Document:

exhibit_4-1.htm

Exhibit 4.1

 

 

 

 

EMPLOYMENT AGREEMENT

THIS AGREEMENT is dated effective this 1st day of January, 2010.

 

BETWEEN:

Pacific Therapeutics Ltd., a company incorporated pursuant to the laws of the Province of British Columbia and having a business office at Suite 1023 – 409 Granville Street, Vancouver, B.C., V6C 1T2

(the "Company")

AND:

 

Douglas Harry Unwin, a businessman residing at [Address]

 

(the "Employee”)

 

WHEREAS:

A.                      The  Company  is  engaged  in  the  business  of  the  development  of biotechnology products; and

B.                      The Employee is presently employed, or is about to be employed, by the Company on the terms and conditions which are now set forth in this Agreement.

NOW  THEREFORE  THIS  AGREEMENT  WITNESSES  that  for  and  in consideration of the Employee's continued employment, the premises and mutual covenants and agreements hereinafter contained, the sum of $1.00 of lawful money of Canada now paid by the Company to the Employee and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged) the parties hereto covenant and agree as follows:

1.0                   Employment

1.1                   The Company hereby employs the Employee in the positions of President and Chief Executive Officer.

 

1.2                   The Employee shall report to the Board of Directors of The Company, and shall perform, observe and conform to such duties and instructions as from time to time are reasonably and lawfully assigned or communicated to the Employee and are consistent with the position.

 

1.3                   Where the Employee is a new employee, the first three months of the Employee's employment with the Company shall constitute a probationary period so that the Company shall have an opportunity to determine the Employee's ability to perform the duties of and the suitability for that position.   The Company may terminate the Employee's employment during the Probationary Period as provided for in section 6 herein.

 

1.4                   Throughout the term of this Agreement the Employee shall:

 

	 	
(a)

	
diligently, honestly and faithfully serve the Company and shall use all reasonable efforts to promote and advance the interests and goodwill of the Company;

	  	  	
 

	 	
(b)

	
conduct himself at all times in a manner which is not materially prejudicial to the Company's interests; and

	 	 	 
	  	
(c)

	
devote substantially all of his business time to the business and affairs of the Company.

 

 

  

1

  

 

 

1.5                  The Employee shall disclose all potential conflicts of interest and activities which could reasonably be seen to compete, indirectly or directly, with the trade or business of the Company, to the Board of Directors of the Company, as from time to time constituted (the "Board").  The Board shall determine, in its sole discretion, whether the activity in question constitutes a conflict of interest or competition with the Company. To the extent that the Board, acting reasonably, determines a conflict or competition exists, the Employee shall discontinue such activity forthwith or within such longer period as the Board agrees.

 

1.6                   For the purposes of sections 1.4 and 1.5 hereof, the Employee includes any firm or company owned or controlled by the Employee.

 

1.7                   It is understood and agreed that as the Company grows, the Employee's responsibilities may be changed to meet the needs of the Company, however, such responsibilities shall be those that are reasonably assigned to the Employee by the Board and are consistent with the Employee's position.

 

2.0                   Compensation

 

2.1                   In  consideration  of  the  services  rendered  by  the  Employee  under  this Agreement, the Company shall pay to the Employee the gross sum of $160,000.00 per annum in equal semi-monthly installments ("Base Salary").  Where the Employee is a new employee, on successful completion of the probationary period, the Employee's salary may be increased in the absolute discretion of the Company.  Thereafter, increases to the Employee's Salary shall be in the absolute discretion of the Company.

 

2.2                   The  Employee  shall  be  eligible  to  participate  in  any  pension  plan established by the Company for its executives or senior employees.

 

2.3                   The  Company  shall  have  the  right  to  deduct  and  withhold  from  the Employee's compensation any amounts required to be deducted and withheld under the applicable provincial or federal laws of Canada.

2.4                   The Employee shall be eligible for an annual bonus as determined by the Company’s Board of Directors or compensation committee, (as applicable).

 

3.0                   Benefits

 

3.1                   Subject to the successful completion of the three (3) month Probationary Period and, subject to any eligibility requirements, the Employee shall be entitled to such benefits which the Company offers from time to time to similar employees (the “Benefits”).

 

3.2                   The  introduction  and  administration  of  the  Benefits  is  within  the Company's sole discretion, and the introduction, deletion or amendment of the Benefits shall not constitute a breach of this Agreement.

 

3.3                   The Company will carry a $900,000.00 insurance policy on the life of the Employee payable to the Company as beneficiary. In the event of the Employees death and payment of the insurance monies to the Company, the Company will:

 

(a) If the Company is privately held purchase from the Employee’s estate and Mrs. Donna Armstrong, the Employee’s spouse, as many shares of the Company as can be purchased for $900,000.00 at a price per share equal to the last common share issue price in an arm’s length transaction.  If the product of the number of shares owned by the Employee’s estate and Mr. Donna Armstrong multiplied by the last common share issue price is less than $900,000.00, then the price per share paid by the Company will be increased so that the total purchase price is $900,000.00;

 

(b) If the Company’s shares are publicly traded, purchase from the Employee’s estate and Mrs. Donna Armstrong, the Employee’s spouse, as many Common shares of the Company as can be purchased for $900,000.00 at a price per share equal to the weighted average of the Company’s common share’s trading price for the last five (5) days prior to the date of the Employee’s death.  If the product of the number of shares owned by the estate and Donna Armstrong multiplied by the five day weighted average of the Company’s common share’s trading price for the last five (5) days prior to the date of the Employee’s death is less than $900,000.00, then the price per share paid by the Company will be increased so that the total purchase price is $900,000.00.

 

 

 

  

2

  

 

 

These shares purchased by the Company shall then be made available to the board of directors to use as an incentive to attract a new Chief Executive Officer and President.

 

4.0                   Vacation

 

4.1                   The Employee shall be entitled to an annual vacation of six (6) weeks per calendar year.  The Employee shall not be permitted to accrue any unused vacation entitlements for use in a future calendar year. The timing of vacations shall be in accordance with the Company's policies and practices and with the Company's needs.

4.2                   At the time of termination of this Agreement any accrued, but unused, vacation time for the then-current calendar year shall be paid out on a pro-rated basis or taken as time off, at the election of the Employee.

 

5.0                  Term of Employment

 

5.1                   Unless otherwise agreed between the parties, the term of employment of the Employee by the Company pursuant to the terms of this Agreement shall commence as of the date of this Agreement and shall continue until such time as this Agreement is terminated pursuant to section 6 herein.

6.0                   Termination

 

6.1                   The Company may terminate the Employee's employment at any time, with no notice, for cause.

 

6.2                   If  this  Agreement  and  the  Employee's  employment  are  terminated  for cause, no notice, salary, benefits or allowances shall be paid or payable to the Employee after or as a result of such termination except in respect of those amounts which were payable in respect of the period ending immediately prior to such termination.

 

6.3                   The Company may terminate the Employee's employment, without cause or following a material adverse change without the Employee’s prior written consent, in his title, status, position, job function, compensation or reporting responsibilities (referred to as a constructive dismissal) by paying the following amounts:

 

(a)  at any time after the 12th month and before the 24 month of employment, without cause, or by constructive dismissal by providing the Employee with a lump sum or continuance of salary of 9 months of his base salary and any accrued bonus payable at the time of his dismissal and a continuance of the Employee’s benefits for 1 year or until he becomes employed whichever is first;

 

(b)   at any time after the 24th month of employment, without cause, or by constructive  dismissal  by  providing  the  Employee  with  a  lump   sum  or continuance of salary of 12 months of his base salary and any accrued bonus payable at the time of his dismissal, and a continuance of the Employee’s benefits for 1 year or until he becomes employed whichever is first.

 

6.4                   The  Employee  may  terminate  this  employment  Agreement  with  the Company during the Probationary Period without notice. Thereafter the Employee may terminate this employment Agreement with the Company upon giving the Company three (3) months’ notice of resignation. Not Withstanding section 6.3, upon giving such notice by the Employee, or at any time thereafter, the Company shall have the right to elect to immediately terminate the Employee's employment, and upon such election, shall provide to the Employee a lump sum equal to the Base Salary only for three (3) months, or to such proportion of the time that remains outstanding at the time of the election.

 

6.5                   In the event a change of control of the Company occurs that involves 50% or more of the Company’s voting shares, and within 12 months of any such change of control, the Employee may elect to be terminated by the Company in accordance with the provisions of clause 6.3 hereof.  All non-vested stock options granted to the Employee by the Company shall automatically vest in the event of a change of control (as described herein).

 

7.0                   Confidentiality and Company Property

 

7.1                   The  Employee  understands  and  acknowledges  that  the  Company  is engaged in a continuous program of research, development and production relating to pulmonary Research and related products ("Business").  Because of the nature of the Business, the Employee's employment creates a relationship of confidence between the Employee and the Company with respect to certain information that gives the Company an advantage in its business and marketplace.   In the course of carrying out and performing the Employee's duties and responsibilities to the Company, the Employee will obtain access to and be entrusted with Confidential and Proprietary Information (as hereinafter defined) relating to the Business and other affairs of the Company.

 

 

 

  

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7.2                   The term "Confidential and Proprietary  Information" as used in this Agreement means all trade secrets, proprietary information and other data or information (and any tangible evidence, record or representation thereof), whether prepared, conceived or developed by an employee of the Company (including the Employee) or received by the Company from an outside source which is maintained in confidence by the Company or any of its customers to obtain a competitive advantage over competitors who do not have access to such trade secrets, proprietary information, or other data or information.   Without limiting the generality of the foregoing, Confidential and Proprietary Information includes:

 

	 	
(a)

	
any  information,  ideas,  improvements,  know-how,  concepts,  research, inventions, innovations, products, services, sales, scientific or other formulas, systems, strategies, formulae, algorithms, patterns, processes, methods, machines, manufactures, compositions, processes, procedures, tests, treatments, developments, data, experimental software, libraries and routines, audio-visual displays technical specifications, technical data, designs,  devices,  patterns,  concepts,  computer  programs,  training  or service manuals, plans for new or revised services or products or other plans, items or strategy methods on compilation of information, or works in process, or any Invention (as defined in Section 8 below), or parts thereof, and any and all revisions and improvements relating to any of the foregoing (in each case whether or not reduced to tangible form) that relate to the Business or affairs of the Company or its subsidiary or affiliated companies, or that result from its marketing, research and/or development activities;

 

	 	

(b)

	
any information relating to the relationship of the Company with any consultants, collaborators, associates, clients, customers, suppliers, principals, contacts or prospects of the Company and any information relating to the requirements, specifications, proposals, orders, contracts or transactions of or with any such consultants, collaborators, associates, clients, customers, suppliers, principals, contacts or prospects of the Company. Including but not limited to client lists;

 

	 	

(c)

	
any sales plan, price schedule, product literature, user documentation, technical documentation, marketing material, plan or survey, business plan or opportunity, product or service development plan or specification, business proposal; and

 

	 	

(d)

	
any information relating to the present Business or proposed business of the Company.

 

7.3                   The  Employee  acknowledges  and  agrees  that  the  Confidential  and Proprietary Information is and will remain the exclusive property of the Company.  The Employee also agrees that the Confidential and Proprietary Information:

 

	 	
(a) 

	
constitutes a proprietary right which the Company is entitled to protect;and

 

	 	
(b) 

	
constitutes information and knowledge not generally known to the trade.

 

7.4                   The Employee understands that the Company has from time to time in its possession information belonging to others or which is claimed by others to be confidential or proprietary and which the Company has agreed to keep confidential. The Employee agrees that all such information shall be Confidential and Proprietary Information for the purposes of this Agreement.

 

7.5                   For purposes of the copyright laws of Canada, to the extent, if any, that such laws are applicable to any Confidential and Proprietary Information, it shall be considered a work made for hire and the Company shall be considered the author thereof.

 

7.6                   The Employee agrees to maintain securely and hold in strict confidence all Confidential and Proprietary Information received, acquired or developed by the Employee or disclosed to the Employee as a result of or in connection  with  the Employee's employment with the Company. The Employee agrees to continue to hold the Confidential and Proprietary Information in strict confidence at all times after the termination of the Employee's employment for whatever reason.  The Employee will not disclose any of the Confidential and Proprietary Information to any person, firm or corporation, nor will the Employee use any of the Confidential and Proprietary Information for any purpose other than in the normal and proper course of the Employee's duties either during the term of the Employee's employment with the Company or at any time afterwards without the express written consent of the Company.  The Employee will use the Employee's best efforts to protect and safeguard Confidential and Proprietary Information from, without limitation, loss, theft, destruction or seizure.

 

 

 

  

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7.7                   The Employee agrees that documents, copies, records and other materials made  or  received  by  the  Employee  that  pertain  to  the  Business  and  affairs  of  the Company or its subsidiary or affiliated companies, including all Confidential and Proprietary Information and which are in the Employee's possession or under the Employee's control are the property of the Company and that the Employee will return same and any copies of them to the Company forthwith upon the termination of the Employee's employment or at any time immediately upon the request of the Company.

 

7.8                   The restrictive obligations set forth above shall not apply to the disclosure or use of any information which:

 

	 	
(a)

	
is or later becomes publicly known under circumstances involving no breach of this Agreement by the Employee;

	 	
 

(b)

	
 

is already known to the Employee outside his work for the Company at the time of receipt of the Confidential Information;

	 	
 

(c)

	
 

is disclosed to a third party under an appropriate confidentiality agreement;

	 	
 

(d)

	
 

is lawfully made available to the Employee by a third party;

	 	
 

(e)

	
 

is independently developed by the Employee who has not been privy to the Confidential Information provided by the Company, or

	 	
 

(f)

	
 

is  required  by  law  to  be  disclosed  but  only  to  the  extent  of  such requirement and the Employee shall immediately notify in writing the Chief Executive Officer of the Company upon receipt of any request for such disclosure.

 

7.9                   The Employee represents and warrants that he has not brought and will not bring with him to the Company any materials or use, while performing his duties for the Company, any materials or documents of a former employer which are not generally available to the public. The Employee understands that, while employed by the Company,  the Employee shall not breach any obligation or confidence or duty the Employee may have to a former employer and the Employee agrees that the Employee will fulfill all such obligations during the Employee's employment with the Company.

 

7.10                 The Employee represents and warrants that the Employee will not use or cause to be incorporated in any of the Employee's work product any data software, information, designs, techniques or know-how which the Employee or the Company does not have the right to use.

7.11                 The provisions of this section 7 shall survive the termination of this Agreement.

 

8.0                   Inventions

 

8.1                   The Employee agrees that all Confidential and Proprietary Information and all other discoveries, inventions, ideas, concepts, processes, products, protocols, treatments, methods, tests and improvements, algorithms, computer programs, or parts thereof, conceived, developed, reduced to practice or otherwise made by the Employee either alone or with others, and in any way relates to the present or proposed programs, services, products or Business of the Company, or to task assigned to the Employee during the period of the Employee's employment by the Company, whether or not conceived, developed, reduced to practice or made during the Employee's employment (collectively "Inventions"), and any and all services and products which embody, emulate or employ any such Invention shall be the sole property of the Company and all copyrights, patents, patent rights, trademarks, service marks and reproduction rights to, and other proprietary rights in, each such Invention, whether or not patentable or copyrightable, shall belong exclusively to the Company.  For purposes of the copyright laws of Canada, to the extent, if any, that such laws are applicable to such Invention or any such service or product, it shall be considered a work made for hire and the Company shall be considered the author thereof.

 

 

 

  

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8.2                   The Employee will promptly disclose to the Company, or any persons designated by it, all Inventions.

 

8.3                   The  Employee  hereby  assigns  to  the  Company  or  its  nominee,  their successors or assigns, all the Employee's rights, title and interest in and to the Inventions.

 

8.4                   The Employee hereby waives for the benefit of the Company and its successors and assigns all the Employee's moral rights in respect of the Inventions.

 

8.5                   The Employee further agrees to assist the Company in every proper way (but at the Company's expense) to obtain and from time to time to enforce patents or copyrights in respect of the Inventions in any and all countries, and to that end the Employee will execute all documents for use in applying for, obtaining and enforcing patents and copyrights on such Inventions as the Company may desire, together with any assignments of such Inventions to the Company or persons designated by it.   The Employee's obligation to assist the Company in obtaining and enforcing patents and copyrights for the Inventions in any and all countries shall continue beyond the termination of the Agreement.

 

8.6                   In the event that the Company is unable for any reason whatsoever to secure the Employee's signature to any lawful and necessary document required to apply for or execute any patent, copyright, trademark or other applications with respect to any Invention (including improvements, renewals, extensions, continuations, divisions or continuations in part thereof), the Employee hereby irrevocably appoints the Company and its duly authorized officers and agents as the Employee's agents and attorneys-in-fact to execute and file any such application and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights or other rights thereon with the same legal force and effect as if executed by the Employee.

 

8.7                   The  Employee  hereby  represents  and  warrants  that  the  Employee  is subject to no contractual or other restriction or obligation, which will in any way limit the Employee's activities on behalf of the Company.  The Employee hereby represents and warrants  to  the  Company  that  the  Employee  has  no  continuing  obligations  to  any previous employer (a) with respect to any previous invention, discovery or other item of intellectual property or (b) which require the Employee not to disclose any information or data to the Company.

 

8.8                   The provisions of this section 8 shall survive the termination of this Agreement.

 

9.0                   Remedies

9.1                   The Employee acknowledges and agrees that a breach by the Employee of any of the covenants contained in sections 7 and 8 of this Agreement herein shall result in damages to the Company and that the Company could not be adequately compensated for such damages by a monetary award.  Accordingly, in the event of any such breach, in addition to all other remedies available to the Company at law or in equity, the Company shall be entitled as a matter of right to apply to a court of competent jurisdiction for such relief by way of restraining order, temporary or permanent injunction, to cure any such breach, or as may be appropriate, to ensure compliance with the provisions of this agreement.

10.0                 Property Rights of the Company

10.1                 Notwithstanding anything else in this Agreement, it is expressly acknowledged and understood by the Employee that all the work product of the Employee while engaged by the Company pursuant to the terms hereof shall vest in the Company absolutely and notwithstanding the generality of the foregoing, all software, product information, improvements, notes, documents, correspondence, produced by the Employee during the term of employment hereunder shall belong absolutely to the Company. The Employee further agrees to execute without further consideration any assignments, conveyances, other documents and assurances as may be necessary to effect the intent of this provision. Notwithstanding the generality of the foregoing, the Company acknowledges that intellectual property,  know-how and the  like  known  by  or  in possession of the Employee as of or prior to the Employee becoming an employee of the Company is hereby expressly excluded from the foregoing restrictions.

 

 

  

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11.0                 Non-Competition

11.1                 The Employee agrees that following the termination of his employment with the Company for any reason, he shall not, within Canada, the United States of America and the countries comprising the European Economic Union, for a period of twelve (12) months from the date of such termination (without the prior written consent of the Company) either individually or in partnership, or in conjunction with any person or persons, firm, association, syndicate, company or corporation as principal, agent, director, officer, employee, consultant, investor or in any other manner whatsoever carry on or be engaged in or be concerned with or interested in, or advise, lend money to, guarantee the debts or obligations of or permit his name or any part thereof to be used or employed by any person or persons, firm, association, syndicate, company or corporation, engaged in or concerned with any business that is engaged in the field of Pulmonary Fibrosis therapy research and development.

11.2                 The Employee acknowledges that a breach by the Employee of any of the covenants contained in section 1.4 and section 11 herein shall result in damages to the Company and that the Company could not be adequately compensated for such damages by a monetary award.  Accordingly, in the event of any such breach, in addition to all other remedies available to the Company at law or in equity, the Company shall be entitled as a matter of right to apply to a Court of competent jurisdiction for such relief by way of restraining order, temporary or permanent injunction, decree or otherwise, as may be appropriate to ensure compliance with the provisions of this Agreement.

11.3                 The  Employee  agrees  that  all  documents,  copies,  records  and  other materials made or received by the Employee and which are in his possession or under his control that pertain to the business and affairs of the Company are the property of the Company and shall be returned to the Company by the Employee forthwith upon the termination of this Agreement or at any time during the term hereof immediately upon the request of the Company.

11.4                The Employee hereby agrees that all restrictions in this Agreement are reasonable and valid and all defenses to the strict enforcement thereof by the Company are hereby waived by the Employee and that provisions of this section 11 shall survive the termination of this Agreement.

12.0                 Employment Standards

12.1                 In the event that the minimum standards in the Employment Standards Act, as it exists from time to time, are more favorable to the Employee in any respect, including but not limited to the provisions herein in respect of notice of termination, minimum wage or vacation entitlement than provided for herein, the provisions of the Employment Standards Act shall apply.

13.0                 General Provisions

13.1                  In this Agreement, unless context otherwise requires, words Importing the singular  include  the  plural  and  vice  versa,  and  words  importing  gender  include  all genders.

13.2                 The headings and the clauses of this Agreement have been inserted as a matter of convenience and for reference only and in no way define, limit or enlarge the scope or meaning of this Agreement or any of its provisions.

13.3                 This Agreement may not be assigned by either party.   This Agreement shall ensure to the benefit of the parties and shall be binding upon the successors of the Company.

13.4                 The  waiver  of  the  Company  of  a  breach  of  any  provision  of  this Agreement by the Employee shall not operate or be construed as a waiver of any subsequent breach by the Employee.

13.5                 This  Agreement  constitutes  the  entire  agreement  between  the  parties hereto relating to the employment of the Employee and supersedes any and all employment agreements or understandings, oral or written, between the Company and the Employee and any such prior agreements relating to the employment of the Employee by the Company are hereby terminated and cancelled.

13.6                 This Agreement shall not be amended except in writing signed by both parties.

 

 

  

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13.7                  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Agreement shall not be affected by such determination and shall remain in full force and effect to the fullest extent permitted by law.

13.8                 The Employee shall, upon the reasonable request of the Company, make, do, execute or cause to be made, done or executed, all such further and lawful acts, deeds, things, documents and assurances of whatsoever nature and kind for the better or more perfect or absolute performance of the terms, conditions and intent of this Agreement.

13.9                 Every notice, request, demand or direction (each for the purposes of this section, a "notice") to be given pursuant to this Agreement by any party to another shall be in writing and shall be delivered in person or sent by registered mail postage prepaid or by facsimile addressed as applicable as follows:

If to the Employee at:

[address]

If to the Company at:

 

409 Granville Street, Suite 1023

Vancouver, B.C. V6C 1T2

Attn: Chairman

Facsimile: (604) 738-1094

or at such other address as specified by the particular party by notice to the other.

13.10               Any notes delivered or sent in accordance with section 13.9 will be deemed to have been given and received:

(a)           if personally delivered, on the day of delivery,

(b)           if by registered mail, on the earlier of the day of receipt and the fifth (5th) business day after the day of mailing, or

(c)           if by facsimile, on the first business day following the day of transmittal.

If a notice is sent by registered mail and mail service is interrupted between the point of mailing and the destination by strike, slow down, force majeure or other cause within three (3) days before or after the time of mailing, the notice will not be deemed to be received until actually received, and the party sending the notice will use any other service which has not been so interrupted or will deliver the notice in order to ensure prompt receipt.

13.11               A reference to a statute includes all regulations made pursuant thereto, all amendments to the statute or regulations in force from time to time, and any statute or regulation which supplements or supersedes such statute or regulations.

13.12               All sums of money which are referred to in this Agreement are expressed in lawful money of Canada.

 

13.13               Time is of the essence of this Agreement.

 

13.14               This Agreement shall be governed and construed in accordance with the laws of the Province of British Columbia, excluding its choice of law rules.

 

14.0                 Independent Legal Advice

 

14.1                 The Employee acknowledges that this Agreement has been prepared by the Company's solicitors and acknowledges that the Employee has had sufficient time to review this Agreement thoroughly, that the Employee has read and understood the terms of this Agreement and that the Employee has been given the opportunity to obtain independent legal advice concerning the interpretation and effect of this Agreement prior to its execution.

 

 

  

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IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of the day and year first above written.

 

DOUGLAS H. UNWIN

 

    signed “Douglas Unwin” 

PACIFIC THERAPEUTICS LTD.

 

    Signed “Greg Beniston”                                                               

Per: Authorized Signatory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9exhibit_4-2.htm

Exhibit 4.2

Form of Agreement for Escrow Arrangements under National Policy 46-201 Escrow for Initial Public Offerings

TABLE OF CONTENTS

	
PART

	
TITLE

	 
	  	  	  	 
	
PART 1

	
ESCROW

	3
	  	
1.1

	
Appointment of Escrow Agent

	3
	  	
1.2

	
Deposit of Escrow Securities in Escrow

	3
	  	
1.3

	
Direction to Escrow Agent

	3
	  	  	  	 
	
PART 2

	
RELEASE OF ESCROW SECURITIES

	4
	  	
2.1

	
Release Schedule for an Established Issuer

	4
	  	
2.2

	
Release Schedule for an Emerging Issuer

	4
	  	
2.3

	
Delivery of Share Certificates for Escrow Securities

	6
	  	
2.4

	
Replacement Certificates

	6
	  	
2.5

	
Release upon Death

	6
	  	  	  	 
	
PART 3

	
EARLY RELEASE ON CHANGE OF ISSUER STATUS

	6
	  	
3.1

	
Becoming an Established Issuer

	6
	  	
3.2

	
Release of Escrow Securities

	6
	  	
3.3

	
Filing Requirements

	7
	  	
3.4

	
Amendment of Release Schedule

	7
	  	  	  	 
	
PART 4

	
DEALING WITH ESCROW SECURITIES

	7
	  	
4.1

	
Restriction on Transfer, etc.

	7
	  	
4.2

	
Pledge, Mortgage or Charge as Collateral for a Loan

	7
	  	
4.3

	
Voting of Escrow Securities

	7
	  	
4.4

	
Dividends on Escrow Securities

	8
	  	
4.5

	
Exercise of Other Rights Attaching to Escrow Securities

	8
	  	  	  	 
	
PART 5

	
PERMITTED TRANSFERS WITHIN ESCROW

	8
	  	
5.1

	
Transfer to Directors and Senior Officers

	8
	  	
5.2

	
Transfer to Other Principals

	8
	  	
5.3

	
Transfer upon Bankruptcy

	9
	  	
5.4

	
Transfer upon Realization of Pledged, Mortgaged or Charged Escrow Securities

	9
	  	
5.5

	
Transfer to Certain Plans and Funds

	10
	  	
5.6

	
Effect of Transfer Within Escrow

	10
	  	  	  	 
	
PART 6

	
BUSINESS COMBINATIONS

	10
	  	
6.1

	
Business Combinations

	10
	  	
6.2

	
Delivery to Escrow Agent

	10
	  	
6.3

	
Delivery to Depositary

	10
	  	
6.4

	
Release of Escrow Securities to Depositary

	11
	  	
6.5

	
Escrow of New Securities

	11
	  	
6.6

	
Release from Escrow of New Securities

	11
	  	  	  	 
	
PART 7

	
RESIGNATION OF ESCROW AGENT

	12
	  	
7.1

	
Resignation of Escrow Agent

	12
	  	  	  	 
	
PART 8

	
OTHER CONTRACTUAL ARRANGEMENTS

	12
	  	  	  	 
	
PART 9

	
NOTICES

	12
	  	
9.1

	
Notice to Escrow Agent

	12
	  	
9.2

	
Notice to Issuer

	13
	  	
9.3

	
Deliveries to Securityholders

	13
	  	
9.4

	
Change of Address

	13
	  	
9.5

	
Postal Interruption

	13

 

 

  

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PART 10

	
GENERAL

	13
	  	
10.1

	
Interpretation – “holding securities”

	13
	  	
10.2

	
Further Assurances

	13
	  	
10.3

	
Time

	13
	  	
10.4

	
Incomplete IPO

	14
	  	
10.5

	
Jurisdiction

	14
	  	
10.6

	
Consent of Securities Regulators to Amendment

	14
	  	
10.7

	
Governing Laws

	14
	  	
10.8

	
Counterparts

	14
	  	
10.9

	
Singular and Plural

	14
	  	
10.10

	
Language

	14
	  	
10.11

	
Benefit and Binding Effect

	14
	  	
10.12

	
Entire Agreement

	14
	  	
10.13

	
Successor to Escrow Agent

	14
	  	  	  	 
	
Schedule “A”

	  	  	A-1
	  	  	  	 
	
Schedule “B”

	  	  	B-1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

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FORM 46-201F1

ESCROW AGREEMENT

THIS AGREEMENT is made as of the 30th day of August, 2011

AMONG:

Pacific Therapeutics Ltd. (the “Issuer”)

AND:

Valiant Trust Company (the “Escrow Agent”)

AND:

EACH OF THE UNDERSIGNED SECURITYHOLDERS OF THE ISSUER

(a “Securityholder” or “you”)

(collectively, the “Parties”)

This Agreement is being entered into by the Parties under National Policy 46-201 Escrow for Initial Public Offerings (the Policy) in connection with the Issuer becoming a reporting issuer in British Columbia and the proposed listing of its class A common shares on the Canadian National Stock Exchange.

For good and valuable consideration, the Parties agree as follows:

	
PART 1

	
ESCROW

	
1.1

	
Appointment of Escrow Agent

The Issuer and the Securityholders appoint the Escrow Agent to act as escrow agent under this Agreement.  The Escrow Agent accepts the appointment.

	
1.2

	
Deposit of Escrow Securities in Escrow

(1)           You are depositing the securities (escrow securities) listed opposite your name in Schedule “A” with the Escrow Agent to be held in escrow under this Agreement.  You will immediately deliver or cause to be delivered to the Escrow Agent any share certificates or other evidence of these securities which you have or which you may later receive.

(2)           If you receive any other securities (additional escrow securities):

(a)           as a dividend or other distribution on escrow securities;

(b)           on the exercise of a right of purchase, conversion or exchange attaching to escrow securities, including securities received on conversion of special warrants;

(c)           on a subdivision, or compulsory or automatic conversion or exchange of escrow securities; or

(d)           from a successor issuer in a business combination, if Part 6 of this Agreement applies, you will deposit them in escrow with the Escrow Agent.  You will deliver or cause to be delivered to the Escrow Agent any share certificates or other evidence of those additional escrow securities.  When this Agreement refers to escrow securities, it includes additional escrow securities.

(3)           You will immediately deliver to the Escrow Agent any replacement share certificates or other evidence of additional escrow securities issued to you.

1.3           Direction to Escrow Agent

The Issuer and the Securityholders direct the Escrow Agent to hold the escrow securities in escrow until they are released from escrow under this Agreement.

 

 

  

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PART 2 

	
RELEASE OF ESCROW SECURITIES

2.1           Release Schedule for an Established Issuer

	
2.1.1 

	
Usual case

If the Issuer is an established issuer (as defined in section 3.3 of the Policy) and you have not sold any escrow securities in a permitted secondary offering, your escrow securities will be released as follows:

	
On ________, 2___, the date the Issuer’s securities are listed on a Canadian exchange (the listing date)

	
1/4 of your escrow securities

	
6 months after the listing date

	
1/3 of your remaining escrow securities

	
12 months after the listing date

	
1/2 of your remaining escrow securities

	
18 months after the listing date

	
your remaining escrow securities

*In the simplest case, where there are no changes to the escrow securities initially deposited and no additional escrow securities, then the release schedule outlined above results in the escrow securities being released in equal tranches of 25%.

	
2.1.2 

	
Alternate meaning of “listing date”

If the Issuer is an established issuer, an alternate meaning for listing date is the date the Issuer completes its IPO if the Issuer’s securities are listed on a Canadian exchange immediately before its IPO.

	
2.1.3 

	
If there is a permitted secondary offering

(1)           If the Issuer is an established issuer and you have sold in a permitted secondary offering 25% or more of your escrow securities, your escrow securities will be released as follows:

	
For delivery to complete the IPO

	
All escrow securities sold by you in the permitted secondary offering

	
6 months after the listing date

	
1/3 of your remaining escrow securities

	
12 months after the listing date

	
1/2 of your remaining escrow securities

	
18 months after the listing date

	
your remaining escrow securities

*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 33 1/3%.

(2)           If the Issuer is an established issuer and you have sold in a permitted secondary offering less than 25% of your escrow securities, your escrow securities will be released as follows:

	
For delivery to complete the IPO

	
All escrow securities sold by you in the permitted secondary offering

	
On the listing date

	
1/4 of your original number of escrow securities less the escrow securities sold by you in the permitted secondary offering

	
6 months after the listing date

	
1/3 of your remaining escrow securities

	
12 months after the listing date

	
1/2 of your remaining escrow securities

	
18 months after the listing date

	
your remaining escrow securities

*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 33 1/3% after completion of the release on the listing date.

	
2.1.4 

	
Additional escrow securities

If you acquire additional escrow securities, those securities will be added to the securities already in escrow, to increase the number of remaining escrow securities.  After that, all of the escrow securities will be released in accordance with the applicable release schedule in the tables above.

	
2.2 

	
Release Schedule for an Emerging Issuer

  

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2.2.1 

	
Usual case

If the Issuer is an emerging issuer (as defined in section 3.3 of the Policy) and you have not sold any escrow securities in a permitted secondary offering, your escrow securities will be released as follows:

	
On _______, 2011, the date the Issuer’s securities are listed on a Canadian exchange (the listing date)

	
1/10 of your escrow securities

	
6 months after the listing date

	
1/6 of your remaining escrow securities

	
12 months after the listing date

	
1/5 of your remaining escrow securities

	
18 months after the listing date

	
1/4 of your remaining escrow securities

	
24 months after the listing date

	
1/3 of your remaining escrow securities

	
30 months after the listing date

	
1/2 of your remaining escrow securities

	
36 months after the listing date

	
your remaining escrow securities

*In the simplest case, where there are no changes to the escrow securities initially deposited and no additional escrow securities, the release schedule outlined above results in the escrow securities being released in equal tranches of 15% after completion of the release on the listing date.

	
2.2.2 

	
Alternate meaning of “listing date”

If the Issuer is an emerging issuer, an alternate meaning for listing date is the date the Issuer completes its IPO if:

(a)           the Issuer’s securities are not listed on a Canadian exchange immediately after its IPO; or

(b)           the Issuer’s securities are listed on a Canadian exchange immediately before its IPO.

	
2.2.3 

	
If there is a permitted secondary offering

(1)           If the Issuer is an emerging issuer and you have sold in a permitted secondary offering 10% or more of your escrow securities, your escrow securities will be released as follows:

	
For delivery to complete the listing

	
All escrow securities sold by you in the permitted secondary offering

	
6 months after the listing date

	
1/6 of your remaining escrow securities

	
12 months after the listing date

	
1/5 of your remaining escrow securities

	
18 months after the listing date

	
1/4 of your remaining escrow securities

	
24 months after the listing date

	
1/3 of your remaining escrow securities

	
30 months after the listing date

	
1/2 of your remaining escrow securities

	
36 months after the listing date

	
your remaining escrow securities

*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 16 2/3%.

(2)           If the Issuer is an emerging issuer and you have sold in a permitted secondary offering less than 10% of your escrow securities, your escrow securities will be released as follows:

	
For delivery to complete the listing

	
All escrow securities sold by you in the permitted secondary offering

	
On the listing date

	
1/10 of your original number of escrow securities less the escrow securities sold by you in the permitted secondary offering

	
6 months after the listing date

	
1/6 of your remaining escrow securities

	
12 months after the listing date

	
1/5 of your remaining escrow securities

	
18 months after the listing date

	
1/4 of your remaining escrow securities

	
24 months after the listing date

	
1/3 of your remaining escrow securities

	
30 months after the listing date

	
1/2 of your remaining escrow securities

	
36 months after the listing date

	
your remaining escrow securities

*In the simplest case, where there are no changes to the remaining escrow securities upon completion of the permitted secondary offering and no additional escrow securities, the release schedule outlined above results in the remaining escrow securities being released in equal tranches of 16 2/3% after completion of the release on the listing date.

  

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2.2.4 

	
Additional escrow securities

If you acquire additional escrow securities, those securities will be added to the securities already in escrow, to increase the number of remaining escrow securities.  After that, all of the escrow securities will be released in accordance with the applicable release schedule in the tables above.

	
2.3 

	
Delivery of Share Certificates for Escrow Securities

The Escrow Agent will send to each Securityholder any share certificates or other evidence of that Securityholder’s escrow securities in the possession of the Escrow Agent released from escrow as soon as reasonably practicable after the release.

	
2.4

	
Replacement Certificates

If, on the date a Securityholder’s escrow securities are to be released, the Escrow Agent holds a share certificate or other evidence representing more escrow securities than are to be released, the Escrow Agent will deliver the share certificate or other evidence to the Issuer or its transfer agent and request replacement share certificates or other evidence.  The Issuer will cause replacement share certificates or other evidence to be prepared and delivered to the Escrow Agent.  After the Escrow Agent receives the replacement share certificates or other evidence, the Escrow Agent will send to the Securityholder or at the Securityholder’s direction, the replacement share certificate or other evidence of the escrow securities released.  The Escrow Agent and Issuer will act as soon as reasonably practicable.

	
2.5 

	
Release upon Death

(1)           If a Securityholder dies, the Securityholder’s escrow securities will be released from escrow.  The Escrow Agent will deliver any share certificates or other evidence of the escrow securities in the possession of the Escrow Agent to the Securityholder’s legal representative.

(2)           Prior to delivery the Escrow Agent must receive:

(a)           a certified copy of the death certificate; and

(b)           any evidence of the legal representative’s status that the Escrow Agent may reasonably require.

	
PART 3

	
EARLY RELEASE ON CHANGE OF ISSUER STATUS

3.1           Becoming an Established Issuer

If the Issuer is an emerging issuer on the date of this Agreement and, during this Agreement, the Issuer:

(a)           lists its securities on The Toronto Stock Exchange Inc.;

(b)           becomes a TSX Venture Exchange Inc. (TSX Venture) Tier 1 issuer; or

(c)           lists or quotes its securities on an exchange or market outside Canada that its “principal regulator” under National Policy 43-201 Mutual Reliance Review System for Prospectuses and Annual Information Forms (in Quebec under Staff Notice, Mutual Reliance Review System for Prospectuses and Annual Information Forms) or, if the Issuer has only filed its IPO prospectus in one jurisdiction, the securities regulator in that jurisdiction, is satisfied has minimum listing requirements at least equal to those of TSX Venture Tier 1,

then the Issuer becomes an established issuer.

3.2           Release of Escrow Securities

(1)           When an emerging issuer becomes an established issuer, the release schedule for its escrow securities changes.

(2)           If an emerging issuer becomes an established issuer 18 months or more after its listing date, all escrow securities will be released immediately.

(3)           If an emerging issuer becomes an established issuer within 18 months after its listing date, all escrow securities that would have been released to that time, if the Issuer was an established issuer on its listing date, will be released immediately.  Remaining escrow securities will be released in equal installments on the day that is 6 months, 12 months and 18 months after the listing date.

 

 

  

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3.3           Filing Requirements

Escrow securities will not be released under this Part until the Issuer does the following:

(a)           at least 20 days before the date of the first release of escrow securities under the new release schedule, files with the securities regulators in the jurisdictions in which it is a reporting issuer

(i)           a certificate signed by a director or officer of the Issuer authorized to sign stating

(A)           that the Issuer has become an established issuer by satisfying one of the conditions in section 3.1 and specifying the condition, and

(B)           the number of escrow securities to be released on the first release date under the new release schedule, and

(ii)           a copy of a letter or other evidence from the exchange or quotation service confirming that the Issuer has satisfied the condition to become an established issuer; and

(b)           at least 10 days before the date of the first release of escrow securities under the new release schedule, issues and files with the securities regulators in the jurisdictions in which it is a reporting issuer a news release disclosing details of the first release of the escrow securities and the change in the release schedule, and sends a copy of such filing to the Escrow Agent.

3.4           Amendment of Release Schedule

The new release schedule will apply 10 days after the Escrow Agent receives a certificate signed by a director or officer of the Issuer authorized to sign

(a)           stating that the Issuer has become an established issuer by satisfying one of the conditions in section 3.1 and specifying the condition;

(b)           stating that the release schedule for the Issuer’s escrow securities has changed;

(c)           stating that the Issuer has issued a news release at least 10 days before the first release date under the new release schedule and specifying the date that the news release was issued; and

(d)           specifying the new release schedule.

	
PART 4 

	
DEALING WITH ESCROW SECURITIES

4.1           Restriction on Transfer, etc.

Unless it is expressly permitted in this Agreement, you will not sell, transfer, assign, mortgage, enter into a derivative transaction concerning, or otherwise deal in any way with your escrow securities or any related share certificates or other evidence of the escrow securities.  If a Securityholder is a private company controlled by one or more principals (as defined in section 3.5 of the Policy) of the Issuer, the Securityholder may not participate in a transaction that results in a change of its control or a change in the economic exposure of the principals to the risks of holding escrow securities.

4.2           Pledge, Mortgage or Charge as Collateral for a Loan

You may pledge, mortgage or charge your escrow securities to a financial institution as collateral for a loan, provided that no escrow securities or any share certificates or other evidence of escrow securities will be transferred or delivered by the Escrow Agent to the financial institution for this purpose.  The loan agreement must provide that the escrow securities will remain in escrow if the lender realizes on the escrow securities to satisfy the loan.

	
4.3

	
Voting of Escrow Securities

You may exercise any voting rights attached to your escrow securities.

 

  

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4.4           Dividends on Escrow Securities

You may receive a dividend or other distribution on your escrow securities, and elect the manner of payment from the standard options offered by the Issuer.  If the Escrow Agent receives a dividend or other distribution on your escrow securities, other than additional escrow securities, the Escrow Agent will pay the dividend or other distribution to you on receipt.

	
4.5

	
Exercise of Other Rights Attaching to Escrow Securities

You may exercise your rights to exchange or convert your escrow securities in accordance with this Agreement.

	
PART 5 

	
PERMITTED TRANSFERS WITHIN ESCROW

5.1           Transfer to Directors and Senior Officers

(1)           You may transfer escrow securities within escrow to existing or, upon their appointment, incoming directors or senior officers of the Issuer or any of its material operating subsidiaries, if the Issuer’s board of directors has approved the transfer.

(2)           Prior to the transfer the Escrow Agent must receive:

(a)           a certified copy of the resolution of the board of directors of the Issuer approving the transfer;

(b)           a certificate signed by a director or officer of the Issuer authorized to sign, stating that the transfer is to a director or senior officer of the Issuer or a material operating subsidiary and that any required approval from the Canadian exchange the Issuer is listed on has been received;

(c)           an acknowledgment in the form of Schedule “B” signed by the transferee;

(d)           copies of the letters sent to the securities regulators described in subsection (3) accompanying the acknowledgement; and

(e)      a transfer power of attorney, completed and executed by the transferor in accordance with the requirements of the Issuer’s transfer agent.

(3)           At least 10 days prior to the transfer, the Issuer will file a copy of the acknowledgement with the securities regulators in the jurisdictions in which it is a reporting issuer.

5.2           Transfer to Other Principals

 

(1)      You may transfer escrow securities within escrow:

(a)           to a person or company that before the proposed transfer holds more than 20% of the voting rights attached to the Issuer’s outstanding securities; or

(b)           to a person or company that after the proposed transfer

(i)           will hold more than 10% of the voting rights attached to the Issuer’s outstanding securities, and

(ii)           has the right to elect or appoint one or more directors or senior officers of the Issuer or any of its material operating subsidiaries.

(2)           Prior to the transfer the Escrow Agent must receive:

(a)           a certificate signed by a director or officer of the Issuer authorized to sign stating that

(i)           the transfer is to a person or company that the officer believes, after reasonable investigation, holds more than 20% of the voting rights attached to the Issuer’s outstanding securities before the proposed transfer, or

(ii)           the transfer is to a person or company that

(A)           the officer believes, after reasonable investigation, will hold more than 10% of the voting rights attached to the Issuer’s outstanding securities, and

 

 

  

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(B)           has the right to elect or appoint one or more directors or senior officers of the Issuer or any of its material operating subsidiaries after the proposed transfer, and

(iii)           any required approval from the Canadian exchange the Issuer is listed on has been received;

(b)           an acknowledgment in the form of Schedule “B” signed by the transferee;

(c)           copies of the letters sent to the securities regulators accompanying the acknowledgement; and

 

(d)           a transfer power of attorney, executed by the transferor in accordance with the requirements of the Issuer’s transfer agent.

(3)           At least 10 days prior to the transfer, the Issuer will file a copy of the acknowledgement with the securities regulators in the jurisdictions in which it is a reporting issuer.

5.3           Transfer upon Bankruptcy

(1)           You may transfer escrow securities within escrow to a trustee in bankruptcy or another person or company entitled to escrow securities on bankruptcy.

(2)           Prior to the transfer, the Escrow Agent must receive:

(a)           a certified copy of either

(i)            the assignment in bankruptcy filed with the Superintendent of Bankruptcy, or

(ii)           the receiving order adjudging the Securityholder bankrupt;

(b)           a certified copy of a certificate of appointment of the trustee in bankruptcy;

(c)           a transfer power of attorney, completed and executed by the transferor in accordance with the requirements of the Issuer’s transfer agent; and

(d)           an acknowledgment in the form of Schedule “B” signed by:

(i)           the trustee in bankruptcy, or

(ii)           on direction from the trustee, with evidence of that direction attached to the acknowledgment form, another person or company legally entitled to the escrow securities.

(3)           Within 10 days after the transfer, the transferee of the escrow securities will file a copy of the acknowledgment with the securities regulators in the jurisdictions in which the Issuer is a reporting issuer.

5.4           Transfer Upon Realization of Pledged, Mortgaged or Charged Escrow Securities

(1)           You may transfer within escrow to a financial institution the escrow securities you have pledged, mortgaged or charged under section 4.2 to that financial institution as collateral for a loan on realization of the loan.

(2)           Prior to the transfer the Escrow Agent must receive:

(a)           a statutory declaration of an officer of the financial institution that the financial institution is legally entitled to the escrow securities;

(b)           a transfer power of attorney, executed by the transferor in accordance with the requirements of the Issuer’s transfer agent; and

(c)           an acknowledgement in the form of Schedule “B” signed by the financial institution.

  

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(3)           Within 10 days after the transfer, the transferee of the escrow securities will file a copy of the acknowledgment with the securities regulators in the jurisdictions in which the Issuer is a reporting issuer.

5.5           Transfer to Certain Plans and Funds

(1)           You may transfer escrow securities within escrow to or between a registered retirement savings plan (RRSP), registered retirement income fund (RRIF) or other similar registered plan or fund with a trustee, where the annuitant of the RRSP or RRIF, or the beneficiaries of the other registered plan or fund are limited to you and your spouse, children and parents, or, if you are the trustee of such a registered plan or fund, to the annuitant of the RRSP or RRIF, or a beneficiary of the other registered plan or fund, as applicable, or his or her spouse, children and parents.

(2)           Prior to the transfer the Escrow Agent must receive:

(a)           evidence from the trustee of the transferee plan or fund, or the trustee’s agent, stating that, to the best of the trustee’s knowledge, the annuitant of the RRSP or RRIF, or the beneficiaries of the other registered plan or fund do not include any person or company other than you and your spouse, children and parents;

(b)           a transfer power of attorney, executed by the transferor in accordance with the requirements of the Issuer’s transfer agent; and

(c)           an acknowledgement in the form of Schedule “B” signed by the trustee of the plan or fund.

(3)           Within 10 days after the transfer, the transferee of the escrow securities will file a copy of the acknowledgment with the securities regulators in the jurisdictions in which the Issuer is a reporting issuer.

5.6           Effect of Transfer Within Escrow

After the transfer of escrow securities within escrow, the escrow securities will remain in escrow and released from escrow under this Agreement as if no transfer has occurred on the same terms that applied before the transfer. The Escrow Agent will not deliver any share certificates or other evidence of the escrow securities to transferees under this Part 5.

	
PART 6 

	
BUSINESS COMBINATIONS

6.1           Business Combinations

This Part applies to the following (business combinations):

(a)           a formal take-over bid for all outstanding equity securities of the Issuer or which, if successful, would result in a change of control of the Issuer

(b)           a formal issuer bid for all outstanding equity securities of the Issuer

(c)           a statutory arrangement

(d)           an amalgamation

(e)           a merger

(f)            a reorganization that has an effect similar to an amalgamation or merger

6.2           Delivery to Escrow Agent

You may tender your escrow securities to a person or company in a business combination.  At least five business days prior to the date the escrow securities must be tendered under the business combination, you must deliver to the Escrow Agent:

(a)           a written direction signed by you that directs the Escrow Agent to deliver to the depositary under the business combination any share certificates or other evidence of the escrow securities and a completed and executed cover letter or similar document and, where required, transfer power of attorney completed and executed for transfer in accordance with the requirements of the depositary, and any other documentation specified or provided by you and required to be delivered to the depositary under the business combination; and

(b)           any other information concerning the business combination as the Escrow Agent may reasonably request.

6.3           Delivery to Depositary

As soon as reasonably practicable, and in any event no later than three business days after the Escrow Agent receives the documents and information required under section 6.2, the Escrow Agent will deliver to the depositary, in accordance with the direction, any share certificates or other evidence of the escrow securities, and a letter addressed to the depositary that

 

 

 

  

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(a)           identifies the escrow securities that are being tendered;

(b)           states that the escrow securities are held in escrow;

(c)           states that the escrow securities are delivered only for the purposes of the business combination and that they will be released from escrow only after the Escrow Agent receives the information described in section 6.4;

(d)           if any share certificates or other evidence of the escrow securities have been delivered to the depositary, requires the depositary to return to the Escrow Agent, as soon as practicable, any share certificates or other evidence of escrow securities that are not released from escrow into the business combination; and

(e)           where applicable, requires the depositary to deliver or cause to be delivered to the Escrow Agent, as soon as practicable, any share certificates or other evidence of additional escrow securities that you acquire under the business combination.

6.4           Release of Escrow Securities to Depositary

The Escrow Agent will release from escrow the tendered escrow securities when the Escrow Agent receives a declaration signed by the depositary or, if the direction identifies the depositary as acting on behalf of another person or company in respect of the business combination, by that other person or company, that:

(a)           the terms and conditions of the business combination have been met or waived; and

(b)           the escrow securities have either been taken up and paid for or are subject to an unconditional obligation to be taken up and paid for under the business combination.

6.5           Escrow of New Securities

If you receive securities (new securities) of another issuer (successor issuer) in exchange for your escrow securities, the new securities will be subject to escrow in substitution for the tendered escrow securities if, immediately after completion of the business combination:

(a)           the successor issuer is not an exempt issuer (as defined in section 3.2 of the Policy);

(b)           you are a principal (as defined in section 3.5 of the Policy) of the successor issuer; and

(c)           you hold more than 1% of the voting rights attached to the successor issuer’s outstanding securities (In calculating this percentage, include securities that may be issued to you under outstanding convertible securities in both your securities and the total securities outstanding.)

6.6           Release from Escrow of New Securities

(1)           As soon as reasonably practicable after the Escrow Agent receives:

(a)           a certificate from the successor issuer signed by a director or officer of the successor issuer authorized to sign

(i)           stating that it is a successor issuer to the Issuer as a result of a business combination and whether it is an emerging issuer or an established issuer under the Policy, and

(ii)           listing the Securityholders whose new securities are subject to escrow under section 6.5, the escrow securities of the Securityholders whose new securities are not subject to escrow under section 6.5 will be released, and the Escrow Agent will send any share certificates or other evidence of the escrow securities in the possession of the Escrow Agent in accordance with section 2.3.

(2)           If your new securities are subject to escrow, unless subsection (3) applies, the Escrow Agent will hold your new securities in escrow on the same terms and conditions, including release dates, as applied to the escrow securities that you exchanged.

  

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(3)           If the Issuer is

(a)           an emerging issuer, the successor issuer is an established issuer, and the business combination occurs 18 months or more after the Issuer’s listing date, all escrow securities will be released immediately; and

(b)           an emerging issuer, the successor issuer is an established issuer, and the business combination occurs within 18 months after the Issuer’s listing date, all escrow securities that would have been released to that time, if the Issuer was an established issuer on its listing date, will be released immediately.  Remaining escrow securities will be released in equal instalments on the day that is 6 months, 12 months and 18 months after the Issuer’s listing date.

	
PART 7 

	
RESIGNATION OF ESCROW AGENT

7.1           Resignation of Escrow Agent

(1)           If the Escrow Agent wishes to resign as escrow agent, the Escrow Agent will give written notice to the Issuer.

(2)           If the Issuer wishes to terminate the Escrow Agent as escrow agent, the Issuer will give written notice to the Escrow Agent.

(3)           If the Escrow Agent resigns or is terminated, the Issuer will be responsible for ensuring that the Escrow Agent is replaced not later than the resignation or termination date by another escrow agent that is acceptable to the securities regulators having jurisdiction in the matter and that has accepted such appointment, which appointment will be binding on the Issuer and the Securityholders.

 

(4)           The resignation or termination of the Escrow Agent will be effective, and the Escrow Agent will cease to be bound by this Agreement, on the date that is 60 days after the date of receipt of the notices referred to above by the Escrow Agent or Issuer, as applicable, or on such other date as the Escrow Agent and the Issuer may agree upon (the “resignation or termination date”), provided that the resignation or termination date will not be less than 10 business days before a release date.

(5)           If the Issuer has not appointed a successor escrow agent within 60 days of the resignation or termination date, the Escrow Agent will apply, at the Issuer’s expense, to a court of competent jurisdiction for the appointment of a successor escrow agent, and the duties and responsibilities of the Escrow Agent will cease immediately upon such appointment.

(6)           On any new appointment under this section, the successor Escrow Agent will be vested with the same powers, rights, duties and obligations as if it had been originally named herein as Escrow Agent, without any further assurance, conveyance, act or deed.  The predecessor Escrow Agent, upon receipt of payment for any outstanding account for its services and expenses then unpaid, will transfer, deliver and pay over to the successor Escrow Agent, who will be entitled to receive, all securities, records or other property on deposit with the predecessor Escrow Agent in relation to this Agreement and the predecessor Escrow Agent will thereupon be discharged as Escrow Agent.

(7)           If any changes are made to Part 8 of this Agreement as a result of the appointment of the successor Escrow Agent, those changes must not be inconsistent with the Policy and the terms of this Agreement and the Issuer to this Agreement will file a copy of the new Agreement with the securities regulators with jurisdiction over this Agreement and the escrow securities.

	
PART 8 

	
OTHER CONTRACTUAL ARRANGEMENTS

[Intentionally left blank]

	
PART 9 

	
NOTICES

9.1           Notice to Escrow Agent

Documents will be considered to have been delivered to the Escrow Agent on the next business day following the date of transmission, if delivered by fax, the date of delivery, if delivered by hand during normal business hours or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the following:

 

 

  

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Valiant Trust Company

600 – 750 Cambie St.

Vancouver, BC

V6B 0A2

Ramie Lousa

(604) 681-3067

9.2           Notice to Issuer

Documents will be considered to have been delivered to the Issuer on the next business day following the date of transmission, if delivered by fax, the date of delivery, if delivered by hand during normal business hours or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the following:

Pacific Therapeutics Ltd.

1023 – 409 Granville St.

Vancouver, BC

V6C 1T2

Douglas Unwin

(604) 738-1094

9.3           Deliveries to Securityholders

Documents will be considered to have been delivered to a Securityholder on the date of delivery, if delivered by hand or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the address on the Issuer’s share register.

Any share certificates or other evidence of a Securityholder’s escrow securities will be sent to the Securityholder’s address on the Issuer’s share register unless the Securityholder has advised the Escrow Agent in writing otherwise at least ten business days before the escrow securities are released from escrow.  The Issuer will provide the Escrow Agent with each Securityholder’s address as listed on the Issuer’s share register.

9.4           Change of Address

(1)           The Escrow Agent may change its address for delivery by delivering notice of the change of address to the Issuer and to each Securityholder.

(2)           The Issuer may change its address for delivery by delivering notice of the change of address to the Escrow Agent and to each Securityholder.

(3)           A Securityholder may change that Securityholder’s address for delivery by delivering notice of the change of address to the Issuer and to the Escrow Agent.

9.5           Postal Interruption

A Party to this Agreement will not mail a document it is required to mail under this Agreement if the Party is aware of an actual or impending disruption of postal service.

	
PART 10 

	
GENERAL

10.1         Interpretation - “holding securities”

When this Agreement refers to securities that a Securityholder “holds”, it means that the Securityholder has direct or indirect beneficial ownership of, or control or direction over, the securities.

10.2         Further Assurances

The Parties will execute and deliver any further documents and perform any further acts reasonably requested by any of the Parties to this Agreement which are necessary to carry out the intent of this Agreement.

10.3         Time

 

Time is of the essence of this Agreement.

 

 

  

13

  

 

10.4         Incomplete IPO

If the Issuer does not complete its IPO and has become a reporting issuer in one or more jurisdictions because it has obtained a receipt for its IPO prospectus, this Agreement will remain in effect until the securities regulators in those jurisdictions order that the Issuer has ceased to be a reporting issuer.

10.5         Governing Laws

The laws of British Columbia (the “Principal Regulator”) and the applicable laws of Canada will govern this Agreement.

10.6         Jurisdiction

The securities regulator in each jurisdiction where the Issuer files its IPO prospectus has jurisdiction over this Agreement and the escrow securities.

10.7         Consent of Securities Regulators to Amendment

Except for amendments made under Part 3, the securities regulators with jurisdiction must approve any amendment to this Agreement and will apply mutual reliance principles in reviewing any amendments that are filed with them. Therefore, the consent of the Principal Regulator will evidence the consent of all securities regulators with jurisdiction.

10.8         Counterparts

The Parties may execute this Agreement by fax and in counterparts, each of which will be considered an original and all of which will be one agreement.

10.9         Singular and Plural

Wherever a singular expression is used in this Agreement, that expression is considered as including the plural or the body corporate where required by the context.

10.10       Language

This Agreement has been drawn up in the English language at the request of all Parties.

10.11       Benefit and Binding Effect

 

This Agreement will benefit and bind the Parties and their heirs, executors, administrators, successors and permitted assigns and all persons claiming through them as if they had been a Party to this Agreement.

10.12       Entire Agreement

This is the entire agreement among the Parties concerning the subject matter set out in this Agreement and supersedes any and all prior understandings and agreements.

10.13       Successor to Escrow Agent

Any corporation with which the Escrow Agent may be amalgamated, merged or consolidated, or any corporation succeeding to the business of the Escrow Agent will be the successor of the Escrow Agent under this Agreement without any further act on its part or on the part or any of the Parties, provided that the successor is recognized as a transfer agent by the Canadian exchange the Issuer is listed on (or if the Issuer is not listed on a Canadian exchange, by any Canadian exchange) and notice is given to the securities regulators with jurisdiction.

The Parties have executed and delivered this Agreement as of the date set out above.

 

 

  

14

  

 

Valiant Trust Company [Escrow Agent]

 

____________________________________________

Authorized signatory

____________________________________________

Authorized signatory

Pacific Therapeutics Ltd. [Issuer]

____________________________________________

Authorized signatory

           Doug Unwin CEO & President                                      

Authorized signatory

If the Securityholder is an individual:

 

	
Signed, sealed and delivered by 

[Securityholder] in the presence of:   

 

____________________________________________ 

Signature of Witness          

 

___________________________________________

Name of Witness  

 

	
)

)

)

)

)

)           ____________________________

)           [Securityholder]

)

)

 

If the Securityholder is not an individual:

[Securityholder]

_____________________________________________

Authorized signatory

_____________________________________________

Authorized signatory

  

15

  

Schedule “A” to Escrow Agreement

Securityholder

Name: [ ]

	
Securities:

	  	  

 

	
Class or description

	
Number

	
Certificate(s) (if applicable)

 

	  	  	  
	  	  	  
	  	  	  
	  	  	  

 

 

 

 

 

 

 

 

 

 

 

 

  

A-1

  

Schedule “B” to Escrow Agreement

Acknowledgment and Agreement to be Bound

I acknowledge that the securities listed in the attached Schedule “A” (the “escrow securities”) have been or will be transferred to me and that the escrow securities are subject to an Escrow Agreement dated August 30, 2011 (the “Escrow Agreement”).

For other good and valuable consideration, I agree to be bound by the Escrow Agreement in respect of the escrow securities, as if I were an original signatory to the Escrow Agreement.

Dated at Vancouver, BC on August 30, 2011.

Where the transferee is not an individual:

[ ]

_________________________________________

Authorized signatory

_________________________________________

Authorized signatory

Where the transferee is an individual:

 

	
Signed, sealed and delivered by 

[ ] in the presence of:   

 

____________________________________________ 

Signature of Witness          

 

___________________________________________

Name of Witness  

 

	
)

)

)

)

)

)           ____________________________

)           [Transferee]

)

)

 

 

 

B-1

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