OF BRITISH IN BANKRUPTCY AND INSOLVENCY OF THE PROPOSAL OF

Estate no. 226843
Court No. 226843IVA02
IN THE SUPREME COURT OF BRITISH COLUMBIA
IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE PROPOSAL OF
439288 B.C. Ltd.
REPORT OF THE INTERIM RECEIVER
INDEX AND LIST OF APPENDICES
Section
Page/Appendix
9
Report
Appendices
Trustee's Report to Creditors in the Proposal
A
Statement of Fee of the Interim Receiver
B
Statement of Fee of Fraser Milner Casgrain LLP
C
Statement of Fee of Cook Roberts
D
Interim Receiver's Statement of Receipts and Disbursements
for the period May 9, 2002 to August 15, 2002
E
Estate No. 226843
Court No. 2268431'" A02
IN THE MATTER OF THE PROPOSAL OF
439288 B.C. LTD.
AN INSOLVENT PERSON
REPORT OF THE INTERIM RECEIVER TO COURT
BACKGROUND
1.1
On April 30, 2002, the British Columbia Financial Institutions Commission
("FICOM") issued an order against 439288 B .C. Ltd. (the "Company") freezing
its assets together with its books and records. FICOM further ordered the
Company to cease receiving money from investors.
1.2
On May 9, 2002, the Company filed a Notice of Intention to File a Proposal. As
Trustee under that Notice of Intention, PricewaterhouseCoopers Inc. applied to
the Court to be appointed Interim Receiver pursuant to Section 47.1 of the
Bankruptcy and Insolvency Act and Section 39 of the Law and Equity Act. The
Court granted the order sought, effectively giving the Interim Receiver
expanded powers of custody and control of the assets and records of the
Company.
1.3
The Company filed a Proposal to its creditors of July 22, 2002. An amended
version of that Proposal was considered at a meeting of the Company's creditors
on August 9, 2002. The Amended proposal was approved by the creditors at
this meeting.
1.4
On August 28, 2002, the Court approved the Amended Proposal.
1.5
The purpose of this report is to:
I
•
Advise the Court of the activities of the Interim Receiver for May 9, 2002 to
August 15, 2002;
•
Advise the Court of our intended future actions;
Seek approval of the professional fees of PricewaterhouseCoopers Inc.,
Fraser Milner Casgrain LLP, and Cook Roberts for the period from
May 9, 2002 to July 31, 2002; and
1
Seek approval of the activities of the Interim Receiver, including its
Statement of Receipts and Disbursements for the period from May 9, 2002
to August 15, 2002.
2
ACTIVITIES OF THE INTERIM RECEIVER TO DATE
2.1 Cash and Banking
2.1.1
Subsequent to May 9, 2002, new bank accounts in the name of the Interim
Receiver were established. The Interim Receiver has controlled all post
May 9, 2002 cash receipts and cash disbursements.
2.1.2
Transfers of cash balances from existing accounts were coordinated with
the lifting of the FICOM freeze order. Issues of set-off with two financial
institutions had to be resolved with the advice of counsel.
2.1.3
Bank transfer or auto-debit payment of borrower loan payments to the
Company were re-directed to the Interim Receiver accounts.
2.1.4
Automatic payment arrangements were established for mortgages, and
recurring lease payments.
2.2 Administrative
2.2.1
Suitable office space was located, furnished and secured in Burns Lake for
the staff of the Interim Receiver. This office remains active to date.
2.2.2
The Interim Receiver arranged for the continued employment of Glenn
Anderson and Jarrett Anderson, both former employees of the Company,
to assist in clarifying loans, investments, and administer the collection of
outstanding loans.
2.2.3
Marmon Financial Services Co. Ltd. (a company owned by Doug
Montaldi) was contracted to assist with the reconciliation of Company
bank accounts, pre-May 9 loan transactions, investor balances and loan
balances.
2.2.4
The Interim Receiver hired a local person on contract to perform data
entry and other clerical duties in the Bums Lake office.
2.2.5
The Company 's books and records were recovered from FICOM.
2.2.6
The Interim Receive reviewed insurance coverage on the Company's
assets and amended coverage as appropriate.
2
Property Portfolio
2.3.1
An inventory of properties owned by the Company was developed from
the Company records and searches of Prince George and Prince Rupert
Land Title Registries.
2.3.2
Title searches were conducted on all such properties, financial
encumbrances ascertained, cash flow particulars were identified for each
property.
2.3.3
Tax assessed values were determined. Total Multiple Listing Service
sales volumes within the area for the year preceding our appointment were
identified. Due to the market conditions, full appraisals of the properties
were not performed.
2.3.4
The Interim Receiver reviewed and assessed management's valuations of
the properties.
2.3.5
Insurance coverage was reviewed and modified as necessary in the
circumstances.
2.3.6
Mortgage payments and property taxes were paid as appropriate.
2.3.7
Written confirmation was obtained for properties owned by the Company
but registered in the name of one or more of the Company principals.
2.4 Loan Portfolio
2.4.1
The Interim Receiver reviewed the nature of records maintained by the
Company and Marmon and found these to be wholly inadequate for the
ongoing administration.
2.4.2
The Interim Receiver searched for any available systems or service
bureaus which might be appropriate for the needs dictated by the loan
portfolio, summarized as follows:
Maintain customer information and loan information in a uniform
fashion;
Be capable of producing statements of loan accounts on demand with
transaction history and audit trail;
Be capable of handling multiple interest rates and compounding
methods;
Have suitable input/output controls and be reconcilable to other
records;
3
Be able to categorize loans by type of loan and by payment history;
and
Be capable of generating summary information on balances at any
particular date or transactions over any particular period.
2.4.3
No suitable system or supplier could be located. After discussion with
management, the Interim Receiver undertook to develop a database system
based on ACCESS software that met these needs. Development of the
database structure was done by staff of PricewaterhouseCoopers LLP.
2.4.4
With the structure developed, the Interim Receiver supervised the input of
the following data:
All Company loan transaction data from December 31, 2000 (opening
balances) and all transactions to May 9, 2002 (as converted from
existing electronic records);
Customer data (address, phone number, other personal data);
Loan data (type of loan, interest rate, compounding terms, repayment
terms); and
Post May 9, 2002 transactions.
2.5
2.4.5
The underlying manual loan records were reviewed for the highest dollar
loans that comprised approximately 75% of the total value of the loan
portfolio. Letters were sent to these borrowers with a statement of their
account showing all transactions to May 9, 2002. The letters requested
positive confirmation of the loan terms and balances due.
2.4.6
Numerous errors were located and corrected. These errors included
multiple loans being handled as one loan account, errors in opening
balances, and co-mingling of loan transactions and investor transactions.
Reconciliation work on smaller loan balances continues.
2.4.7
Meetings were arranged with many borrowers to clarify terms and
expectations.
2.4.8
Several problem loan accounts had unique issues that required significant
time of the Interim Receiver.
2.4.9
A payment rating system was developed and the resulting ratings were
discussed with management and input into the database.
Other Assets
2.5.1
The Interim Receiver identified other assets from Company files,
inspection and enquiry.
4
These assets were then valued, where possible.
i Creditors
2.6.1
Names, addresses and amounts due to investors were identified
electronic records maintained by the Company.
2.6.2
Amounts due to the investors were then compared and reconciled as
necessary to manual records maintained by the Company. Corrections
were made as required. Work continues in reconciling balances.
2.6.3
Investors were categorized as to whether they were promissory note
holders, mortgage holders, or RRSP mortgage holders.
2.6.4
The circumstances surrounding the RRSP investments were reviewed with
considerable scrutiny.
2.7 Reviewable Transactions
2.7.1
At the outset, the Interim Receiver interviewed each director of the
Company independently and obtained a signed record of their disclosures
of parties with whom the Company did not deal with at arm's length and a
summary of those transactions.
2.7.2
The Interim Receiver then reviewed the banking records for the year prior
to May 9, 2002 to identify any transactions with non-arm's length parties.
2.7.3
In view of the extensive loans to the directors and related companies, we
reviewed those loan records in considerable detail.
2.7.4
Related party investments were substantiated by reference to the banking
records.
2.7.5
Mortgages granted to related parties were similarly substantiated to ensure
no preferential treatment had been given.
2.8 Conduct of the Debtor
2.8.1
The Interim Receiver identified several areas of concern with respect to
the past conduct of the Company in the areas of fiscal management,
financial reporting, related party loans, use of designated funds, CCRA
filings, and RRSP investments.
2.9 The findings of the Interim Receiver are detailed in the Trustee's Report to
Creditors reproduced here as Appendix A.
5
THE PROPOSAL PROCESS AND RESULTS
3.1 The Notice of Intention to File a Proposal was filed May 9, 2002. A proposal
was to be filed, or an order extending the time to file a proposal was to be issued,
on or before June 10, 2002.
3.2 On June 7, 2002, the Court approved an extension of the time to file the proposal
to July 22, 2002 and the Company filed a Proposal on that date.
The Trustee's Report to Creditors was distributed to all creditors with all other
required documents and a meeting of creditors was held on August 9, 2002.
3.4 Prior to the meeting of creditors to consider the Proposal, the Company filed an
Amended Proposal which was clearly more beneficial to the creditors.
3.5 At the meeting of creditors, the Amended Proposal was accepted by the required
majority of creditors.
3.6 The Amended Proposal calls for a approximately 50% of the Company assets,
comprising its better loans, its property portfolio, and some other assets, be
transferred to a new company ("Newco"). In return, Newco is to issue
debentures to the investors of the Company.
3.7 The terms of the Amended Proposal are summarized in the Report of the Trustee
to Creditors.
4
INTENDED FUTURE ACTIVITIES OF THE INTERIM RECEIVER
4.1 Pursuant to the terms of the Proposal, assets of the Company are either
transferred to Newco or remain property of the Company to be liquidated for the
benefit of the investors. The Interim Receiver intends to supervise the transfer
of assets to Newco and to ensure that there are sufficient controls over the
liquidation of those assets remaining with the Company.
4.2 Prior to the transfer of assets to Newco, the following activities must be
completed:
•
Newco must be sufficiently organized to receive and administer the assets
being transferred as well as issue the debentures contemplated under the
Proposal;
The amounts of outstanding loans at the time of transfer must be determined;
Security related to those loans must be transferred;
6
The amounts of secured indebtedness being assumed by Newco must be
determined as at the date of transfer;
Newco must prepare the debentures to be issued pursuant to the Proposal;
Upon completion of these activities, the Interim Receiver intends to execute the
necessary conveyances on behalf of the Company.
4.3 After transferring certain assets to Newco, the Company will still own a
portfolio of non-performing loans, most related party loans and a variety of other
assets which are to be liquidated within the Proposal.
4.4 The Interim Receiver's objective is to ensure that these assets are liquidated in
an orderly, economic manner under the supervision of the Trustee and
Inspectors. To this end, the Interim Receiver intends to ensure the following
activities are completed:
•
Messrs. Montaldi and Anderson must execute suitable security agreements
covering all their assets in favour of the Company for the repayment of
related party loans and to secure their obligations in respect of their
guarantee of the repayment of the debentures issued by the Company;
The Company must prepare the debentures to be issued pursuant to the
Proposal;
•
A management agreement, in a form satisfactory to the Trustee and
Inspectors, is to be entered into with Newco for the collection of nonperforming loans and sale of other assets.
4.5 Upon completion of these activities, all assets of the Company will have either
been transferred to Newco or be under management subject to the supervision of
the Trustee and Inspectors.
4.6 The Interim Receiver will then present its final accounts and seek its discharge.
7
PROFESSIONAL FEES TO JULY 31, 2002
5.1 The following table summarizes the fees and disbursements of the Interim
Receiver for the period from May 9, 2002 to July 31, 2002:
Period of Charges
May 9 --- May 31
Fees
$
Total
$
Disbursements
$
,709.50
June 1 - June 30
May/June
July 1 -- July
709.50
117,660.00
680.10
25,000.00
141,148.50
1.395.90
118,340.10
25,000.00
142,544.40
Total
395,518.00
2,076.00
397,594.00
5.2 The Statements of Fee and schedules in support of these statements are
reproduced as Appendix B to this report.
5.3 The accounts of Fraser Milner Casgrain LLP to date are reproduced as
Appendix C to this report and summarized in the following table:
Period of Charges
May 7 -- May 29
May 28 - June 25
June 24 - July 30
Total
Fee
$
18,778.00
13,300.00
71,001.38
Disbursements
$
2,076.05
1,397.57
7,950.24
Total
$
20,854.05
14,697.57
78,951.62
103,079.38
11,423.86
114,503.24
5.4 One account has been rendered by Cook Roberts, as independent counsel to the
Trustee/Interim Receiver, in respect of this matter and is attached as Appendix D
and summarized in the following table:
May - July
1.100.00
142.40
1,242.40
Total
1,100.00
142.40
1,242.40
5.5 Total legal fees per the Statement of Receipts and Disbursements are
$115,745.64 which is the sum of $114,503.24 plus $1,242.40.
6
RECEIPTS AND DISBURSEMENTS OF THE INTERIM RECEIVER
6.1 Attached as Appendix E is a Statement of the Interim Receiver's Receipts and
Disbursements for the period from May 9, 2002 to August 15, 2002.
6.2 Receipts total $1.9 million and disbursements total $900,000, representing an
excess of receipts over disbursements of $1 million.
6.3 Of the surplus, $182,000 is being held in trust by the Interim Receiver as a result
of potential third parties claim against this.
ALL OF WHICH IS RESPECTFULLY SUBMITTED this 26th day of September, 2002.
PricewaterhouseCoopers Inc.,
ourt Appointed Interim Receiver of
C
439288 B.C. Ltd.
Richard D. Pallen
Vice President
9
Appendix A
Trustee's Report to Creditors in the Proposal
Estate No. 226843
Court No. 2268431VA02
IN THE MATTER OF THE PROPOSAL OF
439288 D.C. LTD.
AN INSOLVENT PERSON
REPORT OF THE TRUSTEE TO CREDITORS
INDEX AND LIST OF APPENDICES
Section
Report
Page/Appendix
1-14
Appendices
Summary of Financial Position at May 9, 2002
1
Interim Receiver's Statement of Receipts and Disbursements
2
Property Portfolio
3
Loan Portfolio - Loan Classification Explained
4
Loan Portfolio
5
Related Party Loans
6
Other Assets
7
Conduct of the Debtor
8
Newco - Proposed Governance and Structure
9
Newco - Proposed Cash Flow Projections
10
Form of Debenture to be issued
11
Estate No. 226843
Court No. 226843JVA02
IN THE MATTER OF THE PROPOSAL OF
439288 B.C. LTD.
AN INSOLVENT PERSON
REPORT OF THE TRUSTEE TO CREDITORS
BACKGROUND
1.1
439288 B .C. Ltd. (the "Company") was incorporated on January 15, 1993
and continued a business previously conducted in a partnership between
Messrs. Glenn Anderson and Doug Montaldi. From the beginning, the
Company has been owned and managed jointly by Messrs. Anderson and
Montaldi. In early 2002, the Company determined that it required a
mortgage broker to assist it with its business activities and Mr. Gordon
Shanks joined the Board of Directors. Mr. Shanks is a licensed mortgage
broker and played no active role in the management of the Company.
1.2
The primary business activity of the Company is to lend money, at interest
rates in the range of 16% - 18% per annum, to individuals and businesses in
the Lakes District. Generally, these borrowers were unable to meet the
lending requirements of banks and credit unions. The Company also
invested in real estate, common shares of private companies, and other
assets at the discretion of Messrs. Anderson and Montaldi.
1.3
In order to finance its business, the Company issued promissory notes or
mortgages to investors which typically bore interest at a rate of 12% per
annum. Messrs. Anderson and Montaldi personally guaranteed repayment
of all investments. The majority of these investors reside in the Lakes
District.
1.4
The business proposition for the Company was that the spread between the
income from the loan portfolio, property portfolio and other assets would
provide sufficient income to cover the interest paid to investors, cost of
administration, and loan losses. Credit granting policies were never
formalized by the Company, however, it appears that the objectives of
community investment, community support, and a degree of benevolence
ranked equal to or above the profit motive for the Company.
1.5
The Lakes District economy is highly dependant on the forestry industry.
Low fibre prices and U.S. duties on softwood imports have had a major
adverse impact on this economy.
2
1.6
In early 2002, an investigation by the Financial Institutions Commission
("FICOM') resulted in a determination that the Company's activities were
in violation of provincial regulations. On April 30, 2002, FICOM ordered
the Company to cease receiving investor monies and seized its records and
assets. FICOM then commenced an investigation into the affairs of the
Company.
1.7
On May 9, 2002, the Company filed a Notice of Intention to File a Proposal
naming PricewaterhouseCoopers Inc. as Trustee. On the same day, the
Supreme Court of British Columbia appointed PricewaterhouseCoopers Inc.
as Interim Receiver of the Company with the expanded powers of full
custody and control of the Company's assets.
1.8
In our combined capacities as Trustee under the Proposal and Interim
Receiver, our activities to-date have been directed at assessing the
Company's financial position, preserving and protecting the Company's
assets, and assisting the Company to restructure its operations. The current
objective of the Company is to position itself to be able to recapitalize its
operations by complying with relevant regulations, thus allowing it to carry
on its former business.
1.9
On July 22, 2002, the Company filed its Proposal with us. The purpose of
this report is to summarize the terms and conditions of the Proposal as well
as the activities and findings of the Trustee and Interim Receiver. The
overall intention of this report is to allow the creditors of the Company to
make an informed decision on the Company's Proposal to its creditors.
SUMMARY OF THE PROPOSAL
2.1
The objectives of the Proposal are as follows:
•
To maximize the overall economic return to investors;
•
To enable the business, previously conducted by the Company, to
continue to serve investors, borrowers and the Lakes District
communities;
•
To enable the business to comply with all relevant legislation and
regulations; and
To provide a regular payment to investors on their ongoing investments.
2.2
The Proposal separates the general unsecured creditors into two classes:
Class 1 - Investors; and, Class 2 - Creditors. We summarize the intentions
of the Proposal under the appropriate headings below.
2
2.3
Class 1 - Investors
2.3.1
The Proposal contemplates investors recovering their investments in
the Company from the following two sources:
The creation of a new company ("Newco") that will acquire
certain assets of the Company; and
•
An orderly wind-up of the residual assets of the Company.
2.3.2
We summarize below the intentions of the Proposal with respect to
Newco and the orderly wind-up of the Company.
2.3.3
Newco
2.3.3.1
As a result of the regulatory issues that are currently facing
the Company, the Proposal contemplates the creation of a
new entity that will acquire from the Company its higher
quality loans, its property portfolio, and certain of its other
assets. The estimated value of these assets totals $21
million as at May 9, 2002.
2.3.3.2
As part of the transfer, Newco will assume the direct
secured liabilities that relate to the assets being acquired,
which totals approximately $ 1.6 million as at May 9, 2002.
In addition, Newco will issue to the investors of the
Company a debenture in the amount of 50% of their
May 9, 2002 investment (the "Newco Debentures").
2.3.3.3
The details of the assets to be transferred to Newco together
with the assumption of liabilities are set out in Appendix 1.
2.3.3.4
The Newco Debentures will accrue and pay monthly
interest at a rate of 6% per annum. These debentures will
have a 10-year term, will be non-redeemable, and may be
retracted by Newco at any time. Messrs. Anderson and
Montaldi will guarantee the repayment of the debentures at
their maturity. The proposed terms of the Newco
Debentures are set out in more detail in Appendix 11.
2.3.3.5
A board of five directors will govern Newco. This board
will consist of Messrs. Anderson and Montaldi together
with three other knowledgeable and independent directors.
In the future, Newco will seek new investors by issuing
debentures pursuant to an Offering Memorandum and will
J
3
be subject to the regulations of the British Columbia
Securities Act.
2.3.4
2.4
Wind-up ofthe Company
2.3.4.1
After the contemplated transfer of assets to Newco, the
Company will own the problem loan accounts and certain
of the remaining other assets, which are summarized in
Appendix 7.
2.3.4.2
Under the Proposal, the investors will surrender their
remaining investment in the Company and will receive in
exchange a new debenture (the "439288 Debenture") equal
to the remaining 50% portion of their May 9, 2002
investment. The proposed terms of the 439288 Debentures
are set out in more detail in Appendix 11.
2.3.4.3
The 439288 Debentures will bear no interest. The Trustee
will make semi-annual payments to investors based on the
amount of available cash realized from the wind-up of the
Company's assets that are not transferred to Newco. These
debentures will have a 10-year term and Messrs. Anderson
and Montaldi will guarantee the repayment of any unpaid
balance owing on these debentures at their maturity.
2.3.4.4
In order to effectively and efficiently achieve an orderly
wind-up of the remaining assets of the Company, Newco
will be contracted for the purpose of collecting the assets
that are not transferred to Newco. The Trustee will
supervise this process together with the ongoing collection
efforts of Newco.
Class 2 - Creditors
2.4.1
There are other creditors of the Company in addition to the investors.
Based on the books and records of the Company as well as
information obtained directly from potential creditors, it is estimated
that these creditor claims will total $20,000. Under the terms of the
Proposal, these creditors will be paid the full amount of their proven
claim after the court approval of the Proposal.
FINANCIAL POSITION AND CAUSES OF FINANCIAL DIFFICULTY
3.1
Appendix 1 provides a summary of the Company's financial position as at
May 9, 2002. This Appendix also identifies those assets and liabilities that
4
would remain in the Company and those that would be transferred to
Newco.
3.2
The primary cause of the Company's financial difficulty was incurring more
interest expense on investor contributions than the Company was earning on
its loan portfolio and other assets. Many of the loans were accruing interest
but the borrowers were not paying this interest.
3.3
A summary of two years key operating results (unaudited) is set out below:
($000's)
1999
Interest income
Interest expense
Bad debts
Gross loss from lending activities
Other expense
Net loss before tax
3.4
2,414
(2,666)
2000
3,206
(3,624)
0
_ 667
(919)
(403)
(1,322)
(418)
399)
(817
Instead of receiving monthly interest payments, many investors let their
investments compound over the period. This practice concealed cash
shortages that otherwise would have occurred. In addition, the following
factors contributed to the financial problems not being detected by
management:
•
An overall lack of management information to measure the performance
of the loan portfolio and evaluate lending policies;
Inadequate financial reporting; and
•
3.5
Inadequate and/or inconsistent effort in the collection of delinquent
loans.
Management has recognized that the above noted factors contributed to the
financial problems not being detected and it is the intention of Newco to
implement controls to correct the situation. In particular, we are advised
that Newco intends to take the following steps:
Make full use of the loan portfolio database and reporting system that
has been developed subsequent to May 9, 2002; and
•
Hire a person that will review the loan accounts and manage the
collection function.
5
E M RECEIVER
4
4.1
As Interim Receiver, we took custody and control of the Company's assets
and records. We have controlled all cash receipts and disbursements of the
Company since our appointment. A copy of our Statement of Receipts and
Disbursements from May 9, 2002 to June 30, 2002 is attached as
Appendix 2 to this report.
4.2
We summarize below the other significant activities that have been
undertaken by us in our capacity as Interim Receiver:
Reviewed and amended insurance coverage as necessary;
Developed a database to enable an orderly assessment of the loan
portfolio and provide the Company with a platform for future transaction
entry and management information to better manage the loan portfolio;
Reviewed loan documentation and reconciled electronic to manual
transaction histories for a significant percentage of the value of the
loans;
Prepared statements of account and sought borrower confirmation of
loan terms and balances owing for a significant percentage of the value
of the loans;
•
Developed and implemented a loan payment rating system;
•
Identified loans where continued recognition of interest income is not
appropriate (the "Non-Performing Loans");
Established specific provisions for loan losses on Non-Performing Loans
where there was sufficient information to do so;
Identified and inventoried the Company's property portfolio, searched
all titles, assembled tax assessed values, considered management's
values of those properties, determined the amounts owed on financial
encumbrances, and developed cash flow projections for each property;
and
•
Reviewed transactions with non-arm's length parties to identify potential
fraudulent conveyances, settlements or transactions not at fair value.
6
5
INDENTIFICATION AND EVALUATION OF ASSETS
5.1
Cash
5.1.1
5.2
At the time of our appointment, the Company had two outstanding
loans from financial institutions, each of which was fully cash
collateralised. After FICOM issued its freeze orders, the financial
institutions exercised their right of set-off and remitted the surplus
cash to the Interim Receiver totalling $763,000.
Property Portfolio
5.2.1
The Company owns 31 residential and 9 commercial properties. A
full list of properties is attached as Appendix 3 to this report.
Management has estimated the market value of the properties to be
$4 million.
5.2.2
All properties are located within the Lakes District except for two
houses located in Alberta and one commercial property located in
Quesnel. Some properties were acquired as investments; others were
recovered from defaulting borrowers.
5.2.3
The Lakes District economy is based primarily upon the forest
industry. This industry has suffered over the past few years and the
current real estate market conditions represent a buyer's market.
Accordingly, a distress liquidation of the property portfolio would
realize poor results and would further depress the already weak local
real estate markets.
5.2.4
Due to the current weak market conditions, we did not commission
appraisals on the Company's properties. We think management's
estimates of value are reasonable if the properties were to be sold
under normal sale conditions. However, if the properties were
liquidated under a forced sale scenario, then the values would be
significantly lower.
5.2.5
We make the following comments with respect to the prope
•
Many of the properties are registered in the names of one or
more of the directors of the Company. These directors have
provided written confirmation to us that they hold such
properties in trust for the Company.
•
Three residential properties are rented, however, the tenants are
not paying rents to the Company. Steps have been taken to
remedy this situation.
7
There are a total of $2.5 million RRSP investors with mortgages
on the properties. The RRSP investors were provided with
mortgage security by the Company to allow their investments to
qualify as RRSP eligible. To our knowledge, the RRSP investors
were well aware that the amounts of the mortgages have no
relationship to the underlying value of the properties and that
their investments were being made without real security. As a
result, the terms of the Proposal treats all RRSP investors as
unsecured claims. In order to maintain the qualification of the
investment under the Income Tax Act, a charge on title will
remain in favour of the RRSP investors.
5.2.6
Subsequent to May 9, 2002, mortgage payments were continued to
direct mortgage loans in those situations where it was determined
that there was net equity in the property. In those situations where
there was little or no equity, the monthly mortgage payments were
discontinued.
5.2.7
With respect to the properties where it was determined that there was
net equity in the property, the July 2002 property taxes were paid to
avoid penalties.
5.2.8
The Company made payments of $30,000 to acquire four 10-acre,
unserviced, waterfront lots in Fraser Lake pursuant to an agreement
to purchase these properties. The Company has a commitment to
pay $1,100 per month until February 2007 and a lump sum at that
time of $57,000. The assessed tax value of these lands is $223,000.
The payments on this agreement to purchase have been discontinued.
5.2.9
There are nine properties sold by the Company pursuant to
Agreements for Sale totalling $700,000 to arm's length parties.
These sale agreements are accounted for within the loan portfolio as
mortgages. There are financial institution mortgages on these
properties totalling $370,000 at May 9, 2002. These mortgage
payments have continued.
5.2.10 The Omineca Lama Ranch lands were sold by the Company to
Mr. Doug Montaldi pursuant to a verbal agreement of sale for
$450,000. This represented a $100,000 profit to the Company. Title
is still in the name of the Company. The purchase price was charged
to Mr. Montaldi's loan account at that time. The Ranch is presently
encumbered by two investor mortgages totalling $638,000.
8
5.3
Loan Portfolio
5.3.1 As at May 9, 2002, there are 1,475 outstanding loans with a total
book value of $32 million. The loan portfolio is comprised of higher
risk profile loans. Generally, the borrowers would not qualify for
credit at a traditional financial institution.
5.3.2
Appendix 4 provides further details on the background of the loan
portfolio as well as the classification of the individual loans within
this portfolio.
5.3.3
A summary of loan balances and activity between January 1, 2001
and May 9, 2002 is attached as Appendix 5.
5.3.4
Lending Policies and Practices
5.3.5
5.3.4.1
The Company' s lending practices were very casual and
relied primarily on Mr. Anderson's knowledge of the
individual borrower. Loan documentation that would
typically be found in the credit files of a financial
institution was absent.
5.3.4.2
The Company followed a very patient and non-aggressive
practice for collections. Mr. Anderson frequently
telephoned or wrote to the borrowers to seek payment or an
explanation as to why the payments were not being made.
As detailed in Appendix 4, there was no computerized or
manual system that facilitated the function of collecting
delinquent loans.
Related Party Loans
5.3.5.1
Included within the loan portfolio are loans to
Messrs. Anderson, Montaldi and Shanks (or parties related
to them) totalling $8 million. The full details with respect
to these related party loans are set out in Appendix 6.
5.3.5.2
The related party loans represent 25% of the total loan
portfolio balance and 22% of the total company assets.
5.3.5.3
In granting these related party loans, there was no
mechanism for an independent process to review and
approve these loans. Generally, these loans were issued
without direct security, although we note that the related
parties have invested with the Company approximately
$400,000 and Mr. Montaldi has assumed the Company's
9
responsibility for the ongoing servicing of $638,000 of
mortgage loans registered against the Omineca Lama
Ranch.
5.3.6
5.3.5.4
Generally, the related party loans were not being serviced
by regular payments of interest and principal; however, all
interest earned on the related parties' investments with the
Company as well as certain portions of their remuneration
were periodically credited to the loan accounts.
5.3.5.5
Messrs. Anderson and Montaldi have offered and are fully
willing to provide all of their personal assets as security for
their loans. We are in the process of working with them to
effect the taking of this security. They are also cooperating
with us to enter into transactions that will provide clear title
properties to the Company and otherwise reduce their
indebtedness to the Company.
5.3.5.6
While it has not been the past practice to fully service these
loans, the borrowers have acknowledged that this must
occur in the future and they are currently assessing their
personal circumstances to determine what steps they can
take to commence regular payments of interest that will
supplement the credits that are currently being made. In
the short-term, we expect that only interest will be paid,
however, in the medium and long-term, we expect that they
will commence to make periodic loan reduction payments
in addition to the regular interest payments.
Loans to be Transferred to Newco
5.3.6.1
Pursuant to the terms of the Proposal, all loans classified as
`A', `B', or `C' are to be transferred to Newco at a fair
value. As at May 9, 2002, these loans totalled $15.6
million. The Company has determined that a reasonable
loan loss provision of $1.2 million will be used to record
the net book value of the loans on the accounts of Newco.
The loan balances and provisions at time of transfer will be
adjusted to reflect loan advances and payments between
May 9, 2002 and the date of transfer.
5.3.6.2
Within the loans to be transferred are three related party
loans totalling $1.3 million. The Company directors do not
control any of these borrowers, all loan commitments are
being made, and the borrowers have the capacity to repay
these debts.
10
5.3.7
6
Loans to Remain with the Company
5.3.7.1
Under the terms of the Proposal, the `D' rated loans and
most of the related party loans will remain with the
Company. Given the nature of these loans, it is very
difficult to assign a value to these loans and accordingly,
they will not be transferred.
5.3.7.2
While it is not possible to assign a supportable value to the
majority of the loans remaining with the Company, it is
clear that this portfolio of loans does have substantial value.
5.3.7.3
Many of the unsecured `D' rated loans are to individuals
whom Messrs. Anderson and Montaldi believe, based on
their experience and knowledge of the individuals involved,
will repay their loans. The lack of evidence of the
borrower's ability to pay however, prevents the assigning
of value to these loans.
OTHER ASSETS
6.1
As at May 9, 2002, the book value of the other assets totals $ 880,000. We
have reviewed these assets in detail with the Company and management has
estimated that the current fair value, excluding the value of the noncontrolling shares in Key-Oh Wood Products Ltd. ("Key-Oh") and J.B.
Services Inc. ("JB"), totals $379,000. Details of other assets are provided in
Appendix 7.
6.2
Under the terms of the Proposal, most of these assets will be retained and
liquidated within the Company. The sole asset that is proposed to be
transferred to Newco is an equity position that the Company holds in a
commercial property.
6.3
Most of the assets in this category are non-essential to the operation and
therefore, an outright liquidation is appropriate.
6.4
With respect to the value of the shares held in Key -Oh and JB, management
conservatively estimates that the value of the shares equals the recorded cost
of these investments, which totals $355,000. We are unable to ascertain
whether or not management's estimates of value are reasonable.
11
7
8
CONDUCT OF THE DEBTOR
7.1
We have conducted a review for any transactions that could be considered
fraudulent preferences, settlements or other reviewable transactions pursuant
to the provisions of the Bankruptcy and Insolvency Act ("BIA").
7.2
During the course of our review, we noted certain matters that are reported
within Appendix 8 under the following categories:
•
Fiscal Management;
•
Loans to Related Parties;
•
Use of Designated Funds;
•
CCRA Reporting; and
•
RRSP investors.
7.3
Management believes that the additional governance, annual audit,
additional staff, and better management information that is planned for
Newco will enable it to avoid the problems that currently face the Company.
7.4
Taking all of the findings together and including other discussions that we
have had with the directors as well as other stakeholders in the affairs of the
Company, it appears that the problems resulting from the conduct of the
Company were the result of inadvertence and naivete, rather than mal intent.
CREDITORS' CLAIMS
8.1
Creditors claims are summarized in Appendix 1.
8.2
The secured claims total $1.6 million and are secured against the properties
that are to be transferred to Newco. Therefore, these secured creditors will
be assumed by Newco.
8.3
The Class I creditors are the investors. These claims total $39.4 million, of
which $31 million has been proven.
8.4
The Class 2 creditors are the trade creditors and are owed approximately
$20,000.
12
9
10
REMUNERATION OF THE TRUSTEE
9.1
The fees and disbursements of the Trustee, together with the fees and
disbursements of the Company's legal counsel, will be paid for by the
Company. These fees and disbursements will be subject to the review and
approval of the Estate Inspectors as well as the taxation by the Court.
9.2
Given the long-term nature of the Proposal, it is not possible to provide an
accurate estimate of these fees and disbursements.
OTHER
10.1 Regulation on Newco
10.1.1
Newco intends to issue unsecured debentures to new investors
pursuant to an offering memorandum.
10.1.2
Newco will therefore be regulated pursuant to the British
Columbia Securities Act.
10.1.3
The form of securities offering will be reviewed by the Company's
counsel and FICOM to ensure these securities do not of themselves
bring the actions of Newco within the jurisdiction of FICOM.
10.1.4
Newco plans to continue to broker mortgages and therefore, will
require a suitably licensed mortgage broker to be an officer or
director of Newco. FICOM supervises regulations affecting
mortgage brokers within the province of British Columbia.
10.2 FICOM Investigation
10.2.1
FICOM ordered that the Company cease receiving deposits in
April 2002. That order remains in effect.
10.2.2
FICOM performed an investigation into the affairs of the Company
with which the Company and its directors have fully cooperated.
While we understand that FICOM has completed its fieldwork in
the investigation, to-date, no penalties or charges have been levied
against the Company or directors.
10.2.3
We cannot predict whether any fines or penalties will be imposed
by FICOM. Pursuant to the terms of the Proposal, a fine against
the Company would rank as a creditor defined in the Proposal and
be paid in full.
13
STATEMENT OF ESTIMATED REALIZATION
1 Given the uncertain nature of many of the assets of the Company, it is not
possible for us to provide a reasonable estimate of the return that creditors
can expect to receive from this Proposal. However, given that Newco will
be issuing debentures for 50% of the investor claims, we can estimate that
the return to creditors will be in excess of 50 cents on the dollar of proven
claims.
12
RECOMMENDATIONS
12.1 We think that the Proposal presented meets the objectives stated in Section 2
above. The Company and its directors believe, and many borrowers and
investors have confirmed to us, that it provides a valued service to the
community. Acceptance of this Proposal will enable Newco to continue to
provide that service in compliance with relevant legislation.
12.2 We think that the past management problems were due to inadvertence and
naivete, rather than mal intent. The management tools provided and an
expanded Board of Directors, with independent directors controlling the
Company, should enable Newco to operate more effectively.
12.3 We think that Newco, by making new loans available to the community
will be significantly more successful (and significantly less costly) in
collecting the loans than collection agencies, lawyers and trustees.
12.4 We think that an attempt to liquidate the Company's real estate portfolio
through forced sales would produce a very poor economic return to the
investors and reduce the value of other properties within the community.
12.5 Based on the foregoing, it is the Trustee's recommendation that the creditors
accept the Company's Proposal.
DATED at Vancouver, British Columbia, this 30th day of July, 2002.
PricewaterhouseCoopers
Trustee in the Proposal
439288 R.G. Ca.
S
14
439288 B.C. Ltd.
Summary of Financial Position as at May 9, 2002
($'000's)
Estimated Cost or As Per Statement
Reference
Cash
Appendix 2
Properties
Shares and Investments
Other assets
Property transferred from director
Total Assets
QfAffai
Proposed Owner or Obligee
43921
.C. Ltd
Newc
763
763
10,684
3,805
1,090
8,302
10,682
3,805
1,090
4,129
4,129
Notes 1, 2 & 3
Appendix 3
8,094
31,975
8,094
27,800
5,305
9,434
1,289
16,868
Appendix 5
Appendix 7
Appendix 7
Note 1
3,971
507
373
3,971
350
379
3,971
37,589
33,263
0
350
234
0
10,781
20
Loans - A Rated
Loans - B Rated
Loans - C Rated
Loans - D Rated
Loans - Relates! Parties
Total loans
Book Value
Appendix 1
763
10,684
3,805
1,090
145
426
21,410
Creditors
Trade creditors
Note 5
10
10
Secured Credito
Secured on assets transferred to Newco
Note 4
1,605
1,605
Investors
Total Creditors
Note 2
39,404
41,019
39,404
41,019
19,191
19,211
Surplus (Deficiency)
Note 3
(3,430)
(7,756)
(8,430)
1,605
19,191
20,796
615
Notes
1. Prior to the implementation date, Doug Montaldi will transfer title to the 'Teddy's' building to Newco and the related indebtedness
would be forgiven.
2. The amounts due to Investors is adjusted as follows:
Investors per Statement of Affairs
Investments of Directors
Investors secured on personal property of Doug
Montaldi which is expected to be assumed by him
($'000's)
39,404
(385)
(638)
38,381
The adjusted balance is allocated 50% to Newco and 50% to 439288 B.C. Ltd.
3. The surplus indicated for Newco will be reduced by a general provision at the time of transfer.
4. A summary of the secured charges on assets to be transferred to Newco is as follows:
Reference
('000's)
ortgages and vendor take-back mortgages on property
M
Appendix 3
Investor mortgages (non RRSP) on property
Appendix 3
Less: estimated unsecured portion
Appendix 3
Mortgages on properties sold under agreement for sale
(note that agreement for sale is included in loans)
727
525
(17)
370
1,605
5. As at May 9, 2002, the books and records of the Company reflect total trade creditor claims of $10,000. Subsequent to May 9, 2002,
additional creditor claims have been received and it is currently estimated that the trade creditor claims under the Proposal will total $20,000.
Appendix 2
PRICEWATERHOUSECOOPERS INC.
IN ITS CAPACITY AS
INTERIM RECEIVER FOR 439288 B.C. LTD.
s
STATEMENT OF RECEIPTS AND DISBURSEMENTS
FOR THE PERIOD MAY 9, 2002 TO JUNE 30, 2002
$
RECEIPTS
763,086.93
664, 377.46
16,157.13
106,330.81
488.21
20.00
90.65
Cash on hand
Repayment of loans
Rental income
Investor Trust deposits
Interest income
Sundry income
GST collected
Total Receipts
1,550,551.19
DISBURSEMENTS
Contract services
Insurance
Leasing expense
Office expense
Receiver General (payroll deductions
Rent
Repairs & maintenance
Salaries & wages (net)
Security
Travel
Utilities
Appraisals
Loan advances
Payments to senior mortgagees
Property tax
Title search
Interim Receiver's fees
Legal fees & disbursements
Legal - retainer
Miscellaneous
GST paid
20,643.75
12,072.40
5,148.73
3,822.41
4,826.66
1,645.16
792.86
17,002.63
297.38
24,389.14
1,895.16
90.00
21,580.17
23,139.69
4,648.45
2,287.50
111, 709.50
20, 854.05
25,000.00
265.83
12,766.76
Total Disbursements
314,878.23
EXCESS OF RECEIPTS OVER DISBURSEMENTS
$ 1,235,672.96
1W
Represented by:
$
Cash:
1,118,807.67
106, 330.81
5,170.73
5,363.75
CIBC
CIBC in trust
Royal Bank
Bulkley Valley Credit Union
$ 1,235,672.96
I ^11M
I
I
I
I
I
439288 BC Ltd.
Property Portfolio Summary
As at May 9, 2002
#
Property Name
Beach - Empty Lot
Type of
Property
Property Tax
Assessed
Value
Mgmt's Est.
of Value
Fin Instit 1st 1st Charge
Charge
Investors
34,600
100,000
-
35,219
2 Beach - Fitness Center
Commercial
60,000
100,000
-
50,651
3 Beach - Process 4
Commercial
122,700
150,000
40,816
4 Hair Salon
Commercial
67,700
120,000
-
5 Quesnel Property
Commercial
250,600
300,000
-
6 Smithers Property
Commercial
165,900
550,000
305,858
7 Smithers Property
Commercial
88,100
See Above
See Above
8 Smithers Property
Commercial
92,500
See Above
See Above
9 Smithers Property
Commercial
76,300
See Above
See Above
Total Commercial
I
Appendix 3
Commercial
1
I
I
958,400
1,320,000
1 Anglican Duplex
2 Anglican Lot 2
Residential
Residential
114,500
20,500
120,000
25,000
3 Anglican Lot 4
4 BC Land #1
5 BC Land #2
Residential
Residential
Residential
18,900
5,500
5,500
25,000
5,500
5,500
9 Beach Road
Residential
23,300
30,000
10 Blue Spruce Trailer Park
Residential
13,900
13,900
11 Chris Okey
Residential
221,000
221,000
12 Courtorielle
Residential
97,500
110,000
13 Eckland Property
Residential
115,400
150,000
15 Finch House
Residential
206,900
250,000
16 Garfield Woods
17 Geisbrecht
Residential
Residential
40,400
196,700
50,000
205,000
Equity After
Non RRSP
Charges
40,250
Ann. Cash
Flow After
Fin Instit.
64,781
(1,166)
9,099
4,493
(9,196)
125,782
Flow After
Non RRSP
Charge Comments
(5,366 Vacant tot used for parking
(6,626 Rented -Fitness Center
(24,196 Rented-Process 4
-
120,000
7,560
-
98,353
(8,846)
-
244,142
(28,297)
-
-
See Above
See Above
See Above Vacant lot
-
-
See Above
See Above
See Above Vacant lots (4)
-
See Above
See Above
See above Rented to Skeena Rentals
201,647
346,675
2nd
Charge
Investors
-
287,517
166,032
-
7,560 Rented - Creative Energy
Hair Studio
(32,846 Vacant laundry t storage
near Bouchie Lake
(28,297) Leased to #1 Video
89,771
536,375
(35,452)
120,000
25,000
10,630
(483
454
(61)
(61)
454 Vacant lot
(61 Vacant lot
(61 Vacant lot
10,630 Rented - Duplex
(483 Vacant tot
-
-
25,000
5,500
5,500
-
-
30,000
(248)
(248 Vacant tot
13,900
(387
(387 Occupied by L. Caplette.
No rent paid.
221,000
(1,879
110,000
6,702
-
150,000
(2,172
128,118
-
121,882
(9,925
33,203
-
16,797
205,000
(10,136
6,126
-
-
-
(1,879) Okey occupying but not
pays rig rent.
6,702 Rented to Courtorielle
(2,172 Old house not occupied.
No value
(9,925) Rented to J. Sucharyna.
Exectued transfer to
439288 BC Ltd with
lawyer.
10,136 Occupied by Redwood
6 ,128 Rented to H G esbrecnt
Vacant Lot
#
Property Name
Type of
Property
Property Tax
Assessed
Value
Mgmt's Est.
of Value
Fin Instit 1st 1st Charge
Charge
Investors
2nd
Charge
Investors
Equity After
Non RRSP
Charges
Ann. Cash
Flow After
Fin Instill.
Flow After
Non RRSP
Charge Comments
18 Granisle
Residential
17,800
17,800
-
-
17,800
(347)
20 Hakanson (Woodcock)
Residential
28,300
28.300
-
-
28,300
3,272
21 Hailgren
Residential
7,600
7,600
-
7,600
(73)
22 Jarret (Purchase from)
Residential
166,200
180,000
76.391
4472
4,472
50,000
6.20.
Campbell; French
8,200 Rented to T, Hiebert
25,000
(489
(489) Vacant lot
25,000
(489
(489) Vacant lot
20,00
(388
(388) Vacant lot
(23)
(23l Vacant lot
103,609
(34711, Vacant lot
3,272 Rented to Hakanson
)73^ Vacant lot
Rented Duplex to
23 KOA Pitttock Trailer
Residential
35,400
50,000
25 Lots from Montaldi
Residential
20.700
25,000
-
26 Lots from Montaldi
Residential
20,700
25,000
-
27 Lots from Montaldi
Residential
13,600
20,000
-
33 Smithers Rural Lot #1
Residential
2,300
2,300
34 Smithers Rural Lot #2
Residential
2,300
2,300
35 Spankie Property
Residential
97,800
97,800
36
37
38
39
Residential
Residential
Residential
Residential
76,700
11 ,500
84,000
99,800
160,000
11,500
84,000
99,800
Residential
206,700
250,000
1,971,400
2,272,300
338,027
72,132
1,859,842
10,259
-
325,00
(3,625
(3,625 W. Curtis, pre\,:ous owner
occupying but not paying
rent. Paying all utlyttes
2,17
2,175 Rented to Anthony Werreit
Swenson Property
Taylor Lot
Teikwa Property
Warkentin House
40 Worthing House
Total Residential
1
-
2,300
-
73,097
-
-
Edmonton
Residential
312,500
325,000
-
1 2 Lethbridge
Residential
54,100
54,100
42,038
366 600
379 100
42,038
Total Alberta
-
-
72,132
-
359,648 1
166,032
3,971,400 1
726,7401
Total
1
3,296,4001
Vacant lot
-
24,703
(7,121
(7,121) Occup,ed by J. Bremmer
but not paying rent
160,000
11,500
84,000
27,668
(666)
(1,270)
(280)
3,504
(666?
(1,270)
(280)
(6,096)
250,000
6,305
12,062
vacant lot
Vacant lot
Vacant lot
Rented to Fletcher
6,305 Rented to Dawn Young
659
337 062
1 450
fi 450
2,733,2781
(26,643)1
(90,562)
aura
APPENDIX 4
439288 B.C. LTD.
LOAN PORTFOLIO
BACKGROUND, LOAN CLASSIFICATION AND PAYMENT RATING
BACKGROUND
As at May 9, 2002, the Company had issued and outstanding 1,475 loans totalling $32
million. Generally, the Company maintained the accounts in a manual system which did
not allow for any form of reporting or management assistance. Therefore, we created a
database of all loans and their transaction histories going back to December 31, 2000.
This tool enables us to enter ongoing transactions, summarize activity during any
specified period, prepare statements of account, determine when interest income should
not be recognized, establish specific provisions for loan losses, and perform other ad hoc
reporting.
e database, we categorized loans, firstly as Personal or Business related.
Secondly, loans were categorized as to the security held, if any. If security was held but
appeared to be less than 75% of the loan balance, we considered the loan to be unsecured.
Thirdly, loans were categorized as to their payment history and rated A, B, C or D.
Payment histories were evaluated on two criteria:
1. Change in loan balance. We evaluated loans on the change between the May 9, 2002
loan balance and the sum of the opening balance plus advances.
2. Percentage of accrued interest paid during the period.
The following summarizes the ratings assigned:
A - (i) Paid more than 85% of interest earned during period;
(ii) Paid 71%-80% of interest earned and loan balance decreased by over
10%; or
(iii) Paid 50%-70% of interest earned and loan balance decreased by over
50%.
B-
(i) Paid 70%-80% of interest earned and loan balance increased by less
than 50%;
1
APPENDIX 6
439288 B.C. LTD.
RELATED PARTY LOANS
GLENN ANDERSON, DOUG MONTALDI AND GORDON SHANKS
The following table summarizes the May 9, 2002 balances of loans outstanding to
Messrs. Glenn Anderson, Doug Montaldi and Gordon Shanks, and/or parties related to
them.
Loan Description
Glenn Anderson
Glenn Anderson
Anderson Lindaas Logging Ltd.
McLeod & Anderson (470429 BC)
Tran & Anderson
Anderson/Montaldi/Shanks/Lindaas
Anderson/Shanks
Sub total Glenn Anderson & related
Note
Reference
May 9, 2002
Balance
1
2
3
4
5
6
$1,379,599
450,583
372,350
466.150
403,060
146,334
$3,218,076
Doug Montaldi
7
3,272,957
Montaldi - Ra mark operating (100%)
Montaldi - Teddy's building
Montaldi & Spouse
Montaldi - RRSP loan
8
9
10
11
277,224
477,046
175,584
14,147
Montaldi - Golden
12
257,618
Montaldi - HDS 1
Montaldi - DVM Holdings Ltd.
Montaldi - HDS 2
Sub total Doug Montaldi & related
13
14
15
248,896
6,882
145,302
$4 1 875,656
16
$8 093,732
Interest Rate
16% A
17% M
16.8%M
16.8%M
17% M
18% M
Doug Montaldi (Also refer to note 5)
Gordon Shanks (Also refer to notes 5
& 6)
Gordon Shanks - Frame Realty
Sub total - Gordon Shanks & related
Total
16%A
17%M
17%M
Prime + 2
17%M
16.8%
16.8%M
17%M
5.75%
-
OSE OF LOANS
PURP
NATURE
Glenn Anderson - This loan acted as a personal line of credit to Glenn Anderson from
which he funded a variety of ventures. Many of his shareholder loans to his related
companies were financed by this loan. There have been regular payments on this
account.
2. Anderson Lindaas Logging Ltd. - This loan was advanced directly to this presently
inactive logging company. The company holds significant land and timber inventory
but does not intend logging or selling these rights until fibre prices recover to a
reasonable level. There have been no payments of interest or principal on this loan
for at least the past 18 months.
3. McLeod & Anderson - This loan was advanced to develop a 24 acre commercial site
in Burns Lake. The site has appropriate zoning, is serviced and pre-loaded, and ready
for sale. The layout/subdivision plan has not yet occurred pending anchor sales
interest. This project is expected to require a marketing period of approximately five
years. There have been no payments of interest or principal on this loan.
4. Tran & Anderson - The loans to this partnership pertain to a series of residential
properties that have been built, renovated, or acquired and rented. Interest is not paid
on a regular basis. Payments occur as properties are sold.
5. Anderson/Montaldi/ShanlslLindaas - This loan was for stock market investments in
early 2000. All four individuals are joint and several on this obligation. No
payments of interest or principal have been made on this loan.
6. AndersonlShanl, - This loan was for stock market investments in November 1999.
The loan was interest free for the first year. No payments have been made on this
loan.
7. Doug Montaldi - This has operated as a personal line of credit used to fund a variety
of commercial endeavours, to fund his purchase of the Francois Lake property, to
develop the herd, and buildings and equipment used in the Omineca Lama Ranch.
Mr. Montaldi borrowed monies personally rather than through the individual ventures
being financed so that the interest expense could be deducted personally.
Mr. Montaldi used his monthly interest payments on his investments with the
Company to service a portion of the monthly interest on this loan account. He also
had interest on this loan account forgiven in lieu of compensation as set out in the
Interest Relief Section of this Appendix. There were no other direct payments on this
loan.
8. Montaldi - Raymark Enterprises Ltd. - Operating - Mr. Montaldi is a two-thirds
owner of this company. The Company has provided an operating facility to Raymark
in the amount of $280,000, two-thirds ($184,000) which is personally guaranteed by
Mr. Montaldi; the remaining one-third is personally guaranteed by the other owners
2
of Raymark. Limited payments have been received on this account from Raymark
Ent rises operations but are insufficient to consider loan performance to be
satisfactory.
9. Montaldi - Teddy's Building - Several years ago Mr. Montaldi purchased two-thirds
of the shares of Raymark Enterprises from the former owner, and settled a series of
obligations of the previous owner. Mr. Montaldi assumed responsibility for the
former owner's loan to the Company and those advances in return for the shares in
the business. Subsequently, Mr. Montaldi purchased the building on which Teddy's
Restaurant is situate for $268,000 from Gerobeco Holdings Ltd., a company 50%
owned by Glenn Anderson. This advance was paid by the Company and charged to
this loan account. We have proposed settling this loan by taking title to the property.
This property would then be transferred into Newco as part of the Proposal.
10. Montaldi & Spouse - This amount was loaned by the Company to Mr. Montaldi and
his spouse. There is a back to back loan between the Company and a financial
institution that holds cash collateral for the loan. Mr. Montaldi's agreement is to pay
interest at the same rate as the Company pays to the financial institution. Mr.
Montaldi's spouse pays this loan monthly.
11. Montaldi - RRSP Loan - The balance represents an amount advanced for Mr.
Montaldi's 2002 RRSP contribution, plus interest.
12. Montaldi - Golden - This represents amounts advanced to Gerobeco Holdings Ltd.
for a purchase option on a property in Golden, B.C., plus interest. No payments have
been made on this loan.
ontaldi - HDS I - This represents an amount borrowed by Mr. Montaldi, which he
turn advanced to a wholly-owned company for the purpose of acquiring a property
and improving other properties. No payments have been made on this loan.
14. Montaldi - D VM Holdings Ltd. - This represents a personal loan to Mr. Montaldi.
The funds were advanced directly to DVM Holdings Ltd. by the Company.
15. Montaldi - HDS 2 - This amount was loaned by the Company to Mr. Montaldi in
November 2001. There is a back to back loan between the Company and a financial
institution that holds cash collateral for the loan. Mr. Montaldi's agreement was to
pay interest at the same rate as the Company paid to the financial institution. The
proceeds of this loan were applied to debts due to the Company and to make a
shareholder loan to one of his wholly-owned companies, which in turn deposited
funds with the Company. Regular payments were made on this loan up to May 2002.
16. Gordon Shank - Frame Realty - Mr. Shanks controls Frame Realty (1984) Ltd.
("Frame"). Mr. Montaldi owns a minority interest in Frame.
3
At July 27, 2001, Frame owed the Company approximately $119,000. The real estate
market had been quite inactive and Frame could not service that loan. Frame agreed
to sell the commercial building it occupies to the Company at a price of $275,000.
This was believed to be fair value at the time. The 2002 tax assessed value of the
property is $159,900.
As part of the sale transaction, Frame undertook to rent the building from the
Company at a triple net rent sufficient to service the first mortgage on the property
and reduce that mortgage principal by $1,500 per month. Frame retains a right to
reacquire the property at a price of $275,000 until June 5, 2007. Frame is complying
with all aspects of this agreement.
The Company's rights in this property are recorded under `Other Assets' and are
estimated to be worth $145,000 at May 9, 2002. It is proposed that this asset be
transferred to Newco.
INTEREST RELIEF
Annually, the Company waived an amount of interest on loans to Messrs. Anderson and
Montaldi as part of their remuneration package. The amounts of the interest relief was
credited as payment on their loan accounts on January 1 of each year.
The following table summarizes the interest relief credited to their respective loan
accounts for the years 1997 to 2001.
e
Year
1997 and 1998
Doug Montaldi
$307,210
1999
2000
2001
Glenn Anderson
$289,725
$2882330
$486,485
Nil
$182,943
$167,163
$10,229
No salary was paid to Mr. Montaldi during this period. No salary was paid to Mr.
Anderson until February 2000, when the Company commenced paying him $9,000 per
month retroactive to November 1999.
DEBT SERVICE AND SECURITY
Generally, these loans were issued without direct security.
Mr. Anderson has promised to provide security for his loans. We are currently working
with Mr. Anderson to determine the most appropriate form of this security. Based on our
discussions to date, it appears that the security that Mr. Anderson has offered will provide
the Company with reasonable security for the repayment of principal and interest.
J
4
Mr. Anderson has not been making regular payments of interest. He has agreed to
commence regular payments of interest in the near future and we are currently awaiting
his proposal in this regard.
Mr. Montaldi has promised to provide security for his loans. We are working with him to
establish the most appropriate security. We have reviewed Mr. Montaldi's net worth
statement in some detail and it appears that he can provide security for the principal
balance of the outstanding loans.
We have discussed with Mr. Montaldi steps that he might be able to take that would
reduce the amount owing to the Company. Mr. Montaldi has agreed to off-set his
investments with the Company against his loans, to transfer to the Company his interest
in the Teddy's restaurant property, and to assume the payments related to $638,000 in
mortgages registered against the Omineca Lama Ranch. Mr. Montaldi is currently
assessing other steps that he can take and intends to make his offer prior to the meeting of
creditors to consider the Proposal.
5
APPENDIX 7
439288 B.C. LTD.
UMMARY OF OTHER ASSETS
Original Cost ($)
Estimated Value (S)
1994 Pontiac Grand Am (Repossessed)
1990 Hitachi Excavator EX 200-1
1979 Komatsu An le Dozer D60P
1980 Ford Dump Truck 16' Box Cab Over 9000
Not applicable
Not applicable
R ossessed
7,578
Repossessed
Repossessed
R ossessed
0
0
6,800
5,675
10,000
10 000
1,500
Buildin gs
Frame Real
Mobile Home - Blue Spruce Trailer Park
Mobile Home - KOA Trailer Park "Pittock"
Mobile Home - KOA Trailer Park "Do!! all"
Mobile Home - G. Woods Propgn^ "Redwood"
118,839
Repossessed
60,000
Agreement for Sale
Agreement for Sale
145,000
13,900
50,000
A eement for Sale
Agreement for Sale
1,954
3,400
54,500
Unknown
Unknown
33,915
5,000
15,378
2,000
5,500
55,000
16,720
13,750
33,915
5,000
4,000
Sub Total - (Other Assets per Statement of Affairs)
Est. $373,000
$378,760
Shares & Investments
Fraser Lake Lots A eement for Purchase
Key-Oh Wood Products Shares (48% interest)'
J.B. Services Inc. Shares (48% interest
Universal Software Inc. Shares
Beach Grove Estates Ltd. Shares
Silverdale Lumber & Logging Shares
Invention - Donal Thompson
Invention - Kelly Grunerud
Sub Total - (Shares & investments per Statement of
30,610
140,000
215,000
15,154
90,000
1,000
1,897
13,390
$507,051
0
Unknown'
Unknown'
0
0
0
0
0
0
Affairs)
Total Other Assets
$880,051
$378,760
Item
Vehicles & Heavy Equipment
`tion
Lease - 2001 Ford Ex
Lease - 2002 Ford F350
1974 Ford 750
Miscellaneous
Portable Bunkhouse
Portable Enviro Tanks (2)
Portable Bridges
Silver Bars
Current , Coin Collection & Gold Nuggets
An Work
Race Horse
Office E ui ment
Management conservatively estimates a total value of $350,000 for the shareholdings in
Key-Oh Wood Products and J.B. Services Inc. within the Statement of Affairs. We have
not seen sufficient evidence to conclude on the reasonableness of the potential value of
these investments.
'
APPENDIX 8
439288 B.C. LTD.
CONDUCT OF THE DEBTOR
FISCAL MANAGEMENT
In our joint capacities as Trustee under the Proposal and as Interim Receiver, we have
reviewed the books and records of the Company and have made inquiries of the directors
of the Company with respect to past conduct of the Company. We set out below, under
appropriate headings, our findings.
Accounting for Loan Portfolio and Management Information
The Company's accounting for its loan portfolio was inadequate.
Two sets of records were maintained in respect of the loan portfolio. The first record was
a manual record. A handwritten record of historical loan advances and payments were
made directly on the promissory note. Interest calculations were performed only upon
receiving a payout request or when a new loan was negotiated. These interest
calculations were performed electronically using an amortization software package.
The second record was a computerized loan portfolio record. The records were stored in
electronic form and consisted of: an unique account number, the borrower's name, the
opening balance (i.e. annual rolled forward balance), the borrower's payments (with
reference to deposit slips and transaction dates) and advances (with reference to cheque
numbers and transaction dates).
These computerized records were updated on a regular basis from deposit slips, cheque
stubs, copies of notes paid and copies of new notes. At year end, the outstanding balance
of the loans was calculated by inputting the interest rate and transactions identified into
an amortization schedule. Only then was interest and the ending balance known for the
accounts within the loan portfolio. Given the large volume of loan accounts, this
calculation of interest at year-end is estimated to have taken six man weeks of time to
prepare.
The Company's bank account was reconciled monthly to transactions posted to the
computerized records, including the loan portfolio. Notwithstanding the bank account
reconciliation, posting errors were frequent as a result of numerous loans involving
parties with the same surnames, investor related transactions being commingled with loan
transactions, and other errors with the loan portfolio. Further, there were frequent
instances of numerous loans to the same borrower where all transactions were entered
into one account, despite the loans having different interest rates and/or compounding
terms. These posting errors were corrected at the year-end reconciliation.
Interest was accrued in full on all loans regardless of the payment history or known
difficulties of the borrower. There was no periodic review of loan provisions.
While the accounting was sufficient for the filing of the annual corporate tax return, it
was not sufficient for management decision making purposes. Specifically:
•
There was not an appropriate reconciliation between the manual record and the
computerized record in respect of individual loan transactions;
come was recognized regardless of the payment history and there was a
e to adequately identify specific and general provisions for loan losses;
those cases where a borrower had more than one loan with different interest rates
or compounding terms, all transactions were run through a single account and
therefore, the interest calculations were not always correct;
No information was available to management in respect ofo
the underlying number and balances of personal, business, secured, unsecured, or
mortgage loans;
o the relation of interest paid and interest accrued;
o loans falling into arrears; and
o loans with significant periods of inactivity.
Management had twice undertaken to develop a better loan management system. The
first attempt in 1997 failed, at a cost of $7,000. The second attempt contemplated in
2001, was deferred as no suitable system developer could be identified.
We have developed a database that overcomes many of these deficiencies. The Company
and its successor now have this tool at their disposal. Transaction histories since
December 31, 2000 have been inputted into this database.
Financial Accounting and Reporting
Overall financial accounting and reporting for the Company was inadequate.
Notwithstanding the Company is a private company, accurate financial statements
measuring the financial position of the Company and the results of its operations are
essential.
Financial statements were prepared only annually and were prepared on a "Notice to
Reader" basis. The statements were prepared solely for the purpose of filing income tax
and other government returns.
1
2
The most recent financial statements for the Company are as at December 31, 2000. We
note that these financial statements contain certain material overstatements of revenues
and assets as well as understatement of expenses. We also note that management has
advised us that these statements were not intended to be delivered nor were they
delivered to any investors or potential investors.
Continuing to Operate Despite Losses
A lack of proper management information undoubtedly delayed the time in which
management might reasonably have become aware of the underperformance of the loan
portfolio and income generated by other Company assets. Notwithstanding, management
had been aware of the trading losses suffered by the Company for some time.
Management has advised us that they made efforts to improve the `spread' between
interest income and expense.
These efforts included:
•
reducing the interest paid on investments effective February 1, 2002; and
•
increasing the standard loan interest rate charged to borrowers effective
January 1, 2002.
Management further advises they believed their guarantees to investors provided
sufficient security to overcome the known deficiencies in the Company's financial
position.
To our knowledge, the Company did not make its financial situation known to investors
by presenting financial statements or discussing the Company's affairs with them.
To our knowledge, management did not seek outside assistance in resolving the
Company's challenges.
The loan portfolio database that has been developed will, assuming it is diligently
maintained and appropriate analyses are conducted from time to time, assist in the future
management of the loan portfolio and the development of monthly financial statements
on a timely basis.
An expanded Board of Directors with periodic and regular reviews of the financial
information will provide an improved platform for evaluating loan portfolio performance
and assessing the impact of strategies deployed by future management.
Lastly, the annual financial statements will be prepared in accordance with GAAP and
audited by independent accountants.
3
LOANS TO DIRECTORS AND ASSOCIATED COMPANIES
The nature and extent of loans made by the Company to its directors and associated
companies were known to both Messrs. Anderson and Montaldi. These loans were not
subject to any independent review or approval. Particulars of these loans are detailed in
Appendix 6. The salient facts of these loans are summarized as follows:
Non-arm's length loans represent approximately 25% of the total loan portfolio;
Payments on many of these loans were made sporadically or not at all;
The loans were generally unsecured, although the recipient of the loans have personal
investments with the Company totalling $400,000 and one of the directors has agreed
to personally servicing two company loans that have been granted mortgage security
on the Omineca Lama Ranch in the amount of $638,000; and
•
Management gave themselves interest relief on these loans at their own discretion.
The full details of this issue are set out in Appendix 6 under the heading "Interest
Relief'.
By permitting these loans, the directors placed themselves in a potential conflict of
interest. Specifically, their duties to the Company required them to act in the best
interests of the Company and by placing these loans, it could be argued that they did not.
New directors will be introduced into the governance of Newco. One of the agreed
responsibilities of the new Board is to approve any future non-arm's length transactions.
The strength of this Board will be critical to Newco's ability to steer clear of such
difficulties in the future.
USE OF DESIGNATED FUNDS
In July and August 2001, an investor advanced a significant sum to the Company on the
understanding the funds would be invested in a specified and segregated loan portfolio
and this loan portfolio would be managed on behalf of that investor. The Company
guaranteed a rate of return of 10% to that investor. The Company expected it would earn
an income from managing that loan portfolio based upon the difference between the
actual interest income (i.e. less any loan losses) derived from that loan portfolio and the
10% return promised to the investor.
The Company established a separate bank account for disbursing loan advances and
receiving payments on loans within that investor's portfolio.
The Company kept the manual records of promissory notes maintained for that investor
separate and apart from other loans within the Company portfolio. Management intended
4
to hold this investor's cash, the loans acquired, and the payments received on those loans
separate and apart from the Company's own cash and loans.
Notwithstanding this intention:
In November 2001, the Company borrowed $200,000 from a local financial
institution. The purpose of that loan was to advance funds to one of the directors at
the same rate of interest charged by the financial institution.
As collateral for this loan, the Company used $225,000 from the investor's bank
account. This was not in accordance with the investor's investment criteria. The
borrowing director was unaware that the cash collateral came from the investor
account. Our discussions with the directors indicate the use of the investor funds,
rather than Company funds for collateral to that loan, was done inadvertently and not
intentionally.
May 2002, the financial institution set-off the Company's loan balance and the
collateral placed for deposit. The loan balance had declined by $52,377 and we have
recovered that amount. The Company loan from the financial institution has thus
been repaid from the investor's funds. The director still owes a balance to the
Company on that loan and has agreed to pay off this amount from funds in his
investment with the Company. At that time, these funds will be credited to the
investor account.
The Company sold existing loans, suitable to that investor's criteria, into the
investor's portfolio. The amount owing to the Company, including accrued interest,
was determined and that amount of cash was paid from the investor account to the
Company account. The loan was separately identified both within the electronic
record and within the manual records, as belonging to that investor.
As time progressed, the accounting for these loans became very inaccurate and
commingled with other loans due to the following:
o The unique loan identification number in the electronic record was not changed
when the loan was transferred from the Company to the investor;
o In the manual record, the promissory note and history of payments and advances
was simply transferred from one file to another;
o
On the same promissory note, advances to the borrower may have been from the
Company's account, the investor's account or both; and
o
On the promissory note, payments were not capable of being allocated between
investor and Company advances. In the result, there was little accuracy in
depositing loan payments to the account of the investor or the Company nor were
new promissory notes obtained.
5
The investor has been fully advised of the details of this matte
CCRA
During the course of our review, we identified an instance where, for a number of years,
an unrelated investor (i.e., unrelated to either the Company or the directors) received
substantial, monthly payments of interest in the form of cheques and cash. Only the
interest paid by cheque was reported on the T5 information slip issued by the Company.
We are advised that this act constitutes an offence under Section 239 of the Income Tax
Act.
We note the following:
•
The directors disclosed this matter to us and advised that only this one investor
received payments of interest that were not reported properly;
own volition, the Company ceased paying interest by cash to this investor in
March 2002; and
The Company has voluntarily disclosed particulars of the matter to Canada Customs
and Revenue Agency by letter with amended T5 information slips.
INVESTORS' RRSP INVESTMENTS
Some years ago, several investors sought to invest their RRSP funds with the Company.
In order to qualify as RRSP eligible investments, it was necessary for the Company to
provide the investor with mortgage security. This was done without regard to the
underlying value of the property being used as security. To our knowledge, the proposal
to invest RRSP funds into mortgages on property, where the lands provided little or no
underlying security, was made by investors with full disclosure and after receiving
independent advice.
At May 9, 2002, there were 27 RRSP mortgage investments. These investments totalled
$2.5 million. Based upon the estimated value of these properties and considering prior
ranking charges, with no allowance for costs of disposition, we estimate $1.8 million or
74% of these investments are unsecured claims, not supported by the underlying value of
the mortgaged lands.
To date, all individuals from both inside and outside the Company have advised us that
such RRSP investors were advised, prior to investing, that the underlying security value
offered no protection for their investment.
6
The Proposal contemplates all RRSP mortgage investors be treated as Class 2 unsecured
claims, irrespective of the value of underlying security. Given the apparent disregard for
the underlying security value at the time these mortgage interests were given, this is a
more equitable resolution to all RRSP investors than recognizing the randomly assigned
security provided to some RRSP investors.
7
APPENDIX 9
NEWCO - PROPOSED STRUCTURE AND GOVERNANCE
Newco is a new company to be incorporated a part of the Proposal. The ownership of
Newco will be similar to the ownership of 439288 B.C. Ltd. The corporate governance
will be improved in Newco by the addition of three independent Board of Director
members. The Board of Directors will be made up as follows:
Glenn Anderson
Doug Montaldi
Albert Beach
John R. Brown
Brenda Hiebert
It is proposed that the officers of the Company be as follows:
President
Doug Montaldi
Vice President - Mortgage Brokerage
Gordon Shanks
Secretary/Treasurer
Glenn Anderson
Newco's Board will establish written policies for Newco including the following:
Lending Policy
•
Extent of Glenn Anderson 's lending authority
Establishment of a Credit Committee for regular meetings on loan approvals above
Glenn Anderson's authority, evaluating portfolio performance, periodic revisions of
lending policies;
•
Expected standards of loan file documentation;
•
Establish performance targets; and
•
Review of collections progress, diligence, and effectiveness.
1
Non-Arm's Length Transactions Policy
Approval of all proposed transactions between Newco, any director or officer or
affiliate thereof, or any other related party, regardless of the of dollar amount.
Investment Policy
•
Determine policy with respect to real estate acquisitions and divestitures;
•
Define limits of authority of the officers;
As existing loan principal is collected and/or new investment funds are raised, Newco
requires a policy as to how much is allocated to new loans and how much is allocated
to redeeming debentures (old or new debentures);
Establish performance targets - acquisitions, divestitures, returns and other operating
metrics; and;
•
Monitor performance to targets.
Borrowing Policy
•
Review and approval of documents to be filed with B.C. Securities Commission; and
•
Determine interest rates to be offered and redemption periods on new debenture
issues.
General Governance Issues
•
Approval of executive compensation;
•
Approval of annual operating and capital budgets;
•
Periodic review of interim financial statements;
•
Selection of auditors, establish an Audit Committee; and
•
Review and approval of annual financial statements.
2
Other Matters
Newco will employ a part-time data entry clerk and a full-time Office
Manager/Controller. The data entry clerk would maintain the loan portfolio database.
The Office Manager/Controllers duties will include:
Ensure basic internal controls and security are maintained, that the database is
maintained up to date, that account reconciliations continue and errors are corrected;
•
Maintain the general ledgers for both Newco and the Company, produce monthly
cial statements and analyses for management;
Ensure monthly financial statements are prepared, distributed and reviewed by
management;
Ensure collection agencies and lawyers are diligently pursuing and reporting on
collection activity; and
Ensure security registrations do not lapse.
3
Proposed Newco
Cash Flow Projections
('000)
Receipts
Loans - Interest
Loans - Principal Repayments
Debentures - New Principal
Rents
Deposit Interest
Total Receipts
Appendix 10
Aug 02
Total
Sep 02
Oct 02
Nov 02
Dec 02
Jan 02
Feb 02
Mar 02
Apr 02
May 02
Jun 02
113
160
169
188
240
238
250
250
213
213
238
238
2,506
338
0
11
1
461
480
0
11
0
651
506
0
11
0
686
563
0
11
0
761
720
0
11
0
971
713
0
11
0
961
750
0
11
0
1,011
750
0
11
0
1,011
638
0
11
638
0
11
713
0
11
713
0
11
7,519
0
130
0
0
0
0
1
861
861
961
961
10,155
96
96
96
96
96
96
96
96
96
96
96
0
0
0
0
0
0
0
0
0
0
200
11
34
1
400
11
2
1
600
11
2
1
800
11
2
1
650
11
2
1
650
11
2
1
650
11
2
1
700
11
2
1
700
11
2
1
700
11
2
1
750
11
67
1
96
0
750
11
2
1
1,151
0
Jul 02
Disbursements
Loan & Property Portfolio
Debenture - Interest
Debenture - Principal Repayment
Loans-New Advances
Financial Institution Mortgages
Property Carrying Costs (non-mortgage)
Advertising & Promotion
Collection Fees/Commissions
Legal & Notary fees
Total Investment & Lending
0
7,550
132
116
17
0
0
0
0
0
0
0
0
0
0
0
0
0
37
378
18
528
1
711
1
911
1
761
1
761
1
761
1
811
1
811
1
811
1
926
1
861
65
9,031
5
1
0
11
10
11
1
2
1
2
23
8
1
4
78
5
1
0
19
0
0
1
0
1
2
23
8
1
3
63
5
1
0
3
0
0
1
0
1
2
23
8
1
3
48
5
1
0
3
0
0
1
0
1
2
23
8
1
4
49
5
1
0
3
0
0
1
0
1
2
23
8
1
3
48
12
1
0
3
0
0
1
0
1
2
23
8
1
3
55
5
1
0
3
0
0
1
0
1
2
23
8
1
4
49
5
1
0
3
0
0
1
0
1
2
23
8
1
3
48
8
1
0
3
0
0
1
0
1
2
23
8
1
3
51
8
1
0
3
0
0
1
0
1
2
23
8
1
4
52
8
1
0
3
0
0
1
0
1
2
23
8
1
3
51
48
1
0
3
0
0
1
0
1
2
23
8
1
3
91
119
9
4
65
10
13
7
5
13
27
270
90
6
44
681
5
60
(73)
(199)
162
145
201
152
(1)
(2)
(16)
9
443
Opening Cash Balance
500
505
564
491
292
455
600
801
953
952
950
934
500
Closing Cash Balance
505
564
491
292
455
600
801
953
952
950
934
943
943
Administrative & General
Accounting & Audit fees
Bank charges
GST Payable
Insurance, licence & permits
Legal fees
Leases & Equipment Purchase
Miscellaneous
Office (Supplies & Postage)
Rent (premises)
Salaries - Benefits
Salaries - Management & Directors
Salaries - Office Staff
Telephone
Travel (including auto)
Total Administrative & General
Net Cash Flow
APPENDIX 11
PROPOSED DEBENTURE TERMS
NEWCO DEBENTURES
General
The Newco Debentures will be issued under a trust indenture as supplemented from time to time
by supplemental indentures (the "Indenture"). The aggregate principal amount of debentures
authorized under the Indenture will be unlimited and debentures may be issued from time to time
in one or more series thereunder.
Term
The Newco Debentures will mature 10 years from the date of issue.
Interest
The Newco Debentures will bear interest at a fixed rate of 6% per annum payable monthly in
arrears from the date of issue to the maturity date.
Rank
The Newco Debentures will be direct, unsecured obligations of Newco and will rank equally
with all other unsecured and unsubordinated indebtedness of Newco, except to the extent
prescribed by law.
Form of Newco Debentures
Each Newco Debenture will be issued in definitive form in the name of the holder and delivered
to such holder.
Payment of Principal and Interest
Payments of principal and interest on each Newco Debenture will be made to the holder. As
long as the holder is the registered owner of the Newco Debenture, the holder will be considered
the sole owner of such debenture for the purposes of receiving payment on such debenture.
6133-508001-000001-1ov2
1
Transfer of Newco Debentures
The Newco Debentures will be subject to an indefinite hold period under applicable securities
legislation and may only be transferred pursuant to an exemption from applicable securities
legislation. Transfers of beneficial ownership of the Newco Debentures represented by a
debenture certificate will be effected through records maintained by the trustee, as permitted
under the applicable securities legislation.
Redemption and Purchase for Cancellation
The Newco Debentures may be redeemed by Newco prior to maturity. Newco may, at any time
and from time to time purchase debentures for cancellation by tender or by private contract.
Events of Default
The occurrence of any of the following events with respect to the Newco Debentures will be an
event of default ("Event of Default"):
(a)
if Newco shall make default in payment of any principal or interest on any Newco
Debenture;
(b)
if Newco shall fail to carry out or observe any other obligation under the
Indenture or the Newco Debentures and such failure continues for more than
30 days after written notice thereof;
(c)
if Newco shall make default in the payment of the principal or interest on any of
its indebtedness for borrowed money (other than the Newco Debentures), or if
Newco shall fail to honour its guarantee of the indebtedness of any other person
and, in any such case, the time for payment of such principal, premium, interest or
guaranteed indebtedness shall not have been effectively extended;
(d)
if an order shall be made or an effective resolution passed for the winding-up,
liquidation or dissolution of Newco; or
(e)
if Newco shall make a general assignment for the benefit of its creditors or a
proposal under the Bankruptcy and Insolvency Act (Canada) or any other
bankruptcy, insolvency or analogous laws, or shall be declared bankrupt, or if a
custodian or a sequestrator or a receiver and manager or any other person with
similar powers shall be appointed for Newco or of the property of Newco or any
part thereof which, in the opinion of the trustee, is a substantial part thereof.
6133-508001-000001-10v2
2
Acceleration on and Waiver of Default
an Event of Default has occurred under the Indenture, the trustee may in its discretion and
upon the requisition in writing of the holders of at least 25% of the principal amount of the
Newco Debentures issued and outstanding under the Indenture, subject to any waiver of default
under the Indenture, by notice in writing to Newco declare the principal and interest on all
Newco Debentures then outstanding under the Indenture to be due.
If an Event of Default has occurred under the Indenture (otherwise than by default in payment of
principal moneys at maturity) the holders of the Newco Debentures will have the power by
extraordinary resolution (a resolution passed by holders of 662/3% of the Newco Debentures
present or represented by proxy at a meeting or by instrument in writing signed by holders of
662/3% of the principal amount of the Newco Debentures) to instruct the trustee to waive the
default. In addition, the trustee, so long as it has not become bound to institute any proceedings
under the Indenture, will have the power to waive the default if, in the trustee's opinion, the same
shall have been cured or adequate satisfaction made therefore.
Consolidation, Merger, Amalgamation and Sale of Assets
Newco will not enter into any transaction (whether by way of reorganization, reconstruction,
consolidation, amalgamation, merger, transfer, sale or otherwise) whereby all or substantially all
of its assets would become the property of any other person (the "Successor Corporation") unless
(a) Newco and/or the Successor Corporation, shall, prior to or contemporaneously with the
consummation of that transaction, execute those instruments and do those things as shall be
necessary or advisable to establish that upon the consummation of that transaction (1) the
Successor Corporation will have assumed all the covenants and obligations of Newco under the
Indenture in respect of the Newco Debentures, and (2) the Newco Debentures will be valid and
binding obligations of the Successor Corporation entitling the holders thereof, as against the
Successor Corporation, to all the rights of holders of Newco Debentures under the Indenture; and
(b) that transaction shall be on those terms and shall be carried out at such times and otherwise in
such manner as shall not be prejudicial to the interests of the holders of the Newco Debentures or
to the rights and powers of the trustee under the Indenture.
Modification
In certain circumstances, the Indenture will provide that modifications, abrogations, alterations,
compromises or arrangement of the rights, privileges, restrictions and conditions attaching to a
series of debentures, including the Newco Debentures, issued under the Indenture may be made
if authorized by an extraordinary resolution of holders of such series.
Governing Law
The Indenture and the Newco Debentures will be governed by and construed in accordance with
the laws of the Province of British Columbia and the laws of Canada as applicable therein.
6133-308001-000001-10v2
3
439288 DEBENTURES
The 439288 Debentures will have terms substantially similar to the Newco Debentures except
that the 439288 Debentures will not bear interest and that payments of principal will be made
semi- annually from any proceeds realized from the wind-up of the Company's assets. The
439288 Debentures will not be issued under a trust indenture.
6133-508001-000001-10v2
4
Appendix B
Statement of Fee of the Interim Receiver
PRiCEWATERHOUS C,OPERS I
Statement of Fee
PricewaterhouseCoopers Inc.
601 West Hastings Street
Suite 1400
Vancouver, British Columbia
Canada V6B 5A5
Telephone +1 (604) 806 7000
Facsimile +1 (604) 806 7806
439288 BC Ltd.
c/o Frame Realty
259 Francois Lake Drive
Bums Lake, BC
VOJ I EO
Account No. 70-71-25983-01-001
Invoice No. 76012 - MJV
Date: June 15, 2002
GST REGISTRATION # 86747 0486 RC0001
CA$
For Professional Services Rendered as Interim Receiver with respect to
439288 BC Ltd. ("439288" or the "Company") for the period
May 9, 2002 to May 31, 2002, including:
(NOTE This billing does not include those time charges associated with completion of our Statutory
Duties as Trustee re.• the Proposal, nor does it include time associated with development of the loan
portfolio financial reporting system. Charges in respect of these matters will be billed separately.)
Taking possession
•
Numerous meetings with the Directors of the Company;
•
Arranging for turn over of bank account balances at CIBC, Royal
Bank and the Credit Union;
•
Arranging for turnover of company records from the Financial
Institutions Commission;
•
Arranging and securing appropriate work space and communications
for our Bums Lake administration;
•
Negotiating compensation for the continued services of the
Company's Directors, employees and Marmon Financial Services;
•
Establishing routines for continued access to records and recording of
transactions;
please return one copy with your payment
Interest will be charged on overdue accounts.
PRiCEWATERHOUSGOPERS I
Statement of Fee
Account No. 70-71-25983-01-001
Invoice No. 76012 - MJV
439288 BC Ltd.
June 15, 2002
GST REGISTRATION # 86747 0486 RC0001
CA$
Identification of potential trust issues with respect to the bank account
balances;
Searching for and engaging a local employee to assist with
administration, data entry, and other clerical duties;
Loan portfolio
Documenting past procedures followed for approving, funding, and
recording loans;
Documenting past procedures in respect of the maintenance of manual
records, the maintenance of Caseware records and their present status;
Identifying issues with respect to security, loan documentation,
currency of records, management information on the portfolio;
Developing a strategy for developing a database and the assembly of
other necessary electronic data;
Researching financial reporting systems capable of accounting for a
loan portfolio comprising 1,400 individual borrowers;
Designing the basic requirements for the database;
Reviewing with the Company our recommended course of action with
respect to the development of a new financial reporting system;
Meetings with various borrowers;
(2)
Statement of Fee
Account No. 70-71-25983-01-001
Invoice No. 76012 - MJV
439288 BC Ltd.
June 15, 2002
GST REGIS'
86747 0486120000
CA$
Dealing with particular issues and questions arising from the loan
portfolio, including Interior Timber, Endako Auto Wrecking, Palmer
mortgage;
Reviewing of loan files regarding larger loans to identify
documentation issues and sight manual notations of payment history;
Working with counsel to develop suitable security agreements;
Interviewing Directors of the Company to obtain and document
disclosure of non-arms length transactions;
•
Attending to payouts and security discharges;
Discussions with the Company regarding various proposals from
borrowers;
•
Working with the Company's Directors to arrange communication to
borrowers;
Property portfolio
•
Assembling files for review;
•
Arranging property searches;
•
Communicating with mortgagees to determine balances owing;
•
Considering tax assessed values and managements opinion of values;
•
Considering need for and usefulness of current appraisals;
(3)
IATERHOUSE( 60PERS
0
439288 BC Ltd.
June 15, 2002
Statement of Fee
Account No. 70-71 -25983-01-001
Invoice No. 76012 - MJV
GST REGISTRATION # 86747 0486 RC0001
CA$
Identifying properties held in names of Directors in trust for the
Company and obtain written confirmation;
Assembling particulars of tenancies of properties, cash flows, review
and augment insurance coverage where necessary;
Considering impact of servicing related institutional mortgages and
related investor mortgages on property by property basis;
Interviewing realtors and others regarding current market and property
histories;
•
Identifying situations warranting continued payment of institutional
mortgages;
Cash and banking
•
Establishing new bank accounts in the name of the Interim Receiver;
•
Arranging for continuation of automated loan payments from
borrowers;
•
Arranging for automated payment of institutional mortgages,
insurance premiums, and necessary leases;
•
Maintaining independent record of cash transactions;
Attending to the manual payment of suppliers, property utilities, and
insurance premiums, where automated payments could not be
structured;
•
Preparation of regular cash deposits;
(4)
f'RJCEWATERHOUSECWPERS I
Statement of Fee
Account No. 70-71-25983-01-00
Invoice No. 76012 - MJV
439288 BC Ltd.
June 15, 2002
GST REGISTRATION # 86747 0486 RC0001
CA$
Creditors
•
Numerous communications with secured and unsecured creditors;
•
Interviewing directors and employees to document procedures
followed by the Company in raising capital;
Media
•
Preparation of press release;
•
Attending interviews with various members of the media;
Regulators
Discussions with counsel and regulators regarding ability to raise
funds in the future;
(5)
ATERHOUSQOPERS 0
Statement of Fee
Account No. 70-71-25983-01-001
Invoice No. 76012 - MJV
439288 BC Ltd.
June 15, 2002
GST REGISTRATION # 86747 0486 RC0001
CA$
General
All other discussions, meetings, telephone calls and other matters not
specifically referred to herein.
FEES (Schedule 1)
GST
TOTAL DUE
111,709.50
7,819.67
119,529.17
MJV:RDP:ml
W:\FASdata\B\Bmns Lake (Proposal & Int Rec)\lnterim Receiver\Bills\76012 06-2002 (Bill-I May 9 to 31 02).doc
(6)
Schedule 1
PricewaterhouseCoopers Inc.
Interim Receiver of 439288 BC Ltd.
Summary of Time Charges
for the Period May 9, 2002 to May 31, 2002
Staff
Senior Vice President
Michael Vermette
Gary Powroznik
Vice President
Rick Pallen
Mike Smallwood
Hours
Total ($)
27.5
11.0
11,687.50
5,500.00
118.2
8.0
47,280.00
2,800.00
0.4
108.5
101.5
20.0
30.0
66.00
20,615.00
15,732.50
3,800.00
4,200.00
0.3
28.50
Senior Associate
Patty Cotton
Jason Granger
Nathan Tash
Paul Johnston
Chris Stocco
Technician
Jeane Ingram
111,709.50
ATERHOUSE(60PERS 0
Statement of Fee
PrieewaterhouseCoopers Inc.
601 West Hastings Street
Suite 1400
Vancouver, British Columbia
Canada V6B SAS
439288 BC Ltd.
c/o Frame Realty
259 Francois Lake Drive
VOJ I EO
Burns Lake, BC
Telephone +1 (604) 806 7000
Facsimile +1 (604) 806 7806
Account No. 70-71-25983-01-001
Invoice No. 82051 - MJV
Date: July 19, 2002
GST REGISTRATION # 86747 0486 RC0001
CA$
For Professional Services Rendered as Interim Receiver with respect to
439288 BC Ltd. ("439288" or the "Company") for the period
June 1, 2002 to June 30, 2002, including:
(NOTE: This billing does not Include those time charges associated with completion of our
Duties as Trustee re; the Proposal, nor does it include time associated with development of the loan
portfolio financial reporting system. Charges In respect of these matters will be billed separately.)
Loan portfolio
•
Identifying issues with respect to security, loan documentation,
currency of records, management information on the portfolio;
Implementing strategies for developing a database and the assembly
of other necessary electronic data;
Reconciling the manual records from Glenn Anderson to MS Access
data which was exported from Caseware.
•
Co-ordinating design/data migration in regards to the financial
reporting system;
Meetings with various borrowers;
•
Dealing with particular issues and questions arising from the loan
portfolio, including Interior Timber, Endako Auto Wrecking, Palmer
mortgage;
please return one copy with your payment
Interest will be charged on overdue accounts.
PRJCL1/VATERHOUSECWPERS 0
Statement of Fee
Account No. 70-71-25983-01-001
Invoice No. 82051- MJV
439288 BC Ltd,
July 19, 2002
GST REGISTRATION # 86747 0486 RC000
CA$
Reviewing of loan files regarding larger loans to identify
documentation issues and sight manual notations of payment history;
Attending to payouts and security discharges;
Discussions with the Company regarding various proposals from
borrowers;
Working with the Company's Directors to arrange communication to
borrowers;
Property portfolio
•
Communicating with mortgagees to determine balances owing;
•
Considering tax assessed values and managements opinion of values;
•
Continuing work of establishing particulars of tenancies of properties,
cash flows, review and augment insurance coverage where necessary;
Further review of institutional mortgages and related investor
mortgages on property by property basis;
•
Further work on current market and property histories;
Identifying and ranking of the industrial and investors mortgages on
properties and considering impact;
Identifying situations warranting continued payment of institutional
mortgages;
(2)
ATERHOUSE{(OPE
Statement of Fee
Account No. 70-71 -25983-01-001
Invoice No. 82051 - MJV
439288 BC Ltd.
July 19, 2002
GST REGISTRATION if 86747 0486 RCOOO1
CA$
Cash and banking
Establishing further bank accounts in the name of the Interim
Receiver;
Arranging for continuation of automated loan payments from
borrowers;
Maintaining independent record of cash transactions;
•
Attending to the manual payment of suppliers, property utilities, and
insurance premiums, where automated payments could not be
structured;
Preparation of regular cash deposits;
Preparation of Statement of Receipts and Disbursements.
Creditors
•
Numerous communications with secured and unsecured creditors;
•
Reviewing classification of loans to determine the secured and
unsecured creditors;
Regulators
•
Discussions with counsel and regulators regarding ability to raise
funds in the future;
(3)
ATERHOUSE(60PE
439288 BC Ltd.
July 19, 2442
Statement of Fee
Account No. 74-71-25983Invoice No. 82451- MJV
REGISTRATION # 86747 0486 RC4441
CA$
General
•
Reviewing bank records to identify non-arms length transactions;
•
All other discussions, meetings, telephone calls and other matters not
specifically referred to herein.
FEES (Schedule 1)
DISBURSEMENTS (telephone, telecopy, courier, postage, photocopy)
FEES AND DISBURSEMENTS
GST
TOTAL DUE
117,660.00
680.10
118,340.10
8,283.81
126,623.91
MJV:RDP:ml
W;\PASdata«B\Bums Lake (Proposal & Int Rec)\Interim Receiver\Bills \82051 07-2002 (Bill-3 Jun 1 to 30 02).doc
(4)
Schedule 1
PricewaterhouseCoopers Inc.
Interim Receiver of 439288 BC Ltd.
Summary of Time Charges
for the Period June 1, 2002 to June 30, 2002
Staff
Senior Vice President
Michael Vermette
Hours
Total
15.5
6,587.50
Rick Pallen
141.8
56,720.00
Senior Associate
Patty Cotton
Jason Granger
Chris Stocco
16.5
169.0
123.5
2,722.50
32,110.00
17,290.00
22.3
2,230.00
Vice President
Technician
Magdalena Lo
Total Time Charges
117,660.00
EWATERHOUSE((,l^PERS D
439288 BC Ltd.
c/o Frame Realty
259 Francois Lake Drive
VOJ I EO
Burns Lake, BC
Statement of Fee
PricewaterhouseCoopers Inc.
601 West Hastings Street
Suite 1400
Vancouver, British Columbia
Canada V6B 5A5
Telephone +1 (604) 806 7000
Facsimile + 1(604) 806 7806
Account No. 70-71 -25983-01-003
Invoice No. 82045 - MJV
Date: July 19, 2002
GST REGISTRATION # 86747 0486 RC0001
CA$
FOR PROFESSIONAL SERVICES RENDERED as Interim Receiver with
respect to 439288 BC Ltd. ("439288" or the "Company") for time
associated with development of the loan portfolio financial reporting
system for the period May 9, 2002 to July 10, 2002, including:
Development of the loan portfolio financial reporting system;
•
Additional data amendments to the system; and
•
Support to the system;
25,000.00
FEES (Schedule 1)
1,750.00
GST
26,750.00
TOTAL DUE
MJV:RDP:ml
W:1PASdatalB\Burns Lake (Proposal & Int Rec)\lnterim Receiver\Bills\82045 07-2002 (Bill-4 rate May 9 to June 30 02).doc
please return one copy with your payment
Interest will be charged on overdue accounts.
Schedule I
PricewaterhouseCoopers Inc.
Interim Receiver of 439288 BC Ltd.
Summary of Time Charges
for the Period May 9, 2002 to June 30, 2002
Staff
Senior Manager
Peter Guo
Manager
Bernard Ter Stege
Hours
Total ($)
2.5
1,062.50
91.0
34,125.00
35,187.50
Less Discount
Total Time Charges
X10,187.50
25,000.00
CEWATERHOUSE( 60PERS 0
439288 BC Ltd.
c/o Frame Realty
259 Francois Lake Drive
VOJ I EO
Burns Lake, BC
Statement of Fee
PricewaterhouseCoopers Inc.
601 West Hastings Street
Suite 1400
Vancouver, British Columbia
Canada V6B 5A5
Telephone +1 (604) 806 7000
Facsimile +1 (604) 806 7806
Account No. 70-71-25983-01-001
Invoice No. 70-0071-87197
Date: August 15, 2002
GST REGISTRATION # 86747 0486 RC0001
CA$
For Professional Services Rendered as Interim Receiver with respect to
439288 BC Ltd. ("439288" or the "Company") for the period July 1, 2002
to July 31, 2002, including:
(NOTE: Thls billing does not Include those time charges associated with completion of our Statutory
rubes as Trustee re; the Proposal, nor does it Include time associated with development of the loan
portfolio financial reporting system. Charges in respect of these matters will be billed separately.)
Loan portfolio
Continue reconciliation of loan accounts between Caseware records
and manual records;
•
Review, assess and modify summary reporting from database as
necessary;
Send confirmation letters with borrowers;.
Identify, reconcile and assemble data on related party loans;
Analysis of net worth of related parties and ability to service principal
and interest on loans. Solicit proposals from related parties for
servicing;
Consider ability to reduce indebtedness by transfer of assets, set-off
and identify security that could be put up by related parties in support
of loans;
please return one copy with your payment
Interest will be charged on overdue accounts.
EWATERHOUSE(G0P6
Statement of Fee
Account No. 70-71 -25983-01-001
Invoice No. DRAFT - MJV
439288130 Ltd.
August 15, 2002
GST REGISTRATION # 86747 0486 RCOO01
CA$
Develop two dimensional payment rating system, run analysis on all
loans, perform sensitivity analysis on parameters chosen;
Review accounts listed by payment rating resulting from application
of the objective criteria with management, identify loans which were
not fairly classified and amend payment ratings as appropriate;
Meet with various borrowers;
Deal with particular issues and questions arising from the loan
portfolio, including Interior Timber, August Miller, Endako Auto
Wrecking, and Donovan Palmer;
Establish Trust account for Interior Timber collections pending review
of amount to be realized and competing priority claims;
Property portfolio
Refine and update property particulars;
Write to commercial tenants seeking GST on rents;
•
Assess and address situations where tenants not paying rent on
residential properties as appropriate;
•
Further review of institutional mortgages and related investor
mortgages on property by property basis;
(2)
ATERHOUSQOPERS 0
Statement of Fee
439288 BC Ltd.
August 15, 2002
Account No. 70-71-25983-01-001
Invoice No. DRAFT - MJV
GST REGISTRATION
# 86747
0486 RC0001
CA$
Other assets
•
Identify, inventory and inspect other assets;
Arrange for valuation of other assets as appropriate;
Determine whether JB Services shares and Key-Oh Wood Product
shares were owned personally by principals or corporately by 439288
B.C. Ltd.
Cash and banking
.
Establish further bank accounts in the name of the Interim Receiver;
Maintain independent record of cash transactions;
Attend to the manual payment of suppliers, property utilities, and
insurance premiums, where automated payments could not be
structured;
Preparation of regular cash deposits;
Preparation of Statement of Receipts and Disbursements.
Creditors
Numerous communications with secured and unsecured creditors;
•
Review classification of loans to determine the secured and unsecured
creditors;
Begin reconciliation of Caseware records to manual records;
(3)
1CEWATERHOUSECWPERS 3
Statement of Fee
Account No. 70-71-25983-01-001
Invoice No. DRAFT - MJV
439288 BC Ltd.
August 1, 2002
GST REGISTRATION # 86747 0486 RC0001
CA$
Regulators
Discussions with counsel and regulators regarding ability to raise
funds in the future;
Tax issues
Review tax issues in regards to asset transfer to Newco including
related research and follow-up discussions;
Identify T-5 issue requiring voluntary disclosure and process to be
followed;
Consider availability of tax losses inherent within 439288 B.C. Ltd.
and potential availability for Newco;
Trust issues
n
Further analysis of managed portfolio balances, reconcile, determine
which accounts clearly belonged to beneficiary;
•
Trace cash, determine balances arising and held apart;
Meet with beneficiary, provide documentation as to total account
activity and issues arising;
Restructuring issues
Consider merits of establishing Newco or attempting to restructure
using current corporation;
(4)
WATERHOUSE(cX3PERS 9
439288 BC Ltd.
August 15, 2002
Statement of Fee
Account No. 70-71 -25983-01-001
Invoice No. DRAFT - MJV
GST REGISTRATION # 86747 0486 RC0001
CA$
Identify assets appropriate to be transferred to Newco;
With management, consider the assets to be transferred, fair value of
same and amount of debts that could be assumed by Newco;
n
Consider potential cash flow achievable by Newco;
General
•
Review records to identify non-arm's length transactions;
Summarize issues of concern affecting governance, discuss concerns
with management and propose potential solutions;
Respond to media queries;
All other discussions, meetings, telephone calls and other matters not
specifically referred to herein.
FEES (Schedule 1)
DISBURSEMENTS (telephone, telecopy, courier, postage, photocopy)
FEES AND DISBURSEMENTS
GST
TOTAL DUE
141,148.50
1,395.90
142,544.40
9,978.11
152,522.51
(5)
Schedule 1
PricewaterhouseCoopers Inc.
Interim Receiver of 439288 BC Ltd.
Summary of Time Charges
for the Period July 1, 2002 to July 31, 2002
Staff
Senior Vice President
Michael Vermette
Gary Powroznik
Hours
Total ($)
15.5
2.5
7,362.50
1,250.00
Partner
Brad McDougall
1.7
1,105.00
Vice President
Rick Pallen
159.6
67,032.00
3.5
5.5
1,050.00
2,062.50
13.5
158.0
107.7
2,362.50
31,600.00
26,925.00
3.8
399.00
Manager
Chris Strother
Paul Bekenn
Senior Associate
Patty Cotton
Jason Granger
Chris Stocco
Technician
Magdalena Lo
Total Time Charges
141,148.50
Appendix D
Statement of Fee of Cook Roberts
Aua-06-02
03:53pm
From-Cook Roberts
250 413 3300
T-038
P.003/004
F-888
00K ROBERTS
BARRISTERS & SOLICITORS
Date:
File No:
Bill No:
August 6, 2002
24738 M13P
209574
Our OST
#R.117202796
SEVENTH FLOOR, 1175 DOUGLAS STREET
VICTORIA, BC V8W 2111
PHONE (250) 385-1411
FAX (250) 413-3300
OUSE COOPERS INC.
PRICE WAT
1400 - 601 WEST HASTINGS STREET
VANCOUVER, BC V6B 5A4
Attention: Rio;k. Pollen
STATEMENT OF ACCOUNT
Re: 4392
TO PROFESSIONAL SERVICES RENDERED in connection with your Appointment as Interim Receiver and as a Trustee under a Notice
of intention to Make a Proposal including reviewing the factual circumstances pertaining to the company and certain investors and the
officers operating the company; reviewing a memorandum from you; providing you orally with our opinion; conferring with Mr. Emsley,
solicitor for the principals of the company in regard to disclosure of various matters to the Court; reviewing the material filed in Court
pertaining to your Appointment as interim Receiver; providing you with our opinion as to your duties both as Interim Receiver and as
Trustee named in the Proposal; reviewing your draft opinion letter; providing you with our comments and all related telephone calls,
correspondence and attendances ...
TOTAL FEES
$ 1,100.00
DISBURSEMENTS AND OTHER CHARGES
Taxable Disbursements and O/C
FAX
COPY CHARGES
L.D. TELEPHONE
FAX
FILE A.DMIN FEE
QUICKLAW SEARCH
Total Disbursements
Total Fees & Disbursements
5.50
5.00
4.40
15.50
25.00
4.50
59.90
1,159.90
Tax on Taxable Fees
Goods and Services Tax
Social Services Tax
Tax on Taxable Disbursements
Goods and Services Tax
Total Fees, Disbursements and Taxes
COOK ROBERTS
77.00
82.50
4.19
Appendix E
Interim Receiver's Statement of
Receipts and Disbursements
for the period May 9, 2002 to August 15, 2002
PRICEWATERHOUSECOOPERS INC.
IN ITS CAPACITY AS
INTERIM RECEIVER FOR 439288 B.C. LTD.
STATEMENT OF RECEIPTS AND DISBURSEMENTS
FOR THE PERIOD FROM MAY 9, 2002 TO AUGUST 15, 2002
RECEIPTS
744,875.85
988,626.64
34,211.07
126,675.81
3,656.54
20.00
310.07
Cash on hand
Repayment of loans
Rental income
Investor Trust deposits
Interest income
Sundry income
GST collected
1,898 ,375.98
Total Receipts
DISBURSEMENTS
370.02
35,602.10
15,562.60
6,597.35
6,319.37
3,845.16
2,714.86
26,472.07
16,323.61
347.38
7,364.74
40,152.44
2,583.91
45.05
130.00
25,232.17
35,197.68
61,485.28
2,463.50
395,518.00
115,745.64
25,000.00
421.58
41,145.60
Advertising
Contract labour
Insurance
Leasing expense
Office expense
Rent
Repairs & maintenance
Salaries & wages (net)
Receiver General (payroll deductions)
Security
Telephone
Travel
Utilities
Workers Compensation Board
Appraisals
Loan advances
Payments to senior mortgagees
Property tax
Title search
Interim Receiver's fees
Legal fees & disbursements
Legal - retainer
Miscellaneous
GST paid
866,640.11
Total Disbursements
$ 1,031,735.87
EXCESS OF RECEIPTS OVER DISBURSEMENTS
Represented by:
Cash available:
Amounts held subject to third party claims:
$
849,161.14
182,574.73
$ 1,031,735.87