IN THE MATTER OF THE SECURITIES LEGISLATION OF
NOVA SCOTIA, BRITISH COLUMBIA, MANITOBA, NEWFOUNDLAND AND LABRADOR, PRINCE EDWARD
ISLAND AND NEW BRUNSWICK
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
AND
INDUSTRIAL ALLIANCE CAPITAL TRUST
MRRS DECISION DOCUMENT
WHEREAS the local securities regulatory
authority or regulator (the "Decision Maker") in each of Nova Scotia, British Columbia, Manitoba,
Newfoundland and Labrador, Prince Edward Island and New Brunswick (collectively, the
"Jurisdictions") has received an application on behalf of Industrial Alliance
Insurance and Financial Services Inc. ("Industrial Alliance") and Industrial
Alliance Capital Trust (the "Trust") for a decision, pursuant to the securities
legislation of the Jurisdictions (the "Legislation"), that the requirements
under the Legislation to be registered to trade in a security (the "Registration
Requirement") and to file and obtain a receipt for a preliminary prospectus and a
prospectus (the "Prospectus Requirement") shall not apply to certain
Trades (as
defined herein), subject to certain conditions;
AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief
Applications (the "System"), the Nova Scotia Securities Commission
is the
principal regulator for this application;
AND WHEREAS, unless otherwise defined, the terms herein have the meanings set out in
National Instrument 14-101 Definitions;
AND WHEREAS Industrial Alliance and the Trust have represented to the Decision Makers
that:
1. The Trust is an open-end trust established under the laws of the Province
of Ontario by
Computershare Trust Company of Canada (the "Trustee"), as trustee,
pursuant to a declaration of trust dated June 16, 2003. The Trust's principal
office is located in
Toronto, Ontario and its executive offices are located in Montreal, Quebec. Industrial
Alliance, whose head office is located in Quebec, will be the administrative
agent of the Trust pursuant to an Administration Agreement (as defined herein)
between the Trustee and
Industrial Alliance.
2. Following completion of the Offering described below, the authorized capital
of the Trust will consist of an unlimited number of : (i) Special Trust Securities
(the "Special Trust Securities"); and (ii) Industrial Alliance Trust Securities
– Series A (the "IATS – Series A"). The Special Trust Securities and
the IATS – Series A are collectively referred to herein as the "Trust
Securities".
3. The Trust was established solely for the purpose of effecting a public offering
of IATS – Series A (the "Offering") and possible future offerings of securities in
order to provide Industrial Alliance with a cost effective means of raising capital by
means of: (i) creating and selling the Trust Securities; and (ii) acquiring and holding
assets, which, on completion of the Offering, will consist primarily of one senior
debenture issued by Industrial Alliance (the "IA Series A Debenture").
The IA Series A Debenture will generate income for distribution to holders of
the Trust
Securities. The Trust does not and will not carry on any operating activity,
other than in
connection with the Offering and any future offerings.
4. Subject to regulatory approval, the IATS – Series A will qualify as Tier 1 Capital
of Industrial Alliance for the purposes of the capital adequacy guidelines issued by the
Inspector General of Financial Institutions of Quebec or its successor (the
"Inspector General"). The Trust will also issue and sell Special Trust
Securities, which are voting securities of the Trust, to Industrial Alliance
in connection
with the Offering.
5. Industrial Alliance is a life insurance company governed by An Act respecting
insurance (Qu�bec), Part 1A of the Companies Act (Qu�bec) and An Act
respecting Industrial Alliance, Life Insurance Company (Qu�bec).
6. Industrial Alliance is a reporting issuer or the equivalent in each of the provinces of
Canada that provides for a reporting issuer regime (or its equivalent) and is not, to its
knowledge, in default of any reporting requirement under the Legislation.
7. The share capital of Industrial Alliance consists of (i) an unlimited number
of class A preferred shares without nominal or par value, issuable in series
(the "IA Class A
Preferred Shares"), (ii) 10,000,000 preferred shares with a nominal or par value of
$25 per share, issuable in series (the "IA Preferred Shares"), and (iii) an
unlimited number of common shares without nominal or par value (the "IA Common
Shares"). As of June 13, 2003, 39,237,230 IA Common Shares and 7,500,000 IA Preferred
Shares, Series 1 (the "IA Preferred Shares Series 1") were issued and
outstanding. It is intended that IA Class A Preferred Shares, Series A (the "IA Class
A Preferred Shares Series A") will be created and issued prior to or at the closing
of the Offering. In addition, as of June 13, 2003, 3,000,000 IA Preferred Shares, Series 2
(the "IA Preferred Shares Series 2") and 3,000,000 IA Preferred Shares,
Series 3 were created and reserved for issuance upon the respective conversion
of the IA Preferred
Shares Series 1 and the IA Preferred Shares Series 2. This summary is qualified
in its
entirety by the articles of Industrial Alliance.
8. Pursuant to the terms of the IATS - Series A and a Share Exchange Agreement
to be entered into among Industrial Alliance, the Trust and a party acting as
exchange trustee
(the "Share Exchange Agreement"), the IATS – Series A may be exchanged (the
"Holder Exchange Right"), at the option of the holder of the IATS - Series A,
for IA Class A Preferred Shares, Series YY (the "IA Class A Preferred Shares Series
YY") . The IATS – Series A will be automatically exchanged, without the consent
of the holder, for IA Class A Preferred Shares, Series ZZ (the "IA Class A Preferred
Shares Series ZZ") upon the occurrence of certain stated events relating to the
solvency of Industrial Alliance or actions taken by the Inspector General in respect of
Industrial Alliance (the "Automatic Exchange"). The IA Class A Preferred Shares
Series YY and the IA Class A Preferred Shares Series ZZ are collectively referred to
herein as the "IA Exchange Class A Preferred Shares".
9. The IA Series A Debenture will be convertible at any time at the option of
the holder into IA Class A Preferred Shares Series YY (such right of conversion
being referred to
herein as the "Debenture Conversion Right"), exercisable by the Trust in
circumstances in which holders of IATS – Series A exercise the Holder Exchange Right,
to enable the Trust to satisfy its obligation to deliver IA Class A Preferred Shares
Series YY to holders of IATS – Series A in connection with the Holder Exchange
Right.
10. Pursuant to the Share Exchange Agreement, Industrial Alliance will grant
to the Trust
the right to subscribe (the "Subscription Right") for IA Exchange Class A
Preferred Shares of the appropriate series in order to enable the Trust to redeem the IATS
– Series A (if any remain outstanding) in circumstances where: (i) the Automatic
Exchange is triggered and, for any reason, the Automatic Exchange does not result in the
exchange of all outstanding IATS – Series A for IA Class A Preferred Shares
Series ZZ or (ii) the Holder Exchange Right is exercised following maturity of
the IA Series A
Debenture (in which case, the Trust would not have the benefit of the Debenture
Conversion
Right).
11. The Holder Exchange Right will be effected through the conversion by the
Trust of the corresponding principal amount of the IA Series A Debenture into
IA Class A Preferred
Shares Series YY, or the acquisition by the Trust of such shares through the
exercise of
the Subscription Right. Holders of IATS – Series A exercising the Holder Exchange
Right will, upon surrendering the IATS – Series A to be exchanged, receive from the
Trust 40 IA Class A Preferred Shares Series YY in respect of each IATS – Series A so
exchanged and the IATS – Series A surrendered for exchange will be cancelled.
12. The Automatic Exchange will be effected pursuant to the terms of the Share
Exchange
Agreement. As of the time of the exchange, each holder of IATS – Series A shall be
deemed to have exchanged and transferred to Industrial Alliance all of such holder's
rights, title and interest in and to its IATS – Series A in exchange for 40 IA Class
A Preferred Shares Series ZZ and: (i) such holder shall cease to be a holder of any IATS
– Series A; (ii) all rights of such holder as a securityholder of the Trust will
cease; and (iii) such holder shall therefrom be deemed to be and shall be for all purposes
a holder of IA Class A Preferred Shares Series ZZ. If, for any reason, the Automatic
Exchange does not result in the exchange of all outstanding IATS – Series A for IA
Class A Preferred Shares Series ZZ, the Automatic Exchange will be effected through the
exercise by the Trust of the Subscription Right pursuant to which the Trust will acquire
IA Class A Preferred Shares Series ZZ and will subsequently redeem each IATS – Series
A not so exchanged for 40 IA Class A Preferred Shares Series ZZ and following such
redemption, the IATS – Series A so redeemed will be cancelled.
13. The terms of the IA Exchange Class A Preferred Shares provide that the IA
Exchange Class A Preferred Shares are convertible at the option of the holder
into IA Common Shares
at certain times and in certain circumstances, except where an event giving rise
to the Automatic Exchange in respect of the IATS - Series A has occurred and
is continuing (the "IA Common Share Conversion Right"). The IA Exchange
Class A Preferred Shares are not convertible into IA Common Shares until June
30, 2014.
14. In addition, Industrial Alliance may redeem the IA Exchange Class A Preferred
Shares and pay the redemption price thereof by delivering cash or IA Common Shares
to holders of
redeemed IA Exchange Class A Preferred Shares (the entitlement of Industrial
Alliance to issue IA Common Shares for such purpose being hereinafter referred
to as the "IA
Class A Preferred Share Redemption Right"). The IA Exchange Class A Preferred
Shares are not redeemable into IA Common Shares until December 31, 2008, subject
to Inspector
General approval and certain other terms and conditions.
15. In addition to qualifying the IATS – Series A for distribution, the (final)
prospectus in respect of the Offering (the "Prospectus") will also qualify the
Holder Exchange Right, the Automatic Exchange, the Debenture Conversion Right, the
Subscription Right, the IA Class A Preferred Share Redemption Right and the IA Common
Share Conversion Right (collectively, the "Conversion and Exchange Rights").
Information concerning the Trust and Industrial Alliance will be included, or
incorporated
by reference, in the Prospectus.
16. There may be no registration or prospectus exemptions available under the
Legislation for certain of the trades contemplated by the Conversion and Exchange
Rights (the "Trades").
AND WHEREAS pursuant to the System, this MRRS Decision Document evidences the
decision of
each of the Decision Makers (collectively, the "Decision");
AND WHEREAS 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 Registration
Requirement and the Prospectus Requirement shall not apply to the Trades, provided
that the first trade in IA Exchange Class A Preferred Shares and IA Common Shares
acquired
pursuant to the Decision, other than a trade by the Trust or Industrial Alliance
pursuant to the Conversion and Exchange Rights, shall be deemed to be a distribution
or a primary
distribution to the public under the Legislation of the Jurisdiction in which
the trade
takes place (the "Applicable Legislation") unless:
(a) Industrial Alliance has filed and obtained a receipt for the Prospectus under the
Applicable Legislation;
(b) Industrial Alliance is a reporting issuer or the equivalent under the Applicable
Legislation at the time of the trade, to the extent that the Applicable Legislation
provides a reporting issuer regime; and
(c) the trade is not a control distribution as defined in Multilateral Instrument 45-102 Resale
of Securities.
DATED this 26th day of June, 2003.
H. Leslie O'Brien