Signature of Proxy
Exercise of Discretion of Proxy
Voting Securities
Voting - Advice to Beneficial Holders
THE ARRANGEMENT
Background to the Arrangement
Benefits of the Arrangement
Effect of the Arrangement Upon Securityholders
Management Arrangements
Details of the Arrangement
Conditions to the Arrangement
Procedure for the Arrangement to Become Effective
Treatment of Options to Purchase Common Shares
SELECTED HISTORICAL FINANCIAL INFORMATION AND OTHER DATA
FAIRNESS OPINION
RECOMMENDATION OF THE BOARD OF DIRECTORS
TIMING OF EVENTS
PROCEDURE FOR EXCHANGE OF COMMON SHARES
LEGAL DEVELOPMENTS
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
Residents of Canada
Options
Taxation of the Trust
Taxation of Trust Unitholders
Tax Exempt Trust Unitholders
Non-Residents of Canada
Dissenting Optionholders
Dissenting Shareholders
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
RIGHTS OF DISSENT
UNIT OPTION PLAN
INTERESTS OF CERTAIN PERSONS IN THE ARRANGEMENT AND THE INTENTIONS OF SUCH
PERSONS
EXPENSES OF THE ARRANGEMENT
STOCK EXCHANGE LISTINGS
RESALE OF TRUST UNITS
LEGAL MATTERS
INFORMATION CONCERNING BIG ROCK BREWERY INCOME TRUST
General
Trust Units
Trust Unitholder Limited Liability
Issuance of Trust Units
Cash Distributions
Redemption Right
Meetings of Trust Unitholders
Information and Reports
Takeover Bids
The Trustee
Power of Attorney
Delegation of Authority, Administration and Trust Governance
The Administration Agreement
Liability of the Trustee
Amendments to the Trust Indenture
Term of the Trust and Sale of Substantially All Assets
Exercise of Voting Rights Attached to Amalco Shares
Consolidated Capitalization
Auditors, Transfer Agent and Registrar
INFORMATION CONCERNING 1015047 ALBERTA LTD.
INFORMATION CONCERNING AMALCO
General
Business of Amalco
Directors and Officers
Distribution Policy
Amalco Share Capital
Notes
Payment upon Maturity
Redemption
Ranking
Default
Subordination Agreements
Shareholder Agreement
INFORMATION CONCERNING BIG ROCK BREWERY LTD.
Name and Corporate Structure
General Description of the Business and Recent Acquisitions
Products
Brewing Operations
Ingredients
Packaging
Brewing Facilities and Equipment
Employees
Marketing and Distribution
Competition
Regulatory Matters
Trade Regulations
Proprietary Rights
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Business Environment
Liquidity and Capital Resources
Liquidity and Capital Resources
CONSOLIDATED CAPITALIZATION
DESCRIPTION OF SHARE CAPITAL
Common Shares
Class A Shares
Class B Shares
Class C Shares
Preferred Shares
PRIOR SALES
DIVIDEND RECORD AND POLICY
TRADING HISTORY
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS
PRINCIPAL SHAREHOLDERS
STOCK OPTIONS
DIRECTORS AND OFFICERS
Directors and Senior Management
Board Practices and Committees
NORMAL COURSE ISSUER BID
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
STATEMENT OF EXECUTIVE COMPENSATION
Employment Agreement
Registered Retirement Savings Plan
Composition of Compensation Committee
Report on Executive Compensation
MATERIAL CONTRACTS
LEGAL PROCEEDINGS
AUDITORS, REGISTRAR AND TRANSFER AGENT
RISK FACTORS
Risks Related to the Business and the Industry
Risks Related to the Trust
OTHER BUSINESS
APPROVAL OF DIRECTORS
CERTIFICATE
APPENDICES
A
Arrangement Resolution
B
Interim Order
C
Arrangement Agreement
D
Fairness Opinion
E
Financial Statements
F
Unit Option Plan Resolution
G
Unit Option Plan
H
Section 191 of the Business Corporation Act (Alberta)
ENCLOSURES
Letter of Transmittal
Forms of Proxy
Return Envelope for Proxies
BIG ROCK BREWERY LTD.
5555 - 76TH AVENUE S.E., CALGARY, ALBERTA T2C 4L8 TELEPHONE (403) 720-3239
FACSIMILE (403) 236-7523
November 19, 2002
Dear Big Rock Shareholders and Optionholders:
You are invited to attend a special meeting of holders of common shares and
holders of options to acquire common shares (collectively, the Securityholders)
of Big Rock Brewery Ltd. to be held, pursuant to the Interim Order of the Court
of Queen's Bench of Alberta dated November 19, 2002, at the Big Rock Brewery,
5555 - 76th Avenue S.E., Calgary, Alberta on January 8, 2003 at 10:00 a.m.
(Calgary time).
At the special meeting you will be asked to consider, and, if thought advisable,
to approve a proposed plan of arrangement (the Arrangement) involving Big Rock,
1015047 Alberta Ltd. (AcquisitionCo) and Big Rock Brewery Income Trust (the
Trust).
Pursuant to the Arrangement, shareholders of Big Rock will, indirectly, exchange
their common shares for trust units of the Trust (Trust Units) on the basis of
one (1) Trust Unit for every one (1) common share of Big Rock, and Big Rock will
become a wholly-owned subsidiary of the Trust. Optionholders may elect to: (i)
receive the in-the-money value of their options payable in Trust Units; or (ii)
receive replacement Trust Unit options in exchange for their Big Rock options on
the same terms as their current options. Upon completion of the Arrangement, the
Trust, indirectly through its operating entities, will continue to operate Big
Rock's premium brewing business and all of the Securityholders will be the
holders of all of the outstanding Trust Units. Accordingly, unitholders will be
entitled to receive cash distributions paid by the Trust and will be entitled to
one vote for each Trust Unit held at unitholder meetings.
Converting Big Rock into an income trust will allow shareholders to receive
regular cash distributions from our underlying business on a tax efficient
basis, thereby providing an attractive return on investment to shareholders. The
conversion into an income trust will also provide Big Rock with improved access
to equity capital to finance future growth opportunities.
For the Arrangement to proceed, it must be approved by at least 66 2/3% of the
votes cast by the Big Rock shareholders and optionholders attending the special
meeting, in person or by proxy, each voting separately as a class. A shareholder
will be entitled to one vote per share and an optionholder will be entitled to
one vote per option. If Securityholder approval is obtained, an order of the
Court of Queen's Bench of Alberta will be sought immediately following the
special meeting confirming the Arrangement.
The resolution approving the Trust Unit Option Plan must be approved by a
majority of the votes cast by shareholders voting in person or by proxy at the
meeting.
Lightyear Capital Inc. (Lightyear) was retained as exclusive financial advisor
to Big Rock to assist it in considering the Arrangement and to provide
independent financial advice with respect to the Arrangement. Lightyear has
provided Big Rock with its opinion that the Arrangement is fair, from a
financial point of view, to Securityholders. The Board of Directors, based on
its own investigations, including its consideration of the fairness opinion of
Lightyear, has unanimously concluded that the Arrangement is in the best
interests of Big Rock, is fair to the Securityholders and should be placed
before Securityholders for their approval. The Board of Directors unanimously
recommends that Securityholders vote in favour of the Arrangement, and that the
shareholders vote in favour of the Trust Unit Option Plan.
A Shareholder's exchange of common shares held outside an RRSP or other tax
deferred plan for Trust Units will generally be a taxable disposition for
Canadian federal income tax purposes. A shareholder's taxable gain or loss will
be determined by reference to the fair market value of the Trust Units received
in exchange for the shareholder's Common Shares. Big Rock believes that the fair
market value of the Trust Units may be determined by taking the weighted average
trading price for the Big Rock common shares for the five (5) trading days
immediately prior to the effective date of the Arrangement, as described in
greater detail in the Information Circular. As this method of determining the
fair market value of the Trust Units is not binding on the Canada Customs and
Revenue Agency, shareholders should consult their own tax advisors.
The accompanying Information Circular contains a detailed description of the
Arrangement as well as detailed information regarding Big Rock, AcquisitionCo
and the Trust. Please give this material your careful consideration and, if you
require assistance, consult your financial, tax or other professional advisors.
We hope that you will be able to attend the special meeting. However, if you are
unable to attend the meeting in person, please sign and date the enclosed form
of proxy and mail it to the Calgary office of Valiant Trust Company, Attention:
Proxy Department, so that it is received not later than 48 hours prior to the
time set for the meeting. A return envelope addressed to Valiant Trust Company
is enclosed for your convenience.
If you have any questions regarding the Arrangement, please contact Tim Duffin,
Chief Financial Officer of Big Rock, at (403) 720-4473.
In closing, I want to once again thank you for your continued support of Big
Rock and ask for your positive support for the Arrangement by proxy or at the
meeting.
Yours very truly,
(signed) Edward E. McNally
Chairman of the Board of Directors
and Chief Executive Officer
BIG ROCK BREWERY LTD.
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND OPTIONHOLDERS
to be held on January 8, 2003
NOTICE IS HEREBY GIVEN that, pursuant to an order (the Interim Order) of the
Court of Queen's Bench of Alberta (the Court) dated November 19, 2002, a special
meeting (the Meeting) of the holders (Shareholders) of common shares (Common
Shares) and holders (Optionholders) of options (Options) to purchase Common
Shares (collectively, the Securityholders) of Big Rock Brewery Ltd. (Big Rock or
the Company or the Corporation) will be held at the Big Rock Brewery, 5555 -
76th Avenue S.E., Calgary, Alberta at 10:00 a.m. (Calgary time) on January 8,
2003 for the following purposes:
1.
to consider, pursuant to the Interim Order, and, if deemed advisable, to pass,
with or without variation, a special resolution, the full text of which is set
forth as Appendix A to the accompanying Information Circular, to approve an
arrangement (the Arrangement) under Section 193 of the Business Corporations Act
(Alberta), all as more particularly set forth and described in the accompanying
Information Circular;
2.
conditional upon the Arrangement Resolution being passed, to consider, and, if
deemed advisable, to pass, with or without variation, a resolution, the full
text of which is set forth as Appendix F to the accompanying Information
Circular, to approve the adoption of a Unit Option Plan, all as more
particularly set forth and described in the accompanying Information Circular;
and
3.
to transact such other business as may properly come before the Meeting or any
adjournment thereof.
The specific details of the matters proposed to be put before the Meeting are
set forth in the accompanying Information Circular.
The record date for determination of Securityholders entitled to receive notice
of and to vote at the Meeting is November 19, 2002. Only Securityholders whose
names have been entered in the register of Securityholders at the close of
business on that date and holders of Common Shares issued by the Company after
such date and prior to the Meeting will be entitled to receive notice of and to
vote at the Meeting; provided that, to the extent a Shareholder transfers the
ownership of any Common Shares after November 19, 2002 and the transferee of
those Common Shares establishes that he owns the Common Shares and demands, not
later than 10 days before the Meeting, to be included in the list of
Shareholders eligible to vote at the Meeting, such transferee will be entitled
to vote those Common Shares at the Meeting.
A Securityholder may attend the Meeting in person or may be represented by
proxy. Securityholders who are unable to attend the Meeting or any adjournment
thereof in person are requested to date, sign and return the accompanying form
of proxy for use at the Meeting or any adjournment thereof. To be effective, the
enclosed proxy must be received by the Chairman of the Company, c/o Valiant
Trust Company, at Suite 510, 550 - 6th Avenue S.W., Calgary, Alberta, T2P 0S2,
Attention: Proxy Department, at least 48 hours (excluding Saturdays, Sundays and
holidays) prior to the time set for the Meeting or any adjournment thereof.
Pursuant to the Interim Order, registered Securityholders have the right to
dissent with respect to the Arrangement and, if the Arrangement becomes
effective, to be paid the judicially determined fair value of their Common
Shares or Options, as the case may be, in accordance with the provisions of
Section 191 of the Business Corporations Act (Alberta) and the Interim Order. A
dissenting Securityholder must send to the Company a written objection to the
special resolution, which written objection must be received by the Chairman of
the Company or the Chairman of the Meeting at or before the Meeting. A
Securityholder's right to dissent is more particularly described in the
Information Circular and a copy of the Interim Order and the text of Section 191
of the Business Corporations Act (Alberta) are set forth as Appendix B and H,
respectively, to the accompanying Information Circular. Failure to strictly
comply with the requirements set forth in Section 191 of the Business
Corporations Act (Alberta), as modified by the Interim Order, may result in the
loss of any right of dissent. Persons who are beneficial owners of Common Shares
registered in the name of a broker, custodian, nominee or other intermediary who
wish to dissent should be aware that only the registered holders of Common
Shares are entitled to dissent. Accordingly, a beneficial owner of Common Shares
desiring to exercise the right of dissent must make arrangements for the Common
Shares beneficially owned by him or her to be registered in his or her name
prior to the time the written objection to the special resolution is required to
be received by the Company or, alternatively, make arrangements for the
registered holder of his or her Common Shares to dissent on his behalf.
DATED at the City of Calgary, in the Province of Alberta, this 19th day of
November, 2002.
BY ORDER OF THE COURT OF QUEEN'S
BENCH OF ALBERTA AND THE BOARD OF
DIRECTORS OF BIG ROCK BREWERY LTD.
(signed) Edward E. McNally
Chairman of the Board of Directors
and Chief Executive Officer
IN THE COURT OF QUEEN'S BENCH OF ALBERTA
JUDICIAL DISTRICT OF CALGARY
IN THE MATTER OF SECTION 193 OF THE BUSINESS CORPORATIONS ACT, R.S.A. 2000, c.
B-9;
AND IN THE MATTER OF AN ARRANGEMENT PROPOSED BY BIG ROCK BREWERY LTD. AND
1015047 ALBERTA LTD. INVOLVING BIG ROCK BREWERY LTD., ITS SECURITYHOLDERS,
1015047 ALBERTA LTD. AND BIG ROCK BREWERY INCOME TRUST
NOTICE OF PETITION
NOTICE IS HEREBY GIVEN that a petition (the Petition) has been filed with the
Court of Queen's Bench of Alberta, Judicial District of Calgary (the Court), on
behalf of Big Rock Brewery Ltd. (Big Rock) and 1015047 Alberta Ltd.
(AcquisitionCo) with respect to a proposed arrangement (the Arrangement) under
Section 193 of the Business Corporations Act, R.S.A. 2000, c. B-9 (the ABCA),
involving AcquisitionCo, Big Rock Brewery Income Trust (the Trust), Big Rock and
the holders of common shares and options of Big Rock (collectively, the
Securityholders), which Arrangement is described in greater detail in the
Information Circular and Proxy Statement of Big Rock dated November 19, 2002,
accompanying this Notice of Petition. At the hearing of the Petition, Big Rock
intends to seek:
(a)
an order approving the Arrangement pursuant to the provisions of Section 193 of
the ABCA;
(b)
a declaration that the terms and conditions of the Arrangement are fair to the
holders of the outstanding common shares of Big Rock and the holders of
outstanding options to acquire common shares of Big Rock, both from a
substantive and a procedural point of view;
(c)
a declaration that the Arrangement will, upon the filing of the Articles of
Arrangement, pursuant to the provisions of Section 193 of the ABCA, become
effective in accordance with its terms and will be binding on and after the
Effective Date as defined in the Arrangement; and
(d)
such other and further orders, declarations and directions as the Court may deem
just.
The Court has been advised that its order approving the Arrangement, if granted,
will constitute the basis for an exemption from the registration requirements of
the Securities Act of 1933, as amended, of the United States of America with
respect to the issuance of the units of the Trust to the Securityholders
pursuant to the Arrangement.
AND NOTICE IS FURTHER GIVEN that the said Petition is directed to be heard
before the Honourable Justice Rooke at The Court House, 611 - 4th Street S.W.,
Calgary, Alberta, Canada, on January 8, 2003 at 2:00 p.m. (Calgary time) or as
soon thereafter as counsel may be heard. Any Securityholder or other interested
party desiring to support or oppose the Petition may appear at the time of the
hearing in person or by counsel for that purpose provided such Securityholder or
other interested party files with the Court and serves upon Big Rock, on or
before 12:00 p.m. (noon) on January 7, 2003, a Notice of Intention to Appear
setting out such Securityholder's or interested party's address for service and
indicating whether such Securityholder or interested party intends to support or
oppose the Petition or make submissions, together with any evidence or materials
which are to be presented to the Court. Service on Big Rock is to be effected by
delivery to its solicitors at the address set forth below.
AND NOTICE IS FURTHER GIVEN that, at the hearing and subject to the foregoing,
Securityholders and any other interested persons will be entitled to make
representations as to, and the Court will be requested to consider, the fairness
of the Arrangement. If you do not attend, either in person or by counsel, at
that time, the Court may approve or refuse to approve the Arrangement as
presented, or may approve it subject to such terms and conditions as the Court
may deem fit, without any further notice.
AND NOTICE IS FURTHER GIVEN that the Court, by an Interim Order dated
November 19, 2002, has given directions as to the calling and holding of a
special meeting of the Securityholders for the purpose of such Securityholders
voting upon a special resolution to approve the Arrangement and, in particular,
has directed that such Securityholders shall have the right to dissent under the
provisions of Section 191 of the ABCA upon compliance with the terms of the
Interim Order.
AND NOTICE IS FURTHER GIVEN that a copy of the said Petition and other documents
in the proceedings will be furnished to any Securityholder or other interested
party requesting the same by the undermentioned solicitors for Big Rock upon
written request delivered to such solicitors as follows:
Davis & Company
Suite 2350, 400 - 3rd Avenue S.W.
Calgary, Alberta T2P 4H2
Attention:
David C. Bell
DATED at the City of Calgary, in the Province of Alberta, this 19th day of
November, 2002.
BY ORDER OF THE BOARD OF DIRECTORS OF BIG ROCK BREWERY LTD.
(signed) Edward E. McNally
Chairman of the Board of Directors
and Chief Executive Officer
BY ORDER OF THE BOARD OF DIRECTORS OF 1015047 ALBERTA LTD.
(signed) Edward E. McNally
Director
-#-
BIG ROCK BREWERY LTD.
INFORMATION CIRCULAR
Special Meeting of Securityholders
to be held on January 8, 2003
INTRODUCTION
This Information Circular is furnished in connection with the solicitation of
proxies by and on behalf of the management of the Company for use at the Meeting
and any adjournments thereof. No Person has been authorized to give any
information or make any representation in connection with the Arrangement or
other matters to be considered at the Meeting other than those contained in this
Information Circular and, if given or made, any such information or
representation must not be relied upon as having been authorized.
All summaries of, and references to, the Arrangement in this Information
Circular are qualified in their entirety by reference to the complete text of
the Arrangement Agreement and the Plan of Arrangement, copies of which are
attached as Appendix C to this Information Circular. You are urged to carefully
read the full text of the Arrangement Agreement and the Plan of Arrangement.
All capitalized terms used in this Information Circular but not otherwise
defined herein have the meanings set forth under Glossary of Terms. Information
contained in this Information Circular is given as of November 19, 2002 unless
otherwise specifically stated.
FORWARD-LOOKING STATEMENTS
This Information Circular may contain forward-looking statements. These
statements relate to future events or future performance. In some cases, you can
identify forward-looking statements by words such as may, will, should, expect,
plan, anticipate, believe, estimate, predict, potential, continue, or the
negative of these terms or other comparable terminology. These statements are
only predictions. Actual events or results may differ materially. In evaluating
these statements you should specifically consider various factors, including the
risks outlined under Risk Factors. These factors may cause actual results to
differ materially from any forward-looking statement. In addition, this
Information Circular may contain forward-looking statements attributed to third
party industry sources. You should not place undue reliance on these
forward-looking statements.
Although Management believes that the expectations reflected in the
forward-looking statements are reasonable, future results, levels of activity,
performance, or achievements cannot be guaranteed. Moreover, neither the Company
nor any other person assumes responsibility for the accuracy and completeness of
the forward-looking statements. Big Rock is under no obligation to update
publicly or otherwise revise any forward-looking information. See Information
Concerning Big Rock Brewery Ltd. - Management's Discussion and Analysis of
Financial Condition and Results of Operations and Big Rock's financial
statements included as Appendix E.
INFORMATION FOR UNITED STATES SECURITYHOLDERS
The Trust Units to be issued under the Arrangement have not been registered
under the United States Securities Act of 1933, as amended (the 1933 Act), and
are being issued in reliance on the exemption from registration set forth in
Section 3(a)(10) thereof. The solicitation of proxies is not subject to the
requirements of Section 14(a) of the United States Securities Exchange Act of
1934, as amended (the 1934 Act). The Trust Units will not be listed for trading
on any United States stock exchange. Accordingly, this Information Circular has
been prepared in accordance with disclosure requirements applicable in Canada.
Securityholders in the United States should be aware that such requirements are
different from those of the United States applicable to registration statements
under the 1933 Act and proxy statements under the 1934 Act. The financial
statements of the Company included in this Information Circular have been
prepared in accordance with Canadian generally accepted accounting principles
and are subject to Canadian auditing and auditor independence standards, and
thus are not comparable in all respects to financial statements of United States
companies. Likewise, information concerning the operations of the Company and
the Trust contained herein has been prepared in accordance with Canadian
disclosure standards and is not comparable in all respects to similar
information for United States companies.
Except as otherwise indicated, all dollar amounts indicated in this Information
Circular are expressed in Canadian dollars.
United States Securityholders are advised to consult their tax advisors to
determine the particular tax consequences to them of the Arrangement.
The enforcement by investors of civil liabilities under the United States
securities laws may be affected adversely by the fact that the Company and the
Trust are organized or settled, as applicable, under the laws of a jurisdiction
outside the United States, that their officers and directors and trustees,
respectively, are residents of countries other than the United States, that the
experts named in this Information Circular are residents of countries other than
the United States, and that all or a substantial portion of the assets of the
Company, the Trust and such persons are located outside the United States.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES REGULATORY AUTHORITY IN ANY
STATE, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
REGULATORY AUTHORITY OF ANY STATE PASSED ON THE ADEQUACY OR ACCURACY OF THIS
INFORMATION CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
CURRENCY AND EXCHANGE RATES
All dollar references in the Information Circular are in Canadian dollars,
unless otherwise indicated. On November 19, 2002, the rate of exchange for the
Canadian dollar, expressed in United States dollars, based on the noon rate as
provided by the Bank of Canada was Canadian $1.00 = United States $0.6308.
-#-
SUMMARY OF THE INFORMATION CIRCULAR
The following is a summary of certain information contained elsewhere in this
Information Circular, including the Appendices hereto, and is qualified in its
entirety by reference to the more detailed information contained or referred to
elsewhere in this Information Circular or in the Appendices thereto. Terms with
initial capital letters used in this summary are defined in the Glossary of
Terms. In this summary, all dollar amounts are stated in Canadian dollars.
Big Rock Brewery Ltd.
Big Rock is a regional producer and marketer of premium quality beers,
headquartered in Calgary, Alberta, Canada. The Company's products are available
in draught, bottles and cans. The Company also produces and distributes cider
and cooler products. Big Rock is committed to four business fundamentals:
consistently brewing distinctive, premium quality beers;
profitable growth in business operations;
constantly providing superior, personalized customer services; and
creating and sustaining strong community relationships.
Big Rock products are marketed in five provinces and three territories in Canada
and in the United States. See Information Concerning Big Rock Brewery Ltd. and
Big Rock's financial statements attached hereto as Appendix E.
The Meeting
Pursuant to the Interim Order, the Meeting will be held at the Big Rock Brewery,
5555 - 76th Avenue S.E., Calgary, Alberta on January 8, 2003 at 10:00 a.m.
(Calgary time) for the purpose of, among other things, Securityholders
considering and, if deemed advisable, passing, with or without variation, the
Arrangement Resolution approving the Arrangement. See The Arrangement.
In addition, Shareholders will be asked to consider, and if deemed advisable,
passing, with or without variation, the Unit Option Plan Resolution. See Unit
Option Plan.
Background to the Arrangement and Recommendation of the Board of Directors
In light of the increase in corporate profitability achieved by Big Rock earlier
this year, management began exploring the possibility of establishing a dividend
payment on the Common Shares. As part of their review process, management asked
Lightyear Capital for its opinion on how this would impact Big Rock and its
Shareholders. Thereafter, Lightyear began working with management to consider
various alternatives for Big Rock to provide regular cash distributions to its
Shareholders.
In August 2002, Lightyear Capital presented management with a proposal for Big
Rock to convert to an income trust. In its proposal, Lightyear indicated that it
believed that an income trust was the most tax efficient structure for Big Rock
to provide a regular cash distribution to its Shareholders. Lightyear also
indicated that the underlying business of Big Rock was well suited to support an
income trust structure and that Big Rock would have better access to new equity
capital as an income trust. Management and Lightyear then began an extensive
review process of this proposal, along with legal counsel.
In September 2002, the Board considered the income trust conversion proposal
that had been developed by Lightyear and management. After considering: (i) Big
Rock's business prospects; (ii) the suitability of Big Rock's business for an
income trust; (iii) the anticipated effect that the reorganization would have on
the Shareholders, Optionholders and employees of Big Rock, including the
anticipated income tax consequences; and (iv) the potential requirement for
future equity capital to finance growth opportunities, the Board of Directors
unanimously approved proceeding with the reorganization of Big Rock into an
income trust.
On November 18, 2002, the Board reviewed the documentation that had been
prepared by management and its advisors relating to the proposed reorganization,
including the fairness opinion provided by Lightyear. The Board of Directors
unanimously determined that the Arrangement is in the best interests of the
Company and is fair to Securityholders, from a financial point of view, and
authorized the submission of the Arrangement to Securityholders for the their
approval and to the Court for the Final Order.
The Board of Directors unanimously recommends that Securityholders vote FOR the
Arrangement Resolution and FOR the Unit Option Plan Resolution.
The Arrangement
The purpose of the Arrangement is to convert Big Rock from a corporate entity to
a trust entity. Big Rock's premium brewery business will continue through
Amalco. The Arrangement will result in Shareholders, indirectly, receiving Trust
Units of the Trust in exchange for their Common Shares. The Arrangement involves
a number of steps which will be deemed to occur sequentially. First, the
Shareholders Rights Plan and all outstanding Rights shall be terminated and
shall be of no further force or effect. Second, the authorized capital of Big
Rock will be amended by the creation of the Class A Shares, Class B Shares and
Class C Shares and Big Rock's articles will be amended accordingly. Third, each
of the issued and outstanding Common Shares will be deemed to be exchanged for
one Class B Share and one Class C Share and all of the previously outstanding
Common Shares will be cancelled. Fourth, all of the issued and outstanding Class
B Shares will be acquired by AcquisitionCo, a wholly-owned subsidiary of the
Trust, in exchange for notes of AcquisitionCo (the Notes) on the basis of one
Note, in the amount of the Per Share Principal Amount, for every one Class B
Share. Fifth, the Notes and Class C Shares will be exchanged for Trust Units of
the Trust on the basis of one Trust Unit for each such Note and Class C Share
held. Sixth, holders of Options who execute Option Cancellation Agreements will
exchange their In-the-Money Settlement Amount for Notes (which will, in turn, be
exchanged for Trust Units); and any Remaining Options will be exchanged with the
Trust for replacement Trust Unit Options with the same vesting, exercise price
and expiry date as the Options, in each case, as further described in the Plan
of Arrangement.
Following these exchanges, the Trust will transfer all of the issued and
outstanding AcquisitionCo Common Shares held by it to Big Rock in exchange for
100 Class A Shares issued from Big Rock's treasury. As a further step in the
Arrangement, Big Rock and AcquisitionCo will amalgamate to form a new
corporation (Amalco) which will continue under the name of Big Rock Brewery
Ltd.. Amalco will then be wholly-owned by the Trust. See The Arrangement -
Effect of the Arrangement Upon Securityholders and The Arrangement - Details of
the Arrangement.
The Trust will make cash distributions to Unitholders from the interest and
dividend income received from Amalco, net of administrative expenses. In
addition, at the discretion of the board of directors of Amalco, Unitholders may
receive distributions from any redemption of Trust Units, or upon the repayment
of the principal of the Notes. See The Arrangement - Effect of the Arrangement
Upon Securityholders.
Benefits of the Arrangement
The Board of Directors, in recommending the Arrangement, expects that the
Arrangement will provide a number of benefits to Big Rock and its
Securityholders, including the following:
(a)
as an income trust, Big Rock will be able to provide Unitholders with regular
cash distributions in a more tax efficient manner than by paying dividends as a
corporation;
(b)
the cash distributions will provide an attractive return to Unitholders in the
current interest rate environment;
(c)
the trust structure will result in a more tax-efficient structure with the tax
burden of the Company shifted from the Company to Unitholders; many
Securityholders and future Unitholders are or will become tax-exempt such as
pension plans and individuals holding Trust Units in registered retirement
savings plans, registered retirement income funds and deferred profit sharing
plans and will therefore retain the full amount of cash distributions on a
tax-deferred basis;
(d)
as an income trust, Big Rock will have better access to new equity capital that
may be needed to finance future growth opportunities; and
(e)
as many Big Rock employees are also Shareholders of the Company, converting to
an income trust may be viewed as a form of profit-sharing, thereby enhancing
employee motivation in Big Rock's business success.
The Board of Directors does not foresee any adverse consequences arising from
the Arrangement, and in particular: (i) there will be no increase in management
compensation as result of the conversion to an income trust; (ii) management
intends to retain a sufficient portion of the cash flow generated by the
underlying business of Big Rock to finance planned ongoing capital expenditures
and to maintain a cushion for potential unexpected financial requirements; (iii)
the Trust Units are expected to be listed on the Toronto Stock Exchange in
replacement of the listing currently held by Big Rock Common Shares; (iv) the
Trust units will not be listed on NASDAQ where the Common Shares are also
currently listed, however management believes that this will be a net benefit to
Big Rock given the low level of trading for Big Rock Common Shares on NASDAQ and
the high cost of maintaining that listing; and (v) Unitholders will have voting
privileges in the Trust similar to the voting rights that they had as
Shareholders of Big Rock.
Fairness Opinion
The Board of Directors of the Company asked Lightyear Capital to assess the
fairness, from a financial point of view, of the Arrangement to the
Securityholders. In connection with this mandate, Lightyear Capital has provided
an opinion which states that, in Lightyear Capital's opinion, the Arrangement is
fair, from a financial point of view, to the Securityholders. The fairness
opinion is subject to the assumptions and limitations contained therein and
should be read in its entirety. See Fairness Opinion attached hereto as Appendix
D.
Selected Historical Financial Information and Other Data
The following tables set forth a summary of certain historical financial
information and other data of Big Rock for the dates and periods indicated that
is derived from, and should be read in conjunction with, the audited
consolidated financial statements for the years ended March 31, 2002, 2001 and
2000 and the related notes, the unaudited consolidated financial statements for
the six months ended September 30, 2002 and 2001 and the related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, all as included elsewhere in this Information Circular.
Six Months Ended ________Years Ended March 31st______
Sept. 30, 2002 (audited)
(unaudited)
2002 2001 2000
(thousands except per share amounts)
Sales $21,603 $34,523 $32,238 $31,707
Cash provided by operating activities $2,386 $2,581 $3,411 $2,435
Per Share $0.44 $0.49 $0.69 $0.52
basic and diluted
Net Income $1,727 $1,218 $1,353 $1,461
Per Share $0.32 $0.24 $0.29 $0.31
basic and diluted
Total Assets $35,971 $33,061 $31,346 $29,918
Long-term Debt(1) (including current $3,147 $3,199 $5,038 $5,874
portion)
Purchase of capital assets and cash $978 $3,004 $1,122 $1,143
cost of acquisitions
Note:
(1)
On a consolidated basis, the Trust will continue to have long-term debt owing to
third parties.
The amount of cash to be distributed monthly per Unit shall be equal to a pro
rata share of all amounts received by the Trust from Amalco in each month,
expected to consist of interest payments and/or principal repayments on the
Notes and distributions on or in respect of Trust Units, less:
(a)
costs and expenses of the Trust; and
(b)
any amounts which have become payable in cash by the Trust relating to the
redemption of Units.
Distributions will be made monthly with the first payment made on February 15,
2003 (assuming an Effective Date of January 10, 2003) to holders of record on
January 31, 2003. The amount and timing of distributions will be reviewed by the
Board and may be adjusted from time to time to reflect the then current business
conditions.
Canadian Federal Income Tax Considerations
The indirect exchange of Common Shares for Notes, and subsequently Trust Units,
will constitute a disposition of the Common Shares for proceeds equal to their
fair market value and acquisition of the Trust Units at an equivalent cost
amount. Consequently, a holder of Common Shares that are capital property to the
holder will realize a capital gain, or sustain a capital loss, equal to the
amount by which the fair market value of the Trust Units exceeds, or is exceeded
by, the adjusted cost base of the holder's Common Shares disposed of and any
costs of making the disposition. Big Rock believes that the fair market value of
the Trust Units may be considered to be the Weighted Average Trading Price. The
Weighted Average Trading Price is provided for guidance purposes and is not
binding on any Shareholder nor is it binding on the Canada Customs and Revenue
Agency. Accordingly, Shareholders are advised to consult their own advisors
regarding the tax consequences of the Arrangement.
Holders of Trust Units (who hold their Trust Units outside of a tax exempt plan
such as a registered retirement savings plan) will generally be required to
include in their income the proportionate share of income of the Trust, to the
extent paid to them. Any amount paid to holders of Trust Units in excess of
their share of Trust income (other than certain prescribed amounts) will
constitute a reduction in the adjusted cost base of their Trust Units for the
purposes of computing any capital gain or capital loss thereon.
The Information Circular contains a summary of the principal Canadian federal
income tax considerations which relate to the Arrangement and which are
generally applicable to Securityholders who are resident in Canada. See Canadian
Federal Income Tax Considerations.
This Information Circular does not contain a summary of the income tax
consequences of the Arrangement on Securityholders resident outside of Canada
and the United States. Securityholders who are resident in jurisdictions other
than Canada and the United States should consult their tax advisors with respect
to the tax implications of the Arrangement, including any associated filing
requirements, in such jurisdictions.
United States Federal Income Tax Considerations
The indirect exchange of Common Shares for Trust Units pursuant to the
Arrangement should constitute a non-taxable exchange for Shareholders who are
United States persons.
The Trust will be treated as a corporation for United States federal income tax
purposes. Holders of Trust Units who are United States persons will be required
to include in gross income as ordinary income the gross amount of any
distribution, including any Canadian taxes withheld, to the extent the
distribution does not exceed the current or accumulated earnings and profits of
the Trust as calculated for U.S. tax purposes.
The Information Circular contains a summary of the material United States
federal income tax considerations which relate to the Arrangement and which are
generally applicable to Shareholders who are U.S. persons. See United States
Federal Income Tax Considerations.
Big Rock Income Trust
The Trust is, for Canadian tax purposes, an open-ended investment trust governed
by the laws of the Province of Alberta created pursuant to the Trust Indenture.
The Trust was established for the purposes of, among other things, investing in
securities of AcquisitionCo and Amalco, or any of its subsidiaries, to fund the
brewing business. The Unitholders will be the sole beneficiaries of the Trust.
The Trust will permit Unitholders to participate in the cash flow from Amalco's
business to the extent such cash flow is distributed by the Trustee. See
Information Concerning Big Rock Brewery Income Trust.
The Trust will not be managed by a third party manager. The Trust and Amalco
will be managed by the existing Board of Directors and management of Big Rock
pursuant to the Administration Agreement. See Information Concerning Big Rock
Brewery Income Trust.
1015047 Alberta Ltd.
AcquisitionCo is a wholly-owned subsidiary of the Trust and was incorporated
under the ABCA to participate in the Arrangement, including creating and issuing
the Notes required for implementing the Arrangement. Pursuant to the
Arrangement, AcquisitionCo will amalgamate with the Company and continue as one
corporation under the name Big Rock Brewery Ltd., which will be wholly-owned by
the Trust. See Information Concerning 1015047 Alberta Ltd..
Amalco
Pursuant to the Arrangement, Amalco is created upon the amalgamation of the
Company and AcquisitionCo and will continue to operate as a premium brewing
company. After the Arrangement, the Trust will own all of the issued and
outstanding Amalco Class A Shares, Amalco Class C Shares and Notes. See
Information Concerning Amalco. Pursuant to the Administration Agreement, the
Board of Directors of Amalco has generally been delegated the significant
administrative functions of the Trust. The Board of Directors of Amalco will
supervise the management of the business and affairs of the Trust, including the
business and affairs of the Trust delegated to Amalco. See Information
Concerning Big Rock Brewery Income Trust - Delegation of Authority,
Administration and Trust Governance.
Securityholder Approval
Pursuant to the Interim Order, the majority required to pass the Arrangement
Resolution shall be not less than two thirds of the votes cast by holders of
Common Shares and holders of Options, each voting separately as a class, either
in person or by proxy, at the Meeting of the Securityholders.
Notwithstanding the foregoing, the Arrangement Resolution authorizes the Board
of Directors, without further notice to or approval of the Securityholders,
subject to the terms of the Arrangement Agreement, to amend the Plan of
Arrangement and Arrangement Agreement, to decide not to proceed with the
Arrangement and to revoke such Arrangement Resolution at any time prior to the
Arrangement becoming effective pursuant to the provisions of the ABCA. See
Appendix A to this Information Circular for the full text of the Arrangement
Resolution.
If the Arrangement Resolution is passed, Shareholders will be requested to
consider, and if thought fit, to pass a resolution approving the Unit Option
Plan for employees, officers, directors and consultants of the Trust and its
subsidiaries enabling such persons to acquire options to purchase Units. The
Unit Option Plan Resolution must be passed by at least a majority of the votes
cast thereon at the Meeting. See Unit Option Plan Resolution and Unit Option
Plan as Appendix F and G, respectively.
Dissenting Securityholder Rights
The Interim Order provides that, if the Arrangement Resolution is approved and
the Arrangement is completed, each registered Securityholder will have the right
to dissent and to have his or her Securities cancelled in exchange for a cash
payment from Big Rock equal to the fair value of his or her Securities as of the
day before the Meeting. In order to validly dissent, any such registered
Securityholder must not vote any of his or her Securities in favour of the
Arrangement Resolution, must provide Big Rock with written objection to the
Arrangement at or before the Meeting and must otherwise comply with the dissent
procedures provided under the Interim Order. See Rights of Dissent.
Regulatory Approvals
The Arrangement requires the approval of certain regulatory authorities. The
Arrangement Agreement provides that these approvals are conditions precedent to
the Arrangement becoming effective. It is anticipated that Big Rock or the
Trust, as appropriate, will have made application to all such authorities prior
to the Effective Date in order to obtain all approvals required with respect to
the Arrangement. There is no assurance that approvals from the required
regulatory authorities will be obtained on a timely basis or on terms and
conditions satisfactory to Big Rock and the Trust.
The Arrangement is conditional upon the Trust Units issued in connection with
the Arrangement being approved for listing on the TSX. The TSX has conditionally
approved the listing of the Trust Units that may be issued pursuant to the
Arrangement, subject to compliance with the requirements of such exchange, which
are expected to be met on the Effective Date or as soon as reasonably
practicable thereafter. Listing will be subject to the Trust fulfilling all of
the requirements of the TSX. As soon as possible following the Effective Date,
the Common Shares will be delisted from the TSX and from NASDAQ. Upon completion
of the Arrangement, the Trust Units will not be listed on NASDAQ. See The
Arrangement - Regulatory Approvals - Stock Exchange Listings.
Court Approval
Subject to the terms of the Arrangement Agreement and if the Arrangement
Resolution is approved at the Meeting in the manner required by the Interim
Order, the Company will make application to the Court for the Final Order at The
Court House, 611 - 4th Street S.W., Calgary, Alberta, on January 8, 2003 at 2:00
p.m. (Calgary time) or as soon thereafter as counsel may be heard. On the
application, the Court will consider the fairness of the Arrangement. See The
Arrangement - Procedure for the Arrangement Becoming Effective.
Structure of the Trust after the Arrangement
[[Image Removed: [informationcircular001.jpg]]]
Notes:
(1)
Upon completion of the Arrangement, the Unitholders will own 100% of the Trust.
(2)
Amalco will be the resulting entity upon the amalgamation of Big Rock and
AcquisitionCo. The amalgamation will occur pursuant to the Arrangement on the
Effective Date. See Information Concerning Big Rock Brewery Ltd. for a
description of the Big Rock operating entities.
(3)
Cash flow represents payments made by Amalco to the Trust in respect of interest
and/or principal payments on the Notes. In addition to such payments, dividend
income may also be paid from Amalco to the Trust.
(4)
The Trust may invest repayments of principal on the Notes in securities of
Amalco to enable Amalco to make capital expenditures.
For details on the relationships between these entities, see The Arrangement -
Effect of the Arrangement on Securityholders. For a discussion regarding the Big
Rock operating entities, see Information Concerning Big Rock Brewery Ltd..
GLOSSARY OF TERMS
ABCA means the Business Corporations Act (Alberta), R.S.A. 2000, c. B-9, as
amended, including the regulations promulgated thereunder;
AcquisitionCo means 1015047 Alberta Ltd., a corporation incorporated under the
ABCA and which is wholly-owned by the Trust;
AcquisitionCo Common Shares means the common shares in the capital of
AcquisitionCo having rights substantially the same as the rights attaching to
the Big Rock Brewery Ltd. Common Shares, as more particularly described under
Information Concerning Big Rock Brewery Ltd.;
Administration Agreement means the administrative services agreement between the
Administrator and the Trustee, for and on behalf of the Trust, dated as of the
18th day of November, 2002, as amended or supplemented from time to time;
Administrator means Big Rock and all successors and permitted assigns thereof;
Affiliate or Associate when used to indicate a relationship with a person or
company, means the same as set forth in the Securities Act (Alberta);
Aggregate Note Amount means an amount equal to the sum of: (i) the Per Share
Principal Amount multiplied by the number of Common Shares outstanding
immediately prior to the Effective Time; plus (ii) the cumulative amount of all
In-the-Money Settlement Amounts paid to Optionholders in Trust Units;
Amalco means the corporation which will result from the amalgamation of the
Company and AcquisitionCo pursuant to the Arrangement and which will continue
the premium brewery business of the Company following the Arrangement;
Amalco Class A Shares means the class A voting common shares in the capital of
Amalco, as more particularly described under Information Concerning Amalco;
Amalco Class B Shares means the class B non-voting, retractable common shares in
the capital of Amalco, as more particularly described under Information
Concerning Amalco;
Amalco Class C Shares means the class C voting, redeemable, retractable
preferred shares in the capital of Amalco, as more particularly described under
Information Concerning Amalco;
Amalco Common Shares means common shares in the capital of Amalco, having rights
substantially the same as the rights attaching to the Common Shares, as more
particularly described under Information Concerning Amalco;
Amalco Preferred Shares means the preferred shares in the capital of Amalco, as
more particularly described under Information Concerning Amalco;
Amalgamation means the amalgamation of Big Rock and AcquisitionCo pursuant to
the Arrangement;
Arrangement means the arrangement under Section 193 of the ABCA involving, among
other things, the exchange of Class B Shares for Notes, the exchange of such
Notes and Class C Shares for Trust Units of the Trust and the amalgamation of
the Company and AcquisitionCo, all as more particularly set forth in the Plan of
Arrangement;
Arrangement Agreement means the agreement dated November 19, 2002 between the
Company, AcquisitionCo and the Trust pursuant to which such parties have
proposed to implement the Arrangement, which agreement is attached as Appendix C
to this Information Circular, and any amendment thereto;
Arrangement Resolution means the special resolution of the Securityholders in
substantially the form attached as Appendix A to this Information Circular to be
considered and voted upon by the Shareholders and Optionholders at the Meeting;
Articles of Arrangement means the articles of arrangement in respect of the
Arrangement required under Section 193(10) of the ABCA to be filed with the
Registrar after the Final Order has been granted;
Big Rock Subsidiaries means Big Rock (Sask.) Ltd., Whistler Brewing Company
Ltd., 607313 B.C. Ltd. (operating as Bowen Island Brewing Company), Mountain
View Brewing Company Ltd., Bear Brewing Company Ltd., and Bear View Developers
Ltd.;
Board of Directors or Board means the board of directors of the Company or the
board of directors of Amalco, as the context requires;
Business Day means a day, which is not a Saturday, Sunday or statutory holiday,
when banks in the place at which any action is required to be taken hereunder
are generally open for the transaction of commercial banking business;
Certificate of Arrangement means the certificate or proof of filing to be issued
by the Registrar pursuant to subsection 193(11) or subsection 193(12) of the
ABCA in respect of the Articles of Arrangement;
Class A Shares means the to be created class A voting common shares in the
capital of Big Rock having the rights, restrictions and privileges as set out in
Schedule B to the Plan of Arrangement;
Class B Shares means the to be created class B non-voting, retractable common
shares in the capital of Big Rock having the rights, restrictions and privileges
as set out in Schedule B to the Plan of Arrangement;
Class C Shares means the to be created class C voting, redeemable, retractable
preferred shares in the capital of Big Rock having the rights, restrictions and
privileges as set out in Schedule B to the Plan of Arrangement;
Common Shares means common shares in the capital of the Company;
Company or Corporation or Big Rock means Big Rock Brewery Ltd. and, as the
context requires, its wholly-owned subsidiaries;
Court means the Court of Queen's Bench of Alberta;
Dissenting Options means all Options which are deemed to have been cancelled on
the Effective Date in accordance with the provisions of paragraph 4.1 of the
Plan of Arrangement;
Dissenting Optionholders means registered holders of Options who validly
exercise the rights of dissent provided to them under the Interim Order;
Dissenting Securities means the Dissenting Shares and the Dissenting Options;
Dissenting Securityholders means the Dissenting Shareholders and the Dissenting
Optionholders;
Dissenting Shareholders means registered holders of Common Shares who validly
exercise the rights of dissent provided to them under the Interim Order;
Dissenting Shares means all Common Shares which are deemed to have been
cancelled on the Effective Date in accordance with the provisions of paragraph
4.1 of the Plan of Arrangement;
Distributable Income means all amounts distributed or to be distributed in
accordance with the Trust Indenture during any applicable period to Unitholders;
Distribution Date means a date on which the Trustee is required to make a
distribution of Distributable Income, which date shall be the 15th day of the
month following each Distribution Record Date or, if any such day is not a
Business Day, the next following Business Day or such other dates determined
from time to time by the Trustee;
Distribution Record Date means until otherwise determined by the Trustee, the
last day of each month of each year, provided that if the last day of the month
is not a Business Day, then the Distribution Record Date for such month will be
the first Business Day following the last day of each month of the year or such
other dates in any year determined from time to time by the Trustee, but
December 31 in each year shall be a Distribution Record Date;
EBITDA means net income before interest expense, income taxes and amortization.
EBITDA is a metric used by many investors to compare companies on the basis of
ability to generate cash from operations. It is not intended to represent cash
flow or results of operations in accordance with generally accepted accounting
principles or to represent cash available for distribution. EBITDA may not be
comparable to similarly titled amounts reported by other companies. EBITDA can
be determined from Big Rock's financial statements included as Appendix E by
adding back interest, income tax expense and amortization to net income;
Effective Date means the date shown on the Certificate of Arrangement;
Effective Time means the time on the Effective Date that the Certificate of
Arrangement is issued;
Exercise Price means the price per Common Share at which an Optionholder may
purchase Common Shares pursuant to its Options;
Fairness Opinion means the fairness opinion provided by Lightyear Capital, which
is attached as Appendix D to this Information Circular;
Final Order means the order of the Court approving the Arrangement to be applied
for following the Meeting pursuant to the provisions of paragraph 193(9)(a) of
the ABCA, as such order may be affirmed, amended or modified by any court of
competent jurisdiction;
Holder or Shareholder means a registered holder of Common Shares immediately
prior to the Effective Date or any person who surrenders to the Transfer Agent
certificates representing Common Shares duly endorsed for transfer to such
person;
Information Circular means this information circular and all appendices attached
hereto;
Initial Permitted Securities means any equity or debt securities, or rights
thereto, authorized or issued from time to time by AcquisitionCo and any
successor to AcquisitionCo (including, without limitation, Amalco) including,
without limitation, the AcquisitionCo Common Shares, Amalco Common Shares,
Amalco Class A Shares, Amalco Class B Shares, Amalco Class C Shares and Notes;
Initial Trust Units means the 10 Trust Units issued in connection with the
formation and settling of the Trust;
Interim Order means the order of the Court dated November 19, 2002 under Section
193 of the ABCA containing declarations and directions with respect to the
Arrangement and the Meeting and issued pursuant to the petition of the Company
therefor, a copy of which order is attached as Appendix B to this Information
Circular, including any amendments or modifications thereto;
In-the-Money Options means Options which are exercisable, at the relevant time,
at less than the then current trading price of the Common Shares on the TSX;
In-the-Money Settlement Amount means the payment in Trust Units to be made to an
Optionholder pursuant to a Option Cancellation Agreement, such payment to be the
aggregate of the product of the number of Common Shares the Optionholder is
entitled to purchase pursuant to an Option agreement multiplied by the
difference between the Exercise Price and the Option Market Price;
In-the-Money Settlement Amount Exchange Ratio means the number of Notes to be
issued to the Optionholder in exchange for the In-the-Money Settlement Amount
Right, which shall be equal to one Note in an amount equal to the Weighted
Average Trading Price for every one Common Share which the Optionholder would
have been able to purchase at the Option Market Price for the In-the-Money
Settlement Amount;
In-the-Money Settlement Amount Right means the right to receive the In-the-Money
Settlement Amount in Notes pursuant to the In-the-Money Settlement Amount
Exchange Ratio;
Letter of Transmittal means the letter of transmittal to be completed by
Shareholders to effect the exchange of Common Shares for Trust Units;
Lightyear Capital or Lightyear means Lightyear Capital Inc., exclusive financial
advisor to the Company;
Meeting means the special meeting of the Securityholders to be held on
January 8, 2003 and any adjournment(s) thereof to consider and to vote on, among
other things, the Arrangement Resolution and the Unit Option Plan Resolution;
Non-Resident means a non-resident of Canada within the meaning of the Tax Act;
Note Indenture means the trust indenture providing for the issuance of the Notes
to be dated the Effective Date and made between AcquisitionCo and Valiant Trust
Company, as trustee;
Note Trustee means Valiant Trust Company, or its successor as trustee under the
Note Indenture;
Notes means the 14% unsecured subordinated promissory notes of AcquisitionCo
issuable pursuant to the Arrangement having substantially the terms as set forth
in Schedule A to the Plan of Arrangement;
Notice of Meeting means the notice of the Meeting of the Securityholders which
accompanies this Information Circular;
Notice of Petition means the notice of petition by the Company and AcquisitionCo
to the Court for the Final Order which accompanies this Information Circular;
Option Cancellation Agreement means the agreement entered into prior to the
Effective Time between Big Rock, the Trust, AcquisitionCo and each of the
Optionholders which provide for the payment of the In-the-Money Settlement
Amount in consideration of the surrender by the Optionholder of Options;
Option Market Price means the Weighted Average Trading Price;
Option Plan means Big Rock's Stock Option Plan, or any of its predecessor plans;
Options means the outstanding options to purchase Common Shares granted pursuant
the Option Plan;
Optionholders means holders from time to time of Options;
Permitted Investments means: (i) obligations issued or guaranteed by the
government of Canada or any province of Canada or any agency or instrumentality
thereof; (ii) term deposits, guaranteed investment certificates, certificates of
deposit or bankers' acceptances of or guaranteed by any Canadian chartered bank
or other financial institutions the short-term debt or deposits of which have
been rated at least A or the equivalent by Standard & Poor's Corporation,
Moody's Investors Service, Inc. or Dominion Bond Rating Service Limited; and
(iii) commercial paper rated at least A or the equivalent by Dominion Bond
Rating Service Limited, in each case maturing within 180 days after the date of
acquisition;
Per Share Principal Amount means the Weighted Average Trading Price, less
$0.0001;
Person means any individual, partnership, association, body corporate, trustee,
executor, administrator, legal representative, government, regulatory authority
or other entity;
Plan of Arrangement means the plan of arrangement set forth as Schedule 1 to the
Arrangement Agreement which is attached as Appendix C to this Information
Circular, and any amendment or variation thereto;
pro rata share of any particular amount in respect of a holder of a Trust Unit
at any time shall be the product obtained by multiplying the number of Trust
Units that are owned by that Trust Unitholder at that time by the quotient
obtained when the particular amount is divided by the total number of all Trust
Units that are issued and outstanding at that time;
Record Date means the close of business on November 19, 2002;
Registrar means the Registrar of Corporations duly appointed under the ABCA;
Remaining Options means any Option which is not subject to an Option
Cancellation Agreement and which, pursuant to the Arrangement, will be exchanged
for replacement Trust Unit Options, having substantially the same terms as the
Options;
Reorganization means the reorganization of the Company into an income trust
structure as contemplated by the Arrangement Agreement and the Plan of
Arrangement;
Rights means the rights to acquire Common Shares pursuant to the Shareholder
Rights Plan;
Securities means, collectively, the Common Shares and Options;
Securityholders means, collectively, the holders from time to time of Common
Shares and Options;
Settled Amount means the aggregate amount of one hundred dollars ($100) in
lawful money of Canada paid by the settlor of the Trust to the Trustee for the
purpose of settling the Trust;
Shareholder Agreement means the shareholder agreement to be entered into as of
the Effective Date between Amalco and the Trustee, as trustee for and on behalf
of the Trust;
Shareholder Rights Plan means the shareholder rights plan adopted by Big Rock
pursuant to a shareholder rights plan agreement dated June 7, 1994 between Big
Rock and R-M Trust Company, as amended;
Shareholders means the holders from time to time of Common Shares;
Subsequent Investments means those investments which the Trust is permitted to
make pursuant to the Trust Indenture, namely securities of Amalco or any other
subsidiary of the Trust and securities of any other entities including, without
limitation, bodies corporate, partnerships or trusts, and any other investment
or property described in paragraph 132(6)(b) of the Tax Act (including, without
limitation, any investment or property acquired directly or indirectly from the
issue of Trust Units);
Subsidiary means, when used to indicate a relationship with another body
corporate:
(a)
a body corporate which is controlled by (i) that other, or (ii) that other and
one or more bodies corporate, each of which is controlled by that other, or
(iii) two or more bodies corporate each of which is controlled by that other, or
(b)
a subsidiary of a body corporate that is the other's subsidiary;
and, in the case of the Trust, shall include AcquisitionCo and, as the context
requires, Amalco;
Tax Act means the Income Tax Act (Canada), and the regulations enacted
thereunder;
Transfer Agent means Valiant Trust Company, in respect of both the Common Shares
(effective December 1, 2002) and the Trust Units, at its offices in Calgary,
Alberta and at the offices of its sub-agent in Toronto, Ontario;
Trust means Big Rock Brewery Income Trust, a trust established under the laws of
Alberta pursuant to the Trust Indenture;
Trustee means Valiant Trust Company, the initial trustee of the Trust, or such
other trustee, from time to time, of the Trust;
Trust Indenture means the trust indenture dated as of November 18, 2002 between
Valiant Trust Company, Big Rock and 1015068 Alberta Ltd. as the settlor;
Trust Unit means a unit of the Trust, each unit representing an equal undivided
beneficial interest therein;
Trust Unit Option means an option issued by the Trust to purchase Trust Units,
which will entitle the holder of such option, to purchase Trust Units on the
same terms as such holder may have purchased Common Shares under its Option
Agreement;
Trust Unitholders or Unitholders means the holders from time to time of the
Trust Units;
TSX means The Toronto Stock Exchange;
United States or U.S. means the United States of America and its territories and
possessions; and
Weighted Average Trading Price shall be determined by dividing: (i) the
aggregate dollar trading value of all Common Shares sold on the TSX over the
five (5) consecutive trading days ending on the trading day next preceding the
Effective Date by (ii) the total number of Common Shares sold on the TSX during
such period.
Words importing the singular number only include the plural and vice versa and
words importing any gender include all genders. All dollar amounts set forth in
this Information Circular are in Canadian dollars, except where otherwise
indicated.
SOLICITATION OF PROXIES AND VOTING AT THE MEETING
Solicitation of Proxies
This Information Circular is furnished in connection with the solicitation of
proxies by the management of the Company to be used at the Meeting.
Solicitations of proxies will be primarily by mail, but may also be by newspaper
publication, in person or by telephone, telecopy or oral communication by
directors, officers, employees or agents of the Company who may be remunerated
therefor. All costs of the solicitation will be borne by the Company.
Appointment and Revocation of Proxies
The persons named in the enclosed forms of proxy are directors or officers of
the Company. A Securityholder desiring to appoint a Person (who need not be a
Securityholder) to represent such Securityholder at the Meeting other than the
Persons designated in the accompanying forms of proxy may do so either by
inserting such Person's name in the blank space provided in the appropriate form
of proxy or by completing another form of proxy and, in either case, sending or
delivering the completed proxy to the Chief Financial Officer of the Company,
c/o Valiant Trust Company, Suite 510, 550 - 6th Avenue S.W., Calgary, Alberta,
T2P 0S2, Attention: Proxy Department. A form of proxy must be received by
Valiant Trust Company at least 48 hours (excluding Saturdays, Sundays and
holidays) prior to the time set for the applicable Meeting or any adjournment
thereof. Failure to so deposit a form of proxy shall result in its invalidation.
A Securityholder who has given a form of proxy may revoke it as to any matter on
which a vote has not already been cast pursuant to its authority by an
instrument in writing executed by such Securityholder or by his attorney duly
authorized in writing or, if the Securityholder is a corporation, by an officer
or attorney thereof duly authorized, and deposited either at the above mentioned
office of Valiant Trust Company on or before the last Business Day preceding the
day of the Meeting or any adjournment thereof, or with the chairman of the
Meeting on the day of the Meeting or any adjournment thereof. Notwithstanding
the foregoing, if a registered Securityholder attends personally at the Meeting,
such Securityholder may revoke the proxy and vote in person.
The Board of Directors has fixed the Record Date for the Meeting as at the close
of business on November 19, 2002. Securityholders of the Company of record as at
the Record Date are entitled to receive notice of, to attend and to vote at the
Meeting, except to the extent such Shareholder transfers any of his Common
Shares after the Record Date and the transferee of those Common Shares
establishes that he owns the Common Shares and demands, not later than ten (10)
days before the Meeting, that the transferee's name be included in the list of
Shareholders entitled to vote, in which case such transferee shall be entitled
to vote such Common Shares at the applicable Meeting.
Signature of Proxy
The forms of proxy must be executed by the Securityholder or his attorney
authorized in writing or, if the Securityholder is a corporation, the form of
proxy should be signed in its corporate name under its corporate seal by an
authorized officer whose title should be indicated. A proxy signed by a Person
acting as attorney or in some other representative capacity should reflect such
Person's capacity following his signature and should be accompanied by the
appropriate instrument evidencing qualification and authority to act (unless
such instrument has been previously filed with the Company).
Exercise of Discretion of Proxy
The Persons named in the accompanying forms of proxy will vote the Securities in
respect of which they are appointed in accordance with the direction of the
Securityholder appointing them. In the absence of such direction, such
Securities will be voted in favour of the matters to be acted upon at the
Meeting.
The enclosed forms of proxy confer discretionary authority upon the Persons
named therein with respect to amendments or variations to matters identified in
the accompanying Notice of Meeting and this Information Circular and with
respect to other matters that may properly come before the Meeting. At the date
of this Information Circular, management of the Company knows of no amendments,
variations or other matters to come before the Meeting other than the matters
referred to in the Notice of Meeting.
Voting Securities
As at September 30, 2002, 5,400,156 Common Shares and 622,800 Options were
issued and outstanding. Information concerning the principal holders of Common
Shares and Options is found under the heading Interests of Certain Persons in
the Arrangement and the Intentions of Such Persons.
The Interim Order provides that the Arrangement Resolution is required to be
approved by at least 66 2/3% of the votes cast by Shareholders and
Optionholders, each voting separately as a class, present in person or by proxy
at the Meeting. All other matters for which Shareholder approval is being sought
are required to be approved by a majority of the votes cast by Shareholders
present in person or by proxy at the Meeting.
If the Arrangement Resolution is passed, Shareholders will be requested to
consider, and if thought fit, to pass a resolution approving the Unit Option
Plan for employees, officers, directors and consultants of the Trust and its
subsidiaries enabling such persons to acquire options to purchase Trust Units.
The Unit Option Plan Resolution must be passed by at least a majority of the
votes cast thereon at the Meeting. See Unit Option Plan Resolution and Unit
Option Plan as Appendix F and G, respectively.
Voting - Advice to Beneficial Holders
The information set forth in this section is of significant importance to many
Shareholders, as a substantial number of Shareholders do not hold Common Shares
in their own name. Shareholders who did not hold their Common Shares in their
own name (referred to in this Information Circular as Beneficial Holders) should
note that proxies deposited by Shareholders whose names appear on the records of
the Company as the registered holders thereof can be recognized and acted upon
at the Meeting. If Common Shares are listed in an account statement provided to
a Shareholder by a broker, then, in almost all cases, those Common Shares will
not be registered in the Shareholder's name on the records of the Company. Such
Common Shares will more likely be registered in the name of the broker or an
agent of the broker. In Canada, the vast majority of such Common Shares are
registered under the name of CDS & Co. (the registration name for the Canadian
Depository for Securities, which acts as nominee for many Canadian brokerage
firms). Common Shares held by brokers or their nominees can only be voted (for
or against resolutions) upon instructions of the Beneficial Holder. Without
specific instructions, brokers/nominees are prohibited from voting securities
for their clients. The Company does not know for whose benefit the securities
registered in the names of CDS & Co. are held. Therefore, Beneficial Holders
cannot be recognized at the Meeting for purposes of voting their securities in
person or by way of proxy.
Applicable regulatory policies require intermediaries/brokers to seek voting
instructions from Beneficial Holders in advance of shareholder meetings. Every
intermediary/broker has its own mailing procedures and provides its own return
instructions which should be carefully followed by Beneficial Holders in order
to ensure that their Common Shares are voted at the Meeting. Often, the form of
proxy supplied to a Beneficial Holder by its broker is identical to that
provided to registered Shareholders. However, its purpose is limited to
instructing the registered Shareholder how to vote on behalf of the Beneficial
Holder. The majority of brokers now delegate responsibility for obtaining
instructions from clients to Independent Investor Communications Corporation
(IICC). IICC mails a scanable voting instruction form in lieu of the form of
proxy. Beneficial Holders are asked to complete and return the voting
instruction form to them by mail or facsimile. Alternately, a Beneficial Holder
can call their toll-free telephone number to vote its Securities. IICC then
tabulates the results of all instructions received and provides appropriate
instructions respecting the voting of Securities to be represented at the
meeting. If a Beneficial Holder receives a voting instruction form from IICC it
cannot be used as a proxy to vote Securities directly at the Meeting as the
proxy must be returned to IICC well in advance of the Meeting in order to have
the Securities voted.
If you are a Beneficial Holder and wish to vote in person at the Meeting, please
contact your broker or agent well in advance of the Meeting to determine how you
can do so.
THE ARRANGEMENT
Background to the Arrangement
In light of the increase in corporate profitability achieved by Big Rock earlier
this year, management began exploring the possibility of establishing a dividend
payment on the Common Shares. As part of their review process, management asked
Lightyear Capital for its opinion on how this would impact Big Rock and its
Shareholders. Thereafter, Lightyear began working with management to consider
various alternatives for Big Rock to provide regular cash distributions to its
Shareholders.
In August 2002, Lightyear Capital presented management with a proposal for Big
Rock to convert to an income trust. In its proposal, Lightyear indicated that it
believed that an income trust was the most tax efficient structure for Big Rock
to provide a regular cash distribution to its Shareholders. Lightyear also
indicated that the underlying business of Big Rock was well suited to support an
income trust structure and that Big Rock would have better access to new equity
capital as an income trust. Management and Lightyear then began an extensive
review process of this proposal, along with legal counsel.
In September 2002, the Board considered the income trust conversion proposal
that had been developed by Lightyear and management. After considering: (i) Big
Rock's business prospects; (ii) the suitability of Big Rock's business for an
income trust; (iii) the anticipated effect that the reorganization would have on
the Shareholders, Optionholders and employees of Big Rock, including the
anticipated income tax consequences; and (iv) the potential requirement for
future equity capital to finance growth opportunities, the Board of Directors
unanimously approved proceeding with the reorganization of Big Rock into an
income trust.
On November 18, 2002, the Board reviewed the documentation that had been
prepared by management and its advisors relating to the proposed reorganization,
including the fairness opinion provided by Lightyear. The Board of Directors
unanimously determined that the Arrangement is in the best interests of the
Company and is fair to Securityholders, from a financial point of view, and
authorized the submission of the Arrangement to Securityholders for the their
approval and to the Court for the Final Order.
The Board of Directors unanimously recommends that Securityholders vote FOR the
Arrangement Resolution and FOR the Unit Option Plan Resolution.
Benefits of the Arrangement
The Board of Directors, in recommending the Arrangement, expects that the
Arrangement will provide a number of benefits to Big Rock and its
Securityholders, including the following:
(c)
as an income trust, Big Rock will be able to provide Unitholders with regular
cash distributions in a more tax efficient manner than by paying dividends as a
corporation;
(d)
the cash distributions will provide an attractive return to Unitholders in the
current interest rate environment;
(e)
the trust structure will result in a more tax-efficient structure with the tax
burden of the Company shifted from the Company to Unitholders; many
Securityholders and future Unitholders are or will become tax-exempt such as
pension plans and individuals holding Trust Units in registered retirement
savings plans, registered retirement income funds and deferred profit sharing
plans and will therefore retain the full amount of cash distributions on a
tax-deferred basis;
(f)
as an income trust, Big Rock will have better access to new equity capital that
may be needed to finance future growth opportunities; and
(g)
as many Big Rock employees are also shareholders of the Company, converting to
an income trust may be viewed as a form of profit-sharing, thereby enhancing
employee motivation in Big Rock's business success.
The Board of Directors does not foresee any adverse consequences arising from
the Arrangement, and in particular: (i) there will be no increase in management
compensation as result of the conversion to an income trust; (ii) management
intends to retain a sufficient portion of the cash flow generated by the
underlying business of Big Rock to finance planned ongoing capital expenditures
and to maintain a cushion for potential unexpected financial requirements; (iii)
the Trust Units are expected to be listed on the Toronto Stock Exchange in
replacement of the listing currently held by Big Rock Common Shares; (iv) the
Trust units will not be listed on NASDAQ where the Common Shares are also
currently listed, however management believes that this will be a net benefit to
Big Rock given the low level of trading for Big Rock Common Shares on NASDAQ and
the high cost of maintaining that listing; and (v) Unitholders will have voting
privileges in the Trust similar to the voting rights that they had as
Shareholders of Big Rock.
Effect of the Arrangement Upon Securityholders
Upon completion of the Arrangement, the Company will have amalgamated with
AcquisitionCo to form Amalco, which will be a wholly-owned subsidiary of the
Trust, and the former Shareholders (other than Dissenting Shareholders) will be
holders of Trust Units. Each former Shareholder will receive, indirectly, for
every one (1) Common Share held on the Effective Date, one (1) Trust Unit and
each Optionholder will receive either the in-the-money value of their Options in
the form of Trust Units or will receive replacement Trust Unit Options.
Upon completion of the Arrangement, Amalco will continue to carry on the premium
brewing business currently carried on by the Company. The Trust anticipates
making monthly cash distributions to Trust Unitholders commencing February 15,
2003. The amount of cash to be distributed annually per Trust Unit will be equal
to a pro rata share of interest on the Notes and dividends on or in respect of
Amalco shares received by the Trust, net of administrative expenses and other
obligations of the Trust. In addition, Unitholders may, at the discretion of the
board of directors of Amalco, receive distributions in respect of repayments of
principal on the Notes made by Amalco to the Trust. Amalco may apply or set
aside some or all of its cash flow for capital expenditures or other purposes
prior to making any distributions to the Trust in the form of principal
repayments on the Notes or dividends on the Amalco shares. The amount and timing
of distributions will be reviewed by the Board of Directors and may be adjusted
from time to time to reflect the current business conditions. See Information
Concerning Big Rock Brewery Income Trust - Cash Distributions.
The following sets forth the flow of cash from Amalco to the Trust and from the
Trust to Unitholders following the completion of the Arrangement:
[[Image Removed: [informationcircular002.jpg]]]
Notes:
(1)
Upon completion of the Arrangement, the Unitholders will own 100% of the Trust.
(2)
Amalco will be the resulting entity upon the amalgamation of Big Rock and
AcquisitionCo. The amalgamation will occur pursuant to the Arrangement on the
Effective Date. See Information Concerning Big Rock Brewery Ltd. for a
description of the Big Rock operating entities.
(3)
Cash flow represents payments made by Amalco to the Trust in respect of interest
and/or principal payments on the Notes. In addition to such payments, dividend
income may also be paid from Amalco to the Trust.
(4)
The Trust may invest repayments of principal on the Notes in securities of
Amalco to enable Amalco to make capital expenditures.
For additional information respecting the Trust and Amalco please refer to
Information Concerning Big Rock Brewery Income Trust and Information Concerning
Amalco.
Management Arrangements
The Trust will not be managed by a third party manager. Following completion of
the Arrangement, the Trust and Amalco will be managed by the existing Board of
Directors and management of Big Rock. The Trustee, on behalf of the Trust, and
Amalco will enter into the Administration Agreement pursuant to which Amalco
will provide certain administrative services to the Trust. See also Information
Concerning Big Rock Brewery Income Trust - Delegation of Authority,
Administration and Trust Governance.
Details of the Arrangement
The following description of the Arrangement is qualified in its entirety by
reference to the full text of the Arrangement Agreement and the Plan of
Arrangement set forth in Appendix C to this Information Circular.
Arrangement Agreement
The Company, AcquisitionCo and the Trust have entered into the Arrangement
Agreement which provides for implementation of the Arrangement pursuant to
Section 193 of the ABCA. The Arrangement Agreement contains covenants,
representations and warranties of and from each of the Company, AcquisitionCo
and the Trust and various conditions precedent, both mutual and with respect to
each corporation and the Trust, to the implementation of the Arrangement. The
Arrangement will become effective on the date of filing of the Final Order and
the Articles of Arrangement in the form prescribed by the ABCA and related
documents with the Registrar and the issuance of the Certificate of Arrangement.
On the Effective Date, each of the events below shall occur and shall be deemed
to occur in the following sequence without any further act or formality:
(a)
the Shareholder Rights Plan and all outstanding Rights shall be terminated and
be of no further force or effect;
(b)
the authorized capital of Big Rock will be amended by the creation of the Class
A Shares, Class B Shares and Class C Shares and the Articles of Big Rock will be
amended accordingly;
(c)
each of the issued Common Shares (other than Common Shares held by Dissenting
Shareholders) will be deemed to be exchanged for one Class B Share and one Class
C Share and all of the previous outstanding Common Shares will be cancelled;
(d)
all of the rights, title and interests of Shareholders in the Class B Shares
shall be transferred to AcquisitionCo in exchange for Notes on the basis of one
Note in the Per Share Principal Amount for every one Class B Share held,
resulting in the acquisition by AcquisitionCo of all of the issued and
outstanding Class B Shares;
(e)
all of the rights, title and interests of former Shareholders in the Notes and
Class C Shares shall be transferred to the Trust in exchange for Trust Units on
the basis of one Trust Unit for each Note and Class C Share held, resulting in
the acquisition by the Trust of all of the issued and outstanding Notes and
Class C Shares;
(f)
all rights, title and interests of former Optionholders who have executed an
Option Cancellation Agreement (other than Dissenting Optionholders) which
results in an In-the-Money Settlement Amount Right shall have such right
exchanged with AcquisitionCo for Notes on the basis of the In-the-Money
Settlement Amount Exchange Ratio which shall, in turn, be transferred to the
Trust in exchange for Trust Units on the basis of one Trust Unit for each Note.
Any Remaining Options (other than Remaining Options held by a Dissenting
Optionholder) which are not subject to an Option Cancellation Agreement and
which have not, as at the Effective Time, been exercised by the Optionholder,
will be deemed to have been exchanged for replacement Trust Unit Options;
(g)
each issued and outstanding AcquisitionCo Common Share shall be deemed to be
transferred from the Trust to Big Rock in exchange for 100 Class A Shares issued
from Big Rock's treasury;
(h)
the Company and AcquisitionCo shall be amalgamated and continue as one
corporation, and:
(i)
all of the issued and outstanding Class B Shares, all of which shall then be
held by AcquisitionCo, shall be and shall be deemed to be cancelled without any
repayment of capital;
(ii)
all of the issued and outstanding AcquisitionCo Common Shares, all of which
shall then be held by Big Rock, shall be and shall be deemed to be cancelled
without any repayment of capital; and
(iii)
the name of Amalco shall be Big Rock Brewery Ltd. and the articles of
amalgamation for Amalco shall be the same as the amended articles of
incorporation of Big Rock.
All Common Shares held by Dissenting Shareholders who exercise their right of
dissent shall, if the Dissenting Shareholder is ultimately entitled to be paid
the fair value therefor, be deemed to be transferred to the Company on the
Effective Date in exchange for such fair value or will, if such Dissenting
Shareholders ultimately are not so entitled to be paid the fair value thereof,
be deemed to be transferred to the Trust on the Effective Date in exchange for
Trust Units on the same basis as all other Shareholders pursuant to the
Arrangement. See Rights of Dissent.
Upon completion of the Arrangement, the Trust will be the holder of all of the
issued and outstanding Amalco Class A Shares, Amalco Class C Shares and Notes.
For details respecting the terms of the Amalco Common Shares, Amalco Class A
Shares, Amalco Class B Shares, Amalco Class C Shares, Notes and Trust Units, see
Information Concerning Amalco and Information Concerning Big Rock Brewery Income
Trust.
Conditions to the Arrangement
The respective obligations of the Company, AcquisitionCo and the Trust to
complete the Arrangement are subject to a number of conditions which must be
satisfied or waived on or before the Effective Date. These conditions are set
forth in the Arrangement Agreement and include:
(i)
the Arrangement Resolution shall have been approved at the Meeting by not less
than 66 2/3% of the votes cast by the Securityholders in accordance with the
Interim Order and any applicable regulatory requirements;
(j)
the Final Order shall have been obtained in form and substance satisfactory to
the Company, AcquisitionCo and the Trust, acting reasonably, not later than
January 31, 2003 or such later date as the parties may agree;
(k)
the Arrangement shall have become effective on or before January 31, 2003;
(l)
the Articles of Arrangement and all necessary related documents filed with the
Registrar in accordance with the Arrangement shall be in form and substance
satisfactory to each of AcquisitionCo, the Company and the Trust, acting
reasonably and shall have been accepted for filing by the Registrar together
with the Final Order in accordance with subsection 193(9) of the ABCA;
(m)
there shall be no action taken under any existing applicable law or regulation,
nor any statute, rule, regulation or order, which if enacted, enforced,
promulgated or issued by any court, department, commission, board, regulatory
body, government or governmental authority or similar agency, domestic or
foreign, or there shall not be in force any order or decree of any such entity
that:
(i)
makes illegal or otherwise directly or indirectly restrains, enjoins or
prohibits the Arrangement or any other transactions contemplated herein;
(ii)
results in any judgment or assessment of material damages directly or indirectly
relating to the transactions contemplated herein; or
(iii)
imposes or confirms material limitations on the ability of the Trust effectively
to exercise full rights of ownership of the securities of Amalco, including,
without limitation, the right to vote any such securities;
(n)
there will have been no material change with respect to the income tax laws or
policies of Canada which would have a material adverse effect on the proposed
reorganization of the Company as contemplated by the Arrangement;
(o)
arrangements satisfactory to the Company, AcquisitionCo and the Trust shall have
been made to ensure that all outstanding Options shall have been surrendered,
exercised, exchanged or terminated;
(p)
all necessary third party and regulatory consents, approvals and authorizations
with respect to the transactions contemplated by the Arrangement Agreement shall
have been completed or obtained, including, without limitation, consents and
approvals from the Company's principal lenders;
(q)
there shall not as of the Effective Date, be Securityholders that hold in excess
of 5% of all Common Shares and Options that have validly exercised their rights
of dissent under the Interim Order; and
(r)
the approval of the TSX to the conditional substitutional listing of the Trust
Units to be issued pursuant to the Arrangement shall have been obtained, subject
only to the filing of required documents.
There is no assurance that the above conditions will be satisfied or waived on a
timely basis.
Upon the conditions being fulfilled or waived, the Company intends to cause a
copy of the Final Order and the Articles of Arrangement to be filed with the
Registrar under the ABCA, together with such other materials as may be required
by the Registrar.
Notwithstanding the foregoing, the Arrangement Resolution proposed for
consideration by the Securityholders authorizes the Board of Directors, without
further notice to or approval of such Securityholders, subject to the terms of
the Arrangement, to amend the Plan of Arrangement and the Arrangement Agreement,
to decide not to proceed with the Arrangement and to revoke the Arrangement
Resolution at any time prior to the Arrangement becoming effective pursuant to
the provisions of the ABCA. See Appendix A for the text of the Arrangement
Resolution.
Procedure for the Arrangement to Become Effective
Procedural Steps
The Arrangement is proposed to be carried out pursuant to Section 193 of the
ABCA. The following procedural steps must be taken for the Arrangement to become
effective:
(s)
the Arrangement must be approved by Securityholders in the manner set out in the
Interim Order;
(t)
all conditions precedent to the Arrangement, as set forth in the Arrangement
Agreement, must be satisfied or waived by the appropriate parties;
(u)
the Arrangement must be approved by the Court pursuant to the Final Order; and
(v)
the Final Order, Articles of Arrangement and related documents, in the form
prescribed by the ABCA, must be filed with the Registrar.
Securityholder Approval
Pursuant to the Interim Order, the Arrangement Resolution must be approved by at
least two-thirds (66 2/3%) of the votes cast by Shareholders and Optionholders,
voting as separate classes, who vote in respect of the Arrangement Resolution,
in person or by proxy, at the Meeting.
All other matters to be voted on at the Meeting, including the Unit Option Plan
Resolution, must be approved by a majority of the votes cast by Shareholders who
vote in respect of such matters, in person or by proxy, at the Meeting.
Court Approvals
Interim Order
On November 19, 2002, the Company obtained the Interim Order providing for the
calling and holding of the Meeting and other procedural matters. The Interim
Order is attached as Appendix B to this Information Circular.
Final Order
The ABCA provides that an arrangement requires Court approval. Subject to the
terms of the Arrangement Agreement, and if the Arrangement Resolution is
approved by Securityholders at the Meeting in the manner required by the Interim
Order, the Company will make application to the Court for the Final Order.
The application for the Final Order approving the Arrangement is scheduled for
Wednesday, January 8, 2003 at 2:00 p.m. (Calgary time), or so soon thereafter as
counsel may be heard, at The Court House, 611 - 4th Street S.W., Calgary,
Alberta. At the hearing, any Securityholder and any other interested party who
wishes to participate or to be represented or to present evidence or argument
may do so, subject to filing with the Court and serving upon the Company a
Notice of Intention to Appear together with any evidence or materials which such
party intends to present to the Court on or before 12:00 p.m. (noon) on
January 7, 2003 setting out such Securityholder's or other interested party's
address for service by ordinary mail and indicating whether such Securityholder
or other interested party intends to support or oppose the Application or make
submissions. Service of such notice shall be effected by service upon the
solicitors for the Company, Davis & Company, Suite 2350, 400 - 3rd Avenue S.W.,
Calgary, Alberta, T2P 4H2, Attention: David C. Bell. See Notice of Petition.
The Company has been advised by its counsel, Davis & Company, that the Court has
broad discretion under the ABCA when making orders with respect to an
arrangement and that the Court will consider, among other things, the fairness
of the Arrangement to the Securityholders (and any other interested party as the
Court determines appropriate) both from a substantive and a procedural point of
view. The Court may approve the Arrangement, either as proposed or as amended,
in any manner the Court may direct, subject to compliance with such terms and
conditions, if any, as the Court thinks fit. Depending upon the nature of any
required amendments, the Company, AcquisitionCo or the Trust may determine not
to proceed with the Arrangement.
The issue of Trust Units in exchange for Common Shares and Options pursuant to
the Arrangement will not be registered under the provisions of the United States
Securities Act of 1933, as amended (the 1933 Act), in reliance upon the
exemption from registration provided by Section 3(a)(10) of the 1933 Act. The
Court has been advised that the Company will rely on the Section 3(a)(10)
exemption based on the Court's approval of the Arrangement.
Regulatory Approvals
The Arrangement requires the approval of certain regulatory authorities. The
Arrangement Agreement provides that these approvals are conditions precedent to
the Arrangement becoming effective. The Company or the Trust will have made
application to such authorities prior to the Effective Date in order to obtain
all approvals required with respect to the Arrangement. There is no guarantee
that approvals from the required regulatory authorities will be obtained on a
timely basis or on terms and conditions satisfactory to the Company and the
Trust.
Notice of the proposed Arrangement will be submitted by Big Rock and the Trust
to the Quebec Securities Commission. Completion of the Arrangement is subject to
the approval of the Quebec Securities Commission.
Stock Exchange Listings
The Arrangement is conditional upon the Trust Units issued in connection with
the Arrangement being approved for listing on the TSX. As such, the Trust has
applied to list the Trust Units on the TSX. The TSX has conditionally approved
the listing of the Trust Units that may be issued pursuant to the Arrangement,
subject to compliance with the requirements of such exchange, which are expected
to be met on the Effective Date or as soon as reasonably practicable thereafter.
Listing will be subject to the Trust fulfilling all of the requirements of the
TSX. Following the Effective Date, the Common Shares will be delisted from the
TSX and from NASDAQ. Upon completion of the Arrangement, the Trust Units will
not be listed on NASDAQ.
Treatment of Options to Purchase Common Shares
Pursuant to the Option Plan, there are presently outstanding Options to purchase
599,350 Common Shares at exercise prices ranging from a low of $4.50 to a high
of $7.60 (and an average of $5.84), with all such Options being fully vested.
The Options are held by various directors, officers, consultants and employees
of Big Rock.
At its November 18, 2002 meeting, the Board resolved to allow holders of
Options, who so choose, to receive, in lieu of the Common Shares which the
holder would be entitled to receive, the in-the-money value of their Options
(the In-the-Money Settlement Amount), being a payment of the in-the-money value
of their Options in Trust Units. Optionholders who wish to receive the
In-the-Money Settlement Amount will, prior to the Effective Time, be required to
enter into an agreement (an Option Cancellation Agreement) which will specify
the number of options (the Subject Options) the holder wishes to be subject to
the Trust Unit payment. The Option Cancellation Agreement will provide, at the
Effective Time, for the surrender of all Subject Options in consideration of the
In-the-Money Settlement Amount. As the Option Cancellation Agreement will be
operative only as at the Effective Time, an Optionholder may choose to have some
or all Common Shares, on a fully-vested basis, subject to such agreement. The
In-the-Money Settlement Amount will be the aggregate of the product obtained
when the number of Common Shares which may be purchased by the holder pursuant
to the Subject Options is multiplied by the difference between the Option Market
Price and the exercise price payable by the Optionholders to purchase Common
Shares pursuant to the Subject Options (the Exercise Price). An Optionholder who
enters into an Option Cancellation Agreement will not be entitled to exercise
the Subject Options and receive Common Shares. In the event the Reorganization
should not occur, all Option Cancellation Agreements will be terminated and be
of no further effect.
The Plan of Arrangement provides those Optionholders who have entered into an
Option Cancellation Agreement with the right (the In-the-Money Settlement Amount
Right) to receive the In-the-Money Settlement Amount in Trust Units. The
In-the-Money Settlement Amount will be exchanged for such number of Notes
resulting when such Optionholder's In-the-Money Settlement Amount is divided by
the Option Market price.
The Plan of Arrangement further provides that Options which are not subject to
an Option Cancellation Agreement and which have not, as at the Effective Time,
been exercised by the holder, will be exchanged with the Trust for an option (a
Trust Unit Option) to purchase Trust Units with the same vesting, exercise price
and expiry date as the holder's Options.
Each replacement Trust Unit Option will entitle the holder to purchase one Trust
Unit on the same terms as set forth in the holder's Option agreement.
SELECTED HISTORICAL FINANCIAL INFORMATION AND OTHER DATA
The following tables set forth a summary of certain historical financial
information and other data of Big Rock for the dates and periods indicated that
is derived from, and should be read in conjunction with, the audited
consolidated financial statements for the years ended March 31, 2002, 2001 and
2000 and the related notes, the unaudited consolidated financial statements for
the six months ended September 30, 2002 and 2001 and the related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, all as included elsewhere in this Information Circular.
Six Months Ended ________Years Ended March 31st______
Sept. 30, 2002 (audited)
(unaudited)
2002 2001 2000
(thousands except per share amounts)
Sales $21,603 $34,523 $32,238 $31,707
Cash provided by operating activities $2,386 $2,581 $3,411 $2,435
Per Share $0.44 $0.49 $0.69 $0.52
basic and diluted
Net Income $1,727 $1,218 $1,353 $1,461
Per Share $0.32 $0.24 $0.29 $0.31
basic and diluted
Total Assets $35,971 $33,061 $31,346 $29,918
Long-term Debt(1) (including current $3,147 $3,199 $5,038 $5,874
portion)
Purchase of capital assets and cash $978 $3,004 $1,122 $1,143
cost of acquisitions
Note:
(1)
On a consolidated basis, the Trust will continue to have long-term debt owing to
third parties.
The amount of cash to be distributed monthly per Unit shall be equal to a pro
rata share of all amounts received by the Trust from Amalco in each month,
expected to consist of interest payments and principal repayments on the Notes
and distributions on or in respect of Trust Units, less:
(a)
costs and expenses of the Trust; and
(b)
any amounts which have become payable in cash by the Trust relating to the
redemption of Units.
Distributions will be made monthly with the first payment made on February 15,
2003 (assuming an Effective Date of January 10, 2003) to holders of record on
January 31, 2003. The amount and timing of distributions will be reviewed by the
Board and may be adjusted from time to time to reflect the then current business
conditions.
FAIRNESS OPINION
In September 2002, Lightyear Capital was retained by the Board of Directors as
the exclusive financial advisor to the Company to assist the Company in
considering and structuring the Reorganization, and to provide a fairness
opinion in respect of the fairness, from a financial point of view, to the
Securityholders of any transaction resulting from such consideration. In
consideration for its services in these respects, the Company agreed to pay
Lightyear Capital certain fees upon the Arrangement becoming effective and
agreed to indemnify Lightyear Capital in respect of certain liabilities.
Lightyear Capital has advised the Company that it is not an insider, associate
or affiliate (as such terms are defined in the Securities Act (Alberta)) of the
Company or the Trust or the Interested Parties. Except as exclusive financial
advisor to the Company, neither Lightyear Capital nor any of its associates or
affiliates is an advisor to any of the Interested Parties with respect to the
Arrangement.
In its fairness opinion, Lightyear Capital concluded, on the basis of particular
assumptions and considerations, that the Arrangement is fair, from a financial
point of view, to the Securityholders.
A copy of the Fairness Opinion is attached as Appendix D to this Information
Circular. The Fairness Opinion is subject to the assumptions and limitations
contained therein and should be read in its entirety.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has unanimously determined that the Arrangement is in the
best interests of the Company and is fair to the Securityholders and has
authorized the submission of the Arrangement to the Securityholders for approval
and to the Court for the Final Order. See The Arrangement - Background to the
Arrangement.
The Board of Directors unanimously recommends that Securityholders vote FOR the
Arrangement Resolution and FOR the Unit Option Plan Resolution.
TIMING OF EVENTS
If the Meeting is held as scheduled and is not adjourned and the other necessary
conditions are satisfied or waived, the Company and AcquisitionCo will apply for
the Final Order approving the Arrangement. If the Final Order is obtained on
January 8, 2003 in form and substance satisfactory to the Company, AcquisitionCo
and the Trust, and all other conditions specified are satisfied or waived, the
Company expects the Effective Date will be January 10, 2003. At this point,
however, it is not possible to specify exactly when the Effective Date will be.
The Arrangement will become effective upon filing the Articles of Arrangement
and a copy of the Final Order with the Registrar, together with such other
materials as may be required by the Registrar.
It is the objective of the Company to have the Effective Date occur as soon as
practicable after the Meeting. The Effective Date could be delayed, however, for
a number of reasons, including an objection before the Court at the hearing of
the application for the Final Order on January 8, 2003. As soon as the Effective
Date is determined, the Company will issue a press release confirming the same.
PROCEDURE FOR EXCHANGE OF COMMON SHARES
A Letter of Transmittal has been included in the Meeting materials sent to each
holder of Common Shares of record on the Record Date. Additional Letters of
Transmittal will be sent to each former holder of Common Shares (other than
Dissenting Shareholders) of record on the Effective Date. In addition,
additional copies of the Letter of Transmittal will be available at the offices
of Valiant Trust Company at their offices in the cities of Calgary and Toronto.
Each Shareholder (other than Dissenting Shareholders) will be entitled to
exchange such Shareholder's certificates formerly representing Common Shares for
certificates representing the Trust Units. Shareholders will be entitled to
receive certificates for their Trust Units upon delivering to the Transfer
Agent, or as the Transfer Agent may otherwise direct, the certificates formerly
representing such Shareholder's Common Shares, a duly completed Letter of
Transmittal and such other documents as the Transfer Agent may reasonably
require in accordance with the instructions contained in the Letter of
Transmittal. As soon as practicable after receipt thereof, the certificates
representing the Trust Units will be:
(c)
forwarded by the Transfer Agent to the holder, at the address specified in the
Letter of Transmittal, by first class mail (postage prepaid); or
(d)
made available at the Transfer Agent's offices for pick-up by the holder, if
requested by the holder in the Letter of Transmittal.
If a certificate representing Common Shares has been lost, apparently destroyed
or wrongfully taken, the holder of such shares should immediately contact
Valiant Trust Company, the registrar and transfer agent of the Common Shares
(effective December 1, 2002), so that arrangements can be made to issue a
replacement share certificate to such holder upon such holder satisfying such
reasonable requirements as may be imposed by the Company in connection with the
issuance of such replacement share certificate.
Pursuant to the terms of the Plan of Arrangement, any certificates formerly
representing Common Shares that are not deposited with the Transfer Agent,
together with a duly completed Letter of Transmittal and any other documents the
Transfer Agent reasonably requires, on or before the sixth anniversary of the
Effective Date, shall cease to represent a right or claim of any kind or nature
and the right of the holder of such Common Shares to receive Trust Units shall
be deemed to be surrendered to the Trust together with all interest, dividends
or distributions thereon held for such Shareholder.
LEGAL DEVELOPMENTS
Section 193 of the ABCA provides that where it is impracticable for a
corporation to effect an arrangement under any other provision of the ABCA, the
corporation may apply to the Court for an order approving an arrangement
proposed by such corporation. Application will be made pursuant to this section
of the ABCA for approval of the Arrangement. There have been a number of
judicial decisions considering this section and its application. However, there
have not been, to the knowledge of the Company, any recent significant decisions
relating thereto.
Securityholders should consult their legal advisors with respect to the legal
rights available to them in relation to the Arrangement.
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Felesky Flynn LLP, Canadian tax counsel to the Company (the
Tax Adviso