Exhibit 10.4

 

AMENDED AND RESTATED SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED SECURITY AGREEMENT dated as of May 14, 2015 (this
“Security Agreement”), is by and between WINMARK CORPORATION, a Minnesota
corporation (the “Debtor”), and THE PRIVATEBANK AND TRUST COMPANY, an Illinois
bank and trust company, in its capacity as collateral agent for the Senior
Lenders (as defined in the Intercreditor Agreement defined below) (the “Secured
Party”).

 

RECITALS:

 

A.                                    The Debtor, The PrivateBank and Trust
Company, in its capacity as Agent thereunder (in such capacity, the “Bank
Agent”) and certain other persons are parties to that certain Credit Agreement,
dated as of July 13, 2010 (as amended to the date hereof and as it may be
further amended, modified, supplemented, restated or replaced from time to time,
the “Credit Agreement”), pursuant to which the Lenders from time to time party
thereto (collectively, the “Bank Lenders”) have provided and will continue to
provide financial accommodations to the Debtor and the other Loan Parties (as
defined in the Credit Agreement).

 

B.                                    The Debtor has entered into that certain
Security Agreement, dated as of July 13, 2010 (as amended, modified or
supplemented from time to time prior to the date hereof, the “Original Security
Agreement”) in favor of the Bank Agent.

 

C.                                    The Debtor, the other Issuers (as defined
in the Note Agreement), and the Purchasers named in the Purchaser Schedule
attached thereto (the “Purchasers” and, together with the holders of the Senior
Secured Notes (as defined below) from time to time, the “Noteholders”) are
parties to that certain Note Agreement, dated as of the date hereof (as it may
be amended, modified, supplemented, restated or replaced from time to time, the
“Note Agreement”) pursuant to which the Purchasers are purchasing the Issuers’
senior secured promissory notes in the aggregate principal amount of $25,000,000
on the date hereof (the “Senior Secured Notes”).

 

D.                                    Pursuant to that certain Intercreditor and
Collateral Agency Agreement, dated as of the date hereof (the “Intercreditor
Agreement”), by and between the Secured Party, the Bank Agent, the Bank Lenders
and the Noteholders, the Secured Party shall, among other things, be appointed
as collateral agent in respect of the Collateral described herein for the
benefit of the Senior Lenders.

 

E.                                     The Debtor will benefit from (i) the
continued financial accommodations provided by the Bank Lenders to the Loan
Parties and (ii) the Issuers’ issuance and sale of the Senior Secured Notes to
the Purchasers, and the Debtor finds it advantageous, desirable and in the
Debtor’s best interests to execute and deliver this Security Agreement and grant
to the Secured Party (for the ratable benefit of the Senior Lenders) a security
interest in all of the Debtor’s property, all as provided herein.

 

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F.                                      The Debtor and Secured Party desire to
amend and restate the Original Security Agreement on the terms and conditions
set forth herein.

 

AGREEMENTS:

 

IN CONSIDERATION of one dollar and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

1.                                      Grant of Security Interest and
Collateral.  In order to secure payment and performance of the Senior
Indebtedness (as defined in the Intercreditor Agreement; all such Senior
Indebtedness is herein collectively referred to as the “Obligations”), Debtor
hereby grants the Secured Party (for the ratable benefit of the Senior Lenders)
a security interest (the “Security Interest”) in all of Debtor’s property (the
“Collateral”), including without limitation the following:

 

(a)                                 Inventory and Goods:  All inventory of
Debtor, whether now owned or hereafter acquired and wherever located and other
tangible personal property held for sale or lease or furnished or to be
furnished under contracts of service or consumed in Debtor’s business, and all
goods of Debtor, whether now owned or hereafter acquired and wherever located,
including without limitation all computer programs embedded in goods, and all
other Inventory and Goods, as each such term may be defined in the Uniform
Commercial Code as in effect in the state of Minnesota from time to time (the
“UCC”), of the Debtor, whether now owned or hereafter acquired;

 

(b)                                 Equipment:  All equipment of Debtor, whether
now owned or hereafter acquired and wherever located, including but not limited
to all present and future equipment, machinery, tools, motor vehicles, trade
fixtures, furniture, furnishings, office and recordkeeping equipment and all
goods for use in Debtor’s business, and all other Equipment (as such term may be
defined in the UCC) of the Debtor, whether now owned or hereafter acquired,
together with all parts, equipment and attachments relating to any of the
foregoing;

 

(c)                                  Accounts, Contract Rights and Other Rights
to Payment:  Each and every right of Debtor to the payment of money, whether
such right to payment now exists or hereafter arises, whether such right to
payment arises out of a sale, lease, license, assignment or other disposition of
goods or other property by Debtor, out of a rendering of services by Debtor, out
of a loan by Debtor, out of the overpayment of taxes or other liabilities of
Debtor, or otherwise arises under any contract or agreement, whether such right
to payment is or is not already earned by performance, and howsoever such right
to payment may be evidenced, together with all other rights and interests
(including all liens and security interests) which Debtor may at any time have
by law or agreement against any account debtor or other obligor obligated to
make any such payment or against any of the property of such account debtor or
other obligor; all including but not limited to all present and future debt
instruments, chattel papers, accounts, license fees, contract rights, loans and
obligations receivable and tax refunds, and all other Accounts (as such term may
be defined in the UCC) of the Debtor, whether now owned or hereafter acquired;

 

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(d)                                 Instruments:  All instruments, chattel
paper, letters of credit or other documents of Debtor, whether now owned or
hereafter acquired, including but not limited to promissory notes, drafts, bills
of exchange and trade acceptances; all rights and interests of Debtor, whether
now existing or hereafter created or arising, under leases, licenses or other
contracts, and all other Instruments (as such term may be defined in the UCC) of
the Debtor, whether now owned or hereafter acquired;

 

(e)                                  Deposit Accounts and Investment Property: 
All right, title and interest of Debtor in all deposit and investment accounts
maintained with any bank, savings and loan association, broker, brokerage, or
any other financial institution, together with all monies and other property
deposited or held therein, including, without limitation, any checking account,
savings account, escrow account, savings certificate and margin account, and all
securities, whether certificated or uncertificated, security entitlements,
securities accounts, commodity contracts, and commodity accounts, and all other
Deposit Accounts and Investment Property (as each such term may be defined in
the UCC) of the Debtor, whether now owned or hereafter acquired;

 

(f)                                   General Intangibles:  All general
intangibles of Debtor, whether now owned or hereafter acquired, including, but
not limited to, applications for patents, patents, copyrights, trademarks, trade
secrets, good will, tradenames, customer lists, permits and franchises,
software, and the right to use Debtor’s name, and any and all membership
interests, governance rights, and financial rights in each and every limited
liability company, and all payment intangibles, and all other General
Intangibles (as such term may be defined in the UCC) of the Debtor, whether now
owned or hereafter acquired;

 

(g)                                  Chattel Paper:  All Chattel Paper (as such
term may be defined in the UCC) of the Debtor, whether tangible or electronic,
and whether now owned or hereafter acquired; and

 

(h)                                 Documents, Embedded Software, Etc.:  All of
Debtor’s rights in promissory notes, documents, embedded software, letter of
credit rights and supporting obligations (and security interests and liens
securing them) (as any such term may be defined in the UCC) whether now owned or
hereafter acquired;

 

together with all substitutions and replacements for and products of any of the
foregoing property and proceeds of any and all of the foregoing property and, in
the case of all tangible Collateral, together with (i) all accessories,
attachments, parts, equipment, accessions, repairs and embedded software, now or
hereafter attached or affixed to or used in connection with any such goods,
(ii) all warehouse receipts, bills of lading and other documents of title now or
hereafter covering such goods, and (iii) all books and records of Debtor.

 

2.                                      Representations, Warranties and
Agreements.  Debtor represents, warrants and agrees that:

 

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(a)                                 Debtor is a corporation duly organized,
validly existing and in good standing under the laws of the state of Minnesota. 
This Security Agreement has been duly and validly authorized by all necessary
corporate action.  Debtor has the requisite corporate power and authority to
execute this Security Agreement, to perform Debtor’s obligations hereunder and
to subject the Collateral to the Security Interest.  Debtor’s organizational
charter number is 5Z-841.

 

(b)                                 The Collateral will be used primarily for
business purposes.

 

(c)                                  Debtor’s chief place of business is located
at the address on Exhibit A attached hereto.  Debtor’s records concerning the
Collateral are kept at such address.  The Collateral is located at the addresses
set forth on Exhibit A attached hereto.  Debtor will give at least 30 days’
advance written notice to Secured Party of any change in Debtor’s name or
jurisdiction of organization or chief place of business and any change in or
addition of any Collateral location or any change in the location of Debtor’s
records concerning the Collateral.

 

(d)                                 Debtor has (or will have at the time Debtor
acquires rights in Collateral hereafter arising) and will maintain absolute
title to each item of Collateral free and clear of all security interests, liens
and encumbrances, except the Security Interest (and the Liens permitted by the
Credit Agreement and the Note Agreement), and will defend the Collateral against
all claims or demands of all persons other than Secured Party (and the holders
of Liens permitted by the Credit Agreement and the Note Agreement).

 

(e)                                  Except as otherwise permitted in the Credit
Agreement and Note Agreement, Debtor will not sell or otherwise transfer or
dispose of the Collateral or any interest therein.

 

(f)                                   Debtor will not permit any tangible
Collateral to be located in any state (and, if a county filing is required, in
any county) in which a financing statement covering such Collateral is required
to be, but has not in fact been, filed.

 

(g)                                  All rights to payment and all instruments,
documents, chattel papers and other agreements constituting or evidencing
Collateral are (or will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, set-off or counterclaim
(other than those arising in the ordinary course of business) of each account
debtor or other obligor named therein or in Debtor’s records pertaining thereto
as being obligated to pay such obligation.  Debtor will not agree to any
modification, amendment or cancellation of any such obligation without Secured
Party’s prior written consent except discounts provided by Debtor in the
ordinary course of business, and will not subordinate any such right to payment
to claims of other creditors of such account debtor or other obligor.

 

(h)                                 Debtor will keep all tangible Collateral in
good repair, working order and condition, normal depreciation excepted, and
will, from time to time, replace any worn, broken or defective parts thereof.

 

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(i)                                     Except as otherwise provided in the
Credit Agreement and the Note Agreement, Debtor will promptly pay all taxes and
other governmental charges levied or assessed upon or against any Collateral or
upon or against the creation, perfection or continuance of the Security
Interest.

 

(j)                                    Debtor will promptly notify Secured Party
of any material loss of or damage to any Collateral or of any adverse change in
the prospect of payment of any material sums due on or under any instrument,
chattel paper, account or contract right constituting Collateral.

 

(k)                                 Debtor will, if Secured Party at any time so
requests (whether the request is made before or after the occurrence of an Event
of Default), promptly deliver to Secured Party any instrument, document or
chattel paper constituting Collateral, duly endorsed or assigned by Debtor to
Secured Party.

 

(l)                                     Debtor will at all times keep all
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, and such other risks and in such amounts as Secured Party may
reasonably request, with any loss payable to Secured Party to the extent of its
interest.

 

(m)                             Debtor hereby authorizes the filing of such
financing statements (including, without limitation, any amendments thereto) as
Secured Party may deem necessary or useful to be filed in order to perfect the
Security Interest and, if any Collateral is covered by a certificate of title,
Debtor will from time to time execute such documents as may be required to have
the Security Interest properly noted on a certificate of title.  In addition,
Debtor authorizes Secured Party to file from time to time such financing
statements against the Collateral described as “all personal property” or “all
assets” or the like as Secured Party deems necessary or useful to perfect the
Security Interest.

 

(n)                                 Debtor will pay when due or reimburse
Secured Party on demand for all costs of collection of any of the Obligations
and all other out-of-pocket expenses (including in each case all reasonable
attorneys’ fees) incurred by Secured Party in connection with the creation,
perfection, satisfaction or enforcement of the Security Interest or the
execution or creation, continuance or enforcement of this Security Agreement or
any or all of the Obligations.

 

(o)                                 Debtor will take all such actions as Secured
Party may reasonably request to permit the Secured Party to establish, perfect
and protect the Security Interest in all jurisdictions Secured Party deems
necessary.  Without in any way limiting the generality of the foregoing, Debtor
will execute, deliver or endorse any and all instruments, documents,
assignments, security agreements and other agreements and writings which Secured
Party may at any time reasonably request in order to secure, protect, perfect or
enforce the Security Interest and Secured Party’s rights under this Security
Agreement.

 

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(p)                                 Debtor will not use or keep any Collateral,
or permit it to be used or kept, for any unlawful purpose or in violation of any
federal, state or local law, statute or ordinance.

 

If Debtor at any time fails to perform or observe any of the foregoing
agreements, immediately upon the occurrence of such failure, without notice or
lapse of time, Secured Party may (but need not) perform or observe such
agreement on behalf and in the name, place and stead of Debtor (or, at Secured
Party’s option, in Secured Party’s own name) and may (but need not) take any and
all other actions which Secured Party may reasonably deem necessary to cure or
correct such failure (including, without limitation, the payment of taxes, the
satisfaction of security interests, liens, or encumbrances, the performance of
obligations under contracts or agreements with account debtors or other
obligors, the procurement and maintenance of insurance, the execution of
financing statements, the endorsement of instruments, and the procurement of
repairs, transportation or insurance); and, except to the extent that the effect
of such payment would be to render any loan or forbearance of money usurious or
otherwise illegal under any applicable law, Debtor shall thereupon pay Secured
Party on demand the amount of all moneys expended and all costs and expenses
(including reasonable attorneys’ fees) incurred by Secured Party in connection
with or as a result of Secured Party’s performing or observing such agreements
or taking such actions, together with interest thereon from the date expended or
incurred by Secured Party at the highest rate then applicable to any of the
Obligations.  To facilitate the performance or observance by Secured Party of
such agreements of Debtor, Debtor hereby irrevocably appoints (which appointment
is coupled with an interest) Secured Party, or its delegate, as the
attorney-in-fact of Debtor 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 Debtor, any and all instruments, documents, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by Debtor under this Section 2.

 

3.                                      Lock Box; Collateral Account.  If
Secured Party so requests at any time after the occurrence of an Event of
Default (as defined in Section 7 of this Security Agreement), Debtor will direct
each of its account debtors to make payments due under the relevant account or
chattel paper directly to a special lock box to be under the control of Secured
Party (the “Lock Box”).  Debtor hereby authorizes and directs Secured Party to
deposit into a special collateral account to be established and maintained with
Secured Party (the “Collateral Account”) all checks, drafts, and cash payments
received in the Lock Box.  All deposits in the Collateral Account shall
constitute proceeds of Collateral and shall not constitute payment of any
Obligation.  At its option, Secured Party shall, at any time, apply finally
collected funds on deposit in the Collateral Account to the payment of the
Obligations in such order of application as Secured Party may determine, or
permit Debtor to withdraw all or any part of the balance.  If a Lock Box is so
established, Debtor agrees that it will promptly deliver to Secured Party, for
deposit into the Lock Box, all payments on accounts and chattel paper received
by it.  All such payments shall be delivered to Secured Party in the form
received (except for Debtor’s endorsement where necessary).  Until so deposited,
all such payments on accounts and chattel paper received by Debtor shall be held
in trust by Debtor for and as the property of Secured Party and shall not be
commingled with any funds or property of Debtor.

 

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4.                                      Account Verification and Collection
Rights of Secured Party.  At any time after the occurrence of any Event of
Default, Unmatured Event of Default (as defined in the Credit Agreement) or
Default (as defined in the Note Agreement), Secured Party shall have the right
to verify any accounts in the name of Debtor or in Secured Party’s own name; and
Debtor, whenever requested, shall furnish Secured Party with duplicate
statements of the accounts, which statements may be mailed or delivered by
Secured Party for that purpose.  Whether or not Secured Party exercises its
rights under Section 3 of this Security Agreement, Secured Party may at any time
(whether before or after the occurrence of an Event of Default) notify any
account debtor or any other person obligated to pay any amount due, that such
chattel paper, account or other right to payment has been assigned or
transferred to Secured Party for security and shall be paid directly to Secured
Party.  If Secured Party so requests at any time (whether before or after the
occurrence of an Event of Default), Debtor will so notify such account debtors
and other obligors in writing and will indicate on all invoices to such account
debtors or other obligors that the amount due is payable directly to Secured
Party.  At any time after Secured Party or Debtor gives such notice to an
account debtor or other obligor, Secured Party may (but need not), in Secured
Party’s own name or in Debtor’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 chattel paper, account or other 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.

 

5.                                      Assignment of Insurance.  Debtor hereby
assigns to Secured Party (for the ratable benefit of the Senior Lenders), as
additional security for the payment of the Obligations, any and all moneys
(including but not limited to proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of Debtor under or
with respect to, any and all policies of insurance covering the Collateral, and
Debtor hereby directs the issuer of any such policy to pay any such moneys
directly to Secured Party.  Both before and after the occurrence of an Event of
Default, Secured Party may (but need not), in Secured Party’s own name or in
Debtor’s name, execute and deliver proofs of claim, receive all such moneys,
endorse checks and other instruments representing payment of such moneys, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.  Notwithstanding the foregoing, Debtor shall be entitled to use any such
insurance proceeds to repair or replace any Collateral so long as no Unmatured
Event of Default (as defined in the Credit Agreement), Default (as defined in
the Note Agreement) or Event of Default then exists.

 

6.                                      Right to Offset.  Nothing in this
Security Agreement shall be deemed a waiver or prohibition of Secured Party’s
right of banker’s lien, offset, or counterclaim, which right Debtor hereby
grants to Secured Party.

 

7.                                      Events of Default.  The occurrence of
(i) any Event of Default, as defined in the Credit Agreement or (ii) any Event
of Default, as defined in the Note Agreement, shall constitute an Event of
Default hereunder.

 

8.                                      Remedies Upon Event of Default.  If any
Event of Default shall have occurred and be continuing:

 

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(a)                                 The Secured Party may exercise in respect of
the Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC in effect at that time (whether or not the UCC then
applies to the affected Collateral), and may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any exchange, broker’s board or at any of the Secured
Party’s offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Secured Party may reasonably believe are
commercially reasonable.  The Debtor agrees that, to the extent notice of sale
shall be required by law, at least ten days’ prior notice to the Debtor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification.  The Secured Party shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given.  The Secured Party may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.  The Debtor hereby waives all requirements of law, if any, relating
to the marshalling of assets which would be applicable in connection with the
enforcement by the Secured Party of its remedies hereunder, absent this waiver.

 

(b)                                 The Secured Party may notify any Person
obligated on any of the Collateral that the same has been assigned or
transferred to the Secured Party (for the ratable benefit of the Senior Lenders)
and that the same should be performed as requested by, or paid directly to, the
Secured Party, as the case may be.  The Debtor shall join in giving such notice,
if the Secured Party so requests.  The Secured Party may, in the Secured Party’s
name or in the Debtor’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
Collateral or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligation of any such
Person.

 

(c)                                  Any cash held by the Secured Party as
Collateral (for the ratable benefit of the Senior Lenders) and all cash proceeds
received by the Secured Party in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of the Secured Party, be held by the Secured Party as Collateral (for the
ratable benefit of the Senior Lenders) for, or then or at any time thereafter be
applied in whole or in part by the Secured Party against, all or any part of the
Obligations (including any expenses of the Secured Party).

 

9.                                      Other Personal Property.  If at the time
Secured Party takes possession of any tangible Collateral, any goods, papers or
other properties of Debtor, not affixed to or constituting a part of such
Collateral, are located or to be found upon or within such Collateral, Debtor
agrees to notify Secured Party in writing of that fact, describing the property
so located or to be found, within 7 calendar days after the date on which
Secured Party took possession. Unless and until Secured Party receives such
notice from Debtor, Secured Party shall not be responsible or liable to Debtor
for any action taken or omitted by or on behalf of Secured Party with respect to
such property without actual knowledge of the existence of any such property or
without actual knowledge of the fact that it was located or to be found upon
such Collateral.

 

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10.                               Amendment; Waivers.  This Security Agreement
can be waived, modified, amended, terminated or discharged, and the Security
Interest can be released, only explicitly in a writing signed by Secured Party,
pursuant to Section 2(e) of the Intercreditor Agreement, and Debtor.  A waiver
shall be effective only in the specific instance and for the specific purpose
given.  Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party’s rights or remedies.

 

11.                               Notices.  All notices hereunder shall be in
writing (including facsimile transmission) and shall be sent to the applicable
party at its address shown on the signature page hereto or at such other address
as such party may, by written notice received by the other parties, have
designated as its address for such purpose.  Notices sent by facsimile
transmission shall be deemed to have been given when sent; notices sent by mail
shall be deemed to have been given three Business Days (as defined in the Credit
Agreement as in effect on the date hereof) after the date when sent by
registered or certified mail, postage prepaid; and notices sent by hand delivery
or overnight courier service shall be deemed to have been given when received.

 

12.                               Miscellaneous.  Secured Party’s duty of care
with respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled if Secured Party exercises reasonable care in physically safekeeping
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 Secured Party need not otherwise preserve,
protect, insure or care for any Collateral.  Secured Party shall not be
obligated to preserve any rights Debtor 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 Collateral in any particular order of application. 
This Security Agreement shall be binding upon and inure to the benefit of Debtor
and Secured Party and their respective representatives, successors and assigns
and shall take effect when signed by Debtor and delivered to Secured Party, and
Debtor waives notice of Secured Party’s acceptance hereof.  This Security
Agreement shall be governed by the internal laws of the State of Minnesota,
without giving effect to the conflicts of laws principles thereof.

 

13.                               Consent to Jurisdiction.  AT THE OPTION OF THE
SECURED PARTY, THIS SECURITY AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE DEBTOR
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT.  IN THE EVENT THE DEBTOR COMMENCES
ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS SECURITY
AGREEMENT, THE SECURED PARTY AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH
TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.

 

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14.                               Waiver of Jury Trial.  EACH OF THE DEBTOR AND
THE SECURED PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

 

15.                               Assignment of Security Interest.  Pursuant to
the terms of the Intercreditor Agreement, the Bank Agent hereby assigns all
rights under, and its security interest granted to it by, the Original Security
Agreement to the Secured Party, in accordance with the terms of this Security
Agreement.  Debtor hereby acknowledges and agrees to such assignment.

 

16.                               Amendment and Restatement.  This Security
Agreement amends and restates all of the terms and conditions of the Original
Security Agreement and nothing contained herein shall be construed as a novation
thereof.

 

(The signature page follows.)

 

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THE PARTIES have executed this Security Agreement as of the day and year first
above written.

 

Secured Party (as Collateral Agent for the ratable benefit of the Senior
Lenders):

THE PRIVATEBANK AND TRUST COMPANY

 

 

 

 

 

By:

/s/ Adam F. Oliver

 

Name:

Adam F. Oliver

 

Title:

Officer

 

 

Address for Secured Party:

 

The PrivateBank and Trust Company

 

50 South Sixth Street, Suite 1400

 

Minneapolis, MN 55402

 

Attn: Managing Director

 

Facsimile: 612-333-1391

 

 

 

Bank Agent:

THE PRIVATEBANK AND TRUST COMPANY

 

 

 

 

 

By:

/s/ Adam F. Oliver

 

Name:

Adam F. Oliver

 

Title:

Officer

 

 

Address for Bank Agent:

 

The PrivateBank and Trust Company

 

50 South Sixth Street, Suite 1400

 

Minneapolis, MN 55402

 

Attn: Managing Director

 

Facsimile: 612-333-1391

 

 

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Debtor:

WINMARK CORPORATION

 

 

 

 

 

By:

/s/ Brett D. Heffes

 

Name:

Brett D. Heffes

 

Title:

President

 

 

 

 

Address for Debtor:

 

605 Highway 169 North

 

Suite 400

 

Minneapolis, MN 55441

 

Attention: Chief Financial Officer

 

 

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Exhibit A

 

Location of Collateral

 

Chief Place of

Business and

Collateral Location:                                   605 Highway 169 North,
Suite 400

Minneapolis, MN 55441

 

Collateral Location:                                   222 East Carrillo Street,
Suite 209

Santa Barbara, CA 93101

 

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AMENDED AND RESTATED SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED SECURITY AGREEMENT dated as of May 14, 2015 (this
“Security Agreement”), is by and between WIRTH BUSINESS CREDIT, INC., a
Minnesota corporation (the “Debtor”), and THE PRIVATEBANK AND TRUST COMPANY, an
Illinois bank and trust company, in its capacity as collateral agent for the
Senior Lenders (as defined in the Intercreditor Agreement defined below) (the
“Secured Party”).

 

RECITALS:

 

A.                                    The Debtor, The PrivateBank and Trust
Company, in its capacity as Agent thereunder (in such capacity, the “Bank
Agent”) and certain other persons are parties to that certain Credit Agreement,
dated as of July 13, 2010 (as amended to the date hereof and as it may be
further amended, modified, supplemented, restated or replaced from time to time,
the “Credit Agreement”), pursuant to which the Lenders from time to time party
thereto (collectively, the “Bank Lenders”) have provided and will continue to
provide financial accommodations to the Debtor and the other Loan Parties (as
defined in the Credit Agreement).

 

B.                                    The Debtor has entered into that certain
Security Agreement, dated as of July 13, 2010 (as amended, modified or
supplemented from time to time prior to the date hereof, the “Original Security
Agreement”) in favor of the Bank Agent.

 

C.                                    The Debtor, the other Issuers (as defined
in the Note Agreement), and the Purchasers named in the Purchaser Schedule
attached thereto (the “Purchasers” and, together with the holders of the Senior
Secured Notes (as defined below) from time to time, the “Noteholders”) are
parties to that certain Note Agreement, dated as of the date hereof (as it may
be amended, modified, supplemented, restated or replaced from time to time, the
“Note Agreement”) pursuant to which the Purchasers are purchasing the Issuers’
senior secured promissory notes in the aggregate principal amount of $25,000,000
on the date hereof (the “Senior Secured Notes”).

 

D.                                    Pursuant to that certain Intercreditor and
Collateral Agency Agreement, dated as of the date hereof (the “Intercreditor
Agreement”), by and between the Secured Party, the Bank Agent, the Bank Lenders
and the Noteholders, the Secured Party shall, among other things, be appointed
as collateral agent in respect of the Collateral described herein for the
benefit of the Senior Lenders.

 

E.                                     The Debtor will benefit from (i) the
continued financial accommodations provided by the Bank Lenders to the Loan
Parties and (ii) the Issuers’ issuance and sale of the Senior Secured Notes to
the Purchasers, and the Debtor finds it advantageous, desirable and in the
Debtor’s best interests to execute and deliver this Security Agreement and grant
to the Secured Party (for the ratable benefit of the Senior Lenders) a security
interest in all of the Debtor’s property, all as provided herein.

 

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F.                                      The Debtor and Secured Party desire to
amend and restate the Original Security Agreement on the terms and conditions
set forth herein.

 

AGREEMENTS:

 

IN CONSIDERATION of one dollar and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

1.                                      Grant of Security Interest and
Collateral.  In order to secure payment and performance of the Senior
Indebtedness (as defined in the Intercreditor Agreement; all such Senior
Indebtedness is herein collectively referred to as the “Obligations”), Debtor
hereby grants the Secured Party (for the ratable benefit of the Senior Lenders)
a security interest (the “Security Interest”) in all of Debtor’s property (the
“Collateral”), including without limitation the following:

 

(a)                                 Inventory and Goods:  All inventory of
Debtor, whether now owned or hereafter acquired and wherever located and other
tangible personal property held for sale or lease or furnished or to be
furnished under contracts of service or consumed in Debtor’s business, and all
goods of Debtor, whether now owned or hereafter acquired and wherever located,
including without limitation all computer programs embedded in goods, and all
other Inventory and Goods, as each such term may be defined in the Uniform
Commercial Code as in effect in the state of Minnesota from time to time (the
“UCC”), of the Debtor, whether now owned or hereafter acquired;

 

(b)                                 Equipment:  All equipment of Debtor, whether
now owned or hereafter acquired and wherever located, including but not limited
to all present and future equipment, machinery, tools, motor vehicles, trade
fixtures, furniture, furnishings, office and recordkeeping equipment and all
goods for use in Debtor’s business, and all other Equipment (as such term may be
defined in the UCC) of the Debtor, whether now owned or hereafter acquired,
together with all parts, equipment and attachments relating to any of the
foregoing;

 

(c)                                  Accounts, Contract Rights and Other Rights
to Payment:  Each and every right of Debtor to the payment of money, whether
such right to payment now exists or hereafter arises, whether such right to
payment arises out of a sale, lease, license, assignment or other disposition of
goods or other property by Debtor, out of a rendering of services by Debtor, out
of a loan by Debtor, out of the overpayment of taxes or other liabilities of
Debtor, or otherwise arises under any contract or agreement, whether such right
to payment is or is not already earned by performance, and howsoever such right
to payment may be evidenced, together with all other rights and interests
(including all liens and security interests) which Debtor may at any time have
by law or agreement against any account debtor or other obligor obligated to
make any such payment or against any of the property of such account debtor or
other obligor; all including but not limited to all present and future debt
instruments, chattel papers, accounts, license fees, contract rights, loans and
obligations receivable and tax refunds, and all other Accounts (as such term may
be defined in the UCC) of the Debtor, whether now owned or hereafter acquired;

 

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(d)                                 Instruments:  All instruments, chattel
paper, letters of credit or other documents of Debtor, whether now owned or
hereafter acquired, including but not limited to promissory notes, drafts, bills
of exchange and trade acceptances; all rights and interests of Debtor, whether
now existing or hereafter created or arising, under leases, licenses or other
contracts, and all other Instruments (as such term may be defined in the UCC) of
the Debtor, whether now owned or hereafter acquired;

 

(e)                                  Deposit Accounts and Investment Property: 
All right, title and interest of Debtor in all deposit and investment accounts
maintained with any bank, savings and loan association, broker, brokerage, or
any other financial institution, together with all monies and other property
deposited or held therein, including, without limitation, any checking account,
savings account, escrow account, savings certificate and margin account, and all
securities, whether certificated or uncertificated, security entitlements,
securities accounts, commodity contracts, and commodity accounts, and all other
Deposit Accounts and Investment Property (as each such term may be defined in
the UCC) of the Debtor, whether now owned or hereafter acquired;

 

(f)                                   General Intangibles:  All general
intangibles of Debtor, whether now owned or hereafter acquired, including, but
not limited to, applications for patents, patents, copyrights, trademarks, trade
secrets, good will, tradenames, customer lists, permits and franchises,
software, and the right to use Debtor’s name, and any and all membership
interests, governance rights, and financial rights in each and every limited
liability company, and all payment intangibles, and all other General
Intangibles (as such term may be defined in the UCC) of the Debtor, whether now
owned or hereafter acquired;

 

(g)                                  Chattel Paper:  All Chattel Paper (as such
term may be defined in the UCC) of the Debtor, whether tangible or electronic,
and whether now owned or hereafter acquired; and

 

(h)                                 Documents, Embedded Software, Etc.:  All of
Debtor’s rights in promissory notes, documents, embedded software, letter of
credit rights and supporting obligations (and security interests and liens
securing them) (as any such term may be defined in the UCC) whether now owned or
hereafter acquired;

 

together with all substitutions and replacements for and products of any of the
foregoing property and proceeds of any and all of the foregoing property and, in
the case of all tangible Collateral, together with (i) all accessories,
attachments, parts, equipment, accessions, repairs and embedded software, now or
hereafter attached or affixed to or used in connection with any such goods,
(ii) all warehouse receipts, bills of lading and other documents of title now or
hereafter covering such goods, and (iii) all books and records of Debtor.

 

2.                                      Representations, Warranties and
Agreements.  Debtor represents, warrants and agrees that:

 

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(a)                                 Debtor is a corporation duly organized,
validly existing and in good standing under the laws of the state of Minnesota. 
This Security Agreement has been duly and validly authorized by all necessary
corporate action.  Debtor has the requisite corporate power and authority to
execute this Security Agreement, to perform Debtor’s obligations hereunder and
to subject the Collateral to the Security Interest.  Debtor’s organizational
charter number is 854020-5.

 

(b)                                 The Collateral will be used primarily for
business purposes.

 

(c)                                  Debtor’s chief place of business is located
at the address on Exhibit A attached hereto.  Debtor’s records concerning the
Collateral are kept at such address.  The Collateral is located at the addresses
set forth on Exhibit A attached hereto.  Debtor will give at least 30 days’
advance written notice to Secured Party of any change in Debtor’s name or
jurisdiction of organization or chief place of business and any change in or
addition of any Collateral location or any change in the location of Debtor’s
records concerning the Collateral.

 

(d)                                 Debtor has (or will have at the time Debtor
acquires rights in Collateral hereafter arising) and will maintain absolute
title to each item of Collateral free and clear of all security interests, liens
and encumbrances, except the Security Interest (and the Liens permitted by the
Credit Agreement and the Note Agreement), and will defend the Collateral against
all claims or demands of all persons other than Secured Party (and the holders
of Liens permitted by the Credit Agreement and the Note Agreement).

 

(e)                                  Except as otherwise permitted in the Credit
Agreement and Note Agreement, Debtor will not sell or otherwise transfer or
dispose of the Collateral or any interest therein.

 

(f)                                   Debtor will not permit any tangible
Collateral to be located in any state (and, if a county filing is required, in
any county) in which a financing statement covering such Collateral is required
to be, but has not in fact been, filed.

 

(g)                                  All rights to payment and all instruments,
documents, chattel papers and other agreements constituting or evidencing
Collateral are (or will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, set-off or counterclaim
(other than those arising in the ordinary course of business) of each account
debtor or other obligor named therein or in Debtor’s records pertaining thereto
as being obligated to pay such obligation.  Debtor will not agree to any
modification, amendment or cancellation of any such obligation without Secured
Party’s prior written consent except discounts provided by Debtor in the
ordinary course of business, and will not subordinate any such right to payment
to claims of other creditors of such account debtor or other obligor.

 

(h)                                 Debtor will keep all tangible Collateral in
good repair, working order and condition, normal depreciation excepted, and
will, from time to time, replace any worn, broken or defective parts thereof.

 

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(i)                                     Except as otherwise provided in the
Credit Agreement and the Note Agreement, Debtor will promptly pay all taxes and
other governmental charges levied or assessed upon or against any Collateral or
upon or against the creation, perfection or continuance of the Security
Interest.

 

(j)                                    Debtor will promptly notify Secured Party
of any material loss of or damage to any Collateral or of any adverse change in
the prospect of payment of any material sums due on or under any instrument,
chattel paper, account or contract right constituting Collateral.

 

(k)                                 Debtor will, if Secured Party at any time so
requests (whether the request is made before or after the occurrence of an Event
of Default), promptly deliver to Secured Party any instrument, document or
chattel paper constituting Collateral, duly endorsed or assigned by Debtor to
Secured Party.

 

(l)                                     Debtor will at all times keep all
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, and such other risks and in such amounts as Secured Party may
reasonably request, with any loss payable to Secured Party to the extent of its
interest.

 

(m)                             Debtor hereby authorizes the filing of such
financing statements (including, without limitation, any amendments thereto) as
Secured Party may deem necessary or useful to be filed in order to perfect the
Security Interest and, if any Collateral is covered by a certificate of title,
Debtor will from time to time execute such documents as may be required to have
the Security Interest properly noted on a certificate of title.  In addition,
Debtor authorizes Secured Party to file from time to time such financing
statements against the Collateral described as “all personal property” or “all
assets” or the like as Secured Party deems necessary or useful to perfect the
Security Interest.

 

(n)                                 Debtor will pay when due or reimburse
Secured Party on demand for all costs of collection of any of the Obligations
and all other out-of-pocket expenses (including in each case all reasonable
attorneys’ fees) incurred by Secured Party in connection with the creation,
perfection, satisfaction or enforcement of the Security Interest or the
execution or creation, continuance or enforcement of this Security Agreement or
any or all of the Obligations.

 

(o)                                 Debtor will take all such actions as Secured
Party may reasonably request to permit the Secured Party to establish, perfect
and protect the Security Interest in all jurisdictions Secured Party deems
necessary.  Without in any way limiting the generality of the foregoing, Debtor
will execute, deliver or endorse any and all instruments, documents,
assignments, security agreements and other agreements and writings which Secured
Party may at any time reasonably request in order to secure, protect, perfect or
enforce the Security Interest and Secured Party’s rights under this Security
Agreement.

 

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(p)                                 Debtor will not use or keep any Collateral,
or permit it to be used or kept, for any unlawful purpose or in violation of any
federal, state or local law, statute or ordinance.

 

If Debtor at any time fails to perform or observe any of the foregoing
agreements, immediately upon the occurrence of such failure, without notice or
lapse of time, Secured Party may (but need not) perform or observe such
agreement on behalf and in the name, place and stead of Debtor (or, at Secured
Party’s option, in Secured Party’s own name) and may (but need not) take any and
all other actions which Secured Party may reasonably deem necessary to cure or
correct such failure (including, without limitation, the payment of taxes, the
satisfaction of security interests, liens, or encumbrances, the performance of
obligations under contracts or agreements with account debtors or other
obligors, the procurement and maintenance of insurance, the execution of
financing statements, the endorsement of instruments, and the procurement of
repairs, transportation or insurance); and, except to the extent that the effect
of such payment would be to render any loan or forbearance of money usurious or
otherwise illegal under any applicable law, Debtor shall thereupon pay Secured
Party on demand the amount of all moneys expended and all costs and expenses
(including reasonable attorneys’ fees) incurred by Secured Party in connection
with or as a result of Secured Party’s performing or observing such agreements
or taking such actions, together with interest thereon from the date expended or
incurred by Secured Party at the highest rate then applicable to any of the
Obligations.  To facilitate the performance or observance by Secured Party of
such agreements of Debtor, Debtor hereby irrevocably appoints (which appointment
is coupled with an interest) Secured Party, or its delegate, as the
attorney-in-fact of Debtor 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 Debtor, any and all instruments, documents, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by Debtor under this Section 2.

 

3.                                      Lock Box; Collateral Account.  If
Secured Party so requests at any time after the occurrence of an Event of
Default (as defined in Section 7 of this Security Agreement), Debtor will direct
each of its account debtors to make payments due under the relevant account or
chattel paper directly to a special lock box to be under the control of Secured
Party (the “Lock Box”).  Debtor hereby authorizes and directs Secured Party to
deposit into a special collateral account to be established and maintained with
Secured Party (the “Collateral Account”) all checks, drafts, and cash payments
received in the Lock Box.  All deposits in the Collateral Account shall
constitute proceeds of Collateral and shall not constitute payment of any
Obligation.  At its option, Secured Party shall, at any time, apply finally
collected funds on deposit in the Collateral Account to the payment of the
Obligations in such order of application as Secured Party may determine, or
permit Debtor to withdraw all or any part of the balance.  If a Lock Box is so
established, Debtor agrees that it will promptly deliver to Secured Party, for
deposit into the Lock Box, all payments on accounts and chattel paper received
by it.  All such payments shall be delivered to Secured Party in the form
received (except for Debtor’s endorsement where necessary).  Until so deposited,
all such payments on accounts and chattel paper received by Debtor shall be held
in trust by Debtor for and as the property of Secured Party and shall not be
commingled with any funds or property of Debtor.

 

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4.                                      Account Verification and Collection
Rights of Secured Party.  At any time after the occurrence of any Event of
Default, Unmatured Event of Default (as defined in the Credit Agreement) or
Default (as defined in the Note Agreement), Secured Party shall have the right
to verify any accounts in the name of Debtor or in Secured Party’s own name; and
Debtor, whenever requested, shall furnish Secured Party with duplicate
statements of the accounts, which statements may be mailed or delivered by
Secured Party for that purpose.  Whether or not Secured Party exercises its
rights under Section 3 of this Security Agreement, Secured Party may at any time
(whether before or after the occurrence of an Event of Default) notify any
account debtor or any other person obligated to pay any amount due, that such
chattel paper, account or other right to payment has been assigned or
transferred to Secured Party for security and shall be paid directly to Secured
Party.  If Secured Party so requests at any time (whether before or after the
occurrence of an Event of Default), Debtor will so notify such account debtors
and other obligors in writing and will indicate on all invoices to such account
debtors or other obligors that the amount due is payable directly to Secured
Party.  At any time after Secured Party or Debtor gives such notice to an
account debtor or other obligor, Secured Party may (but need not), in Secured
Party’s own name or in Debtor’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 chattel paper, account or other 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.

 

5.                                      Assignment of Insurance.  Debtor hereby
assigns to Secured Party (for the ratable benefit of the Senior Lenders), as
additional security for the payment of the Obligations, any and all moneys
(including but not limited to proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of Debtor under or
with respect to, any and all policies of insurance covering the Collateral, and
Debtor hereby directs the issuer of any such policy to pay any such moneys
directly to Secured Party.  Both before and after the occurrence of an Event of
Default, Secured Party may (but need not), in Secured Party’s own name or in
Debtor’s name, execute and deliver proofs of claim, receive all such moneys,
endorse checks and other instruments representing payment of such moneys, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.  Notwithstanding the foregoing, Debtor shall be entitled to use any such
insurance proceeds to repair or replace any Collateral so long as no Unmatured
Event of Default (as defined in the Credit Agreement), Default (as defined in
the Note Agreement) or Event of Default then exists.

 

6.                                      Right to Offset.  Nothing in this
Security Agreement shall be deemed a waiver or prohibition of Secured Party’s
right of banker’s lien, offset, or counterclaim, which right Debtor hereby
grants to Secured Party.

 

7.                                      Events of Default.  The occurrence of
(i) any Event of Default, as defined in the Credit Agreement or (ii) any Event
of Default, as defined in the Note Agreement, shall constitute an Event of
Default hereunder.

 

8.                                      Remedies Upon Event of Default.  If any
Event of Default shall have occurred and be continuing:

 

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(a)                                 The Secured Party may exercise in respect of
the Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC in effect at that time (whether or not the UCC then
applies to the affected Collateral), and may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any exchange, broker’s board or at any of the Secured
Party’s offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Secured Party may reasonably believe are
commercially reasonable.  The Debtor agrees that, to the extent notice of sale
shall be required by law, at least ten days’ prior notice to the Debtor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification.  The Secured Party shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given.  The Secured Party may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.  The Debtor hereby waives all requirements of law, if any, relating
to the marshalling of assets which would be applicable in connection with the
enforcement by the Secured Party of its remedies hereunder, absent this waiver.

 

(b)                                 The Secured Party may notify any Person
obligated on any of the Collateral that the same has been assigned or
transferred to the Secured Party (for the ratable benefit of the Senior Lenders)
and that the same should be performed as requested by, or paid directly to, the
Secured Party, as the case may be.  The Debtor shall join in giving such notice,
if the Secured Party so requests.  The Secured Party may, in the Secured Party’s
name or in the Debtor’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
Collateral or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligation of any such
Person.

 

(c)                                  Any cash held by the Secured Party as
Collateral (for the ratable benefit of the Senior Lenders) and all cash proceeds
received by the Secured Party in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of the Secured Party, be held by the Secured Party as Collateral (for the
ratable benefit of the Senior Lenders) for, or then or at any time thereafter be
applied in whole or in part by the Secured Party against, all or any part of the
Obligations (including any expenses of the Secured Party).

 

9.                                      Other Personal Property.  If at the time
Secured Party takes possession of any tangible Collateral, any goods, papers or
other properties of Debtor, not affixed to or constituting a part of such
Collateral, are located or to be found upon or within such Collateral, Debtor
agrees to notify Secured Party in writing of that fact, describing the property
so located or to be found, within 7 calendar days after the date on which
Secured Party took possession. Unless and until Secured Party receives such
notice from Debtor, Secured Party shall not be responsible or liable to Debtor
for any action taken or omitted by or on behalf of Secured Party with respect to
such property without actual knowledge of the existence of any such property or
without actual knowledge of the fact that it was located or to be found upon
such Collateral.

 

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10.                               Amendment; Waivers.  This Security Agreement
can be waived, modified, amended, terminated or discharged, and the Security
Interest can be released, only explicitly in a writing signed by Secured Party,
pursuant to Section 2(e) of the Intercreditor Agreement, and Debtor.  A waiver
shall be effective only in the specific instance and for the specific purpose
given.  Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party’s rights or remedies.

 

11.                               Notices.  All notices hereunder shall be in
writing (including facsimile transmission) and shall be sent to the applicable
party at its address shown on the signature page hereto or at such other address
as such party may, by written notice received by the other parties, have
designated as its address for such purpose.  Notices sent by facsimile
transmission shall be deemed to have been given when sent; notices sent by mail
shall be deemed to have been given three Business Days (as defined in the Credit
Agreement as in effect on the date hereof) after the date when sent by
registered or certified mail, postage prepaid; and notices sent by hand delivery
or overnight courier service shall be deemed to have been given when received.

 

12.                               Miscellaneous.  Secured Party’s duty of care
with respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled if Secured Party exercises reasonable care in physically safekeeping
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 Secured Party need not otherwise preserve,
protect, insure or care for any Collateral.  Secured Party shall not be
obligated to preserve any rights Debtor 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 Collateral in any particular order of application. 
This Security Agreement shall be binding upon and inure to the benefit of Debtor
and Secured Party and their respective representatives, successors and assigns
and shall take effect when signed by Debtor and delivered to Secured Party, and
Debtor waives notice of Secured Party’s acceptance hereof.  This Security
Agreement shall be governed by the internal laws of the State of Minnesota,
without giving effect to the conflicts of laws principles thereof.

 

13.                               Consent to Jurisdiction.  AT THE OPTION OF THE
SECURED PARTY, THIS SECURITY AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE DEBTOR
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT.  IN THE EVENT THE DEBTOR COMMENCES
ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS SECURITY
AGREEMENT, THE SECURED PARTY AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH
TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.

 

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14.                               Waiver of Jury Trial.  EACH OF THE DEBTOR AND
THE SECURED PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

 

15.                               Assignment of Security Interest.  Pursuant to
the terms of the Intercreditor Agreement, the Bank Agent hereby assigns all
rights under, and its security interest granted to it by, the Original Security
Agreement to the Secured Party, in accordance with the terms of this Security
Agreement.  Debtor hereby acknowledges and agrees to such assignment.

 

16.                               Amendment and Restatement.  This Security
Agreement amends and restates all of the terms and conditions of the Original
Security Agreement and nothing contained herein shall be construed as a novation
thereof.

 

(The signature page follows.)

 

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THE PARTIES have executed this Security Agreement as of the day and year first
above written.

 

Secured Party (as Collateral Agent for the ratable benefit of the Senior
Lenders):

THE PRIVATEBANK AND TRUST COMPANY

 

 

 

 

 

 

 

By:

/s/ Adam F. Oliver

 

Name:

Adam F. Oliver

 

Title:

Officer

 

 

Address for Secured Party:

 

The PrivateBank and Trust Company

 

50 South Sixth Street, Suite 1400

 

Minneapolis, MN 55402

 

Attn: Managing Director

 

Facsimile: 612-333-1391

 

 

 

Bank Agent:

THE PRIVATEBANK AND TRUST COMPANY

 

 

 

 

 

By:

/s/ Adam F. Oliver

 

Name:

Adam F. Oliver

 

Title:

Officer

 

 

Address for Bank Agent:

 

The PrivateBank and Trust Company

 

50 South Sixth Street, Suite 1400

 

Minneapolis, MN 55402

 

Attn: Managing Director

 

Facsimile: 612-333-1391

 

 

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Debtor:

WIRTH BUSINESS CREDIT, INC.

 

 

 

 

 

By:

/s/ Brett D. Heffes

 

Name:

Brett D. Heffes

 

Title:

Treasurer

 

 

 

 

Address for Debtor:

 

605 Highway 169 North

 

Suite 400

 

Minneapolis, MN 55441

 

Attention: Chief Financial Officer

 

 

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Exhibit A

 

Location of Collateral

 

Chief Place of

Business and

Collateral Location:                                   605 Highway 169 North,
Suite 400

Minneapolis, MN 55441

 

Collateral Location:                                   222 East Carrillo Street,
Suite 209

Santa Barbara, CA 93101

 

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AMENDED AND RESTATED SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED SECURITY AGREEMENT dated as of May 14, 2015 (this
“Security Agreement”), is by and between WINMARK CAPITAL CORPORATION, a
Minnesota corporation (the “Debtor”), and THE PRIVATEBANK AND TRUST COMPANY, an
Illinois bank and trust company, in its capacity as collateral agent for the
Senior Lenders (as defined in the Intercreditor Agreement defined below) (the
“Secured Party”).

 

RECITALS:

 

A.                                    The Debtor, The PrivateBank and Trust
Company, in its capacity as Agent thereunder (in such capacity, the “Bank
Agent”) and certain other persons are parties to that certain Credit Agreement,
dated as of July 13, 2010 (as amended to the date hereof and as it may be
further amended, modified, supplemented, restated or replaced from time to time,
the “Credit Agreement”), pursuant to which the Lenders from time to time party
thereto (collectively, the “Bank Lenders”) have provided and will continue to
provide financial accommodations to the Debtor and the other Loan Parties (as
defined in the Credit Agreement).

 

B.                                    The Debtor has entered into that certain
Security Agreement, dated as of July 13, 2010 (as amended, modified or
supplemented from time to time prior to the date hereof, the “Original Security
Agreement”) in favor of the Bank Agent.

 

C.                                    The Debtor, the other Issuers (as defined
in the Note Agreement), and the Purchasers named in the Purchaser Schedule
attached thereto (the “Purchasers” and, together with the holders of the Senior
Secured Notes (as defined below) from time to time, the “Noteholders”) are
parties to that certain Note Agreement, dated as of the date hereof (as it may
be amended, modified, supplemented, restated or replaced from time to time, the
“Note Agreement”) pursuant to which the Purchasers are purchasing the Issuers’
senior secured promissory notes in the aggregate principal amount of $25,000,000
on the date hereof (the “Senior Secured Notes”).

 

D.                                    Pursuant to that certain Intercreditor and
Collateral Agency Agreement, dated as of the date hereof (the “Intercreditor
Agreement”), by and between the Secured Party, the Bank Agent, the Bank Lenders
and the Noteholders, the Secured Party shall, among other things, be appointed
as collateral agent in respect of the Collateral described herein for the
benefit of the Senior Lenders.

 

E.                                     The Debtor will benefit from (i) the
continued financial accommodations provided by the Bank Lenders to the Loan
Parties and (ii) the Issuers’ issuance and sale of the Senior Secured Notes to
the Purchasers, and the Debtor finds it advantageous, desirable and in the
Debtor’s best interests to execute and deliver this Security Agreement and grant
to the Secured Party (for the ratable benefit of the Senior Lenders) a security
interest in all of the Debtor’s property, all as provided herein.

 

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F.                                      The Debtor and Secured Party desire to
amend and restate the Original Security Agreement on the terms and conditions
set forth herein.

 

AGREEMENTS:

 

IN CONSIDERATION of one dollar and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

1.                                      Grant of Security Interest and
Collateral.  In order to secure payment and performance of the Senior
Indebtedness (as defined in the Intercreditor Agreement; all such Senior
Indebtedness is herein collectively referred to as the “Obligations”), Debtor
hereby grants the Secured Party (for the ratable benefit of the Senior Lenders)
a security interest (the “Security Interest”) in all of Debtor’s property (the
“Collateral”), including without limitation the following:

 

(a)                                 Inventory and Goods:  All inventory of
Debtor, whether now owned or hereafter acquired and wherever located and other
tangible personal property held for sale or lease or furnished or to be
furnished under contracts of service or consumed in Debtor’s business, and all
goods of Debtor, whether now owned or hereafter acquired and wherever located,
including without limitation all computer programs embedded in goods, and all
other Inventory and Goods, as each such term may be defined in the Uniform
Commercial Code as in effect in the state of Minnesota from time to time (the
“UCC”), of the Debtor, whether now owned or hereafter acquired;

 

(b)                                 Equipment:  All equipment of Debtor, whether
now owned or hereafter acquired and wherever located, including but not limited
to all present and future equipment, machinery, tools, motor vehicles, trade
fixtures, furniture, furnishings, office and recordkeeping equipment and all
goods for use in Debtor’s business, and all other Equipment (as such term may be
defined in the UCC) of the Debtor, whether now owned or hereafter acquired,
together with all parts, equipment and attachments relating to any of the
foregoing;

 

(c)                                  Accounts, Contract Rights and Other Rights
to Payment:  Each and every right of Debtor to the payment of money, whether
such right to payment now exists or hereafter arises, whether such right to
payment arises out of a sale, lease, license, assignment or other disposition of
goods or other property by Debtor, out of a rendering of services by Debtor, out
of a loan by Debtor, out of the overpayment of taxes or other liabilities of
Debtor, or otherwise arises under any contract or agreement, whether such right
to payment is or is not already earned by performance, and howsoever such right
to payment may be evidenced, together with all other rights and interests
(including all liens and security interests) which Debtor may at any time have
by law or agreement against any account debtor or other obligor obligated to
make any such payment or against any of the property of such account debtor or
other obligor; all including but not limited to all present and future debt
instruments, chattel papers, accounts, license fees, contract rights, loans and
obligations receivable and tax refunds, and all other Accounts (as such term may
be defined in the UCC) of the Debtor, whether now owned or hereafter acquired;

 

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(d)                                 Instruments:  All instruments, chattel
paper, letters of credit or other documents of Debtor, whether now owned or
hereafter acquired, including but not limited to promissory notes, drafts, bills
of exchange and trade acceptances; all rights and interests of Debtor, whether
now existing or hereafter created or arising, under leases, licenses or other
contracts, and all other Instruments (as such term may be defined in the UCC) of
the Debtor, whether now owned or hereafter acquired;

 

(e)                                  Deposit Accounts and Investment Property: 
All right, title and interest of Debtor in all deposit and investment accounts
maintained with any bank, savings and loan association, broker, brokerage, or
any other financial institution, together with all monies and other property
deposited or held therein, including, without limitation, any checking account,
savings account, escrow account, savings certificate and margin account, and all
securities, whether certificated or uncertificated, security entitlements,
securities accounts, commodity contracts, and commodity accounts, and all other
Deposit Accounts and Investment Property (as each such term may be defined in
the UCC) of the Debtor, whether now owned or hereafter acquired;

 

(f)                                   General Intangibles:  All general
intangibles of Debtor, whether now owned or hereafter acquired, including, but
not limited to, applications for patents, patents, copyrights, trademarks, trade
secrets, good will, tradenames, customer lists, permits and franchises,
software, and the right to use Debtor’s name, and any and all membership
interests, governance rights, and financial rights in each and every limited
liability company, and all payment intangibles, and all other General
Intangibles (as such term may be defined in the UCC) of the Debtor, whether now
owned or hereafter acquired;

 

(g)                                  Chattel Paper:  All Chattel Paper (as such
term may be defined in the UCC) of the Debtor, whether tangible or electronic,
and whether now owned or hereafter acquired; and

 

(h)                                 Documents, Embedded Software, Etc.:  All of
Debtor’s rights in promissory notes, documents, embedded software, letter of
credit rights and supporting obligations (and security interests and liens
securing them) (as any such term may be defined in the UCC) whether now owned or
hereafter acquired;

 

together with all substitutions and replacements for and products of any of the
foregoing property and proceeds of any and all of the foregoing property and, in
the case of all tangible Collateral, together with (i) all accessories,
attachments, parts, equipment, accessions, repairs and embedded software, now or
hereafter attached or affixed to or used in connection with any such goods,
(ii) all warehouse receipts, bills of lading and other documents of title now or
hereafter covering such goods, and (iii) all books and records of Debtor.

 

2.                                      Representations, Warranties and
Agreements.  Debtor represents, warrants and agrees that:

 

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(a)                                 Debtor is a corporation duly organized,
validly existing and in good standing under the laws of the state of Minnesota. 
This Security Agreement has been duly and validly authorized by all necessary
corporate action.  Debtor has the requisite corporate power and authority to
execute this Security Agreement, to perform Debtor’s obligations hereunder and
to subject the Collateral to the Security Interest.  Debtor’s organizational
charter number is 854020-6.

 

(b)                                 The Collateral will be used primarily for
business purposes.

 

(c)                                  Debtor’s chief place of business is located
at the address on Exhibit A attached hereto.  Debtor’s records concerning the
Collateral are kept at such address.  The Collateral is located at the addresses
set forth on Exhibit A attached hereto.  Debtor will give at least 30 days’
advance written notice to Secured Party of any change in Debtor’s name or
jurisdiction of organization or chief place of business and any change in or
addition of any Collateral location or any change in the location of Debtor’s
records concerning the Collateral.

 

(d)                                 Debtor has (or will have at the time Debtor
acquires rights in Collateral hereafter arising) and will maintain absolute
title to each item of Collateral free and clear of all security interests, liens
and encumbrances, except the Security Interest (and the Liens permitted by the
Credit Agreement and the Note Agreement), and will defend the Collateral against
all claims or demands of all persons other than Secured Party (and the holders
of Liens permitted by the Credit Agreement and the Note Agreement).

 

(e)                                  Except as otherwise permitted in the Credit
Agreement and Note Agreement, Debtor will not sell or otherwise transfer or
dispose of the Collateral or any interest therein.

 

(f)                                   Debtor will not permit any tangible
Collateral to be located in any state (and, if a county filing is required, in
any county) in which a financing statement covering such Collateral is required
to be, but has not in fact been, filed.

 

(g)                                  All rights to payment and all instruments,
documents, chattel papers and other agreements constituting or evidencing
Collateral are (or will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, set-off or counterclaim
(other than those arising in the ordinary course of business) of each account
debtor or other obligor named therein or in Debtor’s records pertaining thereto
as being obligated to pay such obligation.  Debtor will not agree to any
modification, amendment or cancellation of any such obligation without Secured
Party’s prior written consent except discounts provided by Debtor in the
ordinary course of business, and will not subordinate any such right to payment
to claims of other creditors of such account debtor or other obligor.

 

(h)                                 Debtor will keep all tangible Collateral in
good repair, working order and condition, normal depreciation excepted, and
will, from time to time, replace any worn, broken or defective parts thereof.

 

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(i)                                     Except as otherwise provided in the
Credit Agreement and the Note Agreement, Debtor will promptly pay all taxes and
other governmental charges levied or assessed upon or against any Collateral or
upon or against the creation, perfection or continuance of the Security
Interest.

 

(j)                                    Debtor will promptly notify Secured Party
of any material loss of or damage to any Collateral or of any adverse change in
the prospect of payment of any material sums due on or under any instrument,
chattel paper, account or contract right constituting Collateral.

 

(k)                                 Debtor will, if Secured Party at any time so
requests (whether the request is made before or after the occurrence of an Event
of Default), promptly deliver to Secured Party any instrument, document or
chattel paper constituting Collateral, duly endorsed or assigned by Debtor to
Secured Party.

 

(l)                                     Debtor will at all times keep all
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, and such other risks and in such amounts as Secured Party may
reasonably request, with any loss payable to Secured Party to the extent of its
interest.

 

(m)                             Debtor hereby authorizes the filing of such
financing statements (including, without limitation, any amendments thereto) as
Secured Party may deem necessary or useful to be filed in order to perfect the
Security Interest and, if any Collateral is covered by a certificate of title,
Debtor will from time to time execute such documents as may be required to have
the Security Interest properly noted on a certificate of title.  In addition,
Debtor authorizes Secured Party to file from time to time such financing
statements against the Collateral described as “all personal property” or “all
assets” or the like as Secured Party deems necessary or useful to perfect the
Security Interest.

 

(n)                                 Debtor will pay when due or reimburse
Secured Party on demand for all costs of collection of any of the Obligations
and all other out-of-pocket expenses (including in each case all reasonable
attorneys’ fees) incurred by Secured Party in connection with the creation,
perfection, satisfaction or enforcement of the Security Interest or the
execution or creation, continuance or enforcement of this Security Agreement or
any or all of the Obligations.

 

(o)                                 Debtor will take all such actions as Secured
Party may reasonably request to permit the Secured Party to establish, perfect
and protect the Security Interest in all jurisdictions Secured Party deems
necessary.  Without in any way limiting the generality of the foregoing, Debtor
will execute, deliver or endorse any and all instruments, documents,
assignments, security agreements and other agreements and writings which Secured
Party may at any time reasonably request in order to secure, protect, perfect or
enforce the Security Interest and Secured Party’s rights under this Security
Agreement.

 

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(p)                                 Debtor will not use or keep any Collateral,
or permit it to be used or kept, for any unlawful purpose or in violation of any
federal, state or local law, statute or ordinance.

 

If Debtor at any time fails to perform or observe any of the foregoing
agreements, immediately upon the occurrence of such failure, without notice or
lapse of time, Secured Party may (but need not) perform or observe such
agreement on behalf and in the name, place and stead of Debtor (or, at Secured
Party’s option, in Secured Party’s own name) and may (but need not) take any and
all other actions which Secured Party may reasonably deem necessary to cure or
correct such failure (including, without limitation, the payment of taxes, the
satisfaction of security interests, liens, or encumbrances, the performance of
obligations under contracts or agreements with account debtors or other
obligors, the procurement and maintenance of insurance, the execution of
financing statements, the endorsement of instruments, and the procurement of
repairs, transportation or insurance); and, except to the extent that the effect
of such payment would be to render any loan or forbearance of money usurious or
otherwise illegal under any applicable law, Debtor shall thereupon pay Secured
Party on demand the amount of all moneys expended and all costs and expenses
(including reasonable attorneys’ fees) incurred by Secured Party in connection
with or as a result of Secured Party’s performing or observing such agreements
or taking such actions, together with interest thereon from the date expended or
incurred by Secured Party at the highest rate then applicable to any of the
Obligations.  To facilitate the performance or observance by Secured Party of
such agreements of Debtor, Debtor hereby irrevocably appoints (which appointment
is coupled with an interest) Secured Party, or its delegate, as the
attorney-in-fact of Debtor 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 Debtor, any and all instruments, documents, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by Debtor under this Section 2.

 

3.                                      Lock Box; Collateral Account.  If
Secured Party so requests at any time after the occurrence of an Event of
Default (as defined in Section 7 of this Security Agreement), Debtor will direct
each of its account debtors to make payments due under the relevant account or
chattel paper directly to a special lock box to be under the control of Secured
Party (the “Lock Box”).  Debtor hereby authorizes and directs Secured Party to
deposit into a special collateral account to be established and maintained with
Secured Party (the “Collateral Account”) all checks, drafts, and cash payments
received in the Lock Box.  All deposits in the Collateral Account shall
constitute proceeds of Collateral and shall not constitute payment of any
Obligation.  At its option, Secured Party shall, at any time, apply finally
collected funds on deposit in the Collateral Account to the payment of the
Obligations in such order of application as Secured Party may determine, or
permit Debtor to withdraw all or any part of the balance.  If a Lock Box is so
established, Debtor agrees that it will promptly deliver to Secured Party, for
deposit into the Lock Box, all payments on accounts and chattel paper received
by it.  All such payments shall be delivered to Secured Party in the form
received (except for Debtor’s endorsement where necessary).  Until so deposited,
all such payments on accounts and chattel paper received by Debtor shall be held
in trust by Debtor for and as the property of Secured Party and shall not be
commingled with any funds or property of Debtor.

 

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4.                                      Account Verification and Collection
Rights of Secured Party.  At any time after the occurrence of any Event of
Default, Unmatured Event of Default (as defined in the Credit Agreement) or
Default (as defined in the Note Agreement), Secured Party shall have the right
to verify any accounts in the name of Debtor or in Secured Party’s own name; and
Debtor, whenever requested, shall furnish Secured Party with duplicate
statements of the accounts, which statements may be mailed or delivered by
Secured Party for that purpose.  Whether or not Secured Party exercises its
rights under Section 3 of this Security Agreement, Secured Party may at any time
(whether before or after the occurrence of an Event of Default) notify any
account debtor or any other person obligated to pay any amount due, that such
chattel paper, account or other right to payment has been assigned or
transferred to Secured Party for security and shall be paid directly to Secured
Party.  If Secured Party so requests at any time (whether before or after the
occurrence of an Event of Default), Debtor will so notify such account debtors
and other obligors in writing and will indicate on all invoices to such account
debtors or other obligors that the amount due is payable directly to Secured
Party.  At any time after Secured Party or Debtor gives such notice to an
account debtor or other obligor, Secured Party may (but need not), in Secured
Party’s own name or in Debtor’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 chattel paper, account or other 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.

 

5.                                      Assignment of Insurance.  Debtor hereby
assigns to Secured Party (for the ratable benefit of the Senior Lenders), as
additional security for the payment of the Obligations, any and all moneys
(including but not limited to proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of Debtor under or
with respect to, any and all policies of insurance covering the Collateral, and
Debtor hereby directs the issuer of any such policy to pay any such moneys
directly to Secured Party.  Both before and after the occurrence of an Event of
Default, Secured Party may (but need not), in Secured Party’s own name or in
Debtor’s name, execute and deliver proofs of claim, receive all such moneys,
endorse checks and other instruments representing payment of such moneys, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.  Notwithstanding the foregoing, Debtor shall be entitled to use any such
insurance proceeds to repair or replace any Collateral so long as no Unmatured
Event of Default (as defined in the Credit Agreement), Default (as defined in
the Note Agreement) or Event of Default then exists.

 

6.                                      Right to Offset.  Nothing in this
Security Agreement shall be deemed a waiver or prohibition of Secured Party’s
right of banker’s lien, offset, or counterclaim, which right Debtor hereby
grants to Secured Party.

 

7.                                      Events of Default.  The occurrence of
(i) any Event of Default, as defined in the Credit Agreement or (ii) any Event
of Default, as defined in the Note Agreement, shall constitute an Event of
Default hereunder.

 

8.                                      Remedies Upon Event of Default.  If any
Event of Default shall have occurred and be continuing:

 

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(a)                                 The Secured Party may exercise in respect of
the Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC in effect at that time (whether or not the UCC then
applies to the affected Collateral), and may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any exchange, broker’s board or at any of the Secured
Party’s offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Secured Party may reasonably believe are
commercially reasonable.  The Debtor agrees that, to the extent notice of sale
shall be required by law, at least ten days’ prior notice to the Debtor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification.  The Secured Party shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given.  The Secured Party may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.  The Debtor hereby waives all requirements of law, if any, relating
to the marshalling of assets which would be applicable in connection with the
enforcement by the Secured Party of its remedies hereunder, absent this waiver.

 

(b)                                 The Secured Party may notify any Person
obligated on any of the Collateral that the same has been assigned or
transferred to the Secured Party (for the ratable benefit of the Senior Lenders)
and that the same should be performed as requested by, or paid directly to, the
Secured Party, as the case may be.  The Debtor shall join in giving such notice,
if the Secured Party so requests.  The Secured Party may, in the Secured Party’s
name or in the Debtor’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
Collateral or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligation of any such
Person.

 

(c)                                  Any cash held by the Secured Party as
Collateral (for the ratable benefit of the Senior Lenders) and all cash proceeds
received by the Secured Party in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of the Secured Party, be held by the Secured Party as Collateral (for the
ratable benefit of the Senior Lenders) for, or then or at any time thereafter be
applied in whole or in part by the Secured Party against, all or any part of the
Obligations (including any expenses of the Secured Party).

 

9.                                      Other Personal Property.  If at the time
Secured Party takes possession of any tangible Collateral, any goods, papers or
other properties of Debtor, not affixed to or constituting a part of such
Collateral, are located or to be found upon or within such Collateral, Debtor
agrees to notify Secured Party in writing of that fact, describing the property
so located or to be found, within 7 calendar days after the date on which
Secured Party took possession. Unless and until Secured Party receives such
notice from Debtor, Secured Party shall not be responsible or liable to Debtor
for any action taken or omitted by or on behalf of Secured Party with respect to
such property without actual knowledge of the existence of any such property or
without actual knowledge of the fact that it was located or to be found upon
such Collateral.

 

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10.                               Amendment; Waivers.  This Security Agreement
can be waived, modified, amended, terminated or discharged, and the Security
Interest can be released, only explicitly in a writing signed by Secured Party,
pursuant to Section 2(e) of the Intercreditor Agreement, and Debtor.  A waiver
shall be effective only in the specific instance and for the specific purpose
given.  Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party’s rights or remedies.

 

11.                               Notices.  All notices hereunder shall be in
writing (including facsimile transmission) and shall be sent to the applicable
party at its address shown on the signature page hereto or at such other address
as such party may, by written notice received by the other parties, have
designated as its address for such purpose.  Notices sent by facsimile
transmission shall be deemed to have been given when sent; notices sent by mail
shall be deemed to have been given three Business Days (as defined in the Credit
Agreement as in effect on the date hereof) after the date when sent by
registered or certified mail, postage prepaid; and notices sent by hand delivery
or overnight courier service shall be deemed to have been given when received.

 

12.                               Miscellaneous.  Secured Party’s duty of care
with respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled if Secured Party exercises reasonable care in physically safekeeping
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 Secured Party need not otherwise preserve,
protect, insure or care for any Collateral.  Secured Party shall not be
obligated to preserve any rights Debtor 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 Collateral in any particular order of application. 
This Security Agreement shall be binding upon and inure to the benefit of Debtor
and Secured Party and their respective representatives, successors and assigns
and shall take effect when signed by Debtor and delivered to Secured Party, and
Debtor waives notice of Secured Party’s acceptance hereof.  This Security
Agreement shall be governed by the internal laws of the State of Minnesota,
without giving effect to the conflicts of laws principles thereof.

 

13.                               Consent to Jurisdiction.  AT THE OPTION OF THE
SECURED PARTY, THIS SECURITY AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE DEBTOR
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT.  IN THE EVENT THE DEBTOR COMMENCES
ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS SECURITY
AGREEMENT, THE SECURED PARTY AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH
TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.

 

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14.                               Waiver of Jury Trial.  EACH OF THE DEBTOR AND
THE SECURED PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

 

15.                               Assignment of Security Interest.  Pursuant to
the terms of the Intercreditor Agreement, the Bank Agent hereby assigns all
rights under, and its security interest granted to it by, the Original Security
Agreement to the Secured Party, in accordance with the terms of this Security
Agreement.  Debtor hereby acknowledges and agrees to such assignment.

 

16.                               Amendment and Restatement.  This Security
Agreement amends and restates all of the terms and conditions of the Original
Security Agreement and nothing contained herein shall be construed as a novation
thereof.

 

(The signature page follows.)

 

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THE PARTIES have executed this Security Agreement as of the day and year first
above written.

 

Secured Party (as Collateral Agent for the ratable benefit of the Senior
Lenders):

 

THE PRIVATEBANK AND TRUST COMPANY

 

 

 

 

 

By:

/s/ Adam F. Oliver

 

Name:

Adam F. Oliver

 

Title:

Officer

 

 

Address for Secured Party:

 

The PrivateBank and Trust Company

 

50 South Sixth Street, Suite 1400

 

Minneapolis, MN 55402

 

Attn: Managing Director

 

Facsimile: 612-333-1391

 

 

 

Bank Agent:

THE PRIVATEBANK AND TRUST COMPANY

 

 

 

 

 

By:

/s/ Adam F. Oliver

 

Name:

Adam F. Oliver

 

Title:

Officer

 

 

Address for Bank Agent:

 

The PrivateBank and Trust Company

 

50 South Sixth Street, Suite 1400

 

Minneapolis, MN 55402

 

Attn: Managing Director

 

Facsimile: 612-333-1391

 

 

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Debtor:

WINMARK CAPITAL CORPORATION

 

 

 

 

 

By:

/s/ Brett D. Heffes

 

Name:

Brett D. Heffes

 

Title:

Chief Financial Officer and Treasurer

 

 

Address for Debtor:

 

605 Highway 169 North

 

Suite 400

 

Minneapolis, MN 55441

 

Attention:  Chief Financial Officer

 

 

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Exhibit A

 

Location of Collateral

 

Chief Place of
Business and
Collateral Location:                                   605 Highway 169 North,
Suite 400

Minneapolis, MN 55441

 

Collateral Location:                                   222 East Carrillo Street,
Suite 209

Santa Barbara, CA 93101

 

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AMENDED AND RESTATED SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED SECURITY AGREEMENT dated as of May 14, 2015 (this
“Security Agreement”), is by and between GROW BIZ GAMES, INC., a Minnesota
corporation (the “Debtor”), and THE PRIVATEBANK AND TRUST COMPANY, an Illinois
bank and trust company, in its capacity as collateral agent for the Senior
Lenders (as defined in the Intercreditor Agreement defined below) (the “Secured
Party”).

 

RECITALS:

 

A.                                    The Debtor, The PrivateBank and Trust
Company, in its capacity as Agent thereunder (in such capacity, the “Bank
Agent”) and certain other persons are parties to that certain Credit Agreement,
dated as of July 13, 2010 (as amended to the date hereof and as it may be
further amended, modified, supplemented, restated or replaced from time to time,
the “Credit Agreement”), pursuant to which the Lenders from time to time party
thereto (collectively, the “Bank Lenders”) have provided and will continue to
provide financial accommodations to the Debtor and the other Loan Parties (as
defined in the Credit Agreement).

 

B.                                    The Debtor has entered into that certain
Security Agreement, dated as of July 13, 2010 (as amended, modified or
supplemented from time to time prior to the date hereof, the “Original Security
Agreement”) in favor of the Bank Agent.

 

C.                                    The Debtor, the other Issuers (as defined
in the Note Agreement), and the Purchasers named in the Purchaser Schedule
attached thereto (the “Purchasers” and, together with the holders of the Senior
Secured Notes (as defined below) from time to time, the “Noteholders”) are
parties to that certain Note Agreement, dated as of the date hereof (as it may
be amended, modified, supplemented, restated or replaced from time to time, the
“Note Agreement”) pursuant to which the Purchasers are purchasing the Issuers’
senior secured promissory notes in the aggregate principal amount of $25,000,000
on the date hereof (the “Senior Secured Notes”).

 

D.                                    Pursuant to that certain Intercreditor and
Collateral Agency Agreement, dated as of the date hereof (the “Intercreditor
Agreement”), by and between the Secured Party, the Bank Agent, the Bank Lenders
and the Noteholders, the Secured Party shall, among other things, be appointed
as collateral agent in respect of the Collateral described herein for the
benefit of the Senior Lenders.

 

E.                                     The Debtor will benefit from (i) the
continued financial accommodations provided by the Bank Lenders to the Loan
Parties and (ii) the Issuers’ issuance and sale of the Senior Secured Notes to
the Purchasers, and the Debtor finds it advantageous, desirable and in the
Debtor’s best interests to execute and deliver this Security Agreement and grant
to the Secured Party (for the ratable benefit of the Senior Lenders) a security
interest in all of the Debtor’s property, all as provided herein.

 

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F.                                      The Debtor and Secured Party desire to
amend and restate the Original Security Agreement on the terms and conditions
set forth herein.

 

AGREEMENTS:

 

IN CONSIDERATION of one dollar and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

1.                                      Grant of Security Interest and
Collateral.  In order to secure payment and performance of the Senior
Indebtedness (as defined in the Intercreditor Agreement; all such Senior
Indebtedness is herein collectively referred to as the “Obligations”), Debtor
hereby grants the Secured Party (for the ratable benefit of the Senior Lenders)
a security interest (the “Security Interest”) in all of Debtor’s property (the
“Collateral”), including without limitation the following:

 

(a)                                 Inventory and Goods:  All inventory of
Debtor, whether now owned or hereafter acquired and wherever located and other
tangible personal property held for sale or lease or furnished or to be
furnished under contracts of service or consumed in Debtor’s business, and all
goods of Debtor, whether now owned or hereafter acquired and wherever located,
including without limitation all computer programs embedded in goods, and all
other Inventory and Goods, as each such term may be defined in the Uniform
Commercial Code as in effect in the state of Minnesota from time to time (the
“UCC”), of the Debtor, whether now owned or hereafter acquired;

 

(b)                                 Equipment:  All equipment of Debtor, whether
now owned or hereafter acquired and wherever located, including but not limited
to all present and future equipment, machinery, tools, motor vehicles, trade
fixtures, furniture, furnishings, office and recordkeeping equipment and all
goods for use in Debtor’s business, and all other Equipment (as such term may be
defined in the UCC) of the Debtor, whether now owned or hereafter acquired,
together with all parts, equipment and attachments relating to any of the
foregoing;

 

(c)                                  Accounts, Contract Rights and Other Rights
to Payment:  Each and every right of Debtor to the payment of money, whether
such right to payment now exists or hereafter arises, whether such right to
payment arises out of a sale, lease, license, assignment or other disposition of
goods or other property by Debtor, out of a rendering of services by Debtor, out
of a loan by Debtor, out of the overpayment of taxes or other liabilities of
Debtor, or otherwise arises under any contract or agreement, whether such right
to payment is or is not already earned by performance, and howsoever such right
to payment may be evidenced, together with all other rights and interests
(including all liens and security interests) which Debtor may at any time have
by law or agreement against any account debtor or other obligor obligated to
make any such payment or against any of the property of such account debtor or
other obligor; all including but not limited to all present and future debt
instruments, chattel papers, accounts, license fees, contract rights, loans and
obligations receivable and tax refunds, and all other Accounts (as such term may
be defined in the UCC) of the Debtor, whether now owned or hereafter acquired;

 

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(d)                                 Instruments:  All instruments, chattel
paper, letters of credit or other documents of Debtor, whether now owned or
hereafter acquired, including but not limited to promissory notes, drafts, bills
of exchange and trade acceptances; all rights and interests of Debtor, whether
now existing or hereafter created or arising, under leases, licenses or other
contracts, and all other Instruments (as such term may be defined in the UCC) of
the Debtor, whether now owned or hereafter acquired;

 

(e)                                  Deposit Accounts and Investment Property: 
All right, title and interest of Debtor in all deposit and investment accounts
maintained with any bank, savings and loan association, broker, brokerage, or
any other financial institution, together with all monies and other property
deposited or held therein, including, without limitation, any checking account,
savings account, escrow account, savings certificate and margin account, and all
securities, whether certificated or uncertificated, security entitlements,
securities accounts, commodity contracts, and commodity accounts, and all other
Deposit Accounts and Investment Property (as each such term may be defined in
the UCC) of the Debtor, whether now owned or hereafter acquired;

 

(f)                                   General Intangibles:  All general
intangibles of Debtor, whether now owned or hereafter acquired, including, but
not limited to, applications for patents, patents, copyrights, trademarks, trade
secrets, good will, tradenames, customer lists, permits and franchises,
software, and the right to use Debtor’s name, and any and all membership
interests, governance rights, and financial rights in each and every limited
liability company, and all payment intangibles, and all other General
Intangibles (as such term may be defined in the UCC) of the Debtor, whether now
owned or hereafter acquired;

 

(g)                                  Chattel Paper:  All Chattel Paper (as such
term may be defined in the UCC) of the Debtor, whether tangible or electronic,
and whether now owned or hereafter acquired; and

 

(h)                                 Documents, Embedded Software, Etc.:  All of
Debtor’s rights in promissory notes, documents, embedded software, letter of
credit rights and supporting obligations (and security interests and liens
securing them) (as any such term may be defined in the UCC) whether now owned or
hereafter acquired;

 

together with all substitutions and replacements for and products of any of the
foregoing property and proceeds of any and all of the foregoing property and, in
the case of all tangible Collateral, together with (i) all accessories,
attachments, parts, equipment, accessions, repairs and embedded software, now or
hereafter attached or affixed to or used in connection with any such goods,
(ii) all warehouse receipts, bills of lading and other documents of title now or
hereafter covering such goods, and (iii) all books and records of Debtor.

 

2.                                      Representations, Warranties and
Agreements.  Debtor represents, warrants and agrees that:

 

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(a)                                 Debtor is a corporation duly organized,
validly existing and in good standing under the laws of the state of Minnesota. 
This Security Agreement has been duly and validly authorized by all necessary
corporate action.  Debtor has the requisite corporate power and authority to
execute this Security Agreement, to perform Debtor’s obligations hereunder and
to subject the Collateral to the Security Interest.  Debtor’s organizational
charter number is 9T-371.

 

(b)                                 The Collateral will be used primarily for
business purposes.

 

(c)                                  Debtor’s chief place of business is located
at the address on Exhibit A attached hereto.  Debtor’s records concerning the
Collateral are kept at such address.  The Collateral is located at the addresses
set forth on Exhibit A attached hereto.  Debtor will give at least 30 days’
advance written notice to Secured Party of any change in Debtor’s name or
jurisdiction of organization or chief place of business and any change in or
addition of any Collateral location or any change in the location of Debtor’s
records concerning the Collateral.

 

(d)                                 Debtor has (or will have at the time Debtor
acquires rights in Collateral hereafter arising) and will maintain absolute
title to each item of Collateral free and clear of all security interests, liens
and encumbrances, except the Security Interest (and the Liens permitted by the
Credit Agreement and the Note Agreement), and will defend the Collateral against
all claims or demands of all persons other than Secured Party (and the holders
of Liens permitted by the Credit Agreement and the Note Agreement).

 

(e)                                  Except as otherwise permitted in the Credit
Agreement and Note Agreement, Debtor will not sell or otherwise transfer or
dispose of the Collateral or any interest therein.

 

(f)                                   Debtor will not permit any tangible
Collateral to be located in any state (and, if a county filing is required, in
any county) in which a financing statement covering such Collateral is required
to be, but has not in fact been, filed.

 

(g)                                  All rights to payment and all instruments,
documents, chattel papers and other agreements constituting or evidencing
Collateral are (or will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, set-off or counterclaim
(other than those arising in the ordinary course of business) of each account
debtor or other obligor named therein or in Debtor’s records pertaining thereto
as being obligated to pay such obligation.  Debtor will not agree to any
modification, amendment or cancellation of any such obligation without Secured
Party’s prior written consent except discounts provided by Debtor in the
ordinary course of business, and will not subordinate any such right to payment
to claims of other creditors of such account debtor or other obligor.

 

(h)                                 Debtor will keep all tangible Collateral in
good repair, working order and condition, normal depreciation excepted, and
will, from time to time, replace any worn, broken or defective parts thereof.

 

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(i)                                     Except as otherwise provided in the
Credit Agreement and the Note Agreement, Debtor will promptly pay all taxes and
other governmental charges levied or assessed upon or against any Collateral or
upon or against the creation, perfection or continuance of the Security
Interest.

 

(j)                                    Debtor will promptly notify Secured Party
of any material loss of or damage to any Collateral or of any adverse change in
the prospect of payment of any material sums due on or under any instrument,
chattel paper, account or contract right constituting Collateral.

 

(k)                                 Debtor will, if Secured Party at any time so
requests (whether the request is made before or after the occurrence of an Event
of Default), promptly deliver to Secured Party any instrument, document or
chattel paper constituting Collateral, duly endorsed or assigned by Debtor to
Secured Party.

 

(l)                                     Debtor will at all times keep all
tangible Collateral insured against risks of fire (including so-called extended
coverage), theft, and such other risks and in such amounts as Secured Party may
reasonably request, with any loss payable to Secured Party to the extent of its
interest.

 

(m)                             Debtor hereby authorizes the filing of such
financing statements (including, without limitation, any amendments thereto) as
Secured Party may deem necessary or useful to be filed in order to perfect the
Security Interest and, if any Collateral is covered by a certificate of title,
Debtor will from time to time execute such documents as may be required to have
the Security Interest properly noted on a certificate of title.  In addition,
Debtor authorizes Secured Party to file from time to time such financing
statements against the Collateral described as “all personal property” or “all
assets” or the like as Secured Party deems necessary or useful to perfect the
Security Interest.

 

(n)                                 Debtor will pay when due or reimburse
Secured Party on demand for all costs of collection of any of the Obligations
and all other out-of-pocket expenses (including in each case all reasonable
attorneys’ fees) incurred by Secured Party in connection with the creation,
perfection, satisfaction or enforcement of the Security Interest or the
execution or creation, continuance or enforcement of this Security Agreement or
any or all of the Obligations.

 

(o)                                 Debtor will take all such actions as Secured
Party may reasonably request to permit the Secured Party to establish, perfect
and protect the Security Interest in all jurisdictions Secured Party deems
necessary.  Without in any way limiting the generality of the foregoing, Debtor
will execute, deliver or endorse any and all instruments, documents,
assignments, security agreements and other agreements and writings which Secured
Party may at any time reasonably request in order to secure, protect, perfect or
enforce the Security Interest and Secured Party’s rights under this Security
Agreement.

 

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(p)                                 Debtor will not use or keep any Collateral,
or permit it to be used or kept, for any unlawful purpose or in violation of any
federal, state or local law, statute or ordinance.

 

If Debtor at any time fails to perform or observe any of the foregoing
agreements, immediately upon the occurrence of such failure, without notice or
lapse of time, Secured Party may (but need not) perform or observe such
agreement on behalf and in the name, place and stead of Debtor (or, at Secured
Party’s option, in Secured Party’s own name) and may (but need not) take any and
all other actions which Secured Party may reasonably deem necessary to cure or
correct such failure (including, without limitation, the payment of taxes, the
satisfaction of security interests, liens, or encumbrances, the performance of
obligations under contracts or agreements with account debtors or other
obligors, the procurement and maintenance of insurance, the execution of
financing statements, the endorsement of instruments, and the procurement of
repairs, transportation or insurance); and, except to the extent that the effect
of such payment would be to render any loan or forbearance of money usurious or
otherwise illegal under any applicable law, Debtor shall thereupon pay Secured
Party on demand the amount of all moneys expended and all costs and expenses
(including reasonable attorneys’ fees) incurred by Secured Party in connection
with or as a result of Secured Party’s performing or observing such agreements
or taking such actions, together with interest thereon from the date expended or
incurred by Secured Party at the highest rate then applicable to any of the
Obligations.  To facilitate the performance or observance by Secured Party of
such agreements of Debtor, Debtor hereby irrevocably appoints (which appointment
is coupled with an interest) Secured Party, or its delegate, as the
attorney-in-fact of Debtor 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 Debtor, any and all instruments, documents, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by Debtor under this Section 2.

 

3.                                      Lock Box; Collateral Account.  If
Secured Party so requests at any time after the occurrence of an Event of
Default (as defined in Section 7 of this Security Agreement), Debtor will direct
each of its account debtors to make payments due under the relevant account or
chattel paper directly to a special lock box to be under the control of Secured
Party (the “Lock Box”).  Debtor hereby authorizes and directs Secured Party to
deposit into a special collateral account to be established and maintained with
Secured Party (the “Collateral Account”) all checks, drafts, and cash payments
received in the Lock Box.  All deposits in the Collateral Account shall
constitute proceeds of Collateral and shall not constitute payment of any
Obligation.  At its option, Secured Party shall, at any time, apply finally
collected funds on deposit in the Collateral Account to the payment of the
Obligations in such order of application as Secured Party may determine, or
permit Debtor to withdraw all or any part of the balance.  If a Lock Box is so
established, Debtor agrees that it will promptly deliver to Secured Party, for
deposit into the Lock Box, all payments on accounts and chattel paper received
by it.  All such payments shall be delivered to Secured Party in the form
received (except for Debtor’s endorsement where necessary).  Until so deposited,
all such payments on accounts and chattel paper received by Debtor shall be held
in trust by Debtor for and as the property of Secured Party and shall not be
commingled with any funds or property of Debtor.

 

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4.                                      Account Verification and Collection
Rights of Secured Party.  At any time after the occurrence of any Event of
Default, Unmatured Event of Default (as defined in the Credit Agreement) or
Default (as defined in the Note Agreement), Secured Party shall have the right
to verify any accounts in the name of Debtor or in Secured Party’s own name; and
Debtor, whenever requested, shall furnish Secured Party with duplicate
statements of the accounts, which statements may be mailed or delivered by
Secured Party for that purpose.  Whether or not Secured Party exercises its
rights under Section 3 of this Security Agreement, Secured Party may at any time
(whether before or after the occurrence of an Event of Default) notify any
account debtor or any other person obligated to pay any amount due, that such
chattel paper, account or other right to payment has been assigned or
transferred to Secured Party for security and shall be paid directly to Secured
Party.  If Secured Party so requests at any time (whether before or after the
occurrence of an Event of Default), Debtor will so notify such account debtors
and other obligors in writing and will indicate on all invoices to such account
debtors or other obligors that the amount due is payable directly to Secured
Party.  At any time after Secured Party or Debtor gives such notice to an
account debtor or other obligor, Secured Party may (but need not), in Secured
Party’s own name or in Debtor’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 chattel paper, account or other 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.

 

5.                                      Assignment of Insurance.  Debtor hereby
assigns to Secured Party (for the ratable benefit of the Senior Lenders), as
additional security for the payment of the Obligations, any and all moneys
(including but not limited to proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of Debtor under or
with respect to, any and all policies of insurance covering the Collateral, and
Debtor hereby directs the issuer of any such policy to pay any such moneys
directly to Secured Party.  Both before and after the occurrence of an Event of
Default, Secured Party may (but need not), in Secured Party’s own name or in
Debtor’s name, execute and deliver proofs of claim, receive all such moneys,
endorse checks and other instruments representing payment of such moneys, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy.  Notwithstanding the foregoing, Debtor shall be entitled to use any such
insurance proceeds to repair or replace any Collateral so long as no Unmatured
Event of Default (as defined in the Credit Agreement), Default (as defined in
the Note Agreement) or Event of Default then exists.

 

6.                                      Right to Offset.  Nothing in this
Security Agreement shall be deemed a waiver or prohibition of Secured Party’s
right of banker’s lien, offset, or counterclaim, which right Debtor hereby
grants to Secured Party.

 

7.                                      Events of Default.  The occurrence of
(i) any Event of Default, as defined in the Credit Agreement or (ii) any Event
of Default, as defined in the Note Agreement, shall constitute an Event of
Default hereunder.

 

8.                                      Remedies Upon Event of Default.  If any
Event of Default shall have occurred and be continuing:

 

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(a)                                 The Secured Party may exercise in respect of
the Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC in effect at that time (whether or not the UCC then
applies to the affected Collateral), and may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any exchange, broker’s board or at any of the Secured
Party’s offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Secured Party may reasonably believe are
commercially reasonable.  The Debtor agrees that, to the extent notice of sale
shall be required by law, at least ten days’ prior notice to the Debtor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification.  The Secured Party shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given.  The Secured Party may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.  The Debtor hereby waives all requirements of law, if any, relating
to the marshalling of assets which would be applicable in connection with the
enforcement by the Secured Party of its remedies hereunder, absent this waiver.

 

(b)                                 The Secured Party may notify any Person
obligated on any of the Collateral that the same has been assigned or
transferred to the Secured Party (for the ratable benefit of the Senior Lenders)
and that the same should be performed as requested by, or paid directly to, the
Secured Party, as the case may be.  The Debtor shall join in giving such notice,
if the Secured Party so requests.  The Secured Party may, in the Secured Party’s
name or in the Debtor’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
Collateral or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligation of any such
Person.

 

(c)                                  Any cash held by the Secured Party as
Collateral (for the ratable benefit of the Senior Lenders) and all cash proceeds
received by the Secured Party in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of the Secured Party, be held by the Secured Party as Collateral (for the
ratable benefit of the Senior Lenders) for, or then or at any time thereafter be
applied in whole or in part by the Secured Party against, all or any part of the
Obligations (including any expenses of the Secured Party).

 

9.                                      Other Personal Property.  If at the time
Secured Party takes possession of any tangible Collateral, any goods, papers or
other properties of Debtor, not affixed to or constituting a part of such
Collateral, are located or to be found upon or within such Collateral, Debtor
agrees to notify Secured Party in writing of that fact, describing the property
so located or to be found, within 7 calendar days after the date on which
Secured Party took possession. Unless and until Secured Party receives such
notice from Debtor, Secured Party shall not be responsible or liable to Debtor
for any action taken or omitted by or on behalf of Secured Party with respect to
such property without actual knowledge of the existence of any such property or
without actual knowledge of the fact that it was located or to be found upon
such Collateral.

 

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10.                               Amendment; Waivers.  This Security Agreement
can be waived, modified, amended, terminated or discharged, and the Security
Interest can be released, only explicitly in a writing signed by Secured Party,
pursuant to Section 2(e) of the Intercreditor Agreement, and Debtor.  A waiver
shall be effective only in the specific instance and for the specific purpose
given.  Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party’s rights or remedies.

 

11.                               Notices.  All notices hereunder shall be in
writing (including facsimile transmission) and shall be sent to the applicable
party at its address shown on the signature page hereto or at such other address
as such party may, by written notice received by the other parties, have
designated as its address for such purpose.  Notices sent by facsimile
transmission shall be deemed to have been given when sent; notices sent by mail
shall be deemed to have been given three Business Days (as defined in the Credit
Agreement as in effect on the date hereof) after the date when sent by
registered or certified mail, postage prepaid; and notices sent by hand delivery
or overnight courier service shall be deemed to have been given when received.

 

12.                               Miscellaneous.  Secured Party’s duty of care
with respect to Collateral in its possession (as imposed by law) shall be deemed
fulfilled if Secured Party exercises reasonable care in physically safekeeping
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 Secured Party need not otherwise preserve,
protect, insure or care for any Collateral.  Secured Party shall not be
obligated to preserve any rights Debtor 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 Collateral in any particular order of application. 
This Security Agreement shall be binding upon and inure to the benefit of Debtor
and Secured Party and their respective representatives, successors and assigns
and shall take effect when signed by Debtor and delivered to Secured Party, and
Debtor waives notice of Secured Party’s acceptance hereof.  This Security
Agreement shall be governed by the internal laws of the State of Minnesota,
without giving effect to the conflicts of laws principles thereof.

 

13.                               Consent to Jurisdiction.  AT THE OPTION OF THE
SECURED PARTY, THIS SECURITY AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE DEBTOR
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT.  IN THE EVENT THE DEBTOR COMMENCES
ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS SECURITY
AGREEMENT, THE SECURED PARTY AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH
TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.

 

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14.                               Waiver of Jury Trial.  EACH OF THE DEBTOR AND
THE SECURED PARTY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

 

15.                               Assignment of Security Interest.  Pursuant to
the terms of the Intercreditor Agreement, the Bank Agent hereby assigns all
rights under, and its security interest granted to it by, the Original Security
Agreement to the Secured Party, in accordance with the terms of this Security
Agreement.  Debtor hereby acknowledges and agrees to such assignment.

 

16.                               Amendment and Restatement.  This Security
Agreement amends and restates all of the terms and conditions of the Original
Security Agreement and nothing contained herein shall be construed as a novation
thereof.

 

(The signature page follows.)

 

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THE PARTIES have executed this Security Agreement as of the day and year first
above written.

 

Secured Party (as Collateral Agent for the ratable benefit of

 

the Senior Lenders):

THE PRIVATEBANK AND TRUST COMPANY

 

 

 

 

 

By:

/s/ Adam F. Oliver

 

Name:

Adam F. Oliver

 

Title:

Officer

 

 

Address for Secured Party:

 

The PrivateBank and Trust Company

 

50 South Sixth Street, Suite 1400

 

Minneapolis, MN 55402

 

Attn: Managing Director

 

Facsimile: 612-333-1391

 

 

 

Bank Agent:

THE PRIVATEBANK AND TRUST COMPANY

 

 

 

 

 

By:

/s/ Adam F. Oliver

 

Name:

Adam F. Oliver

 

Title:

Officer

 

 

Address for Bank Agent:

 

The PrivateBank and Trust Company

 

50 South Sixth Street, Suite 1400

 

Minneapolis, MN 55402

 

Attn: Managing Director

 

Facsimile: 612-333-1391

 

 

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Debtor:

GROW BIZ GAMES, INC.

 

 

 

 

 

By:

/s/ Brett D. Heffes

 

Name:

Brett D. Heffes

 

Title:

Treasurer

 

 

Address for Debtor:

 

605 Highway 169 North

 

Suite 400

 

Minneapolis, MN 55441

 

Attention: Chief Financial Officer

 

 

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Exhibit A

 

Location of Collateral

 

Chief Place of

Business and

Collateral Location:                                   605 Highway 169 North,
Suite 400

Minneapolis, MN 55441

 

Collateral Location:                                   222 East Carrillo Street,
Suite 209

Santa Barbara, CA 93101

 

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