Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption granted to reporting issuer (Company A) from requirement to include historical financial statements of another reporting issuer (Company B) in Company A's information circular in connection with restructuring transaction under which securities are to be exchanged -- As part of transaction, Company A will vertically amalgamate into Company B through plan of arrangement and shareholders of Company A will receive shares of amalgamated corporation (the resulting reporting issuer).

Business purpose of transaction is for Company A to acquire certain tax assets of Company B -- Company B in default of continuous disclosure obligations under securities legislation -- Company B under Companies' Creditors Arrangement Act (CCAA) protection -- Company B recently disposed of substantially all of its assets, except for tax assets -- In connection with transaction, CCAA court order will extinguish liabilities of Company B and shareholders of Company B will have their shares cancelled for nil consideration.

Business, directors and management of resulting reporting issuer immediately after completion of transaction will be substantially the same as Company A's business, directors and management immediately before completion of transaction -- Exemption granted on condition that Company A's circular include alternative financial disclosure in respect of Company B.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations, ss. 9.1(2)(a), 13.1.

Form 51-102F5 Information Circular , item 14.2.

Citation: Maxim Power Corp., Re, 2010 ABASC 24

January 25, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(THE JURISDICTIONS)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

MAXIM POWER CORP.

(MAXIM OR THE FILER)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from the requirement under the Legislation to provide:

(a) financial statement disclosure with respect to EarthFirst Canada Inc. (EarthFirst) for the years ended December 31, 2007 and 2008 and the nine months ended September 30, 2009 and September 30, 2008 (the Financial Statements);

(b) a pro forma income statement of New Maxim (as defined herein) that gives effect to the Business Combination (as defined herein) as if it had taken place at the beginning of that financial year, for each of the following financial periods: (A) the financial year ended December 31, 2008; and (B) the interim period ended September 30, 2009;

(c) a pro forma balance sheet of New Maxim that gives effect to the Business Combination as at September 30, 2009; and

(d) pro forma earnings per share based on the pro forma financial statements referred to in paragraph (b) above (collectively the Pro Forma Financial Statements),

in the management information circular (the Circular) to be prepared by the Filer and delivered to the holders (Maxim Shareholders) of shares (Maxim Shares) of Maxim in connection with a special meeting of Maxim Shareholders expected to be held on March 2, 2010 to consider the Business Combination (as defined herein) provided the Filer includes the Alternative Financial Disclosure (as defined herein) in the Circular (the Requested Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for the application;

(b) the Filer has provided notice that Subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 Passport System 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:

Maxim

1. Maxim is a corporation incorporated pursuant to the provisions of the Business Corporations Act (Alberta) (ABCA). The principal office of Maxim is located in Calgary, Alberta.

2. Maxim is an independent power producer, which acquires or develops, owns and operates innovative and environmentally responsible power projects. Maxim currently owns and operates 39 power plants in western Canada, United States and France, having 788 MW of electric and 137 MW of thermal net generating capacity.

3. Maxim is a reporting issuer or the equivalent under the securities legislation of British Columbia, Alberta and Ontario. To its knowledge, Maxim is not in default of securities legislation in any jurisdiction of Canada.

4. The Maxim Shares are listed on the Toronto Stock Exchange (TSX) under the symbol "MXG".

5. Maxim has filed an "AIF" and has "current annual financial statements" (as such terms are defined in National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) for the financial year ended December 31, 2008.

EarthFirst

6. EarthFirst is a corporation incorporated under the Canada Business Corporations Act (CBCA). The principal office of EarthFirst is located in Calgary, Alberta.

7. EarthFirst is engaged in the business of wind energy project development. EarthFirst acquired a number of projects since its incorporation on December 8, 2004. The Dokie Project (as defined herein) was the first project EarthFirst attempted to develop.

8. EarthFirst is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland.

9. The common shares of EarthFirst are suspended from trading on the TSX and not otherwise listed or posted for trading on any exchange or quotation and trading reporting system.

10. Prior to the Business Combination (as defined herein), all of EarthFirst's liabilities will be extinguished with respect to EarthFirst by a court order (CCAA Order) under the Companies' Creditor Arrangement Act (CCAA).

11. EarthFirst's liabilities materially exceed its assets prior to the CCAA Order.

CCAA Proceedings

12. Pursuant to an initial order granted by the Alberta Court of Queen's Bench (the Court) on November 4, 2008, EarthFirst was granted protection from its creditors pursuant to the provisions of the CCAA by way of a stay of proceedings. With respect to the Business Combination, the Court has ordered that holders of securities of EarthFirst shall not be entitled to vote on the transactions contemplated by the Arrangement Agreement (as defined herein) and shall not be entitled to the right to dissent with respect to the transactions contemplated by the Arrangement Agreement notwithstanding any applicable provisions of the Canada Business Corporations Act or any other applicable law. It is anticipated that EarthFirst will not be discharged under the CCAA until immediately prior to closing of the Business Combination.

Potential Business Combination

13. Maxim has proposed entering into a business combination with Maxim, EarthFirst and 1494423 Alberta Ltd. (EarthFirst Subco) (the Business Combination).

14. In connection with the Business Combination, on October 7, 2009, Maxim, EarthFirst and EarthFirst Subco entered into an arrangement agreement dated October 7, 2009 (the Arrangement Agreement) to implement a plan of arrangement (the Plan of Arrangement) under Section 193 of the ABCA.

15. The Arrangement Agreement is subject to certain conditions including completion of the transactions contemplated by the Asset Purchase Agreement, as amended, dated May 20, 2009 (the Dokie Agreement) between EarthFirst and GE Energy Financial Services Company, whereby GE Energy Financial Services Company agreed to purchase assets relating to the Dokie Project of EarthFirst (the Dokie Project). The transactions contemplated by the Dokie Agreement were completed on December 11, 2009.

16. Pursuant to the Plan of Arrangement, Maxim will make an investment (the EarthFirst Investment) in EarthFirst of $5,000,000, subject to adjustment in accordance with the Arrangement Agreement, and the EarthFirst Investment and all of the property and assets of EarthFirst immediately prior to the effective time of the Business Combination whether real or personal, tangible or intangible, of every kind and description and wheresoever situate, but excluding the assets that comprise EarthFirst's Buffalo Atlee wind energy development project (the Project Assets) and books and records, shall be transferred, assigned and conveyed for and on behalf of the creditors and shareholders of EarthFirst on an "as is where is" basis and without any recourse to EarthFirst whatsoever.

17. Subject to certain conditions, Maxim has agreed in the Arrangement Agreement to provide funding to EarthFirst during proceedings under the CCAA by way of a loan of up to $500,000 (the Expenses Loan). Any amounts outstanding under the Expenses Loan at the time of completion of the Business Combination would reduce Maxim's obligation to advance the EarthFirst Investment to EarthFirst in connection with the completion of the Business Combination.

18. Prior to the Business Combination, all of EarthFirst's liabilities would be extinguished with respect to EarthFirst by the CCAA Order.

19. Pursuant to the Plan of Arrangement, Maxim will be amalgamated with EarthFirst Subco, a wholly owned subsidiary of EarthFirst, and the entity resulting from such amalgamation will be amalgamated with EarthFirst (with the entity resulting from such amalgamation being named Maxim Power Corp. and being referred to herein as New Maxim). Pursuant to the Plan of Arrangement, all Maxim Shares will be exchanged, indirectly, on a one-for-one basis for common shares of New Maxim and such common shares will have the same rights and privileges as the Maxim Shares. All securities of EarthFirst outstanding immediately prior to implementation of the Plan of Arrangement will be cancelled for nil consideration pursuant to the Plan of Arrangement.

20. Following the completion of the Business Combination: (i) the business of New Maxim would be the current business of Maxim; (ii) New Maxim would be the successor to Maxim; and (iii) the common shares of New Maxim would, subject to approval by the TSX, be listed on the TSX.

21. The proposed Business Combination will constitute a "restructuring transaction" under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) for Maxim.

22. Pursuant to Maxim's constating documents and applicable corporate and securities laws, the Business Combination must be approved by two-thirds of the votes cast by the Maxim Shareholders entitled to vote in person or by proxy at the special meeting of Maxim Shareholders. The special meeting is anticipated to take place on March 2, 2010 and the Circular is expected to be mailed in early February 2010 subject to receipt of the Requested Relief.

Financial Statements in the Circular

23. Pursuant to Section 14.2 of Form NI 51-102F5 Information Circular (the Circular Form) of NI 51-102 (which requires compliance with National Instrument 41-101 General Prospectus Requirements (NI 41-101) and therefore with Form 41-101F1 Information Required in a Prospectus (the Prospectus Form)), Maxim is required to include the Financial Statements and Pro Forma Financial Statements in the Circular.

24. Other than Financial Statements and Pro Forma Financial Statements, the Circular will contain disclosure in accordance with the Circular Form and the Prospectus Form and will contain:

(a) audited statements of income, retained earnings and cash flows for each of the years ended December 31, 2008 and 2009 and audited balance sheets as at December 31, 2008 and 2009 in respect of the Project Assets and unaudited statements of income, retained earnings and cash flows for the interim period ended September 30, 2009 and unaudited balance sheet as at September 30, 2009 in respect of the Project Assets;

(b) a pro forma income statement of New Maxim that gives effect to the Business Combination as if it had taken place at the beginning of that financial year and prepared on the basis that, at each relevant time, the only assets of EarthFirst were the Project Assets and the only liabilities of EarthFirst were those related to the Project Assets, for each of the following financial periods: (A) the financial year ended December 31, 2008; and (B) the interim period ended September 30, 2009; and

(c) a pro forma balance sheet of New Maxim that gives effect to the Business Combination as at September 30, 2009 and prepared on the basis that, at this date, the only assets of EarthFirst were the Project Assets and the only liabilities of EarthFirst were those related to the Project Assets;

(the disclosure referenced in paragraphs 24(a) through (c) above being referred to herein as the Alternative Financial Disclosure).

25. After the sale of the Dokie Project pursuant to the Dokie Agreement and the CCAA Order, EarthFirst will only have assets of nominal value and no liabilities. The Project Assets comprise a very immaterial portion of the assets of EarthFirst prior to giving effect to such transactions (less than 1% of the total assets of EarthFirst excluding certain tax attributes based on the June 30, 2008 interim financial statements, which are the last available interim financial statements of EarthFirst, and based on the last offer received by EarthFirst from an arms' length party earlier this year would be worth approximately $65,000).

26. No income has ever been generated by EarthFirst from the Project Assets and, immediately upon completion of the Business Combination, New Maxim will not be subject to any liabilities or obligations, current, future, contingent or otherwise, in respect of the Project Assets.

27. The Project Assets are at such a state that Maxim would have to make significant investment in wind power generating infrastructure before being able to generate income from the project, but in any event, Maxim would not be able to generate income until at least November 30, 2012, the current proposed date the Alberta Electrical System Operator will complete the electrical interconnection.

28. Historical entity level financial statements that would reflect only EarthFirst's former operations and primarily information related to or derived from the Dokie Project would not assist Maxim Shareholders with their assessment of the business that would be carried on by New Maxim on completion of the Business Combination and are likely to be misleading or confusing to Maxim Shareholders as New Maxim will have no interest in the Dokie Project.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that the Filer includes in the Circular the Alternative Financial Disclosure.

"Blaine Young"
Associate Director, Corporate Finance
Alberta Securities Commission