Mutual Reliance Review System for Exemptive Relief Applications - Relief from theprospectus requirements to permit an issuer to the PREP Procedures under NationalPolicy Statement No. 44 in connection with an initial public offering of common sharesof the issuer. Neither the issuer nor its common shares meet the eligibility criteria setout in National Policy Statement No. 44.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c.S.5, as am., s. 147.
Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am.,
In the Matter of Rule for Shelf Prospectus Offerings and for Pricing Offerings after theProspectus is Receipted.
IN THE MATTER OF THE
MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
724 SOLUTIONS INC.
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatory authority or regulator (the "DecisionMaker") in each of Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick,Prince Edward Island, Nova Scotia and Newfoundland (the "Jurisdictions") have receivedan application from 724 Solutions Inc. (the "Corporation") for a decision pursuant to thesecurities legislation of the Jurisdictions (the "Legislation") exempting the Corporation fromthe eligibility criteria set out in Section 4.1 of National Policy No. 44 ("NP 44") and articles37.5, 37.6 and 37.7 of the Regulation respecting Securities under the Legislation ofQuebec (the "Quebec Regulation"), thereby permitting the use by the Corporation of thePREP Procedures (as such term is defined in NP 44) and similar procedures under theLegislation of Quebec (the "Quebec Procedures") in connection with the Corporation'sproposed initial public offering of Shares (the "Offering") as more fully described below;
AND WHEREAS pursuant to the Mutual Reliance System for Exemptive ReliefApplications (the "System"), the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS the Corporation has represented to the Decision Makers that:
1. The Corporation designs, develops and markets software that enables the deliveryof secure and personalized on-line services over a variety of wired and wirelessInternet access devices.
2. The Corporation was incorporated under the Business Corporations Act (Ontario)and is not a reporting issuer or equivalent under the Legislation.
3. The authorized share capital of the Corporation consists of an unlimited number ofcommon shares (the "Shares") and an unlimited number of preference shares,issuable in series, of which 29,402,426 Shares and no preference shares areissued and outstanding as of December 31, 1999. The Corporation also has issuedand outstanding options (the "Options") to purchase an aggregate of 2,211,594Shares and one warrant (the "Warrant") to purchase 666,668 Shares as ofSeptember 30, 1999.
4. As of December 31, 1999, approximately 38.9% (11,428,570) of the Shares areowned by persons resident in Canada and approximately 96% of the Options areheld by employees of the Corporation resident in Canada. The remainder of theShares and the Options are held by residents of the United States, Finland, theUnited Kingdom or Asian countries.
5. The Offering will consist of concurrent offerings of Shares to the public in Canadaand the United States. The Corporation estimates that approximately 6,000,000Shares will be sold in the Offering for gross proceeds estimated to be between U.S.$66,000,000 and U.S. $78,000,000.
6. On November 2, 1999, the Corporation filed: (i) a preliminary prospectus with thesecurities regulatory authorities of each of the provinces of Canada (each a "SRA"and, collectively, the "SRAs"); and (ii) a Form F-1 registration statement (the"Registration Statement") with the United States Securities and ExchangeCommission (the "SEC"). On January 12, 2000 the Corporation filed an amendmentto the Registration Statement with the SEC and an amended preliminary prospectuswith the SRAs . The Corporation anticipates the filing of a (final) prospectus withthe SRAs on or about January 25, 2000.
7. There is presently no public market for the Shares, however, the Corporation hasapplied to The Toronto Stock Exchange to list the Shares for trading and to theNational Association of Securities Dealers in the United States to have the Sharesquoted on the Nasdaq National Market.
8. In connection with the Offering in the United States, the Corporation plans to usethe procedures permitted by Rule 430A under the Securities Act of 1933 (the "1933Act") which will permit the Corporation to omit certain pricing information in theRegistration Statement, as amended by amendments filed with the SEC, until afterit has been declared effective by the SEC.
9. Use of the PREP Procedures and the Quebec Procedures would permit theCorporation and its underwriters to better co-ordinate the pricing, prospectusdelivery, confirmation of purchase, closing and settlement processes in Canadawith those anticipated to be employed in the United States.
10. Neither the Corporation nor the Shares meet the eligibility criteria set forth in NP 44and article 37.5 of the Quebec Regulation which would otherwise enable theCorporation to use PREP Procedures and the Quebec Procedures.
AND WHEREAS pursuant to the System, this MRRS Decision Document evidencesthe decision of each Decision Maker (collectively, the "Decision");
AND WHEREAS the Decision Makers are of the opinion that it would not beprejudicial to the public interest to make the Decision;
THE DECISION of the Decision Makers under the Legislation is that theCorporation be and is hereby exempted from the eligibility criteria set out in Section 4.1of NP 44 and in the Quebec Regulations and is permitted to use the PREP Proceduresunder NP 44 and the Quebec Procedures in connection with the Canadian tranche of theOffering.
January 27th, 2000.
"Howard I. Wetston" "Robert W. Davis"