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 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.
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EXHIBIT 10.1 - continued
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.
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.
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EXHIBIT 10.1 - continued
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.
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.
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EXHIBIT 10.1 - continued
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.
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.
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EXHIBIT 10.1 - continued
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.
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.
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EXHIBIT 10.1 - continued
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.
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.
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EXHIBIT 10.1 - continued
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 8th day of May, 2004.
MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation
By: /s/ Leslie Boynton
-----------------------
Leslie Boynton
It's Vice President
WINMARK, INC., a Nevada corporation
By: /s/ Mark Winstein
--------------------
Mark Winstein
It's President
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