8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported):  January 29, 2020

Winmark Corporation

(Exact Name of Registrant as Specified in Its Charter)

Minnesota

(State or Other Jurisdiction of Incorporation)

| 000-22012 | 41-1622691 |

| --- | --- | | (Commission File Number) | (I.R.S. Employer Identification Number) |

605 Highway 169 North, Suite 400, Minneapolis, Minnesota 55441

(Address of Principal Executive Offices)  (Zip Code)

(763) 520-8500

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

| Title of each class | Trading Symbol\(s\) | Name of each exchange on which registered |

| --- | --- | --- | | Common Stock, no par value per share | WINA | Nasdaq Global Market |

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 5.02Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

On January 29, 2020, Winmark Corporation (the “Company”) announced in a press release that its current Executive Chairman, John L. Morgan, will retire as a Director and as Executive Chairman, effective March 1, 2020.  Additionally, the Company announced that its Board of Directors (the “Board”) has elected Brett D. Heffes, currently the Company’s Chief Executive Officer and Director, to the additional responsibility of Chairman of the Board, effective March 1, 2020.

A copy of the press release announcing Mr. Morgan’s retirement and Mr. Heffes’s appointment is attached as Exhibit 99.1 of this Current Report on Form 8-K.

On January 29, 2020, the Board authorized entry by the Company into a transition and retirement agreement (the “Agreement) with Mr. Morgan.  Under the Agreement, the Company will pay Mr. Morgan a lump sum of $667,000 on or before March 2, 2020.  Mr. Morgan has agreed to provide transition services to the Company and has agreed to a non-competition covenant for one year.

The foregoing description of the Agreement is qualified in its entirety by reference to the Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

Item 7.01Regulation FD Disclosure

On January 29, 2020, the Company announced in a press release that its Board of Directors has approved the payment of a cash dividend to its shareholders.  The quarterly dividend of $0.25 per share will be paid on March 2, 2020 to shareholders of record on the close of business on February 12, 2020.  Future dividends will be subject to Board approval.  A copy of the press release is attached as Exhibit 99.2 of this Current Report on Form 8-K.

Item 8.01Other Events

On January 29, 2020, the Company announced in a press release that its Board of Directors has approved the payment of a cash dividend to its shareholders. The quarterly dividend of $0.25 per share will be paid on March 2, 2020 to shareholders of record on the close of business on February 12, 2020.   Future dividends will be subject to Board approval.  A copy of the press release is attached as Exhibit 99.2 of this Current Report on Form 8-K.

Item 9.01Financial Statements and Exhibits

(d)Exhibits

| 10.1 | [Transition and Retirement Agreement, dated January 29, 2020, among Winmark Corporation and John L. Morgan](c315-20200129ex10162e090.htm) |

| --- | --- | | 99.1 | Press Release dated January 29, 2020 | | 99.2 | Press Release dated January 29, 2020 |

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

|  | WINMARK CORPORATION |  |

| --- | --- | --- | | Date: January  29, 2020 | By: | /s/Anthony D. Ishaug | | | Anthony D. Ishaug | | | | Chief Financial Officer and Treasurer | |

		Ex.10.1\_Resignation	

WINMARK CORPORATION

TRANSITION AND RETIREMENT AGREEMENT

THIS TRANSITION AND RETIREMENT AGREEMENT (“Transition Agreement” or “Agreement”) is made and entered into by and between Winmark Corporation, a Minnesota corporation (“Company”) and Mr. John L. Morgan (“you”) and will be effective as of January 29, 2020 (“Effective Date”).

RECITALS

WHEREAS, you are currently the Executive Chairman of the Company, a party to that certain employment Agreement with the Company dated as of March 22, 2000 as amended (“Employment Agreement”), and currently serve as a duly elected Director of the Board of Directors of the Company; and

WHEREAS, you have disclosed your intention to retire from the Company and resign from the Board of Directors; and

WHEREAS, you and the Company mutually terminate the Employment Agreement and to set forth in this Agreement the terms and conditions of transition and retirement from the Company, including certain transition payments to you and your continued availability for certain services to the Company;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agrees as follows: | 1. Transition Date; Termination Date.  You will continue to perform your current duties as Executive Chairman of the Company until March 1, 2020 (the “Transition Date”) and on that date, you will cease to be Executive Chairman and will be deemed to have resigned as an officer, employee, board member and from any fiduciary position of any employee benefit plan with the Company or any of its subsidiaries. | | --- | | 2. Transition Services. From the Transition Date until February 28, 2021 (the “Termination Date”), you agree to cooperate with the Company in connection with any transition services that the Company may reasonably request, and be available to the Company to serve as a senior adviser.  Following the Transition Date, you will cease to be an employee of the Company and any subsidiary. | | --- | | 3. Transition Payment. In consideration for your obligations under this Agreement, the Company will pay you a lump sum of $667,000 (the “Transition Payment”) on or before March 2, 2020.  Notwithstanding anything to the contrary, during the period from the Transition Date to the Termination Date, you agree that you shall not be eligible for, and will not receive, any compensation other than the payment set forth in this Section 3, the benefits set forth in Section 4 or any indemnification obligations of the Company. | | --- | | 4. Payment of Benefits; Covenants. | | --- | | a. Health and Dental Insurance.  The Company will continue to make contributions to your Company-sponsored medical and dental insurance plans at the same rate applying as of March 1, 2020, through March 31, 2020.  Effective April 1, 2020, you will have the option to continue your own benefit coverage under COBRA.  You acknowledge that $42,000 of the Transition Payment is for the purpose of continuation of medical and dental coverage should you choose to use it. | | --- |

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| b. 401(k) Retirement Savings Plan. You will be entitled to a distribution from your account in the Company’s qualified 401(k) Retirement Savings Plan and Trust.  You will receive information and forms for this purpose from Human Resources within two weeks of the Transition Date. | | --- | | c. Non-Disclosure.  During your employment and service to the Company, you received Confidential Information as defined below. “Confidential Information” means (a) all information relating to the development, distribution, pricing, marketing and sales of the Company’s products and services including but not limited to franchising and equipment leasing; (b) franchisee or customer lists, contact information, financial information and other information pertaining to existing and prospective franchisees or customers; (c) financial and other information relating to the operation of the Company generally; and (d) other private and confidential information which is a special and unique asset of the Company or information which if known to competitors or others outside of the Company would be harmful to the Company. You will not at any time directly or indirectly use, transfer or divulge any Confidential Information. | | --- | | d. Covenant Not to Compete.  You will not, from March 1, 2020 through February 28, 2021 (the “Restrictive Period”) directly or indirectly or as a partner, officer, director, shareholder, employee, independent contractor or consultant of any other person or entity engage in any business activity that is the same as or similar to the business conducted by the Company as of March 1, 2020 including but not limited to franchising and equipment leasing.  The restriction in this section shall apply within the geographic area in which the Company conducted business as of March 1, 2020. | | --- | | e. Injunctive Relief.  Both parties agree that a  violation of this Agreement could result in immediate and irreparable harm.  As such we agree that either party may apply for injunctive relief from a court of competent jurisdiction to prevent a threatened or continuing breach of such violation.  The prevailing party in any litigation related to this Agreement shall be entitled to any and all relief available at law, including but not limited,  to injunctive relief, damages, offset, suspension or the return of the benefits provided for in the Transition Agreement, costs, attorneys’ fees and costs of collection. | | --- | | 5. Indemnification and Directors; Officers Liability Insurance. You will be entitled to indemnification under the Company’s articles and bylaws and Minnesota corporate law, and you will be entitled to the benefit of coverage under the Company’s directors’ and officers’ liability insurance policies applicable to former officers and directors if eligible. | | --- | | 6. General Provisions. | | --- | | a. Amendments.  This Agreement may not be amended or modified except by a written agreement signed by both parties. | | --- | | b. Severability.  In the event that any provision or portion of this Agreement is determined to be invalid or unenforceable for any reason, the remaining provisions of this agreement will remain in full force and effect to the fullest extent permitted by law. | | --- | | c. Successors and Assigns.  This Agreement will bind and benefit the parties hereto and their respective successors and assigns, but none of either parties’ rights or obligations hereunder may be assigned by either party hereto without the written consent of the other, except by operation of law. | | --- | | d. Dispute Resolution. Any disputes arising under or in connection with this Agreement must be resolved by final and binding arbitration except for applications for injunctive relief. | | --- |

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| e. Tax Withholding; Code 409A.  The Transition Payment shall be reported as compensation and to the extent required, as “nonqualified deferred compensation” subject to Code § 409A and regulations promulgated thereunder.  The Transition Payment and other benefits to be provided to you in connection with this Agreement may be subject to required withholding of federal, state and local income, excise and employment-related taxes, and other deductions for benefits and other expenses. This Agreement and the payments and benefits provided, shall, to the greatest extent permitted by law be exempt from the requirements applicable to deferred compensation under Code § 409A and regulations promulgated thereunder, and to the extent not otherwise exempt, you and the Company intend that this Agreement comply with the requirements of Code § 409A and agree to administer and interpret this Agreement in manner consistent with, and that gives effect to, such intention. | | --- | | f. Notices.  Any notice or other communication under this Agreement must be in writing and will be deemed given when delivered in person, by overnight courier (with receipt confirmed), or upon receipt if sent by certified mail, return receipt requested, as follows (or to such other persons or addresses as may be specified by written notice to the other party): | | --- | | If to the Company: | | --- | | Winmark Corporation Inc. | | Attention:  Chief Executive Officer | | 605 Highway 169 North<br> <br>Minneapolis, Minnesota 55441, Suite 400<br> <br>(763)520-8500 | | If to you: | | Mr. John L. Morgan | | 3750 Las Vegas Blvd South, #3403<br> <br>Las Vegas, NV 89158 | | g. Entire Agreement.  Except as expressly provided for in this Agreement, the Agreement constitutes the entire agreement between the parties regarding the subject matter hereof and supersedes and terminates the Employment Agreement in the times and in the manners hereinabove and supersedes and terminates all other prior agreements with respect to the subject matter hereof. | | --- | | h. Governing Law.  This Agreement has been made in and will be governed and construed in accordance with the laws of the State of Minnesota without giving effect to the principles of conflict of laws of any jurisdiction. | | --- | IN WITNESS WHEREOF, you and a duly authorized officer by and on behalf of the Company have executed this Agreement as of the dates set forth below.

WINMARK CORPORATION

| /s |  |  |  |  |

| --- | --- | --- | --- | --- | | By: | /s/ Brett D. Heffes | | /s/ John L. Morgan | | | Its: Chief Executive Officer | | | John L. Morgan | | | Date: | | January 29, 2020 | Date: | January 29, 2020 |

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		Ex.99.1\_Resignation	

Contact:Brett D.  Heffes

763/520-8500

FOR IMMEDIATE RELEASE

WINMARK CORPORATION ANNOUNCES GOVERNANCE CHANGES

Minneapolis, MN (January 29, 2020)   Winmark Corporation (Nasdaq: WINA) announced today that current Executive Chairman, John L. Morgan, 78, will retire as a Director and as Executive Chairman, effective March 1, 2020.  Additionally, the Company announced that its Board of Directors has elected Brett D. Heffes, 52,  currently the Company’s Chief Executive Officer and Director since 2016, to the additional responsibility of Chairman of the Board of Directors, effective March 1, 2020.

Winmark Corporation creates, supports and finances business.  At December 28, 2019, there were 1,256 franchises in operation under the brands Plato's Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®.  An additional 38 retail franchises have been awarded but are not open.

Note Regarding Forward Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), relating to future events or the future financial performance of the Company.  Such forward-looking statements are only predictions or statements of intention subject to risks and uncertainties and actual events or results could differ materially from those anticipated.  Because actual result may differ, shareholders and prospective investors are cautioned not to place undue reliance on such forward-looking statements.

		Ex\_99.2\_8K\_Dividend	

Exhibit 99.2

Contact:Brett D. Heffes

763/520-8500

FOR IMMEDIATE RELEASE

WINMARK CORPORATION

ANNOUNCES CASH DIVIDEND

Minneapolis, MN (January 29, 2020)    Winmark Corporation (Nasdaq: WINA) announced today that its Board of Directors has approved the payment of a quarterly cash dividend to shareholders. The quarterly dividend of $0.25 per share will be paid March 2, 2020 to shareholders of record on the close of business on February 12, 2020.  Future dividends will be subject to Board approval.

Winmark Corporation creates, supports and finances business. At December 28, 2020, there were 1,256 franchises in operation under the brands Plato’s Closet®, Once Upon A Child®, Play It Again Sports®, Style Encore® and Music Go Round®. An additional 38 retail franchises have been awarded but are not open.