Exemption Orders (Discretionary)
DENBRIDGE CAPITAL CORPORATION
2001 BCSECCOM 571
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Relief granted from the registration and prospectus requirements in connection with the distribution of securities by the issuer in settlement of certain debts – first trades in securities subject to restrictions.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 48 and 76
IN THE MATTER OF THE SECURITIES LEGISLATION OF THE PROVINCES OF QUEBEC, ONTARIO AND BRITISH COLUMBIA
AND
IN THE MATTER OF DENBRIDGE CAPITAL CORPORATION
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of the provinces of Quebec, Ontario and British Columbia (the "Jurisdictions") has received an application from Denbridge Capital Corporation (the "Filer") under the securities legislation of the Jurisdictions (the "Legislation") for an exemption from the registration requirements and prospectus requirements (the “Registration Requirements” and “Prospectus Requirements”, respectively), each as defined in National Instrument 14-101 - Definitions, in respect of certain securities to be issued by the Filer in satisfaction of certain debt;
AND WHEREAS under 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 Decisions Makers that:
1. The Filer's head office is located at 130 Adelaide Avenue West, Suite 2320,Toronto, Ontario, M5H 3P5.
2. The Filer has been a reporting issuer in each of Quebec and Ontario for more than 12 months.
3. The common shares in the capital stock of the Filer (the "Common Shares") are listed and posted for trading on The Toronto Stock Exchange Inc. (the "TSE").
4. The Filer is an investment company whose objective is to invest in various companies during the start-up and growth phases of their economic development.
5. Currently, the Filer's sole investment is in Denbridge Digital Limited ("DDL"), in which it holds approximately an 86% equity interest. DDL's products include radar displays for fixed, mobile and portable marine and ATC (air traffic control) applications; radar tracking and vessel traffic management information systems; offshore platform protection systems, raw radar video compression, decompression and transmission systems; and wireless products that allow for remote data gathering of environmental data, traffic analysis, telecommunication capacity and compressed video/data transmission utilizing cellular technologies.
6. DDL requires an additional infusion of cash, and in order to be in a position to be able to raise such additional funds on behalf of DDL, the Filer plans to convert approximately $21 million of debt into equity (the "Debt Conversion") and thereby render itself free of all debt other than trade payables. Thereafter, the Filer plans to conduct a private placement of approximately $3 million (the "Private Placement") to finance the ongoing operations of DDL.
7. The Debt Conversion and the Private Placement shall have identical terms. Specifically, units will be issued on the basis of one unit (a "Unit") for each $0.075 converted or invested, as the case may be. Each Unit shall be comprised of one Common Share and one-half of a Common Share purchase warrant (a "Purchase Warrant"). Each whole Purchase Warrant shall entitle its holder to receive one Common Share at an exercise price of $0.09 at any time during the five-year period following its issuance.
8. Upon completion of the Debt Conversion and the Private Placement, the Common Shares issued in connection with the Debt Conversion will represent approximately 83% of the issued and outstanding Common Shares of the Filer.
9. Both the Debt Conversion and the Private Placement received the conditional approval of the TSE on November 3, 2000. As per the requirements of the TSE, the shareholders of the Filer approved the Debt Conversion and the Private Placement at a special meeting of shareholders held in Toronto on December 18, 2000 by a 99.60% and 99.89% majority, respectively.
10. The claims of the creditors (the "Creditors") to whom the Units are proposed to be issued in full settlement thereof arise from various different sources and have been incurred for value on commercially reasonable terms. None of the claims of the Creditors has been outstanding for less than 12 months. Six Creditors having claims in the aggregate amount of $4,835,831 do not act at arm’s length with the Filer.
11. The following table sets out the number of Creditors residing in each of the Jurisdictions, the value of their claims and the proportion that each Jurisdiction represents of the total value of outstanding debt being converted:
- Percentage (%) of
Quebec 39 10,350,769 50.77
Ontario 7 2,777,383 13.62
British Columbia 3 649,542 3.19
Outside Canada 11 6,609,709 32.42
__________________
Total 60 20,387,403 100.00
12. The Filer is in financial difficulty and does not have sufficient capital available to satisfy the outstanding claims of the Creditors. The claims of the Creditors were incurred with the expectation that they would be satisfied in cash and not with Common Shares.
13. The Filer is currently in the process of meeting with each of the Creditors on an individual basis and has been advised by them that an important factor in having them agree to the Debt Conversion is that the Units, meaning the Common Shares, and the Common Shares issuable upon the exercise of the Purchase Warrants (the "Warrant Shares"), be freely tradeable following their issuance and not subject to any statutory hold period.
14. The Filer has not received the type of relief set out in this MRRS Decision Document from any of the Jurisdictions in the past 12 months.
AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers under the Legislation is that the Registration Requirements and the Prospectus Requirements of the Legislation shall not apply to trades, by or on behalf of the Filer, of Common Shares, Purchase Warrants and Warrant Shares to the Creditors in connection with the Debt Conversion provided that:
(i) the first trade in a Jurisdiction of Purchase Warrants distributed in reliance on this Decision shall be deemed a distribution to the public under the Legislation of such Jurisdiction; and
(ii) the first trade in a Jurisdiction of Common Shares distributed in reliance on this Decision and Warrant Shares acquired upon the exercise of Purchase Warrants distributed in reliance on this Decision shall be deemed to be a distribution to the public under the Legislation of such Jurisdiction (the “Applicable Legislation”) unless:
(a) at the time of the first trade, the Filer is and has been a reporting issuer under the Applicable Legislation for the 12 months immediately preceding the trade or, if the Filer is not a reporting issuer under the Applicable Legislation, the Filer has filed all continuous disclosure documents filed by it in the Jurisdictions in which it is a reporting issuer, for a period of at least 12 months immediately preceding the date of the trade, with the Decision Maker of the Jurisdiction;
(b) no unusual effort is made to prepare the market or create a demand for the Common Shares;
(c) no extraordinary commission or consideration is paid to a person or company in respect of the trade;
(d) if the seller of the securities is an insider or officer of the Filer, the seller has no reasonable grounds for believing that the Filer is in default of any requirement of the Applicable Legislation; and
(e) except in Quebec, the trade is not a trade from the holdings of any person, company or combination of persons or companies that holds a sufficient number of securities of the Filer so as to affect materially the control of the Filer or more than twenty percent of the outstanding voting securities of the Filer, except where there is evidence showing that the holding of those securities does not affect materially the control of the Filer.
DATED April 24th, 2001.
Paul M. Moore Stephen N. Adams