Resverlogix Corp. et al.
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 10% restriction on the number of securities that may be distributed under an equity line in any 11-month period, certain restrictions on the permitted activities of the purchaser and certain notification and disclosure requirements -- Under the Distribution Agreement, the Purchaser, its affiliates, associates, partners or insiders, will agree not to hold a "short position" in Shares during the term of the Distribution Agreement.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1), 71, 74(1), 147.
National Instrument 44-101 Short Form Prospectus Distributions.
National Instrument 44-102 Shelf Distributions.
Citation: Resverlogix Corp., Re, 2010 ABASC 73
February 19, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
(the Jurisdictions)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
RESVERLOGIX CORP. (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)
DECISION
Background
The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (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 dual application):
(a) the Alberta Securities Commission is the principal regulator for this 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; and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
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
1. The Issuer was incorporated under the laws of Alberta on August 17, 2000.
2. The head office and principal place of business of the Issuer is located at Calgary, Alberta.
3. The Issuer is a reporting issuer in the provinces of Alberta, British Columbia, Ontario and Québec and is not in default of any requirements under the Legislation.
4. The Issuer is authorized to issue an unlimited number of common shares (the Shares) of which 39,418,139 Shares were issued and outstanding as at November 20, 2009.
5. The Shares trade on the Toronto Stock Exchange (the TSX) under the symbol RVX.
6. 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.
7. The Issuer intends to file with the securities regulator in each of British Columbia, Alberta 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).
8. 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
9. The Purchaser is incorporated in the Cayman Islands.
10. The Purchaser is managed by the Purchaser Manager, a Delaware limited liability company with its head office in Jersey City, New Jersey, United States.
11. 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
12. 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 $25 million of Shares (the Aggregate Commitment Amount) over a period of 24 months in a series of drawdowns.
13. 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.
14. 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.
15. On the 11th trading day following the date of each drawdown notice (the Settlement Date), the amount of that drawdown will be paid by the Purchaser and the relevant number of Shares will be issued by the Issuer.
16. 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.
17. 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.
18. 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.
19. The Purchaser, its affiliates, associates, partners and insiders:
(a) will not engage in any short sales with respect to the Shares during the term of the Distribution Agreement, provided that nothing in the Distribution Agreement shall prohibit the Purchaser from selling any Shares that, at the time of sale, the Purchaser either owns or has the unconditional right to acquire (a Permitted Sale); and
(b) except in a Permitted Sale, will not:
(i) grant any right to purchase or acquire any right to dispose of, nor otherwise dispose for value of, any securities of the Issuer or any securities convertible into or exercisable or exchangeable for, or rights to purchase, any securities of the Issuer; or
(ii) enter into any swap, hedge or other agreement that transfers, in whole or in part, the economic risk of ownership of any securities of the Issuer.
20. The Purchaser and the Purchaser Manager will also agree, in effecting any resale 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 relevant drawdown.
21. 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 and the Issuer.
The Prospectus Supplements
22. The Issuer intends to file with the securities regulator in each of British Columbia, Alberta 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.
23. 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 the provinces of British Columbia, Alberta and Ontario 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 Alberta Securities Commission on February •, 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.
24. 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 such 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 each of the provinces of British Columbia, Alberta and Ontario (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, a Distribution).
25. 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.
26. 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.
27. 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.
News Releases / Continuous Disclosure
28. 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.
29. 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.
30. 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).
31. The Issuer will disclose, in its annual financial statements and MD&A filed on SEDAR, the number and price of Shares sold to the Purchaser pursuant to the Distribution Agreement.
Deliveries upon Request
32. 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.
33. 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.
Decision
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker 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 for 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, 10% of the aggregate number of Shares outstanding calculated at the beginning of such period; and
B. during the term of the Distribution Agreement, 19.9% of the aggregate number of Shares outstanding calculated at the date of the Distribution Agreement; 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 Purchase 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, therefore, 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, for so long as the conditions set out in paragraphs (b)(i) through (iii) of this decision are satisfied;
(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) the 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.