Securities Law & Instruments

Headnote

Subsection 74(1) - relief from the registrationrequirement of section 25 of the Act in connection with theadvising activities of certain senior employees of a U.S. bankwith respect to investment partnerships established by the bankfor the benefit of its employees - conditions imposed.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am,ss 25, 74(1).

Rule Cited

OSC Rule 45-501 - Exempt Distributions.

IN THE MATTER OF
THE SECURITIES ACT R.S.O. 1990,
CHAPTER S.5, AS AMENDED (THE "ACT")

AND

IN THE MATTER OF
BANK OF AMERICA CORPORATION
AND BA COINVEST GP, INC.

RULING

WHEREAS the Ontario Securities Commission(the "Commission") has received an application fromBank of America Corporation ("Bank of America") andBA Coinvest GP, Inc. (the "General Partner") for aruling under subsection 74(1) of the Act that the requirementcontained in section 25 of the Act to be registered as an adviserunder the Act where such a person or company engages in or holdshimself, herself or itself out as engaging in the business ofadvising others as to the investing in or the buying and sellingof securities (the "Adviser Registration Requirement")shall not apply to certain trades made in connection with theBanc of America Co?Invest Fund 2002, L.P. (the "DelawarePartnership" or the "Fund"), BA Co?Invest Fund2002 (Cayman), L.P. (the "Cayman Partnership"; andtogether with the Delaware Partnership, the "Partnerships")and other co?invest funds that may be established by Bank ofAmerica from time to time ("Other Co?Invest Funds"),subject to certain conditions;

AND WHEREAS upon considering the applicationand recommendation of staff of the Commission;

AND WHEREAS Bank of America and theGeneral Partner have represented to the Commission that:

1. Bank of America is a U.S. bank holding companyheadquartered in the State of North Carolina. It is not a reportingissuer in Ontario and is not a registrant under the Act.

2. In Canada, Bank of America operates throughBank of America Canada. Bank of America Canada is a wholly-owned,indirect subsidiary of Bank of America and was incorporatedpursuant to the Bank Act (Canada) as a Schedule II Foreign BankSubsidiary. Bank of America Canada is not a reporting issuerunder the Act and is not a registrant under the Act.

The Offering

3. As an incentive to selected senior levelemployees of Bank of America or its affiliates ("EligibleAssociates"), Bank of America proposes to establish thePartnerships in order to give such persons access to the privateequity markets through participation in certain private equityfunds managed by Bank of America personnel (the "ProprietaryFunds") and by investment in private equity funds managedby persons not affiliated with Bank of America (the "Third-PartyFunds").

4. Eligible Associates selected by Bank of Americawill be persons who are:

(a) Vice President level (or the equivalent)or above;

(b) "Accredited Investors" withinthe meaning of Rule 501(a)(6) of Regulation D of the UnitedStates Securities Act of 1933 (the "U.S. Securities Act");

(c) capable of evaluating the merits and risksof an investment in the Partnerships;

(d) able to bear the economic risk and afforda complete loss of their investment; and

(e) in the case of persons resident in Ontario,"accredited investors" within the meaning of OntarioSecurities Commission Rule 45-501 - Exempt Distributions ("OSCRule 45-501").

5. Eligible Associates may invest in the DelawarePartnership either indirectly through the Cayman Partnership,which in turn will invest in the Delaware Partnership, or directlythrough an investment in the Delaware Partnership. Each non-U.S.Eligible Associate who subscribes for Units (each, an "Investor")must choose whether he or she wants to invest directly in theFund by acquiring Units in the Delaware Partnership or indirectlyby acquiring Units in the Cayman Partnership.

6. Currently, there is one (1) Eligible Associateresident in Ontario who will be permitted to purchase Unitsin the Partnerships. From time to time, other Eligible Associatesresident in Ontario, who are at a sufficiently senior leveland are selected by Bank of America, may participate in thePartnerships.

7. No Investor (including the estate or personalrepresentative of a deceased Eligible Associate) may sell, assignor otherwise transfer all or any portion of his or her Unitswithout the prior written consent of the General Partner, whichconsent may be given or withheld in the sole and absolute discretionof the General Partner. In no event shall a transferee be admittedto any of the Partnerships unless such person is an EligibleAssociate, Bank of America, an affiliate of Bank of Americaor a "Qualified Participant." A Qualified Participant(i) is an Eligible Family Member or Qualified Entity (in eachcase as defined below) of an Eligible Associate where such EligibleFamily Member or Qualified Entity qualifies as an "accreditedinvestor" under Rule 501(a) of Regulation D of the U.S.Securities Act, or (ii) is a person or entity to whom the Unitsare transferred under a will or by applicable laws of intestacyupon the death of an Investor (each such persons being a "Beneficiary").An "Eligible Family Member" is a spouse, parent, child,spouse of child, brother, sister, or grandchild of an EligibleAssociate. A "Qualified Entity" is (i) a trust ofwhich the trustee, grantor, and/or beneficiary is an EligibleAssociate, (ii) a partnership, corporation, or other entitycontrolled by an Eligible Associate, or (iii) a trust or otherentity established for the benefit of Eligible Family Membersof an Eligible Associate. Transfers of Units to Beneficiariesunder a will or the laws of intestacy may be consented to bythe General Partner.

The Delaware Partnership

8. The Delaware Partnership will be organizedas a Delaware limited partnership. The Delaware Partnershipwill not be an affiliate of Bank of America within the meaningof the Act.

9. The Delaware Partnership will invest (eitherdirectly or indirectly) in a diversified pool of private equityfunds consisting of the Proprietary Funds described in the OfferingMemorandum and certain Third-Party Funds selected by the investmentcommittee of the Fund or the same individuals acting in theircapacity as the investment committee of a special-purpose partnershipformed to hold the Delaware Partnership's investments in Third-PartyFunds (collectively, the "Investment Committee").

10. The Third-Party Funds in which the DelawarePartnership will invest are typically private equity funds thatmanage their pool of investment capital through a limited partnershipstructure. The general partners of those limited partnershipswill provide the Third-Party Funds with specialized expertisein identifying investment opportunities, making investment decisions,monitoring the completed investments and ultimately disposingof those investments.

The Cayman Partnership

11. The Cayman Partnership will be establishedas a limited partnership under the laws of the Cayman Islands.The Cayman Partnership will not be an affiliate of Bank of Americawithin the meaning of the Act.

12. The Cayman Partnership has been structuredto hold units in the Delaware Partnership. The Cayman Partnershipis designed to provide non-U.S. Investors with a tax efficientmeans of investing in the Delaware Partnership. Ontario residentInvestors will have the choice of investing through the CaymanPartnership or directly in the Delaware Partnership.

The General Partner

13. The General Partner, a non?banking subsidiaryof Bank of America, will be the sole general partner of thePartnerships. All management authority for the Partnershipswill be vested exclusively in the General Partner.

14. The General Partner is a corporation formedunder the laws of North Carolina. The General Partner also servesas the general partner of several employees' securities partnershipssimilar to the Partnerships that were organized in prior years.The board of directors of the General Partner will oversee theaffairs of the Partnerships.

15. The General Partner will purchase a numberof Units and Preferred Units (defined below) equal to at least0.2% of the total number of such Units and Preferred Units outstandingas of the completion of the Offering.

16. The General Partner is not a reporting issueror a registrant under the Act.

The Investment Committee

17. The Fund will have a committee made up ofBank of America officers selected from senior management ofthe Bank of America Principal Investing-Administration unit.

18. The Investment Committee will approve theDelaware Partnership's investments other than investments inProprietary Funds.

19. None of the members of the Investment Committeeor Bank of America is registered as an advisor under the Act.

The Units

20. The Units will not be registered under theU.S. Securities Act of 1933, as amended, and the Units willbe placed with Eligible Associates in the United States in relianceon exemptions from U.S. registration requirements.

21. The Units are being offered pursuant toa confidential offering memorandum and a supplement thereto(collectively, the "Offering Memorandum") which containdisclosure concerning the Delaware Partnership, the Cayman Partnership,the potential for the creation of Other Co-Invest Funds andthe Units. Ontario Eligible Associates will be provided withcertain additional disclosure relevant to them, including astatement to the effect that Ontario securities laws provideOntario resident Investors with a statutory right of actionfor rescission or damages in the event that the Offering Memorandumdelivered to such Investors contains a material misrepresentation.

22. The purchase price of each Unit will beUS$1,000 per Unit. Each Eligible Associate selected by Bankof America to participate in the Partnerships will be invitedto subscribe for up to the number of Units specified in thecover letter addressed to such Eligible Associate. Dependingon the amounts of subscriptions received by Bank of America,the General Partner may, in its sole discretion accept subscriptionsfor less than the full number of Units requested by subscribingEligible Associates.

23. Subject to waiver by the General Partnerin its sole discretion, the minimum subscription by an EligibleAssociate will be US$25,000.

24. Upon subscribing, each Investor will berequired concurrently to pay to the relevant Partnership (onan after tax basis) 50% of his or her total capital commitmentfor the Units to be purchased by such Investor. Thereafter,as determined by the General Partner and in its sole and absolutediscretion, Unit holders will be required to make additionalcapital contributions to the relevant Partnership (anticipatedto be on March 1 of each subsequent year), in an amount determinedby the General Partner (and generally, to be made pro rata amongall Unit holders), until such time as each Unit holder has madecapital contributions to the Partnership in an amount equalto the total capital commitment relating to such Units. Further,the Unit holders (and the Partnerships' other partners) maybe required under certain circumstances to make capital contributionsto the Partnerships, in addition to the amount of the capitalcommitments of US$1,000 per Unit, to the extent necessary toenable the Partnerships to satisfy certain liabilities. Finally,after the Partnerships' final liquidating distribution, eachUnit holder will be required to contribute to any of his orher former partners (including partners of both the DelawarePartnership and the Cayman Partnership), upon demand, his orher proportionate share of any liability or cost incurred bythat former partner on account of any matter or transactionin which such former partner acted for either Partnership priorto its final liquidating distribution. However, a Unit holder'sobligation to make contributions or return amounts to the Partnershipsor such former partners will not exceed, at any time, the sumof that Unit holder's unpaid subscription (if any) plus allamounts distributed to that Unit holder (together with the initialInvestor, if the Unit holder and the Investor are differentpersons) prior to that time and not previously repaid to thePartnerships.

25. If a Unit holder does not make a capitalcontribution when due, the defaulting Unit holder's Units willbe converted into Retired Units (as defined in the PartnershipAgreement relating to the Delaware Fund); that Unit holder'seconomic returns from the Partnerships effectively will be limitedto those attributable to his or her paid-in capital contributionsas of the date of default; and that Unit holder's Units willbe subject to the higher Management Fee (defined below) applicableto Retired Units. In addition, the General Partner will havethe right, but not the obligation, to exercise the Buyback Option(defined below) with respect to all Units held by that Unitholder after conversion into Retired Units.

26. Bank of America (through the General Partnerand possibly other Bank of America affiliates) will make preferredequity contributions to the Fund by subscribing for preferredunits of partnership interest (the "Preferred Units").The aggregate subscription amount to be paid by all acquirersof the Preferred Units for those Preferred Units will be anamount equal to three times the aggregate subscription amountfor Units acquired by all Eligible Associates.

27. Except in the case of certain mandatorycontributions, the General Partner will determine the amountof capital contributions to be made by all partners (includingthe General Partner) and the date on which such capital contributionswill be made, until such time as all partners (including theGeneral Partner) have made capital contributions in respectof their respective Units and Preferred Units equal to theirrespective total subscriptions (i.e., capital commitments) forsuch Units and Preferred Units.

28. An Investor whose employment with Bank ofAmerica is terminated without Cause (as defined in the OfferingMemorandum) or due to Retirement (as defined in the OfferingMemorandum), death or Disability (as defined in the OfferingMemorandum), will continue to participate in the Partnershipsunless other arrangements are made with the consent of thatInvestor.

29. If an Investor's employment terminates forany reason, other than as described in paragraph 28 above, thatInvestor will be entitled to retain a percentage of his or hertotal number of Units according to the date on which his orher employment terminated (the "Vesting Date"). Initially,25% of each Investor's Units are vested (the "InitiallyVested Units"). Generally, if an Investor's Vesting Dateis prior to the second anniversary of his or her subscription(i.e. March 15, 2004), then only the Initially Vested Unitsare vested. Generally, if an Investor's Vesting Date is on orafter the second anniversary of his or her subscription (i.e.March 15, 2004), the Investor is entitled to retain 100% ofhis or her Units. The vesting schedule may vary for subsequentofferings.

30. In respect of unvested units, the GeneralPartner may in its sole discretion reduce the departing Investor'sinterest in the Partnerships. If the General Partner decidesto reduce the departing Investor's interest in the Partnerships,then, unless the departing Investor is terminated for Cause,and the Investor holds Units issued by the Delaware Partnership,the Investor may elect the manner in which such reduction willtake effect (for local law reasons, Investors who choose toinvest in the Cayman Partnership will not be permitted to makesuch an election, which will instead be made by the GeneralPartner). A departing Investor eligible to make this electionmay choose to have either: (a) his or her unvested Units convertedinto a corresponding class of Retired Units (as defined in thePartnership Agreement relating to the Delaware Fund) (the "ConversionOption"); or (b) to have his or her Units repurchased bythe General Partner or its designee (the "Buyback Option").In the case of the exercise of the Buyback Option, the Investor'sUnits will be repurchased by the General Partner or an affiliateat a purchase price equal to the excess, if any, but no lessthan US$1.00 of: (1) the lesser of paid in capital contributionsin respect of such Units (plus interest) and the then fair marketvalue of such Units; or (2) the sum of all distributions bythe Partnerships to such Investor since the inception of thePartnerships and all accrued but unpaid management fees (asdefined below) in respect of such Investor's Units. If an Investoris terminated for Cause prior to the Vesting Date, he or shewill not have the right to choose the conversion option andwill, at the General Partner's sole discretion be subject tothe Buyback Option. Investors who default in payment of theircapital contributions will be subject to special provisionsdescribed in paragraph 25 above, regardless of whether the defaultoccurs before or after the exercise of the Conversion Optionwith respect to their Units.

31. Upon the exercise of the Buyback Optionby the General Partner, the Unit holder will cease to have anyfurther rights to distributions (including liquidating distributionsfrom the Partnerships).

Expenses and Fees

32. Throughout the term of the Partnershipsand until their final liquidating distributions, the Partnershipswill pay the General Partner or one of its affiliates, a fee,calculated on a per Unit basis, for management and administrativeservices (the "Management Fee"). The Management Feecharged with respect to Retired Units held by Unit holders willbe higher than the Management Fee charged with respect to regularUnits. No Management Fee will be charged with respect to PreferredUnits. In addition, throughout the term of the Partnerships,the General Partner will also charge the Unit holders a carriedinterest - similar in economic effect to a fee equal to 1.0%(the General Partner's "Carried Interest Percentage")of the net profits of the Partnerships that otherwise wouldbe distributable to the Unit holders.

Distributions by the Partnerships

33. The General Partner will determine the amount,timing and form of all distributions made by the Partnerships.The General Partner generally intends to distribute promptlyany cash received by the Fund in distributions from a ProprietaryFund or a Third-Party Fund in which it has invested, to thepartners of the Fund, subject to the Carried Interest Percentage(as described above). All distributions generally will be madein the following order and priority:

(a) 100% to the holders of Preferred Units (i.e.,Bank of America and the General Partner) in proportion to theirrespective number of Preferred Units until distributions tosuch holders equal the sum of the following:

(i) a preferred return calculated by compoundinterest at 12 month LIBOR plus 100 basis points, per annum,compounded annually, on the capital contributions in respectof the Preferred Units as of the date contributed; and

(ii) the aggregate amount of capital contributionsmade by such persons in respect of their Preferred Units;

(b) 100% to all Unit holders (and other partnersof the Partnerships holding Units) in proportion to the numberof their respective Units until each Unit holder (or other partner)shall have received total distributions equal to the aggregateamount of capital contributions made in respect of such Units;

(c) then all additional distributions shallbe apportioned among all Unit holders (and other partners ofthe Partnerships holding Units) in proportion to the numberof their respective Units.

34. Distributions prior to the termination ofa Partnership may be in the form of cash or marketable securitiesat the sole discretion of the General Partner, although theGeneral Partner currently intends to sell any securities itreceives in distributions from Proprietary Funds or Third?PartyFunds and distribute the proceeds in cash. Upon the terminationof a Partnership, distributions may also consist of restrictedsecurities or other assets.

35. The Partnerships will use reasonable effortsto provide to Unit holders with audited annual financial statementsprepared in accordance with U.S. generally accepted accountingprincipals. During the term of the Partnerships, Bank of Americawill provide periodic reports to Unit holders, including CanadianInvestors, on the relevant Partnerships.

36. Canadian Investors will participate in thePartnerships on a voluntary basis and are not being inducedto purchase Units by expectation of employment or continuedemployment with Bank of America or any of its affiliates.

37. The Partnerships will terminate after thePartnerships have received their final liquidating distributionsfrom each Proprietary Fund and Third-Party Fund in which thePartnerships invest and have sold, distributed or otherwisedisposed of all of their own assets.

38. Bank of America expects to organize otherinvestment partnerships at least annually to invest in ProprietaryFunds and Third-Party Funds (i.e., the Other Co-Invest Funds).Such Other Co-Invest Funds will be organized and structuredin a similar manner to the Delaware Partnership and will generallybe offered to non-U.S. residents either directly or throughoffshore feeder funds in a manner similar to the manner in whichthe Delaware Partnership and Cayman Partnership are being offeredto Eligible Associates. Any Other Co-Invest Fund that offersUnits to Ontario residents will only offer such Units to EligibleAssociates resident in Ontario.

AND WHEREAS upon the Commission beingsatisfied that to do so would not be prejudicial to the publicinterest;

IT IS RULED that the Adviser RegistrationRequirement under the Act shall not apply to the General Partner,the Investment Committee or their designees for the purposesof providing investment advice to the Partnerships or OtherCo-Invest Funds, provided that:

(a) the Eligible Associates, Beneficiaries andQualified Participants are the only persons to whom Units aredistributed in Canada; and

(b) where the General Partner, the InvestmentCommittee or their designees act as advisers to the Partnershipsor Other Co-Invest Funds in respect of securities of Canadianissuers, such advice will be incidental to their acting as anadviser to the Partnerships or Other Co-Invest Funds in respectof securities of foreign issuers.

April 23, 2002.

"Howard I. Wetston"      "H. Lorne Morphy"