Strongco Inc, Strongco Income Fund and Strongco Acquisitionco Inc. - MRRS Decsion

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- reporting issuer participating in plan of arrangement to form itself into income fund -- fund deemed to be reporting issuer

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c.S.5, as am., ss. 83.1(1)

May 3, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION

OF ONTARIO, NEW BRUNSWICK, NOVA SCOTIA AND

NEWFOUNDLAND AND LABRADOR (the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

STRONGCO INC. (Strongco),

STRONGCO INCOME FUND (the Fund) AND

STRONGCO ACQUISITIONCO INC. (AcquisitionCo, and

together with Strongco and the Fund, the Filer)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation (the Legislation) of the Jurisdictions that the Fund be deemed or declared a reporting issuer at the effective date (the Effective Date) of the proposed plan of arrangement (the Arrangement) under section 182 of the Business Corporations Act (Ontario) (the OBCA) pursuant to the terms of an arrangement agreement made as of March 23, 2005 between Strongco, the Fund and AcquisitionCo which provides for the creation of the Fund as a publicly-traded income trust, for the purposes of the Legislation of the Jurisdictions.

Under the Mutual Reliance Review System for Exemptive Relief Applications

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

This decision is based on the following facts represented by the Filer:

1. Strongco is a corporation amalgamated and subsisting pursuant to the provisions of the OBCA and has its head and registered office located at 1640 Enterprise Road, Mississauga, Ontario, L4W 4L4.

2. Strongco is a reporting issuer in all of the provinces of Canada and is not on any list of defaulting reporting issuers maintained under the Legislation in those jurisdictions.

3. The authorized capital of Strongco consists of an unlimited number of Common Shares. As at March 24, 2005, there were 9,599,855 Common Shares and options (Options) to acquire 450,800 Common Shares outstanding. The Common Shares are listed on the Toronto Stock Exchange (the TSX).

4. The Fund is an unincorporated open-ended limited purpose trust established under the laws of the Province of Ontario pursuant to a declaration of trust (the Declaration of Trust) dated March 21, 2005, and has its head and principal office located at 1640 Enterprise Road, Mississauga, Ontario, L4W 4L4.

5. An unlimited number of units (Units) of the Fund will be issuable pursuant to the Declaration of Trust. As at March 24, 2005, there were four Units outstanding and held by Strongco.

6. The Fund is not a reporting issuer in any of the jurisdictions of Canada but the Units to be issued in connection with the Arrangement have been conditionally approved for listing on the TSX subject to the listing requirements of such exchange.

7. AcquisitionCo is a corporation incorporated pursuant to the OBCA for purposes of acquiring, directly or indirectly, the Common Shares pursuant to the Arrangement and has its head and registered office located at 1640 Enterprise Road, Mississauga, Ontario, L4W 4L4.

8. The Fund owns all of the issued and outstanding common shares (AcquisitionCo Shares) of AcquisitionCo.

9. AcquisitionCo is not a reporting issuer in any of the jurisdictions of Canada. As part of the Arrangement, AcquisitionCo will amalgamate with Strongco to form "New Strongco". New Strongco will become a reporting issuer in certain Jurisdictions as it is the company whose existence will continue following the amalgamation and the exchange of securities in connection with the Arrangement where Strongco has been a reporting issuer for at least 12 months.

10. Strongco has called a meeting (the Meeting) of the holders (Shareholders) of the Common Shares to, among other things, consider and approve the Arrangement. The Meeting will be held on April 28, 2005.

11. The purpose of the Arrangement is to create the Fund as a publicly-traded income trust. Shareholders currently own Common Shares of Strongco, a corporate entity. The Arrangement will result in Shareholders transferring their Common Shares to the Fund in consideration for Units of the Fund.

12. On the Effective Date each of the events below shall, except as otherwise expressly provided, be deemed to occur sequentially without further act or formality:

(a) the Common Shares held by Shareholders (Dissenting Shareholders) who have exercised their dissent rights which remain valid immediately before the Effective Date shall be deemed to have been transferred to Strongco and be cancelled and cease to be outstanding and such Dissenting Shareholders shall cease to have any rights as Shareholders other than the right to be paid the fair value of their Common Shares;

(b) each issued and outstanding Common Share shall be transferred to the Fund (free of any claims) in exchange for one Unit;

(c) the Fund shall transfer to AcquisitionCo (free of any claims) each of the Common Shares held by it in exchange for,

(i) one Series 1 Note of AcquisitionCo (a Series 1 Note), and

(ii) one AcquisitionCo Share,

and an amount equal to the difference between the fair market value of a Common Share and the fair market value of one Series 1 Note, in each case determined at the time of the transfer, shall be added by AcquisitionCo to the stated capital of the AcquisitionCo Shares for each AcquisitionCo Share so issued;

(d) each Option shall be terminated and cease to have further force and effect; and

(e) AcquisitionCo and Strongco (hereinafter referred to in this paragraph (e) as predecessor corporations) shall be amalgamated to form New Strongco with the effect that,

(i) all of the property of the predecessor corporations held immediately before the amalgamation (except any amounts receivable from any predecessor corporations or shares of any predecessor corporations) will become the property of New Strongco;

(ii) all of the liabilities of the predecessor corporations immediately before the amalgamation (except amounts payable to any predecessor corporations) will become liabilities of New Strongco;

(iii) the Fund will receive that number of common shares of New Strongco equal to the aggregate number of Units issued pursuant to paragraph (b) in exchange for all of the AcquisitionCo Shares held by it immediately before the amalgamation; and

(iv) the stated capital of the common shares of New Strongco will be fixed at an amount equal to the stated capital of the AcquisitionCo Shares immediately prior to the amalgamation.

13. Upon completion of the Arrangement, Shareholders will own all of the issued and outstanding Units of the Fund and the Fund will be the holder of all of the issued and outstanding securities of New Strongco.

14. Strongco's information circular dated March 24, 2005 delivered on behalf of Strongco to the Shareholders in connection with the Meeting contains prospectus-level disclosure concerning the respective business and affairs of Strongco, the Fund and New Strongco, including financial information pertaining to the Fund, and a detailed description of the Arrangement.

15. The Arrangement will require: (i) approval by not less than two-thirds of the votes cast by the Shareholders voting, in person or by proxy, at the Meeting; and (ii) approval of the Ontario Superior Court of Justice.

17. At the Effective Date, the Fund will be a reporting issuer under the Legislation of British Columbia, Alberta, Saskatchewan and Québec but will not be a reporting issuer under the Legislation of Ontario, Manitoba, New Brunswick, Nova Scotia and Newfoundland and Labrador.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Fund be deemed or declared a reporting issuer at the Effective Date for the purposes of the Legislation of the Jurisdictions.