Exemption Orders (Discretionary)
THE CIT GROUP, INC.
2001 BCSECCOM 788
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - variation of a previous decision that granted relief from the continuous disclosure requirements to a subsidiary company as long as parent company filed certain documents - parent company merging so relief now conditional on new merged parent company filing continuous disclosure documents
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, s. 171
IN THE MATTER OF THE CANADIAN SECURITIES LEGISLATION OF THE PROVINCES OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, ONTARIO AND NOVA SCOTIA
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF THE CIT GROUP, INC., CIT FINANCIAL LTD. AND CIT HOLDINGS, LLC
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of the provinces of British Columbia, Alberta, Saskatchewan, Ontario and Nova Scotia (the “Jurisdictions”) has received an application from The CIT Group, Inc. (“CIT”), CIT Financial Ltd. (formerly Newcourt Credit Group Inc.) (for the purposes hereof “Newcourt”), CIT Holdings LLC (“Holdings”), Tyco Acquisition Corp. XIX (NV) (“Tyco Acquisition”) and Tyco International Ltd. (“Tyco”) for a decision pursuant to the securities legislation of the Jurisdictions (the “Legislation”) that the decision (the “2000 Decision Document”) granted by the Decision Makers of the Jurisdictions on September 29, 2000 to CIT, Newcourt and Holdings that deemed Newcourt to cease to be a reporting issuer and that deemed Holdings to be a reporting issuer be amended to permit Holdings to comply with the requirements contained in the Legislation with respect to Holdings to issue a press release and file a report with certain Decision Makers upon the occurrence of a material change, file interim financial statements and audited financial statements with the Decision Makers and deliver such statements to the security holders of Holdings, file an information circular or make an annual filing with Decision Makers in lieu of filing an information circular, file an annual information form and provide management’s discussion and analysis of financial condition and results of operations (the “ Continuous Disclosure Requirements”) by filing and delivering disclosure materials relating to New CIT (as defined below) in lieu of materials related to CIT.
AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the “MRRS”), the Ontario Securities Commission is the principal regulator for this application;
AND WHEREAS CIT has represented to the Decision Makers as follows:
CIT, Exchangeco and Holdings
1. CIT and Exchangeco are not in default of any of the requirements of the securities legislation of the Jurisdictions.
2. Holdings is a limited liability company under the laws of the State of Delaware, all of its membership interests are held by CIT and is a reporting issuer in British Columbia, Alberta, Saskatchewan, Ontario, Nova Scotia, Québec and Newfoundland. Holdings is not in default of any of the requirements of the securities legislation of the provinces in which it is a reporting issuer.
Tyco and Tyco Acquisition
3. Tyco is a company incorporated with limited liability under the laws of Bermuda, and is subject to the reporting requirements of the United States Securities Exchange Act of 1934 (the “Exchange Act”). Tyco is a reporting issuer in Ontario, Québec, British Columbia, Alberta, Nova Scotia, Saskatchewan, and Manitoba. Tyco is not in default of any of the requirements of the securities legislation of the provinces in which it is a reporting issuer.
4. The authorized capital of Tyco consists of 2,500,000,000 common shares (“Tyco Common Shares”) and 125,000,000 preference shares, par value U.S.$1.00 per share. As of January 26, 2001: (a) 1,752,275,000 Tyco Common Shares were issued and outstanding; and (b) no preference shares were outstanding. As of December 31, 2000, no more than 180,000,000 Tyco Common Shares were reserved for issuance upon exercise of stock options issued under Tyco’s stock option plans.
5. The Tyco Common Shares are listed on the New York Stock Exchange, the Bermuda Stock Exchange and the London Stock Exchange.
6. Tyco Acquisition is a company incorporated under the laws of the State of Nevada, and is a wholly-owned subsidiary of Tyco. Tyco Acquisition is not a reporting issuer in the Jurisdictions. Following consummation of the Merger (as defined below), Tyco Acquisition will change its name to CIT Holdings (NV) Inc.
Merger of Tyco Acquisition and CIT
7. Pursuant to an agreement and plan of merger (the “Merger Agreement”) dated as of March 12, 2001 between Tyco Acquisition and CIT pursuant to which CIT will merge with and into Tyco Acquisition with Tyco Acquisition continuing as the surviving corporation and as a wholly-owned subsidiary of Tyco (the “Merger”). Holders of CIT common shares will receive 0.6907 of a Tyco Common Share for each share of CIT common share held. The exchangeable shares issued by Exchangeco (the “Exchangeable Shares”) will remain outstanding and each Exchangeable Share will be exchangeable for 0.6907 of a Tyco Common Share (subject to adjustment for certain changes in Tyco Common Shares).
8. The Merger must be approved by at least a majority of the voting power of the outstanding CIT common shares and Exchangeable Shares, voting together as a single class, at a special meeting of CIT shareholders to be held on May 23, 2001.
9. On or about April 23, 2001, a proxy statement/prospectus (the “Circular”) was mailed to all shareholders of CIT and all holders of Exchangeable Shares in connection with the CIT meeting, containing, among other things, a detailed description of the Merger, information concerning Tyco and a discussion of the effect of the Merger on the Exchangeable Shares. The Circular has been prepared in conformity with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”).
10. Application will be made by Tyco to list the Tyco Common Shares to be issued upon exchange of Exchangeable Shares after the completion of the Merger on the New York Stock Exchange.
11. The Merger is expected to be completed on or about June 1, 2001 (the “Closing Date”).
12. Promptly following the Merger, Tyco Acquisition will transfer substantially all the assets and liabilities of CIT to a new wholly-owned subsidiary, The CIT Group, Inc., a Nevada corporation (“New CIT”), which will effectively be the successor corporation to CIT.
Canadian Public Debt
13. At the time of the completion of the Arrangement described in the 2000 Decision Document, Newcourt had outstanding unlisted public debt securities in Canada (“Canadian Public Debt”) pursuant to a trust indenture dated June 1, 1995 between The R-M Trust Company (now CIBC Mellon Trust Company) and Newcourt and supplemental indentures thereto (collectively, the “Indenture”). The debt securities were issued under the Indenture in five series (pursuant to three shelf prospectuses). On November 15, 1999, CIT provided an unconditional, absolute and irrevocable guaranty of full and prompt payment of all principal and interest on the Canadian Public Debt (the “Guaranty”).
14. Holdings and Newcourt entered into a supplemental indenture to the Indenture whereby Holdings expressly assumed all Newcourt’s obligations under the outstanding Canadian Public Debt and Holdings became the primary obligor thereunder. The Guaranty continues to operate in favour of Holdings’ obligations under the Canadian Public Debt.
15. Following the Merger, New CIT, as the effective successor to CIT, will provide an unconditional, absolute and irrevocable guaranty of full and prompt payment of all principal and interest on the Canadian Public Debt.
16. Except as discussed below, the informational requirements of the Exchange Act that will apply to New CIT, as an issuer of public debt and a wholly-owned indirect subsidiary of a public company (Tyco), are the same as the informational requirements that currently apply to CIT. The following items will not need to be disclosed by New CIT in their annual form 10-K filing: (i) Item 4 – Submission of Matters to a Vote of Holders of Securities; (ii) Item 10 – Director and Executive Officers; (iii) Item 11 – Executive Compensation; (iv) Item 12 – Security Ownership of Certain Beneficial Owners and Management; and (v) Item 13 – Certain Relationships and Related Transactions (although a description of related transactions will be required as a note to New CIT’s annual financial statements). Although New CIT is not required under the Exchange Act to provide full management’s discussion and analysis of financial condition and results of operation (Item 7) New CIT will be providing full management’s discussion and analysis of financial condition and results of operation during the time the Canadian Public Debt is outstanding. As well, New CIT will not be required to prepare and file proxy statements in connection with its annual meeting of shareholders.
AND WHEREAS under the MRRS this Decision Document evidences the decision of each Decision Maker (collectively, the “Decision”);
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;
THE DECISION of the Decision Makers pursuant to the Legislation is that the operative portion of the 2000 Decision Document is amended as at the Closing Date by:
(a) deleting paragraph 2(a) and replacing it with the following:
“New CIT files with the Decision Makers copies of all documents required to be filed by it with the SEC under the Exchange Act including, but not limited to, copies of any Form 10-K, Form 10-Q and Form 8-K, which documents will include financial statements prepared solely in accordance with United States generally accepted accounting principles and also files with the Decision Makers full management’s discussion and analysis of financial condition and results of operation as discussed in representation 16 contained in the MRRS Decision Document granted in favour of CIT, Newcourt and Holdings and dated May 31, 2001;”;
(b) deleting references to “CIT” in subparagraphs 2(b), 2(e) and paragraph 3 and replacing them with references to “New CIT”; and
(c) deleting the reference to “CIT” in paragraph 2(c) and replacing it with “Tyco”.
DATED May 31st, 2001.
Robert W. Korthals R. Stephen Paddon