BOR 96/15 - Trades in Options to Consultants [Rescinded]

IN THE MATTER OF THE SECURITIES ACT S.B.C. 1985, c. 83

AND

IN THE MATTER OF TRADES IN OPTIONS TO CONSULTANTS

Exemption Order Under Sections 33 and 59

WHEREAS sections 31(2)(10) and 55(2)(9) of the Securities Act, S.B.C. 1985, c. 83 (the "Act") provides registration and prospectus exemptions for trades by an issuer in its securities with its employees or employees of an affiliate of the issuer;

AND WHEREAS the term "employee" does not include an independent consultant;

AND WHEREAS issuers would like to issue options as incentives to consultants that provide on-going valuable services to the issuer;

AND WHEREAS for the purposes of this order,

"consultant" means, in relation to an issuer, an individual who

(a) provides ongoing consulting services to the issuer or an affiliate of the issuer under a written contract;

(b) possesses technical, business or management expertise of value to the issuer or an affiliate of the issuer;

(c) spends a significant amount of time and attention on the business and affairs of the issuer or an affiliate of the issuer; and

(d) has a relationship with the issuer or an affiliate of the issuer that enables the individual to be knowledgeable concerning the business and affairs of the issuer;

"consultant company" means an issuer all of the voting securities of which are beneficially owned by one or more service providers;

"disinterested security holder approval" means the majority of the votes cast at a security holders meeting of the issuer of the option other than votes attaching to securities beneficially owned by related persons;

"related person" means, in relation to the issuer of the option,

(a) a person who is an insider as defined in the Act, other than a person who comes within that definition solely by being a director or senior officer of a subsidiary of the issuer; or

(b) an associate or affiliate of the person described in paragraph (a);

"market price" means, where there is a published market for the security issuable upon the exercise of the option, the market price determined in accordance with section 163 of the Securities Rules, B.C. Reg. 479/95 and where there is no published market for the security issuable upon the exercise of the option, the fair market price;

"option" means an option, warrant or other right (including conversion rights) to acquire securities of the issuer of the option;

"service provider" means:

(a) a consultant, or

(b) an employee, senior officer, or director of the issuer of the option or of an affiliate of the issuer; and

"services" means the provision of technical, business or management services to the issuer of the option or an affiliate of the issuer, other than services:

(a) that are provided in connection with the sale of securities of the issuer or an affiliate of the issuer, or

(b) of a promotional, investor relations or fiscal agency nature;

AND WHEREAS the Executive Director considers that it would not be prejudicial to the public interest to do so;

IT IS ORDERED under sections 33 and 59 of the Act that sections 20(1)(a) and 42 of the Act do not apply to a trade made by an issuer in its options with a consultant, a consultant company or a trustee on behalf of a consultant, (collectively, "permitted consultants") provided that:

(a) the option is granted as an incentive mechanism for the service provider to continue to provide bona fide, ongoing valuable services to the issuer or an affiliate of the issuer and not for the purpose of repayment or partial repayment of a debt owed to the service provider;

(b) the aggregate number of the securities reserved for issuance under options granted to permitted consultants, does not exceed two (2) percent of the issued and outstanding securities of the issuer as of the date of the grant of the option to the permitted consultant;

(c) at the date of the grant of the option to the permitted consultant, the exercise price of the option is at least equal to the greater of

(i) the market price of the securities issuable upon the exercise of the option; and

(ii) $0.15;

(d) where the permitted consultant is a related person, the securities may not be issued upon the exercise of the option unless the issuer has received disinterested security holder approval of the issuance of those securities to that related person;

(e) where the securities issuable upon the exercise of the option are listed and posted for trading on a stock exchange, the issuer has received, if required by the bylaws, rules or policies of the stock exchange, the consent of the exchange to the issuance of the option;

(f) the option is non-assignable and non-transferable, except that on an optionee's death the option may be transferred to and exercised by the optionee's executor or other legal representative, or the beneficiaries of the optionee's estate in accordance with the terms of the option;

(g) the option expires not later than 5 years from the date of the grant of the option;

(h) the service provider is not induced to purchase, directly or indirectly, the option or the securities issued upon the exercise of an option granted in reliance on this ruling, by expectation of employment, appointment, engagement, or continued employment, appointment or engagement as a service provider; and

(i) the issuer files a Form 20 on or before the tenth day after the trade in the option.

DATED at Vancouver, British Columbia, on August 29, 1996.