Securities Law & Instruments

Headnote

Subsection 74(1) - Relief from the registrationand prospectus requirements in connection with a statutory arrangementinvolving an exchangeable share structure. Filer advised thata separate ruling from Ontario was required to obtain an opinionand complete transaction. Relief arguably also available fortrades under existing exemptions.

Applicable Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25(1), 53(1) and 74(1).

Applicable Rules

Section 2.8 of Ontario Securities CommissionRule 45-501 - Exempt Distributions.

IN THE MATTER OF

THE SECURITIES ACT

R.S.O. 1990, CHAPTER S.5,AS AMENDED (the "Act")

AND

IN THE MATTER OF

THE BOYD GROUP INC.

AND

IN THE MATTER OF

BOYD GROUP INCOME FUND

 

RULING

(Subsection 74(1) of the Act)

WHEREAS The Boyd Group Inc. ("Boyd")and Boyd Group Income Fund (the "Fund") have appliedto the Ontario Securities Commission (the "Commission")for a ruling under Subsection 74(1) of the Act that the registrationrequirement and the prospectus requirement of Sections 25 and53 of the Act, respectively, (the "Registration and ProspectusRequirements") shall not apply to certain trades in securitiesmade in connection with a plan of arrangement (the "Arrangement")under section 185 of The Corporations Act (Manitoba)(the "MCA") involving Boyd, the Fund, Boyd Fund Limited("Fund Subco"), Boyd Group Holdings Inc. ("AmalcoHoldco"), 4612094 Manitoba Inc. ("Management Holdco")and the holders of Boyd's securities ("Boyd Securityholders");

AND WHEREAS Boyd and the Fund have representedto the Commission that:

1. Prior to the Arrangement:

(a) Boyd was a corporation incorporatedunder the laws of the Province of Manitoba, was a reportingissuer in the Province of Ontario and, to the best of itsknowledge, was not in default of any of the requirementsof the Act;

(b) Boyd's authorized share capital consistedof an unlimited number of Class A Shares of Boyd ("BoydClass A Shares"), an unlimited number of Class B votingshares, an unlimited number of Class C non-voting redeemablepreferred shares, 100 Class D voting shares ("BoydClass D Shares") and an unlimited number of Class Evoting cumulative redeemable convertible shares ("BoydClass E Shares"), of which 14,737,002 Boyd Class AShares, 100 Class D voting shares and 2,125,000 Boyd ClassE Shares were issued and outstanding as of January 16, 2003;and

(c) Boyd owned and operated, either directlyor through subsidiaries, automotive collision repair centresin Canada and the United States. The principal names underwhich Boyd carried on business in Canada are "BoydAutobody and Glass", "Boyd Autobody", "ImperialCollision" and "Service Collision Repair Centres".

2. The Fund is an open-ended mutual fund trustgoverned by the laws of the Province of Manitoba created pursuantto a declaration of trust (the "Trust Declaration").The Fund was established for the purposes, among other things,of investing in securities of Fund Subco and Amalco (as hereinafterdefined). The holders (the "Unitholders") of theunits of the Fund (the "Units") are its sole beneficiaries.

3. Amalco Holdco was incorporated under theMCA for purposes of participating in the Arrangement and,upon completion of the Arrangement, owns a minority economicinterest in Amalco (as hereinafter defined) through its ownershipof all of the Class II Shares of Amalco (the "AmalcoClass II Shares"). Amalco Holdco will, subject to applicablelegal and contractual requirements, distribute its incomeon a monthly basis to its shareholders by way of a dividendon the common shares of Amalco Holdco.

4. Fund Subco is a wholly-owned subsidiaryof the Fund and was incorporated under the MCA for purposesof participating in the Arrangement, including creating andissuing the Common Shares of Fund Subco ("Fund SubcoCommon Shares") and the promissory notes of Fund Subco(the "Fund Subco Notes") required for implementingthe Arrangement. Pursuant to the Arrangement, Fund Subco amalgamatedwith Boyd and continued under the name "The Boyd GroupInc." ("Amalco").

5. Management Holdco was incorporated by theManagement Group (as hereinafter defined) under the MCA forpurposes of participating in the Arrangement, including holdinga minority interest in the Class A Common Shares of AmalcoHoldco ("Amalco Holdco Class A Common Shares").

6. As part of the approval process in connectionwith the Arrangement, Boyd and the Fund prepared and causedto be mailed, to each of the Boyd Securityholders, a Noticeof Special Meeting, Notice of Application and Management Informationand Proxy Circular (the "Circular") dated December20, 2002. The Circular contained prospectus level disclosurerelative to the Fund, Boyd and their respective businesses.

7. On January 24, 2003, the Boyd Securityholdersmet to consider and vote upon the Arrangement. The Arrangementwas approved at that meeting in accordance with the provisionsof an interim order of the Court of Queen's Bench (Manitoba).On January 28, 2003, Boyd and the Fund attended at that samecourt and obtained a final order approving the Arrangement.

8. The Arrangement was completed on February28, 2003 (the "Effective Date") along with an initialpublic offering of Units pursuant to a final long form prospectus(the "IPO Prospectus") of the Fund dated February14, 2003 (the "IPO"). The IPO Prospectus was filedwith the Canadian securities regulatory authorities in eachof the Provinces of Manitoba, British Columbia, Alberta, Saskatchewanand Ontario.

9. On the Effective Date, each of the followingevents occurred and was deemed to occur pursuant to the Arrangement:

(i) the note indenture (the "Note Indenture")pursuant to which Fund Subco is authorized to issue theFund Subco Notes was completed to provide for an interestrate under the Note Indenture and the Fund Subco Notes whichis the same as the interest rate disclosed for the NoteIndenture and the Fund Subco Notes by the IPO Prospectus;

(ii) the Boyd Class A Shares were consolidatedin accordance with Articles of Amendment of Boyd;

(iii) those persons who, after December17, 2002 and prior to the Effective Date, converted debenturesconvertible into Boyd Class A Shares (the "Debentures"),were issued the number of Boyd Class A Shares to which theywere respectively entitled as a result of such conversion;

(iv) those persons who, after December 17,2002 and on or before the last business day prior to theEffective Date, exercised options to purchase Boyd ClassA Shares ("Options") by notice and payment ofthe price therefor, were issued the number of Boyd ClassA Shares to which they were entitled as a result of theexercise of such Options;

(v) the Boyd Class D Shares were cancelledand the Boyd Class E Shares were converted into Boyd ClassA Shares;

(vi) Terry Smith, Brock Bulbuck, Coast toCoast Collision Centres Inc., Farelane Properties Ltd.,Coast to Coast Franchise Services Inc. and 2630206 ManitobaInc. (collectively, the "Management Group") exchanged15% of the Boyd Class A Shares held by them in the aggregatefor Fund Subco Notes in the principal amount determinedby multiplying the price (the "IPO Price") atwhich Units were offered under the IPO by the number ofBoyd Class A Shares for which the Fund Subco Notes wereexchanged;

(vii) the members of the Management Groupexchanged their remaining Boyd Class A Shares (other thanthe part to be exchanged by Brock Bulbuck under paragraph(xiii) below) for common shares of Management Holdco ona one for one basis;

(viii) each of the holders of Options whowere issued Boyd Class A Shares upon the exercise of theirOptions, other than Terry Smith and Brock Bulbuck, exchangedsuch Boyd Class A Shares for Fund Subco Notes in the principalamount determined for each of them respectively by multiplyingthe IPO Price by the number of Boyd Class Shares for whichthe Fund Subco Notes were exchanged;

(ix) all of the holders of Boyd Class AShares on the Effective Date who did not dissent to theArrangement, other than the Management Group (collectively,the "Boyd Public Class A Shareholders") exchangeda certain percentage (as determined by the application offormulae set out in the Arrangement) of his, her or itsBoyd Class A Shares for Fund Subco Notes in a principalamount determined for each of them respectively by multiplyingthe IPO Price by the number of Boyd Class A Shares exchangedfor the Fund Subco Notes;

(x) Management Holdco exchanged all of itsBoyd Class A Shares and each of the Boyd Public Class AShareholders exchanged his, her or its remaining Boyd ClassA Shares for Amalco Holdco Class A Common Shares, on a onefor one basis;

(xi) pursuant to the exchange agreementbetween the Fund, Amalco and Amalco Holdco described inthe Circular (the "Exchange Agreement"), ManagementHoldco and Boyd Public Class A Shareholders, as holdersof Amalco Holdco Class A Common Shares, have the right,subject to certain conditions, to retract such shares andreceive Units in exchange therefor;

(xii) each member of the Management Groupand each of the Boyd Public Class A Shareholders exchangedthe Fund Subco Note to which he, she or it is entitled hereunderfor that number of Units determined respectively by dividingthe principal amount of the Fund Subco Note by the IPO Price;

(xiii) Bulbuck exchanged part of his BoydClass A Shares for Amalco Holdco Class A Common Shares ona one for one basis;

(xiv) the Units are retractable at the requestof the Unitholders, for retractions having a cash valuein excess of $25,000 in a calendar month, in exchange forFund Subco Notes, Class I Shares of Amalco (the "AmalcoClass I Shares") and/or Class B Common Shares of AmalcoHoldco (the "Amalco Holdco Class B Common Shares")distributed by the Fund in accordance with the terms andconditions of the Trust Declaration;

(xv) the stated capital of the Boyd ClassA Shares was reduced to $1,000,000;

(xvi) Boyd and Fund Subco amalgamated toform Amalco (the "Amalgamation");

(xvii) as part of the Amalgamation, allshares in the capital of Boyd and Fund Subco were cancelledand Amalco issued:

A. to the Fund, that number of AmalcoClass I Shares equal to the sum of the number of FundSubco Common Shares held by the Fund and the number ofBoyd Class A Shares held by Fund Subco, immediately priorto the Amalgamation; and

B. to Amalco Holdco, that number of AmalcoClass II Shares equal to the number of Boyd Class A Sharesheld by Amalco Holdco immediately prior to the Amalgamation;

(xviii) each outstanding and unexercisedOption was cancelled; and

(xix) the trust indentures under which Debentureswere issued were amended by making the Fund a party theretoand changing certain of the provisions thereof to providethe holders of Debentures issued thereunder the right toexchange such Debentures for Units.

10. All voting shares of Boyd and Optionsheld by persons who validly exercised the rights of dissentprovided to them under the Interim Order ("DissentingShareholders") shall, if the Dissenting Shareholder isultimately entitled to be paid the fair value therefor, bedeemed to be transferred to Boyd on the Effective Date inexchange for such fair value.

11. Upon completion of the Arrangement, theFund is the holder of all of the Fund Subco Notes and allof the Amalco Class I Shares, Amalco Holdco is the holderof all of the Amalco Class II Shares and the Boyd Public ClassA Shareholders and Management Holdco holds Units and AmalcoHoldco Class A Common Shares.

12. In general terms, pursuant to the Arrangement,the Fund directly holds a majority of the voting equity inAmalco, and the remaining minority equity interest in Amalcois owned by Amalco Holdco (which is in turn controlled bythe Fund). Amalco will carry on the existing business of Boydand distribute its cash flow to the Fund and to Amalco Holdco,for distribution to Unitholders and holders of Amalco HoldcoClass A Common Shares, respectively, on a monthly basis.

13. The steps under the Arrangement, the termsof the Amalco Holdco Class A Shares and the exercise of certainrights in connection with the Arrangement or pursuant to theExchange Agreement including, without limitation, the subsequentissuance by the Fund of Units in exchange, indirectly, forAmalco Holdco Class A Shares, involve or may involve a numberof trades or potential trades of Amalco Holdco Class A Shares,Amalco Holdco Class B Shares, Amalco Class I Shares, FundSubco Notes and Units which will occur subsequent to the EffectiveDate (the "Non-Effective Date Trades") for whichthere may be no exemption from the Registration and ProspectusRequirements.

14. No relief is being requested in respectof trades made in connection with the Arrangement on the EffectiveDate, since they are already exempt by virtue of section 2.8of Commission Rule 45-501 - Exempt Distributions (the "StatutoryArrangement Exemption"). However, there is some uncertaintyas to whether the Non-Effective Date Trades can occur in relianceupon the Statutory Arrangement Exemption as those trades willoccur after the Effective Date.

AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS RULED pursuant to subsection 74(1)of the Act that future Non-Effective Date Trades shall not besubject to the Registration and Prospectus Requirements.

March 4, 2003.

"Paul M. Moore"                    "TheresaMcLeod"

Headnote

Subsection 144(1) - Order correcting an errorin a previous ruling. Previous ruling amended to provide thatthe first trade in securities acquired under the ruling shallbe deemed to be a distribution under the Securities Act (Ontario).

Applicable Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,s. 144(1).

IN THE MATTER OF

THE SECURITIES ACT

R.S.O. 1990, CHAPTER S.5,AS AMENDED (the "Act")

AND

IN THE MATTER OF

THE BOYD GROUP INC.

AND

IN THE MATTER OF

BOYD GROUP INCOME FUND

 

ORDER

(Subsection 144(1) of theAct)

WHEREAS on the application of The BoydGroup Inc. ("Boyd") and Boyd Group Income Fund (the"Fund"), the Ontario Securities Commission (the "Commission")issued a ruling dated March 4, 2003 (the "Original Ruling")under Subsection 74(1) of the Act that the registration requirementand the prospectus requirement of Sections 25 and 53 of theAct, respectively, shall not apply to certain trades in securitiesmade in connection with a plan of arrangement under section185 of The Corporations Act (Manitoba) involving Boyd,the Fund, Boyd Fund Limited, Boyd Group Holdings Inc., 4612094Manitoba Inc. and the holders of Boyd's securities;

AND WHEREAS Boyd and the Fund have appliedto amend the Original Ruling to provide that the first tradein securities acquired under the Original Ruling shall be deemedto be a distribution under the Act;

AND UPON considering the applicationand the recommendation of staff of the Commission;

AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS ORDERED pursuant to subsection144(1) of the Act that the Original Ruling be amended such thatthe following language is inserted before the period at theend of Original Ruling: "provided that the first tradein securities acquired under this ruling shall be deemed tobe a distribution under the Act".

March 11, 2003.

"Paul M. Moore"                    "RobertW. Korthals"