Wireless Matrix Corporation - MRRS Decision

Headnote

Subsection 74(1) - issuance of securities by an Ontario reporting issuer pursuant to a three-cornered merger effectedpursuant to Delaware law exempt from section 53 of the Act - no registration relief sought - first trade relief subject toterms.

Relief granted to whole transaction under clause 5.2(2)(c) of National Policy 12-201, notwithstanding apparent reliefunder section 2.8 of Rule 45-501 and section 2.4 of Companion Policy 45-501 CP -- narrow aspect of transactionarguably not covered by section 2.8 -- subsection 72(1)(f)(iii) arguably unavailable for subsequent exercise of assumedwarrants and options since such exercise may not be made pursuant to "a right to convert or exchange previouslygranted by the issuer".

Statutes Cited

Securities Act, R.S.O. 1990, c.s.5, as am., ss. 53, 72(1)(i), and 74(1).

Applicable Ontario Regulations

Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am.

Rules Cited

Rule 45-501 -- Prospectus Exempt Distributions, ss. 2.8, 6.6.

Applicable Policies

Companion Policy 45-501 CP to OSC Rule 45-501 Prospectus Exempt Distributions, s. 2.4.

National Policy 12-201 B Mutual Reliance Review System for Exemptive Relief Applications, s. 5.2(2)(c).

IN THE MATTER OF

THE SECURITIES LEGISLATION

OF ALBERTA, ONTARIO AND BRITISH COLUMBIA

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

WIRELESS MATRIX CORPORATION

MRRS DECISION DOCUMENT

1. WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of Alberta,Ontario and British Columbia (the "Jurisdictions") has received an application from Wireless Matrix Corporation("Wireless") for a decision under the securities legislation of the Jurisdictions (the "Legislation") exemptingcertain distributions from the requirement under the Legislation to file and obtain a receipt for a preliminaryprospectus and a prospectus (the "Prospectus Requirement");

2. AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System") the Alberta Securities Commission is the principal regulator for this application;

3. AND WHEREAS Wireless has represented to the Decision Makers that:

3.1 Wireless is a corporation continued under the Canada Business Corporations Act;

3.2 the head office of Wireless is in Calgary, Alberta;

3.3 Wireless is a reporting issuer in each of the Jurisdictions;

3.4 the authorized capital of Wireless includes an unlimited number of common shares ("WirelessShares");

3.5 22,035,029 Wireless Shares are currently outstanding;

3.6 the Wireless Shares are listed and posted for trading on The Toronto Stock Exchange (the "TSE");

3.7 MX Company, Inc. ("MX") is a corporation incorporated under the laws of the State of Delaware;

3.8 MX is a wholly owned subsidiary of Wireless;

3.9 Norcom Networks Corporation ("Norcom") is a corporation incorporated under the laws of the Stateof Delaware;

3.10 the head office of Norcom is in Reston, Virginia;

3.11 Norcom is not a reporting issuer in any of the Jurisdictions;

3.12 no securities of Norcom are listed on a stock exchange or traded on any market;

3.13 the authorized capital of Norcom includes 4,500,000 shares of common stock ("Norcom Shares");

3.14 3,135,045 Norcom Shares, 515,132 options to purchase Norcom Shares ("Norcom Options") and6,072 warrants to purchase Norcom Shares ("Norcom Warrants") are currently outstanding;

3.15 as at February 13, 2001, 1 holder of Norcom Shares was resident in British Columbia and held 11,679Norcom Shares;

3.16 as at February 13, 2001, 18 holders of Norcom Options were resident in British Columbia and held34,500 Norcom Options;

3.17 Norcom also currently has outstanding a secured promissory note in the principal amount ofUS$5,000,000 (the "Norcom Note");

3.18 the holder of the Norcom Note is resident in British Columbia;

3.19 pursuant to a business combination agreement dated January 8, 2001, Wireless has agreed toacquire Norcom (the "Combination");

3.20 under the Combination:

3.20.1 Norcom and MX will merge;

3.20.2 the holders of Norcom Shares will surrender them in return for a combination of WirelessShares and notes redeemable by Wireless for cash or a specified number of WirelessShares ("Wireless Notes");

3.20.3 the terms of the Norcom Options and Norcom Warrants will be made such that Wireless willbecome obligated to issue a number of Wireless Shares upon their exercise equivalent tothe number of Norcom Shares that would have been issuable if they had been exercisedprior to the Combination; and

3.20.4 the holder of the Norcom Note will exchange it with Wireless in return for a combination ofWireless Shares and cash;

3.21 in connection with the Combination, holders of Norcom Shares and the Norcom Note will receive aprivate placement memorandum prepared in accordance with applicable securities laws of the UnitedStates of America (the "Memorandum");

3.22 the Memorandum will contain a copy of the agreement governing the Combination and, in the caseof holders of Norcom Shares, a form providing for the holder's written consent to the Combination;

3.23 under Delaware law, the Combination must receive the consent of the holders of the majority ofNorcom Shares;

3.24 under Delaware law, the holders of Norcom Shares will receive dissent and appraisal rights in respectof the Combination;

3.25 Wireless will issue up to 16,461,647 Wireless Shares in connection with the Combination and reservefor issuance an additional 2,600,000 Wireless Shares issuable upon the exercise of Norcom Optionsand Norcom Warrants;

3.26 Wireless has received conditional approval from the TSE for the listing of the Wireless Sharesissuable with respect to the Combination;

3.27 the following trades may occur in connection with the Combination (the "Trades"):

3.27.1 the issuance of Wireless Shares and Wireless Notes in return for the surrender of NorcomShares;

3.27.2 the issuance of Wireless Shares in return for the Norcom Note;

3.27.3 the issuance of Wireless Shares upon the redemption of Wireless Notes;

3.27.4 the issuance of Wireless Shares upon the exercise of Norcom Options and NorcomWarrants;

3.28 certain of the Trades will be distributions under the Legislation in respect of which no exemption fromthe Prospectus Requirement is available;

4. AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");

5. AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;

6. THE DECISION of the Decision Makers under the Legislation is that the Prospectus Requirement shall notapply to the Trades;

7. THE FURTHER DECISION of the Decision Makers under the Legislation is that the first trade of WirelessShares issued in reliance on this Decision in a Jurisdiction shall be deemed to be a distribution under theLegislation of such Jurisdiction (the "Applicable Legislation") unless:

7.1 at the time of the first trade, Wireless is and has been a reporting issuer under the ApplicableLegislation for the 12 months immediately preceding the trade;

7.2 no unusual effort is made to prepare the market or to create a demand for the Wireless Shares;

7.3 no extraordinary commission or consideration is paid to a person or company in respect of the trade;

7.4 if the seller of the securities is an insider or officer of Wireless, the seller has no reasonable groundsto believe that Wireless is in default of any requirement of the Applicable Legislation; and

7.5 the first trade is not from the holdings of a person or company or a combination of persons orcompanies holding a sufficient number of any securities of Wireless so as to affect materially thecontrol of Wireless or more than 20% of the outstanding voting securities of Wireless, except wherethere is evidence showing that the holding of those securities does not affect materially the control ofWireless.

8. THE FURTHER DECISION of the Decision Makers under the Legislation is that, except for a trade made toWireless upon the redemption of the Wireless Notes, the first trade of Wireless Notes issued in reliance on thisDecision in a Jurisdiction shall be deemed to be a distribution under the Legislation of such Jurisdiction.

February 22, 2001.

Glenda A. Campbell Jerry A. Bennis

Vice-Chair FCA, Member