Securities Law & Instruments

Headnote

MutualReliance Review System for Exemptive Relief Applications - Relieffrom registration and prospectus requirements in connection withan arrangement where exemptions may not be available in certainjurisdictions for technical reasons. First trade deemed a distributionunless made in accordance with specified provisions of MultilateralInstrument 45-102: Resale of Securities.

ApplicableOntario Statutory Provisions

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

ApplicableOntario Rules

Rule45-501 - Exempt Distributions (2001) 24 OSCB 7011 (November 23,2001).

ApplicableNational Instruments

MultilateralInstrument 45-102: Resale of Securities (2001)24 OSCB 7029 (November 23, 2001), ss. 2.6(3), 2.6(4), 2.9(1),2.14.

INTHE MATTER OF

THESECURITIES LEGISLATION OF

BRITISHCOLUMBIA, SASKATCHEWAN, MANITOBA,

ONTARIO,QUEBEC, NOVA SCOTIA, NEWFOUNDLAND AND LABRADOR, NEW

BRUNSWICK,PRINCE EDWARD ISLAND, THE NORTHWEST TERRITORIES,

YUKONTERRITORY AND NUNAVUT


AND


INTHE MATTER OF

THEMUTUAL RELIANCE REVIEW SYSTEM FOR

EXEMPTIVERELIEF APPLICATIONS


AND


INTHE MATTER OF

ROXIO,INC., ROXIO-MGI HOLDING CORP.

ANDMGI SOFTWARE CORP.


MRRSDECISION DOCUMENT


WHEREAS the local securities regulatory authority orregulator (the "Decision Maker") in each of British Columbia,Saskatchewan, Manitoba, Ontario, Québec, Newfoundlandand Labrador, Nova Scotia, New Brunswick, Prince Edward Island,Northwest Territories, Yukon Territory and Nunavut Territories(the "Jurisdictions") has received an application from Roxio,Inc. ("Roxio"), Roxio-MGI Holding Corp. (the "Roxio Subsidiary")and MGI Software Corp. ("MGI") (collectively the "Applicants")for a decision under the securities legislation of the Jurisdictions(the "Legislation") that the requirements under the Legislationto be registered to trade in a security (the "Registration Requirement")and to file and to obtain a receipt for a preliminary prospectusand a prospectus (the "Prospectus Requirement") shall not applyto certain trades and distributions of securities to be madein connection with the proposed acquisition by the Roxio Subsidiaryof all of the issued and outstanding shares of MGI pursuantto a plan of arrangement;

ANDWHEREAS pursuant to the Mutual Reliance Review SystemFor Exemptive Relief Applications (the "System"), the OntarioSecurities Commission is the principal regulator for this application;

ANDWHEREAS the Applicants have represented to the DecisionMakers that:

1.MGI is a corporation amalgamated under the Business CorporationsAct (Ontario) (the "OBCA"). The registered office of MGIis situated in Richmond Hill, Ontario.

2.MGI carries on business as a provider of visual media softwareproducts and infrastructure that enable users to develop and utilizedigital photographs and video.

3.The authorized capital of MGI consists of an unlimited numberof MGI common shares (the "MGI Common Shares"). As at December31, 2001, there were 37,331,478 MGI Common Shares issued and outstanding.

4.The MGI Common Shares are listed on The Toronto Stock Exchange(the "TSE") under the symbol "MGI". MGI is a "reporting issuer"or the equivalent in all of the provinces of Canada and is notin default of any of the requirements contained in the Legislation.

5.As of December 6, 2001, there were 85 registered holders of MGICommon Shares resident in Canada holding 34,671,750 MGI CommonShares, representing approximately 81.7 % of the total numberof issued and outstanding MGI Common Shares.

6.As of December 6, 2001, of all of the options outstanding underthe MGI stock option plans ("MGI Options"), MGI Options representingthe right to acquire 3,086,363 MGI Common Shares were held byresidents in Canada, representing approximately 83.0% of the totalnumber of MGI Common Shares which may be acquired pursuant tothe exercise of MGI Options.

7.The following warrants to acquire MGI Common Shares have beenpreviously issued and remain outstanding: (i) 135,000 warrantsto purchase 135,000 MGI Common Shares issued on April 16, 1999on a private placement basis to an Ontario resident (the "non-listedwarrants"); and (ii)1,437,500 warrants to purchase 1,437,500 MGICommon Shares issued publicly on or about January 31, 2001 andlisted on The Toronto Stock Exchange (the "listed warrants").The non-listed warrants and the listed warrants are collectivelyreferred to as the "MGI Warrants".

8.Roxio was incorporated under the laws of the State of Delaware.Roxio carries on business as a developer of software that enablesusers to create, manage and move digital media.

9.The authorized capital of Roxio consists of 100,000,000 commonshares (the "Roxio Common Shares") and 10,000,000 shares of preferredstock. As at December18, 2001, there were 16,924,483 Roxio CommonShares and no shares of preferred stock issued and outstanding.

10.The Roxio Common Shares are quoted on the Nasdaq National Market("Nasdaq") under the symbol "ROXI". Roxio is subject to the UnitedStates Securities Exchange Act of 1934, as amended (the"Exchange Act").

11.Roxio is not a "reporting issuer" or the equivalent in any provinceor territory of Canada.

12.As of December 6, 2001, there were 2 registered holders of RoxioCommon Shares in Canada holding 16 Roxio Common Shares, representingapproximately 0.0000009% of the total number of issued and outstandingRoxio Common Shares.

13.The Roxio Subsidiary has been incorporated under the laws ofDelaware for the purposes of the Transaction (defined below)and is an indirect wholly-owned subsidiary of Roxio.

14.Pursuant to a Combination Agreement dated December 3, 2001 betweenRoxio and MGI, Roxio, through the Roxio Subsidiary, intendsto acquire all of the issued and outstanding MGI Common Sharesin a transaction (the "Transaction") to be effected pursuantto a plan of arrangement (the "Arrangement").

15.The effect of the Arrangement will be to provide holders (the"MGI Shareholders") of MGI Common Shares (other than MGI CommonShares held by dissenting shareholders or by Roxio or its affiliates)with Roxio Common Shares at a rate (subject to certain adjustments)equal to 0.05269 Roxio Common Shares for every one (1) MGI CommonShare.

16.Conditional upon the completion of the Transaction, all unvestedstock options granted under MGI's employee stock option planshall be deemed to have vested and become exercisable on theday immediately preceding the closing date of the Transactionand the expiry date under all stock options granted under suchplan shall have been accelerated such that any options thatremain unexercised immediately prior to the closing shall terminateas of the closing date of the Transaction.

17.The warrantholders (listed and unlisted) have agreed to redeemtheir warrants on the effective date of the transaction.

18.The Arrangement will be carried out under Section 182 of theOBCA. MGI has applied for and obtained, under section 182 ofthe OBCA, an interim order (the "Interim Order") of the SuperiorCourt of Justice (Ontario) which order specifies, among otherthings, certain procedures and requirements to be followed inconnection with the calling and holding of the Special Meeting(as defined below) and the completion of the Arrangement.

19.A special meeting (the "Special Meeting") of the MGI Shareholderswas held on January 28, 2002 at which MGI sought and obtained,among other things, the requisite MGI Shareholder approval (which,pursuant to the Interim Order, is 66 2/3% of the votes attachedto the MGI Common Shares represented by proxy or in person atthe Special Meeting) for the special resolution approving theArrangement. At the Special Meeting 97% of the votes attachedto the MGI Common Shares represented at the Special Meetingvoted in favour of the Arrangement.

20.In connection with the Special Meeting and pursuant to the InterimOrder, MGI mailed on or about January 3, 2002 to each MGI Shareholder(i) a notice of special meeting, (ii) a form of proxy and (iii)a management information circular (the "Circular").

21.The Circular contains, among other things, prospectus-leveldisclosure of the business and affairs of Roxio and such otherinformation regarding Roxio, the Roxio Subsidiary, MGI and theTransaction, as is required by the Legislation, except as variedby the Decision of certain of the Decision Makers dated December31, 2001.

22.Upon completion of the Arrangement or shortly thereafter, theMGI Common Shares and the listed warrants will be delisted fromthe TSE. The Applicants expect that the MGI Common Shares andthe listed warrants will be delisted from the TSE no later thanFebruary 6, 2002.

23.Roxio is taking all required steps to ensure that the RoxioCommon Shares issued pursuant to the Arrangement shall be quotedfor trading on Nasdaq.

24.Upon the completion of and as a consequence of the Arrangement,Roxio will become a reporting issuer in Alberta, Saskatchewanand Québec, and may become a reporting issuer in BritishColumbia, Ontario and Newfoundland.

25.Similarly, upon the completion of and as a consequence of theArrangement, the Roxio Subsidiary will become a reporting issuerin Saskatchewan.

26.Upon the completion of the Arrangement, Roxio will be the soleindirect shareholder of the Roxio Subsidiary, and the sole shareholdersof MGI will be Roxio and the Roxio Subsidiary.

27.Upon the completion of the Arrangement, MGI and the Roxio Subsidiaryintend to make applications to be deemed to have ceased to bea reporting issuer (or equivalent) in those Jurisdictions inwhich they are a reporting issuer (or equivalent). Roxio hasnot yet determined whether it will make a similar such applicationor applications. Unless and until relief in respect of suchapplications is granted, the Applicants will comply with allrequirements of the Legislation associated with reporting issuerstatus.

28.Upon the completion of the Arrangement, and assuming the maximumexchange ratio applicable to the exchange of MGI Common Sharesfor Roxio Common Shares, and after giving effect to the exchangeof the listed warrants and non-listed warrants for Roxio CommonShares, the Applicants believe that residents of Canada willnot own directly or indirectly more than 15 percent of the outstandingRoxio Common Shares, and will not represent in number more than15 percent of the total number of owners directly or indirectlyof Roxio Common Shares.

29.There is no public market in Canada for the Roxio Common Sharesand no such public market is expected to develop.

30.Roxio will send to all holders of Roxio Common Shares residentin Canada contemporaneously all disclosure material sent toholders of Roxio Common Shares resident in the United States.

31.The steps under the Transaction involve or may involve a numberof trades of securities (collectively, the "Trades") and theremay be no registration or prospectus exemptions available underthe Legislation for certain of the Trades in some or all ofthe Jurisdictions.

ANDWHEREAS under the System, this MRRS Decision Documentevidences the decision of each Decision Maker (collectively,the "Decision");

ANDWHEREAS each of the Decision Makers is satisfied thatthe test contained in the Legislation that provides the DecisionMaker with the jurisdiction to make the Decision has been met;

THEDECISION of the Decision Makers under the Legislationis that the Trades are not subject to the Registration Requirementand the Prospectus Requirement, provided that:

(a)except in Québec, the first trade in Roxio Common Sharesacquired pursuant to this Decision (including, for greater certainty,Roxio Common Shares acquired upon the exercise of the MGI Warrants)will be a distribution or primary distribution to the publicunless, at the time of the trade:

(i)if Roxio is a reporting issuer in any Jurisdiction listed inAppendix B to Multilateral Instrument 45-102: Resale of Securities("MI 45-102") other than Quebec, the conditions in subsections(3) or (4) of section 2.6 of MI 45-102 are satisfied; and forthe purpose of determining the period of time that Roxio hasbeen a reporting issuer under section 2.6, the period of timethat MGI has been a reporting issuer may be included; and

(ii)if Roxio is not a reporting issuer in any Jurisdiction otherthan Québec, such first trade is made through an exchange,or a market, outside of Canada; and

(b)in Québec, to the extent that there is no exemption availablefrom the Registration Requirement and Prospectus Requirementin respect of any of the Trades, the Trades are not subjectto the Registration Requirement and the Prospectus Requirement,provided that the issuer or one of the parties to the Arrangement(including, for greater certainty, MGI) is and has been a reportingissuer in Québec and has complied with the applicablerequirements for the twelve months immediately preceding theTrades.

January31, 2002.

"R.S.Paddon"       "H. Lorne Morphy"