Multilateral Instrument 11-02 – Passport System – relief from registration and prospectus requirements to permit issuance of underlying securities of convertible debentures. In the course of a friendly take-over bid, target board elected to modify exchange provisions of convertible debentures previously distributed to the public. Following the change of control, the convertible debentures will be convertible into shares of the offeror, instead of the target. As a result, the registration and prospectus exemptions in section 2.42 of National Instrument 45-106 Prospectus and Registration Exemptionsare technically not available.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74(1).
National Instrument 45-102 Resale of Securities, s.2.10
September 3, 2008
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
BARRICK GOLD CORPORATION (THE FILER)
AND CADENCE ENERGY INC. (CADENCE)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the Principal Regulator (the Legislation) that the prospectus and dealer registration requirements not apply to the issuance of common shares of the Filer (the Barrick Shares) upon the conversion of the convertible debentures of Cadence (the Convertible Debentures) into Barrick Shares (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) 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 the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador, the Yukon territory, the Northwest Territories and Nunavut.
Interpretation
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
The decision is based on the following facts represented by the Filer:
(a) The Filer is a corporation existing under the Business Corporations Act (Ontario). The Filer's head office and principal place of business is Brookfield Place, TD Canada Trust Tower, Suite 3700, 161 Bay Street, P.O. Box 212, Toronto, Ontario, M5J 2S1.
(b) The Barrick Shares are listed on the Toronto Stock Exchange (the TSX) and on the New York Stock Exchange (the NYSE) under the symbol "ABX".
(c) The Filer is a reporting issuer in each of the provinces and territories of Canada and is not on the lists of defaulting reporting issuers maintained pursuant to the legislation of any such jurisdiction.
(d) Cadence is a corporation existing under the Business Corporations Act (Alberta). The common shares of Cadence (the Cadence Shares) are listed on the TSX under the symbol "CDS" and the Convertible Debentures are listed on the TSX under the symbol "CDS.DB".
(e) Cadence is a reporting issuer in each of the provinces of Canada and is not on the lists of defaulting reporting issuers maintained pursuant to the legislation of any such jurisdiction.
(f) A receipt was obtained for the prospectus qualifying the distribution of the Convertible Debentures in each of the provinces of Canada on or about June 18, 2007.
(g) If Cadence is acquired by a public company (or its subsidiary), the indenture governing the Convertible Debentures dated June 25, 2007 (the Debenture Indenture) allows the board of directors of Cadence to make the Convertible Debentures convertible into shares of the public company acquiror.
(h) On July 30, 2008, the Filer, through its wholly-owned subsidiary, Cadence Acquisition Inc. (the Offeror), made an offer (the Offer) to acquire all of the issued and outstanding Cadence Shares.
(i) Cadence has made the necessary elections under the Debenture Indenture such that after the effective date (the Change of Control Effective Date) of the change of control arising from the Offer and any compulsory acquisition or other subsequent acquisition transaction, the Convertible Debentures will be convertible into Barrick Shares.
(j) The adjusted conversion rate for the Convertible Debentures will be determined in accordance with the formula therefor set out in the Debenture Indenture, which is based on the relative market value of the Cadence Shares and the Barrick Shares during the five consecutive trading days prior to the Change of Control Effective Date.
(k) The Filer has applied to the TSX and the NYSE to list the Barrick Shares issuable upon the conversion of the Convertible Debentures from and after the Change of Control Effective Date.
(l) Assuming that the conditions of the Offer (including the minimum tender condition) are satisfied and the Offeror takes up and pays for Cadence Shares pursuant to the Offer, because the Offeror will have acquired more than 66⅔% of the outstanding Cadence Shares, the Change of Control Effective Date will have occurred.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the first trade in Barrick Shares issued upon conversion of the Convertible Debentures is a deemed distribution unless the conditions in paragraphs 2.10(b) and (c) of National Instrument 45-102 Resale of Securities are satisfied.
“Wendell S. Wigle” “Suresh Thakrar”
Commissioner Commissioner
Ontario Securities Commission Ontario Securities Commission