EXHIBIT 10.3
ESCROW AGREEMENT
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, is made and entered into as of the 28th day of
February, 2001, by and among Private Bank Minnesota, a Minnesota banking
corporation with principal offices at 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxxxx, Xxxxxxxxx 00000 (the "Escrow Agent"), DAMARK International, Inc., a
Minnesota corporation (the "Company"), and the investors listed on the Schedule
of Buyers attached hereto (individually, a "Buyer" and collectively, the
"Buyers").
WHEREAS, the Company and Buyers have entered into a Securities Purchase
Agreement (the "Purchase Agreement"), under which the Company will issue an
aggregate of up to $20,000,000 principal amount of its 10% Senior Convertible
Notes due August 26, 2001 (the "Notes").
WHEREAS, pursuant to the Purchase Agreement and related documents, the
Company and the Buyers have agreed to provide for the escrow of all amounts in
excess of $10,000,000 from the sale of the notes (the "Escrow Payment Amounts")
as set forth on Exhibit A.
WHEREAS, the Company, the Escrow Agent and the Buyers desire to enter
into an agreement with respect to the escrow of the Escrow Payment Amounts and
agree to be bound by the terms and conditions of this Agreement;
WHEREAS, the Escrow Agent hereby acknowledges receipt of the Escrow
Payment Amounts.
NOW, THEREFORE, the parties agree as follows:
1. TERM OF ESCROW. The term of this Agreement shall begin on the
Escrow Funding Date and end on the date of the release of the final Escrow
Payment Amount in accordance with Section 3 of this Agreement.
2. DELIVERY OF THE ESCROW PAYMENT AMOUNTS. The Escrow Payment Amounts
shall be wired to the Escrow Agent by the respective Buyers in the amounts set
forth on Exhibit A.
3. CONDITIONS FOR RELEASE FROM ESCROW. Upon the satisfaction of both
of the following conditions: (i) the Company's obtaining the Required
Shareholder Approval as defined in Section 4(b)(vi) of the Notes and (ii) the
Company causing the Registration Statement registering the shares underlying the
Notes to be declared effective by the Securities and Exchange Commission, the
Company and the Buyers shall authorize, by written instructions signed by the
Company and each Buyer, the Escrow Agent to pay over to the Company the Escrow
Payment Amounts. Such written instructions may bear facsimile signatures and the
Escrow Agent is hereby authorized to act upon written instructions bearing
facsimile signatures.
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In the event that the Escrow Agent has not received written instructions as set
for in the first sentence of this Section 3 prior to August 26, 2001, the Escrow
Agent shall return the funds to the respective Buyers in the amount set forth in
Exhibit A.
4. DUTY AND LIABILITY OF THE ESCROW AGENT. The sole duty of the
Escrow Agent, other than as herein specified, shall be to receive the funds and
hold them subject to release, as provided in this Escrow Agreement. The Escrow
Agent may conclusively rely upon and shall be protected in acting upon any
statement, certificate, notice, request, consent, order or other document
believed by it to be genuine and to have been signed or presented by the proper
party or parties, as set forth in this Escrow Agreement. The Escrow Agent shall
be under no obligation to institute or defend any action, suit or proceeding in
connection with this Escrow Agreement unless first indemnified to its
satisfaction. The Escrow Agent may consult counsel in respect of any question
arising under this Escrow Agreement and the Escrow Agent shall not be liable for
any action taken or omitted in good faith upon advice of such counsel. All funds
held by the Escrow Agent pursuant to this Escrow Agreement shall constitute
trust property for the purposes for which they are held subject to no right of
offset.
5. INDEMNIFICATION OF ESCROW AGENT. The Company and the Buyers,
jointly and severally, agree to indemnify the Escrow Agent and hold it harmless
against any and all liabilities and expenses, including without limitation, the
reasonable fees and expenses of its counsel, incurred by it as a result of
claims made against the Escrow Agent in connection with its activities
hereunder, except for liabilities incurred by the Escrow Agent resulting from
its own willful misconduct or gross negligence. Any payments made pursuant to
this Section 5 in settlement of any claims by the Escrow Agent are subject to
the prior approval of both the Company and Buyers and neither the Company nor
Buyers shall be liable for any claims settled by the Escrow Agent without such
prior approval.
6. ESCROW AGENT'S FEE. The Escrow Agent shall be entitled to receive
from the Company $1,000 as reasonable compensation for its services as
contemplated herein. The fee agreed upon for services rendered hereunder is
intended as full compensation for the Escrow Agent's services as contemplated by
this Agreement; PROVIDED, HOWEVER, in the event that there is any material
modification hereof, or if any material controversy arises hereunder, or the
Escrow Agent is made a party to or justifiably intervenes in any litigation
pertaining to this Escrow Agreement, or the subject matter hereof, the Escrow
Agent shall be reimbursed for all costs and expenses, including reasonable
attorneys' fees, occasioned by any delay, controversy, litigation or event, and
the same shall be paid by the Company.
7. INVESTMENT OF FUNDS. Unless otherwise agreed in writing by the
Company and the Buyers, all amounts held by the Escrow Agent shall be invested
in money-market funds or treasury bills, and other short-term, investment grade,
interest-bearing instruments with original maturities of 90 days or less.
8. BINDING AGREEMENT AND SUBSTITUTION OF ESCROW. The terms and
conditions of this Agreement shall be binding on the assigns, transferees, and
successors in interest, whether by operation of law or otherwise, of the parties
hereto. If, for any reason, the Escrow Agent should be unable or unwilling to
continue to act as escrow agent hereunder, then, upon 30 days' prior
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notice to the Company and the Buyers, the Company and the Buyers may substitute
another escrow agent which is a bank or trust company charted under the laws of
the United States or the State of Minnesota, and doing business in the
Minneapolis/Saint Xxxx, Minnesota metropolitan area which is mutually acceptable
to the Company and Buyers.
9. GOVERNING LAW. This Escrow Agreement shall be governed by, and
construed under and pursuant to the laws of the State of Minnesota, without
regard to principles of conflicts of laws.
10. TERMINATION OF AGREEMENT. This Escrow Agreement shall terminate in
its entirety when all Escrow Payment Amounts have been released in accordance
with Section 3.
11. COUNTERPART SIGNATURES. This Escrow Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of the date first above written.
COMPANY: DAMARK INTERNATIONAL, INC.
BY /s/
------------------------------------------------
ITS
---------------------------------------------
ESCROW AGENT: PRIVATE BANK MINNESOTA
BY /s/
------------------------------------------------
ITS
---------------------------------------------
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BUYERS: XXXXX TRADING (WISCONSIN)
BY /s/
------------------------------------------------
ITS
---------------------------------------------
SHEPHERD INVESTMENTS
INTERNATIONAL, INC.
(BRITISH VIRGIN ISLANDS)
BY /s/
------------------------------------------------
ITS
---------------------------------------------
WOODVILLE LLC
BY /s/
------------------------------------------------
ITS
-----------------------------------------------
CALM WATERS LIMITED
BY /s/
------------------------------------------------
ITS
---------------------------------------------
/s/
--------------------------------------------------
XXXXXX X. XXXXXX
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Exhibit A
Schedule of Buyers
Principal Amount Paid At Net Amount Net Amount
Amount of Closing to Paid to Allocated to Amount
Senior Company (the Escrow Escrow Two paid to
Convertible "Company Account Account after Percent Xxxxx-
Notes (the Payment allocation of paid to Xxxxxx
Investor Address, "Principal Amount") $77,500 in Purchaser
Telephone and Amount") legal fees)
Investor Name Facsimile Number ("Escrow
Payment
Amount")
------------------------------------------------------------------------------------------------------------------------------------
XXXXX TRADING C/X XXXXX ASSET $2,500,000 $1,760,000 $ 526,250 $ 551,356 $ 50,000 $ 125,000
(WISCONSIN) MANAGEMENT ($38,750 PAID
0000 XXXX XXXXXX TO XXXXXXX
XXXXXX XXXX & XXXXX,
XXXXXX, XX 00000 LLP)
FAX: (000) 000-0000
SHEPHERD C/X XXXXX ASSET $2,500,000 $1,760,000 $ 551,356 $ 50,000 $ 125,000
INVESTMENTS MANAGEMENT $ 526,250
INTERNATIONAL, LTD 0000 XXXX XXXXXX ($38,750 PAID
(BRITISH VIRGIN STREET TO XXXXXXX
ISLANDS) XXXXXX, XX 00000 XXXX & XXXXX,
FAX: (000) 000-0000 LLP)
WOODVILLE LLC XXXXX-XXXXXX $2,000,000 $1,408,000 $ 452,000 $ 441,085 $ 40,000 $ 100,000
CAPITAL GROUP
000 XXXXX 0XX
XXXXXX
XXXXX 0000
XXXXXXXXXXX, XX
00000
ATTENTION: XXXX
XXXXX
FAX: (000) 000-0000
CALM WATERS LIMITED STRONG CAPITAL $7,000,000 $4,928,000 $1,582,000 $1,543,796 $ 350,000 $ 140,000
MANAGEMENT
000 XXXXXXXX
XXXXXXX
XXXXXXXXX XXXXX,
XX 00000
ATTENTION: XXXXXX
XXXXXX
FAX: (000) 000-0000
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XXXXXX X. XXXXXX STRONG CAPITAL $ 200,000 $ 140,800 $ 45,200 $ 44,108 $ 10,000 $ 4,000
MANAGEMENT
000 XXXXXXXX
XXXXXXX
XXXXXXXXX XXXXX,
XX 00000
ATTENTION: XXXXXX
XXXXXX
FAX: (000) 000-0000
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