Exhibit 99.4
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ESCROW AGREEMENT
This ESCROW AGREEMENT dated effective as of March 16th, 1998 by and between
WaveRider Communications, Inc., a Nevada corporation (the "Company"), Xxxxxxx X.
Xxxxx, the corporate secretary of the Company (the "Escrow Agent"), and the
holders of Common Stock issued upon conversion of the Series B Preferred Stock,
each of which has executed this agreement in counterpart, (collectively, the
"Stockholders").
WITNESSETH:
WHEREAS, pursuant to an Exchange Agreement (as defined below), the
stockholders exchanged their shares of the capital stock of Major Wireless
Communications, Inc. for shares of the Series B Preferred Stock (as defined
below).
WHEREAS, the Exchange Agreement provided that the shares of Series B
Preferred Stock issued pursuant to the Exchange Agreement would be held by the
secretary and released only upon the achievement of certain performance
criteria.
WHEREAS, the Company and the Stockholders also entered into a Collateral
Agreement pursuant to which the Stockholders agreed not to convert their shares
of Series B Preferred Stock until the required performance levels had been
satisfied.
WHEREAS, pursuant to the terms of a certain Shareholders Agreement (as
defined below), the Company and the Stockholders have agreed that it would be in
the best interests of the Company and the Stockholders to have the Stockholders
convert their shares into shares of Common Stock.
WHEREAS, in connection with such conversion, the Shareholders Agreement
requires the Stockholders to execute and deliver this Escrow Agreement;
NOW, THEREFORE, in consideration of the promises, the mutual covenants,
representations and warranties made herein and the mutual benefits to be derived
herefrom, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Escrow Agreement, the defined terms set forth below have
the respective meanings set forth below (each such meaning to be equally
applicable to both the singular and plural forms of the respective terms so
defined).
"Common Stock ": the common stock of the Company.
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"Company": WaveRider Communications, Inc., a Nevada corporation.
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"Escrow Account": an account into which the Escrowed Shares are deposited and
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held by the Escrow Agent pursuant to this Agreement.
"Escrow Agent": the person or entity currently serving as escrow agent hereunder
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pursuant to Section 2.1 or Section 2.2. .
"Escrowed Shares": the Common Stock of the Company issued upon conversion of the
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Series B Preferred Stock which is delivered to the Escrow Agent pursuant to the
terms of the Shareholders Agreement, together with any
additional shares of Common Stock or other securities distributed pursuant to a
stock split, stock dividend, reclassification of shares or other similar
transaction to which such shares may be subject.
"Exchange Agreement": that certain Share Exchange Agreement together with
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supplemental agreement thereto, both executed on the 13th day of May, 1997,
between the Company and the shareholders of Major Wireless Communication, Inc.,
as amended.
"Series B Preferred Stock": the Series B Convertible Preferred Stock of the
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Company.
"Shareholder Agreement": the Shareholder Agreement, dated for reference the 16th
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day of March, 1998 among the Company and the Stockholders subject to the terms
of the said Exchange Agreement.
"Stockholders": those individuals or entities together who have executed this
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agreement in counterpart and who are subject to the said Exchange Agreement.
ARTICLE 2
APPOINTMENT OF ESCROW AGENT;
SUCCESSOR ESCROW AGENT
2.1 Appointment of Escrow Agent. Xxxxxxx X. Xxxxx is hereby appointed
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Escrow Agent hereunder, and accepts his appointment and designation as Escrow
Agent pursuant to the terms and conditions of this Escrow Agreement. In the
event Xxxxxxx X. Xxxxx, or any successor to Xx. Xxxxx, ceases to serve as
corporate secretary of the Company at any time, he shall also cease to serve as
Escrow Agent hereunder, and the successor corporate secretary of the Company
shall be designated as the successor Escrow Agent. Any such successor Escrow
Agent shall deliver to each of the other parties hereto a written instrument
accepting such appointment hereunder, whereupon it shall succeed to all the
rights and duties of the Escrow Agent hereunder and shall be entitled to receive
the Escrowed Shares in the Escrow Account at such time.
2.2 Successors to Escrow Agreement. The Escrow Agent, or any successor
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to it hereafter appointed, may at any time resign by giving not less than 60
days prior written notice to each of the other parties hereto, and shall be
discharged of its duties hereunder upon the appointment of a successor Escrow
Agent as hereinafter provided. In the event of any such resignation, a
successor Escrow Agent, shall be selected by the Company. Any such successor
Escrow Agent shall deliver to each of the other parties hereto a written
instrument accepting such appointment hereunder, whereupon it shall succeed to
all the rights and duties of the Escrow Agent hereunder and shall be entitled to
receive the Escrowed Shares in the Escrow Account at such time.
ARTICLE 3
ESCROW ARRANGEMENTS
3.1 Purpose of the Escrow Account. This Escrow Agreement has been
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executed and delivered, and the Escrow Account is hereby established, for the
purpose of holding the Common Stock issuable upon conversion of the Series B
Preferred Stock until certain performance criteria are met.
3.2 Delivery of the Escrowed Shares. As soon as practicable following the
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conversion of the Series B Convertible Preferred Stock of the Company, the
Company shall deliver to the Escrow Agent certificates, registered in the name
of each of the Stockholders, for the Escrowed Shares. The Escrowed Shares shall
represent shares that the Stockholders would otherwise be entitled to receive
upon conversion of the Series B Preferred Stock. The Stockholders will deliver
to the Escrow Agent stock powers duly executed in blank. The Escrow Agent shall
hold all of the Escrowed Shares in escrow for the benefit of the Stockholders
and the Company in accordance with the terms and conditions hereof.
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3.3 Distribution of Escrowed Shares. The Escrow Agent shall release the
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Escrowed Shares to the Stockholders only upon the occurrence of the events and
in the numbers set forth on Schedule A attached hereto, together with any
dividends being held with respect to the shares being released. In the event
that any one or more of the events described in Schedule A have not occurred
prior to February 7, 2002 (the "Expiration Date"), any Escrowed Shares which
have not been released in accordance with the provisions of this Agreement and
Schedule A on or before the Expiration Date, together with any dividends or
other distributions thereon, shall be canceled and returned to the Company;
provided, however, that the Company by its Board of Directors at their sole
discretion and from time to time, may extend such Expiration Date for such
additional time or times up to February 7, 2004, and shall give notice to the
Escrow Agent of any such extension. The Company shall notify the Escrow Agent
and the Stockholders of the occurrence of an event described in Schedule A.
The Escrowed Shares delivered to the Stockholders shall be in proportion to each
Stockholder's ownership of the Escrowed Shares.
3.4 Change in Control. In the event of a "change in control" of the
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Company (as defined below), then the Escrow Agent shall immediately upon the
occurrence of the change in control release all of the Escrowed Shares to the
Stockholders, together with any dividends being held with respect to the shares
being released. For purposes of this Section 3.4, a "change in control" shall
be deemed to have occurred if:
(a) any person or entity acquires beneficial ownership of 20% or more of
the Common Stock of the Company then outstanding, or such other voting
securities of the Company which results in such person or entity owning 20% or
more of the combined voting power of the Company's outstanding securities; or
(b) the shareholders of the Company approve a reorganization, merger,
consolidation, liquidation or dissolution of the Company, or, the sale or
disposition of all the assets of the Company (a "Capital Transaction"); or
(c) a change in the composition of the Board of Directors of the Company
(the "Board") occurs such that the individuals who constitute the Board on
February 16, 1998, become a minority of the Board, provided that such change
does not occur as a result of the sickness, health, disability, voluntary
termination of any existing Board Member.
Notwithstanding the foregoing, a recapitalization or reorganization which
results in all of the outstanding equity and voting securities of the Company
following such recapitalization or reorganization being beneficially owned by
shareholders of the Company in the same proportion as immediately prior to such
recapitalization or reorganization, shall not be deemed to be a change in
control.
3.5 Dividends. Any securities, cash or other property in respect of any
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dividend, stock splits, recapitalizations, redemptions, liquidations, mergers,
spin-offs, split-ups or exchanges or conversion of the Escrowed Shares shall be
held in the Escrow Account by the Escrow Agent subject to all of the terms of
this Escrow Agreement. The Escrow Agent shall retain as part of the Escrow
Account any and all income derived from the Escrowed Shares and/or any other
funds, investments or securities permitted by this Escrow Agreement, and such
income shall become part of the Escrow Account and shall be distributed in
accordance with the terms of this Escrow Agreement. During the term of this
Agreement the Escrowed Shares may not be assigned, sold, transferred, pledged or
otherwise transferred or encumbered.
3.6 Right to Vote the Escrowed Shares. Each of the Stockholders shall
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have the right to the exercise of any voting rights pertaining to the Escrowed
Shares registered in his name until such time as those shares are delivered to
the Company pursuant to Section 3.3.
ARTICLE 4
FEES OF THE ESCROW AGENT;
CERTAIN RIGHTS OF THE ESCROW AGENT
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4.1 Fees. The Escrow Agent shall not receive any fee but shall be
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reimbursed for all of his reasonable expenses, including counsel fees, incurred
by him. All of the Escrow Agent's reasonable expenses, including counsel
fees, hereunder shall be paid by the Company.
4.2 Certain Rights of the Escrow Agent. (a) The Escrow Agent may act upon
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any instrument or other writing believed by it in good faith to be genuine and
to be signed or presented by the proper person. The Escrow Agent shall not be
liable to the Company or any of the Stockholders for any liability or losses
sustained by the Company or such Stockholders as a result of any action taken or
omitted to be taken by it in good faith unless a court of competent jurisdiction
determines that the Escrow Agent's willful misconduct or gross negligence was
the primary cause of any loss to the Company or any such Stockholder, as the
case may be. The Escrow Agent may consult with counsel of its own choice and
shall have full and complete authorization and protection for any action taken
or omitted by it hereunder in good faith and in accordance with the opinion of
such counsel.
(b) Each of the Stockholders and the Company agree jointly and
severally, to indemnify and hold harmless the Escrow Agent from all liabilities
and losses that may be incurred by it as a result of its being named as a party
to or responding to any litigation arising from the performance of its duties
hereunder, except for such litigation that arises from any act or failure to act
by the Escrow Agent that is determined by a court of competent jurisdiction to
constitute willful misconduct or gross negligence.
(c) The Escrow Agent will not be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including, but not limited
to lost profits) even if the Escrow Agent has been advised of the likelihood of
such loss or damage and regardless of the form of action.
(d) The duties and responsibilities of the Escrow Agent hereunder
shall be determined solely by the express provisions of this Escrow Agreement,
and no other or further duties or responsibilities shall be implied. The Escrow
Agent shall not have any liability under, nor duty to inquire into the terms and
provisions of, any Escrow Agreement or instructions, other than as set forth in
this Escrow Agreement.
(e) In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions, claims or demands from
any party hereto which, in its opinion, conflict with any of the provisions of
this Escrow Agreement, the Escrow Agent shall be entitled to refrain from taking
any action and its sole obligation shall be to keep safely the Escrowed Shares
until it shall be directed otherwise in a written notice satisfactory to the
Escrow Agent by the other parties hereto or by a final order or judgment of a
court of competent jurisdiction.
(f) In the event of a dispute between the Company and the Stockholders
in connection herewith such that the Escrow Agent deems it necessary for its
protection to do so, the Escrow Agent may deposit the Escrowed Shares into a
court of competent jurisdiction and thereupon shall have no further duties in
connection herewith to any party.
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ARTICLE 5
TERMINATION OF ESCROW
AND RELEASE OF ESCROWED SHARES
5.1 Termination of Escrow. This Escrow Agreement shall terminate upon
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the earlier to occur of (i) the Expiration Date, as it may be extended, and (ii)
the final distribution of the Escrowed Shares and the termination of the Escrow
Account in accordance with Section 3.3 or 3.4 hereof.
ARTICLE 6
MISCELLANEOUS
6.1 Notices, All notices, requests, demands and other communications
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pursuant to this Escrow Agreement shall be in writing, addressed to the address
of the parties stated below or to such changed address as such party may have
fixed by notice and shall be deemed to have been given and received: (i) the
same day, if by hand delivery, (ii) the next day, if by overnight courier, (iii)
five days after mailed, enclosed in a registered or certified post-paid
envelope, return receipt requested, or (iv) upon telephone confirmation of
receipt by facsimile transmission provided, however, that all notices,
requests, demands and other communications to the Escrow Agent shall be deemed
to have been given and received on the date received by the Escrow Agent: (a)
If to the Stockholders, addressed to such Stockholders at their address as
recorded on the Company records; (b) If to the Company, at 000 Xxxx
Xxxxxx, Xxxxx 000, Xxxxxxxxx, X.X., X0X 0X0; and (c) If to the Escrow
Agent, at 000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, X.X. X0X 0X0
Any notice of change of address shall be effective only upon receipt.
6.2 Entire Escrow Agreement. This Escrow Agreement, in respect of
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the Escrow Agent, the Company and the Stockholders, together with the
Shareholder Agreement, and exhibits and schedules thereto, in respect of the
Company and the Stockholders, sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and supersedes
all prior discussions, agreements and understandings of every kind and nature
among them.
6.3 Governing Law, This Escrow Agreement and its validity, construction
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and performance shall be governed in all respects by the laws of the State of
Nevada, without giving effect to principles of conflicts of law.
6.4 Severability. If any provision of this Escrow Agreement or the
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application of any provision hereof to any person or circumstance is held
invalid, the remainder of this Escrow Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby.
6.5 Successors and Assigns. This Escrow Agreement and all action taken
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hereunder in accordance with the terms hereof shall be binding upon and inure to
the benefit of the Company, the Stockholders and the Escrow Agent, and their
respective successors and assigns.
6.6 Counterparts: Headings. This Escrow Agreement may be executed in one
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or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The headings
contained in this Escrow Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Escrow Agreement.
6.8 Amendment: Waiver. This Escrow Agreement shall not be changed,
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modified or amended except by a writing signed by all of the parties hereto. No
failure or delay on the part of a party hereunder in the exercise of any right
hereunder in enforcing or requiring the compliance or performance by any of the
other parties hereunder of any of the terms or conditions of this Escrow
Agreement shall operate as a waiver of any such right,
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or constitute a waiver of a breach of any such terms or conditions, nor shall
any single or partial exercise of any such right preclude other or further
exercise thereof or of any other right, nor shall any of the aforementioned
failures or delays affect or impair such rights generally in any way. The waiver
by any party of a breach of any term or condition of this Escrow Agreement by
the other party shall not operate as nor be construed as a waiver of any
subsequent breach thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
WAVERIDER COMMUNICATIONS INC., BY:
_______________________ ___________________
President Date
BY:
_______________________ ___________________
(Signature) Date
_______________________
(TITLE)
____________________________________________ __________________________________
XXXXXXX X. XXXXX WITNESS DATE
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SCHEDULE "A" - RELEASE OF SHARES:
(EXTRACTED FROM SHARE EXCHANGE AGREEMENT; "MWCI" REFERS TO MAJOR WIRELESS
COMMUNICATIONS INC.)
MWCI is a development stage company which had developed and has certain
proprietary rights to technology allowing for the wireless transmission of both
voice and data. Its initial move to the marketplace is in the field of internet
delivery in which its wireless systems will be licensed to internet providers
for a fee. The following schedule references the various stages of such
marketing. "Prototype" refers to the complete system enabling such wireless
transmission. "License agreements" refers to the agreements between MWCI and
individual internet servers for the use of MWCI's system and "Gross Revenue"
includes all cumulative revenue generated by MWCI whether from License fees, the
lease or sale of equipment or otherwise, but does not include any taxes required
to be collected by MWCI with respect to same.
EVENT % OF SHARES RELEASED
Prototype development completed 5%
Prototype operational in one community 10%
25 Non-conditional License agreements signed
with non-refundable deposits received 15%
25 Licensees operational utilizing the system 15%
Gross revenue exceeds $10 million CDN 25%
Gross revenue exceeds $25 million CDN 30%
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