Subsection 74(1) of the Act - first trade in securities acquired pursuant to a securitiesexchange take-over bid exempt from section 53 of the Act, subject to certain conditions.
Securities Act, R.S.O. 1990, c.S.5, as am., ss. 53, 72(1)(j), 72(5) and 74(1).
Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am., s. 17.
OSC Rule 45-501 - Exempt Distributions.
OSC Rule 14-501 - Definitions.
R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")
IN THE MATTER OF
HARRIER CAPITAL CORPORATION
UPON the application of Harrier Capital Corporation (the "Issuer") to the Ontario SecuritiesCommission (the "Commission") for a ruling pursuant to subsection 74(l) of the Act that the firsttrade in certain common shares of the Issuer to be acquired pursuant to a securities exchangetake-over bid made by the Issuer for all the issued and outstanding securities of MemexElectronics Inc. ("Memex") will not be subject to section 53 of the Act;
AND UPON considering the application and the recommendation of the staff of theCommission;
AND UPON the Issuer having represented to the Commission that:
1. The Issuer was incorporated under the laws, of the Province of Alberta on November 19,1996 and became a reporting issuer in the Province of Alberta pursuant to a receipt fromthe Alberta Securities Commission (the "ASC") for the Issuer's final prospectus dated April2, 1997.
2. The authorized share capital of the Issuer consists of an unlimited number of commonshares and an unlimited number of preferred shares, of which 2,500,000 common sharesare issued and outstanding. A total of 250,000 common shares are reserved for issuanceunder director's and officer's stock options and no preferred shares are issued andoutstanding.
3. The Issuer is a junior capital pool company for the purposes of ASC Policy 4.11 andCircular No. 7 (the "Policies") of the Canadian Venture Exchange (formerly The AlbertaStock Exchange) (the "Exchange") and its common shares have been listed and postedfor trading on the Junior Capital Pool Board of the Exchange under the trading symbol"HRI". The Issuer's common shares were suspended from trading on January 27, 1999for failure to complete a Major Transaction within the time required by the Policies. It isanticipated that the suspension will be lifted by the Exchange after the Exchange's finalacceptance of the acquisition of the securities of Memex as the Issuer's Major Transaction.
4. Memex is a company incorporated under the laws of the Province of Ontario and is not areporting issuer under the Act. Memex designs hardware and software systems thatenable Internet-based e-manufacturing, including the direct, real-time control of machinetools on the factory floor.
5. The authorized capital of Memex consists of an unlimited number of common shares andan unlimited number of preferred shares of which, as of December 8, 1999, 12,400,000common shares were issued and outstanding. It is anticipated that at the time of the expiryof the Offer (as hereinafter defined), Memex will have 13,268,000 common shares (the"Memex Shares") outstanding.
6. By a lockup agreement dated September 15, 1999, as amended on December 1, 1999 (the"Lockup Agreement"), the Issuer entered into an agreement with majority shareholder ofMemex concerning the business combination of the Issuer and Memex.
7. Pursuant to the terms of the Lockup Agreement, the Issuer has made an offer to purchaseall the issued and outstanding securities of Memex (the "Offer") on the basis of one (1)common share of the Issuer for each one (1) common share of Memex pursuant to whichit proposes to issue a maximum of 13,268,000 common shares (the "Exchange Shares")to the shareholders of Memex who tender their Memex Shares (the "OffereeShareholders").
8. The Offer has been made in compliance with the take-over bid requirements of the Act andthe regulation made thereunder (the "Regulation").
9. In accordance with the requirements of the ASC and the Exchange governing junior capitalpool companies, and the Securities Act (Alberta) (the "Alberta Laws"), the minorityshareholders of the Issuer will have to approve the acquisition of the Memex Shares at ameeting of shareholders (the "Meeting").
10. In connection with the Meeting, and in order to comply with the Alberta Laws, aninformation circular dated November 30, 1999 (the "Information Circular") containingprospectus level disclosure on the Issuer, Memex and the proposed business combinationof the Issuer and Memex was reviewed by the Exchange and then mailed tosecurityholders of the Issuer and filed with the ASC.
11. A securities exchange take-over bid circular (the "Circular") dated December 2, 1999, asamended by a Notice of Change dated January 6, 2000 (the "Notice of Change"), preparedin compliance with the Act and the Securities Act (Alberta) and containing prospectus leveldisclosure of the Offer, the Issuer and Memex, including the audited financial statementsof the Issuer for the financial years ended December 31, 1998 and 1997, unauditedfinancial statements of the Issuer for the periods ending September 30, 1999 and 1998,audited financial statements of Memex for the three years ending September 30, 1999 andpro forma consolidated financial statements of the Issuer combining the financialstatements of the Issuer as at September 30, 1999 and the audited financial statementsof Memex for the year ended September 30, 1999, was distributed to the OffereeShareholders in connection with the Offer.
12. The Circular formed the disclosure basis upon which the Issuer became a reporting issuerin Ontario.
13. On December 23, 1999 a Notice of Extension of the Offer (the "Notice of Extension")prepared in compliance with the Act and the Alberta Laws was distributed to all of theOfferee Shareholders and filed with the Commission in connection with the Offer.
14. Memex shareholders have received the Circular, the Notice of Change, the Notice ofExtension and a director's circular of Memex recommending acceptance of the Offer. If90% of the Memex Shares are deposited pursuant to the Offer, the Issuer will take up theMemex Shares upon expiry of the time for acceptance of the Offer, and issue theExchange Shares to the Offeree Shareholders.
15. A total of 9,288,000 of the Exchange Shares will be subject to performance escrowrestrictions imposed by the Exchange pursuant to the Alberta Laws. In addition, 459,500will be subject to a one year hold period imposed by the Exchange.
16. On December 22, 1998, Rule 45-501 (the "Rule") came into force. The Rule, inter alia,revoked and replaced the prospectus exemption set out in section 17 of the Regulation.The Rule now provides that section 53 of the Act does not apply to a first trade in asecurity previously acquired under the exemption contained in clause 72(1)(j) of the Actif: (a) when such exemption was relied on, a securities exchange take-over bid circularfor the securities was filed by the offeror; (b) the trade is not a control person distribution;and (c) the issuer of the securities was a reporting issuer before the securities exchangetake-over bid circular was filed.
17. The Circular was filed with the Commission by the Issuer on December 7, 1999. TheCommission has accepted the filing of the Circular and has made the Issuer a reportingissuer under the Act effective December 7, 1999. However, because the Issuer was nota reporting issuer in Ontario at the time the Circular was filed, absent this ruling, theOfferee Shareholders resident in Ontario receiving Exchange Shares would only be ableto resell the Exchange Shares in compliance with subsection 72(5) of the Act resulting inan effective hold period of one year from the date that the Circular was filed under the Act.
AND UPON the Commission being satisfied that to do so would not be prejudicial to thepublic interest;
IT IS RULED pursuant to subsection 74(1) of the Act, that the first trade by an OffereeShareholder resident in Ontario in the Exchange Shares acquired pursuant to the Offer shall notbe subject to section 53 of the Act, provided that such trade is made in accordance with theprovisions of subsection 72(5) of the Act except that, for these purposes: (i) it shall not benecessary to satisfy the requirement in clause 72(5)(a) of the Act that the Issuer has been areporting issuer for at least twelve months; and (ii) it shall not be necessary to satisfy therequirement in clause 72(5)(a) that the Issuer not be in default of any requirement of the Act orthe regulations if the Offeree Shareholder is not in a special relationship with the Issuer, or, if theOfferee Shareholder is in a special relationship with the Issuer, the Offeree Shareholder hasreasonable grounds to believe that the Issuer is not in default under the Act or the regulations,where, for these purposes, "special relationship" shall have the same meaning as in CommissionRule 14-501 Definitions.
January 11th, 2000.
"J. A. Geller" "Robert W. Korthals"