1
Exhibit 3q
ESCROW AGREEMENT - PROPERTY
THIS AGREEMENT is made as of the 24th day of Dec, 1992.
BETWEEN:
OF CANADA
MONTREAL TRUST COMPANY, 000 Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
(hereinafter called the "Escrow Agent"
OF THE FIRST PART
AND:
CONSOLIDATED CAPROCK RESOURCES LTD., Xxxxx 000, 000
Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
(hereinafter called the "Company")
OF THE SECOND PART
AND:
THE UNDERSIGNED SHAREHOLDERS IN CONSOLIDATED CAPROCK
RESOURCES LTD.
(hereinafter individually called "Shareholder" and
collectively called the "Shareholders")
OF THE THIRD PART
WHEREAS:
A. The Shareholder has acquired or is about to acquire shares, of the Company
and has agreed to enter into this Escrow Agreement on the terms and conditions
hereinafter provided;
B. The Escrow Agent has agreed to undertake and perform its duties according
to the terms and conditions hereof.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
aforesaid agreements and the mutual covenants and conditions herein contained
and other good and valuable consideration, the Shareholders jointly and
severally covenant and agree with the Company and the Company and the Escrow
Agent covenant with the other and with the Shareholders jointly and severally as
follows:
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1. In this Agreement:
(a) "Exchange" shall mean the Vancouver Stock Exchange;
(b) "lost or alienated" shall mean that circumstance where the Company
has lost, alienated, or has not obtained a good or marketable title
to, or that the Company has abandoned or discontinued development
of, any or all of the property or asset, or that any or all of the
property or asset has become of little or no value;
(c) "property or asset" shall mean the property or asset transferred to
the Company in whole or in part consideration for the issuance of
the shares referred to in Schedule A attached hereto;
(d) "Shares" shall mean the shares of each Shareholder set opposite his
name in Schedule A attached hereto, together with any additional
shares issued by way of a dividend paid in shares which accrues to
the Shares, and shall be deemed to refer to the certificate or
certificates representing such shares;
(e) "Superintendent" shall mean the Superintendent of Brokers of the
Province of British Columbia or any Deputy Superintendent of Brokers
of the Province of British Columbia, or any duly authorized person
performing his duties under the Securities Act of the Province of
British Columbia as from time to time amended; and
(f) "Superintendent or Exchange" means the Superintendent, if the shares
of the Company are not listed on the Exchange, or the Exchange if
the shares of the Company are listed on the Exchange.
2. Each Shareholder hereby places and deposits in escrow with the Escrow
Agent the number of Shares of the Company set forth opposite his name in
Schedule A attached hereto.
3. The parties hereby agree that the Shares and the beneficial ownership of
or any interest in them shall not be sold, assigned, hypothecated, alienated,
released from escrow, transferred with escrow, or otherwise in any manner dealt
with except as may be required by reason of the death or bankruptcy of any
Shareholder, in which case the Escrow Agent shall hold the Shares subject to
this Agreement, for whatever person, firm or corporation shall be legally
entitled to be or become the registered owner thereof.
4. The Shareholders hereby direct the Escrow Agent to retain their Shares,
and not to do or cause anything to be done to release the same from escrow or to
allow any transfer,
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hypothecation or alienation thereof. The Escrow Agent hereby accepts the
responsibilities placed on it hereby and agrees to perform the same in
accordance with the terms hereof and in accordance with any order or direction
of the Superintendent or Exchange, subject only to any right of appeal against
any such order or direction as referred to herein.
5. If, during the period in which any of the Shares are retained in escrow
pursuant hereto, any dividend, other than a dividend paid in shares of the
Company, is received by the Escrow Agent in respect of Shares, such dividend
shall be paid or transferred forthwith to the Shareholders entitled thereto. Any
shares received by the Escrow Agent by way of dividend in respect of the Shares
shall be dealt with as if they were Shares hereunder.
6. All voting rights attached to the Shares may at all times be exercised by
the respective registered owners thereof.
7. The Company hereby acknowledges the terms and conditions of this Agreement
and agrees to take all reasonable steps to facilitate its performance.
8. The written consent, order or direction of the Superintendent or Exchange
to a release from escrow of all or part of the Shares shall terminate this
Agreement only in respect to those Shares so released. For greater certainty
this clause does not apply to Shares transferred within escrow.
9. It is understood and acknowledged by the Company and the Shareholder that
a portion of the consideration for the issuance of the Shares is to encourage
the Shareholder to act in the best interests of the Company and, if the Company
becomes successful due in part for the efforts of the Shareholders, and in such
case, and notwithstanding that the property or asset has been lost or alienated,
the Shareholder shall be entitled to maintain their ownership of the Shares and
to a release of the Shares from the terms of this Agreement from time to time in
accordance with the general policies of the Superintendent or Exchange.
10. In the event that the Company has lost or alienated the property or asset,
the Company and each Shareholder have the express obligation and hereby agree to
declare any such event or the circumstance and the particulars thereof to the
Superintendent or Exchange.
11. Upon the Superintendent or Exchange being advised of the loss or
alienation of the property or asset, they may, at their discretion, make such
order or direction for the cancellation of all or any portion of the Shares as
they deem advisable, provided however, that the fact that the property or
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asset has been lost or alienated shall not, in itself, be cause for cancellation
of all or a part of the shares. It shall advise Escrow Agent of such order or
direction and the Escrow Agent, subject to paragraph 15 hereof, shall cancel
such Shares as the Superintendent or Exchange has ordered or directed.
12. If the Company ceases to own any substantial property or asset whatsoever,
any Shareholder or group of Shareholders of the Company, holding in the
aggregate not less than 5% of the issued and outstanding common shares of the
Company may, by notice in writing directed to the Superintendent or Exchange,
request that the Superintendent or Exchange order or direct that all or a
portion of the Shares be cancelled. Any such shareholder or group of
shareholders shall have the same right of appeal as is set out in paragraph 15.
13. If the Company ceases to own any substantial property or assets whatsoever
and ceases for a period of three (3) months or more to engage in any substantial
business Activity relating to its normal business, then and in such case, the
Superintendent or the Exchange may make an order or direction to cancel all or
any of the shares.
14. Upon receipt of any order or direction of the Superintendent or Exchange
and subject as herein provided, the Shareholder here irrevocably appoints the
Escrow Agent their attorney for the purpose of cancelling, selling, assigning or
transferring any portion of the Shares for the purpose of executing any
necessary acts of assignment or transfer, and with authority to substitute one
or more persons with like full power.
15. Upon receipt by the Escrow Agent of any order or direction for the
cancellation of any of the Shares, the Escrow Agent shall forthwith advise the
Shareholders and shall not take any steps to cancel such Shares for 90 days from
receipt of the order or direction. The Company or any Shareholder shall have the
right to appeal the decision of the Superintendent or Exchange as if it were a
decision of the Superintendent in accordance with the provisions of the
Securities Act of the Province of British Columbia.
16. Any order or direction of the Superintendent or Exchange for the release
of all or any of the Shares from the terms of this Agreement shall be subject to
the same right of appeal by the Company or any shareholder as is set out in
paragraph 15 above and the Escrow Agent shall not release any Shares from the
terms of this Agreement until the expiry of ten (10) days from the receipt of
the order or direction of the Superintendent or Exchange.
17. Nothing herein shall prevent the Company and the Shareholder, or any
successors or permitted assigns of the Shareholder, from amending any agreement
pursuant to which the
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Shares were originally issued, including any amendment which substitutes one
property or asset for the property or asset originally blended to the Company,
PROVIDED HOWEVER, that any such amendment or substitution shall be subject to
the consent of the Superintendent or Exchange.
18. Nothing herein shall prevent the Superintendent or Exchange from
consenting to the release of Shares from the terms of this Agreement from time
to time, even though all or a portion of the property or asset for which the
Shares were originally issued or any property or asset substituted therefor,
has been lost or alienated.
19. Notice of any order or direction of the Superintendent or Exchange shall
be given by the Escrow Agent to all persons or parties affected thereby at their
last known registered address.
20. This Agreement may be executed in several parts in the same form and such
parts as so executed shall together form one original agreement, and such parts,
if more than one, shall be read together and construed as if all the signing
parties hereto had executed one copy of this Agreement.
21. Wherever the singular or masculine are used through this Agreement, the
same shall be construed as being the plural or feminine or neuter when the
context so requires.
22. This Agreement shall enure to the benefit of and be binding upon the
parties hereto, their and each of their heirs, successors, administrators,
successors and permitted assigns.
23. The parties hereto agree that in consideration of the premises and of the
Escrow Agent agreeing to act in such capacity, the Shareholders and the Company
do hereby jointly and severally covenant and agree from time to time and at all
times hereafter well and truly to save, defend and keep harmless and fully
indemnify the Escrow Agent, its successors and assigns, from and against all
loss, costs, charges, suits, demands, claims, damages and expenses which the
Escrow Agent, its successors or assigns, may from time to time hereafter bear,
sustain, suffer or be put unto for or by reason or on account of its acting as
Escrow Agent or anything in any manner relating thereto or by reason of the
Escrow Agent's compliance in good faith with the terms hereof.
24. It is further agreed by and between the parties hereto, and without
restricting the foregoing indemnity, that in case proceedings should hereafter
be taken in any court respecting the Shares, the Escrow Agent shall not be
obliged to defend any such action or submit its rights to the court until it
shall have been indemnified by other good and sufficient security in addition to
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the indemnity hereinbefore given against its costs of such proceedings.
IN WITNESS WHEREOF the parties hereto have executed these presents the day
and year first written above.
THE COMMON SEAL OF MONTREAL )
TRUST COMPANY was hereunto )
affixed in the presence of: ) C/S
)
)
/s/ )
--------------------------- )
Authorized Signatory )
)
)
/s/ )
--------------------------- )
Authorized Signatory )
/s/ /s/ Xxxxx X. Xxxxxxxx
--------------------------- ) -----------------------------
Witness ) Xxxxx X. Xxxxxxxx
THE COMMON SEAL OF )
CONSOLIDATED CAPROCK )
RESOURCES LTD was hereunto )
affixed in the presence of: ) C/S
)
/s/ Xxxxx X. Xxxxxxxx )
--------------------------- )
Authorized Signatory )
)
)
--------------------------- )
Authorized Signatory )
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SCHEDULE A
TO THE ESCROW AGREEMENT - PROPERTY
DATED AS OF THE DAY OF DECEMBER, 1992
AMONG MONTREAL TRUST COMPANY,
CONSOLIDATED CAPROCK RESOURCES LTD.
AND XXXXX X. XXXXXXXX
Shares held in escrow are subject to rules, regulations and policies of the
Superintendent of Brokers and the Vancouver Stock Exchange, as may be in effect
during the currency of this Agreement.
Name and Address of Shareholder Number of Shares
------------------------------- ----------------
Xxxxx Xxxxxxxx 194,276
c/o 000 - 000 Xxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X 0X0
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(APPENDIX A TO LOCAL POLICY STATEMENT 3-07)
ESCROW AGREEMENT ADDITIONAL PRINCIPALS SHARES
THIS AGREEMENT is dated for reference June 25, 1990 and made
AMONG:
MONTREAL TRUST COMPANY OF CANADA, 000 Xxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
(the "Escrow Agent");
AND:
CONSOLIDATED CAPROCK RESOURCES LTD., Xxxxx 000, 000
Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
(the "Issuer");
AND:
EACH SHAREHOLDER, as defined in this Agreement
(collectively, the "Parties").
WHEREAS the Shareholder has acquired or is about to acquire shares of the
Issuer;
AND WHEREAS the Escrow Agent has agreed to act as escrow agent in respect of the
shares upon the acquisition of the shares by the Shareholder;
NOW THEREFORE in consideration of the covenants contained in this Agreement and
other good and valuable consideration (the receipt and sufficiency of which is
acknowledged), the Parties agree as follows:
1. INTERPRETATION
In this Agreement:
(a) "Acknowledgement" means the acknowledgement and agreement to be
bound in the form attached as Schedule A to this Agreement;
(b) "Act" means the Securities Act, S.B.C. 1985, c.83;
(c) "Exchange" means the Vancouver Stock Exchange
(d) "Local Policy Statement 3-07" means the Local Policy Statement 3-07
in effect as of the date of reference of
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this Agreement and attached to Schedule 8 to this Agreement;
(e) "Shareholder" means a holder of shares or the Issuer who executes
this Agreement or an Acknowledgement;
(f) "Shares" means the shares of the Shareholder described in Schedule C
to this Agreement, as amended from time to time in accordance with
section 9;
(g) "Superintendent" means the Superintendent of Brokers appointed under
the Act; and
(h) "Superintendent or the Exchange" means the Superintendent, if the
shares of the Issuer are not listed on the Exchange, or the
Exchange, if the shares of the Issuer are listed on the Exchange.
2. PLACEMENT OF SHARES IN ESCROW
The Shareholder places the Shares in escrow with the Escrow Agent and shall
deliver the certificates representing the Shares to the Escrow Agent as soon as
practicable.
3. VOTING OF SHARES IN ESCROW
Except as provided by section 4(a), the Shareholder may exercise all voting
rights attached to the Shares.
4. WAIVER OF SHAREHOLDER'S RIGHTS
The Shareholder waives the rights attached to the Shares
(a) to vote the Shares on a resolution to cancel any of the Shares;
(b) to receive dividends; and
(c) to participate in the assets and property of the Issuer on a winding
up or dissolution of the Issuer.
5. ABSTENTION FROM VOTING AS A DIRECTOR
A Shareholder that is or becomes a director of the Issuer shall abstain from
voting on a directors' resolution to cancel any of the Shares.
6. TRANSFER WITHIN ESCROW
(1) The Shareholder shall not transfer any of the Shares except in
accordance with Local Policy Statement 3-07 and with the consent of
the Superintendent or the Exchange.
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(2) The Escrow Agent shall not effect a transfer of the Shares within
escrow unless the Escrow Agent has received
(a) a copy of an Acknowledgement executed by the person to whom
the Shares are to be transferred; and
(b) a letter from the Superintendent or the Exchange consenting to
the transfer.
(3) Upon the death or bankruptcy of a Shareholder,, the Escrow Agent
shall hold the Shares subject to this Agreement for the person that
is legally entitled to become the registered owner of the Shares.
(4) If a Shareholder ceases to be a principal, as that term is defined
in Local Policy Statement 3-07, dies, or becomes bankrupt, the
Shareholder shall be entitled to retain the Shares and shall not be
required to transfer or surrender the Shares to the Issuer for
cancellation.
7. RELEASE FROM ESCROW
(1) The Shareholder irrevocably directs the Escrow Agent to retain the
Shares until the Shares are released from escrow pursuant to
subsection (2) or surrendered for cancellation pursuant to section
8.
(2) The Escrow Agent shall not release the Shares from escrow unless the
Escrow Agent has received a letter from the Superintendent or the
Exchange consenting to the release.
(3) The approval of the Superintendent or the Exchange to a release from
escrow of any of the Shares shall terminate this Agreement only in
respect of the Shares so released.
8. SURRENDER FOR CANCELLATION
The Shareholder shall surrender the Shares for cancellation and the Escrow Agent
shall deliver the certificates representing the Share to the Issuer
(a) at the time of a major reorganization of the Issuer, if required as
a condition of the consent to the reorganization by the
Superintendent or the Exchange;
(b) where the Issuer's shares have been subject to a cease trade order
issued under the Act for a period of 2 consecutive years;
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(c) any of, the Shares which have not been released from the escrow
hereby created before the expiration of 5 years from the date the
Exchange accepts this Agreement for filing shall be cancelled
forthwith and the Issuer and the Escrow Agent hereby agree to take
all such actions as may be necessary to expeditiously effect such
cancellation; or
(d) where required by section 6(4).
9. AMENDMENT OF AGREEMENT
(1) Subject to subsection (2), this Agreement may be amended only by a
written agreement among the Parties and with the written consent of
the Superintendent or the Exchange.
(2) Schedule C to this Agreement shall be amended upon
(a) a transfer of Shares pursuant to section 6;
(b) a release of Shares from escrow pursuant to section 7; or
(c) a surrender of Shares for cancellation pursuant to section 8;
and the Escrow Agent shall note the amendment on the Schedule C in
its possession.
10. INDEMNIFICATION OF ESCROW AGENT
The Issuer and the Shareholders, jointly and severally, release, indemnify and
save harmless the Escrow Agent from all costs, charges, claims, demands,
damages, losses and expenses resulting from the Escrow Agent's compliance in
good faith with this Agreement.
11. RESIGNATION OF ESCROW AGENT
(1) If the Escrow Agent wishes to resign as escrow agent in respect of
the Shares, the Escrow Agent shall give notice to the Issuer.
(2) If the Issuer wishes the Escrow Agent to resign as escrow agent in
respect of the Shares, the Issuer shall give notice to the Escrow
Agent.
(3) A notice referred to in subsection (1) or (2) shall be in writing
and delivered to
(a) the Issuer at Xxxxx 000, 000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx
Xxxxxxxx, X0X 0X0 or
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(b) the Escrow Agent, Montreal Trust Company of Canada at 000
Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
and the notice shall be deemed to have been received on the date of
delivery. The Issuer or the Escrow Agent may change its address for
notice by giving notice to the other party in accordance with this
subsection.
(4) A copy of a notice referred to in subsection (1) or shall
concurrently be delivered to the Superintendent or the Exchange.
(5) The resignation of the Escrow Agent shall be effective and the
Escrow Agent shall cease to be bound by this Agreement on the date
that is 180 days after the date of receipt of the notice referred to
in subsection (1) or (2) or on such other date as the Escrow Agent
and the Issuer may agree upon (the "resignation date").
(6) The Issuer shall, before the resignation date and with the written
consent of the Superintendent or the Exchange, appoint another
escrow agent. and that appointment shall be binding on the Issuer
and the Shareholders.
12. FURTHER ASSURANCES
The Parties shall execute and deliver any documents and perform any acts
necessary to carry out the intent of this Agreement.
13. TIME
Time is of the essence of this Agreement.
14. GOVERNING LAWS
This Agreement shall be construed in accordance with and governed by the laws of
British Columbia and the laws of Canada applicable in British Columbia.
15. COUNTERPARTS
This 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 agreement.
16. LANGUAGE
WHEREVER a singular expression is used in this Agreement, that expression is
deemed to include the plural or the body corporate where required by the
context.
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17. ENUREMENT
This Agreement enures to the benefit of and Is binding on the Parties and their
heirs, executors, administrators, successors and permitted assigns.
The Parties have executed and delivered this Agreement as of the date of
reference of this Agreement.
THE CORPORATE SEAL OF MONTREAL )
TRUST COMPANY OF CANADA was here- )
unto affix the presence of: )
)
/s/ ) C/S
-------------------------------- )
Authorized Signatory )
)
/s/ )
-------------------------------- )
Authorized Signature )
THE CORPORATE SEAL OF )
CONSOLIDATED CAPROCK RESOURCES )
LTD. was hereunto affixed in the )
presence of: )
)
/s/ ) C/S
-------------------------------- )
Authorized Signatory )
)
/s/ )
-------------------------------- )
Authorized Signatory )
SIGNED, SEALED AND DELIVERED by )
XXXXX X. XXXXXXX in the presence )
of: ) No. of Shares: 60,724
)
/s/ )
-------------------------------- )
SIGNATURE )
)
/s/ N.E. Xxxxx )
-------------------------------- )
NAME )
)
Xxxxx 0000-000 Xxxx Xxxxxx ) /s/ Xxxxx X. Xxxxxxx
Vancouver, B.C. Canada ) -----------------------------
X0X 0X0 ) XXXXX X. XXXXXXX
-------------------------------- )
ADDRESS )
)
Secretary )
-------------------------------- )
OCCUPATION )
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SIGNED, SEALED AND DELIVERED by )
XXXXXXX X. XXXXXXXXX in the )
presence of: ) No. of Shares: 120,000
X.X. Xxxxx )
-------------------------------- )
Signature
-------------------------------- )
X.X. Xxxxx
-------------------------------- )
Name
Xxxxx 0000-000 Xxxx Xxxxxx ) /s/ Xxxxxxx X. Xxxxxxxxx
Vancouver, B.C. Canada ) -----------------------------
X0X 0X0 ) XXXXXXX X. XXXXXXXXX
-------------------------------- )
Address
Secretary
-------------------------------- )
Occupation
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LPS 3-07
SCHEDULE A T0 ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Superintendent of Brokers or Vancouver Stock Exchange
#0000 - 000 Xxxxxx Xxxxxx 609 Granville Street
Vancouver, B.C. Xxxxxxxxx, X.X.
X0X 0X0 X0X 0X0
(if the shares are not (if the shares are listed
listed on the Vancouver on the Vancouver Stock
Stock Exchange) Exchange)
I acknowledge that
(a) I have entered into an agreement with under which shares of
(the "Shares") will be transferred to me upon receipt of regulatory
approval, and
(b) the Shares are held in escrow subject to an escrow agreement dated for
reference , 19 . (the "Escrow Agreement"), a copy of which is attached
as Schedule A to this acknowledgement.
In consideration of $1.00 and other good and valuable consideration (the receipt
and sufficiency of which is acknowledged) I agree, effective upon receipt of
regulatory approval of the transfer to me of the Shares, to be bound by the
Escrow Agreement in respect of the Shares as if I were an original signatory to
the Escrow Agreement.
Dated at ___________________________ on _______________ 19 ___.
Where the transferee is an individual:
Signed, sealed and delivered by )
[transferee] in the presence of: )
)
)
------------------------------------- )
Name
) --------------------------------
) [transferee]
------------------------------------- )
Address
------------------------------------- )
------------------------------------- )
Occupation
December 21, 1989
16
LPS 3-07
Where the transferee is a company:
The Corporate/Common Seal of )
[transferee] was affixed )
in the presence of: )
)
) c/s
----------------------------------- )
Authorized signatory
)
)
----------------------------------- )
Authorized signatory )
December 21, 1989
17
[LOGO] Province of
British Columbia BRITISH COLUMBIA SECURITIES COMMISSION
OFFICE OF THE
CHAIRMAN
LOCAL POLICY STATEMENT 3-07
POLICY GUIDELINES RESPECTING TRADING SHARES,
PERFORMANCE SHARES AND OTHER CONSIDERATION
TABLE OF CONTENTS
PART TITLE PAGE
---- ----- ----
1. IMPLEMENTATION 1
2. APPLICATION 1
2.1 Pre-prospectus
2.2 Reactivations and reorganizations
3. TRANSITION 2
3.1 Agreements made under former policy statement
3.2 option of conforming with new policy statement
4. DEFINITIONS 2
4.1 Defined terms
4.2 Terms defined in legislation
5. GENERAL MATTERS 5
5.1 Review of opinions and reports
5.2 Requirement for valuation opinion
5.3 out of pocket costs
5.4 confirmation of fair value
6. ISSUANCE OF TRADING SHARES 6
6.1 Minimum price and maximum aggregate value
6.2 Interest in operating subsidiary
6.3 Value assigned to non-cash assets
6.4 Purchase of interest in mineral property
6.5 Accumulated deficit related to issuer's
stated business purpose
6.6 Exclusion of amounts by Superintendent
December 21, 1989
1200. 000 Xxxxxx Xxxxxx
Office:(604) 660-4881 Vancouver
Facsimile: (000) 000-0000 British Columbia
Telex: (000) 00-00000 V6Z 2H4
18
PART TITLE PAGE
---- ----- ----
7. ISSUANCE OF PERFORMANCE SHARES 8
7.1 Issuance to principals
7.2 Natural resource issuer
7.3 Industrial issuer
7.4 Escrow requirement
7.5 Escrow agreement
7.6 Limitations on rights of holders of performance shares
7.7 Rights on ceasing to be a principal
7.8 Undertaking of holding company
8. TRANSFER OF PERFORMANCE SHARES WITHIN ESCROW 10
8.1 Permitted transferees
8.2 Request for consent to transfer
8.3 Documents to be filed with request for consent to transfer
8.4 Letter of consent or objection
8.5 No transfer during period between prospectus receipt and listing
9. RELEASE OF PERFORMANCE SHARES FROM ESCROW 11
9.1 Release of shares of natural resource issuer
9.2 Reduction in release for natural resource issuer
9.3 Release of shares of industrial issuer
9.4 Adjustment of release calculation
9.5 Requirements for release
9.6 Annual release based on annual audited financial statements
9.7 Request for consent to release
9.8 Documents to be filed with request for consent to release
9.9 Letter of consent or objection
9.10 Request by holder of performance shares for consent to release
10. SURRENDER OF PERFORMANCE SHARES FOR 14
CANCELLATION
December 21, 1989
19
LPS 3-07
PART TITLE PAGE
---- ----- ----
11. OTHER CONSIDERATION 14
11.1 Natural resource issuer
11.2 industrial issuer
Appendix A Escrow Agreement
Appendix B Examples of earn-out prices for performance shares issued by an
industrial issuer
Appendix C Undertaking Required from Non-Reporting or Closely Held Company
December 21, 1989
20
PART 1 IMPLEMENTATION
1.1 The following local policy statements are hereby rescinded and this local
policy statement substituted therefor, effective March 1, 1990:
(a) Local Policy Statement 3-07, dated February 6, 1987 (the "Former
Policy Statement"), and
(b) Local Policy Statements 3-08, 3-09 and 3-10, each dated February 1,
1987.
PART 2 APPLICATION
2.1 Pre-prospectus - This local policy statement sets out guidelines for
issuance of shares and payment of consideration for assets by an issuer
intending to do an initial public offering and obtain a listing on the
Vancouver Stock Exchange. This local policy statement addresses
(a) the issuance of trading shares, which are common shares issued as
consideration for cash or assets contributed to the issuer and, in
certain cases, expenses incurred to advance the business of the
issuer,
(b) the issuance of and escrow restrictions imposed on performance
shares, which are common shares issued to directors, officers,
promoters and other principals of the issuer to provide them with
both a reasonable assurance of control during the formative stages
of the issuer's development and an incentive to support the issuer,
and
(c) the payment of other consideration by the issuer for assets or
services.
2.2 Reactivations and reorganizations - This local policy statement applies,
with the necessary changes, to
(a) the reactivation of an issuer by way of a prospectus, carried out in
accordance with Local Policy Statement 3-35 and the policies of the
Vancouver Stock Exchange, and
December 21, 1989
21
2 LPS 3-07
(b) a major reorganization of an issuer, including a reverse take over,
carried out in accordance with the policies of the British Columbia
Securities Commission and the Vancouver Stock Exchange.
PART 3 TRANSITION
3.1 Agreements made under former policy statement - Subject to section 3.2,
shares issued in accordance with the Former Policy Statement will continue
to be governed by any agreements made in accordance with the Former Policy
Statement. Such shares, however, will be subject to the transfer
restrictions and procedures set out in Part 8 and the release criteria and
procedures set out in sections 9.5 through 9.10 of this local policy
statement.
3.2 Option of conforming with new policy statement - An issuer that has issued
shares in accordance with the Former Policy Statement may reorganize its
capital to fully conform with this local policy statement. Before doing
so, the issuer must obtain the approval of its shareholders and the
written consent of the Superintendent of Brokers, if the issuer's shares
are not listed on the Vancouver Stock Exchange, or the Vancouver Stock
Exchange, if the issuer's shares are listed on that exchange. Both the
approval and consent must be obtained by March 1, 1991.
PART 4 DEFINITIONS
4.1 Defined terms - In this local policy statement:
"Act" means the Securities Act, S.B.C. 1985, c. 83;
"arm's length transaction" means a transaction other than a non-arm's
length transaction;
"cash flow" means net income or loss before tax, adjusted to add back the
following expenses:
(a) depreciation,
(b) amortization of goodwill and deferred research and development
costs, excluding general and administrative costs,
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LPS 3-07 3
(c) expensed research and development costs excluding general and
administrative costs, and
(d) any other amounts permitted or required by the Superintendent;
"cumulative cash flow" means, at any time, the aggregate cash flow of an
issuer up to that time from a date no earlier than the issuer's financial
year end immediately preceding the date of its IPO, net of any negative
cash flow;
"earn-out factor" means the number obtained by squaring the performance
share percentage, expressed as a decimal, and multiplying by four;
"earn-out price" means the IPO price multiplied by the earn-out factor;
"escrow agreement" means an agreement in the form attached as Appendix A
to this local policy statement;
"Exchange" means the Vancouver Stock Exchange;
"industrial issuer" means an issuer other than a natural resource issuer;
"IPO" means the initial public offering of common shares of an issuer
under a prospectus which has been filed with, and for which a receipt has
been obtained from, the Superintendent under section 42 of the Act;
"IPO price" means the price per share paid by the public on an issuer's
IPO;
"non-arm's length transaction" means a transaction between the issuer and
a person that, at any time from the date of the transaction until the
date of completion of the issuer's IPO, is
(a) an insider, associate, affiliate or principal of the issuer,
(b) a person that
(i) has a control person, insider or promoter that is a control
person, insider or promoter of the issuer, or
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(ii) has a control person, insider or promoter that is an associate
or affiliate of a control person, insider or promoter of the
issuer
except where the person's insiders that are described in paragraphs
(i) and (ii) hold in total less than 10% of the voting securities of
the person, or
(c) determined by the Superintendent not to be at arm's length to the
issuer;
"performance shares" means common shares of an issuer issued in accordance
with Part 7 of this local policy statement, so long as they are held in
escrow in accordance with this local policy statement;
"Performance share percentage" means the percentage, determined on the
date the issuer's shares are listed, posted and called for trading on the
Exchange, that the issued performance shares of the issuer are of the
total issued and outstanding voting securities of the issuer;
"principal" means, in relation to an issuer,
(a) a promoter of the issuer,
(b) a director of the issuer or of an operating subsidiary of the
issuer,
(c) a full time management employee of the issuer, or of an operating
subsidiary of the issuer, whose direct or indirect employment is
with the issuer or the subsidiary,
(d) a person who has provided key services or contributed a fundamental
asset to the issuer and has elected to be treated as a principal, or
(e) a company all the voting securities of which are owned by one or
more of the persons referred to in subsections (a) through (d);
"Regulation" means the Securities Regulation, B.C. Reg. 270/86;
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"Superintendent or the Exchange" means the Superintendent, if the issuer's
shares are not listed on the Exchange, and the Exchange, if the issuer's
shares are listed on the Exchange;
"trading shares" means shares of the class of common shares issued on an
issuer's IPO, excluding performance shares issued in accordance with Part
7 of this local policy statement;
"valuation opinion" means, in respect of
(a) a natural resource issuer, a written opinion prepared by a qualified
expert as to the fair market value of a resource property,
determined either through the computation of present value or some
other recognized method of valuation acceptable to the
Superintendent, and
(b) an industrial issuer, a written opinion prepared in accordance with
generally applied valuation approaches by a Chartered Business
Valuator, or another expert acceptable to the Superintendent, as to
the highest price available for the issuer's business, assets or
shares in an open and unrestricted market between informed, prudent
parties, acting at arm's length and under no compulsion to act,
expressed in terms of money or money's worth.
4.2 Terms defined in legislation - Subject to section 4.1, terms defined in
the Act, the Regulation and the Interpretation Act, R.S.B.C. 1979, c. 206
and used in this local policy statement have the same meaning as in the
Act, the Regulation and the Interpretation Act.
PART 5 GENERAL MATTERS
5.1 Review of opinions and reports - The Superintendent may, with the
agreement of an issuer, seek the opinion of an engineer, appraiser,
business valuator, accountant or other expert to determine the
acceptability of a valuation opinion or other report filed pursuant to
this local policy statement and, in such circumstances, the issuer will be
liable for the fees charged by such person in connection with providing
the opinion.
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5.2 Requirement for valuation opinion - The Superintendent may, at the time
of reviewing an issuer's prospectus for its IPO, require a valuation
opinion in support of the value attributed to any non-cash assets.
5.3 Out of pocket costs - Where this local policy statement provides that the
value of trading shares issued or other consideration paid to a person by
an issuer for a non-cash asset must be calculated on the basis of the out
of pocket costs incurred by the person in respect of the non-cash asset,
those out of pocket costs must
(a) be reasonable,
(b) have contributed or be reasonably expected to contribute to the
future operations of the issuer,
(c) be supported by an audited statement of costs, and
(d) in respect of a resource property, be restricted to acquisition
costs and such other costs as are necessary to secure a preliminary
evaluation of the resource property and to lead to the
identification of exploration targets.
5.4 Confirmation of fair value - The onus will be on an issuer, if questioned,
to satisfy the Superintendent that fair value was received for costs or
expenditures associated with a non-arm's length transaction.
PART 6 ISSUANCE OF TRADING SHARES
6.1 Minimum price and maximum aggregate value - Although in most cases trading
shares will be paid for in cash, trading shares may be issued for
consideration other than cash. Subject to sections 6.2 through 6.6, an
issuer may issue trading shares at a minimum price of $.25 per share up to
an aggregate value equal to:
(a) the amount of cash paid in as share capital; plus
(b) the fair market value of any non-cash assets contributed as share
capital; plus
(c) the issuer's retained earnings, if any; less
(d) where the issuer has an accumulated deficit, that portion of the
accumulated deficit that does not directly relate to the issuer's
stated business purpose at the time of its IPO.
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6.2 Interest in operating subsidiary - Where an issuer has an operating
subsidiary, or is proposing to issue trading shares in order to acquire an
operating subsidiary, and the value of that operating subsidiary is not
supported by a current valuation opinion, the principles of this Part will
apply to the operating subsidiary for the purpose of determining the
number of trading shares that may be issued by the issuer in respect of
its interest in the operating subsidiary.
6.3 Value assigned to non-cash assets - For the purpose of section 6.1(b),
where non-cash assets are contributed to an issuer by a person in a
non-arm's length transaction, the fair market value attributed to the
non-cash assets must be either
(a) supported by a valuation opinion, or
(b) limited to an amount equal to the out of pocket costs incurred by
the person in respect of the non-cash assets, determined in
accordance with section 5.3.
6.4 Purchase of interest in mineral Property-A natural resource issuer that,
in an arm's length transaction, agrees to issue trading shares as
consideration for a mineral property or an option on a mineral property,
the value of which is not supported by a current valuation opinion, will
generally be required to meet the following conditions:
(a) The consideration must consist of not more than 200,000 trading
shares issuable in no fewer than four blocks, each block consisting
of not more than 50,000 trading shares.
(b) one block of shares may be issued prior to the date the issuer's
shares are listed, posted and called for trading on the Exchange.
(c) The remaining blocks of shares may be issued in stages upon the
filing with the Exchange of engineering reports, acceptable to the
Exchange, recommending further work on the mineral property.
6.5 Accumulated deficit related to issuer's stated business purpose - For the
purpose of section 6.1(d), that portion of the issuer's accumulated
deficit that directly relates to the issuer's stated business purpose at
the time of its IPO includes
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(a) for a natural resource issuer, expenses incurred
(i) in exploring and developing the resource properties upon which
the issuer's IPO proceeds are to be spent, and
(ii) in exploring and developing other resource properties,
provided that these expenses do not exceed the expenses
referred to in paragraph (i), and
(b) for an industrial issuer, expenses incurred in respect of the
project or business to be financed by the issuer's IPO proceeds.
6.6 Exclusion of amounts by Superintendent - The Superintendent may require
that an amount be excluded from the determination of the number of trading
shares that may be issued under this Part if in the circumstances he
considers that to include any such amount would be inappropriate or
unconscionable. For example, the Superintendent would question the
appropriateness of issuing trading shares for non-cash assets unrelated to
the issuer's stated business purpose at the time of its IPO or for
excessive administrative expenses.
PART 7 ISSUANCE OF PERFORMANCE SHARES
7.1 Issuance to principals - Performance shares may be issued for cash to the
principals of an issuer
(a) to provide the principals with a measure of control to facilitate
the development of the issuer in an orderly fashion,
(b) to provide an incentive for the principals to diligently support the
affairs of the issuer, and
(c) to provide an incentive for the principals to contribute management
services or fundamental assets to the issuer.
7.2 Natural resource issuer - A natural resource issuer may issue to its
principals up to a total of 750,000 performance shares, at a minimum price
of $.01 per share.
7.3 Industrial issuer - An industrial issuer may issue performance shares to
its principals, at a minimum price of $.01 per share, provided that the
resulting performance share percentage does not exceed 65%.
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7.4 Escrow requirement - Performance shares are required to be escrowed. It
should be noted that the higher the performance share percentage, the more
difficult it becomes to obtain a release of the performance shares from
escrow. The table attached as Appendix B to this local policy statement
provides some examples of the operation of the release provisions for
industrial issuers set out in Part 9 of this local policy statement.
7.5 Escrow agreement - Prior to or at the time of acquiring performance
shares, principals must execute an escrow agreement. The certificates
representing the performance shares must be registered in the names of the
holders of the shares and deposited with the escrow agent in accordance
with the terms of the escrow agreement. Only a trust company carrying on
business in British Columbia or a company approved by the Superintendent
may act as an escrow agent.
7.6 Limitations on rights of holders of performance shares - The escrow
agreement provides that the holders of performance shares waive any rights
attached to those shares to receive dividends or to participate in the
assets and property of the issuer on a winding up or dissolution. Holders
of performance shares do retain the right to vote those shares, except on
a resolution respecting their cancellation.
7.7 Rights on ceasing to be a principal - The escrow agreement requires that
the parties to it set out in the agreement any rights or obligations of a
person who ceases to be a principal, dies or becomes bankrupt to retain,
transfer or surrender to the issuer for cancellation any performance
shares then held by the person.
7.8 Undertaking of holding company Where performance shares are to be issued
to a non-reporting or closely-held company, wherever situate, rather than
to an individual, the company must, prior to or at the time of acquiring
the performance shares, execute an undertaking in the form attached as
Appendix C to this local policy statement. In the undertaking, the
company agrees not to effect or permit any transfer of ownership of shares
of the company nor to issue further shares of any class in the company
without the consent of the Superintendent or the Exchange, so long as the
company continues to hold any of the issuer's performance shares. An
application for consent should be made in the same manner as an
application for consent to a transfer of performance shares pursuant to
Part 8 of this local policy statement.
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PART 8 TRANSFER OF PERFORMANCE SHARES WITHIN ESCROW
8.1 Permitted transferees - Performance shares may be transferred only to
(a) other principals, including incoming principals,
(b) the issuer of the performance shares, or
(c) an offeror under a formal bid (as defined in section 74 of the Act).
8.2 Request for consent to transfer - In order to transfer performance shares,
the holder of performance shares must deliver to the Superintendent or the
Exchange a written request for consent to the transfer. The request for
consent to the transfer must include:
(a) the name of the escrow agent and the reference date of the escrow
agreement,
(b) an explanation of the reason for the transfer,
(c) a description of the consideration to be paid for the performance
shares,
(d) where the performance shares are to be transferred to a principal,
confirmation that the transferee is a principal or will become a
principal on or before the date of the proposed transfer, and
(e) a description of the exemptions in the Act or the Regulation, if
any, being relied upon to make the transfer.
8.3 Documents to be filed with request for consent to transfer - The request
for consent to the transfer must be accompanied by:
(a) a copy of the transfer agreement,
(b) an acknowledgement and agreement to be bound in the form attached as
Schedule A to the escrow agreement, executed by the transferee,
(c) where the performance shares are to be transferred to a
non-reporting or closely held company, wherever situate, rather
than to an individual, an undertaking by the company in the
form attached as Appendix C to this local policy statement,
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(d) where applicable, evidence that the proposed change of control has
been approved by the shareholders of the issuer, and
(e) the appropriate application fee.
8.4 Letter of consent or objection - Upon receiving a request for consent to
a transfer and accompanying documents that comply with sections 8.2 and
8.3, the Superintendent or the Exchange will issue to the applicant a
letter that either consents or objects to the transfer. A letter
consenting to the transfer will be copied to the escrow agent.
8.5 No transfer during period between Prospectus receipt and listing - The
Superintendent will generally refuse to consent to a transfer of
performance shares during the period between the date of the receipt for
the issuer's prospectus for its IPO and the date the issuer's securities
are listed, posted and called for trading on the Exchange.
PART 9 RELEASE OF PERFORMANCE SHARES FROM ESCROW
9.1 Release of shares of natural resource issuer - Holders of performance
shares of a natural resource issuer will be entitled to the pro-rata
release of those performance shares on the basis of 15% of the original
number of performance shares for every $100,000 expended on exploration
and development of a resource property by
(a) the issuer, or
(b) a person other than the issuer in order to earn an interest in the
resource property, but only in respect of that proportion of the
expenditure equal to the issuer's remaining proportionate Interest
in the resource property after the person's interest has been
earned,
provided that
(c) no more than 50% of the original number of performance shares may be
released in any 12 month period, and
(d) no expenditure on exploration and development made prior to the date
of the receipt for the issuer's prospectus for its IPO may be
included.
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9.2 Reduction in release for natural resource issuer-Where administrative
expenses exceed 33% of total expenditures during the period on which the
calculation in section 9.1 is based,
(a) the pro-rata release factor of 15% will be reduced to 7.5%, and
(b) the percentage of the original number of performance shares
available for release in any 12 month period will be reduced to 25%.
9.3 Release of shares of industrial issuer - Holders of performance shares of
an industrial issuer will be entitled to the pro-rata release of a number
of performance shares equal to the amount of cumulative cash flow, not
previously applied towards release, divided by the earn-out price.
9.4 Adjustment of release calculation - On a consolidation, subdivision,
amalgamation or reclassification of the issuer's shares, the release
calculation must be adjusted so that the proportion of the outstanding
performance shares available for release is unaffected by the
consolidation, subdivision, amalgamation or reclassification.
9.5 Requirements for release - No performance shares may be released from
escrow unless, at the time of the application for release,
(a) the issuer is meeting its current obligations in the ordinary course
of business as they generally become due, as evidenced by a
statutory declaration of the president or chief financial officer of
the issuer,
(b) the issuer's shares are listed, posted and called for trading on all
stock exchanges having jurisdiction over it, as evidenced by letters
from those stock exchanges,
(c) the issuer is not in default of any requirement of the Act or the
Regulation, as evidenced by a certificate issued by the Commission,
and
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(d) the issuer is in good standing with respect to its filing of returns
with the Registrar of Companies under the Company Act or, if the
issuer is incorporated, organized or continued in a jurisdiction
other than British Columbia, with the registrar of companies or
similar authority in that jurisdiction, as evidenced by a
certificate issued by the Registrar of Companies or by that similar
authority.
9.6 Annual release based on annual audited financial Statements - Performance
shares may be released only once during an issuer's financial year. The
release calculation must be based on the issuer's annual audited financial
statements for the year or years during which the release requirements
were met in respect of the performance shares to be released.
9.7 Request for consent to release - In order to obtain a release of
performance shares, the issuer must deliver to the Superintendent or the
Exchange a written request for consent to the release. The request for
consent to the release must include the name of the escrow agent and the
reference date of the escrow agreement.
9.8 Documents to be filed with request for consent to release - The request
for consent to the release must be accompanied by:
(a) written evidence of compliance with the requirements of section 9.5,
(b) annual audited financial statements of the issuer for the financial
year or years during which the release requirements were met in
respect of the performance shares to be released,
(c) where expenditures on a resource property were made by a person
other than the issuer, an audited statement of costs,
(d) a calculation, prepared by the issuer's auditor, of the number of
performance shares to be released, and
(e) the appropriate application fee.
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9.9 Letter of consent or objection - Upon receiving a request for consent to a
release and accompanying documents that comply with sections 9.7 and 9.8,
the Superintendent or the Exchange will issue to the issuer a letter that
either consents or objects to the release. A letter consenting to the
release will be copied to the escrow agent.
9.10 Request by bolder of performance shares for consent to release - A holder
of performance shares may apply to, the Superintendent or the Exchange for
release where the issuer is unable or unwilling to do so. If the president
or chief financial officer of the issuer refuses to provide the statutory
declaration referred to in section 9.5(a), the Superintendent or the
Exchange may waive that requirement.
PART 10 SURRENDER OF PERFORMANCE SHARES FOR CANCELLATION
10.1 Performance shares must be surrendered to the issuer for cancellation
(a) at the time of a major reorganization of the issuer, if required as
a condition of the consent to the reorganization by the
Superintendent or the Exchange,
(b) where the issuer's shares have been subject to a cease trade order
issued under the Act for a period of 2 consecutive years, or
(c) 10 years from, the later of the date of issue of the performance
shares and the date of the receipt for the issuer's prospectus for
its IPO.
PART 11 OTHER CONSIDERATION
11.1 Natural resource issuer - Where a natural resource issuer proposes to
acquire from a person a resource property or an option on a resource
property, the value of which is not supported by a valuation opinion, the
following principles apply:
(a) in an arm's length transaction, the issuer may pay the person cash
consideration.
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(b) In an arm's length transaction, the issuer may agree to pay the
person additional consideration at such time as the resource
property commences commercial production. Such additional
consideration may, depending on the circumstances, consist of cash
consideration, reasonable payments from net profits, securities, or
any combination of these.
(c) In a non-arm's length transaction, the issuer may pay the person
cash consideration up to the amount of the out of pocket costs
incurred by the person in respect of the resource property,
determined in accordance with section 5.3.
(d) In a non-arms length transaction, the issuer may agree to pay the
person additional consideration at such time as the resource
property commences commercial production, where the person has
carried out extensive exploration with results that indicate that
the resource property appears to have substantial merit. The extent
of the person's effort, skill and risk in developing the resource
property will be taken into account by the Superintendent in
determining whether additional consideration is justified. Such
additional consideration may, depending on the circumstances,
consist of cash consideration, reasonable payments from net profits,
securities, or any combination of these. A 15% net profits interest
would normally be considered reasonable.
11.2 Industrial issuer - Where an industrial issuer proposes to acquire from a
person non-cash assets, the value of which are not supported by a
valuation opinion, the following principles apply:
(a) In an arm's length transaction, the issuer may pay the person cash
consideration, a royalty or a combination of these.
(b) In a non-arm's length transaction, the issuer may pay the person
cash consideration up to the amount of the out of pocket costs
incurred by the person in respect of the non-cash assets, determined
in accordance with section 5.3.
DATED at Vancouver, British Columbia, this 21st day of December 1989.
/s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxx
Chairman
December 21, 1989
35
SCHEDULE C TO ESCROW AGREEMENT
NUMBER OF SHARES
NAME OF SHAREHOLDER HELD IN ESCROW
------------------- --------------
XXXXXXX X. XXXXXXXXX 120,000
XXXXX X. XXXXXXX 60,724
