Thales

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for relief from the prospectus and dealer registration requirements for certain trades made in connection with an employee share offering by a French issuer -- The offering involves the use of collective employee shareholding vehicles, each a fonds communs de placement d'entreprise (FCPE) -- The Filer cannot rely on the employee prospectus exemption in section 2.24 of National Instrument 45-106 Prospectus and Registration Exemptions and the Manager cannot rely on the plan administrator exemption in section 8.16 of National Instrument 31-103 Registration Requirements and Exemptions as the shares are not being offered to Canadian employees directly by the issuer but through the FCPEs -- Canadian employees will receive disclosure documents -- The FCPEs are subject to the supervision of the French Autorité des marchés financiers -- Relief granted, subject to conditions.

Applicable Legislative Provisions

Securities Act (Ontario), ss. 53, 74.

National Instrument 31-103 Registration Requirements and Exemptions, s. 8.16.

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

National Instrument 45-106 Prospectus and Registration Exemptions, s. 2.24.

April 21, 2011

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

THALES (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 (the "Legislation") for:

1. an exemption from the prospectus requirements of the Legislation (the "Prospectus Relief") so that such requirements do not apply to

(a) trades in units (the "Units") of

(i) an FCPE named World Classic Relais 2011 (the "Temporary Classic FCPE") which is a fonds commun de placement d'entreprise or "FCPE," a form of collective shareholding vehicle of a type commonly used in France for the conservation of shares held by employee-investors;

(ii) the "World Classic" compartment (the "Principal Classic Compartment") of an FCPE named Actionnariat Salarié Thales, which will merge with the Temporary Classic FCPE following the Employee Share Offering (as defined below) (the term "Classic Compartment" used herein means, prior to the merger, the Temporary Classic FCPE, and following the merger, the Principal Classic Compartment); and

(iii) the "Action Protect 2011" compartment (the "Protected Compartment" and, together with the Classic Compartment, the "Compartments" and each is a "Compartment") of the FCPE named Actionnariat Salarié Thales;

made pursuant to the Employee Share Offering to or with Qualifying Employees (as defined below) resident in the Jurisdiction and in the Provinces of British Columbia, Québec, Nova Scotia and Newfoundland and Labrador (collectively, the "Canadian Employees," and the Canadian Employees who subscribe for Units, the "Canadian Participants");

(b) trades of ordinary shares of the Filer (the "Shares") by the Temporary Classic FCPE, the Principal Classic Compartment and/or the Protected Compartment to or with Canadian Participants upon the redemption of Units by Canadian Participants;

(c) trades in Units of the Classic Compartment to holders of Units of the Protected Compartment upon the transfer of the Canadian Participants' assets in the Protected Compartment to the Classic Compartment at the end of the Lock-Up Period (defined below) in respect of Canadian Participants that do not redeem their Protected Compartment Units at that time;

2. an exemption from the dealer registration requirements of the Legislation (the "Registration Relief") so that such requirements do not apply to the Thales Group (as defined below and which, for clarity, includes the Filer and the Canadian Affiliates), the Temporary Classic FCPE, the Principal Classic Compartment, the Protected Compartment and Amundi (the "Management Company") in respect of:

(a) trades in Units made pursuant to the Employee Share Offering to or with Canadian Employees; and

(b) trades in Shares of the Filer by the Temporary Classic FCPE, the Principal Classic Compartment and/or the Protected Compartment to or with Canadian Participants upon the redemption of Units by Canadian Participants.

(the Prospectus Relief and the Registration Relief, collectively, the "Offering Relief").

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

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) 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 British Columbia, Québec, Nova Scotia and Newfoundland and Labrador.

Interpretation

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

Representations

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

1. The Filer is a corporation formed under the laws of France. It is not, and has no current intention of becoming, a reporting issuer under the Legislation or the securities legislation of any jurisdiction of Canada. The Shares are listed on Euronext Paris Stock Exchange. The Filer is not in default of the Legislation or the securities legislation of any jurisdiction of Canada.

2. The Filer carries on business in Canada through certain affiliated companies, including Thales Canada Inc. and Thales Rail Signalling Solutions Inc. (collectively, the "Canadian Affiliates" and, together with the Filer and other affiliates of the Filer, the "Thales Group"). Each of the Canadian Affiliates is a direct or indirect controlled subsidiary of the Filer and is not, and has no current intention of becoming, a reporting issuer under the Legislation or the securities legislation of any jurisdiction of Canada. The greatest number of employees of Canadian Affiliates is employed in Ontario.

3. As of the date hereof and after giving effect to the Employee Share Offering, Canadian residents do not and will not beneficially own (which term, for the purposes of this paragraph, is deemed to include all Shares held by the Classic Compartment and Protected Department on behalf of Canadian Participants) more than 10% of the Shares and do not and will not represent in number more than 10% of the total number of holders of the Shares as shown on the books of the Filer.

4. The Filer has established a global employee share offering for employees of the Thales Group (the "Employee Share Offering"). The Employee Share Offering is comprised of two subscription options: (i) an offering of Shares to be subscribed through the Classic Compartment (the "Classic Plan") and (ii) an offering of Shares to be subscribed through the Protected Compartment (the "Protected Plan").

5. Only persons who are employees of a member of the Thales Group during the subscription period for the Employee Share Offering and who meet minimum employment criteria (the "Qualifying Employees") will be invited to participate in the Employee Share Offering.

6. The Temporary Classic FCPE, the Principal Classic Compartment and the Protected Compartment were established to facilitate the participation of employees of the Thales Group in the Company's share offerings and to simplify custodial arrangements for such participation. There is no current intention for the Compartments to become reporting issuers under the Legislation or the securities legislation of any jurisdiction of Canada.

7. As set forth above, an FCPE (known in France as a fonds commun de placement d'entreprise) is a shareholding vehicle of a type commonly used in France for the conservation of shares held by employee investors, and must be registered with the French Autorité des marchés financiers (the "French AMF") at the time of its creation.

8. All Units acquired in the Employee Share Offering by Canadian Participants will be subject to a hold period of approximately five years (the "Lock-Up Period"), subject to certain exceptions prescribed by French law (such as a release on death or termination of employment).

9. Under the Classic Plan:

(a) The subscription price for Shares under the Classic Plan will be the Canadian dollar equivalent of the average of the opening price of the Shares (expressed in euros) on the 20 trading days preceding the date of the fixing of the subscription price by the President of the Filer (the "Reference Price"), less a 20% discount.

(b) For each 10 Shares that a Canadian Participant subscribes for under the Classic Plan, the employer of such Canadian Participant will make a matching contribution to the Classic Plan, for the benefit of, and at no cost to, the Canadian Participant, in an amount equal to the subscription price for one additional Share under the Classic Plan, up to a maximum of five matching contribution Shares per Canadian Participant (the "Employer Contribution").

(c) The Temporary Classic FCPE will apply the cash received from each Canadian Participants' subscription and the corresponding Employer Contributions to subscribe for Shares from the Filer. The Shares subscribed for will be held in the Temporary Classic FCPE and the Canadian Participant will receive one Unit in the Temporary Classic FCPE for each Share subscribed for, including Shares purchased with the Employer Contribution.

(d) After completion of the Employee Share Offering, the Temporary Classic FCPE will be merged with the Principal Classic Compartment (subject to the approval of the French AMF and the supervisory board of the Temporary Classic FCPE). Units of the Temporary Classic FCPE held by Canadian Participants will be replaced with Units of the Principal Classic Compartment on a pro rata basis and the Shares subscribed for under the Classic Plan will be held in the Principal Classic Compartment (the "Merger").

(e) The Units will be subject to a hold period of approximately five years (the "Lock-Up Period"), subject to certain exceptions prescribed by French law (such as a release on death or termination of employment).

(f) Any dividends paid on the Shares held in the Classic Compartment will be contributed to the Classic Compartment and used to purchase additional Shares. The net asset value of the Units will be increased to reflect this reinvestment.

(g) At the end of the Lock-Up Period, a Canadian Participant may (i) request the redemption of his or her Units in the Classic Compartment in consideration for the underlying Shares or a cash payment equal to the then market value of the Shares, or (ii) continue to hold his or her Units in the Classic Compartment and request the redemption of those Units at a later date.

(h) In the event of an early unwind resulting from the Canadian Participant exercising one of the exceptions to the Lock-Up Period prescribed by French law and meeting the applicable criteria, a Canadian Participant may request the redemption of Units in the Classic Compartment in consideration for a cash payment equal to the market value of such Shares.

10. Under the Protected Plan:

(a) The subscription price for Shares under the Protected Plan will be the Reference Price, less a discount of 15% (the "Purchase Price").

(b) The Protected Compartment will apply the cash received from each Canadian Participants' subscription (expressed in euros, the "Employee Contribution") to subscribe for Shares from the Filer.

(c) The Canadian Participant will receive one Unit in the Protected Compartment for each Share subscribed for with the Employee Contribution, the value of which will represent the Employee Contribution and the Appreciation Amount (as described below) in respect of a Share.

(d) Units will be subject to the Lock-Up Period, subject to certain exceptions prescribed by French law (such as a release on death or termination of employment).

(e) The Protected Compartment will enter into a swap arrangement ("Swap Agreement") with a bank (Credit Agricole Corporate and Investment Bank, or the "Bank"), which effectively provides that:

(i) during the Lock-Up Period, the Protected Compartment will pay to the Bank the net amount of any dividends received by the Protected Compartment;

(ii) at the end of the Lock-Up Period each Canadian Participant will be entitled to a guaranteed return equal to the sum of

(1) 100% of the value of the Canadian Participant's Employee Contribution, plus:

(2) an amount equal to a multiple (which shall be at least 1.1 and will be communicated to Qualifying Employees prior to the start of the subscription period) times the increase, if any, in the average price of the Shares purchased with the Canadian Participant's Employee Contribution compared to the Reference Price (the "Appreciation Amount").

(iii) If, at the end of the Lock-Up Period, the market value of the Shares in the Protected Compartment is less than 100% of the Employee Contributions, the Bank is obliged to contribute to the Protected Compartment to make up any shortfall. The Swap Agreement will terminate after the final swap payments are made.

(f) At the end of the Lock-Up Period a Canadian Participant may elect to redeem his or her Protected Compartment Units in consideration for cash or Shares with a value equivalent to the Canadian Participant's Employee Contribution and the Canadian Participant's portion of the Appreciation Amount, if any.

(g) If a Canadian Participant chooses not to redeem his or her Units in the Protected Compartment at the end of the Lock-Up Period, his or her investment in the Protected Plan (represented by the Employee Contribution and the Appreciation Amount) will be transferred to the Classic Compartment (subject to the approval of the French AMF). New Units of the Classic Compartment will be issued to the applicable Canadian Participants in recognition of such assets. Canadian Participants will be entitled to redeem these Classic Compartment Units whenever they wish, in consideration for the underlying Shares or a cash payment equal to the market value of such Shares. However, following a transfer to the Classic Compartment, the Canadian Participant's Employee Contribution will no longer be guaranteed by the Swap Agreement.

(h) In the event of an early unwind resulting from a Canadian Participant exercising one of the exceptions to the Lock-Up Period prescribed by French law and meeting the applicable criteria, the Canadian Participant may request the redemption of Units in the Protected Compartment for cash in an amount equal to the value of the Employee Contribution and an amount equal to approximately 1.1 times the increase, if any, in the average price of the Shares purchased with the Canadian Participant's Employee Contribution at the time of the early unwind compared to the Reference Price.

(i) To respond to the fact that, at the time of the initial investment decision relating to participation in the Protected Plan, Canadian Participants will be unable to quantify their potential income tax liability resulting from such participation, the Filer or the Canadian Affiliates will indemnify each Canadian Participant in the Protected Plan for the following costs: all tax costs to the Canadian Participants associated with the payment of dividends in excess of a specified amount of euros per calendar year per Share during the Lock-Up Period, such that, in all cases, a Canadian Participant will, at the time of the original investment decision, be able to determine his or her maximum tax liability in connection with dividends received by the Protected Compartment on his or her behalf under the Protected Plan.

(j) The Management Company is permitted to cancel the Swap Agreement (which will have the effect of cancelling the guarantee) in certain strictly defined conditions where it is determined to be in the best interests of the holders of Units under the Protected Plan. In the event that the Management Company cancelled the Swap Agreement and such actions were determined not to be in the best interests of the holders of the Units of the Protected Plan, then such holders would have a right of action under French law against the Management Company. Under no circumstances will a Canadian Participant in the Protected Plan be responsible to contribute an amount greater than his or her Employee Contribution.

11. The Temporary Classic FCPE is, and the Principal Classic Compartment and Protected Compartment are compartments of, an FCPE, which is a limited liability entity under French law. The Classic Compartment's portfolio will almost entirely consist of Shares of the Filer and cash in respect of dividends paid on the Shares which will be reinvested in Shares, and the Protected Compartment will also include Shares and cash, as well as rights and associated obligations under the Swap Agreement. Each portfolio may also include, from time to time, cash or cash equivalents pending investments in the Shares and for the purposes of Unit redemptions.

12. The Management Company is a portfolio management company governed by the laws of France. The Management Company is registered with the French AMF to manage French investment funds and complies with the rules of the French AMF. To the best of the Filer's knowledge, the Management Company is not, and has no current intention of becoming, a reporting issuer under the Legislation or the securities legislation of any jurisdiction of Canada, and the Management Company is not in default under the Legislation or the securities legislation of any jurisdiction of Canada.

13. The Management Company's portfolio management activities in connection with the Employee Share Offering and the Compartments are limited to purchasing Shares from the Filer, selling such Shares as necessary in order to fund redemption requests, and such activities as may be necessary to give effect to the Swap Agreement.

14. The Management Company is also responsible for preparing accounting documents and publishing periodic informational documents in accordance with the rules of each Compartment. The Management Company's activities do not affect the underlying value of the Shares.

15. Shares purchased pursuant to the Employee Share Offering will be deposited in each Compartment through CACEIS Bank (the "Depositary"), a large French commercial bank subject to French banking legislation. Under French law, the Depositary must be selected by the Management Company from among a limited number of companies identified on a list maintained by the French Minister of the Economy, Finance and Industry, and its appointment must be approved by the French AMF. The Depositary carries out orders to purchase, trade and sell securities in the portfolio and takes all necessary action to allow each Compartment to exercise the rights relating to the securities held in its portfolio.

16. The Unit value of each Compartment will be calculated and reported periodically to the French AMF.

17. All management charges relating to a Compartment and all costs in respect of the sale of the underlying Shares on the redemption of Units will be paid by the relevant Compartment's assets or by the Filer, as provided by the applicable Compartment's regulations.

18. Participation in the Employee Share Offering is voluntary, and Canadian Employees will not be induced to participate in the Employee Share Offering by expectation of employment or continued employment.

19. The total amount invested by a Canadian Participant in the Employee Share Offering cannot exceed 25% of his or her estimated gross annual compensation for 2011.

20. None of the Filer, the Management Company, the Canadian Affiliates or any of their employees, agents or representatives will provide investment advice to Canadian Employees with respect to an investment in the Shares or the Units.

21. The Shares are not currently listed for trading on any stock exchange in Canada and the Filer has no intention to have the Shares so listed. As there is no market for the Shares in Canada, and none is expected to develop, any first trades of Shares by Canadian Participants will be effected through the facilities of, and in accordance with the rules and regulations of, a foreign stock exchange outside of Canada.

22. Canadian Employees will receive an information package in the English or French language, according to their preference, which will include a summary of the terms of the Employee Share Offering, a tax notice containing a description of Canadian income tax consequences of subscribing to and holding Units and requesting the redemption of Units for cash or Shares at the end of the Lock-Up Period.

23. Upon request, Canadian Employees may receive copies of the Filer's French Document de Référence filed with the French AMF in respect of the Filer and a copy of the relevant Compartment's rules (which are analogous to company by-laws). The Canadian Employees will also have access to copies of the continuous disclosure materials relating to the Filer that are furnished to holders of Shares generally.

24. Canadian Participants will receive an initial statement indicating the number and value of the Units they hold under each plan, together with an updated statement at least once per year.

25. There are approximately 1465 Canadian Employees resident in the provinces of British Columbia, Ontario, Québec, Nova Scotia and Newfoundland and Labrador (with the greatest number, approximately 1163, resident in Ontario), who represent, in the aggregate, approximately 2% of the number of employees in the Thales Group worldwide.

Decision

The principal regulator is satisfied that the test contained in the Legislation that provides the principal regulator with the jurisdiction to make the decision has been met.

The decision of the principal regulator under the Legislation is that the Offering Relief is granted provided that the prospectus requirements of the Legislation will apply to the first trade in any Units or Shares acquired by Canadian Participants pursuant to this decision unless the following conditions are met:

(a) the issuer of the security

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

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

(b) at the distribution date, after giving effect to the issue of the security and any other securities of the same class or series that were issued at the same time as or as part of the same distribution as the security, residents of Canada

(i) did not own, directly or indirectly, more than 10% of the outstanding securities of the class or series, and

(ii) did not represent in number more than 10% of the total number of owners, directly or indirectly, of securities of the class or series; and

(c) the first trade is made

(i) through the facilities of an exchange, or a market, outside of Canada, or

(ii) to a person or company outside of Canada.