Golden Rule Resources Ltd. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications - Relief under subsection 116(1) of the Act from theregistration and prospectus requirements under sections 54 and 81 of the Act in connection with the distribution ofsecurities by an issuer in settlement of outstanding litigation against that issuer.

Applicable Alberta Statutory Provisions

Securities Act, S.A., 1981, c.S-6.1, as amended - ss. 54, 81, 116(1) and 116(1.1).

IN THE MATTER OF

THE SECURITIES LEGISLATION

OF ALBERTA, BRITISH COLUMBIA, SASKATCHEWAN, MANITOBA,

ONTARIO, QUÉBEC, NOVA SCOTIA, NEW BRUNSWICK,

PRINCE EDWARD ISLAND AND NEWFOUNDLAND

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

GOLDEN RULE RESOURCES LTD.

MRRS DECISION DOCUMENT

1. WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of Alberta, BritishColumbia, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Prince Edward Island, Nova Scotia andNewfoundland (the "Jurisdictions") has received an application from Golden Rule Resources Ltd. ("GoldenRule") for a decision under the securities legislation of the Jurisdictions (the "Legislation") that the requirementsunder the Legislation to be registered to trade in a security (the "Registration Requirement") and to file and obtain a receiptfor a preliminary prospectus and a prospectus (the "Prospectus Requirement") shall not apply to the issuance byGolden Rule of certain securities in settlement of outstanding litigation;

2. AND WHEREAS under 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 Golden Rule has represented to the Decision Makers that:

3.1 Golden Rule is a corporation incorporated under the Business Corporations Act (Alberta);

3.2 the head office of Golden Rule is in Calgary, Alberta;

3.3 the authorized capital of Golden Rule consists of an unlimited number of common shares (the"Common Shares");

3.4 26,654,081 Common Shares were issued and outstanding as of February 5, 2001;

3.5 the Common Shares are listed for trading on The Toronto Stock Exchange (the "TSE") and quoted onthe National Association of Securities Dealers OTC Bulletin Board;

3.6 the TSE suspended trading in the Common Shares on February 21, 2001 for failure to meet continuinglisting requirements;

3.7 Golden Rule has applied to the Canadian Venture Exchange ("CDNX") to list the Common Shares onthe CDNX. The CDNX is in the process of considering the application;

3.8 Golden Rule is a reporting issuer or the equivalent in British Columbia, Alberta, Saskatchewan,Manitoba, Ontario, Québec and Nova Scotia;

3.9 Golden Rule is subject to the reporting requirements under the Securities Exchange Act of 1934 inthe United States of America (the "United States");

3.10 Golden Rule is not in default of any of the requirements of the Legislation;

3.11 on February 23, 1998, Herman Krangel and Lillian Krangel (the "Representative Plaintiffs")commenced a lawsuit (the "Class Action") against Golden Rule and certain of its directors (the"Defendants") in the United States District Court for the Eastern District of Pennsylvania (the "Court");

3.12 the Representative Plaintiffs brought the Class Action on behalf of all purchasers of Common Sharesduring the period from October 3, 1996 to May 14, 1997 who suffered damage thereby (the "PlaintiffClass");

3.13 the Class Action alleged that the Defendants had, among other things, failed to disclose certain factsregarding Golden Rule in violation of applicable securities laws of the United States;

3.14 on November 30, 1999, the Representative Plaintiffs and the Defendants agreed, subject to theapproval of the Court, to the settlement of the claims of the Representative Plaintiffs under the ClassAction and to the release and discharge of the Defendants (the "Settlement Agreement");

3.15 the Settlement Agreement provided for the denial by the Defendants of all liability or wrongdoing andthe acceptance of such by the Representative Plaintiffs;

3.16 on July 27, 2000, the Court issued an order approving the Settlement Agreement and dismissing theClass Action (the "Order");

3.17 the terms of the Settlement Agreement will require Golden Rule to:

3.17.1 create an administration fund of up to US$250,000 for the purpose of paying the expensesactually and reasonably incurred by the Representative Plaintiffs in effecting the settlementof the Class Action; and

3.17.2 issue to the members of the Plaintiff Class 1,500,000 Common Shares and 3,000,000warrants to purchase Common Shares ("Warrants");

3.18 each Warrant will be exercisable to purchase one Common Share at a price of $0.65 for a period offive years from the date of issuance;

3.19 the Warrants will only be exercisable if the closing price of the Common Shares on the TSE or suchother exchange upon which the Common Shares are listed equals or exceeds $0.65 for twentyconsecutive trading days priory to their expiry;

3.20 the Common Shares and Warrants will be allocated to members of the Plaintiff Class in accordancewith a formula set out in the Settlement Agreement;

3.21 the Settlement Agreement excludes the following entities from the Plaintiff Class:

3.21.1 the Defendants;

3.21.2 members of the immediate family of any individual Defendant;

3.21.3 directors, officers, affiliates and subsidiaries of Golden Rule;

3.21.4 any entity in which any of the above has a controlling interest; and

3.21.5 the legal representatives, heirs, successors or assigns of any of the above;

3.22 prior to the granting of the Order, Golden Rule provided each member of the Plaintiff Class of recordwith a form of notice (the "Notice") detailing the history of the Class Action, the terms of the SettlementAgreement and the right of each member of the Plaintiff Class to lodge objections and reviewdocuments filed with the Court;

3.23 prior to the granting of the Order, Golden Rule published a summary form of the Notice in the nationaleditions of The Globe and Mail and The Wall Street Journal for the purpose of providing notice of theClass Action and Settlement Agreement to members of the Plaintiff Class who may not have receivedthe Notice;

3.24 prior to the granting of the Order, each member of the Plaintiff Class was afforded the opportunity tovoluntarily exclude themselves from the Plaintiff Class and the effect of the Settlement Agreement.No member of the Plaintiff Class requested that they be so excluded;

3.25 there are 154 members of the Plaintiff Class resident in the United States;

3.26 there are 415 members of the Plaintiff Class resident in the Jurisdictions, distributed as follows:

3.27 1,152,211 Common Shares will be issued to members of the Plaintiff Class resident in theJurisdictions under the Settlement Agreement, distributed as follows:

3.28 2,257,307 Warrants will be issued to members of the Plaintiff Class resident in the Jurisdictions underthe Settlement Agreement, distributed as follows:

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 under the Legislation is that the distribution of Common Shares andWarrants to members of the Plaintiff Class under the terms of the Settlement Agreement shall not be subjectto the Registration Requirement and the Prospectus Requirement provided that:

6.1 the first trade in a Jurisdiction of Warrants distributed in reliance on this Decision shall be deemed adistribution or primary distribution to public under the Legislation of such Jurisdiction; and

6.2 the first trade in a Jurisdiction of Common Shares distributed in reliance on this Decision and CommonShares acquired upon the exercise of Warrants distributed in reliance on this Decision shall bedeemed a distribution or primary distribution to the public under the Legislation of such Jurisdiction(the "Applicable Legislation") unless:

6.2.1 at the time of the first trade, Golden Rule is and has been a reporting issuer or the equivalentunder the Applicable Legislation for the 12 months immediately preceding the trade or, ifGolden Rule is not a reporting issuer or the equivalent under the Applicable Legislation,Golden Rule has filed all continuous disclosure documents filed by it in the Jurisdictions inwhich it is a reporting issuer or the equivalent with the Decision Maker of the Jurisdiction;

6.2.2 no unusual effort is made to prepare the market or create a demand for the Common Shares;

6.2.3 no extraordinary commission or consideration is paid to a person or company in respect ofthe trade;

6.2.4 if the seller of the securities is an insider or officer Golden Rule, the seller has no reasonablegrounds to believe that Golden Rule is in default of any requirement of the ApplicableLegislation; and

6.2.5 except in Quebec, the trade is not a trade from the holdings of any person, company orcombination of persons or companies that holds a sufficient number of securities of GoldenRule so as to affect materially the control of Golden Rule or more than twenty percent of theoutstanding voting securities of Golden Rule, except where there is evidence showing thatthe holding of those securities does not affect materially the control of Golden Rule.

March 14, 2001.

"Glenda A. Campbell"       "John W. Cranston"