LPS 3-31 - Incentive Options to Directors and Employees - Unlisted Issuers [Rescinded]
1.1 This Local Policy Statement has been revised solely to conform with the Securities Act S.B.C. 1985 c.83 and the Regulations thereto. Other than consequential amendments, there have been no changes of a substantive nature to this policy. It becomes effective upon proclamation of the Securities Act on February 1, 1987.
2.0 TERMS OF REFERENCE
2.1 This Local Policy Statement deals with the granting of stock options by issuers whose equity securities are not listed on a stock exchange. Incentive stock options granted to directors and employees which are outstanding at the time of filing a prospectus are the chief concern of this Local Policy Statement.
2.2 Stock options granted to other than directors and employees which are outstanding at the time an unlisted issuer files a prospectus should be drawn up subject to approval by regulatory authority. The Superintendent anticipates that stock options granted by an issuer prior to the making of a first distribution will normally be confined to directors and employees.
2.3 For an issuer listed on a stock exchange, the rules, regulations and policies of such exchange will apply to options granted to directors and employees.
2.4 An issuer planning to seek a listing on the Vancouver Stock Exchange should insure that the terms of stock options granted will enable the optionor to comply with the terms of V.S.E. Policy Statement LD 1/82 currently in force. Sections 1(d) and I(e) of VSE LD 1/82 should in particular be complied with.
2.5 An issuer planning to seek a listing with a stock exchange other than the Vancouver Stock Exchange should clear the terms of any outstanding stock options with the exchange concerned.
3.0 AN ISSUER CONTEMPLATING A SHARE OFFERING BY PROSPECTUS
3.1 The aggregate number of shares under option to directors and employees shall be based on the number of equity securities which would be issued and outstanding after completion of the prospectus offering, excluding shares escrowed under Local Policy 3-07, and shall be subject to the following limits:
3.1.1 5% of the above noted base for directors of the optionor or a subsidiary thereof, and
3.1.2 An additional 5% for employees of the optionor or a subsidiary thereof. An individual employed by a issuer providing management services to the optionor may also be deemed an employee of the optionor under this section.
3.2. For the purpose of this policy an individual may qualify for one only of the two categories of stock option referred to in Section 3.1 above.
3.3 The minimum option price shall be the issue price to the public under the prospectus.
3.4 The term of an option granted to a director or employee shall be limited to a maximum of five years from the effective date of the prospectus (i.e the date on which the prospectus is receipted).
3.5 The following terms must be included in all stock option agreements involving directors or employees as optionees:
3.5.1 the option is non-assignable and non-transferable
3.5.2 the option may only be exercised while the optionee is a director or an employee or within a period of not more than 30 days after ceasing to be a director or employee.
3.5.3 the period (if any) within which the optionee's heirs or administrators may exercise any portion of the outstanding option shall not exceed one year from the optionee's death.
3.6 Where an optionee is a director, shareholder ratification of the agreement or any subsequent amendment thereto is required.
3.7 Where an optionee is an employee, the option agreement must contain a representation that the optionee is an employee of the optionor or subsidiary thereof, or that the optionee is an employee of a company under contract to provide management services to the optionor.
4.0 AN UNLISTED ISSUER IN THE POST-PROSPECTUS PHASE CONTEMPLATING THE GRANTING OF AN OPTION
4.1 The comments made in Section 2.4 apply also to an unlisted issuer contemplating the granting of a stock option subsequent to the completion of a prospectus offering but prior to seeking a listing of its shares on the Vancouver Stock Exchange. It should be noted that unless an option has been disclosed in an issuer's prospectus in accordance with this Local Policy Statement, the Vancouver Stock Exchange will not generally consider accepting an incentive option agreement until a satisfactory market in the issuer's securities has been established.
4.2 Where an unlisted issuer in the post-prospectus phase contemplates the granting of an option and also plans to seek a listing of its shares on a recognized stock exchange other than the Vancouver Stock Exchange, the terms of such option should be cleared with the exchange concerned.
4.3 An unlisted issuer in the post-prospectus phase contemplating the granting of an option but not planning to seek a listing of its shares on a stock exchange should draw up an option agreement subject to the approval of regulatory authority. The Superintendent will normally require an optionor in this situation to comply with the relevant parts of Section 3.0.
DATED at Vancouver, B.C. this _______ day of ______________ 19 ___.
B.C. Securities Commission