Cogeco Inc. and Cogeco Cable Inc. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Relief to provide comparative audited financial statements in a business acquisition report (BAR) -- audited financial statements must be included in the BAR - audited financial statements cannot be provided because the company was under Companies' Creditors Arrangement Act protection.

Applicable Legislative Provisions

National Instrument 51-102 - Continuous Disclosure Obligations, s. 8.4.

October 19, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO (THE JURISDICTIONS)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

COGECO INC.

AND

COGECO CABLE INC.

(COLLECTIVELY THE "FILERS")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) that the requirements set out in the following not apply to the acquisition by Cogeco Cable Inc. (the Acquisition) of Cabovisão -- Televisâo por Cabo, S.A. (Cabovisão), a wholly owned subsidiary of Cable Satisfaction International Inc. (CSII) :

i) National Instrument 51-102 Section 8.4 (1)(d) to provide an auditor's report on the financial statements of Cabovisão for the year ended December 31, 2004;

(the Requested Relief).

Application of Principal Regulator System

Under Multilateral Instrument 11-101 Principal Regulation System (MI 11-101) and the Mutual Reliance Review System for Exemptive Relief Applications:

a) the Autorité des marches financiers is the principal regulator for the Filers;

b) the Filers are relying on the exemption in Part 3 of MI 11-101 in Newfoundland & Labrador, New Brunswick, Nova Scotia, Manitoba, Saskatchewan, Alberta and Nunavut; and

(c) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are otherwise defined in this decision.

Representations

This decision is based on the following facts represented by the Filers:

1. Cogeco Inc. is a company incorporated and existing under the Companies Act of Québec.

2. The registered office and principal executive office of the Cogeco Inc. are located at 5 Place Ville-Marie, Suite 915, Montréal, Québec.

3. The authorized share capital of Cogeco Inc. consists of an unlimited number of Subordinate Shares, Multiple Shares, Class A Shares and Class B Shares. As at June 30, 2006, the date of Cogeco Inc.'s most recent interim financial statements, 1,849,900 Multiple Voting Shares and 14,688,356 Subordinate Voting Shares were issued and outstanding.

4. The Subordinate Shares of Cogeco Inc. are listed and traded on the Toronto Stock Exchange under the symbol "CGO".

5. Cogeco Inc. is a reporting issuer or the equivalent in each of the provinces and territories of Canada and, to the knowledge of Cogeco Inc., is not in default under the securities legislation in each of the Jurisdictions except for the fact that the BAR has not been filed.

6. Cogeco Inc.'s financial year-end is August 31.

7. Cogeco Cable Inc. is a subsidiary of Cogeco Inc.

8. Cogeco Cable Inc. is a corporation incorporated and existing under the Canada Business Corporations Act.

9. The registered office and principal executive office of Cogeco Cable Inc. are located at 5 Place Ville-Marie, Suite 915, Montréal, Québec.

10. The authorized share capital of Cogeco Cable Inc. consists of an unlimited number of Class A Preference Shares, Class B Preference Shares, Multiple Voting Shares and Subordinate Voting Shares. As at May 31, 2006, the date of the Filer's most recent interim financial statements, 24,301,634 Subordinate Voting Shares and 15,691,100 Multiple Voting Shares were issued and outstanding.

11. The Subordinate Shares of Cogeco Cable Inc. are listed and traded on the Toronto Stock Exchange under the symbol "CCA.SV".

12. Cogeco Cable Inc. is a reporting issuer or the equivalent in each of the provinces and territories of Canada and, to the knowledge of the Filers, is not in default under the securities legislation in each of the Jurisdictions except for the fact that the BAR has not been filed.

13. Cogeco Cable Inc.'s financial year-end is August 31.

14. CSII is a Canadian communications company that builds and operates broadband networks in Portugal through its indirect wholly owned subsidiary Cabovisão.

15. CSII is a reporting issuer in all the provinces of Canada and its shares were listed on the TSX under the symbol "CSQ" until June 2, 2006, when CSII's shares were delisted.

16. Cabovisão is a private entity wholly owned by CSII, based in and incorporated pursuant to the laws of Portugal and is not a reporting issuer in any Jurisdiction. Cabovisão builds and operates hybrid fibre coaxial networks with two-way transmission and large bandwidth and provides cable television services, high-speed Internet access, telephone and high-speed data transmission services.

17. Cabovisão's financial year-end is December 31.

18. On June 27, 2003, the Superior Court of Québec issued an order approving a reorganization of CSII and arrangement with respect to its creditors pursuant to the Companies' Creditors Arrangement Act.

19. On November 14, 2003, the board of directors of CSII terminated all of its employees.

20. On March 19, 2004, the Superior Court of Québec rendered a judgment in connection with CSII under the Canada Business Corporations Act and the Companies' Creditors Arrangement Act, that, among other orders;

a) sanctioned the Amended Arrangement and Reorganization Plan (the Plan) which had been previously approved by the creditors of CSII on March 16, 2004;

b) directed and authorized Richter & Associés Inc. to effect all the transactions contemplated by the Plan;

c) ordered all proceedings against CSII and its assets be stayed and suspended.

21. CSII did not file continuous disclosure documents as required by the Legislation from the date of April 7, 2004 until June 2, 2006.

22. On June 2, 2006 CSII issued a news release announcing the 'Plan Implementation, Share Purchase and Proceeds Distribution Agreement' that it had entered into with Cogeco Cable Inc., Catalyst Fund Limited Partnership I (Catalyst) and Cabovisão.

23. The aforementioned agreement contemplated the purchase by Cogeco Cable Inc. from CSII, Catalyst and Cabovisão, at a cost of €464.9 million, of all the issued and outstanding shares of Cabovisão.

24. The Acquisition price includes the purchase of senior debt and reimbursement of certain other Cabovisão liabilities, including debtor-in-possession loans made to Cabovisão by Catalyst. The final purchase price will be determined following completion of a post-closing working capital adjustment. Cogeco Cable Inc. is assuming Cabovisão's €20 million working capital deficiency in connection with the Acquisition. The Acquisition price was determined based on unaudited annual financial statements of Cabovisão, which were prepared in accordance with generally accepted accounting principles in Portugal.

25. The Acquisition was approved by the Superior Court of Québec on July 4, 2006 and was subject to the fulfillment of certain conditions of closing, including the implementation of the Plan of Arrangement and Reorganization previously approved by the Court in March 2004, as amended.

26. The transfer of the shares of Cabovisão to Cogeco Cable Inc. was completed on August 3, 2006, effective as of August 1, 2006.

27. The Acquisition constitutes a "significant acquisition" for the Filer as defined in Section 8.3 of NI 51-102 since the significance tests are satisfied if the relevant percentage is read as 40%, and as such, the Filers are required to file a BAR relating to the Acquisition.

28. CSII ceased to operate in 2003 and ceased to fulfill its continuous disclosure obligations under the Legislation in 2004. As a result, CSII did not require Cabovisão to prepare audited financial statements for Cabovisão's financial year ended December 31, 2004 and CSII did not prepare audited consolidated financial statements including or based on financial statements of Cabovisão for the year ended December 31, 2004.

29. The Filers' auditors have never conducted an audit or review of Cabovisão's financial statements for the year ended December 31, 2004.

30. The Filers have been advised by their auditors that the latter are unable to audit the financial statements for the year ended December 31, 2004 because they do not have access to senior management of Cabovisão who would provide documentation necessary to complete the audit of Cabovisão. The Filers and their auditors made reasonable efforts to obtain access to, or copies of, the documentation (including the appropriate representations from senior management) and senior management required to prepare audited financial statements of Cabovisão for this period but such efforts were unsuccessful.

31. The Filers have filed their financial results for the year ended August 31, 2006 which reflect the Acquisition since the closing date of the Acquisition.

32. The conditions of the exemption set out in Section 8.9 of NI 51-102 are met and the Filers intend to rely upon the exemption provided therein from the obligation to provide comparative information for interim financial statements of Cabovisão prepared for the period from January 1, 2006 to July 31, 2006

33. As a private entity, Cabovisão was not required to prepare audited financial statements for the financial year ended December 31, 2004. While similar information may have been included in audited financial statements that CSII was required to prepare as a reporting issuer, CSII failed to file audited financial statements for this period.

Decision

The Decision Makers being satisfied that they have jurisdiction to make this decision and that the relevant test under the Legislation has been met, the Requested Relief is granted, provided that the Filers will include the following financial information relating to Cabovisão in the BAR:

a) Audited balance sheet of Cabovisão as at December 31, 2005 and an unaudited balance sheet as at December 31, 2004, each prepared in accordance with Canadian generally accepted accounting principles (GAAP);

b) Audited income statements and statement of retained earnings and cash flows for the year ended December 31, 2005 with unaudited comparative figures from the year ended December 31, 2004, prepared in accordance with Canadian GAAP;

c) Unaudited pro forma income statements for Cogeco Inc. and Cogeco Cable Inc., constructed for the period September 1, 2005 to August 31, 2006, prepared in accordance with Canadian GAAP; and

d) Unaudited interim financial statements of Cabovisão for the interim period beginning January 1, 2006 and ending July 31, 2006, prepared in accordance with Canadian GAAP.