ShawCor Ltd. and Leslie Shaw - s. 104(2)(c)

July 26, 2005

Order

Headnote

Clause 104(2)(c) - indirect issuer bid resulting from a reorganization involving the issuer and its significant shareholders - after the reorganization, the issuer will have the same number of shares issued and outstanding, and each beneficial shareholder will have the same number of shares and same relative ownership that they owned prior to the reorganization -- controlling shareholder to indemnify and reimburse issuer for certain costs and liabilities associated with reorganization - no adverse economic impact on or prejudice to issuer or public shareholders - issuer exempt from requirements of sections 95, 96, 97, 98 and 100 of the Act.

Ontario Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 89(1), 92, 95, 96, 97, 98, 100, 104(2)(c).

Ontario Rules Cited

Rule 61-501 -- Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions.

July 26, 2005

IN THE MATTER OF

THE SECURITIES ACT,

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

AND

IN THE MATTER OF

SHAWCOR LTD. AND MR. LESLIE SHAW

ORDER

(Clause 104(2)(c))

UPON the application (the "Application") of ShawCor Ltd. ("ShawCor") and Leslie Shaw to the Ontario Securities Commission (the "Commission") for an order pursuant to clause 104(2)(c) of the Act that certain indirect acquisitions by ShawCor of its Class B Multiple Voting Shares, pursuant to a proposed reorganization (the "Reorganization") described in paragraph 1.11 below, are exempt from the requirements of sections 95, 96, 97, 98 and 100 of the Act (the "Issuer Bid Requirements");

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

AND UPON ShawCor and Leslie Shaw having represented to the Commission as follows:

1.1. ShawCor is a corporation existing under the laws of Canada. ShawCor's registered office is located in Toronto, Ontario.

1.2. The issued capital of ShawCor as of June 30, 2005 consists of 61,421,291 Class A Subordinate Voting Shares ("Class A Shares") and 13,727,565 Class B Multiple Voting Shares ("Class B Shares"). The Class A Shares and Class B Shares have the following rights and attributes:

• dividends may be paid on the Class A Shares and Class B Shares at the same time, provided that: (i) all such dividends shall be declared and paid in equal amounts per share on all Class A Shares outstanding; (ii) all such dividends shall be declared and paid in equal amounts per share on all Class B Shares outstanding; and (iii) the amount of such dividends payable on each Class A Share shall equal 110% of the amount of such dividends payable on each Class B Share;

• the holders of Class B Shares are entitled to convert any of their Class B Shares to Class A Shares on the basis of one Class A Share for each Class B Share converted;

• the articles of ShawCor contain take-over bid protection provisions (i.e. "coattail" provisions) in favour of the Class A Shares with respect to any non-exempt takeover bid for Class B Shares which is not also made to the holders of Class A Shares;

• the articles of ShawCor provide that no Class B Share may be issued without the prior consent of the holders of a majority of the Class B Shares outstanding;

• with respect to all other matters, including the distribution of the assets of ShawCor upon a winding up of ShawCor, the Class A Shares and Class B Shares have the same rights and attributes and are the same in all respects; and

• Class A Shares carry 1 vote and the Class B Shares carry 10 votes per share. The Class A Shares and the Class B Shares are referred to herein as the "Shares".

1.3. ShawCor is a reporting issuer under the Act and is not in the list of reporting issuers in default of requirements of the Act or regulations made thereunder. The Shares are listed on the Toronto Stock Exchange.

1.4. Les Shaw Holdings Ltd. ("LSH"), L.E. Shaw Investments Limited ("LESI"), Avdell Holdings Inc. ("Avdell") and 1047570 Ontario Ltd. ("1047570") is each a corporation existing under the laws of Ontario. Each of LSH, LESI, Avdell and 1047570 is a private company within the meaning of the Act.

1.5. The following table describes the shareholder(s) of LSH, LESI, Avdell and 1047570, the municipality of their registered office or residence and the number of Shares held by each of LSH, LESI, Avdell and 1047570:

Corporation and Municipality of Residence

Shareholders and Municipality of Residence

Number of Shares held

LSH, Toronto, Ontario

Avdell, Toronto, Ontario

8,804,685 Class B Shares

LESI, Toronto, Ontario

1047570, Toronto, Ontario

LESI, Toronto, Ontario

Leslie Shaw, Barbados

Nil

Avdell, Toronto, Ontario

Leslie Shaw, Barbados

1,500,000 Class B Shares

LESI, Toronto, Ontario

1047570, Toronto, Ontario

Avdell, Toronto, Ontario

Nil

LSH, Toronto, Ontario

Total

10,304,685 Class B Shares

1.6. In addition to his interest in an aggregate of 10,304,685 Class B Shares held indirectly through LSH and Avdell, representing 51.9% of the votes of ShawCor and 13.7% of the outstanding Shares, Leslie Shaw owns directly 1,389,050 Class B Shares representing 6.99% of the votes and 1.85% of the outstanding Shares.

1.7. Under the terms of a voting trust agreement (the "Avdell Voting Trust Agreement") dated June 15, 2005, Avdell and LSH have granted to Virginia L. Shaw all of the voting rights appertaining to the Class B Shares owned by Avdell (1,500,000 Class B Shares) and LSH (8,804,685 Class B Shares). The Avdell Voting Trust Agreement was entered into following the redemption by Avdell of all of the preference shares of Avdell which were owned by Virginia L. Shaw. These preference shares carried a majority of the voting rights of Avdell and, as a result of such ownership, Virginia L. Shaw exercised control over the Class B Shares owned by Avdell and LSH. The Avdell Voting Trust Agreement maintains Virginia L. Shaw's voting control over the Class B Shares owned by Avdell and LSH.

1.8. Leslie Shaw proposes to enter into a voting trust agreement with Virginia L. Shaw (the "Leslie Shaw Voting Trust Agreement") effective on the date of the Reorganization. Under the terms of the Leslie Shaw Voting Trust Agreement, Leslie Shaw will grant to Virginia L. Shaw all of the voting rights appertaining to 10,304,685 new Class B Shares to be issued to Leslie Shaw in the course of the Reorganization. As a result, Virginia L. Shaw will continue to exercise voting control over 10,304,685 Class B Shares, representing the number of Class B Shares owned by Avdell and LSH prior to the Reorganization. The Leslie Shaw Voting Trust Agreement shall have a minimum term of 5 years. In addition, Virginia L. Shaw may resign as voting trustee and she may select another member of the "Shaw family" (defined to include Leslie Shaw and his siblings, any of their issue and trustees under certain trusts for the benefit of such persons) to act as voting trustee and exercise the voting rights appertaining to the Class B Shares.

1.9. LSH, LESI, Avdell, 1047570, ShawCor and Leslie Shaw propose to complete the Reorganization. Upon completion of the Reorganization, Amalco (as defined in paragraph 1.11 herein) will be a wholly-owned subsidiary of ShawCor and Leslie Shaw will hold 10,304,685 Class B Shares directly, rather than indirectly through LSH and Avdell, in addition to the 1,389,050 Class B Shares currently held by him. Amalco will immediately thereafter be dissolved and pursuant to the provisions of the OBCA, the Class B Shares owned by Amalco will be cancelled such that the number of outstanding Shares will be the same immediately before and immediately after the Reorganization.

1.10. The purpose of the Reorganization is to achieve a structure whereby Leslie Shaw may exercise direct control and direction over the Class B Shares currently held by LSH and Avdell (subject to the terms of the Leslie Shaw Voting Trust Agreement). For purposes of estate planning and succession, this direct ownership will permit a subsequent direct transfer of such Shares directly by Leslie Shaw or by his estate to subsequent transferees or beneficiaries of his estate, and such transferees or beneficiaries can then be positioned to deal directly with such Shares with respect to any decision making, instead of such transferees or beneficiaries succeeding to Leslie Shaw's interests in private corporations.

1.11 The steps involved in the Reorganization are summarized below:

(i) Amalgamation and related matters:

(a) LESI, LSH, Avdell and 1047570, each of which will be a corporation wholly-owned directly or indirectly by Leslie Shaw, will amalgamate under the provisions of the OBCA (the "Amalgamation") under the name Amalgamated Avdell Holdings Inc. ("Amalco"). As a result of the Amalgamation, all of the assets of each amalgamating corporation will become the property of Amalco, including the 1,500,000 Class B Shares currently held by Avdell and the 8,804,685 Class B Shares currently held by LSH.

(b) Leslie Shaw, as sole shareholder of Amalco, will assume any liabilities of Amalco so that Amalco will have no liabilities, contingent or otherwise.

(c) Amalco will declare and pay a dividend in kind to its sole shareholder equal to its net assets, exclusive of the Shares, such that the only assets of Amalco will consist of 10,304,685 Class B Shares.

(ii) Acquisition of shares of Amalco:

(a) The sole shareholder of Amalco (Leslie Shaw) will transfer all of his shares of Amalco to ShawCor in consideration for the issuance to him by ShawCor of 10,304,685 new Class B Shares. As a result of the foregoing, ShawCor will be the holder of all outstanding shares of Amalco.

(b) ShawCor, as sole shareholder of Amalco, will then commence the voluntary dissolution of Amalco and, in furtherance thereof, Amalco will transfer the 10,304,685 Class B Shares it holds to ShawCor, which Class B Shares will be then cancelled.

1.12 Leslie Shaw is a related party of ShawCor within the meaning of Rule 61-501 ("Rule 61-501") of the Ontario Securities Commission and Policy Q-27 ("Policy Q-27") of the Québec Autorité des marchés financiers. Accordingly the Reorganization will be a "related party transaction" under Rule 61-501 and Policy Q-27.

1.13 An exemption from the valuation and minority shareholder approval requirements of Rule 61-501 and Policy Q-27 will be available in respect of the Reorganization pursuant to subsections 5.5(9) and 5.7(4) of Rule 61-501 and subsections 5.6(12) and 5.8(1)(3) of Policy Q-27 since the Reorganization is substantially equivalent to a statutory amalgamation resulting in the combination of ShawCor with an interested party (i.e. Amalco) that is undertaken in whole or in part for the benefit of another related party (i.e. Leslie Shaw), and since the conditions to the availability of such an exemption will be satisfied, namely:

(i) the Reorganization does not and will not have any adverse tax or other consequences to ShawCor or beneficial owners of the Class A Shares and the Class B Shares,

(ii) no material, actual or contingent liability of Amalco will be assumed by ShawCor,

(iii) Leslie Shaw will agree to indemnify ShawCor against any liabilities of Amalco and any liabilities resulting from the Reorganization,

(iv) after the Reorganization, the nature and extent of the voting and financial participating interest of holders of Class A Shares and Class B Shares will be the same as, and the value of their financial participating interest will not be less than, that of their interests in ShawCor before the Reorganization, and

(v) Leslie Shaw will pay for all of the costs and expenses resulting from the Reorganization.

1.14 The issuance of 10,304,685 Class B Shares to Leslie Shaw as part of the Reorganization is subject to approval by the Toronto Stock Exchange.

1.15 All costs and expenses associated with the Reorganization will be borne by the sole shareholder of Amalco, Leslie Shaw. In addition Leslie Shaw will indemnify ShawCor for any and all losses incurred by ShawCor as a result of the Reorganization, including any undischarged or unknown liabilities of Amalco, any liabilities resulting from the Reorganization and any costs incurred by Amalco and ShawCor in connection with the Reorganization.

1.16 ShawCor's board of directors formed an independent committee (the "Independent Committee") of the board of directors to review, among other matters, the proposed terms of the Reorganization and to make a recommendation to the board of directors of ShawCor regarding its implementation. The Independent Committee retained counsel to advise on this matter. It will be a condition of completing the Reorganization that the Independent Committee will have concluded that it is appropriate for ShawCor to proceed with the Reorganization.

1.17 The Reorganization will have no economic impact on ShawCor.

1.18 The Reorganization will not result in either:

(i) a change in the number of Shares issued and outstanding; or

(ii) in any change in the aggregate number of outstanding Shares held by related parties.

1.19 Leslie Shaw has represented to ShawCor that:

(i) Amalco will prior to its sale to ShawCor have no material assets, other than 10,304,685 Class B Shares, or liabilities; and

(ii) the Reorganization will not result in Leslie Shaw or Virginia Shaw exercising direction over a greater number of votes after the Reorganization than is the case at present.

1.20 The offer by ShawCor to acquire all of the shares of Amalco in connection with the Reorganization (the "Offer") constitutes an "issuer bid" under subsection 89(1) and section 92 of the Act to the extent that the Offer constitutes an indirect offer by ShawCor for the Class B Shares owned by Amalco. The exemptions to Part XX of the Act contained in subsection 93(3) of the Act are not available in respect of the Offer.

1.21 The Offer is also a take-over bid for the shares of Amalco under subsection 89(1) of the Act which is exempt from the requirements of sections 95 to 100 of the Act pursuant to clause 93(1)(d).

*Corporation and Municipality of Residence*	*Shareholders and Municipality of Residence*	*Number of Shares held*

LSH, Toronto, Ontario	Avdell, Toronto, Ontario	8,804,685 Class B Shares
	LESI, Toronto, Ontario
	1047570, Toronto, Ontario

LESI, Toronto, Ontario	Leslie Shaw, Barbados	Nil

Avdell, Toronto, Ontario	Leslie Shaw, Barbados	1,500,000 Class B Shares
	LESI, Toronto, Ontario

1047570, Toronto, Ontario	Avdell, Toronto, Ontario	Nil
	LSH, Toronto, Ontario

	Total	10,304,685 Class B Shares

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 Offer to be made by ShawCor as part of the Reorganization be exempt from the Issuer Bid Requirements.

"Paul M. Moore"

"Harold P. Hands"