Borealis Acquisition Corporation (Re), 2008 CanLII 56942

November 4, 2008

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 TERANET INCOME FUND BY BOREALIS ACQUISITION CORPORATION (the Filer)

DECISION

Background

The principal regulator (the “Principal Regulator”) in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Principal Regulator (the “Legislation”) in connection with a take-over bid (the “Offer”) for Teranet Income Fund (the “Fund”) and all of the issued and outstanding Class B limited partnership units of Teranet Holdings Limited Partnership (the “Partnership”), that the requirements of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”) that:

• a Compulsory Acquisition or Subsequent Acquisition Transaction (each as defined below), as applicable, be approved at a meeting of the unitholders of the Fund (the “Unitholders”); and

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

be waived (collectively, the “Exemption Sought”).

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 Quebec.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision unless otherwise defined.

Representations

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

1. The Filer is a special purpose investment entity managed by Borealis Infrastructure Management Inc. (“Borealis Infrastructure”) and was formed to make the Offer. The Filer was incorporated under the Canada Business Corporations Act on September 4, 2008. The Filer has not carried on any business other than that incidental to making the Offer and is not a reporting issuer. The Filer’s head and registered offices are located at 200 Bay Street, Suite 2100, PO Box 56, Toronto, ON M5J 2J2.

2. Borealis Infrastructure is incorporated under the Canada Business Corporations Act and identifies, invests in and manages infrastructure assets on behalf of the OMERS Pension Plan. Borealis Infrastructure has been in the infrastructure business since 1999 and has developed a diversified portfolio of infrastructure assets in Canada. Borealis Infrastructure’s head and registered offices are located at 200 Bay Street, Suite 2100, PO Box 56, Toronto, ON M5J 2J2. The OMERS Pension Plan is one of Canada’s largest pension plans, with more than $52 billion invested in a wide range of companies and assets around the world. The OMERS Pension Plan provides retirement benefits to more than 380,000 members across Ontario.

3. As of the date hereof, Borealis Infrastructure does not beneficially own any Units or any securities convertible or exchangeable for Units. On September 19, 2008, the Filer announced by press release its intention to make, directly or through OMERS Administration Corporation, open market purchases of Trust Units and filed a copy of this press release on SEDAR. As of the date hereof, the Filer holds, through OMERS Administration Corporation acting on its behalf, 2,610,200 Trust Units, representing approximately 1.69% of the outstanding Units calculated on a fully-diluted basis. As of the date hereof, OMERS Administration Corporation holds 995,800 Trust Units, representing approximately 0.64% of the outstanding Units calculated on a fully-diluted basis.

4. The Fund is an unincorporated, open-ended trust established under the laws of Ontario by the Declaration of Trust. It is the Filer’s understanding that the Fund has been structured to qualify as a “mutual fund trust” for the purposes of the Tax Act and as such, its activities are generally limited to investment activities. The Fund was created to indirectly acquire all of the outstanding shares of Teranet Inc. (“Teranet”). Teranet primarily operates and supports a system of electronic registration of interests in real property in Ontario. The Fund may also hold other investments in entities engaged, directly or indirectly, in the business of providing other integrated information products and services, as well as activities ancillary and incidental thereto, and such other investments as the Trustees may determine.

5. The beneficial interests in the Fund are divided into interests of two classes, described and designated as “Trust Units” (“Trust Units”) and “Special Voting Units” (“Special Voting Units”), respectively. An unlimited number of Trust Units and Special Voting Units are issuable pursuant to the Declaration of Trust of the Fund. The Offeror understands, based on Unitholder lists provided by the Fund, that as at September 25, 2008, 150,583,948 Trust Units were issued and outstanding (154,136,100 Trust Units calculated on a fully-diluted basis), and 3,552,152 Special Voting Units were issued and outstanding. Each Trust Unit is transferable and represents an equal undivided beneficial interest in the Fund, in any distributions from the Fund whether of net income, net realized capital gains or other amounts, and in any net assets of the Fund in the event of the termination or winding-up of the Fund. All Trust Units are of the same class with equal rights and privileges. Each whole Trust Unit entitles the holder thereof to one vote at all meetings of Unitholders. The Trust Units are listed and posted for trading on the TSX under the symbol TF-UN.

6. The Special Voting Units are not entitled to any interest or share in the Fund, in any distribution from the Fund whether of net income, net realized capital gains or other amounts, or in any net assets of the Fund in the event of the termination or winding-up of the Fund. Special Voting Units may be issued in series and will only be issued in connection with or in relation to Class B LP Units and, if the Trustees so determine, other exchangeable securities, and will be evidenced only by the certificates representing such Class B LP Units or other exchangeable securities. Special Voting Units are not transferable separately from the Class B LP Units or other exchangeable securities to which they are attached. Each Special Voting Unit entitles the holder thereof to that number of votes at any meeting of Trust Unitholders or in respect of any written resolution of Trust Unitholders that is equal to the number of Trust Units that may be obtained upon the exchange (direct or indirect) of the Class B LP Units or other exchangeable securities to which the Special Voting Unit is attached. Upon the exchange or conversion of a Class B LP Unit or other exchangeable security, as the case may be, for Trust Units, or upon the redemption of any exchangeable security, the Special Voting Unit that is attached to such Class B LP Unit or other exchangeable security will immediately be cancelled without any further action of the Trustees, and the former holder of such Special Voting Unit will cease to have any rights with respect thereto.

7. The Partnership is authorized to issue an unlimited number of Class A LP Units and Class B LP Units. The Offeror understands, based on Unitholder lists provided by the Fund, that as at September 25, 2008, 3,552,152 Class B LP Units were issued and outstanding and held by various persons. All of the Class A LP Units are held indirectly by the Fund.

8. Class B LP Units are indirectly exchangeable for Trust Units in accordance with the terms of an exchange agreement among the Fund, Teranet Operating Trust, Teranet GP, the Partnership and certain persons, dated June 16, 2006. The Class B LP Units are non-voting except as required by law and in certain limited circumstances. The Class B LP Units are accompanied by Special Voting Units that, as described above, entitle the holder to receive notice of, to attend and to vote at all meetings of Trust Unitholders of the Fund (except in respect of Class B LP Units previously exchanged pursuant to the Exchange Agreement).

9. All of the issued and outstanding Trust Units are held by CDS Clearing and Depository Services Inc. (“CDS”) in book-entry only form. The Class B LP Units are registered in the names of 18 holders.

10. Pursuant to the requirements of National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions and MI 11-102, the Ontario Securities Commission is the principal regulator to review and grant the Exemption Sought as the head office of the Fund is located in Ontario.

11. The Filer announced its intention to make the Offer by press release on September 4, 2008. The Filer commenced the Offer on September 12, 2008 by advertisement in English and French published in The Globe and Mail National Edition and La Presse, respectively. The Offer and a take-over bid circular (the “Circular”), prepared in compliance with the Legislation and the securities legislation of the other provinces and the territories of Canada, was filed on SEDAR on September 12, 2008 and was subsequently delivered to Unitholders in compliance with the Legislation on September 16, 2008.

12. On October 15, 2008, the Filer announced an extension of the offer to October 31, 2008. On October 28, 2008, the Filer announced that it was reducing the price under the offer and a further extension of the offer to November 10, 2008. Notices of change or variation, prepared in compliance with the Legislation and the securities legislation of the other provinces and the territories of Canada, were duly filed on SEDAR and subsequently delivered to Unitholders in compliance with the Legislation.

13. The Offer is for all of the outstanding Units at a price of $10.25 in cash per Unit.

14. If the conditions to the Offer are satisfied or waived (including the condition that there shall have been validly deposited under the Offer and not withdrawn (i) at least 66 2/3% of the Trust Units outstanding at the time of take-up (calculated on a fully-diluted basis), (ii) at least 66 2/3% of the Class B LP Units outstanding at the time of take-up, and (iii) at least a majority of the Trust Units outstanding at the time of take-up (calculated on a fully-diluted basis), the votes attached to which would be included in the minority approval of a second step business combination or going private transaction pursuant to MI 61-101 or similar law (collectively, the “Minimum Tender Condition”)) and the Filer takes up and pays for the Units deposited under the Offer, the Filer will, to the extent possible, acquire, or cause the purchase, directly or indirectly, of the Units not tendered to the Offer (the “Remaining Units”) through a Compulsory Acquisition or a Subsequent Acquisition Transaction.

15. The holders of Class B LP Units have the right to vote on certain matters at the Fund level through the Special Voting Units of the Fund associated with each Class B LP Unit.

16. Section 13.7 of the Fund’s amended and restated declaration of trust (the “Declaration of Trust”) provides that, if the Offer is accepted by Unitholders representing at least 90% of the total issued and outstanding Trust Units, on a fully diluted basis assuming the conversion of the Class B LP Units, the Filer will be entitled to acquire (a “Compulsory Acquisition”) the Remaining Units for the consideration per Unit payable under the Offer.

17. The limited partnership agreement (the “Limited Partnership Agreement”) governing the Class B LP Units provides that Class B LP Units not deposited into the Offer may be acquired by the Filer if Section 13.7 of the Declaration of Trust would permit the acquisition of the Trust Units as described in paragraph 10 above.

18. If the Filer is not entitled to acquire the Remaining Units through a Compulsory Acquisition or the Filer decides not to avail itself of such rights, the Filer intends to use reasonable commercial efforts to proceed with the acquisition or cause the redemption of the balance of the Units as soon as practicable by way of an alternative transaction. Such transaction (a “Subsequent Acquisition Transaction”) may include, without limitation:

(a) an amendment to Section 13.7 of the Declaration of Trust to provide that a Compulsory Acquisition may be effected immediately, after take-up and payment of Units deposited under the Offer if the Filer and its affiliates hold not less than 66 2/3% of the Trust Units calculated on a fully-diluted basis (as opposed to the 90% threshold referred to above). Following those amendments to the Declaration of Trust, it is the current intention of the Filer to avail itself of the Compulsory Acquisition, as amended, pursuant to which the Trust Units and the Class B LP Units held by each holder of Units who did not accept the Offer (the “Non-Tendering Offerees”) will be deemed to be directly transferred by the Unitholder to the Filer (and, in the case of Class B LP Units, without any prior exchange for Trust Units), in accordance with the Declaration of Trust, as modified by the Special Resolutions (described below) and in accordance with the Limited Partnership Agreement; or

(b) an alternate form of Subsequent Acquisition Transaction, the form of which may vary, depending on a number of factors including the number of Units acquired pursuant to the Offer.

19. In order to effect a Compulsory Acquisition or a Subsequent Acquisition Transaction, if the Minimum Tender Condition is satisfied, prior to the Filer taking up any Trust Units, the Filer intends to, among other things, effect the amendments to section 13.7 of the Declaration of Trust as referred to above by resolution in writing (the “Special Resolutions”), all in accordance with the Declaration of Trust. Such Special Resolutions include:

(a) removing the current trustees of the Fund (the “Trustees”), and appointing one or more persons designated by the Filer as Trustees;

(b) amending section 13.7 of the Declaration of Trust to provide that a Subsequent Acquisition Transaction may be effected if the Filer and its affiliates, after take-up and payment of Units deposited under the Offer, hold not less than 66 2/3% of the Trust Units calculated on a fully-diluted basis, including any Trust Units held by or on behalf of or issuable to the Filer or any affiliate or associate of the Filer, and authorizing the Filer to execute any such amendment to the Declaration of Trust in connection therewith; provided that notwithstanding that this resolution has been passed by the Unitholders, the Filer is authorized without further notice to or approval of the Unitholders not to proceed with the Subsequent Acquisition Transaction if for whatever reason the Filer determines it appropriate not to so proceed;

(c) amending section 13.7 of the Declaration of Trust to provide that Trust Units held by Non-Tendering Offerees will be deemed to have been transferred to the Filer immediately on the giving of the Filer’s Notice in respect of a Compulsory Acquisition, a Subsequent Acquisition Transaction, or an Alternative Subsequent Acquisition Transaction, as the case may be, and that those Non-Tendering Offerees will cease to have any rights as Trust Unitholders from and after that time, other than the right to be paid the same consideration that the Filer would have paid to those Non-Tendering Offerees if they had tendered those Units to the Offer;

(d) amending section 13.7 of the Declaration of Trust to provide that Class B LP Units held by Non-Tendering Offerees will be deemed to have been transferred directly to the Filer, without exchange first into Trust Units, immediately on the giving of the Filer’s Notice in respect of a Compulsory Acquisition or a Subsequent Acquisition Transaction, as the case may be, and that those Non-Tendering Offerees will cease to have any rights as Class B LP Unitholders, or the holders of the units of the Fund issued to holders of Class B LP Units that represent voting rights in the Fund, together, unless the context otherwise requires, with the associated URP Rights, from and after that time, other than the right to be paid the same consideration that the Filer would have paid to those Non-Tendering Offerees if they had tendered those Units to the Offer;

(e) approving any Compulsory Acquisition or Subsequent Acquisition Transaction that may be undertaken by the Filer under the Declaration of Trust as amended in accordance with the foregoing, in the manner and at the time or times determined by the Filer in its discretion; provided that notwithstanding that this resolution has been passed by the Unitholders, the Filer is authorized without further notice to or approval of the Unitholders not to proceed with the Compulsory Acquisition or Subsequent Acquisition Transaction if, for whatever reason, the Filer determines it appropriate not to so proceed;

(f) amending the Declaration of Trust to permit the Filer, notwithstanding anything to the contrary contained therein, to vote, execute and deliver any instruments of proxy, authorizations, requisitions, resolutions, consents or directions in respect of the Units taken up under the Offer which are at the time beneficially owned by the Filer, if determined necessary or appropriate by the Filer, and authorizing the Filer to execute any such amendment to the Declaration of Trust in connection therewith;

(g) directing all trustees, directors and officers of the Fund and each of the Fund Subsidiaries to cooperate in all respects with the Filer regarding the foregoing including in completing any Compulsory Acquisition or Subsequent Acquisition Transaction undertaken by the Filer in accordance therewith; and

(h) authorizing any officer or director of the Filer, and any other persons designated by the Filer in writing, to execute and deliver all documents and do all acts or things, on behalf of the Fund or otherwise, as may be necessary or desirable to give effect to these Special Resolutions

20. Rather than seeking the approval of Unitholders for a Compulsory Acquisition or Subsequent Acquisition Transaction at a special meeting called for that purpose, the Filer intends to rely on section 11.10 of the Declaration of Trust, which would permit the Special Resolutions to be approved in writing by Unitholders holding not less that 66 2/3% of the issued and outstanding Units (the “Written Resolution”).

21. Further, if the Minimum Tender Condition is satisfied, the Filer will own a sufficient number of Units to approve a Compulsory Acquisition or a Subsequent Acquisition Transaction by the Written Resolution.

22. A Compulsory Acquisition or a Subsequent Acquisition Transaction would be a “business combination” under MI 61-101.

23. To effect either a Compulsory Acquisition or Subsequent Acquisition Transaction, the Filer will comply with the provisions of MI 61-101 and, specifically, will obtain minority approval (as that term is defined in MI 61-101) in accordance with the terms of Part 8 MI 61-101 (“Minority Approval”) by Written Resolution rather than at a meeting of Unitholders.

24. The Circular provided to Unitholders in connection with the Offer contains all disclosure required by the Legislation and the securities legislation of the other provinces and the territories of Canada, 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 Minority Approval, if required, shall have been obtained by Written Resolution.

“Naizam Kanji”

Naizam Kanji

Manager, Mergers & Acquisitions

Ontario Securities Commission

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