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 Statutory Provisions

OSC Rule 61-501 Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions, ss. 4.2, 8.2, 9.1.

July 11, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO AND QUEBEC

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

THE TAKE-OVER BID FOR

VERSACOLD INCOME FUND BY

EIMSKIP HOLDINGS INC.,

AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF

HF. EIMSKIPAFÉLAG ÍSLANDS

 

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of Ontario and Quebec (the Jurisdictions) has received an application from Eimskip Holdings Inc. (the Filer), an indirect wholly-owned subsidiary of HF. Eimskipafélag Islands (Eimskipafélag), in connection with a take-over bid (the Take-Over Bid) for Versacold Income Fund (the Fund) by the Filer for a decision pursuant to the securities legislation of the Jurisdictions (the Legislation) that the requirement (where applicable):

1. to call a meeting of unitholders of the Fund (Unitholders) to approve a Compulsory Acquisition or any Subsequent Acquisition Transaction (each as defined below); and

2. to send an information circular to Unitholders in connection with a meeting to approve a Compulsory Acquisition or a Subsequent Acquisition Transaction;

be waived (collectively, the Requested Relief).

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

(a) the 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 facts represented by the Filer:

1. The Filer is a corporation incorporated under the Canada Business Corporations Act and an indirect wholly-owned subsidiary of Eimskipafélag. The Filer was formed for the purpose of making the Take-Over Bid. Its registered office is located at 100 King Street West, Suite 6600, 1 First Canadian Place, Toronto, Ontario, M5X 1B8.

2. Eimskipafélag is an investment company domiciled in Iceland. It has interests in air, land and sea transportation solutions worldwide. Its head and registered office is located at Korngordum 2, 104 Reykjavik, Iceland.

3. The Fund is an unincorporated limited purpose income trust established under the laws of British Columbia pursuant to its declaration of trust dated December 19, 2001 (the Declaration of Trust). The units of the Fund (the Units) are listed for trading on the Toronto Stock Exchange under the symbol "ICE.UN". The head and registered office of the Fund is located in British Columbia.

4. A take-over bid circular (the Circular) together with a trustees' circular recommending that holders of Units accept the offer was mailed to holders of Units, and holders of securities that are convertible into Units (the Exchangeable Securities), on June 12, 2007.

5. Eimskipafélag, the Filer and the Fund entered into a support agreement (the Support Agreement) dated May 29, 2007 pursuant to which the Offeror agreed to make the Take-Over Bid and the Fund agreed to support the Take-Over Bid, all on the terms and conditions of the Support Agreement.

6. The Take-Over Bid includes the following terms and conditions:

(a) the Filer has offered to acquire all of the issued and outstanding Units at a price of $12.25 in cash per Unit, including any Units that may become issued and outstanding prior to the Expiry Time (defined below) upon the conversion, exchange or exercise of securities that are convertible into, or exchangeable or exercisable for, Units;

(b) the Take-Over Bid is open for acceptance until 8:00 p.m. (Toronto time) on Friday, July 28, 2007, unless withdrawn or extended (the Expiry Time);

(c) there shall have been validly deposited under the Take-Over Bid and not withdrawn at the Expiry Time that number of Units which, together with any Units directly or indirectly owned by the Filer, constitutes at least 66 2/3% of the issued and outstanding Units at the Expiry Time; and

(d) if the Filer takes up and pays for Units deposited under the Take-Over Bid, the Filer currently intends to carry out a compulsory acquisition or a subsequent acquisition transaction to acquire all of the units not deposited under the Take-Over Bid, as more particularly described below.

7. Section 14.12 of the Declaration of Trust currently permits an offeror to acquire the Units not tendered to an offer if, within 120 days after the date the offer is made, the offer is accepted by the holders of not less than 90% of the outstanding Units and Units issuable upon the exchange, conversion or exercise of outstanding Exchangeable Securities, taken together, other than outstanding Units and Units issuable upon the exchange, conversion or exercise of Exchangeable Securities held by or on behalf of, or issuable to, the offeror, an affiliate or an associate of the offeror on the date of the offer (a Compulsory Acquisition).

8. If the Filer takes up and pays for the Units deposited pursuant to the Take-Over Bid, the Filer may proceed with a Compulsory Acquisition of the Units not deposited to the Take-Over Bid as permitted under the Declaration of Trust.

9. If a Compulsory Acquisition as permitted under the Declaration of Trust is not available to the Filer or if the Filer elects not to proceed under those provisions, the Filer currently intends to:

(a) amend Section 14.12 of the Declaration of Trust to provide that a Compulsory Acquisition may be effected immediately if the Filer and its affiliates, after take-up and payment of Units deposited under the Take-Over Bid, hold more than 66 2/3% of the outstanding Units (the Threshold Amendment) and Units issuable upon the exchange, conversion or exercise of any Exchangeable Securities; and/or

(b) amend the Declaration of Trust to change the rights, privileges, restrictions and conditions attaching to the Units (other than Units held by the Filer) and re-designate the Units as special units (Special Units) such that, at the time (the Transfer Time) of delivery by the Fund of a transfer notice to the Fund's transfer agent and immediately following any issuance of Special Units after the Transfer Time, each holder of Special Units shall transfer, and shall be deemed to have transferred to the Filer all of such holder's right, title and interest in and to its Special Units and at and after the Transfer Time, each holder of Special Units shall cease to be a holder of such Special Units and shall not be entitled to exercise any of the rights of a holder of Special Units other than the right to receive $12.25 in cash per Special Unit (such amendments to the Declaration of Trust and transfer of Special Units as a result thereof, a Capital Reorganization).

10. Following such amendments to the Declaration of Trust, it is the current intention of the Filer to avail itself of the Compulsory Acquisition, as amended by the Threshold Amendment, or the Capital Reorganization, as the case may be, to acquire the Units not deposited under the Take-Over Bid (subject to paragraph 17, each of the Compulsory Acquisition, as so amended, and the Capital Reorganization, as applicable, is referred to herein as a Subsequent Acquisition Transaction). If the Filer elects to proceed with a Subsequent Acquisition Transaction, the consideration payable to acquire the remainder of the Units will be the identical consideration per Unit payable by the Filer under the Take-Over Bid.

11. To exercise its rights in respect of a Compulsory Acquisition under Section 14.12 of the Declaration of Trust, the Filer must give notice (the Offeror's Notice) to each holder of Units or Exchangeable Securities who did not accept the Take-Over Bid (in each case a Dissenting Unitholder) of such proposed acquisition by registered mail within 60 days after the date of termination of the Take-Over Bid and in any event within 180 days after the date of the Take-Over Bid. In accordance with the Declaration of Trust, within 20 days after it receives the Offeror's Notice, each Dissenting Unitholder must send its Units and/or Units issuable pursuant to outstanding Exchangeable Securities to the Fund.

12. In connection with either a Compulsory Acquisition or a Subsequent Acquisition Transaction, the Filer currently intends to amend the provisions of Section 14.12 of the Declaration of Trust to provide that Units held by non-tendering Unitholders will be deemed to have been transferred to the Filer immediately on the giving of the Offeror's Notice and that such non-tendering Unitholders will cease to have any rights as Unitholders from and after that time, other than the right to be paid the same consideration that the Filer would have paid to the non-tendering Unitholders if they had tendered such Units to the Take-Over Bid (the Notice Amendment).

13. In order to effect either a Compulsory Acquisition, if available and if the Filer elects to proceed thereunder, or a Subsequent Acquisition Transaction in accordance with the foregoing, rather than seeking Unitholder approval at a special meeting of the Unitholders to be called for such purpose, the Filer intends to rely on Section 13.10 of the Declaration of Trust, which provides that a resolution in writing executed by Unitholders holding more than 66 2/3% of the outstanding votes at any time shall be as valid and binding for all purposes of the Declaration of Trust as if such Unitholders had exercised at that time all of their voting rights in favour of such resolution at a meeting of Unitholders duly called for that purpose.

14. It is a term of the Take-Over Bid, as contained in the Circular and letter of transmittal for use by all registered Unitholders in connection with the Take-Over Bid, that tendering Unitholders grant a power of attorney to the Filer to execute a Unitholders' resolution in writing on their behalf approving, among other things, the Threshold Amendment, the Notice Amendment, the Capital Reorganization and approving any Compulsory Acquisition or Subsequent Acquisition Transaction undertaken in accordance therewith, as applicable (the Written Resolution). The Written Resolution will be executed by or on behalf of Unitholders representing at least 66 2/3% of the votes cast by Unitholders. The Written Resolution may be effective prior to the Expiry Time.

15. Alternatively, the Filer itself may execute the Written Resolution following the take-up of Units under the Take-Over Bid (in which case, the Filer would be the holder of over 66 2/3% of the outstanding Units and, therefore, any Compulsory Acquisition or Subsequent Acquisition Transaction undertaken by the Filer would be a "business combination" under Ontario Securities Commission Rule 61-501 -- Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions (Rule 61-501) and a "going private transaction" under Regulation Q-27 -- Respecting Protection of Minority Securityholders in the Course of Certain Transactions (Regulation Q-27)).

16. If the Filer is unable to effect a Compulsory Acquisition or to propose a Subsequent Acquisition Transaction involving the Fund, or if it proposes a Subsequent Acquisition Transaction but cannot promptly obtain any required approvals or exemptions, the Filer will evaluate its other alternatives. Such alternatives could include, to the extent permitted by applicable law, purchasing additional Units in the open market, in privately negotiated transactions, in another take-over bid or otherwise, or taking no further action.

17. The details of any Subsequent Acquisition Transaction may vary, and the Filer has reserved its ability to propose any other form of subsequent acquisition transaction in accordance with applicable law.

18. Notwithstanding Section 13.10 of the Declaration of Trust, Section 4.2 of Rule 61-501 and Section 4.2 of Regulation Q-27 may require that, in certain circumstances, the Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable, be approved at a meeting of Unitholders called for that purpose.

19. To effect either a Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable, the Filer will comply with the provisions of Rule 61-501 and Regulation Q-27 (as modified by the decision document) and, specifically, will obtain minority approval, as that term is defined in the Legislation, calculated in accordance with the terms of Section 8.2 of Regulation Q-27 and Section 8.2 of Rule 61-501 (the Minority Approval), albeit not at a meeting of Unitholders, but by Written Resolution.

20. The Circular to be provided to Unitholders in connection with the Take-Over 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 Rule 61-501 relating to the disclosure required to be included in information circulars distributed in respect of business combinations.

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, albeit not at a meeting of Unitholders, but by Written Resolution.

"Naizam Kanji"
Manager
Ontario Securities Commission