Mutual Reliance Review System for ExemptiveRelief Applications - OSC Rule 54-501 - Exemption granted fromrequirement to include prospectus level disclosure in an informationcircular where redeemable preferred shares to be issued undera merger effected by way of plan of arrangement - preferredshares used for tax purposes only and will be redeemed on 2ndbusiness day following arrangement and issuer has cash on handto fund the redemption - merger, in substance, a cash transaction,but issuer of view that circular subject to prospectus leveldisclosure requirement of Rule 54-501.
Applicable Ontario Rules
Ontario Securities Commission Rule 54-501 ProspectusDisclosure in Certain Information Circulars - sections 1.2,2.1, 2.2, 2.3, and 3.1.
Applicable Ontario Policies
Companion Policy 61-501 CP - To Ontario SecuritiesCommission Rule 61-501 Insider Bids, Issuer Bids, Going PrivateTransactions and Related Party Transactions - section 2.10.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
BRITISH COLUMBIA AND ONTARIO
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
OPEN TEXT CORPORATION ANDCENTRINITY INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Makers") inBritish Columbia and Ontario (collectively, the "Jurisdictions")has received an application from Open Text Corporation ("OpenText") and Centrinity Inc. ("Centrinity" andtogether with Open Text, the "Filers") for a decisionunder the securities legislation of the Jurisdictions (the "Legislation")that the prospectus level disclosure requirements containedin Sections 2.1, 2.2 and 2.3 of Ontario Securities CommissionRule 54-501, Prospectus Disclosure in Certain InformationCirculars, and Section 11 of British Columbia Form 54-901F(collectively, the "Prospectus Level Disclosure Requirements")shall not apply to a management proxy circular (the "Circular")to be sent to all shareholders of Centrinity in connection withthe proposed amalgamation (the "Amalgamation") ofCentrinity and 3801853 Canada Inc. ("Subco"), a wholly-ownedsubsidiary of Open Text, pursuant to section 181 of CanadaBusiness Corporations Act (the "CBCA") (the amalgamatedcompany to be formed by the amalgamation of Centrinity and Subcobeing referred to as "Amalco");
AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS the Filers have representedto the Decision Makers that:
1. Open Text is a corporation amalgamatedunder the Business Corporations Act (Ontario). Thecommon shares in the capital of Open Text are listed on theToronto Stock Exchange (the "TSX") and the NasdaqNational Market. Open Text is a reporting issuer in each provinceof Canada.
2. Centrinity is a corporation continued underthe CBCA. The Class A common shares in the capital of Centrinity(the "Centrinity Shares") are listed on the TSX.Centrinity is a reporting issuer in British Columbia, Albertaand Ontario.
3. Subco is a corporation incorporated underthe CBCA and is a wholly-owned subsidiary of Open Text. Subcois not a reporting issuer in any province of Canada. Subcowill be used for the sole purpose of effecting the Amalgamation.
4. Pursuant to a merger agreement dated asof September 19, 2002 (the "Merger Agreement") betweenOpen Text, Subco and Centrinity, Open Text intends to acquireall of the issued and outstanding Centrinity Shares, includingCentrinity Shares issuable upon the exercise of outstandingstock options, pursuant to the Amalgamation.
5. The Amalgamation will result in each holderof Centrinity Shares (a "Centrinity Shareholder")receiving one redeemable preferred share in the capital ofAmalco (the "Preferred Shares") for each CentrinityShare. Pursuant to the Amalgamation, Open Text will receivecommon shares in the capital of Amalco in exchange for itsshares of Subco. On the second business day following completionof the Amalgamation, each Preferred Share will be redeemedfor $1.26 in cash (the "Redemption"). Upon completionof the Redemption, Open Text will own all of the shares ofAmalco.
6. The Preferred Shares will be used so thatrollovers provided for under section 87 of the Income TaxAct (Canada) will be available to Centrinity. No new certificatesevidencing the Preferred Shares will be issued to the CentrinityShareholders who will continue to hold their Centrinity Sharecertificates until the Redemption. The Filers are of the viewthat the Circular is subject to the Prospectus Level DisclosureRequirements due to the issuance of the Preferred Shares.
7. The aggregate proceeds of redemption payablepursuant to the Redemption is approximately $31.9 million,representing less than 5% of the market capitalization ofOpen Text. Open Text has in excess of US $110 million in cashand cash equivalents as at its year ended June 30, 2002.
AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");
AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makers underthe Legislation is that the Prospectus Level Disclosure Requirementsshall not apply to the Circular.
October 3, 2002.