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U.S. Silver Corporation and U.S. Silver & Gold Inc.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- application from subsidiary (Subco) of parent company (Parent) for a decision under section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) exempting Subco from the requirements of NI 51-102; for a decision under section 8.6 of National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109) exempting Subco from the requirements of NI 52-109; for a decision under section 121(2)(a)(ii) of the Securities Act (Ontario) exempting the insiders of Subco from the insider reporting requirements of the Act; and for a decision under section 6.1 of National Instrument 55-102 System for Electronic Disclosure by Insiders exempting the insiders of Subco from the requirement to file an insider profile -- Subco is a wholly-owned subsidiary of Parent -- Subco is a reporting issuer and has warrants outstanding -- Warrants entitle holder to acquire common shares of Parent -- Warrants do not qualify as "designated exchangeable securities" under exemption in section 13.3 of NI 51-102 -- relief granted on conditions substantially similar to the conditions contained in section 13.3 of NI 51-102.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 107, 121(2)(a)(ii).
National Instrument 51-102 Continuous Disclosure Obligations, ss. 13.1, 13.3.
National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings s. 8.6.
National Instrument 55-102 System for Electronic Disclosure by Insiders, s. 6.1.
October 26, 2012
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the "Jurisdiction")
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
U.S. SILVER CORPORATION ("U.S. Silver") AND U.S. SILVER & GOLD INC.
("U.S. Silver & Gold") (collectively, the "Filers").
DECISION
Background
1. The securities regulatory authority in the Jurisdiction (the "Decision Maker") has received an application from the Filers for a decision under the securities legislation of the Jurisdiction (the "Legislation") that:
(b) the requirements of National Instrument 51-102 -- Continuous Disclosure Obligations ("NI 51-102") (the "Continuous Disclosure Requirements") do not apply to U.S. Silver;
(c) the requirements of National Instrument 52-109 -- Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109") (the "Certification Requirements") do not apply to U.S. Silver; and
(d) the insider reporting requirements under Part XXI of the Legislation and the requirement to file an insider profile under National Instrument 55-102 -- System for Electronic Disclosure by Insiders (together, the "Insider Reporting Requirements") do not apply to any insider of U.S. Silver.
(Collectively, the "Exemption Sought")
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions:
(i) the Decision Maker is the principal regulator for this application; and
(ii) the Filer has 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 and Alberta.
Interpretation
2. Terms defined in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
3. This decision is based on the following facts represented by the Filers:
(a) U.S. Silver is a corporation existing under the Canada Business Corporations Act (the "CBCA").
(b) RX Gold & Silver Inc. ("RX Gold") is a corporation existing under the Business Corporations Act (Ontario) (the "OBCA").
(c) On August 13, 2012 (the "Effective Date"), U.S. Silver and RX Gold became wholly-owned subsidiaries of U.S. Silver & Gold Inc. ("U.S. Silver & Gold") as a result of a combination transaction pursuant to a combination agreement dated June 7, 2012, as amended on June 28, 2012 (as amended, the "Combination Agreement"), whereby:
(i) each outstanding U.S. Silver common share (collectively, the "U.S. Silver Shares") was exchanged for 0.67 of a common share of U.S. Silver & Gold (each whole share, a "U.S. Silver & Gold Share") pursuant to a plan of arrangement under the CBCA (the "U.S. Silver Arrangement"); and
(ii) each outstanding RX Gold common share (collectively, the "RX Gold Shares") was exchanged for 0.109 of a U.S. Silver & Gold Share pursuant to a plan of arrangement under the OBCA (together with the U.S. Silver Arrangement, the "Combination Transaction").
(d) U.S. Silver
(i) U.S. Silver was incorporated on March 23, 2006 under the OBCA and continued under the CBCA on June 25, 2007;
(ii) U.S. Silver is a reporting issuer in the provinces of Ontario, British Columbia and Alberta;
(iii) The authorized capital of U.S. Silver consists of an unlimited number of U.S. Silver Shares. Prior to the Effective Date, there were issued and outstanding: (i) 61,204,002 U.S. Silver Shares; (ii) options to purchase an aggregate of 4,472,812 U.S. Silver Shares (collectively, the "U.S. Silver Options"); and (iii) warrants to purchase an aggregate of 2,154,328 U.S. Silver Shares (collectively, the "U.S. Silver Warrants");
(iv) The U.S. Silver Shares were delisted from the Toronto Stock Exchange (the "TSX") as of the close of business on August 14, 2012. The U.S. Silver Shares previously traded on the TSX under the symbol "USA"; and
(v) The U.S. Silver Warrants trade on the TSX under the symbol "USL.WT" effective as of August 15, 2012;
(e) RX Gold
(i) RX Gold was incorporated on March 29, 2000 under the OBCA;
(ii) RX Gold ceased to be a reporting issuer in the province of British Columbia on August 25, 2012 and in the provinces of Ontario and Alberta on August 28, 2012;
(iii) The authorized capital of RX Gold consists of an unlimited number of RX Gold Shares. Prior to the Effective Date, there were issued and outstanding: (i) 168,974,816 RX Gold Shares; (ii) options to purchase an aggregate of 10,185,000 RX Gold Shares; and (iii) warrants to purchase an aggregate of 5,000,000 RX Gold Shares (collectively, the "RX Gold Warrants");
(iv) The RX Gold Shares were delisted from the TSX Venture Exchange (the "TSX-V") as of the close of business on August 14, 2012. The RX Gold Shares previously traded on the TSX-V under the symbol "RXE"; and
(v) The RX Gold Warrants were not listed on any stock exchange;
(f) U.S. Silver & Gold
(i) U.S. Silver & Gold was incorporated on June 6, 2012 under the OBCA for the purposes of participating in the Combination Transaction;
(ii) U.S. Silver & Gold is a reporting issuer in Ontario, British Columbia and Alberta;
(iii) The authorized capital of U.S. Silver & Gold consists of an unlimited number of U.S. Silver & Gold Shares. As at the Effective Date, the issued and outstanding capital of U.S. Silver & Gold consisted of (i) 59,424,940 U.S. Silver & Gold Shares; (ii) an aggregate of 4,106,900 U.S. Silver & Gold Shares reserved for issuance pursuant to options of U.S. Silver & Gold; (iii) an aggregate of 1,443,400 U.S. Silver & Gold Shares reserved for issuance pursuant to the U.S. Silver Warrants; and (iv) an aggregate of 545,000 U.S. Silver & Gold Shares reserved for issuance pursuant to the RX Gold Warrants; and
(iv) The U.S. Silver & Gold Shares are listed on the TSX under the symbol "USA" effective as of August 15, 2012;
(g) On July 9, 2012, U.S. Silver obtained an interim order from the Supreme Court of Ontario (the "Court") specifying certain requirements and procedures for a special meeting of the holders of U.S. Silver Shares for the purpose of approving the U.S. Silver Arrangement (the "U.S. Silver Meeting");
(h) On August 7, 2012, holders of U.S. Silver Shares approved the U.S. Silver Arrangement with an affirmative vote of 73.92% of the votes validly cast at the U.S. Silver Meeting;
(i) On August 9, 2012, U.S. Silver received final approval of the Court for the U.S. Silver Arrangement;
(j) The U.S. Silver Arrangement was completed on August 13, 2012;
(k) On the Effective Date, each of U.S. Silver and RX Gold became wholly-owned subsidiaries of U.S. Silver & Gold at which time U.S. Silver & Gold became a reporting issuer in Ontario, British Columbia and Alberta;
(l) Pursuant to and in accordance with the warrant indenture between U.S. Silver and Equity Transfer &Trust Company dated July 16, 2009, as supplemented on July 1, 2010 (as supplemented, the "Warrant Indenture"), to appoint Valiant Trust Company (the "Warrant Agent") as warrant agent, the U.S. Silver Warrants became exercisable for U.S. Silver & Gold Shares (instead of U.S. Silver Shares). For each five U.S. Silver Warrants, a holder is entitled to purchase 0.67 of a U.S. Silver & Gold Share at an aggregate exercise price of $0.775. The U.S. Silver Warrants remain listed on the TSX as warrants of U.S. Silver trading under the symbol "USL.WT";
(m) In connection with the U.S. Silver Arrangement, U.S. Silver mailed to holders of U.S. Silver Shares a management proxy circular (the "Circular") containing information about the U.S. Silver Arrangement, U.S. Silver and prospectus-level disclosure of the business and affairs of U.S. Silver & Gold, a copy of which has been posted on SEDAR under U.S. Silver's profile;
(n) U.S. Silver provided notice to holders of U.S. Silver Warrants in accordance with the requirements of the Warrant Indenture and the Supplemental Warrant Indenture, providing details of the consideration to be received upon the exercise of such U.S. Silver Warrants;
(o) The only securities of U.S. Silver that are held by persons other than U.S. Silver & Gold are the U.S. Silver Warrants, all of which are exercisable only for U.S. Silver & Gold Shares;
(p) The only securities of U.S. Silver that are traded on a marketplace (as defined in National Instrument 21-101 -- Certain Capital Market Participants) are the U.S. Silver Warrants.
(q) Pursuant to the terms of the Warrant Indenture which remains outstanding following the Effective Date, U.S. Silver, U.S. Silver & Gold and the Warrant Agent have entered into a supplemental warrant indenture dated August 13, 2012 (the "Supplemental Warrant Indenture") whereby U.S. Silver & Gold is required to use commercially reasonable efforts to maintain a listing of the common shares of U.S. Silver & Gold and the US Silver Warrants on the TSX. This in effect requires that U.S. Silver continue to be a reporting issuer, by way of the listing of its warrants.
(r) U.S. Silver & Gold cannot rely on the exemption available in s. 13.3 of NI 51-102 for issuers of exchangeable securities because the U.S. Silver Warrants are not "designated exchangeable securities" as defined in NI 51-102 as holders of U.S. Silver Warrants will not have voting rights in respect of U.S. Silver & Gold in their capacity as warrantholders;
(s) The Supplemental Warrant Indenture provides that U.S. Silver and U.S. Silver & Gold will cause certificates representing common shares of U.S. Silver & Gold, if any, from time to time purchased and paid for pursuant to the exercise of warrants to be issued and delivered in accordance with its terms.
(t) Neither the Warrant Indenture nor the Supplemental Warrant Indenture governing the U.S. Silver Warrants specifically requires U.S. Silver or any successor to deliver to holders of U.S. Silver Warrants any continuous disclosure materials of U.S. Silver or any successor;
(u) U.S. Silver is not in default of any requirement under securities legislation in the jurisdictions in which it is a reporting issuer;
(v) U.S. Silver has no intention of accessing the capital markets in the future by issuing any further securities to the public and has no intention of issuing securities to the public other than those that are currently outstanding; and
(w) It is information relating to U.S. Silver & Gold, and not to U.S. Silver, that is of primary importance to holders of U.S. Silver Warrants as outstanding U.S. Silver Warrants are exercisable for U.S. Silver & Gold Shares (and not U.S. Silver Shares); in addition, as U.S. Silver is a subsidiary of U.S. Silver & Gold, U.S. Silver & Gold has consolidated U.S. Silver and RX Gold with U.S. Silver & Gold for the purposes of financial statement reporting; as such, the disclosure required by the Continuous Disclosure Requirements and the Insider Reporting Requirements is no longer meaningful or of any significant benefit to holders of U.S. Silver Warrants and would impose a significant cost on U.S. Silver.
Decision
4. The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
(a) The decision of the Decision Maker under the Legislation is that the Continuous Disclosure Requirements do not apply to U.S. Silver provided that:
(i) U.S. Silver & Gold is the beneficial owner of all of the issued and outstanding voting securities of U.S. Silver;
(ii) U.S. Silver & Gold is a reporting issuer in a designated Canadian jurisdiction (as defined in NI 51-102) and has filed all documents it is required to file under NI 51-102;
(iii) U.S. Silver does not issue any securities, and does not have any securities outstanding other than:
(A) the U.S. Silver Warrants;
(B) securities issued to and held by U.S. Silver & Gold;
(C) debt securities issued to and held by banks, loan corporations, loan and investment corporations, savings companies, trust corporations, treasury branches, savings or credit unions, financial services cooperatives, insurance companies or other financial institutions; or
(D) securities issued under exemptions from the registration requirement and prospectus requirement in National Instrument 45-106 -- Prospectus and Registration Exemptions ("NI 45-106");
(iv) U.S. Silver files in electronic format under its SEDAR profile:
(A) if U.S. Silver & Gold is a reporting issuer in the local jurisdiction, a notice indicating that it is relying on the continuous disclosure documents filed by U.S. Silver & Gold and setting out where those documents can be found in electronic format; or
(B) copies of all documents U.S. Silver & Gold is required to file under securities legislation, other than in connection with a distribution, at the same time as the filing by U.S. Silver & Gold of those documents with a securities regulatory authority or regulator;
(v) U.S. Silver & Gold concurrently sends to all holders of U.S. Silver Warrants all disclosure materials that would be required to be sent to holders of similar warrants of U.S. Silver & Gold in the manner and at the time required by securities legislation;
(vi) U.S. Silver & Gold complies with securities legislation in respect of making public disclosure of material information on a timely basis;
(vii) U.S. Silver & Gold immediately issues in Canada and files any news release that discloses a material change in its affairs; and
(viii) U.S. Silver issues in Canada a news release and files a material change report in accordance with Part 7 of NI 51-102 for all material changes in respect of the affairs of U.S. Silver that are not also material changes in the affairs of U.S. Silver & Gold.
(b) The further decision of the Decision Maker under the Legislation is that the Certification Requirements do not apply to U.S. Silver provided that:
(i) U.S. Silver is not required to, and does not, file its own Interim Filings and Annual Filings (as those terms are defined under NI 52-109);
(ii) U.S. Silver files in electronic format under its SEDAR profile either: (x) copies of U.S. Silver & Gold's annual certificates and interim certificates at the same time as U.S. Silver & Gold is required under NI 52-109 to file such documents; or (y) a notice indicating that it is relying on U.S. Silver & Gold's annual certificates and interim certificates and setting out where those documents can be found for viewing on SEDAR; and
(iii) U.S. Silver is exempt from or otherwise not subject to the Continuous Disclosure Requirements and U.S. Silver and U.S. Silver & Gold are in compliance with the conditions set out in paragraph (a) above.
(c) The further decision of the Decision Maker under the Legislation is that the Insider Reporting Requirements do not apply to any insider of U.S. Silver in respect of securities of U.S. Silver provided that:
(i) if the insider is not U.S. Silver & Gold;
(A) the insider does not receive, in the ordinary course, information as to material facts or material changes concerning U.S. Silver & Gold before the material facts or material changes are generally disclosed; and
(B) the insider is not an insider of U.S. Silver & Gold in any capacity other than by virtue of being an insider of U.S. Silver;
(ii) U.S. Silver & Gold is the beneficial owner of all of the issued and outstanding voting securities of U.S. Silver;
(iii) if the insider is U.S. Silver & Gold, the insider does not beneficially own any U.S. Silver Warrants other than securities acquired through the exercise of the U.S. Silver Warrants and not subsequently traded by such insider;
(iv) U.S. Silver & Gold is a reporting issuer in a designated Canadian jurisdiction;
(v) U.S. Silver has not issued any securities, and does not have any securities outstanding, other than:
(A) the U.S. Silver Warrants;
(B) securities issued to and held by U.S. Silver & Gold;
(C) debt securities issued to and held by banks, loan corporations, loan and investment corporations, savings companies, trust corporations, treasury branches, savings or credit unions, financial services cooperatives, insurance companies or other financial institutions; or
(D) securities issued under exemptions from the registration requirement and prospectus requirement in Section 2.35 of NI 45-106; and
(vi) U.S. Silver is exempt from or otherwise not subject to the Continuous Disclosure Requirements and U.S. Silver and U.S. Silver & Gold are in compliance with the conditions set out in paragraph (a) above.
As to the Exemption Sought (other than from the Insider Reporting Requirements under Part XXI of the Legislation):
Dated this 26th day of October, 2012.
"Shannon O'Hearn"Manager, Corporate Finance BranchOntario Securities Commission
As to the Exemption Sought from the Insider Reporting Requirements under Part XXI of the Legislation:
Dated this 26th day of October, 2012.
"C. Wesley M. Scott"CommissionerOntario Securities Commission"Vern Krishna"CommissionerOntario Securities Commission