Exemption Orders (Discretionary)
SIMMONDS CAPITAL LIMITED
2001 BCSECCOM 527
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF SIMMONDS CAPITAL LIMITED
Exemption Order Under Sections 48 and 76
[para 1]
WHEREAS Simmonds Capital Limited ("Simmonds") has 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 common shares of Simmonds (the “Common Shares”) to certain creditors of Simmonds are exempt from the requirements of sections 34(1)(a) and 61 of the Act;
[para 2]
AND WHEREAS Simmonds has represented to the Executive Director that:
1. Simmonds was amalgamated under the laws of Ontario on January 1, 1997, is a reporting issuer under the Act and is not in default of any requirements of the Act or the Securities Rules, B.C. Reg. 194/97;
2. the authorized capital of Simmonds consists of an unlimited number of Common Shares and an unlimited number of preferred shares (“Preferred Shares”) issuable in series with the attributes of each series to be fixed by the Board of Directors of Simmonds, of which 28,382,291 Common Shares and 5,906,250 Preferred Shares were issued and outstanding as of May 9, 2001; the Preferred Shares are convertible into Common Shares at the rate of one Common Share for every five Preferred Shares;
3. the Common Shares are listed and posted for trading on The Toronto Stock Exchange (“TSE”);
4. Simmonds is a merchant banking company with an active role in certain strategic investments, including interactive gaming technology focused on the North American horse racing market and wireless communications;
5. Simmonds is currently experiencing significant financial difficulties and is unable to pay all of its creditors the amounts owing to them;
6. Simmonds proposes to settle debts with 19 of its creditors (the “Creditors”) holding debts totalling $2,607,957, of which three creditors are residents of British Columbia (the “B.C. Creditors”) and hold debt totalling $246,552;
7. all of the debts are bona fide debts of Simmonds, accrued in connection with its business operations;
8. Simmonds proposes to issue to its Creditors an aggregate of 5,000,000 Common Shares as follows:
(a) a total of 1,850,000 Common Shares at the price of $0.11 per share to two arm's length unsecured creditors;
(b) a total of 1,498,109 Common Shares at the price of $0.11 per share to 11 former employees of Simmonds (the “Former Employees”) in respect of severance obligations owing to the Former Employees;
(c) a total of 900,000 Common Shares at the price of $0.11 per share to two former executives of Simmonds (the “Former Executives”) in respect of severance obligations owing to the Former Executives; and
(d) a total of 751,891 Common Shares at the price of $0.11 per share to five persons who hold promissory notes issued by Simmonds in respect of which the principal and accrued interest remains unpaid;
9. Simmonds has agreed, subject to regulatory and TSE approval, to issue an aggregate of 5,000,000 Common Shares to the Creditors, including the issue of 575,287 Common Shares to the B.C. Creditors, in full satisfaction of outstanding indebtedness and obligations owing to the Creditors;
10. the issuance of the 5,000,000 Common Shares to the Creditors, including the issue of 575,287 Common Shares to the B.C. Creditors, will assist Simmonds in furthering its objective of preserving cash flow necessary for the growth of Simmonds;
11. each of the B.C. Creditors deals at arm's length with Simmonds and the amounts owing to the B.C. Creditors are bona fide debts of Simmonds;
12. each of the B.C. Creditors had originally entered into contractual relations with Simmonds with the expectation that cash payment would be made by Simmonds;
13. each of the B.C. Creditors has accepted Simmonds' proposal to issue the Common Shares to each of them in satisfaction of, and in exchange for, a release of Simmonds' outstanding obligations to each of them, respectively; and
14. the TSE has conditionally accepted notice of the distribution of the Common Shares to the Creditors, including the B.C. Creditors;
[para 3]
AND WHEREAS Simmonds would be able to distribute the Common Shares to the B.C. Creditors in reliance upon sections 89(c) and 128(e) of the Rules, but for the fact that Simmonds is not an “exchange issuer” as defined in section 1(1) of the Act;
[para 4]
AND WHEREAS the Executive Director considers that to do so would not be prejudicial to the public interest;
[para 5]
IT IS ORDERED:
1. under sections 48 and 76 of the Act that the intended trades by Simmonds in Common Shares to the B.C. Creditors are exempt from the requirements of sections 34(1)(a) and 61 of the Act, provided that Simmonds:
(a) issues and files a press release and material change report in connection with the closing of the distribution of the Common Shares to the B.C. Creditors in accordance with section 85(1) of the Act;
(b) prior to or concurrently with distributing the Common Shares to the B.C. Creditors, provides each B.C. Creditor with a copy of this order and a letter which refers to this order and advises the B.C. Creditor that certain protections, rights and remedies provided by the Act in respect of securities issued under a prospectus will be unavailable with respect to the Common Shares acquired under the order; and
(c) files B.C. Form 45-902F on or before the 10th day after the distribution of Common Shares to the B.C. Creditors;
2. under section 76 of the Act, that any trade by a B.C. Creditor in Common Shares acquired under this order is deemed to be a distribution unless:
(a) 12 months have elapsed from the date on which payment of the debt to the B.C. Creditor became due;
(b) if the B.C. Creditor is an insider of Simmonds, other than a director or senior officer of Simmonds, the B.C. Creditor has filed all records required to be filed under sections 87 and 90 of the Act;
(c) if the B.C. Creditor is a director or senior officer of Simmonds, the B.C. Creditor has filed all records required to be filed under sections 87 and 90 of the Act and Simmonds has filed all records required to be filed under Part 12 of the Act and of the Rules;
(d) the trade is not a distribution from the holdings of a control person;
(e) no unusual effort is made to prepare the market or to create a demand for the Common Shares; and
(f) no extraordinary commission or consideration is paid in respect of the trade.
[para 6]
DATED May 24, 2001.
Derek E. Patterson
Manager