Court File and Parties

COURT FILE NO.: CV-23-00711079-00CL DATE: 20240130

ONTARIO - SUPERIOR COURT OF JUSTICE – COMMERCIAL LIST

IN THE MATTER OF AN APPLICATION UNDER SECTION 182 OF THE BUSINESS CORPORATIONS ACT , R.S.O. 1990, C. B.16, AS AMENDED

AND IN THE MATTER OF RULE 14.05(2) OF THE RULES OF CIVIL PROCEDURE

AND IN THE MATTER OF A PROPOSED ARRANGEMENT OF Q4 INC., INVOLVING SEP FORGE BIDCO INC.

RE: Q4 Inc.

BEFORE: Peter J. Osborne J.

COUNSEL: Craig Lockwood, Lauren Harper and Jayne Cooke, for Q4 Inc. Zev Smith, for SEP Forge Bidco Inc.

HEARD: January 30, 2024

Endorsement

[1] Q4 Inc. (“Q4” or the “Applicant”) has brought this Application pursuant to s. 182 of the Business Corporations Act, R.S.O. 1990, c.B.16, as amended, (the “OBCA”) for approval of a plan of arrangement (the “Arrangement”) proposed by Q4 and involving SEP Forge BidCo Inc. (the “Purchaser”) and described in the Management Information Circular (the “Circular”).

[2] On December 20, 2023, Justice Cavanagh granted an interim order authorizing the Applicant to hold a special meeting to consider and vote on special resolutions to approve the Arrangement (the “Interim Order”). The Arrangement was approved by the requisite majorities at the special meeting, with the result that the Applicant seeks approval of the Arrangement today.

[3] The Applicant relies upon the Affidavits of Darrell Heaps affirmed December 18, 2023 and January 26, 2024 together with the exhibits thereto. Defined terms in this Endorsement have the meaning given to them in the Application materials unless otherwise stated.

[4] Q4 is an OBCA Corporation with its head office at Toronto. It is a capital markets access platform that offers products to publicly listed companies, investment managers and investment banks. Its products are cloud-based and primarily sold on a subscription basis. Q4 Shares are listed and trade on the TSX.

[5] The Purchaser is also an OBCA Corporation with its registered office at Toronto, controlled by Sumeru Equity Partners, a technology focused growth capital firm. The Purchaser was formed solely to effect the transactions contemplated by the Arrangement Agreement.

[6] The Arrangement will result in, among other things, the acquisition by the Purchaser of all of the issued and outstanding shares of Q4 in exchange for $6.05 in cash per Share (other than those Shares held by the Rolling Shareholders and Shares to be sold by those parties) which will be acquired in exchange for the Rollover Consideration at an implied value of $6.05 per Rollover Share.

[7] In addition, each Option, DSU, PSU and RSU outstanding immediately prior to the Effective Time of the Arrangement, whether vested or unvested, shall be, in the case of the Options, deemed to be unconditionally vested and exercisable, and each Option, DSU, PSU and RSU shall be further deemed to be assigned and transferred to the Company in exchange for a cash payment, in the case of each Option equal to the amount by which the Consideration exceeds the exercise price of such Option; and in the case of each DSU, PSU and RSU equal to the Consideration; and each such Option, DSU, PSU and RSU shall immediately be cancelled.

[8] The Plan of Arrangement sets out the steps of the Arrangement, including the acquisition of the Shares and the availability to Shareholders of dissent rights in accordance with s. 185 of the OBCA, as modified by the Interim Order and the Plan of Arrangement. Registered Shareholders who opposed the Arrangement Resolution were given the ability to exercise Dissent Rights, and no such rights were exercised.

[9] The Arrangement Agreement is the result of extensive arm’s-length negotiations between representatives of Q4, under the direction of the Special Committee, Sumeru, and the Rolling Shareholders, each with the benefit of financial and legal advice.

[10] The Special Committee and the Board consulted with management as well as legal and financial advisors to arrive at the unanimous recommendation of each of the Special Committee and the Board to recommend the Arrangement Resolution to Shareholders.

[11] Among the factors considered (all of which are set out in the Circular) are: certainty of value and liquidity; the Arrangement being the highest proposal; a review of strategic alternatives; the formal valuation (contained within the Stifel Formal Valuation and Fairness Opinion); fairness opinions from each of Stifel Canada and Raymond James; the go-shop provision; support for the Arrangement; transaction certainty; Arrangement Agreement terms; the ability to respond to any Superior Proposal; lack of financing conditions or regulatory approval conditions; the treatment of employees; the accelerated vesting of Securities; the Termination Fee and Reverse Termination Fee; the protections afforded by minority vote and Court approval requirements, and a variety of other risks and potentially negative effects of the proposed Arrangement. All of these factors are fully set out in the Application materials and in the Circular in particular.

[12] Prior to the meeting authorized by the Interim Order, Q4 distributed the Circular and all other Meeting Materials. I observe that the materials were served on all registered Shareholders as at the Record Date, all Non-registered Shareholders, the directors, the auditors and the Ontario Securities Commission.

[13] The OBCA Director was also served with the materials and confirmed by non-appearance letter dated January 29, 2024 the intention of the Director not to appear, and indeed the Director did not appear today.

[14] I recognize that there was an error with respect to the reported holdings of certain of the directors discovered by Q4 subsequent to the mailing of the Circular, as a result of which the holdings of those directors were incorrectly reported by de minimus amounts which marginally impacted the denominator for the majority approval voting threshold.

[15] However, the error was discovered and corrected with Computershare, the transfer agent for Q4 and the scrutineers for the meeting, prior to the vote, such that the voting results corresponded to the correct holdings and were accurately calculated and reported. I am satisfied that as determined by Q4, the error could not reasonably be expected to have affected the decision of any Shareholder to vote for or against the Arrangement Resolution.

[16] The meeting was held on January 24, 2024 in accordance with the Interim Order and the bylaws of Q4. Quorum was present. 95.77% of the outstanding Q4 Shares were represented virtually or by proxy.

[17] Approval required two-thirds of the votes cast by the Shareholders represented in person and/or by proxy, two-thirds of the votes by Shareholders voting as a single class, and a simple majority of votes cast by shareholders excluding persons described in subparagraphs (a) through (d) of section 8.1(2) of Multilateral Instrument 61-101 (“Minority Shareholders”).

[18] The Shareholders voted in favour of the Arrangement: 38,591,773 votes were cast by all Shareholders voting together as a single class, representing 95.77% of the issued and outstanding Shares. 81.48% of the votes cast on the Arrangement Resolution by Shareholders voting together as a single class were in favour of the Arrangement Resolution; and 70.44% of the votes cast, excluding the votes cast by Shareholders required to be excluded pursuant to the Interim Order and applicable securities law, were in favour of the Arrangement Resolution.

[19] The evidence today discloses that no Shareholders exercised any dissent rights, notwithstanding that the right to dissent, as contemplated in s. 185 of the OBCA as modified by the Plan and the Interim Order, were provided. Moreover, no Shareholder, or for that matter any affected party, has filed a Notice of Appearance or any responding materials.

[20] On December 28, 2023, one Shareholder of Q4, FINSIGHT Group Inc., delivered correspondence to the Board of Q4 expressing alleged concerns with respect to the Arrangement. On the same date, that Shareholder, a competitor of Q4, issued a press release highlighting its concerns and, essentially, expressing its disagreement with the transaction value, although not proposing any alternatives.

[21] It was the conclusion of Q4, including its Special Committee, that the issues raised by this Shareholder did not materially change the landscape with respect to the proposed Arrangement and that the concerns raised in the correspondence were already adequately addressed by the disclosure contained in the Circular, with the result that Q4 proceeded to release the meeting materials on January 3, 2024.

[22] Thereafter, this particular Shareholder issued additional press releases on January 12 and January 17, 2024, encouraging Shareholders to vote against the Arrangement. In response, Q4 issued several press releases (January 10, 12, 15 and 19, 2024) in each case providing disclosure to Shareholders of the benefits of the Arrangement and reiterating the recommendations of the Special Committee and the Board.

[23] Q4 submits, and I agree, that as a result of this exchange, Shareholders were apprised of the issues raised by FINSIGHT well in advance of the vote, and had ample time to consider the issues and how they wished to vote their Shares, before exercising their voting rights.

[24] While not determinative of any issue, I observe that the record includes evidence to the effect that on January 24, 2024, following the announcement of the voting results, the Globe & Mail newspaper published an article in which the CEO of FINSIGHT was quoted as congratulating Sumeru on its acquisition, and wishing the Purchaser, the employees of Q4 and the Rolling Shareholders “good luck in their next chapter”. In any event, FINSIGHT in particular has not exercised any dissent rights, or even communicated to the Applicant informally any intent to oppose approval of the Arrangement, has not filed any materials and has not appeared in Court today.

Analysis and Consideration of Factors

[25] Section 182 of the OBCA gives the court the power to make any order it thinks appropriate in connection with an application for advice and directions in connection with an arrangement, including an order approving the arrangement pursuant to section 182(5)(f).

[26] In making such an order, the court must be satisfied that: a. the statutory procedures and any court-ordered requirements have been met; b. the application has been put forward in good faith; and c. the arrangement is fair and reasonable. See: Re Magna International Inc., 2010 ONSC 4123 at paras 99-105, aff’d 2010 ONSC 4685 at paras. 31-41; BCE Inc. v. 1976 Debentureholders, 2008 SCC 69 at para. 137; and Steel Canada Inc. (Re) 2014 ONSC 4285 at para. 85.

[27] I will address each of these requirements in turn although in so doing I note that all of these requirements were considered and found to have been satisfied when the Interim Order was granted and there has been no material change since that time that would lead to a different conclusion for the purposes of the final approval order sought today.

[28] Q4 is a “corporation” as defined in the OBCA.

[29] The Arrangement is an “Arrangement” within the meaning of s. 182 of the OBCA (i.e., subsection (1)(f): an exchange of securities of a corporation for property, money or other securities of the corporation or property, money or other securities of another body corporate).

[30] The statutory procedures and any court-ordered requirements have been met. In particular here, the terms of the Interim Order have been complied with. Copies of the Meeting Materials were provided in accordance with the terms of the Interim Order.

[31] The Meeting itself was called, held and conducted in accordance with the requirements of the Interim Order. As noted above, the Arrangement was approved by the requisite majorities.

[32] The Arrangement is put forward in good faith. There is no evidence otherwise.

[33] In my view, the Arrangement is fair and reasonable. There is clearly a valid business purpose.

[34] The factors identified by the Supreme Court of Canada that may be relevant to the test for the assessment of the fairness and reasonableness of a proposed arrangement include: a. the vote by security holders on the arrangement; b. the impact on the rights of those security holders; c. the approval of the arrangement by the corporation’s directors and the presence of a fairness opinion; and d. the access of shareholders to dissent and appraisal remedies. (see BCE Inc., (Re), at paras. 138-143 and 150-152).

[35] Each of these factors is satisfied here. The Arrangement was approved by the requisite majorities of shareholders present in person or by proxy at the Meeting.

[36] As observed by Blair, J. in Re St. Lawrence & Hudson Railway Co., 1998 O.J. 3934 at para. 27, what better litmus test then, for assessing whether [a shareholder] might reasonably approve of the plan, than the votes of those whose interests are actually at stake. Such votes are not conclusive but are an important indicator of fairness, as are the lack of dissent or objection.

[37] The Supreme Court of Canada has recognized that although no single factor is conclusive, the outcome of the shareholder vote is an "important indicator of whether a plan is fair reasonable", which can be given "considerable weight", particularly if the margin is large: BCE Inc., (Re), at paras. 141 and 150. The Shareholder vote in this case is a strong indication of the fairness and reasonableness of the Arrangement.

[38] The approval of the Directors, both as a full Board and the Special Committee, was clear. That approval was supported by financial and legal advice provided to both, as well as supported by the fairness opinions which were to the effect that the Arrangement is in the best interests of Q4 and is fair to Q4 shareholders. The approval of the each of the Special Committee and the Board was unanimous.

[39] In the aggregate, all of these factors suggest that the rights of interested parties have been fairly and reasonably balanced. Additional comfort can be drawn from the fact that the form of order sought here is consistent with the model order of this Court.

[40] Having considered all of the foregoing factors, the court is satisfied that the Arrangement is fair and reasonable and is in the best interests of Q4 and its shareholders.

Approval Granted

[41] The Final Approval Order is granted, approving the Arrangement pursuant to section 182(5) of the OBCA.

[42] Order to go as signed by me today, which is effective from today’s date and is enforceable without the necessity of issuing and entering.

[43] There is urgency to having the Applicant receive a certified copy of the Order as soon as possible today. Commercial List Office staff are requested to assist the applicant in this regard.

Osborne J.