Maxim Atlantic Corporation - s. 144

Order

Headnote

Section 144 -- application for partial revocation of cease trade order - variation of cease trade order to permit private placement -- variation of cease trade order to permit tax loss disposition.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am. ss. 127. 144.

Applicable Ontario Policies

OSC Policy 57 - 602 Applications for Partial Revocation to Permit a Securityholder to Establish a Tax Loss.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5,

AS AMENDED (the "Act")

AND

IN THE MATTER OF

MAXIM ATLANTIC CORPORATION

 

ORDER

(Section 144 of the Act)

WHEREAS the securities of Maxim Atlantic Corporation ("Maxim") are currently subject to a temporary cease trade order dated May 26, 2004 made pursuant to paragraph 2 of subsection 127 (1) and subsection 127 (5) of the Act, as extended by a further order dated June 7, 2004 made pursuant to subsection 127(8) of the Act (collectively, the "Cease Trade Order"), ordering that trading in any securities of Maxim cease; and

WHEREAS Maxim has made an application to the Commission pursuant to section 144 of the Act (the "Application") for an order varying the Cease Trade Order with respect to (i) the Private Placement (as defined below); and (ii) the disposition by Prudential Assurance Co. Ltd. ("Prudential") of 12,375,906 common shares of Maxim (the "Prudential Shares") solely for the purpose of establishing a tax loss; and

WHEREAS Ontario Securities Commission Policy 57-602 -- Cease Trading Orders -- Applications of Partial Revocation to Permit a Securityholder to Establish a Tax Loss provides that the Commission is prepared to vary an outstanding cease trade order to permit the disposition of securities subject to the cease trade order for the purposes of establishing a tax loss where the Commission is satisfied that the disposition is being made, so far as the securityholder is concerned, solely for the purpose of that securityholder establishing a tax loss and provided that the securityholder provides the purchaser with a copy of the cease trade order and the variation order.

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

AND UPON Maxim having represented to the Commission that:

1. Maxim is a corporation amalgamated under the Business Corporations Act (Ontario) on January 1, 1989;

2. Maxim is a reporting issuer in Ontario and British Columbia;

3. The authorized share capital of Maxim consists of an unlimited number of common shares and Class A Preferred Shares of which 24,819,367 common shares are issued and outstanding;

4. Maxim's common shares were suspended from trading on the Toronto Stock Exchange (the "Exchange") on June 6, 2003 for failure to meet the Exchange's continued listing requirements and Maxim voluntarily delisted from the Exchange on November 18, 2003;

5. The Cease Trade Order was made by the Commission for Maxim's failure to file audited annual financial statements for the year ended December 31, 2003 and interim unaudited financial statements for the three-month period ended March 31, 2004 (collectively, the "Financial Statements");

6. On July 16, 2004, the Executive Director of the British Columbia Securities Commission ordered that all trading in the securities of Maxim cease until (a) Maxim files the required records, including the Financial Statements and MD&A for the period ended March 31, 2004, and (b) the order is revoked;

7. To bring its continuous disclosure records up to date, Maxim proposes to file its audited financial statements for the financial years ended December 31, 2003, 2004 and 2005 and its interim financial statements for the interim periods ending March 31, 2004 through March 31, 2006 (collectively, the "New Financial Statements"). Maxim is awaiting completion of the New Financial Statements and they will be filed on SEDAR when completed;

8. Maxim intends to complete a private placement (the "Private Placement") of unsecured convertible debentures (the "Debentures") for total gross proceeds of not more than $500,000. The Debentures will be convertible into common shares of Maxim at the rate of $0.15 per share at any time after issuance until October 30, 2007. Maxim may issue warrants to Debenture holders to purchase additional common shares of Maxim for $0.30 per share expiring on October 30, 2007. Distribution of the securities will be effected pursuant to National Instrument 45-106. The Private Placement will be completed in compliance with all applicable securities legislation;

9. Maxim will use the proceeds from the Private Placement to complete the audit and filing of the Financial Statements; conduct shareholder meetings; pay legal and accounting professionals and filing fees; and, the balance, if any, will be used for general working capital purposes;

10. Prudential acquired the Prudential Shares prior to the effective date of the Cease Trade Order;

11. As a result of the Cease Trade Order and other circumstances of Maxim, there is no market for the Prudential Shares and Prudential has determined that the Prudential Shares have no value;

12. Prudential will effect the proposed disposition of the Prudential Shares (the "Disposition") solely for the purpose of enabling it to establish a tax loss in respect of such Disposition;

13. Corporate Finance (Bermuda) Limited (the "Purchaser") is a shareholder of Maxim and is a sophisticated purchaser and understands the Prudential Shares have no market value, the nature of the Cease Trade Order and the purpose of the proposed trade;

14. The Purchaser has agreed to purchase the Prudential Shares for a nominal purchase price of $1,237.59 (representing $.001 per share);

15. The Purchaser will purchase and hold the Prudential Shares as principal;

AND UPON the Commission being of the opinion 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 varied solely to permit trades and acts in furtherance of trades in connection with the Private Placement and the Disposition, provided that:

(a) prior to the issuance of the Debentures and the Disposition each potential investor in Debentures and the Purchaser will:

(i) receive a copy of the Cease Trade Order;

(ii) receive a copy of this Order; and

(iii) receive written notice from Maxim and acknowledge that all of Maxim's securities, including the Prudential Shares, the Debentures and any common shares issued upon conversion of the Debentures, will remain subject to the Cease Trade order until it is revoked; and

(b) this Order will terminate on the earlier of:

(i) the later of the closing of the Private Placement and the closing of the Disposition; and

(ii) 120 days from the date hereof.

May 10th, 2006.

"John Hughes"
Manager, Corporate Finance
Ontario Securities Commission