Doubleclick Inc. et al. - MRRS Decision

MRRS Decision

IN THE MATTER OF

THE SECURITIES

LEGISLATION OF BRITISH COLUMBIA AND ONTARIO

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM FOR

EXEMPTION RELIEF APPLICATIONS

AND

IN THE MATTER OF

DOUBLECLICK INC., DOUBLE CLICK INTERNATIONAL INTERNET ADVERTISING LTD.,

THUNDERBALL ACQUISITION I INC., THUNDERBALL ACQUISITION II INC. AND

FLONETWORK INC.

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatory authority or regulator (the "Decision Makers") in each of BritishColumbia and Ontario (the "Jurisdictions") has received an application from DoubleClick Inc. ("DoubleClick"), DoubleClick International Internet Advertising Ltd. ("DIIA"), Thunderball Acquisition I Inc. ("Holdco"), Thunderball AcquisitionII Inc. ("Exchangeco") and FloNetwork Inc. ("FloNetwork") (collectively, the "Filer") for a decision pursuant to thesecurities legislation of the Jurisdictions (the "Applicable Laws") that the requirements contained in the Applicable Lawsto be registered to trade in a security and to file a preliminary prospectus and a prospectus and receive receipts therefor(the "Registration and Prospectus Requirements") shall not apply to certain trades in securities made in connection withan acquisition (the "Transaction") of FloNetwork by DoubleClick pursuant to an arrangement agreement (the"Arrangement Agreement") made as of February 22, 2001 among DoubleClick, FloNetwork, Holdco and Exchangeco;

AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System"), the Ontario Securities Commission is the principal regulator for this application;

AND WHEREAS the Filer has represented to the Decision Makers that:

1. DoubleClick will acquire all of the issued and outstanding securities of FloNetwork pursuant to the ArrangementAgreement and upon the completion of the Transaction, DoubleClick, through, Holdco, Exchangeco and DIIA(the "DoubleClick Affiliates") will own all of the issued and outstanding shares in the capital of FloNetwork andcertain warrants to acquire shares in the capital of FloNetwork.

2. DoubleClick is a Delaware corporation. DoubleClick is currently subject to the reporting requirements of theUnited States Securities Exchange Act of 1934, as amended, and is not a reporting issuer in any province orterritory of Canada.

3. DoubleClick's authorized capital consists of 5,000,000 shares of preferred stock, US$0.001 par value per share,and 400,000,000 shares of DoubleClick common stock (the "DoubleClick Common Shares"). The DoubleClickCommon Shares are fully participating voting shares. As of March 6, 2001, no preferred stock was issued oroutstanding and 128,454,449 DoubleClick Common Shares were issued and outstanding.

4. The DoubleClick Common Shares are quoted on the Nasdaq Stock Market-National Market System("NASDAQ").

5. DIIA is an Irish corporation and is a direct wholly-owned subsidiary of DoubleClick. The authorized capital ofDIIA consists of 500,000 ordinary shares of £1 each. As of March 6, 2001, there were 500,000 DIIA sharesoutstanding.

6. DIIA is not a reporting issuer in any province or territory of Canada.

7. Holdco is a Nova Scotia corporation. Holdco is a direct wholly-owned subsidiary of DIIA and an indirect wholly-owned subsidiary of DoubleClick. The authorized capital of Holdco consists of 100,000,000 common shares.

8. Holdco is not a reporting issuer in any province or territory of Canada..

9. Exchangeco is a Nova Scotia corporation. Exchangeco has been incorporated as a wholly-owned subsidiaryof Holdco to hold all of the shares in the capital of the FloNetwork and certain FloNetwork warrants.

10. Upon completion of the Transaction the authorized capital of Exchangeco will consist of 100,000,000 commonshares and 10,000,000 shares which are exchangeable for DoubleClick Common Shares (the "ExchangeableShare"). Upon completion of the Transaction, all of the issued and outstanding common shares of Exchangecowill be held directly by Holdco and the securityholders of FloNetwork who elect to receive Exchangeable Sharespursuant to the Arrangement will own all the issued outstanding Exchangeable Shares.

11. Exchangeco is not a reporting issuer in any province or territory of Canada.

12. FloNetwork is incorporated under the laws of Ontario. The authorized capital of FloNetwork consists of anunlimited number of common shares, an unlimited number of Class A preferred shares, an unlimited numberof Class B preferred shares, an unlimited number of Class C preferred shares and an unlimited number of ClassD preferred shares (together, the "FloNetwork Shares"). As of February 22, 2001, there were 6,237,273common shares, 550,000 Class A preferred shares, 8,640,000 Class B preferred shares, 2,650,423 Class Cpreferred shares and 12,033,983 Class D preferred shares outstanding.

13. FloNetwork has issued 4,000,000 Class B warrants convertible into 800,000 FloNetwork common shares and12,033,983 Class D warrants convertible into 1,203,398 FloNetwork common shares (together, the "FloNetworkWarrants" and together with the FloNetwork Shares the "FloNetwork Securities"). FloNetwork has also issueda warrant (the "Transamerica Warrant") to Transamerica Commercial Finance Corporation Canada, a residentof the United States, which is convertible into 32,439 FloNetwork common shares.

14. FloNetwork is not a reporting issuer in any province or Territory of Canada.

15. As of February 22, 2001, FloNetwork had granted 1,904,520 options (the "FloNetwork Options") to purchaseFloNetwork common shares under its share incentive plan to the directors, officers and employees ofFloNetwork and its affiliates.

16. As of March 30, 2001, FloNetwork had 22 registered shareholders excluding current and former directors,officers and employees of FloNetwork. The FloNetwork shareholders, warrant holders and option holders allreside in the United States of America, the United Kingdom, the Republic of Ireland, the British West Indies,Bermuda, the Cayman Islands, the British Virgin Islands and the Provinces of British Columbia and Ontario.

17. The Transaction will be effected by way of an arrangement under section 182 of the Business Corporations Act(Ontario) (the "Arrangement"), which will require: (i) the approval of the holders of at least 66 2/3% of each ofthe FloNetwork common shares, Class A preferred shares, Class B preferred shares, Class C preferred sharesand Class D preferred shares present in person or by proxy and voting as separate classes at the meeting (the"Meeting") of the holders of FloNetwork Shares which is expected to occur on or about April 17, 2001 (the"Meeting Date") for the purpose of approving the Arrangement, and (ii) the approval of the Superior Court ofJustice (Commercial List), the application in respect of which is scheduled to be heard on the next businessday following the Meeting Date.

18. Contemporaneously with the execution of the Arrangement Agreement, certain FloNetwork securityholdersrepresenting at least 86% of the FloNetwork common shares and 100% of each of the FloNetwork Class A, B,C and D preferred shares eligible to vote at the Meeting (the "FloNetwork Supporting Shareholders") enteredinto a shareholder agreement where the FloNetwork Supporting Shareholders undertook to take and not takecertain actions in support of the Transaction. Pursuant to the above-noted shareholder agreement, theFloNetwork Supporting Shareholders undertook to vote or to cause to be voted all FloNetwork Shares ownedby them in favour of the approval and adoption of the Transaction.

19. On or about April 2, 2001, FloNetwork delivered to the registered holders of the FloNetwork Shares amanagement proxy circular (the "Circular") which contains a detailed description of the business and affairs ofDoubleClick and FloNetwork and of the Transaction and the Arrangement.

20. On the Arrangement becoming effective, the outstanding FloNetwork Securities (except those held byshareholders who exercise their rights of dissent in accordance with the Arrangement and Interim Order) willbe exchanged for cash and Exchangeable Shares or cash and DoubleClick Common Shares. As well, on theArrangement becoming effective, outstanding FloNetwork Options will be exchanged in the Transaction foroptions to purchase DoubleClick Common Shares (the "Replacement Options"). The Transamerica Warrantshall be assumed by DoubleClick in accordance with its terms and shall be converted into a warrant exercisablefor DoubleClick Common Shares.

21. Each holder of FloNetwork Securities who receives cash and DoubleClick Common Shares pursuant to theArrangement will receive such consideration from Exchangeco in exchange for his, her or its FloNetworkSecurities. Each holder of FloNetwork Securities who receives cash and Exchangeable Shares pursuant tothe Arrangement will receive such consideration from Exchangeco in exchange for his, her or its FloNetworkSecurities. As a result of the foregoing, upon the completion of the Transaction, all of the then issued andoutstanding FloNetwork Securities will be held by Exchangeco.

22. The Exchangeable Shares, together with the Support Agreement and the Exchange Trust Agreement describedbelow, will provide holders thereof with a security of a Canadian issuer having economic and voting rights whichare, as nearly as practicable, equivalent to those of a DoubleClick Common Share. The Exchangeable Shareswill be exchangeable by a holder thereof for DoubleClick Common Shares on a share-for-share basis at theoption of such holder (subject to a limitation on the minimum number of Exchangeable Shares which may beexchanged by a holder of Exchangeable Shares at any time) and will be required to be exchanged upon theoccurrence of certain events, as more fully described below. Exchangeable Shares will be received by certainholders of FloNetwork Securities on a Canadian tax-deferred rollover basis. Dividends will be payable on theExchangeable Shares contemporaneously and in the equivalent amount per share as dividends on theDoubleClick Common Shares.

23. The Exchangeable Shares will rank prior to the common shares of Exchangeco with respect to the paymentof dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up ofExchangeco. The rights, privileges, restrictions and conditions attaching to the Exchangeable Shares (the"Exchangeable Share Provisions") will provide that each Exchangeable Share will entitle the holder to dividendsfrom Exchangeco payable at the same time as, and in an amount equivalent to, each dividend paid byDoubleClick on a DoubleClick Common Share. Subject to the overriding call right of Holdco referred to belowin this paragraph, on the liquidation, dissolution or winding-up of Exchangeco, a holder of Exchangeable Shareswill be entitled to receive from Exchangeco for each Exchangeable Share held an amount equal to the currentmarket price of a DoubleClick Common Share, to be satisfied by delivery of one DoubleClick Common Share,together with all declared and unpaid dividends on each such Exchangeable Share held by the holder on anydividend record date prior to the date of liquidation, dissolution or winding-up (such aggregate amount, the"Liquidation Price"). Upon a proposed liquidation, dissolution or winding-up of Exchangeco, Holdco will havean overriding call right to purchase all of the outstanding Exchangeable Shares from the holders thereof (otherthan DoubleClick or its affiliates) for a price per share equal to the Liquidation Price, to be satisfied by deliveryof one DoubleClick Common Share, together with all declared and unpaid dividends on each suchExchangeable Share held by the holder on any dividend record date prior to the date of liquidation, dissolutionor winding-up.

24. The Exchangeable Shares will not be listed for trading on any stock exchange or similar market.

25. The Exchangeable Shares will be non-voting (except as required by the Exchangeable Share Provisions or byapplicable law) and will be retractable at the option of the holder (subject to certain limitations). Subject to theoverriding call right of Holdco referred to below in this paragraph, upon retraction the holder will be entitled toreceive from Exchangeco for each Exchangeable Share retracted an amount equal to the current market priceof a DoubleClick Common Share, to be satisfied by delivery of one DoubleClick Common Share, together with,on the designated payment date therefor, all declared and unpaid dividends on each such retractedExchangeable Share held by the holder on any dividend record date prior to the date of retraction (suchaggregate amount, the "Retraction Price"). Upon being notified by Exchangeco of a proposed retraction ofExchangeable Shares, Holdco will have an overriding call right to purchase from the holder all of theExchangeable Shares that are the subject of the retraction notice for a price per share equal to the RetractionPrice, to be satisfied by delivery of one DoubleClick Common Share, together with, on the designated paymentdate therefor, all declared and unpaid dividends on each such retracted Exchangeable Share held by the holderon any dividend record date prior to the date of retraction.

26. Subject to the overriding call right of Holdco referred to below in this paragraph, Exchangeco may redeem allthe Exchangeable Shares then outstanding at any time on or after the third anniversary of the closing of theTransaction (the "Redemption Date"). The board of directors of Exchangeco may accelerate the RedemptionDate in certain circumstances, including: where there are a de minimis number of holders of ExchangeableShares, where there is a change of control of DoubleClick and where the non-voting Exchangeable Shares are,in accordance with their terms, given voting rights. Upon such redemption, a holder will be entitled to receivefrom Exchangeco for each Exchangeable Share redeemed an amount equal to the current market price of aDoubleClick Common Share, to be satisfied by the delivery of one DoubleClick Common Share, together withall declared and unpaid dividends on each such redeemed Exchangeable Share held by the holder on anydividend record date prior to the date of redemption (such aggregate amount, the "Redemption Price"). Uponbeing notified by Exchangeco of a proposed redemption of Exchangeable Shares, Holdco will have anoverriding call right to purchase from the holders all of the outstanding Exchangeable Shares (other thanDoubleClick or its affiliates) for a price per share equal to the Redemption Price, to be satisfied by the deliveryof one DoubleClick Common Share, together with all declared and unpaid dividends on each such redeemedExchangeable Share held by the holder on any dividend record date prior to the date of redemption.

27. Upon the liquidation, dissolution or winding-up of DoubleClick, the Exchangeable Shares will be automaticallyexchanged for DoubleClick Common Shares pursuant to the Exchange Trust Agreement (described below),in order that holders of Exchangeable Shares may participate in the dissolution of DoubleClick on the samebasis as holders of DoubleClick Common Shares. Upon the insolvency of Exchangeco, holders ofExchangeable Shares may put their shares to DoubleClick in exchange for DoubleClick Common Shares, asdescribed below.

28. The overriding call rights of Holdco referred to above are subject to an overriding call right of DoubleClick, incertain circumstances, to purchase from the holders of Exchangeable Shares all of the outstandingExchangeable Shares (other than those held by DoubleClick or its affiliates) (collectively the "DoubleClickOverriding Call Right") for a price per share equal to the Liquidation Price, Retraction Price or RedemptionPrice, as applicable, to be satisfied by delivery of one DoubleClick Common Share, together with all declaredand unpaid dividends on each such Exchangeable Share held by the holder on any dividend record date priorto the date of such call.

29. Upon the exchange of an Exchangeable Share for a DoubleClick Common Share, the holder of theExchangeable Share will no longer be a beneficiary of the trust created by the Exchange Trust Agreement thatholds the DoubleClick Special Voting Share (as described below).

30. The DoubleClick Special Voting Share will be issued to and held by CIBC Mellon Trust Company (the "Trustee")for the benefit of the holders of Exchangeable Shares outstanding from time to time (other than DoubleClickand its affiliates) pursuant to an Exchange Trust Agreement to be entered into by DoubleClick, Holdco,Exchangeco and the Trustee contemporaneously with the closing of the Transaction. The DoubleClick SpecialVoting Share will have a number of votes attached thereto equal to the number of Exchangeable Sharesoutstanding, from time to time, and not owned by DoubleClick or its affiliates. Each voting right attached to theDoubleClick Special Voting Share must be voted by the Trustee pursuant to the instructions of the holder ofthe related Exchangeable Share. In the absence of any such instructions from a holder, the Trustee will notbe entitled to exercise the related voting rights. Upon the exchange of an Exchangeable Share for aDoubleClick Common Share, the holder of the Exchangeable Share becomes a holder of a DoubleClickCommon Share and the right of such holder to exercise votes attached to the DoubleClick Special Voting Shareterminates.

31. Under the Exchange Trust Agreement, DoubleClick will grant to the Trustee, for the benefit of the holders ofthe Exchangeable Shares, a put right (the "Optional Exchange Right"), exercisable upon the insolvency ofExchangeco, to require DoubleClick to purchase from a holder of Exchangeable Shares all or any part of hisor her Exchangeable Shares. The purchase price for each Exchangeable Share purchased by DoubleClick willbe an amount equal to the current market price of a DoubleClick Common Share, to be satisfied by the deliveryto the Trustee, on behalf of the holder, of one DoubleClick Common Share, together with an additional amountequivalent to the full amount of all declared and unpaid dividends on such Exchangeable Share held by suchholder on any dividend record date prior to the closing of the purchase and sale.

32. Under the Exchange Trust Agreement, upon the liquidation, dissolution or winding-up of DoubleClick,DoubleClick will be required to purchase each outstanding Exchangeable Share, and each holder will berequired to sell all of his or her Exchangeable Shares (such purchase and sale obligations are hereafter referredto as the "Automatic Exchange Right"), for a purchase price per share equal to the current market price of aDoubleClick Common Share, to be satisfied by the delivery to the Trustee, on behalf of the holder, of oneDoubleClick Common Share, together with an additional amount equivalent to the full amount of all declaredand unpaid dividends on each such Exchangeable Share held by such holder on any dividend record date priorto the closing of the purchase and sale.

33. The Exchange Trust Agreement also provides that DoubleClick will provide to the holders of ExchangeableShares the same disclosure as it furnishes to the holders of DoubleClick Common Shares resident in the UnitedStates (as required by United States securities laws) which includes financial statements of DoubleClickprepared in accordance with generally accepted accounting principles of the United States.

34. Contemporaneously with the closing of the Transaction, DoubleClick, Holdco and Exchangeco will enter intoa Support Agreement which will provide that DoubleClick will not declare or pay any dividend on theDoubleClick Common Shares unless Exchangeco simultaneously declares and pays an equivalent dividendon the Exchangeable Shares, and that DoubleClick will ensure that Holdco and Exchangeco will be able tohonour the redemption and retraction rights and dissolution entitlements that are attributes of the ExchangeableShares under the Exchangeable Share Provisions and the related redemption, retraction and liquidation callrights described above.

35. The Support Agreement will also provide that, without the prior approval of the holders of the ExchangeableShares, actions such as distributions of stock dividends, options, rights and warrants for the purchase ofsecurities or other assets, subdivisions, reclassifications, reorganizations and other changes cannot be takenin respect of the DoubleClick Common Shares generally without the same or an economically equivalent actionbeing taken in respect of the Exchangeable Shares.

36. The Transaction and the completion thereof and the attributes of the Exchangeable Shares contained in theExchangeable Share Provisions, the Exchange Trust Agreement and the Support Agreement involve or mayinvolve a number of trades of securities in the Jurisdictions (collectively, the "Trades").

37. Following completion of the Arrangement, Canadian shareholders of DoubleClick will represent less than 10%of the holders of DoubleClick Common Shares and will hold less than 10% of the outstanding DoubleClickCommon Shares (and for this purpose, DoubleClick Common Shares and Exchangeable Shares are consideredto be of the same class).

38. There is no market, and none is expected to develop, for the Exchangeable Shares or the DoubleClickCommon Shares in Canada.

AND WHEREAS pursuant to the System, this MRRS Decision Document evidences the decision of eachDecision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Applicable Lawsprovides the Decision Makers with the jurisdiction to make the Decision has been met;

THE DECISION of the Decision Makers pursuant to the Applicable Laws is that, to the extent there are noexemptions available under the Applicable Laws from the Registration and Prospectus Requirements in respect of anyof the Trades, the Trades are not subject to the Registration and Prospectus Requirements, provided that the first tradein Exchangeable Shares or DoubleClick Common Shares received pursuant to the exemptive relief provided in thisMRRS Decision Document shall deemed to be a distribution under the Applicable Laws unless such trade is executedthrough the facilities of NASDAQ or a stock exchange outside Canada and such trade is conducted in accordance withthe rules and policies of NASDAQ or such exchange and in accordance with all laws applicable to NASDAQ or applicableto such stock exchange.

April 20, 2001.

"Paul Moore" "R. Stephen Paddon"