Securities Law & Instruments

Headnote

MRRS for Exemptive Relief Applications - Firsttrade relief granted for first trades in securities acquiredunder an arrangement, subject to certain conditions.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 53 and 74(1).

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

BRITISH COLUMBIA, ALBERTA,SASKATCHEWAN, ONTARIO,

QUEBEC, NEWFOUNDLAND AND LABRADOR,NOVA SCOTIA,

THE YUKON TERRITORY, THE NORTHWESTTERRITORIES AND

NUNAVUT

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

GENERAL MOTORS CORPORATIONAND

HEC HOLDINGS, INC.

 

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Quebec and the Yukon Territory (together, the "DistributionRelief Jurisdictions") has received an application fromGeneral Motors Corporation ("GM") and HEC Holdings,Inc. ("Hughes Holdings") for a decision under thesecurities legislation (the "Legislation") of eachof the Distribution Relief Jurisdictions that the requirementscontained in the Legislation to be registered to trade in asecurity (the "Registration Requirements") and tofile and obtain a receipt for a preliminary prospectus and aprospectus (the "Prospectus Requirements") in respectof such security shall not apply to trades to holders of GMcommon stock and EchoStar Communications Corporation ("EchoStar")Class A common stock in connection with the transactions describedbelow, subject to certain conditions;

AND WHEREAS the Decision Maker in eachof British Columbia, Alberta, Saskatchewan, Ontario, Newfoundlandand Labrador, Nova Scotia, the Yukon Territory, the NorthwestTerritories and Nunavut (collectively, the "Resale ReliefJurisdictions") has received an application from GM andHughes Holdings for a decision under the Legislation of eachof the Resale Relief Jurisdictions that the first trade in asecurity acquired pursuant to the transactions described belowshall not be a distribution;

AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Quebec Securities Commission is the principal regulatorfor this application:

AND WHEREAS GM and Hughes Holdings haverepresented to the Decision Makers that:

1. GM is a corporation incorporated underthe laws of the State of Delaware and has its principal executiveoffices located in Detroit, Michigan. GM is primarily engagedin the automotive industry and, through its wholly owned subsidiary,Hughes Electronics Corporation ("Hughes"), the telecommunicationsindustries. GM is the world's largest manufacturer of automotivevehicles. GM also has financing and insurance operations and,to a lesser extent, is engaged in other industries.

2. GM currently has two classes of commonstock outstanding: common stock, $1-2/3 par value per share("GM $1-2/3 par value common stock") and Class Hcommon stock, $0.10 par value per share ("GM Class Hcommon stock"). GM Class H common stock is a "trackingstock" of GM designed to provide holders with financialreturns based on the financial performance of Hughes.

3. GM $1-2/3 par value common stock is listedon The Toronto Stock Exchange under the symbol "GM".GM Class H common stock is not listed on any Canadian stockexchange. GM $1-2/3 par value common stock and GM Class Hcommon stock are listed on exchanges outside of Canada, includingthe New York Stock Exchange ("NYSE"), on which suchstocks are listed under the symbols "GM" and "GMH",respectively.

4. As of April 1, 2002, based on GM's stocktransfer records, there were approximately:

(a) 877,778,848 shares of GM Class H commonstock outstanding worldwide;

(b) 214,009 shares of GM Class H commonstock outstanding and held directly by residents of Canada,representing approximately 0.024% of the total outstandingshares of GM Class H common stock;

(c) 560,120,773 shares of GM $1-2/3 parvalue common stock outstanding worldwide; and

(d) 928,010 shares of GM $1-2/3 par valuecommon stock outstanding and held directly by residentsof Canada, representing approximately 0.166% of the totaloutstanding shares of GM $1-2/3 par value common stock.

5. GM is a reporting issuer in the provincesof Ontario and Québec and is a "foreign issuer(SEDAR)", as defined in National Instrument 13-101 -System for Electronic Document Analysis and Retrieval (SEDAR).GM is not a reporting issuer in any other province or territoryof Canada and has no present intention of becoming a reportingissuer in any of these jurisdictions.

6. GM is subject to the requirements of theUnited States Securities Exchange Act of 1934 (the "1934Act").

7. Hughes is a corporation incorporated underthe laws of the State of Delaware and has its principal executiveoffices located in El Segundo, California. Hughes is a leadingglobal provider of digital entertainment, information andcommunications services and satellite-based private businessnetworks. Hughes is currently a wholly owned subsidiary ofGM.

8. Hughes Holdings is a corporation incorporatedunder the laws of the State of Delaware. Hughes Holdings,which is currently a wholly owned subsidiary of GM, has notyet conducted any significant activities other than thoserelating to its formation, matters relating to the Transactions(as defined below) and the preparation of documents filedpublicly with the United States Securities and Exchange Commission(the "SEC") and related matters. At the time ofthe consummation of the Transactions, Hughes Holdings willhold all of the outstanding stock of Hughes and will be thecompany that is separated from GM and merged with EchoStar.

9. Hughes Holdings, which will be the survivingcorporation following the Merger (as defined below), willbe authorized to issue Class C common stock, $0.01 par valueper share ("Hughes Holdings Class C common stock")as well as Class A common stock, $0.01 par value per share("New EchoStar Class A common stock") and ClassB common stock, $0.01 par value per share ("New EchoStarClass B common stock"). As described below, the HughesHoldings Class C common stock will be issued prior to theMerger, while the New EchoStar Class A common stock and NewEchoStar Class B common stock will be issued by Hughes Holdingsin connection with the Merger.

10. Hughes Holdings is not a reporting issuerin any Canadian province or territory, but will become a reportingissuer solely in the Province of Quebec as a result of theTransactions.

11. EchoStar is a corporation incorporatedunder the laws of the State of Nevada and has its principalexecutive offices located in Littleton, Colorado. EchoStaroperates two business units: the Dish Network and EchoStarTechnologies Corporation. The Dish Network is a direct broadcastsatellite subscription television service in the United States.EchoStar Technologies Corporation is a supplier of directbroadcast satellite equipment to the Dish Network and internationalsatellite service providers and is engaged in other satelliteservices.

12. EchoStar currently has two classes ofcommon stock outstanding: Class A common stock, $0.01 parvalue per share ("EchoStar Class A common stock")and Class B common stock, $0.01 par value per share ("EchoStarClass B common stock"). Neither class of common stockof EchoStar is listed on any exchange in Canada. EchoStarClass A common stock is quoted on the Nasdaq Stock Market("Nasdaq") under the symbol "DISH". EchoStarClass B common stock is not listed on any exchange or quotedon any market.

13. As of April 1, 2002, based on EchoStar'sstock transfer records, there were approximately:

(a) 241,380,025 shares of EchoStar ClassA common stock outstanding worldwide;

(b) 3,260 shares of EchoStar Class A commonstock outstanding and held directly by residents of Canada,representing approximately 0.001% of the total outstandingshares of EchoStar Class A common stock; and

(c) 238,435,208 shares of EchoStar ClassB common stock outstanding, all of which are held by a singlestockholder that is not resident in Canada.

14. EchoStar is not a reporting issuer inany Canadian province or territory and has no present intentionof becoming a reporting issuer.

15. GM, Hughes and EchoStar have announcedplans to enter into a series of transactions (the "Transactions")that would result in the separation of the business of Hughesfrom GM and the merger of the Hughes business with EchoStar.

16. There are two principal purposes of theTransactions. First, the Transactions are expected to betterposition the businesses of Hughes and EchoStar to competein the multi-channel video programming distribution marketand, overall, in the telecommunications industry. Second,the Transactions are expected to provide significant liquidityand value to GM and its common stockholders.

17. Pursuant to the Transactions, GM willamend its restated certificate of incorporation to, amongother things, make the GM Class H common stock redeemablein exchange for shares of Hughes Holdings Class C common stock.

18. Prior to the Split-Off (as defined below),GM will contribute all of the outstanding stock of Hughesto Hughes Holdings. Hughes Holdings will then issue to GMshares of Hughes Holdings Class C common stock. This willresult in Hughes Holdings becoming the parent company of Hughes.

19. In order to split-off the Hughes business(the "Split-Off"), GM will distribute to each holderof GM Class H common stock one share of Hughes Holdings ClassC common stock in exchange for and in redemption of each shareof GM Class H common stock the holder owns (the "HughesHoldings Distribution"). As a result, all outstandingshares of GM Class H common stock will be redeemed and cancelled.

20. In connection with the Transactions, GMmay receive a number of shares of Hughes Holdings Class Ccommon stock. The number of shares, if any, that GM will retainafter the Transactions will be based on its retained economicinterest in Hughes at the time of the Split-Off. In addition,to the extent required in order to maintain the tax-free statusof the Split-Off to GM and its stockholders, GM may distributeto the GM $1-2/3 par value common stockholders a number ofshares of Hughes Holdings Class C common stock (which wouldotherwise be retained by GM) (the "$1-2/3 Distribution").

21. After the Hughes Holdings Distribution,there will be no shares of GM Class H common stock outstanding,and assuming GM common stockholder approval of a further amendmentto GM's restated certificate of incorporation, GM's restatedcertificate of incorporation will be further amended to eliminateall provisions related to this class of stock. After the Transactions,GM $1-2/3 par value common stock will remain outstanding andwill be GM's only class of common stock.

22. Immediately after the Split-Off, HughesHoldings will merge with EchoStar, with Hughes Holdings asthe surviving corporation (the "Merger"). HughesHoldings will be renamed EchoStar Communications Corporation("New EchoStar"). As a result of the Merger, Hugheswill become a wholly owned subsidiary of New EchoStar.

23. Pursuant to the Merger, each outstandingshare of Hughes Holdings Class C common stock will remainoutstanding as a share of Class C common stock of New EchoStar("New EchoStar Class C common stock") and will remainunchanged.

24. Each holder of EchoStar Class A commonstock will receive approximately 1.3699 shares of New EchoStarClass A common stock for each share of EchoStar Class A commonstock the holder owns, or cash in lieu of fractional sharesof New EchoStar Class A common stock that the holder wouldotherwise receive (the "New EchoStar Class A Distribution").

25. The holder of EchoStar Class B commonstock will receive approximately 1.3699 shares of New EchoStarClass B common stock (collectively with the New EchoStar ClassA common stock and the New EchoStar Class C common stock,the "New EchoStar common stock") for each shareof EchoStar Class B common stock the holder owns, or cashin lieu of fractional shares of New EchoStar Class B commonstock that the holder would otherwise receive.

26. Application will be made to list or quotethe New EchoStar Class A common stock and the New EchoStarClass C common stock on either the NYSE or the Nasdaq. Suchstock will not be listed on any exchange or quoted on anymarket in Canada. New EchoStar Class B common stock will notbe distributed in Canada and will not be listed on any stockexchange or quoted on any market. Accordingly, no market forthe New EchoStar common stock is expected to develop in Canada.

27. Hughes Holdings (to be renamed New EchoStar)will not be a reporting issuer in any province or territoryof Canada except Quebec on the date of the Hughes HoldingsDistribution, the $1-2/3 Distribution, if any, or the NewEchoStar Class A Distribution (collectively, the "DistributionDates").

28. At the Distribution Dates, after givingeffect to the distribution of Hughes Holdings Class C commonstock (which will remain outstanding as New EchoStar ClassC common stock) and the issuance of New EchoStar Class A commonstock, residents in Canada will not own, directly or indirectly,more than 10 percent of the outstanding shares of either ofthese classes of stock and will not represent in number morethan 10 percent of the total number of owners, directly orindirectly, of shares of either of these classes of stock.

29. The amendments to GM's restated certificateof incorporation in connection with the Split-Off requirethe approval of GM stockholders. In addition, GM is askingits stockholders to ratify the Split-Off and Merger, whichratification is a condition to the completion of the Transactions.

30. The Transactions will be carried out inaccordance with applicable U.S. federal securities laws andU.S. state corporate laws. GM common stockholder approvalof the Transactions will be obtained under such laws, andGM common stockholders resident in Canada will have the benefitof any rights and remedies in respect of the consent solicitationstatement/information statement/prospectus and related materialsfurnished in respect of the Transactions as are availableunder applicable U.S. laws.

31. Holders of GM $1-2/3 par value commonstock, GM Class H common stock and EchoStar Class A commonstock resident in Canada will be furnished with a combinedconsent solicitation statement/information statement/prospectusand all other materials mailed to GM and EchoStar common stockholdersin the United States (except to the extent that such othermaterials are of relevance only to U.S. residents or U.S.citizens), as applicable, that provide detailed informationabout the Transactions.

32. Following the Transactions, all continuousdisclosure materials relating to New EchoStar that are furnishedto its Class A and Class C common stockholders generally willalso be furnished to registered New EchoStar Class A and ClassC common stockholders resident in Canada.

AND WHEREAS pursuant to the System, thisMRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers ineach of the Distribution Relief Jurisdictions under the Legislationof such jurisdictions is that trades made in connection withthe Hughes Holdings Distribution, the $1-2/3 Distribution, ifany, and the New EchoStar Class A Distribution shall be exemptfrom the Registration Requirements and Prospectus Requirementsof the Legislation of such jurisdictions;

AND THE DECISION of the Decision Makersin each of the Resale Relief Jurisdictions under the Legislationof such jurisdictions is that the first trade in the sharesof New EchoStar Class C common stock and New EchoStar ClassA common stock acquired pursuant to the distributions referredto above shall not be subject to the Prospectus Requirementsof the Legislation of such jurisdictions, provided that:

(a) after giving effect to the issuanceof the shares of New EchoStar Class C common stock, andany other shares of New EchoStar Class C common stock thatare issued at the same time or as part of the same distribution,residents of Canada will:

(i) not own directly or indirectly morethan ten percent (10%) of the outstanding shares of NewEchoStar Class C common stock; and

(ii) not represent in number more thanten percent (10%) of the total number of owners directlyor indirectly of outstanding shares of New EchoStar ClassC common stock; and

(iii) New EchoStar was not a reportingissuer in any jurisdiction other than Quebec at the distributiondate; and

(b) after giving effect to the issuanceof the shares of New EchoStar Class A common stock, andany other shares of New EchoStar Class A common stock thatare issued at the same time or as part of the same distribution,residents of Canada will:

(i) not own directly or indirectly morethan ten percent (10%) of the outstanding shares of NewEchoStar Class A common stock; and

(ii) not represent in number more thanten percent (10%) of the total number of owners directlyor indirectly of outstanding shares of New EchoStar ClassA common stock; and

(iii) New EchoStar was not a reportingissuer in any jurisdiction other than Quebec at the distributiondate; and

(c) such first trade is made through anexchange or a market outside of Canada, or to a person orcompany outside of Canada.

September 11, 2002.

"Jean-François Bernier"