Fort Chicago Energy Partners L.P.

Decision

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Takeover Bids -- Identical consideration - Offeror requires relief from the requirement in subsection 97(1) of the Securities Act (Ontario) that all holders of the same class of securities must be offered identical consideration -- Under the bid, Canadian resident shareholders will receive shares; Non-resident shareholders and tax shelters will receive substantially the same value as Canadian shareholders in the form of cash paid to the non-resident shareholders and tax shelters based on the proceeds from the sale of their shares.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., s. 97(1).

October 19, 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

FORT CHICAGO ENERGY PARTNERS L.P.

(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from subsection 2.23(1) of Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids and subsection 97(1) of the Securities Act (Ontario) (the Identical Consideration Requirement), which require the Filer to offer identical consideration to all of the holders of the same class of securities that are subject to a take-over bid, in connection with the Filer's offer (the Offer) to acquire all of the issued and outstanding common shares (Pristine Shares) and all of the issued and outstanding common share purchase warrants (Pristine Warrants) of Pristine Power Inc. (Pristine) including those Pristine Shares that may become outstanding after the date of the Offer on exercise or surrender of any securities of Pristine (the Exemption Sought).

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

(a) the Alberta Securities Commission is the principal regulator for this 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, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island; 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 have the same meaning if used in this decision, unless otherwise defined.

Representations

The decision is based on the following facts represented by the Filer:

1. The Filer is a limited partnership established under the Partnership Act (Alberta) pursuant to a limited partnership agreement dated as of October 9, 1997, as amended and restated on November 21, 1997 and May 13, 2003, and as further amended on May 25, 2005, among Fort Chicago Energy Management Ltd., the general partner of the Filer, and each person who is admitted to the Filer as a limited partner from time to time in accordance with the terms thereof (the Partnership Agreement).

2. The Filer's head office is located in Calgary, Alberta.

3. The Filer is a reporting issuer in each of the provinces of Canada and is not in default of any of the requirements of securities legislation applicable to it.

4. The authorized capital of the Filer consists of an unlimited number of Class A limited partnership units (Filer Units) and an unlimited number of Class B limited partnership units, issuable in series, of which, as at September 20, 2010, there were 144,648,389 Filer Units issued and outstanding and no Class B limited partnership units issued and outstanding.

5. The Filer Units are listed on the Toronto Stock Exchange (the TSX).

6. Pristine is a corporation existing under the Canada Business Corporations Act.

7. Pristine's head office is located in Calgary, Alberta.

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

9. To the knowledge of the Filer, the authorized capital of Pristine consists of an unlimited number Pristine Shares, of which, as at September 21, 2010, there were 35,622,556 Pristine Shares issued and outstanding.

10. To the knowledge of the Filer, as at September 21, 2010, Pristine had issued and outstanding: (a) 3,537,500 options to acquire issued and outstanding Pristine Shares, and (b) Pristine Warrants to acquire 2,895,835 Pristine Shares.

11. The Pristine Shares and Pristine Warrants are listed on the TSX.

12. On September 22, 2010, the Filer issued a news release announcing the entering into of a pre-acquisition agreement with Pristine and its intention to make the Offer.

13. On October 1, 2010, the Filer mailed the Offer to the registered holders of the Pristine Shares and the registered holders of the Pristine Warrants.

14. Under the terms of the Offer, the Filer is offering 0.2703 of a Filer Unit for each Pristine Share and $0.02 in cash for each Pristine Warrant.

15. In order for the Filer to continue to qualify as a "Canadian partnership" within the meaning of the Income Tax Act (Canada) (the ITA), Filer Units cannot be held by a person who is a "non-resident" of Canada or a partnership which is not a "Canadian partnership", each as defined in the ITA (each, a Non-Resident). If the Filer loses its status as a "Canadian partnership", the Filer must comply with additional and onerous requirements under the ITA.

16. In order for the exchange of Pristine Shares for Filer Units to be completed on a tax-deferred rollover basis for holders of Pristine Shares who are resident in Canada, Filer Units cannot be held by any Non-Residents.

17. In order for the Filer to remain in compliance with the terms of the Partnership Agreement and certain covenants in respect of its investments, Filer Units cannot be held by any person an interest in which would constitute a "tax shelter investment", as that term is defined in the ITA (each, a Tax Shelter and, together with Non-Residents, Non-Eligible Shareholders).

18. To the knowledge of the Filer, and based on the jurisdiction of residence of registered shareholders of Pristine as disclosed in a registered list of shareholders delivered to the Filer by Pristine, as at September 21, 2010, there were 16,500 Pristine Shares (approximately 0.05% of the issued and outstanding Pristine Shares) held of record by two persons who are Non-Residents.

19. To the knowledge of the Filer, and based on the jurisdiction of residence of beneficial shareholders of Pristine as disclosed in a geographic analysis report delivered to the Filer by Pristine, as at September 13, 2010, there were 3,543,441 Pristine Shares (approximately 9.95% of the issued and outstanding Pristine Shares) beneficially held by 44 persons who are Non-Residents.

20. To the knowledge of the Filer, as at September 21, 2010, there were no Pristine Shares held of record by Tax Shelters, and as at September 13, 2010 there were no Pristine Shares held beneficially by Tax Shelters.

21. The Filer proposes to deliver to the depositary (the Depositary) under the Offer the number of Filer Units that Non-Eligible Shareholders would otherwise be entitled to receive under the Offer. On behalf of the Filer, the Depositary or its nominee will sell, or cause to be sold, those Filer Units by private sale or on any exchange on which the Filer Units are then listed after the payment date for the Pristine Shares tendered by the Non-Eligible Shareholders under the Offer. After completion of the sale, the Depositary will distribute the aggregate net proceeds of the sale, after expenses, commissions and applicable withholding taxes, pro rata among the Non-Eligible Shareholders who tendered their Pristine Shares under the Offer.

22. Based on the exchange ratio of the Offer and the number of Pristine Shares outstanding that, to the knowledge of the Filer, are held by Non-Eligible Shareholders, and assuming that the Filer acquires 100% of the Pristine Shares, the Filer Units to be sold would represent approximately 0.63% of the outstanding Filer Units immediately following completion of the Offer.

23. There is currently a "liquid market" (as such term is defined in Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions) for Filer Units and the Filer reasonably believes that there will continue to be such a "liquid market" for Filer Units following the completion of the Offer and the sale of Filer Units on behalf of the Non-Eligible Shareholders as described in paragraph 21 above.

24. As a result of the mechanism described above, the Filer will: (a) remain a "Canadian partnership" under the ITA and will be able to continue to avail itself of the tax rules relating to "Canadian partnerships" under the ITA, including the ability to complete the Offer (as it relates to the issuance of Filer Units in exchange for Pristine Shares) on a tax-deferred rollover basis under the ITA for holders of Pristine Shares that are resident in Canada; and (b) remain in compliance with the terms of the Partnership Agreement and its covenants in respect of its various investments.

25. If the Filer increases the consideration offered to holders of Pristine Shares resident in Canada, the increase in consideration will also be offered to Non-Eligible Shareholders at the same time and on the same basis.

26. Except to the extent that relief from the Identical Consideration Requirement is granted, the Offer will comply with the requirements under the Legislation concerning take-over bids.

Decision

Each of the Decision Makers is satisfied that the decision satisfies 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, in connection with the Offer, the Exemption Sought is granted so that the Filer is exempt from the Identical Consideration Requirement, provided that Non-Eligible Shareholders who would otherwise receive Filer Units pursuant to the Offer instead receive the net cash proceeds from the sale of the Filer Units in accordance with the procedures set out in paragraph 21 above.

For the Commission:

"Glenda Campbell, QC"
Vice-Chair
 
"Stephen Murison"
Vice-Chair