Section 144 -- variation of cease trade orderto permit certain trades of securities pursuant to an arrangement.
Securities Act, R.S.O., c. S.5, as am., ss.127 and 144.
IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, CHAPTER S-5,AS AMENDED (the "Act")
IN THE MATTER OF
(Section 144 of the Act)
WHEREAS the securities of TomaNet Inc.("TomaNet") are subject to a temporary order of theDirector dated May 25, 2001 under paragraph 127(1)2 and subsection127(5) of the Act and extended by a further order of the Directordated June 8, 2001 (collectively referred to as the "CeaseTrade Order") directing that trading in the securitiesof TomaNet cease;
AND WHEREAS TomaNet has applied to theOntario Securities Commission (the "Commission") foran order under section 144 of the Act varying the Cease TradeOrder;
AND WHEREAS TomaNet has represented tothe Commission that:
1. TomaNet and others will enter into a transaction(the "Transaction") involving (i) the combinationof TomaNet and Imark Corporation ("Imark"), (ii)the acquisitions of the KnowledgePool business division ("KnowledgePool")of Fujitsu Services Limited and the product development andresearch and development assets of Mosaic Technologies Corporation("Mosaic"), and (iii) a private equity financingof up to $7.35 million.
2. On May 8, 2003, Imark and TomaNet enteredinto an arrangement agreement in which Imark agreed to acquireall of the shares of TomaNet in exchange for shares of Imarkpursuant to a plan of arrangement (the "Arrangement")under the Business Corporations Act (Alberta) (the"ABCA").
3. Contemporaneously, Maxim Training Corp(UK) Limited ("Maxim Training UK"), a wholly-ownedsubsidiary of TomaNet, and Mosaic, entered into an asset purchaseagreement pursuant to which Maxim Training UK agreed to acquirecertain assets and employees relating to Mosaic's productdevelopment and research and development business (the "MosaicDevelopment Assets") from Mosaic in exchange for $600,000in cash and a $1,000,000 promissory note, which will be payablein either cash or shares (the "Mosaic Asset Acquisition").
4. Imark, TomaNet and Mosaic issued a jointpress release on May 8, 2003 announcing the Transaction andthe execution of these agreements. Subject to satisfying allclosing conditions and obtaining all applicable regulatoryapprovals, the parties anticipate that the Transaction willbe completed in July 2003.
5. TomaNet is a corporation existing underthe laws of Alberta. TomaNet was continued under the ABCAfrom Ontario on November 19, 1993. TomaNet's head office andprincipal office is located in Toronto, Ontario.
6. From 2001 to March 31, 2003 (the date onwhich TomaNet acquired KnowledgePool through Maxim TrainingUK), TomaNet was an inactive company and did not carry onany business or operations. TomaNet's only current operationsrelate to its indirect ownership of KnowledgePool.
7. In November 2001, Landmark Global FinancialCorporation ("Landmark") seized all of the assetsof TomaNet (including its books and records) pursuant to theenforcement of a security interest over TomaNet's assets.As a result of TomaNet's inability to access certain of itshistorical financial information that is currently held byLandmark, TomaNet is unable to prepare audited financial statementsfor its 2001 and 2002 fiscal years.
8. However, based on management prepared statementsfor the year ended December 31, 2002, TomaNet incurred a netloss of approximately $732,000 on revenues of approximately$7,000. As at December 31, 2002, TomaNet had total assetsof approximately $139,000, total liabilities of approximately$964,000 and total shareholders' equity of approximately negative$475,408.
9. TomaNet's common shares and Class A Shareswere listed and principally traded on the Canadian VentureExchange but have been delisted since May 2001.
10. As at July 10, 2003, TomaNet's share capitalconsisted of (i) an unlimited number of common shares of which11,631,567 were outstanding, (ii) an unlimited number of ClassA shares of which, 23,225,121 were outstanding, (iii) an unlimitednumber of Class B shares, issuable in series, none of whichare outstanding, and (iv) 5,000,002 7% non-cumulative, non-votingpreference shares none of which are outstanding.
11. From September 4, 2001 until April 4,2003, TomaNet did not file any continuous disclosure documents.
12. The Cease Trade Order was issued as aresult of TomaNet's failure to file financial statements.
13. Imark is a corporation amalgamated underthe Business Corporations Act (Ontario). Imark's headoffice and principal office is located in Toronto, Ontario.
14. Imark is a reporting issuer in Ontario.
15. The Imark common shares are listed onthe Toronto Stock Exchange (TSX) under the symbol "IAK".However, because of Imark's failure to meet certain TSX continuedlistings standards, trading in Imark's common shares on theTSX was suspended effective June 6, 2003.
16. Imark intends to apply to the TSX VentureExchange (TSX-V) to have its common shares listed for tradingon the TSX-V as soon as practicable.
17. As at June 30, 2003, Imark's share capitalconsisted of (i) an unlimited number of common shares of which17,082,089 were outstanding; and (ii) an unlimited numberof Class A preferred shares, none of which are outstanding.
18. Mosaic is a corporation continued underthe Canada Business Corporations Act. Mosaic's headoffice and principal office is located in Fredericton, NewBrunswick.
19. Mosaic is a reporting issuer in Albertaand British Columbia.
20. The Mosaic common shares are listed onthe TSX-V under the symbol "MAC". The closing priceof Mosaic's common shares on the TSX-V on July 8, 2003 was$0.07.
21. KnowledgePool's head office is in theUnited Kingdom.
22. On March 31, 2003, TomaNet, through MaximTraining UK, acquired KnowledgePool for £4.0 million.£2.5 million was paid on closing by the issuance ofpromissory notes (the "Notes") by Maxim TrainingUK and the remaining £1.5 million is payable on March31, 2004.
23. The Transaction is proposed to be effectedby the following steps:
(i) TomaNet (through Maxim Training UK)completed the acquisition of KnowledgePool on March 31,2003.
(ii) Maxim Training UK completed the MosaicAsset Acquisition on June 18, 2003.
(iii) The Imark common shares will be consolidatedon an approximately one-for-five basis, such that aftercompleting the Transaction, the existing Imark shareholderswill own approximately 15.21% of the outstanding Imark commonshares.
(iv) Imark will complete an equity privateplacement of its common shares for gross aggregate proceedsof up to approximately $7.35 million (the "PrivatePlacement"). These funds will be used to repay theNotes, to pay transaction costs associated with the Transactionand for Imark's general working capital purposes followingcompletion of the Transaction.
(v) Immediately prior to completion of theArrangement, TomaNet will issue an aggregate of 9,230,769common shares (the "TomaNet Compensation Shares")and pay an aggregate of $532,500 (the "TomaNet CompensationPayment") to certain of its directors and officersas compensation for locating and arranging the Transactionon TomaNet's behalf.
(vi) The TomaNet Compensation Payment willbe funded by Imark advancing proceeds of the Private Placement.The parties anticipate that TomaNet's indebtedness in respectof the advance will be assumed by or transferred to Imarkprior to completion of the Arrangement.
(vii) Certain TomaNet debtholders will convertan aggregate of approximately $2,710,000 of indebtednessinto approximately 37,604,396 TomaNet common shares immediatelyprior to completion of the Arrangement (the "TomaNetDebt Conversion").
(viii) Imark will acquire all of the outstandingshares of TomaNet (the "TomaNet Share Acquisition")pursuant to the Arrangement and Imark will issue its commonshares to the holders of each class of TomaNet shares.
(ix) Maxim Training UK will transfer theMosaic Development Assets to Imark and will assign its remainingrights and obligations under the Mosaic Acquisition Agreementto Imark. Imark intends to repay the promissory note issuedto Mosaic under this agreement by issuing 1,000,000 Imarkcommon shares to Mosaic.
(x) As a result of the Transaction, Imarkwill be the continuing public company combining the currentoperations of TomaNet, Imark and KnowledgePool and certainof the operations of Mosaic, and will change its name to"Maxim Training Corporation".
(xi) Following completion of the Transaction,TomaNet will apply to cease to be a reporting issuer inall jurisdictions in which it is a reporting issuer.
24. Detailed descriptions of the Arrangement,the acquisition of KnowledgePool and the Mosaic DevelopmentAssets and the Private Placement were included in the jointmanagement information circular of TomaNet and Imark (theJoint Circular) that was mailed to their respective shareholderson June 26, 2003 in connection with the special meetings calledto vote on the Transaction.
25. The Transaction will require, among otherclosing conditions:
(i) board approval of each of Imark, TomaNetand Mosaic;
(ii) approval of the shareholders of eachof Imark and TomaNet;
(iii) interim and final orders of the AlbertaCourt of Queen's Bench for the Arrangement;
(iv) partial revocation of the Cease TradeOrder to allow the (i) TomaNet Debt Conversion, (ii) issuanceof the TomaNet Compensation Shares, and (iii) TomaNet ShareAcquisition; and
(v) relief from the Commission from therequirement to include certain historical financial disclosurein the Joint Circular, which the Commission granted on June23, 2003.
26. The Joint Circular contains prospectuslevel disclosure of the business and affairs of Imark (aftergiving effect to the Transaction) and a detailed descriptionof the Transaction.
27. The Joint Circular contains the followingfinancial statements:
Imark Financial Statements
(i) audited statements of income, retainedearnings and cash flows for the years ended December 31,2002, 2001 and 2000;
(ii) audited balance sheets as at December31, 2002 and December 31, 2001;
(iii) unaudited statements of income,retained earnings and cash flows for the three month periodended March 31, 2003 and for the three month period endedMarch 31, 2002; and
(iv) an unaudited balance sheet as ofMarch 31, 2003.
KnowledgePool Financial Statements
(i) audited statements of income and cashflows for the years ended March 31, 2002, 2001 and 2000and for the nine-month periods ended December 31, 2002and December 31, 2001;
(ii) audited balance sheets as at December31, 2002, March 31, 2002 and March 31, 2001;
(iii) unaudited statements of income andcash flows for the three month period ended March 31,2003; and
(iv) unaudited balance sheet as of March31, 2003.
Pro-Forma Financial Statements
(i) a pro forma balance sheet ofMaxim Training Corporation as at December 31, 2002 andMarch 31, 2003 to give effect to the acquisitions of TomaNetand KnowledgePool and completion of the Private Placement;and
(ii) pro forma income statementsof Maxim Training Corporation to give effect to the acquisitionsof TomaNet and KnowledgePool and completion of the PrivatePlacement for the financial year ended December 31, 2002and for the three month period ended March 31, 2003, asif the acquisitions and the Private Placement had takenplace at the beginning of the respective periods.
AND WHEREAS the Commission's power tomake the Order has been assigned to the Director;
AND WHEREAS the Commission is satisfiedthat it would not be prejudicial to the public interest to grantthe order requested;
IT IS ORDERED, pursuant to section 144of the Act, that the Cease Trade Order is varied solely to permit(i) the TomaNet Debt Conversion, (ii) the issuance of the TomaNetCompensation Shares, and (iii) TomaNet shareholders to participatein the Arrangement.
July 16, 2003.