Securities Law & Instruments

Headnote

MRRS - relief from registration and prospectusrequirements granted in connection with arrangement involvingissuance of exchangeable shares where exemptions not availablefor technical reasons - relief from continuous disclosure requirementsgranted to issuer of exchangeable shares, subject to certainconditions.

Applicable Ontario Statutes

Securities Act, R.S.O. 1990, c. S.5, as am,ss. 25(1), 53(1), 74(1), 75, 77, 78, 79, 81 80(b)(iii).

Applicable Ontario Rules

Ontario Securities Commission Rule 51-501 AIFand MD&A (2000) 23 O.S.C.B. 8365.

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA, BRITISH COLUMBIA, SASKATCHEWAN
MANITOBA, ONTARIO, QUÉBEC, NEW BRUNSWICK, PRINCE EDWARDISLAND, NOVA SCOTIA,
NEWFOUNDLAND AND LABRADOR,
THE NORTHWEST TERRITORIES,
NUNAVUT, AND THE YUKON TERRITORY

AND

IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF
CCS INCOME TRUST,
CANADIAN CRUDE SEPARATORS INC., AND
CCS INC.

MRRS DECISION DOCUMENT

1. WHEREAS the local securities regulatoryauthority or regulator (collectively , the "Decision Makers")in each of Alberta, British Columbia, Saskatchewan, Manitoba,Ontario, Québec, New Brunswick, Prince Edward Island,Newfoundland and Labrador, Nova Scotia, the Yukon Territory,Nunavut and the Northwest Territories (the "Jurisdictions")has received an application from CCS Income Trust (the "Trust"),Canadian Crude Separators Inc. ("CCS") and CCS Inc.("AcquisitionCo") for a decision under the securitieslegislation of the Jurisdictions (the "Legislation")that the requirements contained in the Legislation:

1.1 to be registered to trade in a security(the "Registration Requirement") and to file a preliminaryprospectus and a prospectus and receive receipts therefore (the"Prospectus Requirement") shall not apply to certaintrades of securities to be made in connection with a proposedplan of arrangement under section 193 of the Business CorporationsAct (Alberta) (the "ABCA") involving the Trust, AcquisitionCo,CCS and the security holders of CCS; and

1.2 with respect to AcquisitionCo (or its successoron amalgamation with CCS - the "Amalgamated Corporation")in those Jurisdictions in which it becomes a reporting issueror the equivalent under the Legislation to issue a press releaseand file a report upon the occurrence of a material change,file an annual report where applicable, interim financial statementsand audited annual financial statements and deliver such financialstatements to the security holders of AcquisitionCo or the AmalgamatedCorporation, file an information circular or make an annualfiling in lieu of filing an information circular, where applicable,file an annual information form and provide management's discussionand analysis of financial conditions and results of operations(the "Continuous Disclosure Requirements") shall notapply to AcquisitionCo or the Amalgamated Corporation;

2. AND WHEREAS pursuant to the MutualReliance Review System for Exemptive Relief Applications (the"System") the Alberta Securities Commission is theprincipal regulator for this application;

3. AND WHEREAS the Trust, CCS and AcquisitionCohave represented to the Decision Makers that:

3.1 CCS is a corporation organized and subsistingunder the ABCA;

3.2 CCS provides a variety of services to theupstream oil and gas sector, including the provision of oilfield waste treatment, processing and disposal services andcrude oil separation and terminaling services to oil and gasproducers and the operation of a fleet of service rigs;

3.3 the head and principal offices of CCS arelocated at 2400, 530 - 8th Avenue S.W., Calgary, Alberta T2P3S8;

3.4 the authorized capital of CCS presentlyconsists of an unlimited number of common shares ("CommonShares") and up to 764,000 Series "A" preferredshares;

3.5 as at April 19, 2002, 13,824,747 CommonShares and no Series "A" preferred shares were issuedand outstanding; options and warrants ("Options")to purchase 1,733,411 Common Shares were outstanding; and a$17,000,000 6% Subordinated Convertible Debenture due July 29,2005 was issued and outstanding, which Debenture the holderhas agreed to convert into 3,912,778 Common Shares prior tothe Arrangement;

3.6 the Common Shares are presently listed onthe Toronto Stock Exchange (the "TSE");

3.7 CCS is a reporting issuer in the Provincesof Alberta, Saskatchewan, Manitoba, Ontario, Québec,Nova Scotia, and Newfoundland and Labrador and has been formore than 12 months;

3.8 CCS has filed all the information that ithas been required to file as a reporting issuer in each of theProvinces of Alberta, Saskatchewan, Manitoba, Ontario, Québec,Nova Scotia and Newfoundland and Labrador, and is not in defaultof the securities legislation in any of these jurisdictions;

3.9 the Trust is an open-end unincorporatedinvestment trust governed by the laws of the Province of Albertaand created pursuant to a trust indenture dated April 17, 2002between CCS and Computershare Trust Company of Canada, as trustee;

3.10 the head and principal offices of the Trustare located at 2400, 530 - 8th Avenue S.W., Calgary, AlbertaT2P 3S8;

3.11 the Trust was established to invest insecurities of AcquisitionCo and the Amalgamated Corporationinitially but is also permitted to acquire and invest in securitiesof any other subsidiary of the Trust or any other entity;

3.12 the Trust was established with nominalcapitalization and currently has only nominal assets and noliabilities and the only activity which will be carried on bythe Trust will be the holding of securities, initially securitiesof the Amalgamated Corporation;

3.13 the Trust is authorized to issue an unlimitednumber of trust units ("Trust Units") and an unlimitednumber of special voting rights ("Special Voting Rights");

3.14 as at April 24, 2002, there was one TrustUnit issued and outstanding and owned by CCS and no SpecialVoting Rights were outstanding;

3.15 the Trust has received conditional approvalfrom the TSE for the listing on the TSE of the Trust Units tobe issued in connection with the Arrangement subject to, amongother things, completion of the Arrangement;

3.16 the Trust is not a reporting issuer inany of the Jurisdictions;

3.17 AcquisitionCo was incorporated pursuantto the ABCA on April 17, 2002;

3.18 the head and principal offices of AcquisitionCoare located at 2400, 530 - 8th Avenue S.W., Calgary, AlbertaT2P 3S8;

3.19 AcquisitionCo was incorporated to participatein the Arrangement by acquiring, directly or indirectly, CommonShares and Options of CCS;

3.20 the authorized capital of AcquisitionCopresently consists of an unlimited number of common shares;AcquisitionCo will amend its Articles such that it (and theAmalgamated Corporation) will also be authorized to issue anunlimited number of exchangeable shares issuable in series,of which 6,500,000 Series A exchangeable shares (the "ExchangeableShares") will be authorized;

3.21 as at April 24, 2002, 10 common sharesof AcquisitionCo were issued and outstanding and owned by theTrust;

3.22 AcquisitionCo is not a reporting issuerin any of the Jurisdictions;

3.23 the Arrangement will be effected by wayof a plan of arrangement under section 193 of the ABCA whichwill require approval by (i) not less than two-thirds of thevotes cast by the holders of Common Shares and the holders ofOptions (present in person or represented by proxy), each votingseparately as a class, at a meeting to be held on May 22, 2002(the "Meeting") and thereafter, (ii) the approvalof the Court of Queen's Bench of Alberta (the "Court");

3.24 the management information circular (the"Information Circular") mailed to the holders of CommonShares and the holders of Options in connection with the Meetingconforms with the ABCA, applicable securities laws and an interimorder of the Court and contains prospectus-level disclosureconcerning the respective business, affairs and securities ofthe Trust, CCS and the Amalgamated Corporation and a detaileddescription of the Arrangement;

3.25 under the Arrangement:

3.25.1 the holders ("Shareholders")of Common Shares (other than dissenting holders or certain participatingholding corporations ("Participating Holdcos") willexchange each of the Common Shares held by them with AcquisitionCoin consideration for, at the election or deemed election ofeach such Shareholder: (i) one note of AcquisitionCo (a "Note")or (ii) one Series A exchangeable share of AcquisitionCo (an"Exchangeable Share") or (iii) a combination thereof;

3.25.2 the holders ("Participating HoldcoShareholders") of shares of Participating Holdcos ("ParticipatingHoldco Shares") will exchange each of the ParticipatingHoldco Shares held by them with AcquisitionCo in considerationfor, at the election or deemed election of each such ParticipatingHoldco Shareholder: (i) one Note or (ii) one Exchangeable Shareor (iii) a combination thereof;

3.25.3 the holders ("Optionholders")of Options (other than dissenting holders) will exchange eachof the Options held by them with AcquisitionCo for Notes;

3.25.4 Options acquired by AcquisitionCo willbe exchanged with CCS for Common Shares; and

3.25.5 each Note will be exchanged with theTrust for one Trust Unit;

3.26 upon completion of these exchanges, eachParticipating Holdco will become wholly-owned by AcquisitionCoand all of the Common Shares of CCS will be owned by AcquisitionCodirectly or indirectly through the Participating Holdcos;

3.27 as part of the Arrangement, AcquisitionCo,CCS and each Participating Holdco will amalgamate to form theAmalgamated Corporation which will continue under the name "CCSInc.";

3.28 the Amalgamated Corporation will becomea reporting issuer under the Legislation in Alberta, Saskatchewan,Manitoba, Ontario, Québec, Nova Scotia and Newfoundlandand Labrador and will be subject to the Continuous DisclosureRequirements in such Jurisdictions;

3.29 the Trust will become a reporting issuerunder the Legislation in Alberta, Saskatchewan, Ontario, andQuébec and will be subject to the Continuous DisclosureRequirements in such Jurisdictions;

3.30 the Exchangeable Shares will provide aholder with a security having economic, ownership and votingrights which are, as nearly as practicable, equivalent to thoseof the Trust Units;

3.31 under the terms of the Exchangeable Sharesand certain rights to be granted in connection with the Arrangement,holders of Exchangeable Shares will be able to exchange themat their option for Trust Units;

3.32 under the terms of the Exchangeable Sharesand certain rights to be granted in connection with the Arrangement,the Trust or a subsidiary of the Trust other than the AmalgamatedCorporation (an "ExchangeCo") or the Amalgamated Corporationwill be able to redeem, retract or acquire Exchangeable Sharesin exchange for Trust Units in certain circumstances;

3.33 in order to ensure that the ExchangeableShares remain the voting and economical equivalent of the TrustUnits prior to their exchange, the Arrangement provides for:

3.33.1 a voting and exchange trust agreementto be entered into among the Trust, the Amalgamated Corporationand Computershare Trust Company of Canada (the "Trustee")which will, among other things, grant to the Trustee, for thebenefit of holders of Exchangeable Shares, the right to requirethe Trust or ExchangeCo to exchange the Exchangeable Sharesfor Trust Units, or to trigger automatically the exchange ofthe Exchangeable Shares for Trust Units upon the occurrenceof certain specified events;

3.33.2 the deposit by the Trust of a SpecialVoting Right with the Trustee which will effectively providethe holders of Exchangeable Shares with voting rights equivalentto those attached to the Trust Units; and

3.33.3 a support agreement to be entered intobetween the Trust and the Amalgamated Corporation which will,among other things, restrict the Trust from distributing additionalTrust Units or rights to subscribe therefore or other propertyor assets to all or substantially all of the holders of TrustUnits, nor change the rights, privileges or other terms of theTrust Units, unless the same or an economically equivalent changeto the Exchangeable Shares (or in the rights of the holdersthereof) is made simultaneously;

3.34 the steps under the Arrangement, the termsof the Exchangeable Shares and the exercise of certain rightsprovided for in connection with the Arrangement and the ExchangeableShares involves or may involve a number of trades of securities(collectively, the "Trades");

3.35 there are no exemptions from the RegistrationRequirement or the Prospectus Requirement available under theLegislation for certain of the Trades;

3.36 the Information Circular discloses thatthe Trust and AcquisitionCo will rely on exemptions, includingdiscretionary exemptions, from the Registration Requirementand Prospectus Requirement with respect to the issuance of TrustUnits and Exchangeable Shares pursuant to the Arrangement anddiscloses that application will be made to relieve the AmalgamatedCorporation from the Continuous Disclosure Requirements; and

3.37 the Trust will concurrently send to holdersof Exchangeable Shares resident in the Jurisdictions all disclosurematerial it sends to holders of Trust Units pursuant to theLegislation;

4. AND WHEREAS under the System, thisMRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");

5. AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to make theDecision has been met;

6. THE DECISION of the Decision Makersunder the Legislation is that:

6.1 the Registration Requirement and ProspectusRequirement shall not apply to the Trades provided that thefirst trade in securities acquired under this Decision shallbe deemed to be a distribution or primary distribution to thepublic;

6.2 the Prospectus Requirement shall not applyto the first trade in Trust Units and Exchangeable Shares acquiredby security holders of CCS or Participating Holdcos under theArrangement and the first trade of the Trust Units acquiredby the holders thereof on the exercise of all rights, automaticor otherwise, under such Exchangeable Shares, provided that:

6.2.1 except in Québec, the conditionsin subsections (3) or (4) of section 2.6 of Multilateral Instrument45-102 Resale of Securities ("MI 45-102"), with theissuer being the Trust, are satisfied and for the purposes ofdetermining the period of time that the Trust has been a reportingissuer under section 2.6 of MI 45-102, the period of time thatCCS was a reporting issuer in at least one of the jurisdictionslisted in Appendix B of MI 45-102 immediately before the Arrangementmay be included; and

6.2.2 in Québec,

6.2.2.1 the Trust is and has been a reportingissuer in Québec for the 12 months immediately precedingthe trade, including the period of time that CCS was a reportingissuer in Québec immediately before the Arrangement;

6.2.2.2 no unusual effort is made to preparethe market or create a demand for the securities that are thesubject of the trade;

6.2.2.3 no extraordinary commission or considerationis paid to a person or company in respect of the trade; and

6.2.2.4 if the selling security holder is aninsider or officer of the Trust, the selling security holderhas no reasonable grounds to believe that the Trust is in defaultof securities legislation;

6.3 the Continuous Disclosure Requirements shallnot apply to the Amalgamated Corporation for so long as:

6.3.1 the Trust is a reporting issuer in Québecand at least one of the jurisdictions listed in Appendix B ofMI 45-102 and is an electronic filer under National Instrument13-101;

6.3.2 the Trust sends to all holders of ExchangeableShares resident in the Jurisdictions all disclosure materialfurnished to holders of Trust Units under the Continuous DisclosureRequirements;

6.3.3 the Trust complies with the requirementsof the TSE, or such other market or exchange on which the TrustUnits may be quoted or listed, in respect of making public disclosureof material information on a timely basis;

6.3.4 the Amalgamated Corporation is in compliancewith the requirements of the Legislation to issue a press releaseand file a report with the Decision Makers upon the occurrenceof a material change in respect of the affairs of the AmalgamatedCorporation that is not also a material change in the affairsof the Trust;

6.3.5 the Trust shall include in all futuremailings of proxy solicitation materials to holders of ExchangeableShares a clear and concise insert explaining the reason forthe mailed material being solely in relation to the Trust andnot to the Amalgamated Corporation, such insert to include areference to the economic equivalency between the ExchangeableShares and Trust Units and the right to direct voting at meetingsof holders of Trust Units;

6.3.6 the Trust remains the direct or indirectbeneficial owner of all of the issued and outstanding votingsecurities of the Amalgamated Corporation; and

6.3.7 the Amalgamated Corporation does not issueany preferred shares or debt obligations other than debt obligationsissued to its affiliates or to banks, loan corporations, trustcorporations, treasury branches, credit unions, insurance companiesor other financial institutions.

May 22, 2002.

"Glenda A. Campbell"      "David W. Betts"