Orbus Pharma Inc. -- s. 144

Headnote

Section 144 -- application for variation of cease trade order -- issuer cease traded due to failure to file with the Commission annual financial statements -- issuer has applied for a variation of the cease trade order to permit the issuer to proceed with a proposal under the Bankruptcy and Insolvency Act -- partial revocation granted subject to conditions.

Applicable Legislative Provisions

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

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, CHAPTER S.5, AS AMENDED (the ACT)

AND

IN THE MATTER OF

ORBUS PHARMA INC.

ORDER

(Section 144)

WHEREAS the securities of Orbus Pharma Inc. (the Filer) are subject to a temporary cease trade order made by the Director dated May 10, 2010 under paragraph 2 of subsection 127(1) and subsection 127(5) of the Act and a further cease trade order issued by the Director on May 21, 2010 pursuant to subsection 127(1) of the Act (together, the Cease Trade Order) directing that trading in the securities of the Filer cease until the Cease Trade Order is revoked;

AND WHEREAS the Filer has applied to the Ontario Securities Commission (the Commission) pursuant to section 144(1) of the Act for a partial revocation of the Cease Trade Order;

AND WHEREAS the Filer has represented to the Commission that:

1. The Filer is a corporation existing under the Business Corporations Act (Alberta) formed pursuant to an amalgamation on June 1, 2006.

2. The Filer's head office is located in Markham, Ontario.

3. The Filer is a reporting issuer in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec and Nova Scotia.

4. The Filer is engaged in the business of generic drug development and manufacturing.

5. The authorized capital of the Filer consists of an unlimited number of common voting shares (the Common Shares) and an unlimited number of Class A Preferred Shares, of which 15,235,717 Common Shares are currently issued and outstanding.

6. The Filer has issued $7.3 million of convertible secured subordinated debentures which bear interest at 10.0% per annum and which have a maturity date of August 15, 2011 (the Debentures).

7. The Common Shares were suspended from trading on the TSX NEX Exchange on April 30, 2010 for failure to maintain minimum TSX NEX Exchange listing requirements.

8. The Cease Trade Order was issued as a result of the Filer's failure to file its annual audited financial statements, annual management's discussion and analysis, and certification of annual filings for the year ended December 31, 2009 (the Unfiled Documents).

9. In addition to the Unfiled Documents, the Filer has subsequently failed to file its interim unaudited financial statements, interim management's discussion and analysis, and certification of interim filings, for the three-month periods ended March 31, 2010, June 30, 2010 and September 30, 2010 (together with the Unfiled Documents, the Unfiled Continuous Disclosure).

10. The Filer is also subject to cease trade orders issued by the securities regulators in the Provinces of British Columbia, Manitoba, Alberta and Québec for failure to file required filings under applicable securities laws (the Other Cease Trade Orders). The Filer has applied for and expects to be granted concurrently with this partial revocation order, a partial revocation of the cease trade order issued by the Alberta Securities Commission (the Alberta Cease Trade Order) to permit the trades contemplated by the Proposal (as defined below).

11. The Filer is also included on the list of defaulting issuers maintained by the Saskatchewan Financial Services Commission and is also in default in Nova Scotia with respect to the Unfiled Continuous Disclosure.

12. Other than the failure to file the Unfiled Continuous Disclosure, the Filer is not in default of any of the requirements of the Act or the rules and regulations made pursuant thereto.

13. On May 17, 2010. the Filer was granted protection from its creditors under the Bankruptcy and Insolvency Act (the BIA). The protection afforded by the BIA has been extended several times pursuant to orders granted by the Ontario Superior Court of Justice, In Bankruptcy and Insolvency (the Court). The purpose of seeking protection from creditors under the BIA was to allow the Filer time to file with the official receiver a proposal to effect a compromise and arrangement of all claims of the Filer's creditors against the Filer.

14. On September 7, 2010, the Filer filed a proposal (the Proposal) with the Official Receiver in accordance with the BIA, naming RSM Richter Inc. as the Proposal trustee (the Trustee).

15. The steps of implementation of the Proposal include a reorganization of the Filer's share capital and trades of securities of the Filer in Alberta, Saskatchewan, Ontario and the State of New York. The Common Shares, the Debentures and other securities in the capital of the Filer have no value as a result of the Filer's insolvency.

16. The Proposal will involve the issuance of additional Common Shares and shares of a new class to eight secured creditors (the Affected Creditors) and payments of cash to unsecured creditors (the Unsecured Creditors). The Filer will issue approximately 7,311,638 additional Common Shares at a deemed price of $0.05 and 196,500,260 new Class B non-voting common shares (Class B Shares) at a deemed price of $0.04 to the Affected Creditors in settlement of approximately $8,225,592 in debt.

17. According to the Proposal, of the $9,139,547 of debt owed as of July 31, 2010 to the Affected Creditors and which is to be settled or arranged under the Proposal, the Affected Creditors will settle 4% of their claims in exchange for Common Shares, 86% of their claims for Class B Shares and the remaining 10% of their claims shall continue after implementation of the Proposal. All outstanding share purchase warrants and stock options of the Filer will be cancelled for no consideration. Unsecured creditors will receive a cash payment from a pool of $250,000 contributed by Trimac Investments Limited Partnership, the Proposal sponsor (the Proposal Sponsor).

18. The Affected Creditors will receive the Common Shares and Class B Shares pursuant to section 2.11 of National Instrument 45-106 Prospectus and Registration Exemptions and sign acknowledgments that the Filer's securities are currently subject to the Cease Trade Order and the Other Cease Trade Orders.

19. Seven of the Affected Creditors are at arms-length to the Filer. The remaining creditor, the Proposal Sponsor is a "related party" of the Filer as such term is defined in Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101"). Provided that the Proposal is approved and proceeds, the Proposal Sponsor and related parties will hold 4,743,326 Common Shares (representing 21.0% of the outstanding Common Shares) and 65,887,068 Class B Shares (representing 33.5% of the Class B Shares).

20. The Filer is exempt from the formal valuation and minority approval requirements of MI 61-101 pursuant to sections 5.5(f) and 5.7(d), respectively, of MI 61-101. The Proposal was subject to Court approval, the Court was advised of the requirements of MI 61-101 for related party transactions and the Court did not require compliance with section 5.4 or 5.6.

21. The Proposal has been approved by the creditors of the Corporation on September 28, 2010 and the Court on October 18, 2010 as required under the BIA.

22. After the completion of the Proposal, the filer intends to file the Unfiled Continuous Disclosure, pay all outstanding fees and apply to the applicable securities regulator to have the Cease Trade Order and the Other Cease Trade Orders fully revoked.

23. The Filer's SEDAR and SEDI profiles are up to date.

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

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

IT IS ORDERED, pursuant to section 144 of the Act, that the Ontario CTO is partially revoked solely to permit trades in securities of the Filer (including for greater certainty, acts in furtherance of trades in securities of the Filer) that are necessary for and are in connection with the Proposal, provided that, prior to the completion of the Proposal:

(a) Each Affected Creditor resident in Ontario:

(i) receives a copy of the Proposal;

(ii) receives a copy of the Cease Trade Order;

(iii) receives a copy of this order; and

(iv) receives written notice from the Filer, and provides a written acknowledgement to the Filer, that all of the Filer's securities, including the Common Shares and the Class B Shares issued in connection with the Proposal, will remain subject to the Cease Trade Order until it is revoked, and that the granting of this order does not guarantee the issuance of a full revocation in the future; and

(b) the Filer undertakes to make available copies of the written acknowledgements to staff of the Commission on request.

DATED at Toronto this 13th day of January, 2011.