Securities Law & Instruments


Headnote

Mutual Reliance Review System for Exemptive Relief Applications - Issuer is a"connected issuer", but not a "related issuer", in respect of registrants that areunderwriting a distribution of securities of the issuer - Issuer not in financial difficultyand not a "specified party" as defined in Draft Multi-Jurisdictional Instrument 33-105Underwriting Conflicts - underwriters exempt from the requirement in the legislation thatan independent underwriter underwrite a portion of the distribution equal to the portionunderwritten by the lead underwriter

Applicable Ontario Statutes

Securities Act, R.S.O. 1990, c.S.5, as amended

Applicable Ontario Regulations

Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as amended., ss.219(1), 224(1)(b), 233, Part XIII

Applicable Ontario Rules

In the Matter of Limitations on a Registrant Underwriting Securities of a Related or aConnected Issuer of the Registrant (1997), 20 O.S.C.B. 1217, as varied by (1999), 22O.S.C.B. 149.

Proposed Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts (1998), 21O.S.C.B. 781.


IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ONTARIO, QUEBEC AND NEWFOUNDLAND

AND

IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF
SCOTIA CAPITAL INC., TD SECURITIES INC., AND WESTERN OIL SANDS INC.

MRRS DECISION DOCUMENT


WHEREAS the Canadian securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Ontario, Quebec and Newfoundland (the"Jurisdictions") has received an application from Western Oil Sands Inc. (the"Corporation"), Scotia Capital Inc. ("Scotia Capital") and TD Securities Inc. ("TDSecurities," collectively Scotia Capital and TD Securities, the "Connected Underwriters"))for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation")that the provision contained in the Legislation restricting a registrant from acting as anunderwriter in connection with a distribution of securities of a connected issuer of theregistrant (the "Underwriter Restriction") shall not apply to the Connected Underwriters inconnection with a proposed distribution (the "Offering") of common shares (the "Shares")of the Corporation;

AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the principalregulator for this application;

AND WHEREAS the Corporation has represented to the Decision Makers that:

1. The Corporation is incorporated under the laws of the Province of Alberta. TheCorporation holds a 20% undivided interest in an oil sands project (the "Project")being developed near Fort McMurray, Alberta. The Project is being undertaken byShell Canada Limited, as to an undivided 60% interest, Chevron CanadaResources Limited, as to an undivided 20% interest and the Corporation pursuantto a joint venture formed for such purposes.

2. The Offering is the initial public offering of the Corporation. The Corporation hasapplied to list the Shares on The Toronto Stock Exchange.

3. The Corporation has filed a preliminary long form prospectus dated December 23,1999 (the "Preliminary Prospectus") and an amended and restated preliminary longform prospectus dated January 27, 2000 (the "Amended Preliminary Prospectus")with the securities regulatory authority in each of the provinces of Canada inconnection with the Offering.

4. The Corporation will be entering into an underwriting agreement (the "UnderwritingAgreement") in respect of the Offering with a syndicate of underwriters (the"Syndicate") which will include the following underwriters:

Scotia Capital Inc. 30%
TD Securities Inc. 20%
RBC Dominion Securities Inc. 14%
CIBC World Markets Inc. 8.5%
Merrill Lynch Canada Inc. 8.5%
Nesbitt Burns Inc. 8.5%
Credit Suisse First Boston SecuritiesCanada Inc. 3%
National Bank Financial Inc. 2.5%
FirstEnergy Capital Corp. 2%
Goepel McDermid Inc. 1.5%
Griffiths McBurney & Partners 1.5%

5. The Corporation has a $535 million credit facility (the "Credit Facility") which wasprovided by a syndicate of banks including, among others, The Toronto DominionBank ("TD Bank") and the Bank of Nova Scotia ("Scotia Bank," collectively TDBank and Scotia Bank, the "Banks"). A condition precedent (the "ConditionPrecedent") to the availability of the Credit Facility was that the Corporation raisea minimum of $400 million in equity by December 6, 1999.

6. As part of the financing necessary to satisfy the Condition Precedent, effectiveDecember 6, 1999, the Corporation entered into an agreement (the "Put OptionAgreement") with Scotia Bank in respect of the issuance, at the election of theCorporation, of up to 16,540,000 common shares and/or non-voting convertibleequity shares (which are convertible into common shares of the Corporation on aone for one basis), at a price of $5.00 per share, representing, upon exercise,aggregate gross proceeds of $82.7 million.

7. The Put Options will be for a term expiring on the earlier of December 6, 2000 andthe date the Corporation raises, in aggregate, gross proceeds in excess of $280million from new equity financing. Pursuant to the Put Option Agreement, the PutOptions will be automatically canceled pursuant to a formula based on the grossamount of all funds raised by the Corporation through the sale of equity, whetherpursuant to an initial public offering, private placement, rights offering or otherwise.The formula provides that $0.30 of Put Options will be canceled for every $1.00raised through the sale of equity in the Corporation.

8. In consideration for entering the Put Option Agreement, Scotia Bank received465,188 class B warrants, each class B warrant entitling the holder to acquire onecommon share of the Corporation at a price of $8.00 per common share. TheCorporation also paid Scotia Bank a fee of $3,721,500. On December 23, 1999,TD Bank assumed the liabilities and obligations of Scotia Bank with respect to4.0 million Put Options in consideration for $900,000 and the entitlement to 112,500class B warrants. In addition, TD Securities holds 338,071 non-voting convertibleequity shares of the Corporation.

9. TD Securities is a wholly-owned subsidiary of TD Bank and Scotia Capital is awholly-owned subsidiary of Scotia Bank.

10. As a result of the relationships described above in paragraphs 6, 7, 8, and 9 theCorporation may be a "connected issuer" (as defined in the Legislation and inProposed Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts (the"Proposed Instrument")) of the Connected Underwriters. The Corporation is not a"related issuer" (as defined in the Legislation and the Proposed Instrument) of theConnected Underwriters.

11. The Corporation is not a "related issuer" or "connected issuer" (as defined in theLegislation and the Proposed Instrument) of RBC Dominion Securities Inc., CIBCWorld Markets Inc., Merrill Lynch Canada Inc., Nesbitt Burns Inc., Credit SuisseFirst Boston Securities Canada Inc., National Bank Financial Inc., FirstEnergyCapital Corp., Goepel McDermid Inc. or Griffiths McBurney & Partners (the"Independent Underwriters").

12. The nature of the relationship among the Connected Underwriters and the Banksis described in the Preliminary Prospectus and the Amended PreliminaryProspectus and will be described in the final long form prospectus (the"Prospectus") to be filed in connection with the Offering.

13. The Credit Facility is not drawn and will not be drawn at the time of the closing ofthe Offering.

14. Each of the Connected Underwriters is registered as a dealer in the categories of"broker" and "investment dealer" in all of the provinces of Canada.

15. The Prospectus will contain a certificate signed by each of the ConnectedUnderwriters and the Independent Underwriters in accordance with therequirements of the Legislation. Each of the Independent Underwriters hasparticipated in the due diligence relating to the Offering and will participate in thepricing of the Offering.

16. The net proceeds of the Offering will be used together with the proceeds from priorprivate placements and the Credit Facility to fund the Corporation's 20% share ofthe projected capital costs of the Project.

17. The decision to issue the Shares and undertake the Offering was made by theCorporation. The terms of the distribution will be settled through negotiationsbetween the Corporation and the members of the Syndicate without involvement ofthe Banks.

18. The Corporation is not in financial difficulty and is not a "specified party" as definedin the Proposed Instrument.

AND WHEREAS pursuant to the System this MRRS Decision Document evidencesthe decision of each of the Decision Makers (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test contained inthe Legislation that provides the Decision Maker with the jurisdiction to make the Decisionhas been met;

THE DECISION of the Decision Makers is that the Underwriter Restriction shall notapply to the Connected Underwriters in connection with the Offering.

February 17th, 2000.

"Howard I. Wetston"     "R. Stephen Paddon"