Endorsement

Court File No.: CV-25-00737428-00CL
Date: 2025-03-29
Ontario Superior Court of Justice – Commercial List

In the Matter of an Application under section 192 of the Canada Business Corporations Act, RSC 1985, c C-44, as amended, and Rules 14.05(2) and 14.05(3) of the Rules of Civil Procedure, RRO 1990, Reg 194

And in the Matter of a Proposed Arrangement involving Converge Technology Solutions Corp., its shareholders, optionholders, restricted share unitholders, deferred share unitholders, and 16728421 Canada Inc.

Re: Converge Technology Solutions Corp., Applicant

Before: Peter J. Osborne

Counsel:
Julie Rosenthal, Peter Kolla, Larissa Fulop, Mrk Leonard, and Arash Rouhi, for the Responding Party/Applicant
Aaron Kreaden and Maryam Shahid, for the Moving Party, 16728421 Canada Inc.

Heard: 2025-03-28

Introduction

[1] This matter came before me yesterday, Friday, March 28, 2025, on an urgent basis.

[2] The background for and context of yesterday’s hearing are set out in the Endorsements of Justice Kimmel dated March 25 and March 26, 2025, and in the Application materials filed. Defined terms in this Endorsement have the meaning given to them in the Application materials unless otherwise stated.

[3] 16728421 Canada Inc. (“HIG” or the “Purchaser”[^1]) is a party to an arrangement agreement (the “Agreement”) with Converge Technology Solutions Corp. (“Converge”). Converge brought this Application for approval of a plan of arrangement to be implemented by the Agreement.

[4] Cavanagh, J. granted an interim order on March 4, 2025 that, among other things, established mechanics for a shareholder vote and scheduled a meeting of shareholders to take place on April 10, 2025 in respect of the proposed arrangement and the Agreement.

[5] Events subsequent to the granting of that interim order have resulted in the motions before me.

Jurisdiction and Notice

[6] I asked counsel at the outset of this hearing whether the matters before the Court were matters properly brought before the Ontario Securities Commission, and whether, even if they were properly in this Court, the OSC should be on notice of this hearing. Counsel advised collectively that they were of the view that this Court had jurisdiction to deal with the matters before it, in the circumstances of this case.

[7] The OSC has not been put on notice, even on a confidential basis. The Purchaser took the position that it was not the reporting issuer and had no obligation to put the OSC on notice. Converge took the position that it was simply responding to an Application brought by the Purchaser, not a proceeding that it had instituted. In any event, the OSC was not on notice.

Background and Chronology

[8] Converge is a CBCA company and a reporting issuer in Ontario, the shares of which trade on the TSX. Converge is a global IT solutions and managed solutions provider. In late 2022, its Board formed a Special Committee to review strategic alternatives to unlock shareholder value. Ultimately, Converge commenced a formal sales process, and on April 14, 2023, received three non-binding indications of interest, one of which was from an affiliate of HIG.

[9] Converge and HIG entered into a Confidentiality Agreement on July 23, 2024. On December 10, 2024, HIG and two other parties submitted non-binding indications of interest for the acquisition of all of the outstanding shares of Converge. HIG was the highest bidder.

[10] On December 30, 2024, the Board of Converge granted exclusivity to HIG for 30 days to continue due diligence. On January 3, 2025, Converge and HIG entered into a Clean Team Agreement which permitted for the sharing of competitively sensitive information by Converge to HIG, but restricted access to that material for all employees of HIG-owned businesses which were deemed competitive to Converge.

[11] Converge and HIG continued negotiations and ultimately entered into the Agreement on February 6, 2025. Converge issued a press release disclosing the fact that it had entered into the Agreement. The next day, on February 7, 2025. On March 4, 2025, it obtained the interim order referred to above scheduling the shareholders meeting to vote on the Agreement for April 10, 2025.

[12] A dispute has arisen between the parties arising out of the fact that subsequent to the Agreement, Converge received an unsolicited proposal from a third party.

[13] I pause to observe that the urgency of this matter flows from the relevant timing. No Acquisition Proposal as defined in the Agreement has been received by Converge, although it expects to receive one in the evening of Monday, March 31, 2025 (i.e., the next business day from today).

[14] Counsel advised me that the evening of Monday, March 31 is the deadline by which the third party which has made the expression of interest must submit a formal Acquisition Proposal in order that the relevant notice provisions relating to the pending meeting of shareholders can be complied with.

[15] The dispute arose on March 7, 2025, when Converge disclosed to HIG, in accordance with the Agreement, the fact that it had received the unsolicited proposal.

The Parties' Positions

[16] HIG takes the position that the unsolicited proposal cannot in law ever constitute a Superior Proposal for a number of reasons, including these:

a. the efforts of Converge to evaluate the unsolicited proposal were “cursory and wholly inadequate” and failed to address “obvious significant concerns” such that the determination by the Board of Converge that the unsolicited proposal “constitutes, or could reasonably be expected to constitute or lead to, a Superior Proposal” was fatally flawed; and

b. it was brought about as a result of a wilful breach of the Agreement by Converge. In particular, HIG submits that Article 5 of the Agreement was breached by Converge when it entered into a Non-disclosure and Clean Team Agreement with the third party which submitted the unsolicited proposal.

[17] Article 5 of the Agreement provides that Converge is not permitted to enter into any Contract other than an Acceptable Confidentiality Agreement (in accordance with Article 5.3) in respect of, or that could reasonably be expected to lead to, an Acquisition Proposal (i.e., a proposal for a transaction from another party).

[18] The Agreement provides that if Converge receives an unsolicited proposal, it can respond only if the proposal is a “bona fide Acquisition Proposal” and then it may engage in discussions and enter into an Acceptable Confidentiality Agreement.

[19] The Agreement goes on to provide that if the Company receives an Acquisition Proposal that the Board determines is a Superior Proposal, the Purchaser has an opportunity to match the Superior Proposal according to the terms set out in the Agreement.

[20] HIG submits that even if the Acquisition Proposal was “bona fide”, the only agreement Converge was permitted to enter into with the third party was an Acceptable Confidentiality Agreement. Converge did that on March 10, 2025.

[21] Then on March 13, Converge advised HIG that it also intended to enter into a proposed clean team agreement to provide to the third party commercially sensitive information. HIG immediately objected and took the position that doing so would be a breach of Article 5 of the Agreement. Converge then responded by amending the confidentiality agreement it had entered into on March 10 to include the relevant “clean team” terms and took the position that it was simply providing to the third party the same or similar information it had provided to HIG. It then entered into an Amended and Restated Non-Disclosure Agreement with the third party dated March 16, 2025.

Relief Sought

[22] HIG then brought a motion within this Application for urgent relief. While the precise scope of relief sought has evolved over the last few days, HIG seeks in its Amended Notice of Motion the following relief:

a. a declaration that Converge has breached Article 5 of the Agreement by entering into the Amended and Restated Non-Disclosure Agreement;

b. a declaration that doing so constituted a “wilful breach” of the Agreement;

c. a declaration that Converge breached Article 5 of the Agreement in determining that the Acquisition Proposal constituted, or could reasonably be expected to constitute or lead to, a “Superior Proposal”;

d. a declaration that the breaches by Converge of Article 5 of the Agreement precluded it from accepting, approving or entering into a definitive agreement with respect to a Superior Proposal from the third party;

e. a permanent injunction restraining Converge from accepting, approving or entering into a definitive agreement with the third party and preventing Converge from terminating the Agreement with HIG;

f. if necessary, an order requiring Converge to specifically perform the Agreement with HIG without regard to any offer from the third party;

g. in the interim, and while this motion is pending, an interim and interlocutory order providing that all court proceedings related to the motion take place in camera pursuant to section 135(2) of the Courts of Justice Act (the “CJA”) until the earlier of:

i. the Board of Converge has determined that it has received a Superior Proposal and this Court determines that it is permitted to proceed with delivering a Superior Proposal Notice to the Purchaser in accordance with the Agreement; and

ii. the results of the shareholder vote to occur at the meeting already scheduled for April 10, 2025;

h. an order that, during the interim sealing period in effect until after the shareholder vote, all motion materials and decisions in respect of the motion shall be confidential and not form part of the public record pursuant to section 137(2) of the CJA;

i. a declaration that during the interim sealing period in effect until after the shareholder vote, Converge is not required by law or stock exchange rules to disclose the existence of this litigation;

j. a declaration that during the interim sealing period in effect until after the shareholder vote, any withholding by HIG of consent to public disclosure of the existence of this litigation, the receipt of a Superior Proposal by Converge or any other matter “that could reasonably impact the shareholder vote” at the pending meeting is reasonable, pursuant to the Agreement;

k. an interim and interlocutory injunction in effect during the interim sealing period until after the shareholder vote restraining Converge from issuing any public disclosure;

l. a declaration that none of the public disclosure is of such a nature to require disclosure without obtaining the prior written consent of HIG; and

m. a declaration that any public disclosure made without the consent of HIG constitutes a “wilful breach” of the Agreement.

Case Management and Interim Orders

[23] On March 25, 2025, Kimmel, J. conducted a case conference to address scheduling and related issues and directed by Endorsement that:

a. the motion would be heard on the merits on the next available Commercial List date being next Wednesday, April 2, 2025;

b. the motion for interim relief, including but not limited to the publication ban and sealing order, would be heard on March 28, 2025 but the request by HIG that it not be required to give notice to the media of the request was denied, and HIG was directed to give the appropriate notice to the media;

c. until the issue of whether the publication ban and sealing order should be granted had been determined, the motion materials were ordered to be kept confidential and sealed in accordance with the framework established by the Supreme Court of Canada set out in Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41 (“Sierra Club”) and refined in Sherman Estate v. Donovan, 2021 SCC 25 (“Sherman Estate”);

d. the interim disclosure issues were also to be returnable on March 28, 2025 but that in the interim, Converge should not make any public disclosure about the motion pending further directions from the Court at or after the hearing of March 28;

e. motion materials should be filed in accordance with the schedule established by the Court; and

f. all issues relating to the relief sought on the motion would be subject to further direction from the Court.

[24] The parties returned to the Court the very next day for further advice and directions. At a continued case conference before Kimmel J., Converge took the position that the notice of motion delivered by HIG as required did not contain a request for an interlocutory injunction that corresponded with the interim interim injunction granted the day before (i.e., preventing public disclosure of the litigation or the unsolicited proposal) but rather only a permanent injunction, and as a result the interim interim injunction should be dissolved.

[25] By Endorsement dated March 26, 2025, Kimmel, J. further directed, after hearing submissions from the parties, that:

a. HIG would amend its notice of motion to include a request for interlocutory relief that corresponded with the interim interim order made the previous day;

b. since that would require additional evidence and submissions, the previously imposed schedule was amended to contemplate urgent cross examinations and other matters; and

c. all of the issues would be before the Court on March 28 (yesterday).

[26] The matter then came on before me yesterday. The record put before me for this urgent hearing already comprises materials of over 2000 pages, multiple fact witness affidavits, proposed expert opinions and other materials.

[27] Given the circumstances, and the chronology set out above, it is necessary for me to deliver my decision and these reasons on an urgent basis. They are therefore more summary in nature than would be if time permitted otherwise.

Media Notice and Hearing

[28] Counsel advised at the outset of the hearing yesterday that notice had been properly given to the media as directed by Kimmel, J. in respect of the proposed publication ban. No media appeared, with the result that I did not need to address those issues at the hearing.

[29] As set out above, and pursuant to the orders of Kimmel, J., the Application on the merits (for injunctive and other relief) will be heard Wednesday, April 2, 2025. The issues before me today relate to what should happen in the interim, and in particular whether the sealing order and publication bans should continue pending that hearing on the merits.

Interim Relief and Disclosure

[30] HIG seeks the interim relief in accordance with its Amended Notice of Motion set out above, amended slightly as reflected in the draft order that it requests the Court issue today. It submits that there should be no public disclosure of either the fact of this litigation, or the third party proposal received by Converge, until the earlier of:

a. the Board of Converge determines that it has received a Superior Proposal and this Court has determined that Converge is permitted to proceed with delivering a Superior Proposal Notice in accordance with the Agreement; and

b. the results of the shareholder vote at the meeting scheduled for April 10, 2025.

[31] In the interim, HIG submits that the sealing order and publication ban should remain in effect. HIG takes the position that disclosure of the unsolicited proposal and/or even the fact of this litigation will affect the market in a way that is highly prejudicial to the Purchaser, with the result that there should be no disclosure of any facts pending a final determination of whether Converge has breached the Agreement and whether, as a result, the Purchaser is entitled to terminate the Agreement and/or obtain injunctive or other relief.

[32] Converge takes the position that whether or not it had an obligation to issue a press release in respect of the unsolicited proposal, it now has the obligation to issue a press release advising of the fact of this litigation, the fact that the Purchaser is seeking injunctive relief and that HIG is seeking, among other things, a declaration that it is entitled to terminate the Agreement.

[33] Counsel for Converge also advises the Court that while this fact is not in the record, the third party who has delivered the expression of interest is a public company in the United Kingdom, which has advised Converge that, in its view, it has an obligation to issue a press release on Monday, March 31 if it delivers an Acquisition Proposal, regardless of whether any relief has been ordered by this Court. The Purchaser does not agree that the third party has any obligation to disclose. I am not in any position to decide that issue and do not do so.

Directions and Orders

[34] Given the extreme urgency of this matter in the circumstances, and the fact that the parties need direction before Monday, I make the following directions and orders:

a. the orders and directions of Kimmel, J. including for greater certainty the publication ban and sealing orders, shall be continued on an interim basis until (i) Converge receives an Acquisition Proposal as contemplated in the Agreement; and (ii) as contemplated in Section 5.4 of the Agreement, the Board determines, in good faith, that the Acquisition Proposal received constitutes a Superior Proposal (based upon, among other things, the recommendation of the Special Committee); or (iii) further order of this Court.

In practical terms, this means that since Converge expects an Acquisition Proposal in the evening of Monday, March 31, and the Board of Converge must consider it and determine whether it constitutes a Superior Proposal, that the interim orders and directions shall remain in effect until at least Tuesday, April 1, 2025;

b. Converge shall immediately provide notice of this Application, including but not limited to the Endorsements of Justice Kimmel and this Endorsement, to the Ontario Securities Commission on a confidential basis. The OSC shall be advised of the return of the Application on Wednesday, April 2, 2025. If necessary, in the view of the OSC, it may seek advice and directions from this Court on an urgent basis with respect to this Application and the issues raised therein;

c. if and when (i) Converge receives an Acquisition Proposal as contemplated in the Agreement; and (ii) as contemplated in Section 5.4 of the Agreement, the Board determines, in good faith, that the Acquisition Proposal received constitutes a Superior Proposal (based upon, among other things, the recommendation of the Special Committee), which will be on or after Tuesday, April 1, 2025;

i. the meeting of shareholders currently scheduled for April 10, 2025, and all deadlines for notice and voting with respect thereto, are suspended and adjourned pending a final determination by this Court of this Application and/or further direction of the Court and/or any directions of the OSC with respect to procedural issues such as the form and content of notice(s), the timing and conduct of the shareholders meeting and/or other issues;

ii. Converge shall disclose, subject to any direction of the OSC with respect to the content of any press release, that:

1. Converge has received an Acquisition Proposal that the Board has determined constitutes a Superior Proposal within the meaning of the Agreement;

2. the Purchaser (HIG) has advised Converge that its position is that the Acquisition Proposal is not a valid Acquisition Proposal and is not a Superior Proposal capable of acceptance, and that the Purchaser has asserted that Converge breached the Agreement with respect to the Acquisition Proposal and has brought a motion in this Application seeking various relief, including an order declaring the Acquisition Proposal to be incapable of acceptance by Converge, prohibiting Converge from taking any steps in furtherance of the Acquisition Proposal, and declaring that the Purchaser has the right to terminate the Agreement, among other things;

3. no determination on the merits has been made by the Court with respect to the Acquisition Proposal or the allegations of the Purchaser;

4. the hearing of the Application by the Purchaser for injunctive and other relief is returnable in this Court on Wednesday, April 2, 2025;

5. the meeting of shareholders, and all deadlines for voting and notice with respect thereto, are suspended as noted above, pending further order of the Court; and

6. Converge shall further disclose, again subject to any direction of the OSC, to advise shareholders subject to further order of the Court:

   a. when the motion of the Purchaser is determined;

   b. the result of the motion and any relief granted; and

   c. next steps and the timing thereof related to the rescheduled meeting of shareholders, and voting and notice rights related thereto.

iii. Converge shall, subject to any direction of the OSC, in fact issue the further disclosure as contemplated immediately above;

iv. the interim publication ban and interim sealing order shall be of no further force or effect;

d. Converge shall immediately provide a copy of this Endorsement to the third party which has made the unsolicited proposal and which is expected to submit a formal Acquisition Proposal by Monday evening, and advise of the expectation of this Court that no party will take any steps inconsistent with the orders and directions I have made as set out above; and

e. all of the above is subject to further order of this Court.

The Open Court Principle and the Sherman Estate Test

[35] The Supreme Court of Canada recast the test from Sierra Club in Sherman Estate, at para. 38 as follows:

The test for discretionary limits on presumptive court openness has been expressed as a two-step inquiry involving the necessity and proportionality of the proposed order (Sierra Club, at para. 53). Upon examination, however, this test rests upon three core principles that a person seeking such a limit must show. Recasting the test around these three prerequisites, without altering its essence, helps to clarify the burden on an applicant seeking an exception to the open court principle. In order to succeed, the person asking the court to exercise discretion in a way that limits the open court presumption must establish that:

a) court openness poses a serious risk to an important public interest;

b) the order sought is necessary to prevent this serious risk to the identified interest because reasonably alternative measures will not prevent this risk; and

c) as a matter of proportionality, the benefits of the order outweigh its negative effects.

Only where all of these prerequisites have been met can a discretionary limit on openness—for example, a sealing order, a publication ban, an order excluding the public from the hearing, or a redaction order—properly be ordered. This test applies to all discretionary limits on court openness, subject only to valid legislative enactments: Toronto Star Newspapers Ltd. v. Ontario, 2005 SCC 41, [2005] 2 S.C.R. 188 at paras. 7 and 22.

[36] This Court (and other courts) have held in many cases that an important public interest includes the protection of commercially sensitive, confidential, material non-public information. The first factor is established.

[37] With respect to the second and third factors—the necessity of the order sought, the lack of reasonably alternative measures to prevent the risk, and the relative proportionality of the benefits as against the negative effects—the above orders and directions strike the appropriate balance.

Analysis and Conclusion

[38] In my view, it is appropriate that the current terms ordered by the Court remain in place until there are more crystallized facts, and fewer hypothetical scenarios: in other words, until the parties and the Court know whether a Superior Proposal as deemed to be such by the Board of Converge has been received or not. It is preferable that to the greatest extent possible, decisions of the Court be based on facts and not future hypothetical scenarios.

[39] If no Acquisition Proposal is received by the evening of Monday, March 31 (the deadline effectively imposed by the notice requirements for the shareholder meeting already in place), certain issues may become moot.

[40] If an Acquisition Proposal is received by that time, and if the Board determines that it constitutes a Superior Proposal (realistically, on or after Tuesday, April 1), then in my view disclosure should be made such that shareholders are aware of:

a. the Acquisition Proposal having been received;

b. the fact that the Board has determined that it constitutes a Superior Proposal which would ordinarily trigger, among other things, the Right to Match for the Purchaser pursuant to section 5.4 of the Agreement; and

c. the fact that the Purchaser disputes the validity of the Acquisition Proposal and has brought a proceeding in this Court with respect thereto, which proceeding remains pending;

all so that shareholders are fully informed before they have to cast a vote on the Agreement, the Superior Proposal or such other matters as are properly before the shareholders at that time.

[41] As stated above, the motion of HIG for an injunction and declaratory relief will be determined by the Court on the merits following the hearing already scheduled for next Wednesday, April 2.

[42] I therefore considered whether, given that imminent hearing, the publication ban and sealing order currently in place should be continued for what will be, in effect, only an additional day or two, from Tuesday, April 1 until the hearing of the injunction motion on Wednesday, April 2. I am not prepared today to continue the interim relief and order, as requested by HIG, that there be no disclosure until after the shareholder meeting. In my view, and while that would not be appropriate or fair in the circumstances, the above directions strike the appropriate balance.

[43] In the ordinary course, if and when a Superior Proposal were received, it would be disclosed to shareholders. That is what would occur if this motion were not already pending. In other words, if a third party submitted an Acquisition Proposal on Monday, March 31 as is anticipated, and the Board of Converge determined the Acquisition Proposal to be a Superior Proposal, the Company would make disclosure. If HIG immediately took the position that the Acquisition Proposal was incapable in law of being a Superior Proposal (as it has done here), and brought an immediate court challenge, that also would be disclosed to shareholders, and the shareholders meeting would in all likelihood be postponed until the motion was determined one way or the other, so the shareholders knew what they were voting on.

[44] For all of these reasons, I have made the directions and orders set out above. As stated, all are subject to further direction of the Court, including any directions given at or following the hearing of the injunction motion next Wednesday, April 2.

Peter J. Osborne

[^1]: The Purchaser is an affiliate of HIG Capital formed solely for the purpose of engaging in the transaction contemplated by the Agreement. I refer to the Purchaser and HIG interchangeably unless circumstances require a differentiation between the two.