Securities Law & Instruments

Headnote

Direct and indirect issuer bids resulting froma reorganization transaction involving issuer and largest shareholderholding company, followed by the holding company's dissolution- issuer bids exempt from sections 95, 96, 97, 98 and 100 wherethe purpose of the transaction is to enable shareholders todirectly own shares previously held indirectly through theirholding company - beneficial shareholders to provide indemnityand reimbursement to the issuer and its directors - transactionunanimously approved by disinterested board of directors - assessmentof tax consequences provided by issuer's auditor - no adverseeconomic or tax impact or prejudice to issuer or public shareholders.

Subsection 59(1) of Schedule I - issuer is exemptfrom payment of the fee otherwise payable pursuant to clause32(1)(b) of Schedule I to the Regulation in respect of reorganizationtransaction exempted from the issuer bid requirements pursuantto an order under clause 104(2)(c), where the transaction didnot result in any change to the share ownership structure ofthe issuer, subject to the requirement that a minimum fee of$800 be paid.

Applicable Ontario Statute

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 93(1)(c), 95, 96, 97, 98, 100, and 104(2)(c).

Applicable Ontario Regulation

Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am., ss 32(1)(b) and 59(1) of Schedule I.

IN THE MATTER OF
THE SECURITIES ACT R.S.O. 1990,
CHAPTER S.5, AS AMENDED (the "Act")

AND

IN THE MATTER OF
THE REGULATION UNDER THE ACT, R.R.O. 1990,
REGULATION 1015, AS AMENDED (the "Regulation")

AND

IN THE MATTER OF
CFM CORPORATION

ORDER

UPON the application (the "Application")of CFM Corporation ("CFM") to the Ontario SecuritiesCommission (the "Commission") for an order:

(i) pursuant to subsection 104(2)(c) of theAct that the acquisition by CFM of certain of its common sharespursuant to a proposed share exchange transaction (the "ShareExchange") and subsequent winding up transaction (the "WindingUp") described below, shall not be subject to the requirementsof sections 95, 96, 97, 98 and 100 of the Act (the "IssuerBid Requirements"); and

(ii) pursuant to subsection 59(1) of ScheduleI of the Regulation ("Schedule I") that CFM be exemptfrom the requirements under subsection 32(1)(b) of ScheduleI to pay a fee in connection with the filing of a report ofan issuer bid in respect of the Share Exchange and the WindingUp (the "Fee Requirement"), provided that a minimumfee of $800 prescribed by Schedule I is paid.

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

AND UPON CFM having represented to theCommission as follows:

1. CFM is a reporting issuer in Ontario andis not in default under the Act or the Regulation.

2. The authorized capital of CFM consists ofan unlimited number of common shares. As of March 31, 2002,there were 40,427,953 common shares of CFM issued and outstanding(the "Common Shares").

3. The Common Shares are listed for tradingon The Toronto Stock Exchange (the "TSE").

4. 1422602 Ontario Inc. ("1422602")currently owns 6,000,000 Common Shares, representing approximately15% of the issued and outstanding Common Shares (the "1422602CFM Shares").

5. 1422602 is a private holding company ownedby Adamson House Inc. and The Mercury Trust (collectively, the"1422602 Holders"). The Mercury Trust, a Barbadosresident trust, whose trustee is Royal Bank of Canada FinancialCorporation, a company registered in Barbados, holds 100 commonshares of 1422602, the voting of such common shares being directedby Colin Adamson. 1422602's preferred shares, of which thereare 6,000,000 issued and outstanding, are held by Adamson HouseInc., a holding company owned and controlled by Colin Adamson,Jane Adamson and the Adamson Family Trust, for the benefit ofthe Adamson family. Colin Adamson is the Chairman and ChiefExecutive Officer of CFM.

6. 1422602 has no assets other than the 1422602CFM Shares, no liabilities and does not carry on any activebusiness.

7. The Share Exchange will be effected pursuantto the terms of a share purchase agreement among CFM, the 1422602Holders and Colin Adamson (the "Share Purchase Agreement")under which CFM will acquire from the 1422602 Holders all ofthe outstanding shares of 1422602 and will issue 6,000,000 newcommon shares of CFM (the "Treasury Shares") to the1422602 Holders in consideration therefor. The effect of theShare Exchange will be that, upon completion, 1422602 will bea wholly-owned subsidiary of CFM and the 1422602 Holders willhold 6,000,000 Common Shares of CFM directly, rather than indirectlythrough 1422602.

8. Immediately after the completion of the ShareExchange, 1422602 will distribute its assets, including the6,000,000 Common Shares held by 1422602, to CFM in connectionwith the Winding Up, being the voluntary winding up of 1422602pursuant to the provisions of Part XVI of the Business CorporationsAct (Ontario). As the 1422602 CFM Shares will be cancelled,the number of issued and outstanding shares of CFM will notbe altered by the Share Exchange.

9. The purpose of the Share Exchange is to achievea structure whereby each 1422602 Holder will have direct ownershipover Common Shares, rather than indirect ownership of CommonShares through 1422602.

10. Immediately following the Share Exchange,the number of issued and outstanding Common Shares will be thesame. In addition, the 1422602 Holders, as well as the publicshareholders of CFM (the "Public Shareholders"), willbeneficially own the same aggregate number and the same relativepercentages of Common Shares that they owned immediately priorto the Share Exchange and will have the same rights and benefitsin respect of such Common Shares that they currently have.

11. CFM's disinterested directors have determinedthat the Share Exchange will not be prejudicial to CFM or itsshareholders from a legal or financial point of view. CFM'sboard of directors (the "Board"), with Mr. Adamsondeclaring his interest, abstaining from voting in respect thereofand excusing himself from all deliberations related thereto,have approved CFM's participation in the Share Exchange. Inmaking its determination to proceed with the Share Exchange,the Board has considered an assessment of the tax consequencesof the Share Exchange prepared by Ernst & Young LLP, theauditors of CFM.

12. Pursuant to the terms of the Share PurchaseAgreement, Mr. Adamson and the 1422602 Holders have agreed tojointly and severally indemnify and save harmless CFM from alllosses or liabilities that CFM may suffer as a result of theShare Exchange and Winding Up. As security for these indemnificationobligations, on completion of the Share Exchange, the 1422602Holders will deposit such number of Treasury Shares as havea value equal to $30,000,000 (based on the trading price ofthe Common Shares on the TSE as of such date) with a third partyescrow agent to be held in escrow pursuant to the terms of aseparate escrow agreement for four years, such escrow agenthaving the authority to sell such Treasury Shares and use theproceeds thereof to satisfy claims made by CFM against the 1422602Holders pursuant to the indemnification provisions of the SharePurchase Agreement.

13. Pursuant to the terms of the Share PurchaseAgreement, Mr. Adamson and the 1422602 Holders have agreed topay all costs (including legal and accounting costs) incurredby CFM in effecting the Share Exchange and Winding Up.

14. The issuance of the Treasury Shares is subjectto approval by the TSE.

15. The Share Exchange and Winding Up will haveno adverse economic effect on, or adverse tax consequences to,and will in no way prejudice CFM or the Public Shareholders.

16. The acquisition by CFM of the shares of1422602 in connection with the Share Exchange will constitutean indirect issuer bid within the meaning of section 92 andsubsection 89(1) of the Act. Furthermore, the acquisition byCFM of Common Shares in connection with the Winding Up willalso constitute an issuer bid within the meaning of section89(1) of the Act. In neither case would the exemptions fromthe requirements of Part XX of the Act generally available toissuer bids be available.

17. The Share Exchange will also constitutea related party transaction for the purposes of the Commission'sRule 61-501; however, the size of the transaction will fallbelow 25% of CFM's market capitalization determined in accordancewith Rule 61-501, thereby exempting CFM from the independentvaluation and shareholder approval requirements of Rule 61-501.

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

IT IS ORDERED pursuant to subsection104(2)(c) of the Act that the acquisition by CFM of all of theissued and outstanding shares of 1422602 pursuant to the ShareExchange is exempt from the Issuer Bid Requirements;

IT IS FURTHER ORDERED pursuant to subsection104(2)(c) of the Act that the acquisition by CFM of 6,000,000Common Shares pursuant to the Winding Up is exempt from theIssuer Bid Requirements; and

IT IS FURTHER ORDERED that CFM is exemptfrom the Fee Requirement in connection with the Share Exchangeand Winding Up, provided that a minimum fee of $800 prescribedby Schedule I is paid.

April 30, 2002.

"Robert W. Korthals"      "Lorne Morphy"