Securities Law & Instruments


Ruling under subsection 74(1) of the Act - sections25 and 53 of the Act do not apply to a trade in a security ofa Spin Off Company if the requirements of section 2.1 of OSCRule 45-501 - Exempt Distributions, except for paragraph 2.1(1)(b),are satisfied and provided that certain conditions are met.

Ontario Statutes

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

Ontario Rule

OSC Rule 45-501 - Exempt Distributions.



R.S.O. 1990, c. S.5, AS AMENDED(the "Act")






(Subsection 74(1) of the Act)

UPON the application (the "Application")of Parteq Research and Development Innovations (the "Applicant")to the Ontario Securities Commission (the "Commission")for a ruling pursuant to subsection 74(1) of the Act that sections25 and 53 of the Act will not apply to a trade in the securitiesof a Spin Off Company (as defined below) provided that the requirementsof section 2.1 of OSC Rule 45-501 - Exempt Distributions(the "Rule") except for paragraph 2.1(1)(b) are satisfied;

AND UPON considering the Applicationand the recommendation of staff of the Commission;

AND UPON the Applicant representing tothe Commission that:

1. The Applicant is a non-share, non-charitablecorporation which was incorporated under the CorporationsAct (Ontario) on December 16, 1987. The Applicant wasincorporated to protect and commercialize intellectual propertydeveloped by the faculty of Queen's University at Kingston("Queen's").

2. By the terms of the collective agreementbetween Queen's and its faculty, intellectual property createdby a faculty member of Queen's ("Intellectual Property")which the faculty member proposes to commercialize must bedisclosed to Queen's by the faculty member. Queen's may thenrefer the proposal to commercialize to the Applicant, if Queen'sdetermines the Applicant is suited to assist with the commercializationof the relevant Intellectual Property.

3. Queen's has granted to the Applicant anexclusive, worldwide licence of Intellectual Property to allowit to carry out its mandate.

4. Under its management and license arrangementswith Queen's, the Applicant operates as a cost centre. Afteroperating costs, which may include the grant to employeesof the Applicant of incentives which may improve in valuewith the increase in value of companies the Applicant creates(as described below), any surplus arising from the Applicant'soperations from time to time, accrues to Queen's or as itdirects. Queen's is a charitable corporation.

5. If the Applicant determines that the IntellectualProperty is suitable for commercialization, the Applicantand the principal inventor or inventors of the IntellectualProperty enter into one or more agreements providing for theprotection of the Intellectual Property, the sharing of licensingproceeds, research arrangements and other matters. If theIntellectual Property is sufficiently broad to support thecreation of a new venture, the Applicant will lead the creation,organization and financing of a new company to commercializethe relevant Intellectual Property.

6. The Applicant has created 16 companiesto commercialize Intellectual Property. Of these, the following14 companies remain active: (i) Cardiomics Inc.; (ii) CytochromaInc.; (iii) Datec Coating Corporation; (iv) GB TherapeuticsLtd.; (v) iGO Technologies Incorporated; (vi) Integran TechnologiesInc.; (vii) Molecular Mining Corporation; (viii) NeuroceptorInc.; (ix) Neurochem Incorporated; (x) Performance PlantsInc.; (xi) Qubit Systems Inc.; (xii) Roseworks Ltd. (xiii)SE Reactor Inc.; and (xiv) Vaxis Therapeutics Corporation(collectively referred to as the "Spin Off Companies"and individually as a "Spin Off Company"):

7. Only one Spin Off Company has been createdby the Applicant to exploit each core or platform technologyor bundle of Intellectual Property. The Spin Off Companiesare not engaged in a common enterprise, but rather operateindependently, and have distinctive business focuses.

8. The Applicant does not take a control positionin any Spin Off Company. As a general practice, the Applicant'sequity position does not exceed 45% of the issued and outstandingshares of a Spin Off Company, and is diluted as a consequenceof subsequent financing rounds made by each Spin Off Company.

9. It is the Applicant's mandate and obligationto provide intellectual property protection, business andventure creation support to each Spin Off Company.

10. As part of its activity, the Applicantalso acts as the manager of certain investment funds, includingfunds, the investment of which are governed by the CommunitySmall Business Investment Funds Act, S.O. 1992, c.18,as amended. Any benefits earned by the Applicant by virtueof undertaking such management, are treated as part of theordinary cost centre arrangements with Queen's and, afterthe deduction of any operating costs, any surplus accruesto the benefit of Queen's, or as it directs.

11. The Applicant may be considered to bea promoter, as that term is defined under subsection 1(1)of the Act (a "Promoter"), of each of the Spin OffCompanies;

AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS RULED PURSUANT TO subsection 74(1)of the Act that sections 25 and 53 of the Act do not apply toa trade in a security of a Spin Off Company if:

(a) the requirements of section 2.1 of theRule, except for paragraph 2.1(1)(b), are satisfied; and

(b) the seller of the securities of theSpin Off Company provides an information statement substantiallysimilar to Form 45-501F3 to the purchaser of the securityat least four days prior to the date of the trade unless,following such trade, the Spin Off Company will have notmore than five beneficial holders of its securities; andprovided further that

(c) if, under this Ruling, a security ofthe Spin Off Company is distributed to the Applicant ora Promoter the first trade in that security is deemed tobe a distribution unless the conditions in subsection (2)or (3) of section 2.8 of Multilateral Instrument 45-102- Resale of Securities ("MI 45-102") aresatisfied; and

(d) if, under this Ruling, a security ofthe Spin Off Company is distributed to a person or a companyother than the Applicant or a Promoter the first trade inthat security is deemed to be a distribution unless theconditions in subsection (3) or (4) of section 2.6 of MI45-102 are satisfied.

March 11, 2003.

"Paul M. Moore"                    "RobertW. Korthals"