TerraVest Capital Inc.

Decision

Headnote

Related party transaction -- issuer entered into an agreement to acquire another issuer through issuance of its own shares and a subordinated term note -- three related parties of the issuer are "interested parties" of the proposed transaction -- the agreement constitutes a "related party transaction" under MI 61-101 and is subject to minority approval requirements -- a disinterested shareholder who is not an "interested party" provided written consent to the proposed related party transaction, representing approximately 61.03% of the common shares held by all minority shareholders -- approval of the transaction by majority of minority shareholders at a shareholders' meeting would be foregone conclusion -- issuer provided the disinterested shareholder with a copy of the disclosure document considering the transaction and will send a copy to any shareholder who requests it -- issuer will disclose details of the transaction in a material change report and in a disclosure document filed on SEDAR no less than 14 days prior to the closing of the proposed transaction -- exemption from holding shareholders' meeting and formal delivery of information circular granted.

Applicable Legislative Provisions

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, ss. 5.6, 8.1, 9.1.

Companion Policy 61-101CP to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, s. 3.1.

January 31, 2014

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 TERRAVEST CAPITAL 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 (the "Legislation") that the Filer be granted an exemption pursuant to Section 9.1 of Multilateral Instrument 61-101 -- Protection of Minority Security Holders in Special Transactions ("MI 61-101") from the requirements in MI 61-101 that the Filer call a shareholders' meeting to consider a proposed related party transaction (the Proposed Transaction, as defined below), and to send an information circular to shareholders in connection with such meeting (the "Requested Relief").

Under the process for Exemptive Relief Applications in Multiple Jursidictions (for a passport application):

(a) the Ontario Securities Commission (the "Decision Maker") 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 Quebec.

Interpretation

Terms defined in National Instrument 14-101 -- Definitions, MI 11-102 and MI 61-101 have the same meaning if used in this decision, unless otherwise defined.

Representations:

This decision is based on the following facts represented by the Filer:

1. The Filer is a corporation existing under the laws of the Province of Alberta. The principal executive offices of the Filer are located at 4901 Bruce Road, Vegreville, Alberta T9C 1C3.

2. The Filer is a reporting issuer in all of the Provinces of Canada and is not in default of securities legislation in any such jurisdiction.

3. The authorized capital of the Filer consists of an unlimited number of common shares ("Common Shares"). Each Common Share carries the right to one vote at all meetings of shareholders of the Filer. As of the date hereof, a total of 12,417,803 Common Shares are issued and outstanding. The Common Shares are listed and posted for trading on the Toronto Stock Exchange (the "TSX") under the symbol "TVK".

4. On January 5, 2014, the Filer entered into a non-binding letter of intent ("LOI") with Gestion Jerico Inc. ("Gestion Jerico"), a private corporation, and each of the shareholders of Gestion Jerico, pursuant to which the Filer proposed to acquire all of the issued and outstanding shares of Gestion Jerico for an indicative consideration of approximately $33.22 million (the "Proposed Transaction"). The Filer entered into a definitive agreement (the "Definitive Agreement") with the shareholders of Gestion Jerico on January 30, 2014.

5. As at the date hereof, there are 10,000 class A shares ("Class A Shares"), 10,000 class B shares ("Class B Shares") and 3,350,000 class C.1 shares ("Class C.1 Shares") of Gestion Jerico currently issued and outstanding.

6. All of the issued and outstanding shares of Gestion Jerico are held by two shareholders, being: (a) Clarke Inc. ("Clarke"), which owns 7,500, or 75% of the Class A Shares, 7,500, or 75% of the Class B Shares, and 2,512,500, or 75% of the Class C.1 Shares; and (b) Mr. Charles Pellerin, who, through 9202-2599 Quebec Inc. ("PellerinCo"), a holding company indirectly controlled by Mr. Pellerin, owns 2,500, or 25% of the Class A Shares, 2,500, or 25% of the Class B Shares, and 837,500, or 25% of the Class C.1 Shares.

7. Clarke beneficially owns, or exercises direction or control over, directly or indirectly, 4,021,008, or approximately 32.4% of the Common Shares. Geosime Capital Inc. ("Geosime Capital"), beneficially owns, or exercises direction or control over, directly or indirectly, 1,950,000, or approximately 15.7% of the Common Shares. Mr. Pellerin is a director of Clarke, and also owns 1,000, or approximately 0.008% of the Common Shares through a registered retirement savings plan.

8. Geosime Capital is controlled by Mrs. Sime Armoyan, the spouse of Mr. George Armoyan. Based on publicly available information, Mr. George Armoyan owns 77,665 common shares of Clarke directly and has control or direction over 6,083,809 common shares of Clarke through Geosam Investments Limited ("Geosam Investments"), Geosam Capital Limited ("Geosam Capital") and a registered education savings plan ("RESP"), or 34.92% of the issued and outstanding common shares of Clarke in the aggregate. In addition, Scotia Learning Centres Incorporated ("Scotia Learning") owns 1,921,133, or approximately 10.89% of the common shares of Clarke. Scotia Learning is controlled by Mrs. Sime Armoyan. Together, the aggregated holdings of Mr. Armoyan, the RESP, Geosam Capital, Geosam Investments and Scotia Learning represent approximately 45.81% of the outstanding common shares of Clarke.

9. As consideration for its shares in Gestion Jerico, Clarke will receive a subordinated term note of the Filer in the aggregate principal amount of $24,915,000 (the "Subordinated Note"). The Subordinated Note will have a three-year term and an interest rate of 6.5% payable in conjunction with dividends payable on the Common Shares.

10. As consideration for his shares in Gestion Jerico, PellerinCo will receive 1,866,293 Common Shares issued from treasury at a deemed issuance price of $4.45 per Common Share. Pursuant to the Definitive Agreement, PellerinCo will execute and deliver an agreement whereby PellerinCo will agree that following the closing of the Proposed Transaction: (a) one-third of the Common Shares issued to PellerinCo shall not be traded until the first anniversary of the closing date; (b) one-third of the Common Shares issued to PellerinCo shall not be traded until the second anniversary of the closing date; and (c) one-third of the Common Shares issued to PellerinCo may be freely traded, subject to any applicable hold periods under applicable securities laws, provided that such agreement shall immediately terminate upon Mr. Dale Laniuk, the Chief Executive Officer of the Filer ("Mr. Laniuk" or the "Disinterested Shareholder"), trading any of his Common Shares.

11. The Filer's board of directors (the "Board") consists of a total of five directors, three of whom are "independent directors" as defined in MI 61-101, being Mr. Laniuk, Mr. Darryl Vinet and Mr. Rocco Rossi. On December 11, 2013, the Board appointed the independent directors to form a special committee of directors (the "Special Committee") to consider the Proposed Transaction. Approval of the LOI from the Board, including unanimous approval of the Special Committee, was received on January 2, 2014. As further described below, the Proposed Transaction and the Definitive Agreement were unanimously approved by the Special Committee and the Board on January 29, 2014 and the Definitive Agreement was entered into on January 30, 2014.

12. The Proposed Transaction is subject to certain conditions, including receipt of necessary TSX and regulatory approvals (including the exemptive relief hereby granted) and approval of the Filer's shareholders (including the disinterested minority shareholder approval required by Section 5.6 of MI 61-101). Subject to the satisfaction of the conditions in the Definitive Agreement, the Proposed Transaction is expected to close in February of 2014.

13. The Proposed Transaction falls within the definition of "related party transaction", as set out in MI 61-101, as at the date that the Proposed Transaction was agreed to, the parties to the Proposed Transaction were "related parties" of the Filer for the reasons set out below:

(a) Clarke, which owns 4,021,008, or approximately 32.4% of the Common Shares of the Filer, 7,500 Class A Shares, 7,500 Class B Shares and 2,512,500 Class C.1 Shares of Gestion Jerico, is a "control person" of both the Filer and Gestion Jerico;

(b) Geosime Capital, which owns 1,950,000, or approximately 15.7% of the Common Shares of the Filer, is a related party of Clarke; and

(c) Mr. Pellerin, who beneficially owns, in the aggregate, more than 50% of the common shares of PellerinCo, which in turn owns 2,500 Class A Shares, 2,500 Class B Shares and 837,500 Class C.1 Shares of Gestion Jerico, is a director of Clarke.

14. Assuming the completion of the Proposed Transaction, Clarke will receive the Subordinated Note and PellerinCo will receive 1,866,293 Common Shares as consideration for their Gestion Jerico shares. Assuming the Proposed Transaction is completed, Mr. Pellerin will beneficially own, or exercise direction or control over, 1,867,293, or approximately 13.07% of the Common Shares following closing.

15. Mr. George Armoyan, a director of the Filer, is a "control person" and the President and Chief Executive Officer of Clarke. Mr. Blair Cook, a director of the Filer, is also a director of Clarke. Messrs. Armoyan and Cook have declared their interests in the Proposed Transaction due to the fact that Messrs. Armoyan and Cook hold such positions at Clarke, and have recused themselves from any discussions relating to the Proposed Transaction.

16. As at the date hereof, 6,446,795 Common Shares, or approximately 51.92% of the Common Shares, are held by shareholders of the Filer who are not "interested parties" to the Proposed Transaction.

17. Pursuant to Section 5.4 of MI 61-101, the Filer is required to obtain a formal valuation of the Gestion Jerico shares (the "Formal Valuation"), and the Filer has engaged an independent valuator, PricewaterhouseCoopers LLP ("PwC"), to prepare the Formal Valuation. Subsection 6.3(2) of MI 61-101 does not require a formal valuation of the Common Shares to be issued to PellerinCo and the Subordinated Note to be issued to Clarke as: (a) the Common Shares and Subordinated Note are securities of the Filer, a reporting issuer; (b) the Disclosure Document (as defined below) will contain a statement that the Filer has no knowledge of any material information concerning the Filer or its securities that has not been generally disclosed; (c) neither the Filer, nor, to the knowledge of the Filer after reasonable inquiry, the related parties identified in paragraph 13 above, including Clarke, Geosime Capital and Mr. Pellerin, has any knowledge of any material information concerning the Filer or its securities that has not been generally disclosed, and the Disclosure Document for the Proposed Transaction will contain a statement to that effect; and (d) the Disclosure Document will include a description of the effect of the distribution on the direct or indirect voting interests of Clarke, Geosime Capital and Mr. Pellerin.

18. The Filer is required to obtain minority approval for the Proposed Transaction pursuant to Section 5.6 of MI 61-101 and calculated in accordance with the terms of Part 8 of MI 61-101 ("Minority Approval"). In place of a shareholder meeting, the Filer has obtained the written consent (the "Consent") to the Proposed Transaction of Mr. Laniuk, who beneficially owns, or exercises direction or control over, 3,933,872 Common Shares, which represent approximately 31.68% of the issued and outstanding Common Shares and 61.03% of the Common Shares held by disinterested minority shareholders with respect to the Proposed Transaction (excluding the shares of the Filer held by Mr. Pellerin, Clarke and Geosime Capital, who are "interested parties" in the Proposed Transaction).

19. Mr. Laniuk is not entitled to, and will not be entitled to, receive a collateral benefit or any payment or distribution in connection with the Proposed Transaction. The Filer concluded that he is not: (a) an "interested party", as such term is defined in MI 61-101; (b) a related party of an interested party, unless Mr. Laniuk meets that description solely in his capacity as a director or senior officer of one or more entities that are neither interested parties nor issuer insiders of the Filer; or (c) a joint actor with a person or company referred to in (a) or (b) with respect to the Proposed Transaction. The Filer concluded that it is not required under MI 61-101 or TSX requirements to exclude the votes attached to the Common Shares beneficially owned or over which control or direction is exercised by Mr. Laniuk.

20. The Disinterested Shareholder from whom written consent for the Proposed Transaction is sought was provided with a disclosure document pertaining to the Proposed Transaction (the "Disclosure Document"), the contents of which comply with the disclosure requirements set out in Section 5.3(3) of MI 61-101, along with the Formal Valuation and the Consent seeking approval of the Proposed Transaction, prior to providing his Consent. The Disclosure Document and Consent provide the relevant details of the Proposed Transaction and include an acknowledgement that the Disclosure Document describes the Proposed Transaction in sufficient detail to allow the Disinterested Shareholder to make an informed decision regarding approval of the Proposed Transaction.

21. The Special Committee has been informed of and regularly updated on the principal terms and negotiations of the Proposed Transaction, which has been primarily between the Chief Investment Officer and Chief Financial Officer of the Filer and Mr. Pellerin, and has been provided with drafts of the Disclosure Document, Formal Valuation and Definitive Agreement. Mr. Laniuk has previously toured and inspected all the primary manufacturing locations of Gestion Jerico. During the week of January 6, 2014, two members of the Special Committee, including Mr. Laniuk, toured the primary manufacturing facilities of Gestion Jerico together with the Filer's Chief Investment Officer. Members of the Special Committee have also spoken with Clarke and Mr. Pellerin to better understand the operation of the business of Gestion Jerico. On January 24, 2014, the Special Committee received an update from the Chief Investment Officer and Chief Financial Officer of the Filer on the negotiations of the Proposed Transaction, heard from the independent valuator in respect of the progress of the Formal Valuation and was given the opportunity to ask questions about the Proposed Transaction.

22. The Special Committee met again on January 29, 2014 to consider the Definitive Agreement and ancillary documents in their substantially final forms. The meeting was also attended by the Filer's management, legal advisors and PwC. The legal advisors reviewed the principal terms of the Definitive Agreement. PwC provided an oral presentation of the Formal Valuation in its final form to the Special Committee. The Filer's management and the legal advisors also provided an update on its due diligence review of Gestion Jerico.

23. After considering the presentation of its financial and legal advisors and a number of factors, the Special Committee unanimously determined that: (a) the Proposed Transaction was in the best interests of the Filer; and (b) resolved to recommend that the Board approve the Proposed Transaction.

24. Immediately following the Special Committee meeting, the Board held a meeting to consider the Proposed Transaction. The Board, which consisted solely of the members of the Special Committee, as Messrs. Armoyan and Cook had declared their interests in the Proposed Transaction and had recused themselves from any discussions relating to the Proposed Transaction, unanimously determined that the Proposed Transaction was in the best interests of the Filer, approved the Proposed Transaction and authorized the Filer to enter into the Definitive Agreement.

25. Mr. Laniuk delivered the Consent immediately following the Board meeting approving the terms of the Proposed Transaction and the final forms of the Definitive Agreement, Disclosure Document, Formal Valuation and Consent. At the time that the final forms of the Definitive Agreement, Disclosure Document, Formal Valuation and Consent were reviewed by the Special Committee and finalized and approved by the Board, Mr. Laniuk had all the necessary information required to make a well-informed and considered decision in signing the Consent, and did not require additional time between the approval of the Formal Valuation and signing the Consent.

26. On January 30, 2014, the Definitive Agreement was finalized and executed and delivered by the parties. The Filer announced the transaction immediately after the open of markets on January 30, 2014.

27. Having received the Consent from the Disinterested Shareholder, the Filer has received written consent from 61.03% of Common Shares held by shareholders eligible to provide the Minority Approval required for the Proposed Transaction under Part 8 of MI 61-101, which exceeds the simple majority requirement set out in MI 61-101 for such approval.

28. The Disclosure Document, Formal Valuation and Consent of the Disinterested Shareholder will be publicly filed on SEDAR on or about January 31, 2014, and no less than 14 days prior to the closing of the Proposed Transaction.

29. A material change report pertaining to the Proposed Transaction, the contents of which shall comply with the disclosure requirements contained in Section 5.2 of MI 61-101 ("Material Change Report"), will be publicly filed on SEDAR at the same time as the Disclosure Document, the Formal Valuation and the Consent.

30. A press release, the contents of which shall comply with applicable securities law and TSX requirements (the "Press Release"), will be issued and publicly filed on SEDAR at the same time as the Disclosure Document, the Formal Valuation, the Consent and the Material Change Report.

31. A copy of the Disclosure Document and the Formal Valuation will be sent to any shareholder of the Filer who requests a copy.

Decision

32. The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Requested Relief.

The decision of the Decision Maker is that the Requested Relief is granted provided that:

(a) the Filer receives the Formal Valuation with respect to Gestion Jerico with a valuation that supports the consideration paid for the shares of Gestion Jerico under the Proposed Transaction;

(b) the Disclosure Document discloses that:

(i) Minority Approval will be obtained by way of written consent;

(ii) written consent will be obtained from the Disinterested Shareholder; and

(iii) the Filer has applied for and obtained the Requested Relief.

(c) the Disclosure Document, Formal Valuation, Consent, Material Change Report and Press Release are publicly filed on SEDAR no less than 14 days prior to the closing of the Proposed Transaction.

"Naizam Kanji"
Deputy Director, Corporate Finance
Ontario Securities Commission