S-1

As filed with the Securities and Exchange Commission on April 19, 2006

Registration No. 333-                 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

Registration Statement Under The Securities Act of 1933

WINMARK CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota

(State or other jurisdiction of incorporation or organization)

5900

(Primary Standard Industrial Classification Code Number)

41-1622691

(I.R.S. Employer Identification No.)

4200 Dahlberg Drive, Suite 100

Minneapolis, Minnesota 55422-4837

(763) 520-8500

(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)

John L. Morgan, Chairman and Chief Executive Officer

Brett D. Heffes, Chief Financial Officer and Treasurer

Winmark Corporation

4200 Dahlberg Drive, Suite 100

Minneapolis, Minnesota 55422-4837

(763) 520-8500

(Name, address, including zip code, and telephone number
including area code, of agent for service)

COPIES OF ALL COMMUNICATIONS TO:

Jonathan B. Levy, Esq.
Michael R. Kuhn, Esq.
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South 8th Street
Minneapolis, Minnesota 55402
Telephone: (612) 371-3211 Michael J. Kolar, Esq.
Patrice H. Kloss, Esq.
Oppenheimer Wolff & Donnelly LLP
Plaza VII, Suite 3300
45 South 7th Street
Minneapolis, Minnesota 55402
(612) 607-7000

Approximate date of commencement of proposed sale to public: From time to time after this Registration Statement becomes effective as determined by market conditions.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered			Proposed Maximum Offering Price Per Unit			Proposed Maximum Aggregate Offering Price			Amount of Registration Fee
Renewable Unsecured Subordinated Notes		$	50,000,000		(1	)		$	50,000,000		$	5,350

(1)The Renewable Unsecured Subordinated Notes will be issued in denominations selected by the Purchasers in any amount equal to or exceeding $1,000.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

Subject To Completion, Dated April 19, 2006

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS

WINMARK CORPORATION

$50,000,000

Three and Six Month Renewable Unsecured Subordinated Notes
One, Two, Three, Four, Five and Ten Year Renewable Unsecured Subordinated Notes

We are offering an aggregate principal amount of up to $50 million of our renewable unsecured subordinated notes. We may offer the notes from time to time with maturities ranging from three months to ten years. Depending on our capital needs, however, notes with certain terms may not always be available. We will establish interest rates on the securities offered in this prospectus from time to time in prospectus supplements. The notes are unsecured obligations and your right to payment is subordinated in right of payment to all of our existing or future senior, secured, unsecured and subordinate indebtedness and other of our financial obligations. Upon maturity, the notes will be automatically renewed for the same term as your maturing note at an interest rate that we are offering at that time to other investors with similar aggregate note portfolios for notes of the same term, unless we or you elect not to have them renewed. If notes of the same term are not then being offered, the interest rate upon renewal will be the rate specified by us on or before maturity, or the rate of the existing note if no such rate is specified. The interest rate on your renewed note may be different than the interest rate on your original note.

After giving you thirty days advance notice, we may redeem all or a portion of the notes for their original principal amount plus accrued but unpaid interest. You or your representative also may request us to repurchase your notes prior to maturity; however, unless the request is due to your death or total permanent disability, we may, in our sole discretion, decline to repurchase your notes, and will, if we do elect to repurchase your notes, charge you a penalty of up to three months of interest on notes with three month maturities and up to six months of interest on all other notes. Our obligation to repurchase notes prior to maturity for any reason in a single calendar quarter is limited to the greater of $1 million or 2% of the aggregate principal amount of all notes outstanding at the end of the previous quarter.

The notes will be marketed and sold through Sumner Harrington Ltd., which is acting as our selling agent for the notes. The notes will not be listed on any securities exchange or quoted on Nasdaq or any over-the-counter market. Sumner Harrington Ltd. does not intend to make a market in the notes and we do not anticipate that a market in the notes will develop. There will be significant restrictions on your ability to transfer or resell the notes. Sumner Harrington Ltd. also will act as our servicing agent in connection with our ongoing administrative responsibilities for the notes. We have not requested a rating for the notes; however, third parties may independently rate them.

The notes are not certificates of deposit or similar obligations of, and are not guaranteed or insured by, any depository institution, the Federal Deposit Insurance Corporation, the Securities Investor Protection Corporation or any other governmental or private fund or entity.

This prospectus may be used to offer and sell securities only if accompanied by the prospectus supplement that describes the interest rate and maturity for those securities.

An investment in the securities described in this prospectus involves risks. Please see “Risk Factors” on page 7.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus is dated                                         .

	Per Note			Total
Public Offering Price		100	%		100	%
Selling Agent Commissions		3	%		3	%
Proceeds to Winmark, before expenses		97	%		97	%

The selling agent will not receive the entire 3% gross commission on notes with terms of less than two years unless the notes are successively renewed for a total term of two years or more. See “Plan of Distribution” for a description of additional compensation payable to the selling agent and its affiliates in connection with services rendered in offering and selling the notes, serving as servicing agents and providing and managing the advertising and marketing functions related to the sale of the notes. There will be no underwriting discount.

Sumner Harrington Ltd. is not required to sell any specific number or dollar amount of notes but will use its best efforts to sell the notes offered.

We will issue the notes in book-entry or uncertificated form. Subject to certain limited exceptions, you will not receive a certificated security or a negotiable instrument that evidences your notes. Sumner Harrington Ltd. will deliver written confirmations to purchasers of the notes. Wells Fargo Bank, National Association will act as trustee for the notes.

Sumner Harrington Ltd.

TABLE OF CONTENTS

Prospectus

	Page
About this prospectus	1
Prospectus summary	2
Winmark Corporation	2
The Offering	3
Risk factors	7
Caution regarding forward-looking statements	11
Ratio of earnings to fixed charges	11
Use of proceeds	12
Description of the notes	12
Material federal income tax consequences	26
Plan of distribution	28
Legal opinions	30
Experts	30
Where you can find more information	30

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission using a “shelf” registration process. Under this shelf process, we may sell an aggregate of up to $50,000,000 of our renewable unsecured subordinated notes from time to time in various maturities and with varying interest rates. This prospectus provides you with a general description of those securities. We will also provide you with a prospectus supplement that will contain specific information about the terms of the notes we are offering. When we refer in this prospectus to the prospectus supplement, we mean the specific prospectus supplement that applies to the securities we are offering to you. The prospectus supplement may also add, update or change information contained in this prospectus. You should read this prospectus and the prospectus supplement together with the additional information described under the heading “Where You Can Find More Information.”

The registration statement that contains this prospectus (including the exhibits to the registration statement) contains additional information about our company and the securities offered under this prospectus. That registration statement can be read at the SEC web site or at the SEC offices mentioned under the heading “Where You Can Find More Information.”

1

PROSPECTUS SUMMARY

This section is a summary of certain information selected from this prospectus, including information incorporated by reference. This summary is an overview and does not contain all of the information you should consider. Therefore, you should also read the more detailed information set out in the prospectus supplement, this prospectus, and our financial statements and other information incorporated by reference into this prospectus and prospectus supplement. Except when we are discussing repayment obligations under the notes, which are solely obligations of Winmark Corporation, the terms “we,” “our,” and “us” refer to Winmark Corporation and our consolidated subsidiaries.

WINMARK CORPORATION

Business of Winmark Corporation.   We develop and franchise value-oriented retail concepts for stores that buy, sell, trade and consign quality used and new merchandise. Each franchise emphasizes consumer value by offering high quality used merchandise at substantial savings and by purchasing or accepting as trade customers’ used goods that have been outgrown or are no longer used. We offer new merchandise to supplement used goods. We are also engaged in the business of providing non-cancelable leases for high-technology and business-essential equipment to both larger organizations and smaller companies. We started our equipment leasing operations in April of 2004, and we are currently in the early stages of building this portion of our business.

We have over 800 franchised stores across North America. Franchisees are required to operate their businesses according to the systems, specifications, standards, and formats we develop for each brand. We train our franchisees on how to operate the business and provide continuing support and service to the brand. We have four retail brands:

·Play It Again Sports buys, sells and trades quality used and new sporting goods and equipment;

·Once Upon a Child buys and sells used and new children’s clothing, toys, furniture and other accessories;

·Music Go Round buys, sells and trades quality used musical instruments and equipment;

·Plato’s Closet buys and sells gently used, brand-name clothing and accessories for teens and young adults.

As of December 31, 2005, we had 396 Play It Again Sports franchises, 206 Once Upon a Child franchises, 42 Music Go Round franchises and 159 Plato’s Closet franchises. Our franchisees are required to sign ten year franchise agreements. We believe that the franchise agreement renewals are one indicator, among others, to assist us in evaluating our business and preserving future royalties. During the fiscal year ended December 31, 2005, we renewed 43 franchise agreements of the 46 franchise agreements that were available for renewal. We do not have any company-owned stores operating under these brands.

We operate a middle-market equipment leasing business through our wholly-owned subsidiary Winmark Capital Corporation, and a small-ticket financing business through our wholly-owned subsidiary Wirth Business Credit, Inc. (formerly known as Winmark Business Solutions, Inc.). Our middle-market leasing business serves large and medium-sized businesses and focuses on assets which generally have a cost of more than $250,000. Our small-ticket financing business serves small businesses and focuses on assets which generally have a cost of $5,000 to $250,000. We generate equipment leases primarily through business alliances, equipment vendors and directly from customers. We also will begin offering our small-ticket financing products through a network of franchisees who will operate under the name Wirth Business Credit.

2

THE OFFERING

Issuer	Winmark Corporation
Trustee	Wells Fargo Bank, National Association
Selling and Servicing Agent	Sumner Harrington Ltd.
Securities Offered	Renewable Unsecured Subordinated Notes. The notes represent our unsecured promise to repay principal at maturity and to pay interest during the term or at maturity. By purchasing a note, you are lending money to us.
Method of Purchase	Prior to your purchase of notes, you will be required to complete a subscription agreement that will set forth the principal amount of your purchase, the term of the notes and certain other information regarding your ownership of the notes. The form of subscription agreement is filed as an exhibit to the registration statement of which this prospectus is a part. As our servicing agent, Sumner Harrington Ltd. will mail you written confirmation that your subscription has been accepted.
Denomination	You can choose the denomination of the notes you purchase in any principal amount of $1,000 or more, including odd amounts.
Offering Price	100% of the principal amount per note.
Rescission Right	You can rescind your investment within five business days of the postmark date of your purchase confirmation without incurring an early redemption penalty. In addition, if your subscription agreement is accepted by our servicing agent at a time when we have determined that a post-effective amendment to the registration statement of which this prospectus is a part must be filed with the Securities and Exchange Commission, but such post-effective amendment has not yet been declared effective, you will be able to rescind your investment subject to the conditions set forth in this prospectus. See “Description of the Notes—Rescission Right” for additional information.
Maturity	You can generally choose maturities for your notes of 3 or 6 months or 1, 2, 3, 4, 5 or 10 years; however, depending on our capital needs, we may not sell notes of all maturities at all times.
Interest Rate	The interest rate paid on the notes will be established at the time you purchase them, or at the time of renewal, based upon the rates we are offering in our latest interest rate supplement to this prospectus, and will remain fixed throughout each term. We may offer higher rates of interest to investors with larger aggregate note portfolios, as set forth in the then current interest rate supplement.
Interest Payment Dates	You can choose to receive interest payments monthly, quarterly, semiannually, annually or at maturity. If you choose to receive interest payments monthly, you can choose the day on which you will be paid. You may change the interest payment schedule or interest payment date once during the term of your note.

3

Principal Payment	We will not pay principal over the term of the notes. We are obligated to pay the entire principal balance of the outstanding notes upon maturity.
Payment Method	Principal and interest payments will be made by direct deposit to the account you designate in your subscription documents.
Renewal or Redemption on Maturity	Upon maturity, the notes will be automatically renewed for the same term at the interest rate we are offering at that time to other investors with similar aggregate note portfolios for notes of the same maturity, unless we notify you prior to the maturity date that we intend to repay the notes. You may also notify us within 15 days after the maturity date that you want your notes repaid. This 15-day period will be automatically extended if you would otherwise be required to make the repayment election at a time when we have determined that a post-effective amendment to the registration statement of which this prospectus is a part must be filed with the Securities and Exchange Commission, but such post-effective amendment has not yet been declared effective. If similar notes are not being offered at the time of renewal, the interest rate upon renewal will be the rate specified by us on or before the maturity date, or the rate of your existing notes if no such rate is specified. The interest rate being offered upon renewal may, however, be different than the interest rate on your original note. See “Description of the Notes—Renewal or Redemption on Maturity.”
Optional Redemption or Repurchase	After giving you 30 days’ prior notice, we may redeem the notes at a price equal to their original principal amount plus accrued but unpaid interest. You or your representative may request us to repurchase your notes prior to maturity; however, unless the request is due to your death or total permanent disability, we may, in our sole discretion, decline to repurchase your notes, and will, if we elect to repurchase your notes, charge you a penalty of up to three months of interest for notes with a three-month maturity and up to six months of interest for all other notes. The total principal amount of notes that we will be required to repurchase prior to maturity, for any reason in any calendar quarter, will be limited to the greater of $1 million or 2% of the total principal amount of all notes outstanding at the end of the previous quarter. See “Description of Notes—Redemption or Repurchase Prior To Stated Maturity.”
Consolidation, Merger or Sale	Upon any consolidation, merger or sale of our company, we will either redeem all of the notes or our successor will be required to assume our obligation to pay principal and interest on the notes pursuant to the indenture. For a description of these provisions see “Description of the Notes—Consolidation, Merger or Sale.”

4

Ranking; No Security	The notes: ·  are unsecured; ·  rank junior to our existing and future senior debt, including debt we may incur under our existing and future credit facilities; ·  rank junior to our existing and future secured debt; ·  rank junior to our existing and future subordinated debt, except for offerings of additional renewable unsecured subordinated notes which will rank equally with the notes; and ·  rank junior to other of our financial obligations, including obligations we may incur in connection with our investments, acquisitions, and obligations in connection with discounted lease rentals. As of December 31, 2005, we had no outstanding debt senior to the notes. We do have a credit facility with LaSalle Bank that permits us to draw up to $15 million from time to time for certain purposes, and up to $25 million if we satisfy certain conditions. This credit facility is secured by substantially all of our assets. If we draw on the LaSalle credit facility, our obligation to repay LaSalle would be senior to our obligation to repay the notes.
Restrictive Covenants	The indenture governing the notes contains limited restrictive covenants. These covenants: ·  require us to maintain a positive net worth; and ·  prohibit us from paying dividends on our capital stock if there is an event of default with respect to the notes or a payment of the dividend would result in an event of default. The covenants set forth in the indenture are more fully described under “Description of the Notes—Restrictive Covenants.” These covenants have significant exceptions.
Use of Proceeds	If all the notes are sold, with original or aggregate maturities of two years or more, we would expect to receive approximately $47 million of net proceeds from this offering after deducting the selling agent’s commissions and estimated initial offering expenses payable by us. The exact amount of net proceeds may vary considerably depending on how long the notes are offered and other factors. We intend to use the net proceeds to provide capital to grow and expand our leasing portfolio, to acquire businesses or assets, to repurchase our common stock from time to time as we may deem prudent and for other general corporate purposes. Until the capital is deployed, we will invest the proceeds in short term investment grade financial instruments. See “Use of Proceeds.”

5

Absence of Public Market and Transfer Restrictions

There is no existing market for the notes. Sumner Harrington Ltd. has advised us that it does not intend to make a market in the notes after the completion of this offering and we do not anticipate that a secondary market for the notes will develop. We do not intend to apply for listing of the notes on any securities exchange or for quotation of the notes in any automated dealer quotation system. You will be able to transfer or pledge the notes only with our prior written consent. See “Description of the Notes—Transfers.”

Book Entry

The notes will be issued in book entry or uncertificated form only. Except under limited circumstances, the notes will not be evidenced by certificated securities or negotiable instruments. See “Description of the Notes—Book Entry Registration and Transfer.”

6

RISK FACTORS

You should carefully consider the risks involved in deciding whether to invest in the notes we are offering, including the risk factors and those risks described in our Form 10-K for the year ended December 31, 2005. You should also consider the other information in this prospectus and any prospectus supplement as well as other documents incorporated by reference.

The risks described below set forth the material risks associated with the purchase of notes and our company, as well as factors that may influence the outcome of any forward looking statement. Before you invest in the notes, you should carefully consider these risk factors, as well as the other information contained in this prospectus and in the documents incorporated by reference into this prospectus.

RISK FACTORS RELATING TO THE NOTES

The notes may not be a suitable investment for all investors.

The notes may not be a suitable investment for you, and we advise you to consult your investment, tax and other professional financial advisors prior to purchasing notes. The characteristics of the notes, including maturity, interest rate and lack of liquidity, may not satisfy your investment objectives. The notes may not be a suitable investment for you based on your ability to withstand a loss of interest or principal or other aspects of your financial situation, including your income, net worth, financial needs, investment risk profile, return objectives, investment experience and other factors. Prior to purchasing any notes, you should consider your investment allocation with respect to the amount of your contemplated investment in the notes in relation to your other investment holdings and the diversity of those holdings.

You lack priority in payment on the notes, which rank junior to substantially all of our existing and future debt and other financial obligations.

Your right to receive payments on the notes is junior to the extent we incur indebtedness now or in the future. Your notes will be subordinated to the prior payment in full of all of our other debt and financial obligations, including our obligations to make capital contributions in connection with our investments in other private companies. As of March 31, 2006, we had no outstanding indebtedness, but we do have a credit facility with LaSalle Bank that permits us to draw up to $15 million from time to time, and up to $25 million if we satisfy certain conditions. Any amount that we draw under the credit facility will be senior to your notes while it remains outstanding. We also may obtain additional indebtedness at any time that will rank senior to the notes you purchase. Further, we have in the past, and expect in the future, to enter into funding commitments in connection with acquisitions and investments. Our obligations under these types of arrangements may continue for several years following an acquisition or investment, and will rank senior to your notes. In addition, we have in the past and will continue to enter into non-recourse discounting of lease rentals with financial institutions at fixed interest rates. These obligations are also senior to your notes. As of December 31, 2005, our aggregate deferred or contingent cash payment obligations in connection with existing investments totaled approximately $0.5 million, and our discounted lease rentals totaled approximately $0.33 million. Because of the subordination provisions of the notes, in the event of our bankruptcy, liquidation or dissolution, our assets would be available to make payments to you under the notes only after all payments had been made on all of our secured and unsecured indebtedness and other obligations that are senior to the notes. Sufficient assets may not remain after all such senior payments have been made to make any payments to you under the notes, including payments of interest when due or principal upon maturity.

There will be no trading market for the notes, which may make it difficult to transfer your notes.

Your ability to liquidate your investment is limited because of transfer restrictions, the lack of a trading market and the limitation on repurchase requests prior to maturity. Your notes may not be

7

transferred without our prior written consent. In addition, there will be no trading market for the notes. Due to the restrictions on transfer of the notes and the lack of a market for the sale of the notes, even if we permitted a transfer, you might be unable to sell, pledge or otherwise liquidate your investment. Except in the case of death or total permanent disability, repurchases of the notes prior to maturity are subject to our approval and to repurchase penalties of up to three months interest on notes with three-month maturities and up to six months interest on notes with maturities of six months or longer. The total principal amount of notes that we would be required to repurchase in any calendar quarter, for any reason, will be limited to the greater of $1 million or 2% of the aggregate principal amount of all notes outstanding at the end of the previous quarter. See “Description of the Notes.”

The notes will have no sinking fund, security, insurance or guarantee.

There is no sinking fund, security, insurance or guarantee of our obligation to make payments on the notes. The notes are not secured by any of our assets. We will not contribute funds to a separate account, commonly known as a sinking fund, to make interest or principal payments on the notes. The notes are not certificates of deposit or similar obligations of, and are not guaranteed or insured by, any depository institution, the Federal Deposit Insurance Corporation, the Securities Investor Protection Corporation, or any other governmental or private fund or entity. Therefore, if you invest in the notes, you will have to rely only on our cash flow from operations and other sources of funds for repayment of principal at maturity or redemption and for payment of interest when due. If our cash flow from operations and other sources of funds are not sufficient to pay the notes, then you may lose all or part of your investment. The notes are not expected to be rated by any rating agency such as Fitchs, Moody’s or Standard & Poor’s.

The notes will automatically renew unless you request repayment.

Upon maturity, the notes will be automatically renewed for the same term as your maturing note and at an interest rate that we are offering at that time to other investors with similar aggregate note portfolios for notes of the same term, unless we notify you prior to the maturity date that we intend to repay the notes or you notify us within 15 days after the maturity date that you want your notes repaid. This 15-day period will be automatically extended if you would otherwise be required to make the repayment election at a time when we have determined that a post-effective amendment to the registration statement of which this prospectus is a part must be filed with the Securities and Exchange Commission, but such post-effective amendment has not yet been declared effective. If notes with the same term are not then being offered, the interest rate upon renewal will be the rate specified by us on or before the maturity date, or the rate of the existing note if no such rate is specified. The interest rate on your renewed note may be lower than the interest rate of your original note. If your note pays interest only at maturity, you can receive the accrued interest that you have earned during the note term just ended while allowing the principal amount of your note to roll over and renew for the same term at the interest rate then in effect. To exercise this option, you will need to call, fax or send a written request to our servicing agent. Any requests for repurchases after your notes are renewed will be subject to our approval and to repurchase penalties and the limitations on the amount of notes we would be willing to repurchase in any calendar quarter.

We have the right to incur substantial indebtedness that is senior to the notes, which may affect our ability to repay the notes.

We have now and, after we sell these notes, will continue to have the right to incur a substantial amount of indebtedness. If we incur substantial indebtedness it could adversely affect our financial condition and prevent us from fulfilling our obligations under the notes by, among other things:

·increasing our vulnerability to general adverse economic and industry conditions;

8

·requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing amounts available for working capital, capital expenditures and other general corporate purposes;

·limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

·placing us at a competitive disadvantage compared to our competitors that have less debt; and

·limiting our ability to borrow additional funds.

Although we believe we will generate sufficient free cash flow to service any debt we incur and our obligations under the notes, there is no assurance that we will be able to do so. If we do not generate sufficient operating profits, our ability to make required payments on our senior debt, as well as on the debt represented by the notes described in this prospectus, may be impaired.

Our management has broad discretion over the use of proceeds from the offering.

Although we expect to use the proceeds from the offering to grow our leasing portfolio, acquire businesses or assets, and repurchase our common stock, the indenture does not require us to do so. The proceeds of the offering will also be used for other general corporate purposes, which may include the payment of general and administrative expenses. Because no specific allocation of the proceeds will be required in the indenture, our management will have broad discretion in determining how the proceeds of the offering will be used and may choose not to use the funds to pay down debt that is senior to the notes. See “Use of Proceeds.”

We are subject to many restrictions in our credit facility with LaSalle Bank.

The terms of our credit facility impose significant operating and financial restrictions on us and our subsidiaries and require us to meet certain financial tests including having a tangible net worth of at least $6 million. In addition, as of the end of each month our tangible net worth cannot be less than the sum of the tangible net worth of the previous month plus 50% of our net income for the month, if positive. We also must maintain a ratio of earnings before income taxes, depreciation and amortization less capital expenditures and taxes divided by interest expense of at least 2.0 to 1.0. As of the end of each quarter our maximum senior leverage ratio cannot exceed 3.0 to 1.0. This means that the ratio of the amount of debt at any time under the LaSalle facility compared to our tangible net worth must be no higher than 3.0 to 1.0. The LaSalle Bank credit facility’s terms and restrictions may also be amended or supplemented from time to time without requiring any notice to or consent of the holders of the notes or the trustee. These restrictions may have an adverse impact on our business activities, results of operations and financial condition. These restrictions may also significantly limit or prohibit us from engaging in certain transactions, including the following:

·using the credit facility for certain acquisitions or investments or to support our leasing business unless approved by LaSalle Bank;

·incurring or guaranteeing additional indebtedness;

·restricting the amount of rental payments we make under operating leases in any year to $1 million;

·paying dividends or other distributions to our stockholders or redeeming, repurchasing or retiring our capital stock or subordinated obligations;

·creating or permitting liens on our assets or the assets of our subsidiaries except for capital leases on leased property and liens incurred in connection with purchase money security interests;

9

·issuing or selling capital stock of our subsidiaries;

·transferring or selling our assets;

·engaging in mergers or consolidations unless certain conditions are satisfied, including the consent of LaSalle Bank, the business we want to acquire is in our industry, the absence of any defaults, pro forma compliance with all ratios and at least $3 million of loan availability;

·permitting a change of control of our company;

·liquidating, winding up or dissolving our company;

·changing our name or the nature of our business, or the names or nature of the business of our subsidiaries; and

·engaging in transactions with our affiliates outside the normal course of business.

These restrictions may limit our ability to obtain additional sources of capital, which may limit our ability to repay the notes. In addition, the failure to comply with any of the covenants of our credit facility or the indenture or to maintain certain indebtedness ratios would cause a default under our credit facility and may cause a default under the indenture or our other debt agreements that may be outstanding from time to time. A default, if not waived, could result in acceleration of the related indebtedness, in which case such debt would become immediately due and payable. A continuing default or acceleration of our credit facility, the indenture or any other debt agreement, will likely cause a default under the indenture and other debt agreements that otherwise would not be in default, in which case all such related indebtedness could be accelerated. If this occurs, we may not be able to repay our debt or borrow sufficient funds to refinance our indebtedness. Even if any new financing is available, it may not be on terms that are acceptable to us or it may not be sufficient to refinance all of our indebtedness as it becomes due. Complying with these covenants may cause us to take actions that are not favorable to holders of the notes. See “Description of the Notes—Restrictive Covenants.”

You will have only limited protection under the indenture.

In comparison to the restrictive covenants that are imposed on us by our credit facility with LaSalle Bank and other borrowing arrangements, the indenture governing the notes contains relatively minimal restrictions on our activities. In addition, the indenture contains only limited events of default other than our failure to pay principal and interest on time. Because there are only very limited restrictions and limited events of default under the indenture, we will not be restricted from issuing additional debt senior to your notes or be required to maintain any ratios of assets to debt in order to increase the likelihood of timely payments to you under the notes. Further, if we default in the payment of the notes or otherwise under the indenture, you will likely have to rely on the trustee to exercise your remedies on your behalf. You may not be able to seek remedies against us directly. See “Description of the Notes—Events of Default.”

Our right to redeem the notes prior to maturity may result in reinvestment risk for you.

We have the right to redeem any note at any time prior to its stated maturity upon 30 days’ written notice to you. The notes will be redeemed at 100% of the principal amount plus accrued but unpaid interest up to but not including the redemption date. Any such redemption may have the effect of reducing the income or return on investment that any investor may receive on an investment in the notes by reducing the term of the investment. If this occurs, you may not be able to reinvest the proceeds at an interest rate comparable to the rate paid on the notes. See “Description of the Notes—Redemption or Repurchase Prior To Stated Maturity.”

10

Sumner Harrington Ltd. may not remain the selling agent for the notes if the distribution and management agreement is terminated.

The distribution and management agreement between us and Sumner Harrington Ltd. may be terminated by us upon prior notice. Therefore, it is not certain Sumner Harrington Ltd. will be responsible for the marketing, sale and administration of the notes for the duration of this offering. Other parties, including our company, may take over the functions currently provided by Sumner Harrington Ltd. Therefore, you should not rely on Sumner Harrington Ltd. continuously being responsible for marketing, selling and administering the notes.

You may be required to pay taxes on accrued interest on notes prior to receiving a sufficient amount of cash interest payments.

If you choose to have interest on your note paid at maturity and the term of your note exceeds one year, you may be required to pay taxes on the accrued interest prior to our making any interest payments to you. In addition, if you choose to have interest on your note paid monthly, quarterly, semiannually or annually, the amount of interest income reported to the Internal Revenue Service may differ from the sum of your cash interest payments in some years. You should consult your tax advisor to determine your tax obligations.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the documents that are incorporated by reference into this prospectus, contain forward-looking statements regarding our plans, expectations, estimates and beliefs. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings or results from those presently anticipated or projected. We wish to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.”

Forward-looking statements give our expectations or predictions of future conditions, events or results. They are not guarantees of future performance. By their nature, forward-looking statements are subject to risks and uncertainties. A number of factors, many of which are beyond our control, could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. The important factors that could cause our actual results to include those discussed in “Risk Factors” in this prospectus and those discussed in “Risk Factors” in any prospectus supplement. We encourage you to read these sections carefully. We will not necessarily update information in this prospectus or incorporated by reference into this prospectus if any forward-looking statement turns out to be inaccurate. We do not undertake and specifically decline any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

RATIO OF EARNINGS TO FIXED CHARGES

	Fiscal Year Ended
	12/31/05		12/25/04		12/27/03		12/28/02		12/29/01
Ratio of Earnings to Fixed Charges		55.9x		89.9x		84.4x		11.6x		4.3x

11

For purposes of calculating the ratios of earnings to fixed charges, earnings represent income before income taxes, equity investments, extraordinary items and fixed charges. Fixed charges represent interest expense, amortized premiums and discounts, and rental expense.

USE OF PROCEEDS

If all of the notes are sold, with original or aggregate maturities of two years or more, we would expect to receive approximately $47.0 million of net proceeds from this offering after deducting the selling agent’s commissions and estimated offering expenses payable by us, including document fulfillment expenses of $300,000 and a maximum portfolio management fee of $1,125,000 over the course of the notes. See “Plan of Distribution.” The exact amount of net proceeds may vary considerably depending how long the notes are offered and other factors. Although we expect to use the proceeds from the offering to grow our leasing portfolio, acquire businesses or assets and repurchase our common stock, the indenture does not require us to do so. The proceeds of the offering will also be used for other general corporate purposes, which may include the payment of general and administrative expenses. Because no specific allocation of the proceeds will be required in the indenture, we will have broad discretion in determining how the proceeds of the offering will be used and may choose not to use the funds to pay down debt that is senior to the notes.

DESCRIPTION OF THE NOTES

General

The notes we are offering will represent subordinated, unsecured debt obligations of Winmark. We will issue the notes under an indenture between us and Wells Fargo Bank, National Association, as trustee. The terms and conditions of the notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939. The following is a summary of the material provisions of the indenture. For a complete understanding of the notes, you should review the definitive terms and conditions contained in the indenture, which include definitions of certain terms used below. A copy of the indenture has been filed with the SEC as an exhibit to the registration statement of which this prospectus is a part and is available from us at no charge upon request. The notes will be subordinated in right of payment to the prior payment in full of all our secured, unsecured, senior and subordinate debt and other financial obligations, including contingent or deferred payment obligations incurred in connection with acquisitions, whether outstanding on the date of the indenture or incurred following the date of the indenture. Subject to limited restrictions contained in the indenture discussed below, there is no limit under the indenture on the amount of additional debt we may incur. See “—Subordination” below.

The notes are not secured by any collateral or lien and we are not required to establish or maintain a sinking fund to provide for payments on the notes. See “—No Security; No Sinking Fund” below. In addition, the notes are not bank certificates of deposit and are not insured by the Federal Deposit Insurance Corporation, the Securities Investor Protection Corporation or any other agency or company. You may select the amount (subject to a minimum principal amount of $1,000) and term (ranging from 3 months to 10 years) of the notes you would like to purchase when you subscribe; however, depending upon our capital requirements, we may not always offer notes with the requested terms. See “—Denomination” and “—Term” below. We will determine the rate at which we will pay you interest on the notes at the time of subscription and the rate will be fixed for the term of your note. Currently available rates will be set forth in interest rate supplements to this prospectus. The interest rate will vary based on the term to maturity of the note you purchase and the total principal amount of all notes owned by you and your immediate family. We may change the interest rates at which we are offering new or renewed notes based on market conditions, the demand for notes and other factors. See “—Interest Rate” below.

12

Upon acceptance of your subscription to purchase notes, our servicing agent will create an account in a book-entry registration and transfer system for you, and credit the principal amount of your subscription to your account. Our servicing agent will send you a purchase confirmation that will indicate our acceptance of your subscription. You will have five business days from the postmark date of your purchase confirmation to rescind your subscription. If your subscription is rejected by us or our servicing agent, or if you rescind your subscription during the rescission period, all funds deposited will be promptly returned to you without any interest. See “—Book-Entry Registration and Transfer” and “—Rescission Right” below. Investors whose subscriptions for notes have been accepted and anyone who subsequently acquires notes in a qualified transfer are referred to as “holders” or “registered holders” in this prospectus and in the indenture. We may modify or supplement the terms of the notes described in this prospectus from time to time in a supplement to the indenture and a supplement to this prospectus. Except as set forth under “—Amendment, Supplement And Waiver” below, any modification or amendment will not affect notes outstanding at the time of such modification or amendment.

Denomination

You may purchase notes in the minimum principal amount of $1,000 or any amount in excess of $1,000. You will determine the original principal amount of each note you purchase when you subscribe. You may not cumulate purchases of multiple notes with principal amounts less than $1,000 to satisfy the minimum denomination requirement.

Terms to Maturity

We may offer notes with the following terms to maturity:

·three months

·six months

·one year

·two years

·three years

·four years

·five years

·ten years

You will select the term of each note you purchase when you subscribe. You may purchase multiple notes with different terms by filling in investment amounts for more than one term on your subscription agreement. However, we may not always sell notes with all of the above terms to maturity.

Interest Rate

The rate of interest we will offer to pay you on notes at any particular time will vary based upon market conditions, and will be determined by the length of the term of the notes, the total principal amount of all notes owned by you and your immediate family, our capital requirements and other factors described below. The interest rate on a particular note will be determined at the time of subscription or renewal, and then remain fixed for the original or renewal term of the note. We will establish and may change the interest rates payable for notes of various terms and at various investment levels in an interest rate supplement to this prospectus. The notes will earn incrementally higher interest rates when, at the time they are purchased or renewed, the aggregate principal amount of the note portfolios of the holder and the holder’s immediate family is at least $25,000, $50,000, $75,000 or $100,000. But, in case of a

13

renewal, the interest rates payable at the time may be lower due to market conditions. The interest rates payable at each level of investment will be set forth in an interest rate supplement to this prospectus. Immediate family members include parents, children, siblings, grandparents, and grandchildren. Members of sibling families are also considered immediate family members if the holder’s sibling is also a note holder. An investor must identify his or her immediate family members in the subscription agreement in order to use their notes to determine the interest rate for such investor’s notes. Interest rates we offer on the notes may vary based on numerous factors in addition to length of the term and aggregate principal amount.

These factors may include, but are not limited to:

·the desire to attract new investors;

·whether the notes exceed certain principal amounts;

·whether the notes are being renewed by existing holders; and

·whether the notes are beneficially owned by persons residing in particular geographic localities.

Computation of Interest

We will compute interest on notes on the basis of a 365-day calendar year. Interest will compound daily and accrue from the date of purchase. The date of purchase will be the date we receive and accept funds if the funds are received prior to 12:01 p.m. central time on a business day, or the next business day if the funds are received on a non-business day or at or after 12:01 p.m. central time on a business day. Our business days are Monday through Friday, except for legal holidays in the State of Minnesota.

Interest Payment Dates

At the time your subscription agreement is completed, you may elect to have interest paid either monthly, quarterly, semiannually, annually or at maturity. If you choose to have interest paid monthly, you may elect the day of the month on which interest will be paid, subject to our approval. For all other payment periods, interest will be paid on the same day of the month as the purchase date of your note. You will not earn interest on any rescinded note. See “—Rescission Right” below for additional information on your right to rescind your investment.

The period or day of interest payment for each note may be changed one time only by the holder during the term of the note, subject to our approval. Requests to change the election must be made in writing to our servicing agent and will be effective no later than the first business day following the 45th day after the election change request is received. No specific change in election form is required and there is no charge to change the election once during the term of a note. Any interest not paid on an interest payment date will be paid at maturity.

Place and Method of Payment

We will pay principal and interest on the notes by direct deposit to the account you specify in your subscription documents. We will not accept subscription agreements from investors who are unwilling to receive their interest payments via direct deposit. If the foregoing payment method is not available, principal and interest on the notes will be payable at our principal executive office or at such other place as we may designate for payment purposes.

14

Servicing Agent

We have engaged Sumner Harrington Ltd., the investment banking firm that is helping us sell the notes, to act as our servicing agent for the notes. Sumner Harrington Ltd.’s responsibilities as servicing agent will involve certain administrative and customer service functions for the notes that we are responsible for performing as the issuer of the notes. For example, as our servicing agent, Sumner Harrington Ltd. will serve as our registrar and transfer agent and will manage all aspects of the customer service function for the notes, including handling all phone inquiries, mailing investment kits, meeting with investors, processing subscription agreements, issuing quarterly investor statements and redeeming and repurchasing notes. In addition, as servicing agent, Sumner Harrington Ltd. will provide us with monthly reports and analysis regarding the status of the notes, the marketing efforts and the amount of notes that remain available for purchase and also will have the ability to exercise discretion with respect to rejecting subscription agreements.

Other duties of Sumner Harrington Ltd. as our servicing agent under the distribution and management agreement are described throughout this section and under “Plan of Distribution.” As compensation for its services as servicing agent, we will pay Sumner Harrington Ltd. an annual portfolio management fee equal to 0.25% of the weighted average daily principal balance of the notes so long as Sumner Harrington Ltd. is engaged as our servicing agent, subject to certain maximum payment provisions set forth below in “Plan of Distribution.” The ongoing fee will be paid monthly.

The distribution and management agreement may be terminated by either party by prior notice. Sumner Harrington Ltd.’s duties and compensation as selling agent under this agreement are described under “Plan of Distribution.” You may contact our servicing agent with any questions about the notes at the following address and telephone number:

Sumner Harrington Ltd.
11100 Wayzata Boulevard, Suite 170
Minneapolis, MN 55305
Telephone: (800) 234-5777
Fax: (952) 546-5585

Book-Entry Registration and Transfer

The notes are issued in book entry form, which means that no physical note is created. Evidence of your ownership is provided by written confirmation. Except under limited circumstances described below, holders will not receive or be entitled to receive any physical delivery of a certificated security or negotiable instrument that evidences their notes. The issuance and transfer of notes will be accomplished exclusively through the crediting and debiting of the appropriate accounts in our book-entry registration and transfer system. Our servicing agent will maintain the book-entry system.

The holders of the accounts established upon the purchase or transfer of notes will be deemed to be the owners of the notes under the indenture. The holder of the notes must rely upon the procedures established by the trustee to exercise any rights of a holder of notes under the indenture. Our servicing agent will regularly provide the trustee with information regarding the establishment of new accounts and the transfer of existing accounts. Our servicing agent will also regularly provide the trustee with information regarding the total amount of any principal and/or interest due to holders with regard to the notes on any interest payment date or upon redemption.

On each interest payment date, the servicing agent will credit interest due on each account and direct payments to the holders. The servicing agent will determine the interest payments to be made to the book-entry accounts and maintain, supervise and review any records relating to book-entry beneficial interests in the notes.

15

Book-entry notations in the accounts evidencing ownership of the notes are exchangeable for actual notes in principal denominations of $1,000 and any amount in excess of $1,000 and fully registered in those names as we direct only if:

·we, at our option, advise the trustee in writing of our election to terminate the book-entry system, or

·after the occurrence of an event of default under the indenture, holders of more than 50% of the aggregate outstanding principal amount of the notes advise the trustee in writing that the continuation of a book-entry system is no longer in the best interests of the holders of notes and the trustee notifies all registered holders of the occurrence of any such event and the availability of certificated securities that evidence the notes.

Subject to the exceptions described above, the book-entry interests in these securities will not be exchangeable for fully registered certificated notes.

Rescission Right

A purchaser of notes has the right to rescind his or her investment, without penalty, upon written request to our servicing agent within five business days from the postmark date of the purchase confirmation (but not upon transfer or automatic renewal of a note). You will not earn interest on any rescinded note. We will promptly return any funds sent with a subscription agreement that is properly rescinded. A written request for rescission, if personally delivered or delivered via electronic transmission, must be received by our servicing agent on or prior to the fifth business day following the mailing of written confirmation by us of the acceptance of your subscription. If mailed, the written request for rescission must be postmarked on or before the fifth business day following the mailing of such written confirmation by us.

In addition, if your subscription agreement is accepted by our servicing agent at a time when we have determined that a post-effective amendment to the registration statement of which this prospectus is a part must be filed with the Securities and Exchange Commission, but such post-effective amendment has not yet been declared effective, our servicing agent will send to you at your registered address a notice and a copy of the post-effective amendment once it has been declared effective. You will have the right to rescind your investment upon written request to our servicing agent within five business days from the postmark date of the notice that the post-effective amendment has been declared effective. We will promptly return any funds sent with a subscription agreement that is properly rescinded without penalty, although any interest previously paid on the notes being rescinded will be deducted from the funds returned to you upon rescission. A written request for rescission, if personally delivered or delivered via electronic transmission, must be received by our servicing agent on or prior to the fifth business day following the mailing of the notice that the post-effective amendment has been declared effective. If mailed, the written request for rescission must be postmarked on or before the fifth business day following the mailing of such notice.

The limitations on the amount of notes that can be redeemed early in a single calendar quarter described under “—Redemption or Repurchase Prior to Stated Maturity” below do not affect your rescission rights.

Right to Reject Subscriptions

Our servicing agent may reject any subscription for notes in its sole discretion. If a subscription for notes is rejected, we will promptly return any funds sent with that subscription, without interest.

Renewal or Redemption on Maturity

Approximately 15, but not less than 10 days prior to maturity of your note, our servicing agent will send you a notice at your registered address indicating that your note is about to mature and whether we

16

will allow automatic renewal of your note. If we allow you to renew your note, our servicing agent will also send to you a current interest rate supplement and a current prospectus or prospectus supplement if the prospectus has changed since the delivery of this prospectus in connection with your original subscription or any prior renewal. The interest rate supplement will set forth the interest rates then in effect. The notice will recommend that you review the prospectus and any prospectus supplement, along with the interest rate supplement, prior to exercising one of the below options. If we do not send you a new prospectus, a new prospectus will be sent to you upon request. Unless the election period is extended as described below, you will have until 15 days after the maturity date to exercise one of the following options:

·You can do nothing, in which case your note will automatically renew for a new term equal to the original term at the interest rate in effect at the time of renewal. If your note pays interest only at maturity, all accrued interest will be added to the principal amount of your note upon renewal. For notes with other payment options, interest will be paid on the renewed note on the same schedule as the original note.

·You can elect repayment of your note, in which case the principal amount will be repaid in full along with any accrued but unpaid interest. If you choose this option, your note will not earn interest on or after the maturity date.

·You can elect repayment of your note and use all or part of the proceeds to purchase a new note with a different term or principal amount. To exercise this option, you will need to complete a subscription agreement for the new note and mail it along with your request to our servicing agent. The issue date of the new note will be the maturity date of the old note. Any proceeds from the old note that are not applied to the new note will be sent to you.

·If your note pays interest only at maturity, you can receive the accrued interest that you have earned during the note term just ended while allowing the principal amount of your note to roll over and renew for the same term at the interest rate then in effect. To exercise this option, you will need to call, fax or send a written request to our servicing agent.

The foregoing options will be available to holders until termination or redemption under the indenture and the notes by either the holder or us. Interest will accrue from the first day of each renewed term. Each renewed note will retain all its original provisions, including provisions relating to payment, except that the interest rate payable during any renewal term will be the interest rate that is being offered at that time to other holders with similar aggregate note portfolios for notes of the same term as set forth in the interest rate supplement delivered with the maturity notice. If similar notes are not then being offered, the interest rate upon renewal will be the rate specified by us on or before the maturity date, or the rate of the existing note if no such rate is specified.

If we notify the holder of our intention to repay a note at maturity, we will pay the holder the principal amount and any accrued but unpaid interest on the stated maturity date. Similarly, if, within 15 days after a note’s stated maturity date (or during any applicable extension of the 15 day period, as described below), the holder requests repayment with respect to a note, we will pay the holder the principal amount of the note plus accrued but unpaid interest up to, but not including, the note’s stated maturity date.

In the event that a holder’s regularly scheduled interest payment date falls after the maturity date of the note but before the date on which the holder requests repayment, the holder may receive interest payments that include interest for periods after the maturity date of the note. If this occurs, the excess interest will be deducted from our final payment of the principal amount of the note to the holder. We will initiate payment to any holder timely requesting repayment by the later of the maturity date or five business days after the date on which we receive such notice from the holder. Because payment is made by ACH transfer, funds may not be received in the holder’s account for 2 to 3 business days. Requests for repayment should be made to our servicing agent in writing.

17

From time to time we will be required to file post-effective amendments to the registration statement of which this prospectus is a part to update the information it contains. If you would otherwise be required to elect to have your notes renewed or repaid following their stated maturity at a time when we have determined that a post-effective amendment must be filed with the Securities and Exchange Commission but such post-effective amendment has not yet been declared effective, the period during which you can elect renewal or repayment will be automatically extended until ten days following the postmark date of a notice that will be sent to you at your registered address by the servicing agent that the post-effective amendment has been declared effective. In the event that a holder’s regularly scheduled interest payment date falls after the maturity date of the note but before the date on which the holder requests repayment, the holder may receive an interest payment that includes interest for periods after the maturity date of the note. If this occurs, the excess interest will be deducted from our final payment of the principal amount of the note to the holder. All other provisions relating to the renewal or redemption of notes upon their stated maturity described above shall remain unchanged.

Redemption or Repurchase prior to Stated Maturity

The notes may be redeemed prior to stated maturity only as set forth in the indenture and described below. The holder has no right to require us to prepay or repurchase any note prior to its maturity date as originally stated or as it may be extended, except as indicated in the indenture and described below.

Redemption by Us

We have the right to redeem any note at any time prior to its stated maturity upon 30 days written notice to the holder of the note. The holder of the note being redeemed will be paid a redemption price equal to the outstanding principal amount thereof plus accrued and unpaid interest up to but not including the date of redemption without any penalty or premium. We may use any criteria we choose to determine which notes we will redeem if we choose to do so. We are not required to redeem notes on a pro rata basis.

Repurchase Election upon Death or Total Permanent Disability

Notes may be repurchased prior to maturity, in whole and not in part, at the election of a holder who is a natural person (including notes held in an individual retirement account), by giving us written notice within 45 days following the holder’s total permanent disability, as established to our satisfaction, or at the election of the holder’s estate, by giving written notice within 45 days following his or her death. Subject to the limitations described below, we will repurchase the notes within 10 days after the later to occur of the request for repurchase or the establishment to our satisfaction of the holder’s death or total permanent disability. The repurchase price, in the event of such a death or total permanent disability, will be the principal amount of the notes, plus interest accrued and not previously paid up to but not including the date of repurchase. If spouses are joint registered holders of a note, the right to elect to have us repurchase will apply when either registered holder dies or suffers a total permanent disability. If the note is held jointly by two or more persons who are not legally married, none of these persons will have the right to request that we repurchase the notes unless all joint holders have either died or suffered a total permanent disability. If the note is held by a person who is not a natural person such as a trust, partnership, corporation or other similar entity, the right to request repurchase upon death or total permanent disability does not apply.

Repurchase at request of holder.In addition to the right to elect repurchase upon death or total permanent disability, a holder may request that we repurchase one or more of the holders’ notes prior to maturity, in whole and not in part, at any time by giving us written notice. Subject to approval, at our sole discretion, and the limitations described below, we will repurchase the holder’s note(s) specified in the notice within 10 days of receipt of the notice. The repurchase price, in the event we elect to repurchase the notes, will be the principal amount of the note, plus interest accrued and not previously paid (up to but not

18

including the date of repurchase), minus a repurchase penalty. The early repurchase penalty for a note with a three month maturity is the interest accrued on such note up to the date of repurchase, not to exceed three months of simple interest at the existing rate. The early repurchase penalty for a note with a maturity of six months or longer is the interest accrued on such note up to the date of repurchase, not to exceed six months of simple interest at the existing rate. The penalty for early repurchase may be waived or reduced at the discretion of our servicing agent.

Limitations on requirements to repurchase.Our obligation to repurchase notes prior to maturity for any reason will be subject to a calendar quarter limit equal to the greater of $1 million or 2% of the total principal amount of all notes outstanding at the end of the previous calendar quarter. This limit includes any notes we repurchase upon death or total permanent disability of the holder and any notes that we repurchase pursuant to the holders’ right to elect repurchase. Repurchase requests will be honored in the order in which they are received, to the extent possible, and any repurchase request not honored in a calendar quarter will be honored in the next calendar quarter, to the extent possible, since repurchases in the next calendar quarter are also subject to these limits. For purposes of determining the order in which repurchase requests are received, a repurchase request will be deemed made on the later of the date on which it is received by us or, if applicable, the date on which the death or total permanent disability is established to our reasonable satisfaction.

Modifications to repurchase policy.We may modify the policies on repurchase in the future. No modification will affect the right of repurchase applicable to any note outstanding at the time of any such modification.

Transfers

The notes are not negotiable debt instruments and, subject to certain exceptions, will be issued only in book-entry form. The purchase confirmation issued upon our acceptance of a subscription is not a certificated security or negotiable instrument, and no rights of record ownership can be transferred without our prior written consent. Ownership of notes may be transferred on our register only as follows:

·The holder must deliver written notice requesting a transfer to our servicing agent signed by the holder(s) or such holder’s duly authorized representative on a form to be supplied by our servicing agent.

·We must provide our written consent to the proposed transfer.

·We or our servicing agent may require a legal opinion from counsel satisfactory to the servicing agent that the proposed transfer will not violate any applicable securities laws.

·We or our servicing agent may require a signature guarantee in connection with such transfer.

Upon transfer of a note, our servicing agent will provide the new holder of the note with a purchase confirmation that will evidence the transfer of the account on our records. We or our servicing agent may charge a reasonable service charge in connection with the transfer of any note.

Quarterly Statements; Investor Relations

Our servicing agent will provide holders of the notes with quarterly statements, which will indicate, among other things, the account balance at the end of the quarter, interest credited, redemptions or repurchases made, if any, and the interest rate paid during the quarter. These statements will be mailed not later than the 10th business day following the end of each calendar quarter. Our servicing agent may charge such holders a reasonable fee to cover the charges incurred in providing such information.

19

Our servicing agent will also manage customer service and investor relations with respect to the notes. The servicing agent will manage:

·Prospectus delivery and subscription procedures;

·Inquiries from note holders;

·Changes in address or account changes for note holders;

·Preparing and issuing renewal and maturity notices for outstanding notes;

·Reports and analyses to us, the trustee and note holders as applicable.

The servicing agent will also direct the paying agent to make interest and principal payments on the notes, and direct the trustee to issue Form 1099INTs to note holders. The servicing agent expects to develop a web site to facilitate online offers and sales of notes.

Subordination

The indebtedness evidenced by the notes, and any interest thereon, is subordinated in right of payment to all of our senior debt. “Senior debt” means all of our secured, unsecured, senior or subordinate indebtedness including commitments to extend senior debt, as well as other financial obligations of the company, whether outstanding on the date of this prospectus or incurred after the date of this prospectus, whether such indebtedness is or is not specifically designated as being senior debt in its defining instruments, other than the existing notes and future offerings of additional renewable unsecured subordinated notes issued under this indenture which will rank equally with the notes. Senior debt also includes discounted lease rentals that we have incurred in the past and will incur in the future from time to time.

The provisions of the indenture governing subordination of the notes to senior debt may not be amended or terminated without the consent of each holder of senior debt. Also, the subordination provisions cannot be terminated or revoked until all senior debt is paid in full and all commitments to extend senior debt have terminated.

Until all of our senior debt has been fully paid and all obligations of any senior lender to extend credit to us have terminated, we cannot provide holders of the notes or the trustee with any security or guarantee of payment of the notes. In addition, if the trustee or note holders obtain any security for repayment from us while senior debt is outstanding, any senior debt holder is entitled to have such security terminated and assigned to senior debt holders. The indenture prevents note holders or the trustee from challenging the priority or validity of any senior debt holders’ lien over our assets or senior debt holders’ priority over note holders in any legal proceeding. Any documents, agreements or instruments evidencing or relating to any senior debt may be amended, restated, supplemented and/or renewed from time to time without requiring any notice to or consent of any holder of notes or any person or entity acting on behalf of any such holder or the trustee.

The indenture does not prevent holders of senior debt from disposing of, or exercising any other rights with respect to, any or all of the collateral securing the senior debt. As of March 31, 2006, we had approximately $15 million of availability under our credit facility with LaSalle Bank that we could draw upon, and if we were to borrow from LaSalle Bank, this debt would be senior to the notes. We can draw up to $25 million from LaSalle Bank if we satisfy certain conditions. We and our subsidiaries have granted LaSalle Bank a continuing security interest in all assets that we currently hold or subsequently acquire to secure our obligations under the credit facility.

20

We have in the past, and expect in the future to enter into payment arrangements in connection with acquisitions or investments that may involve contingent obligations or commitments. We also have in the past, and will in the future enter into non-recourse discounting of lease rentals with financial institutions at fixed interest rates. Our obligations under these types of arrangements may continue for several years following an acquisition, investment or lease, and will rank senior to your notes. As of December 31, 2005, our aggregate contingent cash payment obligations in connection with completed acquisitions or investments totaled approximately $0.5 million. As of December 31, 2005, our discounted lease rentals totaled approximately $0.33 million. The terms of the notes or the indenture do not impose any limitation on the amount of senior debt or other indebtedness we may incur, although our existing senior debt agreements may restrict us from incurring new senior debt.

The notes are not guaranteed by any of our subsidiaries. Accordingly, in the event of a liquidation or dissolution of one of our subsidiaries, creditors of that subsidiary will be paid in full, or provision for such payment will be made, from the assets of that subsidiary prior to distributing any remaining assets to us as a shareholder of that subsidiary. Therefore, in the event of liquidation or dissolution of a subsidiary, no assets of that subsidiary may be used to make payment to the holders of the notes until the creditors of that subsidiary are paid in full from the assets of that subsidiary.

In the event of any liquidation, dissolution or any other winding up of us, or of any receivership, insolvency, bankruptcy, readjustment, reorganization or similar proceeding under the U.S. Bankruptcy Code or any other applicable federal or state law relating to bankruptcy or insolvency, or during the continuation of any event of default on the senior debt, no payment may be made on the notes until all senior debt has been paid in full or provision for such payment has been made to the satisfaction of the senior debt holders. If any of the above events occurs, holders of senior debt may also submit claims on behalf of holders of the notes and retain the proceeds for their own benefit until they have been fully paid, and any excess will be turned over to the holders of the notes. If any distribution is nonetheless made to holders of the notes, the money or property distributed to them must be paid over to the holders of the senior debt to the extent necessary to pay senior debt in full.

We will not make any payment, direct or indirect (whether for interest, principal, as a result of any redemption or repurchase, at maturity, on default, or otherwise), on the notes and any other indebtedness being subordinated to the payment of the notes, and neither the holders of the notes nor the trustee will have the right, directly or indirectly, to sue on or to enforce the indenture or the notes, if a default or event of default under any senior debt has occurred and is continuing, or if any default or event of default under any senior debt would result from such payment, in each case unless and until:

·all defaults and events of default have been cured or waived or have ceased to exist and would not result from any payment on the notes; or

·the end of the period commencing on the date the trustee receives written notice of default from a holder of the senior debt and ending on the earlier of:

·the trustee’s receipt of a valid waiver of default from the holder of senior debt; or

·the trustee’s receipt of a written notice from the holder of senior debt terminating the payment blockage period.

Provided, however, that if any of the blockage events described above has occurred, a senior debt holder may not block payments for more than 180 days out of any 360 day period. But, this 180-day limit applies only to senior debt holders that join in a notice to block payment due to a senior debt default. If other senior debt holders do not join or give notice of a payment blockage, these non-joining senior debt holders may, if applicable, assert a default and a 180-day period will be calculated in accordance with the notice of default provided by such non-joining senior debt holder.

21

In addition to being unable to make payments on the notes, in case of default on any senior debt, we cannot issue any new notes or renew any existing notes without a waiver from the holder of senior debt or a written notice from the senior debt holder terminating the payment blockage period.

Following, waiver or termination of all blockage periods described above, the trustee may thereafter sue on and enforce the indenture and the notes as long as any funds paid as a result of any such suit or enforcement action shall be paid toward the senior debt until it is indefeasibly paid in full before being applied to the notes.

Until all senior debt is paid in full or commitments to extend senior debt have terminated, note holders cannot exercise any right to subrogate, or stand in the shoes, of a senior debt holder with respect to any distributions on senior debt. The indenture also requires that note holders agree that senior debt holders have no liability to note holders for actions that senior debt holders take in good faith to assert a default on senior debt, collect senior debt or foreclose on security on senior debt.

No Security; No Sinking Fund

The notes are unsecured, which means that none of our tangible or intangible assets or property, nor any of the assets or property of any of our subsidiaries, has been set aside or reserved to make payment to the holders of the notes in the event that we default on our obligations to the holders. In addition, we will not contribute funds to any separate account, commonly known as a sinking fund, to repay principal or interest due on the notes upon maturity or default.

Restrictive Covenants

The indenture contains certain limited restricted covenants that require us to maintain certain financial standards and restrict us from certain actions as set forth below.

The indenture provides that, so long as the notes are outstanding:

·we will maintain a positive net worth; and

·we will not declare or pay any dividends or other payments of cash or other property to our shareholders (other than a dividend paid in shares of our capital stock on a pro rata basis to all our shareholders) unless no default and no event of default with respect to the notes exists or would exist immediately following the declaration or payment of the dividend or other payment.

Consolidation, Merger or Sale

The indenture generally permits a consolidation or merger between us and another entity. It also permits the sale or transfer by us of all or substantially all of our property and assets. These transactions are permitted if:

·the resulting or acquiring entity, if other than us, is a United States corporation, limited liability company or limited partnership and assumes all of our responsibilities and liabilities under the indenture, including the payment of all amounts due on the notes and performance of the covenants in the indenture; and

·immediately after the transaction, and giving effect to the transaction, no event of default under the indenture exists.

If we consolidate or merge with or into any other entity or sell or lease all or substantially all of our assets, according to the terms and conditions of the indenture, the resulting or acquiring entity will be substituted for us in the indenture with the same effect as if it had been an original party to the indenture. As a result, the successor entity may exercise our rights and powers under the indenture, in our name and we will be released from all our liabilities and obligations under the indenture and under the notes.

22

Events of Default

The indenture provides that each of the following constitutes an event of default:

·failure to pay interest on a note within 15 days after the due date for such payment (whether or not prohibited by the subordination provisions of the indenture);

·failure to pay principal on a note within 10 days after the due date for such payment (whether or not prohibited by the subordination provisions of the indenture);

·our failure to observe or perform any material covenant, condition or agreement or our breach of any material representation or warranty, but only after we have been given notice of such failure or breach and such failure or breach is not cured within 30 days after our receipt of notice;

·defaults in certain of our other financial obligations that are not cured within 30 days; and

·certain events of bankruptcy or insolvency with respect to us.

If any event of default occurs and is continuing (other than an event of default involving certain events of bankruptcy or insolvency with respect to us), the trustee or the holders of at least a majority in principal amount of the then outstanding notes may by notice to us declare the unpaid principal of and any accrued interest on the notes to be due and payable immediately. So long as any senior debt is outstanding, however, and a payment blockage on the notes is in effect, a declaration of this kind will not be effective, and neither the trustee nor the holders of notes may enforce the indenture or the notes, except as otherwise set forth above in “—Subordination”. In the event senior debt is outstanding and no payment blockage on the notes is in effect, a declaration of this kind will not become effective until the earlier of:

·the day which is five business days after the receipt by us and the holders of senior debt of such written notice of acceleration; or

·the date of acceleration of any senior debt.

In the case of an event of default arising from certain events of bankruptcy or insolvency, with respect to us, all outstanding notes will become due and payable without further action or notice. Holders of the notes may not enforce the indenture or the notes except as provided in the indenture. Subject to certain limitations, holders of a majority in principal amount of the then outstanding notes may direct the trustee in its exercise of any trust or power. The trustee may withhold from holders of the notes notice of any continuing default or event of default (except a default or event of default relating to the payment of principal or interest) if the trustee in good faith determines that withholding notice would have no material adverse effect on the holders.

The holders of a majority in aggregate principal amount of the notes then outstanding by notice to the trustee may, on behalf of the holders of all of the notes, waive any existing default or event of default and its consequences under the indenture, except:

·a continuing default or event of default in the payment of interest on, or the principal of, a note held by a non-consenting holder; or

·a waiver that would conflict with any judgment or decree.

We are required to deliver to the trustee within 120 days of the end of our fiscal year a certificate regarding compliance with the indenture, and we are required, upon becoming aware of any default or event of default, to deliver to the trustee a certificate specifying such default or event of default and what action we are taking or propose to take with respect to the default or event of default.

23

Amendment, Supplement and Waiver

Except as provided in this prospectus or the indenture, the terms of the indenture or the notes then outstanding may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the notes then outstanding, and any existing default or compliance with any provision of the indenture or the notes may be waived with the consent of the holders of a majority in principal amount of the then outstanding notes.

Notwithstanding the foregoing, an amendment or waiver with any of the following consequences will not be effective unless each note holder consents:

·reduces the aggregate principal amount of notes whose holders must consent to an amendment, supplement or waiver;

·reduces the principal of or changes the fixed maturity of any note or alters the repurchase or redemption provisions or the price at which we shall offer to repurchase or redeem the note;

·reduces the rate of or changes the time for payment of interest, including default interest, on any note;

·waives a default or event of default in the payment of principal or interest on the notes, except a rescission of acceleration of the notes by the holders of at least a majority in aggregate principal amount of the then outstanding notes and a waiver of the payment default that resulted from such acceleration;

·makes any note payable in money other than that stated in this prospectus;

·makes any change in the provisions of the indenture relating to waivers of past defaults or the rights of holders of notes to receive payments of principal of or interest on the notes;

·makes any change to the subordination provisions of the indenture that has a material adverse effect on holders of notes;

·modifies or eliminates the right of the estate of a holder or a holder to cause us to repurchase a note upon the death or total permanent disability of a holder; or

·makes any change in the foregoing amendment and waiver provisions.

Notwithstanding the foregoing, without the consent of any holder of the notes, we and the trustee may amend or supplement the indenture or the notes:

·to cure any ambiguity, defect or inconsistency;

·to provide for assumption of our obligations to holders of the notes in the case of a merger, consolidation or sale of all or substantially all of our assets;

·to provide for additional uncertificated or certificated notes;

·to make any change that does not adversely affect the legal rights under the indenture of any such holder, including but not limited to an increase in the aggregate dollar amount of notes which may be outstanding under the indenture;

·to modify our policy regarding repurchases elected by a holder of notes prior to maturity and our policy regarding repurchase of the notes prior to maturity upon the death or total permanent disability of any holder of the notes, but such modifications shall not materially adversely affect any then outstanding notes; or

·to comply with requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act.

24

The Trustee

Wells Fargo Bank, National Association has agreed to be the trustee under the indenture. The indenture contains certain limitations on the rights of the trustee, should it become one of our creditors, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any claim as security or otherwise. The trustee will be permitted to engage in other transactions with us.

Subject to certain exceptions, the holders of a majority in principal amount of the then outstanding notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee. The indenture provides that in case an event of default specified in the indenture shall occur and not be cured, the trustee will be required, in the exercise of its power, to use the degree of care of a reasonable person in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any holder of notes, unless the holder shall have offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense.

Resignation or Removal of the Trustee

The trustee may resign at any time, or may be removed by the holders of a majority of the aggregate principal amount of the outstanding notes. In addition, upon the occurrence of contingencies relating generally to the insolvency of the trustee or the trustee’s ineligibility to serve as trustee under the Trust Indenture Act of 1939, as amended, we may remove the trustee. However, no resignation or removal of the trustee may become effective until a successor trustee has accepted the appointment as provided in the indenture.

Reports to Trustee

Our servicing agent will provide the trustee with quarterly reports containing any information reasonably requested by the trustee. These quarterly reports will include information on each note outstanding during the preceding quarter, including outstanding principal balance, interest credited and paid, transfers made, any redemption or repurchase and interest rate paid.

No Personal Liability of our or our Servicing Agent’s Directors, Officers, Employees and Shareholders

No director, officer, employee, incorporator or shareholder of ours or our servicing agent, will have any liability for any of our obligations under the notes, the indenture or for any claim based on, in respect to, or by reason of, these obligations or their creation. Each holder of the notes waives and releases these persons from any liability, including any liability arising under applicable securities laws. The waiver and release are part of the consideration for issuance of the notes. We have been advised that the waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy.

Service Charges

We and our servicing agent may assess service charges for changing the registration of any note to reflect a change in name of the holder, multiple changes in interest payment dates or transfers (whether by operation of law or otherwise) of a note by the holder to another person.

Additional Securities

We may offer additional classes of securities with terms and conditions different from the notes currently being offered in this prospectus. We will amend or supplement this prospectus if and when we decide to offer to the public any additional class of security under this prospectus. If we sell the entire principal amount of notes offered in this prospectus, we may register and sell additional notes by amending this prospectus, but we are under no obligation to do so.

25

Variations by State

We may offer different securities and vary the terms and conditions of the offer (including, but not limited to, different interest rates and service charges for all notes) depending upon the state where the purchaser resides.

Interest Withholding

We will withhold 28% (which rate is scheduled to increase to 31% for payments made after December 31, 2010) of any interest paid to any investor who has not provided us with a social security number, employer identification number, or other satisfactory equivalent in the subscription agreement (or another document) or where the Internal Revenue Service has notified us that backup withholding is otherwise required. See “Material Federal Income Tax Consequences—Reporting and Backup Withholding.”

Lack of Liquidity

There is not currently a trading market for the notes, and we do not expect that a trading market for the notes will develop.

Satisfaction and Discharge of Indenture

The indenture shall cease to be of further effect upon the payment in full of all of the outstanding notes and the delivery of an officer’s certificate to the trustee stating that we do not intend to issue additional notes under the indenture or, with certain limitations, upon deposit with the trustee of funds sufficient for the payment in full of all of the outstanding notes.

Reports

We currently file annual reports on Form 10-K containing financial statements and quarterly reports on Form 10-Q containing financial information for the first three quarters of each fiscal year. We also furnish or file current reports on Form 8-K for certain events involving our business. We will send copies of these reports, at no charge, to any holder of notes who requests them in writing.

Paying Agent

We have appointed Wells Fargo to serve as paying agent for the notes. At our or the servicing agent’s direction, Wells Fargo will pay principal and interest on the notes under the terms of any applicable note, pursuant to the indenture and prospectus. Wells Fargo must pay only amounts that we deposit for payment on the notes. We will pay all fees and expenses in connection with the paying agent’s services. Wells Fargo must maintain certain records of note holders’ subscriptions and payments. We have also agreed to indemnify Wells Fargo against any claims that arise from its services as paying agent except for claims resulting from the paying agent’s negligence, bad faith or willful misconduct.

MATERIAL FEDERAL INCOME TAX CONSEQUENCES

The following discussion describes the material federal income tax consequences relating to the purchase of the notes from us and ownership and disposition of the notes. The discussion is based upon the current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), regulations issued under the Code and judicial or ruling authority, all of which are subject to change that may be applied retroactively. The discussion does not deal with note owners other than original purchasers from us. The discussion assumes that the notes are held as capital assets within the meaning of Section 1221 of the Code and does not discuss the federal income tax consequences applicable to all categories of investors, including banks, tax-exempt organizations, insurance companies, dealers in securities or currencies,

26

persons that will hold notes as a position in a hedging, straddle or conversion transactions, or persons that have a functional currency other than the U.S. dollar, some of which may be subject to special rules. If a partnership holds notes, the tax treatment of a partner will generally depend on the status of the partner and on the activities of the partnership. Our counsel is of the opinion that the following discussion of federal income tax consequences is correct in all material respects. An opinion of our counsel, however, is not binding on the Internal Revenue Service or the courts, and no rulings on any of the issues discussed below will be sought from the Internal Revenue Services. You should consult your own tax advisor to determine the specific federal, state, local and any other tax consequences applicable to you relating to your purchase, ownership and disposition of the notes.

Interest Income On The Notes

Subject to the discussion below applicable to “non-U.S. holders,” stated interest on a note will be includible in your gross income as ordinary interest income at the time it is accrued or received in accordance with your method of accounting for United States federal income tax purposes.

If you hold a note issued with original issue discount (“OID”), the provisions of Sections 1271 through 1273 and 1275 of the Code will apply to that note. In general, a note will be issued with OID if its term exceeds one year and interest is paid at maturity. Even if you are a cash method holder, you must include in your gross income, as ordinary income, the daily portion of such OID attributable to each day that you hold the note pursuant to the applicable Code Sections and Treasury regulations promulgated thereunder. This requirement generally will result in the accrual of income before the receipt of cash attributable to that income.

Treatment Of Dispositions Of Notes

Upon the sale, exchange, retirement or other taxable disposition of a note, you will recognize taxable gain or loss in an amount equal to the difference between the amount realized on the disposition and your adjusted tax basis in the note. Your adjusted tax basis of a note generally will equal your original cost for the note, increased by any accrued but unpaid interest you previously included in income with respect to the note and reduced by any principal payments you previously received with respect to the note. Any gain or loss will be capital gain or loss, except for gain representing accrued interest not previously included in your income. The capital gain or loss will be long-term capital gain or loss if the note has been held for more than one year. Capital gain or loss from a note held for one year or less will be short-term capital gain or loss. Capital losses generally may be used only to offset capital gains.

Non-U.S. Holders

Generally, if you are a nonresident alien individual or a non-U.S. corporation and do not hold the note in connection with a United States trade or business, interest paid or accrued on the notes will be treated as “portfolio interest” and therefore will be exempt from United States federal income tax. In that case, you will be entitled to receive interest payments on the notes free of United States federal income tax provided that you periodically provide us with a statement on applicable IRS forms certifying under penalty of perjury that you are not a United States person and provide your name and address. In addition, in that case you will not be subject to United States federal income tax on gain from the disposition of a note unless you are an individual who is present in the United States for 183 days or more during the taxable year in which the disposition takes place and certain other requirements are met. Interest paid to or accrued by a non-U.S. person are not subject to U.S. withholding tax if the income is effectively connected with a United States trade or business conducted by that person and we are provided a properly executed IRS Form W-8ECI. Such “effectively connected income” will, however, generally be subject to the regular United States income tax. Holders of notes should consult their tax advisors regarding the procedures whereby they may establish an exemption from withholding.

27

Reporting And Backup Withholding

We will report annually to the Internal Revenue Service and to holders of record that are not exempted from the reporting requirements any information that may be required with respect to interest paid or required to be accrued on the notes. Under certain circumstances, as a holder of a note, you may be subject to “backup withholding” currently at a 28% rate. Under current law, after December 31, 2010, the backup withholding rate is scheduled to increase to 31%. Backup withholding may apply to you if you are a United States person and, among other circumstances, you fail to furnish on IRS Form W-9 or a substitute Form W-9 your Social Security number or other taxpayer identification number to us. Backup withholding may apply, under certain circumstances, if you are a non-U.S. person and fail to provide us with the statement necessary to establish an exemption from federal income and withholding tax on interest on the note. Backup withholding, however, does not apply to payments on a note made to certain exempt recipients, such as corporations and tax-exempt organizations, and to certain non-U.S. persons. Backup withholding is not an additional tax and may be refunded or credited against your United States federal income tax liability, provided that you furnish certain required information.

This federal tax discussion is included for general information only and may not be applicable depending upon your particular situation. You should consult your own tax advisor with respect to the specific tax consequences to you of the purchase, ownership and disposition of the notes, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in federal or other tax laws.

PLAN OF DISTRIBUTION

Under the terms and subject to the conditions contained in a distribution and management agreement between us and Sumner Harrington Ltd., Sumner Harrington Ltd. has agreed to serve as our selling agent and to use its best efforts to sell the notes on the terms set forth in this prospectus. The selling agent is not obligated to sell any minimum amount of notes or to purchase any of the notes.

The selling agent proposes to offer the notes to the public on our behalf on the terms set forth in this prospectus and the prospectus supplements that we file from time to time. The selling agent plans to market the notes directly to the public through newspaper, radio, internet, direct mail and other advertising. In addition, our selling agent will manage certain administrative and customer service functions relating to the notes, including handling all inquiries from potential investors, mailing investment kits, meeting with investors, processing subscription agreements and responding to all written and telephonic questions relating to the notes. Upon prior written notice to the selling agent, we may elect to use a different selling agent or perform these duties ourselves. The selling agent’s servicing responsibilities are described under “Description of the Notes—Servicing Agent.”

We have agreed to reimburse the selling agent for its out-of-pocket expenses incurred in connection with the offer and sale of the notes, including document fulfillment expenses, legal and accounting fees, regulatory fees, due diligence expenses and marketing costs. We advanced $75,000 to the selling agent to be applied towards the due diligence expenses. Under the terms of the distribution and management agreement, we also will pay our selling agent a commission equal to 3.00% of the principal amount of all notes sold. For notes with maturities of two years or more, the entire 3.00% commission will be paid to the selling agent at the time of issuance and no additional commission will be paid upon renewal. For notes with maturities of less than two years, the gross 3.00% commission will be paid in pro rata installments upon the original issuance and each renewal, if any, over the first two years. Accordingly, the selling agent will not receive the entire 3.00% gross commission on notes with terms of less than two years unless the notes are successively renewed for two years. The selling agent may engage or allow selected brokers or dealers to sell notes for a commission, at no additional cost to us.

28

Under the distribution and management agreement, we have also agreed to pay Sumner Harrington Ltd. an annual portfolio management fee equal to 0.25% of the weighted average principal balance of the notes outstanding for its services as servicing agent. In exchange for the annual portfolio management fee, Sumner Harrington Ltd. will manage all customer service functions concerning the notes and act as an agent between us and the purchasers and holders of the notes. The annual portfolio management fee also covers all costs relating to maintenance of the investor relationship after the purchase of notes. This includes, among other things, addressing all investor inquires regarding the notes, the preparation of all confirmations, notices and statements to purchasers and holders of the notes, the coordination of interest payments with us and the paying agent, the establishment and maintenance of records relating to the notes, the preparation of all reports, statements and analyses regarding the notes, and all out-of-pocket expenses for the printing and mailing of confirmations, notices and statements to the purchasers and holders of the notes. See “Description of the Notes—Servicing Agent.” This ongoing fee will be paid monthly. The amount of this fee will depend upon a number of variables, including the pace at which notes are sold, the terms of the notes sold and whether the notes are redeemed or repurchased.

The distribution and management agreement may be terminated by either us or Sumner Harrington Ltd. upon giving prior notice.

The selling agent will only be compensated to the extent that notes are sold in the offering. The table below summarizes the maximum possible amounts of compensation or reimbursement that we will pay the selling agent for services rendered in offering and selling the notes and serving as the servicing agent with regard to the notes. While actual amounts may differ from the percentages and amounts shown in the table, in no event will the total commission plus the total cost of the remaining line items exceed 6.00% of the aggregate principal amount of the notes sold.

Compensation and Reimbursement	% of Offering			Amount(1)
Total commissions		3.00	%(2)	$	1,500,000
Selling agent’s legal counsel fees		0.15	%	$	75,000
Document fulfillment expenses		0.60	%	$	300,000
Maximum portfolio management fee		2.25	%(3)	$	1,125,000
Total		6.00	%	$	3,000,000

(1)All amounts assume the sale of 100% of aggregate principal amount of notes offered and represent the maximum possible amount payable to the selling agent or its affiliate over the entire term of the offering. If less than 100% of the aggregate principal amount of the notes are sold in the offering, the amounts actually paid to the agent for commissions and annual portfolio management fees will be less. In no event will the compensation paid to the selling agent for commissions, annual portfolio management fees and other categories exceed the percentage amounts shown, as applied to the notes actually sold.

(2)Assumes that each note with a term of less than two years is successively renewed for a total of two years.

(3)The annual portfolio management fee is 0.25% of the weighted average daily principal balance of the notes outstanding. However, in no event will the aggregate portfolio management fees total more than 2.25% of the aggregate principal amount of the notes sold.

The distribution and management agreement provides for reciprocal indemnification between us and the selling agent, including the selling agent’s and our officers, directors and controlling persons, against civil liabilities in connection with this offering, including certain liabilities under the Securities Act of 1933, as amended. Insofar as indemnification for liabilities arising under the Securities Act may be permitted pursuant to such indemnification provisions, we have been advised that in the opinion of the Securities and

29

Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Prior to the offering, there has been no public market for the notes. We do not intend to list the notes on any securities exchange or include them for quotation on Nasdaq. The selling agent is not obligated to make a market in the notes and does not intend to do so. We do not anticipate that a secondary market for the notes will develop.

The foregoing is a summary of the material provisions relating to selling and distribution of the notes in the distribution and management agreement. The provisions of the distribution and management agreement relating to our retention of Sumner Harrington Ltd. to act as our servicing agent in performing our ongoing administrative responsibilities for the notes are described under “Description of the Notes.” Any amendment to the distribution and management agreement will be filed as an exhibit to an amendment to the registration statement of which this prospectus is a part.

LEGAL OPINIONS

Lindquist & Vennum P.L.L.P. will issue an opinion regarding the legality of the securities offered by this prospectus.

EXPERTS

The consolidated financial statements of Winmark Corporation as of December 31, 2005 and December 25, 2004, and for each of the years in the three-year period ended December 31, 2005, have been incorporated by reference herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

We “incorporate by reference” into this prospectus certain information that we have filed with the SEC, which means that we disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus. Some information contained in this prospectus updates the information incorporated by reference. In case of a conflict or inconsistency between information set forth in this prospectus and information incorporated by reference into this prospectus, you should rely on the information contained in the document that was filed later. We incorporate by reference the documents listed below:

·Annual report on Form 10-K for the year ended December 31, 2005 filed on March 28, 2006 (including information specifically incorporated by reference into our Form 10-K from our 2005 annual report to shareholders and from our definitive proxy statement for our 2006 annual meeting of shareholders filed on March 30, 2006); and

·Definitive proxy statement for our 2006 annual meeting of shareholders filed on March 30, 2006; and

·Current Report on Form 8-K dated April 5, 2006 describing a second amendment to our credit facility with LaSalle Bank and an amendment to an agreement with BridgeFunds Limited that

30

extends our obligation to purchase a $500,000 note from BridgeFunds from April 14, 2006 to July 14, 2006 subject to satisfaction of certain conditions.

We will provide to each person, including any beneficial owner of the notes, to whom this prospectus is delivered, a copy of any or all reports or documents that have been incorporated by reference in this prospectus contained in the registration statement but not delivered with the prospectus upon written or oral request. We will deliver these reports or documents at no cost to the requester. You may request these reports or documents by writing to or telephoning us at:

Winmark Corporation
Attn: Chief Financial Officer
4200 Dahlberg Drive, Suite 100
Minneapolis, Minnesota 55422-4837
(763) 520-8500

You may also request these documents via email at information@winmarkcorporation.com.

You may also get these documents from our website under “Investor Relations” at www.winmarkcorporation.com/myarticles.asp?S=7374&PubID=4348&P=4791.

You should rely only on the information included or incorporated by reference in this prospectus or the prospectus supplement. We have not authorized anyone else to provide you with different information. We may only use this prospectus to sell securities if we also deliver a prospectus supplement. We are only offering these securities in states where the offer is permitted. You should not assume that the information in this prospectus or the prospectus supplement is accurate as of any date other than the dates on the front of those documents. Information on our website is not a part of this prospectus or a prospectus supplement.

31

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14.Other Expenses of Issuance and Distribution

The following is an estimate, subject to future contingencies, of the expenses to be incurred by the Registrant in connection with the issuance and distribution of the securities being registered:

SEC registration fee	$	5,350
NASD filing fee	5,500
Legal fees and expenses*	75,000
Trustee fees and expenses*	10,000
Accounting fees and expenses*	25,000
Blue Sky fees and expenses*	5,000
Printing and engraving fees*	20,000
Selling agent’s counsel fees and expenses	75,000
Miscellaneous*	4,150
Total	$	225,000

*Estimated pursuant to instruction to Item 511 of Regulation S-K.

ITEM 15.Indemnification of Directors and Officers

Articles of Incorporation.The registrant’s Articles of Incorporation provide that no director of the registrant may be personally liable to the registrant or our shareholders for monetary damages for breach of fiduciary duty as a director, except for liability: (i) for any breach of the director’s duty of loyalty to us or our shareholders; (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) under sections 302A.559 or 80A.23 of the Minnesota Statutes; (iv) for any transaction from which the director derived any improper personal benefit; or (v) for any act or omission occurring prior to the effective date of this provision in our Articles of Incorporations.

Bylaws and Statutory Provisions.The registrant’s Bylaws provide for indemnification of our officers, directors and employees in connection with a proceeding if such person acted in good faith and in a manner reasonably believed to be in and not opposed to our best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In addition, section 302A.521 of the Minnesota Business Corporation Act provides that a corporation shall indemnify a person made or threatened to be made a party to a proceeding by reason of the former or present official capacity of the person against judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements and reasonable expenses, including attorneys’ fees and disbursements, incurred by the person in connection with the proceeding, if, with respect to the acts or omissions of the person complained of in the proceeding, the person:

(1)   has not been indemnified by another organization or employee benefit plan for the same judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements and reasonable expenses, including attorneys’ fees and disbursements, incurred by the person in connection with the proceeding with respect to the same acts or omissions;

(2)   acted in good faith;

(3)   received no improper personal benefit and section 302A.255 (Director Conflicts of Interest), if applicable, has been satisfied;

II-1

(4)   in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and

(5)   in the case of acts or omissions occurring in the official capacity of a director or, for a person not a director, in the official capacity of an officer, committee member or employee, reasonably believed that the conduct was in the best interests of the corporation, or in the case of acts or omissions occurring in the official capacity of a director, officer, partner, trustee, employee or agent of another organization or employee benefit plan, reasonably believed that the conduct was not opposed to the best interests of the corporation. If the person’s acts or omissions complained of in the proceeding relate to conduct as a director, officer, trustee, employee or agent of an employee benefit plan, the conduct is not considered to be opposed to the best interests of the corporation if the person reasonably believed that the conduct was in the best interests of the participants or beneficiaries of the employee benefit plan.

ITEM 16.Exhibits

The following Exhibits are filed or incorporated by reference as part of this Registration Statement:

1.1	Distribution and Management Agreement between the Company and Sumner Harrington Ltd. dated                      , 2006*
3.1	Articles of Incorporation, as amended (Exhibit 3.1)(1)
3.2	By-laws, as amended and restated to date (Exhibit 3.2)(1)
4.1	Indenture between the Company and Wells Fargo Bank, National Association dated                , 2006*
4.2	Form of Note*
4.3	Form of Note Confirmation*
4.4	Form of Subscription Agreement*
4.5	Paying Agent Agreement between Wells Fargo Bank, National Association and Winmark Corporation dated                , 2006*
5.1	Opinion of Lindquist & Vennum P.L.L.P., counsel to the Registrant regarding the legality of the notes*
8.1	Opinion of Lindquist & Vennum P.L.L.P., counsel to the Registrant as to certain federal income tax matters*
10.1	Asset Purchase Agreement dated January 24, 2002 with Sports Traders, Inc. and James D. Van Buskirk (“Van Buskirk”) concerning acquisition of wholesale business, including amendment dated March 11, 1992 (Exhibit 10.6 (a))(1)
10.2	Retail store agreement dated January 24, 2002 with Van Buskirk (Exhibit 10.6 (b))(1)
10.3	1992 Stock Option Plan, including forms of stock option agreement (Exhibit 10.12)(1)(4)
10.4	Amendment No. 1 to the 1992 Stock Option Plan (Exhibit 10.15)(2)(4)
10.5	Amendment No. 2 to the 1992 Stock Option Plan (Exhibit 10.16)(2)(4)
10.6	Amendment No. 3 to the 1992 Stock Option Plan (Exhibit 10.16)(3)(4)
10.7	Amendment No. 4 to the 1992 Stock Option Plan (Exhibit 10.13)(4)(7)
10.8	Amended and Restated Stock Option Plan for Nonemployee Directors (Exhibit 10.1)(10)(4)
10.9	Employment Agreement with John L. Morgan, dated March 22, 2000 (Exhibit 10.1)(4)(5)
10.10	Common Stock Warrant with Sheldon Fleck, dated March 22, 2000 (Exhibit 10.3)(5)
10.11	Lease with Stan Koch & Sons Trucking, Inc. for Corporate Headquarters (Exhibit 10.4)(6)
10.12	First Amendment to Employment Agreement with John L. Morgan (Exhibit 10.26)(4)(7)

II-2

10.13	2001 Stock Option Plan, including forms of stock option agreements (Exhibit 10.27(4)(7)
10.14	Amendment to Lease with Stan Koch & Sons Trucking for corporate headquarters (Exhibit 10.17)(8)
10.15	Amendment No. 2 to Lease with Stan Koch & Sons Trucking for corporate headquarters (Exhibit 10.17)(9)
10.16	364-Day Revolving Credit Agreement dated September 30, 2004 among Winmark Corporation, as a Loan Party, the Subsidiaries of the Company as Loan Parties, and LaSalle Bank National Association as Lender(11)
10.17	Amendment to 364-Day Revolving Credit Agreement by and among Winmark Corporation, Winmark Capital Corporation, Winmark Business Solutions, Inc. and Grow Biz Games, Inc. and LaSalle Bank National Association dated as of August 25, 2005(12)
10.18	Second Amendment to Employment Agreement with John L. Morgan(13)(4)
10.19	Second Amendment to Credit Agreement with LaSalle Bank National Association dated March 31, 2006(14)
10.20	Series A-1 Preferred Stock Purchase Agreement between Commercial Credit Group, Inc. and Winmark Corporation dated September 22, 2004(15)
10.21	Securities Purchase Agreement between Winmark Corporation and BridgeFunds, Limited dated October 13, 2004(16)
10.22	Amendment No. 1 to Securities Purchase Agreement with BridgeFunds, Limited dated April 4, 2006(17)
12.1	Statement re Ratio of Earnings to Fixed Charges*
23.1	Consent of Lindquist & Vennum P.L.L.P., counsel to the Registrant (included as part of Exhibit 5.1)
23.2	Consent of KPMG LLP*
24.1	Powers of Attorney (included on signature pages)
25.1	Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Wells Fargo Bank, National Association*

  (1)Incorporated by reference to the specified exhibit to the Registration Statement on Form S-1, effective August 24, 1993 (Reg. No. 33-65108).

  (2)Incorporated by reference to the specified exhibit to the Annual Report on Form 10-K for the fiscal year ended December 30, 1995.

  (3)Incorporated by reference to the specified exhibit to the Annual Report on form 10-K for the fiscal year ended December 27, 1997.

  (4)Indicates management contracts, compensation plans or arrangements required to be filed as exhibits.

  (5)Incorporated by reference to the specified exhibit to the Quarterly Report on Form 10-Q for the quarter ended March 25, 2000.

  (6)Incorporated by reference to the specified exhibit to the Quarterly Report on Form 10-Q for the quarter ended June 24, 2000.

  (7)Incorporated by reference to the specified exhibit to Annual Report on Form 10-K for the fiscal year ended December 30, 2000.

  (8)Incorporated by reference to the specified exhibit to the Annual Report on Form 10-K for the fiscal year ended December 27, 2003.

II-3

  (9)Incorporated by reference to the specified exhibit to the Annual Report on Form 10-K for the fiscal year ended December 25, 2004.

(10)Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 26, 2005.

(11)Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended September 25, 2004.

(12)Incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K dated August 29, 2005.

(13)Incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K dated March 28, 2006.

(14)Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K dated April 5, 2006.

(15)Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended September 25, 2004.

(16)Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended September 25, 2004.

(17)Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated April 5, 2006.

*Filed herewith.

ITEM 17.Undertakings

(a)    The undersigned Registrant hereby undertakes:

(1)   To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(i)    to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii)   to reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement; and

(iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;

(2)   That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4

(3)   To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(h)   Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(i)    The undersigned Registrant hereby undertakes that:

(1)   For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this Registration Statement as of the time it was declared effective; and

(2)   For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(j)     the undersigned registrant hereby undertakes to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act (“Act”) in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and as duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis and the State of Minnesota, on the 14th day of April, 2006.

WINMARK CORPORATION
By	/s/ JOHN L. MORGAN
	Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on the dates indicated:

	Signature		Title		Date
/s/ JOHN L. MORGAN		Chairman of the Board and Chief Executive		April 14, 2006
John L. Morgan		Officer (principal executive officer)
/s/ STEPHEN M. BRIGGS		President and Chief Operating Officer		April 14, 2006
Stephen M. Briggs
/s/ BRETT D. HEFFES		Chief Financial Officer and Treasurer		April 14, 2006
Brett D. Heffes
/s/ KIRK A. MACKENZIE		Vice Chairman and Director		April 14, 2006
Kirk A. MacKenzie
/s/ WILLIAM D. DUNLAP, JR.		Director		April 14, 2006
William D. Dunlap, Jr.
/s/ JENELE C. GRASSLE		Director		April 14, 2006
Jenele C. Grassle
/s/ PAUL C. REYELTS		Director		April 14, 2006
Paul C. Reyelts
/s/ MARK. L. WILSON		Director		April 14, 2006
Mark. L. Wilson

II-6

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer of Winmark Corporation, a Minnesota corporation (the “Corporation”), does hereby make, constitute and appoint John L. Morgan and Stephen M. Briggs or any one of them, the undersigned’s true and lawful attorneys-in-fact, with power of substitution, for the undersigned and in the undersigned’s name, place and stead, to sign and affix the undersigned’s name and all amendments, including post-effective amendments, thereto, to be filed by the Corporation with the Securities and Exchange Commission (“SEC”) in connection with the registration under the Securities Act of 1933, as amended, of debt securities of the Corporation, and to file the same, with all exhibits thereto and other supporting documents, with the SEC. The undersigned also grants to said attorneys-in-fact, and each of them full power and authority to do and perform any and all acts necessary or incidental to the performance and execution of the powers herein expressly granted. This power of attorney shall remain in effect until revoked in writing by the undersigned.

	Signature		Title		Date
/s/ JOHN L. MORGAN		Chairman of the Board		April 14, 2006
John L. Morgan		and Chief Executive Officer (principal
		executive officer)
/s/ STEPHEN M. BRIGGS		President and Chief Operating Officer		April 14, 2006
Stephen M. Briggs
/s/ BRETT D. HEFFES		Chief Financial Officer and Treasurer		April 14, 2006
Brett D. Heffes
/s/ KIRK A. MACKENZIE		Vice Chairman and Director		April 14, 2006
Kirk A. MacKenzie
/s/ WILLIAM D. DUNLAP, JR.		Director		April 14, 2006
William D. Dunlap, Jr.
/s/ JENELE C. GRASSLE		Director		April 14, 2006
Jenele C. Grassle
/s/ PAUL C. REYELTS		Director		April 14, 2006
Paul C. Reyelts
/s/ MARK. L. WILSON		Director		April 14, 2006
Mark. L. Wilson

II-7

The following Exhibits are filed or incorporated by reference as part of this Registration Statement:

EXHIBIT INDEX

Exhibit Number	Document Description
1.1	Distribution and Management Agreement between the Company and Sumner Harrington Ltd. dated                      , 2006*
3.1	Articles of Incorporation, as amended (Exhibit 3.1)(1)
3.2	By-laws, as amended and restated to date (Exhibit 3.2)(1)
4.1	Indenture between the Company and Wells Fargo Bank, National Association dated                , 2006*
4.2	Form of Note*
4.3	Form of Note Confirmation*
4.4	Form of Subscription Agreement*
4.5	Paying Agent Agreement between Wells Fargo Bank, National Association and Winmark Corporation dated                , 2006*
5.1	Opinion of Lindquist & Vennum P.L.L.P., counsel to the Registrant regarding the legality of the notes*
8.1	Opinion of Lindquist & Vennum P.L.L.P., counsel to the Registrant as to certain federal income tax matters
10.1	Asset Purchase Agreement dated January 24, 2002 with Sports Traders, Inc. and James D. Van Buskirk (“Van Buskirk”) concerning acquisition of wholesale business, including amendment dated March 11, 1992 (Exhibit 10.6 (a))(1)
10.2	Retail store agreement dated January 24, 2002 with Van Buskirk (Exhibit 10.6 (b))(1)
10.3	1992 Stock Option Plan, including forms of stock option agreement (Exhibit 10.12)(1)(4)
10.4	Amendment No. 1 to the 1992 Stock Option Plan (Exhibit 10.15)(2)(4)
10.5	Amendment No. 2 to the 1992 Stock Option Plan (Exhibit 10.16)(2)(4)
10.6	Amendment No. 3 to the 1992 Stock Option Plan (Exhibit 10.16)(3)(4)
10.7	Amendment No. 4 to the 1992 Stock Option Plan (Exhibit 10.13)(4)(7)
10.8	Amended and Restated Stock Option Plan for Non-employee Directors (Exhibit 10.1)(10)(4)
10.9	Employment Agreement with John L. Morgan, dated March 22, 2000 (Exhibit 10.1)(4)(5)
10.10	Common Stock Warrant with Sheldon Fleck, dated March 22, 2000 (Exhibit 10.3)(5)
10.11	Lease with Stan Koch & Sons Trucking, Inc. for Corporate Headquarters (Exhibit 10.4)(6)
10.12	First Amendment to Employment Agreement with John L. Morgan (Exhibit 10.26)(4)(7)
10.13	2001 Stock Option Plan, including forms of stock option agreements (Exhibit 10.27)(4)(7)
10.14	Amendment to Lease with Stan Koch & Sons Trucking for corporate headquarters (Exhibit 10.17)(8)
10.15	Amendment No. 2 to Lease with Stan Koch & Sons Trucking for corporate headquarters (Exhibit 10.17)(9)
10.16	364-Day Revolving Credit Agreement dated September 30, 2004 among Winmark Corporation, as Loan Party, the Subsidiaries of the Company, as Loan Parties, and LaSalle Bank National Association as Lender(11)
10.17	Amendment to 364-Day Revolving Credit Agreement by and among Winmark Corporation, Winmark Capital Corporation, Winmark Business Solutions, Inc. and Grow Biz Games, Inc. and LaSalle Bank National Association dated as of August 25, 2005(12)

II-8

10.18	Second Amendment to Employment Agreement with John L. Morgan(13)(4)
10.19	Second Amendment to Credit Agreement with LaSalle Bank National Association dated March 31, 2006(14)
10.20	Series A-1 Preferred Stock Purchase Agreement between Commercial Credit Group, Inc. and Winmark Corporation dated September 22, 2004(15)
10.21	Securities Purchase Agreement between Winmark Corporation and BridgeFunds, Limited dated October 13, 2004(16)
10.22	Amendment No. 1 to Securities Purchase Agreement with BridgeFunds, Limited dated April 4, 2006(17)
12.1	Statement re Ratio of Earnings to Fixed Charges*
23.1	Consent of Lindquist & Vennum P.L.L.P., counsel to the Registrant (included as part of Exhibit 5.1)
23.2	Consent of KPMG LLP*
24.1	Powers of Attorney (included on signature pages)
25.1	Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of Wells Fargo, National Association*

  (1)Incorporated by reference to the specified exhibit to the Registration Statement on Form S-1, effective August 24, 1993 (Reg. No. 33-65108).

  (2)Incorporated by reference to the specified exhibit to the Annual Report on Form 10-K for the fiscal year ended December 30, 1995.

  (3)Incorporated by reference to the specified exhibit to the Annual Report on form 10-K for the fiscal year ended December 27, 1997.

  (4)Indicates management contracts, compensation plans or arrangements required to be filed as exhibits.

  (5)Incorporated by reference to the specified exhibit to the Quarterly Report on Form 10-Q for the quarter ended March 25, 2000.

  (6)Incorporated by reference to the specified exhibit to the Quarterly Report on Form 10-Q for the quarter ended June 24, 2000.

  (7)Incorporated by reference to the specified exhibit to Annual Report on Form 10-K for the fiscal year ended December 30, 2000.

  (8)Incorporated by reference to the specified exhibit to the Annual Report on Form 10-K for the fiscal year ended December 27, 2003.

  (9)Incorporated by reference to the specified exhibit to the Annual Report on Form 10-K for the fiscal year ended December 25, 2004.

(10)Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended March 26, 2005.

(11)Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended September 25, 2004.

(12)Incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K dated August 29, 2005.

II-9

(13)Incorporated by reference to Exhibit 10.16 to Annual Report on Form 10-K dated March 28, 2006.

(14)Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K dated April 5, 2006.

(15)Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended September 25, 2004.

(16)Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended September 25, 2004.

(17)Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated April 5, 2006.

*Filed herewith.

II-10

EX-1.1

Exhibit 1.1

DISTRIBUTION AND MANAGEMENT AGREEMENT

dated as of                   , 2006

WINMARK CORPORATION

and

SUMNER HARRINGTON LTD.

$50,000,000

Renewable Unsecured Subordinated Notes

TABLE OF CONTENTS

ARTICLE I DEFINITIONS	1
Section 1.01 Defined Terms	1
Section 1.02 Accounting Terms	5
ARTICLE II APPOINTMENT OF THE AGENT AND RELATED AGREEMENTS	5
Section 2.01 Appointment; Exclusivity	5
Section 2.02 Scope of Agency	5
Section 2.03 Compensation to the Agent	6
Section 2.04 Brokers and Dealers	8
Section 2.05 The Agent’s Unrelated Activities	8
Section 2.06 Best Efforts; Independent Contractor	8
Section 2.07 Issuance and Payment
ARTICLE III SERVICES; STANDARD OF CARE	8
Section 3.01 Services for the Notes	8
Section 3.02 Maintenance of Files and Records	10
Section 3.03 Monthly Reports to the Company	11
ARTICLE IV REPRESENTATIONS AND COVENANTS OF THE COMPANY	12
Section 4.01 Representations, Warranties and Agreements of the Company	12
Section 4.02 Covenants of the Company	19
ARTICLE V REPRESENTATIONS AND COVENANTS OF THE AGENT; CONDITIONS	21
Section 5.01 Representations and Warranties of the Agent	21
Section 5.02 Covenants of the Agent	23
ARTICLE VI CONDITIONS	25
Section 6.01 Conditions of the Agent’s Obligations	25
Section 6.02 Conditions of the Company’s Obligations	30
ARTICLE VII INDEMNIFICATION AND CONTRIBUTION	31
Section 7.01 The Company’s Indemnification of the Agent	31
Section 7.02 The Agent’s Indemnification of the Company	32
Section 7.03 Notice of Indemnification Claim	32
Section 7.04 Contribution	33
Section 7.05 Notice of Contribution Claim	34
Section 7.06 Reimbursement	34
Section 7.07 Arbitration	34
Section 7.08 Intellectual Property Infringement	35
Section 7.09 Confidentiality	35
ARTICLE VIII TERM AND TERMINATION	36
Section 8.01 Effective Date of this Agreement	36
Section 8.02 Termination Prior to Initial Closing Date	36

Section 8.03 Notice of Termination	36
Section 8.04 Termination After Initial Closing Date	36
Section 8.05 Termination Without Termination of Offering	37
ARTICLE IX MISCELLANEOUS	37
Section 9.01 Survival	37
Section 9.02 Notices	38
Section 9.03 Successors and Assigns; Transfer	38
Section 9.04 Cumulative Remedies	39
Section 9.05 Attorneys’ Fees	39
Section 9.06 Entire Agreement	39
Section 9.07 Choice of Law; Venue	39
Section 9.08 Rights to Investor Lists	39
Section 9.09 Waiver; Subsequent Modification	39
Section 9.10 Severability	39
Section 9.11 Joint Preparation	40
Section 9.12 Captions	40
Section 9.13 Counterparts	40
Section 9.14 Third Party Contractors	40

ii

DISTRIBUTION AND MANAGEMENT AGREEMENT

THIS DISTRIBUTION AND MANAGEMENT AGREEMENT is entered into as of this           day of                            , 2006 by and between Winmark Corporation, a Minnesota corporation (the “Company”), and Sumner Harrington Ltd., a Minnesota corporation (the “Agent”).

RECITALS

WHEREAS, the Company proposes to register and publicly offer and sell an aggregate principal amount of up to $50,000,000 of renewable unsecured subordinated notes of the Company; and

WHEREAS, subject to the termination rights set forth herein, the Company desires to appoint the Agent to act as the Company’s exclusive selling agent in connection with the offer, sale and renewal of such notes on a best effort basis and as the Company’s servicing agent to provide certain administrative services with respect to the notes, and Agent desires to accept such duties, all as provided for by the terms of this Agreement.

NOW, THEREFORE, in consideration of the above and for other good and valuable consideration, receipt of which is acknowledged, and in consideration of the mutual promises, covenants, representations and warranties hereinafter set forth, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

Section 1.01 Defined Terms. Whenever used in this Agreement, the following terms have the respective meanings set forth below. The definitions of such terms are applicable to the singular as well as to the plural forms of such terms.

(a)Accepted Note Practices. As applicable to the context in which this term is used, those procedures and practices with respect to the offering, marketing, selling, servicing and administration of the Notes that satisfy the following: (i) meet at least the same demonstrable standards that Agent would follow in exercising reasonable care in offering, marketing, selling, servicing and administering similar programs for publicly offered notes or securities; (ii) comply with all Governmental Rules; (iii) comply with the provisions of this Agreement and the Indenture; and (iv) give due consideration to the accepted standards of practice of prudent investment banking firms that offer, market, sell, service or administer comparable programs for publicly offered notes or securities and the reliance of the Company on the Agent for the offering, marketing, selling, servicing and administration of the Renewable Note Program.

(b)Agent. Sumner Harrington Ltd., a Minnesota corporation, or its successors in interest or assigns, if approved by the Company as provided in Sections 5.02(c) and 9.03, below.

(c)Agreement. This Distribution and Management Agreement, including any exhibits or attachments hereto, as originally executed, and as amended or supplemented from time to time in accordance with the terms hereof.

(d)Business Day. Any day other than (a) a Saturday or Sunday or (b) another day on which banking institutions in the State of Minnesota are authorized or obligated by law, executive order, or governmental decree to be closed.

(e)Commission or SEC. The Securities and Exchange Commission.

(f)Company. Winmark Corporation, or its successors or assigns, if approved by Agent as provided in Section 9.03, below.

(g)Due Period. The monthly, quarterly, semi-annual, or annual periods, or the full term of the Note if interest is due at maturity, for which scheduled payments of interest will be paid on any Note.

(h)Exchange Act. The Securities Exchange Act of 1934, as amended, and as hereafter amended, and the rules and regulations thereunder.

(i)Governmental Rules. Any law, rule, regulation, ordinance, order, code, interpretation, judgment, decree, policy, decision or guideline of any governmental agency, court or authority, including those of the NASD.

(j)Holder. The registered owner of any Note as it appears on the records of the Registrar, including any purchaser or any subsequent transferee or other holder thereof.

(k)Incorporated Documents. All documents that, on or at any time after the effective date of the Registration Statement, are incorporated by reference therein, in the Prospectus, or in any amendment or supplement thereto.

(l)Indenture. That certain Indenture dated on or about                               , 2006, by and between the Company and the Trustee with respect to the Notes.

(m)Initial Closing Date.                               , 2006, or such later date as may be agreed by the Company and the Agent.

(n)Investor. Any person who purchases Notes or who contacts the Agent expressing an interest in purchasing the Notes or requesting information concerning the Notes.

(o)Material Agreement. With respect to a person, any agreement, contract, joint venture, lease, commitment, guaranty or other contractual arrangement or any bond, debenture, indenture, mortgage, deed of trust, loan or security agreement, note, instrument or other evidence of indebtedness, which in the case of any of the foregoing is material to the business, assets, operations, condition or prospects, financial or otherwise,

2

of such person or which is material to the ability of such person to perform its obligations under this Agreement.

(p)NASD. National Association of Securities Dealers, Inc.

(q)Note Confirmation. With respect to the issuance and ownership of the Notes in book-entry form, an appropriate written confirmation of the issuance and ownership or transfer of ownership of a Note to a Holder, the format of which shall comply with the provisions of the Indenture.

(r)Note Portfolio. The aggregate of individual Notes, as it exists from time to time, which, unless the context otherwise requires or provides, determined by the principal balances of the outstanding Notes.

(s)Notes. The renewable unsecured subordinated notes of the Company that are being offered and sold pursuant to the Registration Statement and that have an aggregate principal amount up to $50,000,000 and such other terms as described in the Prospectus, and any additional principal amount of the same or similar notes as may be registered from time to time pursuant to the Registration Statement.

(t)Offering. The offer and sale of the Notes in accordance with the terms and subject to the conditions set forth in the Registration Statement.

(u)Paying Agent. Wells Fargo Bank, National Association or its successors or assigns, or such other paying agent with respect to the Notes as may be subsequently appointed by the Company pursuant to the Indenture.

(v)Paying Agent Agreement. That certain agreement by and between the Company and the Paying Agent relating to the Company’s engagement of the Paying Agent to act as the paying agent for the Notes.

(w)Paying Agent Fees. All fees and expenses payable to the Paying Agent in accordance with the Paying Agent Agreement.

(x)Proposal. That certain proposal made by the Agent to, and accepted by, the Company dated November 30, 2005 with respect to the Renewable Note Program, as amended.

(y)Proprietary Rights. All rights worldwide in and to copyrights, rights to register copyrights, trade secrets, inventions, patents, patent rights, trademarks, trademark rights, confidential and proprietary information protected under contract or otherwise under law, and other similar rights or interests in intellectual or industrial property.

(z)Prospectus. The prospectus included in the Registration Statement at the time it was declared effective by the Commission, as supplemented by all prospectus supplements (including interest rate supplements) related to the Notes that are filed with the Commission pursuant to Rules 424(b) or (c) under the Securities Act. References to

3

the Prospectus shall be deemed to refer to and include the Incorporated Documents to the extent incorporated by reference therein.

(aa)Redemption Payment. The payment of principal plus any accrued and unpaid interest that is being made at the discretion of the Company in accordance with the Indenture.

(bb)Registration Statement. That certain Registration Statement on FormS-1(File No.) of the Company with respect to the Notes filed with the Securities and Exchange Commission under the Securities Act on or about                               , 2006, as amended and declared effective by the Commission, including the respective copies thereof filed with the Commission. References to the Registration Statement shall be deemed to refer to and include the Incorporated Documents to the extent incorporated by reference therein.

(cc)Renewable Note Program. The marketing, subscription and sale, administration, customer service and investor relations, registration of ownership, reporting, payment, repurchase, redemption, renewal and related activities associated with the Notes.

(dd)Repurchase Payment. The payment of principal plus any accrued and unpaid interest, less any penalties upon the repurchase of any Note, that is being made at the request of the Holder in accordance with the Indenture.

(ee)Scheduled Payment. For any Due Period and any Note, the amount of interest and/or principal indicated in such Note as required to be paid by the Company under such Note for the Due Period and giving effect to any rescheduling or reduction of payments in any insolvency or similar proceeding and any portion thereof.

(ff)Securities Act. The Securities Act of 1933, as amended, and as hereafter amended, and the rules and regulations thereunder.

(gg)Subscription Agreement. A subscription agreement entered into by a Person under which such Person has committed to purchase certain Notes as identified thereby, in such form and substance as mutually agreed by the parties and as filed as an exhibit to the Registration Statement.

(hh)Trust Account. The trust account established by the Trustee pursuant to the Indenture.

(ii)Trust Indenture Act. The Trust Indenture Act of 1939, as amended, and as hereafter amended, and the rules and regulations thereunder.

(jj)Trustee. Wells Fargo Bank, National Association, or its successors or assigns, or any replacement Trustee under the terms of the Indenture.

(kk)Trustee’s Fees. All fees and expenses payable to the Trustee in accordance with the Indenture.

4

Section 1.02 Accounting Terms. Unless otherwise specified in this Agreement, all accounting terms used in this Agreement shall be interpreted, all accounting determinations under this Agreement shall be made, and all financial statements required to be delivered by any person pursuant to this Agreement shall be prepared, in accordance with U.S. generally accepted accounting principles, as in effect from time to time and as applied on a consistent basis. To the extent such principles do not apply to certain reports or accounting practices of the Agent, the parties will mutually agree on the accounting practices and assumptions.

ARTICLE II
APPOINTMENT OF THE AGENT AND RELATED AGREEMENTS

Section 2.01 Appointment; Exclusivity. On the basis of the representations, warranties and agreements herein contained, and subject to the terms and conditions set forth herein and in the Prospectus during the term of this Agreement, the Company appoints the Agent as its exclusive agent for purposes of selling, including the offer and sale of the Notes, and servicing, including the servicing and administration of the Notes, in each case, under the Renewable Note Program upon the terms and conditions set forth herein, including, without limitation, compliance and conformity with Accepted Note Practices and Governmental Rules, and the Agent agrees to use its best efforts as such agent to offer and sell the Notes to Investors until the later of the termination of the Offering or the sale of all of the Notes, or until the termination of this Agreement, if earlier. In connection with the administration of the Renewable Note Program, the Agent will carry out the duties provided for herein and as described in the Prospectus as being carried out by the Agent. During the term of this Agreement, the Company agrees to direct to the Agent all inquiries it receives with respect to sales of the Notes or administration of the Renewable Notes Program, as applicable.

Section 2.02 Scope of Agency. In the performance of its duties hereunder, the Agent shall have full power and authority to take any and all actions for purposes of selling, including the offer and sale of Notes, and servicing, including the servicing and administration of the Notes, in each case, under the Renewable Note Program that the Agent, in its discretion, deems necessary or appropriate, subject in all respects to compliance and conformity with Accepted Note Practices and Governmental Rules and the Prospectus. Such discretion shall include, without limitation, the right to accept or reject Subscription Agreements, waive or reduce early repurchase penalties when appropriate, change interest payment dates, enforce early repurchase penalties and allow prepayment of Notes, with or without penalty, subject, in each case to such limitations or conditions as may be provided in the Indenture. Notwithstanding the foregoing, the Agent’s authority to take any action on the Company’s behalf, other than the rejection of Subscription Agreements, which has an immediately discernable, direct, financial impact of $500 or more shall be subject to receiving the prior written consent of the Company. In the performance of its duties hereunder, the Agent shall (i) act as the agent of the Company in connection with the Renewable Note Program; (ii) hold, in trust and as custodian, all Subscription Agreements, notices or other documents received by it in connection with the Renewable Note Program for the sole and exclusive use and benefit of the Company; and (iii) make dispositions of the items in clause (ii) only in accordance with this Agreement, the Indenture or at the written direction of the Company. Except as set forth herein with respect to the Renewable Note Program, the Agent shall have no authority, express or implied, to act in any manner or by any means for or on behalf of the Company.

5

Section 2.03 Compensation to the Agent.

(a)The Agent’s Fees and Commissions. In consideration of the agreement of the Agent to provide its services as set forth in this Agreement, the Company will pay the Agent the following amounts:

(i)a commission as set forth in Exhibit B to the Proposal (which exhibit is hereby incorporated by reference), which shall be payable in consideration for the Agent’s selling and marketing of Notes; and

(ii)an annual portfolio management fee equal to 0.25% of the weighted average daily principal balance of the Note Portfolio, to be invoiced monthly as provided below, which shall be payable in consideration for the administrative services provided by the Agent; provided, however, that in no event will the Company pay or cause to be paid aggregate portfolio management fees totaling more than 2.25% of the aggregate principal amount of the Notes pursuant to the provisions of this Section 2.03(a)(ii).

(b)The Agent’s Expenses. The Company agrees with the Agent that whether or not this Agreement is terminated or cancelled or the sale of the Notes hereunder is consummated, and regardless of the reason for or cause of any such termination, cancellation, or failure to consummate, the Company will pay or cause to be paid to the applicable persons the following, whether incurred prior or subsequent to the date of this Agreement:

(i)subject to the prior written approval by the Company and in addition to such other costs specifically provided for below, all reasonable out-of-pocket costs of the Agent or its affiliates incurred in connection with the Offering, including, but not limited to, designing, printing and mailing all offering and advertising materials, document fulfillment services, advertisements in newspapers, on the radio, on the internet and through direct mail, operating a toll-free telephone number, and assisting the Company with creating a web site, including any costs of a web developer or other third party consultants;

(ii)all reasonable fees and expenses of persons (other than the Agent and its affiliates), including, without limitation, fees and expenses of the Company’s auditors and legal counsel, in connection with the preparation, printing, filing, and delivery of the Registration Statement (including the financial statements therein and all amendments, schedules, and exhibits thereto), the Prospectus, and any amendment thereof or supplement thereto;

(iii)to the extent applicable, all reasonable fees and expenses incurred in connection with the qualification of the Notes for offer and

6

sale under the securities or Blue Sky laws of the states and other jurisdictions which the Agent may designate (with the prior approval of the Company) in accordance with the terms herewith;

(iv)all reasonable out-of-pocket costs incurred by the Agent or any other contractor in connection with the preparation, printing, filing, and delivery of maturity and renewal notices, quarterly statements, newsletters and any other materials to be sent to Holders in connection with the Notes or the Offering;

(v)all reasonable fees and expenses of the Agent’s legal counsel related to the Offering and the ongoing servicing and administration of the Renewable Note Program as provided herein;

(vi)all fees and expenses of the Trustee and the Paying Agent in connection with the Notes, and

(vii)all reasonable out-of-pocket costs incidental to the performance of the Agent’s obligations hereunder with respect to the ongoing servicing and administration of the Renewable Note Program that are not otherwise specifically described herein.

The provisions of this Section are intended to relieve the Agent from the payment of reasonable fees, expenses and out-of-pocket costs that the Company hereby agrees to pay and shall not impair or limit any of the other obligations of the Company hereunder to the Agent; provided, however, that except as provided above regarding reimbursement of expenses in the event of termination of this Agreement (and in Section 2.03(d) below) (which reimbursement obligation shall be limited to actual accountable out-of-pocket expenses) and except for fees payable directly to the Trustee, in no event will the Company pay or cause to be paid amounts totaling more than 0.75% of the aggregate principal amount of the Notes pursuant to the provisions of this Section 2.03(b).

(c)Payment of Fees and Commissions. On the last Business Day of each month, or as soon thereafter as practicable, the Agent shall provide the Company with a written invoice for such month’s fees and commissions that are payable with respect to Notes issued up to the last five Business Days of such month, and Notes issued in the last five Business Days of the immediately preceding month that are, in each case, not rescinded. Such commissions and fees will be due and payable by the later of the 15^th day of every month or 15 days after the date such invoice is received.

(d)Prior Payments. The parties hereby acknowledge prior payment of $75,000 to the Agent as a deposit against its due diligence costs, which amount was paid upon execution of the Proposal. Upon the request of the Company, the Agent will provide a written accounting of this deposit to the Company. Any remaining funds from this deposit will be applied against the Agent’s expenses related to marketing and administering the Notes. To the extent that this Agreement is terminated, the Agent will

7

promptly refund the excess of any unused portion of such funds over amounts otherwise owed hereunder.

Section 2.04 Brokers and Dealers. The Agent may, in its sole discretion and at no additional obligation or expense to the Company, and subject to compliance with all applicable Governmental Rules, use the services of other brokers or dealers who are members in good standing of the NASD in connection with the offer and sale of the Notes. The Agent may enter into agreements with any such broker or dealer to act as its sub-agents for the sale of the Notes and the Agent shall be solely responsible for the payment of any portion of the Agent’s compensation hereunder to such broker or dealer, and be solely responsible for any subagents’ compliance with Governmental Rules in connection with the offer and sale of the Notes.

Section 2.05 The Agent’s Unrelated Activities. The Company agrees that the Agent may sell other notes or securities in offerings similar to the Offering for other issuers during the course of the Offering, and the Agent (and Sumner Harrington Agency, Inc., an affiliate of the Agent) may advertise other notes or securities of other issuers on websites, in print, by radio, or by any other means and at such times as they may determine. The Agent shall have the right to advertise or otherwise disclose to unrelated prospective issuers, at its own expense, its relationship with the Company, the services it provides in connection with the Notes and the amount of money that it raised through the Offering and the performance of the Offering.

Section 2.06 Best Efforts; Independent Contractor. Anything to the contrary notwithstanding, the Agent shall have no obligation to sell any minimum principal amount of Notes or to purchase Notes for its own account, for resale or for any other purpose, but rather the Agent shall use its best efforts as selling agent in connection with the Offering of the Notes. During the term of this Agreement, all actions taken by the Agent pursuant to this Agreement shall be in the capacity of an independent contractor, all sales of Notes conducted by the Agent shall be solely for the account and at the risk of the Company, and in no event shall the Agent have any obligations under the Notes.

Section 2.07 Issuance and Payment. The Notes shall be issued pursuant to the Indenture and all Scheduled Payments, Redemption Payments and Repurchase Payments shall be made by automated clearing house (i.e., ACH) remittance from the Trust Account by the Paying Agent in accordance with the Paying Agent Agreement and the Indenture.

ARTICLE III
SERVICES; STANDARD OF CARE

Section 3.01 Services for the Notes. The services to be provided to the Company by the Agent pursuant to and during the term of this Agreement shall include the following:

(a)Note Structure and Interest Rates. During the term of this Agreement, the Agent shall advise the Company regarding the structure of the Notes and provide sample document forms. Throughout the Offering, the Agent shall assist the Company in determining appropriate Note terms and interest rates based on current market conditions and the Company’s capital goals.

8

(b)Subscription, Sale and Ownership. During the term of this Agreement, the Agent shall review and process each Subscription Agreement for the Notes received from an Investor with the objective of determining whether (i) such agreement is complete and accurate in all material respects, including, without limitation, the execution thereof by such Investor, (ii) an investment in the Notes is suitable for such Investor under applicable Governmental Rules, (iii) such Investor timely remits the proper purchase price for the Notes in accordance with the Subscription Agreement, and (iv) the principal amount, interest rate and term to maturity and any other material terms of the Notes are verified for accuracy and completeness. Upon delivery by each Investor of a completed Subscription Agreement for Notes and full payment of the principal amount of such Notes in accordance with the Investor’s Subscription Agreement, and subject to the prior written consent of the Company if required pursuant to Section 2.02 (which, for the avoidance of doubt, may be given in the form of general directives to sell up to a particular aggregate amount of Notes) the Agent shall promptly (i) accept or reject such Subscription Agreements on the Company’s behalf based upon such factors as the Agent shall determine, including, without limitation, the suitability of any investment in the Notes by the proposed Investor under applicable Governmental Rules, (ii) verify that the payment of the principal amount of such Investor’s accepted subscription for the Notes is being remitted to the Company in accordance with the Subscription Agreement in an account established by the Company for such purpose or in such other manner as may be directed by the Company from time to time, and (iii) remit to the Trustee electronic or hard copies of all accepted Subscription Agreements and related records as may be reasonably requested by the Trustee, including without limitation, a record of each deposit relating to the payment of the subscription amount of the Notes. Pursuant to the preceding sentence, Notes shall be issued by the Agent on the Company’s behalf in book-entry form only and the Agent shall deliver a Note Confirmation to each Holder with respect to such Holder’s respective accepted Subscription Agreement and the receipt of full payment for such Holder’s Notes. In the event that the Agent rejects a Subscription Agreement, the Agent shall promptly return the Subscription Agreement and the related subscription amount to the related Investor. The Company hereby appoints the Agent, and the Agent hereby accepts such appointment, as its initial Registrar (as such term is defined in the Indenture) for the Notes pursuant to the terms of the Indenture. For so long as the Agent shall serve as the Registrar for the Notes, the Agent shall perform, in accordance with the terms of the Indenture, all of the duties and obligations of the Registrar under the Indenture, including, without limitation, the obligation to maintain a book-entry registration and transfer system for the ownership of the Notes in accordance with the terms of the Indenture.

(c)Investor Relations and Reporting. During the term of this Agreement and in exchange for the annual portfolio management fee, the Agent, in conjunction with the Trustee, shall manage all aspects of the customer service and investor relations functions with respect to the Offering, including, but not limited to, handling all inquiries from Investors, mailing investment kits, delivering to each Investor the Prospectus and Subscription Agreement, meeting with Investors, processing Subscription Agreements, responding to all written or telephonic questions by Investors and Holders relating to the Notes, recording changes in Holders’ addresses or accounts, preparing and issuing maturity and renewal notices, quarterly statements, newsletters, reports and analyses to

9

Holders and to the Company, directing the Paying Agent to make Scheduled Payments, Repurchase Payments and Redemption Payments to Holders in a timely manner, and directing the Paying Agent to issue Form 1099INT’s to Holders as required by law. In addition, the Agent shall provide the Trustee (and copy the Company) with management reports regarding the Notes as required under the Indenture.

(d)Web Site Development. Subject to compliance and conformity with Accepted Note Practices by the Agent and all Governmental Rules, the Agent (or a third party service provider working at the Agent’s direction) shall assist the Company in developing a dedicated Internet web site separate from the Company’s corporate site to allow Investors to view online and download copies of the Offering documents (including the Prospectus and Subscription Agreement) and marketing materials that are included in the investment kit or comparable information.

(e)Ownership of Web Pages. Any and all web pages developed or maintained by the Agent in connection with the marketing and selling of the Notes (the “Web Pages”), and all associated Proprietary Rights, shall be owned exclusively by the Agent; provided, however, it is expressly acknowledged and agreed that the Company shall retain, and the Agent shall not hereby acquire, any Proprietary Rights in the Company’s logos, corporate colors, trademarks, trade names, and slogans, any descriptions of the Company’s business. The Agent hereby grants the Company a nonexclusive, perpetual, worldwide license to use the Web Pages for the purpose of marketing and selling the Notes.

Section 3.02 Maintenance of Files and Records. The Agent shall establish and maintain at all times during the term of this Agreement, and for any period required by Governmental Rules, files and records (including, without limitation, computerized records) regarding the Notes and the Note Portfolio, with full and correct entries of all transactions or modifications in a reasonably secure, up-to-date manner and in accordance with the following:

(a)Location. All Note and Note Portfolio files and records shall be stored and maintained at the Agent’s principal place of business, or other location as designated by the Agent. The Agent shall keep in its files all correspondence received or sent regarding each Note, each Investor, and each Holder, whether upon any purchase or transfer of a Note.

(b)Original Documents. The Agent will store all original Subscription Agreements, Note Confirmations, correspondence from Investors and Holders and other materials relating to the Renewable Note Program in a reasonably secure manner at the Agent’s principal offices or such other location as may be agreed upon with the Company. The Agent shall exercise due care in handling and delivering the original documents and the other documents in the Note files and records. The Agent shall not grant or allow any person an interest in original documents or rights thereunder, and all original documents in the possession of the Agent shall be deemed to be in the possession of the Company.

10

(c)Examination. At any time during the Agent’s normal business hours, the Company and its agents and representatives may physically inspect any documents, files or other records relating to the Renewable Note Program and discuss the same with the Agent’s officers and employees. The Agent shall supply copies of any such documents, files, or other records upon the request of the Company, as soon as is reasonably and commercially practicable at the Company’s cost and expense.

(d)Retention. Unless otherwise requested by the Company, or unless otherwise required by Governmental Rules, the Agent shall retain, with respect to each Note, for a period of 24 months from the date the Note is fully paid, all records, files and documents related to each such Note. At the end of such 24-month period, unless otherwise directed by the Company, all such items shall be transferred to the Company, or to a third party as designated by the Company, at the Company’s sole cost and expense. The Agent shall be permitted to retain copies of any such documents for its own files for its own account and at its own expense. The Agent shall maintain the privacy of the Investors and Holders in accordance with all applicable Governmental Rules.

(e)Return. If this Agreement is terminated, the Agent shall promptly deliver to the Company or its designee, as the case may be, all Note files and records (including, without limitation, copies of computerized records and servicing and other software, except as may be prohibited by any third party contract or license) related to the selling and servicing of the Notes and all monies collected by it relating to the Renewable Note Program (less any fees or expenses due to the Agent). The Agent shall be entitled to make and keep copies of such records, at its cost and expense. In addition to delivering such data and monies, the Agent shall use its best efforts to effect the orderly and efficient transfer of the selling and servicing of the Notes to the Company or other party designated by the Company to assume responsibility for such selling and servicing, including, without limitation, directing Holders to remit all repurchase or other notices to the address designated by the Company. All costs of conversion and transfer of such records to the Company or another agent shall be paid by the Company.

(f)Security. The parties shall take appropriate security measures to protect customer nonpublic personal information (“NPI”), as defined in the Gramm-Leach-Bliley Act of 1999, Title V, and its implementing regulations, against accidental or unlawful destruction and unauthorized access, tampering, and copying during storage in either party’s computing or paper environment. Access to NPI must be restricted to only the personnel that have a business need relating to the Renewable Note Program. NPI must be stored in a secured format within all systems at both parties’ location and any other locations where the data may reside. Transmission of such NPI between the parties or vendors must be done in a secure manner, in a method mutually agreed upon by both parties. Each party will engage appropriate and industry-standard measures necessary to meet information security guidelines as required by the Gramm-Leach-Bliley Act, Title V and its implementing regulations as applicable to such party to effectuate this Agreement.

Section 3.03 Information to the Company. As agreed by the parties, the Agent shall make reports and analyses available to the Company regarding the status of the Note Portfolio,

11

the marketing efforts and the amount of Notes remaining available for issuance under the Registration Statement. The Agent shall also provide interim or custom reports at the Company’s request as is commercially reasonable, including, without limitation, a weekly update via email identifying new Holders by name, address and principal amount of Notes purchased. The Agent shall also furnish statements, reports and information to the Paying Agent to the extent that the Company is required to furnish or cause to be furnished such statements, reports or information to the Paying Agent under the Paying Agent Agreement.

ARTICLE IV
REPRESENTATIONS AND COVENANTS OF THE COMPANY

Section 4.01 Representations, Warranties and Agreements of the Company. The Company represents and warrants to and agrees with the Agent as follows, which representations and warranties shall be deemed to be made continuously from and as of the date hereof until this Offering is terminated and all then outstanding Notes have been paid in full or such earlier date that this Agreement has been terminated, except for those representations and warranties that address matters only as of a particular date, which representations and warranties shall be deemed to be made as of such date.

(a)The Company satisfies all of the requirements for the use of Form S-1 with respect to the offer and sale of securities as contemplated by the Offering. The Commission has not issued any order preventing or suspending the use of the Registration Statement or Prospectus and no proceeding for that purpose has been instituted or, to the Company’s knowledge, threatened by the Commission or the securities authority of any state or other jurisdiction.

(b)The Registration Statement, in the form in which it became effective and also in such form as it may be when any post-effective amendment thereto shall become effective, and the Prospectus, and any supplement or amendment thereto when filed with the Commission under Rule 424 under the Securities Act, complied or will comply with the provisions of the Securities Act and the Trust Indenture Act, and did not or will not at any such times contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading, except that this representation and warranty does not apply to: (i) any statements in, or omissions from the Agent Disclosure Statements (as defined in Section 5.01(f) below) in the Registration Statement or the Prospectus, or any amendment thereof or supplement thereto; or (ii) statements in or omissions from the Registration Statement (or any amendment thereto) related to or resulting from the specific terms of the Offering, which terms are included in the Prospectus.

(c)The Incorporated Documents previously filed, at the time they were filed, complied in all material respects with the requirements of the Exchange Act, and all subsequently filed Incorporated Documents will, at the time they are filed, comply in all material respects with the requirements of the Exchange Act. No such previously filed Incorporated Document, when filed, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make

12

the statements therein not misleading; and no such further Incorporated Document, when filed, will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, except that this representation and warranty does not apply to the extent that any misstatement or omission in any Incorporated Document is superseded by a subsequent Incorporated Document, but in such case only with respect to the period from and after the filing of the subsequent Incorporated Document.

(d)The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Minnesota, with full power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statement, the Prospectus and the Incorporated Documents. The Company is duly qualified to do business and is in good standing in each jurisdiction in which the ownership or lease of its properties or the conduct of its business requires such qualification and in which the failure to be qualified or in good standing would have a material adverse effect on the condition (financial or otherwise), earnings, operations or business of the Company and, to the best of the Company’ s knowledge, no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification.

(e)Each subsidiary of the Company has been duly incorporated or organized and is validly existing in good standing under the laws of the jurisdiction of its incorporation or organization, with full power and authority to own, lease and operate its properties and conduct its business as described in the Registration Statement, the Prospectus and the Incorporated Documents. Each such subsidiary is duly qualified to do business and is in good standing in each jurisdiction in which the ownership or lease of its properties or the conduct of its business requires such qualification and in which the failure to be qualified or in good standing would have a material adverse effect on the condition (financial or otherwise), earnings, operations or business of the Company and, to the best of the Company’ s knowledge, no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification.

(f)The Company and each subsidiary has operated and is operating in material compliance with all authorizations, licenses, certificates, consents, permits, approvals and orders of and from all state, federal and other governmental regulatory officials and bodies necessary to own its properties and to conduct its business as described in the Registration Statement, the Prospectus and the Incorporated Documents, all of which are, to the best of the Company’s knowledge, valid and in full force and effect. The Company and each subsidiary is conducting its business in substantial compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business, and the Company and each subsidiary is not in material violation of any applicable law, order, rule, regulation, writ, injunction, judgment or decree of any court, government or governmental agency or body, domestic or foreign, having jurisdiction over the Company or any such subsidiary or their respective over its properties.

13

(g)The Company and each subsidiary is not in violation of its certificate or articles of incorporation or bylaws (or similar governing documents) or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any Material Agreement to which it is a party or by which it or its properties are bound.

(h)The Company has full requisite power and authority to enter into this Agreement and perform the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement on the part of the Company, enforceable against the Company in accordance with its terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity. The performance of this Agreement and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under:

(i)any Material Agreement to which the Company or any subsidiary is a party or by which the Company or any subsidiary or their respective properties may be bound;

(ii)the certificate or articles of incorporation or bylaws of the Company, or

(iii)any applicable law, order, rule, regulation, writ, injunction, judgment or decree of any court, government or governmental agency or body, domestic or foreign, having jurisdiction over the Company or any subsidiary or their respective properties.

(i)No consent, approval, authorization or order of or qualification with any court, governmental agency or body, domestic or foreign, having jurisdiction over the Company or over its properties is required for the execution and delivery of this Agreement and the consummation by the Company of the transactions herein contemplated, except such as may be required under the Securities Act, the Exchange Act, the Trust Indenture Act, or under state or other securities or blue sky laws, all of which requirements have been satisfied.

(j)Except as is otherwise expressly described in or incorporated by reference into the Registration Statement or Prospectus, there is neither pending nor, to the best of the Company’s knowledge, threatened, any action, suit, claim or proceeding against the Company or any subsidiary or any of their respective officers or properties, assets or rights before any court, government or governmental agency or body, domestic or foreign, having jurisdiction there over which, if successful, would be likely to (A) result in any material adverse change in the condition (financial or otherwise), earnings, operations or business of the Company or might materially and adversely affect its properties, assets or rights, or (B) prevent consummation of the transactions contemplated hereby.

14

(k)The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectus and the shares of issued and outstanding Common Stock set forth thereunder have been duly authorized, validly issued, are fully paid and non-assessable, have been issued in compliance with all federal and state securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities, and the authorized and outstanding capital stock of the Company conforms in all material respects with the statements relating thereto contained or incorporated by reference in the Registration Statement and the Prospectus. The Notes to be sold hereunder by the Company have been duly authorized for issuance and sale pursuant to the Indenture and this Agreement and, when issued and delivered against payment therefor in accordance with the terms of the Indenture and this Agreement, will be duly and validly issued and fully paid and non-assessable and will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity and will be sold free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest; and no preemptive right, co-sale right, registration right, right of first refusal or other similar right of shareholders exists with respect to any of the Notes to be sold hereunder by the Company or the issuance and sale thereof.

(l)KPMG, LLP, which has expressed its opinion with respect to certain of the financial statements filed or incorporated by reference as part of the Registration Statement, is an independent accounting firm within the meaning of the Securities Act. The financial statements of the Company set forth or incorporated by reference in the Registration Statement and Prospectus comply in all material respects with the requirements of the Securities Act and fairly present the financial position and the results of operations of the Company at the respective dates and for the respective periods to which they apply in accordance with generally accepted accounting principles consistently applied throughout the periods involved; and the supporting schedules included or incorporated by reference in the Registration Statement present fairly the information required to be stated therein.

(m)Subsequent to the respective dates as of which information is given in the Registration Statement and Prospectus, except as is otherwise disclosed in the Registration Statement or Prospectus or as is otherwise incorporated into the Registration Statement pursuant to the Securities Act, there has not been (i) any material adverse change in the condition, financial or otherwise, earnings, affairs or business prospects of the Company or any subsidiary, or (ii) any material transactions entered into by the Company, or any of its subsidiaries, other than those in the ordinary course of business, including, without limitation:

(i)any material change, or any development involving a material adverse change, in the capital stock or long-term debt (including any capitalized lease obligation) or material increase in the short-term debt of the Company;

15

(ii)any material issuance of options (other than to directors, consultants and employees of the Company), warrants, convertible securities or other rights to purchase the capital stock of the Company;

(iii)any material adverse change in or affecting the condition (financial or otherwise), earnings, operations, business or business prospects, management, financial position, shareholders’ equity, results of operations or general condition of the Company;

(iv)any transaction entered into by the Company that is material to the Company, except transactions entered into by the Company in the ordinary course of business that are consistent with past practices (including without limitation any securitization transaction);

(v)any material obligation, direct or contingent, incurred by the Company, except obligations incurred in the ordinary course of business; or

(vi)any loss or damage (whether or not insured) sustained to the property of the Company, which has a material adverse effect on the condition (financial or otherwise), earnings, operations or business of the Company.

(n)Except as is otherwise expressly disclosed in the Registration Statement or Prospectus or as is otherwise incorporated into the Registration Statement pursuant to the Securities Act:

(i)the Company and its subsidiaries have good and marketable title to all of the property, real and personal, and assets described in the Registration Statement or Prospectus as being owned by them, free and clear of any and all pledges, liens, security interests, encumbrances, equities, charges or claims, other than those set forth or described in the Registration Statement or the Prospectus or those which would not have a material adverse effect on the condition (financial or otherwise), earnings, operations or business of the Company;

(ii)the Material Agreements to which the Company or any subsidiary is a party described in the Registration Statement and Prospectus are valid agreements, enforceable by the Company or such subsidiary except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by judicial limitations on the right of specific performance; and

(iii)except as set forth in the Registration Statement and Prospectus, the Company and each of its subsidiaries owns or leases all such properties as are necessary to their operations as now conducted.

16

(o)The Company has timely filed (or has timely requested an extension of time to file) all necessary federal and state income and franchise tax returns. The Company has paid all taxes shown on such tax returns as due and payable, and there is no tax deficiency that has been or, to the best of the Company’s knowledge, could be asserted against the Company that might have a material adverse effect on the condition (financial or otherwise), earnings, operations, business or properties of the Company, and all tax liabilities are adequately provided for in the books of the Company; provided, however, that the Company has not paid, and a deficiency may have been asserted for, taxes which are being contested by the Company in good faith and by proper proceedings and for which appropriate and reasonable reserves have been provided.

(p)The Company and its subsidiaries own, or possess adequate rights to use, all patents, patent rights, inventions, trade secrets, know-how, technology, service marks, trade names, copyrights, trademarks and other intellectual property rights or information which are necessary for the conduct of their present or intended business as described in the Registration Statement or Prospectus or incorporated by reference therein. The expiration of any patents, patent rights, trade secrets, trademarks, service marks, trade names or copyrights would not have a material adverse effect on the condition (financial or otherwise), earnings, operations or business of the Company and the Company has not received any notice of, and has no knowledge of, any infringement of or conflict with the asserted rights of others with respect to any patents, inventions, trade secrets, know-how, technology, service marks, trade names, copyrights, trademarks and other intellectual property rights that, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, might have a material adverse effect on the condition (financial or otherwise), earnings, operations, business or business prospects of the Company.

(q)The Company has not taken and will not take, directly or indirectly, any action (and does not know of any action by its directors, officers, employees, or other agents) which has constituted or is designed to, or which could reasonably be expected to, cause or result in stabilization or manipulation, as defined in the Exchange Act or otherwise, to facilitate the sale or resale of the Notes. The Company has not distributed and will not distribute prior to the completion of the distribution of the Notes, any offering material in connection with the offering and sale of the Notes other than the Prospectus, the Registration Statement and other materials, if any, permitted by the Securities Act.

(r)The Company and its subsidiaries maintain insurance, which is in full force and effect, with insurers of recognized financial responsibility of the types and in the amounts generally deemed adequate for its business and the Company has no reason to believe that it or its subsidiaries will not be able to renew such existing insurance coverage as and when such coverage expires or obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition (financial or otherwise), earnings, operations, business or business prospects of the Company.

(s)The Company has not at any time during the last five years made any unlawful contribution to any candidate for an office or failed to disclose fully any

17

contribution in violation of law, or made any payment to any federal or state governmental officer or official, domestic or foreign, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that transactions are executed in accordance with management’s general or specific authorizations and transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles. To maintain accountability for assets, access to assets is permitted only in accordance with management’s general or specific authorization, and the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(t)Except as set forth in the Registration Statement and Prospectus or as is otherwise incorporated into the Registration Statement pursuant to the Securities Act:

(i)the Company is in material compliance with all material rules, laws and regulations relating to the use, treatment, storage and disposal of toxic substances and protection of health or the environment (the “Environmental Laws”) which are applicable to its business;

(ii)the Company has received no notice from any governmental authority or third party of an asserted claim under Environmental Laws, which claim is required to be disclosed in the Registration Statement and the Prospectus;

(iii)to the best of the Company’s knowledge, the Company will not be required to make any future material capital expenditures to comply with Environmental Laws: and

(iv)no property that is owned, leased or occupied by the Company has been designated as a Superfund site pursuant to the Comprehensive Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. § 9601, et seq.), or otherwise designated as a contaminated site under applicable state or local law.

(u)The historical financial information, financial projections and due diligence information of the Company presented to the Agent for its review, were prepared in good faith and represent the Company’s good faith estimate of the Company’s financial condition prior to, and immediately following, completion of the sale of the Notes.

(v)During the term of this Agreement, and except as set forth herein and in the Registration Statement, the Company has not taken any action to create a right in any person or entity other than the Agent to any compensation or other payments from either the Company or the Agent, as a finder, underwriter or agent in connection with the Offering or any other proposed transaction between the Company and the Agent. The

18

Company agrees to promptly notify the Agent of any such relationships, including consulting or prior agency agreements entitling other parties to compensation for the Offering and agrees to provide the Agent with a copy of such agreements.

(w)Any certificate signed by any officer of the Company and delivered to the Agent or to the Agent’s counsel shall be deemed a representation and warranty by the Company to the Agent as to the matters covered thereby that have a material relationship to the Offering, the Registration Statement or the Renewable Note Program.

Section 4.02 Covenants of the Company. The Company hereby covenants and agrees with the Agent as follows:

(a)If the Registration Statement has not already been declared effective by the Commission, the Company will use its best efforts to cause the Registration Statement and any post-effective amendments thereto to become effective as promptly as possible. The Company will notify the Agent promptly of the time when the Registration Statement or any post-effective amendment to the Registration Statement has become effective or any supplement to the Prospectus has been filed and of any request by the Commission for any amendment or supplement to the Registration Statement or Prospectus or additional information. The Company will prepare and file with the Commission, promptly upon the Agent’s reasonable request, any amendments or supplements to the Registration Statement or Prospectus that, in the Agent’s opinion may be necessary or advisable in connection with the Offering of the Notes by the Agent. In the event that the Company files any amendment or supplement to the Registration Statement or Prospectus to which the Agent shall reasonably object, the Agent will be relieved of its obligations with respect to the Offering (but not the administration) of the Notes until such time as the Company shall have filed such further amendments or supplements such that the Agent is reasonably satisfied with the Registration Statement and the Prospectus, as then amended or supplemented.

(b)The Company will advise the Agent, promptly after it shall receive notice or obtain knowledge thereof, of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, of the suspension of the qualification of the Notes for offering or sale in any jurisdiction, or of the initiation or receipt of any specific threat of any proceeding for any such purpose. The Company will promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such a stop order should be issued.

(c)Within the time during which a Prospectus relating to the Notes is required to be delivered under the Securities Act, the Company will comply as far as it is able with all requirements imposed upon it by the Securities Act, so far as necessary to permit the continuance of sales of or dealings in the Notes as contemplated by the provisions hereof and the Prospectus. If, during the longer of such period or the term of this Agreement, any event or change occurs that could reasonably be considered material to the Offering or that causes any of the representations and warranties of the Company contained herein to be untrue in any material respect, or as a result of which the Prospectus would include an untrue statement of a material fact or omit to state a material fact necessary to make

19

the statements therein, in the light of the circumstances then existing, not misleading, or if, during such period, it is necessary to amend the Registration Statement or supplement the Prospectus to comply with the Securities Act, then the Company will promptly notify the Agent, and, if necessary, will amend the Registration Statement or supplement the Prospectus (at the expense of the Company) so as to correct such statement or omission or effect such compliance. Without limiting the foregoing, if this Agreement is terminated for any reason, the Company shall promptly amend the Prospectus and any related Offering materials to delete references to the Agent.

(d)The Company will use its best efforts to take such action as requested by the Agent in order to arrange for the qualification of the Notes for offering and sale under the securities laws of such jurisdictions as the Agent may reasonably designate (with the prior approval of the Company) and to continue such qualifications in effect for so long as may be required for purposes of the Offering. In each jurisdiction in which the Notes shall have been qualified as herein provided, the Company will make and file such statements and reports in each year as are or may be reasonably required by the laws of such jurisdiction.

(e)The Company will furnish to the Agent copies of the Registration Statement, the Prospectus, and all amendments and supplements to such documents, in each case as soon as available and in such quantities as the Agent may from time to time reasonably request.

(f)For such period as this Agreement may be in effect, the Company shall make available to the Agent, as soon as the same shall be sent to its shareholders generally, copies of all annual or interim shareholder reports of the Company and will, for the same period, also furnish the Agent one copy of any report, application or document (other than exhibits, which, however, will be furnished on the Agent’s request) filed by the Company with the Commission, The Nasdaq Stock Market or any other securities exchange.

(g)At all times during the term of this Agreement, the Company shall provide all information reasonably requested by the Agent that relates to the Renewable Note Program in a timely manner and shall use its best efforts to insure that such information is complete and accurate.

(h)The Company will, during the term of this Agreement, furnish directly to the Agent quarterly profit and loss statements and reports of the Company’s cash flow as reported on the applicable quarterly report on Form 10-Q; and (ii) within five days following the filing of any quarterly report on Form 10-Q, provide or cause KPMG, LLP(or another nationally recognized firm of independent public accountants) to provide to the Agent a letter from KPMG, LLPor such other firm with respect to the Form 10-Q, confirming that performance of the procedures and providing such comfort as set forth in Sections 6.01(g)(ii)(A), (B) and (C), 6.01(g)(iii)(A) and (B), and 6.01(g)(iv) of this Agreement with respect to the unaudited interim financial statements or other data, as the case may be, contained therein.

20

(i)The Company will apply the net proceeds from the sale of the Notes substantially in the manner set forth under the caption “Use of Proceeds” in the Prospectus.

(j)The Company will not take, and will use its best efforts to cause each of its officers and directors not to take, directly or indirectly, any action designed to or which could reasonably be expected to cause or result in stabilization or manipulation as defined in the Exchange Act of the price of any security of the Company to facilitate the sale or resale of the Notes.

(k)The Company hereby authorizes the Agent to conduct due diligence investigations (limited to one per calendar year following the date hereof) to verify the Company’s ability to offer and perform its obligations under the Notes during the term of this Agreement and agrees to provide the Agent with access to its relevant books and records for the purpose of performing quarterly cash flow analysis.

ARTICLE V
REPRESENTATIONS AND COVENANTS OF THE AGENT; CONDITIONS

Section 5.01 Representations and Warranties of the Agent. The Agent hereby represents and warrants to the Company as follows, which representations and warranties shall be deemed to be made continuously from and as of the date hereof until this Offering is terminated or such earlier date that this Agreement has been terminated:

(a)The Agent (i) has been duly organized, is validly existing and in good standing as a Minnesota corporation, (ii) has qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of its properties or the nature of its activities (including without limitation activities of the Agent hereunder) makes such qualification necessary, and (iii) has full power, authority and legal right to own its property, to carry on its business as presently conducted, and to enter into and perform its obligations under this Agreement. The Agent is a member in good standing of the NASD.

(b)The Agent has full requisite power and authority to enter into this Agreement and perform the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Agent and is a valid and binding agreement on the part of the Agent, enforceable against the Agent in accordance with its terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity. The performance of this Agreement and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms and provisions of, or constitute a default under:

(i)any Material Agreement to which the Agent is a party or by which the Company or its properties may be bound;

(ii)the articles of incorporation or bylaws of the Agent, or

21

(iii)any applicable law, order, rule, regulation, writ, injunction, judgment or decree of any court, government or governmental agency or body, domestic or foreign, having jurisdiction over the Agent or over its properties.

(c)The Agent has obtained all governmental consents, licenses, approvals and authorizations, registrations and declarations which are necessary for the execution, delivery, performance, validity and enforceability of the Agent’s obligations under this Agreement. The Agent is a registered broker-dealer in good standing under the appropriate laws and regulations of each of the states in which offers or solicitations of offers to subscribe for the Notes will be made by the Agent.

(d)There are no actions, suits or proceedings pending or, to the knowledge of the Agent, threatened against or affecting the Agent, before or by any court, administrative agency, arbitrator or governmental body with respect to any of the transactions contemplated by this Agreement, or which will, if determined adversely to the Agent, materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect the Agent’s ability to perform its obligations under this Agreement. The Agent is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by this Agreement.

(e)The Agent has obtained all necessary consents, approvals, waivers and notifications of creditors, lessors and other nongovernmental persons in connection with the execution and delivery of this Agreement, and the consummation of all the transactions herein contemplated.

(f)When the Prospectus Supplement is or was filed with the Commission and at all times subsequent thereto until the termination of the Offering, the Agent Disclosure Statements in the Prospectus (as amended or supplemented, if the Company shall have filed with the Commission any amendment thereof or supplement thereto) will not or did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. “Agent Disclosure Statements” shall mean any statements or disclosures included within or the subject of the Registration Statement or the Prospectus, which, when the Prospectus Supplement is or was filed with the Commission and at all times subsequent thereto, are either (i) included within the disclosure under the heading “Plan of Distribution” in the Prospectus, or (ii) based upon and conform to written information relating to the Agent furnished in writing to the Company by the Agent specifically for use in the preparation of the Prospectus, or any supplement to the Prospectus; provided, however, the Agent makes no representation with respect to any Agent Disclosure Statement made without the consent of the Agent, or with respect to which the Agent has provided the Company a written objection.

(g)The Agent has operated and is operating in material compliance with all authorizations, licenses, certificates, consents, permits, approvals and orders of and from

22

all state, federal and other governmental regulatory officials and bodies necessary to conduct its business as contemplated by and described in this Agreement, all of which are, to the Agent’s knowledge, valid and in full force and effect. The Agent is conducting its business in substantial compliance with all applicable Governmental Rules, laws, rules and regulations of the jurisdictions in which it is conducting business, and the Agent is not in material violation of any applicable Governmental Rules, law, order, rule, regulation, writ, injunction, judgment or decree of any court, government or governmental agency or body, domestic or foreign, having jurisdiction over the Agent or over its properties.

(h)The Agent has not distributed and will not distribute prior to the completion of the Offering, any offering material in connection with the Offering, other than the Prospectus, the Registration Statement, the Incorporated Documents, and other materials, if any, permitted by and in compliance with the Securities Act.

(i)The Agent maintains insurance, which is in full force and effect, with insurers of recognized financial responsibility of the types and in the amounts generally deemed adequate for its business and, to the best of the Agent’s knowledge, in line with the insurance maintained by similar companies and businesses; and the Agent shall add the Company as a beneficiary or additional insured against any covered loss and shall provide the Company with a copy of the respective insurance policies; and the Agent has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the financial condition or business operations of the Agent.

(j)The Agent has received no notice or communication of any threatened or pending claims involving the offer and sales of the Notes.

Section 5.02 Covenants of the Agent. The Agent hereby covenants to the Company as follows, which covenants shall be deemed in force unless and until this Agreement is terminated as provided herein:

(a)The Agent shall punctually perform and observe all of its obligations and agreements contained in this Agreement.

(b)Except as provided in this Agreement, the Agent shall not take any action, or permit any action to be taken by others, which would excuse any person from any of its covenants or obligations under any Note, or under any other instrument related to a Note, or which would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any Note or any such instrument or any right in favor of the Company in a Note or such instrument, without the written consent of the Company.

(c)The Agent shall not assign this Agreement or any of its rights, powers, duties or obligations hereunder without the express prior written consent of the Company, which shall not be unreasonably withheld.

23

(d)Within the shorter of the time during which a prospectus relating to the Notes is required to be delivered under the Securities Act or the term of this Agreement, the Agent will comply with all requirements imposed upon it by the Securities Act, so far as necessary to permit the continuance of sales of or dealings in the Notes as contemplated by the provisions hereof and the Prospectus. If, during the shorter of such period or the term of this Agreement, to the Agent’s best knowledge, any event or change occurs that could reasonably be considered material to the Offering or that causes any of the representations and warranties of the Agent contained herein to be untrue in any material respect, or as a result of which the Prospectus would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if, during such period, to the Agent’s best knowledge, it is necessary to amend the Registration Statement or supplement the Prospectus to comply with the Securities Act, then the Agent will promptly notify the Company, and, if necessary, use reasonable efforts to assist the Company in amending the Registration Statement or supplementing the Prospectus (at the expense of the Company) so as to correct such statement or omission or effect such compliance.

(e)The Agent will use reasonable efforts (i) to determine and designate the states or jurisdictions, if any, where the qualification or registration of the Notes is necessary or advisable in connection with the Offering and (ii) to assist the Company in arranging for the qualification or registration of the Notes for offering and sale under the securities laws of such states or jurisdictions and to continue such qualifications or registrations in effect for so long as may be required for purposes of the distribution of the Notes. In each state or jurisdiction in which the Notes shall have been qualified or registered as herein provided, the Agent will assist with making and filing the Company statements and reports in each year as are or may be reasonably required by the laws of such states or jurisdiction.

(f)At all times during the term of this Agreement, the Agent shall provide all information relating to the Offering, the Renewable Note Program or the Note Portfolio reasonably requested by the Company in a timely manner and shall use its best efforts to insure that such information is complete and accurate in all material respects.

(g)The Agent shall take such additional action as is reasonably requested by the Company in order to carry out the purposes of this Agreement.

(h)The Agent shall comply at all times with all applicable Governmental Rules in connection with the offer and sale of the Notes.

(i)            The Agent shall immediately notify the Company upon receipt of any claim or threatened claim involving the offer or sale of the Notes.

24

ARTICLE VI
CONDITIONS

Section 6.01 Conditions of the Agent’s Obligations. The obligation of the Agent to sell the Notes on a best efforts basis as provided herein shall be subject to the accuracy of the representations and warranties of the Company, to the performance by the Company of its obligations hereunder, and to the satisfaction of the following additional conditions:

(a)The Registration Statement shall be effective, and no stop order suspending the effectiveness thereof shall have been issued and no proceedings for that purpose shall have been initiated or, to the knowledge of the Company, or the Agent, threatened by the Commission or any state securities commission or similar regulatory body. Any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with to the satisfaction of the Agent and the Agent’s counsel.

(b)The Agent shall not have advised the Company of its reasonable belief that the Registration Statement or Prospectus, or any amendment thereof or supplement thereto, contains any untrue statement of a fact which is material or omits to state a fact which is material and is required to be stated therein or is necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading, or, if the Agent has so advised the Company, the Company shall not have taken reasonable action to investigate such belief and, where appropriate, amend the Registration Statement or supplement the Prospectus so as to correct such statement or omission or effect such compliance.

(c)There shall not have occurred any change, or any development involving a prospective change, that materially and adversely affects the Company’s condition (financial or otherwise), earnings, operations, properties, business or business prospects from that set forth in the Registration Statement or Prospectus, and which is material and adverse or that makes it impracticable or inadvisable to proceed with the Offering of the Notes as contemplated by the Prospectus and this Agreement.

(d)The Indenture shall have been duly authorized, executed and delivered by the Company and duly qualified under the Trust Indenture Act and shall constitute a valid and binding obligation of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(e)All corporate proceedings and other legal matters in connection with this Agreement, the form of Registration Statement and the Prospectus, and the registration, authorization, issue, sale and delivery of the Notes shall have been reasonably satisfactory to the Agent’s counsel, in all material respects, and the Agent’s counsel shall have been furnished with such papers and information as it may reasonably have requested to enable it to pass upon the matters referred to in this Section.

25

(f)The Agent shall have received the opinion of Lindquist & Vennum PLLP, counsel for the Company, dated as of the Initial Closing Date, satisfactory in form and substance to the Agent and the Agent’s counsel, which includes the opinions as set forth in Exhibit B attached hereto. Each such counsel, in rendering the foregoing opinion, may rely as to questions of fact upon representations or certificates of officers of the Company and of government officials, in which case its opinion is to state such reliance. Copies of any opinion, representation or certificate so relied upon shall be delivered to the Agent and to the Agent’s counsel.

(g)On the Initial Closing Date, the Agent shall have received from KPMG, LLP a letter, dated as of the Initial Closing Date, in form and substance satisfactory to the Agent, to the effect that they are independent accountants with respect to the Company within the meaning of the Securities Act and the applicable rules and regulations thereunder, and further stating that:

(i)In their opinion, the consolidated balance sheets of the Company as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period then ended, all audited by them and included or incorporated by reference in the Registration Statement, comply as to form in all material respects with the applicable accounting requirements of the Act and the related rules and regulations adopted by the SEC.

(ii)For purposes of the letter they have:

(A)read the minutes of the shareholders’ and directors’ meetings of the Company;

(B)inquired of certain officials of the Company responsible for financial and accounting matters;

(C)performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement of Auditing Standards No. 71, Interim Financial Information, on any unaudited financial statements included or incorporated by reference in the Registration Statement; and

(D)reviewed the unaudited consolidated balance sheet of the Company as of                               , 2006 and the unaudited consolidated statements of income for the                               -month period ended                               , 2006, each of which has been included or incorporated by reference in the Registration Statement.

(iii)Nothing came to their attention as a result of the procedures described above that caused them to believe that:

26

(A)any material modifications should be made to the unaudited consolidated financial statements included or incorporated by reference in the Registration Statement, for them to be in conformity with accounting principles generally accepted in the United States of America;

(B)the unaudited consolidated financial statements included or incorporated by reference in the Registration Statement do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Securities Exchange Act of 1934, as amended, or were not prepared in conformity with generally accepted accounting principles and practices applied on a basis consistent in all material respects with those followed in the preparation of the audited financial statements of the Company included therein;

(C)the unaudited amounts of revenues, income before provision for income taxes, net income and ratio of earnings to fixed charges of the Company included or incorporated by reference in the Prospectus, or any amendment thereof or supplement thereto, were not derived from financial statements prepared in conformity with generally accepted accounting principles and practices applied on a basis consistent in all material respects with those followed in the preparation of the audited financial statements of the Company included therein;

(D)at a specified date not more than five Business Days prior to the date of the letter, there was any change in: (i) the capital stock, (ii) short term indebtedness or long-term debt of the Company and its consolidated subsidiaries, or (iii) shareholders’ equity, as compared with amounts shown on the latest balance sheet incorporated by reference in the Registration Statement; or

(E)for the period from the closing date of the latest income statement filed on a Form 10-Q incorporated by reference in the Registration Statement to the closing date of the latest available income statement read by such accountants, there were any changes, as compared with the corresponding period of the previous year, in consolidated revenues, net income or in the ratio of earnings to fixed charges;

except in all cases set forth in clauses (C) and (D) above, for changes which the Registration Statement discloses have occurred or may occur or which are described in such letter.

(iv)They have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial

27

information contained in the Registration Statement (in each case to the extent that such dollar amounts, percentage and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company’s accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquires, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter.

(h)The Agent shall have received from the Company a certificate, dated as of the Initial Closing Date, of the principal financial officer of the Company, to the effect that:

(i)The representations and warranties of the Company in this Agreement are true and correct as if made on and as of the date of the certificate, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under this Agreement.

(ii)No stop order or other order suspending the effectiveness of the Registration Statement or any amendment thereof or the qualification of the Notes for offering or sale have been issued, and no proceedings for that purpose have been instituted or, to the best of his knowledge, are contemplated by the Commission or any state or regulatory body.

(iii)The signer of said certificate has carefully examined the Registration Statement and the Prospectus and any amendments thereof or supplements thereto.

(iv)Such documents contain all statements and information required to be included therein; the Registration Statement, or any amendment thereof, does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus, as amended or supplemented, does not include any untrue statement of material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(v)There has not occurred any change, or any development involving a prospective change, which materially and adversely affects the Company’s condition (financial or otherwise), earnings, operations, properties, business or business prospects except as set forth on

28

contemplated in the Prospectus (or in the Incorporated Documents as of the date of such certificate).

(vi)Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, the Company has not incurred any material liabilities or material obligations, direct or contingent, or entered into any Material Agreements, not in the ordinary course of business consistent with past practice, and except as disclosed in the financial statements incorporated by reference in the Registration Statement, there has not been any material change in the capital stock, or any material increase in the short-term debt or long-term debt (other than consistent with past practices), or in the issuance of options (other than to directors and employees of the Company), warrants, convertible securities or other rights to purchase the capital stock, of the Company, or any material adverse change or any development involving a prospective material adverse change (whether or not arising in the ordinary course of business) in the general affairs, condition (financial or otherwise), business, key personnel, property, prospects, net worth or results of operations of the Company.

(vii)Except as stated in the Registration Statement and Prospectus, there is not pending or, to their knowledge, threatened or contemplated, any action, suit or proceeding to which the Company is a party before or by any court or governmental agency, authority or body, or any arbitrator, which might result in any material adverse change of the condition, (financial or otherwise), business, prospects, or results of operations of the Company.

(i)The Agent shall have received a certificate of the Secretary of the Company, dated as of such Initial Closing Date, with the documents listed herein attached, and to the effect and certifying as follows:

(i)Attached thereto are true and correct copies of the articles of incorporation of the Company, as amended to the date of the certificate, and stating that there have been no changes or amendments to the attached articles of incorporation of the Company, and no resolutions have been adopted by the Board of Directors or shareholders of the Company relating to (A) the amendment of said articles of incorporation; (B) the merger, consolidation or dissolution of the Company; or (C) the sale of all or substantially all of the assets or business of the Company, and that the Company is in good standing in the State of Minnesota and has paid all of its corporate franchise taxes due as of the date of such certificate.

(ii)Attached thereto is a true and correct copy of the bylaws of the Company as in effect as of the date of such certificate and no resolutions have been adopted by the Board of Directors or shareholders

29

of the Company relating to changes or amendments to the attached bylaws.

(iii)Attached thereto are true and correct copies of the resolutions of the Board of Directors of the Company relating to the preparation and signing of the Registration Statement and this Agreement, the issuance and sale of the Notes and other related matters, and such resolutions have not been amended, modified or rescinded and are in full force and effect as of the date of such certificate and are the only resolutions adopted by the Board of Directors of the Company with respect to the Offering.

(iv)The persons who have signed the Registration Statement and all amendments thereto were duly elected at the respective times of such signing and duly acting as officers and directors of the Company or as an attorney-in-fact therefor, as set forth in the Registration Statement.

(j)Lindquist & Vennum PLLP shall deliver to the Agent a Blue Sky Memorandum reasonably satisfactory to the Agent confirming that all requisite actions for the offer and sale of the Notes in all jurisdictions requested by the Agent have been taken.

(k)The Company shall have furnished to the Agent and to the Agent’s counsel such additional certificates, documents and evidence as the Agent shall reasonably request.

All such opinions, certificates, letters and documents will be in compliance with the provisions hereof only if they are reasonably satisfactory to the Agent and the Agent’s counsel. All statements contained in any certificate, letter or other document delivered pursuant hereto by, or on behalf of, the Company shall be deemed to constitute representations and warranties of the Company.

The Agent may waive in writing the performance of any one or more of the conditions specified in this Section or extend the time for their performance.

If any of the conditions specified in this Section shall not have been fulfilled when and as required by this Agreement to be fulfilled and if the fulfillment of said condition has not been waived by the Agent, this Agreement and all obligations of the Agent hereunder may be canceled at, or at any time prior to, the Initial Closing Date by the Agent. Any such reasonable cancellation shall be without liability of the Agent to the Company and shall not relieve the Company of its obligations under Article VII hereof. Notice of such cancellation shall be given to the Company as specified in Section 8.03.

Section 6.02 Conditions of the Company’s Obligations. The obligations of the Company as provided herein shall be subject to the accuracy of the representations and warranties of the Agent, the performance by the Agent of its obligations hereunder and to the Company’s receipt, within five Business Days of the Initial Closing Date, of the opinion of Oppenheimer Wolff & Donnelly LLP, counsel for the Agent, dated as of the Initial Closing Date,

30

satisfactory in form and substance to the Company and the Company’s counsel, which includes the opinions as set forth in Exhibit C hereto. Such counsel, in rendering the foregoing opinion, may rely as to questions of fact upon representations or certificates of officers of the Agent and of government officials, in which case its opinion is to state such reliance. Copies of any opinion, representation or certificate so relied upon shall be delivered to the Company and to the Company’s counsel.

ARTICLE VII
INDEMNIFICATION AND CONTRIBUTION

Section 7.01 The Company’s Indemnification of the Agent. The Company hereby agrees to indemnify and hold harmless the Agent, and each person, if any, who controls the Agent within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities that arise out of, or are based upon, (i) any breach, in any material respect, of any representation, warranty, agreement or covenant of the Company contained in this Agreement; (ii) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof or supplement thereto, or the omission or alleged omission to state in the Registration Statement or any amendment thereof or supplement thereto a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (iii) any untrue statement or alleged untrue statement of a material fact contained in the Prospectus or any related preliminary prospectus or prospectus supplement, or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; or (iv) any untrue statement or alleged untrue statement of a material fact contained in any application or other statement executed by the Company or based upon written information furnished by the Company filed in any jurisdiction in order to qualify the Notes under, or exempt the Notes or the sale thereof from qualification under, the securities laws of such jurisdiction, or the omission or alleged omission to state in such application or statement a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company will reimburse the Agent and each such controlling person (subject to the limitation set forth in Section 7.03 hereof) for any legal or other expenses reasonably incurred by the Agent or controlling person in connection with investigating or defending against any such loss, claim, damage, liability or action. However, the Company will not be liable and have no defense or indemnification obligations in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission (i) made in reliance upon and in conformity with the Agent Disclosure Statements or any written information furnished to the Company by the Agent specifically for use in any application or other statement executed by the Company or the Agent filed in any jurisdiction in order to qualify the Notes under, or exempt the Notes or the sale thereof from qualification under, the securities laws of such jurisdiction (unless the Agent provided the Company with written notice of such untrue statement or omission within a reasonable time prior to the use thereof and the Company failed to undertake prompt action to correct such untrue statement or omission before its use, in which case the Company’s indemnification shall nevertheless apply); or (ii) is corrected in any amendment or supplement to the Registration Statement or the Prospectus; provided that the Company has performed its obligations hereunder in respect of such amendment or supplement and, to the extent that a prospectus relating to the Notes was

31

required to be delivered by the Agent under the Securities Act, the Agent, having been furnished by or on behalf of the Company with copies of the Prospectus as so amended or supplemented, thereafter fails to deliver such amended or supplemented Prospectus prior to or concurrently with the sale of the Notes to the person asserting such loss, claim, damage or liability.

Section 7.02 The Agent’s Indemnification of the Company. The Agent agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the Registration Statement, and each person who controls the Company within the meaning of Section 15 of the Securities Act against any losses, claims, damages or liabilities that arise out of, or are based upon, (i) any breach, in any material respect, of any representation, warranty, agreement, obligation or covenant of the Agent contained in this Agreement, (ii) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof or supplement thereto, or the omission or alleged omission to state in the Registration Statement or any amendment thereof or supplement thereto, a material fact required to be stated therein or necessary to make the statements therein not misleading; (iii) any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (as amended or as supplemented), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; or (iv) any untrue statement or alleged untrue statement of a material fact contained in any application or other statement executed by the Company or by the Agent and filed in any jurisdiction in order to qualify the Notes under, or exempt the Notes or the sale thereof from qualification under, the securities laws of such jurisdiction, or the omission or alleged omission to state in such application or statement a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that indemnification under subsections (ii) through (iv) above shall extend only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with the Agent Disclosure Statements or any written information furnished to the Company by, or on behalf of, the Agent specifically for use in any application or other statement executed by the Company or by the Agent and filed in any jurisdiction (unless the Agent provided the Company with written notice of such untrue statement or omission within a reasonable time prior to the use thereof and the Company failed to undertake prompt action to correct such untrue statement or omission before its use in which case the Agent’s indemnification shall not apply). The Agent will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, or controlling person (subject to the limitation in Section 7.03 hereof) in connection with investigating or defending against any such loss, claim, damage, liability or action. This indemnity agreement is in addition to any liability which the Agent may otherwise have.

Section 7.03 Notice of Indemnification Claim. Promptly after receipt by an indemnified party under Sections 7.01 or 7.02 of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under Sections 7.01 or 7.02, notify in writing the indemnifying party of the commencement thereof. Failure or delay to so notify the indemnifying party will not relieve it from any liability under Sections 7.01 or 7.02 as to the particular item for which indemnification is then being sought, except to the extent that the indemnifying party incurs or sustains damages or losses or is otherwise materially prejudiced as a result of such failure to notify or delay in notification. In

32

case any such action is brought against any indemnified party, and the indemnified party notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, to assume the defense thereof, with counsel who shall be reasonably satisfactory to such indemnified party. After notice from the indemnifying party to such indemnified party of the indemnifying party’s election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under Sections 7.01 or 7.02 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party, and the indemnified party shall have reasonably concluded that there may be legal defenses available to it or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select one separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties, in which event the fees and expenses of such separate counsel shall be borne by the indemnifying party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel for each indemnified party separate from the indemnifying party’s respective counsel(s) for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. Any such indemnifying party shall not be liable to any such indemnified party on account of any settlement of any claim or action effected without the consent of such indemnifying party.

Section 7.04 Contribution. In order to provide for just and equitable contribution in any action in which the Agent or the Company (or any person who controls the Agent or the Company within the meaning of Section 15 of the Securities Act) makes claim for indemnification pursuant to Sections 7.01 or 7.02 hereof, but such indemnification is unavailable or insufficient to hold harmless and indemnify a party under Sections 7.01 or 7.02, as applicable, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in Sections 7.01 or 7.02, as applicable, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Agent on the other from the offering of the Notes hereunder or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in such clause (i) but also the relative fault of the Company on the one hand and the Agent on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Agent on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Notes (before deducting expenses) received by the Company bear to the total commissions received by the Agent. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Agent and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Agent agree that it would not be just and equitable if contributions pursuant to this Section 7.04 were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in this Section 7.04. The amount paid by an indemnified party as a

33

result of the losses, claims, damages or liabilities referred to in this Section 7.04 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending against any action or claim which is the subject of this Section 7.04. Notwithstanding the provisions of this Section, the Agent shall not be required to contribute any amount in excess of the amount by which (x) the total price at which the Notes which are the subject of the action were distributed to the public exceeds (y) the amount of any damages that the Agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation.

Section 7.05 Notice of Contribution Claim. Promptly after receipt by a party to this Agreement of notice of the commencement of any action, suit or proceeding, such person will, if a claim for contribution in respect thereof is to be made against another party (the “Contributing Party”), notify the Contributing Party of the commencement thereof, but the failure to so notify the Contributing Party will not relieve the Contributing Party from any liability which it may have to any party other than under Section 7.04. Any notice given pursuant to Section 7.03 hereof shall be deemed to be like notice under this Section 7.05. In case any such action, suit or proceeding is brought against any party, and such person notifies a Contributing Party of the commencement thereof, the Contributing Party will be entitled to participate therein with the notifying party and any other Contributing Party similarly notified.

Section 7.06 Reimbursement. In addition to its other obligations under Section 7.01 and 7.04 hereof, the indemnifying party, as applicable, agrees that, as an interim measure during the pendency of any claim, action, investigation, inquiry or other proceeding described in Section 7.01, it will reimburse the indemnified party on a monthly basis for all legal or other expenses incurred in connection with investigating or defending any such claim, action, investigation, inquiry or other proceeding, notwithstanding the absence of a judicial determination as to the propriety and enforceability of the indemnifying party’s obligation to reimburse the indemnified party for such expenses and the possibility that such payments might later be held to have been improper by a court of competent jurisdiction. To the extent that any such interim reimbursement payment is so held to have been improper, the indemnified party shall promptly return such payment to the indemnifying party.

Section 7.07 Arbitration. Any controversy rising out of the operation of the interim reimbursement arrangements set forth in Section 7.06 hereof, including the amounts of any requested reimbursement payments and the method of determining such amounts, shall be settled by arbitration conducted pursuant to the Code of Arbitration Procedure of the NASD. Any such arbitration must be commenced by service of a written demand for arbitration or a written notice of intention to arbitrate, therein electing the arbitration tribunal. If the party demanding arbitration does not make such designation of an arbitration tribunal in such demand or notice, then the party responding to said demand or notice is authorized to do so. Any such arbitration will be limited to the operation of the interim reimbursement provisions contained in Section 7.06 hereof and will not resolve the ultimate propriety or enforceability of the obligation to indemnify for expenses which is created by the provisions of Sections 7.01 and 7.02 hereof or the obligation to contribute to expenses which is created by the provisions of Section 7.04 hereof.

34

Section 7.08 Intellectual Property Infringement. The Agent agrees that it shall defend, indemnify and hold harmless, at its own expense, all suits and claims against the Company and any officers, directors, employees and affiliates of the Company (collectively, the “Company Indemnified Parties”), for infringement or violation of any patent, trademark, copyright, trade secret or other intellectual property rights of any third party that relates to this Agreement or the Offering, sale or servicing of the Notes. The Agent agrees that it shall pay all sums, including without limitation, reasonable attorneys’ fees and other costs incurred by the Company, in defense of, by final judgment or decree, or in settlement of any suit or claim asserted or assessed against, or incurred by, any of the Company Indemnified Parties on account of such infringement or violation, provided that the Company Indemnified Parties involved shall cooperate in all reasonable respects with the Agent and its attorneys in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom; provided, however, that the Company Indemnified Parties may, at their own cost, participate in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. The parties shall cooperate with each other in any notifications to insurers.

Section 7.09 Confidentiality. The parties to this Agreement acknowledge and agree that all information, whether oral or written, concerning a disclosing party and its business operations, prospects and strategy, which is furnished by the disclosing party to the other party is deemed to be confidential, restricted and proprietary to the disclosing party (the “Proprietary Information”). Proprietary Information supplied shall not be disclosed, used or reproduced in any form except as required to accomplish the intent of, and in accordance with the terms of, this Agreement and the Indenture. The receiving party shall provide the same care to avoid disclosure or unauthorized use of Proprietary Information as it provides to protect its own proprietary information, including without limitation retaining Proprietary Information in a secure place with limited access, but in no event shall the receiving party fail to use reasonable care under the circumstances to avoid disclosure or unauthorized use of Proprietary Information. Unless otherwise specified in writing, all Proprietary Information shall (i) remain the property of the disclosing party, (ii) be used by the receiving party only for the purpose for which it was intended under this Agreement and the Indenture, and (iii) together with all copies of such information, be returned to the disclosing party or destroyed upon request of the disclosing party, and, in any event, upon termination of this Agreement, except as otherwise provided or contemplated by this Agreement, including Sections 3.02(b) and (e) and 8.05 hereof. Proprietary Information does not include information which is: (a) published or included as disclosure within the Registration Statement or otherwise available in the public domain through no fault of the receiving party; (b) lawfully received from a third party having rights in the information without restriction of the third party’s right to disseminate the information and without notice of any restriction against its further disclosure; or (c) produced under order of a court of competent jurisdiction or other similar requirement of a governmental agency or authority, so long as the party required to disclose the information provides the other party with prior notice of such order or requirement and its cooperation to the extent reasonable in preserving its confidentiality. Because damages may be difficult to ascertain, and without limiting any other rights and remedies specified herein, an injunction may be sought against the party who has breached or threatened to breach this Section.

35

ARTICLE VIII
TERM AND TERMINATION

Section 8.01 Effective Date of this Agreement. This Agreement shall become effective as of the date first set forth above, and shall continue in full force and effect until terminated as provided below.

Section 8.02 Termination Prior to Initial Closing Date. This Agreement may be terminated by the Agent, at its option, by giving notice to the Company, if (i) the Company shall have failed, refused, or been unable, at or prior to the Initial Closing Date, to perform any agreement on its part to be performed hereunder; (ii) any other condition of the Agent’s obligations hereunder is not fulfilled or waived by the Agent; (iii) a banking moratorium shall have been declared by federal or Minnesota authorities; (iv) there shall have been such a serious, unusual and material change in general economic, monetary, political or financial conditions, or the effect of international conditions on the financial markets in the United States shall be such as, in the judgment of the Agent, makes it inadvisable to proceed with the delivery of the Notes; (v) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other governmental authority which, in the reasonable judgment of the Agent, materially and adversely affects or will materially and adversely affect the business or operations of the Company; or (vi) there shall be a material outbreak of hostilities or material escalation and deterioration in the political and military situation between the United States and any foreign power, or a formal declaration of war by the United States of America shall have occurred. Any such termination shall be without liability of any party to any other party, except as provided in Sections 7.01, 7.02 and 7.04 hereof; provided, however, that the Company shall remain obligated to pay costs and expenses to the extent provided in Section 2.03 hereof.

Section 8.03 Notice of Termination. If the Agent elects to terminate this Agreement as provided in Section 8.02, it shall notify the Company and the Company’s counsel promptly by telephone or transmitted by any standard form of telecommunication, confirmed by letter sent to the address specified in Section 9.02 hereof.

Section 8.04 Termination After Initial Closing Date. The Company or the Agent may terminate this Agreement at any time subsequent to the Initial Closing Date in whole or in part as more specifically provided below, and in such case, the Agent will be paid fees and commissions incurred up to the date of such termination plus its expenses accrued as of such date within 30 days of such termination:

(a)The Company will have the ability to terminate this Agreement in the following manner:

(i)with respect to the Company’s termination of the Agent’s activities to market and sell the Notes, the Company must provide at least seven days prior written notice to the Agent, and

36

(ii)with respect to the Company’s termination of the Agent’s administration activities relating to the Notes, the Company will provide at least 30 days prior written notice to the Agent;

(b)The Agent will have the ability to terminate this Agreement in the following manner:

(i)with respect to the termination of the Agent’s activities to market and sell the Notes, the Agent must provide at least 30 days prior written notice to the Company, except as otherwise provided herein or in the event of any material breach hereof by the Company, in which case such termination may be effective upon one Business Days’ notice, and

(ii)with respect to the termination of the Agent’s other activities relating to the Notes, the Agent must provide at least 60 days prior written notice to the Company; provided, however, that in either case of clause (i) or (ii) of this sentence, the Company may decrease the time periods for terminating the Agent’s activities by providing the Agent with notice for termination consistent with the preceding Section 8.04(a).

(c)In the event of termination of the Agent’s activities to market and sell the Notes under Sections 8.04(a)(i) or (b)(i), above, but not the administration activities as set forth in Sections 8.04(a)(ii) or (b)(ii), the Company will continue to be obligated to pay the portfolio fee under Section 2.03(a)(ii) but will have no obligation to pay commissions under Section 2.03(a)(i) and Section 2.03(c) accruing from and after the effective date of such termination.

(d)In the event of the termination of the administration of the Notes by the Agent pursuant to Sections 8.04(a)(ii) or (b)(ii), but not the termination of the sales and marketing of the Notes by the Agent pursuant to Sections 8.04(a)(i) or (b)(i), the Company will continue to be obligated to pay the commission fee under Section 2.03(a)(i), but will not be obligated to pay the portfolio fee under Section 2.03(a)(ii) for periods after the effective date of such termination.

Section 8.05 Termination Without Termination of Offering. Anything to the contrary notwithstanding, the termination of this Agreement shall not prevent the Company from commencing or cause the Company to terminate the Offering. In the event this Agreement is terminated without a termination of the Offering, then the Company, or its agents, shall be entitled to use all materials developed by the Agent related to the Notes as provided elsewhere herein.

ARTICLE IX
MISCELLANEOUS

Section 9.01 Survival. The respective indemnity and contribution agreements of the Company and the Agent set forth herein and the respective representations, warranties, covenants and agreements of the Company and the Agent set forth herein, shall remain operative and in full

37

force and effect, regardless of any investigation made by, or on behalf of, the Agent, the Company, any of its officers and directors, or any controlling person referred to in Article VII and shall survive the sale of the Notes and any termination or cancellation of this Agreement. Any successor of any party or of any such controlling person, or any legal representative of such controlling person, as the case may be, shall be entitled to the benefit of the respective indemnity and contribution agreements.

Section 9.02 Notices. All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed, delivered or transmitted by any standard form of telecommunication, as follows:

If to the Agent, to:	Sumner Harrington Ltd. 11100 Wayzata Boulevard Suite 170 Minneapolis, Minnesota 55305 Attention: K. Edward Elverud Tel. (952) 542-7952
with a copy to:	Oppenheimer Wolff & Donnelly LLP 45 South 7th Street Suite 3300 Minneapolis, Minnesota 55402 Attention: Michael J. Kolar Tel. (612) 607-7000
If to the Company, to:	Winmark Corporation 4200 Dahlberg Drive, Suite 100 Minneapolis, MN 55422-4837 Attention:                                     Telecopier:
with copies to:	Lindquist & Vennum PLLP 4200 IDS Center 80 South 8th Street Minneapolis, MN 55402 Attention: Jonathan B. Levy Telecopier: (612) 371-3207

Section 9.03 Successors and Assigns; Transfer. This Agreement shall inure to the benefit of and be binding upon the Agent and the Company and their respective successors and permitted assigns, and the officers, directors and controlling persons referred to in Article VII. Nothing expressed in this Agreement is intended or shall be construed to give any person or corporation, other than the parties hereto, their respective successors and assigns, and the controlling persons, officers and directors referred to in Article VII, any legal or equitable right, remedy or claim under, or in respect of, this Agreement or any provision herein contained; this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and their respective executors, administrators,

38

successors, assigns and such controlling persons, officers and directors, and for the benefit of no other person or corporation. Neither party may assign its rights and obligations under this Agreement without the written consent of the other party.

Section 9.04 Cumulative Remedies. Unless otherwise expressly provided herein, the remedies of the parties provided for herein shall be cumulative and concurrent, and may be pursued singularly, successively or together, at the sole discretion of the party for whose benefit such remedy is provided, and may be exercised as often as occasion therefor shall arise.

Section 9.05 Attorneys’ Fees. In the event of any action to enforce or interpret this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees and costs, whether or not such action proceeds to judgment.

Section 9.06 Entire Agreement. Except as otherwise expressly provided herein, this Agreement constitutes the entire agreement of the parties hereto with respect to the matters addressed herein and supersedes all prior or contemporaneous contracts, promises, representations, warranties and statements, whether written or oral (including, but not limited to, the Proposal), with respect to such matters.

Section 9.07 Choice of Law; Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, without regard to conflict of law principles.

Section 9.08 Rights to Investor Lists. The parties acknowledge that the Offering will produce a list of investors that purchase Notes, a list of prospects that respond to advertisements, but do not purchase any Notes, a list of former investors who redeemed their Notes, and a list of former investors whose Notes the Company redeemed. Subject to any privacy laws, both the Company and the Agent will be able to use these lists for their own business purposes as long as doing so does not interfere with the marketing, sale or administration of the Notes.

Section 9.09 Waiver; Subsequent Modification. Except as expressly provided herein, no delay or omission by any party in insisting upon the strict observance or performance of any provision of this Agreement, or in exercising any right or remedy, shall be construed as a waiver or relinquishment of such provision, nor shall it impair such right or remedy, and no waiver by any party or any failure or refusal of the other party to comply with its obligations under this Agreement shall be deemed a waiver of any other or subsequent failure or refusal to so comply by such other party. No waiver or modification of the terms hereof shall be valid unless in writing and signed by the party to be charged, and then only to the extent therein set forth.

Section 9.10 Severability. If any term or provision of this Agreement or application thereof to any person or circumstance shall, to any extent, be found by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term or provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

39

Section 9.11 Joint Preparation. The preparation of this Agreement has been a joint effort of the parties and the resulting document shall not, solely as a matter of judicial construction, be construed more severely against one of the parties than the other.

Section 9.12 Captions. The title of this Agreement and the headings of the various articles, section and subsections have been inserted only for the purpose of convenience, are not part of this Agreement and shall not be deemed in any manner to modify, explain, expand or restrict any of the provisions of this Agreement.

Section 9.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

Section 9.14 Third Party Contractors. In the event that the Company engages a third party to perform any of the obligations of the Agent under this Agreement, including, without limitation, coordinating the receipt and logging of incoming Subscription Agreements to purchase Notes and accompanying funds and documents, the Company shall provide written notice to the Agent of such engagement, the Agent shall thereafter be relieved of any such obligations for which the third party was engaged, and in no event shall the Agent be liable for, or be obligated to indemnify the Company with regard to, any act (or failure to act) of such third party. The Company agrees to indemnify the Agent against any loss, claim, damage or liability arising from the Company’s engagement of any such third party or such third party’s acts (or failures to act) in a manner consistent with the provisions of Article VII hereof.

[Remainder of page intentionally left blank]

40

IN WITNESS WHEREOF, this Distribution and Management Agreement is hereby entered into by the undersigned parties as of the date first set forth above.

WINMARK CORPORATION

By:

Name:

Title:

SUMNER HARRINGTON LTD.

By:

Name: K. Edward Elverud

Title: President

41

EX-4.1

Exhibit 4.1

INDENTURE

Dated as of                                 , 2006,

by and between

WINMARK CORPORATION, as obligor

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

a national banking association, as trustee

$50,000,000

Renewable Unsecured Subordinated Notes

TABLE OF CONTENTS

ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE		1
Section 1.1	Definitions	1
Section 1.2	Other Definitions	6
Section 1.3	Incorporation by Reference of Trust Indenture Act	6
Section 1.4	Rules of Construction	6
ARTICLE II THE SECURITIES		7
Section 2.1	Security Terms; Amount; Accounts; Interest; Maturity	7
Section 2.2	Written Confirmation; Rejection; Rescission	10
Section 2.3	Registrar and Paying Agent	11
Section 2.4	Paying Agent to Hold Money in Trust	12
Section 2.5	List of Holders	12
Section 2.6	Transfer and Exchange	12
Section 2.7	Payment of Principal and Interest; Principal and Interest Rights Preserved	13
Section 2.8	Outstanding Securities	14
Section 2.9	Treasury Securities	14
Section 2.10	Defaulted Interest	14
Section 2.11	Temporary Notes	15
Section 2.12	Execution, Authentication And Delivery	15
Section 2.13	Book-Entry Registration	16
Section 2.14	Initial and Periodic Statements	17
Section 2.15	Appointment of Agents	17
ARTICLE III REDEMPTION AND REPURCHASE		17
Section 3.1	Redemption of Securities at the Company’s Election	17
Section 3.2	Repurchase of Securities at the Holder’s Request	18
ARTICLE IV COVENANTS		20
Section 4.1	Payment of Securities	20
Section 4.2	Maintenance of Office or Agency	20
Section 4.3	SEC Reports and Other Reports	21
Section 4.4	Compliance Certificate	21
Section 4.5	Stay, Extension and Usury Laws	22
Section 4.6	Liquidation	22
Section 4.7	Financial Covenants	23
Section 4.8	Restrictions on Dividends and Certain Transactions with Affiliates	23
Section 4.9	Securitization Transactions and Additional Indebtedness	23
ARTICLE V SUCCESSORS		23
Section 5.1	When the Company May Merge, etc.	23
Section 5.2	Successor Entity Substituted	24
ARTICLE VI DEFAULTS AND REMEDIES		24
Section 6.1	Events of Default	24
Section 6.2	Acceleration	25
Section 6.3	Other Remedies	25
Section 6.4	Waiver of Past Defaults	26
Section 6.5	Control by Majority	26
Section 6.6	Limitation on Suits	26
Section 6.7	Rights of Holders to Receive Payment	27
Section 6.8	Collection Suit by Trustee	27

Section 6.9	Trustee May File Proofs of Claim	27
Section 6.10	Priorities	28
Section 6.11	Undertaking for Costs	28
ARTICLE VII TRUSTEE		28
Section 7.1	Duties of Trustee	28
Section 7.2	Rights of Trustee	30
Section 7.3	Individual Rights of Trustee	30
Section 7.4	Trustee’s Disclaimer	31
Section 7.5	Notice of Defaults	31
Section 7.6	Reports by Trustee to Holders	31
Section 7.7	Compensation and Indemnity	31
Section 7.8	Replacement of Trustee	32
Section 7.9	Successor Trustee by Merger, etc.	33
Section 7.10	Eligibility; Disqualification	34
Section 7.11	Preferential Collection of Claims Against Company	34
ARTICLE VIII DISCHARGE OF INDENTURE		34
Section 8.1	Termination of Company’s Obligations	34
Section 8.2	Application of Trust Money	35
Section 8.3	Repayment to Company	35
Section 8.4	Reinstatement	35
ARTICLE IX AMENDMENTS		36
Section 9.1	Without Consent of Holders	36
Section 9.2	With Consent of Holders	36
Section 9.3	Compliance with Trust Indenture Act	37
Section 9.4	Effect of Consents	38
Section 9.5	Notation on or Exchange of Securities	38
Section 9.6	Trustee to Sign Amendments, etc.	38
ARTICLE X SUBORDINATION		38
Section 10.1	Agreement to Subordinate	38
Section 10.2	Liquidation; Dissolution; Bankruptcy	39
Section 10.3	Default of Senior Debt	41
Section 10.4	When Distribution Must Be Paid Over	42
Section 10.5	Notice by Company	42
Section 10.6	Subrogation	43
Section 10.7	Relative Rights	43
Section 10.8	Subordination May Not Be Impaired by the Company or Holders of Senior Debt	43
Section 10.9	Distribution or Notice to Representative	45
Section 10.10	Rights of Trustee and Paying Agent	45
Section 10.11	Authorization to Effect Subordination	45
Section 10.12	Article Applicable to Paying Agent	45
Section 10.13	Miscellaneous	46
ARTICLE XI MISCELLANEOUS		47
Section 11.1	Trust Indenture Act Controls	47
Section 11.2	Notices	47
Section 11.3	Communication by Holders with Other Holders	49
Section 11.4	Certificate and Opinion as to Conditions Precedent	49

ii

Section 11.5	Statements Required in Certificate or Opinion	49
Section 11.6	Rules by Trustee and Agents	50
Section 11.7	Legal Holidays	50
Section 11.8	No Recourse Against Others	50
Section 11.9	Duplicate Originals	50
Section 11.10	Governing Law	50
Section 11.11	No Adverse Interpretation of Other Agreements	50
Section 11.12	Successors	50
Section 11.13	Severability	50
Section 11.14	Counterpart Originals	51
Section 11.15	Table of Contents, Headings, etc.	51

EXHIBITS:

A – Form of Note

iii

CROSS-REFERENCE TABLE

*Trust Indenture Act Section	Indenture Section
310(a)(1)	7.10
(a)(2)	7.10
(a)(3)	N.A.
(a)(4)	N.A.
(a)(5)	N.A.
(b)	7.8; 7.10
(c)	N.A.
311(a)	7.11
(b)	7.11
(c)	N.A.
312(a)	2.5
(b)	11.3
(c)	11.3
313(a)	7.6
(b)(1)	N.A.
(b)(2)	7.6
(c)	7.6; 11.2
(d)	7.6
314(a)	4.3; 4.4; 11.2
(b)	N.A.
(c)(1)	11.4
(c)(2)	11.4
(c)(3)	11.4; 1.1
(d)	N.A.
(e)	11.5
(f)	N.A.
315(a)	7.1(b)
(b)	7.5; 11.2
(c)	7.1(a)
(d)	7.1(c)
(e)	6.11
316(a)(last sentence)	2.9
(a)(1)(A)	6.5
(a)(1)(B)	6.4
(a)(2)	N.A.
(b)	6.7
(c)	N.A.
317(a)(1)	6.8
(a)(2)	6.9
(b)	2.4
318(a)	11.1

N.A. means not applicable

* This Cross Reference Table is not part of the Indenture

THIS INDENTURE is hereby entered into as of                                   , 2006, by and between Winmark Corporation, a Minnesota corporation (the “Company”), as obligor, and Wells Fargo Bank, National Association, a national banking association, as trustee (the “Trustee”).

The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the renewable, unsecured, subordinated debt securities of the Company issued pursuant to the Company’s registration statement on Form S-1, declared effective by the Securities and Exchange Commission on or about                                             , 2006 (the “Registration Statement”):

ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.1Definitions.

“Account” means the record of beneficial ownership of a Security maintained by the Registrar.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

“Agent” means any Registrar, Paying Agent or co-registrar of the Securities or any Person appointed and retained by the Company to perform certain of the duties or obligations, or exercise certain of the rights and discretions, of the Company hereunder, on behalf of the Company pursuant to Section 2.15 hereof.

“Board of Directors” means the Board of Directors of the Company or any authorized committee of the Board of Directors.

“Business Day” means any day other than a Legal Holiday.

“Company” means Winmark Corporation, a Minnesota corporation, unless and until replaced by a successor in accordance with Article V hereof and thereafter means such successor.

“Corporate Trust Office” means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date as of which this Indenture is originally dated, located at                                                                                       , Attention:                                                 .

“Default” means any event that is or with the passage of time or the giving of notice or both would be an Event of Default.

“Event of Default” has the meaning set forth in Section 6.1 hereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Fiscal Year” means a year ending [December 31].

“GAAP” means, as of any date, generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, which are in effect from time to time.

“Guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness.

“Holder” means a Person in whose name a Security is registered.

“Indebtedness” means, with respect to any Person and without duplication, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or representing the balance deferred and unpaid of the purchase price of any property (including capital lease obligations) or the expenditure for any services or representing any interest rate swap or other hedging obligations, including without limitation, any such balance that constitutes an accrued expense or an account or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and hedging obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and also includes, to the extent not otherwise included, (a) the Guarantee of items that would be included within this definition, and (b) liability for items that would arise by operation of a Person’s status as a general partner of a partnership.

“Indenture” means this Indenture as amended or supplemented from time to time.

“Interest Accrual Period” means, as to each Security, the period from the later of the Issue Date of such Security or the last Payment Date upon which an interest payment was made until and including the day before the following Payment Date during which interest accrues on each Security with respect to any Payment Date.

“Issue Date” means, with respect to any Security, the date on which such Security is deemed registered on the books and records of the Registrar, which shall be (i) the date the Company accepts funds for the purchase of the Security if such funds are received prior to 12:01 p.m. (Central Time) on a Business Day, or if such funds are not so received, on the next Business Day, or (ii) the date that the Security is renewed as of the Maturity Date pursuant to Section 2.1(e).

“Maturity Date” means, with respect to any Security, the date on which the principal of such Security becomes due and payable as therein provided.

2

“Maturity Record Date” means, with respect to any Security, as of 11:59 p.m. of the date 15 days prior to the Maturity Date or Redemption Date applicable to such Security.

“Notice of Maturity” means a written notice from the Company to a Holder (as further described in Section 2.1(d)) that the Holder’s Securities will be maturing on the related Maturity Date occurring within 15 days but not less than 10 days of the delivery of such notice.

“Obligations” means, with respect to any Indebtedness, any principal, premium, interest (including Post-Petition Interest), penalties, fees, indemnifications, reimbursements, damages and other liabilities or amounts of whatever nature payable under the documentation governing, or with respect to, any such Indebtedness.

“Officer” means the Chairman of the Board or principal executive officer of the Company, the President or principal operating officer of the Company, the Chief Financial Officer or principal financial officer of the Company, the Treasurer, Controller or principal accounting officer of the Company, Secretary or any Executive or Senior Vice-President of the Company.

“Officers’ Certificate” means a certificate signed by two Officers, one of whom must be the principal executive officer, principal operating officer, principal financial officer or principal accounting officer of the Company; provided, however, that if the opinion of an accountant is required pursuant to TIA § 314(c)(3), the certificate must be signed by an Officer who is an accountant.

“Opinion of Counsel” means an opinion from legal counsel who is reasonably acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee.

“Pari Passu Debt” means any Indebtedness of the Company that is payable on a pari passu basis with the Securities.

“Payment Account” means the bank account designated by the Holder to receive payments of interest and/or principal due on such Holder’s Securities, as may be amended by the Holder by written notice to the Registrar from time to time.

“Payment Date” means (i) with respect to any Security for which monthly interest payments are required to be made, the first day of the following calendar month or such other date as is designated by the Holder pursuant to subsection 2.1(c), (ii) with respect to any Security for which interest is required to be made quarterly, semi-annually or annually, the same day of the month as the quarterly, semi-annual or annual anniversary of the Issue Date of the Security (except in the case where the Issue Date of a Security is the 29^th, 30^th or 31^st day of the month and there is no like date in the anniversary month, in which case the Payment Date for such month shall be the first day of the following month) and (iii) with respect to each Security, the Maturity Date (or such date following the Maturity Date on which payment is made pursuant to subsection 2.1(d) hereof), the Repurchase Date or the Redemption Date of the Security; provided, that if any such day in the preceding clauses (i) through (iii) is not a Business Day, the Business Day immediately following such day.

3

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

“Post-Petition Interest” means interest accruing after the commencement of any bankruptcy or insolvency case or proceeding with respect to the Company or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, at the rate applicable to the related Indebtedness, whether or not such interest is an allowable claim in any such proceeding.

“Prospectus” means the prospectus included in the Registration Statement at the time it was declared effective by the SEC, as supplemented by any prospectus supplement (including interest rate supplements) relating to the Securities that are filed with the SEC pursuant to Rule 424(b) under the Securities Act. References herein to the Prospectus shall be deemed to refer to and include the documents incorporated therein by reference.

“Receivables” means installment sale contracts, loans evidenced by promissory notes secured by assets, leases, mortgages or other finance receivables or instruments purchased, originated or owned by the Company or any of its Affiliates.

“Redemption Notice” means a written notice from the Company to the Holders (as further described in Section 2.1(f)) stating that the Company is redeeming all or a specified portion of Securities pursuant to Section 3.1, with a copy to the Registrar and the Trustee.

“Redemption Price” means, with respect to any Security to be redeemed, the principal amount of such Security plus the interest accrued but unpaid during the Interest Accrual Period up to and not including the Redemption Date for such Security.

“Regular Record Date” means, with respect to each Payment Date, as of 11:59 p.m. of the date 15 days prior to such Payment Date.

“Repayment Election” means a written notice from a Holder to the Company (as further described in Section 2.1(d)) stating that repayment of the Holder’s Securities is required in connection with the maturity of such Securities.

“Repurchase Price” means, with respect to any Security to be repurchased, the principal amount of such Security plus the interest accrued but unpaid during the Interest Accrual Period up to and not including the Repurchase Date for such Security, minus the Repurchase Penalty, if any.

“Repurchase Request” means a written notice from a Holder to the Company (as further described in Section 2.1(g)) stating that such Holder is making an irrevocable request for the Company to repurchase such Holder’s Securities pursuant to Section 3.2.

“Responsible Officer” when used with respect to the Trustee, means any officer in its Corporate Trust Office, or any other assistant officer of the Trustee in its Corporate Trust Office customarily performing functions similar to those performed by the Persons who at the time shall

4

be such officers, respectively, or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Security” or “Securities” means, the Company’s renewable, unsecured, subordinated notes issued under this Indenture pursuant to the Registration Statement.

“Senior Debt” means any Indebtedness other than the Securities and any Pari Passu Debt (whether outstanding on the date hereof or thereafter created) incurred by the Company (including its subsidiaries) whether such Indebtedness is or is not specifically designated by the Company as being “Senior Debt” in its defining instruments. “Senior Debt” includes, without limitation, Indebtedness pursuant to that certain 364 Day Revolving Credit Agreement dated September 30, 2004, as amended, among the Company and LaSalle Bank National Association and any note or notes issued thereunder and all other “Obligations” as defined therein, in each case as any of the same may be amended, restated, extended, increased, refinanced or otherwise modified from time to time.

“Subscription Agreement” means a Subscription Agreement entered into by a Person under which such Person has committed to purchase certain Securities as identified thereby and which is in substantially the form filed as Exhibit 4.4 to the Registration Statement.

“Servicing Agent” means Sumner Harrington Ltd., a Minnesota corporation.

“TIA” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA.

“Total Permanent Disability” means a determination by a physician approved by the Company that the Holder of a Security who is a natural person, who was gainfully employed on a full time basis at the Issue Date of such Security is unable to work on a full time basis during the succeeding twenty-four months. For purposes of this definition, “working on a full time basis” shall mean working at least forty hours per week.

“Trustee” means Wells Fargo Bank, National Association, a national banking association, until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

“U.S. Government Obligations” means direct obligations of the United States of America, or any agency or instrumentality thereof for the payment of which the full faith and credit of the United States of America is pledged.

“Written Confirmation” means a written confirmation of the acceptance of a subscription for, or the transfer or pledge of, a Security or Securities in the form of a transaction statement executed or issued by the Company or its duly authorized Agent and delivered to the Holder of such Security or Securities with a copy to the Registrar and the Trustee, which is in substantially the form of Exhibit 4.3 to the Registration Statement.

5

Section 1.2Other Definitions.

Term	Defined in Section
“Bankruptcy Law”	6.1
“Custodian”	6.1
“Event of Default”	6.1
“Legal Holiday”	11.7
“Paying Agent”	2.3
“Payment Blockage Period”	10.3
“Payment Notice”	10.3
“Redemption Date”	2.1(f)
“Registrar”	2.3
“Registration Statement”	Introduction
“Repurchase Date”	3.2(d)
“Repurchase Penalty”	3.2(b)
“Securities Register”	2.3

Section 1.3Incorporation by Reference of Trust Indenture Act.

(a)Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

“indenture securities” means the Securities;

“indenture security holder” means any Holder of the Securities;

“indenture to be qualified” means this Indenture;

“indenture trustee” or “institutional trustee” means the Trustee;

“obligor” on the Securities means the Company or any successor obligor upon the Securities.

(b)All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a SEC rule under the TIA have the meanings so assigned to them.

Section 1.4Rules of Construction.

Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

6

(c) references to GAAP, as of any date, shall mean GAAP in effect in the United States as of such date; (d) “or” is not exclusive; (e) words in the singular include the plural, and in the plural include the singular; and (f) provisions apply to successive events and transactions.

ARTICLE II
THE SECURITIES

Section 2.1Security Terms; Amount; Accounts; Interest; Maturity.

(a)Unlimited Amount and Form of Security. The outstanding aggregate principal amount of Securities to be issued hereunder (absent an amendment to the Registration Statement) is limited to $50,000,000, provided, however, that the Company and the Trustee may, without the consent of any Holder, increase such aggregate principal amount of Securities which may be outstanding at any time. The Securities are unsecured obligations of the Company and shall be subordinate in right of payment to the Senior Debt of the Company as further described in Article X. The Securities are an obligation and liability of the Company, and not of any other Person, including, without limitation, any shareholder, director, Officer, employee, Affiliate or Agent of the Company. The Securities are not certificates of deposit or similar obligations of, and are not guaranteed or insured by, any depository institution, the Federal Deposit Insurance Corporation, any other governmental or private fund, any securities insurer or any other Person.

In the event issued in certificated form pursuant to Section 2.13(b): (i) the Securities, together with the Trustee’s certificate of authentication, shall be in substantially the form set forth as Exhibit A to this Indenture, with any appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities; (ii) any portion of the text of any Securities may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Securities; and (iii) the Securities may be subject to notations, legends or endorsements required by law, stock exchange rule, or agreements to which the Company is subject or usage.

(b)Book-Entry; Denominations; Term. Except as provided in Section 2.13(b), each Security shall neither be issued as, nor evidenced by, a promissory note or certificated security, but rather each Security shall be issued in book entry or uncertificated form, in which the record of beneficial ownership of each such Security shall be established and maintained as Accounts by the Registrar pursuant to Section 2.13. In connection with the issuance of each Security in book entry form in accordance with Section 2.13, each such Security shall be deemed to be represented in an uncertificated form that includes the same terms and provisions as those set forth in the form of Security in Exhibit A to this Indenture, and the related Account for each such Security shall be deemed to include these same terms and provisions.

7

Each Security shall be in such denominations as provided by this Indenture and as may be designated from time to time by the Company, but in no event in an original denomination less than $1,000. Separate purchases may not be cumulated to satisfy the minimum denomination requirements. Each Security shall have a term of three or six months, or one, two, three, four, five or ten years, as designated by the Holder at the time of purchase, subject to the Company’s acceptance thereof.

(c)Interest and Interest Payments. Each Security shall bear interest from and commencing on its Issue Date at such rate of interest as the Company shall determine from time to time, which rate may vary from Holder to Holder depending upon the aggregate principal amount of Securities held by such Holder and all immediate family members, as set forth in the Prospectus; provided, however, that the interest rate of each Security will be fixed for the term of such Security upon issuance, subject to change upon the renewal of the Security at maturity. Interest on the Securities will compound daily based on a calendar year consisting of 365 days and the Holder thereof may elect to have interest paid monthly, quarterly, semi-annually, annually, or upon maturity, which payments shall be made on the Payment Date, except that a Holder who elects monthly payments may select the day of the month on which to receive interest payments; provided that no interest shall be paid to a Holder until the expiration of the Holder’s rescission right under Section 2.2(b) and, if the monthly interest payment date selected by the Holder is within five Business Days of the Issue Date of the Security, the first interest payment will be made in the following month and will include all of the interest earned since the Issue Date. If the Holder does not elect an interest payment option, interest will be paid on the Maturity Date of the Note. A Holder may change this election once during the term of the Security, subject to the Company’s approval, which change shall be effective by the first Business Day following the 45^th day after receipt of written notice from the Holder requesting such change.

(d)Repayment Election at Maturity. The Company will send each Holder of a Security (existing as of the applicable Maturity Record Date) a Notice of Maturity approximately 15 but not less than 10 days prior to the Maturity Date of the Security held by such Holder reminding such Holder of the pending maturity of the Security and reminding the Holder that the automatic renewal provision described in Section 2.1(e) will take effect, unless (i) the Company states in the Notice of Maturity that it will not allow the Holder to renew the Security (in which case the Company shall pay the Holder principal and accrued interest with regard to the Security on the Maturity Date), or (ii) the Holder delivers a Repayment Election to the Company for the payment of all principal and interest due on the Security as of the Maturity Date so that such Repayment Election is received by the Company within 15 days after the Maturity Date. Such Notice of Maturity shall also state that payment of principal of a Security shall be made upon presentation of a Repayment Election requiring payment of such Security and shall specify the place where such Repayment Election may be presented. Upon or following the delivery of a Notice of Maturity for a Security, the Holder thereof, in their discretion, may deliver to the Company a Repayment Election; provided that such Repayment Election must be delivered to the Company no later than 15 days after the Maturity Date. If a Holder delivers a Repayment Election requiring repayment on or prior to the 15th day following the Maturity Date, no interest will accrue after the Maturity Date and the

8

Holder will be sent payment upon the later of the Maturity Date or five days following the date the Company receives such Repayment Election from the Holder; provided that if the Company has previously paid interest to the Holder for periods after the Maturity Date, such interest shall be deducted from such payment.

The Notice of Maturity also shall state that the Holder may, and the Holder may, submit a Repayment Election for the repayment of the maturing Security and use all or a portion of the proceeds thereof to purchase a new Security with a different term. To exercise this option, the Holder shall complete a new Subscription Agreement for the new Security and send it along with the Holder’s Repayment Election to the Company. The Issue Date of the new Security shall be the Maturity Date of the maturing Security. Any proceeds from the maturing Security that are not applied to the purchase of the new Security shall be sent to the Holder of such maturing Security.

If a Security pays interest only on the Maturity Date, then the Notice of Maturity also shall state that the Holder may, and the Holder may, submit an “interest-only” Repayment Election in which the Holder requires the payment of the accrued interest that such Holder has earned on the maturing Security up to the Maturity Date and allows the principal amount of such maturing Security to renew in the manner provided in subsection (e) below.

(e)Automatic Renewal. If a Holder of such Security has not delivered a Repayment Election for repayment of the Security on or prior to the 15^th day following the Maturity Date, and the Company did not notify the Holder of its intention to repay the Security in the Notice of Maturity, then such maturing Security shall be extended automatically for an additional term equal to the original term, and shall be deemed to be renewed by the Holder and the Company as of the Maturity Date of such maturing Security. A maturing Security will continue to renew as described herein absent a Redemption Notice or Repurchase Request by the Holder or an indication by the Company that it will repay and not allow the Security to be renewed in the Notice of Maturity. Interest on the renewed Security shall accrue from the Issue Date thereof, which is the first day of such renewed term (i.e., the Maturity Date of the maturing Security). Such renewed Security will be deemed to have the identical terms and provisions of the maturing Security, including provisions relating to payment, except that the interest rate payable during the term of the renewed Security shall be the interest rate which is being offered by the Company on other Securities having the same term and to Persons holding the same aggregate principal amount of Securities (including holdings of immediate family members, as described in the Prospectus) as of the Issue Date of such renewal. If other Securities having the same term are not then being issued on the Issue Date of such renewal, the interest rate upon renewal will be the rate specified by the Company on or before the Maturity Date of such Security, or the then existing rate of the Security being renewed if no such rate is specified. If the maturing Security pays interest only on the Maturity Date, then, except as provided in subsection (d) above, all accrued interest thereon shall be added to the principal amount of the renewed Security upon renewal.

9

Notwithstanding the foregoing or anything in Section 2.1(d) to the contrary, if a Repayment Election is given or is due at a time when the Company has determined that a post-effective amendment to the Registration Statement was required but not yet effective, the Company will provide notice to the Holder (including a copy of the post-effective amendment to the Prospectus), and the Holder will be entitled to rescind his or her Repayment Election, if made, or to make a Repayment Election, if not previously made, by delivering a written rescission of the earlier Repayment Election, or a Repayment Election, as the case may be, to the Company no later than 10 days following the postmark date on the Company’s notice of such post-effective amendment.

(f)Redemption Notice from Company. Pursuant to Section 3.1, each Security shall be redeemable by the Company at any time, without penalty, upon the delivery of a Redemption Notice to the Holder of such Security. Such Redemption Notice shall set forth a date for the redemption of such Security (the “Redemption Date”) that is at least 30 days after the date that such Redemption Notice has been delivered by the Company to the Holder hereunder.

(g)Repurchase Request by Holder. Pursuant to and subject to the limitations set forth in Section 3.2, each Security shall be subject to repurchase at the request of the Holder upon the delivery of a Repurchase Request to the Company. Subject to the limitations on repurchase and the Repurchase Penalties described in Section 3.2, the payment of interest and principal due upon the repurchase of a Security shall be made to the Holder on a Repurchase Date that is within 10 days of the delivery of such Repurchase Request to the Company or, in the case of a repurchase of a Security in connection with the death or Total Permanent Disability of a Holder, a Repurchase Date that is within 10 days after the Company’s receipt of satisfactory establishment or such Holder’s death or Total Permanent Disability.

(h)Terms of Securities. The terms and provisions contained in the Securities shall constitute, and are hereby expressly made, a part of this Indenture and to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, and the Holders by accepting the Securities, expressly agree to such terms and provisions and to be bound hereby and thereby. In case of a conflict, the provisions of this Indenture shall control.

Section 2.2Written Confirmation; Rejection; Rescission.

(a)Except with respect to an automatically renewed Security pursuant to Section 2.1(e), a Security shall not be validly issued to a Person until the following have occurred:  (i) such Person has remitted good and available funds for the full principal amount of such Security to the Company or a duly authorized Agent of the Company; (ii) a Written Confirmation of the acceptance of the subscription is sent by the Company or a duly authorized Agent of the Company to such Person; and (iii) an Account is established by the Registrar in the name of such Person as the Holder of such Security pursuant to Section 2.13 hereof. The Company or a duly authorized Agent of the Company, in their sole discretion, may reject any subscription from a Person for the purchase of Securities, in which event any funds received from such Person pursuant to

10

such subscription shall be promptly returned to such Person. No interest shall be paid on any funds returned on a rejected subscription.

(b)For a period of five Business Days following the mailing by the Company of (i) a Written Confirmation that evidences the valid issuance of a Security at the time of original purchase (but not upon transfer or automatic renewal of a Security), or (ii) notice from the Company that a Holder’s purchase of a Security occurred at a time when a post-effective amendment to the Registration Statement was required but not yet effective (which notice shall be accompanied by a copy of the post-effective amendment to the Prospectus), such Holder shall have the right to rescind the Security and receive repayment of the principal by presenting a written request for such rescission to the Company. Such written request for rescission (A) if personally delivered or delivered via facsimile or electronic transmission, must be received by the Company on or prior to the 5th Business Day following the mailing of such Written Confirmation or post-effective amendment notice by the Company or (B) if mailed must be postmarked on or before the 5th Business Day following the mailing by the Company of such Written Confirmation or post-effective amendment notice. Repayment of the principal shall be made within 10 days of the Company’s receipt of such request from the Holder. No interest shall be paid on any such rescinded Security.

Section 2.3Registrar and Paying Agent.

(a)The Company shall maintain (i) an office or agency where Securities may be presented for registration of transfer or for exchange (“Registrar”) and (ii) an office or agency where Securities may be presented for payment (“Paying Agent”). The Registrar shall keep a register of the Securities and of their transfer and exchange, which shall include the name, address for notices and Payment Account of the Holder and the payment election information, principal amount, term and interest rate for each Security (the “Securities Register”). The Company may appoint one or more co-registrars and one or more additional paying agents. The term “Registrar” includes any co-registrar, and the term “Paying Agent” includes any additional paying agent. The Company may change any Paying Agent or Registrar without prior notice to any Holder; provided that the Company shall promptly notify the Holders and the Trustee of the name and address of any Agent not a party to this Indenture. The Company may act as Paying Agent and/or Registrar. In the event the Company uses any Agent other than the Company or the Trustee, the Company shall enter into an appropriate agency agreement with such Agent, which agreement shall incorporate the provisions of the TIA or provide that the duties performed thereunder are subject to and governed by the provisions of this Indenture. The agreement shall implement or be subject to the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such, and shall be entitled to appropriate compensation in accordance with Section 7.7 hereof. In no event shall the Trustee be liable for the acts or omissions of any predecessor Paying Agent or Registrar.

(b)Pursuant to Section 2.15, the Company hereby appoints the Servicing Agent as the initial Registrar and as agent for service of notices and demands in connection with

11

the Securities. The Servicing Agent shall act as Registrar and agent for service of notices and demands in connection with the Securities until such time as the Company gives the Trustee written notice to the contrary. Also pursuant to Section 2.15, the Company hereby appoints Wells Fargo Bank, National Association as the initial Paying Agent.

Section 2.4Paying Agent to Hold Money in Trust.

Prior to each Payment Date, the Company shall deposit with the Paying Agent sufficient funds to pay principal and interest then so becoming due and payable in cash. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal or interest on the Securities, and will notify the Trustee promptly in writing of any default by the Company in making any such payment. While any such default continues, the Trustee shall require a Paying Agent (if other than the Company) to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company) shall have no further liability for the money delivered to the Trustee. If the Company acts as Paying Agent, then the Company shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. The Company shall notify the Trustee in writing at least five days before the Payment Date of the name and address of the Paying Agent if a person other than the Trustee is named Paying Agent at any time or from time to time.

Section 2.5List of Holders.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders and shall otherwise comply with TIA § 312(a). If the Trustee is not the Registrar, the Registrar shall furnish to the Trustee within 10 days after the end of each fiscal quarter during the term of this Indenture and at such other times as the Trustee may request in writing, a copy of the current Securities Register as of such date as the Trustee may reasonably require and the Company shall otherwise comply with TIA § 312(a).

Section 2.6Transfer and Exchange.

(a)The Securities are not negotiable instruments and cannot be transferred without the prior written consent of the Company (which consent shall not be unreasonably withheld). Requests to the Registrar for the transfer of any Security shall be:

(i)made to the Registrar in writing on a form supplied by the Registrar;

(ii)duly executed by the Holder of the Security, as reflected on the Registrar’s records as of the date of receipt of such transfer request, or such Holder’s attorney duly authorized in writing;

12

(iii)accompanied by the written consent of the Company to the transfer (which consent may not be unreasonably withheld); and

(iv)if requested by the Company or the Registrar, an opinion of Holder’s counsel (which counsel shall be reasonably acceptable to the requesting party) that the transfer does not violate any applicable securities laws and/or a signature guarantee.

(b)Upon transfer of a Security, the Company, or the Registrar on behalf of the Company, will provide the new registered owner of the Security with a Written Confirmation that will evidence the transfer of the Security in the Securities Register and will establish a corresponding Account.

(c)The Company or the Registrar may assess reasonable service charges to a Holder for any registration or transfer or exchange, and the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange pursuant to Section 9.5 hereof).

(d)With respect to the relevant Regular Record Date, the Company shall treat the individual or entity listed on each Account maintained by the Registrar as the absolute owner of the Security represented thereby for purposes of receiving payments thereon and for all other purposes whatsoever.

Section 2.7Payment of Principal and Interest; Principal and Interest Rights Preserved.

(a)Each Security shall accrue interest at the rate specified for such Security in the Securities Register and such interest shall be payable on each Payment Date following the Issue Date for such Security, until the principal thereof becomes due and payable. Any installment of interest payable on a Security that is caused to be punctually paid or duly provided for by the Company on the applicable Payment Date shall be paid to the Holder in whose name such Security is registered in the Securities Register on the applicable Regular Record Date with respect to the Securities outstanding, by electronic deposit to such Holder’s Payment Account as it appears in the Securities Register on such Regular Record Date. The payment of any interest payable in connection with the payment of any principal payable with respect to such Security on a Maturity Date shall be payable as provided below. In the event any payments made by electronic deposit are not accepted into the Holder’s Payment Account for any reason, such funds shall be held in accordance with Sections 2.4 and 8.3 hereof. Any installment of interest not punctually paid or duly provided for shall be payable in the manner and to the Holders as specified in Section 2.10 hereof.

(b)Each of the Securities shall have stated maturities of principal as shall be indicated on such Securities or in the Written Confirmation and as set forth in the Securities Register. The principal of each Security shall be paid in full as of the Maturity Date thereof pursuant to Section 2.1(d), unless the term of such Security is renewed pursuant to Section 2.1(e) hereof or such Security becomes due and payable at an earlier

13

date by acceleration, redemption, repurchase or otherwise. Interest on each Security shall be due and payable on each Payment Date at the interest rate applicable to such Security for the Interest Accrual Period related to such Security and such Payment Date. Notwithstanding any of the foregoing provisions with respect to payments of principal of and interest on the Securities, if the Securities have become or been declared due and payable following an Event of Default, then payments of principal of and interest on the Securities shall be made in accordance with Article VI hereof. If definitive, certificated securities are issued, then the principal payment made on any Security on any Maturity Date (or the Redemption Price or the Repurchase Price of any Security required to be redeemed or repurchased, respectively), and any accrued interest thereon, shall be payable on or after the Maturity Date, Redemption Date or the Repurchase Date therefore at the office or agency of the Company maintained by it for such purpose pursuant to Section 2.3 hereof or at the office of any Paying Agent for such Security.

(c)All computations of interest due with respect to any Security shall be made, unless otherwise specified in the Security, based upon a 365-day year.

Section 2.8Outstanding Securities.

(a)The Securities outstanding at any time are the outstanding principal balances of all Accounts representing the Securities maintained by the Company or such other entity as the Company designated as Registrar.

(b)If the principal amount of any Security is considered paid under Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.

(c)Subject to Section 2.9 hereof, a Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security.

Section 2.9Treasury Securities.

In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or any Affiliate of the Company shall be considered as though not outstanding, except that for purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities that a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded.

Section 2.10Defaulted Interest.

If the Company defaults in a payment of interest on any Security, it shall pay the defaulted interest plus, to the extent lawful, any interest payable on the defaulted interest, to the Holder of such Security on a subsequent special Payment Date, which date shall be at the earliest practicable date, but in all events within 15 days following the scheduled Payment Date of the defaulted interest, in each case at the rate provided in the Security. The Regular Record Date for the scheduled Payment Date shall be the record date for the special Payment Date. Prior to any such special Payment Date, the Company (or the Trustee, in the name of and at the expense of

14

the Company) shall mail to Holder(s) a notice that states the special Payment Date and the amount of such interest to be paid.

Section 2.11Temporary Notes.

If Securities are issued in certificated form in the limited circumstances contemplated under Section 2.13(b), pending the preparation of definitive Securities, the Company may execute, and direct that the Trustee authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities, in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities.

If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Registrar without charge to the Holder.

Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities.

Section 2.12Execution, Authentication And Delivery.

(a)Subject to subsection (b) below, the Securities shall be executed on behalf of the Company by an Officer and attested by its Secretary or Assistant Secretary. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.

At the time of and from time to time after the execution and delivery of this Indenture, the Company will deliver definitive or certificated forms of Securities, if any, executed by the Company to the Trustee for authentication, together with a direction from the Company for the authentication and delivery of such Securities. The Trustee in accordance with such direction from the Company shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Securities issued hereunder shall be dated as of their Issue Date.

No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security an authentication executed by or on behalf of the Trustee by manual signature, and such authentication upon any Security shall be conclusive evidence, and the only evidence, that such Security

15

has been duly authenticated and delivered hereunder and is entitled to the benefits of the Indenture.

(b)Notwithstanding the preceding subsection (a) of this Section, in connection with the issuance of each Security in book-entry form pursuant to Section 2.13, each Security shall be deemed to be executed and attested to by the Company and authenticated and delivered by the Trustee, in the same manner as provided in the preceding subsection (a), upon the delivery by the Company (or the Company’s duly authorized Agent) to the Holder of such Security of a Written Confirmation, with a copy of such Written Confirmation delivered to the Trustee, and the establishment by the Registrar of an Account for such Security in the name of the Holder pursuant to Section 2.13 hereof.

Section 2.13Book-Entry Registration.

(a)The Registrar shall maintain a book-entry registration and transfer system through the establishment and maintenance of Accounts for the benefit of Holders of Securities as the sole method of recording the ownership and transfer of ownership interests in such Securities. The registered owners of the Accounts established by the Registrar in connection with the purchase or transfer of the Securities shall be deemed to be the Holders of the Securities outstanding for all purposes under this Indenture. The Company (or its duly authorized Agent) shall promptly notify the Registrar of the acceptance of a subscriber’s order to purchase a Security by providing a copy of the accepted Subscription Agreement and the related Written Confirmation, and upon receipt of such notices, the Registrar shall establish an Account for such Security by recording a credit to its book-entry registration and transfer system to the Account of the related Holder of such Security for the principal amount of such Security owned by such Holder and issue a Written Confirmation to the Holder, with a copy being delivered to the Trustee, on behalf of the Company. The Registrar shall make appropriate credit and debit entries within each Account to record all of the applicable actions under this Indenture that relate to the ownership of the related Security and issue Written Confirmations to the related Holders as set forth herein, with copies being delivered to the Trustee, on behalf of the Company. For example, the total amount of any principal and/or interest due and payable to the Holders of the Accounts maintained by the Registrar as provided in this Indenture shall be credited to such Accounts by the Registrar within the time frames provided in this Indenture, and the amount of any payments of principal and/or interest distributed to the Holders of the Accounts as provided in this Indenture shall be debited to such Accounts by the Registrar. The Trustee may review the book-entry registration and transfer system as it deems necessary to ensure the Registrar’s compliance with the terms of the Indenture.

(b)Book-entry Accounts evidencing ownership of the Securities shall be exchangeable for definitive or certificated forms of Securities in denominations of $1,000 and any amount in excess thereof and fully registered in the names as each Holder directs only if (i) the Company at its option advises the Trustee and the Registrar in writing of its election to terminate the book-entry system, or (ii) after the occurrence of any Event of Default, Holders of a majority of the aggregate outstanding principal amount of the

16

Securities (as determined based upon the latest quarterly statement provided to the Trustee pursuant to Section 2.5 hereof) advise the Trustee in writing that the continuation of the book-entry system is no longer in the best interests of such Holders and the Trustee notifies all Holders of the Securities, of such event and the availability of certificated forms of securities to the Holders of Securities.

Section 2.14Initial and Periodic Statements.

(a)Subject to the rejection of a Subscription Agreement pursuant to Section 2.2(a), the Registrar shall send Written Confirmations to initial purchasers, registered owners, registered pledgees, former registered owners and former pledgees, within two Business Days of its receipt of proper notice regarding the purchase, transfer or pledge of a Security, with copies of such Written Confirmations being delivered to the Trustee, on behalf of the Company.

(b)The Registrar shall send each Holder of a Security (and each registered pledgee) via U.S. mail not later than 10 Business Days after each quarter end in which such Holder had an outstanding balance in such Holder’s Account, a statement which indicates as of the quarter end preceding the mailing: (i) the balance of such Account; (ii) interest credited for the period; (iii) repayments, redemptions or repurchases, if any, during the period; and (iv) the interest rates paid on the Securities in such Account during the period. The Registrar shall provide additional statements as the Holders or registered pledgees of the Securities may reasonably request from time to time. The Registrar may charge such Holders or pledgees requesting such statements a fee to cover the charges incurred by the Registrar in providing such additional statements.

Section 2.15Appointment of Agents.

The Company may from time to time engage Agents to perform its obligations and exercise its rights and discretion under the terms of this Indenture. In each such case, the Company will provide the Trustee with a copy of each agreement under which any such Agent is engaged and the name, address, telephone number and capacity of the Agent appointed. If any such Agent shall resign, or such Agent’s engagement is terminated by the Company, subsequent to the Agent’s appointment by the Company under this Section 2.15, the Company shall promptly notify the Trustee of such resignation or termination, along with the name, address, telephone number and capacity of any successor Agent. Notwithstanding any engagement of an Agent hereunder, the Company shall remain obligated to fulfill each of its obligations under this Indenture.

ARTICLE III
REDEMPTION AND REPURCHASE

Section 3.1Redemption of Securities at the Company’s Election.

(a)The Company may redeem, in whole or in part, any Security prior to the scheduled Maturity Date of the Security by providing pursuant to Section 2.1(f) a Redemption Notice to the Holder thereof listed on the records maintained by the Registrar, which notice shall include the Redemption Date and the Redemption Price to

17

be paid to the Holder on the Redemption Date. No interest shall accrue on a Security to be redeemed under this Section 3.1 for any period of time after the Redemption Date for such Security, provided that the Company or the Paying Agent has timely tendered the Redemption Price to the Holder.

(b)The Company shall have no mandatory redemption or sinking fund obligations with respect to any of the Securities.

(c)In its sole discretion, the Company may offer certain Holders the ability to extend the maturity of an existing Security through the redemption of such Security and the issuance of a new Security. This redemption option shall not be subject to the 30 day notice of redemption described in Section 2.1(f).

Section 3.2Repurchase of Securities at the Holder’s Request.

(a)Repurchase Upon Death or Disability. Subject to subsection (c) below, within 45 days of the death or Total Permanent Disability of a Holder who is a natural person (including Securities held in an individual retirement account), the estate of such Holder (in the event of death) or such Holder (in the event of Total Permanent Disability) may request that the Company repurchase, in whole and not in part, without penalty, the Security held by such Holder, by delivering to the Company a Repurchase Request. If a Security is held jointly by natural persons who are legally married, then a Repurchase Request may be made when either registered Holder of such Security dies or becomes subject to a Total Permanent Disability, the surviving Holder or the disabled Holder may request that the Company repurchase in whole and not in part, without penalty, such Security as jointly held by the Holders by delivering to the Company a Repurchase Request. In the event a Security is held jointly by two or more natural persons that are not legally married, neither of these persons shall have the right to request that the Company repurchase such Security unless all joint holders of such Security have either died or suffered a Total Permanent Disability. If the Security is held by a Holder who is not a natural person, such as a trust, partnership, corporation or other similar entity, the right to request repurchase upon death or disability does not apply.

(b)Repurchase Upon Holder’s Election. Subject to subsection (c) below, a Holder may request the Company to repurchase, in whole and not in part, the Security held by such Holder by delivering a Repurchase Request to the Company. Any such requested repurchase shall be made only at the Company’s discretion and, if made, will be subject to an early Repurchase Penalty to be deducted from the payment of such Holder’s Repurchase Price on the Repurchase Date. The early repurchase penalty (the “Repurchase Penalty”) shall equal the following:  (i) with respect to a Security with a three month maturity, the interest accrued on a simple interest basis on such Security from the Issue Date to the Repurchase Date at the existing interest rate thereof, but not to exceed three months of simple interest on such Security, or (ii) with respect to a Security with a maturity of six months or longer, the interest accrued on a simple interest basis on such Security from the Issue Date to the Repurchase Date at the existing interest rate thereof, but not to exceed six months of simple interest on such Security.

18

(c)Limitation on Repurchases. The Company will only be required to repurchase Securities for which Repurchase Requests have been received pursuant to paragraph (a) above, and, if accepted by the Company, paragraph (b) above, to the extent that the aggregate Repurchase Price for all Securities for which Repurchase Requests are then outstanding in any calendar quarter would not exceed the greater of (i) two percent of the aggregate outstanding principal balance of all Securities as of the last day of the previous calendar quarter or (ii) $1 million. For the purposes of applying such limits on the aggregate Repurchase Price for outstanding Repurchase Requests, such outstanding Repurchase Requests will be honored in the order of the date received or, in the case of Repurchase Requests made in connection with a Holder’s death or Total Permanent Disability, the later of the date received or the date such death or Total Permanent Disability is established to the reasonable satisfaction of the Company, and to the extent any Repurchase Request is not paid in the quarter received or so established due to such limitations, it will be honored in the subsequent quarter, to the extent possible, subject to the applicability of such limits on aggregate Repurchase Requests in each subsequent quarter. For the avoidance of doubt, in the event that the Company would otherwise be required to repurchase a Security hereunder in a given quarter by reason of the priority of the Repurchase Request (as established in this Section) but for the fact that the Repurchase Price exceeds the amount remaining under the forgoing limitations (after giving effect to all other Repurchase Requests having priority during such quarter), the Company may, at its option, effect a partial repurchase of such Security, up to the portion of the Repurchase Price covered by the amount remaining, and carry the Repurchase Request for the balance of such Security forward as provided above.

(d)Repurchase Date. To the extent a Security for which a Repurchase Request has been received during the then current calendar quarter is determined not to be subject to the limitation in subsection (c) above and thus, will be repurchased during the current quarter, then the Company shall designate a date for the repurchase of such Security (the “Repurchase Date”), which date shall not be more than 10 days after the Company’s receipt of the Repurchase Request or, in the case of a Repurchase Request following the death or Total Permanent Disability of the Holder, 10 days after the Company’s receipt of satisfactory establishment of such Holder’s death or Total Permanent Disability. On the Repurchase Date, the Company shall pay the Repurchase Price to the Holder (or the estate of the Holder, in the case of a request following death) in accordance with Section 2.7. With respect to a Security for which a Repurchase Request has been received during a prior calendar quarter and for which the Repurchase Price was not paid during such prior calendar quarter, but rather the Repurchase Request has been carried over to and is still outstanding in the current calendar quarter (because of the limitation in subsection (c) above), the Company shall designate a Repurchase Date not later than the tenth (10^th) day after the start of such calendar quarter, unless subsection (c) is again applicable, in which case such obligation shall be met not later than the tenth (10^th) day after the start of the next calendar quarter during which such limitation is no longer applicable. No interest shall accrue on a Security to be repurchased under this Section 3.2 for any period of time on or after the Repurchase Date for such Security, provided that the Company or the Paying Agent has timely tendered the Repurchase Price to the Holder or the estate of the Holder, as the case may be.

19

(e)Waiver and Modification of Repurchase Policies. The Company may waive or reduce any early Repurchase Penalty in its sole discretion and may modify at any time its policy on the repurchase of Securities at the request of Holders; provided that no such modification shall adversely affect the rights of Holders to the repurchase of Securities for which Repurchase Requests are then outstanding.

ARTICLE IV
COVENANTS

Section 4.1Payment of Securities.

(a)Subject to Article X, the Company shall duly pay the principal of and interest on each Security on the dates and in the manner provided under this Indenture. Principal and interest (to the extent such interest is paid in cash) shall be considered paid on the date due if the Paying Agent, if other than the Company, holds, at least one Business Day before that date, money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal and interest then due; provided, however, that principal and interest shall not be considered paid within the meaning of this Section 4.1 if money is held by the Paying Agent for the benefit of holders of Senior Debt pursuant to the provisions of Article X hereof. Such Paying Agent shall return to the Company, no later than five days following the date of payment, any money (including accrued interest, if any) that exceeds such amount of principal and interest paid on the Securities in accordance with this Section 4.1.

(b)Subject to Article X, to the extent lawful, the Company shall pay interest (including Post-Petition Interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate borne by the Securities, compounded semi-annually; it shall pay interest (including Post-Petition Interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate, compounded semi-annually.

Section 4.2Maintenance of Office or Agency.

(a)The Company will maintain an office or agency (which may be an office of the Trustee, Registrar or co-registrar) where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

(b)The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give

20

prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

(c)The Company hereby designates its office at 4200 Dahlberg Drive, Suite 100, Minneapolis, Minnesota 55422-4837, as one such office or agency of the Company in accordance with Section 2.3.

Section 4.3SEC Reports and Other Reports.

(a)The Company shall provide to the Trustee, within 45 days after filing with the SEC, paper copies or, if such documents are readily available on the SEC’s website, notification of the availability of, the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Company shall otherwise comply with the periodic reporting requirements as set forth in TIA § 314(a), and the Company shall file with the Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations. Notwithstanding anything to the contrary herein, the Trustee shall have no duty to review such documents for purposes of determining compliance with any provisions of the Indenture.

(b)The Company, or such other entity as the Company shall designate as Registrar, shall provide the Trustee at intervals of not more than six months with management reports which provide the Trustee with such information regarding the Accounts maintained by the Company for the benefit of the Holders of the Securities as the Trustee may reasonably request which information shall include at least the following for the relevant time interval from the date of the immediately preceding report: (i) the outstanding balance of each Account at the end of the period; (ii) interest credited for the period; (iii) repayments, repurchases and redemptions, if any, made during the period; and (iv) the interest rate paid on each Security in such Account maintained by the Registrar during the period.

(c)Notwithstanding any provision of this Indenture to the contrary, the Company shall not have any obligation to maintain any of its securities (other than the Securities hereunder), including without limitation its common stock, as securities registered under the Exchange Act or the Securities Act, as amended, or as securities listed and publicly traded on any national securities exchange.

Section 4.4Compliance Certificate.

(a)The Company shall deliver to the Trustee, within 120 days after the end of each Fiscal Year, beginning in [2006], an Officers’ Certificate stating that a review of the activities of the Company during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has

21

kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of their knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of their knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Securities are prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto.

(b)So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the annual financial statements delivered pursuant to Section 4.3 above shall be accompanied by a written statement of the Company’s independent public accountants that in making the examination necessary for certification of such financial statements nothing has come to their attention which would lead them to believe that the Company has violated the provisions of Section 4.1 of this Indenture or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation.

(c)The Company will, so long as any of the Securities are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers’ Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.

Section 4.5Stay, Extension and Usury Laws.

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all beneficial advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.6Liquidation.

The Board of Directors or the stockholders of the Company shall not adopt a plan of liquidation that provides for, contemplates or the effectuation of which is preceded by (a) the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company, otherwise than substantially as an entirety (Section 5.1 of this Indenture being the Section hereof which governs any such sale, lease, conveyance or other disposition substantially as an entirety), and (b) the distribution of all or substantially all of the proceeds of such sale,

22

lease, conveyance or other disposition and of the remaining assets of the Company to the holders of capital stock of the Company, unless the Company, prior to making any liquidating distribution pursuant to such plan, makes provision for the satisfaction of the Company’s Obligations hereunder and under the Securities as to the payment of principal and interest.

Section 4.7Financial Covenants.

The Company covenants that, so long as any of the Securities are outstanding, the Company will maintain a positive net worth, which includes all equity held by the Company’s common and preferred stockholders and any subordinated debt of the Company that is subordinate to these Securities.

Section 4.8Restrictions on Dividends.

(a)The Company covenants that, so long as any of the Securities are outstanding, it shall not declare or pay any dividends or other payments of cash or other property to its common or preferred stockholders (other than any dividend payable in shares of or rights to acquire shares of the Company’s capital stock on a pro rata basis to all stockholders), unless no Default or Event of Default with respect to the Securities then exists or would exist immediately following the declaration or payment of such dividend or other payment.

(b)The Company covenants that, so long as any of the Securities are outstanding, it shall not guarantee, endorse or otherwise become liable for any obligations of any of the Company’s Affiliates.

Section 4.9Securitization Transactions and Additional Indebtedness.

Except as otherwise provided in Section 4.8(b), the Company shall not be prohibited, restricted or otherwise limited from incurring or refinancing any Indebtedness subsequent to the date hereof, which Indebtedness will have such terms and provisions as the Company and the lender thereof may agree upon without any restriction or limitation hereunder and such Indebtedness will likely be senior in right of payment to the Securities.

ARTICLE V
SUCCESSORS

Section 5.1When the Company May Merge, etc.

(a)The Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation, limited liability company or limited partnership organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person

23

formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made assumes all the obligations of the Company pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee, under the Securities and this Indenture; and (iii) immediately after such transaction no Default or Event of Default exists.

(b)The Company shall deliver to the Trustee prior to the consummation of the proposed transaction an Officers’ Certificate to the foregoing effect and an Opinion of Counsel stating that the proposed transaction and such supplemental indenture comply with this Indenture. The Trustee shall be entitled to conclusively rely upon such Officers’ Certificate and Opinion of Counsel.

Section 5.2Successor Entity Substituted.

Upon any consolidation or merger, or any sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.1, the successor entity or Person formed by such consolidation or into or with which the Company, is merged or to which such sale, lease, conveyance or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor entity or Person has been named as the Company herein, and upon such succession and substitution, the Company shall be released from all of its obligations and liabilities under this Indenture and the Securities.

ARTICLE VI
DEFAULTS AND REMEDIES

Section 6.1Events of Default.

An “Event of Default” occurs if:

(a)the Company fails to pay interest on a Security when the same becomes due and payable and such failure continues for a period of 15 days, whether or not such payment is prohibited by the provisions of Article X hereof;

(b)the Company fails to pay the principal amount of any Security when the same becomes due and payable on any Payment Date, and such failure continues for a period of 10 days, whether or not prohibited by the provisions of Article X hereof;

(c)the Company fails to observe or perform any material covenant, condition or agreement on the part of the Company under this Indenture or the breach by the Company of any material representation or warranty of the Company under this Indenture, and such failure or breach continues unremedied for a period of 30 days after the Company’s receipt of written notice of such failure or breach;

(d)the Company defaults in any other material financial obligation of the Company and such default continues unremedied for a period of 30 days after the Company’s receipt of written notice of such default;

24

(e)the Company pursuant to or within the meaning of any Bankruptcy Law (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a custodian of it or for all or substantially all of its property; (iv) makes a general assignment for the benefit of its creditors; or (v) admits in writing its inability to pay debts as the same become due; or

(f)a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against the Company in an involuntary case; (ii) appoints a custodian of the Company or for all or substantially all of its property; (iii) orders the liquidation of the Company, and in each case the order or decree remains unstayed and in effect for 120 consecutive days.

The term “Bankruptcy Law” means Title 11 of the U.S. Code or any similar federal or state law for the relief of debtors. The term “custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

A Default under clause (c) of this Section 6.1 (except for a Default with respect to Section 4.6 or 5.1) is not an Event of Default until the Trustee or the Holders of at least a majority in principal amount of the then outstanding Securities notify the Company in writing of the Default and the Company does not cure the Default or such Default is not waived within 30 days after receipt of the notice pursuant to Section 6.4. The notice must specify the Default, demand that it be remedied and state that the notice is a “Notice of Default.”

Section 6.2Acceleration.

If an Event of Default (other than an Event of Default specified in clauses (e) or (f) of Section 6.1) occurs and is continuing, the Trustee by notice to the Company or the Holders of at least a majority in principal amount of the then outstanding Securities by written notice to the Company and the Trustee may declare the unpaid principal of and any accrued interest on all the Securities to be due and payable. Upon such declaration, all unpaid principal of and accrued interest on all Securities shall be due and payable immediately; provided, however, that if any Indebtedness or Obligation is outstanding pursuant to, or with respect to, the Senior Debt, such a declaration of acceleration by the Holders shall not become effective until the earlier of (i) the day which is five Business Days after the receipt by each of the Company and the holders of Senior Debt of such written notice of acceleration or (ii) the date of acceleration of any Indebtedness under any Senior Debt; and provided, further, that, so long as any Senior Debt is outstanding, any such declaration by the Trustee or the Holders shall not become effective if any period during which the Company is not permitted to make payment on account of the Securities pursuant to Section 10.3 is then in effect. If an Event of Default specified in clause (e) or (f) of Section 6.1 occurs, all unpaid principal of and accrued interest on all Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

Section 6.3Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may, after a declaration of acceleration under Section 6.2 above, pursue any available remedy to collect the payment of

25

principal or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.

Section 6.4Waiver of Past Defaults.

Holders of a majority in principal amount of the then outstanding Securities by notice to the Trustee may, on behalf of the Holders of all Securities, waive any existing Default or Event of Default and its consequences under this Indenture, including without limitation a rescission of an acceleration pursuant to Section 6.2, except for a continuing Default or Event of Default in the payment of interest on or the principal of any Security held by a non-consenting Holder, or except for a waiver that would conflict with any judgment or decree. Upon actual receipt of any such notice of waiver by a Responsible Officer of the Trustee, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.

Section 6.5Control by Majority.

The Holders of a majority in principal amount of the then outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it, provided, that indemnification for the Trustee’s fees and expenses, in a form reasonably satisfactory to the Trustee, shall have been provided. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of other Holders, or that may involve the Trustee in personal liability.

Section 6.6Limitation on Suits.

A Holder may pursue a remedy with respect to this Indenture only if:

(a)the Holder gives to the Trustee written notice of a continuing Event of Default;

(b)the Holders of at least a majority in principal amount of the then outstanding Securities make a written request to the Trustee to pursue the remedy;

(c)such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense;

(d)the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and

26

(e)during such 60 day period the Holders of a majority in principal amount of the then outstanding Securities do not give the Trustee a direction inconsistent with the request.

A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

Section 6.7Rights of Holders to Receive Payment.

Notwithstanding any other provision of this Indenture, but subject to Article X hereof, the right of any Holder of a Security to receive payment of principal and interest on the Security, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder.

Section 6.8Collection Suit by Trustee.

If an Event of Default specified in Section 6.1(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal and interest remaining unpaid on the Securities and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.9Trustee May File Proofs of Claim.

The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties which the Holders of the Securities may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder

27

thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10Priorities.

If the Trustee collects any money pursuant to this Article, it shall, subject to the provisions of Article X hereof, pay out the money in the following order:

(a)First: to the Trustee, its agents and attorneys for amounts due under Section 7.7, including payment of all compensation, expenses and liabilities incurred, and all advances made, if any, by the Trustee and the costs and expenses of collection;

(b)Second: to holders of Senior Debt to the extent required by Article X hereof;

(c)Third: to (i) Holders for amounts due and unpaid on the Securities for principal and interest, and (ii) holders of Pari Passu Debt for amounts due and unpaid on such Pari Passu Debt for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities and/or such Pari Passu Debt for principal and interest, respectively; and

(d)Fourth: to the Company or to such party as a court of competent jurisdiction shall direct.

The Trustee may fix a record date and payment date for any payment to Holders.

Section 6.11Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7, or a suit by Holders of more than ten percent (10%) in principal amount of the then outstanding Securities.

ARTICLE VII
TRUSTEE

Section 7.1Duties of Trustee.

(a)If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

(b)Except during the continuance of an Event of Default:

28

(i)The duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee.

(ii)In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon resolutions, statements, reports, documents, orders, certificates, opinions or other instruments furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any of the above that are specifically required to be furnished to the Trustee pursuant to this Indenture, the Trustee shall examine them to determine whether they substantially conform to the requirements of this Indenture.

(c)The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i)This paragraph does not limit the effect of paragraph (b)(i) and (b)(ii) of this Section.

(ii)The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proven that the Trustee was negligent in ascertaining the pertinent facts.

(iii)The Trustee shall not be liable to the Holders with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5.

(d)Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section.

(e)No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense.

(f)The Trustee shall not be liable for interest on any money received by it, except as the Trustee may agree in writing with the Company or, except with respect to any money held by the Trustee over a holiday or weekend, in which event the Trustee shall remit to the Company the interest earnings on such money at a rate equal to the then current rate for money market funds invested by the Trustee; provided that the Company has directed the Trustee to invest such money. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

29

Section 7.2Rights of Trustee.

(a)The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented to it by the proper Person. The Trustee need not investigate any fact or matter stated in the document. The Trustee shall have no duty to inquire as to the performance of the Company’s covenants in Article IV hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or any Event of Default except any Default or Event of Default of which the Trustee shall have received written notification or obtained actual knowledge.

Delivery of reports, information and documents to the Trustee under Sections 4.3(a), 4.3(b) and 4.4(b) is for informational purposes only and the Trustee’s receipt of the foregoing shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of their covenants hereunder (as to which the Trustee is entitled to rely conclusively on Officers’ Certificates).

(b)Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(c)The Trustee may act through agents, attorneys, custodians or nominees and shall not be responsible for the misconduct or negligence or the supervision of any agents, attorneys, custodians or nominees appointed by it with due care.

(d)The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within the rights or powers conferred upon it by this Indenture.

(e)Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.

(f)The Trustee shall not be deemed to have notice of an Event of Default for any purpose under this Indenture unless notified of such Event of Default by the Company, the Paying Agent (if other than the Company) or a Holder of the Securities.

Section 7.3Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or an Affiliate of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11.

30

Section 7.4Trustee’s Disclaimer.

The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company’s use of the proceeds from the Securities or any money paid to the Company or upon the Company’s direction under any provision hereof, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement or recital herein or any statement in the Securities or any other document in connection with the sale of the Securities or pursuant to this Indenture other than its certificate of authentication.

Section 7.5Notice of Defaults.

If an Event of Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders a notice of the Event of Default within 90 days after it occurs or as soon as practicable after it is known to a Responsible Officer of the Trustee. Except in the case of an Event of Default in payment on any Security, the Trustee may withhold the notice if and so long as the Responsible Officer of the Trustee in good faith determines that withholding the notice is in the interests of the Holders.

Section 7.6Reports by Trustee to Holders.

(a)Within 60 days of the end of each Fiscal Year, commencing with the fiscal year ending December 31, 2006, the Trustee shall mail to Holders (with a copy to the Company) a brief report dated as of such reporting date that complies with TIA § 313(a) (but if no event described in TIA § 313(a) has occurred within the 12 months preceding the reporting date, no report need be prepared or transmitted). The Trustee also shall comply with TIA § 313(b). The Trustee shall also transmit by mail all reports as required by TIA § 313(c).

(b)Commencing at the time this Indenture is qualified under the TIA, a copy of each report mailed to Holders under this Section 7.6 (at the time of its mailing to Holders) shall be filed with the SEC and each stock exchange, if any, on which the Securities are listed. The Company shall promptly notify the Trustee if and when the Securities are listed on any stock exchange.

Section 7.7Compensation and Indemnity.

(a)The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and its performance of the duties and services required hereunder. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

31

(b)The Company shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, except as set forth in Section 7.7(d). The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder, except to the extent the Company is prejudiced thereby. The Company shall defend the claim and the Trustee shall reasonably cooperate in such defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of one such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld.

(c)The obligations of the Company to pay compensation under Section 7.7(a) through the date of termination, and for indemnification under Section 7.7(b) shall survive the satisfaction and discharge of this Indenture.

(d)The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through its own negligence, bad faith or willful misconduct.

(e)To secure the Company’s payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on the Securities or to pay Senior Debt. Such lien shall survive the satisfaction and discharge of this Indenture.

(f)When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.1(e) or (f) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law.

Section 7.8Replacement of Trustee.

(a)A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.8.

(b)The Trustee may resign at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority of the aggregate principal amount of the outstanding Securities may remove the Trustee (including any successor Trustee) at any time by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:

(i)the Trustee fails to comply with Section 7.10;

(ii)the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

(iii)a Custodian or public officer takes charge of the Trustee or its property;

32

(iv)the Trustee becomes incapable of acting as Trustee under this Indenture, or

(v)the Company so elects, provided such replacement Trustee is qualified.

(c)If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee.

(d)If a successor Trustee does not take office within 30 days after notice that the Trustee has resigned or has been removed, the Company or the Trustee or the Holders of at least a majority in principal amount of the then outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(e)If the Trustee after written request by any Holder who has been a Holder for at least six months fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(f)A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to all Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the lien provided for in Section 7.7. Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company’s obligations to pay compensation under Section 7.7(a) through the date of termination, and for indemnification under Section 7.7(b) hereof shall continue for the benefit of the retiring Trustee.

Section 7.9Successor Trustee by Merger, etc.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee.

Section 7.10Eligibility; Disqualification.

(a)There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any state or territory thereof or of the District of Columbia authorized under such laws to exercise corporate trustee power, shall be subject to supervision or examination by Federal, state, territorial or District of Columbia authority and shall have a combined capital and surplus of at least $5,000,000 as set forth in its most recent published annual report of condition.

33

(b)This Indenture shall always have a Trustee who satisfies the requirements of TIA § 310(a)(1) and (2). The Trustee shall be subject to TIA § 310(b).

Section 7.11Preferential Collection of Claims Against Company.

The Trustee shall be subject to TIA § 311(a), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

ARTICLE VIII
DISCHARGE OF INDENTURE

Section 8.1Termination of Company’s Obligations.

(a)This Indenture shall cease to be of further effect (except that the Company’s obligations to pay compensation under Section 7.7(a) through the date of termination, and for indemnification under Section 7.7(b) and its obligations under Section 8.4, and the Company’s, Trustee’s and Paying Agent’s obligations under Section 8.3 shall survive) when, without violating Article X hereof, all outstanding Securities have been paid in full and the Company has paid all sums payable by the Company hereunder. In addition, the Company may terminate all of its obligations under this Indenture if, without violating Article X hereof:

(i)the Company irrevocably deposits in trust with the Trustee or, at the option of the Trustee, with a trustee reasonably satisfactory to the Trustee and the Company under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, money or U.S. Government Obligations sufficient (as certified by an independent public accountant designated by the Company) to pay principal and interest on the Securities to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, provided that (A) the trustee of the irrevocable trust shall have been irrevocably instructed to pay such money or the proceeds of such U.S. Government Obligations to the Trustee and (B) the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of said principal and interest with respect to the Securities;

(ii)the Company delivers to the Trustee an Officers’ Certificate stating that all conditions precedent to satisfaction and discharge of this Indenture have been complied with; and

(iii)no Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit.

Then, this Indenture shall cease to be of further effect (except as provided in this paragraph), and the Trustee, on demand of the Company, shall execute proper instruments acknowledging confirmation of and discharge under this Indenture. The Company may make the deposit only if Article X hereof does not prohibit such payment.

34

However, the Company’s obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 4.2, 7.7(c), 7.8, 8.3 and 8.4 and the Trustee’s and Paying Agent’s obligations in Section 8.3 shall survive until the Securities are no longer outstanding. Thereafter, only the Company’s obligations to pay compensation under Section 7.7(a) through the date of termination, and for indemnification under Section 7.7(b), its obligations under Section 8.4 and the Company’s, Trustee’s and Paying Agent’s obligations in Section 8.3 shall survive.

(b)After such irrevocable deposit made pursuant to this Section 8.1 and satisfaction of the other conditions set forth herein, the Trustee upon written request shall acknowledge in writing the discharge of the Company’s obligations under this Indenture except for those surviving obligations specified above.

(c)In order to have money available on a payment date to pay principal or interest on the Securities, the U.S. Government Obligations shall be payable as to principal or interest at least one Business Day before such payment date in such amounts as will provide the necessary money. U.S. Government Obligations shall not be callable at the issuer’s option.

Section 8.2Application of Trust Money.

The Trustee or a trustee satisfactory to the Trustee and the Company shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8. 1. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal and interest on the Securities.

Section 8.3Repayment to Company.

(a)The Trustee and the Paying Agent shall promptly pay to the Company upon written request any excess money or securities held by them at any time.

(b)The Trustee and the Paying Agent shall pay to the Company upon written request any money held by them for the payment of principal or interest on the Securities that remains unclaimed for two years after the date upon which such payment shall have become due; provided, however, that the Company shall have either caused notice of such payment to be mailed to each Holder entitled thereto no less than 30 days prior to such repayment or within such period shall have published such notice in a newspaper of widespread circulation published in Hennepin County, Minnesota. After payment to the Company, Holders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease.

Section 8.4Reinstatement.

If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 8.2 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise

35

prohibiting such application, the Company’s obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.1 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 8.2; provided, however, that if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment, as long as no money is owed to the Trustee by the Company, from the money or U.S. Government Obligations held by the Trustee or Paying Agent.

ARTICLE IX
AMENDMENTS

Section 9.1Without Consent of the Holders.

The Company and the Trustee may amend this Indenture or the Securities without the consent of any Holder:

(a)to cure any ambiguity, defect or inconsistency;

(b)to comply with Section 5.1;

(c)to provide for the issuance of uncertificated Securities or certificated Securities in excess of an aggregate outstanding principal balance of $50,000,000;

(d)to make any change that does not adversely affect the legal rights hereunder of any Holder, including but not limited to, an increase in the aggregate dollar amount of Securities which may be outstanding under this Indenture;

(e)make any change in Section 3.2; provided, however, that no such change shall adversely affect the rights of any outstanding or issued Security; or

(f)to comply with any requirements of the SEC in connection with the qualification of this Indenture under the TIA.

Section 9.2With Consent of the Holders.

(a)The Company and the Trustee may amend this Indenture or the Securities with the written consent of the Holders of at least a majority in principal amount of the then outstanding Securities. The Holders of a majority in principal of the then outstanding Securities may also waive on behalf of all Holders any existing Default or Event of Default or compliance with any provision of this Indenture or the Securities. However, without the consent of the Holder of each Security affected, an amendment or waiver under this Section may not:

(i)reduce the aggregate principal amount of Securities whose Holders must consent to an amendment, supplement or waiver;

36

(ii)reduce the rate of or change the time for payment of interest, including default interest, on any outstanding Security;

(iii)reduce the principal of or change the fixed maturity of any Security or alter the redemption provisions or the price at which the Company shall offer to purchase such Security pursuant to Section 3.1 of Article III hereof;

(iv)make any Security payable in money other than that stated in the Prospectus;

(v)modify or eliminate the right of the estate of a Holder or a Holder to cause the Company to repurchase a Security upon the death or Total Permanent Disability of a Holder pursuant to Article III; provided, however, that the Company may not modify or eliminate such right, as it may be in effect on the Issue Date, of any Security which was issued with such right, and after an amendment under this subsection 9.2(a)(v) becomes effective, the Company shall mail to the Holders of each Security then outstanding a notice briefly describing the amendment;

(vi)make any change in Section 6.4 or 6.7 hereof or in this sentence of this Section 9.2;

(vii)make any change in Article X that materially adversely affects the rights of any Holders; or

(viii)waive a Default or Event of Default in the payment of principal of or interest on any Security (except a rescission of acceleration of the Securities by the Holders of at least a majority in aggregate principal amount of the Securities and a waiver of the payment default that resulted from such acceleration).

(b)It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.

(c)After an amendment or waiver under this Section becomes effective, the Company shall mail to the Holders of each Security affected thereby a notice briefly describing the amendment or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority in principal amount of the Securities then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Securities.

Section 9.3Compliance with Trust Indenture Act.

If at the time this Indenture shall be qualified under the TIA, every amendment to this Indenture or the Securities shall be set forth in a supplemental indenture that complies with the TIA as then in effect.

37

Section 9.4Effect of Consents.

(a)Until an amendment or waiver becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder’s Security, even if notation of the consent is not made on any Security. An amendment or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

(b)The Company may fix a record date for determining which Holders must consent to such amendment or waivers. If the Company fixes a record date, the record date shall be fixed at (i) the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders furnished to the Trustee prior to such solicitation pursuant to Section 2.5, or (ii) such other date as the Company shall designate.

Section 9.5Notation on or Exchange of Securities.

The Trustee may place an appropriate notation about an amendment or waiver on any Security, if certificated, or any Account statement. Failure to make any notation or issue a new Security shall not affect the validity and effect of such amendment or waiver.

Section 9.6Trustee to Sign Amendments, etc.

The Trustee shall sign any amendment or supplemental indenture authorized pursuant to this Article IX if, in the Trustee’s reasonable discretion, the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment or supplemental indenture, the Trustee shall be entitled to receive, if requested, an indemnity reasonably satisfactory to it and to receive and, subject to Section 7.1, shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel (or written advice of counsel) as conclusive evidence that such amendment or supplemental indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company in accordance with its terms. The Company may not sign an amendment or supplemental indenture until its Board of Directors approves it.

ARTICLE X
SUBORDINATION

Section 10.1Agreement to Subordinate.

(a)The Company agrees, and each Holder by accepting a Security consents and agrees, that the Indebtedness evidenced by the Securities and the payment of the principal of, and interest on and other amounts owing with respect to, the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article, to the prior indefeasible payment in full, in cash, cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, of all Obligations due in respect of Senior Debt of the Company whether outstanding on the date hereof or hereafter incurred and to the expiration of any commitment of any holder of Senior Debt to extend credit

38

accommodations to the Company, and that the subordination is for the benefit of the holders of Senior Debt.

(b)For purposes of this Article X, a payment or distribution on account of the Securities may consist of cash, property or securities, by set-off or otherwise, and a payment or distribution on account of any of the Securities shall include, without limitation, any redemption, purchase or other acquisition of the Securities.

(c)The Holders agree that the Securities are unsecured, and agree that no Holder nor the Trustee will, unless and until all of the Senior Debt shall have been fully paid and satisfied and all obligations of the holders of the Senior Debt to extend credit accommodations to the Company have terminated (i) accept any security interest from the Company or from any other Person or permit any Person (other than the Company) to become primarily or secondarily obligated for the Securities and (ii) in the event any Holder or the Trustee does obtain any such security interest for the Securities or any such primary or secondary obligations, at the request of any holder of the Senior Debt, each Holder hereby agrees to execute and deliver to such holder, and authorizes such holder to prepare and file where permitted by law, such termination statements and releases as such holder shall reasonably request or require to release the Holder’s or Trustee’s security interest in or lien against such property or such primary or secondary obligations. No Holder nor the Trustee shall challenge, and irrevocably waives any right it may have to challenge, the attachment, validity, perfection, priority or extent of the Senior Debt, or any lien of any holder of Senior Debt or any representative thereof in any collateral, in any judicial, administrative or alternative dispute resolution proceeding.

Section 10.2Liquidation; Dissolution; Bankruptcy.

(a)Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon (i) any dissolution or winding-up or total or partial liquidation or reorganization of the Company whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (ii) any bankruptcy or insolvency case or proceeding or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its assets, (iii) any assignment for the benefit of creditors or any other marshaling of assets of the Company, all obligations due, or to become due, in respect of Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) shall first indefeasibly be paid in full, or provision shall have been made for such payment, in cash, cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, before any payment is made on account of the principal of or interest on the Securities, except that Holders may receive securities that are subordinated to at least the same extent as the Securities are to (x) Senior Debt and (y) any securities issued in exchange for Senior Debt. Upon any such dissolution, winding-up, liquidation or reorganization, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such

39

payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them, directly to the holders of Senior Debt (in order of priority, and when of equal priority, pro rata to such holders of equal priority on the basis of the amounts of Senior Debt held by such holders) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been indefeasibly paid in full and all commitments to extend credit accommodations to the Company shall have expired, or provisions shall have been made for such payment, in cash, cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt (as evidenced by their prior written consent thereto), after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt. For purposes of determining the priority of distributions to holders of Senior Debt under this Agreement, any holder of Senior Debt or representative for any such holder that has been granted by the Company an express security interest or lien (other than a right of set off ) in all of the inventory, accounts receivable and general intangibles (the “Priority Collateral”) of the Company shall have priority over the holder of any Senior Debt that has not been granted such a lien or security interest, in the absence of a written agreement to the contrary signed by the holders of Senior Debt that is secured by Priority Collateral or their representatives. As of the date of this Agreement, (a) LaSalle Bank National Association (“LaSalle”) is entitled to the priority of distributions to holders of Senior Debt under this Agreement under the preceding sentence and (b) the Company is prohibited under its credit documents with LaSalle from granting an express lien in any of the Priority Collateral to any Person other than LaSalle.

(b)If the Trustee does not file a proper claim or proof of debt in the form required in any proceeding of the type specified in Section 6.9 prior to 30 days before the expiration of the time to file such claims or proofs, then any holder of Senior Debt or representative thereof shall have the right to demand, sue for, collect and receive the payments and distributions in respect of the Securities which are required to be paid or delivered to the holders of Senior Debt as provided in this Article X and to file and prove all claims therefor and to take all such other action in the name of the Holders or otherwise, as such holder of Senior Debt may determine to be necessary or appropriate for the enforcement of the provisions of this Article X.

(c)For purposes of this Article X, the words “cash, property or securities” shall be deemed to include securities of the Company or any other corporation provided for by a plan of reorganization or readjustment which are subordinated, to at least the same extent as the Securities, to the payment of all Senior Debt or to the payment of all securities issued in exchange therefor to the holders of Senior Debt. The consolidation of the Company with, or the merger of the Company with or into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Article V shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article V.

40

Section 10.3Default of Senior Debt.

(a)(i) In the event and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Senior Debt, or any amount owing from time to time under or in respect of Senior Debt or in the event that any nonpayment default or event of default with respect to any Senior Debt shall have become or been declared due and payable prior to the date on which it would otherwise have become due and payable, or (ii) in the event that any other nonpayment default or event of default (however described or denominated) with respect to any Senior Debt shall have occurred and be continuing permitting the holders of such Senior Debt (or a trustee or representative on behalf of the holders thereof) to declare such Senior Debt due and payable prior to the date on which it would otherwise have become due and payable, then the Company shall not make, and the Holders and the Trustee shall not receive, any payment, direct or indirect (including any payment which may be payable by reason of the payment of any other Indebtedness of the Company being subordinated to the payment of the Securities) (other than securities that are subordinated to at least the same extent as the Securities are to (x) Senior Debt and (y) any securities issued in exchange for Senior Debt) on account of any Securities unless and until (A) such default or event of default shall have been waived in writing by the holders or representatives of the relevant Senior Debt or shall have ceased to exist or such acceleration shall have been rescinded, or (B) in case of any nonpayment default or event of default specified in clause (ii) above, during the period (a “Payment Blockage Period”) commencing on the date the Company and the Trustee receive written notice (a “Payment Notice”) of such default or event of default (which notice shall be binding on the Trustee and the Holders as to the occurrence of such an default or event of default) from a holder of the Senior Debt to which such default relates and ending on the earliest of (I) 179 days after such date, (II) the date, if any, on which such Senior Debt to which such default relates is discharged and any commitment of the holder(s) of such Senior Debt to extend credit accommodations to the Company shall have expired or such default is waived in writing by the holders of such Senior Debt and (C) the date on which the Trustee receives written notice from the holder of such Senior Debt to which such default relates terminating the Payment Blockage Period. Notwithstanding the foregoing, during any Payment Blockage Period, the Company shall make payments for rescinded subscriptions under Section 2.2(b) (including subscriptions that occur at a time when a post-effective amendment to the Registration Statement was required but not yet effective); provided that the Company shall not issue any new Securities, or renew any existing Securities, at any time when the Company is prohibited from making payments upon Securities pursuant to this Agreement. Notwithstanding the foregoing, payment on the Securities, may not be blocked pursuant to clause (B) of the first sentence of this paragraph for more than 180 days in any period of 360 days; provided that the foregoing limitation shall not apply to any holder of Senior Debt that did not give or join in the relevant Payment Blockage Notice (but rather shall, with respect to such holder, apply only from and after the giving of any Payment Blockage Notice by such other holder or representative thereof). For all purposes of this Section 10.3, no default or event of default which existed or was commencing with respect to the Senior Debt to which a Payment Blockage Period relates on the date such Payment Blockage Period commenced shall be or be made the basis for

41

the commencement or any subsequent Payment Blockage Period unless such default or event of default is cured or waived for a period of not less than 180 consecutive days.

(b)Subject to the provisions of Sections 6.9 and 10.7, neither the Trustee nor the Holders may take any action to assert, demand, sue for, collect, enforce or realize upon the Securities or the related Obligations or any part thereof (each, an “Enforcement Action”) in any period during which the Company is not permitted to make payment on account of the Securities pursuant to Section 10.3, unless and only to the extent that the commencement of a legal action may be required to toll the running of any applicable statute of limitations. The Trustee shall notify each holder of Senior Debt prior to exercising any Enforcement Action.

Section 10.4When Distribution Must Be Paid Over.

(a)If the Trustee or any Holder receives any (i) payment with respect to the Securities, whether in cash, property or securities which the Company is prohibited from making under Section 10.3 (other than securities that are subordinated to at least the same extent as the Securities are to (x) Senior Debt and (y) any securities issued in exchange for Senior Debt) or (ii) any realization upon or proceeds of any Enforcement Action, or any insurance proceeds or condemnation awards with respect to the Company or its property, such realization proceeds or awards shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered to, the holders of Senior Debt (in order of their priority, and when of equal priority, pro rata to such holders of equal priority on the basis of the amounts of Senior Debt held by such holders) for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to indefeasibly pay such Obligations in full, in cash, cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt, in such order of application determined by the holders of the Senior Debt in accordance with the terms of such Senior Debt, and after giving effect to any concurrent cash payment or distribution to or for the other holders of Senior Debt.

(b)With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article X, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or, if permitted by this Agreement, the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article X, except if such payment is made as a result of the willful misconduct or negligence of the Trustee.

Section 10.5Notice by Company.

The Company shall promptly notify the Trustee and the Paying Agent in writing of any facts known to the Company that would cause a payment of any Obligations with respect to the Company to violate this Article (and the Company shall furnish a copy of such notice to the

42

holders of the Senior Debt and their representatives), but failure to give such notice shall not affect the subordination of the Securities to the Senior Debt provided in this Article.

Section 10.6Subrogation.

Unless and until the Senior Debt is indefeasibly paid in full, in cash, cash equivalents or otherwise in a manner satisfactory to the holders of such Senior Debt (as evidenced by their prior written consent thereto) and all commitments of the holders of such Senior Debt to extend credit accommodations to the Company shall have expired, the Holders shall not exercise any right they may have to be subrogated to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt.

Section 10.7Relative Rights.

(a)This Article defines the relative rights of Holders and holders of Senior Debt. Nothing in this Indenture shall:

(i)impair, as between the Company and Holders, the obligations of the Company, which are absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or

(ii)affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Debt;

(iii)prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default at any time when such exercise is not prohibited by this Article, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders.

(b)If the Company fails because of this Article to pay principal of or interest on a Security on the due date, the failure is still a Default or Event of Default, unless cured by payment within 30 days after the Company’s right to make payments on the Securities has resumed in accordance with Section 10.3.

Section 10.8Subordination May Not Be Impaired by the Company or Holders of Senior Debt.

(a)No right of any present or future holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Securities and the Obligations related thereto shall be prejudiced or impaired by any act or failure to act or delay in acting by any such holder or by the Company, the Trustee or any Agent or by the failure of the Company or the Trustee to comply with this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with.

(b)Without limiting the effect of the preceding paragraph, any holder of Senior Debt may at any time and from time to time without the consent of or notice to any Holder or to the Trustee, without impairing or releasing any of the rights of any holder of

43

Senior Debt under this Indenture, upon or without any terms or conditions and in whole or in part:

(i)change the manner, place or term of payment, or change or extend the time of payment of, renew, increase or alter any Senior Debt or any other liability of the Company to such holder, any security therefor, or any liability incurred directly or indirectly in respect thereof, and the provisions of this Article X shall apply to the Senior Debt as so changed, extended, increased, renewed or altered;

(ii)notwithstanding the provisions of Section 5.1 hereof, sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, any Senior Debt or any other liability of the Company or any other Person to such holder or any other liabilities incurred directly or indirectly in respect thereof or hereof or any offset thereagainst;

(iii)exercise or refrain from exercising any rights or remedies against the Company or any other Person or otherwise act or refrain from acting or, for any reason, fail to file, record or otherwise perfect any security interest in or lien on any property of the Company or any other Person;

(iv)settle or compromise or release any Senior Debt or any other liability of the Company or any other Person to such holder, or any security therefor, or any liability incurred directly or indirectly in respect thereof;

(v)retain or obtain, or refrain from retaining or obtaining, a security interest in any property to secure any of the Senior Debt; and

(vi)retain or obtain, or refrain from retaining or obtaining any primary or secondary obligation with respect to any Senior Debt.

(c)All rights and interests under this Indenture of any holder of Senior Debt and all agreements and obligations of the Trustee, the Holders, and the Company under Article VI and under this Article X shall remain in full force and effect irrespective of (i) any lack of validity or enforceability of any agreement or instrument relating to any Senior Debt or (ii) any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Trustee, any Holder, or the Company.

(d)Any holder of Senior Debt is hereby authorized to demand specific performance of the provisions of this Article X, whether or not the Company shall have complied with any of the provisions of this Article X applicable to it, at any time when the Trustee or any Holder shall have failed to comply with any of these provisions. The Trustee and the Holders irrevocably waive any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance.

44

Section 10.9Distribution or Notice to Representative.

(a)Whenever a distribution is to be made or a notice given to any holder of Senior Debt, the distribution may be made and the notice given to the duly appointed representative of such holder.

(b)Upon any payment or distribution of assets of the Company referred to in this Article X, the Trustee and the Holders shall be entitled to rely upon, with respect to any holder of Senior Debt, any certificate of any representative of such holder believed by the Trustee or the Holder in good faith to be genuine or for the purpose of ascertaining the Persons entitled to participate in such distribution and the holders of the Senior Debt and other Indebtedness of the Company.

Section 10.10Rights of Trustee and Paying Agent.

(a)Notwithstanding the provisions of this Article X or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment or distribution by the Trustee, or the taking of any action by the Trustee, and the Trustee or Paying Agent may continue to make payments on the Securities unless it shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Securities to violate this Article, which notice, unless specified by a holder of Senior Debt as such, shall not be deemed to be a Payment Notice. The Trustee may conclusively rely on such notice believed by it in good faith to be genuine. Only the Company or a holder of Senior Debt may give the notice. As between the Company and the Trustee, nothing in this Article X shall apply to amounts due to, or impair the claims of, or payments to, the Trustee under or pursuant to Section 7.7 hereof.

(b)The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights.

Section 10.11Authorization to Effect Subordination.

Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders, the subordination as provided in this Article X, and appoints the Trustee his attorney-in-fact for any and all such purposes.

Section 10.12Article Applicable to Paying Agent.

In case at any time any Paying Agent (other than the Trustee or the Company) shall have been appointed by the Company and be then acting hereunder, the term “Trustee” as used in this Article X shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article X in addition to or in place of the Trustee.

45

Section 10.13Miscellaneous.

(a)The agreements contained in this Article X shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Senior Debt is rescinded or must otherwise be returned by any holder of Senior Debt upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment had not been made.

(b)The Trustee shall notify all holders of Senior Debt (of whose identity the Trustee has received reasonable advance written notice) of the existence of any Default or Event of Default under Section 6.1 promptly after a Responsible Officer of the Trustee actually becomes aware thereof; provided, however, that at least five Business Days prior to the notification of any holder of Senior Debt under this Section 10.13, the Trustee shall provide the Company with notice of its intent to provide such notification, provided further, however, that no defect in the form or delivery of the Trustee’s notice to the Company shall preclude the timely notice by the Trustee to the holders of Senior Debt.

(c)The provisions of this Article and of any related defined terms and any other provisions of this Indenture that benefit the holders of the Senior Debt shall not be terminated, modified, rescinded, amended or annulled without the prior written consent of each holder of Senior Debt or, to the extent permitted by the documentation governing the relevant Senior Debt, by any lesser portion of such Senior Debt or by any representative of such Senior Debt.

(d)Each Holder acknowledges and agrees that, to the extent the terms and provisions of this Article are inconsistent with any other provision of this Agreement or with the Securities or any other documents or instruments evidencing obligations under this Agreement or the Securities, such other provision shall be subject to this Article.

(e)This Article shall be effective and may not be terminated or otherwise revoked by any Holder until the Senior Debt shall have been fully paid and discharged and all obligations of any holder the Senior Debt to extend credit accommodations to the Company have been terminated. This is a continuing agreement of subordination and each holder of Senior Debt may continue, at any time and without notice to any Holder or the Trustee, to extend credit or other financial accommodations and loan monies to or for the benefit of the Company in reliance hereon. No obligation of any Holder under this Article shall be affected by the death or incapacity of, or written revocation by, the such Holder or any other subordinated party, pledgor, endorser, or guarantor, if any.

(f)Each Holder agrees that the no holder of the Senior Debt shall have any liability to such Holder for, and waives any claim which the Holder may now or hereafter have against, such holder of the Senior Debt arising out of any and all actions which such holder of the Senior Debt in good faith takes or omits to take (including, without limitation, actions with respect to any security for the Senior Debt, actions with respect to the occurrence of a default upon the Senior Debt, actions with respect to the foreclosure upon, sale, release, or depreciation of, or failure to realize upon, any security for the Senior Debt and actions with respect to the collection of any claim for all or any part of

46

the Senior Debt from any guarantor or other party) with respect to the documents evidencing the Senior Debt or to the collection of the Senior Debt or the valuation, use, protection or release of any security for the Senior Debt. Each Holder hereby waives any and all right to require the marshalling of assets in connection with the exercise of any of the remedies permitted by applicable law or agreement. Notwithstanding anything to the contrary, each Holder hereby agrees that all payments received by any holder of the Senior Debt may be applied, in whole or in part, to any of the Senior Debt, as such holder, in its sole discretion, deems appropriate.

(g)This Article and the terms, covenants and conditions hereof shall bind and inure to the benefit of each holder of Senior Debt, each Holder, the Trustee, the Company and their respective successors and assigns. This Article sets forth the entire understanding of the parties hereto relating to the subject matter hereof, and all prior understandings and negotiations, written or oral, are merged into and superseded by this Article. The remedies provided in this Article are cumulative and not exclusive of any remedies provided by law.

(h)Each Holder hereby acknowledges that (i) it has had the opportunity to be advised by counsel in connection with this Article, (ii) no holder of the Senior Debt has any fiduciary relationship to the Holders, and (iii) no joint venture exists between the Holders and the holders of the Senior Debt.

(i)The validity, construction and enforceability of this Article shall be governed by the internal laws of the State of Minnesota, without giving effect to conflict of laws principles thereof. At the option of any holder of the Senior Debt commencing such action, this Article may be enforced in any Federal or Minnesota State Court sitting in Hennepin County; and each Holder consents to the jurisdiction and venue of any such court and waives any argument that venue in such forums is not convenient. Each Holder, and each holder of the Senior Debt by its acceptance hereof, irrevocably waives any and all right to trial by jury in any action or proceeding to enforce or defend any rights under this Article, and agree that any such action or proceeding shall be tried before a court and not before a jury.

ARTICLE XI
MISCELLANEOUS

Section 11.1Trust Indenture Act Controls.

If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA § 318(c), the imposed duties shall control.

Section 11.2Notices.

(a)Any notice, instruction, direction, request or other communication by the Company, the Trustee or any other holder of Senior Debt to the others is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, to the other’s address:

47

If to the Company:

Winmark Corporation

4200 Dahlberg Drive, Suite 100

Minneapolis, MN 55422-4837

Attention:                                  

Telecopier:                               

With a copy to:

Lindquist & Vennum PLLP

4200 IDS Center

80 South 8th Street

Minneapolis, MN 55402

Attention:  Jonathan Levy

Telecopier:  (612) 371-3207

If to the Trustee:

Wells Fargo Bank, National Association

Attention:                                        

Telecopier:                                      

If to LaSalle Bank National Association:

50 South Sixth Street

Minneapolis, MN  55402

Attention:  Peter Pricco

Telecopier: (612) 752-9881

If to a holder of Senior Debt, such address as such holder of Senior Debt shall have provided in writing to the Company and the Trustee.

(b)The Company, the Trustee or a holder of Senior Debt by notice to the Company and the Trustee may designate additional or different addresses for subsequent notices or communications.

(c)All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

(d)Any notice or communication to a Holder shall be mailed by first-class mail to his address shown on the register kept by the Registrar. Failure to mail a notice or

48

communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.

(e)If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

(f)If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.

Section 11.3Communication by Holders with Other Holders.

Holders may communicate pursuant to TIA § 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Trustee shall be subject to § 312(b). The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA § 312(c).

Section 11.4Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

(a)an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.5) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(b)an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 11.5) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been complied with.

Section 11.5Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA § 314(a)(4)) shall include:

(a)a statement that the Person making such certificate or opinion has read such covenant or condition;

(b)a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(c)a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion whether such covenant or condition has been complied with; and

(d)a statement whether, in the opinion of such Person, such condition or covenant has been complied with.

49

Section 11.6Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

Section 11.7Legal Holidays.

A “Legal Holiday” is a Saturday, a Sunday or a day on which banking institutions in the State of Minnesota or at a place of payment are authorized or obligated by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period.

Section 11.8No Recourse Against Others.

No director, officer, employee, agent, manager or stockholder of the Company as such, shall have any liability for any Obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such Obligations or their creation. Each Holder by accepting a Security waives and releases all such liability.

Section 11.9Duplicate Originals.

The parties may sign any number of copies of this Indenture. One signed copy is enough to prove this Indenture.

Section 11.10Governing Law.

THE INTERNAL LAW OF THE STATE OF MINNESOTA SHALL GOVERN THIS INDENTURE AND THE SECURITIES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.

Section 11.11No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

Section 11.12Successors.

All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.

Section 11.13Severability.

In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

50

Section 11.14Counterpart Originals.

The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

Section 11.15Table of Contents, Headings, etc.

The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions thereof.

[remainder of page blank]

51

SIGNATURES:

IN WITNESS WHEREOF, the parties hereto have caused to be duly executed as of the day and year first written above, this Indenture.

WINMARK CORPORATION

By:

Name:

Title:

WELLS FARGO BANK, NATIONAL
ASSOCIATION, a national banking association,

as Trustee

By:

Name:

Title:

52

EX-4.2

Exhibit 4.2

THIS RENEWABLE UNSECURED SUBORDINATED NOTE (THE “NOTE”) OF WINMARK CORPORATION (THE “COMPANY”) IS SUBJECT TO THE TERMS OF THE INDENTURE, WHICH AMONG OTHER PROVISIONS, CONTAINS REQUIREMENTS FOR THE HOLDER TO TRANSFER THIS NOTE, INCLUDING THE PRIOR CONSENT OF THE COMPANY TO ANY SUCH TRANSFER. THE INDENTURE HAS BEEN FILED AS EXHIBIT 4.1 TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-1 DECLARED EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION ON OR ABOUT                                     , 2006, PURSUANT TO WHICH THIS NOTE HAS BEEN ISSUED BY THE COMPANY.

THE COMPANY MAY REDEEM THIS NOTE, IN WHOLE OR IN PART, IN ACCORDANCE WITH THE TERMS OF THE INDENTURE.

WINMARK CORPORATION

Incorporated Under the Laws of Minnesota

RENEWABLE UNSECURED SUBORDINATED NOTE

Registered No.:	Registered Principal Amount: $
Issue Date:	Interest Rate:
Term:	Interest Payment Schedule:
Maturity Date:	Payment Date (for interest):

Winmark Corporation, a corporation created under the laws of the State of Minnesota (the “Company,” which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to                                                                               , or registered assigns, the principal sum of                          Dollars ($                ) on the Maturity Date and to pay accrued and unpaid interest hereon from the Issue Date set forth above, or from the most recent Payment Date to which interest has been paid or duly provided for, beginning on the first Payment Date after the Issue Date (the “Initial Payment Date”) and on each subsequent Payment Date thereafter at the Interest Rate set forth above, until the principal hereof is paid or made available for payment; provided, however, that if the Payment Date is within five (5) Business Days of the Issue Date, then the first payment will be made in the following month and will include the interest earned since the Issue Date. Interest shall accrue on the principal amount for the period from the later of the Issue Date of this Note or the last Payment Date upon which an interest payment was made until and including the day before the following Payment Date. Initially capitalized terms used but not defined herein shall have the respective meanings given such terms in the Indenture. The principal hereof is subject to optional redemption by the Company and optional repurchase at the request of the Holder, as provided in the Indenture, and if not so redeemed or repurchased, shall be due and payable in full on the Maturity Date, which also shall constitute a Payment Date.

The principal and interest so payable and punctually paid or duly provided for on any Payment Date, as provided in the Indenture, will be paid to the Person in whose name this Note is registered (the “Holder”) at the close of business on the Regular Record Date for such Payment Date. Payment of the principal of and interest on this Note will be made at the office of the Paying Agent, or in such other office as may be selected in accordance with the Indenture, 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 in United States dollars by wire or by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register.

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the Certificate of Authentication hereon has been executed by or on behalf of the Trustee referred to on the reverse hereof by manual or facsimile signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

No recourse shall be had for the payment of the principal or interest of this Note against any Company incorporator, stockholder, Officer, director, employee, Affiliate or Agent by virtue of any statute or by enforcement of any assessment or otherwise.

IN WITNESS WHEREOF, the Company has caused this Renewable Unsecured Subordinated Note to be signed in its name by the manual or facsimile signature of its President and attested to by the manual or facsimile signature of its Secretary.

Dated:		WINMARK CORPORATION
		By
		Name:
		Title:
Attest:
	, Secretary

CERTIFICATE OF AUTHENTICATION

This Note is one of the Renewable Unsecured Subordinated Notes, referred to in the within-mentioned Indenture.

Dated:	Wells Fargo Bank, National Association, as Trustee
	By:
	Authorized Signature

REVERSE SIDE OF NOTE

This Note is one of a duly authorized issue of Renewable Unsecured Subordinated Notes of the Company designated as its Renewable Unsecured Subordinated Notes (the “Notes”) in the maximum aggregate principal amount of up to $50,000,000, issued and to be issued under an Indenture, dated as of                               , 2006 (the “Indenture”), between the Company and Wells Fargo Bank, National Association, as Trustee (the “Trustee,” which term includes any successor Trustee under the Indenture). Reference is hereby made to the Indenture and all indentures supplemental thereto for a statement of the respective rights, limitation of rights, duties and immunities thereunder of the Company, the Trustee and the Holders, and for a statement of the terms upon which the Notes are, and are to be, authenticated and delivered. Capitalized and certain other terms used herein and not otherwise defined have the meanings set forth in the Indenture.

The Notes are general unsecured obligations of the Company. The payment of the principal of and interest on this Note is expressly subordinated, as provided in the Indenture, to the payment of all Senior Debt and, by the acceptance of this Note, the Holder hereof agrees, expressly for the benefit of the present and future holders of Senior Debt, to be bound by the provisions of the Indenture relating to such subordination and authorizes and appoints as such Holder’s attorney-in-fact, the Trustee, to take such action on such Holder’s behalf as may be necessary or appropriate to effectuate such subordination. The Company may, at its option, at any time redeem this Note either in whole or from time to time in part prior to the Maturity Date by providing at least thirty (30) days written notice to the Holder.

If this Note shall be redeemed by a call for redemption and payment be duly provided hereof as specified in the Indenture, interest shall cease to accrue on this Note.

This Note may be transferred and exchanged only as provided in the Indenture. This Note may not be assigned, transferred or otherwise alienated without the prior written consent of the Company and shall be subject to the Company’s right to demand and receive an opinion of Holder’s legal counsel (which counsel shall be reasonably acceptable to the Company) that the transfer does not violate any applicable securities laws. The Company may also require a signature guarantee.

Approximately fifteen (15) but not less than ten (10) days prior to the Maturity Date, the Company will send the Holder a Notice of Maturity to notify the Holder of the Maturity Date. Except as otherwise provided in the Indenture, if in the Notice of Maturity the Company does not notify the Holder of its intention to repay this Note, and unless within fifteen (15) days after the Maturity Date, the Holder has not demanded repayment of this Note, this Note shall be automatically renewed for an additional term equal to the term of the maturing Note and shall be deemed to have been renewed by the Holder and the Company as of the Maturity Date, such that a new Note shall be deemed to have been issued as of such Maturity Date. This Note will continue to renew as described herein absent some action permitted under the Indenture and this Note by either the Holder or the Company. Interest on the renewed Note shall accrue from the Issue Date thereof, which is the first day of such renewed term. This renewed Note will be deemed to have identical terms and provisions as the maturing Note, including provisions relating to payment, except that the interest rate payable during the term of the renewed Note shall be the interest rate which is being offered by the Company on other Notes with the same term as of the Issue Date of such renewal. If other Notes with the same term are not then being offered on the Issue Date of such renewal, the interest rate upon renewal will be the rate specified by the Company on or before the Maturity Date, or the Note’s existing rate if no such rate is specified. If the Company gives notice to the Holder of the Company’s intention to repay the Note at maturity, the Company shall pay the Holder the principal amount and accrued and unpaid interest thereon on the Maturity Date, and, provided such payment is timely made, no interest will accrue after the Maturity Date. Otherwise, if the Holder requests repayment within fifteen (15) days after the Maturity Date, no interest will accrue after the Maturity Date and the Holder will be sent payment upon the later of the Maturity Date or five (5) days following the date the Company receives such notice from Holder; provided that any interest paid to the Holder accruing after the Maturity Date shall be deducted from such payment.

If an Event of Default shall occur and be continuing, the outstanding principal of this Note may be declared due and payable in the manner and with the effect provided in the Indenture. The Company shall pay all costs of collection, whether or not judicial proceedings are instituted, in the manner provided in the Indenture. The

Indenture provides that such declaration and its consequences may, in certain events, be waived by the Holders of a majority in principal amount of the Notes outstanding.

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 under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Notes at the time outstanding. The Indenture also contains provisions permitting the Holders of specified percentages of aggregate principal amount of the Notes at the time outstanding, on behalf of the Holders of all of the Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. 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 registration of transfer hereof or in exchange hereof 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 or amendment or modification hereof or thereof shall alter or impair the obligation of the Company to pay the principal of and interest on this Note at the times, place and rate and in the coin or currency herein prescribed.

In the event of a consolidation or merger of the Company into, or of the transfer of its assets substantially as an entirety to, a successor entity in accordance with the Indenture, such successor entity shall assume payment of the Notes and the performance of every covenant of the Indenture on the part of the Company, and in the event of any such transfer, the Company (or the successor entity in the event of a subsequent consolidation, merger or transfer) shall be discharged from all obligations and covenants in respect of the Notes and the Indenture and may be dissolved and liquidated, all as more fully set forth in the Indenture.

The Notes are originally issuable in such denominations as may be designated from time to time by the Company, but in no event in an original denomination less than $1,000. Subject to the provisions of the Indenture (including without limitation Section 2.6 thereof), the transfer of this Note is registerable in the Securities Register, upon surrender of this Note for registration of transfer at the office or agency of the Registrar duly endorsed by or accompanied by a written instrument of transfer in the form printed on this Note or in another form satisfactory to the Company and the Registrar duly executed by the Holder hereof or such Holder’s 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 Registrar may assess service charges for any such registration or transfer or exchange, and the Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

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

This Note shall be governed by and construed in accordance with the laws of the State of Minnesota, without giving effect to the conflict of law provisions thereof.

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer this Note)

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto

(Please print name and address of transferee)

this Note, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint                                     , as Attorney-in-Fact, to transfer the within Note on the books kept for registration thereof, with full power of substitution.

Dated:
Signature:
	(Signature must conform in all
	respects to name of holder as
	specified on the face of the Note)
Social Security
or Other Identifying
Number of Transferee:
Signature Guaranteed:

EX-4.3

Exhibit 4.3

WINMARK CORPORATION

4200 Dahlberg Drive, Suite 100

Minneapolis, Minnesota 55422-4837

PURCHASE CONFIRMATION

[Investor name and address] STATEMENT DATE:                     , 200      

TRANSACTION INFORMATION

SECURITY DESCRIPTION: Winmark Corporation Renewable Unsecured Subordinated Note

TRANSACTION:  PURCHASE

TYPE OF OWNERSHIP:

SSN:

NOTE ID TERM PURCHASE DATE MATURITY DATE PAYMENT SCHEDULE

PRINCIPAL AMOUNT INTEREST RATE INVESTOR FEES NET AMOUNT

NOTE: These securities are issued in book-entry form only; no physical certificates will be provided.

INTEREST PAYMENT INFORMATION
ACCOUNT NAME:	BANK:
ACCOUNT #:	ROUTING NUMBER:
INTEREST PAYMENT METHOD: ACH (Direct Deposit)

Your interest payments will be automatically deposited directly into the account listed above. Please verify the account information. If it is incorrect, please call Sumner Harrington Investor Services at 800-234-5777.

All interest payments will be made in accordance with the Interest payment schedule shown in the previous section. If your note pays interest monthly and the monthly interest payment date you selected is within five business days of the Purchase Date, your first interest payment will be made the following month and will include all of the interest earned since the Note Issue Date. If an interest payment date falls on a Saturday, Sunday, or legal holiday, the payment will be made on the next business day.

SECURITIES OFFERED THROUGH SUMNER HARRINGTON LTD.

Sumner Harrington Ltd. was the selling agent for the Issuer in this transaction and is sending you this confirmation statement on the Issuer’s behalf. The Issuer will pay Sumner Harrington Ltd. fees and commissions of up to 3% of the Net Amount as its selling agent plus other fees for providing marketing and other services, but this will not affect your interest or principal.

PLEASE CALL SUMNER HARRINGTON LTD. INVESTOR SERVICES AT 800-234-5777 IF YOU HAVE ANY QUESTIONS.

Sumner Harrington Ltd.	(800) 234-5777
11100 Wayzata Blvd., Suite 170	investorservices@sumnerharrington.com
Minneapolis, MN 55305	www.sumnerharrington.com

EX-4.4

Exhibit 4.4

WINMARK CORPORATION

RENEWABLE UNSECURED SUBORDINATED NOTE SUBSCRIPTION AGREEMENT

To purchase a renewable unsecured subordinated note(s), please complete this form and write a check made payable to WINMARK CORPORATION (“Winmark”). Send this form along with your check and any other documents requested below to the selling agent for the notes, SUMNER HARRINGTON LTD., 11100 WAYZATA BOULEVARD, SUITE 170, MINNEAPOLIS, MN 55305. If you have any questions, call the selling agent for the notes, SUMNER HARRINGTON LTD., at 800-234-5777.

NOTE PURCHASE AMOUNT (minimum principal amount of $1,000 per note)

		INTEREST PAYMENT SCHEDULE (please select one for each note)
Note Term	Principal Amount	Monthly*	Quarterly	Semi-Annually	Annually	Maturity
Three Month	$	[ ]	[ ]	N/A	N/A	[ ]
Six Month	$	[ ]	[ ]	[ ]	N/A	[ ]
One Year	$	[ ]	[ ]	[ ]	[ ]	[ ]
Two Year	$	[ ]	[ ]	[ ]	[ ]	[ ]
Three Year	$	[ ]	[ ]	[ ]	[ ]	[ ]
Four Year	$	[ ]	[ ]	[ ]	[ ]	[ ]
Five Year	$	[ ]	[ ]	[ ]	[ ]	[ ]
Ten Year	$	[ ]	[ ]	[ ]	[ ]	[ ]
TOTAL	$

*Monthly payment date (e.g. 1st, 15th, etc.)

FORM OF OWNERSHIP (please select one)

o Individual Investor (with optional beneficiary)	o Custodian for a Minor
o Joint Tenants with Right of Survivorship	o OtherIRA, SEP, 401(k), 403(b), Keogh, trust, corporation, partnership, etc. (Please include with this form a trust resolution or the appropriate corporation or partnership documents authorizing you to make this investment.)

NOTE PURCHASER (please circle one)

Full Name of Individual Investor/First Joint Tenant/Minor/Entity/Administrator/Trustee

First Name Middle name Last name Social Security Number/Tax ID Number Date of Birth (if applicable)

Full Name of Beneficiary/Second Joint Tenant/Custodian/Transfer on Death (please circle one if applicable)

First Name Middle name Last name Social Security Number/Tax ID Number Date of Birth (not required for custodians)

Name(s) and Relationship of other Family Winmark Note Investors         

PRIMARY ADDRESS (Original correspondence will be sent to this address.)

Individual Investor, IRA Administrator, Trustee, Custodian, Partnership, etc.

Address

City State Zip

Daytime Phone (Include Area Code) E-mail Address

SECONDARY ADDRESS (Optional—copies of correspondence will be sent to this address.)

Beneficiary, IRA Owner, Joint Tenant, Partner, etc.

Address

City State Zip

Daytime Phone (Include Area Code) E-mail Address

DIRECT DEPOSIT  Winmark will electronically deposit your principal and interest payments directly into the account listed in the Direct Deposit section on the reverse side of this form. Please complete and sign the reverse side of this form for automatic deposit to either your checking or savings account.

PASSWORD  When you call Sumner Harrington to discuss your investment, you may be asked to verify your identification by answering the following question.

What is your mother’s maiden name?

CERTIFICATION  Under penalties of perjury, I hereby declare and certify that: (i) I am a bona fide resident of the state listed in the primary mailing address; (ii) I have received and read the prospectus provided by Winmark and understand the risks related to the notes and to Winmark; (iii) Sumner Harrington Ltd. has neither recommended this investment to me nor given me investment, legal or tax advice regarding the notes and the creditworthiness of Winmark; (iv) I have independently determined that this investment is suitable for me without relying on such advice from Sumner Harrington Ltd.; (v) the notes are illiquid due to significant transfer restrictions and the lack of a secondary market; (vi) I risk the loss of my entire principal amount and all accrued but unpaid interest when purchasing the notes and have the financial ability to withstand these losses; (vii) I am purchasing the notes to fulfill my investment objective of earning current taxable interest income; (viii) the social security number or tax identification number listed above is correct; and (ix) I am not subject to backup withholding, either because the Internal Revenue Service has not notified me that I am subject to backup withholding as a result of a failure to report all interest or dividends or I have been notified that I am no longer subject to backup withholding. I understand that my purchase offer is subject to the terms contained in the prospectus, may be rejected in whole or in part and will not become effective until accepted by Winmark or its selling agent.

Signature of Individual Investor/First Joint Tenant/Custodian/Authorized Person Date Signature of Second Joint Tenant (if applicable) Date

(Please complete reverse side)

Office Use Only          ACTP                            ACTP                            DATE                  

DIRECT DEPOSIT

Direct Deposit Information (please check one)

oI currently receive direct deposit payments from an existing Winmark note. Please deposit all principal and interest payments for this new note

oPlease deposit my payments into the account listed below. (If this option is chosen, the account owner must attached to the bottom of this form either a VOIDED check, if this is a checking account, or a deposit slip, if this is a savings account.

Account Owner Name(s)

o  Checking         o  Savings            o  Other

Account Number

Bank Routing Number (9 digits) Bank Name Branch Location

Some financial institutions (e.g. brokerage firms, custodians, mutual savings banks, credit unions, money market funds, etc.) also require “for further credit” information to correctly identify direct deposit accounts. If your financial institution requires this additional information, please list it below. If you are unsure if this additional information is required, please call your financial institution.

For further credit:

Direct Deposit Authorization

As the investor of record and authorized signatory of the account listed above, I hereby authorize Winmark Corporation, its affiliates, or its agents (collectively referred to hereinafter as “Winmark”) to deposit interest and principal payments owed to me, by initiating credit entries in the account to my financial institution listed on this Form. Further, I authorize my financial institution to accept and to credit any credit entries initiated by Winmark to the listed account. In the event of an erroneous credit entry, I also authorize Winmark to debit the account for an amount not to exceed the original amount of the erroneous credit.

This authorization is to remain in full force and effect until Winmark and my financial institution have received written notice from me of its termination in such time and in such manner as to afford Winmark and my financial institution reasonable opportunity to act on it. In the event the listed account is closed, I will promptly notify Winmark of an alternate account into which payments can be made.

Authorized Signature Date

Mail to:

SUMNER HARRINGTON LTD.

11100 Wayzata Boulevard

Suite 170

Minneapolis, Minnesota  55305

ATTACH VOIDED CHECK or DEPOSIT SLIP HERE

EX-4.5

Exhibit 4.5

PAYING AGENT AGREEMENT

THIS PAYING AGENT AGREEMENT (the “Agreement”) is made as of the [  } day of 2006 between Wells Fargo Bank, National Association, a national banking association maintaining its principal corporate trust office at Sixth Street & Marquette Ave; N9303-120, Minneapolis, MN 55479 (the “Paying Agent”), and Winmark Corporation, a Minnesota corporation maintaining its principal place of business at 4200  Dahlberg Drive, Suite 100, Minneapolis, Minnesota 55422-4837 (the “Issuer”).

WHEREAS, the Issuer has authorized and proposes to issue up to $$50 million aggregate principal amount of its Unsecured Subordinated Renewable Notes (the “Notes”) pursuant to an Indenture dated as of        ,    2006   (the “Indenture”), between the Issuer and Wells Fargo Bank, National Association, as trustee (the “Trustee”);

WHEREAS, the Issuer desires to appoint the Paying Agent as paying agent with respect to the Notes; and

WHEREAS, the Paying Agent agrees to act as such paying agent in accordance with, and subject to the terms and provisions of, this Agreement, the Indenture, the Notes and the Prospectus dated  [               ], as it may be supplemented from time to time (as so supplemented, the “Prospectus”);

NOW, THEREFORE, in consideration of the mutual promises hereinafter contained, the Paying Agent and the Issuer hereby covenant and agree as follows:

ARTICLE I

APPOINTMENT

Section 1.1.The Issuer hereby appoints the Paying Agent as its paying agent with respect to the Notes to perform the duties hereinafter set forth.

Section 1.2.The Paying Agent hereby accepts such appointment in accordance with, and subject to, the terms and provisions of this Agreement, and subject to the terms and provisions of the Indenture, the Notes and the Prospectus as such terms and provisions relate to the Paying Agent, and agrees to perform the duties hereinafter set forth and set forth in the Indenture, the Notes and the Prospectus. The Issuer shall be entitled to receive interest or earnings on or with respect to any amounts held or deposited with the Paying Agent overnight or over a holiday or weekend, in which event the Paying Agent shall remit to the Issuer any interest or earnings accrued or earned pursuant to the Issuer’s direction to invest such amounts. Any interest or earnings on or with respect to any amount held by or deposited with the Paying Agent hereunder shall be remitted to the Issuer in accordance with the Issuer’s written instructions. The Paying Agent shall be under no duty or obligation to collateralize or pledge any security therefore, or to segregate such amounts except as required by law.

ARTICLE II

DEPOSIT OF FUNDS

Section 2.1.On the business day immediately prior to each interest or principal payment date described in Article III, the Issuer shall deposit, or cause to be deposited, with the Paying Agent immediately available funds in an amount equal to the aggregate amount to be paid by the Paying Agent on such payment date. In the event the amount deposited with respect to a payment date is less than the sum of the aggregate amounts specified in statements furnished to

1

the Paying Agent pursuant to this Article with respect to such payment date, the Paying Agent shall immediately notify the Issuer, and shall effect no payments with respect to such payment date until such discrepancy has been resolved. Until paid as hereinafter provided, the Paying Agent shall hold such amounts in trust for the benefit of the holders of the Notes, and the Issuer shall deposit with the Paying Agent such additional funds as may be required to pay additional interest to such holders in the event that their interest or principal payments are so delayed as required under the Indenture. The Paying Agent shall not pay any interest or earnings on or with respect to amounts held or deposited hereunder to the Issuer, except as otherwise provided in Section 1.2 hereof.

ARTICLE III

PAYMENTS

Section 3.1.Not later than five business days prior to any date on which interest or principal on the Notes is due and payable, the Issuer shall furnish, or cause to be furnished, to the Paying Agent a file containing information necessary for the Paying Agent to effect such interest or principal payments (each, a “Payment File”). Payment Files shall include amounts payable (net of any tax withholding amounts), and complete bank account information for each individual payment, and be delivered to the Paying Agent by the Issuer, or agent thereof, in an electronic format satisfactory to the Paying Agent.

Section 3.2.The Paying Agent shall effect payment of interest on the Notes as such becomes due and payable on the respective interest payment dates. Except as otherwise required pursuant to the terms of the Notes, the Indenture or the Prospectus, such payment shall be accomplished by the Paying Agent electronically transferring such amounts to an account specified by the registered owner of the Note on the record date in a designation in form and substance satisfactory to the Paying Agent (such designation to be received by the Paying Agent from the Issuer or its agent no later than the record date).

Section 3.3.The Paying Agent shall, at the direction of the Issuer or its agent, effect payment in full of principal on the Notes as of the respective maturity dates, unless the term of the related Note is renewed or such Note becomes due and payable on an earlier date by acceleration, redemption, repurchase or otherwise pursuant to the terms of the Note, the Indenture or the Prospectus. If the Notes are issued as definitive, certificated securities pursuant to the Indenture, then the Paying Agent shall effect payment of the principal of the Notes upon the presentation and surrender of the Notes at the principal corporate trust office of the Paying Agent (a) at maturity, (b) upon redemption or repurchase of the Notes or (c) as otherwise provided by the Notes, the Indenture or the Prospectus. If the Notes are issued in book-entry form pursuant to the Indenture, then the Paying Agent shall effect payment of the principal of each Note upon a direction, instruction or confirmation from the Issuer or registrar as the Issuer’s agent that the book-entry account evidencing such Note is being terminated and cancelled as paid in full (a) at maturity, (b) upon redemption or repurchase of the Notes or (c) as otherwise provided by the Notes, the Indenture or the Prospectus.

Section 3.4.Notwithstanding any provision elsewhere contained herein, payments by the Paying Agent shall be made only out of amounts deposited with the Paying Agent by or on behalf of the Issuer with respect to such payment.

Section 3.5.The Paying Agent will not charge, impose, collect or receive, from the holder or owner of any Note, any fee or consideration for any services performed in connection with any payment of principal or interest to such holder or owner, and any charge for postage, for wiring payment, or otherwise, shall be charged to and collected only from the Issuer.

ARTICLE IV

ADDITIONAL DUTIES OF PAYING AGENT

Section 4.1.The Paying Agent shall: (i) keep and maintain such records in such form and manner consistent

2

with persons providing similar paying agent services; and (ii) perform such related duties as may be necessary for the Paying Agent to perform. Such records shall upon prior written request be available for inspection by authorized officers, employees, and agents of the Issuer during the normal business hours of the Paying Agent. Upon the termination of this Agreement, and at the request and expense of the Issuer, the Paying Agent shall deliver to the Issuer copies of such records reflecting all transactions as of such date, in the form and manner kept by the Paying Agent.

Section 4.2.The Paying Agent shall, at the direction of the Issuer or its agent, file such federal and state tax returns concerning payments hereunder as shall be required of it by applicable law, but shall not be responsible for the collection or withholding of taxes due on such payments except, and only to the extent, required of it as Paying Agent by applicable law or under the Notes, the Indenture or the Prospectus. The Issuer shall provide, or cause to be provided, to the Paying Agent, information necessary or required by the Paying Agent to complete any applicable federal or state returns on behalf of the Issuer, including, but not limited to, certified tax identification numbers for each reportable payee.

Section 4.3.The Paying Agent shall have no duties or responsibilities whatsoever except such duties and responsibilities as are specifically set forth in this Agreement, the Notes, the Indenture or the Prospectus, and no covenant or obligation shall be implied in this Agreement, against the Paying Agent. Without limiting the generality of the foregoing, the Paying Agent shall not be an office or agency of the Issuer where Notes may be presented for re-registration or transfer, nor act as registrar or transfer agent with respect to, or maintain record lists of holders of Notes.

Section 4.4.The Paying Agent shall incur no liability and shall be fully protected in acting upon any written instruction of the Issuer. The Issuer agrees to provide, or cause its agent to provide, written instructions to the Paying Agent with respect to any and all actions to be taken by the Paying Agent where failure to take such actions would adversely affect the rights of or impose liability or penalties (including tax liability or penalties) upon, the Issuer or the registered owners, past or present, of the Notes, and in the absence of such instructions, the Paying Agent shall have no duty to take any such action.

Section 4.5.The Paying Agent shall use its best efforts to perform its obligations hereunder, including the timely taking of action as required hereunder, provided, however, that the Paying Agent shall not be liable for its failure to meet such deadlines, including, without limitation, deadlines for the payment of money to owners of Notes, except such failure as shall result from its negligence, willful misconduct or bad faith.

Section 4.6.With respect to any notices required to be sent by the Paying Agent, the Paying Agent shall not be liable for its failure to include required information in such notices unless such information has been timely provided to it.

Section 4.7.The Paying Agent shall comply with Sections 2.4, 2.7, 4.1, 8.3, 10.10, 10.12 and any other relevant sections of the Indenture (a copy of which will be provided to the Paying Agent, to the extent the Trustee is not also appointed as the Paying Agent) as they pertain to the Paying Agent.

Section 4.8.In connection with the submission of each subscription agreement and other related subscription documents (collectively, the “Subscription Agreement”) by an investor desiring to purchase Notes, the Paying Agent shall perform the following: (i) accept physical delivery by U.S. mail or courier service of such Subscription Agreement and the accompanying investor form of payment, if any; (ii) photocopy the first page of each Subscription Agreement and prepare a record or log (the “Subscription Log”) of each Subscription Agreement received with the name of the investor, the amount of the Notes to be purchased per the Subscription Agreement and the amount of the accompanying investor payment, if any, received; (iii) on the day of receipt, forward each original Subscription Agreement and form of investor payment, if any, to the Issuer or the designated selling agent of the Issuer; (iv) on each day on which one or more Subscription Agreements are received, forward a copy of the Subscription Log to the Issuer and its designated selling agent, if any; and (v) if the Paying Agent receives any correspondence pertaining to the Notes, forward such correspondence to the addressee thereof with a copy to the Issuer or its designated selling agent, as the case may be. The

3

Issuer shall provide written notice to the Paying Agent of any person designated as its selling agent or subsequently terminated as its selling agent. In the event that the Paying Agent is terminated pursuant to this Agreement, at the request of the Issuer, the Paying Agent shall use reasonable efforts to transfer and cooperate with the transfer of its duties under this Section 4.9 to the Issuer or a successor paying agent or other party as designated by the Issuer, including the forwarding of any Subscription Agreements and investor payments received.

ARTICLE V

CONCERNING THE PAYING AGENT

Section 5.1.The Paying Agent shall not be liable for any loss or damage, including reasonable counsel fees and expenses, resulting from its actions or omissions to act hereunder, except for any loss or damage arising out of its own bad faith, negligence or willful misconduct. Without limiting the generality of the foregoing, the Paying Agent shall not be liable for any action taken or omitted in reliance on any notice, direction, consent, certificate, affidavit, statement, designation or other paper or document reasonably believed by it to be genuine and to have been duly and properly signed or presented to it by the Issuer.

Section 5.2.The Issuer shall indemnify and hold harmless the Paying Agent from and against any and all claims, demands, expenses (including reasonable counsel fees and out-of-pocket expenses) and liabilities of any and every nature which the Paying Agent may sustain or incur or which may be asserted against the Paying Agent as a result of any action taken or omitted by the Paying Agent hereunder without bad faith, negligence or willful misconduct. At any time, the Paying Agent may apply to the Issuer for written instructions with respect to any matter arising under this Agreement and shall be fully protected in acting in accordance with such instructions. In addition, the Paying Agent may, as reasonably necessary, consult counsel to the Issuer, and shall be fully protected with respect to any action taken or omitted in good faith in accordance with such advice or opinion of counsel to the Issuer.

Section 5.3.The Paying Agent may employ agents or attorneys-in-fact, and shall not be liable for any loss or damage arising out of, or in connection with, the actions or omissions to act of such agents or attorneys-in-fact provided the Paying Agent acted without bad faith, negligence, or willful misconduct in connection with the selection of such agents or attorneys-in-fact.

Section 5.4.The Paying Agent makes no representations with respect to the validity or sufficiency of the Notes, or the use or application of the proceeds of the sale or distribution thereof, and shall incur no liability with respect to the foregoing.

Section 5.5.Notwithstanding any other provision elsewhere contained in this Agreement, the Paying Agent is acting solely as agent of the Issuer and does not assume any obligation or relationship of agency or trust for or with any owners or holders of Notes other than the limited obligations with respect to amounts deposited for the payment of principal of and interest on the Notes and the obligations set forth in Sections 4.7, and 4.8 hereof.

Section 5.6.The Issuer shall pay to the Paying Agent for its performance hereunder: (a) such compensation as may mutually be agreed upon in writing in a schedule to this Agreement or otherwise; and (b) its out-of-pocket expenses (including reasonable counsel fees and expenses) incurred in connection with this Agreement, including, without limitation, those referred to in Section 3.4 hereof.

ARTICLE VI

GENERAL

Section 6.1.Either of the parties hereto may terminate this Agreement by giving to the other a notice in writing specifying a termination date which, unless otherwise waived by the other party, is at least forty-five (45) days after the giving of such notice; provided, however, that each party hereto may terminate this Agreement upon the breach or failure of the other party to perform any obligations hereunder and such breach or failure to perform shall continue for

4

ten (10) days after written notice thereof or upon the entry of a decree or order of involuntary bankruptcy, commencement of a voluntary case under applicable bankruptcy laws, appointment of a trustee in bankruptcy or an assignment for the benefit of creditors by either party thereto. Upon the date specified in such notice, the Paying Agent shall, upon making the delivery required by Section 4.1 hereof, be relieved of all duties and responsibilities pursuant to this Agreement; provided that the provisions of Sections 5.1, 5.2 and 5.6 hereof shall survive the termination of this Agreement.

Section 6.2.Any notice, instruction, request for instructions or other instrument in writing authorized or required by this Agreement to given to either party shall be deemed given if addressed and mailed certified mail to it at its offices at the address first above written, or at such other place as such party may from time to time designate in writing.

Section 6.3.As of the date hereof, the Issuer hereby designates Sumner Harrington Ltd. as its designated selling agent for purposes of this agreement. The Paying Agent may rely on information received from Sumner Harrington, Ltd. in connection herewith as is if such information had been delivered by the Issuer, including Payment Files, information provided in connection with federal or state filings, and subscription information, if applicable. Notices given to Sumner Harrington Ltd. pursuant to Section 6.2 shall be sent to its office address at 11100 Wayzata Boulevard. Suite 170, Minneapolis, Minnesota 55305.

Section 6.4.This Agreement may not be amended or modified in any manner except by a written agreement executed by both parties and shall be acknowledged and agreed to by the designated selling agent, to the extent the amendment or modification effects the duties of the selling agent.

Section 6.5.This Agreement shall extend to and be binding upon the parties hereto and their respective successors and assigns.

Section 6.6.Nothing in this Agreement, express or implied, shall give to any person, other than the parties hereto, the Trustee (which is expressly made a third-party beneficiary hereto for purposes of Section 4.7 of this Agreement), and their successors hereunder, any benefit or any legal or equitable right, remedy or claim under this Agreement.

Section 6.7.This Agreement shall be governed by, and construed in accordance with, the laws of the State of Minnesota, without regard to conflicts of laws principles thereof.

Section 6.8.This Agreement may be signed in any number of counterparts with the same effect as if the signatures to each counterparts were upon a single instrument, and all such counterparts together shall be deemed an original of this Agreement.

[Signature Page begins on next page]

5

IN WITNESS WHEREOF, the parties hereto have caused this Paying Agent Agreement to be executed by their respective corporate officers, thereunto duly authorized, as of the day and year first above written.

Winmark Corporation, as Issuer

By:

Name:

Title:

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Paying Agent

By:

Name:

Title:

ACKNOWLEDGED AND AGREED TO:

Sumner Harrington Ltd.,

as Issuer’s Agent pursuant to Section 6.3 hereof

By:

Name:

Title:

EX-5.1

Exhibit 5.1

LINDQUIST & VENNUM P.L.L.P.
4200 IDS CENTER	IN DENVER:
80 SOUTH EIGHTH STREET	600 17TH STREET, SUITE 1800 SOUTH
MINNEAPOLIS, MN 55402-2274	DENVER, COLORADO 80202-5441
TELEPHONE: 612-371-3211	TELEPHONE: 303-573-5900
FAX: 612-371-3207	FAX: 303-573-1956
ATTORNEYS AT LAW	www.lindquist.com

April 18, 2006

Winmark Corporation

4200 Dahlberg Drive

Minneapolis, MN 55422-4832

Re:Registration Statement on Form S-1

Ladies and Gentlemen:

We have acted as counsel to Winmark Corporation, Inc., a Minnesota corporation, (the “Company”), in connection with the Registration Statement on Form S-1 (the “Registration Statement”) filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”), relating to the proposed offer and sale of $50 million in principal renewable unsecured subordinated notes of the Company (collectively, the “Securities”). The Securities may be issued and sold or delivered from time to time as set forth in the Registration Statement, any amendment thereto, the prospectus contained therein, (the “Prospectus”) and supplements to the Prospectus pursuant to Rule 415 under the Securities Act.

We have examined certain minutes and records of the Company, including the Company’s Articles of Incorporation and Bylaws, certain actions, resolutions and proceedings of the Board of Directors. We have also examined the form of Registration Statement and underwriting agreement for the Securities. We have also examined other documents and records and made such further investigations as we have deemed relevant and necessary in connection with the opinions expressed herein.

In rendering the opinions set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies, and the authenticity of the originals of such latter documents. We also have assumed that in the case of documents filed as proposed forms, such forms will at the time of execution, authentication, issuance and delivery of the Securities related thereto, will be legal and binding obligations of the Company, or underwriter as applicable.

Based upon the foregoing, and subject to the qualifications and limitations stated herein, we are of the opinion that:

When and if the Registration Statement will have become effective pursuant to the provisions of the Securities Act, the Securities will have been duly issued in the form and containing the terms described and provided in the Prospectus and applicable supplement,

and the respective proceedings of the Company related thereto, including any required consents, approvals, authorizations and other orders of the Commission or other regulatory authority or other third party with respect thereto are obtained, and the Securities have been duly executed by the Company and delivered to the purchasers against payment of the agreed consideration, the Securities being offered by the Company will be validly issued, fully paid and nonassessable Securities of the Company.

Our opinions expressed above are subject to the qualifications that we express no opinion as to the applicability of, compliance with or effect of (a) any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent conveyance, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, (b) general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or law), (c) public policy considerations that may limit the rights of parties to obtain certain remedies and (d) other commonly recognized statutory and judicial constraints on enforceability, including, without limitation, statutes of limitations.

We are members of the bar of the State of Minnesota and we do not express any opinion herein concerning any law other than the law of the State of Minnesota and the Federal law of the United States.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, and to the reference to our firm under the heading “Legal Opinions” in the Prospectus included in the Registration Statement.

Very truly yours,

/s/ Lindquist & Vennum P.L.L.P.

2

EX-8.1

Exhibit 8.1

LINDQUIST & VENNUM P.L.L.P. 4200 IDS CENTER 80 SOUTH EIGHTH STREET MINNEAPOLIS, MN 55402-2274 TELEPHONE: 612-371-3211 FAX: 612-371-3207	IN DENVER: 600 17TH STREET, SUITE 1800 SOUTH DENVER, CO 80202-5441 TELEPHONE: 303-573-5900 FAX: 303-573-1956
ATTORNEYS AT LAW	www.lindquist.com

April 18, 2006

Winmark Corporation

4200 Dahlberg Drive, Suite 100

Minneapolis, Minnesota 55422-4837

Ladies and Gentlemen:

We have acted as counsel to Winmark Corporation, a Minnesota corporation (the “Company”), in connection with (i) the issuance and sale by the Company of up to $50,000,000 of renewable, unsecured, subordinated notes (the “Notes”) and (ii) the preparation of the Company’s Registration Statement on Form S-1 (the “Registration Statement”), filed with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Act of 1933, as amended (the “1933 Act”).

For purposes of this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of the form of Note and the Indenture by and between the Company and Wells Fargo Bank, National Association, (the “Indenture,” and together with the form of Note, the “Note Documents”), each in the form filed as an exhibit to the Registration Statement, and of the Registration Statement and of such corporate records and other agreements, documents and instruments, and have made such inquiries of such officers and representatives and have considered such matters of law as we have deemed appropriate as the basis for the opinions hereinafter set forth.

In all cases, we have assumed the legal capacity of each natural person signing any of the Note Documents, the genuineness of signatures, the authenticity of documents submitted to us as originals, the conformity to authentic original documents of documents submitted to us as copies and the accuracy and completeness of all corporate records and other information made available to us by the Company. We have further assumed that the Note Documents have been duly authorized, executed and delivered by, and are the legal, valid and binding obligations of, all parties thereto other than the Company.

As to questions of fact material to this opinion, we have relied upon the accuracy of the representations and warranties made by the parties in the Note Documents, and upon statements made to us in discussions with the Company’s management. Except as otherwise expressly indicated, we have not undertaken any independent investigation of factual matters.

Based on the foregoing, and subject to the qualifications, limitations and assumptions stated herein, in our opinion, the statements in the Registration Statement under the caption

“Material Federal Income Tax Consequences,” to the extent they constitute matters of law or legal conclusions, are accurate in all material respects.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement.

Very truly yours,

/s/ LINDQUIST & VENNUM PLLP

2

EX-12.1

Exhibit 12.1

Winmark Corporation

Ratio of Earnings to Fixed Charges

	Fiscal Year Ended
	12/31/2005	12/25/2004	12/27/2003	12/28/2002	12/29/2001
Fixed Charges
Interest Expensed/Capitalized	6,784	—	—	264,200	1,007,400
Amortized premiums/discounts	—	—	—	255,900	517,200
Est. rental expense interest	81,075	79,437	80,125	83,673	81,993
Subsidiaries Security Dividends	—	—	—	—
Total Fixed Charges	87,859	79,437	80,125	603,773	1,606,593
Earnings
Add:
Pretax income from Operations (before equity investments)	4,824,200	7,065,300	6,679,000	6,368,400	5,259,100
Fixed Charges	87,859	79,437	80,125	603,773	1,606,593
Amortization of Capitalized interest	—	—	—	—	—
Distributed income of Equity investees	—	—	—	—	—
Pretax losses of Equity investees for guarantees included in fixed charges	—	—	—	—	—
Less:
Interest Capitalized	—	—	—	—	—
Subsidiaries Security Dividends	—	—	—	—	—
Minority interest in pretax (income)/Loss of subsidiaries w/o fixed charges	—	—	—	—	—
Total Earnings	4,912,059	7,144,737	6,759,125	6,972,173	6,865,693
Ratio of Earnings to Fixed Charges	55.9	89.9	84.4	11.6	4.3

Winmark Corporation  

Estimated rental expense interest

(using 1/3 of lease payment)

		Fiscal Year Ended
		12/31/2005	12/25/2004	12/27/2003	12/28/2002	12/29/2001
Copier Leases
Loffler
I500	1/02 to 7/05	840	1,680	1,680	1,680
All others	6/03 to 6/05	702	1,404	702
Replacements
	7/05 to current	1,680
WCC	2/05 to current	1,500
IKON
OCE	Pre 2000 to 12/05	3,360	3,360	3,360	3,360	3,360
Others	Pre 2000 to 2/03			940	5,640	5,640
Others	3/03 to 8/03			450
BUILDING LEASE
August 2000 to current		72,993	72,993	72,993	72,993	72,993
(Base rent of $18,248.30 per month)
Total Estimated rental expense interest		81,075	79,437	80,125	83,673	81,993

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Winmark Corporation:

We consent to the use of our report dated February 16, 2006, with respect to the consolidated balance sheets of Winmark Corporation and subsidiaries as of December 31, 2005 and December 25, 2004, and the related consolidated statements of earnings, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2005, incorporated herein by reference and to the reference to our firm under the heading “Experts” in the prospectus.

Minneapolis, Minnesota

April 17, 2006

EX-25.1

Exhibit 25.1

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM T-1

STATEMENT OF ELIGIBILITY

UNDER THE TRUST INDENTURE ACT OF 1939 OF A

CORPORATION DESIGNATED TO ACT AS TRUSTEE

o CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b) (2)

WELLS FARGO BANK, NATIONAL ASSOCIATION

(Exact name of trustee as specified in its charter)

A National Banking Association	94-1347393
(Jurisdiction of incorporation or	(I.R.S. Employer
organization if not a U.S. national	Identification No.)
bank)
101 North Phillips Avenue
Sioux Falls, South Dakota	57104
(Address of principal executive offices)	(Zip code)

Wells Fargo & Company
Law Department, Trust Section
MAC N9305-175

Sixth Street and Marquette Avenue, 17^th Floor

Minneapolis, Minnesota 55479

(612) 667-4608

(Name, address and telephone number of agent for service)

WINMARK CORPORATION

(Exact name of obligor as specified in its charter)

Minnesota	41-1622691
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
4200 Dahlberg Drive, Suite 100
Golden Valley, Minnesota	55422-4837
(Address of principal executive offices)	(Zip code)

Renewable Unsecured Subordinated Notes

(Title of the indenture securities)

Item 1.General Information. Furnish the following information as to the trustee:

(a)Name and address of each examining or supervising authority to which it is subject.

Comptroller of the Currency

Treasury Department

Washington, D.C.

Federal Deposit Insurance Corporation

Washington, D.C.

Federal Reserve Bank of San Francisco

San Francisco, California 94120

(b)Whether it is authorized to exercise corporate trust powers.

The trustee is authorized to exercise corporate trust powers.

Item 2.Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation.

None with respect to the trustee.

No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13.

Item 15. Foreign Trustee.      Not applicable.

Item 16. List of Exhibits.       List below all exhibits filed as a part of this Statement of Eligibility.

Exhibit 1.	A copy of the Articles of Association of the trustee now in effect.*
Exhibit 2.	A copy of the Comptroller of the Currency Certificate of Corporate Existence and Fiduciary Powers for Wells Fargo Bank, National Association, dated February 4, 2004.**
Exhibit 3.	See Exhibit 2
Exhibit 4.	Copy of By-laws of the trustee as now in effect.***
Exhibit 5.	Not applicable.
Exhibit 6.	The consent of the trustee required by Section 321(b) of the Act.
Exhibit 7.	A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.
Exhibit 8.	Not applicable.
Exhibit 9.	Not applicable.

2

*Incorporated by reference to the exhibit of the same number to the trustee’s Form T-1 filed as exhibit 25 to the Form S-4 dated December 30, 2005 of Hornbeck Offshore Services LLC file number 333-130784-06.

**Incorporated by reference to the exhibit of the same number to the trustee’s Form T-1 filed as exhibit 25 to the Form T-3 dated March 3, 2004 of Trans-Lux Corporation file number 022-28721.

*** Incorporated by reference to the exhibit of the same number to the trustee’s Form T-1 filed as exhibit 25 to the Form S-4 dated May 26, 2005 of Penn National Gaming Inc. file number 333-125274.

3

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wells Fargo Bank, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Minneapolis and State of Minnesota on the 12^th day of April 2006.

WELLS FARGO BANK, NATIONAL ASSOCIATION

/s/ Jane Schweiger

Jane Y. Schweiger

Vice President

4

EXHIBIT 6

April 12, 2006

Securities and Exchange Commission

Washington, D.C. 20549

Gentlemen:

In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor.

Very truly yours,

WELLS FARGO BANK, NATIONAL ASSOCIATION

/s/ Jane Schweiger

Jane Y. Schweiger

Vice President

5

EXHIBIT 7

Consolidated Report of Condition of

Wells Fargo Bank National Association

of 101 North Phillips Avenue, Sioux Falls, SD 57104

And Foreign and Domestic Subsidiaries,

at the close of business December 31, 2005, filed in accordance with 12 U.S.C. §161 for National Banks.

		Dollar Amounts
		In Millions
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin		$	15,347
Interest-bearing balances		1,496
Securities:
Held-to-maturity securities		0
Available-for-sale securities		37,327
Federal funds sold and securities purchased under agreements to resell:
Federal funds sold in domestic offices		2,394
Securities purchased under agreements to resell		950
Loans and lease financing receivables:
Loans and leases held for sale		37,316
Loans and leases, net of unearned income	255,460
LESS: Allowance for loan and lease losses	2,122
Loans and leases, net of unearned income and allowance		253,338
Trading Assets		6,375
Premises and fixed assets (including capitalized leases)		3,846
Other real estate owned		173
Investments in unconsolidated subsidiaries and associated companies		377
Customers’ liability to this bank on acceptances outstanding		70
Intangible assets
Goodwill		8,735
Other intangible assets		13,074
Other assets		22,440
Total assets		$	403,258
LIABILITIES
Deposits:
In domestic offices		$	295,315
Noninterest-bearing	82,045
Interest-bearing	213,270
In foreign offices, Edge and Agreement subsidiaries, and IBFs		24,081
Noninterest-bearing	5
Interest-bearing	24,076
Federal funds purchased and securities sold under agreements to repurchase:
Federal funds purchased in domestic offices		12,959
Securities sold under agreements to repurchase		4,684

6

	Dollar Amounts
	In Millions
Trading liabilities	5,276
Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases)	5,267
Bank’s liability on acceptances executed and outstanding	70
Subordinated notes and debentures	7,830
Other liabilities	11,951
Total liabilities	$	367,433
Minority interest in consolidated subsidiaries	54
EQUITY CAPITAL
Perpetual preferred stock and related surplus	0
Common stock	520
Surplus (exclude all surplus related to preferred stock)	24,671
Retained earnings	10,249
Accumulated other comprehensive income	331
Other equity capital components	0
Total equity capital	35,771
Total liabilities, minority interest, and equity capital	$	403,258

I, Karen B. Martin, Vice President of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge

and belief.

Karen B. Martin

Vice President

We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct.

Dave Munio
John Stumpf	Directors
Avid Modjtabai

7

CORRESP

LINDQUIST & VENNUM P.L.L.P.

4200 IDS CENTER 80 SOUTH EIGHTH STREET MINNEAPOLIS, MN 55402-2274 TELEPHONE: 612-371-3211 FAX: 612-371-3207	IN DENVER: 600 17TH STREET, SUITE 1800 SOUTH DENVER, COLORADO 80202-5441 TELEPHONE: 303-573-5900 FAX: 303-573-1956
ATTORNEYS AT LAW	www.lindquist.com

JONATHAN B. LEVY

612-371-2412

jlevy@lindquist.com

April 19, 2006

VIA EDGAR CORRESPONDENCE
Securities and Exchange Commission
100 F. Street, NE
Washington D.C. 20549

Re:Winmark Corporation
Registration Statement on Form S-1

Ladies and Gentlemen:

On behalf of Winmark Corporation (the “Company”) and pursuant to the Securities Act of 1933, as amended (the “Act”), and the general rules and regulations under the Act, transmitted electronically herewith for filing via EDGAR is the Company’s Registration Statement on Form S-1 with exhibits. This Form S-1 relates to a shelf offering of up to $50 million in principal of renewable unsecured subordinated notes.

The filing fee for this registration statement is $5,350. The filing fee has been wired to the SEC’s account at the Mellon Bank in Pittsburgh, Pennsylvania.

If you have any questions or comments concerning the Registration Statement or desire any additional information, please contact me at (612) 371-2412.

Very truly yours,

LINDQUIST & VENNUM

/s/ Jonathan B. Levy

CC:Brett Heffes

Cate Heaven

Ed Elverud

Mike Kolar

Patrice Kloss