Securities Law & Instruments

Headnote

Consent given to an offering corporation under the Business Corporations Act (Ontario) to continue under the Bank Act (Canada).

Statutes Cited

Business Corporations Act, R.S.O. 1990, c. B.16, as am., s. 181.

Securities Act, R.S.O. 1990, c. S.5, as am.

Regulations Cited

Regulation made under the Business Corporations Act, O. Reg. 289/00, as am., s. 4(b).

IN THE MATTER OF

R.R.O. 1990, REGULATION 289/00

(the "Regulation")

MADE UNDER THE

BUSINESS CORPORATIONS ACT (ONTARIO)

R.S.O. 1990, c. B.16, AS AMENDED

(the "OBCA")

AND

IN THE MATTER OF

XCEED MORTGAGE CORPORATION

CONSENT

(Subsection 4(b) of the Regulation)

UPON the application (the "Application") of Xceed Mortgage Corporation (the "Applicant") to the Ontario Securities Commission (the "Commission") requesting the Commission's consent to the continuance of the Applicant as a bank under the Bank Act, S.C. 1991, c. 46, as amended (the "Bank Act") as required pursuant to Subsection 4(b) of the Regulation;

AND UPON considering the Application and the recommendation of the staff of the Commission;

AND UPON the Applicant having represented to the Commission that:

1. The Applicant was amalgamated under the OBCA by certificate and articles of amalgamation dated June 8, 2004. Its head office is located at 18 King Street East, 10th Floor, Toronto, Ontario, M5C 1C4.

2. The Applicant is an offering corporation under the OBCA and a reporting issuer under the Securities Act, R.S.O. 1990, c. S.5, as amended (the "Act"). All of the issued and outstanding common shares of the Applicant are listed on the Toronto Stock Exchange under the symbol "XMC".

3. The Applicant is not in default of any of the provisions of the OBCA, the Act or the regulations made under the Act.

4. The Applicant is not a party to any proceeding or, to the best of its knowledge, information and belief, any pending proceeding under the OBCA or the Act.

5. The authorized capital of the Applicant consists of an unlimited number of common shares and an unlimited number of preferred shares, of which, as at July 22, 2009, 27,566,157 common shares and no preferred shares were issued and outstanding.

6. The Applicant proposes to submit an application to the Director under the OBCA for authorization to continue as a bank under the Bank Act pursuant to Section 181 of the OBCA (the "Application for Continuance"). Pursuant to Subsection 4(b) of the Regulation, as the Applicant is an offering corporation under the OBCA, the Application for Continuance must be accompanied by a consent from the Commission.

7. Management of the Applicant prepared and mailed to shareholders an information circular dated July 31, 2009 (the "Circular") describing the proposed continuance of the Applicant as a bank under the Bank Act.

8. The Application for Continuance was approved by the shareholders of the Applicant by special resolution at a special meeting of the shareholders held on September 10, 2009 (the "Meeting"). The special resolution was approved at the Meeting by 99.8% of the votes cast.

9. The Applicant intends to submit the Application for Continuance to the Director and to apply to the Minister of Finance of Canada (the "Federal Minister") to issue letters patent continuing the Applicant as a bank under the Bank Act. The Applicant will not submit a formal application for letters patent to the Federal Minister until it receives approval of its application materials from the Office of the Superintendent of Financial Institutions ("OSFI"). The Applicant is engaged in ongoing discussions with OSFI and is working toward the finalization of its application materials.

10. The Applicant intends to continue as a bank under the Bank Act so it may, among other things, expand and improve the profitability of its mortgage lending business. Continuance as a bank will provide the Applicant with access to retail deposits, an additional source of funding for its mortgage origination activities. This source of funding will enable the Applicant to compete more effectively with other small Canadian banks and trust companies in its industry and reduce significant costs associated with the Applicant's existing business activities.

11. If the Federal Minister issues letters patent continuing the Applicant as a bank under the Bank Act, the Applicant will be governed by the Bank Act and become subject to the regulatory oversight of the Office of the Superintendent of Financial Institutions. The Applicant will continue to be a reporting issuer in each of the provinces of Canada immediately following the continuance.

12. The material rights, duties and obligations of a bank under the Bank Act are similar to those of a corporation incorporated under the OBCA. The Circular contains a description of the principal differences between the OBCA and the Bank Act that management of the Applicant believes are relevant to shareholders.

13. Pursuant to Section 185 of the OBCA, all shareholders of record as of the record date for the Meeting are entitled to dissent rights with respect to the Application for Continuance. The Circular contains a description of these dissent rights.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

THE COMMISSION HEREBY CONSENTS to the continuance of the Applicant as a bank under the Bank Act.

DATED at Toronto, Ontario this 24th day of November, 2009.

"Margot C. Howard"
Commissioner
Ontario Securities Commission
 
"Paulette Kennedy"
Commissioner
Ontario Securities Commission