Exemption Orders (Discretionary)
WIRELESS MATRIX CORPORATION
2001 BCSECCOM 269
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Relief from the prospectus requirements in connection with trades being undertaken to complete a business combination between a Canadian public corporation and a private Delaware company.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, s. 76
IN THE MATTER OF THE SECURITIES LEGISLATION OF ALBERTA, ONTARIO AND BRITISH COLUMBIA
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF WIRELESS MATRIX CORPORATION
MRRS DECISION DOCUMENT
1. WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of Alberta, Ontario and British Columbia (the “Jurisdictions”) has received an application from Wireless Matrix Corporation (“Wireless”) for a decision under the securities legislation of the Jurisdictions (the “Legislation”) exempting certain distributions from the requirement under the Legislation to file and obtain a receipt for a preliminary prospectus and a prospectus (the “Prospectus Requirement”);
2. AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the “System”) the Alberta Securities Commission is the principal regulator for this application;
3. AND WHEREAS Wireless has represented to the Decision Makers that:
3.1 Wireless is a corporation continued under the Canada Business Corporations Act;
3.2 the head office of Wireless is in Calgary, Alberta;
3.3 Wireless is a reporting issuer in each of the Jurisdictions;
3.4 the authorized capital of Wireless includes an unlimited number of common shares (“Wireless Shares”);
3.5 22,035,029 Wireless Shares are currently outstanding;
3.6 the Wireless Shares are listed and posted for trading on The Toronto Stock Exchange (the “TSE”);
3.7 MX Company, Inc. (“MX”) is a corporation incorporated under the laws of the State of Delaware;
3.8 MX is a wholly owned subsidiary of Wireless;
3.9 Norcom Networks Corporation (“Norcom”) is a corporation incorporated under the laws of the State of Delaware;
3.10 the head office of Norcom is in Reston, Virginia;
3.11 Norcom is not a reporting issuer in any of the Jurisdictions;
3.12 no securities of Norcom are listed on a stock exchange or traded on any market;
3.13 the authorized capital of Norcom includes 4,500,000 shares of common stock (“Norcom Shares”);
3.14 3,135,045 Norcom Shares, 515,132 options to purchase Norcom Shares (“Norcom Options”) and 6,072 warrants to purchase Norcom Shares (“Norcom Warrants”) are currently outstanding;
3.15 as at February 13, 2001, 1 holder of Norcom Shares was resident in British Columbia and held 11,679 Norcom Shares;
3.16 as at February 13, 2001, 18 holders of Norcom Options were resident in British Columbia and held 34,500 Norcom Options;
3.17 Norcom also currently has outstanding a secured promissory note in the principal amount of US$5,000,000 (the “Norcom Note”);
3.18 the holder of the Norcom Note is resident in British Columbia;
3.19 pursuant to a business combination agreement dated January 8, 2001, Wireless has agreed to acquire Norcom (the “Combination”);
3.20 under the Combination:
3.20.1 Norcom and MX will merge;
3.20.2 the holders of Norcom Shares will surrender them in return for a combination of Wireless Shares and notes redeemable by Wireless for cash or a specified number of Wireless Shares (“Wireless Notes”);
3.20.3 the terms of the Norcom Options and Norcom Warrants will be made such that Wireless will become obligated to issue a number of Wireless Shares upon their exercise equivalent to the number of Norcom Shares that would have been issuable if they had been exercised prior to the Combination; and
3.20.4 the holder of the Norcom Note will exchange it with Wireless in return for a combination of Wireless Shares and cash;
3.21 in connection with the Combination, holders of Norcom Shares and the Norcom Note will receive a private placement memorandum prepared in accordance with applicable securities laws of the United States of America (the “Memorandum”);
3.22 the Memorandum will contain a copy of the agreement governing the Combination and, in the case of holders of Norcom Shares, a form providing for the holder’s written consent to the Combination;
3.23 under Delaware law, the Combination must receive the consent of the holders of the majority of Norcom Shares;
3.24 under Delaware law, the holders of Norcom Shares will receive dissent and appraisal rights in respect of the Combination;
3.25 Wireless will issue up to 16,461,647 Wireless Shares in connection with the Combination and reserve for issuance an additional 2,600,000 Wireless Shares issuable upon the exercise of Norcom Options and Norcom Warrants;
3.26 Wireless has received conditional approval from the TSE for the listing of the Wireless Shares issuable with respect to the Combination;
3.27 the following trades may occur in connection with the Combination (the “Trades”):
3.27.1 the issuance of Wireless Shares and Wireless Notes in return for the surrender of Norcom Shares;
3.27.2 the issuance of Wireless Shares in return for the Norcom Note;
3.27.3 the issuance of Wireless Shares upon the redemption of Wireless Notes;
3.27.4 the issuance of Wireless Shares upon the exercise of Norcom Options and Norcom Warrants;
3.28 certain of the Trades will be distributions under the Legislation in respect of which no exemption from the Prospectus Requirement is available;
4. AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the “Decision”);
5. AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
6. THE DECISION of the Decision Makers under the Legislation is that the Prospectus Requirement shall not apply to the Trades;
7. THE FURTHER DECISION of the Decision Makers under the Legislation is that the first trade of Wireless Shares issued in reliance on this Decision in a Jurisdiction shall be deemed to be a distribution under the Legislation of such Jurisdiction (the “Applicable Legislation”) unless:
7.1 at the time of the first trade, Wireless is and has been a reporting issuer under the Applicable Legislation for the 12 months immediately preceding the trade;
7.2 no unusual effort is made to prepare the market or to create a demand for the Wireless Shares;
7.3 no extraordinary commission or consideration is paid to a person or company in respect of the trade;
7.4 if the seller of the securities is an insider or officer of Wireless, the seller has no reasonable grounds to believe that Wireless is in default of any requirement of the Applicable Legislation; and
7.5 the first trade is not from the holdings of a person or company or a combination of persons or companies holding a sufficient number of any securities of Wireless so as to affect materially the control of Wireless or more than 20% of the outstanding voting securities of Wireless, except where there is evidence showing that the holding of those securities does not affect materially the control of Wireless.
8. THE FURTHER DECISION of the Decision Makers under the Legislation is that, except for a trade made to Wireless upon the redemption of the Wireless Notes, the first trade of Wireless Notes issued in reliance on this Decision in a Jurisdiction shall be deemed to be a distribution under the Legislation of such Jurisdiction.
DATED this 22nd day of February, 2001.
Glenda A. Campbell, Vice-Chair Jerry A. Bennis, FCA, Member