Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications - Exemption granted from registration andprospectus requirements in connection with issuance and subsequentconversion of convertible debentures by wholly owned subsidiaryof reporting issuer. Convertible debentures issued in exchangefor convertible debentures of parent reporting issuer whichwere qualified by a prospectus. Convertible debentures of subsidiaryissued to avoid U.K. withholding taxes. Convertible debenturesof subsidiary to be guaranteed by parent reporting issuer andthe economic equivalent of convertible debentures.

Applicable Ontario Statutes

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53, and 74(1).

Applicable Ontario Rules

Multilateral Instrument 45-102 - Resale of Securities,ss. 2.10.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ONTARIO AND BRITISH COLUMBIA

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

NAMIBIAN MINERALS CORPORATIONAND NAMIBIAN (GIBRALTAR) LIMITED

 

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the Decision Maker") in each ofOntario and British Columbia (the "Jurisdictions")has received an application from Namibian Minerals Corporation("Namco") for a decision pursuant to the securitieslegislation of the Jurisdictions (the "Legislation")that the registration and prospectus requirements under theLegislation shall not apply to certain trades as described herein;

AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System")the Ontario Securities Commission is the principal regulatorfor this application;

AND WHEREAS Namco has represented tothe Decision Makers that:

1. Namco is incorporated under the laws ofthe Yukon Territory and is a publicly traded company. Thecommon shares (the "Common Shares") of Namco arelisted or quoted for trading on The Toronto Stock Exchange(the "TSX"), the NASDAQ over-the-counter bulletinboard system ("NASDAQ OTC") and the Namibian StockExchange (the "NSX"). Namco is a reporting issuereach of the Jurisdictions and is not in default of any requirementsunder the Legislation. Namco is a qualifying issuer underMultilateral Instrument 45-102 Resale of Securities ("MI45-102").

2. Namco (Gibraltar) Limited ("NamcoGibraltar") is a wholly-owned subsidiary of Namco andis incorporated pursuant to the laws of Gibraltar. Namco Gibraltardoes not carry on any business and Namco has no intentionthat Namco Gibraltar will carry on any business in the future.As at December 31, 2001, Namco Gibraltar's sole asset consistedof a loan due from Namco in the amount of US$674,800 and theonly material indebtedness of Namco Gibraltar is pursuantto certain convertible debentures in respect of which approximatelyUS$1,550,000 in principal amount (for which interest is payableannually on December 4, 2001 at 8% per annum). These convertibledebentures are guaranteed by Namco.

3. On March 23, 2001, Namco completed thesale of 9,475,758 special warrants and US$6,273,000 in principalamount of special notes (the "Tranche 1 Special Notes").This private placement was conducted with the assistance,on a best efforts basis, of Canaccord Capital Corporation(the "Agent") pursuant to an agency agreement datedas of March 21, 2001 (the "Agency Agreement").

4. The Tranche 1 Special Notes entitled theholders thereof to acquire, subject to adjustment in certaincircumstances, without additional payment, an equivalent principalamount of convertible debentures (the "Tranche 1 ConvertibleDebentures") and 1,515.15 warrants (the "Tranche1 Warrants") for each US$1,000 in principal amount ofTranche 1 Special Notes held by the holders. The Tranche 1Convertible Debentures and the Tranche 1 Warrants underlyingthe Tranche 1 Special Notes were issued under a prospectusfiled in Ontario and British Columbia for which a receiptwas obtained on June 20, 2001 (the "Prospectus").

5. Pursuant to a supplemental trust indenturedated February 25, 2002, the terms of the Tranche 1 ConvertibleDebentures were amended, by special resolution of the holdersof the Tranche 1 Convertible Debentures passed in accordancewith the trust indenture governing those debentures, as follows:

(a) each US$1,000 in principal amount ofTranche 1 Convertible Debentures now entitles the holderthereof to receive, upon conversion, at no additional cost,subject to adjustment in certain circumstances, Common Sharesat a conversion price of US$0.22 each on or before September23, 2008; and

(b) accrued interest on the Tranche 1 ConvertibleDebentures is now convertible into Common Shares from timeto time at a conversion price equal to a weighted averagemarket price of the Common Shares prior to conversion.

6. The Common Shares issuable pursuant tothe Tranche 1 Convertible Debentures are referred to hereinas the "Underlying Tranche 1 Common Shares".

7. On April 30, 2001, Namco completed thesale of US$2,600,000 in principal amount of special notesof Namco (the "Tranche 2 Special Notes"). This privateplacement was also conducted with the assistance, on a bestefforts basis, of the Agent pursuant to the Agency Agreement.

8. The Tranche 2 Special Notes entitled theholders thereof to acquire, subject to adjustment in certaincircumstances, without additional payment, an equivalent principalamount of convertible debentures (the "Tranche 2 ConvertibleDebentures") and 1,515.15 common share purchase warrantsof Namco (the "Tranche 2 Warrants") for each US$1,000in principal amount of Tranche 2 Special Notes. The Tranche2 Convertible Debentures and the Tranche 2 Warrants underlyingthe Tranche 2 Special Notes were also issued under the Prospectus.

9. Pursuant to a supplemental trust indenturedated February 25, 2002, the terms of the Tranche 2 ConvertibleDebentures were amended, by special resolution of the holdersof the Tranche 2 Convertible Debentures passed in accordancewith the trust indenture governing those debentures, as follows:

(a) each US$1,000 in principal amount ofTranche 2 Convertible Debentures now entitles the holderthereof to receive, upon conversion, at no additional cost,subject to adjustment in certain circumstances, Common Sharesat a conversion price of US$0.22 each on or before October30, 2008; and

(b) accrued interest on the Tranche 2 ConvertibleDebentures is now convertible into Common Shares from timeto time at a conversion price equal to a weighted averagemarket price of the Common Shares prior to conversion.

10. The Common Shares issuable pursuant tothe Tranche 2 Convertible Debentures and the Tranche 2 Warrantsare referred to herein as the "Underlying Tranche 2 CommonShares".

11. In order to implement a more efficientcapital structure for Namco, Namco wishes to transfer thefull legal obligations in respect of the Tranche 1 ConvertibleDebentures and the Tranche 2 Convertible Debentures to NamcoGibraltar. Pursuant to the terms of the trust indentures underlyingthe Tranche 1 Convertible Debentures and the Tranche 2 ConvertibleDebentures (collectively, the "Debt Indentures"),Namco has the right to transfer its obligations in respectof the Debt Indentures to its wholly-owned subsidiary NamcoGibraltar (the "Convertible Debenture Transfer"),provided that Namco agrees to guarantee the obligations beingassumed by Namco Gibraltar.

12. The Convertible Debenture Transfer willbe implemented as follows:

(a) Namco Gibraltar will issue a first trancheof convertible debentures to replace the Tranche 1 ConvertibleDebentures (the "Tranche 1 Gibraltar Convertible Debentures"),such that the terms of the Tranche 1 Gibraltar ConvertibleDebentures will be substantially equivalent to the termsof the Tranche 1 Convertible Debentures and will be guaranteedby Namco; and

(b) Namco Gibraltar will issue a secondtranche of convertible debentures to replace the Tranche2 Convertible Debentures (the "Tranche 2 GibraltarConvertible Debentures"), such that the terms of theTranche 2 Gibraltar Convertible Debentures will be substantiallyequivalent to the terms of the Tranche 2 Convertible Debenturesand will be guaranteed by Namco.

13. The Prospectus included a descriptionof the terms of the Tranche 1 Convertible Debentures and theTranche 2 Convertible Debenture which permit Namco to transferthose obligations to its wholly-owned subsidiary Namco Gibraltar,and a description of the terms of the Tranche 1 GibraltarConvertible Debentures and the Tranche 2 Gibraltar ConvertibleDebentures.

14. The following trades will occur in connectionwith, or may occur following, the Convertible Debenture Transfer:

(a) the issuance of the Tranche 1 GibraltarConvertible Debentures to holders of the Tranche 1 ConvertibleDebentures in exchange for the Tranche 1 Convertible Debentures;

(b) the issuance of the Tranche 2 GibraltarConvertible Debentures to holders of the Tranche 2 ConvertibleDebentures in exchange for the Tranche 2 Convertible Debentures;

(c) first trades in respect of the Tranche1 Gibraltar Convertible Debentures and the Tranche 2 GibraltarConvertible Debentures following a Convertible DebentureTransfer;

(d) the distribution of the Common Sharesissuable upon exercise of the Tranche 1 Gibraltar ConvertibleDebentures; and

(e) the distribution of the Common Sharesissuable upon exercise of the Tranche 2 Gibraltar ConvertibleDebentures;

(collectively, the "Gibraltar ConvertibleDebenture Trades").

AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers underthe Legislation is that the registration and prospectus requirementsin the Legislation shall not apply to the Gibraltar ConvertibleDebenture Trades, provided that section 2.6 of MI 45-102 shallnot apply to the first trades in Common Shares issued upon conversionof the Tranche 1 and Tranche 2 Gibraltar Convertible Debenturesif the conditions in section 2.10 of MI 45-102 are satisfied.

October 31, 2002.

"Theresa McLeod"                    "K.D.Adams"