Subsection 72(1)(j) not technically applicable securities exchange take-over bid whereofferor company different from issuer company - relief provided on grounds that transactionfalls within the spirit of subsection 72(1)(j) - Rule 72-501 not applicable to rulings - firsttrade relief analogous to Rule 72-501.
Securities Act, R.S.O. 1990 c.S.5 ss. 25, 35(1)(16), 35(1)(17), 53, 72(1)(j), 72(1)(k), s.74(1), ss. 93(1)(d).
Ontario Securities Commission Rule 72-501 - Prospectus Exemption For First Trade Overa Market Outside Ontario.
R.S.O. 1990, Chapter S.5, AS AMENDED (the "Act")
IN THE MATTER OF
SIGNAL 9 SOLUTIONS CANADA INC.
UPON application by Signal 9 Solutions Canada Inc. ("S9") to the Ontario SecuritiesCommission (the "Commission") for a ruling pursuant to subsection 74(1) of the Actexempting (i) the trades by a wholly-owned Nova Scotia subsidiary ("McAfee.comCanada") of McAfee.com Corporation ("McAfee.com"), a United States public company,to the shareholders ("Shareholders") of S9, pursuant to a share purchase agreement (the"Share Purchase Agreement") to be entered into among McAfee.com, S9 and theShareholders, of shares in the Class A common stock of McAfee.com ("McAfee.comShares") made pursuant to the Share Purchase Agreement and (ii) the first trades of theMcAfee.com Shares, from the requirements of sections 25 and 53 of the Act;
AND UPON considering the Application and the recommendation of staff of theCommission;
AND UPON S9 and McAfee.com having represented to the Commission that:
Signal 9 Solutions Canada Inc.
1. S9 was incorporated under the laws of Canada on August 8, 1996.
2. S9 is in the business of developing software.
3. The registered head office of S9 is located in the Township of Beckwith, County ofLanark, and the executive offices of S9 are located at Suite 406, 580 Terry FoxDrive, Kanata, Ontario K2L 4B9.
4. S9's authorized capital consists of an unlimited number of common shares, anunlimited number of Class "A" shares, and an unlimited number of Class "B" shares,of which 8,873,375 common shares and 1,923,375.5 Class "A" shares are issuedand outstanding.
5. Prior to the closing of the Acquisition, S9 will amalgamate with certain of its directand indirect holding companies pursuant to a long form amalgamation under theCanada Business Corporations Act. The resulting amalgamating corporation, alsoreferred herein as S9, will have the same issued and outstanding share capital asS9.
6. A majority of the Shareholders are Ontario residents.
7. McAfee.com is a corporation existing under the laws of the State of Delaware.
8. McAfee.com is a leading consumer Application Service Provider, providing userswith online services to secure, manage, repair, update and upgrade personalcomputers over the Internet.
9. The executive offices of McAfee.com are located at 2805 Bowers Avenue, SantaClara, CA 95054.
10. The authorized capital of McAfee.com consists of 165 million shares of Class Acommon stock, 65 million shares of Class B common stock and 5 million shares ofPreferred stock. As of January 27, 2000, McAfee.com had outstandingapproximately 7.2 million shares of Class A common stock, 36 million shares ofClass B common stock and no shares of Preferred stock. The shares of Class Acommon stock are fully participating voting shares and are quoted on the NASDAQNational Market.
11. McAfee.com is subject to the requirements of the United States Securities ExchangeAct of 1934, as amended. McAfee.com is not a reporting issuer under the Act orunder any other securities legislation in Canada and will not become a reportingissuer under the Act following completion of the Acquisition.
12. McAfee.com Canada will be incorporated under the laws of Nova Scotia solely toeffect the Acquisition.
13. Prior to the closing of the Acquisition, McAfee.com Canada will not carry on anybusiness. Upon closing of the Acquisition, McAfee.com Canada's sole asset willbe the outstanding shares of S9.
14. The registered head office of McAfee.com Canada is expected to be located at1959 Upper Water Street, Halifax, NS B3J 2X2.
15. Pursuant to the Share Purchase Agreement, McAfee.com Canada will acquire allthe outstanding shares of S9.
16. The acquisition of the shares of S9 by McAfee.com Canada under the SharePurchase Agreement will not be subject to the registration and prospectusrequirements of the Act by virtue of the exemptions contained in paragraph 35(1)17and clause 72(1)(k) of the Act, respectively, and will be a take-over bid which willbe exempt from the requirements of sections 95 to 100 of the Act pursuant to clause93(1)(d) of the Act.
17. The Share Purchase Agreement also contemplates trades in McAfee.com Sharesfrom McAfee.com Canada to the Shareholders. Such trades are distributions withinthe meaning of the Act and accordingly are subject to both the registration andprospectus requirements of the Act.
18. The registration exemption contained in paragraph 35(1)16 of the Act and thecorresponding prospectus exemption contained in clause 72(1)(j) of the Act may beunavailable with respect to the trades of the McAfee.com Shares pursuant to theShare Purchase Agreement because the trades are being made by McAfee.comCanada and not by McAfee.com.
19. McAfee.com is a Delaware corporation, is not a reporting issuer in Ontario and willnot become a reporting issuer in Ontario by reason of the acquisition under theShare Purchase Agreement.
20. The shares in the Class A common stock of McAfee.com are traded on the NasdaqStock Market and are not listed or posted for trading on any exchange in Canada.
21. Assuming completion of the Acquisition, the Shareholders would, as at January 27,2000, constitute less than 2% of the total number of registered holders of sharesof Class A common stock of McAfee.com holding approximately 4% of the totalissued and outstanding shares of Class A common stock of McAfee.com.
AND UPON the Commission is satisfied that to do so would not be prejudicial to thepublic interest;
IT IS RULED pursuant to subsection 74(1) of the Act that:
(a) the trades of the McAfee.com Shares to the Shareholders made pursuant tothe Acquisition; and
(b) the first trades of the McAfee.com Shares acquired pursuant to theAcquisition,
are not subject to sections 25 and 53 of the Act, provided that a first trade referredto in paragraph (b) above shall be a distribution unless such trade is executed:
(c) through the facilities of a stock exchange outside of Ontario;
(d) on the Nasdaq Stock Market; or
(e) on The Stock Exchange Automated Quotation System of the London StockExchange Limited.
February 1st, 2000.
"Howard I. Wetston" "Robert W. Korthals"