Securities Law & Instruments

Headnote

Subsection 104(2)(c) of the Act -- 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, pursuant to a repurchase program and at a discounted purchase price, up to 11,220,000 of its common shares under its normal course issuer bid from a third party purchasing as agent -- 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 101.2 of the Act -- 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 statutory normal course issuer bid exemptions -- no adverse economic impact on, or prejudice to the Issuer or its security holders -- acquisition of securities exempt from the issuer bid requirements in sections 94 to 94.8 and 97 to 98.7 of the Act, subject to conditions, including that the agreement governing the program will prohibit the third party from selling common shares from its existing inventory to the issuer under the program unless it has purchased, or had purchased on its behalf, an equivalent number of common shares on the market, which number of common shares must be equal to the number of common shares sold to the issuer.

Statutes Cited

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 CANADIAN NATIONAL RAILWAY COMPANY

ORDER (Clause 104(2)(c))

UPON the application (the "Application") of Canadian National Railway Company (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 sections 97 to 98.7, inclusive, of the Act (the "Issuer Bid Requirements") in respect of the proposed purchases by the Issuer of up to 11,220,000 (the "Program Maximum") of its common shares (the "Common Shares") from Canadian Imperial Bank of Commerce ("CIBC") pursuant to a repurchase program (the "Program");

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

AND UPON the Issuer (and the CIBC Entities in respect of paragraphs 5, 6, 7, 8, 21, 22, 25 to 34, inclusive, 41 and 42 as they relate to the CIBC Entities) having represented to the Commission that:

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

2. The registered and head office of the Issuer is located at 935 de La Gauchetière Street West, Montréal, Quebec, H3B 2M9.

3. The Issuer is a reporting issuer in each of the provinces and territories of Canada (the "Jurisdictions") and the Common Shares are listed for trading on the Toronto Stock Exchange (the "TSX") and the New York Stock Exchange (the "NYSE") under the symbols "CNR" and "CNI", respectively. The Issuer is not in default of any requirement of the securities legislation of the Jurisdictions.

4. The authorized common share capital of the Issuer consists of an unlimited number of Common Shares, of which 784,818,180 were issued and outstanding as of February 18, 2016.

5. CIBC is a full service Schedule 1 Bank under the Bank Act (Canada). The corporate headquarters of CIBC are located in the Province of Ontario.

6. CIBC does not directly or indirectly own more than 5% of the issued and outstanding Common Shares.

7. CIBC is the beneficial owner of at least 11,220,000 Common Shares, none of which were acquired by, or on behalf of, CIBC in anticipation or contemplation of resale to the Issuer (such Common Shares over which CIBC has beneficial ownership, the "Inventory Shares"). No Common Shares were purchased by, or on behalf of, CIBC on or after January 19, 2016, 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 CIBC to the Issuer.

8. CIBC 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. CIBC is an "accredited investor" within the meaning of National Instrument 45-106 Prospectus Exemptions.

9. Pursuant to a Notice of Intention to Make a Normal Course Issuer Bid (the "Original Notice") which was accepted by the TSX effective October 30, 2015, the Issuer was permitted to make a normal course issuer bid (the "Normal Course Issuer Bid") to purchase up to 33,000,000 Common Shares, representing approximately 4.9% of the Issuer's public float of Common Shares as of the date specified in the Original Notice. The Original Notice described the terms of the Initial Scotia Program (as defined below). On November 27, 2015, the TSX accepted an amendment to the Original Notice (the "Amendment" and together with the Original Notice, the "Notice") to reflect an increase to the maximum number of Common Shares that may be purchased under the Initial Scotia Program and to specifically contemplate purchases by the Issuer pursuant to one or more additional share purchase program agreements conducted pursuant to issuer bid exemption orders issued by securities regulatory authorities. The Notice also specifies that purchases under the Normal Course Issuer Bid will be conducted through the facilities of the TSX and the NYSE or alternative trading systems, if eligible, or by such other means as may be permitted by the TSX or a securities regulatory authority in accordance with sections 628 to 629.3 of Part VI of the TSX Company Manual (the "TSX Rules"), including under automatic trading plans and by private agreements or share repurchase programs under issuer bid exemption orders issued by securities regulatory authorities.

10. The Normal Course Issuer Bid is being conducted in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 101.2(1) of the Act, and its equivalent provision in the securities legislation of the other Jurisdictions (the "Designated Exchange Exemption").

11. The Normal Course Issuer Bid is also being conducted in the normal course on the NYSE and other permitted published markets (collectively with the NYSE, the "Other Published Markets") in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 101.2(2) of the Act, and its equivalent provision in the securities legislation of the other Jurisdictions (the "Other Published Markets Exemption", and together with the Designated Exchange Exemption, the "Statutory Exemptions").

12. Pursuant to the TSX Rules, the Issuer has appointed Scotia Capital Inc. as its designated broker in Canada, and Merrill Lynch, Pierce, Fenner & Smith as its designated broker in the United States, in each case, in respect of the Normal Course Issuer Bid (the "Responsible Brokers").

13. The Issuer may, from time to time, appoint a non-independent purchasing agent (a "Plan Trustee") to fulfill requirements for the delivery of Common Shares under the Issuer's security-based compensation plans (the "Plan Trustee Purchases").

14. Effective October 30, 2015, the Issuer implemented an automatic repurchase plan (the "ARP") to permit the Issuer to make purchases under the Normal Course Issuer Bid 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 ARP was approved by the TSX and is in compliance with the TSX Rules and applicable securities law.

15. The maximum number of Common Shares that the Issuer is permitted to repurchase under the Normal Course Issuer Bid, being 33,000,000 Common Shares, will be reduced by the number of Plan Trustee Purchases and purchases under the ARP.

16. To the best of the Issuer's knowledge, the "public float" (calculated in accordance with the TSX Rules) for the Common Shares as at February 18, 2016 consisted of 665,629,324 Common Shares. 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").

17. The Commission granted the Issuer an order on October 27, 2015 (the "October Order") pursuant to clause 104(2)(c) of the Act exempting the Issuer from the Issuer Bid Requirements in connection with the proposed purchases by the Issuer of up to 4,000,000 Common Shares from The Bank of Nova Scotia ("Scotia") pursuant to a share repurchase program (the "Initial Scotia Program"). On November 27, 2015, the Commission granted the Issuer an order pursuant to section 144 of the Act varying the October Order so as to increase the maximum number of Common Shares that may be purchased under the Initial Scotia Program from 4,000,000 to 5,175,000 Common Shares (such varied Initial Scotia Program, the "Scotia Program"). The Issuer purchased 5,175,000 Common Shares under the Scotia Program, which was completed on December 22, 2015.

18. The Commission granted an order on December 18, 2015 pursuant to clause 104(2)(c) of the Act exempting the Issuer from the Issuer Bid Requirements in connection with the proposed purchases by the Issuer of up to 4,356,000 Common Shares from Royal Bank of Canada ("RBC") pursuant to a share repurchase program (the "First RBC Program"). The Issuer purchased 4,356,000 Common Shares under the First RBC Program, which was completed on February 11, 2016.

19. The Autorité des Marchés Financiers granted an order on February 4, 2016 pursuant to section 263 of the Securities Act (Québec) from the equivalent provisions to the Issuer Bid Requirements in connection with the proposed purchases by the Issuer of up to 1,500,000 Common Shares from National Bank of Canada (the "NBC Program"). The Issuer purchased 1,500,000 Common Shares under the NBC Program, which was completed on March 2, 2016.

20. The Commission granted an order on February 16, 2016 pursuant to clause 104(2)(c) of the Act exempting the Issuer from the Issuer Bid Requirements in connection with the proposed purchases by the Issuer of up to 1,726,000 Common Shares from RBC pursuant to a share repurchase program (the "Second RBC Program"). As at March 7, 2016, the Issuer has purchased 334,550 Common Shares under the Second RBC Program. The Second RBC Program terminates on the earlier of March 24, 2016 and the date on which the Issuer will have purchased 1,726,000 Common Shares from RBC under the Second RBC Program. The Issuer expects the Second RBC Program to be completed on or about March 22, 2016.

21. The Issuer proposes to participate in the Program during, and as a part of, the Normal Course Issuer Bid. The Program will be governed by, and conducted in accordance with, the terms and conditions of a Repurchase Program Agreement (the "Program Agreement") that will be entered into among the Issuer, CIBC and CIBC World Markets Inc. ("CIBC WM", and together with CIBC, the "CIBC Entities") prior to the commencement of the Program and a copy of which will be delivered by the Issuer to the Commission promptly thereafter.

22. The Program will begin on the Trading Day following the completion or termination of the Second RBC Program, and the Program will terminate on the earlier of September 9, 2016 and the date on which the Issuer will have purchased the Program Maximum from CIBC (the "Program Term"). Neither the Issuer, nor any of the CIBC Entities may unilaterally terminate the Program Agreement during the Program Term, except in the case of an event of default by a party thereunder.

23. At least two clear trading days prior to the commencement of the Program, the Issuer will issue a press release that has been pre-cleared by the TSX that describes the material features of the Program and discloses the Issuer's intention to participate in the Program during the Normal Course Issuer Bid (the "Press Release").

24. The Program Maximum is less than the number of Common Shares remaining that the Issuer is entitled to acquire under the Normal Course Issuer Bid, calculated as at the date of the Program Agreement.

25. Pursuant to the terms of the Program Agreement, CIBC has retained CIBC WM to acquire Common Shares through the facilities of the TSX and on Other Published Markets in Canada (each, a "Canadian Other Published Market" and collectively with the TSX, the "Canadian Markets"). No Common Shares will be acquired under the Program on any Other Published Markets other than Canadian Other Published Markets.

26. CIBC WM is registered as an investment dealer under the securities legislation of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia and New Brunswick. It is also registered as a futures commission merchant under the Commodity Futures Act (Ontario) and as dealer (futures commission merchant) under The Commodity Futures Act (Manitoba). CIBC WM 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 CIBC WM is located in Toronto, Ontario.

27. The Program Term will include Blackout Periods. During such times, the CIBC Entities will conduct the Program in their sole discretion, in accordance with the irrevocable instructions set out in the Program Agreement and established at a time when the Issuer was not in a Blackout Period, in compliance with exchange and securities regulatory requirements applicable to automatic repurchase plans. The Program and its terms have been approved by the TSX and would, during a Blackout Period, be an "automatic securities purchase plan" as defined in National Instrument 55-104 Insider Reporting Requirements and Exemptions.

28. At such times during the Program Term when the Issuer is not in a Blackout Period, CIBC WM will purchase Common Shares on the applicable Trading Day (as defined below) in accordance with instructions that the CIBC Entities receive from the Issuer prior to the opening of trading on such day, which instructions will be the same instructions that the Issuer would give to Scotia Capital Inc., as its designated Canadian broker in respect of the Normal Course Issuer Bid, if it was conducting the Normal Course Issuer Bid in reliance on the Statutory Exemptions.

29. The Program Agreement will provide that all Common Shares acquired for the purposes of the Program by CIBC WM 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 Rules and any 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 Normal Course Issuer Bid, provided that:

(i) the aggregate number of Common Shares to be acquired on Canadian Markets by CIBC WM on each Trading Day shall not exceed the maximum daily limit that is imposed upon the Normal Course Issuer Bid pursuant to the TSX 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 CIBC WM on each Trading Day will not exceed the maximum daily limit that is imposed on the Normal Course Issuer Bid pursuant to the TSX Rules;

(ii) the aggregate number of Common Shares acquired by CIBC WM in connection with the Program shall not exceed the Program Maximum;

(iii) the aggregate number of Common Shares acquired by CIBC WM in connection with the Program on Canadian Other Published Markets shall not exceed that number of Common Shares remaining eligible for purchase pursuant to the Other Published Markets Exemption, calculated as at the date of the Program Agreement;

(iv) in respect of each Trading Day, upon the occurrence of a cessation of trading on the TSX or other event that would impair CIBC WM's ability to acquire Common Shares on Canadian Markets on such Trading Day (a "Market Disruption Event"), CIBC WM will cease acquiring Common Shares on such Trading Day and the number of Common Shares acquired by CIBC WM to such time on such Trading Day will be the "Acquired Shares" in respect of that Trading Day for the purposes of the Program; and

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

30. Pursuant to the Program Agreement, on every Trading Day, CIBC WM will purchase the Number of Common Shares. The "Number of Common Shares" will be no greater than the least of: (a) the quotient of an agreed upon daily Canadian dollar amount divided by the Discounted Price; (b) the Program Maximum less the aggregate number of Common Shares previously purchased by CIBC WM under the Program; (c) on a Trading Day on which a Market Disruption Event occurred, the Acquired Shares; and (d) the Modified Maximum Daily Limit. The "Discounted Price" per Common Share will be equal to (i) the volume weighted average price of the Common Shares on the Trading Day on which purchases were made less an agreed upon discount, or (ii) upon the occurrence of a Market Disruption Event, the volume weighted average price of the Common Shares at the time of the Market Disruption Event less an agreed upon discount.

31. Under the Program Agreement, CIBC will deliver to the Issuer that number of Inventory Shares equal to the number of Common Shares purchased by CIBC WM on a Trading Day under the Program on the second Trading Day thereafter, and the Issuer will pay CIBC a purchase price equal to the Discounted Price for each such Inventory Share. Each Inventory Share purchased by the Issuer under the Program will be cancelled upon delivery to the Issuer.

32. The Program Agreement will prohibit CIBC from selling any Inventory Shares to the Issuer under the Program unless CIBC WM has purchased the equivalent number of Common Shares on the Canadian Markets. The number of Common Shares that are purchased by CIBC WM on the Canadian Markets on a Trading Day will be equal to the Number of Common Shares for such Trading Day.

33. The Program Agreement will (a) prohibit the Issuer from purchasing any Common Shares (other than Inventory Shares purchased under the Program), (b) require the Issuer to prohibit the Responsible Brokers from acquiring any Common Shares on behalf of the Issuer, (c) require the Issuer to prohibit the Plan Trustee from undertaking any Plan Trustee Purchases, and (d) require the Issuer to prohibit the designated broker under the ARP from acquiring any Common Shares on behalf of the Issuer, in each case, during the conduct of the Program by the CIBC Entities.

34. The Program Agreement will provide that all purchases of Common Shares under the Program by CIBC WM will be done as if CIBC WM was an agent of the Issuer and neither of the CIBC 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 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) file a notice on the System for Electronic Document Analysis and Retrieval (SEDAR) disclosing the number of Common Shares acquired under the Program and the aggregate dollar amount paid for such Common Shares.

36. The Issuer is of the view that (a) it will be able to purchase Common Shares from CIBC at a lower price than the price at which it would be able to purchase an equivalent quantity of Common Shares under the Normal Course Issuer Bid in reliance on the Statutory 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. But for the fact that the Discount Price will be at a discount to the prevailing market price and below the prevailing bid-ask price for the Common Shares on the TSX at the time that the Issuer purchases Common Shares from CIBC, the Issuer could otherwise acquire such Common Shares through the facilities of the TSX as a "block purchase" in accordance with the block purchase exception in paragraph 629(1)7 of the TSX Rules and the Designated Exchange Exemption.

38. The entering into of the Program Agreement, the purchase of Common Shares by CIBC WM in connection with the Program, and the sale of Inventory Shares by CIBC to the Issuer will not adversely affect the Issuer or the rights of any of the Issuer's security holders and it will not materially affect control of the Issuer.

39. The sale of Inventory Shares to the Issuer by CIBC will not be a "distribution" (as defined in the Act).

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

41. At the time that the Issuer and the CIBC Entities enter into the Program Agreement, neither the Issuer, nor any member of the Equity Derivatives Trading group of CIBC, nor any personnel of either of the CIBC 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").

42. Each of CIBC Entities has policies and procedures that are designed to ensure conduct of the Program in accordance with, among other things, the Program Agreement and to preclude those persons responsible for administering the Program from acquiring any Undisclosed Information during the conduct of the Program.

AND UPON the Commission being satisfied that 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 respect of the entering into of the Program Agreement and the delivery of the Inventory Shares by CIBC to the Issuer pursuant to the Program, provided that:

(a) at least two clear trading days prior to the commencement of the Program, the Issuer will issue the Press Release;

(b) the Program Agreement will require that purchases of Common Shares under the Program will be made only on Canadian Markets, and only by CIBC WM;

(c) the Program Agreement will require that CIBC WM abide by the NCIB Rules applicable to the Normal Course Issuer Bid, subject to clauses 29(i) and (v) hereof;

(d) the Program Agreement will require that the CIBC Entities maintain records of all purchases of Common Shares that are made by CIBC WM pursuant to the Program, which will be available to the Commission and IIROC upon request;

(e) the Program Agreement will prohibit CIBC from selling Inventory Shares to the Issuer under the Program unless CIBC WM has purchased an equivalent number of Common Shares on the Canadian Markets, and the Program Agreement will provide that the number of Common Shares that are purchased by CIBC WM on the Canadian Markets on a Trading Day will be equal to the Number of Common Shares for that Trading Day;

(f) the Common Shares acquired by CIBC WM under the Program will be taken into account by the Issuer when calculating the maximum annual aggregate limits that are imposed upon the Normal Course Issuer Bid in accordance with the TSX Rules and those Common Shares that were purchased by CIBC WM on Canadian Other Published Markets will be 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;

(g) the Program Agreement will (i) prohibit the Issuer from purchasing any Common Shares (other than Inventory Shares purchased under the Program), (ii) require the Issuer to prohibit the Responsible Brokers from acquiring any Common Shares on behalf of the Issuer, (iii) require the Issuer to prohibit the Plan Trustee from undertaking any Plan Trustee Purchases, and (iv) require the Issuer to prohibit the designated broker under the ARP from acquiring any Common Shares on behalf of the Issuer, in each case, during the conduct of the Program by the CIBC Entities;

(h) each purchase made by CIBC WM through the facilities of the Canadian Markets pursuant to the Program shall be marked with such designation as would be required by the applicable marketplace and UMIR for trades made by an agent of the Issuer;

(i) at the time that the Program Agreement is entered into by the Issuer and the CIBC Entities, the Common Shares must be "highly liquid securities", as that term is defined in section 1.1 of OSC Rule 48-501 and section 1.1 of UMIR;

(j) at the time that the Issuer and the CIBC Entities enter into the Program Agreement, neither the Issuer, nor any member of the Equity Derivatives Trading group of CIBC, nor any personnel of either of the CIBC 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 Undisclosed Information; and

(k) in addition to reporting its purchases of Common Shares under the Program to the TSX in accordance with the TSX 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) file a notice on SEDAR disclosing the number of Common Shares acquired under the Program and the aggregate dollar amount paid for such Common Shares.

DATED at Toronto, Ontario, this 15th day of March, 2016

"Grant Vingoe"
Vice-Chair
Ontario Securities Commission
 
"William J. Furlong"
Commissioner
Ontario Securities Commission