EXHIBIT 10.1
Escrow Agreement
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is made by and between the
Manufacturers and Traders Trust Company, a New York banking corporation., with
its principal office located at One M & T Plaza, Buffalo New York 14203 (the
"Escrow Agent"), and Winmark, Inc., a Nevada corporation, with its principal
office located at 607 E Street, S.E. Washington, D.C. 20003 (the "Issuer").
W I T N E S S E T H :
WHEREAS, the Issuer has filed with the Securities and Exchange Commission
(the "Commission"), Washington, D.C., an SB-2 Registration Statement, as amended
(the Registration Statement"), and related Prospectus, File No. 333-112163, in
connection with an initial public offering of the Issuer's securities,
comprising 500,000 shares of the Issuer's common stock to be sold at a price of
$0.10 per share (the "Securities"), which shall not exceed 50 subscribers;
WHEREAS, the Issuer proposes to offer the Securities to the public on a
"best efforts, all or none" basis as set forth in the Registration Statement;
WHEREAS, the Issuer proposes to establish an escrow account (the "Escrow
Account"), to which subscription funds which are received by the Escrow Agent in
connection with such public offering are to be credited, and the Escrow Agent is
willing to establish the Escrow Account on the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, the Escrow Agent will establish an Escrow Account into which the
subscription funds, which are received by the Escrow Agent and credited to the
Escrow Account, are to be deposited.
NOW, THEREFORE, for and in consideration of the promises and mutual
covenants herein contained, and other valuable consideration, the parties hereto
hereby agree as follows:
1.0 THE REGISTRATION STATEMENT.
1.1 The Issuer has filed the Registration Statement with the Commission
and is included herein as Exhibit A to this Agreement, and is made a
part hereof.
2.0 ESTABLISHMENT OF THE ESCROW ACCOUNT.
2.1 The Issuer shall establish a non-interest-bearing Escrow Account at
the Escrow Agent. The purpose of the Escrow Account is for (a) the
deposit of all subscription funds (checks or wire transfers) which are
received by the Issuer from prospective purchasers of the Securities
and are delivered by the Issuer to the EscrowAgent; (b) the holding of
amounts of subscription funds which are collected through the banking
system, and (c) the disbursement of collected funds, all as described
herein.
2.2 On or before the date of the initial deposit in the Escrow Account
pursuant to this Agreement, the Issuer shall notify the Escrow Agent
in writing of the effective date (the "Effective Date") of the
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ESTABLISHMENT OF THE ESCROW ACCOUNT - continued
Registration Statement, and the Escrow Agent shall not be required to
accept any amounts for credit to the Escrow Account or for deposit in
the Escrow Account prior to its receipt of such notification.
2.3 The offering period (the "Offering Period"), which shall be deemed to
commence on the Effective Date, shall consist of the number of
calendar days or business days as set forth in the Registration
Statement. The Offering Period shall be extended by an extension
period only if the Escrow Agent shall have received written notice
thereof at least five business days prior to the expiration of the
Offering Period. The extension period, which shall be deemed to
commence the next calendar day following the expiration of the
Offering Period, shall consist of the number of calendar days or
business days set forth in the Registration Statement. The last day of
the Offering Period, or the last day of the extension period, is
referred to herein as the "Termination Date." Except as provided in
Section 4.3 hereof, after the Termination Date, the Issuer shall not
deposit, and the Escrow Agent shall not accept, any additional amounts
representing payments by prospective purchasers.
3.0 DEPOSITS TO THE ESCROW ACCOUNT.
3.1 The Issuer shall promptly deliver to the Escrow Agent all funds which
it receives from prospective purchasers of the Securities, which funds
shall be in the form of checks or wire transfers. Upon the Escrow
Agent's receipt of such funds, they shall be credited to the Escrow
Account. All checks delivered to the Escrow Agent shall be made
payable to the " Manufacturers and Traders Trust Company/Winmark, Inc.
Escrow Account." Any checks payable other than to the Escrow Agent as
required hereby shall be returned to the prospective purchaser.
3.2 Promptly after receiving subscription funds as described in Section
3.1, the Escrow Agent shall deposit the same into the Escrow Account.
Amounts of funds so deposited are hereinafter referred to as "Escrow
Amounts." The Escrow Agent shall cause to process all Escrow Amounts
for collection through the banking system. Simultaneously with each
deposit to the Escrow Account, the Issuer shall inform the Escrow
Agent in writing of the name, address and social security number of
the prospective purchaser, the amount of Securities subscribed for by
such purchaser, and the aggregate dollar amount of such subscription
(collectively, the "Subscription Information").
3.3 The Escrow Agent shall not be required to accept for credit to the
Escrow Account checks which are not accompanied by the appropriate
Subscription Information. Wire transfers and cash representing
payments by prospective purchasers shall not be deemed deposited in
the Escrow Account until the Escrow Agent has received in writing the
Subscription Information required with respect to such payments.
3.4 The Escrow Agent shall not be required to accept in the Escrow Account
any amounts representing payments by prospective purchasers, whether
by check, or wire, except during the Escrow Agent's regular business
hours.
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DEPOSITS TO THE ESCROW ACCOUNT - continued
3.5 Only those Escrow Amounts, which have been deposited in the Escrow
Account and which have cleared the banking system and have been
collected by the Escrow Agent, are herein referred to as the "Fund."
3.6 If the proposed offering is terminated before the Termination Date,
the Escrow Agent shall refund any portion of the Fund prior to
disbursement of the Fund in accordance with Article 4 hereof upon
instructions in from the Issuer.
4.0 DISBURSEMENT FROM THE ESCROW ACCOUNT.
4.1 Subject to Section 4.3 below, if by the close of regular banking hours
on the Termination Date the Escrow Agent determines that the amount in
the Fund is less than the minimum amount of the offering, then the
Escrow Agent shall promptly refund to each prospective purchaser the
amount of payment received from such purchaser which is then held in
the Fund or which thereafter clears the banking system, without
interest thereon or deduction therefrom, by drawing checks on the
Escrow Account for the amounts of such payments and mail them to the
purchasers. In such event, the Escrow Agent shall promptly notify the
Issuer of its distribution of the Fund.
4.2 The terms of the offering must provide, and the Issuer must satisfy,
the following conditions:
within five business days after the effective date of the post-effective
amendment, the Issuer shall send by first class mail to each purchaser of
securities held in escrow, a copy of the prospectus contained in the
post-effective amendment and any amendment or supplement thereto;
each purchaser shall have no fewer than 20 business days and no more than
45 business days from the effective date of the post-effective amendment to
notify the Issuer in writing that the purchaser elects to remain an investor. If
the Issuer has not received such written notification by the 45th business day
following the effective date of the post-effective amendment, funds and interest
or dividends, if any held in escrow shall be sent by first class mail or other
equally prompt means to the purchaser within five business days; the acquisition
meeting the criteria set forth above will be consummated if a sufficient number
of purchasers confirm their investment with the Issuer; and if a consummated
acquisition meeting the requirements above has not ccurred by a date 18 months
after the effective date of the Issuer's initial registration statement, funds
held in escrow shall be returned by first class mail to the purchasers with five
business days following that date. Issuer shall promptly notify Escrow Agent if
any of the above conditions are not timely satisfied.
Funds held in the escrow account may be released to the Issuer and
securities may be delivered to the purchaser only at the same time as or after:
the escrow agent has received a signed representation from the Issuer,
together with other evidence acceptable to the escrow agent, that the
requirements of paragraphs (e)(1) and (e)(2) of Rule 419 have been met; and
the escrow agent has received a signed representation from the Issuer,
together with other evidence acceptable to the escrow agent, that the
requirements of paragraph (e)(2)(iii) of Rule 419 have been met.
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DISBURSEMENT FROM THE ESCROW ACCOUNT - continued
4.3 If the Escrow Agent has on hand at the close of business on the
Termination Date any uncollected amounts which when added to the Fund
would raise the amount in the Fund to the minimum offering amount, and
result in the Fund representing the sale of the minimum offering
amount, the Collection Period, consisting of the number of business
days set forth in the Registration Statement, shall be utilized to
allow such uncollected funds to clear the banking system.
4.4 Upon disbursement of the Fund pursuant to the terms of this Article 4,
the Escrow Agent shall be relieved of all further obligations and
released from all liability under this Agreement. It is expressly
agreed and understood that in no event shall the aggregate amount of
payments made by the Escrow Agent exceed the amount of the Fund.
5.0 RIGHTS, DUTIES AND RESPONSIBILITIES OF THE ESCROW AGENT; INDEMNIFICATION.
5.1 The Escrow Agent shall notify the Issuer on a regular basis of the
escrow amounts which have been deposited in the Escrow Account and of
the amounts, constituting the Fund, which have cleared the banking
system and have been collected by the Escrow Agent.
5.2 The Escrow Agent shall not be responsible for or be required to
enforce any of the terms or conditions of the Agreement with respect
to the Issuer.
5.3 The Escrow Agent shall not be required to accept from the Issuer any
subscription information pertaining to prospective purchasers unless
such Subscription Information is accompanied by checks or wire
transfers meeting the requirement of Section 3.1, nor shall the Escrow
Agent be required to keep records of any information with respect to
payments deposited by the Issuer, except as to the amount of such
payments; however, the Escrow Agent shall notify the Issuer within a
reasonable time of any discrepancy between the amount set forth in any
subscription information and the amount delivered to the Escrow Agent
therewith. Such amount need not be accepted for deposit in the Escrow
Agent until such discrepancy has been resolved.
5.4 The Escrow Agent shall be under no duty or responsibility to enforce
collection of any check delivered to it hereunder. The Escrow Agent,
within a reasonable time, shall return to the Issuer any check
received which is dishonored, together with the Subscription
Information which accompanied such check.
5.5 The Escrow Agent shall be entitled to rely upon the accuracy, act in
reliance upon the contents, and assume the genuineness of any notice,
instruction, certificate, signature, instrument or other document
which is given to the Escrow Agent by the Issuer pursuant to this
Agreement without the necessity of the Escrow Agent verifying the
truth or accuracy thereof. The Escrow Agent shall not be obligated to
make any inquiry as to the authority, capacity, existence or identity
of any person purporting to give any such notice or instructions or to
execute any such certificate, instrument or other document.
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DISBURSEMENT FROM THE ESCROW ACCOUNT - continued
5.6 If the Escrow Agent is uncertain as to its duties or rights hereunder
or shall receive instructions with respect to the Escrow Account, the
escrow amounts of the Fund which, in its sole determination, are in
conflict either with other instructions received by it or with any
provision of this Agreement, it shall be entitled to hold the escrow
amounts, the Fund or a portion thereof, in the Escrow Account pending
the resolution of such uncertainty to the Escrow Agent's sole
satisfaction, by final judgment of a court of competent jurisdiction
or otherwise; or the Escrow Agent, at its sole option, may deposit
with the Clerk of a court of competent jurisdiction in a proceeding to
which all parties in interest are joined. Upon the deposit by the
Escrow Agent of the Fund with the Clerk of any court, the Escrow Agent
shall be relieved of all further obligations and released from all
liability hereunder.
5.7 The Escrow Agent shall not be liable for any action taken or omitted
hereunder, or for the misconduct of any employee, agent or attorney
appointed by it, except in the case of willful misconduct or gross
negligence. The Escrow Agent shall be entitled to consult with counsel
of its own choosing and shall not be liable for any action taken,
suffered or omitted by it in accordance with the advice of such
counsel.
5.8 The Escrow Agent shall have no responsibility at any time to ascertain
whether or not any security interest exists in the escrow amounts, the
Fund or any part thereof or to file any financing statement under the
Uniform Commercial Code with respect to the Fund or any part thereof.
5.9 The Corporation agrees to indemnify the Escrow Agent and its officers,
directors, employees, agents, and shareholders (jointly and severally,
the "Indemnitees") against, and hold them harmless of and from, any
and all losses, liabilities, costs, damages, and expenses, including,
but not limited to, reasonable fees and disbursements for counsel of
its own choosing (collectively, "Liabilities"), that the Indemnitees
may suffer or incur and which arise out of or relate to this Agreement
or any transaction to which this Agreement relates, unless such
Liability is the result of the willful rnisconduct or gross negligence
of the Indemnitees.
5.10 If the indemnification provided for in this Section 5 is applicable
but is held to be unavailable, the Corporation shall contribute such
amounts as are just and equitable to pay or to reimburse the
Indemnitees for the aggregate of any and all Liabilities actually
incurred by the Indemnitees as a result of or in connection with any
amount paid in settlement of any action, claim, or proceeding arising
out of or relating in any way to any actions or omissions of the
Corporation.
5.11 The provisions of this Section 5 shaI1 survive any termination of this
Agreement, whether by disbursement of the Fund, resignation of the
Escrow Agent, or otherwise.
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6.0 AMENDMENT; RESIGNATION.
6.1 This Agreement may be altered or amended only with the written consent
of the parties hereto. The Escrow Agent may resign for any reason upon
five business days' written notice to the Issuer. Should the Escrow
Agent resign as herein provided, it shall not be required to accept
any deposit, make any disbursement or otherwise dispose of the escrow
amounts, but its only duty shall be to hold the escrow accounts until
they clear the banking system and the Fund for a period of not more
than five business days following the effective date of such
resignation, at which time (a) if a successor escrow agent shall have
been appointed and written notice thereof shall have been given to the
resigning escrow agent by the Issuer and such successor escrow agent,
then the resigning escrow agent shall pay over to the successor escrow
agent the Fund, less any portion thereof previously paid out in
accordance with this Agreement; or (b) if the resigning escrow agent
shall not have received written notice signed by the Issuer and a
successor escrow agent, then the resigning escrow agent shall promptly
refund the amount in the Fund to each prospective purchaser, without
interest thereon or deduction therefrom, and the resigning Escrow
Agent shall promptly notify the Issuer of its liquidation and
distribution of the Fund; whereupon, in either case, the Escrow Agent
shall be relieved of all further obligations and released from all
liability under this Agreement. Without limiting the provisions of
Section 8 hereof, the resigning Escrow Agent shall be entitled to be
reimbursed by the Issuer for any expenses incurred in connection with
its resignation, transfer of the Fund to a successor escrow agent or
distribution of the Fund pursuant to this Section 6.
7.0 REPRESENTATIONS AND WARRANTIES.
7.1 The Issuer represents and warrants to the Escrow Agent that no party
other than the parties hereto and the prospective purchasers have, or
shall have, any claim or security interest in the Fund or any part
thereof.
7.2 No financing statement under the Uniform Commercial Code is on file in
any jurisdiction claiming a security interest in or describing the
Fund or any part thereof.
7.3 The Subscription Information submitted with each deposit shall, at the
time of submission and at the time of the disbursement of the Fund, be
deemed a representation and warranty that such deposit represents a
bona fide payment by the purchaser described therein for the amount of
Securities set forth in such Subscription Information.
7.4 All of the information contained in the Registration Statement is, as
of the date hereof, and will be, at the time of any disbursement of
the Fund, true and correct.
8.0 FEES AND EXPENSES.
8.1 The Escrow Agent shall be entitled to an acceptance fee of $2,000 and
an annual administrative fee of $2,000, payable upon the execution of
this Agreement. In addition, the Issuer agrees to reimburse the Escrow
Agent for any reasonable fees and expenses incurred in connection with
this Agreement, including, but not limited to, disbursement fees not
to exceed $50 per subscriber in excess of 15 subscribers.
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9.0 GOVERNING LAW AND ASSIGNMENT.
9.1 This Agreement shall be construed in accordance with and governed by
the laws of the State of New York shall be binding upon the parties
hereto and their respective successors and assigns; provided, however,
that any assignment or transfer by any party of its rights under this
Agreement or with respect to the Fund shall be void as against the
Escrow Agent unless (a) written notice thereof shall be given to the
Escrow Agent; and (b) the Escrow Agent shall have consented in writing
to such assignment or transfer.
10.0 NOTICES.
10.1 All notices required to be given in connection with this Agreement
shall be sent by registered or certified mail, return receipt
requested, or by hand delivery with receipt acknowledged, or by
Express Mail service offered by the United States Post Office to the
addresses set forth in the beginning of this Agreement or such other
address as the parties hereto may designate.
11.0 SEVERABILITY.
11.1 If any provision of this Agreement or the application thereof to any
person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Agreement or the
application of such provision to persons of circumstances other than
those to which it is held invalid or unenforceable shall not be
affected thereby and shall be valid and enforceable to the fullest
extent permitted by law.
12.0 EXECUTION IN SEVERAL COUNTERPARTS; ENTIRE AGREEMENT.
12.1 This Agreement may be executed in several counterparts or by separate
instruments, all of such counterparts and instruments shall constitute
one agreement, binding on all of the parties hereto.
12.2 This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, written or oral, of the parties
in connection therewith.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
upon proper legal authority as of the _____ day of May, 2004.
MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation
By: ___________________________
Its:____________________________
WINMARK, INC., a Nevada corporation
By: ______________________________
Mark Winstein, its President
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