Securities Law & Instruments

Headnote

Rule 61-501 - Related party transactions - Applicantproposes to issue new shares and enter into various relatedparty transactions with a debentureholder/shareholder of theApplicant that beneficially owns approximately 50% of its commonshares due to holding of out of the money warrants - the proposedtransactions are a consequence of a recapitalization agreementinvolving an arm's length party pursuant to which arm's lengthparty will end up holding approximately 61% of Applicant's votingsecurities - the proposed transactions are supported by a holderof approximately 19.8% of the common shares of the Applicant- the supporting shareholder is not a party to the transaction,deals at arm's length from the shareholder whose affiliate isinvolved in the transactions and will be treated identicallywith all holders of affected securities - proposed transactionsare subject to minority approval - transactions exempt fromrequirement to prepare valuation.

Ontario Rules Cited

Rule 61-501 - Insider Bids, Issuer Bids, GoingPrivate Transactions and Related Party Transactions, ss. 5.5,5.6 - 6, and 9.1.

IN THE MATTER OF
ONTARIO SECURITIES COMMISSION RULE 61-501
("RULE 61-501")

AND

IN THE MATTER OF
VOXCOM INCORPORATED

(SECTION 9.1 of RULE 61-501)

UPON the application (the "Application")of VOXCOM Incorporated ("VOXCOM" or the "Corporation")to the Director for a decision pursuant to Section 9.1 of Rule61-501 that, in connection with the Related Party Transactions(as defined in paragraph 10 below), the Corporation be exemptfrom the formal valuation requirements in section 5.5 of Rule61-501;

AND UPON considering the Applicationand the recommendation of staff of the Commission;

AND UPON VOXCOM having represented tothe Director as follows:

1. The Corporation is a corporation incorporatedunder the Canada Business Corporations Act.

2. The Corporation is a reporting issuer inOntario and is not on the list of defaulting reporting issuersmaintained by the Ontario Securities Commission.

3. The Corporation is authorized to issue anunlimited number of common shares (the "Common Shares"),40,000 Class "A" Performance Shares, Series I (non-voting),40,000 Class "A" Performance Shares, Series II (non-voting),40,000 Class "A" Performance Shares, Series III (non-voting),40,000 Class "A" Performance Shares, Series IV (non-voting),and 40,000 Class "A" Performance Shares, Series V(non-voting) (collectively the "Class "A" Shares").As at April 1, 2002 there were 5,061,576 Common Shares and 200,000Class "A" Shares issued and outstanding.

4. The Common Shares are listed on the TSX VentureExchange (the "TSX"). The closing price of the CommonShares on the TSX on April 5, 2002 was $0.75.

5. Clairvest Group Inc. ("Clairvest")is a corporation incorporated under the laws of the Provinceof Ontario.

6. Clairvest is a reporting issuer in Ontarioand is not on the list of defaulting reporting issuers maintainedby the Commission.

7. Catterton Oilers Investment LLC ("Catterton")is an affiliate of Catterton Partners IV, L.P., a series ofrelated private equity investment funds formed to make privateequity investments in companies with a primary focus on theconsumer product and services industry. Catterton Partners IV,L.P. is one of the largest private equity funds in the UnitedStates focussing on consumer product and services companieswith over U.S.$400 million of capital.

8. Clairvest is a related party of the Corporationfor the purposes of Rule 61-501, and beneficially owns, directlyor indirectly, the following securities of the Company:

a) 230,000 Common Shares;

b) an option to acquire an additional 200,000Common Shares at a price of $1.95 per share exercisable at anytime up to and including February 28, 2006 (the "ClairvestOptions");

c) warrants to acquire up to 3,813,631 CommonShares at a price of $1.80 per share exercisable at any time,expiring on November 30, 2006; and

d) warrants to acquire up to 873,418 CommonShares at a price of $3.95 per share exercisable at any time,expiring on March 1, 2006.

(The warrants set out in (c) and (d) above willhereinafter jointly be referred to as the "Clairvest Warrants".)

In the event that the Clairvest Options andClairvest Warrants were fully converted (along with Clairvest'scurrent 230,000 Common Shares of the Corporation), Clairvestwould hold approximately 51.4% of the issued and outstandingCommon Shares of the Corporation, assuming no other convertiblesecurities are converted to Common Shares. In the past six (6)months, the closing price of the Corporation's Common Shareson TSX has not been higher than $0.70, and the closing priceof the Corporation's Common Shares on TSX on March 25, 2002(the last day the Corporation's shares traded before the transactionwas announced) was $0.70. Accordingly, the exercise prices of$1.95 per share in respect of the Clairvest Options and $1.80and $3.95 per share in respect of the Clairvest Warrants aresignificantly out of the money. Without taking into accountthese securities, Clairvest's ownership interest of voting securitiesis 4.5%.

9. VOXCOM entered into a recapitalization agreement(the "Recapitalization Agreement") dated April 1,2002 with Catterton and Clairvest pursuant to which:

a) The Corporation has agreed to amend its articlesso as to create Class "B" Convertible RetractableShares of the Corporation (the "Preferred Shares"),which are convertible at any time (at the option of the holder)into common shares at a conversion rate of 1:1, are retractablecommencing on the 4th anniversary of the date of issue, areentitled to vote, and are entitled to a preference with respectto return of capital in certain circumstances including thedissolution of the Corporation;

b) Catterton has agreed to subscribe for 25,300,000Preferred Shares at a price of $1.00 per share, for an aggregatepurchase price of $25,300,000;

c) Clairvest has agreed to subscribe for 10,600,000Preferred Shares at a price of $1.00 per share, for an aggregatepurchase price of $10,600,000;

d) The Corporation has agreed to certain specificconditions relating to the use of the net proceeds of the transaction,including:

i) repayment of all amounts owed to Clairvestunder the debentures held by it (being $8,617,999 as at February28, 2002). The result of the foregoing is that Clairvest isincreasing its investment in the Corporation by only $2 millionand, in order to satisfy a requirement of Catterton that Cattertonand Clairvest be pari passu, Clairvest is moving from a holderof secured debt of the Corporation to a preferred shareholder;

ii) repayment of the balance owing under a $10million subordinated secured loan with SCC Canada Inc. ("SCC")(such balance, as of April 1, 2002, being in the amount of $10,249,860)pursuant to the terms of a letter agreement between the Corporationand SCC dated March 22, 2002;

iii) subject to the prior consent of Clairvestand Catterton, to use the balance of the net proceeds to repaycertain indebtedness owing under the Corporation's $70 millionsecured credit facility with a syndicate of lenders led by TorontoDominion Bank (the "Senior Credit Facility"), of which$55,625,000 was outstanding as at April 1, 2002;

e) Clairvest has agreed to transfer certainof its interest in the Clairvest Options and the Clairvest Warrantsto Catterton & SCC (there is no additional payment to Clairvestwith regard to the transfer of the Clairvest Options and ClairvestWarrants to Catterton). The effect of the foregoing is thatthe holdings of Clairvest and Catterton in the Clairvest Optionsand the Clairvest Warrants is proportional to each of theirinitial holdings of Preferred Shares;

f) The Corporation will enter into a right offirst offer agreement with Catterton (the "Right of FirstOffer Agreement") wherein the Corporation will grant toCatterton, under certain circumstances, the right to acquireup to an additional 15,000,000 Preferred Shares of the Corporationat a price of not less than one ($1.00) dollar per share fora period of eighteen (18) months from the closing date;

g) The Corporation will enter into a shareholdersagreement with Catterton, Clairvest and senior Management settingout various agreements made between the parties with respectto corporate governance issues relating to the Corporation andits Board of Directors;

h) The Corporation will enter into a registrationrights agreement with Clairvest and Catterton setting out theterms and conditions of various short and long?term registrationsand/or qualifications, in both Canada and the United States,which the Corporation may be required to complete with respectto the Common and Preferred Shares of the Corporation;

i) The Corporation will enter into a managementservices agreement with each of Catterton and Clairvest pursuantto which the Corporation will pay Catterton and Clairvest annualfees of $229,000 and $96,000 respectively (plus all applicablegoods and services or other applicable provincial taxes as required)for the provision of various corporate finance and financialplanning services to be provided by each of them to the Corporation;and

j) On closing, the Corporation will pay to Cattertona closing fee of $705,000, and to Clairvest a closing fee of$295,000.

On closing, (without giving effect to the exerciseof Catterton's right of first refusal), Catterton will hold25.3 million voting shares, or 61.8% of the voting securities(non-diluted) of the Corporation. Clairvest will hold 10.8 millionvoting shares, or 26.4% of the voting securities (non-diluted)of the Corporation.

The Board of Directors of VOXCOM unanimouslyapproved this transaction on January 28, 2002, with the Clairvestnominees declaring their interest and refraining from votingthereon. On March 28, 2002 the Board of Directors met againto confirm their resolve to proceed with this transaction.

10. The transactions contemplated between theCorporation and Clairvest in paragraphs 9(d)(i), 9(g), 9(h),9(i), and 9(j) above pursuant to the Recapitalization Agreementconstitute related party transactions under and pursuant toRule 61-501 (the "Related Party Transactions").

11. Aliant Horizons Inc. ("Aliant")holds just under 20% of the outstanding Common Shares. Aliantis not a party to the Related Party Transactions and is dealingat arm's length with Clairvest. Aliant supports the RelatedParty Transactions and is being treated identically to all otherholders of the Common Shares and the Class "A" Sharesof the Corporation, and it will not receive, directly or indirectly,as a consequence of the transaction, a benefit that is not alsobeing received on a pro rata basis by all such other shareholders.

12. Without taking into account the ClairvestOptions and Clairvest Warrants, all of which are significantlyout of the money, Clairvest beneficially owns less than 5% ofthe voting securities of the Corporation and significantly lessthan the number of common shares owned by Aliant.

13. The initial negotiations with respect tothis transaction were conducted at arm's length between theCorporation and members of the management of Catterton PartnersIV, L.P. The subsequent negotiations between Clairvest and membersof the management of Catterton Partners IV, L.P. were at arm'slength and did not involve the participation of the Corporation.

14. The management proxy circular for the Annualand Special Shareholders meeting to be held in June, 2002 willprovide appropriate disclosure (including disclosure in accordancewith Section 5.4 of Rule 61-501) of the Recapitalization Agreementand the transactions contemplated thereby (including the RelatedParty Transactions).

15. The shareholders of the Corporation willbe required to approve the Recapitalization Agreement and thetransactions contemplated thereby (including the Related PartyTransactions) in accordance with the Canada Business CorporationsAct, the requirements of TSX and the minority approval requirementsof Rule 61-501.

16. The Preferred Shares are being purchasedby both Catterton and Clairvest at a price of $1.00 per share.This reflects a significant premium to the market price forthe Common Shares, into which the Preferred Shares are convertibleon a 1:1 basis.

AND UPON the Director being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS DECIDED pursuant to Section 9.1of Rule 61-501 that VOXCOM shall not be subject to the valuationrequirements in Section 5.5 of Rule 61-501 in connection withthe Related Party Transactions initiated pursuant to the RecapitalizationAgreement, provided that VOXCOM complies with the other applicableprovisions of Rule 61-501.

May 3, 2002.

"Ralph Shay"