Mutual Reliance Review System for Exemptive Relief Applications - Issuer is a"connected issuer", but not a "related issuer", in respect of the Applicants who are threeBank-owned registrants which are underwriting part of a distribution of securities of theIssuer - Applicants exempt from the requirement in the legislation that an independentunderwriter underwrite a portion of the distribution equal to the largest portion beingunderwritten by a non-independent underwriter.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c.S.5, as am.
Applicable Ontario Regulations
Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am., ss. 219(1),224(1)(b), 233, Part XIII.
Applicable Ontario Rules
Proposed Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts (1998), 21OSCB 781. 33-5B - In the Matter of Limitations on a Registrant Underwriting Securitiesof a Related or a Connected Issuer of the Registrant (1997), 20 OSCB 1217, as variedby (1999), 22 OSCB 149.
THE SECURITIES LEGISLATION OF ONTARIO, QUEBEC AND BRITISH COLUMBIA
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
RBC DOMINION SECURITIES INC., CIBC WORLD MARKETS INC., SCOTIA CAPITAL INC., AND STRATOS GLOBAL CORP.
MRRS DECISION DOCUMENT
WHEREAS an application has been received by the securities regulatory authorityor regulator (the "Decision Maker") in each of Ontario, British Columbia and Quebec (the"Jurisdictions") from RBC Dominion Securities Inc., CIBC World Markets Inc. and ScotiaCapital Inc. (the "Applicants") for a decision pursuant to the securities legislation of theJurisdictions (the "Legislation") that the Applicants be exempt from the restrictioncontained in the Legislation prohibiting an underwriter from acting in connection with adistribution of securities of a related or connected issuer of the underwriter unless aportion of the distribution at least equal to that portion underwritten by non-independentunderwriters is underwritten by independent underwriters and that an independentunderwriter underwrites a portion of the offering which is not less than the largest portionof the distribution underwritten by a non-independent underwriter (the "IndependentUnderwriter Requirement") in connection with a proposed distribution (the "Offering") ofcommon shares (the "Shares") of Stratos Global Corporation (the "Issuer") to be issuedupon the exercise of special warrants ("Warrants") of the Issuer by way of short formprospectus.
AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), the Ontario Securities Commission is the principalregulator for the purposes of this application;
AND WHEREAS it has been represented by the Applicants to the Decision Makersthat:
1. The Issuer is a Corporation existing pursuant to the Canadian BusinessCorporations Act formed upon the amalgamation of ResourceCan Limited andResourceCan Ventures Limited, incorporated under the Corporations Act(Newfoundland) on October 10, 1980 and January 15, 1986 respectively, whichwere amalgamated on October 31, 1989 and continued under the CanadianBusiness Corporations Act on May 28, 1996.
2. The head office of the Issuer is in Ontario.
3. The Issuer completed a private placement of Warrants on April 7, 2000 (the"Closing Date") in reliance upon the exemptions from prospectus requirements ofapplicable Canadian securities law and exemptions from the registrationrequirements of applicable securities law in the United States; the Warrants areexercisable by the holders thereof on a one for one basis for Shares, subject toadjustment and certain conditions.
4. To allow for the Shares to be freely tradeable in Canada, the Issuer undertook tofile a preliminary prospectus (the "Preliminary Prospectus") as soon as practicablefollowing the Closing Date and to file and obtain receipts for a final prospectus (the"Prospectus") in all applicable Canadian jurisdictions not later than 90 daysfollowing the Closing Date.
5. The Issuer entered into an underwriting agreement (the "Underwriting Agreement")dated March 28, 2000 in respect of the Offering with a syndicate of underwriterseach of whom is obligated to purchase, or to arrange for substituted purchasers topurchase, as follows:
RBC Dominion Securities Inc. 40%
CIBC World Markets Inc. 20%
Yorkton Securities Inc. 20%
Scotia Capital Inc. 10%
Newcrest Capital Inc. 10%
6. Each of Yorkton Securities Inc. and Newcrest Capital Inc. (the "IndependentUnderwriters" and collectively with the Applicants, the "Underwriters") is anindependent underwriter (as defined in proposed Multi-Jurisdictional Instrument33-105 - Underwriting Conflicts (the "Proposed Conflicts Instrument")) with respectto the Offering.
7. The Issuer entered into a credit agreement (the "Credit Agreement") with the RoyalBank of Canada as Agent and the Canadian Imperial Bank of Commerce and TheBank of Nova Scotia as Co-Agents (collectively, the "Banks"), pursuant to which theBanks agreed to lend up to US$136 million to the Issuer.
8. The Issuer is and has been in compliance with the terms of the Credit Agreement.
9. RBC Dominion Securities Inc. is a wholly-owned indirect subsidiary of the RoyalBank of Canada, CIBC World Markets Inc. is wholly-owned subsidiary of theCanadian Imperial Bank of Commerce, and Scotia Capital Inc. is a wholly-ownedsubsidiary of The Bank of Nova Scotia.
10. The Issuer used a portion of the net proceeds derived from the offering of Warrantsto fund the repayment of debt under the Credit Agreement.
11. The Issuer is not a "related issuer" or "connected issuer" (as those terms aredefined in the Proposed Conflicts Instrument) of the Independent Underwriters.
12. Each of the Applicants is not a "related issuer" of the Issuer but may, by virtue ofthe Credit Agreement be a "connected issuer" of the Issuer (as those terms aredefined in the Proposed Conflicts Instrument).
13. The nature and details of the relationship between the Issuer, the Applicants andthe Banks was disclosed in the subscription agreement for the private placementof Warrants, and the information set out in Appendix C of the Proposed ConflictsInstrument will be disclosed in the Preliminary Prospectus and Prospectus.
14. The decision to issue Warrants, including the determination of the terms of suchdistribution has been made through negotiations between the Issuer and theUnderwriters without the involvement of the Banks.
15. The Independent Underwriters have underwritten 30% of the of the offering ofWarrants and Yorkton Securities Inc. has underwritten 20% of the of the offering ofWarrants; the Independent Underwriters have participated and will continue toparticipate in the due diligence relating to the Offering and have participated in thestructuring and pricing of the offering of Warrants.
16. The certificate in each of the Preliminary Prospectus and the Prospectus will besigned by the Underwriters, including each of the Independent Underwriters;
AND WHEREAS pursuant to the System, this MRRS Decision Document confirmsthe decision of the Decision Makers (the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained inthe Legislation that provides the Decision Makers with the jurisdiction to make the Decisionhas been met;
IT IS THE DECISION of the Decision Makers that the Independent UnderwriterRequirement shall not apply to the Applicants in connection with the Offering provided thatthe information set out in Appendix C of the Proposed Conflicts Instrument will bedisclosed in the Preliminary Prospectus and Prospectus.
June 26, 2000.
"J. A. Geller" "Stephen N. Adams"