THE MANITOBA SECURITIES COMMISSION MSC RULE 2001-8 (Section 149.1, The Securities Act) NATIONAL INSTRUMENT 45-101 RIGHTS OFFERINGS TABLE OF CONTENTS PART TITLE PAGE PART 1 DEFINITIONS, INTERPRETATION AND APPLICATION 1 1.1 Definitions 1 1.2 Interpretation 3 1.3 Application 4 PART 2 REMOVAL OF RIGHTS OFFERING PROSPECTUS EXEMPTION 4 2.1 General 4 2.2 Restricted offerings 4 PART 3 PROSPECTUS EXEMPT OFFERINGS 5 3.1 Deliveries to the reviewing authority 5 3.2 Delivery to securityholders 5 3.3 Amendments 6 PART 4 PROSPECTUS OFFERINGS 6 4.1 Reliance on registration exemption 6 4.2 Prospectus 6 4.3 Compliance with instrument 6 4.4 Amendment 7 PART 5 INSIDER SUBSCRIPTIONS 7 5.1 Insider subscriptions 7 PART 6 STAND-BY COMMITMENTS 7 6.1 Stand-by commitments 7 PART 7 ADDITIONAL SUBSCRIPTION PRIVILEGE 7 7.1 Additional subscription privilege 7 7.2 Stand-by commitment 7 7.3 Number or amount of securities 8 7.4 Price of securities 8 - i -
PART 8 APPOINTMENT OF DEPOSITORY 8 8.1 Depository 8 8.2 Release of funds from depository 9 PART 9 LISTING REPRESENTATIONS 9 9.1 Listing representations 9 PART 10 EXEMPTION 9 10.1 Connection test 9 10.2 Exemption 10 10.3 Evidence of exemption 10 PART 11 CITATION AND EFFECTIVE DATE 11 11.1 Citation 11 11.2 Effective date of instrument 11 FORM 45-101F (i) - ii -
THE MANITOBA SECURITIES COMMISSION MSC RULE 2001-8 (Section 149.1, The Securities Act) NATIONAL INSTRUMENT 45-101 RIGHTS OFFERINGS PART 1 – DEFINITIONS, INTERPRETATION AND APPLICATION Definitions 1.1 In this Instrument "acceptance date" means (a) in all jurisdictions except Quebec, (i) the date that is 10 days after the date the issuer gives the notice referred to in the rights offering prospectus exemption, or (ii) if the reviewing authority has objected to the proposed trade under the rights offering prospectus exemption, the date the reviewing authority notifies the issuer by written notice that it no longer objects to the use of the rights offering prospectus exemption; and (b) in Quebec, (i) the date that is 15 days after the date the issuer gives the notice referred to in the rights offering prospectus exemption, or (ii) if the reviewing authority has objected to the proposed trade under the rights offering prospectus exemption, the date the reviewing authority notifies the issuer by written notice that it no longer objects to the use of the rights offering prospectus exemption. "additional subscription privilege" means the privilege, granted to a holder of a right, to subscribe for securities not subscribed for under a basic subscription privilege; "basic subscription privilege" means a privilege to subscribe for that number of securities set out in a rights certificate held by a holder of the rights certificate; "class" includes a series of a class of securities;
- 2 - "managing dealer" means a dealer that has entered into an agreement with an issuer under which the dealer has agreed to organize, and participate in, the solicitation of the exercise of rights issued by the issuer; "market price" means for securities of a class for which there is a published market (a) except as provided in paragraph (b) (i) if the published market provides a closing price, the simple average of the closing price of securities of that class on the published market for each of the trading days on which there was a closing price falling not more than 20 trading days immediately before the day as of which the market price is being determined, or (ii) if the published market does not provide a closing price, but provides only the highest and lowest prices of securities of the class traded, the average of the simple averages of the highest and lowest prices of securities of the class on the published market for each of the trading days on which there were highest and lowest prices falling not more than 20 trading days immediately before the day as of which the market price is being determined, or (b) if trading of securities of the class in the published market has occurred on fewer than 10 of the immediately preceding 20 trading days, the average of the following amounts established for each of the 20 trading days immediately before the day as of which the market price is being determined: 1. The average of the closing bid and closing ask prices for each day on which there was no trading. 2. If the published market (i) provides a closing price of securities of the class for each day that there has been trading, the closing price, or (ii) provides only the highest and lowest prices, the average of the highest and lowest prices of securities of that class for each day that there has been trading; "published market" means, for a class of securities, a marketplace on which the securities have traded that discloses regularly in a publication of general and regular paid circulation or in a form that is broadly distributed by electronic means the prices at which those securities have traded; "reviewing authority" means (a) in all jurisdictions except British Columbia and Alberta, the securities regulatory authority or regulator; and
- 3 - (b) in British Columbia and Alberta, the regulator; "rights offering" means (a) in all jurisdictions except British Columbia, the issuance by an issuer to its securityholders of (i) a right to purchase additional securities of the issuer's own issue, and (ii) securities on exercise of the right; and (b) in British Columbia, the issuance by an issuer to its securityholders of a right to purchase additional securities of the issuer's own issue; "rights offering prospectus exemption" means the exemption in securities legislation from the prospectus requirement for a rights offering; "rights offering registration exemption" means the exemption in securities legislation from the trading registration requirement for a rights offering; "soliciting dealer" means a person or company the interest of which in a rights offering is limited to participating in the solicitation of the exercise of rights by holders of those rights; "stand-by commitment" means an agreement by a person or company to acquire securities of an issuer not issued under the basic subscription privilege or the additional subscription privilege available under a rights offering; and "subscription price" means the price per security at which the securities issuable on the exercise of rights may be subscribed for under a rights offering. Interpretation 1.2 For the purpose of the definition of "market price", if there is more than one published market for a security, (a) if only one of the published markets is in Canada, the market price shall be determined solely by reference to that market; (b) if there is more than one published market in Canada, the market price shall be determined solely by reference to the published market in Canada on which the greatest volume of trading in the particular class of securities occurred during the 20 trading days immediately before the date as of which the market price is being determined; and
- 4 - (c) if there is no published market in Canada, the market price shall be determined solely by reference to the published market on which the greatest volume of trading in the particular class of securities occurred during the 20 trading days immediately before the date on which the market price is being determined. Application 1.3 This Instrument applies to an issuer that trades in a local jurisdiction, by way of a rights offering, securities of its own issue to a beneficial holder of its securities. PART 2 – REMOVAL OF RIGHTS OFFERING PROSPECTUS EXEMPTION General 2.1 The rights offering prospectus exemption is not available to an issuer unless the issuer and the rights offering comply with the requirements of Parts 3, 5, 6, 7 and 8 of this Instrument. Restricted offerings 2.2 The rights offering prospectus exemption is not available to an issuer for a rights offering in any of the following circumstances: 1. The issuer is a reporting issuer in any jurisdiction and there would be an increase of more than 25 percent in the number, or, in the case of debt, the principal amount, of the outstanding securities of the class to be issued upon the exercise of rights, assuming the exercise of all rights issued under the rights offering and the exercise of any other rights issued by the issuer under the rights offering prospectus exemption during the 12 months immediately before the acceptance date. 2. The issuer has entered into an agreement to compensate a person or company for soliciting the exercise of rights issued under the rights offering that provides for payment of a higher fee for soliciting the exercise of rights by holders of rights that were not securityholders of the issuer immediately before the rights offering than the fee payable for soliciting the exercise of rights by holders of rights that were securityholders at that time. 3. The rights offering is conditional on a minimum amount of proceeds being raised and the exercise period for the rights is more than 45 days after the acceptance date. 4. The issuer is not a reporting issuer in any jurisdiction and the exercise period for the rights is more than 60 days after the acceptance date. 5. The issuer is a reporting issuer in any jurisdiction and the exercise period for the rights is more than 90 days after the acceptance date.
- 5 -6. The issuer is a reporting issuer in any jurisdiction and the exercise period for the rights is less than 21 days after the date on which the rights offering circular is sent to securityholders under paragraph 3.2(a). 7. The issuer is a reporting issuer in any jurisdiction and has not filed financial statements required to be filed under Canadian securities legislation. PART 3 – PROSPECTUS EXEMPT OFFERINGS Deliveries to the reviewing authority 3.1(1) An issuer that is relying on the rights offering prospectus exemption shall send to the reviewing authority the following documents: 1. A rights offering circular in draft and final form prepared in accordance with Form 45-101F. 2. If the issuer is not a reporting issuer in any jurisdiction, a statement of the issuer signed on its behalf by a senior officer confirming: (a) that the issuer is in compliance with the requirements of its incorporating legislation concerning the distribution of information to its security holders; and (b) no material change has occurred that has not been previously disclosed in writing to its security holders. 3. A copy of any agreement entered into, or proposed to be entered into, by the issuer with a managing dealer. 4. A copy of the technical reports and certificates prepared under National Instrument 43-101 Standards of Disclosure for Mineral Projects or National Policy Statement No. 2-B Guide for Engineers and Geologists Submitting Oil and Gas Reports to Canadian Provincial Securities Administrators or any successor instrument. 5. The details of any other rights offering completed by the issuer within the 12 months immediately preceding the date the rights offering circular in draft form is sent to the reviewing authority. 3.1(2) A rights offering circular in draft form may exclude information about the subscription price and other matters dependent on the subscription price. Delivery to securityholders 3.2 An issuer that is required to provide notice under the rights offering prospectus exemption shall send
- 6 - (a) to each securityholder entitled to receive rights under the rights offering a rights offering circular to which the reviewing authority has not objected or has confirmed its acceptance; and (b) to each securityholder entitled to receive rights under the rights offering and to each registered rights holder, a copy of any amendment under section 3.3. Amendments 3.3(1) An issuer that has sent to its securityholders a rights offering circular under paragraph 3.2(a) may amend the rights offering circular, for the purpose of updating information, by sending to the reviewing authority an amendment to the rights offering circular in draft and final form or an amended rights offering circular in draft and final form blacklined to the previously filed rights offering circular. 3.3(2) Despite subsection (1), after the acceptance date, an issuer shall not amend the rights offering circular to change the terms of the rights offering. PART 4 – PROSPECTUS OFFERINGS Reliance on registration exemption 4.1 An issuer that files a prospectus for a rights offering and intends to rely on the rights offering registration exemption shall state that it intends to rely on the exemption in a letter accompanying the filing of the preliminary prospectus. Prospectus 4.2 An issuer shall not file a prospectus for a rights offering, unless (a) in addition to qualifying the distribution of the rights, the prospectus qualifies the distribution of the securities issuable on the exercise of the rights; (b) if there is a managing dealer, the managing dealer has signed the underwriter's certificate in the prospectus; and (c) if the issuer is a reporting issuer, the exercise period for the rights is at least 21 days after the date on which the prospectus is sent to securityholders. Compliance with instrument 4.3 An issuer shall not file a prospectus or an amendment to a prospectus for a rights offering unless the issuer and the rights offering comply with the requirements of Parts 5, 6, 7 and 8.
- 7 -Amendment 4.4 An issuer shall not file an amendment to a prospectus for a rights offering to change the terms of the rights offering. PART 5 – INSIDER SUBSCRIPTIONS Insider subscriptions 5.1(1) If there is no published market or the subscription price is greater than the market price, for securities of the class of securities issuable on the exercise of the rights, no insider of the issuer shall be permitted to increase its proportionate interest in the issuer through the exercise of the rights under the rights offering or through a stand-by commitment. 5.1(2) Subsection (1) does not apply if there is no published market and the issuer, at the time that the rights offering circular in final form or the rights offering prospectus under which the rights are to be issued is sent to the reviewing authority, by notice in writing confirms to the reviewing authority that the subscription price for the securities issuable on the exercise of the rights is not greater than the fair value of the securities on the day before the date the subscription price is established. PART 6 – STAND-BY COMMITMENTS Stand-by commitments 6.1 If there is a stand-by commitment for a rights offering, the issuer shall deliver to the reviewing authority at the time the rights offering circular in final form or the rights offering prospectus is sent to the reviewing authority evidence that the person or company providing the stand-by commitment has the financial ability to carry out the stand-by commitment. PART 7 – ADDITIONAL SUBSCRIPTION PRIVILEGE Additional subscription privilege 7.1 An issuer shall not grant an additional subscription privilege to a holder of a right unless the issuer grants the additional subscription privilege to all holders of rights. Stand-by commitment 7.2 If there is a stand-by commitment for a rights offering, the issuer shall grant an additional subscription privilege to all holders of rights.
- 8 -Number or amount of securities 7.3(1) Under an additional subscription privilege, each holder of a right shall be entitled to receive, on exercise of the additional subscription privilege, the number or amount of securities that is equal to the lesser of (a) the number or amount of securities subscribed for by the holder under the additional subscription privilege; and (b) x(y/z) where x = the aggregate number or amount of securities available through unexercised rights, y = the number of rights previously exercised by the holder under the rights offering, and z = the aggregate number of rights previously exercised under the rights offering by holders of rights that have subscribed for securities under the additional subscription privilege. 7.3(2) Any unexercised rights shall be allocated on a pro rata basis to holders who subscribed for additional securities based on the additional subscription privilege up to the number of securities subscribed for by a particular holder. Price of securities 7.4 The subscription price under an additional subscription privilege or a stand-by commitment shall be the same as the subscription price under the basic subscription privilege. PART 8 – APPOINTMENT OF DEPOSITORY Depository 8.1(1) Subject to section 8.2, if a reporting issuer has specified in a rights offering circular or rights offering prospectus that no securities will be issued on the exercise of the rights unless proceeds at least equal to the specified minimum amount are received by the issuer under the rights offering, the issuer shall appoint one of the following to hold, as a depository, all money received on the exercise of the rights until that specified minimum amount is received or until the money is returned under the agreement referred to in section 8.2: 1. A Canadian financial institution. 2. A registrant in the jurisdiction in which the funds are proposed to be held, who is acting as managing dealer for the rights offering, or if there is no managing dealer, who is acting as a soliciting dealer.
- 9 -8.1(2) The issuer shall identify the depository appointed under subsection (1) in the rights offering circular or rights offering prospectus. Release of funds from depository 8.2 The agreement between the depository and the issuer under which the depository referred to in section 8.1 is appointed shall provide that, if the specified minimum amount referred to in section 8.1 is not received by the depository during the exercise period for the rights, the money held by the depository will be returned in full to the holders of rights that have subscribed for securities under the rights offering. PART 9 – LISTING REPRESENTATIONS Listing representations 9.1 A reviewing authority's written permission to include a listing representation that is not otherwise permitted under the securities legislation of the Jurisdictions in a rights offering circular or in a rights offering prospectus is evidenced by the acceptance of, or non-objection to, the circular or the issuance of a receipt for the prospectus by the reviewing authority. PART 10 – EXEMPTION Connection test 10.1(1) Parts 2, 3, 5, 6, 7 and 8 do not apply to an issuer effecting a rights offering if (a) to the knowledge of the issuer after reasonable enquiry, (i) the number of beneficial holders of the class for which the rights are issued resident in Canada does not constitute 10 percent or more of all holders of that class; (ii) the number of securities of the issuer of the class for which the rights are issued beneficially held by securityholders resident in Canada does not constitute, in the aggregate, 10 percent or more of the outstanding securities of that class; (iii) the number of beneficial holders of the class for which the rights are issued resident in the local jurisdiction does not constitute five percent or more of all holders of that class; and (iv) the number of securities of the issuer of the class for which the rights are issued beneficially held by securityholders resident in the local jurisdiction does not constitute, in the aggregate, five percent or more of the outstanding securities of that class; and
- 10 - (b) all materials sent to any other securityholders for the rights offering are concurrently sent to the reviewing authority and to each securityholder of the issuer resident in the local jurisdiction. 10.1(2) An issuer relying on the exemption in subsection (1) shall send to the reviewing authority a written notice that it is relying on the exemption and a certificate of an officer or director of the issuer, or if the issuer is a limited partnership, an officer or director of the general partner of the issuer, or if the issuer is a trust, a trustee or officer or director of a trustee of the issuer, that to the knowledge of the person signing the certificate, after reasonable inquiry that (a) the number of beneficial holders of the class for which the rights are issued resident in Canada does not constitute 10 percent or more of all holders of that class; (b) the number of securities of the issuer of the class for which the rights are issued beneficially held by securityholders resident in Canada does not constitute, in the aggregate, 10 percent or more of the outstanding securities of that class; (c) the number of beneficial holders of the class for which the rights are issued resident in the local jurisdiction does not constitute five percent or more of all holders of that class; and (d) the number of securities of the issuer of the class for which the rights are issued beneficially held by securityholders resident in the local jurisdiction does not constitute, in the aggregate, five percent or more of the outstanding securities of that class. Exemption 10.2(1) The regulator or the securities regulatory authority may grant an exemption from this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption. 10.2(2) Despite subsection (1), in Ontario, only the regulator may grant such an exemption. Evidence of exemption 10.3 Without limiting the manner in which an exemption under section 10.2 may be evidenced, the issuance by the reviewing authority of a receipt for the rights offering prospectus or acceptance of, or non-objection to, the rights offering circular is evidence of the granting of the exemption if (a) the person or company that sought the exemption delivered to the regulator on or before the date the preliminary rights offering prospectus or rights offering circular in draft form was sent to the reviewing authority, a letter or memorandum describing the matters relating to the exemption application, and indicating why consideration should be given to the granting of the exemption; and
- 11 - (b) the regulator has not sent written notice to the contrary to the person or company that sought the exemption before or concurrently with the issuance of the receipt for the prospectus or acceptance of, or non-objection to, the circular by the reviewing authority. PART 11 – CITATION AND EFFECTIVE DATE Citation 11.1 This rule may be cited or referred to as either MSC Rule 2001-8 or National Instrument 45-101. Effective date of instrument 11.2 This Instrument comes into force on July 25, 2001.
NATIONAL INSTRUMENT 45-101 FORM 45-101F INFORMATION REQUIRED IN A RIGHTS OFFERING CIRCULAR This is the form required by section 3.1 of National Instrument 45-101 Rights Offerings. Item 1 - Name of Issuer Name of issuer 1.1 State the full legal name of the issuer and the addresses of its head office or registered office, and of its principal office. Item 2 - Summary of Offering Summary of offering 2.1 On the first page of the circular, set out in summary form (i) the number of rights; (ii) the record date; (iii) the time and date of expiry of the offer; (iv) the subscription price; (v) the basic subscription privilege; (vi) the maximum number of securities issuable and the proceeds to be received by the issuer, assuming the exercise of all rights issued under the rights offering; (vii) the estimated expenses of the rights offering; (viii) any stand-by commitment; (ix) the basis on which any additional subscription privilege may be exercised; and (x) the minimum amount of proceeds, if any, upon which the rights offering is conditioned. INSTRUCTIONS: 1. If the rights will be listed on a stock exchange, include the following statement on the face page: "The Rights will be listed on the [name of exchange]". - i -
2. If the securities issuable on the exercise of the rights will be listed on a stock exchange, include the following statement on the face page: "The [name of exchange] has approved the listing of the [name of securities] issuable on the exercise of the Rights". Item 3 - International Issuers 3.1 If the Issuer is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, state the following on the cover page or under a separate heading elsewhere in the rights offering circular, with the bracketed information completed: A[The issuer] is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada. Although [the issuer has appointed [name(s) and address(es) for agent(s) for service] as its agent(s) for service of process in [list jurisdictions] it may not be possible for investors to collect from the issuer, judgments obtained in Canadian courts predicated on the civil liability provisions of securities legislation@ 3.2 In Saskatchewan, the rights offering circular must comply with the requirement to disclose statutory rights of action prescribed under securities legislation. Item 4 - Brief Description of the Business of the Issuer Brief description of the business of the issuer 4.1 Briefly describe the business carried on and intended to be carried on by the issuer and its subsidiaries. Item 5 - Details of the Rights and Securities Offered Details of the rights and securities offered 5.1 Describe the significant attributes of the rights issued under the rights offering and the securities to be issued on the exercise of the rights. Item 6 - Registration and Delivery of Certificates Evidencing Securities Registration and delivery of certificates evidencing securities 6.1 Describe the details of the registration and delivery of security certificates or other evidence of securities to holders of rights who exercise the rights. - ii -
Item 7 - Subscription Agent and Transfer Agent Subscription agent and transfer agent 7.1(1) Identify the person or company appointed as subscription agent to receive subscriptions and payments from holders of a rights certificate and to perform the services relating to the exercise and transfer of the rights and provide details of such arrangements. 7.1(2) Identify the person or company appointed as registrar and transfer agent for the securities to be issued on exercise of the rights. Item 8 - How to Exercise the Rights How to exercise the rights 8.1 Set out in detail how a holder may exercise the basic subscription privilege, exercise any additional subscription privilege, sell or transfer rights or divide or combine the rights evidenced by the certificate. INSTRUCTIONS: 1. Describe the basis on which a holder of a rights certificate may exercise the basic subscription privilege and any additional subscription privilege. 2. State if a holder of rights is to forward payment for additional securities issuable under any additional subscription privilege with the duly completed rights certificate or wait until notified by the issuer of the number of additional securities allotted to such holder. 3. Describe the basis on which the holder of a rights certificate may sell or transfer the rights or the prohibitions to the transfer. 4. Describe the basis on which the holder of a rights certificate may divide or combine the certificate with other rights certificates. Item 9 - Stand-By Commitment Stand-by commitment 9.1 Identify the person or company providing the stand-by commitment, if any. Describe the stand-by commitment, if any, and the material terms of the basis on which the person or company providing the stand-by commitment may terminate the obligation under the stand-by commitment. Item 10 - Escrow of Proceeds and Depository Escrow of proceeds and depository 10.1 Identify the depository, if any, and any provisions for the deposit of the proceeds of the rights offering with the depository. - iii -
Item 11 - Managing Dealer, Soliciting Dealer(s) and Underwriting Conflicts Managing dealer and soliciting dealer(s) 11.1 Identify the managing dealer, if any, and the soliciting dealers, if known, and describe the fees payable to them. Underwriting conflicts 11.2(1) except in Quebec, if Multilateral Instrument 33-105 Underwriting Conflicts is not in force, provide the disclosure required by securities legislation. 11.2(2) except in Quebec, if and when Multilateral Instrument 33-105 Underwriting Conflicts comes into force, comply with the requirements of Multilateral Instrument 33-105 Underwriting Conflicts. 11.2(3) in Quebec, provide the disclosure regarding underwriting conflicts in accordance with Quebec securities legislation. INSTRUCTIONS: Disclose any information concerning conflicts of interest, including, without limitation, underwriting conflicts, as required by securities legislation Item 12 - Intention of Insiders to Exercise Rights Intention of insiders to exercise rights 12.1 State, if known to the issuer after reasonable enquiry, the intentions of insiders of the issuer, concerning the exercise of rights issued under the rights offering. Item 13 - Ownership of Securities of Issuer Ownership of securities of issuer 13.1 Provide the following information for each person or company that is the direct or indirect beneficial owner of or exercises control or direction over more than 10 percent of any class or series of voting securities of the issuer as of a specified date not more than 30 days before the date of the rights offering circular: (a) the name; (b) for each class or series of voting securities of the issuer, the number or amount of securities owned, controlled or directed; and (c) the percentage of each class or series of voting securities known by the issuer to be owned, controlled or directed. - iv -
Changes of ownership 13.2 State the particulars of any issuances and, if known to any director or senior officer of the issuer, transfers of securities of the issuer that in either case have materially affected the control of the issuer since the end of the most recent financial year for which audited financial statements have been prepared. Item 14 - Use of Proceeds Use of proceeds 14.1 Describe the use of the proceeds of the rights offering. INSTRUCTIONS: Specify the estimated gross and net proceeds of the rights offering assuming full exercise of the rights, any minimum amount of proceeds required, and the purpose intended for the proceeds. Item 15 - Statement as to Resale Restrictions Statement as to resale restrictions 15.1 where the issuer is offering rights in one or more jurisdictions in which there are restrictions on the resale of securities, the rights offering circular shall include a heading entitled AStatement as to Resale Restrictions@ under which the issuer shall include a statement disclosing when those rights and underlying securities will become freely tradable in those jurisdictions and that until then, such securities may not be resold except pursuant to a prospectus or prospectus exemption, which may only be available in limited circumstances. Item 16 - Website Website 16.1 Disclose the SEDAR website address and that continuous disclosure for the issuer can be obtained on that site. - v -
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