HeadnoteMutualReliance Review System for Exemptive Relief Applications - relieffrom registration and prospectus requirements in connection totrades made with or subsequent to a proposed plan of arrangementunder the Business Corporations Act (Alberta). One of the partiesdeemed to be a reporting issuer as of the effective time of thearrangement.
ApplicableOntario Statutory ProvisionsSecuritiesAct, R.S.O. 1990, c.S.5, as am., ss. 25, 53, 72(1)(i), 74(1),83.1.
ApplicableMultilateral InstrumentsMultilateralInstrument 45-102, s. 2.6, 2.8.
INTHE MATTER OF
OFBRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,
MANITOBA,ONTARIO, QUEBEC, NOVA SCOTIA, NEW BRUNSWICK,
PRINCE EDWARD ISLAND AND NEWFOUNDLAND AND LABRADOR
INTHE MATTER OF
THEMUTUAL RELIANCE REVIEW SYSTEM
FOREXEMPTIVE RELIEF APPLICATIONS
INTHE MATTER OF
PROVIDENT ENERGY LTD. AND PROVIDENT ENERGY TRUST
WHEREASthe local securities regulatory authority or regulator (the"Decision Maker") in each of British Columbia, Alberta, Saskatchewan,Manitoba, Ontario, Québec, Nova Scotia, New Brunswick,Prince Edward Island and Newfoundland (the "Jurisdictions")has received an application from Richland Petroleum Corporation("Richland"), Terraquest Energy Corporation ("Terraquest") andProvident Energy Trust (the "Trust") (collectively, the "Filer")for a decision under the securities legislation of the Jurisdictions(the "Legislation") that:
(a)the requirements contained in the Legislation to be registeredto trade in a security and to file and obtain a receipt fora preliminary prospectus and a prospectus (the "Registrationand Prospectus Requirements") shall not apply to certain tradesmade in connection with or subsequent to a proposed plan ofarrangement (the "Arrangement") under the Business CorporationsAct (Alberta) (the "ABCA") involving Richland, Terraquest,the Trust and Provident Energy Ltd. ("Provident"); and
(b)in the provinces of British Columbia, Alberta, Saskatchewan,Ontario and Québec, provided that such provinces' securitieslaws contain the concept of a reporting issuer or the equivalent,Terraquest shall be deemed to be a reporting issuer as of theeffective time of the Arrangement;
ANDWHEREAS pursuant to the Mutual Reliance Review Systemfor Exemptive Relief Applications (the "System") the AlbertaSecurities Commission is the principal regulator for this application;
ANDWHEREAS the Filer has represented to the Decision Makersthat:
1.Richland is a corporation incorporated under the ABCA and isheadquartered in Calgary, Alberta;
2.Richland is a junior oil and natural gas exploration and productioncompany engaged in exploration for crude oil and natural gasin the Western Canada Sedimentary Basin and in the East LostHills area of California. Conducting its Canadian activitiesprimarily in Saskatchewan and Alberta, Richland initiates andoperates the majority of its prospects, maintaining a high workinginterest in all new operations;
3.the authorized capital of Richland consists of an unlimitednumber of common shares ("Common Shares"), of which, as at thedate hereof, 26,772,586 Common Shares are issued and outstanding.In addition, as at the date hereof, 2,207,007 Common Shareshave been reserved for issuance on exercise of outstanding stockoptions;
4.Richland is, and has been for a period of time in excess of12 months, a reporting issuer (where such concept exists) underthe securities legislation of British Columbia, Alberta, Saskatchewan,Manitoba, Ontario and Quebec. To the best of its knowledge,information and belief, Richland is not in default of any requirementsof the securities Legislation of the Jurisdictions in whichit is a reporting issuer;
5.the Common Shares are listed and posted for trading on The TorontoStock Exchange (the "TSE") under the symbol "RLP";
6.the Trust is an open and unincorporated investment trust createdunder the laws of Alberta pursuant to the Provident Trust indenturedated as of January 25, 2001 as amended as of March 5,2001 between Montreal Trust Company of Canada and Founders EnergyLtd. (the "Provident Trust Indenture"). The beneficiaries ofthe Trust are the holders of trust units of the Trust ("Unitholders").The head and principal offices of the Trust are located at 900,606 - 4th Street S.W., Calgary, Alberta, T2P 1T1.The registered office of the Trust is 3700, 400 - 3rd AvenueS.W., Calgary, Alberta, T2P 4H2;
7.the Trust is a reporting issuer (where such concept exists)in each of the provinces of Canada and is a "qualifying issuer"as defined under Multilateral Instrument 45-102 Resale ofSecurities ("MI 45-102");
8.the Trust is authorized to issue an unlimited number of trustunits ("Trust Units"). As at November 26, 2001, there were17,022,321 Trust Units issued and outstanding;
9.the Trust was established to acquire and hold, directly andindirectly, interests in petroleum and natural gas properties.Cash flow from the properties is distributed from Providentto the Trust by way of royalty payments, interest payments andprincipal repayments on promissory notes issued by Providentto the Trust. Distributable cash generated by the royalties,interest and principal repayments is then distributed monthlyto Unitholders;
10.the Unitholders will continue to be entitled to the entire economicinterest in Provident (after the proposed amalgamation withRichland), as a wholly-owned subsidiary of the Trust, upon theArrangement being completed;
11.The attributes of the Trust Units are as follows:
(i) each Trust Unit represents an equal fractional undividedbeneficial interest in any distribution by the Trust (whetherof net income, net realized capital gains or other amounts)and in any net assets of the Trust in the event of terminationor winding-up;
(ii) Trust Units shall rank among themselves equally and rateablywithout discrimination, preference or priority;
(iii) Unitholders are not subject to any liability whatsoeverto any person in connection with the assets, the obligationsor the affairs of the Trust or with respect to any act performedby the trustee of the Trust;
(iv) Unitholders are entitled to receive a proportionate shareof the net income, net realized capital gains or other amountsof the Trust to be distributed on a monthly basis;
(v) the Trust Units have no restrictions on transfer and arelisted on The Toronto Stock Exchange (the "TSE") under the symbol"PVE.UN" and the American Stock Exchange (the "AMEX") underthe symbol "PVX";
(vi) the Trust Units are redeemable at the option of the holderfrom time to time and at any time either in cash or by the distributionof a note instrument having an aggregate principal amount equalto the amount of cash such redeeming holder of Trust Units wouldotherwise be entitled to; and
(vii) annual meetings of the Unitholders (with the Unitholdersbeing entitled to one vote per Trust Unit) shall be held eachyear at which the trustee shall be appointed, auditors shallbe appointed and other matters requiring approval of Unitholdersshall be put forward for approval as may be required from timeto time;
12.to the best of its knowledge, information and belief, the Trustis not in default of any requirements under the Legislation;
13.Provident is a corporation wholly-owned by the Trust. Provident,was incorporated under the ABCA on January 17, 2001 and wasamalgamated with Founders Energy Ltd. pursuant to a statutoryplan of arrangement. Provident was amalgamated with Maxx PetroleumLtd. effective May 25, 2001 pursuant to a statutory plan ofarrangement. It is anticipated that as the final step in theArrangement, Provident will amalgamate with Richland and continueunder the name "Provident Energy Ltd." The head and principaloffices of Provident are located at 900, 606 - 4th Street S.W.,Calgary, Alberta, T2P 1T1. The registered office of Providentis 3700, 400 - 3rd Avenue S.W., Calgary, Alberta, T2P 4H2. Theprincipal business of Provident is to manage and administerthe operating activities associated with the oil and gas propertiesin which it has an interest;
14.Terraquest is a corporation incorporated under the ABCA andis headquartered in Calgary, Alberta.
15.Terraquest has not conducted any business to date, except forthe entering into of an arrangement agreement with Richland,Provident and the Trust. After giving effect to the Arrangement,the properties currently owned by Richland located at Bow Island,Firebird, McLeans Creek, Eyremore, and Whitecourt, Alberta (collectively,the "Terraquest Properties"), will be transferred to Terraquest.
16.the authorized capital of Terraquest consists of an unlimitednumber of common shares ("Terraquest Shares"), an unlimitednumber of first preferred shares and an unlimited number ofsecond preferred shares of which, as at the date hereof, oneTerraquest Share is issued and outstanding and such TerraquestShare is held by Richland;
17.Terraquest is not a reporting issuer in any jurisdiction;
18.Terraquest will apply to list the Terraquest Shares on eitherthe TSE or the Canadian Venture Exchange Inc.
19.the proposed directors and officers of Terraquest are listedin Appendix E to the Information Circular of Richland (the "InformationCircular");
20.on November 26, 2001, Richland and the Trust announcedthe intention, by way of the Arrangement, to transfer the TerraquestProperties to Terraquest and then to combine the remaining businessof Richland with Provident;
21.under the terms of the Arrangement, the Richland shareholderswill exchange their Common Shares for Trust Units and TerraquestShares on the basis of 0.40 Trust Units and one Terraquest Sharefor each Common Share held;
22.Terraquest intends to issue approximately 9,500,000 TerraquestShares to investors, including certain directors and officersof Richland and associates of them, a portion of which willbe issued as "flow-through" shares, and will be issued at aprice per share determined by the Terraquest Board of Directorsbut will not be less than the weighted average trading priceof the Terraquest Shares for the first five trading days followingthe listing of the Terraquest shares on the TSE;
23.the Arrangement consists of a number of steps and trades asset out in the Plan of Arrangement, which was appended to theInformation Circular, none of which will be effective unlessall are effective;
24.the Arrangement provides for the following transactions to occur:
A) all Common Shares, other than Common Shares owned by dissentingshareholders ("Dissenting Shares") owned by non-residents ofCanada within the meaning of the Income Tax Act of Canada("Tax Act") shall be transferred to Provident (free of any claims)and such Richland Common shareholders ("Richland Shareholders")shall receive acquisition notes ("Acquisition Notes") and TerraquestShares from Provident on the basis of the Per Share PrincipalAmount (as defined in the Information Circular) of AcquisitionNotes and one Terraquest Share for every one Common Share andsuch Terraquest Shares shall be delivered by Provident to suchRichland Shareholders upon the completion of the event referredto in subsection (f) below;
B) with respect to Common Shares acquired by Provident fromthe non-resident holders:
(1) the non-resident holders of such Common Shares shall ceaseto be holders of such Common Shares and such non-resident holdersshall be removed from the register of Common Shares with respectto such Common Shares;
C) Provident shall and shall be deemed to be, the transfereeof all such Common Shares (free of any claims) and shall beentered in the register of Common Shares; and
D) there shall be deemed to be issued to each such holder anaggregate principal amount of Acquisition Notes equal to thenumber of Common Shares previously held by such holder multipliedby the Per Share Principal Amount and such holder's name shallbe added to the register of Acquisition Notes and the sharecertificate representing Common Shares shall represent suchprincipal amount of Acquisition Notes after the above describedtransfer;
E) the articles of Richland shall be amended to change its authorizedcapital by the addition of an unlimited amount of Class A Sharesand Class B Shares;
F) the articles of Richland shall be amended such that eachof the issued and outstanding Common Shares (other than DissentingShares) shall and shall be deemed to be changed into one ClassA Share and one Class B Share;
G) Richland shall sell the Terraquest Properties to Terraquestin accordance with the Purchase and Sale Agreement, pursuantto which Terraquest shall issue to Richland as considerationfor the Terraquest Properties such number of Terraquest Shareswhich when added to Terraquest's then issued and outstandingshares shall be equal to the total number of Class B Sharesissued and outstanding immediately after the change referredto in subsection (d) above;
H) Richland shall redeem all of the issued and outstanding ClassB Shares in consideration of the transfer to the holders thereofof one Terraquest Share for each Class B Share redeemed;
I) each issued and outstanding Class A Share (other than thoseheld by Provident), shall be and shall be deemed to be, exchangedwith Provident for Acquisition Notes on the basis of the PerShare Principal Amount of Acquisition Notes for every one ClassA Share;
J) the Acquisition Notes shall be, and shall be deemed to be,exchanged with the Trust, without recourse, resulting in theacquisition by the Trust, free of any claims, of all of theAcquisition Notes and the acquisition by the holders of AcquisitionNotes, free of any claims, of Trust Units, on the basis of 0.40Trust Units for each Per Share Principal Amount of AcquisitionNotes;
K) in lieu of fractional Trust Units each holder of a ClassA Share who would otherwise be entitled to receive a fractionalTrust Unit shall be paid by the Trust an amount equal to theproduct of (a) such fraction multiplied by (b) $9.50, such amountshall be provided to a depositary ("the Depositary") by theTrust upon request in full satisfaction of such fractional entitlement;
L) the trades and distributions of securities in this paragraphare defined as the "Trades";
25.if the effective date ("Effective Date") shall not occur ona date which results in the shareholders of Richland being unitholdersof the Trust of record for the purposes of receiving the Trust'sJanuary 2002 cash distribution (such record date being anticipatedto be on or about January 31, 2002) each Richland shareholdershall receive, in addition to the 0.40 of a Trust Unit and 1Terraquest Share, a cash payment for each Common Share of 0.40multiplied by the per Trust Unit amount of the January cashdistribution payable by the Trust;
26.Richland and Provident shall be amalgamated and continue asone corporation under the name of "Provident Energy Ltd.";
27.the Information Circular has been provided to all shareholdersand filed in the Jurisdictions and contains prospectus leveldisclosure of Richland, Terraquest, Provident and the Trust;
28.the Board of Directors of Richland has determined that the Arrangementis fair to the holders of Common Shares, that the Arrangementis in the best interests of Richland and the holders of CommonShare and has resolved to unanimously recommend that the holdersof Common Shares vote in favour of the Arrangement. The Boardof Directors of Richland has also received an opinion from GriffithsMcBurney & Partners, its financial advisors, that the Arrangementis fair, from a financial point of view, to the holders of CommonShares who vote in favour of the Arrangement;
29.the Terraquest Properties have been the subject of continuousdisclosure on an ongoing basis for more than 12 months pursuantto Richland's responsibilities as a reporting issuer;
30.the shareholders will have the right to dissent from the Arrangementunder Section 184 of the ABCA, the Information Circularwill disclose full particulars of this right in accordance withapplicable law;
31.the Arrangement is subject to both shareholder approval andthe approval of the Court of Queen's Bench of Alberta;
32.exemptions from registration and prospectus requirements ofthe Legislation in respect of the Trades, and exemptions fromprospectus requirements of the Legislation in respect of thefirst trades in Terraquest shares and Trust Units followingthe Arrangement, are not otherwise available in all Jurisdictions;
33.Terraquest will not be a reporting issuer within the definitionsof all of the applicable Jurisdictions at the time of the Arrangementbecoming effective.
AND WHEREAS under the System, this MRRS Decision Documentevidences the decision of each Decision Maker (collectively,the "Decision");
ANDWHEREAS each of the Decision Makers is satisfied thatthe test contained in the Legislation that provides the DecisionMaker with the jurisdiction to make the Decision has been met;
TheDecision of the Decision Makers under the Legislation is thatthe Registration and Prospectus Requirements shall not applyto the Trades made in connection with the Arrangement providedthat the first trade in Terraquest Shares and Trust Units acquiredpursuant to this Decision in a Jurisdiction shall be deemedto be a distribution or primary distribution to the public underthe Legislation of such Jurisdiction (the "Applicable Legislation")unless
(i) except in Québec, the conditions in subsections (3)or (4) of section 2.6 and subsections (2) or (3) of section2.8 (except for the requirement that Terraquest have been areporting issuer for 12 months) of MI 45-102 Resale of Securitiesare satisfied; and
(ii) in Québec,
(a) the issuer is a reporting issuer in Québec immediatelypreceding the trade,
(b) no unusual effort is made to prepare the market or to createa demand for the securities that are the subject of the trade,
(c) no extraordinary commission or consideration is paid toa person or company in respect of the trade, and
(d) if the selling shareholder is an insider or officer of theissuer, the selling shareholder has no reasonable grounds tobelieve that the issuer is in default of securities legislation.
AND WHEREAS the Decision of the Decision Makers underthe Legislation is that: in the provinces of British Columbia,Alberta, Saskatchewan, Ontario and Québec where an issuercan be deemed to be a reporting issuer or the equivalent undersuch provinces' securities laws, Terraquest shall be deemedto be a reporting issuer as of the effective time of the Arrangement.
January16, 2002."StephenP. Sibold" "Glenda A. Campbell"