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Rider Resources Inc. & Roberts Bay Resources Ltd. - MRRS Decision
Headnote
MRRS for Exemptive Relief Applications - Take-over bid - Offeror has entered into understanding with three sellingsecurityholders who are directors or senior officers of offeree issuer that they will become directors or officers of offeroror target following the bid - Decision that agreements are being made for reasons other than to increase the value ofthe consideration paid to the directors and officers for their shares of the offeree issuer and that the agreements maybe entered into despite the prohibition against collateral benefits.
Statues Cited
Securities Act, R.S.O. 1990, c.S5, as amended., ss. 97(2) and 104(2)(a).
IN THE MATTER OF
THE SECURITIES LEGISLATION
OF BRITISH COLUMBIA, ALBERTA AND ONTARIO
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
RIDER RESOURCES INC. AND
ROBERTS BAY RESOURCES LTD.
MRRS DECISION DOCUMENT
1. WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of BritishColumbia, Alberta, and Ontario (the "Jurisdictions") has received an application from Rider Resources Inc.("Rider") for a decision under the securities legislation of the Jurisdictions (the "Legislation") thatunderstandings entered into with certain holders of common shares of Roberts Bay Resources Ltd. ("RobertsBay"): (i) were entered into for reasons other than to increase the value of the consideration paid to suchshareholders for their common shares; and (ii) may be entered into despite the provision contained in theLegislation which provides that if an offeror makes or intends to make a take-over bid or issuer bid, neitherthe offeror nor any person or company acting jointly or in concert with the offeror shall enter into any collateralagreement, commitment or understanding with any holder or beneficial owner of securities of the offeree issuerthat has the effect of providing to the holder or owner a consideration of greater value than that offered to theother holders of the same class of securities (the "Collateral Benefit Prohibition");
2. AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System") the Alberta Securities Commission is the principal regulator for this application;
3. AND WHEREAS Rider has represented to the Decision Makers that:
3.1 Rider is a public company incorporated under the Business Corporations Act (Alberta) and isheadquartered in Calgary;
3.2 the common shares of Rider (the "Rider Shares") are listed on The Toronto Stock Exchange andRider is a reporting issuer for the purposes of certain Canadian securities legislation;
3.3 Roberts Bay is a public company incorporated under the Business Corporations Act (Alberta) whosecommon shares are listed on the Canadian Venture Exchange Inc. and which is a reporting issuerfor the purposes of certain Canadian securities legislation;
3.4 the authorized capital of Roberts Bay consists of an unlimited number of common shares and anunlimited number of preferred shares. As at February 21, 2001, there were 21,499,840 commonshares and no preferred shares outstanding as well as outstanding options or warrants to acquire1,914,000 common shares;
3.5 Rider mailed a take-over bid offer and circular (the "Offer") with respect to a proposed take-over bidfor all of the issued and outstanding common shares of Roberts Bay (the "Common Shares") onMarch 30, 2001;
3.6 under the terms of the Offer, the holders of Common Shares are entitled to receive one Rider Sharefor every three Common Shares they hold;
3.7 Robin Hugo ("Robin Hugo") is the holder of 1,922,000 Common Shares and 475,000 options topurchase Common Shares, or approximately 10.24% (on a fully diluted basis) of the outstandingCommon Shares of Roberts Bay. Robin Hugo is currently the President of Roberts Bay;
3.8 G. Ramon Hugo ("Ray Hugo") is the holder of 6,573,412 Common Shares and options to acquire800,000 Common Shares, or approximately 31.49% (on a fully diluted basis) of the outstandingCommon Shares (fully diluted) of Roberts Bay. Ray Hugo is currently a director of Roberts Bay;
3.9 M. Scott Wilson ("Wilson") is the holder of 25,000 Common Shares and options to purchase 214,000Common Shares, or approximately 1.02% (on a fully diluted basis) of the outstanding CommonShares (fully diluted) of Roberts Bay. Wilson is currently a director of Roberts Bay;
3.10 Rider has entered into an understanding (the "Understandings") with each of Robin Hugo, Ray Hugoand Wilson (the "Key Principals") based on a pre-acquisition agreement executed by Rider andRoberts Bay on March 19, 2001 wherein Rider agreed, promptly upon acquiring at least 66% of theoutstanding Common Shares, to use its reasonable best efforts to cause the resignation of certainof its directors and to have Robin Hugo appointed VP Land of Rider and each of Ray Hugo andWilson appointed as directors of Rider;
3.11 the primary purpose of appointing Robin Hugo as VP Land is to provide for continuity of seniormanagement rather than to increase the value of the consideration paid to Robin Hugo for hisCommon Shares. In addition, Robin Hugo is very familiar with the history of Roberts Bay and theproperties being acquired by Rider pursuant to the Offer;
3.12 the directors and officers of Roberts Bay and certain shareholders of Roberts Bay representingapproximately 63% (on a fully diluted basis) of the outstanding Common Shares have entered intostandard lock-up agreements with Rider;
3.13 Robin Hugo will be paid the same salary as VP Land of Rider that he currently receives as thePresident of Roberts Bay. Also, in the event he leaves the employ of Rider, Robin Hugo will not beentitled to any severance obligation beyond what he is entitled to receive at common law;
3.14 as directors of Rider, Ray Hugo and Wilson will each be entitled to receive a fee of $300 per specialmeeting and $500 per board meeting. The Understandings provide for identical compensation tothat which Rider currently pays to its directors;
3.15 the Understandings have been entered into for valid business reasons on commercially reasonableterms unrelated to the Key Principal's holdings of the Common Shares and not for the purposes ofconferring an economic or collateral benefit on the Key Principals that other holders of the CommonShares will not enjoy or increasing the value of the consideration to be paid to the Key Principalspursuant to the Offer; and
3.16 the Offer is being made in compliance with the Legislation of the Jurisdictions, except to the extentthat exemptive relief is granted in respect of the Collateral Benefit Prohibition;
4. AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");
5. AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make the Decision has been met;
6. THE DECISION of the Decision Makers under the Legislation is that:
6.1 the Understandings were entered into for reasons other than to increase the value of theconsideration to be paid to the Key Principals for their Common Shares; and
6.2 the Understanding may be entered into despite the Collateral Benefit Prohibition.
April 23, 2001.
"Eric T. Spink" "Thomas G. Cooke"