Mutual Reliance Review System for ExemptiveRelief Application B relief granted from the requirement toreconcile to Canadian GAAP certain financial statements includedin an information circular that were prepared in accordancewith U.S. GAAP.
Ontario Rule Cited
OSC Rule 54-501 - Prospectus Disclosure, s.3.1.
IN THE MATTER OF
THE SECURITIES LEGISLATIONOF
ALBERTA, BRITISH COLUMBIA,SASKATCHEWAN,
ONTARIO AND QUÉBEC
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEWSYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
IN THE MATTER OF
IN THE MATTER OF
FEDERAL SIGNAL CORPORATION
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof British Columbia, Alberta, Saskatchewan, Ontario and Québec(the "Jurisdictions") has received an applicationfrom Wittke Inc. ("Wittke") and Federal Signal Corporation("FSC" and., together with Wittke, the "Applicant")for a decision under the securities legislation of the Jurisdictions(the "Legislation") that the requirements containedin the Legislation:
(a) that the historical financial statementsof FSC (the "FSC Financial Statements"), whichare prepared in accordance with United States generallyaccepted accounting principles ("U.S. GAAP"),be accompanied by a note to explain and quantify the effectof material differences between Canadian generally acceptedaccounting principles ("Canadian GAAP") and U.S.GAAP that relate to measurements and provide a reconciliationof such financial statements to Canadian GAAP or otherwiseprovide disclosure consistent with Canadian GAAP requirementsto the extent not already reflected in the FSC FinancialStatements;
(b) that the foreign auditor's report accompanyingthe FSC Financial Statements be accompanied by a statementfrom the auditor of FSC disclosing any material differencesin the form and content of its auditor's report as comparedto a Canadian auditor's report and confirming that the auditingstandards applied are substantially equivalent to Canadiangenerally accepted auditing standards;
(c) to provide a restatement of those partsof the management's discussion and analysis of financialcondition and results of operations for the FSC FinancialStatements (the "FSC MD&A") that would readdifferently if the FSC MD&A were based on financialstatements prepared in accordance with Canadian GAAP; and
(d) that the FSC MD&A and the selectedconsolidated financial information required in connectiontherewith provide a cross-reference to the notes to theFSC Financial Statements containing a reconciliation ofthe FSC Financial Statements to Canadian GAAP.
(collectively, the "GAAP ReconciliationRequirements") shall not apply to the Applicant with respectto disclosure pertaining to FSC in the management informationcircular of Wittke (the "Circular") to be sent tothe shareholders of Wittke in connection with a proposed transactionpursuant to which 984069 Alberta Ltd. ("Subco"), anindirect wholly-owned subsidiary of FSC, will, subject to thesatisfaction of certain conditions, acquire all of the issuedand outstanding common shares ("Wittke Shares") ofWittke by way of an arrangement (the "Arrangement")under section 193 of the Business Corporations Act (Alberta)(the "ABCA") involving Wittke, its shareholders (the"Securityholders") and optionholders, FSC and Subco;
AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System")created pursuant to National Policy 12-201, the Alberta SecuritiesCommission is the principal regulator for this application;
AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 or in Québec Commission Notice 14-101;
AND WHEREAS the Applicant has representedto the Decision Makers that:
1. Wittke is incorporated under the ABCA andmaintains its head office in Calgary, Alberta.
2. The authorized capital of Wittke consistsof an unlimited number of Wittke Shares and an unlimited numberof preferred shares, issuable in series. As of the close ofbusiness on August 14, 2002, 7,757,089 Wittke Shares and nopreferred shares were issued and outstanding. The Wittke Sharesare fully participating voting shares.
3. As of July 31, 2002, options ("WittkeOptions") to acquire an aggregate of 539,090 Wittke Shareswere outstanding under Wittke's stock option plan.
4. The Wittke Shares are listed on the TorontoStock Exchange (the "TSX").
5. Wittke is a "reporting issuer"or the equivalent in British Columbia, Alberta, Ontario andQuébec and, to its knowledge, is not in default ofany of the requirements of the Legislation of any such jurisdiction.
6. FSC is a Delaware corporation and maintainsits principal executive offices in Oak Brook, Illinois.
7. The authorized capital of FSC consistsof 90,000,000 shares of common stock, US$1 par value ("FSCShares"), and 800,000 shares of preference stock, US$1par value. The FSC Shares are fully participating voting shares..
8. As of August 14, 2002, there were 45,247,450FSC Shares issued and outstanding, of which less than 1% ofthe issued and outstanding FSC Shares are held of record byshareholders in Canada according to the latest informationFSC has available to it.
9. As of August 1, 2002, options and otherrights ("FSC Options") to acquire an aggregate of1,801,574 FSC Shares were outstanding under FSC's stock benefitplans, of which less than 50,000 FSC Options (representingless than 4% of the total number of FSC Options) were heldby approximately 55 persons in Canada.
10. The FSC Shares are listed on the New YorkStock Exchange (the "NYSE").
11. FSC is subject to the United States SecuritiesExchange Act of 1934, as amended but is not a "reportingissuer" or the equivalent in any province or territoryof Canada.
12. Subco was incorporated under the ABCAon April 16, 2002 and is a wholly-owned subsidiary of FSC.Subco was organized for the sole purpose of being a partyto the Arrangement.
13. On August 15, 2002, Wittke, FSC and Subcoentered into an agreement (the "Arrangement Agreement")pursuant to which Subco will, subject to the satisfactionof certain conditions, including the requisite approval ofthe Securityholders, directly or indirectly acquire all ofthe issued and outstanding Wittke Shares by way of an arrangementunder the ABCA.
14. Under the Arrangement Agreement, Wittkehas agreed to convene and hold a special meeting (the "SpecialMeeting") of Securityholders for the purpose of consideringand, if deemed advisable, approving a special resolution toapprove the Arrangement. The board of directors of Wittkehas fixed September 30, 2002 as the date of the Special Meeting.
15. Following approval by the Securityholdersat the Special Meeting of the special resolution approvingthe Arrangement, and the issuance by the Court of Queen'sBench of Alberta of a favourable order approving the Arrangement,Wittke will file Articles of Arrangement under the ABCA. TheArrangement will become effective upon the filing of the Articlesof Amendment, which is expected to occur on or about October1, 2002.
16. The consideration payable under the Arrangementto each holder of Wittke Shares (the "Consideration")shall be, at the election of the holder, either:
(a) the number of FSC Shares equal to theproduct of the Share Exchange Ratio and the number of WittkeShares held by such holder; or
(b) 50% of the consideration in the formof FSC Shares (i.e., that number of FSC Shares equalto the product of the Share Exchange Ratio and the numberof Wittke Shares held by such holder divided by two) and50% of the consideration in the form of cash (i.e.,C$6.25 per Wittke Share),
where the Share Exchange Ratio is the ratiodetermined by dividing C$12.50 by the volume-weighted averagetrading price of the FSC Shares on the NYSE for the twentytrading days preceding the fourth trading day before the dateof the Special Meeting as specified in the Circular, convertedto Canadian dollars as provided in the Arrangement Agreement(and subject to change to accommodate the possibility of anincrease in the Consideration offered under the Arrangement).
17. More particularly, the Arrangement willprovide for the following:
(a) every issued and outstanding WittkeShare that is held at the effective time of the Arrangementby a person that is not:
(i) a shareholder who validly exercisesits dissent rights and is ultimately entitled to be paidfair value for its Wittke Shares, or
(ii) a holding company ("HoldingCompany") that satisfies certain conditions specifiedin the Arrangement Agreement (including the making ofan election),
shall be transferred to Subco in exchangefor the Consideration elected by such person;
(b) all of the issued and outstanding sharesin the capital of every Holding Company shall be transferredto Subco in exchange for the Consideration that such HoldingCompany would have received if its Wittke Shares were transferreddirectly to Subco as described in paragraph (a) above ratherthan indirectly as described in this paragraph (b);
(c) all Wittke Options that are outstandingat the effective time of the Arrangement shall be surrenderedto Wittke in exchange for a cash payment equal to, for eachWittke Share issuable upon the exercise of that Wittke Option,the difference between C$12.50 and the exercise price pershare, following which the Wittke Options shall be cancelled;and
(d) the Holding Companies shall be amalgamatedwith Wittke.
18. The Circular will, in accordance withthe Legislation, contain prospectus-level disclosure regardingWittke and FSC (subject to such exemptive relief as may begranted by the appropriate securities regulatory authorities)and a description of the Arrangement.
19. In particular, the Circular is expectedto contain the following historical financial statements (statementsof income, retained earnings and cash flows) of Wittke andFSC:
(a) audited annual financial statementsof FSC for each of the fiscal years ended December 31, 2001,December 31, 2000 and December 31, 1999, together with balancesheets as at December 31, 2001 and December 31, 2000 andauditor's reports thereon, all in accordance with U.S. GAAP;
(b) unaudited interim financial statementsof FSC for each of the six month periods ended June 30,2002 and June 30, 2001, together with a balance sheet asat June 30, 2002, all in accordance with U.S. GAAP;
(c) audited annual financial statementsof Wittke for each of the fiscal years ended September 30,2001, September 30, 2000 and September 30, 1999, togetherwith balance sheets as at September 30, 2001 and September30, 2000 and auditor's reports thereon, all in accordancewith Canadian GAAP; and
(d) unaudited interim financial statementsof Wittke for each of the nine month periods ended June30, 2002 and June 30, 2001, together with a balance sheetas at June 30, 2002, all in accordance with Canadian GAAP.
20. Certain Securityholders have entered intoagreements ("Support Agreements") with FSC pursuantto which such Securityholders have agreed, among other thingsand subject to certain conditions, to vote in favour of theArrangement at the Special Meeting and to elect to take 50%of their Consideration in cash and 50% in FSC Shares. An aggregateof 3.583,365 Wittke Shares are subject to Support Agreements.
21. Although the exact number of FSC Sharesto be issued under the Arrangement will not be known untilall Securityholders have made their elections as to the formof Consideration they wish to receive, even if all Securityholderselect to receive Consideration comprised entirely of FSC Sharesit is expected that, upon completion of the Arrangement, lessthan 6% of the total number of issued and outstanding FSCShares (on a fully diluted basis) will be held of record bypersons resident in Canada.
AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");
AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Makers with the jurisdiction to make theDecision has been met;
THE DECISION of the Decision Makers pursuantto the Legislation is that the GAAP Reconciliation Requirementsshall not apply to the Applicant with respect to disclosurepertaining to FSC in the Circular.
September 3, 2002.