Final Rule (effective May 1, 2000): OSC Rule - 61-501, 61-501CP - Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions

OSC Rule

April 14, 2000

ONTARIO SECURITIES COMMISSION RULE 61-501
INSIDER BIDS, ISSUER BIDS, GOING PRIVATE TRANSACTIONS
AND RELATED PARTY TRANSACTIONS
TABLE OF CONTENTS

PART TITLE

PART 1 GENERAL PROVISIONS

1.1 Definitions

1.2 Application of Part XX of the Act

1.3 Liquid Market in a Class of Securities

1.4 Arm's Length Dealings

1.5 Interpretation

PART 2 INSIDER BIDS

2.1 Application

2.2 Disclosure

2.3 Formal Valuation

2.4 Exemptions from Formal Valuation Requirement

PART 3 ISSUER BIDS

3.1 Application

3.2 Disclosure

3.3 Formal Valuation

3.4 Exemptions from Formal Valuation Requirement

PART 4 GOING PRIVATE TRANSACTIONS

4.1 Application

4.2 Meeting and Information Circular

4.3 Conditions for Relief from Timing for OBCA Information Circular

4.4 Formal Valuation

4.5 Exemptions from Formal Valuation Requirement

4.6 Conditions for Relief from OBCA Valuation Requirement

4.7 Minority Approval

4.8 Exemptions from Minority Approval Requirement

4.9 Conditions for Relief from OBCA Minority Approval Requirement

PART 5 RELATED PARTY TRANSACTIONS

5.1 Application

5.2 Disclosure: News Release and Material Change Report

5.3 Copy of Material Change Report

5.4 Meeting and Information Circular

5.5 Formal Valuation

5.6 Exemptions from Formal Valuation Requirement

5.7 Minority Approval

5.8 Exemptions from Minority Approval

PART 6 FORMAL VALUATIONS AND PRIOR VALUATIONS

6.1 Independence

6.2 Disclosure Re Valuator

6.3 Subject Matter of Formal Valuation

6.4 Preparation of Formal Valuation

6.5 Summary of Formal Valuation

6.6 Filing of Formal Valuation

6.7 Valuator's Consent

6.8 Disclosure of Prior Valuation

6.9 Filing of Prior Valuation

PART 7 INDEPENDENT DIRECTORS

7.1 Independent Directors

PART 8 MINORITY APPROVAL

8.1 From Holders of Affected Securities

8.2 Multi-Step Transactions

PART 9 EXEMPTION

9.1 Exemption

PART 10 EFFECTIVE DATE

10.1 Effective Date

ONTARIO SECURITIES COMMISSION RULE 61-501

INSIDER BIDS, ISSUER BIDS, GOING PRIVATE TRANSACTIONS

AND RELATED PARTY TRANSACTIONS

PART 1 DEFINITIONS AND INTERPRETATION

1.1 Definitions

(1) In this Rule

"affected security" means,

(a) for a going private transaction of an issuer, a participating security of the issuer in which the interestof a beneficial owner would be terminated by reason of the transaction, and

(b) for a related party transaction of an issuer, a participating security of the issuer;

"bona fide lender" means a person or company that

(a) holds securities sufficient to affect materially the control of an issuer

(i) solely as collateral for debt under a written pledge agreement entered into by the person orcompany as a lender, or

(ii) solely as collateral acquired under a written agreement by the person or company as anassignee or transferee of the debt and collateral referred to in subparagraph (i),

(b) is not yet legally entitled to dispose of the securities for the purpose of applying proceeds ofrealization in repayment of the secured debt, and

(c) was not a related party of the issuer at the time the pledge agreement referred to in subparagraph(a)(i) or the assignment or transfer referred to in subparagraph (a)(ii) was entered into;

"class" includes a series of a class;

"disclosure document" means,

(a) for an insider bid,

(i) a take-over bid circular sent to holders of offeree securities, or

(ii) if the insider bid takes the form of a stock exchange insider bid, the disclosure document sentto holders of offeree securities that is deemed to be a take-over bid circular under subsection131(10) of the Act,

(b) for an issuer bid,

(i) an issuer bid circular sent to holders of offeree securities, or

(ii) if the issuer bid takes the form of a stock exchange issuer bid, the disclosure document sent toholders of offeree securities that is deemed to be an issuer bid circular under subsection 131(10)of the Act,

(c) for a going private transaction, an information circular sent to holders of affected securities, or, if noinformation circular is required, another document sent to holders of affected securities in connectionwith a meeting of holders of affected securities, and

(d) for a related party transaction,

(i) an information circular sent to holders of affected securities,

(ii) if no information circular is required, another document sent to holders of affected securities inconnection with a meeting of holders of affected securities, or

(iii) if no information circular or document is required, a material change report filed for thetransaction;

"fair market value" means, except as provided in paragraph 6.4(1)(d), the monetary consideration that,in an open and unrestricted market, a prudent and informed buyer would pay to a prudent and informedseller, each acting at arm's length with the other and under no compulsion to act;

"formal valuation" means, for a transaction, a valuation prepared in accordance with Part 6 that containsa qualified and independent valuator's opinion as to a value or range of values representing the fair marketvalue of the subject matter of the valuation;

"freely tradeable" means, in respect of securities, that

(a) the securities are not non-transferable,

(b) the securities are not subject to any escrow requirements,

(c) the securities do not form part of the holdings of any person or company or combination of personsor companies referred to in paragraph (c) of the definition of "distribution" in the Act,

(d) the securities are not subject to any cease trade order imposed by a Canadian securities regulatoryauthority,

(e) all hold periods imposed by Canadian securities legislation before the securities can be traded withouta prospectus or in reliance on a prospectus exemption have expired, and

(f) any period of time for which the issuer has to have been a reporting issuer before the securities canbe traded without a prospectus or in reliance on a prospectus exemption has passed;

"independent committee" means, for an issuer, a committee consisting exclusively of one or moreindependent directors of the issuer;

"independent director" means, for an issuer in respect of a transaction, a director of the issuer who

(a) is not an interested party in the transaction, and

(b) is independent, as determined in accordance with section 7.1;

"independent valuator" means, for a transaction, a valuator that is independent of all interested partiesin the transaction, as determined in accordance with section 6.1;

"interested party" means,

(a) for an insider bid, the offeror,

(b) for an issuer bid,

(i) the issuer, and

(ii) any person or company, other than a bona fide lender, that, whether alone or jointly or in concertwith others, holds or would reasonably be expected to hold, upon successful completion of theissuer bid, securities of the issuer sufficient to affect materially its control,

(c) for a going private transaction, a related party of the issuer that is the subject of the going privatetransaction, if the related party would

(i) be entitled to receive, directly or indirectly, consequent upon the transaction

(A) a consideration per security that is not identical in amount and type to that paid to all otherbeneficial owners in Canada of affected securities of the same class, or

(B) consideration of greater value than that paid to all other beneficial owners of affectedsecurities of the same class, or

(ii) upon completion of the transaction, beneficially own, or exercise control or direction over,participating securities of a class other than affected securities, and

(d) for a related party transaction in respect of the issuer, a related party of the issuer, that is a party toor is involved in the related party transaction,

"issuer insider" means, for an issuer

(a) every director or senior officer of the issuer,

(b) every director or senior officer of a company that is itself an issuer insider or subsidiary entity of theissuer, and

(c) a person or company who beneficially owns, directly or indirectly, voting securities of the issuer orwho exercises control or direction over voting securities of the issuer, or a combination of both,carrying more than 10 percent of the voting rights attached to all voting securities of the issuer for thetime being outstanding other than voting securities beneficially owned by the person or company asunderwriter in the course of a distribution;

"market capitalization" of an issuer means, for a transaction, the aggregate market price of all outstandingsecurities of all classes of equity securities of the issuer, the market price of the outstanding securities ofa class being

(a) in the case of equity securities of a class for which there is a published market, the product of

(i) the number of securities of the class outstanding as at the close of business on the last businessday of the calendar month preceding the calendar month in which the transaction is agreed toor, if no securities of the class were outstanding on that day, on the first business day after thatday that securities of the class became outstanding, so long as that day precedes the date thetransaction is agreed to, and

(ii) the market price of the securities on the published market on which the class of securities isprincipally traded at the business day referred to in subparagraph (i), as determined inaccordance with subsections 183(1), (2) and (4) of the Regulation,

(b) in the case of equity securities of a class for which there is no published market but that are currentlyconvertible into a class of equity securities for which there is a published market, the product of

(i) the number of equity securities into which the convertible securities were convertible as at theclose of business on the last business day of the calendar month preceding the calendar monthin which the transaction is agreed to or, if no convertible securities were outstanding orconvertible on that day, on the first business day after that day that the convertible securitiesbecame outstanding or convertible, so long as that day precedes the date the transaction isagreed to, and

(ii) the market price of the securities into which the convertible securities were convertible, on thepublished market on which the class of securities is principally traded, at the business dayreferred to in subparagraph (i), as determined in accordance with subsections 183(1), (2) and(4) of the Regulation, and

(c) in the case of equity securities of a class not referred to in paragraphs (a) or (b), the amountdetermined by the issuer's board of directors in good faith to represent the market price of theoutstanding securities of that class;

"minority approval" means, for a going private transaction or related party transaction in respect of anissuer, approval of the proposed transaction by a majority of the votes cast by holders of each class ofaffected securities specified by section 8.1 at a meeting of securityholders of that class called to considerthe transaction;

"OBCA" means the Business Corporations Act;

"offeree security" means a security that is subject to an insider bid or an issuer bid;

"participating security" means a security of an issuer that carries a residual right to participate in theearnings of the issuer and, upon the liquidation or winding up of the issuer, in its assets;

"prior valuation" means a valuation or appraisal of an issuer or its securities or material assets, whetheror not prepared by an independent valuator, that, if disclosed, would reasonably be expected to affect thedecision of a beneficial owner to vote for or against a transaction, or to retain or dispose of affectedsecurities or offeree securities, other than

(a) a report of a valuation or appraisal prepared for the issuer by another person or company, if

(i) the report was not solicited by the issuer, and

(ii) the person or company preparing the report did so without knowledge of any material non-publicinformation concerning the issuer, its securities or any of its material assets,

(b) in respect of a transaction involving an issuer, an internal valuation or appraisal prepared for theissuer in the ordinary course of business that has not been made available to, and has been preparedwithout the participation of

(i) the board of directors of the issuer, or

(ii) any director or senior officer of an interested party, except a person who is a senior officer of theissuer in the case of an issuer bid,

(i) has been prepared by or for and at the expense of a person or company other than the issuer,an interested party, or an associate or affiliated entity of the issuer or an interested party, and

(ii) is either generally available to clients of the analyst or of the analyst's employer or of an affiliatedentity or associate of the analyst's employer or, if not, is not based, so far as the person orcompany required to disclose a prior valuation is aware, on any material non-public informationconcerning the issuer, its securities or any of its material assets,

(d) a valuation or appraisal prepared by a person or company or a person or company retained by theperson or company, for the purpose of assisting the person or company in determining the price atwhich to propose a transaction that resulted in the person or company becoming an issuer insider,if the valuation or appraisal is not made available to any of the independent directors of the issuer,or

(e) a valuation or appraisal prepared by an interested party or a person or company retained by theinterested party, for the purpose of assisting the interested party in determining the price at which topropose a transaction that, if pursued, would be an insider bid, going private transaction or relatedparty transaction, if the valuation or appraisal is not made available to any of the independentdirectors of the issuer;

"related party" of an issuer or of an interested party in connection with a transaction, as the case may be,means a person or company, other than a bona fide lender, that, at the relevant time and after reasonableinquiry, is known by the issuer, the interested party or a director or senior officer of the issuer or interestedparty to be

(a) a person or company, whether alone or jointly or in concert with others, that holds securities of theissuer or of the interested party sufficient to affect materially the control of the issuer or of theinterested party,

(b) a person or company in respect of which a person or company referred to in paragraph (a), whetheralone or jointly or in concert with others, holds securities sufficient to affect materially the control ofthe first-mentioned person or company referred to in this paragraph (b),

(c) a person or company in respect of which the issuer or the interested party, whether alone or jointlyor in concert with others, holds securities sufficient to affect materially the control of the person orcompany,

(d) a person or company that beneficially owns, or exercises control or direction over, voting securitiesof the issuer or of the interested party carrying more than 10 percent of the voting rights attached toall of the issued and outstanding voting securities of the issuer or of the interested party,

(e) a director or senior officer

(i) of the issuer or of the interested party, or

(ii) of a related party within the meaning of paragraph (a), (b) (c), (d), (f) or (g) of the issuer or ofthe interested party,

(f) a person or company that manages or directs, to any substantial degree, the affairs or operations ofthe issuer or the interested party under an agreement, arrangement or understanding between theperson or company and the issuer or the interested party, including the general partner of an issueror interested party that is a limited partnership, and

(g) an affiliated entity of, a person controlling, or a company controlled by, any of the persons orcompanies described in paragraphs (a) through (f);

"stock exchange insider bid" means an insider bid described in subclause (b)(i) of the definition of "formalbid" in subsection 89(1) of the Act;

"stock exchange issuer bid" means an issuer bid described in subclause (b)(i) of the definition of "formalbid" in subsection 89(1) of the Act; and

"valuation date" means, in respect of a transaction, the effective date of a formal valuation for thetransaction.

(2) For the purposes of this Rule, a person or company, whether alone or jointly or in concert with others,that beneficially owns, or exercises control or direction over, voting securities to which are attachedmore than 20 percent of the votes attached to all of the outstanding voting securities of anotherperson or company, is considered, in the absence of evidence to the contrary, to hold securitiessufficient to affect materially the control of that person or company.

(3) For the purposes of the Act, the regulations and the rules,

"going private transaction" means an amalgamation, arrangement, consolidation, amendment to theterms of a class of participating securities of the issuer or any other transaction with or involving a personor company that is a related party of the issuer at the time the transaction is agreed to, as a consequenceof which the interest of a beneficial owner of a participating security of the issuer in that security may beterminated without the beneficial owner's consent, other than

(a) an acquisition of a participating security of an issuer under a statutory right of compulsory acquisition,

(b) a share consolidation that does not have the effect of terminating the interests of the beneficialowners of participating securities of an issuer in those securities without their consent except to anextent that is nominal in the circumstances,

(c) a redemption of, or other compulsory termination of, a beneficial owner's interest in a participatingsecurity of an issuer in accordance with and under the terms attached to the class of securities ofwhich the participating security forms a part,

(d) a proceeding under the liquidation or dissolution provisions of the statute under which the issuer isorganized or is governed as to corporate law matters, or

(e) a transaction in which the related party or an affiliated entity of the related party

(i) is only entitled to receive, directly or indirectly, consequent upon the transaction a considerationper security that is identical in amount and type to that paid to all other beneficial owners inCanada of affected securities of the same class,

(ii) is not entitled to receive, directly or indirectly, consequent upon the transaction consideration ofgreater value than that paid to all other beneficial owners of affected securities of the same class,and

(iii) upon completion of the transaction does not beneficially own or exercise control or direction overparticipating securities of a class other than affected securities;

"insider bid" means a take-over bid made by

(a) an issuer insider of the offeree issuer,

(b) an associate or affiliated entity of the issuer insider,

(d) an offeror acting jointly or in concert with a person or company referred to in paragraphs (a), (b) or(c); and

"related party transaction" means, in respect of an issuer, a transaction between or involving the issuerand a person or company that is a related party of the issuer at the time the transaction is agreed to,whether or not there are also other parties to the transaction, as a consequence of which, either by itselfor together with other related transactions between or involving the issuer and the related party or aperson or company acting jointly or in concert with the related party, whether or not there are also otherparties to the transaction, the issuer directly or indirectly

(a) purchases or acquires an asset from the related party for valuable consideration,

(b) purchases or acquires, jointly or in concert with the related party, an asset from a third party if theproportion of the asset acquired by the issuer is less than the proportion of the consideration paid bythe issuer,

(d) sells, transfers or disposes of an asset to the related party,

(e) sells, transfers or disposes of, jointly or in concert with the related party, an asset to a third party ifthe proportion of the consideration received by the issuer is less than the proportion of the asset sold,transferred or disposed of by the issuer,

(f) leases property to or from the related party,

(g) issues a security to the related party or subscribes for a security of the related party,

(h) amends or agrees to the amendment of the terms of a security of the issuer if the security isbeneficially owned or is one over which control or direction is exercised by the related party, or agreesto the amendment of the terms of a security of the related party if the security is beneficially ownedby the issuer or is one over which the issuer exercises control or direction,

(i) borrows money from or lends money to the related party,

(j) releases, cancels or forgives a debt or liability owed by the related party,

(k) provides a guarantee or collateral security for a debt or liability of the related party, or amends oragrees to the amendment of the terms of the guarantee or security,

(l) is a party to an amalgamation, arrangement or merger with the related party, other than a transactionreferred to in paragraph (m), or

(m) participates in a transaction with the related party that is a going private transaction in respect of therelated party or would be a going private transaction in respect of the related party except that itcomes within the exception in paragraph (e) of the definition of going private transaction.

1.2 Application of Part XX of the Act

(1) For the purposes of this Rule,

(a) "formal bid" and "offeror" have the respective meanings ascribed to those terms in subsection 89(1)of the Act; and

(b) "acting jointly or in concert" has the meaning ascribed to that phrase in section 91 of the Act.

(2) For the purposes of the definition of related party and subsection 1.1(2), section 90 of the Act appliesin determining beneficial ownership of securities.

1.3 Liquid Market in a Class of Securities

(1) For the purposes of this Rule, a liquid market in a class of securities of an issuer in respect of atransaction involving an issuer exists at a particular time only

(a) if

(i) there is a published market for the class of securities,

(ii) during the period of 12 months before the date the transaction is agreed to in the case of arelated party transaction or 12 months before the date an insider bid, issuer bid, or going privatetransaction is announced, in the case of an insider bid, issuer bid, or going private transaction

(A) the number of outstanding securities of the class was at all times at least 5,000,000,excluding securities beneficially owned, directly or indirectly, or over which control ordirection was exercised, by related parties and securities that were not freely tradeable,

(B) the aggregate trading volume of the class of securities on the published market on whichthat class is principally traded was at least 1,000,000 securities,

(C) there were at least 1,000 trades in securities of the class on the published market on whichthat class is principally traded, and

(D) the aggregate trading value based on the price of the trades referred to in clause (C) wasat least $15,000,000, and

(iii) the market value of the class of securities on the published market on which that class isprincipally traded, as determined in accordance with subsections (2) and (3), was at least$75,000,000 for the calendar month preceding the calendar month

(A) in which the transaction is agreed to, in the case of a related party transaction, or

(B) in which the transaction is announced, in the case of an insider bid, issuer bid or goingprivate transaction, or

(b) if the test set out in paragraph (a) is not met,

(i) there is a published market for the class of securities,

(ii) a qualified person or company that is independent of all interested parties to the transaction, asdetermined in accordance with section 6.1, provides an opinion to the issuer that there is a liquidmarket in the class at the date the transaction is agreed to in the case of a related partytransaction or at the date the transaction is announced in the case of an insider bid, issuer bidor going private transaction, and

(iii) the opinion is included in a disclosure document for the transaction, together with a statementthat the published market on which the class is principally traded has sent a letter to the Directorindicating concurrence with the opinion or providing a similar opinion.

(2) For the purpose of determining whether an issuer satisfies the market value requirement ofsubparagraph (1)(a)(iii), the market value of a class of securities for the calendar month is calculatedby multiplying

(a) the number of securities of the class outstanding as at the close of business on the last business dayof the calendar month; by

(b) if

(i) the published market provides a closing price for the securities, the arithmetic average of theclosing prices of the securities of that class on the published market on which that class isprincipally traded for each of the trading days during the calendar month, or

(ii) the published market does not provide a closing price, but provides only the highest and lowestprices of securities traded on a particular day, the arithmetic average of the simple averages ofthe highest and lowest prices of the securities of that class on the published market on which thatclass is principally traded for each of the trading days for which the securities traded during thecalendar month.

(3) For the purposes of subsection (2), in calculating the number of securities of the class, an issuer shallexclude those securities of the class that were beneficially owned, directly or indirectly, or over whichcontrol or direction was exercised, by related parties and securities that were not freely tradeable.

(4) An issuer that relies on an opinion referred to in paragraph (1)(b) shall cause the letter referred to insubparagraph (1)(b)(iii) to be provided promptly to the Director.

1.4 Arm's Length Dealings

(1) It is a question of fact whether two or more persons or companies act, negotiate or deal with eachother at arm's length.

(2) Despite subsection (1), an issuer does not act, negotiate or deal at arm's length with a related partyof the issuer and an interested party does not act, negotiate or deal at arm's length with a relatedparty of the interested party.

1.5 Interpretation

(1) In this Rule, a person or company is considered to be an affiliated entity of another person orcompany if one is a subsidiary entity of the other or if both are subsidiary entities of the same personor company, or if each of them is controlled by the same person or company.

(2) In this Rule, a person or company is considered to be a subsidiary entity of another person orcompany if

(a) it is controlled by

(i) that other, or

(ii) that other and one or more persons or companies, each of which is controlled by that other, or

(iii) two or more persons or companies, each of which is controlled by that other; or

(b) it is a subsidiary entity of a person or company that is that other's subsidiary entity.

(3) In this Rule for the purposes of interpreting the terms "subsidiary entity" and "affiliated entity", aperson or company is considered to be controlled by another person or company if

(a) in the case of a person or company

(i) the other person or company beneficially owns or exercises control or direction over votingsecurities of the first-mentioned person or company carrying more than 50 percent of the votesfor the election of directors, and

(ii) the votes carried by the securities are entitled, if exercised, to elect a majority of the directors ofthe first-mentioned person or company;

(b) in the case of a partnership that does not have directors, other than a limited partnership, the otherperson or company beneficially owns or exercises control or direction over more than 50 percent ofthe interests in the partnership; or

(4) For the purposes of this Rule, a person or company is considered to be a wholly-owned subsidiaryentity of an issuer if the issuer owns, directly or indirectly, all the voting and equity securities andsecurities convertible or exchangeable into voting and equity securities of the person or company.

PART 2 INSIDER BIDS

2.1 Application

(1) This Part applies to every insider bid, except an insider bid that is exempt from Part XX of the Actunder

(a) clause 93(1)(a) of the Act, unless it is a stock exchange insider bid;

(b) clauses 93(1)(b) through (f) of the Act; or

(2) Despite subsection (1), this Part does not apply to a take-over bid that is an insider bid by reasonsolely of the application of section 90 of the Act to an agreement between the offeror and asecurityholder of the offeree issuer that offeree securities beneficially owned by the securityholder,or over which the securityholder exercises control or direction, will be tendered to the bid, if

(a) the securityholder is not acting jointly or in concert with the offeror; and

(b) the general nature and material terms of the agreement to tender are disclosed in a news release andreport filed under section 101 of the Act or are otherwise generally disclosed.

(3) Despite subsection (1), this Part does not apply to an MJDS take-over bid circular, an MJDS directors'circular, or an MJDS director's or officer's circular, in respect of an insider bid, unless securityholdersof the offeree issuer whose last address as shown on the books of the issuer is in Canada, asdetermined in accordance with subsections 12.1(2) through (4) of National Instrument 71-101 TheMultijurisdictional Disclosure System, hold 20 percent or more of the class of securities that is thesubject of the bid.

(4) For the purpose of subsection (3), the terms "MJDS take-over bid circular", "MJDS directors' circular"and "MJDS director's or officer's circular" have the meaning ascribed to those terms in NationalInstrument 71-101.

2.2 Disclosure

(1) An offeror shall disclose in a disclosure document for an insider bid

(a) the background to the insider bid; and

(b) in accordance with section 6.8, every prior valuation in respect of the offeree issuer

(i) that has been made in the 24 months before the date of the insider bid, and

(ii) the existence of which is known after reasonable inquiry to the offeror or any director or seniorofficer of the offeror.

(2) An offeror shall include in the required disclosure document for a stock exchange insider bid thedisclosure required by Form 33 of the Regulation, appropriately modified.

(3) The board of directors of an offeree issuer shall

(a) disclose in the directors' circular for an insider bid in accordance with section 6.8 every prior valuationin respect of the offeree issuer not disclosed in the disclosure document for the insider bid

(i) that has been made in the 24 months before the date of the insider bid, and

(ii) the existence of which is known after reasonable inquiry to the offeree issuer or to any directoror senior officer of the offeree issuer;

(b) disclose in the directors' circular a description of the background to the insider bid to the extent thebackground has not been disclosed in the disclosure document for the insider bid;

(c) disclose in the directors' circular any bona fide prior offer that relates to the offeree securities or isotherwise relevant to the insider bid, which offer was received by the issuer during the 24 monthsbefore the insider bid was publicly announced, and a description of the offer and the background tothe offer; and

(d) include in the directors' circular a discussion of the review and approval process adopted by the boardof directors and the independent committee, if any, of the offeree issuer for the insider bid, includingany materially contrary view or abstention by a director and any material disagreement between theboard and the independent committee.

2.3 Formal Valuation

(1) Subject to section 2.4, the offeror in an insider bid shall

(a) obtain, at its own expense, a formal valuation;

(b) provide the disclosure required by section 6.2;

(c) disclose, in accordance with section 6.5, a summary of the formal valuation in the disclosuredocument for the insider bid, unless the formal valuation is included in its entirety in the disclosuredocument; and

(d) comply with the other provisions of Part 6 applicable to it relating to formal valuations.

(2) An independent committee of the offeree issuer shall, and the offeror shall enable the independentcommittee to

(a) determine who the valuator will be; and

(b) supervise the preparation of the formal valuation.

2.4 Exemptions from Formal Valuation Requirement

(1) Section 2.3 does not apply to an offeror in connection with an insider bid in any of the followingcircumstances if the facts supporting reliance upon an exemption are disclosed in the disclosuredocument for the insider bid:

1. Discretionary Exemption - The offeror has been granted an exemption from section 2.3 under section 9.1.

2. Lack of Knowledge and Representation - The offeror does not have and has not had within the preceding12 months any board or management representation in respect of the offeree issuer and has noknowledge of any material non-public information concerning the offeree issuer or its securities.

3. Previous Arm's Length Negotiations - If

(a) the consideration under the insider bid is at least equal in value to and is in the same form as thehighest consideration agreed to with one or more selling securityholders of the offeree issuer in arm'slength negotiations

(i) in connection with the making of the insider bid,

(ii) in connection with another transaction involving securities of the class of offeree securities, if theagreement was entered into not more than 12 months before the date of the first publicannouncement of the bid, or

(iii) in connection with two or more transactions or a combination of transactions referred to insubparagraphs (i) and (ii),

(b) at least one of the selling securityholders party to an agreement referred to in subparagraph (a)(i) or(ii) beneficially owns or exercises control or direction over, or beneficially owned or exercised controlor direction over, and agreed to sell,

(i) at least five percent of the outstanding securities of the class of offeree securities, as determinedin accordance with subsection (2), if the offeror beneficially owned, directly or indirectly, 80percent or more of the outstanding securities of the class of offeree securities, as determined inaccordance with subsection (2), or

(ii) at least 10 percent of the outstanding securities of the class of offeree securities, as determinedin accordance with subsection (2), if the offeror beneficially owned, directly or indirectly, less than80 percent of the outstanding securities of the class of offeree securities, as determined inaccordance with subsection (2),

(c) one or more of the selling securityholders party to any of the transactions referred to in paragraph(a) beneficially owns or exercises control or direction over, or beneficially owned or exercised controlor direction over, and agreed to sell, in the aggregate, at least 20 percent of the outstanding securitiesof the class of offeree securities, as determined in accordance with subsection (3), beneficiallyowned, or over which control or direction is exercised, by persons or companies other than the offerorand persons or companies acting jointly or in concert with the offeror,

(d) the offeror reasonably believes, after reasonable inquiry, that at the time of each of the agreementsreferred to in paragraph (a)

(i) each selling securityholder party to the agreement had full knowledge and access to informationconcerning the offeree issuer and its securities, and

(ii) any factors peculiar to a selling securityholder party to the agreement, including non-financialfactors, that were considered relevant by that selling securityholder in assessing theconsideration did not have the effect of reducing the price that would otherwise have beenconsidered acceptable by that selling securityholder,

(e) at the time of each of the agreements referred to in paragraph (a), the offeror did not know, and tothe knowledge of the offeror, after reasonable inquiry, no selling securityholder party to the agreementknew, of any material non-public information in respect of the offeree issuer or the offeree securitiesthat,

(i) was not disclosed generally, and

(ii) if disclosed, could have reasonably been expected to increase the agreed consideration,

(f) any of the agreements referred to in paragraph (a) was entered into with a selling securityholder bya person or company other than the offeror, the offeror reasonably believes, after reasonable inquiry,that at the time of that agreement, the person or company did not know of any material non-publicinformation in respect of the offeree issuer or the offeree securities that

(i) was not disclosed generally, and

(ii) if disclosed, could have reasonably been expected to increase the agreed consideration, and

(g) the offeror does not know, after reasonable inquiry, of any material non-public information in respectof the offeree issuer or the offeree securities since the time of each of the agreements referred to inparagraph (a) that has not been disclosed generally and could reasonably be expected to increasethe value of the offeree securities.

4. Auction - If

(a) the insider bid is publicly announced or made while

(i) one or more formal bids for securities of the same class that are the subject of the insider bidhave been made and are outstanding,

(ii) one or more going private transactions for securities of the same class that are the subject of theinsider bid and ascribe a per security value to those securities are outstanding, or

(iii) one or more transactions are outstanding that

(A) would be going private transactions in respect of securities of the same class that are thesubject of the insider bid except that they come within the exception in paragraph (e) of thedefinition of going private transaction, and

(B) ascribe a per security value to those securities,

(b) at the time the insider bid is made, the offeree issuer has provided equal access to the offeree issuerand information concerning the offeree issuer and its securities, to the offeror in the insider bid, allother offerors and all other persons or companies that proposed the transactions described insubparagraph (ii) or (iii) of paragraph (a), and

(i) includes all material non-public information concerning the offeree issuer and its securities thatis known to the offeror after reasonable inquiry but has not been generally disclosed, togetherwith a description of the nature of the offeror's access to the issuer; and

(ii) states that the offeror does not know, after reasonable inquiry, of any material non-publicinformation concerning the offeree issuer and its securities other than information that has beendisclosed under subparagraph (i) or that has otherwise been generally disclosed.

(2) For the purpose of paragraph 3(b) of subsection (1), the number of outstanding securities of the classof offeree securities

(a) is calculated at the time of the agreement referred to in subparagraph 3(a)(i) or (ii) of subsection (1),if the offeror knows the number of securities of the class outstanding at that time; or

(b) if paragraph (a) does not apply, is determined based upon the information most recently provided bythe offeree issuer in a material change report or under section 2.1 of National Instrument 62-102Disclosure of Outstanding Share Data, immediately preceding the date of the agreement referred toin subparagraph 3(a)(i) or (ii) of subsection (1).

(3) For the purpose of paragraph 3(c) of subsection (1), the number of outstanding securities of the classof offeree securities

(a) is calculated at the date of the last of the agreements referred to in paragraph 3(a) of subsection (1),if the offeror knows the number of securities of the class outstanding at that time; or

(b) if paragraph (a) does not apply, is determined based upon the information most recently provided bythe offeree issuer in a material change report or under section 2.1 of National Instrument 62-102,immediately preceding the date of the last of the agreements referred to in paragraph 3(a) ofsubsection (1).

PART 3 ISSUER BIDS

3.1 Application

(1) This Part applies to every issuer bid, except an issuer bid that is exempt from Part XX of the Actunder

(a) clauses 93(3)(a) through (d) and (f) through (i) of the Act;

(b) clause 93(3)(e) of the Act, unless it is a stock exchange issuer bid; or

(2) Despite subsection (1), this Part does not apply to a MJDS issuer bid circular, unless securityholdersof the offeree issuer whose last address as shown on the books of the issuer is in Canada, asdetermined in accordance with subsections 12.1(2) through (4) of National Instrument 71-101, hold20 percent or more of the class of securities that is the subject of the bid.

(3) For the purpose of subsection (2), the term "MJDS issuer bid circular" has the meaning ascribed tothat term in National Instrument 71-101.

3.2 Disclosure

(1) An issuer shall

(a) include in a disclosure document for an issuer bid the disclosure required by item 16 of Form 32 ofthe Regulation, to the extent applicable;

(b) disclose in the disclosure document a description of the background to the issuer bid;

(c) disclose in the disclosure document in accordance with section 6.8 every prior valuation in respectof the offeree issuer

(i) that has been made in the 24 months before the date of the issuer bid, and

(ii) the existence of which is known after reasonable inquiry to the issuer or to any director or seniorofficer of the issuer;

(d) disclose in the disclosure document any bona fide prior offer that relates to the offeree securities oris otherwise relevant to the issuer bid, which offer was received by the issuer during the 24 monthsbefore the issuer bid was publicly announced, and a description of the offer and the background tothe offer;

(e) include in the disclosure document a discussion of the review and approval process adopted by theboard of directors and the independent committee, if any, of the issuer for the issuer bid, includingany materially contrary view or abstention by a director and any material disagreement between theboard and the independent committee; and

(f) include in the disclosure document

(i) a statement of the intention, if known to the issuer after reasonable inquiry, of every interestedparty to accept or not to accept the issuer bid; and

(ii) a description of the effect that the issuer anticipates the issuer bid, if successful, will have on thedirect or indirect voting interest in the issuer of every interested party.

(2) An issuer shall include in the required disclosure document for a stock exchange issuer bid theapplicable disclosure required by Form 33 of the Regulation.

3.3 Formal Valuation

(1) Subject to section 3.4, an issuer that makes an issuer bid shall

(a) obtain a formal valuation;

(b) provide the disclosure required by section 6.2;

(c) disclose, in accordance with section 6.5, a summary of the formal valuation in the disclosuredocument for the issuer bid, unless the formal valuation is included in its entirety in the disclosuredocument;

(d) if there is an interested party other than the issuer, state in the disclosure document who will pay orhas paid for the valuation; and

(e) comply with the other provisions of Part 6 applicable to it relating to formal valuations.

(2) The board of directors of the issuer or an independent committee of the board shall

(a) determine who the valuator will be; and

(b) supervise the preparation of the formal valuation.

3.4 Exemptions from Formal Valuation Requirement - Section 3.3 does not apply to an issuer in connectionwith an issuer bid in any of the following circumstances if the facts supporting reliance upon an exemptionare disclosed in the disclosure document for the issuer bid:

1. Discretionary Exemption - The issuer has been granted an exemption from section 3.3 under section9.1.

2. Bid for Non-Convertible Securities - The issuer bid is for securities that are not participating securitiesand that are not, directly or indirectly, convertible into or exchangeable for participating securities.

3. Liquid Market - The issuer bid is made for securities for which

(a) a liquid market exists,

(b) it is reasonable to conclude that, following the completion of the bid, there will be a market forbeneficial owners of the securities who do not tender to the bid that is not materially less liquidthan the market that existed at the time of the making of the bid, and

(c) if an opinion referred to in subparagraph (b)(ii) of subsection 1.3(1) is provided, the person orcompany providing the opinion reaches the conclusion described in subparagraph 3(b) of thissection 3.4 and so states in its opinion.

PART 4 GOING PRIVATE TRANSACTIONS

4.1 Application

(1) Subject to subsection (2), this Part applies to every going private transaction.

(2) This Part does not apply to a going private transaction

(a) if the issuer is not a reporting issuer;

(b) if the issuer is a mutual fund;

(i) persons or companies

(A) whose last address as shown on the books of the issuer is in Ontario do not hold more thantwo percent of each class of the outstanding affected securities of the issuer, or

(B) who are in Ontario and who beneficially own affected securities of the issuer do notbeneficially own more than two percent of each class of the outstanding affected securitiesof the issuer, and

(ii) all documents concerning the transaction that are sent generally to other holders of affectedsecurities of the issuer are concurrently sent to all holders of the securities whose last addressas shown on the books of the issuer is in Ontario; or

(d) if the transaction

(i) was announced before the coming into force of this Rule,

(ii) has not been completed before the coming into force of this Rule,

(iii) is being carried out in accordance with the guidelines of Ontario Securities Commission Policy9.1, and

(iv) is completed substantially in accordance with the terms generally disclosed at the time thetransaction was announced or thereafter before the coming into force of this Rule.

4.2 Meeting and Information Circular

(1) If minority approval is required to be obtained for a going private transaction, the issuer shall

(a) call a meeting of holders of affected securities; and

(b) send an information circular to holders of affected securities.

(2) An issuer shall include in the information circular referred to in paragraph (1)(b)

(a) the disclosure required by Form 33 of the Regulation, to the extent applicable and with necessarymodifications;

(b) the disclosure required by item 16 of Form 32 of the Regulation, to the extent applicable, togetherwith a description of rights that may be available to securityholders opposed to the transaction andof legal developments, if any, relating to the type of transaction;

(d) disclosure in accordance with section 6.8 of every prior valuation in respect of the issuer

(i) that has been made in the 24 months before the date of the information circular, and

(ii) the existence of which is known after reasonable inquiry to the issuer or to any director or seniorofficer of the issuer;

(e) disclosure of any bona fide prior offer that relates to the subject matter of or is otherwise relevant tothe transaction, which offer was received by the issuer during the 24 months before the transactionwas publicly announced, and a description of the offer and the background to the offer; and

(f) a discussion of the review and approval process adopted by the board of directors and theindependent committee, if any, of the issuer for the transaction, including any materially contrary viewor abstention by a director and any material disagreement between the board and the independentcommittee.

(3) If, after sending the information circular referred to in paragraph (1)(b) and before the date of themeeting, a change occurs that, if disclosed, would reasonably be expected to affect the decision ofa beneficial owner of affected securities to vote for or against the going private transaction or to retainor dispose of affected securities, the issuer shall promptly disseminate disclosure of the change

(a) in a manner that the issuer reasonably determines will inform beneficial owners of affected securitiesof the change; and

(b) sufficiently in advance of the meeting that the beneficial owners of affected securities will be able toassess the impact of the change.

(4) If subsection (3) applies, the issuer shall file a copy of the information disseminatedcontemporaneously with its dissemination.

4.3 Conditions for Relief from Timing for OBCA Information Circular

(1) The conditions for the granting of an exemption from the requirement in subsection 190(3) of theOBCA to send a management information circular not less than 40 days before the date of a meetingcalled to consider a "going private transaction" as defined in the OBCA are that

(a) Part 4 does not apply to the transaction by reason of subsection 4.1(2);

(b) the transaction is not a going private transaction as defined in subsection 1.1(3); or

(2) If any one of the conditions in subsection (1) applies, an issuer that proposes to carry out atransaction that is a "going private transaction" as defined in the OBCA

(a) is exempt from the 40 day requirement in subsection 190(3) of the OBCA in respect of a meetingcalled to consider a "going private transaction" as defined in the OBCA; and

(b) is not required to make an application under subsection 190(6) of the OBCA for the requisiteexemption.

4.4 Formal Valuation

(1) Subject to section 4.5, an issuer whose affected securities are the subject of a proposed going privatetransaction shall

(a) obtain a formal valuation;

(b) provide the disclosure required by section 6.2;

(c) disclose, in accordance with section 6.5, a summary of the formal valuation in the disclosuredocument for the going private transaction, unless the formal valuation is included in its entirety inthe disclosure document;

(d) state in the disclosure document for the going private transaction who will pay or has paid for thevaluation; and

(e) comply with the other provisions of Part 6 applicable to it relating to formal valuations.

(2) The board of directors of the issuer or an independent committee of the board shall

(a) determine who the valuator will be; and

(b) supervise the preparation of the formal valuation.

4.5 Exemptions from Formal Valuation Requirement

(1) Section 4.4 does not apply to an issuer in connection with a going private transaction in any of thefollowing circumstances if the facts supporting reliance upon an exemption are disclosed in thedisclosure document:

1. Discretionary Exemption - The issuer has been granted an exemption from section 4.4 under section 9.1.

2. Previous Arm's Length Negotiations - If

(a) the consideration under the going private transaction is at least equal in value to and is in the sameform as the highest consideration agreed to with one or more selling securityholders of the issuer inarm's length negotiations

(i) in connection with the going private transaction,

(ii) in connection with another transaction involving securities of the class of affected securities, ifthe agreement was entered into not more than 12 months before the date of the first publicannouncement of the going private transaction, or

(iii) in connection with two or more transactions or a combination of transactions referred to insubparagraphs (i) and (ii),

(i) at least five percent of the outstanding securities of the class of affected securities, asdetermined in accordance with subsection (2), if the person or company proposing the goingprivate transaction beneficially owned, directly or indirectly, 80 percent or more of theoutstanding securities of the class of affected securities, as determined in accordance withsubsection (2), or

(ii) at least 10 percent of the outstanding securities of the class of affected securities, as determinedin accordance with subsection (2), if the person or company proposing the going privatetransaction beneficially owned, directly or indirectly, less than 80 percent of the outstandingsecurities of the class of affected securities, as determined in accordance with subsection (2),

(c) one or more of the selling securityholders party to any of the transactions referred to in paragraph(a) beneficially owns or exercises control or direction over, or beneficially owned or exercised controlor direction over, and agreed to sell, in the aggregate, at least 20 percent of the outstanding securitiesof the class of affected securities, as determined in accordance with subsection (3), beneficiallyowned or over which control or direction is exercised by persons or companies other than aninterested party and persons or companies acting jointly or in concert with an interested party,

(d) the person or company proposing the going private transaction reasonably believes, after reasonableinquiry, that at the time of each of the agreements referred to in paragraph (a)

(i) each selling securityholder party to the agreement had full knowledge of and access toinformation concerning the issuer and its securities,

(ii) any factors peculiar to a selling securityholder party to the agreement, including non-financialfactors, that were considered relevant by the selling securityholder in assessing the considerationdid not have the effect of reducing the price that would otherwise have been consideredacceptable by that selling securityholder,

(e) at the time of each of the agreements referred to in paragraph (a), the person or company proposingthe going private transaction did not know, and to the knowledge of the person or company proposingthe going private transaction, after reasonable inquiry, no selling securityholder party to theagreement knew, of any material non-public information in respect of the issuer or the affectedsecurities that

(i) was not disclosed generally, and

(ii) if disclosed, could have reasonably been expected to increase the agreed consideration,

(f) any of the agreements referred to in paragraph (a) was entered into with a selling securityholder bya person or company other than the person or company proposing the going private transaction, theperson or company proposing the going private transaction reasonably believes, after reasonableinquiry, that at the time of that agreement, the person or company did not know of any material non-public information in respect of the issuer or the affected securities that,

(i) was not disclosed generally, and

(ii) if disclosed, could have reasonably been expected to increase the agreed consideration, and

(g) the person or company proposing the going private transaction, after reasonable inquiry, does notknow of any material non-public information in respect of the issuer or the affected securities sincethe time of each of the agreements referred to in paragraph (a) that has not been disclosed generallyand could reasonably be expected to increase the value of the affected securities.

3. Auction - If

(a) the going private transaction is publicly announced while

(i) one or more going private transactions for the affected securities that ascribe a per security valueto those securities are outstanding,

(ii) one or more transactions are outstanding that

(A) would be going private transactions in respect of the affected securities, except that theycome within the exception in paragraph (e) of the definition of going private transaction, and

(B) ascribe a per security value to those securities, or

(iii) one or more formal bids for the affected securities have been made and are outstanding, and

(b) at the time the disclosure document for the going private transaction has been sent, the issuer hasprovided equal access to the issuer and information concerning the issuer and its securities, to theperson or company proposing the going private transaction, the persons or companies that haveproposed the other transactions described in clauses (i) or (ii) of subparagraph (a) and the offerorsthat have made the formal bids.

4. Second Step Going Private Transaction - If

(a) the going private transaction in respect of the offeree issuer is being effected by a person or companyor an affiliated entity of the person or company following a formal bid by the person or company andis in respect of the outstanding securities of the same class that were the subject of the bid,

(b) the going private transaction is completed no later than 120 days after the date of expiry of the formalbid,

(d) the consideration per security paid by the person or company or the affiliated entity of the person orcompany in the going private transaction

(i) is at least equal in value to the consideration per security that was paid by the person orcompany in the formal bid, and

(ii) is in the same form as the consideration per security that was paid by the person or companyin the formal bid, and if the consideration paid consisted of securities of the person or company,consists of the same securities, and

(e) the disclosure document for the formal bid

(i) described the tax consequences of both the formal bid and the subsequent going privatetransaction, if, at the time of making the formal bid, the tax consequences arising from thesubsequent going private transaction

(A) were known or reasonably foreseeable to the person or company that made the formal bid,and

(B) were reasonably expected to be different from the tax consequences of tendering to theformal bid, or

(ii) disclosed that the tax consequences of the formal bid and the subsequent going privatetransaction may be different, if, at the time of making the formal bid, the person or company thatmade the formal bid did not know or could not reasonably foresee the tax consequences arisingfrom the subsequent going private transaction.

5. Non-redeemable Investment Fund - The issuer is a non-redeemable investment fund that

(a) at least once each quarter calculates and publicly disseminates the net asset value of its securities,and

(b) at the time of announcing the going private transaction, publicly disseminates the net asset value ofits securities as at the business day before announcing the going private transaction.

(2) For the purposes of paragraph 2(b) of subsection (1), the number of outstanding securities of theclass of affected securities

(a) is calculated at the time of the agreement referred to in subparagraph 2(a)(i) or (ii) of subsection (1),if the person or company proposing the going private transaction knows the number of securities ofthe class outstanding at that time; or

(b) if paragraph (a) does not apply, is determined based upon the information most recently provided bythe issuer of the affected securities, in a material change report or under section 2.1 of NationalInstrument 62-102, immediately preceding the date of the agreement referred to in subparagraph2(a)(i) or (ii) of subsection (1).

(3) For the purposes of paragraph 2(c) of subsection (1), the number of outstanding securities of theclass of affected securities

(a) is calculated at the date of the last of the agreements referred to in paragraph 2(a) of subsection (1),if the person or company proposing the going private transaction knows the number of securities ofthe class outstanding at that time; or

(b) if paragraph (a) does not apply, is determined based upon the information most recently provided bythe issuer of the affected securities in a material change report or under section 2.1 of NationalInstrument 62-102, immediately preceding the date of the last of the agreements referred to inparagraph 2(a) of subsection (1).

4.6 Conditions for Relief from OBCA Valuation Requirement

(1) The conditions for the granting of an exemption from the requirements of subsection 190(2) andclauses 190(3)(a) and (c) of the OBCA for a transaction that is a "going private transaction" asdefined in the OBCA are that

(a) Part 4 does not apply to the transaction by reason of subsection 4.1(2);

(b) the transaction is not a going private transaction as defined in subsection 1.1(3);

(d) the issuer complies with section 4.4.

(2) If any one of the conditions referred to in subsection (1) applies, an issuer that proposes to carry outa transaction that is a "going private transaction" as defined in the OBCA

(a) is exempt from the requirements of subsection 190(2) and clauses 190(3)(a) and (c) of the OBCA;and

(b) is not required to make an application under subsection 190(6) of the OBCA for the requisiteexemptions.

4.7 Minority Approval - Subject to section 4.8, no going private transaction shall be carried out in respect of anissuer unless minority approval for the going private transaction has been obtained under Part 8.

4.8 Exemptions from Minority Approval Requirement

(1) Section 4.7 does not apply to a going private transaction in any of the following circumstances if thefacts supporting reliance upon an exemption are disclosed in the disclosure document for the goingprivate transaction:

1. Discretionary Exemption - The issuer has been granted an exemption from section 4.7 under section 9.1.

2. 90 Percent Exemption - Subject to subsection (2), one or more interested parties beneficially owns 90percent or more of the outstanding securities of a class of affected securities at the time that the goingprivate transaction is proposed and either

(a) an appraisal remedy is available to holders of the class of affected securities under the statute underwhich the issuer is organized or is governed as to corporate law matters, or

(b) if the appraisal remedy referred to in subparagraph (a) is not available, holders of the class ofaffected securities are given an enforceable right that is substantially equivalent to the appraisalremedy provided for in subsection 185(4) of the OBCA and that is described in the disclosuredocument for the going private transaction.

(2) If there are two or more classes of affected securities, paragraph 2 of subsection (1) applies only toa class for which the interested party beneficially owns or the interested parties beneficially own 90percent or more of the outstanding securities of the class.

4.9 Conditions for Relief from OBCA Minority Approval Requirement

(1) The conditions for the granting of an exemption from the requirements of clauses 190(3)(b) and (d)and subsection 190(4) of the OBCA for a transaction that is a "going private transaction" as definedin the OBCA are that

(a) Part 4 does not apply to the transaction by reason of subsection 4.1(2);

(b) the transaction is not a going private transaction as defined in subsection 1.1(3);

(d) the issuer complies with section 4.7.

(2) If any one of the conditions referred to in subsection (1) applies, an issuer that proposes to carry outa transaction that is a "going private transaction" as defined in the OBCA

(a) is exempt from the requirements of clauses 190(3)(b) and (d) and subsection 190(4) of the OBCA;and

(b) is not required to make an application under subsection 190(6) of the OBCA for the requisiteexemptions.

PART 5 RELATED PARTY TRANSACTIONS

5.1 Application

(1) Subject to subsection (2), this Part applies to every related party transaction.

(2) This Part does not apply to a related party transaction

(a) if the issuer is not a reporting issuer;

(b) if the issuer is a mutual fund;

(i) persons or companies

(A) whose last address as shown on the books of the issuer is in Ontario do not hold more thantwo percent of each class of the outstanding affected securities of the issuer, or

(B) who are in Ontario and who beneficially own affected securities of the issuer do notbeneficially own more than two percent of each class of the outstanding affected securitiesof the issuer, and

(d) that is a statutory amalgamation between

(i) the issuer and one or more of its wholly-owned subsidiary entities, but no other person orcompany, or

(ii) two or more wholly-owned subsidiary entities of the issuer, but no other person or company;

(e) that is a going private transaction in respect of the issuer carried out in accordance with Part 4 orexempt from Part 4 under subsection 4.1(2);

(f) that would be a going private transaction in respect of the issuer except that it comes within theexceptions in paragraphs (a) through (e) of the definition of going private transaction;

(g) that

(i) is part of a series of related transactions that the issuer or a predecessor of the issuer negotiatedat arm's length with a person or company that became a related party of the issuer only as aconsequence of one of the transactions in the series of related transactions, and

(ii) the issuer is obligated to and does complete the transaction substantially in accordance with theterms negotiated at arm's length;

(h) that was agreed to by the issuer or a predecessor of the issuer before July 5, 1991, if the issuer isobligated to complete the transaction in accordance with the terms agreed to and generally disclosedat that time or thereafter before the coming into force of this Rule;

(i) that

(i) was agreed to by the issuer or a predecessor of the issuer after July 5, 1991 but before thecoming into force of this Rule,

(ii) has not been completed before the coming into force of this Rule,

(iii) is being carried out in accordance with the guidelines of Ontario Securities Commission Policy9.1, and

(iv) the issuer is obligated to and does complete the transaction substantially in accordance with theterms agreed to and generally disclosed at the time the transaction was agreed to or thereafterbefore the coming into force of this Rule;

(j) if

(i) the transaction was agreed to by the issuer or a predecessor of the issuer on or before the datethat the issuer became a reporting issuer, and

(ii) the issuer is obligated to and does complete the transaction substantially in accordance with theterms agreed to and generally disclosed at the time the transaction was agreed to or thereafteron or before the date that the issuer became a reporting issuer;

(k) if the transaction represents an issuance or transfer by an issuer of securities upon the exercise bya holder of a right to purchase, convert, exchange or retract previously granted by the issuer, whichright is attached to a class of securities for which there is a published market, and the issuer isobligated to complete the transaction;

(l) that is carried out by an issuer to which the Rule In the Matter of Certain Trades in Securities of JuniorResource Issuers (1997), 20 OSCB 1218, as amended by (1999), 22 OSCB 2152, or any successorto that Rule applies, in accordance with that Rule or any successor to that Rule; or

(m) that is a distribution

(i) of the securities of an issuer and is a related party transaction in respect of the issuer solelybecause the interested party is an underwriter of the distribution, and

(ii) carried out in compliance with, or under an exemption from, the requirements of

(A) until Multilateral Instrument 33-105 Underwriting Conflicts comes into force, Part XIII of theRegulation, and

(B) after Multilateral Instrument 33-105 comes into force, that Multilateral Instrument.

(3) This Part does not apply to a person or company that is subject to the requirements of Part IX of theLoan and Trust Corporations Act, Part XI of the Bank Act (Canada), Part XI of the InsuranceCompanies Act (Canada), or Part XI of the Trust and Loan Companies Act (Canada), and the personor company complies with those provisions.

5.2 Disclosure: News Release and Material Change Report

(1) An issuer shall include in a material change report required to be filed under the Act for a relatedparty transaction

(a) a description of the transaction and its material terms;

(b) the purpose and business reasons for the transaction;

(d) a description of

(i) the interest in the transaction of every interested party that is expected to receive, directly orindirectly, as a consequence of the transaction, a benefit that is not also expected to be receivedon a pro rata basis by all other holders of affected securities, and the issuer insiders, associates,affiliated entities and other related parties of that interested party,

(ii) the effect of the transaction on every person or company referred to in subparagraph (i), and

(iii) the nature of any benefit that will accrue as a consequence of the transaction to every person orcompany referred to in subparagraph (i);

(e) if subsection 5.4(2) does not apply to the issuer, a discussion of the review and approval processadopted by the board of directors, and the independent committee, if any, of the issuer for thetransaction, including any materially contrary view or abstention by a director and any materialdisagreement between the board and the independent committee;

(f) a summary in accordance with section 6.5 of the formal valuation, if any, obtained for the transaction,unless the formal valuation is included in its entirety in the material change report or will be includedin its entirety in another disclosure document for the transaction;

(g) disclosure in accordance with section 6.8 of every prior valuation in respect of the issuer that hasbeen made in the 24 months before the date of the material change report

(i) that relates to the subject matter of or is otherwise relevant to the transaction, and

(ii) the existence of which is known after reasonable inquiry to the issuer or to any director or seniorofficer of the issuer; and

(h) the general nature and material terms of any agreement entered into by the issuer, or a related partyof the issuer, with an interested party, or a person or company acting jointly or in concert with aninterested party, in connection with the transaction.

(2) If a material change report is filed by a reporting issuer less than 21 days before the expected dateof closing of the transaction, the issuer shall explain in the news release required to be issued underthe Act and material change report why the shorter period is reasonable or necessary in thecircumstances.

(3) Despite paragraph (1)(f), if an issuer is required to include a summary of the formal valuation in thematerial change report and the formal valuation is not available at the time the issuer files thematerial change report, the issuer shall file a supplementary material change report containing thedisclosure required by paragraph (1)(f) as soon as the formal valuation is available.

5.3 Copy of Material Change Report - An issuer shall send a copy of any material change report prepared byit in respect of the related party transaction to any securityholder of the issuer upon request and withoutcharge.

5.4 Meeting and Information Circular

(1) If minority approval is required to be obtained for a related party transaction, the issuer shall

(a) call a meeting of holders of affected securities; and

(b) send an information circular to holders of affected securities.

(2) An issuer shall include in the information circular referred to in paragraph (1)(b)

(a) the disclosure required by Form 33 of the Regulation, to the extent applicable and with necessarymodifications;

(d) disclosure in accordance with section 6.8 of every prior valuation in respect of the issuer that relatesto the subject matter of or is otherwise relevant to the transaction

(i) that has been made in the 24 months before the date of the information circular, and

(ii) the existence of which is known after reasonable inquiry to the issuer or to any director or seniorofficer of the issuer;

(e) disclosure of any bona fide prior offer that relates to the subject matter of or is otherwise relevant tothe transaction, which was received by the issuer during the 24 months before the transaction waspublicly announced, and a description of the offer and the background to the offer; and

(3) If, after sending the information circular referred to in paragraph (1)(b) and before the date of themeeting, a change occurs that would, if disclosed, reasonably be expected to affect the decision ofa beneficial owner of affected securities to vote for or against the related party transaction or to retainor dispose of affected securities, the issuer shall promptly disseminate disclosure of the change

(a) in a manner that the issuer reasonably determines will inform beneficial owners of affected securitiesof the change; and

(b) sufficiently in advance of the meeting that the beneficial owners of affected securities will be able toassess the impact of the change.

(4) If subsection (3) applies, the issuer shall file a copy of the information disseminatedcontemporaneously with its dissemination.

5.5 Formal Valuation

(1) Subject to section 5.6, an issuer involved in a related party transaction shall

(a) obtain a formal valuation;

(b) provide the disclosure required by section 6.2;

(c) disclose, in accordance with section 6.5, a summary of the formal valuation in the disclosuredocument for the related party transaction, unless the formal valuation is included in its entirety inthe disclosure document;

(d) state in the disclosure document for the related party transaction who will pay or has paid for thevaluation; and

(e) comply with the other provisions of Part 6 applicable to it relating to formal valuations.

(2) The board of directors of the issuer or an independent committee of the board shall

(a) determine who the valuator will be; and

(b) supervise the preparation of the formal valuation.

5.6 Exemptions from Formal Valuation Requirement - Section 5.5 does not apply to an issuer in connectionwith a related party transaction in any of the following circumstances if the facts supporting reliance upon anexemption are disclosed in both the material change report referred to in section 5.2 and the informationcircular referred to in paragraph (b) of subsection 5.4(1):

1. Discretionary Exemption - The issuer has been granted an exemption from section 5.5 under section 9.1.

2. Fair Market Value not more than 25 Percent of Market Capitalization - The transaction

(a) is not an amalgamation or merger, whether by way of arrangement or otherwise, and

(b) is one in which at the date the transaction is agreed to

(i) neither the fair market value of the subject matter of, nor the fair market value of theconsideration for, the transaction, insofar as it involves all interested parties, is greater than 25percent of the issuer's market capitalization, or

(ii) if either of the values referred to in clause (i) is not readily determinable, the board of directorsof the issuer, acting in good faith, determines that the value referred to in clause (i) that is notreadily determinable, is not greater than 25 percent of the issuer's market capitalization.

3. Amalgamation, Merger or Arrangement - The transaction is

(a) an amalgamation, merger or arrangement between an issuer or a wholly-owned subsidiary entity ofthe issuer, and an interested party described in paragraph (c) of the definition of related party withouttaking into account securities beneficially owned by an affiliated entity of the issuer that is not asubsidiary entity of the issuer, and

(b) one in which, as at the date the transaction is agreed to

(i) neither the fair market value of the securities of the interested party beneficially owned bypersons or companies other than the issuer and persons or companies acting jointly or in concertwith the issuer, before the transaction, nor the fair market value of the consideration to bereceived by those persons or companies under the transaction, is greater than 25 percent of theissuer's market capitalization, or

(ii) if either of the values referred to in clause (i) is not readily determinable, the board of directorsof the issuer, acting in good faith, determines that the value referred to in clause (i) that is notreadily determinable is not greater than 25 percent of the issuer's market capitalization.

4. Certain Transactions in the Ordinary Course of Business - The transaction is

(a) a purchase or sale, in the ordinary course of business of the issuer, of inventory consisting ofpersonal property under an agreement that has been approved by the board of directors of the issuerand the existence of which has been generally disclosed, or

(b) a lease of real or personal property under an agreement on reasonable commercial terms that,considered as a whole, are not less advantageous to the issuer than if the lease was with a personor company dealing at arm's length with the issuer and the existence of which has been generallydisclosed.

5. Pro Rata Transaction - If

(a) the transaction consists of

(i) a rights offering made to holders of affected securities,

(ii) a dividend paid in cash or in securities of the issuer or a dividend in specie to holders of affectedsecurities,

(iii) a distribution of assets of the issuer directly or indirectly to holders of affected securities, or

(iv) a reorganization of one or more classes of an issuer's affected securities to which subparagraphs(i), (ii) and (iii) do not apply, and

(b) the interested party is treated identically to all other holders in Canada of affected securities and doesnot receive, directly or indirectly, as a consequence of the transaction consideration of greater valuethan that received on a pro rata basis by all other holders of affected securities, except that in thecase of a rights offering made to holders of affected securities, an interested party may provide astand-by commitment, and take up securities under the stand-by commitment, in accordance withthe terms of Commission Policy No. 6.2 Rights Offerings or a successor rule.

6. Negotiated Transaction with Arm's Length Controlling Shareholder - The interested party beneficiallyowns, or exercises control or direction over, voting securities of the issuer that carry fewer voting rightsthan the voting securities beneficially owned, or over which control or direction is exercised, by anothersecurityholder of the issuer whose holding affects materially the control of the issuer and who, in thecircumstances of the transaction

(a) is not also a party to the transaction,

(b) is dealing at arm's length with the interested party,

(d) is treated identically to all other holders in Canada of affected securities and does not receive, directlyor indirectly, as a consequence of the transaction a benefit that is not also received on a pro ratabasis by all other holders of affected securities.

7. Bankruptcy, Insolvency or Reorganization - If

(a) the transaction is subject to court approval under

(i) the Bankruptcy and Insolvency Act (Canada) or the Companies' Creditors Arrangement Act(Canada),

(ii) section 191 of the Canada Business Corporations Act (Canada), or

(iii) bankruptcy or insolvency laws of another jurisdiction or foreign jurisdiction that are applicableto the transaction,

(b) the issuer advises the court of the requirements of this Rule, and

8. Financial Hardship - If

(a) the issuer is insolvent or in serious financial difficulty,

(b) the transaction is designed to improve the financial position of the issuer,

(d) the board of directors of the issuer, acting in good faith, determines, and not less than two-thirds ofthe independent directors of the issuer, acting in good faith, determine, that

(i) paragraphs (a) and (b) apply, and

(ii) the terms of the transaction are reasonable in the circumstances of the issuer.

9. Transaction with Wholly-owned Subsidiary Entity - The transaction is between

(a) an issuer and one or more wholly-owned subsidiary entities of the issuer and no other person orcompany,

(b) an issuer that is, directly or indirectly, a wholly-owned subsidiary entity of another issuer and thatissuer and no other person or company, or

10. Transaction with an Interested Party involving another Related Party - If paragraph 9 does not apply,the transaction is between an issuer and an interested party described in paragraph (c) of thedefinition of related party, without taking into account securities beneficially owned by an affiliatedentity of the issuer that is not a subsidiary entity of the issuer if, to the knowledge of the issuer afterreasonable inquiry, no other related party of the issuer other than a wholly-owned subsidiary entityof the issuer either

(a) beneficially owns, or exercises control or direction over, other than through the related party's interestin the issuer, securities in the interested party that

(i) constitute more than five percent of the securities of a class of the interested party, or

(ii) could reasonably be expected to result in the related party exercising control or influence overthe issuer so as to benefit the interested party, or

(b) receives, directly or indirectly, as a consequence of the transaction, other than through its securityholding in the interested party referred to in subparagraph (a), a benefit that is not also received ona pro rata basis by all other holders of affected securities.

11. Loan on Commercial Terms - The transaction is

(a) a loan, or the creation of, or an advance under, a credit facility

(i) that is obtained by the issuer from an interested party on reasonable commercial terms that arenot less advantageous to the issuer than if the loan or credit facility were obtained from a personor company dealing at arm's length with the issuer

(ii) that is not, directly or indirectly, convertible into or exchangeable for participating securities orvoting securities of the issuer or a subsidiary entity of the issuer and is not otherwiseparticipating in nature or accompanied by rights to acquire participating or voting securities ofthe issuer or a subsidiary entity of the issuer, and

(iii) for which neither principal nor interest is payable, directly or indirectly, in participating securitiesor voting securities of the issuer or a subsidiary entity of the issuer, or

(b) a payment in cash by the issuer to that interested party as payment under the loan or credit facilityreferred to in paragraph (a).

12. Amalgamation with No Adverse Effect on Issuer or Minority - The transaction is a statutoryamalgamation between the issuer or a wholly-owned subsidiary entity of the issuer and an interestedparty that is undertaken in whole or in part for the benefit of another related party, if

(a) the transaction does not and will not have any adverse tax or other consequences to the issuer, acompany resulting from the amalgamation or beneficial owners of affected securities generally,

(b) no material actual or contingent liability of the interested party with which the issuer or a wholly-owned subsidiary entity of the issuer is amalgamating will be assumed by the issuer, the wholly-owned subsidiary entity of the issuer or a successor to the issuer,

(c) the related party agrees to indemnify the issuer against any and all liabilities of the interested partywith which the issuer, or a wholly-owned subsidiary entity of the issuer is amalgamating,

(d) after the transaction, the nature and extent of the equity participation of holders of affected securitiesin the amalgamated entity will be the same as, and the value of their equity participation will not beless than, the value of their interest in the issuer before the transaction, and

(e) the related party pays for all of the costs and expenses of or relating to or resulting from thetransaction.

13. Transaction Size - The transaction is one in which, at the date the transaction is agreed to

(a) neither the fair market value of the subject matter of, nor the fair market value of the considerationfor, the transaction is $500,000 or more, or

(b) if either of the values referred to in subparagraph (a) is not readily determinable, the board ofdirectors of the issuer that is the subject of the related party transaction, acting in good faith,determines that the value referred to in subparagraph (a) that is not readily determinable is less than$500,000.

14. Distribution of Listed Securities - The transaction involves a distribution by an issuer of its securitiesto an interested party for cash consideration, if

(a) the securities have been listed and posted for trading on The Toronto Stock Exchange, The MontrealExchange or the Canadian Venture Exchange or any predecessor market to those stock exchangesfor the 12 months immediately preceding the date that the transaction is agreed to,

(b) a liquid market for the securities exists,

(c) neither the issuer nor, to the knowledge of the issuer after reasonable inquiry, the interested party hasknowledge of any material non-public information concerning the issuer or its securities that has notbeen generally disclosed, and the disclosure document for the related party transaction includes astatement to that effect, and

(d) the disclosure document for the related party transaction includes a description of the effect of thedistribution on the direct or indirect voting interest of the interested party.

15. Asset Resale - The subject matter of the related party transaction was acquired by the issuer or aninterested party, as the case may be, in a prior transaction with a person or company acting at arm'slength that was agreed to not more than 12 months before the date that the related party transactionis agreed to and a qualified valuator, independent of all interested parties to the transaction, asdetermined in accordance with section 6.1, provides a written opinion that, after making suchadjustments, if any, as the valuator considers appropriate in the exercise of the valuator'sprofessional judgment

(a) the value of the consideration payable by the issuer for the subject matter of the related partytransaction is not more than the value of the consideration paid by the interested party in the priorarm's length transaction, or

(b) the value of the consideration to be received by the issuer for the subject matter of the related partytransaction is not less than the value of the consideration paid by the issuer in the prior arm's lengthtransaction.

16. Non-redeemable Investment Fund - The issuer is a non-redeemable investment fund that

(a) at least once each quarter calculates and publicly disseminates the net asset value of its securities,and

(b) at the time of announcing the related party transaction, publicly disseminates the net asset value ofits securities as at the business day before announcing the related party transaction.

5.7 Minority Approval - Subject to section 5.8, an issuer shall not carry out a related party transaction unlessminority approval for the related party transaction has been obtained under Part 8.

5.8 Exemptions from Minority Approval

(1) Section 5.7 does not apply to an issuer in connection with a related party transaction in any of thefollowing circumstances if the facts supporting reliance upon an exemption are disclosed in both thematerial change report referred to in section 5.2 and the information circular referred to in paragraph(b) of subsection 5.4(1):

1. Discretionary Exemption - The issuer has been granted an exemption from section 5.7 under section9.1.

2. Fair Market Value not more than 25 Percent of Market Capitalization - The circumstances describedin paragraph 2 or 3 of section 5.6.

3. Other Transactions Exempt from Formal Valuation - The circumstances described in paragraph 4,5, 6, 9, 10, 11 or 12 of section 5.6.

4. Bankruptcy - The circumstances described in subparagraphs 7(a) and 7(b) of section 5.6, if the courtdoes not require compliance with section 5.7.

5. Financial Hardship - The circumstances described in paragraph 8 of section 5.6, if there is no otherrequirement, corporate or otherwise, to hold a meeting to obtain any approval of the holders of anyclass of affected securities.

6. 90 Percent Exemption - Subject to subsection (2), one or more interested parties beneficially owns90 percent or more of the outstanding securities of a class of affected securities at the time that therelated party transaction is proposed and either

(a) an appraisal remedy is available to holders of the class of affected securities under the statuteunder which the issuer is organized or is governed as to corporate law matters, or

(b) if the appraisal remedy referred to in subparagraph (a) is not available, holders of the class ofaffected securities are given an enforceable right that is substantially equivalent to the appraisalremedy provided for in subsection 185(4) of the OBCA and that is described in an informationcircular or other document sent to securityholders in connection with a meeting to approve therelated party transaction.

(2) If there are two or more classes of affected securities, paragraph 6 of subsection (1) applies only toa class for which the interested party beneficially owns, or the interested parties beneficially own, 90percent or more of the outstanding securities of the class.

PART 6 FORMAL VALUATIONS AND PRIOR VALUATIONS

6.1 Independence

(1) Every formal valuation required by this Rule for a transaction shall be prepared by an independentvaluator for the transaction having appropriate qualifications.

(2) Subject to subsections (3), (4) and (5), it is a question of fact as to whether

(a) a valuator is independent of an interested party;

(b) a person or company is independent of an interested party, for the purpose of subparagraph (b)(ii)of subsection 1.3(1); and

(3) A valuator or a person or company referred to in paragraph (2)(b) is not independent of an interestedparty in connection with a transaction if

(a) the valuator or the person or company or an affiliated entity of either of them is an issuer insider,associate or affiliated entity of the interested party;

(b) except in the circumstances described in paragraph (e), and subject to subsection (5), the valuatoror the person or company or an affiliated entity of either of them acts as an adviser to the interestedparty in respect of the transaction;

(c) the compensation of the valuator or the person or company or an affiliated entity of either of themdepends in whole or in part upon an agreement, arrangement or understanding that gives the valuatoror person or company or affiliated entity of either of them a financial incentive in respect of theconclusions reached in the formal valuation or opinion or the outcome of the transaction;

(d) the valuator or the person or company or an affiliated entity of either of them is

(i) a manager or co-manager of a soliciting dealer group formed in respect of the transaction, or

(ii) a member of the soliciting dealer group, if the valuator or person or company or affiliated entityof either of them, in its capacity as a soliciting dealer, performs services beyond the customarysoliciting dealer's function or receives more than the per security or per securityholder feespayable to other members of the group;

(e) the valuator or the person or company is the independent auditor of the issuer or of an interestedparty, or the valuator or person or company is an affiliated entity of the auditor, unless neither thevaluator nor the person or company nor an affiliated entity of either of them will be the independentauditor of the issuer or an interested party upon completion of the transaction and that fact has beenpublicly disclosed; or

(f) the valuator or the person or company or an affiliated entity of either of them has a material financialinterest in the completion of the transaction.

(4) A valuator or a person or company referred to in paragraph (2)(b) that is paid by one or moreinterested parties to a transaction or is paid jointly by the issuer and one or more interested partiesto a transaction to prepare a formal valuation for a transaction or to provide the opinion referred toin subparagraph (b)(ii) of subsection 1.3(1) for a transaction is not, by virtue of that fact alone, notindependent.

(5) For the purpose of paragraph (3)(b), a valuator or a person or company referred to in paragraph(2)(b) that is retained by an issuer to prepare a formal valuation for an issuer bid or to provide theopinion referred to in subparagraph (b)(ii) of subsection 1.3(1) for an issuer bid is not, by virtue of thatfact alone, considered to be an adviser to the interested party in respect of the transaction.

6.2 Disclosure Re Valuator - An issuer or offeror required to obtain a formal valuation in respect of a transactionor that relies on an opinion referred to in subparagraph (b)(ii) of subsection 1.3(1) or paragraph 15 of section5.6 shall include in the disclosure document for the transaction

(a) a statement that the valuator or the person or company has been determined to be qualified andindependent;

(b) a description of any past, present or anticipated relationship between the valuator or the person orcompany and the issuer or an interested party that may be relevant to a perception of lack ofindependence;

(d) a description of any other factors relevant to a perceived lack of independence of the valuator or theperson or company;

(e) the basis for determining that the valuator or the person or company is qualified; and

(f) the basis for determining that the valuator or the person or company is independent, despite anyperceived lack of independence, including the amount of the compensation or other factors referredto in paragraphs (b) and (d).

6.3 Subject Matter of Formal Valuation

(1) An issuer or offeror required to obtain a formal valuation under this Rule shall provide the valuationin respect of

(a) the offeree securities, in the case of an insider bid or issuer bid;

(b) the affected securities, in the case of a going private transaction;

(d) except as provided in subsection (2), any non-cash consideration being offered in or forming part ofthe transaction.

(2) A formal valuation of non-cash consideration is not required if

(a) the non-cash consideration consists of securities of a class of an issuer for which a liquid marketexists;

(b) the securities offered as non-cash consideration

(i) constitute 10 percent or less of the aggregate number of securities of the class that are issuedand outstanding immediately before the distribution of the securities offered as non-cashconsideration, and

(ii) are freely tradeable;

(d) the issuer or offeror required to obtain the formal valuation states in the disclosure document for thetransaction that the issuer or offeror has no knowledge of any material non-public informationconcerning the issuer of the securities or its securities that has not been generally disclosed.

6.4 Preparation of Formal Valuation

(1) A person or company preparing a formal valuation under this Rule shall

(a) prepare the formal valuation in a diligent and professional manner;

(b) prepare the formal valuation as of an effective date that is not more than 120 days before the earlierof

(i) the date that a disclosure document for the transaction is first sent to securityholders, ifapplicable, and

(ii) the date that a disclosure document is filed;

(c) make appropriate adjustments in the formal valuation for material intervening events of which it isaware between the effective date of the valuation and the earlier of the dates referred to in paragraph(b);

(d) in determining fair market value of securities, not include in the formal valuation a downwardadjustment to reflect the liquidity of the securities, the effect of the transaction on the securities or thefact that the securities do not form part of a controlling interest; and

(e) provide sufficient disclosure in the formal valuation to allow the beneficial owners of the securities tounderstand the principal judgments and principal underlying reasoning of the valuator so as to forma reasoned judgment of the valuation opinion or conclusion.

(2) National Instrument 52-101 Future Oriented Financial Information does not apply to a formalvaluation for which financial forecasts and projections are relied upon and disclosed.

6.5 Summary of Formal Valuation

(1) An issuer or offeror that is required by this Rule to provide a summary of a formal valuation shallensure that the summary provides sufficient detail to allow the beneficial owners of the securities tounderstand the principal judgments and principal underlying reasoning of the valuator so as to forma reasoned judgment of the valuation opinion or conclusion.

(2) In addition to the disclosure referred to in subsection (1), if an issuer or offeror is required by this Ruleto provide a summary of a formal valuation, the issuer or offeror shall ensure that the summary

(a) discloses

(i) the valuation date, and

(ii) any distinctive material benefit that might accrue to an interested party as a consequence of thetransaction, including the earlier use of available tax losses, lower income taxes, reduced costsor increased revenues;

(b) if the formal valuation differs materially from a prior valuation, explains the differences between thetwo valuations or, if it is not practicable to do so, the reasons why it is not practicable to do so;

(d) states that a copy of the formal valuation will be sent to any securityholder upon request and withoutcharge.

6.6 Filing of Formal Valuation

(1) An issuer or offeror required to obtain a formal valuation in respect of a transaction shall file a copyof the formal valuation

(a) concurrently with the sending of the disclosure document for the transaction to securityholders; or

(b) concurrently with the filing of a material change report for a related party transaction for which nodisclosure document is sent to securityholders, or if the formal valuation is not available at the timeof filing the material change report, as soon as the formal valuation is available.

(2) If the formal valuation is included in its entirety in a disclosure document, an issuer or offeror satisfiesthe requirement in subsection (1) by filing the disclosure document.

6.7 Valuator's Consent - An issuer or offeror required to obtain a formal valuation shall

(a) obtain the valuator's consent to its filing and to the inclusion of the formal valuation or disclosure ofa summary of the formal valuation in the disclosure document for the transaction for which the formalvaluation was obtained; and

(b) include in the disclosure document a statement signed by the valuator substantially as follows:

We refer to the formal valuation dated , which we prepared for (indicate name of the person orcompany) for (briefly describe the transaction for which the formal valuation was prepared). Weconsent to the filing of the formal valuation with the Ontario Securities Commission and theinclusion of [a summary of the formal valuation/the formal valuation] in this document.

6.8 Disclosure of Prior Valuation

(1) A person or company required to disclose a prior valuation shall, in the document in which the personor company is required to disclose the prior valuation

(a) disclose sufficient detail to enable beneficial owners of securities to understand the prior valuationand its relevance to the present transaction;

(b) indicate an address where a copy of the prior valuation is available for inspection; and

(2) If there are no prior valuations, the existence of which is known after reasonable inquiry, the personor company preparing the document in which the person or company would be required to disclosethe prior valuation, if one existed, shall include a statement to that effect in the document.

(3) Despite anything to the contrary contained in this Rule, disclosure of a prior valuation is not requiredin a document if

(a) the contents of the prior valuation are not known to the person or company required under this Ruleto disclose the prior valuation;

(b) the prior valuation is not reasonably obtainable by the person or company referred to in paragraph(a), irrespective of any obligations of confidentiality; and

(c) the document contains statements in respect of the prior valuation substantially to the effect ofparagraphs (a) and (b).

6.9 Filing of Prior Valuation - An issuer or offeror required to disclose a prior valuation shall file a copy of theprior valuation concurrently with the filing of the document to which the prior valuation relates.

PART 7 INDEPENDENT DIRECTORS

7.1 Independent Directors

(1) Subject to subsections (2) and (3), it is a question of fact as to whether a director of an issuer isindependent.

(2) A director of an issuer is not independent in connection with a transaction if

(a) the director is currently, or has been at any time during the 12 months before the date of thetransaction, an employee, issuer insider or associate of an interested party or an affiliated entity ofan interested party, other than solely in his or her capacity as a director of the issuer;

(b) the director is currently, or has been at any time during the 12 months before the date of thetransaction, an adviser to an interested party in connection with the transaction, an employee, issuerinsider or associate of any person or company acting as an adviser to an interested party inconnection with the transaction or an affiliated entity of the adviser, other than solely in his or hercapacity as a director of the issuer;

(c) the director has a material financial interest in an interested party or an affiliated entity of aninterested party or it is anticipated that the director will, in the event that the transaction is successful,be provided with the opportunity to obtain a material financial interest in an interested party, anaffiliated entity of the interested party, or in the issuer; or

(d) the director would reasonably be expected to receive a benefit as a consequence of the transactionthat is not also received on a pro rata basis by all other beneficial owners in Canada of affectedsecurities.

(3) For the purposes of this section, in the case of an issuer bid, a director of the issuer is not, by thatfact alone, not independent of the issuer.

PART 8 MINORITY APPROVAL

8.1 From Holders of Affected Securities

(1) Subject to subsection (2), if minority approval is required for a going private transaction or relatedparty transaction, it shall be obtained from the holders of every class of affected securities of theissuer, in each case voting separately as a class.

(2) If minority approval is required for a going private transaction or a related party transaction and thetransaction would affect a particular series of a class of affected securities of the issuer in a mannerdifferent from other securities of the class, then the holders of the series shall be entitled to voteseparately as a series.

(3) In determining minority approval for a going private transaction or a related party transaction, anissuer shall exclude the votes attached to affected securities that, to the knowledge of the issuer orany interested party or their respective directors or senior officers, after reasonable inquiry, arebeneficially owned or over which control or direction is exercised by

(a) the issuer;

(b) subject to section 8.2, an interested party, unless, in the context of a related party transaction, theinterested party is treated identically to all other holders in Canada of affected securities and doesnot receive, directly or indirectly, as a consequence of the transaction, consideration of greater valuethan that received by all other holders of affected securities;

(i) the related party is a director of the issuer who is independent of the interested party, or

(ii) in the context of a related party transaction, the related party and interested party are treatedidentically to all other holders in Canada of affected securities and do not receive, directly orindirectly, as a consequence of the transaction, consideration of greater value than that receivedby all other holders of affected securities and the related party of an interested party does nothold, directly or indirectly, whether alone or jointly or in concert with others, securities of morethan one party to the transaction sufficient to affect materially the control of such parties; and

(d) a person or company acting jointly or in concert with a person or company referred to in paragraph(b) or (c) in respect of the transaction.

8.2 Multi-Step Transactions - Despite paragraphs (b) and (c) of subsection 8.1(3), the votes attached tosecurities tendered to a formal bid may be included as votes in favour of a subsequent going privatetransaction in the determination of whether the requisite minority approval has been obtained if

(a) the securityholder tendering the securities

(i) did not receive

(A) a consideration per security that is not identical in amount and type to that paid to all otherbeneficial owners in Canada of affected securities of the same class, or

(B) consideration of greater value than that paid to all other beneficial owners of affectedsecurities of the same class, or

(ii) upon completion of the transaction, did not beneficially own, or exercise control or direction over,participating securities of a class other than affected securities;

(b) the going private transaction is completed no later than 120 days after the date of expiry of the formalbid;

(c) the going private transaction is proposed by the offeror who made the formal bid or an affiliated entityof the offeror and involves the outstanding securities of the same class that were the subject of theformal bid and that were not acquired by the offeror under the formal bid;

(d) the consideration per security in the subsequent going private transaction is

(i) at least equal in value to the consideration per security in the formal bid paid by the offeror, and

(ii) in the same form as the consideration per security in the formal bid, and if the consideration paidconsisted of securities of the person or company, consists of the same securities; and

(e) the disclosure document for the formal bid

(i) disclosed the intent to effect the subsequent transaction,

(ii) contained a summary of a formal valuation of the securities in accordance with the applicableprovisions of Part 6, or contained the valuation in its entirety, if the offeror in the formal bid wassubject to and not exempt from the requirement to obtain a formal valuation,

(iii) identified the securities, if known to the offeror after reasonable inquiry, the votes attached towhich would be required to be excluded in the determination of whether the requisite minorityapproval of the subsequent transaction had been obtained,

(iv) stated that the subsequent transaction would be subject to minority approval,

(v) identified each class of securities, the holders of which would be entitled to vote separately asa class on the subsequent transaction,

(vi) described the tax consequences of both the formal bid and the subsequent going privatetransaction, if, at the time of making the formal bid, the tax consequences arising from thesubsequent going private transaction

(A) were known or reasonably foreseeable to the offeror, and

(B) were reasonably expected to be different from the tax consequences of tendering to theformal bid, and

(vii) disclosed that the tax consequences of the formal bid and the subsequent going privatetransaction may be different, if, at the time of making the formal bid, the offeror did not know orcould not reasonably foresee the tax consequences arising from the subsequent going privatetransaction.

PART 9 EXEMPTION

9.1 Exemption - The Director may grant an exemption to this Rule, in whole or in part, subject to such conditionsor restrictions as may be imposed in the exemption.

PART 10 EFFECTIVE DATE

10.1 Effective Date - This Rule comes into force on May 1, 2000.

ONTARIO SECURITIES COMMISSION

COMPANION POLICY 61-501CP

TO ONTARIO SECURITIES COMMISSION RULE 61-501

INSIDER BIDS, ISSUER BIDS, GOING PRIVATE TRANSACTIONS AND RELATED PARTY TRANSACTIONS

TABLE OF CONTENTS

PART TITLE

PART 1 GENERAL

1.1 General

PART 2 DEFINITIONS AND INTERPRETATION

2.1 Director

2.2 Freely Tradeable

2.3 Jointly or in Concert

2.4 Issuer Bid

2.5 Director for Purposes of Section 1.3

2.6 Going Private Transactions Carried out inAccordance with Part 4

2.7 Related Party Transactions Carried out inAccordance with Policy 9.1

2.8 Persons or Companies Involved in aTransaction

2.9 Amalgamations

2.10 Same Consideration

2.11 Arm's Length

2.12 Previous Arm's Length Negotiations

2.13 Collateral Benefit

PART 3 MAJORITY OF THE MINORITY APPROVAL

3.1 Majority of the Minority Approval

PART 4 DISCLOSURE

4.1 Form 33 Disclosure

4.2 Disclosure of Financial Information

4.3 Disclosure of Smaller Related

Party Transactions

PART 5 VALUATIONS

5.1 Formal Valuations

5.2 Independent Valuators

PART 6 RELATED TRANSACTIONS

6.1 Related Transactions

PART 7 ROLE OF DIRECTORS

7.1 Role of Directors

ONTARIO SECURITIES COMMISSION

COMPANION POLICY 61-501CP

TO ONTARIO SECURITIES COMMISSION RULE 61-501

INSIDER BIDS, ISSUER BIDS, GOING PRIVATETRANSACTIONS

AND RELATED PARTY TRANSACTIONS

PART 1 GENERAL

1.1 General - The Commission regards it as essential,in connection with the disclosure, valuation, reviewand approval processes followed for insider bids,issuer bids, going private transactions and relatedparty transactions, that all securityholders be treatedin a manner that is fair and that is perceived to befair. In the view of the Commission, issuers andothers who benefit from access to the capitalmarkets assume an obligation to treatsecurityholders fairly and the fulfilment of thisobligation is essential to the protection of the publicinterest in maintaining capital markets that operateefficiently, fairly and with integrity.

The Commission does not consider that insider bids,issuer bids, going private transactions and relatedparty transactions are inherently unfair. It recognizes,however, that these transactions are capable ofbeing abusive or unfair, and has made Rule 61-501(the "Rule") to regulate these transactions.

This Policy expresses the Commission's views oncertain matters related to the Rule.

PART 2 DEFINITIONS AND INTERPRETATION

2.1 Director - The term "director" is used frequently inthe Rule. By virtue of Rule 14-501 Definitions, theterm has the meaning in section 1 of the Act. TheCommission is of the view that, by virtue of thisdefinition, in appropriate circumstances a director ofa general partner in a limited partnership can beconsidered to be a director of the limited partnership.

2.2 Freely Tradeable - In order for securities to be"freely tradeable" for purposes of the Rule, all holdperiods imposed by Ontario securities law must haveexpired, any period of time under Ontario securitieslaw for which an issuer must be a reporting issuermust have passed and the other conditions of thedefinition must be met. Securities that can only bedistributed under a prospectus or in reliance on aprospectus exemption, including any exemption inOntario securities law applicable to control persondistributions, would not be considered to be freelytradeable.

2.3 Jointly or in Concert

(1) The Act sets out certain circumstances wherethe presumption will arise that parties areacting jointly or in concert. Paragraph (b) ofsubsection 1.2(1) of the Rule provides that theterm "acting jointly or in concert" has themeaning ascribed to it in section 91 of theAct. The Commission is of the view that, foran insider bid, an offeror and an insider maybe viewed as acting jointly or in concert if anagreement, commitment or understandingbetween an offeror and an insider providesthat the insider shall not tender to the offer orprovides the insider with an opportunity notoffered to all securityholders to maintain oracquire a direct or indirect equity interest inthe offeror, the issuer or a material asset ofthe issuer.

(2) Concern has been expressed that agreementsby a shareholder to tender into a proposedtake-over bid or to vote in favour of aproposed transaction, which are commonlyreferred to as lock-up agreements, may resultin the selling shareholder being seen to beacting jointly or in concert with an acquiror.While the language of section 91 of the Act isbroad, and the particular facts of any casemust be considered, the Commission is of theview that an ordinary lock-up agreement withan identically treated shareholder should notin and of itself generally result in arm's lengthparties being seen to be acting jointly or inconcert.

2.4 Issuer Bid

(1) The term "issuer bid" is defined in NationalInstrument 14-101 Definitions as having themeaning ascribed to that term in securitieslegislation (in Ontario, subsection 89(1) of theAct). Subject to subsection (2), theCommission is of the view that, by virtue ofthe provisions of section 92 of the Act, anoffer to acquire securities of the issuer madeby a wholly-owned subsidiary entity of theissuer would be an issuer bid.

(2) The Commission is of the view that there maybe limited circumstances in which a purchaseof securities of an issuer made by a wholly-owned subsidiary entity of the issuer may notbe an issuer bid. An example of one suchsituation is where the wholly-ownedsubsidiary entity of the issuer is a registereddealer and the registered dealer is not actingat the direction of the issuer in making thepurchases, e.g., a registered dealer acting inits capacity as an underwriter or agent for apurchaser other than the issuer.

2.5 Director for Purposes of Section 1.3 -Subparagraph (b)(iii) of subsection 1.3(1) of the Ruleand subsection 1.3(4) of the Rule require certainletters to be sent to the Director for purposes ofsatisfying the liquid market test. Those lettersshould be sent to the Director, Take-over/IssuerBids, Mergers and Acquisitions, Corporate FinanceBranch.

2.6 Going Private Transactions Carried Out inAccordance with Part 4 - Paragraph (c) ofsubsection 4.3(1) of the Rule provides an exemptionfrom the 40 day delivery requirement in the OBCA ifthe going private transaction is carried out inaccordance with Part 4 of the Rule. Paragraph (e) ofsubsection 5.1(2) of the Rule provides that Part 5 ofthe Rule does not apply to a related party transactionthat is a going private transaction carried out inaccordance with Part 4 of the Rule. If the issuerrelies on or obtains an exemption from the valuationor majority of the minority requirements in Part 4 ofthe Rule, the Commission still views the goingprivate transaction as being carried out inaccordance with Part 4 of the Rule.

2.7 Related Party Transactions Carried Out inAccordance with Policy 9.1 - Paragraph (d) ofsubsection 4.1(2) of the Rule provides that Part 4 ofthe Rule does not apply to a going privatetransaction that was announced before the cominginto force of the Rule and, among other things, isbeing carried out in accordance with the guidelinesof Ontario Securities Commission Policy 9.1.Paragraph (i) of subsection 5.1(2) provides a similarexemption for related party transactions. TheCommission is of the view that the transaction isbeing carried out in accordance with the guidelinesof Ontario Securities Commission Policy 9.1

(1) if Policy 9.1 is being complied with, or

(2) if all or any part of a transaction is not beingcarried out in accordance with Policy 9.1, thetransaction is being carried out in accordancewith a "no-action letter" granted by staff.

2.8 Persons or Companies Involved in a Transaction- In the definitions of "interested party", "going privatetransaction" and "related party transaction", the Rulerefers to a person or company involved in atransaction or a transaction involving a person orcompany. In those situations, the Rule sets outcertain consequences for the person or company(e.g., disclosure, exclusion for minority approvalpurposes). The Commission is of the view that adirector or senior officer of an issuer is not involvedin a transaction merely because the director orsenior officer is acting in that capacity in negotiatingor approving the transaction.

2.9 Amalgamations

(1) Generally, a transaction is a going privatetransaction if the interest of a beneficial ownerof a participating security of an issuer may beterminated without the beneficial owner'sconsent as a consequence of the transaction,a related party of the issuer is involved in thetransaction and the transaction does notcome within the exceptions to the definition ofgoing private transaction in the Rule. TheCommission is of the view that in the normalsituation, where two or more arm's lengthoperating corporations amalgamate andshareholders of the amalgamatingcorporations receive non-redeemableparticipating securities of the amalgamatedcorporation, a beneficial owner's interest in aparticipating security is not being terminatedand therefore the transaction is not a goingprivate transaction.

(2) An amalgamation between a corporation andone or more related parties of the corporationis a related party transaction for all of theamalgamating corporations.

(3) Exemptions from the valuation and minorityapproval requirements of the Rule may beavailable under paragraphs 3 and 10 ofsection 5.6 and paragraphs 2 and 3 ofsubsection 5.8(1) of the Rule for an upstreamcorporation amalgamating with a downstreamcorporation. Those exemptions are notavailable for the downstream corporation.Similarly, those exemptions are not availablefor amalgamating corporations that arerelated parties because of a commoncontrolling shareholder.

(4) Paragraph 5 of section 5.6 and paragraph 3of subsection 5.8(1) contain an exemptionfrom the valuation requirement and minorityapproval requirement for certain transactions,including a reorganization of one or moreclasses of an issuer's affected securities ifcertain conditions are satisfied. Areorganization, as referred to in thoseparagraphs, is a reorganization of capital andwould not encompass an amalgamation ofthe issuer with another issuer.

2.10 Same Consideration - One of the conditions to thevaluation for second step going private transactionsexemption in paragraph 4 of section 4.5 is that theconsideration per security paid in the going privatetransaction is in the same form as the considerationper security paid in the formal bid. The Commissionis aware that often in going private transactions, theconsideration takes the form of redeemablepreference shares, which are immediately redeemedfor cash. The Commission is of the view that wherethe cash paid on redemption is the same as the cashconsideration paid on the formal bid, theconsideration in the going private transaction is inthe same form as the consideration paid in theformal bid.

2.11 Arm's Length - Section 1.4 of the Rule provides thatit is a question of fact whether two or more personsor companies act, negotiate or deal with each otherat arm's length. The Commission is of the view thatpersons or companies related to each other by bloodor marriage would not normally be considered to bedealing with each other at arm's length. TheCommission also notes that in the case of theexemptions in paragraph 3 of subsection 2.4(1) andparagraph 2 of subsection 4.5(1), the arm's lengthrelationship must be between the sellingsecurityholder and all persons or companies thatnegotiated with the selling securityholder.

2.12 Previous Arm's Length Negotiations - TheCommission notes that the previous arm's lengthnegotiation exemption is based on the view that suchnegotiations can be a substitute for a valuation. Animportant requirement for the exemption to beavailable is that the offeror or proponent of the goingprivate transaction, as the case might be, engages in"reasonable inquiries" to determine whether variouscircumstances exist. In the Commission's view, ifan offeror cannot satisfy this requirement, throughreceipt of representations of the parties directlyinvolved or some other suitable method, the offeroror proponent of the transaction is not entitled to relyon this exemption.

2.13 Collateral Benefit

(1) A number of provisions in the Rule turn onwhether a particular securityholder isreceiving consideration of greater value thanthat received by or paid to othersecurityholders.

(2) The Commission notes that the words"consideration of greater value" are found insubsection 97(2) of the Act, which subsectioncontains what is commonly referred to as the"collateral benefit rule".

(3) Decisions considering subsection 97(2) of theAct may be of assistance in interpreting therelevant provisions in the Rule.

(4) The Commission is of the view that asecurityholder does not receive considerationof greater value than another securityholdermerely as a result of holding more sharesthan another securityholder.

PART 3 MAJORITY OF THE MINORITY APPROVAL

3.1 Majority of the Minority Approval - While the Ruleprovides, in a number of circumstances, for minorityapproval, the Commission recognizes that such arequirement may give rise to abuses. As the purposeof the Rule is to ensure fair treatment of minoritysecurityholders, unjustifiable minority tactics in asituation involving a minimal minority position maycause the Director to grant an exemption from therequirement to obtain minority approval.

PART 4 DISCLOSURE

4.1 Form 33 Disclosure

(1) Form 32 of the Regulation (the form for atake-over bid circular) requires for an insiderbid, and subsection 2.2(2) of the Rulerequires for a stock exchange insider bid, thedisclosure required by Form 33 of theRegulation, appropriately modified. In theview of the Commission, Form 33 disclosurewould generally include, in addition to Form32 disclosure, disclosure with respect to thefollowing items, with necessary modifications,in the context of an insider bid or a stockexchange insider bid:

1. Item 10 Reasons for Bid

2. Item 14 Acceptance of Bid

3. Item 15 Benefits from Bid

4. Item 17 Other Benefits to Insiders,Affiliates and Associates

5. Item 18 Arrangements Between Issuerand Security Holder

6. Item 19 Previous Purchases and Sales

7. Item 21 Valuation

8. Item 24 Previous Distribution

9. Item 25 Dividend Policy

10. Item 26 Tax Consequences

11. Item 27 Expenses of Bid

(2) Paragraph (a) of subsection 4.2(2) of the Ruleand paragraph (a) of subsection 5.4(2) of theRule require, for a going private transactionand a related party transaction, respectively,the disclosure required by Form 33 of theRegulation, to the extent applicable and withnecessary modifications. In the view of theCommission, Form 33 disclosure wouldgenerally include disclosure with respect tothe following items, with necessarymodifications, in the context of thosetransactions:

1. Item 5 Consideration Offered

2. Item 10 Reasons for Bid

3. Item 11 Trading in Securities to beAcquired

4. Item 12 Ownership of Securities ofIssuer

5. Item 13 Commitments to AcquireSecurities of Issuer

6. Item 14 Acceptance of Bid

7. Item 15 Benefits from Bid

8. Item 16 Material Changes in the Affairsof Issuer

9. Item 17 Other Benefits to Insiders,Affiliates and Associates

10. Item 18 Arrangements Between Issuerand Security Holder

11. Item 19 Previous Purchases and Sales

12. Item 20 Financial Statements

13. Item 21 Valuation

14. Item 22 Securities of Issuer to beExchanged for Others

15. Item 23 Approval of Bid

16. Item 24 Previous Distribution

17. Item 25 Dividend Policy

18. Item 26 Tax Consequences

19. Item 27 Expenses of Bid

20. Item 28 Judicial Developments

21. Item 29 Other Material Facts

22. Item 30 Solicitations

4.2 Disclosure of Financial Information - TheCommission is of the view that, in order to providesecurityholders with sufficiently detailed informationto form a reasoned judgment, a disclosure documentdelivered to securityholders in respect of transactionssubject to and not exempt from the formal valuationrequirements of the Rule should contain, unless suchinformation would be irrelevant or unavailable,summary disclosure of comparative historical annualfinancial information over the previous three yearsand of historical interim financial information for themost recent period and the comparative period in theprevious year, together with summary informationconcerning key financial statement ratios andstatistics and key operating statistics over the sameperiods. This disclosure would be in addition to anydisclosure required under Ontario securities law orreferred to in Staff Accounting Communique No. 7:Financial Disclosure in Information Circulars, or otherStaff Accounting Communiques or any successorinstruments.

4.3 Disclosure of Smaller Related PartyTransactions -The Commission is of the view thattransactions involving related parties, and beneficialownership by an issuer of, or an issuer's exercise ofcontrol or direction over, securities of related partiesother than the issuer's subsidiary entities, should bedisclosed to securityholders if they are materialeither individually or in the aggregate, in order toprovide securityholders with sufficiently detailedinformation to form a reasoned judgment regardingsuch matters as the election of directors. If suchtransactions or ownership do not otherwise requireimmediate disclosure, annual disclosure may suffice.Issuers are referred, without limitation, to item8 of Form 30 of the Regulation and othersimilar information circular requirements, aswell as to section 3840 of the Handbook.

PART 5 VALUATIONS

5.1 Formal Valuations

(1) The Rule requires formal valuations in anumber of circumstances. The Commissionis of the view that a conclusory statement ofopinion as to the value or range of values ofthe subject matter of the formal valuationdoes not by itself achieve this purpose.

(2) The disclosure standards proposed by theInvestment Dealers Association of Canadaand Appendix A to Standard #110 of theCanadian Institute of Chartered BusinessValuators each generally represent areasonable approach to meeting theapplicable legal requirements. Specificdisclosure standards, however, cannot beconstrued as a substitute for the professionaljudgment and responsibility of the valuatorand, on occasion, additional disclosure maybe necessary.

(3) A person or company required to have aformal valuation prepared should, at therequest of the valuator, promptly furnish thevaluator with access to the person orcompany's management and advisers and toall material information in its possessionrelevant to the formal valuation. The valuatoris expected to use that access to perform acomprehensive review and analysis ofinformation upon which the formal valuationis based. The valuator should form its ownindependent views of the reasonableness ofthis information, including any forecasts orprojections or other measurements of theexpected future performance of the enterprise,and of any of the assumptions upon which itis based, and adjust the informationaccordingly.

(4) The disclosure in the valuation of the scope ofreview should include a description of anylimitation on the scope of the review and theimplications of the limitation on the valuator'sconclusion. Scope limitations should not beimposed by the issuer, an interested party orthe valuator, but should be limited to thosebeyond their control that arise solely as aresult of unusual circumstances. In addition,it is inappropriate for any interested party toexercise or attempt to exercise any influenceover a valuator.

(5) The person or company responsible forobtaining a formal valuation should work incooperation with the valuator to ensure thatthe requirements of the Rule are satisfied.

(6) Subsection 2.3(2) of the Rule provides that inthe context of an insider bid, an independentcommittee of the offeree issuer shall, and theofferor shall enable the independentcommittee to, determine who the valuator willbe and supervise the preparation of the formalvaluation. The Commission is aware that anindependent committee could attempt to usethis requirement as a means to delay orimpede an insider bid viewed by them asunfriendly. In a situation where an offeror isof the view that an independent committee isnot acting in a timely manner in having theformal valuation prepared, the offeror mayseek relief under section 9.1 of the Rule fromthe requirement that the issuer obtain avaluation.

(7) Similarly, in circumstances where anindependent committee is of the view that abid that has been announced will not actuallybe made or that the bid is not being made ingood faith, an independent committee mayapply for relief from the requirement that theindependent committee determine thevaluator and supervise the preparation of thevaluation.

(8) Subsection 6.4(2) of the Rule provides thatNational Instrument 52-101 Future-OrientedFinancial Information does not apply to aformal valuation for which financial forecastsand projections are relied upon and disclosed.National Instrument 52-101 will replaceNational Policy No. 48 Future-OrientedFinancial Information. Until such time,National Policy No. 48 does not apply to aformal valuation for which financial forecastsand projections are relied upon and disclosed.

5.2 Independent Valuators - While, except in certainprescribed situations, the Rule provides that it is aquestion of fact as to whether a valuator or a personor company providing the opinion referred to insubparagraph (b)(ii) of subsection 1.3(1) isindependent, situations have been identified in thepast that raise serious concerns for the Commissionand that must be disclosed and assessed formateriality. In determining the independence of thevaluator or person or company from the interestedparty, a number of factors may be relevant, includingwhether

(a) the valuator or the person or company or anaffiliated entity of either of them has amaterial financial interest in future business inrespect of which an agreement,commitment or understanding existsinvolving the issuer, an interested partyof the issuer or an associate oraffiliated entity of the issuer orinterested party;

(b) during the 24 months before the valuator orperson or company was first contacted for thepurpose of the formal valuation or opinion, thevaluator or the person or company or anaffiliated entity of either of them

(i) had a material involvement in anevaluation, appraisal or review of thefinancial condition of an interestedparty or an associate or affiliated entityof the interested party, other than theissuer,

(ii) had a material involvement in anevaluation, appraisal or review of thefinancial condition of an issuer or anassociate or an affiliated entity of theissuer, if the evaluation, appraisal orreview was carried out at the directionor request of the interested party orpaid for by the interested party, otherthan the issuer in the case of an issuerbid,

(iii) acted as a lead or co-lead underwriterof a distribution of securities by theinterested party, or acted as a lead orco-lead underwriter of a distribution ofsecurities by the issuer if the retentionof the underwriter was carried out atthe direction or request of theinterested party or paid for by theinterested party, other than the issuerin the case of an issuer bid,

(iv) had a material financial interest intransactions involving the interestedparty, other than the issuer in the caseof an issuer bid, or

(v) had a material financial interest intransactions involving the issuer otherthan by virtue of performing theservices referred to in subparagraphs(b)(ii) and (b)(iii); or

(i) a lead or co-lead lender or manager ofa lending syndicate in respect of thetransaction in question, or

(ii) a lender of a material amount ofindebtedness in a situation where aninterested party or the issuer is infinancial difficulty and the transactionwould reasonably be expected to havethe effect of materially enhancing thelender's position.

PART 6 RELATED TRANSACTIONS

6.1 Related Transactions

(1) The definition of "related party transaction" insubsection 1.1(3) of the Rule refers to otherrelated transactions between the issuer andthe related party.

(2) Depending on the circumstances, it may bepossible for an issuer to rely on one or moreexemptions in the Rule in connection with aseries of transactions between the issuer anda related party.

(3) The Commission may intervene if it believesthat one or more exemptions are not capableof being relied upon such that a part or all ofthe transaction is not exempt from theproposed Rule or if a transaction is beingstructured or carried out in series or stages totake advantage of individual exemptions thatcould not be relied upon if the transaction wascarried out in one step.

PART 7 ROLE OF DIRECTORS

7.1 Role of Directors

(1) Paragraphs (d) of subsection 2.2(3), (e) ofsubsection 3.2(1), (f) of subsection 4.2(2), (e)of subsection 5.2(1) and (f) of subsection5.4(2) of the Rule require that the relevantdisclosure documents include a discussion ofthe review and approval process adopted bythe board of directors and the independentcommittee, if any, of the issuer for therelevant transaction, including any materiallycontrary view or abstention by a director andany material disagreement between the boardand the independent committee.

(2) An issuer involved in any of the types oftransactions regulated by the Rule shouldprovide sufficient information to beneficialowners of securities to enable them to makean informed decision. Accordingly, directorsshould disclose their reasonable beliefs as tothe desirability or fairness of the proposedtransaction and make usefulrecommendations with regard to thetransaction. A statement that the directors areunable to make or are not making arecommendation with respect to thetransaction, without detailed reasons,generally would be viewed asinsufficient disclosure.

(3) In reaching a conclusion as to the fairness ofa transaction, the directors should disclose inreasonable detail the material factors onwhich their beliefs regarding the transactionare based. The disclosure disseminated bythe directors should discuss fully thebackground of deliberations by the directorsand any special committee and any analysisof expert opinions obtained.

(4) The factors that are important in determiningthe fairness of a transaction to beneficialowners of securities and the weight to begiven to these factors in a particular contextwill vary with the circumstances. Normally thefactors considered should include whether ornot the transaction is subject to minorityapproval, whether or not the transaction hasbeen reviewed and approved by a specialcommittee and, if there has been a formalvaluation, whether the consideration offered isfair in relation to the valuation conclusionsarrived at through the application of thevaluation methods considered relevant for thesubject matter of the formal valuation. Astatement that the directors have noreasonable belief as to the desirability orfairness of the transaction or that thetransaction is fair in relation to values arrivedat through the application of valuationmethods considered relevant, without more,generally would be viewed as insufficientdisclosure.

(5) The directors of an issuer involved in anissuer bid, insider bid, going privatetransaction or related party transactiongenerally are in the best position to assessthe formal valuation to be provided tosecurityholders. Accordingly, theCommission is of the view that, in dischargingtheir duty to securityholders, the directorsshould consider the formal valuation and allprior valuations disclosed and discuss themfully in the applicable disclosure document.

(6) To safeguard against the potential for unfairadvantage accruing to an interested party asa result of that party's conflict of interest orinformational or other advantage in respect ofthe proposed transaction, it is good practicefor negotiations respecting a transactioninvolving an interested party to be carried outby or reviewed and reported upon by a specialcommittee of disinterested directors.Following this practice normally would assistin addressing the Commission's interest inmaintaining capital markets that operateefficiently, fairly and with integrity. While theRule only mandates independent committeesin limited circumstances, the Commission isof the view that it generally would beappropriate for, and that corporate law mayrequire, issuers involved in a materialtransaction to which the Rule applies toconstitute an independent committee of theboard of directors to participate in thetransaction. The Commission also wouldencourage independent committees to selectthe valuator, to supervise any formalvaluation involved and to review thedisclosure respecting the formal valuation.

(7) A special committee should, in theCommission's view, include only directorswho are independent from the interestedparty. While a special committee may invitenon-independent board members and otherpersons possessing specialized knowledge tomeet with, provide information to, and carryout instructions from, the committee, in theCommission's view non-independent personsshould not be present at or participate in thedecision-making deliberations of the specialcommittee.

REGULATION TO AMEND REGULATION 1015 OF THE REVISED REGULATIONS OF ONTARIO, 1990 MADE UNDER THE SECURITIES ACT

Note: Since the end of 1998, Regulation 1015 has beenamended by Ontario Regulations 1/99, 322/99 and3/00. Previous amendments are listed in the Tableof Regulations in the Statutes of Ontario, 1998.

1. Section 182 of Regulation 1015 of the RevisedRegulations of Ontario, 1990 is revoked.

2. The definition of "going private transaction"in subsection 203.2 (2) of the Regulation is amended bystriking out "subsection 2.2 (4) of Ontario SecuritiesCommission Policy Statement 9.1" and substituting"subsection 1.1 (3) of Ontario Securities CommissionRule 61-501 Insider Bids, Issuer Bids, Going PrivateTransactions and Related Party Transactions".

3. (1) The definition of "going private transaction"in subsection 1 (1) of Schedule 1 to the Regulation isamended by striking out "subsection 2.2 (4) of OntarioSecurities Commission Policy Statement 9.1" andsubstituting"subsection 1.1 (3) of Ontario SecuritiesCommission Rule 61-501 Insider Bids, Issuer Bids, GoingPrivate Transactions and Related Party Transactions".

(2) Subsection 46 (1) of Schedule 1 to theRegulation is revoked.

(3) Subsection 46 (2) of Schedule 1 to theRegulation is amended by striking out "Ontario SecuritiesCommission Policy Statement 9.1" and substituting"Ontario Securities Commission Rule 61-501 Insider Bids,Issuer Bids, Going Private Transactions and Related PartyTransactions".

4. This Regulation comes into force on May 1,2000.