National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions-- Application for exemptive relief to permit issuer and underwriter, acting as agent for the issuer, to enter into equity distribution agreement to make "at the market" (ATM) distributions of trust units to investors through the facilities of the Toronto Stock Exchange (TSX) -- ATM distributions to be made pursuant to shelf prospectus procedures in Part 9 of NI 44-102 Shelf Distributions -- issuer will issue a press release and file agreement on SEDAR -- application for relief from prospectus delivery requirement -- delivery of prospectus not practicable in circumstances of an ATM distribution -- relief from prospectus delivery requirement has effect of removing two-day right of withdrawal and remedies of rescission or damages for non-delivery of the prospectus -- application for relief from certain prospectus form requirements -- standard certification by issuer does not work in an ATM distribution since no other supplement to be filed in connection with ATM distribution -- relief granted to permit modified forward-looking certificate language -- relief granted on terms and conditions set out in decision document - decision will terminate 25 months after the issuance of a receipt for the shelf prospectus.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c.S.5, as am., ss. 71(1), 71(2), 133, and 147
Applicable Ontario Rules
National Instrument 41-101 General Prospectus Requirements and related Amendments.
National Instrument 44-101 Short Form Prospectus Distributions, Part 8; and Item 20 of Form 44-101F1.
National Instrument 44-102 Shelf Distributions, Part 9; and s. 1.1 of Appendix A.
Citation: TriStar Oil & Gas Ltd., Re, 2009 ABASC 295
July 7, 2009
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
TRISTAR OIL & GAS LTD. (the Issuer),
FIRSTENERGY CAPITAL CORP. (FCC) AND
SOCIÉTÉ GÉNÉRALE VALEURS MOBILIÈRES INC.
(SGVM, and together with FCC, the Underwriters,
and together with FCC and the Issuer, the Filers)
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application (the Application):
(a) from the Underwriters for a decision under the securities legislation in each Jurisdiction (the Legislation) that the requirement that a dealer not acting as agent of the purchaser who receives an order or subscription for a security offered in a distribution to which the prospectus requirement applies deliver to the purchaser or its agent the latest prospectus and any amendment to the prospectus (the Prospectus Delivery Requirement) does not apply to the Underwriters or any other Toronto Stock Exchange (TSX) participating organization acting as selling agent for the Underwriters (such other TSX participating organization, a Selling Agent) in connection with an at-the-market distribution (the ATM Distribution), as defined in National Instrument 44-102 Shelf Distributions (NI 44-102), made by the Issuer pursuant to the Equity Distribution Agreement (as defined below);
(b) from the Issuer for a decision under the Legislation that the requirement to include in a prospectus:
(i) a certificate of the Issuer in the form specified in section 1.1 of Appendix A to NI 44-102, and
(ii) the statement respecting purchasers' statutory rights of withdrawal and remedies of rescission or damages in the form prescribed by item 20 of Form 44-101F1,
(the Prospectus Form Requirements) do not apply to a prospectus filed in connection with the ATM Distribution; and
(c) from the Filers for a decision under the Legislation that the Application and this decision (the Confidential Material) be kept confidential and not be made public until the earlier of: (i) the date on which the Issuer and the Underwriters enter into the Equity Distribution Agreement; (ii) the date the Filers advise the Decision Makers that there is no longer any need for the Confidential Material to remain confidential; and (iii) the date that is 90 days after the date of this decision.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission (the Commission) is the principal regulator for the Application,
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and Labrador, and
(c) the decision is the decision of the principle regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision, unless they are otherwise defined in this decision.
1. The Issuer is a corporation amalgamated under the Business Corporations Act (Alberta). The head office of the Issuer is located in Calgary, Alberta.
2. The Issuer is a reporting issuer or the equivalent under the Legislation and is in compliance in all material respects with the applicable requirements of the Legislation.
3. Common shares (Shares) of the Issuer are listed on the TSX.
4. FCC is based in Calgary, Alberta and is registered as an investment dealer under the Legislation.
5. SGVM is based in Montréal, Québec and is registered as an investment dealer under the Legislation.
Proposed ATM Distribution
6. The Issuer is proposing to enter into an equity distribution agreement (the Equity Distribution Agreement) with the Underwriters relating to an ATM Distribution by the Issuer pursuant to the shelf prospectus procedures prescribed by Part 9 of NI 44-102.
7. Prior to making an ATM Distribution, the Issuer will have filed in the Jurisdictions in connection with the ATM Distribution (i) a shelf prospectus (the Shelf Prospectus), and (ii) a prospectus supplement describing the terms of the Equity Distribution Agreement (the Prospectus Supplement).
8. The Issuer will issue a news release regarding entering into the Equity Distribution Agreement and will file the agreement on SEDAR. The news release will indicate that the Shelf Prospectus and Prospectus Supplement have been filed on SEDAR and specify where and how purchasers may obtain copies. A copy of the news release will also be posted on the Issuer's website.
9. Under the proposed ATM Distribution, the Issuer may issue and sell Shares in an amount not to exceed 10% of the aggregate market value of the outstanding Shares calculated in accordance with section 9.2 of NI 44-102.
10. The Underwriters will, in turn, sell Shares in Canada through methods constituting an ATM Distribution, including sales made on the TSX through the Underwriters, directly or through a Selling Agent.
11. The Underwriters will act as the sole underwriters on behalf of the Issuer in connection with the sale of the Shares on the TSX and will be the only entities paid an underwriting fee or commission by the Issuer in connection with such sales. The Underwriters will sign an underwriters' certificate in the Prospectus Supplement filed on SEDAR. The Underwriters will effect the ATM Distributions on the TSX either themselves or through a Selling Agent. If the sales are effected through a Selling Agent, the Selling Agent will be paid a seller's commission for effecting the trades on the Underwriters' behalf. A purchaser's rights and remedies under the Legislation against the Underwriters as underwriters of an ATM Distribution through the TSX will not be affected by a decision to effect the sale directly or through a Selling Agent.
12. The number of Shares sold on the TSX pursuant to the ATM Distribution on any trading day will not exceed 25% of the trading volume of the Shares on the TSX on that day.
13. The Equity Distribution Agreement will provide that at the time of each sale of Shares pursuant to an ATM Distribution, the Issuer will make a representation to the Underwriters that the prospectus contains full, true and plain disclosure of all material facts relating to the Issuer and Shares being distributed. The Issuer would therefore be unable to proceed with sales pursuant to an ATM Distribution when it is in possession of undisclosed information that would constitute a material fact or a material change in respect of the Shares.
14. If, after the Issuer delivers a sell notice to the Underwriters, the sale of Shares specified in the notice, taking into consideration prior sales, would constitute a material fact, the Issuer would have to suspend sales under the Equity Distribution Agreement until either: (i) it had filed a material change report or amended the prospectus, or (ii) circumstances had changed so that the sales would no longer constitute a material fact or material change.
15. In determining whether the sale of the number of Shares specified in the sell notice would constitute a material fact or material change, the Issuer will take into account a number of factors, including, without limitation: (i) the parameters of the sell notice including the number of Shares proposed to be sold; (ii) the percentage of the outstanding Shares that number represents; (iii) trading volume and volatility of Shares; (iv) recent developments in the business, affairs and capital structure of the Issuer; and (v) prevailing market conditions generally.
16. The Underwriters will monitor closely the market's reaction to trades made under the ATM Distribution in order to evaluate the likely market impact of future trades. The Underwriters have experience and expertise in managing sell orders to limit downward pressure on the stock price. If the Underwriters have concerns as to whether a particular sell order placed by the Issuer may have a significant effect on the market price of the Shares, the Underwriters will recommend against effecting the trade at that time. It is in the interest of both the Issuer and the Underwriters to minimize the market impact of sales under the ATM Distribution.
17. The underwriters' certificate signed by the Underwriters included in the Prospectus Supplement will be in the form prescribed by section 2.2 of Appendix B to NI 44-102.
Prospectus Delivery Requirement
18. Pursuant to the Prospectus Delivery Requirement, a dealer effecting the trade of Shares on the TSX on behalf of the Issuer as part of an ATM Distribution is required to deliver a prospectus to all investors who purchase Shares on the TSX.
19. The delivery of a prospectus is not practicable in the circumstances of an ATM Distribution as neither the Underwriters nor the Selling Agent effecting the trade will know the identity of the purchasers.
20. A purchaser is deemed to have relied upon a misrepresentation in a prospectus if it was a misrepresentation at the time of purchase, without regard to whether or not they received the prospectus.
21. Pursuant to the Legislation, an agreement to purchase securities is not binding on the purchaser if a dealer receives, not later than midnight on the second day exclusive of Saturdays, Sundays and holidays, after receipt by the purchaser of the latest prospectus or any amendment to the prospectus, a notice in writing that the purchaser does not intend to be bound by the agreement of purchase (the Withdrawal Right).
22. The Withdrawal Right is not workable in the context of an ATM Distribution because the prospectus will not be delivered.
Right of Rescission or Damages for Non-Delivery
23. Pursuant to the Legislation, a purchaser of securities has a right of rescission or damages against a dealer for non-delivery of the prospectus (the Right of Action for Non-Delivery).
24. The Right of Action for Non-Delivery is not workable in the context of an ATM Distribution because the prospectus will not be delivered.
Disclosure of Securities Sold in ATM Distribution
25. The Issuer will file on SEDAR a report disclosing the number and average price of Shares distributed over the TSX by the Issuer pursuant to the prospectus filed in connection with the ATM Distribution as well as gross proceeds, commission and net proceeds within seven calendar days after the end of the month with respect to sales during the prior month.
26. The Issuer will also disclose the number and average price of Shares sold under the ATM Distribution as well as gross proceeds, commission and net proceeds in the ordinary course in its annual and interim financial statements and MD&A filed on SEDAR.
Prospectus Form Requirements
27. Exemptive relief from the Prospectus Form Requirements for the Issuer's forward-looking certificate in the Shelf Prospectus is required to reflect that no pricing supplement will be filed subsequent to the Prospectus Supplement. Accordingly, the Issuer will file the Shelf Prospectus with the following certificate in substitution for the certificate prescribed by the Prospectus Form Requirements:
This short form prospectus, together with the documents incorporated in this prospectus by reference as of the date of a particular distribution of securities under this prospectus, will, as of that date, constitute full, true and plain disclosure of all material facts relating to the securities offered by this prospectus and the supplement(s) as required by the securities legislation of each Jurisdiction.
28. Exemptive relief from the Prospectus Form Requirements is required to reflect the Issuer's relief from the Prospectus Delivery Requirement. Accordingly, the following language will be included in the Prospectus Supplement in substitution for the language prescribed by the Prospectus Form Requirements:
Securities legislation in the Jurisdictions provides purchasers with the right to withdraw from an agreement to purchase securities and with remedies for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment are not delivered to the purchaser, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. However, purchasers of Shares under the Issuer's at-the-market distribution will not have any right to withdraw from an agreement to purchase the Shares and will not have remedies of rescission or, in some jurisdictions, revision of the price, or damages for non-delivery of the prospectus because the prospectus relating to Shares purchased by such purchaser will not be delivered as permitted under a decision document dated •, 2009.
Securities legislation in the Jurisdictions also provides purchasers with remedies for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment contain a misrepresentation, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. Any remedies under securities legislation in the Jurisdictions that a purchaser of Shares under the Issuer's at-the-market distribution may have against the Issuer or the Underwriters, for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment contain a misrepresentation remain unaffected by the non-delivery of the prospectus and the decision referred to above.
Purchasers should refer to the applicable provisions of the securities legislation and the decision document referred to above for the particulars of their rights or consult with a legal adviser.
Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.
The decision of the Decision Makers under the Legislation is that:
(a) provided that the disclosure described in sections 25, 27 and 28 is made, the Prospectus Form Requirements do not apply under the Legislation to the prospectus of the Issuer filed in connection with the ATM Distribution;
(b) provided that the representations in sections 8, 10, 11 and 15 are complied with, the Prospectus Delivery Requirement under the Legislation does not apply to the Underwriters or any Selling Agent and, as a result, the Withdrawal Right and the Right of Action for Non-Delivery will not apply to the ATM Distribution;
(c) the Confidential Material will be kept confidential and not be made public until the earlier of: (i) the date on which the Issuer enters into the Equity Distribution Agreement with the Underwriters; (ii) the date the Filers advise the Decision Makers that there is no longer any need for the Confidential Material to remain confidential; and (iii) the date that is 90 days after the date of this decision; and
(d) this decision will terminate 25 months after the issuance of a receipt for the Shelf Prospectus.