Securities Law & Instruments

Headnote

Section 144 - application for partial revocation of cease trade order - variation of cease trade order to permit certain trades for the purpose of closing out an outstanding short position held by fund entities and to facilitate wind-up of fund entities - fund manager to surrender registration following wind-up of fund entities - partial revocation granted subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O., c. S.5, as am., ss. 127 and 144.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

(the "Act")

AND

IN THE MATTER OF

ENTERPRISE CAPITAL MANAGEMENT INC.

(the "Applicant")

AND

ROYAL OAK VENTURES INC.,

FORMERLY ROYAL OAK MINES INC.

("Royal Oak")

ORDER

(Section 144)

WHEREAS the securities of Royal Oak are subject to a temporary cease trade order made by the Director dated February 16, 2000 pursuant to section 127 of the Act, as extended by a further order made by the Director dated March 1, 2000 pursuant to section 127 of the Act (collectively, the "Cease Trade Order"), ordering that trading in the securities of Royal Oak cease until the Cease Trade Order is revoked;

AND WHEREAS the Applicant has made an application to the Ontario Securities Commission (the "Commission") pursuant to subsection 144(1) of the Act for a partial revocation of the Cease Trade Order to permit CIBC Mellon Global Securities Service Company ("CIBC Mellon"), Fiducie Desjardins Inc. ("Desjardins") and RBC Dexia Investor Services ("RBC", and together with CIBC Mellon and Desjardins, the "Vendors"), on behalf of their respective clients, to sell common shares of Royal Oak ("Royal Oak Shares") to certain funds managed by the Applicant (the "Funds"), solely for the purpose of closing out the Short Position (as defined below) (the "Dispositions").

AND UPON the Applicant having represented to the Commission as follows:

1. Each of the Funds was established and is existing under the laws of the Province of Ontario and is managed by the Applicant. The Applicant is a corporation established and existing under the laws of the Province of Ontario.

2. In addition to the Cease Trade Order, the securities of Royal Oak are subject to the following cease trade orders:

(a) an order of the Autorité des marchés financiers ("AMF") (1999-MC-1815) issued on July 20, 1999 (the "AMF Cease Trade Order");

(b) an order of the Alberta Securities Commission issued on September 13, 2002; and

(c) an order of the British Columbia Securities Commission issued on July 19, 1999.

3. The Applicant has concurrently applied to the AMF for a partial revocation of the AMF Cease Trade Order to permit the Dispositions.

4. The Funds collectively hold an aggregate short position of 797,075 Royal Oak Shares (the "Short Position"). In connection with the creation of the Short Position, the Funds pledged cash collateral (the "Collateral") to lenders of Royal Oak Shares.

5. The Funds established the Short Position on or about July 15, 1997. At such time, the Applicant had no information concerning potential cease trade orders of Royal Oak Shares and the Cease Trade Order was not reasonably foreseeable considering the information then available to the Applicant. At the time the Short Position was established, Royal Oak Shares were listed on the Toronto Stock Exchange and the American Stock Exchange.

6. The Applicant intends to wind down the Funds and settle the Funds' outstanding transactions, including closing out the Short Position and obtaining a return of the Collateral, as soon as practicable. Upon winding-up the Funds, the Applicant intends to surrender its registration under National Instrument 31-103 Registration Requirements and Exemptions prior to certain filing deadlines in September 2010.

7. Substantially all of the assets of the Funds have been distributed to investors, the majority of which were distributed in 2002 and 2003. The Funds' respective constating documents, which pre-date the effective date of the Cease Trade Order, initially provided that the Funds would be active investors for a five-year period following establishment, subsequent to which, each Fund would enter into a liquidation period of no more than 18 months, during which the affairs of the Funds would be wound up and all Fund property would be distributed to investors. The winding up of the Funds was subsequently postponed so that the Applicant could: (i) settle the Short Position and secure a return of the Collateral, and (ii) resolve an unrelated litigation proceeding. In September 2009, the litigation matter was resolved leaving settlement of the Short Position as the sole remaining material obligation of the Funds.

8. To settle the Short Position, and secure a return of the Collateral, the Funds must acquire Royal Oak Shares.

9. Each of the Vendors lent Royal Oak Shares to the Funds for the purposes of establishing the Short Position. The Vendors (on behalf of their respective clients) have agreed, subject to the granting of this Order, to sell Royal Oak Shares to the Funds at $0.04 per share.

10. Neither the Applicant nor any of the Funds is an insider of Royal Oak or is in default under any applicable securities legislation.

11. The Applicant and each of the Funds are "accredited investors" under applicable securities laws and understand the nature of the Cease Trade Order. To the best of the Applicant's knowledge, each of the Vendors is an "accredited investor" under applicable securities laws.

12. The Dispositions are necessary in order for the Applicant to distribute the remaining Fund property to investors as set out in the Funds' respective constating documents and, thereafter, wind-up the Funds.

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Director being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED pursuant to section 144 of the Act that the Cease Trade Order is partially revoked solely to permit trades and acts in furtherance of trades in Royal Oak Shares that are necessary for and in connection with the Dispositions, provided that:

1. prior to the completion of the Dispositions, each participant in the Dispositions will:

(a) receive:

(i) a copy of the Cease Trade order; and

(ii) a copy of this order for the partial revocation of the Cease Trade Order;

(b) provide the Applicant with signed and dated acknowledgements which clearly state that all of Royal Oak's securities will remain subject to the Cease Trade Order, and that the issuance of a partial revocation order does not guarantee the issuance of a full revocation order in the future; and

2. the Applicant undertakes to make available copies of the written acknowledgements referred to in paragraph 1(b) to staff of the Commission upon request.

DATED at Toronto this 31st day of August, 2010

"Jo-Anne Matear"
Assistant Manager, Corporate Finance
Ontario Securities Commission