Document:

EXHIBIT
10.18

 

WINMARK CORPORATION

2010 STOCK OPTION PLAN

 

SECTION 1.

DEFINITIONS

 

As used herein,
the following terms shall have the meanings indicated below:

 

(a)                                  “Affiliate” shall mean a Parent or
Subsidiary of the Company.

 

(b)                                 “Committee” shall mean a Committee of two
or more directors who shall be appointed by and serve at the pleasure of the
Board.  In the event the Company’s
securities are registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, each of the members of the Committee shall be
a “non-employee director” within the meaning of Rule 16b-3, or any
successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934 as amended and shall be
independent under the listing rules of any stock exchange upon which the
Company’s common stock is listed for trading.

 

(c)                                  The “Company” shall mean Winmark
Corporation, a Minnesota corporation.

 

(d)                                 “Fair Market Value” as of any date shall
mean (i) if such stock is listed on the Nasdaq Global Select Market,
Nasdaq Global Market, Nasdaq Capital Market, or an established stock exchange,
the price of such stock at the close of the regular trading session of such
market or exchange on such date, as reported by The Wall Street Journal or
a comparable reporting service, or, if no sale of such stock shall have
occurred on such date, on the next preceding day on which there was a sale of
stock; (ii) if such stock is not so listed on the Nasdaq National Market,
Nasdaq SmallCap Market, or an established stock exchange, the average of the
closing “bid” and “asked” prices quoted by the OTC Bulletin Board, the Pink OTC
Markets, or any comparable reporting service on such date or, if there are no
quoted “bid” and “asked” prices on such date, on the next preceding date for
which there are such quotes; or (iii) if such stock is not publicly traded
as of such date, the per share value as determined by the Board, or the
Committee, in its sole discretion by applying principles of valuation with
respect to the Company’s Common Stock.

 

(e)                                  The “Internal Revenue Code” is the
Internal Revenue Code of 1986, as amended from time to time.

 

(f)                                    “Option Stock” shall mean Common Stock of
the Company (subject to adjustment as described in Section 12) reserved
for options pursuant to this Plan.

 

(g)                                 The “Optionee” means an employee of the
Company or any Affiliate to whom an incentive stock option has been granted
pursuant to Section 9; a consultant or advisor, to or director, employee
or officer, of the Company or any Affiliate to whom a nonqualified stock option
has been granted pursuant to Section 10; or a director to whom a
nonqualified stock option has been granted hereunder.

 

(h)                                 “Parent” shall mean any corporation which
owns, directly or indirectly in an unbroken chain, fifty percent (50%) or more
of the total voting power of the Company’s outstanding stock.

 

(i)                                     The “Plan” means the Winmark Corporation
2010 Stock Option Plan, as amended hereafter from time to time, including the
form of Option Agreements as they may be modified by the Administrator from
time to time.

 

 

(j)                                     A “Subsidiary” shall mean any corporation
of which fifty percent (50%) or more of the total voting power of outstanding
stock is owned, directly or indirectly in an unbroken chain, by the Company.

 

SECTION 2.

PURPOSE

 

The purpose of the
Plan is to promote the success of the Company and its Affiliates by
facilitating the employment and retention of competent personnel and by
furnishing incentive to officers, directors, employees, consultants, and
advisors upon whose efforts the success of the Company and its Affiliates will
depend to a large degree.

 

It is the
intention of the Company to carry out the Plan through the granting of stock
options which will qualify as “incentive stock options” under the provisions of
Section 422 of the Internal Revenue Code, or any successor provision, and
through the granting of “non-qualified stock options.”  Adoption of this Plan shall be and is
expressly subject to the condition of approval by the shareholders of the
Company within twelve (12) months before or after the adoption of the Plan by
the Board of Directors.  In the event
shareholder approval is not obtained within such twelve-month period, any
incentive stock options granted under the Plan shall automatically become
nonqualified stock options.

 

SECTION 3.

EFFECTIVE DATE OF PLAN

 

The Plan shall be
effective as of the date of adoption by the Board of Directors, subject to
approval by the shareholders of the Company as required in Section 2.

 

SECTION 4.

ADMINISTRATION

 

The Plan shall be
administered by the Committee which shall be appointed by the Board of
Directors of the Company (the “Board”) (hereinafter the Committee shall be
referred to as the “Administrator”).  The
Administrator shall have all of the powers vested in it under the provisions of
the Plan, including but not limited to exclusive authority (where applicable
and within the limitations described herein) to determine, in its sole
discretion, whether an incentive stock option or nonqualified stock option
shall be granted, the individuals to whom, and the time or times at which,
options shall be granted, the number of shares subject to each option and the
option price and terms and conditions of each option.  The Administrator shall have full power and
authority to administer and interpret the Plan, to make and amend rules,
regulations and guidelines for administering the Plan, to prescribe the form
and conditions of the respective stock option agreements (which may vary from
Optionee to Optionee) evidencing each option and to make all other
determinations necessary or advisable for the administration of the Plan.  The Administrator’s interpretation of the
Plan, and all actions taken and determinations made by the Administrator
pursuant to the power vested in it hereunder, shall be conclusive and binding
on all parties concerned.

 

No member of the
Board or the Committee shall be liable for any action taken or determination
made in good faith in connection with the administration of the Plan.  Any action of the Committee with respect to
the administration of the Plan shall be taken pursuant to a majority vote of
the Committee members or pursuant to the written resolution of all Committee
members.

 

 

SECTION 5.

PARTICIPANTS

 

The Administrator
shall from time to time, at its discretion and without approval of the
shareholders, designate those employees, officers, directors, consultants, and
advisors of the Company or of any Affiliate to whom nonqualified stock options
shall be granted under this Plan; provided, however, that consultants or
advisors shall not be eligible to receive stock options hereunder unless such
consultant or advisor renders bona fide services to the Company or Affiliate
and such services are not in connection with the offer or sale of securities in
a capital raising transaction and do not directly or indirectly promote or
maintain a market for the Company’s securities. 
The Administrator shall, from time to time, at its discretion and
without approval of the shareholders, designate those employees of the Company
or any Affiliate to whom incentive stock options shall be granted under this
Plan.  The Administrator may grant
additional incentive stock options or nonqualified stock options under this
Plan to some or all participants then holding options or may grant options
solely or partially to new participants. 
In designating participants, the Administrator shall also determine the
number of shares to be optioned to each such participant.  The Administrator may from time to time
designate individuals as being ineligible to participate in the Plan.

 

SECTION 6.

STOCK

 

The Stock to be optioned under this Plan shall consist
of authorized but unissued shares of Option Stock.  Two Hundred Fifty Thousand (250,000) shares
of Option Stock shall be reserved and available for options under the Plan;
provided, however, that the total number of shares of Option Stock reserved for
options under this Plan shall be subject to adjustment as provided in Section 12
of the Plan.  In the event that any outstanding
option under the Plan for any reason expires or is terminated prior to the
exercise thereof, the shares of Option Stock allocable to the unexercised
portion of such option shall continue to be reserved for options under the Plan
and may be optioned hereunder.

 

SECTION 7.

DURATION OF PLAN

 

Incentive stock options may be granted pursuant to the
Plan from time to time during a period of ten (10) years from the
effective date as defined in Section 3. 
Nonqualified stock options may be granted pursuant to the Plan from time
to time after the effective date of the Plan and until the Plan is discontinued
or terminated by the Board.

 

SECTION 8.

PAYMENT

 

Optionees may pay
for shares upon exercise of options granted pursuant to this Plan with cash,
personal check, certified check or, if approved by the Administrator in its
sole discretion, previously-owned shares of Option Stock valued at such stock’s
then Fair Market Value, or such other form of payment as may be authorized by
the Administrator.  The Administrator
may, in its sole discretion, limit the forms of payment available to the
Optionee and may exercise such discretion any time prior to the termination of
the Option granted to the Optionee or upon any exercise of the Option by the
Optionee.  “Previously-owned shares”
means shares of Option Stock which the Optionee has owned for at least six (6) months
prior to the exercise of the stock option, or for such other period of time as
may be required by generally accepted accounting principles.

 

 

With respect to
payment in the form of shares of Option Stock, the Administrator may require
advance approval or adopt such rules as it deems necessary to assure
compliance with Rule 16b-3, or any successor provision, as then in effect,
of the General Rules and Regulations under the Securities Exchange Act of
1934, if applicable.

 

SECTION 9.

TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS

 

Each incentive
stock option granted pursuant to this Section 9 shall be evidenced by a
written stock option agreement (the “Option Agreement”).  The Option Agreement shall be in such form as
may be approved from time to time by the Administrator and may vary from
Optionee to Optionee; provided, however, that each Optionee and each Option
Agreement shall comply with and be subject to the following terms and
conditions:

 

(a)                                  Number of Shares and Option Price. 
The Option Agreement shall state the total number of shares covered by
the incentive stock option.  To the
extent required to qualify the Option as an incentive stock option under Section 422
of the Internal Revenue Code, or any successor provision, the option price per
share shall not be less than one hundred percent (100%) of the per share Fair
Market Value of the Option Stock on the date the Administrator grants the
option; provided, however, that if an Optionee owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of its parent or any Subsidiary, the option price per share of
an incentive stock option granted to such Optionee shall not be less than one
hundred ten percent (110%) of the per share Fair Market Value of the Option
Stock on the date of the grant of the option. 
The Administrator shall have full authority and discretion in
establishing the option price and shall be fully protected in so doing.

 

(b)                                 Term and Exercisability of Incentive
Stock Option.  The term during which any incentive stock
option granted under the Plan may be exercised shall be established in each
case by the Administrator .  To the
extent required to qualify the Option as an incentive stock option under Section 422
of the Internal Revenue Code, or any successor provision, in no event shall any
incentive stock option be exercisable during a term of more than ten (10) years
after the date on which it is granted; provided, however, that if an Optionee
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of its parent or any
Subsidiary, the incentive stock option granted to such Optionee shall be
exercisable during a term of not more than five (5) years after the date
on which it is granted.  The Option
Agreement shall state when the incentive stock option becomes exercisable and
shall also state the maximum term during which the option may be
exercised.  In the event an incentive
stock option is exercisable immediately, the manner of exercise of the option
in the event it is not exercised in full immediately shall be specified in the
Option Agreement.  The Administrator may
accelerate the exercise date of any incentive stock option granted hereunder
which is not immediately exercisable as of the date of grant.

 

(c)                                  Other Provisions. 
The Option Agreement authorized under this Section 9 shall contain
such other provisions as the Administrator shall deem advisable.  Any such Option Agreement shall contain such
limitations and restrictions upon the exercise of the option as shall be
necessary to ensure that such option will be considered an “incentive stock
option” as defined in Section 422 of the Internal Revenue Code or to
conform to any change therein.

 

 

SECTION 10.

TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS

 

Each nonqualified
stock option granted pursuant to this Section 10 shall be evidenced by a
written Option Agreement.  The Option
Agreement shall be in such form as may be approved from time to time by the
Administrator and may vary from Optionee to Optionee; provided, however, that
each Optionee and each Option Agreement shall comply with and be subject to the
following terms and conditions:

 

(a)                                  Number of Shares and Option Price. 
The Option Agreement shall state the total number of shares covered by
the nonqualified stock option.  Unless
otherwise determined by the Administrator, the option price per share shall be
one hundred percent (100%) of the per share Fair Market Value of the Option
Stock on the date the Administrator grants the option; provided, however, that
the option price per share may not be less than eighty-five percent (85%) of
the per share Fair Market Value of the Option Stock on the date of grant.

 

(b)                                 Term and Exercisability of Nonqualified
Stock Option.  The term during which any nonqualified stock
option granted under the Plan may be exercised shall be established in each
case by the Administrator.  The Option
Agreement shall state when the nonqualified stock option becomes exercisable
and shall also state the maximum term during which the option may be
exercised.  In the event a nonqualified
stock option is exercisable immediately, the manner of exercise of the option
in the event it is not exercised in full immediately shall be specified in the
stock option agreement.  The
Administrator may accelerate the exercise date of any nonqualified stock option
granted hereunder which is not immediately exercisable as of the date of grant.

 

(c)                                  Withholding. 
The Company or its Affiliate shall be entitled to withhold and deduct
from future wages of the Optionee all legally required amounts necessary to
satisfy any and all withholding and employment-related taxes attributable to
the Optionee’s exercise of a nonqualified stock option.  In the event the Optionee is required under
the Option Agreement to pay the Company, or make arrangements satisfactory to
the Company respecting payment of, such withholding and employment-related
taxes, the Administrator may, in its discretion and pursuant to such rules as
it may adopt, permit the Optionee to satisfy such obligation, in whole or in
part, by electing to have the Company withhold shares of Option Stock otherwise
issuable to the Optionee as a result of the option’s exercise having a Fair
Market Value equal to the minimum required tax withholding, based on the
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to the supplemental income
resulting from the option.  In no event
may the Company or any Affiliate withhold shares having a Fair Market Value in
excess of such statutory minimum required tax withholding.  The Optionee’s election to have shares
withheld for this purpose shall be made on or before the date the option is
exercised or, if later, the date that the amount of tax to be withheld is
determined under applicable tax law. 
Such election shall be approved by the Administrator and otherwise
comply with such rules as the Administrator may adopt to assure compliance
with Rule 16b-3, or any successor provision, as then in effect, of the
General Rules and Regulations under the Securities Exchange Act of 1934,
if applicable.

 

(d)                                 Other Provisions. 
The Option Agreement authorized under this Section 10 shall contain
such other provisions as the Administrator shall deem advisable.

 

 

SECTION 11.

TRANSFER OF OPTION

 

No incentive stock option shall be transferable, in
whole or in part, by the Optionee other than by will or by the laws of descent
and distribution and, during the Optionee’s lifetime, the option may be
exercised only by the Optionee.  If the
Optionee shall attempt any transfer of any incentive stock option granted under
the Plan during the Optionee’s lifetime, such transfer shall be void and the
incentive stock option, to the extent not fully exercised, shall terminate.

 

No nonqualified
stock option shall be transferred, except that the Administrator may, in its
sole discretion, permit the Optionee to transfer any or all nonqualified stock
options to any member of the Optionee’s “immediate family” as such term is
defined in Rule 16a-1(e) promulgated under the Securities Exchange
Act of 1934, or any successor provision, or to one or more trusts whose
beneficiaries are members of such Optionee’s “immediate family” or partnerships
in which such family members are the only partners; provided, however, that the
Optionee receives no consideration for the transfer and such transferred nonqualified
stock option shall continue to be subject to the same terms and conditions as
were applicable to such nonqualified stock option immediately prior to its
transfer.

 

SECTION 12.

RECAPITALIZATION, SALE, MERGER, EXCHANGE

OR LIQUIDATION

 

If, following adoption
of this Plan, the Company effects an increase or decrease in the number of
shares of Common Stock in the form of a subdivision or consolidation of shares,
or the payment of a stock dividend, or effects any other increase or decrease
in the number of shares of Common Stock without receipt of consideration by the
Company, the number of shares of Option Stock reserved under Section 6
hereof and the number of shares of Option Stock covered by each outstanding
option and the price per share thereof shall be appropriately adjusted by the
Board to reflect such change.  Additional
shares which may be credited pursuant to such adjustment shall be subject to
the same restrictions as are applicable to the shares with respect to which the
adjustment relates.

 

Unless otherwise provided
in the Option Agreement, in the event of an acquisition of the Company through
the sale of substantially all of the Company’s assets and the consequent
discontinuance of its business or through a merger, consolidation, exchange, reorganization,
reclassification, extraordinary dividend, divestiture or liquidation of the
Company (collectively referred to as a “transaction”), all outstanding stock
options shall become immediately exercisable, whether or not such options had
become exercisable prior to the transaction. 
In addition to the foregoing, the Board may provide for one or more of
the following:

 

(a)                                  the complete termination of this Plan and
the cancellation of outstanding options not exercised prior to a date specified
by the Board (which date shall give Optionees a reasonable period of time in
which to exercise the options prior to the effectiveness of such transaction);

 

(b)                                 that Optionees holding outstanding stock
options shall receive, with respect to each share of Stock subject to such
options, as of the effective date of any such transaction, cash in an amount
equal to the excess of the Fair Market Value of such Stock on the date
immediately preceding the effective date of such transaction over the option
price per share of such options; provided that the Board may, in lieu of such
cash payment, distribute to such Optionees shares of stock of the Company or
shares of stock of any corporation succeeding the Company by reason of such
transaction, such shares having a value equal to the cash payment herein;

 

 

(c)                                  the continuance of the Plan with respect
to the exercise of options which were outstanding as of the date of adoption by
the Board of such plan for such transaction and provide to Optionees holding
such options the right to exercise their respective options as to an equivalent
number of shares of stock of the corporation succeeding the Company by reason
of such transaction.

 

The Board may restrict
the rights of or the applicability of this Section 12 to the extent necessary
to comply with Section 16(b) of the Securities Exchange Act of 1934,
the Internal Revenue Code or any other applicable law or regulation.  The grant of an option pursuant to the Plan
shall not limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, exchange or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.

 

SECTION 13.

INVESTMENT PURPOSE

 

No shares of
Option Stock shall be issued pursuant to the Plan unless and until there has
been compliance, in the opinion of Company’s counsel, with all applicable legal
requirements, including without limitation, those relating to securities laws
and stock exchange listing requirements. 
As a condition to the issuance of Option Stock to Optionee, the
Administrator may require Optionee to (a) represent that the shares of
Option Stock are being acquired for investment and not resale and to make such
other representations as the Administrator shall deem necessary or appropriate
to qualify the issuance of the shares as exempt from the Securities Act of 1933
and any other applicable securities laws, and (b) represent that Optionee
shall not dispose of the shares of Option Stock in violation of the Securities
Act of 1933 or any other applicable securities laws.

 

As a further condition to the grant of any stock
option or the issuance of Option Stock to Optionee, Optionee agrees to the
following:

 

(a)                                  In the event the Company advises Optionee
that it plans an underwritten public offering of its Common Stock in compliance
with the Securities Act of 1933, as amended, and the underwriter(s) seek
to impose restrictions under which certain shareholders may not sell or contract
to sell or grant any option to buy or otherwise dispose of part or all of their
stock purchase rights of the underlying Common Stock, Optionee will not, for a
period not to exceed 180 days from the prospectus, sell or contract to sell or
grant an option to buy or otherwise dispose of any stock option granted to
Optionee pursuant to the Plan or any of the underlying shares of Option Stock
without the prior written consent of the underwriter(s) or its
representative(s).

 

(b)                                 In the event the Company makes any public
offering of its securities and determines in its sole discretion that it is
necessary to reduce the number of issued but unexercised stock purchase rights
so as to comply with any states securities or Blue Sky law limitations with
respect thereto, the Administrator shall have the right (i) to accelerate
the exercisability of any stock option and the date on which such option must
be exercised, provided that the Company gives Optionee prior written notice of
such acceleration, and (ii) to cancel any options or portions thereof
which Optionee does not exercise prior to or contemporaneously with such public
offering.

 

The Company reserves the
right to place a legend on any stock certificate issued upon exercise of an
option granted pursuant to the Plan to assure compliance with this Section 13.

 

 

SECTION 14.

RIGHTS AS
A SHAREHOLDER

 

An Optionee (or
the Optionee’s successor or successors) shall have no rights as a shareholder
with respect to any shares covered by an option until the date of the issuance
of a stock certificate evidencing such shares. 
No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property), distributions or other rights
for which the record date is prior to the date such stock certificate is
actually issued (except as otherwise provided in Section 12 of the Plan).

 

SECTION 15.

AMENDMENT OF THE PLAN

 

The Administrator may from time to time, insofar as
permitted by law, suspend or discontinue the Plan or revise or amend it in any
respect; provided, however, that no such revision or amendment, except as is
authorized in Section 12, shall impair the terms and conditions of any
option which is outstanding on the date of such revision or amendment to the
material detriment of the Optionee without the consent of the Optionee.  Notwithstanding the foregoing, no such
revision or amendment shall (i) increase the number of shares subject to
the Plan except as provided in Section 12 hereof, (ii) change the
designation of the class of employees eligible to receive options, (iii) decrease
the price at which options may be granted, (iv) materially increase the
benefits accruing to Optionees under the Plan, or otherwise make any material
amendment of the Plan as defined under any listing regulations of the stock
exchange in which the Company’s common stock is listed without the approval of
the shareholders of the Company if such approval is required for compliance
with the requirements of any applicable law or regulation.  Furthermore, the Plan may not, without the
approval of the shareholders, be amended in any manner that will cause
incentive stock options to fail to meet the requirements of Section 422 of
the Internal Revenue Code.

 

SECTION 16.

NO OBLIGATION TO EXERCISE OPTION

 

The granting of an
option shall impose no obligation upon the Optionee to exercise such
option.  Further, the granting of an
option hereunder shall not impose upon the Company or any Affiliate any
obligation to retain the Optionee in its employ for any period.

 

 

INCENTIVE STOCK OPTION AGREEMENT

 

WINMARK CORPORATION

2010 STOCK OPTION PLAN

 

THIS AGREEMENT, made effective as of this
             day of
                              ,
              ,
by and between Winmark Corporation, a Minnesota corporation (the “Company”),
and
                                  
(“Optionee”).

 

W I T N E S S E T H:

 

WHEREAS, Optionee
on the date hereof is a key employee or officer of the Company or an Affiliate;
and

 

WHEREAS, the
Company wishes to grant an incentive stock option to Optionee to purchase
shares of the Company’s Common Stock pursuant to the Company’s 2010 Stock
Option Plan (the “Plan”); and

 

                                                WHEREAS, the Administrator of the Plan
has authorized the grant of an incentive stock option to Optionee and has
determined that, as of the effective date of this Agreement, the fair market
value of the Company’s Common Stock is
$         per share;

 

NOW, THEREFORE, in
consideration of the premises and of the mutual covenants herein contained, the
parties hereto agree as follows:

 

1.                                       Grant of Option. 
The Company hereby grants to Optionee on the date set forth above (the
“Date of Grant”), the right and option (the “Option”) to purchase all or
portions of an aggregate of                             
(                            )
shares of Common Stock (the “Stock”) at a per share price of
$             on
the terms and conditions set forth herein, and subject to adjustment pursuant
to Section 12 of the Plan.  This
Option is intended to be an incentive stock option within the meaning of Section 422,
or any successor provision, of the Internal Revenue Code of 1986, as amended
(the “Code”), and the regulations thereunder, to the extent permitted under
Code Section 422(d).

 

2.                                       Duration and
Exercisability.

 

a.                                       General. 
The term during which this Option may be exercised shall terminate on
                        ,
                except as otherwise provided in Paragraphs 2(b) through
2(d) below.  This Option shall
become exercisable according to the following schedule:

 

	
  Vesting
  Date

  	
   

  	
  Cumulative Percentage

  of Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

Once the Option becomes
exercisable to the extent of one hundred percent (100%) of the aggregate number
of shares specified in Paragraph 1, Optionee may continue to exercise this
Option under the terms and conditions of this Agreement until the termination
of the Option as provided herein.  If
Optionee does not purchase upon an exercise of this Option the full number of
shares which Optionee is then entitled to purchase, Optionee may purchase upon
any subsequent exercise prior to this Option’s termination such previously
unpurchased shares in addition to those Optionee is otherwise entitled to
purchase.

 

 

b.                                      Termination of Employment
(Other Than Disability or Death).  If Optionee’s
employment with the Company or its Affiliate is terminated for any reason other
than disability or death, this Option shall terminate on the earlier of (i) the
close of business on the three-month anniversary date of the such termination
of employment, and (ii) the expiration date of this Option stated in
Paragraph 2(a) above.  In such
period following the termination of Optionee’s employment, this Option shall be
exercisable only to the extent the Option was exercisable on the vesting date
immediately preceding such termination of employment, but had not previously
been exercised.  To the extent this
Option was not exercisable upon such termination of employment, or if Optionee
does not exercise the Option within the time specified in this Paragraph 2(b),
all rights of Optionee under this Option shall be forfeited.

 

c.                                       Disability. 
If Optionee’s employment terminates because of disability (as defined in
Code Section 22(e), or any successor provision), this Option shall
terminate on the earlier of (i) the close of business on the twelve-month
anniversary date of the such termination of employment, and (ii) the
expiration date of this Option stated in Paragraph 2(a) above.  In such period following the termination of
Optionee’s employment, this Option shall be exercisable only to the extent the
Option was exercisable on the vesting date immediately preceding such
termination of employment, but had not previously been exercised.  To the extent this Option was not exercisable
upon such termination of employment, or if Optionee does not exercise the
Option within the time specified in this Paragraph 2(c), all rights of Optionee
under this Option shall be forfeited.

 

d.                                      Death. 
In the event of Optionee’s death, this Option shall terminate on the
earlier of (i) the close of business on the twelve-month anniversary date
of the date of Optionee’s death, and (ii) the expiration date of this
Option stated in Paragraph 2(a) above. 
In such period following Optionee’s death, this Option shall be
exercisable by the person or persons to whom Optionee’s rights under this
Option shall have passed by Optionee’s will or by the laws of descent and
distribution only to the extent the Option was exercisable on the vesting date
immediately preceding the date of Optionee’s death, but had not previously been
exercised.  To the extent this Option was
not exercisable upon the date of Optionee’s death, or if such person or persons
do not exercise this Option within the time specified in this Paragraph 2(d),
all rights under this Option shall be forfeited.

 

3.                                       Manner of Exercise.

 

a.                                       General. 
The Option may be exercised only by Optionee (or other proper party in
the event of death or incapacity), subject to the conditions of the Plan and
subject to such other administrative rules as the Administrator may deem
advisable, by delivering within the Option Period written notice of exercise to
the Company at its principal office.  The
notice shall state the number of shares as to which the Option is being
exercised and shall be accompanied by payment in full of the Option price for
all shares designated in the notice.  The
exercise of the Option shall be deemed effective upon receipt of such notice by
the Company and upon payment that complies with the terms of the Plan and this
Agreement.  The Option may be exercised
with respect to any number or all of the shares as to which it can then be
exercised and, if partially exercised, may be so exercised as to the
unexercised shares any number of times during the Option period as provided
herein.

 

 

b.                                      Form of Payment. 
Subject to approval by the Administrator, payment of the option price by
Optionee shall be in the form of cash, personal check, certified check or
previously acquired shares of Stock of the Company, or any combination
thereof.  Any Stock so tendered as part
of such payment shall be valued at its Fair Market Value as provided in the
Plan.  For purposes of this Agreement,
“previously-owned shares” means shares of Stock which the Optionee has owned
for at least six (6) months prior to the exercise of the stock option, or
for such other period of time as may be required by generally accepted
accounting principles.

 

c.                                       Stock Transfer Records. 
As soon as practicable after the effective exercise of all or any part
of the Option, Optionee shall be recorded on the stock transfer books of the
Company as the owner of the shares purchased, and the Company shall deliver to
Optionee one or more duly issued stock certificates evidencing such
ownership.  All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.

 

4.                                       Miscellaneous.

 

a.                                       Employment; Rights as
Shareholder.  This Agreement shall not confer on Optionee
any right with respect to continuance of employment by the Company or any of
its Affiliates, nor will it interfere in any way with the right of the Company
to terminate such employment.  Optionee
shall have no rights as a shareholder with respect to shares subject to this
Option until such shares have been issued to Optionee upon exercise of this
Option.  No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property), distributions or other rights for which the record date is prior to
the date such shares are issued, except as provided in Section 12 of the
Plan.

 

b.                                      Securities Law Compliance. 
The exercise of all or any parts of this Option shall only be effective
at such time as counsel to the Company shall have determined that the issuance
and delivery of Stock pursuant to such exercise will not violate any state or
federal securities or other laws. 
Optionee may be required by the Company, as a condition of the
effectiveness of any exercise of this Option, to agree in writing that all Stock
to be acquired pursuant to such exercise shall be held, until such time that
such Stock is registered and freely tradable under applicable state and federal
securities laws, for Optionee’s own account without a view to any further
distribution thereof, that the certificates for such shares shall bear an
appropriate legend to that effect and that such shares will be not transferred
or disposed of except in compliance with applicable state and federal
securities laws.

 

c.                                       Mergers,
Recapitalizations, Stock Splits, Etc.  Pursuant and
subject to Section 12 of the Plan, certain changes in the number or
character of the Stock (through sale, merger, consolidation, exchange,
reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an
adjustment, reduction or enlargement, as appropriate, in Optionee’s rights with
respect to any unexercised portion of the Option (i.e., Optionee shall
have such “anti-dilution” rights under the Option with respect to such events,
but shall not have “preemptive” rights).

 

d.                                      Shares Reserved. 
The Company shall at all times during the option period reserve and keep
available such number of shares as will be sufficient to satisfy the
requirements of this Agreement.

 

 

e.                                       Withholding Taxes on
Disqualifying Disposition.  In the event
of a disqualifying disposition of the shares acquired through the exercise of
this Option, Optionee hereby agrees to inform the Company of such
disposition.  Upon notice of a disqualifying
disposition, the Company may take such action as it deems appropriate to insure
that, if necessary to comply with all applicable federal or state income tax
laws or regulations, all applicable federal and state payroll, income or other
taxes are withheld from any amounts payable by the Company to Optionee.  If the Company is unable to withhold such
federal and state taxes, for whatever reason, Optionee hereby agrees to pay to
the Company an amount equal to the amount the Company would otherwise be
required to withhold under federal or state law.  Optionee may, subject to the approval and
discretion of the Administrator or such administrative rules it may deem
advisable, elect to have all or a portion of such tax withholding obligations
satisfied by delivering shares of Stock having a Fair Market Value equal to
such obligations.

 

f.                                         Nontransferability. 
During the lifetime of Optionee, the accrued Option shall be exercisable
only by Optionee or by the Optionee’s guardian or other legal representative,
and shall not be assignable or transferable by Optionee, in whole or in part,
other than by will or by the laws of descent and distribution.

 

g.                                      2010 Stock Option Plan. 
The Option evidenced by this Agreement is granted pursuant to the Plan,
a copy of which Plan has been made available to Optionee and is hereby
incorporated into this Agreement.  This
Agreement is subject to and in all respects limited and conditioned as provided
in the Plan.  The Plan governs this
Option and, in the event of any questions as to the construction of this
Agreement or in the event of a conflict between the Plan and this Agreement,
the Plan shall govern, except as the Plan otherwise provides.

 

h.                                      Lockup Period Limitation. 
Optionee agrees that in the event the Company advises Optionee that it
plans an underwritten public offering of its Common Stock in compliance with
the Securities Act of 1933, as amended, and that the underwriter(s) seek
to impose restrictions under which certain shareholders may not sell or
contract to sell or grant any option to buy or otherwise dispose of part or all
of their stock purchase rights of the underlying Common Stock, Optionee hereby
agrees that for a period not to exceed 180 days from the prospectus, Optionee
will not sell or contract to sell or grant an option to buy or otherwise
dispose of this option or any of the underlying shares of Stock without the
prior written consent of the underwriter(s) or its representative(s).

 

i.                                          Blue Sky Limitation. 
Notwithstanding anything in this Agreement to the contrary, in the event
the Company makes any public offering of its securities and determines in its
sole discretion that it is necessary to reduce the number of issued but
unexercised stock purchase rights so as to comply with any state securities or
Blue Sky law limitations with respect thereto, the Administrator shall have the
right (i) to accelerate the exercisability of this Option and the date on
which this Option must be exercised, provided that the Company gives Optionee
15 days’ prior written notice of such acceleration, and (ii) to cancel any
portion of this Option or any other option granted to Optionee pursuant to the
Plan which is not exercised prior to or contemporaneously with such public
offering.  Notice shall be deemed given
when delivered personally or when deposited in the United States mail, first
class postage prepaid and addressed to Optionee at the address of Optionee on
file with the Company.

 

 

j.                                          Stock Legend. 
The Administrator may require that the certificates for any shares of
Stock purchased by Optionee (or, in the case of death, Optionee’s successors)
shall bear an appropriate legend to reflect the restrictions of Paragraph 4(b) and
Paragraphs 4(h) through 4(j) of this Agreement.

 

k.                                       Scope of Agreement. 
This Agreement shall bind and inure to the benefit of the Company and
its successors and assigns and Optionee and any successor or successors of
Optionee permitted by Paragraph 2 or Paragraph 4(f) above.

 

l.                                          Arbitration. 
Any dispute arising out of or relating to this Agreement or the alleged
breach of it, or the making of this Agreement, including claims of fraud in the
inducement, shall be discussed between the disputing parties in a good faith
effort to arrive at a mutual settlement of any such controversy.  If, notwithstanding, such dispute cannot be
resolved, such dispute shall be settled by binding arbitration.  Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.  The arbitrator shall be a retired state or
federal judge or an attorney who has practiced securities or business
litigation for at least 10 years.  If the
parties cannot agree on an arbitrator within 20 days, any party may request
that the chief judge of the District Court for Hennepin County, Minnesota,
select an arbitrator.  Arbitration will
be conducted pursuant to the provisions of this Agreement, and the commercial
arbitration rules of the American Arbitration Association, unless such rules are
inconsistent with the provisions of this Agreement.  Limited civil discovery shall be permitted
for the production of documents and taking of depositions.  Unresolved discovery disputes may be brought
to the attention of the arbitrator who may dispose of such dispute.  The arbitrator shall have the authority to
award any remedy or relief that a court of this state could order or grant;
provided, however, that punitive or exemplary damages shall not be
awarded.  The arbitrator may award to the
prevailing party, if any, as determined by the arbitrator, all of its costs and
fees, including the arbitrator’s fees, administrative fees, travel expenses,
out-of-pocket expenses and reasonable attorneys’ fees.  Unless otherwise agreed by the parties, the
place of any arbitration proceedings shall be Hennepin County, Minneapolis.

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed on the
day and year first above written.

 

	
  WINMARK
  CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  	
  Optionee

  
					

 

 

NONQUALIFIED
STOCK OPTION AGREEMENT

 

WINMARK
CORPORATION

2010
STOCK OPTION PLAN

 

THIS AGREEMENT, made
effective as of this
             day of
                      ,
          , by and between
Winmark Corporation, a Minnesota corporation (the “Company”), and
                                
(“Optionee”).

 

W I T N E S S E T
H:

 

WHEREAS, Optionee on the
date hereof is a key employee, officer or director of the Company or an
Affiliate; and

 

WHEREAS, the Company
wishes to grant a nonqualified stock option to Optionee to purchase shares of
the Company’s Common Stock pursuant to the Company’s 2010 Stock Option Plan
(the “Plan”); and

 

WHEREAS, the
Administrator has authorized the grant of a nonqualified stock option to
Optionee and has determined that, as of the effective date of this Agreement,
the fair market value of the Company’s Common Stock is
$                
per share;

 

NOW, THEREFORE, in
consideration of the premises and of the mutual covenants herein contained, the
parties hereto agree as follows:

 

1.                                       Grant of Option. 
The Company hereby grants to Optionee on the date set forth above (the
“Date of Grant”), the right and option (the “Option”) to purchase all or
portions of an aggregate of
              
(                                )
shares of Common Stock (the “Stock”) at a per share price of
$             on
the terms and conditions set forth herein, and subject to adjustment pursuant
to Section 12 of the Plan.  This
Option is a nonqualified stock option and will not be treated as an incentive
stock option, as defined under Section 422, or any successor provision, of
the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations
thereunder.

 

2.                                       Duration and
Exercisability.

 

a.                                       General. 
The term during which this Option may be exercised shall terminate on
                              ,
            ,
except as otherwise provided in Paragraphs 2(b) through 2(d) below.  This Option shall become exercisable
according to the following schedule:

 

	
  Vesting
  Date

  	
   

  	
  Cumulative Percentage

  of Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

Once the Option becomes
fully exercisable, Optionee may continue to exercise this Option under the
terms and conditions of this Agreement until the termination of the Option as
provided herein.  If Optionee does not
purchase upon an exercise of this Option the full number of shares which
Optionee is then entitled to purchase, Optionee may purchase upon any
subsequent exercise prior to this Option’s termination such previously
un-purchased shares in addition to those Optionee is otherwise entitled to
purchase.

 

 

b.                                      Termination of
Relationship (Other Than Disability or Death). 
If Optionee’s relationship with the Company or any Subsidiary is
terminated for any reason other than disability or death, this Option shall
completely terminate on the earlier of (i) the close of business on the
three-month anniversary date of the termination of such relationship, and (ii) the
expiration date of this Option stated in Paragraph 2(a) above.  In such period following such termination,
this Option shall be exercisable only to the extent the Option was exercisable
on the vesting date immediately preceding the date on which Optionee’s
relationship with the Company or Subsidiary terminated, but had not previously
been exercised.  To the extent this
Option was not exercisable upon the termination of such relationship, or if
Optionee does not exercise the Option within the time specified in this
Paragraph 2(b), all rights of Optionee under this Option shall be forfeited.

 

c.                                       Disability. 
If Optionee ceases to be [an employee] [a consultant] [a nonemployee
director] of the Company or any Subsidiary because of disability (as defined in
Code Section 22(e), or any successor provision), this Option shall
completely terminate on the earlier of (i) the close of business on the
twelve-month anniversary date of the termination of all such relationships, and
(ii) the expiration date of this Option stated in Paragraph 2(a) above.  In such period following such termination,
this Option shall be exercisable only to the extent the Option was exercisable
on the vesting date immediately preceding the date on which all of Optionee’s
relationships with the Company or Subsidiary have terminated, but had not
previously been exercised.  To the extent
this Option was not exercisable upon the termination of such relationship, or
if Optionee does not exercise the Option within the time specified in this
Paragraph 2(c), all rights of Optionee under this Option shall be forfeited.

 

d.                                      Death. 
In the event of Optionee’s death, this Option shall terminate on the
earlier of (i) the close of business on the twelve-month anniversary date
of the date of Optionee’s death, and (ii) the expiration date of this
Option stated in Paragraph 2(a) above. 
In such period following Optionee’s death, this Option may be exercised
by the person or persons to whom Optionee’s rights under this Option shall have
passed by Optionee’s will or by the laws of descent and distribution only to
the extent the Option was exercisable on the vesting date immediately preceding
the date of Optionee’s death, but had not previously been exercised.  To the extent this Option was not exercisable
upon the date of Optionee’s death, or if such person or persons fail to
exercise this Option within the time specified in this Paragraph 2(d), all
rights under this Option shall be forfeited.

 

3.                                       Manner of Exercise.

 

a.                                       General. 
The Option may be exercised only by Optionee (or other proper party in
the event of death or incapacity), subject to the conditions of the Plan and
subject to such other administrative rules as the Administrator may deem
advisable, by delivering within the option period written notice of exercise to
the Company at its principal office.  The
notice shall state the number of shares as to which the Option is being
exercised and shall be accompanied by payment in full of the option price for
all shares designated in the notice.  The
exercise of the Option shall be deemed effective upon receipt of such notice by
the Company and upon payment that complies with the terms of the Plan and this
Agreement.  The Option may be exercised
with respect to any number or all of the shares as to which it can then be
exercised and, if partially exercised, may be exercised as to the unexercised
shares any number of times during the option period as provided herein.

 

 

b.                                      Form of Payment. 
Subject to the approval of the Administrator, payment of the option
price by Optionee shall be in the form of cash, personal check, certified check
or previously acquired shares of Stock of the Company, or any combination
thereof.  Any Stock so tendered as part
of such payment shall be valued at its Fair Market Value as provided in the
Plan.  For purposes of this Agreement,
“previously-owned shares” means shares of Stock which the Optionee has owned
for at least six (6) months prior to the exercise of the stock option, or
for such other period of time as may be required by generally accepted
accounting principles.

 

c.                                       Stock Transfer Records. 
As soon as practicable after the effective exercise of all or any part
of the Option, Optionee shall be recorded on the stock transfer books of the
Company as the owner of the shares purchased, and the Company shall deliver to
Optionee one or more duly issued stock certificates evidencing such
ownership.  All requisite original issue
or transfer documentary stamp taxes shall be paid by the Company.

 

4.                                       Miscellaneous.

 

a.                                       Rights as Shareholder. 
This Agreement shall not confer on Optionee any right with respect to
the continuance of any relationship with the Company or any of its
Affiliates,  nor will it interfere in any
way with the right of the Company to terminate any such relationship.  Optionee shall have no rights as a
shareholder with respect to shares subject to this Option until such shares
have been issued to Optionee upon exercise of this Option.  No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such shares are issued, except as provided in Section 12 of the Plan.

 

b.                                      Securities Law
Compliance.  The exercise of all or any parts of this
Option shall only be effective at such time as counsel to the Company shall
have determined that the issuance and delivery of Stock pursuant to such
exercise will not violate any state or federal securities or other laws.  Optionee may be required by the Company, as a
condition of the effectiveness of any exercise of this Option, to agree in
writing that all Stock to be acquired pursuant to such exercise shall be held,
until such time that such Stock is registered and freely tradable under
applicable state and federal securities laws, for Optionee’s own account
without a view to any further distribution thereof and that such shares will be
not transferred or disposed of except in compliance with applicable state and
federal securities laws.

 

c.                                       Mergers,
Recapitalizations, Stock Splits, Etc.  Pursuant and
subject to Section 12 of the Plan, certain changes in the number or
character of the Stock of the Company (through sale, merger, consolidation,
exchange, reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an
adjustment, reduction or enlargement, as appropriate, in Optionee’s rights with
respect to any unexercised portion of the Option (i.e., Optionee shall have
such “anti-dilution” rights under the Option with respect to such events, but
shall not have “preemptive” rights).

 

d.                                      Shares Reserved. 
The Company shall at all times during the option period reserve and keep
available such number of shares as will be sufficient to satisfy the
requirements of this Agreement.

 

 

e.                                       Withholding Taxes. 
In order to permit the Company to comply with all applicable federal or
state income tax laws or regulations, the Company may take such action as it
deems appropriate to insure that, if necessary, all applicable federal or state
payroll, income or other taxes are withheld from any amounts payable by the
Company to Optionee.  If the Company is
unable to withhold such federal and state taxes, for whatever reason, Optionee
hereby agrees to pay to the Company an amount equal to the amount the Company
would otherwise be required to withhold under federal or state law.

 

Subject to such rules as
the Administrator may adopt, the Administrator may, in its sole discretion,
permit a Optionee to satisfy such withholding tax obligations, in whole or in
part (i) by delivering shares of Stock of having an equivalent fair market
value, or (ii) by electing to have the Company withhold shares of Stock
otherwise issuable to Optionee having a Fair Market Value equal to the minimum
required tax withholding, based on the minimum statutory withholding rates for
federal and state tax purposes, including payroll taxes, that are applicable to
the supplemental income resulting from the option.  In no event may the Company or Affiliate
withhold shares having a Fair Market Value in excess of such statutory minimum
required tax withholding.  Optionee’s
election to have shares withheld for purposes of such withholding tax
obligations shall be made on or before the date that triggers such obligations
or, if later, the date that the amount of tax to be withheld is determined
under applicable tax law.  Optionee’s
election shall be approved by the Administrator and otherwise comply with such rules as
the Administrator may adopt to assure compliance with Rule 16b-3 or any
successor provision, as then in effect, of the General Rules and
Regulations under the Securities and Exchange Act of 1934, if applicable.

 

f.                                         Nontransferability. 
During the lifetime of Optionee, the accrued Option shall be exercisable
only by Optionee or by the Optionee’s guardian or other legal representative,
and shall not be assignable or transferable by Optionee, in whole or in part,
other than by will or by the laws of descent and distribution.

 

g.                                      2010 Stock Option Plan. 
The Option evidenced by this Agreement is granted pursuant to the Plan,
a copy of which Plan has been made available to Optionee and is hereby
incorporated into this Agreement.  This
Agreement is subject to and in all respects limited and conditioned as provided
in the Plan.  All defined terms of the
Plan shall have the same meaning when used in this Agreement.  The Plan governs this Option and, in the
event of any questions as to the construction of this Agreement or in the event
of a conflict between the Plan and this Agreement, the Plan shall govern,
except as the Plan otherwise provides.

 

h.                                      Lockup Period Limitation. 
Optionee agrees that in the event the Company advises Optionee that it
plans an underwritten public offering of its Common Stock in compliance with
the Securities Act of 1933, as amended, and that the underwriter(s) seek
to impose restrictions under which certain shareholders may not sell or
contract to sell or grant any option to buy or otherwise dispose of part or all
of their stock purchase rights of the underlying Common Stock, Optionee hereby
agrees that for a period not to exceed 180 days from the prospectus, Optionee
will not sell or contract to sell or grant an option to buy or otherwise
dispose of this option or any of the underlying shares of Stock without the
prior written consent of the underwriter(s) or its representative(s).

 

 

i.                                          Blue Sky Limitation. 
Notwithstanding anything in this Agreement to the contrary, in the event
the Company makes any public offering of its securities and determines in its
sole discretion that it is necessary to reduce the number of issued but
unexercised stock purchase rights so as to comply with any state securities or
Blue Sky law limitations with respect thereto, the Administrator shall have the
right (i) to accelerate the exercisability of this Option and the date on
which this Option must be exercised, provided that the Company gives Optionee
15 days’ prior written notice of such acceleration, and (ii) to cancel any
portion of this Option or any other option granted to Optionee pursuant to the
Plan which is not exercised prior to or contemporaneously with such public
offering.  Notice shall be deemed given
when delivered personally or when deposited in the United States mail, first
class postage prepaid and addressed to Optionee at the address of Optionee on
file with the Company.

 

j.                                          Stock Legend. 
The Administrator may require that the certificates for any shares of
Common Stock purchased by Optionee (or, in the case of death, Optionee’s
successors) shall bear an appropriate legend to reflect the restrictions of
Paragraph 4(b) and Paragraphs 4(h) through 4(j) of this
Agreement.

 

k.                                       Scope of Agreement. 
This Agreement shall bind and inure to the benefit of the Company and
its successors and assigns and Optionee and any successor or successors of
Optionee permitted by Paragraph 2 or Paragraph 4(f) above.

 

l.                                          Arbitration. 
Any dispute arising out of or relating to this Agreement or the alleged
breach of it, or the making of this Agreement, including claims of fraud in the
inducement, shall be discussed between the disputing parties in a good faith
effort to arrive at a mutual settlement of any such controversy.  If, notwithstanding, such dispute cannot be
resolved, such dispute shall be settled by binding arbitration.  Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.  The arbitrator shall be a retired state or
federal judge or an attorney who has practiced securities or business
litigation for at least 10 years.  If the
parties cannot agree on an arbitrator within 20 days, any party may request
that the chief judge of the District Court for Hennepin County, Minnesota, select
an arbitrator.  Arbitration will be
conducted pursuant to the provisions of this Agreement, and the commercial
arbitration rules of the American Arbitration Association, unless such rules are
inconsistent with the provisions of this Agreement.  Limited civil discovery shall be permitted
for the production of documents and taking of depositions.  Unresolved discovery disputes may be brought
to the attention of the arbitrator who may dispose of such dispute.  The arbitrator shall have the authority to
award any remedy or relief that a court of this state could order or grant;
provided, however, that punitive or exemplary damages shall not be awarded. The
arbitrator may award to the prevailing party, if any, as determined by the
arbitrator, all of its costs and fees, including the arbitrator’s fees,
administrative fees, travel expenses, out-of-pocket expenses and reasonable
attorneys’ fees. Unless otherwise agreed by the parties, the place of any
arbitration proceedings shall be Hennepin County, Minnesota.

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed on the
day and year first above written.

 

 

	
  WINMARK
  CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  	
  OptioneeExhibit 4.1

 

AMERIPRISE FINANCIAL, INC.

 

5.30% Senior Note due 2020

 

	
  No.         

  	
  $                          

  
	
   

  	
   

  
	
  CUSIP No. 03076CAE6

  	
   

  

 

AMERIPRISE
FINANCIAL, INC., a Delaware corporation (hereinafter called the “Company”, which term includes
any successor corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to CEDE & Co. or registered
assigns, the principal sum of                       
Dollars ($                      )
on March 15, 2020, and to pay interest (computed on the basis of a 360-day
year comprised of twelve 30-day months) thereon from March 11, 2010, or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, on each March 15 and September 15, commencing September 15,
2010, and at maturity, at the rate per annum specified in the title of this
Note, until the principal hereof is paid or made available for payment.  The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in said
Indenture, be paid to the Person in whose name this Note (or one or more
Predecessor Securities) is registered at the close of business on the last day
of the month preceding each respective Interest Payment Date (February 28
or 29, as the case may be, and August 31) and at maturity.  In any case where such Interest Payment Date
shall not be a Business Day, then (notwithstanding any other provision of said
Indenture or the Notes) payment of such interest need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on such date, and, if such payment is so made, no interest
shall accrue for the period from and after such date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
registered Holder on the initial record date for such interest payment (February 28
or 29, or August 31, as the case may be), and may be paid to the Person in
whose name this Note (or one or more Predecessor Securities) is registered at
the close of business on a record date for the payment of such Defaulted
Interest to be fixed by the Trustee for the Notes, notice whereof shall be
given to Holders of Notes not less than 10 days prior to such record date, or
may be paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Notes may be listed, and
upon such notice as may be required by such exchange, all as more fully
provided in said Indenture. Payment of the principal,  premium, if any, and interest on this Note will be made at the office
or agency of the Company maintained for that purpose in the City of St. Paul,
Minnesota, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts,
provided, however, that at the option of the Company payment of interest may be
made (subject to collection) by check mailed to the address of the Person
entitled thereto as such address shall appear on the Securities Register.

 

ADDITIONAL
PROVISIONS OF THIS NOTE ARE CONTAINED ON THE REVERSE HEREOF AND SUCH PROVISIONS
SHALL HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH IN THIS PLACE.

 

Unless
the certificate of authentication hereon has been executed by or on behalf of
the Trustee for the Notes by manual signature, this Note shall not be entitled
to any benefit under the Indenture, or be valid or obligatory for any purpose.

 

 

IN
WITNESS WHEREOF, AMERIPRISE FINANCIAL, INC. has caused this instrument to be
duly executed under its corporate seal.

 

	
  Dated: March 11, 2010

  
	
   

  	
  AMERIPRISE FINANCIAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Thomas R. Moore

  
	
   

  	
   

  	
  Vice
  President, Corporate Secretary and Chief Governance Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  David H. Weiser

  
	
   

  	
   

  	
  Assistant
  Secretary

  

 

 

This
is one of the Securities of the series designated herein and referred to in the
within-mentioned Indenture.

 

Dated:  March 11, 2010

 

	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION

  
	
   

  	
  as
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

2

 

AMERIPRISE
FINANCIAL, INC.

 

5.30%
Senior Note due 2020

 

This
Note is one of a duly authorized issue of debentures, notes or other evidences
or indebtedness (hereinafter called the “Securities”) of the Company of the series hereinafter specified, which series is
initially limited in aggregate principal amount to $                          
(except as provided in the Indenture hereinafter mentioned), all such
Securities issued and to be issued under an Indenture dated as of May 5,
2006 between the Company and U.S. Bank National Association, as Trustee (the “Indenture”), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
statement of the rights and limitation of rights thereunder of the Holders of
the Securities and of the rights, obligations, duties and immunities of the
Trustee for each series of Securities and of the Company, and the terms upon
which the Securities are and are to be authenticated and delivered. As provided
in the Indenture, the Securities may be issued in one or more series, which
different series may be issued in various aggregate principal amounts, may be
denominated in currencies other than U.S. dollars (including composite
currencies), may mature at different times, may bear interest, if any, at
different rates, may be subject to different redemption provisions, if any, may
be subject to different sinking, purchase or analogous funds, if any, may be
subject to different covenants and Events of Default and may otherwise vary as
provided in or permitted by the Indenture. This Note is one of a series of the
Securities designated 5.30% Senior Notes due 2020 (the “Notes”).

 

Prior
to the Stated Maturity the Company may, at its option, at any time and
from time to time, redeem the Notes in whole or in part.  The Notes will be redeemable at a Redemption
Price, plus accrued and unpaid interest to the Redemption Date, equal to the
greater of (1) 100% of the principal amount of the Notes to be redeemed or
(2) the sum of the present values of the remaining scheduled payments of
principal and interest on the Notes to be redeemed that would be due after the
related Redemption Date but for such redemption (except that, if such
Redemption Date is not an Interest Payment Date, the amount of the next
succeeding scheduled interest payment will be reduced by the amount of interest
accrued thereon to the Redemption Date), discounted to the Redemption Date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Treasury Rate plus 25 basis points.

 

Notice
of redemption shall be mailed to the registered Holders of the Notes designated
for redemption at their addresses as the same shall appear on the Securities
Register, not less than 30 days nor more than 60 days prior to the Redemption
Date, subject to all the conditions and provisions of the Indenture.

 

In
the event of redemption of this Note in part only, a new Note or Notes for the
amount of the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof.

 

“Treasury
Rate” means, with respect to any Redemption Date, the rate per annum equal to
the semi-annual equivalent yield to maturity (computed as of the second
Business Day immediately preceding such Redemption Date) of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) equal to the Comparable Treasury Price
for such Redemption Date.

 

“Comparable
Treasury Issue” means the United States Treasury security selected by an
Independent Investment Banker that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the 

 

3

 

remaining term of the Notes.  “Independent Investment Banker” means one of
the Reference Treasury Dealers appointed by the Company.

 

“Comparable
Treasury Price” means, with respect to any Redemption Date, (1) the
average of the Reference Treasury Dealer Quotations for such Redemption Date,
after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (2) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all Quotations obtained.

 

“Reference
Treasury Dealer” means each of Goldman, Sachs & Co., Credit Suisse
Securities (USA) LLC and Morgan Stanley & Co. Incorporated and their
respective successors and two other nationally recognized investment banking
firms that are Primary Treasury Dealers specified from time to time by the
Company, except that if any of the foregoing ceases to be a primary U.S.
Government securities dealer in the United States (a “Primary Treasury Dealer”),
the Company is required to designate as a substitute another nationally
recognized investment banking firm that is a Primary Treasury Dealer.

 

“Reference
Treasury Dealer Quotations” means, with respect to each Reference Treasury
Dealer and any Redemption Date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer as of 3:30 p.m., New York City time, on
the third Business Day preceding such Redemption Date.

 

On and after any Redemption
Date, interest will cease to accrue on the Notes called for redemption.  Prior to any Redemption Date, the Company is
required to deposit with a Paying Agent money sufficient to pay the Redemption
Price of and accrued interest on the Notes to be redeemed on such date.  If the Company is redeeming less than all the
Notes, the Trustee under the Indenture must select the Notes to be redeemed by
such method as the Trustee deems fair and appropriate in accordance with
methods generally used at the time of selection by fiduciaries in similar
circumstances.

 

The
Indenture contains provisions for defeasance and discharge of the entire
principal of all the Securities of any series upon compliance by the Company
with certain conditions set forth therein.

 

If
an Event of Default with respect to the Notes, as defined in the Indenture,
shall occur and be continuing, the principal of all the Notes may be declared
due and payable in the manner and with the effect provided in the Indenture.

 

The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the Holders of the Securities of any series under the Indenture
at any time by the Company with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities of each
series affected thereby.  The Indenture
also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the Securities of any series at the time
Outstanding, on behalf of the Holders of all the Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences with respect
to such series. Any such consent or waiver by the Holder of this Note shall be
conclusive and binding upon such Holder and upon all future Holders of this
Note and of any Note issued upon the transfer hereof or in exchange herefor or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Note.

 

No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal,  

 

4

 

premium, if any, and interest on this Note at
the times, place and rate, and in the coin or currency, herein prescribed.

 

As
provided in the Indenture and subject to certain limitations therein set forth,
this Note is transferable on the Securities Register of the Company, upon
surrender of this Note for registration of transfer at the office or agency of
the Company to be maintained for that purpose in the City of St. Paul,
Minnesota, or at any other office or agency of the Company maintained for that
purpose, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Securities Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and thereupon
one or more new Notes, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

 

The
Notes are issuable only in registered form without coupons in denominations of
$2,000 and integral multiples of $1,000 in excess thereof.  As provided in the Indenture and subject to
certain limitations therein set forth, Notes are exchangeable for a like
aggregate principal amount of Notes of the same series of other authorized
denominations, as requested by the Holder surrendering the same.

 

No
service charge shall be made for any such transfer or exchange, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with the registration of such transfer or
exchange, other than certain exchanges not involving any transfer.

 

Certain
terms used in this Note which are defined in the Indenture have the meanings
set forth therein.

 

This
Note shall for all purposes be governed by, and construed in accordance with,
the laws of the State of New York.

 

Prior
to due presentment for registration of transfer, the Company, the Trustee for
the Notes and any agent of the Company or such Trustee may treat the Person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Note be overdue, and neither the Company, such Trustee nor any such agent
shall be affected by notice to the contrary.

 

The Company may, without
consent of the Holders of the Notes but in compliance with the terms of the
Indenture, increase the principal amount of the Notes by issuing additional
Notes on the same terms and conditions as the Notes, except for any differences
in the issue price and interest accrued prior to the date of issuance of the
additional Notes, and with the same CUSIP number as the Notes. The Notes and
any additional Notes issued by the Company will rank equally and ratably and
shall be treated as a single series of Securities for all purposes under the
Indenture. No additional Notes shall be issued at any time that there is an
Event of Default under the Indenture with respect to the Notes that has
occurred and is continuing.

 

5

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