Farelogix Inc . et al. - ss. 74(1)

WHEREAS the Ontario Securities Commission (the "Commission") has received an application from Farelogix Inc. ("Farelogix"), Farelogix.com Inc. ("Farelogix Canada"), Farelogix Holdings (Nova Scotia) Company ("Farelogix Holdings") and Farelogix Holdings Inc. ("Mirrorco") (collectively, the "Applicants") for a decision pursuant to the Act that certain trades in securities made in connection with or resulting from a reorganization of Farelogix Canada (the "Reorganization") pursuant to letters of transmittal and election forms (the "Letters of Transmittal") are exempt from the registration and prospectus requirements of the Act;

AND WHEREAS the Commission has considered the application and the recommendation of the staff of the Commission;

AND WHEREAS it has been represented by the Applicants to the Commission that:

1. Farelogix is a corporation existing under the laws of the State of Delaware. Its authorized capital consists of 10,100,000 shares consisting of 7,500,000 shares of common stock par value $0.00001 per share, 100,000 shares of non-participating convertible preferred stock, par value $0.00001 per share (the "Non-Participating Preferred Stock") and 2,500,000 shares of participating convertible Series A convertible preferred stock, par value $0.00001 per share (the "Series A Convertible Preferred Shares"). Upon completion of the Reorganization and related financing, there will be 1,004,318 Series A Convertible Preferred Shares outstanding, one common share of Farelogix outstanding and no shares of undesignated preferred stock issued and outstanding other than one Farelogix Special Voting Share (as hereinafter defined). Upon completion of the Reorganization, none of the shares of Farelogix will be listed or posted for trading on any exchange, nor will Farelogix be a reporting issuer or the equivalent thereof in any jurisdiction. Following the Reorganization, Farelogix will indirectly own all of the issued and outstanding common shares of Farelogix Canada.

2. Farelogix Holdings is an unlimited liability company organized under the laws of the Province of Nova Scotia and will be a direct subsidiary of Farelogix following the completion of the Reorganization. The authorized capital of Farelogix Holdings consists of a 1,000,000 common shares. Farelogix owns all of the issued and outstanding shares of Farelogix Holdings. Farelogix Holdings is a private company and is not a reporting issuer in Ontario.

3. Mirrorco is a corporation organized under the laws of the Province of Ontario. The authorized capital of Mirrorco consists of an unlimited number of common shares and an unlimited number of Exchangeable Shares (as hereinafter defined). Farelogix Holdings owns all of the issued and outstanding common shares of Mirrorco. Following the Reorganization, all of the Exchangeable Shares will be owned by existing common shareholders of Farelogix Canada (the "Farelogix Canada Shareholders"). Mirrorco is not a reporting issuer in Ontario.

4. Farelogix Canada, a corporation organized under the laws of the Province of Ontario, is not a reporting issuer in Ontario and none of its securities are listed or posted for trading on any exchange. Farelogix Canada is in the business of developing software for the travel industry.

5. The authorized capital of Farelogix Canada consists of an unlimited number of common shares ("Farelogix Canada Common Shares"), an unlimited number of preferential non-cumulative voting class A shares, an unlimited number of preferential non-voting class B shares and an unlimited number of non-voting class C shares. Farelogix Canada currently has 36 shareholders. As at the date hereof, there were issued and outstanding (i) 1,540,561 Farelogix Canada Common Shares, (ii) options to purchase 209,172 Farelogix Canada Common Shares ("Farelogix Canada Options") held by consultants to Farelogix Canada pursuant to consulting agreements, and (iii) outstanding warrants (the "Farelogix Canada Warrants") to purchase 9,887 Farelogix Canada Common Shares.

6. The Reorganization will be effected pursuant to the terms of the Letters of Transmittal. The Letters of Transmittal provide that Mirrorco and/or Farelogix will acquire all of the issued and outstanding Farelogix Canada Common Shares held by the Farelogix Canada Shareholders. The consideration paid by Mirrorco and/or Farelogix for the Farelogix Canada Common Shares shall be the issuance by Mirrorco to the Farelogix Canada Shareholders, at the shareholder's option, of either (i) non-voting exchangeable shares in the capital of Mirrorco (the "Exchangeable Shares") which, when combined with the voting rights granted to the Farelogix Canada Shareholders through the voting and exchange trust agreement and the exchangeable share support agreement described below, will have substantially the rights, privileges, restrictions and conditions of common shares of Farelogix, or (ii) common shares of Farelogix.

7. Upon the Reorganization becoming effective and a resolution of the board of directors of Farelogix Canada authorizing the following exchanges pursuant to the Farelogix Canada employee stock option plan and various warrant agreements, each Farelogix Canada Option will be exchanged for an option (a "Replacement Option") to purchase that number of common shares of Farelogix and each Farelogix Canada Warrant will be exchanged for a replacement warrant (a "Replacement Warrant") to purchase that number of common shares of Farelogix.

8. The Exchangeable Shares, together with an exchangeable share support agreement to be entered into at the closing of the Reorganization among Farelogix, Farelogix Holdings and Mirrorco (the "Support Agreement") and a voting and exchange trust agreement to be entered into at the closing of the Reorganization among Farelogix, Farelogix Holdings, Mirrorco and a trustee (the "Voting Trust and Exchange Agreement"), will provide holders thereof with a security of Mirrorco having voting and economic rights which are, as nearly as practicable, equivalent to those of the common shares of Farelogix.

9. The Exchangeable Shares will rank prior to the common shares of Mirrorco with respect to the payment of dividends and the distribution of assets in the event of a liquidation, dissolution or winding-up of Mirrorco to the extent described below.

10. 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 dividends from Mirrorco payable at the same time as, and equivalent to, each dividend paid by Farelogix on the common shares of Farelogix. Subject to the overriding call right of Farelogix Holdings (or Farelogix) referred to below, on the liquidation, dissolution or winding-up of Mirrorco, a holder of Exchangeable Shares will be entitled to receive from Mirrorco for each Exchangeable Share held an amount equal to the current market price of a common share of Farelogix, to be satisfied by delivery of one common share of Farelogix, together with all declared and unpaid dividends on each such Exchangeable Share held by the holder on any dividend 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 Mirrorco, Farelogix Holdings (or Farelogix) will have an overriding call right (the "Liquidation Call Right") to purchase all of the outstanding Exchangeable Shares from the holders thereof (other than Farelogix or its affiliates) for a price per share equal to the Liquidation Price.

11. The Exchangeable Shares will be non-voting (except as required by the Exchangeable Share Provisions or by applicable law) and will be retractable at the option of the holder at any time. Subject to the overriding call right of Farelogix Holdings (or Farelogix) referred to below, upon retraction the holder will be entitled to receive from Mirrorco for each Exchangeable Share retracted an amount equal to the current market price of a common share of Farelogix, to be satisfied by delivery of one common share of Farelogix, together with, on the designated payment date therefor, all declared and unpaid dividends on each such retracted Exchangeable Share held by the holder on any dividend record date prior to the date of retraction (such aggregate amount, the "Retraction Price"). Upon being notified by Mirrorco of a proposed retraction of Exchangeable Shares, Farelogix Holdings (or Farelogix) will have an overriding call right (the "Retraction Call Right") to purchase from the holder all of the Exchangeable Shares that are the subject of the retraction notice for a price per share equal to the Retraction Price.

12. Subject to the overriding call right of Farelogix Holdings (or Farelogix) described below, Mirrorco may redeem all the Exchangeable Shares then outstanding at any time on or after the date which is ten years from the Effective Date (the "Redemption Date"). The board of directors may accelerate the Redemption Date in certain circumstances which are set out in the Exchangeable Share Provisions. Upon such redemption, a holder will be entitled to receive from Mirrorco for each Exchangeable Share redeemed an amount equal to the current market price of a common share of Farelogix, to be satisfied by the delivery of one common share of Farelogix, together with all declared and unpaid dividends on each such redeemed Exchangeable Share held by the holder on any dividend record date prior to the date of redemption (such aggregate amount, the "Redemption Price"). Upon being notified by Mirrorco of a proposed redemption of Exchangeable Shares, Farelogix Holdings (or Farelogix) will have an overriding call right (the "Redemption Call Right") to purchase from the holders all of the outstanding Exchangeable Shares (other than Farelogix or its affiliates) for a price per share equal to the Redemption Price.

13. Under the Voting Trust and Exchange Agreement, Farelogix will grant to the trustee under the Voting Trust and Exchange Agreement (the "Trustee") for the benefit of the holders of the Exchangeable Shares a put right (the "Optional Exchange Right"), exercisable upon the insolvency of Mirrorco, to require Farelogix Holdings (or Farelogix) to purchase from a holder of Exchangeable Shares all or any part of his or her Exchangeable Shares. The purchase price for each Exchangeable Share purchased by Farelogix Holdings (or Farelogix) will be an amount equal to the current market price of a common share of Farelogix, to be satisfied by delivery to the Trustee, on behalf of the holder, of one common share of Farelogix, together with an additional amount equivalent to the full amount of all declared and unpaid dividends on such Exchangeable Share held by such holder on any dividend record date prior to the closing of the purchase and sale.

14. Under the Voting Trust and Exchange Agreement, upon the liquidation, dissolution or winding-up of Farelogix, Farelogix Holdings (or Farelogix) will be required to purchase each outstanding Exchangeable Share, and each holder will be required to sell all of his or her Exchangeable Shares, (such purchase and sale obligations are hereafter referred to as the "Automatic Exchange Right") for a purchase price per share equal to the current market price of a common share of Farelogix, to be satisfied by the delivery to the Trustee, on behalf of the holder, of one common share of Farelogix, together with an additional amount equivalent to the full amount of all declared and unpaid dividends on each such Exchangeable Share held by such holder on any dividend record date prior to the closing of the purchase and sale.

15. Under the Voting Trust and Exchange Agreement, Farelogix will issue and deposit with the Trustee one Farelogix special voting share (the "Farelogix Special Voting Share") which entitles the holder to an equivalent number of votes at meetings of the holders of common shares of Farelogix equal to the number of Exchangeable Shares outstanding from time to time. The Trustee shall hold the Farelogix Special Voting Share for and on behalf of the holders of Exchangeable Shares. The Trustee, as holder of record of the Farelogix Special Voting Share, shall be entitled to all of the voting rights including the right to consent to vote in person or by proxy the Farelogix Special Voting Share, on any matter, question, or proposition whatsoever that may properly come before the common shareholders of Farelogix. The Trustee shall exercise the voting rights only on the basis of instructions received from the holders of Exchangeable Shares who shall be entitled to instruct the Trustee as to the voting thereof. The Trustee shall hold the Farelogix Special Voting Share and any other properties that may become the subject of the trust for the exclusive benefit of the holders of Exchangeable Shares. In this manner, the holders of Exchangeable Shares holding the Exchangeable Shares will be entitled to exercise the votes they would have received as shareholders of Farelogix as if they had been issued shares of Farelogix pursuant to the Reorganization.

16. Contemporaneously with the closing of the Reorganization, Farelogix, Farelogix Holdings and Mirrorco will enter into the Support Agreement which will provide that Farelogix will not declare or pay any dividend on the common shares of Farelogix unless Mirrorco simultaneously declares and pays an equivalent dividend on the Exchangeable Shares, and that Farelogix will ensure that Mirrorco and Farelogix Holdings will be able to honour the redemption and retraction rights and dissolution entitlements that are attributes of the Exchangeable Shares under the Exchangeable Share Provisions and the related redemption, retraction and liquidation call rights described above.

17. The Support Agreement will also provide that, without the prior approval of the holders of the Exchangeable Shares, actions such as distributions of stock dividends, options, rights and warrants for the purchase of securities or other assets, subdivisions, reclassifications, reorganizations and other changes cannot be taken in respect of the common shares generally without the same or an economically equivalent action being taken in respect of the Exchangeable Shares.

18. The trades and possible trades in securities to which the Reorganization gives rise include the following:

(a) the issuance of Exchangeable Shares by Mirrorco and the provision of the ancillary rights pursuant to the Voting Trust and Exchange Agreement and the Support Agreement to holders (other than Farelogix Holdings) of Farelogix Canada Common Shares and the transfer of Farelogix Canada Common Shares by such holders to Mirrorco, as part of the Reorganization;

(b) the exchange of Farelogix Canada Options for Replacement Options, the exchange of the Farelogix Canada Warrants for Replacement Warrants and the issuance and delivery of common shares of Farelogix by Farelogix to holders of a Replacement Option or a Farelogix Warrant upon the exercise thereof;

(c) the creation of the call rights in favour of Farelogix Holdings (or Farelogix) referred to in paragraphs 10, 11 and 12 above;

(d) the creation of the Automatic Exchange Right and the Optional Exchange Right in favour of the trustee, for the benefit of the holders of the Exchangeable Shares;

(e) the issuance and intra-group transfers of common shares of Farelogix and related issuances of shares of Farelogix affiliates in consideration therefor, all by and between Farelogix and its affiliates, from time to time to enable common shares of Farelogix to be delivered to a holder of Exchangeable Shares, and the subsequent delivery thereof to such holder, upon: (i) a holder's retraction of Exchangeable Shares; (ii) the exercise of the Retraction Call Right; (iii) the redemption of the Exchangeable Shares by Mirrorco; (iv) the exercise of the Redemption Call Right; (v) the liquidation, dissolution or winding-up of Farelogix Canada; and (vi) the exercise of the Liquidation Call Right;

(f) the transfer of Exchangeable Shares by the holder to Mirrorco, Farelogix or Farelogix Holdings, as applicable, upon: (i) the holder's retraction of Exchangeable Shares; (ii) the exercise of the Retraction Call Right; (iii) the redemption of the Exchangeable Shares by Mirrorco; (iv) the exercise of the Redemption Call Right; (v) the liquidation, dissolution or winding-up of Farelogix Canada; and (vi) the exercise of the Liquidation Call Right;

(g) the issuance and delivery of common shares of Farelogix by Farelogix or Farelogix Holdings to each other and to a holder of Exchangeable Shares upon the exercise of the Optional Exchange Right or the Automatic Exchange Right;

(h) the issuance and delivery of the Farelogix Special Voting Share by Farelogix to the Trustee in connection with the granting of votes to the holders of Exchangeable Shares and the transfer to Farelogix of Farelogix Special Voting Share by the Trustee upon the exchange, by any means, of Exchangeable Shares for common shares of Farelogix; and

(i) the transfer of Exchangeable Shares by a holder to Farelogix or Farelogix Holdings upon the Trustee's exercise of the Optional Exchange Right or the Automatic Exchange Right

(collectively, the "Trades"); and

19. All disclosure material including, without limitation, copies of annual financial statements and all proxy material which is furnished to holders of securities of Farelogix resident in the United States will be provided to holders of the Exchangeable Shares, and will be provided to all holders of Farelogix securities resident in Ontario.

AND WHEREAS the Commission is satisfied that to do so would not be prejudicial to the public interest;

IT IS RULED, pursuant to subsection 74(1) of the Act, that the Trades will not be subject to the registration and prospectus requirements of the Act, provided that:

A. Farelogix shall provide or cause to be provided each recipient or proposed recipient of any securities acquired pursuant to a Trade that is resident in Ontario with an explanation of the limitations imposed upon the distribution of such securities;

B. the first trade in any securities acquired pursuant to a Trade shall be a distribution, unless:

(i) if Farelogix is a reporting issuer in Ontario, and has been a reporting issuer in Ontario for a period of twelve months, such first trade is made in accordance with the provisions of subsection 72(5) of the Act and subsection 2.18(3) of Commission Rule 45-501- Exempt Distributions as if the securities had been acquired pursuant to one of the exemptions referred to in subsection 72(5) of the Act; or

(ii) if Farelogix is not a reporting issuer in Ontario, such first trade is made through the facilities of a stock exchange outside Ontario or on the Nasdaq Stock Market and at the time of such first trade, holders of common shares of Farelogix (with the holders of Exchangeable Shares considered to be holders of common shares of Farelogix) whose last address as shown on the books of Farelogix or Mirrorco, as the case may be, is in Ontario, do not hold more than 10% of the common shares of Farelogix and represent in number, not more than 10% of the holders of common shares of Farelogix.

March 2, 2001.

J.A. Geller, Robert W. Davis