Exemption Orders (Discretionary)
RBC DOMINION SECURITIES INC.
2001 BCSECCOM 255
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Issuer is a “connected issuer,” but not a “related issuer,” of registrants that are to act as underwriters in a proposed distribution of the Issuer - Registrant underwriters exempted from independent underwriter requirements, provided that, at the time of the distribution, issuer is not a "specified party” as defined in Draft Multi-Jurisdictional Instrument 33-105 - Underwriting Conflicts, and the Issuer is not a “related issuer” to any of the underwriters.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, s. 48
Securities Rules, B.C. Reg. 194/97, s. 78(2)(b)
REVISED
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO, NEWFOUNDLAND, BRITISH COLUMBIA, AND QUEBEC
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF RBC DOMINION SECURITIES INC., NATIONAL BANK FINANCIAL INC., CIBC WORLD MARKETS INC., AND DESJARDINS SECURITIES INC. AND MINDREADY SOLUTIONS INC.
MRRS DECISION DOCUMENT
WHEREAS the securities regulatory authority or regulator (the "Decision Maker") in each of British Columbia, Ontario, Newfoundland and Québec (the "Jurisdictions") has received an application from RBC Dominion Securities Inc. ("DS"), Desjardins Securities Inc. ("DSI"), National Bank Financial Inc. ("NBF") and CIBC World Markets Inc.(“CWM”), (the "Filers") for a decision, pursuant to the securities legislation of the Jurisdictions (the "Legislation"), that the requirement (the "Independent Underwriter Requirement") contained in the Legislation which restricts a registrant from acting as an underwriter in connection with a distribution of securities of an issuer made by means of prospectus, where the issuer is a connected issuer (or the equivalent) of the registrant unless a portion of the distribution at least equal to that portion underwritten by non-independent underwriters is underwritten by an independent underwriter, shall not apply to the Filers in respect of a proposed distribution (the "Offering") of Subordinate voting shares "Offered Securities") of Mindready Solutions Inc. (the "Corporation"), pursuant to a prospectus (the "Prospectus");
AND WHEREAS the Filer has represented to the Decision Makers that:
(i) in connection with the initial public offering of Subordinate Voting Shares of the Corporation an exemption be granted by each of the Decision Makers in order to permit the syndicate to be formed to underwrite the Offering to consist of:
| NAME OF UNDERWRITER | PORTION OF OFFERING |
| DS | 44% |
| CWM | 22.5% |
| Yorkton Securities Inc. | 13.5% |
| DSI. | 10% |
| NBF | 10% |
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications, the Commission des valeurs mobilières du Québec is the Principal Jurisdiction for this application.
AND WHEREAS it has been represented to the Decision Makers that:
1. The Corporation was incorporated under the Canada Business Corporations Act on September 16, 1999 and is not currently a reporting issuer under the Act.
2. The Corporation’s primary business is test engineering solutions, which consists of the design and implementation of electronics test solutions for every step of the quality assurance process required by customers, including but not limited to x-ray, in-circuit, functional and environmental test solutions.
3. The Corporation is proposing to complete the Offering in each of the provinces of Canada and the Offering is to be made by way of a long form prospectus (the "Prospectus").
4. The head office of the Corporation is in Québec.
5. A preliminary prospectus in respect of the Offering was filed with the securities regulators of each province, with the Commission des valeurs mobilières du Québec designated as the principal regulator under National Policy 43-201 (Mutual Reliance Review System for Prospectuses and Annual Information Forms), on October 6, 2000.
6. The nature of the relationship among the Corporation and the Filer has been described in the Preliminary Prospectus and will be described in the Prospectus. The Prospectus will contain the information specified in Appendix "C" of the Multi-Jurisdictional Instrument 33-105 and Companion Policy 33-105 – Underwriting Conflicts (“Proposed Instrument”) in connection with indebtedness of the Corporation to CIBC;
7. DS initially approached and began to discuss the possibility of an initial public offering with the Corporation in August 2000.
8. The Corporation is a subsidiary of Nurun Inc. ("Nurun"), whose shares are listed for trading on the Toronto Stock Exchange. Nurun is, in turn, an indirect subsidiary of Quebecor Inc. ("Quebecor"), the shares of which are also listed on the Toronto Stock Exchange.
9. Quebecor is currently in the process of arranging for financing in connection with its proposed acquisition of all of the common shares of Le Groupe Vidéotron Ltée. The financing will take the form of a non-revolving acquisition facility in the amount of approximately $2 billion in favour of Quebecor Médiaco Inc. ("Quebecor Médiaco"), an affiliate of Quebecor, by a syndicate of financial institutions to be led by the Royal Bank of Canada ("RBC"). A credit facility in the amount of $1.2 billion will also be extended to Quebecor by a syndicate of financial institutions to be led by RBC. The National Bank (“NB”), of which National Bank Financial Inc. is an indirect wholly-owned subsidiary and Caisse Centrale Desjardins (“CCD”), of which Desjardins Securities Inc. is an indirect majority-owned subsidiary will form part of the syndicate of financial institutions which is extending a credit facility to Quebecor Inc. and to certain companies within the Quebecor Inc. group of companies.
10. Canadian Imperial Bank of Commerce ("CIBC") is a lender to the Corporation (and Beltron Technologies Inc., a company acquired by the Corporation in March 2000 whose activities are now carried on by the Corporation) pursuant to a credit facility in the approximate amount of $15 million, which includes an operating line of credit and a "bridge loan" in the amount of $5 million. As of the date hereof, an approximate amount of $5 million has been drawn down under such credit facility and the Corporation expects that an approximate amount of $7 million will have been drawn down at the time of the closing of the Offering. It is anticipated that a portion of the proceeds of the Offering will be used to reimburse part of the indebtedness to CIBC.
11. The lenders did not and will not participate in the decision to make the Offering or in the determination of its terms.
12. DS proposes that the Syndicate consist of:
| NAME OF UNDERWRITER | PORTION OF OFFERING |
| DS | 44% |
| CWM | 22.5% |
| Yorkton Securities Inc. | 13.5% |
| DSI | 10% |
| NBF | 10% |
13. Each of DS, CW, Yorkton Securities Inc. and Desjardins Securities Inc. has participated in the drafting of the Prospectus and in the due diligence related to the Offering.
14. The Filer will not benefit in any manner from the Offering other than the payment of their underwriting fees in connection with the Offering.
15. DS is a wholly-owned subsidiary of RBC and CW is a wholly-owned subsidiary of CIBC.
16. Neither DS, NBF, DSI or CWM played a role in the decisions of Quebecor, Nurun or the Corporation to accept the financing arrangements described above. Such arrangements are not conditional upon either DS or CW being involved in the Offering or, in fact, upon the Offering being completed. Each of Quebecor, Nurun and the Corporation accepted the financings and the terms thereof independently of any involvement of either DS, NBF, DSI or CWM in the Offering. The net proceeds from the Offering will not be used to repay the indebtedness to the RBC or the members of its lending syndicate or to CIBC, with the exception of the repayment of a portion of the indebtedness to CIBC by the Corporation as mentioned above.
17. The Corporation is not a "related issuer", as defined in the Legislation, in respect of any of the members of the Syndicate, including DS, Desjardins Securities Inc., National Bank Financial Inc. and CW. The Corporation may be considered to be a "connected issuer", as defined in the Legislation, of DS, NB, CCD and/or CW if the indebtedness of Quebecor and Quebecor Médiaco to RBC, NB, CCD and/or the indebtedness of Nurun and the Corporation to CIBC is considered to be "indebtedness to, or any other relationship with …" DS or RBC, FBN or BN, DSI or CCD and CWM or CIBC "that in connection with a distribution of securities of the Corporation, is material to a prospective subscriber of the securities".
18. In connection with the Offering, the Corporation is neither a "related issuer" nor a "connected issuer", as such terms are defined in the Legislation, in respect of either Yorkton Securities Inc. or Desjardins Securities Inc.
19. The Issuer is not a "specified party" as defined in the Proposed Instrument.
20. The applicant has requested an exemption from the relevant provisions of the Legislation, such that DS, NBF, CWM, Yorkton Securities Inc. and DSI be permitted to underwrite the Offering in the proportions specified above. In light of the facts described above and, specifically, the fact that 13.5% of the Offering will be underwritten by an independent underwriter (namely Yorkton Securities Inc.), it was respectfully submitted to the Decision Makers that the granting of the exemption requested would not be detrimental to the protection of investors.
WHEREAS pursuant to the mutual reliance review system for exemptive relief applications, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers, under the Legislation, is that the Independent Underwriter Requirement shall not apply to the Filers in connection with the Offering provided the Issuer is not a related issuer, as defined in the Proposed Instrument, to the Filers at the time of the Offering and is not a specified party, as defined in the Proposed Instrument, at the time of the Offering.
DATED at Montréal, this 12 day of December, 2000.
Le directeur de la Conformité et de l'application,
Me Jean Lorrain