Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether there is an acquisition of control following a share-for-share exchange XXXXXXXXXX
Position: There was no acquisition of control
Reasons: XXXXXXXXXX. Control for purposes of 256(7)(c) means de jure control.
XXXXXXXXXX
XXXXXXXXXX 1999-001121
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Attention: XXXXXXXXXX
XXXXXXXXXX, 2000
Dear Sirs:
Re: XXXXXXXXXX ("XXXXXXXXXX/Aco")
Business No. XXXXXXXXXX
XXXXXXXXXX ("XXXXXXXXXX/Bco")
Business No. XXXXXXXXXX
Advance Income Tax Ruling
We are writing in response to your letter of XXXXXXXXXX as restated by your letter of XXXXXXXXXX in which you requested advance income tax rulings on behalf of the above-noted taxpayers. We acknowledge your letters of XXXXXXXXXX and our telephone conversations in connection herewith.
To the best of your knowledge, and that of the taxpayers named herein, none of the issues involved in this advance income tax ruling request is under objection or appeal or is being considered by any tax services office or taxation centre of the Canada Customs and Revenue Agency in connection with any income tax return already filed.
DEFINITIONS
In this letter, the following terms have the meanings specified:
(a) "Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c.1, as amended to the date hereof, and unless otherwise stated, every reference herein to a part, section, subsection, paragraph, subparagraph or clause is a reference to the relevant provision of the Act;
(a.1) "acquiror" has the meaning assigned by the proposed definition of "specified corporation" in the Legislative Proposals released by the Department of Finance on November 30, 1999;
(b) "adjusted cost base" has the meaning assigned by section 54;
(c) "Announcement" has the meaning assigned by paragraph 28;
(d) "arm's length" has the meaning assigned by section 251;
(e) "Butterfly Transaction" means the transactions described in paragraphs 47 to 54;
(f) "Butterfly Proportion" means the fraction A/B
where:
A is the net fair market value of the assets to be transferred to XXXXXXXXXX/Jco referred to in paragraph 50 immediately before such transfer; and
B is the net fair market value of all property owned by XXXXXXXXXX/Aco immediately before the transfer of assets to XXXXXXXXXX/Jco referred to in paragraph 50;
(g) "Canadian corporation" has the meaning assigned by subsection 89(1);
(h) "capital property" has the meaning assigned by section 54;
(i) "CBCA" means the Canada Business Corporations Act;
(j) "XXXXXXXXXX/Gco" means XXXXXXXXXX, as described in paragraph 27;
(k) "XXXXXXXXXX/Gco Purchase Price" has the meaning assigned by paragraph 29;
(l) "XXXXXXXXXX/Gco Shares" has the meaning assigned by paragraph 29;
(m) "Contract" means the contract described in paragraph 28;
(n) "CCRA" means, on or after November 1, 1999, the Canada Customs and Revenue Agency, and before November 1, 1999, Revenue Canada, Taxation;
(o) "cost amount" has the meaning assigned by subsection 248(1);
(o.1) "XXXXXXXXXX Offer" means the take-over bid announced by XXXXXXXXXX/Aco on XXXXXXXXXX to acquire all of the common shares of XXXXXXXXXX at a price of $XXXXXXXXXX per common share to be paid in cash, and includes the offer for all of shares of XXXXXXXXXX referred to in the XXXXXXXXXX Lock-up Agreement";
(p) "distribution" has the meaning assigned by subsection 55(1);
(q) "dividend rental arrangement" has the meaning assigned by subsection 248(1);
(q.1) "XXXXXXXXXX Lock-up Agreement" means the lock-up agreement to be entered into between XXXXXXXXXX/Aco and the controlling shareholders of XXXXXXXXXX pursuant to which, among other things, XXXXXXXXXX/Aco agrees to make a cash offer for the shares of XXXXXXXXXX and the controlling shareholders of XXXXXXXXXX agree to tender their shares into such an offer;
(r) "Effective Date" means the effective date of the Plan of Arrangement;
(s) "XXXXXXXXXX/Aco" means XXXXXXXXXX, as described in paragraph 1 and, after the amalgamation described in paragraph 47, the corporation resulting from such amalgamation;
(t) "XXXXXXXXXX/Aco Board" means the Board of Directors of XXXXXXXXXX/Aco;
(u) "XXXXXXXXXX/Aco XXXXXXXXXX Common Shares" means the XXXXXXXXXX shares of XXXXXXXXXX/Aco described in paragraph 47;
(v) "XXXXXXXXXX/Aco Common Shareholders" means holders of XXXXXXXXXX/Aco Common Shares or XXXXXXXXXX/Aco XXXXXXXXXX Common Shares;
(w) "XXXXXXXXXX/Aco Common Shares" means the voting common shares of XXXXXXXXXX/Aco described in paragraph 3, either before or after the amalgamation described in paragraph 47;
(x) "XXXXXXXXXX/Aco Directors Share Unit Plan" means the XXXXXXXXXX Share Unit Plan for Non-Executive Directors (XXXXXXXXXX) described in paragraph 13;
(y) "XXXXXXXXXX/Aco dissenting shareholders" means the shareholders of XXXXXXXXXX/Aco who dissent from the Plan of Arrangement, as described in paragraph 46;
(z) "XXXXXXXXXX/Aco Executives Share Unit Plan" means the XXXXXXXXXX Share Unit Plan for Senior Executives and Other Key Employees (XXXXXXXXXX) described in paragraph 13;
(aa) "XXXXXXXXXX/Aco Optionholder" means a holder of XXXXXXXXXX/Aco Stock Options, as described in paragraph 12, before or after the exchange of options described in paragraph 48;
(bb) "XXXXXXXXXX/Aco Preferred Shareholder" means a holder of XXXXXXXXXX/Aco Preferred Shares;
(cc) "XXXXXXXXXX/Aco Preferred Shares" means XXXXXXXXXX;
(dd) "XXXXXXXXXX/Aco Redemption Note" means the note payable described in paragraph 52;
(ee) "XXXXXXXXXX/Aco Share Unit Plans" means the XXXXXXXXXX/Aco Directors Share Unit Plan and the XXXXXXXXXX/Aco Executives Share Unit Plan;
(ff) "XXXXXXXXXX/Aco Share Units" means the share units granted under XXXXXXXXXX/Aco Share Unit Plans;
(gg) "XXXXXXXXXX/Aco Stock Option" means an employee stock option to acquire XXXXXXXXXX/Aco Common Shares granted pursuant to one of the XXXXXXXXXX/Aco Stock Option Plans;
(hh) "XXXXXXXXXX/Aco Stock Option Plans" means the XXXXXXXXXX Long-term Incentive (Stock Option) Program (XXXXXXXXXX), as amended from time to time, and the XXXXXXXXXX Long-term Incentive (Stock Option) Program (XXXXXXXXXX);
(ii) "exchanged XXXXXXXXXX/Aco Stock Option" has the meaning assigned by paragraph 48;
(jj) "fair market value" means the highest price available in an open and unrestricted market between informed prudent parties acting at arm's length;
(kk) "forgiven amount" has the meaning assigned by subsections 80(1) and 80.01(1);
(ll) "guarantee agreement" has the meaning assigned by subsection 112(2.2);
(mm) "Majority Shareholders" has the meaning assigned by paragraph 27;
(nn) "XXXXXXXXXX/Bco" means XXXXXXXXXX, as described in paragraphs 17 and 18;
(oo) "XXXXXXXXXX/Bco Common Shareholders" means the holders of XXXXXXXXXX/Bco Common Shares, excluding XXXXXXXXXX/Aco, XXXXXXXXXX/Ico, XXXXXXXXXX/Dco, and XXXXXXXXXX/Cco;
(pp) "XXXXXXXXXX/Bco Common Shares" means the voting common shares of XXXXXXXXXX/Bco, as described in paragraph 19;
(qq) "XXXXXXXXXX/Bco dissenting shareholders" means the shareholders of XXXXXXXXXX/Bco who dissent from the Plan of Arrangement, as described in paragraph 46;
(rr) "XXXXXXXXXX/Ico" means the Canadian corporation described in paragraph 22 and, after the amalgamation described in paragraph 57, the corporation resulting from such amalgamation;
(ss) "XXXXXXXXXX/Ico Board" means the Board of Directors of XXXXXXXXXX/Ico;
(tt) "XXXXXXXXXX/Ico Common Shares" means the voting common shares of XXXXXXXXXX/Ico, as described in paragraph 22;
(uu) "XXXXXXXXXX/Ico XXXXXXXXXX/Aco Stock Option" has the meaning assigned by paragraph 58;
(vv) "XXXXXXXXXX/Jco" means the Canadian corporation described in paragraph 23;
(ww) "XXXXXXXXXX/Jco Common Shares" means the voting common shares of XXXXXXXXXX/Jco, as described in paragraph 23;
(xx) "XXXXXXXXXX/Jco Redemption Note" means the note payable described in paragraph 51;
(yy) "XXXXXXXXXX/Bco Optionholder" means a holder of XXXXXXXXXX/Bco Options as described in paragraph 21;
(zz) "XXXXXXXXXX/Bco Preferred Shares" means the issued and outstanding XXXXXXXXXX Preferred Shares of XXXXXXXXXX/Bco, as described in paragraph 19;
(aaa) "XXXXXXXXXX/Bco XXXXXXXXXX Shares" means the XXXXXXXXXX/Bco Preferred Shares described in paragraph 20;
(bbb) reserved;
(ccc) "new XXXXXXXXXX/Aco Preferred Shares" has the meaning assigned by paragraph 47;
(ddd) "New XXXXXXXXXX/Aco Stock Option" has the meaning assigned by paragraph 48;
(eee) "old XXXXXXXXXX/Aco Preferred Shares" has the meaning assigned by paragraph 47;
(fff) "Option" means the agreement described in paragraph 27;
(ggg) "Other Operations" has the meaning assigned by paragraph 65;
(hhh) "paid-up capital" has the meaning assigned by subsection 89(1);
(iii) "Plan of Arrangement" means the proposed plan of arrangement under section 192 of the CBCA to effect the transactions described in paragraphs 47 to 61;
(jjj) "principal amount" has the meaning assigned by subsection 248(1);
(kkk) "private corporation" has the meaning assigned by subsection 89(1);
(lll) "Proposed Transactions" means the transactions referred to in paragraphs 39 to 63;
(mmm) "public corporation" has the meaning assigned by subsection 89(1);
(nnn) "Purchase Agreement" means the agreement described in paragraph 29;
(ooo) "Regulations" refers to the Income Tax Regulations;
(ppp) "restricted financial institution" has the meaning assigned by subsection 248(1);
(qqq) "safe income on hand" in respect of the shares of a corporation at a particular time means the portion of the unrealized gain inherent in the shares at that time that cannot reasonably be considered to be attributable to anything other than income earned or realized (as determined under paragraph 55(5)(b)) by the corporation and its subsidiaries after 1971 and before the safe-income determination time for the series of transactions that includes the Proposed Transactions;
(rrr) "safe-income determination time" has the meaning assigned by subsection 55(1);
(sss) "series of transactions or events" has the meaning assigned by subsection 248(10);
(ttt) "XXXXXXXXXX Shares" means the XXXXXXXXXX Preferred Shares, XXXXXXXXXX of XXXXXXXXXX/Aco, as described in paragraph 5;
(uuu) "XXXXXXXXXX Shares" means the XXXXXXXXXX Preferred Shares, XXXXXXXXXX of XXXXXXXXXX/Aco, as described in paragraph 6;
(vvv) "XXXXXXXXXX Shares" means the XXXXXXXXXX Preferred Shares, XXXXXXXXXX of XXXXXXXXXX/Aco, as described in paragraph 7;
(www) "XXXXXXXXXX Shares" means the XXXXXXXXXX Preferred Shares, XXXXXXXXXX of XXXXXXXXXX/Aco, as described in paragraph 8;
(xxx) "XXXXXXXXXX Shares" means the XXXXXXXXXX Preferred Shares, XXXXXXXXXX of XXXXXXXXXX/Aco, as described in paragraph 8;
(yyy) "XXXXXXXXXX Shares" means the XXXXXXXXXX Preferred Shares, XXXXXXXXXX of XXXXXXXXXX/Aco, as described in paragraph 8;
(zzz) "XXXXXXXXXX Shares" means the XXXXXXXXXX Preferred Shares, XXXXXXXXXX of XXXXXXXXXX/Aco, as described in paragraph 8;
(aaaa) "XXXXXXXXXX Shares" means the XXXXXXXXXX Preferred Shares, XXXXXXXXXX of XXXXXXXXXX/Aco, as described in paragraph 8;
(bbbb) "XXXXXXXXXX Shares" means the XXXXXXXXXX Preferred Shares, XXXXXXXXXX of XXXXXXXXXX/Aco, as described in paragraph 8;
(cccc) "XXXXXXXXXX Shares" means the XXXXXXXXXX Preferred Shares, XXXXXXXXXX of XXXXXXXXXX/Aco, as described in paragraph 8;
(dddd) "XXXXXXXXXX Shares" means the XXXXXXXXXX Preferred Shares, XXXXXXXXXX of XXXXXXXXXX/Aco, as described in paragraph 8;
(eeee) "Share Unit Holders" means the holders of XXXXXXXXXX/Aco Share Units as described in paragraph 13;
(ffff) "short-term preferred share" has the meaning assigned by subsection 248(1);
(gggg) "special resolution" has the meaning assigned by paragraph 22;
(hhhh) "specified class" has the meaning assigned by subsection 55(1);
(iiii) "specified financial institution" has the meaning assigned by subsection 248(1);
(jjjj) "specified shareholder" has the meaning assigned by subsection 248(1) as modified by subsections 55(3.2) and (3.3);
(kkkk) "stated capital account" has the meaning assigned by section 26 of the CBCA;
(llll) "XXXXXXXXXX/Cco" means XXXXXXXXXX, the Canadian corporation described in paragraph 14;
(mmmm) "XXXXXXXXXX/Cco Common Shares" means the voting common shares of XXXXXXXXXX/Cco, as described in paragraph 14;
(nnnn) "XXXXXXXXXX/Cco Option" has the meaning assigned by paragraph 48;
(oooo) "XXXXXXXXXX/Cco Optionholder" means a holder of XXXXXXXXXX/Cco Options;
(pppp) "XXXXXXXXXX/Cco Preferred Shares" means the preferred shares of XXXXXXXXXX/Cco, as described in paragraph 40;
(qqqq) "subsidiary controlled corporation" has the meaning assigned by subsection 248(1);
(rrrr) "subsidiary wholly-owned corporation" has the meaning assigned by subsection 248(1);
(ssss) "taxable Canadian corporation" has the meaning assigned by subsection 89(1);
(tttt) "taxable dividend" has the meaning assigned by subsection 89(1);
(uuuu) "taxable preferred share" has the meaning assigned by subsection 248(1);
(vvvv) "XXXXXXXXXX Agreements" means the support agreement entered into between XXXXXXXXXX/Aco and XXXXXXXXXX pursuant to which, among other things, XXXXXXXXXX/Aco agrees to make an offer for the shares of XXXXXXXXXX not owned by XXXXXXXXXX/Aco or affiliates of XXXXXXXXXX/Aco and XXXXXXXXXX agrees to support such offer and the lock-up agreements entered into by XXXXXXXXXX/Aco and significant shareholders of XXXXXXXXXX under which, among other things, the shareholders agree to tender their shares into such an offer;
(wwww) "term preferred share" has the meaning assigned by subsection 248(1);
(xxxx) "Transferred Multiple" means the result obtained from the following equation:
Transferred Proportion
1- Transferred Proportion
(yyyy) "Transferred Proportion" means the fraction:
A x C
B
where:
A is the Butterfly Proportion;
B is the fair market value of all of the XXXXXXXXXX/Aco Common Shares and XXXXXXXXXX/Aco XXXXXXXXXX Common Shares issued and outstanding immediately before the transfer described in paragraph 50; and
C is the fair market value of all shares of all classes of XXXXXXXXXX/Aco issued and outstanding immediately before the transfer described in paragraph 50;
(zzzz) "Trustee" has the meaning assigned by paragraph 63;
(aaaaa) "unsuccessful auction" has the meaning assigned by paragraph 20; and
(bbbbb) "XXXXXXXXXX/Dco" means XXXXXXXXXX, the Canadian corporation described in paragraph 14.
FACTS
Facts Relating to XXXXXXXXXX/Aco
1. XXXXXXXXXX/Aco was incorporated in XXXXXXXXXX and is governed by the CBCA. It is a public corporation and a taxable Canadian corporation.
2. XXXXXXXXXX/Aco is a XXXXXXXXXX corporation whose principal subsidiaries and associated companies constitute XXXXXXXXXX business:
(a) XXXXXXXXXX
(b) XXXXXXXXXX
(c XXXXXXXXXX
(d) XXXXXXXXXX
(e) XXXXXXXXXX
3. As at XXXXXXXXXX/Aco had XXXXXXXXXX common shares issued and outstanding representing all of its issued voting shares (the "XXXXXXXXXX/Aco Common Shares"). The XXXXXXXXXX/Aco Common Shares are listed on XXXXXXXXXX.
The XXXXXXXXXX/Aco Common Shares are not short-term preferred shares, taxable preferred shares or term preferred shares.
4. XXXXXXXXXX/Aco also has XXXXXXXXXX issued and outstanding XXXXXXXXXX Preferred Shares issued XXXXXXXXXX. The relevant terms and conditions of the XXXXXXXXXX Preferred Shares are described in greater detail in paragraphs 5 to 8.
5.
XXXXXXXXXX
6.
XXXXXXXXXX
7.
XXXXXXXXXX
8.
XXXXXXXXXX
9. Based on a review of the shareholders' register, and to the knowledge of XXXXXXXXXX/Aco's directors and senior officers, it does not appear that any XXXXXXXXXX/Aco Common Shareholder owns more than 10% of the issued and outstanding XXXXXXXXXX/Aco Common Shares.
10.
XXXXXXXXXX
11. XXXXXXXXXX/Aco currently has outstanding long-term debt XXXXXXXXXX with various terms to maturity and with an aggregate principal amount of approximately $XXXXXXXXXX.
12. XXXXXXXXXX/Aco has granted XXXXXXXXXX/Aco Stock Options under the XXXXXXXXXX/Aco Stock Option Plans to certain officers and employees of XXXXXXXXXX/Aco and its subsidiaries (the "XXXXXXXXXX/Aco Optionholders"). As of XXXXXXXXXX, a total of XXXXXXXXXX options for XXXXXXXXXX/Aco Common Shares at exercise prices ranging from approximately $XXXXXXXXXX to $XXXXXXXXXX per share were outstanding to XXXXXXXXXX/Aco Optionholders under the XXXXXXXXXX/Aco Stock Option Plans. In each case, the exercise price of the XXXXXXXXXX/Aco Stock Option is not less than the fair market value of an XXXXXXXXXX/Aco Common Share at the time that the XXXXXXXXXX/Aco Stock Option was granted to the XXXXXXXXXX/Aco Optionholder. The expiry dates of the XXXXXXXXXX/Aco Stock Options range from XXXXXXXXXX.
13. Certain directors, officers and key employees of XXXXXXXXXX/Aco and its subsidiaries have been granted XXXXXXXXXX/Aco Share Units under the XXXXXXXXXX/Aco Share Unit Plans (the "Share Unit Holders"). Under the XXXXXXXXXX/Aco Share Unit Plans, Share Unit Holders are granted a notional monetary bonus, which is then divided by the fair market value of the XXXXXXXXXX/Aco Common Shares, to arrive at a calculated number of "units" maintained in a notional account on behalf of the Share Unit Holder. The Share Unit Holder is entitled to redeem the "units" no earlier than retirement, termination of employment or death, and no later than the end of the first calendar year following said events. At that time, the value which the Share Unit Holder will receive for the "units" is based on the fair market value of the XXXXXXXXXX/Aco Common Shares, determined at a time commencing one year before the redemption date. There is no protection provided to a Share Unit Holder against a decline in the fair market value of XXXXXXXXXX/Aco Common Shares. The XXXXXXXXXX/Aco Share Unit Plans are plans prescribed under paragraph 6801(d) of the Regulations. The XXXXXXXXXX/Aco XXXXXXXXXX Plan is the subject of advance income tax ruling XXXXXXXXXX dated XXXXXXXXXX and the XXXXXXXXXX/Aco XXXXXXXXXX Unit Plan is the subject of advance income tax ruling XXXXXXXXXX. As of XXXXXXXXXX, a total of XXXXXXXXXX/Aco Share Units have been credited to Share Unit Holders' accounts under the XXXXXXXXXX/Aco XXXXXXXXXX Plan and a total of XXXXXXXXXX/Aco Share Units have been credited to Share Unit Holders' accounts under the XXXXXXXXXX/Aco XXXXXXXXXX Unit Plan.
14. As at XXXXXXXXXX/Aco owned directly XXXXXXXXXX/Bco Common Shares (XXXXXXXXXX/Bco is discussed in greater detail below). XXXXXXXXXX/Aco also owns an additional XXXXXXXXXX/Bco Common Shares through XXXXXXXXXX/Cco and an additional XXXXXXXXXX/Bco Common Shares through XXXXXXXXXX/Dco. Both XXXXXXXXXX/Cco and XXXXXXXXXX/Dco are corporations which are wholly-owned subsidiaries of XXXXXXXXXX/Aco. XXXXXXXXXX/Aco's aggregate direct and indirect interest in XXXXXXXXXX/Bco currently approximates XXXXXXXXXX% of the XXXXXXXXXX/Bco Common Shares.
The issued and outstanding share capital of XXXXXXXXXX/Cco consists of XXXXXXXXXX common shares (the "XXXXXXXXXX/Cco Common Shares").
15. The fair market value of the XXXXXXXXXX/Bco Common Shares directly held by each of XXXXXXXXXX/Aco, XXXXXXXXXX/Cco, and XXXXXXXXXX/Dco will exceed the adjusted cost base to XXXXXXXXXX/Aco, XXXXXXXXXX/Cco, and XXXXXXXXXX/Dco, respectively, of such shares and the paid-up capital of such shares.
16. The fair market value of the shares of XXXXXXXXXX/Cco and of XXXXXXXXXX/Dco, which are directly held by XXXXXXXXXX/Aco at XXXXXXXXXX, will exceed the adjusted cost base to XXXXXXXXXX/Aco of such shares and the paid-up capital of such shares.
Facts Relating to XXXXXXXXXX/Bco
17. XXXXXXXXXX/Bco is a public corporation and taxable Canadian corporation that is governed by the CBCA.
18.
XXXXXXXXXX
19. As at XXXXXXXXXX/Bco had XXXXXXXXXX common shares issued and outstanding representing all of the issued voting shares (the "XXXXXXXXXX/Bco Common Shares"). The XXXXXXXXXX/Bco Common Shares are listed on XXXXXXXXXX.
As at XXXXXXXXXX/Bco also had XXXXXXXXXX issued and outstanding XXXXXXXXXX Preferred Shares issued XXXXXXXXXX:
(a) XXXXXXXXXX
(b) XXXXXXXXXX
(c XXXXXXXXXX
20. The XXXXXXXXXX/Bco XXXXXXXXXX Shares are listed and posted for trading on the XXXXXXXXXX.
XXXXXXXXXX
21. XXXXXXXXXX/Bco Stock Option Plans
XXXXXXXXXX/Bco has granted XXXXXXXXXX/Bco Options under the XXXXXXXXXX/Bco Plan") to certain officers and employees of XXXXXXXXXX/Bco and its subsidiaries (the "XXXXXXXXXX/Bco Optionholders"). As of XXXXXXXXXX, a total of XXXXXXXXXX/Bco Options for XXXXXXXXXX/Bco Common Shares at exercise prices ranging from $XXXXXXXXXX to $XXXXXXXXXX per share were outstanding to XXXXXXXXXX/Bco Optionholders under the XXXXXXXXXX/Bco Plan. Each option is granted on its own or along with stock appreciation rights (each referred to as a "SAR") which is a right to receive payment of an amount equal to the appreciation in value of a XXXXXXXXXX/Bco Common Share covered by the SAR from the date it is granted to the date the SAR is exercised. Each SAR entitles its holder to receive, upon exercise of the SAR, an amount equal to the difference between the market value of a XXXXXXXXXX/Bco Common Share on the date of exercise of the SAR and the subscription price of the related option. As of XXXXXXXXXX, there were XXXXXXXXXX SARs outstanding and approximately XXXXXXXXXX of these SARs were held by persons subject to tax in Canada.
In each case, the exercise price of a XXXXXXXXXX/Bco Option is not less than the fair market value of a XXXXXXXXXX/Bco Common Share at the time that the XXXXXXXXXX/Bco Option was granted to the XXXXXXXXXX/Bco Optionholder. As of XXXXXXXXXX, the expiry dates of the XXXXXXXXXX/Bco Options range from XXXXXXXXXX.
XXXXXXXXXX/Bco has allocated to certain employees of XXXXXXXXXX/Bco and its subsidiaries restricted stock units (each a "RSU") pursuant to the XXXXXXXXXX (the "RSU Plan"). When granted, each RSU entitles the holder thereof to receive one XXXXXXXXXX/Bco Common Share subject to satisfaction of certain performance criteria. Under no circumstances is a RSU considered to be a XXXXXXXXXX/Bco Common Share and it does not entitle its holder to exercise voting rights, dividends or any other rights attaching to ownership of a XXXXXXXXXX/Bco Common Share. As of XXXXXXXXXX, a total of XXXXXXXXXX RSUs that are to be settled for XXXXXXXXXX/Bco Common Shares were allocated to employees of XXXXXXXXXX/Bco and its subsidiaries under the RSU Plan.
XXXXXXXXXX/Bco acquired XXXXXXXXXX ("XXXXXXXXXX/Eco"), a corporation incorporated under the laws of the XXXXXXXXXX, by way of a merger of a wholly owned subsidiary of XXXXXXXXXX/Bco with and into XXXXXXXXXX/Eco (the "XXXXXXXXXX/Eco Merger"). On XXXXXXXXXX, the shares of XXXXXXXXXX/Eco were transferred to XXXXXXXXXX. ("XXXXXXXXXX/Kco"), a wholly owned subsidiary of XXXXXXXXXX/Bco, in exchange for shares of XXXXXXXXXX/Kco. At the effective time of the XXXXXXXXXX/Eco Merger, XXXXXXXXXX/Bco assumed all the options to acquire shares of XXXXXXXXXX/Eco (the "XXXXXXXXXX/Eco Options") then outstanding under the XXXXXXXXXX (the "XXXXXXXXXX/Eco Plan"). Each XXXXXXXXXX/Eco Option constitutes an option to acquire, on the same terms and conditions as were applicable prior to the effective time of the XXXXXXXXXX/Eco Merger, the number of XXXXXXXXXX/Bco Common Shares as the holder of such option would have been entitled to receive pursuant to the XXXXXXXXXX/Eco Merger had such a holder exercised such option in full immediately prior to the XXXXXXXXXX/Eco Merger (not taking into account whether or not such option was, in fact, exercisable) at a price per share equal to (i) the aggregate exercise price for XXXXXXXXXX/Eco common stock otherwise purchasable pursuant to such option divided by (ii) the number of XXXXXXXXXX/Bco Common Shares deemed purchasable pursuant to such assumed XXXXXXXXXX/Eco Option, subject to an exception for fractional shares.
No further grants have been made of XXXXXXXXXX/Eco Options since the XXXXXXXXXX/Eco Merger and any options granted prior to the XXXXXXXXXX/Eco Merger and that are still outstanding will be exercisable under the XXXXXXXXXX/Eco Plan for XXXXXXXXXX/Bco Common Shares.
As of XXXXXXXXXX, a total of XXXXXXXXXX options were outstanding under the XXXXXXXXXX/Eco Plan at exercisable prices ranging from XXXXXXXXXX to XXXXXXXXXX per XXXXXXXXXX/Bco Common Share. In each case, the exercise price of an option under the XXXXXXXXXX/Eco Plan is not less than the fair market value of a share of XXXXXXXXXX/Eco at the time that the option was granted to the XXXXXXXXXX/Eco optionholder.
On XXXXXXXXXX/Bco and XXXXXXXXXX ("XXXXXXXXXX/Fco"), a corporation incorporated under the laws of the XXXXXXXXXX, announced the signing of a definitive agreement whereby XXXXXXXXXX/Bco will acquire XXXXXXXXXX/Fco (the "XXXXXXXXXX/Fco Merger"). XXXXXXXXXX.
At the effective time of the XXXXXXXXXX/Fco Merger, XXXXXXXXXX/Bco intends to assume all options to acquire common shares of XXXXXXXXXX/Fco granted to employees or directors of, or consultants or advisors to, XXXXXXXXXX/Fco or any of its subsidiaries pursuant to stock option plans previously established by XXXXXXXXXX/Fco (the "XXXXXXXXXX/Fco Options") under the XXXXXXXXXX (the "XXXXXXXXXX/Fco Plan"). The XXXXXXXXXX/Fco Plan will be frozen at the effective time of the XXXXXXXXXX/Fco Merger and no further options will be granted thereunder after that time.
At the effective time of the XXXXXXXXXX/Fco Merger, each XXXXXXXXXX/Fco Option will be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under the XXXXXXXXXX/Fco Plan prior to the effective time of the XXXXXXXXXX/Fco Merger, the number of XXXXXXXXXX/Bco Common Shares (rounded down to the greatest number of whole XXXXXXXXXX/Bco Common Shares) that is equal to the product of (i) the number of common shares of XXXXXXXXXX/Fco covered by such XXXXXXXXXX/Fco Option immediately prior to the effective time of the XXXXXXXXXX/Fco Merger multiplied by (ii) XXXXXXXXXX, at an option exercise price per XXXXXXXXXX/Bco Common Share equal to the quotient of (iii) the option exercise price per common share of XXXXXXXXXX/Fco covered by such XXXXXXXXXX/Fco Option immediately prior to the effective time of the XXXXXXXXXX/Fco Merger divided by (iv) XXXXXXXXXX. In all cases, the exercise price of each XXXXXXXXXX/Fco Option outstanding under the XXXXXXXXXX/Fco Plan is not less than XXXXXXXXXX % of the fair market value of the shares for which such option was exercisable at the time the option was granted.
The participants under the XXXXXXXXXX/Fco Plan and holders of RSUs are not eligible for the deduction permitted by subparagraph 110(1)(d).
Corporations Incorporated for Proposed Transactions
22. Prior to the implementation of the Proposed Transactions, a new corporation ("XXXXXXXXXX/Ico") will be incorporated under the CBCA. XXXXXXXXXX/Ico will be a taxable Canadian corporation.
The authorized share capital of XXXXXXXXXX/Ico will consist of an unlimited number of voting common shares (the "XXXXXXXXXX/Ico Common Shares") and XXXXXXXXXX preferred shares.
XXXXXXXXXX
No shares of XXXXXXXXXX/Ico will be issued on incorporation. XXXXXXXXXX.
23. Prior to the implementation of the Proposed Transactions, XXXXXXXXXX/Ico will have incorporated a subsidiary corporation (XXXXXXXXXX/Jco) under the CBCA. XXXXXXXXXX/Jco will be a taxable Canadian corporation. The authorized share capital of XXXXXXXXXX/Jco will consist of an unlimited number of common shares (the "XXXXXXXXXX/Jco Common Shares"). One XXXXXXXXXX/Jco Common Share will be issued to XXXXXXXXXX/Ico on incorporation for aggregate proceeds of $XXXXXXXXXX.
24.
XXXXXXXXXX
25.
XXXXXXXXXX
(i) XXXXXXXXXX;
(ii) XXXXXXXXXX
(iii) XXXXXXXXXX.
XXXXXXXXXX
26.
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX/Aco is considering, or in the future may consider, acquisitions or other transactions that are unrelated to the Proposed Transactions.
27.
XXXXXXXXXX
28.
XXXXXXXXXX
29.
XXXXXXXXXX
30. The XXXXXXXXXX/Aco Board approved the adoption of a shareholder rights plan on XXXXXXXXXX, which plan will be subject to ratification by the XXXXXXXXXX/Aco Common Shareholders in a vote that will be separate from the vote in respect of the Plan of Arrangement. Such plan is intended to be established irrespective of shareholder approval of the Plan of Arrangement. The plan is intended to ensure, to the extent possible, that all shareholders of XXXXXXXXXX/Aco would be treated fairly in connection with any take-over offer (as defined under the plan) for XXXXXXXXXX/Aco. Pursuant to the plan, XXXXXXXXXX/Aco distributed certain rights to shareholders enabling them to purchase XXXXXXXXXX/Aco Common Shares, and the effective exercise price in respect of such rights would initially be an amount which would be significantly in excess of the fair market value of the shares to be acquired upon the exercise of such rights, but would be reduced to an amount which would be significantly less than the fair market value of such shares in the event that a person who does not comply with certain provisions of the shareholder rights plan acquires more than a specified percentage of the XXXXXXXXXX/Aco Common Shares. The share purchase rights under the plan do not trade separately from the related common shares until such time (if ever) as a person either acquired or announced an intention to acquire a specified percentage of the XXXXXXXXXX/Aco Common Shares and, until such time, such rights would not have any material value.
The terms and conditions of the share purchase rights will provide that on the amalgamation referred to in paragraph 47, the share purchase rights will become rights to acquire new XXXXXXXXXX/Aco Common Shares. The share purchase rights will remain outstanding at all relevant times and would not be cancelled and replaced with new share purchase rights.
31. All of the transactions referred to in paragraphs 26, 29 and 30 were, or, if completed, would be, undertaken irrespective of whether the Proposed Transactions are undertaken. Similarly, the Proposed Transactions would be undertaken irrespective of such transactions. For greater certainty, none of such transactions has been or will be undertaken in contemplation of the Proposed Transactions.
32. Except as described herein, no debts have been or will be incurred or paid and no property has been or will be acquired by XXXXXXXXXX/Aco or any company controlled by XXXXXXXXXX/Aco in contemplation of the proposed transactions described below, other than in a transaction described in subparagraphs 55(3.1)(a)(i) to (iv).
33. None of the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares, the XXXXXXXXXX/Jco Common Shares, the XXXXXXXXXX/Cco Common Shares or the XXXXXXXXXX/Cco Preferred Shares, is or will be subject to a guarantee agreement.
34. None of the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares, the XXXXXXXXXX/Jco Common Shares, the XXXXXXXXXX/Cco Common Shares or the XXXXXXXXXX/Cco Preferred Shares, has been or will be issued or acquired as part of a transaction or event or series of transactions or events of the type described in subsection 112(2.5).
35. None of the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares, the XXXXXXXXXX/Jco Common Shares, the XXXXXXXXXX/Cco Common Shares or the XXXXXXXXXX/Cco Preferred Shares, is or will be subject to a dividend rental arrangement.
36. Except as described herein, no changes to the share capital structure of XXXXXXXXXX/Aco are contemplated before the date of the commencement of the Proposed Transactions with the exception of changes that would result from the refinancing, conversion or new issuance of preferred shares and the ordinary operations of XXXXXXXXXX/Aco's Shareholder Dividend Reinvestment and Stock Purchase Plan, Employees' Savings Plan, the exercise of XXXXXXXXXX/Aco Stock Options by officers and key employees.
The issuance of XXXXXXXXXX/Aco shares pursuant to the XXXXXXXXXX/Aco's Shareholder Dividend Reinvestment and Stock Purchase Plan, the Employees' Savings Plan and the exercise of XXXXXXXXXX/Aco Stock Options by officers and key employees, and the new issuance of preferred shares are done in the ordinary course of the business of XXXXXXXXXX/Aco and would occur whether or not the Butterfly Transaction takes place.
37. XXXXXXXXXX/Aco is not a restricted financial institution. Neither XXXXXXXXXX/Ico nor XXXXXXXXXX/Jco is a restricted financial institution.
38. All of the shares owned by XXXXXXXXXX/Aco, XXXXXXXXXX/Cco, XXXXXXXXXX/Dco, XXXXXXXXXX/Ico and XXXXXXXXXX/Jco are and will be held as capital property.
PROPOSED TRANSACTIONS
Pre-Arrangement Transactions
39. Upon obtaining the required approval of the holders of XXXXXXXXXX Shares, the terms and conditions of the XXXXXXXXXX Shares will be amended XXXXXXXXXX:
(a) XXXXXXXXXX;
(b) XXXXXXXXXX;
(c) XXXXXXXXXX.
40. XXXXXXXXXX/Cco's articles of incorporation will be amended to create a new class of preferred shares (the "XXXXXXXXXX/Cco Preferred Shares"). Each XXXXXXXXXX/Cco Preferred Share will be redeemable at any time at the option of the issuer and retractable at any time at the option of the holder for an aggregate amount equal to the fair market value of the property received for the issuance of the shares divided by the number of XXXXXXXXXX/Cco Preferred Shares issued as consideration for such property. The XXXXXXXXXX/Cco Preferred Shares will be non-voting.
41. XXXXXXXXXX/Dco will transfer to XXXXXXXXXX/Cco all of the XXXXXXXXXX/Bco Common Shares owned by XXXXXXXXXX/Dco in consideration for the issuance to XXXXXXXXXX/Dco of XXXXXXXXXX/Cco Preferred Shares with a fair market value equal to the fair market value of the transferred XXXXXXXXXX/Bco Common Shares at the time of the transfer.
XXXXXXXXXX/Dco will jointly elect with XXXXXXXXXX/Cco, in prescribed form and within the time allowed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX/Bco Common Shares. The agreed amount in respect of the transfer will be equal to the cost amount of such shares to XXXXXXXXXX/Dco at the time of disposition, which will be less than the fair market value of the XXXXXXXXXX/Bco Common Shares at that time.
XXXXXXXXXX/Cco will add to the stated capital account maintained for its XXXXXXXXXX/Cco Preferred Shares an amount not to exceed the aggregate paid-up capital of the XXXXXXXXXX/Bco Common Shares so transferred.
42. XXXXXXXXXX/Aco will transfer to XXXXXXXXXX/Cco all of the XXXXXXXXXX/Bco Common Shares owned by XXXXXXXXXX/Aco in consideration for:
(a) the obligation of XXXXXXXXXX/Cco to transfer to XXXXXXXXXX/Aco any amounts received by XXXXXXXXXX/Cco in the future in respect of the exercise of the XXXXXXXXXX/Cco Options (or any options exchanged therefor, i.e., the XXXXXXXXXX/Ico XXXXXXXXXX/Aco Options), as and when received by XXXXXXXXXX/Cco;
(b) the right of XXXXXXXXXX/Aco to exercise in the future any otherwise forfeited XXXXXXXXXX/Cco Options (or any options exchanged therefor) on generally the same terms and conditions that were applicable to the holder of the XXXXXXXXXX/Cco Options; and
(c) the issuance by XXXXXXXXXX/Cco of XXXXXXXXXX/Cco Common Shares with a fair market value not exceeding the fair market value of the transferred XXXXXXXXXX/Bco Common Shares at the time of the transfer less the fair market value of the consideration referred to in (a) and (b).
XXXXXXXXXX/Aco will jointly elect with XXXXXXXXXX/Cco, in prescribed form and within the time allowed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX/Bco Common Shares. The agreed amount in respect of the transfer will be equal to the cost amount of such shares to XXXXXXXXXX/Aco at the time of disposition which will be less than the fair market value of the XXXXXXXXXX/Bco Common Shares at that time, and greater than the amount referred to under paragraph 85(1)(b) in respect of the transfer.
XXXXXXXXXX/Cco will add to the stated capital account maintained for its common shares an amount not to exceed the aggregate paid-up capital of the XXXXXXXXXX/Bco Common Shares so transferred, less the fair market value of the consideration referred to in (a) and (b).
43. Contemporaneous with the transfer in paragraph 42, XXXXXXXXXX/Aco will transfer to XXXXXXXXXX/Cco an agreed amount of cash or short-term investments in consideration for additional common shares of XXXXXXXXXX/Cco. XXXXXXXXXX/Cco will add an amount to the stated capital account in respect of the XXXXXXXXXX/Cco Common Shares issued equal to the value of such cash or short-term investments.
The cash or short-term investments will be used to pay for the agreed amount of estimated transaction costs (incurred by parties other than XXXXXXXXXX/Aco in respect of the Proposed Transactions) which XXXXXXXXXX/Aco agreed to bear. In the event that such agreed amount is not equal to the amount to be borne by XXXXXXXXXX/Aco having regard to the transaction costs actually incurred, XXXXXXXXXX/Aco will be required to pay any deficiency to XXXXXXXXXX/Ico and will have the right to receive any excess from XXXXXXXXXX/Ico.
44. Through one or more increases in stated capital, XXXXXXXXXX/Cco will:
(a) increase the stated capital of the XXXXXXXXXX/Cco Common Shares by amounts that will in aggregate not exceed the amount by which (i) the safe income on hand of XXXXXXXXXX/Bco in respect of the XXXXXXXXXX/Bco Common Shares held by XXXXXXXXXX/Cco at the safe income determination time in respect of the transaction or event or series of transactions or events that includes the Proposed Transactions, exceeds (ii) the safe income on hand of XXXXXXXXXX/Bco in respect of the XXXXXXXXXX/Bco Common Shares held by XXXXXXXXXX/Dco immediately before the transfer to XXXXXXXXXX/Cco as described in paragraph 42; and
(b) increase the stated capital of the XXXXXXXXXX/Cco Preferred Shares by amounts that will in aggregate not exceed the safe income on hand of XXXXXXXXXX/Bco in respect of the XXXXXXXXXX/Bco Common Shares held by XXXXXXXXXX/Dco immediately before the transfer of such shares to XXXXXXXXXX/Cco as described in paragraph 42.
45. XXXXXXXXXX/Cco's articles of incorporation will be amended to change the number of issued and outstanding XXXXXXXXXX/Cco Common Shares in order to effect a stock consolidation. The stock consolidation will be undertaken in such a manner that the number of issued and outstanding XXXXXXXXXX/Cco Common Shares following the stock consolidation will equal the number of issued and outstanding XXXXXXXXXX/Bco Common Shares owned by XXXXXXXXXX/Cco, less XXXXXXXXXX.
46. Subject to the appropriate shareholder, regulatory and court approvals, the transactions described in paragraphs 47 to 61 will be undertaken pursuant to the Plan of Arrangement on the Effective Date in the sequence set forth below. Subject to compliance with the relevant CBCA provisions, each common shareholder of XXXXXXXXXX/Aco or XXXXXXXXXX/Bco will be entitled to dissent from the Plan of Arrangement in accordance with the provisions of the CBCA. Each dissenting shareholder (an "XXXXXXXXXX/Aco dissenting shareholder" or a "XXXXXXXXXX/Bco dissenting shareholder", respectively) will cease to be a shareholder of XXXXXXXXXX/Aco or XXXXXXXXXX/Bco, as the case may be, immediately prior to the transactions described in paragraphs 47 to 61, such that the shares of XXXXXXXXXX/Aco or XXXXXXXXXX/Bco held by the XXXXXXXXXX/Aco dissenting shareholder or XXXXXXXXXX/Bco dissenting shareholder, as the case may be, will no longer be considered to be outstanding. After the completion of the Proposed Transactions which are included in the Plan of Arrangement, each XXXXXXXXXX/Aco dissenting shareholder or XXXXXXXXXX/Bco dissenting shareholder will be entitled to be paid the fair value of his shares of XXXXXXXXXX/Aco or XXXXXXXXXX/Bco, as the case may be, determined on the last business day before the day upon which the shareholder vote in relation to the Plan of Arrangement takes place.
Butterfly Transactions
47. XXXXXXXXXX/Aco and XXXXXXXXXX/Dco (hereinafter referred to as "predecessor corporations") will undertake an amalgamation under the provisions of the CBCA (XXXXXXXXXX/Aco or the corporation resulting from such amalgamation will be referred to as "XXXXXXXXXX/Aco") in such a manner, and the Plan of Arrangement will provide, that:
(a) all of the property (except any amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations held immediately before the amalgamation will become property of XXXXXXXXXX/Aco by virtue of the amalgamation;
(b) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become liabilities of XXXXXXXXXX/Aco by virtue of the amalgamation;
(c) all of the shares of XXXXXXXXXX/Dco held by XXXXXXXXXX/Aco immediately prior to the amalgamation will be cancelled by virtue of the amalgamation; and
(d) shareholders of XXXXXXXXXX/Aco (other than XXXXXXXXXX/Aco dissenting shareholders) will receive shares of the capital stock of new XXXXXXXXXX/Aco by virtue of the amalgamation, in the following manner:
(i) an XXXXXXXXXX/Aco Common Shareholder will receive:
(A) the number of new XXXXXXXXXX/Aco Common Shares that is equal to the number of XXXXXXXXXX/Aco Common Shares held by the XXXXXXXXXX/Aco Common Shareholder immediately before the amalgamation; and
(B) the number of XXXXXXXXXX/Aco XXXXXXXXXX Common Shares that is equal to the Transferred Multiple of the XXXXXXXXXX/Aco Common Shares held by the XXXXXXXXXX/Aco Common Shareholder immediately before the amalgamation; and
(ii) an XXXXXXXXXX/Aco Preferred Shareholder will receive the same number of new XXXXXXXXXX/Aco Preferred Shares (the "new XXXXXXXXXX/Aco Preferred Shares") with terms and conditions identical to the XXXXXXXXXX/Aco Preferred Shares held by the XXXXXXXXXX/Aco Preferred Shareholder immediately before the amalgamation (the "old XXXXXXXXXX/Aco Preferred Shares").
From the time of their issuance upon the amalgamation, the new XXXXXXXXXX/Aco Common Shares will be listed on a prescribed stock exchange.
XXXXXXXXXX/Aco will add an amount to the stated capital account in respect of:
(i) a particular series of new XXXXXXXXXX/Aco Preferred Shares equal to the paid-up capital immediately before the amalgamation of that particular series of old XXXXXXXXXX/Aco preferred shares;
(ii) the new XXXXXXXXXX/Aco Common Shares issued equal to the result of the amount (1 - Transferred Proportion) multiplied by the paid-up capital of the XXXXXXXXXX/Aco Common Shares (excluding the paid-up capital of XXXXXXXXXX/Aco Common Shares held by XXXXXXXXXX/Aco dissenting shareholders) immediately before the amalgamation; and
(iii) the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares issued equal to the Transferred Proportion of the paid-up capital of the XXXXXXXXXX/Aco Common Shares (excluding the paid-up capital of XXXXXXXXXX/Aco Common Shares held by XXXXXXXXXX/Aco dissenting shareholders) immediately before the amalgamation.
The rights, privileges and restrictions attaching to XXXXXXXXXX/Aco XXXXXXXXXX Common Shares will be identical to the XXXXXXXXXX/Aco Common Shares except that each XXXXXXXXXX/Aco XXXXXXXXXX Common Share will be non-voting and will be convertible into XXXXXXXXXX/Aco Common Shares on a one-for-one basis.
Other than the part of the Arrangement Agreement which calls for the purchase for cancellation of the new XXXXXXXXXX/Aco XXXXXXXXXX Common Shares at fair market value, there will not be any agreement in respect of the new XXXXXXXXXX/Aco Common Shares or the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares in respect of any of the matters referred to in any of subparagraphs (b)(i) to (iv) of the definition of "taxable preferred share" or in any of paragraphs (a), (b), (f) or (h) of the definition of "short-term preferred share" in subsection 248(1).
48. Contemporaneous with the transaction referred to in paragraph 47, each outstanding XXXXXXXXXX/Aco Stock Option, under an agreement referred to in subsections 7(1) or 7(1.1), will be cancelled (referred to herein as the "exchanged XXXXXXXXXX/Aco Stock Option") and each XXXXXXXXXX/Aco Optionholder will receive in exchange a new option granted by XXXXXXXXXX/Aco to acquire XXXXXXXXXX/Aco Common Shares (the "New XXXXXXXXXX/Aco Stock Option") and a new option granted by XXXXXXXXXX/Cco to acquire XXXXXXXXXX/Cco Common Shares (the "XXXXXXXXXX/Cco Option"). The number of XXXXXXXXXX/Cco Common Shares for which the XXXXXXXXXX/Cco Stock Options will be exercisable will reflect the number of XXXXXXXXXX/Ico Common Shares which the XXXXXXXXXX/Aco Optionholder would have received (had it owned the XXXXXXXXXX/Aco Common Shares subject to the XXXXXXXXXX/Aco Stock Option) in the exchange of the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares described in paragraph 49.
Under the New XXXXXXXXXX/Aco Stock Option and the XXXXXXXXXX/Cco Option issued to an XXXXXXXXXX/Aco Optionholder, the total fair market value, immediately after the exchange, of the XXXXXXXXXX/Aco Common Shares and the XXXXXXXXXX/Cco Common Shares, respectively, issuable thereunder may exceed the total amount payable by the XXXXXXXXXX/Aco Optionholder to acquire the XXXXXXXXXX/Aco Common Shares and the XXXXXXXXXX/Cco Common Shares, respectively, under the relevant New XXXXXXXXXX/Aco Stock Option and XXXXXXXXXX/Cco Option, respectively. However, the aggregate of such excess, for both the New XXXXXXXXXX/Aco Stock Option and the XXXXXXXXXX/Cco Option, will not exceed the amount by which the total fair market value, immediately before the exchange, of the XXXXXXXXXX/Aco Common Shares issuable under the applicable exchanged XXXXXXXXXX/Aco Stock Option exceeds the exercise price payable by the XXXXXXXXXX/Aco Optionholder to acquire the XXXXXXXXXX/Aco Common Shares under the exchanged XXXXXXXXXX/Aco Stock Option.
49. Each holder of XXXXXXXXXX/Aco XXXXXXXXXX Common Shares will transfer all such shares to XXXXXXXXXX/Ico. As consideration for each XXXXXXXXXX/Aco XXXXXXXXXX Common Share transferred to it, XXXXXXXXXX/Ico will issue a fraction of a XXXXXXXXXX/Ico Common Share to be agreed upon by XXXXXXXXXX/Aco and XXXXXXXXXX/Bco prior to the Effective Date, which fraction will take into account the dilutive effect that would occur if all the XXXXXXXXXX/Ico XXXXXXXXXX/Aco Stock Options were exercised. Fractional XXXXXXXXXX/Ico Common Shares that would otherwise be received by an XXXXXXXXXX/Aco Common Shareholder will be dealt with in the manner described in paragraph 63. Elections under subsection 85(1) will not be filed in respect of the foregoing exchange.
XXXXXXXXXX/Ico will add to the stated capital account of the XXXXXXXXXX/Ico Common Shares an amount equal to the aggregate paid-up capital of the transferred XXXXXXXXXX/Aco XXXXXXXXXX Common Shares.
The XXXXXXXXXX/Ico Common Shares will be listed on a prescribed stock exchange at the time of their issuance.
50. XXXXXXXXXX/Aco will transfer to XXXXXXXXXX/Jco most of the XXXXXXXXXX/Cco Common Shares held by XXXXXXXXXX/Aco. In consideration for the transfer, XXXXXXXXXX/Jco will issue XXXXXXXXXX/Jco Common Shares with a fair market value equal to the fair market value of the transferred property at the time of the transfer. As a result of such transfer, the net fair market value of the property received by XXXXXXXXXX/Jco will be equal to or approximate the Butterfly Proportion of the net fair market value of all property owned by XXXXXXXXXX/Aco immediately before the transfer.
Any difference between the fair market value of the property transferred to XXXXXXXXXX/Jco from XXXXXXXXXX/Aco and the Butterfly Proportion of the net fair market value of all property owned by XXXXXXXXXX/Aco immediately before the transfer will not exceed 1% of the Butterfly Proportion of the net fair market value of all the property of XXXXXXXXXX/Aco immediately before the transfer.
XXXXXXXXXX/Aco will jointly elect with XXXXXXXXXX/Jco, in prescribed form and within the time allowed by subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the XXXXXXXXXX/Cco Common Shares. The agreed amount in respect of the XXXXXXXXXX/Cco Common Shares transferred will be equal to the cost amount of such shares to XXXXXXXXXX/Aco at the time of disposition, which will be less than the fair market value of the transferred XXXXXXXXXX/Cco Common Shares at that time.
XXXXXXXXXX/Jco will add an amount to the stated capital account in respect of the XXXXXXXXXX/Jco Common Shares issued as consideration for the transfer of the transferred assets not to exceed the maximum amount that could be added to the paid-up capital of such shares, having regard to subsection 85(2.1).
51. XXXXXXXXXX/Jco will purchase for cancellation the XXXXXXXXXX/Jco Common Shares held by XXXXXXXXXX/Aco in consideration for the issuance by XXXXXXXXXX/Jco to XXXXXXXXXX/Aco of a non-interest-bearing demand note (the "XXXXXXXXXX/Jco Redemption Note") having a principal amount and fair market value equal to the fair market value of the XXXXXXXXXX/Jco Common Shares purchased for cancellation.
52. XXXXXXXXXX/Aco will purchase for cancellation the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares held by XXXXXXXXXX/Ico in consideration for the issuance by XXXXXXXXXX/Aco to XXXXXXXXXX/Ico of a non-interest-bearing demand note (the "XXXXXXXXXX/Aco Redemption Note") having a principal amount and fair market value equal to the fair market value of the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares purchased for cancellation.
53. XXXXXXXXXX/Jco will be wound up into XXXXXXXXXX/Ico under the provisions of the CBCA and will distribute all of its assets, rights and properties to XXXXXXXXXX/Ico, including all of XXXXXXXXXX/Jco's interest in the XXXXXXXXXX/Cco Common Shares, and all the liabilities and obligations of XXXXXXXXXX/Jco will be assumed by XXXXXXXXXX/Ico, including the liability of XXXXXXXXXX/Jco under the XXXXXXXXXX/Jco Redemption Note.
54. The XXXXXXXXXX/Jco Redemption Note will be set off against the XXXXXXXXXX/Aco Redemption Note in full satisfaction of the respective obligation under each note (although the principal amounts of the notes will be different) and the notes will be cancelled.
Post-Butterfly Transactions
55. XXXXXXXXXX/Ico will acquire the XXXXXXXXXX/Bco Common Shares from the XXXXXXXXXX/Bco Common Shareholders in return for the issuance of XXXXXXXXXX/Ico Common Shares on a one-for-one basis. The XXXXXXXXXX/Ico Common Shares acquired by the former holders of XXXXXXXXXX/Bco Common Shares will represent more than XXXXXXXXXX%, but less than XXXXXXXXXX%, of both the aggregate voting rights and equity of the common share capital of XXXXXXXXXX/Ico.
56. The XXXXXXXXXX/Bco Preferred Shares will remain issued and outstanding. The rights and obligations of XXXXXXXXXX/Bco under the XXXXXXXXXX/Bco Exchange Rights currently attached to the XXXXXXXXXX/BcoXXXXXXXXXX Shares will be amended so that if a XXXXXXXXXX/Bco Exchange Right ever takes force and effect, a holder of a XXXXXXXXXX/Bco XXXXXXXXXX Share will be entitled to acquire from XXXXXXXXXX/Bco, XXXXXXXXXX/Ico Common Shares on the same ratio basis as currently determined under the XXXXXXXXXX/Bco Exchange Right (in respect of XXXXXXXXXX/Bco Common Shares) unless XXXXXXXXXX/Bco elects to redeem all of the XXXXXXXXXX/Bco XXXXXXXXXX Shares. XXXXXXXXXX/Ico would agree with XXXXXXXXXX/Bco to deliver XXXXXXXXXX/Ico Common Shares if such shares are required to be delivered pursuant to the exercise of XXXXXXXXXX/Bco Exchange Rights. XXXXXXXXXX/Bco would agree to issue to XXXXXXXXXX/Ico the number of XXXXXXXXXX/Bco Common Shares having a value equal to the value of the XXXXXXXXXX/Ico Common Shares delivered to the holder of the XXXXXXXXXX/Bco Exchange Right.
In the event that such an exchange were to take place, the holder of a XXXXXXXXXX/Bco Exchange Right would exchange with XXXXXXXXXX/Bco such right together with one XXXXXXXXXX/Bco XXXXXXXXXX Share, for that number of XXXXXXXXXX/Ico Common Shares determined by dividing $XXXXXXXXXX by the greater of $XXXXXXXXXX and XXXXXXXXXX% of the weighted average trading price of the XXXXXXXXXX/Ico Common Shares on the XXXXXXXXXX Stock Exchange for the 10 trading days ending immediately preceding the exchange date.
57. XXXXXXXXXX/Ico and XXXXXXXXXX/Cco (hereinafter referred to as "predecessor corporations") will undertake an amalgamation under the provisions of the CBCA (XXXXXXXXXX/Ico or the corporation resulting from such amalgamation will be referred to as "XXXXXXXXXX/Ico") in such a manner, and the Plan of Arrangement will provide, that:
(a) all of the property (except any amounts receivable from any predecessor corporation or shares of the capital stock of any predecessor corporation) of the predecessor corporations held immediately before the amalgamation will become property of XXXXXXXXXX/Ico by virtue of the amalgamation;
(b) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the amalgamation will become liabilities of XXXXXXXXXX/Ico by virtue of the amalgamation;
(c) all of the shares of XXXXXXXXXX/Cco held by XXXXXXXXXX/Ico immediately prior to the amalgamation will be cancelled by virtue of the amalgamation;
(d) XXXXXXXXXX/Aco will receive XXXXXXXXXX/Ico Common Shares in exchange for XXXXXXXXXX/Cco Common Shares and for XXXXXXXXXX/Cco Preferred Shares; and
(e) shareholders of XXXXXXXXXX/Ico will receive XXXXXXXXXX/Ico Common Shares on a one-for-one basis.
XXXXXXXXXX/Aco will own approximately XXXXXXXXXX % of the issued and outstanding XXXXXXXXXX/Ico Common Shares.
The amount added to the stated capital account of the XXXXXXXXXX/Ico Common Shares will be equal to an amount equal to aggregate of: (a) the paid-up capital of the XXXXXXXXXX/Ico Common Shares, immediately prior to the amalgamation; (b) the paid-up capital of the XXXXXXXXXX/Cco Preferred Shares, immediately prior to the amalgamation; and (c) the paid-up capital of the XXXXXXXXXX/Cco Common Shares (excluding the paid-up capital of the XXXXXXXXXX/Cco Common Shares held by XXXXXXXXXX/Ico), immediately prior to the amalgamation.
58. Contemporaneous with the amalgamation of XXXXXXXXXX/Cco and XXXXXXXXXX/Ico described in paragraph 57 the XXXXXXXXXX/Cco Options will be cancelled and each XXXXXXXXXX/Cco Optionholder will receive in exchange a new option granted by XXXXXXXXXX/Ico to acquire XXXXXXXXXX/Ico Common Shares (the "XXXXXXXXXX/Ico XXXXXXXXXX/Aco Stock Options").
Under each XXXXXXXXXX/Ico XXXXXXXXXX/Aco Stock Option, the total fair market value, immediately after the exchange, of the XXXXXXXXXX/Ico Common Shares issuable thereunder may exceed the total amount payable to acquire the XXXXXXXXXX/Ico Common Shares under the relevant XXXXXXXXXX/Ico XXXXXXXXXX/Aco Stock Option. However, such excess will not exceed the amount by which the total fair market value, immediately before the exchange, of the XXXXXXXXXX/Cco Common Shares issuable under the applicable XXXXXXXXXX/Cco Option exceeds the exercise price payable to acquire the XXXXXXXXXX/Cco Common Shares under the XXXXXXXXXX/Cco Options prior to the exchange.
59. Contemporaneous with the amalgamation described in paragraph 57 above, XXXXXXXXXX/Ico will assume the XXXXXXXXXX/Bco Plan, the XXXXXXXXXX/Eco Plan and the XXXXXXXXXX/Fco Plan and make appropriate amendments and/or adjustments to each such plan to provide that (i) the outstanding options under each plan will become exercisable for XXXXXXXXXX/Ico Common Shares; and (ii) all future grants of options under the XXXXXXXXXX/Bco Plan will relate to XXXXXXXXXX/Ico Common Shares; and (iii) each of the plans will be sponsored by XXXXXXXXXX/Ico and administered by the XXXXXXXXXX/Ico Board or an authorized committee thereof (the options as amended and/or adjusted are referred to herein as the "New XXXXXXXXXX/Bco Stock Options") . In addition, the value of each SAR under the XXXXXXXXXX/Bco Plan will be determined with reference to XXXXXXXXXX/Ico Common Shares.
The RSU Plan will remain a plan of XXXXXXXXXX/Bco. Amendments and/or adjustments will be made to provide that (i) all RSUs granted or issued under the RSU Plan will be settled in XXXXXXXXXX/Ico Common Shares, and (ii) all future grants under the RSU Plan will relate to XXXXXXXXXX/Ico Common Shares.
Under the New XXXXXXXXXX/Bco Stock Option issued to a XXXXXXXXXX/Bco Optionholder, the total fair market value, immediately after the assumption, amendment and/or adjustment, of the XXXXXXXXXX/Ico Common Shares issuable thereunder may exceed the total amount payable by the XXXXXXXXXX/Bco Optionholder to acquire the XXXXXXXXXX/Ico Common Shares under the New XXXXXXXXXX/Bco Stock Option. However, such excess will not exceed the amount by which the total fair market value, immediately before the assumption, amendment and/or adjustment, of the XXXXXXXXXX/Bco Common Shares issuable under the existing option pursuant to the applicable XXXXXXXXXX/Bco Plan, the XXXXXXXXXX/Eco Plan and the XXXXXXXXXX/Fco Plan exceeds the exercise price payable by that XXXXXXXXXX/Bco Optionholder under the existing option.
The amount, if any, by which (i) the total value of the XXXXXXXXXX/Ico Common Shares for which a RSU can be settled immediately after the amendments and/or adjustments set out herein will exceed (ii) the total amount payable by the participant to acquire such XXXXXXXXXX/Ico Common Shares pursuant to the RSU Plan will not exceed the amount, if any, by which (iii) the total value of XXXXXXXXXX/Bco Common Shares for which a RSU can be settled immediately before the amendments and/or adjustments set out herein exceeded (iv) the amount payable by the participant to acquire such XXXXXXXXXX/Bco Common Shares pursuant to the RSU Plan.
The XXXXXXXXXX/Bco Plan, the XXXXXXXXXX/Eco Plan, the XXXXXXXXXX/Fco Plan and the RSU Plan are agreements to issue shares to employees referred to in subsections 7(1) or 7(1.1).
The amendments and/or adjustments described herein will result in a XXXXXXXXXX/Bco Optionholder or holder of a RSU, as the case may be, disposing of rights under an agreement referred to in subsection 7(1) or 7(1.1) and having received no consideration from XXXXXXXXXX/Bco or XXXXXXXXXX/Ico other than rights under the New XXXXXXXXXX/Bco Stock Option Plans or RSU Plan, as the case may be.
60. Contemporaneous with the amalgamation described in paragraph 57:
(a) the obligation of XXXXXXXXXX/Cco to transfer to XXXXXXXXXX/Aco amounts, as and when received, in respect of the exercise of the XXXXXXXXXX/Cco Options will become an obligation of XXXXXXXXXX/Ico to transfer to XXXXXXXXXX/Aco amounts, as and when received, in respect of the exercise of XXXXXXXXXX/Ico XXXXXXXXXX/Aco Stock Options; and
(b) the right of XXXXXXXXXX/Aco to exercise any otherwise forfeited XXXXXXXXXX/Cco Options will become the right of XXXXXXXXXX/Aco to exercise any otherwise forfeited XXXXXXXXXX/Ico XXXXXXXXXX/Aco Stock Options on generally the same terms and conditions that were applicable to the holder. For greater certainty, any exercise price payable by XXXXXXXXXX/Aco in respect of such forfeited XXXXXXXXXX/Ico XXXXXXXXXX/Aco Stock Options will be subject to the obligation of XXXXXXXXXX/Ico to transfer such amounts to XXXXXXXXXX/Aco as referred to above.
61. If XXXXXXXXXX/Bco has not by the Effective Date implemented the stock split referred to in paragraph 19, the issued and outstanding XXXXXXXXXX/Ico Common Shares will be split on a two-for-one basis.
Post-Plan of Arrangement Transactions
62. It is anticipated that XXXXXXXXXX/Ico will consider the implementation of a shareholder rights plan similar to the shareholder rights plan described in paragraph 30. In such case, provided that the required shareholder approval is obtained, which approval will be considered in a vote separate from approval of the Plan of Arrangement, XXXXXXXXXX will implement a shareholder rights plan similar to the shareholder rights plan described in paragraph 30. After the completion of the Plan of Arrangement, rights to acquire XXXXXXXXXX/Ico Common Shares will be issued under such shareholder rights plan to all holders of XXXXXXXXXX/Ico Common Shares.
63. Any fractional XXXXXXXXXX/Ico Common Shares receivable by XXXXXXXXXX/Aco Common Shareholders on the transfer referred to in paragraph 49, after the stock split referred to paragraph 61, will be aggregated and issued to a third-party trustee (the "Trustee") on behalf of the XXXXXXXXXX/Aco Common Shareholders. The Trustee will sell all of the XXXXXXXXXX/Ico Common Shares so received for cash proceeds in the open market, and remit to each XXXXXXXXXX/Aco Common Shareholder the holder's pro rata share of such proceeds.
PURPOSES OF THE PROPOSED TRANSACTIONS
64. The overall purpose of the Proposed Transactions, aside from the acquisition of XXXXXXXXXX/Bco Common Shares by XXXXXXXXXX/Ico (described below), is to permit most of the XXXXXXXXXX/Bco Common Shares currently owned by XXXXXXXXXX/Aco to be indirectly distributed to the XXXXXXXXXX/Aco Common Shareholders in a tax-deferred manner.
65.
XXXXXXXXXX
66.
XXXXXXXXXX
67. The specific purposes of certain of the Proposed Transactions are as follows:
(a) The purpose of the proposed transactions described in paragraphs 47 to 54 is to effect the Butterfly Transaction;
(b) The articles of XXXXXXXXXX/Ico will provide that a special resolution is required to elect the XXXXXXXXXX/Ico Board in order that no acquisition of control of XXXXXXXXXX/Ico occurs by virtue of the Proposed Transactions;
(c) The purpose of the incorporation of XXXXXXXXXX/Jco (described in paragraph 22) as the recipient of the transferred assets (described in paragraph 50) is to simplify valuation issues relating to the determination of the number of XXXXXXXXXX/Jco Common Shares required to be issued as consideration for such assets;
(d) The purpose of the multiple increases to stated capital described in paragraph 44 is to "convert" the safe income on hand in respect of the shares in the capital stock of XXXXXXXXXX/Cco into tax cost;
(e) The purpose of the proposed transaction described in paragraph 47 is to create the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares which will be transferred to XXXXXXXXXX/Ico to effect the Butterfly Transaction. An XXXXXXXXXX/Aco Common Shareholder will receive that number of XXXXXXXXXX/Aco XXXXXXXXXX Common Shares that allows the number of XXXXXXXXXX/Aco Common Shares issued and outstanding following the Butterfly Transaction to equal the number of XXXXXXXXXX/Aco Common Shares issued and outstanding prior to the Butterfly Transaction. Pursuant to subsection 87(10), the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares will be deemed to be listed on a prescribed stock exchange until their redemption by XXXXXXXXXX/Aco so that such shares will not be taxable Canadian property;
(f) The purpose of the proposed transactions described in paragraphs 48 and 58 is to restructure the XXXXXXXXXX/Aco Stock Options in a manner which is equitable to the XXXXXXXXXX/Aco Optionholders in light of XXXXXXXXXX/Aco's divestiture of most of its XXXXXXXXXX/Bco Common Shares and which preserves the benefit accrued under the XXXXXXXXXX/Aco Stock Options; and
(g) The purpose of the arrangement described in paragraph 60 is to adjust for the dilution suffered by the XXXXXXXXXX/Aco Common Shareholders in respect of the XXXXXXXXXX/Ico XXXXXXXXXX/Aco Stock Options.
RULINGS
Provided that the above statements are accurate and constitute complete disclosure of all of the relevant facts, proposed transactions and the purposes of the proposed transactions, we confirm the following:
Amendment of XXXXXXXXXX Shares
A. Immediately following the amendment of the terms and conditions of the XXXXXXXXXX Shares described in paragraph 39, the XXXXXXXXXX Shares will constitute shares of a specified class.
Transfer of XXXXXXXXXX/Bco Common Shares by XXXXXXXXXX/Dco
B. On the transfer of the XXXXXXXXXX/Bco Common Shares by XXXXXXXXXX/Dco to XXXXXXXXXX/Cco described in paragraph 41, subject to the provisions of subsection 69(11), the provisions of subsection 85(1) will apply with the result that the amount agreed upon by XXXXXXXXXX/Dco and XXXXXXXXXX/Cco in their joint election in respect of the transferred property will be deemed pursuant to paragraph 85(1)(a) to be proceeds of disposition thereof to XXXXXXXXXX/Dco and the cost thereof to XXXXXXXXXX/Cco.
For greater certainty, the provisions of paragraph 85(1)(e.2) will not apply to the transfer described in paragraph 41 above.
Transfer of XXXXXXXXXX/Bco Common Shares by XXXXXXXXXX/Aco
C. On the transfer of the XXXXXXXXXX/Bco Common Shares by XXXXXXXXXX/Aco to XXXXXXXXXX/Cco described in paragraph 42, subject to the provisions of subsection 69(11), the provisions of subsection 85(1) will apply with the result that the amount agreed upon by XXXXXXXXXX/Aco and XXXXXXXXXX/Cco in their joint election in respect of the transferred property will be deemed pursuant to paragraph 85(1)(a) to be proceeds of disposition thereof to XXXXXXXXXX/Aco and the cost thereof to XXXXXXXXXX/Cco.
For greater certainty, the provisions of paragraph 85(1)(e.2) will not apply to the transfer described in paragraph 42 above.
Funding of XXXXXXXXXX/Cco
D. Paragraph 12(1)(x) will not apply to require XXXXXXXXXX/Cco or XXXXXXXXXX/Ico to include an amount in computing its income by virtue of the transaction described in paragraph 43.
Increase in stated capital of XXXXXXXXXX Common Shares and XXXXXXXXXX Preferred Shares
E. The increases in stated capital of the XXXXXXXXXX/Cco Common Shares and the XXXXXXXXXX/Cco Preferred Shares described in paragraph 44 will have the following results:
(a) XXXXXXXXXX/Cco will be deemed to have paid, and XXXXXXXXXX/Dco and XXXXXXXXXX/Aco, as the case may be, will be deemed to have received, a dividend on the XXXXXXXXXX/Cco Common Shares and the XXXXXXXXXX/Cco Preferred Shares, respectively, equal to each increase, by virtue of subsection 84(1);
(b) XXXXXXXXXX/Dco and XXXXXXXXXX/Aco, as the case may be, each will be entitled, pursuant to subsection 112(1), to deduct the amounts of such deemed dividends in computing its taxable income for the taxation year in which such dividend is deemed to be received, and for greater certainty, the provisions of subsections 112(2.1), (2.2), (2.3) or (2.4) will not apply to deny the deduction of such deemed dividends;
(c) no taxes under Part IV.1 of the Act will be payable by XXXXXXXXXX/Dco or XXXXXXXXXX/Aco in respect of the deemed dividends;
(d) no taxes under Part VI.1 of the Act will be payable by XXXXXXXXXX/Cco in respect of the deemed dividends;
(e) the provisions of subsection 55(2) will not apply to a deemed dividend, to the extent that the full amount of the deemed dividend does not exceed the safe income on hand of XXXXXXXXXX/Bco in respect of the XXXXXXXXXX/Cco Common Shares and XXXXXXXXXX/Cco Preferred Shares, as the case may be, immediately before the time of the dividend; and
(f) the provisions of paragraph 53(1)(b) will apply to increase the adjusted cost base of the XXXXXXXXXX/Cco Common Shares and XXXXXXXXXX/Cco Preferred Shares, as the case may be, by the amount of the dividends deemed to be received.
Stock Consolidation by XXXXXXXXXX/Cco
F. Provided that there is no change in the paid-up capital of the XXXXXXXXXX/Cco Common Shares, or in the interest, rights or privileges of the holder of XXXXXXXXXX/Cco Common Shares on the stock consolidation described in paragraph 45:
(a) XXXXXXXXXX/Aco will not be regarded as having disposed of its XXXXXXXXXX/Cco Common Shares;
(b) the aggregate adjusted cost base of the XXXXXXXXXX/Cco Common Shares held by XXXXXXXXXX/Aco immediately after the stock consolidation will be equal to the aggregate adjusted cost base of the XXXXXXXXXX/Cco Common Shares to XXXXXXXXXX/Aco immediately before the stock consolidation; and
(c) neither subsection 84(1) nor 84(3) will apply to deem XXXXXXXXXX/Aco to have received a dividend in respect of the stock consolidation.
Amalgamation of XXXXXXXXXX/Aco and XXXXXXXXXX/Dco
G. On the amalgamation of XXXXXXXXXX/Aco and XXXXXXXXXX/Dco described in paragraph 47, the provisions of:
(a) subsection 87(1) will apply;
(b) the provisions of subsection 87(4) will apply in respect of persons who hold the shares of XXXXXXXXXX/Aco as capital property immediately before the amalgamation, such that:
(i) the XXXXXXXXXX/Aco Common Shareholders and the XXXXXXXXXX/Aco Preferred Shareholders will be deemed by paragraph 87(4)(a) to have disposed of the holder's XXXXXXXXXX/Aco Common Shares or XXXXXXXXXX/Aco Preferred Shares, as the case may be, for proceeds of disposition equal to the holder's adjusted cost base of such shares immediately prior to the amalgamation;
(ii) the XXXXXXXXXX/Aco Common Shareholders will be deemed by paragraph 87(4)(b) to have acquired the new XXXXXXXXXX/Aco Common Shares and XXXXXXXXXX/Aco XXXXXXXXXX Common Shares, respectively, at a cost equal to the proportion of the aggregate proceeds of disposition of the XXXXXXXXXX/Aco Common Shares referred to in (i), above, that
A. the fair market value, immediately after the amalgamation, of the new XXXXXXXXXX/Aco Common Shares or of the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares, as the case may be,
is of
B. the fair market value, immediately after the amalgamation, of all of the new XXXXXXXXXX/Aco Common Shares and XXXXXXXXXX/Aco XXXXXXXXXX Common Shares received by the XXXXXXXXXX/Aco Common Shareholder on the amalgamation;
(iii) the XXXXXXXXXX/Aco Preferred Shareholders will be considered to have acquired the new XXXXXXXXXX/Aco Preferred Shares of a particular series at a cost equal to the adjusted cost base to the holder of the old XXXXXXXXXX/Aco Preferred Shares of that series held prior to the amalgamation;
(c) subsection 87(4.2) will apply for the purposes of applying Parts IV.I and VI.I and the definitions "short-term preferred share" and "taxable preferred share" in subsection 248(1), such that:
(i) a new XXXXXXXXXX/Aco Preferred Share will be deemed to have been issued at the time the old XXXXXXXXXX/Aco Preferred Share was issued;
(ii) a new XXXXXXXXXX/Aco Preferred Share will be deemed to have been acquired at the time the old XXXXXXXXXX/Aco Preferred Share was acquired;
(iii) amalgamated XXXXXXXXXX/Aco will be deemed to be the same corporation as, and a continuation of, the predecessor XXXXXXXXXX/Aco; and
(iv) an election made under subsection 191.2(1) by the predecessor XXXXXXXXXX/Aco with respect to the old XXXXXXXXXX/Aco Preferred Shares of a particular series will be deemed to be an election made by amalgamated XXXXXXXXXX/Aco with respect to the new XXXXXXXXX/Aco Preferred Shares of that series; and
(d) subsection 87(10) will apply to the new XXXXXXXXXX/Aco XXXXXXXXXX Common Shares such that the new XXXXXXXXXX/Aco XXXXXXXXXX Common Shares will be deemed to be listed on XXXXXXXXXX Stock Exchange until purchased for cancellation by XXXXXXXXXX/Aco, as described in paragraph 52.
Exchange of XXXXXXXXXX/Aco Stock Options
H. The provisions of subsection 7(1.4) will apply for purposes of section 7 to the exchange of stock options described in paragraph 48, with the result that:
(a) an XXXXXXXXXX/Aco Optionholder will be deemed not to have disposed of his exchanged XXXXXXXXXX/Aco Stock Options and not to have acquired the New XXXXXXXXXX/Aco Stock Option and XXXXXXXXXX/Cco Option;
(b) the New XXXXXXXXXX/Aco Stock Option and XXXXXXXXXX/Cco Option will be deemed to be the same option as, and a continuation of, the exchanged XXXXXXXXXX/Aco Stock Option;
(c) XXXXXXXXXX/Cco will be deemed to be the same corporation as, and a continuation of XXXXXXXXXX/Aco; and
(d) an XXXXXXXXXX /Aco Optionholder will not be deemed to have received a benefit for the purposes of paragraph 7(1)(b) and no income inclusion will otherwise arise.
Transfer of XXXXXXXXXX/Aco XXXXXXXXXX Common Shares to XXXXXXXXXX/Ico
I. Provided that an XXXXXXXXXX/Aco Common Shareholder who, immediately before the exchange of shares described in paragraph 49, holds his XXXXXXXXXX/Aco XXXXXXXXXX Common Shares as capital property:
(a) deals at arm's length with XXXXXXXXXX/Ico immediately before the exchange;
(b) does not include any portion of the gain or loss, otherwise determined, from the disposition of the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares in computing the holder's income for the taxation year in which the share exchange takes place;
(c) does not file an election under subsection 85(1) or 85(2) with XXXXXXXXXX/Ico in respect of the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares;
(d) does not receive any consideration other than the XXXXXXXXXX/Ico Common Shares in exchange for the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares (and for this purpose any cash received by a holder on the sale of fractional shares described in paragraph 63 will not be considered to be consideration for the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares);
and further, provided that immediately after the exchange,
(e) such holder or persons with whom the holder does not deal at arm's length or such holder together with persons with whom the holder does not deal at arm's length, will not
(i) control XXXXXXXXXX/Ico, or
(ii) beneficially own shares of XXXXXXXXXX/Ico having a fair market value of more than 50% of the fair market value of all the issued and outstanding shares of the capital stock of XXXXXXXXXX/Ico
then, pursuant to paragraph 85.1(1)(a), such holder will be deemed:
(f) to have disposed of the holder's XXXXXXXXXX/Aco XXXXXXXXXX Common Shares for proceeds of disposition equal to their adjusted cost base to the holder immediately before the exchange; and
(g) to have acquired the XXXXXXXXXX/Ico Common Shares at a cost equal to the adjusted cost base to the holder of the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares immediately before the exchange; and
pursuant to paragraph 85.1(1)(b), the cost to XXXXXXXXXX/Ico of each XXXXXXXXXX/Aco XXXXXXXXXX Common Share acquired by XXXXXXXXXX/Ico as a result of the exchange will be deemed to be the lesser of such share's fair market value immediately before the exchange and its paid-up capital immediately before the exchange.
Butterfly Transfer
J. On the transfer of the XXXXXXXXXX/Cco Common Shares by XXXXXXXXXX/Aco to XXXXXXXXXX/Jco described in paragraph 50 above, subject to the provision of subsection 69(11), the provisions of subsection 85(1) will apply with the result that the amount agreed upon by XXXXXXXXXX/Aco and XXXXXXXXXX/Jco in their joint election in respect of the transferred property will be deemed pursuant to paragraph 85(1)(a) to be the proceeds of disposition thereof to XXXXXXXXXX/Aco and the cost thereof to XXXXXXXXXX/Jco.
For greater certainty, the provisions of paragraph 85(1)(e.2) will not apply to the transfer described in paragraph 50 above.
Elimination of Cross-Shareholdings
K. On the purchase for cancellation by XXXXXXXXXX/Jco of the XXXXXXXXXX/Jco Common Shares, as described in paragraph 51 above, the amount, if any, by which the amount paid for the purchase of the shares exceeds the paid-up capital of the shares immediately before the purchase will:
(a) be deemed pursuant to paragraph 84(3)(a) to be a dividend paid by XXXXXXXXXX/Jco; and
(b) be deemed pursuant to paragraph 84(3)(b) to be a dividend received by XXXXXXXXXX/Aco.
By virtue of the application of paragraph (j) of the definition "proceeds of disposition" in section 54, the amount of a deemed dividend described in (b) above will be excluded from the proceeds of disposition of the shares.
To the extent a dividend described in (b) above is a taxable dividend, such dividend will, pursuant to subsection 112(1), be deductible in computing the taxable income of the recipient for the year in which the dividend is deemed to have been received, and, for greater certainty, such deduction will not be precluded by any of subsections 112(2.1), (2.2), (2.3) or (2.4).
Part IV.1 of the Act will not apply to the deemed dividend described in (b).
Part VI.1 of the Act will not apply to the deemed dividend described in (a).
L. On the purchase for cancellation by XXXXXXXXXX/Aco of the XXXXXXXXXX/Aco XXXXXXXXXX Common Shares, as described in paragraph 52 above, the amount, if any, by which the amount paid for the purchase of the shares exceeds the paid-up capital of the shares immediately before the purchase will:
(a) be deemed pursuant to paragraph 84(3)(a) to be a dividend paid by XXXXXXXXXX/Aco;
(b) be deemed pursuant to paragraph 84(3)(b) to be a dividend received by XXXXXXXXXX/Ico.
By virtue of the application of paragraph (j) of the definition "proceeds of disposition" in section 54, the amount of a deemed dividend described in (b) above will be excluded from the proceeds of disposition of the shares.
To the extent a dividend described in (b) above is a taxable dividend, such dividend will, pursuant to subsection 112(1), be deductible in computing the taxable income of the recipient for the year in which the dividend is deemed to have been received, and, for greater certainty, such deduction will not be precluded by any of subsections 112(2.1), (2.2), (2.3) or (2.4).
Part IV.1 of the Act will not apply to the deemed dividend described in (b).
Part VI.1 of the Act will not apply to the deemed dividend described in (a).
M. Provided that the transfer by XXXXXXXXXX/Aco of most of its XXXXXXXXXX/Cco Common Shares to XXXXXXXXXX/Jco described in paragraph 50 meets the "types of property" requirement in the definition of "distribution" in subsection 55(1), and provided that as part of the series of transactions or events that includes the proposed transactions described herein, there is not:
(a) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);
(b) an acquisition of control in the circumstances described in 55(3.1)(b)(ii);
(c) an acquisition of any shares of a distributing corporation in contemplation of the distribution in the circumstances described in subparagraph 55(3.1)(b)(iii);
(d) in respect of the taxable dividend described in Ruling L above, an acquisition of property in the circumstances described in paragraph 55(3.1)(c); or
(e) in respect of the taxable dividend described in Ruling K above, an acquisition of property in the circumstances described in paragraph 55(3.1)(d)
which has not been described herein, then by virtue of paragraph 55(3)(b), subsection 55(2) will not apply to the taxable dividends referred to in the Rulings in K and L above and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).
Winding-up of XXXXXXXXXX/Jco
N. The provisions of subsection 88(1) will apply on the winding-up of XXXXXXXXXX/Jco into XXXXXXXXXX/Ico as described in paragraph 53 and for greater certainty:
(a) each property of XXXXXXXXXX/Jco distributed to XXXXXXXXXX/Ico on the winding-up will be deemed by paragraph 88(1)(a) to have been disposed of by XXXXXXXXXX/Jco for proceeds of disposition determined under that paragraph;
(b) the shares in the capital stock of XXXXXXXXXX/Jco held by XXXXXXXXXX/Ico immediately before the winding-up will be deemed by paragraph 88(1)(b) to have been disposed of by XXXXXXXXXX/Ico for proceeds of disposition determined under that paragraph; and
(c) each property of XXXXXXXXXX/Jco distributed to XXXXXXXXXX/Ico on the winding-up will be deemed to have been acquired by XXXXXXXXXX/Ico for an amount equal to the amount deemed by paragraph 88(1)(a) to be XXXXXXXXXX/Jco's proceeds of disposition of the property.
Set-off
O. The set-off and cancellation of the XXXXXXXXXX/Jco Redemption Note against the XXXXXXXXXX/Aco Redemption Note described in paragraph 54 will not give rise to a "forgiven amount" within the meaning thereof in subsection 80(1) or 80.01(1), and neither XXXXXXXXXX/Ico nor XXXXXXXXXX/Aco will realize a gain or incur any loss as a result of such set-off and cancellation.
Acquisition of Remaining XXXXXXXXXX/Bco Shares
P. Provided that a XXXXXXXXXX/Bco Common Shareholder who, immediately before the exchange of shares described in paragraph 55, holds his XXXXXXXXXX/Bco Common Shares as capital property:
(a) deals at arm's length with XXXXXXXXXX/Ico immediately before the exchange;
(b) does not include any portion of the gain or loss, otherwise determined, from the disposition of the XXXXXXXXXX/Bco Common Shares in computing the holder's income for the taxation year in which the share exchange takes place;
(c) does not file an election under 85(1) or 85(2) with XXXXXXXXXX/Ico in respect of the XXXXXXXXXX/Bco Common Shares;
(d) does not receive any consideration, other than XXXXXXXXXX/Ico Common Shares, in exchange for the XXXXXXXXXX/Bco Common Shares;
and further, provided that immediately after the exchange,
(e) such holder or persons with whom the holder does not deal at arm's length or such holder together with persons with whom the holder does not deal at arm's length, will not
(i) control XXXXXXXXXX/Ico, or
(ii) beneficially own shares of XXXXXXXXXX/Ico having a fair market value of more than 50% of the fair market value of all the issued and outstanding shares of the capital stock of XXXXXXXXXX/Ico
then, pursuant to paragraph 85.1(1)(a), such holder will be deemed:
(f) to have disposed of the holder's XXXXXXXXXX/Bco Common Shares for proceeds of disposition equal to their adjusted cost base to the holder immediately before the exchange; and
(g) to have acquired the XXXXXXXXXX/Ico Common Shares at a cost to the holder equal to the adjusted cost base to the holder of the XXXXXXXXXX/Bco Common Shares immediately before the exchange; and
pursuant to paragraph 85.1(1)(b), the cost to XXXXXXXXXX/Ico of each XXXXXXXXXX/Bco Common Share acquired by XXXXXXXXXX/Ico as a result of the exchange will be deemed to be the lesser of its fair market value immediately before the exchange and its paid-up capital immediately before the exchange.
Q. Provided that the aggregate of the number of XXXXXXXXXX/Ico Common Shares received by the holders of XXXXXXXXXX/Bco Common Shares on the exchange of shares described in paragraph 55, and the number of XXXXXXXXXX/Ico Common Shares received by XXXXXXXXXX/Aco on the amalgamation of XXXXXXXXXX/Ico and XXXXXXXXXX/Cco, as described in paragraph 57, does not equal or exceed 66 2/3% of the XXXXXXXXXX/Ico Common Shares issued and outstanding immediately after the amalgamation described in paragraph 57, paragraph 256(7)(c) will not apply to deem control of XXXXXXXXXX/Ico to be acquired by a person or group of persons.
Amalgamation of XXXXXXXXXX/Ico and XXXXXXXXXX/Cco
R. On the amalgamation of XXXXXXXXXX/Ico and XXXXXXXXXX/Cco described in paragraph 57, the provisions of:
(a) subsection 87(1) will apply;
(b) the provisions of subsection 87(4) will apply in respect of persons who hold the shares of XXXXXXXXXX/Ico and XXXXXXXXXX/Cco as capital property immediately before the amalgamation, such that:
(i) the XXXXXXXXXX/Ico Common Shareholders, the holders of XXXXXXXXXX/Cco Common Shares, and the holder of XXXXXXXXXX/Cco Preferred Shares, as the case may be, will be deemed by paragraph 87(4)(a) to have disposed of the holder's XXXXXXXXXX/Ico Common Shares, XXXXXXXXXX/Cco Common Shares or XXXXXXXXXX/Cco Preferred Shares, as the case may be, for proceeds of disposition equal to the holder's adjusted cost base of such shares immediately prior to the amalgamation;
(ii) XXXXXXXXXX/Aco will be deemed by paragraph 87(4)(b) to have acquired the XXXXXXXXXX/Ico Common Shares for an amount equal to the aggregate proceeds of disposition of the XXXXXXXXXX/Cco Common Shares and XXXXXXXXXX/Cco Preferred Shares referred to in (i), above; and
(iii) the XXXXXXXXXX/Ico Common Shareholders will be considered to have acquired the new XXXXXXXXXX/Ico Common Shares for an amount equal to the adjusted cost base to the holder of the old XXXXXXXXXX/Ico Common Shares held prior to the amalgamation.
R.1 XXXXXXXXXX/Aco will not be deemed to be a specified shareholder of a transferee corporation solely as a result of the application of paragraph 55(3.2)(b) on the amalgamation described in paragraph 57.
Exchange of XXXXXXXXXX/Cco Options
S. The provisions of subsection 7(1.4) will apply for purposes of section 7 to the exchange of stock options described in paragraph 58, with the result that:
(a) a XXXXXXXXXX/Cco Optionholder will be deemed not to have disposed of his exchanged XXXXXXXXXX/Cco Stock Options and not to have acquired the XXXXXXXXXX/Ico XXXXXXXXXX/Aco Stock Option;
(b) the XXXXXXXXXX/Ico XXXXXXXXXX/Aco Stock Option will be deemed to be the same option as, and a continuation of, the exchanged XXXXXXXXXX/Cco Stock Option;
(c) XXXXXXXXXX/Ico will be deemed to be the same corporation as, and a continuation of XXXXXXXXXX/Aco and XXXXXXXXXX/Cco; and
(d) a XXXXXXXXXX/Cco Optionholder will not be deemed to have received a benefit for the purposes of paragraph 7(1)(b) and no income inclusion will otherwise arise.
Exchange of XXXXXXXXXX/Bco Options
T. The provisions of subsection 7(1.4) will apply for purposes of section 7 to the assumption, amendment and/or adjustment of stock options described in paragraph 59, with the result that:
(a) a XXXXXXXXXX/Bco Optionholder will be deemed not to have disposed of his existing XXXXXXXXXX/Bco Stock Options and not to have acquired the New XXXXXXXXXX/Bco Stock Option;
(b) the New XXXXXXXXXX/Bco Stock Option will be deemed to be the same option as, and a continuation of, the existing XXXXXXXXXX/Bco Stock Option;
(c) XXXXXXXXXX/Ico will be deemed to be the same corporation as, and a continuation of XXXXXXXXXX/Bco; and
(d) a XXXXXXXXXX/Bco Optionholder will not be deemed to have received a benefit for the purposes of paragraph 7(1)(b) and no income inclusion will otherwise arise.
XXXXXXXXXX/Aco Dissenting Shareholders
U. An XXXXXXXXXX/Aco dissenting shareholder who holds XXXXXXXXXX/Aco Common Shares as capital property and who dissents from the Plan of Arrangement, and who, pursuant to court order under the CBCA, is given rights of dissent, will include in the proceeds of disposition of the XXXXXXXXXX/Aco Common Shares the cash payment received in respect of such shares (other than an amount in respect of interest awarded by a court). For greater certainty, subsection 84(3) will not apply to such acquisition.
XXXXXXXXXX/Bco Dissenting Shareholders
V. A XXXXXXXXXX/Bco dissenting shareholder who dissents from the Plan of Arrangement, and who, pursuant to court order under the CBCA, is given rights of dissent, will, subject to the application of subsection 55(2), be deemed by paragraph 84(3)(b) to have received a taxable dividend equal to the amount by which the cash amount received by such dissenting shareholder from XXXXXXXXXX/Bco (other than an amount in respect of interest awarded by a court) for such shareholder's shares, as described in paragraph 46, exceeds the paid-up capital of such shares.
W. Pursuant to paragraph (j) of the definition of "proceeds of disposition" in section 54, the proceeds of disposition in respect of the XXXXXXXXXX/Bco Common Shares received by such a XXXXXXXXXX/Bco dissenting shareholder will be reduced by the amount of the dividend so deemed to have been received, to the extent subsection 55(2) does not apply to such dividend.
Other Rulings
X. Provided that the XXXXXXXXXX/Ico Common Shares are listed on a prescribed stock exchange, such shares will be a "qualified investment":
(a) for a deferred profit sharing plan by virtue of paragraph (d) of the definition "qualified investment" in section 204;
(b) for a registered retirement savings plan by virtue of paragraph (a) of the definition "qualified investment" in subsection 146(1);
(c) for a registered retirement income fund by virtue of paragraph (a) of the definition "qualified investment" in subsection 146.3(1); and
(d) for a registered education savings plan by virtue of paragraph (a) of the definition "qualified investment" in subsection 146.1(1).
Y. Except as noted in Comment 4 below, the provisions of subsection 15(1), 56(2), 56(4), 69(4) and 246(1) will not be applied as a result of the proposed transactions, in and by themselves.
Z. The provisions of subsection 245(2) will not be applied as a result of the proposed transactions, in and by themselves, to redetermine the tax consequences confirmed in the rulings given.
These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R3 dated December 30, 1996 issued by the CCRA and are binding provided that the proposed transactions are completed before XXXXXXXXXX with the exception of the filing of the articles of dissolution of XXXXXXXXXX/Ico.
These rulings are based on the Act as it currently reads and do not take into account any future amendments, whether currently proposed or not, to the Act.
OPINIONS
1. In the event that the proposed amendments to add subsection 55(3.02) and the definition "specified corporation" in subsection 55(1) are enacted substantially in the form proposed in the Legislative Proposals released by the Department of Finance on November 30, 1999, and provided that
(a) there is not a distribution by XXXXXXXXXX/Aco to a corporation that is not an acquiror before the day that is XXXXXXXXXX years after the Effective Date;
(b) there is not a distribution by XXXXXXXXXX/Ico or any other acquiror in relation to XXXXXXXXXX/Aco before the day that is XXXXXXXXXX years after the Effective Date
and provided that as part of the series of transactions or events that includes the Proposed Transactions there is not:
(c) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);
(d) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii);
(e) an acquisition of any shares of a distributing corporation in contemplation of the distribution in the circumstances described in subparagraph 55(3.1)(b)(iii);
(f) in respect of the taxable dividend described in Ruling L above, an acquisition of property in the circumstances described in paragraph 55(3.1)(c); or
(g) in respect of the taxable dividend described in Ruling K above, an acquisition of property in the circumstances described in paragraph 55(3.1)((d)
which has not been described herein, it is then our opinion that by virtue of paragraph 55(3)(b), subsection 55(2) will not apply to the taxable dividends referred to in Ruling K and L above and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).
The foregoing opinions are not rulings and, in accordance with the practice referred to in Information Circular 70-6R3, are not binding on the CCRA.
1. Nothing in this letter should be construed as implying that the CCRA has agreed to or accepted:
(a) the determination of the fair market value or adjusted cost base of any property referred to herein, or the paid-up capital of any shares;
(b) that the XXXXXXXXXX/Bco XXXXXXXXXX Shares will not be deemed, by paragraph (e) of the definition "taxable preferred share" in subsection 248(1), to have been issued after June 18, 1987 as a result of the issuance of the exchange rights on XXXXXXXXXX or the amendment of such rights described in paragraph 56 above; or
(c) any tax consequences arising from the facts or proposed transactions described herein other than those specifically confirmed in the rulings given.
2. Whether an acquisition or disposition of shares occurs in a series of transactions or events as part of which the dividends described in Rulings K and L above are received (the "Butterfly Series"), for the purposes of paragraph 55(3.1)(b), is a question of fact which will depend on the circumstances. In general, an acquisition or disposition of shares of XXXXXXXXXX/Aco by a person who is not a specified shareholder of XXXXXXXXXX/Aco before the public announcement of the Proposed Transactions and acquires and disposes of the shares primarily for the purpose of realizing a trading profit that results from the current discount on the shares of XXXXXXXXXX/Aco, will not necessarily be considered to occur as part of the Butterfly Series.
3.
XXXXXXXXXX
4. The CCRA has not considered and does not express any comments on the application of subsections 15(1), 56(2), 56(4), 69(4) and 246(1) to:
(i) the payments that will be received by XXXXXXXXXX/Aco pursuant to the obligation referred to in subparagraph 42(a) above;
(ii) the exercise of the right of XXXXXXXXXX/Aco to exercise any otherwise forfeited stock option referred to in subparagraph 42(b); or
(iii) the payment by XXXXXXXXXX/Aco or XXXXXXXXXX/Cco of transaction costs incurred by parties other than XXXXXXXXXX/Aco or XXXXXXXXXX/Cco referred to in paragraph 43.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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