Securities Law & Instruments

Headnote

Mutual Reliance Review Systemfor Exemptive Relief Applications - Employment agreements enteredinto between offeror and key employees and executives of theofferee who are also selling securityholders of the offeree- executives holding less than ten percent of offeree shareson a fully-diluted basis - agreements reflect commercially reasonableterms and negotiated at arm's length - agreements include paymentof retention bonuses - Decision made that agreements being enteredinto for reasons other than to increase the value of the considerationpaid to the selling securityholders for their shares and thatsuch agreements may be entered into notwithstanding the prohibitionon collateral benefits.

Applicable Statutory Provisions

Securities Act, R.S.O. 1990,c. S.5, as amended, ss. 97 and 104(2)(a).

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, MANITOBA, ONTARIO,

QUÉBEC, NOVA SCOTIA,AND NEWFOUNDLAND AND LABRADOR

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

646543 B.C. LTD.

MRRS DECISION DOCUMENT

WHEREAS the local securitiesregulatory authority or regulator (the "Decision Makers")in each of British Columbia, Alberta, Saskatchewan, Manitoba,Ontario, Québec, Nova Scotia, and Newfoundland and Labrador(the "Jurisdictions") has received an applicationfrom 646543 B.C. Ltd. (the "Filer") for a decisionunder the securities legislation of the Jurisdictions (the "Legislation")that, in connection with an offer dated May 1, 2002 to purchase,by way of a formal take-over bid (the "Bid") by theFiler, all of the outstanding common shares (the "CommonShares") of A.L.I. Technologies Inc. ("ALI"),retention and employment agreements (collectively, the "EmploymentAgreements") between ALI and eight of ALI's senior employees(the "Employees"), who are also holders of CommonShares or options to acquire Common Shares, have been made forreasons other than to increase the value of the considerationpaid to the Employees for their Common Shares and may be enteredinto despite the provisions in the Legislation that prohibitan offeror who makes or intends to make a take-over bid fromentering into any collateral agreement with any holder or beneficialowner of securities of the offeree issuer that has the effectof providing to the holder or owner a consideration of greatervalue than that offered to the other holders of the same classof securities (the "Prohibition on Collateral Agreements");

AND WHEREAS under theMutual Reliance Review System for Exemptive Relief Applications(the "System"), the British Columbia Securities Commissionis the principal regulator for this application;

AND WHEREAS the Filerhas represented to the Decision Makers that:

1. ALI is a corporation governedby the Company Act (British Columbia) (the "BCCA")and is a reporting issuer in British Columbia, Alberta, Manitobaand Ontario; ALI is a medical information technology companythat develops and markets film-less digital image networksystems including, primarily, ultrasound and radiologicalapplications;

2. the Common Shares are tradedon The Toronto Stock Exchange; as at April 24, 2002, ALI had10,970,900 issued and outstanding Common Shares;

3. the Filer, a BCCA company,is a wholly-owned subsidiary of McKesson Corporation ("McKesson");the Filer was incorporated on April 26, 2002 solely for thepurpose of making the Bid and is not, and has no current intentionof becoming, a reporting issuer in any jurisdiction in Canada;

4. McKesson is incorporatedunder the laws of Delaware and is not, and has no currentintention of becoming, a reporting issuer in any jurisdictionin Canada;

5. McKesson is one of theworld's largest health care service and technology companies;McKesson's principal businesses are: (i) the wholesale distributionof ethical and proprietary drugs, medical-surgical suppliesand health and beauty care products to drug and food stores,mass merchandisers and health care providers; and (ii) theprovision of patient, clinical, financial and managed care,strategic management software solutions, networking technologies,information outsourcing and other services to health careorganizations;

6. on May 1, 2002, McKesson,the Filer and ALI entered into a support agreement with respectto the Bid (the "Support Agreement") under whichthe Filer agreed, subject to the satisfaction of certain conditions,to make the Bid for all of the outstanding Common Shares ata price of $43.50 per Common Share in cash; the offering pricewas negotiated at arm's length by McKesson and ALI and representsa premium of 34% over the closing price for the Common Sharesof $32.51 on May 1, 2002;

7. McKesson and the Filerhave entered into lock-up agreements with certain of the directorsand officers of ALI who, as at May 1, 2002, collectively ownedor controlled approximately 34% of the outstanding CommonShares on an undiluted basis and, taking into considerationoptions to acquire additional Common Shares, collectivelyowned or controlled approximately 32% of the outstanding CommonShares on a fully-diluted basis; one of the Employees, GregPeet, ALI's President and CEO, is a party to a lock-up agreement;

8. when the Support Agreementwas being negotiated by McKesson and ALI, McKesson requestedthat the Employees agree to remain employed by ALI after thecompletion of the Bid; McKesson wished to secure such an agreementbecause of the integral role that McKesson believes the Employeeshad in developing ALI's business and the Employees' substantialand valuable experience and expertise with respect to ALI'sbusiness; McKesson believes that the continued employmentof the Employees by ALI following completion of the Bid willbe of great assistance to McKesson in ensuring a successfultransition following completion of the Bid;

9. the current positions atALI of the Employees (which will remain the same upon completionof the Bid, as will the Employees' duties and responsibilities)and the reasons why the continued employment of each of theEmployees following completion of the Bid is important toMcKesson, are as follows:

(a) Gregory Peet is thePresident and CEO of ALI, and as President and CEO, Mr.Peet is integral to the business of ALI both in terms ofALI's relationships with its customers and Mr. Peet's knowledgeand experience with respect to ALI and its software andtechnology;

(b) Bing Teng is currentlyALI's Vice President, Sales, and will be important to ALIpost-acquisition due to his relationships with ALI's customers;

(c) Michael Brozino is ALI'sDirector of Sales and provides an important link betweenALI and its existing customers;

(d) Alan Noordvyk is a Director,Engineering, at ALI and is one of the key persons at ALIbecause of his knowledge of ALI's software and technology;

(e) Marcel Sutanto is alsoa Director, Engineering, and has extensive knowledge ofALI's software and technology;

(f) Warren Edwards is aDirector, Engineering, who has cultivated relationshipswith many of ALI's existing customers;

(g) Rod O'Reilly is ALI'sVice President, Operations, and will be important to ALIupon completion of the Bid both due to his relationshipswith ALI's customers and his knowledge of ALI's softwareand technology; and

(h) David Sutherland isALI's Vice President, Services, and similarly is and willbe important to ALI because of his relationships with ALI'scustomers and his knowledge of ALI's products;

10. the Employment Agreementsprovide that each of the Employees will receive retentionbonuses if such Employee continues to be employed by ALI for24 months after the date on which the Employment Conditionis satisfied; the amount of the retention bonus for each Employeeranges from US$100,000 to US$400,000, and the aggregate amountof the retention bonuses payable to all of the Employees isUS$1,450,000; Greg Peet will receive a further retention bonusof US$200,000 if he remains employed by ALI for an additional12 months; the retention bonuses will be pro-rated for anyEmployee whose employment is terminated without cause by ALIprior to the retention bonus payment date;

11. in addition, the EmploymentAgreements provide that the Employees shall each receive stockoptions for common shares of McKesson, ranging from 5,000options to 25,000 options, in accordance with McKesson's 1998Canadian Stock Incentive Plan or, for the two Employees locatedin United States, in accordance with McKesson's United StatesStock Incentive Plan;

12. except for the retentionbonuses and McKesson stock options, the Employment Agreementsdo not materially change the salaries, bonuses, benefits andtermination rights that the Employees currently enjoy;

13. with the exception ofGreg Peet, the Employees are under no obligation to tendertheir Common Shares under the Bid;

14. the Employment Agreementswere negotiated on an arm's length basis and are on commerciallyreasonable terms; in the United States, the use of retentionbonuses is not uncommon in the context of mergers and acquisitionswhere the acquiror wants to retain the services of the keyemployees of the acquired company; in all other respects,the Employment Agreements are consistent with current industrypractice in Canada and McKesson's compensation arrangementsfor new executive employees; the retention bonuses are intendedto provide an incentive for the Employees to continue in theemployment of ALI following completion of the Bid;

15. the Employees' executionof the Employment Agreements was a condition to McKesson andthe Filer entering into the Support Agreement; McKesson believesthat without the continued employment of the Employees, therewould be a material reduction in the likelihood of a successfultransition following completion of the Bid and a correspondingreduction in the value of ALI to McKesson and its shareholders;

16. collectively, the Employeeshold in the aggregate Common Shares and options to acquireCommon Shares representing less than 10% of the total issuedand outstanding Common Shares on a fully diluted basis; noneof the Employees are related to McKesson or the Filer; and

17. the Employment Agreementswere entered into for valid business reasons unrelated tothe Employees' holding of Common Shares, were not enteredinto for the purpose of conferring a collateral benefit onthe Employees not enjoyed by the other holders of Common Sharesand are being made for reasons other than to increase thevalue of the consideration to be paid to the Employees underthe Bid;

AND WHEREAS under theSystem, this MRRS Decision Document evidences the decision ofeach Decision Maker (collectively, the "Decision");

AND WHEREAS each of theDecision Makers is satisfied that the test contained in theLegislation that provides the Decision Maker with the jurisdictionto make the Decision has been met;

THE DECISION of the DecisionMakers under the Legislation is that, in connection with theBid, the Employment Agreements are being entered into for reasonsother than to increase the value of the consideration to bepaid to the Employees for their Common Shares and may be enteredinto despite the Prohibition on Collateral Benefits.

May 29, 2002.

"Brenda Leong"