Exemption Orders (Discretionary)

GOEPEL McDERMID INC.


2000 BCSECCOM 366


Headnote:

Mutual Reliance Review System for Exemptive Relief Applications – Registration and prospectus relief for a variety of trades in connection with the acquisition of a non-reporting Canadian company by a non-reporting U.S. issuer employing an exchangeable share structure. First trade relief also granted provided trades are executed on an exchange or market outside of Canada.

Applicable British Columbia Provisions

Securities Act, R.S.B.C. 1996, c. 418, ss. 34(1)(a), 45(2)(9), 48, 61, 74(2)(8), 76

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 GOEPEL McDERMID INC.

MRRS DECISION DOCUMENT

[para 1]
WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of the provinces of British Columbia, Alberta and Ontario (the “Jurisdictions”) has received an application from Goepel McDermid Inc.(“GMI”)(the “Filer”) for a decision pursuant to the securities legislation of the Jurisdictions (the “Legislation”) that certain trades in securities made in connection with or resulting from the proposed acquisition (the “Transaction”) by Raymond James Financial, Inc. (“RJF”) through Raymond James Holdings (Canada), Inc. (“RJ Holdings”) of all of the issued and outstanding shares of GMI, to be effected by way of a plan of arrangement (the “Arrangement”) under section 192 of the Canada Business Corporations Act (the “CBCA”) pursuant to an arrangement agreement (the “Arrangement Agreement”) entered into among GMI, RJF and RJ Holdings on November 27, 2000 shall be exempt from the requirements contained in the Legislation to be registered to trade in a security (the “Registration Requirements”) and to file and obtain a receipt for a preliminary prospectus and a prospectus (the “Prospectus Requirements”);

[para 2]
AND WHEREAS under the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the British Columbia Securities Commission is the principal regulator for this application;

[para 3]
AND WHEREAS the Filer has represented to the Decision Makers that:

1. RJF, through its wholly-owned subsidiary Raymond James & Associates Inc., is a securities brokerage firm engaged in most aspects of the securities business throughout the United States;

2. RJF was incorporated in 1974 under the laws of the state of Florida, is not a reporting issuer under the Legislation or under any other Canadian securities legislation, but is subject to the reporting requirements of the United States Securities Exchange Act of 1934, as amended; RJF has no present intention to become a reporting issuer in any of the Jurisdictions;

3. the authorized capital of RJF consists of 100,000,000 common shares, with U.S. $0.01 par value (the “RJF Common Shares”), of which 46,572,368 RJF Common Shares were issued and outstanding as of the date hereof;

4. the RJF Common Shares are listed and posted for trading on the New York Stock Exchange under the symbol “RJF”;

5. RJ Holdings was incorporated on August 9, 2000 under the CBCA and is a wholly-owned subsidiary of RJF;

6. the authorized capital of RJ Holdings consists of an unlimited number of common shares (the “RJ Holdings Common Shares”) of which 100 are issued and outstanding as of the date hereof;

7. prior to the completion of the Arrangement, RJF shall cause RJ Holdings to amend its share capital structure to create Class A non-voting retractable shares (the “Class A Retractable Shares”), Class B non-voting retractable shares (the “ClassBRetractableShares”), Class C non-voting retractable shares (the “Class C Retractable Shares” and collectively, the “RetractableShares”), Class D non-voting exchangeable shares (the “Class D Exchangeable Shares”) and Class E non-voting exchangeable shares (the “Class E Exchangeable Shares” and collectively, the “Exchangeable Shares”);

8. RJ Holdings is not a reporting issuer under the Legislation or under any other Canadian securities legislation; RJ Holdings has no present intention to become a reporting issuer in any of the Jurisdictions;

9. GMI is an independent, full service investment dealer, serving corporations, institutions and private investors across Canada; the head office of GMI is located in British Columbia;

10. GMI was continued under the CBCA on April 1, 1998, is not a reporting issuer under the Legislation or under any other Canadian securities legislation, and is not a reporting issuer under the securities legislation of any other jurisdiction;

11. the authorized share capital of GMI consists of an unlimited number of common shares (the “GMI Common Shares”) and an unlimited number of Class A non-voting preferred shares (the “GMI Preferred Shares”), of which7,140,030 GMI Common Shares and 7,140,030 GMI Preferred Shares are issued and outstanding as of the date hereof;

12. the GMI Common Shares and GMI Preferred Shares are owned by employees of GMI, their spouses and holding companies that are wholly owned by employees of GMI or their spouses; no single shareholder of GMI holds greater than ten percent of the outstanding GMI Common Shares or GMI Preferred Shares; as of the date hereof 3,920,641 or 54.91% of the GMI Common Shares and 3,920,641 or 54.91% of the GMI Preferred Shares are held in British Columbia; 1,655,072 or 23.18% of the GMI Common Shares and 1,655,072 or 23.18% of the GMI Preferred Shares are held in Ontario and 1,564,317 or 21.91% of the GMI Common Shares and 1,564,317 or 21.91% of the GMI Preferred Shares are held in Alberta;

13. RJF, RJ Holdings and GMI have entered into an Arrangement Agreement dated November 27, 2000; the Arrangement Agreement provides that RJF, through RJ Holdings, will

acquire all of the issued and outstanding GMI Common Shares and GMI Preferred Shares by way of the Arrangement;

14. in accordance with the terms of an interim order dated November 24, 2000 (the “Interim Order”) from the Supreme Court of British Columbia (the “Court”), the Arrangement must be approved by 66 2/3% of the votes cast at the meeting (the “GMI Meeting”) of holders of GMI Preferred Shares and GMI Common Shares (the “GMI Securityholders”);

15. on November 28, 2000, GMI mailed a management information circular to all GMI Securityholders containing prospectus level disclosure of the business and affairs of RJF and RJ Holdings, the particulars of the Arrangement and the securities to be issued in connection therewith;

16. an application must be made to the Court in order to obtain a final order approving the Arrangement once the Arrangement has been approved by GMI Securityholders at the GMI Meeting in accordance with the terms of the Interim Order;

17. under the Arrangement, each outstanding GMI Preferred Share (other than those held by any holder who exercises its right of dissent) shall be deemed to be exchanged for $0.50;

18. each holder of GMI Common Shares (other than any holder who exercises its right of dissent) may elect to receive, at its option:

(a) one Class A Retractable Share and one Class B Retractable Share for each GMI Common Share held; or

(b) $15.00 in cash for each GMI Common Share held; or

(c) a number of Class D Exchangeable Shares equal to 0.7 times the number of the holder’s GMI Common Shares times an exchange ratio (as set out in the Arrangement Agreement) (the “Exchange Ratio”), together with a number of Class E Exchangeable Shares equal to 0.3 times the number of the holder’s GMI Common Shares times the Exchange Ratio; or

(d) such combination of the foregoing;

19. RJ Holdings will not be obligated to issue any fraction of an Exchangeable Share; if any fractional interest in an Exchangeable Share would be issuable to any holder of GMI Common Shares, RJ Holdings shall deliver the nearest whole number of Exchangeable Shares to such holder of GMI Common Shares, rounding down;

20. unless a holder of GMI Common Shares otherwise elects, each holder of GMI Common Shares will be deemed to have elected and will receive Exchangeable Shares as set out in 18(c) above; a maximum of 1,000,000 Exchangeable Shares will be issued; if holders of GMI Common Shares are deemed to have elected to receive more than 1,000,000 Exchangeable Shares, such holders will receive a pro rata share of the 1,000,000 Exchangeable Shares according to their proportionate share of all GMI Common Shares outstanding and the remainder of the consideration will be paid to such holders by the issuance of Retractable Shares in accordance with 18(a) above;

21. if one or more holders of GMI Common Shares elect to receive less than their full pro rata share of Exchangeable Shares, any unallocated Exchangeable Shares will be allocated pro rata in the manner provided in the Arrangement Agreement among holders of GMI Common Shares who elect to receive more than their pro rata share of Exchangeable Shares;

22. all Class A Retractable Shares and Class D Exchangeable Shares shall be issued and delivered, and all cash consideration pursuant to paragraph 18(b) above will be paid to the holders of GMI Common Shares on the date on which the Arrangement is effective (the “Effective Date”);

23. 30% of the cash consideration received by a holder of GMI Common Shares pursuant to paragraph 18(b) above will be paid by such holder to RJ Holdings to purchase Class C Retractable Shares at a price of $4.50 per share;

24. the remaining consideration comprised of Class B Retractable Shares and Class E Exchangeable Shares and all Class C Retractable Shares purchased with a portion of the cash consideration will be held in escrow pursuant to the terms of an escrow agreement (the “Escrow Agreement”) that will be entered into among GMI, RJ Holdings and the Montreal Trust Company of Canada contemporaneously with the closing of the Transaction; the Escrowed Shares will be released from such escrow on January 10, 2003, or such other date as provided under the Escrow Agreement, to holders of GMI Common Shares who were not in “competition” with RJF (as defined in the Arrangement Agreement) during the two years following the Effective Date;

25. the rights, privileges, restrictions and conditions attaching to the Retractable Shares (the “Retractable Share Provisions”), provide that the Retractable Shares shall be entitled to a preference over the RJ Holdings Common Shares and shall rank senior to the Exchangeable Shares with respect to the distribution of assets in the event of a liquidation, dissolution or winding-up of RJ Holdings; the Retractable Shares shall rank junior to the Exchangeable Shares with respect to the payment of dividends;

26. the Retractable Shares will be non-voting (except as required by the Retractable Share Provisions or by applicable law); pursuant to the Retractable Share Provisions, the Class A Retractable Shares will be retractable semi-annually, at the holder’s option, and the Class B and Class C Retractable Shares may be similarly retracted once released from escrow pursuant to the terms of the Escrow Agreement; subject to the overriding call right of RJF described below, upon the date of retraction (the “Retractable Share Retraction Date”), a holder of Retractable Shares shall be entitled to receive an amount (the “Retractable Share Retraction Price”) approximately equal to $10.50 per Class A Retractable Share, $4.75 per Class B Retractable Share and $4.75 per Class C Retractable Share, together with, on the payment date therefor, the full amount of all declared and unpaid dividends on any such Retractable Share held by such holder on any dividend record date prior to the Retractable Share Retraction Date; in addition to the foregoing the Retractable Share Retraction Price will increase annually by a small amount (this will be in the range of a 2.5% compounded rate); upon being notified by RJ Holdings of a proposed retraction of Retractable Shares, RJF will have an overriding call right to purchase or to cause its designee to purchase from the holder all of the Retractable Shares that are the subject of the retraction notice for a price per share equal to the Retractable Share Retraction Price;

27. subject to the overriding call right of RJF described below, RJ Holdings shall redeem all but not less than all the Retractable Shares then outstanding at any time on or after the last business day in January 2011, or such other date as provided under the Retractable Share Provisions (the “Retractable Share Redemption Date”); upon such redemption, RJ Holdings will cause a holder to receive from RJF an amount equal to the Retractable Share Retraction Price calculated on the last business day prior to the Retractable Share Redemption Date together with the full amount of all declared and unpaid dividends on each such Retractable Share held by such holder on any dividend record date prior to the Retractable Share Redemption Date (such aggregate amount, the “Retractable Share Redemption Price”); upon being notified by RJ Holdings of a proposed redemption of Retractable Shares, RJF will have an overriding call right to purchase or to cause its designee to purchase from the holder all of the Retractable Shares for a price per share equal to the Retractable Share Redemption Price;

28. subject to the overriding call right of RJF described below, on the liquidation, dissolution or winding-up of RJ Holdings, a holder of Retractable Shares shall be entitled, subject to applicable law, to receive from the assets of RJ Holdings for each Retractable Share held on the effective date of such liquidation, dissolution or winding-up (the “Retractable Share Liquidation Date”), before any distribution of any part of the assets of RJ Holdings among the holders of the RJ Holdings Common Shares or any other shares ranking junior to the Retractable Shares, an amount per share equal to the Retractable Share Retraction Price calculated as of the last business day prior to the Retractable Share Liquidation Date (the “Retractable Share Liquidation Price”), which shall be satisfied in full by RJ Holdings by causing to be paid to such holder the Retractable Share Liquidation Price, together with all declared and unpaid dividends on each such Retractable Share held by such holder on any dividend record date prior to the Retractable Share Liquidation Date; upon a proposed liquidation, dissolution or winding-up of RJ Holdings, RJF will have an overriding call right to purchase or to cause its designee to purchase from the holder all of the Retractable Shares for a price per share equal to the Retractable Share Liquidation Price;

29. the provisions attaching to the Exchangeable Shares (the “Exchangeable Share Provisions”), together with various rights provided in a support agreement (the “Support Agreement”) to be entered into among RJF, RJ Holdings, GMI and Montreal Trust Company of Canada (the “Trustee”) contemporaneously with the closing of the Transaction will provide holders of Exchangeable Shares with a security of a Canadian issuer having economic rights which are, in all material respects, equivalent to those of an RJF Common Share;

30. the Exchangeable Shares will be entitled to a preference over the RJ Holdings Common Shares and any other shares ranking junior to the Exchangeable Shares with respect to the payment of dividends and the distribution of assets in the event of a liquidation, dissolution or winding-up of RJ Holdings; the Exchangeable Shares will rank senior to the Retractable Shares with respect to the payment of dividends, but junior to the Retractable Shares with respect to the distribution of assets in the event of a liquidation, dissolution or winding-up of RJ Holdings;

31. the Exchangeable Shares will be non-voting (except as required by the Exchangeable Share Provisions or by applicable law); pursuant to the Exchangeable Share Provisions, the Class D Exchangeable Shares will be retractable at certain times, at the holder’s option, and the Class E Exchangeable Shares may be similarly retracted once released from escrow pursuant to the terms of the Escrow Agreement; subject to the overriding call right of RJF described below, upon the date of retraction (the “Exchangeable Share Retraction Date”) the holder will be entitled to receive from RJF for each Exchangeable Share retracted an amount equal to the current market price of an RJF Common Share, to be satisfied by delivery of one RJF Common Share, together with, on the designated payment date therefor, all declared and unpaid dividends on each such retracted Exchangeable Share held by the holder on any dividend record date prior to the Exchangeable Share Retraction Date (such aggregate amount, the “Exchangeable Share Retraction Price”); upon being notified by RJ Holdings of a proposed retraction of Exchangeable Shares, RJF will have an overriding call right to purchase or cause its designee to purchase from the holder all of the Exchangeable Shares that are the subject of the retraction notice for a price per share equal to theExchangeable Share Retraction Price;

32. subject to the overriding call right of RJF described below, RJ Holdings mayredeem all the Exchangeable Shares then outstanding at any time on or after the earlier of the last business day in January 2011 and the date that Canadian tax laws are amended in order to permit the Exchangeable Shares to be exchanged on a tax deferred basis, or such other date as provided under the Exchangeable Share Provisions; upon such redemption (the “Exchangeable Share Redemption Date”), RJ Holdings shall cause each holder to receive for each Exchangeable Share redeemed an amount equal to the current market price of an RJF Common Share, to be satisfied by the delivery of one RJF Common Share, together with all declared and unpaid dividends on each such redeemed Exchangeable Share held by the holder on any dividend record date prior to the Exchangeable Share Redemption Date (such aggregate amount, the “Exchangeable Share Redemption Price”); upon being notified by RJ Holdings of a proposed redemption of Exchangeable Shares, RJF will have an overriding call right to purchase or cause its designee to purchase from the holders all of the outstanding Exchangeable Shares for a price per share equal to the Exchangeable Share Redemption Price;

33. subject to the overriding call right of RJF described below, on the liquidation, dissolution or winding-up of RJ Holdings, a holder of Exchangeable Shares shall be entitled, subject to applicable law, to receive from RJ Holdings for each Exchangeable Share held an amount equal to the current market price of an RJF Common Share, to be satisfied by delivery of one RJF Common Share, together with all declared and unpaid dividends on each such Exchangeable Share held by the holder on any dividend record date prior to the date of liquidation, dissolution or winding-up, (such aggregate amount, the “Exchangeable Share Liquidation Price”); upon a proposed liquidation, dissolution or winding up of RJ Holdings, RJF will have an overriding call right to purchase or to cause its designee to purchase from the holder all of the Exchangeable Shares from the holders thereof for a price per share equal to the Exchangeable Share Liquidation Price;

34. contemporaneously with the closing of the Arrangement, RJF, RJ Holdings and GMI will enter into a Support Agreement which will provide that RJF will not declare or pay any dividend on the RJF Common Shares unless RJ Holdings simultaneously declares and pays an equivalent dividend on the Exchangeable Shares, and that RJF and RJ Holdings will be able to honour the retraction rights and dissolution entitlements that are attributes of the Retractable Shares under the Retractable Share Provisions, the redemption and retraction rights and dissolution entitlements that are attributes of the Exchangeable Shares under the Exchangeable Share Provisions and the related redemption, retraction and liquidation call rights described above;

35. the Support Agreement will also provide that, without the prior approval of the holders of the Exchangeable Shares, actions such as distributions of stock dividends, options, rights and warrants for the purchase of securities or other assets, subdivisions, reclassifications, reorganizations and other changes cannot be taken in respect of the RJF Common Shares generally without the same or an economically equivalent action being taken in respect of the Exchangeable Shares;

36. under the Support Agreement, RJF will grant to the Trustee for the benefit of the holders of the Exchangeable Shares a put right exercisable upon the insolvency of RJ Holdings, to require RJF to purchase or to cause its designee to purchase from a holder of Exchangeable Shares all or any part of its Exchangeable Shares; the purchase price for each Exchangeable Share purchased by RJF will be an amount equal to the current market price of an RJF Common Share, to be satisfied by the delivery to the Trustee, on behalf of the holder, of one RJF Common Share, together with an additional amount equivalent to the full amount of all declared and unpaid dividends on such Exchangeable Share held by such holder on any dividend record date prior to the closing of the purchase and sale;

37. under the Support Agreement, upon the liquidation, dissolution or winding-up of RJF, RJF will be required to purchase or to cause its designee to purchase each outstanding Exchangeable Share, and each holder will be required to sell all of its Exchangeable Shares, for a purchase price per share equal to the current market price of an RJF Common Share, to be satisfied by the delivery to the Trustee, on behalf of the holder, of one RJF Common Share, together with an additional amount equivalent to the full amount of all declared and unpaid dividends on each such Exchangeable Share held by such holder on any dividend record date prior to the closing of the purchase and sale;

38. the steps under the Transaction, including the exchange of GMI Common Shares for Retractable and/or Exchangeable Shares, the attributes of the Retractable Shares contained in the Retractable Share Provisions and the Support Agreement, the attributes of the Exchangeable Shares contained in the Exchangeable Share Provisions and the Support Agreement and the related issuance and intra-group transfers of RJF Common Shares and related issuances of shares of RJF’s designee in consideration therefor in connection with the steps under the Transaction involve or may involve a number of trades of securities (collectively, the “Trades”) and there may be no registration or prospectus exemptions available under the Legislation for certain of the Trades;

39. if all of the Exchangeable Shares were exchanged after completion of the Transaction, former holders of GMI Common Shares resident in the Jurisdictions would not in aggregate hold more than 10% of the total number of issued and outstanding RJF Common Shares or represent more than 10% of the total number of holders of RJF Common Shares;

40. there is no market for the RJF Common Shares in the Jurisdictions and none is expected to develop;

41. upon completion of the Transaction, neither of RJF or RJ Holdings will become reporting issuers under the Legislation; and

42. all disclosure material furnished to holders of RJF Common Shares in the United States will be provided to holders of the Exchangeable Shares and RJF Common Shares resident in the Jurisdictions.

[para 4]
AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the “Decision”);

[para 5]
AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Makers with the jurisdiction to make the decision has been met;

[para 6]
THE DECISION of the Decision Makers pursuant to the Legislation is that:

1. the Registration and Prospectus Requirements shall not apply to the Trades;

2. the first trade of Exchangeable Shares or Retractable Shares, except under the Exchangeable Share Provisions, the Retractable Share Provision, the Support Agreement or the Arrangement Agreement, shall be a distribution; and

3. the first trade of RJF Common Shares acquired upon exchange, redemption or retraction of the Exchangeable Shares under their terms shall be a distribution unless such trade is executed on an exchange or market outside of Canada.

[para 7]
DATED December 22, 2000.


Brenda Leong
Director
©2024 British Columbia Securities Commission