Securities Law & Instruments

Headnote

NP 11-203 -- MI 61-101 -- take-over bid and subsequent business combination -- MI 61-101 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 valid as if such voting rights had been exercised at a meeting of unitholders -- relief granted from requirement that information circular be sent and meeting be held -- minority approval to be obtained albeit in writing rather than at a meeting of unitholders.

Applicable Legislative Provisions

Multilateral Instrument 11-102 Passport System.

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdiction.

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions.

June 16, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

THE TAKE-OVER BID FOR

RESOLVE BUSINESS OUTSOURCING INCOME FUND

BY 2206997 ONTARIO INC.

(the Filer)

 

DECISION

Background

The principal regulator (the Principal Regulator) in the Jurisdiction has received an application from the Filer, in connection with a take-over bid (the Offer) for all of the outstanding units (the Units) of Resolve Business Outsourcing Income Fund (Resolve), for a decision pursuant to the securities legislation of the Jurisdiction (the Legislation) that the following requirements of section 4.2 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101) be waived (the Exemption Sought):

1. a Compulsory Acquisition or Subsequent Acquisition Transaction (each as defined below), as applicable, be approved at a meeting of the holders of Units (the Unitholders) and special voting units of Resolve (the Special Voting Units); and

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

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

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

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in Québec.

Interpretation

Defined terms contained in National Instrument 14-101 and MI 11-102 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 Filer:

1. Pursuant to the requirements of National Policy 11-203 and MI 11-102, the Ontario Securities Commission is the principal regulator to review and grant the Exemption Sought as the head office of Resolve is located in Ontario.

2. Davis + Henderson Income Fund (D+H) is a trust established under the laws of the Province of Ontario pursuant to a declaration of trust dated November 6, 2001, as amended and restated on July 23, 2004. D+H's head office is located at 939 Eglinton Avenue East, Suite 201, Toronto, Ontario, M4G 4H7. D+H is a reporting issuer in all of the provinces and territories of Canada and files its continuous disclosure documents with the Canadian securities regulatory authorities.

3. D+H is authorized to issue an unlimited number of trust units (the D+H Units), which are listed on the Toronto Stock Exchange (the TSX) under the trading symbol "DHF.UN" and held by CDS Clearing and Depository Services Inc. (CDS) in non-certificated inventory.

4. An application has been made to the TSX by D+H to list the D+H Units that are to be issued to unitholders of Resolve (collectively, the Unitholders) after take-up of and payment for Units deposited under the Offer. The D+H Units issued in connection with the Offer will be issued as fully paid D+H Units.

5. The Filer is an indirect wholly owned subsidiary of D+H and was incorporated under the laws of the Province of Ontario on May 22, 2009 for the purposes of the Offer and has not carried on any business prior to the date hereof other than in respect of matters directly relating to the making of the Offer. The registered office of the Filer is 939 Eglinton Avenue East, Suite 201, Toronto, Ontario, M4G 4H7. The Filer is not a reporting issuer in any of the provinces or territories of Canada.

6. Resolve is an unincorporated open-ended limited purpose trust formed under the laws of the Province of Ontario pursuant to a declaration of trust (the Declaration of Trust) dated March 9, 2006. Resolve's head office is located at 85 The East Mall, Toronto Ontario, M8Z 5W4. Resolve is a reporting issuer in all of the provinces and territories of Canada and files its continuous disclosure documents with the Canadian securities regulatory authorities.

7. Resolve is authorized to issue: (a) an unlimited number of Units, which are listed on the TSX under the trading symbol "RBO.UN" and held by CDS in non-certificated inventory; and (b) an unlimited number of Special Voting Units. Special Voting Units may only be issued to holders of Class B LP Units (defined below) for the purpose of providing voting rights with respect to Resolve to the holders of such securities. Special Voting Units are attached to the Class B LP Units to which they relate and are not transferable separately from such Class B LP Units.

8. Resolve Business Outsourcing Limited Partnership, a subsidiary of Resolve, is authorized to issue an unlimited number of class B limited partnership units (the Class B LP Units). The Class B LP Units are indirectly exchangeable into Units on a one-to-one basis and are non-transferable, other than in accordance with the terms of the applicable exchange agreement or the applicable partnership agreement.

9. Assuming all issued and outstanding Class B LP Units are exchanged pursuant to the terms of the applicable exchange agreement, 32,584,500 Units will be issued and outstanding. As owners of more than 66-2/3% of the outstanding Class B LP Units have agreed to tender to the Offer, it is currently anticipated that, pursuant to the terms of the Lock-up Agreement and of the Support Agreement, the limited partnership agreement of Resolve Business Outsourcing Limited Partnership will be amended prior to the Offer expiry time such that if, among other conditions, within the time provided in the Offer for its acceptance or within 45 days after the date the Offer is made, whichever period is the shorter, the Offer is accepted by Unitholders representing at least 66-2/3% of the outstanding Units, the holders of Class B LP Units shall be deemed to have caused all of the Class B LP Units held by them to be exchanged for Units pursuant to the provisions of the exchange agreement. At the time of the exchange, the Special Voting Units will automatically be cancelled by Resolve in proportion to the Class B LP Units being exchanged for no consideration and without any action required on the part of Resolve, all in accordance with the provisions of the exchange agreement.

10. On June 2, 2009, the Filer, D+H and Resolve entered into a support agreement (the Support Agreement) pursuant to which the Filer agreed to make the Offer and Resolve agreed to recommend that Unitholders accept the Offer.

11. On June 2, 2009, Mr. Robert L. Conconi, a member of the board of trustees of Resolve and, indirectly through various holdings, Resolve's largest unitholder, entered into a lock-up agreement with D+H and the Filer (the Lock-up Agreement). Under the Lock-up Agreement, all of the Units (including those issuable upon exercise or exchange of Class B LP Units) beneficially owned or controlled by Mr. Conconi or his affiliates, will be tendered to the Offer, unless the Support Agreement is terminated in accordance with its terms.

12. As provided in the Support Agreement, the Filer will make the Offer and, in connection with the Offer, will prepare and mail a take-over bid circular (the Circular), French and English copies of which, as well as Resolve's trustees' circular, will be sent to all Unitholders.

13. The Circular will provide that:

(a) The Offer is for all of the outstanding Units on the basis of 0.285 of a unit of D+H for each Unit of Resolve (the Exchange Ratio), subject to adjustment as set out below;

(b) It is expected that the transaction will be completed on or before July 31, 2009. If the transaction is not completed by July 31, 2009, the Exchange Ratio shall be 0.288 of a unit of D+H for each Unit, unless any delay in the completion of the transaction results from (i) the receipt by Resolve of an Acquisition Proposal, if such Acquisition Proposal is, or would reasonably be expected to be, if consummated in accordance with its terms (but not assuming away any risk of non-completion), a Superior Acquisition Proposal, (ii) the Sale Transaction not having been completed by the earlier of (A) the Expiry Time and (B) July 29, 2009, (iii) the Competition Act Approval not having been obtained by the earlier of (A) the Expiry Time and (B) July 29, 2009 or (iv) a material or intentional breach by Resolve of any of its covenants, representations or warranties contained in the Support Agreement in which cases, the Exchange Ratio will continue to be 0.285 of a unit of D+H for each Unit, even if the transaction is completed after July 31, 2009. Capitalized terms used in this paragraph, that are not defined in this paragraph, have the meaning ascribed thereto in the Support Agreement;

(c) One of the conditions of the Offer is that the number of Units which represent at least 66 2/3% of the outstanding Units on a fully-diluted basis shall have been validly deposited under the Offer and not withdrawn at the expiry of the Offer;

(d) If the conditions to the Offer are satisfied (or waived by the Filer) and the Filer takes up and pays for the Units deposited pursuant to the Offer, the Filer may proceed with a compulsory acquisition of the Units not deposited to the Offer as permitted by the Declaration of Trust dated March 9, 2006 for the same consideration per Unit as was paid under the Offer, if within 120 days after the date of the Offer, the Offer is accepted by Unitholders holding not less than 90% of the outstanding Units (a Compulsory Acquisition);

(e) In connection with either a Compulsory Acquisition, if available and if the Filer elects to proceed thereunder, or a Subsequent Acquisition Transaction (as defined below), the Filer currently intends to amend the Declaration of Trust by the Written Resolution (as defined below) to provide that Unitholders who do not deposit their Units under the Offer (the Dissenting Offerees) will be deemed to have elected to transfer and to have transferred their Units to the Filer immediately on the giving of the Filer's notice prescribed by the Declaration of Trust notifying Dissenting Offerees that, among other things, the Filer is entitled to acquire their Units by way of Compulsory Acquisition or Subsequent Acquisition Transaction, as applicable (as opposed to 21 days after sending of an Filer's notice, as currently provided) (the Notice Amendment);

(f) If a Compulsory Acquisition as permitted under the Declaration of Trust is not available to the Filer or the Filer elects not to proceed under those provisions, the Filer currently intends to acquire the Units not acquired under the Offer (a Subsequent Acquisition Transaction) by, among other means:

(i) amending Section 13.13 of the Declaration of Trust to provide that (A) if the conditions to the Offer are satisfied (or waived by the Filer) and the Filer takes up and pays for the Units deposited pursuant to the Offer, the Filer may proceed with the acquisition of the Units not deposited to the Offer as permitted by the Declaration of Trust for the same consideration per Unit as was paid under the Offer, if within 120 days after the date of the Offer, the Offer is accepted by Unitholders holding not less than 66 2/3% of the outstanding Units on a fully diluted basis, and (B) in the event the Filer elects to effect a Compulsory Acquisition or the acquisition of Units pursuant to (A) above, Units held by non-tendering Unitholders will be deemed to have been transferred to the Filer as provided by the Notice Amendment and that the Dissenting Offerees will cease to have any rights as Unitholders from and after that time, other than the right to be paid the consideration that the Filer would have paid to the Dissenting Offerees had they accepted the Offer (the Threshold Amendment); and

(ii) approving any other Subsequent Acquisition Transaction that may be undertaken by the Filer in accordance with the Declaration of Trust, as amended in accordance with the foregoing (the Subsequent Acquisition Amendment);

(g) 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 the Unitholders' approval at a special meeting of the Unitholders to be called for such purpose, the Filer intends to rely on Section 12.11 of the Declaration of Trust, which specifies that a resolution in writing circulated to all Unitholders and executed by Unitholders holding more than 66 2/3% of the outstanding Units on a fully-diluted basis entitled to be voted on such resolution, if such resolution is a special resolution, is as valid and binding as if such resolution had been passed at a meeting of Unitholders duly called for the purpose, which written resolution (the Written Resolution) will approve, among other things, the Notice Amendment, the Threshold Amendment and the Subsequent Acquisition Amendment or Subsequent Acquisition Transaction undertaken in accordance therewith, as applicable;

(h) The letter of transmittal for use in connection with the Offer will stipulate that the execution thereof irrevocably approves, and irrevocably constitutes, appoints and authorizes the Filer, each director and officer of the Filer and any other person designated by the Filer in writing, as the true and lawful agent, attorney, attorney-in-fact and proxy of the holder of the deposited Units with respect to the deposited Units with full power of substitution (such power of attorney, being coupled with an interest, being irrevocable), in the name of and on behalf of such Unitholder to vote, execute and deliver any and all instruments of proxy, authorizations, requisitions, resolutions (in writing or otherwise), consents and directions, in form and on terms satisfactory to the Filer, approving the Written Resolution. The Written Resolution would be effective immediately prior to the time at which the Filer takes up and accepts for payment the Units deposited under the Offer. Alternatively, the Filer may execute the Written Resolution shortly following the take-up of Units under the Offer; and

(i) If the Filer is unable to effect either the Compulsory Acquisition or the Subsequent Acquisition Transaction in the manner described above, the Filer reserves the right, to the extent permitted by applicable law 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, in another take-over bid or exchange offer or otherwise or from Resolve, or (ii) take no further action to acquire additional Units. Alternatively, the Filer may sell or otherwise dispose of any or all Units acquired pursuant to the Offer or otherwise.

14. Notwithstanding the fact that Section 12.11 of the Declaration of Trust permits certain actions of Resolve to be authorized by Written Resolution, Section 4.2 of 61-101 may require, in certain circumstances, that the Compulsory Acquisition or Subsequent Acquisition Transaction be approved at a meeting of Unitholders called for that purpose.

15. It will be a condition of the Offer that minority approval (as contemplated in Part 8 of MI 61-101) shall have been obtained. Minority approval (as contemplated in Part 8 of MI 61-101) will be obtained by the Written Resolution rather than at a meeting of the holders of Units and Special Voting Units.

16. The Circular to be provided to Unitholders in connection with the Offer contains all disclosure required by applicable securities laws, including without limitation, the disclosure required under the take-over bid provisions and form requirements of applicable securities legislation and the provisions of MI 61-101 relating to the disclosure required to be included in information circulars distributed in respect of business combinations.

Decision

The Principal Regulator is satisfied that the decision meets the test set out in the Legislation for the Principal Regulator to make the decision.

The decision of the Principal Regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) Minority approval (as contemplated in Part 8 of MI 61-101) shall have been obtained by the Written Resolution; and

(b) The Circular contains the disclosure set out in each paragraph of representation 13, above.

"Michael Brown"
Assistant Manager
Ontario Securities Commission