Headnote
National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions - Application for exemptive relief in relation to a proposed distribution of securities by the issuer by way of an "equity line of credit" – a drawdown under an equity line of credit may be considered to be an indirect distribution of securities by the issuer to purchasers in the secondary market through the equity line purchaser acting as underwriter – relief granted to the issuer and purchaser from certain registration and prospectus requirements, subject to terms and conditions, including a 9.9% restriction on the number of securities that may be distributed under an equity line in any 12-month period, certain restrictions on the permitted activities of the purchaser and certain notification and disclosure requirements.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c.S.5, as am., ss. 25(1), 71, 74(1) and 147
National Instrument 44-101 Short Form Prospectus Distributions
National Instrument 44-102 Shelf Distributions
March 16, 2010
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 Vena Resources Inc. (THE “ISSUER”), YA GLOBAL MASTER SPV LTD. (THE “PURCHASER”) AND YORKVILLE ADVISORS, LLC (THE “PURCHASER MANAGER” AND, TOGETHER WITH THE ISSUER AND THE PURCHASER, THE “FILERS”)
Background
The securities regulatory authority or regulator 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”):
(a) that the following prospectus disclosure requirements under the Legislation (the “Prospectus Disclosure Requirements”) do not fully apply to the Issuer in connection with the Distribution (as defined below):
(i) the statement in the Prospectus Supplement (as defined below) respecting statutory rights of withdrawal and rescission in the form prescribed by item 20 of Form 44-101F1 of National Instrument 44-101 Short Form Prospectus Distributions (“NI 44-101”); and
(ii) the statements required by subsections 5.5(2) and (3) of National Instrument 44-102 Shelf Distributions (“NI 44-102”);
(b) that the prohibition from acting as a dealer unless the person is registered as such (the “Dealer Registration Requirement”) does not apply to the Purchaser and the Purchaser Manager in connection with the Distribution;
(c) that the requirement that a dealer send a copy of the Prospectus (as defined below) to a subscriber or purchaser in the context of a distribution (the “Prospectus Delivery Requirement”) does not apply to the Purchaser, the Purchaser Manager or the dealer(s) through whom the Purchaser distributes the Shares (as defined below) and that, as a result, rights of withdrawal or rights of rescission, price revision or damages for non-delivery of the Prospectus do not apply in connection with the Distribution; and
(d) that the application for this decision and this decision (collectively, the “Confidential Materials”) be kept confidential until the occurrence of the earliest of the following:
(i) the date on which the Issuer publicly announces by way of a news release the execution of the Distribution Agreement (as defined below);
(ii) the date on which the Issuer advises the Decision Makers that there is no longer any need to hold the Confidential Materials in confidence; and
(iii) 90 days after the date of this decision,
(the “Request For Confidentiality”).
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 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 Alberta and British Columbia.
Interpretation
Terms defined in National Instrument 14‑101 ‑ Definitions and MI 11‑102 have the same meanings if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filers:
The Issuer
The Issuer is incorporated under the laws of Canada and has its head office located at 130 Adelaide Street West, Suite 2700, Toronto, Ontario, M5H 3P5.
The Issuer is a reporting issuer in the provinces of Alberta, British Columbia and Ontario and is not in default of securities legislation in these provinces.
The Issuer’s authorized share capital currently consists of an unlimited number of common shares (the “Shares”) of which 88,264,576 Shares were outstanding as at March 1, 2010.
The Shares are listed for trading on the Toronto Stock Exchange (the “TSX”). Based on the closing price of $0.30 of the Shares on the TSX on March 1, 2010, the current market capitalization of the Issuer is approximately $26,476,372.
The Issuer is qualified to file a short form prospectus under section 2.2 of NI 44‑101 and therefore to file a base shelf prospectus under NI 44‑102.
The Issuer intends to file with the securities regulators in each of Alberta, British Columbia and Ontario a base shelf prospectus pertaining to various securities of the Issuer, including the Shares (such base shelf prospectus and any amendment thereto and renewal thereof, being referred to herein as the “Base Shelf Prospectus”).
The statements required by subsections 5.5(2) and (3) of NI 44-102 included in the Base Shelf Prospectus will be qualified by adding the following (the “Additional Disclosure”): “, except in cases where an exemption from such delivery requirements has been obtained”.
The Purchaser
The Purchaser is incorporated in the Cayman Islands.
The Purchaser is managed by the Purchaser Manager, a Delaware limited liability company, with its head office in Jersey City, New Jersey, United States.
Neither the Purchaser nor the Purchaser Manager is a reporting issuer or registered as a registered firm as defined in National Instrument 31‑103 Registration Requirements and Exemptions in any jurisdiction of Canada. The Purchaser and the Purchaser Manager are not in default of any requirements under the Legislation.
The Distribution Agreement
The Issuer proposes to enter into a standby equity distribution agreement with the Purchaser (the “Distribution Agreement”) pursuant to which the Purchaser will agree to purchase, and the Issuer will have the right but not the obligation to issue and sell, up to $10,000,000 of Shares (the “Aggregate Commitment Amount”) over a period of 60 months in a series of drawdowns.
Under the Distribution Agreement, the Issuer will have the sole ability to determine the timing and the amount of each drawdown, subject to a maximum investment amount per drawdown and the Aggregate Commitment Amount.
The purchase price per Share and the number of Shares to be issued to the Purchaser for each drawdown will be calculated based on a predetermined percentage discount from the daily volume-weighted average price of the Shares traded on the TSX over a period of ten trading days following a drawdown notice sent by the Issuer (the “Drawdown Pricing Period”). The Issuer may fix in such drawdown notice a minimum purchase price below which it will not issue any Shares for any given trading day.
On the 11th trading day following the date of each drawdown notice (the “Settlement Date”), the amount of the drawdown will be paid by the Purchaser and the relevant number of Shares will be issued by the Issuer.
The Distribution Agreement will provide that, at the time of each drawdown notice and at each Settlement Date, the Issuer will make a representation to the Purchaser that the Base Shelf Prospectus, as supplemented (the “Prospectus”), contains full, true and plain disclosure of all material facts relating to the Issuer and the Shares being distributed. The Issuer would therefore be unable to issue Shares when it is in possession of undisclosed information that would constitute a material fact or a material change.
On or after the Settlement Date for any drawdown, the Purchaser may seek to sell all or a portion of the Shares purchased under the drawdown.
The Purchaser, its affiliates, associates, partners or insiders, will agree not to own at any time, directly or indirectly, more than 9.9% of all issued and outstanding Shares.
After receipt of a drawdown notice, the Purchaser may seek to resell Shares to be purchased under the drawdown, or engage in hedging strategies, in order to reduce the economic risk associated with the purchase of securities of the Issuer.
Under the Distribution Agreement, the Purchaser, its affiliates, associates, partners and insiders, will agree not to hold a net short position in Shares during the term of the Distribution Agreement. Accordingly, the Purchaser may sell Shares to hedge its obligation to purchase Shares under a drawdown notice provided that:
(a) The Purchaser complies with applicable TSX regulations and securities legislation; and
(b) The Purchaser will not during a drawdown pricing period, together with any affiliate, associate and subsidiaries, sell Shares for gross proceeds in aggregate exceeding the amount of the drawdown.
The Purchaser and the Purchaser Manager will also agree, in effecting any sale of Shares, not to engage in any sales, marketing or solicitation activities of the type undertaken by underwriters in the context of a public offering. More specifically, the Purchaser and the Purchaser Manager will not (a) advertise or otherwise hold itself out as a dealer, (b) purchase or sell securities as principal from or to customers, (c) carry a dealer inventory in securities, (d) quote a market in securities, (e) extend or arrange for the extension of credit in connection with securities transactions, (f) run a book of repurchase and reverse repurchase agreements, (g) use a carrying broker for securities transactions, (h) lend securities for customers, (i) guarantee contract performance or indemnify the Issuer for any loss or liability from the failure of the transaction to be successfully consummated, (j) participate in a selling group, or (k) during a Drawdown Pricing Period, together with any affiliate, associate, subsidiaries, partners or insiders, sell Shares for gross proceeds in the aggregate exceeding the amount of the drawdown.
The Purchaser will not solicit offers to purchase Shares and will complete all sales of Shares through one or more dealer(s) unaffiliated with the Purchaser, the Purchaser Manager or the Issuer.
The Prospectus Supplements
The Issuer intends to file with the securities regulator in each of the provinces of Alberta, British Columbia and Ontario a prospectus supplement to the Base Shelf Prospectus (each a “Prospectus Supplement”) within two business days after the Settlement Date for each drawdown under the Distribution Agreement.
The Prospectus Supplement will include (i) the number of Shares sold, (ii) the price per Share, (iii) the information required under NI 44-102 including the disclosure required by subsection 9.1(3) of NI 44-102, and (iv) the following statement (the ‘Amended Statement of Rights”):
Securities legislation in certain of the provinces of Canada provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. The securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus and any amendment are not delivered to the purchaser, provided that the remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province. However, such rights and remedies will not be available to purchasers of common shares distributed under this prospectus because the prospectus will not be delivered to purchasers, as permitted under a decision document issued by the Ontario Securities Commission on , 2010.
The securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus and any amendment contain a misrepresentation, provided that the remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province. Such remedies remain unaffected by the non‑delivery of the prospectus, as permitted under the decision document referred to above.
The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province for the particulars of these rights or consult with a legal adviser.
The Base Shelf Prospectus, as supplemented by each Prospectus Supplement, will: (a) qualify the distribution of Shares to the Purchaser on the Settlement Date of the drawdown disclosed in the relevant Prospectus Supplement; and (b) qualify the distribution of Shares to purchasers who purchase them from the Purchaser through the dealer(s) engaged by the Purchaser through the TSX or another exchange recognized by the securities regulator in the Jurisdiction (the “TSX Purchasers”) during the period that commences on the first day of the relevant Drawdown Pricing Period and ends on the earlier of (i) the date on which the distribution of such Shares has ended or (ii) the 40th day following the relevant Settlement Date (collectively, the “Distribution”).
The Prospectus Delivery Requirements are not workable in the context of a Distribution because the TSX Purchasers will not be readily identifiable as the dealer(s) acting on behalf of the Purchaser may combine the sell orders made under the Prospectus with other sell orders and the dealer(s) acting on behalf of the TSX Purchasers may combine a number of purchase orders.
The Prospectus Supplement will contain an underwriter's certificate in the form set out in section 2.2 of Appendix B to NI 44‑102 signed by the Purchaser.
At least three business days prior to the filing of each Prospectus Supplement, the Issuer will provide for comment to the Decision Makers a draft of such Prospectus Supplement.
Press Releases / Continuous Disclosure
- After execution of the Distribution Agreement the Issuer will:
(a) promptly issue and file a news release disclosing the existence and purpose of the Distribution Agreement and the Aggregate Commitment Amount; and
(b) within ten days:
(i) file a material change report disclosing, at a minimum, the information required in paragraph (a); and
(ii) file a copy of the Distribution Agreement.
Promptly after delivery of each drawdown notice to the Purchaser, the Issuer will issue and file a news release disclosing, for that drawdown, the aggregate amount, the maximum number of Shares to be issued and the minimum price (if any) per Share.
In respect of each Settlement Date the Issuer will:
(a) promptly issue and file a news release disclosing:
(i) the number of Shares sold and the price per Share in the relevant drawdown;
(ii) that the Base Shelf Prospectus and the relevant Prospectus Supplement are available on SEDAR and specifying how a copy of these documents can be obtained; and
(iii) the Amended Statement of Rights; and
(b) within ten days file a material change report if the Distribution constitutes a material change disclosing, at a minimum, the information required in paragraph (a).
- The Issuer will also disclose, for each financial period, the number and price of Shares sold to the Purchaser pursuant to the Distribution Agreement in its financial statements and MD&A for such financial period filed on SEDAR.
Deliveries upon Request
The Issuer will deliver to the Decision Makers and to the TSX, upon request, a copy of each drawdown notice delivered by the Issuer to the Purchaser under the Distribution Agreement.
Pursuant to the Distribution Agreement, the Purchaser will agree to make available to the Decision Makers, upon request, full particulars of trading and hedging activities by the Purchaser or the Purchaser Manager (and, if required, trading and hedging activities by their affiliates, associates, partners or insiders) in relation to securities of the Issuer during the term of the Distribution Agreement.
Decisions
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Makers to make the decision.
The decision of the Decision Makers under the Legislation is that:
(a) the Prospectus Disclosure Requirements do not apply to the Issuer in connection with the Distribution, so long as:
(i) the Additional Disclosure is included in the Base Shelf Prospectus;
(ii) the Issuer files Prospectus Supplements that:
(A) qualify the Distribution;
(B) include the disclosure required by subsection 9.1(3) of NI 44‑102; and
(C) include the Amended Statement of Rights;
(iii) the Issuer issues the news releases described in paragraphs 28, 29 and 30 above:
(iv) the number of Shares distributed by the Issuer under one or more equity lines of credit, including the equity line of credit established under the Distribution Agreement, does not exceed:
(A) in any 12 month period, 9.9% of the aggregate number of Shares outstanding calculated at the beginning of such period, and
(B) during the term of the Distribution Agreement, 25% of the aggregate number of Shares outstanding calculated on the fifth trading day following the final Base Shelf Prospectus or such other time and place the Purchaser and the Issuer may agree upon, unless the Issuer has obtained shareholder approval; and
(v) the Issuer delivers to the Decision Makers and the TSX, upon request, a copy of each drawdown notice delivered by the Issuer to the Purchaser under the Distribution Agreement;
(b) the Dealer Registration Requirement does not apply to the Purchaser or the Purchaser Manager in connection with a Distribution for so long as:
(i) the Purchaser and the Purchaser Manager do not solicit offers to purchase the Shares in Canada;
(ii) the Purchaser and the Purchaser Manager effect all Distributions to TSX Purchasers through the TSX (or the TSX Venture Exchange, the NASDAQ or the NYSE, provided that the Issuer’s securities are listed for trading on such exchange) using one or more dealer(s) unaffiliated with the Purchaser, the Purchaser Manager and the Issuer;
(iii) no extraordinary commission or consideration is paid by the Purchaser or the Purchaser Manager to a person or company in respect of the Distribution to the TSX Purchasers; and
(iv) the Purchaser and the Purchaser Manager make available to the Decision Makers, upon request, full particulars of trading and hedging activities by the Purchaser, the Purchaser Manager and their affiliates, associates, partners or insiders in relation to securities of the Issuer during the term of the Distribution Agreement;
(c) the Prospectus Delivery Requirement does not apply to the Purchaser, to the Purchaser Manager or to the dealer(s) through whom the Purchaser distributes the Shares and, that, as a result, rights of withdrawal or rights of rescission, price revision or damages for non‑delivery of the Prospectus do not apply in connection with the Distribution, so long as the conditions set out in paragraphs (b)(i) through (iii) of this decision are satisfied; and
(d) this decision applies only to Distributions completed within 24 months after execution of the Distribution Agreement; and
(e) this decision will terminate 24 months after execution of the Distribution Agreement.
The further decision of the Decision Makers under the Legislation is that the Request for Confidentiality is granted until the earliest of the following:
(f) date on which the Issuer publicly announces by way of a news release the execution of the Distribution Agreement;
(g) the date on which the Issuer advises the Decision Makers that there is no longer any need to hold the Confidential Materials in confidence; and
(h) 90 days after the date of this decision.
As to the Exemption Sought from the Prospectus Disclosure Requirements:
“Jo-Anne Matear”
Assistant Manager, Corporate Finance Branch
Ontario Securities Commission
As to the Exemption Sought from the Dealer Registration Requirement and the Prospectus Delivery Requirement:
“Wesley M. Scott” “David L. Knight”
Commissioner Commissioner
Ontario Securities Commission Ontario Securities Commission