Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications - as a result of the exercise of call rightsupon exchangeable shares, issuer has only one security holder- issuer deemed to have ceased to be a reporting issuer.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.s. 83.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ONTARIO, ALBERTA, NEWFOUNDLAND,NOVA SCOTIA,

QUEBEC AND SASKATCHEWAN

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

PHOTON DYNAMICS CANADA INC.

 

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario, Alberta, Newfoundland, Nova Scotia, Quebec and Saskatchewan(the "Jurisdictions") has received an applicationfrom Photon Dynamics Canada Inc. (formerly Image ProcessingSystems Inc.) ("Photon Canada") for a decision underthe securities legislation of the Jurisdictions (the "Legislation")that Photon Canada be deemed to have ceased to be a reportingissuer under the Legislation;

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, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions or in Québec Commission Notice 14-101;

AND WHEREAS Photon Canada has representedto the Decision Makers that:

1. Photon Canada was incorporated pursuantto the Business Corporations Act (Ontario) on April8, 1988.

2. The principal executive office of PhotonCanada is located at 221 Whitehall Drive, Markham, Ontario.

3. Photon Canada is a reporting issuer ineach of the Jurisdictions.

4. The common shares in the capital of PhotonCanada (the "Photon Canada Common Shares") werelisted and posted for trading on the Toronto Stock Exchange("TSX") under the symbol "IPV", but werevoluntarily de-listed from the TSX following the completionof a certain transaction (the "Transaction"), whichis described below.

5. The Transaction involved the re-organizationof the capital structure of Photon Canada by way of a planof arrangement, a simultaneous acquisition by Photon DynamicsNova Scotia Company ("Photon ULC"), a wholly ownedsubsidiary of Photon Dynamics, Inc. ("Photon"),of all of the issued and outstanding Photon Canada CommonShares and the subsequent de-listing of all securities ofPhoton Canada from the TSX on January 3, 2001.

6. As part of the Transaction, holders ofthe Photon Canada Common Shares received 0.0447 exchangeableshares of Photon Canada (the "Photon Canada ExchangeableShares") for each Photon Canada Common Share held. EachPhoton Canada Exchangeable Share was exchangeable into onecommon share in the capital of Photon. The Photon Canada ExchangeableShares were retractable at the option of the holders and,upon retraction, were subject to the overall call right ofPhoton ULC to purchase all of the outstanding Photon CanadaExchangeable Shares. Photon ULC subsequently exercised itscall right each time a retraction was made and, as a result,has become the owner of all Photon Canada Exchangeable Shares.

7. The authorized capital of Photon Canadaconsists of an unlimited number of Photon Canada Common Shares,an unlimited number of preferred shares (the "PhotonCanada Preferred Shares") and an unlimited number ofPhoton Canada Exchangeable Shares.

8. As of September 13, 2002, there was oneissued and outstanding Photon Canada Common Share, 1,159,832issued and outstanding Photon Canada Exchangeable Shares,and no issued and outstanding Photon Canada Preferred Shares.There are no other securities of Photon Canada, includingdebt securities, issued and outstanding. All of the issuedand outstanding securities of Photon Canada are owned by PhotonULC. No securities of Photon Canada, including debt securities,are listed or quoted on any exchange.

9. To the best of our knowledge, Photon Canadais not in default of any of the requirements of the Legislation.

10. Photon Canada does not intend to offersecurities to the public.

AND WHEREAS under the System, this MRRSDecision Document evidences the decision (the "Decision")of each Decision Maker (collectively, the "Decision Makers");

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 Photon Canada is deemed to have ceasedto be a reporting issuer under the Legislation.

October 28, 2002.

"John Hughes"