Securities Law & Instruments

Headnote

Clause 104(2)(c) -- Issuer bid -- relief from issuer bid requirements in sections 94 to 94.8 and 97 to 98.7 of the Act -- Issuer proposes to purchase, at a discounted purchase price, up to 1,465,000 of its common shares from one of its shareholders -- due to discounted purchase price, proposed purchases cannot be made through TSX trading system -- but for the fact that the proposed purchases cannot be made through the TSX trading system, the Issuer could otherwise acquire the subject shares in reliance upon the issuer bid exemption available under section 101.2 of the Act and in accordance with the TSX rules governing normal course issuer bid purchases -- no adverse economic impact on or prejudice to issuer or public shareholders -- proposed purchases exempt from issuer bid requirements in sections 94 to 94.8 and 97 to 98.7 of the Act, subject to conditions, including that the issuer not purchase, in the aggregate, more than one-third of the maximum number of shares to be purchased under its normal course issuer bid by way of off-exchange block purchases.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 94 to 94.8, 97 to 98.7, 104(2)(c).

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED AND IN THE MATTER OF TIM HORTONS INC.

ORDER (Clause 104(2)(c))

UPON the application (the "Application") of Tim Hortons Inc. (the "Issuer") to the Ontario Securities Commission (the "Commission") for an order pursuant to clause 104(2)(c) of the Securities Act (Ontario) (the "Act") exempting the Issuer from the requirements of sections 94 to 94.8, inclusive, and 97 to 98.7, inclusive, of the Act (the "Issuer Bid Requirements") in connection with the proposed purchases (the "Proposed Purchases") by the Issuer of up to 1,465,000 common shares of the Issuer (the "Subject Shares") in one or more tranches, from Royal Bank of Canada (the "Selling Shareholder");

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

AND UPON the Issuer (and the Selling Shareholder in respect of paragraphs 5, 6, 7, 8, 12, 23 and 24 as they relate to the Selling Shareholder) having represented to the Commission that:

1. The Issuer is a corporation governed by the Canada Business Corporations Act.

2. The registered and principal business office of the Issuer is 874 Sinclair Road, Oakville, Ontario, L6K 2Y1.

3. The Issuer is a reporting issuer in each of the provinces and territories of Canada and its common shares are listed for trading on the Toronto Stock Exchange (the "TSX") and the New York Stock Exchange (the "NYSE") under the symbol "THI". The Issuer is not in default of any requirement of the securities legislation in the jurisdictions in which it is a reporting issuer.

4. The Issuer's authorized share capital consists of an unlimited number of common shares (each, a "Common Share") of which 138,165,308 are issued and outstanding as of February 14, 2014.

5. The corporate headquarters of the Selling Shareholder are located in the Province of Ontario.

6. The Selling Shareholder has advised the Issuer that it does not directly or indirectly beneficially own more than 5% of the issued and outstanding Common Shares.

7. The Selling Shareholder has advised the Issuer that it is the beneficial owner of at least 1,465,000 Common Shares and that the Subject Shares were not acquired by the Selling Shareholder in anticipation of resale pursuant to private agreements under an issuer bid exemption order issued by a securities regulatory authority ("Off-Exchange Block Purchase").

8. The Selling Shareholder is at arm's length to the Issuer and is not an "insider" of the Issuer or "associate" of an "insider" of the Issuer, or an "associate" or "affiliate" of the Issuer, as such terms are defined in the Act. The Selling Shareholder is an "accredited investor" within the meaning of National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106").

9. Pursuant to a Notice of Intention to make the Normal Course Issuer Bid (the "Notice") accepted by the TSX on February 19, 2014, the Issuer has a normal course issuer bid effective February 28, 2014 (the "Normal Course Issuer Bid") to repurchase its Common Shares, such repurchases not to exceed the regulatory maximum of 13,726,219 Common Shares, representing 10% of the public float as of February 14, 2014, in accordance with sections 628 to 629.3 of Part VI of the TSX Company Manual (the "TSX NCIB Rules").

10. The Normal Course Issuer Bid is being conducted through the facilities of the TSX and purchases may also be made on the NYSE or alternative trading systems, if eligible, or by such other means as may be permitted by the TSX and/or the NYSE, including private agreements under an issuer bid exemption order issued by a securities regulatory authority.

11. The Issuer intends to enter into an automatic repurchase plan agreement with a broker providing for the repurchase of Common Shares to be conducted by the broker on the TSX, NYSE or alternative trading platforms within pre-determined parameters as part of the Normal Course Issuer Bid from February 28, 2014 to February 27, 2015. The Issuer will instruct the broker not to conduct a Block Purchase in accordance with the TSX NCIB Rules during the calendar week that the Issuer completes a Proposed Purchase. The Issuer has a self-imposed trading black-out period with respect to its regularly scheduled quarterly results (the "Blackout Period"). No purchases of Subject Shares pursuant to Off-Exchange Block Purchases will be made during the Blackout Period.

12. The Issuer and the Selling Shareholder intend to enter into one or more agreements of purchase and sale (each, an "Agreement"), under which the Issuer will agree to acquire some or all of the Subject Shares from the Selling Shareholder by one or more purchases (each such purchase under an Agreement, a "Proposed Purchase"). The purchase price (each such price, a "Purchase Price") for each Proposed Purchase will be negotiated at arm's length between the Issuer and the Selling Shareholder and specified in the applicable Agreement. The Purchase Price under each Agreement will be at a discount to the prevailing market price on the TSX and below the prevailing bid-ask price for the Issuer's Common Shares at the time of each Proposed Purchase under each Agreement. All Agreements in respect of a Proposed Purchase will occur by May 31, 2014.

13. The Subject Shares acquired under each Proposed Purchase will constitute a "block", as that term is defined in section 628 of the TSX NCIB Rules.

14. The purchases of the Subject Shares by the Issuer pursuant to each Agreement will constitute an "issuer bid" for purposes of the Act, to which the Issuer Bid Requirements would apply.

15. Because the Purchase Price will be at a discount to the prevailing market price on the TSX and below the prevailing bid-ask price for the Issuer's Common Shares, at the time of each Proposed Purchase, each Proposed Purchase cannot be made through the TSX trading system and, therefore, will not occur "through the facilities" of the TSX. As a result, the Issuer will be unable to acquire the Subject Shares from the Selling Shareholder in reliance upon the exemption from the Issuer Bid Requirements that is available pursuant to section 101.2(1) of the Act.

16. But for the fact that the Purchase Price will be at a discount to the prevailing market price on the TSX and below the prevailing bid-ask price for the Issuer's Common Shares, at the time of each Proposed Purchase, the Issuer could otherwise acquire the Subject Shares as a "block purchase" (a "Block Purchase") in accordance with the block purchase exception in section 629(1)7 of the TSX NCIB Rules and the exemption from the Issuer Bid Requirements available pursuant to section 101.2(1) of the Act.

17. The sale of any of the Subject Shares to the Issuer will not be a "distribution" (as defined in the Act).

18. For each Proposed Purchase, the Issuer will be able to acquire the Subject Shares from the Selling Shareholder without the Issuer being subject to the dealer registration requirements of the Act.

19. Management of the Issuer is of the view that the Issuer will be able to purchase the Subject Shares at a lower price than the price at which it would be able to purchase the Subject Shares under the Normal Course Issuer Bid, through the facilities of the TSX, and management is of the view that this is an appropriate use of funds to increase shareholder value.

20. The purchase of the Subject Shares will not adversely affect the Issuer or the rights of any of the Issuer's securityholders and it will not materially affect control of the Issuer. To the knowledge of the Issuer, the Proposed Purchases will not prejudice the ability of other securityholders of the Issuer to otherwise sell Common Shares in the open market at the prevailing market price. The Proposed Purchases will be carried out with a minimum cost to the Issuer.

21. To the best of the Issuer's knowledge, as of February 14, 2014, the "public float" for the Issuer's Common Shares represented approximately 99.35% of all issued and outstanding Common Shares for purposes of the TSX NCIB Rules.

22. The Common Shares are "highly liquid securities" within the meaning of section 1.1 of OSC Rule 48-501 Trading During Distributions, Formal Bids and Share Exchange Transactions and section 1.1 of the Universal Market Integrity Rules.

23. Other than the Purchase Price, no additional fee or other consideration will be paid in connection with the Proposed Purchases.

24. At the time that each Agreement in respect of a Proposed Purchase is entered into by the Issuer and the Selling Shareholder, neither the Issuer nor the Selling Shareholder will be aware of any "material change" or any "material fact" (each as defined in the Act) in respect of the Issuer that has not been generally disclosed.

25. The Issuer will not purchase, pursuant to private agreements under an issuer bid exemption order by a securities regulatory authority, in the aggregate, more than one-third of the maximum number of Common Shares that the Issuer may purchase under its Normal Course Issuer Bid.

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

IT IS ORDERED pursuant to clause 104(2)(c) of the Act that the Issuer be exempt from the Issuer Bid Requirements in connection with the Proposed Purchases, provided that:

(a) the Proposed Purchases will be taken into account by the Issuer when calculating the maximum annual aggregate limit that is imposed upon the Issuer's Normal Course Issuer Bid in accordance with the TSX NCIB Rules;

(b) the Issuer will refrain from conducting a Block Purchase in accordance with the TSX NCIB Rules during the calendar week that it completes each Proposed Purchase and may not make any further purchases under its Normal Course Issuer Bid for the remainder of that calendar day on which it completes each Proposed Purchase;

(c) the Purchase Price for each Proposed Purchase is not higher than the last "independent trade" (as that term is used in paragraph 629(l)1 of the TSX NCIB Rules) of a board lot of Common Shares immediately prior to the execution of each Proposed Purchase;

(d) the Issuer will otherwise acquire any additional Common Shares pursuant to the Issuer's Normal Course Issuer Bid in accordance with the Notice and TSX NCIB Rules, as applicable;

(e) immediately following each Proposed Purchase of the Subject Shares from the Selling Shareholder, the Issuer will report the purchase of the Subject Shares to the TSX;

(f) the Issuer will issue a press release disclosing (i) its intention to make the Proposed Purchases, and where such Proposed Purchases are made in tranches, in advance of the first tranche, and (ii) that information regarding each Proposed Purchase, including the number of Common Shares purchased and the aggregate purchase price, will be available on the System for Electronic Document Analysis and Retrieval (SEDAR) following the completion of each Proposed Purchase;

(g) the Issuer will report information regarding each Proposed Purchase, including the number of Common Shares purchased and the aggregate purchase price, on SEDAR before 5:00 p.m. (Toronto time) on the business day following such purchase;

(h) at the time that each Agreement in respect of a Proposed Purchase is entered into by the Issuer and the Selling Shareholder, neither the Issuer nor the Selling Shareholder will be aware of any "material change" or "material fact" (each as defined in the Act) in respect of the Issuer that has not been generally disclosed; and

(i) the Issuer does not purchase, pursuant to Off-Exchange Block Purchases, in the aggregate, more than one-third of the maximum number of Common Shares that the Issuer can purchase under its Normal Course Issuer Bid.

DATED at Toronto this 28th day of February, 2014.

"Edward P. Kerwin"
Commissioner
Ontario Securities Commission
 
"Judith Robertson"
Commissioner
Ontario Securities Commission