Royal Oak Ventures Inc., Formerly Royal Oak Mines Inc.

Headnote

Section 144 - partial revocation of cease trade order to permit settlement of outstandingdebt owed to creditors by the issuance of shares.

Statutes Cited

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

WHEREAS by an Assignment made pursuant to section 6 of the Act and datedMarch 10, 1995, as amended November 9, 1995 (the "Assignment"), the OntarioSecurities Commission ( the "Commission") assigned to each Director (as defined inthe Act) certain powers and duties of the Commission under section 144 of the Act torevoke or vary any decision made by a Director;

AND WHEREAS the securities of Royal Oak Ventures Inc., formerly Royal OakMines Inc. (the "Applicant") are subject to a Temporary Order of the Director datedFebruary 16, 2000 made under section 127 of the Act and extended by an Order of theDirector dated March 1, 2000 (the "Cease Trade Order") directing that trading in thesecurities of the Applicant cease;

AND WHEREAS the Applicant has made an application to the Commission foran order of partial revocation of the Cease Trade Order pursuant to section 144 of theAct with respect to the proposed issuance by the Applicant pursuant to a proposal (the"Proposal") made under the Bankruptcy and Insolvency Act (Canada) (the "BIA") of (1)common shares in the capital of the Applicant (the "Common Shares") to be issued to asecured creditor of the Applicant resident in Ontario and (2) non-voting shares (the"Non-voting Shares") to the 509 unsecured creditors of the Applicant resident inOntario (the "Unsecured Creditors");

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

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

Royal Oak Ventures Inc.

1. The Applicant is a corporation that was incorporated under the BusinessCorporations Act (Ontario) (the "OBCA") on July 23, 1991, and is a reportingissuer or the equivalent thereof in each of the provinces and territories ofCanada (the "Jurisdictions").

2. Prior to the implementation of the Proposal, the share capital of the Applicantconsisted of an unlimited number of common shares (the "Common Shares") andspecial shares ("Special Shares"), of which there are approximately 163 millionCommon Shares outstanding and no Special Shares outstanding.

3. The Common Shares of a predecessor to the Applicant, which merged with otherpredecessors to become the Applicant on July 23, 1991, were originally listed onThe Toronto Stock Exchange on September 4, 1987. On April 16, 1999 TheToronto Stock Exchange suspended trading of the Common Shares.

4. The securities of the Applicant are subject to cease trade orders in the provincesof British Columbia, Alberta, Manitoba and Québec and the Cease Trade Orderin Ontario for failing to file interim financial statements for the three month periodended March 31, 1999, the six month period ended June 30, 1999 and the ninemonth period ended September 30, 1999 during the course of the CCAA andBIA proceedings described below.

CCAA and BIA Proceedings

5. On February 15, 1999, the Applicant acknowledged its insolvency and submittedan application under the Companies' Creditors' Arrangement Act (Canada) (the"CCAA") seeking an opportunity to present a plan of compromise or arrangementto its creditors. Its application was granted and the Ontario Superior Court ofJustice granted an Initial Order under the CCAA on February 15, 1999.

6. In compliance with the CCAA, the Initial Order appointedPricewaterhouseCoopers Inc. ("PwC") as Monitor.

7. Following the Initial Order, the Applicant continued mining operations andcontinued capital expenditure programs which included the construction of itstailings dam in accordance with the requirements of the British Columbiagovernment. It prepared cash-flow forecasts which were reviewed by PwC andwhich were the subject of PwC's reports to the Court. PwC also reported to theCourt and to the Applicant's creditors concerning the Applicant's financialperformance on a receipts and disbursements basis.

8. Stakeholders of the Applicant lost confidence in the ability of the Board ofDirectors and management to effect a compromise. As a result, themanagement of the Applicant brought a motion to the Court for the appointmentof an interim receiver.

9. On April 16, 1999, PwC was appointed by court order as interim receiver of theproperty, assets and undertaking of the Applicant pursuant to Section 47 of theBIA. Under that court order, PwC was directed to market the Applicant'sbusiness for sale either on the basis of a restructuring or on the basis of anasset sale.

10. As interim receiver, PwC submitted its marketing plan to the Court for approval,which approval was granted on May 3, 1999.

11. At the time of the order by the Court appointing PwC as interim receiver, theApplicant's major assets consisted of four operating mines, two mines on "careand maintenance" status, a number of exploration and development properties, anumber of investments in publicly traded stocks, and its wholly-ownedsubsidiary, Arctic Precious Metals, Inc. By far the most significant asset ownedby the Applicant is its interest in the Kemess Mine in northern British Columbia.

12. Following extensive marketing efforts, PwC received and accepted the best offermade for the purchase of the Applicant's assets. Substantially all of the assets,other than the Kemess Mine have been sold or otherwise disposed of.

13. PwC received an acceptable offer for the Kemess Mine in the marketingprocess. However, rather than complete that sale, and with the concurrence ofthe Kemess Mine asset purchaser, PwC sought approval of the Court to file theProposal under the BIA to compromise the claims of creditors and to provide forthe continuation of the Applicant's mining business at Kemess by the Applicant.The restructuring of the Applicant would provide greater benefits to all of thestakeholders than would a sale of the Kemess Mine in accordance with theaccepted offer.

14. By order dated November 22, 1999, the Court authorized PwC to file theProposal on behalf of the Applicant. As noted above, the Proposal was filed inaccordance with the BIA on December 3, 1999, accepted by all classes ofcreditors at meetings held on December 14, 1999 and approved by the Court, onnotice to all creditors and shareholders, on January 4, 2000. PwC wasappointed Trustee under the Proposal.

15. Prior to approval of the Proposal by the Court, registered shareholders andcreditors of the Applicant received the Trustee's report which contained nearprospectus level disclosure regarding the Applicant and the Proposal.

The Proposal

16. Under the terms of the Proposal, the capital structure, assets and liabilities ofthe Applicant are completely restructured. The Proposal allowed for thecompromise or satisfaction of claims of the Applicant's creditors, permitted theApplicant to continue as a going concern with the Kemess Mine as theApplicant's principal assets and allowed for the possibility of new business to beintroduced to the Applicant in the future.

17. The Proposal provided for the reorganization of the capital and assets of theApplicant and compromise of the Applicant's liabilities as set out in the Proposalthrough the following steps:

A. the sale of a royalty interest in the Kemess Mine to Northgate ResourcesLimited ("Northgate"), or its nominee, equal to 95% of the net cash flow ofthe Kemess Mine and subject to the transfer and conversion rightscontained in a Royalty Agreement;

B. the transfer of all remaining assets of the Applicant, other than theKemess Mine, or relating to, the Kemess Mine, to a wholly-ownedsubsidiary for sale for the benefit of secured creditors; and

C. the satisfaction or assumption of outstanding indebtedness of theApplicant through the distribution of a portion of the purchase price for theroyalty and the issuance of Common Shares and Non-voting Shares.

18. With respect to paragraph 17.C, the implementation of the Proposal requires thefollowing distributions of securities of the Applicant take place:

A. Trilon Financial Corporation ("Trilon"), a secured creditor of the Applicant,will receive Common Shares representing 48.5% and Non-voting Sharessuch that Trilon's equity interest will total 67% of the restructuredApplicant in exchange for a release of $15 million of indebtedness;

B. the holders of certain notes issued by the Applicant will receive apayment of $1.0 million in cash in repayment of costs plus Non-votingShares representing 30% equity interest in the restructured Applicant, inexchange for and satisfaction of their approximately $263 million ofsecured and unsecured creditor claims; and

C. the Unsecured Creditors will receive a cash payment of $2.0 million andNon-voting Shares equal to 2% equity interest in the restructuredApplicant, calculated on a fully-diluted basis, in exchange for andsatisfaction of approximately $424 million of Unsecured Creditor claims,including governmental claims.

19. The total number of Non-voting Shares to be issued to Unsecured Creditorsresident in each Jurisdiction will not exceed 1% of the equity interest in theApplicant in each Jurisdiction following the reorganization.

20. All of the distributions contemplated by the Proposal have been approved by theCourt under the BIA. Articles of Reorganization were filed by the Applicant inaccordance with the Proposal on February 11, 2000.

21. Prior to the reorganization the Common Shares were consolidated on a 100 for 1basis resulting in existing shareholders holding 51.5% of the voting shares of therestructured Applicant representing a 1% equity interest.

22. As a consequence of the implementation of the Proposal, virtually all of the debtof the Applicant and to creditors affected by the Proposal will either becompromised or assumed.

Distributions Required to Implement the Proposal

23. The distribution of the following securities of the Applicant necessary tocomplete the implementation of the Proposal were made on February 11, 2000:

A. a debenture issued by the Applicant to Northgate creating a fixed andfloating charge on all property and assets relating the to the KemessMine;

B. a note issued by the Applicant to PwC in trust on behalf of Trilon in theaggregate principal amount of $15 million convertible uponimplementation of the Proposal into 1,530,288 Common Shares and107,341,027 Non-voting Shares (the "Secured Creditor Note");

C. a promissory note issued by the Applicant to PwC in trust on behalf of thecertain secured creditors (the "Hedge Creditors") in the aggregateprincipal amount of $2.1 million;

D. a note issued by the Applicant to PwC in trust on behalf of holders ofcertain notes issued by the Applicant (the "Note Holders"), in theaggregate principal amount of $175 million convertible uponimplementation of the Proposal into 48,748,350 Non-voting Shares (the"Note Holders Note"); and,

E. a note issued by the Applicant to PwC in trust on behalf of certainunsecured creditors of the Applicant (the "Unsecured Creditors")convertible upon implementation of the Proposal into 3,249,890 Non-voting Shares (the "Unsecured Creditors Note").

Distributions Required Following Implementation of the Proposal

24. The following securities of the Applicant are required to be distributed by PwCfollowing implementation of the Proposal in connection with its obligations astrustee under the Proposal (the "Post-Implementation Distributions"):

A. 1,530,288 Common Shares and 107,341,027 Non-voting Shares to bedistributed to Trilon upon conversion of the Secured Creditor Note;

B. 107,341,027 Non-voting Shares to be distributed to a trustee on behalf ofthe Note Holders upon conversion of the Note Holders Note;

C. three promissory notes in the aggregate collective principal amount ofUS$2.1 million issued to each Hedge Creditor in proportion of their claimsagainst Royal Oak (the "Hedge Creditor Notes"); and,

D. 3,249,890 Non-voting Shares to be distributed to the UnsecuredCreditors, 509 of which are resident in Ontario, upon conversion of theUnsecured Creditors Note.

25. The Hedge Creditor Notes were distributed to the Hedge Creditors on February11, 2000 immediately following implementation of the Proposal.

26. An application was submitted to the Commission as principal regulator under theMutual Reliance Review System for exemptive relief from prospectus andregistration requirements for those securities described at paragraph 24.D to bedistributed to the Unsecured Creditors in certain jurisdictions where such relief isrequired, and the relief was granted by Decision Document dated February 29,2000 (the "MRRS Decision").

27. All of the Unsecured Creditors are at arm's length to the Applicant.

28. Apart from the failure to file financial statements that prompted the issuance ofthe Cease Trade Order, described in paragraph 4, the Applicant is not in defaultof any requirement of the Act, the rules or the regulation made thereunder.

29. The Post-Implementation Distributions of Common Shares and Non-votingShares to Secured and Unsecured Creditors resident in Ontario will not bepermitted under the Act until an order has been granted under section 144 of theAct by the Commission which partially revokes the Cease Trade Order to permitsuch distributions.

30. The Applicant understands that the Cease Trade Order will remain in effectfollowing the completion of the Post-Implementation Distributions and that thesecurities distributed to Trilon and to the Unsecured Creditors will remain subjectto the Cease Trade Order.

31. The Applicant understands that if and when application is made to theCommission to revoke the Cease Trade Order, the Commission may require, asa condition of revoking the Cease Trade Order, that the Applicant shall havebeen discharged from bankruptcy and that supplementary informationconcerning the reorganized enterprise be filed with the Commission.

AND UPON considering the application and the recommendation of the Staff ofthe Commission;

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

IT IS ORDERED pursuant to section 144 of the Act that the Cease Trade Orderbe and is hereby partially revoked to permit the Post-Implementation Distributions toTrilon and the 509 Unsecured Creditors of the Applicant resident in Ontario.

March 13^th, 2000.

"Margo Paul"