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Working Ventures II Technology Fund Inc. and Working Ventures Investment Services Inc.
Headnote
Mutual Reliance Review System for ExemptiveRelief Applications - relief granted to a fund issuer from theprospectus and registration requirements to implement an incentiveplan, where certain securities of the Fund are to be issuedto certain employees of the Fund's manager.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53 and 74(1).
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
SASKATCHEWAN, ONTARIO ANDNOVA SCOTIA
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
WORKING VENTURES II TECHNOLOGYFUND INC. AND
WORKING VENTURES INVESTMENTSERVICES INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Saskatchewan, Ontario and Nova Scotia (the "Jurisdictions")has received an application from Working Ventures II TechnologyFund Inc. (the "Fund") and Working Ventures InvestmentServices Inc. (the "Manager", and together with theFund, the "Filers") for a decision under the securitieslegislation of the Jurisdictions (the "Legislation")that the requirements contained in the Legislation to be registeredto trade in a security and to file and obtain a receipt fora preliminary prospectus and a prospectus (the "Registrationand Prospectus Requirements") shall not apply to tradesby the Fund in co-ownership interests in the Fund's interestsin Venture Assets (defined below) pursuant to a Structured PropertyInterest Incentive Plan adopted by the Manager for the benefitof certain eligible individuals;
AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Québec Commission Notice 14-101;
AND WHEREAS the Filers have representedto the Decision Makers as follows:
1. The Fund is a corporation incorporatedunder the laws of Canada on October 27, 2000 and was, as ofNovember 29, 2000, and is currently registered as a labour-sponsoredinvestment fund corporation under the Community Small BusinessInvestment Funds Act (Ontario) (the "CSBIF Act").The Fund is a prescribed labour-sponsored venture capitalcorporation under the Income Tax Act (Canada). Thehead office of the Fund is located in Toronto, Ontario.
2. The Manager is a corporation incorporatedunder the laws of Canada and is a wholly-owned subsidiaryof Working Ventures Inc. ("WV Inc."). The head officeof the Manager is located in Toronto, Ontario.
3. The Manager acts as manager of the Fundpursuant to a management agreement entered into between theFund and the Manager.
4. The Manager has adopted a Structured PropertyInterest Incentive Plan (the "Plan") for the benefitof certain eligible individuals who are employees or officersof the Manager (the "Participants"). The Plan willbe implemented by the Fund entering into a co-ownership agreementwith the Manager pursuant to which the Fund will convey tothe Manager, as nominee for the Participants, an undividedco-ownership interest (the "Co-Ownership Interest")in each of the Fund's investments in eligible businesses forpurposes of the CSBIF Act (the "Venture Assets").
5. The purpose of the Plan is to attract andretain qualified personnel, to recognize Participants fortheir services, and to give Participants the opportunity toparticipate in the growth of the Venture Assets on a moretax effective basis through co-ownership interests in theinvestee companies.
6. The Participants will be designated bythe Board of Directors of WV Inc. (the "Board").Employees of the Manager who are either (i) members of theinvestment department or (ii) senior officers of the Managerare eligible to be Participants.
7. Each time the Fund makes an investmentin a Venture Asset, the Participants receive from the Funda Co-Ownership Interest in that Venture Asset. Initially,the Participants' Co-Ownership Interest in a particular VentureAsset will be nominal (0.001%).
8. The Participants' Co-ownership Interestremains nominal until such time as the Fund has realized gains(net of realized losses) from the sale of Venture Assets equalto the aggregate cost of all the Fund's retained Venture Assetsplus the threshold rate of return (the "Threshold Rate")described in paragraph 9 (the "Target").
9. The Threshold Rate is a cumulative annualrate of return calculated on the basis of the average annualrate of return for five-year Government of Canada bonds plus2% and is applied to the amount of the Fund's cost of itsportfolio of Venture Assets.
10. The Participants' Co-Ownership Interestin a particular Venture Asset that is sold at a time whenthe Fund has realized net gains in excess of the Target willhave a value equal to 20% of the gain on the sale of the particularVenture Asset above the Target.
11. Immediately before the sale of any VentureAsset for cash or cash equivalents, each Participant's individualco-ownership interest (a "Participant's Interest")will be computed as a percentage of the total ownership insuch investment by the Senior Vice-President, Finance andAdministration of the Manager.
12. After the calculation described in paragraph11, the Fund's and each Participant's Interest will be partitionedand the Fund's interest and each Participant's Interest inthe Venture Asset will be disposed of together. The Participantshave no right to deal separately with their interests in theVenture Assets.
13. The Board will allocate to each Participantan individual co-ownership percentage (the "IndividualCo-ownership Percentage") of the Participants' co-ownershipinterest in each Venture Asset held by the Fund.
14. Where the employment of a Participantis terminated, the Participant will convey all or a portionof his or her Participant's Interest in the Venture Assetsto the Manager, as nominee, and the Manager will, subjectto an alternative direction of the Board, convey such co-ownershipinterests to the remaining actively employed Participantsin proportion to their pro-rata holdings of all the Participants'Co-Ownership Interests.
15. On March 30 of each calendar year afterthe effective date of the Plan, the Board will reallocateto each Participant who remains employed by the Manager anIndividual Co-ownership Percentage in respect of (i) capitalraised by the Fund since the last reallocation and (ii) anyParticipant's individual Co-Ownership interests in VentureAssets conveyed to the Manager, as nominee, as a result ofthe termination of the Participant's employment.
16. Individual Co-ownership Percentages willalso be reallocated upon the employment by the Manager ofa new Participant after the effective date of the Plan.
17. Where a reallocation results in a decreasein a Participant's Individual Co-Ownership Percentage, suchParticipant will be deemed to have conveyed an undivided co-ownershipinterest in the Venture Assets to such other Participantswhose Individual Co-ownership Percentages have increased,such conveyances to be pro-rated among affected Participants.
AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");
AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makers underthe Legislation is that the Registration and Prospectus Requirementsshall not apply to:
(i) the conveyance of the Co-Ownership Interestsin Venture Assets by the Fund to the Participants;
(ii) trades in Participants' Interests inVenture Assets between the Manager, as nominee, and Participantsand trades between Participants resulting from a reallocationinitiated by the Manager; and
(iii) the disposition of the Participants'Interests in the Venture Assets on the disposition of VentureAssets by the Fund.
October 18, 2002.
"Robert W. Korthals" "MaryTheresa McLeod"