SAFRAN - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Securities Act (Ontario), ss. 25 and 53 - Application for relief from the prospectus requirement and the dealer registration requirement in respect of certain trades made in connection with an employee share offering by a French issuer - The offering involves the use of a collective employee shareholding vehicle, a fonds commun de placement d'entreprise (FCPE) - The issuer cannot rely on the employee exemption in section 2.24 of National Instrument 45-106 Prospectus and Registration Exemptionsas the shares are not being offered to Canadian participants directly by the issuer, but through the FCPE - Number of Canadian employees de minimis - Canadian participants will not be induced to participate in the offering by expectation of employment or continued employment - Canadian participants will receive certain disclosure documents - The FCPE is subject to the supervision of the French Autorité des marchés financiers -- No market for shares of the issuer in Canada - Relief granted, subject to conditions.

Securities Act (Ontario), s. 25 - Application for relief from the dealer registration requirement and adviser registration requirement for the manager of the FCPE to the extent its activities require compliance - The manager will not be involved in providing advice to Canadian participants and its activities do not affect the underlying value of the shares being offered -- Relief granted in respect of specified activities of the manager, subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am. ss. 25, 53, 74.

National Instrument 45-102 Resale of Securities, s. 2.14.

National Instrument 45-106 Prospectus and Registration Exemptions, ss. 2.24, 2.28.

November 24, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO AND QUÉBEC

(the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

SAFRAN (the "Filer")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") for:

1. an exemption from the prospectus requirements and the dealer registration requirements of the Legislation (the "Prospectus and Registration Relief") so that such requirements do not apply to:

(i) trades in the units ("Units") of a collective shareholding vehicle, the SAFRAN International FCPE (the "Fund") made pursuant to the Employee Share Offering (as defined below) to or with Qualifying Employees (as defined below) resident in the Jurisdictions who elect to participate in the Employee Share Offering (the "Canadian Participants"); and

(ii) trades of ordinary shares of the Filer (the "Shares") by the Fund to Canadian Participants upon the redemption of Units by Canadian Participants;

2. an exemption from the adviser registration requirements and dealer registration requirements of the Legislation so that such requirements do not apply to the manager of the Fund, Natexis Asset Management (the "Manager"), to the extent that its activities described in paragraphs 15 and 16 hereof require compliance with the adviser registration requirements and dealer registration requirements (collectively, with the Prospectus and Registration Relief, the "Initial Requested Relief"); and

3. an exemption from the dealer registration requirements of the Legislation so that such requirements do not apply to the first trade in any Shares acquired by Canadian Participants under the Employee Share Offering (the "First Trade Registration Relief").

Under the Mutual Reliance Review System for Exemptive Relief Applications

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation formed under the laws of France. It is not and has no current intention of becoming a reporting issuer (or equivalent) under the Legislation. The Shares are listed on Euronext Paris.

2. The Filer carries on business in Canada through the following affiliated companies: Messier-Dowty Inc., Turboméca Canada Inc., Hispano-Suiza Canada Inc. and Sagem-Interstar Inc. (the "Canadian Affiliates", together with the Filer and other affiliates of the Filer, the "SAFRAN Group"). Each of the Canadian Affiliates is a direct or indirect controlled subsidiary of the Filer and is not and has no current intention of becoming a reporting issuer (or equivalent) under the Legislation.

3. The Filer intends to establish a global employee share offering (the "Employee Share Offering") for Qualifying Employees (as defined below) of the Filer and its participating affiliates including the Canadian Affiliates. Only persons who are employees of a member of the SAFRAN Group at the time of investment and who have been employed by a member of the SAFRAN Group for a minimum of three months (in the aggregate) during the period starting from January 1st of the year prior to investment and ending on the last day of the applicable Offering Period (as defined below) (the "Qualifying Employees") will be invited to participate in the Employee Share Offering.

4. The Fund was established for the purpose of implementing the Employee Share Offering.

5. The Fund is not and has no intention of becoming a reporting issuer under the Legislation.

6. The Fund is a collective shareholding vehicle (fonds commun de placement d'entreprise or "FCPE") of a type commonly used in France for the conservation or custodianship of shares held by employee investors. The Fund has been registered with and approved by the Autorité des marchés financiers in France (the "French AMF"). Only Qualifying Employees will be allowed to hold Units of the Fund in an amount proportionate to the number of Shares held by the Fund on behalf of such participants.

7. The Employee Share Offering will consist of four quarterly offering periods in each year (each such quarterly period, an "Offering Period"), followed by an investment date (an "Investment Date"). During each Offering Period, Canadian Participants may submit purchase orders indicating the amount they wish to invest in the Fund as of the applicable Investment Date.

8. The Canadian Affiliates will, as part of the Employee Share Offering, provide Canadian Participants with an employer contribution amount calculated at a rate of 60% of the amount invested by a Canadian Participant in any Offering Period, up to an annual maximum of €2,000 (the "Employer Contribution"), for the acquisition of additional Units. For this purpose, the Canadian Affiliates will cause a cash payment to be made to the Fund on behalf of the Canadian Participants and the Fund will subscribe for additional Shares in the name of such Canadian Participants and issue to such Canadian Participants a number of Units corresponding to the value of the Employer Contribution.

9. Qualifying Employees will be invited to participate in the Employee Share Offering under the following terms:

(i) Canadian Participants will be issued Units in the Fund, which will purchase Shares on behalf of the Canadian Participants, at a purchase price that is equal to the price of the Shares at the time of acquisition on Euronext Paris on the Investment Date of the applicable Offering Period;

(ii) the Shares will be held in the Fund and the Canadian Participant will receive Units in the Fund in an amount proportionate to their respective investments in the Fund;

(iii) Canadian Participants will receive additional Units of the Fund corresponding to the value of the Employer Contribution;

(iv) the Units will be subject to a hold period of approximately five years (the "Lock-Up Period"), subject to certain exceptions prescribed by French law (such as a release on death or termination of employment);

(v) any dividends paid on the Shares held in the Fund will be contributed to the Fund and used to purchase additional Shares. The Canadian Participants will receive additional Units or fractions of Units representing such Shares; and

(vi) at the end of the Lock-Up Period, or in the event of an early unwind resulting from the Canadian Participant exercising one of the exceptions to the Lock-Up Period prescribed by French law, a Canadian Participant may (a) redeem Units in the Fund in consideration for the underlying Shares or a cash payment equal to the then market value of the Shares, or (b) continue to hold Units in the Fund and redeem those Units at a later date.

10. In consideration for their investments, the Canadian Participants will receive a number of Units corresponding to the number of Shares purchased on their behalf by the Fund. The Units will not be listed on any stock exchange.

11. The value of a Unit under the Fund is tied to the market price of the Share. The Unit value of the Fund will be calculated and reported to the French AMF on a regular basis, based on the net assets of the Fund divided by the number of Units outstanding. The number of Units in the Fund will be adjusted on the basis of the market price of the Shares and other assets (cash, in exceptional circumstances) held by the Fund, effective from the first date on which the net asset value is calculated and whenever Shares or other assets are contributed to the Fund, as applicable. Upon such adjustments being made, a holder may be credited with additional Units or tenths, hundredths, thousandths or ten-thousandths of Units.

12. Subject to the Lock-Up Period described above, the Fund will redeem Units at the request of the Canadian Participants. The Canadian Participant will be paid on the basis of the net market price of the Shares corresponding to the Canadian Participant's Units and will be settled by payment in cash or Shares. All management charges relating to the Fund will be paid by the Filer, as provided by the Fund's regulations. The Fund, due to board lot sizes, will be able to liquidate positions in the Shares more readily and at a better price than an individual investor.

13. Under French law the Fund, as a FCPE, is a limited liability entity. The Fund's portfolio will consist exclusively of the Shares and, from time to time, cash or cash equivalents pending investments in Shares and for the purposes of Unit redemptions.

14. The Manager of the Fund is an asset management company governed by the laws of France. The Manager is registered with the French AMF to manage French investment funds and complies with the rules of the French AMF. The Manager is not and has no intention of becoming a reporting issuer under the Legislation.

15. The Manager's portfolio management activities in connection with the Employee Share Offering and the Fund are limited to subscribing for Shares from the Filer and selling such Shares as necessary in order to fund redemption requests.

16. The Manager is also responsible for preparing accounting documents and publishing periodic informational documents as provided by the rules of the Fund. The Manager's activities in no way affect the underlying value of the Shares and the Manager will not be involved in providing advice to any Canadian Participant.

17. Shares issued in the Employee Share Offering will be deposited in the Fund through Natexis Banque Populaires (the "Depositary"), a large French commercial bank subject to French banking legislation.

18. Under French law, the Depositary must be selected by the Manager from among a limited number of companies identified on a list by the French Minister of the Economy, Finance and Industry and its appointment must be approved by the French AMF. The Depositary carries out orders to purchase, trade and sell securities in the portfolio and takes all necessary action to allow the Fund to exercise the rights relating to the securities held in its portfolio.

19. The Canadian resident Qualifying Employees will not be induced to participate in the Employee Share Offering by expectation of employment or continued employment.

20. The total amount invested by a Qualifying Employee in the Employee Share Offering cannot exceed 25% of his or her estimated gross annual compensation for the applicable year of investment, exclusive of any Employer Contribution.

21. None of the Filer, the Manager, the Canadian Affiliates or any of their employees, agents or representatives will provide investment advice to the Canadian Participants with respect to an investment in the Shares or Units.

22. The Canadian Participants will receive an information package in the English or French language, as applicable, which will include a summary of the terms of the Employee Share Offering, a description of Canadian income tax consequences of purchasing and holding the Units in the Fund and redeeming Units at the end of the Lock-Up Period, an Information Notice approved by the French AMF for the Fund describing the main characteristics of the Fund and a purchase order form.

23. Upon request, Canadian Participants may receive copies of the Filer's French Document de Référence filed with the French AMF in respect of the Shares and a copy of the Fund's rules (which are analogous to company by-laws). The Canadian Participants will also have access to the continuous disclosure materials relating to the Filer furnished to the Filer's shareholders generally, which are accessible on the Filer's website and the French AMF website.

24. There are approximately 1,010 Qualifying Employees resident in Canada, in the provinces of Ontario (648) and Québec (362), who represent in the aggregate less than 2% of the number of the SAFRAN Group's employees worldwide.

25. As of the date hereof and after giving effect to the Employee Share Offering, Canadian Participants do not and will not beneficially own (which term, for the purposes of this paragraph, is deemed to include all Shares held by the Fund on behalf of Canadian Participants) more than 10% of the Shares and do not and will not represent in number more than 10% of the total number of holders of the Shares as shown on the books of the Filer.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Initial Requested Relief is granted provided that:

1. the first trade in any Units or Shares acquired by Canadian Participants pursuant to this Decision in a Jurisdiction is deemed a distribution or a primary distribution to the public under the Legislation of such Jurisdiction unless the following conditions are met:

(a) the issuer of the security

(i) was not a reporting issuer in any jurisdiction of Canada at the distribution date, or

(ii) is not a reporting issuer in any jurisdiction of Canada at the date of the trade;

(b) at the distribution date, after giving effect to the issue of the security and any other securities of the same class or series that were issued at the same time as or as part of the same distribution as the security, residents of Canada

(i) did not own directly or indirectly more than 10 percent of the outstanding securities of the class or series, and

(ii) did not represent in number more than 10 percent of the total number of owners directly or indirectly of securities of the class or series; and

(c) the trade is made

(i) through an exchange, or a market, outside of Canada, or

(ii) to a person or company outside of Canada; and

2. in Québec, the required fees are paid in accordance with Section 271.6(1.1) of the Securities Regulation (Québec).

It is the further decision of the Decision Makers under the Legislation that the First Trade Registration Relief is granted provided that the conditions set out in paragraphs (1)(a), (b) and (c) under this decision granting the Initial Requested Relief are satisfied.