HeadnoteMutualReliance Review System for Exemptive Relief Applications - relieffrom registration requirements for first trade by former employeesin shares acquired pursuant to the employee share purchase planor employee stock option plans of the issuer subject to certainconditions.
ApplicableOntario StatutesSecuritiesAct, R.S.O. 1990, c.S.5, as am., ss. 25, 74(1).
ApplicableOntario RulesRule45-503 - Trades to Employees, Executives and Consultants (1998)21 OSCB 6559.
ApplicableInstrumentMultilateralInstrument 45-102 - Resale of Securities, s. 2.14.
INTHE MATTER OF
THE CANADIAN SECURITIES LEGISLATION OF
ALBERTA, BRITISH COLUMBIA, MANITOBA, NEW BRUNSWICK,
NEWFOUNDLAND,NOVA SCOTIA, ONTARIO, PRINCE EDWARD ISLAND,
INTHE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR
EXEMPTIVE RELIEF APPLICATIONS
INTHE MATTER OF
MRRSDECISION DOCUMENTWHEREASthe local Securities Regulatory Authority or Regulator (the "DecisionMaker" and collectively, the "Decision Makers") in each of Alberta,British Columbia, Manitoba, New Brunswick, Newfoundland, NovaScotia, Ontario, Prince Edward Island, Québec, and Saskatchewan(the "Jurisdictions") has received an application (the "Application")from Patterson Dental Company ("Patterson" or the "Filer") fora decision under the Securities Legislation of the Jurisdictions(the "Legislation") that the requirements contained in the Legislationto 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") (collectively,the "Registration and Prospectus Requirements") shall not applyto certain trades in Common Stock shares in the capital of theFiler (the "Shares") and in options (the "Options") to subscribefor Shares made in connection with the Patterson Dental CompanyStock Option Plan for Canadian Employees (the "Plan");
ANDWHEREAS under the Mutual Reliance Review System for ExemptiveRelief Applications (the "System"), Québec is the principalJurisdiction for this Application;
ANDWHEREAS the Filer has represented to the Decision Makersthat:
1.The Filer is a corporation incorporated under the laws of theState of Minnesota, in the United States of America, is not areporting issuer under the Legislation, and has no present intentionto acquire such status in Canada.
2.As at March 8, 2001, the Filer's authorized share capital consistedof 100,000,000 Shares, 10,000,000 Series A Preferred shares and20,000,000 shares of Preferred stock, of which only 67,516,945Shares were issued and outstanding at said date.
3.The Shares are listed and quoted for trading on the NASDAQ StockMarket ("NASDAQ").
4.The Filer is registered with the Securities and Exchange Commissionin the U.S. under the Securities Exchange Act 1934 and is notexempt from the reporting requirements thereunder.
5.The Plan was established to assist the Filer in the retentionand motivation of key Canadian employees, to compensate them fortheir contributions to the growth and profits of the Filer andits affiliates, and to encourage their ownership of stock in Patterson.
6.The Plan was adopted on June 13, 2000 and no specific term isprovided thereunder.
7.As at March 16, 2001, there were approximately 67 employees ofthe Filer's affiliates resident in Canada ("Canadian Employees")eligible to participate in the Plan, of which there were approximately5 in British Columbia, 12 in Alberta, 3 in Manitoba, 25 in Ontario,20 in Québec, 2 in Saskatchewan, 2 in Nova Scotia, and1 in Newfoundland.
8.There were, as at March 16, 2001, no Canadian Employees residentin New Brunswick, or Prince Edward Island, but Canadian Employeesmay eventually be recruited in these Jurisdictions.
9.Options to purchase a maximum of 1,000,000 Shares may be issuedunder the Plan, which represents approximately 1.48% of the totalnumber of outstanding Shares as at March 8, 2001.
10.Less than 10% of the shareholders of the Filer are resident inCanada and less than 10% of the Shares are held by Canadian residents.
11.Canadian Employees have not been and will not be induced to participatein the Plan by expectation of employment or continued employmentby the Filer or an affiliated entity of the Filer, or by expectationof appointment or continued appointment, in instances where aCanadian Employee is an officer of the Filer or of an affiliatedentity of the Filer.
12.The Options to be granted may be exercised within a period commencingon the third anniversary of the Option grant and ending on thefifth anniversary of such Option grant.
13.The Shares to be issued and sold under the Plan will be purchasedat their fair market value (i.e. the Shares' closing price onNASDAQ on the day preceding the day of the Option grant to a CanadianEmployee), with a portion equivalent to 37.5% of the Shares' valuebeing payable upon the Option grant and the remaining 62.5% beingpayable upon exercise of the Options.
14.Each Canadian Employee will be provided a copy of the Plan, asstipulated in a Participation Agreement to be entered into bysaid participating Canadian Employee upon every such grant andPatterson will provide all Canadian Employees who elect to participatein the Plan with the same documentation regarding the Plan andthe Filer that is provided to Plan participants resident in otherjurisdictions.
15.A statutory exemption from prospectus and registration is availablefor the grant of Options and the issuance and sale of Shares toCanadian Employees, under the Plan, by the Filer in each of theJurisdictions but New Brunswick, where no exemptions are availablefor trades to employees of the Filer's Canadian affiliates.
16.Either Canadian Employees, former Canadian Employees, legal representativesof deceased Canadian Employees ("Legal Representatives"), or someor all of them (as the case may be), have no registration exemptionsavailable to them in every Province in respect of the resale ofthe Shares acquired under the Plan.
17.In Ontario, British Columbia, Alberta, Saskatchewan, Manitoba,New Brunswick, Newfoundland and Labrador, Nova Scotia, and PrinceEdward Island, a prospectus is not required or an exemption therefromis available for the sale of Shares acquired under the Plan byCanadian Employees, former Canadian Employees, or Legal Representatives,if certain conditions set out in Multilateral Instrument 45-102are met.
18.In Québec however, a prospectus exemption is not availablefor such trades.
19.Furthermore, in Québec, the Filer is unable to rely solelyon the statutory registration and prospectus exemptions for thegrant of Options and the issuance of Shares to the Canadian employees,since it is not a reporting issuer and cannot, therefore, benefitfrom a final prospectus exemption.
20.Because there is no market for the Shares in Canada and none isexpected to develop, any resale of the Shares acquired under thePlan will be made to persons or companies outside Canada or throughthe facilities of, and in accordance with the rules applicableto a stock exchange or organized market outside Canada on whichthe Shares may be listed or quoted for trading, and through personsduly registered or exempted under applicable laws;
AND WHEREASpursuant to the System, this MRRS Decision Document evidencesthe decision of each of the Decision Makers (collectively the"Decision");ANDWHEREAS each of the Decision Makers is satisfied thatthe test provided by the Legislation pursuant to which they havejurisdiction to render a decision has been met.
THEDECISION of the Decision Makers under the Legislationis that:
1.The Prospectus and Registration Requirements of the Legislationshall not apply to the grant of Options to purchase Shares byPatterson to Canadian Employees under the Plan, nor to the issuanceof Shares by Patterson to Canadian Employees upon the exerciseof such Options pursuant to the Plan; and
2.The Prospectus Requirements of the Legislation shall not applyto first trades in Shares acquired under the Plan, provided suchfirst trades are deemed distributions or primary distributionsto the public, and the Registration Requirements of the Legislationshall not apply to first trades in Shares acquired under the Plan,provided that:
(i)except in Québec, the conditions in subsection (1) of section2.14 of Multilateral Instrument 45-102 are satisfied; or
(ii)in Québec, the alienation (resale) is made between CanadianEmployees, former Canadian Employees, Legal Representatives, andtheir affiliates or outside Québec.