NorthStar Gaming Holdings Inc.

Headnote

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption from the requirement to call a meeting of shareholders to consider proposed related party transactions and to send an information circular to such shareholders -- issuer will be issuing securities to related parties and such issuances constitute related party transactions subject to the minority approval requirements of MI 61-101 -- issuer has received written confirmation from shareholders holding a majority of the shares eligible to be counted in determining minority approval under Part 8 of MI 61-101 that they intend to consent to the proposed transactions -- issuer disclosed the details of the proposed related party transactions in a disclosure document containing the information required by section 5.3 of MI 61-101 that was filed on SEDAR+ and provided to each shareholder from whom consent is being sought -- exemption sought granted, subject to conditions, including that no executed consents are obtained by the issuer until at least 14 days have passed from the date the relevant consenting shareholders were provided with the disclosure document and form of written consent, and the issuer does not close the transactions unless and until (i) the consenting shareholders have had at least 14 days to review the disclosure document and form of written consent, and (ii) at least 14 days have elapsed from the date that the disclosure document and form of written consent were filed on SEDAR+.

Applicable Legislative Provisions

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, ss. 5.3, 5.6, 8.1 and 9.1(2).

Companion Policy 61-101CP to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, s. 3.1.

October 26, 2023

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 NORTHSTAR GAMING HOLDINGS INC. (the "Filer")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") exempting the Filer from the requirement in subsection 5.3(2) of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") to call a meeting of holders of Common Shares (as defined below) to consider the Proposed Transaction (as defined below) and the Concurrent Offering (as defined below) and to send an information circular to holders of Common Shares (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 section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in Alberta.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 and MI 61-101 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 corporation existing under the laws of British Columbia. The principal and head office of the Filer is located at 220 King Street West, Suite 200, Toronto, ON M5H 1K4. The registered office of the Filer is located at 666 Burrard Street, Suite 2500, Vancouver, British Columbia, V6C 2X8. On July 6, 2023, the Filer received shareholder approval to continue into Ontario. The Filer is in the process of implementing the continuance, but has not done so as at the date hereof.

2. The Filer is currently a reporting issuer in each of Alberta, British Columbia and Ontario (the "Reporting Jurisdictions"). The Filer is not in default of any requirement of securities legislation in any of the Reporting Jurisdictions.

3. The Filer's authorized capital consists of an unlimited number of common shares in the capital of the Filer ("Common Shares"), of which 163,263,557 are issued and outstanding as at the date hereof, and an unlimited number of redeemable preferred shares in the capital of the Filer ("Preferred Shares"), of which 66,300 are issued and outstanding as at the date hereof. Each Common Share carries the right to one vote at all meetings of shareholders of the Filer. There are no voting rights attached to the Preferred Shares. However, pursuant to a conversion rights agreement dated March 3, 2023 between Torstar Corporation (together with its affiliates, "Torstar"), which indirectly owns all 66,300 Preferred Shares, the Filer and certain third parties, Torstar has the right to convert 42,500 of the Preferred Shares into 5,666,667 Common Shares. The Filer also has 51,176,873 Common Shares reserved for issuance on the exercise of warrants and stock options and the settlement of restricted share units granted to directors and officers.

4. The Filer's Common Shares are listed on the TSX Venture Exchange (the "TSXV") under the symbol "BET".

5. The Filer has negotiated a private placement (the "Proposed Transaction") with one of its shareholders, Playtech plc ("Playtech"). On September 21, 2023, Playtech and the Filer executed a subscription agreement (the "Subscription Agreement") pursuant to which Playtech has agreed to purchase securities of the Filer as described below for a total purchase price of $10,000,000. The securities purchased consist of: (a) 28,571,428 units ("Units") at a price of $0.175 per Unit, with each Unit consisting of (i) one Common Share, (ii) one half of a share purchase warrant, with each whole warrant being exercisable at $0.36 per Common Share for five years (each, an "A Warrant"), and (iii) one half of a share purchase warrant, with each whole warrant being exercisable at $0.40 per Common Share for a period of five years (each, a "B Warrant"), for an aggregate subscription price of $5,000,000; and (b) a convertible debenture (the "Debenture") in the principal amount of $5,000,000 bearing interest at the rate of 8% per annum payable and compounding quarterly with a term of three years. The original principal amount of the Debenture will be convertible, at the option of Playtech, into Common Shares of the Filer at a price of $0.20 per Common Share. The Debenture also provides for payment in kind of interest ("PIK Interest"), where each quarterly interest amount will be capitalized to increase the outstanding principal amount of the Debenture on the interest payment date unless the Filer elects to pay a particular interest payment in cash on the interest payment date. Subject to the approval of the TSXV, any such capitalized interest will be convertible, at the option of Playtech, based on the Filer's trading price at the time the applicable interest is capitalized.

6. The board of directors of the Filer (the "Board"), with a conflicted director who is an executive officer of Playtech abstaining from considering and voting on the matter, unanimously approved the Proposed Transaction on September 21, 2023.

7. The Filer's intention to complete the Proposed Transaction was first announced on August 24, 2023. Following the execution of the Subscription Agreement on September 21, 2023, the material terms of the Subscription Agreement, the Proposed Transaction and the Concurrent Offering were described in a press release dated September 22, 2023 and in a material change report dated September 26, 2023 (the "MCR"). The MCR contains all additional information required by Section 5.2 of MI 61-101.

8. The Board consists of a total of eight directors, seven of whom are "independent directors" (as defined in MI 61-101) with respect to the Proposed Transaction, being Vic Bertrand, Brian Cooper, Chris Hodgson, Dean MacDonald, Michael Moskowitz, Sylvia Prentice and Barry Shafran (the "Independent Directors"). The other member of the Board, Chris McGinnis, who is an executive officer of Playtech, declared his conflict and recused himself from all negotiations on behalf of either the Filer or Playtech with respect to the Proposed Transaction. On October 12, 2023, the Board also approved the issuance of up to an additional $750,000 of Units and Debentures on the same terms as the Proposed Transaction to other investors, including members of management of the Filer (the "Concurrent Offering"). Mr. Moskowitz and Mr. MacDonald, who are participating in the Concurrent Offering, abstained from approving the Concurrent Offering.

9. In order to come to their determination to approve the Proposed Transaction, the Independent Directors met independently from the non-independent director of the Board and met with management of the Filer to discuss the Proposed Transaction and the Concurrent Offering. The Independent Directors evaluated the Proposed Transaction and the Concurrent Offering to determine whether they were fair and reasonable, and considered a number of factors including the financing needs of the Filer, that management had reached out to various investment bankers and that there were no offers to conduct a financing for the Filer from this process and the fact that the Proposed Transaction and the Concurrent Offering were priced at a premium to the $0.16 closing price of the Common Shares on the TSXV immediately prior to the initial announcement of the Proposed Transaction on August 24, 2023 and the ten day average closing price of the Common Shares on that date of $0.159. The most recent closing price for the Common Shares on the TSXV immediately prior to the execution of the Subscription Agreement was $0.145, and the average closing price over the prior ten days was $0.143. At no point between the announcement of the Proposed Transaction and the signing of the Subscription Agreement did the Common Shares trade on the TSXV at a price higher than the offering price of the Units. Following such discussions, the Independent Directors determined that the terms of the Proposed Transaction negotiated by management of the Filer were fair and reasonable.

10. Playtech currently owns 24,500,000 Common Shares and 24,500,000 warrants to acquire Common Shares, 12,250,000 of which are exercisable at $0.85 and 12,250,000 of which are exercisable at $0.90 (collectively, the "Current Warrants"), representing approximately 15.01% of the outstanding Common Shares on a non-diluted basis and approximately 26.10% on a partially-diluted basis.

11. Immediately upon the completion of the Proposed Transaction, Playtech will own 53,071,428 Common Shares, 14,285,714 A Warrants, 14,285,714 B Warrants, the Current Warrants, and the Debenture (the principal of which will be convertible into up to 25,000,000 Common Shares), representing approximately 27.67% of the outstanding Common Shares on a non-diluted basis and approximately 48.59% on a partially-diluted basis (if it is assumed that the Concurrent Offering is not completed and not including any Common Shares issuable upon conversion of PIK Interest, if applicable).

12. Playtech is a "related party" of the Filer (as defined in MI 61-101), as it has beneficial ownership of, or control or direction over, directly or indirectly, securities of the Filer carrying more than 10% of the voting rights attached to all of the Filer's outstanding voting securities.

13. Since Playtech is a related party of the Filer, the Proposed Transaction constitutes a related party transaction pursuant to paragraph (g) of the definition of "related party transaction" in MI 61-101 and, consequently, MI 61-101 requires that the Filer obtain a formal valuation for, and minority approval of, the Proposed Transaction, in the absence of exemptions therefrom.

14. The following directors and officers will be participating in the Concurrent Offering: Michael Moskowitz, CEO and Director will be investing $50,000, Dean MacDonald, Director will be investing $50,000, Jennifer Barber, CFO will be investing $5,000 and Corey Goodman, Chief Development Officer, Counsel and Corporate Secretary will be investing $25,000 (the "Participating Insiders"). The Participating Insiders currently own, in the aggregate, 7,878,476 Common Shares, 4,479,751 options to acquire Common Shares and 7,626,154 restricted share units, representing approximately 4.83% of the outstanding Common Shares on a non-diluted basis and approximately 11.40% on a partially-diluted basis. Immediately upon the completion of the Proposed Transaction and the Concurrent Offering, the Participating Insiders will own, in the aggregate, 8,249,906 Common Shares, 185,715 A Warrants, 185,715 B Warrants, Convertible Debentures in the aggregate principal amount of $65,000, 4,479,751 options to acquire Common Shares and 7,626,154 restricted share units, representing approximately 4.29% of the outstanding Common Shares on a non-diluted basis and approximately 10.27% on a partially-diluted basis. The individual holdings of each Participating Insider both before and after the completion of the Proposed Transaction and the Concurrent Offering are set out in the Disclosure Document (as defined below).

15. Each of the Participating Insiders is a "related party" of the Filer (as defined in MI 61-101), as each is a director and/or a senior officer of the Filer.

16. Since each of the Participating Insiders is a related party of the Filer, their participation in the Concurrent Offering also constitutes a related party transaction pursuant to paragraph (g) of the definition of "related party transaction" in MI 61-101.

17. The Proposed Transaction and the Concurrent Offering are exempt from the formal valuation requirement in section 5.4 of MI 61-101 pursuant to paragraph 5.5(b) of MI 61-101 on the basis that no securities of the Filer are listed or quoted on the Toronto Stock Exchange, Aequitas NEO Exchange Inc., the New York Stock Exchange, the American Stock Exchange, the NASDAQ Stock Market, or a stock exchange outside of Canada and the United States other than the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc.

18. The Proposed Transaction and the Concurrent Offering (with respect to insider participation) are subject to the minority approval requirements of section 5.6 of MI 61-101 and, accordingly, the Filer is required by section 5.6 of MI 61-101 to obtain "minority approval" (as defined in MI 61-101) of the Proposed Transaction and the Concurrent Offering (with respect to insider participation) in accordance with Part 8 of MI 61-101 (the "Minority Approval").

19. In addition to the Minority Approval, the Proposed Transaction and the Concurrent Offering (with respect to insider participation) will also require the approval of disinterested holders of Common Shares pursuant to TSXV Policy 4.1 -- Private Placements, which provides that such approval can be obtained by written consent, subject to obtaining the Exemption Sought.

20. Subsection 5.3(2) of MI 61-101 also requires that an issuer proposing to carry out a related party transaction for which minority approval is required call a meeting of holders of affected securities (as defined in MI 61-101) and send an information circular to those holders.

21. As at October 16, 2023, 130,885,081 Common Shares, or approximately 80.17% of the issued and outstanding Common Shares, were held by shareholders that are eligible to vote for purposes of the Minority Approval required for the Proposed Transaction and the Concurrent Offering pursuant to subsection 8.1(2) of MI 61-101. Only the 24,500,000 Common Shares held by Playtech and the 7,878,476 Common Shares held by the Participating Insiders are required to be excluded for purposes of the Minority Approval.

22. The Filer has approached certain shareholders, being Torstar, Tevir Capital LP Ltd., Rivett Capital Syndicate Inc., and Vic Bertrand (each a "Consenting Party" and collectively, the "Consenting Parties"), to request their support for the Proposed Transaction and the Concurrent Offering. The Filer has received written confirmation from the Consenting Parties who, as at October 16, 2023, collectively held 72,524,673 Common Shares, representing approximately 44.42% of the issued and outstanding Common Shares and approximately 55.41% of the Common Shares eligible to vote for purposes of the Minority Approval required for the Proposed Transaction and the Concurrent Offering, that they intend to consent to the Proposed Transaction and the Concurrent Offering, subject to their review and consideration of the disclosure document dated October 13, 2023 pertaining to the Proposed Transaction and the Concurrent Offering (the "Disclosure Document"), the contents of which satisfy and comply with the disclosure requirements set out in subsection 5.3(3) of MI 61-101, which consents will be evidenced through the execution of a form of written consent (the "Consent" and, together with the Disclosure Document, the "Transaction Documents") accompanying the Disclosure Document.

23. As the Filer believes that holders of a majority of the Common Shares eligible to be voted would vote in favour of the Proposed Transaction and the Concurrent Offering, the Filer wishes to obtain the Minority Approval by way of written consent as opposed to at a meeting of holders of Common Shares.

24. No Consenting Party is: (a) an "interested party" (as defined in MI 61-101) in respect of the Proposed Transaction or the Concurrent Offering; (b) a related party of an interested party in respect of the Proposed Transaction or the Concurrent Offering; or (c) a joint actor with a party referred to in (a) or (b) above in respect of the Proposed Transaction or the Concurrent Offering.

25. The Filer filed copies of the Transaction Documents on the System for Electronic Document Analysis and Retrieval + ("SEDAR+") on October 13, 2023.

26. Each Consenting Party has been provided with a copy of the Transaction Documents. The Transaction Documents set out the relevant details of the Proposed Transaction and the Concurrent Offering, and the Consent includes an acknowledgement from each Consenting Party that such Consenting Party has had a minimum of 14 days from the time that it received the Transaction Documents to review such documents.

27. None of the Consenting Parties is obligated to provide the Filer with an executed Consent, and each Consenting Party will make its determination on whether to provide the Filer with an executed Consent based on its review and consideration of the Transaction Documents.

28. No Consenting Party has received, or will receive, directly or indirectly, any payment, beneficial enhancement, collateral benefit or inducement of any kind in respect of the Proposed Transaction or the Concurrent Offering, or in connection with agreeing to execute the Consent.

29. The Filer will not obtain executed Consents until at least 14 days have passed from the date the relevant Consenting Party received the Transaction Documents.

30. The Filer will not close the Proposed Transaction or the Concurrent Offering unless and until: (a) the Consenting Parties have had at least 14 days to review the Transaction Documents; and (b) at least 14 days have elapsed from the date that the Transaction Documents were filed on SEDAR+.

31. The Filer will send a copy of the Transaction Documents to any holder of Common Shares who requests a copy, free of charge.

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) the Filer receives executed copies of Consents from holders of Common Shares holding a majority of the Common Shares eligible to vote for the purposes of the Minority Approval required for the Proposed Transaction and the Concurrent Offering;

(b) the Filer does not obtain executed Consents until at least 14 days have passed from the date that the relevant Consenting Party was provided with the Transaction Documents;

(c) the Filer provides each Consenting Party with a copy of this decision;

(d) the Disclosure Document contains the information required pursuant to section 5.3 of MI 61-101, and also discloses that:

(i) the Filer has applied for the Exemption Sought,

(ii) the Filer intends to seek written consent from the Consenting Parties, and

(iii) if the Filer does not obtain executed Consents from holders of Common Shares holding a majority of the Common Shares eligible to vote for the purposes of the Minority Approval required for the Proposed Transaction and the Concurrent Offering, the Filer will call a meeting of holders of Common Shares to seek the Minority Approval and send an information circular to holders of Common Shares in accordance with MI 61-101 before proceeding with the Proposed Transaction and the Concurrent Offering;

(e) no Consenting Party has received, or will receive, directly or indirectly, any payment, beneficial enhancement, collateral benefit or inducement of any kind in respect of the Proposed Transaction or in connection with agreeing to execute the Consent;

(f) the Filer does not close the Proposed Transaction or the Concurrent Offering unless and until:

(i) the Consenting Parties have had at least 14 days to review the Transaction Documents, and

(ii) at least 14 days have elapsed from the date that the Transaction Documents were filed on SEDAR+;

(g) the Filer sends a copy of the Transaction Documents to any holder of Common Shares who requests a copy, free of charge; and

(h) there are no other approvals required in respect of the Proposed Transaction or the Concurrent Offering which must be obtained at a meeting of holders of Common Shares.