Securities Law & Instruments


Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – exemption granted from the continuous disclosure, certification, insider reporting, audit committee and corporate governance requirements. Issuer meets the conditions of section 13.4 of NI 51-102, except the issuer proposes to issue convertible preferred shares that are convertible into other preferred shares of the issuer.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Requirements.
National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings.
National Instrument 52-110 Audit Committees.
National Instrument 58-101 Disclosure of Corporate Governance Practices.
National Instrument 55-102 System for Electronic Disclosure by Insiders.
National Instrument 44-101 Short Form Prospectus Distributions.

Translation

July 14, 2016

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
QUÉBEC AND ONTARIO
(the Jurisdictions)

AND

IN THE MATTER OF T
HE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
RONA INC.
(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Makers) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) granting, subject to the conditions set forth herein, the Filer or its insiders, as the case may be, relief from:

a)            the continuous disclosure requirements contained in Regulation 51-102 respecting Continuous Disclosure Obligations (as amended from time to time, Regulation 51-102) (the Continuous Disclosure Require-ments);

b)            the certification requirements contained in Regulation 52-109 respecting Certification of Disclosure in Issuers’ Annual and Interim Filings (as amended from time to time, Regulation 52-109) (the Certification Require-ments);

c)             the audit committee requirements contained in Regulation 52-110 respecting Audit Committees (as amended from time to time, Regulation 52-110) (the Audit Committee Requirements);

d)            the corporate governance disclosure requirements contained in Regulation 58-101 respecting Disclosure of Corporate Governance Practices (as amended from time to time, Regulation 58-101) (the Corporate Governance Requirements);

(the Continuous Disclosure Requirements, the Certification Requirements, the Audit Committee Requirements and the Corporate Governance Requirements are collectively referred to as the Disclosure Requirements);

e)            the insider reporting requirements set out in Regulation 55-104 respecting Insider Reporting Requirements and Exemptions (as amended from time to time, Regulation 55-104) as well as, if applicable, any comparable insider reporting requirements under the Legislation (the Insider Reporting Requirements).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

a)            the Autorité des marchés financiers is the principal regulator for this application;

b)            the Filer has provided notice that Section 4.7(1) of Regulation 11-102 respecting Passport System (Regulation 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador (the Passport Jurisdictions);

c)             the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in Regulation 14-101 respecting Definitions and Regulation 11-102 have the same meaning if used in this decision, unless otherwise defined herein.

Representations

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

The Filer

1.             The Filer is a corporation existing under the Business Corporations Act (Québec) (QBCA).

2.             The head office of the Filer is located at 220, chemin du Tremblay, Boucherville, Québec, J4B 8H7.

3.             The Filer is a reporting issuer in the Jurisdictions and the Passport Jurisdictions and it is not in default of securities legislation as reporting issuer.

4.             The authorized share capital of the Filer includes:

a)            an unlimited number of common shares (the Common Shares);

b)            an unlimited number of Class A Preferred Shares, issuable in series of which three series, designated as an unlimited number of Class A Preferred Shares, Series 5, an unlimited number of Cumulative 5-Year Rate Reset Series 6 Class A Preferred Shares (the Series 6 Class A Preferred Shares) and an unlimited number of Cumulative Floating Rate Series 7 Class A Preferred Shares (the Series 7 Class A Preferred Shares), are currently authorized.

5.             During the first quarter of 2011, the Filer issued a total of 6,900,000 Series 6 Class A Preferred Shares under a short form prospectus for total gross proceeds of $172,500,000.

6.             Pursuant to articles of amalgamation of the Filer, the Series 6 Class A Preferred Shares are convertible into Series 7 Class A Preferred Shares, and the Series 7 Class A Preferred Shares are convertible into Series 6 Class A Preferred Shares every five years. The conversion rights of the Series 6 Class A Preferred Shares and the Series 7 Class A Preferred Shares (collectively, the Preferred Shares) are collectively referred to herein as the Conversion Feature. The purpose of the Conversion Feature attached to the Preferred Shares is to allow the holder to decide every five years whether to receive a fixed-rate or a floating-rate dividend for the next five years.

7.             As of the date of this Decision, 106,950,585 Common Shares are issued and outstanding. Following the exercise by holders of Series 6 Class A Preferred Shares of the Conversion Feature on March 31, 2016, 4,677,863 Series 6 Class A Preferred Shares and 2,222,137 Series 7 Class A Preferred Shares are issued and outstanding. The Filer does not have any other classes or series of shares issued and outstanding.

8.             The Preferred Shares are listed for trading on the Toronto Stock Exchange (TSX).


9.             On October 20, 2006, the Filer issued an aggregate principal amount of $400,000,000 of 5.40% debentures due October 20, 2016 (the Debentures). As of March 27, 2016, an aggregate principal amount of $116,684,000 of Debentures remained outstanding. The Debentures are not convertible and the Filer has not made any application to list them on any exchange.

10.          The terms of the Preferred Shares as set forth under the articles of amalgamation of the Filer and the terms of the Debentures as set forth under the indenture governing the Debentures do not require the Filer to deliver or otherwise make available to the holders of Preferred Shares or Debentures continuous disclosure documents of the type contemplated under Regulation 51-102 of the Filer.

Lowe’s

11.          Lowe’s Companies, Inc. (Lowe’s) is a corporation existing under the laws of the State of North Carolina.

12.          Lowe’s principal executive office is located at 1000 Lowe’s Blvd., Mooresville, North Carolina, United States of America.

13.          Lowe’s is not a reporting issuer in Canada and is not in default of securities legislation.

14.          Lowe’s common stock is registered under section 12 of the 1934 Act and Lowe’s is not registered or required to be registered as an investment company under the Investment Company Act of 1940 of the United States of America, as amended. Lowe’s is therefore a “SEC issuer” under Regulation 51-102. Its common stock is traded on the New York Stock Exchange (NYSE).

15.          Lowe’s is not in default of the requirements imposed by the SEC or under the 1933 Act, the 1934 Act or the rules of the NYSE.

The Arrangement

16.          On May 20, 2016 the Filer and Lowe’s announced the completion of the acquisition by a wholly-owned subsidiary of Lowe’s (the Purchaser) of all of the issued and outstanding Common Shares of the Filer at a price of $24.00 per share in cash by way of a statutory plan of arrangement under the QBCA (the Arrangement).

17.          Following the closing of the Arrangement, Lowe’s is the beneficial owner of all the outstanding voting securities of the Filer.

18.          In connection with the closing of the Arrangement, the Common Shares were delisted from the TSX effective as of the close of business on May 24, 2016.

19.          Since the Preferred Shares and the Debentures remain outstanding, the Filer remains reporting issuer in the Jurisdictions and the Passport Jurisdictions.

20.          Lowe’s will provide (i) a full and unconditional guarantee of the payments to be made by the Filer in respect of the Preferred Shares, as stipulated in the terms of the securities or in an agreement governing the rights of holders of the securities, that will result in the holders of Preferred Shares being entitled to receive payment from Lowe’s within 15 days of any failure by the Filer to make a payment (the Preferred Shares Guarantee), and (ii) a full and unconditional guarantee of the payments to be made by the Filer in respect of the Debentures, as stipulated in the terms of the securities or in an agreement governing the rights of holders of the securities, that will result in the holders of Debentures being entitled to receive payment from Lowe’s within 15 days of any failure by the Filer to make a payment (together with the Preferred Shares Guarantee, the Guarantees), in each case, as contemplated by paragraph (d) of the definition of “designated credit support securities” in Regulation 51-102.

21.          Lowe’s will be a “parent credit supporter”, the Filer will be a “credit support issuer” and the Debentures will be “designated credit support securities”, in each case as defined in Regulation 51-102.

22.          The Preferred Shares are not “designated credit support securities” because of their Conversion Feature and the fact that they are convertible into securities of the Filer. As a result, the Filer cannot rely on the exemption provided in Section 13.4 of Regulation 51-102 and this relief is required.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Makers to make the decision.


Relief from the Disclosure Requirements

The decision of the Decision Makers under the Legislation is that relief from the Disclosure Requirements is granted, provided that:

a)            the Filer satisfies all the conditions set forth in Section 13.4(2) of Regulation 51-102, other than sub-paragraph (c);

b)            Lowe’s is the beneficial owner of all the issued and outstanding voting securities of the Filer;

c)             the Filer files in electronic format copies of all documents Lowe’s is required to file with the SEC under the 1934 Act, at the same time or as soon as practicable after the filing by Lowe’s of those documents with the SEC;

d)            the Filer does not issue any securities, and does not have any securities outstanding, other than:

i.              designated credit support securities;

ii.             the Preferred Shares;

iii.            securities issued to and held by Lowe’s or an affiliate of Lowe’s;

iv.            debt securities issued to and held by banks, loan corporations, loan and investment corporations, savings companies, trust corporations, treasury branches, savings or credit unions, financial services cooperatives, insurance companies or other financial institutions; or

v.             securities issued under exemption from the prospectus requirement in Section 2.35 of Regulation 45-106 respecting Prospectus Exemptions.

Relief from the Insider Reporting Requirements

The further decision of the Decision Makers under the Legislation is that relief from the Insider Reporting Requirements is granted, provided that:

a)            the Filer satisfies the conditions of the relief from the Disclosure Requirements;

b)            if the insider is not Lowe’s, (i) the insider does not receive, in the ordinary course, information as to material facts or material changes concerning Lowe’s before the material facts or material changes are generally disclosed, and (ii) the insider is not an insider of Lowe’s in any capacity other than by virtue of being insider of the Filer; and

c)             if the insider is Lowe’s, Lowe’s does not beneficially own any Preferred Shares or “designated credit support securities”.

“Gilles Leclerc”
Superintendent, Securities Markets