BCSC

Exemption Orders (Discretionary)

SYSCO CORPORATION

2001 BCSECCOM 446

IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF SYSCO CORPORATION

AND

IN THE MATTER OF SYSCO CANADA COMPANY

AND

IN THE MATTER OF SYSCO HOLDINGS OF KELOWNA, INC.

AND

IN THE MATTER OF HRI SUPPLY, LTD.

Exemption Order Under Sections 48 and 76

[para 1]
WHEREAS SYSCO Corporation ("SYSCO"), Sysco Canada Company ("CallCo"), SYSCO Holdings of Kelowna, Inc. ("Sysco Holdings") and HRI Supply, Ltd. ("HRI") have applied to the Executive Director for an order under sections 48 and 76 of the Securities Act, R.S.B.C. 1996, c. 418 that certain intended trades in securities made in connection with the proposed acquisition (the "Acquisition") by SYSCO of all the issued and outstanding shares in the capital of HRI from the shareholders of HRI, are exempt from the requirements of sections 34(1)(a) and 61 of the Act;

[para 2]
AND WHEREAS SYSCO, CallCo and Sysco Holdings have represented to the Executive Director that:

1. SYSCO is a corporation existing under the laws of the State of Delaware, is not a reporting issuer under the Act or under the securities legislation of any other province and is registered under and is subject to the reporting requirements of the United States Securities Exchange Act of 1934, as amended;

2. SYSCO is in the business of distributing food and related products to the food service industry;

3. the authorized share capital of SYSCO, as of February 23, 2001, consists of 1,000,000,000 shares of common stock ("SYSCO Common Shares"), of which 669,076,641SYSCO Common Shares were issued and outstanding, and 1,500,000 shares of preferred stock with a par value of US$1 per share, of which none was issued and outstanding;

4. according to the share register of SYSCO as at March 2, 2001, holders of SYSCO Common Shares resident in British Columbia represent less than 1% of the total number of holders of SYSCO Common Shares;

5. the SYSCO Common Shares are listed and traded on the New York Stock Exchange;

6. CallCo, a direct wholly-owned subsidiary of SYSCO, is an unlimited liability company incorporated under the laws of Nova Scotia and is a "private issuer" under the Act;

7. Sysco Holdings, a direct wholly-owned subsidiary of CallCo, is a corporation incorporated under the laws of Canada and is a “private issuer” under the Act incorporated for the sole purpose of facilitating the Acquisition;

8. the authorized capital of Sysco Holdings consists ofan unlimited number of exchangeable shares (the "Exchangeable Shares") and an unlimited number of common shares; as of the date of this order, one common share and no Exchangeable Shares are issued and outstanding;

9. HRI, a “private Issuer” under the Act in the food distribution business, is incorporated under the laws of British Columbia and will undergo an amalgamation (the “Amalgamation”) with Raylee Holdings Ltd., a private company that holds the real estate assets utilized by HRI in carrying on its business, to form a corporation amalgamated under the laws of Canada (“Amalco”) immediately prior to the closing of the Acquisition (hereafter HRI and Amalco are both referred to as “HRI”);

10. as at the date of this order, the authorized capital of HRI consists of 1,000,000 Class A Voting Common Shares, 2,500 Class B Non-Voting Redeemable Preferred Shares, 2,500 Class C Non-Voting Redeemable Preferred Shares, 2,500 Class D Non-Voting Redeemable Preferred Shares, 2,500 Class E Non-Voting Redeemable Preferred Shares, 100,000 Class F Voting Convertible Redeemable Preferred Shares and 100,000 Class G Voting Convertible Redeemable Preferred Shares and 100,000 Class H Voting Convertible Redeemable Preferred Shares, of which, as of the date hereof, 10,000 Class A Voting Common Shares and 500 Class F Voting Convertible Redeemable Preferred Shares were issued and outstanding; immediately prior to the closing of the Acquisition, the authorized capital of HRI will consist of an unlimited number of common shares, of which 11,850,000 common shares will be issued and outstanding;

11. as at the date of this order and immediately prior to the closing of the Acquisition, all of the issued and outstanding securities of HRI are, and will be, held by seven shareholders (the “HRI Shareholders”);

12. the HRI Shareholders indicated their approval of the Acquisition by entering into two separate share purchase agreements under which SYSCO has agreed to acquire, through Sysco Holdings, all of the issued and outstanding securities of HRI from the HRI Shareholders in exchange for cash consideration, in the case of five of the HRI Shareholders, and in the case of the remaining two HRI Shareholders (the “Remaining HRI Shareholders”), Exchangeable Shares that are exchangeable for SYSCO Common Shares and an exchange right (the “Exchange Right”) to be granted under an exchange and support agreement among SYSCO, CallCo, Sysco Holdings and the Remaining HRI Shareholders (the “Exchange and Support Agreement”);

13. the attributes of the Exchangeable Shares (the "Exchangeable Share Provisions") include the following:

(a) the Exchangeable Shares are, as nearly as is practicable, the economic equivalent of SYSCO Common Shares;

(b) each Exchangeable Share entitles the holder thereof to receive dividends at the same time as holders of SYSCO Common Shares as follows:

(i) in the case of a cash dividend on SYSCO Common Shares, an amount in cash equal to the Canadian Dollar equivalent of the cash dividend declared on each SYSCO Common Share for each Exchangeable Share;

(ii) in the case of a share dividend declared on SYSCO Common Shares to be paid in SYSCO Common Shares, a number of Exchangeable Shares equal to the number of SYSCO Common Shares to be paid on each SYSCO Common Share for each Exchangeable Share (the “Dividend Right”); and

(iii) in the case of a dividend declared on SYSCO Common Shares to be paid in property (other than cash or SYSCO Common Shares), a type and amount of property which is the same as the type and amount of property declared as a dividend on each SYSCO Common Share for each Exchangeable Share;

(c) in the event of the liquidation, dissolution or winding-up of Sysco Holdings, the Exchangeable Shares have preference over all other classes of shares of Sysco Holdings with respect to the distribution of assets;

(d) the Exchangeable Shares are subject to CallCo's overriding call right (the "Call Right") to acquire the Exchangeable Shares in certain circumstances in consideration for one SYSCO Common Share from SYSCO plus an additional amount representing any declared and unpaid dividends on the Exchangeable Shares;

(e) in the event of the liquidation of SYSCO or retraction of Exchangeable Shares by the holder thereof, each holder has the right at the time of such liquidation or retraction (the "Retraction Right") to receive an amount per share equal to the Canadian Dollar equivalent of the fair market value of one SYSCO Common Share at such time (to be fully paid and satisfied by the delivery of one SYSCO Common Share by SYSCO) plus an additional amount representing any declared and unpaid dividends on the Exchangeable Shares, subject to CallCo's Call Right to acquire the Exchangeable Shares; and

(f) the Exchangeable Shares must be redeemed by Sysco Holdings (the “Redemption Right”) on the date to be established by the board of directors of Sysco Holdings (the "Redemption Date"), subject to extension or acceleration in certain circumstances and to CallCo's Call Right to acquire the Exchangeable Shares and on the Redemption Date, SYSCO will issue SYSCO Common Shares to the holders of Exchangeable Shares;

14. under the Exchange and Support Agreement:

(a) each holder of an Exchange Right is entitled, upon the occurrence of certain SYSCO Holdings insolvency events, to require SYSCO to purchase all of the Exchangeable Shares held by the holder in consideration for an amount per Exchangeable Share held by the holder equal to the Canadian Dollar equivalent of the fair market value of one SYSCO Common Share at such time plus any declared and unpaid dividends of the Exchangeable Shares;

(b) all of the outstanding Exchangeable Shares will be automatically exchanged for SYSCO Common Shares immediately prior to the effective time of a liquidation event of SYSCO (the “Automatic Exchange Right”); and

(c) SYSCO and Sysco Holdings will:

(i) agree not to declare or pay any dividends on SYSCO Common Shares unless Sysco Holdings has sufficient resources available to pay simultaneous and equivalent dividends on the Exchangeable Shares, and Sysco Holdings simultaneously declares or pays, as the case may be, such equivalent dividends; and

(ii) ensure that Sysco Holdings will be able to honour the Redemption Right, the Retraction Right, and entitlements upon liquidation of the Exchangeable Shares;

15. If Canadian residents holding HRI shares acquire the maximum number of SYSCO Common Shares to which they are entitled in connection with the Acquisition, the Exchange and Support Agreement and the Exchangeable Share Provisions, there would be less than 10% of the total number of holders of SYSCO Common Shares resident in Canada holding less than 10% of the total issued and outstanding SYSCO Common Shares;

16. there are no registration and prospectus exemptions available for certain intended trades and potential trades in connection with the Acquisition:

(a) the trades by SYSCO of SYSCO Common Shares upon the exercise of the Call Right, Retraction Right, Automatic Exchange Right and on the Redemption Date;

(b) the trades by the holders of Exchangeable Shares in Exchangeable Shares to SYSCO under the Automatic Exchange Right and the exercise of the Call Right; and

(c) the trades in Exchangeable Shares under the Dividend Right;

(the “Non-Exempt Trades”)

17. so long as any outstanding Exchangeable Shares are held by any person other than SYSCO or its affiliates, SYSCO will remain the direct or indirect beneficial owner of all of the outstanding voting shares of SYSCO Holdings and CallCo; and

18. all disclosure material furnished to holders of SYSCO Common Shares in the United States will be provided to holders of Exchangeable Shares and SYSCO Common Shares who are resident in British Columbia;

[para 3]
AND WHEREAS the Executive Director considers that it would not be prejudicial to the public interest to do so;

[para 4]
IT IS ORDERED:

1. under sections 48 and 76 of the Act that the Non-Exempt Trades are exempt from the requirements of sections 34(1)(a) and 61 of the Act;

2. any trade in Exchangeable Shares, other than under the Dividend Right or in exchange for SYSCO Common Shares, shall be a distribution; and

3. under section 76 of the Act, that any trade in the shares of SYSCO acquired under this order is deemed to be a distribution unless such trade is executed through an exchange, or a market, outside Canada.

[para 5]
DATED on April 27, 2001.

Derek E. Patterson
Manager