Given the limited nature of the “fiduciary clause,” what constitutes a “higher proposal” is often also a highly negotiated issue. In general, a “higher proposal” requires the board of directors of a target company to conclude certain issues relating to the competing offer, including the reasonable ability of the offer (i) to be concluded without undue delay (taking into account financial, legal, regulatory and other factors) and (ii) not to be subject to a condition of financing or due diligence. The board of directors of the target company must conclude, after a sound assessment and consultation with external legal and financial advisors, that the competing offer is financially more favourable to its shareholders than the transaction originally envisaged. Before the target company`s board of directors can exercise its “trust contract,” the acquisition agreement generally requires that it give the incumbent purchaser the right to respond to the competing offer or to amend its offer to provide for more favourable terms than the competing offer. If the competing offer is not satisfied or exceeded and the board of directors of a target company finds that the competing offer is indeed a “higher proposal,” it can exercise its rights under the “fiduciary clause” and terminate the established transaction. Such termination is usually related to an arrival or termination fee payable to the established buyer. 2 In a takeover bid from a Canadian company, they are generally referred to as support agreements and, for comparison plans, they are called transaction agreements. In this newsletter, we will refer to all agreements, such as merger agreements. While a buyer wants to ensure that the transaction he has proposed and negotiated with the target company will be completed even if another entity makes a competing offer to the entity concerned, the board of directors wants to ensure that a target company can properly meet its trust obligations. A “receiver clause” is one of the elements of the arsenal available to the board of directors of a target company to enable the exercise of its fiduciary duties and maximize shareholder value.