Elad Canada Inc.

Decision

Headnote

Process for Exemptive Relief Application in Multiple Jurisdictions (passport application ) -- relief from take-over bid requirements -- tender offers would be eligible for Foreign Take-over Bid Exemption but for shares held by offeror through Canadian partnerships and trusts -- relief granted subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., s. 104(2)(c).

November 7, 2012

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

ELAD CANADA INC.

(the Company)

DECISION

Background

The principal regulator in the Jurisdiction (the Decision Maker) has received an application from Y.T. America Israel Investment Ltd. (the Filer) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for:

(A) a decision under section 104(2)(c) of the Legislation exempting the Filer or any direct or indirect subsidiary of the Filer (the Bidder) from the requirements of sections 93 to 99.1 of the Legislation (the Formal Bid Requirements) in respect of tender offers to be made by the Bidder for certain securities of Elad Canada Inc. (the Company);

(B) an order pursuant to section 9.1 of Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions (MI 61-101), exempting the Filer from the requirements contained in Part 2 of MI 61-101 in connection with tender offers to be made by the Bidder for certain securities of the Company; and

(C) an order that the application for this decision and this decision (collectively, the Confidential Materials) be kept confidential and not be made public until the occurrence of the earliest of the following:

(i) the date on which the Bidder publicly announces by way of a news release in Israel a tender offer for securities of the Company;

(ii) the date on which the Filer advises the Decision Maker that there is no longer any need to hold the Confidential Materials in Confidence; or

(iii) the date that is 60 days after the date of this decision (the Confidentiality Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(i) the Ontario Securities Commission is the principal regulator for this application; and

(ii) 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 each of the provinces of Canada other than Ontario (the Non-Principal Passport Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision unless they are otherwise defined in this decision.

Representations

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

1. The Filer is a private company incorporated under the laws of Israel. The shareholders of Filer are not resident in Canada.

2. The Filer directly or indirectly controls a number of entities (each an Elad Subsidiary, and collectively with the Filer, the El-Ad Group) worldwide in connection with its business of acquiring, developing and owning real estate assets worldwide.

3. The Company was incorporated pursuant to the Business Corporations Act (Ontario) on December 23, 2009. Its registered and head office is located at Suite 1405, 5001 Yonge Street, Toronto, Ontario, Canada M2N 6P6.

4. The Company owns a portfolio of real estate assets and development projects in Quebec, Ontario and Illinois. The Company completed, on August 31, 2010, an initial public offering (the IPO) of its common shares and warrants on the Tel Aviv Stock Exchange (the TASE) by way of a Hebrew language prospectus filed on August 23, 2010 in Israel pursuant to the securities laws of Israel.

5. Subsequent to the IPO, on May 23, 2011 the Company completed a public offering in Israel of Series A bonds on the TASE by way of a Hebrew language prospectus filed in Israel pursuant to the securities laws of Israel.

6. The Company's authorized share capital consists of an unlimited number of common shares without nominal or par value, of which 113,018,100 common shares are issued and outstanding as of September 2, 2012. In addition, the Company has warrants and options issued and outstanding, each of which is exercisable into one common share of the Company.

7. In August 2011, the Company filed in Israel a Hebrew language shelf prospectus pursuant to the securities laws of Israel, relating to the potential future offerings, pursuant to "shelf offering reports", of common shares, warrants, rights, bonds (convertible and/or non-convertible), options for bonds, and/or commercial debt securities of the Company.

8. The Company is not a reporting issuer in any province or territory in Canada.

9. The common shares, warrants and bonds of the Company are currently listed on the TASE.

10. To the knowledge of the Filer, the Company is not in default of securities legislation in Ontario or the Non-Principal Passport Jurisdictions.

11. The Filer owns securities of the Company through seven Alberta-resident trusts (collectively, the Trusts), including a portion of such securities that are held indirectly through a Canadian limited partnership (Elad LP), the limited partnership interests of which are held by the Trusts. In addition, a Bermudian incorporated subsidiary of the Filer holds 100 common shares of the Company.

12. The sole trustee of each Trust (the Trustee) is a corporation resident in Canada and an Elad Subsidiary. All of the issued and outstanding shares of the Trustee are beneficially owned, indirectly through a complex holding structure, by the Filer. The two individual directors of the Trustee are both residents of Canada. One of the two directors of the Trustee is an employee of the Company and an officer and director of an Elad Subsidiary.

13. The beneficiaries of each Trust (except Riviera Trust) consist of a subset of members of the Filer, together with persons who are related, within the meaning of the Income Tax Act (Canada), to existing beneficiaries.

14. Riviera Trust is a discretionary trust with beneficiaries consisting of a member of the Filer, together with such other beneficiaries as may be determined by the Trustee from time to time.

15. The ultimate beneficiaries of the Trusts and the ultimate beneficial owner of the Trustee are all not resident in Canada.

16. As at the date hereof, the Trusts hold in aggregate, directly or indirectly through Elad LP, approximately 88.7% of the issued and outstanding common shares and none of the issued and outstanding warrants of the Company.

17. All of the publicly listed securities of the Company trading on the TASE are held in book-entry only form, and are registered in the name of The Nominee Company of Bank Hapoalim Ltd., an Israeli financial institution that acts as registrar for the Company.

18. The Filer has obtained a report from Menora Mivtachim Group, a third party Israeli capital markets advisor, that purports to identify the holders of approximately 96% of the issued shares of the Company (i.e. El-Ad Group, which holds approximately 88% plus holders of an additional 8% of the shares based on market research done by Menora Mivtachim Group). Each of the additional shareholders identified by Menora Mivtachim Group is an Israeli institutional investor (mutual fund, life insurance company, etc.). Although the Filer is not responsible for the accuracy of the information in the report, the data in it is consistent with the Filer's belief regarding the identity of the shareholders of the Company and the Filer does not have any reason to believe that any of the information in the report is not correct.

19. It is possible for a listed issuer to request from the Tel Aviv Stock Exchange that it poll the brokers who have positions in the listed company's shares for a geographic breakdown of such holdings. The Filer understands that the Company made such a request in January 2011 and was advised that, at that time, none of the brokers were holding any shares of the Company on behalf of any shareholders whose addresses were in Canada.

20. As at October 26, 2012, aside from the Trusts and Elad LP, to the best knowledge of the Filer, none of the shareholders and none of the warrantholders of the Company were resident in Canada.

21. There are six Canadian employees of the Company that hold, in total, 1,101,000 options to acquire common shares of the Company. If all such options were vested and exercised, such common shares would represent approximately 1% of the issued and outstanding common shares of the Company.

22. The Bidder will inform each of the optionholders of the material terms of the Offer.

23. The Filer is considering a tender offer for the common shares of the Company not currently held by the Trusts and a tender offer for the warrants of the Company, each to be made pursuant to Israeli laws and in compliance with the rules and regulations of the TASE. The tender offers will be made through the Bidder, which will be a direct or indirect wholly-owned subsidiary of the Filer.

24. Provided there are no securityholders of the Company (other than the Trusts) that are in a Canadian jurisdiction or whose last address as shown on the books of the Company is in Canada, an offer to acquire the outstanding securities of the Company beneficially held by the securityholders (other than the Trusts) would not fit within the definition of "take-over bid" under Canadian securities laws and as such, Canadian securities laws relating to take-over bids would not apply.

25. If the Trusts and Elad LP were not resident in Canada and the tender offers were to be made to a de minimis number of securityholders in Canada, an exemption would be available from Canadian take-over bid rules pursuant to Section 100.3 (the Foreign Take-Over Bid Exemption) of the Securities Act (Ontario).

26. As a result of the securities of the Company being registered in book-entry only form, it is not possible to be certain whether securities of the Company are beneficially owned by Canadians. In any case, certain Canadian-resident employees of the Company hold options to purchase common shares of the Company, and it is possible that some of these options will be exercised prior the expiry of the tender offer in order for the common shares underlying those options to be tendered.

27. The conditions to the take-over bid exemption contained in section 100.3 of the Legislation (the Foreign Take-Over Bid Exemption) include (i) securityholders of the Company whose last address as shown on the books of the Company is in Canada hold less than 10% of the outstanding securities of the class subject to the bid at the commencement of the bid; (ii) the offeror reasonably believes that securityholders in Canada beneficially own less than 10% of the outstanding securities of the class subject to the bid at the commencement of the bid (collectively with (i) above, the Bid Residency Test); (iii) the published market on which the greatest dollar volume of trading in securities of that class occurred during the 12 months immediately preceding the commencement of the bid was not in Canada; and (iv) securityholders in Ontario are entitled to participate in the bid on terms at least as favourable as the terms that apply to the general body of security holders of the same class.

28. In the case of the Foreign Take-Over Bid Exemption, the relevant time for measuring whether the tests set out in the Foreign Take-Over Bid Exemption are met in respect of the Canadian ownership thresholds is the time of the commencement of the bid.

29. The Company is a non-reporting issuer none of whose securities, in substance, are held, to the best knowledge of the Filer, by residents in Canada. However, for tax planning purposes, the common shares of the Company that are beneficially owned by the Filer (the ultimate ownership of which is held by persons who are not residents of Canada) are held through one or more wholly-owned Canadian entities.

30. The Filer reasonably believes that securityholders in Canada, other than the Trusts, beneficially own less than 10% of the outstanding securities of the Company.

31. Securityholders in Canada, if any, will be entitled to participate in the bid on terms at least as favourable as the terms that apply to the general body of securityholders.

32. The tender offer process in Israel does not require the mailing of any material relating to the tender offer to be sent to securityholders of the Company, rather, the rules require such materials to be publicly filed through the MAGNA system in Israel (the Israeli equivalent to SEDAR).

33. The Company's securities are book-entry only, and as such, the Company essentially has one securityholder shown on the books of the Company, namely, The Nominee Company of Bank Hapoalim Ltd. The tender offer materials publicly filed on MAGNA will be in the Hebrew language and will contain a statement to the effect that securityholders that are resident of Canada may contact the El-Ad Group for a summary of the material terms of the tender offer in the English language.

34. The Bidder does not intend to publish a notice or advertisement relating to the tender offer in Ontario.

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:

1. pursuant to section 104(2)(c) of the Legislation the Bidder is exempt from the Formal Bid Requirements in respect of any tender offer to be made by the Bidder for securities of the Company provided that:

(i) the requirements of the Foreign Take-Over Bid Exemption other than the Bid Residency Test are satisfied;

(ii) the Filer's representations contained in paragraphs 15 and 29 remain true and correct at the date of commencement of the tender offer;

(iii) the tender offer materials publicly filed on the MAGNA system in Israel in the Hebrew language contain a statement to the effect that securityholders that are resident of Canada may contact the El-Ad Group for a summary of the material terms of the tender offer in the English language;

(iv) the tender offer to be made by the Bidder for securities of the Company is commenced within 60 days of this decision, and

2. the Confidentiality Sought is granted.

"Sarah B. Kavanagh"
Commissioner
 
"Christopher Portner"
Commissioner

The further decision of the principal regulator under the Legislation is that:

1. pursuant to section 9.1 of MI 61-101, any tender offer to be made by the Bidder for securities of the Company is exempt from Part 2 of MI 61-101, provided that:

(i) the requirements of the Foreign Take-Over Bid Exemption other than the Bid Residency Test are satisfied;

(ii) the Filer's representations contained in paragraphs 15 and 29 remain true and correct at the date of commencement of the tender offer;

(v) the tender offer materials publicly filed on the MAGNA system in Israel in the Hebrew language contain a statement to the effect that securityholders that are resident of Canada may contact the El-Ad Group for a summary of the material terms of the tender offer in the English language;

(vi) the tender offer to be made by the Bidder for securities of the Company is commenced within 60 days of this decision, and

2. the Confidentiality Sought is granted.

"Shannon O'Hearn
Manager, Corporate Finance