Exemption Orders (Discretionary)
GOLDEN SOIL, INC.
2001 BCSECCOM 185
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF GOLDEN SOIL, INC.
AND
IN THE MATTER OF MERILUS TECHNOLOGIES INC.
AND
IN THE MATTER OF 613636 BRITISH COLUMBIA, INC.
Exemption Order Under Sections 48 and 76
[para 1]
WHEREAS Golden Soil and Merilus have applied to the Executive Director for an order under sections 48 and 76 of the Act that certain intended trades in securities to be made in connection with the acquisition of Merilus by Golden Soil (the “Transaction”) are exempt from the requirements of sections 34(1)(a) and 61 of the Act;
[para 2]
AND WHEREAS Golden Soil and Merilus have represented to the Executive Director that:
1. Golden Soil is incorporated under the laws of the State of Nevada and is not a reporting issuer under the Act, but is subject to the reporting requirements of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”) and is current with all its filings with the United States Securities and Exchange Commission (the “SEC”);
2. as of December 28, 2000, the authorized capital of Golden Soil consisted of 100,000,000 shares of common stock, $0.001 par value per share (“Golden Soil Common Shares”) and 1 preferred share with a par value of $1.00 (“Golden Soil Preferred Share”), of which 8,750,000 Golden Soil Common Shares were issued and outstanding and no Golden Soil Preferred Shares were issued and outstanding;
3. the Golden Soil Common Shares are quoted on the OTC Bulletin Board of the National Association of Securities Dealers;
4. 613636 British Columbia, Inc. (“Holdco”) is incorporated under the laws of British Columbia, is a wholly-owned subsidiary of Golden Soil and is not a reporting issuer under the Act;
5. as of December 28, 2000, the authorized capital of Holdco consisted of 10,000,000 shares of common stock with no par value, of which 100 shares were issued and outstanding and held by Golden Soil;
6. Holdco was incorporated for the purpose of facilitating the Transaction;
7. Merilus is incorporated under the laws of British Columbia and is not a reporting issuer under the Act;
8. as of December 28, 2000, the authorized capital of Merilus consisted of 1,000,000 shares of common stock (“Merilus Common Shares”) and 5,000,000 preferred shares all of which have been designated as exchangeable shares (the "Exchangeable Shares"), of which 6,464 Merilus Common Shares were issued and outstanding and no Exchangeable Shares were issued and outstanding;
9. on completion of the Transaction, Golden Soil will indirectly, through Holdco, hold all of the Merilus Common Shares and the current holders of Merilus Common Shares will hold Exchangeable Shares;
10. the Transaction is subject to the approval of the shareholders of Merilus and Golden Soil. In connection with approving the Transaction, the shareholders of Merilus and Golden Soil have been furnished with a management information statement prepared by Golden Soil that sets out the particulars of the Transaction as required under the Exchange Act and related rules of the SEC and which contains, among other things, disclosure of the business and affairs of each of Merilus and Golden Soil;
11. on the Transaction becoming effective, holders of Merilus Common Shares will receive 585.9375 Exchangeable Shares for each Merilus Common Share;
12. Merilus will issue 10,000 Merilus Common Shares to Holdco upon completion of the Transaction for an aggregate purchase price of $1,000;
13. the Exchangeable Shares will provide holders with a security having economic and voting rights which are, as nearly as possible, equivalent to those of Golden Soil Common Shares;
14. the holders of Merilus Common Shares will receive Exchangeable Shares on a Canadian tax-deferred roll-over basis, with each Exchangeable Share exchangeable for a Golden Soil Common Share at any time at the option of the holder and as required on the occurrence of certain events;
15. in order to provide holders of Exchangeable Shares with voting rights in Golden Soil, Golden Soil, Merilus and a trust company (the “Trustee”) will enter into a voting and exchange trust agreement (the "Voting Agreement") under the terms of which, Golden Soil will issue to the Trustee the one Golden Soil Preferred Share, which will entitle the Trustee to a number of votes equal to the number of Exchangeable Shares from time to time outstanding; with respect to any matter as to which the holder of the Golden Soil Preferred Share is entitled to vote, each holder of an Exchangeable Share will have the right to instruct the Trustee as to the manner of voting thereupon;
16. on the effective date of the Transaction, Golden Soil and Merilus will enter into a support agreement (the "Support Agreement") that will provide, among other things, that:
(a) Golden Soil will not declare or pay dividends on the Golden Soil Common Shares unless Merilus immediately thereafter declares or pays, as the case may be, an equivalent dividend on the Exchangeable Shares and Merilus has resources available to pay equivalent dividends on the Exchangeable Shares; and
(b) Golden Soil will ensure that Merilus will be able to honour the redemption and retraction rights and the entitlements upon liquidation pursuant to the terms of the Exchangeable Shares;
17. the share provisions attaching to the Exchangeable Shares (the "Exchangeable Share Provisions") provide that:
(a) except as required by applicable law, the holders of Exchangeable Shares will not be permitted to vote at meetings of the shareholders of Merilus;
(b) the Exchangeable Shares will rank pari passu with the Golden Soil Common Shares, with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of Golden Soil, whether voluntary or involuntary, or any other distribution of the assets of Golden Soil among its shareholders for the purpose of winding-up its affairs;
(c) each Exchangeable Share is entitled to a dividend from Merilus equal to the dividend paid by Golden Soil on a Golden Soil Common Share, payable immediately after the payment of the dividend on Golden Soil Common Shares, although Golden Soil stock dividends would be paid to the holders of Exchangeable Shares in Exchangeable Shares;
(d) the holders of Exchangeable Shares are entitled, upon the liquidation, dissolution or winding-up of Merilus, to receive, for each Exchangeable Share, an amount equal to the market price of one Golden Soil Common Share (the "Liquidation Amount") to be satisfied by the delivery by Merilus to such holder of one Golden Soil Common Share for each such Exchangeable Share, plus the right to receive the full amount, when paid, of all unpaid dividends on such Exchangeable Share for which the record date has occurred prior to the effective date of the liquidation, subject to Golden Soil’s overriding call right to purchase all, but not less than all, of the outstanding Exchangeable Shares that are the subject of such proposed exchange on the liquidation, dissolution or winding up of Merilus at a price per share equal to the Liquidation Amount which may be satisfied by the delivery by Golden Soil of one Golden Soil Common Share for each such Exchangeable Share;
(e) the holders of Exchangeable Shares are entitled, at any time, to require Merilus to retract any or all of their Exchangeable Shares and to receive, for each Exchangeable Share, an amount equal to the market price of one Golden Soil Common Share (the "Retraction Price") to be satisfied by the delivery by Merilus to such holder of one Golden Soil Common Share for each such Exchangeable Share, plus the right to receive the full amount, when paid, of all unpaid dividends on such Exchangeable Share for which the record date has occurred prior to the date of retraction, subject to Golden Soil’s overriding call right to purchase all, but not less than all, of the Exchangeable Shares that are the subject of such proposed retraction at a price per share equal to the Retraction Price which may be satisfied by the delivery by Golden Soil of one Golden Soil Common Share for each such Exchangeable Share;
(f) Merilus must redeem all outstanding Exchangeable Shares on the date that is ten years after the effective date of the Transaction (or earlier in certain circumstances) (the "Redemption Date") for an amount equal to the market price of one Golden Soil Common Share (the "Redemption Price") to be satisfied by delivery of one Golden Soil Common Share, plus the right to receive the full amount, when paid, of all unpaid dividends on such Exchangeable Share for which the record date has occurred, subject to Golden Soil’s overriding call right to purchase, on the Redemption Date, all but not less than all of the Exchangeable Shares that are the subject of such proposed redemption at a price per share equal to the Redemption Price which may be satisfied by the delivery by Golden Soil of one Golden Soil Common Share for each such Exchangeable Share;
(g) pursuant to the Voting Agreement, upon the institution and continuance of insolvency proceedings against Merilus, a holder of Exchangeable Shares will be entitled to instruct the Trustee to exercise an optional exchange right with respect to any or all of the Exchangeable Shares held by such holder, thereby requiring Golden Soil to purchase such Exchangeable Share for an amount equal to the market price of one Golden Soil Common Share to be satisfied by the delivery of one Golden Soil Common Share, plus the right to receive the full amount, when paid, of all unpaid dividends on the Exchangeable Share for which the record date has occurred prior to the closing of the purchase and sale; and
(h) pursuant to the Voting Agreement, upon the voluntary or involuntary liquidation or winding-up of Golden Soil or similar transaction, the Exchangeable Shares will be automatically exchanged for Golden Soil Common Shares in order that the holders of such Exchangeable Shares may participate in the dissolution of Golden Soil;
18. in addition to any mandatory hold period imposed under US securities laws, the stockholders of Merilus have agreed to voluntarily escrow any Golden Soil Common Shares received on exchange, retraction or redemption of the Exchangeable Shares for a period of one year from the date of closing the Transaction;
19. the number of Exchangeable Shares or Golden Soil Common Shares the holders of Merilus Common Shares will be entitled to receive under the Transaction will be 3,787,500 Golden Soil Common Shares or 30.21% of the current outstanding share capital of Golden Soil;
20. Golden Soil will concurrently send to all holders of Exchangeable Shares or Golden Soil Common Shares resident in British Columbia all disclosure material furnished to holders of Golden Soil Common Shares resident in the United States, including, but not limited to, copies of its annual report and all proxy solicitation materials;
21. the steps under the Transaction and the creation and exercise of the rights provided for in the Exchangeable Share Provisions, the Voting Agreement and the Support Agreement involve a number of trades or possible trades in securities (the "Permitted Trades");
22. the fundamental investment decision to be made by a shareholder of Merilus is made when such holder votes in respect of the Transaction; as a result of this decision, a holder (other than a holder who exercises a right of dissent) receives Exchangeable Shares in exchange for Merilus Common Shares; and
23. there is no market for the Exchangeable Shares or Golden Soil Common Shares in British Columbia and none is expected to develop;
[para 3]
AND WHEREAS the Executive Director considers that to do so would not be prejudicial to the public interest;
[para 4]
IT IS ORDERED:
1. under sections 48 and 76 of the Act, that to the extent there are no exemptions available from sections 34(1)(a) and 61 of the Act in respect of any of the Permitted Trades, such Permitted Trades are exempt from the requirements of sections 34(1)(a) and 61 of the Act;
2. under section 76 of the Act, that any trade in the Exchangeable Shares, other than a Permitted Trade, is a distribution; and
3. under section 76 of the Act, that any trade of Golden Soil Common Shares acquired under the Transaction is a distribution unless:
(i) Golden Soil is a reporting issuer under the Act and has been for the twelve months preceding the trade;
(ii) if the seller is an insider of Golden Soil, other than a director or senior officer of Golden Soil, the seller has filed all records required to be filed under sections 87 and 90 of the Act;
provided that Golden Soil provides a copy of this order to each holder of Exchangeable Shares.
[para 5]
DATED February 9, 2001.
Derek E. Patterson
Manager