Exemption Orders (Discretionary)

PEACE ARCH ENTERTAINMENT GROUP INC.


2001 BCSECCOM 1122




ORDER UNDER SECTIONS 48 AND 76 OF THE SECURITIES ACT, R.S.B.C. 1996, c. 418

PEACE ARCH ENTERTAINMENT GROUP INC.

Background

[para 1]
Peace Arch Entertainment Group Inc. applied for an order under sections 48 and 76 of the Securities Act, R.S.B.C. 1996, c. 418 that certain intended trades by Peace Arch of warrants to BCMC Capital Limited Partnership, BCMC Capital II Limited Partnership, Business Development Bank of Canada, Working Opportunity Fund (EVCC) Ltd. ("WOF") and Frank Groff (collectively, the "Lenders") are exempt from the requirements of sections 34(1)(a) and 61(1) of the Act (the "Registration and Prospectus Requirements").

Representations

[para 2]
Peace Arch represents that:

1. Peace Arch is a company incorporated under the laws of British Columbia, is a reporting issuer under the Act and is not in default of any requirement of the securities legislation of British Columbia;

2. the authorized capital of Peace Arch is 225,000,000 shares without par value divided into:

(a) 100,000,000 Class A Multiple Voting Shares without par value having the special rights and restrictions set out in the Articles of Peace Arch;

(b) 100,000,000 Class B Subordinate Voting Shares without par value having the special rights and restrictions set out in the Articles of Peace Arch; and

(c) 25,000,000 preference shares without par value having the special rights and restrictions set out in Part 27 of the Articles of Peace Arch;

3. as of June 29, 2001 there were 1,107,445 Class A Multiple Voting Shares and 2,780,399 Class B Subordinate Voting Shares outstanding;

4. the Class B Shares trade on The Toronto Stock Exchange (the "TSE") and the American Stock Exchange, and the Class A Shares trade on the TSE only; Peace Arch is not an exchange issuer under the Act;

5. Immortal Productions Inc. ("Immortal") is a subsidiary of Peace Arch;

6. in August 2000, the Lenders, under loan agreements, advanced a total amount of $7,550,000 (the "Loans") to Peace Arch;

7. as security for repayment of the Loans, the Lenders were each granted, among other things, a security interest in Immortal's interest in the television series "The Immortal" (the "T.V. Series");

8. Peace Arch has negotiated a sale and leaseback transaction (the "Transaction") of Immortal's interest in the T.V. Series;

9. one of the terms of the Transaction requires that the Lenders release their respective security interest in the T.V. Series;

10. in consideration for the Lenders releasing their respective security interest in the T.V. Series, Peace Arch has agreed, subject to regulatory and board of directors approval, to issue to the Lenders on a pro rata basis, non-transferable share purchase warrants (the "Warrants") allowing the holders to purchase up to 95,570 Class B Subordinate Voting Shares of Peace Arch at an exercise price of $5.30 per share; each Warrant will expire 6 months from the due date of the Loans;

11. other than WOF, none of the Lenders is an insider of Peace Arch or an associate of an insider of Peace Arch; and

12. on August 29, 2001 the TSE conditionally approved the issuance of the Warrants to the Lenders.

ORDER

[para 3]
Because it is not prejudicial to the public interest, the Executive Director orders that:

1. under sections 48 and 76 of the Act, the intended trades by Peace Arch of Warrants to the Lenders are exempt from the Registration and Prospectus Requirements of the Act provided that Peace Arch:

(a) delivers a copy of this order to each of the Lenders prior to the trades; and

(b) files a BC Form 45-902F on or before the 10th day after each distribution of the Warrants to the Lenders;

2. under section 76 of the Act, any trade in Class B Subordinate Voting Shares of Peace Arch acquired by the Lenders, upon exercise of the Warrants, is deemed to be a distribution unless:

(a) twelve months or, if Peace Arch complies with Local Policy Statement 3-27 and the provisions of BC Instrument 45-506 in connection with the distribution, four months, have elapsed from the date of issuance of the Warrants;

(b) if the seller is an insider of Peace Arch, other than a director or senior officer of Peace Arch, the seller has filed all records required to be filed under sections 87 and 90 of the Act;

(c) if the seller is a director or senior officer of Peace Arch, the seller has filed all records required to be filed under sections 87 and 90 of the Act and Peace Arch has filed all records required to be filed under Part 12 of the Act and of the Rules;

(d) the trade is not a distribution from the holdings of a control person;

(e) no unusual effort is made to prepare the market or to create a demand for the securities; and

(f) no extraordinary commission or other consideration is paid in respect of the trade.

[para 4]
DATED November 28, 2001.

Brenda Leong
Director