Securities Law & Instruments

Headnote

Mutual Reliance Review System for Exemptive Relief Applications - Exemption grantedfrom the requirement to disclose executive compensation in Item 6 of Form 30 andindebtedness of directors, executive officers and senior officers in Item 7 of Form 30 inconnection with the mailing of an information circular for a special shareholders'meeting to approve a related party transaction pursuant to Ontario Rule 61-501 andQuebec Policy Q-27 - Relief granted because the excluded information had just beenpublicly disclosed in connection with the issuer's annual meeting, there had been nomaterial change in the excluded information since it was publicly disclosed, and theexcluded information was not relevant to the matters under consideration at the specialmeeting.

Ontario Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am, ss. 86(1) and 88(2)(b).

Ontario Regulations Cited

Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am., Items 6and 7 of Form 30.

Ontario Rules Cited

Rule 61-501 - Insider Bids, Issuer Bids, Going Private Transactions and Related PartyTransactions (2000) 23 OSCB 971, ss. 5.4(1).

IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA,ALBERTA, SASKATCHEWAN, ONTARIO, NOVA SCOTIA AND NEWFOUNDLAND

AND

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

AND

IN THE MATTER OF
CANBRAS COMMUNICATIONS CORP.

DECISION DOCUMENT


WHEREAS the Canadian securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia andNewfoundland (the "Jurisdictions") has received an application from CanbrasCommunications Corp. ("Canbras") for a decision pursuant to the Canadian securitieslegislation of the Jurisdictions (the "Legislation") that Canbras be exempted from therequirement to include disclosure in the Information Circular (as defined below) regardingexecutive compensation and indebtedness of directors, executive officers and seniorofficers as otherwise required by the Legislation (collectively, the "Required Disclosure");

 

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 Canbras has represented to the Decision Makers that:

1. Canbras was continued under the Canada Business Corporations Act on June 22,1998. Canbras became a reporting issuer in Ontario in May, 2000 when itscommon shares (the "Common Shares") were listed and posted for trading on TheToronto Stock Exchange. It is also a reporting issuer in British Columbia, Quebec,Nova Scotia, Saskatchewan and Alberta and has undertaken to file all continuousdisclosure documents with Newfoundland, Prince Edward Island, New Brunswickand Manitoba as if it were a reporting issuer in such jurisdictions.

2. The authorized capital of Canbras consists of an unlimited number of CommonShares, of which 19,223,113 are issued and outstanding as of August 22, 2000.

3. Bell Canada International Inc. ("BCI") owns and/or controls (directly and indirectly)approximately 54.5% of the outstanding Common Shares (on a non-diluted basis).Accordingly, Canbras and BCI are considered related parties for the purposes ofOntario Rule 61-501 (the "Rule") and Quebec Policy Q-27 (the "Policy").

4. Since May, 1998, BCI has provided Canbras with a series of secured, subordinatedloans which, in the aggregate, including accrued interest, currently totalapproximately $79.5 million (the "BCI Loans"). In connection with the provision ofsome of the BCI Loans or the amendment of the terms of the BCI Loans, Canbrasobtained exemptions or waivers from the valuation and minority approvalrequirements of the Rule.

5. On July 27, 2000 BCI and a specially appointed committee of directors of Canbraswho are independent from BCI and who are acting on behalf of Canbras (the"Special Committee") reached an agreement in principle to:

(i) convert the BCI Loans into Common Shares based on a price of $11.17 perCommon Share (the "Conversion Transaction"); and

(ii) concurrently with the Conversion Transaction, have BCI provide Canbraswith a new short-term convertible subordinated loan facility in the amount of$25 million (the "New Loan").

Based on the conversion price of $11.17, Canbras will issue approximately 7.1million Common Shares to BCI in the Conversion Transaction, which will increaseBCI's ownership in Canbras from the present level of 54.5% to approximately 66.8%of the outstanding Common Shares.

6. The New Loan will contain substantially the same terms as those agreed to inprevious loans with BCI but will be unsecured. The New Loan will have a maturitydate of December 31, 2000, subject to early repayment at Canbras' option, andsubject to early mandatory repayment in certain events. The New Loan isconvertible into Common Shares in certain circumstances, subject to any requisiteregulatory requirements.

7. The Conversion Transaction and New Loan (collectively, the "Transaction") aresubject to the formal valuation, minority approval and disclosure provisions in theRule and Policy applicable to related party transactions.

8. The agreement-in-principle for the Transaction was reached following therecommendation of the Special Committee and is subject to the receipt of theapproval of a majority of Canbras' shareholders other than BCI (the "IndependentShareholders") at a special meeting of the shareholders of Canbras to be held onSeptember 26, 2000 (the "Special Meeting"), all requisite regulatory and thirdparty lender approvals and consents, the ratification of the board of directors of BCIand the receipt of a fairness opinion from Merrill Lynch, Pierce, Finner & SmithIncorporated ("Merrill Lynch"), an independent financial advisor that was retainedas a financial advisor by the Special Committee. Merrill Lynch also is providing aformal valuation, a summary of which will be included in the information circular (the"Information Circular") being prepared for the Special Meeting.

9. Unless a discretionary exemption was granted, the Legislation would require thatthe Information Circular include the Required Disclosure.

10. The Required Disclosure is not relevant to the matters being considered by theIndependent Shareholders at the Special Meeting since the directors and seniorofficers of Canbras are not directly or indirectly parties to the Transaction andneither their performance nor their compensation is to be at issue at the SpecialMeeting.

11. The Required Disclosure was provided to shareholders of Canbras in theinformation circular dated April 18, 2000 (the "Annual Meeting Circular") that wasmailed to the shareholders of Canbras, and filed in the Jurisdictions, in connectionwith its annual general meeting held on June 20, 2000 and there has been nomaterial change to the Required Disclosure as contained in the Annual MeetingCircular.

AND WHEREAS pursuant to the System, this MRRS Decision Document evidencesthe decision 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 Maker pursuant to the Legislation is that Canbrasbe exempted from the requirement to include the Required Disclosure in the InformationCircular.

September 8th, 2000.

"J. A. Geller"      "Morley P. Carscallen"