Xinergy Ltd. and Jon E. Nix – s. 144(1)

Order

Headnote

Section 144 -- application for variation of cease trade order -- issuer cease traded due to failure to file certain continuous disclosure documents required by Ontario securities law -- applicant has applied for a variation of the cease trade order to permit the conversion of non-voting shares of issuer to voting common shares of the issuer -- articles of issuer permit the conversion of non-voting shares to voting shares at election of holder at any time without payment of additional consideration -- rights attached to non-voting shares substantially identical to voting shares -- notification of conversion provided to issuer -- partial revocation granted solely to permit conversion.

Applicable Legislative Provisions

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

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED (THE "ACT") AND IN THE MATTER OF XINERGY LTD. AND JON E. NIX (THE "APPLICANT")

ORDER (Section 144(1) of the Act)

WHEREAS the securities of Xinergy Ltd. ("Xinergy") are subject to a temporary cease trade order issued by the Director on April 8, 2015 pursuant to paragraph 2 of subsection 127(1) and subsection 127(5) of the Act, as extended by a further cease trade order issued by the Director on April 20, 2015 pursuant to paragraph 2 of subsection 127(1) of the Act (the "Cease Trade Order"), directing that all trading in securities of Xinergy, whether direct or indirect, cease until further order by the Director;

AND WHEREAS a cease trade order with respect to Xinergy's securities was also issued by The Manitoba Securities Commission ("MSC") on April 9, 2014 and the British Columbia Securities Commission ("BCSC") on April 14, 2015 (the "Additional Cease Trade Orders");

AND WHEREAS Jon E. Nix (the "Applicant"), a shareholder of Xinergy, has made an application to the Commission pursuant to section 144(1) of the Act to vary the Cease Trade Order (the "Application") solely to permit the Conversion (as defined below);

AND WHEREAS the Applicant has represented to the Commission that:

1. Xinergy is a reporting issuer under the securities legislation of the provinces of Ontario, British Columbia, Manitoba and Alberta.

2. The Cease Trade Order and the Additional Cease Trade Orders were issued due to the failure of Xinergy to file its financial statements, management's discussion and analysis, annual information form and certifications of the foregoing filings for the year ended December 31, 2014.

3. The Voting Shares (as defined below) were previously listed for trading on the Toronto Stock Exchange (the "TSX"). On April 7, 2015, trading in the Voting Shares on the TSX was temporarily suspended by Investment Industry Regulatory Organization of Canada and the TSX commenced a delisting review in respect of the Voting Shares. On April 13, 2015, the TSX announced that it had determined to delist the Voting Shares as of the close of business on May 12, 2015 for Xinergy's failure to meet the continued listing requirements of the TSX and that the Voting Shares would remain suspended from trading.

4. On April 6, 2015, Xinergy issued a news release announcing, among other things, that Xinergy and twenty-five of its subsidiaries filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Western District of Virginia, Roanoke Division (the "US Bankruptcy Court").

5. The Applicant is the registered holder and beneficial owner of: (i) 4,592,563 voting common shares in the capital of Xinergy ("Voting Shares") representing, to the best of the Applicant's knowledge, approximately 7.88% of the issued and outstanding Voting Shares; and (ii) 7,467,541 non-voting common shares in the capital of Xinergy ("Non-Voting Shares"), representing, to the best of the Applicant's knowledge, 100% of the issued and outstanding Non-Voting Shares of Xinergy.

6. Pursuant to the articles of Xinergy (the "Articles"), at the election of the holder of any Non-Voting Shares, such Non-Voting Shares may be converted into Voting Shares, at any time, and without the payment of additional consideration by such holder, on the basis of one Voting Share for one Non-Voting Share. If all of the Non-Voting Shares held by the Applicant were converted, the Applicant would hold, to the best of the Applicant's knowledge, approximately 18.3% of the issued and outstanding Voting Shares.

7. The Articles provide that each Voting Share carries the right to one vote at a meeting of the shareholders of Xinergy and that the Non-Voting Shares do not carry any voting rights except as required by law. Other than the foregoing, the rights attached to the Voting Shares and Non-Voting Shares are substantially identical, including that holders of Non-Voting Shares: (i) are entitled to receive dividends if and when declared, provided the same benefit per share is conferred on the holders of Voting Shares; and (ii) in the event of liquidation, dissolution or winding up of Xinergy, share equally in the assets of Xinergy as are distributable to the holders of Voting Shares.

8. On April 16, 2015, the Applicant provided notice to Xinergy of his election to convert all of his Non-Voting Shares into Voting Shares in accordance with the Articles (the "Conversion") and submitted a requisition pursuant to Section 105 of the Business Corporations Act (Ontario) (the "OBCA") requisitioning the directors of Xinergy (the "Directors") to call a meeting of shareholders of Xinergy for the purpose of, among other things, the removal from office of certain Directors and the appointment to the board of directors of Xinergy of additional individuals identified by the Applicant (the "Requisitioned Meeting").

9. On April 17, 2015, Xinergy's legal counsel advised the Applicant that, as a result of the Cease Trade Order and Additional Cease Trade Orders, Xinergy would not effect the Conversion and would not issue the Applicant the Voting Shares issuable to the Applicant in accordance with the Articles.

10. On May 7, 2015, legal counsel to Xinergy delivered correspondence to the Applicant's legal counsel advising, among other things, that Xinergy did not intend to call the Requisitioned Meeting.

11. Pursuant to subsection 105(4) of the OBCA, the Applicant is entitled to call the Requisitioned Meeting. The Requisitioned Meeting was called by the Applicant and is expected to be held on June 19, 2015. The record date for the Requisitioned Meeting is May 20, 2015.

12. The purpose of the Conversion is to ensure that the Applicant may exercise all voting rights that will attach to the Voting Shares at the Requisitioned Meeting or at any other proceeding where the holders of Voting Shares are entitled to vote such shares.

13. The Applicant has complied with all applicable insider filing requirements and all early warning reporting requirements pursuant to National Instrument 55-104 Insider Reporting Requirements and Exemptions, National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issuers and the Act.

14. Pursuant to an order dated May 8, 2015, the US Bankruptcy Court has ordered, among other things, that certain transfers of Voting Shares and Non-Voting Shares shall be restricted in order to preserve Xinergy's ability to utilize net operating loss carryforwards and certain other tax attributes for U.S. federal income tax purposes (the "Trading Limitation Order"). As the Applicant is the beneficial owner of the Non-Voting Shares that are the subject of the proposed Conversion and will be the beneficial owner of the Voting Shares issued in connection with the Conversion, the Conversion will not breach the Trading Limitation Order.

15. The Applicant has provided notification to Xinergy of the filing of this Application. A copy of this application has also been filed with the US Bankruptcy Court.

16. The Conversion will be exempt from the prospectus requirement pursuant to subsection 2.42(1) of National Instrument 45-106 Prospectus and Registration Exemptions.

AND UPON the Director being satisfied that it is not prejudicial to the public interest to vary the Cease Trade Order under section 144(1) of the Act;

IT IS ORDERED that, pursuant to section 144(1) of the Act, the Cease Trade Order is hereby partially revoked solely to permit the Conversion provided that the Cease Trade Order shall otherwise remain in effect, unamended, except as expressly provided in this order.

DATED this 19th day of May, 2015.

"Naizam Kanji"
Director,
Office of Mergers & Acquisitions