4Front Corp.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Issuer granted relief from certain restricted security requirements under National Instrument 41-101 General Prospectus Requirements, National Instrument 44-101 Short Form Prospectus Distributions, and National Instrument 51-102 Continuous Disclosure Obligations – Relief granted subject to conditions.

OSC Rule 56-501 Restricted Shares – Issuer granted relief from certain restricted share requirements under OSC Rule 56-501 – Relief granted subject to conditions.

Applicable Legislative Provisions

National Instrument 41-101 General Prospectus Requirements, ss. 12.2(3), 12.2(4), 12.3, and 19.1.
Form 41-101F1 Information Required in a Prospectus, s. 1.13(1).
National Instrument 44-101 Short Form Prospectus Distributions, s. 8.1.
Form 44-101F1 Short Form Prospectus, s. 1.12(1).
National Instrument 51-102 Continuous Disclosure Obligations, ss. 10.1(1)(a), 10.1(2), 10.1(4), 10.1(6), and 13.1.
OSC Rule 56-501 Restricted Shares, ss. 2.3(1)(1.), 2.3(1)(3.), 2.3(2), 3.2 and s. 4.2.

July 30, 2019

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
4FRONT CORP.
(THE “FILER”)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of 4Front Ventures Corp. (the “Resulting Issuer”), a successor reporting issuer to Cannex Capital Holdings Inc. (“Cannex”), for a decision under the securities legislation of the Jurisdiction of the principal regulator (the “Legislation”) that the requirements under:

(a)           subsections 12.2(3) and 12.2(4) of National Instrument 41-101 General Prospectus Requirements (“NI 41-101”), relating to the use of restricted security terms, and subsection 1.13(1) of Form 41-101F1 Information Required in a Prospectus and subsection 1.12(1) of Form 44-101F1 Short Form Prospectus, relating to restricted security disclosure, shall not apply to the Class B proportionate voting shares of the Resulting Issuer (the “Proportionate Voting Shares”) in connection with any prospectus that may be filed by the Resulting Issuer under NI 41-101, National Instrument 44-101 Short Form Prospectus Distributions, National Instrument 44-102 Shelf Distributions or National Instrument 44-103 Post-Receipt Pricing (the “Prospectus Disclosure Exemption”);

(b)           section 12.3 of NI 41-101 relating to prospectus filing eligibility for distributions of restricted securities shall not apply to distributions by the Resulting Issuer of Subordinate Voting Shares (as defined below), Proportionate Voting Shares, Multiple Voting Shares (as defined below), Resulting Issuer Proportionate Share Options (as defined below), Resulting Issuer Subordinate Share Options (as defined below), Resulting Issuer NH Warrants (as defined below), Resulting Issuer Cannex Warrants (as defined below), Resulting Issuer Cannex Notes (as defined below), and any other securities of the Resulting Issuer, on a go-forward basis, that are directly or indirectly convertible into, or exercisable or exchangeable for, Subordinate Voting Shares or Proportionate Voting Shares (the “Prospectus Eligibility Exemption”);

(c)           subsections 10.1(1)(a), 10.1(2), 10.1(4) and 10.1(6) of National Instrument 51-102 Continuous Disclosure Obligations relating to the use of restricted security terms and restricted security disclosure shall not apply to the Proportionate Voting Shares in connection with continuous disclosure documents that may be prepared by the Resulting Issuer under NI 51-102 (the “CD Disclosure Exemption”);

(d)           subsections 2.3(1)(1.), 2.3(1)(3.) and 2.3(2) of Ontario Securities Commission Rule 56-501 Restricted Shares (“OSC Rule 56-501”) relating to the use of restricted share terms and restricted share disclosure shall not apply to the Proportionate Voting Shares in connection with dealer and adviser documentation, rights offering circulars and offering memoranda of the Resulting Issuer (the “OSC Rule 56-501 Disclosure Exemption”); and

(e)           subsection 3.2 of OSC Rule 56-501 relating to the withdrawal of prospectus exemptions for distributions of restricted shares shall not apply to distributions by the Resulting Issuer of Subordinate Voting Shares (as defined below), Proportionate Voting Shares, Multiple Voting Shares (as defined below), Resulting Issuer Proportionate Share Options (as defined below), Resulting Issuer Subordinate Share Options (as defined below), Resulting Issuer NH Warrants (as defined below), Resulting Issuer Cannex Warrants (as defined below), Resulting Issuer Cannex Notes (as defined below), and any other securities of the Resulting Issuer, on a go-forward basis, that are directly or indirectly convertible into, or exercisable or exchangeable for, Subordinate Voting Shares or Proportionate Voting Shares (the “OSC Rule 56-501 Withdrawal Exemption” and, together with the Prospectus Disclosure Exemption, the Prospectus Eligibility Exemption, the CD Disclosure Exemption and the OSC Rule 56-501 Disclosure Exemption, 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 each of the provinces and territories of Canada (other than with respect to the OSC Rule 56-501 Disclosure Exemption and the OSC Rule 56-501 Withdrawal Exemption), which, pursuant to subsection 8.2(2) of National Policy 11-202 Process for Prospectus Reviews in Multiple Jurisdictions and subsection 5.2(6) of National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions, also satisfies the notice requirement of subsection 4.7(1)(c) of MI 11-102.

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 was incorporated under the laws of the State of Nevada on February 14, 2019. The Filer was continued out of Nevada and into British Columbia on July 26, 2019 and exists under the Business Corporations Act (British Columbia) (the “BCBCA”).

2.             Cannex is a corporation existing under the laws of the Province of British Columbia. Cannex is a reporting issuer in the provinces of Ontario, Alberta and British Columbia. Cannex has two classes of shares issued and outstanding: Common shares (the “Cannex Common Shares”) and Class A restricted voting shares (the “Cannex Class A Shares”). The Cannex Common Shares are listed for trading on the Canadian Securities Exchange (the “CSE”) under the symbol “CNNX”.

3.             4Front Holdings LLC (“4Front Holdings”) is a limited liability company formed under the laws of the State of Delaware on August 29, 2016.

4.             1196260 B.C. Ltd. (“BC Newco”) is a corporation incorporated under the laws of the province of British Columbia on February 1, 2019.

5.             On March 1, 2019, the Filer, Cannex, 4Front Holdings and BC Newco entered into a business combination agreement (the “Business Combination Agreement”) in connection with the proposed business combination transaction (the “Transaction”) involving such parties pursuant to which, among other things, the Filer and BC Newco will amalgamate to form the Resulting Issuer. A summary of the Transaction and the Business Combination Agreement can be found in the management information circular of Cannex dated March 19, 2019 (the “Cannex Circular”) and filed on Cannex’s SEDAR profile. The Business Combination Agreement was amended on each of May 29, 2019 and July 29, 2019 to, among other things, extend the outside date for closing the Transaction to November 30, 2019 and make minor adjustments to the Resulting Issuer’s share capitalization figures, respectively.

6.             It is a condition of closing the Transaction that the Class A subordinate voting shares of the Resulting Issuer (the “Subordinate Voting Shares”) be listed for trading on the CSE.

7.             The businesses of Cannex and 4Front Holdings will be combined through a plan of arrangement (the “Plan of Arrangement”).

8.             In advance of the effective time of the Plan of Arrangement (the “Effective Time”), the Filer, 4Front Holdings, and other related companies conducted a pre-closing reorganization through a series of transactions (the “Pre-Arrangement Transactions”) pursuant to which the Filer indirectly acquired the outstanding units of 4Front Holdings and the securityholders of 4Front Holdings and two of its shareholders, 4Front Ventures Corp. and 4Front Can/Am InvestCo Inc., became securityholders of the Filer.

9.             Immediately prior to the Effective Time, the Filer will have three classes of shares: Class A subordinate voting shares, Class B proportionate voting shares and Class C multiple voting shares, each of which will have the same terms and conditions as the proposed shares of the Resulting Issuer (as described below).

10.          Pursuant to the Plan of Arrangement, the Filer will amalgamate with BC Newco to form 4Front Ventures Corp., the Resulting Issuer (the “Amalgamation”).

11.          The Resulting Issuer will have three classes of shares: Subordinate Voting Shares, Proportionate Voting Shares and Class C multiple voting shares (the “Multiple Voting Shares”), the terms of which are described below. Upon completion of the Transaction, the Resulting Issuer will have 1,276,208 Multiple Voting Shares issued and outstanding, 5,114,591 Proportionate Voting Shares issued and outstanding, and 120,408,927 Subordinate Voting Shares issued and outstanding (in each case, assuming no convertible securities are exercised from the date of this decision to the time of completion of the Transaction).

12.          The Subordinate Voting Shares will be “equity securities”, as defined in NI 41-101 and NI 51-102, and “equity shares”, as defined in OSC Rule 56-501. The Subordinate Voting Shares will be “restricted securities”, as defined in NI 41-101 and NI 51-102, and “restricted shares”, as defined in OSC Rule 56-501, because both the Multiple Voting Shares and the Proportionate Voting Shares will carry a greater number of votes per security relative to the Subordinate Voting Shares.

13.          The Proportionate Voting Shares will be “equity securities”, as defined in NI 41-101 and NI 51-102, and “equity shares”, as defined in OSC Rule 56-501. The Proportionate Voting Shares will be “restricted securities”, as defined in NI 41-101 and NI 51-102, and “restricted shares”, as defined in OSC Rule 56-501, because the Multiple Voting Shares will carry a greater number of votes per security relative to the Proportionate Voting Shares.

14.          Upon completion of the Amalgamation, the Resulting Issuer will issue to each holder of securities of the Filer the same number and class of securities held by such holder immediately prior to the Effective Time of the Plan of Arrangement.

15.          In addition, upon completion of the Amalgamation, the Resulting Issuer will issue to each holder of the options and warrants of the Filer the same number and class of securities held by such holder in immediately prior to the Effective Time of the Plan of Arrangement. Such options of the Resulting Issuer (each a “Resulting Issuer Proportionate Share Option”) will be convertible into Proportionate Voting Shares of the Resulting Issuer. Such warrants of the Resulting Issuer (each, a “Resulting Issuer NH Warrant”) will be convertible into Subordinate Voting Shares of the Resulting Issuer.

16.          Under the Plan of Arrangement, the holders of securities of Cannex will also exchange their securities for securities of the Resulting Issuer, substantially as follows:

(a)           each Cannex Common Share and Cannex Class A Share outstanding immediately prior to the Effective Time will be exchanged for Subordinate Voting Shares and Proportionate Voting Shares, respectively, on the basis of the Cannex share exchange ratio contemplated in the Plan of Arrangement (the “Cannex Share Exchange Ratio”);

(b)           each warrant issued by Cannex outstanding immediately prior to the Effective Time will be exchanged for a substantially similar warrant of the Resulting Issuer (each a “Resulting Issuer Cannex Warrant”), adjusted in accordance with the Cannex Share Exchange Ratio;

(c)           each convertible note issued by Cannex (each a “Cannex Note”) outstanding immediately prior to the Effective Time will be exchanged for a note of the Resulting Issuer (each a “Resulting Issuer Cannex Note”) in accordance with the Plan of Arrangement, adjusted in accordance with the Cannex Share Exchange Ratio;

(d)           each option issued by Cannex to purchase Cannex Common Shares and each option issued by Cannex to purchase Cannex Class A Shares outstanding immediately prior to the Effective Time will be exchanged for a Resulting Issuer subordinate share option (each a “Resulting Issuer Subordinate Share Option”) and a Resulting Issuer proportionate share option (each a “Resulting Issuer Proportionate Share Option”), respectively, in each case adjusted in accordance with the Cannex Share Exchange Ratio.

17.          The Transaction will be effected by the Plan of Arrangement under the BCBCA and was subject to approval by the Supreme Court of British Columbia, which was obtained on July 30, 2019.

18.          The Transaction was also subject to the following approvals of the holders of Cannex Common Shares, Cannex Class A Shares and Cannex Notes at a meeting of the shareholders and noteholders of Cannex, which was held on April 18, 2019 (the “Cannex Meeting”):

(a)           66⅔% of the votes cast on the resolution to approve the Cannex component of the Transaction (the “Cannex Component of the Business Combination Resolution”) by holders of Cannex Class A Shares present in person or by proxy at the Cannex Meeting voting as a class pursuant to subsection 289(1)(b) of the BCBCA;

(b)           66⅔% of the votes cast on the Cannex Component of the Business Combination Resolution by holders of Cannex Common Shares present in person or by proxy at the Cannex Meeting voting as a class pursuant to subsection 289(1)(b) of the BCBCA;

(c)           66⅔% of the votes cast on the Cannex Component of the Business Combination Resolution by holders of Cannex Class A Shares and Cannex Common Shares present in person or by proxy at the Cannex Meeting voting together pursuant to subsection 289(1)(a) of the BCBCA;

(d)           the majority of votes cast by minority shareholders of Cannex, as contemplated by OSC Rule 56-501 and NI 41-101;

(e)           a majority in number of the Cannex noteholders who represent at least 75% in value of the issued and outstanding Cannex Notes or class of noteholders pursuant to subsection 289(1)(d) of the BCBCA;

(f)            a simple majority of the votes cast by holders of Cannex Common Shares, excluding the votes of Cannex Common Shares held or controlled by “interested parties” as defined in Multilateral Instrument 61-101 Protection of Minority Securityholders in Special Transactions (“MI 61-101”); and

(g)           a simple majority of the votes cast by holders of Cannex Class A Shares, excluding the votes of Cannex Class A Shares held or controlled by “interested parties” as defined in MI 61-101.

19.          The Cannex Circular was mailed to shareholders and noteholders of Cannex on March 25, 2019. The Cannex Circular disclosed the approvals that would be sought at the Cannex Meeting. The Cannex Circular complied with the disclosure requirements with respect to an information circular related to: (a) restricted shares set out in subsection 3.2(1)(e) of OSC Rule 56-501; and (b) restricted securities set out in subsection 12.3(2) of NI 41-101. As disclosed in the Cannex Circular, to the best of the knowledge of management of Cannex and the Cannex board of directors, there were no affiliates of Cannex that beneficially owned any securities of Cannex and there was no “control person” of Cannex (as contemplated in OSC Rule 56-501 and Part 12 of NI 41-101) and, accordingly, there were no securities of Cannex which were not be counted for the purposes of the approval set out in representation 18(d) above. The Transaction received all of the approvals set out in representation 18 above at the Cannex Meeting.

20.          In addition, the Transaction was subject to the following approvals of holders of shares of the Filer, as well as those persons entitled to acquire shares of the Filer pursuant to the Pre-Arrangement Transactions (collectively, the “Filer Shareholders”), at a meeting of the Filer Shareholders, which was convened on the morning of July 26, 2019, adjourned until the afternoon of July 26, 2019, and completed on the afternoon of July 26, 2019 (the “Filer Meeting”):

(a)           66⅔% of the votes cast by the holders of the Filer’s subordinate voting shares, present in person or represented by proxy at the Filer Meeting, voting separately by class pursuant to subsection 289(1)(b) of the BCBCA;

(b)           66⅔% of the votes cast by the holders of the Filer’s proportionate voting shares, present in person or represented by proxy at the Filer Meeting, voting separately by class pursuant to subsection 289(1)(b) of the BCBCA;

(c)           66⅔% of the votes cast by the holders of the Filer’s multiple voting shares, present in person or represented by proxy at the Filer Meeting, voting separately by class pursuant to subsection 289(1)(b) of the BCBCA;

(d)           66⅔% of the votes cast by the Filer Shareholders, present in person or represented by proxy at the Filer Meeting, voting together as a single class pursuant to subsection 289(1)(a) of the BCBCA;

(e)           a majority of the votes cast by the Filer Shareholders approving the Transaction and the Plan of Arrangement, excluding votes of affiliates of the Filer and control persons of the Filer, as contemplated by OSC Rule 56-501 and NI 41-101;

(f)            a majority of the votes cast by holders of the Filer’s subordinate voting shares, voting as a class, approving the Transaction and the Plan of Arrangement, excluding votes of affiliates of the Filer and control persons of the Filer, as contemplated by OSC Rule 56-501 and NI 41-101;

(g)           a majority of the votes cast by holders of the Filer’s proportionate voting shares, voting as a class, approving the Transaction and the Plan of Arrangement, excluding votes of affiliates of the Filer and control persons of the Filer, as contemplated by OSC Rule 56-501 and NI 41-101; and

(h)           a majority of the votes cast by holders of the Filer’s multiple voting shares, voting as a class, approving the Transaction and the Plan of Arrangement, excluding votes of affiliates of the Filer and control persons of the Filer, as contemplated by OSC Rule 56-501 and NI 41-101.

21.          A management information circular dated July 11, 2019 (the “Filer Circular”) was disseminated to the Filer Shareholders on July 16, 2019. The Filer Circular disclosed the approvals that would be sought at the Filer Meeting. The Filer Circular complied with the disclosure requirements with respect to an information circular related to: (a) restricted shares set out in subsection 3.2(1)(e) of OSC Rule 56-501; and (b) restricted securities set out in subsection 12.3(2) of NI 41-101. The Transaction received all of the approvals set out in representation 20 above at the Filer Meeting.

22.          The following is a summary of the terms attaching to the Resulting Issuer’s shares (the “Share Terms”):

(a)           Holders of the Subordinate Voting Shares will be entitled to notice of and to attend and vote at any meeting of the shareholders of the Resulting Issuer, except a meeting of which only holders of another class or series of shares of the Resulting Issuer will have the right to vote. At each such meeting, holders of Subordinate Voting Shares will be entitled to one vote in respect of each Subordinate Voting Share.

(b)           Holders of Subordinate Voting Shares will be entitled to receive, as and when declared by the directors of the Resulting Issuer, dividends in cash or property of the Resulting Issuer. No dividend will be declared on the Subordinate Voting Shares unless the Resulting Issuer simultaneously declares equivalent dividends on: (i) the Proportionate Voting Shares, in an amount equal to the dividend declared per Subordinate Voting Share multiplied by 80; and (ii) the Multiple Voting Shares, in an amount equal to the amount of the dividend declared per Subordinate Voting Share.

(c)           In the event of the liquidation, dissolution or winding-up of the Resulting Issuer, holders of Subordinate Voting Shares will be entitled to participate rateably along with all the holders of Proportionate Voting Shares and Multiple Voting Shares, with the amount of such distribution per Subordinate Voting Share equal to each of: (i) the amount of such distribution per Proportionate Voting Share divided by 80; and (ii) the amount of such distribution per Multiple Voting Share.

(d)           If an offer is made to purchase Proportionate Voting Shares, and such offer is required, pursuant to applicable securities legislation or the rules of any stock exchange on which the Proportionate Voting Shares or the Subordinate Voting Shares which may be obtained upon conversion of the Proportionate Voting Shares may then be listed, to be made to all or substantially all of the holders of Proportionate Voting Shares in a province or territory of Canada to which the requirement applies (such offer to purchase, an “Offer”) and not made to the holders of Subordinate Voting Shares for consideration per Subordinate Voting Share equal to 0.0125 of the consideration offered per Proportionate Voting Share, then each Subordinate Voting Share will become convertible at the option of the holder into Proportionate Voting Shares on the basis of 80 Subordinate Voting Shares for one Proportionate Voting Share, at any time while the Offer is in effect until one day after the time prescribed by applicable securities legislation or stock exchange rules for the offeror to take up and pay for such shares as are to be acquired pursuant to the Offer.

(e)           Holders of Proportionate Voting Shares will be entitled to notice of and to attend and vote at any meeting of the shareholders of the Resulting Issuer, except a meeting of which only holders of another class or series of shares of the Resulting Issuer will have the right to vote. Subject to the terms set out in the articles of the Resulting Issuer, at each such meeting, holders of Proportionate Voting Shares will be entitled to 80 votes in respect of each Proportionate Voting Share.

(f)            Holders of Proportionate Voting Shares will be entitled to receive, as and when declared by the directors of the Resulting Issuer, dividends in cash or property of the Resulting Issuer. No dividend will be declared on the Proportionate Voting Shares unless the Resulting Issuer simultaneously declares equivalent dividends on: (i) the Subordinate Voting Shares, in an amount equal to the amount of the dividend declared per Proportionate Voting Share divided by 80; and (ii) the Multiple Voting Shares, in an amount equal to the dividend declared per Proportionate Voting Share divided by 80.

(g)           In the event of the liquidation, dissolution or winding-up of the Resulting Issuer, the holders of Proportionate Voting Shares will be entitled to participate rateably along with the holders of Subordinate Voting Shares and Multiple Voting Shares, with the amount of such distribution per Proportionate Voting Share equal to each of: (i) the amount of such distribution per Subordinate Voting Share multiplied by 80; and (ii) the amount of such distribution per Multiple Voting Share multiplied by 80. Each fraction of a Proportionate Voting Share will be entitled to the amount calculated by multiplying the fraction by the amount payable per whole Proportionate Voting Share.

(h)           Each Proportionate Voting Share shall be convertible, at the option of the holder thereof, into such number of fully paid and non-assessable Subordinate Voting Shares as is determined by multiplying the number of Proportionate Voting Shares in respect of which the share conversion right is exercised by 80. The ability to convert the Proportionate Voting Shares during the six month period after the Effective Time will be subject to a restriction that, unless the board of directors of the Resulting Issuer determines otherwise, the aggregate number of Subordinate Voting Shares, Proportionate Voting Shares and Multiple Voting Shares held of record, directly or indirectly, by residents of the United States, may not exceed 40% of the aggregate number of Subordinate Voting Shares, Proportionate Voting Shares and Multiple Voting Shares issued and outstanding after giving effect to such conversions.

(i)            Holders of Multiple Voting Shares will be entitled to notice of and to attend and vote at any meeting of the shareholders of the Resulting Issuer, except a meeting of which only holders of another class or series of shares of the Resulting Issuer will have the right to vote. At each such meeting, holders of Multiple Voting Shares will be entitled to 800 votes in respect of each Multiple Voting Share held.

(j)            Multiple Voting Shares will not be convertible into Subordinate Voting Shares on a one-for-one basis until, at the earliest, three years from the closing date of the Transaction (the “Initial Conversion Date”). Each Multiple Voting Share shall automatically convert, without any action on the part of the holder thereof, into Subordinate Voting Shares on the basis of one Subordinate Voting Share for one Multiple Voting Share upon: (i) the death or disability of an Initial Holder (as defined below) with respect to all Multiple Voting Shares held by an Initial Holder; (ii) an Involuntary Transfer Event (as defined in the Share Terms) with respect to the Multiple Voting Shares being transferred pursuant to the Involuntary Transfer Event; or (iii) any other transfer of Multiple Voting Shares to anyone other than another Initial Holder with respect to such Multiple Voting Shares being transferred.

(k)           Holders of Multiple Voting Shares will be entitled to receive, as and when declared by the directors of the Resulting Issuer, dividends in cash or property of the Resulting Issuer. No dividend will be declared on the Multiple Voting Shares unless the Resulting Issuer simultaneously declares equivalent dividends on: (i) the Subordinate Voting Shares, in an amount equal to the amount of the dividend declared per Multiple Voting Share; and (ii) the Proportionate Voting Shares, in an amount equal to the dividend declared per Multiple Voting Share multiplied by 80.

(l)            In the event of the liquidation, dissolution or winding-up of the Resulting Issuer, the holders of Multiple Voting Shares will be entitled to participate rateably along with the holders of Proportionate Voting Shares and Subordinate Voting Shares, with the amount of such distribution per Multiple Voting Share equal to each of: (i) the amount of such distribution per Subordinate Voting Share; and (ii) the amount of such distribution per Proportionate Voting Share divided by 80.

(m)          No Multiple Voting Shares may be transferred by the holder thereof without the prior written consent of the board of directors of the Resulting Issuer, except a holder of Multiple Voting Shares as of the date of initial issuance of Multiple Voting Shares (the “Initial Holder”) is permitted to transfer Multiple Voting Shares prior to the Initial Conversion Date to another Initial Holder.

(n)           If an offer is made to purchase Subordinate Voting Shares or Proportionate Voting Shares, and such offer is required pursuant to applicable securities legislation or the rules of any stock exchange on which the Proportionate Voting Shares or Subordinate Voting Shares may then be listed, to be made to all or substantially all of the holders of Proportionate Voting Shares or Subordinate Voting Shares in a province or territory of Canada to which the requirement applies (such offer to purchase, a “MVS Offer”), then such MVS Offer will be extended by the offeror to the holders of Multiple Voting Shares (which will not be required to convert in order to participate in the MVS Offer) for: (i) consideration per Multiple Voting Share equal to 0.0125 of the consideration offered per Proportionate Voting Share; or (ii) the consideration offered per Subordinate Voting Share, as applicable.

23.          Concurrent with the completion of the Transaction, the holders of the Multiple Voting Shares will enter into a coattail agreement with the Resulting Issuer and a trustee for the benefit of the holders of the Subordinate Voting Shares and the Proportionate Voting Shares. The coattail agreement will restrict the sale of Multiple Voting Shares if such sale would constitute an offer to purchase Multiple Voting Shares that is required to be made to all or substantially all of the holders of the Multiple Voting Shares, unless such offer is extended by the offeror to: (a) all of the holders of Subordinate Voting Shares for consideration per Subordinate Voting Share at least equal to the consideration offered per Multiple Voting Share; and (b) all of the holders of Proportionate Voting Shares for consideration per Proportionate Voting Share at least equal to 80 times the consideration offered per Multiple Voting Share.

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:

(a)           in respect of the Prospectus Disclosure Exemption, the CD Disclosure Exemption and the OSC Rule 56-501 Disclosure Exemption: (i) the Proportionate Voting Shares continue to be “restricted securities” as such term is defined in NI 41-101 and NI 51-102, and “restricted shares” as such term is defined in OSC Rule 56-501; and (ii) the Proportionate Voting Shares are referred to as “subordinate proportionate voting shares” (except as may be permitted pursuant to subsection 12.2(3) of NI 41-101, subsection 10.1(6) of NI 51-102 or subsection 2.3(2) of OSC Rule 56-501);

(b)           in respect of the Prospectus Eligibility Exemption, a subsequent restricted security reorganization, if any, carried out by the Resulting Issuer related to the Subordinate Voting Shares or the Proportionate Voting Shares, other than a restricted security reorganization that results only in the creation of a security that is not itself a subject security or a restricted security but that is, directly or indirectly, convertible into or exercisable or exchangeable for Subordinate Voting Shares or Proportionate Voting Shares, complies with the requirements of section 12.3 of NI 41-101; and

(c)           in respect of the OSC Rule 56-501 Withdrawal Exemption, a subsequent restricted share reorganization, if any, carried out by the Resulting Issuer related to the Subordinate Voting Shares or the Proportionate Voting Shares, other than a restricted security reorganization that results only in the creation of a security that is not itself a subject security or a restricted security but that is, directly or indirectly, convertible into or exercisable or exchangeable for Subordinate Voting Shares or Proportionate Voting Shares, complies with the requirements of section 3.2 of OSC Rule 56-501.

“Winnie Sanjoto”
Manager, Corporate Finance
Ontario Securities Commission