Securities Law & Instruments


Mutual Reliance Review System for Exemptive Relief Applications -- relief from the formal valuation requirements pertaining to related party transactions and business combinations contained in Rule 61-501 -- Insider Bids, Issuer Bids, Business Combination and Related Party Transactions - relief from Part XX of the Securities Act (Ontario) -- purchase and sale of fund assets to related party and subsequent termination of fund constitute a related party transaction and business combination under OSC Rule 61-501 -- exemption from formal valuation requirements not available -- related party did not obtain any special information or degree of influence over the business and operations -- purchase price negotiations at arms' length -- exemptive relief from formal valuation requirements granted -- purchase and sale of fund assets constitutes take-over bid -- exemptions from take-over bid requirements not available for technical reasons -- exemptive relief granted from take-over bid requirements.

Applicable Ontario Statutory Provisions

Securities Act,R.S.O. 1990, c.S.5, as am., ss. 104(2)(c), 93(1)(d) and s. 184 of the Regulations.

OSC Rule 61-501 -- Insider Bids, Issuer Bids, Business Combination and Related Party Transactions.

February 23, 2007
















The local securities regulatory authority or regulator (the Decision Maker) in each of Ontario and Québec (the Jurisdictions) has received a joint application from Great Lakes Carbon Income Fund (the GLC Fund) and Rain Commodities (Canada) Inc. (RC Canada, collectively with the GLC Fund, the Applicants), in connection with the potential acquisition of the Trust Assets (the Transaction) of the GLC Fund by RC Canada, for a decision pursuant to the securities legislation of the Jurisdictions (the Legislation) that:

1. the requirement of the Legislation for a formal valuation with respect to the purchase of the Trust Assets and the Transaction generally, be waived (the Valuation Requested Relief); and

2. in Ontario, relief be granted from the application of the formal take-over bid requirements in the Legislation, including the provisions relating to delivery of an offer and take-over bid circular and any notices of change or variation thereto, delivery of a directors' circular and any notices of change or variation thereto, minimum deposit periods and withdrawal rights, take-up of and payment for securities tendered to a take-over bid, disclosure, financing, restrictions upon purchases of securities, identical consideration and collateral benefits (collectively, the Take-over Bid Requirements).

(collectively, the Requested Relief).

Under the Mutual Reliance Review System for Exemptive Relief Applications

a) the Ontario Securities Commission is the principal regulator, and

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


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


This decision is based upon the following representations by the Applicants:

1. The GLC Fund is an Ontario trust formed pursuant to a Declaration of Trust dated June 25, 2003, as amended and restated on July 28, 2003 and August 11, 2003, and as further amended on May 10, 2004 and March 13, 2006. The GLC Fund's registered office is located at Suite 3000, 79 Wellington Street West, Box 270, Toronto, Ontario, M5K 1N2.

2. The GLC Fund is, and has been for the last twelve months, a reporting issuer (or equivalent) under the securities laws of each of the provinces and territories in Canada, and is not on the list of reporting issuers in default in any of those jurisdictions.

3. The outstanding capital of the GLC Fund consists of 37,672,622 trust units (the GLC Units).

4. RC Canada and Rain Commodities (USA) Inc. (RCUSA) are subsidiaries of Rain Commodities Ltd. (RCOL, together with RC Canada and RCUSA, the Rain Entities). RCOL is an Indian public company. None of the Rain Entities are reporting issuers in Canada.

5. On March 2, 2006, RCUSA completed a transaction with American Industrial Partners (AIP) as a result of which RCUSA indirectly acquired 9,324,327 "stapled interests" and 1,029,974 additional "spinster" shares of Class B Common Stock of GLC Carbon USA Inc. (GLC Carbon USA), a subsidiary of the GLC Fund. AIP is a private equity investor that, prior to the initial public offering (the IPO) of the GLC Fund, held 95.2% of the equity interests of GLC Carbon USA. Following the IPO and subsequent secondary offering by the GLC Fund, AIP's remaining interest in GLC Carbon USA was represented by the stapled interests and spinster shares acquired by RCUSA in the above referenced transaction. AIP is at arm's length with each of the Rain Entities.

6. The stapled interests are exchangeable into GLC Units through a series of contractual exchange rights. None of the stapled interests have been exchanged to date by the Rain Entities, and none of the Rain Entities, or Rain/GLC Holdings, LLC, or any of their affiliates, currently, or have ever, directly or indirectly owned any GLC Units.

7. If RCUSA were to exchange all of the acquired stapled interests for GLC Units, RCUSA would acquire direct ownership of 9,324,327 GLC Units, representing approximately 19.84% of the outstanding units calculated on a partially diluted basis. The additional 1,029,974 spinster shares of Class B Common Stock of GLC Carbon USA are not exchangeable for GLC Units.

8. As a result of this transaction, the Rain Entities took the position that they inherited the rights of AIP/GLC Holdings, LLC under a securityholders agreement governing GLC Carbon USA, the GLC Fund and other affiliated entities. However, the GLC Fund and GLC Carbon USA did not accept that position. A number of discussions were held between the Rain Entities and the GLC Fund subsequent to the acquisition aimed at clarifying the Rain Entities' rights with respect to GLC Carbon USA, although no agreement was ever reached with the GLC Fund's trustees or the board of GLC Carbon USA regarding the Rain Entities' rights under that agreement. As well, while the Rain Entities did attempt to exercise certain of the rights relating to board nominations, RCUSA has never appointed or had elected one of their nominees to the board of GLC Carbon USA, nor has any management position with any such entity ever been held by any person associated with the Rain Entities.

9. Notwithstanding RCUSA's ownership of the securities specified in representation #3 above, the GLC Fund, GLC Carbon USA and their respective subsidiaries, on the one hand, and the Rain Entities, on the other hand, deal and have dealt with each other on an arm's length basis.

10. On March 8, 2006, the GLC Fund implemented a unitholder rights plan. On June 7, 2006, the unitholder rights plan, as amended on April 26, 2006, was approved by the GLC Fund's unitholders and such plan remains in effect as of February 12, 2007.

11. At the time of the initial acquisition of the interest in GLC Carbon USA, RCUSA also agreed with the vendor of AIP/GLC Holdings, LLC to purchase all of the unstapled shares of Class B Common Stock of GLC Carbon USA owned by certain individual shareholders (the Shareholders) of GLC Carbon USA at a price equal to US$4.77 per unstapled share, subject to conditions, including discussions aimed at clarifying the rights of the Rain Entities under the securityholders agreement. No shares were ever purchased by the Rain Entities from the Shareholders as the offer was made (at a price of US$4.77 per share) but expired unaccepted.

12. The GLC Fund currently owns all of the shares of Carbon Canada Inc., which in turn currently holds Class A Common Stock representing 73.56% of the outstanding shares of GLC Carbon USA. The balance of the outstanding shares of GLC Carbon USA are held as follows:

Class A
Class B
Existing Lender:
Class A
Class B
Holdings, LLC:
Total Equity

13. On October 19, 2006, RCUSA and RCOL entered into a confidentiality and standstill agreement with the GLC Fund and GLC Carbon USA (the NDA), Pursuant to the NDA, RCUSA and RCOL were provided with non-public information regarding the GLC Fund, GLC Carbon USA and their respective subsidiaries. Aside from information provided pursuant to the NDA, none of the Rain Entities have, or have historically had, access to non-public information in respect of the GLC Fund.

14. The GLC Fund and GLC Carbon USA provided another party with due diligence access that was on substantially the same terms as the NDA.

15. RC Canada, RCUSA and the GLC Fund have entered into an agreement whereby RC Canada would acquire 100% of the Trust Assets of the GLC Fund (the Proposed Transaction). Trust Assets include the common shares of Carbon Canada Inc. and the 16% notes of Huron Carbon ULC held by the GLC Fund. Upon completion of the purchase and sale of the Trust Assets, the GLC Fund would terminate its existence and distribute its remaining assets, principally the cash received in the transaction, to its unitholders.

16. The parties have agreed on an effective price per unit that would be paid for the Trust Assets of C$11.60.

17. The purchase and sale of the Trust Assets, being a transaction between an issuer and a related party of that issuer, would be a "related party transaction" within the meaning of the Legislation.

18. The purchase and sale of the Trust Assets would need to be approved by not only two-thirds of the GLC Fund's unitholders that vote on the transaction at the special meeting of unitholders (required by the declaration of trust), but also by a majority of the minority shareholders (required by the Legislation), excluding the votes cast (if any) by the Rain Entities, their affiliates and the Shareholders. Given that these entities do not hold voting securities in the GLC Fund, the minority vote requirement will be satisfied if the necessary two-thirds majority is achieved at the meeting.

19. The Legislation also requires that a formal valuation be completed for a related party transaction. In the case of the purchase and sale of the Trust Assets, the subject matter of the formal valuation would be the Trust Assets themselves (being the non-cash assets involved in the related party transaction.)

20. As a holder of a GLC Unit may have their interest in that security terminated without their consent on the termination of the GLC Fund following the completion of the purchase and sale of the Trust Assets, the termination of the GLC Fund may also be considered a "business combination" or a "going private transaction", as applicable, for purposes of the Legislation.

21. There is no exemption available in the Legislation that would provide an exemption from the formal valuation requirement in these circumstances.

22. By order of the Ontario Securities Commission dated March 19, 2004, Carbon Canada Inc. was deemed a reporting issuer for purposes of the Legislation in Ontario. As a result, the proposed purchase of the shares of Carbon Canada Inc. is a take-over bid within the meaning of Ontario Legislation for which no exemption is available.

23. The interest of the Rain Entities in GLC Carbon USA and its status as an "insider" has not resulted in the Rain Entities being provided with any special information or obtaining any degree of influence over the business and operations of GLC Carbon USA.

24. Except pursuant to the NDA, the Rain Entities have not gained any knowledge of, or influence over, the business or operations of the GLC Fund that would otherwise be within the possession of any other "insider".

25. Each of the trustees of the GLC Fund (i) are at arm's length with each of the Rain Entities; (ii) on February 4, 2007 approved the Proposed Transaction; and (iii) on February 4, 2007 approved the application by the GLC Fund for the Valuation Requested Relief.


Each of the Decision Makers is satisfied that the test contained in the Legislation 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 Valuation Requested Relief is granted.

"Naizam Kanji"
Ontario Securities Commission

The further decision of the Decision Maker in Ontario is that the Take-Over Bid Requested Relief is granted.

"Carol S. Perry"
Ontario Securities Commission
"David L. Knight"
Ontario Securities Commission