Securities Law & Instruments

Headnote

Subsection 74(1) - trades in securities of U.S. issuer to be made pursuant to theexercise of various exchange rights attached to securities issued by Canadiansubsidiary of U.S. issuer not subject to registration and prospectus requirements - firsttrade relief provided subject to certain conditions

Statutes Cited

Securities Act, R.S.O. 1990, c.S.5, as am., ss. 25, 53, 74(1)

Applicable Rules

Ontario Securities Commission Rule 45-501 - Exempt Distributions (1998) 21 O.S.C.B.6548.

Ontario Securities Commission Rule 72-501 - Prospectus Exemption for a First TradeOver a Market Outside Ontario (1998) 21 O.S.C.B. 3873.

IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, C. S.5, AS AMENDED (the "Act")

AND

IN THE MATTER OF
TRUESPECTRA CANADA INC., AND TRUESPECTRA, INC.

RULING
(Subsection 74(1))


UPON the application (the "Application") of TrueSpectra Canada Inc. ("TS Canada")and TrueSpectra, Inc. ("TS U.S.") to the Ontario Securities Commission (the "Commission")for a ruling pursuant to subsection 74(1) of the Act, that certain trades in securities of TSU.S. shall not be subject to sections 25 or 53 of the Act;

AND UPON considering the Application and the recommendation of staff of theCommission;

AND UPON TS Canada and TS U.S. having represented to the Commission that:

1. TS Canada is a corporation incorporated under the laws of the Province of Ontarioand is not a reporting issuer under the Act. TS Canada designs, develops,produces, markets and licenses computer software products.

2. In order to provide better access to the United States capital markets, TS Canadacompleted a reorganization (the "Reorganization") on March 17, 2000. As a resultof the Reorganization, TS Canada became an indirect, wholly-owned subsidiaryof TS U.S.

3. TS U.S. is a corporation organized under the laws of Delaware and is not areporting issuer under the Act. None of TS U.S.'s securities have been registeredunder the United States Securities Exchange Act of 1933, as amended, and noneof its securities are publicly traded on any stock exchange or market. TS U.S.designs, develops, produces, markets and licenses computer software products.

4. As part of the Reorganization, shareholders of TS Canada received securities of TSCanada exchangeable for securities of TS U.S. (the "Exchangeable Securities").The Exchangeable Securities provide a holder with a security of a Canadian issuerhaving economic and voting rights which are, as nearly as practicable, equivalentto those of the corresponding class of securities of TS U.S.

5. As part of the Reorganization, warrants to purchase an aggregate of 528,655 TSCanada shares were converted into warrants (the "Warrants") to acquire therelevant class of Exchangeable Securities, and options to purchase an aggregateof 2,197,813 TS Canada common shares were converted into options (the "TS U.S.Options") to purchase equivalent securities of TS U.S.

6. The Reorganization was unanimously approved by the directors and shareholdersof TS Canada.

7. The share provisions attaching to the Exchangeable Securities, together withprovisions contained in an exchange rights agreement entered into concurrentlywith the Reorganization, create various retraction, redemption, liquidation, put andcall rights (the "Exchange Rights") which provide mechanisms by which theExchangeable Securities will be ultimately exchanged for securities of TS U.S.

8. Exemptions from the registration and prospectus requirements of the Act may notbe available for the issuance of securities of TS U.S. to Ontario residents uponexercise of any of the Exchange Rights.

9. It is expected that all future financings of TS Canada and TS U.S. will beundertaken in the United States and that new investors will primarily be residentsof the United States. No market for the securities of TS U.S. is expected to developin Ontario. It is intended that TS U.S. will make its initial public offering in theUnited States and seek listing on the Nasdaq Stock Market.

10. If, as of the date of the Application, holders of Exchangeable Securities resident inOntario exchanged such securities for securities of TS U.S. they would holdapproximately 59.7% of the common shares of TS U.S., and would represent innumber approximately 52% of the holders of common shares of TS U.S.

11. All disclosure material furnished to holders of securities of TS U.S. resident in theUnited States will be provided to the holders of the Exchangeable Securities andWarrants, and will be provided to all security holders of TS U.S. resident in Ontario.

AND UPON the Commission being satisfied that to do so would not be prejudicialto the public interest;

IT IS RULED, pursuant to subsection 74(1) of the Act that:

a. any trade in securities of TS U.S. in accordance with the exercise of any of theExchange Rights will not be subject to sections 25 or 53 of the Act;

b. the first trade in any TS U.S. securities acquired on exercise of any of the ExchangeRights or pursuant to the exercise of the TS U.S. Options shall be a distributionunless:

i. if TS U.S. is a reporting issuer in Ontario, such first trade is made inaccordance with the provisions of subsection 72(5) of the Act and subsection2.18(3) of Commission Rule 45-501 - Exempt Distributions as if the securitieshad been acquired pursuant to one of the exemptions referred to insubsection 72(5) of the Act; or

ii. if TS U.S. is not a reporting issuer in Ontario, such first trade is madethrough the facilities of a stock exchange outside Ontario or on the NasdaqStock Market and at the time of such first trade, holders of common sharesof TS U.S. (with holders of Exchangeable Securities considered to beholders of common shares of TS U.S.) whose last address as shown on thebooks of TS U.S. or TS Canada, as the case may be, is in Ontario, do nothold more than 10% of the common shares of TS U.S. and represent innumber, not more than 10% of the holders of common shares of TS U.S.

June 23rd, 2000.

"Howard I. Wetston"    "Robert W. Davis"