BOR 90/02 - Trades in Shares Issued in Accordance With the Employee Investment Act [Rescinded]

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

IN THE MATTER OF TRADES IN SHARES ISSUED IN ACCORDANCE WITH THE EMPLOYEE INVESTMENT ACT

Exemption Order under Sections 33 and 59

WHEREAS the Employee Investment Act, S.B.C. 1989, c. 24 (the "EI Act") encourages employees resident in the Province to invest in their employers, either

(a) indirectly, through employee venture capital corporations formed for that purpose, or

(b) directly, through employee share ownership plans;

AND WHEREAS for the purpose of this order

"Act" means the Securities Act, S.B.C. 1989, c. 83,

"Affiliate" means an affiliate as defined in the EI Act,

"Constitution" means a constitution as defined in the EI Act,

"Eligible Business" means,

(a) when used in relation to an ESOP, the issuer that has registered the ESOP under the EI Act, and

(b) when used in relation to an EVCC, the issuer in whose shares the Constitution of the EVCC permits the EVCC to invest;

"Employee" means, when used in relation to an Eligible Business, an employee of the Eligible Business or of an Affiliate of the Eligible Business;

"Employee Venture Capital Plan" means an employee venture capital plan registered under the EI Act;

"ESOP" means an employee share ownership plan registered under the EI Act by an Eligible Business;

"EVCC" means an employee venture capital corporation registered under the EI Act, the Constitution of which

(a) restricts the EVCC to investing in shares of a particular Eligible Business and in investments permitted by section 22(1)(b), (d), (e) and (f) of the EI Act, and

(b) prohibits the EVCC from issuing shares to any person other than a Permitted Purchaser;

"Permitted Purchaser" means, when used in relation to an EVCC, an Employee of the Eligible Business in whose shares the Constitution of the EVCC permits the EVCC to invest;

"Regulation" means the Securities Regulation, B.C. Reg. 270/86;

AND WHEREAS an EVCC may not distribute its shares to Permitted Purchasers in reliance on sections 31(2)(10) and 55(2)(9) of the Act unless the Eligible Business in whose shares the Constitution of the EVCC permits it to invest is a subsidiary of the EVCC;

AND WHEREAS although an Eligible Business may distribute its shares to Employees under an ESOP in reliance on sections 31(2)(10) and 55(2)(9) of the Act, the resale of those shares will be restricted for an indefinite period of time unless the Eligible Business is or becomes a reporting issuer;

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

IT IS ORDERED

1. under sections 33 and 59 of the Act that sections 20 and 42 of the Act do not apply to an EVCC in respect of a trade in a share of its own issue to a Permitted Purchaser provided that

(a) the EVCC has not distributed any of its shares to persons other than Permitted Purchasers, except for shares distributed to the first subscriber or subscribers pursuant to section 5(1) of the Company Act, R.S.B.C. 1979, c. 59,

(b) the trade is made pursuant to the Employee Venture Capital Plan of the EVCC,

(c) the certificate representing the share contains a legend stating that the share may be transferred only in compliance with the provisions of the Act, the Regulation and this order, and

(d) prior to the trade, the EVCC notifies the Permitted Purchaser in writing of the resale restrictions imposed by this order;

2. under section 59 of the Act that a trade

(a) in a share that was issued by an EVCC in reliance on

(i) paragraph 1 of this order, or

(ii) section 55(2)(9) of the Act, or

(b) in a share that was issued by an Eligible Business under an ESOP in reliance on section 55(2)(9) of the Act

is deemed to be a distribution unless the share was acquired in a trade made in reliance on paragraph 4(a)(iv) or (b)(ii) of this order;

3. under section 33 of the Act that section 20 of the Act does not apply to

(a) a Permitted Purchaser in respect of a trade in a share that was issued by an EVCC in reliance on

(i) paragraph 1 of this order, or

(ii) section 55(2)(9) of the Act

provided that the trade is to a Permitted Purchaser, or

(b) an Employee in respect of a trade in a share that was issued by an Eligible Business under an ESOP in reliance on section 55(2)(9) of the Act provided that the trade is to an Employee; and

4. under section 59 of the Act that section 42 of the Act does not apply to

(a) a Permitted Purchaser in respect of a trade in a share that was issued by an EVCC in reliance on

(i) paragraph 1 of this order, or

(ii) section 55(2)(9) of the Act

provided that the trade is

(iii) to a Permitted Purchaser, or

(iv) made in compliance with the resale restrictions set out in sections 133 and 134 of the Regulation that would have been applicable to the trade had the share been acquired under section 55(2)(9) of the Act, or

(b) an Employee in respect of a trade in a share that was issued by an Eligible Business under an ESOP in reliance on section 55(2)(9) of the Act provided that the trade is

(i) to an Employee, or

(ii) made in compliance with the resale restrictions set out in sections 133 and 134 of the Regulation that would have been applicable to the trade had the share been acquired under section 55(2)(9) of the Act.

DATED at Vancouver, British Columbia, this 27th day of February 1990.