Securities Law & Instruments

Headnote

Mutual Reliance Review Systemfor Exemptive Relief Applications - Registration and prospectusrelief provided for trades made in connection with a seriesof transactions that will result in a company acquiring a numberof limited partnerships and the general partners of such partnerships.Relief granted subject to the resale restriction that the firsttrade in common shares of the company acquired pursuant to thisruling is deemed to be a distribution unless conditions in subsection(3) or (4) of section 2.6 of Multilateral Instrument 45-102are satisfied.

Applicable Ontario StatutoryProvisions

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

Applicable Ontario Rules

Rule 61-501 - Insider Bids,Issuer Bids, Going Private Transactions and Related Party Transactions.

Applicable Instruments

Multilateral Instrument 45-102- Resale of Securities - section 2.6.

IN THE MATTER OF

THE SECURITIES LEGISLATIONOF

ALBERTA, SASKATCHEWAN, MANITOBA,ONTARIO, QUEBEC,

NEW BRUNSWICK, NOVA SCOTIA,NEWFOUNDLAND AND LABRADOR,

PRINCE EDWARD ISLAND, NORTHWESTTERRITORIES, NUNAVUT

AND THE YUKON TERRITORY

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

ENDEV ENERGY INC.

 

MRRS DECISION DOCUMENT

1. WHEREAS the localsecurities regulatory authority or regulator (the "DecisionMaker") in each of Alberta, Saskatchewan, Manitoba, Ontario,Quebec, New Brunswick, Nova Scotia, Newfoundland and Labrador,Prince Edward Island, Northwest Territories, Nanavut and theYukon Territory (the "Jurisdictions") has receivedan application from Endev Energy Inc. ("Endev")for a decision under the securities legislation of the Jurisdictions(the "Legislation") that the requirements containedin the Legislation to be registered to trade in a security(the "Registration Requirements") and to file andobtain a receipt for a preliminary prospectus and a prospectus(the "Prospectus Requirements") will not apply tocertain trades (more specifically set out below) made in connectiona series of transactions involving Endev and a number of limitedpartnerships (the "Partnerships") as well as thegeneral partners (the "General Partners") of thePartnerships;

2. AND WHEREAS underthe Mutual Reliance Review System for Exemptive Relief Applications(the "System") the Alberta Securities Commissionis the principal regulator for this application;

3. AND WHEREAS Endevhas represented to the Decision Makers that:

3.1 Endev was incorporatedas 656525 Alberta Ltd. under the Business CorporationsAct (Alberta) (the "ABCA") on May 31, 1995;

3.2 Endev changed its nameto Internet Filtering Systems Inc. on October 18, 1995 andagain on February 28, 1996 to Net Shepherd Inc.;

3.3 on August 1, 1996, Endevamalgamated with Enerstar Resources Inc. ("Enerstar")and on January 1, 1999 Endev amalgamated with two of itswholly-owned subsidiaries, Chronologic Systems Inc. and708607 Alberta Ltd.;

3.4 on April 8, 2002, Endeveffected a consolidation of its share capital on the basisof one new common Share for each ten common shares formerlyoutstanding, and changed its name to Flock Resources Ltd.;

3.5 on June 12, 2002 Endevchanged its name from Flock Resources Ltd. to Endev EnergyInc.;

3.6 Endev is authorizedto issue an unlimited number of common shares (the "CommonShares") and an unlimited number of first preferredshares, of which approximately 11,020,051 Common Shareswere outstanding as of June 1, 2002;

3.7 the head office of Endevis located at Calgary, Alberta;

3.8 Endev is, and has beenfor a period of time in excess of 12 months, a reportingissuer under the securities legislation of British Columbia,Alberta and Ontario;

3.9 to the best of its knowledge,information and belief, Endev is not in default of any ofthe requirements under the Legislation;

3.10 each of the Partnershipsis a limited partnership formed under the laws of Ontariofor the acquisition, development and production of petroleumand natural gas in western Canada;

3.11 the head office ofeach Partnership is located at Toronto, Ontario;

3.12 each Partnership ismanaged by a General Partner. The limited partners of thePartnerships (the "Limited Partners") are notentitled to participate in the management or control ofthe business and affairs of the Partnership;

3.13 the interests of thelimited partners in each Partnership is divided into anunlimited number of units ("Units"). The Partnershipshave varying numbers of Units issued and outstanding. EachPartnership Unit is equal to each other Unit of the samePartnership and has the same rights and obligations attachingto it as each other Unit. There is currently no market forthe Units;

3.14 each of the Partnershipsare, and have been for a period of time in excess of 12months, a reporting issuer under the securities legislationof all or most of the provinces and territories of Canada.To the best of the knowledge, information and belief ofEndev, none of the Partnerships are in default of the requirementsunder the Legislation;

3.15 on April 19, 2002,Endev entered into various letter agreements ("theLetter Agreements") with each of the General Partnersof the Partnerships, namely, NCE Energy Assets (1993) Fund,NCE Oil & Gas (1993) Fund, NCE Energy Assets (1994)Fund, NCE Oil & Gas (1994) Fund, NCE Energy Assets (1995)Fund, NCE Oil & Gas (1995) Fund, NCE Energy Assets (1996)Fund, NCE Oil & Gas (1996) Fund and NCE Oil & Gas(1997) Fund;

3.16 under the Letter Agreements,Endev agreed to:

3.16.1 make offers (the"Offers") to acquire all the issued and outstandingUnits of each of the Partnerships;

3.16.2 proceed with thefollowing transactions (the "Transactions"):

3.16.2.1 the acquisitionof all of the assets (the "Assets") of allof the Partnerships for the issuance of an aggregateof approximately 54,015,751 Common Shares to the Partnerships;

3.16.2.2 the acquisitionof all of the shares of the General Partners of eachof the Partnerships in consideration of the issuanceof approximately 3,443,651 Common Shares to extinguishexisting obligations of the Partnerships to pay feesto the General Partners;

3.16.2.3 97.5% of theCommon Shares issued to the Partnerships in exchangefor the Assets will subsequently be distributed to theLimited Partners pro rata to the number of Units heldby each Limited Partner; and

3.16.2.4 the remaining2.5% of the Common Shares issued to the Partnershipswill be distributed to certain agents (the "Agents")acting at arm's length to each of the parties to thetransactions, which Agents' originally distributed theUnits to the public, in order to extinguish an investorservices fee ("Investor Services Fee") payableby each Partnership to the Agents;

3.17 on April 30, 2002,Endev made the Offers pursuant to a formal take-over bidcircular dated April 30, 2002 (the "Take-Over Bid Circular"),which was open for acceptance until 4:30 p.m. (Calgary time)on June 18, 2002;

3.18 a management informationcircular (the "Information Circular") in connectionwith the annual and special meeting (the "Meeting")of the shareholders of Endev held on June 10, 2002 to approvethe Transactions and the issuance of Common Shares underthe Transactions, among other things, was mailed to EndevShareholders on May 6, 2002;

3.19 the Information Circularforwarded to Endev shareholders in connection with the Meetingbeing called to consider the Transactions and the Take-OverBid Circular (together, the "Circulars") forwardedto the holders of the Units of each Partnership containsprospectus-level disclosure regarding the businesses ofEndev and each of the Partnerships;

3.20 the Circulars alsocontain a valuation from Sayer Securities Limited in respectof the Transactions and a fairness opinion from YorktonSecurities Inc. concluding that the consideration to bereceived pursuant to the Transactions is fair, from a financialpoint of view, to the Limited Partners;

3.21 the Board of Directorsof Endev has unanimously approved the Transactions and hasrecommended that the Endev shareholders vote in favour ofthe resolution approving the Transactions;

3.22 in accordance withRule 61-501 ("Rule 61-501") of the Ontario SecuritiesCommission and Policy Q-27 of the Quebec Securities Commission,the Transactions were approved by a majority of the votescast by disinterested shareholders of Endev at the Meeting(which, in this case, excluded the votes of all "interestedparties" in the Transactions, as such term is definedunder Rule 61-501). The Transactions were also approvedby the TSX Venture Exchange;

3.23 each Transaction wasapproved by at least two-thirds of the votes cast by limitedpartners of each Partnership at each partnership meetingcalled to approve the Transactions. To the knowledge ofEndev, no interested parties held any Units of the Partnerships;

3.24 in accordance withRule 61-501 of the Ontario Securities Commission and PolicyQ-27 of the Quebec Securities Commission, each Transactionwas approved by a majority of the votes cast by disinterestedlimited partners of each Partnership at each Partnershipmeeting;

3.25 under the Offers, Endevhas been successful in acquiring approximately 35% to 52%of the Units of each of the Partnerships;

3.26 Endev is proceedingto take up and pay for the Units deposited under the Offers,and intends to allow, and to facilitate, the Transactionsto proceed, such that Endev will issue Common Shares tothe Partnerships in exchange for the Assets and the Partnershipswill subsequently be dissolved, with the result that formerlimited partners of each Partnership will receive CommonShares of Endev pro rata to their respective interests inthe Partnerships;

3.27 to the extent thatEndev holds Units of any Partnership as a result of thecompletion of the Offers, and is subsequently distributedCommon Shares through the dissolution of the Partnerships,such Common Shares will be cancelled. Accordingly, the aggregate"net" number of Common Shares issued in connectionwith the Transactions will be the same as if Endev had notproceeded with the Offers, but only proceeded with the acquisitionof all the Assets of the Partnerships through the Transactions;

3.28 in connection withthe Transactions, the following trades (the "Trades")are not exempt from the Registration Requirements and ProspectusRequirements in all Jurisdictions:

3.28.1 the issuance ofthe Common Shares to the Partnerships in exchange forthe Assets;

3.28.2 the distributionof the Common Shares to the Limited Partners in connectionwith the dissolution of the Partnerships, and the firsttrade by Limited Partners of such Common Shares; and

3.28.3 the distributionof the Common Shares to the Agents in order to extinguishthe obligation to pay the Investor Services Fees, andthe first trade of such Common Shares;

4. AND WHEREAS underthe System, this MRRS Decision Document evidences the decisionof each Decision Maker (collectively, the "Decision");

5. AND WHEREAS eachof the Decision Makers is satisfied that the test containedin the Legislation that provides the Decision Maker with thejurisdiction to make the Decision has been met;

6. THE DECISION ofthe Decision Makers under the Legislation is that the RegistrationRequirements and Prospectus Requirements will not apply tothe Trades made in connection with the Transactions providedthat the first trade in Endev Shares acquired under this Decisionin a Jurisdiction shall be deemed to be a distribution orprimary distribution to the public under the Legislation ofsuch Jurisdiction unless the conditions in subsection (3)or (4) of section 2.6 of Multilateral Instrument 45-102 Resaleof Securities are satisfied.

July 22, 2002.

"Glenda A. Campbell"                  "WalterB. O'Donoghue"