Exemption Orders (Discretionary)
NOVITAS ENERGY LTD.
2001 BCSECCOM 844
Headnote
Mutual Reliance Review System for Exemptive Relief Applications - Relief from the registration requirement to permit the issuance of securities under a prospectus by an issuer to shareholders, employees and consultants of its parent.
Applicable British Columbia Provisions
Securities Act, R.S.B.C. 1996, c. 418, ss. 34(1)(a) and 48
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA,
SASKATCHEWAN AND ONTARIO
AND
IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF NOVITAS ENERGY LTD. AND BONTERRA ENERGY CORP.
MRRS DECISION DOCUMENT
1. WHEREAS the local securities regulatory authority or regulator (the “Decision Maker”) in each of the provinces of British Columbia, Alberta, Saskatchewan and Ontario (the “Jurisdictions”) has received an application from Novitas Energy Ltd. ("Novitas") and Bonterra Energy Corp. (“Bonterra”) for a decision pursuant to the securities legislation of the Jurisdictions (the "Legislation") exempting Novitas from the registration requirement under the Legislation (the “Registration Requirement”) in respect of the issuance by Novitas of rights to acquire common shares of Novitas to the shareholders of Bonterra and in respect of the issuance by Novitas of common shares of Novitas to certain service providers of Novitas;
2. AND WHEREAS pursuant to the Mutual Reliance Review System for Exemptive Relief Applications (the “System”) the Alberta Securities Commission is the principal regulator for this application;
3. AND WHEREAS Novitas has represented to the Decision Makers that:
3.1 Novitas was incorporated under the Business Corporations Act (Alberta) (the “ABCA”) on June 15, 2001;
3.2 Novitas’ head office is located in Calgary, Alberta;
3.3 Novitas is not a reporting issuer under the Legislation;
3.4 Novitas is not in default of any of the requirements of the Legislation;
3.5 the authorized capital of Novitas consists of an unlimited number of common shares (the “Common Shares”) and an unlimited number of class B shares of which there are 10 Common Shares outstanding;
3.6 all of the outstanding Common Shares are held by Bonterra;
3.7 Novitas is seeking conditional approval for listing the Common Shares on the Canadian Venture Exchange (the “CDNX”);
3.8 Bonterra was incorporated under the ABCA on February 17, 1998;
3.9 Bonterra’s head office is located in Calgary, Alberta;
3.10 Bonterra holds certain interests in oil and gas properties in Western Canada;
3.11 Bonterra is a reporting issuer under the Legislation and became a reporting issuer in Alberta on May 29, 1998 by filing and receiving a receipt for a prospectus;
3.12 Bonterra is not in default of any of the requirements of the Legislation;
3.13 the authorized capital of Bonterra consists of an unlimited number of common shares (the “Bonterra Common Shares”) of which there are 34,768,906Bonterra Common Shares outstanding;
3.14 under an arrangement agreement (the “Arrangement”) dated May 16, 2001 between Bonterra, Bonterra Acquisition Corp. (“AcquisitionCo”), a wholly owned subsidiary of Bonterra Energy Income Trust (the “Trust”), and the Trust:
3.14.1 AcquisitionCo acquired units of the Trust in exchange for units of AcquisitionCo on the basis of one AcquisitionCo unit for every Trust unit;
3.14.2 each AcquisitionCo unit consists of unsecured subordinated notes and one common share of AcquisitionCo; and
3.14.3 all of the Bonterra Common Shares were acquired by AcquisitionCo in exchange for units of the Trust on the basis of one unit for every four Bonterra Common Shares;
3.15 at an annual and special meeting of Bonterra shareholders held on June 25, 2001, the Bonterra shareholders approved the Arrangement;
3.16 the Bonterra Common Shares were delisted from the CDNX at the close of business on July 4, 2001;
3.17 the Trust units are listed and posted for trading on the CDNX;
3.18 Novitas was incorporated at the initiation of Bonterra to hold interests in oil and gas properties in Western Canada and for the purpose of facilitating a restructuring option for Bonterra to increase shareholder value;
3.19 all of the officers and directors of Novitas are also officers and directors of Bonterra;
3.20 under an agreement between Novitas and Bonterra dated June 15, 2001, Novitas purchased certain oil and gas properties (the “Novitas Properties”) from Bonterra;
3.21 the Novitas Properties:
3.21.1 had been owned and operated by Bonterra since 1998;
3.21.2 are comprised of four wells, two water injection wells and two wells that currently produce oil and associated hydrocarbons; and
3.21.3 are identical to the majority of the remaining properties owned and operated by Bonterra in terms of production history, revenue, reserve life, operatorship, risk, type of hydrocarbons, netbacks, lifting costs and decline rates;
3.22 at the time of Bonterra’s incorporation, Bonterra and Comstate Resources Ltd. (“Comstate”) entered into a management agreement under which Bonterra and Comstate agreed that Comstate employees (the “Employees”) and consultants (the “Consultants”) would operate and administer the affairs of Bonterra;
3.23 on June 15, 2001, Novitas and Comstate entered into a management agreement under which Novitas and Comstate agreed that the Employees and Consultants would operate and administer the affairs of Novitas;
3.24 Comstate, through the Employees and the Consultants, currently operates and administers the affairs of Bonterra and Novitas;
3.25 Novitas has filed a preliminary long form prospectus (the "Prospectus") under which Novitas intends to:
3.25.1 offer rights (the “Rights”) to acquire Common Shares to Bonterra shareholders of record as of June 26, 2001 (the “Eligible Shareholders”); and
3.25.2 qualify for distribution an aggregate maximum of 4,000,000 Common Shares available for subscription to certain of the Employees (the “Eligible Employees”), the Consultants (the “Eligible Consultants”) and the directors and officers of Novitas;
3.26 there are 8 Eligible Employees, 4 Eligible Consultants and approximately 625 Eligible Shareholders;
3.27 all of the Eligible Employees and the Eligible Consultants are resident in Alberta;
3.28 the Prospectus will:
3.28.1 disclose the risks associated with Novitas' operations, lack of history and immediate prospects; and
3.28.2 include an independent engineering report by Sproule Associates Limited regarding the Novitas Properties;
3.29 the Eligible Employees, Eligible Consultants and the number of Common Shares to be offered to the Eligible Employees and Eligible Consultants consists of:
Name of Eligible Consultant Number of Common Shares
Steve Safonovich - Engineering and Operations 500,000
Consultant
Roy Varty - Engineer Consultant 100,000
Gary Skinner - Maintenance and Constructions 10,000
Consultant
Bob Gaskell - Production Accountant Consultant 20,000
Total630,000
Name of Eligible Employee Number of Common Shares
Bernie Dumanowski - Engineer 85,000
Byron Nodwell - Geologist 30,000
Danny Botterill - Field Supervisor 65,000
Karen Bartek - Drayton Office Assistant 20,000
Marlayne Dahlgren - Drayton Office Assistant 40,000
Harjeet Judgev - Accountant 20,000
Kathy Janzen - Accountant 10,000
Shelley Lunz - Receptionist 5,000
Total275,000
3.30 the Eligible Consultants spend, and have spent, a significant amount of time and attention on the business and affairs of Bonterra and Novitas and have a relationship with Bonterra and Novitas that enables them to be knowledgeable concerning the business and affairs of Bonterra and Novitas;
3.31 none of the Eligible Consultants are involved in investor relations;
3.32 the Eligible Consultants and Eligible Employees will not be induced to purchase, directly or indirectly, the Common Shares by expectation of employment, appointment, engagement or continued employment, appointment or engagement as a consultant of, or as an employee of, Comstate;
3.33 the Rights will:
3.33.1 only be offered to the Eligible Shareholders;
3.33.2 be issued on a one for one basis with no stand-by or additional subscription privilege;
3.33.3 be issued for no consideration;
3.33.4 entitle the holder to subscribe for one Common Share at a price of $0.15 per share;
3.33.5 be non-transferable; and
3.33.6 not be listed for trading;
3.34 the Eligible Shareholders exercising the Rights will have full civil and statutory rights of action against Novitas and against Bonterra (in its capacity as a promoter);
3.35 Novitas may rely on an exemption under the Legislation from the Registration Requirement regarding the proposed issuance of the Common Shares to the senior officers and directors under the Prospectus;
3.36 there are no exemptions under the Legislation from the Registration Requirement available to Novitas regarding the proposed issuance of the Common Shares to the Eligible Employees under the Prospectus; and
3.37 there are no exemptions under the Legislation from the Registration Requirement available to Novitas regarding the proposed issuance of the Rights to the Eligible Shareholders under the Prospectus;
4. AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the “Decision”);
5. AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;
6. AND WHEREAS the Decision of the Decision Makers under the Legislation is that the Registration Requirement shall not apply to the issuance by Novitas of the:
6.1 Rights to acquire Common Shares of Novitas to the Eligible Shareholders; and
6.2 Common Shares to the Eligible Consultants and the Eligible Employees.
DATED this 10th day of August, 2001.
Glenda A. Campbell, Vice-Chair Eric T. Spink, Vice-Chair