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93-88 SEC Approves Amendment Clarifying The Application of the NASD's Corporate Financing Rule to Rule 415 Shelf Offerings and Certain Canadian Securities;

Effective Date: February 1, 1994

SUGGESTED ROUTING

Senior Management
Corporate Finance
Institutional
Legal & Compliance
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Executive Summary

On November 10, 1993, the Securities and Exchange Commission (SEC) approved an amendment to Subsection (b)(7)(C) to Article III, Section 44 of the Rules of Fair Practice clarifying that the exemptions from the filing requirements of the NASD's Corporate Financing Rule for securities registered on Forms S-3 or F-3 offered pursuant to Rule 415 under the Securities Act of 1933 (Securities Act) are limited to offerings that meet the eligibility criteria as set forth in these forms prior to October 21, 1992. In addition, the exemption for securities registered on Form F-10 under the Securities Act is amended to limit the exemption to Canadian issuers that meet the standards set forth in the SEC release approving that form and are offered pursuant to Canadian shelf-offering procedures. The text of the amendment, effective on February 1, 1994, follows the discussion below. In addition, attached is a copy of SEC registration statement Forms S-3 and F-3, prior to October 21, 1992, and Form F-10 as originally approved by the SEC.

Background

The Interpretation of the Board of Governors, Review of Corporate Financing (Corporate Financing Interpretation) was adopted in the early 1970s as an interpretation of the NASD basic ethical rule contained in Article III, Section 1 of the Rules of Fair Practice, which requires that "A member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade." The purpose of the Corporate Financing Interpretation was to determine whether the offering terms and arrangements of public offerings filed with the NASD for review were fair and reasonable in accordance with Article III, Section 1 of the Rules of Fair Practice. To that end, it required that the NASD issue an opinion as to the fairness and reasonableness of underwriting terms and arrangements.

Although not defined in the Corporate Financing Interpretation, the term "public offering" is defined in Schedule E to the NASD By-Laws1 to include any primary or secondary distribution of securities made pursuant to a registration statement or offering circular, except for offerings pursuant to Section 4(2) of the Exchange Act. Pursuant to the terms of the Corporate Financing Interpretation as of 1981, exemptions from the filing requirements of the Corporate Financing Interpretation were provided for certain specified classes of offerings that were regulated by other rules of the NASD, were under a specific scheme of regulation by other entities such as the SEC or the Treasury Department, or were subject to market forces that would assure the fairness and reasonableness of underwriting terms and arrangements of such offerings.

In 1982, the SEC adopted the Integrated Disclosure System, including new Form S-32. Form S-3, the SEC's short-form registration statement, permits the issuer to incorporate many of the required disclosure items by reference to the disclosure of the same items in filings under the Securities Exchange Act of 1934. On March 8, 1983, the NASD simultaneously issued Notice to Members 83-12 (March 8, 1983) (1983 Notice to Members) and filed with the SEC Rule Filing SR-NASD-83-33 (1983 rule filing) for immediate effectiveness to clarify the availability of an exemption from the filing requirements of the Corporate Financing Interpretation for shelf offerings pursuant to new Rule 415.

The NASD stated in the 1983 Notice to Members and 1983 rule filing that exemptions to the Corporate Financing Interpretation filing requirements had previously been available where market forces or other constraints were present to assure the fairness and reasonableness of underwriting terms and arrangements, including specifically the amount of underwriting compensation. The 1983 Notice to Members and 1983 rule filing further stated that market pressures in Rule 415 transactions registered on Form S-3 often result in the amount of underwriting compensation being determined through a competitive bidding process that helps to achieve its reasonableness. Finally, the NASD stated it had concluded that even in transactions that eventually include a traditional underwriting agreement, competitive pressures come into play in the negotiations preceding the execution of the agreement that can be relied on to achieve the overall fairness of the agreements. An important clarification was provided in the 1983 Notice to Members and 1983 rule filing that offerings subject to the exemption were only exempt from the filing requirements of the Corporate Financing Interpretation and remained subject to the substantive requirements of the Interpretation.4

Subsequently, in 1988, the NASD issued Notice to Members 88-101 (December 1988) in response to inquiries of members and their counsel for clarification regarding the Corporate Financing Department's review procedures for Rule 415 offerings. That Notice includes the following statement regarding the view of the Corporate Financing Committee as to the continuing rationale for the availability of the exemption for offerings registered on Form S-3 and offered pursuant to Rule 415:

In connection with Rule 415 offerings, the Committee determined to exempt from the filing requirements securities registered on Form S-3 because an issue able to satisfy Form S-3's "registrant requirements" would be followed closely by investors and market professionals. The Committee also felt that the securities markets would efficiently determine a fair price for the securities being offered and that any underwriting compensation received by members ordinarily would be determined under very competitive circumstances (generally limited to normal brokerage transactions). The Committee did not believe that the same facts were present in Rule 415 offerings where the securities are registered on any form other than S-3.

In 1991, the NASD filed rule filing SR-NASD-91-19 with the SEC, which included a proposed codification of the Corporate Financing Interpretation as the new Corporate Financing Rule.5 The Rule 415/S-3 exemption was included in the new Rule at Subsection (b)(7)(C) and specified that the exemption was also available for shelf offerings on Form F-3 consistent with the Corporate Financing Committee's earlier interpretation.

Subsequently, the SEC adopted the Multi-Jurisdiction Disclosure and Modifications to the Current Registration and Reporting System for Canadian Issuers (MJDS) which adopted new forms for offerings in the U.S. by Canadian issuers6, and the NASD adopted an exemption for offerings filed on new Form F-10 by Canadian private and crown corporations and offered pursuant to Canadian shelf-offering rules.7

On October 21, 1992, the SEC approved an amendment to expand the availability of Form S-3 and to make Rule 415 registrations available to additional issuers as part of an effort to reduce the cost of financing through the securities markets.8 The SEC's amendment to Form S-3 has reduced the reporting history requirement of Form S-3 from 36 to 12 months for most issuers, reduced the public float test from $150 million to $75 million, and eliminated the three-million-share volume requirement. Finally, no reporting history is required to rely on Form S-3 to register investment grade asset-backed securities. At the same time, the SEC amendments permitted the registration of a single shelf-registration statement covering debt, equity, and other classes of securities without a specific allocation of offering amounts among the classes of securities being registered.

Description of the Amendment

The NASD reviewed the SEC's amendments to Form S-3 in keeping with its prior history of considering amendments to the NASD's Corporate Financing Filing Requirements to coordinate with the SEC's amendments to its registration forms and rules. The NASD is obligated to ensure the fairness of underwriting terms and arrangements as a self-regulatory organization registered under Section 15A of the Securities Exchange Act of 1934. The NASD determined that investment grade non-convertible debt and investment grade non-convertible securities registered on amended Form S-3 should continue to be exempt from the Corporate Financing Rule Filing Requirements, regardless of the registration form relied on, under a separate exemption set forth in Section (b)(7)(B) of the Corporate Financing Rule.

The NASD, however, concluded it did not have sufficient information for the issuers that became eligible to file on Form S-3 to reach a determination that the Rule 415/S-3 exemption should be extended to the newly qualified issuers. Therefore, the NASD determined not to change its Filing Requirements at this time to provide an exemption for offerings by companies that meet the new requirements of Form S-3. The NASD will, however, undertake a one-year review of offerings filed with the NASD on registration statement Form S-3 and are offered pursuant to Rule 415 by companies that would not meet the prior criteria for Form S-3 to determine whether the market forces related to such offerings result in the presence of fair and reasonable underwriting terms and arrangements.

Accordingly, to clarify the Filing Requirements of the Corporate Financing Rule for issuers that now qualify to register on amended Form S-3, Section (b)(7)(C) of the Corporate Financing Rule is amended to provide that the exemption is only available for offerings that comply with Form S-3 pursuant to the requirements for that Form prior to October 21, 1992, which is the date of SEC approval of the amendments to Form S-3 expanding the availability of Form S-3 and making Rule 415 registrations available to additional issuers. The NASD believes the proposed rule change continues to ensure that compliance with the NASD's Corporate Financing Rule is effectively monitored.

Section (b)(7)(C) of the Corporate Financing Rule is also amended so that the exemption provided for shelf offerings on Form F-3 has been modified to reference the requirements for that Form prior to October 21, 1992, and the exemption for Form F-10 has been modified to reference the SEC release approving the MJDS. Although the SEC did not adopt amendments to these forms at the time it amended Form S-3, the NASD believes it should clarify all of these exemptions in the event amendments are adopted by the SEC in the future.

Policy for the Review of Shelf-Registration Statements

In determining not to expand the exemption from the Corporate Financing Rule at this time, the NASD recognizes its responsibility to ensure that application of the Rule does not impose a substantial burden on issuers. In this connection, it is important to note that the Corporate Financing Department has procedures to facilitate the expeditious review of shelf offerings. The NASD believes that publication of these procedures, as set forth below, will assist issuers, members, and their counsel to avail themselves of procedures that will expedite review of an offering pursuant to Rule 415 that is registered on SEC Form S-3 and avoid additional reviews of arrangements entered into in connection with separate offerings off the shelf.

The procedures approved by the Corporate Financing Committee are as follows:

1. Where the participating NASD member(s) have not been determined, the issuer may file the offering with the NASD for potential NASD member participants.
2. All necessary documents should be filed as set forth in Section (b)(5) of the Corporate Financing Rule.
3. The cover letter to the filing should include all information in response to the items set forth under "Information Required to Be Filed" contained in Subsection (b)(6) of the Corporate Financing Rule requiring, among other things, estimates of the maximum underwriting compensation, maximum price per share, and maximum amounts of any other underwriting compensation, as well as a statement of any affiliations between the issuer and any NASD member, and any purchases of securities of the issuer made by any NASD member in the prior 12 months.
4. The Corporate Financing Department staff will render an opinion of no objections to the underwriting terms and arrangements if undertakings are received for the compensation and disclosure of the compensation in the offering document and that the Corporate Financing Department would be notified of any changes of issuer-member affiliation or purchases of the issuer's securities by a member.
5. In recognition of the market-timing issues associated with shelf offerings, the staff of the Corporate Financing Department are authorized to grant priority to the review of shelf offerings. To determine the timetable for a proposed shelf offering, NASD staff routinely contact counsel on the date the offering is filed.

Interpretation

In the SEC release9 publishing the amendment for comment, the NASD stated in footnote 5 to the release that the Form S-3 and Form F-3 exemptions from the Corporate Financing Rule filing requirements cannot be used for offerings if the Rule 415 box is checked on the cover page of the registration statement but the securities are distributed in a single traditional underwriting arrangement shortly after effectiveness. The NASD position set forth in footnote 5 reflects the NASD's original intent to limit the Corporate Financing Rule filing exemption to "delayed basis" shelf offerings. The NASD recognizes that the circumstances under which registrants may claim reliance on Rule 415 was changed by the SEC's adoption of Rule 430A in 198710 —well after the NASD's 1983 adoption of the S-3/Rule 415 exemption. Rule 430A provided a registrant the flexibility to offer its securities during a five-day post-effective period without filing an amendment to the registration statement. If the registrant was uncertain at the time of filing whether or not the securities would be offered promptly after effectiveness or on a delayed basis under Rule 415, the SEC permitted the registrant to follow an administrative procedure to retain the option to proceed under either Rule 430A or Rule 415 for all or a portion of the registered securities.11

Registrants also may claim reliance on Rule 415 in the case where the registrant includes on a single registration statement securities to be offered shortly after effectiveness in a conventional underwritten offering and other securities (such as common stock underlying warrants and securities of selling shareholders) to be offered on a delayed basis in the future. In this case, the registrant would include undertakings in compliance with Rule 415 for the delayed offerings, but not for the conventional underwriting.

As a result of the ability of registrants to rely on Rule 430A and Rule 415 simultaneously and to register a conventional and delayed offering on the same registration statement, it has been argued that the act of "checking the Rule 415 box" on the cover page of the registration statement is sufficient for a member to rely on the S-3/Rule 415 exemption to the Filing Requirements of the Corporate Financing Rule. The Filing Requirements of the Corporate Financing Rule requires that all public offerings of securities be filed with the NASD for review if a member participates in the offering, unless an exemption from filing is available. The NASD believes that a claimed exemption from the Filing Requirements of the Corporate Financing Rule cannot be "potentially" or "possibly" available, or available under some circumstances and not others, or—in the case of a shelf registration— only available for a portion of the securities registered. It is, therefore, inappropriate for a member to rely on any of the available exemptions from the Filing Requirements of the Corporate Financing Rule if, at the time between the date when filing with the Corporate Financing Department would be required and the effective date of the offering, the member does not reasonably believe that the offering, including each tranche of securities off of a shelf registration, qualifies for an exemption. The member is required to review the facts and circumstances of the offering and must reasonably believe that the proposed manner of distribution satisfies an exemption from the Filing Requirements of the Corporate Financing Rule to rely on that exemption.

In particular, the NASD believes that "checking the Rule 415 box" on the cover page of a Form S-3 registration statement is not dispositive of the availability of the S-3/Rule 415 exemption under the Corporate Financing Rule as the Rule 415 election may relate solely to the future issuance of common stock underlying warrants or of common stock registered for selling shareholders and not to the registration on the same registration statement of securities of the issuer that are to be sold in a conventional underwriting shortly after effectiveness of the registration statement.

Moreover, if a registrant relies on both Rule 430A and Rule 415 for an offering registered on Form S-3, the NASD believes that the offering is required to be filed for review under the Filing Requirements of the Corporate Financing Rule, as the simultaneous reliance on Rule 430A indicates that it is possible the securities may be sold in the form of a traditional underwriting syndicate within a few days following the effective date of the offering.12

* * * * *

To assist members in determining whether an exemption from the Filing Requirements is available under Subsections (b)(7)(C)(i) and (ii) to Article III, Section 44 of the NASD Rules of Fair Practice, the NASD is attaching to this Notice a copy of Forms S-3 and F-3 as those forms existed before October 21, 1992, and a copy of Form F-10 as approved by the SEC on June 21, 1991.

The amendments take effect February 1, 1994. Questions regarding this Notice may be directed to the Corporate Financing Department of the NASD at (202) 728-8258.


1 The Corporate Financing Interpretation provided that definitions in the By-Laws or the Rules of Fair Practice have the meaning defined therein for purposes of the Interpretation unless the context requires otherwise. The discussion herein is based on the definition as of 1981.

2 The financial criteria for Form S-3 was modified from that in Form S-16, with the other requirements for reporting history and default on debt remaining the same.

To use Form S-3, the issuer was required to have at least $150 million aggregate market value of voting stock held by non-affiliates or, alternatively, $100 million aggregate market value of voting stock held by non-affiliates and an annual trading volume of at least three million shares, except in the case of an offering of investment grade debt (i.e., debt rated in one of the four highest generic rating categories by a nationally recognized statistical rating organization).

3 Securities Exchange Act Rel. No. 19648 (April 4, 1983); 48 F.R. 15358 (April 8, 1983).

4 In 1984, in response to a request by the staff of the SEC for an interpretation of the filing requirements under the Corporate Financing Interpretation for foreign private issuers, the NASD determined to treat offerings on Form F-3 the same as offerings on Form S-3 by providing an exemption to the filing requirements if the offering is made pursuant to Rule 415 on the basis that the scheme of regulation on Form F-3 paralleled that for a company registering on Form S-3.

5 The Corporate Financing Rule was adopted as Article III, Section 44 to the NASD Rules of Fair Practice on April 15, 1992, at which time the Corporate Financing Interpretation was rescinded. Securities Exchange Act Rel. No. 30587 (April 15, 1992); 57 FR 14597 (April 21, 1992).

6 Securities Act Release No. 6902 (June 21, 1991).

7 Form F-10 may be used by Canadian issuers with outstanding equity with an aggregate market value of at least (CN) $360 million and a public float of at least (CN) $75 million, where the issuer has a reporting history with Canadian authorities of at least 36 months.

8 Securities Act Rel. No. 6964 (October 22, 1992), 57 FR 48970 (October 29, 1992).

9 Securities Exchange Act Release No. 32316 (May 17, 1993); 58 F.R. 29672.

10 Rule 430A permits the filing of a final prospectus that omits certain pricing and underwriting compensation information and interest payments and maturity dates so long as a prospectus with the final information is filed with the SEC within five days following the effective date of the offering.

11 Securities Act Release No. 6964 (October 22, 1992), footnote 30 citing Securities Act Release No. 6714 (May 27, 1987). The SEC further expanded the ability of a registrant to rely on Rule 430A when it amended Form S-3 in 1992, by amending Form 430A to permit price changes and volume decreases that do not materially change the disclosure in the registration statement to be reflected in the final prospectus without the need to file a post-effective amendment. Previously, even immaterial decreases in the volume of securities offered and a pricing change outside of a bona fide range would have required the filing of a post-effective amendment. Securities Act Release No. 6964 (October 22, 1992).

12 In its release adopting the amendments to Form S-3, the SEC was asked regarding a practice that had developed in response to concerns about immediate underwritten sales of a large (or the entire) amount of securities offered pursuant to a registration statement that disclosed that the securities would be offered from time to time in the market, and did not disclose the terms of the distribution immediately after effectiveness. The SEC reminded registrants that disclosure in the registration statement at the time of effectiveness should accurately reflect the registrant's current plans and arrangements for the distribution of securities and stated that compliance with the 48hour waiting period is not an appropriate basis for relying on Rule 415. Securities Act Release No. 6964 (October 22, 1992).


Text of Amendment to Article III, Section 44 of the Rules of Fair Practice

(Note: New language is underlined; deleted language is bracketed.)

THE CORPORATE FINANCING RULE

Underwriting Terms and Arrangements

Sec. 44.

(b) Filing Requirements

* * * * *
(7) Offerings Exempt From Filing

* * * * *
(C) offerings of securities:
(i) registered with the Securities and Exchange Commission on registration statement Forms S-3 or F-3 pursuant to the standards for those Forms prior to October 21, 1992 and offered pursuant to Rule 415 adopted under the Securities Act of 1933, as amended; [,] or
(ii) a foreign private issuer incorporated or organized under the laws of Canada or any Canadian province or territory, and is registered with the Securities and Exchange Commission on Form F-10 [(only with respect to Canadian issuers)] pursuant to the standards for that Form approved in Securities Act Release No. 6902 (June 21, 1991) and offered pursuant to [the home jurisdiction's] Canadian shelf prospectus offering procedures;

FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

I. Eligibility Requirements For Use of Form S-3.

This instruction sets forth registrant requirements and transaction requirements for the use of Form S-3. Any registrant which meets the requirements of paragraph A. below ("Registrant Requirements") may use this form for the registration of securities under the Securities Act of 1933 which are offered in any transaction specified in paragraph B. below ("Transaction Requirements"), provided that the requirements applicable to the specified transaction are met. With respect to majority-owned subsidiaries, see paragraph C. below.
A. Registrant Requirements. All registrants must meet the following conditions in order to use this Form S-3 for registration under the Securities Act of securities offered in the transactions specified in paragraph B. below:
1. The registrant is organized under the laws of the United States or any State or Territory or the District of Columbia and has its principal business operations in the United States or its territories.
2. The registrant has a class of securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 or a class of equity securities registered pursuant to Section 12(g) of the Exchange Act or is required to file reports pursuant to Section 15(d) of the Exchange Act.
3. The registrant: (a) has been subject to the requirements of Section 12 or 15(d) of the Exchange Act and has filed all the material required to be filed pursuant to Section 13, 14 or 15(d) for a period of at least 36 calendar months immediately preceding the filing of the registration statement on this form; and (b) has filed in a timely manner all reports required to be filed during the 12 calendar months and any portion of a month immediately preceding the filing of the registration statement and, if the registrant has used (during the 12 calendar months and any portion of a month immediately preceding the filing of the registration statement) Rule 12b-25 (b) under the Exchange Act with respect to a report or a portion of a report, that report or portion thereof has actually been filed within the time period prescribed by the rule.
4. Neither the registrant nor any of its consolidated or unconsolidated subsidiaries have, since the end of the last fiscal year for which certified financial statements of the registrant and its consolidated subsidiaries were included in a report filed pursuant to Section 13 (a) or 15 (d) of the Exchange Act: (a) failed to pay any dividend or sinking fund installment on preferred stock; or (b) defaulted: (i) on any installment or installments on indebtedness for borrowed money, or (ii) on any rental on one or more long term leases, which defaults in the aggregate are material to the financial position of the registrant and its consolidated and unconsolidated subsidiaries, taken as a whole.
5. A foreign issuer, other than a foreign government, which satisfies all of the above provisions of these registrant eligibility requirements except the provisions in paragraph A.I. above, relating to organization and principal business shall be deemed to have met these registrant eligibility requirements provided that such foreign issuer files the same reports with the Commission under Section 13(a) or 15(d) of the Exchange Act as a domestic registrant pursuant to paragraph 3 above.
6. If the registrant is a successor registrant, it shall be deemed to have met conditions 1, 2, 3, and 4above if: (a) its predecessor and it, taken together, do so, provided that the succession was primarily for the purpose of changing the state of incorporation of the predecessor or forming a holding company and that the assets and liabilities of the successor at the time of succession were substantially the same as those of the predecessor, or (b) if all predecessors met the conditions at the time of succession and the registrant has continued to do so since the succession.
B. Transaction Requirements. Security offerings meeting any of the following conditions and made by registrants meeting the Registrant Requirements above may be registered on this form:
1. Primary Offerings by Certain Registrants.

Securities to be offered for cash by or on behalf of a registrant, or outstanding securities to be offered for cash for the account of any person other than the registrant, including securities acquired by standby underwriters in connection with the call or redemption by the registrant of warrants or a class of convertible securities; provided that the aggregate market value of the voting stock held by non-affiliates of the registrant is $150 million or more, or alternatively, the aggregate market value of the voting stock held by non-affiliates of the registrant is $100 million or more and the registrant has had an annual trading volume of such stock of three million shares or more.

Instruction. The aggregate market value of the registrant's outstanding voting stock shall be computed by use of the price at which the stock was last sold, or the average of the bid and asked prices of such stock as of a date within 60 days prior to the date of filing. Annual trading volume shall be the volume of shares traded in any continuous 12 month period ended within 60 days prior to the date of filing. See the definition of "affiliate" in Securities Act Rule 405.
2. Primary Offerings of Certain Debt and Non-Convertible Preferred Securities.

Non-convertible debt and preferred securities to be offered for cash by or on behalf of a registrant, provided such securities are "investment grade securities," as defined below. A non-convertible debt or preferred security is an "investment grade security" if, at the time of effectiveness of the registration statement, at least one nationally recognized statistical rating organization (as that term is used in Rule 15c3-1 (c) (2) (vi) (F) under the Exchange Act) has rated the security in one of its generic rating categories which signifies investment grade; typically, the four highest rating categories (within which there may be sub-categories or gradations indicating relative standing) signify investment grade.
3. Transactions Involving Secondary Offerings.

Outstanding securities to be offered for the account of any person other than the issuer, including securities acquired by standby underwriters in connection with the call or redemption by the issuer of warrants or a class of convertible securities, if securities of the same class are listed and registered on a national securities exchange or are quoted on the automated quotation system of a national securities association. In addition, attention is directed to General Instruction C to Form S-8 for the registration of employee benefit plan securities for resale.
4. Rights Offerings, Dividend or Interest Reinvestment Plans, and Conversions or Warrants.

Securities to be offered: (a) upon the exercise of outstanding rights granted by the issuer of the securities to be offered, if such rights are granted on a pro rata basis to all existing security holders of the class of securities to which the rights attach; or (b) pursuant to a dividend or interest reinvestment plan; or (c) upon the conversion of outstanding convertible securities or upon the exercise of outstanding transferable warrants issued by the issuer of the securities to be offered, or by an affiliate of such issuer; provided the issuer has sent to all record holders of such rights, or to all participants in such plans, or to all record holders of such convertible securities or transferable warrants, respectively, material containing the information required by Rule 14a-3(b) under the Exchange Act and Items 401, 402 and 403 of Regulation S-K within the 12 calendar months immediately preceding the filing of the registration statement, except that the information required by Items 401, 402 and 403 of Regulation S-K need only be provided to holders of rights exercisable for common stock, holders of securities convertible into common stock, participants in plans which may invest in common stock, or in securities convertible into common stock or warrants exercisable for common stock, respectively.
C. Majority-Owned Subsidiaries. If a registrant is a majority-owned subsidiary, security offerings may be registered on this form if:
1. The registrant-subsidiary itself meets the Registrant Requirements and the applicable Transaction Requirement;
2. The parent of the registrant-subsidiary meets the Registrant Requirements and the conditions of Transaction Requirement B.2. (Primary Offerings of Certain Debt and Non-Convertible Preferred Securities) are met; or
3. The parent of the registrant-subsidiary meets the Registrant Requirements and the applicable Transaction Requirement and fully guarantees the securities being registered as to principal and interest.

Note. In such an instance, the parent-guarantor is the issuer of a separate security consisting of the guarantee which must be concurrently registered but may be registered on the same registration statement as are the guaranteed securities.

FORM F-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

I. Eligibility Requirements for Use of Form F-3

This instruction sets forth registrant requirements and transaction requirements for the use of Form F-3. Any foreign private issuer, as defined in Rule 405 which meets the requirements of I.A. below ("Registrant Requirements") may use this Form for the registration of securities under the Securities Act of 1933 (the "Securities Act") which are offered in any transaction specified in I.B. below ("Transaction Requirements"), provided that the requirements applicable to the specified transaction are met. With respect to majority-owned subsidiaries, see Instruction I.A.6 below.
A. Registrant Requirements. All registrants must meet the following conditions in order to use this Form F-3 for registration under the Securities Act of securities offered in the transactions specified in I.B. below:
1. The registrant has a class of securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 ("Exchange Act") or a class of equity securities registered pursuant to Section 12(g) of the Exchange Act or is required to file reports pursuant to Section 15(d) of the Exchange Act and is eligible to file and has filed annual reports on Form 20-F under the Exchange Act.
2. The registrant: (a) has been subject to the requirements of Section 12 or 15(d) of the Exchange Act and has filed all the material required to be filed pursuant to Sections 13, 14, or 15(d) for a period of at least 36 calendar months immediately preceding the filing of the registration statement on this Form; and (b) has filed in a timely manner all reports required to be filed during the 12 calendar months and any portion of a month immediately preceding the filing of the registration statement and, if the registrant has used (during the 12 calendar months and any portion of a month immediately preceding the filing of the registration statement) Rule 12b-25(b) under the Exchange Act with respect to a report or a portion of a report, that report or portion thereof has actually been filed within the time period prescribed by the Rule.
3. Neither the registrant nor any of its consolidated or unconsolidated subsidiaries have, since the end of their last fiscal year for which certified financial statements of the registrant and its consolidated subsidiaries were included in a report filed pursuant to Section 13(a) or 15(d) of the Exchange Act: (a) failed to pay any dividend or sinking fund installment on preferred stock; or (b) defaulted (i) on any installment or installments on indebtedness for borrowed money, or (ii) on any rental on one or more long-term leases, which defaults in the aggregate are material to the financial position of the registrant and its consolidated and unconsolidated subsidiaries, taken as a whole.
4. The aggregate market value worldwide of the voting stock held by non-affiliates of the registrant is the equivalent of $300 million or more, except that the provisions of this paragraph do not apply if the only securities being registered are to be offered in a transaction of the type described in B.2. of the Transaction Requirements.

Instruction. The aggregate market value of the registrant's outstanding voting stock shall be computed by use of the price at which the stock was last sold, or the average of the bid and asked prices of such stock, in the principal market for such stock as of a date within 60 days prior to the date of filing. [See the definition of "affiliate" in Securities Act, Rule 405.]
5. If the registrant is a successor registrant, it shall be deemed to have met conditions 1, 2, 3, and 4above if: (a) its predecessor and it, taken together, do so, provided that the succession was primarily for the purpose of changing the state or other jurisdiction of incorporation of the predecessor or forming a holding company and that the assets and liabilities of the successor at the time of succession were substantially the same as those of the predecessor; or (b) all predecessors met the conditions at the time of succession and the registrant has continued to do so since the succession.
6. Majority-owned Subsidiaries. If a registrant is a majority-owned subsidiary, security offerings may be registered on this Form if:
(i) the registrant-subsidiary itself meets the Registrant Requirements and the applicable Transaction Requirement;
(ii) the parent of the registrant-subsidiary meets the Registrant Requirements and the condition of Transaction Requirement B.2. (Primary Offerings of Certain Debt Securities) are met; or
(iii) the parent of the registrant-subsidiary meets the Registrant Requirements and the applicable Transaction Requirements and fully guarantees the securities being registered as to principal and interest.
Note: In the situations described in (i), (ii), and (iii) above, the parent-guarantor is the issuer of a separate security consisting of the guarantee which must be concurrently registered but may be registered on the same registration statement as are the guaranteed securities. Both the parent-guarantor and the subsidiary shall each disclose the information required by this Form as if each were the only registrant except that if the subsidiary will not be eligible to file annual reports on Form 20-F after the effective date of the registration statement, then it shall disclose the information specified in Form S-3. Rule 3-10 of Regulation S-X specifies the financial statements required.
B. Transaction Requirements. Security offerings meeting any of the following conditions and made by registrants meeting the Registrant Requirements above may be registered on this Form:
1. Primary Offerings by Certain Registrants

Securities to be offered for cash by or on behalf of a registrant; if the financial statements in the registrant's latest filing on Form 20-F comply with Item 18 thereof.
2. Offerings of Certain Debt Securities

Non-convertible debt securities to be offered for cash if such debt securities are "investment grade debt securities," as defined below. A non-convertible debt security is an "investment grade debt security" if, at the time of effectiveness of the registration statement, at least one nationally recognized statistical rating, organization (as that term is used in Rule 15c3-1 (c) (2) (vi) (F) under the Exchange Act has rated the security in one of its generic rating categories that signifies investment grade; typically, the four highest rating categories (within which there may be subcategories or graduations indicating relative standing) signify investment grade.
3. Transactions Involving Secondary Offerings

Outstanding securities to be offered for the account of any person other than the issuer, including securities acquired by standby underwriters in connection with the call or redemption by the issuer of warrants or a class of convertible securities. In addition, Form F-3 may be used by affiliates to register securities for resale pursuant to the conditions specified in General Instruction C to Form S-8 if the financial statements in the registrant's latest filing on Form 20-F comply with Item 18 thereof.
4. Rights Offerings, Dividend or Interest Reinvestment Plans, and Conversions or Warrants

Securities to be offered: (a) upon the exercise of outstanding rights granted by the issuer of the securities to be offered, if such rights are granted pro rata to all existing security holders of the class of securities to which the rights attach; or (b) pursuant to a dividend or interest reinvestment plan; or (c) upon the conversion of outstanding convertible securities or upon the exercise of outstanding transferable warrants issued by the issuer of the securities to be offered, or by an affiliate of such issuer. The registration of securities to be offered or sold in a standby underwriting in the United States or similar arrangement is not permitted pursuant to this paragraph. See paragraphs (1), (2), and (3) above.

FORM F-10

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

I. Eligibility Requirements For Use of Form F-10.
A. Form F-10 may be used for the registration of securities under the Securities Act of 1933 (the "Securities Act"), including securities to be issued in an exchange offer or in connection with a statutory amalgamation, merger, arrangement or other reorganization requiring the vote of shareholders of the participating companies (a "business combination").
B. This form may not be used for registration of derivative securities except:
(1) warrants, options and rights, provided that such securities and the underlying securities to which they relate are issued by the registrant, its parent or an affiliate of either; and (2) convertible securities, provided that such securities are convertible only into securities of the registrant, its parent or an affiliate of either.

Instruction. For purposes of this form, an "affiliate" of a person is anyone who beneficially owns, directly or indirectly, or exercises control or direction over, more than 10 percent of the outstanding equity shares of such person. The determination of a person's affiliates shall be made as of the end of such person's most recently completed fiscal year.
C. Form F-10 is available to any registrant that:
(1) Is incorporated or organized under the laws of Canada or any Canadian Province or Territory;
(2) Is a foreign private issuer;
(3) Has been subject to the continuous disclosure requirements of any securities commission or equivalent regulatory authority in Canada for a period of at least 36 calendar months immediately preceding the filing of this form, and is currently in compliance with such obligations, provided, however, that in case of a business combination, each participating company other than the successor registrant must meet such 36-month reporting obligation, except that any such participating company shall not be required to meet such reporting requirement if other participating companies whose assets and gross revenues, respectively, would contribute at least 80 percent of the total assets and gross revenues from continuing operations of the successor registrant, as measured based on pro forma combination of the participating companies' most recently completed fiscal years, each meet such requirement;
(4) Has an aggregate market value of its outstanding equity shares of (CN) $360 million or more, provided, however, that in the case of a business combination, the aggregate market value of the outstanding shares of each participating company other than the successor registrant is (CN) $360 million or more, except that any such participating company shall not be requiredä to meet such market value requirement if other participating companies whose assets and gross revenues, respectively, would contribute at least 80 percent of the total assets and gross revenues from continuing operations of the successor registrant, as measured based on pro forma combination of the participating companies' most recently completed fiscal years, each meet such market value requirement; and
(5) Has an aggregate market value of the public float of its outstanding equity shares of (CN) $75million or more, provided, however, that in the case of a business combination, the aggregate market value of the public float of the outstanding equity shares of each participating company other than the successor registrant is (CN) $75 million or more, except that any such participating company shall not be required to meet such public float requirement if other participating companies whose assets and gross revenues, respectively, would contribute at least 80 percent of the total assets and gross revenues from continuing operations of the successor registrant, as measured based on pro forma combination of the participating companies' most recently completed fiscal years, each meet such public float requirement; provided, further, that in the case of a business combination, such public float requirement shall be deemed satisfied in the case of a participating company whose equity shares were the subject of an exchange offer that was registered or would have been eligible for registration on Form F-8, Form F-9, Form F-10 or Form F-80, or a tender offer in connection with which Schedule 13E-4F or 14D-1F was filed or could have been filed, that terminated within the last 12 months, if the participating company would have satisfied such public float requirement immediately prior to commencement of such exchange or tender offer.

Instructions.
1. For purposes of this form, "foreign private issuer" shall be construed in accordance with Rule 405under the Securities Act.
2. For purposes of this form, the "public float" of specified securities shall mean only such securities held by persons other than affiliates of the issuer.
3. For purposes of this form, "equity shares" shall mean common shares, non-voting equity shares and subordinate or restricted voting equity shares, but shall not include preferred shares.
4. For purposes of this form, the market value of outstanding equity shares (whether or not held by affiliates) shall be computed by use of the price at which such shares were last sold, or the average of the bid and asked prices of such shares, in the principal market for such shares as of a date within 60 days prior to the date of filing. If there is no market for any of such securities, the book value of such securities computed as of the latest practicable date prior to the filing of this form shall be used for purposes of calculating the market value, unless the issuer of such securities is in bankruptcy or receivership, or has an accumulated capital deficit, in which case one-third of the principal amount, par value or stated value of such securities shall be used.
D. In the case of an exchange offer, the issuer of the securities to be exchanged (the "subject securities") for securities of the registrant shall be incorporated or organized under the laws of Canada or any Canadian Province or Territory and be a foreign private issuer.
E. In the case of a business combination, each participating company shall be incorporated or organized under the laws of Canada or any Canadian Province or Territory and be a foreign private issuer.
F. In the case of an exchange offer, the securities to be registered on this form shall be offered to U.S. holders upon terms and conditions not less favorable than those offered to any other holder of the same class of subject securities.
G. In the case of a business combination, the securities to be registered on this form shall be offered to U.S. holders upon terms and conditions not less favorable than those offered to any other holder of the same class of such securities of the participating company.

Instructions.
1. For purposes of exchange offers, the term "U.S. holder" shall mean any person whose address appears on the records of the issuer of the subject securities, any voting trustee, any depositary, any share transfer agent or any person acting in a similar capacity on behalf of the issuer of the subject securities as being located in the United States.
2. For purposes of business combinations, the term "U.S. holder" shall mean any person whose address appears on the records of a participating company, any voting trustee, any depositary, any share transfer agent or any person acting in a similar capacity on behalf of a participating company as being located in the United States.
3. For purposes of this form, the class of subject securities shall not include any securities that maybe converted into or are exchangeable for the subject securities.
H. With respect to registration of debt securities or preferred securities on this form, if the registrant is a majority-owned subsidiary, it shall be deemed to meet the requirements of I.C.(3), (4) and (5) above if the parent of the registrant-subsidiary meets the requirements of I.C. above, and fully and unconditionally guarantees the securities being registered as to principal and interest (if debt securities) or as to liquidation preference, redemption price and dividends (if preferred shares); provided, however, that the securities of the subsidiary are only convertible or exchangeable, if at all, for the securities of the parent.
I. If the registrant is a successor registrant subsisting after a business combination, it shall be deemed to meet the 36-month reporting requirement of I.C.(3) above if: (1) the time the successor registrant has been subject to the continuous disclosure requirements of any securities commission or equivalent regulatory authority in Canada, when added separately to the time each predecessor had been subject to such requirements at the time of the business combination, in each case equals at least 36 calendar months, provided, however, that any predecessor need not be considered for purposes of the reporting history calculation if the reporting histories of predecessors whose assets and gross revenues, respectively, would contribute at least 80 percent of the total assets and gross revenues from continuing operations of the successor registrant, as measured based on pro forma combination of such participating companies' most recently completed fiscal years immediately prior to the business combination, when combined with the reporting history of the successor registrant in each case satisfy such 36-month reporting requirement; and (2) the successor registrant has been subject to such continuous disclosure requirements since the business combination, and is currently in compliance with its obligations thereunder.
J. This form shall not be used for registration of securities if no takeover bid circular or issuer bid circular (in the case of an exchange offer) or information circular (in the case of a business combination) or rights offering circular (in the case of exempt rights offerings) or prospectus (in all other cases) is prepared pursuant to the requirements of any Canadian jurisdiction due to the availability of an exemption from such requirements.
K. This form shall not be used if the registrant or, in the case of an exchange offer, the issuer of the subject securities is an investment company registered or required to be registered under the Investment Company Act of 1940.

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