Toronto Stock Exchange Issues Guidance On Securityholder Rights Plans

The TSX expects most securityholder rights plans to have a triggering threshold of 20%, consistent with takeover bid requirements under Canadian securities legislation. The stock exchange requirements for securityholder rights plans generally are set forth in

• Sections 634 to 637 of the TSX Company Manual,¹ and
  
  
• Staff Notice 2006-0002² (regarding the public announcement of a plan).
  
  

The TSX has recently received applications by issuers seeking to adopt securityholder rights plans with triggering thresholds of less than 20%. Consequently, the TSX has issued Staff Notice 2008-0006³ to specify the following additional requirements that will apply in such situations:

• The issuer will have to explain, in detail, to the TSX why a triggering threshold of less than 20% is necessary.
  
  
• When filing the plan with the TSX, the issuer must disclose any knowledge of relevant events, such as an upcoming proxy contest or an acquisition or disposition of a block of securities above the triggering threshold.
  
  
• In the news release announcing the plan, the issuer must disclose that the triggering threshold is less than 20% and provide an explanation. The news release must also state whether the TSX has deferred its review of, or consent to, the plan for the reasons set out below.
  
  
• The TSX will defer its review of, or decision to consent to, a plan if it appears that the plan is being adopted as a tactical or defensive strategy, or if the issuer does not intend to seek securityholder approval for the plan. Furthermore, the TSX will not consent to the adoption of another plan until three years after the initial plan was adopted or securityholder approval is given for the plan, whichever is earlier. The TSX will also consider deferring its review of, or decision to consent to, a plan if it appears likely that securityholders will not approve the plan.

Footnotes

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^{2.http://tsx.complinet.com/en/display/display_main.html?rbid=2072&element_id=471}

^{3.http://tsx.complinet.com/en/display/display_main.html?rbid=2072&element_id=619}

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