Empire Company Limited

Headnote

Dutch auction issuer bid - With respect to securities tendered at or below the clearingprice, offer providing for full take-up of and payment for shares tendered by odd lotholders, as well as additional purchases from certain shareholders in order to prevent thecreation of odd lots or potential odd lots - Offeror exempt from the requirement in thelegislation to take up and pay for securities proportionately according to the number ofsecurities deposited by each securityholder and the associated disclosure requirement -Offeror also exempt from the requirement to disclose the exact number of shares it intendsto purchase - Offeror also exempt from the valuation requirement on the basis that thereis a liquid market for the securities

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am, ss. 95(7) and 104(2)(c)

Regulations Cited

Regulation made under the Securities Act, R.R.O. 1990, Reg. 1015, as am., s. 189(b) andItems 2 and 9 of Form 33

Rules Cited

Proposed Rule 61-501 - Insider Bids, Issuer Bids, Going Private Transactions and RelatedParty Transactions, ss. 1.3(1) and 3.2(1)

In the matter of Insider Bids, Issuer Bids and Take-over Bids in Anticipation of a Going-Private Transaction (1997) 20 OSCB 1219 (effective March 1, 1997), as amended.

UPON the application (the "Application") of Empire Company Limited ("Empire") tothe Ontario Securities Commission (the "Commission"), in connection with the proposedpurchase by Empire of a portion of its outstanding non-voting Class A shares (the "ClassA Shares") pursuant to an issuer bid (the "Offer"), for an order pursuant to clause 104(2)(c)of the Act exempting Empire from paragraph 7 of section 95 of the Act and clause 189(b)of the regulation under the Act (the "Regulation") insofar as it requires compliance withitems 2 and 9 of Form 33 of the Regulation;

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

AND UPON Empire having represented to the Commission as follows:

1. Empire is a reporting issuer under the Act. It is not in default of any requirement ofthe Act or the Regulation and is not on the list of defaulting reporting issuersmaintained pursuant to subsection 72(9) of the Act.

2. Empire's authorized capital consists of 34,261,305 preferred shares with a parvalue of $25 each, issuable in series as a class (the "Preferred Shares"),136,583,367 Class A Shares and 20,400,000 voting Class B common shareswithout par value (the "Class B Shares"). As at January 20, 2000, there wereissued and outstanding on a consolidated basis 976,900 Series 2 Preferred Shares,262,352 Series 3 Preferred Shares, 20,790,200 Class A Shares and 17,448,728Class B Shares.

3. The Series 2 Preferred Shares, Series 3 Preferred Shares and the Class A Sharesare listed on The Toronto Stock Exchange (the "TSE"). On January 20, 2000, theclosing price of the Class A Shares on the TSE was $27.25. The Class B Sharesare closely held, primarily by members of the Sobey family.

4. Pursuant to the Offer, Empire proposes to acquire approximately 5,500,000 ClassA Shares, representing approximately 27% of the class, in accordance with thefollowing modified Dutch auction procedure (the "Procedure"), as disclosed in thecircular (the "Circular") to be sent by Empire to each holder of Class A Shares(collectively, the "Shareholders"):

A. The Circular will specify that the maximum number of Class A Shares (the"Specified Number") that Empire intends to purchase pursuant to the Offeris 5,500,000, excluding any Class A Shares that Empire intends to purchasein accordance with the procedures described in subparagraph 4(J) below.

B. The Circular also will specify the range of prices (the "Range") within whichEmpire is prepared to purchase Class A Shares under the Offer.

C. Shareholders wishing to tender to the Offer will be able to specify the lowestprice within the Range at which they are willing to sell their Class A Shares(an "Auction Tender").

D. Shareholders wishing to tender to the Offer but not wishing to make anAuction Tender may elect to be deemed to have tendered at the PurchasePrice determined in accordance with subparagraph 4(E) below (a "PurchasePrice Tender").

E. The purchase price (the "Purchase Price") of the Class A Shares tenderedto the Offer will be the lowest price that will enable Empire to purchase theSpecified Number and will be determined based upon the number of ClassA Shares tendered pursuant to an Auction Tender at each price within theRange and tendered pursuant to a Purchase Price Tender, with eachPurchase Price Tender being considered a tender at the lowest price in theRange for the purpose of calculating the Purchase Price.

F. All Class A Shares tendered at prices above the Purchase Price will bereturned to the appropriate Shareholders.

G. All Class A Shares tendered by Shareholders who specify a tender price forsuch tendered Class A Shares that falls outside the Range will beconsidered to have been improperly tendered, will be excluded from thedetermination of the Purchase Price, will not be purchased by Empire andwill be returned to the tendering Shareholders.

H. All Class A Shares tendered by Shareholders who fail to specify any tenderprice for such tendered Class A Shares and fail to indicate that they havetendered their Class A Shares pursuant to a Purchase Price Tender will beconsidered to have been tendered pursuant to a Purchase Price Tender.

I. All Class A Shares tendered at or below the Purchase Price pursuant to anAuction Tender and all Class A Shares tendered pursuant to a PurchasePrice Tender will be taken up and paid for at the Purchase Price, subject toproration if the aggregate number of Class A Shares tendered at or belowthe Purchase Price pursuant to Auction Tenders and the aggregate numberof Class A Shares tendered pursuant to Purchase Price Tenders exceedsthe Specified Number (an "Over-Subscription").

J. If an Over-Subscription occurs and in order to avoid the creation of "odd lots"as a result of proration, the number of Class A Shares to be purchased fromeach Shareholder who tenders Class A Shares at or below the PurchasePrice will be rounded up as follows. In addition to the Specified Number,Empire will purchase an additional number of Class A Shares at thePurchase Price from each such tendering Shareholder equal to the minimumnumber of Class A Shares necessary such that the number of Class AShares not purchased from such Shareholder (the "Return Number") will bea whole multiple of 100, except that, if the Return Number for any suchShareholder is less than 100, Empire will purchase from each suchShareholder that number of additional Class A Shares equal to the ReturnNumber. Multiple tenders by a Shareholder at or below the Purchase Pricewill be aggregated for this purpose.

K. The aggregate amount that Empire will expend pursuant to the Offer will notbe ascertained until the Purchase Price is determined and the number ofClass A Shares, if any, to be purchased in addition to the Specified Numberpursuant to the procedure described in subparagraph 4(J) is determined.

5. Prior to the Offer's expiry, all information regarding the number of Class A Sharestendered and the prices at which such Class A Shares are tendered will be keptconfidential, and the depository will be directed by Empire to maintain suchconfidentiality until the Purchase Price is determined.

6. Since the Offer is for fewer than all the Class A Shares, if an Over-Subscriptionoccurs, paragraph 7 of section 95 of the Act would require Empire to take up andpay for deposited Class A Shares proportionately, according to the number of ClassA Shares deposited by each Shareholder. In addition, item 9 of Form 33 of theRegulation would require disclosure in the Circular that Empire would, if Class AShares tendered to the Offer exceeded the Specified Number, take up such ClassA Shares proportionately according to the number of Class A Shares tendered byeach Shareholder.

7. For purposes of the Offer, there is a liquid market for the Class A Shares within themeaning of paragraph (1) of section 1.3 of proposed rule 61-501 (the "ProposedRule").

8. No formal valuation will be prepared in connection with the Offer or disclosed in theCircular as Empire intends to rely upon a waiver of the valuation provisions in OSCPolicy Statement 9.1 (the "Valuation Waiver") and an exemption from the valuationrequirement in the Regulation provided for in the rule entitled In the Matter ofInsider Bids, Issuer Bids and Take-over Bids in Anticipation of a Going PrivateTransaction (1997) 20 OSCB 1219 (effective March 1, 1997), as amended.

9. The Circular will:

A. disclose the mechanics for the take-up of and payment for, or the return of,Class A Shares as described in paragraph 4 above;

B. explain that, by tendering Class A Shares at the lowest price in the Range,a Shareholder reasonably can expect that the Class A Shares so tenderedwill be purchased at the Purchase Price, subject to proration as describedin paragraph 4 above;

C. disclose the basis upon which the Valuation Waiver was granted and therepresentations made by Empire in support of its request for the ValuationWaiver; and

D. contain disclosure satisfying paragraph (1) of section 3.2 of the ProposedRule.

AND UPON the Commission being satisfied that to do so would not be prejudicialto the public interest;

IT IS ORDERED pursuant to clause 104 (2)(c) of the Act that, in connection with theOffer, Empire is exempt from paragraph 7 of section 95 of the Act and clause 189(b) of theRegulation insofar as clause 189(b) requires compliance with items 2 and 9 of Form 33 ofthe Regulation, provided that Class A Shares tendered to the Offer are taken up and paidfor, or returned to Shareholders, in accordance with the Procedure.

February 8th, 2000.

"J. A. Geller"     "R. Stephen Paddon"