Securities Law & Instruments

INTHE MATTER OF

THESECURITIES ACT

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


AND


INTHE MATTER OF

ALKARIMJIVRAJ

ORDER


WHEREASon December 17, 2001, the Ontario Securities Commission (the"Commission") issued a Notice of Hearing pursuant to sections127(1) and 127.1 of the Securities Act, R.S.O. 1990 c. S.5,as amended (the "Act") in respect of Alkarim Jivraj ("Jivraj");

ANDWHEREAS Alkarim Jivraj ("Jivraj") entered into a settlementagreement dated December 17, 2001 (the "Settlement Agreement")in which it agreed to a proposed settlement of the proceeding,subject to the approval of the Commission;

ANDUPON reviewing the Settlement Agreement and the Statementof Allegations of Staff of the Commission ("Staff"), and uponhearing submissions from counsel for Jivraj and from Staff;

ANDWHEREAS the Commission is of the opinion that it isin the public interest to make this Order;

ITIS HEREBY ORDERED THAT:

1.the Settlement Agreement dated December 17, 2001, attached tothis Order, is hereby approved;

2.pursuant to subsection 127(1)(6) of the Act, Jivraj is herebyreprimanded; and

3.pursuant to subsection 127.1(2)(b) of the Act, at the time ofapproval of this settlement, Jivraj is ordered to pay $5,000to the Commission in respect of a portion of the Commission'scosts with respect to this matter.

December19, 2001.

 

INTHE MATTER OF

THESECURITIES ACT

R.S.O.1990, c. S.5, AS AMENDED


AND


INTHE MATTER OF

ALKARIMJIVRAJ

SETTLEMENTAGREEMENT


I.INTRODUCTION

1. ByNotice of Hearing dated December 17, 2001 (the "Notice of Hearing"),the Ontario Securities Commission (the "Commission") announcedthat it proposed to hold a hearing to consider whether, pursuantto sections 127(1) and 127.1 of the Securities Act, R.S.O. 1990,c. S.5, as amended (the "Act"), it is in the public interest forthe Commission:

(a)to make an order approving the proposed settlement entered intobetween Staff of the Commission ("Staff") and Alkarim Jivraj ("Jivraj")of this proceeding, pursuant to sections 127 and 127.1 of theAct, which approval will be sought jointly by Staff and Jivraj;

(b)to make an order that the respondent Jivraj be reprimanded;

(c)to make an order that the respondent Jivraj pay costs to the Commission.

II.JOINT SETTLEMENT RECOMMENDATION

2. Staffagree to recommend settlement of the proceeding initiated in respectof the respondent Jivraj by the Notice of Hearing in accordancewith the terms and conditions set out below. Jivraj consents tothe making of an order against him in the form attached as Schedule"A" on the basis of the facts set out below.

III.STATEMENT OF FACTS

ACKNOWLEDGEMENT

3.For the purpose of this proceeding only Jivraj agrees with thefacts as set out in this Part III.

FACTS

YORKTONSECURITIES INC.

4.Yorkton Securities Inc. ("Yorkton") is registered as, among otherthings, a broker and investment dealer under the Act and is amember of, among other things, The Toronto Stock Exchange (the"TSE") and the Investment Dealers Association of Canada (the "IDA").Yorkton is an employee-owned firm with over 600 employees. Yorktonis a wholly-owned subsidiary of Yorkton Financial Inc.

5.Jivraj is an investment banker who has been employed at Yorktonsince 1996. In 1998, Jivraj was employed by Yorkton as an Associateworking under the supervision of the head of investment banking.Later, Jivraj was registered as an approved, non-trading officerwith the title of Vice-President and Director from May 24, 2000to March 12, 2001. Since March 12, 2001 Jivraj has been registeredas an approved, non-trading officer with the title of Vice-Presidentand Managing Director, Technology Investment.

6.The conduct of Jivraj that is the subject matter of this SettlementAgreement occurred prior to February 2001 (the "Material Time").

XENCETAND GTI RTO

7. GTRGroup Inc. ("GTR") was the continuing company formed through thereverse take-over (the "RTO") by Games Trader Inc. ("GTI") ofthe listed "shell" then known as Xencet Investments Inc. ("Xencet")in October 1998 and the concurrent exchange of securities withshareholders of 1308129 Ontario Inc. ("1308129"). Effective September5, 2001, GTR changed its name to Mad Catz Interactive Inc. Duringthe Material Time GTR was a reporting issuer in British Columbia,Alberta and Ontario and its common shares were listed and postedfor trading on the TSE under the symbol GTR.

8.During the Material Time GTR carried on business through two operatingsubsidiaries. Through the first of those subsidiaries (which carriedon business under the name "Games Trader"), GTR was a supplierof video games to mass merchant and specialty retailers in theUnited States and Canada, with its principal business activitybeing the sourcing, refurbishing, repackaging and distributionof previously played video game software. Through the second ofthose subsidiaries, GTR designed, developed, manufactured (throughthird parties) and marketed interactive video game control devicesand accessories.

9.GTI was, until it was taken public through the RTO, a closely-heldcompany that carried on the business later operated under the"Games Trader" name.

10.Xencet Investments Inc. ("Xencet") was a TSE listed company. Inmid February 1998, Xencet had no significant operations. It heldcash and cash equivalents in excess of $7.5 million. Its onlyother asset was a listing on the TSE. To preserve this listing,the TSE required that Xencet enter into a legally binding agreementby August 18, 1998 to acquire an operating business that, if completed,would result in Xencet meeting the original listing requirementsof the TSE.

11.In or about late July 1998, Jivraj was formally assigned to theXencet/GTI RTO transaction, although Jivraj had information regardingthe RTO prior to that date. Jivraj's primary responsibility wasto close the financing transaction concurrent with the RTO.

12.On July 31, 1998, Xencet and GTI entered into an acquisition agreement(the "Acquisition Agreement"), as amended and restated on August20, 1998, providing for the acquisition of all the issued andoutstanding common shares of GTI, pursuant to securities exchangeagreements to be entered into with the holders of GTI common sharesin exchange for units of Xencet comprised of common shares anda fractional number of common share purchase warrants.

13.The share ratio agreed to by Xencet and GTI, as reflected in theAcquisition Agreement, was as follows:

"Onthe terms and subject to the conditions set out herein and inthe Securities Exchange Agreement, the transactions contemplatedby this Agreement shall be effected by the implementation of thefollowing steps on the Closing Date:

(a)Xencet shall acquire all of the GTI Securities from the GTI Securityholdersin exchange for an aggregate of:

(i)10,300,000 Xencet Common Shares: and

(ii)1,000,000 Xencet Series A Warrants;

(b)Peter Kozicz shall receive options to purchase 514,884 commonshares of Xencet exercisable until April 7, 2000 for the KoziczOptions held by him, it being the intent that the options to begranted to Peter Kozicz will be granted at the market price ofthe common shares of Xencet, as agreed to with the TSE, and thatthe accrued gain in the Kozicz Options, being the excess of theexercise price per share of the options to be granted by Xencetto Peter Kozicz over $0.4017 (the "Excess Amount") will be treatedas a pre-payment of a portion of the exercise price per sharepayable under such options equal to the Excess Amount per shareof the options to be granted to Peter Kozicz, so that Peter Koziczis in the same economic position as if he continued to hold theKozicz Options, and the TSE shall have approved the issuance ofsuch options on the foregoing terms on or before August 12, 1998."

TheAcquisition Agreement and the terms contained therein were notthen publicly available.

14.In mid-1998, Jivraj became aware that several senior Yorkton officershad purchased shares in GTI.

15.In mid-1998, Jivraj approached Yorkton's then President and proposedthat Yorkton's then President sell to him common shares in GTI.Yorkton's then President agreed to sell a portion of his positionin GTI, subject to shareholder approval of the transfer to Jivraj.

16.On August 19, 1998, Jivraj completed the purchase of 2,217 commonshares of GTI from the holding company of Yorkton's then President,for $1,441.05. The transfer was approved by a shareholder's resolutiondated August 19, 1998.

17.The RTO Transaction was publicly announced by Xencet on August26, 1998, which announcement included disclosure of the shareexchange ratio agreed to by Xencet and GTI as reflected in theAcquisition Agreement, as amended and restated on August 20, 1998.The RTO was completed by October 30, 1998, and the name of thecompany was changed to Games Traders Inc. ("GTR") as of November11, 1998. Following the RTO, the common shares of Xencet/GTR tradedon the TSE at prices above the price of the GTI shares purchasedby Jivraj in August of 1998. However, the shares of GTI acquiredby Jivraj were subject to an escrow agreement and were not tradedby Jivraj until March, 2000.

CONDUCTCONTRARY TO THE PUBLIC INTEREST

18.Jivraj's purchase of GTI shares was contrary to the public interestgiven his position as an investment banker, the nature of hisinvolvement in assisting GTI with its financing, and either Jivraj'sknowledge of undisclosed information in respect of the proposedRTO or the availability to Jivraj of such undisclosed informationby virtue of his role in assisting GTI on the proposed RTO.

IV.TERMS OF SETTLEMENT

19.Jivraj agrees to the following terms of settlement:

(a)at the time of approval of this settlement agreement, Jivraj willmake a voluntary payment to the Commission in the amount of $10,000,such payment to be allocated to such third parties as the Commissionmay determine for purposes that will benefit Ontario investors;

(b)that the Commission make an order under subsection 127(1)(6) ofthe Act that Jivraj be reprimanded; and

(c)that the Commission make an order under subsection 127.1(1)(b)of the Act that Jivraj make payment to the Commission in the amountof $5,000 in respect of the costs of the Commission's investigationin relation to this proceeding, such payment to be made at thetime of approval of this settlement.

V.CONSENT

20.Jivraj hereby consents to an order of the Commission incorporatingthe provisions of Part IV above in the form of an order attachedas Schedule "A".

VI.STAFF COMMITMENT

21.If this settlement is approved by the Commission, Staff will notinitiate any other proceeding under the Securities Act, R.S.O.1990, c. S.5 against Jivraj respecting the facts set out in PartIII of this Settlement Agreement.

VII.APPROVAL OF SETTLEMENT

22.Approval of the settlement set out in this Settlement Agreementshall be sought at the public hearing of the Commission scheduledfor December 19, 2001, or such other date as may be agreed toby Staff and the respondent (the "Settlement Hearing").

23.Counsel for Staff or for Jivraj may refer to any part, or all,of this Settlement Agreement at the Settlement Hearing. Staffand Jivraj agree that this Settlement Agreement will constitutethe entirety of the evidence to be submitted at the SettlementHearing.

24.If this settlement is approved by the Commission, Jivraj agreesto waive his rights to a full hearing, judicial review or appealof the matter under the Act.

25.Staff and Jivraj agree that if this settlement is approved bythe Commission, they will not make any public statement inconsistentwith this Settlement Agreement.

26.If, for any reason whatsoever, this settlement is not approvedby the Commission, or an order in the form attached as Schedule"A" is not made by the Commission;

(a)this Settlement Agreement and its terms, including all discussionsand negotiations between Staff and Jivraj leading up to its presentationat the Settlement Hearing, shall be without prejudice to Staffand Jivraj;

(b)Staff and Jivraj shall be entitled to all available proceedings,remedies and challenges, including proceeding to a hearing ofthe allegations in the Notice of Hearing and Statement of Allegationsof Staff, unaffected by this Settlement Agreement or the settlementdiscussions/negotiations;

(c)the terms of this Settlement Agreement will not be referred toin any subsequent proceeding, or disclosed to any person exceptwith the written consent of Staff and Jivraj , or as may be requiredby law; and

(d)Jivraj agrees that he will not, in any proceeding, refer to orrely upon this Settlement Agreement, the settlement discussions/negotiationsor the process of approval of this Settlement Agreement as thebasis of any attack on the Commission's jurisdiction, allegedbias or appearance of bias, alleged unfairness or any other remediesor challenges that may otherwise be available.

VIII.DISCLOSURE OF AGREEMENT

43.Except as permitted under paragraph 42 above, this SettlementAgreement and its terms will be treated as confidential by Staffand Jivraj until approved by the Commission, and forever if, forany reason whatsoever, this settlement is not approved by theCommission, except with the written consent of Staff and Jivraj,or as may be required by law.

44.Any obligations of confidentiality shall terminate upon approvalof this settlement by the Commission.

IX.EXECUTION OF SETTLEMENT AGREEMENT

45.This Settlement Agreement may be signed in one or more counterpartswhich together shall constitute a binding agreement.

46.A facsimile copy of any signature shall be as effective as anoriginal signature.

December17, 2001.

______________________________________________________________

WITNESSALKARIM JIVRAJ




DATEDthis 17th day of December, 2001.

STAFF OF THE

ONTARIO SECURITIES COMMISSION




(Per)_______________________________

Michael Watson

Director, Enforcement Branch



Schedule "A"

INTHE MATTER OF THE SECURITIES ACT

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


AND


INTHE MATTER OF

ALKARIMJIVRAJ

ORDER

WHEREASon December 17, 2001, the Ontario Securities Commission (the"Commission") issued a Notice of Hearing pursuant to sections127(1) and 127.1 of the Securities Act, R.S.O. 1990 c. S.5,as amended (the "Act") in respect of Alkarim Jivraj ("Jivraj");

ANDWHEREAS Alkarim Jivraj ("Jivraj") entered into a settlementagreement dated December 17, 2001 (the "Settlement Agreement")in which it agreed to a proposed settlement of the proceeding,subject to the approval of the Commission;

ANDUPON reviewing the Settlement Agreement and the Statementof Allegations of Staff of the Commission ("Staff"), and uponhearing submissions from counsel for Jivraj and from Staff;

ANDWHEREAS the Commission is of the opinion that it is inthe public interest to make this Order;

ITIS HEREBY ORDERED THAT:

1.the Settlement Agreement dated December 17, 2001, attached tothis Order, is hereby approved;

2.pursuant to subsection 127(1)(6) of the Act, Jivraj is herebyreprimanded; and

3.pursuant to subsection 127.1(2)(b) of the Act, at the time ofapproval of this settlement, Jivraj is ordered to pay $5,000 tothe Commission in respect of a portion of the Commission's costswith respect to this matter.

December19, 2001.