately upon the occurrence of such failure, without notice or lapse of time), the Lender may, but need not, perform or observe such covenant on behalf and in the name, place and stead of the Borrower (or, at the Lender’s option, in the Lender’s name) and may, but need not, take any and all other actions which the Lender may reasonably deem necessary to cure or correct such failure (including the payment of taxes, the satisfaction of Liens, the performance of obligations owed to account debtors or other obligors, the procurement and maintenance of insurance, the execution of assignments, security agreements and financing statements, and the endorsement of instruments); and the Borrower shall thereupon pay to the Lender on demand the amount of all monies expended and all costs and expenses (including reasonable attorneys’ fees and legal expenses) incurred by the Lender in connection with or as a result of the performance or observance of such agreements or the taking of such action by the Lender, together with interest thereon from the date expended or incurred at the Default Rate. To facilitate the Lender’s performance or observance of such covenants of the Borrower, the Borrower hereby irrevocably appoints the Lender, or the Lender’s delegate, acting alone, as the Borrower’s

attorney in fact (which appointment is coupled with an interest) with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file in the name and on behalf of the Borrower any and all instruments, documents, assignments, security agreements, financing statements, applications for insurance and other agreements and writings required to be obtained, executed, delivered or endorsed by the Borrower hereunder.

ARTICLE VII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES

Section 7.1 Events of Default. “Event of Default”, wherever used herein, means any one of the following events:

(a) Default in the payment of any Obligations when they become due and payable,;

(b) Failure to pay when due any amount specified in Section 2.3 relating to the Borrower’s Obligation of Reimbursement, or failure to pay immediately when due or upon termination of the Credit Facility any amounts required to be paid for deposit in the Special Account under Section 2.4;

(c) An Overadvance arises as the result of any reduction in the Borrowing Base, or arises in any manner on terms not otherwise approved of in advance by the Lender in writing;

(d) Any Financial Covenant shall become inapplicable due to the lapse of time and the failure to amend any such covenant to cover future periods;

(e) The Borrower or any Guarantor shall be or become insolvent, or admit in writing its or his inability to pay its or his debts as they mature, or make an assignment for the benefit of creditors; or the Borrower or any Guarantor shall apply for or consent to the appointment of any receiver, trustee, or similar officer for it or him or for all or any substantial part of its or his property; or such receiver, trustee or similar officer shall be appointed without the application or consent of the Borrower or such Guarantor, as the case may be; or the Borrower or any Guarantor shall institute (by petition, application, answer, consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding relating to it under the laws of any jurisdiction; or any such proceeding shall be instituted (by petition, application or otherwise) against the Borrower or any such Guarantor; or any judgment, writ, warrant of attachment or execution or similar process shall be issued or levied against a substantial part of the property of the Borrower or any Guarantor;

(f) A petition shall be filed by or against the Borrower or any Guarantor under the United States Bankruptcy Code naming the Borrower or such Guarantor as debtor;

(g) Any representation or warranty made by the Borrower in this Agreement, by any Guarantor in any Guaranty delivered to the Lender, or by the Borrower (or any of its Officers) or any Guarantor in any agreement, certificate, instrument or financial statement or other statement contemplated by or made or delivered pursuant to or in connection with this Agreement or any such guaranty shall prove to have been incorrect in any material respect when deemed to be effective;

(h) The rendering against the Borrower of an arbitration award, final judgment, decree or order for the payment of money in excess of $1,000,000 and the continuance of such arbitration award, judgment, decree or order unsatisfied and in effect for any period of 30 consecutive days without a stay of execution;

(i) A default under any bond, debenture, note or other evidence of material indebtedness of the Borrower owed to any Person other than the Lender, or under any indenture or other instrument under which any such evidence of indebtedness has been issued or by which it is governed, or under any material lease or other contract, and the expiration of the applicable period of grace, if any, specified in such evidence of indebtedness, indenture, other instrument, lease or contract;

(j) Any Reportable Event, which the Lender determines in good faith might constitute grounds for the termination of any Pension Plan or for the appointment by the appropriate United States District Court of a trustee to administer any Pension Plan, shall have occurred and be continuing 30 days after written notice to such effect shall have been given to the Borrower by the Lender; or a trustee shall have been appointed by an appropriate United States District Court to administer any Pension Plan; or the Pension Benefit Guaranty Corporation shall have instituted proceedings to terminate any Pension Plan or to appoint a trustee to administer any Pension Plan; or the Borrower or any ERISA Affiliate shall have filed for a distress termination of any Pension Plan under Title IV of ERISA; or the Borrower or any ERISA Affiliate shall have failed to make any quarterly contribution required with respect to any Pension Plan under Section 412(m) of the IRC, which the Lender determines in good faith may by itself, or in combination with any such failures that the Lender may determine are likely to occur in the future, result in the imposition of a Lien on the Borrower’s assets in favor of the Pension Plan; or any withdrawal, partial withdrawal, reorganization or other event occurs with respect to a Multiemployer Plan which results or could reasonably be expected to result in a material liability of the Borrower to the Multiemployer Plan under Title IV of ERISA;

(k) An event of default shall occur under any Security Document;

(l) The Borrower shall liquidate, dissolve, terminate or suspend its business operations or otherwise fail to operate its business in the ordinary course, merge with another Person unless the Borrower is the surviving entity; or sell or attempt to sell all or substantially all of its assets, without the Lender’s prior written consent;

(m) Default in the payment of any amount owed by the Borrower to the Lender other than any indebtedness arising hereunder;

(n) Any Guarantor shall repudiate, purport to revoke or fail to perform any obligation under such Guaranty in favor of the Lender, or any Guarantor shall cease to exist;

(o) Any event or circumstance with respect to the Borrower shall occur such that the Lender shall believe in good faith that the prospect of payment of all or any part of the Obligations or the performance by the Borrower under the Loan Documents is impaired or any material adverse change in the business or financial condition of the Borrower shall occur;

(p) Any breach, default or event of default by or attributable to any Affiliate under any agreement between such Affiliate and the Lender shall occur;

(q) Default in the performance, or breach, of any covenant or agreement of the Borrower contained in this Agreement, other than those identified in Sections 7.1(a) through (p) above and other than a breach of the requirements of Section 6.2, the breach of which covenant is not cured to the Lender’s satisfaction within ten (10) Banking Days, provided that Lender shall have no obligation to make an Advance during any such cure period.

Section 7.2 Rights and Remedies. During any Default Period, the Lender may exercise any or all of the following rights and remedies:

(a) The Lender may, by notice to the Borrower, declare the Commitment to be terminated, whereupon the same shall forthwith terminate;

(b) The Lender may, by notice to the Borrower, declare the Obligations to be forthwith due and payable, whereupon all Obligations shall become and be forthwith due and payable, without presentment, notice of dishonor, protest or further notice of any kind, all of which the Borrower hereby expressly waives;

(c) The Lender may, without notice to the Borrower and without further action, apply any and all money owing by the Lender to the Borrower to the payment of the Obligations;

(d) The Lender may exercise and enforce any and all rights and remedies available upon default to a secured party under the UCC, including the right to take possession of Collateral, or any evidence thereof, proceeding without judicial process or by judicial process (without a prior hearing or notice thereof, which the Borrower hereby expressly waives) and the right to sell, lease or otherwise dispose of any or all of the Collateral (with or without giving any warranties as to the Collateral, title to the Collateral or similar warranties), and, in connection therewith, the Borrower will on demand assemble the Collateral and make it available to the Lender at a place to be designated by the Lender which is reasonably convenient to both parties;

(e) The Lender may make demand upon the Borrower and, forthwith upon such demand, the Borrower will pay to the Lender in immediately available funds for deposit in the Special Account pursuant to Section 2.4 an amount equal to the aggregate maximum amount available to be drawn under all Letters of Credit then outstanding, assuming compliance with all conditions for drawing thereunder;

(f) The Lender may exercise and enforce its rights and remedies under the Loan Documents; and

(g) The Lender may exercise any other rights and remedies available to it by law or agreement.

Notwithstanding the foregoing, upon the occurrence of an Event of Default described in Section 7.1(e) or (f), the Obligations shall be immediately due and payable automatically without presentment, demand, protest or notice of any kind. If the Lender sells any of the Collateral on credit, the Obligations will be reduced only to the extent of payments actually received. If the purchaser fails to pay for the Collateral, the Lender may resell the Collateral and shall apply any proceeds actually received to the Obligations.

Section 7.3 Certain Notices. If notice to the Borrower of any intended disposition of Collateral or any other intended action is required by law in a particular instance, such notice shall be deemed commercially reasonable if given (in the manner specified in Section 8.3) at least ten calendar days before the date of intended disposition or other action.

ARTICLE VIII
MISCELLANEOUS

Section 8.1 No Waiver; Cumulative Remedies; Compliance with Laws. No failure or delay by the Lender in exercising any right, power or remedy under the Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy under the Loan Documents. The remedies provided in the Loan Documents are cumulative and not exclusive of any remedies provided by law. The Lender will comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and such compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.

Section 8.2 Amendments, Etc. No amendment, modification, termination or waiver of any provision of any Loan Document or consent to any departure by the Borrower therefrom or any release of a Security Interest shall be effective unless the same shall be in writing and signed by the parties hereto, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

Section 8.3 Notices; Communication of Confidential Information; Requests for Accounting. Except as otherwise expressly provided herein, all notices, requests, demands and other communications provided for under the Loan Documents shall be in writing and shall be (a) personally delivered, (b) sent by first class United States mail, (c) sent by overnight courier of national reputation, (d) transmitted by telecopy, or (e) sent as electronic mail, in each case delivered or sent to the party to whom notice is being given to the business address, telecopier number, or e mail address set forth below next to its signature or, as to each party, at such other business address, telecopier number, or e mail address as it may hereafter designate in writing to the other party pursuant to the terms of this Section. All such notices, requests, demands and other communications shall be deemed to be an authenticated record communicated or given and effective when received by the Lender or the Borrower, as the case may be. All notices, financial information, or other business records sent by either party to this Agreement may be transmitted, sent, or otherwise communicated via such medium as the sending party may deem appropriate and commercially reasonable. All requests for an accounting under Section 9-210 of the UCC (i) shall be made in a writing signed by a Person authorized under Section 2.2(a), (ii)

shall be personally delivered, sent by registered or certified mail, return receipt requested, or by overnight courier of national reputation, (iii) shall be deemed to be sent when received by the Lender and (iv) shall otherwise comply with the requirements of Section 9-210. The Borrower requests that the Lender respond to all such requests that on their face appear to come from an authorized individual and releases the Lender from any liability for so responding. The Borrower shall pay the Lender the maximum amount allowed by the UCC for responding to such requests.

Section 8.4 Further Documents. The Borrower will from time to time execute, deliver, endorse and authorize the filing of any and all instruments, documents, conveyances, assignments, security agreements, financing statements, control agreements and other agreements and writings that the Lender may reasonably request in order to secure, protect, perfect or enforce the Security Interest or the Lender’s rights under the Loan Documents (but any failure to request or assure that the Borrower executes, delivers, endorses or authorizes the filing of any such item shall not affect or impair the validity, sufficiency or enforceability of the Loan Documents and the Security Interest, regardless of whether any such item was or was not executed, delivered or endorsed in a similar context or on a prior occasion).

Section 8.5 Costs and Expenses. The Borrower shall pay on demand all costs and expenses, including reasonable attorneys’ fees, incurred by the Lender in connection with the Obligations, this Agreement, the Loan Documents, any Letter of Credit and any other document or agreement related hereto or thereto, and the transactions contemplated hereby, including all such costs, expenses and fees incurred in connection with the negotiation, preparation, execution, amendment, administration, performance, collection and enforcement of the Obligations and all such documents and agreements and the creation, perfection, protection, satisfaction, foreclosure or enforcement of the Security Interest.

Section 8.6 Indemnity. In addition to the payment of expenses pursuant to Section 8.5, the Borrower shall indemnify, defend and hold harmless the Lender, and any of its participants, parent corporations, subsidiary corporations, affiliated corporations, successor corporations, and all present and future officers, directors, employees, attorneys and agents of the foregoing (the “Indemnitees”) from and against any of the following (collectively, “Indemnified Liabilities”):

(i) Any and all transfer taxes, documentary taxes, assessments or charges made by any governmental authority by reason of the execution and delivery of the Loan Documents or the making of the Advances;

(ii) Any claims, loss or damage to which any Indemnitee may be subjected if any representation or warranty contained in Section 5.14 proves to be incorrect in any respect or as a result of any violation of the covenant contained in Section 6.10(b) ; and

(iii) Any and all other liabilities, losses, damages, penalties, judgments, suits, claims, costs and expenses of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel) in connection with the foregoing and any other investigative, administrative or judicial proceedings, whether or not such Indemnitee shall be designated a party thereto, which may be imposed on, incurred by or asserted

against any such Indemnitee, in any manner related to or arising out of or in connection with the making of the Advances and the Loan Documents or the use or intended use of the proceeds of the Advances. Notwithstanding the foregoing, the Borrower shall not be obligated to indemnify any Indemnitee for any Indemnified Liability caused by the gross negligence or willful misconduct of such Indemnitee.

If any investigative, judicial or administrative proceeding arising from any of the foregoing is brought against any Indemnitee, upon such Indemnitee’s request, the Borrower, or counsel designated by the Borrower and satisfactory to the Indemnitee, will resist and defend such action, suit or proceeding to the extent and in the manner directed by the Indemnitee, at the Borrower’s sole costs and expense. Each Indemnitee will use its best efforts to cooperate in the defense of any such action, suit or proceeding. If the foregoing undertaking to indemnify, defend and hold harmless may be held to be unenforceable because it violates any law or public policy, the Borrower shall nevertheless make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law. The Borrower’s obligation under this Section 8.6 shall survive the termination of this Agreement and the discharge of the Borrower’s other obligations hereunder.

Section 8.7 Participants. The Lender and its participants, if any, are not partners or joint venturers, and the Lender shall not have any liability or responsibility for any obligation, act or omission of any of its participants. All rights and powers specifically conferred upon the Lender may be transferred or delegated to any of the Lender’s participants, successors or assigns.

Section 8.8 Execution in Counterparts; Telefacsimile Execution. This Agreement and other Loan Documents may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.

Section 8.9 Retention of Borrower’s Records. The Lender shall have no obligation to maintain any electronic records or any documents, schedules, invoices, agings, or other papers delivered to the Lender by the Borrower or in connection with the Loan Documents for more than 30 days after receipt by the Lender. If there is a special need to retain specific records, the Borrower must inform the Lender of its need to retain those records with particularity, which must be delivered in accordance with the notice provisions of Section 8.3 within 30 days of the Lender taking control of same.

Section 8.10 Binding Effect; Assignment; Complete Agreement; Sharing Information. The Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights thereunder or any interest therein without the Lender’s prior written consent. This Agreement shall also bind all Persons who become a party to this Agreement as a borrower. This Agreement, together with the Loan Documents, comprises the

complete and integrated agreement of the parties on the subject matter hereof and supersedes all prior agreements, written or oral, on the subject matter hereof. To the extent that any provision of this Agreement contradicts other provisions of the Loan Documents, this Agreement shall control. Without limiting the Lender’s right to share information regarding the Borrower and its Affiliates with the Lender’s participants, accountants, lawyers and other advisors, the Lender and Wells Fargo Bank may share any and all information they may have in their possession regarding the Borrower and its Affiliates solely in connection with the performance of services by Lender under this Agreement.

Section 8.11 Severability of Provisions. Any provision of this Agreement that is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof.

Section 8.12 Headings. Article, Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

Section 8.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial. The Loan Documents shall be governed by and construed in accordance with the substantive laws (other than conflict laws) of the State of Minnesota. The parties hereto hereby (i) consent to the personal jurisdiction of the state and federal courts located in the State of Minnesota in connection with any controversy related to this Agreement; (ii) waive any argument that venue in any such forum is not convenient; (iii) agree that any litigation initiated by the Lender or the Borrower in connection with this Agreement or the other Loan Documents may be venued in either the state or federal courts located in the City of Minneapolis, Minnesota and (iv) agree that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

Section 8.14 Confidentiality. Lender agrees that it will use its reasonable efforts not to disclose without the prior consent of the Borrower (other than to its employees, auditors, advisors or counsel, provided such Persons shall be subject to the provisions of this Section 8.14 to the same extent as the Lender) any information with respect to the Borrower which is now or in the future furnished pursuant to this Agreement or any of the Loan Documents and which is designated by the Borrower to the Lender as confidential, provided that the Lender may disclose any such information (i) as has become generally available to the public other than by virtue of a breach of this Section 8.4 by the Lender, (ii) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (iii) as may be required or appropriate in respect to any summons or subpoena or in connection with any litigation and (iv) in order to comply with any law, order, regulation or ruling applicable to the Lender.

THE BORROWER AND THE LENDER WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW OR IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. Borrower’s Initials ; Lender’s Initials ;

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written.

Christopher & Banks, Inc.		CHRISTOPHER & BANKS, INC.
Christopher & Banks Company
Christopher & Banks Services Company		By:
2400 Xenium Lane		Andrew K. Moller
Plymouth, Minnesota 55441		Senior Vice President & Chief
		Financial Officer
Telecopier: 763) 551-5161
Attention: Andrew K. Moller
e-mail: amoller@christopherandbanks.com
		CHRISTOPHER & BANKS COMPANY

		By:
		Andrew K. Moller
		Senior Vice President & Chief
		Financial Officer


		CHRISTOPHER & BANKS SERVICES
		COMPANY

		By:
		Andrew K. Moller
		Senior Vice President & Chief
		Financial Officer


Wells Fargo Bank, National Association,		WELLS FARGO BANK, NATIONAL
acting through its Wells Fargo Business Credit		ASSOCIATION, acting through its Wells
operating division		Fargo Business Credit operating division
MAC- 9312-040
Sixth & Marquette		By:
Minneapolis, Minnesota 55479		Kerri L. Otto
Telecopier: ((612) 673-8589		Its Assistant Vice President
Attention: Kerri L. Otto
e-mail: kerri.l.Otto@wellsfargo.com

Table of Exhibits and Schedules

Exhibit A		Form of Revolving Note

Exhibit B		Compliance Certificate

Exhibit C		Premises

Schedule 5.1		Trade Names, Chief Executive Office, Principal Place of Business, and Locations of Collateral

Schedule 5.2		Capitalization and Organizational Chart

Schedule 5.5		Subsidiaries

Schedule 5.7		Litigation Matters

Schedule 5.11		Intellectual Property Disclosures

Schedule 5.14		Environmental Matters

Schedule 6.3		Permitted Liens

Schedule 6.4		Permitted Indebtedness and Guaranties

Exhibit A to Credit and Security Agreement

REVOLVING NOTE

$50,000,000.00 Nove mber 4, 2005

For value received, the undersigned CHRISTOPHER & BANKS, INC., CHRISTOPHER & BANKS COMPANY AND CHRISTOPHER & BANKS SERVICES COMPANY, each a Minnesota corporation (the “Borrower”), hereby jointly and severally promise to pay on the Termination Date under the Credit Agreement (defined below), to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Lender”), acting through its Wells Fargo Business Credit operating division, at its office in Minneapolis, Minnesota, or at any other place designated at any time by the holder hereof, in lawful money of the United States of America and in immediately available funds, the principal sum of Fifty Million and 00/100 Dollars ($50,000,000.00) or the aggregate unpaid principal amount of all Revolving Advances made by the Lender to the Borrower under the Credit Agreement (defined below) together with interest on the principal amount hereunder remaining unpaid from time to time, computed on the basis of the actual number of days elapsed and a 360-day year, from the date hereof until this Note is fully paid at the rate from time to time in effect under the Amended and Restated Credit and Security Agreement dated the same date as this Note (the “Credit Agreement”) by and between the Lender and the Borrower. The principal hereof and interest accruing thereon shall be due and payable as provided in the Credit Agreement. This Note may be prepaid only in accordance with the Credit Agreement.

This Note is issued pursuant, and is subject, to the Credit Agreement, which provides, among other things, for acceleration hereof. This Note is the Revolving Note referred to in the Credit Agreement. This Note is secured, among other things, pursuant to the Credit Agreement and the Security Documents as therein defined, and may now or hereafter be secured by one or more other security agreements, mortgages, deeds of trust, assignments or other instruments or agreements.

The Borrower shall pay all costs of collection, including reasonable attorneys’ fees and legal expenses if this Note is not paid when due, whether or not legal proceedings are commenced.

A-1

Presentment or other demand for payment, notice of dishonor and protest are expressly waived. Each of the undersigned is primarily liable herein as co-maker; and neither are merely “accommodation parties.” The undersigned each waive all defenses based upon the status of an accommodation party.

		CHRISTOPHER & BANKS, INC.

		By:
		Andrew K. Moller
		Senior Vice President & Chief Financial
		Officer



		CHRISTOPHER & BANKS COMPANY

		By:
		Andrew K. Moller
		Senior Vice President & Chief Financial
		Officer


		CHRISTOPHER & BANKS SERVICES
		COMPANY

		By:
		Andrew K. Moller
		Senior Vice President & Chief Financial
		Officer

A-2

Exhibit B to Credit and Security Agreement

COMPLIANCE CERTIFICATE

To:                          Wells Fargo Business Credit
Date:                                           , 20
Subject:                  Financial Statements

In accordance with our Amended and Restated Credit and Security Agreement dated as of November 4, 2005 (the “Credit Agreement”), attached are the financial statements of (the “Borrower”) as of and for , 20 (the “Reporting Date”) and the year-to-date period then ended (the “Current Financials”). All terms used in this certificate have the meanings given in the Credit Agreement.

I certify that the Current Financials have been prepared in accordance with GAAP, subject to year-end audit adjustments, and fairly present the Borrower’s financial condition as of the date thereof.

I further hereby certify as follows: Events of Default. (Check one):

	o	The undersigned does not have knowledge of the occurrence of a Default or Event of Default under the Credit Agreement except as previously reported in writing to the Lender.

	o	The undersigned has knowledge of the occurrence of a Default or Event of Default under the Credit Agreement not previously reported in writing to the Lender and attached hereto is a statement of the facts with respect to thereto. The Borrower acknowledges that pursuant to 2.5(b) of the Credit Agreement, the Lender may impose the Default Rate at any time during the resulting Default Period.

Material Adverse Change in Litigation Matters of the Borrower. I further hereby certify as follows (check one):

	o	The undersigned has no knowledge of any material adverse change to the litigation exposure of the Borrower or any of its Guarantors or Affiliates.

	o	The undersigned has knowledge of material adverse changes to the litigation exposure of the Borrower or any of its Guarantors or Affiliates not previously disclosed in Schedule 5.7. Attached to this Certificate is a statement of the facts with respect thereto.

Financial Covenants. I further hereby certify as follows (check and complete each of the following):

1. Minimum Cash Flow; Maximum Cash on Hand. Pursuant to Section 6.2(a) of the Credit Agreement, as of the Reporting Date, the Borrower’s Cash Flow was $

B-1

which o satisfies o does not satisfy the requirement that such amount be not less than $0 on the Reporting Date, or such Cash Flow was less than $0 but the Borrower’s cash and cash equivalents as of such date o satisfies o does not satisfy the requirement that such amount be not less than the amount set forth in the table below:

Period	Minimum Cash and Cash Equivalents
End of first fiscal quarter	$	20,000,000
End of second fiscal quarter	$	15,000,000
End of third fiscal quarter	$	10,000,000
End of fourth fiscal quarter	$	25,000,000

2. Minimum Inventory Turns Ratio. Pursuant to Section 6.2(b) of the Credit Agreement, as of the Reporting Date, the Borrower’s Inventory Turns Ratio was to 1:00 which o satisfies o does not satisfy the requirement that such ratio be no less than 3.00 to 1.00 on the Reporting Date.

Attached hereto are all relevant facts in reasonable detail to evidence, and the computations of the financial covenants referred to above. These computations were made in accordance with GAAP.



		By:
			Its Chief Financial Officer

B-2

Exhibit C to Credit and Security Agreement

PREMISES

The Premises referred to in the Credit and Security Agreement are as follows:

1. Headquarters and Distribution Center:

2400 Xenium Lane North

Plymouth, Minnesota 55441

2. Stores:

See attached spreadsheets.

Schedule 5.1 to Credit and Security Agreement

TRADE NAMES, CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF BUSINESS,

AND LOCATIONS OF COLLATERAL

TRADE NAMES

Christopher & Banks

C.J. Banks

Acorn

CHIEF EXECUTIVE OFFICE/PRINCIPAL PLACE OF BUSINESS

2400 Xenium Lane North

Plymouth, Minnesota 55441

OTHER INVENTORY AND EQUIPMENT LOCATIONS

None.

Schedule 5.2 to Credit and Security Agreement

CAPITALIZATION AND ORGANIZATIONAL CHART

Christopher & Banks Corporation, a Delaware corporation (“CBK”), is the parent organization and traded on the New York Stock Exchange. Christopher & Banks, Inc., a Minnesota corporation (“CBI”), a wholly owned subsidiary of CBK, is the operating company and the Borrower under the Credit and Security Agreement. Christopher & Banks Company, a Minnesota corporation (“CBC”), is a wholly owned subsidiary of CBI. Christopher & Banks Services Company, a Minnesota corporation, is a wholly owned subsidiary of CBC.

Schedule 5.7 to Credit and Security Agreement

LITIGATION MATTERS

None.

Schedule 5.11 to Credit and Security Agreement

INTELLECTUAL PROPERTY DISCLOSURES

The Borrower has the following trademarks:

Christopher & Banks

C&B by Christopher & Banks

C.J. Banks

Shapely Siloutettes

Braun’s

The Borrower files a copyright on many of its designs. This list constantly changes and a copy may be obtained by contacting the Borrower’s Chief Financial Officer.

Schedule 5.14 to Credit and Security Agreement

ENVIRONMENTAL MATTERS

None.

Schedule 6.3 to Credit and Security Agreement

PERMITTED LIENS

None.

Schedule 6.4 to Credit and Security Agreement

Permitted Indebtedness and Guaranties

INDEBTEDNESS

NONE.

GUARANTIES

NONE.

EX-10.41 9 a07-12680_1ex10d41.htm EX-10.41

Exhibit 10.41

AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT

EFFECTIVE DATE: December 14, 2006

PARTIES:

Christopher & Banks Corporation	(“Corporation”)

Matthew Dillon	(“Executive”)

WHEREAS, the Corporation and Executive are parties to an existing Executive Employment Agreement dated June 12, 2006 (hereinafter referred to as “Executive Employment Agreement”); and

WHEREAS, the Corporation and Executive desire to amend the Executive Employment Agreement in certain respects.

NOW, THEREFORE, the Corporation and Executive agree that as of the Effective Date written above the following amendments shall be made a part of the Executive Employment Agreement:

1. Section 1.1 of the Executive Employment Agreement is deleted in its entirety and replaced with the following new
Section 1.1:

1.1 The Corporation hereby employs Executive, and Executive agrees to be employed by the Corporation as President and Chief Merchandising Officer through December 31, 2006. Effective January 1, 2007, Executive will assume the position of President and Chief Executive Officer. The appointment of Executive to the position of President and CEO will not require further Board approval. Upon his appointment to the position of President and CEO, Executive agrees to perform such duties as are customarily incident to the positions of President and CEO and are assigned to him from time to time by the Board of Directors of the Corporation. Concurrently with Executive’s appointment as President and CEO of the Corporation, Executive will be appointed to the Board of Directors of the Corporation to serve until his successor is appointed or shall have been elected. However, in the event that Executive is terminated or elects to resign as an employee of the Corporation, Executive agrees to submit his resignation as a director of the Corporation effective concurrently with the effective date of his termination or resignation as an employee of the Corporation.

2. Section 2.1 of the Executive Employment Agreement is deleted in its entirety and replaced with the following new
Section 2.1:

2.1 The term of this Agreement shall be the period commencing on June 12, 2006 and ending on February 28, 2010, unless sooner terminated as hereinafter provided in Article 13. The term of this Agreement will continue on a year-to-year basis after February 28, 2010 unless either party gives written notice of non-renewal of this Agreement to the other party at least 90 days prior to the end of the term ending February 28, 2010 or any one-year extension. The severance payments described in Section 13.1 of this Agreement shall not apply in the event of non-renewal of this Agreement.

3. Section 3.1 of the Executive Employment Agreement is deleted in its entirety and replaced with the following new
Section 3.1:

3.1 Executive agrees to devote his full time and effort, to the best of his ability, to carry out his duties as an Executive of the Corporation for the profit, benefit and advantage of the business of the Corporation. Through December 31, 2006, Executive shall report directly to the Chief Executive Officer of the Corporation. Beginning January 1, 2007, Executive shall report directly to the Board of Directors.

4. Section 4.1 of the Executive Employment Agreement is deleted in its entirety and replaced with the following new
Section 4.1:

4.1 Until December 31, 2006, Executive’s base salary will continue to be $475,000. Effective January 1, 2007, and upon the Executive’s appointment as President and CEO of the Corporation, the Corporation agrees to pay Executive an annual base salary of $775,000, less required and authorized deductions and withholding. For fiscal 2008 and for each fiscal year thereafter, Executive’s base salary shall be reviewed and increases, if any, shall be awarded to Executive by the Board of Directors in its sole discretion, but the base salary shall not be reduced from that of the prior fiscal year. Executive’s base salary shall be payable at the same intervals as the Corporation pays other executives.

This Amendment shall be attached to and be a part of the Executive Employment Agreement between Christopher & Banks Corporation and Matthew Dillon.

Except as set forth herein, the Executive Employment Agreement shall remain in full force without modification.

In consideration of the mutual covenants contained herein, the parties have executed this Amendment effective as of the date and year above written.

CHRISTOPHER & BANKS CORPORATION		MATTHEW DILLON

	/s/ Larry C. Barenbaum	/s/ Matthew Dillon
By:	Larry C. Barenbaum	Matthew Dillon
Its:	Chairman

EX-21.1 10 a07-12680_1ex21d1.htm EX-21.1

Exhibit 21.1

CHRISTOPHER & BANKS CORPORATION

Subsidiaries of the Registrant

		Jurisdiction
Subsidiaries:		of Incorporation

Christopher & Banks, Inc. (a)		Minnesota

Christopher & Banks Company (b)		Minnesota

Christopher & Banks Services Company (c)		Minnesota

(a) Wholly-owned subsidiary of the registrant

(b) Wholly-owned subsidiary of Christopher & Banks, Inc.

EX-23.1 11 a07-12680_1ex23d1.htm EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 333-33446, 333-30554, 333-95109, 333-64085, 333-64087 and 333-95553) of Christopher & Banks Corporation of our report dated May 2, 2007 relating to the financial statements, financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

PricewaterhouseCoopers LLP

Minneapolis, Minnesota

May 2, 2007

EX-31.1 12 a07-12680_1ex31d1.htm EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13A-14(A),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Matthew P. Dillon, certify that:

1. I have reviewed this annual report on Form 10-K of Christopher & Banks Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), and internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2007
		/s/ Matthew P. Dillon
		Matthew P. Dillon
		President and Chief Executive Officer

EX-31.2 13 a07-12680_1ex31d2.htm EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13A-14(A),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew K. Moller, certify that:

1. I have reviewed this annual report on Form 10-K of Christopher & Banks Corporation;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 2, 2007
		/s/ Andrew K. Moller
		Andrew K. Moller
		Executive Vice President and Chief Financial Officer

EX-32.1 14 a07-12680_1ex32d1.htm EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Matthew P. Dillon, Chief Executive Officer of Christopher & Banks Corporation (the “Company”) certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The annual report of the Company on Form 10-K for the period ended March 3, 2007 as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: May 2, 2007

	By:	/s/ Matthew P. Dillon
		Matthew P. Dillon
		President and Chief Executive Officer

EX-32.2 15 a07-12680_1ex32d2.htm EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew K. Moller, Executive Vice President and Chief Financial Officer of Christopher & Banks Corporation (the “Company”) certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 2, 2007

	By:	/s/ Andrew K. Moller
		Andrew K. Moller
		Executive Vice President and Chief FinancialOfficer

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CHRISTOPHER & BANKS CORPORATION

Report of Independent Registered Public Accounting Firm

ARTICLE I DEFINITIONS

(a) The Maximum Line Amount; or

(b) Subject to change from time to time in the Lender’s sole discretion with prior written or telefacsimile notice to the Borrower, the sum of

(i) either (A) between June 1 and August 31 in any year, and so long as there are no outstanding Advances, 80% of Eligible Inventory, or (B) at all other times, 70% of Eligible Inventory; plus

ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY

Section 2.3 Letters of Credit.

(b) No Letter of Credit shall be issued with an expiration date later than one (1) year from the date of issuance or the Maturity Date in effect as of the date of issuance, whichever is earlier.

(c) Any request for issuance of a Letter of Credit shall be deemed to be a representation by the Borrower that the conditions set forth in Section 4.2 have been satisfied as of the date of the request.

Section 2.5 Interest; Default Interest Rate; Application of Payments; Participations; Usury.

(a) Interest. Except as provided in Section 2.5(b) and Section 2.5(e), the principal amount of each Advance shall bear interest at the Floating Rate.

(c) Application of Payments. Payments shall be applied to the Obligations on the Business Day of receipt by the Lender in the Lender’s general account.

(d) Participations. If any Person shall acquire a participation in the Advances or the Obligation of Reimbursement, the Borrower shall be obligated to the Lender to pay the full amount of all interest calculated under this Section 2.5, along with all other fees, charges and

Section 2.6 Fees.

(c) Standby Letter of Credit Fees. The Borrower shall pay to the Lender a fee with respect to each standby Letter of Credit, if any, accruing on a daily basis and computed at an

Section 2.7 Time for Interest Payments; Payment on Non-Business Days; Computation of Interest and Fees.

(c) Computation of Interest and Fees. Interest accruing on the outstanding principal balance of the Advances and fees hereunder outstanding from time to time shall be computed on the basis of actual number of days elapsed in a year of 360 days.

Section 2.8 Lockbox and Collateral Account; Sweep of Funds.

(a) Lockbox and Collateral Account.

Section 2.12 Use of Proceeds. The Borrower shall use the proceeds of Advances and each Letter of Credit for ordinary working capital and other general lawful corporate purposes.

ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF

Section 3.4 Occupancy.(a) The Borrower hereby irrevocably grants to the Lender the right to take possession of the at any time during a Default Period notice .

(b) The Lender may use the Premises only to hold, process, sell, use, store, liquidate, realize upon or otherwise dispose of goods that are Collateral and for other purposes that the Lender may in good faith deem to be related or incidental purposes.

ARTICLE IV CONDITIONS OF LENDING

(a) This Agreement.

(b) The Revolving Note.

(d) A complete and accurate list of all stores operated by the Borrower, with the following information for each such location: store number, address, and telephone number, name of landlord and, if applicable, property manager, together with such landlord’s and property manager’s address.

(f) An acknowledgment and waiver of Liens from each warehouse in which the Borrower is storing Inventory.

(h) The Wholesale Lockbox and Collection Account Agreement.

(k) A current certificate issued by the Secretary of State of Minnesota, certifying that each Borrower is in compliance with all applicable organizational requirements of the State of Minnesota.

(l) Evidence that the Borrower is duly licensed or qualified to transact business in all jurisdictions where the character of the property owned or leased or the nature of the business transacted by it makes such licensing or qualification necessary.

(m) A certificate of an Officer of the Borrower confirming, in his personal capacity, the representations and warranties set forth in Article V.

(n) Certificates of the insurance required hereunder, with all hazard insurance containing a lender’s loss payable endorsement in the Lender’s favor and with all liability insurance naming the Lender as an additional insured.

(o) The separate Guaranty of each Guarantor, pursuant to which each Guarantor unconditionally guarantees the full and prompt payment of all Obligations, together with the Guarantor Security Agreement.

(q) An opinion of counsel to each Borrower and the Guarantor, addressed to the Lender.

(s) Such other documents as the Lender in its sole discretion may require.

Section 4.2 Conditions Precedent to All Advances and Letters of Credit. The Lender’s obligation to make each Advance or to cause the issuance of a Letter of Credit shall be subject to the further conditions precedent that:

(a) the representations and warranties contained in Article V are correct on and as of the date of such Advance or issuance of a Letter of Credit as though made on and as of such date, except to the extent that such representations and warranties relate solely to an earlier date; and

(b) no event has occurred and is continuing, or would result from such Advance or issuance of a Letter of Credit that constitutes a Default or an Event of Default.

ARTICLE V REPRESENTATIONS AND WARRANTIES

Section 5.2 Capitalization. There are no rights to acquire ownership interests which if fully exercised would cause such Person to hold more than five percent (5%) of all ownership interests of the Borrower on a fully diluted basis.

Section 5.4 Legal Agreements. This Agreement constitutes and, upon due execution by the Borrower, the other Loan Documents will constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms.

Section 5.10 Titles and Liens. The Borrower has good and marketable title to all Collateral free and clear of all Liens other than Permitted Liens. No financing statement naming the Borrower as debtor is on file in any office except to perfect only Permitted Liens.

Section 5.11 Intellectual Property Rights. Schedule 5.11 is a complete list of all patents, applications for patents, trademarks, applications to register trademarks, service marks, applications to register service marks, mask works, trade dress and copyrights for which the

Section 5.14 Environmental Matters.

(b) Except as disclosed on Schedule 5.14, to the best of Borrower’s knowledge, the Borrower has not disposed of Hazardous Substances in such a manner as to create any material liability under any Environmental Law.

(f) The Borrower has delivered to the Lender all environmental assessments, audits, reports, permits, licenses and other documents describing or relating in any way to the Borrower’s headquarters at 2400 Xenium Lane North, Plymouth, Minnesota or the Borrower’s businesses.

ARTICLE VI COVENANTS

(c) Collateral Reports. Within twenty (20) days after the end of each moth or more frequently if the Lender so requires, agings of the Borrower’s accounts receivable and its accounts payable, and within fifteen (15) days after the end of each month, an inventory

certification report, and a calculation of the Borrower’s Accounts, Inventory, Eligible Inventory and Eligible In-Transit Inventory as of each month, or more frequently as the Lender requires.

(h) Officers. Promptly upon knowledge thereof, notice of the termination of employment of William Prange, Chief Executive Officer of Christopher & Banks, Inc., Joseph Pennington, President of Christopher & Banks, Inc., or Andrew Moller, Chief Financial Officer of Christopher & Banks, Inc.

(i) Collateral. Promptly upon knowledge thereof, notice of any loss of or material damage to any Collateral or of any substantial adverse change in any Collateral or the prospect of payment thereof.

(k) Intellectual Property.

(iii) Promptly upon receipt, copies of all material registrations and filings with respect to its Intellectual Property Rights.

(l) Reports to Shareholders. Promptly upon their distribution, copies of all financial statements, reports and proxy statements which the Guarantor shall have sent to its shareholders.

(m) SEC Filings. If Lender so requests, promptly after the sending or filing thereof, copies of all regular and periodic reports which the Guarantor shall file with the Securities and Exchange Commission or any national securities exchange.

(n) Violations of Law. Promptly upon knowledge thereof, notice of the Borrower’s violation of any law, rule or regulation, the non-compliance with which could materially and adversely affect the financial condition, properties or operations of the Borrower.

(o) Other Reports. From time to time, with reasonable promptness, any and all receivables schedules, inventory reports, collection reports, deposit records, equipment schedules, copies of invoices to account debtors and such other material, reports, records or information as the Lender may request.

Section 6.2 Financial Covenants. The following financial covenants shall be calculated on a consolidated basis including the Borrower and the Guarantor:

(a) Minimum Cash Flow; Minimum Cash on Hand. The Borrower will maintain on a rolling twelve-month basis, determined as at the end of each fiscal quarter, Cash Flow at or above $0. Notwithstanding the foregoing, in the event the Borrower fails to maintain the

(b) Minimum Inventory Turns Ratio. The Borrower will maintain, on a rolling twelve-month basis, determined as at the end of each fiscal quarter, an Inventory Turns Ratio of not less than 3.0 to 1.0.

Section 6.3 Permitted Liens; Financing Statements.

(a) The Borrower will not create, incur or suffer to exist any Lien upon or of any of its assets, now owned or hereafter acquired, to secure any indebtedness; excluding, however, from the operation of the foregoing, the following (each a “Permitted Lien”; collectively, “Permitted Liens”):

(i) In the case of any of the Borrower’s property which is not Collateral, covenants, restrictions, rights, easements and minor irregularities in title which do not materially interfere with the Borrower’s business or operations as presently conducted;

(ii) Liens in existence on the date hereof and listed in Schedule 6.3 hereto, securing indebtedness for borrowed money permitted under Section 6.4;

(iii) The Security Interest and Liens created by the Security Documents and other liens in favor of the Lender or the Lender’s affiliates;

(vi) Liens on property or assets acquired pursuant to a permitted acquisition under Section 6.17 provided that such Liens do not attach to any other asset of the Borrower or any of its Subsidiaries;

(vii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(ix) inchoate Liens for taxes, assessments or governmental charges or levies not yet due or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with GAAP; and

(b) The Borrower will not amend any financing statements in favor of the Lender except as permitted by law. Any authorization by the Lender to any Person to amend financing statements in favor of the Lender shall be in writing.

(a) Indebtedness arising hereunder;

(b) Indebtedness of the Borrower in existence on the date hereof and listed in Schedule 6.4 hereto;

(c) Indebtedness relating to Permitted Liens;

Section 6.5 Guaranties. The Borrower will not assume, guarantee, endorse or otherwise become directly or contingently liable in connection with any obligations of any other Person, except:

(a) The endorsement of negotiable instruments by the Borrower for deposit or collection or similar transactions in the ordinary course of business; and

(b) Guaranties, endorsements and other direct or contingent liabilities in connection with the obligations of other Persons, in existence on the date hereof and listed in Schedule 6.4 hereto.

(b) Travel advances not exceeding at any one time an aggregate of $50,000; and

(c) Prepaid rent not exceeding two months or security deposits; and

(d) Current investments in the Subsidiaries in existence on the date hereof and listed in Schedule 5.5 hereto.

ARTICLE I
DEFINITIONS

ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY

ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF

ARTICLE IV
CONDITIONS OF LENDING

ARTICLE V
REPRESENTATIONS AND WARRANTIES

ARTICLE VI
COVENANTS