ESCROW AGREEMENT
THIS ESCROW AGREEMENT made as of the 27th day of April, 2000.
Between:
XXXXXX.XX, INC., of 00 Xxxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx, X0X 0X0
And
GROOME XXXXXXX.XXX INC., of 000-00 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx, X0X
0X0
And
PACIFIC CORPORATE TRUST COMPANY, of 000 Xxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
WHEREAS:
A. The Company and the Agent wish to close the Offering and require
in connection with such closing that 15% of the gross proceeds received
from Canadian subscribers be placed in escrow and have requested the
Trustee to act as the escrow agent;
B. The Agency Agreement requires that 15% of the gross proceeds
received from non U.S. subscribers in the Offering are to be held by the
Trustee on the terms and conditions of this Agreement as the same may be
amended or supplemented from time-to-time; and
C. The Trustee has agreed to act as escrow agent and trustee under
this Agreement;
THIS AGREEMENT WITNESSES THAT, in consideration of the mutual covenants
contained herein, the parties agree as follows:
Article 1
Interpretation
1.1 Definitions
As used in this Agreement, including in the recitals, the following
terms have the following meanings:
"Agency Agreement" means the agreement dated effective April 10, 2000
made between the Company and the Agent relating to the Offering;
"Agent" means Groome Xxxxxxx.xxx Inc.;
"Closing Date" means the first closing date of the issuance of the
Special Warrants to be conducted as on one or more closings, the first
at which shall be on April 27, 2000 or such other day as may be agreed
between the Company and the Agent;
"Commissions" means the Securities Commissions of British Columbia,
Alberta, Ontario and Quebec;
"Company" means Xxxxxx.xx, Inc.;
"Common Shares" means fully paid and non-assessable common shares with a
par value of $0.001 per share in the capital of the Company;
"Distribution" means the issuance of Unit Shares and Warrants to the
holders of Special Warrants on the exercise or deemed exercise of the
Special Warrants;
"Effective Registration" means the registration of the resale of the
Unit Shares and the Common Shares issuable upon the exercise of the
Warrants pursuant to a Registration Statement filed in compliance with
the United States Securities Act of 1933, as amended and the declaration
or ordering of the effectiveness of such Registration Statement (the
"Confirmation") by the United States Securities and Exchange Commission.
"Escrowed Funds" means the Holdback and all proceeds of investment and
reinvestment thereof from time-to-time;
"Holdback" means 15% of the gross proceeds received from non U.S.
subscribers in the Offering on the Closing Date as set out in Schedule
"A" hereto, being the sum of $158,997.94;
"Offering" means the Company's sale of up to 20,000,000 Special Warrants
to be effected through one or more closings;
"Prospectus" means, a prospectus, including any amendments thereto,
which upon issuance of a receipt by each at the Commissions for the
final prospectus will qualify the Distribution;
"Qualified Investments" means those investments in which the Escrowed
Funds may be invested and reinvested in accordance with this Agreement,
being short-term interest-bearing or discount obligations issued or
guaranteed by the Government of Canada or other short-term investment-
grade debt obligations as may be agreed to from time-to-time by the
Company and the Agent in writing;
"Registration Statement" means a registration statement of the Company
under the United States Securities Act of 1933, as amended;
"Special Warrants" means special warrants issued by the Company pursuant
to the Offering;
"Trustee" means Pacific Corporate Trust Company;
"Underlying Securities" means the Unit Shares and Warrants issuable on
the exercise of the Special Warrants;
"Unit Shares" means the Common Shares issued by the Company on the
exercise of the Special Warrants;
"Warrants" mean the whole common share purchase warrants to be issued by
the Company on the exercise of the Special Warrants.
1.2 Headings
The division of this Agreement into Articles and paragraphs and the
provision of headings therefor are for convenience of reference only and
do not affect or limit its construction or interpretation.
1.3 Gender and Number
References to gender include all genders and, except where the context
otherwise requires, the singular includes the plural and vice-versa.
1.3 Business Day
Any action or payment required or permitted to be taken or made
hereunder on a day that is not a business day in Vancouver, British
Columbia may be taken or made on the next succeeding business day.
1.5 Dollar Amounts
Unless otherwise herein specially provided all references herein
to dollar amounts are references to U.S. currency.
Article 2
Closing in Escrow
2.1 Delivery to Trustee
Subject to the provisions of section 4.1 hereof, the Company and the
Agent agree that the Escrowed Funds shall be held by the Trustee in
escrow in accordance with the terms of this Agreement until the earlier
to occur (the "Escrow Expiry") of:\
(a) 4:30 p.m. on April 26, 2001; and
(b) the date on which the Trustee receives written notice from the
Agent that both a receipt for the final Prospectus has been issued by
each of the Commissions where qualification is required and the
Confirmation has been received.
Article 3
Deposit of Holdback, Qualified Investments
3.1 Deposit of Holdback with Trustee
The Company hereby deposits the Holdback in the amount of $158,997.94
and the Trustee hereby acknowledges receipt of the same with the Trustee
on the terms and conditions of this Agreement.
3.2 Qualified Investments
Pending distribution of all of the Escrowed Funds in accordance with
Article 4, the Trustee will hold, invest and reinvest the balance of the
Escrowed Funds held by it from time-to-time, in Qualified Investments at
the written direction of the Company. Pending receipt by the Trustee of
such written direction, the Trustee will place and deposit, as soon as
practicable, the Escrowed Funds in interest-bearing accounts of a
Canadian Schedule I chartered bank or other senior Canadian financial
institution (the "Deposit Account") at the then current rate of interest
on similar deposits. Such written direction will specify the maturity
dates of such Qualified Investments so as to allow the Trustee to comply
with its obligations under Article 4 but in no event shall the Qualified
Investments have a maturity date in excess of 60 days. Such written
direction, to be effective, will be given on a business day, provided
that if such direction is given after 11:00 a.m. (Vancouver time) on any
business day it will be effective on the next succeeding business day.
Such written direction may also direct the Trustee to realize on all or
a portion of the Qualified Investments in anticipation of the
distribution of the Escrowed Funds pursuant to Article 4. In the event
the Trustee is unable to invest the Escrow Funds in Qualified
Investments with the maturity dates specified in any written direction
to the Trustee, the Trustee shall maintain the Escrow Funds in the
Deposit Account. All Qualified Investments will be registered in the
name of the Trustee and will be retained by the Trustee either through
Canadian Depository for Securities Limited or in safekeeping in the City
of Vancouver and, for such purpose, may be placed in the vaults of the
Trustee or any Canadian chartered bank or trust company, or deposited
for safekeeping with such bank or trust company.
Article 4
Distribution of Escrowed Funds
4.1 Release of Escrowed Funds
Subject to paragraph 4.2, the Trustee will release the Escrowed Funds to
the Company on the earlier of:
(a) the dates on which holders convert, from time-to-time, their
Special Warrants into the Underlying Securities, with respect only to
the Escrowed Funds pertaining to the Special Warrants so converted and
subject to the Company providing the Trustee with written evidence of
such conversion by the holder or by direct receipt from the holder of a
duly completed and signed Exercise and Subscription Form in the form
attached as a Schedule to the Special Warrant Certificate evidencing the
Special Warrants; and
(b) the Escrow Expiry.
For the purposes of clause 4.1(a) "Escrow Funds pertaining to the
Special Warrants converted" shall mean 15% of the gross proceeds paid by
the holder for that number of Special warrants which have been converted
by such holder plus the proceeds of investment and reinvestment
attributable to such amount.
4.2 Notice of Release to Agent and to Company
The Trustee shall, concurrently with each release of Escrowed Funds from
time-to-time, give written notice to the Agent and the Company of the
same.
4.3 Method of Distribution and Delivery
(a) All distributions of money will be made by cheque drawn upon a
Canadian Schedule I chartered bank made payable to or to the order of
the Company.
(b) The delivery of a cheque by the Trustee as required hereunder will
satisfy and discharge the liability for any amounts due to the extent of
the sum or sums represented thereby, unless such cheque is not honoured
on presentation; provided that in the event of the non-receipt of such
cheque by the payee, or the loss or destruction thereof, the Trustee,
upon being furnished with reasonable evidence of such non-receipt, loss
or destruction and an indemnity reasonably satisfactory to it, will
issue to such payee a replacement cheque for the amount of such cheque.
Article 5
Concerning the Trustee
5.1 Remuneration and Expenses
The Company covenants that it will pay to the Trustee the fees agreed to
by the Company and the Trustee from time-to-time for its services
hereunder and will pay or reimburse the Trustee upon its request for all
reasonable expenses and distributions of the Trustee in the
administration or execution of the trusts hereby created (including the
reasonable compensation and the disbursements of its legal counsel and
all other advisers, experts, accountants and assistants not regularly in
its employ) until all duties of the Trustee hereunder have been finally
and fully performed, except any such expense or disbursements in
connection with or related to or required to be made as a result of the
negligence, wilful misconduct or bad faith of the Trustee.
5.2 Resignation and Replacement
The Trustee may resign its position hereunder and be discharged from all
further duties and liabilities hereunder after giving not less than 90
days' notice in writing to the Company and the Agent; provided that such
shorter notice may be given as the Company and Agent will accept as
sufficient. In the event that the office of trustee becomes vacant by
resignation or incapacity to act or otherwise, the Company and Agent
will appoint in writing a new trustee in place of the trustee vacating
office. If the Company and Agent fail for a period of 10 days to make
such appointment, then the retiring or former trustee may apply to a
Judge of the Supreme Court of British Columbia, at the expense of the
Company, for the appointment of a new trustee after such notification to
the Company as such Judge may order. On any new appointment and upon
payment to the Trustee vacating office of any amounts owing to it
hereunder, the former trustee will transfer to the new trustee all the
Escrowed Funds (whether in the form of cash or Qualified Investments)
and the new trustee will be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Trustee
hereunder without any further assurance, conveyance, act or deed; but if
for any reason it becomes necessary or expedient to execute any further
deed or assurance the same will be done at the expense of the Company
and may and will be legally and validly executed by the former Trustee.
5.3 Reliance
The Trustee will be entitled to take legal or other advice and employ
such assistance as in its judgment, acting reasonably, may be necessary
for the proper discharge of its duties and the determination of its
rights hereunder and, if acting in good faith, may act and rely upon the
opinion, information or advice of counsel or any other independent
expert or adviser retained by it, and the Trustee may act on and rely as
to the truth of the statements and the accuracy of the opinions
expressed therein, upon statutory declarations, opinions, reports,
certificates, notices, statements, directions, instruments or other
evidence furnished to the Trustee pursuant to any provision hereof and
the Trustee will not be responsible for any loss resulting from any
action or inaction taken in good faith in reliance upon such opinion,
information or advice.
5.4 Disagreements
In the event of any disagreement arising regarding the terms of this
Agreement, the Trustee will be entitled, at its option, to refuse to
comply with any or all demands whatsoever until the dispute is settled
either by agreement in writing between the parties, by arbitration or
mediation or by a court of competent jurisdiction.
5.5 Accounting
The Trustee will maintain accurate books, records and accounts of the
transactions effected or controlled by the Trustee hereunder and the
receipt, investment, reinvestment and distribution of the Escrowed Funds
and will provide to the Company and the Agent records and statements
thereof upon request.
5.6 Standard of Care
In the exercise and discharge of its rights and duties hereunder, the
Trustee will act honestly and in good faith with a view to the best
interests of the persons having an interest in the Escrowed Funds and
will exercise that degree of care, diligence and skill that a reasonably
prudent professional trustee would exercise in comparable circumstances.
5.7 Acceptance of Trust
The Trustee hereby accepts the covenants, trusts and obligations of this
Agreement declared and provided for and agrees to perform the same upon
the terms and conditions herein before set forth and to hold and
exercise the rights, privileges and benefits conferred upon it hereby in
trust for and on behalf of the persons having an interest in the
Escrowed Funds.
5.8 Indemnity
Except for acts of negligence, wilful misconduct or bad faith, the
Trustee will not be liable for any act done or step taken or omitted by
it in good faith, or for any mistake of fact or law, and the Company
hereby indemnifies and saves harmless the Trustee and its officers from
and against all claims, demands, actions, suits, liabilities or other
proceedings by whomsoever made, prosecuted or brought and from all
losses (other than loss of the Trustee's profits), costs, damages and
expenses (including legal and advisory expenses) in any manner based
upon, occasioned by or attributable to any act of the Trustee in the
execution of its duties hereunder. It is understood and agreed that
this indemnification will survive the termination or resignation of the
Trustee hereunder.
5.9 Indemnification for Withholding Tax Liability
The Company will indemnify the Trustee in respect of any obligation to
withhold any monies to be remitted to Revenue Canada, Taxation. The
Trustee also will not be obligated to account to Revenue Canada,
Taxation with respect to any taxes accruing as a result of either the
deposit or distribution of any funds hereunder.
5.10 Miscellaneous
(a) The Trustee will not be liable for any loss of the Escrowed Funds
due to the insolvency, negligence or malfeasance of any financial
institution with whom the Escrowed Funds have been deposited or in whose
securities the same have been invested in accordance with this
Agreement.
(b) The Trustee will be protected in acting upon any written notice,
request, waiver, consent, certificate, receipt, statutory declaration or
other paper or document furnished to it in accordance with the terms of
this Agreement, not only as to its due execution and the validity and
effectiveness of its provisions but also as to the truth and
acceptability of any information therein contained which it in good
faith believes to be genuine and what it purports to be.
(c) The Trustee will disburse monies according to this Agreement only
to the extent that monies have been deposited with it.
5.11 Completion of Trustees Obligations
Upon payment of the entire amount of the Escrow Funds to or to the order
of the Company in accordance with the terms of this Agreement, as the
same may be amended or supplemented from time-to-time, the Trustee shall
have no further duties or obligations hereunder and shall be released
from any further duties or obligations hereunder.
Article 6
General
6.1 Amendment
This Agreement may be amended, with or without the approval of the
Trustee, for the purposes of evidencing the succession to the Trustee or
another trustee and the transfer to and assumption by any such successor
of the rights, privileges and obligations of the Trustee hereunder. In
addition, to the extent that there are one or more closings in respect
to the issuance of Special Warrants which occur after the Closing Date
and prior to the Escrow Expiry (the "Subsequent Closings"), then the
parties shall either amend this Agreement to reflect the additional
Holdback and Escrow Funds to be maintained by the Trustee or shall enter
into a new agreement with respect to Holdback required in respect of the
Subsequent Closings on substantially the same terms and conditions as
contained in this Agreement.
6.2 Assignment
This Agreement may not be assigned by any party without the consent in
writing of the other parties. This Agreement will enure to and bind the
parties and their lawful successors and permitted assigns.
6.3 Waiver
No act, omission, delay, acquiescence or course of conduct on the part
of any party, other than a specific written instrument, will constitute
a waiver of or consent to any breach or default by any other party
hereto, or affect or limit the right of any party to insist on strict or
timely performance of the obligations of any other party.
6.4 Severability
The invalidity or unenforceability of any particular provision of this
Agreement will not affect or limit the validity or enforceability of the
remaining provisions of this Agreement.
6.5 Notices
(a) Unless otherwise expressly provided in this Agreement, any notice
to be given under this Agreement by a party to another will be deemed to
be validly given if delivered or if transmitted by fax:
(i) if to the Company:
Xxxxxx.xx Inc..
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, XX X0X 0X0
Attn: Xx. Xxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
Maitland & Company
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, X.X. X0X 0X0
Attn: Xx. Xxxxxxxxxxx X. Xxxxxx
Fax: (000) 000-0000
(ii) if to the Agent:
Groome Xxxxxxx.xxx Inc.
00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX X0X 0X0
Attn: Xx. Xxxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
Fraser Xxxxxx
1 First Canadian Place
000 Xxxx Xxxxxx Xxxx
Xxxxxxx, XX X0X 0X0
Attn: Xx. Xxxxx Rapuch
Fax: (000) 000-0000
(iii) if to the Trustee:
Pacific Corporate Trust Company
Xxxxx 000, 000 Xxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Attn: Xx. Xxxx Xxxxxxxxxx
Fax: (000) 000-0000
and any notice given in accordance with the foregoing will be deemed to
have been received on the date of delivery or, if transmitted by fax, on
the first business day following the date of transmission.
(b) The parties may, from time-to-time, notify the others, in the
manner provided above, of a change of address which, from the effective
date of the notice and until changed by like notice, will be the address
of such party for all purposes of this Agreement.
6.6 Further Assurances
Each of the parties will do or cause to be done all such acts and things
and will execute or cause to be executed all such documents, agreements
and other instruments as may reasonably be necessary or desirable for
the purpose of carrying out the provisions and intent of this Agreement.
6.7 Counterpart Execution and Fax Delivery
This Agreement may be executed in any number of counterparts, all of
which taken together will form one and the same instrument and each of
which will be deemed to be an original. This Agreement may be delivered
by fax.
6.8 Governing Law
This Agreement and the rights and obligations of the parties hereunder
will be governed by and interpreted exclusively in accordance with the
laws of British Columbia and the laws of Canada applicable therein.
IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first above written notwithstanding its actual date of execution.
XXXXXX.XX INC.
By: /s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx, Chief Executive Officer
GROOME XXXXXXX.XXX INC.
By: /s/ Xxxxxx Page
Xxxxxx Page, Vice President
PACIFIC CORPORATE TRUST COMPANY
By: /s/ Xxxx Xxxxx
Xxxx Xxxxx, President
By: /s/ Xxxx Xxxxxxxxxx
Xxxx Xxxxxxxxxx, Vice President
