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ESCROW AGREEMENT
THIS AGREEMENTmade as of the 22nd day of November, 2000.
BETWEEN:
SAND TECHNOLOGY INC., a corporation incorporated under the
laws of the Province of Canada
(hereinafter called the "Company")
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SPROTT SECURITIES INC., a corporation incorporated under the
laws of the Province of Ontario
(hereinafter called "Sprott")
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AIRD & BERLIS, a partnership formed under the laws of the
Province of Ontario
(hereinafter called the "Escrow Agent")
WHEREAS the Company and Sprott have entered into a purchase agreement dated as
of the date hereof (the "Purchase Agreement");
AND WHEREASthe provisions of the Purchase Agreement provide for the deposit of
66 2/3% of the gross proceeds of the Offering with an escrow agent designated by
the Company and Sprott to be held in trust by such escrow agent pending the
registration of the Common Shares sold pursuant to the Offering and the Common
Shares underlying the Compensation Warrants.
AND WHEREAS all terms not defined herein shall have the meanings ascribed to
them respectively in the Purchase Agreement;
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NOW THEREFORE IN CONSIDERATION of the mutual covenants and promises contained in
this agreement and the Purchase Agreement, the parties hereto agree as follows:
1. DESIGNATION OF ESCROW AGENT
1.1 Pursuant to the provisions of Article 2 of the Purchase Agreement, the
Company and Sprott hereby designate the Escrow Agent to act as the escrow
agent referred to in the Purchase Agreement.
1.2 The Escrow Agent hereby agrees to act as the escrow agent referred to in
the Purchase Agreement on the terms and conditions set out herein.
1.3 In discharging its duties under this agreement, the Escrow Agent shall
have regard only to the provisions hereof and no other agreement, document
or instrument and, specifically, the Escrow Agent shall have no obligation
to read or examine the Purchase Agreement except to the extent that terms
defined therein are used herein.
2. DELIVERY OF PROCEEDS
2.1 Concurrently with the execution of this agreement and the Closing of the
Offering, Sprott shall deliver U.S.$10,380,000 (the "Proceeds") to the
Escrow Agent in the form of a certified cheque made payable to "Aird &
Berlis in Trust".
2.2 If Sprott fails to deliver the total aggregate Proceeds, the Escrow Agent
shall have no obligations, liability or responsibility under this
agreement whatsoever, and this agreement shall be of no force and effect.
3. INSTRUCTIONS TO ESCROW AGENT
3.1 Upon receipt of the Proceeds, the Escrow Agent shall deposit such Proceeds
in a term deposit, guaranteed investment certificate or segregated
interest-bearing account of or with the Bank of Nova Scotia, maturing on
the date the F3 Registration Statement becomes effective (the "Effective
Date") (or such other date or dates in the sole and absolute discretion of
the Escrow Agent) to be dealt with by the Escrow Agent subject to the
terms and conditions hereof.
3.2 The Proceeds shall not be released from escrow or dealt with in any other
manner whatsoever except pursuant to the terms and conditions of this
agreement.
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3.3 The Proceeds shall be held by the Escrow Agent until the earlier of:
(a) verbal notice to the Company by the SEC that the F3 Registration
Statement has become effective and such effectiveness has been
independently verified by the Escrow Agreement (the "Completion
Event"); and
(b) 5:00 p.m. (Toronto time) on the date which is 90 days from the
Clearing Date ("Expiry Time").
3.4 Subject to sections 3.5 and 3.6 hereof, upon the occurrence of the
Completion Event at any time before the Expiry Time, the Escrow Agent
shall as soon as possible, but in any event within three (3) business
days, release and deliver to the Company the Proceeds, together with any
and all interest earned thereon.
3.5 (a) if the Completion Event does not occur on or before the Expiry
Time, the Escrow Agent shall send a notice to the Corporation,
Sprott and each purchaser of Common Shares under the Offering (the
"Default Notice"), substantially in the form attached hereto as
Schedule "A". Each holder of Common Shares so notified shall
thereafter be entitled, prior to 5:00 p.m. (Toronto time) on that
date which is five business days from the Expiry Time, to require
the Corporation to repurchase for cancellation all of the Common
Shares held by such holder and thereby to receive U.S. $6.00 per
Common Share eligible for repurchase plus such holder's pro rata
portion of the interest earned pursuant hereto (calculated from and
including the Closing Date to the date immediately preceding the
date of payment to such holder of Common Shares). Any funds
remaining in escrow after the payment to all holders electing to
exercise their repurchase rights, shall be released and delivered
to the Company.
(b) should there be insufficient funds held in escrow to pay all
holders electing to exercise their repurchase rights, the Company
shall forthwith pay to the Escrow Agent the difference between the
funds required for repurchase of the Common Shares and the funds
held in escrow pursuant to this agreement.
3.6 In the event that any action or other proceedings are commenced by any of
the parties hereto to which one or both of the other parties hereto is a
party relating to this agreement, the Escrow Agent shall be permitted to
deposit into court the Proceeds (together with all interest earned
thereon) pursuant to the applicable rules of procedure governing such
action or proceedings and shall thereafter be released from any and all
obligation to hold the Proceeds as Escrow Agent hereunder.
3.7 For the purposes of this section 3, "business day" means any day other
than Saturday, Sunday or any statutory holiday observed in Ontario.
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4. ESCROW AGENT'S FEES AND EXPENSES
4.1 The Company shall pay to the Escrow Agent (i) its fees for acting
hereunder as Escrow Agent from time to time as and when incurred to a
maximum of Cdn. $5,000, and (ii) the Escrow Agent's out-of-pocket
expenses, including, without limitation, reasonable legal fees and
disbursements incurred as a result of consulting independent counsel, if
necessary, as to its obligations hereunder, any fees and disbursements
incurred in connection with the investing of the Proceeds and all
applicable taxes thereon.
5. LIMITATIONS ON DUTIES AND LIABILITIES OF ESCROW AGENT
5.1 The acceptance by the Escrow Agent of its duties and obligations under
this agreement is subject to the following terms and conditions, which the
parties to this agreement hereby agree shall govern with respect to the
Escrow Agent's rights, duties, liabilities and immunities:
(a) the Escrow Agent shall not be liable or accountable for any loss or
damage whatsoever, including, without limitation, loss of profit,
to any person caused by the performance or failure to perform by it
of its responsibilities under this agreement, save only to the
extent that such loss or damage is attributable to the gross
negligence or wilful misconduct of the Escrow Agent or to any
action taken or omitted to be taken by the Escrow Agent in bad
faith;
(b) the Escrow Agent shall have no duties except those which are
expressly set forth herein and shall not be bound by any notice of
a claim or a demand with respect thereto or any waiver,
modification, amendment, termination or rescission of this
agreement unless received by it in writing and signed by all of the
parties hereto (or, in the case of a waiver, the party so waiving)
other than the Escrow Agent and is in a form satisfactory to the
Escrow Agent;
(c) the Escrow Agent shall be protected in acting upon any certificate,
written notice, request, waiver, consent, receipt, statutory
declaration or other paper or document furnished to it and signed
by one or both of the other parties hereto or on its or their
behalf as herein provided not only as to its due execution and the
validity and effectiveness of its provisions but also as to the
truth and acceptability of any information therein contained which
the Escrow Agent in good faith believes to be genuine in what it
purports to be;
(d) the Escrow Agent shall not be liable for or by reason of any
statements of fact or recitals in this agreement and shall not be
required to verify the same;
(e) nothing herein contained shall impose any obligation on the Escrow
Agent to see to or require evidence of the registration or filing
or recording (or renewal thereof) of
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this agreement, or any instrument ancillary or supplemental
thereto, or to procure any further, any other or additional
instrument or further assurance;
(f) in the exercise of its rights and duties hereunder, the Escrow
Agent shall not be in any way responsible for the consequence of
any breach on the part of a party hereto of any of their respective
covenants herein contained or of any acts of Sprott or servants of
any of them;
(g) the Escrow Agent shall retain the right not to act and shall not be
held liable for refusing to act unless it has received clear and
reasonable documentation which complies with the terms of this
agreement. Such documentation must not require the exercise of any
discretion or independent judgment;
(h) in the event of any disagreement arising regarding the terms of
this agreement, the Escrow Agent shall be entitled at its option to
refuse to comply with any or all demands whatsoever until the
dispute is settled either by agreement amongst the various parties
or by a court of competent jurisdiction;
(i) the Escrow Agent may resign its agency and be discharged from all
duties and obligations hereunder by giving to the Company and
Sprott 30 days prior notice of its resignation, or such shorter
period as such parties shall accept as sufficient; and
(j) if the Escrow Agent resigns its agency in accordance herewith,
Sprott and the Company shall have the right and obligation to
appoint a succeeding Escrow Agent who, upon accepting such
appointment, shall assume all of the obligations and
responsibilities and shall be entitled to enjoy the benefits and
rights of the Escrow Agent hereunder. If a successor escrow agent
is appointed as herein provided, the Escrow Agent shall pay and
deliver to such successor all funds, agreements and other documents
then in its possession upon payment of its fees.
5.2 The rights and benefits held by and the indemnities granted in favour of
the Escrow Agent set out in Articles 4, 5, 8 and 11 hereof shall continue
indefinitely notwithstanding the appointment of a successor escrow agent
pursuant to provisions of this Article 5.
5.3 No implied duties or obligations of the Escrow Agent shall be read into
this agreement.
5.4 Payments made by the Escrow Agent hereunder shall be duly made if paid by
certified trust cheque.
6. DISCHARGE OF ESCROW AGENT
6.1 The Escrow Agent shall be discharged from any further duty upon release of
the Proceeds held in escrow in accordance with Article 3 of this agreement
or the payment into court of
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the Proceeds in accordance with Article 3.5 of this agreement.
7. CO-OPERATION OF SPROTT AND THE COMPANY WITH ESCROW AGENT
7.1 The Underwriter and the Company shall deliver to the Escrow Agent all
documents, pay to the Escrow Agent all sums and do or cause to be done all
other things necessary to enable the Escrow Agent to comply with this
agreement.
8. DISCLOSURE BY ESCROW AGENT
8.1 The Underwriter and the Company acknowledge that the Escrow Agent is
currently acting as counsel to Sprott and may, in the future, act as
counsel to Sprott. The Underwriter and the Company further acknowledge
their desire for the Escrow Agent to act in such capacity notwithstanding
the disclosures set out in the first sentence of this Article 8. The
Company and Sprott agree that in the event of a dispute under this
agreement, the Escrow Agent shall have the right to deposit the Proceeds,
together with all interest earned thereon into a court of competent
jurisdiction until such dispute is resolved to the satisfaction of such
court.
9. NOTICE
9.1 Any notice required to be given hereunder shall be sufficiently given and
delivered to the Escrow Agent if personally delivered, addressed to the
Escrow Agent as set out below. Any notice, certificate or other writing
required or permitted to be given hereunder (a "Notice") shall be
sufficiently given and delivered to the party to whom it is given if
personally delivered or mailed, by prepaid registered mail, addressed to
such party as follows:
If to the Company, to: SAND TECHNOLOGY INC.
4141 Sherbrooke St. O.
Suite 410
Westmount, P.Q.
H3Z 1B8
Attention: Mr. Arthur G. Ritchie
Telecopier No.: (514) 939-2042
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with a copy to: LAVERY, DE BILLY
Suite 4000, 1 Place Ville Marie
Montreal, Quebec
H3B 4M4
Attention: Georges Dube
Telecopier No.: (514) 871-8977
If to Sprott, to: SPROTT SECURITIES INC.
Royal Bank Plaza, South Tower
Suite 3450
Toronto, Ontario
M5J 2J2
Attention: John Douglas
Telecopier No.: (416) 943-6496
If to the Escrow Agent, to: Aird & Berlis
Barristers & Solicitors
BCE Place
Suite 1800, Box 754
181 Bay Street
Toronto, Canada
M5J 2T9
Attention: Sonia M. Yung
Telecopier No.: (416) 863-1515
or such other address as the party to whom a Notice is to be given shall
have last notified in writing the other parties hereto of a change of
address for the purposes of this provision. Any Notice mailed as
aforesaid shall be deemed to have been given and received on the date that
the Notice is signed for by the party to whom it is addressed or any
employee or Underwriter thereof. Any Notice personally delivered to the
party to whom it is addressed shall be deemed to have been given and
received on the day it is personally delivered, but if any such day falls
on a weekend or statutory holiday in the City of Toronto, then the Notice
shall be deemed to have been given and received on the business day next
following such day. In the event of a postal disruption, a Notice must be
personally delivered.
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10. AMENDMENT
10.1 This agreement shall not be amended, revoked or rescinded as to any of its
terms and conditions except by agreement in writing signed by all of the
parties hereto.
11. INDEMNIFICATION OF ESCROW AGENT
11.1 The Underwriter and the Company jointly and severally agree to indemnify
and hold the Escrow Agent harmless against any and all losses, claims,
suits, demands, costs and expenses that may be incurred by the Escrow
Agent or made on the Escrow Agent by the Company, Sprott or any third
party by reason of the Escrow Agent's compliance in good faith with the
terms of this agreement, except claims, suits or demands arising from, the
wilful default or gross negligence of the Escrow Agent in the performance
of its duties hereunder. In no event shall the Escrow Agent be liable to
Sprott or the Company for any act which it may do or which it may omit to
do with respect to this agreement, except in the case of gross negligence
or wilful misconduct of the Escrow Agent.
12. BINDING AGREEMENT - NOT ASSIGNABLE
12.1 This agreement shall constitute a binding obligation and shall enure to
the benefit of each of the parties hereto and their respective successors
and assigns and shall not be assignable by any of them without the prior
consent in writing of each of the other parties.
13. GOVERNING LAWS
13.1 This agreement shall be governed by and construed in accordance with the
laws of the Province of Quebec and the laws of Canada applicable therein.
14. INTERPRETATION
14.1 The headings of the articles and sections of this agreement are inserted
for convenience only and shall not be deemed to constitute part of this
agreement or to affect the construction hereof.
15. SEVERABILITY
15.1 Any provision hereof which is prohibited or unenforceable in any
jurisdiction will, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in
any other jurisdiction. To the extent permitted by law, the parties hereto
waive any provision of law which renders any such provision prohibited or
unenforceable in any respect.
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16. ENTIRE AGREEMENT
16.1 This agreement constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written. There are no conditions, warranties, representations or other
agreements between the parties in connection with the subject matter of
this agreement (whether oral or written, express or implied, statutory or
otherwise) except as specifically set out in this agreement.
17. WAIVER
17.1 A waiver of any default, breach or non-compliance under this agreement is
not effective unless in writing and signed by the party to be bound by the
waiver. No waiver shall be inferred from or implied by any failure to act
or delay in acting by a party in respect of any default, breach or
non-observance or by anything done or omitted to be done by the other
party. The waiver by a party of any default, breach or non-compliance
under this agreement shall not operate as a waiver of that party's rights
under this agreement in respect of any continuing or subsequent default,
breach or non-observance (whether of the same or any other nature).
18. TIME OF THE ESSENCE
18.1 Time shall be of the essence of this agreement.
19. EXECUTION
19.1 This agreement may be executed in one or more counterparts, and may be
delivered by facsimile, each of which so executed or delivered shall
constitute an original and all of which together shall constitute one and
the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered these
presents as of the date first above written.
SAND TECHNOLOGY INC.
By: /s/ Arthur G. Ritchie c/s
--------------------------------
Name: Arthur G. Ritchie
Title: Chairman
SPROTT SECURITIES INC.
By: /s/ Jeff Kennedy c/s
--------------------------------
Name: Jeff Kennedy
Title: Chief Financial Officer
AIRD & BERLIS
By: /s/ Sonia M. Yung
--------------------------------
Partner
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SCHEDULE "A"
FORM OF NOTICE TO BE DELIVERED PURSUANT TO SECTION
NOTICE OF NON-COMPLIANCE
To: The purchasers of Common Shares of Sand Technology Inc. pursuant to the
Offering of Common Shares pursuant to a Purchase Agreement dated November 22,
2000 ("Common Shares").
You are hereby informed that the Completion Event did not occur prior to the
Expiry Time and, accordingly, each holder of said Common Shares may elect either
(i) to require the Company to repurchase all but not less than all of said
Common Shares (the "Repurchasable Shares") and receive from the Escrow Agent the
sum of U.S. $6.00 (the "Repurchase Price") for each Repurchasable Share plus a
pro rata share of the interest earned on the funds held in escrow by the Escrow
Agent from November 22, 2000 until the date of payment or (ii) to retain such
Common Shares. In the event that a holder of Common Shares has not elected
either of the options referred to in items (i) or (ii) above within five
business days of the Expiry Time, he shall be deemed to have elected the option
referred to in item (i) to have all of said Repurchasable Shares held by such
holder repurchased by the Company.
To elect to have the Company repurchase the Repurchasable Shares or to elect to
retain the Repurchasable Shares and not tender them for repurchase, complete the
Election of Repurchase or Retention Form attached hereto as Appendix I and
return the same to the Escrow Agent as soon as possible. If you are electing to
have your Repurchasable Shares repurchased, Common Share Certificates should be
forwarded to the Escrow Agent at Aird & Berlis, BCE Place, 181 Bay Street, Suite
1800, Toronto, Ontario, M5J 2T9, Attention: Sonia M. Yung. FOR THE PROTECTION OF
THE HOLDER, IT IS RECOMMENDED THAT IT WOULD BE PRUDENT TO SEND THE COMMON SHARE
CERTIFICATE BY REGISTERED MAIL IF FORWARDING BY MAIL.
Unless you direct otherwise in the Election of Repurchase or Retention Form,
payment of the Repurchase Price shall be made on or after the sixth business day
after the date hereof against surrender of the Common Share Certificate(s)
representing the Repurchasable Shares being repurchased, by cheque or cheques
equal to the Repurchase Price, less all amounts directed in writing by the
Company to the Escrow Agent to be withheld on the basis that such amounts are
required to be withheld by law in respect of such payments.
Capitalized terms used herein shall have the meanings ascribed thereto in the
Purchase Agreement.
If you require any further information in this regard, please write or telephone
the undersigned (Attention: Sonia M. Yung - Telephone (416) 863-1500).
Yours very truly,
AIRD & BERLIS
[signed]
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APPENDIX I
COMMON SHARES
ELECTION OF REPURCHASE OR RETENTION
TO: SAND TECHNOLOGY INC.
AND TO: AIRD & BERLIS
CHECK ONE OF THE FOLLOWING:
_____ The undersigned holder of the within Common Shares hereby surrenders
for repurchase all of such Common Shares (the "Repurchasable Shares")
on the terms specified in the Escrow Agreement and directs that payment
for such Repurchasable Shares be made to the undersigned or,
alternatively as follows:
NAME: _____________________________________________________
ADDRESS:
(in full): __________________________________________________
(Please Print)
If payment is to be made to a person other than the holder of
Repurchasable Shares, such shareholder must pay to the Escrow Agent all
exigible taxes and the signature of the shareholder must be guaranteed.
Please indicate YES/NO (circle) if the payment is to be delivered at
the office where these Repurchasable Shares are surrendered, failing
which the payment will be mailed.
_____ The undersigned holder of the within Common Shares hereby elects to retain
the Repurchaeable Shares.
DATED this ______ day of ______________________, 2001.
_________________________________
Witness Signature of Shareholder
_________________________________
Print Name in Full
_________________________________
Address in Full
Signature of shareholder
Guaranteed by:
--------
*
--------
* Authorized Signature Number
NOTE: If the signature of the person executing this form is to be guaranteed, it
must be guaranteed by a Canadian Chartered Bank or Trust Company or by a Member
of the Toronto, Canadian Venture or Montreal stock exchanges.
