Securities Law & Instruments


Relief from issuer bid requirements -- proposed surrender by shareholder of common shares of the Applicant due to change in shareholder's internal investment restrictions-- no consideration is being paid for the surrender of the common shares -- the surrender is not a related party transaction.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 95-98, 100, 104(2)(c).



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

(the Act)






(Clause 104(2)(c))

UPON the application (the Application) of ESI Entertainment Systems Inc. (the Applicant) to the Ontario Securities Commission (the Commission) for an order pursuant to clause 104(2)(c) of the Act exempting the Applicant from the requirements of sections 95, 96, 97, 98 and 100 of the Act (the Issuer Bid Requirements) in connection with the proposed surrender (the Surrender) by the Royal Bank of Canada (RBC) of common shares without par value (the Common Shares) in the capital of the Applicant;

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

AND UPON the Applicant having represented to the Commission that:

1. The Applicant is a corporation continued under the laws of British Columbia and its head office and registered office are located at 1500-4710 Kingsway, Burnaby, British Columbia. The Applicant provides products and services to the international gaming industry.

2. The Applicant is a reporting issuer in the Province of Ontario and the Common Shares are listed on the Toronto Stock Exchange (the Exchange) under the symbol "ESY". The Applicant is not in default of any requirement of the securities legislation in the Province of Ontario.

3. The authorized share capital of the Applicant consists of an unlimited number of Common Shares, of which 19,008,333 Common Shares were issued and outstanding as of September 6, 2007.

4. RBC is a Canadian chartered bank with its head office in Toronto, Ontario.

5. RBC holds 4,765,016 Common Shares (the RBC Direct Common Shares) directly for its own account.

6. RBC also holds legal title to, but no beneficial interest in, 103,586 Common Shares (the LP Common Shares) as general partner of certain limited partnerships (the Partnerships).

7. Since investing in the Applicant, RBC has changed its internal investment restrictions and, as such, the Common Shares are no longer securities that meet RBC's internal criteria for eligible investments. In order to comply with its internal investment restrictions, RBC wishes to surrender the RBC Direct Common Shares to the Applicant for cancellation.

8. On August 30, 2007, RBC and the Applicant entered into an agreement (the Surrender Agreement) whereby the Applicant agreed to accept the Surrender of all of the RBC Direct Common Shares for cancellation, subject to any necessary approvals being obtained. Pursuant to the terms of the Surrender Agreement, RBC will receive no consideration in exchange for the Surrender of the RBC Direct Shares.

9. The Surrender Agreement also provides that the Applicant will accept for surrender for no consideration any of the LP Common Shares, if RBC, as general partner, distributes the LP Common Shares to the limited partners of the Partnerships.

10. On August 30, 2007, the date of the Surrender Agreement, the closing price on the Exchange of the Common Shares was $0.34. On September 6, 2007, the date of the Application, the closing price on the Exchange of the Common Shares was $0.205.

11. The Applicant and RBC were arms-length parties at the time the Surrender Agreement was agreed and the Surrender of the RBC Direct Common Shares and, if applicable, the LP Common Shares, is not a related party transaction as such term is defined in Commission Rule 61-501.

12. As RBC will not receive any consideration for surrender of the RBC Direct Shares or the LP Common Shares (if applicable), the Surrender Agreement does not provide greater value to RBC for the RBC Direct Shares or, if applicable, the LP Common Shares than the value RBC paid to acquire the RBC Direct Shares and, if applicable, the LP Common Shares.

13. The Surrender of the RBC Direct Shares and, if applicable, the LP Common Shares pursuant to the Surrender Agreement is an issuer bid as defined in section 89(1) of the Act and is not an exempt issuer bid under section 93(3) of the Act.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest.

IT IS ORDERED pursuant to clause 104(2)(c) of the Act that the Applicant is exempt from the Issuer Bid Requirements in connection with the Surrender of the RBC Direct Shares and, if applicable, the LP Common Shares.

The Commission is satisfied that the test contained in the Act that provides the Commission with the jurisdiction to make the decision has been met.

DATED at Toronto, this 2nd day of October, 2007.

"Harold P. Hands"
Ontario Securities Commission
"Paul K. Bates"
Ontario Securities Commission