ESCROW AGREEMENT
(Performance Escrow Agreement)
THIS AGREEMENT made effective this 7th day of May, 1997.
1077431 ONTARIO LIMITED
(herein called " 1077431")
OF THE FIRST PART
- and -
MONTREAL TRUST COMPANY OF CANADA
(herein called the "Trustee")
OF THE SECOND PART
- and -
RICHARD SHERMAN
(herein called "Sherman")
OF THE THIRD PART
WHEREAS Alpha Ventures Inc. ("Ventures") has made an offer to purchase all
of the shares of Alpha Corporation ("AC") dated April 9, 1997 (the "Offer"),
which Offer was duly accepted by all of the shareholders of AC;
AND WHEREAS 1077431 is a shareholder of Ventures;
AND WHEREAS 1,426,082 common shares of Ventures owned by 1077431 (the
"1077431 Shares") are subject to a performance based Form C Escrow Agreement
dated as of the date hereof between Ventures, the Trustee and certain other
shareholders of Ventures (the "Escrow Agreement ');
AND WHEREAS Sherman owns all of the issued and outstanding securities of
1077431
AND WHEREAS to comply with the requirements of The Alberta Stock Exchange,
Sherman is desirous of depositing in escrow all of the issued and outstanding
common shares in the capital of 1077431 (the "Escrowed Shares") which escrow
shall be based on the performance of Ventures;
AND WHEREAS the Trustee has agreed to undertake and perform its duties
according to the terms and conditions hereof;
NOW THEREFORE this agreement witnesses that in consideration of the sum of
one dollar ($ 1.00) paid by the parties to each other, receipt of this sum being
acknowledged by each of the parties to each other, Sherman covenants and agrees
with 1077431 and with the Trustee, and 1077431 and the Trustee covenant and
agree each with the other and with Sherman jointly and severally as follows:
I Where used in this agreement or in any amendment of supplement hereto,
unless the context otherwise requires, the following words and phrases
shall have the following ascribed to them below:
(a) "Cash Flow" means net income derived from the business of Ventures, as
shown on the audited financial statements or verified by Ventures'
auditors, adjusted for the following add backs:
(1) depreciation,
(2) depletion,
(3) deferred taxes,
(4) amortization of goodwill,
(5) amortization of research and development costs,
(b) "Related Party" means promoters, officers, directors, other insiders
of Ventures and any associates or affiliates of the foregoing.
2. Sherman hereby places and deposits in escrow with the Trustee the Escrowed
Shares which are represented by the certificates described in Schedule "A"
and the Trustee hereby acknowledges receipt of those certificates. Sherman
agrees to deposit in escrow any further certificates representing
securities in 1077431 which he may receive as a stock dividend on
securities hereby escrowed, and to deliver to the Trustee immediately on
receipt thereof the certificates for any such further securities and any
replacement certificates which may at any time be issued for any escrowed
securities.
3. The Parties hereby agree that, subject to the provisions of paragraph 6
herein, the Escrowed Shares and the beneficial ownership of or any interest
in them and the certificate representing them (including any replacement
securities or certificates) shall not be sold, assigned, hypothecated,
alienated, released from escrow, transferred within escrow, or otherwise in
any manner dealt with, without the written consent of The Alberta Stock
Exchange (hereinafter referred to as the "Exchange") given to the Trustee
or except as may be required by reason of the death or bankruptcy of
Sherman or the bankruptcy of 1077431, in which case the Trustee shall hold
the said certificates subject to this agreement, for whatever person, or
company shall be legally entitled to become the registered owner thereof.
4. Sherman directs the Trustee to retain the Escrowed Shares and the
certificates (including any replacement securities or certificates)
representing them and not to do or cause anything to be done to release
them from escrow or to allow any transfer, hypothecation or alienation
thereof, without the written consent of the Exchange. The Trustee accepts
the responsibilities
placed on it by this agreement and agrees to perform them in accordance
with the terms of this Agreement and the written consent, orders or
directions of the Exchange.
5 Sherman may apply to the Exchange for a consent for a transfer within
escrow and shall, before applying, give reasonable notice in writing of his
intention to 1077431 and the Trustee.
6 (a) The Exchange will consent to the release from escrow of one share for
each $0.20 of Cash Flow.
(b) Any release from escrow under this paragraph 6 shall be made
pursuant to a written application of behalf of 1077431 or
Sherman, which application shall be accompanied by evidence of
the Cash Flow received in a form satisfactory to the Exchange.
Application for release may only be made once per year and may
only relate to Cash Flow received in the preceding fiscal year
or the fiscal years of Ventures since the last release from
escrow pursuant to this agreement, whichever is greater.
(c) Notwithstanding subparagraph (b) above, the maximum number of
shares to be released from escrow in any year shall be
one-third of the original number of shares held in escrow.
7. A release from escrow of all or part of the Escrowed Shares shall terminate
this agreement only in respect to those securities so released. For greater
certainty this paragraph does not apply to securities transferred within
escrow.
8. Sherman shall, if a dividend is declared by 1077431 while the Escrowed
Shares or any of them continue to be held in escrow under this Agreement,
renounce and release any right to receive payment of the dividend on the
shares then held in escrow.
9. If 1077431 is wound up and any securities remain in escrow under this
agreement at the time when a distribution of assets to holders of
securities is made by the liquidator, Sherman shall assign his right to
receive that part of the distribution which is attributable to the escrowed
securities to the Trustee, for the benefit of, and in trust for the persons
and companies who are then holders of free securities in 1077431 rateably
in proportion to their holdings.
10. (a) In the event that any or all of the business of Ventures has become of
little value or no value, Ventures shall declare the occurrence of
that event, with full particulars thereof, to the Exchange by a
resolution of its directors;
(b) Sherman agrees with 1077431 and the Trustee that in the event of such
diminution of value, the securities held in escrow shall not be
cancelled or released from escrow, in whole or in part, except with
the consent of the Exchange.
(c) The Exchange may, in its sole discretion, having regard to the value
of the property as ultimately established and such other circumstances
as it may consider relevant,
determine the number of securities to be cancelled or released and
shall communicate its decision in writing to the Trustee. If the
Exchange determines that less than all the securities then held in
escrow shall be cancelled or released shall be taken rateably from the
escrowed security holding of Sherman, unless the Exchange otherwise
directs Sherman, with the consent of the Exchange, otherwise agree in
writing.
(d) On receipt by the Trustee of a determination to cancel, Sherman shall
tender the required number of escrowed securities to 1077431 by way of
gift for cancellation and, 1077431 shall thereupon take the necessary
action, by way of reduction of capital or otherwise, to cancel them,
and the certificates for these securities shall be delivered up for
cancellation.
(e) Sherman undertakes and agrees to vote and cause to be voted his
securities in a manner consistent with the terms, conditions and
intent of this agreement in relation to the aforesaid giving back of
securities for cancellation.
11. Notwithstanding paragraphs 6 and 10, any shares remaining in escrow on the
fifth anniversary of the date of this agreement, unless otherwise exempted
in writing by the Exchange, shall be cancelled by the Trustee within 6
months of the said fifth anniversary.
12. All voting rights attached to the escrowed securities shall at all times be
exercised by Sherman.
13. Sherman and 1077431 hereby jointly and severally agree to and do hereby
release and indemnify and save harmless the Trustee from and against all
claims, suits, demands, costs, damages and expenses which may be occasioned
by reason of the Trustee's compliance in good faith with the terms hereof.
14. 1077431 hereby acknowledges the terms and conditions of this Agreement and
agrees to take all reasonable steps to facilitate its performance and to
pay the Trustee's proper charges for its services as trustee of this
escrow.
15. If the Trustee should wish to resign, it shall give at least 6 months'
notice to 107743 1 which may, with the written consent of the Exchange, by
writing appoint another Trustee in its place and such appointment shall be
binding on Sherman, and the new Trustee shall assume and be bound by the
obligations of the Trustee hereunder.
16. The covenants of Sherman with 1077431 in this agreement are made with
1077431 both in its own right and as trustee for the holders from time to
time of free securities in 1077431, and may be enforced not only by
10777431 but also by any holder of free securities.
17. This agreement may be executed in several parts of the same form and the
parts as so executed shall together constitute one original agreement, and
the parts, if more than one, shall be read together and construed as if all
the signing parties hereto had executed one copy of this agreement.
18. Wherever the singular or masculine is used, the same shall be construed to
include the plural or feminine or neuter where the context so requires.
19. This agreement shall enure to the benefit of and be binding on the parties
to this agreement and each of their heirs, executors, administrators,
successors and assigns.
IN WITNESS WHEREOF 1077431 and the Trustee have caused their respective
corporate seals to be hereto affixed and Sherman has hereto set his hand and
seal.
1077431 ONTARIO LIMITED
per: _________________________________
per: _________________________________
MONTREAL TRUST COMPANY OF CANADA
per: _________________________________
per: _________________________________
- ----------------- ------------------
Witness Richard A. Sherman
SCHEDULE "A"
Name of Security Holder and Number of Securities Certificate Numbers of
address Type of Securities Escrowed Escrowed Securities
Richard Sherman Common Shares 1,426,082 C-6