TDO-CORP #7307919 v. 5

Dealing With Multiple Listed Companies in M&A Transactions

Brian C. Graves Partner, McCarthy Tétrault LLP (Toronto)

George J. Sampas Partner, Sullivan & Cromwell LLP (New York) The Canadian Institute Mergers & Acquisitions for the Mining Industry December 1-2, 2008 The Metropolitan Hotel, Toronto

Table of Contents Introduction...................................................................................................................................................................................... 1

Data on Selected Global Mining Exchanges.................................................................................................................................... 2

Why Do Companies Seek Multiple Listings? ................................................................................................................................... 3

Recent Trends in Multiple Exchange Listings .................................................................................................................................. 6

Multiple Listed Targets..................................................................................................................................................................... 8

Multiple Listed Acquirers................................................................................................................................................................ 11

Target/Acquirer Listed on Different Exchanges ............................................................................................................................. 12

Cross-Border Share Exchange Deals - Exchangeable Shares...................................................................................................... 13

DLC (Dual-Listed Company) Structures ........................................................................................................................................ 17

Practice Tips for Dealing With Multiple Exchanges and Securities Law Requirements ................................................................. 22

Appendix I – Comparison of Selected Features of Applicable Canadian, U.S. and U.K. Take-Over Bid Rules............................. 23

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Introduction ♦ Mining is a global business, and friendly and unsolicited merger and acquisition activity has historically been an important

feature of the competitive landscape. While most mining company executives think primarily in terms of combining assets, the fact is that substantial asset combinations are more often accomplished by company-to-company mergers than through asset transactions. As a result of mining companies of varying sizes having a number of choices of stock exchanges for listing their shares, even non-cross-border mergers must frequently contend with the legal and regulatory implications of listings on multiple exchanges.

♦ The various possible combinations of listings of targets and acquirers across the key global mining exchanges are too numerous to make possible an exhaustive canvass of the issues raised in each jurisdiction. Frequently the issues raised when transactions reach across borders are not purely stock exchange issues, but also arise because of the different (and sometimes conflicting) requirements of securities laws that apply in the various jurisdictions.

♦ This paper tries to identify the main areas where cross-border M&A transactions can run into issues posed by the application of multiple stock exchange rules or securities laws. We have focused here on company share acquisitions, as opposed to asset deals, since the securities regulatory issues in a share deals are generally more numerous (although the transaction itself may in fact be simpler to execute than an asset deal which achieves a similar business combination).

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Data on Selected Global Mining Exchanges1 ♦ Set out below is selected information on listings of mining companies on certain global stock exchanges:

Exchange No. of Listed Mining

Companies at Dec. 31, 2007

New Mining Listings in

2007

Quoted Market Value of Mining

Companies at Dec. 31, 2007 (C$)

Number of Mining

Financings in 2007

Value of Mining Financings in

2007 (US$)

Percentage of Interlisted

Companies as at Sept. 30, 2008 – All

Industries

TSX/TSXV 1,373 186 $372.3 billion 2,552 $17.57 billion 11% (TSX only)

ASX 625 142 n/a 410 $8.24 billion n/a

LSE/AIM 229 33 $529.8 billion 187 $9.88 billion n/a

AMEX 66 13 n/a 3 $0.09 billion n/a

JSE 54 4 n/a 1 $1.48 billion 22%

NYSE 45 3 n/a 2 $2.58 billion n/a

n/a = Not available.

♦ The TSX/TSXV in particular have strong international presence in mining: o The TSX/TSXV together account for 57% of the world’s listed mining companies, although they account for only 9% of

total listed companies across all industries. o International issuers make up 24% of the total number of mining issuers on the TSX (3% on the TSXV). Of these,

approximately 46% are companies incorporated in the United States, 21% in Australia, 10% in each of China and the UK/Europe, 8% in South Africa and the remaining 5% elsewhere.

o 49% of the mineral projects held by TSX/TSXV companies are outside of Canada.

1 Source: Toronto Stock Exchange and other exchange websites. All data as of December 31, 2007 except as otherwise indicated.

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Why Do Companies Seek Multiple Listings? A. Advantages of Multiple Listings

♦ There are many potential benefits to having a listing on more than one exchange. Among the most oft-cited of these are the following:

o Increased Access to Capital. An issuer may gain increased access to capital outside the home market for several reasons, including:

* A new listing may open up to the issuer an investor constituency having greater familiarity with the issuer’s business sector than in its home market. As shown on the preceding page, Canada, Australia and the U.K. have the largest number of listed mining companies, and therefore the greatest depth among analysts in the mining sector. As a result, a listing in any of these countries by a foreign (for example, U.S.) company may result in the company’s business model being better understood, which may lead to improved financing terms.

* Likewise, the new market may have a specialized investor base, such as the substantial retail and mutual/tracker fund investor base in Canada, or the broad institutional base in London.

o Potentially Lower Cost of Capital. In addition to contributing to a better understanding of the company’s business, a listing on a major established exchange such as the NYSE or the LSE may give rise to a “bonding” effect on a company’s share price and cost of capital. While there is debate about the longevity of this effect, the theory goes that by the issuer voluntarily subjecting itself to a higher regulatory standard such as the U.S. regime (including the Sarbanes-Oxley Act and 10(b)-5 liability), the company is sending a signal as to its high confidence in its business, accounting controls and procedures, corporate governance and other less visible internal attributes. This lowers the perceived riskiness of the shares and, at least in theory, decreases the listed company’s cost of capital.

o Greater Liquidity. Companies will frequently find they increase their total trading volume (combined home and new market) and decrease their market spreads after the cross-listing. The proportion of total trading volume that the new market captures and any trading restrictions in either market will influence the degree of enhanced liquidity.

o Opportunities to Grow Through M&A. Having publicly traded securities in multiple jurisdictions may facilitate engaging in share exchange M&A transactions, as a result of the liquidity and other effects referred to above. For instance, a foreign company’s ability to achieve a share acquisition in U.S. markets may be made easier by prior compliance with SEC requirements, and sales of the foreign acquirer’s shares by former target shareholders after completion of the acquisition (i.e. “flowback” to the foreign jurisdiction) may be reduced by obtaining a U.S. listing. Alternatively, a new listing may be motivated by a particular acquisition where the target’s shareholders would benefit from the acquirer obtaining an additional listing.

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o Disclosure Benefits. U.S. listed mining companies governed by SEC Industry Guide 7 are not permitted to disclose measured, indicated or inferred mineral resources in their public disclosure unless such disclosure is “required by law” in another jurisdiction. Instead, they are limited to disclosing only proven and probable mineral reserves, plus a more amorphous category of “mineralized material” which is more difficult for investors and analysts to understand and value. For exploration or development companies which have as yet not progressed to the feasibility study stage and delineated any proven or probable reserves, this can result in companies being undervalued compared to their foreign peers for whom resource disclosure is permitted. By obtaining a listing on the TSX/TSXV or another exchange whose rules require disclosure of mineral resources, a company can derive a direct disclosure advantage in its home U.S. market.

o Greater Market Recognition. Foreign listing can enhance name recognition for the firm and its products among customer and supplier bases, partly through additional media coverage and financial research and analysis. This could, in some circumstances, result in increased commercial benefits in the form of export sales.

B. Downsides of Multiple Listings

♦ The disadvantages, costs and potential risks associated with obtaining a multiple listing include the following: o Direct Costs and Fees. Initial costs of the cross-listing include: (i) initial listing fees payable to the exchange

(approximately US$150,000 - $250,000 on the NYSE, for example), (ii) fees payable to parties who assist with the listing, such as underwriters (if the listing is accompanied by a public offering, as is often the case), NOMADs, legal advisers, auditors and others, (iii) for a listing in Canada, the cost of independent geologists’ reports prepared under NI 43-101, which are time-consuming, potentially expensive and require involvement by company personnel in order that they are done right.

o Ongoing Costs and Fees. Similarly, listings fees and costs of ongoing compliance with the securities laws and listings regimes of each new jurisdiction will multiply with the number of jurisdictions involved (although some exchanges have different fee regimes for foreign companies with secondary listings).

o Auditor/GAAP Costs. While really a subset of the first two points above, these can be very significant if the financial reporting rules in the various jurisdictions differ. In the past, where a U.S. GAAP reconciliation was required by virtue of a U.S. listing, the cost of this reconciliation on a quarterly basis was substantial and may have acted as a deterrent to such listings. Recent amendments to the U.S. SEC reporting requirements allow foreign private issuers to eliminate the U.S. GAAP reconciliation if the issuer publishes its financial statements under IAS IFRS standards.

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o Increased Liability and Disclosure Risks. Compliance with more stringent securities law regimes, such as that of the United States (Sarbanes-Oxley Act, Rule 10(b)-5 liability, etc.) can be a source of increased potential liability. Where arrangements such as MJDS are not in place for an issuer listed in two jurisdictions to file identical disclosure documents in both of them, care must be taken to ensure that equivalent disclosure is made in the respective disclosure documents in each jurisdiction, or else investors might complain of unequal treatment. In addition, U.S. plantiffs’ lawyers may feel that a U.S. listed foreign private issuer is an easier target than a non-U.S. listed foreign issuer.

o Demand on Management Time and Attention. All of the foregoing means that the administrative burden on management of a multiple-listed company is greater, and management resources are accordingly diverted from focusing on running the business.

C. Special Purpose and Involuntary Listings

♦ Some forms of securities will find a more ready market on certain exchanges. For instance, a relatively liquid market in convertible notes has developed on the Luxembourg Stock Exchange such that many companies seeking financing through convertibles will seek a listing of those notes (but not the underlying shares) on that exchange.

♦ Companies should also be mindful that sometimes their shares or other securities can occasionally be listed on certain stock exchanges without their knowledge. For example, in 2004, hundreds of U.S. public companies discovered that their shares had been listed on the Berlin-Bremen Stock Exchange without their knowledge or authorization. The exchange’s rules permitted any authorized broker to cause a company to be listed on the exchange by filing an application to commence dealings on that exchange, and brokers had made such applications for a number of them. Most of these companies sought an immediate halt in trading in their stock on that exchange, since looser trading rules (particularly in relation to short selling) were making their share prices more volatile. Since then, one occasionally hears of public companies “discovering” they have a listing on a foreign (often European) exchange and having to take steps to delist from that exchange.

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Recent Trends in Multiple Exchange Listings A. Canadian Companies Listing on AIM

♦ From 2003 through 2007 the number of secondary AIM listings by Canadian public companies took off, driven by several factors:

o Deep pool of capital in London hungry for access to resource stocks in emerging markets such as Africa and Russia/Eastern Europe, where many Canadian companies have assets.

o A period of generally increased regulation in North America decreased the relative burden of compliance with AIM rules, which in any event frequently defer to the issuer’s home jurisdiction and rely heavily on the supervision of nominated advisers (“NOMADs”) – securities firms that act as principal quality controllers for the market and lend their reputation to the companies for which they act.

o Relatively low costs of admission were seen to be offset by increased exposure to institutional investors and potentially greater liquidity with the introduction of the FTSE AIM UK 50 Index and FTSE AIM All Share Index in 2005.

♦ TSX-listed mining companies which have obtained dual listings on AIM have included First Quantum, Bema Gold, Yamana Gold, Platmin, Adastra Minerals and European Goldfields.

♦ Recently, AIM listings have fallen off somewhat and companies of sufficient size are listing directly on the LSE seeking even greater liquidity, while others are upgrading their listings from AIM to the LSE (e.g. First Quantum, Heritage Oil)

♦ Previously, initial listings on AIM by Canadian companies without an initial listing on the TSX were rare. Shares in Canadian-incorporated companies are considered “taxable Canadian property” under Canadian income tax rules, with the result that 25% of the purchase price on trades of shares to non-Canadian residents must be withheld by the purchaser and paid to Canadian tax authorities pending the delivery by the seller of a “section 116 clearance certificate”. These rules do not apply where the subject company is listed on a “prescribed stock exchange”, of which the TSX is one but AIM is not. For this reason, even if a Canadian company desired mainly an AIM listing, it would generally also seek a listing on the TSX.

♦ However, since 2007 the Canadian government has changed these rules – now if a Canadian company is listed on a “recognized stock exchange” (of which AIM is one), then no clearance certificate or withholding will be required. This may result in some Canadian companies seeking an IPO directly in London without a concurrent TSX listing.

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♦ Other possibilities to avoid a TSX listing while listing on AIM include: o Redomiciling the company out of Canada so it is no longer subject to Canadian income tax rules; or o Converting the Canadian company into a “mutual fund corporation”, which under Canadian income tax rules is not

taxable Canadian property. This, however, requires that 95% of the shares be redeemable, which may be unattractive to investors, and ensuring that more than 50% of the company’s shares are at all time held by Canadian residents. Examples include Canadian software companies Excapsa Software Inc. and Sandvine Corporation (although Sandvine abandoned the mutual fund corporation structure shortly thereafter and sought a TSX listing.)

B. Decline in Appetite for U.S. Secondary Listings

♦ Over recent years, the depth of the market for debt and equity securities of junior mining companies in the London, Australian and Canadian markets has meant that fewer mining companies saw benefits in complying with U.S. reporting requirements to have greater access to U.S. investors.

♦ While the recent changes discussed above to U.S. accounting rules lowers the cost of obtaining and maintaining a U.S. listing, other challenges remain, including more frequent litigation and potentially greater liability exposure as well as the restrictions on reserve reporting described above.

♦ Also, companies’ ready access to debt and equity markets and investor appetite for high leverage ratios has generally meant fewer “farm-in” transactions with majors at the asset level have been concluded than was previously the norm.

♦ Some foreign private issuers with relatively few U.S. shareholders have terminated their U.S. listings and SEC-reporting obligations.

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Multiple Listed Targets A. Conduct of the Transaction ♦ When proposing to acquire a multiple listed company, an important question will be – whose securities laws and related rules

will apply to the transaction? These rules may apply based on the jurisdiction of incorporation of the target, where it is listed, where it has security holders, where its control and management lie, and other factors. For example, in a take-over bid:

o Canada – Canadian take-over bid rules generally apply where the target has shareholders in Canada, although an exemption is available where (i) less than 10% of the target’s outstanding shares are held (of record and, to the acquirer’s belief, beneficially) by Canadians and (ii) the greatest dollar volume of trading in the target’s securities over the last 12 months occurred on a market outside Canada, whether or not the target is listed on an exchange in Canada.

o United States – If a bidder uses U.S. instrumentalities (internet, phone or mail), U.S. tender and exchange offer rules generally apply where the target company has shareholders in the U.S., irrespective of where it is listed. The substantive provisions of the U.S. Exchange Act of 1934 (the “Exchange Act”) will not apply to a tender or exchange offer where fewer that 10% of the target shares are owned by U.S. persons (Tier I exemption). Some limited relief from these provisions is also available where the target’s U.S. ownership is between 10% and 40% (Tier II exemption).2 In addition. if the target is a listed Canadian issuer, the substantive provision of the Exchange Act will generally not apply unless 40% or more of the target shares are owned by U.S. persons.

o United Kingdom – The City Code on Takeovers and Mergers applies only to public company targets incorporated in England and Wales, the Channel Islands or the Isle of Man (i) if the target is listed on the LSE, or (ii) if the target’s management and control are in the U.K., irrespective of where listed.

♦ Attached as Appendix I is a summary of certain of the substantive rules under each of these regimes. Some of the key areas of difference among them include the following:

o Role of financial advisers o Pre-bid acquisitions o Bid conditions (including financing conditions) o Break fee requirements

2 The SEC has proposed changes to the cross-border rules that would, among other things, make it easier to apply them by allowing acquirers to calculate U.S. ownership for purposes of the Tier I and II tests at any time within a 60 day period prior to public announcement of the transaction, rather than at the 30th day prior to commencement as the rules currently provide, and to include all holders in the denominator in calculating whether the exemption applies.

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♦ As one example, UK rules require that once a bidder has announced its intention to make a take-over bid, it must mail its

take-over bid circular within 28 days. This is a problem for bids which are “insider bids” under Canadian MI 61-101 since such bids require the preparation of a formal valuation which can delay the mailing past the 28 day mark. In such circumstances, counsel to the bidder will need to engage with the exchanges and/or securities regulators to reach a common approach that both sets of regulators can live with. Generally, compliance with the highest standard in any relevant jurisdiction will be acceptable.

♦ With multiple exchanges and applicable securities laws also come different rules regarding the disclosure of transactions prior to the parties reaching a definitive agreement. The parties to a negotiated transaction will need to be especially mindful of these issues to avoid any risk of premature disclosure or failure to meet disclosure obligations.

B. Settlement and Logistical Issues

♦ Where companies list on certain exchanges, what is held by “shareholders” in those jurisdictions may not be actual shares but instead units of beneficial ownership or other interests in shares. Examples include:

o United States – Some non-U.S. companies trade on U.S. exchanges through “American Depositary Receipts” (ADRs), which enable U.S. investors to acquire equity in foreign companies without undertaking cross-border transactions. ADRs are issued by a U.S. depository bank (often BoNY or Citi) and entitle the holder to obtain the foreign share, but many U.S. investors prefer to hold their shares in ADR form.

o United Kingdom – Interests in shares may take the form of “CREST Depositary Interests”, which trade on the LSE and AIM. These are beneficial interests which permit “dematerialized” shareholdings, and all trades in them are settled electronically without physical delivery.

o Australia – Interests in shares may take the form of “CHESS Depositary Interests”, which are similar to their CREST equivalents and trade on the ASX.

♦ In connection with an acquisition of a company with any of these forms of ownership, navigating the logistics is always possible, but involves careful planning and coordination.

o In the case of CREST and CHESS, the Canadian depositary (usually a trust company) and counsel appointed by the acquiring company will need to liaise with CREST or CHESS, as the case may be, to ensure that holders under either system will be able to deposit their share interests and have such deposits recognized on the same timing as regular shareholders of the target. Among other things, this may involve holders completing a special form of letter of transmittal, different from the one used by regular shareholders, which is designed to work with the electronic acceptance instructions that are used under those systems. In all cases, CREST or CHESS interest holders should be advised to contact their broker or other nominee.

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o Under these systems, in the event of a hostile take-over bid the target can be required to provide certain information sufficient to enable the bidder to send bid material to CREST/CHESS holders, but the information that might be voluntarily provided to a friendly bidder would be more extensive and would make the process of soliciting acceptances from holders easier.

C. Delisting the Target Post-Acquisition

♦ It is important to cause the target company to be de-listed as soon as possible following the completion of an acquisition. Until an issuer has been de-listed (and not merely subject to a trading halt) from all exchanges on which any of its securities trade, Canadian securities regulators will not grant an application for it to cease to be a reporting issuer for Canadian securities law purposes. Accordingly, absent a discretionary exemption, it will continue to be subject to ongoing reporting obligations until all such de-listings have been effected. While these exemptions are granted with regularity in cases where a financial statement reporting deadline would occur between the completion of the acquisition and the completion of all de-listings, this is an additional expense which should, if possible, be avoided through careful planning.

♦ Procedures for de-listing the target company following a successful acquisition will differ depending on the exchange.

♦ For example, the TSX will de-list a company immediately upon either (i) all of its shares being acquired in a plan of arrangement or amalgamation transaction, or (ii) upon 90% or more of its shares being acquired in a take-over bid, provided the acquirer has at such time launched a compulsory acquisition for the remaining outstanding shares which makes it a fait accompli that 100% of the shares will be acquired.

♦ In contrast, the LSE will de-list a company upon shares carrying 75% of its voting rights having been acquired, however, the process is not as quick as with the TSX. An application must be made to both the FSA and the LSE to have the shares de-listed, and there is a waiting period of approximately one month before the de-listing becomes effective.

♦ In terms of actual trading in the shares these differences in timing should not be an issue, since all trading in the target shares should effectively cease once the acquisition is complete or a compulsory acquisition is launched. However, for the disclosure reasons cited above, a speedy de-listing from all exchanges is desirable.

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Multiple Listed Acquirers ♦ Having a listing in multiple jurisdictions may make acquisitions, even in the issuer’s home jurisdiction, more complicated.

Examples include: o Canadian related party rules, as set out in Multilateral Instrument 61-101 Protection of Minority Security Holders in

Special Transactions, provide that a TSXV (but not a TSX) issuer is exempt from the time-consuming and costly formal valuation requirements for related party transactions or business combinations. If the issuer is listed on the NYSE, AMEX or Nasdaq or any stock exchange outside Canada and the U.S. other than AIM, this exemption is not available.

o TSX rules provide for an exemption to the general rule that acquisitions by a listed company involving the issuance of 25% of the listed company’s shares must be approved by the company’s shareholders – the exemption is available where the target of the acquisition is a public company.3 Stock exchanges in other jurisdictions may not have equivalent rules, although if the TSX is the primary listing it may be possible to persuade the foreign stock exchange to waive their rules in this respect.

o As referred to earlier, the parties to a negotiated transaction will need to be especially mindful of the different requirements they face regarding disclosure of negotiations prior to entering into a definitive agreement, in order to avoid any risk of premature disclosure or failure to meet disclosure obligations.

♦ The NYSE and NASDAQ typically enter into listing agreements with foreign private issuers that provide that the ‘home country’ corporate governance provisions will apply rather than the NYSE or NASDAQ rules. This means that whereas a U.S. issuer would need to receive approval from its own shareholders if it proposes to issue 20% or more of its securities in a transaction or otherwise transfer control, a similarly-listed foreign private issuer might not be obliged to put the same transaction to its own shareholders for ratification.

3 This issue was also litigated in connection with the 2006 share exchange acquisition of Glamis Gold Ltd. by Goldcorp Inc., in which the court dismissed Robert McEwen’s application to the Ontario Superior Court of Justice for an order directing Goldcorp, the acquirer, to call a shareholder meeting.

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Target/Acquirer Listed on Different Exchanges ♦ For a foreign-listed acquirer considering acquiring a Canadian company, sometimes a key consideration (if the acquisition

price will include securities of the acquirer) is whether the acquirer will seek a listing on the TSX/TSXV. Doing so increases the attractiveness of the offer since it offers greater liquidity to target shareholders, allows institutional shareholders of the target to remain in compliance with any limits on non-Canadian-listed foreign companies in their portfolios, and may allow improved tax treatment of the transaction to Canadian resident target shareholders. However, they must balance this against the potential additional disclosure burden of complying with Canadian continuous disclosure requirements.

♦ Foreign (non-U.S. listed) companies concerned about this increased disclosure burden can take heart. If the result of the acquisition is that the foreign company will have less than 10% of its equity securities, on a fully-diluted basis, owned directly or indirectly by residents of Canada, then in reliance on National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers, the foreign company will be entitled to file, in response to Canadian continuous disclosure obligations, the documents that it is already required to file in another “designated foreign jurisdiction”.4,5

♦ Going in the other direction, for an acquirer listed on the TSX/TSXV and contemplating a new listing on AIM as part of an acquisition of a U.K.-listed company, there are some technical rules regarding disclosure of mineral reserves and resources in the CPR which is required to accompany an AIM admission document that are at odds with NI 43-101. These include the requirement under AIM to add inferred resources to other categories, which is expressly prohibited by NI 43-101.

♦ Unless an exemption applies, U.S. 14d-9 rules (applicable to targets in tender offers) require target disclosure of negotiations and agreements related to defense measures as well as compensation arrangements that may be triggered. Compliance with these rules may provide a hostile bidder with greater information than might be the case in other jurisdictions. (Examples of such disclosure include Pechiney’s disclosure in response to Alcan’s bid, and Aventis’ disclosure in response to Sanofi’s bid.) These rules do not apply, however, in plan of arrangement transactions.

♦ For an acquisition of a Canadian company by a foreign parent involving a share exchange, it is quite common for the acquisition to involve an exchangeable share structure. This is driven largely by tax reasons (see next page).

4 “Designated foreign jurisdictions” include, among others, Australia, Germany, Hong Kong, South Africa and the U.K., but not the United States. 5 It is not entirely clear that this means the foreign issuer is exempt from the requirement to file a NI 43-101 compliant technical report to support technical disclosure by the foreign issuer, including mineral reserves and resources.

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Cross-Border Share Exchange Deals - Exchangeable Shares ♦ Variations of an exchangeable share structure have been used in numerous transactions where a foreign acquirer (“Parent”)

has sought to acquire a Canadian-incorporated target (“Target”) by issuing its own securities in exchange for target shares. Examples have included Vivendi/Seagram (2000), Newmont/Franco-Nevada (2001), Coeur d’Alène/Wheaton River (2004) and Nustar/Intrepid (2006).

♦ If Target shareholders received shares of Parent directly, no tax-free rollover would be available to them. The principal attraction of an exchangeable share structure to Target shareholder is that, because the exchangeable shares are issued by a Canadian entity, Target shareholders can exchange them on a rollover basis and defer any gain until the exchangeable shares are ultimately exchanged into shares of Parent or disposed of.

♦ Under than exchangeable share structure, Parent offers to acquire the shares of Target in exchange for exchangeable shares of a special-purpose Canadian-incorporated company owned by Parent (“Exchangeco”). The exchangeable shares are designed to be economically and legally equivalent to the shares of Parent.

♦ For the benefit of Target shareholders who have no need for a rollover (either because they will realize a loss on the share exchange or for other reasons), often the alternative of electing Parent shares directly, rather than just shares of Exchangeco, is offered.

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♦ The following diagram illustrates the principal features of a typical exchangeable share structure:

Public

US Parent

Callco

Exchangeco

Target

Common shares (NYSE, TSX)

100% common shares

100% common shares

100% common shares

U.S. Canada

Special voting share

Trust Call Right

Exchangeable shares (TSX)

Former Target shares

Former Target shareholders

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♦ The principal attributes of the exchangeable shares under a typical structure are: o Dividends/Liquidation: The holder of an exchangeable share is entitled to dividends and an amount on liquidation

equal to the dividends paid on, and the liquidation entitlement of, one Parent share. Parent binds itself, among other things, not to declare or pay dividends on its ordinary shares unless Exchangeco simultaneously pays an equivalent dividend on the exchangeable shares.

o Redemption/Call Right: The exchangeable shares are redeemable by Exchangeco at the option of the holder for an amount equal to the value of a Parent share. Each of Parent and another Canadian-incorporated subsidiary of Parent (“Callco”) have an overriding call right, which for tax reasons it will be strongly motivated always to exercise6, to purchase any exchangeable shares tendered by holders to Exchangeco for redemption. The purchase price under the call right typically results in the delivery of the Parent share. The ability of Callco to hold Parent shares pending delivery to holders of exchangeable shares is subject to, among other things, any applicable corporate incest rules under Parent’s governing corporate law.

o Voting: The holder of an exchangeable share does not have a vote in respect of the affairs of Exchangeco, but has the ability through a voting trust arrangement to exercise voting rights at shareholder meetings of Parent. The most effective corporate mechanism used to accomplish this depends upon Parent’s governing corporate law and Parent’s ability to implement any such mechanism without undue delay. A typical structure favored by U.S. offerors involves the formation of a trust that has the right to vote a special preferred share of Parent carrying an aggregate number of votes equal to the number of outstanding exchangeable shares. Until a holder’s exchangeable shares are redeemed or acquired by Exchangeco, Parent or Callco, the holder is entitled to direct a number of votes attached to the special preferred share equal to the number of exchangeable shares held. The percentage interest in Parent held by the trust decreases as the exchangeable shares of Exchangeco are redeemed or acquired by Exchangeco, Parent or Callco.

o Support by Parent: A support agreement is entered into under which Parent agrees to take all necessary steps in order that Exchangeco and Callco can carry out their respective obligations in relation to the exchangeable shares. In addition, under the support agreement and the exchangeable share terms, Parent is prohibited from taking certain actions affecting the holders of exchangeable shares (such as a liquidation of Exchangeco, any amendment to the terms and conditions of the exchangeable shares, or any amendment to the support agreement) unless the approval of the holders of the exchangeable shares other than Parent or Callco is obtained.

o Stock Exchange Listing: The exchangeable shares are listed on the TSX to ensure they have liquidity.

6 Parent will realize better paid-up capital in Canada if the right is exercised by Callco.

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♦ Exchangeable share structures are complicated and any Canadian tax analysis will need to be done very carefully. However, in addition to the rollover treatment discussed above, the following are certain Canadian tax points which may be of particular interest:

o Since the exchangeable shares are shares of a Canadian company, Canadian shareholders will, so long as they hold their exchangeable shares, receive dividends on shares of a Canadian company. There are certain tax benefits to Canadian shareholders as a result of receiving dividends from a Canadian company as opposed to from a non-resident company. Dividends paid by a Canadian company to Canadian shareholders that are individuals benefit from the dividend gross-up and tax credit (which can reduce the tax rate by as much as 15%) and such dividends received by Canadian corporate shareholders benefit from the inter-corporate dividend deduction.

o Since the Federal Budget in 2000, there has been a proposal to introduce into Canadian tax law a rollover for a cross-border share-for-share exchange of shares of a Canadian company for shares of a non-resident company. This would eliminate the principal rationale for using this structure, being rollover treatment for Target shareholders. The Department of Finance (Canada) has moved the date for introduction of this rule several times, so there can be no assurance as to when (if at all) such a rule may be introduced.

o Holders of exchangeable shares would still be taxable on an exchange of their exchangeable shares for Parent shares. The rollover treatment described above is merely a deferral of tax.

o In an acquisition by way of exchangeable shares, the tax attributes of the Target are maintained at their historic amounts. In particular, an exchangeable share transaction does not provide any opportunity to increase or “bump” the tax cost to Target of its assets, as might be available on a cash bid. This may affect the tax planning of Parent in connection with the transaction as Target will be unable to distribute its non-Canadian assets without immediate Canadian tax.

o Assuming a typical exchangeable share structure, the exchangeable shares would likely be considered a type of preferred shares for purposes of the Income Tax Act (Canada). As a result, Exchangeco would be subject to a 50% preferred share tax on dividends paid on the exchangeable shares, if any. This tax is refundable, by way of deduction against the ordinary taxes payable by Exchangeco.

♦ Typically only Canadian resident shareholders of the Target may elect to receive the exchangeable shares, and such shares are not listed outside Canada (e.g. Vivendi/Seagram).

♦ Shares of the Parent issued upon the exchange of exchangeable shares are typically freely tradeable in the U.S. unless the holder is an affiliate of a party to the transaction.

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DLC (Dual-Listed Company) Structures ♦ A DLC involves two listed companies (normally resident in different jurisdictions) combining their operations into a single

economic enterprise while retaining their separate legal identities, tax residencies, stock exchange listings and shareholder base.

♦ The respective shareholders of the “merging” companies do not transfer or exchange their existing shares in the companies, but arrangements are entered into whereby economic integration between the two companies is achieved. The result is that the shareholders of each entity are in substantially the same position in terms of votes, dividends and capital returns as if they held shares in a single economic enterprise controlling the assets of both entities.

♦ While DLCs appeared to have lost their lustre a few years ago, two recent transactions have given new life to this structure: o Reuters’ merger with the Thomson Corporation in 2008 using a DLC structure o The recently abandoned proposed offer by BHP Billiton for Rio Tinto, which would have involved BHP Billiton (a DLC

company) acquiring Rio Tinto (another DLC).

♦ The complexity of these structures is such that they are used only by large merging companies. Examples include the following:

Companies Which Still Have a DLC Structure (date adopted)

Companies Which Have Abandoned a DLC Structure (dates in effect)

Unilever (1930) Reed Elsevier (1993)

Rio Tinto (1995) BHP Billiton (2001)

Investec Bank (2002) Carnival (2003) InBev (2004)

Mondi Group (2007) Thomson Reuters (2008)

Royal Dutch Shell (1907-2005) SmithKline Beecham (1989-1996)

Fortis (1990-2001) Dexia (1996-2000)

ABB Group (1998-1999)

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♦ DLC structures can take one of three forms: o Stapled Stock Structure: The shares of the DLC entities are “stapled” together, meaning that they can only be traded

together as a unit. This structure is rarely used and has not been used in any of the large international DLC transactions of recent years.

o Intermediate Holding Company Structure: The business operations of the two companies are merged under one or more intermediate holding companies in which the two listed companies hold shares. Ownership of the intermediate holding company will be split according to the relative values of the assets contributed by each party. The listed companies retain their separate existences but their function is now simply to hold shares in the intermediate holding company, to receive dividends from it and to distribute those dividends to its own shareholders. This structure was utilised in two large European DLC arrangements in the 1990’s (Reed/Elsevier and BAT/Zurich), but have otherwise been rarely used, due in part to the fact that this structure requires the transfer of assets from each listed company to the intermediate holding company which raises certain tax and other complications (such as pre-emptive and other third party rights arising on a transfer of assets).

o Synthetic Merger Structure: A majority of the international DLC structures effected in recent years, most notably those involving Australian entities (e.g., RTZ/CRA (Rio Tinto) and BHP/Billiton), have involved a “synthetic merger”. Under this structure, the business operations of the listed companies are not jointly owned but remain within the separate ownership of the two companies. The DLC entities achieve economic integration by entering into a series of contractual and constitutional arrangements whereby each company ensures that shareholders of each are treated equivalently in economic terms and that they both operate as of they were a single corporate group. This DLC structure has the benefit that any pre-emptive rights in favour of third parties (a significant consideration, particularly in respect of mining assets) are less likely to be triggered as there is no actual transfer of the assets.

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♦ The following are common features of most “synthetic merger” arrangements:

o Equalisation Ratio: The ratio of economic and voting rights attaching to a share in one of the listed companies relative to those rights attaching to a share of the other listed company is determined by an “equalisation ratio” (usually 1:1 in a “merger of equals” and ensured by the larger of the two entities undertaking a bonus issue on completion of the merger). Each listed company undertakes to ensure, as far as possible, that all ordinary shares of both companies enjoy economic returns and voting rights (and in the case of liquidation, liquidation proceeds) in the combined group in proportion to the equalisation ratio. As part of this “equalisation process” for example, each company will effectively underwrite the other’s agreed dividend payment by agreeing to make up any deficiency in the other party’s profits where this is necessary to enable the latter to pay the agreed (ie. equal) dividend.

o Directors and Management: Unified management of the operations of the DLC is provided by the listed companies having identical boards and unified executive management teams. Each board is authorised to have regard to the interests of both groups of shareholders in managing the combined group and a director may not serve on the board of one company unless he/she also serves as a director of the other company.

o Cross-Guarantees: Each entity gives a guarantee of the contractual obligations of the other so that creditors will be placed in a similar position as if the debts owed to them by the one entity were instead owed to them by the combined group. This achieves the objective of ensuring a single credit rating for the combined group.

o Voting Arrangements: Special voting arrangements are entered into so that the shareholders of each entity effectively vote as a single decision making body on matters which affect both groups. This matters where each group of shareholders have a divergent interest require separate approval of each group.

o Takeover Restrictions: Each entity ensures that its constating documents provide that any person(s) cannot gain control of one entity or of the combined group other than by making an offer to the shareholders of both entities on equivalent terms.

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♦ The following diagram illustrates a typical DLC structure:

♦ The following are some of the key advantages of the DLC structure as compared to other forms of mergers: o Tax Issues: Synthetic merger structures are particularly tax advantageous as there are no capital gains tax or stamp

duty consequences. Furthermore, from an Australian perspective, the DLC structure is advantageous because it preserves the ability of an Australian listed company to pay “franked” dividends to its Australian shareholders (which eliminates double taxation of dividends).

Operations

Company B shareholders

Operations

Company A Special Voting

Share Trust

Company B Special Voting

Share Trust

Special Voting Shares

Special Voting Shares

Common shares

(TSX-listed)

Common shares (LSE-listed)

Equalization agreement Cross-guarantees Identical boards Unified management

Company A shareholders

Company B

Company A

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o Flag Issues: Large international transactions often involve “national champions” and it is important that these national entities be viewed as maintaining their domestic characteristics. This is particularly the case in the Australian context where the possibility of companies such BHP and CRA being taken over by foreign entities may have resulted in the transaction not obtaining the various forms of governmental approval.

o Index Inclusion: Although S&P has changed its rules in recent years, certain issuers obtained advice that the DLC structure would allow the company to retain status as a “S&P 500” company, thereby reducing forced selling of acquirer shares and reducing the likelihood of flowback.

♦ However, there are significant disadvantages to a DLC structure:

o The cumbersome nature of the structure results in an increased complexity of operations (e.g. two different legal and accounting regimes, plus actions often subject to approval of both sets of shareholders).

o Although in theory the equalisation process described above is intended to integrate the economic structure of the DLC group, in practice, the shares of the two DLC entities generally do not trade within a tight range of one another for reasons relating to liquidity, local tax issues (e.g., income tax, dividend tax and share transfer costs), exchange rate differentials, political risk and demand for index stock. This can give rise to arbitrage between the companies’ shares.

o By retaining the separate existences of the two companies, each with its own corporate culture, integration between the two companies is made more difficult.

o Any take-over of a DLC is made much more complicated, which may make management feel more complacent.

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Practice Tips for Dealing With Multiple Exchanges and Securities Law Requirements The pitfalls of dealing with multiple exchanges discussed here are only examples, and the particular exchanges and applicable securities laws will dictate the issues you will face in any particular circumstances. However, the following are some tips for minimizing the impact of these potential issues on a transaction’s timing and results:

♦ Try to identify the issues as early as possible in the transaction planning process. If the issues relate to the preparation of technical reports (either under NI 43-101 or CPR requirements) or financial statements, these can be long lead time items. Seek local counsel advice at an early stage.

♦ Advance planning and discussions are important with securities regulators. The SEC and the OSC are willing to work on a confidential basis with issuers to analyze new and unprecedented exemptive relief. The SEC in particular shows its greatest flexibility in considering cross-border transactions (e.g., Alcan/Pechiney, Inbev/Anheuser-Busch).

♦ In communicating with stock exchanges, have regard to local custom as to who has these discussions. Approaches vary by jurisdiction. For example, in Canada, discussions with the TSX are most often initiated by counsel to the issuer, while on the TSXV a more informal approach is practiced and the exchange is accustomed to hearing directly from management of listed issuers. By contrast, discussions with the JSE in South Africa are often conducted by the issuer’s financial advisers.

♦ Most exchanges recognize the concept of a “primary” and “secondary” listing, and where they are the secondary exchange they may be prepared to waive their own requirements, provided similar (but possibly conflicting) requirements of the primary exchange are followed. This is generally less effective in dealing with the conflicting requirements of securities laws.

♦ Understand early in the process what the transaction may mean for preparing financial statements both for the transaction itself and for ongoing reporting obligations. If information otherwise required is not available (either because the transaction is unsolicited or the financial records would not allow you to prepare the information for the time periods required), discuss the issue with the relevant accounting staff early on – these types of issue are often the thorniest and most time-consuming to resolve.

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Appendix I – Comparison of Selected Features of Applicable Canadian, U.S. and U.K. Take-Over Bid Rules

Canada United States United Kingdom

Engagement of Financial Advisers

Target and bidder are generally not required to hire financial advisers, but target will frequently establish a special committee who will retain a financial adviser to provide a fairness opinion to the target board.

A formal valuation by an independent financial adviser is required for related party transactions (subject to certain exceptions).

No requirement for financial adviser to bidder to make any confirmation re bidder having sufficient funds.

While targets and bidders are not required to hire financial advisors, since the 1980s, the Delaware case Smith v. Van Gorkom – where directors of a Delaware company were found personally liable when approving a sale of the company too quickly without obtaining a fairness opinion – has inspired companies to hire financial advisors in acquisition transactions.

No requirement for financial advisor to bidder to make any confirmation re the bidder having sufficient funds.

Target board must retain an independent financial adviser. Bidder will also usually retain a financial adviser.

AIM Rules require NOMADs to only work for their AIM company client on a takeover transaction.

Success fees included as part of financial adviser compensation can trigger conflicts which require Takeover Panel clearance.

Financial adviser to the bidder must confirm that bidder has sufficient funds.

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Canada United States United Kingdom

Pre-Bid Acquisitions – Announcement and Restrictions

Acquisition of beneficial ownership of 10% or more of target’s securities triggers requirement for a press announcement by the bidder and filing of an “early warning” report, requiring a statement of the bidder’s intentions (although this can often be managed).

Threshold decreases 5% if a take-over bid by another offeror is already outstanding.

Any additional purchases of 2% or more must similarly be announced and an updated early warning report filed.

In each case, further purchases are prohibited until a clear business day has elapsed from such disclosure.

If a potential bidder acquires 10% or more of target then it become an “insider” and, subject to exemptions, an independent formal valuation of the target securities will be required for any follow-on acquisition or subsequent material transaction between them.

Acquisition of beneficial ownership of 5% or more of target’s securities triggers requirement for filing a Schedule 13D reporting the purchase and requiring a statement of the bidder’s intentions. If intentions change or the acquiror purchases or sells an additional 1%, disclosure must be promptly amended.

U.S. Hart-Scott-Rodino rules also require antitrust filings prior to completing acquisition of voting securities of a U.S. issuer if transaction exceeds certain dollar limitations (approximately $63 million currently). Notices of these filings must also be sent to target.

Acquisition, directly or indirectly, of 3% of the voting rights in the target (whether as a shareholder or otherwise) triggers an obligation to notify the target and the Financial Services Authority (“FSA”). No requirement for bidder to disclose its intentions.

Threshold decreases to 1% if another takeover bid has been commenced or if the target has announced a potential bid.

Any additional acquisitions of 1% or more of voting rights must be notified.

No restrictions on further purchases, subject to the rules on mandatory offers at 30% (see below).

Announcement must be made as soon as possible and, in any event, within two trading days of the acquisition.

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Canada United States United Kingdom

Integration With Pre-Bid Transactions

“Pre-bid integration rule” provides that if any target securities have been purchased by the bidder in the 90 day period before the bid is commenced, the bid price must be at least equal to and “in the same form” as the highest consideration paid on a per security basis under the prior transaction.

The “in the same form” requirement means that pre-bid purchases for cash would preclude an all share exchange bid until the 90 days have elapsed (but would not preclude a bid where target shareholders had their unrestricted choice of cash or acquirer shares).

State laws and charter provisions of target frequently prohibit transactions between a person who has acquired a certain percentage of the target (i.e., Delaware’s General Corporate Law section 203 set at 15%) and any affiliate of that acquiror for three years after such purchase unless the transaction resulting in such ownership received prior target board approval or certain other price or voting requirements are met.

If within three months prior to commencement of the offer period bidder has acquired an interest in shares of target, the offer to holders of shares of the same class must be on “no less favourable terms”.

“No less favourable terms” does not always require an all cash bid if pre-bid purchases were for cash provided any securities offered have, at the date of announcement of bidder’s firm intention to make the offer, a value equivalent to the highest cash price paid. An all cash offer or cash alternative is required if:

- the offer is a mandatory offer under Rule 9; or

- the bidder has acquired 10% of more of the securities of target for cash in the prior 12 months or during the offer period.

Financing Bidder must have made, at the time of the bid, adequate arrangements to ensure funds will be available to pay for securities deposited under the bid. Bidder must believe that there is only a remote possibility that funds would not be available to it should the other conditions to bid be satisfied.

The standard is slightly lower than that applied in the U.K. with many Canadian bids being launched based on conditional bank commitment letters.

Offer may be wholly contingent on obtaining financing. Details of the financing arrangements must be made publicly available. In addition, under SEC rules, financial statements of the acquiror may need to be provided if offer is conditioned on obtaining financing.

Financial adviser must confirm sufficient funds are available and can be required by Panel to pay consideration if bidder fails to pay

Very high standard applied to certainty of funds; only conditions to financing typically allowed are in case of bankruptcy of the bidder or legal limits applicable to the financing source.

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Canada United States United Kingdom

Break Fees No rules in the legislation on break fees; in practice, 2%-3% of target’s market capitalization is common but 4%-5% have also been agreed.

State law fiduciary duty requirements and the caselaw that has evolved from such requirements are the basis for limits on the amount of break fees. Generally break fees have been in the 2-4% range but may be lower if the transaction is an ‘unshopped’ private equity buyout or MBO. In Asarco decision, court found that directors likely breached their fiduciary duties by agreeing to a 7% break up fee.

Takeover Code permits normally no more than 1% of the bid value as a maximum: can be agreed up to this amount with several bidders but (i) the Listing Rules restrict break fees greater than 1% of market value (at offer price) for a Class 1 transaction, (ii) there can be “financial assistance” issues that arise. Hence, 1% of target’s net assets on a market value basis is current market practice.

The Panel must be consulted about any proposed break fee.

Commencing the Bid

If friendly, by mailing the formal offer documents to shareholders.

If hostile, generally by press release followed by mailing within 10 to 14 days.

Until the steps referred to above taken, there is no legal obligation to make a take-over bid, even where an intention to do so has previously been announced.

Formal ‘commencement’ of the bid triggered by publication of ads in national newspaper or via mailing to target’s shareholders with means to tender their shares.

Typically, public announcement of friendly or unsolicited acquisition will be made prior to formal launch, Old rules required launch within 5 business days but new rules set no time limit.

Formal launch begins clock for required bidder response on Schedule 14d-9 and related mandated disclosure of negotiations in response to bid and change of control agreements that could affect management decision-making.

By detailed press release including all material terms and conditions of the offer and, if the offer includes cash or cash element, confirmation from the bidder’s financial advisor that bidder has the resources available to satisfy the cash element in full.

Bidder must have formed a firm intention to make an offer and have every reason to believe it can and will continue to be able to implement offer.

Once bidder’s intention to make the offer is announced, the formal offer document must be mailed within 28 days.

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Canada United States United Kingdom

Minimum Offer Period and Key Steps

Minimum offer period is 35 days. Key steps timetable for negotiated bid is as follows:

T Takeover bid circular mailed to target shareholders.

T+35 Earliest date for expiry of bid. Bid is often extended for at least one 10 day period to allow deposit of additional shares.

T+45 End of extended bid. All conditions satisfied or waived. Shares deposited are taken up and paid for.

T+46 If 90% tender has been achieved, bidder commences the 30 day compulsory acquisition process to acquire 100% ownership of target (but for all practical purposes, bidder will be treated as having acquired 100% of the shares by about T+50 and can de-list the target shares from the TSX at that time).If 90% tender is not achieved but more than 66 2/3% is achieved, bidder implements a second stage squeeze-out transaction to achieve 100% within about 2 months.

Minimum offer period is 20 U.S. business days. If conditions of offer not met at closing of offer period, bidder must extend or terminate offer prior to opening of next business day. If offer extended, bidder must also announce number of shares tendered at end of prior offer period.

Most U.S. companies allow acquiror of 50% or more of target shares to call a vote on a merger; acquiror to vote its shares in favor, thus squeezing out remaining shareholders. Some companies have a higher vote requirement for mergers – i.e., two thirds of those voting.

Minimum offer period is 21 days. Key steps timetable for negotiated bid is as follows:

T-28 Bidder announces its intention to make bid.

T Bid document mailed.

T+21 Earliest date bid can go “unconditional” (last date is T+60).

T+35 Bid normally open for 14 days after declared unconditional as to acceptances.

T+42 Last date for all conditions to be satisfied.

T+56 Last date for consideration to be mailed. If 90% tender achieved, bidder implements a compulsory acquisition (approximately 3 to 4 months).

Bid Conditions In a friendly bid, conditions are typically negotiated and set out in a “support agreement” between bidder and target and then in bid circular.

Minimum acceptance condition often set at the shares owed by bidder together with those tendered under the offer equalling 66 2/3% of the

In friendly transactions, conditions of tender offer are negotiated and set out in merger agreement. Minimum tender condition typically set at level allowing bidder to complete squeeze-out (50% or 66 2/3%)

In unsolicited transactions, bidder

Relatively standard suite of conditions are negotiated and set out in press announcement and bid circular. Conditions cannot depend on subjective judgement of bidder’s directors.

Minimum acceptance condition is generally set at 90% of the shares not

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Canada United States United Kingdom

outstanding shares of target, being the threshold that enables bidder to carry out a second stage squeeze-out transaction.

There is greater flexibility for bidder to invoke conditions than in the U.K., including as to material adverse change (“MAC”). Courts are ultimately the arbiters of whether a condition is properly invoked.

free to set its own conditions but marketplace may react negatively if conditions provide bidder with too much discretion.

While bidder and target are free to negotiate a non-standard MAC provision that is likely to be honored by a court, if normal MAC language is included, case law suggests that a MAC event allowing buyer to walk away must be one that has a severe and durationally significant impact.

already held by the bidder or its associates, being the threshold that permits use of the statutory compulsory squeeze-out process. Bidder will normally reserve right to go unconditional as to acceptances at any lower level that exceeds a 50% holding.

Takeover Panel is arbiter of when conditions may be invoked by bidder and rarely allows bidder to invoke any conditions other than minimum acceptance thresholds and anti-trust conditions. MAC clauses very unlikely to be effective.

Minority Squeeze-Out Thresholds

For take-over bid, 90% of the shares to which the bid relates (excluding shares owned by bidder at the date bid is commenced) will permit a statutory compulsory acquisition to reach 100%. This is a straightforward process.

Second stage squeeze-out also possible with 66 2/3% of the votes.

Typically, if acquiror has 90% or more of target shares, it can accomplish an immediate squeeze-out merger. If 90% has not been achieved, but acquiror has obtained shares sufficient to cause the merger to be approved, typically 50% or 66 2/3%, a shareholder vote will be called, a proxy statement filed with the SEC and reviewed, and the merger consummated within 2½ to 4 months.

90% of the shares to which the offer relates (excluding shares owned by bidder or associates at time offer document is posted or acquired by bidder during period of offer but outside of the offer) will permit a compulsory acquisition.

Scheme of arrangement or second stage squeeze- out possible with 75% of the votes.

Defences In the event of a hostile bid, Canadian companies are not necessarily precluded from taking defensive measures such as:

- shareholder rights plans

- special dividends

- strategic alliances

Rights plans and other defenses typically permissible. State law governs. Defenses typically must be reasonable in relation to the threat posed. Because of institutional hostility to rights plans, many companies will not put in place new rights plans until threat is manifested (i.e., Saks Fifth Avenue). Securities regulators

Poison pills or frustrating transactions strictly prohibited without shareholder approval once offer is announced; it is difficult for U.K. incorporated companies to create poison pills.

General principle is that the board should not take any action which may result in shareholders being denied the right to decide on the merits of

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Canada United States United Kingdom

- change of control provisions

- litigation or securities regulatory proceedings

However, in relation to shareholder rights plans, securities regulators will not allow these to stay in place indefinitely. Bidder may make application to have such a plan struck down, but plans will generally be effective in extending the minimum bid period to 50-60 days.

have no power to cause target to terminate rights plan.

offer. A non-exhaustive list of matters requiring shareholder approval is set out in the Takeover Code (e.g. issue of shares, sale or purchase of a material asset).

Disclosure Requirements

If securities are being offered, then the bid circular must contain prospectus level disclosure about the issuer, including historical and pro forma financial statements.

Any information about the bidder already on the public file in Canada can be incorporated by reference - a Canadian public company bidder or foreign bidder that is a reporting issuer in Canada would have an advantage over any other foreign bidder in this regard.

The bid circular is not subject to review by securities regulators.

NI 43-101 compliance with technical report(s) for material mineral properties (where not previously filed) would be required for mining companies.

If securities are being offered, bid document is considered a prospectus and meet U.S. SEC standards and requirements, including financial statement requirements, which may include pro forma disclosure. Prospectus must be filed with SEC. If SEC reviews the prospectus, offer may not be consummated prior to resolution of SEC comments. Exemptions apply for bids for Canadian companies.

If securities are being offered then the bid circular must be a prospectus or “equivalent document”

Information about the bidder already on the public file in the U.K. (following issue of a prospectus on a Main Market listing) can be incorporated by reference - a London Main Market listed bidder would have an advantage over another bidder in this regard.

The bid circular must be approved by the FSA if securities are offered as consideration.

Detailed additional Takeover Code disclosure requirements.