Subsection 74(1) -- relief from the registration requirement under section 25 of the Act in respect of first trades in common shares of Acquiring Company received by debentureholders of Target Company in accordance with a plan of arrangement pursuant to section 182 of the Business Corporations Act (Ontario).
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 74(1).
Business Corporations Act, R.S.O. 1990, c. B.16, as am., s. 182.
IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, CHAPTER S.5. AS AMENDED (the "Act")
IN THE MATTER OF
SYNX PHARMA INC.
(Subsection 74(1) of the Act)
UPON the application of Nanogen, Inc. ("Nanogen") and SynX Pharma Inc. ("SynX") (collectively the "Applicants") to the Ontario Securities Commission (the "Commission") for a ruling pursuant to subsection 74(1) of the Act that certain trades in shares in the capital stock of Nanogen (the "Nanogen Common Shares"), to be made in connection with a Share Dealing Service (as described below) shall not be subject to section 25 of the Act;
AND UPON considering the application and the recommendation of the staff of the Commission;
AND UPON the Applicants have represented to the Commission that:
1. SynX is a company incorporated under the Business Corporations Act (Ontario) (the "OBCA"). The common shares in the capital of SynX (the "SynX Common Shares") are listed on the Toronto Stock Exchange (the "TSX") under the symbol "SYY".
2. SynX's authorized share capital consists of an unlimited number of SynX Common Shares and an unlimited number of non-voting preference shares, issuable in series. As of February 9, 2004, the issued and outstanding share capital of SynX consisted of 10,267,389 SynX Common Shares and no preference shares. As of February 9, 2004, 1,958,168 options to purchase SynX Common Shares (the "SynX Options"), 1,725,000 warrants to purchase SynX Common Shares (the "SynX Warrants"), secured subordinated debentures (the "SynX Debentures") in the aggregate principal amount of $3,450,000 and no other securities of SynX were issued and outstanding.
3. Nanogen is a Delaware company based in California, the common stock of which is listed for trading on the Nasdaq National Market ("Nasdaq"), under the symbol "NGEN". Nanogen is currently subject to the United States Securities Exchange Act of 1934, as amended.
4. Nanogen's authorized share capital consists of 50,000,000 Nanogen Common Shares and 5,000,000 shares of convertible preferred stock. As of March 3, 2004, the issued and outstanding share capital of Nanogen consisted of 26,669,215 Nanogen Common Shares and no convertible preferred stock. In addition, there are 1,834,565 issued and outstanding warrants to purchase Nanogen Common Shares.
5. A plan of arrangement (the "Arrangement") involving SynX, Nanogen, all of the holders of SynX Common Shares, all of the holders of SynX Debentures, all of the holders of SynX Options and all of the holders of SynX Warrants will be effected pursuant to section 182 of the OBCA.
6. Under the Arrangement, each SynX Option will represent an option to purchase the number of Nanogen Common Shares determined by multiplying the number of SynX Common Shares subject to such SynX Option by an exchange ratio determined pursuant to the Arrangement (the "Exchange Ratio"), subject to rounding.
7. Under the Arrangement, each SynX Warrant will represent a warrant to purchase the number of Nanogen Common Shares determined by multiplying the number of SynX Common Shares subject to such SynX Warrant by the Exchange Ratio, subject to rounding.
8. Upon the Arrangement becoming effective, Nanogen will acquire each of the outstanding SynX Common Shares (except those held by dissenting shareholders) for approximately $1.45 in Nanogen Common Shares.
9. Upon the Arrangement becoming effective, Nanogen will acquire all of the outstanding SynX Debentures for that number of Nanogen Common Shares equal to the aggregate principal amount of SynX Debentures expressed in United States dollars divided by the average of the best bid price and best ask price of Nanogen Common Shares on the Nasdaq Stock Market at 10:00 am EST on the day the Transaction closes.
10. As of March 17, 2004, there were 14 registered holders of SynX Debentures (the "SynX Debentureholders"); 11 of which are resident in Ontario.
11. It is expected that certain of the SynX Debentureholders will use the services of The Seidler Companies Incorporated ("Seidler") in connection with the consideration that they will receive pursuant to the Arrangement (the "Share Dealing Service"). As such, Seidler's role may include:
(a) opening and maintaining brokerage accounts on behalf of the SynX Debentureholders only with respect to the Nanogen Common Shares issued to the SynX Debentureholders pursuant to the Arrangement;
(b) holding in such brokerage accounts the Nanogen Common Shares on behalf of the SynX Debentureholders; and
(c) facilitating the resale of Nanogen Common Shares outside of Canada on the Nasdaq National Market, converting the sale proceeds from U.S. dollars to Canadian dollars, and distributing to the SynX Debentureholders proceeds of the resale of such Nanogen Common Shares.
12. The SynX Debentureholders' brokerage accounts with Seidler will be closed after the proceeds of resale have been distributed.
13. Based on information available to the Applicants at the time of this ruling, trades of Nanogen Common Shares by former SynX Debentureholders eligible to use the Share Dealing Service, will constitute approximately 7.923% of the average daily trading volume for Nanogen Common Shares on Nasdaq for the twenty trading day period ending on April 8, 2004.
14. Seidler is a corporation incorporated under the laws of Delaware, with its head office located at 5156 South Figueroa St., Suite 1100, Los Angeles, California. Seidler is an investment banking and financial services firm which is registered as a broker-dealer with the New York Stock Exchange, Inc. Seidler is not registered to trade securities in any capacity under the laws of any Canadian jurisdiction.
15. SynX Debentureholder accounts established in order to implement the Share Dealing Service will benefit from Securities Investor Protection Corporation coverage.
16. It is expected that the SynX Common Shares will be delisted from the TSX on or after the effective time of the Arrangement.
17. Nanogen will apply to Nasdaq to list the Nanogen Common Shares to be issued pursuant to the Arrangement and issuable upon exercise of the SynX Options and SynX Warrants.
18. In order for the SynX Debentureholders to receive substantially the same consideration upon purchase of the SynX Debentures pursuant to the Arrangement as they would have received upon redemption of the SynX Debentures pursuant to the Trust Indenture, the consideration for purchase of the SynX Debentures pursuant to the Arrangement is equal to the aggregate principal amount of SynX Debentures expressed in United States dollars divided by the average of the best bid price and best ask price of Nanogen Common Shares on the Nasdaq Stock Market at 10:00 am EST on the day the Transaction closes.
19. Seidler will facilitate the sale, in the United States, of the Nanogen Common Shares acquired pursuant to the Arrangement in connection with the SynX Debentures for certain of the SynX Debentureholders who intend to sell such Nanogen Common Shares as soon as practically possible on the Nasdaq National Market through the services of Seidler (the "Share Dealing Service").
UPON the Commission being satisfied that to do so would not be prejudicial to the public interest.
IT IS RULED, pursuant to subsection 74(1) of the Act that section 25 of the Act does not apply to trades in Nanogen Common Shares made by Seidler on behalf of former SynX Debentureholders, made pursuant to the Share Dealing Service, provided that:
(a) at the time the Share Dealing Service is provided to a SynX Debentureholder, Seidler has received a representation that the SynX Debentureholder is an "accredited investor" as that term is defined in section 1.1 of Commission Rule 45-501; and
(b) Seidler conducts know your client and suitability reviews in accordance with the securities laws of the United States, the rules of the National Association of Securities Dealers and the rules of the New York Stock Exchange, for each SynX Debentureholder participating in the Share Dealing Service.
April 16, 2004.
"Paul M. Moore"
"Susan Wolburgh Jenah"