Exemption Orders (Discretionary)
RIDER RESOURCES INC.
2001 BCSECCOM 568
Headnote
Mutual Reliance Review System for Exemptive Relief Applications – Exemption granted from the prohibition against collateral agreements where an offeror makes or intends to make a take over bid, regarding certain employment arrangements involving employees of the offeree issuer that were negotiated at arm’s length and made on commercially reasonable terms.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 107(2), 114(2)(a)
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA AND ONTARIO
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF RIDER RESOURCES INC.
AND
IN THE MATTER OF ROBERTS BAY RESOURCES LTD.
MRRS DECISION DOCUMENT
1. WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of British Columbia, Alberta, and Ontario (the "Jurisdictions") has received an application from Rider Resources Inc. ("Rider") for a decision under the securities legislation of the Jurisdictions (the "Legislation") that understandings entered into with certain holders of common shares of Roberts Bay Resources Ltd. ("Roberts Bay"): (i) were entered into for reasons other than to increase the value of the consideration paid to such shareholders for their common shares; and (ii) may be entered into despite the provision contained in the Legislation which provides that if an offeror makes or intends to make a take-over bid or issuer bid, neither the offeror nor any person or company acting jointly or in concert with the offeror shall enter into any collateral agreement, commitment or understanding with any holder or beneficial owner of securities of the offeree issuer that has the effect of providing to the holder or owner a consideration of greater value than that offered to the other holders of the same class of securities (the "Collateral Benefit Prohibition");
2. AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the “System”) the Alberta Securities Commission is the principal regulator for this application;
3. AND WHEREAS Rider has represented to the Decision Makers that:
3.1 Rider is a public company incorporated under the Business Corporations Act (Alberta) and is headquartered in Calgary;
3.2 the common shares of Rider (the "Rider Shares") are listed on The Toronto Stock Exchange and Rider is a reporting issuer for the purposes of certain Canadian securities legislation;
3.3 Roberts Bay is a public company incorporated under the Business Corporations Act (Alberta) whose common shares are listed on the Canadian Venture Exchange Inc. and which is a reporting issuer for the purposes of certain Canadian securities legislation;
3.4 the authorized capital of Roberts Bay consists of an unlimited number of common shares and an unlimited number of preferred shares. As at February 21, 2001, there were 21,499,840 common shares and no preferred shares outstanding as well as outstanding options or warrants to acquire 1,914,000 common shares;
3.5 Rider mailed a take-over bid offer and circular (the "Offer") with respect to a proposed take-over bid for all of the issued and outstanding common shares of Roberts Bay (the “Common Shares”) on March 30, 2001;
3.6 under the terms of the Offer, the holders of Common Shares are entitled to receive one Rider Share for every three Common Shares they hold;
3.7 Robin Hugo ("Robin Hugo") is the holder of 1,922,000 Common Shares and 475,000 options to purchase Common Shares, or approximately 10.24% (on a fully diluted basis) of the outstanding Common Shares of Roberts Bay. Robin Hugo is currently the President of Roberts Bay;
3.8 G. Ramon Hugo ("Ray Hugo") is the holder of 6,573,412 Common Shares and options to acquire 800,000 Common Shares, or approximately 31.49% (on a fully diluted basis) of the outstanding Common Shares (fully diluted) of Roberts Bay. Ray Hugo is currently a director of Roberts Bay;
3.9 M. Scott Wilson ("Wilson") is the holder of 25,000 Common Shares and options to purchase 214,000 Common Shares, or approximately 1.02% (on a fully diluted basis) of the outstanding Common Shares (fully diluted) of Roberts Bay. Wilson is currently a director of Roberts Bay;
3.10 Rider has entered into an understanding (the “Understandings”) with each of Robin Hugo, Ray Hugo and Wilson (the “Key Principals”) based on a pre-acquisition agreement executed by Rider and Roberts Bay on March 19, 2001 wherein Rider agreed, promptly upon acquiring at least 66_% of the outstanding Common Shares, to use its reasonable best efforts to cause the resignation of certain of its directors and to have Robin Hugo appointed VP Land of Rider and each of Ray Hugo and Wilson appointed as directors of Rider;
3.11 the primary purpose of appointing Robin Hugo as VP Land is to provide for continuity of senior management rather than to increase the value of the consideration paid to Robin Hugo for his Common Shares. In addition, Robin Hugo is very familiar with the history of Roberts Bay and the properties being acquired by Rider pursuant to the Offer;
3.12 the directors and officers of Roberts Bay and certain shareholders of Roberts Bay representing approximately 63% (on a fully diluted basis) of the outstanding Common Shares have entered into standard lock-up agreements with Rider;
3.13 Robin Hugo will be paid the same salary as VP Land of Rider that he currently receives as the President of Roberts Bay. Also, in the event he leaves the employ of Rider, Robin Hugo will not be entitled to any severance obligation beyond what he is entitled to receive at common law;
3.14 as directors of Rider, Ray Hugo and Wilson will each be entitled to receive a fee of $300 per special meeting and $500 per board meeting. The Understandings provide for identical compensation to that which Rider currently pays to its directors;
3.15 the Understandings have been entered into for valid business reasons on commercially reasonable terms unrelated to the Key Principal’s holdings of the Common Shares and not for the purposes of conferring an economic or collateral benefit on the Key Principals that other holders of the Common Shares will not enjoy or increasing the value of the consideration to be paid to the Key Principals pursuant to the Offer; and
3.16 the Offer is being made in compliance with the Legislation of the Jurisdictions, except to the extent that exemptive relief is granted in respect of the Collateral Benefit Prohibition;
4. AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the "Decision");
5. AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
6. THE DECISION of the Decision Makers under the Legislation is that:
6.1 the Understandings were entered into for reasons other than to increase the value of the consideration to be paid to the Key Principals for their Common Shares; and
6.2 the Understanding may be entered into despite the Collateral Benefit Prohibition.
DATED this 23rd day of April, 2001.
Eric T. Spink, Vice-Chair Thomas G. Cooke, Q.C., Member