A corporation that wishes to raise capital by issuing public shares must comply with the Quebec Securities Act and its applicable regulations. Unless the corporation qualifies for an exemption, the corporation must, in compliance with the Autorité des marchés financiers (AMF), issue an offering memorandum or prospectus containing all the pertinent information so that the AMF may evaluate the proposed public offering. The corporation will have to retain the services of a broker, unless it decides to issue the public offering itself.

This agreement template sets out the legal framework of a best efforts underwriting made by a broker who also acts as depositary. The broker undertakes, as best effort underwriter for the issuing corporation, to find buyers for the shares the corporation is offering in its prospectus without, however, acquiring them. And in its role as depositary it agrees to hold any negotiable instrument received for the share subscription, in trust, until authorised to release the funds in accordance with the provisions of the agreement.

Please note that the escrow agreement is not the same thing as a “firm commitment underwriting,” in which the broker undertakes to acquire the shares of the issuing corporation at a date and price fixed by the agreement, in order to sell them to investors on the aftermarket.

It is important to pay a particular attention to the applicable legislation that could affect the interpretation of certain clauses in this agreement, such as the Civil Code of Quebec, especially its provisions concerning mandates, deposit agreements, administering the property of others and service agreements, and the Quebec Securities Act and its regulations, in particular its provisions concerning brokers.

We recommend using this Escrow Agency Agreement template in the following circumstances, namely, when:

- the broker does not wish to be contractually bound to acquire the issuing corporation’s securities under an IPO; because the broker does not want to take the risk that the securities might not be purchased, and

- the broker acts as both best efforts underwriter and depositary. [Note that when a third party acts as depositary, you should use both the Best Efforts Agency Agreement - IPO (template D03200) and the Escrow Agreement - IPO (template D03300).]

However, note that this Escrow Agency Agreement template may also be used with the Transfer Agency and Registrar Agreement (template D03550), according to which the transfer agent has the mandate to issue and transfer the shares, to replace and cancel the share certificates, to keep the registers, to pay the dividends and their distributions, to answer the registered shareholders’ questions, as well as any other related task.

0.00 INTERPRETATION
0.01 Definitions
0.01.01 Activities
0.01.02 Additional Shares
0.01.03 Agreement
0.01.04 AMF
0.01.05 Best Efforts
0.01.06 Breach
0.01.07 Business Days
0.01.08 Closing Date for Additional Shares
0.01.09 Closing Date for Initial Shares
0.01.10 Closing Session for Additional Shares
0.01.11 Closing Session for Initial Shares
0.01.12 Commercial Paper
0.01.13 Commercial Paper Security
0.01.14 Confidential Information
0.01.15 Deadline
0.01.16 Event of Default
0.01.17 Final Prospectus
0.01.18 Force Majeure
0.01.19 Important Information
0.01.20 Initial Shares
0.01.21 Intellectual Property
0.01.22 Law
0.01.23 Legal Representatives
0.01.24 Maximum Distribution
0.01.25 Minimum Distribution
0.01.26 Offered Shares
0.01.27 Offering
0.01.28 Offering Documents
0.01.29 Ordinary Course of Business
0.01.30 Over-Allotment Option
0.01.31 PARTY
0.01.32 Person
0.01.33 Preliminary Prospectus
0.01.34 Prime Rate
0.01.35 Prospectus
0.01.36 Qualifying Jurisdictions
0.01.37 Regulatory Authority
0.01.38 Share
0.01.39 Stock Exchange
0.01.40 Subscriber
0.01.41 Transfer Agent
0.01.42 Transfer Agency Agreement
0.01.43 Trust Account
0.02 Entire Agreement
0.03 Applicable Laws
0.04 Non-Compliance
0.04.01 Severability
0.04.02 Substitute Provision
0.05 Miscellaneous
0.05.01 Cumulative Rights
0.05.02 No Waiver
0.05.03 Time and Days
a) Time of the Essence
b) Computation of Time
c) Delays
0.05.04 Financial References
0.05.05 Cross-References
0.05.06 Gender and Number
0.05.07 Headings
0.05.08 Presumptions
0.05.09 Knowledge
0.05.10 Approval
1.00 PURPOSE
1.01 Appointment and Removal
1.01.01 Initial Appointment
1.01.02 Removal
1.01.03 New Appointment
1.01.04 Delivery
1.01.05 Liability
1.02 Mandate
1.03 Conditions
2.00 CONSIDERATION
2.01 Commission
2.02 Fees
2.02.01 Amount
2.02.02 Indexation
2.02.01 Lump Sum Fee
2.02.02 Indexation
2.02.03 Additional Fees
2.03 Disbursements
2.03.01 Reimbursement
2.03.02 Exceptional Disbursements
3.00 TERMS OF PAYMENT
3.01 Procedure
3.02 Interest
3.03 Loss of Term
3.04 Reimbursement of Legal Costs
4.00 SECURITY
4.01 In Favour of ESCROW AGENT
4.02 In Favour of ISSUER
5.00 MUTUAL REPRESENTATIONS AND WARRANTIES
5.01 Authority
5.02 Binding Agreement
6.00 REPRESENTATIONS AND WARRANTIES OF ISSUER
6.01 Status
6.02 Stock Market
6.03 Compliance
6.04 Legal Proceedings
6.05 Disclosure
6.06 Other Agreement
6.07 Offering Documents
6.07.01 Prospectus
6.07.02 Other
7.00 REPRESENTATIONS AND WARRANTIES OF ESCROW AGENT
7.01 Status
7.02 Authorizations
8.00 MUTUAL DUTIES AND OBLIGATIONS
8.01 Representations and Warranties
8.02 Confidential Information
8.02.01 Duration of Undertaking
8.02.02 End of Agreement
a) Request for Return
b) Destruction
8.02.03 Penalty
9.00 DUTIES AND OBLIGATIONS OF ISSUER
9.01 Compliant Offering
9.01.01 Offering Documents
9.01.02 Confirmation of Representations
9.01.03 Due Diligence
a) Authorization
b) Collaboration
9.02 Offering Period
9.03 Minimum Distribution Realized
9.03.01 Closing Session for Initial Shares
a) Closing Session
b) Initial Share Certificates
9.03.02 Over-Allotment Option
9.04 Delivery of Offering Documents
9.04.01 Signed Copy
9.04.02 Commercial Copy
9.05 Action Taken by Regulatory Authority
9.05.01 Notice
9.05.02 Best Efforts
9.05.03 Honouring Undertakings
9.06 Important Information
9.07 Indemnification of ESCROW AGENT
10.00 DUTIES AND OBLIGATIONS OF ESCROW AGENT
10.01 Mandate
10.02 Securities Act
10.03 Prospectus
10.03.01 Signature
10.03.02 Transmission
10.04 Cancelling Delivery
10.05 Commercial Paper
10.05.01 Verifying
10.05.02 Holding
10.06 Minimum Distribution Realized
10.06.01 Notice
10.06.02 Commercial Paper Security
10.06.03 Cashing-In
10.06.04 Commercial Paper Not Honoured
10.06.05 Release
a) Amount Cashed In
b) Commercial Paper Security
10.07 Minimum Distribution Not Realized
10.07.01 Before Deadline
10.07.02 By the Deadline
10.08 Dispute
10.09 Over-Allotment Option
10.09.01 Applicable Terms
10.09.02 Notice
10.09.03 Content of Notice
10.09.04 Place
10.10 Liability
10.10.01 Acts, Errors or Omissions
10.10.02 Non Liability
a) Acts by PARTIES
b) Validity of Commercial Paper
c) Legal Counsel
10.10.03 Legal Proceedings
10.11 Resignation
11.00 SPECIAL PROVISIONS
11.01 Transfer Agency Agreement
11.02 Assignment
11.02.01 Prohibition
11.02.02 Exception
11.03 Force Majeure
11.03.01 No Default
11.03.02 Duty
11.03.03 Rights of Other PARTY
11.04 Further Assurances
11.05 Reimbursement of Legal Costs
12.00 GENERAL PROVISIONS
12.01 Notice
12.02 Dispute Resolution
12.02.01 Good Faith Negotiations
12.02.02 Mediation
a) Process
b) Mediator
c) Settlement
d) Legal Proceedings [OR Arbitration]
12.02.03 Arbitration
a) Notice
b) Reply
c) Appointment of a Third Arbitrator
d) Subcontracts
e) Confidentiality
f) Hearing
g) Ruling
h) Costs
i) Supplementary Rules
12.03 Election
12.04 Counterparts
12.05 Amendment
12.06 No Waiver of Rights
12.07 Electronic Transmission
12.08 Language
13.00 TERMINATION
13.01 Mutual Consent
13.02 Without Notice
13.03 Prior Notice
13.03.01 With Time to Cure Default (Event of Default)
13.03.02 Without Time to Cure Default
14.00 EFFECTIVE DATE
15.00 DURATION
15.01 End of Agreement
15.02 Survival
16.00 SCOPE


SCHEDULE A – EXCERPT OF A RESOLUTION OF ..........
SCHEDULE 0.01.30 – OVER-ALLOTMENT OPTION
SCHEDULE 3.00 – TERMS OF PAYMENT