DECLARATION OF TRUST AND ESCROW AGREEMENT
THIS DECLARATION OF TRUST AND ESCROW AGREEMENT ("Agreement") is made
and entered into as of January __, 2002, by and among PlayandWin, Inc.,
a Nevada Corporation ("PWIN"); Playandwin Canada Inc., an Ontario
Corporation and a wholly-owned subsidiary of PWIN ("PWIN Canada"); and
Chapman & Flanagan, Ltd., a Nevada professional corporation (the
"Escrow Agent"). PWIN and PWIN Canada may herein be referred to,
collectively, as the "Parties", or any of them may be referred to
herein individually as a "Party".
RECITALS
A. In March 2000, PWIN Canada acquired all of the issued and
outstanding shares of Lynx Gaming Corp. ("Lynx") and P.E.S.T.
Creative Gaming Corp. ("PEST") from the persons identified in
Schedule "A" hereto (hereinafter collectively referred to as the
"Owners") in exchange for 100% of the Class B Special Shares of
PWIN Canada (the "Exchangeable Shares").
B. The Exchangeable Shares are non-voting preferred shares
exchangeable into common shares of PWIN ("PWIN Shares"). PWIN
Canada may exchange the Exchangeable Shares at any time and must
do so (i) in the event of a take-over bid for all of the issued
and outstanding securities of PWIN, or (ii) on the fifth
anniversary of the closing of the acquisition of Lynx or PEST.
The Owners may not exchange their Exchangeable Shares for one year
after the closing of the acquisition of Lynx or PEST, and
thereafter may exchange one-third of their Class B Special Shares
after the first anniversary of that closing, an additional one-
third after the second anniversary, and all of them after the
third anniversary. In addition, the Exchangeable Shares may not be
converted without the approval of the Ontario Securities
Commission (the "OSC").
C. PWIN proposes to enter into a transaction which will result in a
spin-off of PWIN Canada, the disposition of the assets acquired on
the acquisition of Lynx and PEST, a change of control and a change
of management for PWIN.
D. PWIN Proposes to issue the PWIN Shares to the Escrow Agent in
trust for the Owners pending the conversion of their Exchangeable
Shares.
E. PWIN and the Escrow Agent have executed this Agreement to evidence
that each such entity understands, approves, accepts and agrees to
the terms and conditions specified in this Agreement.
F. Insofar as the release of the PWIN Shares is regulated by the
Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
and other applicable federal, state, and provincial securities
laws, the Parties represent and warrant that each of them will
comply with the requirements of the Securities Act, the Exchange
Act, and any other applicable federal, state, or provincial
securities laws.
G. The Parties acknowledge that they have been informed that the
Escrow Agent has acted as counsel for PWIN. Each of the Parties
nevertheless desires the Escrow Agent to provide the services to
the Parties specified herein and, therefore, expressly waives any
conflicts of interest and consents and gives approval to the
employment of the Escrow Agent pursuant to the terms, and subject
to the conditions, of this Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE RECITALS SPECIFIED ABOVE THAT
SHALL BE DEEMED TO BE A SUBSTANTIVE PART OF THIS AGREEMENT, AND THE
MUTUAL COVENANTS, PROMISES, UNDERTAKINGS, AGREEMENTS, REPRESENTATIONS
AND WARRANTIES SPECIFIED IN THIS AGREEMENT AND OTHER GOOD AND VALUABLE
CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY
ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED LEGALLY AND EQUITABLY,
THE PARTIES DO HEREBY COVENANT, PROMISE, AGREE, REPRESENT AND WARRANT
AS FOLLOWS:
1. Duties of the Escrow Agent. The Escrow Agent shall hold the PWIN
Shares in trust for the Owners in amounts set out in Schedule "A"
hereto on the terms set out in this Agreement. The PWIN Shares
specified for each Owner shall be held by the Escrow Agent until:
(i) PWIN or PWIN's counsel notifies the Escrow Agent, in writing,
that no applicable federal, state, and provincial securities
laws will be violated by the release of the PWIN Shares to the
Owners;
(ii) the Owner requests in writing from the Escrow Agent the
release of PWIN Shares on the conversion of the Owner's
Exchangeable Shares; and
(iii) the Owner tenders to the Escrow Agent certificates
representing the Exchangeable Shares to be converted.
Any PWIN Shares remaining in trust on September 24, 2004, shall be
distributed to the Owners entitled to the same. Furthermore, until
the date indicated opposite each Owner's name in Schedule "A" (the
"Full Release Date") the maximum number of PWIN Shares that the
Escrow Agent may release to any one Owner shall be two-thirds (2/3)
of the PWIN Shares to which that Owner is entitled according to
Schedule "A" (rounding down in the case of fractions). After the
Full Release Date, the maximum number of PWIN Shares that the Escrow
Agent may release to each Owner shall be the full number of PWIN
Shares to which such Owner is entitled according to Schedule "A"
(subject to any prior releases). The Escrow Agent does not have any
duty to give the instruments, documents or funds delivered hereunder
any greater degree of care than it, as the Escrow Agent, would
ordinarily give similar property held in trust for the benefit of
others. The Escrow Agent will not act as a mediator or advisor with
respect to the release of the PWIN Shares, nor will the Escrow Agent
arbitrate any disputes that may occur regarding such release. The
duties of the Escrow Agent shall be limited to those expressly
specified in this Agreement, and no duties or obligations shall be
implied or presumed against the Escrow Agent.
2. Cancellation of Exchangeable Shares. Upon delivering PWIN Shares
to Owners on the conversion of their Exchangeable Shares, the
Escrow Agent shall forthwith surrender all Exchangeable Shares
received for conversion to PWIN Canada for cancellation.
3. Authority Relative to This Agreement. The Escrow Agent is hereby
granted, authorized, empowered and instructed to act for and on
behalf of the Parties, to take any and all action necessary or
appropriate to carry out the intents and purposes of this
Agreement, including, but not necessarily limited to, the release
of the PWIN Shares. The Escrow Agent is expressly authorized,
empowered and directed to employ such legal counsel and other
experts as the Escrow Agent may deem necessary properly to advise
the Escrow Agent in connection with the Escrow Agent's duties
hereunder, and the Parties agree to pay such counsel reasonable
compensation therefor. The Escrow Agent is expressly authorized,
empowered and instructed to comply with and obey orders, judgments
and decrees of any court, and the Escrow Agent shall not be liable
to any of the Parties or to any other person, firm or corporation
by reason of the Escrow Agent's compliance with any such order,
judgment or decree subsequently reversed, amended, modified,
annulled, set aside, vacated, or found to have been entered
without jurisdiction.
4. Cooperation. Each Party shall cooperate with the Escrow Agent in
consummating the transaction contemplated by the provisions of
this Agreement and in delivering all documents, instruments and
funds necessary or appropriate to consummate that transaction.
5. Reliance. The Escrow Agent is entitled to rely conclusively on any
joint written instructions of PWIN and any of the Owners
concerning the release of that Owner's portion of the PWIN Shares.
The Escrow Agent is expressly authorized to disregard any
instructions or communications given to the Escrow Agent by any
Party or Parties which are not in accordance with paragraph 1.
The Escrow Agent may: (i) act in reliance upon any writing or
instrument or signature which it, in good faith, believes to be
genuine; (ii) assume the validity and accuracy of any statement or
assertion contained in such a writing or instrument; and (iii)
assume that any person purporting to give any writing, notice,
advice or instruction on behalf of a Party in connection with the
provisions of this Agreement has been duly authorized to do so.
The Escrow Agent shall not be liable in any manner for the
sufficiency or correctness as to form, manner of execution or
validity of any written instructions delivered to it, nor as to
the identity, authority, or rights of any person executing the
same.
6. Interpleader. If the Parties and/or the Escrow Agent shall
disagree about the interpretation of this Agreement, or about the
respective rights and obligations created by this Agreement, or
the propriety of any action contemplated to be taken by the Escrow
Agent, the Escrow Agent may, but shall not be required to, file an
action in interpleader; or the Parties may require the Escrow
Agent to file an action in interpleader, to resolve such
disagreement. The Escrow Agent shall be indemnified jointly and
severally by the Parties for all costs and attorney fees incurred
by the Escrow Agent in connection with any such interpleader
action and shall be fully protected from any claims of
nonperformance or other claims in law or in tort until a final
judgment in such interpleader action is received.
7. Voting Rights. Except for those PWIN Shares whose release has
been requested by an Owner and for whose release the conditions
specified in paragraph 1 above have been met, none of the shares
subject to this Agreement shall have voting rights.
8. Ontario Securities Law. The Parties represent and warrant to the
Escrow Agent that the issuance of PWIN Shares to the Escrow Agent
in trust for the Owners, and the Escrow Agent's dealings with the
PWIN Shares pursuant to this Agreement do not and will not
contravene any provisions of the securities legislation of the
Province of Ontario, or the rules, regulations and policies
promulgated thereunder, so long as the terms of this Agreement are
complied with. Each of the Parties, for and on behalf of
themselves and their successors, predecessors, assignees,
partners, attorneys, accountants, representatives, agents,
officers, directors, employees, shareholders, affiliates,
associates, parent and subsidiary corporations (and the officers,
directors, employees, consultants, shareholders and affiliates of
each such parent and subsidiary corporations), hereby irrevocably
and forever release, acquit and discharge the Escrow Agent from
any and all claims, charges, complaints, injuries, liabilities,
obligations, losses, debts, suits, demands, grievances, costs,
expenses (including, but not limited to, attorneys' fees, receiver
fees, accountant fees, and other professional and expert fees),
rights, actions and causes of action, of any nature or manner
whatsoever, known and unknown, suspected and unsuspected,
contingent or fixed, liquidated or unliquidated, past, present or
future, resulting from any actual or alleged violations of any
provisions of the securities legislation of the Province of
Ontario or the rules, regulations and policies promulgated
thereunder, by the Escrow Agent in the course of performing its
obligations under this Agreement.
9. Release of Claims and Indemnification.
9.1 Each of the Parties, for and on behalf of themselves and
their successors, predecessors, assignees, partners,
attorneys, accountants, representatives, agents, officers,
directors, employees, shareholders, affiliates, associates,
parent and subsidiary corporations (and the officers,
directors, employees, consultants, shareholders and
affiliates of each such parent and subsidiary corporations),
hereby irrevocably and forever release, acquit and discharge
the Escrow Agent from any and all claims, charges,
complaints, injuries, liabilities, obligations, losses,
debts, suits, demands, grievances, costs, expenses
(including, but not limited to, attorneys' fees, receiver
fees, accountant fees, and other professional and expert
fees), rights, actions and causes of action, of any nature or
manner whatsoever, known and unknown, suspected and
unsuspected, contingent or fixed, liquidated or unliquidated,
past, present or future, including, but not limited to,
rights resulting from alleged violations of any contracts,
express or implied, any covenant of good faith and fair
dealing, express or implied, any tort, or any federal, state,
provincial or other governmental statute, regulation, law or
ordinance from the beginning of time to the release of the
Shares.
9.2 It is understood that there is a risk that, subsequent to the
execution and delivery of this Agreement, losses, damages or
injuries might be incurred which are unknown or
unanticipated, for whatever reason, at the time of the
execution and delivery of this Agreement. It is nonetheless
specifically agreed that the releases of the Escrow Agent
pursuant to this Agreement are fully and completely effective
regardless of any present lack of knowledge on the part of
any Party as to any and all claims, charges, complaints,
liabilities, obligations, debts, suits, demands, grievances,
losses, damages, injuries, costs, expenses, rights, actions
or causes of action, or as to any possible fact or
circumstance relating in any manner to the matters for which
the releases specified in this Agreement are made.
9.3 The Parties agree, jointly and severally, to indemnify and
hold harmless the Escrow Agent from any and all claims,
liabilities, costs, or expenses in any way arising from or
relating to the duties or performance of the Escrow Agent
pursuant to this Agreement.
10. Fees. PWIN Canada shall pay the reasonable fees and expenses of
the Escrow Agent incurred in the performance of the Escrow Agent's
obligations hereunder.
11. Agents. The Escrow Agent may execute any of its rights and powers
specified in this Agreement, or perform any of its
responsibilities required to be performed pursuant to this
Agreement, either directly or by or through its agents, employees
or representatives.
12. Resignation. The Escrow Agent may resign at any time upon giving
fifteen (15) calendar days written notice to the Parties. Within
that fifteen (15) calendar day period, the Parties shall have the
sole right to appoint by written consent or agreement between them
a successor the Escrow Agent by written notice to the Escrow
Agent. Thereupon, any and all documents and instruments delivered
to the Escrow Agent pursuant to this Agreement shall be
transferred from the Escrow Agent to the successor escrow agent,
subject to the lien rights of the Escrow Agent pursuant to
Paragraph 7 of this Agreement. If a successor the Escrow Agent is
not appointed by Purchasers and Sellers within ten (10) days after
notice of the resignation of the Escrow Agent, the Escrow Agent
may petition a court of competent jurisdiction to name a successor
the Escrow Agent hereunder.
13. Successors and Assigns. This Agreement is binding on and inures to
the benefit of the Parties and their successors, permitted
assignees, and legal and personal representatives.
14. Execution in Counterparts. This Agreement may be executed in
counterparts, in which case each executed counterpart will be
deemed to be an original and all executed counterparts will
constitute the same agreement.
15. Facsimile Signatures. Facsimile signatures on counterparts of
this Agreement are hereby authorized and shall be acknowledged as
if such facsimile signatures were originally executed signatures.
16. Entire Agreement. This Agreement specifies the final, complete
and exclusive expression of the understanding among the Parties
and the Escrow Agent concerning the escrow for the transactions
contemplated hereunder and supersedes any prior or contemporaneous
agreement or representation, oral or written, by any of them
regarding that escrow. A waiver, discharge, amendment or
modification of this Agreement or any of its provisions will be
valid and effective only if it is in writing and signed by or on
behalf of each Party. Nothing in this Agreement, whether expressed
or implied, is intended or should be construed to confer upon, or
grant to, any person other than the Parties any rights, remedy, or
claim pursuant to or by reason of this Agreement or any provision
of it.
17. Notices. Every notice, request, demand, consent, approval or
other communication required or permitted under this Agreement
shall be in writing and will be effective and duly given either
when hand delivered, when delivered by a nationally recognized
overnight courier service, by facsimile machine, or on the fifth
day after it is deposited in the United States mail (by registered
or certified mail, postage prepaid, return receipt requested)
addressed to the appropriate party as set forth below:
If to the Escrow Chapman & Flanagan, Ltd.
Agent: 777 North Rainbow Blvd., Suite
390
Las Vegas, NV 89107
Facsimile: (702) 650-5667
If to the Owners: c/o PlayandWin Inc.
7050 Weston Road
Vaughan, ON L4L 8G7
Facsimile: (905) 850-5012
If to PWIN or PWIN PlayandWin Inc.
Canada: 7050 Weston Road
Vaughan, ON L4L 8G7
Facsimile: (905) 850-5012
With a copy to:
Chapman & Flanagan, Ltd.
777 North Rainbow Blvd., Suite
390
Las Vegas, NV 89107
Facsimile: (702) 650-5667
18. Choice of Law. The validity, interpretation, construction, and
enforcement of this Agreement shall be controlled by the laws of
the State of Nevada, without application of any conflicts of laws
principles.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
signed on the date first written above.
Playandwin Canada Inc. PlayandWin, Inc.
By: /s/ Stewart Garner By: /s/ Stewart Garner
Its: President Its: President
Chapman & Flanagan, Ltd.
By: Daniel G Chapman
Its: Secretary
SCHEDULE "A"
THE OWNERS
Number of
Exchangeable
Name Shares Held Full Release Date
Barnier, Cammie 1,250 September 9, 2002
Bloovol, Marilyn H. 5,000 September 9, 2002
B-MAC Trading Inc. 23,572 September 9, 2002
Bone, Gerald 7,492 September 9, 2002
Brady, Bob 4,000 September 9, 2002
Buck, Darren 4,000 September 9, 2002
Burgess, Neil R.H. 500 September 9, 2002
Burgess, Paul D. H. 1,000 September 9, 2002
Carter, Gary W. 1,892 September 9, 2002
Chapman, Kirsten 6,500 September 9, 2002
Clementi, Gary S. 500 September 9, 2002
Clements, Deron 4,000 September 9, 2002
Colony Investments 40,000 September 9, 2002
Limited
Colony Investments Limited 5,715 September 24, 2002
Consular Investment 264,002 September 9, 2002
Corporation
Coulson, Hugh 4,000 September 9, 2002
Day, J. Richard 4,000 September 9, 2002
Esquivel, Paul 4,500 September 9, 2002
Finley, John 4,000 September 9, 2002
FMF Investment Group S.A. 15,685 September 9, 2002
FMF Investments S.A. 2,858 September 24, 2002
Gamble, Wm. S. 4,000 September 9, 2002
Garner, Robert 9,000 September 9, 2002
Garner, Robert & Anna 13,250 September 9, 2002
Garner, Stewart 110,500 September 9, 2002
Garvey, Baird 500 September 9, 2002
Garvey, Paul & Carolyn 4,000 September 9, 2002
Greenstein, Joel 4,000 September 9, 2002
Hapak, James R. 2,500 September 9, 2002
Harper, Graham 2,500 September 9, 2002
Hayward, Sheila & John 4,000 September 9, 2002
Ho, Yook-Ying 5,000 September 9, 2002
Hunter, J. Stephen 6,000 September 9, 2002
Hunter, Laura M. 1,892 September 9, 2002
Hunter, Margaret C. 1,892 September 9, 2002
Hunter, Stephen 1,892 September 9, 2002
Irwin, Lynda 500 September 9, 2002
Jeffery, Martin 1,000 September 9, 2002
K. Island Investments Ltd. 1,000 September 9, 2002
Kamula, Randy 500 September 9, 2002
Kwan, Patrick 1,000 September 9, 2002
MacCannell, Scott 4,500 September 9, 2002
MacTavish, Bridget 1,000 September 9, 2002
McLean, Bill 1,000 September 9, 2002
Millar, R. K. R. 2,000 September 9, 2002
Minerson, Peter H. 2,500 September 9, 2002
O'Mahony, Paul 1,500 September 9, 2002
Pearson, Sherry-Anne 4,500 September 9, 2002
Peneycad, W. A. 2,500 September 9, 2002
Sinnott, Tom 53,000 September 9, 2002
Smallwood, Ed 1,000 September 9, 2002
Smith, Stewart 500 September 9, 2002
Solomon, David S. 1,000 September 9, 2002
Taunton Associates Ltd. 23,572 September 9, 2002
Thast, Robert L. 4,000 September 9, 2002
Tradewinds Investments Ltd. 15,685 September 9, 2002
Walton, Dane 2,858 September 24, 2002
Wolfe, Jamie 750 September 9, 2002
TOTAL: 701,257