West Fraser Timber Co. Ltd. and The Bank of Nova Scotia – s. 6.1 of NI 62-104 Take-Over Bids and Issuer Bids

Headnote

Section 6.1 of NI 62-104 – Issuer bid – relief from the requirements applicable to issuer bids in Part 2 of NI 62-104 – issuer proposes to purchase, pursuant to a repurchase program and at a discounted purchase price, up to a specified number of its common shares under its normal course issuer bid from a third party – the third party will abide by the requirements governing normal course issuer bids as though it was the issuer, subject to certain modifications, including that the third party will not make any purchases under the program pursuant to a pre-arranged trade – common shares delivered to the issuer for cancellation will be common shares from the third party's existing inventory – due to the discounted purchase price, the common shares cannot be acquired through the TSX trading system – but for the fact that the common shares cannot be acquired through the TSX trading system, the Issuer could otherwise acquire such shares in accordance with TSX rules and in reliance upon the issuer bid exemption available under section 4.8 of NI 62-104 – the third party will purchase common shares under the program on the same basis as if the issuer had conducted the bid in reliance on the normal course issuer bid exemptions set out in securities legislation – no adverse economic impact on, or prejudice to the issuer or its security holders – acquisition of securities exempt from the requirements applicable to issuer bids in Part 2 of NI 62-104, subject to conditions, including that the number of common shares transferred by the third party from its existing inventory to the issuer for purchase under the program be equivalent to the number of common shares that the third party has purchased, or had purchased on its behalf, on Canadian markets.

Statutes Cited

National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

AND

IN THE MATTER OF

WEST FRASER TIMBER CO. LTD. AND

THE BANK OF NOVA SCOTIA

ORDER

(Section 6.1 of National Instrument 62-104)

UPON the application (the “Application”) of West Fraser Timber Co. Ltd. (the “Issuer”) and The Bank of Nova Scotia (“BNS”, and together with the Issuer, the “Filers”) to the Ontario Securities Commission (the “Commission”) for an order pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids (“NI 62-104”) exempting the Issuer from the requirements applicable to issuer bids in Part 2 of NI 62-104 (the “Issuer Bid Requirements”) in respect of the proposed purchases by the Issuer of up to 1,000,000 (the “Program Maximum”) of its common shares (the “Common Shares”) from BNS pursuant to a share repurchase program (the “Program”);

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Issuer having represented to the Commission the matters set out in paragraphs 1 to 4, inclusive, 8, 10 to 18, inclusive, 20 to 27, inclusive, 31, 33, 35 to 37, inclusive, 39 and 40, as they relate to the Issuer;

AND UPON BNS and Scotia Capital Inc. (“SCI”, and together with BNS, the “Scotia Entities”) having represented to the Commission the matters set out in paragraphs 5 to 9, inclusive, 18 to 21, inclusive, 25, 27 to 32, inclusive, 34, 38, 40 and 41, as they relate to the Scotia Entities;

1.             The Issuer is a corporation governed under the Business Corporations Act (British Columbia).

2.             The Issuer’s registered office is located at 1055 West Georgia Street, Suite 1500, Vancouver, British Columbia, V6E 4N7 and its head office is located at 858 Beatty Street, Suite 501, Vancouver, British Columbia, V6B 1C1.

3.             The Issuer is a reporting issuer in each of the provinces of Canada and in the Yukon (collectively, the “Jurisdictions”) and the Common Shares are listed for trading on the Toronto Stock Exchange (the “TSX”) under the symbol “WFT”. The Issuer is not in default of any requirement of the securities legislation of the Jurisdictions.

4.             The authorized share capital of the Issuer consists of: (a) 400,000,000 Common Shares; (b) 20,000,000 Class B common shares; and (c) 10,000,000 preferred shares issuable in series. As at February 8, 2018, the Issuer had 75,631,226 Common Shares and 2,281,478 Class B common shares issued and outstanding.

5.             BNS is a Schedule I bank governed by the Bank Act (Canada). The executive office of BNS is located in the Province of Ontario.

6.             SCI is registered as an investment dealer under the securities legislation of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia, Newfoundland and Labrador, New Brunswick, Prince Edward Island, the Yukon, the Northwest Territories and Nunavut. SCI is a member of the Investment Industry Regulatory Organization of Canada (“IIROC”) and the Canadian Investor Protection Fund, a participating organization or member of the TSX, TSX Venture Exchange and Canadian Securities Exchange, and an approved participant of the Bourse de Montréal. The head office of SCI is located in Toronto, Ontario.

7.             BNS does not own, directly or indirectly, more than 5% of the issued and outstanding Common Shares.

8.             BNS is the beneficial owner of at least 1,000,000 Common Shares, none of which were acquired by, or on behalf of, BNS in anticipation or contemplation of resale to the Issuer (such Common Shares over which BNS has beneficial ownership, the “Inventory Shares”). All of the Inventory Shares are held by BNS in the Province of Ontario, and all purchases of Inventory Shares by the Issuer from BNS will be executed and settled in the Province of Ontario. No Common Shares were purchased by, or on behalf of, BNS on or after November 14, 2017, being the date that was 30 days prior to the date of the Application, in anticipation or contemplation of a sale of Common Shares by BNS to the Issuer.

9.             BNS is at arm’s length to the Issuer and is not an “insider” of the Issuer, an “associate” of an “insider” of the Issuer, or an “associate” or “affiliate” of the Issuer, as such terms are defined in the Securities Act (Ontario) (the “Act”). BNS is an “accredited investor” within the meaning of National Instrument 45-106 Prospectus Exemptions.

10.          Pursuant to a Notice of Intention to Make a Normal Course Issuer Bid (the “Original Notice”) which was accepted by the TSX effective September 12, 2017, the Issuer is permitted to make a normal course issuer bid (the “NCIB”) to purchase for cancellation, during the 12-month period beginning on September 19, 2017 and ending on September 18, 2018, up to 3,794,375 Common Shares, representing approximately 5% of the issued and outstanding Common Shares as of the date specified in the Original Notice. The Original Notice specifies that purchases under the NCIB are to be conducted through the facilities of the TSX or through other Canadian marketplaces. On December 14, 2017, the TSX accepted an amendment (the “First Notice Amendment”) to the Original Notice to specify that purchases may also be made by such other means as may be permitted by the TSX in accordance with sections 628 to 629.3 of Part VI of the TSX Company Manual (the “TSX NCIB Rules”) or by a securities regulatory authority, including under automatic trading plans, and by private agreements or share repurchase programs under issuer bid exemption orders issued by securities regulatory authorities. On December 22, 2017, the TSX accepted a second amendment (the “Second Notice Amendment” and, together with the Original Notice and the First Notice Amendment, the “Notice”) to the Original Notice, as amended by the First Notice Amendment, to reflect the intention of the Issuer to (a) enter into an automatic share purchase plan with Raymond James Ltd. for the Blackout Period (as defined below) in effect from January 1, 2018 until February 15, 2018, inclusive (such purchase plan, the “Raymond James ASPP”, and such Blackout Period, the “Current Blackout Period”), and (b) enter into the Program.

11.          The NCIB is being conducted in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 4.8(2) of NI 62-104 (the “Designated Exchange Exemption”).

12.          The NCIB is also being conducted in the normal course on other permitted published markets in Canada (collectively, the “Canadian Other Published Markets”) in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 4.8(3) of NI 62-104 (the “Other Published Markets Exemption”, and together with the Designated Exchange Exemption, the “Exemptions”).

13.          Pursuant to the TSX NCIB Rules, the Issuer has appointed Raymond James Ltd. as its designated broker in respect of the NCIB (the “Responsible Broker”).

14.          The Issuer may, from time to time, appoint a non-independent purchasing agent (a “Plan Trustee”) to purchase Common Shares on the open market to fulfill requirements for the delivery of Common Shares under the Issuer’s employee share purchase plan and security-based compensation plans (the “Plan Trustee Purchases”). A Plan Trustee has not been appointed by the Issuer, no Plan Trustee will be appointed by the Issuer during the Program Term (as defined below) and no Plan Trustee Purchases will be required or made during the Program Term.

15.          The Notice provides that the Issuer may implement an automatic trading plan (“ASPP”) to permit the Issuer to make purchases under the NCIB at such times when the Issuer would not be permitted to trade in its securities, including regularly scheduled quarterly blackout periods and other internal blackout periods (each such time, a “Blackout Period”). The Issuer entered into the Raymond James ASPP on December 22, 2017, which (a) was approved by the TSX and is in compliance with rules of the TSX and applicable securities law, and (b) will terminate prior to the beginning of the Program. No ASPP (other than the Program during a Blackout Period) will be implemented or operative during the Program Term.

16.          As at February 8, 2018, the Issuer had purchased a total of 119,094 Common Shares pursuant to the NCIB, none of which were purchased pursuant to issuer bid exemption orders issued by securities regulatory authorities.

17.          To the best of the Issuer’s knowledge, the “public float” (calculated in accordance with the TSX NCIB Rules) for the Common Shares as at February 8, 2018 consisted of 60,146,787 Common Shares, representing approximately 79.5% of the Issuer’s issued and outstanding Common Shares as of such date. The Common Shares are “highly-liquid securities” as that term is defined in section 1.1 of OSC Rule 48-501 Trading during Distributions, Formal Bids and Share Exchange Transactions (“OSC Rule 48-501”) and section 1.1 of the Universal Market Integrity Rules (“UMIR”).

18.          The Filers wish to participate in the Program during, and as part of, the NCIB to enable the Issuer to purchase from BNS, and for BNS to sell to the Issuer, that number of Common Shares equal to the Program Maximum.

19.          Pursuant to the terms of the Program Agreement (as defined below), SCI will be retained by BNS to acquire Common Shares through the facilities of the TSX and on Canadian Other Published Markets (collectively with the TSX, the “Canadian Markets”) under the Program. No Common Shares will be acquired under the Program on a market that is not a Canadian Market.

20.          The Program will be governed by, and conducted in accordance with, the terms and conditions of a Share Repurchase Program Agreement (the “Program Agreement”) that will be entered into among the Filers and SCI prior to the commencement of the Program, a copy of which will be delivered by the Filers to the Commission and the TSX promptly thereafter. The Program Agreement will not be entered into during the Current Blackout Period.

21.          The Program will not commence until the passage of two clear trading days from the date of the dissemination to the public of the Issuer’s financial results and/or any and all “material changes” or any “material facts” (each as defined in the Act) in respect of the Issuer or the Common Shares relating to the Current Blackout Period, and will terminate on the earlier of: (a) September 18, 2018; (b) the date on which the Issuer will have purchased the Program Maximum under the Program; and (c) the date on which the Program is terminated in accordance with its terms (the “Program Term”). Neither the Issuer nor any of the Scotia Entities may unilaterally terminate the Program Agreement during the Program Term, except in the case of an event of default by a party thereunder or a change in law or announced change in law that would have adverse consequences to the transactions contemplated thereunder or to the Issuer or either of the Scotia Entities.

22.          At least two clear Trading Days prior to the commencement of the Program, the Issuer will issue and file a press release that has been pre-cleared by the TSX that: (a) describes the material features of the Program, including the Program Term; (b) discloses the Issuer’s intention to participate in the Program during the NCIB; (c) states that it is the Issuer’s current intention to purchase the Program Maximum, but that the number of Common Shares purchased pursuant to the Program may be less than the Program Maximum; (d) provides an explanation as to why less than the Program Maximum may be purchased; and (e) states that, immediately following the completion of the Program, the Issuer will issue and file the Completion Press Release (as defined below) (the “Commencement Press Release”).

23.          The Program Maximum will not exceed the number of Common Shares remaining that the Issuer is entitled to acquire under the NCIB, calculated as at the date of the Program Agreement.

24.          The TSX has (a) been advised of the Issuer’s intention to enter into the Program, (b) been provided with drafts of the Program Agreement and the Commencement Press Release, and (c) confirmed it has no objection to the Issuer conducting the Program as part of the NCIB.

25.          The Program Term may include one or more Blackout Periods. During a Blackout Period, the Program will:

(a)           be an “automatic securities purchase plan” as defined in National Instrument 55-104 Insider Reporting Requirements and Exemptions (as applied, mutatis mutandis, to purchases made by an issuer) and SCI will conduct the Program in its sole discretion, in accordance with either the instructions established by the Issuer and set out in the Program Agreement, or the instructions conveyed by the Issuer to SCI in writing at a time when the Issuer is not in a Blackout Period (the “Irrevocable Instructions”); and

(b)           comply with applicable securities regulatory requirements and guidance, including, inter alia, clause 175(2) of Regulation 1015 of the Act, OSC Staff Notice 55-701 Automatic Securities Disposition Plans and Automatic Securities Purchase Plans and similar rules and regulations regarding automatic acquisitions of securities under Canadian securities laws.

26.          The Issuer will not give purchase instructions in respect of the Program to SCI at any time that the Issuer is aware of Undisclosed Information (as defined below).

27.          At such times during the Program Term when the Issuer is not in a Blackout Period, SCI will purchase Common Shares on the applicable Trading Day (as defined below) in accordance with instructions received by SCI from the Issuer prior to the opening of trading on such Trading Day. These instructions and the Irrevocable Instructions will be of the same nature as the instructions that the Issuer would have given to the Responsible Broker if the Issuer was conducting the NCIB in reliance on the Exemptions.

28.          All Common Shares acquired for the purposes of the Program by SCI on a day during the Program Term on which Canadian Markets are open for trading (each, a “Trading Day”) must be acquired on Canadian Markets in accordance with the TSX NCIB Rules and the by-laws, rules, regulations or policies of any Canadian Markets upon which purchases are carried out (collectively, the “NCIB Rules”) that would be applicable to the Issuer in connection with the NCIB, provided that:

(a)           the aggregate number of Common Shares to be acquired on Canadian Markets by SCI on each Trading Day shall not exceed the maximum daily limit that is imposed upon the NCIB pursuant to the TSX NCIB Rules, determined with reference to an average daily trading volume that is based on the trading volume of the Common Shares on all Canadian Markets rather than being limited to the trading volume on the TSX only (the “Modified Maximum Daily Limit”), it being understood that the aggregate number of Common Shares to be acquired on the TSX by SCI on each Trading Day will not exceed the maximum daily limit that is imposed on the NCIB pursuant to the TSX NCIB Rules; and

(b)           notwithstanding the block purchase exception provided for in the TSX NCIB Rules, no purchases will be made by SCI on any Canadian Markets pursuant to a pre-arranged trade.

29.          The aggregate number of Common Shares that will be acquired by SCI in connection with the Program:

(a)           shall not exceed the Program Maximum; and

(b)           on Canadian Other Published Markets, shall not exceed that number of Common Shares remaining eligible for purchase by the Issuer pursuant to the Other Published Markets Exemption, calculated as at the date of the Program Agreement.

30.          On every Trading Day, SCI will purchase the Number of Common Shares. The “Number of Common Shares” will be no greater than the least of:

(a)           the maximum number of Common Shares that can be purchased: (i) as established in the instructions received by SCI from the Issuer prior to the opening of trading on such day at such times when the Issuer is not in a Blackout Period; or (ii) pursuant to the Irrevocable Instructions at such times when the Issuer is in a Blackout Period;

(b)           the Program Maximum less the aggregate number of Common Shares previously purchased by SCI under the Program;

(c)           on a Trading Day where trading ceases on the TSX or some other event that would impair SCI’s ability to acquire Common Shares on Canadian Markets occurs (a “Market Disruption Event”), the number of Common Shares acquired by SCI on such Trading Day up until the time of the Market Disruption Event; and

(d)           the Modified Maximum Daily Limit.

31.          BNS will deliver to the Issuer that number of Inventory Shares equal to the Number of Common Shares purchased by SCI on a Trading Day under the Program on the Trading Day immediately thereafter (or such other Trading Day as agreed to between the parties to the Program Agreement), and the Issuer will pay BNS a purchase price equal to the Discounted Price for each such Inventory Share on such date. Each Inventory Share purchased by the Issuer under the Program will be cancelled by the Issuer upon delivery to the Issuer or its transfer agent.

The “Discounted Price” per Common Share will be equal to (a) the volume weighted average price of the Common Shares on the Canadian Markets on the Trading Day on which purchases were made less an agreed upon discount, or (b) upon the occurrence of a Market Disruption Event, the volume weighted average price of the Common Shares on the Canadian Markets at the time of the Market Disruption Event less an agreed upon discount.

32.          BNS will not sell any Inventory Shares to the Issuer unless SCI has purchased the equivalent Number of Common Shares on Canadian Markets under the Program. The number of Common Shares that are purchased by SCI on Canadian Markets under the Program on a Trading Day will be equal to the Number of Common Shares for such Trading Day. SCI will provide the Issuer with a daily written report of SCI’s purchases under the Program, which report will indicate, inter alia, the aggregate number of Common Shares acquired, the Canadian Market on which such Common Shares were acquired, and the Modified Maximum Daily Limit.

33.          During the Program Term, the Issuer will: (a) not purchase, directly or indirectly, any Common Shares (other than Inventory Shares purchased under the Program); (b) prohibit the Responsible Broker from acquiring any Common Shares on its behalf; (c) not appoint a Plan Trustee or make any Plan Trustee Purchases; and (d) not implement an ASPP (other than the Program during a Blackout Period).

34.          All purchases of Common Shares under the Program will be made by SCI and neither of the Scotia Entities will engage in any hedging activity in connection with the conduct of the Program.

35.          The Issuer will report its purchases of Common Shares under the Program to the TSX in accordance with the TSX NCIB Rules. In addition, immediately following the completion of the Program, the Issuer will: (a) report the total number of Common Shares acquired under the Program to the TSX and the Commission; and (b) issue and file a press release that announces the completion of the Program and sets out the number of Common Shares acquired under the Program and the aggregate dollar amount paid for such Common Shares (the “Completion Press Release”).

36.          The Issuer is of the view that: (a) it will be able to purchase Common Shares from BNS at a lower price than the price at which it would be able to purchase an equivalent quantity of Common Shares under the NCIB in reliance on the Exemptions; and (b) the purchase of Common Shares pursuant to the Program is in the best interests of the Issuer and constitutes a desirable use of the Issuer’s funds.

37.          The entering into of the Program Agreement, the purchase of Common Shares by SCI in connection with the Program, and the sale of Inventory Shares by BNS to the Issuer will not adversely affect the Issuer or the rights of any of the Issuer’s security holders and will not materially affect control of the Issuer.

38.          The sale of Inventory Shares to the Issuer by BNS will not be a “distribution” (as defined in the Act).

39.          The Issuer will be able to acquire the Inventory Shares from BNS without the Issuer being subject to the dealer registration requirements of the Act.

40.          At the time that the Issuer and the Scotia Entities enter into the Program Agreement, neither the Issuer, nor any member of the Global Equity Derivatives group of BNS, nor any personnel of either of the Scotia Entities that negotiated the Program Agreement or made, participated in the making of, or provided advice in connection with, the decision to enter into the Program Agreement and sell the Common Shares, will be aware of any “material change” or “material fact” (each as defined in the Act) with respect to the Issuer or the Common Shares that has not been generally disclosed (the “Undisclosed Information”).

41.          Each of the Scotia Entities:

(a)           has policies and procedures in place to ensure that the Program will be conducted in accordance with, among other things, the Program Agreement and this Order, and to preclude those persons responsible for administering the Program from acquiring any Undisclosed Information during the conduct of the Program; and

(b)           will, prior to entering into the Program Agreement: (i) ensure that its systems are capable of adhering to, and performing in accordance with, the requirements of the Program, the Program Agreement and this Order; and (ii) provide all necessary training and take all necessary actions to ensure that the persons administering and executing the purchases under the Program are aware of, and understand the terms of, the Program Agreement and this Order.

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

IT IS ORDERED pursuant to section 6.1 of NI 62-104 that the Issuer be exempt from the Issuer Bid Requirements in respect of the purchase of Inventory Shares from BNS pursuant to the Program, provided that:

(a)           at least two clear Trading Days prior to the commencement of the Program, the Issuer issues and files the Commencement Press Release;

(b)           all purchases of Common Shares under the Program are made on Canadian Markets by SCI, and are:

(i)            made in accordance with the NCIB Rules applicable to the NCIB, as modified by paragraph 28 of this Order;

(ii)           taken into account by the Issuer when calculating the maximum annual aggregate limits that are imposed upon the NCIB in accordance with the TSX NCIB Rules, with those Common Shares purchased on Canadian Other Published Markets being taken into account by the Issuer when calculating the maximum aggregate limits that are imposed upon the Issuer in accordance with the Other Published Markets Exemption;

(iii)          marked with such designation as would be required by the applicable marketplace and UMIR for trades made by an agent of the Issuer; and

(iv)          monitored by the Scotia Entities on a continual basis for the purposes of ensuring compliance with the terms of this Order, the NCIB Rules, and applicable securities law;

(c)           during the Program Term: (i) the Issuer does not purchase, directly or indirectly, any Common Shares (other than Inventory Shares purchased under the Program); (ii) no Common Shares are purchased on behalf of the Issuer by the Responsible Broker; (iii) no Plan Trustee is appointed and no Plan Trustee Purchases are conducted; and (iv) no ASPP (other than the Program during a Blackout Period) is implemented or operative;

(d)           the number of Inventory Shares transferred by BNS to the Issuer for purchase under the Program in respect of a particular Trading Day is equal to the number of Common Shares purchased by SCI on Canadian Markets under the Program in respect of the Trading Day;

(e)           no hedging activity is engaged in by the Scotia Entities in connection with the conduct of the Program;

(f)            at the time that the Program Agreement is entered into by the Filers and SCI:

(i)            the Common Shares are “highly liquid securities”, as that term is defined in section 1.1 of OSC Rule 48-501 and section 1.1 of UMIR; and

(ii)           none of the Issuer, any member of the Global Equity Derivatives group of BNS, or any personnel of either of the Scotia Entities that negotiated the Program Agreement or made, participated in the making of, or provided advice in connection with, the decision to enter into the Program Agreement and sell the Common Shares, was aware of any Undisclosed Information;

(g)           no purchase instructions in respect of the Program are given by the Issuer to SCI at any time that the Issuer is aware of Undisclosed Information;

(h)           the Scotia Entities maintain records of all purchases of Common Shares that are made by SCI pursuant to the Program, which will be available to the Commission and IIROC upon request; and

(i)            In addition to reporting its purchases of Common Shares under the Program to the TSX in accordance with the TSX NCIB Rules, immediately following the completion of the Program, the Issuer will: (i) report the total number of Common Shares acquired under the Program to the TSX and the Commission; and (ii) issue and file the Completion Press Release.

DATED at Toronto, Ontario this 14th day of February, 2018.