Exemption Orders (Discretionary)

HOMESTORE.COM, INC.


2001 BCSECCOM 415




IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF HOMESTORE.COM, INC.

AND

IN THE MATTER OF TOP PRODUCER SYSTEMS COMPANY

Exemption Order Under Sections 48 and 76

WHEREAS Homestore.com, Inc. (“Homestore”) and Top Producer Systems Company (“Top Producer”) have applied to the Executive Director for an order under sections 48 and 76 of the Securities Act, R.S.B.C. 1996, c. 418 that certain intended trades in securities made in connection with the acquisition by Homestore of Top Producer (the “Acquisition”) are exempt from the requirements of sections 34(1)(a) and 61 of the Act;

AND WHEREAS Homestore and Top Producer have represented to the Executive Director that:

1. Top Producer is a corporation amalgamated under the laws of Nova Scotia and is a private issuer under the Act;

2. the authorized capital of Top Producer consists of: (a) 1,000,000 Class A Common shares without par value; (b) 1,000,000 Class B Common shares without par value; (c) 1,000,000 Class C Common shares with a par value of $0.01 each; (d) 1,000,000 Class D Common shares with a par value of $0.01 each; (e) 1,000,000 Class E Common shares with a par value of $0.01 each; (f) 1,000,000 Class A Preferred shares with a par value of $0.01 each; (g) 1,000,000 Class B Preferred shares with a par value of $0.001 each (“Exchangeable Shares”); (h) 1,000,000 Class C Preferred shares with a par value of $0.001 each; (i) 1,000,000 Class D Preferred shares with a par value of $0.001 each; (j) 1,000,000 Class E Preferred shares with a par value of $0.001 each; (k) 1,000,000 Class F Preferred shares with a par value of $0.001 each; and (l) 1,000,000 Class G Preferred shares with a par value of $0.001 each (the Class C to G Preferred shares are collectively referred to as the “Tracking Shares”);

3. immediately prior to the Acquisition, Top Producer had 168,500 Class C Common shares, 170,000 Class E Common shares, 23,245 Class A Preferred shares, 170,000 Exchangeable Shares and 170,000 of each class of the Tracking Shares issued and outstanding, all of which were owned by a total of six persons, all of whom are resident in British Columbia (the “Vendors”);

4. Homestore is a corporation incorporated under the laws of the State of Delaware on July 29, 1993, is not a reporting issuer under the Act, but is registered under and is subject to the reporting requirements of the United States Securities Exchange Act of 1934 and is current with all its filings with the United States Securities and Exchange Commission;

5. the authorized capital of Homestore consists of 500,000,000 shares of common stock with a par value of US$0.001 each (the “Homestore Shares”) and 10,000,000 shares of preferred convertible stock with a par value of US$0.001 each, and as at September 30, 2000, approximately 82,710,794 Homestore Shares were issued and outstanding;

6. the Homestore Shares are quoted on the NASDAQ National Market;

7. pursuant to the terms of a purchase agreement entered into amongst the Vendors, Homestore, Top Producer and certain other parties, all of the issued and outstanding voting shares in the capital of Top Producer (the “Capital Shares”) owned by the Vendors were acquired by Homestore through its indirect wholly-owned subsidiary 3041776 Nova Scotia Company (“3041776”), a Nova Scotia unlimited liability company incorporated for the purposes of acquiring the Capital Shares, in consideration for, among other things, the Exchangeable Shares and the Tracking Shares of Top Producer (together, the “Subject Shares”);

8. the Subject Shares include the right of the holders thereof to exchange such shares from time to time for Homestore Shares under exchange rights that are supported by contractual obligations of Homestore;

9. the Subject Shares have economic (but not voting) attributes which are, as nearly as practicable, equivalent to those of Homestore Shares; in the event of a change in the capital of Homestore affecting the Homestore Shares or a distribution of Homestore Shares to holders thereof where the same or an economically equivalent change is not made to, or benefit conferred upon the holders of, the Subject Shares, then the number of Homestore Shares exchangeable for each Subject Share will be adjusted to ensure that the economic interests of holders of Subject Shares will not be adversely affected by the occurrence of such event;

10. the Exchangeable Shares are redeemable at any time by Top Producer during the ten business day period commencing on each of September 1 of 2001, 2002, 2003, 2004 and 2005 (each a “Retraction Period”) for an aggregate of US$12,100,000 payable in Homestore Shares at a price of US$23.98698 per Homestore Share (“Exchangeable Redemption Price”), and retractable at the request of the holder for the Exchangeable Redemption Price during a Retraction Period subject to at least 50% of the then outstanding Exchangeable Shares being then called for retraction (the “Minimum Amount”) (other than during the last Retraction Period, in which case, there is no Minimum Amount); the retraction rights of the holders are subject to an overriding retraction call right in favour of Homestore and HSTPUS Inc. (“HSTPUS”), a private Delaware-incorporated wholly-owned subsidiary of Homestore, to purchase the Exchangeable Shares for the Exchangeable Redemption Price, notice of which must be given by Homestore or HSTPUS before the expiry of the applicable Retraction Period; the Exchangeable Shares are redeemable by Top Producer any time after May 31, 2005 for the Exchangeable Redemption Price;

11. upon a liquidation of Top Producer, the Exchangeable Shares give the holder the right to receive the Exchangeable Redemption Price from Top Producer, subject to an overriding liquidation call right in favour of Homestore and HSTPUS to purchase the Exchangeable Shares for the Exchangeable Redemption Price; upon a liquidation of Homestore, the Exchangeable Shares give the holder the automatic right of exchange for Homestore Shares on the basis of the Exchangeable Redemption Price;

12. the Tracking Shares have the same rights of retraction and redemption as described above for the Exchangeable Shares (with the references to Exchangeable Redemption Price being replaced with Tracking Redemption Price (as defined below)), except as follows:

(a) the aggregate redemption price for each class of Tracking Shares (“Tracking Redemption Price”) is US$0, provided that if specified earn-out performance criteria relating to the amount by which Top Producer’s revenues for a particular period exceed revenue targets are met by Top Producer during the periods set forth below, then the aggregate Tracking Redemption Price for each such class of Tracking Shares will increase to the amounts indicated below and will be payable in cash, Homestore Shares or a combination of both (at the option of Homestore):

(i) if the specified performance criteria are met during the period of June 1, 2000 to December 31, 2000, then the Class C Tracking Share Tracking Redemption Price will be US$1,605,800;

(ii) if the specified performance criteria are met during the period of January 1, 2001 to December 31, 2001, then the Class D Tracking Share Tracking Redemption Price will be US$3,287,933;

(iii) if the specified performance criteria are met during the period of January 1, 2002 to December 31, 2002, then the Class E Tracking Share Tracking Redemption Price will be US$4,205,333;

(iv) if the specified performance criteria are met during the period of January 1, 2003 to December 31, 2003, then the Class F Tracking Share Tracking Redemption Price will be US$4,588,400;

(v) if the specified performance criteria are met during the period of January 1, 2004 to December 31, 2004, then the Class G Tracking Share Tracking Redemption Price will be US$1,912,533; and

(b) for purposes of paying the Tracking Redemption Price, the price per Homestore Share, if Homestore elects to issue Homestore Shares, will be the 30 trading day average trading price of the Homestore Shares on the NASDAQ National Market ending three days before the issuance of any Homestore Shares in payment of all, or part, of the Tracking Redemption Price;

13. the Subject Shares provide that:

(a) except as required by applicable law, the holders of the Subject Shares shall not be entitled as such to receive notice of or to attend any meeting of the shareholders of Homestore or to vote at any such meeting; and

(b) each holder of Subject Shares will be entitled to dividends from Top Producer payable on the Subject Shares at the same time as, and in the amount equivalent to, the dividends payable by Homestore on the number of Homestore Shares for which the Subject Shares may be exchanged;

14. assuming the Vendors acquire the maximum number of Homestore Shares to which they are entitled pursuant to an exchange of the Subject Shares, then the Vendors would constitute less than 1% of the total number of registered holders of Homestore Shares holding less than 1% of the total issued and outstanding Homestore Shares;

15. upon completion of the Acquisition and after giving effect to the issuance of Homestore Shares in exchange for the Subject Shares, shareholders whose last address as shown on the books of Homestore was in Canada do not hold, in the aggregate, more than 10% of the total issued and outstanding Homestore Shares;

16. as a result of the Acquisition, Homestore, through its indirect wholly-owned subsidiary 3041776, is the sole holder of the voting securities of Top Producer, and upon the exercise in full by the Vendors of the exchange rights attaching to the Subject Shares, Homestore and/or its wholly-owned subsidiary HSTPUS will also become the holder of all of the non-voting securities issued by Top Producer, other than options to acquire Homestore Shares that may be issued from time to time by Top Producer to its officers and employees;

17. there is no market in Canada for Homestore Shares and no such market is expected to develop;

18. the Acquisition was carried out in accordance with British Columbia and U.S. laws, and, in connection with the Acquisition, the Vendors were provided with all information material to the Acquisition and the Homestore Shares;

19. all disclosure material required to be provided to holders of Homestore Shares will also be provided to holders of Subject Shares; and

20. there are no exemptions from the registration and prospectus requirements of the Act in connection with the exercise of the exchange rights attaching to the Subject Shares for (i) the intended trades by Homestore or HSTPUS of Homestore Shares to the Vendors and (ii) the intended trades by the Vendors of Subject Shares to Homestore or HSTPUS (together, the “Non-Exempt Trades”);

AND WHEREAS the Executive Director considers that it would not be prejudicial to the public interest to do so;

IT IS ORDERED:

1. under sections 48 and 76 of the Act that the Non-Exempt Trades are exempt from the requirements of sections 34(1)(a) and 61 of the Act provided that each holder of Subject Shares is provided with a copy of this order; and

2. under section 76 of the Act that any trade in Homestore Shares acquired in connection with the Acquisition is deemed to be a distribution unless such trade is executed through an exchange or market outside of Canada.


DATED April 17, 2001.




Derek E. Patterson
Manager
©2024 British Columbia Securities Commission