Mutual Reliance Review System for Exemptive Relief Applications - relief fromregistration and prospectus requirements in respect of certain trades made inconnection with spin-off of subsidiary of reporting issuer using option exchangeableshare structure, subject to first trade restrictions - relief from continuous disclosurerequirements granted to Exchangeco and relief from insider reporting obligationsgranted to Exchangeco insiders, provided that issuer of underlying securities deliversall applicable disclosure to holders of exchangeable shares, and other conditions -waiver of requirement to file annual information forms and management discussion andanalysis of financial condition and results of operations granted to Exchangeco -permission granted to include representations as to listing and quoting of securities onThe TSE and NASDAQ in non-offering prospectus provided to shareholders ofreporting issuer.
Applicable Ontario Statutory Provisions
Securities Act , R.S.O. 1990, c.S.5, as am., ss. 25, 35(1)13, 38(3), 53, 72(1)(g), 72(5),74(1), 75, 77, 78, 79, 80(b)(iii), 81, 85, 86, 88(2), 107, 108, 109 and 121(2).
Applicable Ontario Rules
Rule 45-501 - Exempt Distributions
Applicable Ontario Policies
OSC Policy Statement No. 5.10 - Annual Information Form and Management'sDiscussion and Analysis of Financial Condition and Results of Operations
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
MAGNA INTERNATIONAL INC., MAGNA ENTERTAINMENT CORP. AND MEC HOLDINGS (CANADA) INC.
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, NewBrunswick, Prince Edward Island, Nova Scotia, Newfoundland, the Yukon Territory, theNorthwest Territories and Nunavut (collectively, the "Jurisdictions") has received anapplication from Magna International Inc. ("Magna"), Magna Entertainment Corp. ("MEC")and MEC Holdings (Canada) Inc. ("Exchangeco") (collectively, the "Filer") for a decisionpursuant to the securities legislation of the Jurisdictions (the "Legislation") that:
(a) the trades of securities involved in connection with the distribution by Magna toholders of its Class A Subordinate Voting Shares and Class B Shares (collectively,"Magna Shares"), MEC Class A Subordinate Voting Shares (the "MEC Class AShares") and exchangeable shares of Exchangeco ("Exchangeable Shares") as adividend-in-kind (the "Spin-off") and all related trades shall be exempt from theregistration and prospectus requirements of the Legislation;
(b) Exchangeco be exempt from the requirements of the Legislation to report materialchanges, to deliver and file interim and comparative financial statements, and to fileannual forms in lieu of filing information circulars and to file and deliver annualinformation forms (including management's discussion and analysis of the financialcondition and results of operation of Exchangeco), subject to certain conditions; and
(c) each "insider" (as such term is defined in the Legislation) of Exchangeco be exemptfrom the insider reporting requirements of the Legislation, subject to certainconditions, as described below.
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive ReliefApplications ("MRRS"), the Ontario Securities Commission is the principal regulator for thisapplication;
AND WHEREAS the Filer has represented to the Decision Makers that:
Magna International Inc. (Magna)
1. Magna is the largest Canadian, and one of the largest global, independentsuppliers of technologically advanced automotive systems, components andcomplete modules. Magna has over 54,000 employees in 164 manufacturingfacilities (including 14 joint venture facilities) of which 97 are located in NorthAmerica, 62 in Europe, two in South America and three in Asia, as well as 30product development, testing and engineering facilities. These facilities are locatedin 19 countries.
2. Magna is a company incorporated under the laws of the Province of Ontario and isa reporting issuer or the equivalent in every province in Canada which recognizesthe concept of reporting issuer status. The head office of Magna is located inOntario.
3. As of December 31, 1999, Magna had a total of 77,438,465 Class A SubordinateVoting Shares issued and outstanding and 1,097,909 Class B Shares issued andoutstanding. The Class A Subordinate Voting Shares are listed on the New YorkStock Exchange (the "NYSE") and The Toronto Stock Exchange (the "TSE"). TheClass B Shares are listed on the TSE.
Magna Entertainment Corp. (MEC)
4. MEC is a Delaware corporation, all of the outstanding shares of which were held byMagna as of December 29, 1999, except for: (i) 650,695 MEC Class A Shares heldby The Edward J. DeBartolo Corporation, which represented approximately0.8114% of the total equity of MEC on such date; and (ii) 1,012,195 MEC Class AShares held by Ladbroke Racing Corporation, which represented approximately1.2621% of the total equity of MEC on such date.
5. MEC was established to hold, and does currently hold directly or indirectly, all thenon-automotive-related assets (including non-automotive real estate) previouslyowned by Magna.
6. MEC acquires, develops and operates horse racetracks and related pari-mutuelwagering operations. In addition, MEC owns a real estate portfolio which includesa "gated" residential community currently under development, one operational golfcourse and related recreational facilities, a golf course under development andundeveloped land.
7. The capital stock of MEC consists of two classes - the MEC Class A Shares andClass B Stock of MEC (the "MEC Class B Shares"). Holders of MEC Class AShares are entitled to one vote per share, holders of the MEC Class B Shares areentitled to 20 votes per share and all holders vote together as a single class, exceptwhere separate class votes are required by law. MEC Class B Shares areconvertible into MEC Class A Shares at any time on a one-for-one basis.
MEC Holdings (Canada) Inc. (Exchangeco)
8. Exchangeco is company incorporated under the laws of the Province of Ontario.The authorized share capital of Exchangeco consists of two classes: CommonShares and Exchangeable Shares. All of the Common Shares are held by MEC,and all of the Exchangeable Shares are held by Magna. The Exchangeable Sharesare exchangeable for shares of MEC at any time. The Articles of Exchangecocurrently contain private company restrictions, which will be deleted by amendmentto be made prior to the Spin-off.
9. Magna intends to distribute MEC Class A Shares (by first converting certain of theMEC Class B Shares held by it into MEC Class A Shares) and ExchangeableShares representing approximately 20% of Magna's combined total equity interestin MEC and Exchangeco as a dividend-in-kind to each holder of Magna Shares("Magna Shareholders").
10. Upon completion of the Spin-off, Magna will own MEC Class B Shares representingapproximately 80% of the combined total equity of MEC and Exchangeco andapproximately 99% of the total voting interests attaching to all of the outstandingvoting shares of MEC.
11. One-fifth of one MEC Class A Share or Exchangeable Share will be distributed inrespect of each Magna Share held by a particular holder. A total of approximately15.7 million MEC Class A Shares and Exchangeable Shares will be distributedpursuant to the Spin-off.
12. Holders of Magna Shares will not be required to pay for the MEC Class A Sharesor Exchangeable Shares received by them in the Spin-off or surrender any MagnaShares in order to receive the MEC Class A Shares or Exchangeable Shares.
13. A holder of a number of Magna Shares not evenly divisible by five will not beentitled to receive a fractional interest in an MEC Class A Share or ExchangeableShare, but will be entitled to a cash payment instead. The amount of the cashpayment will be the fair market value of the fractional interest, based upon Magna'sdetermination of the fair market value of the MEC Class A Shares andExchangeable Shares on the date of the Spin-off. The payment of cash by Magnainstead of delivering any fractional interests in MEC Class A Shares is referred toas the "Fractional Interest Monetization".
14. In order to satisfy withholding tax obligations applicable in respect of holders ofMagna Shares who are not residents of Canada, Magna may, in addition towithholding some or all of a cash dividend expected to be paid concurrently with theSpin-off, withhold up to 25% of the MEC Class A Shares that would otherwise bedistributed to each such non-Canadian resident holder (the "Withheld Shares"). Theactual number of Withheld Shares will be that number having a fair market valueon the date of the Spin-off, as determined by Magna, equal to any shortfall in theamount that Magna is required to remit to Revenue Canada in respect of itswithholding tax obligations relating to the Spin-off after taking into account theamount of the cash dividend withheld. Magna will remit to Revenue Canada, inaddition to the relevant portion of the cash dividend, an amount of cash equal to thevalue of the Withheld Shares so determined, and will hold the Withheld Shares forits own benefit. The payment of cash to Revenue Canada by Magna in an amountequal to the value of the Withheld Shares is referred to as the "Withheld ShareMonetization". There will be no withholding of MEC Class A Shares, and inconsequence no Withheld Share Monetization, if the amount of the concurrent cashdividend is by itself sufficient to satisfy the amount that Magna is required to remitto Revenue Canada (i.e., Magna will withhold the full amount of the concurrent cashdividend in respect of a particular shareholder before withholding any MEC ClassA Shares).
15. As of December 31, 1999, there were 290,400 options to purchase Class ASubordinate Voting Shares of Magna outstanding under Magna's stock option plan(the "Option Plan"), with varying exercise prices and expiry dates ranging from May13, 2006 to October 31, 2009 (collectively, the "Outstanding Options"). EachOutstanding Option entitles the holder to obtain one Magna Class A SubordinateVoting Share upon payment of the applicable exercise price. Magna is consideringthe possibility that, subject to the approval of the TSE and, if required, the NYSE,on the Spin-off Date it will cancel all of its currently outstanding stock options, andissue new options (the "Replacement Options") to the current option holders. IfMagna determines to do so, the Replacement Options would have the same expirydate, vesting conditions and other terms and conditions as the existing options,except that the exercise price of the Replacement Options may be adjusted to giveeffect to the Spin-off. In addition to this adjustment to the exercise price or insteadof it, Magna may provide for each Replacement Option to entitle the holder toobtain, from Magna, one Magna Class A Share together with one-fifth of one MECClass A Share upon exercise. In such case, if a Replacement Option holder wereto exercise a number of Replacement Options not evenly divisible by five, thatholder would receive a fractional interest in an MEC Class A Share. Instead ofcancelling the outstanding options and issuing Replacement Options, subject to theapproval of the TSE and, if required, the NYSE, Magna may issue a new option (an"Additional Option") to each holder of an Outstanding Option in respect of eachOutstanding Option held. Each Additional Option would entitle the holder toacquire, from Magna, one-fifth of an MEC Class A Share for a nominal exerciseprice. A holder of an Additional Option could only exercise such option concurrentlywith the exercise of an Outstanding Option.
16. MEC is currently not a reporting issuer or the equivalent in any province of Canada.However, it has filed a preliminary non-offering prospectus dated November 8, 1999(the "Non-Offering Prospectus") in the provinces of British Columbia, Alberta,Saskatchewan, Ontario, Quebec, Newfoundland and Nova Scotia and will file thefinal Non-Offering Prospectus to enable it to become a reporting issuer pursuant toapplicable securities legislation in such provinces, notwithstanding that no sale ofits securities is contemplated in such Non-Offering Prospectus. The Non-OfferingProspectus will be amended to serve as a non-offering prospectus for Exchangecoas well as MEC, so that Exchangeco will also become a reporting issuer.
17. The final Non-Offering Prospectus will be sent to all Magna Shareholders who areshareholders of record on the record date for the Spin-off. The final Non-OfferingProspectus will contain full, true and plain disclosure of all material facts relating toMEC, Exchangeco and the Spin-off. The Non-Offering Prospectus will not containfinancial statements for Exchangeco as a separate entity, although it will includefinancial statements for MEC on a consolidated basis which will give effect to theassets and liabilities of Exchangeco.
18. The Non-Offering Prospectus and certain accompanying explanatory materials willstate that Canadian resident shareholders of Magna may elect to receiveExchangeable Shares in satisfaction of Magna's obligation to deliver the MECClass A Shares declared as a dividend in kind, and that Canadian shareholders willbe deemed to have elected to receive Exchangeable Shares in lieu of MEC ClassA Shares unless they notify Magna to the contrary by a specified date.
19. Subject to all requisite consents and approvals, the final Non-Offering Prospectuswill contain representations regarding the quotation and trading of the MEC ClassA Shares on the Nasdaq National Market ("NASDAQ") and the listing of suchshares and the Exchangeable Shares on the TSE (the "Listing Representations").
20. The Exchangeable Shares, together with the Voting and Exchange Agreementdescribed below and the Exchangeable Share Support Agreement also describedbelow, will provide holders thereof with a security of a Canadian issuer havingeconomic and voting rights which are, as nearly as practicable, equivalent to thoseof an MEC Class A Share. Provided that the Exchangeable Shares are listed ona prescribed stock exchange in Canada (which includes the TSE) and certain otherconditions are met, it is expected that they will be "qualified investments" for certaininvestors and that they will not constitute "foreign property", in each case under theIncome Tax Act (Canada). The Exchangeable Shares will be exchangeable by aholder thereof for MEC Class A Shares on a share-for-share basis at any time atthe option of such holder and will be required to be exchanged upon the occurrenceof certain events, as more fully described below. Dividends will be payable on theExchangeable Shares contemporaneously and in the equivalent amount per shareas dividends on the MEC Class A Shares, although currently no dividends areanticipated to be paid on the MEC Class A Shares. The Exchangeable Shares aresubject to adjustment or modification in the event of a stock split or other changesto the MEC Class A Shares so as to maintain at all times a one-to-one relationshipbetween the Exchangeable Shares and MEC Class A Shares.
21. The rights, privileges, restrictions and conditions attaching to the ExchangeableShares (the "Exchangeable Share Provisions") will provide that the ExchangeableShares will rank prior to the common shares of Exchangeco with respect to thepayment of dividends and the distribution of assets in the event of the liquidation,dissolution or winding-up of Exchangeco.
22. The Exchangeable Shares will be non-voting with respect to Exchangeco (exceptas required by the Exchangeable Share Provisions or by applicable law) and willbe retractable at the option of the holder at any time. Subject to the overriding callright of MEC referred to below in this paragraph, upon retraction the holder will beentitled to receive from Exchangeco for each Exchangeable Share retracted anamount equal to the current market price of an MEC Class A Share, to be satisfiedby delivery of one MEC Class A Share, together with, on the designated paymentdate therefor, all declared and unpaid dividends on each such retractedExchangeable Share held by the holder on any dividend record date prior to thedate of retraction (such aggregate amount, the "Retraction Price"). Upon beingnotified by Exchangeco of a proposed retraction of Exchangeable Shares, MEC willhave an overriding call right to purchase from the holder all of the ExchangeableShares that are the subject of the retraction notice for a price per share equal to theRetraction Price.
23. Subject to the overriding call right of MEC referred to below in this paragraph,Exchangeco may redeem all but not less than all (other than those held by MEC orits subsidiaries) Exchangeable Shares then outstanding at any time on or afterOctober 1, 2001, or such other date thereafter but prior to April 1, 2003 that theboard of directors of Exchangeco may determine (the "Redemption Date"). Incertain circumstances the board of directors of Exchangeco may accelerate theRedemption Date. Upon such redemption, a holder will be entitled to receive fromExchangeco for each Exchangeable Share redeemed an amount equal to thecurrent market price of an MEC Class A Share, to be satisfied by the delivery of oneMEC Class A Share, together with all declared and unpaid dividends on each suchredeemed Exchangeable Share held by the holder on any dividend record dateprior to the date of redemption (such aggregate amount, the "Redemption Price").Upon being notified by Exchangeco of a proposed redemption of ExchangeableShares, MEC will have an overriding call right to purchase from the holders all (butnot less than all) of the outstanding Exchangeable Shares (other than MEC or itssubsidiaries) for a price per share equal to the Redemption Price.
Voting and Exchange Agreement
24. Subject to the overriding call right of MEC referred to below in this paragraph, onthe liquidation, dissolution or winding-up of Exchangeco, holders of ExchangeableShares will be entitled to put their shares to MEC in exchange for MEC Class AShares pursuant to the Voting and Exchange Agreement. Upon a proposedliquidation, dissolution or winding-up of Exchangeco, MEC will have an overridingcall right to purchase all of the outstanding Exchangeable Shares from the holdersthereof (other than MEC or its subsidiaries) for a price per share equal to thecurrent market price of an MEC Class A Share, to be satisfied by the delivery of oneMEC Class A Share, together with all declared and unpaid dividends on each suchExchangeable Share held by the holder on any dividend record date prior to thedate of liquidation, dissolution or winding-up of Exchangeco.
25. Upon the liquidation, dissolution or winding-up of MEC, all Exchangeable Sharesheld by holders (other than MEC or its subsidiaries) will be automatically exchangedfor MEC Class A Shares pursuant to the Voting and Exchange Agreement, in orderthat holders of Exchangeable Shares may participate in the dissolution of MEC onthe same basis as holders of MEC Class A Shares.
26. Pursuant to a Voting and Exchange Agreement dated as of December 30, 1999 (asthe same may be amended and restated from time to time) among Magna, MEC andExchangeco, Magna will exercise voting rights attaching to certain MEC Class AShares or MEC Class B Shares held by it in accordance with directions receivedfrom holders of Exchangeable Shares (the "Voting Rights"). As a result, holders ofExchangeable Shares will be entitled to exercise substantially the same votingrights in respect of MEC as they would have been entitled to exercise if they heldMEC Class A Shares instead of Exchangeable Shares.
27. Under the Voting and Exchange Agreement, upon the insolvency of Exchangeco,a holder of Exchangeable Shares has the right (the "Exchange Right") to requireMEC to purchase from the holder all or any part of his or her Exchangeable Shares.The purchase price for each Exchangeable Share purchased by MEC will be anamount equal to the current market price of an MEC Class A Share, to be satisfiedby the delivery by MEC of one MEC Class A Share, together with an additionalamount equivalent to the full amount of all declared and unpaid dividends on suchExchangeable Share held by such holder on any dividend record date prior to theclosing of the purchase and sale.
28. Under the Voting and Exchange Agreement, upon the liquidation, dissolution orwinding-up of MEC, MEC will automatically be deemed to purchase eachoutstanding Exchangeable Share held by a holder other than those held by MECor a subsidiary of MEC, and each such holder will be required to sell all of his or herExchangeable Shares (such purchase and sale obligations are hereafter referredto as the "Automatic Exchange Right"), for a purchase price per share equal to thecurrent market price of an MEC Class A Share, to be satisfied by the delivery byMEC to the holder of one MEC Class A Share, together with an additional amountequivalent to the full amount of all declared and unpaid dividends on each suchExchangeable Share held by such holder on any dividend record date prior to thedate of the exchange.
Exchangeable Share Support Agreement
29. Under the terms of an Exchangeable Share Support Agreement dated as ofDecember 30, 1999 (as the same may be amended or restated from time to time)between MEC and Exchangeco, MEC will not declare or pay any dividends on theMEC Class A Shares unless Exchangeco simultaneously declares and pays anequivalent dividend on the Exchangeable Shares, and MEC will ensure that it andExchangeco will be able to honour the redemption and retraction rights anddissolution entitlements that are attributes of the Exchangeable Shares under theExchangeable Share Provisions and the related redemption, retraction andliquidation call rights described above.
30. Under the terms of the Exchangeable Share Support Agreement, without the priorapproval of the holders of the Exchangeable Shares, actions such as distributionsof stock dividends, options, rights and warrants for the purchase of securities orother assets, subdivisions, reclassifications, reorganizations and other changescannot be taken in respect of MEC Class A Shares generally without the same oran economically equivalent action being taken in respect of the ExchangeableShares.
Exemptions in Respect of Trades and Distributions of Securities and First TradesThereafter
31. The steps involved in the Spin-off and the attributes of the Exchangeable Sharescontained in the Exchangeable Share Provisions, the Voting and ExchangeAgreement and the Exchangeable Share Support Agreement involve or may involvea number of trades and distributions of securities (collectively, the "Trades"),including trades related to the delivery by Magna of Exchangeable Shares and MECClass A Shares pursuant to the Spin-off or upon the issuance of MEC Class AShares in exchange for Exchangeable Shares, trades or distributions that may beconsidered to occur in connection with the Withheld Shares Monetization, andtrades in Exchangeable Shares and MEC Class A Shares pursuant to the exerciseof the various rights attached to the Exchangeable Shares or under the Voting andExchange Agreement.
32. None of the trades or possible trades described above involve an investmentdecision. The initial Spin-off of MEC Class A Shares or Exchangeable Shares toa Magna Shareholder will effectively constitute a dividend in kind to theshareholders, who will not pay any consideration therefor. Although Canadianshareholders will be able to elect (and, in the absence of a request to the contrary,will be deemed to elect) to receive Exchangeable Shares in satisfaction of their rightto obtain MEC Class A Shares pursuant to the Spin-off, the Exchangeable Shareswill provide certain Canadian tax benefits to certain Canadian holders but willotherwise be, as nearly as practicable, the economic and voting equivalent of theMEC Class A Shares.
33. The information respecting Exchangeco that would be required to be disseminatedthrough compliance with the continuous disclosure and reporting issuerrequirements and the requirement to file an annual information form is not relevant(and is arguably misleading) to the holders of Exchangeable Shares. The optionin favour of certain holders of MEC Class A Shares to receive ExchangeableShares under the Spin-off will permit certain holders to hold property that is not"foreign property" under the Income Tax Act (Canada). As a result of the economicand voting equivalency between the Exchangeable Shares and the MEC Class AShares, holders of Exchangeable Shares will have a participating interestdetermined by reference to MEC, rather than Exchangeco, and dividend anddissolution entitlements will be determined by reference to the financialperformance and condition of MEC, not Exchangeco. By the same token, onlyMEC, as the sole holder of all of Exchangeco's common shares, will have aparticipating interest determined by reference to Exchangeco. Accordingly, it is theinformation relating to MEC, not Exchangeco, that will be relevant to holders of boththe MEC Class A Shares and the Exchangeable Shares. In light of the fact that thevalue of the Exchangeable Shares, in terms of dividend and dissolution entitlementsand capital appreciation, is determined by reference to the consolidated financialperformance and condition of MEC, and in light of the fact that all materialinformation regarding MEC will be publicly available, information respecting thefinancial condition of Exchangeco (otherwise than as included in MEC'sconsolidated financial statements) is not material (and is arguably misleading) toholders of Exchangeable Shares.
AND WHEREAS pursuant to the System, this MRRS Decision Document evidences thedecision of each Decision Maker (collectively, the Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained in theLegislation that provides the Decision Maker with the jurisdiction to make the Decision hasbeen met;
THE DECISION of the Decision Makers pursuant to the Legislation is:
1. that the prospectus requirements and registration requirements shall not apply toany of the Trades made in connection with or pursuant to the Spin-off, the Votingand Exchange Trust Agreement and the Exchangeable Share Support Agreementprovided that the first trade in Exchangeable Shares received by holders of MagnaShares pursuant to the Spin-off and the first trade of MEC Class A Shares receivedby holders of Magna Shares pursuant to the Spin-off or received by holders ofExchangeable Shares who obtain MEC Class A Shares in respect thereof, orreceived by holders of Replacement Options or Additional Options who obtain MECClass A Shares upon the exercise thereof, shall be a distribution under theLegislation of the Jurisdiction in which the trade takes place (the "ApplicableLegislation"), unless otherwise exempt thereunder or unless either:
(i) such first trade is made in the following circumstances:
(a) Exchangeco or MEC, as the case may be, is a reporting issuer or theequivalent under the Applicable Legislation;
(b) if the seller is in a special relationship with Exchangeco or MEC, asthe case may be, (as defined in the Applicable Legislation) the sellerhas reasonable grounds to believe that Exchangeco or MEC, as thecase may be, is not in default of any requirement of the ApplicableLegislation;
(c) no unusual effort is made to prepare the market or to create ademand for the Exchangeable Shares or the MEC Class A Shares, asthe case may be, and no extraordinary commission or considerationis paid in respect of such first trade; and
(d) disclosure of the exempt trade is made to the Decision Maker(s) (theDecision Makers hereby confirming that the filing of the applicationwith the Decision Makers for the relief granted in this Decisionconstitutes disclosure to the Decision Makers of the exempt trade);
then such first trade is a distribution only if it is a trade made from theholdings of any person, company or combination of persons or companiesholding a sufficient number of any securities of Exchangeco or MEC to affectmaterially the control of Exchangeco or MEC, as the case may be, (anyholding of any person, company or combination of persons or companiesholding more than 20% of the outstanding voting securities of Exchangecoor MEC shall, in the absence of evidence to the contrary, be deemed toaffect materially the control of Exchangeco or MEC, respectively) but anysuch distribution shall not be subject to the prospectus requirements of theLegislation of the Jurisdiction in which such trade takes place (the "PertinentLegislation") if:
(i) Exchangeco or MEC, as the case may be, is a reporting issueror the equivalent under the Pertinent Legislation and is not indefault of any requirement of the Pertinent Legislation;
(ii) the seller files with the applicable Decision Maker(s) and anyother stock exchange recognized by such Decision Maker(s)for this purpose on which the Exchangeable Shares or theMEC Class A Shares, as the case may be, are listed at leastseven days and not more than fourteen days prior to the firsttrade made to carry out the distribution;
(A) a notice of intention to sell in the form prescribed by thePertinent Legislation for control block distributions (the"Control Block Rules") disclosing particulars of thecontrol position known to the seller, the number ofExchangeable Shares or MEC Class A Shares to besold and the method of distribution; and
(B) a declaration signed by the seller as at a date not morethan twenty-four hours prior to its filing and preparedand executed in accordance with the Control BlockRules and certified as follows:
"the seller for whose account the securities to whichthis certificate relates are to be sold hereby representsthat the seller has no knowledge of any material changewhich has occurred in the affairs of the issuer of thesecurities which has not been generally disclosed andreported to the [name of securities regulatory authorityin the Jurisdiction where the trade takes place], nor hasthe seller any knowledge of any other material adverseinformation in regard to the current and prospectiveoperations of the issuer which have not been generallydisclosed";
provided that the notice required to be filed under section(ii)(A) and the declaration required to be filed under section(ii)(B) shall be renewed and filed at the end of sixty days afterthe original date of filing and thereafter at the end of eachtwenty-eight day period so long as any of the ExchangeableShares or MEC Class A Shares specified under the originalnotice have not been sold or until notice has been filed that theExchangeable Shares or MEC Class A Shares so specified orany part thereof are no longer for sale;
(iii) the seller files with the applicable Decision Maker(s) withinthree days after the completion of any such first trade, a reportof the trade in the form prescribed by the Pertinent Legislation;
(iv) no unusual effort is made to prepare the market or to create ademand for the Exchangeable Shares or MEC Class A Shares,as the case may be, and no extraordinary commission or otherconsideration is paid in respect of such first trade; and
(v) the seller (or an affiliated entity) has held the ExchangeableShares or MEC Class A Shares, as the case may be, and/orthe Magna Shares in respect of which the ExchangeableShares or the MEC Class A Shares, as the case may be, wereissued, in the aggregate for a period of at least six monthsprovided that if:
(A) the Pertinent Legislation provides that, upon a seller towhom the Control Block Rules apply, acquiringadditional securities of a class pursuant to certainprescribed exemptions from prospectus requirementsunder such legislation, all securities of such class aresubject to a hold period commencing the date the lastsecurity of the class was acquired under suchprescribed exemptions; and
(B) the seller acquires Exchangeable Shares or MEC ClassA Shares, as the case may be, pursuant to any suchprescribed exemptions,
all Exchangeable Shares or MEC Class A Shares, as the casemay be, held by the seller will be subject to the hold periodprescribed by the Pertinent Legislation, which shall run fromthe date any such subsequent Exchangeable Shares or MECClass A Shares, as the case may be, are acquired; or
(ii) such first trade is executed through the facilities of a stock exchange ormarket outside of Canada and such first trade is made in accordance withthe rules of the stock exchange or market upon which the trade is made inaccordance with all laws applicable to such stock exchange or market; and
2. that the requirements contained in the Legislation to issue a press release and filea report with the Decision Makers upon the occurrence of a material change, fileinterim financial statements and audited annual financial statements with theDecision Makers and deliver such statements to the security holders ofExchangeco, make an annual filing with the Decision Makers in lieu of filing aninformation circular and comply with insider reporting requirements shall not applyto Exchangeco or any insider of Exchangeco who is not otherwise an insider ofMEC, provided that, at the time that any such requirement would otherwise apply:
(a) MEC sends to all holders of Exchangeable Shares resident in each provinceexcept Quebec and in each territory of Canada all disclosure material thatit is required to send to its shareholders pursuant to its Canadian continuousdisclosure obligations, including, without limitation, copies of its annualreport and all proxy solicitation materials;
(b) MEC files with the Decision Makers copies of all documents required to befiled by it pursuant to its Canadian continuous disclosure obligations;
(c) MEC complies with the requirements of the Canadian securities regulatoryauthorities and the TSE in respect of making public disclosure of materialinformation on a timely basis and forthwith issues in Canada and files withthe Decision Makers any such press release that discloses a materialchange in MEC's affairs;
(d) prior to or coincident with the distribution of the Exchangeable Shares,Exchangeco provides to each recipient or proposed recipient ofExchangeable Shares resident in Canada (other than a resident of Quebec)a statement that, as a consequence of this Decision Document, Exchangecoand its insiders will be exempt from certain disclosure requirementsapplicable to reporting issuers and its insiders in Canada, and specifyingthose requirements Exchangeco and its insiders have been exempted fromand identifying the disclosure that will be made in substitution therefor(which may be satisfied by the inclusion of such a statement in the Non-Offering Prospectus);
(e) Exchangeco complies with the requirements of the Legislation in respect ofmaterial changes in the affairs of Exchangeco that would be material toholders of Exchangeable Shares but would not be material to holders ofMEC Class A Shares;
(f) MEC includes in all future mailings of proxy solicitation materials to holdersof Exchangeable Shares a clear and concise statement explaining thereason for the mailed material being solely in relation to MEC and not inrelation to Exchangeco, such statement to include reference to the economicequivalency between the Exchangeable Shares and the MEC Class AShares and the right to direct voting at meetings of stockholders of MECpursuant to the Voting and Exchange Agreement;
(g) MEC remains the direct or indirect beneficial owner of all the issued andoutstanding voting securities of Exchangeco other than the ExchangeableShares; and
(h) Exchangeco has not issued any securities to the public other than theExchangeable Shares.
DATED February 14, 2000.
"Howard I. Wetston" "R. Stephen Paddon"
THE FURTHER DECISION of the Decision Makers is:
3. that permission or consent to make the listing representation in the prospectuscontained in the registration statement on Form S-1 and the Non-OfferingProspectus is hereby granted.
DATED February 14, 2000.
THE FURTHER DECISION of the Decision Makers in Ontario and Saskatchewan is:
4. that the requirement of the Legislation to file and deliver annual informationforms (including management's discussion and analysis of the financial conditionand results of operations) shall not apply to Exchangeco, provided that, at thetime that any such requirement would otherwise apply, the conditions set out inparagraph 2 of this Decision have been complied with; and
February 14th, 2000.