2007 Ruling 2006-0207721R3 - Public corporation spin-off

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether a proposed spin-off is exempt from the application of subsection 55(2)

Position: Yes.

Reasons: It meets the requirements of paragraph 55(3)(b).

XXXXXXXXXX 							2006-020772

XXXXXXXXXX, 2007

Dear XXXXXXXXXX:

Re: XXXXXXXXXX
Advance Income Tax Ruling

This is in reply to your letter of XXXXXXXXXX, which was amended and replaced by your letters of XXXXXXXXXX, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayer. We acknowledge your numerous e-mails in respect of this ruling.

Preliminary Matters

To the best of your knowledge and that of the officers of the taxpayer, none of the issues involved in this ruling request is:

(a) in an earlier return of the taxpayer or any related person;

(b) being considered by a tax services office or taxation centre in connection with a previously filed tax return of the taxpayer or any related person;

(c) under objection by the taxpayer or any related person;

(d) before the courts; or

(e) the subject of a ruling previously considered by the Directorate.

DEFINITIONS:

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

• "Acquiror" has the meaning assigned in the definition of "specified corporation" in subsection 55(1);
• "Act" means the Income Tax Act, R.S.C. 1985 (5th Supp.) c. 1, as amended to the date hereof, and unless otherwise stated, every reference herein to a part, section, subsection, paragraph, subparagraph or clause is a reference to the relevant provision of the Act;
• "adjusted cost base" has the meaning assigned by section 54;
• "agreed amount" in respect of a property means the amount that the transferor and the transferee of the property have agreed upon in an election under subsection 85(1);
• "Amalco" means the corporation resulting from the Amalgamation of Spinco and Newco as set out in Paragraph 35;
• "Amalco Common Shares" means the common shares of Amalco;
• "Amalco Stock Option" has the meaning assigned by Paragraph 35(g);
• "arm's length" has the meaning assigned by section 251;
• "BCA" means the Business Corporations Act (XXXXXXXXXX);
• "Butterfly Proportion" means the fraction A/B where:

A. is the net fair market value of the Spin-off Property to be transferred by DC to Spinco as described in Paragraph 29 determined immediately before such transfer; and

B. is the net fair market value of all property owned by DC immediately before the transfer of the Spin-off Property to Spinco as described in Paragraph 29;

• "capital property" has the meaning assigned by section 54;
• "cost amount" has the meaning assigned by subsection 248(1);
• "CRA" means the Canada Revenue Agency;
• "DC" means XXXXXXXXXX, the corporation more particularly described in Paragraph 1;
• "DC Butterfly Share Redemption Amount" has the meaning assigned by Paragraph 23(a);
• "DC Butterfly Shares" means the new class of special shares in the capital of DC described in Paragraph 23;
• "DC Common Shares" means the common shares in the capital of DC described in Paragraph 6;
• "DC New Common Shares" means the New Common Shares of DC described in Paragraph 23;
• "DC Redemption Note" means the promissory note to be issued by DC as described in Paragraph 33;
• "DC Shareholder" means a holder of DC Common Shares;
• "DC Stock Option" means a right to acquire one Common Share in the capital of DC under the DC Stock Option Plan, as described in Paragraph 8;
• "DC Stock Option Holder" means a person who holds a DC Stock Option;
• "DC Stock Option Plan" means the existing stock option plan of DC as described in Paragraph 8;
• *DC Warrant" means the existing common share purchase warrants of DC;
• *DC Warrant Holder" means a person who holds a DC Warrant;
• *depreciable property" has the meaning assigned by subsection 13(21);
• "disposition" has the meaning assigned by subsection 248(1);
• "Dissenting Shareholder" means a shareholder of DC who dissents from the Plan of Arrangement, as described in Paragraph 22;
• "distribution" has the meaning assigned by subsection 55(1);
• "Effective Date" means the effective date of the Plan of Arrangement;
• "eligible capital property" has the meaning assigned by section 54;
• "eligible property" has the meaning assigned by subsection 85(1.1);
• "fair market value" means the highest price available in an open and unrestricted market between informed prudent parties acting at arm's length and under no compulsion to act, expressed in terms of cash;
• "flow-through share" has the meaning assigned by subsection 66(15);
• "In the Money Amount" means, in relation to a particular stock option in respect of which the fair market value of the shares that are the subject of the option exceeds the exercise price of the option, the amount of such excess;
• "New DC Stock Options" has the meaning assigned by Paragraph 26.1;
• "Newco" means XXXXXXXXXX, a corporation incorporated on XXXXXXXXXX under the BCA in connection with the Proposed Transactions;
• "paid-up capital" has the meaning assigned by subsection 89(1);
• "Paragraph" refers to a numbered paragraph;
• "paragraph" refers to a paragraph of the Act;
• "Participant" means a DC Shareholder, other than a Dissenting Shareholder;
• "Plan of Arrangement" means the proposed plan of arrangement under the BCA to effect the divisive reorganization and amalgamation described in Paragraphs 22 to 35;
• "prescribed stock exchange" has the meaning assigned by Part XXXII of the Regulations;
• "proceeds of disposition" has the meaning assigned by section 54;
• "Proposed Transactions" means the transactions referred to in Paragraphs 22 to 35;
• "public corporation" has the meaning assigned by subsection 89(1);
• "Regulations" refers to the Income Tax Regulations;
• "related person" has the meaning assigned by subsection 251(2);
• "restricted financial institution" has the meaning assigned by subsection 248(1);
• "short-term preferred share" has the meaning assigned by subsection 248(1);
• "specified financial institution" has the meaning assigned by subsection 248(1);
• "specified shareholder" has the meaning assigned by subsection 248(1) as modified by subsections 55(3.2) and (3.3);
• "Spinco" means XXXXXXXXXX ., a corporation more fully described in Paragraph 19;
• "Spinco Commitment" means the commitment of Spinco in respect of the DC Warrants and the unpaid bonuses of DC Common Shares, as referred to in Paragraph 27;
• "Spinco Common Shares" means the common shares of Spinco, as described in Paragraph 19;
• "Spinco Redemption Note" means the promissory note to be issued by Spinco as described in Paragraph 32;
• "Spinco Reorganization Share Redemption Amount" has the meaning assigned by Paragraph 24(a);
• "Spinco Reorganization Shares" means the class of preferred shares in the capital of Spinco as described in Paragraph 24;
• "Spinco Stock Options" has the meaning assigned by Paragraph 26.1;
• "Spin-off Property" means XXXXXXXXXX % of the issued and outstanding shares of Newco following the transfer described in Paragraph 28 below;
• "stated capital" has the meaning assigned by the BCA;
• "Stock Exchange" means the XXXXXXXXXX Stock Exchange;
• "subject corporation" has the meaning assigned by subsection 186(3);
• "taxable Canadian corporation" has the meaning assigned by subsection 89(1);
• "taxable Canadian property" has the meaning assigned by subsection 248(1);
• "taxable dividend" has the meaning assigned by subsection 89(l);
• "taxable preferred share" has the meaning assigned by subsection 248(1); and
• "Transferred Properties" has the meaning assigned by Paragraph 2.

Our understanding of the facts, Proposed Transactions and the purposes of the Proposed Transactions is as follows:

STATEMENT OF FACTS

Facts Relating to DC

1. DC is a public corporation and a taxable Canadian corporation and is governed by the BCA. DC has a XXXXXXXXXX fiscal and taxation year-end. DC files its tax returns at and deals with the XXXXXXXXXX office of the CRA. DC is not a subject corporation.

2. XXXXXXXXXX.

3. XXXXXXXXXX.

4. XXXXXXXXXX.

5. As at XXXXXXXXXX, the current market capitalization of DC was approximately $XXXXXXXXXX. DC's management believes that, while this market capitalization has increased significantly in the last several weeks, it still reflects an undervaluation of DC, relative to the fair market value of its net assets and that in part this has occurred because of XXXXXXXXXX . This diversity has led to complexity when trying to value the shares of DC. In particular, DC considers that the value of the Transferred Properties is not fully reflected in its current market capitalization and it proposes to split these properties off into a separate public corporation as described herein. In addition, DC proposes to establish tracking shares to track the value of its XXXXXXXXXX properties.

6. As at XXXXXXXXXX, DC had approximately XXXXXXXXXX common shares issued and outstanding, representing all of its issued shares (the "DC Common Shares"). Certain of the DC Common Shares were issued as flow-through shares. The DC Common Shares are listed on the Stock Exchange. The DC Common Shares are not short-term preferred shares or taxable preferred shares.

7. The directors and senior management of DC are not aware of any person or related group of persons that beneficially owns or has owned at any time in the last year, directly or indirectly, 10% or more of the issued and outstanding DC Common Shares.

8. DC has a stock option plan (the "DC Stock Option Plan") for directors, officers, employees and consultants of DC. Under the terms of the DC Stock Option Plan, qualifying individuals may be entitled to acquire DC Common Shares at prices that cannot be lower than the closing price of such shares on the Stock Exchange on the trading day immediately preceding the day on which the particular DC Stock Option was granted. Under the terms of the DC Stock Option Plan, the number of DC Stock Options that may be granted cannot exceed XXXXXXXXXX% of the issued and outstanding DC Common Shares. DC has outstanding approximately XXXXXXXXXX DC Stock Options, exercisable at prices varying from $XXXXXXXXXX per share to $XXXXXXXXXX per share, with an average exercise price of approximately $XXXXXXXXXX. All but XXXXXXXXXX of the DC Stock Options are fully vested and hence are currently exercisable.

9. The DC Stock Option Holders have always dealt with DC at arm's length for purposes of the Act and will continue to do so during and after the Proposed Transactions described below.

10. Following the exercise of approximately XXXXXXXXXX DC Warrants in XXXXXXXXXX, DC has outstanding approximately XXXXXXXXXX DC Warrants, exercisable at an average price of approximately $XXXXXXXXXX per share.

11. DC has outstanding certain debentures that were issued in XXXXXXXXXX in an aggregate principal amount of approximately $XXXXXXXXXX. The holders of these debentures have the right to convert these debentures into DC Common Shares at any time before the maturity thereof on XXXXXXXXXX. It is anticipated that the holders will choose to convert such debentures into DC Common Shares prior to the Effective Date. The holders' right to convert these debentures is not subject to any consent or approval on the part of DC and DC, therefore, has no control over whether the holders will choose to exercise such right. Accordingly, if any property is acquired by DC as a result of a conversion of such debentures, it will not be acquired by DC in contemplation of the Proposed Transactions.

12. [Reserved].

Recent Transactions

13. In XXXXXXXXXX, DC filed a draft rights offering circular on a confidential basis with certain securities commissions, pursuant to which existing shareholders would be granted rights to acquire additional common shares of DC, which would not be flow-through shares. This rights offering was originally scheduled to be completed earlier in XXXXXXXXXX, but was postponed for various business reasons, including the expectation of more favourable market conditions later in the year. The rights offering was reactivated in XXXXXXXXXX. The purpose of the rights offering was primarily to raise additional funds to finance DC's ongoing XXXXXXXXXX activities XXXXXXXXXX. The rights offering was completed on XXXXXXXXXX . Pursuant thereto, DC raised funds of approximately $XXXXXXXXXX, before issue costs estimated to be approximately $XXXXXXXXXX.

14. XXXXXXXXXX..

15. On XXXXXXXXXX, DC entered into an agreement with an underwriting syndicate pursuant to which the underwriters agreed to purchase, or arrange for the purchase of, XXXXXXXXXX treasury DC Common Shares at a price of $XXXXXXXXXX per share for a total of $XXXXXXXXXX. The underwriters also had the option to purchase an additional XXXXXXXXXX DC Common Shares at the same price per share for an additional $XXXXXXXXXX. This option was not exercised. The offering was completed on or about XXXXXXXXXX and pursuant thereto DC raised net proceeds of approximately $XXXXXXXXXX . If the Proposed Transactions described below are completed, the net proceeds minus any portion thereof expended by DC before the Effective Date will be transferred to Newco as described below. Accordingly, it is currently estimated that cash of approximately $XXXXXXXXXX will be so transferred to Newco. If the Proposed Transactions cannot be completed then DC will retain the cash and spend the cash itself on the Transferred Properties. Neither the decision to undertake the offering nor the timing or structure of the offering was dependent on the Proposed Transactions and accordingly such offering was not undertaken in contemplation of the Proposed Transactions.

16. In XXXXXXXXXX , pursuant to a stock bonus program for employees and directors, the compensation committee of the board of directors of DC resolved to pay a bonus of XXXXXXXXXX DC Common Shares to a retired employee who remains a director of DC, in recognition of such person's contributions to DC. It is contemplated that these shares will be issued before the Effective Date. No property will be acquired by DC as a consequence of the issuance of these shares. Other stock bonuses totalling XXXXXXXXXX DC Common Shares were also declared concurrently in respect of existing employees, but the shares issuable thereunder will not be required to be issued until later in XXXXXXXXXX , after the Effective Date. The commitment to such existing employees includes a provision to the effect that in the event that any assets of DC are spun out to another corporation before the date that the DC Common Shares are receivable, such employees will be entitled to receive a proportionate number of shares of the other corporation in addition to the DC Common Shares. Accordingly, as a result of the Proposed Transactions, it is expected that such employees will become entitled to receive XXXXXXXXXX Amalco Common Shares pursuant to these bonuses.

17. The transactions and activities described in Paragraphs 13 to 16 above have been, or will be, carried out by DC in the ordinary course of its business or as part of the ongoing management of DC's portfolio of assets. These transactions have been, or will be, undertaken regardless of whether the Proposed Transactions are implemented. Similarly, the Proposed Transactions would have been undertaken regardless of such transactions. For greater certainty, none of these transactions has been or will be undertaken in contemplation of the Proposed Transactions. No person was, or will be, a specified shareholder of DC either immediately before or immediately after completion of these transactions. The transactions described in Paragraphs 11, 13, 15 and 16 did not, or will not, result in any shareholder becoming a specified shareholder of DC.

18. Newco was incorporated on XXXXXXXXXX, under the BCA. Newco is a taxable Canadian corporation with an authorized share capital consisting of an unlimited number of voting common shares. Effective on its incorporation, DC subscribed for common shares of Newco for nominal consideration.

19. Spinco was incorporated on XXXXXXXXXX, under the BCA. Spinco is a taxable Canadian corporation. Its authorized share capital currently consists of an unlimited number of fully participating voting common shares (the "Spinco Common Shares"). Under the Plan of Arrangement, an unlimited number of special shares (the "Spinco Reorganization Shares") will be created as more particularly described in Paragraph 24. Spinco will also be authorized to grant options and issue warrants. Prior to the completion of the Proposed Transactions, Spinco will not have any assets and will not have any liabilities. No shares of Spinco will be issued on incorporation or prior to the issue of Spinco Common Shares as described in Paragraph 26.

20. On XXXXXXXXXX, DC, Spinco and Newco entered into an agreement to implement the Plan of Arrangement. Pursuant to the Plan of Arrangement,

(a) DC will transfer the Transferred Properties and cash to Newco in exchange for common shares of Newco;

(b) DC will then transfer XXXXXXXXXX% of the common shares of Newco (the "Spin-off Property") to Spinco; and

(c) following the elimination of cross shareholdings between Spinco and DC, Spinco will amalgamate with Newco.

The Plan of Arrangement is subject to shareholder, regulatory and court approvals and to receipt of either an advance income tax ruling from the CRA or other comfort satisfactory to the directors of DC.

PROPOSED TRANSACTIONS

21. Subject to the applicable conditions and approvals, the Proposed Transactions described in Paragraphs 22 to 35 will be undertaken pursuant to the Plan of Arrangement under the BCA in the sequence set forth below. With the exception of the filing of any elections under the Act, these transactions will occur by virtue of the Plan of Arrangement and will be designated in the Plan of Arrangement to occur on the Effective Date and in the order set out below. The Effective Date of the Plan of Arrangement will be on a date that will be subsequent to the date of this letter and is currently anticipated to be in early XXXXXXXXXX. The Plan of Arrangement must be approved by the holders of at least XXXXXXXXXX of the DC Common Shares voting at a meeting of the holders of DC Common Shares to approve the Plan of Arrangement.

Dissent Right

22. Each DC Shareholder will be entitled to dissent from the Plan of Arrangement in accordance with the provisions of the Plan of Arrangement and the BCA. Under the Plan of Arrangement, any DC Shareholder who so dissents (a "Dissenting Shareholder") will be considered to have ceased to be a shareholder of DC, at the time that the Plan of Arrangement becomes effective, but immediately before any other transactions that will occur under the Plan of Arrangement. Accordingly, the DC Common Shares held by a Dissenting Shareholder will no longer be considered to be outstanding for the purpose of the remaining corporate law transactions under the Plan of Arrangement. After the completion of the Plan of Arrangement, each such Dissenting Shareholder will be entitled to be paid the fair value of its DC Common Shares in respect of which the right of dissent was exercised.

Reorganization of DC's Share Capital

23. The articles of DC will be amended to create and authorize the issuance of an unlimited number of DC New Common Shares and an unlimited number of DC Butterfly Shares and to increase the voting rights of the DC Common Shares to XXXXXXXXXX votes per share. The purpose of increasing such voting rights is to create a distinction between the DC Common Shares and the DC New Common Shares in order to support their being treated as separate classes of shares under the BCA.

Each DC New Common Share will be a fully participating voting common share with the holder thereof entitled to one vote at meetings of shareholders of DC. The terms of the DC New Common Shares will otherwise be the same as those of the DC Common Shares.

The DC Butterfly Shares will have the following attributes:

(a) each DC Butterfly Share will be redeemable, subject to applicable law, at any time at the option of DC at a redemption amount equal to the aggregate fair market value of all of the DC Common Shares outstanding immediately before the exchange of DC Common Shares described in Paragraph 25, multiplied by the Butterfly Proportion, then divided by the number of issued and outstanding DC Butterfly Shares, plus any declared but unpaid dividends thereon (the "DC Butterfly Share Redemption Amount");

(b) each DC Butterfly Share will be retractable, subject to applicable law, at any time at the option of the holder at a retraction amount equal to the DC Butterfly Share Redemption Amount;

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

(d) there will be a provision restricting the payment of dividends on other classes of shares so that no such dividends may be paid on any other class of shares of DC if the resulting realizable value of the net assets of DC after payment of the dividends would be less than the aggregate of the DC Butterfly Share Redemption Amount relating to all of the DC Butterfly Shares then outstanding;

(e) for the purpose of subsection 191(4), the terms and conditions of the DC Butterfly Shares to be issued as described in Paragraph 25 will, at the time of their issue, specify an amount in respect of each DC Butterfly Share. The amount to be specified in respect of each DC Butterfly Share will:

(i) be pursuant to a resolution of the board of directors of DC;

(ii) be expressed as a dollar amount;

(iii) not be determined by a formula; and

(iv) not exceed the fair market value of the property received by DC in consideration for its issuance;

(f) the holder of each DC Butterfly Share will be entitled, upon the liquidation, dissolution or winding-up of DC, to a payment in priority to all other classes of shares of DC of an amount equal to the DC Butterfly Share Redemption Amount to the extent of the amount of value of property available under applicable law for payment to shareholders upon such liquidation, dissolution or winding-up, but will be entitled to no more than the amount of that payment; and

(g) the holder of each DC Butterfly Share will not be entitled to vote at meetings of shareholders of DC, other than as provided by the BCA.

Creation of Spinco Reorganization Shares

24. The articles of Spinco will be amended to create and authorize the issuance of an unlimited number of Spinco Reorganization Shares. The Spinco Reorganization Shares will have the following attributes:

(a) each Spinco Reorganization Share will be redeemable, subject to applicable law, at any time at the option of Spinco at a redemption amount equal to the aggregate fair market value of the Spin-off Property at the time of its transfer to Spinco as described in Paragraph 29 less the value of the non-share consideration to be provided by Spinco, divided by the number of Spinco Reorganization Shares issued as consideration for such transfer, plus any declared but unpaid dividends thereon (the "Spinco Reorganization Share Redemption Amount");

(b) each Spinco Reorganization Share will be retractable, subject to applicable law, at any time at the option of the holder at a retraction amount equal to the Spinco Reorganization Share Redemption Amount;

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

(d) there will be a provision restricting the payment of dividends on other classes of shares so that no such dividends may be paid on any other class of shares of Spinco if the resulting realizable value of the net assets of Spinco after payment of the dividends would be less than the aggregate of the Spinco Reorganization Share Redemption Amount relating to all of the Spinco Reorganization Shares then outstanding;

(e) for the purpose of subsection 191(4), the terms and conditions of the Spinco Reorganization Shares to be issued as described in Paragraph 29 will, at the time of their issue, specify an amount in respect of each Spinco Reorganization Share. The amount to be specified in respect of each Spinco Reorganization Share will:

(i) be pursuant to a resolution of the board of directors of Spinco;

(ii) be expressed as a dollar amount;

(iii) not be determined by a formula; and

(iv) not exceed the net fair market value of the property received by Spinco in consideration for its issuance;

(f) the holder of each Spinco Reorganization Share will be entitled, upon the liquidation, dissolution or winding-up of Spinco, to a payment of an amount equal to the Spinco Reorganization Share Redemption Amount to the extent of the amount of value of property available under applicable law for payment to shareholders upon such liquidation, dissolution or winding-up, but will be entitled to no more than the amount of that payment; and

(g) the holder of each Spinco Reorganization Share will not be entitled to vote at meetings of shareholders of Spinco, other than as provided by the BCA.

Exchange of DC Common Shares

25. Each Participant will exchange each of the Participant's DC Common Shares for consideration consisting only of one DC New Common Share and one DC Butterfly Share. In connection with the exchange,

(a) the DC Common Shares so exchanged will be cancelled;

(b) the aggregate addition to the stated capital in respect of the DC New Common Shares and the DC Butterfly Shares to be issued by DC on the exchange described in this Paragraph will not exceed the paid-up capital of the DC Common Shares (excluding any DC Common Shares owned by the Dissenting Shareholders) immediately before the exchange. For greater certainty, the aggregate paid-up capital of the DC Common Shares will be allocated between the DC New Common Shares and the DC Butterfly Shares based on the proportion that the fair market value of the DC New Common Shares or the DC Butterfly Shares, as the case may be, is of the fair market value of all new shares issued by DC on the exchange;

(c) it is not contemplated that DC will file a joint election under the provisions of subsection 85(1) with any Participant in respect of this share exchange; and

(d) the DC New Common Shares will be listed for trading on the Stock Exchange.

Other than as set out in this letter, there will not be any agreement in respect of the DC Butterfly Shares in respect of any matters referred to in any of subparagraphs (b)(i) to (iv) of the definition of taxable preferred share or in any of paragraphs (a), (b), (f) or (h) of the definition of short-term preferred share in subsection 248(1).

Transfer of DC Butterfly Shares to Spinco

26. Each Participant will transfer all of such Participant's DC Butterfly Shares to Spinco in exchange for Spinco Common Shares. As sole consideration for the DC Butterfly Shares transferred to it, Spinco will issue Spinco Common Shares to each Participant, on the basis of XXXXXXXXXX of a Spinco Common Share for each DC Butterfly Share transferred by the particular Participant. The number of Spinco Common Shares issued to each Participant will be rounded downwards to the nearest whole number and no cash or other consideration will be paid in respect of any fractional Spinco Common Share that would otherwise be issued to the Participant but for such rounding. The value of any fractional Spinco Share that would otherwise be issuable to any particular Participant but for such rounding will not exceed $XXXXXXXXXX.

The fair market value, immediately before the transfer described in Paragraph 29, of each Participant's Spinco Common Shares will equal or approximate the amount determined by the formula: (A x B/C) + D in respect of such Participant, as set out in subparagraph (b)(iii) of the definition "permitted exchange" in subsection 55(1). In this paragraph, "approximate the amount" means that the discrepancy of the amount, if any, between the fair market value of the Spinco Common Shares received by a particular Participant and the fair market value of the Spinco Common Shares that the particular Participant would have received had the Participant received its proportionate number of Spinco Common Shares, will not exceed the greater of $XXXXXXXXXX and XXXXXXXXXX% of the amount so determined under such formula.

It is not contemplated that Spinco will file a joint election under the provisions of subsection 85(1) with any Participant in respect of this transfer.

Pursuant to the BCA, the amount to be added to the stated capital of the Spinco Common Shares on such transfer will be an amount equal to the aggregate paid-up capital of the transferred DC Butterfly Shares.

Replacement of Existing DC Stock Options

26.1 Immediately after the transfer of the DC Butterfly Shares to Spinco described in Paragraph 26, each holder of DC Stock Options will dispose of a portion of such holder's respective rights under the DC Stock Options to each of DC and Spinco in consideration for the issuance to the particular holder of new stock options granted by DC ("New DC Stock Options") to acquire DC New Common Shares and new stock options granted by Spinco ("Spinco Stock Options") to acquire Spinco Common Shares in such a manner that:

(a) the particular holder will receive no consideration for the exchange of such DC Stock Options other than New DC Stock Options and Spinco Stock Options;

(b) the original exercise price of a holder's DC Stock Options will be allocated to the New DC Stock Options and the Spinco Stock Options acquired by such holder on the exchange, such that an amount equal to the Butterfly Proportion of such original exercise price will be payable to Spinco under the Spinco Stock Options and an amount equal to the remainder of the original exercise price will be payable to DC under the New DC Stock Options;

(c) the other material financial terms and conditions of the New DC Stock Options and the Spinco Stock Options will parallel those of the DC Stock Options, and in particular, the number of New DC Common Shares and Spinco Common Shares to be issued in each case will be such that, for each DC Common Share that the holder would have been entitled to acquire under the DC Stock Option, the holder will become entitled to acquire one New DC Common Share under the corresponding New DC Stock Options and XXXXXXXXXX of a Spinco Common Share under the corresponding Spinco Stock Options; and

(d) the DC Stock Options will be cancelled upon the foregoing transfers.

The issuance by Spinco of the Spinco Stock Options will be in anticipation of the transfer of the Spin-off Property as described in Paragraph 29 and will form part of the non-share consideration relating to such transfer.

Effect Upon DC Warrants

27. Pursuant to the provisions of the DC Warrants and as a result of the Plan of Arrangement, each holder of a DC Warrant will be entitled to receive upon the exercise of a DC Warrant the number of New DC Common Shares and the number of Spinco Common Shares which such holder would have been entitled to receive if such holder had been the holder of the number of DC Common Shares issuable under the DC Warrant at the Effective Date. In this regard, Spinco will enter into the Spinco Commitment as referred to in Paragraph 29. Under the terms of the Spinco Commitment, Spinco (or Amalco) will be entitled to the Butterfly Proportion of the subscription proceeds payable on the exercise of each DC Warrant that is outstanding at the Effective Date. DC shall not acquire any beneficial ownership of the Spinco Common Shares (or Amalco Common Shares) issued upon the exercise of the DC Warrants. Under the Spinco Commitment, Spinco or Amalco will also be obligated to issue Spinco Common Shares, or Amalco Common Shares, to the holders of the DC Warrants, as well as the XXXXXXXXXX shares to be issued as described in Paragraph 16.

Transfer of the Transferred Properties and Cash to Newco

28. DC will transfer to Newco its interest in the Transferred Properties, together with cash in an amount approximately equal to $XXXXXXXXXX (being the unexpended balance of the net proceeds of the offering described in Paragraph 15) in exchange for common shares of Newco. Any non-share consideration for the transfer will be allocated to, and will be less than, the amount of the transferred cash. DC and Newco will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of each eligible property that is included in the Transferred Properties. In each case, the agreed amount will not exceed the fair market value of the particular eligible property, nor will it be less than the amount permitted under paragraph 85(1)(b). The agreed amount for each property XXXXXXXXXX will be $XXXXXXXXXX. Pursuant to the BCA, the addition to the stated capital of the Newco common shares will be the aggregate of the cash and the agreed amount of each eligible property less the amount of any non-share consideration.

Transfer of Spin-off Property to Spinco

29. Immediately before the transfer of property described herein, the fair market value of the property of DC will be determined as though there was only one type of property, as contemplated by subsection 55(3.02), on a net fair market value basis. For greater certainty:

(a) any tax accounts, such as the balance of any non-capital losses, net capital losses and tax pools, will not be considered to be property of DC for the purposes of determining the net fair market value of the property of DC as described herein, and

(b) no amount will be considered to be a liability of DC unless it represents a true legal liability which is capable of quantification.

DC will then transfer the Spin-off Property, consisting of XXXXXXXXXX% of the Newco common shares, to Spinco. As consideration for the transfer of the Spin-off Property, Spinco

(i) has issued the Spinco Stock Options as described in Paragraph 26.1;

(ii) will provide the Spinco Commitment and

(iii) will issue Spinco Reorganization Shares, having an aggregate fair market value and redemption amount equal to the fair market value, at the time of the transfer, of the Spin-off Property less an amount equal to the aggregate fair market value at such time of the Spinco Commitment and the Spinco Stock Options so issued.

DC and Spinco will jointly elect, in prescribed form and within the time referred to in subsection 85(6), to have the provisions of subsection 85(1) apply to the transfer of the Spin-off Property. The agreed amount in respect of the election will not exceed the fair market value of the Spin-off Property. The agreed amount will be an amount equal to the greater of the cost amount of the Spin-off Property to DC and the fair market value of the non-share consideration, being the issue of the Spinco Stock Options and the provision of the Spinco Commitment.

Pursuant to the BCA, the amount to be added to the stated capital of the Spinco Reorganization Shares to be issued by Spinco to DC as described herein will be equal to the agreed amount for the Spin-off Property less the value of the non-share consideration.

30. Immediately after the transfer described in Paragraph 29, the fair market value of the Spin-off Property acquired by Spinco on the distribution, determined on a net fair market value basis, will be equal to that proportion of the net fair market value of all the property of DC, determined immediately before the transfer, that:

(a) the aggregate fair market value of the DC Butterfly Shares owned by Spinco, immediately before the transfer, is of

(b) the aggregate fair market value of all the issued and outstanding shares of DC immediately before the transfer.

31. [Reserved]

Elimination of Cross Shareholdings

32. Spinco will redeem all of the Spinco Reorganization Shares held by DC and will issue to DC, as payment therefor, a non-interest-bearing demand note (the "Spinco Redemption Note") having a principal amount and fair market value equal to the aggregate of the Spinco Reorganization Share Redemption Amounts of the Spinco Reorganization Shares redeemed. DC will accept the Spinco Redemption Note as full payment of the Spinco Reorganization Share Redemption Amounts of the Spinco Reorganization Shares so redeemed, with the risk of the Spinco Redemption Note being dishonoured.

33. DC will redeem the DC Butterfly Shares held by Spinco and will issue to Spinco, as payment therefor, a non-interest-bearing demand note (the "DC Redemption Note") having a principal amount and fair market value equal to the aggregate DC Butterfly Share Redemption Amounts of the DC Butterfly Shares so redeemed. Spinco will accept the DC Redemption Note as full payment of the DC Butterfly Share Redemption Amounts of the DC Butterfly Shares so redeemed, with the risk of the DC Redemption Note being dishonoured.

Set-off of Notes

34. DC will satisfy its obligations under the DC Redemption Note by transferring the Spinco Redemption Note to Spinco and Spinco will accept the Spinco Redemption Note in full satisfaction of DC's obligations under the DC Redemption Note. Similarly, Spinco will satisfy its obligations under the Spinco Redemption Note by transferring the DC Redemption Note to DC and DC will accept the DC Redemption Note in full satisfaction of Spinco's obligations under the Spinco Redemption Note. The DC Redemption Note and the Spinco Redemption Note will both be marked paid in full and cancelled.

Amalgamation

35. Spinco and Newco will amalgamate under the provisions of the BCA to form Amalco, in such a manner that on and by virtue of the amalgamation:

(a) all of the property (except any amounts receivable from, or shares of the capital stock of, any predecessor corporation) of the predecessor corporations immediately before the merger will become property of Amalco;

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

(c) all the shares in the capital stock of Newco that are owned or held by Spinco immediately prior to the merger will be cancelled for no consideration;

(d) DC will exchange its Newco shares for Amalco Common Shares;

(e) each holder of Spinco Common Shares will exchange such shares for Amalco Common Shares;

(f) the stated capital of the Amalco Common Shares immediately after the amalgamation will be equal to the aggregate of the paid-up capital of the Spinco Common Shares and the paid-up capital of the common shares in the capital stock of Newco immediately before the amalgamation, minus the paid-up capital of the common shares of the capital stock of Newco that are cancelled on the amalgamation as contemplated by (c) above; and

(g) each outstanding Spinco Stock Option will become an option to acquire the same number of Amalco Common Shares, for the same aggregate exercise price and will become subject to an employee stock option plan to be established on behalf of Amalco pursuant to the Arrangement (an "Amalco Stock Option").

Immediately following such amalgamation, DC will own XXXXXXXXXX% of the outstanding Amalco Common Shares and the remaining outstanding Amalco Common Shares will be held by the Participants.

Additional Information

36. Amalco may raise additional capital to finance its activities by issuing additional shares of its capital stock. DC expects to continue to raise capital to finance its ongoing activities. However, it is not expected that any person or group of persons will acquire control of either Amalco or DC as a consequence of any of these potential financing activities. The Plan of Arrangement is not being undertaken to facilitate any proposed or contemplated acquisition of control of either DC or Amalco.

37. The Proposed Transactions will occur in the order presented unless otherwise indicated, with the exception of the filing of any applicable election forms, which will be filed by the applicable due date following the completion of the Proposed Transactions.

38. Each of the DC Common Shares, DC New Common Shares and the Spinco Common Shares will be unconditionally listed on a prescribed stock exchange. The listing of the Spinco Common Shares will occur before the amalgamation of Spinco and Newco described in Paragraph 35 above. Spinco will, pursuant to the post-amble in the definition of public corporation in subsection 89(1) make the election in its return of income for its first taxation year to have been a public corporation from the beginning of such taxation year.

39. None of DC, Subco, Newco or Spinco is, or will be at any time during the Proposed Transactions, a specified financial institution or a restricted financial institution.

40. No person (other than Spinco by virtue of its acquisition of the DC Butterfly Shares) will be a specified shareholder of DC at any time during the series of transactions that includes the Proposed Transactions.

41. Except as described herein, no debts have been or will be incurred or paid and no property has been or will be acquired by DC or any corporation controlled by DC in contemplation of the distribution described below, other than in a transaction described in subparagraphs 55(3.1)(a)(i) to (iv).

42. Neither DC nor Amalco will sell or transfer any property, as part of a series of transactions or events that includes the Proposed Transactions, to an unrelated person or partnership subsequent to the Proposed Transactions.

43. None of the shares of DC or Spinco described herein is or will be, at any time during the implementation of the Proposed Transactions:

(a) the subject of any undertaking or agreement that is referred to in subsection 112(2.2) as a "guarantee agreement";

(b) a share that is issued or acquired as part of a transaction, event or series of transactions or events of the type described in subsection 112(2.5); or

(c) the subject of a dividend rental arrangement referred to in subsection 112(2.3) as that term is defined in subsection 248(1).

44. Following completion of the Proposed Transactions, certain management services will be provided by DC to Amalco at cost plus ten percent, which the parties believe represents fair market value.

PURPOSE OF THE PROPOSED TRANSACTIONS

45. DC considers that the distribution of the Transferred Properties as described herein is in the best interests of the DC Common Shareholders. The Proposed Transactions will separate these properties from DC's other properties with the expectation that this will enhance the ability of each of DC and Amalco to pursue its independent corporate objectives, strategies and financing which will maximize the value to the current DC Shareholders. By retaining an interest in Amalco, DC's market capitalization should benefit from any overall increase in the market capitalization of the two companies as a result of the implementation of the Proposed Transactions.

RULINGS

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, Proposed Transactions, purposes of the Proposed Transactions and additional information, we confirm the following:

A. The amendment to the terms of the DC Common Shares to increase the voting rights, as described in Paragraph 23, will not result in a disposition of the DC Common Shares, in and of itself.

A.1 On the exchange of DC Common Shares by a Participant, as described in Paragraph 25, the provisions of subsection 86(1) will apply and the provisions of subsection 86(2) will not apply to the disposition of each existing DC Common Share by a Participant for one DC New Common Share and one DC Butterfly Share provided that:

(a) the particular Participant holds the DC Common Shares as capital property; and

(b) the particular Participant and DC do not file an election under subsection 85(1) or (2) in respect of the exchange,

such that

(c) the Participant will be deemed by paragraph 86(1)(b) to have acquired the DC New Common Shares and DC Butterfly Shares at a cost equal to the proportion of the adjusted cost base to the Participant of such DC Common Shares immediately before the exchange that

(A) the fair market value, immediately after the exchange, of the DC New Common Shares or of the DC Butterfly Shares, as the case may be, received by the particular Participant

is of

(B) the fair market value, immediately after the exchange, of all the shares of DC acquired by the Participant on the exchange; and

(d) pursuant to paragraph 86(1)(c), such Participant will be deemed to have disposed of the Participant's DC Common Shares for aggregate proceeds of disposition equal to the aggregate cost to the Participant of the DC New Common Shares and DC Butterfly Shares received by the Participant as determined in (c) above.

A.2 Provided that a Participant holds the DC Common Shares as capital property, the share exchanges described in Paragraph 25 or Paragraph 26 will not, in and by themselves, cause the DC Butterfly Shares or the DC New Common Shares not to be capital property to such Participant.

B. Provided that a Participant who, immediately before the exchange of DC Butterfly Shares for Spinco Shares as described in Paragraph 26,

(a) holds such DC Butterfly Shares as capital property:

(b) does not receive any consideration other than the Spinco Common Shares in exchange for the DC Butterfly Shares;

(c) deals at arm's length with Spinco immediately before the exchange;

(d) does not file an election under subsection 85(1) or subsection 85(2) with respect to the exchange; and

(e) does not include any portion of the gain or loss otherwise determined in computing his or her income for that year;

and further provided that immediately after such exchange:

(f) the particular Participant or persons with whom such Participant does not deal at arm's length, or the particular Participant together with any other person or persons with whom such Participant does not deal at arm's length, will not control Spinco or beneficially own shares of Spinco having an aggregate fair market value representing more than 50% of the aggregate fair market value of all of the outstanding shares of Spinco;

then pursuant to paragraph 85.1(1)(a):

(g) such Participant will be deemed to have disposed of such DC Butterfly Shares for proceeds of disposition equal to the aggregate adjusted cost base of such DC Butterfly Shares to the particular Participant immediately before the exchange; and

(h) such Participant will be deemed to have acquired such Spinco Shares at an aggregate cost equal to the aggregate adjusted cost base of such Participant's DC Butterfly Shares immediately before the exchange;

and pursuant to paragraph 85.1(1)(b):

(i) the cost to Spinco of each DC Butterfly Share acquired from each such Participant will be deemed to be the lesser of its fair market value immediately before the exchange and the paid-up capital of such DC Butterfly Share immediately before the exchange.

C. Provided that the requisite joint elections are filed in prescribed form and within the prescribed time and subject to the application of subsection 69(11), the provisions of subsection 85(1) will apply to

(a) the transfer by DC to Newco of such of the Transferred Properties as are eligible property as described in Paragraph 28;

(b) the transfer of the Spin-off Property by DC to Spinco as described in Paragraph 29,

such that the agreed amount in respect of each transfer of eligible property will be deemed to be the applicable transferor's proceeds of disposition and the applicable transferee's cost thereof pursuant to paragraph 85(1)(a). For greater certainty, paragraph 85(1)(e.2) will not apply to such transfers.

D. [Reserved].

E. The provisions of subsection 7(1.4) will apply with respect to each exchange by a particular holder of DC Stock Options that are subject to the provisions of subsection 7(1) for New DC Stock Options and Spinco Stock Options, as described in Paragraph 26.1, provided that the aggregate In The Money Amount of the New DC Stock Options and Spinco Stock Options received by the holder does not exceed the aggregate In The Money Amount of the DC Stock Options exchanged by the holder, with the result that for the purposes of section 7:

(a) such holder will be deemed (other than for the purposes of subparagraph 7(9)(d)(ii)) not to have disposed of the DC Stock Options and not to have acquired the New DC Stock Options and the Spinco Stock Options;

(b) the New DC Stock Options and the Spinco Stock Options will be deemed to be the same as, and a continuation of the corresponding DC Stock Options: and

(c) Spinco will be deemed in respect of such stock options to be the same person as, and a continuation of, DC.

E.1 The provisions of subsection 7(1.4) will further apply on the amalgamation of Spinco and Newco as described in Paragraph 35 with respect to each outstanding Spinco Stock Option that is subject to the provisions of subsection 7(1) and that becomes an Amalco Stock Option on the amalgamation, provided that the aggregate In The Money Amount of the Amalco Stock Options received by the holder does not exceed the aggregate In The Money Amount of the Spinco Stock Options held by the holder immediately before the Amalgamation, with the result that for the purposes of section 7:

(a) such holder will be deemed (other than for the purposes of subparagraph 7(9)(d)(ii)) not to have disposed of the Spinco Stock Options and not to have acquired the Amalco Stock Options;

(b) the Amalco Stock Options will be deemed to be the same as, and a continuation of the Spinco Stock Options and hence, by virtue of Ruling E (b), a continuation of the corresponding DC Stock Options; and

(c) Amalco will be deemed in respect of such stock options to be the same person as, and a continuation of, Spinco and, by virtue of Ruling E(c), of DC.

F. The Proposed Transactions, in and of themselves, will not result in a disposition of DC Warrants by the holders thereof for the purposes of the definition of "disposition" in subsection 248(1).

G. As a result of the redemption by Spinco of the Spinco Reorganization Shares described in Paragraph 32:

(a) Spinco will be deemed by paragraph 84(3)(a) to have paid, and DC will be deemed by paragraph 84(3)(b) to have received, a dividend equal to the amount by which the amount paid on such redemption exceeds the paid-up capital of the Spinco Reorganization Shares;

(b) the amount of such deemed dividend will be included in DC's income pursuant to subsection 82(1) and paragraph 12(1)(j);

(c) the amount of such deemed dividend will be excluded, pursuant to paragraph (j) of the definition of "proceeds of disposition" in section 54, in determining DC's proceeds of disposition for the Spinco Reorganization Shares;

(d) DC will be entitled, pursuant to subsection 112(1), to deduct the amount of such deemed dividend in computing its taxable income for the taxation year in which such dividend is deemed to be received and, for greater certainty, the provisions of subsection 112(2.1), (2.2), (2.3) or (2.4) will not apply to deny the deduction of such deemed dividend;

(e) to the extent that the amount paid by Spinco to DC on the redemption of the Spinco Reorganization Shares does not exceed the amount specified in respect of those shares for the purposes of subsection 191(4), the deemed dividend referred to in (a) will not be subject to tax under Part IV.1 or Part VI.1 on the basis that the dividend will be deemed to be an excepted dividend and an excluded dividend, as the case may be, pursuant to subsection 191(4); and

(f) the provisions of subsection 112(3) will apply to reduce any loss that would otherwise be realized by DC as a result of the redemption of the Spinco Reorganization Shares.

H. As a result of the redemption by DC of the DC Butterfly Shares held by Spinco described in Paragraph 33:

(a) DC will be deemed by paragraph 84(3)(a) to have paid, and Spinco will be deemed by paragraph 84(3)(b) to have received, a dividend equal to the amount by which the amount paid on such redemption exceeds the paid-up capital of the DC Shares;

(b) the amount of such deemed dividend will be included in Spinco's income pursuant to subsection 82(1) and paragraph 12(1)(j);

(c) the amount of such deemed dividend will be excluded, pursuant to paragraph (j) of the definition of "proceeds of disposition" in section 54, in determining Spinco's proceeds of disposition for the DC Butterfly Shares;

(d) Spinco will be entitled, pursuant to subsection 112(1), to deduct the amount of such deemed dividend in computing its taxable income for the taxation year in which such dividend is deemed to be received and. for greater certainty, the provisions of subsections 112(2.1), (2.2), (2.3) or (2.4) will not apply to deny the deduction of such deemed dividend;

(e) to the extent that the amount paid by DC to Spinco on the redemption of the DC Butterfly Shares does not exceed the amount specified in respect of those shares for the purposes of subsection 191(4), the deemed dividend referred to in (a) will not be subject to tax under Part IV.1 or Part VI.1 on the basis that the dividend will be deemed to be an excepted dividend and an excluded dividend, as the case may be, pursuant to subsection 191(4); and

(f) the provisions of subsection 112(3) will apply to reduce any loss that would otherwise be realized by Spinco as a result of the redemption of the DC Butterfly Shares.

I. Provided that:

(a) there is not a distribution by DC to a corporation that is not an Acquiror before the day that is three years after the Effective Date; and

(b) there is not a distribution by Spinco or Amalco before the day that is three years after the Effective Date;

and as part of the series of transactions or events that includes the Proposed Transactions, there is not:

(c) a disposition of property in the circumstances described in subparagraph 55(3.1)(b)(i);

(d) an acquisition of control in the circumstances described in subparagraph 55(3.1)(b)(ii);

(e) an acquisition of any shares of DC in contemplation of the distribution in the circumstances described in subparagraph 55(3.1)(b)(iii); or

(f) an acquisition of property in the circumstances described in paragraphs 55(3.1)(c) or (d);

which has not been described herein, then by virtue of paragraph 55(3)(b), subsection 55(2) will not apply to the taxable dividends referred to in Rulings G and H above and for greater certainty, subsection 55(3.1) will not apply to deny the exemption under paragraph 55(3)(b).

J. The cost to Spinco of the DC Redemption Note issued to Spinco as described in Paragraph 33 and the cost to DC of the Spinco Redemption Note issued to DC as described in Paragraph 32 will in each case, upon the issuance thereof be equal to its principal amount and, as such, neither Spinco nor DC will realize any gain or incur any loss therefrom.

K. The payment and cancellation of the Spinco Redemption Note and the DC Redemption Note described in Paragraph 34 will not, in either case, give rise to a "forgiven amount" within the meaning thereof in subsection 80(1) or 80.01(1).

L. With regard to the payment by DC in respect of DC Common Shares held by a Dissenting Shareholder as described in Paragraph 22:

(a) subject to the application of subsection 55(2), the Dissenting Shareholder will be deemed by paragraph 84(3)(b) to have received a dividend equal to the amount by which any payment from DC to the Dissenting Shareholder in respect of the purchase of such Dissenting Shareholder's DC Common Shares exceeds the paid up capital of such shares immediately prior to their purchase;

(b) subsections 212(2) and 215(9) will apply (subject to the provisions of any applicable income tax convention) to require DC to withhold and remit 25% of the amount of any dividend deemed to have been paid as described in (a) to a Dissenting Shareholder who is a non-resident of Canada; and

(c) paragraph (j) of the definition of "proceeds of disposition" in section 54 will apply to exclude the amount of the deemed dividend described in (a) from the proceeds of disposition of the DC Common Shares recognized by the Dissenting Shareholder as a result of such purchase of the DC Common Shares by DC, provided that the shares were held as capital property by the Dissenting Shareholder.

M. [Reserved].

N. Upon the amalgamation of Spinco and Newco, as described in Paragraph 35,

(a) the provisions of section 87 will apply to the amalgamation;

(b) provided that the Spinco Common Shares are held by a particular holder thereof as capital property, the provisions of subsections 87(4), other than paragraphs 87(4)(c) to (e), will apply to such holder; and

(c) provided that Spinco makes the election to be a public corporation as described in Paragraph 38, Amalco will be deemed to be a public corporation at the commencement of its first taxation year pursuant to paragraph 87(2)(ii).

O. Provided that Spinco makes the election to be a public corporation as described in Paragraph 38, the Spinco Common Shares, and the Amalco Common Shares will be "qualified investments":

(a) for a deferred profit sharing plan by virtue of paragraph (i) of the definition "qualified investment" in section 204;

(b) for a registered retirement savings plan by virtue of paragraph (d) of the definition "qualified investment" in subsection 146(1);

(c) for a registered retirement income fund by virtue of paragraph (c) of the definition "qualified investment" in subsection 146.3(1); and

(d) for a registered education savings plan by virtue of paragraph (e) of the definition "qualified investment" in subsection 146.1(1).

P. The provisions of subsections 15(1), 56(2), 56(4), 69(4) and 246(1) will not be applied as a result of the Proposed Transactions, in and by themselves.

Q. The provisions of subsection 245(2) will not be applied as a result of the Proposed Transactions, in and by themselves, to redetermine the tax consequences confirmed in the rulings given.

These rulings are given subject to the limitations and qualifications set out in Information Circular 70-6R5 issued by the CRA on May 17, 2002, and are binding on the CRA provided that the Proposed Transactions are completed by XXXXXXXXXX.

The above rulings are based on the Act in its present form 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

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, adjusted cost base or paid-up capital of any shares referred to herein;

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

OPINIONS

Provided that the amendment to the Act concerning the proposed addition of subsection 55(6) contained in the Notice of Ways and Means Motion dated November 9, 2006, is enacted substantially as drafted, and provided that immediately before the exchange described in Paragraph 25, a DC Common Share is not taxable Canadian property to its holder, we confirm that the DC Butterfly Shares will be deemed, for the purposes of subsection 116(6) and the definition "taxable Canadian property" in subsection 248(1) to be listed on a prescribed stock exchange.

Provided that the amendment to the Act concerning the proposed addition to subsection 256(7) contained in the Notice of Ways and Means Motion dated November 9, 2006, is enacted substantially as drafted, by virtue of clause 256(7)(a)(i)(E), no acquisition of control of Newco will be considered to have occurred as a result of the Proposed Transactions, in and of themselves.

The foregoing opinions are not rulings and as noted in Information Circular 70-6R5 are not binding on the CRA.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch