In the Matter of The Rubicon Project, Inc., 2015 CanLII 37371

June 30, 2015

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 The Rubicon Project, 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 the prospectus requirement contained in the Legislation will not apply to a first trade in respect of common shares in the capital stock of the Filer (Rubicon Shares) issued (i) to former shareholders of Chango Inc. (Chango) in connection with the indirect acquisition (the Transaction) of all of the outstanding shares in the capital of Chango (Chango Shares) by way of a plan of arrangement (the Plan of Arrangement) under section 182 of the Business Corporations Act (Ontario) (OBCA), (ii) on exercise of the Replacement Options (as such term is defined below) or (iii) on the settlement of up to 200,000 Rubicon RSUs (as such term is defined below) granted to Chango employees who are resident in Canada following the closing of the Transaction (the Closing). Such requested relief is referred to herein as, the Exemption Sought.

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

(a) the Ontario Securities Commission (the 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 Québec.

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 company incorporated under the laws of Delaware. The head office of the Filer is in Los Angeles, California and the Filer has offices globally including New York, Chicago, San Francisco, Seattle, Miami, Paris, Hamburg, Sydney, London, Tokyo, Singapore and Sao Paulo.

2. The Filer is a technology company that automates the buying and selling of advertising.

3. As of April 28, 2015, there were:

(a) 42,559,280 Rubicon Shares issued and outstanding;

(b) 7,553,823 Rubicon Shares issuable upon the exercise of options to acquire Rubicon Shares (Rubicon Options)

(c) 1,690,748 shares of restricted stock of the Filer issued and outstanding (“Restricted Stock”); and

(d) 891,312 restricted stock units granted by the Filer outstanding (Rubicon RSUs), each of which, upon settlement, entitle the holder to one Rubicon Share.

4. The Filer has confirmed with the transfer agent for the Rubicon Shares that there are no registered holders of Rubicon Shares resident in Canada.

5. Based on its searches of nominee accounts for underlying beneficial shareholders of Rubicon Shares, the Filer has concluded that, to the best of its knowledge, immediately prior to the Closing, Canadian residents held less than 1% of the outstanding Rubicon Shares and represented less than 2% of the total number of owners of Rubicon Shares.

6. Immediately prior to the Closing, Canadian residents held less than 1% of the outstanding Rubicon Options and represented less than 1% of the total number of holders of Rubicon Options.

7. Immediately prior to the Closing, Canadian residents held less than 5% of the outstanding Rubicon RSUs and represented less than 4% of the total number of holders of Rubicon RSUs.

8. The Filer is not and has no present intention of becoming a reporting issuer, or the equivalent, under the securities legislation of any jurisdiction of Canada. The Filer has never completed a public offering of Rubicon Shares in Canada and has no present intention to complete a public offering of shares in Canada.

9. The Rubicon Shares are admitted to trading on the New York Stock Exchange (the NYSE) under the symbol “RUBI”. Rubicon Shares are not listed or quoted on any other exchange or marketplace (as such term is defined in National Instrument 21-101 – Marketplace Operation) in Canada or elsewhere and the Filer has no present intention to apply for a listing in Canada or elsewhere.

10. As at the date hereof, the head office of the Filer is located in Los Angeles, California. Immediately prior to the Closing, the Filer had limited operations in Canada as a result of an all-cash acquisition of another Toronto-based company made in October 2014.

11. The Filer is not in default of securities legislation in Ontario or Québec.

Chango

12. Chango was incorporated under the OBCA. At the Closing, Chango amalgamated with a subsidiary of the Filer to form The Rubicon Project Chango, Inc. (RP Chango).

13. Prior to the Closing, the head office of Chango was in Toronto, Ontario and Chango had offices in New York, Chicago and San Francisco. Following Closing, RP Chango continues to have operations, employees and one director in Canada.

14. RP Chango is an online advertising and marketing company in the field of data-driven digital advertising and marketing, specializing in search re-targeting and programmatic marketing.

15. Chango was not, and RP Chango is not, a reporting issuer, or the equivalent, under the securities legislation of any jurisdiction of Canada. Chango was not, and RP Chango is not, an “offering corporation” under the OBCA.

16. Prior to the Closing, the authorized capital of Chango consisted of:

(a) an unlimited number of Common Shares (Chango Common Shares);

(b) 3,259,771 Class A Preferred Shares (Chango Class A Preferred Shares);

(c) 4,796,889 Class B Preferred Shares (Chango Class B Preferred Shares); and

(d) 1,387,281 Class B-1 Preferred Shares (Chango Class B-1 Preferred Shares and together with the Chango Class A Preferred Shares and Chango Class B Preferred Shares, the Chango Preferred Shares).

17. Immediately prior to Closing, there were:

(a) 3,728,227 Chango Common Shares issued and outstanding;

(b) 3,259,771 Chango Class A Preferred Shares issued and outstanding;

(c) 4,775,282 Chango Class B Preferred Shares issued and outstanding; and

(d) 1,387,281 Chango Class B-1 Preferred Shares issued and outstanding.

18. Since Chango’s inception, it completed several offerings of Chango Common Shares and Chango Preferred Shares. In each case, Chango relied upon an exemption from the prospectus requirement in issuing Chango Common Shares and Chango Preferred Shares.

19. Immediately prior to Closing, 1,282,084 Chango Common Shares were reserved for issuance upon the exercise of options to acquire Chango Common Shares (Chango Options). Each holder of Chango Options was a former or current employee, director, advisor or consultant of Chango.

20. Immediately prior to Closing, 21,607 Chango Class B Preferred Shares were reserved for issuance upon the exercise of warrants to acquire Chango Class B Preferred Shares (Chango Warrants).

21. No securities of Chango were listed or quoted and no securities of RP Chango are listed or quoted on any stock exchange or marketplace (as such term is defined in National Instrument 21-101 – Marketplace Operation) in Canada or elsewhere.

22. Immediately prior to Closing, the registered shareholders of Chango included residents of Ontario (35), Québec (4) and jurisdictions outside of Canada (12).

23. Immediately prior to Closing, the holders of Chango Options included residents of Ontario (54) and jurisdictions outside of Canada (26).

24. Chango was not, and RP Chango is not, in default of securities legislation in Ontario or Québec.

Transaction

25. Under the Plan of Arrangement, the Chango Warrants were converted into Chango Class B Preferred Shares on a cashless exercise basis, and then all Chango Preferred Shares were converted into Chango Common Shares on a one-for-one basis, leaving outstanding only Chango Common Shares and Chango Options. The Filer then indirectly acquired all of the issued and outstanding Chango Common Shares.

26. Under the Plan of Arrangement, except for Chango Options that were exercised prior to completion of the Transaction pursuant to the Plan of Arrangement, option holders of Chango exchanged their unexercised Chango Options for Rubicon Options (Replacement Options).

27. The aggregate consideration for the Transaction, including the acquisition of all of the issued and outstanding Chango Common Shares and the exchange of the unexercised Chango Options for the Replacement Options, is up to approximately U.S. $120 million (the Arrangement Consideration) payable in cash and Rubicon Shares, subject to adjustment as determined pursuant to the arrangement agreement dated as of March 31, 2015 between the Filer, an indirect subsidiary of the Filer, Chango and certain of Chango’s shareholders (the Arrangement Agreement).

28. Each former holder of Chango Common Shares is entitled to such shareholder’s pro rata interest in the Arrangement Consideration payable in accordance with the terms of the Plan of Arrangement, the Arrangement Agreement and related ancillary agreements.

29. Each former holder of Chango Options is entitled to Replacement Options at an exchange ratio based on the price of Rubicon Shares equal to U.S. $18.77.

30. In connection with the Transaction, the Filer will grant up to 200,000 Rubicon RSUs to employees of Chango who are resident in Canada.

31. As of the date hereof, it is not possible to determine precisely what the net amount payable to former shareholders of Chango will be as the former shareholders of Chango may be entitled to a contingent payment of up to approximately US$18 million (the “Contingent Amount”). The portion of the Contingent Amount payable to former shareholders of Chango, if any, will be determined as soon as practicable following December 31, 2015 and in any event no later than March 1, 2016 and is payable, at the discretion of the Applicant, in cash and/or Rubicon Shares.

(a) Based on (A) the consideration payable to former shareholders of Chango upon the Closing (excluding, for greater certainty, any payments relating to the Contingent Amount) and (B) assuming the maximum number of Rubicon RSUs to be granted to employees of Chango in connection with the Transaction, as described in paragraph 30 above,

(i) residents of Canada own directly or indirectly an aggregate of approximately 3,883,675 Rubicon Shares, representing approximately 9.13% of the Rubicon Shares issued and outstanding;

(ii) assuming on a pro forma basis the exercise of all Replacement Options and settlement of all Rubicon RSUs and Restricted Stock, residents of Canada own directly or indirectly an aggregate of approximately 4,379,809 Rubicon Shares, representing approximately 8.31% of the Rubicon Shares issued and outstanding (on a fully-diluted basis assuming the exercise of all Rubicon Options and settlement of all Rubicon RSUs and Restricted Stock); and

(iii) approximately 170 residents of Canada (including: (i) current holders of Rubicon Shares, Rubicon Options, Rubicon RSUs or Restricted Stock (ii) holders of Chango Common Shares who receive Rubicon Shares and/or Replacement Options in connection with the Transaction; and (iii) holders of Rubicon RSUs granted in connection with the Transaction), representing approximately 5.15% of the total number of owners, directly or indirectly own Rubicon Shares.

(b) Based on (A) the consideration payable to former shareholders of Chango upon the Closing (excluding, for greater certainty, any payments relating to the Contingent Amount); (B) assuming the maximum number of Rubicon RSUs to be granted to employees of Chango in connection with the Transaction, as described in paragraph 30 above; and (C) assuming former shareholders of Chango are entitled to receive the full Contingent Amount (assuming: (x) the greatest possible number of shares are issued, i.e. the former shareholders of Chango are entitled to receive the full Contingent Amount at a price of US$18.77 per share and the Applicant elects to pay the full Contingent Amount in Rubicon Shares and (y) no former shareholders of Chango dispose of Rubicon Shares following the expiry of applicable lock-up periods but prior to the payment of the full Contingent Amount),

(i) residents of Canada will own directly or indirectly an aggregate of approximately 4,702,391 Rubicon Shares, representing approximately 10.80% of the Rubicon Shares issued and outstanding;

(ii) assuming on a pro forma basis the exercise of all Replacement Options and settlement of all Rubicon RSUs and Restricted Stock, residents of Canada will own directly or indirectly an aggregate of approximately 5,198,525 Rubicon Shares, representing approximately 9.69% of the Rubicon Shares issued and outstanding (on a fully-diluted basis assuming the exercise of all Rubicon Options and settlement of all Rubicon RSUs and Restricted Stock); and

(iii) approximately 170 residents of Canada (including (i) current holders of Rubicon Shares, Rubicon Options, Rubicon RSUs or Restricted Stock; (ii) holders of Chango Common Shares who receive Rubicon Shares and/or Replacement Options in connection with the Transaction; and (iii) holders of Rubicon RSUs granted in connection with the Transaction), representing approximately 5.15% of the total number of owners, will directly or indirectly own Rubicon Shares.

32. The Rubicon Shares issued in connection with the Transaction or issuable from time to time upon exercise of Replacement Options or settlement of Rubicon RSUs issued in connection with the Transaction are or will be listed on the NYSE.

33. The Filer provides holders of Rubicon Shares resident in Canada the same information and materials that the U.S. Securities and Exchange Commission and the NYSE requires the Filer to provide to all other holders of Rubicon Shares.

34. The Plan of Arrangement was approved by the former shareholders of Chango on April 20, 2015. The Plan of Arrangement received approval from the Ontario Superior Court of Justice pursuant to an interim order dated April 7, 2015 and a final order dated April 22, 2015.

35. The Transaction had widespread support among Chango’s significant investors. Former shareholders of Chango holding shares representing approximately 98.62% of the Common Shares in the capital of Chango, 100% of the Class A Preferred Shares in the capital of Chango, 100% of the Class B Preferred Shares in the capital of Chango and 100% of the Class B-1 Preferred Shares in the capital of Chango, voted in favour of the Plan of Arrangement at the shareholder meeting of Chango held on April 20, 2015.

36. In the absence of the Exemption Sought, the first trade of Rubicon Shares issued under the Plan of Arrangement in exchange for Chango Common Shares, or issuable from time to time upon exercise of Replacement Options or settlement of Rubicon RSUs issued in connection with the Transaction will be deemed a distribution pursuant to National Instrument 45-102 – Resale of Securities (NI 45-102) unless, among other things, the Filer has been a reporting issuer for four months immediately preceding the trade in one of the jurisdictions set forth in Appendix B to NI 45-102, which include, among others, Ontario and Québec. As the Filer is not a reporting issuer, or the equivalent in Canada, the Rubicon Shares issued under the Plan of Arrangement in exchange for Chango Common Shares or issuable from time to time on exercise of Replacement Options or Rubicon RSUs issued in connection with the Transaction could, in certain circumstances, be subject to an indefinite hold period.

37. Assuming the accuracy of the estimates described in paragraph 31(b) above, it is possible that the former shareholders of Chango resident in Canada will not be able to rely on the prospectus exemption set out in section 2.14 of NI 45-102 for a first trade of Rubicon Shares issued under the Plan of Arrangement in exchange for Chango Common Shares or issuable from time to time upon the exercise of Replacement Options or the settlement of Rubicon RSUs issued in connection with the Transaction because, following the Transaction, residents of Canada may, collectively, own directly or indirectly, more than 10% of the Rubicon Shares issued and outstanding.

38. Except for the requirements set out in subsections 2.14(l)(b) and 2.14(2)(c) of NI 45-102, all applicable conditions to the resale of the Rubicon Shares issued under the Plan of Arrangement in exchange for Chango Common Shares or issuable from time to time upon exercise of Replacement Options or settlement of Rubicon RSUs issued in connection with the Transaction contained in section 2.14 of NI 45-102 will be satisfied.

39. Any public resale of Rubicon Shares will take place over a foreign exchange or market (the NYSE) and therefore is unlikely to have any connection to the investing public in Canada.

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) a first trade under NI 45-102 in respect of Rubicon Shares issued (i) under the Plan of Arrangement in exchange for Chango Shares, (ii) from time to time upon exercise of Replacement Options or (iii) on settlement of the Rubicon RSUs issued in connection with the Transaction, is executed through the facilities of the NYSE or another exchange or market outside of Canada or to a person or company outside of Canada; and

(b) at the distribution date, after giving effect to the issue of the Rubicon Shares pursuant to the Plan of Arrangement, residents of Canada (excluding former holders of Chango Shares):

(i) did not own directly or indirectly more than 10 percent of the outstanding Rubicon Shares; and

(ii) did not represent in number more than 10 percent of the total number of owners directly or indirectly of Rubicon Shares.

“Deborah Leckman”

“Chris Portner”

Commissioner Ontario Securities Commission

Commissioner Ontario Securities Commission