Subsection 74(1) exemption from Sections 25and 53 of the Act for the grant of non-transferable optionsto a maximum of two specific members of the Issuer's AdvisoryBoard resident in Ontario, subject to certain conditions.
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53, 72(1)(f)(iii), 74(1).
Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am., Schedule 1, ss. 20, 59(2).
Ontario Securities Commission Rule 45-503 -Trades to Employees, Executives and Consultants.
Multilateral Instrument 45-102 - Resale of Securities.
IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, c. S.5, AS AMENDED
IN THE MATTER OF
CITOTECH SYSTEMS INC.
(subsection 59(2) of Schedule 1 to the Regulation
made under the Act)
UPON the application of Citotech SystemsInc. ("Citotech") to the Ontario Securities Commission(the "Commission") for a ruling pursuant to subsection74(1) of the Securities Act, R.S.O. 1990, c.S.5, as amended(the "Act"), that certain trades in stock optionsof Citotech (the "Options") to two members of itsAdvisory Board that are resident in Ontario are exempt fromsections 25 and 53 of the Act, and for a ruling pursuant tosubsection 59(2) of Schedule I to the General Regulation madeunder the Act, R.R.O. 1990, Regulation 1015 (the "Regulation")that Citotech be exempt from the fee applicable under Section20 of Schedule I to the Regulation;
AND UPON Citotech having representedto the Commission that:
1. Citotech was incorporated under the CanadaBusiness Corporations Act and is a reporting issuer in the provincesof British Columbia and Alberta;
2. the authorized capital of Citotech consists of an unlimitednumber of both common shares and preferred shares, of which12,821,505 common shares and no preferred shares were issuedand outstanding as of April 25, 2002;
3. the common shares of Citotech are listedand posted for trading on the Canadian Venture Exchange (the"CDNX");
4. on February 25, 2002, Citotech completedthe acquisition (the "Microstart Acquisition") ofall of the assets and intellectual property pertaining to thattechnology known as the Microstart System, a new technologyintended for starting internal combustion gasoline engines invehicles without requiring a conventional starter motor andautomobile battery, and is now in the business of marketingthe Microstart System;
5. Citotech grants Options under a share optionplan (the "Plan"), which has been accepted by theCDNX, to directors, officers, and employees of Citotech andother persons who provide a service of value to Citotech andcontribute to the success of Citotech;
6. Citotech has formed an Advisory Board comprisedof consultants (the "Advisors") who are either qualifiedautomotive engineers or experienced in technical or marketingaspects of the automotive industry and who will provide thenecessary guidance to enable the Microstart System to reachits full commercial potential;
7. the Advisors are each individuals who willprovide ongoing consulting services to Citotech under a writtencontract, possesses technical or marketing experience and expertisein aspects of the automotive field that are related to the MicrostartSystem and have knowledge of the Microstart System;
8. at the request of Citotech's management,at least once per year, the Advisors will review and provideCitotech's management with advice regarding the developmentand marketing of products related to the Microstart System;
9. Advisors are not consultants as defined underCommission Rule 45-503 - Trades to Employees, Executives andConsultants because, as members of an advisory board, the Advisorsdo not, in the opinion of the Company, spend a significant amountof time and attention on the business and affairs of Citotech,but rather are consulted by Citotech as needed on an ongoingbasis in their area of expertise;
10. Citotech proposes to grant Options underthe Plan to two particular Advisors resident in Ontario, Mr.Gary Lukassen and Mr. Gordon Taylor (together the "OntarioAdvisors"), who are not directors, officers or employeesof Citotech and are not affiliated, associated or related inany other way to Citotech;
11. the Options are to be granted as an incentivemechanism for the Ontario Advisors to continue to provide bonafide, ongoing valuable services to Citotech and not for thepurpose of repayment or partial repayment of any debt owed tothe Ontario Advisors;
12. the Options will be granted in accordancewith the bylaws, rules and policies of the CDNX governing stockoptions and stock purchase plans at an exercise price determinedaccording to the Plan by reference to the prevailing marketprice of the common shares of Citotech and without any discounttherefrom;
13. the Options are non-transferable and non-assignable,except that on the death of an Ontario Advisor, Options maybe transferred to and exercised by the Ontario Advisor's executoror other legal representative, or the beneficiaries of the OntarioAdvisor's estate in accordance with the terms of the Option;
14. the Options expire not later than five yearsfrom their date of grant; and
15. the Ontario Advisors will not be inducedto acquire common shares of Citotech upon the exercise of theOptions by expectation of continued membership on the AdvisoryBoard or employment with Citotech;
AND UPON the Commission being satisfiedthat it would not be prejudicial to the public interest to doso;
IT IS RULED pursuant to section 74(1)of the Act that trades of Options by Citotech to the OntarioAdvisors are exempt from the requirements of sections 25 and53 of the Act provided that the grant and terms of such Optionscomply with the rules and policies of the CDNX governing stockoptions and that Citotech provides each Ontario Advisor witha copy of this Ruling;
IT IS FURTHER RULED pursuant to section74(1) of the Act that the first trade in the securities acquiredon the exercise of the Options are exempt from section 53 ofthe Act provided that:
(a) the conditions of section 2.6 of MultilateralInstrument 45-102 - Resale of Securities are satisfied; and
(b) disclosure of the securities acquired onthe exercise of the Options is made in accordance with Part10 of Commission Rule 45-503 - Trades to Employees, Executivesand Consultants;
AND IT IS FURTHER RULED pursuant tosection 59(2) of Schedule I to the Regulation, that the feesapplicable under section 20 of Schedule I to the Regulationto the securities issued on the exercise of the Options in relianceon subsection 72(1)(f)(iii) shall not apply provided that Citotechcomplies with section 11.1 of Commission Rule 45-503 - Tradesto Employees, Executives and Consultants and for that purpose,the reference to service providers shall be deemed to includethe Ontario Advisors.
April 26th, 2002.
"Paul M. Moore" "Theresa McLeod"