Esprit Exploration Completes Reorganization

On October 1, 2004, Esprit Exploration Ltd. completed a reorganization by way of plan of arrangement into Esprit Energy Trust and ProspEx Resources Ltd. Pursuant to the arrangement, each holder of a common share of Esprit Exploration received 0.2 of a ProspEx Resources Ltd. common share and a cash payment of $0.22 and were entitled to received 0.25 of either a class A trust unit or a class B trust unit upon delivery of a residency declaration.

The class A trust units and class B trust units have the same rights to vote, receive distributions and participate in the assets of Esprit Energy Trust upon any wind up or dissolution. The class B trust units may only be held by Canadian residents and, while class A trust units may be converted to class B trust units, class B trust units may never be converted to class A trust units.

The indenture creating Esprit Energy Trust provides that the number of class A trust units issued and outstanding may not exceed 80 per cent of the number of class B trust units. These prohibitions were designed to address the unexpected amendments to the Income Tax Act proposed by Finance Canada on September 16, 2004, making Esprit’s structure unique to all other royalty trusts in this regard. Additionally the Esprit structure created the “post-arrangement entitlement,” a security designed to be a place marker for shareholders who fail to respond to the arrangement with a letter of transmittal and residency declaration and to provide additional certainty as to foreign ownership determination. The transaction value based on trading values of ProspEx and Esprit Trust on the Toronto Stock Exchange following the closing was in excess of $500 million.

Esprit was represented by Bennett Jones LLP with a team that consisted of Robert Lehodey, Q.C., Darrell Peterson, Took Whiteley, Jane Brindle and Brent Kraus (corporate/securities), Alan Ross and Greg Johnson (tax), Robert Desbarats (oil and gas) and Phil Backman (banking).