2001 Ruling 2001-0066303 - PUblic spin-off

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: Spin-off of public butterfly

Position: routine

Reasons:

XXXXXXXXXX 2001-006630

XXXXXXXXXX, 2001

Dear XXXXXXXXXX:

Re: XXXXXXXXXX

NewCo

XXXXXXXXXX.

AmalCo

This is in reply to your letters of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayers.

To the best of your knowledge, none of the issues involved in this Ruling:

a) is in an earlier tax return of the existing Applicants or a related person;

b) is being considered by a tax services office or taxation centre in connection with a previously filed tax return of the existing Applicants or a related person;

c) is under objection by the existing Applicants or a related person;

d) is before the courts; or

e) is the subject of a ruling previously issued by the Income Tax Rulings Directorate.

DEFINITIONS

In this letter, the following terms have the meanings specified:

XXXXXXXXXX.

"ACB" means "adjusted cost base" as that expression is defined in section 54 and subsection 248(1);

"Act" means the Income Tax Act, R.S.C. 1985 c.1 (5th Supp.), as amended;

"agreed amount" in respect of an asset means the amount that the transferor and transferee of the asset agree upon in their election under subsection 85(1) in respect of that asset;

XXXXXXXXXX;

"AmalCo" means the corporation resulting from the Amalgamation;

"AmalCo Group" means AmalCo and all of those corporations in which AmalCo will have a direct or indirect interest;

"AmalCo President Options" means the stock options of AmalCo that will be issued as described in Paragraph 76;

"AmalCo Shares" means the common shares of AmalCo as described in Paragraph 75;

"AmalCo Stock Options" means the stock options that AmalCo will issue as described in Paragraph 78;

"Amalgamation" means the amalgamation of NewCo with Canco/XXXXXXXXXX as described in Paragraph 75;

"Applicants" means PUBCO/XXXXXXXXXX, NewCo, Canco/XXXXXXXXXX and AmalCo;

XXXXXXXXXX;

"capital property" has the meaning assigned in section 54 and subsection 248(1);

XXXXXXXXXX;

"CBCA" means the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended;

XXXXXXXXXX;

"Dissenting Shareholder" means a PUBCO/XXXXXXXXXX Shareholder who exercises its shareholder's rights to dissent from the Plan of Arrangement;

"Distribution" means the transactions described in Paragraph 67 whereby PUBCO/XXXXXXXXXX will transfer to NewCo the Canco/XXXXXXXXXX Shares for the consideration described in Paragraph 68;

"Domaincos" means XXXXXXXXXX;

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

"XXXXXXXXXX Partnership" means XXXXXXXXXX;

XXXXXXXXXX
XXXXXXXXXX

"Existing PUBCO/XXXXXXXXXX Shares" means the issued and outstanding Common Shares of PUBCO/XXXXXXXXXX;

"Existing PUBCO/XXXXXXXXXX Stock Options" means the existing stock options of PUBCO/XXXXXXXXXX described in Paragraph 9;

"FMV" means fair market value;

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

"XXXXXXXXXX Business" means the businesses carried on by certain members of the PUBCO/XXXXXXXXXX Group as described in Paragraphs 20 to 31.;

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

"Canco/XXXXXXXXXX" means XXXXXXXXXX;

"Canco/XXXXXXXXXX Loan" means the loan from PUBCO/XXXXXXXXXX to Canco/XXXXXXXXXX as described in Paragraph 45;

"Canco/XXXXXXXXXX Options" means the stock options of Canco/XXXXXXXXXX issued to the Canco/XXXXXXXXXX President as described in Paragraph 31;

"Canco/XXXXXXXXXX President" means the president of Canco/XXXXXXXXXX as described in Paragraph 31;

"Canco/XXXXXXXXXX Shares" means the outstanding Class "A" Common Shares of Canco/XXXXXXXXXX as described in Paragraph 22;

XXXXXXXXXX

"PUBCO/XXXXXXXXXX" means XXXXXXXXXX;

"PUBCO/XXXXXXXXXX Group" means PUBCO/XXXXXXXXXX and all of those corporations and the partnership in which PUBCO/XXXXXXXXXX has a direct or indirect interest;

XXXXXXXXXX

"PUBCO/XXXXXXXXXX Redemption Note" means a promissory note to be issued in satisfaction of the redemption of the PUBCO/XXXXXXXXXX Special Shares, as described in Paragraph 72;

"PUBCO/XXXXXXXXXX Shareholders" means all of the holders of Existing PUBCO/XXXXXXXXXX Shares immediately before the Transaction Date;

"PUBCO/XXXXXXXXXX Special Shares" means the preferred shares of PUBCO/XXXXXXXXXX with the terms and conditions described in Paragraph 60, to be issued to PUBCO/XXXXXXXXXX Shareholders as described in Paragraph 61;

XXXXXXXXXX

"XXXXXXXXXX Family" means XXXXXXXXXX;

"XXXXXXXXXX Trust" means a discretionary family trust settled on XXXXXXXXXX;

"New PUBCO/XXXXXXXXXX Shares" means the new common shares of PUBCO/XXXXXXXXXX with the terms and conditions described in Paragraph 60 which PUBCO/XXXXXXXXXX will be authorized to issue pursuant to the amendment to its Articles as described in Paragraph 60;

"New PUBCO/XXXXXXXXXX Stock Options" means the stock options that PUBCO/XXXXXXXXXX will issue as described in Paragraph 63;

"NewCo" means the new XXXXXXXXXX corporation described in paragraph 56 to which the Canco/XXXXXXXXXX Shares will be transferred;

"NewCo Group" means NewCo and all of those corporations in which NewCo will have a direct or indirect interest as a result of the Proposed Transactions;

"NewCo Redemption Note" means the promissory note to be issued in satisfaction of the redemption of the NewCo Special Shares as described in Paragraph 71;

"NewCo Shares" means the common shares of NewCo as described in Paragraph 57, to be issued to holders of PUBCO/XXXXXXXXXX Special Shares as described in Paragraph 64;

"NewCo Special Shares" means the preferred shares of NewCo with the terms and conditions described in Paragraph 57, to be issued to PUBCO/XXXXXXXXXX as described in Paragraph 68;

XXXXXXXXXX
XXXXXXXXXX

"XXXXXXXXXX Business" means the businesses carried on by certain members of the PUBCO/XXXXXXXXXX Group as described in Paragraphs 18 and 19;

XXXXXXXXXX

"Paragraph" refers to a numbered paragraph in this letter;

"Participant" means a PUBCO/XXXXXXXXXX Shareholder, other than a Dissenting Shareholder;

XXXXXXXXXX

"Plan of Arrangement" means the proposed plan of arrangement under the XXXXXXXXXX to effect the divisive reorganization of PUBCO/XXXXXXXXXX as described in the Proposed Transactions;

XXXXXXXXXX
XXXXXXXXXX

"private corporation" has the meaning assigned in subsection 89(1);

"Proposed Transactions" means the proposed transactions described in Paragraphs 56 to 78;

"public corporation" has the meaning assigned in subsection 89(1);

"PUC" means paid-up capital as that expression is defined in subsection 89(1);

XXXXXXXXXX

"RFI" means restricted financial institution as defined in subsection 248(1);

"XXXXXXXXXX" means the corporation the outstanding shares of which are subject to the XXXXXXXXXX Option as described in Paragraph 42;

"XXXXXXXXXX Loan" means the loan from Canco/XXXXXXXXXX to XXXXXXXXXX as described in Paragraph 44;

"XXXXXXXXXX Option" means the option described in Paragraph 43;

"SFI" means specified financial institution as defined in subsection 248(1);

XXXXXXXXXX

"subject corporation" has the meaning assigned in subsection 186(3);

"stated capital" means stated capital as that expression is used in the XXXXXXXXXX;

"taxable Canadian corporation" has the meaning assigned in subsection 89(1);

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

"Transaction Date" means the date on which the Proposed Transactions in Paragraphs 58 to 78 will occur;

"XXXXXXXXXX Business" means the businesses carried on by certain members of the PUBCO/XXXXXXXXXX Group as described in Paragraphs 16 and 17;

"Vendors" means the persons that granted the XXXXXXXXXX Option as described in Paragraph 42; and
XXXXXXXXXX.

Our understanding of the facts, proposed transactions and the purposes of the proposed transactions is as follows:

FACTS

General Facts Relating to PUBCO/XXXXXXXXXX

1. PUBCO/XXXXXXXXXX is a public corporation and a taxable Canadian corporation with its head office in XXXXXXXXXX .

2. XXXXXXXXXX.

3. XXXXXXXXXX.

4. XXXXXXXXXX.

5. XXXXXXXXXX.

6. The authorized share capital of PUBCO/XXXXXXXXXX consists of an unlimited number of Common Shares and an unlimited number of Preferred Shares that are issuable in series.

7. XXXXXXXXXX.

8. XXXXXXXXXX.

9. XXXXXXXXXX.

10. To the best of the knowledge of the directors and senior officers of PUBCO/XXXXXXXXXX, as of the date hereof no person or related group of persons beneficially owns, directly or indirectly, more than 10% of the Existing PUBCO/XXXXXXXXXX Shares other than as outlined below.

Existing Existing Total
PUBCO/XXXXXXXXXX PUBCO/XXXXXXXXXX
Shares Stock Options

XXXXXXXXXX

11. XXXXXXXXXX.

12. XXXXXXXXXX is an XXXXXXXXXX corporation all of the outstanding voting common shares of which are owned by the XXXXXXXXXX Trust and all of the non-voting preferred shares of which are owned by XXXXXXXXXX.

13. XXXXXXXXXX is an XXXXXXXXXX corporation all of the outstanding shares of which are owned by XXXXXXXXXX.

14. XXXXXXXXXX is the Chairman of the Board of PUBCO/XXXXXXXXXX and XXXXXXXXXX is the President and Chief Executive Officer and a director of PUBCO/XXXXXXXXXX. Both XXXXXXXXXX are Senior Vice Presidents and directors of PUBCO/XXXXXXXXXX also are directors and officers of various corporations in the PUBCO/XXXXXXXXXX Group.

15. Historically, the PUBCO/XXXXXXXXXX Group has grown through the acquisition of assets or share interests in other corporations with complementary operations. Examples of recent acquisitions are:

XXXXXXXXXX.

The PUBCO/XXXXXXXXXX Group also has grown through internal expansion, including the relatively recent development and growth of the XXXXXXXXXX Business division. XXXXXXXXXX

The XXXXXXXXXX Business

16. XXXXXXXXXX.

17. XXXXXXXXXX.

The XXXXXXXXXX Business

18. XXXXXXXXXX.

19. XXXXXXXXXX.

The XXXXXXXXXX Business

20. XXXXXXXXXX.

21. XXXXXXXXXX.

22. XXXXXXXXXX.

23. XXXXXXXXXX.

24. XXXXXXXXXX.

25. XXXXXXXXXX.

26. XXXXXXXXXX.

27. XXXXXXXXXX.

28. XXXXXXXXXX.

29. XXXXXXXXXX.

30. XXXXXXXXXX.

31. XXXXXXXXXX.

Miscellaneous

32. PUBCO/XXXXXXXXXX provides management and corporate services to the other corporations in the PUBCO/XXXXXXXXXX Group.

33. XXXXXXXXXX.

34. XXXXXXXXXX.

35. XXXXXXXXXX.

36. XXXXXXXXXX.

37. XXXXXXXXXX.

38. XXXXXXXXXX.

39. XXXXXXXXXX.

.40. XXXXXXXXXX.

41. XXXXXXXXXX.

Proposed Acquisition of XXXXXXXXXX

42. Canco/XXXXXXXXXX acquired the XXXXXXXXXX Option to purchase from the Vendors all of the issued shares of XXXXXXXXXX, which is a corporation established pursuant to the CBCA which carries on a XXXXXXXXXX business in Canada. The Vendors are all resident in Canada and deal at arm's length with the PUBCO/XXXXXXXXXX Group and the XXXXXXXXXX Family.

43. The purchase price for the XXXXXXXXXX Option was $XXXXXXXXXX. Under the terms of the XXXXXXXXXX Option:

(a) Canco/XXXXXXXXXX has the right to purchase the shares of XXXXXXXXXX from the Vendors by payment of an additional $XXXXXXXXXX;

(b) Canco/XXXXXXXXXX may assign its rights and obligations;
(c) exercise of the XXXXXXXXXX Option is in the sole discretion of Canco/XXXXXXXXXX, and can occur at any time on or before XXXXXXXXXX;

(d) the additional $XXXXXXXXXX may be paid in any combination of:

- cash;

- shares of Canco/XXXXXXXXXX or an affiliate thereof (provided such shares are then trading on a stock exchange in Canada or the U.S.); or

- shares of Canco/XXXXXXXXXX that are exchangeable, at the option of the Vendors, into shares of an affiliate of Canco/XXXXXXXXXX that are shares which trade on a stock exchange in Canada or the U.S.

The entitlement to receive cash or share consideration is at the option of the Vendors. The form of share consideration to be delivered (i.e., shares of Canco/XXXXXXXXXX or shares of an affiliate) is at the option of Canco/XXXXXXXXXX.

44. Canco/XXXXXXXXXX also has loaned $XXXXXXXXXX to XXXXXXXXXX under the XXXXXXXXXX Loan. The XXXXXXXXXX Loan is secured with a subordinate charge over all of the assets of XXXXXXXXXX and is repayable upon demand.

45. The funding for the acquisition by Canco/XXXXXXXXXX of the XXXXXXXXXX Option and the XXXXXXXXXX Loan was through PUBCO/XXXXXXXXXX loaning approximately $XXXXXXXXXX to Canco/XXXXXXXXXX under the Canco/XXXXXXXXXX Loan.

46. Canco/XXXXXXXXXX acquired the XXXXXXXXXX Option in order to secure ownership and control of XXXXXXXXXX and its assets, which is desirable to help expand the XXXXXXXXXX Business division. The acquisition of the XXXXXXXXXX Option and possible exercise thereof is independent of whether Canco/XXXXXXXXXX remains within the PUBCO/XXXXXXXXXX Group, is the subject of a private placement issuance of shares or an initial public offering issuance of shares or is spun-out of the PUBCO/XXXXXXXXXX Group to become a new publicly traded corporation. The acquisition of the XXXXXXXXXX Option was an important aspect of developing Canco/XXXXXXXXXX and the XXXXXXXXXX Business division of PUBCO/XXXXXXXXXX. The acquisition of the XXXXXXXXXX Option was not in furtherance of or in contemplation of the Distribution. It is expected that the XXXXXXXXXX Option will be exercised whether or not the Proposed Transactions are undertaken.

47. It is anticipated that funding for future growth and development of the XXXXXXXXXX Business division will be raised through a private placement of shares and/or a public offering of AmalCo Shares by AmalCo at some time after the Proposed Transactions. However, any such shares issuance would represent less than 50% of the AmalCo Shares to be issued as described in Paragraph 80. Additional funding also may be raised through debt financing.

Additional Information

48. No property has or will become property of any corporation in the PUBCO/XXXXXXXXXX Group in contemplation of and before the Distribution, except as described herein, and no liabilities have been, or will be, incurred or discharged by any member of the PUBCO/XXXXXXXXXX Group in contemplation of and before the Distribution, except as described herein. With respect to the XXXXXXXXXX transfer of operating assets by XXXXXXXXXX to the XXXXXXXXXX Partnership, that transaction was made to consolidate operations and was not made in contemplation of the Distribution and was undertaken irrespective of whether or not the Proposed Transactions will be undertaken. With respect to the XXXXXXXXXX Option and any possible exercise thereof, that transaction was, or will be, in the ordinary course of the PUBCO/XXXXXXXXXX Group's business expansion and was not, and will not be, made in contemplation of the Distribution and would have, or will be, undertaken irrespective of whether the Proposed Transactions are undertaken. Further, the Proposed Transactions would be undertaken irrespective of whether these transactions had been undertaken.

49. Except as specifically outlined herein, there is no expectation or intention of any person in the PUBCO/XXXXXXXXXX Group, NewCo Group or AmalCo Group to dispose of any property in the foreseeable future, including as part of any of the Proposed Transactions, other than in the ordinary course of business, or as described herein.

50. PUBCO/XXXXXXXXXX undertaking of the Proposed Transactions is conditional upon the approval of its shareholders and the XXXXXXXXXX.

51. There are not, and will not be at any time prior to the completion of the Proposed Transactions, any agreements or undertakings which constitute or include a "guarantee agreement", as defined in subsection 112(2.2), in respect of any of the outstanding shares of PUBCO/XXXXXXXXXX, NewCo or AmalCo.

52. None of PUBCO/XXXXXXXXXX, NewCo or AmalCo has, or will have, entered into a dividend rental arrangement, as defined in subsection 248(1), in respect of any of the shares to be repurchased or redeemed as part of the Proposed Transactions.

53. None of the shares issued by PUBCO/XXXXXXXXXX , NewCo or AmalCo will be issued or acquired as part of a series of transactions of the type described in subsection 112(2.5).

54. No member of the PUBCO/XXXXXXXXXX Group, NewCo Group or AmalCo Group will be a corporation described in any of paragraphs (a) to (f) of the definition of "financial intermediary corporation" in subsection 191(1).

55. Each of PUBCO/XXXXXXXXXX and NewCo will have the financial capacity to honour, upon presentation for payment, the amount payable under the promissory note issued by it as part of the Proposed Transactions.

PROPOSED TRANSACTIONS

NewCo Articles of Incorporation

56. NewCo will be a newly created corporation incorporated under the XXXXXXXXXX and a taxable Canadian corporation. Prior to the transactions relating hereto, NewCo will not have had any assets or liabilities or have issued any shares.

57. NewCo's Articles of Incorporation will provide that its authorized capital will include:

(a) NewCo Shares, each of which will be a fully participating voting common share with the holder thereof entitled to one vote at meetings of shareholders of NewCo; and

(b) NewCo Special Shares having the following attributes:

- each NewCo Special Share will be redeemable, subject to applicable law, at any time at the option of NewCo at a redemption amount equal to the aggregate FMV of the consideration paid to NewCo on issuance thereof (i.e., the Canco/XXXXXXXXXX Shares as described in Paragraph 67) divided by the number of NewCo Special Shares issued as consideration therefor (plus any declared but unpaid dividends);

- each NewCo Special Share will be retractable, subject to applicable -law, at any time at the option of the holder at a retraction amount equal to the redemption amount described above;

- the holder of each NewCo Special Share will be entitled to a non-cumulative cash dividend as and when declared by the board of directors from time to time, which dividend need not also be declared on any other class of shares of NewCo;

- there will be a provision restricting the payment of dividends on other classes of shares so that no such dividends may be paid on any other class of shares of NewCo if the resulting realizable value of the net assets of NewCo after payment of the dividends would be less than the aggregate of the redemption amounts of all of the NewCo Special Shares then outstanding;

- for the purpose of subsection 191(4), the terms and conditions of the NewCo Special Shares to be issued as described herein will, at the time of their issue, specify an amount in respect of each NewCo Special Share. The amount to be specified in respect of each NewCo Special Share will:

- be pursuant to a resolution of the board of directors of Newco;

- be expressed as a dollar amount;

- not be determined by a formula; and

- not exceed the FMV of the property received by NewCo in consideration for its issuance;

- the holder of each NewCo Special Share will be entitled, upon the liquidation, dissolution or winding-up of NewCo, to a payment in priority to all other classes of shares of NewCo of an amount equal to the redemption amount therefor to the extent of the amount or value of property available under applicable law for payment to shareholders upon dissolution, but will be entitled to no more than the amount of that payment; and

- the holder of each NewCo Special Share will not be entitled to vote at meetings of shareholders of NewCo, other than as provided under the XXXXXXXXXX.

Reorganization of PUBCO/XXXXXXXXXX Share Capital

57A. A "Management Information Circular" will be mailed to all holders of PUBCO/XXXXXXXXXX common shares in contemplation of a meeting of those shareholders to, inter alia, approve the proposed Plan of Arrangement. This document also will be filed with the XXXXXXXXXX requiring "prospectus level disclosure" regarding NewCo and the NewCo Shares and it also will be filed with the appropriate provincial Securities Administrators. There is no legal requirement for this document to be "accepted" by the XXXXXXXXXX or any other public authority in Canada.

58. Subject to, among other things, the appropriate shareholder and court approvals, the Proposed Transactions generally will be undertaken pursuant to the Plan of Arrangement. With the exception of the actual filing of elections under the Act, the transactions involving stock options, the public listing of shares and any subsequent private placement or initial public offering of AmalCo Shares, the following Proposed Transactions will occur by virtue of the Plan of Arrangement and will be designated in the Plan of Arrangement to occur on the Transaction Date in the order set out below. The Transaction Date will be on a date that will be subsequent to the date of receipt of the rulings requested herein.

59. Each PUBCO/XXXXXXXXXX Shareholder will be entitled to dissent from the Plan of Arrangement pursuant to the provisions of the Plan of Arrangement. For the purposes of the transactions comprising the Plan of Arrangement, any Dissenting Shareholder who ultimately is entitled to be paid the FMV of its Existing PUBCO/XXXXXXXXXX Shares will be deemed, under the Plan of Arrangement, to have transferred its Existing PUBCO/XXXXXXXXXX Shares to PUBCO/XXXXXXXXXX and such shares will be deemed to have been cancelled by PUBCO/XXXXXXXXXX, immediately prior to the Transaction Date.

59A. Either prior to or as part of the Plan of Arrangement, but in either case, before the transaction described in Paragraph 67, cash in the range of approximately $XXXXXXXXXX will be invested by PUBCO/XXXXXXXXXX into the share capital of Canco/XXXXXXXXXX, either as contributed surplus or in consideration of additional shares of Canco/XXXXXXXXXX . This cash will be used by Canco/XXXXXXXXXX as working capital to fund business operations.

60. PUBCO/XXXXXXXXXX Articles of Incorporation will be amended to create two new classes of shares as follows:

- New PUBCO/XXXXXXXXXX Shares, each of which will be a fully participating voting common share with the holder thereof entitled to one vote at meetings of shareholders of PUBCO/XXXXXXXXXX, the provisions of which will be slightly different than the Existing PUBCO/XXXXXXXXXX Shares, but which otherwise will have other terms which parallel the terms of the Existing PUBCO/XXXXXXXXXX Shares; and

- PUBCO/XXXXXXXXXX Special Shares with the following attributes:

- each PUBCO/XXXXXXXXXX Special Share will be redeemable, subject to applicable law, at any time at the option of PUBCO/XXXXXXXXXX at a redemption amount equal to the FMV of all of PUBCO/XXXXXXXXXX issued and outstanding shares multiplied by the proportion that the FMV of the Canco/XXXXXXXXXX Shares is of the FMV of all of PUBCO/XXXXXXXXXX property then divided by the number of PUBCO/XXXXXXXXXX Special Shares issued on the reorganization of capital (plus any declared but unpaid dividends);

- each PUBCO/XXXXXXXXXX Special Share will be retractable, subject to applicable law, at any time at the option of the holder at a retraction amount equal to the redemption amount described above;

- the holder of each PUBCO/XXXXXXXXXX Special Share will be entitled to a non-cumulative cash dividend as and when declared by the board of directors from time to time, which dividend need not also be declared on any other class of shares of PUBCO/XXXXXXXXXX;

- there will be a provision restricting the payment of dividends on other classes of shares so that no such dividends may be paid on any other class of shares of PUBCO/XXXXXXXXXX if the resulting realizable value of the net assets of PUBCO/XXXXXXXXXX after payment of the dividends would be less than the aggregate of the redemption amounts of all of the PUBCO/XXXXXXXXXX Special Shares then outstanding;

- for the purpose of subsection 191(4), the terms and conditions of the PUBCO/XXXXXXXXXX Special Shares to be issued as described herein will, at the time of their issue, specify an amount in respect of each PUBCO/XXXXXXXXXX Special Share. The amount to be specified in respect of each PUBCO/XXXXXXXXXX Special Share will:

- be pursuant to a resolution of the board of directors of PUBCO/XXXXXXXXXX;

- be expressed as a dollar amount;

- not be determined by a formula; and

- not exceed the FMV of the property received by PUBCO/XXXXXXXXXX in consideration for its issuance;

- the holder of each PUBCO/XXXXXXXXXX Special Share will be entitled, upon the liquidation, dissolution or winding-up of PUBCO/XXXXXXXXXX, to a payment in priority to all other classes of shares of PUBCO/XXXXXXXXXX, of an amount equal to the redemption amount thereof to the extent of the amount or value of property available under applicable law for payment to shareholders upon dissolution, but will be entitled to no more than the amount of that payment; and

- the holder of each PUBCO/XXXXXXXXXX Special Share will be entitled to one vote for every XXXXXXXXXX shares held at meetings of shareholders of PUBCO/XXXXXXXXXX, except as may be otherwise provided under the XXXXXXXXXX.

61. Each Participant will, in exchange for each Existing PUBCO/XXXXXXXXXX Share held, receive one New PUBCO/XXXXXXXXXX Share and one PUBCO/XXXXXXXXXX Special Share.

62. The additions to the stated capital of the New PUBCO/XXXXXXXXXX Shares and the PUBCO/XXXXXXXXXX Special Shares will reflect the relative aggregate FMV's of such shares and, in the aggregate, will not exceed the aggregate PUC of the Existing PUBCO/XXXXXXXXXX Shares immediately prior to the reorganization of capital.

Stock Options

63. Concurrent with the foregoing amendment of PUBCO/XXXXXXXXXX capital as described in Paragraph 60, each employee of corporations in the PUBCO/XXXXXXXXXX Group will exchange such employee's Existing PUBCO/XXXXXXXXXX Stock Options for New PUBCO/XXXXXXXXXX Stock Options, which will provide that upon completion of the Proposed Transactions the particular employee may acquire New PUBCO/XXXXXXXXXX Shares at a reduced exercise price compared to the Existing PUBCO/XXXXXXXXXX Stock Options, to reflect the decline in the FMV of the equity of PUBCO/XXXXXXXXXX as a result of the spin-off of Canco/XXXXXXXXXX. The amount by which the FMV of the New PUBCO/XXXXXXXXXX Shares immediately after the exchange will exceed the exercise price under the New PUBCO/XXXXXXXXXX Options will not exceed the amount by which the FMV of the Existing PUBCO/XXXXXXXXXX Shares immediately before the exchange will exceed the exercise price under the Existing PUBCO/XXXXXXXXXX Stock Options.

For this purpose, and as required by the XXXXXXXXXX Stock Exchange, the FMV of the Existing PUBCO/XXXXXXXXXX Shares will be determined based upon the weighted average trading price of such shares over a specified period of days (expected in the range of 5-20 days) and the FMV of the New PUBCO/XXXXXXXXXX Shares will be determined based upon the weighted average trading price of such shares over a similar specified period of days (also expected to be in the range of 5-20 days).

Transfer of PUBCO/XXXXXXXXXX Special Shares to NewCo

64. NewCo will acquire from the Participants all of the PUBCO/XXXXXXXXXX Special Shares in exchange for an identical number of NewCo Shares. The certificates for the PUBCO/XXXXXXXXXX Special Shares which otherwise would be delivered to the Participants instead will be delivered directly to NewCo. The NewCo Shares so acquired will be consistent with the information provided in the Management Information Circular described in Paragraph XXXXXXXXXX and such acquisition by the Participant will be consistent with the relevant provincial securities legislation throughout Canada, as well as within the rules and policy guidelines that govern, or are established by the XXXXXXXXXX.

65. If requested by a particular Participant, NewCo will execute a joint election under subsection 85(1) in respect of the disposition by that Participant of PUBCO/XXXXXXXXXX Special Shares for NewCo Shares. It is anticipated that each member of the XXXXXXXXXX Family that is a Participant will execute and file a valid subsection 85(1) joint election with NewCo in respect of the dispositions of PUBCO/XXXXXXXXXX Special Shares.

66. Pursuant to XXXXXXXXXX, the addition to the stated capital of NewCo in respect of the issuance of the NewCo Shares will not exceed the aggregate PUC of the PUBCO/XXXXXXXXXX Special Shares transferred to NewCo.

Transfer of Canco/XXXXXXXXXX Shares to NewCo

67. PUBCO/XXXXXXXXXX will transfer to NewCo all of the Canco/XXXXXXXXXX Shares at their FMV determined immediately before the transfer.

67A Immediately after the transfer described in Paragraph 67, the FMV of the Canco/XXXXXXXXXX Shares will equal the proportion of the FMV of all the property of PUBCO/XXXXXXXXXX determined before the transfer, that:

(a) the aggregate FMV of the PUBCO/XXXXXXXXXX shares owned by NewCo immediately before the transfer, is of

(b) the aggregate FMV of all the issued and outstanding shares of PUBCO/XXXXXXXXXX immediately before the transfer,

all determined on the presumption that the aggregate FMV of the property of PUBCO/XXXXXXXXXX is equal to the amount determined to be the FMV of the issued and outstanding shares of PUBCO/XXXXXXXXXX at that time.

68. In consideration for the transfer of the Canco/XXXXXXXXXX Shares, NewCo will issue NewCo Special Shares to PUBCO/XXXXXXXXXX which will have an aggregate redemption amount equal to the FMV of the Canco/XXXXXXXXXX Shares transferred.

69. PUBCO/XXXXXXXXXX and NewCo will jointly elect, in prescribed form and within the time determined under subsection 85(6), for the provisions of subsection 85(1) to apply to the transfer of the Canco/XXXXXXXXXX Shares to NewCo. The Agreed Amount will be the ACB to PUBCO/XXXXXXXXXX of the Canco/XXXXXXXXXX Shares transferred, which will not exceed the FMV of those shares.

70. Pursuant to XXXXXXXXXX, the addition to the stated capital of NewCo in respect of the issuance of the NewCo Special Shares to PUBCO/XXXXXXXXXX will not exceed the Agreed Amount under subsection 85(1) in respect of the transfer of the Canco/XXXXXXXXXX Shares to NewCo.

Cross-Redemption

71. NewCo will redeem from PUBCO/XXXXXXXXXX all of the NewCo Special Shares for an amount equal to the aggregate of the redemption amounts of the shares so redeemed, and will issue to PUBCO/XXXXXXXXXX in consideration therefor the NewCo Redemption Note, being a demand promissory note with a principal amount equal to the aggregate of the foregoing redemption amounts. PUBCO/XXXXXXXXXX will accept such note as full and absolute payment of the redemption amounts in respect of all such redeemed shares, with the risk of the note being dishonoured.

72. PUBCO/XXXXXXXXXX will redeem from NewCo all of the PUBCO/XXXXXXXXXX Special Shares for an amount equal to the aggregate of the redemption amounts of the shares so redeemed, and will issue to NewCo in consideration therefor the PUBCO/XXXXXXXXXX Redemption Note, being a demand promissory note with a principal amount equal to the aggregate of the foregoing redemption amounts. NewCo will accept such PUBCO/XXXXXXXXXX Redemption Note as full payment of the redemption amounts in respect of such redeemed shares, with the risk of the note being dishonoured.

73. Each of the NewCo Redemption Note and the PUBCO/XXXXXXXXXX Redemption Note will have interest payable only from the date of demand for payment by the holder to the date of payment of the amount owing under the particular note at a rate equal to the average monthly prime rate of a Canadian chartered bank.

Set-Off

74. PUBCO/XXXXXXXXXX will pay the principal amount of the PUBCO/XXXXXXXXXX Redemption Note by transferring to NewCo the NewCo Redemption Note which will be accepted by NewCo in full payment of PUBCO/XXXXXXXXXX obligation. NewCo will pay the principal amount of the NewCo Redemption Note by transferring to PUBCO/XXXXXXXXXX the PUBCO/XXXXXXXXXX Redemption Note which will be accepted by PUBCO/XXXXXXXXXX in full payment of NewCo's obligation. The PUBCO/XXXXXXXXXX Redemption Note and the NewCo Redemption Note both will thereupon be marked paid in full and cancelled.

74A NewCo will, pursuant to paragraph (b) of the definition "public corporation" in subsection 89(1), elect to be a public corporation.

74B NewCo will, pursuant to the definition "public corporation" in subsection 89(1), elect in its return of income for its first taxation year to have been a public corporation from the beginning of such year.

Amalgamation of Canco/XXXXXXXXXX with NewCo

75. Canco/XXXXXXXXXX will be amalgamated with NewCo under XXXXXXXXXX to form AmalCo in such manner that:

(a) all of the property (except amounts receivable from any predecessor corporation or shares of any predecessor corporation) of the predecessor corporations immediately before the merger will become property of AmalCo by virtue of the merger;

(b) all of the liabilities (except any amounts payable to any predecessor corporation) of the predecessor corporations immediately before the merger will become liabilities of AmalCo by virtue of the merger; and

(c) no securities or other property will be issued on the Amalgamation and the NewCo Shares will remain outstanding following the Amalgamation as AmalCo Shares with a Stated Capital equal to the Stated Capital of the NewCo Shares.

76. XXXXXXXXXX will become the Chairman of the board of directors of AmalCo and the Canco/XXXXXXXXXX President will become President of AmalCo. The Canco/XXXXXXXXXX Options held by the Canco/XXXXXXXXXX President will be exchanged for options of AmalCo permitting him to acquire AmalCo Shares from the treasury of AmalCo on the same terms and conditions as Canco/XXXXXXXXXX Shares could have been acquired under the Canco/XXXXXXXXXX Options ("AmalCo President Options").

77. The AmalCo Shares will be listed on XXXXXXXXXX Stock Exchange.

78. AmalCo will issue AmalCo Stock Options to enable certain directors, officers and other employees of the AmalCo Group to acquire AmalCo Shares from treasury at exercise prices that will not be less than the FMV of the AmalCo Shares on the day on which the particular AmalCo Stock Options are granted.

78A. The share certificates in connection with the various share transactions outlined above will be handled as set forth below.

(a) Recognizing that all of the PUBCO/XXXXXXXXXX Special Shares issued to the Participants will immediately be acquired by NewCo in exchange for NewCo Shares, no PUBCO/XXXXXXXXXX Special Shares certificates will be issued or delivered to the Participants. However, NewCo will be issued a certificate for all of the PUBCO/XXXXXXXXXX Special Shares upon NewCo's acquisition thereof. Similarly, recognizing that all of the NewCo Shares issued in exchange for PUBCO/XXXXXXXXXX Special Shares will be converted to AmalCo Shares on the amalgamation of Canco/XXXXXXXXXX and the NewCo, no separate share certificates in respect of NewCo Shares will be issued or delivered to the Participants.

(b) As soon as practicable following the "record date" (expected to be the seventh trading day on the XXXXXXXXXX Stock Exchange following the date of the Plan of Arrangement) AmalCo shall cause to be issued to the registered holder of Amalco Shares at the close of business on such record date shares certificates representing the AmalCo Shares of which each such person is the registered holder, and shall cause such share certificates to be delivered or mailed to such registered holders.

(c) From and after the time of the exchange described in Paragraph 61, share certificates representing Existing PUBCO/XXXXXXXXXX Shares held by a Participant shall for all purposes be deemed to be shares certificates representing New PUBCO/XXXXXXXXXX Shares, and no new share certificates shall be issued with respect to the New PUBCO/XXXXXXXXXX Shares issued in connection with the Arrangement.

(d) From the time of the exchange described in Paragraph 61, to the close of business on the record date described in subparagraph (b) hereof, share certificates representing Existing PUBCO/XXXXXXXXXX Shares held by a Participant also shall be deemed pursuant to the Plan of Arrangement for all purposes also to represent NewCo Shares until the time of the Amalgamation and thereafter to represent AmalCo Shares issued in connection with the Plan of Arrangement.

Post-Proposed Transactions

79. Each of PUBCO/XXXXXXXXXX and AmalCo will operate as separate entities.

80. AmalCo may raise additional capital by an issuance of AmalCo Shares to the public as part of a public offering or through private placement, provided always that such issuance would be limited to not more than 50% of the AmalCo Shares issued in the Proposed Transactions.

81. AmalCo will repay the Canco/XXXXXXXXXX Loan from funds derived from additional share capital, debt financing, cash flow from operations or some combination thereof.

82. AmalCo may exercise the XXXXXXXXXX Option and acquire the shares of XXXXXXXXXX for cash or AmalCo Shares.

PURPOSES OF THE PROPOSED TRANSACTIONS

PUBCO/XXXXXXXXXX believes that it is in the best interests of the PUBCO/XXXXXXXXXX Shareholders that PUBCO/XXXXXXXXXX "spin-off" its XXXXXXXXXX Business division on the basis outlined above for the following reasons.

1. The creation of AmalCo as a separate public corporation should increase shareholder value because the XXXXXXXXXX Business division ultimately will achieve a higher valuation as a stand-alone business.

2. The separation of PUBCO/XXXXXXXXXX businesses between PUBCO/XXXXXXXXXX and AmalCo will enhance the ability of each separate public corporation to pursue its independent corporate objectives and strategies.

3. It is preferable to give the PUBCO/XXXXXXXXXX Shareholders a choice to make an independent investment decision in respect of their value-based investment in the XXXXXXXXXX Business and XXXXXXXXXX Businesses on the one hand, and the XXXXXXXXXX Business on the other.

4. The "spin-off" will allow the separate businesses to access capital for growth on the basis of their individual visions and strategies.

5. The separation also will enhance shareholder liquidity.

RULINGS

Provided that the above statements constitute a complete and accurate disclosure of all the relevant facts, proposed transactions and purposes of the proposed transactions, we rule as follows:

A) With regard to the purchase by PUBCO/XXXXXXXXXX of Existing PUBCO/XXXXXXXXXX Shares held by a Dissenting Shareholder as described in Paragraph 59:

(a) subject to the application of subsection 55(2), the Dissenting Shareholder will be deemed by paragraph 84(3)(b) to have received a dividend equal to the amount by which any payment from PUBCO/XXXXXXXXXX to the Dissenting Shareholder in respect of the purchase of such person's shares exceeds the PUC of such shares immediately prior to their purchase;

(b) subsections 212(2) and 215(1) will apply (subject to the provisions of any applicable income tax convention) to require PUBCO/XXXXXXXXXX to withhold and remit 25% of the amount of any such dividend deemed to have been paid to a Dissenting Shareholder who is a non-resident person; and

(c) paragraph (j) of the definition of "proceeds of disposition" in section 54 will apply to exclude the amount of such deemed dividend from the proceeds of disposition of the Existing PUBCO/XXXXXXXXXX Shares recognized by the Dissenting Shareholder as a result of the purchase of such shares by PUBCO/XXXXXXXXXX.

B) The provisions of subsection 86(1) will apply and the provisions of subsections 86(2) and (2.1) will not apply to the disposition of each Existing PUBCO/XXXXXXXXXX Share by each Participant for one New PUBCO/XXXXXXXXXX Share and one PUBCO/XXXXXXXXXX Special Share provided:

(a) the particular Participant holds the Existing PUBCO/XXXXXXXXXX Share as capital property; and

(b) the particular Participant and PUBCO/XXXXXXXXXX do not file an election under subsection 85(1) in respect of the particular share exchange,

such that:

(c) the cost of the New PUBCO/XXXXXXXXXX Shares and PUBCO/XXXXXXXXXX Special Shares received on the exchange by each particular Participant will be deemed by paragraph 86(1)(b) to be an amount equal to that proportion of the aggregate ACB to the particular Participants, immediately before the exchange, of the Existing PUBCO/XXXXXXXXXX Shares, that

(i) the FMV, immediately after the exchange, of the New PUBCO/XXXXXXXXXX Shares or the PUBCO/XXXXXXXXXX Special Shares, as the case may be, received by the particular Participant

is of

(ii) the FMV, immediately after the exchange, of all of the shares of PUBCO/XXXXXXXXXX received by the particular Participant for the Existing PUBCO/XXXXXXXXXX Shares; and

(d) pursuant to paragraph 86(1)(c), such Participant will be deemed to have disposed of its Existing PUBCO/XXXXXXXXXX Shares for aggregate proceeds of disposition equal to the aggregate cost to the Participant of the New PUBCO/XXXXXXXXXX Shares and PUBCO/XXXXXXXXXX Special Shares received by it as determined in (c) above.

C) Provided that a particular Participant who, immediately before the exchange of PUBCO/XXXXXXXXXX Special Shares for an identical number of NewCo Shares:

(a) holds the PUBCO/XXXXXXXXXX Special Shares as capital property;

(b) deals at arm's length with NewCo immediately before the exchange;

(c) does not file an election under subsection 85(1) with respect to the exchange; and

(d) does not include any portion of the gain or loss otherwise determined in computing his or her income for that year,
and further provided that immediately after the exchange;

(e) no such Participant or such person or persons with whom the Participant does not deal at arm's length, or no such holder together with any person or persons with whom the Participant does not deal at arm's length, will

(i) control Newco, or

(ii) beneficially own shares of Newco having a FMV of more than 50% of the FMV of all the outstanding shares of Newco, then pursuant to paragraph 85.1(1)(a) such Participant will be deemed:

(f) to have disposed of such PUBCO/XXXXXXXXXX Special Shares for proceeds of disposition equal to the ACB to such Participant of those shares immediately before the exchange;

(g) to have acquired the NewCo Shares at a cost to such person equal to the ACB to such Participant of such PUBCO/XXXXXXXXXX Special Shares immediately before the exchange; and

(h) the cost to NewCo of each PUBCO/XXXXXXXXXX Special Share acquired from each such Participant will be deemed to be the lesser of its FMV immediately before the Exchange and the PUC of the PUBCO/XXXXXXXXXX Special Share immediately before the Exchange.

D) Provided that the requisite elections are made in the prescribed form and within the prescribed time period, and provided that the property transferred is an eligible property, subject to the application of subsection 69(11), the provisions of subsection 85(1) will apply to the transfer:

(a) by PUBCO/XXXXXXXXXX of the Canco/XXXXXXXXXX Shares to NewCo as described in Paragraph 67, and

(b) by any holder of PUBCO/XXXXXXXXXX Special Shares (including a member of the XXXXXXXXXX Family) of all such shares to NewCo as described in Paragraphs 64 and 65.

such that the Agreed Amounts in respect of each transfer will be deemed to be the proceeds of disposition for the particular transferred property to each transferor and the cost to each transferee for the particular transferred property.

For greater certainty, paragraph 85(1)(e.2) will not apply to the transfer.

E) For the purposes of subparagraph (b)(iii) of the definition of PUC in subsection 89(1), the PUC of:

(a) the New PUBCO/XXXXXXXXXX Shares and PUBCO/XXXXXXXXXX Special Shares issued to the holders of Existing PUBCO/XXXXXXXXXX Shares as described in Paragraph 61;

(b) the NewCo Shares issued to holders of PUBCO/XXXXXXXXXX Special Shares exchanged therefor as described in Paragraph 64;

(c) the NewCo Special Shares issued to PUBCO/XXXXXXXXXX as described in Paragraph 68; and

(d) the AmalCo Shares issued in Paragraph 75;

computed without reference to the Act will be equal to their stated capital as determined for purposes of the XXXXXXXXXX.

E.1) The NewCo Shares issued as described in Paragraph 64 will be qualified for distribution to the public for purposes of section 4800 of the Income Tax Regulations.

F) Subsection 84(3) will apply:

(a) on the redemption, as described in Paragraph 71, of the NewCo Special Shares owned by PUBCO/XXXXXXXXXX, to deem NewCo to have paid and PUBCO/XXXXXXXXXX to have received; and

(b) on the redemption, as described in Paragraph 72, of the PUBCO/XXXXXXXXXX Special Shares owned by NewCo, to deem PUBCO/XXXXXXXXXX to have paid and NewCo to have received a dividend on such shares equal to the amount, if any, by which the aggregate amount paid upon such redemption exceeds the aggregate PUC in respect of such shares immediately before such redemption, and any such dividend

(c) will be included, pursuant to subsection 82(1) and paragraph 12(1)(j), in computing the income of the corporation deemed to have received such dividend;

(d) will be deductible pursuant to subsection 112(1) by the corporation deemed to have received the dividend;

(e) will not be a dividend to which any of subsections 112(2.1), (2.2), (2.3) or (2.4) apply;

(f) will be excluded, pursuant to paragraph (j) of the definition of "proceeds of disposition" in section 54, in determining the proceeds of disposition to the recipient corporation of the shares so redeemed;

(g) will not be subject to tax under Part IV; and

(h) will not be subject to tax under Parts IV.1 or VI.1.

G) The provisions of subsection 112(3) will apply to reduce any loss which otherwise would be determined for the particular holder as a result of the redemptions of shares described in the Proposed Transactions.

G.1) Provided that the transfer of the Canco/XXXXXXXXXX Shares by PUBCO/XXXXXXXXXX to NewCo, as described in paragraph 67 above, meets the type of property requirement in the definition "distribution" in subsection 55(1), and provided that, as part of the series of transactions or events that includes the proposed transactions described above, 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 subparagraph 55(3.1)(b)(ii);

(c) an acquisition of property in the circumstances described in subparagraph 55(3.1)( b)(iii); or

(d) an acquisition of property in the circumstances described in paragraphs 55(3.1)(c) or 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 given in Ruling F above and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).

H) The cost to NewCo of the PUBCO/XXXXXXXXXX Redemption Note and the cost to PUBCO/XXXXXXXXXX of the NewCo Redemption Note will in each case, upon the issuance thereof, be equal to the principal amount of the particular note. Accordingly, no amount will be included in the income of NewCo or PUBCO/XXXXXXXXXX upon payment of the principal amount of the particular note.

I) The repayment of the PUBCO/XXXXXXXXXX Redemption Note held by NewCo and the NewCo Redemption Note held by PUBCO/XXXXXXXXXX as described in Paragraph 74 will not, in and of itself, result in an income inclusion or the application of the provisions of section 80.

J) Provided that the Existing PUBCO/XXXXXXXXXX shares constitute capital property to a particular Participant prior to the commencement of the Proposed Transactions, the Proposed Transactions will not, in and by themselves, cause the New PUBCO/XXXXXXXXXX Shares, the PUBCO/XXXXXXXXXX Special Shares, the NewCo Shares and the AmalCo Shares to be received by that Participant as a result of the Proposed Transactions not to be capital property to that Participant.

K) Upon the occurrence of the Amalgamation described in Paragraph 75:

(a) the provisions of section 87 will apply in respect of Newco, Canco/XXXXXXXXXX and AmalCo; and

(b) provided that the NewCo Shares are held by a particular holder thereof as capital property, the provisions of subsection 87(4) (excluding paragraphs 87(4)(c) to (e)) will apply to such holder, such that the holder will be considered to have received AmalCo Shares in consideration for the disposition by such holder of the NewCo Shares and will be deemed to have disposed of such NewCo Shares for proceeds equal to, and to have acquired the AmalCo Shares at a cost equal to the ACBs to the holder of such NewCo Shares immediately before the Amalgamation.

L) Control for purposes of the Act, of PUBCO/XXXXXXXXXX, NewCo or AmalCo will not be considered to be have been acquired by a person or group of persons by reason only of the Proposed Transactions.

M) Provided that the New PUBCO/XXXXXXXXXX Shares, the NewCo Shares and the AmalCo Shares are listed on a prescribed stock exchange in Canada, 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).

N) The Proposed Transactions, in and of themselves, will not result in the application of subsections 15(1), 56(2), 56(4) or 246(1).

O) Subsection 7(1.4) will apply in respect of the exchange of Existing PUBCO/XXXXXXXXXX Stock Options for New PUBCO/XXXXXXXXXX Stock Options as described in Paragraph 63 and the exchange of Canco/XXXXXXXXXX Options for AmalCo President Options as described in paragraph 76. For greater certainty, to the extent that subsection 7(1.4) is applicable, paragraph 7(1)(b) will not apply in respect of such exchanges.

O.1) A shareholder who is not resident in Canada will not be required to comply with the provisions of section 116 in respect of the disposition of his shares pursuant to the amalgamation described in paragraph 75 above.

P) Subsection 245(2) will not be applied, as a result of the Proposed Transactions in and of themselves, to redetermine the tax consequences described in the rulings given above.
These rulings are given subject to the statements of limitations and qualification set forth in Information Circular 70-6R4 issued on January 29, 2001, by the Canada Customs and Revenue Agency and are binding provided that the proposed transactions are completed before XXXXXXXXXX.

The above rulings are based on the Act in its present form and do not take into account any proposed amendments which if enacted could have an effect on the rulings provided herein.

COMMENTS

(a) Nothing in this letter should be construed as implying that the Canada Customs and Revenue Agency has reviewed, accepted or otherwise agreed to: the determination of the ACB, the FMV or the PUC of any shares referred to herein; or

(b) any tax consequences relating to the facts and proposed transactions described herein other than those specifically described in the rulings given above.

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 Notice of Ways and Means issued by the Department of Finance in March 2001, and provided that:

(a) there is not a distribution by PUBCO/XXXXXXXXXX to a corporation that is not an "acquiror", within the meaning ascribed in the definition "specified corporation", before the day that is three years after the date that the proposed transactions are implemented; and

(b) there is not a distribution by AmalCo or any other acquiror in relation to PUBCO/XXXXXXXXXX before the day that is three years after the date that the proposed transactions are implemented;

proposed subsection 55(3.02) would apply to the proposed transactions such that the definition "distribution" in subsection 55(1) is amended so that "each type of property" is revised to read as "property" and "property of that type" is amended to read as "property".

2. Provided that the proposed amendments to paragraph 110(1)(d) as set forth in the Notice of Ways and Means issued by the Department of Finance in March, 2001 are enacted substantially as proposed and provided that:

(a) each share to be issued under the New PUBCO/XXXXXXXXXX Stock Options as described in paragraph 63 and under the AmalCo President Options as described in paragraph 76 and the AmalCo Stock Options as described in paragraph 78 is a prescribed security under section 6204 of the Income Tax Regulations at the time of its sale or issue, or would have been a prescribed share if it were issued or sold to the relevant taxpayer at the time the taxpayer disposed of rights under the relevant stock option agreement;

(b) the amount payable by the relevant taxpayer to acquire the security under the relevant stock option agreement (determined without reference to any change in the value of a currency other than Canada relative to Canadian currency after the agreement was made):

(i) in the case of the AmalCo Stock Options, is not less than the amount described in proposed clause 110(1)(d)(ii)(A); and

(ii) in the case of the New PUBCO/XXXXXXXXXX Stock Options and the AmalCo President Options, is not less than the amount described in proposed clause 110(1)(d)(iii)(A); and

(c) (i) in the case of the AmalCo Stock Options, proposed clause 110(1)(d)(ii)(B) is satisfied; and

(ii) in the case of the New PUBCO/XXXXXXXXXX Stock Options and the AmalCo President Options, proposed clause 110(1)(d)(iii)(B) is satisfied;

the relevant taxpayer will be entitled to a deduction as contemplated under proposed paragraph 110(1)(d) in respect of the amount of any benefit deemed by subsection 7(1) to have been received by the taxpayer in the year in respect of a security that was to be issued under the New PUBCO/XXXXXXXXXX Stock Options, AmalCo President Options or the AmalCo Stock Options, as the case may be, or in respect of the transfer or other disposition of rights under any of the foregoing stock option agreements.

The foregoing opinions are not rulings, and, in accordance with the practice referred to in Information Circular 70-6R4 are not binding on the Canada Customs and Revenue Agency.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch