Modatech Systems Inc. - s. 144

Headnote

Section 144 of the Securities Act (Ontario) -- variation of cease trade order to complete the redemption of a class of shares.

Applicable Ontario Statutory Provision

Securities Act, R.S.O., c. S.5, as am., ss. 127, 144.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, C.S.5, AS AMENDED (THE ACT)

AND

IN THE MATTER OF

MODATECH SYSTEMS INC.

ORDER

(Section 144)

WHEREAS Modatech Systems Inc. (Modatech) has made an application (the Application) to the Ontario Securities Commission (the Commission) for an order under section 144 of the Act to vary a cease trade order dated December 13, 1995 made pursuant to paragraph 2 of subsection 127(1) and subsection 127(5) of the Act, as extended by a further order dated December 22, 1995 made pursuant to subsection 127(8) of the Act (collectively, the Order) solely to permit Modatech to redeem all of its issued and outstanding Class A Preferred Shares.

AND WHEREAS Modatech has represented to the Commission that:

1. Modatech is a public real estate company incorporated under the Company Act (British Columbia) on February 28, 1983 under the name 260827 B.C. Ltd., and changed its name on May 28, 1984 to Modatech Systems Inc.

2. Modatech is a reporting issuer in British Columbia, Manitoba, Ontario and Québec and is also subject to cease trade orders issued by the British Columbia Securities Commission (BCSC), the Manitoba Securities Commission (MSC) and the Autorité des marchés financiers (AMF). Modatech has concurrently applied to the BCSC, MSC and AMF for a partial revocation of these cease trade orders.

3. Modatech's authorized capital consists of 25,000,000 common shares, 12,500,000 Class A Preferred Shares and 2,500,000 Class B Preferred Shares, of which 6,772,001 common shares (the Common Shares), 12,093,522 Class A Preferred Shares (the Class A Preferred

Shares) and 2,000,000 Class B Preferred Shares (the Class B Preferred Shares) are issued and outstanding.

4. The Common Shares are not listed or posted for trading on any stock exchange or market, however, they were formerly listed and posted for trading on the Toronto Stock Exchange and NASDAQ (the Exchanges). The Common Shares were de-listed from the Exchanges as result of the Order.

5. When the Share Redemption (defined below) is completed, Modatech's securities, including debt securities, will be beneficially owned, directly or indirectly, by less than 15 security holders in each of the jurisdictions in Canada and less than 51 security holders in total in Canada.

6. No securities of the Applicant are traded on a marketplace as defined in National Instrument 21-101 Marketplace Operation.

7. The Applicant has no current intention to seek public financing by way of an offering of securities.

8. The Order was issued against Modatech for failing to file its interim financial statements for the nine month period ended August 31, 1995. The most recent continuous disclosure document filed by Modatech on SEDAR is the Notice of Alteration to the Class A Preferred Shares (the Notice of Alteration). Modatech has not filed any continuous disclosure documentation since the Notice of Alteration was filed on SEDAR on November 16, 2005, and is currently in default of the following continuous disclosure filing obligations since November 15, 2005:

• Audited financial statements for the financial years ended November 30, 2005 and November 30, 2006;

• Management's Discussion and Analysis for the financial years ended November 30, 2005 and November 30, 2006;

• Forms 52-109F1 -- Certification of Annual Filings on behalf of the CEO and CFO for the financial years ended November 30, 2005 and November 30, 2006;

• Financial statements for all interim periods from the period ended February 28, 2006 to the period ended February 28, 2007;

• Management's Discussion and Analysis for all interim periods from the period ended February 28, 2006 to the period ended February 28, 2007; and

• Forms 52-109F2 -- Certification of Interim Filings on behalf of the CEO and CFO for all interim periods from the period ended February 28, 2006 to the period ended February 28, 2007.

9. In its Notice of Annual and Special General Meeting dated October 11, 2005, Modatech provided notice to the holders of the Common Shares, the Class A Preferred Shares and the Class B Preferred Shares of its intention to redeem all of the issued and outstanding 12,093,522 Class A Preferred Shares (the Share Redemption) by payment of the sum of $0.025 per Class A Preferred Share plus all declared and unpaid dividends thereon owing in the amount of $0.0078945 per share.

10. At the time of the shareholder vote on the Share Redemption on November 7, 2005, Modatech's continuous disclosure record was up to date. As a result, Modatech shareholders had all of the information necessary to make an informed investment decision prior to voting on the Share Redemption.

11. When originally issued, the Class A Preferred Shares were retractable at the option of the shareholder at any time after December 31, 2005 for $.025 per share (the "Retraction Price") plus a cumulative, preferred dividend of 6% per annum on the Retraction Price until December 31, 2005. As a result, the Share Redemption price was fixed at the same price as the Retraction Price, with the same dividend entitlement.

12. Voting separately as classes, the holders of Modatech Common Shares, Class A Preferred Shares and Class B Preferred Shares passed separate special resolutions at Modatech's annual and special meeting of shareholders on November 7, 2005 authorizing the amending of Modatech's articles of incorporation to permit the Share Redemption.

13. Modatech cannot effect the Share Redemption without a partial revocation of the Order.

14. Upon the completion of the Share Redemption, the Class A Preferred Shares will be cancelled. The effect of the Share Redemption will be that the issued and outstanding capital of Modatech will consist of 6,772,001 Common Shares and 2,000,000 Class B Preferred Shares.

15. After the Share Redemption, Modatech will only have two private securityholders, including debt securityholders, and intends to apply to deem to cease to be a reporting issuer in all jurisdictions in Canada where it is currently a reporting issuer.

AND UPON considering the Application and the recommendation of the staff of the Commission;

AND UPON the Director being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED, pursuant to section 144 of the Act, that the Order is partially revoked solely to permit the Share Redemption.

DATED this 18th day of May, 2007