7 July 2006 Income Tax Severed Letter 2006-0177341R3 - Creation of an income trust

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.

SUMMARY: Creation of an income trust—ITA-55, 97(2), 132(6), 245—Advance income tax ruling—Several issues relating to the creation of an income trust, including (1) whether an exchange of common shares for preferred and common shares amounts to a disposition; (2) whether the condition in 55(1)“specified class”(b) is met where shares of one series are convertible into shares of another series where both series are meant to be of a “specified class”; (3) whether a redemption premium is an early redemption premium for purposes of 55(1)“specified class”(c) if the shares are issued indefinitely; (4) whether the proposed butterfly taints a similar butterfly performed under 55(3.02) less than 3 years ago; (5) whether the wind-up of ACo Subco is a distribution that might taint the butterfly under 55(1)“specified corporation”(d); (6) whether the redemption of shares or the payment of a note taints the butterfly under 55(3.1)(a); (7) whether the transfer of property to Operating LP followed by a subsequent transfer to the other partner two days later qualifies under 97(2); (8) whether there is an acquisition of control when the trustees acquire the majority of the shares of DCo Amalco and GP; (9) whether New Trust qualifies as a mutual fund trust immediately after the proposed transactions are implemented; (10) whether GAAR applies; and (11) whether the receipt of property from Operating LP results in a disposition of a partnership interest.

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.

PRINCIPAL ISSUES: Ruling A: whether an exchange of common shares for preferred and common shares amounts to a disposition; Rulings F and G: (i) whether the condition in paragraph (b) of the definition “specified class” in subsection 55(1) is met where shares of one series are convertible into shares of another series where both series are meant to be of a “specified class”; (ii) whether a redemption premium is an early redemption premium for the purpose of paragraph (c) of the definition “specified class” in subsection 55(1) if the shares are issued indefinitely; (iii) whether the current proposed butterfly taints a similar butterfly performed under 55(3.02) less than 3 year ago; (iv) whether the wind-up of ACo Subco is a distribution that might taint the butterfly under paragraph (d) of the definition of “specified corporation” in subsection 55(1); (v) whether the redemption of shares or the payment of a note taints the butterfly under paragraph 5(3.1)(a); Rulings K, L, and M: whether the transfer of property to Operating LP followed by a subsequent transfer to the other partner 2 days later qualifies under 97(2); Ruling S: whether there is an acquisition of control when the trustees acquire the majority of the shares of DCo Amalco and XXXXXXXXXX GP; Ruling U: whether New Trust qualifies as a MFT immediately after the Proposed Transactions are implemented; XXXXXXXXXX; Ruling AA: whether GAAR applies. Additional issue: whether the receipt of property from Operating LP results in a disposition of a partnership interest.

POSITION: Ruling A: Yes, the exchange is a disposition and section 86 applies but GAAR might apply if the purpose of such reorganization is to take advantage of the exception in subsection 84(4.1); Rulings F and G: (i) Yes, the condition is met because each series should be tested without reference to the interconvertibility feature; (ii) Yes, the redemption premium is an early redemption premium because it compensates for foregoing the opportunity to convert the share with a fixed dividend rate in the future; (iii) No, the transferee is an acquiror as described in paragraph (b) of the definition “specified corporation” in 55(1); (iv) the wind-up of ACo Subco is not a distribution that might taint the butterfly under paragraph (d) of the definition “specified corporation” in subsection 55(1) because of the presumption in paragraph (f) of the definition of “specified corporation” in 55(1); (v) the redemption of shares or the payment of a note does not taint the butterfly under paragraph 55(3.1)(a) because the shares are earmarked for cancellation and the payment of a debt is not an acquisition; Rulings K, L, and M: the transfer of property to a partnership followed by a subsequent transfer to the other partner 2 days later qualifies under 97(2) on the basis of the Continental Bank case; Ruling S: the acquisition of the majority of the shares of DCo Amalco and XXXXXXXXXX GP by the trustees of New Fund results in an acquisition of control; Ruling U: New Fund qualifies as a mutual fund trust because all the interests of the beneficiaries are described by reference to units and its only undertaking is the investing of its funds in property; XXXXXXXXXX; Ruling AA: GAAR does not apply—see submission to the GAAR committee and the minutes of those meetings. Additional issue: the receipt of property from Operating LP does not result in a disposition of a partnership interest as there is no decrease in such interest.

XXXXXXXXXX 2006-017734

XXXXXXXXXX

XXXXXXXXXX, 2006

Dear XXXXXXXXXX:

Re: XXXXXXXXXX (Business No. XXXXXXXXXX, XXXXXXXXXX TSO, XXXXXXXXXX Taxation Centre)

XXXXXXXXXX Business No. XXXXXXXXXX, XXXXXXXXXX TSO, XXXXXXXXXX Taxation Centre)

XXXXXXXXXX (Business No. XXXXXXXXXX, XXXXXXXXXX TSO, XXXXXXXXXX Taxation Centre)

XXXXXXXXXX (Business No. XXXXXXXXXX, XXXXXXXXXX TSO, XXXXXXXXXX Taxation Centre)

XXXXXXXXXX (Business No. XXXXXXXXXX)

(collectively, the “Taxpayers”)

• We are writing in response to your letter of XXXXXXXXXX as amended on XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-referenced taxpayers. We also acknowledge receipt of your emails as well as our telephone conversations. The documents submitted with your request are only part of this document to the extent described herein.
• (i) To the best of your knowledge and that of the above-referenced taxpayers none of the issues involved in this ruling are:
• (ii) in an earlier return of the Taxpayers or a related person;
• (iii) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the Taxpayers or a related person; under objection by the Taxpayers or a related person;
• (iv) before the courts; or
• (v) the subject of a ruling previously issued by the Income Tax Rulings Directorate.

The Taxpayers have confirmed that the proposed transactions described herein will not affect their ability to pay any of their outstanding tax liabilities.

All statutory references herein are to provisions of theIncome Tax Act(Canada), R.S.C. 1985 (5th Supp.), c. 1, as amended to the date hereof (the “Act”) or to theIncome Tax Regulations(the “Regulations”) and all references to monetary amounts are in Canadian dollars.

DEFINITIONS

• In this letter, unless otherwise expressly stated, the following terms have the meanings specified:
• “ACo” means XXXXXXXXXX., a corporation XXXXXXXXXX. ACo is governed by theFirst Act;
• “ACo Common Shares” means the issued and outstanding common shares of Aco, which are the only voting shares of ACo. As at XXXXXXXXXX, there were XXXXXXXXXX ACo Common Shares;
• “ACo Preferred Shares” means the issued and outstanding XXXXXXXXXX Preferred Shares of ACo XXXXXXXXXX. There are XXXXXXXXXX ACo Preferred Shares;
• “ACo Subco” means a corporation incorporated under theFirst Act;
• “ACo Subco Common Shares” means voting and fully participating common shares of ACo Subco;
• “ACo Subco Note” means a demand non-interest-bearing promissory note issued by ACo Subco on the redemption of the ACo Subco Preferred Shares and having a principal amount and fair market value equal to the ACo Subco Redemption Amount;
• “ACo Subco Preferred Shares” means the non-voting redeemable and retractable preferred shares of ACo Subco. Each ACo Subco 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, net of any liabilities assumed by the issuer at the time of issuance divided by the number of ACo Subco Preferred Shares issued as consideration for such property and will entitle the holder thereof to a non-cumulative cash dividend equal to XXXXXXXXXX% of the ACo Subco Redemption Amount having priority over the ACo Subco Common Shares;
• “ACo Subco Redemption Amount” means the aggregate redemption amount of the ACo Subco Preferred Shares equal to the aggregate fair market value of the BCo Subco Common Shares that BCo transfers to ACo Subco at the time of that transfer. There are no liabilities that will be assumed on such transfer;
• “acquiror” has the meaning assigned by the definition of “specified corporation” in subsection 55(1);
• “AcquisitionCo” means a corporation incorporated under theFirst Act;
• “adjusted cost base” has the meaning assigned by section 54;
• “affiliated persons” has the meaning assigned by subsection 251.1(1);
• “Agreements” means the agreements summarized in Schedule D;
• “allowable capital loss” has the meaning assigned by paragraph 38(1)(b);
• “arm's length” has the meaning assigned by section 251;
• “Authorizations” means favourable advance income tax rulings from the CRA, XXXXXXXXXX
• “BCo” means XXXXXXXXXX., which was incorporated in XXXXXXXXXX under theFirst Act;
• “BCo Butterfly” means the transactions described in this letter under the heading BCo Butterfly;
• “BCo Butterfly Proportion” means the fraction A/B where A is the fair market value of the BCo Subco Common Shares immediately before their transfer to ACo Subco; and B is the net fair market value of all property owned by BCo immediately before the transfer of BCo Subco Common Shares to ACo Subco;
• “BCo Common Shares” means the issued and outstanding common shares of BCo. As at XXXXXXXXXX, there were XXXXXXXXXX BCo Common Shares which represent all the issued and outstanding shares of the capital stock of BCo;
• “BCo New Common Shares” means the voting and fully participating common shares of BCo issued on the BCo Share Exchange. The terms and conditions of the BCo New Common Shares will be the same as those of the existing BCo Common Shares;
• “BCo Note” means a demand non-interest-bearing promissory note issued by BCo on the redemption of all of the BCo Reorganization Shares held by ACo Subco;
• “BCo Redemption Amount” means the aggregate redemption amount of the BCo Reorganization Shares issued on the BCo Share Exchange which will be equal to the BCo Butterfly Proportion of the aggregate fair market value of all of the issued and outstanding BCo Common Shares immediately before the BCo Share Exchange;
• “BCo Reorganization Shares” means non-voting, redeemable and retractable preferred shares of BCo issued on the BCo Share Exchange. Each BCo Reorganization Share will entitle the holder thereof to a redemption amount equal to the BCo Redemption Amount and to a non-cumulative cash dividend equal to XXXXXXXXXX% per annum of such amount at that time having priority over the BCo New Common Shares;
• “BCo Share Exchange” means the exchange by ACo of each BCo Common Share that it holds for one BCo New Common Share and one BCo Reorganization Share, having an aggregate fair market value equal to the fair market value of the BCo Common Share so exchanged, immediately before the BCo Share Exchange;
• “BCo Subco” means a corporation incorporated under theFirst Act;
• “BCo Subco Common Shares” means the voting and fully participating common shares of BCo Subco;
• “BCo Subco Note” means a demand non-interest-bearing promissory note issued by BCo Subco on the redemption of the BCo Subco Preferred Shares and having a principal amount and fair market value equal to the BCo Subco Redemption Amount;
• “BCo Subco Preferred Shares” means non-voting redeemable and retractable preferred shares of BCo Subco. Each BCo Subco 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, net of any liabilities assumed by the issuer at the time of issuance divided by the number of BCo Subco Preferred Shares issued as consideration for such property and will entitle the holder thereof to a non-cumulative cash dividend equal to XXXXXXXXXX% of the BCo Subco Redemption Amount having priority over the BCo Subco Common Shares;
• “BCo Subco Redemption Amount” means the aggregate redemption amount of the BCo Subco Preferred Shares equal to the aggregate fair market value of the shares of DCo and FCo that CCo transfers to BCo Subco at the time of that transfer, net of the CCo Assumed Liabilities;
• XXXXXXXXXX;
• “beneficiary” has the meaning assigned by subsection 108(1) and, for greater clarity, as extended by subsection 248(25);
• “Business C” means the business carried by CCo and its subsidiaries. XXXXXXXXXX
• “Business D” means XXXXXXXXXX
• “Business Day” means any day on which commercial banks are generally open for business in XXXXXXXXXX;
• “Canadian corporation” has the meaning assigned by subsection 89(1);
• “Canadian Resident” means an individual, corporation or trust that resides in Canada for purposes of the Act;
• “capital gain” has the meaning assigned by subsection 39(1);
• “capital loss” has the meaning assigned by subsection 39(1);
• “capital property” has the meaning assigned by section 54;
• “CCo” means XXXXXXXXXX, a corporation XXXXXXXXXX under theFirst Actof XXXXXXXXXX;
• “CCo Assumed Liabilities” means certain short-term liabilities of CCo due to ACo in the amount of approximately $XXXXXXXXXX to be assumed by BCo Subco in connection with the transfer described in Paragraph 45;
• “CCo Board” means the Board of Directors of CCo;
• “CCo Butterfly” means the transactions described in this letter under the heading CCo Butterfly Transactions;
• “CCo Butterfly Proportion” means the fraction A/B where A is the fair market value of the shares of DCo and FCO to be transferred to BCo Subco net of the CCo Assumed Liabilities, immediately before such transfer, and B is the net fair market value of all property owned by CCo immediately before the transfer of the shares of DCo and FCO to BCo Subco;
• “CCo Common Shares” means the issued and outstanding common shares of CCo. As at XXXXXXXXXX, there were XXXXXXXXXX CCo Common Shares, representing the totality of its voting shares;
• “CCo New Common Shares” means the voting and fully participating common shares of CCo proposed to be issued as described in this letter. The terms and conditions of the CCo New Common Shares will be the same as those of the existing CCo Common Shares;
• “CCo Note” means a demand non-interest-bearing promissory note issued by CCo on the redemption of all the CCo Reorganization Shares held by BCo Subco;
• “CCo Operating Assets” means those assets that are listed in Schedule B, used by CCo in XXXXXXXXXX;
• “CCo Preferred Shares” means the XXXXXXXXXX issued and outstanding CCo XXXXXXXXXX Shares. XXXXXXXXXX CCo Preferred Shares are non-voting (unless CCo fails to pay XXXXXXXXXX dividends on that class, consecutive or not);
• “CCo XXXXXXXXXX Operating Assets” means capital property XXXXXXXXXX which are XXXXXXXXXX;
• “CCo Redemption Amount” amount means the aggregate redemption amount of the CCo Reorganization Shares issued on the CCo Share Exchange which will be equal to the CCo Butterfly Proportion of the aggregate fair market value of all of the issued and outstanding CCo Common Shares and CCo Preferred Shares immediately before the CCo Share Exchange;
• “CCo Reorganization Shares” means non-voting, redeemable and retractable preferred shares of CCo issued on the CCo Share Exchange. Each CCo Reorganization Share will entitle the holder thereof to a redemption amount equal to the CCo Redemption Amount and to a non-cumulative cash dividend equal to XXXXXXXXXX% per annum of such amount at that time, having priority over the CCo New Common Shares;
• “CCo XXXXXXXXXX Shares” means the XXXXXXXXXX remaining issued and outstanding XXXXXXXXXX Preferred Shares XXXXXXXXXX issued by CCo in XXXXXXXXXX for $XXXXXXXXXX per share ($XXXXXXXXXX gross proceeds). The stated capital of the CCo XXXXXXXXXX Shares is $XXXXXXXXXX per share. XXXXXXXXXX entitled to a floating adjustable cumulative preferred cash dividend XXXXXXXXXX, the CCo XXXXXXXXXX Shares are redeemable, at any time at CCo's option, for $XXXXXXXXXX per share plus accrued and unpaid dividends. In CCo's view, the $XXXXXXXXXX premium payable by CCo in order to redeem the CCo XXXXXXXXXX Shares after XXXXXXXXXX is an early redemption premium for the purpose of the definition of “specified class”. The CCo XXXXXXXXXX Shares were and will be convertible into CCo XXXXXXXXXX Shares at the holders' option on a XXXXXXXXXX basis on XXXXXXXXXX;
• XXXXXXXXXX;
• XXXXXXXXXX;
• XXXXXXXXXX;
• XXXXXXXXXX;
• XXXXXXXXXX;
• “CCo Share Exchange” means the exchange by BCo of each CCo Common Share that it holds for one CCo New Common Share and one CCo Reorganization Share having an aggregate fair market value equal to the fair market value of the CCo Common Share so exchanged, immediately before the CCo Share Exchange;
• “cost amount” has the meaning assigned by subsection 248(1);
• “CRA” means the Canada Revenue Agency;
• “Day One” means XXXXXXXXXX;
• “Day Two” means the Business Day that follows Day One;
• “Day Three” means the Business Day that follows Day Two;
• “DCo” means an entity incorporated on XXXXXXXXXX under theFirst ActXXXXXXXXXX
• “DCo Amalco” means the corporation resulting from the amalgamation of DCo and several of its subsidiaries as proposed in this letter;
• “DCo Amalco Common Shares” means the common shares of DCo Amalco;
• “DCo Amalco Interest” means the DCo Shares held by ACo and subsequently converted into DCo Amalco Common Shares;
• “DCo Amalco Non Operating Assets” means certain assets described in Schedule B used by DCo Amalco in the XXXXXXXXXX;
• “DCo Amalco Operating Assets” means substantially all of DCo Amalco's assets which are used by it in the XXXXXXXXXX, including capital property and eligible capital property, but excluding the DCo Amalco Non Operating Assets;
• “DCo Common Shares” means the issued and outstanding common shares of DCo. As at XXXXXXXXXX, there were XXXXXXXXXX DCo Common Shares;
• “DCo MergerCo” means the corporation resulting from the amalgamation of DCo Amalco and AcquisitionCo;
• “DCo MergerCo Shares” means the common shares of DCo MergerCo;
• “DCo XXXXXXXXXX Shares” means the issued and outstanding XXXXXXXXXX preferred shares of DCo. As at XXXXXXXXXX, there were XXXXXXXXXX DCo XXXXXXXXXX Shares. XXXXXXXXXX;
• XXXXXXXXXX;
• “DCo Shares” means collectively the XXXXXXXXXX DCo Common Shares held by CCo, the XXXXXXXXXX DCo Common Shares held by GCo and the XXXXXXXXXX DCo Common Shares held by ICo;
• “DCo Subsidiaries” means OCo, XXXXXXXXXX and RCo;
• “Deferred Recapture” means the aggregate of the following amounts that would have been included in the income of DCo Amalco had any asset transferred by it to Operating LP been transferred at fair market value on Day 2, namely (i) the lesser of the amounts deducted by DCo and its predecessors under paragraph 20(1)(b) (that amount is approximately equal to $XXXXXXXXXX) and any income inclusion under subsection 14(1), in respect of the DCo Amalco Operating Assets, and (ii) any income inclusion under section 13 in respect of the DCo Amalco Operating Assets. For greater certainty, the Deferred Recapture will be based on the excess of such fair market value over the subsection 97(2) elected amount in respect of the related assets;
• “disposition” has the meaning assigned by subsection 248(1);
• “distributing corporation” has the meaning assigned by subsection 55(1);
• “distribution” has the meaning assigned by subsection 55(1);
• “dividend rental arrangement” has the meaning assigned by subsection 248(1);
• “ECo” means XXXXXXXXXX.;
• “ExchangeCo” means a corporation that will be wholly-owned by New Fund;
• “ExchangeCo Notes” means XXXXXXXXXX Exchange Notes and XXXXXXXXXX Exchange Notes. The interest rate on the ExchangeCo Notes will be XXXXXXXXXX% less than the interest rates on the Holdings Trust XXXXXXXXXX Notes and the Holdings Trust XXXXXXXXXX Notes
• “Exchange Right” means a right granted by New Fund to CCo, ACo and all their assignees to require XXXXXXXXXX LP and Operating LP to exchange for one New Fund Unit, at any time and from time to time, (i) each bundled XXXXXXXXXX GP Share and XXXXXXXXXX LP Exchangeable Unit or (ii) each Operating LP Exchangeable Unit. The number of New Fund Units issued on such exchange will be adjusted to the number of New Fund Units that would have been held if the exchange had been made immediately before a subdivision, distribution of New Fund Units to all or substantially all fund unitholders (other than a distribution made where the net income for tax purposes of New Fund is greater than its distributable cash and income is paid by New Fund by issuing additional New Fund Units to all unitholders, followed by an immediate consolidation of the units to the number of units previously outstanding), consolidation or similar change resulting in a change in the number of (i) XXXXXXXXXX GP Shares and Exchangeable XXXXXXXXXX LP Units; (ii) Operating LP Exchangeable Units; or (iii) New Fund Units. No adjustment will be made if the subdivision, New Fund Units distribution, consolidation or similar change is pursuant to the exercise of Exchange Rights, a distribution in kind of New Fund Units followed by an immediate consolidation, the redemption of New Fund Units pursuant to the terms of the New Fund Units, or a redemption pursuant to non-resident ownership restrictions. Alternatively, Exchange Right means the right XXXXXXXXXX LP and Operating LP granted to ACo and CCo, respectively, and all their assignees, to require the acquisition for a cash payment of (i) bundled XXXXXXXXXX GP Shares and XXXXXXXXXX LP Exchangeable Units or (ii) Operating LP Exchangeable Units. The redemption or acquisition proceeds will be equal to the net proceeds on the issuance of an underwritten offering of the applicable number of New Fund Units less any expenses of an underwritten offering funded through equity financing. The Fund will grant to XXXXXXXXXX LP and Operating LP the right to require New Fund to issue a number of New Fund Units equivalent to the number of New Fund Units that would be received by ACo, CCo and their assignees had they required to be provided with New Fund Units instead of cash on the exercise of their Exchange Right;;
• “FCo” means a taxable Canadian corporation incorporated on XXXXXXXXXX under XXXXXXXXXX;
• “FCo Common Shares” means the issued and outstanding common shares of FCo. As at XXXXXXXXXX, there were XXXXXXXXXX FCo Common Shares;
• XXXXXXXXXX;
• XXXXXXXXXX;
• “FCo XXXXXXXXXX Shares” means the issued and outstanding XXXXXXXXXX preferred shares of FCo. XXXXXXXXXX There are XXXXXXXXXX FCo XXXXXXXXXX Shares;
• “eligible property” has the meaning assigned by subsection 85(1.1);
• “First Act” means the CanadaBusiness Corporations Act;
• “First Exchange” means XXXXXXXXXX;
• “forgiven amount” has the meaning assigned by subsections 80(1) and 80.01(1);
• “Fund Trustees” means a group of XXXXXXXXXX persons who will be elected by Unitholders in accordance with the Fund Declaration of Trust to act as trustees of New Fund, subject to the terms of the XXXXXXXXXX Agreement. Fund Trustees are nominated by the Board of XXXXXXXXXX GP as directed by ACo with respect to the nomination of up to a majority of the Fund Trustees for so long as ACo and CCo, directly or indirectly, hold not less than XXXXXXXXXX% of the New Fund Units on a fully diluted basis and certain major agreements between CCo and Operating LP are in place, subject to the terms of the XXXXXXXXXX Agreement. The principles set forth in the XXXXXXXXXX Agreement relating to the composition of the Board of XXXXXXXXXX GP shall also apply to the selection of nominees for election as Fund Trustees. The ACo nominees for election as Fund Trustees may be directors, officers or employees of ACo or its affiliates. On Closing, it is expected that there will initially be XXXXXXXXXX Fund Trustees chosen from the following individuals: XXXXXXXXXX. The Fund Trustees will appoint the chair of the Fund Trustees. If the chair is not Independent (as such term is defined in National Instrument 58-101—Disclosure of Corporate Governance Practices (”NI 58-101”)), a lead Fund Trustee who is independent will also be appointed;
• “GCo” means XXXXXXXXXX.;
• “guarantee agreement” has the meaning assigned by subsection 112(2.2);
• “HCo” means XXXXXXXXXX.;
• “XXXXXXXXXX GP” means a Canadian corporation incorporated under theFirst Act. According to the XXXXXXXXXX Agreement, ACo shall be entitled to nominate up to a majority of the directors of XXXXXXXXXX GP for so long as ACo and CCo, directly or indirectly, hold not less than XXXXXXXXXX% of the New Fund Units (fully-diluted) and certain major commercial agreements between CCo and Operating LP are in place;
• “XXXXXXXXXX GP Shares” means the common shares of XXXXXXXXXX GP;
• “XXXXXXXXXX LP” means a limited partnership to be formed and governed by the laws of the Province of XXXXXXXXXX;
• “XXXXXXXXXX LP Common Units” means the limited partner units issued by XXXXXXXXXX LP;
• “XXXXXXXXXX LP Exchangeable Units” means, XXXXXXXXXX exchangeable limited partnership units of XXXXXXXXXX LP which give right to an Exchange Right;
• “ICo” means XXXXXXXXXX.;
• “Information Circular” means the Information Circular dated XXXXXXXXXX and filed by DCo on XXXXXXXXXX;
• “JCo” means XXXXXXXXXX.;
• “KCo” means XXXXXXXXXX.;
• “LCo” means XXXXXXXXXX.;
• “MCo” means XXXXXXXXXX;
• XXXXXXXXXX;
• “mutual fund trust” has the meaning assigned by subsection 132(6);
• “N Partnership” means XXXXXXXXXX;
• “New Fund” means XXXXXXXXXX, a trust settled by XXXXXXXXXX., a corporation wholly-owned by XXXXXXXXXX with the transfer of $XXXXXXXXXX to the initial trustee of New Fund, and governed by the laws of XXXXXXXXXX;
• “New Fund Units” means the trust units issued by New Fund that are not New Fund Voting Units;
• “New Fund Voting Units” means special voting units issued by New Fund. No New Fund Voting Unit shall be entitled to any interest or share in any distribution from New Fund or in any net assets of New Fund in the event of its termination or winding-up. New Fund Voting Units may be issued in series and shall only be issued, in the discretion of the Trustees, in connection with or in relation to securities which are exchangeable for New Fund Units, including Operating LP Exchangeable Units and XXXXXXXXXX LP Exchangeable Units. Upon the exercise, exchange, conversion, repurchase or redemption of an Operating LP Exchangeable Unit or a XXXXXXXXXX LP Exchangeable Unit for or into a New Fund Unit, or upon the expiry or termination (if any) of the exercise, exchange or conversion rights, the related New Fund Voting Unit will immediately be cancelled.
• “New Trust” means XXXXXXXXXX, a limited purpose trust formed under the laws of the province of XXXXXXXXXX;
• “New Trust Trustee” means the persons designated to act as trustees of New Trust, subject to the terms of the XXXXXXXXXX Agreement.
• “OCo” means XXXXXXXXXX.;
• “Operating GP” means DCo Amalco or its successors. The XXXXXXXXXX initial directors of Operating GP will be the same as the XXXXXXXXXX initial directors of XXXXXXXXXX GP;
• “Operating GP Unit” means the general partner units of Operating LP;
• “Operating LP” means a limited partnership to be governed by the laws of the province of XXXXXXXXXX;
• “Operating LP Brand” means the trademarks and trade names of Operating LP;
• “Operating LP Exchangeable Units” means XXXXXXXXXX limited partner units of Operating LP which give right to an Exchange Right;
• “Operating Subco” means a taxable Canadian corporation to be incorporated under theFirst Act;
• “paid-up capital” has the meaning assigned by subsection 89(1);
• “Paragraph” refers to a numbered paragraph in this letter;
• “Partnership 1” means XXXXXXXXXX;
• “PCo” means XXXXXXXXXX.;
• XXXXXXXXXX
• “Pre-1972 CSOH” means pre-1972 capital surplus on hand as that expression is defined in subsection 88(2.1);
• “Previous Rulings” means XXXXXXXXXX
• “principal amount” has the meaning assigned by subsection 248(1);
• “proceeds of disposition” has the meaning assigned by section 54;
• “Property” means all the property determined on a consolidated basis by including the appropriate pro-rata share of the assets of any corporation over which BCo and CCo have the ability to exercise significant influence. For the purposes of that determination, that includes corporations over which another corporation has the ability to exercise significant influence where BCo or CCo has the ability to exercise significant influence over that other corporation.
• “Proposed Transactions” means the transactions referred to in the Proposed Transactions section in this letter;
• “public corporation” has the meaning assigned by subsection 89(1);
• “QCo” means XXXXXXXXXX., whose business consists of XXXXXXXXXX;
• “QCo Shares” means the issued and outstanding shares of QCo;
• “RCo” means XXXXXXXXXX;
• “related person” has the meaning assigned by section 251;
• “replacement property” means a particular eligible property that meets the requirements of subsection 14(7);
• “restricted financial institution” has the meaning assigned by subsection 248(1);
• “Safe Income on Hand” in respect of particular shares 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 defined in paragraph 55(5)(b), (c) or (d) depending on the circumstances) by a company and its subsidiaries after 1971 and before the safe-income determination time (as defined in subsection 55(1)) for the series of transactions that includes the dividends;
• “SCo” means XXXXXXXXXX, a new taxable Canadian corporation incorporated under theFirst Act;
• XXXXXXXXXX;
• XXXXXXXXXX;
• “XXXXXXXXXX Agreement” means the agreement to be entered into by ACo, CCo, New Fund, New Trust, XXXXXXXXXX GP, any transferee of any XXXXXXXXXX GP Shares, XXXXXXXXXX LP, Operating LP, DCo MergerCo and Operating Subco The XXXXXXXXXX agreement will provide for, among other things, the size and composition of the Boards of XXXXXXXXXX GP and Operating GP and the Fund Trustees, the number of and nominees for election as Fund Trustees and other governance matters. The XXXXXXXXXX Agreement is not a unanimous shareholders agreement for the purposes of theFirst Act;
• “XXXXXXXXXX Exchange Notes” means notes issued by ExchangeCo. XXXXXXXXXX Exchange Notes are interest bearing and mature at a date that is no later than the XXXXXXXXXX anniversary of the date of issuance;
• “XXXXXXXXXX Exchange Notes” means notes issued by ExchangeCo. XXXXXXXXXX Exchange Notes are interest bearing and mature at a date that is no later than the XXXXXXXXXX anniversary of the date of issuance;
• “series of transactions or events” has the extended meaning assigned by subsection 248(10);
• XXXXXXXXXX
• “specified class” has the meaning assigned by subsection 55(1);
• “specified corporation” has the meaning assigned by subsection 55(1);
• “specified financial institution” has the meaning assigned by subsection 248(1);
• “stated capital account” has the meaning assigned by section 26 of theFirst Act;
• “subsidiary wholly-owned corporation” has the meaning assigned by subsection 248(1);
• “taxable Canadian corporation” has the meaning assigned by subsection 89(1);
• “taxable dividend” has the meaning assigned by subsection 89(1);
• XXXXXXXXXX;
• “transferee corporation” has the meaning assigned by subsection 55(1);
• “Transition Agreement” means the XXXXXXXXXX entered into by ACo, CCo and DCo on XXXXXXXXXX; and
• “Unit Trust” has the meaning assigned by subsection 108(2).

• FACTS
• 1. ACo is a public corporation and a taxable Canadian corporation. The ACo Common shares are listed on the First Exchange XXXXXXXXXX. The ACo Preferred Shares are listed on the First Exchange. Based on a review of the shareholders' register, and to the knowledge of ACo's directors and senior officers, no shareholder owns 10% or more of the issued and outstanding ACo Common Shares. No shareholder owns more than 10% of the ACo Preferred Shares except XXXXXXXXXX
  • 2. The relevant aspects of ACo's corporate structure can be summarized as follows:
  • (a) ACo owns all the BCo Common Shares;
  • (b) BCo owns all the CCo Common Shares. CCo operates Business C.
  • (c) CCo owns all the issued and outstanding common shares of GCo;
  • (d) GCo owns all the FCo Common Shares and all the issued and outstanding shares of KCo and ICo;
  • (e) As of XXXXXXXXXX the DCo Shares held directly and indirectly by CCo represented approximately XXXXXXXXXX% of the issued and outstanding equity of DCo.
  • (f) FCo owns XXXXXXXXXX.
  • (g) ECo is an indirect wholly-owned subsidiary of CCo XXXXXXXXXX
  • (h) ACo and CCo own XXXXXXXXXX. The latter acts as a general partner of XXXXXXXXXX. ACo and a wholly-owned subsidiary of CCo act as limited partners; and
  • (i) Other XXXXXXXXXX businesses such as LCo and XXXXXXXXXX
• 3. DCo is a public corporation that through its subsidiaries operates Business D. The DCo Common Shares and the DCo XXXXXXXXXX Shares are listed on the First Exchange. XXXXXXXXXX
  • 4. The relevant aspects of DCo's corporate structure can be summarized as follows:
    • (a) DCo owns all the issued and outstanding shares of:
    • i. OCo;
    • ii. QCo;
    • iii. RCo;
  • (b) Through OCo, DCo owns all the issued and outstanding shares of XXXXXXXXXX
  • (c) Through another subsidiary, DCo owns all the issued and outstanding shares of JCo.
  • (d) DCo, XXXXXXXXXX. and XXXXXXXXXX. have entered into Partnership 1; Partnership 1 holds a XXXXXXXXXX% interest and DCo holds a XXXXXXXXXX% interest in N Partnership (their combined interest is equal to XXXXXXXXXX%). XXXXXXXXXX;
  • (e) OCo indirectly holds approximately XXXXXXXXXX% of the shares of MCo.
• 5. The following shares are held as capital property: the shares of BCo held by ACo, the shares of CCo held by BCo, the FCo Common Shares held by GCo and the DCo Shares held by CCo, GCo and ICo.
• 6. Some entities in the ACo corporate group have obtained the Previous Rulings.
• 7. ACo has issued and currently has outstanding long-term notes in various series with various terms to maturity and with an aggregate principal amount of approximately $XXXXXXXXXX.
• 8. As at XXXXXXXXXX, ACo had approximately $XXXXXXXXXX of capital losses carried forward. None of the paid-up capital of the issued and outstanding ACo Common Shares is derived from the capitalization of Pre-1972 CSOH in respect of which an election has been made in accordance with the provisions of subsection 83(1) as it read with respect to dividends which became payable before 1979.
• 9. BCo is a taxable Canadian corporation. BCo has indebtedness of $XXXXXXXXXX outstanding, which is owed to XXXXXXXXXX, a partnership of which ACo and XXXXXXXXXX. (a subsidiary wholly-owned corporation of CCo) are the sole partners. That indebtedness was incurred in connection with a transfer of assets from ACo to BCo and ultimately CCo in XXXXXXXXXX.
• 10. CCo is a public corporation and a taxable Canadian corporation. The CCo Preferred Shares are listed on the First Exchange.
• 11. The following XXXXXXXXXX own CCo Preferred Shares: XXXXXXXXXX
• 12. XXXXXXXXXX
• 13. The FCo XXXXXXXXXX Shares are listed on the First Exchange.
• 14. ACo, CCo and DCo have entered into the Transition Agreement.
• 15. The parties referred to in Schedule A have entered into or announced various commercial transactions described in Schedule A.
• 16. Except as described herein, no debts have been or will be incurred or paid and no property has been or will be acquired by BCo or CCo, or any company controlled by BCo or CCo in contemplation of and before the Proposed Transactions described below, other than in a transaction described in subparagraphs 55(3.1)(a)(i) to (iv).
• 17. At all relevant times, the Property of BCo, CCo, ACo Subco and BCo Subco will be classified as business property for the purposes of the definition of “distribution” in subsection 55(1) for the reasons indicated on Schedule E.
• 18. On XXXXXXXXXX, the shareholders of DCo approved a resolution giving DCo approval to implement the Proposed Transactions. XXXXXXXXXX.
• 19. None of the ACo Subco Preferred Shares, BCo Subco Preferred Shares, BCo Reorganization Shares or CCo Reorganization Shares, is or will be subject to a guarantee agreement.
• 20. None of the ACo Subco Preferred Shares, BCo Subco Preferred Shares, BCo Reorganization Shares or CCo Reorganization 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).
• 21. None of the ACo Subco Preferred Shares, BCo Subco Preferred Shares, BCo Reorganization Shares or CCo Reorganization Shares, is or will be subject to a dividend rental arrangement.
• 22. Except as described herein, no changes to the share capital structure of BCo or CCo 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. Any such preferred shares issued will be shares of a specified class.
• 23. None of BCo or CCo or any corporation controlled by BCo or CCo, is, or will be, at any time before the completion of the Proposed Transactions, a corporation described in any of paragraphs (a) to (f) of the definition of “financial intermediary corporation” in subsection 191(1).
• 24. None of BCo, CCo, ACo Subco or BCo Subco is, or will be, at any time before the completion of the Proposed Transactions, a restricted financial institution or a specified financial institution.
• 25. Each of BCo, CCo, ACo Subco and BCo Subco 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.
• Prior to the implementation of the Proposed Transactions, the following entities will be created:
• 26. ACo will incorporate ACo Subco. No shares of ACo Subco will be issued on incorporation and it will qualify as a taxable Canadian corporation.
• The authorized share capital of ACo Subco will consist of an unlimited number of ACo Subco Common Shares and an unlimited number of ACo Subco Preferred Shares.
• 27. BCo will incorporate BCo Subco. No shares of BCo Subco will be issued on incorporation and it will qualify as a taxable Canadian corporation.
• 28. The authorized share capital of BCo Subco will consist of an unlimited number of BCo Subco Common Shares and an unlimited number of BCo Subco Preferred Shares.
• 29. New Fund will be settled. The majority of the Fund Trustees and New Fund will be Canadian Residents.
• 30. New Fund will be a Unit Trust. The interest of each beneficiary under New Fund will be described by reference to New Fund Units and New Fund Voting Units. A holder of a New Fund Voting Unit may require New Fund to redeem it at any time for no consideration, subject to the terms of the trust indenture of New Fund. Each holder of a New Fund Unit can require New Fund to redeem at any time or from time to time on demand the unit for an amount equal to the lesser of (i) XXXXXXXXXX, depending on the available information; and (ii) XXXXXXXXXX% of the Closing Market Price on the redemption date. The redemption proceeds are payable by way of cash payment (to the extent of $XXXXXXXXXX overall redemption proceeds over the month) no later than the last day of the calendar month following the calendar month in which the New Fund Units were tendered for redemption. The Fund may also make that payment in specie. To do so, New Fund will, subject to regulatory approval, cause the Trust to redeem some of its notes and units of the Trust having an aggregate value equal to the redemption price in consideration of the issuance to New Fund of other series of notes. Such notes will then be transferred to ExchangeCo in exchange for ExchangeCo Notes. The ExchangeCo Notes will then be distributed in satisfaction of the redemption price.
• 31. New Fund will duly elect pursuant to subsection 132(6.1) to be considered to have been a mutual fund trust from the date of its creation. New Fund's only undertaking will be the investing of its funds in property (other than real property or an interest in real property). The New Fund Trustees will not form a majority of the directors of DCo Amalco, XXXXXXXXXX GP or any other entity. New Fund will exercise the right to vote the shares of XXXXXXXXXX GP held by it, but will not be a party to any agreements, including the XXXXXXXXXX Agreement, which will give it any special influence over the activities of other entities. Upon the completion of the Proposed Transactions, there will be at least XXXXXXXXXX holders of New Fund Units, each of whom will hold at least XXXXXXXXXX New Fund Units having an aggregate fair market value of not less than $XXXXXXXXXX. It is anticipated that the Fund Units will be widely held by the public. New Fund will comply with the conditions prescribed by section 4801 of the Regulations. The Fund was not established and will not be maintained primarily for the benefit of non-resident persons at any moment of its existence.
• 32. New Fund will settle New Trust by transferring a nominal sum to the New Trust Trustees. New Trust will be a Canadian Resident. New Trust will be a Unit Trust. The majority of the New Trust Trustees and New Trust will be Canadian Residents. Less than half of the New Trust Trustees will be New Fund Trustees. Units of New Trust will be redeemable at any time in consideration for cash and/or the issuance of notes of New Trust
• 33. New Trust will incorporate XXXXXXXXXX GP, which will be a taxable Canadian corporation. New Trust and XXXXXXXXXX GP will form XXXXXXXXXX LP, in which XXXXXXXXXX GP will hold 1 general partner unit and New Trust will hold XXXXXXXXXX LP Common Units. XXXXXXXXXX LP will issue XXXXXXXXXX LP Common Units and XXXXXXXXXX LP Exchangeable Units as part of the Proposed Transactions. XXXXXXXXXX GP will have discretion to determine how distributable cash of XXXXXXXXXX LP will be distributed on the XXXXXXXXXX LP Common Units and the XXXXXXXXXX LP Exchangeable Units but only for the purpose of ensuring that distributions paid on the XXXXXXXXXX LP Exchangeable Units are equivalent to the distributions paid on New Fund Units. New Fund will not, without the prior approval of ACo, CCo or their assignees or without issuing or distributing to them a pro rata (based on the number of New Fund Units to which they are entitled) economic equivalent, issue or distribute (i) New Fund Units or any right to acquire such units to all or substantially all holders of New Fund Units; (ii) evidences of indebtedness of New Fund; (iii) assets of New Fund except in respect of the redemption of New Fund Units. However, (i) may exclude issuances or distributions pursuant to a New Fund distribution reinvestment plan, other direct or indirect equity purchase or equity compensation plans of New Fund that have been approved by ACo, CCo or their assignees and the issuance of New Fund Units as a distribution and subsequent immediate consolidation.
• 34. XXXXXXXXXX LP will incorporate AcquisitionCo, which will be a taxable Canadian corporation.
• 35. DCo will incorporate Operating Subco.
• 36. ACo, CCo and DCo will cause XXXXXXXXXX LP, New Fund and New Trust to become bound by the Transition Agreement. The governance of the various entities is summarized in Schedule C.

PROPOSED TRANSACTIONS

• The transactions described in paragraphs 38 to 78 will be undertaken in the order described below, except that the amendment of the articles of BCo described in Paragraph 50 will be undertaken immediately after the amendment of the articles of CCo referred to in Paragraph 42 and except for the transactions described in Paragraphs 73 to 78, the precise order of which has not yet been determined. XXXXXXXXXX The steps described in paragraphs 37 to 56 will be undertaken before Day One. The steps described in paragraphs 57 to 59 will be undertaken on Day One. The steps described in paragraphs 60 to 62 will be undertaken on Day Two. The steps described in paragraphs 63 to 71 will be undertaken on Day Three. The steps described in paragraphs 72 to 78 will be undertaken after Day Three.
• 37. Aco, CCo and DCo will seek the Authorizations.
  • 38. ACo will, prior to Day One, effect the following in chronological order:
  • a. cause CCo to repay all amounts owing by it to FCo pursuant to a note receivable;
  • b. cause FCo to repay the note owed by it to GCo;
  • c. having caused FCo to send a notice of redemption to the holders of the outstanding FCo XXXXXXXXXX Shares so as to enable a redemption of all outstanding FCo XXXXXXXXXX Shares by FCo on XXXXXXXXXX, fund the redemption price thereof, and cause FCo to effect the redemption of such shares. No shares of FCo will be listed on a stock exchange in Canada prescribed for the purposes of subsection 89(1) after such redemption, and no shares of a class that were previously so listed prior to such redemption will be outstanding after such redemption;
  • d. cause FCo to file an election not to be a public corporation in order to be entitled to effect distributions in favour of its sole shareholder by way of returns of capital under subsection 84(4);
  • e. cause FCo to distribute to GCo an amount of approximately $XXXXXXXXXX by way of a reduction of the stated capital maintained for the issued and outstanding FCo Common Shares;
  • f. cause FCo to distribute to GCo an aggregate amount of approximately $XXXXXXXXXX by way of the payment of dividends on the FCo Common Shares out of its Safe Income on Hand.
• Redemption of DCo XXXXXXXXXX Shares, Amalgamation of DCo and Various Subsidiaries and Winding-up of GCo and ICo.
• 39. DCo will redeem all of the issued and outstanding DCo XXXXXXXXXX Shares on XXXXXXXXXX for cash in accordance with their terms.
• 40. DCo and the DCo Subsidiaries will be amalgamated under theFirst Actto form DCo Amalco. Only DCo Amalco Common Shares will be issued on the amalgamation.
• 41. GCo and ICo will successively be wound-up into CCo with the result that the shares of DCo Amalco, Kco and FCo, proceeds from the settlement of the note referred to in Paragraph 38(b) above and the approximately $XXXXXXXXXX proceeds of the reduction of stated capital and the approximately $XXXXXXXXXX dividends distributed by FCo to GCo will be distributed to CCo.

• CCo Butterfly Transaction
• 42. The articles of incorporation of CCo will be amended to create one new class of an unlimited number of CCo New Common Shares and one new series of an unlimited number of CCo Reorganization Shares.
• 43. BCo and CCo will effect the CCo Share Exchange. CCo will add to the stated capital accounts maintained for the CCo New Common Shares and the CCo Reorganization Shares issued on the CCo Share Exchange an amount equal, in aggregate, to the paid-up capital of the exchanged CCo Common Shares, immediately before the CCo Share Exchange. For greater certainty, immediately after that addition, the aggregate paid-up capital of the CCo New Common Shares and CCo Reorganization Shares will not exceed the paid-up capital of the CCo Common Shares immediately before the CCo Share Exchange and that paid-up capital will be allocated proportionately between the CCo New Common Shares and the CCo Reorganization Shares on the basis of their fair market value.
• Immediately following the CCo Share Exchange, all of the previously issued and outstanding CCo Common Shares will be cancelled. No elections under subsection 85(1) will be filed in respect of the CCo Share Exchange.
• 44. Immediately after the CCo Share Exchange, BCo will transfer to BCo Subco all of its CCo Reorganization Shares. As consideration for the transfer, BCo Subco will issue to BCo XXXXXXXXXX BCo Subco Common Shares. BCo Subco will add to the stated capital account of the BCo Subco Common Shares issued as consideration for the transfer of the CCo Reorganization Shares an amount that will not exceed the maximum amount that could be added to the paid-up capital of such shares, having regard to subsection 85(2.1).
• BCo will jointly elect with BCo Subco, 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 CCo Reorganization Shares. The agreed amount in respect of the CCo Reorganization Shares transferred will be equal to the cost amount of such shares to BCo at the time of the transfer and that amount will be less than the fair market value of the CCo Reorganization Shares at that time.
• 45. Immediately before the transfer by CCo of its shares of DCo Amalco and FCo to BCo Subco described herein, the property of CCo will be determined as though there was one type of property, as contemplated by subsection 55(3.02), on a net basis. For greater certainty, any tax accounts, such as the balance of any non-capital losses and net capital losses will not be considered property in determining the net fair market value of the property of CCo for the purposes of Proposed Transactions. While CCo intends to qualify as a specified corporation and, consequently, should not be required to fulfill the “type of property” requirement set forth in the definition of “distribution” in subsection 55(1), it is CCo's view that all of its property should qualify as one type of property, that is, “business property” for purposes of the “type of property” butterfly rules.
• Immediately after the transfer by BCo of its CCo Reorganization Shares to BCo Subco, CCo will transfer the DCo Amalco Shares and its FCo Common Shares to BCo Subco. As consideration for the transfer, BCo Subco will (i) assume the CCo Assumed Liabilities; and (ii) issue BCo Subco Preferred Shares to CCo having an aggregate redemption amount equal to the BCo Subco Redemption Amount. BCo Subco will add an amount to the stated capital account in respect of the BCo Subco Preferred Shares issued as consideration for the transfer of the shares of DCo Amalco and FCo that will not exceed the maximum amount that could be added to the paid-up capital of such shares, having regard to subsection 85(2.1).
• CCo will jointly elect with BCo Subco, 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 DCo Amalco Shares and the FCo Common Shares. The agreed amount in respect of the DCo Amalco Shares and FCo Common Shares transferred will be equal to or greater than the cost amount of such shares to CCo at the time of disposition, will be at least equal to the amount of the CCo Assumed Liabilities, and will be less than the fair market value of those shares at that time.
  • 46. For greater certainty, immediately after the transfer by CCo of the DCo Amalco Shares and FCo Common Shares to BCo Subco described herein, the fair market value of those shares net of the CCo Assumed Liabilities will be equal to that proportion of the net fair market value of all property of CCo, determined immediately before such transfer that:
  • (a) the fair market value of the CCo Reorganization Shares owned by BCo Subco, immediately before such transfer,
  • is of
  • (b) the aggregate fair market value of all of the issued and outstanding shares of CCo immediately before such transfer.
• 47. BCo Subco will redeem all of the BCo Subco Preferred Shares held by CCo and will issue to CCo in consideration therefor the BCo Subco Note. CCo will accept the BCo Subco Note as full satisfaction for the redemption price of its BCo Subco Preferred Shares so redeemed with the risk of the note being dishonoured.
• 48. CCo will redeem all of the CCo Reorganization Shares held by BCo Subco and will issue in consideration therefor the CCo Note. BCo Subco will accept the CCo Note as full satisfaction for the CCo Redemption Amount with the risk of the note being dishonoured.
• 49. BCo Subco will satisfy the principal amount of the BCo Subco Note by transferring to CCo the CCo Note and CCo will accept it in full payment of BCo Subco's obligation. Concurrently, CCo will satisfy the principal amount of the CCo Note by transferring to BCo Subco the BCo Subco Note and BCo Subco will accept it in full payment of CCo's obligation. The BCo Subco Note and the CCo Note will both be marked paid in full and cancelled.

• BCo Butterfly Transaction
• 50. The articles of incorporation of BCo will be amended to create one new class of an unlimited number of BCo New Common Shares and one new class of an unlimited number of BCo Reorganization Shares.
• ACo and BCo will effect the BCo Share Exchange. BCo will add to the stated capital accounts maintained for the BCo New Common Shares and the BCo Reorganization Shares issued on the BCo Share Exchange an amount equal, in aggregate, to the paid-up capital of the exchanged BCo Common Shares, immediately before the BCo Share Exchange. For greater certainty, immediately after that addition, the aggregate paid-up capital of the BCo New Common Shares and BCo Reorganization Shares will not exceed the paid-up capital of the BCo Common Shares immediately before the BCo Share Exchange and that paid-up capital will be allocated proportionately between the BCo New Common Shares and the BCo Reorganization Shares on the basis of their fair market value.
• Immediately following the BCo Share Exchange, all of the previously issued and outstanding BCo Common Shares will be cancelled. Elections under subsection 85(1) will not be filed in respect of the BCo Share Exchange.
• 51. Immediately after the BCo Share Exchange, ACo will transfer to ACo Subco all of its BCo Reorganization Shares. As consideration for the transfer, ACo Subco will issue to ACo XXXXXXXXXX ACo Subco Common Shares. ACo Subco will add to the stated capital account of the ACo Subco Common Shares issued as consideration for the transfer of the BCo Reorganization Shares an amount that will not exceed the maximum amount that could be added to the paid-up capital of such shares, having regard to subsection 85(2.1).
• ACo will jointly elect with ACo Subco, 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 BCo Reorganization Shares. The agreed amount in respect of the BCo Reorganization Shares transferred will be equal to the cost amount of such shares to ACo at the time of the transfer and that amount will be less than the fair market value of the BCo Reorganization Shares at that time.
• 52. Immediately after the transfer by ACo of its BCo Reorganization Shares to ACo Subco, BCo will transfer its BCo Subco Common Shares to ACo Subco. As consideration for the transfer, ACo Subco will issue ACo Subco Preferred Shares to BCo having an aggregate redemption amount equal to the ACo Subco Redemption Amount. ACo Subco will add an amount to the stated capital account in respect of the ACo Subco Preferred Shares issued as consideration for the transfer of the BCo Subco Common Shares that will not exceed the maximum amount that could be added to the paid-up capital of such shares, having regard to subsection 85(2.1).
• BCo will jointly elect with ACo Subco, 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 BCo Subco Common Shares. The agreed amount in respect of the BCo Subco Common Shares transferred will be equal to the cost amount of such shares to BCo at the time of disposition, which will be less than the fair market value of the transferred BCo Subco Common Shares at that time.
• Immediately before the transfer by BCo of its BCo Subco Common Shares to ACo Subco, the property of BCo will be determined as though there was one type of property, as contemplated by subsection 55(3.02), on a net basis. For greater certainty, any tax accounts, such as the balance of any non-capital losses and net capital losses will not be considered property in determining the net fair market value of the property of BCo for the purposes of the Proposed Transactions. It is BCo's view that all of its property should qualify as one type of property, that is, “business property” for purposes of the “type of property” butterfly rules.
  • For greater certainty, immediately after the transfer by BCo of its BCo Subco Common Shares to ACo Subco, the fair market value of those shares will be equal to that proportion of the net fair market value of all property of BCo, determined immediately before such transfer that:
  • (a) the fair market value of the BCo Reorganization Shares owned by ACo Subco, immediately before such transfer,
  • is of
  • (b) the aggregate fair market value of all of the issued and outstanding shares of BCo immediately before such transfer.
• 53. ACo Subco will redeem all of the ACo Subco Preferred Shares held by BCo and will issue to BCo in consideration therefor the ACo Subco Note. BCo will accept the ACo Subco Note as full satisfaction for the redemption price of its ACo Subco Preferred Shares and will accept the risk of the note being dishonoured.
• 54. BCo will redeem all of the BCo Reorganization Shares held by ACo Subco and will issue in consideration therefor the BCo Note. ACo Subco will accept the BCo Note as full satisfaction for the BCo Redemption Amount with the risk of the note being dishonoured.
• 55. ACo Subco will satisfy the principal amount of the ACo Subco Note by transferring to BCo the BCo Note that will be accepted by BCo in full payment of ACo Subco's obligation. Concurrently, BCo will satisfy the principal amount of the BCo Note by transferring to ACo Subco the ACo Subco Note that will be accepted by ACo Subco in full payment of BCo's obligation. The ACo Subco Note and the BCo Note will both be marked paid in full and cancelled.

• Successive Windings-Up of ACo Subco and BCo Subco into ACo
• 56. ACo Subco and BCo Subco will be successively wound-up under subsection 88(1) into ACo with the result that ACo will receive the shares of DCo Amalco and the FCo Common Shares and the CCo Assumed Liabilities will be assumed by ACo and will be cancelled.

• DAY ONE TRANSACTIONS:
• 57. CCo and DCo Amalco will enter into a partnership agreement to form Operating LP. CCo and DCo Amalco will also enter into the Agreements.
• 58. On the formation of Operating LP, DCo Amalco will acquire XXXXXXXXXX Operating GP Unit for nominal consideration. DCo Amalco and its successors will administer, manage, control and operate the business of Operating LP. Operating GP, Operating LP, XXXXXXXXXX GP and XXXXXXXXXX LP shall ensure that cash distributions on the Exchangeable LP Units, the XXXXXXXXXX LP Units and the Fund Units will be equal on a per-unit basis in respect of any particular period. That might involve advancing to each other on mutually agreed terms a portion of their cash holdings. In any circumstance, including the winding-up, dissolution or termination of New Fund, New Fund will not declare or pay cash distributions in respect of any period on a New Fund Unit in excess of declared or paid cash distributions on an Exchangeable LP Unit or XXXXXXXXXX LP Unit in respect of that period.
• 59. At XXXXXXXXXX on Day One, CCo will transfer capital property comprising the CCo XXXXXXXXXX Operating Assets to Operating LP in consideration for approximately XXXXXXXXXX Operating LP Exchangeable Units. DCo Amalco or its successors, Operating LP, through its general partner DCo Amalco or its successors, and CCo will jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have subsection 97(2) apply to the transfer. The fair market value of the depreciable property at the time of the disposition will be less than both (i) the undepreciated capital cost to CCo of all property of the prescribed class in which the depreciable property is included immediately before the disposition; and (ii) the cost to CCo of the depreciable property. The agreed amount will be deemed to be equal to the fair market value of such assets at the time of disposition.

DAY TWO TRANSACTIONS:

• Contribution of DCo Amalco's Assets
  • 60. At XXXXXXXXXX on Day Two, DCo Amalco will contribute substantially all of its assets, including XXXXXXXXXX, to Operating LP in consideration for (i) approximately XXXXXXXXXX partnership units of Operating LP; and (ii) the assumption by Operating LP of substantially all of DCo Amalco's liabilities and indebtedness. DCo Amalco (or its successor, DCo MergerCo), Operating LP, through its general partner DCo Amalco (or its successor, DCo MergerCo) and CCo will jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have subsection 97(2) apply to the transfer. The agreed amount will be equal to, or higher than:
  • (a) for depreciable property, the least of (i) the undepreciated capital cost to DCo Amalco of all property of the prescribed class in which the depreciable property is included immediately before the disposition; (ii) the cost to DCo Amalco of the depreciable property; and (iii) the fair market value of the depreciable property at the time of the disposition;
  • (b) for eligible capital property, the least of (i) 4/3 of DCo Amalco's cumulative eligible capital in respect of the related business immediately before the disposition; (ii) the cost to DCo Amalco of the eligible capital property; and (iii) the fair market value of the eligible capital property at the time of disposition; and
  • (c) for all other capital property (other than depreciable property), the lesser of (i) such fair market value; and (ii) the cost amount to DCo Amalco of the capital property at the time of the disposition.
• The agreed amount in respect of any depreciable property, eligible capital property, and capital property (other than depreciable property) will not be greater than the fair market value thereof at the time of the disposition or less than the fair market value of the consideration received therefor (other than the partnership units of Operating LP).
• In certain cases, both the undepreciated capital cost and aggregate capital cost to DCo Amalco of depreciable property forming part of the DCo Amalco Operating Assets and included in a particular prescribed class will be greater than the fair market value of such property at the time of the transfer. In that case, subsection 97(2) will not apply to the transfer. Instead, subsection 13(21.2) will apply so that DCo Amalco will be deemed to have disposed of such property for proceeds of disposition equal to the lesser of the undepreciated capital cost and capital cost of property of the relevant prescribed class. In addition, for each prescribed class to which subsection 13(21.2) so applies, DCo Amalco will be deemed by subparagraph 13(21.2)(e)(iii) to own a property of a separate class that was acquired at a capital cost equal to the excess of such proceeds over such fair market value.
• 61. Immediately following that transfer, through Operating LP, DCo Amalco will use the DCo Amalco Operating Assets, the DCo Amalco Non Operating Assets and the other assets acquired from DCo Amalco in the carrying on of its XXXXXXXXXX business. The income realized by Operating LP in connection with the carrying on of its business, including the income arising from the operation of the DCo Amalco Non Operating Assets from the date of the transfer referred to in this Paragraph to the date of its subsequent disposition will be included in the computation of the income of Operating LP under subsection 96(1).
• 62. DCo Amalco will transfer a XXXXXXXXXX interest in Operating LP in favour of Operating Subco in consideration for shares of Operating Subco, XXXXXXXXXX.

DCo Amalco and Operating Subco will jointly elect, 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 interest in Operating LP. The agreed amount in respect of the XXXXXXXXXX interest transferred will be at least equal to the cost amount of such interest to DCo Amalco, which cost amount will be less than its fair market value.

DAY THREE TRANSACTIONS:

• Contribution of CCo Operating Assets (Other than CCo XXXXXXXXXX Operating Assets) and Transfer by Operating LP of DCo Amalco Non Operating Assets XXXXXXXXXX
  • 63. At XXXXXXXXXX on Day 3, CCo will contribute the CCo Operating Assets (other than the CCo XXXXXXXXXX Operating Assets previously transferred) to Operating LP in consideration for:
  • a. a non-interest-bearing promissory note having a principal amount of approximately $XXXXXXXXXX;
  • b. the assumption of related liabilities;
  • c. the DCo Amalco Non Operating Assets, subject to the assumption of certain related liabilities (the aggregate net value of which is estimated to be approximately $XXXXXXXXXX);
  • d. XXXXXXXXXX; and
  • e. approximately XXXXXXXXXX additional Operating LP Exchangeable Units.
  • DCo Amalco, or its successors, Operating LP, through its general partner DCo Amalco or its successors, Operating Subco, and CCo will jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have subsection 97(2) apply to the transfer. The estimated fair market value of the eligible capital property included in the transferred CCo Operating Assets at the time of the disposition will be greater than both (i) 4/3 of CCo's cumulative eligible capital in respect of the business immediately before the disposition, and (ii) the cost to CCo of the eligible capital property. The agreed amount will be equal to, or higher than:
  • (a) for depreciable property, the least of (i) the undepreciated capital cost to CCo of all property of the prescribed class in which the depreciable property is included immediately before the disposition; (ii) the cost to CCo of the depreciable property; and (iii) the fair market value of the depreciable property at the time of the disposition;
  • (b) for eligible capital property, the least of (i) 4/3 of CCo's cumulative eligible capital in respect of the related business immediately before the disposition; (ii) the cost to CCo of the eligible capital property; and (iii) the fair market value of the eligible capital property at the time of disposition; and
  • (c) for all other capital property (other than depreciable property), the lesser of (i) such fair market value; and (ii) the cost amount to CCo of the capital property at the time of the disposition.
• The agreed amount in respect of any depreciable property, eligible capital property, and capital property (other than depreciable property) will not be greater than the fair market value thereof at the time of the disposition or less than the fair market value of the consideration received therefor (other than Operating LP Exchangeable Units). The agreed amount in respect of eligible capital property included in the transfer of the CCo Operating Assets other than the CCo XXXXXXXXXX Operating Assets will not be less than the estimate of the fair market value of the eligible capital property included in the DCo Amalco Non Operating Assets at the time of disposition. CCo and Operating LP will agree that, if CRA should disagree with the parties' determination of the fair market value of the eligible capital property included in the DCo Amalco Non Operating Assets, they will apply to amend the elected amount in respect of the eligible capital property included in the transferred CCo Operating Assets to comply with CRA's determination of such fair market value. As a result, CCo and Operating LP are expected to realize proceeds from the disposition of eligible capital property in the amount of approximately $XXXXXXXXXX.
• 64. CCo will use the DCo Amalco Non Operating Assets for a use that is the same as or similar to the use to which it put the CCo Operating Assets that they replaced, for the purpose of gaining or producing income from a business to be carried on that will be the same as or similar to the business in which the CCo Operating Assets were used. CCo will offer the same kind of products and services as it is currently offering to its customers, XXXXXXXXXX Following completion of the transactions described above, CCo will integrate the DCo Amalco Non Operating Assets with its remaining business operations by causing the employees transferred to CCo in the course of the transfer of the DCo Amalco Non Operating Assets to report under a common management structure. The cash receipts and disbursements of the operations will be made from a centralized bank account. The DCo Amalco Non Operating Assets and the remaining business operations of CCo will benefit from centralized management, legal, financial, administrative services and a co-ordinated marketing effort. CCo will outsource specific services to Operating LP on a medium or long-term basis. Operating LP's trademarks and trade names (“Operating LP Brand”) will be licensed to CCo for use in the territories where the DCo Amalco Non Operating Assets are operated. The Operating LP Brand may be used by CCo on a transitional or long-term basis. CCo may develop a new branding strategy over time and the use of the Operating LP Brand may be phased out.

• Direct and Indirect Acquisition by New Fund of Shares of DCo Amalco and FCo
  • 65. The DCo Amalco Common Shares and the FCo shares will be subject to the following transfers:
  • a. New Fund will purchase all DCo Amalco Common Shares, other than a portion of the DCo Amalco Interest retained by ACo, and will issue New Fund Units on the basis of one New Fund Unit for each DCo Amalco Common Share. ACo will transfer to New Fund, at a minimum, a sufficient number of DCo Amalco Common Shares so that New Fund will acquire a majority of the DCo Amalco Common Shares and New Trust will hold a majority of XXXXXXXXXX GP Shares following the transaction referred to in Paragraph 67.
  • XXXXXXXXXX
  • b. New Fund will transfer the DCo Amalco Common Shares that it holds to New Trust in consideration for units and notes of New Trust;
  • c. Simultaneously with the previous transfer, ACo will contribute each remaining DCo Amalco Common Share then held by it to XXXXXXXXXX LP (free of any claim) in consideration for XXXXXXXXXX LP Exchangeable Unit. ACo will subscribe for one XXXXXXXXXX GP Share for each XXXXXXXXXX LP Exchangeable Unit acquired. ACo will hold the XXXXXXXXXX LP Exchangeable Units and the XXXXXXXXXX GP Shares on account of capital. ACo, XXXXXXXXXX GP, XXXXXXXXXX LP, through its general partner XXXXXXXXXX GP and New Trust will jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have subsection 97(2) apply to that transfer. The agreed amount in respect of the DCo Amalco Interest transferred will be equal to or greater than the cost amount of such shares to ACo at the time of disposition, which will be less than the fair market value of the transferred DCo Amalco Interest at that time.
  • d. Simultaneously with the previous transfer, ACo will contribute all of its FCO Common Shares to XXXXXXXXXX LP (free of any claim) in consideration for approximately XXXXXXXXXX XXXXXXXXXX LP Exchangeable Units. ACo will subscribe for the same number of XXXXXXXXXX GP Shares. ACo, XXXXXXXXXX GP, XXXXXXXXXX LP, through its general partner XXXXXXXXXX GP, and New Trust will jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have subsection 97(2) apply to the transfer. The agreed amount in respect of the FCO Common Shares transferred will be equal to or greater than the cost amount of such shares to ACo at the time of disposition, which will be less than the fair market value of the transferred FCO Common Shares at that time.
• 66. In connection with the transfers described in the previous Paragraph and in Paragraphs 59 and 63, New Fund will issue to ACo and CCo a number of New Fund Voting Units equal to the number of XXXXXXXXXX LP Exchangeable Units and Operating LP Exchangeable Units, respectively, held by them.
• 67. New Trust will contribute all the DCo Amalco Common Shares that it holds to XXXXXXXXXX LP in exchange for approximately XXXXXXXXXX LP Common Units. New Trust will subscribe for the same number of XXXXXXXXXX GP Shares. The number of XXXXXXXXXX LP Common Units and XXXXXXXXXX GP Shares will be adjusted to take into account the number of DCo Amalco Common Shares transferred by ACo to New Fund. The number of XXXXXXXXXX GP Shares subscribed by New Trust represents the majority of the issued and outstanding XXXXXXXXXX GP Shares. At this stage, all the DCo Amalco Common Shares will be registered in the name of XXXXXXXXXX GP, in its capacity as general partner of XXXXXXXXXX LP. Subsequently on the same day, outside of the XXXXXXXXXX, New Trust will transfer such XXXXXXXXXX GP Shares to New Fund.
• 68. XXXXXXXXXX LP will transfer all DCo Amalco Common Shares acquired from New Trust and ACo to AcquisitionCo in consideration for interest-bearing debt (and possibly some non-interest-bearing debt), common shares and preferred shares of AcquisitionCo. The interest rate on the debt will not exceed market rates determined at the time of issuance, having regard to the terms and conditions of the debt and the nature, financial structure and creditworthiness of the issuer.
• XXXXXXXXXX GP, XXXXXXXXXX LP, acting through its general partner XXXXXXXXXX GP, ACo and New Trust will jointly elect with AcquisitionCo, 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 DCo Amalco Common Shares. The agreed amount in respect of the DCo Amalco Common Shares transferred will be at least equal to the higher of the cost amount of such shares to XXXXXXXXXX LP at the time of disposition and the fair market value of the consideration received therefor (other than the shares of Acquisitionco), which agreed amount will be less than the fair market value of the DCo Amalco Common Shares at that time.
• AcquisitionCo will add to the stated capital account of the common shares and preferred shares of AcquisitionCo issued as consideration for the transfer of the DCo Amalco Common Shares an aggregate amount not to exceed the amount by which the agreed amount in respect of the DCo Amalco Common Shares transferred by XXXXXXXXXX LP to AcquisitionCo at that time exceeds the principal amount of the debt received.

• Amalgamation of DCo Amalco and AcquisitionCo
  • 69. DCo Amalco and AcquisitionCo (hereinafter at all times referred to as “predecessor corporations”) will undertake a vertical short form amalgamation under the provisions of theFirst Actto form DCo MergerCo in such a manner 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 immediately before the amalgamation will become property of DCo MergerCo 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 DCo MergerCo by virtue of the amalgamation;
  • (c) the DCo Amalco Common Shares held by AcquisitionCo immediately prior to the amalgamation will be cancelled by virtue of the amalgamation; and
  • (d) the common shares and preferred shares of AcquisitionCo held by XXXXXXXXXX LP immediately before the amalgamation will become common shares and preferred shares of DCo MergerCo owned by XXXXXXXXXX LP immediately after the amalgamation.
• 70. XXXXXXXXXX LP will contribute all preferred shares of DCo MergerCo to FCo in consideration for common shares and interest-bearing (and possibly non-interest-bearing) debt of FCo. The interest rate on the debt will not exceed market rates determined at the time of issuance, having regard to the terms and conditions of the debt and the nature, financial structure and creditworthiness of the issuer. XXXXXXXXXX LP, acting through its general partner XXXXXXXXXX GP, XXXXXXXXXX GP, ACo and New Trust will jointly elect with FCo, 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 preferred shares of DCo MergerCo.
• The agreed amount in respect of the preferred shares of DCo MergerCo transferred will be equal to the fair market value of the consideration received therefor (other than the shares of FCo) which amount will be equal to or greater than the cost amount of such shares to XXXXXXXXXX LP at the time of disposition. The elected amount will be less than or equal to the fair market value of the transferred shares of DCo MergerCo at that time.
• 71. ACo, CCo, New Fund, New Trust, XXXXXXXXXX GP, XXXXXXXXXX LP, Operating LP and DCo MergerCo will enter into the XXXXXXXXXX Agreement.

POST DAY THREE TRANSACTIONS:

• Exercise of the Exchange Right by ACo or CCo
  • 72. Following receipt of notice from either ACo or CCo provided to XXXXXXXXXX LP and/or Operating LP to the effect that they desire to receive cash instead of New Fund Units on the exercise of an Exchange Right, the following sequence of events will occur:
  • a. New Fund will issue additional New Fund Units in order to raise a net amount determined by the terms of the Exchange Right;
  • b. New Fund will contribute the net issuance proceeds to New Trust in consideration for units of New Trust and notes of New Trust;
  • c. New Trust will contribute such proceeds in favour of XXXXXXXXXX LP (through XXXXXXXXXX GP acting as general partner) in consideration for XXXXXXXXXX LP Common Units;
  • d. If the exercise of the Exchange Right relates to XXXXXXXXXX LP Exchangeable Units, XXXXXXXXXX LP (through XXXXXXXXXX GP acting as general partner) will redeem all or portion of the XXXXXXXXXX LP Exchangeable Units held by ACo (and a corresponding number of XXXXXXXXXX GP Shares will be acquired by either New Fund or New Trust and a corresponding number of New Fund Voting Units will be cancelled without consideration) in consideration for cash equal to the proceeds received by XXXXXXXXXX LP from New Trust; and
  • e. If the exercise of the Exchange Right relates to Operating LP Exchangeable Units, the proceeds received by XXXXXXXXXX LP from New Trust will either be used by XXXXXXXXXX LP to acquire the Operating LP Exchangeable Units (which will be converted into non-exchangeable units of Operating LP on the transfer) or such proceeds will be contributed and/or loaned at interest to DCo MergerCo and ultimately used to acquire or (through a contribution to Operating LP) redeem the Operating LP Exchangeable Units (which, if acquired, will be converted into non-exchangeable units of Operating LP on the transfer). In addition, New Trust or New Fund will subscribe for additional XXXXXXXXXX GP Shares. The actual mechanics of this exchange will depend on the XXXXXXXXXX requirements at the time of the exchange. In addition, a corresponding number of New Fund Voting Units will be cancelled for no consideration.
• XXXXXXXXXX
• 73. XXXXXXXXXX

• Windings-up
• 74. Partnership 1 will be wound up and an undivided interest in its assets (the interest in N Partnership) will be distributed pro rata to the partners of Partnership 1, namely, DCo MergerCo and XXXXXXXXXX.
• 75. XXXXXXXXXX. will be wound up under section 88(1) into DCo MergerCo and, as a result, DCo MergerCo will own the totality of the interest in N Partnership formerly held by Partnership 1.

• SCo transactions
• 76. CCo will incorporate SCo. The authorized share capital of SCo will consist of one class of an unlimited number of voting and fully participating common shares.
• 77. CCo will transfer all of the issued and outstanding shares of KCo to SCo as consideration for the issuance of XXXXXXXXXX common shares.
• BCo will jointly elect with SCo, 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 KCo shares. The agreed amount in respect of the KCo shares transferred will be equal to the cost amount of such shares to CCo at the time of disposition, which will be less than the fair market value of the KCo shares at that time.
• SCo will add to the stated capital account of the common shares issued as consideration for the transfer of the KCo shares an amount not to exceed the agreed amount in respect of the KCo shares transferred by CCo to SCo.

• Transfer of XXXXXXXXXX GP Shares and a portion of XXXXXXXXXX LP Exchangeable Units to CCo
• 78. ACo will contribute all of its XXXXXXXXXX GP Shares and a portion of its XXXXXXXXXX LP Exchangeable Units to BCo in consideration for BCo Common Shares. BCo will hold the XXXXXXXXXX GP Shares and the XXXXXXXXXX LP Exchangeable Units transferred on account of capital. ACo will jointly elect with BCo, 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 GP Shares and the XXXXXXXXXX LP Exchangeable Units transferred. The agreed amount in respect of the XXXXXXXXXX GP Shares and the XXXXXXXXXX LP Exchangeable Units transferred will be equal to the adjusted cost base to ACo of the XXXXXXXXXX GP Shares and the XXXXXXXXXX LP Exchangeable Units transferred, respectively, which adjusted cost base will be equal to or less than the fair market value of the XXXXXXXXXX GP Shares and the XXXXXXXXXX LP Exchangeable Units, respectively, transferred at that time.
• BCo will contribute all of its XXXXXXXXXX GP Shares and a portion of its XXXXXXXXXX LP Exchangeable Units to CCo in consideration for CCo New Common Shares. CCo will hold the XXXXXXXXXX GP Shares and the XXXXXXXXXX LP Exchangeable Units on account of capital. BCo will jointly elect with 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 GP Shares and the XXXXXXXXXX LP Exchangeable Units. The agreed amount in respect of the XXXXXXXXXX GP Shares transferred will be equal to the adjusted cost base to BCo of the XXXXXXXXXX GP Shares and the XXXXXXXXXX LP Exchangeable Units transferred, which adjusted cost base will be equal to or less than the fair market value of the transferred XXXXXXXXXX GP Shares and the XXXXXXXXXX LP Exchangeable Units at that time.

• Continuation of Business as Going Concern
• 79. It is not the intention of the parties to this ruling to enter into a transaction whereby the property of Operating LP will be disposed of in such way as to result in an income inclusion in respect of the Deferred Recapture.

PURPOSES OF THE PROPOSED TRANSACTIONS

• The purposes of the Proposed Transactions are to:
• a. Increase shareholder value by combining the CCo Operating Assets with those of DCo in an income trust structure. One of the reasons for that structure is the better tax integration and the higher cash flow for investors that it offers. Another reason is the preference that some taxpayers have for income trust units based on their tax status. The tax efficiency is achieved by having DCo MergerCo and FCo incur indebtedness, interest on which will be deductible in computing their taxable income, and by having FCo acquire preferred shares of DCo MergerCo, dividends on which (whether paid in cash or by way of stock dividends) will not be subject to tax by virtue of subsection 112(1);
• b. allow CCo to offer XXXXXXXXXX services XXXXXXXXXX leading to a higher shareholder value from a fast-growing business;
• c. XXXXXXXXXX;
• d. move the DCo Shares and FCo Shares within the related ACo group on a tax-deferred basis in order to allow for the use of ACo's capital losses on the disposition of the DCo Shares or the exchange of bundled XXXXXXXXXX GP Shares and XXXXXXXXXX LP Exchangeable Units for New Fund Units. The Proposed Transactions will allow some or all of the taxable capital gain realized on a taxable disposition of the DCo Shares to be included in the income of ACo, rather than CCo, for the purposes of the Act, allowing such taxable capital gain to be set-off with the allowable capital losses of ACo.
• e. put ACo and its affiliates in the same economic position as unitholders of New Fund inter alia by holding New Fund Voting Units, Operating LP Exchangeable Units and XXXXXXXXXX LP Exchangeable Units;
• f. XXXXXXXXXX;
• g. create a vehicle to compete more effectively XXXXXXXXXX; and
• h. create more scale and greater opportunities for future growth XXXXXXXXXX

RULINGS

• Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, Proposed Transactions and purpose of the proposed transactions, and provided that the Proposed Transactions are completed in the manner described above, our rulings are as follows:
  • A. The provisions of subsection 86(1) will apply, and the provisions of subsection 86(2) will not apply, to the CCo Share Exchange described in Paragraph 43 and the BCo Share Exchange described in Paragraph 50, such that:
    • (a) the cost of the CCo Reorganization Shares and the CCo New Common Shares received by BCo on the CCo Shares Exchange will, respectively, be deemed by paragraph 86(1)(b) to be an amount equal to that proportion of the aggregate adjusted cost base to BCo, immediately before the CCo Share Exchange, of BCo's CCo Common Shares that
    • (i) the fair market value, immediately after the CCo Share Exchange, of the CCo Reorganization Shares and the CCo New Common Shares, as the case may be,
    • is of
    • (ii) the fair market value, immediately after the CCo Share Exchange, of all of the CCo Reorganization Shares and the CCo New Common Shares received by BCo for BCo's CCo Common Shares;
  • (b) pursuant to paragraph 86(1)(c), BCo will be deemed to have disposed of its CCo Common Shares for proceeds of disposition equal to the aggregate cost to BCo of the CCo Reorganization Shares and the CCo New Common Shares as determined in (a) above;
    • (c) the cost of the BCo Reorganization Shares and the BCo New Common Shares received by ACo on the BCo Share Exchange will, respectively, be deemed by paragraph 86(1)(b) to be an amount equal to that proportion of the aggregate adjusted cost base to ACo, immediately before the BCo Share Exchange, of ACo's BCo Common Shares that
    • (i) the fair market value, immediately after the BCo Share Exchange, of the BCo Reorganization Shares and the BCo New Common Shares, as the case may be,
    • is of
    • (ii) the fair market value, immediately after the BCo Share Exchange, of all of the BCo Reorganization Shares and the BCo New Common Shares received by ACo for ACo's BCo Common Shares; and
  • (d) pursuant to paragraph 86(1)(c), ACo will be deemed to have disposed of its BCo Common Shares for proceeds of disposition equal to the aggregate cost to ACo of the BCo Reorganization Shares and the BCo New Common Shares as determined in (c) above.
• B. No dividend will be deemed to arise, by virtue of either of subsection 84(1) or 84(3), as a result of the CCo Share Exchange described in Paragraph 43 and the BCo Share Exchange described in Paragraph 50.
  • C. The provisions of subsection 85(1) will apply:
  • (a) to the transfer by BCo of its CCo Reorganization Shares to BCo Subco described in Paragraph 44;
  • (b) to the transfer by CCo of its shares of DCo and FCo to BCo Subco described in Paragraph 45;
  • (c) to the transfer by ACo of its BCo Reorganization Shares to ACo Subco described in Paragraph 51;
  • (d) to the transfer by BCo of its BCo Subco Common Shares to ACo Subco described in Paragraph 52;
  • (e) as a result of the application of subsection 85(2), to the transfer by XXXXXXXXXX LP of its DCo Amalco Common Shares to AcquisitionCo described in Paragraph 68;
  • (f) as a result of the application of subsection 85(2), to the transfer by XXXXXXXXXX LP of its preferred shares of AcquisitionCo to FCo described in Paragraph 70;
  • (g) to the transfer by CCo of all of the issued and outstanding shares of KCo to SCo described in Paragraph 77;
  • (h) to the transfer by ACo of its XXXXXXXXXX GP Shares and a portion of its XXXXXXXXXX LP Exchangeable Units to BCo described in Paragraph 78;
  • (i) to the transfer by BCo of its XXXXXXXXXX GP Shares and a portion of its XXXXXXXXXX LP Exchangeable Units to CCo described in Paragraph 78; and
  • (j) to the transfer by DCo Amalco of a XXXXXXXXXX interest in Operating LP to Operating Subco described in Paragraph 62,
• such that the agreed amount in respect of each transfer of eligible property will be deemed to be the transferor's proceeds of disposition and the transferee's cost thereof pursuant to paragraph 85(1)(a).

• For greater certainty, paragraph 85(1)(e.2) will not apply to the transfers.
  • D. Subsection 84(3) will apply on the redemption:
  • (a) of the BCo Subco Preferred Shares held by CCo described in Paragraph 47, to deem BCo Subco to have paid and CCo to have received; and
  • (b) of the CCo Reorganization Shares held by BCo Subco described in Paragraph 48, to deem CCo to have paid and BCo Subco 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 paid-up capital in respect of such shares immediately before such redemption, and any such dividend:
  • (c) will be included in computing the income, pursuant to subsection 82(1) and paragraph 12(1)(j), of the person deemed to have received such dividend;
  • (d) will be deductible by each recipient of such dividend in computing its respective taxable income pursuant to subsection 112(1) and, for greater certainty, the provisions of subsection 112(2.1), (2.2), (2.3) or (2.4) will not apply to deny the subsection 112(1) deduction in respect of such dividend;
  • (e) will be excluded from the proceeds of disposition of the shares by virtue of paragraph (j) of the definition of “proceeds of disposition” in section 54;
  • (f) by virtue of subsection 112(3), will reduce the loss, if any, in respect of the disposition of the shares on which the dividend is deemed to be received; and
  • (g) will not be subject to tax under Part IV.1 and Part VI.1 on the basis that such dividend will be an excepted dividend by virtue of paragraph (b) of the definition of “excepted dividend” in section 187.1 and an excluded dividend by virtue of paragraph (a) of the definition of “excluded dividend” in subsection 191(1), as each of the recipients will have a substantial interest, within the meaning assigned by paragraph 191(2)(a), in the payer corporation at the time such taxable dividend is paid.
  • E. Subsection 84(3) will apply on the redemption:
  • (a) of the ACo Subco Preferred Shares held by BCo described in Paragraph 53, to deem ACo Subco to have paid and BCo to have received; and
  • (b) of the BCo Reorganization Shares held by ACo Subco described in Paragraph 54, to deem BCo to have paid and ACo Subco 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 paid-up capital in respect of such shares immediately before such redemption, and any such dividend:
  • (c) will be included in computing the income, pursuant to subsection 82(1) and paragraph 12(1)(j), of the person deemed to have received such dividend;
  • (d) will be deductible by each recipient of such dividend in computing its respective taxable income pursuant to subsection 112(1) and, for greater certainty, the provisions of subsection 112(2.1), (2.2), (2.3) or (2.4) will not apply to deny the subsection 112(1) deduction in respect of such dividend;
  • (e) will be excluded from the proceeds of disposition of the shares by virtue of paragraph (j) of the definition of “proceeds of disposition” in section 54 of the Act;
  • (f) by virtue of subsection 112(3) of the Act, will reduce the loss, if any, in respect of the disposition of the shares on which the dividend is deemed to be received; and
  • (g) will not be subject to tax under Part IV.1 and Part VI.1 on the basis that such dividend will be an excepted dividend by virtue of paragraph (b) of the definition of “expected dividend” in section 187.1 and an excluded dividend by virtue of paragraph (a) of the definition of “excluded dividend” in subsection 191(1), as each of the recipients will have a substantial interest, within the meaning assigned by paragraph 191(2)(a), in the payer corporation at the time such taxable dividend is paid.
  • F. 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 subparagraph 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); or
  • (d) an acquisition of property in the circumstances described in paragraph 55(3.1)(c) or (d); and
  • if, immediately before the CCo Butterfly, CCo has more than one type of property for the purposes of the definition “distribution” in subsection 55(1), provided also that there is not:
  • (e) a distribution by CCo to a corporation that is not an acquiror before the day that is three years after the day on which the CCo Reorganization Shares are exchanged for the BCo Subco Common Shares described in Paragraph 44; or
  • (f) a distribution by ACo before the day that is three years after the day on which the CCo Reorganization Shares are exchanged for the BCo Subco Common Shares described in Paragraph 44,
  • 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 ruling D above and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).

• None of the property described in Schedule E to this letter will be considered to be investment property for the purposes of the definition “distribution” in subsection 55(1).
  • G. 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 subparagraph 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); or
  • (d) an acquisition of property in the circumstances described in paragraphs 55(3.1)(c) or (d); and
  • if, immediately before the BCo Butterfly, BCo has more than one type of property for the purposes of the definition “distribution” in subsection 55(1), provided also that there is not:
  • (e) a distribution by BCo to a corporation that is not an acquiror before the day that is three years after the day on which the BCo Reorganization Shares are exchanged for the ACo Subco Common Shares described in Paragraph 51; or
  • (f) a distribution by ACo before the day that is three years after the day on which the BCo Reorganization Shares are exchanged for the ACo Subco Common Shares described in Paragraph 51,
  • 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 ruling E above and, for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).

• None of the property described in Schedule E to this letter will be considered to be investment property for the purposes of the definition “distribution” in subsection 55(1).
  • H. The settlement and cancellation of:
  • (a) the BCo Subco Note held by CCo described in Paragraph 49;
  • (b) the CCo Note held by BCo Subco described in Paragraph 49;
  • (c) the ACo Subco Note held by BCo described in Paragraph 55;
  • (d) the BCo Note held by ACo Subco described in Paragraph 55;
  • will not give rise to a “forgiven amount” within the meaning thereof in subsection 80(1) and 80.01(1). In addition, none of BCo, CCo, ACo Subco and BCo Subco will realize any gain or incur any loss as a result of the transfer and payment of those notes as described in those Paragraphs.
• I. Provided that the DCo Shares, CCo Common Shares, BCo Common Shares, and the shares of FCo, as the case may be, constitute capital property to their respective holders immediately prior to the commencement of the Proposed Transactions, the Proposed Transactions will not, in and by themselves, cause the DCo Shares, DCo Amalco Interest, DCo MergerCo Shares, ACo Subco Common Shares, ACo Subco Preferred Shares, BCo New Common Shares, BCo Reorganization Shares, BCo Subco Common Shares, BCo Subco Preferred Shares, CCo New Common Shares and CCo Reorganization Shares to be received pursuant to the Proposed Transactions to not be capital property to their respective holders.
  • J. On the successive windings-up of BCo Subco and ACo Subco described in Paragraph 56, the provisions of subsection 88(1) will apply such that:
  • a) ACo Subco will, pursuant to subparagraph 88(1)(a)(iii), be deemed to have disposed of its shares of BCo Subco for proceeds of disposition equal to the cost amount to ACo Subco of such shares immediately before its winding-up;
  • b) BCo Subco will, pursuant to subparagraph 88(1)(a)(iii), be deemed to have disposed of its shares of DCo and its FCo Common Shares for proceeds of disposition equal to the cost amount to BCo Subco of such shares immediately before its winding-up; and
  • c) ACo will, pursuant to paragraph 88(l)(b), be deemed to have disposed of its shares of ACo Subco and its shares of BCo Subco for proceeds equal to the greater of the amounts described in subparagraphs 88(l)(b)(i) and (ii).
• K. To the extent that CCo, DCo Amalco (or its successor DCo MergerCo) and Operating LP, through its general partner DCo Amalco (or its successor DCo MergerCo), jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have subsection 97(2) apply to the transfer, subsection 97(2) will apply to the transfer by CCo of the capital property comprising the CCo XXXXXXXXXX Operating Assets to Operating LP described under Paragraph 59 such that the agreed amount in respect of each eligible property transferred will be deemed to be the transferor's proceeds of disposition and the transferee's cost thereof pursuant to paragraph 85(1)(a), which is made applicable by paragraph 97(2)(a).
• L. To the extent that DCo Amalco (or its successor DCo MergerCo), CCo and Operating LP, through its general partner DCo Amalco (or its successor DCo MergerCo), jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have subsection 97(2) apply to the transfer, subsection 97(2) will apply to the transfer by DCo Amalco of the capital property and eligible capital property comprising the DCo Amalco Operating Assets, the DCo Amalco Non Operating Assets and its other assets to Operating LP described in Paragraph 60, such that the agreed amount in respect of each eligible property transferred will be deemed to be the transferor's proceeds of disposition and the transferee's cost thereof pursuant to paragraph 85(1)(a), which is made applicable by paragraph 97(2)(a).
• M. To the extent that CCo, DCo Amalco (or its successor DCo MergerCo), Operating Subco and Operating LP, through its general partner DCo Amalco (or its successor DCo MergerCo), jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have subsection 97(2) apply to the transfer, subsection 97(2) will apply to the transfer by CCo of the capital property and eligible capital property comprising the CCo Operating Assets (other than the CCo XXXXXXXXXX Operating Assets previously transferred in the transaction described in Paragraph 59) to Operating LP described in Paragraph 63, such that the agreed amount in respect of each eligible property transferred will be deemed to be the transferor's proceeds of disposition and the transferee's cost thereof pursuant to paragraph 85(1)(a), which is made applicable by paragraph 97(2)(a).
• N. Provided that ACo, XXXXXXXXXX GP, XXXXXXXXXX LP through its general partner XXXXXXXXXX GP, and New Trust jointly elect, in prescribed form and within the time referred to in subsection 96(4), to have subsection 97(2) apply to the transfer, subsection 97(2) will apply to the transfer by ACo of its remaining DCo Amalco Interest to XXXXXXXXXX LP described in Paragraph 65(c), such that the agreed amount in respect of each property transferred will be deemed to be the transferor's proceeds of disposition and the transferee's cost thereof pursuant to paragraph 85(1)(a), which is made applicable by paragraph 97(2)(a).
• O. To the extent that ACo holds the FCo Common Shares on account of capital and that it jointly elects with XXXXXXXXXX GP, XXXXXXXXXX LP through its general partner XXXXXXXXXX GP, and New Trust, in prescribed form and within the time referred to in subsection 96(4), to have subsection 97(2) apply to the transfer, subsection 97(2) will apply to the transfer by ACo of the FCo Common Shares to XXXXXXXXXX LP described in Paragraph 65(d) such that the agreed amount in respect of each property transferred will be deemed to be the transferor's proceeds of disposition and the transferee's cost thereof pursuant to paragraph 85(1)(a), which is made applicable by paragraph 97(2)(a).
  • P. The eligible capital property included in the DCo Amalco Non-Operating Assets acquired by CCo will be a “replacement property”, as defined under subsection 14(7), for the eligible capital property included in the CCo Operating Assets such that:
  • (a) the amount included in A of the definition of the “cumulative eligible capital” in respect of CCo by virtue of the acquisition of the DCo Amalco Non-Operating Assets as described in paragraph 60 will be equal to 3/4 of the fair market value of the eligible capital property included in such DCo Non-Operating Assets;
  • (b) the amount included in paragraph (a) of E of the definition of the “cumulative eligible capital” in respect of CCo by virtue of the disposition of the CCo Operating Assets as described in paragraph 60 will be equal to the agreed amount referred to in paragraph 60 in respect of eligible capital property included in such CCo Operating Assets (3/4 of which will be included in amount E of the definition of “cumulative eligible capital”); and
  • (c) the amount of the decrease to the cumulative eligible capital pool in paragraph (b) will be offset by the increase to the same cumulative eligible capital property pool in paragraph (a).
  • Q. The eligible capital property included in the CCo Operating Assets acquired by Operating LP will be a “replacement property”, as defined under subsection 14(7), for the eligible capital property included in the DCo Amalco Non-Operating Assets such that:
  • (a) the amount included in A of the definition of the “cumulative eligible capital” in respect of Operating LP by virtue of the acquisition of the as described in paragraph 60 will be equal to 3/4 of the fair market value of the eligible capital property included in such CCo Operating Assets;
  • (b) the amount included in paragraph (a) of E of the definition of the “cumulative eligible capital” in respect of Operating LP by virtue of the disposition of the DCo Amalco Non-Operating Assets as described in paragraph 60 will be equal to the agreed amount referred to in paragraph 60 in respect of eligible capital property included in such DCo Amalco Non-Operating Assets (3/4 of which will be included in amount E of the definition of “cumulative eligible capital”); and
  • (c) the amount of the decrease to the cumulative eligible capital pool in paragraph (b) will be offset by the increase to the same cumulative eligible capital property pool in paragraph (a).
  • R. On the amalgamation of DCo Amalco and AcquisitionCo described in Paragraph 69, the provisions of:
  • (a) subsection 87(1) will, by virtue of subsection 87(1.1), apply;
    • (b) provided that the shares of AcquisitionCo were capital property to XXXXXXXXXX LP and XXXXXXXXXX GP immediately before the amalgamation, the provisions of subsection 87(4), other than paragraphs (c), (d), and (e) thereof, will apply such that:
    • (i) XXXXXXXXXX LP will be deemed by paragraph 87(4)(a) to have disposed of its shares of AcquisitionCo for proceeds of disposition equal to the adjusted cost base of such shares immediately prior to the amalgamation; and
    • (ii) XXXXXXXXXX LP will be deemed by paragraph 87(4)(b) to have acquired its shares of DCo MergerCo at a cost equal to the proceeds of disposition described in paragraph (i) above;
  • (c) the cancellation of the DCo Amalco Common Shares held by AcquisitionCo by virtue of the amalgamation will not give rise to a gain or loss to AcquisitionCo; and
  • (d) subsection 87(7) will apply to a debt or other obligation of AcquisitionCo that became a debt or other obligation of DCo MergerCo where the amount payable by DCo MergerCo on the maturity of the debt or other obligation, as the case may be, is the same as the amount that would have been payable by AcquisitionCo on its maturity and therefore the provisions of section 80 will not apply to such debt or other obligation of Acquisitionco as a result of the amalgamation.
• S. For the purposes of the provisions of the Act making reference to “control” and not using the expression “controlled, directly or indirectly in any manner whatever” as defined in subsection 256(5.1), control of DCo Amalco (predecessor to DCo MergerCo) and XXXXXXXXXX GP will be acquired by New Fund as a consequence of the acquisition by New Fund of the majority of the DCo Amalco Common Shares as described in Paragraph 65(a) and the majority of the XXXXXXXXXX GP Shares as described in Paragraph 67, and New Fund will not lose control of XXXXXXXXXX GP or DCo MergerCo as a result of subsequent Proposed Transactions. Subsection 256(7) will not apply to deem such control not to have been acquired. ACo will not be considered to control DCo MergerCo by virtue of the arrangements under the XXXXXXXXXX Agreement, in and by themselves.
• T. Upon the acquisition of control of DCo Amalco, there will be a terminal loss on the property of a separate class or classes, as the case may be, by virtue of the operation of clause 13(21.2)(e)(iii)(D) and subsection 20(16), in the amount of the balance of the undepreciated capital cost of property included in the separate class or separate classes by virtue of the application of subsection 13(21.2) as described in Paragraph 60. For the purposes of the application of subsection 111(5) following such acquisition of control, DCo MergerCo will be considered to carry on the business or businesses, carried on by Operating LP, including the business or businesses that were carried on by DCo Amalco immediately before Paragraph 65(a) in connection with which the DCo Amalco Operating Assets and the DCo Amalco Non Operating Assets were used.
• U. At the time immediately after the Proposed Transactions have been implemented and provided that subsection 132(7) is complied with and that the only undertaking of New Fund is the investing of its funds in property (other than real property or an interest in real property), New Fund will, at that time, qualify as a unit trust and a mutual fund trust;
• V. For the purposes of section 7 of the Act, employees of Operating LP will also be considered to be employees of DCo MergerCo, as general partner of Operating LP.
• W. FCo will meet the condition in paragraph 4800(2)(a) of the Regulations at the time that it elects not to be a public corporation, notwithstanding the fact that its preferred shares that were previously listed on a stock exchange in Canada prescribed for the purposes of section 89 are no longer issued and outstanding.
• X. XXXXXXXXXX
• Y. XXXXXXXXXX
• Z. The provisions of subsections 15(1), 56(2), 56(4), 69(4) and 246(1) will not apply to the BCo Butterfly and the CCo Butterfly in and by themselves. Subject to the comment below, the provisions of subsection 69(11) will not apply to (1) the disposition of the DCo Amalco Non-Operating Assets and the QCo shares to Operating LP on Day Two as a consequence of the subsequent disposition of such property to CCo on Day Three, or (2) any other disposition of property referred to in Rulings C, J, K, L, M, N or O as a consequence of any subsequent disposition of such property disclosed in this letter.
• AA. Subject to the comment below, the provisions of subsection 245(2) will not be applied as a result of the Proposed Transactions, in and by themselves, to re-determine the tax consequences confirmed in the rulings given above.

The above rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002 and are binding on the Canada Revenue Agency provided that the proposed transactions are completed within six months of the date of this letter.

The above rulings are based on the law as it presently reads and do not take into account any proposed amendments to the Act which, if enacted, could have an effect on the rulings provided herein.

COMMENTS

Should any of the properties of Operating LP referred to in this letter be disposed of in such a way as to result in an income inclusion in respect of the Deferred Recapture, nothing in this letter precludes the CRA from applying section 245 to determine the tax consequences as is reasonable in order to make DCo Mergerco (or its successors) liable to tax on its share of such Deferred Recapture, subject to any right of objection and appeal, for example by increasing DCo MergerCo's (or any of its successors') taxable income for the relevant year so that it is equal to DCo MergerCo's (or any of its successors') share of such income inclusion for the year of the disposition.

Nothing in this letter precludes CRA from applying subsection 69(11), subject to any right of objection or appeal, to any “subsequent disposition” referred to in subsection 69(11) which is not disclosed in this letter.

• Nothing in this ruling should be construed as implying that the CRA has agreed to or reviewed:
• (a) the determination of the fair market value or adjusted cost base of any particular asset, the paid-up capital in respect of any share referred to herein, the amount of any net capital loss or non-capital loss or the Safe Income on Hand in respect of any share;
• (b) the adjustment clause described herein;
• (c) the nature of the legal relationships entered into or contemplated by the entities named in this letter.
  • (d) any tax consequences relating to the facts and Proposed Transactions described herein other than those specifically described in the rulings given above, including without restricting the generality of the foregoing:
  • i. the tax consequences of any future paid-up capital reduction;
  • ii. the tax consequences of the exchange of the XXXXXXXXXX LP Exchangeable Units, XXXXXXXXXX GP Shares and Operating LP Exchangeable Units;
  • iii. except for ruling U, the tax status of any entity described in the ruling.

Yours truly,

for Director

Reorganizations and Resources Division

Income Tax Rulings Directorate

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