Section 5.4 does not apply to an issuer carrying out a related party transaction in any of the following circumstances:
(a) Fair Market Value Not More Than 25% of Market Capitalization – 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, insofar as it involves interested parties, exceeds 25 per cent of the issuer’s market capitalization, and for this purpose
(i) if either of the fair market values is not readily determinable, any determination as to whether that fair market value exceeds the threshold for this exemption shall be made by the issuer’s board of directors acting in good faith,
(ii) if the transaction is one in which the issuer or a wholly-owned subsidiary entity of the issuer combines with a related party, through an amalgamation, arrangement or otherwise, the subject matter of the transaction shall be deemed to be the securities of the related party held, at the time the transaction is agreed to, by persons other than the issuer or a wholly-owned subsidiary entity of the issuer, and the consideration for the transaction shall be deemed to be the consideration received by those persons,
(iii) if the transaction is one of two or more connected transactions that are related party transactions and would, without the exemption in this paragraph (a), require formal valuations under this Instrument, the fair market values for all of those transactions shall be aggregated in determining whether the tests for this exemption are met, and
(iv) if the assets involved in the transaction (the “initial transaction”) include warrants, options or other instruments providing for the possible future purchase of securities or other assets (the “future transaction”), the calculation of the fair market value for the initial transaction shall include the fair market value, as of the time the initial transaction is agreed to, of the maximum number of securities or other consideration that the issuer may be required to issue or pay in the future transaction,
(b) Issuer Not Listed on Specified Markets – no securities of the issuer are listed or quoted on the Toronto Stock Exchange, Aequitas NEO Exchange Inc., the New York Stock Exchange, the American Stock Exchange, the NASDAQ Stock Market, or a stock exchange outside of Canada and the United States other than the Alternative Investment Market of the London Stock Exchange or the PLUS markets operated by PLUS Markets Group plc,
(c) Distribution of Securities for Cash – the transaction is a distribution of securities of the issuer to a related party for cash consideration, if
(i) neither the issuer nor, to the knowledge of the issuer after reasonable inquiry, the related party has knowledge of any material information concerning the issuer or its securities that has not been generally disclosed, and the disclosure document for the transaction includes a statement to that effect, and
(ii) the disclosure document for the transaction includes a description of the effect of the distribution on the direct or indirect voting interest of the related party,
(d) Certain Transactions in the Ordinary Course of Business – the transaction is
(i) a purchase or sale, in the ordinary course of business of the issuer, of inventory consisting of personal or movable property under an agreement that has been approved by the board of directors of the issuer and the existence of which has been generally disclosed, or
(ii) a lease of real or immovable property or personal or movable property under an agreement on reasonable commercial terms that, considered as a whole, are not less advantageous to the issuer than if the lease was with a person dealing at arm’s length with the issuer and the existence of which has been generally disclosed,
(e) Transaction Supported by Arm’s Length Control Person – the interested party beneficially owns, or exercises control or direction over, voting securities of the issuer that carry fewer voting rights than the voting securities beneficially owned, or over which control or direction is exercised, by another security holder of the issuer who is a control person of the issuer and who, in the circumstances of the transaction
(i) is not also an interested party,
(ii) is at arm’s length to the interested party, and
(iii) supports the transaction,
(f) Bankruptcy, Insolvency, Court Order –
(i) the transaction is subject to court approval, or a court orders that the transaction be effected, under
(A) bankruptcy or insolvency law, or
(B) section 191 of the CBCA, any successor to that section, or equivalent legislation of a jurisdiction,
(ii) the court is advised of the requirements of this Instrument regarding formal valuations for related party transactions, and of the provisions of this paragraph (f), and
(iii) the court does not require compliance with section 5.4,
(g) Financial Hardship –
(i) the issuer is insolvent or in serious financial difficulty,
(ii) the transaction is designed to improve the financial position of the issuer,
(iii) paragraph (f) is not applicable,
(iv) the issuer has one or more independent directors in respect of the transaction, and
(v) the issuer’s board of directors, acting in good faith, determines, and at least two-thirds of the issuer’s independent directors, acting in good faith, determine that
(A) subparagraphs (i) and (ii) apply, and
(B) the terms of the transaction are reasonable in the circumstances of the issuer,
(h) Asset Resale –
(i) the subject matter of the related party transaction was acquired by the issuer or an interested party, as the case may be, in a prior arm’s length transaction that was agreed to not more than 12 months before the date that the related party transaction is agreed to, and a qualified, independent valuator provides a written opinion that, after making such adjustments, if any, as the valuator considers appropriate in the exercise of the valuator’s professional judgment
(A) the value of the consideration payable by the issuer for the subject matter of the related party transaction is not more than the value of the consideration paid by the interested party in the prior arm’s length transaction, or
(B) the value of the consideration to be received by the issuer for the subject matter of the related party transaction is not less than the value of the consideration paid by the issuer in the prior arm’s length transaction, and
(ii) the disclosure document for the related party transaction includes the same disclosure regarding the valuator as is required in the case of a formal valuation under section 6.2,
(i) Non-redeemable Investment Fund – the issuer is a non-redeemable investment fund that
(i) at least once each quarter calculates and publicly disseminates the net asset value of its securities, and
(ii) at the time of publicly announcing the related party transaction, publicly disseminates the net asset value of its securities as of the business day before the announcement,
(j) Amalgamation or Equivalent Transaction with No Adverse Effect on Issuer or Minority – the transaction is a statutory amalgamation, or substantially equivalent transaction, resulting in the combination of the issuer or a wholly-owned subsidiary entity of the issuer with an interested party, that is undertaken in whole or in part for the benefit of another related party, if all of the following conditions are satisfied:
(i) the transaction does not and will not have any adverse tax or other consequences to the issuer, the person resulting from the combination, or beneficial owners of affected securities generally,
(ii) no material actual or contingent liability of the interested party with which the issuer or a wholly-owned subsidiary entity of the issuer is combining will be assumed by the issuer, the wholly-owned subsidiary entity of the issuer or the person resulting from the combination,
(iii) the related party benefiting from the transaction agrees to indemnify the issuer against any liabilities of the interested party with which the issuer, or a wholly-owned subsidiary entity of the issuer, is combining,
(iv) after the transaction, the nature and extent of the voting and financial participating interests of holders of affected securities in the person resulting from the combination will be the same as, and the value of their financial participating interests will not be less than, that of their interests in the issuer before the transaction,
(v) the related party benefiting from the transaction pays for all of the costs and expenses resulting from the transaction.