Securities Law & Instruments


Section 144 -- variation of cease trade order to permit private placement.

Applicable Ontario Statutory Provision

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 127 and 144.

May 27, 2005









(Section 144)

WHEREAS the securities of Adex Mining Inc. (the Issuer) are subject to a cease trade order of the Director dated May 27, 1998 (the Cease Trade Order) made under section 127 of the Act directing that trading in the securities of the Issuer cease until the Cease Trade Order is revoked by a further order of revocation;

AND WHEREAS the Issuer has made an application to the Ontario Securities Commission for an order to vary the Cease Trade Order pursuant to section 144 of the Act with respect to three proposed transactions: (i) to negotiate with potential accredited investors and complete a private placement of a minimum of $250,000 and a maximum of $1,000,000 by way of an equity or debt offering (the Private Placement); (ii) to negotiate a debt settlement with one of the two principal creditors of Adex to settle the approximately $500,000 claimed by them (the Arm's Length Debt Settlement); and (iii) to negotiate a debt settlement with two principals of Adex to settle an aggregate of $129,000 of debt (the Non-arm's Length Debt Settlement) (the Arm's Length Debt Settlement and the Non-arm's Length Debt Settlement are collectively referred to as the Debt Settlements);

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

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

1. The Issuer was formed by articles of amalgamation under the Business Corporations Act (Ontario) on December 31, 1992 under the name Adex Mining Corp. on the amalgamation of Bellex Mining Corp. and Adonis Resources Inc. Bellex Mining Corp. was continued into Ontario from British Columbia on December 30, 1992 and was originally formed under the laws of British Columbia on May 18, 1988. Adonis Resources Inc. was continued into Ontario from British Columbia on December 31, 1992 and was originally formed under the laws of British Columbia on March 30, 1989. The Corporation changed its name to Adex Mining Inc. by articles of amendment dated July 15, 1996.

2. The authorized capital of the Issuer consists of an unlimited number of common shares without par value, of which 21,019,975 common shares are currently issued and outstanding, and an unlimited number of preferred shares issuable in series, of which none are currently outstanding.

3. The Issuer became a reporting issuer in Ontario in 1992. The Issuer is also a reporting issuer in British Columbia.

4. None of the Issuer or its predecessors had been subject to a cease trade order of either the Commission or the British Columbia Securities Commission prior to the issuance of the Cease Trade Order. The British Columbia Securities Commission issued an order ceasing trading in the common shares of the Issuer on July 16, 1998. The Cease Trade Order was issued in Ontario as a result of the Issuer's failure to file audited annual financial statements for the year ended December 31, 1997. These statements were subsequently filed on December 4, 1998 together with the interim statements for the three months ended March 31, 1998, the six months ended June 30, 1998 and the nine months ended September 30, 1998, all of which were mailed to shareholders. However, no further financial statements have been filed with the Commission.

5. Prior to the issuance of the Cease Trade Order, the common shares of the Issuer were traded on the Toronto Stock Exchange and have since been delisted.

6. The Issuer's failure to file financial statements was a result of financial distress as the Issuer had expended all of its cash resources developing and maintaining its principal property, the Mount Pleasant Mine (the Property) located in the province of New Brunswick, and the Issuer did not have sufficient funds to have its financial statements prepared and audited

7. The Issuer has held an interest in the Property since June 1995. In 1997 the Issuer retained Kvaerner Metals Davy Ltd. (now known as Aker Kvaerner Canada Inc.) (Kvaerner) to perform a feasibility study on the Property. The Issuer believes that there is an opportunity to develop the Property and to do so the remaining directors of the Issuer wish to complete the Private Placement and the Debt Settlements.

8. The Issuer wishes to raise between $250,000 and $1,000,000 by way of an equity offering or debt offering of convertible securities to accredited investors including existing shareholders, possibly in the form of a convertible debenture, convertible into units at a price of $0.10 per unit. Each unit could be comprised of a common share and a full warrant with each warrant exercisable to purchase a further common share at $0.10 for nine months; at $0.20 for a further nine months; and at $0.30 for a further six months after the closing of the offering. The Private Placement could also include the offering of a convertible debenture and warrants with the convertible debenture convertible into common shares and the warrants exercisable on the same terms as the warrants referred to above.

9. The funds from the Private Placement would be used to maintain the Issuer and the Property until a more significant financing and a full revocation of the Cease Trade Order can be undertaken.

10. The Issuer is also currently the defendant in an action brought by Kvaerner in respect of payment for the feasibility study prepared by Kvaerner. The amount being claimed is $500,000.

11. The Issuer wishes to be able to negotiate a cash settlement, which will be paid out of the proceeds of the maximum Private Placement, or the issuance of common shares of the Issuer in partial or full satisfaction of the liability (the Arm's Length Debt Settlement). A proposal could involve a cash payment and 1,000,000 common shares or more priced at $0.10 per share with the possibility of warrants or a debenture on the same terms as set out above.

12. In addition, the Issuer wishes to settle $129,000 of debt owed to an insider and a former insider for securities being comprised of common shares and warrants or a convertible debenture on the same terms as set out above (the Non-arm's Length Debt Settlement).

13. The other major liability of the Issuer is approximately $700,000 in property tax arrears and interest thereon owed to the Province of New Brunswick relating to the Property. The Province of New Brunswick has tentatively agreed that payment be deferred until commencement of commercial production.

14. Other than Kvaerner and the Province of New Brunswick, the Issuer has no substantial liabilities.

15. The Issuer proposes to use the proceeds from the Private Placement as follows:

(a) completion of the audit and filing of the Issuer's financial statements;

(b) hold shareholders meeting;

(c) prepare NI 43-101 report on the Property;

(d) seek full revocation of the Cease Trade Order;

(e) property care and maintenance;

(f) working capital;

(g) cash settlement of litigation;

(h) listing on TSXV, assuming maximum offering; and

(i) work on property in accordance with NI 43-101, assuming maximum offering.

16. As part of the reactivation plan, the Issuer will make full, true and plain disclosure of all its affairs on the public record including holding a shareholders meeting.

17. Apart from its failure to file financial statements, the Issuer is not in default of any requirements of the Act, the rules or the regulations made thereunder, subject to updating its continuous disclosure record pursuant to disclosure in an Information Circular for a shareholders meeting to be called once adequate funding is in place.

18. Concurrent with the Debt Settlements and prior to completion of the Private Placement, each potential investor in securities of the Issuer will:

(a) receive a copy of the Cease Trade Order;

(b) receive a copy of this Order; and

(c) receive written notice from the Issuer and acknowledge that all of the Issuer's securities, including debentures and warrants and any common shares issued upon conversion of the debentures or exercise of the warrants, will remain subject to the Cease Trade Order until it is revoked by the Commission.

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

IT IS ORDERED pursuant to section 144 of the Act that the Cease Trade Order be varied solely to permit the Private Placement and the Debt Settlements as described in paragraphs 8 to 12 of this Order and the issuance of common shares on the exercise of warrants or the conversion of debentures.

"Erez Blumberger"
Assistant Manager, Corporate Finance