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Exhibit 4.4
ESCROW AGREEMENT
THIS AGREEMENT is dated for reference November 17, 1997.
UNDERTAKING REQUIRED FROM
NON-REPORTING COMPANY
TO: Executive Director or Vancouver Stock Exchange or
B.C. Securities Commission ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
#▇▇▇▇ - 865 Hornby Street Vancouver, B.C.
▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇
(If the shares are not listed on the VSE) (if the shares are listed on the VSE)
The undersigned (the "Corporate Escrow Shareholder") represents that ▇▇▇▇▇▇ ▇.
Pardiak is the sole holder of voting shares of the Corporate Escrow Shareholder
and undertakes, for the duration of time that the Corporate Escrow Shareholder
is the registered owner of escrowed shares of DSI DATOTECH SYSTEMS INC. (the
"Issuer"),
a. to effect or permit transfer of ownership in the voting shares of the
Corporate Escrow Shareholder, or
b. to allot and issue further voting shares of any class of shares of the
Corporate Escrow Shareholder
only upon receipt of the written consent of the Executive Director of the
British Columbia Securities Commission, 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 Vancouver on the 7 day of December, 1997.
The Corporate/Common Seal of ▇▇▇▇▇▇
▇. PARDIAK HOLDINGS LIMITED was
affixed in the presence of
/s/ ▇▇▇▇▇▇ ▇. Pardiak c/s
--------------------------------------------------
Authorized Signatory
------------------------------
Authorized Signatory
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AMONG:
PACIFIC CORPORATE TRUST COMPANY, a company having an office at
830, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
(the "Escrow Agent")
AND:
DSI DATOTECH SYSTEMS INC., a company having an office at 712 - ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
(the "issuer")
AND:
PARDIAK MANAGEMENT INTERNATIONAL LIMITED. 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 THIS AGREEMENT WITNESSES that 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:
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(a) "Acknowledgment" means the acknowledgment and agreement to be bound in
the form attached as Schedule A to this agreement:
(b) "Act" means the Securities Act, R.S.B.C. 1996, c.238, as amended from
time to time;
(c) "Exchange" means the Vancouver Stock Exchange;
(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 Executive
Director under section 61 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 executed this
agreement or an Acknowledgment;
(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) "Executive Director" means the Executive Director of the B.C.
Securities Commission appointed under the Act; and
(i) "Executive Director or the Exchange" means the Executive
Director, 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. For the purposes of this agreement, the Escrow Agent is the agent
solely of the Executive Director or the Exchange, not the Issuer.
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
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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
(a) The Shareholder shall not transfer any of the Shares except in
accordance with Local Policy Statement 3-07 and with the
consent of the Executive Director or the Exchange.
(b) The Escrow Agent shall not effect a transfer of the Shares within
escrow unless the Escrow Agent has received
(i) a copy of an Acknowledgment executed by the person to whom the Shares
are to be transferred, and
(ii) a letter from the Executive Director or the Exchange consenting to the
transfer.
(c) 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.
(d) If the sole voting shareholder, ▇▇▇▇▇▇ ▇. Pardiak, of the Shareholder
ceases to be an officer of the Company because:
(i) the shareholder terminates its consulting employment agreement with the
Company, or
(ii) the Company terminates his employment agreement with
the Company because the Shareholder or Pardiak is
guilty of conduct which at common law constitutes
just cause for termination of employment
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the Shareholder shall be entitled to retain that number of Shares equal to the
number of Shares then held by it, times the number of months from August 1, 1997
until the date the Shareholder ceased to be contracted by the Company, rounded
to the nearest tenth, divided by 24 and shall not be obligated to transfer or
surrender that number of Shares to the Company or any other person, but the
balance of the Shares shall be deemed to have been forthwith gifted to the
Company.
(e) A Shareholder who ceases to be a principal, as that term is
defined in Local Policy Statement 3-07 for any other reason
not covered by the paragraph immediately above, dies or
becomes bankrupt, shall be entitled to retain any Shares then
held by it and shall not be obligated to transfer or surrender
the Shares to the Company or any other person.
7. RELEASE FROM ESCROW
(a) The Shareholder irrevocably directs the Escrow Agent to retain
the Shares until the Shares are released from escrow pursuant
to subsection (b) or surrender for cancellation pursuant to
section 8.
(b) The Escrow Agent shall not release the Shares from escrow
unless the Escrow Agent has received a letter from the
Executive Director or the Exchange consenting to the release.
(c) The approval of the Executive Director 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.
(d) The Shareholders acknowledges that there are currently 468,500
performance shares held in escrow for ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and 1,000,000 shares
allotted to ▇▇▇▇ ▇▇▇▇▇▇▇ (collectively the "Existing Performance Shares") and
that 100% of the Cumulative Cash flow is to be allocated to the calculation of
the release of the Existing Performance Shares until such time as the Existing
Performance Shares are released from escrow and/or issued, as the case may be.
Thereafter, 100% of the Cumulative Cash flow will be allocated to the
calculation of the release of the Shares and the 1,300,000 common shares of the
Company to be issued to Segev Management International Ltd., to be released pro
rata!!
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
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(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 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) five years from the date the exchange has accepted this Agreement for
filing or
(d) where required by section 6(d).
9. AMENDMENT OF AGREEMENT
(a) Subject to subsection (b), this agreement may be amended only
by a written agreement among the Parties and with the written
consent of the Executive Director or the Exchange.
(b) Schedule C to this agreement shall be amended upon
(i) a transfer of Shares pursuant to section 6,
(ii) a release of Shares from escrow pursuant to section 7, or
(iii) 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
(a) If the Escrow Agent wishes to resign as escrow agent in
respect of the Shares, the Escrow Agent shall give notice to
the Issuer.
(b) 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.
(c) A notice referred to in subsection (a) or (b) shall be in writing and
delivered to
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(i) the Issuer at:
▇▇▇▇▇ ▇▇▇ - ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ 3147
Attention: Secretary
(ii) the Escrow Agent at:
Pacific Corporate Trust Company
▇▇▇ -▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Stock Transfer
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.
(d) A copy of a notice referred to in subsection (a) or (b) shall
concurrently be delivered to the Executive Director or the Exchange.
(e) 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 (a) or (b) or on such other date as
the Escrow Agent and the Issuer may agree upon (the
"resignation date").
(f) The Issuer shall, before the resignation date and with the
written consent of the Executive Director 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
Tine is of the essence of this agreement.
14. GOVERNING LAWS
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This agreement shall be construed in accordance with and governed by the laws of
British Columbia and the laws of Canada applicable in British Columbia.
15. COUNTERPARTS
This agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original and all of which shall constitute one agreement.
16. LANGUAGE
Wherever a singular expression is used in this agreement, that expression is
deemed to include the plural or the body corporate where required by the
context.
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Compared with original and
certified to be a true copy
/s/
Authorized Signing Officer
Pacific Corporate Trust Company
17. ENUREMENT
This Agreement inures to the benefit of and is binding on the Parties and their
heirs, executors, administrators, successors and permitted assigns.
18. EARN-OUT PRICE
The "earn-out price" as defined in Local Policy Statement 3-07 is agreed to be
$0.25 per Share.
IN WITNESS WHEREOF the Parties have executed and delivered this agreement as of
the date of reference of this agreement.
The Corporate/Common Seal of )
PACIFIC CORPORATE TRUST )
COMPANY w as affixed in the presence )
of: )
/s/ ) c/s
Authorized Signatory )
)
/s/ )
Authorized Signatory )
)
)
The Common Seal of DSI DATOTECH )
SYSTEMS INC. was affixed in the )
presence of: )
)
/s/__________________________ ) c/s
Authorized Signatory )
)
/s/▇▇▇▇▇ ▇. Dancer )
Authorized Signatory )
)
)
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The Corporate/Common Seal of SEGEV )
MANAGEMENT INTERNATIONAL )
LTD. was affixed in the presence of: )
)
Authorized Signatory ) c/s
/s/
Compared with original and
certified to be a true copy
/s/
------------------------------
Authorized Signing Officer
Pacific Corporate Trust
Authorized Signatory )
)
/s/ )
)
The Corporate/Common Seal of )
PARDIAK MANAGEMENT )
INTERNATIONAL LIMITED was )
affixed in the presence of: )
) c/s
Authorized Signatory )
)
)
Authorized Signatory )
)
)
SCHEDULE A TO ESCROW AGREEMENT
ACKNOWLEDGMENT AND AGREEMENT TO BE BOUND
TO: Executive Director or Vancouver Stock Exchange
B.C. Securities Commission ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
#▇▇▇▇ - 865 Hornby Street Vancouver, B.C.
▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇
(if the shares are not listed on the VSE) (if the shares are listed on the VSE)
I acknowledge that
(a) I have entered into an agreement with _______________________ under
which _____________ common shares of DSI DATOTECH SYSTEMS INC. (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 17, 1997 (the "Escrow Agreement"), a copy of which is
attached as Schedule A to this acknowledgment.
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 ) [Shareholder]
)
Occupation )
Where the transferee is a company:
The Corporate/Common Seal of )
[transferee] was affixed in the presence of: )
)
---------------------------------- )
Authorized Signatory ) c/s
)
Authorized Signatory )
[GRAPHIC_OMITTED]
Province of BRITISH COLUMBIA SECURITIES COMMISSION
British Columbia
SCHEDULE B
OFFICE OF THE
CHAIRMAN
LOCAL POLICY STATEMENT 3-07
POLICY GUIDELINES RESPECTING TRADING SHARES,
PERFORMANCE SHARES AND OTHER CONSIDERATION
TABLE OF CONTENTS
PART TITLE PAGE
---- ----- ----
1. IMPLEMENTATION 1
2. APPLICATION 1
2. 1 Pre-prospectus
2.2 Reactivations and reorganizations
3. TRANSITION 2
3.1 Agreements made under former policy statement
3.2 Option of conforming with new policy statement
4. DEFINITIONS 2
4.1 Defined terms
4.2 Terms defined in legislation
5. GENERAL MATTERS 5
5.1 Review of opinions and reports
5.2 Requirement for valuation opinion
5.3 Out of pocket costs
5.4 Confirmation of fair value
6. ISSUANCE OF TRADING SHARES 6
6.1 Minimum price and maximum aggregate value
6.2 Interest in operating subsidiary
6.3 Value assigned to non-cash assets
6.4 Purchase of interest in mineral property
PART TITLE PAGE
---- ----- ----
6.5 Accumulated deficit related to issuer's stated
business purpose
6.6 Exclusion of amounts by Superintendent
7. ISSUANCE OF PERFORMANCE SHARE 8
7.1 Issuance to principals
7.2 Natural resource issuer
7.3 Industrial issuer
7.4 Escrow requirement
7.5 Escrow agreement
7.6 Limitations on rights of holders of performance shares 7.7
Rights on ceasing to be a principal 7.8 undertaking of holding
company
8. TRANSFER OF PERFORMANCE SHARES WITHIN ESCROW 10
8.1 Permitted transferees
8.2 Request for consent to transfer
8.3 Documents to be filed with request for consent to transfer
8.4 Letter of consent or objection 8.5 No transfer during
period between prospectus receipt
and listing
9. RELEASE OF PERFORMANCE SHARES FROM ESCROW 11
9. 1 Release of shares of natural resource issuer
9.2 Reduction in release for natural resource issuer
9.3 Release of shares of industrial issuer
9.4 Adjustment of release calculation
9.5 Requirements for release
9.6 Annual release based on annual audited financial statements
9.7 Request for consent to release
9.8 Documents to be filed with request for consent to release
9.9 Letter of consent or objection
9.10 Request by holder of performance shares for consent to release
10. SURRENDER OF PERFORMANCE SHARES FOR 14
CANCELLATION
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
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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
(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
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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 B 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;
"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;
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"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,
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(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 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.
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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
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(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.l(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.
-7-
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 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.
-8-
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 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
--------------------------------------------
-9-
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 acknowledgment 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,
(d) where applicable, evidence that the proposed change of control has been
approved by the shareholders of the issuer, and
-10-
(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
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(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
(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
-12-
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
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(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.
(b) In an arm's length transaction, the issuer may agree to pay
the person additional consideration at such time as the
resource property commences commercial production. Such
additional consideration may, depending on the circumstances,
consist of cash consideration, reasonable payments from net
profits, securities, or any combination of these.
(c) In a non-arm's length transaction, the issuer may pay the
person cash consideration up to the amount of the out of
pocket costs incurred by the person in respect of the resource
property, determined in accordance with section 5.3.
(d) In a non-arms length transaction, the issuer may agree to pay the
person additional consideration at such time as the resource property commences
commercial production, where the person has carried out extensive exploration
with results that indicate that the resource property appears to have
substantial merit. The extent of the person's effort, skill and risk in
developing the resource property will be taken into account by the
Superintendent in determining whether additional consideration is justified.
Such additional consideration may, depending on the circumstances, consist of
cash consideration, reasonable payments from net profits, securities, or any
combination of these. A 15% net profits interest would normally be considered
reasonable.
11.2 Industrial issuer - Where an industrial issuer proposes to acquire from
a person non-cash assets, the value of which are not supported by a
valuation opinion, the following principles apply:
(a) In an arm's length transaction, the issuer may pay the person cash
consideration, a royalty or a combination of these.
-14-
(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/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman
APPENDIX A TO LOCAL POLICY STATEMENT 3-07
ESCROW AGREEMENT
THIS AGREEMENT is dated for reference
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) "Acknowledgment" means the acknowledgment 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;
-2-
(c) "Exchange" means the Vancouver Stock Exchange;
(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 Acknowledgment;
(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
-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 Acknowledgment 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.
-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.
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 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
(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.
-5-
10. QUALIFICATION 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").
(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.
-6-
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. INUREMENT
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 Corporate/Common Seal of [Escrow Agent] was affixed in the presence of:
________________________________ c/s
Authorized signatory
--------------------------------
Authorized signatory
-7-
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
Authorized signatory
----------------------------------
Authorized signatory
SCHEDULE A TO ESCROW AGREEMENT
ACKNOWLEDGMENT AND AGREEMENT TO BE BOUND
To: Superintendent of Brokers or Vancouver Stock Exchange
#▇▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 609 Granville Street
Vancouver, B.C. ▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇ ▇▇▇ lH1
(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 acknowledgment.
In consideration of $1.00 and other good and valuable consideration (the receipt
and sufficiency of which is acknowledged) I agree, effective upon receipt of
regulatory approval of the transfer to me of the Shares, to be bound by the
Escrow Agreement in respect of the Shares as if I were an original signatory to
the Escrow Agreement.
Dated at on 19 .
------------------- ----------------------------------- -----
Where the transferee is an individual:
Signed, sealed and delivered by
[transferee) in the presence of:
--------------------------------------
Name
-------------------------------------- ---------------------------
[transferee]
Address
--------------------------------------
Occupation
Where the transferee is a company:
The Corporate/Common Seal of
[transferee] was affixed
in the presence of:
______________________________________ c/s
Authorized signatory
--------------------------------------
Authorized signatory
SCHEDULE C TO ESCROW AGREEMENT
NAME OF SHAREHOLDER NUMBER OF SHARES HELD IN ESCROW
APPENDIX B 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
0
$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 IP0.
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
#▇▇▇▇ - ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 609 Granville Street
Vancouver, B.C. ▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇
(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:
--------------------------------------
Authorized signatory c/s
--------------------------------------
Authorized signatory
SCHEDULE C TO ESCROW AGREEMENT
NAME OF SHAREHOLDER NUMBER OF SHARES HELD IN ESCROW
Pardiak Management International Limited 1,300,000
UNDERTAKING REQUIRED FROM
NON-REPORTING COMPANY
TO: Executive Director or Vancouver Stock Exchange
B.C. Securities Commission ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
#▇▇▇▇ - 865 Hornby Street Vancouver, B.C.
▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇
(if the shares are not listed on the (if the shares are listed on the
VSE) VSE)
The undersigned (the "Corporate Escrow Shareholder") represents that ▇▇▇▇▇▇ ▇.
Pardiak is the sole holder of voting shares of the Corporate Escrow Shareholder
and undertakes, for the duration of time that the Corporate Escrow Shareholder
is the registered owner of escrowed shares of DSI DATOTECH SYSTEMS INC. (the
"Issuer"),
a. to effect or permit transfer of ownership in the voting shares of the
Corporate Escrow Shareholder, or
b. to allot and issue farther voting shares of any class of shares of the
Corporate Escrow Shareholder
only upon receipt of the written consent of the Executive Director of the
British Columbia Securities Commission, 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 Vancouver on the 7 day of December, 1997.
The Corporate/Common Seal of ▇▇▇▇▇▇ ▇. PARDIAK HOLDINGS LIMITED was affixed in
the presence of:
/s/▇▇▇▇▇▇ ▇. Pardiak c/s
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Authorized Signatory
Authorized Signatory