Securities Law & Instruments

Headnote

Mutual Reliance Review Systemfor Exemptive Relief Applications - Issue of common shares byissuer to holders of its debentures, in satisfaction of interestamounts owing in respect of the debentures, exempted from registrationand prospectus requirements - First trades relief in commonshares acquired pursuant to decision provided, subject to certainconditions - Debentures were originally issued pursuant to aprospectus.

Applicable Ontario Statute

Securities Act, R.S.O. 1990,c. S.5, as am., ss. 25, 53 and 74.

Applicable Instrument

Multilateral Instrument 45-102- Resale of Securities - s.2.6.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ALBERTA, SASKATCHEWAN, MANITOBA,

ONTARIO, QUÉBEC, NEWBRUNSWICK, NOVA SCOTIA,

PRINCE EDWARD ISLAND, NEWFOUNDLAND,YUKON TERRITORY,

NORTHWEST TERRITORIES ANDNUNAVUT

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

COM DEV INTERNATIONAL LTD.

 

MRRS DECISION DOCUMENT

WHEREAS the local securitiesregulatory authority or regulator (the "Decision Maker"),in each of Alberta, Saskatchewan, Manitoba, Ontario, Québec,New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland,Yukon Territory, Northwest Territories and Nunavut (collectively,the "Jurisdictions") has received an application fromCom Dev International Ltd. ("Com Dev") for a decisionpursuant to the securities legislation, regulations, rules,instruments and/or policies of the Jurisdictions (the "Legislation")that:

(a) the requirements containedin the Legislation to be registered to trade in a security(the "Registration Requirements") and to filea preliminary prospectus and a prospectus and receive receiptstherefor (the "Prospectus Requirements") shallnot apply to the issuance of common shares (the "CommonShares") of Com Dev as payment of interest (the "InterestShares") under the terms of previously issued convertibledebentures in lieu of cash; and

(b) the Prospectus Requirementsshall not apply to the first trades of the Interest Shares,subject to certain terms and conditions.

AND WHEREAS pursuantto the Mutual Reliance Review System for Exemptive Relief Applications(the "System"), the Ontario Securities Commissionis the principal regulator for this application;

AND WHEREAS Com Dev hasrepresented to each Decision Maker that:

1. Com Dev is a corporationamalgamated under the Canada Business Corporations Act.The head office of Com Dev is in Ontario.

2. Where applicable, Com Devis a reporting issuer, or equivalent, in each of the Jurisdictionsand is not in default of any of the requirements of the Legislation.

3. The Common Shares are listedand posted for trading on the facilities of the Toronto StockExchange ("TSX").

4. On December 6, 2001, ComDev issued Cdn.$18,000,000 aggregate principal amount of 6.75%convertible unsecured debentures (the "Convertible Debentures")pursuant to a trust indenture of the same date (the "TrustIndenture") between Com Dev and Computershare Trust Companyof Canada (the "Trustee"). The Convertible Debentureswere issued in reliance on a prospectus filed with the securitiesregulatory authorities in each of the provinces of Canadadated November 30, 2001. The Convertible Debentures will matureDecember 31, 2006 subject to any rights of early redemptionset out in the Trust Indenture.

5. As at the date hereof,all of the Convertible Debentures remain outstanding.

6. Interest is payable onthe Convertible Debentures on June 30 and December 30 (each,an "Interest Payment Date") of every year untilmaturity.

7. Pursuant to the terms ofthe Trust Indenture, Com Dev has the right, on any InterestPayment Date, to issue Interest Shares in lieu of cash inpayment of all or part of any accrued and unpaid interestas at such date (including overdue interest and interest thereon),subject to receipt of the necessary approvals from the applicablesecurities regulatory authorities and to listing approvalfrom the TSX. The number of Interest Shares to be issued uponexercise of such right is calculated by dividing the amountof interest to be paid by the Current Market Price of theInterest Shares. "Current Market Price" is definedin the Trust Indenture to mean:

"in respect of aCommon Share on any particular date, the weighted averagetrading price at which such share has traded for the 20consecutive trading days ending five trading days beforesuch date on The Toronto Stock Exchange, or (a) if the CommonShares are not then listed on The Toronto Stock Exchange,on such other stock exchange on which the Common Sharesare listed as may be selected for such purpose by the Boardof Directors of the Corporation, or (b) if the Common Sharesare not listed, then on the over-the-counter market. Theweighted average trading price shall be determined by dividingthe aggregate sale price of all Common Shares sold on suchexchange or market, as the case may be, during such 20 consecutivetrading days by the total number of common shares so sold."

8. In order to exercise itsright to pay interest in the form of Common Shares, Com Devmust give notice to the holders of Convertible Debentures(the "Holders") and the Trustee that it intendsto exercise such right at least 5 calendar days prior to theInterest Payment Date on which Com Dev exercises such right.The Trust Indenture also provides that the Interest Sharesshall not be subject to any resale restrictions under thesecurities laws of the Province of Ontario and shall be listedon the TSX. In addition, Com Dev must give notice to the TSXnot less than 10 business days before the Interest PaymentDate that it intends to pay interest in Common Shares in lieuof cash.

9. Com Dev wishes to be ina position to exercise its option to pay interest on the ConvertibleDebentures by the issuance of Interest Shares in lieu of cash,commencing with the interest payable on the next InterestPayment Date, namely June 30, 2002.

10. An application has beenmade to the TSX for the listing of any Interest Shares thatmay become issuable upon any interest payment due date duringthe term of the Convertible Debentures.

AND WHEREAS pursuantto the System, this MRRS Decision Document evidences the decisionof each Decision Maker (collectively, the "Decision");

AND WHEREAS each of theDecision Makers is satisfied that the test contained in theLegislation that provides the Decision Makers with the jurisdictionto make the Decision has been met;

THE DECISION of the DecisionMakers pursuant to the Legislation is:

1. the Prospectus Requirementsand the Registration Requirements shall not apply to the issuanceof the Interest Shares provided that the first trade in InterestShares shall be deemed to be a distribution or primary distributionto the public under the Legislation of the Jurisdiction inwhich the trade takes place (the "Applicable Legislation"),unless:

(a) except in Quebec, suchtrade is made in compliance with Section 2.6 of MI 45-102as if the securities had been issued pursuant to one ofthe exemptions referenced in Section 2.4 of MI 45-102; or

(b) in Quebec,

(i) Com Dev is a reportingissuer in Quebec and has complied with the applicablerequirements for 12 months immediately preceding the trade;

(ii) no unusual effortis made to prepare the market or to create a demand forthe securities that are the subject of the trade;

(iii) no extraordinarycommission or consideration is paid to a person or companyin respect of the trade; and

(iv) if the selling securityholder is an insider or officer of Com Dev, the sellingsecurity holder has no reasonable grounds to believe thatCom Dev is in default of any requirement of securitieslegislation.

June 25, 2002.

"Robert Korthals"                    "HaroldP. Hands"