Mercer Park Brand Acquisition Corp.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Special purpose acquisition corporation (SPAC) issuer granted relief from certain restricted security requirements under National Instrument 41-101General Prospectus Requirements -- relief granted subject to conditions.

OSC Rule 56-501 Restricted Shares -- Special purpose acquisition corporation (SPAC) issuer granted relief from certain restricted share requirements under OSC Rule 56-501 -- relief granted subject to conditions.

Applicable Legislative Provisions

National Instrument 41-101 General Prospectus Requirements, s. 12.3.

OSC Rule 56-501 Restricted Shares, Part 3.

August 21, 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 MERCER PARK BRAND 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 requirements under:

(a) Section 12.3 of NI 41-101 General Prospectus Requirements ("NI 41-101") relating to prospectus filing eligibility for distributions of restricted securities, subject securities or securities that are directly or indirectly convertible into, or exercisable or exchangeable for, restricted securities or subject securities, shall not apply to distributions of Subordinate Voting Shares, Multiple Voting Shares (each as defined below), or securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, Subordinate Voting Shares or Multiple Voting Shares, in connection with, and following the closing of, the Qualifying Transaction (as defined below) (the "Prospectus Eligibility Exemption"); and

(b) Part 3 of OSC Rule 56-501 Restricted Shares ("OSC Rule 56-501") relating to the withdrawal of prospectus exemptions for stock distributions shall not apply to the distribution of Subordinate Voting Shares, Multiple Voting Shares, or securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, Subordinate Voting Shares or Multiple Voting Shares, in connection with, and following the closing of, the Qualifying Transaction (the "56-501 Withdrawal Exemption", and together with the Prospectus Eligibility Exemption", 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 subsection 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut (together with Ontario, the "Jurisdictions") in respect of the Prospectus Eligibility Exemption.

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.

Representations

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

The Filer

1. The Filer is a corporation incorporated under the laws of British Columbia on April 16, 2019 and its registered and head office is located at 333 Bay Street, Suite 3400, Toronto, Ontario, M5H 2S7.

2. The Filer is a reporting issuer in the Jurisdictions and is not in default under the securities legislation in force in any of the Jurisdictions.

3. The authorized capital of the Filer consists of an unlimited number of Class A restricted voting shares ("Class A Restricted Voting Shares"), an unlimited number of Class B shares ("Class B Shares"), an unlimited number of subordinate voting shares ("Subordinate Voting Shares") and an unlimited number of multiple voting shares ("Multiple Voting Shares").

4. The Class A Restricted Voting Shares were offered to the public pursuant to an initial public offering (the "IPO") under a long form prospectus dated May 7, 2019 (the "Prospectus"). On May 13, 2019, the Filer announced that it raised US$402,500,000 from the sale of "Class A Restricted Voting Units" under the IPO (including US$52,500,000 of Class A Restricted Voting Units issued pursuant to the full exercise of the over-allotment option). Each Class A Restricted Voting Unit consisted of one Class A Restricted Voting Share and one-half of a warrant ("Warrant"), with each whole Warrant being exercisable for US$11.50 per each Class A Restricted Voting Share (following the Qualifying Transaction, each whole Warrant is exercisable for US$11.50 per each Subordinate Voting Share).

5. In connection with the IPO, Mercer Park CB II, L.P. ("Mercer LP"), the sponsor of the Filer purchased the following securities: (i) 109,000 Class B Units for an aggregate purchase price of US$1,090,000 (each Class B Unit consists of one Class B Share and one-half of a Warrant); (ii) 9,810,000 Warrants for an aggregate purchase price of US$9,810,000; and (iii) 10,069,750 Class B Shares for an aggregate price of US$24,950.44.

6. As at the date hereof, the Filer had outstanding 40,250,000 Class A Restricted Voting Shares, 10,198,750 Class B Shares and 29,989,500 Warrants. The Filer has no other shares or warrants outstanding.

7. The Class A Restricted Voting Shares are listed and posted for trading in Canada on the Neo Exchange (the "NEO") under the symbol "BRND.U". The Class B Shares are not listed or posted for trading on any stock exchange, nor is it anticipated that the Class B Shares will be listed or posted for trading on any exchange in the future.

8. As disclosed in the Prospectus, 100% of the gross proceeds from the sale of the Class A Restricted Voting Shares (and warrants attached to such shares) are held in escrow by Odyssey Trust Company, pending the completion of a Qualifying Transaction (the "Escrow Amount").

The Filer's Capital Structure -- Pre Qualifying Transaction

9. As disclosed in the Prospectus, the Class A Restricted Voting Shares are entitled to one vote per share, other than on matters relating to the election and/or removal of the directors and auditors prior to the closing of the Qualifying Transaction. It is not currently expected that any meetings involving the holders of Class A Restricted Voting Shares will take place.

10. The Class B Shares are entitled to one vote per share and will receive notice of all shareholder meetings. The holders of Class B Shares are not entitled to access, or benefit from, the proceeds in the Escrow Amount. The holders of Class B Shares are the "Founders" (as such term is defined in the Prospectus) of the Filer, and as such, are involved in the Filer's management.

11. Prior to the closing of the Qualifying Transaction, the Filer will not issue any Subordinate Voting Shares or Multiple Voting Shares.

12. The pre-Qualifying Transaction dual class share structure (i.e. the Class A Restricted Voting Shares and the Class B Shares) has been adopted to provide appropriate treatment for the holders of Class A Restricted Voting Shares in the event that (1) a Qualifying Transaction is not completed within the required time frame; or (2) the Redemption Right (as defined below) is exercised by holders of Class A Restricted Voting Shares.

The Qualifying Transaction

13. The Filer was created for the purposes of effecting, directly or indirectly, an acquisition of one or more businesses or assets (the "Qualifying Transaction"). The Filer is specifically focusing its search of the noted acquisition to businesses that operate branded products businesses in cannabis and/or cannabis-adjacent industries, however, the Filer is not limited to particular industry or geographic region for the purposes of the Qualifying Transaction.

14. As the Filer has deposited 100% of the proceeds from the sale of the Class A Restricted Voting Shares into escrow, pursuant to the rules of the NEO, the Filer is not required to hold a shareholder meeting to consider the approval of the Qualifying Transaction. However, in lieu of voting, holders of Class A Restricted Voting Shares will be able to redeem their shares (except for holders of more than 15% of the number of Class A Restricted Voting Shares issued, who will be subject to a 15% limit of the number of Class A Restricted Voting Shares that are redeemable) and receive back their original purchase price for the Class A Units plus any interest earned on the amount, minus all applicable taxes and expenses directly related to the redemption (the "Redemption Right"). Class B Shares do not have any redemption rights.

15. In connection with the Qualifying Transaction, the Filer will:

(a) prepare and file a long form prospectus containing disclosure about the Qualifying Transaction (the "Qualifying Transaction Prospectus");

(b) mail a notice of redemption to the holders of the Class A Restricted Voting Shares at least 21 days prior to the redemption deadline; and

(c) send by prepaid mail or otherwise deliver the Qualifying Transaction Prospectus to the holders of the Class A Restricted Voting Shares no later than midnight (Toronto time) on the second business day prior to the deadline for redemption, which delivery may be effected electronically.

16. Pursuant to the Redemption Right, holders of Class A Restricted Voting Shares will be able to choose whether to remain invested in the Filer or redeem all or a portion of their Class A Voting Shares. Should a holder of Class A Restricted Voting Shares choose to redeem, the amount payable per Class A Restricted Voting Share redeemed will be equal to their pro-rata portion of the Escrow Amount (including any interest earned on the amount), minus all applicable taxes and expenses directly related to the exercise of the Redemption Right.

The Filer's Capital Structure -- Post Qualifying Transaction

17. As disclosed in the Prospectus (and as will be disclosed in the Qualifying Transaction Prospectus), upon closing of the Qualifying Transaction:

(i) each Class A Restricted Voting Share ("Class A Restricted Voting Share") will, unless previously redeemed, be automatically converted into one subordinate voting share ("Subordinate Voting Share"); and

(ii) each Class B Share ("Class B Share") will, be automatically converted on a 100-for-1 basis into multiple voting shares ("Multiple Voting Shares")

(collectively, the "Share Exchange").

18. As such, pursuant to the Share Exchange, the Filer will issue one (1) Multiple Voting Share for each one hundred (100) Class B Shares. Each Multiple Voting Share entitles the holder thereof to 2,500 votes at subsequent shareholder meetings. Each Multiple Voting Share is convertible at a ratio of one (1) Multiple Voting Share for one hundred (100) Subordinate Voting Shares (and such conversion will automatically occur on the fifth anniversary of the closing of the Qualifying Transaction). In the event of the liquidation, dissolution or winding-up of the Filer, each Multiple Voting Share is entitled to 100 times the amount distributed per each Subordinate Voting Share.

19. Further, pursuant to the Share Exchange, the Filer will issue one (1) Subordinate Voting Share for each one (1) Class A Restricted Voting Share not otherwise redeemed pursuant to the Redemption Right. Each Subordinate Voting Share entitles the holder thereof to one (1) vote at subsequent shareholder meetings.

20. As required by the Articles (as defined below), upon completion of the Qualifying Transaction, the Filer will not issue, or have outstanding, any Class A Restricted Voting Shares, Class B Shares, or such securities that are directly or indirectly convertible into, or exercisable or exchangeable for Class A Restricted Voting Shares or Class B Shares.

21. After the closing of the Qualifying Transaction, any outstanding Warrants will become exercisable for Subordinate Voting Shares and the Filer will not issue any Class A Restricted Voting Shares or Class B Shares.

22. The Prospectus provides detailed disclosure on the terms of the Class A Restricted Voting Shares, the Class B Shares, the Subordinate Voting Shares and the Multiple Voting Shares and the conversion of Class A Restricted Voting Shares into Subordinate Voting Shares and Class B Shares into Multiple Voting Shares on closing of the Qualifying Transaction. The Prospectus also discloses the possibility of future issuance of Multiple Voting Shares upon the approval of the board of directors of the Filer. The Qualifying Transaction Prospectus will also include detailed disclosure of the terms of the Subordinate Voting Shares and the Multiple Voting Shares.

23. The Qualifying Transaction Prospectus will provide disclosure on the reason for the dual share structure of the Filer after the closing of the Qualifying Transaction, which is namely to allow the Founders to have effective control over the Filer. After five (5) years from the date of the Qualifying Transaction, all of the Multiple Voting Shares of the Filer will automatically convert into Subordinate Voting Shares at a ratio of one (1) Multiple Voting Share for one hundred (100) Subordinate Voting Shares.

24. Lastly, to provide additional rights and protections to holders of Subordinate Voting Shares, as disclosed in the Prospectus:

(a) in connection with any change of control transaction requiring approval of the holders of Subordinate Voting Shares and Multiple Voting Shares under the Business Corporations Act (British Columbia) (the "BCBCA"), the constating documents of the Filer, namely the Filer's "Articles" under the BCBCA (the "Articles"), require that holders of Subordinate Voting Shares and Multiple Voting Shares shall be treated equally and identically, on a per share basis (except in respect of the number of votes allotted to each share), unless different treatment of the shares of each such class is approved by a majority of the votes cast by the holders of outstanding Subordinate Voting Shares or their proxyholders in respect of a resolution approving such change of control transaction, voting separately as a class at a meeting of the holders of that class called and held for such purpose; and

(b) in connection with the closing of the Qualifying Transaction, holders of Multiple Voting Shares will enter into a customary coattail agreement (the "Coattail Agreement") with the Filer designed to prevent transactions that otherwise would deprive holders of Subordinate Voting Shares of rights under the take-over bid regime to which they would otherwise been entitled to if the Multiple Voting Shares would have been Subordinate Voting Shares. The Coattail Agreement will comply with section 10.19 of the Listing Manual of the NEO and will contain certain provisions customary for issuers with a dual-class share structure, requiring that in essence, holders of Subordinate Voting Shares be provided with the same offer made to holders of Multiple Voting Shares in the event of a take-over bid.

25. Subsequent to the Share Exchange, it is expected that the Subordinate Voting Shares will be listed and posted for trading on the NEO. The Multiple Voting Shares are not expected to be listed or posted for trading on any exchange.

Prospectus Eligibility Exemption

26. The Subordinate Voting Shares will be "restricted securities" within the meaning of NI 41-101 and the Multiple Voting Shares will be "subject securities" within the meaning of NI 41-101.

27. Subject to certain exemptions, subsection 12.3(1) of NI 41-101 provides that an issuer must not file a prospectus under which restricted securities, subject securities, or securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, restricted securities or subject securities are distributed.

28. The Filer cannot rely on the "restricted security reorganization" exemption in paragraph 12.3(1)(b) of NI 41-101 for the future issuance of Subordinate Voting Shares and Multiple Voting Shares (or securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, Subordinate Voting Shares or Multiple Voting Shares) under a prospectus because the Subordinate Voting Shares and Multiple Voting Shares were created in connection with the closing of the IPO and not as part of a restricted security reorganization that received shareholder approval at the time the Filer was a reporting issuer.

29. The Filer cannot rely on the exemption provided in paragraph 12.3(3)(b) of NI 41-101 because the Filer is already a reporting issuer and as such, will not be a "private issuer" immediately prior to filing any future prospectus. Further, the Filer will not be able to rely on the exemption provided in paragraph 12.3(3)(c) of NI 41-101 because the Prospectus qualified for distribution Class A Restricted Voting Shares and Class B Shares and any future prospectus would qualify for distribution a different class of shares, being the Subordinate Voting Shares and/or the Multiple Voting Shares.

30. As such, the Filer would be required to receive prior shareholder approval pursuant to paragraph 12.3(1)(a) of NI 41-101 each time it wishes to issue Subordinate Voting Shares or Multiple Voting Shares (or securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, Subordinate Voting Shares or Multiple Voting Shares) under a prospectus.

56-501 Withdrawal Exemption

31. The Subordinate Voting Shares will be "restricted shares" and the Multiple Voting Shares will be "subject securities", each within the meaning of OSC Rule 56-501.

32. Subject to certain exemptions, subsection 3.2(1) of OSC Rule 56-501 provides that the prospectus exemptions under Ontario securities law will not be available for certain stock distributions of securities, including the distribution of the Subordinate Voting Shares or Multiple Voting Shares.

33. The Filer cannot rely on the "restricted security reorganization" exemption in subsection 3.2(2) of OSC Rule 56-501 for the future issuance of Subordinate Voting Shares and Multiple Voting Shares (or securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, Subordinate Voting Shares or Multiple Voting Shares) under a prospectus exemption as the Subordinate Voting Shares and Multiple Voting Shares were created in connection with the closing of the IPO.

34. Further, future issuances of Subordinate Voting Shares and Multiple Voting Shares will not qualify for either of the exemptions found in subparagraphs 3.2(3)(b)(i) or (ii) of OSC Rule 56-501 since the Filer will be a reporting issuer prior to the distribution of the Subordinate Voting Shares and Multiple Voting Shares, and the Subordinate Voting Shares and/or Multiple Voting Shares are different classes of securities than the Class A Restricted Voting Shares and Class B Shares which were distributed in connection with the Filer becoming a reporting issuer.

35. As such, the Filer would be required to receive prior shareholder approval pursuant to subparagraph 3.2(1)(d)(i) of OSC Rule 56-501 each time it wishes to distribute Subordinate Voting Shares or Multiple Voting Shares (or securities that are, directly or indirectly, convertible into, or exercisable or exchangeable for, Subordinate Voting Shares or Multiple Voting Shares) under a prospectus exemption.

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 representations in paragraphs 3 to 25 continue to apply;

(b) prior to the closing of the Qualifying Transaction:

(i) The Filer has no restricted securities or restricted shares issued and outstanding, other than Class A Restricted Voting Shares; and

(ii) The Filer has no subject securities issued and outstanding, other than Class B Shares; and

(c) following the closing of the Qualifying Transaction:

(i) the Filer has no restricted securities or restricted shares issued and outstanding, other than Subordinate Voting Shares; and

(ii) the Filer has no subject securities issued and outstanding, other than Multiple Voting Shares.

"Michael Balter"

Manager, Corporate Finance Branch