Zemex Corporation - cl. 104(2)(c)

Headnote

Clause 104(2)(c) - Exemption from issuer bidrequirements of Part XX granted to issuer proposing to acquireits shares from a senior employee - exemption in section 93(3)(d)unavailable as "market price" calculated as of dateagreement to purchase entered into and not as of date of acquisition- terms of purchase and purchase price binding on employee asof date of agreement - agreement subject to approval by issuer'sboard of directors - purchase of issuer's shares part of retirementarrangement for employee - terms of arrangement other than purchaseof shares entered into for valid business reasons unrelatedto purchase and not for the purpose of increasing the considerationpayable to employee for shares being purchased by issuer.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as amended,ss. 93(3)(d), 95, 96, 97, 98, 100 and 104(2)(c).

IN THE MATTER OF

THE ONTARIO SECURITIES COMMISSIONACT,

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

AND

IN THE MATTER OF

ZEMEX CORPORATION

ORDER

(Clause 104(2)(c) OSA)

UPON the application by Zemex Corporation("Zemex") to the Ontario Securities Commission (the"Commission") for an order pursuant to clause 104(2)(c)of the OSA exempting Zemex from the requirements of sections95, 96, 97, 98 and 100 of the OSA (the "Issuer Bid Requirements")with respect to common shares of Zemex (the "Shares")that Zemex proposes to repurchase for cancellation from a currentemployee;

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

AND UPON Zemex having represented tothe Commission as follows:

1. Zemex was established under the CanadaBusiness Corporations Act pursuant to a certificate ofcontinuance dated June 5, 1998. The predecessor to Zemex wasoriginally incorporated in 1907 in the state of Maine andeventually reincorporated as Zemex Corporation in the stateof Delaware ("Zemex U.S."). Effective January 21,1999, Zemex completed a reorganization pursuant to which shareholdersof Zemex U.S. became shareholders of Zemex and Zemex U.S.merged with Zemex Acquisition Corporation to form Zemex U.S.Corporation, a wholly-owned subsidiary of Zemex.

2. Zemex is authorized to issue an unlimitednumber of Shares and an unlimited number of first preferenceshares, issuable in series. As of July 26, 2002, Zemex had8,209,792 Shares issued and outstanding.

3. The Shares are listed and posted for tradingin Canada on the Toronto Stock Exchange (the "TSX")and in the United States on The New York Stock Exchange (the"NYSE"). Zemex began trading on the TSX in 1999,while its predecessors have been trading on the NYSE since1939.

4. The percentage of volume of trading ofthe Shares on the NYSE in the first six months of 2002 representedapproximately 95% of the total volume of trading of the Shareson the TSX and NYSE combined.

5. Zemex has been a reporting issuer underthe OSA since 1999 and is not on the list of defaulting reportingissuers maintained pursuant to subsection 72(9) of the OSA.

6. As of July 26, 2002, Zemex's market capitalizationwas in excess of US$50,000,000.

7. Richard L. Lister ("Lister")is President and Chief Executive Officer of Zemex and hasheld these positions since May 1993. As of July 23, 2002,Lister was the beneficial owner of 534,405 Shares representingapproximately 7% of the issued and outstanding Shares.

8. On June 28, 2002 (the "ArrangementDate") the chair of the compensation committee of Zemex(the "Compensation Committee") concluded the termsof a retirement arrangement (the "Arrangement")with Lister, whereby Zemex agreed to, among other things,purchase 340,000 Shares from Lister for cancellation (the"Purchase") for the "market price" ofUS$6.96 per share, for the aggregate consideration of US$2,366,400.The "market price" was calculated in accordancewith section 183 of Ontario Regulation 1015 made under theOSA, and is based on the appropriate closing prices per shareon the TSX and converted to US dollars based on the Bank ofCanada noon exchange rate of C$1.5110 as of June 27, 2002.The Arrangement's closing was subject to approval by Zemex'sboard of directors (the "Board").

9. The 340,000 Shares that Zemex intends torepurchase from Lister under the Purchase represent approximately64% of the total number of Shares beneficially held by Lister,and approximately 4% of the issued and outstanding Shares.

10. The purpose of the Arrangement is to provideLister with a full retirement package relating to his retiringfrom Zemex by January 2003 and to reorganize Lister's relationshipwith Zemex to ensure an efficient transition to a new Presidentand Chief Executive Officer.

11. On June 14, 2002, the Board authorizedthe Compensation Committee, which is composed of members whoare independent of management, to negotiate the final termsof the Arrangement. The Compensation Committee negotiatedthe Arrangement on behalf of Zemex and has concluded thatthe Arrangement is in the best interests of Zemex. The CompensationCommittee and Lister determined that the specific price ofthe Shares subject to the Purchase is central to the Arrangementas this price influences the specific terms of the other transactionsin the Arrangement.

12. The Arrangement was approved by the Boardon July 24, 2002. A majority of the directors of the Boardare independent of management. The Arrangement is to closeon August 1, 2002 (the "Anticipated Closing Date"),subject to regulatory approval.

13. The Shares subject to the Purchase, onceacquired by Zemex on the Anticipated Closing Date, when aggregatedwith all other Shares acquired by Zemex in reliance on theexemption from the Issuer Bid Requirements provided for inclause 93(3)(d) of the OSA within the 12-month period immediatelyprior to the Anticipated Closing Date, will not be more than5 percent of the issued and outstanding Shares at the commencementof such 12-month period.

14. In making the Purchase, Zemex is unableto rely on the exemption from the Issuer Bid Requirementsin clause 93(3)(d) of the OSA because the date for calculating"market price" under the Purchase is the ArrangementDate and not the date of acquisition of the Shares under thePurchase, as required under such clause.

15. The "market price" of US$6.96for the Shares being repurchased under the Purchase was bindingon Lister as of the Arrangement Date and the Purchase willoccur at that price regardless of any changes in the current"market price" of the Shares.

16. The terms of the Arrangement other thanthe Purchase were entered into for valid business reasonsunrelated to the Purchase and not for the purpose of increasingthe consideration payable to Lister for the Shares being repurchasedunder the Purchase.

AND UPON the Commission being of theopinion that to do so would not be prejudicial to the publicinterest;

IT IS ORDERED pursuant to clause 104(2)(c)of the OSA that the Purchase is exempt from the Issuer Bid Requirements.

July 30, 2002.

"Robert W. Korthals"                    "HowardI. Wetston"