VM Hotel Acquisition Corp.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the formal valuation and minority approval requirements in Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions -- issuer is a special purpose acquisition corporation that will have no operations and generate no operating revenues until it completes its qualifying acquisition -- issuer's authorized capital consists of class A restricted voting shares which are entitled to be redeemed at the election of the holder prior to the completion of the qualifying acquisition for an amount equivalent to their initial investment, and class B shares that do not have any redemption rights but which have the residual right to share in the assets of the issuer on liquidation or dissolution -- the entirety of the gross proceeds from the initial public offering of the class A restricted voting shares were put into an escrow account to be used to, among other things, satisfy any redemptions in respect of the restricted voting shares and fund the qualifying acquisition -- the class B shares do not have access to, and cannot benefit from, the funds in the escrow account -- only the class A restricted voting shares are listed and posted for trading on an exchange -- relief granted subject to conditions, including that the related party transaction constituting the issuer's qualifying acquisition would qualify for the 25% market capitalization exemption if the class A restricted voting shares represented all of the outstanding equity securities of the issuer.

November 14, 2022

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 VM HOTEL ACQUISITION CORP. (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") that the Filer be granted an exemption pursuant to section 9.1 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") from the minority approval and formal valuation requirements under Part 5 of MI 61-101 in respect of the Proposed Transaction (as defined below), which transaction constitutes a related party transaction for the purposes of MI 61-101 (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, Manitoba, and New Brunswick.

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. For the purpose of this decision, the following terms have the meaning ascribed to them:

"qualifying acquisition" shall have the meaning ascribed to such term in the TSX Company Manual;

"Redemption Price" shall mean an amount per share equal to the pro-rata portion of: (a) the Escrowed Funds, including interest and other amounts earned thereon; less (b) an amount equal to the total of (i) applicable taxes payable by the Filer on such interest and other amounts earned in the Filer's escrow account, and (ii) actual and expected direct expenses related to the redemption, each as reasonably determined by the Filer;

"SPAC" shall mean a special purpose acquisition corporation;

"TSX" shall mean the Toronto Stock Exchange; and

"Winding-Up Redemption Price" shall mean an amount per share equal to the pro-rata portion of: (a) the Escrowed Funds, including any interest and other amounts earned thereon; less (b) an amount equal to the total of (i) any applicable taxes payable by the Filer on such interest and other amounts earned in the Filer's escrow account, and (ii) any taxes of the Filer arising in connection with the redemption of the Class A Restricted Voting Shares, and (iii) up to a maximum of U.S. $50,000 of interest and other amounts earned to pay actual and expected winding-up expenses and certain other related costs, each as reasonably determined by the Filer.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a SPAC existing under and governed by the laws of the Province of British Columbia. The Filer was formed for the purpose of effecting its qualifying acquisition pursuant to the acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, share exchange, asset acquisition, share purchase, reorganization, or any other similar business combination involving the Filer. From the time of the Filer's initial public offering (the "IPO") and until such time as the Filer completes its qualifying acquisition, the Filer has not had any operations and has generated no operating revenues.

2. The Filer's head office is located at 161 Bay Street, Suite 2420, Toronto, Ontario, Canada, M5J 2S1.

3. The Filer is a reporting issuer (or the equivalent thereof) in each of the provinces and territories of Canada (other than Quebec) and is not in default of securities legislation in any jurisdiction.

4. The authorized capital of the Filer consists of an unlimited number of Class A restricted voting shares (the "Class A Restricted Voting Shares"), an unlimited number of Class B shares (the "Class B Shares"), an unlimited number of common shares (the "Common Shares") and an unlimited number of proportionate voting shares (the "Proportionate Voting Shares"). As of October 31, 2022, the Filer has 10,000,000 Class A Restricted Voting Shares issued and outstanding, and 2,937,500 Class B Shares issued and outstanding.

5. The Class A Restricted Voting Shares comprised part of the Class A restricted voting units ("Class A Restricted Voting Units") offered to the public pursuant to the final long form prospectus of the Filer dated February 23, 2021. The Class B Shares were issued to the Filer's sponsors, VM HA Sponsor Corp. and VM HA Sponsor LP (together, the "Sponsors"), and certain third parties in connection with the Filer's IPO. The Filer also has 5,175,000 warrants outstanding, 5,000,000 of which formed part of the Class A Restricted Voting Units that were sold to the public in its IPO, and 175,000 of which formed part of the Class B units ("Class B Units") that were sold to the Sponsors and certain third parties in connection with its IPO. Each warrant entitles the holder to purchase one Class A Restricted Voting Share of the Filer at a price of $11.50, subject to anti-dilution adjustments, during the period commencing 65 days after the completion of the qualifying acquisition and ending five years after the completion of the qualifying acquisition. As of October 31, 2022, the Sponsors hold 2,545,500 Class B Shares, representing approximately 87% of the outstanding Class B Shares and approximately 20% of the aggregate Class A Restricted Voting Shares and Class B Shares outstanding.

6. The entirety of the gross proceeds from the Class A Restricted Voting Shares offered under the IPO were put into the Filer's escrow account (the "Escrowed Funds") to be used to, inter alia, satisfy the payment of the Redemption Price due to holders of Class A Restricted Voting Shares upon the exercise of the redemption right attached to the Class A Restricted Voting Shares, and fund the qualifying acquisition. Any Escrowed Funds which are not used to consummate the qualifying acquisition will be disbursed to the Filer and will, along with any other amounts not expended prior to the consummation of the qualifying acquisition, be used to fund general ongoing expenses.

7. Provided that holders of Class A Restricted Voting Shares adhere to the specified timing requirements, such holders are entitled to redeem all or a portion of their Class A Restricted Voting Shares, whether they vote for or against, or do not vote on, the qualifying acquisition for the Redemption Price per Class A Restricted Voting Share. Upon the closing of the qualifying acquisition, any Class A Restricted Voting Shares that are not redeemed will be automatically converted into Common Shares on the basis of one Common Share for each Class A Restricted Voting Share converted, and any Class B Shares will be automatically converted on a 100-for-1 basis into Proportionate Voting Shares.

8. The net proceeds from the issuance of the Class B Units and Class B Shares were not put into the Filer's escrow account, and may be used towards the Filer's general ongoing expenses and funding the identification and completion of a qualifying acquisition.

9. The holders of Class B Shares do not have access to, and cannot benefit from, the Escrowed Funds, and accordingly, do not have any redemption rights.

10. The Redemption Price is payable in cash from the Escrowed Funds, and upon such payment, the holders of Class A Restricted Voting Shares will have no further rights in respect of the Class A Restricted Voting Shares.

11. The Filer has entered into a business combination agreement with TCPI Mergersub, Inc., a wholly-owned subsidiary of the Filer, The Pyure Company Inc. ("Pyure") and HGI Industries, Inc., a predecessor and majority shareholder of Pyure, pursuant to which, among other things, the Filer will, indirectly through a series of transactions, acquire all of the issued and outstanding shares of Pyure (the "Proposed Transaction"). The Proposed Transaction would constitute the Filer's qualifying acquisition.

12. Tom Vukota (the "Senior Officer"), who currently serves as the Executive Chair and Corporate Secretary of the Filer, is a "related party" (as defined under MI 61-101) of the Filer and holds 145,000 stock options of Pyure (the "Options"). In addition, a corporation that is an "affiliated entity" (as defined under MI 61-101) of the Senior Officer, 1001 Investments Holdings Ltd. ("1001 Holdings") owns 3,200,000 Series 2 preferred shares of Pyure (the "Preferred Shares"), representing approximately 6.36% of the issued and outstanding shares of Pyure (on a non-diluted basis), which will be indirectly acquired by the Filer as part of the Proposed Transaction. The value of the purchase price attributable to related parties of the Filer, being the Senior Officer and 1001 Holdings, is equal to approximately $12,094,900 (the "Related Party Consideration"), being approximately $11,744,000 in respect of the Preferred Shares and $350,900 in respect of the Options.

13. The acquisition of shares of the Filer from the Senior Officer and 1001 Holdings constitutes a related party transaction under MI 61-101 that would require the Filer to obtain a formal valuation and minority approval (the "Minority Protections"), unless an exemption is available.

14. A related party transaction that is subject to MI 61-101 may be exempt from the Minority Protections if, at the time the transaction is agreed to, neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the transaction, exceeds 25% of the issuer's market capitalization (the "Transaction Size Exemption").

15. The Filer may not be entitled to rely on the Transaction Size Exemption because the definition of market capitalization is calculated with reference to the aggregate market price of all outstanding equity securities of the Filer.

16. For the purposes of MI 61-101, an equity security is a security that carries a residual right to participate in the earnings of the issuer and, on liquidation or winding-up of the issuer, in its assets. The Class A Restricted Voting Shares do not have a residual right to share in the assets of the Filer on a liquidation or dissolution, as they are entitled only to receive an amount equal to the Winding-Up Redemption Price for each Class A Restricted Voting Share then outstanding. Prior to the completion of the qualifying acquisition, the residual right to share in the assets of the Filer on liquidation or dissolution rests with the Class B Shares.

17. The Class A Restricted Voting Shares are listed and posted for trading on the TSX under the trading symbol "VMH.U". The Class B Shares are not listed on any stock exchange and prior to the completion of a qualifying acquisition, are not transferable absent TSX consent. For the purposes of the TSX and public shareholders, the aggregate market value of the Class A Restricted Voting Shares represents the market capitalization of the Filer.

18. If the market capitalization of the Filer was calculated on the basis of the outstanding Class A Restricted Voting Shares representing all of the outstanding equity securities of the Filer, the Related Party Interest would represent approximately 12% of the Filer's market capitalization.

19. The Filer has included in the amended and restated material change report dated October 28, 2022 in connection with the Proposed Transaction, and will include in its non-offering prospectus in connection with the Proposed Transaction, a statement that it has applied for the Exemption Sought and a description of the substance and effects of the Exemption Sought, if granted.

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 Proposed Transaction would qualify for the Transaction Size Exemption contained in MI 61-101 if the Class A Restricted Voting Shares represented all of the outstanding equity securities of the Filer, and

(b) any disclosure document provided to holders of Class A Restricted Voting Shares and Class B Shares, in connection with the Proposed Transaction includes a statement that the Filer has applied for, and been granted, the Exemption Sought, and a description of the substance and effects of the Exemption Sought.