Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from prospectus and registration requirements for spin-off by publicly traded U.S. company to investors by issuing shares of spun off entity as dividends - Reorganization technically not covered by prescribed reorganization exemptions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74(1).

Citation: Marathon Oil Corporation, Re, 2011 ABASC 356

June 28, 2011

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

MARATHON OIL CORPORATION

(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 the prospectus requirements of section 110 of the Securities Act (Alberta) and section 53 of the Securities Act (Ontario) in connection with:

(a) the proposed distribution by the Filer of common shares (MPC Common Shares) of Marathon Petroleum Corporation (MPC) to holders of common shares of the Filer (Marathon Shareholders) resident in Canada by way of a pro rata dividend in kind (the Spin-off) whereby each Marathon Shareholder resident in Canada (Marathon Canadian Shareholder) will receive one MPC Common Share for every two common shares of the Filer (Marathon Common Shares) held; and

(b) the proposed distribution by the Filer and MPC of:

(i) options to acquire MPC Common Shares (MPC Options), to holders of options to purchase Marathon Common Shares (Marathon Options) resident in Canada (the Marathon Canadian Optionholders), to replace vested but unexercised Marathon Options;

(ii) MPC Options, to existing Marathon Canadian Optionholders who will become officers or employees of MPC following the Spin-off, to replace unvested Marathon Options; and

(iii) restricted stock and restricted stock units of MPC (collectively, MPC Restricted Stock Securities), to holders of restricted stock and restricted stock units of the Filer (Marathon Restricted Stock Securities) resident in Canada (the Marathon Canadian Restricted Stockholders) who will become officers or employees of MPC following the Spin-off, to replace Marathon Restricted Stock Securities;

(collectively, the Requested Relief).

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 section 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, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; and

(c) this 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 or MI 11-102 have the same meanings if used in this decision, unless otherwise defined herein.

Representations

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

1. The Filer is a Delaware company headquartered in Houston, Texas.

2. The authorized capital stock of the Filer consists of 1,100,000,000 Marathon Common Shares and 26,000,000 shares of preferred stock, issuable in series. As of May 31, 2011, there were 712,890,813 Marathon Common Shares issued and outstanding and 57,247,272 Marathon Common Shares were held as treasury shares. As of May 31, 2011, no shares of Marathon preferred stock were issued and outstanding.

3. The Marathon Common Shares are listed on the New York Stock Exchange (the NYSE) and trade under the symbol "MRO". The Marathon Common Shares are not listed on any Canadian exchange and the Filer has no intention of listing its securities on any Canadian exchange.

4. The Filer is currently subject to the U.S. Securities Exchange Act of 1934, as amended, and the rules, regulations and orders promulgated thereunder.

5. The Filer is a reporting issuer under the securities laws of each of the provinces of Canada (the Reporting Jurisdictions). The Filer became a reporting issuer in each of the Reporting Jurisdictions in October 2007 as a result of the issuance of Marathon Common Shares to shareholders of Western Oil Sands Inc. (Western) in exchange for all of the common shares of Western pursuant to a plan of arrangement under the Business Corporations Act (Alberta). To the knowledge of the Filer, the Filer is not in default of any of its obligations as a reporting issuer under the securities laws of any of the Reporting Jurisdictions.

6. As of May 31, 2011, there were approximately 249 registered Marathon Canadian Shareholders. To the knowledge of the Filer, there are registered and beneficial Marathon Canadian Shareholders resident in each of the provinces of Canada, other than Prince Edward Island. The Marathon Canadian Shareholders constituted less than 0.50% of the approximately 51,515 Marathon Shareholders of record worldwide on May 31, 2011. As of May 31, 2011, the registered Marathon Canadian Shareholders collectively held approximately 55,251 Marathon Common Shares, constituting less than 0.01% of the approximately 712,890,813 issued and outstanding Marathon Common Shares.

7. As of May 31, 2011, there were approximately 23 Marathon Canadian Optionholders. The Marathon Canadian Optionholders constituted approximately 2.96% of the approximately 776 holders of Marathon Options worldwide on May 31, 2011. As of May 31, 2011, Marathon Canadian Optionholders collectively held approximately 255,293 Marathon Options, constituting approximately 1.24% of the approximately 20,539,981 outstanding Marathon Options.

8. As of May 31, 2011, there were approximately 17 Marathon Canadian Restricted Stockholders. The Marathon Canadian Restricted Stockholders constituted approximately 1.65% of the approximately 1,032 holders of Marathon Restricted Stock Securities worldwide on May 31, 2011. As of May 31, 2011, Marathon Canadian Restricted Stockholders collectively held approximately 20,905 Marathon Restricted Stock Securities, constituting approximately 1.5% of the approximately 1,392,183 outstanding Marathon Restricted Stock Securities.

9. MPC is currently an indirect wholly-owned subsidiary of the Filer incorporated in Delaware on November 9, 2009.

10. The authorized capital stock of MPC consists of 1,000,000,000 MPC Common Shares and 30,000,000 shares of preferred stock, issuable in series. As of May 31, 2011, 2 MPC Common Shares are issued and outstanding, all of which are held by Marathon Oil Company, a wholly-owned subsidiary of the Filer. The Filer and MPC anticipate that, upon completion of the Spin-off, approximately 355,000,000 MPC Common Shares will be issued and outstanding. No shares of MPC preferred stock are expected to be issued and outstanding upon the completion of the Spin-off.

11. The Spin-off was publicly announced by the Filer in a news release dated January 13, 2011, and a Current Report on Form 8-K was filed by the Filer with the applicable Canadian securities regulatory authorities or regulators on the same date.

12. Upon completion of the Spin-off, MPC will cease to be a subsidiary of the Filer and will become an independent, publicly-traded company.

13. Subject to the satisfaction of certain conditions, including the receipt by the Filer of all necessary approvals of the U.S. Securities and Exchange Commission (the SEC), it is currently anticipated that the Spin-off will become effective on June 30, 2011.

14. The Spin-off will be effected by the following principal steps:

(a) by means of a tax-free stock distribution for United States federal income tax purposes, the Filer will distribute the MPC Common Shares to the Marathon Shareholders at the rate of one MPC Common Share for every two Marathon Common Shares held;

(b) Marathon Shareholders will not be required to pay any consideration for the MPC Common Shares received in the Spin-off or to surrender or exchange their Marathon Common Shares in order to receive MPC Common Shares;

(c) Marathon Shareholders are not required to vote their Marathon Common Shares in respect of the Spin-off, nor are they required to take any other action in connection with the Spin-off;

(d) fractional MPC Common Shares will not be issued to Marathon Shareholders in connection with the Spin-off. All fractional MPC Common Shares will be aggregated and sold by the transfer agent, and Marathon Shareholders who would otherwise be entitled to receive a fractional MPC Common Share will receive their pro rata share of the proceeds of such sale in lieu thereof;

(e) outstanding vested Marathon Options held by current or former officers and employees of the Filer will be replaced with economically equivalent adjusted options to acquire Marathon Common Shares (Adjusted Marathon Options) and MPC Options;

(f) outstanding unvested Marathon Options held by existing officers and employees of the Filer who will not become officers or employees of MPC following the Spin-off will be replaced with economically equivalent Adjusted Marathon Options;

(g) outstanding unvested Marathon Options held by existing officers and employees of the Filer who will become officers or employees of MPC following the Spin-off will be replaced with economically equivalent MPC Options;

(h) outstanding vested stock appreciation rights of the Filer (Marathon SARs) held by current or former officers and employees of the Filer will be replaced with economically equivalent adjusted stock appreciation rights of the Filer (Adjusted Marathon SARs) and stock appreciation rights of MPC (MPC SARs). There are no holders of Marathon SARs resident in Canada;

(i) outstanding Marathon Restricted Stock Securities held by existing directors, officers and employees of the Filer who will not become directors, officers or employees of MPC following the Spin-off will be replaced with economically equivalent adjusted Marathon Restricted Stock Securities (Adjusted Marathon Restricted Stock Securities); and

(j) outstanding Marathon Restricted Stock Securities held by existing directors, officers and employees of the Filer who will become directors, officers or employees of MPC following the Spin-off will be replaced with economically equivalent MPC Restricted Stock Securities.

15. Following the completion of the Spin-off, the Marathon Common Shares will continue to be listed for trading on the NYSE. It is expected that the MPC Common Shares will be listed for trading on the NYSE.

16. MPC does not intend to list any of its securities on any Canadian exchange, and MPC does not intend to become a reporting issuer in any jurisdiction in Canada.

17. The Spin-off will be effected in accordance with the laws of Delaware. Because the Spin-off will be effected by way of a dividend to the holders of Marathon Common Shares, no shareholder approval of the proposed transaction is required under the laws of Delaware.

18. On January 25, 2011, MPC filed a registration statement on Form 10 with the SEC detailing the planned Spin-off, and subsequently filed amendments to the registration statement on March 29, 2011; April 29, 2011; May 17, 2011; May 20, 2011 and May 26, 2011 (the registration statement, as so amended, is referred to as theRegistration Statement).

19. After the SEC has completed its review of the Registration Statement, Marathon Shareholders will receive a copy of the information statement (the Information Statement) comprising part of the Registration Statement. All materials relating to the Spin-off and the dividend sent by or on behalf of the Filer or MPC in the United States (including the Information Statement) will be sent concurrently to the Marathon Canadian Shareholders.

20. The Marathon Canadian Shareholders who receive MPC Common Shares as a dividend pursuant to the Spin-off will have the benefit of the same rights and remedies in respect of the disclosure documentation received in connection with the Spin-off that are available under the laws of the United States to Marathon Shareholders resident in the United States.

21. Because there will be no active trading market for the MPC Common Shares in Canada following the Spin-off and none is expected to develop, it is expected that any resale of the MPC Common Shares distributed in the Spin-off will occur through the facilities of the NYSE. The Filer expects that the MPC Common Shares will be qualified for public distribution in the United States.

22. Following the Spin-off, MPC will send, concurrently to the holders of MPC Common Shares resident in Canada, the same disclosure materials that it sends to holders of MPC Common Shares resident in the United States.

23. The issuance of the Marathon Common Shares and MPC Common Shares on the exercise, conversion or exchange of the Adjusted Marathon Options, the Adjusted Marathon SARs, the Adjusted Marathon Restricted Stock Securities, the MPC Options, the MPC SARs and the MPC Restricted Stock Securities will be made in accordance with all applicable laws of the United States. Because there will be no active trading market for the Marathon Common Shares or the MPC Common Shares in Canada and none is expected to develop, it is expected that any resale of the Marathon Common Shares and MPC Common Shares issued on exercise, conversion or exchange of the Adjusted Marathon Options, the Adjusted Marathon Restricted Stock Securities, the MPC Options, and the MPC Restricted Stock Securities by the Marathon Canadian Optionholders and the holders of Adjusted Marathon Restricted Stock Securities, MPC Options and MPC Restricted Stock Securities resident in Canada will occur through the facilities of the NYSE.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Makers to make the decision.

The decision of the Decision Makers under the Legislation is that:

(a) the Requested Relief is granted; and

(b) the resale of MPC Common Shares acquired in the Spin-off or on the exercise of MPC Options, and MPC Common Shares represented by MPC Restricted Stock Securities held by Marathon Canadian Restricted Stockholders, will be deemed to be a distribution or primary distribution to the public under the Legislation unless the conditions in section 2.6 or 2.14 of National Instrument 45-102 Resale of Securities are satisfied.

For the Commission:

"William Rice, QC"
Chair
 
"Glenda Campbell, QC"
Vice-Chair