Securities Law & Instruments

Headnote

Mutual Reliance Review Systemfor Exemptive Relief Applications - Relief from registrationand prospectus requirements granted for certain trades and distributionsof securities in connection with a statutory arrangement whereexemptions not available for technical reasons. First tradein certain securities acquired under decision deemed a distributionunless certain conditions in Multilateral Instrument 45-102- Resale of Securities - are satisfied.

Applicable Ontario StatutoryProvisions

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

Applicable Ontario Rules

Ontario Securities CommissionRule 45-501 - Exempt Distributions - section 2.8.

Applicable Instruments

Multilateral Instrument 45-102- Resale of Securities - section 2.6.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ALBERTA, BRITISH COLUMBIA,MANITOBA, NEW BRUNSWICK,

NEWFOUNDLAND AND LABRADOR,THE NORTHWEST TERRITORIES,

NOVA SCOTIA, NUNAVUT, ONTARIO,PRINCE EDWARD ISLAND,

SASKATCHEWAN AND THE YUKONTERRITORY

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

CONTRANS INCOME FUND, CONTRANSCORP.,

CONTRANS HOLDING COMPANY CORP.,

CONTRANS OPERATING TRUST AND

CONTRANS HOLDING LIMITED PARTNERSHIP

 

MRRS DECISION DOCUMENT

WHEREAS the local securitiesregulatory authority or regulator (the "Decision Maker")in each of Alberta, British Columbia, Manitoba, New Brunswick,Newfoundland and Labrador, the Northwest Territories, Nova Scotia,Nunavut, Ontario, Prince Edward Island, Saskatchewan and theYukon Territory (the "Jurisdictions") has receivedan application from Contrans Income Fund (the "Fund"),Contrans Corp. ("Contrans" or the "Company"),Contrans Holding Company Corp. ("Newco"), ContransOperating Trust (the "Operating Trust") and ContransHolding Limited Partnership (the "Partnership") (collectively,the "Applicants") for a decision under the securitieslegislation of the Jurisdictions (the "Legislation")that the requirements under the Legislation to be registeredto trade in a security (the "Registration Requirement")and to file and obtain a receipt for a preliminary prospectusand a prospectus (the "Prospectus Requirement") shallnot apply to certain trades and distributions of securitiesto be made in connection with the acquisition of all of theissued and outstanding Class A subordinate voting shares (the"Subordinate Voting Shares") and Class B multiplevoting shares (the "Multiple Voting Shares") of theCompany pursuant to a plan of arrangement (the "Plan ofArrangement") under section 182 of the Business CorporationsAct (Ontario) (the "OBCA") involving the Companyand its shareholders (the "Transaction");

AND WHEREAS pursuantto the Mutual Reliance Review System ("MRRS") forExemptive Relief Applications (the "System"), theOntario Securities Commission is the principal regulator forthis application;

AND WHEREAS the Applicantshave represented to the Decision Makers that:

1. the Fund is an unincorporatedopen-ended limited purpose trust established under the lawsof the Province of Ontario pursuant to a declaration of trustdated as of April 16, 2002. The Fund was created for the purposeof acquiring and holding certain investments. The head andprincipal offices of the Fund are located at 1179 RidgewayRoad, Woodstock, Ontario N4S 8P6;

2. on June 14, 2002, the Fundfiled a preliminary prospectus in each of the Jurisdictionsin connection with an initial public offering of subordinatevoting trust units (the "Subordinate Voting Trust Units").The Fund will file a (final) prospectus in each of the Jurisdictionsprior to closing of the Transaction. Upon receipt of the MRRSdecision document with respect to such (final) prospectus,the Fund will become a reporting issuer or the equivalentin each of the Jurisdictions;

3. the Fund was establishedwith nominal capitalization and currently has only nominalassets and no liabilities. The only activity currently anticipatedto be carried on by the Fund will be the holding of units(the "Operating Trust Units") and notes (the "OperatingTrust Notes") of the Operating Trust;

4. the Fund is authorizedto issue an unlimited number of Subordinate Voting Trust Units,an unlimited number of series A subordinate voting rights(the "Subordinate Voting Rights") and a limitednumber of series B multiple voting rights (the "MultipleVoting Rights"). As of the close of business on June21, 2002, one Subordinate Voting Trust Unit and no SubordinateVoting Rights or Multiple Voting Rights (together, the "SpecialVoting Rights") were issued and outstanding;

5. in connection with theTransaction, the Fund will indirectly issue Subordinate VotingTrust Units to shareholders of the Company (the "Shareholders")(other than Shareholders electing to receive Partnership Units).Subordinate Voting Trust Units are redeemable at any timeon demand by the holders thereof (the "Unitholders").In certain instances, such a redemption may be paid and satisfiedby way of a distribution in specie of a pro rata numberof securities of the Operating Trust held by the Fund anda pro rata share of any other assets after taking into accountall liabilities of the Fund;

6. it is anticipated thatthe redemption right described above will not be the primarymechanism for holders of Subordinate Voting Trust Units todispose of their Subordinate Voting Trust Units. Securitiesof the Operating Trust will not be listed on any stock exchange;

7. the Fund has received conditionalapproval from the Toronto Stock Exchange (the "TSX")for the listing on the TSX of the Subordinate Voting TrustUnits issuable in connection with the Transaction subjectto, among other things, completion of the Transaction. TheSubordinate Voting Trust Units issued pursuant to the Transactionor issuable from time to time in exchange for units of thePartnership issued pursuant to the Transaction will also belisted on the TSX, subject to receipt of final approval fromthe TSX;

8. the Operating Trust isan unincorporated open-ended trust established under the lawsof the Province of Ontario pursuant to a declaration of trustdated as of April 16, 2002. The head and principal officesof the Operating Trust are located at 1179 Ridgeway Road,Woodstock, Ontario N4S 8P6. The beneficial interests in theOperating Trust constitute a single class of units describedand designated as Operating Trust Units. The initial holderof the Operating Trust Units is the Fund. The Operating Trustwas formed to serve as the conduit through which investmentand initial business purposes of the Fund will be carriedout;

9. the Operating Trust will,from time to time, have debt obligations outstanding to theFund. The debt will be evidenced by Operating Trust Notesissued under a note indenture. The Fund will be the initialholder of the Operating Trust Notes, and entitled to the paymentsand rights of an unsecured creditor;

10. the Operating Trust isnot a reporting issuer (or equivalent) in any of the Jurisdictions;

11. the Company was incorporatedunder the OBCA on July 23, 1982. The Company operates in thetransportation industry, principally in the truckload marketas a provider of freight transportation services. The headand principal offices of the Company are located at 1179 RidgewayRoad, Woodstock, Ontario N4S 8P6;

12. the authorized capitalof the Company consists of an unlimited number of SubordinateVoting Shares, an unlimited number of Multiple Voting Sharesand an unlimited number of preference shares, issuable inseries of which, as at June 21, 2002, 4,070,068 SubordinateVoting Shares, 366,931 Multiple Voting Shares and no preferredshares were outstanding. Each Subordinate Voting Share entitlesthe holder thereof to one vote at all meetings of Shareholdersand each Multiple Voting Share entitles the holder thereofto ten votes at all meetings of Shareholders;

13. the Subordinate VotingShares are presently listed on the TSX and the Company isa reporting issuer (or the equivalent) in each of the Jurisdictions.Following the effective date of the Transaction, the SubordinateVoting Shares will be delisted from the TSX and the Companywill apply to cease to be a reporting issuer, where applicable;

14. Newco was incorporatedunder the OBCA for the purpose of participating in the Transaction.The authorized capital of Newco consists of an unlimited numberof common shares (the "Newco Common Shares"). Thehead and principal offices of Newco are located at 1179 RidgewayRoad, Woodstock, Ontario N4S 8P6;

15. Newco Common Shares andnotes of Newco ("Newco Notes") will be issued toholders of Subordinate Voting Shares and Multiple Voting Shares(together, "Contrans Shares") who elect to receiveSubordinate Voting Trust Units pursuant to the Transaction.Such Newco Common Shares and Newco Notes will be subsequently(but within the Arrangement) transferred by the holders tothe Fund in exchange for Subordinate Voting Trust Units andsubsequently sold by the Fund to the Operating Trust in exchangefor Operating Trust Units and Operating Trust Notes;

16. subsequent to the stepsdescribed above and as part of the Plan of Arrangement, Newcoand Contrans will amalgamate to form Contrans Corp. ("NewContrans");

17. New Contrans will be formedby way of articles of amalgamation pursuant to the laws ofthe Province of Ontario upon the amalgamation of Contransand Newco. New Contrans will be a holding company and willown Class C limited partnership units of the Partnership (the"Class C LP Units") and notes of the Partnership.New Contrans will also be the administrator of the Fund andthe Operating Trust and manager of the Partnership and variouslimited partnerships formed, or to be formed, in connectionwith the Arrangement as the Operating Entities;

18. New Contrans will be authorizedto issue an unlimited number of common shares ("New ContransCommon Shares"), an unlimited number of Class A specialshares ("New Contrans Series A Special Shares")and an unlimited number of Class B special shares ("NewContrans Series B Special Shares") (collectively, the"New Contrans Special Shares"). Upon completionof the Plan of Arrangement, the issued and outstanding securitiesof New Contrans will consist of New Contrans Common Shares,notes of New Contrans (the "New Contrans Notes")and the New Contrans Special Shares. New Contrans will issueNew Contrans Common Shares and New Contrans Notes to the OperatingTrust in an amount equal to that number of Special VotingRights issued by the Fund to the holders of Partnership Units.The New Contrans Special Shares will be held by the Partnership;

19. the Partnership is tobe a limited partnership formed under the laws of the Provinceof Ontario. The general partner will be Contrans Holding GPInc., which will be a wholly-owned subsidiary of New Contrans.The head and principal offices of the Partnership are locatedat 1179 Ridgeway Road, Woodstock, Ontario N4S 8P6;

20. the Partnership will beauthorized to issue three classes of partnership interests,Class A limited partnership units ("Class A LP Units"),Class B limited partnership units ("Class B LP Units")and Class C LP Units. Upon completion of the Transaction,all issued and outstanding Class C LP Units will be held byNew Contrans and all Class A LP Units and Class B LP Units(together, "Partnership Units") will be held byformer holders of Contrans Shares who have elected to exchangesuch shares for Class A LP Units and Class B LP Units;

21. the Partnership is nota reporting issuer (or its equivalent) in any of the Jurisdictions;

22. the Transaction will beeffected by way of the Plan of Arrangement, which requires(i) Shareholder approval (which approval was obtained at aspecial meeting of Shareholders held on May 21, 2002 (the"Meeting"), and (ii) the final approval of the OntarioSuperior Court of Justice (the application in respect of whichwas heard on July 5, 2002);

23. the management informationcircular (the "Circular") delivered to Shareholdersin connection with the Meeting has been prepared in conformitywith the provisions of the OBCA, applicable securities lawsand an interim order of the Court and contains prospectus-leveldisclosure of the business and affairs of the Fund, the Companyand the Partnership and a detailed description of the Transactionand the Plan of Arrangement and was mailed to shareholdersin connection with the Meeting on April 16, 2002;

24. on the Plan of Arrangementbecoming effective, in accordance with elections made or deemedto be made by holders of Contrans Shares, the outstandingContrans Shares will be indirectly (after giving effect tovarious steps of the Transaction which are to occur in immediatesuccession) exchanged for Partnership Units (and related SpecialVoting Rights), Subordinate Voting Trust Units or a combinationof the foregoing;

25. the rights, privileges,restrictions and conditions attaching to the Partnership Unitsunder the limited partnership agreement (the "LimitedPartnership Agreement") governing the Partnership, togetherwith the Exchange Agreements and the Investment Exchange Agreementdescribed below, will provide holders thereof with a securityhaving economic rights which are, as nearly as practicable,equivalent to those of Subordinate Voting Trust Units. Thisalternative has been provided in order to give holders ofContrans Shares who are residents of Canada the opportunityto pursue certain tax efficiencies with respect to the exchangeof their Contrans Shares. The Partnership Units will be exchangeableby a holder thereof for Subordinate Voting Trust Units ona one-for-one basis at any time at the option of such holderand will be required to be exchanged upon the occurrence ofcertain events;

26. the Limited PartnershipAgreement will provide that the Partnership Units will benon-voting (except as required by the Limited PartnershipAgreement or by applicable law) and each Partnership Unitwill entitle the holder to distributions from the Partnershippayable at the same time as, and equivalent to, each distributionpaid by the Fund on a Subordinate Voting Trust Unit. On theliquidation, dissolution or winding-up of the Partnership,a holder of Partnership Units will be entitled to receivefrom the Partnership an amount equal to all declared and unpaiddistributions on each such Partnership Unit held by the holderon any distribution record date prior to the date of liquidation,dissolution or winding-up and will be entitled to a returnof his or her capital contribution upon the dissolution, wind-upor liquidation of the Partnership on a pro rata basisfrom the assets of the Partnership. Partnership Units mayonly be transferred in certain limited circumstances;

27. the Limited PartnershipAgreement will further provide that upon certain actions,such as distributions of stock dividends, options, rightsor warrants for the purchase of securities or other assets,subdivisions, reclassifications, reorganizations and otherchanges, being taken in respect of the Subordinate VotingTrust Units generally, the same or an economically equivalentaction will be taken by the Partnership in respect of thePartnership Units. Pursuant to the Exchange Agreements (ashereinafter defined), the Fund has agreed that, to the extentfurther Class A LP Units are issued, it will issue a correspondingnumber of Subordinate Voting Rights to the holders thereof;

28. pursuant to the Plan ofArrangement, each of the holders of Class A LP Units willreceive one Subordinate Voting Right for each Class A LP Unitand each of the holders of Class B LP Units will receive oneMultiple Voting Right for each Class B LP Unit. Each SubordinateVoting Right will entitle the holder thereof to one vote atmeetings of Unitholders and each Multiple Voting Right willentitle the holder thereof to ten votes at meetings of Unitholders.Special Voting Rights will have none of the other rights attachedto Subordinate Voting Trust Units. The Special Voting Rightsto be issued to the holders of Partnership Units may be transferredtogether with the associated Partnership Units only in certaincircumstances, will be evidenced only by the certificatesrepresenting such Partnership Units and will be automaticallyredeemed for nominal consideration and cancelled upon theexchange of Partnership Units for Subordinate Voting TrustUnits on a voluntary basis as well as upon the occurrenceof certain other events giving rise to a Compulsory Exchange(as hereinafter defined), as described in the Circular;

29. certain exchange rightswill be granted by the Fund and the Operating Trust to theholders of Partnership Units and by the holders of PartnershipUnits to the Operating Trust pursuant to an agreement (the"Exchange Agreement") to be entered into by theOperating Trust and each holder of Partnership Units contemporaneouslywith the closing of the Transaction. Under each Exchange Agreement,the Operating Trust will grant to the holders of the PartnershipUnits an exchange right (an "Exchange Right"), exercisableat any time, to require the Operating Trust to exchange allor any part of a holder's Partnership Units for SubordinateVoting Trust Units on the basis of one Subordinate VotingTrust for each Partnership Unit exchanged. In addition, eachSpecial Voting Right attached to the Partnership Units beingexchanged by a holder will be automatically redeemed by theOperating Trust for nominal consideration and cancelled;

30. under the Exchange Agreements,the Operating Trust may force the exchange (a "CompulsoryExchange") of Partnership Units for Subordinate VotingTrust Units in certain circumstances, as described in theCircular. Upon the Operating Trust effecting a CompulsoryExchange, a holder of Partnership Units will be entitled toreceive from the Operating Trust Subordinate Voting TrustUnits on the basis of one Subordinate Voting Trust Unit foreach Partnership Unit exchanged. In addition, each SpecialVoting Right attached to the Partnership Units being exchangedby the Operating Trust will be automatically redeemed fornominal consideration and cancelled;

31. in the event that theOperating Trust is unable for any reason to exchange PartnershipUnits for Subordinate Voting Trust Units in connection withthe exercise of an Exchange Right or a Compulsory Exchange,the holders of Partnership Units may be permitted to dealdirectly with the Fund in order to effect such exchange;

32. contemporaneously withthe closing of the Transaction, the Fund and the OperatingTrust will enter into an agreement (the "Investment ExchangeAgreement") which will provide that the Fund will purchasecertain securities of the Operating Trust in exchange forSubordinate Voting Trust Units in sufficient numbers to allowthe Operating Trust to meet its obligations, from time totime, in respect of the Exchange Right and the CompulsoryExchange under the Exchange Agreements;

33. the steps under the Transactionand the attributes of the Partnership Units contained in theLimited Partnership Agreement, the Exchange Agreement andthe Investment Exchange Agreement involve or may involve anumber of trades of securities, including the trades notedbelow (collectively the "Trades") and there maybe no registration or prospectus exemptions available underthe Legislation for certain of the Trades:

Trades in connection withthe initial issuance of Subordinate Voting Trust Units

(a) the issuance of NewcoCommon Shares and Newco Notes by Newco to Shareholders andthe transfer of Contrans Shares by Shareholders to Newcoin exchange;

(b) the issuance of SubordinateVoting Trust Units by the Fund to holders of Newco CommonShares and Newco Notes and the transfer of Newco CommonShares and Newco Notes by holders to the Fund in exchange;

(c) the sale of Newco CommonShares and Newco Notes by the Fund to the Operating Trustand the issuance of Operating Trust Units and OperatingTrust Notes by the Operating Trust to the Fund as consideration;

Trades in connection withthe amalgamation of Contrans and Newco

(d) the issuance of NewContrans Common Shares and New Contrans Notes by New Contransto the Operating Trust and the transfer of Newco CommonShares and Newco Notes by the Operating Trust in exchange;

(e) the issuance of NewContrans Series A Special Shares by New Contrans to holdersof Subordinate Voting Shares (or shareholders of an eligibleholding company holding Subordinate Voting Shares) and thetransfer of Subordinate Voting Shares (or shares of an eligibleholding company) by Shareholders in exchange;

(f) the issuance of NewContrans Series B Special Shares by New Contrans to holdersof Multiple Voting Shares (or shareholders of an eligibleholding company holding Multiple Voting Shares) and thetransfer of Multiple Voting Shares (or shares of an eligibleholding company) by Shareholders in exchange;

Trades in connection withthe issuance of Partnership Units and associated Special VotingRights

(g) the issuance of ClassA LP Units, or a combination of Class A LP Units and exchangenotes, which exchange notes are immediately and automaticallyexchanged for Subordinate Voting Trust Units, by the Partnershipto holders of New Contrans Series A Special Shares (or shareholdersof an eligible holding company holding New Contrans SeriesA Special Shares) and the transfer of New Contrans SeriesA Special Shares (or shares of an eligible Holding Company)by holders in exchange;

(h) the issuance of ClassB LP Units, or a combination of Class B LP Units and exchangenotes, which exchange notes are immediately and automaticallyexchanged for Subordinate Voting Trust Units, by the Partnershipto holders of New Contrans Series B Special Shares (or shareholdersof an eligible holding company holding New Contrans SeriesB Special Shares) and the transfer of New Contrans SeriesB Special Shares (or shares of an eligible holding company)by holders in exchange;

(i) the issuance of SubordinateVoting Rights by the Fund to holders of Class A LP Units;

(j) the issuance of MultipleVoting Rights by the Fund to holders of Class B LP Units;

(k) the issuance of NewContrans Common Shares by New Contrans to the OperatingTrust for each Subordinate Voting Right and Multiple VotingRight issued by the Fund;

Trades in connection withthe Exchange Agreements and Investment Exchange Agreement

(l) the grant by the OperatingTrust to the holders of Partnership Units, pursuant to theExchange Agreements, of the Exchange Right;

(m) the creation of theright to effect a Compulsory Exchange in favour of the OperatingTrust;

(n) the issuance and intra-grouptransfers of Subordinate Voting Trust Units and relatedissuances of securities of the Operating Trust in considerationtherefor, all by and between the Fund and the OperatingTrust, from time to time to enable the Operating Trust todeliver Subordinate Voting Trust Units to a holder of PartnershipUnits upon the exchange of Partnership Units pursuant tothe Exchange Right or the Compulsory Exchange (i.e., theFund will issue and contribute Subordinate Voting TrustUnits to the Operating Trust and in consideration therefor,the Operating Trust will issue securities of the OperatingTrust to the Fund; the Operating Trust will then have SubordinateVoting Trust Units to deliver to holders of PartnershipUnits upon exercise of the Exchange Right or CompulsoryExchange);

(o) the transfer of SubordinateVoting Trust Units by the Operating Trust to the holdersof Partnership Units upon the exercise of the Exchange Rightor the Compulsory Exchange;

(p) the transfer of PartnershipUnits by the holder to the Operating Trust upon the exchangeof Partnership Units pursuant to the Exchange Right or theCompulsory Exchange;

(q) the redemption, fromtime to time, of Partnership Units by the Partnership inthe event that the Operating Trust is unable to acquirePartnership Units upon exercise of the Exchange Right orthe Compulsory Exchange;

(r) the issuance of SubordinateVoting Trust Units by the Fund, from time to time, in connectionwith the redemption of Partnership Units by the Partnership,and the subsequent delivery thereof by the Fund upon suchexercise of the redemption right;

(s) the redemption, fromtime to time, of Special Voting Rights of the Fund uponthe exchange of the associated Partnership Units;

(t) the exchange, from timeto time, of Multiple Voting Rights for Subordinate VotingRights in certain circumstances; and

Post-Transaction Trades

(u) the distribution bythe Fund, from time to time, to the holders of PartnershipUnits of Subordinate Voting Rights upon the issuance offurther Class A LP Units to such holders in order to maintainthe equivalency of the Partnership Units to the SubordinateVoting Trust Units.

34. in addition, there aretrades in connection with the redemption of Subordinate VotingTrust Units (the "Redemption Trades") for whichthere are no prospectus exemptions available under the legislation,being:

(a) the redemption, fromtime to time, of Subordinate Voting Trust Units by the Fundupon a request by a holder; and

(b) the distribution bythe Fund, from time to time, to the former holders of SubordinateVoting Trust Units redeemed by the Fund as a distributionin specie of Operating Trust Notes.

AND WHEREAS under theSystem, this MRRS Decision Document evidences the decision ofeach Decision Maker (collectively, the "Decision");

AND WHEREAS each of theDecision Makers is satisfied that the test contained in theLegislation that provides the Decision Maker with the jurisdictionto make the Decision has been met;

THE DECISION of the DecisionMakers under the Legislation is that:

1. the Registration Requirementand the Prospectus Requirement shall not apply to the Tradesor the Redemption Trades provided that the first trade inSubordinate Voting Trust Units, Partnership Units and OperatingTrust Notes acquired under this Decision shall be deemed tobe a distribution or primary distribution to the public; and

2. the Prospectus Requirementshall not apply to the first trade of Subordinate Voting TrustUnits acquired under this Decision provided that the conditionsin subsections (3) or (4) of section 2.6 of Multilateral Instrument45-102 Resale of Securities ("MI 45-102") are satisfied,except that for the purposes of determining the period oftime that the Fund has been a reporting issuer under section2.6 of MI 45-102, the period of time that the Company wasa reporting issuer in at least one of the jurisdictions listedin Appendix B of MI 45-102 immediately before the Transactionmay be included.

July 19, 2002.

"Paul M. Moore"                    "HaroldP. Hands"