Kaushik Rakhit et al.

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – reporting insider party to automatic securities disposition plan – relief granted from section 3.3 of NI 55-104 and subsection 107(2) of the Securities Act (Ontario).

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., s. 107(2).

National Instrument 55-104 Insider Reporting Requirements and Exemptions, s. 3.3.

Citation: Re Seven Generations Energy Ltd., 2018 ABASC 23

February 9, 2018

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(the Jurisdictions)

 

AND

 

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS

IN MULTIPLE JURISDICTIONS

 

AND

 

IN THE MATTER OF

KAUSHIK RAKHIT (Rakhit),

BARRY HUCIK (Hucik),

JORDAN JOHNSEN (Johnsen),

CHRISTOPHER LAW (Law),

GLEN NEVOKSHONOFF (Nevokshonoff),

SUSAN TARGETT (Targett) (collectively, the Insiders)

AND

SEVEN GENERATIONS ENERGY LTD.

(Seven Generations, and, together with the Insiders, the Filers)

 

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application from the Filers for a decision (the Exemption Sought) under the securities legislation (the Legislation) of the Jurisdictions exempting each of the Insiders from the requirement in section 3.3 of National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104) and subsection 107(2) of the Securities Act (Ontario) (the Ontario Act) to file an insider report within five days following the disposition of securities under the ASDP (as defined below), subject to certain conditions.

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

(a)           the Alberta Securities Commission is the principal regulator for this application;

 

(b)           the Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; and

 

(c)           this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 or NI 55-104 have the same meaning if used in this decision, unless otherwise defined herein.

Representations

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

Seven Generations

1.             Seven Generations is a corporation existing under the laws of Canada, is a reporting issuer in each of the provinces of Canada and is not in default of securities legislation in any jurisdiction.

 

2.             The head office of Seven Generations is located in Calgary, Alberta.

 

3.             The authorized share capital of Seven Generations consists of an unlimited number of common shares (Common Shares), an unlimited number of class B common shares, an unlimited number of each of series A, series B, series C and series D preferred shares and an unlimited number of special voting shares. As at December 19, 2017, Seven Generations had 354,728,168 Common Shares issued and outstanding and no class B common shares, preferred shares of any series or special voting shares issued and outstanding.

 

4.             The Common Shares are listed and posted for trading on the Toronto Stock Exchange under the symbol “VII”.

 

The Insiders

 

5.             Rakhit is a Director of Seven Generations and is a reporting insider. Rakhit is not in default of securities legislation in any jurisdiction.

 

6.             As at December 19, 2017, Rakhit beneficially owned, controlled or directed 647,948 Common Shares (representing approximately 0.183% of the then outstanding Common Shares), and held 66,856 options (Options) to purchase Common Shares, each Option entitling the holder to purchase one Common Share, and 32,140 warrants (Warrants) to purchase Common Shares, each Warrant entitling the holder to purchase one Common Share. Rakhit holds 856 Options and 2,140 Warrants expiring on June 27, 2018, which will be subject to the ASDP.

 

7.             Rakhit wishes to sell up to 2,996 Common Shares pursuant to the ASDP, by selling Common Shares gained upon exercise of the Options and Warrants expiring on June 27, 2018.

 

8.             Hucik is Vice President, Drilling of Seven Generations and is a reporting insider. Hucik is not in default of securities legislation in any jurisdiction.

 

9.             As at December 19, 2017, Hucik beneficially owned, controlled or directed 51,048 Common Shares (representing approximately 0.014% of the then outstanding Common Shares), and held 605,162 Options, each Option entitling the holder to purchase one Common Share, and 1,060,720 Warrants, each Warrant entitling the holder to purchase one Common Share. Hucik holds 357,214 Options and 893,036 Warrants expiring on June 27, 2018, which will be subject to the ASDP.

 

10.          Hucik wishes to sell up to 1,250,250 Common Shares pursuant to the ASDP, by selling Common Shares gained upon exercise of the Options and Warrants expiring on June 27, 2018.

 

11.          Johnsen is Vice President, Operations & Engineering of Seven Generations and is a reporting insider. Johnsen is not in default of securities legislation in any jurisdiction.

 

12.          As at December 19, 2017, Johnsen beneficially owned, controlled or directed 6,139 Common Shares (representing approximately 0.002% of the then outstanding Common Shares), and held 237,556 Options, each Option entitling the holder to purchase one Common Share, and 725,568 Warrants, each Warrant entitling the holder to purchase one Common Share. Johnsen holds no Options and 505,940 Warrants expiring on June 27, 2018, which will be subject to the ASDP.

 

13.          Johnsen wishes to sell up to 505,940 Common Shares pursuant to the ASDP, by selling Common Shares gained upon exercise of Warrants expiring on June 27, 2018.

 

14.          Law is Chief Financial Officer of Seven Generations and is a reporting insider. Law is not in default of securities legislation in any jurisdiction.

 

15.          As at December 19, 2017, Law beneficially owned, controlled or directed 48,769 Common Shares (representing approximately 0.014% of the then outstanding Common Shares), and held 672,588 Options, each Option entitling the holder to purchase one Common Share, and 528,210 Warrants, each Warrant entitling the holder to purchase one Common Share. Law holds 201,814 Options and 247,720 Warrants expiring on June 27, 2018, which will be subject to the ASDP.

 

16.          Law wishes to sell up to 449,534 Common Shares pursuant to the ASDP, by selling Common Shares gained upon exercise of the Options and Warrants expiring on June 27, 2018.

 

17.          Nevokshonoff is Chief Operating Officer of Seven Generations and is a reporting insider. Nevokshonoff is not in default of securities legislation in any jurisdiction.

 

18.          As at December 19, 2017, Nevokshonoff beneficially owned, controlled or directed 36,488 Common Shares (representing approximately 0.010% of the then outstanding Common Shares), and held 590,379 Options, each Option entitling the holder to purchase one Common Share, and 678,210 Warrants, each Warrant entitling the holder to purchase one Common Share. Nevokshonoff holds 145,150 Options and 397,720 Warrants expiring on June 27, 2018, which will be subject to the ASDP.

 

19.          Nevokshonoff wishes to sell up to 542,870 Common Shares pursuant to the ASDP, by selling Common Shares gained upon exercise of the Options and Warrants expiring on June 27, 2018.

 

20.          Targett is Executive Vice President, Corporate of Seven Generations and is a reporting insider. Targett is not in default of securities legislation in any jurisdiction.

 

21.          As at December 19, 2017, Targett beneficially owned, controlled or directed 84,322 Common Shares (representing approximately 0.024% of the then outstanding Common Shares), and held 629,438 Options, each Option entitling the holder to purchase one Common Share, and 830,704 Warrants, each Warrant entitling the holder to purchase one Common Share. Targett holds 232,530 Options and 581,324 Warrants expiring on June 27, 2018, which will be subject to the ASDP.

 

22.          Targett wishes to sell up to 813,854 Common Shares pursuant to the ASDP, by selling Common Shares gained upon exercise of the Options and Warrants expiring on June 27, 2018.

 

The Automatic Securities Disposition Plan

 

23.          RBC Dominion Securities Inc. (the Administrator), Seven Generations and the Insiders entered into an automatic securities disposition plan (the ASDP) on December 19, 2017 to be effective upon receipt of the Exemption Sought, to facilitate the automatic exercise on each Insider’s behalf of Options and Warrants and the automatic sale on each Insider’s behalf of Common Shares, including those Common Shares acquired upon exercise of Options and Warrants. The Options and Warrants that are the subject of the ASDP are held in electronic form by an affiliate of Solium Capital Inc. (Solium) in its capacity as administrator of Seven Generations equity based compensation plans. Each Insider has deposited exercise forms with the Administrator, in respect of the Options and Warrants expiring on June 27, 2018, and appointed the Administrator to act as its agent to exercise the Options and Warrants. The Administrator will exercise those Options and/or Warrants (through Solium’s systems) and sell the underlying Common Shares in accordance with the trading parameters provided by that Insider.

 

24.          Seven Generations will issue a news release announcing the effectiveness of the ASDP promptly after issuance of this decision.

 

25.          The ASDP may be modified or amended (including any amendments to the trading parameters or other instructions by an Insider) if all of the following conditions are met:

 

(a)           there is written agreement between the Administrator, Seven Generations and each of the Insiders;

 

(b)           each Insider in respect of whom the ASDP is modified or amended has provided notice to the public of the proposed change by describing it in a filing on the System for Electronic Disclosure by Insiders (SEDI) and Seven Generations has notified the public in a news release of both the modification or amendment and that each of the Insiders has confirmed that they are not aware of an undisclosed material fact or material change about Seven Generations or any of its securities;

 

(c)           any applicable regulatory approval has been obtained;

 

(d)           there is no blackout period in effect in respect of the securities of Seven Generations;

 

(e)           the Insider does not possess any material non-public information about Seven Generations or the securities of Seven Generations, and has no knowledge of a material fact or material change with respect to Seven Generations or any securities of Seven Generations (including the Common Shares) that has not been generally disclosed and has executed and delivered a certificate addressed to Seven Generations and the Administrator confirming that;

 

(f)            such modification or amendment is made in good faith and not as part of a plan or scheme to evade the prohibitions of section 147 of the Securities Act (Alberta) (the Alberta Act), section 76 of the Ontario Act or comparable prohibitions in other securities legislation.

 

26.          The Administrator is a securities broker which is at arm’s length to Seven Generations and each of the Insiders.

 

27.          The ASDP does not provide for any waiting period following the voluntary termination of the ASDP by the Insiders before the Insiders can enroll in a new ASDP. However, this decision does not provide the Exemption Sought in respect of any new ASDP.

 

28.          The Administrator has been appointed as an independent broker to effect the exercise of Options and Warrants and the sale of the Common Shares pursuant to the terms and conditions of the ASDP. The transactions under the ASDP will be effected by the Administrator in accordance with pre-determined instructions as to the exercise of Options and Warrants, the number and dollar value of Common Shares to be sold, and other relevant information.

 

29.          Subject to the restrictions set forth in the ASDP, the Administrator shall execute the trades in such a way as to attempt to minimize the negative price impact on the market and to attempt to maximize the prices obtained for the Common Shares sold.

 

30.          Except for modifications or amendments as described above, the Insiders do not have the authority to make investment decisions or influence or control any exercise or disposition effected by the Administrator pursuant to the ASDP and the Administrator and the Insiders will not consult regarding any exercise or disposition.

 

31.          No Insider will disclose to the Administrator any information concerning Seven Generations that could reasonably be expected to influence or affect any exercise or disposition under the ASDP.

 

32.          The ASDP includes a waiting period of 30 days between the effective date of the ASDP and the date that the first exercise or disposition can be made under the ASDP.

 

33.          The ASDP has been structured to comply with applicable securities legislation and guidance, including section 147(7)(c) of the Alberta Act, paragraph 175(2)(b) of the General Regulation under the Ontario Act and Ontario Securities Commission Staff Notice 55-701 Automatic Securities Disposition Plans and Automatic Securities Purchase Plans.

 

34.          At the time of execution of and entering into the ASDP, each of the Insiders represented that they did not possess knowledge of a material fact or material change (as such terms are defined under applicable Canadian securities laws) with respect to Seven Generations that had not been generally disclosed, and that they entered into the ASDP in good faith and not as part of a plan or scheme to evade the insider trading prohibitions of applicable Canadian securities laws.

 

35.          The Warrants and Options and the Common Shares issuable on the exercise thereof are not subject to any liens, security interests or other impediments to transfer (except for limitations imposed by any applicable laws).

 

36.          The ASDP will automatically terminate on the earliest to occur of:

 

(a)           December 31, 2018;

 

(b)           the exercise of all of the Options and Warrants and the sale of all of the Common Shares contemplated under the ASDP (including Common Shares underlying Options and Warrants);

 

(c)           Seven Generations’ reasonable determination of any of the following:

 

(i)            the ASDP does not comply with applicable securities legislation;

(ii)           any Insider or the Administrator has not complied with the terms of the ASDP;

 

(iii)          any Insider or the Administrator has not complied with applicable securities laws in connection with the ASDP;

 

(iv)          any Insider or the Administrator has become subject to a legal restriction which prevents the Insider or the Administrator from continuing to be subject to the ASDP;

 

(d)           the public announcement of, or execution of an agreement for, a take-over bid or exchange offer with respect to the Common Shares or merger, amalgamation, arrangement, acquisition, reorganization, recapitalization or comparable transaction affecting the securities of Seven Generations as a result of which the Common Shares are to be exchanged or converted into cash and/or securities of another entity.

 

37.          An Insider may elect to irrevocably terminate his or her participation in the ASDP if all of the following conditions are met:

 

(a)           there is no blackout period in effect in respect of the securities of Seven Generations;

 

(b)           the Insider does not possess any knowledge of a material fact or material change that has not been generally disclosed and is acting in good faith and not as part of a plan or scheme to evade the prohibitions of Section 147 of the Alberta Act, Section 76 of the Ontario Act or comparable prohibitions in other securities legislation and executes and delivers a certificate addressed to Seven Generations and the Administrator confirming that at the time of the request to terminate his or her participation in the ASDP;

 

(c)           the Insider notifies the public of the termination by making a SEDI filing and Seven Generations has notified the public in a news release of the termination and that the Insider has confirmed that they are not aware of an undisclosed material fact or material change about Seven Generations or any of its securities.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted in respect of an Insider provided that at the time of relying on the Exemption Sought the Insider is compliance with its representations in paragraphs 25, 30 and 31 of this decision and by March 31 of each calendar year the Insider files a report through SEDI of all acquisitions and dispositions under the ASDP during the prior calendar year not previously disclosed in a SEDI filing, disclosing either of the following:

(a)           each acquisition and disposition on a transaction-by-transaction basis;

 

(b)           all acquisitions as a single transaction using the average unit price of the securities, and all dispositions as a single transaction using the average unit price of the securities.

“Tom Graham, CA”

Director, Corporate Finance

Alberta Securities Commission