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MedReleaf Corp.
Headnote
National Policy 11-206 Process for Cease to be a Reporting Issuer Applications -- Application for an order that the issuer is not a reporting issuer under applicable securities laws -- issuer has outstanding warrants exercisable into securities of acquirer -- warrant holders no longer require public disclosure in respect of the issuer -- relief granted.
Applicable Legislative Provisions
Securities Act (Ontario), s.1(10)(a)(ii).
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (THE JURISDICTION) AND IN THE MATTER OF THE PROCESS FOR CEASE TO BE A REPORTING ISSUER APPLICATIONS AND IN THE MATTER OF MEDRELEAF CORP. (THE FILER)
ORDER
Background
The principal regulator in the Jurisdiction has received an application from the Filer for an order under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that the Filer has ceased to be a reporting issuer in all jurisdictions of Canada in which it is a reporting issuer (the Order Sought).
Under the Process for Cease to be a Reporting Issuer Applications (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 4C.5(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island, the Yukon, the Northwest Territories, and Nunavut.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this order, unless otherwise defined.
Representations
This order is based on the following facts represented by the Filer:
1. The Filer was incorporated under the Business Corporations Act (Ontario) (the OBCA) on February 28, 2013.
2. The Filer's head office is at Markham Industrial Park, Markham, Ontario L3R 6G3.
3. On July 25, 2018 (the Effective Date), Aurora Cannabis Inc. (Aurora) acquired all of the issued and outstanding common shares of the Filer, pursuant to a plan of arrangement under the OBCA (the Arrangement), which became effective at 12:01 AM (EST) (the Effective Time) on the Effective Date.
4. Aurora is a corporation existing under the Business Corporations Act (British Columbia). The authorized share capital of Aurora consists of an unlimited number of common shares (the Aurora Shares). The Aurora Shares are listed on the Toronto Stock Exchange (the TSX) under the symbol "ACB". Aurora is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.
5. Immediately prior to the Effective Time, the Filer had the following issued and outstanding securities: (i) 102,710,159 common shares (the Filer Shares); (ii) 3,944,812 plan options to purchase Filer Shares (the Filer Plan Options); (iii) 759,115 legacy options to purchase Filer Shares (the Filer Legacy Options and, together with the Filer Plan Options, the Filer Options); (iv) 2,875,000 warrants to purchase Filer Shares (the Filer Warrants); and (v) 60,866 deferred share units to purchase Filer Shares (the Filer DSUs). The Filer Shares were listed on the TSX under the symbol "LEAF". No other securities of the Filer were listed on any exchange.
6. To the best of the Filer's knowledge and belief and based on a geographic distribution report obtained pursuant to section 2.5(2) of National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer, there are 264 holders of Filer Warrants, 161 of which are in Ontario (485,600 Filer Warrants representing 19.40% of the total aggregate Filer Warrants), 35 of which are in Alberta (11,459 Filer Warrants representing 0.46% of the total aggregate Filer Warrants), 38 of which are in British Columbia (55,350 Filer Warrants representing 2.21% of the total aggregate Filer Warrants), 4 of which are in Quebec (4,200 Filer Warrants representing 0.17% of the total aggregate Filer Warrants), 4 of which are in Saskatchewan (1,800 Filer Warrants representing 0.07% of the total aggregate Filer Warrants), 1 of which is in Manitoba (190 Filer Warrants representing 0.01% of the total aggregate Filer Warrants), 2 of which are in New Brunswick (24,999 Filer Warrants representing 1.00% of the total aggregate Filer Warrants), 4 of which are in the United States (30,723 Filer Warrants representing 1.23% of the total aggregate Filer Warrants), and 15 of which are in other foreign jurisdictions (1,888,586 Filer Warrants representing 75.46% of the total aggregate Filer Warrants).
7. The Filer distributed the meeting materials (which included the information circular, notice of meeting, notice of application, and the interim order) to the holders of the Filer Shares, Filer Options, Filer Warrants and Filer DSUs in connection with the special meeting of holders of Filer Shares that took place on July 18, 2018 to consider the Arrangement.
8. Pursuant to the Arrangement, among other things, the following occurred as of the Effective Time:
(a) each Filer Share (other than Filer Shares held by Aurora or any affiliates thereof) was deemed to be assigned and transferred by the holder thereof to Aurora in exchange for 3.575 Aurora Shares (the Share Consideration) and $0.000001 in cash (the Cash Consideration, and together with the Share Consideration, the Consideration) for each Filer Share;
(b) each Filer Plan Option outstanding after the first amalgamation under the Arrangement (the First Amalgamation) (whether vested or unvested) was exchanged for an option of Aurora (a Replacement Option) to acquire such number of Aurora Shares as is equal to: (A) that number of Filer Shares that were issuable upon exercise of such Filer Plan Option immediately following the First Amalgamation, multiplied by (B) the exchange ratio of 3.575 Aurora Shares per Filer Share issuable (the Exchange Ratio) and, on an aggregate basis, rounded down to the nearest whole number of Aurora Shares, at an exercise price per Aurora Share equal to the greater of (i) the quotient determined by dividing: (X) the exercise price per Filer Share at which such Filer Plan Option was exercisable immediately following the First Amalgamation, by (Y) the Exchange Ratio, rounded up to the nearest whole cent, and (ii) such minimum amount that meets the requirements of paragraph 7(1.4)(c) of the Tax Act. All terms and conditions of a Replacement Option, including the term to expiry, vesting, conditions to and manner of exercising, are the same as the Filer Plan Option for which it was exchanged, and any certificate or option agreement previously evidencing the Filer Plan Option were deemed to evidence such Replacement Option;
(c) the Filer Legacy Options were conditionally exercised immediately before the Effective Time and the underlying Filer Shares were exchanged for Aurora Shares at the Exchange Ratio; and
(d) each Filer DSU (whether vested or unvested) outstanding immediately following the First Amalgamation was, notwithstanding the terms of the Filer's deferred share unit plan, without any further action by or on behalf of the holder of such Filer DSU, deemed to have fully vested and be settled in exchange for the Share Consideration and the Cash Consideration and each such Filer DSU was immediately cancelled.
9. Pursuant to the terms of the Arrangement and the supplemental common share purchase warrant indenture dated July 25, 2018 between the Filer, Aurora and TSX Trust Company (the Supplemental Indenture), which governs the Filer Warrants and supplements the base common share purchase warrant indenture dated January 31, 2018 between the Filer and TSX Trust Company, Aurora became obligated to provide and each holder of a Filer Warrant became entitled to receive (and such holder shall accept) upon the exercise of such holder's Filer Warrant, in lieu of Filer Shares to which such holder was theretofore entitled upon such exercise the Share Consideration which the holder would have been entitled to receive as a result of the transactions contemplated by the Arrangement if, immediately prior to the Effective Time, such holder had been the registered holder of the number of Filer Shares to which such holder would have been entitled if such holder had exercised such holder's Filer Warrants immediately prior to the Effective Time, at an exercise price of $34.499999 with the aggregate exercise price being round down to the nearest whole penny. Pursuant to the Arrangement and the Supplemental Indenture, Aurora is obligated to issue the number of Aurora Shares required to meet the Filer's obligations upon exercise of the Filer Warrants.
10. The Filer is not required to remain a reporting issuer pursuant to the terms of the Supplemental Indenture. The terms of the Supplemental Indenture contains provisions addressing, amongst others, a corporate merger, amalgamation, arrangement, or business combination, including the Arrangement, and provides for the payment of the Consideration in lieu of the Filer Shares subsequent to such an event. As a result, no consents or approvals are required from the holders of the Filer Warrants.
11. In connection with the Arrangement, additional Aurora Shares are authorized for issuance upon exercise of the Filer Warrants.
12. The Filer Shares were delisted from the TSX on July 26, 2018.
13. The Filer is not eligible to surrender its status as a reporting issuer pursuant to the simplified procedure in National Policy 11-206 Process for Cease to be a Reporting Issuer Applications because (i) the Filer is in default of securities legislation as described below and (ii) the Filer Warrants are not beneficially owned, directly or indirectly, by fewer than 15 securityholders in each of the jurisdictions of Canada and fewer than 51 securityholders in total worldwide.
14. The Filer is not a reporting issuer in any jurisdiction of Canada other than the jurisdictions identified in this order. The Filer is applying for an order that it has ceased to be a reporting issuer in all of the jurisdictions of Canada in which it is a reporting issuer.
15. Upon granting of the Order Sought, the Filer will not be a reporting issuer or the equivalent in any jurisdiction of Canada.
16. Aurora is not in default of its obligations as a reporting issuer under securities legislation in any jurisdiction.
17. The Filer is not in default of securities legislation in any jurisdiction, except for its failure to file its interim financial statements and management discussion and analysis for the period ended June 30, 2018 as required under National Instrument 51-102 Continuous Disclosure Obligations and related certificates as required under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings.
18. The Filer has no intention to seek public financing by way of an offering of securities.
19. The Filer is not an OTC reporting issuer under Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets.
20. No securities of the Filer, including debt securities, are traded in Canada or another country on a marketplace as defined in National Instrument 21-101 Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported.
Order
The principal regulator is satisfied that the order meets the test set out in the Legislation for the principal regulator to make the order.
The decision of the principal regulator under the Legislation is that the Order Sought is granted.
DATED at Toronto on this 28th day of September, 2018.
"Deborah Leckman"
Commissioner
Ontario Securities Commission
"Robert P. Hutchison"
Commissioner
Ontario Securities Commission