Benvest Capital Inc. et al. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications. - Relief from continuous disclosure requirements granted in connection with an arrangement and issuer of exchangeable shares.

Applicable Instrument

National Instrument 51-102 Continuous Disclosure Obligations.

April 21, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION

OF

QUÉBEC AND ONTARIO

(the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF BENVEST CAPITAL INC.,

BENVEST NEW LOOK INCOME FUND AND

NEW LOOK ACQUISITIONCO INC.

MRRS DECISION DOCUMENT

Background

1. The local securities regulatory authority or regulator (collectively, the "Decision Makers") in each of the Jurisdictions has received an application from Benvest Capital Inc., Benvest New Look Income Fund and New Look AcquistionCo Inc. (collectively, the "Filer") for a decision under the securities legislation of the Jurisdictions (the "Legislation") that New Look AcquistionCo Inc. ("AcquisitionCo") (or its successor on the amalgamation with Benvest Capital Inc. ("Benvest") and various holding companies ("Holding Companies"), if any, ("New NLI") on the effective date (the "Effective Date") of the proposed plan of arrangement (the "Arrangement") under section 192 of the Canada Business Corporations Act (the "CBCA") involving, inter alia, Benvest New Look Income Fund (the "Fund"), Benvest, AcquisitionCo, New Look ExchangeCo Inc. ("ExchangeCo") and the security holders of Benvest and Holding Companies), be exempted from National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102") and from any comparable continuous disclosure requirements under the Legislation that has not yet been repealed or otherwise rendered ineffective as a consequence of the adoption of NI 51-102 (the "Comparable Continuous Disclosure Requirements") and, in Québec, an application to revise Order 2004-PDG-0020 dated March 26, 2004 (the "Québec Order") providing the same result than an exemption application (collectively, the "Requested Relief").

2. Under the Mutual Reliance Review System for Exemptive Relief Applications:

2.1 the Autorité des marchés financiers is the principal regulator for this application; and

2.2 this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

3. Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

4. The decision is based on the following facts represented by the Filer:

4.1 Benvest is a corporation amalgamated and subsisting pursuant to the provisions of the CBCA.

4.2 The head and registered office of Benvest is located at 1, Place Ville Marie, Suite 3438, Montreal, Québec, H3B 3N6.

4.3 Benvest is a holding company whose assets consist primarily of all the issued and outstanding securities of Lunetterie New Look International Inc. ("NLI"), cash and accounts receivable and an equity interest in The Fitness Company.

4.4 The authorized capital of Benvest consists of an unlimited number of common shares, Series A (the "Benvest Shares") and unlimited number of First Preferred Shares, issuable in series and an unlimited number of Second Preferred Shares, issuable in series.

4.5 As at March 15, 2005, 9,387,199 Benvest Shares were issued and outstanding.

4.6 The Benvest Shares are listed on the Toronto Stock Exchange (the "TSX").

4.7 Benvest is a reporting issuer in the Provinces of Ontario and Québec and has been for more than 12 months.

4.8 Benvest's fiscal year end is April 30.

4.9 Benvest has filed all the information that it has been required to file as a reporting issuer in each of the Provinces of Ontario and Québec and is not in default of the securities legislation in either of these jurisdictions.

4.10 The Fund is an unincorporated open-ended investment trust governed by the laws of the Province of Ontario and created pursuant to a declaration of trust dated March 15, 2005 (the "Declaration of Trust").

4.11 The Fund was established for the purpose of, among other things:

(i) investing in the common shares and notes of AcquisitionCo and acquiring, directly or indirectly, the Benvest Shares pursuant to the Arrangement;

(ii) investing in securities, including securities issued by New NLI and its affiliates, and otherwise lending funds to New NLI and its affiliates;

4.12 The head and registered office of the Fund is located at located at 1, Place Ville Marie, Suite 3438, Montreal, Québec, H3B 3N6.

4.13 The Fund was established with nominal capitalization and currently has only nominal assets and no liabilities. The only activity which will initially be carried on by the Fund will be the holding of securities of AcquisitionCo, ExchangeCo and New NLI.

4.14 The Fund is authorized to issue an unlimited number of units ("Units") and an unlimited number of special voting units ("Special Voting Units").

4.15 As of the date hereof, there is one Unit issued and outstanding, which is owned by Timothy G. Youdan, Attorney, and no Special Voting Units are outstanding.

4.16 Units are redeemable at any time on demand by the holders thereof. In certain instances, such a redemption may be paid and satisfied by way of shares or notes of New NLI.

4.17 It is anticipated that the redemption right described above will not be the primary mechanism for Unit holders to liquidate their investment. New NLI shares or notes which may be distributed to Unit holders in connection with a redemption will not be listed on any stock exchange and no market is expected to develop in such shares or notes and they may be subject to restrictions under applicable securities laws.

4.18 The Fund has received conditional approval from the TSX for the listing on the TSX of the Units to be issued in connection with the Arrangement subject to, among other things, completion of the Arrangement. The Units issuable from time to time in exchange for exchangeable shares of New NLI will also be listed on the TSX, subject to receipt of final approval from the TSX.

4.19 The Fund is not a reporting issuer (or the equivalent) in any of the Jurisdictions. Upon completion of the Arrangement, the Fund will become a reporting issuer (or the equivalent) in certain of the Jurisdictions due to the fact that its existence will continue following the exchange of securities in connection with the Arrangement.

4.20 The Fund's fiscal year end is December 31.

4.21 AcquisitionCo is a wholly-owned subsidiary of the Fund and was incorporated pursuant to the CBCA on March 14, 2005. AcquisitionCo was incorporated to participate in the Arrangement.

4.22 The head and registered office of AcquisitionCo is located at 1, Place Ville Marie, Suite 3438, Montreal, Québec, H3B 3N6.

4.23 The authorized capital of AcquisitionCo currently consists of an unlimited number of common shares and an unlimited number of preferred shares. Prior to the Arrangement, the articles of AcquisitionCo will be amended to create a class of exchangeable shares, unlimited in number (the "Exchangeable Shares").

4.24 As of the date hereof, there is one common share of AcquisitionCo and 3,129,693 preferred shares of AcquisitionCo issued and outstanding, all of which are owned by the Fund. All common and preferred shares of New NLI will be owned beneficially by the Fund, for as long as any outstanding Exchangeable Shares are owned by any person other than the Fund or any of the Fund's subsidiaries and other affiliates.

4.25 AcquisitionCo is not a reporting issuer (or the equivalent) in any of the Jurisdictions. Upon completion of the Arrangement, New NLI will become a reporting issuer (or the equivalent) in certain of the Jurisdictions due to the fact that its existence will continue following the exchange of securities in connection with the Arrangement.

4.26 The articles of New NLI will be the same as the articles of AcquisitionCo, and New NLI's name will be "Lunetterie New Look Inc. / New Look Eyewear Inc.". The head and registered office of New NLI will be the head and registered office of AcquisitionCo.

4.27 The Arrangement will be effected by way of a plan of arrangement pursuant to section 192 of the CBCA, as described herein. The Arrangement will require: (i) approval by not less than two-thirds of the votes cast by the shareholders of Benvest ("Shareholders") (present in person or represented by proxy) at the meeting (the "Meeting") of Shareholders to be held for the purpose of approving the Arrangement; and (ii) approval of the Québec Superior Court of Québec.

4.28 Benvest's information circular dated March 22, 2005 (the "Information Circular") contains prospectus-level disclosure concerning the respective business and affairs of Benvest, the Fund and NLI and a detailed description of the Arrangement, and is being mailed to Shareholders in connection with the Meeting. The Information Circular has been prepared in conformity with the provisions of the CBCA and applicable securities laws and policies.

4.29 The assets that will make up the business of New NLI have been the subject of continuous disclosure on an ongoing basis for more than 12 months, in accordance with Benvest's responsibilities as a reporting issuer subject to continuous disclosure requirements.

4.30 The Arrangement will ultimately result in Shareholders transferring their Benvest Shares to the Fund or AcquisitionCo in consideration for Units of the Fund, or a combination of Units and Exchangeable Shares exchangeable for such Units. In essence, each holder of Benvest Shares will transfer such shares to the Fund for Units on a one-for-one basis, or, if the Shareholder is a Canadian resident taxable entity, will be able to elect to transfer (i) up to 662/3% of its Benvest Shares to AcquisitionCo in exchange for Exchangeable Shares on a one-for-one basis and (ii) the balance of such holder's Benvest Shares to the Fund for Units (on a one-for-one basis).

4.31 New NLI will become a reporting issuer (or the equivalent) under the Legislation in each in Ontario and Québec and will be subject to the requirements of NI 51-102, the Comparable Continuous Disclosure Requirements and the Québec Order (collectively, the "Continuous Disclosure Requirements") in such Jurisdictions at the Effective Date.

4.32 The Exchangeable Shares provide a holder with a security having economic and voting rights which are equivalent to those of the Units.

4.33 Under the terms of the Exchangeable Shares and certain ancillary rights to be granted in connection with the Arrangement, holders of Exchangeable Shares will be able to exchange them at their option at any time for Units, on a one-for-one basis.

4.34 Under the terms of the Exchangeable Shares and certain ancillary rights to be granted in connection with the Arrangement, the Fund, ExchangeCo or New NLI will redeem, retract or otherwise acquire Exchangeable Shares in exchange for Units in certain circumstances.

4.35 In order to ensure that the Exchangeable Shares remain the voting and economical equivalent of the Units prior to their exchange, the Arrangement provides for:

(i) a voting and exchange trust agreement to be entered into among the Fund, AcquisitionCo and Natcan Trust Company (the "Voting and Exchange Agreement Trustee") which will, among other things, 1) grant to the Voting and Exchange Agreement Trustee, for the benefit of holders of Exchangeable Shares, the right to require the Fund or ExchangeCo to exchange the Exchangeable Shares for Units, and 2) trigger automatically the exchange of the Exchangeable Shares for Units upon the occurrence of certain specified events;

(iii) the deposit by the Fund of Special Voting Units with the Voting and Exchange Agreement Trustee which will effectively provide the holders of Exchangeable Shares with voting rights equivalent to those attached to the Units; and

(iv) a support agreement to be entered into between the Fund, AcquisitionCo and ExchangeCo which will, among other things, restrict the Fund from issuing or distributing to the holders of all or substantially all of the outstanding Units:

(v) additional Units or securities convertible into Units;

(vi) rights, options or warrants for the purchase of Units; or

(vii) units or securities of the Fund other than Units, rights, options or warrants other than those mentioned above, evidence of indebtedness of the Fund or other assets of the Fund,

unless the same or an equivalent distribution is simultaneously made to holders of Exchangeable Shares, an equivalent change is simultaneously made to the Exchangeable Shares, or the approval of holders of Exchangeable Shares has been obtained.

4.36 The Information Circular discloses that New NLI will make an application in order to obtain the Continuous Disclosure Relief.

4.37 The Fund will concurrently send to holders of Exchangeable Shares resident in the Jurisdictions all disclosure material it sends to holders of Units pursuant to the Legislation.

Decision

5. 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.

6. The decision of the Decision Makers under the Legislation is that the Requested Relief is granted for so long as:

6.2.1 the Fund is a reporting issuer in at least one of the jurisdictions listed in Appendix B of Multilateral Instrument 45-102 Resale of Securities and is an electronic filer under National Instrument 13-101 System for Electronic Data Analysis and Retrieval (SEDAR);

6.2.2 the Fund sends concurrently to all holders of Exchangeable Shares resident in the Jurisdictions all disclosure material furnished to holders of Units pursuant to the Continuous Disclosure Requirements;

6.2.3 the Fund files with each Decision Maker copies of all documents required to be filed by it pursuant to the Continuous Disclosure Requirements;

6.2.4 the Fund is in compliance with the requirements in the Legislation and of any market or exchange on which the Units are quoted or listed in respect of making public disclosure of material information on a timely basis, and immediately issues and files any news release that discloses a material change in its affairs;

6.2.5 New NLI issues a news release and files a material change report in accordance with Part 7 of NI 51-102 for all material changes in respect of the affairs of New NLI that are not also material changes in the affairs of the Fund;

6.2.6 the Fund includes in all mailings of proxy solicitation materials to holders of Exchangeable Shares a clear and concise statement that explains the reason the mailed material relates solely to the Fund, indicates that the Exchangeable Shares are the economic equivalent to the Units, and describes the voting rights associated with the Exchangeable Shares;

6.2.7 the Fund remains the direct or indirect beneficial owner of all of the issued and outstanding voting securities of New NLI, other than the Exchangeable Shares; and

6.2.8 New NLI has not issued any securities, other than the Exchangeable Shares, securities issued to the Fund or its affiliates, or debt securities issued to banks, loan corporations, trust corporations, treasury branches, credit unions, insurance companies or other financial institutions.