BCSC

Exemption Orders (Discretionary)

BONTERRA ENERGY CORP.

2001 BCSECCOM 674

IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418

AND

IN THE MATTER OF BONTERRA ENERGY CORP.

AND

IN THE MATTER OF BONTERRA ACQUISITION CORP.

AND

IN THE MATTER OF BONTERRA ENERGY INCOME TRUST

Exemption Order Under Sections 1(1), 48 and 76

[para 1]
WHEREAS Bonterra Energy Corp. (“Bonterra Energy”), Bonterra Acquisition Corp. (“BAC”) and Bonterra Energy Income Trust (the “Trust”) have applied to the Executive Director for an order under sections 48 and 76 of the Securities Act, R.S.B.C. 1996, c. 418 that sections 34(1)(a) and 61 of the Act do not apply to certain intended trades in securities in connection with a plan of arrangement (the “Arrangement”), and for an order under section 1(1) of the Act that the Trust be designated as a reporting issuer;

[para 2]
AND WHEREAS Bonterra Energy, BAC and the Trust have represented to the Executive Director that:

1. Bonterra Energy is a corporation incorporated under the Business Corporations Act (Alberta);

2. the authorized share capital of Bonterra Energy consists of an unlimited number of common shares (the “Energy Common Shares”) and an unlimited number of Class B shares, issuable in one or more series, of which 34,095,906 Energy Common Shares were issued and outstanding as at May 17, 2001;

3. the Energy Common Shares are listed on the Canadian Venture Exchange Inc. (“CDNX”);

4. Bonterra Energy is currently, and has been for over 12 months, a reporting issuer under the Act and in Alberta, Saskatchewan, Manitoba and Ontario, and is not in default of any requirement of the Act or the Securities Rules, B.C. Reg. 194/97;

5. Bonterra Energy is in the business of acquiring interests in petroleum and natural gas rights and in exploring, developing and producing petroleum and natural gas from properties located in Alberta and Saskatchewan;

6. BAC is incorporated under the Business Corporations Act (Alberta), and is a wholly-owned subsidiary of the Trust;

7. the Trust is an open-ended, unincorporated limited purpose trust governed by the laws of Alberta and created by a trust indenture dated May 15, 2001 between Olympia Trust Company and Bonterra Energy;

8. BAC was incorporated, and the Trust was formed, for the purpose of participating in the proposed Arrangement; neither BAC nor the Trust carries on any other business or owns or holds any other property or assets;

9. Bonterra Energy, BAC, and the Trust entered into an agreement on May 16, 2001 to carry out the transactions required to effect the Arrangement; the agreement provides that the holders of Energy Common Shares will receive, in exchange for their Energy Common Shares, units (“Trust Units”) of undivided beneficial interest in the Trust from BAC on the basis of one Trust Unit for every four Energy Common Shares;

10. as part of the Arrangement and immediately after the exchange of the Energy Common Shares for Trust Units , BAC and Bonterra Energy will amalgamate to form an amalgamated corporation (“Amalco”) under the name “Bonterra Energy Corp.”;

11. on completion of the amalgamation, the authorized capital of Amalco will consist of (i) an unlimited number of preferred shares, issuable in series, and (ii) an unlimited number of common shares; all of the issued and outstanding common shares and approximately $42.3 million of subordinated notes of Amalco will be held by the Trust;

12. the Arrangement is subject to the approval of the Bonterra Energy shareholders by at least 66⅔% of the votes cast by the shareholders at an annual and extraordinary meeting scheduled to be held on June 25, 2001 (the ôMeetingö), and is also subject to the approval of the Court of Queen’s Bench of Alberta;

13. in connection with the Meeting, an information circular in the prescribed form providing prospectus level disclosure regarding Bonterra Energy, BAC and the Trust has been delivered to each of the Bonterra Energy shareholders entitled to attend the Meeting;

14. immediately prior to the Arrangement becoming effective, BAC will acquire Trust Units from the Trust in exchange for units of BAC consisting of $4.86 principal amount unsecured subordinated notes and one common share of BAC;

15. under the Arrangement, the following actions will occur, in the following order:

(a) each issued and outstanding Energy Common Share (other than Energy Common Shares held by dissenting shareholders) will be exchanged with BAC for Trust Units on the basis of one Trust Unit for every four Energy Common Shares, subject to a cash payment in lieu of fractional Trust Units, resulting in the acquisition by BAC of all of the issued and outstanding Energy Common Shares (other than Energy Common Shares held by dissenting shareholders) and the acquisition of Trust Units by holders of Energy Common Shares;

(b) Bonterra Energy and BAC will amalgamate to form Amalco; and

(c) all of the issued and outstanding Energy Common Shares will be cancelled, and all of the issued and outstanding common shares of BAC will be converted into common shares of Amalco on a one for one basis;

16. on completion of the Arrangement (the “Effective Date”), the Trust Units will be widely held and an application to list the Trust Units on The Toronto Stock Exchange will be made;

17. because the Trust Units will be distributed by BAC rather than by the Trust under the Arrangement, the exemptions from registration and prospectus requirements in sections 45(2)(9) and 74(2)(8) of the Act are not available for the distribution of Trust Units by BAC; and

18. if the Trust directly exchanged its securities with the holders of the securities of Bonterra Energy in connection with the Arrangement, the Trust would become a reporting issuer and would be deemed to have been a reporting issuer for the period of time that Bonterra Energy has been a reporting issuer at the date of the Arrangement, pursuant to paragraph (d) of the definition of “reporting issuer” in section 1(1) of the Act;

[para 3]
AND WHEREAS the Executive Director considers that to do so would not be prejudicial to the public interest;

[para 4]
IT IS ORDERED:

1. under sections 48 and 76 of the Act, that the intended trades by BAC in Units of the Trust to the shareholders of Bonterra Energy in connection with the Arrangement are exempt from the requirements of sections 34(1)(a) and 61 of the Act;

2. under section 76 of the Act, that any trade in Units of the Trust acquired under this order is deemed to be a distribution unless:

(a) the Trust is a reporting issuer;

(b) if the seller is an insider of the Trust other than a director or senior officer of the Trust, the seller has filed all records required to be filed under sections 87 and 90 of the Act;

(c) if the seller is a director or senior officer of the Trust, the seller has filed all records required to be filed under sections 87 and 90 of the Act and the Trust has filed all records required to be filed under Part 12 of the Act and of the Rules;

(d) the trade is not a distribution from the holdings of a control person;

(e) no unusual effort is made to prepare the market or create a demand for the securities; and

(f) no extraordinary commission or other consideration is paid in respect of the trade;

3. under section 1(1) of the Act, that the Trust is designated as a reporting issuer under the Act as at the Effective Date.

[para 5]
DATED June 21, 2001.

Derek E. Patterson
Acting Director