Securities Law & Instruments

Headnote

Mutual Reliance Review System for ExemptiveRelief Applications - relief from the identical considerationrequirement -- payment of cash in lieu of common shares of theofferor permitted for holders of the shares of the offeree residentin the United States of America and a holder of the shares ofthe offeree resident in a foreign jurisdiction other than theUnited States of America.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990 c. S.5, as am.,ss. 97(1), 104(2)(c).

IN THE MATTER OF

THE SECURITIES LEGISLATION

OF BRITISH COLUMBIA, ALBERTAAND ONTARIO

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEWSYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

SHAKER RESOURCES INC.

AND PETROFLOW ENERGY LTD.

 

MRRS DECISION DOCUMENT

1. WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") ineach of British Columbia, Alberta, and Ontario (the "Jurisdictions")has received an application from Shaker Resources Inc. ("Shaker")for a decision under the securities legislation of the Jurisdictions(the "Legislation") exempting Shaker from the requirementcontained in the Legislation that when a take-over bid ismade, all the holders of securities that are of the same classshall be offered identical consideration (the "IdenticalConsideration Requirement") in connection with an offerby Shaker to purchase the outstanding common shares and multiplevoting shares of Petroflow Energy Ltd. ("Petroflow");

2. AND WHEREAS under the Mutual Reliance ReviewSystem for Exemptive Relief Applications (the "System"),the Alberta Securities Commission is the principal regulatorfor this application;

3. AND WHEREAS, unless otherwise defined,the terms herein have the meaning set out in National Instrument14-101 Definitions;

4. AND WHEREAS Shaker has represented to theDecision Makers that:

4.1 Shaker is a public company incorporatedunder the Business Corporations Act (Alberta) (the"ABCA");

4.2 Shaker's head office is located in theProvince of Alberta;

4.3 Shaker is a reporting issuer in BritishColumbia and Alberta and not in default of any of the requirementsof the Legislation;

4.4 the authorized capital of Shaker consistsof an unlimited number of common shares (the "CommonShares") of which as of April 11, 2003, there were16,113,000 Common Shares outstanding;

4.5 the Common Shares are listed on theTSX Venture Exchange;

4.6 Shaker is not eligible to use the multijurisdictionaldisclosure system pursuant to National Instrument 71-101Multijurisdictional Disclosure System;

4.7 Petroflow is a public company incorporatedunder the Business Corporations Act (Canada);

4.8 Petroflow's head office is located inthe Province of Nova Scotia;

4.9 Petroflow is a reporting issuer in BritishColumbia, Alberta, and Ontario, and is not in default ofany of the requirements of the Legislation;

4.10 the authorized capital of Petroflowincludes an unlimited number of Class A subordinate votingshares (the "Subordinate Voting Shares"), an unlimitednumber of Class B multiple voting shares (the "MultipleVoting Shares" and together with the Subordinate VotingShares, the "Petroflow Shares") and an unlimitednumber of preferred shares, issuable in series, of which,as of April 11, 2003, there were 17,214,694 SubordinateVoting Shares, and 2,625,013 Multiple Voting Shares outstanding;

4.11 the Subordinate Voting Shares are listedon the TSX Venture Exchange Inc.;

4.12 effective April 11, 2003, Shaker andPetroflow entered into a pre-acquisition agreement (the"Pre-acquisition Agreement") pursuant to whichShaker agreed to make a take-over bid (the "Bid")for all of the outstanding Petroflow Shares on or aboutApril 30, 2003;

4.13 the Pre-acquisition Agreement was amendedto allow Shaker to make the Bid before May 7, 2003;

4.14 on May 5, 2003 Shaker made the Bid;

4.15 the Bid was made in compliance withthe Legislation except to the extent that relief is requiredin respect of the Identical Consideration Requirement;

4.16 under the terms of the Bid, the priceto be paid to holders of Petroflow Shares resident in Canadais one Common Share for each 13.68 Petroflow Shares;

4.17 the Common Shares issuable under theBid to holders (the "U.S. Shareholders") of PetroflowShares resident in the United States of America (the "UnitedStates") have not been and will not be registered underthe United States Securities Act of 1933 and, accordingly,the delivery of Common Shares to U.S. Shareholders withoutfurther action by Shaker may constitute a violation of thelaws of the United States;

4.18 to the best information of Shaker,there are three registered U.S. Shareholders and one registeredholder (the "Foreign Shareholder") of PetroflowShares resident in a foreign country other than the UnitedStates;

4.19 to the best information of Shaker,the U.S. Shareholders currently hold a total of 3,500 PetroflowShares, representing 0.0176% of the total number of outstandingPetroflow Shares and the Foreign Shareholder currently holds500 Petroflow Shares representing 0.0025% of the total numberof outstanding Petroflow Shares;

4.20 the delivery of Common Shares to theU.S. Shareholders would require the filing of a registrationstatement and subject Shaker to continuous disclosure requirementswhich would be overly burdensome to Shaker;

4.21 the closing price (the "ClosingPrice") of the Common Shares on April 9, 2003 (thelast day the Common Shares traded before the announcementof the Bid) was $1.00;

4.22 based the Closing Price, the priceof one Common Share for every 13.68 Petroflow Shares wasdetermined to be equal to a cash price of $0.073 per PetroflowShare;

4.23 under the Bid each U.S. Shareholderor Foreign Shareholder, or holder of Petroflow Shares whoappears to Shaker or to Valiant Trust Company (the "Depositary")to be resident in a country other than Canada, may onlyreceive cash for their Petroflow Shares unless the issuanceof Common Shares is permitted under local securities lawsin such foreign country without being registered or qualifiedfor issuance;

4.24 to the extent that U.S. Shareholdersand the Foreign Shareholder, resident in jurisdictions inwhich the issuance of Common Shares in exchange for theirPetroflow Shares is not permitted under local securitieslaws, elect to deposit their Petroflow Shares pursuant tothe Bid, Shaker proposes to pay cash in the amount of $0.073(Cdn.) per Petroflow Share, less applicable withholdingtaxes, substantially simultaneously with the delivery toall other holders of Petroflow Shares of the considerationto which such shareholders are entitled under the Bid;

4.25 if Shaker increases the considerationoffered to holders of Petroflow Shares resident in Canada,the increase in consideration will also be offered to U.S.Shareholders and Foreign Shareholders at the same time andon the same basis; and

4.26 Shaker will pay the cash directly tothe Depositary who will then distribute the cash to theU.S. Shareholders and the Foreign Shareholder resident injurisdictions in which the issuance of Common Shares inexchange for their Petroflow Shares is not permitted;

5. AND WHEREAS under the System, this MRRSDecision Document evidences the decision of each DecisionMaker (collectively, the "Decision");

6. AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to makethe Decision has been met;

7. THE DECISION of the Decision Makers underthe Legislation is that, in connection with the Bid, Shakeris exempt from the Identical Consideration Requirement insofaras the U.S. Shareholders and Foreign Shareholders who wouldotherwise receive Common Shares under the Bid will receivecash proceeds as set out in paragraphs 4.24, 4.25, and 4.26.

June 3, 2003.

"Glenda A. Campbell"
"Stephen R. Murison"