HeadnoteRule54-501 - Relief granted from the requirement to reconcile to CanadianGAAP certain financial statements included in an information circularthat were prepared in accordance with U.S. GAAP
OntarioRule CitedRule54-501 Prospectus Disclosure in Certain Information Circulars(2000), 23 OSCB 8519, section 3.1
Rule41-501 General Prospectus Requirements (2000), 23 OSCB 761, sections9.1, 9.4; Form 41-501F1 section 8.4 and subsection 8.5(2)
INTHE MATTER OF
THESECURITIES LEGISLATION OF
BRITISHCOLUMBIA, ALBERTA, SASKATCHEWAN,
INTHE MATTER OF
MRRSDECISION DOCUMENTWHEREASthe local securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Alberta, Saskatchewan, Ontarioand Quebec and (the "Jurisdictions") has received an applicationfrom Accelio Corporation ("Accelio") and Adobe Systems Incorporated("Adobe" and, together with Accelio, the "Applicant") for a decisionunder the securities legislation of the Jurisdictions (the "Legislation")that the requirements contained in the Legislation:
(a)that the notes to the financial statements of Adobe explain andquantify any significant differences, or the effect of materialdifferences, between Canadian generally accepted accounting principles("Canadian GAAP") and United States generally accepted accountingprincipals ("U.S. GAAP") and thereby provide a reconciliationof such financial statements to Canadian GAAP, and provide disclosureconsistent with Canadian GAAP requirements to the extent not alreadyreflected in the financial statements;
(b)that the Adobe auditor's report disclose any material differencesin the form and content of its auditor's report as compared toa Canadian auditor's report, explain any significant differencesbetween the generally accepted auditing standards ("GAAS") ofthe United States as compared with Canadian GAAS and confirm thatthe auditing standards applied are substantially equivalent toCanadian GAAS; and
(c)that the Adobe consolidated financial information and management'sdiscussion and analysis of operating results and financial position(the "Adobe MD&A") provide a restatement of those parts ofthe Adobe MD&A that would be read differently if the AdobeMD&A were based on statements prepared in accordance withCanadian GAAP and the requirement that the Adobe MD&A providea cross-reference to the notes in the financial statements thatreconcile the differences between U.S. GAAP and Canadian GAAP.
(collectively,the "GAAP Reconciliation Requirements") shall not apply to theApplicant with respect to disclosure in a management proxy circular(the "Circular") to be sent to each Accelio Shareholder (as definedbelow) in connection with a proposed transaction whereby Adobewill acquire all of the outstanding common shares of Accelio (the"Acquisition") through Adobe Systems International Limited Partnership(the "Purchaser");
ANDWHEREAS under the Mutual Reliance Review System for ExemptiveRelief Applications created pursuant to National Policy 12-201(the "MRRS"), the Ontario Securities Commission (the "Commission")is the principal regulator for this application;
ANDWHEREAS the Applicant has represented to the DecisionMaker that:
1.Adobe will make the Acquisition by an arrangement (the "Arrangement")under Section 192 of the Canada Business Corporations Act (the"CBCA") whereby Adobe will acquire, through the Purchaser, allof the issued and outstanding common shares in the capital ofAccelio (the "Accelio Common Shares").
2.Prior to the consummation of the Arrangement, the vesting of eachAccelio Option (as defined below) will be accelerated on or aboutMarch 5, 2002 such that all Accelio Options will be exercisablepursuant to their respective terms as of such date for eitherAccelio Common Shares or cash and each Accelio Warrant (as definedbelow) will be terminated for a cash payment not to exceed US$0.05per Accelio Warrant.
3.It is currently anticipated that the Arrangement will result ineach holder (an "Accelio Shareholder") of Accelio Common Shares(other than Accelio Common Shares held by shareholders who dissentto the Arrangement ("Dissenting Shareholders") or by Adobe, thePurchaser or their respective affiliates) receiving a number ofshares of common stock of Adobe ("Adobe Shares") for each AccelioCommon Share held based on an exchange ratio (the "Exchange Ratio")and the expiration of each Accelio Option that is not exercisedprior to the date at which the Arrangement becomes effective (the"Effective Time"). Upon completion of the Acquisition, Adobe willown directly or indirectly all of the Accelio Common Shares.
4.Adobe was initially incorporated under the laws of Californiain 1983 and was subsequently reincorporated under the laws ofDelaware in 1997. The principal executive offices of Adobe arelocated in San Jose, California. Adobe Shares are quoted on theNasdaq National Market ("Nasdaq"). Adobe is currently subjectto the United States Securities Exchange Act of 1934, as amended(the "Exchange Act"). Adobe is not a reporting issuer or the equivalentin any province or territory of Canada and does not intend tobecome a reporting issuer or the equivalent in any province orterritory of Canada by virtue of the Arrangement.
5.As of February 12, 2002 there were seven registered holders ofAdobe Shares in Canada holding 2,807 Adobe Shares, representingapproximately 0.001% of the total number of issued and outstandingAdobe Shares.
6.The Purchaser is a limited partnership formed under the laws ofthe Cayman Islands, all of the interest of which is directly orindirectly owned by Adobe. The Purchaser is not a reporting issueror the equivalent in any province or territory of Canada and doesnot intend to become a reporting issuer or the equivalent in anyprovince or territory of Canada by virtue of the Arrangement.
7.Accelio is incorporated under the CBCA and the registered andhead office of Accelio is located in Ottawa, Ontario. The AccelioCommon Shares are listed and posted for trading on The TorontoStock Exchange (the "TSE"), and quoted on Nasdaq and the PacificStock Exchange. Accelio is a reporting issuer or the equivalentin all provinces of Canada. To Accelio's best knowledge, Acceliois not in default of any of the requirements of the securitieslegislation of these provinces. In addition, Accelio is subjectto the Exchange Act. On February 28, 2002 the closing price ofthe Accelio Common Shares on the TSE was $4.38 per share.
8.As of February 28, 2002, there were 263 registered Accelio Shareholdersin Canada holding 10,369,874 Accelio Common Shares, representingapproximately 41.53% of the total number of issued and outstandingAccelio Common Shares.
9.As of February 21, 2002, of all of the options to purchase AccelioCommon Shares currently outstanding under Accelio's 1995 EmployeeStock Option Plan and warrants to purchase Accelio Common Sharescurrently outstanding (collectively, the "Accelio Options"), AccelioOptions representing the right to acquire 3,779,067 Accelio CommonShares were held by residents of Canada, representing approximately77.668% of the total number of Accelio Common Shares which maybe acquired pursuant to the exercise of Accelio Options. As ofFebruary 28, 2002, Adobe Options to purchase up to 736,919 AccelioCommon Shares had exercise prices lower than $4.38 and were heldby residents of Canada.
10.As of February 28, 2002, all of the outstanding warrants to purchaseAccelio Common Shares (the "Accelio Warrants") were held by residentsof Canada.
11.Prior to the Special Meeting (as defined below), Accelio willapply to the court under the CBCA for an interim order (the "InterimOrder") which order will specify, among other things, certainprocedures and requirements for the Special Meeting and the completionof the Arrangement.
12.A special meeting (the "Special Meeting") of the Accelio Shareholdersis anticipated to be held on April 9, 2002 at which Accelio will,among other things, seek the requisite Accelio Shareholder approval(which, pursuant to the Interim Order, is expected to be 662/3%of the votes attached to the Accelio Common Shares representedby proxy or in person at the Special Meeting) for the specialresolution approving the Arrangement.
13.Accelio will mail on or about March 15, 2002 to each Accelio Shareholder(i) a notice of special meeting, (ii) a form of proxy and (iii)the Circular. The Circular will be prepared in accordance withthe Legislation, except with respect to any relief granted therefrom,and will contain disclosure of the Transaction and the businessand affairs of each of Adobe and Accelio.
14.The Circular will either contain or incorporate by reference thefollowing financial statements:
(a)audited annual financial statements of Adobe for each of the threefiscal years ended December 3, 1999, December 1, 2000 and November27, 2001 together with balance sheets as at December 1, 2000 andNovember 27, 2001 and the auditor's reports thereon, all in accordancewith U.S. GAAP; and
(b)audited annual financial statements of Accelio for the fiscalyear ended April 30, 2001, together with the balance sheet asat the end of such period and the auditor's report thereon, andunaudited interim financial statements for the period ended October31, 2001, all in accordance with Canadian GAAP.
15.It is expected that upon consummation of the Arrangement or shortlythereafter, the Accelio Common Shares will be delisted from eachof the TSE, the Nasdaq and the Pacific Stock Exchange, and thatan application will be filed with the applicable Canadian securitiesregulators to have Accelio cease to be a reporting issuer.
16.Adobe will apply to have the Adobe Shares quoted for trading onNasdaq.
17.Upon the completion of the Arrangement, assuming there are noDissenting Shareholders and assuming that no Adobe Options willbe exercised otherwise than for cash, it is expected that theregistered holders of Adobe Shares resident in Canada (calculatedbased upon the number of registered Accelio Shareholders who areresident Canadians as of February 28, 2002 and registered holdersof Adobe Shares who are resident Canadians as of February 12,2002) will hold only approximately 0.35% of the issued and outstandingAdobe Shares.
ANDWHEREAS under the MRRS, this MRRS Decision Document evidencesthe 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 GAAP Reconciliation Requirements shall not apply inconnection with the disclosure pertaining to Adobe in the Circular.