Telesat Corporation and Telesat Partnership LP
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Filers wish to put in place an exchangeable security issuer structure but are unable to rely on the exemption for exchangeable security issuers in applicable securities legislation -- Equivalent relief granted, subject to conditions.
Entity in structure also granted relief from insider reporting requirements, subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, ss. 107 and 121(2)(a)(ii).
National Instrument 51-102 Continuous Disclosure Obligations, ss. 13.1(2) and 13.3.
National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, ss. 8.4 and 8.6(2).
National Instrument 52-110 Audit Committees, ss. 1.2(f) and 8.1(2).
National Instrument 55-102 System for Electronic Disclosure by Insiders (SEDI), s. 6.1(2).
National Instrument 55-104 Insider Reporting Requirements and Exemptions, s. 10.1(2).
National Instrument 58-101 Disclosure of Corporate Governance Practices, ss. 1.3(c) and 3.1(2).
November 16, 2021
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 TELESAT CORPORATION (the "Issuer") AND TELESAT PARTNERSHIP LP (the "Partnership" and together with the Issuer, the "Filers")
DECISION
Background
The principal regulator in the Jurisdiction has received an application (the "Application") from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for an exemption from certain provisions of National Instrument 51-102 -- Continuous Disclosure Obligations ("NI 51-102"), National Instrument 52-109 -- Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109"), National Instrument 52-110 -- Audit Committees ("NI 52-110"), and National Instrument 58-101 -- Disclosure of Corporate Governance Practices ("NI 58-101").
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 Filers have 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, British Columbia, Manitoba, New Brunswick, Newfoundland, the Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Quebec, Saskatchewan and the Yukon Territory.
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.
Requested Relief
The Filers have requested a decision exempting the Partnership under:
(a) section 13.1 of NI 51-102 from the requirements of NI 51-102 (the "Continuous Disclosure Requirements"),
(b) section 8.6 of NI 52-109 from the requirements of the Partnership to certify the disclosure in its annual and interim filings (the "Certification Requirements"),
(c) section 8.1 of NI 52-110 from the application of the requirements of NI 52-110 (the "Audit Committee Requirements"),
(d) section 3.1 of NI 58-101 from requirements of the Partnership to disclose its corporate governance practices (the "Corporate Governance Requirements"),
(e) insiders of the Partnership from the insider reporting requirement (as defined in National Instrument 14-101 Definitions) (the "Insider Reporting Requirements") in respect of the Partnership,
in each case, permitting the Partnership to satisfy the Continuous Disclosure Requirements, Certification Requirements, Audit Committee Requirements, Corporate Governance Requirements and Insider Reporting Requirements by relying on the continuous disclosure documents filed or other documents, disclosure, or filings prepared and certified, as applicable, by or on behalf of the Issuer and the audit committee and corporate governance disclosure and practices implemented by the Issuer (collectively the "Requested Relief").
Representations
The Transaction and Parties to the Transaction
1. The Filers are parties to a transaction agreement and plan of merger dated November 23, 2020 (the "Transaction Agreement") with Telesat Canada ("Telesat"), Telesat CanHold Corporation, Loral Space & Communications Inc. ("Loral"), Lion Combination Sub Corporation, Public Sector Pension Investment Board ("PSP Investments"), and Red Isle Private Investments Inc. ("Red Isle").
2. The Issuer is a corporation incorporated under the Business Corporations Act (British Columbia) on October 21, 2020.
3. The Issuer's registered office is located at 666 Burrard Street, Suite 1700, Vancouver, British Columbia, V6C 2X8 and its head office and principal place of business is located at 160 Elgin St. Suite 2100, Ottawa, Ontario, K2P 2P7. The Issuer was formed to be the publicly traded general partner of the Partnership following completion of the Transaction (as defined below).
4. The Partnership is a limited partnership formed under the laws of Ontario on November 12, 2020. The Partnership's head office and principal place of business is 160 Elgin St. Suite 2100, Ottawa, ON K2P 2P7.
5. Telesat is a leading global satellite operator that was initially formed as a Canadian crown corporation on May 2, 1969. Currently, Telesat is a privately held corporation amalgamated under the Canada Business Corporations Act. Telesat's head office and principal place of business is 160 Elgin St. Suite 2100, Ottawa, ON K2P 2P7.
6. Loral is a Delaware corporation incorporated on June 24, 2005. Loral's voting shares are currently listed for trading on the Nasdaq under the symbol "LORL". Loral holds an indirect 62.6% equity interest in Telesat and an indirect 32.6% voting interest on all matters. Loral's principal executive office is located at 600 Fifth Avenue, New York, New York 10020.
7. The principal shareholder of Loral is MHR Fund Management LLC ("MHR"), a New York based private equity firm. MHR, through certain of its affiliated funds, holds approximately 39.9% of Loral's voting common shares and is the holder of all of Loral's non-voting common shares. MHR's principal executive office is located at 1345 Avenue of the Americas, 42nd Floor, New York, New York 10105.
8. PSP Investments is a Canadian Crown corporation established to invest funds for the pension plans of the Public Service, the Canadian Armed Forces, the Royal Canadian Mounted Police, and the Reserve Force. PSP Investments holds its interest in Telesat through a wholly owned subsidiary, Red Isle, a corporation formed under the CBCA. PSP Investments' principal place of business is at 1250 Boulevard René Lévesque West, Suite 1400, Montreal, Quebec, Canada, H3B 5E9 and its registered office is at 1 Rideau Street, 7th Floor, Ottawa, Ontario, Canada, K1N 8S7.
9. Red Isle's interest in Telesat is a 36.7% equity interest, a 67.4% voting interest on all matters except for the election of directors, and a 29.4% voting interest for the election of directors. Red Isle's principal place of business and its registered office is at 1250 Boulevard René Lévesque West, Suite 1400, Montreal, Quebec, Canada, H3B 5E9.
10. Pursuant to the Transaction Agreement, the Filers will complete an integration transaction (the "Transaction") that will result in, among other things:
(a) the Partnership indirectly acquiring all of the equity interests of both Telesat and Loral;
(b) the Issuer becoming the Canadian-controlled publicly traded general partner of the Partnership;
(c) each common share of Loral outstanding immediately prior to the effective time of the Transaction being converted into the right to receive (i) if the Loral stockholder elects to receive units of the Partnership pursuant to the Transaction Agreement (a "Telesat Partnership Election") one newly issued Class A unit of the Partnership (a "Class A Unit") if such Loral stockholder can demonstrate it is Canadian (as such term is defined in the Investment Canada Act), and otherwise one newly issued Class B unit of the Partnership (a "Class B Unit") or (ii) if the Loral stockholder makes an election to receive shares of the Issuer or does not validly make a Telesat Partnership Election, one newly issued Class A common share of the Issuer (a "Class A Share") if such Loral stockholder can demonstrate it is Canadian (as such term is defined in the Investment Canada Act), and otherwise one newly issued Class B variable voting share of the Issuer (a "Class B Variable Voting Share");
(d) Red Isle receiving a combination of Class C Fully Voting Shares, Class C Limited Voting Shares and Class C Units in exchange for its equity interests in Telesat; and
(e) The Class A Shares and Class B Variable Voting Shares being listed for trading on the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market (the "Nasdaq") under a single ticker symbol and CUSIP.
11. The Filers are not currently reporting issuers in any province or territory of Canada. The Filers are not in default of any requirement of the securities legislation in any province or territory of Canada. Following issuance of a final receipt for their non-offering prospectus and completion of the Transaction, the Filers will each be reporting issuers in each of the provinces and territories of Canada and will be subject to Canadian continuous disclosure and other reporting obligations under applicable Canadian securities laws, absent available exemptions.
Capital Structure of the Issuer
12. The Issuer will, in connection with the completion of the Transaction, undertake a re-organization and file articles of amendment (the "Amended Articles") that provide for the capital and voting structure of the Issuer as a publicly traded company. Upon completion of the Transaction, the Issuer will be the Canadian-controlled publicly traded general partner of the Partnership.
13. The authorized share capital of the Issuer consists of an unlimited number of super voting shares (the "Super Voting Shares"). As at November 9, 2021, there are 50 Super Voting Shares issued and outstanding, all of which are held by the incorporator of the Issuer, Henry Intven.
14. All of the outstanding Super Voting Shares will be redeemed at their issue price upon completion of the Transaction. The Amended Articles will prohibit the issuance of Super Voting Shares, and the Issuer will deliver an undertaking to the principal regulator that no Super Voting Shares will be issued, which undertaking will remain in force until such time as the Amended Articles are amended to remove the Super Voting Shares from the Issuer's authorized share capital.
15. In connection with completion of the Transaction, the Issuer will file the Amended Articles, which provide for the following outstanding classes of shares: Class A Shares, Class B Variable Voting Shares, Class C Fully Voting Shares, Class C Limited Voting Shares, Class A Special Voting Shares, Class B Special Voting Shares, Class C Special Voting Shares, Super Voting Shares and the Golden Share.
16. The Issuer has adopted the Class A Shares and Class B Variable Voting Shares along with the Golden Share to ensure it remains Canadian controlled following completion of the Transaction.
17. The Class C Fully Voting Shares and Class C Limited Voting Shares (together the "Class C Shares") were included in the capital structure of the Issuer solely to ensure PSP Investments' compliance with its governing legislation with respect to the ability to elect directors; the Class C Shares serve no other purpose.
18. The Class A Shares, Class B Variable Voting Shares, and Class C Shares (collectively the "Issuer Shares") will be economically identical. Holders of the Issuer Shares will be entitled to receive dividends if, as and when declared by the Issuer's board of directors (the "Issuer's Board") out of the assets of the Issuer and payable in such manner as the Issuer's Board may determine, provided that any dividend must be declared and paid in equal amounts per Class A Share, Class B Variable Voting Shares, Class C Fully Voting Share and Class C Limited Voting Share.
19. The Golden Share and the Class A Special Voting Shares, Class B Special Voting Shares, Class C Special Voting Shares (collectively, the "Special Voting Shares") have no material economic entitlements.
20. Holders of Issuer Shares, Special Voting Shares, and the Golden Share will generally be entitled to receive notice of and attend meetings of the Issuer's shareholders and receive copies of all proxy materials, information statements and other written communications, including from third parties, given in respect of Issuer Shares.
21. Holders of Class A Shares, Class B Variable Voting Shares and Class C Shares shall have one vote for each share held at all meetings of the shareholders of the Issuer, except meetings at which only holders of another class or of a particular series shall have the right to vote, provided that holders of Class C Limited Voting Shares will not be entitled to vote on the election of directors of the Issuer.
22. The Golden Share is entitled to participate in a particular vote only when (i) in the event of a vote with respect to the election of directors of the Issuer, the number of fully diluted Class B Variable Voting Shares is greater than the aggregate number of fully diluted Class A Shares and Class C Fully Voting Shares, (ii) in the event of a vote with respect to any matter other than the election of directors of the Issuer, the number of fully diluted Class B Variable Voting Shares is greater than the aggregate number of fully diluted Class A Shares and Class C Shares, or (iii) a person who is not Canadian (as defined in the Investment Canada Act) beneficially owns or controls more than one-third of the sum of (a) the number of votes attached to the Class A Shares, Class B Variable Voting Shares, Class C Shares and the Special Voting Shares then outstanding, and (b) the Golden Share Canadian Votes, as defined and described below (such person, a "Non-Canadian Principal Shareholder" and such limitation, the "Non-- Canadian Voting Limitation").
23. Voting power will be attributed to the Golden Share in two ways. First, the Golden Share will be attributed with the number of votes required to ensure that the votes cast by the holders of Class A Shares and Class A Units (indirectly via the Class A Special Voting Share), Class C Shares and Class C Units (indirectly via the Special Voting Share) and the Golden Share, together, represent a simple majority of the votes cast and entitled to vote (such voting power, the "Golden Share Canadian Votes"). Second, the Golden Share will be attributed with the number of votes in excess of the Non-Canadian Voting Limitation exercised by a Non-Canadian Principal Shareholder.
24. The Golden Share voting rights will be voted pro rata consistent with the sum of the aggregate votes of the Class A Shares and the Class A Special Voting Shares (in each case, excluding any votes cast by or on behalf of PSP Investments and/or its affiliates), the votes of each of which will be controlled by holders who can demonstrate that they are Canadian. However, if (i) one or more holders other than PSP Investments or its controlled affiliates holds an aggregate amount of Class A Shares and/or Class A Units exceeding 5% of the aggregate number of outstanding Class A Shares, Class B Variable Voting Shares, Class C Shares, Class A Units, Class B Units and Class C Units, taken as a whole as of the record date for the applicable vote (each such holder, a "5% Voter") and (ii) the 5% Voters together hold over 50% of the aggregate number of outstanding Class A Shares and Class A Units (in each case, excluding any Class A Shares or Class A Units held by or on behalf of PSP Investments and/or its affiliates) taken as a whole as of the record date for the applicable vote, one-half of the voting rights attached to the Golden Share will be voted pro rata consistent with the aggregate votes cast on the applicable matter as described in the first sentence of this paragraph 24 and the other half will be voted pro rata consistent with the aggregate votes cast on the applicable matter by the holders of Class A Shares and the Class A Special Voting Share (in each case, excluding any votes cast by or on behalf of the 5% Voters and PSP Investments and/or its affiliates).
Capital Structure of the Partnership
25. The Partnership will, in connection with the completion of the Transaction, adopt an amended and restated limited partnership agreement (the "A&R Partnership Agreement"). The A&R Partnership Agreement will provide for an exchangeable unit structure of the Partnership following completion of the Transaction. Upon completion of the Transaction, the Partnership will be the indirect holder of all of the equity interests in both Telesat and Loral.
26. The A&R Partnership Agreement provides for a capital structure consisting of GP Units, Class A Units, Class B Units, Class C Units and Class D Units.
27. The Class A Units, Class B Units, and Class C Units (together, the "Exchangeable Units") will be economically identical to each other.
28. The Class D Units will have no economic entitlement until such time as there are no Exchangeable Units outstanding.
29. The GP Units will be held by the Issuer. The Issuer will hold a number of GP Units that corresponds to the number of Issuer Shares outstanding.
30. The Partnership's multi-class exchangeable unit structure is being implemented solely to provide for certain favourable tax treatment for stockholders of Loral in connection with the exchange of Loral common shares for equity interest in the Filers upon completion of the Transaction.
31. The Exchangeable Units are intended to provide economic rights that are substantially equivalent, and (through the Special Voting Shares) voting rights with respect to the Issuer that are equivalent, to the corresponding rights afforded to holders of Class A Shares, Class B Variable Voting Shares and Class C Shares, respectively, of the Issuer.
32. The Exchangeable Units are modelled on the conventional exchangeable share structure used in Canada and are intended to provide US stockholders with a tax deferral on the disposition of their Loral common shares in connection with the Transaction. The Exchangeable Units have equivalent voting rights and substantially equivalent economic rights to the Issuer Shares, and are exchangeable from and after a six month period following the Transaction into the corresponding class of Issuer Shares for no additional consideration.
33. Equivalent voting rights are conveyed to the holders of Exchangeable Units through the mechanism of the Special Voting Shares and a voting trust agreement, as is often done in conventional exchangeable share structures. As part of the Transaction, the Issuer, the Partnership and a trustee to be agreed between the parties ("Trustee") will enter into the voting trust agreement (the "Trust Agreement").
34. Under the Trust Agreement, the Trustee will be granted specified rights and will agree to specified obligations and the Issuer will issue the Special Voting Share to the Trustee. The Trustee will also enter into a trust voting agreement (the "Voting Agreement") to govern the manner in which the Special Voting Shares (and the Golden Share) will be voted. The Special Voting Shares will have the number of votes, which may be cast by the Trustee at any meeting at which the holders of Issuer Shares are entitled to vote or in respect of any written consent sought by the Issuer from its holders of Issuer Shares, equal to the then outstanding number of Exchangeable Units. Each holder of an Exchangeable Unit on the record date for any meeting or shareholder consent at which holders of Issuer Shares are entitled to vote will be entitled to instruct the Issuer to instruct the Trustee to exercise the votes attached to the Special Voting Shares for each Exchangeable Unit held by the exchangeable unitholder. The Trustee will exercise each vote attached to the Special Voting Shares pursuant to the Voting Agreement.
35. Under the A&R Partnership Agreement, the Issuer, in its capacity as the general partner of the Partnership, is required to send copies of all proxy materials, information statements, reports (including all interim and annual financial statements) and other written communications to the holders of Exchangeable Units at the same time as such materials are first sent to holders of Issuer Shares. In addition, the Issuer, in its capacity of the general partner of the Partnership, is also required to send to the holders of Exchangeable Units all materials sent by third parties to the holders of Issuer Shares, including dissident proxy and information circulars and tender and exchange offer circulars, as soon as reasonably practicable after the materials are received by the Issuer or the shareholders thereof.
36. Pursuant to the A&R Partnership Agreement, the holders of Exchangeable Units will have the right to exercise certain rights of shareholders of the Issuer as if such holders had exchanged their Exchangeable Units for Issuer Shares, including (i) rights of holders of Issuer Shares set forth in the Amended Articles and under applicable law (other than voting rights and rights to dividends or other distributions) and (ii) statutory rights with respect to the inspection of books and records and shareholder lists, and to make a shareholder requisition, to have a court call a shareholder meeting, to participate in a meeting telephonically and to submit shareholder proposals.
37. Pursuant to the A&R Partnership Agreement, for so long as the Issuer is general partner of the Partnership, if any shares in the capital of the Issuer other than Class A Shares, Class B Variable Voting Shares or Class C Shares are issued by the Issuer ("New Shares"), the Issuer will (either immediately before or after such issuance), (a) cause the Partnership to create a corresponding new class of Exchangeable Units ("New Units") that have corresponding distribution rights to such New Shares, (b) cause the Partnership to issue one or more New Units to the Issuer in exchange for the contribution by the Issuer of the proceeds from, or other consideration received in connection with, the issuance of such New Shares to the Partnership and (c) effect such amendments to the A&R Partnership Agreement as are necessary to give effect to the foregoing.
38. The Issuer and the Issuer's Board are prohibited from proposing or recommending an offer for the Issuer Shares or for the Exchangeable Units unless the holders of the Exchangeable Units and the holders of Issuer's shares are entitled to participate to the same extent and on an equitably equivalent basis. As a result of the inability of a holder of Exchangeable Units to exchange such Exchangeable Units into Issuer Shares prior to the six month anniversary of the Transaction, if a bid with respect to Issuer Shares was made in that six month period, a holder of Exchangeable Units could not participate in such bid unless it was proposed or recommended by the Issuer or the Issuer's Board or was otherwise effected with the consent or approval of the Issuer's Board.
39. A statement substantially to the effect of the statement in paragraph 38 above will be included in any management information circular and annual information form of the Issuer filed pursuant to NI 51-102 prior to the one year anniversary of the date of the effective time of the Transaction.
40. Canadian securities regulatory authorities may intervene in the public interest (either on application by an interested party or by staff of a Canadian securities regulatory authority) to prevent an offer to holders of Issuer Shares or Exchangeable Units being made or completed where such offer is abusive of the holders of one of those security classes that are not subject to that offer.
41. A statement substantially to the effect of the statement in paragraph 40 above will be included in any management information circular and annual information form of the Issuer filed pursuant to NI 51-102; provided that such statement may be modified to reflect any change in the applicable law and need not be made with respect to the Exchangeable Units if, at the applicable time, there are no outstanding securities of such class (other than securities beneficially owned, either directly or indirectly, by the Issuer).
42. In addition:
(a) the Issuer may not issue or distribute rights, options or warrants or other securities or assets of the Issuer to all or substantially all of the holders of Class A Shares, Class B Variable Voting Shares and Class C Shares unless a corresponding distribution is made to holders of the Exchangeable Units;
(b) no subdivision or combination of the outstanding Class A Shares, Class B Variable Voting Shares or Class C Shares of the Issuer is permitted unless a corresponding subdivision or combination of the Exchangeable Units is made;
(c) approval of holders of the Exchangeable Units is required for an action (such as an amendment to the A&R Partnership Agreement) that would affect the economic rights of an Exchangeable Unit relative to the Class A Shares, Class B Variable Voting Shares or Class C Shares, as applicable;
(d) after making distributions to the Issuer required pursuant to the A&R Partnership Agreement for expenses related to taxes, operations, administration, and contractual obligations, including in connection with the dissolution of the Partnership, the Issuer may make pro rata distributions to each Exchangeable Unit and the Issuer based on the respective number of outstanding Issuer Shares and outstanding Exchangeable Units at the time of distribution; and
(e) as a result of the distribution provisions of the A&R Partnership Agreement, assets of the Partnership that will be distributed to the Issuer and that will be available for distribution to the holders of Issuer Shares will be proportionate to the assets that are distributed to the holders of the Exchangeable Units (except for tax consequences), based on the respective number of outstanding Issuer Shares and outstanding Exchangeable Units at the time of dissolution.
43. As a consequence of these restrictions, the limitation on receipt of distributions except for distributions on a pro rata basis and in order to fund administrative and operating expenses and the other terms governing the relationship between the Issuer and the Partnership, the consolidated financial position of the Issuer and the consolidated financial position of the Partnership will remain identical in all material respects (with certain differences due to (i) tax consequences for the Issuer and (ii) accounting for partnership units) and the Issuer will not have any business other than through its interest in the Partnership.
Requested Relief
44. The Partnership will be an "exchangeable security issuer" and the Issuer (as the Partnership's "parent issuer" for the purposes of NI 51-102) will be the beneficial owner of all of the issued and outstanding "voting securities" (for purposes of NI 51-102) of the Partnership. As the limited partnership agreement confers only limited voting rights to the holders of Exchangeable Units in respect of matters affecting the Partnership, the Exchangeable Units do not constitute "voting securities" for this purpose. Accordingly, the Partnership could satisfy all of its continuous disclosure obligations under NI 51-102 by relying on the disclosure documents of the Issuer, provided that it met the other requirements and conditions of section 13.3(2) of NI 51-102 (the "Exchangeable CD Exemption").
45. By satisfying the requirements and conditions of the Exchangeable CD Exemption, the Partnership would also be exempt from (i) the certification requirements of NI 52-109 pursuant to section 8.4 of that instrument, (ii) the audit committee requirements of NI 52-110 pursuant to section 1.2(f) of that instrument, and (iii) the corporate governance disclosure requirements of NI 58-101 pursuant to section 1.3(c) of that instrument.
46. In addition, the insider reporting requirement and the requirement to file an insider profile under NI 55-102 do not apply to any insider of an exchangeable security issuer in respect of securities of that exchangeable security issuer so long as the conditions of section 13.3(3) of NI 51-102 are met (the "Exchangeable Insider Reporting and Profile Exemption").
47. A common condition to each of the Exchangeable CD Exemption and the Exchangeable Insider Reporting and Profile Exemption is that any exchangeable security issued by the exchangeable security issuer be a "designated exchangeable security" (as defined in Section 13.3(1) of NI 51-102).
48. Further, the Exchangeable CD Exemption requires that the parent issuer include in all mailings of proxy solicitation materials to holders of designated exchangeable securities a clear and concise statement that, among other things, indicates the designated exchangeable securities are the economic equivalent to the underlying securities (the "Economic Equivalence Disclosure Requirement").
49. As the Exchangeable Units have only "substantially equivalent economic" rights to the corresponding class of Issuer Shares, the Class A Units, Class B Units and Class C Units are not "designated exchangeable securities". As such, the conditions of the Exchangeable CD Exemption and Exchangeable Insider Reporting and Profile Exemption and the Economic Equivalence Disclosure Requirement cannot be satisfied, and the Partnership cannot rely on the applicable exemptions to the Certification Requirements, Audit Committee Requirements, and Corporate Governance Requirements.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to grant the Requested Relief.
The decision of the principal regulator under the Legislation is that the Requested Relief is granted provided that:
1. in respect of the Continuous Disclosure Requirements,
(a) the Issuer and the Partnership continue to satisfy the conditions set out in subsection 13.3(2) of NI 51-102, except as modified as follows:
(i) that any reference to designated exchangeable security in section 13.3 of NI 51-102 shall be deemed to include the Exchangeable Units notwithstanding that the Exchangeable Units do not provide their holders with economic rights which are, as nearly as possible for tax implications, equivalent to the Class A Shares, Class B Variable Voting Shares and Class C Shares, as applicable;
(ii) any management information circular and annual information form of the Issuer discloses:
A. the differences between the rights of holders of Exchangeable Units and the rights of holders of Issuer Shares;
B. how the Exchangeable Units provide voting rights that are equivalent to the Issuer Shares through the Special Voting Shares held by the Trustee pursuant to the Trust Agreement and Voting Agreement;
C. how the Exchangeable Units provide economic rights that are substantially equivalent to the Issuer Shares, and
D. a summary of the Requested Relief in respect of the Continuous Disclosure Requirements granted by this decision;
(the disclosure required by items (A) -- (C) above of this clause (ii) may be satisfied through disclosure that is substantially similar to the disclosure attached as Appendix A to this decision),
(iii) the Issuer does not have to comply with the condition in subsection 13.3(2)(h)(ii) of NI 51-102.
(b) the consolidated financial position of the Partnership and the consolidated financial position of the Issuer will remain identical in all material respects and the Issuer will not have any business other than through its interest in the Partnership;
(c) the Issuer will consolidate the financial information of the Partnership in accordance with IFRS in each of its annual financial statements and interim financial reports filed on SEDAR;
(d) the Issuer is not in breach of its representation to include the disclosure referred to in paragraph 39 or 41 of the section of this decision entitled "Representations"; and
(e) the Issuer will deliver, in connection with the Filers' non-offering prospectus, an undertaking pursuant to subsection 6.1 of National Policy -- 41-201 -- Income Trusts and Other Indirect Offerings;
2. in respect of the Certification Requirements, the Audit Committee Requirements and the Corporate Governance Requirements, the Issuer and the Partnership continue to satisfy the conditions for relief from the Continuous Disclosure Requirements set forth above; and
3. in respect of the Insider Reporting Requirements,
(a) an insider of the Partnership (a "Partnership Insider") can only rely on the Requested Relief in respect of the Insider Reporting Requirements so long as:
(i) the Partnership Insider complies with the conditions in sections 13.3(3)(a) and (c) of NI 51-102, and
(ii) the Filers continue to satisfy the conditions for relief from the Continuous Disclosure Requirements set forth above,
(b) for greater certainty, a Partnership Insider may only rely on the Requested Relief in respect of the Insider Reporting Requirements so long as such Partnership Insider aggregates (i) any votes that such Partnership Insider is entitled to instruct the Trustee holding the Special Voting Share to exercise by virtue of such Partnership Insider's beneficial ownership of, or control or direction over, Exchangeable Units (whether direct or indirect) and (ii) any votes carried by any other securities of the Issuer that are beneficially owned by such Partnership Insider, or over which such Partnership Insider has control or direction, whether direct or indirect, in determining whether it is an "insider" and "significant shareholder" of the Issuer for purposes of National Instrument 55-104 -- Insider Reporting Requirements and Exemptions.
As to the Exemption Sought (other than from the Insider Reporting Requirements in the Securities Act (Ontario)):
"Michael Balter"Manager, Corporate FinanceOntario Securities Commission
As to the Exemption Sought from the Insider Reporting Requirements in the Securities Act (Ontario):
Appendix A
The Exchangeable Units of the Partnership are intended to provide economic rights that are substantially equivalent, and voting rights with respect to the Issuer that are equivalent, to the corresponding rights afforded to holders of Class A Shares, Class B Variable Voting Shares and Class C Shares. Under the terms of the amended and restated partnership agreement, the rights, privileges, restrictions and conditions attaching to the Exchangeable Units include the following:
• From and after the six month anniversary of the date of the effective time of the Transaction, the Exchangeable Units will be exchangeable at any time, at the option of the holder, on a one-for-one basis for the corresponding class of the Issuer Shares. Exchangeable Units will not be exchangeable prior to the six month anniversary of the date of the effective time of the Transaction.
• After making distributions to the Issuer required pursuant to the A&R Partnership Agreement for expenses related to taxes, operations, administration, and contractual obligations, the Partnership may make pro rata distributions to each Exchangeable Unit and the Issuer based on the respective number of outstanding Issuer Shares and outstanding Exchangeable Units at the time of distribution.
• If the Issuer issues the Issuer Shares in the form of a dividend or distribution on the Issuer Share, the Partnership will issue to each holder of Exchangeable Units, in respect of each Exchangeable Unit held by such holder, a number of Exchangeable Units equal to the number of Issuer Shares issued in respect of each Issuer Share.
• If the Issuer issues or distributes rights, options or warrants or other securities or assets of the Issuer to all or substantially all of the holders of Issuer Shares, the Partnership is required to make a corresponding distribution to holders of the Exchangeable Units.
• No subdivision or combination of the outstanding shares of Issuer Shares is permitted unless a corresponding subdivision or combination of Exchangeable Units is made.
• The Issuer and its board of directors are prohibited from proposing or recommending an offer for the Issuer Shares or for the Exchangeable Units unless the holders of the Exchangeable Units and the holders of the Issuers Shares are entitled to participate to the same extent and on equitably equivalent basis.
• Upon a dissolution and liquidation of the Partnership, if Exchangeable Units remain outstanding and have not been exchanged for the corresponding class of the Issuer Shares, then the distribution of the assets of the Partnership between holders of Issuer Shares and holders of Exchangeable Units will be made on a pro rata basis based on the number of Issuer Shares and Partnership exchangeable units outstanding. Prior to this pro rata distribution, the Partnership is required to pay to the Issuer sufficient amounts to fund the expenses or other obligations of the Issuer to ensure that any property and cash distributed to the Issuer in respect of the Issuer Shares will be available for distribution to holders of Issuer Shares in an amount per share equal to distributions in respect of each Exchangeable Unit.
• Approval of holders of the Exchangeable Units is required for an action (such as an amendment to the amended and restated partnership agreement) that would affect the economic rights of an Exchangeable Unit relative to an Issuer Share.
• The holders of Exchangeable Units are indirectly entitled to vote in respect of matters on which holders of Issuers Shares are entitled to vote through Special Voting Shares of the Issuer. The Special Voting Shares are held by a trustee, entitling the trustee to that number of votes on matters on which holders of Issuers Shares are entitled to vote equal to the number of Exchangeable Units outstanding. The trustee is required to cast such votes in accordance with voting instructions provided by the Issuer on behalf of holders of Exchangeable Units in accordance with the Voting Agreement. The trustee will exercise each vote attached to the Special Voting Shares only as directed by the Issuer on behalf of the relevant holder of Exchangeable Units.