Exemption Orders (Discretionary)
MICROSOFT CORPORATION
2001 BCSECCOM 517
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF MICROSOFT CORPORATION
AND
IN THE MATTER OF NCOMPASS LABS INC.
Exemption Order Under Sections 48 and 76
[para 1]
WHEREAS Microsoft Corporation (“Microsoft”) has applied to the Executive Director for an order under sections 48 and 76 of the Securities Act, R.S.B.C. 1996, c. 418, that certain intended trades in options to be made in connection with the proposed acquisition (the “Transaction”) by Microsoft of all of the issued and outstanding shares of NCompass Labs Inc. (“NCompass”) are exempt from the requirements of sections 34(1)(a) and 61 of the Act;
[para 2]
AND WHEREAS Microsoft has represented to the Executive Director that:
1. Microsoft is incorporated under the laws of the State of Washington, is not a reporting issuer under the Act and has no current intention of becoming a reporting issuer under the Act, but is currently subject to the reporting requirements of the United States Securities Exchange Act of 1934, as amended, and is current with all its filings with the United States Securities and Exchange Commission (the “SEC”);
2. the authorized capital of Microsoft consists of 12,000,000,000 common shares (“Microsoft Common Shares”) and 100,000,000 preferred shares; as of the close of business on March 31, 2001, 5,335,530,335 Microsoft Common Shares and options to purchase 930,577,909 Microsoft Common Shares were issued and outstanding and no preferred shares were outstanding;
3. the Microsoft Common Shares are quoted on the NASDAQ National Market (the “NNM”) and the Microsoft Common Shares which may be issued from time to time upon the exercise of Replacement Options (as such term is defined below) will be quoted on the NNM;
4. NCompass is a company continued under the Canada Business Corporations Act (“CBCA”) and is not a reporting issuer under the Act;
5. the authorized capital of NCompass consists of 137,382,868 shares (the “NCompass Shares”), divided into 100,000,000 Class A Common Shares, 10,000,000 Class B Common Shares, 2,470,587 Class A Preferred Shares, 10,000,000 Class B Preferred Shares, 4,912,281 Class C Preferred Shares and 10,000,000 Class D Preferred Shares (the Class A Preferred Shares, Class B Preferred Shares, Class C Preferred Shares and Class D Preferred Shares being collectively referred to herein as the “Preferred Shares”); as of April 26, 2001, there were 6,237,366 Class A Common Shares, 2,629,762 Class B Common Shares, 2,470,587 Class A Preferred Shares, 9,805,863 Class B Preferred Shares, 3,557,734 Class C Preferred Shares and 1,486,000 Class D Preferred Shares of NCompass issued and outstanding and, as at April 24, 2001, there were outstanding options (“NCompass Options”) to purchase an aggregate of 2,720,471 Class A Common Shares;
6. the Transaction is proposed to be completed by way of a plan of arrangement (the “Arrangement”) under section 192 of the CBCA and requires (i) the approval of at least (A) three quarters (3/4) of the votes cast by each class of Preferred Shares at separate meetings of the holders of Preferred Shares; and (B) two-thirds of the votes cast by each of the holders of Class B Common Shares and the holders of Class A Common Shares and NCompass Options (voting together as one class) at each such separate meeting (and for which purpose the holders of NCompass Options will be entitled to one vote for each Class A Common Share that they are entitled to receive upon the exercise of the NCompass Options); and (ii) the approval of the Supreme Court of British Columbia (the “Court”);
7. the management proxy circular (the “Circular”) mailed to the security holders of NCompass in connection with the Arrangement was prepared by NCompass to conform with the requirements of the CBCA and an interim order of the Court obtained in respect of the Arrangement; the Circular contains a detailed description of the Arrangement, information regarding Microsoft and incorporates by reference various documents filed by Microsoft with the SEC, copies of which documents are attached as an appendix to the Circular;
8. upon the Arrangement becoming effective: the outstanding NCompass Shares will be acquired indirectly by Microsoft for cash; and outstanding NCompass Options that are held by employees of NCompass who have been offered, and accepted, employment with Microsoft following the Arrangement, including employees resident in British Columbia (the “BC Employees”), which are not exercised or cancelled, will be exchanged under the Arrangement for options to purchase Microsoft Common Shares (“Replacement Options”);
9. the Replacement Options will be issued pursuant to Microsoft’s 2001 Stock Plan and will be non-transferable except in accordance with the terms of the 2001 Stock Plan;
10. Microsoft is not able to rely on the exemptions from the registration and prospectus requirements of the Act contained in sections 45(2)(9) and 74(2)(8) of the Act for the issuance of the Replacement Options as the Circular has not been prepared in accordance with Form 30 prescribed in the Act, and may not be able to rely on the exemptions contained in sections 45(2)(10) and 74(2)(9) of the Act as the Replacement Options will be issued under the Arrangement concurrently with the transfer of the NCompass Shares to Microsoft;
11. at the time of the issuance of the Replacement Options, and after giving effect to the issuance of Microsoft Common Shares on exercise of the Replacement Options, persons whose last address as shown on the books of Microsoft was in Canada and who held Microsoft Common Shares will not hold more than 10% of the outstanding Microsoft Common Shares;
12. the majority of the directors and the majority of the senior officers of Microsoft reside outside British Columbia; and
13. there is no organized market in Canada for the Microsoft Common Shares and none is expected to develop;
[para 3]
AND WHEREAS the Executive Director considers that to do so would not be prejudicial to the public interest;
[para 4]
IT IS ORDERED:
1. under sections 48 and 76 of the Act that the issuance of the Replacement Options to the BC Employees is exempt from the requirements of sections 34(1)(a) and 61 of the Act, provided that Microsoft provides a copy of this order to each holder of Replacement Options;
2. under section 76 of the Act that any trade in Replacement Options will be deemed to be a distribution; and
3. under section 76 of the Act that any trade in Microsoft Common Shares acquired on the exercise of the Replacement Options will be deemed to be a distribution, unless the trade is executed through the facilities of an exchange or market outside Canada.
[para 5]
DATED May 18, 2001.
Derek E. Patterson
Acting Director