Leisure Canada Inc. - s. 9.1 of Rule 61-501

Decision

Headnote

Rule 61-501 - Related partytransactions - Relief from minority approval requirement grantedin connection with proposed issuance of shares and warrantsby a TSX Venture Exchange issuer to a significant shareholder.A majority of the minority shareholders have expressed supportfor the transaction and will consent to the transaction in writing.

Rule Cited

Rule 61-501 - Insider Bids,Issuer Bids, Going Private Transactions and Related Party Transactions,ss. 5.5, 5.6(17), 5.7, and 9.1.

IN THE MATTER OF

ONTARIO SECURITIES COMMISSION

RULE 61-501 ("Rule 61-501")

AND

IN THE MATTER OF

LEISURE CANADA INC.

 

DECISION

(section 9.1 of Rule 61-501)

UPON the applicationof Leisure Canada Inc. ("Leisure Canada") to the Directorof the Ontario Securities Commission pursuant to section 9.1of Rule 61-501 for a decision exempting Leisure Canada fromthe minority approval requirement set forth in section 5.7 ofRule 61-501 in connection with a proposed related party transactionwith International Capital Inc. ("ICI");

AND UPON consideringthe application and the recommendation of staff of the Commission;

AND UPON Leisure Canadahaving represented to the Director as follows:

1. Leisure Canada is a corporationexisting under the laws of the Province of Ontario and isa reporting issuer under the Securities Act (Ontario).

2. The authorized capitalof Leisure Canada consists of an unlimited number of ClassA shares (the "Shares"), an unlimited number ofClass B shares, and an unlimited number of Class C shares,of which there are currently 33,973,988 Shares and no ClassB or Class C shares outstanding. The Shares are listed onthe TSX Venture Exchange.

3. Leisure Canada has reachedagreement with ICI with respect to a private placement (the"Transaction") of 10,000,000 units of Leisure Canadaat a price of US$0.4889 (approximately C$0.75) per unit forgross proceeds of US$4,889,497 (approximately C$7,500,000).Each unit will consist of one Share and one non-transferableshare purchase warrant, where each warrant entitles the holderto purchase a Share for a period of three years at a priceof US$0.6519 (approximately C$1.00).

4. Leisure Canada disclosedthe details of the Transaction in a press release and in materialchange reports.

5. ICI is a "relatedparty" to Leisure Canada in accordance with the definitioncontained in Rule 61-501. ICI currently holds 7,705,431 Sharesrepresenting approximately 22.7% of the outstanding Shares.In addition, ICI is owned by a trust, the beneficiaries ofwhich are Walter H. Berukoff, the Chairman and Chief ExecutiveOfficer of Leisure Canada, or persons related to Mr. Berukoff.Consequently, the Transaction is a related party transaction.

6. The board of directorsof Leisure Canada appointed an independent committee consistingof two independent directors. The independent committee willreview the Transaction, with the assistance of outside counselif required, and report back to the board of directors atits next meeting expected to be held in late August, 2002.Assuming the independent committee recommends approval ofthe Transaction, the entire board of directors will be askedto consider and, if thought appropriate, approve the Transaction.

7. The Transaction is exemptfrom the valuation requirement contained in section 5.5 ofRule 61-501 pursuant to paragraph 5.6(17) and is subject toa number of conditions including, without limitation, theapproval of the Transaction by the TSX Venture Exchange.

8. It is expected that shareholdersowning approximately 38.9% of the Shares and who deal at arm'slength with ICI (the "Outside Shareholders") willprovide their written consent to the Transaction. None ofthe Outside Shareholders are participating in the Transaction.Since the Outside Shareholders own more than 50% of the Sharesheld by all minority shareholders, minority approval of theTransaction will be received and, accordingly, approval ofthe Transaction by a majority of the minority shareholdersat a meeting would be a foregone conclusion.

AND UPON the Directorbeing satisfied that to do so would not be prejudicial to thepublic interest;

IT IS DECIDED by theDirector pursuant to section 9.1 of Rule 61-501 that LeisureCanada shall not be subject to the minority approval requirementin section 5.7 of Rule 61-501 in connection with the Transaction,provided that:

a. the Outside Shareholdersconsent in writing to the Transaction, which consent mustcontain an acknowledgement that they are aware of the termsof the Transaction and must be filed with the Director; and

b. Leisure Canada complieswith the other applicable provisions of Rule 61-501.

July 19, 2002.

"Ralph Shay"