Securities Law & Instruments

Headnote

Multilateral Instrument 11-101 Principal Regulator System and National Instrument 51- 102 Continuous Disclosure Obligations - exemption granted from the requirement to include financial statements in an information circular for an acquisition that is not significant using the tests in the continuous disclosure rule.

Applicable Legislative Provisions

National Instrument 51-102 Continuous Disclosure Obligations.

Multilateral Instrument 11-101 Principal Regulator System.

July 4, 2007

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(THE JURISDICTIONS)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

THE BUFFALO OIL CORPORATION (BUFFALO) AND

CHOICE RESOURCES CORP. (CHOICE)

 

MRRS DECISION DOCUMENT

Background

1. The local securities regulatory authority or regulator (the Decision Makers) in each of the Jurisdictions has received an application from Buffalo and Choice for a decision under the securities legislation of the Jurisdictions (the Legislation) that Buffalo and Choice are exempt from the requirements of the Legislation to include in an information circular certain financial disclosure in respect of acquisitions completed by Buffalo and Choice within the three most recently completed financial years of such issuers (the Requested Relief).

Application of Principal Regulator System

2. Under Multilateral Instrument 11-101, Principal Regulator System (MI 11-101) and the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Alberta Securities Commission is the principal regulator for this application;

(b) Buffalo is relying on the exemption contained in Part 3 of MI 11-101 in each of the provinces of British Columbia and Saskatchewan;

(c) Choice is relying on the exemption contained in Part 3 of MI 11-101 in the province of British Columbia; and

(d) the MRRS decision document evidences the decision of each Decision Maker.

3. Pursuant to Canadian Securities Administrators (CSA) Staff Notice 42-303 (the Staff Notice), an issuer may submit an application to the provincial and territorial securities regulatory authorities requesting relief from certain requirements of the prospectus rules that are not consistent with National Instrument 51-102, Continuous Disclosure Obligations (NI 51-102).

4. Pursuant to the Staff Notice, the CSA have indicated that they are generally prepared to recommend that relief be granted from the significance tests for determining if a business acquisition is significant and the financial statements required to be included in a prospectus on the condition that the issuer applies the significance tests set out in section 8.3 of NI 51-102 and provides the financial statements specified in section 8.4 of NI 51-102.

Interpretation

5. Defined terms contain in National Instrument 14-101, Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

6. This decision is based on the following facts represented by Buffalo and Choice:

(a) Buffalo is a corporation incorporated under the laws of the Province of Alberta and its head office is located in Calgary, Alberta.

(b) The common shares (Buffalo Shares) of Buffalo are listed and posted for trading on the TSX Venture Exchange (TSXV) under the trading symbol "BFO".

(c) Buffalo is a reporting issuer or equivalent in each of the Jurisdictions and in the Provinces of British Columbia and Saskatchewan and is a "venture issuer" within the meaning of NI 51-102.

(d) Buffalo is not in default of any requirements of the Legislation.

(e) Pursuant to an offer dated August 25, 2006 and a subsequent compulsory acquisition transaction, Buffalo acquired (the Pocaterra Acquisition) all of the issued and outstanding common shares of Pocaterra Energy Inc. (Pocaterra) for total consideration comprised of $6,865,753 in cash and the issuance of 2,388,076 Buffalo Shares (at a deemed price of $1.70 per Buffalo Share) to former holders of Pocaterra shares.

(f) Choice is a corporation incorporated under the laws of the Province of Alberta and its head office is located in Calgary, Alberta.

(g) The common shares (Choice Shares) of Choice are listed and posted for trading on the TSXV under the trading symbol "CZE".

(h) Choice is a reporting issuer or equivalent in each of the Jurisdictions and in the Province of British Columbia and is a "venture issuer" within the meaning of NI 51-102.

(i) Choice is not in default of any requirements of the Legislation.

(j) Pursuant to an arrangement agreement dated May 11, 2006 between Choice and Deep Resources Ltd. (Deep), on July 21, 2006, Choice acquired (the Deep Acquisition) all of the issued and outstanding common shares of Deep for total consideration paid to former holders of Deep shares comprised of 14,531,772 Choice Shares and 5,086,125 warrants to acquire Choice Shares (each whole warrant entitling the holder thereof one Choice Share at an exercise price of $1.50 until July 21, 2007, subject to accelerated expiry in certain circumstances ).

(k) Buffalo and Choice are proposing to amalgamate (the Amalgamation) under the Business Corporations Act (Alberta) pursuant to an amalgamation agreement between Buffalo and Choice dated May 30, 2007.

(l) Pursuant to the Amalgamation, each outstanding Buffalo Share will be exchanged for one common share (Amalco Share) of the issuer (Amalco) resulting from the Amalgamation of Buffalo and Choice and each outstanding Choice Share will be exchanged for 0.474 Amalco Shares.

(m) Buffalo and Choice each propose to hold a special meeting of their respective shareholders, each such meeting to be held on or about August 2, 2007 (the Shareholders' Meetings) at which the shareholders will be given the opportunity to vote on the Amalgamation among other things. Buffalo and Choice are currently preparing a joint information circular (the Information Circular) to be distributed to their respective shareholders.

(n) The Information Circular will contain, among other things, prospectus level disclosure of the business and affairs of each of Buffalo and Choice and the particulars of the Amalgamation.

(o) Pursuant to section 14.2 of Form 51-102F5, because the Pocaterra Acquisition is a significant acquisition for the purposes of OSC Rule 41-501, Buffalo is required to include the financial statement disclosure in the Information Circular as described in sections 6.2 and 6.5 of OSC Rule 41-501, in respect of the Pocaterra Acquisition (the Buffalo Acquisition Disclosure Requirements).

(p) Pursuant to section 14.2 of Form 51-102F5, because the Deep Acquisition is a significant acquisition for the purposes of OSC Rule 41-501, Choice is required to include the financial statement disclosure in the Information Circular as described in sections 6.2 and 6.5 of OSC Rule 41-501, in respect of the Deep Acquisition (the Choice Acquisition Disclosure Requirements and, collectively with the Buffalo Acquisition Disclosure Requirements, the Acquisition Disclosures Requirements).

(q) The Pocaterra Acquisition is not significant for Buffalo within the meaning of that term pursuant to section 8.3 of NI 51-102. As a result, Buffalo would not be required to prepare the financial statements specified in section 8.4 of NI 51-102 in respect of the Pocaterra Acquisition.

(r) The Deep Acquisition is not significant for Choice within the meaning of that term pursuant to section 8.3 of NI 51-102. As a result, Choice would not be required to prepare the financial statements specified in section 8.4 of NI 51-102 in respect of the Deep Acquisition.

Decision

7. Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Makers with the jurisdiction to make the decision has been met.

8. The Decision of the Decision Makers pursuant to the Legislation is that the Requested Relief is granted and the Acquisition Disclosure Requirements shall not apply to Buffalo and Choice.

"Agnes Lau, CA"
Associate Director, Corporate Finance
Alberta Securities Commission