Acasta Enterprises Inc. – s. 9.1 of MI 61-101 Protection of Minority Security Holders in Special Transactions and s. 6.1 of NI Take-Over Bids and Issuer Bids

Headnote

Section 6.1 of NI 62-104 and section 9.1 of MI 61-101 -- Issuer bid -- relief from the requirements applicable to issuer bids in Part 2 of NI 62-104 and Part 3 of MI 61-101 -- issuer proposes to sell one of its business units in exchange for the return of a specified number of its shares and other consideration -- the purchaser is a related party of the issuer -- the issuer is able to satisfy, and is relying on, the financial hardship exemption from the formal valuation and minority approval requirements of MI 61-101 -- issuer has received executed, written consents from disinterested shareholders in respect of the share repurchase holding a majority of the outstanding shares -- each consenting party received all material information in respect of the proposed transaction, confirmed that it is familiar with the terms of the proposed transaction and had the opportunity to obtain independent legal advice -- the special committee received an opinion from an independent investment bank that is independent of all interested parties in respect of the proposed transaction, that the consideration to be received by the issuer in connection with the proposed transaction is fair, from a financial point of view to the issuer -- selling shareholders are not receiving cash in exchange for their subject shares -- terms of the proposed transaction were not agreed to in order to give preferential treatment to the selling shareholders, either collectively or individually, or to provide a method for the issuer to purchase the subject shares -- purpose of the share repurchase is to facilitate the sale of the business unit in order to generate sufficient immediate cash proceeds to satisfy the demand of a lender under a secured credit facility and improve the issuer's financial position -- the issuer's board and special committee have unanimously determined that the proposed transaction is in the best interests of the issuer and its shareholders, the terms of the proposed transaction are reasonable and the proposed transaction will improve the financial position of the issuer and benefit the shareholders to whom the bid was not extended -- share repurchase is exempt from the requirements applicable to issuer bids in Part 2 of NI 62-104 and Part 3 of MI 61-101, subject to conditions.

Statutes Cited

National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.

Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions, Part 3 and s. 9.1.

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c.S.5, AS AMENDED AND IN THE MATTER OF ACASTA ENTERPRISES INC.

ORDER (Section 9.1 of Multilateral Instrument 61-101 and Section 6.1 of National Instrument 62-104)

UPON the application (the "Application") of Acasta Enterprises Inc. (the "Filer") for an order pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids ("NI 62-104") and section 9.1 of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") exempting the Filer from the requirements applicable to issuer bids in Part 2 of NI 62-104 and Part 3 of MI 61-101 (the "Issuer Bid Requirements") in connection with the proposed sale of all of the issued and outstanding shares in the capital of each of Stellwagen Group Limited, Stellwagen Capital LLC, Aviation Finance Corporation LLC and Infrastructure Finance & Trade Limited (collectively, "Stellwagen") to an affiliate of Douglas Brennan, the Chief Executive Officer of the entities comprising Stellwagen (the "Purchaser", and such sale, the "Proposed Transaction").

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Filer having represented to the Commission that:

1. The Filer is a corporation existing under the laws of the Province of Ontario. The head office of the Filer is located at 150 Bloor Street West, Suite 310, Toronto, Ontario M5S 2X9.

2. The Filer is a reporting issuer in all of the provinces and territories 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 Class A restricted voting shares (the "Class A Shares") and Class B shares (the "Class B Shares"). As at March 18, 2018, no Class A Shares and 95,715,298 Class B Shares were issued and outstanding. The Filer also has 20,884,062 warrants to purchase Class B Shares (the "Warrants") outstanding. The Class B Shares and Warrants trade on the Toronto Stock Exchange (the "TSX") under the symbols AEF and AEF.WT, respectively. The Class A Shares are not listed on any marketplace.

4. The Filer was a special purpose acquisition corporation incorporated for the purpose of effecting a qualifying acquisition. On January 3, 2017, the Filer announced the closing of its qualifying acquisition under Part X of the TSX Company Manual (the "Qualifying Acquisition") of 100% of three businesses, alongside the Filer's launch as a long-term investment and private equity management firm.

5. Pursuant to its Qualifying Acquisition, the Filer acquired Stellwagen, a commercial aviation finance advisory and asset management business, and two private label consumer staples businesses, Apollo Health and Beauty Care Partnership and Apollo Laboratories Inc. (collectively, "Apollo") and JemPak Corporation ("JemPak").

6. The Filer acquired Stellwagen for a total purchase price of $324,829,923, which was satisfied by (a) $96,545,743 in cash, (b) the issuance of 22,828,418 Class B Shares at $10.00 per Class B Share, and (c) an earn-out entitlement (the "Earn-out").

7. 21,280,160 Class B Shares (or 22.4% of the issued and outstanding Class B Shares, calculated on a non-diluted basis) of the 22,828,418 Class B Shares issued as part of the Filer's acquisition of Stellwagen were issued to Martello Finance Company Limited ("Martello"), a company existing under the laws of Cyprus. None of the Martello Class B Shares have a Canadian address on the books of the Filer. All of the share capital of Martello is held in trust for Mr. Brennan.

8. On May 14, 2017, the Filer entered into a secured two-year credit facility agreement (the "SP Credit Facility") with a syndicate (the "Lenders") consisting of SP Acasta Funding, LP (the "Majority Lender"), and affiliates of each of Mr. Brennan and Richard and Charles Wachsberg (together, the "Wachsbergs"), each of whom is a "related party" of the Filer (as such term is defined in MI 61-101), and U.S. Bank National Association, as administrative agent. The SP Credit Facility allows for the borrowing of up to U.S.$150 million, is guaranteed by Stellwagen Acquisition Corp. ("Stellwagen Acquisition") and Stellwagen Group Limited (together, the "Guarantors"), and is secured by a first ranking charge over all personal property of the Filer as well as a pledge of all equity interests owned by the Filer and each of the Guarantors.

9. On December 5, 2017, Stellwagen entered into a revolving credit and security agreement with Morgan Stanley Asset Funding Inc. (the "MS Credit Agreement"). The intended use of proceeds of the MS Credit Agreement required consent of a majority of the Lenders. Accordingly, the Filer reached out to the Majority Lender to negotiate terms under which the Majority Lender would provide consent.

10. During the course of discussions with the Majority Lender on the terms of the consent, the Filer's expectations for the 2018 results of operations of its businesses declined. In addition, management of Stellwagen communicated that it was going to require additional working capital liquidity support during the first quarter of 2018. In early January 2018, management alerted the board of directors of the Filer (the "Board") that, based on projected performance, the Filer was at risk of failing to comply with its covenants under the SP Credit Facility as of March 31, 2018, and, more specifically, that the Filer was at risk of breaching the covenant under the SP Credit Facility that required the Filer to maintain a debt to EBITDA multiple of under 5.25.

11. While the discussions were ongoing with the Majority Lender, the Filer was simultaneously in discussions with Martello and Almada Inc. ("Almada"), a company controlled by Alon Ossip and Martin Goldfarb, in respect of a potential aircraft operating lease fund (the "Lease Fund"). It was expected that this lease fund would generate fee revenue for Stellwagen and provide funding for its developing fund business.

12. A special committee of independent directors (the "Special Committee") consisting of Jay Swartz (Chair), Geoff Beattie, Robert Schwartz and Michael Young (until his resignation as a director of the Filer), was formed to explore and consider the formation of the Lease Fund, including but not limited to the structuring, financing and formation of the Lease Fund, as well as considering alternatives to the Lease Fund.

13. The Filer, Martello and Almada were unable to reach agreement on acceptable business terms for the Lease Fund and discussions ceased in mid-January 2018.

14. On January 19, 2018, Martello sent a letter to the Board demanding changes to the composition of the Board. Martello also issued a press release and filed an updated early warning report on January 22, 2018 disclosing that it had delivered this letter.

15. Mr. Beattie led the discussions on behalf of the Special Committee and with its input and oversight, with (a) Mr. Brennan, Mr. Ossip and the Wachsbergs regarding the future direction of the Filer, and (b) the Majority Lender regarding the terms on which it would be willing to provide the consent required pursuant to the SP Credit Facility.

16. The Majority Lender has observer status with respect to meetings of the Board and was aware of the deterioration of the Filer's business, that projections indicated that the Filer's expected 2018 financial performance was going to be weaker than expected and that Martello had demanded changes to the composition of the Board.

17. On February 6, 2018, the Filer entered into an amending agreement (the "Amending Agreement") with the Lenders, effective as of January 31, 2018, setting out the terms on which the consent required pursuant to the SP Credit Facility in connection with the entering into of the MS Credit Agreement. Pursuant to the Amending Agreement, in exchange for its agreement to provide the required consent, the Filer made an immediate U.S.$5 million repayment of amounts outstanding under the SP Credit Facility and agreed to a further repayment of U.S.$25 million of amounts outstanding under the SP Credit Facility (the "Principal Payment") by March 1, 2018.

18. Also on February 6, 2018, and in order to fund the Principal Payment, the Filer entered into a non-binding term sheet (the "Term Sheet") with Martello with respect to the Proposed Transaction, and the Special Committee and Martello continued their negotiations on a definitive agreement with respect to the Proposed Transaction.

19. Also on February 6, 2018, the Board agreed to formally amend and expand the mandate for the Special Committee, to be comprised of Messrs. Beattie, Schwartz and Swartz, with Mr. Beattie as chair to oversee the Proposed Transaction and if desirable pursue other strategic alternatives to maximize value for the Filer's shareholders or to address the Filer's liquidity and capital resources, including, without limitation, any potential negotiated transaction or transactions involving the Filer, such as a sale of one or more of the Filer's operating subsidiaries, or a financing transaction.

20. On March 1, 2018, the Filer entered into an extension agreement with the Lenders (the "First Extension Agreement") to extend the deadline for payment of the Principal Payment until March 7, 2018.

21. On March 7, 2018 the Filer entered into a second extension agreement with the Lenders (the "Second Extension Agreement") to extend the deadline for payment of the Principal Payment to March 21, 2018, which deadline may be automatically extended to March 31, 2018 in accordance with the terms of the Second Extension Agreement.

22. On March 19, 2018, the Filer and Stellwagen Acquisition entered into a definitive share purchase agreement with the Purchaser with respect to the Proposed Transaction (the "Definitive Agreement"). Stellwagen Acquisition is a wholly-owned subsidiary of the Filer and the registered holder of Stellwagen.

23. Pursuant to the Proposed Transaction, Stellwagen Acquisition will receive, as consideration for Stellwagen (collectively, the "Consideration"):

(a) cash consideration in the amount of U.S.$35 million;

(b) the return of 26,000,000 Class B Shares to the Filer for cancellation (collectively, the "Subject Shares");

(c) downside protection of up to U.S.$5 million to the Filer if the proceeds realized from the monetization of the profit participating notes of Stelloan Investment Company I DAC (the "PPNs") held by the Filer, which have a book value of U.S.$47.5 million, are lower than a specified amount; and

(d) termination of the Earn-out.

24. The Subject Shares are beneficially owned or controlled, directly or indirectly, in the amounts set out next to their names by the following persons (collectively, the "Purchasing Group"). Each member of the Purchasing Group is a direct or indirect shareholder of the Purchaser.

Name	Number of Subject Shares
Douglas Brennan	19,211,829
Belinda Stronach	1,000,000
Element Investment Corp.	3,037,500
Eugene O'Reilly	469,169
Stephen Coyle	140,751
Catherine Power	140,751
Alon Ossip	1,000,000
Martin Goldfarb	1,000,000

25. None of the Subject Shares are Class B Shares held by the Filer's founders (the "Founders") that are subject to restrictions from transfer pursuant to the terms of the forfeiture and transfer restrictions agreement and undertaking dated as of July 30, 2015 among the Founders, the Filer, BMO Nesbitt Burns Inc., TD Securities Inc. and Canaccord Genuity Corp., and the TSX. Certain of the Subject Shares are subject to contractual restrictions on transfer pursuant to lock-up and/or escrow agreements entered into by certain members of the Purchasing Group in connection with the Qualifying Acquisition, which restrictions the Filer has agreed to waive in order to facilitate the Proposed Transaction.

26. The repurchase of the Subject Shares (the "Share Repurchase") is an integral part of the Proposed Transaction. No member of the Purchasing Group is receiving any cash in exchange for their respective Subject Shares, which are being returned to the Filer for cancellation.

27. As a result of the fact that no Shareholders other than the members of the Purchasing Group are parties to the Proposed Transaction, it is impossible for the Filer to offer to acquire Class B Shares from all holders of Class B Shares (collectively, the "Shareholders") on the same terms and conditions as those contemplated by the Proposed Transaction.

28. The terms of the Proposed Transaction were not agreed to in order to give preferential treatment to the Purchasing Group, either collectively or individually, or to provide a method for the Filer to purchase the Subject Shares, but rather to facilitate the sale of Stellwagen in order to generate sufficient immediate cash proceeds to satisfy the Principal Payment and to improve the Filer's financial position.

29. The Special Committee engaged Blair Franklin Capital Partners Inc. ("Blair Franklin"), an independent investment bank that is independent of all "interested parties" (as defined in MI 61-101) in the Proposed Transaction, to provide its opinion as to the fairness, from a financial point of view, to the Filer of the Consideration to be received by the Filer pursuant to the Proposed Transaction. On March 18, 2018, Blair Franklin delivered an opinion (the "Fairness Opinion") to the Special Committee that the Consideration to be received by the Filer in connection with the Proposed Transaction is fair, from a financial point of view, to the Filer.

30. Each of the Board and the Special Committee have unanimously determined, acting in good faith, that:

(a) the Proposed Transaction is in the best interests of the Filer and its Shareholders;

(b) the terms of the Proposed Transaction are reasonable; and

(c) the Proposed Transaction will improve the financial position of the Filer and will benefit the Shareholders to whom the issuer bid is not extended.

31. Management of the Filer, the Board and the Special Committee are of the view that the Proposed Transaction is the only transaction available to the Filer that is reasonably capable of generating sufficient proceeds to make the Principal Payment within the timeframe demanded by the Majority Lender. Absent the completion of the Proposed Transaction and the cash proceeds therefrom, the Filer will default under the Amending Agreement by failing to make the Principal Payment. The Filer would potentially also breach its debt to EBITDA covenant of 5.25 under the SP Credit Facility during 2018, which would cause a cross-default under the Filer's other debt arrangements and could put the Filer at risk for an insolvency filing.

32. The cash proceeds from the Proposed Transaction will enable the Filer to make the Principal Payment, thereby remedying the Filer's immediate financial problems, and will improve the Filer's debt to EBITDA ratio and enable the Filer to remain onside the debt to EBITDA covenant under the SP Credit Facility.

33. The Purchaser is a "related party" of the Filer (as such term is defined in MI 61-101) and the Proposed Transaction is a "related party transaction" under paragraph (a) of that definition in MI 61-101.

34. Paragraphs 5.5(g) and 5.7(1)(e) of MI 61-101 (together, the "Financial Hardship Exemption") exempts related party transactions from the formal valuation and minority approval requirements, respectively, contained therein, if the issuer is in financial hardship. The Filer is able to satisfy the Financial Hardship Exemption and is relying on the Financial Hardship Exemption in respect of the Proposed Transaction.

35. The Share Repurchase forming part of the Proposed Transaction constitutes an indirect "issuer bid" for the purposes of NI 62-104 and MI 61-101, to which the Issuer Bid Requirements would apply. The Share Repurchase cannot be made in reliance upon the exemptions from the Issuer Bid Requirements set out in Part 4 of NI 62-104 and section 3.4 of MI 61-101.

36. The Filer has received executed, written consents from Shareholders (collectively, the "Consenting Parties" and each, a "Consenting Party") holding a majority of the outstanding Class B Shares, other than the Class B Shares held by (a) interested parties; (b) related parties of an interested party, unless the related party meets that description solely in its 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) above, in respect of the Share Repurchase (such excluded persons, the "Excluded Persons").

37. Each Consenting Party has (a) received all material information in respect of the Proposed Transaction, including the Fairness Opinion and the share purchase agreement, (b) confirmed that it is familiar with the terms of the Proposed Transaction, and (c) had the opportunity to obtain independent legal advice.

38. No Consenting Party (including those Consenting Parties that are not related parties of the Filer) has received, or will receive, any collateral benefit in respect of the Share Repurchase or in connection with agreeing to provide its written consent.

39. Each Consenting Party was provided with a copy of:

(a) the press release issued by the Filer on February 6, 2018 announcing the entering into of the Term Sheet and Amending Agreement, and the related material change report filed on February 16, 2018;

(b) the press release issued by the Filer on March 1, 2018 announcing the First Extension Agreement; and

(c) the press release issued by the Filer on March 8, 2018 providing an update on the Proposed Transaction.

40. Each Consenting Party will be provided with a copy of (collectively, the "Subsequently Filed Documents"):

(a) the press release issued by the Filer on March 19, 2018 announcing the entering into of the Definitive Agreement, and the related material change report on the same date;

(b) the Fairness Opinion, which will be filed by the Filer on SEDAR; and

(c) any document issued and filed by the Filer on SEDAR in respect of the Proposed Transaction prior to the closing of the Proposed Transaction.

41. The Filer will apply to the Superior Court of Justice (Ontario) (the "Court") for an order approving a plan of arrangement under the Business Corporations Act (Ontario) to reduce the stated capital of the Class B Shares so that the Filer can satisfy the solvency test under applicable corporate laws required to repurchase the Subject Shares.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED pursuant to section 6.1 of NI 62-104 and section 9.1 of MI 61-101 that the Filer be exempt from the Issuer Bid Requirements in connection with the Share Repurchase, provided that:

(a) as at the time of the closing of the Proposed Transaction, the Filer is in possession of executed written consents from Consenting Parties holding, in the aggregate , a majority of the outstanding Class B Shares, other than the Class B Shares held by Excluded Persons;

(b) as at the time of the closing of the Proposed Transaction, each of the Board and the Special Committee remain of the view that the Proposed Transaction is in the best interests of the Filer and its Shareholders and that the terms of the Proposed Transaction are reasonable;

(c) no Consenting Party (including those Consenting Parties that are not related parties of the Filer) has received, or will receive, any collateral benefit in respect of the Share Repurchase or in connection with agreeing to provide its written consent;

(d) each Consenting Party receives a copy of this order and the Subsequently Filed Documents;

(e) each Consenting Party has (a) received all material information in respect of the Proposed Transaction, (b) confirmed that it is familiar with the terms of the Proposed Transaction, and (c) has had the opportunity to obtain independent legal advice;

(f) the Filer does not close the Proposed Transaction unless and until the seventh (7th) calendar day after the granting of this order;

(g) the Filer issues and files a press release on SEDAR disclosing that the Filer has been granted exemptive relief from the Issuer Bid Requirements in connection with the Share Repurchase and that it will not close the Proposed Transaction earlier than the seventh (7th) calendar day after the granting of the order;

(h) there are no approvals required in respect of the Proposed Transaction that must be obtained at a meeting of Shareholders; and

(i) the Filer receives the approval of the Court to reduce the stated capital of the Class B Shares so that the Filer can satisfy the solvency test under applicable corporate laws required to repurchase the Subject Shares.

DATED at Toronto this 19th day of March, 2018.

"Naizam Kanji"

Director, Office of Mergers & Acquisitions

Ontario Securities Commission