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EXHIBIT (6)(2)
AMENDED AND RESTATED
PERFORMANCE SHARES ALLOTMENT AGREEMENT
THIS AGREEMENT made the 22nd day of November, 1991 and amended the 6th day of
December, 1996.
BETWEEN:
GLOBAL ELECTION SYSTEMS INC. (formerly Macrotrends
International Ventures.) a corporation duly incorporated
under the laws of the Province of British Columbia having an
office at 0000 Xxxx Xxxxxx, Xxxxxxxxx, X.X., X0X 0X0;
(the "Issuer")
OF THE FIRST PART
AND:
THE INDIVIDUALS LISTED ON SCHEDULE "A" ATTACHED TO THIS AGREEMENT;
(individually a "Principal" and collectively the "Principals")
OF THE SECOND PART
WHEREAS:
A. The Principals are "principals" of the Issuer within the meaning of
Local Policy Statement 3-07, dated effective March 1, 1990, of the British
Columbia Securities Commission;
B. The Principals wish to subscribe for 2,738,000 performance escrow
shares of the Company (the "Shares") and the Company has agreed to issue the
Shares to the Principals upon the terms and subject to the conditions contained
in this Agreement as set out in Schedule "A" to this Agreement;
C. The Shares, when issued, will be escrowed pursuant to a Performance
Shares Escrow Agreement in the form attached as Schedule "B" to this Agreement
(the "Escrow Agreement");
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NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
covenants and agreements herein contained, the parties hereto do covenant and
agree (the "Agreement") each with the other as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE ISSUER
1.1 The Issuer represents and warrants to, and covenants and agrees with
the Principals that the Issuer has good and sufficient right and authority to
enter into this Agreement on the terms and conditions set forth herein and to
issue the Shares to the Principals as provided for hereunder.
2. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPALS
2.1 The Principals each individually represent and warrant to, and covenant
and agree with the Issuer that they are principals of the Issuer and each has
good and sufficient right and authority to enter into this Agreement on the
terms and conditions set forth herein.
2.2 The representations, warranties, covenants and agreements of the
Principals shall be true as of the date that the Principals' Shares are
subscribed for by the Principals (the "Subscription Date") as though such
representations, warranties, covenants and agreements were made at and as of the
Subscription Date.
3. ALLOTMENT AND ISSUANCE OF SHARES
3.1 ON the basis of the representations, warranties, covenants and
agreements of the parties hereto as set forth herein and subject to the terms of
this Agreement, the Principals agree to subscribe from the Issuer, and the
Issuer agrees to allot for issuance to the Principals, the Shares as set out in
Schedule "A" attached hereto.
3.2 As full payment for the Shares, the Principals shall pay the Issuer
$0.08 per Share. Upon receipt of full payment for Shares and an executed copy of
an Escrow Agreement from a Principal, the Company shall issue the Shares to each
Principal, provided that the Company shall not issue shares to a Principal until
receipt of full payment for all Shares allotted to that Principal as set out in
Schedule "A".
3.3 The Company's obligation to issue Shares to any Principal pursuant to
paragraph 3.2 shall expire on the earlier of January 17, 2000 or on the date on
which application is made to the British Columbia Securities Commission for the
first release of Shares from escrow. In the event such application is made, if a
Principal has not subscribed and fully paid for his Shares, then the allotment
of the Shares to such Principal shall be withdrawn and such Principal shall have
no right to acquire any of the Shares previously he Shares previously allotted
to him.
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4. REGULATORY APPROVAL
4.1 This Agreement is subject to all necessary securities regulatory
approvals of the British Columbia Securities Commission. The Issuer shall use
its best efforts to obtain such necessary approvals to this agreement by no
later than January 17, 1997.
5. GENERAL
5.1 Time and each of the terms and conditions of this Agreement shall be of
the essence of this Agreement.
5.2 The Schedules to this Agreement incorporated by reference and the
recitals to this Agreement constitute a part of this Agreement.
5.3 This Agreement constitutes the entire agreement between the parties
hereto in respect of the matters referred to herein and there are no
representations, warranties, covenants or agreements, expressed or implied,
collateral hereto other than as expressly set forth or referred to herein.
5.4 The headings in this Agreement are for reference only and do not
constitute terms of the Agreement.
5.5 The provisions contained in this Agreement which, by their terms,
require performance by a party to this Agreement subsequent to the execution of
this Agreement, shall survive the execution of this Agreement.
5.6 Whenever the singular or masculine is used in this Agreement the same
shall be deemed to include the plural or the feminine or the body corporate as
the context may require.
5.7 The parties hereto shall execute and deliver all such further documents
and instruments and do all such acts and things as any party may, either before
or after the Closing Date, reasonably require in order to carry out the full
intent and meaning of this Agreement.
5.8 Any notice, request, demand and other communication to be given under
this Agreement shall be in writing and shall be delivered by hand to the parties
at their respective addresses appearing on the cover page of this Agreement, or
to such other addresses as may be given in writing by the parties hereto in the
manner provided for in this paragraph, and shall be deemed to have been received
on the date of delivery.
5.9 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
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5.10 This Agreement shall be subject to, governed by, and construed in
accordance with the laws of the Province of British Columbia.
5.11 This Agreement may be signed by the parties in as many counterparts
as may be deemed necessary, each of which so signed shall be deemed to be an
original, and all such counterparts together shall constitute one and the same
instrument.
IN WITNESS WHEREOF the parties have hereunto set their hands and
seals effect as of the Effective Date first above written.
The COMMON SEAL of GLOBAL )
ELECTION SYSTEMS INC. was hereunto )
affixed in the presence of: )
)
)
/s/ ILLEGIBLE ) c/s
---------------------------------- )
Authorized Signatory )
)
)
/s/ ILLEGIBLE )
---------------------------------- )
Authorized Signatory )
SIGNED, SEALED AND DELIVERED by )
XXXXXXX XXXXXXXX in the presence of: )
)
)
/s/ ILLEGIBLE ) /s/ XXXXXXX XXXXXXXX
---------------------------------- ) -----------------------------------
Signature of Witness ) XXXXXXX XXXXXXXX
)
Name: XXXXXXX XXXXXXXX )
---------------------------- )
)
)
Address: 0000-0000 XXXXXX XX. )
------------------------- )
)
VANCOUVER, B.C. )
---------------------------------- )
)
Occupation: ACCOUNTANT )
---------------------- )
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SIGNED, SEALED AND DELIVERED by )
XXXXX XXXXX in the presence of: )
)
)
)
/s/ X. XXXXX ) /s/ XXXXX X. XXXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) XXXXX XXXXX
)
)
Name: X. XXXXX )
---------------------------- )
)
Address: 00 XXXXXXXX XXX. )
------------------------- )
)
XXXXXXX X0X XX0 )
---------------------------------- )
)
Occupation: SALES )
---------------------- )
SIGNED, SEALED AND DELIVERED by )
THE ESTATE OF XXXXXX XXXX in the )
presence of: )
)
)
---------------------------------- ) -----------------------------------
Signature of Witness ) THE ESTATE OF XXXXXX XXXX
)
Name: )
---------------------------- )
)
Address: )
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Occupation: )
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SIGNED, SEALED AND DELIVERED by )
XXXXX XXXXX in the presence of: )
)
)
)
---------------------------------- ) ------------------------------------
Signature of Witness ) XXXXX XXXXX
)
Name: )
---------------------------- )
)
Address: )
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Occupation: )
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SIGNED, SEALED AND DELIVERED by )
THE ESTATE OF XXXXXX XXXX in the )
presence of: )
)
/s/ XXX XxXXXXXX ) /s/ XXXX KEPTLEMON, EXECUTORY
---------------------------------- ) -----------------------------------
Signature of Witness ) THE ESTATE OF XXXXXX XXXX
)
Name: XXX XxXXXXXX )
---------------------------- )
)
Address: 00 Xxxxxx Xxxxx )
------------------------- )
)
Xxxxxxxxx, Xxx X0X 0X0 )
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Occupation: EXECUTIVE SECRETARY )
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SIGNED, SEALED AND DELIVERED by )
XXXXXXX XXXXXX in the presence of: )
)
/s/ XXXXXXXXX X. XXXXXXX ) /s/ XXXXXXX X. XXXXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) XXXXXXX XXXXXX
)
Name: Xxxxxxxxx Xxxxxxx )
---------------------------- )
)
Address: 0000 Xxxxxx Xxxx. #000 )
------------------------- )
Albuquerque, New Mexico )
---------------------------------- )
)
Occupation: Secretary )
---------------------- )
SIGNED, SEALED AND DELIVERED by )
TALBOT IREDALE in the presence of: )
)
)
---------------------------------- ) ------------------------------------
Signature of Witness ) TALBOT IREDALE
)
Name: )
---------------------------- )
)
Address: )
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Occupation: )
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SIGNED, SEALED AND DELIVERED by )
XXX XXXXX in the presence of: )
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)
---------------------------------- ) ------------------------------------
Signature of Witness ) XXX XXXXX
)
Name: )
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)
Address: )
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OCCUPATION: )
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SIGNED, SEALED AND DELIVERED by )
XXXXXXX XXXXXX in the presence of: )
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)
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Signature of Witness ) XXXXXXX XXXXXX
)
Name: )
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)
Address: )
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Occupation: )
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SIGNED, SEALED AND DELIVERED by )
TALBOT IREDALE in the presence of: )
)
/s/ M. I. XXXXXXXX ) /s/ TALBOT IREDALE
---------------------------------- ) ------------------------------------
Signature of Witness ) TALBOT IREDALE
)
Name: XXXXXXX XXXXXXXX )
---------------------------- )
)
Address: 0000-0000 XXXXXX XX. )
------------------------- )
)
VANCOUVER, B.C. )
---------------------------------- )
)
Occupation: ACCOUNTANT )
---------------------- )
SIGNED, SEALED AND DELIVERED by )
XXX XXXXX in the presence of: )
)
)
---------------------------------- ) ------------------------------------
Signature of Witness ) XXX XXXXX
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Name: )
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Address: )
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Occupation: )
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SIGNED, SEALED AND DELIVERED by )
XXXXXXX XXXXXX in the presence of: )
)
)
---------------------------------- ) ------------------------------------
Signature of Witness ) XXXXXXX XXXXXX
)
Name: )
---------------------------- )
)
Address: )
------------------------- )
)
---------------------------------- )
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Occupation: )
---------------------- )
SIGNED, SEALED AND DELIVERED by )
TALBOT IREDALE in the presence of: )
)
/s/ M. I. XXXXXXXX ) /s/ TALBOT IREDALE
---------------------------------- ) ------------------------------------
Signature of Witness ) TALBOT IREDALE
)
Name: XXXXXXX XXXXXXXX )
---------------------------- )
)
Address: 0000-0000 XXXXXX XX. )
------------------------- )
)
VANCOUVER, B.C. )
---------------------------------- )
)
Occupation: ACCOUNTANT )
---------------------- )
SIGNED, SEALED AND DELIVERED by )
XXX XXXXX in the presence of: )
)
/s/ M. I. XXXXXXXX ) /s/ XXX XXXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) XXX XXXXX
)
Name: XXXXXXX XXXXXXXX )
---------------------------- )
)
Address: 0000-0000 XXXXXX XX. )
------------------------- )
)
VANCOUVER, B.C. )
---------------------------------- )
)
Occupation: ACCOUNTANT )
---------------------- )
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SIGNED, SEALED AND DELIVERED by )
XXXXXXX XXXXXXXX in the presence of: )
)
)
/s/ XXXX XXX ) /s/ XXXXXXX XXXXXXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) XXXXXXX XXXXXXXX
)
Name: XXXX XXX )
---------------------------- )
)
Address: 0000 XXXX 00XX XXX. )
------------------------- )
VANCOUVER, B.C. )
---------------------------------- )
)
Occupation: Accountant )
---------------------- )
SIGNED, SEALED AND DELIVERED by )
Xxxxxx Xxx Xxxx in the presence of: )
)
)
---------------------------------- ) ------------------------------------
Signature of Witness ) XXXXXX XXX XXXX
)
Name: )
---------------------------- )
)
Address: )
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Occupation: )
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SIGNED, SEALED AND DELIVERED by )
XXXXXXX XXXXXXXX in the presence of: )
)
) /s/ XXXXXXX XXXXXXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) XXXXXXX XXXXXXXX
)
Name: )
---------------------------- )
)
Address: )
------------------------- )
)
---------------------------------- )
)
Occupation: )
---------------------- )
SIGNED, SEALED AND DELIVERED by )
XXXXXX XXX XXXX in the presence of: )
)
/s/ XXXXXXXXX X. XXXXXXX ) /s/ XXXXXX XXX XXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) XXXXXX XXX XXXX
)
Name: Xxxxxxxxx Xxxxxxx )
---------------------------- )
)
Address: 0000 Xxxxxx Xxxx. #000 )
------------------------- )
Albuquerque, New Mexico )
---------------------------------- )
)
Occupation: Secretary )
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SCHEDULE "A"
NAME OF PRINCIPAL NUMBER OF SHARES
Xxxxxxx Xxxxxxxx 282,267
00000 - 00xx Xxxxxx
Xxxxxx, X.X. X0X 0X0
Xxxxx Xxxxx 88,208
Apt. 000 - 000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Estate of Xxxxxx Xxxx 17,641
c/o XXXX XXXXXXXXXX
OENEST, XXXXXX BESBRISAY T LANEK
YOO - 000 XXXXXXXX XX., XXXX
XXXXXXX XXX X0X 0X0
Xxxxxxx Xxxxxx 35,283
Xxxxx 0
Xxx 000X
Xxxxxxxx, Xxxxxxxx
00000
Talbot Iredale 70,566
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Xxx Xxxxx 28,227
000 - 0000 XXXXX XX.
XXXXXXX X.X. X0X 0X0
Xxxxxxx Xxxxxxxx 28,227
#000 - 0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, X.X. X0X 0X0
Xxxxxx Xxx Xxxx 2,187,581
0000 Xxxxxxxxx XX
Xxxxxxxxxxx, XX 00000
---------
TOTAL: 2,738,000
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SCHEDULE "B"
PERFORMANCE SHARES ESCROW AGREEMENT
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PERFORMANCE SHARES ESCROW AGREEMENT
THIS AGREEMENT IS DATED FOR REFERENCE THE __ DAY OF ___, 199_;
AMONG:
MONTREAL TRUST COMPANY OF CANADA, 4th Flr., 000 Xxxxxxx Xxxxxx,
Xxxxxxxxx, X.X., X0X 0X0
(the "Escrow Agent")
AND:
GLOBAL ELECTION SYSTEMS INC. (formerly Macrotrends International
Ventures Inc.) a corporation duly incorporated under the laws of the
Province of British Columbia having an office at 0000 Xxxx Xxxxxx,
Xxxxxxxxx, X.X., X0X 0X0;
(the "Issuer")
AND:
EACH SHAREHOLDER, as defined in this Agreement
(collectively, the "Parties");
WHEREAS each 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 (the "Agreement") as follows:
1. INTERPRETATION
In this Agreement:
(a) "Acceptance Date" means the date on which this agreement was
accepted by the Commission;
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(b) "Acknowledgement" means the acknowledgement and agreement to
be bound in the form attached as Schedule "A" to this
Agreement;
(c) "Act" means the Securities Act, S.B.C. 1985, c. 83;
(d) "Cash Flow" means net income or loss before tax, adjusted to
add back the following expenses:
(i) depreciation,
(ii) amortization of goodwill and deferred research and
development costs, excluding general and
administrative costs,
(iii) expenses research and development costs, excluding
general and administrative costs, and
(iv) any other amounts permitted or required by the
Executive Director;
(e) "Commission" means the British Columbia Securities Commission;
(f) "Cumulative Cash Flow" means, at any time, the aggregate cash
flow of the Issuer up to that time from a date no earlier than
the Issuer's financial year end immediately preceding the
Acceptance Date, net of any negative cash flow;
(g) "Executive Director" means the Executive Director appointed
under the Act;
(h) "Local Policy Statement 3-07" means the Commission Local
Policy Statement 3-07 in effect as of the date of reference of
this Agreement and attached as Schedule "B" to this
Agreement;
(i) "Shareholder" means a holder of shares of the Issuer who
executes this Agreement or an Acknowledgement; and
(j) "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.
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.
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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 Sharers except in
accordance with Local Policy Statement 3-07 and with the consent of the
Executive Director.
(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 Executive Director 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) In the event the Shareholder ceases to be a "principal" (as that term
is defined in Local Policy Statement 3-07) of the Issuer, the
Shareholder shall do all such things in respect of the Shares as may be
required by the Company including, without in any way limiting the
generality of the foregoing, gifting back the Shares, or any part of
them, to the issuer or transferring the Shares, or any part of them, to
a person or persons directed by the Company.
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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 Executive Director
consenting to the release.
(3) The approval of the Executive Director to a release from escrow of any
of the Shares shall terminate this Agreement only in respect of the
Shares so released.
(4) The Shares will be released, on a pro-rata basis to the Shareholders,
pursuant to subsection (2) on the basis of one Share for every $0.7975
of Cumulative Cash Flow generated by the Issuer.
(5) Notwithstanding any other provision in this Agreement, any Shares not
released before January 17, 2000 shall be cancelled.
8. SURRENDER FOR CANCELLATION
The Shareholder shall surrender the Shares for cancellation by the Issuer and
the Escrow Agent shall deliver the certificates representing the Shares 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 Executive Director;
(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; and
(c) 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
Executive Director.
(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; and
(c) a surrender of Shares for cancellation pursuant to section 8;
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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 its address appearing on the cover page of this
Agreement; or
(b) the Escrow Agent at its address appearing on the cover page of
this Agreement;
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 (2) shall
concurrently be delivered to the Executive Director.
(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 Executive Director, appoint another escrow agent and
that appointment shall be binding on the Issuer and the Shareholders.
12. ENTIRE AGREEMENT
This Agreement supersedes and replaces all other escrow agreements applying to
the Shares required by securities regulators and all such Agreements are
terminated and of no further force and effect from the reference date of this
Agreement.
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13. FURTHER ASSURANCES
The Parties shall execute and deliver any documents and perform any acts
necessary to carry out the intent of this Agreement.
14. TIME
Time is of the essence of this Agreement.
15. 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.
16. 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.
17. 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.
18. ENUREMENT
This Agreement inures 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 COMMON SEAL of ESCROW AGENT )
was hereunto affixed in the presence of: )
)
) c/s
---------------------------------------- )
Authorized Signatory )
)
---------------------------------------- )
Authorized Signatory )
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The COMMON SEAL of GLOBAL )
ELECTION SYSTEMS INC. was hereunto )
affixed in the presence of: )
)
)
) c/s
)
)
------------------------------------------ )
Authorized Signatory )
)
)
------------------------------------------ )
Authorized Signatory )
SIGNED, SEALED AND DELIVERED by )
XXXXXXX XXXXXXXX in the presence of: )
)
------------------------------------------ ) ----------------------------------------
Signature of Witness ) XXXXXXX XXXXXXXX
)
)
Name: )
------------------------------------- )
)
Address: )
---------------------------------- )
)
------------------------------------------ )
)
Occupation: )
------------------------------ )
)
SIGNED, SEALED AND DELIVERED by )
XXXXXX XXX XXXX in the presence of: )
)
------------------------------------------ ) ----------------------------------------
Signature of Witness ) XXXXXX XXX XXXX
)
)
Name: )
------------------------------------- )
)
Address: )
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)
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Occupation: )
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SIGNED, SEALED AND DELIVERED by )
XXXXX XXXXX in the presence of: )
)
)
------------------------------- ) ----------------------------
Signature of Witness ) XXXXX XXXXX
)
Name: )
-------------------------- )
)
Address: )
----------------------- )
)
------------------------------- )
)
Occupation: )
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SIGNED, SEALED AND DELIVERED by )
THE ESTATE OF XXXXXX XXXX in the )
presence of: )
)
)
------------------------------- ) ----------------------------
Signature of Witness ) THE ESTATE OF XXXXXX XXXX
)
Name: )
-------------------------- )
)
Address: )
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)
------------------------------- )
)
Occupation: )
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SIGNED, SEALED AND DELIVERED by )
XXXXXXX XXXXXX in the presence of: )
)
---------------------------------- ) ----------------------------------
Signature of Witness ) XXXXXXX XXXXXX
)
Name: )
----------------------------- )
)
Address: )
-------------------------- )
)
---------------------------------- )
)
Occupation: )
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SIGNED, SEALED AND DELIVERED by )
TALBOT IREDALE in the presence of: )
)
---------------------------------- ) ----------------------------------
Signature of Witness ) TALBOT IREDALE
)
Name: )
----------------------------- )
)
Address: )
-------------------------- )
)
---------------------------------- )
)
Occupation: )
----------------------- )
SIGNED, SEALED AND DELIVERED by )
XXX XXXXX in the presence of: )
)
---------------------------------- ) ----------------------------------
Signature of Witness ) XXX XXXXX
)
Name: )
----------------------------- )
)
Address: )
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)
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Occupation: )
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SIGNED, SEALED AND DELIVERED by )
XXXXXXX XXXXXXXX in the presence of: )
)
)
------------------------------------- ) -----------------------------------
Signature of Witness ) XXXXXXX XXXXXXXX
)
Name: )
------------------------------- )
)
Address: )
---------------------------- )
)
)
------------------------------------- )
)
)
Occupation: )
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SCHEDULE "A" TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Executive Director
0000 - 000 Xxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X 0X0
I, __________________ (the "Transferee"), acknowledge that:
(a) I have entered into an agreement with GLOBAL ELECTIONS SYSTEMS INC. (the
"Issuer") under which _______ shares of the Issuer (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 November __, 1991 (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 __, 199_.
Where the Transferee is an individual:
SIGNED, SEALED AND DELIVERED by )
the Transferee in the presence of: )
)
_________________________________ ) _______________________________
Signature of Witness )
)
Name:____________________________ )
)
Address:_________________________ )
)
_________________________________ )
)
Occupation:______________________ )
25
Where the Transferee is a company:
The CORPORATE SEAL of the Transferee )
was hereunto affixed in the presence of: )
)
)
) c/s
------------------------------------------- )
Authorized Signatory )
)
------------------------------------------- )
Authorized Signatory )
- 2 -
26
SCHEDULE "B" TO ESCROW AGREEMENT
Local Policy Statement 3-07 in effect as of the date of the Escrow
Agreement.
27
[PROVINCE OF BRITISH COLUMBIA LETTERHEAD]
BRITISH COLUMBIA SECURITIES COMMISSION
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
28
LPS 3-07
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 CANCELLATION 14
December 21, 1989
29
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
30
LPS 3-07
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
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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
(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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LPS 3-07
(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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LPS 3-07
"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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LPS 3-07
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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LPS 3-07
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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LPS 3-07
(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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LPS 3-07
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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LPS 3-07
(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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LPS 3-07
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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LPS 3-07
(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 holder 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-arm's 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
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LPS 3-07
APPENDIX A TO LOCAL POLICY STATEMENT 3-07
ESCROW AGREEMENT
THIS AGREEMENT is dated for reference __________________, 19___ and made
AMONG:
(the "Escrow Agent");
AND:
(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;
December 21, 1989
46
- 2 -
LPS 3-07
(d) "IPO" means the initial public offering of common shares of the 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;
(e) "LOCAL POLICY STATEMENT 3-07 means the Local Policy Statement 3-07 in
effect as of the date of reference of this agreement and attached as
Schedule B to this agreement;
(f) "SHAREHOLDER" means a holder of shares of the Issuer who executes this
agreement or an Acknowledgement;
(g) "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;
(h) "SUPERINTENDENT" means the Superintendent of Brokers appointed under the
Act; and
(i) "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
December 21, 1989
47
LPS 3-07
- 3 -
(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.
(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) [Set out in this subsection the rights and obligations of a Shareholder who
ceases to be a principal, as that term is defined in Local Policy Statement
3-07, dies, or becomes bankrupt, to retain, transfer or surrender to the
Issuer for cancellation any shares held by the Shareholder.]
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.
December 21, 1989
48
LPS 3-07
- 4 -
(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.
B. SURRENDER FOR CANCELLATION
The Shareholder shall surrender the Shares for cancellation and the Escrow Agent
shall deliver the certificates representing the Shares 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,
(c) 10 years from the later of the date of issue of the Shares and the
date of the receipt for the Issuer's prospectus on its IPO, 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
December 21, 1989
49
LPS 3-07
- 5 -
(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 ____________________, or
(b) the Escrow Agent at ____________________
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").
December 21, 1989
50
- 6 -
LPS 3-07
(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.
17. ENUREMENT
This Agreement enures to the benefit of and is binding on the Parties and their
heirs, executors, administrators, successors and permitted assigns.
December 21, 1989
51
LPS 3-07
- 7 -
The Parties have executed and delivered this agreement as of the date of
reference of this agreement.
The Corporate/Common Seal of )
[Escrow Agent] was affixed )
in the presence of: )
) c/s
--------------------------------- )
Authorized signatory )
)
--------------------------------- )
Authorized signatory )
The Corporate/Common Seal of )
[Issuer] was affixed )
in the presence of: )
) c/s
--------------------------------- )
Authorized signatory )
)
--------------------------------- )
Authorized signatory )
Where the Shareholder is an individual:
Signed, sealed and delivered by )
[Shareholder] in the presence of: )
)
--------------------------------- )
Name )
)
--------------------------------- ) ------------------------------
Address ) [Shareholder]
)
--------------------------------- )
)
)
--------------------------------- )
)
)
--------------------------------- )
Occupation
December 21, 1989
52
LPS 3-07
- 8 -
Where the Shareholder is a company:
The Corporate/Common Seal of )
[Shareholder] was affixed )
in the presence of: )
)
)
) c/s
------------------------------- )
Authorized signatory )
)
)
------------------------------- )
Authorized signatory )
December 21, 1989
53
LPS 3-07
SCHEDULE A TO 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 )
)
)
------------------------------- ) ------------------------
Address ) [transferee]
)
)
------------------------------- )
)
)
------------------------------- )
Occupation
December 21, 1989
54
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
55
LPS 3-07
SCHEDULE C TO ESCROW AGREEMENT
--------------------------------------------------------------------------------
NAME OF SHAREHOLDER NUMBER OF SHARES HELD IN ESCROW
--------------------------------------------------------------------------------
December 21, 1989
56
LPS 0-00
XXXXXXXX X TO LOCAL POLICY STATEMENT 3-07
EXAMPLES OF EARN-OUT PRICES FOR PERFORMANCE SHARES
ISSUED BY AN INDUSTRIAL ISSUER
--------------------------------------------------
--------------------------------------------
EARN-OUT PRICE IN DOLLARS
-------------------------------------------------------------------------------
PERFORMANCE SHARE
PERCENTAGE 5% 25% 45% 65%
-------------------------------------------------------------------------------
EARN-OUT FACTOR .01x .25x .81x 1.69x
-------------------------------------------------------------------------------
I
P $0.40 .004 .10 .324 .676
O
$0.60 .006 .15 .486 1.014
P
R $0.80 .008 .20 .648 1.352
I
C $1.00 .010 .25 .810 1.690
E
-------------------------------------------------------------------------------
The earn-out price represents the amount of cash flow that must be generated to
release one performance share from escrow. The following definitions are
applicable to the calculation.
EARN-OUT PRICE:
The IPO price multiplied by the EARN-OUT FACTOR.
IPO PRICE:
The price per share paid by the public on the issuer's IPO.
EARN-OUT FACTOR:
The number obtained by squaring the PERFORMANCE SHARE PERCENTAGE,
expressed as a decimal, and multiplying the result by four.
PERFORMANCE SHARE PERCENTAGE:
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.
December 21, 1989
57
LPS 3-07
--------
APPENDIX C TO LOCAL POLICY STATEMENT 3-07
UNDERTAKING REQUIRED FROM NON-REPORTING
OR CLOSELY HELD COMPANY
---------------------------------------
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 Issuer's shares (if the Issuer's shares
are not listed on the are listed on the
Vancouver Stock Exchange) Vancouver Stock Exchange)
________________ (the "Company") undertakes, for the duration of the time that
the Company is the registered owner of escrowed shares of ____________________
(the "Issuer"),
(a) to effect or permit transfer of ownership in the shares of the Company, or
(b) to allot and issue further shares of any class of shares of the Company
only upon receipt of the written consent of the Superintendent of Brokers, if
the Issuer's shares are not listed on the Vancouver Stock Exchange (the
"Exchange"), or the Exchange, if the Issuer's shares are listed on the Exchange.
Dated at ___________________________ on __________________ 19 ____.
The Corporate/Common Seal of )
[Company] was affixed )
in the presence of: )
)
)
--------------------------------- ) c/s
Authorized signatory )
)
-------------------------------- )
Authorized signatory )
December 21, 1989
58
SCHEDULE "C" TO ESCROW AGREEMENT
-------------------------------------------------------------------------------
NAME OF SHAREHOLDER NUMBER OF SHARES HELD IN ESCROW
-------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxx 282,267
00000 - 00xx Xxxxxx
Xxxxxx, X.X. X0X 0X0
Xxxxx Xxxxx 88,208
Apt. 000 - 000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Estate of Xxxxxx Xxxx 17,641
c/o Xxxx Xxxxxxxxxx
Genest, Murray, Desbrisah & Lanek
700 - 000 Xxxxxxxx Xx. Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Xxxxxxx Xxxxxx 35,283
Xxxxx 0
Xxx 000X
Xxxxxxxx, Xxxxxxxx
00000
Talbot Iredale 70,566
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Xxx Xxxxx 28,227
#000 - 0000 Xxxxx Xx.
Xxxxxxx, X.X. X0X 0X0
Xxxxxxx Xxxxxxxx 28,227
#000 - 0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, X.X. X0X 0X0
Xxxxxx Xxx Xxxx 2,187,581
0000 Xxxxxxxxx XX
Xxxxxxxxxxx, XX 00000
---------
TOTAL: 2,738,000
=========
- 2 -
59
PERFORMANCE SHARES ESCROW AGREEMENT
THIS AGREEMENT IS DATED FOR REFERENCE THE 16 DAY OF January, 1998.
AMONG:
MONTREAL TRUST COMPANY OF CANADA, 4th Flr., 000 Xxxxxxx Xxxxxx,
Xxxxxxxxx, X.X., X0X 0X0
(the "Escrow Agent")
AND:
GLOBAL ELECTION SYSTEMS INC. (formerly Macrotrends International
Ventures Inc.) a corporation duly incorporated under the laws of the
Province of British Columbia having an office at 0000 Xxxx Xxxxxx,
Xxxxxxxxx, X.X., X0X 0X0;
(the "Issuer")
AND:
EACH SHAREHOLDER, as defined in this Agreement
(collectively, the "Parties");
WHEREAS each 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 (the "Agreement") as follows:
1. INTERPRETATION
In this Agreement:
(a) "Acceptance Date" means the date on which this agreement was accepted
by the Commission;
(b) "Acknowledgement" means the acknowledgement and agreement to be bound
in the form attached as Schedule "A" to this Agreement;
60
(c) "Act" means the Securities Act, S.B.C. 1985. c.83;
(d) "Cash Flow" means net income or loss before tax, adjusted to add
back the following expenses:
(i) depreciation,
(ii) amortization of goodwill and deferred research and
development costs, excluding general and administrative
costs,
(iii) expenses research and development costs, excluding general
and administrative costs, and
(iv) any other amounts permitted or required by the Executive
Director,
(e) "Commission" means the British Columbia Securities Commission;
(f) "Cumulative Cash Flow" means, at any time, the aggregate cash
flow of the Issuer up to that time from a date no earlier than
the Issuer's financial year end immediately preceding the
Acceptance Date, net of any negative cash flow;
(g) "Executive Director" means the Executive Director appointed under
the Act;
(h) "Local Policy Statement 3-07" means the Commission Local Policy
Statement 3-07 in effect as of the date of reference of this
Agreement and attached as Schedule "B" to this Agreement;
(i) "Shareholder" means a holder of shares of the Issuer who executes
this Agreement or an Acknowledgement; and
(j) "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.
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 waive's the rights attached to the Shares:
(a) to vote the Shares on a resolution to cancel any of the Shares;
- 2 -
61
(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 Sharers except in accordance
with Local Policy Statement 3-07 and with the consent of the Executive
Director.
(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 Executive Director 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) In the event the Shareholder ceases to be a "principal" (as that term is
defined in Local Policy Statement 3-07) of the Issuer, the Shareholder
shall do all such things in respect of the Shares as may be required by the
Company including, without in any way limiting the generality of the
foregoing, gifting back the Shares, or any part of them, to the issuer or
transferring the Shares, or any part of them, to a person or persons
directed by the Company.
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 Executive Director consenting to the
release.
(3) The approval of the Executive Director to a release from escrow of any of
the shares shall terminate this Agreement only in respect of the shares
so released.
- 3 -
62
(4) The Shares will be released, on a pro-rata basis to the Shareholders,
pursuant to subsection (2) on the basis of one Share for every $0.7975 of
Cumulative Cash Flow generated by the Issuer.
(5) Notwithstanding any other provision in this Agreement, any Shares not
released before January 17, 2000 shall be cancelled.
8. SURRENDER FOR CANCELLATION
The Shareholder shall surrender the Shares for cancellation by the Issuer and
the Escrow Agent shall deliver the certificates representing the Shares to the
Issuer:
(1) at the time of a major reorganization of the Issuer, if required as a
condition of the consent to the reorganization by the Executive Director;
(2) where the Issuer's shares have been subject to a cease trade order issued
under the Act for a period of 2 consecutive years; and
(3) 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 Executive
Director.
(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; and
(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.
- 4 -
63
(3) A notice referred to in subsection (1) or (2) shall be in writing and
delivered to:
(a) the Issuer at its address appearing on the cover page of this
Agreement; or
(b) the Escrow Agent at its address appearing on the cover page of this
Agreement;
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 (2) shall concurrently
be delivered to the Executive Director.
(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 Executive Director, appoint another escrow agent and that
appointment shall be binding on the Issuer and the Shareholders.
12. ENTIRE AGREEMENT
This Agreement supersedes and replaces all other escrow agreements applying to
the Shares required by securities regulators and all such Agreements are
terminated and of no further force and effect from the reference date of this
Agreement.
13. FURTHER ASSURANCES
The Parties shall execute and deliver any documents and perform any acts
necessary to carry out the intent of this Agreement.
14. TIME
Time is of the essence of this Agreement.
15. 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.
16. 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.
- 5 -
64
17. 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.
18. ENUREMENT
This Agreement inures 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 COMMON SEAL of ESCROW AGENT )
was hereunto affixed in the presence of:)
)
/s/ XXXXX )
--------------------------------------- )
Authorized Signatory )
)
/s/ ILLEGIBLE )
--------------------------------------- )
Authorized Signatory
THE COMMON SEAL of GLOBAL )
ELECTION SYSTEMS INC. was hereunto )
affixed in the presence of: )
)
)
)
/s/ XXXXXXX X. XXXXXXXX )
--------------------------------------- )
Xxxxxxx X. Xxxxxxxx
-6-
65
SIGNED, SEALED AND DELIVERED )
by XXXXXXX XXXXXXXX )
in the presence of: )
)
/s/ XXXXXX XXXXXXX ) /s/ XXXXXXX XXXXXXXX
------------------------------------- ) -----------------------------------
Signature of Witness ) XXXXXXX XXXXXXXX
)
Name: Xxxxxx Xxxxxxx )
------------------------------- )
)
Address: 11339-87 Ave. )
---------------------------- )
)
N. Delta, B.C. O4C 2Z6 )
------------------------------------- )
)
)
Occupation: Administrative Assistant )
------------------------- )
SIGNED, SEALED AND DELIVERED )
by XXXXXX XXX XXXX )
in the presence of: )
)
/s/ XXXXX XXXXXX ) /s/ XXXXXX XXX XXXX
------------------------------------- ) -----------------------------------
Signature of Witness ) XXXXXX XXX XXXX
)
Name: Xxxxx Xxxxxx )
------------------------------- )
)
Address: 0000 Xxxxxxx Xx. )
---------------------------- )
)
XxXxxxxx, XX 00000 )
------------------------------------- )
)
)
Occupation: Adm. Asst. )
------------------------- )
- 7 -
66
SIGNED, SEALED & DELIVERED )
by XXXXX XXXXX )
in the presence of: )
)
/s/ XXXXXXX X. XXXXX ) /s/ XXXXX X. XXXXX
---------------------------- ) ------------------------
Signature of Witness ) XXXXX XXXXX
)
Name: Xxxxxxx X. Xxxxx )
------------------------ )
)
Address: 000 Xxxxxx Xx. #000 )
--------------------- )
Xxxxxxx XXX X0X 0X0 )
--------------------- )
Occupation: Retired )
------------------ )
SIGNED, SEALED & DELIVERED )
by THE ESTATE OF XXXXXX XXXX )
in the presence of: )
)
)
----------------------------- ) -----------------------------
Signature of Witness ) THE ESTATE OF XXXXXX XXXX
)
Name: )
------------------------ )
)
Address: )
--------------------- )
)
--------------------- )
Occupation: )
--------------------- )
- 8 -
67
SIGNED, SEALED & DELIVERED )
by XXXXX XXXXX )
in the presence of: )
)
)
----------------------------------- ) ------------------------------------
Signature of Witness ) XXXXX XXXXX
)
Name: )
----------------------------- )
)
Address: )
-------------------------- )
)
)
----------------------------------- )
)
Occupation: )
----------------------- )
SIGNED, SEALED & DELIVERED )
by THE ESTATE OF XXXXXX XXXX ) /s/ XXXXX X. COPPER, TRUSTEE
in the presence of: )
)
/s/ BLAIV MACKENZIE ) /s/ [ILLEGIBLE] TRUSTEE
----------------------------------- ) ------------------------------------
Signature of Witness ) THE ESTATE OF XXXXXX XXXX
)
Name: Blaiv MacKenzie )
----------------------------- )
)
Address: 0 Xxxx Xx Xxxx, Xxxxx 0000 )
-------------------------- )
)
Xxxxxxx, Xxxxxxx X0X IBJ )
----------------------------------- )
)
Occupation: C.A. )
---------------------- )
- 8 -
68
SIGNED, SEALED, & DELIVERED )
by XXXXXXX XXXXXX )
in the presence of: )
)
/s/ XXXXX X. XXXXXX ) /s/ XXXXXXX XXXXXX
---------------------------------- ) -----------------------
Signature of Witness ) XXXXXXX XXXXXX
)
Name: Xxxxx X. Xxxxxx )
---------------------------- )
)
Address: Xx. 0 Xxx 000 J )
------------------------- )
Xxxxxxxx, XX 00000 )
--------------------------------- )
)
Occupation: Housewife )
----------------------- )
SIGNED, SEALED, & DELIVERED )
by TALBOT IREDALE )
in the presence of: )
)
)
---------------------------------- ) -----------------------
Signature of Witness ) TALBOT IREDALE
)
Name: )
---------------------------- )
)
Address: )
------------------------- )
)
---------------------------------- )
)
Occupation: )
----------------------- )
69
SIGNED, SEALED & DELIVERED )
by XXXXXXX XXXXXX )
in the presence of: )
)
)
---------------------------------- ) ------------------------------------
Signature of Witness ) XXXXXXX XXXXXX
)
Name: )
---------------------------- )
)
Address: )
------------------------- )
)
)
---------------------------------- )
)
Occupation: )
---------------------- )
SIGNED, SEALED & DELIVERED )
by TALBOT IREDALE )
in the presence of )
)
/s/ X. X. XXXXXXXX ) /s/ TALBOT IREDALE
---------------------------------- ) ------------------------------------
Signature of Witness ) TALBOT IREDALE
)
Name: X. X. XXXXXXXX )
---------------------------- )
)
Address: 00000 00XX XXX. )
------------------------- )
SURREY B.C. )
---------------------------------- )
)
Occupation: MARKETING )
---------------------- )
- 9 -
70
SIGNED, SEALED & DELIVERED )
by XXX XXXXX )
in the presence of: )
)
/s/ XXXXX XXXXXX ) /s/ XXX X. XXXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) XXX XXXXX
)
Name: Xxxxx Xxxxxx )
---------------------------- )
)
Address: 0000 Xxxxxxx Xx. )
------------------------- )
XxXxxxxx, XX 00000 )
---------------------------------- )
)
Occupation: Adm. Asst. )
---------------------- )
SIGNED, SEALED & DELIVERED )
by XXXXXXX XXXXXXXX )
in the presence of: )
)
/s/ X. X. XXXXXXXXX ) /s/ XXXX XXXXXXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) XXXXXXX XXXXXXXX
)
Name: X. X. XXXXXXXXX )
---------------------------- )
)
Address: 0000 XXXX XX. )
------------------------- )
XXXXXXXXX X.X. X0X 0X0 )
---------------------------------- )
)
Occupation: PROGRAMMER )
---------------------- )
- 10 -
71
SCHEDULE "A" TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Executive Director
0000-000 Xxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X 0X0
I, XXXXXXX X. XXXXXXXX (the "Transferee"), acknowledge that:
(a) I have entered into an agreement with GLOBAL ELECTION SYSTEMS INC.
(the "Issuer") under which 282,267 shares of the Issuer (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 January ____, 1998 (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 Vancouver on JAN 16th, 1998.
Where the Transferee is an individual:
SIGNED, SEALED & DELIVERED )
by the Transferee in the presence of: )
)
/s/ XXXXXX XXXXXXX ) /s/ XXXXXXX X. XXXXXXXX
------------------------------------ ) ------------------------------------
Signature of Witness ) (Signature of Transferee)
)
Name: Xxxxxx Xxxxxxx )
------------------------------ )
)
Address: 11339 ____ AVENUE )
--------------------------- )
X. XXXXX, X.X. X0X 0X0 )
------------------------------------ )
)
Occupation: Administrative Assistant )
------------------------ )
-1-
72
SCHEDULE "A" TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Executive Director
0000- 000 Xxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X ZH4
I, XXXXXX X. XXX XXXX (the "Transferee"), acknowledge that:
(a) I have entered into an agreement with GLOBAL ELECTION SYSTEMS INC.
(the "Issuer") under which ______ shares of the Issuer (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 January ____, 1998 (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 McKinney, TX on January 15, 1998.
Where the Transferee is an individual:
SIGNED, SEALED & DELIVERED )
by the Transferee in the presence of: )
)
/s/ XXXXX XXXXXX ) /s/ XXXXXX X. XXX XXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) (Signature of Transferee)
)
Name: Xxxxx Xxxxxx )
---------------------------- )
)
Address: 0000 Xxxxxxx Xx. )
------------------------- )
)
XxXxxxxx, XX 00000 )
---------------------------------- )
)
Occupation: Adm. Asst. )
---------------------- )
-1-
73
SCHEDULE "A" TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Executive Director
0000- 000 Xxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X 0X0
I, XXXXX X. XXXXX (the "Transferee"), acknowledge that:
(a) I have entered into an agreement with GLOBAL ELECTION SYSTEMS INC.
(the "Issuer") under which 88,208 shares of the Issuer (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 January ____, 1998 (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 TORONTO on JAN 15, 1998.
Where the Transferee is an individual:
SIGNED, SEALED & DELIVERED )
by the Transferee in the presence of: )
)
/s/ XXXXXXX X. XXXXX ) /s/ XXXXX X. XXXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) (Signature of Transferee)
)
Name: XXXXXXX X. XXXXX )
---------------------------- )
)
Address: 625 AVENUE __ #701 )
------------------------- )
)
XXXXXXX, XXX. X0X 0X0 )
---------------------------------- )
)
Occupation: RETIRED )
---------------------- )
-1-
74
SCHEDULE "A" TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Executive Director
0000- 000 Xxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X ZH4
The undersigned as Trustees of the Estate of Xxxxxx Xxxx (the "Transferee"),
acknowledge that:
(a) I have entered into an agreement with GLOBAL ELECTION SYSTEMS INC.
(the "Issuer") under which 17,641 shares of the Issuer (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 January ____, 1998 (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 TORONTO on __________________, 1998.
Where the Transferee is an individual:
SIGNED, SEALED & DELIVERED )
by the Transferee in the presence of: ) /s/ XXXXX I COPPER, Trustee
)
/s/ BLAIV MACKENZIE ) /s/ ILLEGIBLE, Trustee
---------------------------------- ) ------------------------------------
Signature of Witness ) (Signature of Transferee)
)
Name: Blaiv MacKenzie )
---------------------------- )
)
Address: 0 Xxxx Xx X )
------------------------- )
)
Xxxxxxx, Xxxxxxx X0X JB5 )
---------------------------------- )
)
Occupation: C.A. )
---------------------- )
- 1 -
75
SCHEDULE "A" TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
TO: Executive Director
0000-000 Xxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X 0X0
I, XXXXXXX X. XXXXXX (the "Transferee"), acknowledge that:
(a) I have entered into an agreement with GLOBAL ELECTIONS SYSTEMS INC.
(the "Issuer") under which 35,283 shares of the Issuer (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 January ____, 1998 (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 Chouteau, OK on Jan. 15, 1998.
Where the Transferee is an individual:
SIGNED, SEALED AND DELIVERED )
by the Transferee in the presence of: )
)
/s/ XXXXX X. XXXXXX ) /s/ XXXXXXX X. XXXXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) (Signature of Transferee)
)
Name: Xxxxx X. Xxxxxx )
---------------------------- )
)
Address: Xx. 0 Xxx 000 J )
------------------------- )
Xxxxxxxx, XX 00000 )
---------------------------------- )
)
Occupation: Housewife )
---------------------- )
76
SCHEDULE "A" TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Executive Director
0000- 000 Xxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X ZH4
I, TALBOT IREDALE (the "Transferee"), acknowledge that:
(a) I have entered into an agreement with GLOBAL ELECTIONS SYSTEMS INC.
(the "Issuer") under which 70,566 shares of the Issuer (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 January ____, 1998 (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 Vancouver on JAN 16, 1998.
Where the Transferee is an individual:
SIGNED, SEALED AND DELIVERED )
by the Transferee in the presence of: )
)
/s/ X. X. XXXXXXXX ) /s/ TALBOT IREDALE
---------------------------------- ) ------------------------------------
Signature of Witness ) (Signature of Transferee)
)
Name: X. X. XXXXXXXX )
---------------------------- )
)
Address: 00000 00XX XXX. )
------------------------- )
SURREY B.C. )
---------------------------------- )
)
Occupation: MARKETING )
---------------------- )
-1-
77
SCHEDULE "A" TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Executive Director
0000- 000 Xxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X ZH4
I, XXX X. XXXXX (the "Transferee"), acknowledge that:
(a) I have entered into an agreement with GLOBAL ELECTIONS SYSTEMS INC.
(the "Issuer") under which ______ shares of the Issuer (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 January ____, 1998 (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 McKinney, TX on January 15, 1998.
Where the Transferee is an individual:
SIGNED, SEALED AND DELIVERED )
by the Transferee in the presence of: )
)
/s/ XXXXX XXXXXX ) /s/ XXX X. XXXXX
---------------------------------- ) ------------------------------------
Signature of Witness ) (Signature of Transferee)
)
Name: XXXXX XXXXXX )
---------------------------- )
)
Address: 0000 Xxxxxxx Xx. )
------------------------- )
XxXxxxxx, XX 00000 )
---------------------------------- )
)
Occupation: ADM. ASST. )
---------------------- )
-1-
78
SCHEDULE "A" TO ESCROW AGREEMENT
ACKNOWLEDGEMENT AND AGREEMENT TO BE BOUND
To: Executive Director
0000- 000 Xxxxxx Xxxxxx
Xxxxxxxxx, X.X.
X0X ZH4
I, XXXX MASSOLLO (the "Transferee"), acknowledge that:
(a) I have entered into an agreement with GLOBAL ELECTIONS SYSTEMS INC.
(the "Issuer") under which 28,227 shares of the Issuer (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 January ____, 1998 (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 Vancouver on Jan 16, 1998.
Where the Transferee is an individual:
SIGNED, SEALED AND DELIVERED )
by the Transferee in the presence of: )
)
/s/ X. X. XXXXXXXXX ) /s/ XXXX MASSOLLO
---------------------------------- ) ------------------------------------
Signature of Witness ) (Signature of Transferee)
)
Name: X. X. XXXXXXXXX )
---------------------------- )
)
Address: 0000 XXXX XX. )
------------------------- )
XXXXXXXXX, X.X. X0X0X0 )
---------------------------------- )
)
Occupation: PROGRAMMER )
---------------------- )
-1-
79
Where the Transferee is a company:
THE CORPORATE SEAL of the Transferee )
was hereunto affixed in the presence of: )
)
)
---------------------------------------- ) c/s
)
)
---------------------------------------- )
- 2 -
80
SCHEDULE "B" TO ESCROW AGREEMENT
Local Policy Statement 3-07 in effect as of the date of the Escrow Agreement.
81
LOCAL POLICY STATEMENTS 3-07
LOCAL POLICY STATEMENT 3-07
POLICY GUIDELINES RESPECTING TRADING SHARES, PERFORMANCE SHARES AND
OTHER CONSIDERATION
------------------------------------------------------------------------------
See NIN 92/3 "Clarification of waivers relating to Local Policy Statement 3-07".
The Executive Director confirms the waiver of the requirements to enter into a
pooling or escrow agreement if a person who is not a control person holds shares
in the capital of an issuer which becomes an exchange issuer.
Re PLC Systems Inc., Xxxxx Xxxxxxxx, Xxxxx X. Xxxx and Xxxxx xxx Xxxxx (1993),
1 C.C.L.S. 53 (B.C. Sec. Comm.).
Where an escrow agreement provides that the escrow shares will be released
"from time to time in accordance with the general policies of the
Superintendent (now known as the Executive Director) or Exchange", the general
policies to be applied by the Superintendent in deciding the appropriate
application for the release of the escrow shares are the policies in effect at
the time the application is made. It would be patently unreasonable for the
applicants to expect the Executive Director, in deciding an escrow release
application, to apply a policy inconsistent with that of the Commission.
Considerable mischief will result if holders of escrow shares are able to have
those shares released on a more favourable basis simply because the issuer of
the shares had been delisted from the Exchange. It is in the public interest
that the Commission's policy directives with respect to the release of escrow
shares be consistently applied by the Executive Director and the Exchange.
Re Ingot Group Holdings Inc., [1993] 35 B.C.S.C. Weekly Summary 16 (B.C. Sec.
Comm.).
An escrow agreement provided that where the property for which the escrow shares
have been issued is lost or alienated, the Exchange may, at its discretion,
cancel the shares as it deems advisable. The Exchange must determine on the
facts whether the property has been lost or alienated prior to it exercising its
discretion. In concurring reasons, Commissioner Hira stated that cancelling
escrow shares is a significant alienation of property rights, particularly from
the prospective of the person whose escrow shares are being cancelled.
------------------------------------------------------------------------------
TABLE OF CONTENTS
1. IMPLEMENTATION
2. APPLICATION
2.1 Pre-prospectus
2.2 Reactivations and reorganizations
3. TRANSITION
3.1 Agreements made under former policy statement
3.2 Option of conforming with new policy statement
4. DEFINITIONS
4.1 Defined terms
4.2 Terms defined in legislation
5. GENERAL MATTERS
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
6.1 Minimum price and maximum aggregate value
6.2 Interest in operating subsidiary
7-33
82
LOCAL POLICY STATEMENTS 3-07
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 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
(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,
(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;
-----------------------------------------------------------------------------
The practice of the Commission is to allow the issuer to choose either its
financial year end immediately prior to or immediately subsequent to its
initial public offering as the time from which the cumulative cash flow shall
be calculated.
-----------------------------------------------------------------------------
83
3-07 LOCAL POLICY STATEMENTS
"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
(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;
"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
7-36
84
LOCAL POLICY STATEMENTS
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.
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.
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
7-37
85
3-07 LOCAL POLICY STATEMENTS
(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
(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 purposes 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%.
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
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LOCAL POLICY STATEMENTS 3-07
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.
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
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3-07 LOCAL POLICY STATEMENTS
undertaking by the company in the form attached as Appendix C to
this local policy statement,
(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.
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,
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LOCAL POLICY STATEMENTS 3-07
(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
(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.
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 holder 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 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.
(b) In an arm's length transaction, the issuer may agree to pay the
person
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3-07 LOCAL POLICY STATEMENTS
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-arm's 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.
Xxxxxxx X. Xxxxxxx
Chairman
APPENDIX A TO LOCAL POLICY STATEMENT 3-07
ESCROW AGREEMENT
THIS AGREEMENT is dated for reference ______________, 19__ and made
AMONG:
(the "Escrow Agent");
AND:
(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;
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LOCAL POLICY STATEMENTS 3-07
(d) "IPO" means the initial public offering of common shares of the
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;
(e) "Local Policy Statement 3-07" means the Local Policy Statement
3-07 in effect as of the date of reference of this agreement and
attached as Schedule B to this agreement;
(f) "Shareholder" means a holder of shares of the Issuer who executes
this agreement or an Acknowledgement;
(g) "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;
(h) "Superintendent" means the Superintendent of Brokers appointed
under the Act; and
(i) "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 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.
(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) [Set out in this subsection the rights and obligations of a
Shareholder who ceases to be a principal, as that term is defined in
Local Policy Statement 3-07, dies, or becomes bankrupt, to retain,
transfer or surrender to the Issuer for cancellation any Shares held
by the Shareholder.]
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.
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3-07 LOCAL POLICY STATEMENTS
(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 Shares 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 period of 2 consecutive years.
(c) 10 years from the later of the date of issue of the Shares and
the date of the receipt for the Issuer's prospectus on its IPO,
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 an 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 ________________________, or
(b) the Escrow Agent at _________________________
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.
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LOCAL POLICY STATEMENTS 3-07
--------------------------------------------------------------------------------
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.
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/Common Seal of )
[Escrow Agent] was affixed )
in the presence of: )
) c/s
-------------------------------------- )
Authorized signatory )
)
-------------------------------------- )
Authorized signatory )
)
The Corporate/Common Seal of )
[Issuer] was affixed )
in the presence of: )
) c/s
-------------------------------------- )
Authorized signatory )
)
-------------------------------------- )
Authorized signatory )
Where the Shareholder is an individual:
Signed, sealed and delivered by )
[Shareholder] in the presence of: )
)
-------------------------------------- )
Name )
)
-------------------------------------- ) -----------------------------
Address ) [Shareholder]
)
-------------------------------------- )
)
-------------------------------------- )
Occupation
Where the Shareholder is a company:
The Corporate/Common Seal of )
[Shareholder] was affixed )
in the presence of: )
)
-------------------------------------- ) c/s
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3-07 LOCAL POLICY STATEMENTS
-------------------------------------------------------------------------------
Authorized signatory )
)
-----------------------------------)
Authorized signatory )
SCHEDULE A TO 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 Exchange) Stock 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 )
)
-------------------------------------- ) -----------------------------
Address [transferee]
)
-------------------------------------- )
)
-------------------------------------- )
Occupation
Where the transferee is a company:
The Corporate/Common Seal of )
[transferee] was affixed )
in the presence of: )
)
-------------------------------------- ) c/s
Authorized signatory )
)
-------------------------------------- )
Authorized signatory )
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LOCAL POLICY STATEMENTS 3-07
--------------------------------------------------------------------------------
SCHEDULE C TO ESCROW AGREEMENT
--------------------------------------------------------------------------------
NAME OF SHAREHOLDER NUMBER OF SHARES HELD IN ESCROW
--------------------------------------------------------------------------------
APPENDIX B TO LOCAL STATEMENT 3-07
EXAMPLES OF EARN-OUT PRICES FOR PERFORMANCE SHARES
ISSUED BY AN INDUSTRIAL ISSUER
----------------------------------------------------------------------
EARN-OUT PRICE IN DOLLARS
----------------------------------------------------------------------
PERFORMANCE SHARE 5% 25% 45% 65%
PERCENTAGE
-------------------- ----- ---- ---- ---- -----
EARN-OUT FACTOR .01x .25x .81x 1.69x
-------------------- ----- ---- ---- ---- -----
I
-------------------- ----- ---- ---- ---- -----
P $0.40 .004 .10 .34 676
-------------------- ----- ---- ---- ---- -----
O .60 .006 .15 .486 1.014
-------------------- ----- ---- ---- ---- -----
P
-------------------- ----- ---- ---- ---- -----
R $0.80 .008 .20 .648 1.352
-------------------- ----- ---- ---- ---- -----
I
-------------------- ----- ---- ---- ---- -----
C $1.00 .010 .25 .810 1.690
-------------------- ----- ---- ---- ---- -----
E
-------------------- ----- ---- ---- ---- -----
The earn-out price represents the amount of cash flow that must be generated to
release one performance share from escrow. The following definitions are
applicable to the calculation.
Earn-out Price:
The IPO price multiplied by the earn-out factor.
IPO Price:
The price per share paid by the public on the issuer's IPO.
Earn-out Factor:
The number obtained by squaring the performance share percentage, expressed
as a decimal, and multiplying the result by four.
Performance Share Percentage:
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.
APPENDIX C TO LOCAL POLICY STATEMENT 3-07
UNDERTAKING REQUIRED FROM NON-REPORTING
OR CLOSELY HELD COMPANY
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)
_________ (the "Company") undertakes, for the duration of the time that the
Company is the registered owner of escrowed shares of ___________________ (the
"Issuer"),
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3-12 LOCAL POLICY STATEMENTS
-------------------------------------------------------------------------------
(a) to effect or permit transfer of ownership in the shares of the
Company, or
(b) to allot and issue further shares of any class of shares of the
Company
only upon receipt of the written consent of the Superintendent of Brokers, if
the Issuer's shares are not listed on the Vancouver Stock Exchange (the
"Exchange"), or the Exchange, if the Issuer's shares are listed on the Exchange.
Dated at _______________________ on ________________ 19___.
The Corporate/Common Seal of )
[Company] was affixed )
in the presence of: )
)
) c/s
------------------------------------ )
Authorized signatory )
)
------------------------------------ )
Authorized signatory
96
SCHEDULE "C" TO ESCROW AGREEMENT
------------------------------------------------------------------------------
NAME OF SHAREHOLDER NUMBER OF SHARES HELD IN ESCROW
------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxx 282,267
00000 - 00xx Xxxxxx
Xxxxxx, X.X. X0X 0X0
Xxxxx Xxxxx 88,208
Apt. 000 - 000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Estate of Xxxxxx Xxxx 17,641
c/o Xxxx Xxxxxxxxxx
Genest, Murray, Desbria & Lanek
700 - 000 Xxxxxxxx Xxxxxx, Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Xxxxxxx Xxxxxx 35,283
Xxxxx 0
Xxx 000X
Xxxxxxxx, Xxxxxxxx
00000
Talbot Iredale 70,566
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Xxx Xxxxx 28,227
000 - 0000 Xxxxx Xxxxxx
Xxxxxxx, X.X. X0X 0X0
Xxxxxxx Xxxxxxxx 28,227
#000 - 0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, X.X. XXX 0X0
Xxxxxx Xxx Xxxx 2,187,581
0000 Xxxxxxxxx XX
Xxxxxxxxxxx, XX 00000
TOTAL: 2,738,000
---------
