Subsection 74(1) - distribution of shares of a U.S. reporting company which is not areporting issuer or equivalent in Canada as a dividend in kind is not subject to sections25 and 53 of the Act, subject to certain conditions - first trade is a distribution unlesssuch first trade is made through the facilities of a U.S. quotation system in compliancewith the rules of such quotation system.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1990, c.S.5, as am. ss. 25, 35(1)13, 53, 72(1)(g), 74(1).
IN THE MATTER OF THE
MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
COUNSEL CORPORATION AND AMERICAN HOMEPATIENT, INC.
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory authority or regulator (the "DecisionMakers") in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, NewBrunswick, Prince Edward Island, Nova Scotia and Newfoundland (the "Jurisdictions")have received an application from Counsel Corporation (the "Corporation") for a decisionunder the securities legislation of the Jurisdictions (the "Legislation") that: (i) therequirements 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 prospectusand a prospectus (the "Prospectus Requirements") shall not apply to a dividend in kind ofcommon shares of American HomePatient, Inc. ("AHOM") by the Corporation to itsCanadian shareholders; and (ii) the Prospectus Requirements shall not apply to the firsttrade of common shares of AHOM by the Corporation's Canadian shareholders subject tocertain conditions;
AND WHEREAS pursuant to the Mutual Reliance System for Exemptive ReliefApplications (the "System"), the Ontario Securities Commission is the principal regulatorfor this application;
AND WHEREAS the Corporation has represented to the Decision Makers that:
1. The Corporation is governed by the Business Corporations Act (Ontario) and is areporting issuer or equivalent in each of the Jurisdictions.
2. The Corporation is not in default of any requirements of the Legislation.
3. The common shares of the Corporation (the "Counsel Shares") are listed for tradingon The Toronto Stock Exchange and on the Nasdaq Stock Market.
4. The authorized share capital of the Corporation consists of an unlimited number ofCounsel Shares and an unlimited number of Preferred Shares of which 25,298,122Counsel Shares are currently issued and outstanding.
5. Approximately 59% of the outstanding Counsel Shares are held by residents ofOntario (the "Ontario Shareholders") and approximately 17% of the Counsel Sharesare owned by persons resident in the rest of Canada (together with the OntarioShareholders, the "Canadian Shareholders"). Ontario resident officers anddirectors of the Corporation, who by virtue of the Corporation's interest in AHOMare familiar with AHOM, own or control approximately 33.5% of the outstandingCounsel Shares.
6. AHOM was originally incorporated as a Delaware corporation in 1991 under thename Diversicare Inc., went public in the United States in November 1991 andtherefore became subject to the requirements of the United States Securities andExchange Act of 1934 (the "1934 Act"). On May 13, 1994, Diversicare changed itsname to American HomePatient Inc.
7. AHOM is not a reporting issuer or equivalent in any other province or territory ofCanada and has no intention of becoming a reporting issuer or equivalent in thesejurisdictions.
8. The shares of common stock of AHOM (the "AHOM Shares") are traded on the OTCBulletin Board ("OTCBB") in the United States. The AHOM Shares last traded onthe OTCBB on March 7, 2000, at a price of U.S. $1.01 per share. The averagedaily trading volume of the AHOM Shares is approximately 66,800 shares. InFebruary 2000, 612,300 AHOM Shares traded on the OTCBB.
9. The Corporation currently owns 3,979,625 AHOM Shares. The AHOM Sharesowned by the Corporation represent approximately 26% of the total number ofAHOM Shares issued and outstanding. The Corporation does not take an activerole in managing AHOM, although Morris Perlis, Allan Silber and Edward Sonshine(all directors of the Corporation) are also directors of AHOM (out of a total of eightdirectors). From 1988 through 1998, the Corporation played an active role in themanagement of AHOM and the Corporation's Annual Information Form accordinglycontained extensive information about AHOM and AHOM's financial results werereflected in the Corporation's consolidated financial statements. In December 1998,the Corporation's investment in AHOM was classified as a discontinued operationand since that time, the Corporation has held the AHOM Shares as a passiveinvestment.
10. The Corporation intends to distribute all of the AHOM Shares it owns as a dividendin kind to the Corporation's shareholders (the "Distribution").
11. Subsequent to the Distribution, Canadian Shareholders would own the followingpercentage of total AHOM Shares outstanding: British Columbia (0.2132%);Alberta (0.1265%); Saskatchewan (0.0229%); Manitoba (0.1177%); Ontario(15.3%); Quebec (3.583%); New Brunswick (0.0216%); Prince Edward Island(0.0003%); Nova Scotia (0.0295%); Newfoundland (0.0039%).
12. Following the Distribution, it is expected that Ontario resident officers and directorsof the Corporation would own or control approximately 8.7% of the outstandingAHOM Shares.
13. As of the date hereof and immediately upon completion of the Distribution,Canadian Shareholders in each of the Jurisdictions, except in Ontario as describedin paragraph 11 above, do not and will not own more than 10% of the AHOMShares. In addition, as of the date hereof and immediately upon completion of theDistribution, Canadian Shareholders in each of the Jurisdictions do not and will notrepresent in number more than 10% of the total number of holders of AHOMShares.
14. In connection with the Distribution, the Corporation shall provide to all of itsshareholders, including the Canadian Shareholders, a copy of AHOM's most recentForm 10-K annual report for its financial year ended December 31, 1999 whichcontains, among other things, financial and other detailed company informationrelating to AHOM. The Canadian Shareholders will have the same rights at law, ifany, with respect to the AHOM Shares and will receive, in connection with theDistribution, the same disclosure documentation received by the Corporation'sshareholders resident in the United States.
15. The Distribution would be exempt from the Registration Requirements andProspectus Requirements of the Legislation in certain of the Jurisdictions but for thefact that AHOM is not a reporting issuer or equivalent under the Legislation.
AND WHEREAS pursuant to the System, this MRRS Decision Document evidencesthe decision of each Decision Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied that the test contained inthe Legislation that provides the Decision Maker with the jurisdiction to make the decisionhas been met;
THE DECISION of the Decision Makers pursuant to the Legislation is that theCorporation is exempt from the Registration Requirements and the ProspectusRequirements in connection with the Distribution of the AHOM Shares, provided that thefirst trades in the AHOM Shares by the Canadian Shareholders shall be a distribution ora primary distribution to the public under the Legislation unless such trade is executedthrough the facilities of the OTCBB and in accordance with the rules and requirements ofthe OTCBB and all laws applicable to such quotation system.
April 24th, 2000.
"J. A. Geller" "Howard I. Wetston"