Subsection 74(1) - issuance of shares to certain Ontario residents by non-reportingissuer pursuant to its directed share program in connection with its U.S. initial publicoffering exempt from section 53 of Act - first trade is a distribution unless made inaccordance with subsection 72(4) or made through the facilities of a stock exchange ormarket outside of Ontario, subject to certain conditions.
Securities Act, R.S.O. 1990, c.S.5, as am., ss. 53, 72(4) and 74(1).
Ontario Securities Commission Rule 14-501 - Definitions ((1997), 20 OSCB 4054, asamended, (1999), 22 OSCB 1173.
Ontario Securities Commission Rule 45-501 - Prospectus Exempt Distributions (1998),21 OSCB 6548.
Ontario Securities Commission Rule 72-501 - Prospectus Exemption for First TradeOver A Market Outside Ontario (1998) 21 OSCB 3873.
R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")
IN THE MATTER OF
UPON the application of Genuity Inc. ("Genuity") to the Ontario SecuritiesCommission (the "Commission") for a ruling pursuant to subsection 74(1) of the Act thatcertain trades in the shares of Class A Common Stock of Genuity (the "Shares") to bemade pursuant to a proposed Directed Share Program (the "Program") to friends of thePresident of Genuity residing in the Province of Ontario, who elect to participate in theProgram (the "Ontario Program Participants"), shall not be subject to section 53 of the Act;
AND UPON considering the application and recommendation of the staff of theCommission;
AND UPON Genuity having represented to the Commission that:
1. Genuity is a corporation incorporated under the laws of Delaware and is not areporting issuer under the Act and has no present intention of becoming a reportingissuer under the Act.
2. Genuity is currently in the process of completing an initial public offering (the "IPO")in the United States and in connection therewith has filed a registration statementon Form S-1, as amended (the "Preliminary Prospectus").
3. Genuity proposes to offer 173,913,000 Shares under the IPO.
4. Upon completion of the IPO, the Shares will be quoted on the Nasdaq NationalMarket.
5. The Program is being made available to Genuity's employees and other individualswhom Genuity's officers may designate ("Genuity Program Participants"), includingthe Ontario Program Participants (Genuity Program Participants and OntarioProgram Participants collectively known as "Program Participants"), in connectionwith the IPO, all on the same terms and conditions.
6. Participation in the Program is voluntary and the Preliminary Prospectus and finalprospectus prepared in accordance with U.S. Securities laws will be forwarded toeach Ontario Program Participant who chooses to participate in the Program.
7. The Shares will be offered at a price equal to the price of the shares of Class ACommon Stock of Genuity in connection with the IPO.
8. The Ontario Program Participants consist of six friends of the President of Genuity.
9. The aggregate number of Shares offered to the Ontario Program Participants willnot exceed 6,000.
10. After giving effect to the IPO, the aggregate number of Shares held by OntarioProgram Participants residing in the Province of Ontario will be less than 1% of theissued and outstanding shares of Genuity.
11. Ontario Program Participants will be provided with a notice advising that an OntarioProgram Participant will not have any rights against Genuity under provincialsecurities laws and, as a result, must rely on other remedies which may beavailable, including common law rights of action for damages or rescission or rightsof action under the civil liability provisions of U.S. federal securities laws.
12. The annual reports, proxy materials and other materials generally distributed toGenuity shareholders resident in the United States will be provided to OntarioProgram Participants at the same time and in the same manner as the documentswould be provided to United States resident shareholders.
13. There is not expected to be a market for the Shares in Ontario and it is intendedthat any resale of Shares acquired under the Program will be effected through thefacilities of the Nasdaq National Market in accordance with its rules and regulations.
14. The trades in Ontario to Ontario Program Participants will be effected by RBCDominion Inc., a registered dealer under the Act.
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: trades in Sharespursuant to the Program to Ontario Program Participants are not subject to section 53 ofthe Act, provided that the first trade in any of the Shares acquired by an Ontario ProgramParticipant pursuant to this ruling shall be a distribution unless such trade is made inaccordance with the following conditions:
A. such trade is made in accordance with the provisions of subsection 72(4) of the Act,as modified by section 3.10 of Commission Rule 45-501 Prospectus ExemptDistributions, as if the Shares had been acquired pursuant to an exemption referredto in subsection 72(4) of the Act, except that, for these purposes, it shall not benecessary to satisfy the requirements in clause 72(4)(a) that the issuer not be indefault of any requirement of the Act or the regulations if the seller is not in aspecial relationship with the issuer, or if the seller is in a special relationship withthe issuer, the seller has reasonable grounds to believe that the issuer is not indefault under the Act or the regulations, where, for these purposes, "specialrelationship" shall have the same meaning as in Commission Rule 14-501Definitions; or
B. such trade is made in accordance with the provisions of Subsection 2.1 ofCommission Rule 72-501 Prospectus Exemption For First Trade Over a MarketOutside Ontario.
June 27th, 2000.
"Howard I. Wetston" "Robert W. Davis"