EXHIBIT 3.1
BONUS SHARES ESCROW AND PLEDGE AGREEMENT
THIS AGREEMENT dated the ____ day of December, 1998.
AMONG:
SONIC SYSTEMS CORPORATION,
a Delaware corporation
(the "Depositor ")
AND:
SONIC SYSTEMS CORPORATION
Xxxxx 000-0000 Xxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X 0X0
(the "Company ")
AND:
THE SHAREHOLDERS OF THE COMPANY
more particularly described in Section 2.01 (b) below
(the "Shareholders")
WHEREAS:
A. The Depositor issued 2,500,000 shares of common stock (the "Escrowed
Shares") pursuant to the terms of a stock exchange agreement (the
"Stock Exchange Agreement") dated November 18, 1998 between the
Depositor and the Company;
B. The Escrowed Shares are deposited under this Escrow Agreement for the
benefit of the Company and the Shareholders pursuant to the terms of
this Escrow Agreement; and
C. A total of 700,000 Escrowed Shares shall be pledged to the Depositor as
security for representations, warranties, and covenants of the Company
set out in the Stock Exchange Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
of the respective covenants and agreements hereinafter contained and good and
other valuable consideration (the receipt and sufficiency whereof is hereby
acknowledged by the parties hereto), the parties hereto covenant and agree each
with the other as follows:
1.01 DEPOSIT AND TRANSFER OF BONUS SHARES
The Depositor hereby transfers to the Company all right, title, and interest in
and to the Escrowed Shares and deposits with Xxxxxxx & Xxxxx, P.L.L.C., Columbia
Center, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx, 00000-0000 (the
"Escrow Agent") certificates representing the Escrowed Shares, duly registered
in the name of the Company.
2.01 RELEASE FROM ESCROW
The Company shall have complete authority with respect to determining when the
Escrowed Shares are to be released from the terms of this Escrow Agreement, to
whom the Escrowed Shares are to be released from the terms of this Escrow
Agreement, and in what quantities the Escrowed Shares are to be released from
the terms of this Escrow Agreement, subject only to the following terms:
(a) 700,000 Escrowed Shares ("Indemnity Shares") shall be held in escrow
pursuant to the terms of this Escrow Agreement until the ________ day
of June, 2000, at which time and thereafter 420,000 Indemnity Shares
may be released from the terms of this Escrow Agreement and thereafter
an additional 70,000 Indemnity Shares may be released from the terms of
this Escrow Agreement on and after each of the _____ day of September,
2000, December, 2000, March, 2001,and June, 2001;
(b) 1,800,000 Escrowed Shares shall be held in escrow pursuant to the terms
of this Escrow Agreement until the ________ day of December, 1999, at
which time and thereafter 720,000 Escrowed Shares may be released from
the terms of this Escrow Agreement and thereafter an additional 180,000
Escrowed Shares may be released from the terms of this Escrow Agreement
on and after each of the _____ day of March, 2000, June, 2000,
September, 2000, December, 2000, March, 2001,and June, 2001; and
(c) One Escrowed Share which is not an Indemnity Share shall be issued
(subject to the terms of this Escrow Agreement) to those shareholders
of the Company (the "Shareholders") for every four (no fractional
shares will be issued) shares of common stock of the Depositor issued
to the Shareholders pursuant to the Offer (as defined in the Stock
Exchange Agreement), other than with respect to (i) the shares of
common stock issued pursuant to the tendering of securities of the
Company issued at a cost of $0.01, and (ii) the shares of common stock
issued for securities of the Company pursuant to a compulsory
acquisition procedure or subsequent acquisition transaction.
3.01 PLEDGE
The Company hereby assigns, mortgages, charges, hypothecates and pledges to and
in favour of the Depositor, all of the Indemnity Shares subject to the terms of
this Escrow Agreement as security for Losses (as defined in the Stock Exchange
Agreement) incurred as a result of a Cause Event (as defined in the Stock
Exchange Agreement).
4.01 REORGANIZATION
In the event of any reorganization (whether affecting the share capital or
corporate reorganization or otherwise) of the Depositor, the term "Indemnity
Shares" shall be deemed to refer to the Indemnity Shares described in Section
2.01 (a) hereof, as affected by such reorganization.
5.01 COVENANT OF COMPANY AND SHAREHOLDERS
Each of the Company and the Shareholders hereby covenants with the Depositor
that during the term of this Escrow Agreement neither the Company nor the
Shareholders will, without the written consent of the Depositor, sell, assign,
transfer, dispose of, pledge or encumber in any way the Escrowed Shares or
Indemnity Shares that have not been released pursuant to the terms of this
Escrow Agreement.
6.01 ENFORCEMENT BY DEPOSITOR
If any Losses (as defined in the Stock Exchange Agreement) are incurred by the
Depositor after the Closing Date (as defined in the Stock Exchange Agreement)
from a Cause Event (as defined in the Stock Exchange Agreement), then that
number of Indemnity Shares equal in value to the Losses (based on the price per
share as of the date of occurrence of facts or circumstances giving rise to the
Cause Event), which are security under this Escrow Agreement (and have not been
previously released pursuant to the terms of this Escrow Agreement), shall
become immediately enforceable by the Depositor, and in such event that number
of Indemnity Shares shall be released from this Escrow Agreement and all right s
thereto, including certificates therefor, shall be immediately transferred and
delivered to the Depositor.
7.01 RIGHTS OF DEPOSITOR
At any time after all or a portion of the security constituted by this Escrow
Agreement shall become enforceable as provided herein, the Depositor shall be
entitled to:
(a) exercise any and all corporate rights and exercise any and all rights
of conversion, exchange, subscription or other rights, privileges or
options pertaining to the Indemnity Shares subject to enforcement
rights under this Escrow Agreement as the absolute owner thereof; and
(b) exercise any and all rights and remedies provided by applicable law.
8.01 TERMINATION OF PLEDGE
On ______ day of June, 2001 any security created and granted under this Escrow
Agreement shall terminate and any Indemnity Shares not subject to enforcement
rights under this Escrow Agreement shall become and be free and clear of the
mortgage, pledge and charge hereof. In that event the Company shall be entitled
to the delivery of all certificates, powers of attorneys, instruments and other
documents for the Indemnity Shares not subject to enforcement rights under this
Escrow Agreement.
9.01 RIGHTS OF PLEDGORS
Until the security constituted by this Escrow Agreement shall have become
enforceable as provided in Section 6.01 hereof, the Company shall be entitled to
exercise all rights and privileges (including voting the Indemnity Shares at any
meeting of, and with respect to any action taken by, the Company as holders of
the Indemnity Shares) and to receive all benefits to which the Company are
entitled by virtue of being the owners and registered owners of the Indemnity
Shares.
10.01 COSTS AND EXPENSES
All costs and charges incurred by or on behalf of the Depositor with reference
to the Indemnity Shares or the realization thereof (including, without
limitation, all legal fees and court costs and all expenses of realizing upon
the security including without limitation, costs and charges in connection with
realizing, collecting, selling, transferring, or delivering the Indemnity Shares
or exercising or enforcing its rights thereunder) shall be added to and form a
part of the obligations of the Company and shall be a first charge upon the
proceeds of any such realization, collection, sale, transfer or delivery, or
exercise.
11.01 EXCLUSIVE REMEDY
The Depositor shall have no other recourse against the Shareholders or the
Company other than any rights in and to the Indemnity Shares which the Depositor
holds under this Pledge Agreement.
12.01 NO MERGER
The security hereby constituted shall not operate by way of merger of any of the
Stock Exchange Agreement and no judgment recovered by the Depositor shall
operate by way of merger of or in any way affect the security of the Indemnity
Shares which is in addition to and not in substitution for any other security
now or hereafter held by the Depositor.
13.01 APPOINTMENT OF ATTORNEY FOR ENFORCEMENT
The Depositor is hereby irrevocably appointed attorney of the Company with full
powers of substitution after the security constituted by this Escrow Agreement
has become enforceable, at any time and from time to time thereafter to endorse
and/or transfer the Indemnity Shares or any of them, and the Depositor, its
nominees or transferees are hereby empowered to exercise all rights and powers
and to perform all acts of ownership with respect to the Indemnity Shares to the
same extent as the Company might do.
14.01 ATTACHMENT
The Company and the Depositor acknowledge that it is their intention that the
security interests herein created shall attach on the execution hereof by the
Company and that value has been given.
15.01 TERMINATION OF ESCROW AGREEMENT
On ______ day of June, 2001 this Escrow Agreement shall terminate and any
security created under this Escrow Agreement shall become and be free and clear
of the mortgage, pledge and charge hereof.
16.01 SUCCESSORS AND ASSIGNS
The provisions hereof shall be binding upon and enure to the benefit of the
Depositor and the Company and their respective successors and assigns.
17.01 GOVERNING LAW
This Escrow Agreement shall be governed by and construed in accordance with the
laws of the State of Washington, without regard to such jurisdiction's conflicts
of laws principles, and shall be treated in all respects as a Washington
contract.
18.01 FURTHER ASSURANCES
The Depositor shall from time to time do all such acts and things and execute
and deliver all such deeds, transfers, assignments and instruments as the
Company may reasonably require for perfecting the security constituted hereby
and for facilitating the sale of the Escrowed Shares in connection with any
realization thereof and for exercising all powers, authorities and discretion
hereby conferred upon the Company.
19.01 TERMINATION
On the _____ day of June, 2001 this Escrow Agreement shall terminate and be of
no further force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement on
the day and year first above written.
SONIC SYSTEMS CORPORATION,
A DELAWARE CORPORATION
BY:________________________
ITS:_______________________
SONIC SYSTEMS CORPORATION,
A BRITISH COLUMBIA CORPORATION
BY:________________________
ITS:_______________________
XXXXX XXXXXX, AS TRUSTEE
FOR THE SHAREHOLDERS
___________________________
