Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemptive relief from prospectus requirements for first trades in non-reporting issuer's common shares issued pursuant to prospectus exemptions -- Filer is a subsidiary of a global real estate developer that carries on business through a number of subsidiaries -- Filer intends to effect an IPO on the Tel Aviv Stock Exchange -- Post-IPO between 55-85% of the Filer's common shares will be owned directly or indirectly by Trusts resident in Alberta -- none of the ultimate beneficiaries of the Trusts or the ultimate beneficial owner of the Trustee are Canadian residents -- Filer intends to issue incentive stock options to certain employees, executive officers, directors and consultants in Ontario and Quebec -- Exemptive relief analogous to s. 2.14 of National Instrument 45-102 Resale of Securities granted in order to effectively permit direct or indirect holders of Filer's common shares that are ultimately beneficially owned by non-residents of Canada to be excluded from share ownership calculation set out in s. 2.14.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).

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

May 11, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

ELAD CANADA INC.

(the Filer)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption under the Legislation from the prospectus requirements contained in the Legislation in connection with first trades of the Filer's Common Shares distributed under an exemption from the prospectus requirement.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(i) the Ontario Securities Commission is the principal regulator for this application; and

(ii) the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in each of the provinces of Canada other than Ontario (the Non-Principal Passport Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision unless they are otherwise defined in this decision.

Representations

This decision is based on the following facts represented by the Filer and Y.T. America Israel Investment Ltd. (Elad Israel), where applicable:

Elad Israel and the El-Ad Group

1. Elad Israel is a private company incorporated under the laws of Israel. The shareholders of Elad Israel are not resident in Canada.

2. Elad Israel directly or indirectly controls a number of entities (each an Elad Subsidiary, and collectively with Elad Israel, the El-Ad Group) worldwide in connection with its business of acquiring, developing and owning real estate assets worldwide.

The Filer

3. The Filer was incorporated pursuant to the Business Corporations Act (Ontario) on December 23, 2009. Its registered and head office is located at Suite 1405, 5001 Yonge Street, Toronto, Ontario, Canada M2N 6P6.

4. The Filer's authorized share capital consists of an unlimited number of common shares (Common Shares) and an unlimited number of preferred shares (Preferred Shares), each without nominal or par value, of which one hundred Common Shares were issued and are outstanding as at the date hereof.

5. The Filer has been formed to acquire, by way of reorganization, a portfolio of real estate assets and development projects in Quebec and Ontario (the Assets) which are owned by Elad Subsidiaries, as described below. Upon completion of the reorganization, the Filer and its shareholders will engage in an initial public offering of Common Shares and Common Share purchase warrants (the Offering) on the Tel Aviv Stock Exchange (the TASE) by way of a Hebrew language prospectus (the Israeli Prospectus) to be filed in Israel pursuant to the securities laws of Israel.

6. The Filer is not a reporting issuer in any province in Canada and will not become a reporting issuer as a result of the Offering. The Filer has no current intention of becoming a reporting issuer in Canada.

7. The securities of the Filer are not currently listed on any exchange or quotation system and it has no plans to apply for a listing in Canada.

8. The Filer is not in default of securities legislation in Ontario or the Non-Principal Passport Jurisdictions.

The Trusts

9. The Assets are currently held by seven Alberta resident trusts: Moose Trust, Tiger Trust, Lion Trust, Loon Trust, Riviera Trust, Tower Trust and Westmount Square Trust (collectively, the Trusts).

10. The sole trustee of each Trust (the Trustee) is a corporation resident in Canada and an Elad Subsidiary. All of the issued and outstanding shares of the Trustee are beneficially owned, indirectly through a complex holding structure, by Elad Israel. The two individual directors of the Trustee are both residents of Canada. One of the two directors of the Trustee is an employee of an Elad Subsidiary.

11. The beneficiaries of each Trust (except Riviera Trust) consist of a subset of members of the El-Ad Group, together with persons who are related, within the meaning of the Income Tax Act (Canada) (the ITA), to existing beneficiaries.

12. Riviera Trust is a discretionary trust with beneficiaries consisting of a member of the El-Ad Group, together with such other beneficiaries as may be determined by the Trustee from time to time. Prior to the Reorganization, the assets held by Riviera Trust account for approximately 2.75% of the total value of the Assets.

13. The ultimate beneficiaries of the Trusts and the ultimate beneficial owner of the Trustee are all not resident in Canada.

The Reorganization and the Offering

14. Prior to the Offering, the Filer will complete a reorganization wherein the Assets will be transferred to the Filer in exchange for Common Shares and Preferred Shares (the Reorganization).

15. At the completion of the Reorganization, the Trusts will (directly or indirectly through a Canadian limited partnership (Elad LP)) hold 100% of the issued and outstanding Common Shares and Preferred Shares. The Trusts will be the only limited partners of Elad LP and hold all of the outstanding shares of the sole general partner of Elad LP. The outstanding Preferred Shares will be redeemed prior to completion of the Offering.

16. The Filer currently intends to raise approximately New Israeli Shekels 185 million (approximately Cdn $50.5 million) pursuant to the Offering, although the exact amount of money intended to be raised, the number of Common Shares to be sold and the offer price have not been finalized.

17. Although the number of shares to be issued has not been finally determined, immediately following the completion of the Offering:

(a) the Trusts expect that they will in aggregate hold, directly or indirectly through Elad LP, approximately 55-85% of the issued and outstanding Common Shares (collectively, the El-Ad Share Block);

(b) it is expected that residents of Canada will not represent in number more than 10 percent of the total number of owners directly or indirectly of Common Shares; and

(c) no Preferred Shares will be issued or outstanding.

18. Reasonable precautions, consistent with the Interpretation Note issued in respect of former OSC Policy 1.5, will be taken to ensure that the Common Shares issued pursuant to the Offering are not distributed into Canada. These precautions include:

(a) imposing requirements in the underwriting agreement and selling group arrangements that restrict the underwriters and the selling group members from soliciting or selling the Common Shares under the Offering to Canadian residents and oblige the underwriters to certify that they have not, to the best of their knowledge after reasonable investigation, solicited or sold any of the Common Shares being offered to Canadian residents; and

(b) the inclusion of a legend on the cover of the Israeli Prospectus, the form upon which orders for Common Shares are made and all advertisements regarding the Offering indicating that the offering is unavailable to Canadian residents.

19. Drafts of the Israeli Prospectus have been filed with the Israeli Securities Authority and the Reorganization and the Offering are scheduled to occur in the second quarter of 2010.

20. Immediately upon completion of the Offering, the Filer will be listed on a foreign stock exchange and, aside from the Trusts, does not expect to have any shareholders resident in Canada.

21. A trade in any of the Jurisdictions of Common Shares from the El-Ad Share Block will be a distribution under either the Legislation or the securities legislation of one of the non-Principal Passport Jurisdictions. Each Trust will deliver to the Filer an undertaking not to trade and to cause Elad LP not to trade the Filer's Common Shares unless such trade does not require the filing of a prospectus in Ontario or in a Non-Principal Passport Jurisdiction.

22. Under Tel-Aviv Stock Exchange rules, the Elad Share Block will be subject to a "lock-up" for an 18 month period following the Offering (the TASE Lock-up). Pursuant to the TASE Lock-up, the Elad Share Block will be deposited with an escrow agent, and the Trusts will be generally restricted from selling the Elad Share Block. The Elad Share Block will be released from the TASE Lock-up at a rate of 2.5% of the Elad Share Block per month beginning the fourth month after the Offering. In addition, beginning six months after the Offering, the TASE Lock-up will not restrict the Trusts from selling the Elad Share Block in an off-market transaction if the purchaser undertakes to be bound by the TASE Lock-up.

23. Following completion of the Offering, if the Trusts were not resident in Canada, an exemption from the prospectus requirement pursuant to section 2.14 (the First Trade Exemption) of National Instrument 45-102 Resale of Securities (NI 45-102) would be available for the first trades of any Common Shares distributed in Canada pursuant to any exemption from the prospectus requirement.

24. The conditions to the First Trade Exemption include a requirement that residents of Canada not directly or indirectly own more than 10% of the outstanding securities of the class or series distributed.

25. Because the Trusts will directly or indirectly through Elad LP own more than 10% of the Common Shares and are resident in Canada, the First Trade Exemption will not be available for the first trades of any Common Shares distributed in Canada, even though:

(a) none of the ultimate beneficiaries of the Trusts nor the ultimate beneficial owner of the Trustee are resident in Canada; and

(b) all Common Shares that are part of the El-Ad Share Block will be indirectly beneficially owned by persons not resident in Canada.

26. From time to time after completion of the Offering, the Filer expects to issue, pursuant to an available prospectus exemption, incentive stock options to certain employees, executive officers, directors and consultants resident in Ontario and Quebec.

27. The Filer does not intend to issue securities to residents of the provinces and territories of Canada other than to:

(a) the Trusts in Alberta as part of the Reorganization; and

(b) to employees, executive officers, directors and consultants resident in Ontario and Quebec.

28. The financial reports, proxy materials and other materials distributed to the securityholders pursuant to the securities laws of Israel will be provided to any securityholders resident in Canada in accordance with applicable corporate and securities laws.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that:

1. the prospectus requirement does not apply to the first trade of any Common Share of the Filer distributed from time to time after the completion of the Offering under an exemption from the prospectus requirement (each a Post-Offering Distribution) if:

(a) the Filer

(i) was not a reporting issuer in any jurisdiction of Canada at the Post-Offering Distribution date, or

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

(b) at the Post-Offering Distribution date, after giving effect to the issue of the Common Shares and any other Common Shares that were issued at the same time as or as part of the same Post-Offering Distribution,

(i) residents of Canada did not own directly or indirectly more than 10 percent of the outstanding Common Shares,

(ii) despite paragraph (i) above, in calculating the number of outstanding Common Shares owned directly or indirectly by residents of Canada, Common Shares that are directly or indirectly owned by an Elad Subsidiary resident in Canada may be excluded provided that:

A. if the Elad Subsidiary is a trust, none of the ultimate beneficiaries of the trust are residents of Canada. and

B. none of the issued and outstanding shares of Elad Israel are beneficially owned by residents of Canada,

(iii) residents of Canada did not represent in number more than 10 percent of the total number of owners directly or indirectly of Common Shares, and

(iv) despite paragraph (iii) above, in calculating the number of residents of Canada who own directly or indirectly outstanding Common Shares, Elad Subsidiaries resident in Canada that directly or indirectly own Common Shares may be excluded provided that:

A. if the Elad Subsidiary is a trust, none of the ultimate beneficiaries of the trust are residents of Canada; and

B. none of the issued and outstanding shares of Elad Israel are beneficially owned by residents of Canada; 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. the prospectus requirement does not apply to the first trade of any Common Share of the Filer distributed from time to time after completion of the Offering pursuant to the exercise of a stock option granted to an employee, executive officer, director or consultant (each a Stock Option) if:

(a) the Stock Option that entitled the holder to acquire the Common Share was distributed under an exemption from the prospectus requirement;

(b) the Filer

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

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

(c) the conditions in paragraph (1)(b) would have been satisfied for the Common Share at the time of the initial distribution of the Stock Option; and

(d) the condition in paragraph (1)(c) is satisfied.

"Mary Condon"
Commissioner
 
"Wes M. Scott"
Commissioner