Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications -- Relief granted, subject to certain conditions,from the prospectus and registration requirements in respectof trades in connection with a merger transaction pursuant tothe Insurance Companies Act (Canada).

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 35(1)15.i., 53, 72(1)(i), 74(1).

Applicable Ontario Rule

Ontario Securities Commission Rule 45-501 ExemptDistributions.

Applicable Multilateral Instrument

Multilateral Instrument 45-102 Resale of Securities.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ALBERTA, SASKATCHEWAN, MANITOBA,ONTARIO, QUÉBEC,

NEW BRUNSWICK, NOVA SCOTIA,NEWFOUNDLAND AND LABRADOR,

YUKON TERRITORY, NORTHWESTTERRITORIES AND

NUNAVUT TERRITORY

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

GREAT-WEST LIFECO INC. AND

CANADA LIFE FINANCIAL CORPORATION

 

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Alberta, Saskatchewan, Manitoba, Ontario, Québec,New Brunswick, Nova Scotia, Newfoundland and Labrador, the YukonTerritory, the Northwest Territories and the Nunavut Territory(collectively, the "Jurisdictions") has received anapplication from Great-West Lifeco Inc. ("Lifeco")and Canada Life Financial Corporation ("CLFC") (collectively,the "Filer") for a decision pursuant to the securitieslegislation of the Jurisdictions (the "Legislation")that the trades of securities contemplated by the proposed securitiesexchange transaction (the "Transaction") involvingLifeco and CLFC to be effected by way of a reorganization ofCLFC's capital structure shall be exempt from the dealer registrationand prospectus requirements of the Legislation (collectivelythe "Registration and Prospectus Requirements");

AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Manitoba Securities Commission is the principal regulatorfor this application;

AND WHEREAS, unless otherwise defined,the terms herein have the same meaning set out in National Instrument14-101 Definitions or in Québec Commission Notice 14-101;

AND WHEREAS the Filer has representedto the Decision Makers that:

1. Lifeco and CLFC entered into a transactionagreement made as of February 14, 2003 (the "TransactionAgreement") providing for the Transaction to be effectedby way of a reorganization of CLFC's capital structure involvingthe change of the common shares of CLFC ("CLFC CommonShares") into a new class of exchangeable shares of CLFC(the "Exchangeable Shares") and the automatic transferof the Exchangeable Shares to Lifeco for a combination ofup to 24,000,000 4.80% Non-Cumulative First Preferred Shares,Series E of Lifeco ("Lifeco Series E Shares"), upto 8,000,000 5.90% Non-Cumulative First Preferred Shares,Series F of Lifeco ("Lifeco Series F Shares" andtogether with the Lifeco Series E shares, the "LifecoPreferred Shares") and up to 55,958,505 common sharesof Lifeco ("Lifeco Common Shares") to be issuedby Lifeco, as well as cash, through a series of transactionsto holders of CLFC Common Shares ("CLFC Shareholders")all as more particularly described in paragraphs 6 and 7 below.

2. Lifeco is a company incorporated underthe Canada Business Corporations Act (the "CBCA")and is a reporting issuer or equivalent under the Legislation.To its knowledge, Lifeco is not in default of any applicablerequirement of the Legislation. Lifeco is eligible to usea short form prospectus pursuant to National Instrument 44-101in each Jurisdiction. Lifeco is a "qualifying issuer"as defined in Multilateral Instrument 45-102 Resale of Securities("MI 45-102"). Lifeco's registered office is locatedat 100 Osborne Street North, Winnipeg, Manitoba R3C 3A5.

3. The authorized share capital of Lifecoconsists of an unlimited number of Lifeco Common Shares, anunlimited number of first preferred shares, issuable in series("First Preferred Shares"), an unlimited numberof Class A preferred shares, issuable in series ("ClassA Preferred Shares"), and an unlimited number of secondpreferred shares, issuable in series. As at February 17, 2003,there were outstanding, (a) 366,218,412 Lifeco Common Shares;(b) 4,000,000 First Preferred Shares, Series C; (c) 8,000,000First Preferred Shares, Series D; and (d) 5,192,242 ClassA Preferred Shares, Series 1. The Lifeco Common Shares, FirstPreferred Shares, Series C, First Preferred Shares, SeriesD and Class A Preferred Shares, Series 1 are traded on theToronto Stock Exchange (the "TSX").

4. CLFC is an insurance company incorporatedunder the Insurance Companies Act (Canada) (the "ICA")and is a reporting issuer or equivalent under the Legislation.To its knowledge, CLFC is not in default of any applicablerequirement of the Legislation. CLFC is eligible to use ashort-form prospectus pursuant to National Instrument 44-101in each Jurisdiction. CLFC's registered office is locatedat 330 University Avenue, Toronto, Ontario M5G 1R8.

5. The authorized share capital of CLFC consistsof an unlimited number of CLFC Common Shares and an unlimitednumber of non-voting preferred shares, issuable in series("CLFC Preferred Shares"). As of February 14, 2003,there were no more than 160,400,000 CLFC Common Shares and6,000,000 CLFC Preferred Shares issued and outstanding. TheCLFC Preferred Shares are currently listed and posted fortrading on the TSX and the CLFC Common Shares are currentlylisted and posted for trading on the TSX and the New YorkStock Exchange.

6. The reorganization of CLFC's capital structurewill consist of the following:

(a) an amendment to the by-laws of CLFCto create the Exchangeable Shares, which will rank juniorto the CLFC Preferred Shares and equal to the CLFC CommonShares and have the following principal conditions:

(i) each Exchangeable Share, other thanthose held by CLFC Shareholders who validly exercise theirDissent Right (defined below) and do not subsequentlycease to be entitled to exercise such Dissent Right ("DissentingShareholders"), will be automatically transferredto Lifeco at the Closing Date (defined below) in exchangefor any of $44.50 in cash, 1.78 Lifeco Series E Shares,1.78 Lifeco Series F Shares, 1.1849 Lifeco Common Sharesor a combination of the foregoing (subject in each caseto election and proration based on a specified maximumnumber of shares and amount of cash to be issued or paid)and subject to customary anti-dilution provisions (the"Elected Consideration"),

(ii) each Exchangeable Share held by aDissenting Shareholder will be automatically transferredto Lifeco at the Closing Date for the right to receivean amount equal to the fair value in cash of such ExchangeableShare from Lifeco in accordance with the dissent rightsagreement dated March 22, 2003 between CLFC, Lifeco andeach Dissenting Shareholder (the "Dissent RightsAgreement"), and

(iii) the Exchangeable Shares will becomeconvertible at the option of the holder thereof into CLFCCommon Shares; and

(b) an amendment to the by-laws of CLFCto change the CLFC Common Shares, other than those beneficiallyowned by Lifeco or its subsidiaries that have not been allocatedto a segregated or other investment fund established andmaintained by any of such subsidiaries, into ExchangeableShares at the Closing Date on the basis of one ExchangeableShare for each CLFC Common Share.

7. Lifeco and CLFC have entered into the DissentRights Agreement to provide CLFC Shareholders with a dissentright (the "Dissent Right") substantially similarto the dissent right provided by section 190 of the CBCA,except that any payment in respect of Exchangeable Shareswill be made by Lifeco in cash only and the notice of dissentwill be required to be delivered not later than 2:00 p.m.(Toronto time) on the business day before the CLFC Meeting(defined below).

8. At the Closing Date, the reorganizationof CLFC's capital structure will be implemented through theoccurrence of the following steps in the following order:

(a) each CLFC Common Share, except thosebeneficially owned by Lifeco or any of its subsidiariesthat have not been allocated to a segregated or other investmentfund established and maintained by any of such subsidiaries,will be changed into one Exchangeable Share;

(b) each Exchangeable Share will be transferredautomatically to Lifeco, in exchange for: (i) in the caseof each Exchangeable Share not held by a Dissenting Shareholder,the Elected Consideration; and (ii) in the case of eachExchangeable Share held by a Dissenting Shareholder, theright provided in the Dissent Rights Agreement; and

(c) Lifeco may, at its option, convert theExchangeable Shares acquired by it as contemplated aboveinto CLFC Common Shares on a share-for-share basis in accordancewith the share conditions of the Exchangeable Shares.

9. Steps 8(a) and (b) will occur automatically,without any further action being taken by holders of the CLFCCommon Shares, on the later of (a) July 10, 2003; (b) 12 businessdays after all conditions to the completion of the Transactionhave been satisfied or waived; or (c) such earlier or laterdate as may be agreed to by CLFC and Lifeco (the "ClosingDate").

10. No fractional Lifeco Common Shares orLifeco Preferred Shares will be issued pursuant to the Transaction.In lieu of fractional shares, each holder of CLFC Common Shareswho would otherwise be entitled to receive a fraction of aLifeco Common Share or a Lifeco Preferred Share shall be paidan amount in cash equal to such holder's proportionate shareof the proceeds (after deducting fees and expenses) receivedfrom aggregating all such fractional interests and sellingthem in the open market.

11. In the event shareholders receive an amountof Lifeco Common Shares or any series of Lifeco PreferredShares numbering less than 100 shares, they will be entitledto elect to have those shares sold on their behalf and receivea cash payment equal to such shareholder's proportionate shareof the proceeds (after deducting fees and expenses) receivedon the sale of such shares. The shares will be sold on theTSX as soon as possible following the Closing Date, but inany event no later than three business days following theClosing Date.

12. Options to purchase CLFC Common Shares("CLFC Options") have been granted to eligible personspursuant to the Canada Life Financial Corporation Stock OptionPlan (the "CLFC Stock Option Plan"). As of the closeof business on February 14, 2003, there are no more than 3,100,000CLFC Common Shares issuable upon the exercise of outstandingCLFC Options.

13. The Transaction Agreement contemplatesthat, subject to the satisfaction of Lifeco regarding thetruth of certain matters relating to holders of the CLFC Optionsor the receipt of a comfort letter from the Department ofFinance to the satisfaction of Lifeco and subject to the receiptof the approval of the TSX, CLFC will amend the terms of theCLFC Stock Option Plan to, among other things, provide (I)that each unexercised CLFC Option outstanding at the ClosingDate will be exchanged for an option to acquire, at the exerciseprice under the CLFC Option, that number of Lifeco CommonShares as is equal to the product of the number of CLFC CommonShares that were issuable on exercise of such CLFC Optionimmediately prior to the Closing Date multiplied by 1.1849and rounded down to the nearest whole number of Lifeco CommonShares (a "New CLFC Option") and (ii) each New CLFCOption will automatically expire 45 days after the ClosingDate. Lifeco has agreed under the terms of the TransactionAgreement to issue the appropriate number of Lifeco CommonShares on the exercise of the New CLFC Options. The foregoingexchange of CLFC Options set out above will be made upon consentof each optionholder and in compliance with the rules andregulations of the TSX.

14. The Transaction has been voted on andapproved by holders of CLFC Common Shares at a special meetingheld on May 5, 2003 (the "CLFC Meeting"). Underthe ICA, the Transaction required the favourable vote of atleast 66 2/3% of the votes cast by the holders of the CLFCCommon Shares voting at the CLFC Meeting. The CLFC Meetingwas held in accordance with the ICA.

15. In connection with the CLFC Meeting, CLFCprepared and delivered to the CLFC Shareholders, a managementinformation circular dated March 22, 2003 (the "CLFCCircular"). In addition to containing a detailed descriptionof the Transaction, the CLFC Circular contains prospectus-leveldisclosure of the business and affairs of each of CLFC andLifeco.

16. After the Transaction was approved atthe CLFC Meeting, CLFC mailed a Letter of Election and TransmittalForm to shareholders whose CLFC Common Shares are representedby physical share certificates or a Letter of Election Formto shareholders whose CLFC Common Shares are registered inthe name of the holder and in respect of which no physicalshare certificate has been issued and the holder has not transferredhis or her CLFC Common Shares to a broker, custodian, nomineeor other intermediary. The Letter of Election and TransmittalForm and Letter of Election Form enable such shareholdersto choose the form(s) of consideration they wish to receiveby completing the applicable form.

17. The steps under the Transaction, the amendmentto the CLFC Option Plan, the exchange of CLFC Options to NewCLFC Options and the exercises of the New CLFC Options, ifany, involve or may involve a number of trades of securities(collectively, the "Trades") and there may be noregistration or prospectus exemption available under the Legislationfor certain of the Trades.

18. A holder of CLFC Common Shares will makeone fundamental investment decision at the time when suchholder votes in respect of the Transaction and/or determineswhether to dissent in respect thereof. As a result of thisdecision, a holder of CLFC Common Shares will ultimately receivecash, Lifeco Common Shares and/or Lifeco Preferred Sharesin exchange for the Exchangeable Shares held by such holderor in payment in cash of the fair value of the CLFC CommonShares formerly held by such holder.

19. The contemplated changes in respect ofthe CLFC Options have been proposed in order to not disadvantagecertain holders of CLFC Options from a tax perspective.

20. Lifeco has applied to list the LifecoCommon Shares and Lifeco Preferred Shares to be issued ormade issuable pursuant to the Transaction and the amendmentto the CLFC Option Plan (on the exercise of the New CLFC Options)on the TSX.

AND WHEREAS pursuant to the System, thisMRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");

AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

THE DECISION of the Decision Makers underthe Legislation is that the Registration and Prospectus Requirementsshall not apply to the Trades provided that the first tradein any security acquired pursuant to this Decision in a Jurisdictionshall be deemed to be a distribution or primary distributionto the public under the Legislation of such Jurisdiction (the"Applicable Legislation") unless in respect of a firsttrade of Lifeco Common Shares or Lifeco Preferred Shares:

(a) except in Québec,

(i) Lifeco is and has been a reporting issuerin any of Alberta, British Columbia, Manitoba, Nova Scotia,Ontario or Saskatchewan for the 4 months immediately precedingthe trade,

(ii) the trade is not a control distribution,

(iii) no unusual effort is made to preparethe market or to create demand for the securities that arethe subject of the trade,

(iv) no extraordinary commission or considerationis paid to a person or company in respect of the trade,and

(v) if the selling shareholder is an insideror officer of Lifeco, the selling shareholder has no reasonablegrounds to believe that Lifeco is in default of securitieslegislation

(b) in Québec,

(i) Lifeco is and has been a reporting issuerin Québec for the 12 months immediately precedingthe trade,

(ii) no unusual effort is made to preparethe market or to create demand for the securities that arethe subject of the trade,

(iii) no extraordinary commission or considerationis paid to a person or company in respect of the trade,and

(iv) if the selling shareholder is an insideror officer of Lifeco, the selling shareholder has no reasonablegrounds to believe that Lifeco is in default of securitieslegislation.

June 18, 2003.

"Chris Besko"