Escrow Agreement

Escrow for Initial Public Offerings in Canada

Securities regulators in Canada usually require an issuer making an initial public offering to enter into an escrow agreement with its principals and an escrow agent.

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What is an Escrow Agreement?

Under an escrow agreement in the form required by Canadian National Policy 46-201 Escrow for Initial Public Offerings (“NP 46-201”), “principals” of an issuer place their securities in escrow with an escrow agent, typically the issuer’s registrar and transfer agent. The escrow agreement is a legally binding arrangement in a required form that restricts principals from selling or dealing in other ways with the escrow securities until they are released from escrow according to an escrow release schedule contained in the escrow agreement.

What is the purpose of escrow?

A public investor who buys securities in an initial public offering relies on the issuer’s management and principal securityholders to carry out the plans described in the issuer’s prospectus. This is particularly true for issuers with a limited history of operations. An escrow agreement ties the issuer’s management and its principal securityholders to the issuer by restricting their ability to sell their securities for a period of time following the issuer’s offering. This gives them an incentive to devote their time and attention to the issuer’s business while they are securityholders. In addition, escrow is commonly used to protect investors and ensure stability in a company’s share price by preventing large sell-offs immediately after a company goes public or after a specific corporate event.

In the case of Pulsar Helium, specific shares of Pulsar Helium’s principals have been placed in escrow in connection with Pulsar Helium’s initial public offering, meaning they are restricted from being sold until they are gradually released based on a predetermined schedule as set out in the escrow agreement.

Who is Subject to an Escrow Agreement?

There are different forms of escrow agreements, the most significant for Pulsar Helium being:

Form 46-201F, the form of escrow agreement required by NP 46-201 (the “Canadian Escrow Agreement”): this agreement is entered into with “principals” of an issuer (these include a person or company who acted as a promoter of the issuer within two years before its IPO prospectus; a director or senior officer of the issuer or any of its material operating subsidiaries at the time of the IPO prospectus; a person or company that held securities carrying more than 20% of the voting rights attached to the issuer’s outstanding securities immediately before and immediately after the issuer’s IPO; and a person or company that holds securities carrying more than 10% of the voting rights attached to the issuer’s outstanding securities immediately before and immediately after the issuer’s IPO, and who has elected or appointed, or has the right to elect or appoint, one or more directors or senior officers of the issuer or any of its material operating subsidiaries), and it restricts them from selling or dealing in other ways with the escrow securities (including security compensation securities) until they are released from escrow according to the escrow agreement. In the case of Pulsar Helium, 20% of the escrowed securities were released from escrow 18 months from the listing date on the TSX Venture Exchange and 20% are to be released every six months thereafter (with the last shares being released from escrow on 15 February 2027).

Where a company, amongst other things, has not been earning revenue for at least two years, the AIM Rules for Companies (the “AIM Rules”) requires such companies to enact lock-in provisions (the “AIM lock-in arrangements”) which apply to related parties, including but not limited to, directors, shareholders holding 10% or more of any class of the Company’s security or voting rights, and any applicable employees (as defined in the AIM Rules) at the time of admission to AIM for a minimum of 12 months. In the UK these are referred to as lock-in restrictions. Such persons will be subject to lock-in restrictions over their shares (including, but not limited to, any shares issued on the exercise of any warrants or options). The Pulsar directors' lock-in period will expire on 18 October 2025 but they will still be subject to customary orderly market restrictions for a further 6 months.

What Happens if a Director or Officer of the Company Sells Shares When They Become Freely Tradeable?

According to Canadian securities laws, any reporting insider of a reporting issuer who sells shares (or acquires shares) of the reporting issuer must file an insider report in connection with the sale within 5 days. Such insider report is filed via the System for Electronic Disclosure by Insiders (SEDI) and information regarding the holdings of reporting insiders is available here: https://www.sedi.ca/sedi/SVTItdController?locale=en_CA.

In addition, Directors and Persons Discharging Managerial Responsibilities (PDMRs) and their persons closely associated with a PDMR (PCAs) must notify Pulsar (or in the case of a PCA communicate via their PDMRs) of all transactions conducted on their own account in respect of Pulsar’s securities, in accordance with the UK Market Abuse Regulation (MAR), promptly and no later than three working days after the date of the transaction. In accordance with Pulsar's Share Dealing Policy and notwithstanding that MAR imposes a deadline of three working days, in order to ensure that any notification forms can be reviewed prior to submission, and to ensure that Pulsar can meet its own notification deadlines, Pulsar expects PDMRs and their PCAs to notify the relevant information to the Company in draft form within 24 hours of any such transaction being conducted. Certain exemptions and minimum thresholds apply to such notifications. Pulsar will publicly disclose any such notified transactions via Regulatory News Service (RNS) in accordance with the AIM Rules and MAR.

How Many Shares Are Currently Held in Escrow?

As of March 2025, 37,140,820 common shares of Pulsar Helium are held in escrow under the Canadian Escrow Agreement, with 9,285,205 common shares to be released on each of August 15, 2025, February 15, 2026, August 15, 2026 and February 15, 2027. The common shares released from escrow on each of February 15, 2025 and August 15, 2025 are subject to the AIM lock-in arrangements and may not be disposed of until October 18, 2025.

What Happens When the Common Shares are released from escrow?

Once common shares are released from escrow, the holders of such shares are free to sell, hold, or transfer them, subject to applicable regulation and legislation. However, since the releases are to occur gradually (rather than all at once), it minimises the risk of excessive selling pressure in the market.

Can Escrowed/Locked-In Shareholders Sell Their Escrowed/Locked-In Shares Now?

No, shareholders holding escrowed/locked-in shares cannot sell them until the respective restrictions expire. Once shares are released from escrow or unlocked, as the case may be, they become freely tradeable on the respective stock exchanges (subject to any orderly market arrangements in the UK).

Can the Holders of Escrowed/Locked-In Shares Buy Shares on the Open Market?

Yes, holders of escrowed Pulsar Helium shares can buy shares outside of escrow if they are freely tradable and available on the open market. However, any such purchases would be subject to, inter alia, market conditions, insider trading rules in Canada and MAR, regulatory approvals, and company policies. Any shares acquired would also subject to the AIM lock-in arrangements.

Where Can I Find More Information?

For any further clarifications, please refer to official regulatory filings and the Company’s AIM Admission Document, or contact the investor relations team directly at connect@pulsarhelium.com.

Important Notices

Nothing in this document should be treated as formal legal, business, tax or financial advice. Investors should seek their own appropriate professional advice. The Company accepts no responsibility for the information contained herein.