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Proposed Form F1: OSC Rule - 41-501 - General Prospectus Requirements and Forms (Repealed by 41-801 on March 17, 2008)
Proposed Form F1: OSC Rule - 41-501 - General Prospectus Requirements and Forms (Repealed by 41-801 on March 17, 2008)
ONTARIO SECURITIES COMMISSION FORM 41-501F1
INFORMATION REQUIRED IN A PROSPECTUS(1),(2)
General Instructions
1. The objective of the prospectus is to provide information concerning the issuer thatan investor needs to make an informed investment decision. This Form sets out thebasic disclosure that is required, subject to the obligation to provide full, true andplain disclosure of all material facts relating to the securities issued or proposed tobe distributed. Certain rules of specific application impose prospectus disclosureobligations in addition to those described in this Form.
2. Unless an Item specifically requires disclosure only in the preliminary prospectus,the disclosure requirements set out in this Form are for both the preliminaryprospectus and the prospectus. Details concerning the price and other mattersdependent upon or relating to price, such as the number of securities beingdistributed, may be left out of the preliminary prospectus, along with specificsconcerning the plan of distribution, to the extent that these matters have not beendecided.
3. The disclosure must be understandable to readers and presented in an easy to readformat. The information required should be presented concisely and in plainlanguage. The use of non-technical terminology is encouraged and if technicalterms are used they should be defined.
4. Each Item outlines a disclosure requirement. Instructions relating to an Item areprinted in italics.
5. No reference need be made to inapplicable Items and unless otherwise required inthis Form, negative answers to Items may be omitted.
6. Terms used in this Form that are defined in Rule 41-501 General ProspectusRequirements have the meanings given to them in that Rule.(3)
7. Where the term "issuer" is used in an Item, it may be necessary, in order to meet therequirement for full, true and plain disclosure of all material facts, to includedisclosure of the issuer's subsidiaries and proposed subsidiaries and on entities'investees. For this purpose "investees" is defined to mean any entity that theHandbook recommends that the issuer account for by the equity method or theproportionate consolidation method. An entity may be considered a proposedsubsidiary only if the entity will be a subsidiary on, or immediately following,completion of the distribution.
8. If disclosure is required as of a specific date and there has been a material changeor change which is otherwise significant in the required information subsequent tothat date, the information shall instead be presented as of a date subsequent to thechange.
9. The prospectus shall be prepared in accordance with securities legislation as at thedate of issuance of a receipt for the preliminary prospectus, or if a pro formaprospectus is filed under section 62 of the Act, the date of the pro forma prospectus.See section 2.1 of Rule 41-501 General Prospectus Requirements.
10. Where the term "class" is used in any Item to describe securities the term includesa series of a class.
Item 1 - Front Page Disclosure
1.1 Required Language - Every prospectus shall include the disclosure required bysection 2.1 of National Instrument 41-101 Prospectus Disclosure Requirements by stating initalics at the top of the front page, the following, with bracketed information completed:
"The securities described in this prospectus can only be distributed where it is legalto sell them, by people who are legally permitted to sell them. No securitiesregulatory authority has expressed an opinion about these securities and it is anoffence to claim otherwise."(4)
INSTRUCTION: National Instrument 41-101 Prospectus Disclosure Requirementsprovides that this statement may be modified to reflect the terms ofand conditions of a distribution.
1.2 Preliminary Prospectus Disclosure - Every preliminary prospectus shall include thedisclosure required by section 2.2 of National Instrument 41-101 Prospectus DisclosureRequirements by stating in red ink on the left hand side of the front page the following, withbracketed information completed:
"This preliminary prospectus relating to the securities described in it, has been filedin [each of/certain of] the [provinces/provinces and territories of Canada] but hasnot yet become final for the purpose of a distribution. Information contained in thispreliminary prospectus may not be complete and may have to be amended. Thesecurities may not be distributed until a receipt is obtained for the prospectus."(5)
INSTRUCTION: National Instrument 41-101 Prospectus Disclosure Requirementsprovides that this statement may be modified to reflect the terms ofand conditions of a distribution.
1.3 Basic Disclosure about the Distribution
(1) State the following immediately below the disclosure required by Item 1.1 on the frontpage of the prospectus with bracketed information completed:
(Date)
[number and type of securities qualified for distribution under the prospectus,including any options or warrants, and the price per security](6)
(2) Disclose the method by which the offering price has been or will be determined andif estimates have been provided explain the process for determining the estimates.(7)
(3) If the securities are listed on a stock exchange and are to be distributed at a pricebased upon the market price, indicate the market involved and the market price as ofthe latest practicable date.
INSTRUCTIONS:
1. The description of the number and type of securities being distributed shall includethe restricted share terms, if any, prescribed by Rule 56-501 Restricted Shares.
2. If the offering price is in a currency other than the Canadian dollar or the UnitedStates dollar, comply with the disclosure requirements of National Instrument 52-102Use of Currencies in Material Filed with Securities Regulatory Authorities.(8)
3. The information required by paragraph (3) of Item 1.3 shall be updated and includedin the prospectus.
1.4 Distribution(9)
(1) The information called for by the following table shall be given, in substantially thefollowing tabular form, on the front page of the prospectus for securities beingdistributed for cash:
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(2) If there is an over-allotment option, describe, in a note to the table or otherwise, theterms of the option and the fact that the prospectus qualifies both the grant of theoption and the issuance or transfer of securities that will be issued or transferred if theoption is exercised.(10)
(3) If the prospectus discloses a plan to distribute the securities on a best efforts basis,disclose in the table the minimum subscription. If there is a maximum subscriptionthat differs from the minimum subscription, provide totals for both the minimum andmaximum subscriptions.
(4) Disclose separately on the front page of the prospectus those securities that areunderwritten, those under option and those to be sold on a best efforts basis, and, inthe case of a best efforts distribution, the latest date that the distribution is to remainopen.(11)
(5) If a minimum amount of funds is required by the issuer and the securities are to bedistributed on a best efforts basis, state on the front page of the prospectus that thedistribution shall not continue for a period of more than 90 days after the date of thereceipt for the prospectus if subscriptions representing the minimum amount of fundsare not obtained within that period unless each of the persons or companies whosubscribed within that period have provided their express written consent.(12)
(6) If a security is being distributed for the account of a securityholder, provide on thefront page of the prospectus the name of the securityholder and a cross-reference tothe applicable section in the prospectus where further information about the sellingsecurityholder is provided. State the portion of the expenses of the distribution to beborne by the selling securityholder and if none of the expenses of the distribution arebeing borne by the selling securityholder include a statement to that effect and discussthe reason for these arrangements.
(7) If the prospectus is used for a special warrant or similar transaction, state on the frontpage, as a note to the table, the amount that has been received by the issuer of thespecial warrants or similar securities on the sale of the special warrants or similarsecurities. If the funds are held in escrow, disclose the conditions for release.
(8) If the underwriter has been granted a compensation option, state on the front pagewhether the prospectus qualifies the grant of all or part of the compensation optionand provide a cross reference to the applicable section in the prospectus where furtherinformation about the compensation option is provided.
INSTRUCTIONS:(13)
1. Estimate amounts, if necessary. For non-fixed price distributions that are being made ona best efforts basis, disclosure of the information called for by the table may be set forth asa percentage or a range of percentages and need not be set forth in tabular form.
2. In the table, disclose only commissions paid or payable in cash by the issuer or sellingsecurityholder and discounts granted. Commissions or other consideration paid or payablein cash or otherwise by other persons or companies and consideration other than discountsgranted and cash paid or payable by the issuer or selling securityholder (including warrantsand options) shall be set out in a note to the table with a reference in column (b) of the tableto the note. Any finder's fees or similar payment shall be disclosed in a note to column (b)of the table.
3. If debt securities are offered, also express the information in the table as a percentage.(14) Ifdebt securities are offered at a premium or a discount, state in bold type the effective yieldif held to maturity.
4. For paragraphs 1.4(2) and (8), see Rule 48-502 Underwriters' Options.
5. For paragraph 1.4(7), see National Instrument 46-101 Special Warrant Transactions.
1.5 Non-Fixed Price Distributions(15) - If non-convertible debt securities or non-convertiblepreferred shares are to be distributed at non-fixed prices as permitted by section 4.1 of Rule 41-501General Prospectus Requirements, disclose on the front page of the prospectus
(a) the discount allowed or commission payable to the underwriter;
(b) any other compensation payable to the underwriter and, if applicable, that theunderwriter's compensation will be increased or decreased by the amount by whichthe aggregate price paid for the securities by the purchasers exceeds or is less than thegross proceeds paid by the underwriter to the issuer or selling securityholder;
(c) that the securities to be distributed under the prospectus will be distributed either atprices determined by reference to the prevailing price of a specified security in aspecified market, at market prices prevailing at the time of sale or at prices to benegotiated with purchasers, which prices may vary as between purchasers and duringthe period of distribution of the securities;
(d) if the price of the securities is to be determined by reference to the prevailing price ofa specified security in a specified market, the price of the specified security in thespecified market at the latest practicable date;
(e) if the price of the securities will be the market price prevailing at the time of sale, themarket price at the latest practicable date; and
(f) the net proceeds or, if the distribution is to be made on a best efforts basis, theminimum amount of net proceeds, if any, to be received by the issuer or sellingsecurityholder.
1.6 Reduced Price Distributions - If an issuer, underwriter or selling securityholder wishes todecrease the price at which securities are distributed for cash from the initial public offering pricefixed in the prospectus, include in bold type on the front page of the prospectus a cross-referenceto the disclosure concerning this in the prospectus.
1.7 Market for Securities
(1) Identify the exchange(s) upon which the securities being distributed are traded, if any.
(2) If application has been made to list or quote the securities being distributed and if securitiesof the same class as the securities being distributed or any other class of securities arecurrently listed or quoted, state, in substantially the following form, on the front page of thepreliminary prospectus, with bracketed information completed:(16)
"An application has been made to list or quote the securities distributed under thisprospectus on [name of Exchange]. Listing will be subject to the issuer fulfilling allthe listing requirements of [name of Exchange]."
(3) If application has been made to list or quote the securities being distributed and conditionallisting approval has been received, state, in substantially the following form, on the front pageof the prospectus, with bracketed information completed:
"[name of Exchange] has conditionally approved the listing of these securities.Listing is subject to the [issuer] fulfilling all of the requirements of the [name ofExchange] on or before [date], including distribution of these securities to aminimum number of public securityholders."(17)
(4) Disclose on the front page of the prospectus any intention to stabilize the market. Providea cross-reference to the applicable section in the body of the prospectus where furtherinformation about market stabilization is available.(18)
(5) If no market for the securities being distributed under the prospectus exists or will exist afterthe distribution, state in bold type on the front page of the prospectus:
"There is no market through which these securities may be sold and purchasersmay not be able to resell securities purchased under the prospectus".(19)
1.8 Risk Factors - Include on the front page of the prospectus a cross reference to the disclosure,if any, about the risks of an investment in the securities being distributed.
1.9 Underwriter(s)
(1) If the issuer or a selling securityholder is a connected issuer of an underwriter of thedistribution or if the issuer is also an underwriter for purposes of National Instrument 33-105Underwriting Conflicts, comply with the disclosure requirements of Appendix C of NationalInstrument 33-105 Underwriting Conflicts by including the following on the front page of theprospectus:
1. A statement in bold type naming the relevant underwriter(s) that the issuer or theselling securityholder is a connected issuer of the underwriter(s) in connection withthe distribution.
2. A summary of the basis on which the issuer or selling securityholder is a connectedissuer of the named underwriter(s).
3. A cross-reference to the applicable section in the body of the prospectus where furtherinformation concerning the relationship between the issuer or selling securityholderand the underwriter(s) is provided.
(2) If an underwriter has agreed to purchase all of the securities at a specified price and theunderwriter's obligations are subject to conditions, provide the following disclosure requiredby section 3.1 of National Instrument 41-101 Prospectus Disclosure Requirements on thefront page of the prospectus:
"We, as principals, conditionally offer these securities, subject to prior sale, if, asand when issued by the [name of issuer] and accepted by us in accordance with theconditions contained in the underwriting agreement referred to under Plan ofDistribution".
(3) If an underwriter has agreed to purchase all of the securities at a specified price, state on thefront page of the prospectus that the securities are to be taken up by the underwriter, if at all,on or before a date not later than 42 days after the date of the receipt for the prospectus.(20)
(4) If there is no underwriter involved in the distribution, provide a statement in bold type on thefront page of the prospectus to the effect that no underwriter has been involved in thepreparation of the prospectus or performed any review of the contents of the prospectus.(21)
INSTRUCTIONS:
1. "connected issuer" is defined in Section 1.1 of National Instrument 33-105 UnderwritingConflicts.
2. National Instrument 41-101 Prospectus Disclosure Requirements provides that the statementrequired by paragraph (2) may be modified to reflect the terms and conditions of adistribution.
1.10 International Issuers - If the issuer, a selling securityholder, a guarantor or promoter of thesecurities distributed under the prospectus is incorporated, continued or otherwise governed underthe laws of a foreign jurisdiction or resides outside of Canada, provide the following on one of thefirst three pages of the prospectus or under a separate heading elsewhere in the prospectus, withbracketed information completed:
The [issuer, selling securityholder, guarantor and/or promoter] is incorporated, continuedor otherwise governed under the laws of a foreign jurisdiction or resides outside of Canada.Although [the issuer, selling securityholder, guarantor and/or promoter] has appointed[name and address of agent for service] as its agent for service of process in Ontario it maynot be possible for investors to collect from the issuer, selling securityholder, guarantor orpromoter, judgments obtained in courts in Ontario predicated upon the civil liabilityprovisions of securities legislation.(22)
Item 2 - Table of Contents(23)
2.1 Table of Contents - Include a table of contents.
Item 3 - Summary of Prospectus(24)
3.1 General - Give a brief description, near the beginning of the prospectus, of the informationin the body of the prospectus that, in the opinion of the issuer or selling securityholder, would bemost likely to influence the investor's decision to purchase the security, including
(a) the principal business of the issuer and its subsidiaries;
(b) the securities to be distributed, including the offering price and expected net proceeds;
(c) use of proceeds;
(d) risk factors; and
(e) summary financial information in the form set out in Item 8.1.
3.2 Cautionary Language - At the beginning of the summary include a statement in substantiallythe following form:
"The following is a summary of the principal features of this distribution and shouldbe read together with the more detailed information and financial data andstatements contained elsewhere in this prospectus."
INSTRUCTION: Appropriate cross-references should be made to Items in the prospectus ifinformation is difficult to summarize accurately, but the salient points mustbe summarized.
Item 4 - Corporate Structure(25)
4.1 Name and Incorporation
(1) State the full corporate name of the issuer or, if the issuer is an unincorporated entity, thefull name under which the entity exists and carries on business and the address[es] of theissuer's head and registered office.(26)
(2) State the statute under which the issuer is incorporated, continued or organized or if theissuer is an unincorporated entity, the laws of the jurisdiction under which the issuer isestablished and exists. If material, state whether the articles or other constating orestablishing documents of the issuer have been amended and describe the substance ofmaterial amendments.
INSTRUCTION: Particulars of articles of incorporation, continuance and amendment needto be set out only if material to the securities being distributed under theprospectus. See Item 10.
4.2 Intercorporate Relationships(27)
(1) Illustrate by way of a diagram or otherwise the intercorporate relationships among theissuer and the issuer's material subsidiaries. For each subsidiary state the percentage ofvotes attaching to all voting securities of the subsidiary represented by voting securitiesbeneficially owned or over which control or direction is exercised by the issuer and theplace of incorporation, continuance or organization. Also disclose the percentage of eachclass of non-voting securities beneficially owned or over which control or direction isexercised by the issuer.
(2) If the securities distributed under the prospectus are being issued on or under, or pursuantto, an acquisition, amalgamation, merger, reorganization or arrangement, illustrate by wayof a diagram or otherwise these intercorporate relationships both before and after thecompletion of the proposed transaction
INSTRUCTION: A particular subsidiary may be omitted if
(a) the total assets of the subsidiary do not constitute more than 10 percent of theconsolidated assets of the issuer at the most recent financial year end and thesubsidiary is not otherwise material; and
(b) the assets of the omitted subsidiaries in the aggregate do not constitute more than30 percent of the consolidated assets of the issuer(28).
Item 5 - Business of the Issuer(29)
5.1 General Development of the Business(30).
(1) Describe the general development of the business of the issuer over the last three(31) financialyears. If the business consists of the production or distribution of more than one productor the rendering of more than one kind of service, indicate, in so far as practical, theprincipal products or services. Also discuss changes in the business of the issuer that areexpected to occur during the current financial year of the issuer.
(2) If material, the description of the business shall include a discussion of the followingmatters, identifying the dominant industry segments or each reportable industry segmentaffected
(a) the competitive conditions in the principal markets and geographic areas inwhich the issuer operates including, if reasonably possible, an assessment ofthe issuer's competitive position;
(b) the dollar amount spent by the issuer on research and development andexploration and development in its last three financial years;
(c) the financial and operational effects of environmental protection requirementson the capital expenditures, earnings and competitive position of the issuer inthe current financial year and any expected impact on the position in futureyears;
(d) the number of employees of the issuer as at the end of its most recent financialyear or as an average over the year, whichever is more relevant;
(e) any risks associated with foreign operations of the issuer and any dependenceof one or more of the issuer's industry segments upon such foreign operations;
(f) the nature and results of any bankruptcy, receivership or similar proceedingsagainst the issuer or any of its material subsidiaries within the last threefinancial years;
(g) the nature and results of any material reorganization of the issuer or any of itsmaterial subsidiaries within the last three financial years;
(h) material changes in the types of products produced or services rendered by theissuer and its material subsidiaries; and
(i) any material changes in the mode of conducting the business of the issuer orits material subsidiaries.
INSTRUCTION: The description shall not relate to the powers and objects in theincorporating or organizing instruments, but to the actual business carriedon and intended to be carried on. Include only major events or conditionsthat have influenced the general development of the business of the issuer.Include the business of subsidiaries of the issuer only in so far as is necessaryto explain the character and development of the business conducted by thecombined enterprise.
5.2 Narrative Description of the Business(32),(33) - Describe the business of the issuer withreference to each dominant industry segment of the issuer or each reportable industry segment of theissuer as defined in the Handbook(34). For each industry segment of the issuer include the followinginformation:
1. Principal Products or Services - With respect to principal products or services
(a) the history of development of the issuer's principal products or services and theirprincipal markets;
(b) the stage of development of the principal products, including if they are at the design,prototype, market test or commercial production stage;
(c) if the products are not at the commercial production stage or if more than 10 percentof the net proceeds from the distribution will be used for research and development
(i) the stage of development that management anticipates will be reached usingthe proceeds from the distribution available,
(ii) the major components of the proposed development program that will befunded using the proceeds from the distribution with a breakdown of costs,
(iii) whether the issuer is conducting its own research and development, issubcontracting out the research and development or is using a combination ofthose methods, and
(iv) the additional steps required to reach commercial production and an estimateof costs and timing.
2. Operations - Concerning production and sales
(a) the actual or proposed method of production of the issuer's products or, if the issuerprovides services, the method of providing the services;
(b) the payment terms, expiration dates and the terms of any renewal options of anymaterial leases or mortgages, whether the leases or mortgages are in good standingand, if applicable, that the landlord or mortgagee is not at arm's length with the issuer;
(c) any specialized skill or knowledge requirements necessary for the products to beproduced or services to be offered and the extent that this skill or knowledge isavailable to the issuer;
(d) the sources and availability of raw materials, component parts or finished products;
(e) the importance, duration and effect on the segment of identifiable intangible propertiessuch as brand names, circulation lists, copyrights, franchises, licences, patents,software, subscription lists and trademarks;
(f) the extent to which the business of the segment is seasonal; and
(g) a description of any aspect of the issuer's business that may be affected in the currentfinancial year by renegotiation or termination of contracts or sub-contracts.
3. Market - With respect to the issuer's market
(a) if aggregate sales made to or income received from any one customer, by one or moresegments, amounted to 10 percent or more of consolidated revenues of the issuer inany of the issuer's last three financial years, the number of these customers and theaggregate percentage of sales to or income from these customers;
(b) if more than 40 percent of the issuer's sales within an operating segment were madeto customers in a geographic segment in any of the last three completed financialyears, the geographic segment and the percentage of the operating segment's salesmade to these customers;
(c) material industry trends within the operating segments and specific geographicalsegments referred to in paragraph (b); and
(d) the competition within the operating segments and specific geographical segmentsreferred to in paragraph (b) including names of the issuer's principal competitors, acomparison of the principal aspects of competition (e.g. price, service, warranty orproduct performance) between the issuer and its principal competitors, and potentialsources of significant new competition.
INSTRUCTION: In determining sales to customers for purposes of paragraph (a) if it is knownthat a group of customers is under common control, the group shall beconsidered one customer.
4. Lending - With respect to lending operations of an issuer's business, describe theinvestment policies and lending and investment restrictions.
5.3 Acquisitions and Dispositions(35) - Disclose any material acquisitions and dispositionsrelating to the issuer's business made by the issuer during the last three financial years of the issueror, if the issuer has been in existence for less than three financial years, the period the issuer has beenin existence, and any intended material acquisitions or dispositions, including particulars of
(a) the nature of the assets acquired or disposed of or to be acquired or disposed of;
(b) the actual or proposed date of each acquisition or disposition;
(c) the consideration, both monetary and non-monetary, paid or to be paid to or by the issuer;
(d) any material obligations that must be complied with to keep any acquisition or dispositionagreement in good standing;
(e) the impact of the acquisition or disposition on the operating results and financial positionof the issuer;
(f) any valuation opinion obtained within the last 12 months required by Canadian securitieslegislation or Canadian securities directives of a Canadian securities regulatory authority ora policy of a stock exchange to support the value of the consideration received or paid bythe issuer or its subsidiary for the assets, including the name of the author, the date of theopinion, the assets to which the opinion relates and the value attributed to the assets; and
(g) whether the transaction is at arm's-length and, if not, the identity of the parties and therelationship of the parties to the issuer.
Item 6 - Description of Property
6.1 General(36) - State briefly with respect to the principal properties of the issuer including, butnot limited to, manufacturing plants, warehouses, service and retail outlets and investmentproperties
(a) the location, principal use and condition of each property, except that if the issuer hasnumerous locations, the information may be presented on a regional basis by reportingthe total number of properties for each region;
(b) the operating segment of the issuer using the property; and
(c) whether the property is owned freehold or otherwise, or leased or whether heldsubject to any material encumbrances including a brief description of any materialencumbrances against the property.
6.2 Natural Resource Operations (other than Oil and Gas)(37) - With respect to naturalresource operations of the issuer, other than oil and gas operations, provide the following:
1. Location, Description and Acquisition of Properties - As to each of the principalproperties, mines and plants presently owned, leased, held under option or operated, orintended to be owned, leased, held under option or operated, by the issuer
(a) the name, location, size, number of claims and concessions of, and means of accessto, the property;
(b) a brief description of the title, claim or lease under which the issuer has, or will have,the right to hold or operate the property, indicating any conditions that the issuer mustmeet to obtain or retain the property;
(c) if a principal property was acquired within the last three financial years of the issueror is intended to be acquired by the issuer from an insider or promoter of the issueror an associate or affiliate of an insider or promoter, the name and address of thevendor, the relationship of the vendor to the issuer and the consideration paid orintended to be paid to the vendor;(38) and
(d) to the extent known, the name of every person or company that has received or isexpected to receive a greater than five percent interest in the consideration receivedor to be received by the vendor referred to in subparagraph (c).
2. History - Describe previous prospecting, exploration, development and operationsconducted by the issuer and to the extent known, by others, on the principalproperties, including the names of previous operators, the years during which workwas done, the cost of the work and results achieved.
3. Geology, Mineral Deposits and Reserves - Describe
(a) the general geology and structure of the principal properties;
(b) to the extent known, estimated resources and reserves by deposits and by categoriesthat conform to the classifications and definitions in National Instrument 43-101Guide for Engineers, Geologists and Prospectors;
(c) the character, extent and condition of any underground exploration and developmentand any underground plant and equipment, and, if none, so state; and
(d) the character, extent and condition of any surface exploration and development andany surface plant and equipment, and, if none, so state.
4. Proposed Exploration and Development Program - Disclose the issuer's proposedprogram of exploration or development of the principal properties including a timetable forthe program, describing each significant component of the program and a breakdown ofcosts for the program. If the property is without a known body of commercial ore and theproposed program is exploratory, include a statement to that effect.
See Instructions following Item 6.3
6.3 Oil and Gas Companies(39) - With respect to oil and gas operations of an issuer, providethe following:
1. Location, Description and Acquisition - For each principal(40) oil and gas property,plant, facility and installation and other principal property owned, leased or held underoption, or intended to be owned, leased or held under option, by the issuer:
(a) the location, by province, if in Canada or state, if in the United States and by countryotherwise of all producing wells, and all non-unitized wells capable of producing, inwhich the issuer has an interest, with the interest expressed in terms of net wells,distinguishing separately oil wells and gas wells;
(b) for interests in properties on which there are no current reserves, the gross acreagein which the issuer has an interest and the net interest of the issuer expressed in termsof net leasable acreage, and the location of acreage by geographical area;
(c) to the extent that such properties are not unitized and are capable of but are notproducing, indicate the proximity of the properties to pipe lines or other means oftransportation;
(d) if a principal property was acquired within the last three financial years of the issueror is intended to be acquired by the issuer, from an insider or promoter of the issueror an associate or affiliate of an insider or promoter, state the name and address of thevendor, the relationship of the vendor to the issuer and the consideration paid orintended to be paid to the vendor; and
(e) to the extent known, the name of every person or company who has received or isexpected to receive a greater than five percent interest in the consideration receivedor to be received by any vendor referred to in subparagraph (d).
2. History - Details of the net crude oil, natural gas liquids and natural gas productionof the issuer, including the interest of the issuer in the crude oil, natural gas liquids andnatural gas production of any other person or company, for each of the last three financialyears and for the current year as at a date not more than 120 days before to the date of thepreliminary prospectus or pro forma prospectus.
3. Drilling Activity - State the number of wells the issuer has drilled or has participatedin the drilling of for each of the last three financial years and for the current year as at a datenot more than 120 days before to the date of the preliminary prospectus or pro formaprospectus, the number of wells completed as producing wells and as dry holes, theamounts expended by the issuer during the last three financial years and the portion of thecurrent year on drilling and exploration activities.
4. Geology and Reserve - Describe, to the extent known, the estimated reserves bydeposit and by categories that conform to the classification and definition in NationalInstrument 43-102 Guide for Engineers or Geologists Submitting Oil and Gas Reports.
5. Proposed Exploration and Development Program - Disclose the issuer's proposedprogram of exploration or development of the principal properties including a timetable forthe program, describing each significant component of the program and a breakdown ofcosts for the program. If the proposed program is exploratory, include a statement to thateffect.
INSTRUCTIONS: for Items 6.2 and 6.3
1. For purposes of Items 6.2 and 6.3 the principal properties which are required to bedescribed are those properties of the issuer upon which more than 10 percent of the netproceeds of the issue are to be expended or that contributed at least 10 percent of thegross revenues of the issuer during the most recent financial year of the issuer.Information for the other properties of the issuer shall be given in summary form.
2. The information required by these Items shall be derived from or supported by informationobtained from the report relating to the property required to be filed with the Commissionunder National Instrument 43-101 Guide for Engineers, Geologists and Prospectors orNational Instrument 43-102 Guide for Engineers or Geologists Submitting Oil and GasReports, if a statement to such effect is made in the prospectus.
3. In giving the information required by these Items, include ownership interests such as feeinterests, leasehold interests, royalty interests, interests in reservation and all other typesand variations of ownership interests.
4. Do not include the amounts expended for payments made for and under leases or othersimilar interests, but state separately for the years and period referred to in paragraph 3of Item 6.3 the amounts paid or payable for and under leases or other similar interests.
Item 7 - Use of Proceeds(41)
7.1 Proceeds - State the estimated net proceeds to be received by the issuer or, in the case ofa non-fixed price distribution or a distribution to be made on a best efforts basis, the minimum amountof net proceeds to be received by the issuer from the sale of the securities distributed and state theparticulars of any provisions or arrangements made for holding any part of the net proceeds of thedistribution in trust or escrow subject to the fulfilment of conditions.
7.2 Principal Purposes - Describe, in tabular form if appropriate, each of the principalpurposes, with approximate amounts, for which the net proceeds will be used by the issuer. If theclosing of the distribution is subject to a minimum subscription, provide disclosure of the use ofproceeds for the minimum and maximum subscriptions.
7.3 Escrowed Proceeds - Where required, specify if unallocated funds will be placed in a trustor escrow account, invested or added to the working capital of the company and give details of thearrangements made for, and the persons responsible for, the supervision of the trust or escrowaccount or the investment of unallocated funds and the investment policy to be followed.
INSTRUCTIONS:
1. Statements as to the principal purposes to which the net proceeds are to be applied shallbe reasonably specific. The phrase "for general corporate purposes" will generally notbe sufficient.
2. The issuer may choose to include a statement such as the following as a lead-in:(42)
"The issuer intends to spend the funds available to it as stated in this prospectus. Theremay be circumstances, however, where, for sound business reasons, a reallocation of fundsmay be necessary."
3. If any material amounts of other funds are to be used in conjunction with the proceeds,state the amounts and sources of the other funds.
4. If more than 10 percent of the net proceeds(43) are to be used to acquire assets, describe theassets, and, if known, the particulars of the purchase price being paid for or beingallocated to the respective categories of assets, including intangible assets that are beingacquired. If the acquisition is from an insider of the issuer, give the name of the personor company from whom the assets are to be acquired and the principle followed indetermining the cost. Describe the nature of the title to or interest in the assets to beacquired by the issuer. If any part of the consideration for the acquisition of any of theassets consists of securities of the issuer, give brief particulars of the designation, numberor amount, voting rights, if any, and other appropriate information relating to thesecurities, including particulars of any issuance of any securities of the same class withinthe two preceding years.
5. If more than 10 percent of the net proceeds(44) will be used to reduce or retire indebtednessand the indebtedness was incurred within the two preceding years, describe the principalpurposes for which the proceeds of the indebtedness were used and, if the creditor is aninsider of the issuer, identify the creditor and the nature of the relationship to the issuerand the outstanding amount owed.
6. If the prospectus is used for a special warrant or similar transaction, describe theprincipal purposes for which the funds were raised in the transaction. If all or a portionof the funds have been spent, explain how the funds were spent.
Item 8 - Summary Financial Information and Management's Discussion and Analysis
8.1 Summary Financial Information(45)
(1) Provide financial data in substantially the following tabular form for the issuer's last threefinancial years and any period subsequent to the most recent financial year end for whichfinancial statements are included in the prospectus:
The summary financial data presented below as at the end of and for the years ended ....., ..... and..... have been derived from the [consolidated] financial statements. The summary financial datapresented below as at the end of and for the .....-month periods ended ..... and ..... have been derivedfrom unaudited [consolidated] financial statements which, in the opinion of management, have beenprepared on the same basis as the audited financial statements and include all adjustmentsnecessary to present fairly the information set forth in the statements.
| Income Statement Data
Net sales or total revenue: Income (loss) before extraordinary items Income (loss) per share before extraordinary items Net income (loss) Net income (loss) per share Dividends per share(46) |
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| Balance Sheet Data
Total assets Total long-term financial liabilities(47) |
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INSTRUCTION: The content of the table may be modified to reflect the financial disclosure of the issuerincluded in the issuer's consolidated financial statements and must include all materialinformation.
(2) Provide the following financial data in substantially the tabular form required by paragraph8.1(1),(48) for each of the issuer's last eight quarters ending with the most recent financial year:
Net sales or total revenue
Income (loss) before extraordinary items
Income (loss) per share before extraordinary items
Net income (loss)
Net income (loss) per share
(3) Discuss, in notes to the tables provided under (1) and (2), those factors affecting thecomparability of the data, including discontinued operations, changes in accounting policies,significant acquisitions or disposals and major changes in the direction of the business. Alsodescribe any contractual restriction or restriction in the share provisions that could preventthe issuer from paying dividends. Describe the issuer's dividend policy and if a decision hasbeen made to change the dividend policy, disclose the intended change.
(4) If the issuer is required, pursuant to section 3.2 of Rule 41-501 General ProspectusRequirements, to reconcile its financial statements to Canadian GAAP, discuss, in notes tothe tables the reconciliation and any aspects of the differences between the foreign accountingprinciples applied and Canadian GAAP necessary for an understanding of the financialstatements.
8.2 Issuers Incorporated Less than One Year - If the issuer was incorporated or organized lessthan one year prior to the date as of which the most recent balance sheet contained in the prospectusis drawn up or if the issuer's business is still in the development stage, indicate the amount orestimated amount of preliminary expenses incurred by the issuer, showing administrative anddevelopment expenses separately, including the amount already expended and the estimated futureexpenditures.
8.3 Management's Discussion and Analysis(49) - Reproduce the disclosure required by Part IIIof Rule 51-501 Annual Information Form and Management's Discussion and Analysis of FinancialCondition and Results of Operation for the issuer, except that the disclosure shall relate to thefinancial condition, changes in financial condition and results of operations of the issuer for the lastthree financial years.
Item 9 - Earnings Coverage Ratios(50)
9.1 Earnings Coverage Ratios
(1) If the securities being offered are debt securities having a term to maturity in excessof one year or are preferred shares, disclose
(a) the earnings coverage ratio based on the 12 month period ended on the last dayof the most recently completed period for which audited annual financialstatements of the issuer are required to be included in the prospectus; and
(b) the earnings coverage ratio based on the 12 month period ended on the last dayof the most recently completed period for which interim financial statements ofthe issuer are included in the prospectus if the period is subsequent to the lastday of the most recently completed period for which audited annual financialstatements of the issuer are included in the prospectus.
(2) The ratios referred to in subsection (1) shall be adjusted to reflect:
(a) the issuance of all long term financial liabilities and, in the case of a distributionof preferred shares, all preferred shares, issued since the date of the annual orinterim financial statements;
(b) the issuance of the securities that are to be distributed under the prospectusbased on the price at which the securities will be distributed;
(c) the repayment, redemption or other retirement of all long term financialliabilities since the date of the annual or interim financial statements, all longterm financial liabilities to be repaid or redeemed from the proceeds to berealized from the sale of securities offered under the prospectus and, in the caseof an issuance of preferred shares, all preferred shares repaid, redeemed orotherwise retired since the date of the annual or interim financial statements andall preferred shares to be repaid, redeemed or otherwise retired from theproceeds to be realized from the sale of the securities under the prospectus; and
(d) the servicing costs that were incurred, or will be incurred, in relation to theadjustments.
INSTRUCTIONS:
1. Earnings coverage shall be calculated by dividing x by y where:
(a) "x" is the issuer's consolidated net income before interest and income taxes for therelevant period; and
(b) "y" is (i) for an issue of debt securities, interest expense determined in accordancewith Canadian GAAP after giving effect to the distribution and any retirement ofobligations plus the amount of interest that has been capitalized during the period,and (ii) for an issue of preferred shares, dividends declared during the periodtogether with any dividends payable in the future after giving effect to thedistribution plus annual interest requirements.(51)
2. Recurring costs should be included in all coverage calculations but imputed interestincome from the proceeds of the distribution should not be included.
Item 10 - Description of the Securities Distributed(52)
10.1 Terms
(1) If shares are being distributed, state the description or the designation of the class ofshares distributed and describe all material attributes and characteristics, including,without limiting the generality of the foregoing,
(a) dividend rights;
(b) voting rights;
(c) liquidation or distribution rights;
(d) pre-emptive rights;
(e) conversion or exchange rights;
(f) redemption, retraction, purchase for cancellation or surrender provisions;
(g) sinking or purchase fund provisions;
(h) liability to further calls or to assessment by the issuer; and
(i) provisions permitting or restricting the issuance of additional securities.
(2) If debt securities are being distributed, give a brief summary of the material attributesand characteristics of the indebtedness and the security, if any, for the debt, including
(a) provisions for interest rate, maturity and premium, if any;
(b) conversion or exchange rights;
(c) redemption, retraction, purchase for cancellation or surrender provisions;
(d) sinking or purchase fund provisions;
(e) the nature and priority of any security for the debt securities, brieflyidentifying the principal properties subject to lien or charge;
(f) provisions permitting or restricting the issuance of additional securities, theincurring of additional indebtedness and other material negative covenants(including restrictions against payment of dividends and restrictions againstgiving security on the assets of the issuer or its subsidiaries) and provisionsas to the release or substitution of assets securing the debt securities;
(g) the name of the trustee under any indenture relating to the obligations andthe nature of any material relationship between the trustee or any of itsaffiliates(53) and the issuer or any of its affiliates; and
(h) any financial arrangements between the issuer and any of its affiliates oramong its affiliates that could affect the security for the indebtedness.
(3) If securities other than shares or debt securities are being distributed, describe fullythe material attributes and characteristics of those securities. If subscription warrantsor rights are being distributed or issued, state the description and amount of securitiescovered by the warrants or rights, the period during which, and the price at which,the warrants or rights are exercisable, and the principal terms and conditions underwhich they may be exercised.
(4) If securities of a class may be partially redeemed or repurchased, state the manner ofselecting the securities to be redeemed or repurchased.
(5) The attributes of all underlying securities relating to conversion or exchange rightsor warrants to acquire any security shall be disclosed, together with all the otherinformation that would be required if the underlying security were distributed directlyunder the prospectus.(54)
10.2 Modification of Terms(55) - Describe provisions as to modification, amendment or variation ofany rights attached to the security. If the rights of holders of securities may be modifiedotherwise than in accordance with the provisions attached to the securities or the provisions ofthe governing statute relating to the securities, explain briefly.(56)
10.3 Constraints
(1) If there are constraints imposed on the ownership of securities of the issuer to ensurethat the issuer has a required level of Canadian ownership, describe the mechanism,if any, by which the level of Canadian ownership of the securities of the issuer will bemonitored and maintained.(57)
(2) If the shares are restricted shares for purposes of Rule 56-501 Restricted Shares,comply with the applicable disclosure requirement of that Rule.
10.4 Ratings - If one or more ratings, including provisional ratings, have been received from one ormore approved rating organizations for the securities to be distributed and the rating or ratingscontinue in effect, disclose(58)
(a) each security rating including a provisional rating, received from anapproved rating organization whether or not it is an approved rating;
(b) the name of each approved rating organization that has assigned a rating forthe securities to be distributed;
(c) a definition or description of the category in which each approved ratingorganization rated the securities to be distributed and the relative rank ofeach rating within the organization's overall classification system;
(d) a statement that a security rating is not a recommendation to buy, sell orhold securities and may be subject to revision or withdrawal at any time bythe rating organization; and
(d) any announcement made by an approved rating organization that theorganization intends to revise or withdraw a rating previously assigned andrequired to be disclosed under this paragraph.
10.5 Project Financings - If the distribution is a project financing made by an issuer that is anunincorporated association or co-tenancy comprised of securityholders, disclose who will haveresponsibility for compliance with the continuous disclosure obligations under the Act.
INSTRUCTIONS:
1. This Item requires only a brief summary of the provisions that are material from an investmentstandpoint. The provisions attaching to the securities do not need to be set out in full.
2. If the rights attaching to the securities being offered are materially limited or qualified by therights of any other class of securities, or if any other class of securities ranks ahead of orequally with the securities being offered, include information about the other securities thatwill enable investors to understand the rights attaching to the securities being offered. If thesecurities being offered are to be offered in exchange for other securities, include a descriptionof the other securities. No information need be given as to any class of securities that is to beredeemed or otherwise retired if appropriate steps to assure redemption or retirement havebeen or will be taken before or contemporaneously with the delivery of the securities beingoffered.
3. In addition to the summary referred to in Instruction 1, the issuer may attach as a schedule tothe prospectus a copy of the provisions attaching to the securities being offered.
Item 11 - Consolidated Capitalization(59)
11.1 Consolidated Capitalization - Describe any material change in, and the effect of the materialchanges on, the share and loan capital of the issuer on a consolidated basis since the date of thecomparative balance sheets for the issuer's most recent financial year contained in the prospectus.
Item 12 - Options to Purchase Securities(60)
12.1 Options to Purchase Securities - State, in tabular form, in the preliminary prospectus or proforma prospectus as at a specified date not more than 30 days before the date of the preliminaryprospectus or pro forma prospectus, and in the prospectus as at a specified date not more than 30days before the date of the prospectus, information as to options(61) to purchase securities of the issueror a subsidiary of the issuer that are held or will be held upon completion of the distribution by
(a) all executive officers of the issuer as a group and by all directors of the issuer whoare not also executive officers as a group, indicating the aggregate number ofexecutive officers and the aggregate number of directors to whom the informationapplies, without naming them;
(b) all executive officers of all subsidiaries of the issuer as a group and by all directorsof such subsidiaries who are not also executive officers of the subsidiary as agroup, in each case, without naming them and excluding individuals referred to inparagraph (a), indicating the aggregate number of executive officers and theaggregate number of directors to whom the information applies;
(c) all other employees of the issuer as a group, without naming them;
(d) all other employees of subsidiaries of the issuer as a group, without naming them;and
(e) any other person or company, including the underwriter, naming each person orcompany.
INSTRUCTIONS:
1. Describe the options, stating the material provisions of each class or type of option including:
(a) the designation and number of the securities under option;
(b) the purchase price of the securities under option or the formula by which the purchaseprice will be determined, and the expiration dates of the options;
(c) if reasonably ascertainable, the market value of the securities under option on the dateof grant;
(d) if reasonably ascertainable, the market value of the securities under option on thespecified date; and
(e) with respect to options referred to in paragraph (e) of Item 12.1, the particulars of thegrant including the consideration for the grant.
Item 13 - Prior Sales(62)
13.1 Prior Sales - State the prices at which securities of the class distributed under the prospectushave been sold within the 12 months prior to the date of the preliminary prospectus or pro formaprospectus, or are to be sold, by the issuer or selling securityholder and the number of securities ofthe class sold or to be sold at each price.
13.2 Stock Exchange Price - If shares of the class of shares to be distributed under the prospectusare listed on a Canadian stock exchange or traded on a Canadian market, provide the price ranges andvolume traded on the Canadian stock exchange or market on which the greatest volume of tradinggenerally occurs or, if the shares are not listed on a Canadian stock exchange or traded on a Canadianmarket, provide the price ranges and volume traded on the foreign stock exchange or market onwhich the greatest volume of trading generally occurs.(63) Information is to be provided on a monthlybasis for each month or, if applicable, part month, of the current quarter and the immediatelypreceding quarter and on a quarterly basis for the next preceding seven quarters.
INSTRUCTIONS: In the case of sales by a selling securityholder, the information required byItem 13.1 may be given in the form of price ranges for each calendar month.
Item 14 - Escrowed Securities(64)
14.1 Escrowed Securities - State as of a specified date within 30 days prior to the date of thepreliminary prospectus or pro forma prospectus, in substantially the tabular form indicated, thenumber of securities of each class of voting securities of the issuer, to the knowledge of the issuer,held in escrow, disclosing the name of the depository, if any, and the date of and conditions governingthe release of the securities from escrow.
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Item 15 - Principal Shareholders(65) and Selling Securityholders(66)
15.1 Principal Shareholders and Selling Securityholders - Provide the following informationas of a specified date not more than 30 days before the date of the preliminary prospectus or proforma prospectus in substantially the tabular forms indicated
(a) the number of securities of each class of voting securities of the issuer owned by aprincipal shareholder and if any securities are being distributed for the account of asecurityholder, of that securityholder. Show in column (c) if the securities are ownedboth of record and beneficially, of record only, or beneficially only, and show incolumns (d) and (e) the respective amounts and percentages known by the issuer tobe owned in each manner.
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(b) the percentage of securities of each class of voting securities of the issuer or asubsidiary of the issuer, beneficially owned, directly or indirectly or over whichcontrol or direction is exercised, by all directors and senior officers of the issuer, asa group, without naming them.(67)
INSTRUCTIONS:
1. If a company or partnership is shown as a principal shareholder of an issuer, disclose in afootnote to the table, the name of each individual who, through ownership of or control ordirection over the securities of the company or membership in the partnership, as the case maybe, is a principal shareholder of the company.
2. If voting securities are being distributed on or under an acquisition, amalgamation, merger,reorganization or arrangement, indicate as far as practicable the holdings by each person orcompany described in paragraphs (a) and (b) of voting securities that will exist after givingeffect to the transaction.
3. If any of the securities being distributed are being distributed for the account of asecurityholder, name the securityholder and state the number or amount of the securities of theclass being distributed that are owned by the selling securityholder, the number or amount ofsecurities being distributed for the account of the selling securityholder and the number oramount of securities to be owned by the selling securityholder after the distribution. State thedate the selling securityholder acquired the securities and if the securities were acquired in the12 months preceding the date of the preliminary prospectus or pro forma prospectus, asapplicable, the cost to the securityholder in the aggregate and on a per security basis.(68)
4. If, to the knowledge of the issuer or the underwriter of the securities being distributed, morethan 10 percent of any class of voting securities of the issuer is held or is to be held subject toany voting trust or other similar agreement state the designation of the securities, the numberor amount of the securities held or to be held subject to the agreement and the duration of theagreement. State the names and addresses of the voting trustees and outline briefly their votingrights and other powers under the agreement.
5. If, to the knowledge of the issuer or the underwriter of the securities being distributed, anyperson or company named in answer to paragraph (a) of this Item is an associate or affiliateof another person or company named in paragraph (a), disclose, in so far as known, thematerial facts of the relationship, including any basis for influence over the issuer held by theperson or company other than the holding of voting securities of the issuer.
Item 16 - Directors and Officers(69)
16.1 Name, Address, Occupation and Security Holding - Furnish in tabular form thenames and either the full address, or the municipality of residence or the postal address of eachdirector and officer of the issuer and indicate the positions and offices held with the issuer. State theprincipal occupations within the five preceding years of each director or officer of the issuer, thedirector's membership on any board committee and the number and percentage of securities of eachclass of voting securities of the issuer or any of its subsidiaries beneficially owned directly orindirectly or over which control or direction is exercised by all directors and executive officers of theissuer as a group.(70)
INSTRUCTIONS:
1. If the principal occupation of a director or officer is that of an officer of a company otherthan the issuer, state the principal business in which such person or company is engaged.
2. If, during the period, a director or officer has held more than one position with the issueror the issuer's controlling shareholder or a subsidiary of the issuer, state only the firstand current position held.
16.2 Corporate Cease Trade Orders or Bankruptcies(71) - If a director or officer of the issuer is,or within the 10 years before the date of the preliminary prospectus has been, a director or officer ofany issuer that, while that person was acting in that capacity,
(a) was the subject of a cease trade or similar order, or an order that denied the issuer accessto any exemptions under Ontario securities law, for a period of more than 30 consecutivedays, state the fact and describe the basis on which the order was made and whether theorder is still in effect; or
(b) became bankrupt, made a proposal under any legislation relating to bankruptcy orinsolvency or was subject to or instituted any proceedings, arrangement or compromisewith creditors or had a receiver, receiver manager or trustee appointed to hold its assets,state the fact.
16.3 Penalties or Sanctions - If a director or officer of the issuer has, within the 10 years beforethe date of the preliminary prospectus, been subject to any penalties or sanctions imposed by a courtor securities regulator relating to trading in securities, promotion or management of a publicly tradedissuer, or theft or fraud, describe the penalties or sanctions imposed and the grounds on which theywere imposed.
16.4 Individual Bankruptcies - If a director or officer of the issuer has, within the 10 years beforethe date of the preliminary prospectus, become bankrupt, made a proposal under any legislationrelating to bankruptcy or insolvency, or been subject to or instituted any proceedings, arrangementor compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold theassets of the director or officer, state the fact.
16.5 Conflicts of Interest - Disclose particulars of existing or potential material conflicts of interestbetween the issuer or a subsidiary of the issuer and a director or officer of the issuer as a result of thedirector or officer's outside business interests.
Item 17 - Executive Compensation(72)
17.1 Disclosure - Include in the prospectus a Statement of Executive Compensation in Form 40 tothe Regulation and describe any intention to make any material changes to that compensation.
17.2 Exception - Despite section 17.1, the disclosure required by Items V, VIII, IX and X of Form40 may be omitted.
Item 18 - Indebtedness of Directors and Executive Officers(73)
18.1 Indebtedness of Directors and Executive Officers
(1) Provide the information required by paragraph (2) for each individual who is, or at anytime during the most recently completed financial year of the issuer was, a director orexecutive officer of the issuer, and each associate of any such individual(74) and
(a) who is, or at any time since the beginning of the most recently completedfinancial year of the issuer was, indebted to the issuer or a subsidiary of theissuer; or
(b) whose indebtedness to another entity is, or at any time since the beginning ofthe most recently completed financial year of the issuer was, the subject of aguarantee, support agreement, letter of credit or other similar arrangement orunderstanding provided by the issuer or a subsidiary of the issuer.
(2) Disclose, substantially in the tabular form set out below, all indebtedness, other thanroutine indebtedness, of the individuals referred to in paragraph (1)(75) and,
(a) the name of the borrower (column (a));
(b) if the borrower is a director or executive officer, the principal position of theborrower; if the borrower was, during the year, but no longer is a director orexecutive officer, include a statement to that effect; if the borrower is includedas an associate of a director or executive officer, describe briefly therelationship of the borrower to an individual who is or, during the year, was adirector or executive officer, name that individual and provide the informationthat would be required by this subparagraph for that individual if he or she wasthe borrower (column (a));
(c) whether the issuer or a subsidiary of the issuer is the lender or the provider ofa guarantee, support agreement, letter of credit or similar arrangement orunderstanding (column (b));
(d) the largest aggregate amount of the indebtedness outstanding at any time duringthe last completed financial year (column (c));
(e) the aggregate amount of the indebtedness outstanding as at a specified date notmore than 30 days before the date of the preliminary prospectus or pro formaprospectus (column (d));
(f) if the indebtedness was incurred to purchase securities of the issuer or of asubsidiary of the issuer separately for each class(76) of securities, the aggregatenumber of securities purchased during the last completed financial year with thefinancial assistance (column (e)); and
(g) the security for the indebtedness, if any, provided to the issuer, a subsidiary ofthe issuer or the other entity (column (f)).
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
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Indebtedness
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(3) Disclose in the introduction immediately preceding the table required by paragraph (2) theaggregate indebtedness of all officers, directors, employees, and former officers, directors andemployees of the issuer or a subsidiary of the issuer outstanding as at a specified date notmore than 30 days before the date of the preliminary prospectus or pro forma prospectus, asapplicable(77), that is owed to
(a) the issuer or a subsidiary of the issuer; or
(b) another entity if the indebtedness is the subject of a guarantee, support agreement,letter of credit or other similar arrangement or understanding provided by the issueror any of its subsidiaries.
(4) Disclose in a footnote to, or a narrative accompanying, the table required by this Item
(a) the material terms of the indebtedness and, if applicable, of each guarantee, supportagreement, letter of credit or other similar arrangement or understanding, includingthe term to maturity, rate of interest and any understanding, agreement or intentionto limit recourse, and any security for the indebtedness and the nature of thetransaction in which the indebtedness was incurred;
(b) any material adjustment or amendment made during the most recently completedfinancial year of the issuer to the terms of the indebtedness and, if applicable, theguarantee, support agreement, letter of credit or similar arrangement orunderstanding; and
(c) the class of the securities purchased with financial assistance or held as security forthe indebtedness and, if the class of securities is not publicly traded, all material termsof the securities.
INSTRUCTIONS:
1. For purposes of this Item, "routine indebtedness" means indebtedness described in any of thefollowing
(a) If an issuer makes loans to employees of the issuer generally, whether or not in theordinary course of business, loans are considered as routine indebtedness if made onterms, including terms relating to interest rate and security, no more favourable to theborrower than the terms on which loans are made by the issuer to employees generallyunless the amount at any time during the last completed financial year remainingunpaid under the loans to any one director or executive officer together with his or herassociates exceeds $25,000, in which case the indebtedness is not routine.
(b) Whether or not the issuer makes loans in the ordinary course of business, a loan to adirector or executive officer is routine indebtedness if
(i) the borrower is a full-time employee of the issuer or a subsidiary of the issuer,
(ii) the loan is fully secured against the residence of the borrower, and
(iii) the amount of the loan does not exceed the annual aggregate salary of theborrower from the issuer and its subsidiaries.
(c) If the issuer makes loans in the ordinary course of business, a loan to a person orcompany other than a full-time employee of the issuer or of a subsidiary of the issueris routine indebtedness, if the loan
(i) is made on substantially the same terms, including terms relating to interest rateand security, as are available when a loan is made to other customers of theissuer with comparable credit ratings, and
(ii) involves no greater than usual risks of collectability.
(d) Indebtedness for purchases made on usual trade terms, ordinary travel or expenseadvances, or for similar reasons is routine indebtedness if the repayment arrangementsare in accordance with usual commercial practice.
2. For purposes of this Item, "support agreement" includes an agreement to provide assistancein the maintenance or servicing of any indebtedness and an agreement to providecompensation for the purpose of maintaining or servicing any indebtedness of the borrower.
3. No disclosure need be made under this Item of indebtedness that has been entirely repaid onor before the date of the prospectus.
Item 19 - Plan of Distribution(78)
19.1 Name of Underwriters - If the securities being distributed are to be sold to an underwriter, givethe name of the underwriter. State briefly the nature of the underwriter's obligation to take up andpay for the securities. Indicate the date by which the underwriter is obligated to purchase thesecurities.
19.2 Disclosure of Market Out - If securities are distributed under a prospectus by an underwriterthat has agreed to purchase all of the securities at a specified price and the underwriter's obligationsare subject to conditions, provide the disclosure required by section 3.1 of National Instrument 41-101 Prospectus Disclosure Requirements by including the following, with modifications necessaryto reflect the terms of the distribution:
"Under an agreement dated [insert date of agreement] between [issuer] and [insert nameof Underwriter(s)], as underwriter[s], [issuer] has agreed to sell and the underwriter[s][has/have] agreed to purchase on [insert closing date] the securities at a price of [insertoffering price], payable in cash to [issuer] against delivery. The obligations of theunderwriter[s] under the agreement may be terminated at [its/their] discretion on thebasis of [its/their] assessment of the state of the financial markets and may also beterminated upon the occurrence of certain stated events. The underwriter[s] [is/are],however, obligated to take up and pay for all of the securities if any of the securities arepurchased under the agreement".
19.3 Best Efforts Offering - Outline briefly the plan of distribution of any securities being offeredother than on the basis described in Item 19.2.
19.4 Over-Allotments - If the issuer, a selling securityholder or an underwriter knows or has reasonto believe that there is an intention to over-allot or that the price of any security may be stabilized tofacilitate the distribution of the securities to be distributed in accordance with Rule 48-501 MarketStabilization, this intention must be disclosed.(79)
19.5 Minimum Distribution - If a minimum amount of funds is required by the issuer and thesecurities are to be distributed on a best efforts basis, state the minimum amount required to be raised,and also indicate the maximum that could be raised and that the distribution shall not continue for aperiod of more than 90 days after the date of the receipt for the prospectus if subscriptionsrepresenting the minimum amount of funds are not obtained within the period, unless each of thosepersons or companies who subscribed within the period has provided their express written consent.(80)
19.6 Approvals - If the purpose of the distribution is to fund a new business and the issuer has notobtained all material licenses, registrations and approvals necessary for the operation of the business,include a statement that
(a) all funds received from subscribers will be held by a Canadian chartered bank or trustcompany, as depository, for not longer than 90 days; and
(b) if, at the end of the period, the necessary licences, registrations and approvals havenot been obtained, the depository will return the funds to subscribers.(81)
19.7 Reduced Price Distributions(82) - If an issuer, underwriter or selling securityholder wishes todecrease the price at which securities are distributed for cash from the initial public offering pricefixed in the prospectus in accordance with the procedures permitted by section 4.1 of Rule 41-501General Prospectus Requirements, disclose that after the underwriter has made a good faith effortto sell all of the securities at the initial public offering price fixed in the prospectus, the offering pricemay be decreased and further changed, from time to time, to an amount not greater than the initialoffering price fixed in the prospectus and that the compensation realized by the underwriter will bedecreased by the amount that the aggregate price paid by purchasers for the securities is less than thegross proceeds paid by the underwriter to the issuer or selling securityholder.
Item 20 - Risk Factors(83)
20.1 Risk Factors - Describe the risk of an investment in the securities being distributed.
INSTRUCTIONS:
1. Discuss such matters as cash flow and liquidity problems, inexperience of management,general risks inherent in the business carried on by the issuer, environmental and health risks,reliance on key personnel, the arbitrary establishment of the offering price, regulatoryconstraints, economic or political conditions and financial history and any other matter thatin the opinion of the issuer or selling securityholder would be most likely to influence theinvestor's decision to purchase the securities.
2. The most significant risks should be disclosed first.
3. If there is a risk that purchasers of the securities offered may become liable to make anadditional contribution beyond the price of the security, disclose the risk.
Item 21 - Promoters(84)
21.1 Promoters - If a person or company is or has been a promoter of the issuer or of a subsidiaryof the issuer within the two(85) years immediately preceding the date of the preliminary prospectus orpro forma prospectus
(a) state the name of the promoter, the nature and amount of anything of value, includingmoney, property, contracts, options or rights of any kind received or to be receivedby the promoter directly or indirectly from the issuer or from a subsidiary of theissuer, and the nature and amount of any assets, services or other considerationtherefor received or to be received by the issuer or a subsidiary of the issuer; and
(b) state, for an asset acquired within the two years prior to the date of the preliminaryprospectus or pro forma prospectus or thereafter, or to be acquired, by the issuer orby a subsidiary of the issuer from a promoter
(i) the consideration paid or to be paid for the asset and the method by which theconsideration has been or will be determined,
(ii) the person or company making the determination and the person or company'srelationship with the issuer, the promoter, an affiliate of the issuer or thepromoter, and
(iii) the date that the asset was acquired by the promoter and the cost of the assetto the promoter.
Item 22 - Legal Proceedings(86)
22.1 Legal Proceedings - Describe any legal proceedings material to the issuer to which the issueror a subsidiary of the issuer is a party or of which any of their property is the subject matter and anysuch proceedings known to be contemplated, including the name of the court or agency, the dateinstituted, the principal parties to the litigation, the nature of the claim, the amount claimed, if any,if the proceedings are being contested, and the present status of the proceedings.
INSTRUCTION: No information need be given with respect to any proceeding that involvesprimarily a claim for damages if the amount involved, exclusive of interest andcosts, does not exceed 10 percent of the current assets of the issuer and itssubsidiaries on a consolidated basis. However, if any proceeding presents inlarge degree the same legal and factual issues as other proceedings pending orknown to be contemplated, the amount involved in the other proceedings shall beincluded in computing the percentage.
Item 23 - Interest of Management and Others in Material Transactions(87)
23.1 Interest of Management and Others in Material Transactions - Describe and, if practicable,state the approximate amount of, any material interest, direct or indirect, of any of the followingpersons or companies in any transaction within the three years before the date of the preliminaryprospectus or pro forma prospectus, or in any proposed transaction, that has materially affected orwill materially affect the issuer or a subsidiary of the issuer:
1. Any director or executive officer of the issuer.
2. A securityholder disclosed in the prospectus as a principal shareholder.
3. An associate or affiliate of any of the persons or companies referred to in paragraphs 1 and2.
INSTRUCTIONS:
1. The materiality of an interest is to be determined on the basis of the significance of theinformation to investors in light of all the circumstances of the particular case. Theimportance of the interest to the person having the interest, the relationship of the parties tothe transaction with each other and the amount involved are among the factors to beconsidered in determining the significance of the information to investors.(88)
2. Give a brief description of the material transaction. Include the name of each person(89) orcompany whose interest in any transaction is described and the nature of the relationship tothe issuer.
3. For any transaction involving the purchase of assets by or sale of assets to the issuer or asubsidiary of the issuer, state the cost of the assets to the purchaser and the cost of the assetsto the seller if acquired by the seller within three years before the transaction.
4. This Item does not apply to any interest arising from the ownership of securities of the issuerif the securityholder receives no extra or special benefit or advantage not shared on an equalbasis by all other holders of the same class of securities or all other holders of the same classof securities who are resident in Canada.
5. Information must be included as to any material underwriting discounts or commissions uponthe sale of securities by the issuer if any of the specified persons or companies were or are tobe an underwriter or are associates, affiliates or partners of a person or company that was oris to be an underwriter.
6. No information need be given in answer to this Item as to any transaction, or any interest ina transaction, if
(a) the rates or charges involved in the transaction are fixed by law or determined bycompetitive bids;
(b) the interest of a specified person or company in the transaction is solely that of a directorof another company that is a party to the transaction;
(c) the transaction involves services as a bank or other depository of funds, a transfer agent,registrar, trustee under a trust indenture or other similar services;
(d) the interest of a specified person or company, including all periodic instalments in thecase of any lease or other agreement providing for periodic payments or instalments, doesnot exceed $100,000; or
(e) the transaction does not involve remuneration for services and the interest of the specifiedperson or company arose from the beneficial ownership, direct or indirect, of less than10 percent of any class of equity securities of another company that is party to thetransaction and the transaction is in the ordinary course of business of the issuer or itssubsidiaries.
7. Describe all transactions not excluded above that involve remuneration (including an issuanceof securities), directly or indirectly, to any of the specified persons or companies for servicesin any capacity unless the interest of the person or company arises solely from the beneficialownership, direct or indirect, of less than 10 percent of any class of equity securities of anothercompany furnishing the services to the issuer or its subsidiaries.
Item 24 - Relationship Between Issuer or Selling Securityholder and Underwriter(90)
24.1 Relationship Between Issuer or Selling Securityholder and Underwriter - If the issuer orselling securityholder is a connected issuer of an underwriter of the distribution, or if the issuer is alsoan underwriter, comply with the disclosure requirements of National Instrument 33-105 UnderwritingConflicts(91) by stating the following:
1. That the issuer or the selling securityholder is a connected issuer of the underwriter for thedistribution; the underwriter(s) for which the issuer is a connected issuer must be named.
2. For each underwriter referred to in paragraph 1, the basis on which the issuer or sellingsecurityholder is a connected issuer, including
(a) if the issuer or selling securityholder is a connected issuer to the underwriterbecause it is a related issuer of the underwriter, the details of the holding, powerto direct voting, or direct or indirect beneficial ownership of, securities that causethe issuer or selling securityholder to be a related issuer;
(b) if the issuer or selling securityholder is a connected issuer to the underwriterbecause of indebtedness, the disclosure required by paragraph 3; and
(c) if the issuer or selling securityholder is a connected issuer to the underwriterbecause of a relationship other than indebtedness, the details of that relationship.
3. If the issuer or selling securityholder is a connected issuer to the underwriter because ofindebtedness,
(a) the amount of the indebtedness;
(b) the extent to which the issuer or selling securityholder is in compliance with theterms of an agreement governing the indebtedness;
(c) the extent to which the related issuer has waived a breach of the agreement sinceits execution;
(d) the nature of the security for the indebtedness; and
(e) the extent to which the financial position of the issuer or selling securityholder orthe value of the security has changed since the indebtedness was incurred.
4. The involvement of the underwriter in respect of which the issuer or selling securityholderis a connected issuer, and the involvement of a related issuer of the underwriter in thedecision to distribute the securities being offered and the determination of the terms of thedistribution, including disclosure concerning whether the issue was required, suggested orconsented to by the underwriter or a related issuer of the underwriter and, if so, on whatbasis.
5. The effect of the issue on the underwriter and each related issuer of each underwriter,including
(a) information about the extent to which the proceeds of the issue will be applied,directly or indirectly, for the benefit of the underwriter or a related issuer of theunderwriter, or
(b) if the proceeds will not be applied for the benefit of the underwriter or a relatedissuer or connected issuer of the underwriter, a statement to that effect.
6. If a portion of the proceeds of the distribution is to be directly or indirectly applied to
(a) the payment of indebtedness or interest owed by the issuer, or by an associate orrelated issuer of the issuer, or by a person or company of which the issuer is anassociate, or by the selling securityholder or by an associate or related issuer of theselling securityholder, or by a person or company of which the sellingsecurityholder is an associate, to the underwriter, or to a related issuer of theunderwriter, or
(b) the redemption, purchase for cancellation or for treasury or other retirement ofshares other than equity securities of the issuer, or of an associate or related issuerof the issuer, or of a person or company of which the issuer or is an associate, orof the selling securityholder, or of an associate or related issuer of the sellingsecurityholder, or of a person or company of which the ruling securityholder is anassociate, held by the underwriter, or by a related issuer of the underwriter
particulars of the indebtedness or shares in respect of which the payment is to be madeand of the payment proposed to be made.
7. That an underwriter that is an independent underwriter for purposes of National Instrument33-105 Underwriting Conflicts has underwritten a portion of the distribution and the rolethat that underwriter has played in the structuring and pricing of the distribution and in thedue diligence activities carried on by the underwriters for the distribution.
8. Any other material facts with respect to the relationship or connection between eachunderwriter referred to in paragraph 1, a related issuer of each underwriter and the issuerthat are not required to be described by the foregoing.
INSTRUCTIONS: "Related issuer" and "connected issuer" are defined in section 1.1 of NationalInstrument 33-105 Underwriting Conflicts.
Item 25 - Guaranteed Securities(92)
25.1 Guaranteed Securities - If the securities of the issuer are guaranteed by another issuer, provideinformation about the guarantor that is required in order to provide full, true and plain disclosure ofall material facts concerning the securities to be distributed including the information stipulated inItems 4, 5, 6, 8, 16, 22, 24 and 29 of this Form and such other information as is required to meet thestandard.
Item 26 - Auditors, Transfer Agents and Registrars(93)
26.1 Auditors - State the name and address of the auditor of the issuer.
26.2 Transfer Agent and Registrar - If shares are to be distributed, state the names of the issuer'stransfer agent(s) and registrar(s) and the location (by municipalities) of the register(s) of transfers ofthat class of shares.
26.3 Registration of Securities - If securities other than shares are distributed, state the location (bymunicipalities) of each register on which transfers of the securities may be recorded.
Item 27 - Material Contracts(94)
27.1 Material Contracts - Give particulars of every material contract entered into within the twoyears before the date of the preliminary prospectus or pro forma prospectus or thereafter, by theissuer or a subsidiary of the issuer and state a reasonable time and place at which the contracts orcopies of the contracts may be inspected during distribution of the securities being offered.
INSTRUCTIONS:
1. The term "material contract" for this purpose means a contract that can reasonably beregarded as material to a proposed investor in the securities being distributed and may in somecircumstances include contracts with a person or company providing the issuer withpromotional or investor relations services.
2. Set out a complete list of all material contracts, indicating those that are disclosed elsewherein the prospectus and provide particulars about those material contracts for which particularsare not given elsewhere in the prospectus. This Item does not require disclosure of contractsentered into by the issuer or a subsidiary of the issuer in the ordinary course of business.
3. Particulars of contracts should include the dates of, parties to, consideration provided for, andgeneral nature of, the contracts.
Item 28 - Experts(95)
28.1 Opinions - Name all counsel responsible for opinions presented in the prospectus.
28.2 Tax Consequences - If the income tax aspects of an investment in the securities beingdistributed are particularly relevant to the investor, include a statement in bold type to the effect thatinvestors are advised to consult their own tax advisers.
28.3 Interest of Experts -
(1) Disclose all direct or indirect interests in the property of the issuer or of an associate oraffiliate of the issuer received or to be received by a person or company whoseprofession or business gives authority to a statement made by the person or companyand who is named as having prepared or certified a part of the prospectus or certifieda report or valuation described or included in the prospectus.
(2) Disclose the beneficial ownership, direct or indirect, by a person or company referredto in paragraph (1) of any securities of the issuer or any associate or affiliate of theissuer.
(3) If a person or a director, officer or employee of a person or company referred to inparagraph (1) is or is expected to be elected, appointed or employed as a director,officer or employee of the issuer or of any associate or affiliate of the issuer, disclose thefact or expectation.
INSTRUCTIONS: For the purpose of paragraph 28.3(2), if the ownership is one percent or less,a general statement to that effect shall be sufficient.
Item 29 - Other Material Facts(96)
29.1 Other Material Facts - Give particulars of any material facts about the securities proposed tobe distributed which are not disclosed under the other Items.
Item 30 - Purchasers' Statutory Rights(97)
30.1 Purchasers' Statutory Rights - Provide the disclosure required by section 4.1 of NationalInstrument 41-101 Prospectus Disclosure Requirements by including a statement in substantially thefollowing form, with bracketed information completed:
"Securities legislation in [certain of the provinces [and territories] of Canada/the Provinceof [insert name of local jurisdiction, if applicable] provides purchasers with the right towithdraw from an agreement to purchase securities within two business days after receiptor deemed receipt of a prospectus and any amendment. [In several of theprovinces/provinces and territories], [T/t]he securities legislation further provides apurchaser with remedies for rescission [or [, in some jurisdictions,] damages] if theprospectus and any amendment contains a misrepresentation or is not delivered to thepurchaser, provided that the remedies for rescission [or damages] are exercised by thepurchaser within the time limit prescribed by the securities legislation of the purchaser'sprovince [or territory]. The purchaser should refer to any applicable provisions of thesecurities legislation of the purchaser's province [or territory] for the particulars of theserights or consult with a legal adviser."
INSTRUCTIONS:
1. Please refer to National Instrument 46-101 Special Warrants for the disclosure of contractualrights of rescission, required in that type of distribution.
2. National Instrument 41-101 Prospectus Disclosure Requirements provides that this statementmay be modified to reflect the terms of and conditions of a distribution.
Item 31 - Financial Statements
31.1 Financial Statements - Include the financial statements required under Part 3 of Rule 41-501General Prospectus Requirements.
Item 32 - Certificates
32.1 Certificates - Include the certificates required under the Act and under Part 5 of Rule 41-501General Prospectus Requirements.
General Instructions 1
Item 1 - Front Page Disclosure 3
1.1 Required Language 3
1.2 Preliminary Prospectus Disclosure 3
1.3 Basic Disclosure about the Distribution 4
1.4 Distribution 5
1.5 Non-Fixed Price Distributions 7
1.6 Reduced Price Distributions 8
1.7 Market for Securities 8
1.8 Risk Factors 9
1.9 Underwriter(s) 9
1.10 International Issuers 11
Item 2 - Table of Contents 11
2.1 Table of Contents 11
Item 3 - Summary of Prospectus 12
3.1 General 12
3.2 Cautionary Language 12
Item 4 - Corporate Structure 13
4.1 Name and Incorporation 13
4.2 Intercorporate Relationships 13
Item 5 - Business of the Issuer 14
5.1 General Development of the Business 14
5.2 Narrative Description of the Business 16
5.3 Acquisitions and Dispositions 18
Item 6 - Description of Property 19
6.1 General 19
6.2 Natural Resource Operations (other than Oil and Gas) 19
6.3 Oil and Gas Companies 21
Item 7 - Use of Proceeds 23
7.1 Proceeds 23
7.2 Principal Purposes 23
7.3 Escrowed Proceeds 23
Item 8 - Summary Financial Information and Management's Discussion andAnalysis 25
8.1 Summary Financial Information 25
8.2 Issuers Incorporated Less than One Year 27
8.3 Management's Discussion and Analysis 27
Item 9 - Earnings Coverage Ratios 28
9.1 Earnings Coverage 28
Item 10 - Description of the Securities Distributed 29
10.1 Terms 29
10.2 Modification of Terms 31
10.3 Constraints 31
10.4 Ratings 32
10.5 Project Financings 32
Item 11 - Consolidated Capitalization 33
11.1 Consolidated Capitalization 33
Item 12 - Options to Purchase Securities 33
12.1 Options to Purchase Securities 33
Item 13 - Prior Sales 35
13.1 Prior Sales 35
13.2 Stock Exchange Price 35
Item 14 - Escrowed Securities 35
14.1 Escrowed Securities 35
Item 15 - Principal Shareholders and Selling Securityholders 36
15.1 Principal Shareholders and Selling Securityholders 36
Item 16 - Directors and Officers 38
16.1 Name, Address, Occupation and Security Holding 38
16.2 Corporate Cease Trade Orders or Bankruptcies 39
16.3 Penalties or Sanctions 39
16.4 Individual Bankruptcies 39
16.5 Conflicts of Interest 40
Item 17 - Executive Compensation 40
17.1 Disclosure 40
17.2 Exception 40
Item 18 - Indebtedness of Directors and Executive Officers 40
18.1 Indebtedness of Directors and Executive Officers 40
Item 19 - Plan of Distribution 44
19.1 Name of Underwriters 44
19.2 Disclosure of Market Out 44
19.3 Best Efforts Offering 45
19.4 Over-Allotments 45
19.5 Minimum Distribution 45
19.6 Approvals 45
19.7 Reduced Price Distributions 46
Item 20 - Risk Factors 46
20.1 Risk Factors 46
Item 21 - Promoters 47
21.1 Promoters 47
Item 22 - Legal Proceedings 47
22.1 Legal Proceedings 47
Item 23 - Interest of Management and Others in Material Transactions 48
23.1 Interest of Management and Others in Material Transactions 48
Item 24 - Relationship Between Issuer or Selling Securityholder and Underwriter 50
24.1 Relationship Between Issuer or Selling Securityholder and Underwriter 50
Item 25 - Guaranteed Securities 52
25.1 Guaranteed Securities 52
Item 26 - Auditors, Transfer Agents and Registrars 53
26.1 Auditors 53
26.2 Transfer Agent and Registrar 53
26.3 Registration of Securities 53
Item 27 - Material Contracts 53
27.1 Material Contracts 53
Item 28 - Experts 54
28.1 Opinions 54
28.2 Tax Consequences 54
28.3 Interest of Experts 54
Item 29 - Other Material Facts 54
29.1 Other Material Facts 55
Item 30 - Purchasers' Statutory Rights 55
30.1 Purchasers' Statutory Rights 55
Item 31 - Financial Statements 55
31.1 Financial Statements 55
Item 32 - Certificates 56
32.1 Certificates 56
1. This Form restates and will replace Forms 12, 13 and 14 and restates the prospectus disclosurerequirements from sections 34, 36, 38, 47, 49, 51 and 59 of the Regulation to the Securities Act and fromOntario Securities Commission Policy 5.1 ("OSC Policy 5.1") and Ontario Securities Commission Policy5.7 ("OSC Policy 5.7").
2. A proposed general definition rule has been published. It contains definitions of certain terms used inmore than one rule. That rule also provides, among other things, that terms used in a rule and defined insection 1 of the Securities Act or subsection 1(2) of the Regulation will have the respective meaning givento them in the Securities Act or regulation, as appropriate. The definition rule also incorporates termsdefined in National Instrument 14-101 Definitions. National Instrument 14-101 contains, among otherthings, definitions for terms used in more than one national instrument.
3. Currently, the only terms defined in Rule 41-501 are "approved rating", "approved rating organization","convertible" and "non-convertible".
4. Currently required under section 51 of the Regulation to the Act and National Policy No. 13 DisclaimerClause on Prospectus and National Policy No. 32 Prospectus Warning Re: Scope of Distribution whichhave been reformulated as section 2.1 of proposed National Instrument 41-101 Prospectus DisclosureRequirements.
5. Currently required under section 50 of Regulation to the Act which will be revoked.
6. New requirement.
7. From Item 1, instruction 4 of Forms 12, 13 and 14.
8. From National Policy Statement No. 14.
9. From Item 1 of Forms 12, 13 and 14.
10. Currently prescribed, in part, in paragraph 10(a) of OSC Policy 5.1.
11. In part, prescribed by Item 2, paragraph (b) of Forms 12 and 13, Item 2, paragraph (d) of Form 14.
12. Currently required under paragraph 7 of subsection 38(1) of the Regulation. The period has beenextended from 60 days to 90 days and conforms with proposed National Instrument 44-101 PromptOffering Qualification System.
13. Combines Item 1, Instruction 1 from each of Forms 12, 13 and 14.
14. Currently prescribed in paragraph B.2(g) of OSC Policy 5.7 and Instruction 6 of Item 1 of Form 12.Consistent with the general practice of not making specific reference to "permissive" clauses, the referencein Form 12 to the right of the Director to consent to the price of debt securities being expressed as otherthan a percentage has been deleted.
15. Consistent with the requirements of subsection 4.3(l) of proposed National Policy Statement No. 44 Rulesfor Shelf Prospectus Offerings and For Pricing Offerings After the Final Prospectus Is Issued, paragraph 2of Item 2 and paragraph 4 of Item 7 of Appendix B of National Policy Statement No. 47 Prompt OfferingQualification System and section 22 of Policy 5.1, as reformulated in section 4.1 of Rule 41-501 GeneralProspectus Requirements and proposed National Instrument 44-101 Prompt Offering QualificationSystem.
16. See section 38(3) of the Act. Issuance of a receipt shall constitute the evidence of the permission of theDirector as required under subsection 38(3) of the Act.
17. Currently prescribed by paragraph 7(b) of Ontario Securities Commission Policy 5.1.
18. Currently prescribed by paragraph 5 of Ontario Securities Commission Policy 5.1.
19. Currently prescribed by subsection 38(1)6 of the Regulation and, in part, in Item 3 of Forms 12, 13 and14.
20. Currently prescribed by subsection 38(1)5 of the Regulation and paragraph B2(e) of OSC Policy 5.7. Thesix week period prescribed has been changed to 42 days to be consistent with other time periodrequirements for prospectus disclosure which are expressed in days. The provision which excludedcontinuous offerings has been deleted as it is not practicable to have a continuous distribution on a "firmcommitment basis".
21. New requirement.
22. Currently prescribed by paragraph 25(d) of OSC Policy 5.1, but expanded here to include guarantors.
23. Currently required under subsection 49(5) of the Regulation.
24. Currently in Item 4 of Forms 12, 13 and 14 although the list of disclosure items is new. Paragraph (e) is anew requirement but is typically included in prospectus summaries.
25. Currently required in Items 8 and 27 of Forms 12 and 14 and Items 10 and 12 of Form 13. This hasbeen revised to correspond to Item 1 of Appendix A of NP 47 and proposed National Instrument 44-101Prompt Offering Qualification System.
26. A reference to "registered office" has been added in place of "a principal place of business".
27. Based on Item 27 of Forms 12 and 14 and Item 12 of Form 13. Paragraph (c) of each of the Items hasbeen deleted.
28. This has been conformed to the corresponding provision in NP 47 but has been amended to refer only toassets and not revenues.
29. Currently prescribed by Item 9 of Form 12, Item 13 of Form 13 and Item 9 of Form 14.
30. This Item has been drafted to apply to all types of issuers although this disclosure is currently onlyrequired for industrial and natural resource issuers.
31. The relevant time period has been reduced from five to three to correspond to the three years offinancial disclosure.
32. From the equivalent B.C. requirement. Some of the terminology has been changed to use the CICAHandbook, 1700 Exposure Draft terminology. These requirements will be consistent with thecomparable disclosure requirements of proposed National Instrument 44-101 Prompt OfferingQualification System.
33. The requirements for additional disclosure concerning the business of finance companies currentlyincluded in Items 8, 11 and 13 of Form 13 have been deleted as this disclosure is now required by theHandbook of the Canadian Institute of Chartered Accountants.
34. The term "handbook" is defined in the proposed National Instrument 14-101. The definition is "theHandbook of the Canadian Institute of Chartered Accountants, as amended from time to time".
35. Currently required under Item 11 of Form 12, Item 15 of Form 13 and Item 12 of Form 14. Expandedfrom current form requirement to include the same requirements as British Columbia and to extend therelevant time frame from 2 to 3 years except in the case of valuations, in order to match the financialstatement disclosure requirement. Item 8.2 requires the inclusion of the financial informationconcerning the acquired business described in section 3.3 of Rule 41-501 General ProspectusRequirements.
36. Currently required in Item 12 of Form 12 and will be consistent with the comparable disclosurerequirements in National Instrument 44-101 Prompt Offering Qualification System.
37. Currently required in paragraph (b) of Item 9 of Form 14 and expanded to include some of the BritishColumbia requirements. Corresponds to National Instrument 44-101 Prompt Offering QualificationSystem
38. This has been revised to conform to the similar disclosure requirement for oil and gas companies. Seeparagraph (d) of Item 6.3.
39. Currently required in paragraph (c) of Item 9 of Form 14.
40. Instruction 1 has been extended to apply to oil and gas properties.
41. Currently required in Item 5 of Forms 12, 13 and 14.
42. New provision.
43. Currently the Form refers to a "material part of proceeds". The reference to 10 percent is consistentwith the British Columbia requirement.
44. Currently the Form refers to a "material part of proceeds". The reference to 10 percent is consistentwith the British Columbia requirement.
45. There is not currently any requirement to include summary financial information in the prospectus. Ithas become common practice to include such information immediately before the MD&A. Thisdisclosure is consistent with the requirement of Item 4 of Appendix A to NP 47.
46. See Item 12 and Footnote 58.
47. The reference to "total long-term financial liabilities" replaces the reference to "total long term debt".
48. From NP 47.
49. Inclusion of MD&A in the prospectus will satisfy the existing requirement under Item 13 of Form 12, Item16 of Form 13 and Item 13 of Form 14. This proposed rule will require all reporting issuers in Ontario whoare not otherwise exempted, to prepare and file annually Management's Discussion and Analysis of FinancialResults substantially in the form required to be prepared and filed by issuers eligible under the PromptOffering Qualification System.
50. The requirement to disclose the asset coverage has been deleted; a similar approach is expected to be made inproposed National Instrument 44-101 Prompt Offering Qualification System.
51. The method of calculation is based on the Corporate Finance Accountants Practice Manual.
52. Currently required under Items 17, 18 and 19 of Form 12, Items 21, 22 and 23 of Form 13 and Items 17, 18and 19 of Form 14.
53. A reference to affiliates of the trustee has been added.
54. Currently required under paragraph 6 of OSC Policy 5.1.
55. Form 12, Item 17(b) and 17(a)(ix).56 Currently required under paragraph (b) of Item 17 of Form 12. The requirement has been expanded to applyto any security being offered and not just shares.
57. Currently required under paragraph 17 of OSC Policy 5.1.
58. Consistent with paragraph (4) of Item 8 of Appendix B of NP 47.
59. The current requirement in Item 7 of Form 12, "Share and Loan Capital Structure" is typically satisfiedthrough a capitalization table. In light of the fact that Item 8.4 now requires that MD&A disclosure beincluded in the prospectus and that the disclosure provided by a capitalization table is included in theMD&A, this Item has been revised to parallel the requirement in Item 5 of Appendix B to NP 47.
60. Currently required under Item 24 of Form 12, Item 28 of Form 13 and Item 24 of Form 14.
61. The term "option" is defined in Rule 14-501 Definitions. The definition is "an agreement that provides theholder with the right, but not the obligation, to do one or more of the following on terms or at a priceestablished by or determinable by reference to the agreement at or by a time established by the agreement: (1)Receive an amount of cash determinable by reference to a specified quantity of the underlying interest of theoption. (2) Purchase a specified quantity of the underlying interest of the option. (3) Sell a specified quantityof the underlying interest of the option".
62. Currently required under Item 28 of Form 12, Item 31 of Form 13 and Item 28 of Form 14.
63. This language reflects the similar concept in the definition of "market price" in section 183 of the Regulationthat the relevant market is the principal Canadian market as determined by volume of trading.
64. Currently required under Item 25 of Form 12, Item 29 of Form 13 and Item 25 of Form 14.
65. The term "principal shareholder" is defined in Rule 14-501 Definitions. The definition is, if used to indicatea relationship with a person or company, "a person or company that is the direct or indirect registered owneror beneficial owner of more than 10 percent of any class or series of voting securities".
66. Currently required under Item 26 of Form 112, Item 30 of Form 13 and Item 26 of Form 14. Theinformation required concerning selling securityholders is new.
67. 67 This Item corresponds to the current requirement of paragraph (3) of Item 7 of NP 47.
68. This is a new requirement for non-resource issuers.
69. Currently required in Item 21 of Form 12, Item 25 of Form 13 and Item 21 of Form 14.
70. This corresponds to the current requirement in Item 5(a)(vii) of Form 30.
71. Items 16.2, 16.3 and 16.4 are based on requirements in British Columbia.
72. Currently required in Item 22 of Form 12, Item 26 of Form 13 and Item 22 of Form 14.
73. Currently required in Item 23 of Form 12, Item 27 of Form 13 and Item 23 of Form 14. Each of those Itemsrequired information for each individual who was during the most recently completed financial year adirector, executive officer or senior officer of the issuer. For this purpose, executive officer has the samemeaning as in Form 40. As there appears to be significant overlap between the term"executive officer" and"senior officer", only one term ("executive officer") will be used. It will be defined in the local definition ruleto mean an individual who is or at any time during the most recently completed financial year was (a) a chairof the issuer, if that individual performed the functions of the office on a full time basis, (b) a vice-chair ofthe issuer, if that individual performed the functions of the office on a full-time basis, (c) the president of theissuer, (d) a vice-president of the issuer in charge of a principal business unit, division or function such assales, finance, or production, or (e) an officer of the issuer or any of its subsidiaries or any other person whoperformed a policy-making function in respect of the issuer.
74. References to proposed nominees for election as directors have been removed. If a director is to be elected inconnection with a prospectus distribution, it can be left to the issuer to include material disclosureconcerning the director.
75. This Item in each of Forms 12, 13 and 14 currently requires that information concerning indebtednessincurred to purchase shares be disclosed separately from other non-routine indebtedness. It was decided thatthis separate disclosure was no longer required and the Form has been amended accordingly. Currently theForms only require a description of security for indebtedness incurred to purchase shares. As revised anysecurity for any disclosed indebtedness must be described.
76. The phrase "or series" has been deleted. See General Instruction 10.
77. The reference to the date of the preliminary prospectus or pro forma prospectus was changed from theexisting requirement which refers to "the date of certification".
78. Currently required under Item 2 of Forms 12, 13 and 14. Note that Item 2 of Form 14 includes twoparagraphs which have not been included on the basis that the information is already required to be providedunder other Items of the Form.
79. Currently required under paragraph 5 of OSC Policy 5.1.
80. Currently required under paragraph 7 of subsection 38(1) of the Regulation with a change to increase theperiod of time from 60 days to 90 days and to remove the requirement to receive the consent of the Directorto any increase in the number of days.
81. Currently required under paragraph 4 of OSC Policy 5.1 and included under section 7.2 of Rule 41-501General Prospectus Requirements. A change has been made to stipulate that only trust companies andchartered banks may hold the funds in trust.
82. New provision in subsection 4.1(4) of Rule 41-501 General Prospectus Requirements.
83. Based on the requirements under Item 10 of Form 12, Item 14 of Form 13 and Item 10 of Form 14.
84. Currently required under Item 15 of Form 12, Item 19 of Form 13 and Item 15 of Form 14.
85. Pursuant to subsection 58(6) of the Act, the Director may require a person or company who has been apromoter within the two preceding years to sign the certificate. For that reason, two years has been chosenas the appropriate time frame for disclosure in this Item.
86. Currently required under Item 16 of Form 12, Item 20 of Form 13 and Item 16 of Form 14.
87. Currently required under Item 29 of Form 12, Item 32 of Form 13 and Item 29 of Form 14.
88. Based on materiality guidelines in NP 47 and the corresponding U.S. requirement.
89. The requirement to disclose the address of the interested party has been deleted.
90. Currently required under Item 30 of Form 12, Item 33 of Form 13 and Item 30 of Form 14. Item 31 of Form12 and the corresponding items in Forms 13 and 14 concerning underwriters as issuers has not beenreformulated in this rule and accordingly, there is no longer a need for there to be two independentvaluations where a non-reporting issuer issuing securities is a dealer.
91. This text reflects current proposed drafts of this Instrument, and is subject to change.
92. Subsection 53(4) of the Regulation currently requires financial statement disclosure for the guarantor only inrespect of an offering of guaranteed debt securities.
93. Currently required under Item 32 of Form 12, Item 38 of Form 13 and Item 32 of Form 14.
94. Currently required under Item 33 of Form 12, Item 39 of Form 13 and Item 33 of Form 14. There is nocorresponding requirement for POP issuers although the AIF is required to include disclosure of any aspectof the issuer's business that may be affected by renegotiation or termination of contracts.
95. Currently required under paragraph A(4) of OSC Policy 5.7 and subsection 34(4) of the Regulation.
96. Currently required under Item 34 of Form 12, Item 40 of Form 13 and Item 34 of Form 14.
97. Currently required under NP 35 and to be required under proposed National Instrument 41-101 ProspectusDisclosure Requirements.