Securities Law & Instruments

IN THE MATTER OF

THE SECURITIES ACT

R.S.O. 1990, c. S-5, as amended

AND

IN THE MATTER OF

THE FARINI COMPANIES INC.

and DARRYL HARRIS

 

ORDER

(Section 127)

WHEREAS on April 22, 2003 the OntarioSecurities Commission issued a Notice of Hearing pursuant tosections 127 and 127.1 of the Securities Act, R.S.O.1990 c.S.5, as amended (the "Act") in respect of TheFarini Companies Inc. and Darryl Harris (the "Respondents");

AND WHEREAS the Respondents entered intoa settlement agreement with Staff of the Commission dated June23, 2003 (the "Settlement Agreement") in which theyagreed to a proposed settlement of the proceeding, subject tothe approval of the Commission;

AND UPON reviewing the Settlement Agreementand the Statement of Allegations of Staff of the Commission,and upon hearing submissions from counsel for Staff of the Commission;

AND WHEREAS the Commission is of theopinion that it is in the public interest to make this Order;

IT IS ORDERED THAT:

(1) the Settlement Agreement dated June 23,2003 attached to this Order is hereby approved;

(2) pursuant to clause 7 of section 127(1)of the Act, Darryl Harris is hereby required to resign hisposition as Director of Farini by June 30, 2003;

(3) pursuant to clause 8 of section 127(1)of the Act, Darryl Harris is hereby prohibited from becomingor acting as a director or officer of any issuer for a periodof one year from the date of this order; and

(4) pursuant to clause 6 of section 127(1)of the Act, the Respondents are hereby reprimanded by theCommission.

June 25, 2003.

"Kerry D. Adams"
"H. Lorne Morphy"

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S-5, as amended

AND

IN THE MATTER OF

THE FARINI COMPANIES INC.,

and DARRYL HARRIS

SETTLEMENT AGREEMENT BETWEENSTAFF

OF THE ONTARIO SECURITIESCOMMISSION,

THE FARINI COMPANIES INC.and DARRYL HARRIS

INTRODUCTION

1. By notice of hearing dated April 22, 2003,the Ontario Securities Commission announced that it proposedto hold a hearing to consider whether, pursuant to section127 of the Securities Act, it is in the public interest forthe Commission to make an order:

(a) that trading in securities by the respondentscease permanently or for such period as the Commission maydirect;

(b) that the respondents be reprimanded;

(c) that Harris resign any positions thathe holds as a director or officer of any issuer;

(d) that Harris be prohibited from becomingor acting as a director or officer of any issuer permanentlyor for such period as the Commission may direct;

(e) that the respondents pay the costs ofStaff's investigation in relation to this matter;

(f) that the respondents pay the costs ofor related to the hearing that are incurred by or on behalfof the Commission; and

(g) to make such other order as the Commissionmay deem appropriate.

II JOINT SETTLEMENT RECOMMENDATION

2. Staff of the Commission ("Staff")agree to recommend settlement of the proceeding initiatedin respect of the respondents by the Notice of Hearing inaccordance with the terms and conditions set out below. Therespondents consent to the making of an order against themin the form attached as Schedule "A" on the basisof the facts set out below.

III STATEMENT OF FACTS

Acknowledgement

3. For the purposes of this settlement agreement,the respondents agree with the facts set out in this PartIII.

Factual Background

4. The Farini Companies Inc. is an Ontariocorporation which manufactured and distributed pasta makersand food products.

5. Farini is a reporting issuer in Ontariowhose shares traded on the Canadian Dealers Network untilOctober, 2000.

6. Darryl Harris has been a Director of Farinisince October 8, 1999.

Failure to Meet Financial Statement FilingRequirements

7. During the period between May, 1996 andMay, 2002, Farini repeatedly failed to file both interim andaudited annual financial statements with the Commission withinthe time periods prescribed by sections 77 and 78 of the SecuritiesAct.

8. In particular, Farini failed on 11 occasionsto file its interim financial statements within the time periodprescribed by section 77 of the Securities Act.

9. Specifically, Farini failed to file:

(a) its first quarter interim financialstatements for the 1998, 1999, 2000, 2001 and 2002 fiscalyears;

(b) its second quarter interim financialstatements for the 1998, 2000, 2001 and 2002 fiscal years;and

(c) its third quarter interim financialstatements for the 1998, 1999 and 2000 and 2002 fiscal years

within the required time period.

10. In addition, Farini failed on 8 occasionsto file its annual comparative financial statements withinthe time period prescribed by section 78 of the SecuritiesAct.

11. Specifically, Farini failed to file itsannual comparative financial statements for the 1995, 1996,1997, 1998, 1999, 2000, 2001, and 2002 fiscal years withinthe required time period.

12. As a result of Farini's failure to fileits financial statements in a timely manner, the Commissionimposed four cease trade orders on its shares. The Commission'sorders to this effect were dated May 28, 1999, July 26, 2000,May 25, 2001 and May 24, 2002.

13. To date, Farini's latest failure to filehas not been rectified, and the Commission's cease trade orderdated May 24, 2002 remains in effect.

Harris' Responsibility

14. Harris was a Director of Farini at thetime of the following breaches, namely:

(a) 8 failures to file interim financialstatements within the time periods prescribed by section77 of the Securities Act; and

(b) 4 failures to file annual comparativefinancial statements within the time periods prescribedby section 78 of the Securities Act.

15. Specifically, Harris was a Director atthe time of Farini's failure to file:

(a) its first quarter interim financialstatements for the 2000, 2001, and 2002 fiscal years;

(b) its second quarter interim financialstatements for the 2000, 2001 and 2002 fiscal years;

(c) its third quarter interim financialstatements for the 1999, 2000 and 2002 fiscal years; and

(d) its annual comparative financial statementsfor the 1999, 2000, 2001 and 2002 fiscal years

within the required time period.

Conduct Contrary to the Public Interest

16. Farini breached sections 77 and 78 ofthe Securities Act, as set out above, and thereby actedin a manner contrary to the public interest.

17. Harris authorized, permitted or acquiescedin Farini's contraventions of sections 77 and 78 of the SecuritiesAct and thereby acted in a manner contrary to the publicinterest.

18. The respondents agree that it is in thepublic interest for the Commission to make an order in theform attached as Schedule "A".

IV TERMS OF SETTLEMENT

19. The respondents agree to the followingterms of settlement:

(a) The Commission will make an order underclause 7 of section 127(1) of the Act requiring Harris toresign his position as a Director of Farini by June 30,2003;

(b) The Commission will make an order underclause 8 of section 127(1) of the Act prohibiting Harrisfrom becoming or acting as a director or officer of anyissuer for a period of one year following the date of theorder; and

(c) The Commission will make an order underclause 6 of section 127(1) of the Act reprimanding Fariniand Harris.

STAFF COMMITMENT

20. If this settlement agreement is approvedby the Commission, Staff will not initiate any proceedingunder Ontario securities law in respect of any conduct oralleged conduct of the respondents in relation to the factsset out in Part III of this settlement agreement, subjectto the provisions of paragraph 24 below.

PROCEDURE FOR APPROVAL OF SETTLEMENT

21. Approval of this settlement agreementshall be sought at the public hearing of the Commission scheduledfor Wednesday June 25, 2003, or such other date as may beagreed to by Staff and the respondents in accordance withthe procedures described in this settlement agreement.

22. Staff and the respondents agree that ifthis settlement agreement is approved by the Commission, itwill constitute the entirety of the evidence to be submittedrespecting the respondents in this matter, and respondentsagree to waive their rights to a full hearing, judicial reviewor appeal of the matter under the Securities Act.

23. Staff and the respondents agree that ifthis settlement agreement is approved by the Commission, neitherStaff nor the respondents will make any public statement inconsistentwith this settlement agreement.

24. If the respondents fail to honour theagreement contained in paragraph 23 of this settlement agreement,Staff reserve the right to bring proceedings under Ontariosecurities law against the respondents based on the factsset out in Part III of this settlement agreement, as wellas the breach of the settlement agreement.

25. If, for any reason whatsoever, this settlementagreement is not approved by the Commission or an order inthe form attached as Schedule "A" is not made bythe Commission, each of Staff and the respondents will beentitled to all available proceedings, remedies and challenges,including proceeding to a hearing of the allegations in theNotice of Hearing and Statement of Allegations, unaffectedby this settlement agreement or the settlement negotiations.

26. Whether or not this settlement agreementis approved by the Commission, the respondents agree thatthey will not, in any proceeding, refer to or rely upon thissettlement agreement or the negotiation or process of approvalof this settlement agreement as the basis for any attack onthe Commission=s jurisdiction, alleged bias, appearance ofbias, alleged unfairness or any other remedies or challengesthat may otherwise be available.

DISCLOSURE OF AGREEMENT

27. The terms of this settlement agreementwill be treated as confidential by all parties hereto untilapproved by the Commission, and forever if, for any reasonwhatsoever, this settlement agreement is not approved by theCommission, except with the written consent of both the respondentsand Staff or as may be required by law.

28. Any obligations of confidentiality shallterminate upon approval of this settlement agreement by theCommission.

EXECUTION OF AGREEMENT

29. This settlement agreement may be signedin one or more counterparts which together shall constitutea binding agreement.

30. A facsimile copy of any signature shallbe effective as an original signature.

June 23, 2003.

"Darryl Harris"
Darryl Harris

June 23, 2003.

"Darryl Harris"
The Farini Companies Inc.
Per: Darryl Harris

June 23, 2003.

"Michael Watson"
Staff of the Ontario Securities Commission
Per: Michael Watson