4 - Distribution Requirements

CSA Notice and Request for Comment Proposed Amendments to National Instrument 44-102 Shelf Distributions and Change to Companion Policy 44-102CP Shelf Distributions relating to At-the-Market Distributions May 9, 2019 Introduction The Canadian Securities Administrators (CSA or we) are publishing, for a 90-day comment period, proposed amendments to National Instrument 44-102 Shelf Distributions (NI 44-102) and a proposed change to Companion Policy 44-102CP Shelf Distributions (44-102CP). We are proposing amendments to Part 9 of NI 44-102 (the Proposed Amendments) to replace relief that has historically been required by issuers conducting at-the-market (ATM) distributions of equity securities. This notice contains the following annexes:  Annex A – Proposed Amendments to NI 44-102  Annex B – Proposed Change to Companion Policy 44-102CP  Annex C – Local Matters This notice will also be available on the following website of CSA jurisdictions: www.bcsc.bc.ca www.albertasecurities.com www.fcaa.gov.sk.ca www.mbsecurities.ca www.osc.gov.on.ca www.lautorite.qc.ca www.fcnb.ca nssc.novascotia.ca Substance and Purpose Part 9 of NI 44-102 contemplates the distribution of equity securities by way of an ATM distribution using the shelf procedures. Part 9 of NI 44-102 does not currently provide an exemption for the prospectus delivery requirement. Because of the nature of ATM distributions, issuers are required to request exemptive relief (ATM Orders) from certain prospectus-related requirements if they wish to conduct ATM distributions in Canada. The Proposed Amendments

-2- are aimed at reducing the regulatory burden for issuers who wish to conduct ATM distributions, without compromising investor protection. The Proposed Amendments adopt the terms found in ATM Orders, so that issuers would not have to apply for exemptive relief to conduct ATM distributions. Background The Proposed Amendments are informed by comment letters received respecting ATM distributions in response to CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers as summarized in CSA Staff Notice 51-353 Update on CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers. NI 44-102 was adopted in 2000. The requirements of Part 9, together with the conditions that appear in ATM Orders (collectively, the ATM Requirements) form the regulatory framework for ATM distributions in Canada. The ATM Requirements were derived in part from rules previously adopted by the U.S. Securities and Exchange Commission (SEC), where ATM distributions have been conducted since the early 1980s. ATM distributions in Canada are not as common as they are in the U.S. market. Industry participants have observed that the lack of ATM distributions in Canada may be due to restrictions and obligations imposed by the ATM Requirements. In particular, we understand that certain requirements originally applicable to U.S. ATM distributions, and upon which some of the ATM Requirements were based, have since been relaxed or abandoned by the SEC. Summary of the Proposed Amendments The Proposed Amendments include:  An exemption for the underwriter from the requirement to deliver a prospectus to purchasers in a distribution of securities;  An exemption for the issuer and underwriter from certain of the prospectus form requirements, including a relaxation of the form of statement of rights. The Proposed Amendments contain several requirements for issuers and underwriters conducting ATM distributions taken from the ATM Orders. Additionally, the Proposed Amendments contain a requirement that an issuer must disclose on the cover page of its base shelf prospectus that it may qualify an ATM distribution. The Proposed Amendments contemplate two different approaches (labelled as Option 1 and Option 2 in Annex A) to conducting ATM distributions. Once the CSA has reviewed the comments received with respect to Options 1 and 2, the CSA will select one of these two options to include in the amendments to Part 9 of NI 44-102.

-3- Option 1: Limit ATMs to circumstances in which liquidity would be expected The first approach allows an issuer to distribute securities under an ATM prospectus, as that term is defined in the Proposed Amendments, only if (i) the aggregate number of securities of the class distributed on one or more ATM exchanges under the ATM prospectus on any trading day does not exceed 25% of the trading volume of that class on all marketplaces on that day (the 25% Daily Cap) or (ii) the securities are “highly liquid securities”, as defined in the Proposed Amendments. The 25% Daily Cap is a requirement that has been typically imposed in the ATM Orders. Its purpose was to reduce the risk that an ATM distribution would have a material impact on the price of the securities being distributed. This risk is also reduced where an ATM distribution only involves the issuance of “highly liquid securities.” As with certain of the ATM Orders under the Proposed Amendments, issuers distributing highly liquid securities would not be required to file a monthly report disclosing certain information about the ATM distribution, provided that the same disclosure is made on a quarterly basis. Under Option 1, issuers that do not have highly liquid securities will be subject to the 25% Daily Cap. The benefits of the exemptions in the Proposed Amendments to such issuers may be limited if the daily trading volume of their securities is low. We acknowledge that such issuers are more likely to be small to mid-size issuers. Option 2: No liquidity requirements The second approach is to impose neither the 25% Daily Cap nor the “highly liquid securities” requirement. Arguably, issuers are already incentivized not to conduct ATM distributions that will have a material impact on the market price of their securities. Additionally, an investment dealer must be involved to facilitate the ATM distribution onto the marketplace. The investment dealer, who is expected to have the experience and expertise in managing orders to limit negative impact on market integrity, is also prohibited from engaging in conduct that may disrupt a fair and orderly market. Removal of 10% Aggregate Cap Currently, section 9.1 of NI 44-102 provides that the market value of equity securities distributed under a single ATM distribution prospectus supplement may not exceed 10% of the aggregate market value of the issuer’s outstanding equity securities of the same class (the 10% Aggregate Cap). We understand that the 10% Aggregate Cap has been an impediment to the establishment of ATM distributions in Canada and, accordingly, the Proposed Amendments remove it. Its removal does not adversely affect investor protection because the dilution concerns underlying the 10% Aggregate Cap are addressed by other factors, including existing prospectus and continuous disclosure requirements and the requirement to engage an underwriter in the ATM distribution. Removal of Instalment Receipts Part 9 of NI 44-102 currently permits issuers to use ATM Distributions to issue instalment receipts convertible into equity securities. However, there does not appear to be a market demand for ATM distributions of instalment receipts in Canada. As a result, the Proposed Amendments do not contemplate instalment receipts.

-4- The proposed changes to 44-102CP correspond to the Proposed Amendments. Request for Comments We welcome comments on the Proposed Amendments. In particular, we would like to receive feedback on the following questions: General Questions 1. Is a “highly liquid securities” test or the 25% Daily Cap necessary to reduce the impact on the market price of an issuer’s securities? Please explain. 2. The Proposed Amendments only permit distributions of equity securities. Should the issuance of debt securities under an ATM distribution be permitted? If yes, please explain the market need and suggest appropriate exemptions and conditions. Non-redeemable investment funds (NRIFs) and exchange-traded mutual funds (ETFs) The Proposed Amendments would permit ATM distributions by NRIFs or by ETFs that are not in continuous distribution (ETFNCDs). The Proposed Amendments do not remove the ETF Facts delivery requirement that applies to dealers transacting in securities of ETFs in continuous distribution. We have not otherwise added any conditions particular to NRIFs or ETFNCDs. NRIFs and ETFNCDs are already or will be subject to some operational requirements under National Instrument 81-102 Investment Funds that they must comply with on an on-going basis such as the requirements to not issue new securities at a price less than the fund’s net asset value per security or to not invest in illiquid assets making more than 20% of their net asset value. 3. Do you think that permitting NRIFs and ETFNCDs to conduct ATM distributions is warranted, based on differences in their distribution model and investor base compared to ETFs in continuous distribution? 4. If the CSA permits NRIFs and ETFNCDs to use ATM distributions, what additional conditions, if any, should apply? 5. Net asset value (NAV) is calculated daily, if using specified derivatives or selling short, or, otherwise, weekly. How frequently should the NAV be calculated with respect to ATM distributions? 6. Under new restrictions that came into force on January 3, 2019, NRIFs are generally limited to having 25% of assets in illiquid assets. However, illiquid assets are difficult to value. We have concerns that the NAV in some cases may be “stale” and may not reflect the economic value of the underlying assets. Should we restrict NRIFs with significant illiquid assets from conducting ATM distributions? What should the threshold be? Please submit your comments in writing on or before August 7, 2019.

-5- Address your submission to all of the CSA as follows: British Columbia Securities Commission Alberta Securities Commission Financial and Consumer Affairs Authority of Saskatchewan Manitoba Securities Commission Ontario Securities Commission Autorité des marchés financiers Financial and Consumer Services Commission (New Brunswick) Department of Justice and Public Safety, Prince Edward Island Nova Scotia Securities Commission Superintendent of Securities, Newfoundland and Labrador Superintendent of Securities, Northwest Territories Superintendent of Securities, Yukon Superintendent of Securities, Nunavut Deliver your comments only to the addresses listed below. Your comments will be distributed to the other participating CSA jurisdictions. The Secretary Ontario Securities Commission 20 Queen Street West 22nd Floor Toronto, Ontario M5H 3S8 Fax: 416-593-2318 comments@osc.gov.on.ca Me Anne-Marie Beaudoin Corporate Secretary Autorité des marchés financiers 800, rue du Square-Victoria, 4e étage C.P. 246, Place Victoria Montréal (Québec) H4Z 1G3 Fax : 514-864-6381 consultation-en-cours@lautorite.qc.ca Comments Received will be Publicly Available We cannot keep submissions confidential because securities legislation in certain provinces requires publication of a summary of the written comments received during the comment period. Please note that comments received will be made publicly available and posted on websites of the Alberta Securities Commission at www.albertasecurities.com, the Ontario Securities Commission at www.osc.gov.on.ca and the Autorité des marchés financiers at www.lautorite.qc.ca, and may be posted on the websites of certain other securities regulatory authorities. You should not include

-6- personal information directly in the comments to be published. It is important that you state on whose behalf you are making the submission. Questions Please refer your questions to any of the following: Elliott Mak Senior Legal Counsel, Corporate Finance British Columbia Securities Commission 604-899-6501 emak@bcsc.bc.ca Gillian Findlay Senior Legal Counsel, Corporate Finance Alberta Securities Commission 403-297-3302 gillian.findlay@asc.ca Patrick Weeks Corporate Finance Analyst Manitoba Securities Commission 204-945-3326 patrick.weeks@gov.mb.ca Michael Tang Senior Legal Counsel, Corporate Finance Branch Ontario Securities Commission 416-593-2330 mtang@osc.gov.on.ca Carolyne Lassonde Senior Legal Counsel, Legal Affairs Autorité des marchés financiers 514-395-0337 ext. 2545 carolyne.lassonde@lautorite.qc.ca Abel Lazarus Director, Corporate Finance Nova Scotia Securities Commission 902-424-6859 Abel.lazarus@novascotia.ca Jan Bagh Senior Legal Counsel, Corporate Finance Alberta Securities Commission 403-355-2804 jan.bagh@asc.ca Heather Kuchuran Acting Deputy Director, Corporate Finance Financial and Consumer Affairs Authority of Saskatchewan 306-787-1009 heather.kuchuran@gov.sk.ca Michael Balter Manager, Corporate Finance Branch Ontario Securities Commission 416-593-3739 mbalter@osc.gov.on.ca Roxane Gunning Legal Counsel, Corporate Finance Branch Ontario Securities Commission 416-593-8269 rgunning@osc.gov.on.ca Wendy Morgan Deputy Director, Policy Financial and Consumer Services Commission (New Brunswick) 506-643-7202 wendy.morgan@fcnb.ca

PROPOSED AMENDMENTS TO NATIONAL INSTRUMENT 44-102 SHELF DISTRIBUTIONS 1. National Instrument 44-102 Shelf Distributions is amended by this Instrument. 2. Part 9 is replaced with the following: PART 9 – AT-THE-MARKET DISTRIBUTIONS OF EQUITY SECURITIES UNDER SHELF 9.1 Definitions In this Part “ATM exchange” means (a) a short form eligible exchange, or (b) a marketplace outside of Canada; “ATM prospectus” means (a) a short form prospectus that is a base shelf prospectus for an at-the-market distribution, (b) a shelf prospectus supplement to a base shelf prospectus referred to in paragraph (a), and (c) a shelf prospectus supplement establishing an at-the-market distribution; “highly-liquid security” means, in relation to an at-the-market distribution, a listed security or quoted security that: (a) has traded, in total, on one or more marketplaces, as reported on a consolidated market display during a 60-day period ending not earlier than 10 days prior to the distribution: (i) an average of at least 100 times per trading day, and (ii) with an average trading value of at least $1,000,000 per trading day; or (b) at the time of the distribution is subject to Regulation M under the 1934 Act and is considered to be an "actively-traded security" under that regulation. “investment dealer” has the meaning ascribed to it in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations; “marketplace” has the meaning ascribed to it in National Instrument 21-101 Marketplace Operation. 9.2 Provisions not applicable to at-the-market distributions (1) The following provisions do not apply to an issuer distributing a security under an ATM prospectus: (a) section 7.2 of NI 41-101; (b) Item 20 of Form 44-101F1; (c) item 8 of section 5.5 of this Instrument. (2) The following provisions do not apply to an investment dealer acting as an underwriter in connection with the distribution of a security under an ATM prospectus: (a) section 6.7 or a similar provision under securities legislation; 1

(b) item 8 of section 5.5 of this Instrument. 9.3 Requirements for issuers and underwriters conducting at-the-market distributions (1) An issuer may distribute a security under an ATM prospectus as part of an at-the-market distribution if all of the following apply: [OPTION 1 – LIQUIDITY TEST: (a) either: (i) the security being distributed is a highly-liquid security, or (ii) the aggregate number of securities of the class distributed on all ATM exchanges under the ATM prospectus on the day of the distribution does not exceed 25% of the trading volume of that class on all marketplaces on that day;] [OPTION 2 – NO LIQUIDITY TEST: paragraph (a) will not be adopted] (b) the security being distributed is an equity security; (c) the security is distributed through an investment dealer acting as an underwriter in connection with the distribution; (d) with respect to any agreement with an investment dealer referred to in paragraph (c) to distribute the security, the issuer (i) has issued and filed a news release (A) announcing that the issuer has entered into the agreement, (B) indicating that an ATM prospectus has been filed, or will be filed, on SEDAR, and (C) specifying where and how a purchaser of a security under the at-the-market distribution may obtain a copy of the agreement and the ATM prospectus; and (ii) has filed a copy of the agreement on SEDAR; (e) the ATM prospectus discloses the material terms of any agreement referred to in paragraph (d); (f) the issuer distributes the security through an ATM exchange; (g) the issuer has disclosed the distribution if it constitutes a material fact or material change; (h) the cover page of the base shelf prospectus states that it may qualify an at-the- market distribution; (i) the ATM prospectus states in substantially the following words: “Securities legislation in some provinces [and territories] of Canada provides purchasers of securities with the right to withdraw from an agreement to purchase securities and with remedies for rescission or, in some jurisdictions, revisions of the price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser 2

and any amendment are not delivered to the purchaser, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. However, purchasers of [describe securities] distributed under an at-the-market distribution by [name of issuer] do not have the right to withdraw from an agreement to purchase the [describe securities] and do not have remedies of rescission or, in some jurisdictions, revisions of the price, or damages for non- delivery of the prospectus supplement, the accompanying prospectus and any amendment thereto relating to [describe securities] purchased by such purchaser because the prospectus supplement, the accompanying prospectus and any amendment thereto relating to the [describe securities] purchased by such purchaser will not be delivered, as permitted under Part 9 of National Instrument 44-102 Shelf Distributions. Securities legislation in some provinces [and territories] of Canada further provides purchasers with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment contains a misrepresentation. Those remedies must be exercised by the purchaser within the time limit prescribed by securities legislation. Any remedies under securities legislation that a purchaser of [describe securities] distributed under an at-the-market distribution by [name of issuer] may have against [name of issuer] or its agents for rescission or, in some jurisdictions, revisions of the price, or damages if the prospectus supplement, the accompanying prospectus and any amendment thereto relating to securities purchased by a purchaser and any amendment contain a misrepresentation will remain unaffected by the non-delivery of the prospectus referred to above. A purchaser should refer to any applicable securities legislation for the particulars of these rights and should consult a legal adviser.”; (j) if there has been any previous statement of a purchaser's rights contained in a previous version of the ATM prospectus, the issuer discloses in the ATM prospectus that, solely with regards to the at-the-market distribution, the statement of rights required to be included in the ATM prospectus under paragraph (i) supersedes and replaces the previous statement; (k) the ATM prospectus states: “No underwriter of the at-the-market distribution, nor any person or company acting jointly or in concert with an underwriter, may enter into any transaction that is intended to stabilize or maintain the market price of the securities or securities of the same class as the securities distributed under the ATM prospectus, including selling an aggregate number or principal amount of securities that would result in the underwriter creating an over-allocation position in the securities.”; 3

(l) the ATM prospectus includes the certificates required under Part 5 of NI 41-101 or other securities legislation in the form required under section 9.5 or 9.6 of this Instrument, as applicable. (2) An underwriter of an at-the-market distribution, or a person or company acting jointly or in concert with the underwriter, must not enter into any transaction that is intended to stabilize or maintain the market price of the same class of securities distributed under the at-the-market distribution, including for greater certainty, trading a security that would result in the underwriter creating an over-allocation position in that class of securities. 9.4 Reporting (1) Subject to subsection (2), for each month during which the issuer distributes securities under an ATM prospectus, the issuer, within 7 days after the end of the month, files a report on SEDAR, disclosing (a) the number and average price of the securities distributed under the ATM prospectus, and (b) the aggregate gross and net proceeds raised, and the aggregate commissions paid or payable, under the ATM prospectus to date. (2) If each security distributed under an ATM prospectus is a highly-liquid security at the time of the at-the-market distribution, subsection (1) does not apply to the distribution if, in its annual financial statements, interim financial reports, and management discussion and analysis filed on SEDAR, for the year and period immediately following the distribution, the issuer discloses (a) the number and average price of the securities distributed under the ATM prospectus, and (b) the aggregate gross and net proceeds raised, and the aggregate commissions paid or payable, under the ATM prospectus to date. 9.5 Form of certificates – base shelf prospectus establishing an at-the-market distribution (1) If a base shelf prospectus establishes an at-the-market distribution, the issuer certificate form required under paragraph 9.3(1)(l) must state the following: “This short form prospectus, together with the documents incorporated in this prospectus by reference, will, as of the date of a particular distribution of securities under the prospectus, constitute full, true and plain disclosure of all material facts relating to the securities offered by this prospectus and the supplement(s) as required by the securities legislation of [insert name of each jurisdiction in which qualified]. “ (2) If a base shelf prospectus establishes an at-the-market distribution, the underwriter certificate form required under paragraph 9.3 (1) (l) must state the following: 4