Securities Law & Instruments

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- OSC Rule 61-501 -- take-over bid and subsequent business combination -- Rule 61-501 requires sending of information circular and holding of meeting in connection with second step business combination -- target's declaration of trust provides that a resolution in writing executed by unitholders holding more than 66 2/3% of the outstanding units is valid and binding as if such voting rights had been exercised in favour of such resolution at a meeting of Unitholders -- second step business combination to be subject to minority approval, calculated in accordance with section 8.2 of Rule 61-501 -- relief granted from requirement that information circular be sent and meeting be held.

Applicable Ontario Rule

OSC Rule 61-501 Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions, ss. 4.2, 9.1.

June 18, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUEBEC AND ONTARIO

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF THE

TAKE-OVER BID FOR

CLEAN POWER INCOME FUND BY

MACQUARIE POWER & INFRASTRUCTURE

INCOME FUND

 

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of Quebec and Ontario (the "Jurisdictions") has received an application from Macquarie Power & Infrastructure Income Fund (the "Applicant" or "MPIIF"), in connection with a take-over bid (the "Bid") for Clean Power Income Fund (the "Fund"), for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") that the requirements of the Legislation that:

(1) a Compulsory Acquisition or the Subsequent Acquisition Transaction (each as defined below), as applicable, be approved at a meeting of the holders (the "Unitholders") of the trust units of the Fund ("Units"); and

(2) an information circular be sent to the Unitholders in connection with a Compulsory Acquisition or the Subsequent Acquisition Transaction, as applicable;

be waived (collectively, the "Requested Relief").

Under the Mutual Reliance Review System ("MRRS") for Exemptive Relief Applications:

(a) the Ontario Securities Commission ("OSC") 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 representations by the Applicant:

1. MPIIF is an unincorporated, open-ended, limited purpose trust established under the laws of the Province of Ontario by a declaration of trust dated March 15, 2004, as amended and restated as of April 16, 2004 and as further amended effective February 21, 2006. The head office and registered office of MPIIF are located in Toronto, Ontario. MPIIF is a reporting issuer in all provinces and territories of Canada and is not on the list of defaulting issuers maintained in any Jurisdiction.

2. The Fund is an unincorporated, open-ended, limited purpose trust established under the laws of the Province of Ontario pursuant to a trust indenture dated October 31, 2001, as amended and restated as of July 16, 2003 (the "Trust Indenture"). The head office and registered office of the Fund are located in Toronto, Ontario. The Fund is a reporting issuer in all provinces and territories of Canada and is not on the list of defaulting issuers maintained in any Jurisdiction. The Units are listed on the Toronto Stock Exchange under the trading symbol "CLE".

3. MPIIF, the Fund and Clean Power Operating Trust ("CPOT"), the sole beneficiary of which is the Fund, entered into a support agreement (the "Support Agreement") dated April 18, 2007, pursuant to which MPIIF agreed to make the Bid and the Fund agreed to support the Bid, all upon the terms and conditions set out in the Support Agreement. MPIIF and the Fund issued a joint press release announcing the signing of the Support Agreement on April 18, 2007.

4. In connection with the Bid and in accordance with the provisions of the Support Agreement, on May 18, 2007, MPIIF sent a take-over bid circular (the "Circular") to Unitholders and holders of the Fund's 6.75% convertible debentures due December 31, 2010 (the "Debentures").

5. The Bid is for all of the outstanding Units in consideration for 0.5581 trust units of MPIIF ("MPIIF Units") and a Contingency Value Receipt (a "CVR") for each Unit validly deposited to the Bid and not validly withdrawn.

6. The outstanding Units are held by CDS Clearing and Depository Services Inc. ("CDS") in book-entry only form.

7. One of the conditions of the Bid is that greater than 66 2/3% of the Units that are issued and outstanding on the expiry of the Bid, other than Units held at the commencement date of the Bid by or on behalf of MPIIF or its affiliates, will be validly deposited and not validly withdrawn under the Bid.

8. It is currently contemplated that:

(a) If the conditions to the Bid are satisfied or waived by MPIIF and MPIIF takes up and pays for Units deposited pursuant to the Bid, MPIIF may proceed with a compulsory acquisition of the Units not deposited to the Bid in accordance with the terms of the Trust Indenture for the same consideration per Unit as was paid under the Bid, if, within 120 days after the date of the Bid, the Bid is accepted by holders of not less than 90% of the outstanding Units and Units issuable on the exchange, conversion or exercise of any outstanding exchangeable securities (being a unit, share or other security convertible into or exchangeable for Unit(s) without the payment of additional consideration therefor, whether or not issued by the Fund), other than outstanding Units and Units issuable upon the exchange, conversion or exercise of exchangeable securities that are beneficially owned, or over which control or direction is exercised at the date of the Bid by or on behalf of MPIIF or an affiliate or an associate of MPIIF or any person or company acting jointly or in concert with MPIIF (a "Compulsory Acquisition").

(b) If a Compulsory Acquisition in the manner described above is not available to MPIIF or if MPIIF elects not to proceed with a Compulsory Acquisition in the manner described above, MPIIF may:

(i) by way of the Written Resolution (as defined below), approve and permit the Trust Indenture to be amended as permitted pursuant to its terms (the "Compulsory Acquisition Amendment") to provide that a compulsory acquisition may be effected immediately if MPIIF and its affiliates, after take-up of and payment for Units deposited under the Bid, hold not less than 66?% of the Units that are issued and outstanding on the expiry of the Bid, other than Units held at the date of the Bid by or on behalf of MPIIF or its affiliates or associates in order to provide for the acquisition of any Units held by non-tendering offerees and any Units issued upon the conversion of Debentures after the expiry of the Bid and prior to the consummation of such compulsory acquisition (collectively, the "Compulsory Acquisition Offerees") in return for the same consideration as the consideration paid under the Bid (the acquisition contemplated by such Compulsory Acquisition Amendment is also referred to herein as a "Compulsory Acquisition"); and

(ii) proceed with the Compulsory Acquisition in the manner described in paragraph 8(b)(i) above to acquire the Units held by Compulsory Acquisition Offerees as permitted by the Trust Indenture, as so amended.

(c) In connection with a Compulsory Acquisition, if MPIIF elects to proceed thereby, MPIIF may by way of the Written Resolution (as defined below) approve and permit the Trust Indenture to be amended as permitted pursuant to its terms (the "Notice Amendment") to provide that Units held by Compulsory Acquisition Offerees will be deemed to have been transferred to an offeror immediately on the giving of the offeror's notice as prescribed by the Trust Indenture (as opposed to 20 days after receipt of an offeror's notice, as currently provided) notifying Compulsory Acquisition Offerees that, among other things, Compulsory Acquisition Offerees are required to transfer their Units to the offeror on the same terms on which the offeror acquired the Units of the offerees who accepted the Bid.

(d) If a Compulsory Acquisition in the manner described in subsections 8(a) or 8(b) above is not available to MPIIF or MPIIF elects not to proceed with a Compulsory Acquisition, MPIIF may:

(i) by way of the Written Resolution (as defined below), approve and permit: (A) the sale of the assets of the Fund to MPIIF in exchange for aggregate consideration at least equal to the consideration that would have been payable by MPIIF under the Bid, if all Units had been deposited thereunder, plus the assumption of the Debenture liability and, following such sale, the winding-up of the Fund, including the redemption of all Units held by Unitholders (subject to the retention or reacquisition of one Unit by MPIIF in its discretion) for a per Unit redemption price equal in value to and in the same form as the per Unit consideration offered pursuant to the Bid (the "Subsequent Acquisition Transaction"), and (B) certain amendments to the Trust Indenture, as permitted pursuant to its terms, in connection therewith (the "Subsequent Acquisition Amendments"); and

(ii) proceed with the Subsequent Acquisition Transaction in the manner described in paragraph 8(d)(i) above as permitted by the Trust Indenture, as so amended.

(e) In order to effect any Compulsory Acquisition or Subsequent Acquisition Transaction, all in accordance with the foregoing, rather than seeking the Unitholders' approval at a special meeting of the Unitholders to be called for such purpose, MPIIF intends to rely on section 10.8 of the Trust Indenture, which specifies that a resolution in writing by Unitholders holding a proportion of all the outstanding Units required to vote in favour thereof at a meeting of Unitholders to approve that resolution is as valid as if such resolution had been passed at a meeting of Unitholders (the "Written Resolution").

(f) The amendments to the Trust Indenture in connection with either a Compulsory Acquisition or Subsequent Acquisition Transaction must be approved by "special resolution", which is defined in the Trust Indenture as a resolution passed by Unitholders holding more than 66 2/3% of the outstanding Units; accordingly, the Written Resolution must be approved by Unitholders holding more than 66 2/3% of the outstanding Units.

(g) The Written Resolution will approve, among other things, the Compulsory Acquisition Amendment, the Subsequent Acquisition Amendments, the Notice Amendment and any Compulsory Acquisition or Subsequent Acquisition Transaction undertaken in accordance therewith, as applicable.

(h) If MPIIF is unable to or elects not to pursue any Compulsory Acquisition or Subsequent Acquisition Transaction in the manner described above, MPIIF has reserved the right, to the extent permitted by applicable laws and subject to the terms and conditions of the Support Agreement, to:

(i) purchase additional Units in the open market or in privately negotiated transactions or otherwise;

(ii) take no further action to acquire additional Units;

(iii) acquire the Fund's assets by way of an arrangement, amalgamation, merger, reorganization, consolidation, recapitalization, redemption or other transaction involving MPIIF and/or any of its affiliates and the Fund and/or its subsidiaries; or

(iv) sell or otherwise dispose of any or all Units acquired pursuant to the Bid.

9. Notwithstanding section 10.8 of the Trust Indenture, the Legislation requires, in certain circumstances, that a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable, be approved at a meeting of Unitholders called for that purpose.

10. To effect either a Compulsory Acquisition or a Subsequent Acquisition Transaction, as applicable, the Applicant will obtain minority approval, as that term is defined in the Legislation, calculated in accordance with the terms of Section 8.2 of Ontario Securities Rule 61-501 and Section 8.2 of Autorité des marchés financiers du Québec Regulation Q-27 (the "Minority Approval"), albeit not at a meeting of Unitholders, but by the Written Resolution.

11. The Circular provided to Unitholders in connection with the Bid contains all disclosure required by applicable securities laws, including without limitation the take-over bid provisions and form requirements of the securities legislation in the Jurisdictions and the provisions of OSC Rule 61-501 relating to the disclosure required to be included in a disclosure document for a formal bid in respect of a second-step business combination.

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 Requested Relief is granted provided that Minority Approval shall have been obtained by Written Resolution.

"Naizam Kanji"
Manager, Mergers & Acquisitions
Ontario Securities Commission