Exemption Orders (Discretionary)
TD SECURITIES INC.
2000 BCSECCOM 364
Headnote
Mutual Reliance Review System for Exemptive Relief Applications – Registrant underwriters exempted from independent underwriter requirements, provided that, an independent underwrites at least 20% of the offering and fulfils certain other conditions as set out in Part 2 of Proposed Multi-Jurisdictional Instrument 33-105 – Underwriting Conflicts
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)
IN THE MATTER OF THE CANADIAN SECURITIES LEGISLATION OF QUEBEC, BRITISH COLUMBIA, ONTARIO AND NEWFOUNDLAND
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF TD SECURITIES INC. AND DATARADIO INC.
MRRS DECISION DOCUMENT
WHEREAS an application has been received by the securities commission (the “Decision Maker”) of Quebec, British Columbia, Alberta, Ontario and Newfoundland (the “Jurisdictions”) from TD Securities Inc. (“TDSI”) for a decision pursuant to the securities legislation of Quebec, British Columbia, Alberta, Ontario and Newfoundland (the “Legislation”) that the requirements to comply with the rule against acting as an Underwriter in connection with a distribution of securities of a connected issuer of the underwriter (the “Independent Underwriter Requirement”) contained in the Legislation shall not apply to TDSI in connection with a proposed initial public offering of common shares by Dataradio Inc. (the “Issuer”) (the “Offering”) to be made by means of a prospectus (the “Prospectus”);
WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the “ERA”) the Quebec Securities Commission is the principal regulator for this application;
AND WHEREAS the Issuer and TDSI have represented to the Decision Makers that:
1. The Issuer is a designer and manufacturer of wireless data equipment for the private network wireless data communications industry.
2. The Issuer is a corporation resulting from an amalgamation under the Canada Business Corporations Act (“CBCA”) on September 6, 1985, of Dataradio Inc., a company incorporated under the CBCA on September 6, 1983, and Presud Communications Inc., a company incorporated under the CBCA on December 8, 1981. The head office of the Issuer is located in Québec.
3. The Issuer filed a preliminary prospectus dated October 20th, 2000 (the “Preliminary Prospectus”) in all Canadian provinces. The Issuer currently has an authorized capital consisting of an unlimited number of common shares and an unlimited number of preferred shares, issuable in series, of which 20,000,000 common shares and no preferred shares are outstanding on the date hereof.
4. On May 5, 2000, the Issuer entered into a $1,500,000 secured revolving credit facility (the “Committed Revolver”) and a $4,500,000 commercial instalment loan (the “Commercial Loan” and collectively with the Committed Revolver, the “Credit Facilities”) with the Toronto Dominion Bank (the “Bank”).
5. Pursuant to an agreement dated October 5, 2000, the Bank agreed to increase the Committed Revolver to $3,000,000 and extend the term for the Committed Revolver to October 5, 2001. This agreement was subject, amongst other things, to the acceptance by the Issuer that the final repayment date for the outstanding balance of the Commercial Loan be changed from December 31, 2001 to November 30, 2000.
6. TDSI is a wholly-owned subsidiary of the Bank.
7. As of September 30, 2000, the amount drawn by the Issuer on the Committed Revolver was $ 914,000.
8. As of September 30, 2000, the amount drawn by the Issuer on the Commercial Loan was $ 724,000.
9. It is possible that a total of up to $3,641,000 will be drawn by the Issuer on the Credit Facilities before the closing of the transaction.
10. By virtue of the Credit Facilities, the Issuer may, in connection with the Offering, be considered a “Connected Issuer” of TDSI in accordance with the Multi-Jurisdictional Instrument 33-105 and Companion Policy 33-105 – Underwriting Conflicts (“33-105”). The Issuer is not a “Related Issuer” as defined in 33-105.
11. It is anticipated that the Offering will be approximately $50 million.
12. Part of the proceeds of the Offering will be used by the Issuer to repay the amounts drawn under the Credit Facilities.
13. No default has been reported under the Credit Facilities.
14. The audited consolidated balance sheet of the Issuer as at July 31, 2000 indicates that shareholders’ equity is $9,808,000. Based on the audited consolidated balance sheet of the Issuer as at July 31, 2000, the sum of the Credit Facilities outstanding at September 30, 2000 represents 16.70% of the Issuer’s shareholders’ equity. Based on the audited consolidated balance sheet of the Issuer as at July 31, 2000 and the possible $3,641,000 to be drawn on the Credit Facilities before the closing of the transaction, the sum of the Credit Facilities could represent 37.12% of the Issuer’s shareholders’ equity. The Issuer is not in a Minor Debt Relationship as defined in 33-105.
15. Pursuant to an agreement (the “Underwriting Agreement”) to be made between the Issuer, TDSI, CIBC World Markets Inc. (“CIBC WM”), National Bank Financial Inc. (“National”) and BMO Nesbitt Burns Inc. (“Nesbitt”) (collectively the “Underwriters”), the Underwriters will purchase the common shares under the Offering on the terms and conditions described therein.
16. The Issuer is neither a “Connected Issuer” nor a “Related Issuer” of CIBC WM for the purposes of the Offering.
17. CIBC WM will underwrite at least 20% of the dollar value of the Offering, will participate in the structuring and pricing of the Offering and has and will continue to participate in the due diligence activities performed by the Underwriters for the Offering.
18. The Preliminary Prospectus and the Prospectus will contain a certificate signed by the Underwriters.
19. TDSI will not receive any benefits from the Offering other than the payment of its fees in connection therewith.
20. Each of the Underwriters will be, at the time of final receipt of the Prospectus, registered as a dealer in the categories of “broker” and “investment dealer” in all provinces and territories.
21. The Preliminary Prospectus and the Prospectus will disclose the nature of the relationship between the Issuer, TDSI and the Bank and the existence of the Credit Facilities as specified in Appendix “C” of 33-105.
22. The Underwriters will subscribe to the offering according to the following table:
| Underwriter | Percentage of Offering |
| TD Securities Inc. | 47% |
| CIBC World Markets Inc. | 25% |
| National Bank Financial Inc. | 18% |
| BMO Nesbitt Burns Inc. | 10% |
23. The decision to make the Offering, including the terms and conditions of distribution, were made through negotiations between the Issuer and the Underwriters without the involvement of the Bank.
24. The Issuer is not in financial difficulty, is not under immediate financial pressure to proceed with the Offering and is not in default in any of its obligations. The Issuer is not a “specified party” as such term is defined in 33-105.
AND WHEREAS under the System, 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 TDSI in connection with the Offering provided that:
a) CIBC WM underwrites at least 20% of the Offering;
b) CIBC WM participates in the due diligence, prospectus drafting and pricing in relation to the Offering and the extent of its participation is fully described in the Prospectus;
c) CIBC WM signs the underwriters certificate in the Prospectus;
d) the Prospectus contains the disclosure stated in paragraph 21 above; and
e) the relationship between the Issuer and TD will be disclosed in the Prospectus.
DATED at Montréal, this 24 day of November, 2000.
Me Jean Lorrain
Le Directeur de la Conformité et application