NCE Energy Trust et al. - MRRS Decision
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - combination of two issuers using exchangeableshare structure by plan of arrangement - relief under subsections 116(1), 123(c) and 184(2) of the Alberta Act from therequirements under sections 54 and 81 of the Alberta Act and the continuous disclosure requirements under Part 11 ofthe Alberta Act in connection with the exchangeable share structure.
Applicable Alberta Statutory Provisions
Securities Act, S.A., 1981, c.S-6.1, as amended, s. 54, 81, 116(1), 116(1.1), Part 11, 123(c) and 184(2).
IN THE MATTER OF
THE SECURITIES LEGISLATION
OF ALBERTA AND ONTARIO
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF NCE ENERGY TRUST, NCE ENERGY CORPORATION,
923513 ALBERTA LTD., AND FORTE ENERGY LTD.
1. WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of Alberta andOntario (the "Jurisdictions") has received an application from NCE Energy Trust ("NCE Trust"), NCE EnergyCorporation ("NCE Energy"), 923513 Alberta Ltd. ("NCE Subco") and Forte Energy Ltd. ("Forte") for a decisionpursuant to the securities legislation of the Jurisdictions (the "Legislation") that:
1.1 the requirements contained in the Legislation to be registered to trade in a security (the "RegistrationRequirements") and to file a preliminary prospectus and a prospectus and to obtain receipts therefor(the "Prospectus Requirements") shall not apply to certain trades to be made in connection with anagreement to combine the business of NCE Trust and Forte through a plan of arrangement involvingNCE Trust, NCE Energy, NCE Subco and Forte; and
1.2 the requirements contained in the Legislation for a reporting issuer to issue a press release and filea report with the Decision Makers upon the occurrence of a material change, file and deliver interimand audited annual financial statements and annual reports, information circulars and annualinformation forms and provide management's discussion and analysis of financial conditions andresults of operations (the "Continuous Disclosure Requirements") shall not apply to NCE Energy,provided certain conditions are met;
2. AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the"System") the Alberta Securities Commission is the principal regulator for this application;
3. AND WHEREAS NCE Trust, NCE Energy, NCE Subco and Forte have represented to the Decision Makers that:
3.1 Forte is a corporation incorporated under the Business Corporations Act (Alberta) (the "ABCA");
3.2 the principal office of Forte is located in Calgary, Alberta;
3.3 the authorized share capital of Forte includes of an unlimited number of common shares ("ForteShares");
3.4 10,177,500 Forte Shares are outstanding;
3.5 no securities of Forte are listed or quoted on any exchange or market;
3.6 Forte is not a reporting issuer in any jurisdiction;
3.7 holders of Forte Shares ("Forte Shareholders") and holders of options to acquire Forte Shares ("ForteOptions") reside in only two Canadian jurisdictions: Alberta and Ontario;
3.8 NCE Trust is a trust established under the laws of the Province of Ontario;
3.9 the principal office of NCE Trust is located in Calgary, Alberta;
3.10 NCE Trust is authorized to issue an unlimited number of trust units ("NCE Trust Units");
3.11 19,458,506 NCE Trust Units are outstanding;
3.12 the NCE Trust Units are currently listed and posted for trading on the Toronto Stock Exchange (the"TSE");
3.13 NCE Trust is a reporting issuer, or the equivalent, under the legislation of all provinces and territoriesof Canada where such a concept exists and is not in default of any of the requirements of suchlegislation;
3.14 NCE Energy is a corporation amalgamated under the ABCA;
3.15 the principal office of NCE Energy is in Calgary, Alberta;
3.16 the authorized capital of NCE Energy consists of an unlimited number of common shares ("NCEShares");
3.17 one NCE Share is outstanding;
3.18 the NCE Share is held by Montréal Trust Company of Canada as trustee for NCE Trust;
3.19 before the effective time of the Arrangement (to be defined herein), NCE Energy will amend its articlesto allow it to issue up to 7,415,000 exchangeable shares (the "Exchangeable Shares");
3.20 NCE Energy is not a reporting issuer in any jurisdiction;
3.21 NCE Subco is a corporation incorporated under the ABCA;
3.22 all of the issued and outstanding shares of NCE Subco are owned by NCE Trust;
3.23 NCE Subco was incorporated solely for the purposes of facilitating the acquisition of ExchangeableShares under various call rights to be created in connection with the Arrangement (to be definedherein);
3.24 NCE Trust, NCE Energy and Forte have entered into an agreement made as of April 5, 2001 (the"Arrangement Agreement") which provides for the combination of the businesses of NCE Trust andForte (the "Combination");
3.25 the Combination will be undertaken by way of a plan of arrangement effected under section 186 of theABCA involving NCE Trust, NCE Energy, NCE Subco and Forte (the "Arrangement");
3.26 under the terms of the Arrangement, Forte Shareholders (other than dissenting Forte Shareholders)will transfer each of the Forte Shares held by them to NCE Energy in consideration for, at the electionof each such Forte Shareholder, either of the following options or a combination thereof:
3.26.1 $4.59 cash for each Forte Share (the "Cash Consideration"), provided that not more than$20,000,000 in cash shall be payable in the aggregate, with the balance being paid in NCETrust Units or Exchangeable Shares at an exchange ratio of 1.067 NCE Trust Units or 1.067Exchangeable Shares per Forte Share; or
3.26.2 1.067 NCE Trust Units for each Forte Share (the "Trust Unit Consideration") or 1.067Exchangeable Shares for each Forte Share (the "Exchangeable Share Consideration"),provided that not more than an aggregate of 7,415,000 NCE Trust Units (calculated on a fullydiluted basis, assuming the conversion of all Exchangeable Shares) shall be issued in theaggregate, with the balance being paid in cash at a price of $4.59 for each Forte Share;
3.27 the Exchangeable Shares will provide a holder with a security having economic, ownership and votingrights which are, as nearly as practicable (with the exception of dividend treatment), equivalent tothose of NCE Trust Units;
3.28 any Forte Options not exercised by Forte Optionholders prior to the Arrangement shall be cancelled;
3.29 as a result of such exchange, Forte will become a wholly owned subsidiary of NCE Energy and,immediately thereafter, Forte and NCE Energy will amalgamate as part of the Arrangement;
3.30 under the terms of the Exchangeable Shares and certain rights to be granted in connection with theArrangement, holders of Exchangeable Shares will be able to exchange them at their option for NCETrust Units;
3.31 under the terms of the Exchangeable Shares and certain rights to be granted in connection with theArrangement, NCE Trust, NCE Subco or NCE Energy will be able to redeem, retract or acquireExchangeable Shares in exchange for NCE Trust Units in certain circumstances;
3.32 in order to ensure that the Exchangeable Shares remain the voting and economic equivalent of NCETrust Units prior to their exchange, the Arrangement provides for:
3.32.1 a support agreement to be entered into between NCE Trust, NCE Subco, NCE Energy andComputershare Trust Company of Canada (the "Trustee") which will, among other things,restrict NCE Trust from changing the rights, privileges or other terms of NCE Trust Unitsunless economically equivalent changes are made to the Exchangeable Shares;
3.32.2 a voting and exchange trust agreement to be entered into between NCE Trust, NCE Subco,NCE Energy and the Trustee which will, among other things, grant to the Trustee, for thebenefit of holders of Exchangeable Shares, the right to require NCE Trust or NCE Subco toexchange the Exchangeable Shares for NCE Trust Units, or to trigger automatically theexchange of the Exchangeable Shares for Trust Units upon the occurrence of certainspecified events; and
3.32.3 the deposit by NCE Trust of a special voting unit with the Trustee which will effectivelyprovide the holders of Exchangeable Shares with voting rights equivalent to those attachedto the NCE Trust Units;
3.33 the terms of the Arrangement, the terms of the Exchangeable Shares and the exercise of certain rightsprovided for in connection with the Arrangement may result in certain trades under the Legislation (the"Trades");
3.34 NCE Energy has applied for, and has received, conditional approval for the listing of the ExchangeableShares on the TSE following the completion of the Arrangement;
3.35 the Arrangement is subject to approval of the holders of Forte Shares ("Forte Shareholders") and ForteOptions ("Forte Optionholders") and the Court of Queen's Bench of Alberta;
3.36 a meeting of Forte Shareholders and Forte Optionholders has been scheduled for May 11, 2001 (the"Meeting");
3.37 an information circular and proxy statement (the "Information Circular") prepared in accordance withthe Legislation was provided to Forte Shareholders and Forte Optionholders in connection with theMeeting;
3.38 the Information Circular contains prospectus type disclosure concerning the Arrangement and thebusinesses of NCE Trust, NCE Energy and Forte;
3.39 the Information Circular discloses that NCE Trust, NCE Subco and NCE Energy have applied for relieffrom the Registration and Prospectus Requirements and the Continuous Disclosure Requirements asthey apply to NCE Energy and that NCE Energy will provide holders of the Exchangeable Shares withthe documents filed by NCE Trust pursuant to the Continuous Disclosure Requirements; and
3.40 NCE Trust will concurrently send to holders of Exchangeable Shares resident in the Jurisdictions alldisclosure material it sends to holders of NCE Trust Units pursuant to the Legislation;
4. AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each DecisionMaker (collectively, the "Decision");
5. AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that providesthe Decision Maker with the jurisdiction to make the Decision has been met;
6. THE DECISION of the Decision Makers pursuant to the Legislation is that:
6.1 the Registration and Prospectus Requirements shall not apply to the Trades provided that the firsttrade of Exchangeable Shares and NCE Trust Units issued under the Arrangement and the first tradeof NCE Trust Units issued upon the exchange, redemption or retraction of Exchangeable Shares shallbe deemed to be a distribution under the Legislation of the Jurisdiction in which the trade takes place(the "Applicable Jurisidiction") unless:
6.1.1 the trade is exempt from the Prospectus Requirements under the Legislation of theJurisdiction in which the trade takes place (the "Applicable Jurisdiction"); or
6.1.2 NCE Trust is a reporting issuer in the Applicable Jurisdiction;
6.1.3 if the seller is in a special relationship with NCE Energy or NCE Trust, as defined under theLegislation of the Applicable Jurisdiction, the seller has no reasonable ground to believe thatNCE Energy or NCE Trust is in default of any requirements of the Legislation of theApplicable Jurisdiction;
6.1.4 no unusual effort is made to prepare the market or to create a demand for the ExchangeableShares or the NCE Trust Units and no extraordinary commission or consideration is paid inrespect of the trade; and
6.1.5 the trade is not a trade from the holdings of any person, company or combination of personsor companies holding a sufficient number of securities of NCE Trust, or a combination ofsecurities of NCE Energy and NCE Trust, to affect materially the control of NCE Trust orholds, in the absence of evidence showing that the holding of those securities does not affectmaterially the control of NCE Trust, more than 20 percent of the outstanding voting securitiesof NCE Trust (and for these purposes the Exchangeable Shares shall be considered to bevoting securities of NCE Trust);
6.2 the Continuous Disclosure Requirements shall not apply to NCE Energy for as long as:
6.2.1 NCE Trust sends to all holders of Exchangeable Shares resident in the Jurisdictions alldisclosure material furnished to holders of NCE Trust Units under the Legislation;
6.2.2 NCE Trust complies with the requirements of the TSE, or such other market or exchange onwhich the NCE Trust Units may be quoted or listed, in respect of making public disclosureof material information on a timely basis;
6.2.3 NCE Trust shall include in all future mailings of proxy solicitation materials to holders ofExchangeable Shares a clear and concise insert explaining the reason for the mailedmaterial being solely in relation to NCE Trust and not to NCE Energy, such insert to includea reference to the economic equivalency between the Exchangeable Shares and NCE TrustUnits and the right to direct voting at NCE Trust Unitholders' meetings;
6.2.4 all continuous disclosure documents filed by NCE Trust with the Jurisdictions pursuant to theContinuous Disclosure Requirements shall also be filed with the Jurisdictions by NCE Energyif NCE Energy is a reporting issuer in that Jurisdiction;
6.2.5 NCE Energy does not declare any dividends on the Exchangeable Shares;
6.2.6 NCE Trust remains the direct or indirect beneficial owner of all the issued and outstandingvoting securities of NCE Energy; and
6.2.7 NCE Energy does not issue any second preferred shares or debt obligations other than debtobligations issued to banks, loan corporations, trust corporations, treasury branches, creditunions, insurance companies or other financial institutions;
May 11 , 2001.
Stephen P. Sibold Glenda A. Campbell