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Headline Media Group Inc. et al. - MRRS Decision
IN THE MATTER OF
THE SECURITIES LEGISLATION OF ONTARIO,
BRITISH COLUMBIA, ALBERTA, NEWFOUNDLAND AND QUEBEC
AND
IN THE MATTER OF THE
MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
GRIFFITHS MCBURNEY & PARTNERS
AND TD SECURITIES INC. AND
HEADLINE MEDIA GROUP INC.
MRRS DECISION DOCUMENT
WHEREAS the securities regulatory authority or regulator (the "Decision Maker") in each of Ontario, BritishColumbia, Alberta, Newfoundland and Quebec (collectively, the "Jurisdictions") has received an application from GriffithsMcBurney & Partners ("GMP") and TD Securities Inc. ("TD" and, together with GMP, the "Filers") for a decision pursuantto the securities legislation of the Jurisdictions (the "Legislation") that the requirement contained in the Legislation whichrestricts a registrant from acting as an underwriter in connection with a distribution of securities of an issuer made bymeans of prospectus, where the issuer is a connected issuer (or the equivalent) of the registrant unless a portion of thedistribution at least equal to that portion underwritten by non-independent underwriters is underwritten by an independentunderwriter (the "Independent Underwriter Requirement") shall not apply to the Filers in connection with the proposedpublic offering (the "Offering") of Class A Subordinate Voting Shares (the "Shares") of Headline Media Group Inc. (the"Issuer") pursuant to a prospectus;
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System"), the Ontario Securities Commission ("OSC") is the principal regulator for this application;
AND WHEREAS the Filers have represented to the Decision Makers that:
1. The head office of each of the Filers is in Toronto, Ontario.
2. The Issuer is a traditional and new media company that has four material wholly-owned subsidiaries: The ScoreTelevision Network Ltd. ("The Score"), PrideVision Inc. ("PrideVision"), St. Clair Group Investments Inc. ("St.Clair") and Headline Media Ventures Inc. ("HMVI"). The Score is a Canadian media company which operatesa specialty television service providing sports news, information and highlights as well as live event sportsprogramming. PrideVision, which intends to operate a specialty television service targeted to the interests ofthe gay community, has recently had its application for the specialty television service approved by theCanadian Radio-television and Telecommunications Commission and anticipates launching the specialtytelevision service in September 2001. St. Clair is a Canadian sports and entertainment marketing services andmedia company. HMVI makes investments in entities involved in the development of content-enablingtechnologies, software and solutions.
3. The Issuer was amalgamated pursuant to the Business Corporations Act (Ontario) (the "OBCA") on November30, 1979 under the name Old Canada Investment Corporation Limited. Prior to November 24, 2000, the Issueroperated as a closed end investment company. On November 24, 2000, pursuant to a reverse takeovertransaction, the Issuer acquired The Score as its primary asset and the Issuer's business changed to that ofa media company. At that time, the Issuer changed its name to Headline Media Group Inc. A certificate andarticles of continuance dated November 24, 2000 continued the Issuer under the Canada BusinessCorporations Act (the "CBCA").
4. The Issuer is currently a reporting issuer in Ontario and Alberta and is not in default of its requirements underthe Legislation.
5. The Issuer filed a preliminary prospectus ("the Preliminary Prospectus") qualifying the distribution of the Shareswith the securities regulatory authority in each of the provinces of Canada on March 9, 2001, and will file a finalprospectus (the "Final Prospectus") as soon as possible thereafter.
6. The Shares are currently listed for trading on The Toronto Stock Exchange.
7. The Issuer will enter into an underwriting agreement with the Filers, CIBC World Markets Inc. ("CIBC WM"),BMO Nesbitt Burns Inc. ("BMO") and Raymond James Ltd. ("RJ") (collectively, the "Underwriters") whereby theIssuer will agree to issue and sell the Shares, and the Underwriters will agree to purchase such shares.
8. The approximate proportionate share of the Offering underwritten by each of the Underwriters is expected tobe as follows:
Underwriter Name Proportionate Share of the Offering
GMP 40%
TD Securities 20%
CIBC WM 20%
BMO 10%
RJ 10%
9. GMP holds, on its own account and on account of certain partners, an aggregate of 1,666,667 Shares whichwere acquired on November 24, 2000 in exchange for 66,928.74 common shares that it held in the capital ofThe Score being valued, at the time of the Corporation's reverse takeover transaction, at approximately $74.70per share.
10. TD Securities is a subsidiary of a Canadian chartered bank that is a lender to The Score pursuant to anamended and restated credit facility that provides The Score with a $15.0 million credit facility consisting ofthree tranches: a $6.5 million term loan due August 31, 2002, an additional term loan for up to $6.5 million dueAugust 31, 2002 and a $2.0 million revolving operating line due August 31, 2002. A portion of the outstandingindebtedness under this credit facility may be reduced by the net proceeds of the Offering.
11. Accordingly, the Issuer may be considered a "connected issuer" of the Filers within the meaning of theLegislation. The Issuer is not a "related issuer" of the Filers within the meaning of the Legislation.
12. The Issuer is neither a "related issuer" nor a "connected issuer", as each term is defined in the Legislation, inrespect of CIBC WM, BMO and RJ (the "Independent Underwriters"). The Independent Underwriters are allindependent underwriters as defined in draft Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts (the"Proposed Instrument").
13. Because the Issuer may be considered a connected issuer of the Filers, the underwriting syndicate may notcomply with the Independent Underwriting Requirement.
14. The Filers are registered under the Legislation in the categories of "broker" and "investment dealer".
15. The nature and details of the relationships between the Issuer, the Filers, and the Independent Underwritersare described in the Preliminary Prospectus and will be described in the Final Prospectus.
16. The Filers will receive no benefit relating to the Offering other than the payment of their underwriting fees inconnection therewith.
17. The decision to issue the Shares, including the determination of the terms of the distribution, were madethrough negotiations among the Issuer and the Underwriters.
18. The Independent Underwriters will underwrite an aggregate of 40% of the Offering and will participate in thedue diligence relating to the Offering and in the structuring and pricing of the Offering. The extent of suchparticipation is described in the Preliminary Prospectus and will be described in the Final Prospectus.
19. The Preliminary Prospectus contains and the Final Prospectus will contain the information required by AppendixC to the Proposed Instrument.
20. The Issuer is not a "specified party" as defined in the Proposed Instrument.
21. The certificate in the Preliminary Prospectus has been signed, and the certificate in the Final Prospectus willbe signed, by each of the Underwriters as required by the Act.
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of eachDecision Maker (the "Decision");
AND WHEREAS each Decision Maker is satisfied that the test contained in the Legislation that provides theDecision Maker with the jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers, pursuant to the Legislation, is that the Independent UnderwriterRequirement shall not apply to the Filers in connection
with the Offering provided that the Issuer is not a "related issuer", as defined in the Proposed Instrument, to the Filersat the time of the Offering and is not a "specified party", as defined in the Proposed Instrument, at the time of theOffering.
April 12, 2001.
"Paul Moore" "R. Stephen Paddon"