Securities Law & Instruments


Subsection 74(1) - issuance of preference shares of a US non-reporting issuer to a deminimus number of sophisticated Ontario investors in connection with US privatefinancing required in order to fund certain acquisitions exempt from sections 25 and 53of the Act. Ontario investors involved with the financing and with one of the targetcompanies. First trades a distribution unless made over the Nasdaq Stock Market.

Statutes Cited

Securities Act, R.S.O. 1990, c.S.5, as am., ss. 25, 53, 74(1).

United States Securities Act of 1933.




(Subsection 74(1))

UPON the application of Inc. (the "Applicant") to the OntarioSecurities Commission (the "Commission") for a ruling pursuant to subsection 74(1) of theAct that the issuance of series A preference shares of the Applicant to certain investorsin Ontario are not subject to section 25 or 53 of the Act, subject to certain terms andconditions;

AND UPON considering the application and the recommendation of the staff of theCommission;

AND UPON the Applicant having represented to the Commission that:

1. The Applicant is a corporation incorporated under the laws of the State ofDelaware. The authorized capital of the Applicant will consist of a fixed number ofshares of common stock, par value U.S.$0001 per share ("Common Stock") and 20million shares of series A preference shares, par value U.S.$0.0001 per share("Preference Shares").

2. The Applicant is not a reporting issuer under the Act and does not currently intendto become a reporting issuer under the Act.

3. The Applicant is completing a private financing (the "Financing") in the UnitedStates resulting in aggregate proceeds to the Applicant of approximately U.S.$90million, in order to fund, inter alia, the cash portion of the consideration required inconnection with certain acquisitions, including the acquisition of a majority-ownedsubsidiary of Quorum Growth Partners I Limited Partnership ("QGP").

4. QGP has been capitalized as a private limited partnership and is managed byQuorum Growth Funding Limited, a wholly-owned subsidiary of Quorum FundingCorporation ("Quorum").

5. Investors who intend to participate in the Financing and who are residents of theUnited States will do so pursuant to Regulation D of the Securities Act of 1933 (the"US Act") (the "Investors") and will provide the Applicant with a representation letterconfirming their status as an Accredited Investor (as defined in Rule 501 inRegulation D under the US Act). Regulation D provides that in the event that anInvestor himself is not an Accredited Investor, such Investor can appoint an Investorwho is an Accredited Investor as their personal representative in order to takeadvantage of the exemption.

6. QGP and its related entities (but excluding its directors, officers and employees) willown about 14% of the issued and outstanding shares of the Applicant, on a fullydiluted basis.

7. Approximately seven persons who are residents of Ontario intend to participate inthe Financing (the "Ontario Investors") and intend to subscribe for PreferenceShares in amounts less than Cdn.$150,000. The Ontario Investors consist of twoofficers of Quorum, four employees of Quorum and one member of QGP's advisoryboard.

8. Each Ontario Investor will either: (i) provide the Applicant with a representationletter confirming their status as an Accredited Investor; or (ii) if such OntarioInvestor is not an Accredited Investor, appoint an Ontario Investor who is anAccredited Investor as their personal representative.

9. Each Ontario Investor will execute a subscription agreement with the Applicantwhich will contain certain representations and warranties, including:

(i) that the Ontario Investor is capable of assessing the merits and risksassociated with their investment as a result of their financial and investmentexperience and can bear the loss of their entire investment in PreferenceShares;

(ii) that the Ontario Investor is a person who, through prior business dealingsor other associations with one or more officers or directors of the Applicant,has common bonds of interest or association with such persons;

(iii) that the Ontario Investor is familiar with the aims and objectives of theApplicant; and

(iv) that the Ontario Investor understands that certificates representingPreference Shares will include a legend imprinted thereon setting out resalerestrictions, including that such shares will not be permitted to be soldpursuant to any pre-arranged sale to any Canadian resident, for an indefiniteperiod, unless such sale is made in accordance with applicable securitieslegislation in the Province of Ontario.

10. The Ontario Investors will represent not more than 0.23% of the total number ofPreference Shares to be sold pursuant to the Financing.

11. The Ontario Investors are sophisticated purchasers with substantial financialknowledge and financial wherewithal.

12. Each of the Ontario Investors has been involved in various aspects of one or moreof: (i) conducting due diligence on the entities to be acquired by the Applicant; (ii)developing the Applicant's business plan; (iii) involvement with the Financing; (iv)investigating and evaluating the various industries in which the Applicant (and theentities to be acquired) will be conducting business; or (v) assessing and evaluatingone or more aspects of the foregoing matters enumerated in 12(i) to 12(iv). TheApplicant expects that the Ontario Investors will continue to be involved withQuorum, which entity will have a significant equity interest of the Applicant.

13. Each Ontario Investor, will be entitled to receive, as a result of being a holder ofPreference Shares: (i) audited annual financial statements of the Applicant; (ii)unaudited quarterly financial statements of the Applicant; and (iii) monthly financialreports in respect of Applicant compared against the Applicant's annual businessplan. Each of the Ontario Investors will receive the same reporting information ofthe Applicant as all other holders of Preference Shares.

14. The Applicant will not be providing any financial assistance or other incentive to theOntario Investors in connection with their purchase of Preference Shares.

15. There are less than 35 Ontario resident holders of Preference Shares of theApplicant, holding in the aggregate more than 10% of the issued and outstandingPreference Shares, but less than 15% of the issued and outstanding PreferenceShares.

16. The market for the Preference Shares is in the United States.

17. The Applicant is not required to provide Investors with the equivalent of an offeringmemorandum nor contractual rights of action in connection with the Financing bythe Investors in the Applicant.

AND UPON the Commission being satisfied that to so rule would not be prejudicialto the public interest;

IT IS RULED pursuant to subsection 74(1) of the Act that the issuance ofPreference Shares by the Applicant to the Ontario Investors is not subject to section 25or 53 of the Act, provided that the first trade by an Ontario Investor in the PreferenceShares shall be a distribution unless such trade is made through the facilities of theNasdaq Stock Market and in accordance with the rules of such market and all lawsapplicable to such market.

March 17th, 2000.

"J. A. Geller"     "Robert W. Davis"