Document:

Exhibit 10.3

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT dated
as of July 13, 2010 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 Agent for the ratable benefit of the Lenders
referred to below) (the “Secured Party”).

 

RECITALS:

 

A.            The
Debtor, the Secured Party and certain other persons are parties to that certain
Credit Agreement of even date herewith (as it may be 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 “Lenders”)
are providing financial accommodations to the Debtor and the other Loan Parties
(as defined in the Credit Agreement).

 

B.            The
Debtor will benefit from the financial accommodations provided by the Lenders
to the Loan Parties, and the Debtor desires to grant to the Secured Party (for
the ratable benefit of the Lenders) a security interest in all of the Debtor’s
property, all as provided 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
each and every debt, liability and obligation of every type and description
which Debtor and/or any other Loan Party may now or at any time hereafter owe
to the Secured Party and/or any other Lender whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether it arises
under or is evidenced by this Security Agreement, the Credit Agreement, or any
other present or future instrument or agreement or by operation of law, and
whether it is or may be direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole, joint,
several or joint and several (all such debts, liabilities and obligations and
any amendments, extensions, renewals or replacements thereof are herein
collectively referred to as the “Obligations”), Debtor hereby grants the
Secured Party (for the ratable benefit of the 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;

 

1

 

(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;

 

(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

 

2

 

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:

 

(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 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).

 

3

 

(e)           Except as
otherwise provided in the Credit 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.

 

(i)            Except as
otherwise provided in the Credit 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 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

 

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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.

 

(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 

 

5

 

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.

 

4.             Account
Verification and Collection Rights of Secured Party.  At any time after the occurrence of any Event
of Default or Unmatured Event of Default (as defined in the Credit 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 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,

 

6

 

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 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 any Event of Default, as
defined in Section 13.1 of the Credit Agreement, shall constitute an Event
of Default hereunder.

 

8.             Remedies
Upon Event of Default.  Upon the occurrence of an Event of Default
and at any time thereafter until such Event of Default is cured to the written
satisfaction of Secured Party, Secured Party may exercise any one or more of
the rights or remedies set forth in Section 13.2 of the Credit Agreement.  All rights and remedies of Secured Party
shall be cumulative and may be exercised singularly or concurrently, at Secured
Party’s option, and the exercise or enforcement of any one such right or remedy
shall neither be a condition to nor bar the exercise or enforcement of any
other.

 

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.

 

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 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 to be given to
Debtor shall be deemed sufficiently given if given in the manner specified in Section 16.3
of the Credit Agreement.

 

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

 

7

 

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.

 

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.

 

(The signature page follows.)

 

8

 

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

 

	
  Secured
  Party (as Agent

  	
   

  	
   

  
	
  for
  the ratable benefit of the Lenders):

  	
   

  	
  THE
  PRIVATEBANK AND TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Peter Pricco

  
	
   

  	
   

  	
   

  	
  Its:
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Debtor:

  	
   

  	
  WINMARK CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Brett D. Heffes

  
	
   

  	
   

  	
   

  	
  Its:
  President, Finance and Administration

  

 

9

 

Exhibit A

 

Location of Collateral

 

	
  Chief Place of

  	
   

  	
   

  
	
  Business and

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  605 Highway 169 North,
  Suite 400

  
	
   

  	
   

  	
  Minneapolis, MN 55441

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  1942 Broadway Suite #
  318 & 317

  
	
   

  	
   

  	
  Boulder, CO 80302

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  2 Ravinia Drive,
  Suite # 500

  
	
   

  	
   

  	
  Atlanta, GA 30346

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  1309 State Street,
  Suite A

  
	
   

  	
   

  	
  Santa Barbara, CA 93101

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  233 East Carillo Street,
  Suite C

  
	
   

  	
   

  	
  Santa
  Barbara, CA 93101

  

 

10

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT dated
as of July 13, 2010 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 Agent for the ratable benefit of the Lenders
referred to below) (the “Secured Party”).

 

RECITALS:

 

A.            The
Debtor, the Secured Party and certain other persons are parties to that certain
Credit Agreement of even date herewith (as it may be 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 “Lenders”)
are providing financial accommodations to the Debtor and the other Loan Parties
(as defined in the Credit Agreement).

 

B.            The
Debtor will benefit from the financial accommodations provided by the Lenders
to the Loan Parties, and the Debtor desires to grant to the Secured Party (for
the ratable benefit of the Lenders) a security interest in all of the Debtor’s
property, all as provided 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
each and every debt, liability and obligation of every type and description
which Debtor and/or any other Loan Party may now or at any time hereafter owe
to the Secured Party and/or any other Lender whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether it arises
under or is evidenced by this Security Agreement, the Credit Agreement, or any
other present or future instrument or agreement or by operation of law, and
whether it is or may be direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole, joint,
several or joint and several (all such debts, liabilities and obligations and any
amendments, extensions, renewals or replacements thereof are herein
collectively referred to as the “Obligations”), Debtor hereby grants the
Secured Party (for the ratable benefit of the 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;

 

1

 

(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;

 

(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

 

2

 

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:

 

(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 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).

 

3

 

(e)           Except as
otherwise provided in the Credit 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.

 

(i)            Except as
otherwise provided in the Credit 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 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

 

4

 

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.

 

(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 

 

5

 

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.

 

4.             Account
Verification and Collection Rights of Secured Party.  At any time after the occurrence of any Event
of Default or Unmatured Event of Default (as defined in the Credit 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 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,

 

6

 

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 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 any Event of Default, as
defined in Section 13.1 of the Credit Agreement, shall constitute an Event
of Default hereunder.

 

8.             Remedies
Upon Event of Default.  Upon the occurrence of an Event of Default
and at any time thereafter until such Event of Default is cured to the written
satisfaction of Secured Party, Secured Party may exercise any one or more of
the rights or remedies set forth in Section 13.2 of the Credit Agreement.  All rights and remedies of Secured Party shall
be cumulative and may be exercised singularly or concurrently, at Secured Party’s
option, and the exercise or enforcement of any one such right or remedy shall
neither be a condition to nor bar the exercise or enforcement of any other.

 

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.

 

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 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 to be given to
Debtor shall be deemed sufficiently given if given in the manner specified in Section 16.3
of the Credit Agreement.

 

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

 

7

 

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.

 

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.

 

(The signature page follows.)

 

8

 

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

 

	
  Secured
  Party (as Agent

  	
   

  	
   

  
	
  for
  the ratable benefit of the Lenders):

  	
   

  	
  THE
  PRIVATEBANK AND TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Peter Pricco

  
	
   

  	
   

  	
   

  	
  Its:
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Debtor:

  	
   

  	
  WIRTH BUSINESS CREDIT, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Brett D. Heffes

  
	
   

  	
   

  	
   

  	
  Its:
  Treasurer

  

 

9

 

Exhibit A

 

Location of Collateral

 

	
  Chief Place of

  	
   

  	
   

  
	
  Business and

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  605 Highway 169 North,
  Suite 400

  
	
   

  	
   

  	
  Minneapolis, MN 55441

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  1942 Broadway Suite #
  318 & 317

  
	
   

  	
   

  	
  Boulder, CO 80302

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  2 Ravinia Drive,
  Suite # 500

  
	
   

  	
   

  	
  Atlanta, GA 30346

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  1309 State Street,
  Suite A

  
	
   

  	
   

  	
  Santa Barbara, CA 93101

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  233 East Carillo Street,
  Suite C

  
	
   

  	
   

  	
  Santa
  Barbara, CA 93101

  

 

10

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT dated
as of July 13, 2010 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 Agent for the ratable benefit of the Lenders
referred to below) (the “Secured Party”).

 

RECITALS:

 

A.            The
Debtor, the Secured Party and certain other persons are parties to that certain
Credit Agreement of even date herewith (as it may be 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 “Lenders”)
are providing financial accommodations to the Debtor and the other Loan Parties
(as defined in the Credit Agreement).

 

B.            The
Debtor will benefit from the financial accommodations provided by the Lenders
to the Loan Parties, and the Debtor desires to grant to the Secured Party (for
the ratable benefit of the Lenders) a security interest in all of the Debtor’s
property, all as provided 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
each and every debt, liability and obligation of every type and description
which Debtor and/or any other Loan Party may now or at any time hereafter owe
to the Secured Party and/or any other Lender whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether it arises
under or is evidenced by this Security Agreement, the Credit Agreement, or any
other present or future instrument or agreement or by operation of law, and
whether it is or may be direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole, joint,
several or joint and several (all such debts, liabilities and obligations and any
amendments, extensions, renewals or replacements thereof are herein
collectively referred to as the “Obligations”), Debtor hereby grants the
Secured Party (for the ratable benefit of the 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;

 

1

 

(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;

 

(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

 

2

 

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:

 

(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 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).

 

3

 

(e)           Except as
otherwise provided in the Credit 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.

 

(i)            Except as
otherwise provided in the Credit 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 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

 

4

 

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.

 

(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 

 

5

 

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.

 

4.             Account
Verification and Collection Rights of Secured Party.  At any time after the occurrence of any Event
of Default or Unmatured Event of Default (as defined in the Credit 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 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,

 

6

 

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 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 any Event of Default, as
defined in Section 13.1 of the Credit Agreement, shall constitute an Event
of Default hereunder.

 

8.             Remedies
Upon Event of Default.  Upon the occurrence of an Event of Default
and at any time thereafter until such Event of Default is cured to the written
satisfaction of Secured Party, Secured Party may exercise any one or more of
the rights or remedies set forth in Section 13.2 of the Credit Agreement.  All rights and remedies of Secured Party shall
be cumulative and may be exercised singularly or concurrently, at Secured Party’s
option, and the exercise or enforcement of any one such right or remedy shall
neither be a condition to nor bar the exercise or enforcement of any other.

 

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.

 

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 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 to be given to
Debtor shall be deemed sufficiently given if given in the manner specified in Section 16.3
of the Credit Agreement.

 

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

 

7

 

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.

 

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.

 

(The signature page follows.)

 

8

 

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

 

	
  Secured
  Party (as Agent

  	
   

  	
   

  
	
  for
  the ratable benefit of the Lenders):

  	
   

  	
  THE
  PRIVATEBANK AND TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Peter Pricco

  
	
   

  	
   

  	
   

  	
  Its:
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Debtor:

  	
   

  	
  WINMARK CAPITAL CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Brett D. Heffes

  
	
   

  	
   

  	
   

  	
  Its:
  Chief Financial Officer and Treasurer

  

 

9

 

Exhibit A

 

Location of Collateral

 

	
  Chief Place of

  	
   

  	
   

  
	
  Business and

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  605 Highway 169 North,
  Suite 400

  
	
   

  	
   

  	
  Minneapolis, MN 55441

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  1942 Broadway Suite #
  318 & 317

  
	
   

  	
   

  	
  Boulder, CO 80302

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  2 Ravinia Drive,
  Suite # 500

  
	
   

  	
   

  	
  Atlanta, GA 30346

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  1309 State Street,
  Suite A

  
	
   

  	
   

  	
  Santa Barbara, CA 93101

  
	
   

  	
   

  	
   

  
	
  Collateral Location:

  	
   

  	
  233 East Carillo Street,
  Suite C

  
	
   

  	
   

  	
  Santa
  Barbara, CA 93101

  

 

10

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT dated
as of July 13, 2010 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 Agent for the ratable benefit of the Lenders
referred to below) (the “Secured Party”).

 

RECITALS:

 

A.            The
Debtor, the Secured Party and certain other persons are parties to that certain
Credit Agreement of even date herewith (as it may be 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 “Lenders”)
are providing financial accommodations to the Debtor and the other Loan Parties
(as defined in the Credit Agreement).

 

B.            The
Debtor will benefit from the financial accommodations provided by the Lenders
to the Loan Parties, and the Debtor desires to grant to the Secured Party (for
the ratable benefit of the Lenders) a security interest in all of the Debtor’s
property, all as provided 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
each and every debt, liability and obligation of every type and description
which Debtor and/or any other Loan Party may now or at any time hereafter owe
to the Secured Party and/or any other Lender whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether it arises
under or is evidenced by this Security Agreement, the Credit Agreement, or any
other present or future instrument or agreement or by operation of law, and
whether it is or may be direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole, joint,
several or joint and several (all such debts, liabilities and obligations and
any amendments, extensions, renewals or replacements thereof are herein
collectively referred to as the “Obligations”), Debtor hereby grants the
Secured Party (for the ratable benefit of the 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;

 

1

 

(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;

 

(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

 

2

 

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:

 

(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 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).

 

3

 

(e)           Except as
otherwise provided in the Credit 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.

 

(i)            Except as
otherwise provided in the Credit 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 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

 

4

 

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.

 

(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 

 

5

 

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.

 

4.             Account
Verification and Collection Rights of Secured Party.  At any time after the occurrence of any Event
of Default or Unmatured Event of Default (as defined in the Credit 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 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,

 

6

 

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 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 any Event of Default, as
defined in Section 13.1 of the Credit Agreement, shall constitute an Event
of Default hereunder.

 

8.             Remedies
Upon Event of Default.  Upon the occurrence of an Event of Default
and at any time thereafter until such Event of Default is cured to the written
satisfaction of Secured Party, Secured Party may exercise any one or more of
the rights or remedies set forth in Section 13.2 of the Credit
Agreement.  All rights and remedies of
Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party’s option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise
or enforcement of any other.

 

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.

 

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 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 to be given to
Debtor shall be deemed sufficiently given if given in the manner specified in Section 16.3
of the Credit Agreement.

 

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

 

7

 

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.

 

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.

 

(The signature page follows.)

 

8

 

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

 

	
  Secured
  Party (as Agent

  	
   

  
	
  for
  the ratable benefit of the Lenders):

  	
  THE
  PRIVATEBANK AND TRUST COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Peter Pricco

  
	
   

  	
   

  	
  Its:
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
  Debtor:

  	
  GROW BIZ GAMES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Brett D. Heffes

  
	
   

  	
   

  	
  Its:
  Treasurer

  

 

9

 

Exhibit A

 

Location of Collateral

 

	
  Chief Place of

  	
   

  
	
  Business and

  	
   

  
	
  Collateral Location:

  	
  605 Highway 169 North,
  Suite 400

  
	
   

  	
  Minneapolis, MN 55441

  
	
   

  	
   

  
	
  Collateral Location:

  	
  1942 Broadway Suite #
  318 & 317

  
	
   

  	
  Boulder, CO 80302

  
	
   

  	
   

  
	
  Collateral Location:

  	
  2 Ravinia Drive,
  Suite # 500

  
	
   

  	
  Atlanta, GA 30346

  
	
   

  	
   

  
	
  Collateral Location:

  	
  1309 State Street,
  Suite A

  
	
   

  	
  Santa Barbara, CA 93101

  
	
   

  	
   

  
	
  Collateral Location:

  	
  233 East Carillo Street,
  Suite C

  
	
   

  	
  Santa Barbara, CA 93101

  

 

10Exhibit 10.4

 

PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT, dated as of July 13, 2010,
is made and given by WINMARK CORPORATION, a Minnesota corporation (the “Pledgor”)
to THE PRIVATEBANK AND TRUST COMPANY, an Illinois bank and trust company (in
its capacity as Agent for the ratable benefit of the Lenders referred to below)
(the “Bank”).

 

RECITALS:

 

A.            The Pledgor, the Bank and
certain other persons are parties to that certain Credit Agreement of even date
herewith (as it may be 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 “Lenders”) are
providing financial accommodations to the Pledgor and the other Loan Parties
(as defined in the Credit Agreement).

 

B.            The Pledgor owns all of the
outstanding equity interests of Wirth Business Credit, Inc., a Minnesota
corporation, Winmark Capital Corporation, a Minnesota corporation, and Grow Biz
Games, Inc., a Minnesota corporation (the “Pledged Securities”).

 

C.            The Pledgor will benefit from the financial
accommodations provided by the Lenders to the Loan Parties, and the Pledgor finds it advantageous, desirable and
in the Pledgor’s best interests to execute and deliver to the Bank this
Agreement.

 

AGREEMENTS:

 

IN CONSIDERATION of the premises and in order to induce
the Bank and the other Lenders to enter into the Credit Agreement and to extend
credit accommodations to the Pledgor thereunder, the Pledgor hereby agrees with
the Bank for the ratable benefit of the Lenders as follows:

 

Section 1.  Defined Terms.

 

(a)           General.  As used in this Agreement, the
following terms shall have the meanings indicated:

 

“Collateral” shall have the meaning given to such
term in Section 2.

 

“Event of Default” shall have the meaning given
to such term in Section 11.

 

“Lien” shall mean any security interest,
mortgage, pledge, lien, charge, encumbrance, title retention agreement or
analogous instrument or device (including the interest of the lessors under
capitalized leases), in, of or on any assets or properties of the Person
referred to.

 

1

 

“Obligations” shall mean (a) any and
all indebtedness, liabilities and obligations of the Pledgor and/or any other
Loan Party to the Bank and/or any other Lender of every kind, nature or
description under the Credit Agreement, including the Pledgor’s obligation on
any note or notes hereafter issued in substitution or replacement thereof,
whether due or to become due, and whether now existing or hereafter arising or
incurred, (b) any and all liabilities of the Pledgor under this Agreement,
whether due or to become due, and whether now existing or hereafter arising or
incurred and (c) any and all other indebtedness, liabilities and obligations
of the Pledgor and/or any other Loan Party to the Bank and/or any other Lender
of every kind, nature or description, whether due or to become due, and whether
now existing or hereafter arising or incurred.

 

“Person” shall mean any individual, corporation,
partnership, limited partnership, limited liability company, joint venture,
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether
acting in an individual, fiduciary or other capacity.

 

“Security Interest” shall have the meaning
given to such term in Section 2.

 

(b)           Terms
Defined in Uniform Commercial Code.  All other terms used in this Agreement that
are not specifically defined herein or the definitions of which are not
incorporated herein by reference shall have the meaning assigned to such terms
in the Uniform Commercial Code in effect in the State of Minnesota as of the
date first above written to the extent such other terms are defined therein.

 

(c)           Singular/Plural, Etc.  Unless the context of this
Agreement otherwise clearly requires, references to the plural include the
singular, references to the singular include the plural and “or” has the
inclusive meaning represented by the phrase “and/or.”  The words “include,” “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation.”  The words “hereof,”
“herein,” “hereunder,” and similar terms in this Agreement refer
to this Agreement as a whole and not to any particular provision of this
Agreement.  References to Sections are
references to Sections in this Pledge Agreement unless otherwise provided.

 

Section 2.  Pledge.  As security for the payment and performance
of all of the Obligations, the Pledgor hereby pledges to the Bank (for the ratable benefit of the Lenders) and
grants to the Bank (for the ratable
benefit of the Lenders) a security interest (the “Security Interest”)
in the following (the “Collateral”):

 

(a)           The
Pledged Securities and the certificates representing the Pledged Securities,
and all distributions, dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Securities.

 

(b)           All
additional securities of any issuer of the Pledged Securities from time to time
acquired by the Pledgor in any manner, and the certificates representing such
additional securities, and all distributions, dividends, cash, instruments and
other property 

 

2

 

from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such securities.

 

(c)           All
notes, debentures or other property constituting collateral for or otherwise
securing the payment and/or performance of any such additional securities or
equity interests.

 

(d)           All
proceeds of any and all of the foregoing (including proceeds that constitute
property of types described above).

 

Section 3.  Delivery of Collateral.  All certificates and instruments
representing or evidencing the Pledged Securities shall be delivered to the
Bank contemporaneously with the execution of this Agreement.  All certificates and instruments representing
or evidencing Collateral received by the Pledgor after the execution of this
Agreement shall be delivered to the Bank promptly upon the Pledgor’s receipt
thereof.  All such certificates and
instruments shall be held by or on behalf of the Bank (for the ratable benefit of the Lenders) pursuant hereto and shall
be in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Bank.  The
Bank shall have the right at any time, whether before or after an Event of
Default, to cause any or all of the Collateral to be transferred of record into
the name of the Bank or its nominee (but subject to the rights of the Pledgor
under Section 6) and to exchange certificates and instruments
representing or evidencing Collateral for certificates and instruments of
smaller or larger denominations. 
Notwithstanding any of the foregoing, as to any Collateral consisting of
book-entry or uncertificated securities or securities which are held by a third
Person, the Pledgor shall deliver to the Bank evidence satisfactory to the Bank
that such Collateral has been registered in the name of, or as pledged to, the
Bank (for the ratable benefit of the
Lenders).  Such evidence shall
include the acknowledgment of the issuer or Person holding such Collateral that
such issuer or Person holds such Collateral as agent for the Bank (for the ratable benefit of the Lenders) and
that such Collateral is identified on the books of such issuer or third Person
as belonging to or pledged to the Bank (for
the ratable benefit of the Lenders).

 

Section 4.  Certain Warranties and Covenants.  The Pledgor makes the following
warranties and covenants with respect to such Pledgor and his Pledged
Securities:

 

(a)           The
Pledgor has title to the Pledged Securities and will have title to each other
item of Collateral hereafter acquired, free of all Liens except the Security
Interest.

 

(b)           The
Pledgor has full power and authority to execute this Pledge Agreement, to
perform the Pledgor’s obligations hereunder and to subject the Collateral to
the Security Interest created hereby.

 

(c)           No
financing statement covering all or any part of the Collateral is on file in
any public office (except for any financing statements filed by the Bank).

 

(d)           The
Pledged Securities have been duly authorized and validly issued by the issuer
thereof and are fully paid and nonassessable. 
The certificates representing the 

 

3

 

Pledged Securities are genuine.  The Pledged Securities are not subject to any
offset or similar right or claim of the issuer thereof.

 

(e)           The
Pledgor’s company charter number is 5Z-841.

 

Section 5.  Further Assurances.  The Pledgor agrees that at any
time and from time to time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments and documents, and take
all further action that may be necessary or that the Bank may reasonably
request, in order to perfect and protect the Security Interest or to enable the
Bank to exercise and enforce its rights and remedies hereunder with respect to
any Collateral (but any failure to request or assure that the Pledgor execute
and deliver such instruments or documents or to take such action shall not
affect or impair the validity, sufficiency or enforceability of this Agreement
and the Security Interest, regardless of whether any such item was or was not
executed and delivered or action taken in a similar context or on a prior
occasion).  Without in any way limiting
the generality of the foregoing, the Pledgor hereby authorizes the Bank to file
from time to time such financing statements against the Collateral as the Bank
deems necessary or useful to perfect the Security Interest.

 

Section 6.  Voting Rights; Dividends; Etc.

 

(a)           Subject
to Section 6(d), the Pledgor shall be entitled to exercise or
refrain from exercising any and all voting and other consensual rights
pertaining to the Pledged Securities or any other securities that become part
of the Collateral or any part thereof for any purpose not inconsistent with the
terms of this Agreement or the Credit Agreement; provided, however, that the
Pledgor shall not exercise or refrain from exercising any such right if such
action could reasonably be expected to have a material adverse effect on the
value of the Collateral or any material part thereof.

 

(b)           Subject
to Section 6(e), the Pledgor shall be entitled to receive, retain,
and use in any manner not prohibited by the Credit Agreement any and all
distributions or dividends paid in respect of the Collateral; provided, however,
that any and all

 

(i)            distributions
or dividends paid or payable other than in cash in respect of, and instruments
and other property received, receivable or otherwise distributed in respect of,
or in exchange for, any Collateral,

 

(ii)           dividends and other distributions paid or payable in cash in respect of
any Collateral in connection with a partial or total liquidation or dissolution
or in connection with a reduction of capital, capital surplus or
paid-in-surplus, and

 

(iii)          cash paid, payable or otherwise distributed in redemption of, or in
exchange for, any Collateral,

 

shall be, and shall be forthwith delivered to the Bank
to hold as, Collateral (for the ratable
benefit of the Lenders) and shall, if received by the Pledgor, be
received in trust for the benefit of the Bank (for the ratable benefit of the Lenders), be segregated from the
other 

 

4

 

property or funds of the Pledgor, and be forthwith
delivered to the Bank as Collateral (for
the ratable benefit of the Lenders) in the same form as so received
(with any necessary endorsement or assignment). 
The Pledgor shall, upon request by the Bank, promptly execute all such
documents and do all such acts as may be necessary or desirable to give effect
to the provisions of this Section 6(b).

 

(c)           The
Bank shall execute and deliver (or cause to be executed and delivered) to the
Pledgor all such proxies and other instruments as the Pledgor may reasonably
request for the purpose of enabling the Pledgor to exercise the voting and
other rights that the Pledgor is entitled to exercise pursuant to Section 6(a) and
to receive the dividends that the Pledgor is authorized to receive and retain
pursuant to Section 6(b).

 

(d)           Upon
the occurrence and during the continuance of any Event of Default, the Bank
shall have the right in its sole discretion, and the Pledgor shall execute and
deliver all such proxies and other instruments as may be necessary or
appropriate to give effect to such right, to terminate all rights of the
Pledgor to exercise or refrain from exercising the voting and other consensual
rights that the Pledgor would otherwise be entitled to exercise pursuant to Section 6(a),
and all such rights shall thereupon become vested in the Bank (for the ratable benefit of the Lenders) who
shall thereupon have the sole right to exercise or refrain from exercising such
voting and other consensual rights; provided, however, that the Bank shall not
be deemed to possess or have control over any voting rights with respect to any
Collateral unless and until the Bank has given written notice to the Pledgor
that any further exercise of such voting rights by the Pledgor is prohibited
and that the Bank and/or its assigns will henceforth exercise such voting
rights; and provided, further, that neither the registration of any item of
Collateral in the Bank’s name nor the exercise of any voting rights with
respect thereto shall be deemed to constitute a retention by the Bank of any
such Collateral in satisfaction of the Obligations or any part thereof.

 

(e)           Upon
the occurrence and during the continuance of any Event of Default:

 

(i)            all
rights of the Pledgor to receive the distributions and dividends that the
Pledgor would otherwise be authorized to receive and retain pursuant to Section 6(b) shall
cease, and all such rights shall thereupon become vested in the Bank (for the ratable benefit of the Lenders) who
shall thereupon have the sole right to receive and hold such distributions and
dividends as Collateral, and

 

(ii)           all payments of distributions and dividends that are received by the
Pledgor contrary to the provisions of paragraph (i) of this Section 6(e) shall
be received in trust for the benefit of the Bank (for the ratable benefit of the Lenders), shall be segregated from
other funds of the Pledgor and shall be forthwith paid over to the Bank as
Collateral (for the ratable benefit of
the Lenders) in the same form as so received (with any necessary
endorsement).

 

5

 

Section 7.  Transfers and Other Liens; Additional
Securities.

 

(a)           The
Pledgor agrees that the Pledgor will not (i) sell, assign (by operation of
law or otherwise) or otherwise dispose of, or grant any option with respect to,
any of the Collateral, or (ii) create or permit to exist any Lien upon or
with respect to any of the Collateral.

 

(b)           The
Pledgor agrees that the Pledgor will (i) cause each issuer of the Pledged
Securities that it controls not to issue any stock or other securities in addition
to or in substitution for the Pledged Securities to any Person other than the
Pledgor hereunder, and (ii) pledge hereunder, immediately upon the Pledgor’s
acquisition (directly or indirectly) thereof, any and all additional securities
of each issuer of the Pledged Securities.

 

Section 8.  Bank Appointed Attorney-in-Fact.  The Pledgor hereby appoints the
Bank the Pledgor’s attorney-in-fact, with full authority in the place and stead
of such Pledgor and in the name of such Pledgor or otherwise, from time to time
in the Bank’s discretion, to take any action and to execute any instrument that
the Bank may reasonably believe necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of the Pledgor under Section 6),
in a manner consistent with the terms hereof, including, without limitation, to
receive, indorse and collect all instruments made payable to the Pledgor
representing any dividend or other distribution in respect of the Collateral or
any part thereof and to give full discharge for the same.

 

Section 9.  Bank May Perform.  If the Pledgor fails to perform
any agreement contained herein, the Bank may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Bank
incurred in connection therewith shall be payable by the Pledgor under Section 14.

 

Section 10.  The Bank’s Duties.  The powers conferred on the Bank
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers.  The Bank shall be deemed to have exercised
reasonable care in the safekeeping of any Collateral in its possession if such
Collateral is accorded treatment substantially equal to the safekeeping which
the Bank accords its own property of like kind. 
Except for the safekeeping of any Collateral in its possession and the
accounting for monies and for other properties actually received by it
hereunder, the Bank shall have no duty, as to any Collateral, as to
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Bank has or is deemed to have knowledge of such matters, or as to the
taking of any necessary steps to preserve rights against any Persons or any other
rights pertaining to any Collateral.  The
Bank will take action in the nature of exchanges, conversions, redemption,
tenders and the like requested in writing by the Pledgor with respect to any of
the Collateral in the Bank’s possession if the Bank in its reasonable judgment
determines that such action will not impair the Security Interest or the value
of the Collateral, but a failure of the Bank to comply with any such request
shall not of itself be deemed a failure to exercise reasonable care.

 

6

 

Section 11.  Event of Default.  The occurrence of any Event of
Default, as defined in Section 13.1 of the Credit Agreement, shall
constitute an Event of Default hereunder.

 

Section 12.  Remedies upon Default.  If any Event of Default shall
have occurred and be continuing:

 

(a)           The
Bank 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 Uniform Commercial Code of the
State of Minnesota (the “Uniform Commercial Code”) in effect at that
time (whether or not the Uniform Commercial Code 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 Bank’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Bank may reasonably believe are commercially reasonable.  The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days’ prior notice to the
Pledgor 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 Bank shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given.  The Bank 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 Pledgor
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 Bank
of its remedies hereunder, absent this waiver.

 

(b)           The
Bank may notify any Person obligated on any of the Collateral that the same has
been assigned or transferred to the Bank (for the ratable benefit of the Lenders) and that the same should
be performed as requested by, or paid directly to, the Bank, as the case may
be.  The Pledgor shall join in giving
such notice, if the Bank so requests. 
The Bank may, in the Bank’s name or in the Pledgor’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 Bank as Collateral (for
the ratable benefit of the Lenders) and all cash proceeds received by
the Bank 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 Bank, be held
by the Bank as Collateral (for the
ratable benefit of the Lenders) for, or then or at any time thereafter
be applied in whole or in part by the Bank against, all or any part of the
Obligations (including any expenses of the Bank payable pursuant to Section 14).

 

Section 13.  Waiver of Certain Claims.  The Pledgor acknowledges that
because of present or future circumstances, a question may arise under the
Securities Act of 1933, as from 

 

7

 

time to time amended (the “Securities Act”), with
respect to any disposition of the Collateral permitted hereunder.  The Pledgor understands that compliance with
the Securities Act may very strictly limit the course of conduct of the Bank if
the Bank were to attempt to dispose of all or any portion of the Collateral and
may also limit the extent to which or the manner in which any subsequent
transferee of the Collateral or any portion thereof may dispose of the same.  There may be other legal restrictions or
limitations affecting the Bank in any attempt to dispose of all or any portion
of the Collateral under the applicable Blue Sky or other securities laws or
similar laws analogous in purpose or effect. 
The Bank may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such Collateral for their own account for investment only
and not to engage in a distribution or resale thereof.  The Pledgor agrees that the Bank shall not
incur any liability, and any liability of the Pledgor for any deficiency shall
not be impaired, as a result of the sale of the Collateral or any portion
thereof at any such private sale in a manner that the Bank reasonably believes
is commercially reasonable (within the meaning of the Uniform Commercial
Code).  The Pledgor hereby waives any
claims against the Bank arising by reason of the fact that the price at which
the Collateral may have been sold at such sale was less than the price that
might have been obtained at a public sale or was less than the aggregate amount
of the Obligations, even if the Bank shall accept the first offer received and
does not offer any portion of the Collateral to more than one possible
purchaser.  The Pledgor further agrees
that the Bank has no obligation to delay sale of any Collateral for the period
of time necessary to permit the issuer of such Collateral to qualify or
register such Collateral for public sale under the Securities Act, applicable
Blue Sky laws and other applicable state and federal securities laws, even if
the issuer would agree to do so.  Without
limiting the generality of the foregoing, the provisions of this Section would
apply if, for example, the Bank were to place all or any portion of the
Collateral for private placement by an investment banking firm, or if such
investment banking firm purchased all or any portion of the Collateral for its
own account, or if the Bank placed all or any portion of the Collateral
privately with a purchaser or purchasers.

 

Section 14.  Costs and Expenses; Indemnity.  The Pledgor will pay or reimburse
the Bank on demand for all out-of-pocket expenses (including in each case all
filing and recording fees and taxes and all reasonable fees and expenses of
counsel and of any experts and agents) incurred by the Bank in connection with
the creation, perfection, protection, satisfaction, foreclosure or enforcement
of the Security Interest and the preparation, administration, continuance,
amendment or enforcement of this Agreement, and all such costs and expenses
shall be part of the Obligations secured by the Security Interest.  The Pledgor shall indemnify and hold the Bank
harmless from and against any and all claims, losses and liabilities (including
reasonable attorneys’ fees) growing out of or resulting from this Agreement
(including enforcement of this Agreement) or the Bank’s actions pursuant
hereto, except claims, losses or liabilities resulting from the Bank’s gross
negligence or willful misconduct as determined by a final judgment of a court
of competent jurisdiction.  Any liability
of the Pledgor to indemnify and hold the Bank harmless pursuant to the
preceding sentence shall be part of the Obligations secured by the Security
Interest.  The obligations of the Pledgor
under this Section shall survive any termination of this Agreement.

 

Section 15.  Waivers and Amendments; Remedies.  This Agreement can be waived,
modified, amended, terminated or discharged, and the Security Interest can be
released, only 

 

8

 

explicitly in a writing signed by the Bank.  A waiver so signed 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 rights and remedies available to
the Bank.  All rights and remedies of the
Bank shall be cumulative and may be exercised singly in any order or sequence,
or concurrently, at the Bank’s option, and the exercise or enforcement of any
such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other.

 

Section 16.  Notices.  All notices to be given shall be
deemed sufficiently given if sent in the same manner as provided in the Credit
Agreement.

 

Section 17.  Pledgor Acknowledgments.  The Pledgor hereby acknowledges
that (a) the Pledgor has been advised by counsel in the negotiation,
execution and delivery of this Agreement, (b) the Bank has no fiduciary
relationship to the Pledgor, the relationship being solely that of debtor and
creditor, and (c) no joint venture exists between the Pledgor and the
Bank.

 

Section 18.  Continuing Security Interest; Assignments
under Note.  This Agreement shall create a continuing
security interest in the Collateral and shall (a) remain in full force and
effect until the indefeasible payment in full in cash of the Obligations and
the expiration of the obligation, if any, of the Bank and the other Lenders to
extend credit accommodations to the Pledgor, (b) be binding upon the
Pledgor, and Pledgor’s successors and assigns, and (c) inure, together
with the rights and remedies of the Bank hereunder, to the benefit of, and be
enforceable by, the Bank and its legal representatives, successors, transferees
and assigns.  Without limiting the
generality of the foregoing clause (c), the Bank may assign or otherwise
transfer all or any portion of its rights and obligations under the Credit
Agreement to any other Person to the extent and in the manner provided in the
Credit Agreement, and may similarly transfer all or any portion of its rights
under this Pledge Agreement to such Persons.

 

Section 19.  Termination of Security Interest.  Upon indefeasible payment in full
in cash of the Obligations and the expiration of any obligation of the Bank to
extend credit accommodations to the Pledgor, the Security Interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Pledgor.  Upon any such termination, the
Bank will return to the Pledgor such of the Collateral as shall not have been
sold or otherwise applied pursuant to the terms hereof and execute and deliver
to the Pledgor such documents as the Pledgor shall reasonably request to
evidence such termination.  Any reversion
or return of the Collateral upon termination of this Agreement and any
instruments of transfer or termination shall be at the expense of the Pledgor
and shall be without warranty by, or recourse on, the Bank.  As used in this Section, “Pledgor”
includes any assigns of Pledgor, any Person holding a subordinate security
interest in any part of the Collateral or whoever else may be lawfully entitled
to any part of the Collateral.

 

Section 20.  Governing Law and Construction.  THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY
OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA.  Whenever possible, each provision
of this Agreement and any other statement, instrument or transaction
contemplated hereby or relating hereto shall be interpreted in such manner as
to be effective and 

 

9

 

valid under such applicable law, but, if any provision
of this Agreement or any other statement, instrument or transaction
contemplated hereby or relating hereto shall be held to be prohibited or
invalid under such applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement or
any other statement, instrument or transaction contemplated hereby or relating
hereto.

 

Section 21.  Consent to Jurisdiction; Waiver of Jury
Trial.  AT THE OPTION OF THE BANK,
THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE PLEDGOR 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 PLEDGOR COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER
ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE
RELATIONSHIP CREATED BY THIS AGREEMENT, THE BANK 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.  EACH OF THE PLEDGOR
AND THE BANK IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

Section 22.  Counterparts.  This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, but all such counterparts together shall constitute but
one and the same instrument.

 

Section 23.  General.  All representations and
warranties contained in this Agreement or in any other agreement between the
Pledgor and the Bank shall survive the execution, delivery and performance of
this Agreement and the creation and payment of the Obligations.  The Pledgor waives notice of the acceptance
of this Agreement by the Bank.  Captions
in this Agreement are for reference and convenience only and shall not affect
the interpretation or meaning of any provision of this Agreement.

 

(The signature page follows.)

 

10

 

EACH PLEDGOR has caused this Pledge Agreement to be duly
executed and delivered as of the date first above written.

 

	
   

  	
  PLEDGOR:

  
	
   

  	
   

  
	
   

  	
  WINMARK
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brett D. Heffes

  
	
   

  	
  Its: 

  	
  President, Finance and Administration

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Pledgor:

  
	
   

  	
  605 Highway 169 North

  
	
   

  	
  Suite 400

  
	
   

  	
  Minneapolis, MN 55422

  
	
   

  	
  Attention: Chief Financial
  Officer

  
	
   

  	
   

  
	
  Address for Bank:

  	
   

  
	
  The PrivateBank and Trust Company

  	
   

  
	
  50 South Sixth Street,
  Suite 1415

  	
   

  
	
  Minneapolis, MN 55402

  	
   

  
	
  Attention: Peter Pricco

  	
   

  

 

11

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