Granby Industries Income Fund et al. - MRRS Decision

Headnote

Mutual Reliance Review System -- Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions -- take-over bid and subsequent business combination -- MI 61-101 requires sending of information circular and holding of meeting in connection with second step business combination -- second step business combination to be subject to minority approval, calculated in accordance with section 8.2 of MI 61-101 -- relief granted from requirement that information circular be sent and meeting be held, provided that minority approval is obtained by written resolution.

Applicable Legislative Provisions

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions.

February 27, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO AND QUEBEC

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF THE

PROPOSED TAKE-OVER BID FOR

GRANBY INDUSTRIES INCOME FUND BY

CLARKE ACQUISITION CORPORATION,

A WHOLLY-OWNED SUBSIDIARY OF CLARKE INC.

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of Ontario and Quebec (the "Jurisdictions") has received an application from Clarke Acquisition Corporation (the "Acquiror"), a wholly-owned subsidiary of Clarke Inc. ("Clarke" and together with the Acquiror, unless the context otherwise requires, the "Applicant"), in connection with a take-over bid (the "Bid") for Granby Industries Income Fund ("Granby"), for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") that:

the requirements of the Legislation that:

(a) a Compulsory Acquisition or Subsequent Acquisition Transaction (each as defined below) be approved at a meeting of the unitholders of Granby ("Unitholders"); and

(b) an information circular be sent to Unitholders in connection with a Compulsory Acquisition or Subsequent Acquisition Transaction;

be waived (collectively, the "Requested Relief").

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) this MRRS Decision Document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are otherwise defined herein.

Representations

This decision is based on the following representations by the Applicant:

1. The Acquiror is a corporation incorporated under the Canada Business Corporations Act ("CBCA") as "6658156 Canada Inc.". On November 28, 2006, the Acquiror amended its articles to change its name to Clarke Atlantic Partners Inc. and on November 26, 2007, the Acquiror amended its articles to change its name to Clarke Acquisition Corporation, and is a wholly owned subsidiary of Clarke. The Acquiror's principal offices are located at 6009 Quinpool Road, 9th Floor, Halifax, Nova Scotia, B3K 5J7.

2. Clarke is a publicly traded investment holding company incorporated under the CBCA on December 9, 1997. Clarke has interests in freight transportation services, international shipping, and real estate and information technology services. Clarke's principal offices are located at 9th Floor, 6009 Quinpool Road, Halifax, Nova Scotia, B3K 5J7.

3. Granby is a trust established under the laws of the Province of Ontario pursuant to an amended and restated declaration of trust dated as of December 7, 2004 (the "Declaration of Trust"). Granby's head office is located at 6 -- 2679 Bristol Circle, Oakville, Ontario, L6H 6Z8. Granby also has operations at 1020 André Liné Street, Granby, Québec, J2J 1J9 and 84 Irwin Street, Granby, Québec, J2J 2P1.

4. Granby, indirectly through GI Operating Trust (the "Operating Trust"), holds a 90% interest in each of Granby Industries Limited Partnership ("Granby LP") and Granby Industries Inc. ("Granby GP"), the general partner of Granby LP. The Operating Trust is a trust established under the laws of the Province of Ontario. Granby holds all of the outstanding interests in the Operating Trust, and also holds Series 1 Notes of the Operating Trust in the aggregate principal amount of $59,005,150.

5. Granby LP is a limited partnership established under the laws of the Province of Manitoba pursuant to an amended and restated limited partnership agreement dated as of December 16, 2004. Granby GP is a corporation incorporated under the CBCA pursuant to articles of incorporation dated October 19, 2004.

6. Granby is a manufacturer of high quality tanks for the residential and light commercial storage of heating oil and other petroleum based products, primarily for the replacement storage tank market, and is also a leading manufacturer of coated copper tubing.

7. The authorized capital of Granby consists of an unlimited number of trust units ("Units"). The Units are listed and posted for trading on the TSX under the symbol "GBY.UN". Based on information provided by Granby, as at December 20, 2007, there were 7,375,644 Units issued and outstanding.

8. Granby is a reporting issuer or the equivalent in all of the provinces and territories of Canada and files continuous disclosure documents with the Canadian securities authorities. Such documents are available at www.sedar.com.

9. An offer to purchase and take-over bid circular of the Applicant dated January 9, 2008 together with a trustees' circular of the Granby trustees recommending that holders of Units accept the Bid was mailed to holders of Units on January 11, 2008.

10. Clarke and Granby entered into a support agreement (the "Support Agreement") dated December 21, 2007 pursuant to which Clarke agreed to make the Bid and Granby agreed to support the Bid, all on the terms and conditions of the Support Agreement.

11. Clarke and Granby Trust, an affiliate of TorQuest Partners Inc., (the "Locked-Up Unitholder") entered into a lock-up agreement (the "Lock-Up Agreement") dated December 21, 2007 pursuant to which the Locked-Up Unitholder agreed to sell its Class B limited partnership units ("Class B LP Units") in the capital of Granby LP and all of its shares ("GP Shares") in the capital of Granby GP to the Applicant for a cash purchase price equal to $0.1275 for each Class B LP Unit and associated GP Share, all on the terms and conditions of the Lock-Up Agreement.

12. The Bid includes the following terms and conditions:

(a) the Acquiror has offered to acquire all of the issued and outstanding Units at a price of $0.17 in cash per Unit;

(b) the Bid is open for acceptance until 5:00 p.m. (Toronto time) on February 18, 2008, unless withdrawn or extended (the "Expiry Time");

(c) there shall have been validly deposited under the Bid and not withdrawn at the Expiry Time that number of Units which, together with any Units directly or indirectly owned by the Applicant, constitutes at least 66 2/3% of the issued and outstanding Units at the Expiry Time; and

(d) if the Acquiror takes up and pays for Units deposited under the Bid, the Acquiror currently intends to carry out a Compulsory Acquisition (as defined below) or a Subsequent Acquisition Transaction to acquire all of the Units not deposited under the Bid, as more particularly described below.

13. Section 13.6 of the Declaration of Trust currently permits an offeror to acquire the Units not tendered to an offer if, within 120 days after the date the offer is made, the offer is accepted by the Unitholders of not less than 90% of the outstanding Units (on a fully diluted basis) other than Units held by or on behalf of, the Applicant, an affiliate or an associate of the Applicant on the date of the offer (a "Compulsory Acquisition").

14. If the Acquiror takes up and pays for the Units deposited pursuant to the Bid, the Acquiror may proceed with a Compulsory Acquisition of the Units not deposited to the Bid as permitted under the Declaration of Trust.

15. If a Compulsory Acquisition as permitted under the Declaration of Trust is not available to the Acquiror or if the Acquiror elects not to proceed under those provisions, the Acquiror currently intends to:

(a) amend Section 13.6 of the Declaration of Trust to provide that a Compulsory Acquisition may be effected immediately if the Acquiror and its affiliates, after take-up and payment of Units deposited under the Bid, hold more than 66 2/3% of the outstanding Units (on a fully diluted basis) (the "Threshold Amendment"); and/or

(b) amend the Declaration of Trust to change the rights, privileges, restrictions and conditions attaching to the Units (other than Units held by the Acquiror) and re-designate the Units as special units ("Special Units") such that, at the time (the "Transfer Time") of delivery by Granby of a transfer notice to Granby's transfer agent and immediately following any issuance of Special Units after the Transfer Time, each holder of Special Units shall transfer, and shall be deemed to have transferred to the Acquiror all of such holder's right, title and interest in and to its Special Units and at and after the Transfer Time, each holder of Special Units shall cease to be a holder of such Special Units and shall not be entitled to exercise any of the rights of a holder of Special Units other than the right to receive $0.17 in cash per Special Unit (such amendments to the Declaration of Trust and transfer of Special Units as a result thereof, a "Capital Reorganization").

16. Following such amendments to the Declaration of Trust, it is the current intention of the Acquiror to avail itself of the Compulsory Acquisition, as amended by the Threshold Amendment, or the Capital Reorganization, as the case may be, to acquire the Units not deposited under the Bid (each of the Compulsory Acquisition, as amended by the Threshold Amount, and the Capital Reorganization, as applicable, is referred to herein as a "Subsequent Acquisition Transaction"). If the Acquiror elects to proceed with a Subsequent Acquisition Transaction, the consideration payable to acquire the remainder of the units will be the identical consideration per Unit payable by the Acquiror under the Bid.

17. To exercise its rights in respect of a Subsequent Acquisition Transaction under Section 13.6 of the Declaration of Trust, the Acquiror must give notice (the "Offeror's Notice") to each holder of Units who did not accept the Bid (in each case a "Dissenting Unitholder") of such proposed acquisition by registered mail within 60 days after the date of termination of the Bid and in any event within 180 days after the date of the Bid. In accordance with the Declaration of Trust, within 21 days after it receives the Offeror's Notice, each Dissenting Unitholder must send its Units to Granby.

18. In connection with a Subsequent Acquisition Transaction, the Acquiror currently intends to amend the provisions of Section 13.6 of the Declaration of Trust to provide that Units held by non-tendering Unitholders will be deemed to have been transferred to the Acquiror immediately on the giving of the Offeror's Notice and that such non-tendering Unitholders will cease to have any rights as Unitholders from and after that time, other than the right to be paid the same consideration that the Acquiror would have paid to the non-tendering Unitholders if they had tendered such Units to the Bid (the "Notice Amendment").

19. In order to effect a Subsequent Acquisition Transaction in accordance with the foregoing, rather than seeking Unitholder approval at a special meeting of the Unitholders to be called for such purpose, the Acquiror intends to rely on Section 11.10 of the Declaration of Trust, which provides that a special resolution in writing executed by Unitholders holding more than 66 2/3% of the outstanding votes at any time shall be as valid and binding for all purposes of the Declaration of Trust as if such Unitholders had exercised at that time all of their voting rights in favour of such resolution at a meeting of Unitholders duly called for that purpose.

20. To effect a Compulsory Acquisition or Subsequent Acquisition Transaction, the Applicant will comply with the provisions of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") (as modified by the decision document) and, specifically, will obtain minority approval, as that term is defined in the legislation, calculated in accordance with the terms of Section 8.2 of MI 61-101 (the "Minority Approval"), albeit not at a meeting of Unitholders, but by written resolution.

21. The Circular provided to Unitholders in connection with the Bid contains all disclosure required by applicable securities laws, including without limitation the take-over bid provisions and form requirements of the Legislation in the Jurisdictions and provisions of MI 61-101 relating to the disclosure required to be included in information circulars distributed in respect of business combinations.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that Minority Approval shall have been obtained, albeit not at a meeting of Unitholders, but by written resolution.