Final Rule (effective December 22, 1998): OSC Rule - 45-503 - Trades to Employees, Executives and Consultants

Notice of Ministerial Approval OSC Rule

January 8, 1999

NOTICE OF FINAL RULE UNDER THE SECURITIES ACT
RULE 45-503
TRADES TO EMPLOYEES, EXECUTIVES AND CONSULTANTS

On December 7, 1998 the Minister of Finance approved Rule 45-503 Trades toEmployees, Executives and Consultants (the "Rule"). The Rule came into force onDecember 22, 1998.

The related regulation revoking subsections 69(4) and 69(5) of Regulation 1015 (the"Regulation") of the Revised Regulations of Ontario, 1990 made under the Securities Act,and section 24 of Schedule 1 to the Regulation, and amending section 20 of Schedule 1to the Regulation was filed as O. Reg. 657/98 on December 15, 1998 and was publishedin The Ontario Gazette on January 2, 1999.

Previously, materials related to the Rule were published in the Bulletin on February 20,1998, April 10, 1998, May 29, 1998, August 21, 1998, October 16, 1998 and December18, 1998. For a detailed list of related publications see the 1998 Year End Summary ofPublications in Chapter 1 of this Bulletin.

The Rule and the related regulation O. Reg. 657/98 are published in Chapter 5 of thisBulletin.

ONTARIO SECURITIES COMMISSION RULE
RULE 45-503TRADES TO EMPLOYEES, EXECUTIVES AND CONSULTANTS
TABLE OF CONTENTS

PART TITLE

PART 1 DEFINITIONS AND INTERPRETATION
1.1 Definitions 1
1.2 Interpretation 5

PART 2 TRADES BY AN ISSUER, AN AFFILIATED ENTITY ORADMINISTRATOR OF SECURITIES OF THE ISSUER'S OWN ISSUE TOEMPLOYEES, CONSULTANTS AND ADMINISTRATORS
2.1 Removal of Exemption for Trades under Paragraph 19 ofSubsection 35(1) and Clause 72(1)(n) of the Act 8
2.2 Exemption for Trades by an Issuer or Administrator of Securities ofthe Issuer's Own Issue to Employees, Consultants andAdministrators 8
2.3 Registration Exemption for Trades by an Affiliated Entity ofSecurities of the Issuer's Own Issue to Employees, Consultantsand Administrators in Furtherance of an Exempt Trade 8
2.4 De Minimis Registration Exemption for Trades by Employees,Consultants and Administrators 8

PART 3 TRADES BY AN ISSUER, AN AFFILIATED ENTITY ORADMINISTRATOR OF SECURITIES OF THE ISSUER'S OWN ISSUE TOEXECUTIVES AND ADMINISTRATORS
3.1 Exemption for Trades by a Listed Issuer or Administrator ofSecurities of the Issuer's Own Issue to Executives andAdministrators 9
3.2 Exemption for Trades by a Non-Listed Issuer or Administrator ofSecurities of the Issuer's Own Issue to Executives andAdministrators 9
3.3 Exemption for Securities of Foreign-Listed Issuers and De MinimisExemption for Trades by an Issuer or Administrator of Securities ofthe Issuer's Own Issue to Executives and Administrators 11
3.4 Registration Exemption for Trades by an Affiliated Entity ofSecurities of the Issuer's Own Issue to Executives andAdministrators in Furtherance of an Exempt Trade 11
3.5 De Minimis Registration Exemption for Trades by Executives andAdministrators 11

PART 4 REQUIRED INFORMATION FOR SHAREHOLDER APPROVAL
4.1 Required Information for Shareholder Approval 12

PART 5 CONTROL PERSON DISTRIBUTIONS TO EMPLOYEES, EXECUTIVES,CONSULTANTS AND ADMINISTRATORS
5.1 Exemption for Control Person Distributions to Employees,Executives, Consultants and Administrators 13
5.2 Exemption for Trades by an Issuer, an Affiliated Entity orAdministrator of Securities of the Issuer in Furtherance of a ControlPerson Distribution 13

PART 6 PERSONAL TRANSFERS
6.1 Personal Transfers 13

PART 7 REMOVAL OF CERTAIN EXEMPTIONS FOR TRADES OF SECURITIESOF CERTAIN COMPANIES
7.1 Removal of Certain Exemptions for Trades of Securities of CertainCompanies 14
PART 8 TRADES MADE BY CURRENT OR FORMER EMPLOYEES,EXECUTIVES OR CONSULTANTS, OR ADMINISTRATORS OFSECURITIES OF CERTAIN NON-REPORTING ISSUERS
8.1 Exemption for Trades Made by Current or Former Employees,Executives or Consultants, or Administrators of Securities ofCertain Non-Reporting Issuers 14
8.2 Registration Exemption for Trades by an Issuer or an AffiliatedEntity of Securities of the Issuer in Furtherance of Exempt Tradesmade by Current or Former Employees, Executives or Consultantsof Certain Non-Reporting Issuers 15

PART 9 RESTRICTIONS ON FIRST TRADES IN SECURITIES ACQUIREDUNDER EXEMPTIONS IN RULE
9.1 Restrictions on First Trades in Securities Acquired UnderExemptions in Rule 16

PART 10 DISCLOSURE OF EXEMPT TRADES 18
10.1 Disclosure 18
10.2 Disclosure Before Resale 18
10.3 Annual Disclosure 18
10.4 Monthly Disclosure 19
10.5 Form of Disclosure 19

PART 11 FEES
11.1 Fees 19

PART 12 EXEMPTION
12.1 Exemption 20

ONTARIO SECURITIES COMMISSION RULERULE 45-503
TRADES TO EMPLOYEES, EXECUTIVES AND CONSULTANTS

PART 1 DEFINITIONS AND INTERPRETATION

1.1 Definitions - In this Rule

"administrator" means an employee administrator or an executiveadministrator;

"associated consultant" means, for an issuer, a consultant of the issuer orof an affiliated entity of the issuer if

(a) the consultant is an associate of the issuer or of an affiliated entity ofthe issuer, or

(b) the issuer or an affiliated entity of the issuer is an associate of theconsultant;

"consultant" means, for an issuer, an individual, other than an employee oran executive of the issuer, that

(a) is engaged to provide on a bona fide basis consulting, technical,management or other services to the issuer or to an affiliated entityof the issuer under a written contract between the issuer or theaffiliated entity and the individual or a consultant company orconsultant partnership of the individual, and

(b) in the reasonable opinion of the issuer, spends or will spend asignificant amount of time and attention on the affairs and businessof the issuer or an affiliated entity of the issuer;

"consultant company" means, for an individual consultant, a company ofwhich the individual consultant is an employee or shareholder;

"consultant partnership" means, for an individual consultant, a partnershipof which the individual consultant is an employee or partner;

"employee" means, for an issuer, an employee of the issuer or of anaffiliated entity of the issuer, other than an executive of the issuer;

"employee administrator" means, for an issuer, a trustee, custodian oradministrator acting on behalf or for the benefit of employees, consultants,employees and executives, employees and consultants, executives andconsultants, or employees, executives and consultants, of the issuer;

"executive" means, for an issuer, an issuer-officer or an issuer-director;

"executive administrator" means, for an issuer, a trustee, custodian oradministrator acting on behalf or for the benefit of executives, employeesand executives, executives and consultants, or employees, executives andconsultants, of the issuer;

"foreign-listed issuer" means an issuer any of the securities of which arelisted and posted for trading, or traded, on the American Stock Exchange,the New York Stock Exchange or the London Stock Exchange Limited orquoted on the Nasdaq Stock Market;

"hold period" means that period of either six, 12 or 18 months that would beapplicable to a security, or an underlying security, if the security orunderlying security had been acquired under an exemption referred to insubsection 72(4) of the Act;

"incentive" means a compensation or incentive arrangement for anexecutive;

"incentive plan" means a plan providing for incentives;

"investor consultant" means, for an issuer, a consultant that is a registrantor provides to the issuer or an affiliated entity of the issuer services providedby a registrant or services consisting of investor relations activities;

"investor relations activities" means any activities that promote or reasonablycould be expected to promote the purchase or sale of securities of the issueror an affiliated entity of the issuer, other than

(a) the dissemination of information provided, or records prepared, in theordinary course of the business of the issuer

(i) to promote the sale of products or services of the issuer, or

(ii) to raise public awareness of the issuer; or

(b) activities or communications necessary to comply with therequirements of

(i) Ontario securities law, or

(ii) the by-laws, rules or other regulatory instruments of a SRO;

"issuer-director" means, for an issuer, a director of the issuer or of anaffiliated entity of the issuer;

"issuer-officer" means, for an issuer, an officer of the issuer or of an affiliatedentity of the issuer⁴;

"listed issuer" means an issuer any of the securities of which are listed andposted for trading, or traded, on The Toronto Stock Exchange, The MontrealExchange, the Alberta Stock Exchange or the Vancouver Stock Exchange;

"non-transferable option" means an option the terms of which prohibittransfer except in the case of

(a) the death of the individual option holder,

(b) a transaction described in section 6.1 whether the transaction is atrade, or

(i) a spouse of the option holder,

(ii) a minor child of the option holder,

(iii) a minor grandchild⁶ of the option holder, or

(iv) a trust, of which at least one of the trustees is the optionholderand the beneficiaries of which are one or more of theoption holder and a person referred to in subparagraph (i), (ii)and (iii);

"outstanding issue" means

(a) for the purposes of subparagraphs 3.2(a)(ii) and (iv), the number ofshares of the applicable class outstanding immediately before theshare issuance for which the determination is to be made, excludingshares issued as or under incentives during the preceding 12 monthperiod, or

(b) otherwise, the number of shares of the applicable class outstanding;

"related person", for an issuer, means

(a) a director or senior officer of the issuer, or

(b) an associate of a director or senior officer of the issuer;

"service provider option" means an option granted to an employee, anexecutive or a consultant;

"service provider plan" means a plan providing for the grant or issue ofsecurities to employees, executives, consultants or any combination ofemployees, executives and consultants;

"shareholder approval" means, for an incentive, incentive plan, oramendment to an incentive or incentive plan, of an issuer, approval given bya majority of the votes cast at a meeting of the shareholders of the issuerother than votes attaching to securities beneficially owned by

(a) related persons to whom securities may be issued under the incentiveor incentive plan, and

(b) associates of the persons referred in paragraph (a);

"support agreement" includes an agreement to provide assistance in themaintenance or servicing of indebtedness of the borrower and an agreementto provide compensation for the purpose of maintaining or servicingindebtedness of the borrower; and

"underlying security" means

(a) a security that is issued or transferred in accordance with the termsof a convertible security, or

(b) any other security issued or transferred as a result of the conversionor exchange, directly or indirectly, of the first security referred to inparagraph (a) or a security referred to in this clause.

1.2 Interpretation

(1) In this Rule, trades in a security of an issuer to or by

(a) a consultant, include trades made to or by the consultant'sconsultant company, the consultant's consultant partnership,or a RRSP or a RRIF established by or for the consultant orunder which the consultant is the beneficiary;

(b) an employee, includes trades made to or by a subsidiary entityof the employee or a RRSP or a RRIF established by or for theemployee or under which the employee is the beneficiary; and

(c) an executive, includes trades made to or by a subsidiary entityof the executive or a RRSP or a RRIF established by or for theexecutive or under which the executive is the beneficiary.

(2) In this Rule, a person or company is considered to be an affiliatedentity of another person or company if one is a subsidiary entity of theother or if both are subsidiary entities of the same person orcompany, or if each of them is controlled by the same person orcompany.

(3) In this Rule, a person or company is considered to be controlled bya person or company if

(a) in the case of a person or company

(i) voting securities of the first-mentioned person orcompany carrying more than 50 percent of the votes forthe election of directors are held, otherwise than by wayof security only, by or for the benefit of the other personor company, and

(ii) the votes carried by the securities are entitled, ifexercised, to elect a majority of the directors of the first-mentioned person or company;

(b) in the case of a partnership that does not have directors, otherthan a limited partnership, the second-mentioned person orcompany holds more than 50 percent of the interests in thepartnership; or

(4) In this Rule, a person or company is considered to be a subsidiaryentity of another person or company if

(a) it is controlled by

(i) that other, or

(ii) that other and one or more persons or companies, eachof which is controlled by that other, or

(iii) two or more persons or companies, each of which iscontrolled by that other; or

(b) it is a subsidiary entity of a person or company that is thatother's subsidiary entity.

(5) In this Rule, the term "special relationship", when used in referenceto a person or company in a special relationship with a reportingissuer, shall be interpreted in accordance with subsection 76(5) of theAct.

(6) In this Rule, the participation of an employee, issuer-officer orconsultant in a trade is considered voluntary if the employee, officeror consultant is not induced to purchase the security

(a) in the case of an employee, by expectation of the employee'semployment or continued employment by the issuer or anaffiliated entity of the issuer;

(b) in the case of an issuer-officer of the issuer or an affiliatedentity of the issuer, by expectation of the issuer-officer'sappointment or employment or continued appointment oremployment as an issuer-officer of the issuer; and

(c) in the case of a consultant, by expectation of the individualconsultant, the consultant's consultant company or theconsultant's consultant partnership being engaged orcontinuing to be engaged by the issuer or an affiliated entity ofthe issuer as a consultant;

(7) In this Rule, an issuer is considered to have a de minimis Ontariomarket if, at the relevant time, in the case of securities of each classof the issuer

(a) persons or companies whose last address as shown on thebooks of the issuer is in Ontario and who held securities of theclass of securities

(i) did not hold more than 10 percent of the outstandingsecurities of the class of securities, and

(ii) did not represent in number more than 10 percent ofthe total number of holders of securities of the class ofsecurities; or

(b) persons or companies who are in Ontario and who beneficiallyown securities of the class of securities

(i) did not beneficially own more than 10 percent of theoutstanding securities of the class of securities, and

(ii) did not represent in number more than 10 percent ofthe total number of holders of securities of the class ofsecurities.

PART 2 TRADES BY AN ISSUER, AN AFFILIATED ENTITY OR ADMINISTRATOROF SECURITIES OF THE ISSUER'S OWN ISSUE TO EMPLOYEES,CONSULTANTS AND ADMINISTRATORS

2.1 Removal of Exemption for Trades under Paragraph 19 of Subsection35(1) and Clause 72(1)(n) of the Act - The exemptions contained inparagraph 19 of subsection 35(1) and clause 72(1)(n) of the Act are notavailable for a trade.

2.2 Exemption for Trades by an Issuer or Administrator of Securities of theIssuer's Own Issue to Employees, Consultants and Administrators

(1) Sections 25 and 53 of the Act do not apply to a trade by an issuer oran employee administrator of an issuer in a security of the issuer'sown issue to an employee of the issuer, a consultant of the issuer oran employee administrator of the issuer, if the participation of theemployee or the consultant in the trade is voluntary.

(2) The exemptions in subsection (1) are not available for a trade to aregistrant that is a consultant in connection with services provided bythe registrant relating to a distribution.

2.3 Registration Exemption for Trades by an Affiliated Entity of Securitiesof the Issuer's Own Issue to Employees, Consultants andAdministrators in Furtherance of an Exempt Trade - Section 25 of the Actdoes not apply to a trade by an affiliated entity of the issuer in furtheranceof a trade under section 2.2.

2.4 De Minimis Registration Exemption for Trades by Employees,Consultants and Administrators - Section 25 of the Act does not apply toa trade by an employee of an issuer, a consultant of an issuer, or anemployee administrator of an issuer on behalf of an employee or aconsultant of an issuer, in a security of the issuer's own issue, if

(a) the issuer is not a reporting issuer;

(b) at the time of the acquisition of the security, or in the case of asecurity acquired on the exercise of a convertible security at the timeof the acquisition of the convertible security, the issuer has a deminimis Ontario market; and

(i) through the facilities of a stock exchange outside Ontario;

(ii) on the Nasdaq Stock Market; or

(iii) on the Stock Exchange Automated Quotation System of theLondon Stock Exchange Limited.

PART 3 TRADES BY AN ISSUER, AN AFFILIATED ENTITY OR ADMINISTRATOROF SECURITIES OF THE ISSUER'S OWN ISSUE TO EXECUTIVES ANDADMINISTRATORS

3.1 Exemption for Trades by a Listed Issuer or Administrator of Securitiesof the Issuer's Own Issue to Executives and Administrators - Sections25 and 53 of the Act do not apply to a trade by an issuer or an executiveadministrator of an issuer in a security of the issuer's own issue to anexecutive of the issuer or an executive administrator of the issuer, if

(a) the issuer is a listed issuer; and

(b) in the case of an executive that is an officer, the participationof the issuer-officer in the trade is voluntary.

3.2 Exemption for Trades by a Non-Listed Issuer or Administrator ofSecurities of the Issuer's Own Issue to Executives and Administrators -Sections 25 and 53 of the Act do not apply to a trade by an issuer which isnot a listed issuer or an executive administrator of the issuer in a security ofthe issuer's own issue to an executive of the issuer or an executiveadministrator of the issuer, if

(a) in the case of the issue of a security as an incentive, priorshareholder approval has been obtained for the incentive orthe incentive plan under which the incentive is issued if theissue of the incentive is under an incentive plan, and anyamendments to the incentive or incentive plan, if the incentiveor incentive plan, if amended, as amended, together with all ofthe issuer's other previously established or proposedincentives or incentive plans, could result, at any time, in

(i) the number of shares reserved for issuance under stockoptions granted to related persons exceeding 10percent of the outstanding issue,

(ii) the issuance to related persons, within a 12 monthperiod, of a number of shares exceeding 10 percent ofthe outstanding issue,

(iii) the number of shares reserved for issuance under stockoptions granted to any one related person and therelated person's associates exceeding five percent ofthe outstanding issue, or

(iv) the issuance to any one related person and the relatedperson's associates, within a 12 month period, of anumber of shares exceeding five percent of theoutstanding issue;

(b) in the case of the issue of a security as an incentive, theincentive or incentive plan specifies a maximum number ofsecurities, or in the case of options, of underlying securities,issuable under it, and any approval obtained under paragraph(a) is for that maximum number;

(c) for a trade of a security that consists of the grant of an option,the option is a non-transferable option to purchase securitiesof the issuer; and

(d) in the case of an executive that is an issuer-officer, theparticipation of the issuer-officer in the trade is voluntary.

3.3 Exemption for Securities of Foreign-Listed Issuers and De MinimisExemption for Trades by an Issuer or Administrator of Securities of theIssuer's Own Issue to Executives and Administrators - Sections 25 and53 of the Act do not apply to a trade by an issuer that is not a listed issueror an executive administrator of the issuer in a security of the issuer's ownissue to an executive of the issuer or an executive administrator of the issuer

(a) if the issuer is not a reporting issuer;

(b) if

(i) the issuer is a foreign-listed issuer, or

(ii) at the time of the trade, the issuer has a de minimisOntario market; and

(c) in the case of an executive that is an issuer-officer, if theparticipation of the issuer-officer in the trade is voluntary.

3.4 Registration Exemption for Trades by an Affiliated Entity of Securitiesof the Issuer's Own Issue to Executives and Administrators inFurtherance of an Exempt Trade - Section 25 of the Act does not apply toa trade by an affiliated entity of the issuer in furtherance of a trade undersection 3.1, section 3.2 or section 3.3.

3.5 De Minimis Registration Exemption for Trades by Executives andAdministrators - Section 25 of the Act does not apply to a trade by anexecutive of an issuer, or an executive administrator of an issuer on behalfof an executive of the issuer, in a security of the issuer's own issue, if

(a) the issuer is not a reporting issuer;

(i) through the facilities of a stock exchange outside Ontario,

(ii) on the Nasdaq Stock Market, or

(iii) on the Stock Exchange Automated Quotation System of theLondon Stock Exchange Limited.

PART 4 REQUIRED INFORMATION FOR SHAREHOLDER APPROVAL

4.1 Required Information for Shareholder Approval - In addition to any otherrequirements of Ontario securities law, if an issuer presents to itsshareholders an incentive, incentive plan, or amendment to an incentive orincentive plan, for approval as contemplated by section 3.2, the issuer shalldisclose in the information circular for the meeting information respecting theincentive, incentive plan or the amendment to the incentive or incentive planin sufficient detail to permit shareholders to form a reasoned judgmentconcerning the matter, including

(a) the eligibility of employees, issuer-officers, issuer-directorsand consultants to be issued securities under the incentive orincentive plan or amendments¹⁸;

(b) the maximum number of securities, or in the case of options,of underlying securities, issuable under the incentive orincentive plan;

(c) particulars relating to any financial assistance or supportagreement to be provided to participants by the issuer or anyaffiliated entity of the issuer to facilitate the purchase of sharesunder the incentive or incentive plan, including whether theassistance or support is to be provided on a full-, part- or non-recourse basis;

(d) in the case of options, the maximum term and the basis for thedetermination of the exercise price¹⁸;

(e) particulars relating to the options or other entitlements to begranted under the incentive or incentive plan; and

(f) the number of votes attaching to securities that, to the issuer'sknowledge at the time the information is provided, will not beincluded for the purposes of determining whether shareholderapproval has been obtained.

PART 5 CONTROL PERSON DISTRIBUTIONS TO EMPLOYEES, EXECUTIVES,CONSULTANTS AND ADMINISTRATORS

5.1 Exemption for Control Person Distributions to Employees, Executives,Consultants and Administrators

(1) Sections 25 and 53 of the Act do not apply to a control persondistribution of a security of an issuer or an option of which theunderlying security is a security of an issuer to an employee of theissuer, an executive of the issuer, a consultant of the issuer or anadministrator of the issuer or by the administrator of that security toan employee of the issuer, an executive of the issuer or a consultantof the issuer, if

(a) for a trade that consists of the grant of an option, the option isa non-transferable option to purchase securities of the issuer;and

(b) the participation of the employee, the consultant, or in the caseof an executive that is an issuer-officer, the issuer-officer, inthe trade is voluntary.

(2) The exemptions in subsection (1) are not available for a trade to aregistrant that is a consultant in connection with services provided bythe registrant relating to a distribution.

5.2 Exemption for Trades by an Issuer, an Affiliated Entity or Administratorof Securities of the Issuer in Furtherance of a Control PersonDistribution - Section 25 of the Act does not apply to a trade by an issueror an affiliated entity of the issuer in furtherance of a trade under section 5.1.

PART 6 PERSONAL TRANSFERS

6.1 Personal Transfers - Section 25 of the Act does not apply to a trade in asecurity of an issuer

(a) between any of an employee of the issuer, a subsidiary entity of thatemployee, a RRSP established by or for that employee or underwhich that employee is the beneficiary and a RRIF established by orfor that employee or under which that employee is the beneficiary;

(b) between any of an executive of the issuer, a subsidiary entity of thatexecutive, a RRSP established by or for that executive or under whichthat executive is the beneficiary and a RRIF established by or for thatexecutive or under which that executive is the beneficiary; or

(c) between any of an individual who is a consultant of the issuer, thatindividual's consultant company, that individual's consultantpartnership, a RRSP established by or for that individual or underwhich that individual is the beneficiary and a RRIF established by orfor that individual or under which that individual is the beneficiary.

PART 7 REMOVAL OF CERTAIN EXEMPTIONS FOR TRADES OF SECURITIESOF CERTAIN COMPANIES

7.1 Removal of Certain Exemptions for Trades of Securities of CertainCompanies - The exemptions contained in paragraph 10 of subsection35(2) and clause 73(1)(a) of the Act are not available for a trade of a securityof a subsidiary company of an employee or an executive, or a consultantcompany, if the company has acquired securities under an exemptioncontained in this Rule and at the time of the trade holds the securities,unless a trade of the securities acquired by the company to the purchaserwould have been permitted under section 9.1.

PART 8 TRADES MADE BY CURRENT OR FORMER EMPLOYEES, EXECUTIVESOR CONSULTANTS, OR ADMINISTRATORS OF SECURITIES OFCERTAIN NON-REPORTING ISSUERS

8.1 Exemption for Trades Made by Current or Former Employees,Executives or Consultants, or Administrators of Securities of CertainNon-Reporting Issuers

(1) Sections 25 and 53 of the Act do not apply to a trade by a current orformer employee of an issuer, a current or former executive of anissuer, a current or former consultant of an issuer or an administratorof an issuer in a security of the issuer to an employee of the issuer,an executive of the issuer, a consultant of the issuer or anadministrator of the issuer, if

(a) the participation in the trade of the employee, the consultant,or in the case of an executive that is an issuer-officer, theissuer-officer, to whom the trade is made is voluntary;

(b) the issuer is not a reporting issuer; and

(c) the price of the security being traded is established by agenerally applicable formula or similar provisions contained ina written agreement among some or all of the shareholders ofthe issuer to which the transferee is, or upon becoming atransferee, will be required to be, a party.

(2) In this section, the references to "current" and "former" refer to thestatus at the relevant time of the individual employee, the individualexecutive and, in the case of a consultant, the status of the individualconsultant or the consultant's consultant company or consultantpartnership.

8.2 Registration Exemption for Trades by an Issuer or an Affiliated Entityof Securities of the Issuer in Furtherance of Exempt Trades made byCurrent or Former Employees, Executives or Consultants of CertainNon-Reporting Issuers - Section 25 of the Act does not apply to a trade byan issuer or an affiliated entity of the issuer in furtherance of a trade undersection 8.1.

PART 9 RESTRICTIONS ON FIRST TRADES IN SECURITIES ACQUIRED UNDEREXEMPTIONS IN RULE

9.1 Restrictions on First Trades in Securities Acquired Under Exemptionsin Rule

(1) A person or company, other than an associated consultant or aninvestor consultant of the issuer of the security, may trade a securityacquired under the exemption from the requirements of section 53 ofthe Act contained in section 2.2, section 3.1, section 3.2, section 3.3,section 5.1 or section 8.1 or in the circumstances described inparagraph (d) only

(a) if the first trade is made under a prospectus for which a receipthas been obtained from the Director;

(b) if the first trade is made under an exemption in Ontariosecurities law from section 53 of the Act;

(i) at the time of the trade, the issuer of the security is areporting issuer and has been a reporting issuer for atleast 12 months,

(ii) in the case of a person or company that is in a specialrelationship with the issuer, the person or company hasreasonable grounds to believe that the issuer is not indefault under the Act or the regulations,

(iii) in the case of a security acquired under the exemptioncontained in section 2.2, section 3.1, section 3.2 orsection 5.1, disclosure to the Commission has beenmade of the trade under section 2.2, section 3.1,section 3.2 or section 5.1 in accordance with Part 10,

(iv) no unusual effort is made to prepare the market or tocreate a demand for the security and no extraordinarycommission or consideration is paid for the trade, and

(v) the trade is not a control person distribution; or

(d) if the trade is a trade referred to in section 6.1 or section 8.1.

(2) An associated consultant or an investor consultant of an issuer maytrade a security of the issuer acquired, or an underlying security ofthe issuer acquired directly or indirectly as a result of acquiring asecurity, under the exemption from the requirements of section 53 ofthe Act contained in section 2.2 or section 5.1 or in the circumstancesdescribed in paragraph (d) only

(a) if the first trade is made under a prospectus for which a receipthas been obtained from the Director;

(b) if the first trade is made under an exemption in Ontariosecurities law from section 53 of the Act;

(i) at the time of the trade, the issuer of the security is areporting issuer,

(ii) in the case of a person or company that is in a specialrelationship with the issuer, the person or company hasreasonable grounds to believe that the reporting issueris not in default under the Act or the regulations,

(iii) in the case of a security acquired under the exemptionin section 2.2 or section 5.1, disclosure to theCommission has been made of the trade under section2.2 or section 5.1 in accordance with Part 10,

(iv) the hold period has elapsed from the later of the date ofthe acquisition of the security acquired under theexemption in section 2.2 or section 5.1 and the date theissuer of the security became a reporting issuer,

(v) no unusual effort is made to prepare the market or tocreate a demand for the security and no extraordinarycommission or consideration is paid for the trade, and

(vi) the trade is not a control person distribution; or

(d) if the trade is a trade referred to in section 6.1 or 8.1.

PART 10 DISCLOSURE OF EXEMPT TRADES

10.1 Disclosure - The disclosure contemplated by section 9.1 for securitiesacquired under the exemptions contained in sections 2.2, 3.1, 3.2 and 5.1shall, and the disclosure contemplated by clause 72(5)(b) of the Act forsecurities acquired on the exercise of service provider options under theexemption contained in subclause 72(1)(f)(iii) of the Act may, be made inaccordance with this Part.

10.2 Disclosure Before Resale - The disclosure referred to in section 10.1 maybe made by the issuer or, for securities acquired under the exemptioncontained in section 5.1, by the issuer or the person or company making thedistribution, by disclosing the date of the trade, the number of securitiespurchased and the purchase price paid or to be paid, in

(a) an information circular or take-over bid circular filed inaccordance with the regulations; or

(b) a letter filed by a person or company certifying that the personor the company has knowledge of the facts contained in theletter

if in either case the filing is effected before any resale of the securities.

10.3 Annual Disclosure - The disclosure referred to in section 10.1 may also bemade by the issuer, for a service provider plan, when the service providerplan is commenced and, for securities issued or traded other than under aservice provider plan, when the initial security is issued or traded, and notless frequently than annually after the first disclosure, if the number ofsecurities of the class of securities issued or sold in any calendar month inreliance on the exemptions described in section 10.1 does not exceed onepercent of the securities of that class that were outstanding at the beginningof the calendar month in which the securities were issued or sold.

10.4 Monthly Disclosure

(1) If the number of securities of the class of securities issued or sold inany calendar month in reliance on the exemptions described insection 10.1 does exceed one percent of the securities of that classthat were outstanding at the beginning of the calendar month in whichthe securities were issued or sold, the disclosure referred to insection 10.1 may be made by the issuer for that calendar month,within 10 days after the end of the month.

(2) The issuer may make disclosure in accordance with section 10.3 forthe other calendar months in the annual period excluding such monthor months for which disclosure has been made under subsection (1).

10.5 Form of Disclosure - For the purposes of sections 10.3 and 10.4, thedisclosure may be made in the form of a letter filed disclosing the date of thetrade, the number of securities purchased and the purchase price paid or tobe paid, and certifying that the person or the company has knowledge of thefacts contained in the letter.

PART 11 FEES

11.1 Fees

(1) The issuer shall pay a fee of $100.00 for the securities issued underthe exemptions contained in sections 2.2, 3.1, 3.2 and 3.3 andsecurities acquired on the exercise of service provider options inreliance on the exemption contained in subclause 72(1)(f)(iii) of theAct and, subject to subsection (3), the person or company making thedistribution shall pay a fee of $100.00 for the securities distributedunder the exemption contained in section 5.1

(a) for all securities distributed under a service provider plan

(i) on the date the service provider plan is commenced,and

(ii) on each anniversary of the date of commencement ofthe service provider plan, if securities were issued ordistributed in Ontario under the service provider planduring the twelve-month period preceding the date ofthe anniversary; and

(b) if securities are issued or distributed under these exemptionsother than under a service provider plan

(i) when the initial security is issued or distributed, and

(ii) on each anniversary of the date of the issue ordistribution of the initial security, if additional securitieswere issued or distributed in Ontario by that person orcompany during the 12 month period before the date ofthe anniversary.

(2) Despite subsection (1), no fee shall be payable for securitiesacquired under the exemptions contained in this Rule for a trade byan employee administrator or executive administrator to an employee,an executive or a consultant.

(3) The issuer may pay the fee for securities distributed under theexemption contained in section 5.1 referred to in subsection (1) andin this case the person or company making the distribution shall notbe required to make that payment.

PART 12 EXEMPTION

12.1 Exemption - The Director may grant an exemption to this Rule, in whole orin part, subject to such conditions or restrictions as may be imposed in theexemption.

REGULATION TO AMEND

REGULATION 1015 OF THE REVISED REGULATIONS OF ONTARIO, 1990

MADE UNDER THE

SECURITIES ACT

Note: Since January 1, 1997, Regulation 1015 has been amended by OntarioRegulations 247/97, 507/97, 88/98, 130/98, 149/98, 165/98, 166/98 and 268/98.For prior amendments, see the Table of Regulations in the Statutes of Ontario,1996.

1. Subsections 69 (4) and (5) of Regulation 1015 of the RevisedRegulations of Ontario, 1990 are revoked.

2. (1) Section 20 of Schedule 1 to the Regulation is amended by adding thefollowing subsection:

(2) Subsection (1) does not apply with respect to securities that are issuedthrough the exercise of a service provider option as defined in Ontario SecuritiesCommission Rule 45-503 Trades to Employees, Executives and Consultants.

(2) Section 24 of Schedule 1 to the Regulation is revoked.

3. This Regulation comes into force on the same day as the rule made bythe Ontario Securities Commission on October 6, 1998 entitled "OntarioSecurities Commission Rule 45-503 Trades to Employees, Executives andConsultants".

Note: The rule made by the Ontario Securities Commission on October 6, 1998entitled "Ontario Securities Commission Rule 45-503 Trades to Employees,Executives and Consultants" comes into force on December 22, 1998.