Acclaim Energy Trust et al. - MRRS Decision

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications - exemption in Part 13 of National Instrument44-101 not available for technical reasons - relief grantedto permit short form eligible issuers to incorporate documentsby reference into information circular

Applicable Ontario Statutes

Securities Act R.S.O. 1990, c. S.5, as am.

Applicable National Instruments

National Instrument 44-101 Short Form ProspectusDistributions (2000) 23 OSCB (Supp) 867.

Applicable Ontario Rules

Commission Rule 54-501 Prospectus Disclosurein Certain Information Circulars (2000) 23 OSCB 8519.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ALBERTA, SASKATCHEWAN, MANITOBA,

ONTARIO, QUÉBEC, NOVASCOTIA, NEW BRUNSWICK,

PRINCE EDWARD ISLAND AND NEWFOUNDLAND

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

ACCLAIM ENERGY TRUST,

ACCLAIM ENERGY INC.,

KETCH ENERGY LTD. AND

KETCH RESOURCES LTD.

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") in eachof Alberta, Saskatchewan, Manitoba, Ontario, Québec,Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland(the "Jurisdictions") has received an application(the "Application") from Acclaim Energy Trust ("Acclaim"),Ketch Energy Ltd. ("Ketch") and Ketch Resources Ltd.("ExploreCo") (collectively, the "Filers")for a decision under the securities legislation of the Jurisdictions(the "Legislation") that:

1. the registration and prospectus requirementsof the Legislation (the "Maritime Legislation")in the Provinces of New Brunswick, Nova Scotia, Prince EdwardIsland and Newfoundland (the "Maritime Jurisdictions")shall not apply to certain trades made by Acclaim in connectionwith a proposed plan of arrangement (the "Arrangement")under the Business Corporations Act (Alberta) (the "ABCA")involving Acclaim, Acclaim Energy Inc. ("AEI"),Ketch, ExploreCo and the securityholders of Ketch; and

2. (i) the registration and prospectus requirementsof the Legislation shall not apply to certain trades madeby ExploreCo in connection with or subsequent to the Arrangement;and (ii) ExploreCo be deemed or declared a reporting issuerat the time of the Arrangement becoming effective for thepurposes of the Legislation, other than Manitoba, Newfoundland,New Brunswick and Prince Edward Island;

AND WHEREAS under the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Alberta Securities Commission is the Principal Regulatorfor the Application;

AND WHEREAS the Filers have representedto the Decision Makers that:

Acclaim Energy Trust

1. Acclaim is an open-ended trust settledunder the laws of Alberta and is headquartered in Calgary,Alberta;

2. Acclaim's business is the acquisition ofinterests in crude oil and natural gas rights and the exploration,development, production, marketing and sale of crude oil andnatural gas;

3. the authorized capital of Acclaim consistsof an unlimited number of trust units ("Trust Units")and an unlimited number of special voting units ("SpecialVoting Units"), of which, as at July 18, 2002, 32,252,809Trust Units and one Special Voting Unit (representing 29,171,184votes) were issued and outstanding;

4. Acclaim is, and has been for a period oftime in excess of 12 months, a reporting issuer (where suchconcept exists) under the securities legislation of the Jurisdictions.To the best of its knowledge, information and belief, Acclaimis not in default of the requirements under the Legislationor the regulations made thereunder (the "Regulations");

5. the Trust Units are listed and posted fortrading on the Toronto Stock Exchange (the "TSX")under the trading symbol "AE.UN";

Ketch Energy Ltd.

6. Ketch is a corporation continued underthe ABCA and is headquartered in Calgary, Alberta;

7. Ketch's business is the acquisition ofinterests in petroleum and natural gas rights and the explorationfor and the development, production, marketing and sale of,petroleum and natural gas;

8. the authorized capital of Ketch consistsof 100,000,000 common shares ("Common Shares"),of which, as at June 30, 2002, 46,744,285 Common Shares wereissued and outstanding. Also as of June 30, 2002, 3,338,000Common Shares were reserved for issuance in connection withthe exercise of outstanding options to acquire Common Shares("Options");

9. Ketch is, and has been for a period oftime in excess of 12 months, a reporting issuer (where suchconcept exists) under the securities legislation of the provincesof Alberta, British Columbia, Saskatchewan, Manitoba, Ontarioand Québec. To the best of its knowledge, informationand belief, Ketch is not in default of the requirements underthe Legislation or the Regulations;

10. the Common Shares are listed and postedfor trading on the TSX under the trading symbol "KCH";

Ketch Resources Ltd.

11. ExploreCo is a corporation incorporatedunder the ABCA and is headquartered in Calgary, Alberta;

12. ExploreCo has not conducted any businessto date, but has executed the Arrangement Agreement;

13. the authorized capital of ExploreCo consistsof an unlimited number of common shares ("ExploreCo Shares").As of the date hereof, there is issued and outstanding 1 ExploreCoShare, and it is owned by Ketch;

14. ExploreCo is not a reporting issuer inany jurisdiction;

15. ExploreCo has applied to list the ExploreCoShares on the TSX;

The Arrangement

16. on July 18, 2002, Ketch and Acclaim jointlyannounced that they had entered into an arrangement agreement(the "Arrangement Agreement") in respect of theArrangement to be effected under the ABCA. The informationcircular (the "Information Circular") in respectof the Arrangement in connection with a special meeting (the"Meeting") of the holders of Common Shares ("Shareholders")and the holders of Options ("Optionholders") tobe held on September 26, 2002 was mailed to the holders ofCommon Shares and Options (collectively, the "Ketch Securityholders")on August 23, 2002;

17. Under the terms of the Arrangement Agreement,Ketch has agreed to transfer certain of its exploration andproduction assets to ExploreCo ("ExploreCo Assets")and then combine the remaining business of Ketch with Acclaim;

18. The Arrangement provides for the followingtransactions to occur on the effective date:

(a) Ketch shall distribute to Shareholdersas a return of capital one ExploreCo Share for each threeCommon Shares held;

(b) each issued and outstanding Common Shareshall be transferred to 984486 Alberta Ltd. ("AcquisitionCo"),a wholly-owned subsidiary of Acclaim, in exchange for 1.15Trust Units for each Common Share held;

(c) AcquisitionCo shall issue 1 unsecured,subordinated, demand note ("Note") to Acclaimfor each Trust Unit issued above;

(d) all unexercised Options will be cancelledand the holders thereof shall be entitled to receive TrustUnits for each such Option. The number of Trust Units receivedwill be based upon the 95% of the amount by which the weightedaverage trading price of the Common Shares exceeds the exerciseprice of such Option, multiplied by the number of CommonShares to which such Option relates divided by the weightedaverage trading price of the Trust Units; and

(e) AcquisitionCo shall contemporaneouslywith the cancellation of Options and the issuance of TrustUnits referred to above, issue and deliver to Acclaim suchnumber of Notes as is equal to the product of 1.15 and thenumber of Trust Units required to be delivered by Acclaimabove in consideration for the cancellation of the Options;

19. no fractional Trust Units or ExploreCoShares shall be issued and in lieu of any fractional TrustUnit or ExploreCo Share, each registered Shareholder or Optionholderwill receive the next lowest number of Trust Units or ExploreCoShares, as the case may be;

20. it is a condition to completion of theArrangement that AEI shall have acquired all of the issuedand outstanding shares of Acclaim Energy Management Inc ("ManagementCo")not later than the effective time of the Arrangement in exchangefor the issuance of not more than 1,000,000 AEI preferredshares ("AEI Preferred Shares"), subject to adjustmentfor any working capital deficiency and tax liabilities accruedto the date of purchase. In addition, at the effective time,AEI shall issue an aggregate of not more than 762,594 AEIPreferred Shares to the shareholders of ManagementCo in exchangefor non-competition covenants from such shareholders. EachAEI Preferred Share will be convertible, after receipt ofall necessary regulatory approvals, into exchangeable sharesin the capital of AEI which shall be exchangeable on a onefor one basis for Acclaim Trust Units, subject to adjustmentfor distributions;

21. in connection with the Arrangement, Ketchintends to accelerate the vesting of all outstanding Optionsand will agree with any holder of Options that, in lieu ofsuch person exercising their Options, Ketch will pay to thatperson with respect to 50% of such person's Options the differencebetween the exercise price of the Options and $6.25 in exchangefor the termination of such Options, provided such holderalso agrees to exercise or surrender their remaining Optionsto Ketch for cancellation for no consideration effective atthe effective time of the Arrangement;

22. it is also a condition to the Arrangementthat all outstanding warrants to acquire Ketch Shares shallhave been exercised, cancelled or otherwise terminated;

The Order

23. the Information Circular in connectionwith the Arrangement provided to all holders of Common Sharesand Options, and filed in all of the Jurisdictions contains(or, to the extent permitted, has incorporated by reference)prospectus-level disclosure in respect of Acclaim, Ketch andExploreCo;

24. the ExploreCo Assets have been the subjectof continuous disclosure on an ongoing basis for more than12 months, in accordance with Ketch's responsibilities asa reporting issuer;

25. holders of Common Shares and Options willhave the right to dissent from the Arrangement under Section191 of the ABCA, and the Information Circular discloses fullparticulars of this right in accordance with applicable law;

26. exemptions from registration and prospectusrequirements of the Maritime Legislation in respect of tradesmade in securities of Acclaim are not available. Exemptionsfrom registration and prospectus requirements of the Legislationin respect of trades made in securities of ExploreCo in connectionwith the Arrangement and exemptions from prospectus requirementsof the Legislation in respect of first trades in Trust Unitsand ExploreCo Shares following the Arrangement are not otherwiseavailable in all Jurisdictions;

27. ExploreCo will not be a reporting issuerwithin the definitions of all of the applicable Jurisdictionsat the time of the Arrangement becoming effective;

AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each Decision Maker(collectively, the "Decision");

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;

THE DECISION of the Decision Makers underthe Legislation and the Maritime Legislation is that:

1. all trades made in securities of Acclaimin connection with the Arrangement shall not be subject tothe registration and prospectus requirements of the MaritimeLegislation;

2. all trades made in securities of ExploreCoin connection with the Arrangement shall not be subject tothe registration and prospectus requirements of the Legislation;

3. except in Québec, the first tradein a Jurisdiction of ExploreCo Shares acquired by former holdersof Common Shares or Options in connection with the Arrangementshall be a distribution or a primary distribution to the publicunder the Legislation of such Jurisdiction except that where:

(a) ExploreCo is a reporting issuer in ajurisdiction listed in Appendix B to Multilateral Instrument45-102 preceding the trade;

(b) the seller is in a special relationshipwith ExploreCo, as defined in the Legislation, the sellerhas reasonable grounds to believe that ExploreCo is notin default of any requirement of the Legislation; and

(c) no unusual effort is made to preparethe market or to create a demand for the securities andno extraordinary commission or consideration is paid inrespect of the first trades;

then such a first trade shall be a distributionor a primary distribution to the public only if it is fromthe holdings of any person, company or combination of personsor companies, as the case may be, holding a sufficient numberof securities of ExploreCo, to affect materially the controlof ExploreCo, but any holding of any person, company or combinationof persons or companies holding more than 20% of the outstandingvoting securities of ExploreCo shall, in the absence of evidenceto the contrary, be deemed to affect materially the controlof ExploreCo;

4. in Québec the alienation of ExploreCoShares acquired by former holders of Common Shares or Optionsin connection with the Arrangement shall be a distributionunder the legislation of Québec except that where:

(a) ExploreCo is a reporting issuer in Québecimmediately preceding the trade;

(b) no unusual effort is made to preparethe market or to create a demand for the securities thatare the subject of the trade;

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

(d) if the selling shareholder is an insideror officer of ExploreCo, the selling securityholder hasno reasonable grounds to believe that ExploreCo is in defaultof any requirement of securities legislation; and

5. ExploreCo shall be deemed or declared areporting issuer at the time of the Arrangement becoming effectivefor the purposes of the Legislation of the Jurisdictions,other than Manitoba, Newfoundland, New Brunswick and PrinceEdward Island.

September 30, 2002.

"Glenda A. Campbell"                    "EricT. Spink"