September 9, 2005
IN THE MATTER OF
THE SECURITIES ACT, R.S.O. 1990,
CHAPTER S.5, AS AMENDED (Act)
IN THE MATTER OF
CANADIAN TRADING AND QUOTATION SYSTEM INC.
(Section 144 of the Act)
WHEREAS the Commission issued an order dated May 7, 2004, recognizing the Canadian Trading and Quotation System Inc. (CNQ) as a stock exchange pursuant to section 21 of the Act (Recognition Order);
AND WHEREAS CNQ has applied for an order pursuant to section 144 of the Act to vary the financial viability terms and conditions of the Recognition Order and to correct typographical errors in the Recognition Order;
AND WHEREAS the Commission has received certain representations from CNQ in connection with CNQ's application to vary the Recognition Order;
AND UPON the Commission being of the opinion that it is not prejudicial to the public interest to vary the Recognition Order;
IT IS ORDERED pursuant to section 144 of the Act that the Recognition Order be varied as follows:
1. Item 5 of Schedule A of the Recognition Order is repealed and replaced by the following:
5. FINANCIAL VIABILITY
(a) CNQ will maintain sufficient financial resources for the proper performance of its functions.
(b) CNQ will deliver to Commission staff its annual financial budget, together with the underlying assumptions, that has been approved by its Board of Directors, within 30 days after the commencement of each fiscal year. Such financial budget should include monthly projected revenues, expenses and cash flows.
(c) For the two-year period commencing on September 9, 2005:
(i) CNQ will deliver to Commission staff unaudited monthly financial statements prepared in accordance with Generally Accepted Accounting Principles, and a status update on any pending capital raising transaction(s) including the amount, terms and name(s) of individuals/entities that have committed to providing funding and their commitment, within 30 days of each month end;
(ii) CNQ will deliver to Commission staff the following within 60 days of each quarter end:
(A) a comparison of the monthly revenues and expenses incurred by CNQ with the projected monthly revenues and expenses included in the most recent annual financial budget delivered to Commission staff, and
(B) for each revenue item whose actual was significantly lower than its projected amount, and for each expense item whose actual was significantly higher than its projected amount, the reasons for the variance;
(iii) CNQ will, prior to making a cash interest payment or principal repayment on the following debts, demonstrate to the satisfaction of Commission staff that it will have sufficient financial resources to continue its operations after the payment:
(A) the subordinated, convertible debentures described in the term sheet dated November 29, 2002,
(B) the debts owed by CNQ described in the subordinated agreement dated December 23, 2002 between 1141216 Ontario Limited, Wendsley Lake Corporation, CNQ and The Business, Engineering, Science & Technology Discoveries Fund Inc., and
(C) any amounts owed by CNQ to any officers or directors, or to any person or company that owns or controls, directly or indirectly, more than 10% of CNQ, except for reasonable compensation arising in the normal course of business; and
(iv) CNQ will, prior to making any loans, bonuses, dividends or other distributions of assets to any director, officer, related company or shareholder that are in excess of the amount included in the most recent annual financial budget delivered to Commission staff, demonstrate to the satisfaction of Commission staff that it will have sufficient financial resources to continue its operations after the payment.
(d) After September 9, 2007:
(i) CNQ will, on a quarterly basis (along with the quarterly financial statements required to be delivered pursuant to paragraph 10), report to Commission staff the following financial ratios to permit trend analysis and provide an early warning signal with respect to the financial health of the company:
(A) a current ratio, being the ratio of current assets to current liabilities,
(B) a debt to cash flow ratio, being the ratio of total debt (including any line of credit drawdowns, term loans (current and long-term portions) and debentures, but excluding accounts payable, accrued expenses and other liabilities) to EBITDA (or earnings before interest, taxes, depreciation and amortization) for the most recent 12 months, and
(C) a financial leverage ratio, being the ratio of total assets to shareholders' equity,
in each case following the same accounting principles as those used for the audited financial statements of CNQ;
(ii) If CNQ fails to maintain, or anticipates it will fail to maintain:
(A) a current ratio of greater than or equal to 1.1/1,
(B) a debt to cash flow ratio of less than or equal to 4.0/1, or
(C) a financial leverage ratio of less than or equal to 4.0/1,
it will immediately report to Commission staff; and
(iii) If CNQ fails to maintain its current ratio, debt to cash flow ratio or financial leverage ratio at the levels outlined in paragraph (d)(ii) above for a period of more than three months, its President will immediately deliver a letter advising Commission staff of the reasons for the continued ratio deficiencies and the steps being taken to rectify the situation, and the Commission or its staff may impose terms or conditions on CNQ as it determines appropriate, including but not limited to requirements outlined in paragraph (c) above.
2. The word "Quotation" in the heading of Item 2 of Appendix A of Schedule A of the Recognition Order is replaced with the word "Listing".
3. The word "routing" in paragraph 3(d) of Appendix B of Schedule A of the Recognition Order is replaced with "routine".
"Paul M. Moore"
"Robert L. Shirriff"