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.
Securities Act, R.S.O. 1990, c.S.5, as am., ss. 25, 53, 74(1).
Ontario Securities Commission Rule 45-501 - Exempt Distributions (1998) 21 O.S.C.B.6548.
R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")
IN THE MATTER OF
RAVISENT TECHNOLOGIES INC.
IN THE MATTER OF
RAVISENT NOVA SCOTIA ULC
IN THE MATTER OF
RAVISENT BRITISH COLUMBIA INC.
UPON the application of Ravisent Technologies Inc. ("RAVISENT") and each of itsCanadian subsidiaries, Ravisent Nova Scotia ULC ("Ravisent NS") and Ravisent BritishColumbia Inc. ("Ravisent BC") (hereinafter collectively referred to as the "Applicants") tothe Ontario Securities Commission (the "Commission") for a ruling pursuant to subsection74(1) of the Act that certain intended trades in securities shall not be subject to section 25or 53 of the Act;
AND UPON considering the application and the recommendation of the staff of theCommission;
AND UPON the Applicants having represented to the Commission as follows:
1. RAVISENT is incorporated under the laws of Delaware, is not and has no intentionof becoming a reporting issuer under the Act, but is a registrant under the SecuritiesAct of 1933 (the "1933 Act"), is subject to the continuous disclosure requirementsof the Securities Exchange Act of 1934 (the " 1934 Act"), and is not in default ofany requirement thereof.
2. The authorized capital of RAVISENT consists of 50,000,000 shares of commonstock (the "RAVISENT Common Shares") and 5,000,000 shares of preferred stockwith a par value of US $0.001 per share, of which 16,596,180 RAVISENT CommonShares and no preferred shares were issued and outstanding as at July 5, 2000.
3. The RAVISENT Common Shares trade on the NASDAQ NATIONAL MARKET("NASDAQ").
4. Ravisent BC is incorporated under the laws of British Columbia and is not areporting issuer under the Act or the securities laws of any other jurisdiction.
5. The authorized capital of Ravisent BC consists of 100,000,000 common shares andof 100,000,000 exchangeable preferred shares (the "Exchangeable Shares") ofwhich 100 common shares and no Exchangeable Shares were issued andoutstanding as at July 5, 2000; Ravisent NS owns all of the issued and outstandingcommon shares of Ravisent BC.
6. Ravisent NS is an unlimited liability company organized under the laws of NovaScotia and is not a reporting issuer under the Act or the securities laws of any otherjurisdictions.
7. The authorized capital of Ravisent NS consists of 100,000,000 common shareswithout par value of which 100 common shares were issued and outstanding as atJuly 4, 2000; RAVISENT owns all of the issued and outstanding shares of RavisentNS.
8. Cinax Designs Inc. ("Cinax") is a company incorporated under the laws of BritishColumbia and is not a reporting issuer under the Act.
9. The authorized capital of Cinax consists of 100,000,000 Class A Shares without parvalue and 50,000,000 Class B Shares without par value of which 9,307,500 ClassA Shares ("Cinax Class A Shares") and 402, 500 Class B Shares ("Cinax Class BShares") were issued and outstanding as of July 27, 2000, of which 136,500 CinaxClass A Shares comprising approximatly 1.5% of the outstanding Class A Sharesare held by a shareholder resident in Ontario (the "Ontario Cinax Shareholder").
10. RAVISENT incorporated Ravisent BC for the purpose of making an offer (the"Offer") to purchase all of the outstanding Cinax Class A Shares and Cinax ClassB Shares.
11. Under the Offer, Ravisent BC offered to purchase each Cinax Class A Share andCinax Class B Share in consideration for (i) cash and (ii) at the option of CinaxShareholders, Exchangeable Shares or RAVISENT Common Shares, or both.
12. The Offer closed on August 9, 2000 and the Exchangeable Shares were issued tothe Cinax Shareholders pursuant to registration and prospectus exemptions underthe Act.
13. Because Ravisent BC is a taxable Canadian corporation, Canadian income taxrules permit Cinax security holders to defer the capital gain they would otherwiserealize if they instead were to tender their Cinax Class A Shares and Cinax ClassB Shares directly to RAVISENT.
14. The share provisions attached to the Exchangeable Shares (the "ExchangeableShare Provisions") are structured so that at all times the Exchangeable Shares willhave rights that are, as nearly as practicable, economically equivalent to the rightsattached to RAVISENT Common Shares, and by virtue of an agreement ( the"Parent Support Agreement") between RAVISENT, Ravisent NS and Ravisent BC,obligations and procedures are established to ensure that RAVISENT or RavisentNS, as applicable, will take certain actions such that Ravisent BC will be able tosatisfy its obligations under the Exchangeable Share Provisions.
15. Under the Exchangeable Share Provisions:
a. holders of Exchangeable Shares are entitled, through a special dividendright (the "Special Dividend Right"), to dividends from Ravisent BC at thesame time as, and in the same kind as, dividends paid by RAVISENT onRAVISENT Common Shares, which dividends could include RAVISENTCommon Shares;
b. holders of Exchangeable Shares, through a retraction feature (the"Retraction Right") are entitled to require Ravisent BC to purchase theirExchangeable Shares in exchange for RAVISENT Common Shares plus acash amount equal to any declared and unpaid dividends on the RAVISENTCommon Shares (the "Dividend Amount");
c. Ravisent BC will redeem any outstanding Exchangeable Shares on August5, 2005, in exchange for RAVISENT Common Shares and the DividendAmount (the Automatic Redemption"), and on the liquidation, dissolution orwinding up of Ravisent BC, holders of Exchangeable Shares are entitled,through a special liquidation right (the "Liquidation Right"), to receive fromRavisent BC one RAVISENT Common Share and the Dividend Amount foreach Exchangeable Share they hold;
d. upon receiving notice of a retraction or redemption of Exchangeable Sharesor of the proposed liquidation, dissolution or winding up of Ravisent BC,RAVISENT and Ravisent NS, each have overriding call rights (the "CallRights") to purchase outstanding Exchangeable Shares in exchange for anequivalent number of RAVISENT Common Shares and the Dividend Amount;and
e. in the event of liquidation, dissolution or winding up of RAVISENT,RAVISENT will automatically exchange (the "Automatic Exchange Right")each Exchangeable Share for a RAVISENT Common Share and theDividend Amount.
16. Under the Parent Support Agreement, RAVISENT will:
a. not declare or pay any dividends on the RAVISENT Common Shares unless:
i. RAVISENT has sufficient assets available to pay equivalent dividendson the Exchangeable Shares, and
ii. Ravisent BC simultaneously declares or pays, as the case may be,such equivalent dividends on the Exchangeable Shares;
b. take all actions and do all things as are necessary or desirable to enableRavisent BC to honour the redemption and retraction rights and dissolutionentitlements that are attributes of the Exchangeable Shares; and
c. not reorganize its capital in a manner affecting the RAVISENT CommonShares or make certain distributions on the RAVISENT Common Sharesunless an economically equivalent change is made to, or benefit is conferredupon the holders of, the Exchangeable Shares.
17. Pursuant to an escrow agreement (the "Escrow Agreement") between RAVISENT,Ravisent BC, Ravisent NS, Montreal Trust Company of Canada (the "EscrowAgent") and Eric Camarind, as agent for the Cinax Shareholders, an aggregate of177,250 of the RAVISENT Common Shares and the Exchangeable Shares (the"Escrow Shares") will be deposited by RAVISENT in escrow with the Escrow Agentto constitute an indemnification escrow fund to be held and released by the EscrowAgent in accordance with the terms of the Escrow Agreement.
18. Pursuant to an employee escrow agreement (the "Employee Escrow Agreement")between RAVISENT, certain former Cinax Shareholders who will then beemployees of RAVISENT or one of its subsidiaries and the Escrow Agent, all of theRAVISENT Common Shares and Exchangeable Shares issued to such employees(the "Employee Escrow Shares") will be deposited by RAVISENT in escrow with theEscrow Agent to constitute an employee escrow fund to be held and released bythe Escrow Agent in accordance with the terms of the Employee Escrow Agreement.
19. RAVISENT will provide holders of Exchangeable Shares with the same disclosurethat it will provide to holders of RAVISENT Common Shares under the 1933 Act, the1934 Act and the NASDAQ requirements.
20. Assuming the exchange of all Exchangeable Shares for RAVISENT CommonShares, immediately after the completion of the Offer, all persons or companies whoare resident in Ontario will not in aggregate hold of record or own beneficially morethan 10% of the issued and outstanding RAVISENT Common Shares or representmore than 10% of the number of holders of RAVISENT Common Shares (theOntario Cinax Shareholder will hold less than 0.02% of the outstanding RAVISENTCommon Shares).
21. Following completion of the Offer, and on or about August 31, 2000, Cinax (whichat that time will have all of its issued and outstanding shares owned by RavisentBC) and Ravisent BC will amalgamate (the "Amalgamation") to form and continueas one company ("BC Amalco") to be named "Ravisent British Columbia Inc." underthe Company Act (British Columbia) upon the terms and conditions to be set forthin an amalgamation agreement between Cinax and Ravisent BC.
22. Pursuant to the Amalgamation, each of the issued and outstanding shares in thecapital of Cinax held by Ravisent BC shall be cancelled in accordance with theCompany Act (British Columbia) and each of the issued and outstandingExchangeable Shares of Ravisent BC shall be exchanged for one fully paid andnon-assessable exchangeable share in the capital of Amalco which shares shallcontain exactly the same rights and restrictions as the Exchangeable Shares (the"Amalgamation Trades").
23. The Offer was unanimously approved by the shareholders of Cinax; eachshareholder of Cinax received an information circular under U.S. securities lawsprior to approval.
24. The Amalgamation Trades will be exempt from the prospectus and registrationrequirements of Section 25 and 53 of the Act under Section 35 (1) 15 and 72(1) (i),respectively, of the Act.
25. For the purposes of the Subject Trades (as defined below), all references toRavisent BC shall be deemed to include BC Amalco as successor to Ravisent BC.
26. The acquisition of the Cinax Class A Shares and the Cinax Class B Shares from theCinax Shareholders in consideration for the issuance of the Exchangeable Sharesby Ravisent BC is exempt from the take over bid requirements of Sections 95 to 100of the Act under Section 93(1)(d) of the Act.
27. There are no statutory exemptions from the registration and prospectusrequirements of the Act for the following trades by the Ontario Cinax Shareholderin connection with the Offer:
a. the delivery of the Escrow Shares to the Escrow Agent and the release of theEscrow Shares by the Escrow Agent from escrow to RAVISENT or the CinaxShareholders, as the case may be all in accordance with the terms andconditions of the Escrow Agreement;
b. the creation in favour of RAVISENT and Ravisent NS of the Call Rights;
c. the trade by Ravisent BC of RAVISENT Common Shares to a holder ofExchangeable Shares pursuant to the Special Dividend Right, the AutomaticRedemption, Retraction Right or Liquidation Right attached to theExchangeable Shares;
d. the trade by RAVISENT or Ravisent NS of RAVISENT Common Shares toa holder of Exchangeable Shares, and the trade by a holder ofExchangeable Shares in Exchangeable Shares to RAVISENT or RavisentNS, in connection with the exercise of the Call Rights; and
e. the distribution by RAVISENT of RAVISENT Common Shares to the holdersof Exchangeable Shares, and the trade by holders of Exchangeable Sharesin Exchangeable Shares to RAVISENT, pursuant to the Automatic ExchangeRight;
(collectively, the "Subject Trades").
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 of the Subject Trades made by the Ontario Cinax Shareholder will notbe subject to sections 25 or 53 of the Act;
B. the first trade in any RAVISENT Common Share issued upon the exchangeof Exchangeable Shares shall be a distribution unless:
i. if RAVISENT is a reporting issuer in Ontario, such first trade is madein accordance with the provisions of subsection 72(5) of the Act andsubsection 2.18(3) of Commission Rule 45-501 - Exempt Distributionsas if the securities had been acquired pursuant to one of theexemptions referred to in subsection 72(5) of the Act; or
ii. if RAVISENT is not a reporting issuer in Ontario, such first trade ismade through the facilities of a stock exchange outside Ontario orthrough NASDAQ and such first trade is made in accordance with therules of the stock exchange upon which the trade is made or the rulesof NASDAQ in accordance with all laws applicable to that stockexchange or applicable to NASDAQ.
August 22nd, 2000.
"Howard I. Wetston" "R. Stephen Paddon"