Securities Law & Instruments

Headnote

MRRS - National Policy N. 47 - waiver, pursuant to Section 4.5 of NP 47 ofs.43(1)(b)(ii)(B) to permit an offering to securities consisting of non-convertible seniorsecured debentures of a subsidiary of a POP issuer - the POP issuer, as guarantor ofthe non-convertible debentures of its subsidiary, meets the eligibility criteria of s. 43 ofNP 47 but does not have outstanding debt securities with an approved rating. S.80(b)(iii) - subsidiary issuer of non-convertible debentures is exempt from certaincontinuous disclosure requirements subject to filing parent's financial information andsummarized financial information about the issuer.

S. 121(2)(a)(ii) - relief from insider reporting requirements for parent and itssubsidiaries and affiliates.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c.S.5, as am., s. 77, 78, 80(b)(iii), s. 121(2)(a)(ii).

Regulations Cited

Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am.,

Policies Cited

National Policy Statement No. 47 - Prompt Offering Qualification System.


IN THE MATTER OF THE SECURITIES LEGISLATIONOF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO, QUEBEC,NEW BRUNSWICK, PRINCE EDWARD ISLAND AND NEWFOUNDLAND

AND

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

AND

IN THE MATTER OF
MOFFAT COMMUNICATIONS LIMITED AND VIDEON CABLESYSTEMS INC.

MRRS DECISION DOCUMENT


WHEREAS the local securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec,New Brunswick, Prince Edward Island and Newfoundland (the "Jurisdictions") has receivedan application from Moffat Communications Limited ("Moffat") and Videon CableSystemsInc. (the "Issuer", and collectively with Moffat, the "Filer") for a decision under thesecurities legislation (collectively the "Legislation") of each of the Jurisdictions that

A. the Issuer be granted a waiver pursuant to section 4.5 of National Policy StatementNo. 47 ("NP 47"), from the provisions of subparagraph 4.3(1)(b)(ii)(B) of NP 47 andan exemption pursuant to section 263 of the Securities Act (Quebec) so as topermit the Issuer to participate in the prompt offering qualification system pursuantto NP 47 and pursuant to the applicable securities legislation of Quebec, includingbut not limited to, Title II and Title III of the Securities Act (Quebec) and theRegulation respecting securities (Quebec) (the "POP System");

B. the Issuer be exempted from the requirements to file and/or deliver to securityholders Interim financial statements, Annual financial statements, Material changereports and press releases, Information circulars and Annual information forms orreports (collectively the "Reporting Requirements"); and

C. Moffat, Moffat's direct or indirect subsidiaries and Moffat's affiliates (the "MoffatGroup") be exempted from the requirement contained in the Legislation for aninsider of a reporting issuer or equivalent to file reports disclosing the insider'sdirect or indirect beneficial ownership of, or control or direction over, securities ofthe reporting issuer or equivalent (the "Insider Reporting Requirement")

AND WHEREAS under the Mutual Reliance Review System for Exemptive ReliefApplications (the "System"), the Manitoba Securities Commission is the principaljurisdiction for this application;

AND UPON the Issuer having represented to the Decision Makers as follows:

1. Moffat is a corporation amalgamated under the Canada Business Corporations Acton August 31, 1979.

2. Moffat, directly and through its wholly-owned subsidiaries, provides broadcasttelevision, cable, Internet and telecommunications services in Canada, and cableand Internet services in the United States. Cable and Internet Services are offeredin Canada through Videon, which owns and operates cable television systems inManitoba, Alberta and Northwestern Ontario. High-speed business telecomservices are offered through Videon FiberLinkT in the Canadian cities ofEdmonton, Alberta and Winnipeg, Manitoba. In addition, Moffat owns a seventy-seven percent (77%) interest in Lifestyle Television (1994) Limited (also knows asWTN), a nationally distributed Canada specialty programming service. Further,Moffat owns and operates CKY-TV, the CTV Television Network affiliate in theprovince of Manitoba.

3. Moffat is a reporting issuer or equivalent in British Columbia, Alberta,Saskatchewan, Manitoba, Ontario and Quebec, and has been so for at least threeyears. Moffat has been deemed to be a reporting issuer in Nova Scotia sinceJanuary 5, 1999. On February 8, 2000, Moffat filed in the provinces of Nova Scotia,Newfoundland, New Brunswick and Prince Edward Island all Continuous DisclosureMaterials that it had previously filed in the provinces of British Columbia, Alberta,Saskatchewan, Manitoba, Ontario and Quebec since February 1, 1999. Moffat isnot in default of any of the requirements of the Legislation in the Jurisdictions.

4. Common shares issued by Moffat are listed on The Toronto Stock Exchange. Themarket value of the public float of these common shares is in excess of $500million. This amount excludes all common shares held by persons who hold tenpercent (10%) or more of the issued and outstanding common shares of Moffat.

5. Moffat has filed with the Decision Makers in all the Jurisdictions an Initial AnnualInformation Form ("AIF") pursuant to National Policy 47 ("NP 47") and therequirements of the Quebec Legislation. The AIF was accepted by the DecisionMakers on March 24, 2000.

6. Moffat is eligible to issue securities under the POP System and therefore iseligible to file a "simplified prospectus" (to be referred to as a "short form"prospectus herein).

7. The Issuer is a corporation continued under the laws of the Province of Manitobaon August 31, 1979, and is a wholly-owned subsidiary of Moffat.

8. The Issuer markets basic cable service and discretionary services such as specialtychannels, pay-TV, pay-per-view, digital TV and high-speed Internet services.Further the Issuer provides high-speed, high-capacity fibre optic telecom servicefor business. The Issuer, directly and indirectly through its wholly-owned subsidiaryVideon CableSystems Alberta Inc., operates cable television systems in Winnipeg,Manitoba and Edmonton, Alberta and forty-seven regional communities in theprovinces of Alberta, Manitoba and Ontario. The Issuer, directly and indirectlythrough its wholly-owned subsidiary Videon CableSystems Alberta Inc., alsoprovides high-speed, high-capacity fibre optic telecom service for business inWinnipeg, Manitoba and Edmonton, Alberta. The Issuer's United States cableoperations include Kingwood Cablevision, Inc. near Houston, Texas; FSN Cable,Inc. near Tampa, Florida; and Palm Coast Cablevision, Ltd., just south ofJacksonville, Florida. High-speed Internet access and security monitoring servicesare also provided through Kingwood Cablevision.

9. The Issuer is not a reporting issuer or the equivalent in any province or territory ofCanada.

10. The Issuer proposes to offer (the "Offering") to the public, in each of theJurisdictions, non-convertible senior secured debentures (the "Debentures") by wayof a short form prospectus pursuant to the POP System. The disclosure in the shortform prospectus will relate to Moffat on a consolidated basis. Financial informationwith respect to the Issuer is included in the consolidated financial information ofMoffat and has been included in such consolidation since at least 1972.

11. The Debentures will be fully and unconditionally guaranteed by Moffat as to thepayments required to be made by the Issuer to holders of the Debentures, whichguarantee will provide for the right of the holders of the Debentures to receivepayment from Moffat within 15 days of any failure by the Issuer to make a paymentas required. At the request of a syndicate of banks (the "Bank Syndicate"), Moffatcurrently guarantees a $400 million credit facility (the "Credit Facility") provided bythe Bank Syndicate to the Issuer.

12. TD Securities Inc. and RBC Dominion Securities Inc., the co-lead underwriters inrespect of the Offering (the "Underwriters"), have advised Moffat that they view theguarantee by Moffat as the principal investment consideration in respect of theDebentures. Further, Moffat understands that the Underwriters will be relying onthe guarantee from Moffat and the credit rating of the Issuer (which they expect willlargely be based on the operations of Moffat) in soliciting prospective purchasersof the Debentures. In particular, all discussions with prospective investors,including "road shows", investor presentations and any meetings with management,will focus on the operations of Moffat as a whole and the strength of its guarantee,as opposed to the Issuer in isolation.

13. The Issuer will not proceed with the Offering if it cannot obtain a rating of at leastB++(low) from Canada Bond Rating Service and BBB(low) from Dominion BondRating Service Limited.

14. Moffat itself would be eligible to issue debt using a short form prospectus pursuantto the POP System. The Issuer, however, is not eligible to qualify the Debenturespursuant to the alternative eligibility criteria set out in section 4.3 of NP 47 andsection 166 of the Regulation under the Securities Act (Quebec) because Moffatdoes not have issued and outstanding debt with an Approved Rating.

15. As a result of the Offering, the Issuer will become a reporting issuer or equivalentin the Jurisdictions whose Legislation contains such status, and will be required tocomply with the obligations imposed upon reporting issuers or the equivalent underthe Legislation.

AND WHEREAS under the System, this MRRS Decision Document evidences thedecision of each Decision Maker (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 under the Legislation is that

1. the requirements contained in subparagraph 4.3(1)(b)(ii)(B) of NP 47 bewaived pursuant to Section 4.5 of NP 47 and those contained under section18 of the Securities Act (Quebec) and section 166 of the Regulationrespecting securities (Quebec) pursuant to section 263 of the Securities Act(Quebec) to enable the Issuer to issue non-convertible debt securities underthe POP System provided that

(a) the aggregate market value of Moffat's equity securities listed andposted for trading on The Toronto Stock Exchange or on some otherstock exchange in Canada is $75,000,000 or more on a date within60 days before the date of the filing of the issuer's preliminary shortform prospectus, other than those equity securities that are held bypersons who control 10% or more of the outstanding equity securitiesof Moffat; and

(b) the Issuer complies with all of the filing requirements and proceduresand each of the other eligibility requirements of the POP System;

2. the Issuer be exempted from the Reporting Requirements and the MoffatGroup be exempted from the Insider Reporting Requirement with respect tothe Issuer, subject to the following conditions being met:

(a) Moffat remains a reporting issuer or the equivalent in theJurisdictions;

(b) the Issuer remains a wholly owned direct or indirect subsidiary ofMoffat;

(c) Moffat continues to comply with all timely and continuous disclosurefiling requirements of the Legislation;

(d) if there is a material change in respect of the business, operations orcapital of the Issuer that is not a material change in respect of Moffat,Moffat will file, on behalf of the Issuer, a material change reportnotwithstanding that the change may not be a material change inrespect of Moffat;

(e) the Issuer does not issue additional securities other than theDebentures (or any other series of the Debentures which hereinaftermay be issued), debt securities ranking pari passu to the Debentures,any debentures issued in connection with the security granted by theIssuer to the holders of Debentures or debt ranking pari passu withthe Debentures, and those securities currently issued andoutstanding, other than to Moffat or to wholly owned subsidiaries ofMoffat.

(f) Moffat continues to fully and unconditionally guarantee theDebentures as to the payments required to be made by the Issuer toholders of the Debentures;

 

(g) if Debentures of another series or debt securities ranking pari passuwith the Debentures are hereinafter issued by the Issuer, Moffat shallfully and unconditionally guarantee such Debentures or debtsecurities as to the payments required to be made by the Issuer toholders of such Debentures or debt securities;

(h) the Issuer files Moffat's annual comparative audited consolidatedfinancial statements and an annual audited comparative summary ofthe Issuer's consolidated financial results for the most recentlycompleted financial year and the financial year immediately precedingsuch financial year. The Issuer's annual audited consolidatedcomparative summary shall include the following line items:

(i) revenues;

(ii) operating income before other expenses;

(iii) income from continuing operations;

(iv) net income;

(v) current assets;

(vi) non current assets;

(vii) current liabilities; and

(viii) non current liabilities;

(i) the Issuer files Moffat's interim comparative consolidated financialstatements and an interim comparative summary of the Issuer'sconsolidated financial results for the most recently completed interimperiod and the corresponding interim period in the previous financialyear. The Issuer's interim consolidated comparative summary shallinclude the following line items:

(i) revenues;

(ii) operating income before other expenses;

(iii) income from continuing operations;

(iv) net income;

(j) if in the future the Decision Makers require by rule or Legislation thatinterim financial statements must include a balance sheet, thedisclosure included in clause (i) above would also be required toinclude a summary of the following line items:

(i) current assets;

(ii) non current assets;

(iii) current liabilities; and

(iv) non current liabilities;

(k) such filings as are referred to in (h), (i) and (j) above are to be madewithin the time limits required by the Act provided that the first filingto be made by the Issuer under clause (i) shall be in respect of thethird quarter ending May 31, 2000 and the first filing to be made bythe Issuer under clause (h) shall be in respect of the financial yearended August 31, 2000.

March 29th, 2000.

"Douglas R. Brown"