Securities Law & Instruments

Headnote

Going private transaction -- valuation and minorityapproval requirements -- reverse take-over bid ("RTO")accomplished by way of amalgamation -- issuer's securities subjectto a cease trade order but a conditional partial revocationobtained solely to permit shareholders to vote on the RTO --cost of conducting formal valuation would greatly exceed considerationissuer's shareholders to receive under the RTO -- issuer doesnot have the funds to do a formal valuation -- issuer has noassets -- shareholders to vote on the RTO mailing in proxies-- RTO to be implemented upon receipt of the majority of theminority of the votes cast -- shareholders to be mailed disclosuredocument summarizing main elements of RTO - more detailed informationavailable on SEDAR and can be requested from issuer withoutcharge -- applicant exempt from valuation and minority approvalrequirements.

Applicable Rule

61-501 -- Insider Bids, Issuer Bids, Going PrivateTransactions and Related Party Transactions, ss. 4.4, 4.5, 4.7,4.8. and 9.1.

IN THE MATTER OF

ONTARIO SECURITIES COMMISSIONRULE 61-501

AND

IN THE MATTER OF

GRAND OAKES RESOURCES CORP.

 

RULING

(Section 9.1 of Rule 61-501)

UPON the application (the "Application")of Grand Oakes Resources Corp. (the "Issuer" to theDirector of the Ontario Securities Commission (the "Commission")for a decision pursuant to section 9.1 of Rule 61-501 (the "Rule")that, in connection with an amalgamation between the Issuerand Midland Minerals Corporation ("Midlands"), theIssuer be exempt from the minority approval requirement in section4.7 of the Rule (the "Minority Approval Requirement")and the formal valuation requirement in section 4.4 of the Rule(the "Formal Valuation Requirement");

AND UPON considering the Applicationand the recommendation of staff of the Commission;

AND UPON the Issuer representing to theDirector as follows:

1. The Issuer was incorporated under the BusinessCorporations Act (Ontario) on February 23, 1988 and isa reporting issuer under the Securities Act (Ontario)(the "Act"). The Issuer is not a reporting issueror the equivalent in any other jurisdiction in Canada.

2. The authorized capital of the Issuer consistsof an unlimited number of common shares (the "CommonShares"), of which 2,575,005 Common Shares are issuedand outstanding. The Common Shares are not listed on any stockexchange or published market.

3. Stanley Mourin, a former director of theIssuer, is the only person who beneficially owns, directlyor indirectly, or exercises control or direction over morethan 10% of the Common Shares. Mr. Mourin owns 492,201 CommonShares, which represent 19.11% of the outstanding Common Shares.Therefore, Mr. Mourin is a "related party" of theIssuer within the meaning of the Rule.

4. The Issuer is presently inactive as ithas divested itself of all of its material assets.

5. The Issuer is contemplating a reverse take-overtransaction (the "RTO") with Midlands, a privateOntario corporation that has been exploring its mineral resourceproperties in Tanzania and Ghana.

6. The authorized capital of Midlands consistsof an unlimited number of common shares (the "MidlandsShares"), of which 19,539,399 Midlands Shares are issuedand outstanding. Kim Harris, a director of Midlands and theIssuer, and Edward Harris jointly own 54% of the MidlandsShares. Sika Resources Inc. owns 27.7% of the Midlands Shares.

7. The RTO is to be accomplished by an amalgamation(the "Amalgamation") between the Issuer and Midlandsunder which the shareholders of each of the amalgamating corporationsare to exchange their shares for shares of the amalgamatedcorporation ("Amalco"). The terms of the Amalgamationare as follows:

(a) holders of the Common Shares (the "GrandOakes Shareholders") will exchange every 4.5 CommonShares for one common share of Amalco (the "AmalcoShares");

(b) holders of Midlands Shares (the "MidlandsShareholders") will exchange each Midlands Share forone Amalco Share; and

(c) Midlands may issue, before the RTO,up to an additional 4,935,601 Midlands Shares to fund theexploration of its properties and for working capital.

8. As part of the RTO, Mr. Mourin agreed,in exchange for consideration of $50,000 in cash, to: (i)transfer his Common Shares to Kim Harris and (ii) transferto Amalco for cancellation a debt of $59,234 owed by the Issuerto a private corporation controlled by Mr. Mourin (the "MourinTransaction").

9. As a result of the RTO, Midlands Shareholderswill own 97.2% of the Amalco Shares. Kim Harris and EdwardHarris will jointly own 52.4% of the Amalco Shares.

10. The Common Shares are subject to a temporaryorder of the Manager, Corporate Finance Branch (the "Manager")of the Commission dated July 23, 2002 and extended by theorder of the Manager dated August 2, 2002 made under section127 of the Act (collectively referred to as the "CeaseTrade Order") directing that trading in the Common Sharescease.

11. On June 27, 2003, pursuant to section144 of the Act, the Commission ordered that the Cease TradeOrder be partially revoked, subject to conditions, solelyto permit the Grand Oakes Shareholders to vote on the Amalgamation(the "Partial Revocation Order").

12. The RTO is a "going private transaction"within the meaning of the Rule and the Issuer has to complywith, among other requirements, the Minority Approval Requirementand the Formal Valuation Requirement.

13. The Amalgamation was unanimously approvedby the Grand Oakes Shareholders at a special meeting (the"Special Meeting") held on June 30, 2003. However,the Special Meeting was not conducted in compliance with theRule.

14. If the Issuer had to comply with the FormalValuation Requirement, it is estimated that the cost of aformal valuation of Midlands' resource properties would beat least $50,000. The Issuer has no funds to pay for a formalvaluation; as at February 28, 2003, its liabilities exceededits assets by $87,212, and it is unable to raise any fundsto pay for a formal valuation. In addition, the cost of aformal valuation will be much greater than the value of theAmalco Shares to be issued to Grand Oakes Shareholders underthe RTO.

15. The Issuer will send each Grand OakesShareholder a new form of proxy (the "New Proxy")permitting them to vote again, with the RTO subject to approvalby a majority of the votes cast by Grand Oakes Shareholdersother than Mr. Mourin (the "Minority Shareholders")who complete such proxies. The Grand Oakes Shareholders willhave 21 days from the date of mailing of the New Proxies tovote on the RTO.

16. The Issuer will, together with the NewProxies, send the Minority Shareholders a disclosure document(the "Disclosure Document") describing the RTO andthe Mourin Transaction in sufficient detail to allow the MinorityShareholders to make an informed decision. The DisclosureDocument will inform the Minority Shareholders that revisedfinancial statements and a revised information circular withenhanced disclosure have been filed on SEDAR and are availablefor download at www.sedar.com. The Disclosure Document willalso inform the Minority Shareholders that copies of the revisedfinancial statements and the revised information circularwill be sent to them upon request and without charge.

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

IT IS DECIDED pursuant to section 9.1of the Rule that, in connection with the RTO, the Issuer:

(a) shall not be subject to the MinorityApproval Requirement, provided that the RTO is approvedby a majority of the votes cast by the Minority Shareholdersas described in paragraph 15; and

(b) shall be exempt from the Formal ValuationRequirement, provided that the Issuer complies with theother applicable provisions of the Rule.

October 24, 2003.

"Ralph Shay"