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Jawz Inc. and Jawz Acquisition Canada Corp. - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -relief from the registration and prospectusrequirements to facilitate an exchangeable share structure
Applicable Ontario Statutes Cited
Securities Act, R.S.O. 1990,c.S.5,as am.,ss. 25, 35, 53,72(1),74(1)
IN THE MATTER OF
THE SECURITIES LEGISLATION
OF ALBERTA AND ONTARIO
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF JAWZ INC. AND
JAWS ACQUISITION CANADA CORP.
MRRS DECISION DOCUMENT
1. WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of Alberta andOntario (collectively, the "Jurisdictions") has received an application from Jawz Inc. ("Jawz") and JawsAcquisition Canada Corp. ("JACC") for a decision pursuant to the securities legislation of the Jurisdictions (the"Legislation") that the requirements under the Legislation to be registered to trade in a security (the"Registration Requirement") and to file and obtain a receipt for a preliminary prospectus and a prospectus (the"Prospectus Requirement") shall not apply to certain trades of common shares of Jawz and exchangeableshares of JACC;
2. AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System"), the Alberta Securities Commission is the principal regulator for this application;
3. AND WHEREAS Jawz and JACC have represented to the Decision Makers that:
3.1 Jawz is a corporation incorporated under the laws of the State of Nevada;
3.2 the head office of Jawz is in Calgary, Alberta;
3.3 the authorized capital of Jawz includes 95,000,000 shares of common stock ("Jawz Common Stock");
3.4 as of October 10, 2000, there were 30,959,089 shares of Jawz Common Stock issued andoutstanding;
3.5 the Jawz Common Stock is quoted for trading on the National Association of Securities DealersAutomated Quotation System ("NASDAQ");
3.6 Jawz is subject to the reporting requirements under the Securities Exchange Act of 1934 in the UnitedStates of America;
3.7 Jawz is a reporting issuer in the Jurisdictions, but has been granted relief from its reporting obligationsunder the Legislation on condition that it file with the Decision Makers certain continuous disclosurethat it is required to file with securities regulatory authorities in the United States of America;
3.8 JACC is a corporation incorporated under the Business Corporations Act (Alberta);
3.9 the head office of JACC is located in Calgary, Alberta;
3.10 JACC is not a reporting issuer in the Jurisdictions;
3.11 no securities of JACC are listed on a stock exchange or traded over the counter in Canada orelsewhere;
3.12 the authorized capital of JACC consists of an unlimited number of common shares ("JACC CommonShares") and an unlimited number of exchangeable shares ("Exchangeable Shares");
3.13 as of October 30, 2000, there were 100 JACC Common Shares issued and outstanding;
3.14 all of the issued and outstanding JACC Common Shares are owned by Jawz;
3.15 as of October 30, 2000, there were 4,825,874 Exchangeable Shares issued and outstanding;
3.16 on July 31, 2000, JACC issued 1,731,932 Exchangeable Shares to the former common shareholdersof Pace Systems Group Inc. in exchange for an equal number of exchangeable shares of JawsAcquisition Corp. ("JAC"), a subsidiary of Jawz, held by them (the "Pace Transaction");
3.17 the Pace Transaction was completed by means of a reorganization involving Jawz, JACC, JAC andthe former common shareholders of Pace Systems Group Inc.;
3.18 on August 15, 2000, JACC issued 1,548,838 Exchangeable Shares to the shareholders of4Comm.com Inc. ("4Comm") in exchange for the shares of 4Comm held by them (the "4CommTransaction");
3.19 on August 15, 2000, JACC issued 389,104 Exchangeable Shares to the shareholders of GeneralNetwork Services Inc. ("GNS") in exchange for the shares of GNS held by them (the "GNSTransaction");
3.20 on August 22, 2000, JACC issued 1,120,000 Exchangeable Shares to the shareholders of BetachSystems Inc. and Betach Advanced Solutions Inc. (collectively, "Betach") in exchange for the sharesof Betach held by them (the "Betach Transaction");
3.21 each of 4Comm, GNS and Betach are private issuers or private companies as defined in theLegislation;
3.22 4Comm, GNS and Betach are not reporting issuers under the Legislation;
3.23 no securities of 4Comm, GNS and Betach are listed on a stock exchange or traded over the counterin Canada or elsewhere;
3.24 Jawz and JACC were able to rely on exemptions from the take-over bid requirements contained in theLegislation to complete the 4Comm Transaction, the GNS Transaction and the Betach Transaction;
3.25 under the terms of the Exchangeable Shares and certain rights granted in connection with the PaceTransaction, the 4Comm Transaction, the GNS Transaction and the Betach Transaction, holders ofExchangeable Shares may exchange them for Jawz Common Stock on a one for one basis;
3.26 under the terms of the Exchangeable Shares and certain rights granted in connection with the PaceTransaction, the 4Comm Transaction, the GNS Transaction and the Betach Transaction, Jawz orJACC may acquire or redeem Exchangeable Shares in exchange for Jawz Common Stock in certaincircumstances;
3.27 in order to ensure that the Exchangeable Shares remain the economic equivalent of Jawz CommonStock prior to their exchange, the Pace Transaction, the 4Common Transaction, the GNS Transactionand the Betach Transaction provided for:
3.27.1 a support agreement between Jawz and JACC which, among other things, restricts Jawzfrom declaring or paying dividends on Jawz Common Stock unless equivalent dividends aredeclared and paid on the Exchangeable Shares and from subdividing, consolidating orreclassifying Jawz Common Stock unless economically equivalent changes are made to theExchangeable Shares;
3.27.2 an exchange trust agreement between Jawz and Computershare Investor Services Inc. (the"Depository") which, among other things, granted to the Depository, for the benefit of holdersof Exchangeable Shares, the right to require Jawz to indirectly exchange the ExchangeableShares for Jawz Common Stock upon the occurrence of certain specified events (the"Exchange Rights");
3.27.3 the deposit by Jawz of a special voting share (the "Voting Share") with the Depositary whicheffectively provides holders of Exchangeable Shares with voting rights equivalent to thoseattached to Jawz Common Stock;
3.28 the following trades or distributions occurred in connection with the Pace Transaction, the 4CommTransaction, the GNS Transaction and the Betach Transaction (collectively, the "Transaction Trades"):
3.28.1 the issuance by JACC of Exchangeable Shares to the former common shareholders of Pacein exchange for the exchangeable shares of JAC held by them;
3.28.2 the issuance by JACC of Exchangeable Shares to the shareholders of 4Comm, GNS andBetach in exchange for the shares of 4Comm, GNS and Betach held by them;
3.28.3 the transfer by the former shareholders of Pace of the exchangeable shares of JAC held bythem to JACC;
3.28.4 the transfer by the shareholders of 4Comm, GNS and Betach of the shares in 4Comm, GNSand Betach held by them to JACC;
3.28.5 the grant by Jawz of the Exchange Rights to the Depository;
3.28.6 the issuance by Jawz of the Voting Share to the Depositary;
3.28.7 the grant by holders of Exchangeable Shares to Jawz of certain rights to purchaseExchangeable Shares for Jawz Common Stock (the "Call Rights"); and
3.28.8 the grant by Jawz to the holders of Exchangeable Shares of certain rights to require Jawzto purchase Exchangeable Shares for Jawz Common Stock (the "Put Rights");
3.29 Jawz, JACC and the holders of the Exchangeable Shares were able to rely on exemptions from theRegistration Requirement and the Prospectus Requirement contained in the Legislation to conductthe Transaction Trades;
3.30 the following trades or distributions may occur under the terms of the Exchangeable Shares or uponthe exercise of the Exchange Rights, the Call Rights or the Put Rights (collectively, the "ExchangeTrades"):
3.30.1 the issuance by Jawz and delivery by JACC of Jawz Common Stock to holders ofExchangeable Shares upon the exercise of the Exchange Rights;
3.30.2 the issuance by Jawz of Jawz Common Stock to holders of Exchangeable Shares upon theexercise of the Call Rights or Put Rights;
3.30.3 the issuance by Jawz and delivery by JACC of Jawz Common Stock to holders ofExchangeable Shares upon the exchange or redemption of the Exchangeable Shares undertheir terms; and
3.30.4 the transfer of Exchangeable Shares by the holders thereof to Jawz or JACC in connectionwith the exercise of the Exchange Rights, the Call Rights or the Put Rights or upon theexchange or redemption of the Exchangeable Shares under their terms;
3.31 to date, none of the Exchangeable Shares have been exchanged by their holders or been acquiredor redeemed by Jawz or JACC;
3.32 Jawz, JACC and the holders of the Exchangeable Shares are not able to rely on any exemptions fromthe Registration Requirement and the Prospectus Requirement contained in the Legislation to conductthe Exchange Trades;
3.33 Jawz concurrently sends to holders of Exchangeable Shares resident in the Jurisdictions all disclosurematerial it sends to holders of Jawz Common Stock in general;
4. AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");
5. AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;
6. THE DECISION of the Decision Makers is that the Registration Requirement and the Prospectus Requirementshall not apply to the Exchange Trades;
7. THE FURTHER DECISION of the Decision Makers is that the first trade of Jawz Common Stock acquired inconnection with an Exchange Trade shall be deemed to be a distribution under the Legislation of theJurisdiction in which the trade takes place (the "Applicable Jurisdiction") unless:
7.1 at the time the trade occurs, Jawz is a reporting issuer under the Legislation of the ApplicableJurisdiction and has been a reporting issuer under the Legislation of the Applicable Jurisdiction for aperiod of twelve months;
7.2 if the seller is in a special relationship with Jawz, as defined in the Legislation of the ApplicableJurisdiction, the seller has no reasonable grounds to believe that Jawz is in default of any requirementof the Legislation of the Applicable Jurisdiction;
7.3 no unusual effort is made to prepare the market or to create a demand for the Jawz Common Stockand no extraordinary commission or consideration is paid in respect of the trade; and
7.4 the trade is not a trade from the holdings of any person, company or combination of persons orcompanies that holds a sufficient number of securities of Jawz or an affiliate of Jawz to affectmaterially the control of Jawz or holds more than 20 percent of the outstanding voting securities ofJawz in the absence of evidence showing that the holding of those securities does not affect materiallythe control of Jawz.
DATED at Edmonton, Alberta this 5th day of December,2000.
original signed by
"Eric T. Spink", Vice-Chair
"Thomas G. Cooke", Q.C., Member