Exfo Inc.
Headnote
National Policy 11-206 Process for Cease to be a Reporting Issuer Applications -- the issuer ceases to be a reporting issuer under securities legislation -- more than 15 securityholders in a jurisdiction.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(a)(ii).
[TRANSLATION]
DECISION No 2021-IC-0021
File No: 17678
October 27, 2021
IN THE MATTER OF THE SECURITIES LEGISLATION OF QUÉBEC AND ONTARIO (the Jurisdictions) AND IN THE MATTER OF THE PROCESS FOR CEASE TO BE A REPORTING ISSUER APPLICATIONS AND IN THE MATTER OF EXFO INC. (the Filer)
ORDER
Background
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for an order under the securities legislation of the Jurisdictions (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 dual application):
(a) the Autorité des marches financiers (Québec) is the principal regulator for this application,
(b) the Filer has provided notice that subsection 4C.5(1) of Regulation 11-102 Passport System (Regulation 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland, and
(c) this order is the order of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
Terms defined in Regulation 14-101 respecting Definitions, Regulation 11-102 and, in Québec, in Regulation 14-501Q on definitions 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 is a corporation existing under the CBCA. Its head office is located at 400, Godin Avenue, Québec City (Québec) G1M 2K2.
2. On June 7, 2021, EXFO Inc. (EXFO), 11172239 Canada Inc. (the Purchaser) and G. Lamonde Investissements Financiers Inc. (GLIF) entered into an arrangement agreement providing for, among other things, the acquisition by the Purchaser of all of the issued and outstanding subordinate voting shares (the SVS) of EXFO, other than SVS held directly or indirectly by Germain Lamonde and Philippe Morin, by way of a plan of arrangement under the Canada Business Corporations Act (the CBCA), which was completed on August 27, 2021 (the Arrangement). Following the completion of the Arrangement, EXFO and the Purchaser effected a statutory vertical short-form amalgamation (the Amalgamation) on September 1, 2021, with the Purchaser and EXFO continuing as one corporation under the name "EXFO Inc.", being the Filer.
3. The Arrangement was approved by the shareholders of EXFO at a special meeting of the shareholders held on August 13, 2021 and by the Superior Court of Québec on August 20, 2021.
4. On August 25, 2021, the Purchaser issued unsecured convertible debentures (the Debentures) in the aggregate amount of US$17,250,000 in favour of, respectively, GLIF and Investissement Québec. The Debentures are convertible into Filer Common Shares at any time after 30 months of the date of issuance of the Debentures or upon the occurrence of certain liquidity events in accordance with the terms set forth in the Debentures.
5. On August 24, 2021, the Purchaser acquired the SVS held by Germain Lamonde, GLIF, 9356-8988 Québec Inc. (9356) and Philippe Morin (collectively, the Rollover Shareholders) and all of the issued and outstanding multiple voting shares of EXFO from GLIF and 9356 in consideration for common shares of the Purchaser (the Filer Common Shares).
6. Pursuant to the Arrangement:
(a) on August 27, 2021, the Purchaser has acquired all of the issued and outstanding SVS at a price of $6.25 in cash per SVS (the Consideration), except the SVS held by it that were previously acquired from the Rollover Shareholders in exchange for Filer Common Shares, as noted in paragraph 4 above; and
(i) the holders of such acquired SVS have ceased to have any rights as holders of SVS;
(ii) the names of such holders have been removed from the register of holders of SVS maintained by or on behalf of EXFO; and
(iii) the Purchaser has been recorded as the holder of the SVS so transferred and the legal and beneficial owner thereof.
(b) each deferred stock unit (the DSU) issued pursuant to the deferred stock units plan of EXFO effective as of January 12, 2005, as amended as of January 10, 2018 (the DSU Plan) outstanding immediately prior to the effective time of the Arrangement (the Effective Time) (whether vested or unvested), notwithstanding the terms of the DSU Plan, has been, without any further action by or on behalf of the holders of DSUs, assigned and transferred by such holders to EXFO in exchange for a cash payment from EXFO equal to the Consideration, less applicable withholdings, and each such DSU has been immediately cancelled and all obligations in respect of the DSUs have been deemed to be fully satisfied;
(c) each stock appreciation right (the SAR) issued pursuant to the stock appreciation rights plan of EXFO established on August 4, 2001, as amended on January 12, 2010 (the SAR Plan) outstanding immediately prior to the Effective Time (whether vested or unvested), notwithstanding the terms of the SAR Plan, has been, without any further action by or on behalf of the holders of SARs, assigned and transferred by such holders to EXFO in exchange for a cash payment from EXFO equal to the amount (if any) by which the Consideration exceeded the exercise price of such SAR determined on the date of grant, less applicable withholdings, and each such SAR has been immediately cancelled and all obligations in respect of the SARs have been deemed to be fully satisfied; and
(d) the long-term incentive plan of EXFO dated as of May 25, 2000 and amended as of January 9, 2004, January 12, 2005, January 6, 2016, January 10, 2018 and January 9, 2019 relating to restricted stock units (each, a RSU) and performance share units (each, a PSU) has been amended and restated (the Amended LTIP) to take into account the privatization of EXFO, and the RSUs and PSUs outstanding immediately prior to the Effective Time have been, without any further action by or on behalf of the holders thereof, confirmed as outstanding and governed by the terms of the Amended LTIP and any RSU agreement and PSU agreement, as applicable, in each case as amended, restated or supplemented.
7. The SVS, which were the only securities of EXFO previously listed on an exchange, ceased trading on the NASDAQ Stock Market (the Nasdaq) as at the close of business on August 27, 2021 and were delisted from the Toronto Stock Exchange as at the close of business on August 30, 2021.
8. Following the completion of the Arrangement, EXFO and the Purchaser effected the Amalgamation on September 1, 2021, with the Purchaser and EXFO continuing as one corporation under the name "EXFO Inc.", being the Filer.
9. Pursuant to the Amalgamation, the SVS were cancelled under the Amalgamation without any repayment of capital in respect thereof.
10. The intention of EXFO to make an application to cease to be a reporting issuer is expressed in the management proxy circular of EXFO dated July 15, 2021, a copy of which (a) was provided to the holders of SVS; and (b) has been filed under EXFO's profile on SEDAR at www.sedar.com.
11. The Amended LTIP is the long-term incentive plan of the Filer and pursuant to the Amalgamation, RSUs and PSUs of EXFO became RSUs and PSUs of the Filer.
12. The Filer has no current intention to conduct a financing by way of distribution of its securities.
13. At the time of the Arrangement, EXFO was a reporting issuer in all of the provinces of Canada. As a result of the issuance of Filer Common Shares in exchange for SVS held by the Rollover Shareholders, the Purchaser became a reporting issuer in all of the provinces of Canada pursuant to subsection 68(4) of the Securities Act (Québec). Similarly, the Filer became a reporting issuer in all of the provinces of Canada as a result of the Amalgamation.
14. The authorized capital of the Filer consists of an unlimited number of Filer Common Shares. As at the date hereof, there are 36,032,304 Filer Common Shares issued and outstanding.
15. The Filer Common Shares are held by four (4) shareholders, namely, the Rollover Shareholders, all of whom (a) were shareholders of EXFO prior to the Arrangement; and (b) are residing in the jurisdiction of Québec.
16. On September 1, 2021, all of the shareholders of the Filer entered into a unanimous shareholders agreement governing, among other things, their relationship and their rights and obligations arising out of the ownership of Filer Common Shares (the USA). Both the USA and the articles of amalgamation of the Filer contain restrictions on the transfer of Filer Common Shares.
17. As at the date hereof, there are 1,679,309 RSUs (the Filers RSUs) and 304,227 PSUs (the Filer PSUs) issued and outstanding. The Filer RSUs and the Filer PSUs are governed by the Amended LTIP, the main amendments of which have all been communicated to the holders of Filer RSUs (the RSU Holders) and Filer PSUs (the PSU Holders and collectively with the RSU holders, the Incentive Holders) prior to the completion of the Arrangement. Under the Amended LTIP, any Incentive Holder who exercises Filer RSUs or Filer PSUs, as applicable, for Filer Common Shares will be required to become a party to the USA.
18. As at the date hereof, there are one hundred and ninety-one (191) RSU Holders and sixteen (16) PSU Holders. Each such Incentive Holder is an employee of the Filer or of a subsidiary of the Filer.
19. As at the date hereof, the Filer has no securities issued and outstanding other than the Filer Common Shares, the Filer RSUs, the Filer PSUs and the Debentures.
20. The sixteen (16) PSU Holders are residing in the following jurisdictions:
(a) thirteen (13) in Canada, all of which are located in Québec;
(b) one (1) in the United States;
(c) one (1) in the Netherlands; and
(d) one (1) in Singapore.
21. The one hundred and ninety-one (191) RSU Holders are residing in the following jurisdictions:
(a) ninety-three (93) in Canada, of which two (2) are located in Ontario and ninety-one (91) in Québec;
(b) sixteen (16) in the United States;
(c) twenty-three (23) in France;
(d) eight (8) in Spain;
(e) nineteen (19) in the UK;
(f) two (2) in Malaysia;
(g) four (4) in Finland;
(h) two (2) in Singapore;
(i) one (1) in South Africa;
(j) three (3) in Netherlands;
(k) fourteen (14) in India;
(l) one (1) in Australia;
(m) three (3) in Germany;
(n) one (1) in the Czech Republic; and
(o) one (1) in Argentina.
22. There are two (2) Debenture holders and they are both residing in the jurisdiction of Québec.
23. The Filer is not an OTC reporting issuer under Multilateral Instrument 51-105 respecting Issuers Quoted in the U.S. Over-the-Counter Markets.
24. As at the date hereof, the outstanding securities of the Filer, including debt securities, are beneficially owned, directly or indirectly, by one hundred and ninety-four (194) securityholders in total worldwide, of whom ninety-six (96) securityholders are located in Canada with fewer than fifteen (15) securityholders in each of the jurisdictions of Canada (except in the Province of Québec where ninety-four (94) securityholders are located).
25. No securities of the Filer, including debt securities, are traded in Canada or another country on a marketplace as defined in Regulation 21-101 respecting Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported.
26. The Filer is not in default of securities legislation in any jurisdiction.
27. At the time of granting the Order Sought, the Filer will no longer be a reporting issuer in any of the provinces of Canada.
Order
Each of the Decision Makers is satisfied that the order meets the test set out in the Legislation for the Decision Maker to make the order.
The decision of the Decision Makers under the Legislation is that the Order Sought is granted.
"Marie-Claude Brunet-Ladrie"
Director, Continuous Disclosure