Securities Law & Instruments

Headnote

Section 144 - partial revocation of cease trade order to permit issuer to complete the sale of two properties in consideration of, among other things, common shares of the issuer for cancellation.

Applicable Ontario Statutory Provisions

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

IN THE MATTER OF

THE SECURITIES ACT

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

AND

IN THE MATTER OF

VITAL RETIREMENT LIVING INC.

 

ORDER

(Section 144)

WHEREAS the securities of Vital Retirement Living Inc. (the Applicant) are subject to a cease trade order issued by the Ontario Securities Commission (the Commission) on May 23, 2003 (the Cease Trade Order);

AND WHEREAS the Applicant has applied to the Commission pursuant to Section 144 of the Act (the Application) for a partial revocation of the Cease Trade Order;

AND WHEREAS the Applicant has represented to the Commission that:

1. The Applicant was incorporated on March 4, 1998 under the Business Corporations Act (Alberta).

2. The common shares of the Applicant began trading on the Alberta Stock Exchange on October 6, 1998. As a result of the consolidation of Canadian junior stock exchanges, the Applicant's common shares were listed and traded on the TSX Venture Exchange until the Cease Trade Order was issued on May 23, 2003.

3. The Applicant's principal business since its inception has been the development and management of retirement home facilities. The Applicant's most significant asset is a 100 bed retirement home, known as Brookside Manor. The Applicant also owns two smaller retirement homes, Tudhope Manor and Lafontaine Terrance (the Homes), and a 33% interest in a retirement home management company based in Seattle, Washington, that operates over 30 retirement facilities.

4. Beginning in early 2000, the Applicant experienced a number of business reversals that contributed to the deterioration of its financial condition. By early 2003, the Applicant was unable to complete its audit for the year ended December 31, 2002 as a result of uncertainty as to the carrying value of the Homes and a lack of liquid financial resources to complete the audit. The Cease Trade Order was issued by the Commission on May 23, 2003 as a result of the Applicant's failure to file financial statements for the year ended December 31, 2002.

5. Since the date of the Cease Trade Order, the Board of Directors of the Applicant has been working to reduce operating costs and rationalize its assets in an attempt to preserve shareholder value.

6. As part of its efforts to improve its financial position, the Applicant is pursuing a proposed transaction (the Transaction) whereby it will sell the Homes to an entity controlled by Mel Dancy (Dancy), a related party of the Applicant. At closing Dancy will: (1) pay to the Applicant $67,000 in cash; (2) pay out mortgage debt on the Homes in the amount of approximately $2,237,000; and (3) deliver approximately 7,257,000 common shares of the Applicant to the Applicant for cancellation.

7. The acquisition by the Applicant of 7,257,000 common shares of its own issue will constitute a "trade" under applicable securities legislation and, as such, the Transaction cannot be completed without a partial revocation of the Cease Trade Order.

8. The acquisition of the 7,257,000 common shares by the Applicant will also constitute an "issuer bid" under Subsection 89(1) of the Act. The Applicant has received exemptive relief from the issuer bid provisions pursuant to an order made by the Commission dated October 8, 2004.

9. The Transaction constitutes a "related party transaction" under Commission Rule 61-501 -- Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions (Rule 61-501). The Board of Directors of the Applicant, the members of which are each independent pursuant to section 7.1 of Rule 61-501, has determined that the Applicant is entitled to rely on the valuation exemption in subsection 5.5(8) and the minority approval exemption in subsection 5.7(1)(6) of Rule 61-501 on the basis that the Applicant is in serious financial difficulty, the Transaction is designed to improve the financial position of the Applicant and the terms of the Transaction are reasonable in the circumstances.

10. The Board of Directors of the Applicant has unanimously concluded that the Transaction represents the best available option for the Applicant in maximizing shareholder value for the public shareholders. The Homes have been listed for sale for an extended period of time without any other satisfactory offers being received.

11. In addition to providing cash resources adequate to operate the business of the Applicant until such time as the Applicant can obtain income from its other assets, the Transaction will remove the uncertainty associated with the carrying value of the Homes on the balance sheet of the Applicant.

12. The Applicant will reserve a portion of the cash proceeds of the Transaction sufficient to complete, file and deliver the financial statements and continuous disclosure documents that are in arrears. Once the Applicant had filed all documents which are in arrears, it will apply to the Commission for a full revocation of the Cease Trade Order.

AND WHEREAS the Director is 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 Cease Trade Order be and is hereby partially revoked solely to permit the trades and acts in furtherance of trades associated with the acquisition by the Applicant of approximately 7,257,000 common shares of the Applicant for cancellation pursuant to the Transaction, provided that:

(i) the Applicant files and delivers the financial statements and continuous disclosure documents that are in arrears and applies to the Commission for a full revocation of the Cease Trade Order by April 30, 2005; and

(ii) the Applicant files a material change report containing the information required by section 5.2 of Commission Rule 61-501 as soon as practicable following the completion of the Transaction, and in any event within 10 days.

November 9, 2004.

"Erez Blumberger"