IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA, BRITISH COLUMBIA, MANITOBA, NEWFOUNDLAND AND LABRADOR, NOVA SCOTIA,
ONTARIO,
Qu�bec, AND SASKATCHEWAN
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
CANADIAN TIRE CORPORATION, LIMITED
AND
CTC ACQUISITION LIMITED
AND
MARK'S WORK WEARHOUSE LTD.
MRRS DECISION DOCUMENT
WHEREAS the local securities
regulatory authority or regulator (the "Decision Maker") in each of the
provinces of Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Nova Scotia,
Ontario, Qu�bec and Saskatchewan (collectively, the "Jurisdictions") has
received an application (the "Application") from CTC Acquisition Limited (the
"Offeror"), and its parent corporation Canadian Tire Corporation, Limited
("Canadian Tire" and, together with the Offeror, the "Applicants") for
a decision under the securities legislation of the Jurisdictions (the
"Legislation"), in connection with an offer dated December 27, 2001 (the
"Offer") to purchase, by way of a formal take-over bid by the Offeror, all of
the outstanding common shares (the "Common Shares") of Mark's Work Wearhouse
Ltd. ("Mark's"), that employment agreements (the "New Employment
Agreements") between Canadian Tire and each of two of the senior officers of Mark's,
who are also holders of Common Shares, have been made for reasons other than to increase
the value of the consideration paid to such senior officers for their Common Shares and
may be entered into notwithstanding the provision in the Legislation that prohibits an
offeror who makes or intends to make a take-over bid or issuer bid and any person acting
jointly or in concert with the offeror from entering into any collateral agreement,
commitment or understanding with any holder or beneficial owner of securities of the
offeree issuer that has the effect of providing to the holder or owner a consideration of
greater value than that offered to other holders of the same class of securities (the
"Prohibition on Collateral Benefits");
AND WHEREAS pursuant to the Mutual Reliance Review
System for Exemptive Relief Applications (the "System"), the Ontario
Securities
Commission is the principal regulator for the Application;
AND WHEREAS the Applicants have represented to the
Decision Makers as follows:
1. Mark's was formed by amalgamation under the Business Corporations Act (Alberta)
(the "ABCA") and is a reporting issuer in each of the provinces of
Canada.
2. The authorized share capital of Mark's is comprised of an unlimited number
of Common
Shares and 100,000,000 first preferred shares, issuable in series (the "Preferred
Shares"). Mark's has advised the Applicants that, as at December 17, 2001, there were
26,294,159 Common Shares and no Preferred Shares outstanding and, in addition, 2,252,850
options outstanding to acquire Common Shares (the "Options"). The Common Shares
are listed and posted for trading on The Toronto Stock Exchange under the symbol
"MWW".
3. Garth Mitchell ("Mitchell") and Michael Lambert ("Lambert")
(collectively, the "Executives") are each directors and senior officers of
Mark's, holding the positions of President & Chief Executive Officer and
Chief Financial Officer, respectively. Mark's has advised the Applicants that,
as of December
17, 2001, Mitchell beneficially owned 179,525 Common Shares and 590,600 Options
and Lambert beneficially owned 86,585 Common Shares and 378,100 Options. The
Common Shares
owned by Mitchell and Lambert represent approximately 2.7% and 1.6% of the outstanding
Common Shares, respectively (on a fully-diluted basis). Neither of the Executives
is
related to Canadian Tire or the Offeror.
4. The Offeror is incorporated under the Business Corporations Act (Ontario) and is
a wholly-owned subsidiary of Canadian Tire. The Applicant has been incorporated for the
sole purpose of making the Offer and has not carried on any prior business operations.
5. The intention of the Offeror to make the Offer was publicly announced on December
19,
2001. The Offer was mailed to holders of Common Shares (the "Shareholders")
on December 27, 2001 and, unless withdrawn or extended, will expire on February
1, 2002.
6. Under the Offer, $4.10 has been offered for each Common Share.
7. The Offer is conditional upon, among other things, sufficient Common Shares
being tendered to the Offer to assure that the Offeror is ultimately able to
successfully
acquire all of the outstanding Common Shares, either pursuant to the exercise
of the
statutory right of compulsory acquisition under Part 16 of the ABCA (a "Right of
Compulsory Acquisition") or by way of an amalgamation, reclassification, statutory
arrangement, consolidation or other combination of Mark's and the Offeror, or an affiliate
of the Offeror (a "Subsequent Acquisition Transaction").
8. On December 18, 2001, Canadian Tire entered into the New Employment Agreements,
conditional upon regulatory approval, with each of the Executives in respect of their
continued employment with either Canadian Tire or Mark's following completion of the
Offer.
9. The Offer is conditional upon the New Employment Agreements being in effect
upon first take-up of Common Shares under the Offer. However, pursuant to an
agreement among Canadian
Tire, Mark's, Lambert and Mitchell dated December 18, 2001, it was agreed that,
in the event that the relief sought in the Application which is the subject of
this Decision
Document is not obtained in respect of the New Employment Agreements, such failure
shall not constitute a breach of the foregoing condition. In such event, Lambert
and Mitchell
agreed that their existing employment agreements (the "Existing Employment
Agreements") with Mark's would continue in full force and effect following
completion of the Offer, subject to a waiver by each of them of an entitlement
to certain change of
control payments, and Canadian Tire agreed to cause Mark's to honour such agreements.
The parties also agreed to continue to negotiate in good faith new arrangements
which would be
as close as possible to the New Employment Agreements without constituting a
collateral
benefit under applicable securities law.
10. The Existing Employment Agreements provide for, among other things, the payment of
varying amounts of compensation if either of the Executives is terminated without cause or
voluntarily terminates his employment with Mark's at any time within 90 days following a
change of control of Mark's. If the Offer is successful, a change of control will be
considered to have occurred for the purposes of the Existing Employment Agreements.
11. Canadian Tire believes that each of the Executives has been instrumental in the growth
of the business of Mark's and the success of Mark's during the Executives' respective
tenures with the company and that the Executives also possess substantial invaluable
experience, expertise and relationships in both the Mark's organization and the retail
sector generally.
12. Canadian Tire believes that the role of each of the Executives following completion of
the Offer is critical to the ability of Canadian Tire to ensure an effective transition
and the continued success of Mark's. In addition, Canadian Tire believes that the
continued services of the Executives will be fundamental to increasing the likelihood that
other valuable members of the management team will remain with Mark's following completion
of the Offer.
13. The Offeror would not have agreed to make the Offer unless satisfactory arrangements
had been entered into in respect of the ongoing employment of the Executives with Canadian
Tire or Mark's following completion of the Offer. The Offeror believes that, if it were to
acquire all of the outstanding Common Shares but not the services of the key senior
officers of Mark's, there would be a material reduction in the likelihood of a successful
transition of Mark's following completion of the Offer and a corresponding reduction in
the value of Mark's to Canadian Tire and its shareholders.
14. Canadian Tire believes that the terms of the New Employment Agreements are consistent
with the those in respect of individuals occupying comparable positions within public
companies in the retail sector generally, and more particularly with other senior officers
of Canadian Tire.
15. The New Employment Agreements were negotiated on an arm's length basis, are on
commercially reasonable terms, are consistent with current industry practice and Canadian
Tire's compensation arrangements for new executives, and are intended to provide an
incentive for the Executives to continue in the employment of Canadian Tire on an ongoing
basis following completion of the Offer.
16. The New Employment Agreements were entered into for valid business reasons unrelated
to the Executives' holdings of Common Shares and not for the purpose of providing the
Executives with greater consideration for their Common Shares than the consideration that
may be received under the Offer by Shareholders other than the Executives.
17. The Executives own approximately 1% of the outstanding Common Shares (less than 5% on
a fully-diluted basis) and the acquisition of their Common Shares is almost (if not
entirely) immaterial to the success of the Offer. The Executives are under no specific
obligation to tender their Common Shares under the Offer.
18. In the context of the Offer, the availability to the Offeror of a Right of Compulsory
Acquisition or the ability to effect a Subsequent Acquisition Transaction renders the
Executives, in their capacities as Shareholders, of minimal relevance to the Offeror as a
result of their de minimis holdings of Common Shares.
AND WHEREAS under the
System, this MRRS Decision Document evidences the decision of each Decision
Maker (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfied
that the test contained in the Legislation that provides each Decision Maker with the
jurisdiction to make the Decision has been met;
THE DECISION of the Decision Makers under the
Legislation is that, in connection with the Offer, the New Employment Agreements are being
entered into for reasons other than to increase the value of the consideration to be paid
to the Executives for their Common Shares and may be entered into notwithstanding the
Prohibition on Collateral Benefits.
DATED January 25, 2002.
| Paul Moore | R. Stephen Paddon |
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Employment agreements
entered into between offeror and key executives of the offeree who are also selling
securityholders of the offeree - executives holding less than five percent of offeree
shares on a fully-diluted basis - agreements reflect commercially reasonable terms and
negotiated at arm's length - Decision made that agreements being entered into for reasons
other than to increase the value of the consideration paid to the selling securityholders
for their shares and that such agreements may be entered into notwithstanding the
prohibition on collateral benefits.
Applicable Statutory Provisions
Securities Act, R.S.O. 1990, c. S.5, as amended, ss. 97 and 104(2)(a).