Clairvest Group Inc. – s. 4.2 of OSC Rule 56-501 Restricted Shares

Headnote

OSC Rule 56-501 Restricted Shares -- section 4.2 -- issuer exempt from certain requirements of Part 3 of Rule 56-501 with respect to creation and implementation of non-voting share option plan.

Statutes Cited

OSC Rule 56-501 Restricted Shares, s. 4.2.

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5., AS AMENDED (the Act) AND IN THE MATTER OF CLAIRVEST GROUP INC. (the Filer)

ORDER (Section 4.2 of Rule 56-501)

WHEREAS the Filer has applied to the Director (the Director) for an exemption from the requirements under section 3.2 of OSC Rule 56-501 Restricted Shares (Rule 56-501) for a prospectus exemption to be available for a stock distribution of securities so that these requirements shall not apply to the Filer in connection with the reorganization and any stock distribution of a series of non-voting shares of the Filer (Non-Voting Shares) upon the grant and exercise of options to purchase Non-Voting Shares (Options) pursuant to a non-voting share option plan (the Plan);

AND WHEREAS the Filer has represented to the Director that:

1. The Filer was incorporated under the Business Corporations Act (Ontario) on February 13, 1987. The Filer's head office is located in Toronto, Ontario.

2. The Filer is a reporting issuer only in the Province of Ontario.

3. The authorized capital of the Filer consists of an unlimited number of preference shares, issuable in series (Preference Shares) and an unlimited number of common shares (Common Shares). As at the date hereof, no Preference Shares and 15,214,095 Common Shares are issued and outstanding.

4. The Common Shares are listed on the Toronto Stock Exchange.

5. The Filer is not in default of any applicable securities laws.

6. The Filer's directors own or control approximately 84.5% of the outstanding Common Shares. Excluding the Common Shares owned or controlled by Kenneth Rotman, who is the only person or company that may be considered a control person of the Filer within the meaning of Rule 56-501 (the Control Person), the remaining directors own or control approximately 68.6% of the remaining Common Shares.

7. On May 26, 2016, the Filer adopted the Plan pursuant to which Options to purchase Non-Voting Shares will be granted to employee participants.

8. The Non-Voting Shares will be: (i) non-voting; (ii) not convertible into Common Shares; (iii) participate pari passu with Common Shares on liquidation; (iv) entitled to dividends on the same basis as Common Shares; (v) redeemable at the option of the Filer for fair market value; and (vi) have no coat tails. Each Non-Voting Share will represent the equivalent of two Common Shares and will be pari passu and without preference based on that ratio.

9. The Plan will also provide an option holder with the right in lieu of exercising the Option, to receive a cash payment equal to the difference between the fair market value of the Option and its exercise price.

10. On May 26, 2016, the Filer approved the creation of the Non-Voting Shares by way of a resolution of directors in accordance with the terms of the Preference Shares which authorize the directors to determine the attributes of each series of Preference Shares.

11. The Filer intends to file articles of amendment (the Articles) with respect to the Non-Voting Shares on or about June 22, 2016. A maximum of 1,000,000 Non-Voting Shares will be authorized by the directors of the Filer.

12. The Non-Voting Shares will only be issued in connection with the terms of the Plan and will not be used as currency by the Filer to finance future operations.

13. The Non-Voting Shares will not be listed on the Toronto Stock Exchange and will not be convertible into Common Shares.

14. The Non-Voting Shares are "restricted shares" as defined in Rule 56-501 as they are equity shares which are not "common shares" as defined in Rule 56-501.

15. The Filer intends to rely upon the employee prospectus exemption contained in subsection 2.24 of National Instrument 45-106 Prospectus Exemptions in connection with securities issued pursuant to the Plan.

16. Section 3.2 of Rule 56-501 applies such that the prospectus exemptions under Ontario securities laws will not be available for a stock distribution of Non-Voting Shares of the Filer unless either:

(a) the stock distribution receives minority approval; or

(b) the reorganization carried out by the Filer to create the Non-Voting Shares receives minority approval.

17. The setting of the terms of the Non-Voting Shares by directors' resolution and creation of the Non-Voting Shares upon the filing of the Articles, together, constitute a reorganization as that term is defined in Rule 56-501.

18. The grant of Options and the issuance of Non-Voting Shares upon the exercise of Options are stock distributions as that term is defined in Rule 56-501.

19. The requirement under section 3.2 of Rule 56-501 restricts the issuance of restricted shares, such as the Non-Voting Shares of the Filer, unless the applicable stock distribution or reorganization carried out by the issuer related to the restricted shares that are the subject of the stock distribution has obtained minority approval at a meeting and that shareholders received disclosure in an information circular of certain prescribed information.

20. For the purposes of Rule 56-501 as it applies to the Filer, minority approval means the approval of a proposed reorganization or stock distribution by a majority of the votes cast by shareholders of the Filer, excluding the Control Person, at a meeting of shareholders called to consider such reorganization or stock distribution.

21. Long term compensation plan awards are generally granted to the Filer's employees in June of each year and consequently the Filer will not have the opportunity to seek minority approval of its shareholders to authorize the creation of the Non-Voting Shares at a meeting.

22. In lieu of a holding a shareholders meeting, the Filer received informed written shareholder consents from 11 shareholders holding positions equal to 5,001,355 Common Shares, representing 66.4% of the Common Shares owned by all shareholders other than those owned or controlled by the Control Person with respect to the creation of the Non-Voting Shares and future issuances under the Plan. The information disclosed in the written shareholder consents indicated that minority approval for the reorganization and stock distribution was required and that the minority approval would exclude any votes cast by the Control Person.

23. As a result of having received the written shareholder consents from shareholders eligible to provide minority approval as required under Rule 56-501, the Filer has received minority approval with respect to the reorganization and stock distribution of Options and Non-Voting Shares pursuant to the terms of the Plan.

24. A press release disseminating details of the Non-Voting Shares and the Plan (the Press Release) will be issued and publicly filed on SEDAR as soon as possible and before any grants are made under the Plan.

25. The Filer will comply with Part 10 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) with respect to disclosure of the Non-Voting Shares in its continuous disclosure.

26. The Filer will also include in the information circular for its next shareholders meeting certain information respecting the Plan and the Non-Voting Shares.

AND WHEREAS the Director is satisfied that it would not be prejudicial to the public interest to grant the exemption requested;

IT IS ORDERED pursuant to subsection 4.2 of Rule 56-501 that the Filer be and is hereby exempted from the requirements of section 3.2 of Rule 56-501 in connection with the reorganization and any stock distribution of Options and Non-Voting Shares pursuant to the Plan provided that:

(a) the Filer files the Press Release on SEDAR no less than seven days prior to the filing of the Articles and any grants being made under the Plan; and

(b) any future reorganization, if any, carried out by the Filer complies with the provisions of section 3.2 of Rule 56-501.

DATED at Toronto on this 14th day of June, 2016.

"Naizam Kanji"

Director, Office of Mergers & Acquisitions

Ontario Securities Commission