Exemption Orders (Discretionary)

GRAYMONT LIMITED

Headnote

Mutual Reliance Review System for Exemptive Relief Applications - registration and prospectus relief for trades to and among a limited group of shareholders that is closely connected to and knowledgeable about the business and affairs of the issuer

Applicable British Columbia Provisions

Securities Act, R.S.B.C. 1996, c. 418, ss. 34(1)(a), 48, 61, 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 GRAYMONT LIMITED

MRRS DECISION DOCUMENT

WHEREAS the Canadian securities regulatory authority or regulator (the “Decision Maker”) in each of British Columbia, Alberta and Ontario (the “Jurisdictions”) has received an application from Graymont Limited (“Graymont”) for a decision pursuant to the securities legislation of the Jurisdictions (the “Legislation”) that the requirements contained in the Legislation to be registered to trade in a security (the “Registration Requirement”) and to file a preliminary prospectus and a prospectus, and receive receipts therefor (the “Prospectus Requirement”) shall not apply to certain intended trades in securities of Graymont;

AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the “System”), the British Columbia Securities Commission is the principal regulator for this application;

AND WHEREAS Graymont has represented to the Decision Makers that:

1. Graymont was amalgamated under the laws of Canada on December 31, 1980 and is a “private issuer” or “private company” under the Legislation;

2. Graymont is one of the largest North American producers of lime, which is used primarily in the mining, steel, environmental, pulp and paper, and chemical industries, and also has diversified operations in other areas;

3. the authorized capital of Graymont consists of an unlimited number of common shares, an unlimited number of Class B common shares, an unlimited number of Class C common shares, 10,000,000 convertible redeemable shares, and an unlimited number of preferred shares, issuable in series, of which 1,000,000 are designated as Series A preferred shares and 1,000,000 are designated as Series B preferred shares (collectively, the “Shares”);

4. as of September 30, 1998, 252,735 common shares, 749,606 Class B common shares, 135,602 Class C common shares, 126,367.5 Series A preferred shares and 442,604 Series B preferred shares were issued and outstanding;

5. the common shares, Class B common shares and Class C common shares are inter-convertible and are identical in all respects except for the paid up capital of the shares;

6. the Series A and Series B preferred shares were issued to holders of common shares, Class B common shares and Class C common shares on a pro rata basis as stock dividends and will be redeemed by Graymont, for cash, at a future date or dates; the Series A and Series B preferred shares are generally only traded if the underlying common shares, Class B common shares and Class C common shares are also traded;

7. as of September 30, 1998, the outstanding Shares were beneficially owned by approximately 35 persons, exclusive of employees and former employees of Graymont;

8. all of Graymont’s shareholders are members of the extended Graham family (being descendants of F. Ronald Graham, the founder of Graymont, or persons related or connected to them) (the “Extended Graham Family Members”), current or former directors, officers or employees of Graymont or its subsidiaries, companies of which a majority of the shares having voting rights are owned, directly or indirectly, by or for the benefit of, such persons, and trusts (whether inter vivos or testamentary) established for the benefit of such persons (the “Existing Shareholders”);

9. substantially all of the shareholders of Graymont who are Extended Graham Family Members or holding companies or family trusts for such persons are party to a deposit agreement (the “Deposit Agreement”) under which each shareholder may only transfer beneficial ownership of, or a beneficial interest in, Shares to:
      (a) Graymont;

      (b) other members of the shareholder’s “Nuclear Graham Family”, which is defined by the Deposit Agreement to mean one of 11 individual members of the Extended Graham Family named in the Deposit Agreement (a “Named Member”), together with:
          (i) children, grandchildren and other descendants of the Named Member, including children, grandchildren and other descendants who are adopted (the “Named Member’s Descendants”);

          (ii) corporations of which a majority of the voting shares then having voting rights are owned, directly or indirectly, by or for the benefit of the Named Member, the Named Member’s Descendants or any combination thereof; and

          (iii) trusts, whether inter vivos or testamentary, under which the only persons who may have any interest in Shares are the Named Member, the Named Member’s Descendants, any combination thereof and, to the extent only of a life interest, a spouse of an individual member of the particular Nuclear Graham Family;
      (c) other shareholders of Graymont, provided that the shareholder sells the Shares through a mechanism established by the Deposit Agreement (the “Deposit Agreement Resale Mechanism”) under which other shareholders are given the opportunity to purchase the Shares on a pro rata basis; or

      (d) any other buyer, if neither Graymont nor the other shareholders of Graymont have purchased all of the selling shareholder’s Shares pursuant to the Deposit Agreement Resale Mechanism;

10. substantially all of Graymont’s shareholders who are not Extended Graham Family Members or holding companies or family trusts for such persons have entered into shareholder agreements (the “Shareholder Agreements”) under which each shareholder may only transfer beneficial ownership of, or a beneficial interest in, Shares to:
      (a) Graymont;

      (b) “Family Members”, which is defined by the Shareholder Agreements to mean:
          (i) descendants of the shareholder (the “Descendants”); and

          (ii) trusts under which the only persons who have or may acquire a beneficial interest are Family Members, Affiliates of the shareholder (as defined below) or a spouse of a Family Member;
      (c) corporations of which a majority of the voting shares then having voting rights to elect directors are directly or indirectly owned by one or more Family Members (the “Affiliates”); and

      (d) other shareholders of Graymont, provided that the shareholder sells the Shares through a mechanism established by the Shareholder Agreements (the “Shareholder Agreement Resale Mechanism”) under which other shareholders are given the opportunity to purchase the Shares on a pro rata basis; or

      (e) any other buyer, if neither Graymont nor the other shareholders of Graymont have purchased all of the selling shareholder’s Shares pursuant to the Shareholder Agreement Resale Mechanism;
11. if the shareholders of Graymont do not purchase all of a selling shareholder’s Shares pursuant to an offer under the Deposit Agreement Resale Mechanism or the Shareholder Agreement Resale Mechanism, Graymont intends to purchase all of the Shares;

12. all of the Existing Shareholders of Graymont and all of the persons to whom they are permitted to transfer their Shares under the Deposit Agreement and the Shareholder Agreements (the “Agreements”) have or will have a close connection with Graymont and substantial knowledge of the business and affairs of Graymont on an ongoing basis, and are not or will not be members of the public;

13. Graymont provides each of its shareholders with annual audited and quarterly unaudited financial statements, including a management discussion and analysis of Graymont’s operations; Graymont also provides its shareholders with an information circular, prepared in accordance with the requirements of the Canada Business Corporations Act prior to Graymont’s annual general meeting;

14. if the number of beneficial holders of Shares, excluding employees and former employees, becomes greater than 50:
      (a) Graymont will no longer be able to rely upon the registration and prospectus exemptions contained in the Legislation for “private issuers” or “private companies” to distribute Shares;

      (b) there will be registration and prospectus exemptions available under the Legislation for Graymont to distribute Shares to directors, officers and employees of Graymont and its subsidiaries, but there will not be registration and prospectus exemptions available under the Legislation of certain of the Jurisdictions for Graymont to distribute Shares to:
          (i) persons that beneficially owned, directly or indirectly, Shares while employed by Graymont or one of its subsidiaries and at all times since ceasing to be so employed, have continued to beneficially own, directly or indirectly, at least one Share (“Former Employees”);

          (ii) corporations in which a majority of the voting shares are owned, directly or indirectly, by or for the benefit of directors, senior officers, employees or Former Employees of Graymont (“Director, Officer and Employee Holdcos”); and

          (iii) trusts, whether inter vivos or testamentary, under which the only persons who may have any interest in Graymont Shares are directors, senior officers, employees or Former Employees of Graymont (“Director, Officer and Employee Trusts”); and
      (c) there will be limited registration and prospectus exemptions available to permit holders of Shares to transfer them;

15. if Graymont distributes Shares to a Director, Officer and Employee Holdco or a Director, Officer and Employee Trust, the relevant employee will not be induced to purchase by expectation of employment or continued employment;

16. Graymont will promptly provide a copy of this MRRS Decision Document to each of the Existing Shareholders and to new shareholders at the time their names are entered on Graymont’s register of shareholders;

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

AND WHEREAS the Decision Makers are of the opinion that it would not be prejudicial to the public interest to make the Decision;

The Decision of the Decision Makers pursuant to the Legislation is that:

1. the Registration Requirement and the Prospectus Requirement shall not apply to trades in Shares by Graymont to:
      (a) Existing Shareholders;

      (b) any of the persons to whom Existing Shareholders who are party to an Agreement may transfer Shares under the Agreements;

      (c) Former Employees;

      (d) Director, Officer and Employee Holdcos; and

      (e) Director, Officer and Employee Trusts;
      (together, the “Permitted Recipients”);

2. the Registration Requirement shall not apply to a trade in Shares by:
      (a) a Permitted Recipient; or

      (b) a director, senior officer or employee of Graymont or its subsidiaries;
      (together, the “Permitted Transferees”) to another Permitted Transferee;

3. a trade in Shares by a Permitted Recipient is deemed to be a distribution under the Legislation unless the Shares are traded to a Permitted Transferee; and

4. a trade in Shares by a director, senior officer or employee of Graymont or its subsidiaries is exempt from the Prospectus Requirement provided that the Shares are traded to a Permitted Transferee.

DATED at Vancouver, British Columbia, on February 9, 1999.



”Margaret Sheehy”

Margaret Sheehy
Director

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