Securities Law & Instruments

Headnote

Relief from issuer bid requirements -- Applicantissued 1,500,000 of its class A common shares ("Class AShares") to a private company as consideration for 35%of the share capital of a target company pursuant to a sharepurchase agreement -- 1,000,000 of the Class A Shares (the "EscrowedShares") were held in escrow -- 250,000 of the EscrowedShares would be returned to the Applicant as a reduction ofthe purchase price if the target company did not meet certainprofit thresholds -- target company failed to meet profit thresholds-- the terms of the escrow agreement required the payment of$1.00 before the 250,000 Escrowed Shares could be returned tothe Applicant and therefore qualified as an issuer bid -- thetransaction is analogous to 93(3)(a) of the Act as the acquisitionis accordance with the terms and conditions of the share purchaseagreement and the escrow agreement, which do not require theprior agreement of the owner of the securities -- if the bidwas extended to all holders of Class A Shares, those holderswould receive an offer of $0.000004 per share while such sharesare trading at $0.23 per share -- relief granted.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 93(3), 95-98, 100 and 104(2)(c).

IN THE MATTER OF

THE SECURITIES ACT, R.S.O.1990,

CHAPTER S.5, AS AMENDED (the"Act")

AND

IN THE MATTER OF

IMAFLEX INC.

 

ORDER

(Clause 104(2)(c) of the Act)

UPON the application of Imaflex Inc.(the "Applicant") to the Ontario Securities Commission(the "Commission") for a for an order pursuant toclause 104(2)(c) of the Act that the Applicant be exempt fromthe requirements of sections 95-98 and section 100 of the Act(the "Issuer Bid Requirements") in connection withthe Proposed Acquisition (as described in paragraph 14 below);

AND UPON considering the applicationand the recommendation of the staff of the Commission;

AND UPON the Applicant having representedto the Commission that:

1. The Applicant is a body corporate incorporatedunder the Canada Business Corporations Act pursuantto articles of amalgamation dated February 1, 1999.

2. The Applicant's head office is locatedin Montreal, Quebec.

3. The Applicant is a reporting issuer inAlberta and British Columbia and is not in default of anyrequirement under the Securities Act (Alberta) or theSecurities Act (British Columbia).

4. The authorized capital of the Applicantconsists of an unlimited number of Class A Shares (the "ClassA Shares"), an unlimited number of Class B Shares andan unlimited number of convertible Class B Series 1, of which31,784,646 Class A Shares are issued and outstanding.

5. The Class A Shares are listed on the TSXVenture Exchange (the "TSX-V"). The closing priceof the Class A Shares on the TSX-V on April 9, 2003 was $0.23.

6. The business of the Applicant consistsof the manufacture and sale of custom-made polyethylene filmsfor various packaging needs.

7. The Applicant entered into a share purchaseagreement (the "Share Purchase Agreement"), datedMarch 29, 2001, with Poli-Bram Limited ("Poli-Bram"),a private arm's length corporation.

8. The Share Purchase Agreement provided thatthe Applicant would issue 1,500,000 Class A Shares to Poli-Bramas consideration for the purchase of 35% of the outstandingshare capital of Canslit Inc. ("Canslit") from Poli-Bram.

9. Concurrent with the transaction with Poli-Bram,the Applicant also acquired the remaining 65% of the outstandingshare capital of Canslit, and Canslit became a wholly-ownedsubsidiary of the Applicant and remains so at the presenttime.

10. Each of the 1,500,000 Class A Shares issuedto Poli-Bram was issued at a price of $0.25, representinga total value of $375,000.

11. Of the 1,500,000 Class A Shares issuedto Poli-Bram, 1,000,000 were placed in escrow (the "EscrowShares") with Montreal Trust Company (now ComputershareTrust Company of Canada) as escrow agent (the "EscrowAgent") pursuant to an escrow agreement (the "EscrowAgreement") between Poli-Bram, the Applicant and theEscrow Agent dated March 29, 2001.

12. Pursuant to the Share Purchase Agreementand the Escrow Agreement, if Canslit did not meet a profitthreshold of an amount equal to a net profit after tax ofat least 4% during the fiscal year ended December 31, 2002,the Escrow Agent is obligated to return 250,000 of the EscrowShares to the Applicant.

13. Because of concerns regarding the sufficiencyof consideration, the Escrow Agreement requires the Applicantto make an aggregate payment of $1.00 as consideration forthe 250,000 Escrow Shares.

14. The financial statements for the 2002fiscal year show that Canslit did not meet the required threshold.Therefore, upon receipt of $1.00 from the Applicant, the EscrowAgent must deliver to the Applicant 250,000 Escrow Shares(the "Proposed Acquisition").

15. The Proposed Acquisition is an issuerbid as defined in subsection 89(1) of the Act and is not anexempt issuer bid under subsection 93(3) of the Act.

16. Although the Proposed Acquisition is notan exempt issuer bid under subsection 93(3) of the Act, thesecurities are being acquired in accordance with the termsand conditions of the Share Purchase Agreement and the EscrowAgreement, which were negotiated between arm's length parties.Such terms and conditions permit the Applicant to proceedwith the Proposed Acquisition without the prior agreementof the owner of the securities, Poli-Bram. This is analogousto the situation contemplated by paragraph 93(3)(a) of theAct, which provides that an issuer bid is an exempt issuerbid if securities are being acquired pursuant to the termsand conditions attaching thereto that permit the acquisitionwithout the prior agreement of the owners of the securities.

17. The total consideration being paid toPoli-Bram is $1.00. As a result, if the Applicant were toextend the Proposed Acquisition to all holders of Class AShares in Ontario, those holders would receive an offer ofonly $0.000004 per share, although such shares are tradingat $0.23 on the TSX-V (as of closing April 9, 2003).

AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS ORDERED pursuant to clause 104(2)(c)of the Act that the Applicant is exempt from the Issuer BidRequirements of the Act in connection with the Proposed Acquisition.

April 15, 2003.

"Derek Brown"
"Paul M. Moore"