Securities Law & Instruments

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from the take-over bid requirements in Part 2 of NI 62-104 to allow for take-over bid thresholds to be calculated based on the aggregate number of voting securities outstanding, as opposed to on a per-class basis -- issuer is subject to foreign ownership restrictions in its governing federal legislation and has implemented a dual class share structure solely to ensure compliance with foreign ownership restrictions in the aviation industry; both classes of shares are freely tradable, have identical economic attributes and are automatically and mandatorily inter-convertible based on the shareholder's Canadian or non-Canadian status -- relief granted to allow offerors to calculate their ownership position by combining the outstanding classes of shares for the purposes of determining whether take-over bid requirements are triggered.

Relief from the early warning requirements to allow early warning thresholds to be calculated based on the aggregate number of voting shares outstanding, as opposed to on a per-class basis -- issuer is subject to foreign ownership restrictions in its governing federal legislation and has implemented a dual class share structure solely to ensure compliance with foreign ownership restrictions in the aviation industry; both classes of shares are freely tradable, have identical economic attributes and are automatically and mandatorily inter-convertible based on the shareholder's Canadian or non-Canadian status -- relief granted to allow acquirors to calculate their ownership position by combining the outstanding classes of shares for the purposes of determining whether early warning requirements are triggered.

Relief from the requirement to issue and file a news release in section 5.4 of NI 62-104 to provide that the threshold triggering the requirement for an acquiror to file a news release during a take-over bid or an issuer bid is to be calculated based on the aggregate number of voting shares outstanding, as opposed to on a per-class basis -- issuer is subject to foreign ownership restrictions in its governing federal legislation and has implemented a dual class share structure solely to ensure compliance with foreign ownership restrictions in the aviation industry; both classes of shares are freely tradable, have identical economic attributes and are automatically and mandatorily inter-convertible based on the shareholder's Canadian or non-Canadian status -- relief granted to allow acquirors to calculate their ownership position by combining the outstanding classes of shares for the purposes of determining whether the requirement to file a news release during a take-over bid or issuer bid is triggered.

Relief so that an eligible institutional investor subject to early warning requirements may rely on alternative eligibility criteria from those set forth in section 4.5 of NI 62-103 in order to benefit from the exemption contained in section 4.1 of NI 62-103 -- issuer is subject to foreign ownership restrictions in its governing federal legislation and has implemented a dual class share structure solely to ensure compliance with foreign ownership restrictions in the aviation industry; both classes of shares are freely tradable, have identical economic attributes and are automatically and mandatorily inter-convertible based on the shareholder's Canadian or non-Canadian status -- relief granted to allow eligible institutional investors to calculate their ownership position by combining the outstanding classes of common shares for the purposes of determining whether they are eligible for the reporting exemption in section 4.1 of NI 62-103.

Relief so that the issuer can provide disclosure on significant shareholders in its information circular on a combined basis, rather than for each class of voting shares -- issuer is subject to foreign ownership restrictions in its governing federal legislation and has implemented a dual class share structure solely to ensure compliance with foreign ownership restrictions in the aviation industry; both classes of shares are freely tradable, have identical economic attributes and are automatically and mandatorily inter-convertible based on the shareholder's Canadian or non-Canadian status -- relief granted to allow issuer to provide disclosure on holders of its voting shares on a combined basis in its information circular.

Applicable Legislative Provisions

National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2, ss. 5.2, 5.4 and 6.1.

National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, ss. 4.1, 4., 11.1.

National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1.

May 1, 2019

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
CARGOJET 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") that, subject to the conditions of this decision:

(a) an offer to acquire either outstanding common shares of the Filer (the "Common Shares") or variable voting shares of the Filer (the "Variable Voting Shares", and together with the Common Shares, the "Shares") which, in either case, would constitute a take-over bid under the Legislation as a result of the securities subject to the offer to acquire, together with the offeror's securities of that class, representing in the aggregate 20% or more of the outstanding Common Shares or Variable Voting Shares, as the case may be, at the date of the offer to acquire, be exempt from the requirements set out in Part 2 of National Instrument 62-104 Take-Over Bids and Issuer Bids ("NI 62-104") applicable to take-over bids (the "TOB Relief");

(b) an acquiror who triggers the disclosure and filing obligations pursuant to the early warning requirements contained in the Legislation with respect to either the Common Shares or Variable Voting Shares, as the case may be, be exempt from such requirements (the "Early Warning Relief");

(c) an acquiror who acquires, during a take-over bid or an issuer bid, beneficial ownership of, or control or direction over, either Common Shares or Variable Voting Shares that, together with the acquiror's securities of that class, would constitute 5% or more of the outstanding Common Shares or Variable Voting Shares, as the case may be, be exempt from the requirement to issue and file a news release set out in section 5.4 of NI 62-104 (the "News Release Relief"); and

(d) the Filer be exempt from the disclosure requirements in Item 6.5 of Form 51-102F5 Information Circular ("Form 51-102F5") (the "Alternative Disclosure Relief", and collectively with the TOB Relief, the Early Warning Relief, and the News Release Relief, 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, 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, MI 11-102, NI 62-103, and NI 62-104, including, without limitation, "offeror", "offeror's securities", "offer to acquire", "acquiror", "acquiror's securities", "eligible institutional investor", and "security-holding percentage", have the same meaning if used in this decision unless otherwise defined. For the purposes of this decision, the terms below have the following meanings:

"Canadian" has the meaning ascribed to that term in the CTA; and

"CTA" means Canada Transportation Act, as it may be amended from time to time.

Representations

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

1. The Filer is a corporation existing under the Business Corporations Act (Ontario) and in good standing.

2. The Filer is a reporting issuer in all of the provinces and territories of Canada, and is not in default of the securities legislation in any of these jurisdictions.

3. The Filer's registered and executive office is located at 2281 North Sheridan Way, Mississauga, Ontario, L5K 2S3.

4. The Filer's authorized share capital consists of: (a) an unlimited number of Common Shares; (b) an unlimited number of Variable Voting Shares; and (c) an unlimited number of preferred shares, issuable in series. As of April 12, 2019, there were 13,027,437 Common Shares, 437,370 Variable Voting Shares, and no preferred shares issued and outstanding.

5. Each of the Common Shares and the Variable Voting Shares are currently listed on the Toronto Stock Exchange (the "TSX") under the symbols "CJT" and "CJT.A", respectively, and are expected to be listed on the TSX under the single symbol "CJT" effective on or about May 8, 2019. The Filer is not in default of any of the requirements of the TSX Company Manual.

6. The Filer is a leading provider of time sensitive overnight air cargo services in Canada.

7. The Filer is subject to the requirements of the CTA. The CTA requires that air carriers which provide domestic services be controlled in fact by Canadians, and permits non-Canadians to hold a maximum of 49% of the voting interests in a licensed domestic carrier, provided that no single non-Canadian holds more than 25% of such voting interests and provided that non-Canadian air service providers do not, in the aggregate, hold more than 25% of the voting interests in a Canadian airline.

8. Pursuant to the articles of the Filer (the "Articles"), the Common Shares can only be held, beneficially owned or controlled, directly or indirectly, by Canadians. Each issued and outstanding Common Share will be automatically converted into one Variable Voting Share, without any further act on the part of the Filer or the holder, if such Common Share is or becomes held, beneficially owned or controlled, directly or indirectly, by a person who is a member of a class of persons who under Canadian law is restricted from holding a specified percentage (or part) of all the issued and outstanding shares of the Filer, as a body corporate to which such restrictions apply.

9. Pursuant to the Articles, the Variable Voting Shares can only be held, beneficially owned or controlled, directly or indirectly, other than by way of security, by persons who are non-Canadians. Each outstanding Variable Voting Share will be automatically converted into one Common Share, without any further act on the part of the Filer or the holder, if: (a) such Variable Voting Share is or becomes beneficially owned or controlled, directly or indirectly, by a Canadian; or (b) the holder of such Variable Voting Share becomes a member of any class of persons, which class of persons is not restricted under the laws of Canada from owning shares of the Filer or from holding a specified percentage (or part) of all the issued and outstanding shares in the capital of the Filer.

10. Each Common Share confers the right to one vote. Each Variable Voting Share confers the right to one vote unless: (a) the number of issued and outstanding Variable Voting Shares exceeds 25% of the total number of all issued and outstanding Shares; or (b) the total number of votes cast by or on behalf of holders of Variable Voting Shares at any meeting exceeds 25% of the total number of votes cast at such meeting. If either of the aforementioned thresholds would otherwise be surpassed at any time, the vote attached to each Variable Voting Share decreases automatically and without further act or formality to equal the maximum permitted vote per Variable Voting Share such that: (a) the Variable Voting Shares as a class do not carry more than 25% of the aggregate votes attached to all issued and outstanding Shares; and (b) the total number of votes cast by or on behalf of holders of Variable Voting Shares at any meeting does not exceed 25% of the total number of votes cast at such meeting.

11. Aside from the differences in voting rights set out in paragraph 10, the Variable Voting Shares and Common Shares are the same in all other respects, including with regard to the right to receive dividends, if any, and the right to receive the property and assets of the Filer in the event of dissolution, liquidation, or winding up of the Filer.

12. The Articles contain coattail provisions pursuant to which Variable Voting Shares may be converted into Common Shares in the event an offer is made to purchase Common Shares and the offer is one which is required to be made to all or substantially all the holders of Common Shares. The Articles also contain coattail provisions pursuant to which Common Shares may be converted into Variable Voting Shares in the event an offer is made to purchase Variable Voting Shares and the offer is one which is required to be made to all or substantially all the holders of Variable Voting Shares.

13. The Filer's dual class structure was implemented solely to ensure compliance with the requirements of the CTA; it has no other purpose.

14. An investor does not control or choose which class of Shares it acquires and holds. There are no unique features of either class of Shares which an existing or potential investor can choose to acquire, exercise or dispose of; the class of Shares ultimately available to an investor is solely a function of the investor's Canadian or non-Canadian residency status only. Moreover, if, after having acquired Shares, a holder's Canadian or non-Canadian residency status changes, such Shares will convert accordingly and automatically, without formality or regard to any other consideration.

15. The Variable Voting Shares are not considered "restricted voting securities" or "restricted voting shares" for the purposes of the Legislation.

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 publicly discloses the terms of the Exemption Sought in a news release filed on SEDAR promptly following the issuance of this decision;

(b) the Filer discloses the terms and conditions of the Exemption Sought in all of its annual information forms and management information circulars filed on SEDAR following the issuance of this decision and in any other filing where the characteristics of the Shares are described;

(c) with respect only to the TOB Relief, the Common Shares or Variable Voting Shares, as the case may be, subject to the offer to acquire of an offeror, together with the Common Shares and Variable Voting Shares beneficially owned, or over which control or direction is exercised, by the offeror or any person acting jointly or in concert with the offeror, would not constitute, at the date of the offer to acquire, in the aggregate 20% or more of the outstanding Common Shares and Variable Voting Shares on a combined basis;

(d) with respect only to the Early Warning Relief,

(i) the acquiror complies with the early warning requirements, except that, for the purpose of determining the percentage of outstanding Common Shares or Variable Voting Shares, as the case may be, that the acquiror has acquired or disposed of beneficial ownership, or acquired or ceased to have control or direction over, the acquiror calculates the percentage using (A) a denominator comprised of all of the outstanding Common Shares and Variable Voting Shares, determined in accordance with subsection 1.8(2) of NI 62-104, on a combined basis, as opposed to a per-class basis, and (B) a numerator including, as acquiror's securities, all of the Common Shares and Variable Voting Shares that constitute acquiror's securities; or

(ii) in the case of an acquiror that is an eligible institutional investor, the acquiror complies with the requirements of the alternative monthly reporting system set out in Part 4 of NI 62-103 to the extent it is not disqualified from filing reports thereunder pursuant to section 4.2 of NI 62-103, except that, for purposes of determining the acquiror's securityholding percentage, the acquiror calculates its securityholding percentage using (A) a denominator comprised of all of the outstanding Common Shares and Variable Voting Shares, determined in accordance with subsection 1.8(2) of NI 62-104, on a combined basis, as opposed to a per-class basis, and (B) a numerator including all of the Common Shares and Variable Voting Shares owned or controlled by the eligible institutional investor;

(e) with respect only to the News Release Relief, the Common Shares or Variable Voting Shares, as the case may be, that the acquiror acquires beneficial ownership of, or control or direction over, together with the securities of the Filer beneficially owned, or over which control or direction is exercised, by the acquiror or any person acting jointly or in concert with the acquiror, would not constitute 5% or more of the outstanding Common Shares and Variable Voting Shares, as the case may be, calculated using (i) a denominator comprised of all of the outstanding Common Shares and Variable Voting Shares, determined in accordance with subsection 1.8(2) of NI 62-104, on a combined basis, as opposed to a per-class basis, and (ii) a numerator including as acquiror's securities, all of the Common Shares and Variable Voting Shares that constitute acquiror's securities;

(f) with respect only to the Alternative Disclosure Relief, the Filer provides the disclosure required by Item 6.5 of Form 51-102F5, except that for purposes of determining the percentage of voting rights attached to the Common Shares or Variable Voting Shares, the Filer calculates the voting percentage using (i) a denominator comprised of all of the outstanding Common Shares and Variable Voting Shares on a combined basis, as opposed to a per-class basis, and (ii) a numerator including all of the Common Shares and Variable Voting Shares beneficially owned, or over which control or direction is exercised, directly or indirectly, by any person who, to the knowledge of the Filer's directors or executive officers, beneficially owns, controls or directs, directly or indirectly, voting securities carrying 10% or more of the voting rights attached to the outstanding Common Shares and Variable Voting Shares on a combined basis, as opposed to a per-class basis.

"Naizam Kanji"
Director, Office of Mergers & Acquisitions
Ontario Securities Commission