CEM International Inc. - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications -- relief from take-over bid requirements -- no statutory exemption are available in the event of share transfer to settle a litigation -- no cash consideration is paid -- no other shareholders since there are not involved in the litigation --upon the share transfer the litigation will settle.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 95-103, 104(2)(c).
October 6, 2006
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
THE PROVINCES OF
ONTARIO AND QUÉBEC (the Jurisdictions)
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
CEM INTERNATIONAL INC. (the Filer or CEM)
MRRS DECISION DOCUMENT
Background
The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for :
• The Filer be exempted from the take-over bid requirements contained in the Legislation in connection with the acquisition by the Filer of an aggregate 2,877,909 common shares in the share capital of Mindready Solutions Inc. (Mindready) from UTT Pharma Inc. (Pharma), 4130944 Canada Inc. (Canada Inc.), Claude Dumoulin, Stephen Mitchell, Neils Fogt and Anthony Orlando (Messrs. Dumoulin, Mitchell, Fogt and Orlando are referred to as the Management Holders) (the Requested Relief).
Under the Mutual Reliance Review System for Exemptive Relief Application
a) The Autorité des marches financiers is the principal regulator for this application, and
b) This MRRS decision document evidences the decision of each Decision Maker.
Interpretation
Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.
Representations
This decision is based on the following facts represented by the Filer :
1. Mindready is incorporated under the Canada Business Corporations Act, with its head office situated at 2800 Marie-Curie Avenue, Montreal Quebec, H4S 2C2. Mindready is a reporting issuer under the Legislation.
2. Mindready's authorized share capital consists of an unlimited number of common shares. There are currently 28,849,330 outstanding shares of Mindready.
3. Mindready's common shares are listed on the Toronto Stock Exchange.
4. The Filer is a company incorporated in the State of Delaware with its head office situated at Terminal Tower 50 Public Square, Suite 2700, Cleveland, Ohio 44113 USA,
5. The Filer is not a reporting issuer under the Legislation.
6. The Filer currently owns 5,472,600 common shares of Mindready.
7. The Filer is owned by Morgenthaler Partners VI L.P. (Morgenthaler).
8. On November 15, 2005, Mindready, Pharma, Canada Inc., the Filer, the Offenberg Trust and certain other shareholders of UTTC United Tri-Tech Corporation (UTTC) entered into a share purchase agreement, pursuant to which Mindready agreed to purchase all of the outstanding securities of UTTC (the Share Purchase Agreement). As consideration for the purchase of the UTTC securities, Mindready agreed to issue common shares of Mindready and warrants to purchase common shares of Mindready.
9. The transactions contemplated by the Share Purchase Agreement closed on November 30, 2005.
10. On March 23, 2006, Mindready filed an action in Superior Court, Province of Québec, District of Montreal, case number 500-17-030185-063, against the Filer, Morgenthaler, Pharma, Canada Inc., the Offenberg Familly Trust, the Management Holders, Joe Ippoliti, Gilles Charbonneau, John Lutsi and William E. Offenberg (the Mindready Litigation), which was seeking the annulment of the Share Purchase Agreement and the related agreement on the basis that the representations and warranties contained therein were inaccurate.
11. The Filer, John Lutisi, William E. Offenberg, the Offenberg Family Trust and Morgenthaler (the Morgenthaler Releasors) contested the Mindready Litigation. The Morgenthaler Releasors were to issue a counterclaim against Mindready and an action in warranty against the other former shareholders of UTTC for damages, on the basis that any losses suffered by Mindready as a result of the Mindready Litigation were the result of actions undertaken by Joe Ippoliti and other persons under his control and supervision. Joe Ippoliti is the founder of Pharma and owned stock of UTTC through Pharma and Canada Inc. Joe Ippoliti was the President and CEO of UTTC until February 2006. The Filer was prepared to seek damages from Joe Ippoliti, Gilles Charbonneau and the Management Holders.
12. All the parties agreed to settle the Mindready Litigation as well as all other claims related thereto without any admission of liability.
13. In that respect, the parties entered into two (2) settlement agreements i) the Mindready Debt Settlement Agreement and ii) the CEM Share Settlement Agreement on June 22, 2006.
14. Pursuant to the terms and conditions of the CEM Share Settlement Agreement, the Filer agreed to release Joe Ippoliti, Gilles Charbonneau and the Management Holders from any liability to the Filer and Morgenthaler related to the claims described in paragraphs above. In consideration for such release by Morgenthaler, each of Pharma, Canada Inc. and the Management Holders agree to transfer an aggregate of 2,877,909 common shares of Mindready to the Filer.
Decision
Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.
The decision of the Decision Makers under the Legislation is that the Requested Relief is granted.