MRRS -- exemption from the requirement containedin the securities legislation of the Jurisdictions to be registeredto trade in a security in connection with Fastrak's activitiesas an administrator of employee share incentive plans for clientcompanies, subject to conditions.
Applicable Ontario Statute
Ontario Securities Act, R.S.O. 1990, c. S.5,s. 25(1), 147.
Applicable Ontario Rules
OSC Rule 45-503.
OSC Rule 32-501.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
ALBERTA, BRITISH COLUMBIA,MANITOBA,
ONTARIO AND SASKATCHEWAN
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
FASTRAK SYSTEMS INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Makers")in each of Alberta, British Columbia, Manitoba, Ontario andSaskatchewan (the "Jurisdictions") has receivedan application from Fastrak Systems Inc. ("Fastrak")for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that therequirement contained in the Legislation to be registered totrade in a security (the "Registration Requirement")shall not apply to Fastrak's activities as administrator ofemployee share incentive plans ("ESPs") ofclient companies which permit employees, officers and directorsresident in any of the Jurisdictions ("Plan Participants")to purchase securities, as more fully described below;
AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "MRRS"),the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS Fastrak has represented tothe Decision Maker that:
1. Fastrak is a corporation incorporated underthe laws of Ontario, with its head office in Ontario. It isnot registered to trade in securities in any capacity underthe laws of any jurisdiction.
2. Fastrak is in the business of administeringESPs. Fastrak enters into administration agreements ("AdministrationAgreements") with companies that have previouslyestablished, or will hereafter establish, ESPs (individuallya "Company" and collectively the "Companies").The distribution of securities under ESPs, and the first tradeof such securities, will be exempt from the registration andprospectus requirements of the Legislation, as applicable,pursuant to available exemptions or, where required, exemptionorders granted under applicable Legislation in the Jurisdictions.
3. ESPs may include:
(i) share purchase plans, share bonus plans,restricted share plans, share award plans and similar plans,each of which involve, or may potentially involve, the issuanceof shares of a Company to a Plan Participant; and
(ii) share option plans which involve, ormay potentially involve, the issuance of options to purchaseshares of a Company to a Plan Participant and, on exerciseof such options, the issuance of shares of the Company tothe Plan Participant.
4. Plan Participants may include registeredretirement savings plans, registered retirement income fundsand registered education savings plans of which employees,officers and directors of a Company or its affiliates arebeneficiaries.
5. Under an ESP, only employees, directorsand officers of the relevant Company and its affiliates willbe eligible to acquire securities pursuant to the ESP. Participationin the ESP is voluntary and employees are not required topurchase securities nor are they induced to purchase securitiesby expectation of employment with the Company or its affiliates.
6. Fastrak's services as administrator ofESPs will principally involve:
(a) maintaining accounts for Plan Participantswhich will provide information on holdings, purchases, sales,option values and vesting schedules, option exercises, dividendsand asset values;
(b) maintaining an Internet website, interactivevoice response facilities and a "1-800" call centre;
(c) distributing annual reports, quarterlyfinancial statements and management proxy circulars of theapplicable Company to Plan Participants;
(d) facilitating option exercises;
(e) facilitating sales of shares; and
(f) reporting to Companies and Plan Participantson a periodic basis.
7. Each Company (or its Canadian affiliate)will establish and maintain a trading account ("ESPAccount") for and on behalf of Plan Participantswith a dealer who is registered under applicable Legislation(the "Plan Broker"). Fastrak will have accessand authority to deal with the Plan Broker regarding the ESPAccount so as to permit Fastrak to perform its duties underthe Administration Agreements.
8. Each Company (or its Canadian affiliate)will arrange with the Plan Broker to have payroll deductionsand additional Company contributions, if applicable, delivereddirectly from the Company to the Plan Broker. Alternatively,Plan Participants may contribute funds directly to the PlanBroker.
9. Upon receipt of the contributed funds fromthe Company and/or Plan Participants, the Plan Broker willaggregate the amounts from such contributions for each designatedinvestment period and will purchase shares in the secondarymarkets for and on behalf of the Plan Participants.
10. Options and shares (through option exercisesor otherwise) may be issued directly by the Company from treasuryto Plan Participants if the ESP so provides.
11. Shares will be registered in the nameof the Company, as nominee for the Plan Participants, andwill be held in the ESP Account. Plan Participants who havepersonal investment accounts with a broker may request, atany time, to have their ESP securities moved from the ESPAccount to their personal brokerage account. Thereafter, thePlan Participant will deal directly with his or her personalbroker.
12. The Company and/or the Plan Broker willcommunicate the number of securities issued from treasuryor acquired in the secondary markets to Fastrak. Fastrak willthen record these acquisitions on a pro rata basisfor each contributing Plan Participant.
13. If and when they so desire, Plan Participantsmay communicate sell orders and cashless option exerciseswith respect to ESP securities to Fastrak by means of theInternet, interactive voice response facilities ("IVR")or facsimile. In addition, Fastrak will maintain a "1-800"call centre (the "Call Centre") to assistPlan Participants with general inquiries concerning Plan Participants'account information. Fastrak has established a policy prohibitingits customer service representatives from accepting oral sellorders from Plan Participants over the telephone. No advicewill be offered or available from Fastrak to Plan Participantsconcerning the purchase or sale of ESP securities.
14. In respect of each Company, Fastrak willaggregate sell orders received from Plan Participants (otherthan Plan Participants who have elected to execute transactionsthrough a personal broker) over a time period designated bythe Company (a business day or days). At the end of the timeperiod, Fastrak will place a single aggregate sell order withthe Plan Broker for each Company. The Plan Broker will thenexecute sales of shares in the secondary markets for and onbehalf of the Plan Participants.
15. The Plan Broker will remit the aggregateproceeds of sales (net of brokerage commissions) directlyto the Plan Participants or directly into a segregated bankaccount maintained by Fastrak with a Canadian financial institutionfor each ESP, whereupon Fastrak will then remit the proceeds(net of administration fees with respect to the sale whichmay be charged by Fastrak to the Plan Participant or the Companyin accordance with the fee arrangement between Fastrak andthe Company) to each Plan Participant that placed a sell orderon a pro rata basis.
16. Cash and non-cash dividends paid on sharesacquired under ESPs will be credited to the applicable ESPAccount. Subject to the terms of the Plan, cash dividendswill be automatically reinvested by the Plan Broker in additionalsecurities in the manner described above. Similarly, stockdividends and/or stock splits are deposited into each ESPaccount and allocated pro rata to each Plan Participant,where applicable. Stock rights cannot be exercised, and maybe sold and the proceeds reinvested by the Plan Broker inthe manner described above. An administration fee may be chargedto the Company on reinvestment purchases in accordance withthe fee arrangement between Fastrak and the Company.
17. If a Plan Participant ceases to be qualifiedto participate in an ESP, by reason of termination of employmentwith the Company or otherwise, such person shall cease tobe a Plan Participant. Upon the occurrence of such an eventand upon the Company's instructions, Fastrak will direct thePlan Broker to transfer the former Plan Participant's securities,sell the securities, or deliver share certificates representingthe securities together with a cheque for the former PlanParticipant's fractional interest, if any. Administrationfees and commissions, where applicable with respect to salesand/or withdrawals are typically borne by the Plan Participant.
18. Plan Participants may at all times reviewthe real-time status of their holdings of ESP securities throughFastrak's Internet website, IVR or the Call Centre.
AND WHEREAS pursuant to the system, thisMRRS Decision Document evidences the decision of each of theDecision Makers (collectively, the "Decision");
AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides each Decision Maker with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makers pursuantto the Legislation is that the Registration Requirement shallnot apply in respect of the services provided by Fastrak asadministrator of ESPs and the activities of Plan Participantsin connection with the provision of such services by Fastrakprovided that:
(a) in connection with the administrationof ESPs pursuant to an Administration Agreement, Fastrak limitsits activities to those described in the representations aboveas being undertaken by it;
(b) the sale of securities by a Plan Participantunder each ESP is made through the Plan Broker;
(c) Fastrak does not provide any advice toany Plan Participant concerning the decision to purchase orsell securities;
(d) all funds received by Fastrak from thesale of securities by a Plan Participant under an ESP aredeposited promptly into a segregated bank account with a Canadianfinancial institution and then promptly remitted to the applicablePlan Participants net of Fastrak's fees as set out in theapplicable Administration Agreement;
(e) Fastrak maintains bonding or insurancewith respect to its activities in an amount of not less than$200,000;
(f) Fastrak sends to each Plan Participanta statement of account showing any debit or credit balanceand the details of any securities held, purchases, sales,option values and vesting schedules, option exercises, dividendsand asset values, not less than once every three months;
(g) Fastrak, in respect of each ESP for whichit has entered into an Administration Agreement, maintainsbooks and records necessary to record properly all transactionsfor which it is responsible pursuant to the AdministrationAgreement; and
(h) Fastrak provides to each Plan Participantwho uses Fastrak's services in connection with an ESP a writtenstatement which states that the Plan Participant is receivingno investment advice from Fastrak with respect to the purchaseor sale of securities under the ESP and that if the Plan Participantwishes to receive investment advice in connection with theESP then the Plan Participant should contact a broker or dealer.
February 24, 2003.
"H. Lorne Morphy"
"Robert L. Shirriff"